-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NI1x8j/RVNevgsxwFwNW+t4hBlHEQ1S1cNE4uoJo0QaZMYzRX+sxLbwRIKvHlRs/ 13brDmTUO1oBfSIhRFDVyw== /in/edgar/work/20000612/0000006885-00-000027/0000006885-00-000027.txt : 20000919 0000006885-00-000027.hdr.sgml : 20000919 ACCESSION NUMBER: 0000006885-00-000027 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 18 CONFORMED PERIOD OF REPORT: 20000129 FILED AS OF DATE: 20000612 FILER: COMPANY DATA: COMPANY CONFORMED NAME: STAGE STORES INC CENTRAL INDEX KEY: 0000006885 STANDARD INDUSTRIAL CLASSIFICATION: [5311 ] IRS NUMBER: 760407711 STATE OF INCORPORATION: DE FISCAL YEAR END: 0130 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-14035 FILM NUMBER: 652958 BUSINESS ADDRESS: STREET 1: 10201 MAIN ST CITY: HOUSTON STATE: TX ZIP: 77025 BUSINESS PHONE: 7136675601 MAIL ADDRESS: STREET 1: 10201 MAIN STREET CITY: HOUSTON STATE: TX ZIP: 77025 FORMER COMPANY: FORMER CONFORMED NAME: APPAREL RETAILERS INC DATE OF NAME CHANGE: 19930908 10-K 1 0001.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended January 29, 2000 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______ to ______ Commission File No. 001-14035 Stage Stores, Inc. (Exact name of registrant as specified in its charter) DELAWARE 76-0407711 (State or other jurisdiction of (I.R.S. Employer Identification incorporation or organization) No.) 10201 MAIN STREET, HOUSTON, 77025 TEXAS (Zip Code) (Address of principal executive offices) Registrant's telephone number, including area code: (800) 579-2302 Securities registered pursuant to Section 12(b) of the Act: NONE Securities registered pursuant to Section 12(g) of the Act: Name of each exchange on which Title of each class registered Common Stock ($0.01 par value) New York Stock Exchange Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No X Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] The aggregate market value of the voting common stock held by non-affiliates as of May 30, 2000 was $3,768,436. At May 30, 2000, there were 26,850,223 shares of Common Stock and 1,250,584 shares of Class B Common Stock outstanding. DOCUMENTS INCORPORATED BY REFERENCE None. PART I References to a particular year are to the Company's fiscal year which is the 52 or 53 week period ending on the Saturday closest to January 31 of the following calendar year (e.g., a reference to "1999" is a reference to the fiscal year ended January 29, 2000). ITEM 1. BUSINESS Recent Developments As a result of the Company's poor financial performance, lack of adequate trade support to fund its inventory working capital requirements, lack of sufficient financial flexibility and liquidity, and violations under certain covenants under its various debt agreements, the Company filed for protection under Chapter 11 of Title 11 of the United States Bankruptcy Code ("Chapter 11") on June 1, 2000 in the United States Bankruptcy Court for the Southern District of Texas ( the "Court"). The Company has negotiated a $450.0 million debtor-in-possession financing agreement (the "DIP Financing") with a lender to finance the Company's working capital requirements during Chapter 11 reorganization proceedings. On June 2, 2000, the Court approved among other things, the proposed DIP Financing subject to certain conditions. Under the Court's Interim Order, the Court limited the amount available under the DIP Financing to $385.0 million pending a Final Order. Proceeds under the DIP Financing will be used to retire the Company's existing Accounts Receivable Program and Senior Revolving Credit Facility (defined herein) and for general working capital purposes. Under Chapter 11, the Company will operate its business as debtor-in-possession, subject to the approval of the Bankruptcy Court for certain proposed actions. Additionally, one or more creditor committees will be formed and would have the right to review and object to any non-ordinary course of business transactions and participate in the formulation of any plan or plans of reorganization. As of the petition date, actions to collect pre-petition indebtedness are stayed and other contractual obligations may not be enforced against the Company. In addition, the Company may reject executory contracts and lease obligations, and parties affected by these rejections may file claims with the Bankruptcy Court in accordance with the reorganization process. Substantially all liabilities as of the petition date are subject to settlement under a plan of reorganization to be voted upon by all impaired classes of creditors and equity security holders and approved by the Bankruptcy Court. General Stage Stores, Inc. (the "Company" or "Stage Stores") operates family apparel stores offering moderately priced, nationally recognized brand name apparel, accessories, cosmetics and footwear in approximately 500 small towns and communities throughout the United States. Stage Stores was formed in 1988 when the management of Palais Royal, together with several venture capital firms, acquired the family-owned Bealls and Palais Royal chains which were originally founded in the 1920's. The Company has developed a franchise focused on small markets offering a broad range of brand name merchandise with a high level of customer service in convenient locations. As a result of its small market focus, Stage Stores generally faces less competition for brand name apparel because consumers in small markets generally are able to shop for branded merchandise only in regional malls. In those small markets where the Company does compete for brand name apparel sales, such competition generally comes from local retailers, small regional chains and, to a lesser extent, national department stores. The Company believes it has a competitive advantage over local retailers and smaller regional chains due to its: (i) economies of scale, (ii) historically good vendor relationships and (iii) proprietary credit card program. The Company believes it has a competitive advantage in small markets over national department stores due to its experience with smaller markets. In addition, due to minimal merchandise overlap, Stage Stores generally does not directly compete for branded apparel sales with national discounters such as Wal-Mart. At January 29, 2000, the Company, through its wholly-owned subsidiary Specialty Retailers, Inc. ("SRI"), operated 648 stores (averaging approximately 16,000 selling square feet) in thirty- three states throughout the United States. Although the Company's stores may be operated under its "Stage", "Bealls" and "Palais Royal" trade names depending on the geographical market, the Company operates the vast majority of the stores under one concept and strategy. Approximately 70% of these stores are located in small markets and communities with populations at or below 30,000. The remainder of the Company's stores operate in metropolitan areas, such as Houston, Texas. The Company's merchandising strategy focuses on the traditionally higher margin categories of women's, men's and children's branded apparel, accessories, cosmetics and footwear. Merchandise mix may vary from store to store to accommodate differing demographic factors. The Company currently purchases merchandise from a vendor base of approximately six hundred and fifty vendors. Over 85% of 1999 sales consisted of branded merchandise, including nationally recognized brands such as Levi Strauss, Liz Claiborne, Chaps/Ralph Lauren, Calvin Klein, Sag Harbor, Hanes, Nike, Reebok and Haggar Apparel. Levi accounted for approximately 6.4% of the Company's 1999 retail purchases. No other vendor accounted for more than 5%. In addition, the Company, through its membership in Associated Merchandising Corporation ("AMC"), a cooperative buying service, purchases imported merchandise for its private label program. The membership provides the Company with synergistic purchasing opportunities allowing it to augment its branded merchandise assortments. Private label merchandise purchased through AMC accounted for approximately 5% of the Company's total retail purchases for 1999. The Company offers a carefully chosen but broad selection of moderately-priced, branded merchandise which is divided into distinct departments as follows (percentages represent each department's contribution to Company sales): Department 1999 1998 Men's/Young Men 19% 20% Misses Sportswear 15 15 Shoes 12 11 Juniors 10 10 Children 8 9 Accessories & Gifts 8 8 Special Sizes 6 6 Cosmetics 5 5 Intimate 4 4 Dresses & Suits 3 3 Boys 3 3 Activewear 3 2 Junior Dresses 2 2 Coats 2 2 100% 100% Employees During 1999, the Company employed an average of 15,686 full and part-time employees at all of its locations, of which 1,948 were salaried and 13,738 were hourly. The Company's central office (which includes corporate, credit and distribution center offices) employed an average of 607 salaried and 1,036 hourly employees during 1999. In its stores during 1999, the Company employed an average of 1,341 salaried and 12,702 hourly employees. Such averages will vary during the year as the Company traditionally hires additional employees and increases the hours of part-time employees during peak seasonal selling periods. There are no collective bargaining agreements in effect with respect to any of the Company's employees. The Company believes that relationships with its employees are good. ITEM 2. PROPERTIES The Company's corporate headquarters is located in a 130,000 square foot building in Houston, Texas. The Company leases the building and most of the land at its Houston facility. The Company owns a 450,000 square foot distribution center and a credit department facility, both located in Jacksonville, Texas. The Jacksonville distribution center and credit department facility collateralizes the Company's Credit Facility (as defined herein). See Note 6 to the Consolidated Financial Statements. At January 29, 2000, the Company operated 648 stores located in thirty-three states as follows: Number of State Stores Alabama 4 Arizona 4 Arkansas 28 Colorado 7 Florida 2 Georgia 1 Illinois 15 Indiana 16 Iowa 13 Kansas 25 Louisiana 50 Maryland 1 Michigan 7 Minnesota 11 Mississippi 17 Missouri 22 Montana 6 Nebraska 4 Nevada 3 New Mexico 25 New York 2 Ohio 25 Oklahoma 66 Oregon 8 Pennsylvania 2 South Carolina 1 South Dakota 6 Texas 263 Virginia 1 Washington 4 West Virgina 1 Wisconsin 3 Wyoming 5 Total 648 Full line stores range in size from approximately 4,100 to 68,000 selling square feet, with the average being approximately 16,000 selling square feet. The Company's stores are primarily located in strip shopping centers. All store locations are leased except for three Bealls stores and one Stage store, aggregating 138,000 selling square feet, which are owned. The majority of leases provide for a base rent plus contingent rentals, generally based upon a percentage of net sales. ITEM 3. LEGAL PROCEEDINGS From time to time the Company and its subsidiaries are involved in various litigation matters arising in the ordinary course of their business. On March 30, 1999, a class action lawsuit was filed against the Company and certain of its officers, directors and stockholders in the United States District Court for the Southern District of Texas by John C. Weld, Jr., a stockholder who purchased 125 shares of the Company's common stock on August 3, 1998, alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder (the "Weld Suit"). The Company believed that the allegations of the Weld Suit are without merit, and on July 23, 1999, the Company filed a motion to dismiss. United States District Judge Kenneth Hoyt entered an order on December 8, 1999 dismissing the Weld Suit. The order has been appealed by Mr. Weld. On March 28, 2000, the Company filed a lawsuit against Carl Tooker, the Company's former Chairman, Chief Executive Officer and President in the District Court of Harris County, Texas. The lawsuit is an action for damages arising from transactions Mr. Tooker engaged in or directed while serving as President, Chief Executive Officer and Chairman of the Board of Directors of the Company which transactions benefited him personally or were otherwise contrary to his duties as an officer and director. (See Form 8-K dated March 9, 2000). The suit also seeks recovery of debt owed by Mr. Tooker to the Company pursuant to loans and promissory notes Mr. Tooker caused the Company to make to him while serving in those capacities, and for conversion of stock collateral pledged to the Company to secure his indebtedness. The Company also seeks a mandatory injunction requiring Mr. Tooker to deposit into the registry of the Court all remaining stock collateral in his possession, and for a declaratory judgment that Mr. Tooker was properly terminated "for cause" under the terms of his employment agreement. The Company seeks to recover not less than an aggregate of $2,755,672, accrued interest, punitive damages, costs and reasonable attorneys' fees. On or about April 27, 2000 Mr. Tooker filed an Answer and Counterclaim against the Company and a Third Part Petition against the Company's Interim President, Chief Executive Officer and Chairman of the Board, John J. Wiesner, Martin Stringer, counsel to the Special Committee, and the law firm of McKinney & Stringer, P.C. The answer generally denies all allegations made by the Company. Mr. Tooker seeks damages from the Company of approximately $3.9 million, plus attorney's fees, interest, and costs for breach of his employment contract, and a like amount, including punitive damages, from the third-party defendants for alleged tortious interference with his employment contract. Mr. Tooker also seeks to impose a constructive trust on the $300,000 in the Company's possession for certain contractual benefits he claims to be due under his employment agreement. The remaining claims seek damages against the Company and in part against the third-party defendants, totaling $18 million, plus punitive damages, fees, interest and costs, on theories of defamation, civil conspiracy, breach of fiduciary duty and breach of duty of good faith and fair dealing. The case is in its initial development, prior to any discovery. The Company and the third- party defendants dispute his allegations and intend to vigorously defend all of Mr. Tooker's claims. In March 2000, eleven former employees of SRI d/b/a Palais Royal, filed two separate suits in the United States District Court for the Southern District of Texas against the Company, SRI and Mary Elizabeth Pena, arising out of alleged conduct occurring over an unspecified time while the plaintiffs were working at one or more Palais Royal stores in the Houston, Texas area. The plaintiffs allege that on separate occasions they were falsely accused of stealing merchandise and other company property and giving discounts for purchases against company policy. The suits accuse the defendants of defamation, false imprisonment, intentional infliction of mental distress, assault and violation of the Racketeer Influenced and Corrupt Organizations (RICO) Act. The claims seek unspecified damages for mental anguish, lost earnings, exemplary damages, treble damages, interest, attorneys' fees and costs. The Company denies the allegations and intends to vigorously defend the claims. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY- HOLDERS No matters were submitted to a vote of security holders during the quarter ended January 29, 2000. PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Company's authorized common equity securities consist of par value $0.01 per share common stock ("Common Stock") and par value $0.01 per share Class B common stock ("Class B Common Stock"). Prior to April 16, 1998, the Common Stock was quoted on the NASDAQ National Market System under the symbol "STGE". Beginning April 16, 1998, the Company's Common Stock started trading on the New York Stock Exchange under the symbol "SGE". As of May 30, 2000, there was one holder of Class B Common Stock and 299 holders of record of Common Stock. The following table sets forth, for the periods indicated, the high, low and closing prices for the Common Stock as reported by the New York Stock Exchange: Common Stock Prices High Low Close Quarter ended May 2, 1998 $53.00 $35.75 $51.13 Quarter ended August 1, 1998 53.75 25.00 25.44 Quarter ended October 31, 1998 26.13 8.75 13.25 Quarter ended January 30, 1999 15.00 6.75 8.00 Quarter ended May 1, 1999 9.25 5.00 6.44 Quarter ended July 31, 1999 8.13 5.06 6.44 Quarter ended October 30, 1999 9.75 4.81 4.81 Quarter ended January 29, 2000 5.00 1.38 1.38 The Company has not declared or paid any cash dividends on its Common Stock since its initial public offering and does not expect to pay cash dividends for the foreseeable future. The Company anticipates that, for the foreseeable future, earnings will be reinvested in the business and used to service indebtedness. The Company's existing indebtedness limits its ability to pay dividends. The declaration and payment of dividends by the Company are subject to the discretion of the Board. Any future determination to pay dividends will depend on the Company's results of operations, financial condition, capital requirements, contractual restrictions under its current indebtedness and other factors deemed relevant by the Board. On June 6, 2000, the New York Stock Exchange informed the Company that the trading of the Company's stock will be suspended immediately. Following the suspension, application will be made by the New York Stock Exchange to the Securities and Exchange Commission to delist the Company's stock. ITEM 6. SELECTED FINANCIAL DATA The following sets forth selected consolidated financial data for the periods indicated. The selected consolidated financial data were derived from, and should be read in conjunction with, the Company's Consolidated Financial Statements. All dollar amounts are stated in thousands, except for per share data. Fiscal Year 1999 1998 Statement of operations data: Net sales $1,121,567 1,173,547 Cost of sales and related buying, occupancy and distribution expenses 897,117 839,238 Gross profit 224,450 (2) 334,309 Selling, general and Administrative expenses 387,816 (3) 271,477 Store opening and closure program costs 44,986 (4) 10,192 Operating income (loss) (208,352) 52,640 Interest, net 48,634 46,471 Income (loss) before income tax, extraordinary item and cumulative effect of change in accounting principle (256,986) 6,169 Income tax expense 20,217 (5) 2,455 Income (loss) before extraordinary item and cumulative effect of change in accounting principle (277,203) 3,714 Extraordinary item, net of tax, early retirement of debt (749) -- Cumulative effect of change in accounting principle, net of tax, reporting costs of start-up activities (3,938) -- Net income (loss) $(281,890) 3,714 Basic earnings per common share before extraordinary item and cumulative effect of change in accounting principle $(9.89) $0.13 Basic earnings (loss) per common share $(10.06) $0.13 Basic weighted average common shares outstanding 28,028 27,885 Diluted earnings per common share before extraordinary item and cumulative effect of change in accounting principle $(9.89) $0.13 Diluted earnings (loss) per common share $(10.06) $0.13 Diluted weighted average common shares outstanding 28,028 28,428 Margin and other data: Gross profit margin 20.0% 28.5% Selling, general and administrative expense rate 34.6% 23.1% Operating income (loss) margin (18.6%) 4.5% Store data: Comparable store sales growth (7.0%) (3.0%) Store Openings 10 86 Store Closings 41 14 Number of stores open at end of period 648 679 Total selling area square footage (thousands) 10,290 10,548 Balance sheet data (at end of period): Working capital $(258,281) $368,138 Total assets 554,687 857,680 Long-term debt -- 487,968 Stockholders' equity (deficit) (74,967) 204,392 Fiscal Year 1997 1996 Statement of operations data: Net sales $1,073,316 $776,550 Cost of sales and related buying, occupancy and distribution expenses 730,179 532,563 Gross profit 343,137 243,987 Selling, general and Administrative expenses 240,011 172,579 Store opening and closure program costs 8,686 2,838 Operating income (loss) 94,440 68,570 Interest, net 38,277 45,954 Income (loss) before income tax, extraordinary item and cumulative effect of change in accounting principle 56,163 22,616 Income tax expense 21,623 8,594 Income (loss) before extraordinary item and cumulative effect of change in accounting principle 34,540 14,022 Extraordinary item, net of tax, early retirement of debt (18,295) (16,081) Cumulative effect of change in accounting principle, net of tax, reporting costs of start-up activities -- -- Net income (loss) $16,245 $(2,059) Basic earnings per common share before extraordinary item and cumulative effect of change in accounting principle $1.34 $0.91 Basic earnings (loss) per common share $0.63 $(0.13) Basic weighted average common shares outstanding 25,808 15,394 Diluted earnings per common share before extraordinary item and cumulative effect of change in accounting principle $1.30 $0.88 Diluted earnings (loss) per common share $0.61 $(0.13) Diluted weighted average common shares outstanding 26,483 15,927 Margin and other data: Gross profit margin 32.0% 31.4% Selling, general and administrative expense rate 22.4% 22.2% Operating income (loss) margin 8.8% 8.8% Store data: Comparable store sales growth 4.1% 3.3% Store Openings 301 (6) 69 Store Closings 9 10 Number of stores open at end of period 607 315 Total selling area square footage (thousands) 9,557 5,670 Balance sheet data (at end of period): Working capital $318,064 $235,219 Total assets 759,396 509,283 Long-term debt 395,248 298,453 Stockholders' equity (deficit) 205,078 92,266 Fiscal Year 1995 (1) Statement of operations data: Net sales $682,624 Cost of sales and related buying, occupancy and distribution expenses 468,347 Gross profit 214,277 Selling, general and Administrative expenses 149,102 Store opening and closure program costs 3,689 Operating income (loss) 61,486 Interest, net 43,989 Income (loss) before income tax, extraordinary item and cumulative effect of change in accounting principle 17,497 Income tax expense 6,767 Income (loss) before extraordinary item and cumulative effect of change in accounting principle 10,730 Extraordinary item, net of tax, early retirement of debt -- Cumulative effect of change in accounting principle, net of tax, reporting costs of start-up activities -- Net income (loss) $10,730 Basic earnings per common share before extraordinary item and cumulative effect of change in accounting principle $0.88 Basic earnings (loss) per common share $0.88 Basic weighted average common shares outstanding 12,255 Diluted earnings per common share before extraordinary item and cumulative effect of change in accounting principle $0.86 Diluted earnings (loss) per common share $0.86 Diluted weighted average common shares outstanding 12,483 Margin and other data: Gross profit margin 31.4% Selling, general and administrative expense rate 21.8% Operating income (loss) margin 9.0% Store data: Comparable store sales growth 0.8% Store Openings 68 Store Closings 0 Number of stores open at end of period 256 Total selling area square footage (thousands) 4,886 Balance sheet data (at end of period): Working capital $170,108 Total assets 408,254 Long-term debt 380,039 Stockholders' equity (deficit) (72,314) ________________________ (1) 1995 includes 53 weeks. Comparable store sales growth for 1995 has been determined based on a comparable 52 week period. (2) Includes $69.3 million of unusual charges related to store closings, lower of cost or market reserves for seasonal inventory and LIFO inventory reserves. See Item 7 "Significant Events" below. (3) Includes $115.9 million of unusual charges related to the write down of long-lived assets, including goodwill, and certain other charges. See Item 7 "Significant Events" below. (4) Includes $44.2 million of costs associated with the Company's 1999 and 2000 store closure programs. See Item 7 "Significant Events" below. (5) Includes a $89.5 million valuation allowance provided for certain deferred tax assets. See Item 7 "Significant Events" below. (6) Includes 104 stores acquired from C. R. Anthony Company in 1997 which were not converted to the Company's format and trade names until 1998. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS "Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995. Certain items discussed or incorporated by reference herein contain forward-looking statements that involve risks and uncertainties including, but not limited to, the ability to obtain financing on terms reasonably satisfactory to the Company, the ability of the Company to obtain normal trade terms from its vendors, the ability of the Company to comply with the various covenant requirements contained in the Company's debt agreements and the demand for apparel. The demand for apparel can be affected by weather patterns, levels of competition, competitors' marketing strategies, changes in fashion trends, availability of product on normal payment terms and the failure to achieve the expected results of the Company's merchandising and marketing plans as well as its store opening and closing plans. The occurrence of any of the above have had and can continue to have a material and adverse impact on the Company's operating results. See "Risk Factors" below. Certain information herein contains estimates which represent management's best judgment as of the date hereof based on information currently available; however, the Company does not intend to update this information to reflect developments or information obtained after the date hereof and disclaims any legal obligation to the contrary. General Overview. The Company operates family apparel stores offering moderately-priced, nationally recognized brand name apparel, accessories, cosmetics and footwear in approximately 500 small towns and communities throughout the United States. The Company has recognized the high level of brand awareness and demand for fashionable, quality apparel by consumers in small markets and has identified these markets as a profitable and underserved niche. The Company has developed a franchise focused on small markets offering a broad range of brand name merchandise with a high level of customer service in convenient locations. At January 29, 2000, the Company, through its wholly-owned subsidiary Specialty Retailers, Inc., operated 648 stores (averaging approximately 16,000 selling square feet) in thirty- three states throughout the United States. Although the Company's stores may be operated primarily under its "Stage", "Bealls" and "Palais Royal" trade names depending on the geographical market, the Company operates the vast majority of the stores under one concept and strategy. Approximately 70% of these stores are located in small markets and communities with populations at or below 30,000. The remainder of the Company's stores operate in metropolitan areas, such as suburban Houston, Texas. Significant Events. As a result of the Company's poor financial performance, lack of adequate trade support to fund its inventory working capital requirements, lack of sufficient financial flexibility and liquidity, and violations under certain covenants under its various debt agreements, the Company filed for protection under Chapter 11 of Title 11 of the United States Bankruptcy Code ("Chapter 11") on June 1, 2000 in the United States Bankruptcy Court for the Southern District of Texas ( the "Court"). The Company has negotiated a $450.0 million debtor-in- possession financing agreement (the "DIP Financing") with a lender to finance the Company's working capital requirements during Chapter 11 reorganization proceedings. On June 2, 2000, the Court approved among other things, the proposed DIP Financing subject to certain conditions. Under the Court's Interim Order, the Court limited the amount available under the DIP Financing to $385.0 million pending a Final Order. Proceeds under the DIP Financing will be used to retire the Company's existing Accounts Receivable Program and Senior Revolving Credit Facility (defined herein) and for general working capital purposes. Under Chapter 11, the Company will operate its business as debtor-in-possession, subject to the approval of the Bankruptcy Court for certain proposed actions. Additionally, one or more creditor committees will be formed and would have the right to review and object to any non-ordinary course of business transactions and participate in the formulation of any plan or plans of reorganization. As of the petition date, actions to collect pre-petition indebtedness are stayed and other contractual obligations may not be enforced against the Company. In addition, the Company may reject executory contracts and lease obligations, and parties affected by these rejections may file claims with the Bankruptcy Court in accordance with the reorganization process. Substantially all liabilities as of the petition date are subject to settlement under a plan of reorganization to be voted upon by all impaired classes of creditors and equity security holders and approved by the Bankruptcy Court. As a result of the Company's poor financial performance for 1999, the Company performed a cash flow analysis as required under Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long- Lived Assets to Be Disposed of" and Accounting Principles Board Opinion No. 17. This analysis resulted in the Company recording an impairment loss of $41.7 million in 1999, consisting of $26.0 million in incremental depreciation and amortization related to property, equipment and leasehold improvements associated with underperforming stores and $15.7 million related to goodwill. The impairment loss is included in selling, general and administrative expense in the accompanying statement of operations. As a result of the impact of the Company's Bankruptcy Filing on June 1, 2000 on estimated future cash flows, the Company reevaluated the recoverability of its remaining goodwill. Based upon this re-evaluation, the Company wrote-off the remaining balance of goodwill amounting to $67.9 million and other intangible assets amounting to $1.0 million during 1999. The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates continuity of operations, realization of assets and liquidation of liabilities in the ordinary course of business. However, as a result of the Chapter 11 filing and circumstances relating to this event, including the Company's highly leveraged financial structure and recurring losses from operations as reflected in the consolidated financial statements, such realization of assets and liquidation of liabilities is subject to uncertainty. Further, a plan of reorganization could materially change the amounts reported in the consolidated financial statements, which do not give effect to any adjustments to the carrying value of assets or amounts of liabilities that might be necessary as a consequence of a plan of reorganization. Additionally, there will likely be additional store closures as part of the reorganization process which would result in additional adjustments. The ability of the Company to continue as a going concern is dependent upon, among other things, confirmation of a plan of reorganization, future profitable operations, the ability to comply with debtor- in-possession agreements and the ability to generate sufficient cash from operations and financing sources to meet obligations. Additionally, the accompanying consolidated financial statements do not include any adjustments that would be required if the Company were in liquidation. Substantially all of the Company's liabilities are subject to settlement under reorganization proceedings. The Company's debt to banks and bondholders is in default of the terms of the applicable loan agreements, notes and debentures. For financial reporting purposes, those liabilities and obligations have been classified as current liabilities. The ultimate adequacy of security for any secured debt obligations and settlement of all liabilities and obligations cannot be determined until a plan of reorganization is confirmed. On March 9, 2000, the Company announced that it had completed a new $35.0 million senior revolving credit facility. The new facility increased the current borrowing capacity of the Company to $235.0 million when combined with its existing $200.0 million revolving credit facility. Both facilities will expire on June 14, 2002. The new $35.0 million facility is secured by a perfected first priority security interest on the inventory of the Company. Additionally, the Company granted the lenders under the existing $200.0 million revolving credit facility a secondary lien on $50.0 million of inventory as well as a first lien on store furniture and fixtures and certain other assets. The $50.0 million secondary lien will be reduced by any amounts outstanding under the new $35.0 million senior revolving credit facility. Therefore, the maximum lien on the Company's inventory is $50.0 million under the combined facilities. Under the terms of the new credit facility, the Company will issue warrants to the lenders to purchase 7.5% of the Company's outstanding common stock. The exercise price under the warrants will be determined based upon the average closing price of the Company's stock for the 30 days following the date of commitment. The warrants will expire on March 6, 2003. The Company repaid amounts outstanding under the Senior Revolving Credit Facility with proceeds from its DIP Financing. See "Liquidity and Capital Resources" below as well as Note 6 to the Consolidated Financial Statements. On February 22, 2000, the Company announced the departure of Carl Tooker who was Chairman, Chief Executive Officer and President of the Company. The Company stated that Mr. Tooker's departure was the result of an inquiry conducted by a special committee consisting of all of the non-management members of the Board of Directors, which reviewed transactions between the Company and Mr. Tooker. The effect of the transactions has been included in the Company's results for prior periods and are not material to the financial condition or operations of the Company; however, these transactions had not been properly reported to the Company's Board of Directors. With Mr. Tooker's departure, the Board will oversee operations and coordinate the search for a new Chief Executive Officer. The Board has appointed Director John J. (Jack) Wiesner Chairman, Interim Chief Executive Officer and President. The other members of the Board have agreed to assist Mr. Wiesner as necessary. The Company is actively conducting a search for a new Chief Executive Officer. In addition, certain other members of senior management have resigned from the Company. The duties of these members of senior management have been reassigned to existing members of management. On February 3, 2000, the Company announced that its bank lending group had amended certain provisions contained within its $200.0 million Credit Facility Agreement. The amendment, which was effective as of that date, waived the Company's compliance with the financial covenants contained in the credit agreement for the fourth quarter of 1999. In addition, the amendment revised the financial covenants for the first three quarters of 2000 as well as the requirements under the clean down provision. During the fourth quarter of 1999, the Company recorded certain significant pretax charges aggregating $205.7 million. Of the total, $62.0 million was charged to cost of sales, $115.9 million was charged to selling, general and administrative ("SG&A") expenses while the balance of $27.8 million was charged to store opening and closure program costs. With respect to the charge to cost of sales, $54.0 million related to a lower of cost or market reserve for excess fall clearance inventory and inventory to be liquidated in connection with the store closure program announced on February 3, 2000 (see below) while $8.0 million was a LIFO charge resulting from an overall decrease in the level of inventory at year end. The charge to SG&A expenses for the fourth quarter is comprised of a $110.6 million write down of long-lived assets in accordance with Statement of Financial Accounting Standards No. 121 and Accounting Principles Board Opinion No. 17 (of this amount, $84.6 million relates to goodwill and other intangibles and the remaining amount relates to other long-lived assets), a $2.8 million provision against certain miscellaneous receivables, $0.6 million associated with severance for the Company's work force reduction program and $1.9 million associated with certain costs related to the refinancing of the Company's accounts receivable program completed in November 1999. The store opening and closure costs of $27.8 million for the fourth quarter reflect the costs associated with additional store closures announced on February 3, 2000. In addition, income tax expense includes an $89.5 million valuation allowance recorded during the fourth quarter related to certain deferred tax assets (see Note 11 - Income Taxes to the Consolidated Financial Statements). On November 9, 1999, the Company completed a refinancing of the existing term and revolving certificates outstanding under its Accounts Receivable Program (see Note 4 to the Company's Consolidated Financial Statements). In connection with the refinancing, the Company's special purpose off-balance sheet trust (the "Trust") replaced the previously existing term and revolving certificates with new term and revolving certificates (the "New Certificates"). The New Certificates provided the Company with a maximum availability of $329.9 million, subject to the amount of receivables held in the Trust. Based upon the amount of receivables in the Trust at the time of closing, the Company received approximately $292.4 million of proceeds. Of this amount, approximately $259.3 million was used to retire the outstanding balances under the previously existing Trust certificates, which were scheduled to begin amortizing in December of 1999. The remainder of the proceeds were used to redeem the previously existing $30.0 million aggregate principle amount of SRI Receivables Purchase Co., Inc. ("SRPC") 12.5% Trust certificate-backed notes and to pay for other costs associated with the refinancing. In connection with the refinancing, the Company recorded an after-tax extraordinary charge of approximately $0.7 million in the fourth quarter of 1999 related to the early retirement of debt. The Company also recorded an additional $1.9 million of pretax costs in selling, general and administrative ("SG&A") expenses associated with the refinancing during the fourth quarter of 1999. The Company redeemed the New Certificates with proceeds from its DIP Financing. During the second quarter of 1999, the Company announced a store closure program under which the Company closed approximately 35 under performing stores during the last three quarters of the year. In connection with the store closure program, the Company recorded a total of $23.7 million of pretax costs during the second and third quarters of 1999, of which $7.3 million is included in cost of sales while the remaining $16.4 million is included in store opening and closure program costs. Of the total $23.7 million of costs, approximately $2.5 million represented severance and lease termination costs, approximately $2.5 million represented operating costs for the stores in the closure program during the second and third quarters of 1999, approximately $7.3 million represented a lower of cost or market reserve related to the inventory to be liquidated in the stores in the closure program while the balance related primarily to the write-off of fixed assets and intangibles associated with the stores in the closure program. The financial information, discussion and analysis that follow should be read in conjunction with the Company's Consolidated Financial Statements included elsewhere herein. Results of Operations The following sets forth the results of operations as a percentage of sales for the periods indicated: Fiscal Year 1999 1998 1997 Net sales 100.0% 100.0% 100.0% Cost of sales and related buying, occupancy and distribution expenses 80.0 71.5 68.0 Gross profit margin 20.0 28.5 32.0 Selling, general and administrative expenses 34.6 23.1 22.4 Store opening and closure program costs 4.0 0.9 0.8 Operating income (loss) margin (18.6) 4.5 8.8 Net interest expense 4.3 4.0 3.6 Income (loss) before income tax, extraordinary item and cumulative effect of change in accounting principle (22.9)% 0.5% 5.2% 1999 Compared to 1998 Sales for the year ended January 29, 2000 decreased 4.4% to $1,121.6 million from $1,173.5 million for the year ended January 30, 1999. The decrease in sales for 1999 reflects, among other things, the net reduction of 31 stores during the year and a 7.0% decline in comparable store sales. Management believes the majority of the decline in comparable store sales was attributable to (i) the impact on the first quarter of the aggressive management of the Company's inventory levels throughout the 1998 fall selling season, (ii) the impact on the second and third quarters of the Company's more conservative promotional cadence throughout the two periods and (iii) the impact on the fourth quarter of the softness in the Company's sales during the Christmas selling period. The Company's aggressive inventory management activities that were put into place during the 1998 fall selling season negatively impacted the Company's merchandise mix and, to a lesser extent, the Company's customer base. As a result, the Company began the first quarter with significantly lower levels of inventory on a comparable store basis as compared to the prior year's first quarter levels, particularly with respect to clearance merchandise. The lower levels of clearance inventory, as well as the continued aggressive pricing on this clearance merchandise throughout February, was a significant contributor to the decline in comparable store sales for the first quarter. In addition, sales for the Easter selling period were softer than expected as a result of lower than planned inventory levels during the period. Sales results for the second and third quarters were negatively impacted by a reduction in the number of promotional events and a lower level of price discounting as compared to the same periods in the prior year. While the Company anticipated that this strategy would negatively impact sales, the more conservative promotional cadence was designed to improve merchandise margins by increasing the sell-through of regular priced goods. In addition, comparable store sales for the third quarter were negatively impacted by a reduction in the level of clearance activities during the early part of the quarter as compared to last year. Due to inventory management initiatives that the Company put into place during the early part of 1999, the level of seasonal clearance merchandise on hand at the beginning of the third quarter of 1999 was significantly below last year's level and, therefore, sales for the third quarter of 1999 were negatively impacted as compared to the third quarter of 1998. Finally, management believes that the weakness in sales over the Christmas holiday period reflects an increased level of competitive promotional activity during the period as well as inventory management issues during the fourth quarter of 1999. As a result, the Company ended the year with an abnormally high portion of its inventory in fall clearance product which has required significant markdowns to sell during the first quarter of 2000. As a result, the Company recorded a lower of cost or market reserve for this seasonal inventry during the fourth quarter (see Item 7 "Significant Events" above and further discussion below). Gross profit decreased 32.8% to $224.5 million for 1999 from $334.3 million for 1998. Gross profit, as a percent of sales, decreased to 20.0% for the current year from 28.5% for the prior year. The lower gross profit percentage for 1999 reflects, among other things, (i) the impact of the increased level of promotional activity utilized during the fourth quarter of 1999, (ii) the negative sales leverage associated with the Company's fixed buying, occupancy and distribution expenses which are included in cost of goods sold, (iii) lower vendor discounts on new store inventory purchases and reduced levels of store grand opening sales, which typically carry a higher level of gross margin, as a result of the reduction in the number of new stores opened during 1999 as compared to 1998, (iv) the recording of lower of cost or market reserves during the second and fourth quarters aggregating $61.3 million, (v) an $8.0 million LIFO charge relating to an overall decrease in inventories which resulted in the liquidation of certain high cost historical inventory layers and (vi) higher than anticipated net shrinkage expense. The lower of cost or market reserves recorded during these two periods relate to inventory to be liquidated in conjunction with store closures and the excess Christmas clearance inventory as discussed above. The decline in the gross profit percentage was partially offset by higher merchandise margins during the second and third quarters of the current year resulting from a reduction in the level of clearance sales and a more conservative promotional cadence followed during these periods. SG&A expenses for 1999 increased 42.8% to $387.8 million from $271.5 million in the comparable period of 1998 and, as a percent of sales, increased to 34.6% from 23.1% in the comparable period last year. SG&A expenses for 1999 reflect, among other things, a $110.6 million write down of long-lived assets in accordance with Statement of Financial Accounting Standards No. 121 and Accounting Principles Board Opinion No. 17 consisting of increased depreciation and amortization of $26.0 million related to property, equipment and leasehold improvements associated with underperforming stores and associated goodwill and other intangibles of $84.6 million, a $2.8 million provision against certain miscellaneous receivables, $0.6 million of severance for workforce reduction programs and $1.9 million associated with certain costs related to the refinancing of the Company's Accounts Receivable Program which was completed in November 1999. SG&A expenses for the current year benefited from an increase in the fair value of the Company's retained interest in its accounts receivable trust, the result of which is included in SG&A expenses, reduced payroll and payroll related costs and the Company's continuing efforts in controlling SG&A expenses. The reduction in payroll related costs was primarily associated with reduced vacation expense resulting from a change in the Company's employee benefit program during the first quarter of this year. The current year SG&A expenses also benefited from a reduction in operating costs associated with the stores included in the store closure program which was implemented during the second quarter of 1999. Store opening and closure program costs for 1999 of $45.0 million reflect $0.8 million of costs associated with 10 new stores opened during 1999, as well as costs associated with the Company's store closure programs. As a result of the factors discussed above, the Company had an operating loss of $208.4 million for 1999 as compared to operating income of $52.6 million for the comparable period in 1998. Net interest expense for 1999 increased 4.5% to $48.6 million from $46.5 million for the comparable period in 1998 due to a higher level of average borrowings outstanding and an increase in overall borrowing rates. Income tax expense for 1999 of $20.3 million includes an $89.5 million valuation allowance provided for certain deferred tax assets. As a result of the foregoing, the Company's net loss, before extraordinary item and the cumulative effect of change in accounting principle, for the year ended January 29, 2000 was $277.2 million as compared to net income of $3.7 million for the year ended January 30, 1999. In connection with the adoption of SOP 98-5, the Company recorded the cumulative effect of change in accounting principle, net of tax, of $3.9 million during the first quarter of 1999. The charge reflects the write-off of the unamortized organizational costs associated with the Company's accounts receivable trust and credit card bank. During the fourth quarter of 1999, the Company recorded an extraordinary item, net of tax, of $0.7 million in connection with the early retirement in November 1999 of the $30.0 million aggregate principal amount of SRPC 12.5% Trust certificate-backed notes. 1998 Compared to 1997 Sales for the year ended January 30, 1999 increased 9.3% to $1,173.5 million from $1,073.3 million for the year ended January 31, 1998. The increase in sales was primarily due to an approximately $132.8 million increase in sales from stores opened or acquired during 1998 and 1997 which are not included in comparable store sales, partly offset by a 3.0% decline in comparable store sales. Management believes the majority of the decline in comparable store sales was attributable to (i) the extreme hot weather and drought conditions during the second quarter of 1998 in a substantial portion of the Company's market area, (ii) the unseasonably warm weather which existed throughout the majority of the 1998 Christmas selling period, (iii) the implementation of a "value pricing" program on selected private label merchandise and (iv) the aggressive but prudent management of the Company's inventory levels throughout the fall selling season. The extreme weather conditions which impacted the majority of the Company's markets during late June and July 1998 resulted in reduced customer traffic and changed customers' spending patterns during this period. As a result, comparable store sales for the second quarter decreased 5.0%. Unseasonably warm weather conditions in most markets in the third and fourth quarters of 1998 negatively impacted the sales of the traditional cold weather categories of merchandise. In response, the Company accelerated its promotional activities during this period by increasing the level of permanent and promotional markdowns on its seasonal merchandise. This strategy lowered the average retail unit price of merchandise sold during the fall selling season which negatively impacted net sales. As a result of these factors and those discussed below, comparable store sales for the fall selling season decreased 4.3%. In order to mitigate any potential economic impact that the record summer heat and drought conditions had on the small market communities in which the Company operates, the Company implemented a value pricing strategy on a small portion of its private label merchandise. Under the value pricing strategy, the Company reduced the price point on certain key private label basic items for the fall season. The program was designed to generate sufficient additional unit sales to offset the reduction in the average unit selling price. Due to the increased promotional activities discussed above during the fourth quarter, the program did not accomplish its goals. For 1999, based upon the results of this program, the Company eliminated the value pricing strategy from its merchandise mix. Finally, the Company aggressively managed its inventory levels throughout the fall selling season due to the softness in overall sales. Actions taken to control inventory levels included a significant reduction in the aggregate amount of merchandise receipts for the fall selling season as well as the acceleration of the Company's promotional activities discussed above. The significant reduction in the receipt flow for the fall selling season negatively impacted the freshness and content of certain of the Company's merchandise offerings thereby further depressing sales levels. However, as a result of its aggressive promotional activities and prudent management of its inventory levels, retail inventory per square foot on a comparable store basis at year-end 1998 was approximately 8% lower than the corresponding 1997 level. Management believes it has identified the content issues within its merchandise offerings created during 1998 and has put plans in place to address these issues in 1999. Gross profit decreased 2.6% to $334.3 million in 1998 from $343.1 million in 1997. Gross profit as a percent of sales decreased to 28.5% in 1998 from 32.0% in 1997. Contributing to the decline in gross profit were the higher levels of markdowns designed to stimulate traffic during the adverse weather conditions in the second quarter and the aggressive discounting and promotional activity during the second half of the year designed to drive unit sales and liquidate seasonal merchandise. In addition, the lower gross profit percentage reflects the impact of fixed buying, occupancy, and distribution expense components included in cost of goods sold in relation to lower sales levels as well as higher shrinkage expense. Selling, general and administrative expenses increased 13.1% to $271.5 million in 1998 from $240.0 million in 1997. Selling, general and administrative expenses as a percent of sales for 1998 increased to 23.1% from 22.4% in 1997. Factors contributing to the increase in selling, general and administrative expenses as a percent of sales were the negative leverage resulting from the reduced sales level and the increased promotional expense associated with the aggressive management of the Company's inventory level discussed above. Advertising expenses as a percentage of sales were 4.3% in 1998 as compared to 3.7% in 1997. Offsetting these increases were approximately $5.6 million of certain duplicative and one-time costs associated with the CR Anthony acquisition which were incurred in 1997 as well as the positive impact of the Company's newly formed credit card bank which has allowed the Company to charge its customers a service charge and late fee rate structure consistent with other national apparel retailers. Store opening and closure costs for 1998 increased to $10.2 million from $8.7 million for the same period in 1997 due to an increase in the number of stores opened during 1998 as compared to 1997. Operating income for 1998 decreased to $52.6 million from $94.4 million in 1997 due to the factors discussed above. Operating income as a percent of sales for 1998 was 4.5% as compared to 8.8% in 1997. Net interest expense for 1998 increased 21.4% to $46.5 million from $38.3 million in 1997 due to higher levels of borrowings under the Credit Facilities resulting from the Company's expansion program. The Company's net income before extraordinary items for 1998 decreased to $3.7 million as compared to $34.5 million in 1997 due to the impact of the factors discussed above. Seasonality and Inflation The Company's business is seasonal and sales traditionally are lower during the first nine months of the year (February through October) and higher during the last three months of the year (November through January). Working capital requirements fluctuate during the year and generally reach their highest levels during the third and fourth quarters. Fiscal Year 1999 Q1 Q2 Q3 Q4 Net sales $262,591 $269,848 $264,327 $324,801 Gross profit 70,359 74,021 77,203 2,867 Operating inc. (loss) 8,391 (8,332) 12,560 (220,971) Quarters' operating income as a pecent of annual N/A N/A N/A N/A Income (loss) before extraordinary item and cummulative effect of a change in accounting principle (2,269) (15,091) 224 (260,067) Net income (loss) (4,671) (15,091) 224 (262,352) Fiscal Year 1998 Q1 Q2 Q3 Q4 Net sales $272,788 $271,805 $271,605 $357,349 Gross profit 87,225 82,239 75,252 89,593 Operating inc. (loss) 25,278 12,678 7,226 7,458 Quarters'operating income as a percent of annual 48% 24% 14% 14% Income (loss) before extraordinary item and cummulative effect of change in accounting principle 9,035 765 (3,152) (2,934) Net income (loss) 9,035 765 (3,152) (2,934) The Company does not believe that inflation had a material effect on its results of operations during the past two years. However, there can be no assurance that the Company's business will not be affected by inflation in the future. Liquidity and Capital Resources As a result of the Company's poor financial performance, lack of adequate trade support to fund its inventory working capital requirements, lack of sufficient financial flexibility and liquidity, and violations under certain covenants under its various debt agreements, the Company filed for protection under Chapter 11 of Title 11 of the United States Bankruptcy Code ("Chapter 11") on June 1, 2000 in the United States Bankruptcy Court for the Southern District of Texas ( the "Court"). The Company has negotiated a $450.0 million debtor-in-possession financing agreement (the "DIP Financing") with a lender to finance the Company's working capital requirements during Chapter 11 reorganization proceedings. On June 2, 2000, the Court approved among other things, the proposed DIP Financing subject to certain conditions. Under the Court's Interim Order, the Court limited the amount available under the DIP Financing to $385.0 million pending a Final Order. Proceeds under the DIP Financing will be used to retire the Company's existing Accounts Receivable Program and Senior Revolving Credit Facility and for general working capital purposes. If the Company receives a Final Order approving the DIP Financing as proposed, management believes there should be sufficient liquidity to fund the Company's working capital requirements during the reorganization proceedings; however there can be no assurances the entire $450.0 million DIP Financing will be approved by the Court. Under Chapter 11, the Company will operate its business as debtor-in-possession, subject to the approval of the Bankruptcy Court for certain proposed actions. Additionally, one or more creditor committees will be formed and would have the right to review and object to any non-ordinary course of business transactions and participate in the formulation of any plan or plans of reorganization. As of the petition date, actions to collect pre-petition indebtedness are stayed and other contractual obligations may not be enforced against the Company. In addition, the Company may reject executory contracts and lease obligations, and parties affected by these rejections may file claims with the Bankruptcy Court in accordance with the reorganization process. Substantially all liabilities as of the petition date are subject to settlement under a plan of reorganization to be voted upon by all impaired classes of creditors and equity security holders and approved by the Bankruptcy Court. Total working capital decreased $626.4 million to a deficit of $258.3 million at January 29, 2000 from $368.1 million at January 30, 1999. The most significant changes in working capital were: (i) a decrease of $80.2 million in inventories associated with the net reduction of 31 stores during 1999 as well as certain significant charges and reserves recorded during the fourth quarter of 1999 aggregating $62.0 million, as discussed in "Results of Operations" above, and (ii) a reduction of $28.2 million in undivided interest in accounts receivable trust due to a higher level of borrowings outstanding under the Company's Accounts Receivable Program, of which $30.0 million of the increase represents borrowings related to the retirement of the SRPC notes in November 1999, and (iii) the reclassification of long-term debt of $492.4 million to current as a result of certain covenant violations under the respective debt agreements. The Company's primary capital requirements are for working capital, debt service and capital expenditures. Cash interest payments were $45.5 million in 1999. Capital expenditures are generally for new store openings, remodeling of existing stores and facilities, customary store maintenance and operating system enhancements and upgrades. Capital expenditures were $22.0 million during 1999 as compared to $88.7 million in 1998. Capital expenditures during 1999 were primarily related to 10 new store openings, remodeling of existing stores and the implementation of a new merchandising system. Management estimates that capital expenditures will be approximately $15.0 million for 2000. As discussed above, all of the Company debt has been classified as current in the accompanying financial statements. Recent Accounting Pronouncements In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities", which requires that all derivative financial instruments be recorded in the financial statements. SFAS No. 133 is effective for the Company in the first quarter of 2001, and the Company is in the process of ascertaining the impact this new standard will have on its financial statements. In March 2000, the FASB issued interpretation No. 44, Accounting for Certain Transactions Involving Stock Compensation which provides guidance for certain issues arising from the application of APB Opinion No. 25; the Company is currently evaluating the impact of application of this interpretation on its financial statements. Risk Factors Current Bankruptcy Proceeding: As a result of the Company's poor financial performance, lack of adequate trade support to fund its inventory working capital requirements, lack of sufficient financial flexibility and liquidity, and violations under certain covenants under its various debt agreements, the Company filed for protection under Chapter 11 of Title 11 of the United States Bankruptcy Code on June 1, 2000 in the United States Bankruptcy Court for the Southern District of Texas. Under Chapter 11, the Company will operate its business as debtor-in- possession, subject to the approval of the Bankruptcy Court for certain proposed actions. Additionally, one or more creditor committees will be formed and would have the right to review and object to any non-ordinary course of business transactions and participate in the formulation of any plan or plans of reorganization. There can be no assurances that the Company will be successful in reorganizing under Chapter 11 which could result in liquidation. Leverage and Restrictive Covenants: Due to the level of the Company's indebtedness under the DIP Financing, any material or adverse development affecting the business of the Company could significantly limit its ability to withstand competitive pressures or adverse economic conditions, to take advantage of expansion opportunities or other significant business opportunities that may arise, to meet its obligations as they become due or to comply with the various covenant requirements contained in the Company's DIP Financing. In addition, the Company's DIP Financing imposes operating and financial restrictions on the Company and certain of its subsidiaries. Such restrictions limit the Company's ability to incur additional indebtedness, to make dividend payments and to make capital expenditures in excess of authorized amounts. Availability of Merchandise Product on Normal Trade Terms: The Company is highly dependent on obtaining merchandise product on normal trade terms. Due to the Company's recent financial performance, some of the Company's key vendors have become more restrictive in granting trade credit through either reducing the Company's credit lines or shortening payment terms. In addition, the majority of the Company's factors have required letters of credit to partially secure the credit lines that these factors have provided to the Company. The tightening of credit from the vendor or factor community has had a material adverse impact on the Company's business and financial condition. Economic and Market Conditions: A substantial portion of the Company's operations are located in the central United States. In addition, many of the Company's stores are situated in small towns and rural environments that are substantially dependent upon the local economy. The retail apparel business is dependent upon the level of consumer spending, which may be adversely affected by an economic downturn or a decline in consumer confidence. An economic downturn, particularly in the central United States and any state (such as Texas) from which the Company derives a significant portion of its net sales, could have a material and adverse effect on the Company's business and financial condition. The Company's success depends, in part, upon its ability to anticipate and respond to changing consumer preferences and fashion trends in a timely manner. Although the Company attempts to stay abreast of emerging lifestyle and consumer preferences affecting its merchandise, any sustained failure by the Company to identify and respond to such trends could have a material and adverse effect on the Company's business and financial condition. The Company's business is seasonal and its quarterly sales and profits traditionally have been lower during the first three fiscal quarters of the year (February through October) and higher during the fourth fiscal quarter (November through January). In addition, working capital requirements fluctuate throughout the year, increasing substantially in October and November in anticipation of the holiday season due to requirements for significantly higher inventory levels. Any substantial decrease in sales for the last three months of the year could have a material and adverse effect on the Company's business and financial condition. The Company's business depends, in part, on normal weather patterns across its markets. Any unusual weather patterns in the Company's markets can have a material and adverse impact on the Company's business and financial condition. Competition: The retail apparel business is highly competitive. Although competition varies widely from market to market, the Company faces substantial competition, particularly in its Houston area markets, from national, regional and local department and specialty stores. Some of the Company's competitors are considerably larger than the Company and have substantially greater financial and other resources. Although the Company currently offers branded merchandise not available at certain other retailers (including large national discounters) in its small market stores, there can be no assurance that existing or new competitors will not carry similar branded merchandise in the future, which could have a material and adverse effect on the Company's business and financial condition. Dependence on Key Personnel: The success of the Company depends to a large extent on its management team. Certain members of senior management, including the former Chief Executive Officer, the Chief Financial Officer, the Chief Merchandising Officer and the Chief Information Officer have departed from the Company. Although the responsibilities of these individuals have been reassigned to other members of management, their departure could have a material adverse effect on the Company's business and financial condition. Consumer Credit Risks - Private Label Credit Card Portfolio: Sales under the Company's private label credit card program represent a significant portion of the Company's business. In recent years, some retailers have experienced substantial increases in the rate of charge-offs in their credit card portfolios. Any significant deterioration in the quality of the Company's accounts receivable portfolio or any adverse changes in laws regulating the granting or servicing of credit (including late fees and the finance charge applied to outstanding balances) could have a material and adverse effect on the Company's business and financial condition. Interest Rate Risk: Borrowings under the Company's DIP Financing bear a floating rate of interest. If market rates of interest increase, the Company's financial results could be materially and adversely affected. See "Liquidity and Capital Resources." Centralized Operations: The Company's buying, credit, distribution and other corporate operations are highly centralized in three main locations. The Company's operations could be materially affected if a catastrophic event (such as, but not limited to, fire, hurricanes or floods) impacts use of these facilities. There can be no assurances that the Company would be successful in obtaining alternative servicing facilities in a timely manner if such a catastrophic event should occur. Year 2000 Compliance: The Company is currently not aware of any Year 2000 problems with its information systems or peripheral systems and hardware. However, the success to date of the Company's Year 2000 efforts cannot guarantee that a Year 2000 problem affecting its systems or those of its major third party vendors will not become apparent in the future. In the event that the Company or any of its major third party vendors does encounter any Year 2000 problems, the Company's business or operations could be adversely affected. The aggregate cost that was paid to third parties who assisted in the Company's Year 2000 efforts was approximately $2.5 million. These costs were expensed as incurred. These amounts did not include any costs associated with the implementation of contingency plans or the costs associated with the replacement of information systems, hardware or equipment, substantially all of which was capitalized. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK See: "Risk Factors", above. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA See "Index to Financial Statements and Schedules" included on page 31 for information required under this Item 8. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The following table lists the names, ages and all positions held by the directors and executive officers of Stage Stores as of June 1, 2000: Name Age Position John Wiesner 62 Chairman, Interim Chief Executive Officer and President Ernest Cruse 49 Senior Vice President Director of Stores Barry Gold 57 Executive Vice President Administration and Assistant to CEO Ron Lucas 52 Executive Vice President, Human Resources Charles Sledge 34 Senior Vice President Finance, Treasurer and Corporate Secretary Jack Bush 65 Director Harold Compton 52 Director Robert Huth 54 Director Richard Jolosky 65 Director Carl Tooker 52 Director Mr. Wiesner, who had been a Director since July 1997, was appointed Chairman, Interim Chief Executive Officer and President in February 2000 upon the departure of Carl Tooker, the Company's former Chairman, Chief Executive Officer and President. Prior to joining the Company, Mr. Wiesner held varying positions at CR Anthony, including Chairman of the Board, Chief Executive Officer from 1987 to 1997. Mr. Wiesner is also a Director of Lamonts, Elder-Beerman, Inc. and Loewen Group, Inc. and an advisory director of Fiesta Foods, Inc. Mr. Cruse has been with the Company since 1966 and is currently Senior Vice President, Director of Stores. Prior to assuming this position, Mr. Cruse was Senior Vice President of Planning and Allocation from February 1999 to February 2000, Senior Vice President, Territorial Manager of Stores from February 1997 to February 1999, Vice President, Regional Manager of Stores from September 1995 to February 1997, and Vice President, District Manager of Stores from February 1984 to September 1995. Mr. Gold joined the Company in March 2000 as Executive Vice President, Administration and Assistant to the Chief Executive Officer. Prior to joining the Company, Mr. Gold was Executive Vice President of Operations, Logistics and Loss Prevention since March 1998 for Jumbo Sports. Jumbo Sports filed a voluntary Chapter 11 Petition under the Federal bankruptcy laws on January 1, 1999. Mr. Gold previously served as Executive Vice President of Stores and Operations for L. Luria and Son, a specialty retailer, from 1996 to 1998. L. Luria and Son filed for protection under Chapter 11 of the Bankruptcy Code on August 13, 1997. Prior to that he served as Chief Financial Officer of The Flax Art and Design Company, Inc. and Vice Chairman/Chief Operating Officer of Fisher Big Wheel. Mr. Lucas joined the Company in July 1995 as Senior Vice President, Human Resources and was promoted to Executive Vice President, Human Resources in March 1998. Between 1987 and 1995, Mr. Lucas served as Vice President, Human Resources at two different divisions of Limited, Inc., the Limited Stores Division and Lane Bryant. Previously, he spent seventeen years at the Venture Stores Division of May Co. where from 1985 to 1987 he was Vice President, Organization Development. Mr. Sledge joined the Company in April 1996 as Vice President, Controller and was promoted to Senior Vice President Finance and Treasurer in April 1999. Prior to joining the Company, Mr. Sledge was a Senior Audit Manager with PricewaterhouseCoopers, LLP, where he was employed since 1989. Mr. Bush has been a Director since December 1997. Mr. Bush is also President of Raintree Partners, Inc., a management consulting firm where he has served since 1995. He served as Chairman, Director and Chief Executive Officer of Jumbo Sports from December 1997 to March 1999. Jumbo Sports filed a voluntary Chapter 11 Petition under the Federal bankruptcy laws on January 1, 1999. He also serves as a Director of TeleQuip Company and Chairman of the Strategic Board of Directors of the College of Business and Public Administration at the University of Missouri. From August 1991 to August 1995, Mr. Bush was President, a Director and a consultant to Michaels Stores, Inc. From April 1996 to April 1999, he served as Chief Concept Officer of Aaron Bros. Holding Company. Mr. Bush is also Chairman of an internet company, IdeaForest.com. Mr. Compton has been a Director since March 1997. Mr. Compton is currently Chief Executive Officer of CompUSA, Inc. From September 1994 to March 2000, Mr. Compton was President of CompUSA Stores and from August 1994 to February 2000, he served as Executive Vice President of CompUSA, Inc. Mr. Compton served as President and Chief Operating Officer of Central Electric Inc. from December 1993 to August 1994 and as Executive Vice President- Operations & Human Resources of HomeBase, Inc. from 1989 to 1993. Mr. Compton is also a Director of Linens `N Things, Inc. Mr. Huth has been a Director since March 1997. Mr. Huth is currently Director, Chief Executive Officer and President of David's Bridal where he has served since May 1999. Previously, he served as Director, President and Chief Operating Officer of David's Bridal from 1995 to May 1999. Prior to joining David's Bridal, Mr. Huth served as Director, Executive Vice President and Chief Financial Officer of Melville Corporation from 1987 to 1995. Mr. Jolosky has been a Director since March 1997. From January 1996 until his retirement in October 1999, Mr. Jolosky was President and Vice Chairman of Payless ShoeSource, Inc. Mr. Jolosky served as President and Chief Executive Officer of Silverman Jewelry Company from 1995 to 1996 and as Chief Executive Officer of the Richard Allen Company from 1992 to 1995. Although Mr. Tooker was terminated as President and Chief Executive Officer and ceased serving as Chairman of the Board of Directors on February 21, 2000, he continues to serve as a Director until the expiration of his term at the Company's annual shareholders meeting which is unscheduled as of June 1, 2000. DIRECTOR AND OFFICER AND TEN PERCENT STOCKHOLDER SECURITIES REPORTS Federal securities laws require the Company's directors and officers, and persons who own more than ten percent of the Company's Common Stock, to file with the Securities and Exchange Commission, the New York Stock Exchange and the Secretary of the Company initial reports of ownership and reports of changes in ownership of the Common Stock of the Company. To the Company's knowledge, based solely on a review of the copies of such reports furnished to the Company and written representations that no other reports are required, during 1999, all of the Company's officers, directors and greater-than-ten- percent beneficial owners made all required filings except the following: the Form 4 for the March 1999 period for Ron Lucas and the former executives of the Company, Carl Tooker, James Marcum, Stephen Lovell, Jim Bodemuller and Gregg Kennedy, were not filed on a timely basis. ITEM 11. EXECUTIVE COMPENSATION Compensation of Directors Directors who are full-time employees or affiliates of the Company, including John Wiesner subsequent to his appointment on February 21, 2000 as Chairman, Interim Chief Executive Officer and President, receive no additional compensation for serving on the Board of Directors. Directors who are not full-time employees or affiliates of the Company, namely Messrs. Bush, Compton, Huth, Jolosky and Wiesner (prior to February 21, 2000), receive quarterly cash compensation of $5,000 for services rendered as Director and $1,000 for each committee meeting the Director attends. In addition, such Directors are eligible for annual option grants which vest over a four year period. During 1999, such directors did not receive any option grants. Mr. Wiesner also received monthly compensation under a preexisting severance agreement he had with C. R. Anthony Co., which the Company acquired in 1997. Summary Compensation Table The following summarizes, for the fiscal years indicated, the principal components of compensation for the Company's Chief Executive Officer (the "CEO") and the four highest compensated executive officers (collectively, the "named executive officers") as of January 29, 2000. Sections omitted are not applicable. Annual Compensation Other Annual Fiscal Salary Bonus Compensation Name and Principal Position Year ($) ($)(1) ($) Carl Tooker, (4) 1999 795,000 -- 510,950 (5) Former Chairman, Chief 1998 758,333 -- 137,658 (6) Executive Officer and President 1997 683,438 645,000 119,341 (7) James Marcum, (20) 1999 437,500 -- 36,812 (8) Former Director, Vice Chairman 1998 420,833 -- 62,539 (9) and Chief Financial Officer 1997 377,563 322,000 110,945 (10) Stephen Lovell, (11) 1999 437,500 -- 34,201 (12) Former Vice Chairman and 1998 420,833 -- 62,404 (13) Chief Field Operations Officer 1997 363,044 322,000 527,017 (14) Gregg Kennedy, (21) 1999 325,000 -- 15,169 (15) Former Executive VP and 1998 99,375 15,000 20,921 (16) Chief Merchandising Officer 1997 -- -- -- Jim Bodemuller, (21) 1999 308,333 -- 32,025 (17) Former Executive VP and 1998 292,624 -- 16,485 (18) Chief Information Officer 1997 188,493 187,000 23,679 (19) Long-term Compensation Awards Securities Restricted Underlying All Other Fiscal Stock Options/ Comp. Name and Principal Position Year ($)(2) SARs (#) ($)(3) Carl Tooker, (4) 1999 212,500 45,000 4,448 Former Chairman, Chief 1998 744,750 35,000 9,282 Executive Officer and President 1997 3,225,000 50,000 9,282 James Marcum, (20) 1999 93,750 20,000 1,934 Former Director, Vice Chairman 1998 372,375 42,000 2,127 and Chief Financial Officer 1997 806,250 15,000 1,483 Stephen Lovell, (11) 1999 93,750 20,000 1,934 Former Vice Chairman and 1998 372,375 42,000 3,232 Chief Field Operations Officer 1997 806,250 15,000 2,332 Gregg Kennedy, (21) 1999 93,750 40,000 2,819 Former Executive VP and 1998 -- 12,000 1,140 Chief Merchandising Officer 1997 -- -- -- Jim Bodemuller, (21) 1999 62,500 12,500 4,448 Former Executive VP and 1998 211,013 25,000 6,781 Chief Information Officer 1997 161,250 35,000 1,832 _______________________________ (1) Amounts reflect bonuses earned during the fiscal year covered (and paid during the subsequent fiscal year). (2) Represents the restricted stock awards to the named executives multiplied by the market price of the underlying common stock as of the grant date. These shares are subject to various vesting requirements. (3) Amounts reflect premiums paid for life insurance coverage. (4) Mr. Tooker's employment with the Company was terminated on February 21, 2000. (5) Amount shown reflects the value realized upon the exercise of options for common stock of $460,899 during 1999. Value realized is based upon the fair market value of the stock at the exercise date minus the exercise price. Amount shown also reflects the value realized upon the issuance of common stock pursuant to vested restricted stock awards of $34,313 during 1999. Value realized is based upon the fair market value of the stock at the date of vesting. Amount shown also reflects automobile allowance of $12,000 and health insurance benefits of $3,739 paid to Mr. Tooker during 1999. (6) Amount shown reflects imputed interest on executive loans of $78,263, a distribution related to options vested of $38,000, housing allowance of $5,000, automobile allowance of $12,000 and health insurance benefits of $4,395 paid to Mr. Tooker during 1998. (7) Amounts shown reflects imputed interest on executive loans of $45,685, a distribution related to options vested of $38,000, housing and automobile allowances of $32,000 and health insurance benefits of $3,656 paid to Mr. Tooker during 1997. (8) Amount shown reflects the value realized upon the issuance of common stock pursuant to vested restricted stock awards of $17,156 during 1999. Value realized is based upon the fair market value of the stock at the date of vesting. Amount shown also reflects housing allowance of $2,011, automobile allowance of $12,000 and health insurance benefits of $5,645 paid to Mr. Marcum during 1999. (9) Amount shown reflects imputed interest on executive loans of $24,977, housing allowance of $18,777, automobile allowance of $12,000 and health insurance benefits of $6,785 paid to Mr. Marcum during 1998. (10) Amount shown reflects moving expenses of $74,490, imputed interest on executive loans of $20,485, housing and automobile allowances of $12,000 and health insurance benefits of $3,970 paid to Mr. Marcum during 1997. (11) Mr. Lovell ceased serving as Chief Field Operations Officer on February 22, 2000 and left the Company on March 31, 2000. (12) Amount shown reflects the value realized upon the issuance of common stock pursuant to vested restricted stock awards of $17,156 during 1999. Value realized is based upon the fair market value of the stock at the date of vesting. Amount shown also reflects automobile allowance of $12,000 and health insurance benefits of $5,045 paid to Mr. Lovell during 1999. (13) Amount shown reflects imputed interest on executive loans of $42,880, automobile allowance of $12,000 and health insurance benefits of $7,524 paid to Mr. Lovell during 1998. (14) Amount shown reflects the value realized by Mr. Lovell upon the exercise of options for common stock of $485,941 during 1997. Value realized is based upon the fair market value of the stock at the exercise date minus the exercise price. Amount shown also reflects imputed interest on executive loans of $25,015, housing and automobile allowances of $12,000, and health insurance benefits of $4,061 paid to Mr. Lovell during 1997. (15) Amount shown reflects moving expenses of $240, automobile allowance of $12,000 and health insurance benefits of $2,929 paid to Mr. Kennedy during 1999. (16) Amount shown reflects moving expenses of $20,921 paid to Mr. Kennedy during 1998. (17) Amount shown reflects the value realized upon the issuance of common stock pursuant to vested restricted stock awards of $9,722 during 1999. Value realized is based upon the fair market value of the stock at the date of vesting. Amount shown also reflects moving expense of $7,118, automobile allowance of $12,000 and health insurance benefits of $3,185 paid to Mr. Bodemuller during 1999. (18) Amount shown reflects automobile allowance of $12,000 and health insurance benefits of $4,485 paid to Mr. Bodemuller during 1998. (19) Amount reflects moving expenses of $20,270, housing and automobile allowances of $2,000 and health insurance benefits of $1,409 paid to Mr. Bodemuller during 1997. (20) Mr. Marcum resigned from the Company effective May 1, 2000. (21) Messers. Bodemuller and Kennedy resigned from the Company effective May 26, 2000. Option/SAR Grants During 1999 The following discloses options granted during 1999 to the named executive officers: Individual Grants Number of % of Total Securities Options/ Underlying SARs Options/ Granted to SAR's Employees Granted in Fiscal Exercise or Expiration Name (#)(1) Year (%) Base Price ($) Date Carl Tooker 45,000 9.04 7.25 3/31/09 James Marcum 20,000 4.02 7.25 3/31/09 Stephen Lovell 20,000 4.02 7.25 3/31/09 Gregg Kennedy 40,000 8.04 7.56 2/12/09 Jim Bodemuller 12,500 2.51 7.25 3/31/09 Potential Realizable Value at Assumed Annual Rates of Stock Price Appreciation for Option Term 5% 10% Annual Annual Growth Growth Name Rate ($) Rate ($) Carl Tooker 205,177 519,958 James Marcum 91,190 231,093 Stephen Lovell 91,190 231,093 Gregg Kennedy 190,241 482,107 Jim Bodemuller 56,994 144,433 ___________________ (1) All of such options were granted under the 1996 Incentive Plan. The options granted under the Stock Option Plan are subject to vesting. Aggregated Option/SAR Exercises During 1999 and 1999 Year-End Option/SAR Values The following summarizes exercises of stock options (granted in prior years) by the named executive officers during 1999, as well as the number and value of all unexercised options held by the named executive officers at the end of 1999: Shares Acquired on Value Name Exercise (#) Realized ($)(1) Carl Tooker 75,782 460,899 James Marcum -- -- Stephen Lovell -- -- Gregg Kennedy -- -- Jim Bodemuller -- -- Number of Securities Value of Underlying Unexercised Unexercised In-the-Money Options/SARs Options/SARs at at FY-End (#) FY-End ($)(2) Exercisable/ Exercisable/ Name Unexercisable Unexercisable Carl Tooker 133,211/238,341 --/-- James Marcum 117,463/106,364 --/-- Stephen Lovell 70,096/115,836 --/-- Gregg Kennedy 3,000/49,000 --/-- Jim Bodemuller 23,750/48,750 --/-- ___________ (1) Value realized is based upon the fair market value of the stock at the exercise date minus the exercise price. (2) Value is based upon the closing price of the Common Stock on January 28, 2000 of $1.38 minus the exercise price. Employment Agreements At year-end, the named executive officers had employment agreements with the Company which provided for their initial base salaries as well as annual incentive bonuses as agreed to with the Compensation Committee. The employment agreements also provide for annual performance reviews, salary increases at the discretion of the Compensation Committee and participation in all other bonus and benefit plans available to executive officers of the Company. The employment agreements in effect for the named executive officers for the fiscal year ended January 29, 2000 may vary slightly from officer to officer. The details are contained in copies of the various agreements referenced as exhibits attached to the Form 10-K. Generally, the employment agreements provide that if the Company terminates an officer other than for good cause (as defined in the respective employment agreements), the officer would be entitled to two times his base salary. In addition, the officer would be entitled to his targeted bonus amounts, any accrued or unpaid bonus, salary and deferred compensation, any expense allowances and any earned but unpaid benefits under the Company's benefit plans (the "Additional Payments"). In addition, any unvested stock options and restricted stock awards would continue to vest during this two year period. (In the case of Mr. Tooker, his employment agreement provided for three times base salary and the Additional Payments described above if terminated without cause. Since both Mr. Tooker and Mr. Lovell were terminated for cause on February 21, 2000 and March 31, 2000 respectively, they are not entitled to payments under their respective employment agreements nor do their vesting rights extend past the date of termination). In the event the Company elects not to permit the automatic renewal of an officer's employment contract at the end of a term (one year), or in the event an officer is terminated or resigns for good reason (as defined in the respective employment agreements) following a change of control, the employment agreements provide that the respective individual would be entitled to three times his base salary plus the Additional Payments described above. In the event of a change of control of the Company in which the Company does not survive, all unvested options for the purchase of Common Stock and restricted stock held by the aforementioned individuals would vest immediately and the respective individual would also be entitled to certain other payments as specified in the employment agreements. The employment agreements also contain certain non-compete and confidentiality provisions. Each of the employment agreements renews annually in accordance with its terms. As a result of his dismissal from the Company for cause, the Company is not obligated to make any payments to Mr. Tooker under his employment agreement. Additionally, as a result of their resignation from the Company after year-end, the employment agreements for Messrs. Marcum, Bodemuller and Kennedy terminated. Company Retirement Plans Retirement Plan The Stage Stores, Inc. Retirement Plan (the "Plan") is a qualified defined benefit plan. Benefits under the Plan are administered through a trust arrangement providing benefits in the form of monthly payments or a single lump sum payment. The Plan covers substantially all employees who have completed one year of service with 1,000 hours of service as of June 30, 1998. Effective June 30, 1998, the Plan was frozen. There were no future benefit accruals after that date. Any service after that date will continue toward vesting and eligibility for normal and early retirement. The Plan is administered by the retirement plan committee (the "Retirement Committee"), and the Company appoints its three to five members. All determinations of the Retirement Committee are made in accordance with the provisions of the Plan in a uniform and nondiscriminatory manner. Generally, a participant is eligible for a benefit on his/her normal retirement date, which is the later of age 65 or the fifth anniversary of the date of hire. A participant may elect an early retirement benefit if he/she is at least 55 years old, has ten (10) Years of Service (as defined below) and retires from active employment with the Company. Early retirement benefits are reduced according to a formula established in the Plan based upon each full month that the participant's age is less than 65 on the date the payments commence. If a participant who is vested terminates employment, he/she is entitled to a deferred benefit payable at his/her normal retirement date or an earlier date, if requested, but not before age 55. The amount of a participant's retirement benefit is based on each Year of Credited Service (as defined below) and on his/her earnings for that year. The individual yearly benefits are then totaled to determine the annual benefit at age 65. The annual amount of the participant's normal retirement benefit is derived, subject to certain limitations, by adding (i) 1% of earnings up to $30,600 plus 1-1/2% of the excess of such earnings over $30,600 for each Year of Credited Service earned on or after July 1, 1989 through December 31, 1991, (ii) 1% of earnings up to $31,800 plus 1-1/2% of the excess of such earnings over $31,800 for each Year of Credited Service earned after December 31, 1991 and (iii) 1% of earnings up to $42,500 plus 1-1/2% of the excess of such earnings over $42,500 for each Year of Credited Service earned after December 31, 1994 through June 30, 1998. The normal retirement benefit formula produces an annual benefit which is paid to the participant in equal monthly installments. The standard form of payment for a single participant is a monthly benefit payable for the participant's life only. The standard form of payment for a married participant is a 50% joint and survivor benefit, which provides a reduced monthly benefit to the participant during his/her lifetime, and 50% of that benefit to the participant's spouse for his/her lifetime in the event of the participant's death. Other forms of the payment are also provided including lump sum payouts, but they require participant election. In addition, the Retirement Committee may elect to pay the benefit equivalent of a benefit payable at normal retirement date in the form of a lump sum payment, if the lump sum payment does not exceed $5,000. Any participant who is credited with 1,000 or more hours of service in a calendar year receives a "Year of Service", while any participant who is credited with 1,284 or more hours of service in a calendar year receives a "Year of Credited Service". Years of Service determine a participant's eligibility for benefits under the Plan, and the percentage vested in those benefits. After five Years of Service, a participant is 100% vested. The Plan is funded entirely by Company contributions that are held by a trustee for the exclusive benefit of the participants. The Company voluntarily agreed to contribute the amounts necessary to provide the assets required to meet the future benefits payable to Plan participants. Under the Retirement Plan, contributions are not specifically allocated to individual participants. The Benefit Equalization Plan The Specialty Retailers, Inc. Benefit Equalization Plan (the "Equalization Plan") is a non-qualified defined benefit plan which is intended to replace the benefits that cannot be provided under the terms of the Retirement Plan on account of certain limitations imposed under the Internal Revenue Code (for example, the Retirement Plan cannot consider compensation for a participant which is in excess of $160,000 when determining the participant's benefit). Effective June 30, 1998, the Equalization Plan was frozen. There were no future benefit accruals after that date. Any service after that date will continue toward vesting and eligibility for normal and early retirement. The Equalization Plan is unfunded. However, upon a change of control as defined in the Equalization Plan, the Company is required to deposit into a rabbi trust sufficient funds to cover all obligations then accrued under the Equalization Plan. The Equalization Plan was terminated May 31, 2000. Supplemental Employee Retirement Plan In 1996, the Company adopted the Specialty Retailers, Inc. Supplemental Executive Retirement Plan (the "SERP"). The SERP provides for supplemental retirement benefits for certain key executives of the Company upon retirement at or after age 65 with at least fifteen (15) years of credited service with the Company. The SERP provides for annual retirement compensation of 50% of the retiree's average annual base salary for the three years preceding retirement, less amounts received under the Company's defined benefit retirement plans. Participants in the SERP may elect to receive reduced early retirement benefits at or after age 55 with at least fifteen (15) years of credited service. Upon a change in control as defined in the SERP, the Company is required to deposit into a rabbi trust, sufficient funds to cover all obligations then accrued under the SERP. If a participant's employment is terminated after a change in control by the Company without cause or by the participant for good reason, the participant will be fully vested in the benefit that would have been payable at age 55. This amount will be paid to the participant in a lump sum upon termination of employment. The SERP was terminated by the Board of Directors on March 7, 2000. At the time of termination, there were no participants eligible for benefits under this plan. Company Deferred Compensation Plan The Specialty Retailers, Inc. Deferred Compensation Plan (the "Deferred Compensation Plan") provides executive officers and other key employees of the Company with the opportunity to participate in an unfunded, deferred compensation program that is not qualified under the Code. Generally, the Code and the Employee Retirement Income Security Act of 1974, as amended, restrict contributions to a 401(k) plan by highly compensated employees. The Deferred Compensation Plan is intended to allow participants to defer income at the same rates as those employees not restricted by such regulations. Under the Deferred Compensation Plan, participants may defer up to 15% of their salary and bonus (not otherwise covered by the Company's 401(k) plan) and earn a rate of return based on select indices chosen by each participant. The Company may, but is not obligated to, establish a grantor trust for the purposes of holding assets to provide benefits to the participants. The Company will match 50% of the first 6% of each participant's contributions to the Deferred Compensation Plan not otherwise covered by the Company's 401(k) plan. Company contributions vest over five years of service. The Deferred Compensation Plan was terminated by the Board of Directors on March 7, 2000. The Company paid the participants their appropriate account balances during April 2000. Compensation Committee Report The Compensation Committee of the Board of Directors is responsible for administering and making recommendations to the Board of Directors the amount of compensation of senior executives of the Company. During 1999, the Compensation Committee consisted of Messrs. Compton and Jolosky. The Company's executive compensation programs are designed to align the interests of senior management with those of the Company's stockholders. There are three key components of executive compensation: base salary, pay for performance (bonus plan), and long-term performance incentive. It is the intent of these programs to attract, motivate and retain senior executives. It is the philosophy of the Compensation Committee to allocate a significant portion of cash compensation to variable performance- based compensation in order to reward executives for high achievement. Base Salary The salaries for senior executives are based upon a combination of factors including past individual performance, competitive salary levels, and an individual's potential for making significant contributions to future Company performance. Bonus Plan Each of the named executive officers and certain other key personnel of the Company participate in an executive/management bonus plan (the "Bonus Plan") The Bonus Plan provides for annual bonus awards based upon individual performance and actual operating results compared to planned operating results. Bonus payments are subject to modification at the discretion of the Compensation Committee. Due to the Company's poor 1999 performance, no bonuses were paid to the named executive officers for such year. In addition, during 1999, the Compensation Committee recommended and the Board of Directors approved a special bonus plan designed to retain certain key executives. No bonuses were paid to the named executive officers under this bonus plan. Stock Options and Restricted Stock Stock options and restricted stock are an important component of senior executive compensation. The 1993 Stock Option Plan and the 1996 Equity Incentive Plan were designed to motivate senior executives and other key employees to contribute to the long-term growth of stockholder value. Generally, options granted under such plans have been, and are expected to be, granted with a price equal to the market price of the Common Stock on the date of the grant and vest over four years. This approach is designed to encourage the creation of long-term stockholder value since the full benefit of such options cannot be realized unless the stock price exceeds the exercise price. Restricted stock is generally issued with long-term vesting schedules. This approach provides a retention incentive for the recipient as well as the creation of long-term stockholder value. Pursuant to the 1996 Equity Incentive Plan, the Compensation Committee recommended, and the Board of Directors approved, an award of restricted stock to the named executive officers during 1999 as follows: Mr. Tooker - 34,000 shares; Mr. Marcum - 15,000 shares; Mr. Lovell - 15,000 shares; Mr. Kennedy - 15,000 shares; and Mr. Bodemuller - 10,000 shares. These awards vest 25% per year on each of the first through fourth anniversaries of the grant date. The vesting rights applicable to grants made to Mr. Tooker and Mr. Lovell are limited by virtue of their termination. Chief Executive Officer The compensation policies described above applied as well to the compensation of Mr. Tooker. The Compensation Committee was directly responsible for making recommendations to the Board of Directors for approval of Mr. Tooker's salary level and all awards and grants to Mr. Tooker under incentive components of the compensation program. The overall compensation package of Mr. Tooker was designed to recognize the fact that he bore primary responsibility for increasing the value of stockholders' investments. Accordingly, a substantial portion of Mr. Tooker's compensation was incentive-based, providing greater compensation as direct and indirect financial measures of stockholder value increase. Mr. Tooker's compensation was thus structured and administered to motivate and reward the successful exercise of these qualities. Mr. Tooker's base compensation for 1999 was directly related to the Company's overall performance for 1998, as measured by financial and other criteria such as: (i) the financial performance of the Company, (ii) the performance of the senior management team and (iii) other related qualitative factors. Due to the Company's poor 1999 performance, no bonus was paid to Mr. Tooker for such year. As previously discussed, Mr. Tooker left employment with the Company on February 22, 2000. Conclusion Through the programs described above, a significant portion of the Company's executive compensation is linked directly to corporate performance and stock price appreciation. The Compensation Committee believes that existing compensation policies and programs are competitive and effectively align executive compensation with the Company's goal of maximizing the return to stockholders. The Compensation Committee has determined that it is unlikely that the Company would pay amounts during 2000 that would result in the loss of a federal income tax deduction under Section 162(m) of the Code, and accordingly, had not recommended that any special actions be taken or that any plans or programs be revised at this time in light of such provision. Harold Compton and Richard Jolosky, Compensation Committee PERFORMANCE GRAPH The following graph compares the value of $100.00 invested on October 25, 1996 (the date of the initial public offering ("IPO") of the Company) through January 28, 2000 (the last day of public trading in fiscal 1999 at the closing price on the New York Stock Exchange ("NYSE")) in the Common Stock, the S&P 500 and the S&P 500 Retail. The return of the indices is calculated assuming reinvestment of dividends during the period presented. The Company has not paid any dividends since its IPO. The stock price performance shown on the graph below is not necessarily indicative of future price performance. COMPARISON OF CUMULATIVE TOTAL RETURN AMONG STAGE STORES, INC., S&P 500 AND S&P 500 RETAIL -- Line Graph Showing Comparison of Cummulative Total Return -- -- Among Stage Stores, Inc., S&P 500 and S&P 500 Retail -- Date Stage Stores, Inc. S&P 500 Retail S&P 500 10/25/96 $100.00 $100.00 $100.00 1/31/97 $105.30 $94.86 $112.16 1/30/98 $235.04 $139.19 $139.86 1/29/99 $48.48 $221.45 $182.62 1/28/00 $8.33 $237.77 $194.05 Prior to April 16, 1998, the Company's Common Stock was quoted on the NASDAQ National Market System under the symbol "STGE". Beginning April 16, 1998, the Company's Common Stock started trading on the NYSE under the symbol "SGE". ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The table below sets forth certain information regarding ownership of Common Stock as of either May 30, 2000 or based on the latest filings made under Section 13 (d) and 13 (g) of the Securities Exchange Act of 1934 and assuming exercise of options exercisable within sixty days of May 30, 2000 by (i) each person or entity who owns of record or beneficially 5% or more of the Common Stock, (ii) each director and named executive officer and (iii) all directors and named executive officers as a group. Each such stockholder is assumed to have sole voting and investment power as to the shares shown. Known exceptions are noted. As of May 30, 2000, 1,250,584 shares of Class B Common Stock were outstanding, all of which is owned by Court Square Capital Limited, a subsidiary of Citigroup Inc. Number of Percentage Shares of Shares of Name Common Stock Common Stock 5% Stockholders Brookside Capital Partners 3,980,472 14.2% Fund, L.P. Two Copley Place Boston, MA 02116 AXA Financial, Inc. 2,646,900 9.4% 1290 Avenue of the Americas New York, NY 10104 Citigroup Inc. (1) 2,549,548 9.1% 153 East 53rd Street New York, NY 10043 Lord, Abbett & Co. 2,451,689 8.7% 90 Hudson Street Jersey City, NJ 07302 Thomson Horstman & Bryant, 2,250,400 8.0% Inc. Park 80 West, Plaza Two Saddle Brook, NJ 07663 The Bear Stearns Companies 2,228,800 7.9% Inc. 245 Park Avenue New York, NY 10167 Wellington Management 2,062,800 7.3% Company, LLP. 75 State Street Boston, MA 02109 Directors and Executive Officers John Wiesner 6,750 * Ernest Cruse 12,954 * Barry Gold 0 * Ron Lucas 60,054 * Charles Sledge 16,200 * Jack E. Bush 8,750 * Harold Compton 5,000 * Robert Huth 9,000 * Richard Jolosky 5,000 * All executive officers and directors as a group (9 persons) 126,208 .45% _____________________________________ * Less than 1%. (1) Citigroup Inc. beneficially owns shares (including Class B Common Stock) through its subsidiaries Citicorp Venture Capital, Court Square Capital Limited and other subsidiaries. Citicorp Venture Capital owns 600,296 shares of Common Stock, Court Square owns 370,068 shares of Common Stock and 1,250,584 shares of non- voting Class B Common Stock and other subsidiaries of Citigroup Inc. own 328,600 shares of Common Stock. Each share of non- voting Class B Common Stock is convertible, subject to certain restrictions, into shares of Common Stock. (2) Messrs. Tooker, Marcum, Lovell, Kennedy and Bodemuller are no longer officers of the Company. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Loans The Company had loans outstanding at January 29, 2000 to certain executive officers of the Company in the aggregate principal amount of $2,974,686. As of January 29, 2000, Mr. Tooker had six loans from the Company outstanding. Mr. Tooker owed the Company $1,109,692 in principal and accrued interest on the loans, which was the largest aggregate amount of indebtedness outstanding owed by Mr. Tooker to the Company at any time during the 1999 fiscal year. The principal balances and rates of interest on the loans are $140,000 (5.70%), $203,200 (5.70%), $175,000 (5.88% up to 7/15/99; 12.0% thereafter), $125,000 (5.74% up to 9/15/99; 12.0% thereafter), $200,000 (8.50%) and $200,000 (9.0%). On February 20, 2000, the Special Committee of the Board determined that a loan in the principal amount of $300,000 was part of the "Ranch Transaction" as described below in "Other Transactions" and should be reflected on the books of the Company as a loan repayment when Mr. Tooker caused the Company to purchase this property and pay him an amount he claimed as his equity in such property. The Company is seeking from Mr. Tooker the full amount of its loss in connection with this transaction, including the amount credited to payment of this loan and has filed suit to recover such amounts. As of January 29, 2000, Mr. Marcum had five loans from the Company outstanding. Mr. Marcum owed the Company $498,125 in principal and accrued interest on these loans, which was the largest aggregate amount of indebtedness outstanding owed by Mr. Marcum to the Company at any time during the 1999 fiscal year. The principal balances and rates of interest on the loans are $115,000 (5.70%), $75,000 (5.70%), $165,000 (5.88% up to 7/15/99; 12.0% thereafter), $12,500 (8.50%) and $100,000 (9.0%). A News Release regarding Mr. Marcum's resignation was issued by the Company May 24, 2000. As of June 1, 2000, Mr. Marcum's loans with the Company had been repaid in full. As of January 29, 2000, Mr. Lovell had six loans from the Company outstanding. Mr. Lovell owed the Company $565,544 in principal and accrued interest on the loans, which was the largest aggregate amount of indebtedness outstanding owed by Mr. Lovell to the Company at any time during the 1999 fiscal year. The principal balances and rates of interest on the loans are $150,000 (6.30%), $125,000 (5.87%), $142,679 (5.93%), $25,000 (8.50%), $20,000 (9.0%) and $71,815 (9.0%). On may 31, 2000, the Company and Mr. Lovell entered into a settlement agreement which resolved all outstanding loans and other issues between the Company and Mr. Lovell. As of January 29, 2000, Mr. Lucas had three loans from the Company outstanding. Mr. Lucas owed the Company $683,043 in principal and accrued interest on the loans, which was the largest aggregate amount of indebtedness owed by Mr. Lucas to the Company at any time during the 1999 fiscal year. The principal balances and rates of interest on the loans are $377,195 (5.98% up to 4/29/99; 12.0% thereafter), $145,000 (8.5%) and $107,298 (9.0%). Arrangements have been made with Mr. Lucas to repay the remaining balances outstanding under his loans. Consulting Services Beginning in March 2000, Mr. Bush began providing certain consulting services to the Company. Under his consulting agreement with the Company, Mr. Bush receives a specified daily consulting rate plus reimbursement of any expenses he incurs while performing such consulting services. Other Transactions Mr. Tooker's departure as President and Chief Executive Officer follows an inquiry conducted by a Special Committee consisting of all of the non-management members of the Board of Directors, which reviewed certain transactions between the Company and Mr. Tooker. The effects of the transactions reviewed have been reflected in the Company's results for prior periods, and the Committee believes they are not material to the financial condition or operations of the Company. However, these transactions had not been properly reported to the Company's Board of Directors. Specifically, the Special Committee determined that the Company purchased Mr. Tooker's personal residence in 1997 at a price specified by him, and assumed all liability for the property, including upkeep and existing debt payments, until it was sold in 1999 (the "Ranch Transaction"). The Company sustained a loss of $806,556 as a result of this transaction. Although the payment of these funds has been reflected in the Company's books and records, this transaction was not previously disclosed in prior filings with the SEC, nor was it approved by the Board of Directors. In another transaction, it was determined that in May, 1997 the Company entered into a severance agreement and a separate consulting contract in connection with the separation of an employee who shortly thereafter became Mr. Tooker's spouse. The Company recorded in its books and records payments to or for the benefit of his spouse beginning in May, 1997, and ending in August 1998, totaling $608,317.48, without the knowledge or approval of the Board of Directors. Additionally, these transactions were not previously disclosed in prior filings with the SEC. The Special Committee also determined that while employed by the Company in 1996 and 1997, this employee entered into transactions with a company with whom her sister was believed to be affiliated, in which the Company paid a total of $313,260 for purchases of clothing inventory. The Special Committee did not find any overcharges with respect to the inventory purchases. Demand has been made upon Mr. Tooker to reimburse the Company for the unauthorized payments regarding his personal residence and the severance paid to his spouse. In addition, the Company has demanded repayment by Mr. Tooker of outstanding loans he obtained from the Company, with interest thereon, totaling approximately $1.1 million. Some of these loans are secured by collateral which includes securities of the Company. The Special Committee further determined that during the years 1997 through 1999, the Company maintained a contractual relationship with Stage Planning and Design, Inc. ("SPAD"), believed to be a wholly-owned subsidiary of U.S. Builders, Inc., to manage the construction of store openings and remodeling. Under the terms of this agreement, the Company was required to and did reimburse or pay direct all of SPAD's costs, including all payroll expenses. In 1997, the Company paid SPAD in excess of $2.4 million, and in 1998 in excess of $9.9 million. Until late 1999, Mr. Tooker's son-in-law was an officer and project manager for SPAD, whose compensation was included as a reimbursable expense billed to the Company during this time. Although the expenditures were recorded on the Company's books and records for the years in which they were accrued, the relationship involving Mr. Tooker's son-in-law was not approved by the Board of Directors. News Releases regarding Mr. Tooker's departure and certain other matters were issued by the Company on February 22, 2000 and March 9, 2000. In connection with the aforementioned matters, the Company has received and responded to an information request as part of an informal inquiry by the Securities and Exchange Commission. Transactions with Stockholders Registration Rights Agreement The Company is party to a Registration Agreement (the "Registration Agreement") with Court Square pursuant to which such stockholder has the right to cause the Company to register shares of Common Stock (the "registrable securities") under the Securities Act. As of May 30, 2000, 1,620,652 outstanding shares of Common Stock constitute registrable securities and therefore will be eligible for registration pursuant to the Registration Agreement. Under the terms of the Registration Agreement, the holders of at least a majority of the registrable securities can require the Company, subject to certain limitations, to file up to three "long-form" registration statements under the Securities Act covering all or part of the registrable securities, and, subject to certain limitations, to file an unlimited number of "short-form" registration statements under the Securities Act covering all or part of the registrable securities. The Company is obligated to pay all registration expenses (other than underwriting discounts and commissions and subject to certain limitations) incurred in connection with the demand registrations. In addition, the Registration Statement provides the Court Square with "piggyback" registration rights, subject to certain limitations, whenever the Company files a registration statement on a registration form that can be used to register registrable securities. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) and (d) Financial Statements See "Index to Financial Statements and Schedules" on Page 31. (b) Reports on Form 8-K filed during the last quarter of the period covered by this report. The Company filed a News Release on Form 8-K dated November 4, 1999 related to Stage Stores, Inc. announcing third quarter 1999 sales. The Company filed a News Release on Form 8-K dated November 12, 1999 related to Stage Stores, Inc. announcing the completion of the refinancing of the Company's accounts receivable program. The Company filed a News Release on Form 8-K dated November 18, 1999 related to Stage Stores, Inc. announcing third quarter 1999 results. The Company filed a News Release on Form 8-K dated December 10, 1999 related to Stage Stores, Inc. announcing the dismissal of the class action lawsuit. The Company filed a News Release on Form 8-K dated January 6, 2000 related to Stage Stores, Inc. announcing 1999 holiday period sales. The Company filed a News Release on Form 8-K dated February 3, 2000 related to Stage Stores, Inc. announcing an amendment to the credit agreement, discussing the Company's cost reduction program and reporting fourth quarter 1999 sales. The Company filed a copy of the Fifth Amendment Agreement to the Credit Agreement, dated as of February 3, 2000, on Form 8-K dated February 7, 2000. The Company filed a News Release on Form 8-K dated February 23, 2000 related to Stage Stores, Inc. announcing the departure of the Company's President and Chief Executive Officer and a commitment to increase the Company's working capital facility. The Company filed a News Release on Form 8-K dated March 9, 2000 related to Stage Stores, Inc. announcing fourth quarter and full year 1999 results. The Company also provided additional details on the departure of the Company's President and Chief Executive Officer as announced in a News Release on Form 8-K dated February 23, 2000. The Company filed a News Release on Form 8-K dated May 1, 2000 related to Stage Stores Inc. announcing the departure of the Company's Vice Chairman and Chief Financial Officer. The Company filed a News Release on Form 8-K dated June 1, 2000 related to Stage Stores Inc. announcing a major restructuring under Chapter 11 of the United States Bankruptcy Code and commencement of its reorganization proceedings in the United States Bankruptcy Court in Houston, Texas. (c) Exhibits - See "Exhibit Index" at X-1. SIGNATURES Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. STAGE STORES, INC. /s/ John J. Wiesner June 6, 2000 John J. Wiesner Chairman, Chief Executive Officer and President (principal executive officer) STAGE STORES, INC. /s/ Charles M. Sledge June 6, 2000 Charles M. Sledge Senior VP Finance, Treasurer and Secretary (principal financial and accounting officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated. /s/ John J. Wiesner Chairman of the Board June 6, 2000 John J. Wiesner of Directors /s/ Jack Bush Director June 6, 2000 Jack Bush /s/ Robert Huth Director June 6, 2000 Robert Huth /s/ Richard Jolosky Director June 6, 2000 Richard Jolosky /s/ Harold Compton Director June 6, 2000 Harold Compton INDEX TO FINANCIAL STATEMENTS AND SCHEDULES Page Number Financial Statements Report of Independent Accountants F-1 Consolidated Balance Sheet at January 29, 2000 and January 30, 1999 F-2 Consolidated Statement of Operations for 1999, 1998 and 1997 F-3 Consolidated Statement of Cash Flows for 1999, 1998 and 1997 F-4 Consolidated Statement of Stockholders' Equity for 1999, 1998 and 1997 F-5 Notes to Consolidated Financial Statements F-6 Schedules All schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto. EXHIBIT INDEX The following documents are the exhibits to the Form 10-K. For convenient reference, each exhibit is listed according to the Exhibit Table of Regulation S-K. Exhibit Number Exhibit *2.1 Agreement and Plan of Merger, dated as of March 5, 1997, between Stage Stores, Inc. and C.R. Anthony Company (Incorporated by Reference to Exhibit 2.1 of Registration No. 333-27809 on Form S-4). *2.2 First Amendment to Agreement and Plan of Merger, dated as of May 20, 1997, between Stage Stores, Inc. and C. R. Anthony Company (Incorporated by Reference to Exhibit 2.2 of Registration No. 333-27809 on Form S-4). *3.1 Amended and Restated Certificate of Incorporation of Stage Stores, Inc. (Incorporated by Reference to Exhibit 3.3 of Registration No. 333-5855 on Form S-1). *3.2 Amended and Restated By-Laws of Stage Stores, Inc. (Incorporated by Reference to Exhibit 3.4 of Registration No. 333-5855 on Form S-1). *3.3 Restated Articles Certificate of Incorporation of Specialty Retailers, Inc. (Incorporated by Reference to Exhibit 3.3 of Registration No. 333-32695 on Form S-4). *3.4 Amended and Restated Bylaws of Specialty Retailers, Inc. (Incorporated by Reference to Exhibit 3.4 of Registration No. 333-32695 on Form S-4). *3.5 Certificate of Incorporation of Specialty Retailers, Inc. (NV) (Incorporated by Reference to Exhibit 3.5 of Registration No. 333-32695 on Form S-4). *3.6 Bylaws of Specialty Retailers, Inc. (NV) (Incorporated by Reference to Exhibit 3.6 of Registration No. 333-32695 on Form S-4). *3.7 Rights Agreement dated as of November 11, 1998 between Stage Stores, Inc. and ChaseMellon Shareholder Services, L.L.C. as Rights Agent (Incorporated by Reference to Exhibit 1 of Form 8- K of Stage Stores, Inc., dated November 12, 1998). *4.1 Credit Agreement dated as of June 17, 1997 by and among Specialty Retailers, Inc., Stage Stores, Inc., the banks named therein and Credit Suisse First Boston (Incorporated by Reference to Exhibit 4.1 of Registration No. 333-32695 on Form S-4). *4.2 Amendment Agreement dated as of June 26, 1997 by and among Specialty Retailers, Inc., Stage Stores, Inc., the banks named therein and Credit Suisse First Boston to the Credit Agreement dated as of June 17, 1997 (Incorporated by Reference to Exhibit 4.2 on Form 10-K of Stage Stores, Inc., for fiscal year ended January 30, 1999). *4.3 Second Amendment Agreement dated as of October 1, 1997 by and among Specialty Retailers, Inc., Stage Stores, Inc., the banks named therein and Credit Suisse First Boston to the Credit Agreement dated as of June 17, 1997 (Incorporated by Reference to Exhibit 4.3 on Form 10-K of Stage Stores, Inc., for fiscal year ended January 30, 1999). *4.4 Third Amendment Agreement dated as of October 6, 1998 by and among Specialty Retailers, Inc., Stage Stores, Inc., the banks named therein and Credit Suisse First Boston to the Credit Agreement dated as of June 17, 1997. (Incorporated by Reference to Exhibit 4.1 on Form 10-Q of Stage Stores, Inc., dated October 31, 1998). EXHIBIT INDEX (Continued) Exhibit Number Exhibit *4.5 Fourth Amendment Agreement dated as of January 27, 1999 by and among Specialty Retailers, Inc., Stage Stores, Inc., the banks named therein and Credit Suisse First Boston to the Credit Agreement dated as of June 17, 1997. (Incorporated by Reference to Form 8-K of Stage Stores, Inc., dated January 28, 1999). *4.6 Fifth Amendment Agreement dated as of February 3, 2000 by and among Specialty Retailers, Inc., Stage Stores, Inc., the banks named therein and Credit Suisse First Boston to the Credit Agreement dated as of June 17, 1997. (Incorporated by Reference to Form 8-K of Stage Stores, Inc., dated February 7, 2000). **4.7 Sixth Amendment Agreement dated as of February 18, 2000 by and among Specialty Retailers, Inc., Stage Stores, Inc., the banks named therein and Credit Suisse First Boston to the Credit Agreement dated as of June 17, 1997. **4.8 Credit Agreement dated as of March 6, 2000 by and among Specialty Retailers, Inc., Stage Stores, Inc., the banks named therein and Credit Suisse First Boston. *4.9 Indenture dated as of June 17, 1997 relating to the $200,000,000 aggregate principal amount of 81/2% Senior Notes due 2005 among Specialty Retailers, Inc., Stage Stores, Inc. and State Street Bank and Trust Company, and First Supplemental Indenture dated as of July 2, 1997 (Incorporated by Reference to Exhibit 4.2 of Registration No. 333-32695 on Form S-4). *4.10 Indenture dated as of June 17, 1997 relating to the $100,000,000 aggregate principal amount of 9% Senior Subordinated Notes due 2007 among Specialty Retailers, Inc., Stage Stores, Inc. and State Street Bank and Trust Company, and First Supplemental Indenture dated as of July 2, 1997 (Incorporated by Reference to Exhibit 4.3 of Registration No. 333-32695 on Form S-4). *4.11 Indenture between 3 Bealls Holding Corporation and Bankers Trust Company, as Trustee, relating to 3 Bealls Holding Corporation's 9% Subordinated Debentures due 2002 (Incorporated by Reference to Exhibit 4.2 of Registration No. 33-24571 on Form S-4) and First Supplemental Indenture dated August 2, 1993 (Incorporated by Reference to Exhibit 4.4 of Registration No. 33-68258 on Form S-4). *4.12 Indenture between 3 Bealls Holding Corporation and IBJ Schroder Bank and Trust Company, as Trustee, relating to 3 Bealls Holding Corporation's 7% Junior Subordinated Debentures due 2002 (Incorporated by Reference to Exhibit 4.3 of Registration No. 33- 24571 on Form S-4) and First Supplemental Indenture dated August 2, 1993 (Incorporated by Reference to Exhibit 4.5 of Registration No. 33-68258 on Form S-4). **4.13 Second Amended and Restated Pooling and Servicing Agreement by and among SRI Receivables Purchase Co., Inc., Specialty Retailers, Inc., and Bankers Trust (Delaware) dated November 1, 1999. **4.14 Amendment and Consent to the Second Amended and Restated Pooling and Servicing Agreement by and among SRI Receivables Purchase Co., Inc., Specialty Retailers, Inc., and Bankers Trust (Delaware) dated December 9, 1999. *4.15 Amended and Restated Receivables Purchase Agreement among SRI Receivables Purchase Co., Inc. and Originators dated May 30, 1996 (Incorporated by Reference to Exhibit 4.7 on Form 10-Q of Apparel Retailers, Inc., dated May 4, 1996). EXHIBIT INDEX (Continued) Exhibit Number Exhibit *4.16 First Amendment to the Amended and Restated Receivables Purchase Agreement among SRI Receivables Purchase Co., Inc. and Originators dated August 1, 1998 (Incorporated by Reference to Exhibit 4.14 on Form 10-K of SRI Receivables Purchase Co., Inc., for fiscal year ended January 30, 1999). **4.17 Second Amendment to the Amended and Restated Receivables Purchase Agreement among SRI Receivables Purchase Co., Inc. and Originators dated November 9, 1999. *4.18 Receivables Transfer Agreement among Specialty Retailers, Inc., and Granite National Bank, N.A. dated as of August 1, 1998 (Incorporated by Reference to Exhibit 4.15 on Form 10-K of SRI Receivables Purchase Co., Inc., for fiscal year ended January 30, 1999). **4.19 First Amendment to the Receivables Transfer Agreement among Specialty Retailers, Inc., and Granite National Bank, N.A. dated as of November 9, 1999. **4.20 Series 1999-1 Supplement to the Second Amended and Restated Pooling and Servicing Agreement among SRI Receivables Purchase Co., Inc., Specialty Retailers, Inc. and Bankers Trust "Delaware", dated as of November 9, 1999, including amendments as of December 9, 1999. **4.21 Issuance Supplement I to the Series 1999-1 Supplement to the Second Amended and Restated Pooling and Servicing Agreement among SRI Receivables Purchase Co., Inc., Specialty Retailers, Inc. and Bankers Trust "Delaware", dated as of November 9, 1999. **4.22 Issuance and Indemnity Agreement among Specialty Retailers, Inc., SRI Receivables Purchase Co., Inc., Bankers Trust "Delaware" and R.V.I. Guaranty Co. Ltd, dated as of December 9, 1999. **4.23 Class A-1 Certificate Purchase Agreement among SRI Receivables Purchase Co., Inc., Specialty Retailers, Inc., the Class A-1 Purchasers parties thereto and Credit Suisse First Boston, dated as of November 9, 1999. **4.24 Class A-2 Certificate Purchase Agreement among SRI Receivables Purchase Co., Inc., Specialty Retailers, Inc., the Class A-2 Purchasers parties thereto and Credit Suisse First Boston, dated as of November 9, 1999. **4.25 Class B Certificate Purchase Agreement among SRI Receivables Purchase Co., Inc., Specialty Retailers, Inc., the Class B Purchasers parties thereto and Credit Suisse First Boston, dated as of November 9, 1999. **4.26 Class C and Class D Certificate Purchase Agreement among SRI Receivables Purchase Co., Inc., Specialty Retailers, Inc., and Credit Suisse First Boston, dated as of November 9, 1999. *10.1 Registration Agreement by and among Specialty Retailers, Inc., Tyler Capital Fund, L.P. Tyler Massachusetts, L.P., Tyler International, L.P.-I, Tyler International, L.P.-II, Bain Venture Capital, Citicorp Capital Investors, Ltd., Acadia Partners, L.P., Drexel Burnham Lambert Incorporated, and certain other Purchasers, dated December 29, 1988 (Incorporated by Reference to Exhibit 10.10 of Registration No. 33-27714 on Form S-1) and Amendment to Registration Agreement dated August 2, 1993 (Incorporated by Reference to Exhibit 10.5 of Registration No. 33-68258 on Form S-4). *10.2 Apparel Retailers, Inc. Stock Option Plan (Incorporated by Reference to Exhibit 10.13 of Registration No. 33-68258 on Form S-4). EXHIBIT INDEX (Continued) Exhibit Number Exhibit *10.3 Employment Agreement between Stage Stores, Inc. and Carl E. Tooker dated April 1, 1998. (Incorporated by Reference to Exhibit 10.3 on Form 10-K of Stage Stores, Inc., dated January 31, 1998). *10.4 Stock Option Agreement between Specialty Retailers, Inc. and Carl E. Tooker dated June 9, 1993 (Incorporated by Reference to Exhibit 10.18 of Registration No. 33-68258 on Form S-4). *10.5 Employment Agreement between James Marcum and Stage Stores, Inc. dated April 1, 1998. (Incorporated by Reference to Exhibit 10.6 on Form 10-K of Stage Stores, Inc., dated January 31, 1998). *10.6 Employment Agreement between Stephen Lovell and Stage Stores, Inc. dated April 1, 1998. (Incorporated by Reference to Exhibit 10.7 on Form 10-K of Stage Stores, Inc., dated January 31, 1998). *10.7 Employment Agreement between Ron Lucas and Stage Stores, Inc. dated April 1, 1998. (Incorporated by Reference to Exhibit 10.8 on Form 10-K of Stage Stores, Inc., dated January 31, 1998). *10.8 Employment Agreement between Jim Bodemuller and Stage Stores, Inc. dated April 1, 1998. (Incorporated by Reference to Exhibit 10.9 on Form 10-K of Stage Stores, Inc., dated January 31, 1998). **10.9 Employment Agreement between John J. Wiesner and Stage Stores, Inc. dated February 22, 2000. **10.10 First Amendment to Employment Agreement between John J. Wiesner and Stage Stores, Inc. dated May 5, 2000. *10.11 Securities Purchase Agreement among Palais Royal, Inc. and certain selling stockholders of Uhlmans, dated May 9, 1996 (Incorporated by Reference to Exhibit 10.1 on Form 10-Q of Stage Stores, Inc., dated June 12, 1996). *10.12 Stage Stores, Inc. Amended and Restated 1996 Equity Incentive Plan (Incorporated by Reference to Exhibit A of the Proxy Statement for the annual meeting of stockholders of Stage Stores, Inc., dated April 13, 1999). *21.1 List of Registrant's Subsidiaries. **23.1 Consent of PricewaterhouseCoopers LLP. **27.1 Financial Data Schedule. ________ * Previously Filed ** Filed Herewith Report of Independent Accountants To the Board of Directors and Stockholders of Stage Stores, Inc. In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, stockholders' equity and cash flows present fairly, in all material respects, the financial position of Stage Stores, Inc. and its subsidiaries (the "Company") at January 29, 2000 and January 30, 1999, and the results of their operations and their cash flows for each of the three years in the period ended January 29, 2000, in conformity with accounting principles generally accepted in the United States. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company incurred a net loss of $281.9 million for the year ended January 29, 2000 and had a working capital deficit and stockholders' deficit of $258.2 million and $75.0 million, respectively, at January 29, 2000. As described in Note 2 to the financial statements, the Company's financial performance to date for the year ending February 3, 2001 has resulted in restrictions on the credit terms for the purchase of merchandise inventory. Additionally, the Company is in violation of certain terms of its loan agreements. As a result, on June 1, 2000 the Company, filed for protection under Chapter 11 of Title 11 of the United States Bankruptcy Code. These matters raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 2 to the financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. As discussed in Note 1 to the financial statements, the Company adopted Statement of Position 98-5, "Reporting on Cost of Start- Up Activities," during the year ended January 29, 2000. PricewaterhouseCoopers LLP Houston, Texas March 9, 2000, except as to Notes 2, 6, 11, 13 and 14 to the financial statements, which are as of June 1, 2000 Stage Stores, Inc. Consolidated Balance Sheet (in thousands, except par values) January 29, 2000 January 30, 1999 ASSETS Cash and cash equivalents $20,179 $12,832 Undivided interest in accounts receivable trust 41,600 69,816 Merchandise inventories, net 261,104 341,316 Prepaid expenses 7,945 24,981 Other current assets 26,246 34,436 Deferred income taxes -- 25,056 Total current assets 357,074 508,437 Property, equipment and leasehold improvements, net 181,834 233,263 Goodwill, net -- 92,551 Other assets 15,779 23,429 Total assets $554,687 $857,680 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Accounts payable $40,955 $82,779 Accrued expenses and other current liabilities 72,177 52,706 Current portion of long-term debt 9,830 4,814 Long-term debt classified as current 492,393 -- Total current liabilities 615,355 140,299 Long-term debt including credit facilities -- 487,968 Other long-term liabilities 14,299 21,175 Deferred income taxes -- 3,846 Total liabilities 629,654 653,288 Preferred stock, par value $1.00, non- voting, 3 shares authorized, no shares issued or outstanding -- -- Common stock, par value $0.01, 75,000 shares authorized, 26,834 and 26,718 shares issued and outstanding, respectively 268 267 Class B common stock, par value $0.01, convertible non-voting, 3,000 shares authorized, 1,250 shares issued and outstanding 13 13 Additional paid-in capital 266,590 265,716 Accumulated deficit (337,500) (55,610) Accumulated other comprehensive income (4,338) (5,994) Stockholders' equity (deficit) (74,967) 204,392 Commitments and contingencies -- -- Total liabilities and stockholders' equity (deficit) $554,687 $857,680 Stage Stores, Inc. Consolidated Statement of Operations (in thousands, except earnings per share) Fiscal Year 1999 1998 1997 Net sales $1,121,567 $1,173,547 $1,073,316 Cost of sales and related buying, occupancy and distribution expenses 897,117 839,238 730,179 Gross profit 224,450 334,309 343,137 Selling, general and administrative expenses 387,816 271,477 240,011 Store opening and closure program costs 44,986 10,192 8,686 Operating income (loss) (208,352) 52,640 94,440 Interest, net 48,634 46,471 38,277 Income (loss) before income tax, extraordinary item and cumulative effect of change in accounting principle (256,986) 6,169 56,163 Income tax expense 20,217 2,455 21,623 Income (loss) before extraordinary item and cumulative effect of change in accounting principle (277,203) 3,714 34,540 Extraordinary item, net of tax -- early retirement of debt (749) -- (18,295) Cumulative effect of change in accounting principle, net of tax - reporting costs of start-up activities (3,938) -- -- Net income (loss) $(281,890) $3,714 $16,245 Basic earnings (loss) per common share data: Basic earnings per common share before extraordinary item and cumulative effect of change in accounting principle $(9.89) 0.13 $1.34 Extraordinary item, net of tax -- early retirement of debt (0.03) -- (0.71) Cumulative effect of change in accounting principle, net of tax - reporting costs of start-up activities (0.14) -- -- Basic earnings (loss) per common share $(10.06) $0.13 $0.63 Basic weighted average common shares outstanding 28,028 27,885 25,808 Diluted earnings (loss) per common share data: Diluted earnings per common share before extraordinary item and cumulative effect of change in accounting principle $(9.89) $0.13 $1.30 Extraordinary item, net of tax -- early retirement of debt (0.03) -- (0.69) Cumulative effect of change in accounting principle, net of tax - reporting costs of start-up activities (0.14) -- -- Diluted earnings (loss) per common share $(10.06) $0.13 $0.61 Diluted weighted average common shares outstanding 28,028 28,428 26,483 Stage Stores, Inc. Consolidated Statement of Cash Flows (in thousands) Fiscal Year 1999 1998 1997 Cash flows from operating activities: Net income (loss) $(281,890) $3,714 $16,245 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 173,631 33,474 19,828 Deferred income taxes 20,151 2,371 27,438 Accretion of discount 1,254 1,138 1,231 Amortization of debt issue costs 2,930 2,577 2,274 Loss on early retirement of debt 749 -- 18,295 Cumulative effect of change in accounting principle 3,938 -- -- Changes in operating assets and liabilities: Decrease (increase) in undivided interest in accounts receivable trust 28,216 (8,605) 22,777 Decrease (increase) in merchandise inventories 80,212 (38,201) (76,451) Decrease (increase) in other assets 24,629 (2,637) (26,970) Increase (decrease) in accounts payable and accrued liabilities (29,919) (9,341) 14,167 Total adjustments 305,791 (19,224) 2,589 Net cash provided by (used in) operating activities 23,901 (15,510) 18,834 Cash flows from investing activities: Additions to property, equipment and leasehold improvements (22,037) (88,719) (64,859) Acquisitions, net of cash acquired -- -- (4,946) Net cash used in investing activities (22,037) (88,719) (69,805) Cash flows from financing activities: Proceeds from: Credit facilities 43,000 96,300 45,700 Long-term debt -- -- 299,718 Common stock 128 955 22,522 Payments on: Long-term debt (34,813) (2,596) (299,533) Additions to debt issue costs (2,832) (913) (12,407) Net cash provided by financing activities 5,483 93,746 56,000 Net increase (decrease) in cash and cash equivalents 7,347 (10,483) 5,029 Cash and cash equivalents: Beginning of year 12,832 23,315 18,286 End of year $20,179 $12,832 $23,315 Supplemental disclosures: Cash flow information: Interest paid $45,528 $43,015 $45,988 Income taxes paid (refunded) $197 $(2,872) $(14,436) Non-cash investing and financing activities: In connection with various acquisitions, liabilities were assumed as follows: Fair value allocated to assets acquired $-- $-- $120,665 Cash paid for assets acquired, including acquisition expenses -- -- (4,946) Value of Common Stock exchanged -- -- (72,284) Liabilities assumed $-- $-- $43,435 Stage Stores, Inc. Consolidated Statement of Stockholders' Equity (Deficit) (in thousands) Fiscal Year 1999 1998 1997 Shares Outstanding Shares of common stock issued: Beginning balance 26,718 26,500 22,033 Issuance of stock 116 218 4,467 Ending balance 26,834 26,718 26,500 Shares of Class B stock issued: Beginning balance 1,250 1,250 1,250 Ending balance 1,250 1,250 1,250 Stockholders' Equity (Deficit) Common stock issued: Beginning balance $267 $265 $220 Issuance of stock 1 2 45 Ending balance 268 267 265 Class B stock issued: Beginning balance 13 13 13 Ending balance 13 13 13 Additional Paid-in Capital: Beginning balance 265,716 264,679 169,811 Issuance of stock 874 953 94,761 Vested compensatory stock options -- 84 107 Ending balance 266,590 265,716 264,679 Accumulated deficit and accumulated other comprehensive income: Beginning balance (61,604) (59,879) (77,778) Comprehensive income (loss): Net income (loss) (281,890) 3,714 16,245 Other comprehensive income (loss) 1,656 (5,439) 1,654 Total comprehensive income (loss) (280,234) (1,725) 17,899 Ending balance (341,838) (61,604) (59,879) Total Stockholders' Equity (Deficit) $(74,967) $204,392 $205,078 Accumulated other comprehensive income: Beginning balance $(5,994) $(555) $(2,209) Comprehensive income (loss) - Minimum pension liability adjustment, net of tax 1,656 (5,439) 1,654 Ending balance $(4,338) $(5,994) $(555) Stage Stores, Inc. Notes to Consolidated Financial Statements NOTE 1 - DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES Description of Business: Stage Stores, Inc. ("Stage Stores" or the "Company"), through its wholly-owned subsidiary, Specialty Retailers, Inc. ("SRI"), operates family apparel stores primarily under the names "Bealls", "Palais Royal" and "Stage" offering nationally recognized brand name family apparel, accessories, cosmetics and footwear. As of January 29, 2000, the Company operated 648 stores in thirty-three states located throughout the United States. Principles of Consolidation: The consolidated financial statements include the accounts of Stage Stores and its wholly- owned subsidiaries. All significant intercompany transactions have been eliminated in consolidation. Fiscal Year: References to a particular year are to the Company's fiscal year which is the 52 or 53 week period ending on the Saturday closest to January 31 of the following calendar year (e.g., a reference to "1999" is a reference to the fiscal year ended January 29, 2000). Use of Estimates: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make certain estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Cash and Cash Equivalents: The Company considers highly liquid investments with initial maturities of less than three months to be cash equivalents in its statement of cash flows. Accounts Receivable Securitization: The Company securitizes substantially all of its trade accounts receivable through a wholly-owned special purpose entity, SRI Receivables Purchase Co., Inc. ("SRPC"). SRPC holds a retained interest in the securitization vehicle (the "Retained Interest"), a special purpose trust (the "Trust"). The Company accounts for the Retained Interest in accordance with Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities" ("SFAS 115"). Under SFAS 115, the Retained Interest is accounted for as an investment in debt securities and classified as trading securities. Accordingly, the Retained Interest is recorded at fair value in the accompanying balance sheet with any change in fair value reflected currently in income. The unrealized gain recorded to income in 1999, 1998 and 1997 was $7.3 million, $3.2 million and $0.7 million, respectively. Merchandise Inventories: The Company states its merchandise inventories at the lower of cost or market based upon the retail method of accounting, cost being determined using the last-in, first-out ("LIFO") method. Market is estimated on a pool-by-pool basis. The Company believes that the LIFO method, which charges the most recent merchandise costs to the results of current operations, provides a better matching of current costs with current revenues in the determination of operating results. During 1999 inventory quantities were reduced. This reduction resulted in a liquidation of LIFO inventory quantities carried at higher costs prevailing in prior years as compared with the cost of 1999 purchases, the effect of which increased cost of goods sold by approximately $8.8 million and increased net loss by approximately $8.8 million or $0.31 dollars per share. Property, Equipment and Leasehold Improvements: Property, equipment and leasehold improvements are stated at cost and depreciated over their estimated useful lives using the straight- line method. The estimated useful lives of leasehold improvements do not exceed the term of the related lease, including renewal options. The estimated useful lives in years are generally as follows: Buildings 20-25 Store and office fixtures and equipment 5-12 Warehouse equipment 5-15 Leasehold improvements 5-30 Goodwill and Other Intangibles: The Company amortizes goodwill and intangible assets on a straight-line basis over the estimated future periods benefited, not to exceed forty years. Amortization periods for goodwill and other intangibles associated with acquisitions are currently five to forty years. Each year, the Company evaluates the remaining useful life associated with goodwill based upon, among other things, historical and expected long-term results of operations. Accumulated amortization of goodwill was $10.3 million at January 30, 1999. Debt Issue Costs: Debt issue costs are accounted for as a deferred charge and amortized on a straight-line basis over the term of the related issue. Amortization of debt issue costs were $2.9 million, $2.6 million and $2.3 million for 1999, 1998 and 1997, respectively. Accrued Expenses and Other Current Liabilities: Accrued expenses and other current liabilities include accrued payroll and related payroll taxes of $8.3 million and $7.3 million at January 29, 2000 and January 30, 1999, respectively. Financial Instruments: Except for the Retained Interest, the Company records all financial instruments at cost. The cost of all financial instruments, except long-term debt and the Retained Interest, approximates fair value. Comprehensive income: Other comprehensive income refers to revenues, expenses, gains and losses that under generally accepted accounting principles are recorded directly as an adjustment to stockholders' equity. Minimum pension liability adjustment is the Company's only component of comprehensive income. The minimum pension liability adjustments recorded in the accompanying statement of stockholders' equity are net of tax expense (benefit) of ($1.7) million, $3.5 million and ($1.1) million in 1999, 1998 and 1997, respectively. Store Pre-Opening Expenses: Costs related to the opening of new stores are expensed as incurred. Advertising Expenses: Advertising costs are charged to operations when the related advertising first takes place. Advertising costs were $52.5 million, $50.4 million and $39.5 million for 1999, 1998 and 1997, respectively. Prepaid advertising costs were $1.3 million and $2.7 million at January 29, 2000 and January 30, 1999, respectively. Impairment of Assets: The Company reviews for the impairment of long-lived assets and certain identifiable intangibles whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. An impairment loss would be recognized when estimated future cash flows expected to result from the use of the asset and its eventual disposition are less than its carrying amount. Income Taxes: The provision for income taxes is computed based on the pretax income included in the Consolidated Statement of Operations. The asset and liability approach is used to recognize deferred tax liabilities and assets for the expected future tax consequences of temporary differences between the carrying amounts for financial reporting purposes and the tax basis of assets and liabilities. A valuation allowance is to be established if it is more likely than not that some portion of the deferred tax asset will not be realized. Earnings per Share: Basic earnings per share is computed using the weighted average number of common shares outstanding during the periods. Diluted earnings per share is computed using the weighted average number of common shares as well as all potentially dilutive common share equivalents outstanding. Stock options and restricted stock are the only potentially dilutive share equivalents the Company has outstanding for the periods presented. Incremental shares of 543 thousand and 675 thousand in 1998 and 1997, respectively, were used in the calculation of diluted earnings per common share. All common share equivalents were excluded from the computation of diluted earnings per share in 1999, as they were anti-dilutive. Common share equivalents of 408 thousand and 245 thousand in 1998 and 1997, respectively, were not included in the computation of diluted earnings per share as they were anti-dilutive. Start-up Costs: In April 1998, the Accounting Standards Executive Committee issued Statement of Position 98-5, "Reporting on the Costs of Start-Up Activities" ("SOP 98-5"), effective for fiscal years beginning after December 15, 1998. SOP 98-5 provides guidance on the financial reporting of start-up costs and organization costs. It requires costs of start-up activities and organization costs to be expensed as incurred. Initial adoption of SOP 98-5 is to be reported as the cumulative effect of a change in accounting principle. The Company adopted SOP 98-5 in the first quarter of 1999 which resulted in a net of tax charge of $3.9 million. Reclassifications: The accompanying Consolidated Financial Statements include reclassifications from financial statements issued in previous years. New Accounting Pronouncements: In June 1998 the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," which requires that all derivative financial instruments be recorded in the financial statements. SFAS No. 133 is effective for the Company in the first quarter of 2001, and the Company is in the process of ascertaining the impact this new standard will have on its financial statements. In March 2000, the FASB issued interpretation No. 44, Accounting for Certain Transactions Involving Stock Compensation which provides guidance for certain issues arising from the application of APB Opinion No. 25; the Company is currently evaluating the impact of application of this interpretation on its financial statements. NOTE 2 - LIQUIDITY AND MANAGEMENT PLANS The Company incurred a net loss of $281.9 million for the year ended January 29, 2000; the Company also had working capital deficit and stockholders' deficit of $258.3 million and $75.0 million respectively, at January 29, 2000. The Company is highly leveraged and depends on adequate trade support to fund its inventory working capital requirements. As a result of the Company's poor financial performance to date for the year ending February 3, 2001, the vendor community has significantly restricted the Company's access to normal trade terms. As a result, the Company can not currently believe it has sufficient liquidity to fund its working capital requirements As of June 1, 2000, the Company was in violation of certain covenants under its various debt agreements. As a result, substantially all of the Company's debt has been classified as current in the accompanying balance sheet at January 29, 2000. These violations of the terms of its debt agreements could allow lenders to take actions to accelerate the repayment schedule of these debt instruments. The Company would be unable to pay amounts becoming due as a result of any acceleration of repayment terms. As a result of the foregoing, the Company filed for protection under Chapter 11 of Title 11 of the United States Bankruptcy Code ("Chapter 11") on June 1, 2000. Under Chapter 11, the Company is seeking approval to operate as a debtor-in- possession. The Company is currently negotiating with a lender to finance the Company's working capital requirements during Chapter 11 reorganization proceedings, however there can be no assurances the financing will be obtained or approved by the Court. Under Chapter 11, the Company would intend to operate its business as debtor-in-possession, subject to the approval of the Bankruptcy Court for certain proposed actions. Additionally, one or more creditor committees would be formed and would have the right to review and object to any non-ordinary course of business transactions and participate in the formulation of any plan or plans of reorganization. As of the petition date, actions to collect pre-petition indebtedness are stayed and other contractual obligations may not be enforced against the Company. In addition, the Company may reject executory contracts and lease obligations, and parties affected by these rejections may file claims with the Bankruptcy Court in accordance with the reorganization process. Substantially all liabilities as of the petition date are subject to settlement under a plan of reorganization to be voted upon by all impaired classes of creditors and equity security holders and approved by the Bankruptcy Court. As a result of the foregoing matters, the estimate of expected future cash flows of stores was lowered. The Company recorded an impairment loss of $41.7 million in 1999, consisting of increased depreciation and amortization of $26.0 million related to property, equipment and leasehold improvements associated with underperforming stores and associated goodwill of $15.7 million. The impairment loss is included in selling, general and administrative expense in the accompanying statement of operations. Additionally, because of the foregoing matters the Company reevaluated the recoverability of its remaining goodwill; as a result the Company wrote-off the remaining balance amounting to $67.9 million and other intangible assets amounting to $1.0 million during 1999. The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates continuity of operations, realization of assets and liquidation of liabilities in the ordinary course of business. However, as a result of the Chapter 11 filing and circumstances relating to this event, including the Company's highly leveraged financial structure and recurring losses from operations as reflected in the consolidated financial statements, such realization of assets and liquidation of liabilities is subject to uncertainty. Further, a plan of reorganization could materially change the amounts reported in the consolidated financial statements, which do not give effect to any adjustments to the carrying value of assets or amounts of liabilities that might be necessary as a consequence of a plan of reorganization. Additionally, there will likely be additional store closures as part of the reorganization process which would result in additional adjustments. The ability of the Company to continue as a going concern is dependent upon, among other things, confirmation of a plan of reorganization, future profitable operations, the ability to comply with debtor- in-possession agreements and the ability to generate sufficient cash from operations and financing sources to meet obligations. Additionally, the accompanying consolidated financial statements do not include any adjustments that would be required if the Company were in liquidation. Substantially all of the Company's liabilities are subject to settlement under reorganization proceedings. The Company's debt to banks and bondholders is in default of the terms of the applicable loan agreements, notes and debentures. For financial reporting purposes, those liabilities and obligations have been classified as current liabilities. The ultimate adequacy of security for any secured debt obligations and settlement of all liabilities and obligations cannot be determined until a plan of reorganization is confirmed. NOTE 3 - STORE CLOSURE PROGRAM During the second quarter of 1999, the Company implemented a store closure program under which the Company closed 35 underperforming stores during the last three quarters of 1999. During the fourth quarter of 1999, the Company implemented a store closure program to close an additional 64 stores. As of January 29, 2000, 5 of the stores have been closed while the remaining 59 stores are expected to be closed by the end of the third quarter of 2000. In connection with these closures, the Company recorded $59.0 million of pretax costs, of which $14.8 million is included in cost of sales while the remaining $44.2 million is included in store opening and closure program costs. Of the $59.0 million of costs, approximately $9.4 million represents severance and lease termination costs, approximately $2.8 million represents a reserve for uncollectible accounts receivable associated with the Company's private label credit card program, approximately $3.4 million represents write-off of prepaid supplies and signage, approximately $14.8 million represents a lower of cost or market reserve related to the inventory being liquidated in the stores in the store closure program, while the balance relates primarily to the write-off of fixed assets and intangibles associated with these stores. As of January 29, 2000, the accompanying balance sheet includes a lower of cost or market reserve of $6.2 million related to the inventory remaining to be liquidated in the stores in the closure program and $8.2 million for estimated severance and lease termination costs to be paid. The stores included in the store closure program had the following operating results prior to store closure charges: 1999 1998 1997 Net sales $56,062 $72,929 $61,281 Gross margin 17,380 26,196 21,292 Direct operating expense 21,942 29,424 20,683 Contribution before corporate allocations $(4,562) $(3,228) $609 NOTE 4 - ACCOUNTS RECEIVABLE SECURITIZATION Pursuant to the accounts receivable securitization (the "Accounts Receivable Program"), the Company sells substantially all of the accounts receivable generated by the holders of the Company's private label credit card accounts to SRPC on a daily basis in exchange for cash or an increase in the Company's interest. SRPC is a separate limited-purpose subsidiary that is operated in a fashion intended to ensure that its assets and liabilities are distinct from those of the Company and its other affiliates as SRPC's creditors have a claim on its assets prior to becoming available to any creditor of the Company. On November 9, 1999, the Company completed a refinancing of the existing term and revolving certificates outstanding under its Accounts Receivable Program. In connection with the refinancing, the previously existing term and revolving certificates were replaced with new term and revolving certificates (the "New Certificates"). The New Certificates provide the Company with a maximum availability of $329.9 million, subject to the amount of receivables held in the Trust. The New Certificates consists of $283.5 million of revolving certificates and $46.4 million of term certificates. The revolving certificates consist of Class A and Class B Variable Funding Certificates and the term certificates consist of Class C and Class D Floating Rate Asset Backed Certificates. In addition, the trust has issued Class E Certificates, which are subordinate to all of the other certificates. The amount of the outstanding balance under the revolving certificates will vary based upon a number of factors which include, among others, the level of receivables in the Trust and the working capital needs of the Company. The commitment period for the revolving certificates expires in November 2000 and is subject to annual renewal with consent from the holders of the revolving certificates. The term certificates begin to amortize during September 2002. Under certain circumstances, collections on the accounts receivable portfolio which would have otherwise been available to the Company, may be retained within the Trust to be unavailable to the Company until the satisfaction of certain conditions. As of January 29, 2000, $1.2 million was being retained in the Trust. In addition, certain conditions could cause an early amortization event in the Trust. If such an event occurs, the amortization period for all the certificates would begin immediately. The filing of protection under Chapter 11 of Title 11 of the United States Bankruptcy Code would trigger an early amortization event, which results in the acceleration of principle payments to certain classes of certificate holders. Additionally, an amortization event could result in write down in the recorded amount of the undivided interest in the accounts receivable trusts included in the accompanying balance sheet. Based upon the amount of receivables in the Trust at the time of closing, the Company received $292.4 million of proceeds. Of this amount, $259.3 million was used to retire the outstanding balances under the previously existing Trust certificates, which were scheduled to begin amortizing in December of 1999. The remainder of the proceeds were used to redeem the previously existing $30.0 million aggregate principle amount of SRPC 12.5% Trust certificate-backed notes and other costs associated with the refinancing. In connection with the refinancing, the Company recorded an after-tax extraordinary charge of approximately $0.7 million in the fourth quarter of 1999 related to the early retirement of debt. Amounts outstanding under the New Certificates are funded by the issuance of commercial paper in the open market through a facility agent at various rates and maturities. If the commercial paper market is unavailable, amounts outstanding under the revolving component of the New Certificates will be funded by a liquidity provider. If accounts receivable balances in the Trust fall below the level required to support the term certificates and revolving certificates, certain principal collections may be retained in the Trust until such time as the receivable balances exceed the certificates then outstanding and the required Company's interest. The Trust may issue additional series of certificates from time to time. Terms of any future series will be determined at the time of issuance. The outstanding balances of the term certificates totaled $46.4 million and $165.0 million at January 29, 2000 and January 30, 1999, respectively. There was $270.7 million and $115.6 million outstanding under the revolving certificates at January 29, 2000 and January 30, 1999, respectively. Total accounts receivable transferred to the Trust during 1999, 1998 and 1997 were $567.1 million, $585.3 million and $508.9 million, respectively. The cash flows generated from the accounts receivable in the Trust are dedicated to: (i) the purchase of new accounts receivable generated by the Company; (ii) payment of a return on the certificates; and (iii) the payment of a servicing fee to SRI. Any remaining cash flows are remitted to SRPC. The New Certificates entitle the holders to receive a return, based upon the London Interbank Offered Rate ("LIBOR"), plus a specified margin. At January 29, 2000, the blended rate of return on the New Certificates was 6.5%. Accounts receivable sold to SRPC that subsequently become defaulted are allocated to each certificate class by order of preference. Class A Certificates are senior to all of the other certificates and Class E Certificates are subordinate to all the other certificates. The Class E Certificates are held by the Company and comprise the Company's undivided interest in the Trust. This amount represents the Company's total risk exposure with respect to the Accounts Receivable Program. NOTE 5 - PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS Property, equipment and leasehold improvements were as follows (in thousands): January 29, 2000 January 30, 1999 Land $3,074 $3,074 Buildings 16,980 16,980 Fixtures and equipment 206,632 198,588 Leasehold improvements 132,843 130,870 359,529 349,512 Accumulated depreciation 177,695 116,249 $181,834 $233,263 Depreciation expense was $73.9 million, $25.9 million and $16.8 million for 1999, 1998 and 1997, respectively. Depreciation expense for 1999 includes impairment charges of $26.0 million related to property, equipment and leasehold improvements associated with underperforming stores and $17.3 million of writedown related to stores included in the store closure program. Gains and losses on retirement or disposition of fixed assets are recognized when incurred and are included in income (loss) from operations. See Note 2 to financial statements. NOTE 6 - LONG-TERM DEBT Long-term debt consists of the following (in thousands): January 29, 2000 Janaury 30, 1999 Senior Notes $200,000 $200,000 Senior Subordinated Notes, net of discount 99,721 99,696 Credit Facility 185,000 142,000 SRPC Notes -- 30,000 Other long-term debt 17,502 21,086 502,223 492,782 Less debt classified as current 492,393 -- Less current maturities 9,830 4,814 $-- $487,968 As of June 1, the Company was in violation of certain of its covenants under its various debt agreements. These violations of the terms of its debt agreements could allow lenders to take actions to accelerate the repayment schedule of these debt instruments. Therefore, the Company's debt has been classified as current. The Senior Notes were issued during June 1997 by SRI with a principal amount of $200.0 million, bear interest at 8.5% payable semi-annually on January 15 and July 15, and mature July 15, 2005. The Senior Notes are general unsecured obligations and rank senior to all subordinated debt of SRI including the Senior Subordinated Notes. The Senior Subordinated Notes were issued during June 1997 by SRI with a principal amount of $100.0 million and at a discount which results in a combined effective interest rate of 9.03%. The Senior Subordinated Notes bear interest at 9% payable semi-annually on January 15 and July 15 and mature July 15, 2007. The Senior Subordinated Notes are subordinated to the obligations under the Senior Notes. Concurrently with the issuance of the Senior Notes and Senior Subordinated Notes, SRI entered into a new credit facility with a group of lenders (the "Credit Facility") which replaced the Company's existing $75.0 million credit facility. The Credit Facility provides for: (i) a $100.0 million working capital and letter of credit facility (the "Working Capital Facility") pursuant to which SRI shall have the right at any time prior to June 17, 2000 to solicit one or more lenders and/or new financial institutions to provide up to $25 million in additional commitments to increase the Working Capital Facility to an amount not to exceed $125 million in the aggregate, subject to certain conditions, of which up to $50 million may be used for letters of credit; and (ii) a $100.0 million expansion facility (the "Expansion Facility"). The Credit Facility matures on June 14, 2002 provided that in addition to certain mandatory reductions in commitments, the commitments under the Expansion Facility will be reduced on the fourth anniversary of the signing of the Credit Facility by the amount, if any, necessary so that total reductions in the amount of the commitments under the Expansion Facility (taking into account all mandatory reductions) will have been at least $25 million. A commitment fee on the unused commitments of each of the Working Capital Facility and Expansion Facility is payable quarterly in arrears. The amount of the commitment fee is determined based on the Adjusted Leverage Ratio (as defined in the Credit Facility), and ranges from 0.25% to 0.50% per annum. Advances under the Working Capital Facility and Expansion Facility bear interest at the Company's option, at the Base Rate plus the applicable Margin Percentage or at the Eurodollar Rate plus the applicable Margin Percentage (each as defined in the Credit Facility). The Margin Percentage is determined from time to time based on the Adjusted Leverage Ratio and was 2.25% for the Base Rate and 3.25% for the Eurodollar Rate at January 29, 2000. The effective interest rate for borrowings outstanding under the Credit Facility was 8.8% at January 29, 2000. The Credit Facility contains covenants which, among other things, restrict the: (i) incurrence of additional debt; (ii) incurrence of capitalized lease obligations; (iii) payment of dividends; (iv) formation of certain business combinations; (v) acquisition of subordinated debt; (vi) use of proceeds received under the agreement; (vii) aggregate amount of capital expenditures; (viii) transactions with related parties; and (ix) changes in lines of business. In addition, the Credit Facility requires the Company to maintain compliance with certain specified financial covenants, including covenants relating to minimum interest coverage, minimum fixed charge coverage and maximum leverage ratios. The Credit Facility also limits the amount which can be outstanding for a specified length of time each year. A portion of the Credit Facility is collateralized by SRI's distribution center located in Jacksonville, Texas, including equipment located therein and a pledge of SRPC stock. The net book value of the distribution center was approximately $5.4 million at January 29, 2000. On March 9, 2000, SRI entered into a new $35.0 million senior revolving credit facility (the "Senior Revolving Credit Facility") with certain of the lenders participating in the Credit Facility. The Senior Revolving Credit Facility matures June 14, 2002 and provides for working capital borrowings and is collateralized by a perfected first priority security interest on $50.0 million of inventory. Advances under the Senior Revolving Credit Facility will bear interest at the Company's option, at the Base Rate plus the applicable Margin Percentage or at the Eurodollar Rate plus the applicable Margin Percentage (each as defined in the Senior Revolving Credit Facility). SRI will pay a commitment fee on the unused commitment of 0.50% per annum payable quarterly in arrears. In connection with the Senior Revolving Credit Facility, the Credit Facility was amended to provide (a) a first priority lien on the Company's corporate concentration cash account (b) a second priority lien on inventory equal to $50.0 million less borrowings outstanding under the Senior Revolving Credit Facility (c) a first priority lien on all tangible personal property, including furniture, fixtures and equipment (excluding inventory except to the amount described in (b) above). In addition, the amendment limits the amount of readily available cash or cash equivalents in the Company's corporate concentration cash account to $20.0 million after giving effect to any borrowings under the Credit Facility. Under the terms of the new credit facility, the Company will issue warrants to the lenders to purchase 7.5% of the Company's outstanding common stock. The exercise price under the warrants will be determined based upon the average closing price of the Company's stock for the 30 days following the date of commitment. The warrants will expire on March 6, 2003. The Company had $2.8 million of availability under the Credit Facility at January 29, 2000. In addition, the Company had cash and cash equivalents on hand of $20.2 million at January 29, 2000. The Company had $6.0 million of availability under the combined credit facilities at May 25, 2000. During November 1999, the Company retired the $30.0 million aggregate principle amount of SRPC 12.5% Trust Certificate-Backed Notes in connection with the refinancing related to the Accounts Receivable Program (see note 4). In connection with various acquisitions, the Company has indebtedness which bear interest between 7% and 12% and maturity dates between 2000 through 2004. Aggregate maturities of long-term debt excluding the Credit Facility for the next five years are: 2000 - $4.8 million; 2001 - $2.6 million; 2002 - $2.7 million; 2003 - $14.2 million and 2004 - - $0.2 million. Management estimates the fair value of its long-term debt to be $325.7 million and $482.4 million at January 29, 2000 and January 30, 1999, respectively. In developing its estimates, management considered quoted market prices for each instrument, if available, current market interest rates in relation to the coupon interest rates of each instrument, the relative subordination of each instrument and the relative liquidity of the instrument as indicated by the presence or lack of an active market. Given the matters discussed in Note 2, the current market value of the Company's long-term debt would be substantially below the aforementioned amounts. NOTE 7 - STOCKHOLDERS' EQUITY The Company's authorized common equity securities consist of par value $0.01 per share common stock ("Common Stock") and par value $0.01 per share Class B common stock ("Class B Common Stock"). Except as otherwise described herein, all shares of Common Stock and Class B Common Stock are identical and entitle the holders thereof to the same rights and privileges (except with respect to voting privileges). Holders of Class B Common Stock may elect at any time to convert any or all of such shares into Common Stock, on a share-for-share basis, to the extent the holder thereof is not prohibited from owning additional voting securities by virtue of regulatory restrictions. The holders of Common Stock are entitled to one vote per share on all matters to be voted upon by the stockholders. Except as required by law, holders of Class B Common Stock do not have the right to vote on any matters to be voted upon by the stockholders. During September 1997, the Company completed an offering of approximately 7.1 million shares of common stock, 6.4 million shares of which were secondary shares representing the shares owned by two venture capital firms. The remaining 650,000 shares were issued as primary shares, a result of an over-allotment provision. The shares sold by the Company resulted in net proceeds to the Company of approximately $20.7 million, which were used to reduce borrowings outstanding under the Company's Credit Facility. In November 1998, the Company adopted a Stockholder Rights Plan designed to protect Company stockholders in the event of takeover activity that would deny them the full value of their investment. Terms of this plan provide for a dividend distribution of one right for each share of Common Stock of the Company to holders of record at the close of business on November 13, 1998. The rights will become exercisable only in the event, with certain exceptions, a person or group of affiliated or associated persons accumulates 15% or more of the Company's voting stock, or if a person or group announces an offer to acquire 15% or more. The rights will expire on November 10, 2008. Each right will entitle the holder to buy one one-hundred thousandth of a share of a new series of preferred stock at a price of $60. In addition, upon the occurrence of certain events, holders of the rights would be entitled to purchase either Company stock or shares in an "acquiring entity" at half of market value. Further, at any time after a person or group acquires 15% or more (but less than 50%) of the Company's outstanding voting stock, the Board of Directors may, at its option, exchange part or all of the Rights (other than Rights held by the acquiring person or group, which would become void) for shares of the Company's common stock on a one-for-one basis. The Company generally will be entitled to redeem the rights at $0.01 per right at any time until the tenth day following the acquisition of a 15% position in its voting stock. NOTE 8 - STOCK OPTION PLANS In 1993, the Company adopted the Third Amended and Restated Stock Option Plan (the "1993 Stock Option Plan") designed to provide incentives to present and future executive, managerial and other key employees and advisors to the Company (the "Participants") as selected by the Board of Directors or the compensation committee of the Board of Directors (the "Board"). All options granted under the 1993 Stock Option Plan were non- qualified within the meaning of Section 422A of the Internal Revenue Code. The number of shares of common stock which could be granted under the 1993 Stock Option Plan was 1,894,540 shares. As of January 29, 2000, there were 906,124 options outstanding under the 1993 Stock Option Plan. During 1996, the Company adopted the 1996 Equity Incentive Plan (the "Incentive Plan"). The Incentive Plan provides for the granting of the following types of awards: stock options, stock appreciation rights ("SARs"), restricted stock, performance units, performance grants and other types of awards that the Board deems to be consistent with the purposes of the Incentive Plan. An aggregate of 3,500,000 shares of common stock have been reserved for issuance under the Incentive Plan. No Participant shall be entitled to receive grants of common stock, stock options or SARs with respect to common stock, in any calendar year in excess of 400,000 shares in the aggregate. As of January 29, 2000, there were 1,204,483 options and 378,525 shares of restricted stock outstanding under the Incentive Plan. The Board will have exclusive discretion to select the Participants and to determine the type, size and terms of each award, to modify the terms of awards, to determine when awards will be granted and paid, and to make all other determinations which it deems necessary or desirable in the interpretation and administration of the Incentive Plan. The Incentive Plan is scheduled to terminate ten years from the date that the Incentive Plan was initially approved and adopted by the stockholders of the Company, unless extended for up to an additional five years by action of the Board. With limited exceptions, including termination of employment as a result of death, disability or retirement, or except as otherwise determined by the Board, rights to these forms of contingent compensation are forfeited if a recipient's employment or performance of services terminates within a specified period following the award. Generally, a Participant's rights and interest under the Incentive Plan will not be transferable except by will or by the laws of descent and distribution. Options are rights to purchase a specified number of shares of common stock at a price fixed by the Board. The option price may be equal to or greater than the fair market value of the underlying shares of common stock, but in no event less than the fair market value on the date of grant. Options granted under the 1993 Stock Option Plan generally become exercisable in installments of 20% per year on each of the first through the fifth anniversaries of the grant date and have a maximum term of ten years. Options granted under the Incentive Plan generally become exercisable in installments of 25% per year on each of the first through fourth anniversaries of the grant date and have a maximum term of ten years. A summary of the option activity under the various plans follows: Number of Weighted Outstanding Average Options Option Price Options outstanding at February 1, 1997 1,475,581 6.61 Granted 570,550 23.84 Surrendered (124,015) 13.31 Exercised (208,023) 2.22 Options outstanding at January 31, 1998 1,714,093 12.39 Granted 505,200 38.08 Surrendered (147,185) 26.35 Exercised (217,218) 4.57 Options outstanding at January 30, 1999 1,854,890 19.15 Granted 497,608 6.80 Surrendered (144,107) 25.94 Exercised (97,784) 0.84 Options outstanding at January 29, 2000 2,220,607 16.62 Exercisable options under the various plans at January 30, 1999 and January 31, 1998 were 526,752 and 333,159 with a weighted average exercise price of $7.88 and $2.87, respectively. A summary of outstanding and exercisable options as of January 29, 2000 follows: Number of Weighted Weighted Average Option Outstanding Average Remaining Price Options Exercise Price Contractual Life $0.00 - $0.12 5,542 $0.11 2.8 2.42 - 3.75 306,011 2.94 5.7 5.00 - 8.00 729,531 6.36 7.9 9.00 - 13.88 180,635 10.53 8.7 17.00 - 21.15 245,400 20.90 6.5 22.00 - 30.00 346,888 22.82 7.2 33.75 - 42.13 27,000 37.17 7.8 49.75 - 51.88 269,600 51.61 8.2 2,110,607 16.78 7.4 Number of Option Exercisable Weighted Average Price Options Exercise Price $0.00 - $0.12 5,542 $0.11 2.42 - 3.75 229,722 2.79 5.00 - 8.00 174,858 5.28 9.00 - 13.88 47,053 10.53 17.00 - 21.15 17,500 19.81 22.00 - 30.00 194,125 22.95 33.75 - 42.13 13,000 37.15 49.75 - 51.88 69,689 51.61 751,489 14.56 A summary of the restricted stock activity under the various plans follows: Number of Weighted Shares Average Grant Date Fair Value Unvested restricted stock grants outstanding at February 1, 1997 -- -- Granted 220,000 32.04 Surrendered -- -- Vested -- -- Unvested restricted stock grants outstanding at January 31, 1998 220,000 32.04 Granted 73,300 41.48 Surrendered -- -- Vested -- -- Unvested restricted stock grants outstanding at January 30, 1999 293,300 34.40 Granted 123,750 6.45 Surrendered (20,475) 35.00 Vested (18,050) 41.38 Unvested restricted stock grants outstanding at January 29, 2000 378,525 24.90 The 1999 and 1998 grants vest 25% per year on each of the first through fourth anniversary dates of the grant date and contain certain accelerated vesting provisions. The 1997 grants vest at the end of three year period and contain certain accelerated vesting provisions. The issuance of shares which have vested has been recorded as non-cash increase in stockholders equity. The Company applies Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" in accounting for its plans. Compensation expense was $3.1 million, $3.2 million and $0.5 million in 1999, 1998 and 1997, respectively. The following pro forma data is calculated as if compensation cost for the Company's stock option plans were determined based upon the fair value at the grant date for awards under these plans consistent with the methodology prescribed under Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation": Fiscal Year 1999 1998 1997 Pro forma net income (loss) (in thousands) $(283,396) $1,106 $15,407 Pro forma basic earnings (loss) per common share (10.11) 0.04 0.60 Pro forma diluted earnings (loss) per common share (10.11) 0.04 0.58 Weighted average grant-date value of options granted 5.63 22.30 13.96 The fair value of the options granted is estimated using the Black-Scholes option-pricing model with the following assumptions for 1999: no dividend yield; volatility of 88.95%; risk-free interest rate of 6.7%; assumed forfeiture rate at 100.00% and an expected life of 7.86 years. For 1998, the following assumptions were used: no dividend yield; volatility of 47.32%; risk-free interest rate of 4.9%; assumed forfeiture rate of 71.27% and an expected life of 7.8 years. For 1997, the following assumptions were used: no dividend yield; volatility of 47.32%; risk-free interest rate of 5.5%; assumed forfeiture rate of 76.92% and an expected life of 7.42 years. The pro forma amounts above are not likely to be representative of future years because options vest over several years and additional awards generally are made each year. NOTE 9 - EMPLOYEE BENEFIT PLANS Pension benefits for employees are provided under the SSI Restated Retirement Plan (the "Retirement Plan"), a qualified defined benefit plan. Benefits are administered through a trust arrangement which provides monthly payments or lump sum distributions. The Retirement Plan covers substantially all employees who have completed one year of service with 1,000 hours of service as of June 30, 1998. Benefits under the plan are based upon a percentage of the participant's earnings during each year of credited service. Supplemental pension benefits for certain key executives are provided under the SRI Supplemental Executive Retirement Plan (the "Supplemental Retirement Plan"), a non-qualified defined benefit plan. Information regarding the Retirement Plan and the Supplemental Retirement Plan is as follows (in thousands): January 29, 2000 January 30, 1999 Change in benefit obligation: Benefit obligation at beginning of year $31,639 $34,716 Service cost 731 917 Interest cost 2,109 2,191 Actuarial (gain) loss (2,860) 3,056 Plan disbursements (2,449) (3,913) Plan curtailment -- (5,991) Plan settlement -- 663 Projected benefit obligation at end of year 29,170 31,639 Change in plan assets: Fair value of plan assets at beginning of year 21,711 26,624 Actual return on plan assets 1,089 (1,550) Employer contributions 2,880 550 Plan disbursements (2,449) (3,913) Fair value of plan assets at end of year 23,231 21,711 Funded status (5,939) (9,928) Unrecognized prior service cost 306 326 Unrecognized net actuarial (gain) loss 7,317 9,890 Net amount recognized $1,684 $288 Amounts recognized in the consolidated balance sheet consist of: Accrued benefit liability $(5,427) $(9,538) Accumulated other comprehensive income 7,111 9,826 Net amount recognized $1,684 $288 January 29, 2000 January 30, 1999 Weighted-average assumptions as of year end: Discount rate 7.0% 6.5% Expected long-term rate of return on plan assets 9.0% 9.0% Rate of annual compensation increase 5.0% N/A Rate of increase in maximum benefit and compensation limits N/A 3.5% Assumed rate of increase in taxable wage base N/A N/A The components of pension cost for the Retirement Plan and the Supplemental Retirement Plan were as follows (in thousands): Fiscal Year 1999 1998 1997 Net periodic pension cost for the fiscal year ended: Service cost $731 $917 $1,738 Interest cost 2,109 2,191 2,328 Expected return on plan assets (1,888) (2,367) (2,521) Amortization of prior service cost 20 18 (6) Recognized actuarial loss 512 127 507 Net periodic pension cost $1,484 $886 $2,046 Included in accrued expenses and other accrued liabilities is $6.3 million for estimated contributions to the Retirement Plan in 2000. The Company's funding policy for the Retirement Plan is to contribute the minimum amount required by applicable regulations. Retirement Plan assets include 100,000 shares of Stage Stores common stock purchased during the Company's initial public offering. Effective June 30, 1998, the Retirement Plan was frozen. There will be no future benefit accruals after that date. Any service after that date will continue to count toward vesting and eligibility for normal and early retirement. The Company recorded a gain in 1998 of $2.0 million associated with the plan curtailment. The Company has a contributory 401(k) savings plan covering substantially all qualifying employees. Under the 401(k), participants may contribute up to 15% of their qualifying earnings, subject to certain restrictions. The Company currently matches 50% of each participant's contributions, limited to 6% of each participant's salary. The Company's matching contributions were approximately $1.0 million for 1999, $0.8 million for 1998 and $0.4 million for 1997. NOTE 10 - OPERATING LEASES The Company leases stores, service center facilities, the corporate headquarters and equipment under operating leases. A number of store leases provide for escalating minimum rent. Rental expense is recognized on a straight-line basis over the life of such leases. The majority of the Company's store leases provide for contingent rentals, generally based upon a percentage of net sales. The Company has renewal options for most of its store leases; such leases generally require that the Company pay for utilities, taxes and maintenance expense. A summary of rental expense associated with operating leases follows (in thousands): Fiscal Year 1999 1998 1997 Minimum rentals $51,926 $48,022 $37,601 Contingent rentals 3,838 3,993 4,545 Equipment rentals 4,544 3,854 1,240 $60,308 $55,869 $43,386 Minimum rental commitments on long-term operating leases at January 29, 2000, net of sub-leases, are as follows (in thousands): Fiscal Year: 2000 $52,435 2001 47,641 2002 41,197 2003 34,246 2004 27,619 Thereafter 112,888 $316,026 NOTE 11 - INCOME TAXES All Company operations are domestic. Income tax expense charged to continuing operations consisted of the following (in thousands): Fiscal Year 1999 1998 1997 Federal income tax expense (benefit): Current $-- $(66) $11,012 Deferred 28,617 3,246 8,413 28,617 3,180 19,425 State income tax expense (benefit): Current 66 150 193 Deferred (8,466) (875) 2,005 (8,400) (725) 2,198 $20,217 $2,455 $21,623 A reconciliation between the federal income tax expense charged to continuing operations computed at statutory tax rates and the actual income tax expense recorded follows (in thousands): Fiscal Year 1999 1998 1997 Federal income tax expense at the statutory rate $(91,585) $2,159 $19,657 State income taxes, net (5,460) (471) 1,428 Goodwill amortization 26,040 742 388 Permanent differences, net 1,674 25 150 Valuation reserve 89,548 -- -- $20,217 $2,455 $21,623 In connection with the early retirement of various indebtedness, the Company recorded extraordinary charges of $0.7 million and $18.3 million in 1999 and 1997, respectively, net of applicable income taxes of $0.0 and $11.5 million in 1999 and 1997, respectively. The 1997 income tax benefit relating to the extraordinary items is comprised of a $9.9 million deferred federal tax benefit and a $1.6 million deferred state tax benefit. During 1999, the Company recorded a charge of $3.9 million in connection with the cumulative effect of a change in accounting principle reporting costs of start-up activities, net of applicable income taxes of $0.0 million. Deferred tax liabilities (assets) consist of the following (in thousands): January 29, 2000 January 30, 1999 Gross deferred tax liabilities: Depreciation and amortization $-- $14,790 State income taxes 5,183 1,838 Other 5,711 7,786 10,894 24,414 Gross deferred tax assets: Retained Certificates (3,033) (2,460) Net operating loss carryforwards (74,747) (25,160) AMT tax credit carryforward (2,686) (3,040) Depreciation and amortization (2,860) -- Accrued expenses (5,109) (4,558) Pensions (2,599) (4,231) Escalating leases (5,884) (1,802) Accrued payroll costs -- (1,445) Inventory reserves (2,841) (2,546) Other (683) (382) (100,442) (45,624) Valuation allowance 89,548 -- Net deferred tax assets $-- $(21,210) The net change in the valuation allowance for deferred tax assets was an increase of $89.5 million in 1999, which, relates to federal and state net operating loss carryforwards. Based on the projected earnings of the Company and matters set forth in Note 2, management believes it is more likely than not that the net deferred tax assets will not be realized and has, therefore, provided a full valuation allowance against the net deferred tax assets. The Company has net operating loss carryforwards for federal income tax purposes of approximately $178.9 million, which if not utilized will expire in varying amounts between 2007 and 2021. The Company has net operating loss carryforwards for state income tax purposes of approximately $230.0 million, which if not utilized, will expire in varying amounts between 2002 and 2021. The Company's ability to utilize net operating loss carryforwards may be limited if certain changes in ownership occur or as a result of the bankruptcy process. NOTE 12 - QUARTERLY FINANCIAL INFORMATION Unaudited quarterly financial data is summarized as follows (in thousands): Fiscal Year 1999 Q1 Q2 Q3 Q4 Net sales $262,591 $269,848 $264,327 $324,801 Gross profit 70,359 74,021 77,203 2,867 Operating income (loss) 8,391 (8,332) 12,560 (220,971) Income (loss) before extraordinary item and cumulative effect of change in accounting principle (2,269) (15,091) 224 (260,067) Extraordinary item, net of tax - early retirement of debt -- -- -- (749) Cumulative effect of change in accounting principle, net of tax - reporting costs of start-up activities (2,402) -- -- (1,536) Net income (loss) (4,671) (15,091) 224 (262,352) Basic earnings (loss) per common share data: Basic earnings per common share before extraordinary item and cumulative effect of change in accounting principle (0.08) (0.54) 0.01 (9.26) Extraordinary item - early retirement of debt, net of tax -- -- -- (0.03) Cumulative effect of change in accounting principle - reporting costs of start-up activities, net of tax (0.09) -- -- (0.05) Basic earnings (loss) per common share (0.17) (0.54) 0.01 (9.34) Diluted earnings (loss) per common share data: Diluted earnings per common share before extraordinary item cumulative effect of change in accounting principle (0.08) (0.54) 0.01 (9.26) Extraordinary item - early retirement of debt, net of tax -- -- -- (0.03) Cumulative effect of change in accounting principle - reporting costs of start-up activities, net of tax (0.09) -- -- (0.05) Diluted earnings (loss) per common share (0.17) (0.54) 0.01 (9.34) During the fourth quarter of 1999, the Company recorded certain one-time pretax charges aggregating $205.7 million. Fiscal Year 1998 Q1 Q2 Q3 Q4 Net sales $272,788 $271,805 $271,605 $357,349 Gross profit 87,225 82,239 75,252 89,593 Operating income 25,278 12,678 7,226 7,458 Net income (loss) 9,035 765 (3,152) (2,934) Basic earnings (loss) per common share 0.33 0.03 (0.11) (0.10) Diluted earnings (loss) per common share 0.32 0.03 (0.11) (0.10) NOTE 13 - RELATED PARTY TRANSACTIONS The Company has made loans, in an aggregate principal amount of $2.7 million and $2.1 million at January 29, 2000 and January 30, 1999, respectively, to certain present and former executive officers of the Company. These loans are full recourse loans and are secured by a pledge of the shares of common stock owned by such executive officers. The loans provide for interest from 5.7% to 9.0% and mature no later than November 3, 2000. At January 29, 2000, the Company has recorded a reserve of $1.6 million related to these loans for potential uncollectibility. On February 22, 2000, Carl Tooker left employment with the Company, effective that date. Mr. Tooker was Chairman, Chief Executive Officer and President of the Company. Mr. Tooker's departure follows an inquiry conducted by a Special Committee consisting of all of the non-management members of the Board of Directors, which reviewed certain transactions between the Company and Mr. Tooker. The effects of the transactions reviewed have been reflected in the Company's results for prior periods, and the Committee believes they are not material to the financial condition or operations of the Company. However, these transactions had not been properly reported to the Company's Board of Directors. The Company purchased Mr. Tooker's personal residence in 1997 at a price specified by him, and assumed all liability for the property, including upkeep and existing debt payments, until it was sold in 1999. The Company sustained a loss of $806,556 as a result of this transaction. In May, 1997 the Company entered into a severance agreement and a separate consulting contract in connection with the separation of an employee who shortly thereafter became Mr. Tooker's spouse. The Company recorded in its books and records payments to or for the benefit of his spouse beginning in May, 1997, and ending in August 1998, totaling $608,317. The Special Committee also determined that while employed by the Company in 1996 and 1997, this employee entered into transactions with a company with whom her sister was believed to be affiliated, in which the Company paid a total of $313,260 for purchases of clothing inventory. The Special Committee did not find any overcharges with respect to the inventory purchases. Demand has been made upon Mr. Tooker to reimburse the Company for the unauthorized payments regarding his personal residence and the severance paid to his spouse. In addition, the Company has demanded repayment by Mr. Tooker of outstanding loans he obtained from the Company, with interest thereon, totaling approximately $1.1 million. Some of these loans are secured by collateral which includes securities of the Company. Mr. Tooker has not responded to the Company's demands. The Special Committee further determined that during the years 1997 through 1999, the Company maintained a contractual relationship with Stage Planning and Design, Inc. ("SPAD"), believed to be a wholly owned subsidiary of U.S. Builders, Inc., to manage the construction of store remodeling. Under the terms of this agreement, the Company was required to and did reimburse or pay direct all of SPAD's costs, including all payroll expenses. In 1997, the Company paid SPAD in excess of $2.4 million, and in 1998 in excess of $9.9 million. Until late 1999, Mr. Tooker's son-in-law was an officer and project manager for SPAD, whose compensation was included as a reimbursable expense billed to the Company during this time. Although the expenditures were recorded on the Company's books and records for the years in which they were accrued, the relationship involving Mr. Tooker's son-in-law was not previously discussed with and approved by the Board of Directors. In connection with the aforementioned matters, the Company has received and responded to an information request as part of an informal inquiry by the Securities and Exchange Commission. NOTE 14 - COMMITMENTS AND CONTINGENCIES Litigation: From time to time, the Company and its subsidiaries are involved in various litigation matters arising in the ordinary course of its business. On March 30, 1999, a class action lawsuit was filed against the Company and certain of its officers, directors and stockholders in the United States District Court for the Southern District of Texas by John C. Weld, Jr., a stockholder who purchased 125 shares of the Company's common stock on August 3, 1998, alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder (the "Weld Suit"). The Company believed that the allegations of the Weld Suit are without merit, and on July 23, 1999, the Company filed a motion to dismiss. United States District Judge Kenneth Hoyt entered an order on December 8, 1999 dismissing the Weld Suit. The order has been appealed by Mr. Weld. On March 28, 2000, the Company filed a lawsuit against Carl Tooker. The lawsuit was filed in the District Court of Harris County, Texas, 333 District Court, Case No. 2000-15666. The lawsuit is an action for damages arising from transactions Mr. Tooker engaged in or directed while serving as President, Chief Executive Officer and Chairman of the Board of Directors of the Company which transactions benefited him personally or were otherwise contrary to his duties as an officer and director. The suit also seeks recovery of debt owed by Mr. Tooker to the Company pursuant to loans and promissory notes Mr. Tooker caused the Company to make to him while serving in those capacities, and for conversion of stock collateral pledged to the Company to secure his indebtedness. The Company also seeks a mandatory injunction requiring Mr. Tooker to deposit into the registry of the Court all remaining stock collateral in his possession, and for a declaratory judgment that Mr. Tooker was properly terminated "for cause" under the terms of his employment agreement. The Company seeks to recover not less than an aggregate of $2,755,672, accrued interest, punitive damages, costs and reasonable attorneys' fees. On or about April 27, 2000 Mr. Tooker filed an Answer and Counterclaim against the Company and a Third Part Petition against the Company's Chairman, Interim Chief Executive Officer and President, John J. Wiesner, Martin Stringer, the Company's counsel and counsel to the Special Committee, and the law firm of McKinney & Stringer, P.C. The answer generally denies all allegations made by the Company. Mr. Tooker seeks damages from the Company of approximately $3.9 million, plus attorney's fees, interest, and costs for breach of his employment contract, and a like amount, including punitive damages, from the third-party defendants for alleged tortious interference with his employment contract. Mr. Tooker also seeks to impose a constructive trust on the $300,000 in the Company's possession for certain contractual benefits he claims to be due under his employment agreement. The remaining claims seek damages against the Company and in part against the third-party defendants, totaling $18 million, plus punitive damages, fees, interest and costs, on theories of defamation, civil conspiracy, breach of fiduciary duty and breach of duty of good faith and fair dealing. The case is in its initial development, prior to any discovery. The Company and the third-party defendants dispute his allegations and intend to vigorously defend all of Mr. Tooker's claims. In March 2000, eleven former employees of SRI d/b/a Palais Royal, filed two separate suits in the United States District Court for the Southern District of Texas against the Company, SRI and Mary Elizabeth Pena, arising out of alleged conduct occurring over an unspecified time while the plaintiffs were working at one or more Palais Royal stores in the Houston, Texas area. The plaintiffs allege that on separate occasions they were falsely accused of stealing merchandise and other company property and giving discounts for purchases against company policy. The suits accuse the defendants of defamation, false imprisonment, intentional infliction of mental distress, assault and violation of the Racketeer Influenced and Corrupt Organizations (RICO) Act. The claims seek unspecified damages for mental anguish, lost earnings, exemplary damages, treble damages, interest, attorneys' fees and costs. The Company denies the allegations and intends to vigorously defend the claims. Letters of Credit: The Company issues letters of credit to support certain merchandise purchases which are required to be collateralized. The Company had outstanding letters of credit totaling approximately $12.2 million at January 29, 2000, all of which were collateralized by the Credit Facility (see Note 6). These letters of credit expire within twelve months of issuance. Concentration of Credit Risk: Financial instruments which potentially subject the Company to concentrations of credit risk are primarily cash, short-term investments and the accounts receivable transferred to the Trust (see Note 4). The Company's cash management and investment policies restrict investments to low-risk, highly-liquid securities and the Company performs periodic evaluations of the relative credit standing of the financial institutions with which it deals. The credit risk associated with the accounts receivable transferred to the Trust is limited by the large number of customers in the Company's customer base. The Company's customers primarily reside in the central United States. NOTE 15 - C. R. ANTHONY COMPANY ACQUISITION During June 1997, the Company acquired C.R. Anthony Company ("CR Anthony") which operated 246 family apparel stores in small markets throughout the central and midwestern United States under the names "Anthony's" and "Anthony's Limited". The Company issued 3,607,044 shares in exchange for the outstanding common stock of CR Anthony. The purchase price for CR Anthony (including the common stock issued by the Company) was approximately $77.2 million, including acquisition costs and net of cash acquired. CR Anthony had net sales of $288.4 million and net income of $4.8 million for the year ended February 1, 1997. The following unaudited pro forma information gives effect to the acquisition of CR Anthony as if the transaction had occurred at the beginning of the periods presented (in thousands, except per common share data): Fiscal 1997 (unaudited) Net sales $1,181,816 Income before extraordinary items $33,482 Net income $15,187 Basic earnings per common share before extraordinary items $1.23 Basic earnings per common share $0.56 Diluted earnings per common share before extraordinary items $1.20 Diluted earnings per common share $0.54 The above amounts are based on certain estimates and assumptions which the Company believes are reasonable. The pro forma results do not purport to be indicative of the results which would have occurred if the acquisition or refinancing had actually taken place at the beginning of the periods presented, nor are they necessarily indicative of the results of any future periods. The acquisition of CR Anthony was accounted for under the purchase method of accounting. Accordingly, the total acquisition cost was allocated to the assets acquired and liabilities assumed at their estimated fair values based upon information currently available to the Company. The excess of the purchase price over the estimated fair value of such assets and liabilities was recognized as goodwill and is being amortized on a straight-line basis over forty years. NOTE 16 - CONSOLIDATING FINANCIAL STATEMENTS SRI is the primary obligor under the long-term indebtedness issued in connection with the Note Offering (see Note 64). Stage Stores and Specialty Retailers, Inc. (NV), a wholly-owned subsidiary of Stage Stores (which was incorporated during June, 1997), are guarantors under such indebtedness. The consolidating condensed financial information for Stage Stores and its wholly- owned subsidiaries are presented below. The financial data for SRI Receivables Purchase Co. does not reflect the total consolidated operating performance of the Company's Accounts Receivable Program. For a summary of the total consolidated operating performance of the Company's Accounts Receivable Program, see Note 4. Consolidating Condensed Balance Sheet January 29, 2000 (in thousands) Specialty SRI Receivables SRI SRI Retailers, Inc. Purchase Co. Eliminations Consolidated ASSETS Cash and cash equivalents $18,077 $-- $-- $18,077 Undivided interest in accounts receivable trust (13,101) 54,701 -- 41,600 Merchandise inventories, net 261,104 -- -- 261,104 Prepaid expenses 7,725 220 -- 7,945 Other current assets 17,755 8,491 -- 26,246 Total current assets 291,560 63,412 -- 354,972 Property, equipment and leasehold improvements, net 180,761 -- -- 180,761 Other assets 13,111 2,608 -- 15,719 Investment in subsidiaries 36,690 -- (36,690) -- Total assets $522,122 $66,020 $(36,690) $551,452 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Accounts payable $40,955 $-- $-- $40,955 Accrued expenses and other current liabilities 69,385 2,770 -- 72,155 Current portion of long-term debt 9,830 -- -- 9,830 Long-term debt classified as current 492,393 -- -- 492,393 Total current liabilities 612,563 2,770 -- 615,333 Long-term debt -- -- -- -- Other long-term liabilities 14,299 -- -- 14,299 Intercompany notes/advances 160,719 26,560 -- 187,279 Investment in subsidiaries -- -- -- -- Total liabilities 787,581 29,330 -- 816,911 Preferred stock -- -- -- -- Common stock -- -- -- -- Class B common stock -- -- -- -- Additional paid- in capital 3,317 33,908 (33,908) 3,317 Accumulated earnings (deficit) (264,438) 2,782 (2,782) (264,438) Accumulated other comprehensive income (4,338) -- -- (4,338) Stockholders' equity (deficit) (265,459) 36,690 (36,690) (265,459) Total liabilities and stockholders' equity (deficit) $522,122 $66,020 $(36,690) $551,452 Consolidating Condensed Balance Sheet January 29, 2000 (in thousands) Specialty Stage Retailers, Stage Stores Stores, Inc. Inc. (NV) Eliminations Consolidated ASSETS Cash and cash equivalents $102 $2,000 $-- $20,179 Undivided interest in accounts receivable trust -- -- -- 41,600 Merchandise inventories, net -- -- -- 261,104 Prepaid expenses -- -- -- 7,945 Other current assets -- -- -- 26,246 Total current assets 102 2,000 -- 357,074 Property, equipment and leasehold improvements, net -- 1,073 -- 181,834 Other assets -- 60 -- 15,779 Investment in subsidiaries -- -- -- -- Total assets $102 $3,133 $-- $554,687 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Accounts payable $-- $-- $-- $40,955 Accrued expenses and other current liabilities 22 -- -- 72,177 Current portion of long-term debt -- -- -- 9,830 Long-term debt classified as current -- -- -- 492,393 Total current liabilities 22 -- -- 615,355 Long-term debt -- -- -- -- Other long-term liabilities -- -- -- 14,299 Intercompany notes/advances 18 (187,297) -- -- Investment in subsidiaries 75,029 -- (75,029) -- Total liabilities 75,069 (187,297) (75,029) 629,654 Preferred stock -- -- -- -- Common stock 268 -- -- 268 Class B common stock 13 -- -- 13 Additional paid-in capital 266,590 160,915 (164,232) 266,590 Accumulated earnings (deficit) (337,500) 29,515 234,923 (337,500) Accumulated other 4,338 comprehensive income (4,338) -- 4,338 (4,338) Stockholders' equity (deficit) (74,967) 190,430 75,029 (74,967) Total liabilities and stockholders' equity (deficit) $102 $3,133 $-- $554,687 Consolidating Condensed Balance Sheet January 30, 1999 (in thousands) Specialty SRI Receivables SRI SRI Retailers, Inc. Purchase Co. Eliminations Consolidated ASSETS Cash and cash equivalents $10,882 $ -- $-- $10,882 Undivided interest in accounts receivable trust (13,228) 83,044 -- 69,816 Merchandise inventories, net 341,316 -- -- 341,316 Prepaid expenses 24,082 899 -- 24,981 Other current assets 53,566 5,926 -- 59,492 Total current assets 416,618 89,869 -- 506,487 Property, equipment and leasehold improvements, net 231,499 -- -- 231,499 Goodwill, net 92,551 -- -- 92,551 Other assets 18,967 4,402 -- 23,369 Investment in subsidiaries 37,886 -- (37,886) -- Total assets $797,521 $94,271 $(37,886) 853,906 LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable $82,779 $-- $-- $82,779 Accrued expenses and other current liabilities 49,726 2,888 -- 52,614 Current portion of long-term debt 4,814 -- -- 4,814 Total current liabilities 137,319 2,888 -- 140,207 Long-term debt 457,968 30,000 -- 487,968 Other long-term liabilities 25,021 -- -- 25,021 Intercompany notes/advances 151,273 23,497 -- 174,770 Total liabilities 771,581 56,385 -- 827,966 Preferred stock -- -- -- -- Common stock -- -- -- -- Class B common stock -- -- -- -- Additional paid-in capital 3,317 32,130 (32,130) 3,317 Accumulated earnings (deficit) 28,617 5,756 (5,756) 28,617 Accumulated other comprehensive income (5,994) -- -- (5,994) Stockholders' equity 25,940 37,886 (37,886) 25,940 Total liabilities and stockholders' equity $797,521 $94,271 $(37,886) $853,906 Consolidating Condensed Balance Sheet January 30, 1999 (in thousands) Specialty Stage Retailers, Stage Stores Stores, Inc. Inc. (NV) Eliminations Consolidated ASSETS Cash and cash equivalents $2 $1,948 $-- $12,832 Undivided interest in accounts receivable trust -- -- -- 69,816 Merchandise inventories, net -- -- -- 341,316 Prepaid expenses -- -- -- 24,981 Other current assets -- -- -- 59,492 Total current assets 2 1,948 -- 508,437 Property, equipment and leasehold improvements, net -- 1,764 -- 233,263 Goodwill, net -- -- -- 92,551 Other assets -- 60 -- 23,429 Investment in subsidiaries 204,349 -- (204,349) -- Total assets $204,351 $3,772 $(204,349) $857,680 LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable $-- $-- $-- $82,779 Accrued expenses and other current liabilities 92 -- -- 52,706 Current portion of long-term debt -- -- -- 4,814 Total current liabilities 92 -- -- 140,299 Long-term debt -- -- -- 487,968 Other long-term liabilities -- -- -- 25,021 Intercompany notes/advances (133) (174,637) -- -- Total liabilities (41) (174,637) -- 653,288 Preferred stock -- -- -- -- Common stock 267 -- -- 267 Class B common stock 13 -- -- 13 Additional paid-in capital 265,716 160,040 (163,357) 265,716 Accumulated earnings (deficit) (55,610) 18,369 (46,986) (55,610) Accumulated other comprehensive income (5,994) -- 5,994 (5,994) Stockholders' equity 204,392 178,409 (204,349) 204,392 Total liabilities and stockholders' equity $204,351 $3,772 $(204,349) $857,680 Consolidating Condensed Statement of Operations Fiscal Year ended January 29, 2000 (in thousands) Specialty SRI Receivables SRI SRI Retailes, Inc. Purchase Co. Eliminations Consolidated Net sales $1,121,567 $-- $-- $1,121,567 Cost of sales and related buying, occupancy and distribution expenses 897,117 -- -- 897,117 Gross profit 224,450 -- -- 224,450 Selling, general and administrative expenses 389,873 (1,597) -- 388,276 Store opening and closure program costs 44,986 -- -- 44,986 Operating income (210,409) 1,597 -- (208,812) Interest expense, net 61,894 3,457 -- 65,351 Income (loss) before income taxes, equity in net earnings of subsidiaries, extraordinary item and cumulative effect of change in accounting principle (272,303) (1,860) -- (274,163) Income tax expense (benefit) 14,842 (637) -- 14,205 Income (loss) before equity in net earnings of subsidiaries, extraordinary item and cumulative effect of change in accounting principle (287,145) (1,223) -- (288,368) Equity in net earnings of subsidiaries (2,974) -- 2,974 -- Income (loss) before extraordinary item and cumulative effect of change in accounting principle (290,119) (1,223) 2,974 (288,368) Extraordinary item - early retirement of debt, net of tax (204) (545) -- (749) Cumulative effect of change in accounting principle - reporting costs of start-up activities, net of tax (2,732) (1,206) -- (3,938) Net income (loss) $(293,055) $(2,974) $2,974 $(293,055) Consolidating Condensed Statement of Operations Fiscal Year ended January 29, 2000 (in thousands) Specialty Stage Retailers, Stage Stores Stores, Inc. Inc. (NV) Eliminations Consolidated Net sales $-- $-- $-- $1,121,567 Cost of sales and related buying, occupancy and distribution expenses -- -- -- 897,117 Gross profit -- -- -- 224,450 Selling, general and administrative expenses 125 (585) -- 387,816 Store opening and program closure costs -- -- -- 44,986 Operating income (125) 585 -- (208,352) Interest expense, net -- (16,717) -- 48,634 Income (loss) before income taxes, equity in net earnings of subsidiaries, extraordinary item and cumulative effect of change in accounting principle (125) 17,302 -- (256,986) Income tax expense (benefit) (44) 6,056 -- 20,217 Income (loss) before equity in net earnings of subsidiaries, extraordinary item and cumulative effect of change in accounting principle (81) 11,246 -- (277,203) Equity in net earnings of subsidiaries (281,809) -- 281,809 -- Income (loss) before extraordinary item and cumulative effect of change in accounting principle (281,809) 11,246 281,809 (277,203) Extraordinary item - early retirement of debt, net of tax -- -- -- (749) Cumulative effect of change in accounting principle - reporting costs of start-up activities, net of tax -- -- -- (3,938) Net income (loss) $(281,890) $11,246 $281,809 $(281,890) Consolidating Condensed Statement of Operations Fiscal Year ended January 30, 1999 (in thousands) Specialty SRI Receivables SRI SRI Retailers, Inc. Purchase Co. Elimination Consolidated Net sales $1,173,547 $ -- $ -- $1,173,547 Cost of sales and related buying, occupancy and distribution expenses 839,238 -- -- 839,238 Gross profit 334,309 -- -- 334,309 Selling, general and administrative expenses 277,523 (1,467) -- 276,056 Store opening and closure costs 10,192 -- -- 10,192 Operating income 46,594 1,467 -- 48,061 Interest expense, net 65,345 (3,435) -- 61,910 Income (loss) before income taxes (18,751) 4,902 -- (13,849) Income tax expense (benefit) (6,377) 1,826 -- (4,551) Income (loss) before equity in net earnings of subsidiaries (12,374) 3,076 -- (9,298) Equity in net earnings of subsidiaries 3,076 -- (3,076) -- Net income (loss) $(9,298) $3,076 $(3,076) $(9,298) Consolidating Condensed Statement of Operations Fiscal Year ended January 30, 1999 (in thousands) Specialty Stage Retailers, Stage Stores Stores, Inc. Inc. (NV) Elimiations Consolidated Net sales $ -- $ -- $ -- $1,173,547 Cost of sales and related buying, occupancy and distribution expenses -- -- -- 839,238 Gross profit -- -- -- 334,309 Selling, general and administrative expenses 93 (4,672) -- 271,477 Store opening and closure costs -- -- -- 10,192 Operating income (93) 4,672 -- 52,640 Interest expense, net -- (15,439) -- 46,471 Income (loss) before income taxes (93) 20,111 -- 6,169 Income tax expense (benefit) (33) 7,039 -- 2,455 Income (loss) before equity in net earnings of subsidiaries (60) 13,072 -- 3,714 Equity in net earnings of subsidiaries 3,774 -- (3,774) -- Net income (loss) $3,714 $13,072 $(3,774) $3,714 Consolidating Condensed Statement of Operations Fiscal Year ended January 31, 1998 (in thousands) Specialty SRI Receivables SRI SRI Retailers, Inc. Purchase Co. Eliminations Consolidated Net sales $1,073,316 $-- $-- $1,073,316 Cost of sales and related buying, occupancy and distribution expenses 730,179 -- -- 730,179 Gross profit 343,137 -- -- 343,137 Selling, general and administrative expenses 242,843 (2,865) -- 239,978 Store opening and closure costs 8,686 -- -- 8,686 Operating income 91,608 2,865 -- 94,473 Interest expense, net 47,746 (1,164) -- 46,582 Income (loss) before income taxes 43,862 4,029 -- 47,891 Income tax expense (benefit) 17,234 1,483 -- 18,717 Income (loss) before equity in net earnings of subsidiaries and extraordinary item 26,628 2,546 -- 29,174 Equity in net earnings of subsidiaries 1,904 -- (1,904) -- Income (loss) before extraordinary item 28,532 2,546 (1,904) 29,174 Extraordinary item - early retirement of debt (17,653) (642) -- (18,295) Net income (loss) $10,879 $1,904 $(1,904) $10,879 Consolidating Condensed Statement of Operations Fiscal Year ended January 31, 1998 (in thousands) Specialty Stage Retailer, Stage Stores Stores, Inc. Inc. (NV) Eliminations Consolidated Net sales $-- $-- $-- $1,073,316 Cost of sales and related buying, occupancy and distribution expenses -- -- -- 730,177 Gross profit -- -- -- 343,137 Selling, general and administrative expenses 30 3 -- 240,011 Store opening and closure costs -- -- -- 8,686 Operating income (30) (3) -- 94,440 Interest expense, net -- (8,305) -- 38,277 Income (loss) before income taxes (30) 8,302 -- 56,163 Income tax expense (benefit) -- 2,906 -- 21,623 Income (loss) before equity in net earnings of subsidiaries and extraordinary item (30) 5,396 -- 34,540 Equity in net earnings of subsidiaries 16,275 -- (16,275) -- Income (loss) before extraordinary item 16,245 5,396 (16,275) 34,540 Extraordinary item - early retirement of debt -- -- -- (18,295) Net income (loss) $16,245 $5,396 $(16,275) $16,245 Consolidating Condensed Statement of Cash Flows Fiscal Year ended January 29, 2000 (in thousands) Specialty SRI Receivables SRI SRI Retailers, Inc. Purchase Co. Eliminations Consolidated Cash flows from operating activities: Net cash provided by (used in) operating activities $28,755 $(4,878) $-- $23,877 Cash flows from investing activities: Investment in subsidiaries -- -- -- -- Additions to property, equipment and leasehold improvements (22,037) -- -- (22,037) Proceeds from the sales of accounts receivable, net (34,878) 34,878 -- -- Dividend from subsidiary -- -- -- -- Net cash used in investing activities (56,915) 34,878 -- (22,037) Cash flows from financing activities: Proceeds from working capital facility 43,000 -- -- 43,000 Proceeds from issuance of commom stock -- -- -- -- Proceeds from capital contribution -- -- -- -- Payments on long-term debt (4,813) (30,000) -- (34,813) Additions to debt issue costs (2,832) -- -- (2,832) Dividend paid -- -- -- -- Net cash provided by (used in) financing activities 35,355 (30,000) -- 5,355 Net increase (decrease) in cash and cash equivalents 7,195 -- -- 7,195 Cash and cash equivalents: Beginning of period 10,882 -- -- 10,882 End of period $18,077 $ -- $ -- $18,077 Consolidating Condensed Statement of Cash Flows Fiscal Year ended January 29, 2000 (in thousands) Specialty Stage Retailers Stage Stores Stores, Inc. Inc. (NV) Elimiations Consolidated Cash flows from operating activities: Net cash provided by (used in) operating activities $ -- $24 $-- $23,901 Cash flows from investing activities: Investment in subsidiaries (128) -- 128 -- Additions to property, equipment and leasehold improvements -- -- -- (22,037) Proceeds from the sales of accounts receivable, net -- -- -- -- Dividend from subsidiary 100 -- (100) -- Net cash used in investing activities (28) -- 28 (22,037) Cash flows from financing activities: Proceeds from working capital facility -- -- -- 43,000 Proceeds from issuance of common stock 128 -- -- 128 Proceeds from capital contribution -- 128 (128) -- Payments on long-term debt -- -- -- (34,813) Additions to debt issue costs -- -- -- (2,832) Dividend paid -- (100) 100 -- Net cash provided by (used in) financing activities 128 28 (28) 5,483 Net increase (decrease) in cash and cash equivalents 100 52 -- 7,347 Cash and cash equivalents: Beginning of period 2 1,948 -- 12,832 End of period $102 $2,000 $ -- $20,179 Consolidating Condensed Statement of Cash Flows Fiscal Year ended January 30, 1999 (in thousands) Specialty SRI Receivables SRI SRI Retailers, Inc. Purchase Co. Elimination Consolidated Cash flows from operating activities: Net cash provided by (used in) operating activities $(28,747) $11,586 $-- $(17,161) Cash flows from investing activities: Investment in subsidiaries -- -- -- -- Additions to property, equipment and leasehold improvements (88,047) -- -- (88,047) Proceeds from the sales of accounts receivable, net 2,504 (2,504) -- -- Dividend from subsidiary 9,082 -- (9,082) -- Net cash used in investing activities (76,461) (2,504) (9,082) (88,047) Cash flows from financing activities: Proceeds from working capital facility 96,300 -- -- 96,300 Proceeds from issuance of common stock -- -- -- -- Proceeds from capital contribution -- -- -- -- Payments on long-term debt (2,596) -- -- (2,596) Additions to debt issue costs (913) -- -- (913) Dividends paid -- (9,082) 9,082 -- Net cash provided by (used in) financing activities 92,791 (9,082) 9,082 92,791 Net increase (decrease) in cash and cash equivalents (12,417) -- -- (12,417) Cash and cash equivalents: Beginning of period 23,299 -- -- 23,299 End of period $10,882 $-- $-- $10,882 Consolidating Condensed Statement of Cash Flows Fiscal Year ended January 30, 1999 (in thousands) Specialty Stage Retailers, Stage Stores Stores, Inc. Inc. (NV) Eliminations Consolidated Cash flows from operating activities: Net cash provided by (used in) operating activities $(31) $1,682 $-- $(15,510) Cash flows from investing activities: Investment in subsidiaries (1,038) -- 1,038 -- Additions to property, equipment and leasehold improvements -- (672) -- (88,719) Proceeds from the sales of accounts receivable, net -- -- -- -- Dividend from subsidiary 100 -- (100) -- Net cash used in investing activities (938) (672) 938 (88,719) Cash flows from financing activities: Proceeds from working capital facility -- -- -- 96,300 Proceeds from issuance of common stock 955 -- -- 955 Proceeds from capital contribution -- 1,038 (1,038) -- Payments on long-term debt -- -- -- (2,596) Additions to det issue costs -- -- -- (913) Dividend paid -- (100) 100 -- Net cash provided by (used in) financing activities 955 938 (938) 93,746 Net increase (decrease) in cash and cash equivalents (14) 1,948 -- (10,483) Cash and cash equivalents: Beginning of period 16 -- -- 23,315 End of period $2 $1,948 $-- $12,832 Consolidating Condensed Statement of Cash Flows Fiscal Year ended January 31, 1998 (in thousands) Specialty SRI Receivables SRI SRI Retailers, Inc. Purchase Co. Eliminations Consolidated Cash flows from operating activities: Net cash provided by (used in) operating activities $36,822 $(17,988) $-- $18,834 Cash flows from investing activities: Acquisitions, net of cash acquired (4,946) -- -- (4,946) Investment in subsidiaries 21,243 -- -- 21,243 Intercompany notes/advances 22,522 -- -- 22,522 Additions to property, equipment and leasehold improvements (64,859) -- -- (64,859) Proceeds from the sales of accounts receivable, net (19,962) 19,962 -- -- Dividend from subsidiary 1,904 -- (1,904) -- Net cash used in investing activities (44,098) 19,962 (1,904) (26,040) Cash flows from financing activities: Proceeds from working capital facility 45,700 -- -- 45,700 Proceeds from issuance of long-term debt 299,718 -- -- 299,718 Proceeds from issuance of common stock -- -- -- -- Proceeds from capital contribution (21,243) -- -- (21,243) Payments on long-term debt (299,533) -- -- (299,533) Additions to debt issue costs (12,337) (70) -- (12,407) Dividend paid -- (1,904) 1,904 -- Net cash provided by (used in) financing activities 12,305 (1,974) 1,904 12,235 Net indecrease in cash and cash equivalents 5,029 -- -- 5,029 Cash and cash equivalents: Beginning of period 18,270 -- -- 18,270 End of period $23,299 $-- $-- $23,299 Consolidating Condensed Statement of Cash Flows Fiscal Year ended January 31, 1998 (in thousands) Specialty Stage Retailers, Stage Stores Stores, Inc. Inc. (NV) Eliminations Consolidated Cash flows from operating activities: Net cash provided by (used in) operating activities $-- $-- $-- $18,834 Cash flows from investing activities: Acquisitions, net of cash acquired -- -- -- (4,946) Investment in subsidiaries (21,243) -- -- -- Intercompany notes/advances (1,279) (21,243) -- -- Additions to property, equipment and leasehold improvements -- -- -- (64,859) Proceeds from the sales of accounts receivable, net -- -- -- -- Dividend from subsidiary -- -- -- -- Net cash used in investing activities (22,522) (21,243) -- (69,805) Cash flows from financing activities: Proceeds from working capital facility -- -- -- 45,700 Proceeds from issuance of long-term debt -- -- -- 299,718 Proceeds from issuance of common stock 22,522 -- -- 22,522 Proceeds from capital contributions -- 21,243 -- -- Payments on long-term debt -- -- -- (299,533) Additions to debt issue costs -- -- -- (12,407) Dividend paid -- -- -- -- Net cash provided by (used in) financing activities 22,522 21,243 -- 56,000 Net increase in cash and cash equivalents -- -- -- 5,029 Cash and cash equivalents: Beginning of period 16 -- -- 18,286 End of period $16 $-- $-- $23,315 EX-4.7 2 0002.txt Exhibit 4.7 SIXTH AMENDMENT AGREEMENT This SIXTH AMENDMENT AGREEMENT, dated as of February 18, 2000 (the "Agreement"), is among Specialty Retailers, Inc. (the "Borrower"), Stage Stores, Inc. (the "Parent"), the banks named therein (the "Banks") and Credit Suisse First Boston, as Administrative Agent, Collateral Agent, Swingline Bank and L/C Bank (the "Administrative Agent"). PRELIMINARY STATEMENT WHEREAS, the Borrower, the Parent, the Banks and the Administrative Agent are parties to the Credit Agreement, dated as of June 17, 1997, as amended through the date hereof (the "Credit Agreement"); WHEREAS, the Borrower has requested the amendment of certain provisions set forth in the Credit Agreement; WHEREAS, the Banks have agreed to amend the specific provisions set forth herein under the terms and conditions set forth herein; NOW, THEREFORE, the parties hereto hereby agree as follows: SECTION 1. Defined Terms. Capitalized terms used and not defined herein shall have the meanings assigned to such terms in the Credit Agreement. SECTION 2. Amendments. The Banks hereby agree to amend the Credit Agreement as follows: (a) The definition of "Consolidated EBITDA" in Section 1.1 of the Credit Agreement is hereby amended by adding the following before the "." at the end thereof: ", plus (ix) any special charges relating to the closing of any stores other than the stores listed on Schedule 1 to the Sixth Amendment Agreement, dated as of February 18, 2000. (b) The definition of "Material Adverse Effect" in Section 1.1 of the Credit Agreement is hereby restated in its entirety as follows: ""Material Adverse Effect" shall mean, measured from the date of closing of the Senior Revolving Credit Facility, a material adverse effect upon (i) the business, operations, proper ties, assets or condition (financial or otherwise) of the Parent and its Subsidiaries taken as a whole or (ii) the ability of any Loan Party to perform, or of the Administrative Agent, any L/C Bank, the Swingline Bank, the Collateral Agent or any of the Banks to enforce, any of the Obligations." (c) Section 1.1 of the Credit Agreement is hereby amended by adding the following definition: ""Senior Revolving Credit Facility" shall mean the Senior Financing as defined in that Commitment Letter dated as of February 18, 2000, substantially in the form attached hereto as Exhibit A." (d) The Credit Agreement is hereby amended by adding the following new Section 6.2(k): "(k) Indebtedness under the Senior Revolving Credit Facility." (e) Section 6.3(g) of the Credit Agreement is hereby amended by adding the following before the word "securing" in the second line thereof: "or pursuant to any other document" (f) The Credit Agreement is hereby amended by adding the following new Section 6.3(k): "(k) Liens created by the Borrower or any Subsidiary against inventory for the benefit of Senior Revolving Credit Facility." (g) The Credit Agreement is hereby amended by adding the following new Section 2.10(d): "(d) Simultaneously with any required prepayment of the Revolving Loans in accordance with the provisions of Section 2.12(i) , each Bank's Total Expansion Loan Commitment shall be permanently reduced by such Bank's Pro Rata Share of the amount of such prepayment." (h) The Credit Agreement is hereby amended by adding the following new Section 2.12(i): "(i) Store Closings. On the tenth Business Day after the end of the fiscal month after the termination of business at a store (other than the stores listed on Schedule 1 to the Sixth Amendment Agreement, dated as of February __, 2000), the Borrower shall prepay the outstanding Expansion Loans in an amount equal to 100% of the amount of the proceeds from liquidating the existing inventory, furniture and fixtures at such store to be closed at the commencement of a going out of business or similar sale, less all cash costs associated with closing such store, including but not limited to future lease or occupancy cost payments, severance payments, costs of conducting such going out of business or similar sale and taxes." (i) The Credit Agreement is hereby amended by adding the following new Section 4.28: "Section 4.28 Cash Balances. The aggregate amount of readily available cash or cash equivalent in the corporate concentration account of the Borrower and its Subsidiaries does not exceed at any time $20 million after giving effect to any proposed borrowing." (j) The Credit Agreement is hereby amended by adding the following new Section 5.12: "Section 5.12 Cash Sweep. The Borrower hereby covenants on each Business Day to sweep cash held at stores and local deposit or concentration accounts to the corporate concentration account in accordance with customary and typical past historical practices of the Borrower." SECTION 3. Representations and Warranties; No Defaults. Each Loan Party hereby represents and warrants that after giving effect to the amendments set forth in Section 2 of this Agreement, (a) the representations and warranties contained in the Credit Agreement and Loan Documents are correct on the effective date of this Agreement, and (b) no Default or Event of Default has occurred or is continuing on the date hereof and on the effective date of this Agreement. SECTION 4. Counterparts. This Agreement (a) may be executed in two or more counterparts, each of which shall be deemed an original, but all of which taken together shall constitute one and the same instrument, (b) shall be effective only in this specific instance for the specific purpose set forth herein, and (c) does not allow any other or further departure from the terms of the Credit Agreement or the Loan Documents, which terms shall continue in full force and effect. SECTION 5. Conditions to Effectiveness. This Agree ment shall become effective as of the date hereof when (a) copies hereof, when taken together, bearing the signatures of each of the Loan Parties and the Required Banks have been received by the Administrative Agent, (b) the Borrower has granted the Banks a first priority lien on the corporate concentration account to secure the Obligations under the Existing Facility, (c) the Borrower has granted the Banks a second priority lien on all Eligible Inventory (to be defined) of the Borrower and its Subsidiaries to secure an amount equal to the difference between $50 million of borrowing under the Existing Facility minus the amount of indebtedness under the Senior Revolving Credit Facility outstanding on the date of the occurrence of an Event of Default (as defined in the Senior Revolving Credit Facility), (d) the Borrower has granted the Banks a first priority lien to secure the Obligations under the Existing Facility on all tangible personal property, including furniture, fixtures and equipment and (e) the Senior Revolving Credit Facility is duly executed and becomes effective. The Borrower and Subsidiaries agree to effect such additional documents or agreements as the Administrative Agent may reasonably request in connection with the foregoing. SECTION 6. Acknowledgments, Releases and Defenses. Each Loan Party hereby (i) acknowledges and confirms that the Administrative Agent and the Banks have performed fully all of their respective obligations under the Credit Agreement and the other Loan Documents and the instruments and agreements referred to therein; (ii) releases the Administrative Agent, the Banks, and the Administrative Agent's and Banks' respective officers, directors, employees, agents, attorneys, affiliates, subsidiaries and representatives from any an all actions, causes of action, claims, demands, damages and liabilities of whatever kind or nature, in law or in equity, now known or unknown, suspected or unsuspected to the extent that any of the foregoing arises from any action or failure to act on or prior to the date hereof; (iii) acknowledges that it has no offsets or defenses to its obligations under the Credit Agreement and the other Loan Documents; and (iv) ratifies, acknowledges and affirms its obligations under the Credit Agreement and the other Loan Documents, including, without limitation, the amounts borrowed thereunder. Except as otherwise specified herein, there is no amendment of any other term, condition or provision of the Credit Agreement all of which are hereby ratified and confirmed by the Borrower and the Parent. SECTION 7. Applicable Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their duly authorized officers, all as of the date and year first written above. SPECIALTY RETAILERS, INC. By: /s/ Charles M. Sledge___________________ Name: Charles M. Sledge Title: SVP Finance & Treasurer STAGE STORES, INC. By: /s/ James A. Marcum __________________ Name: James A. Marcum Title: Vice Chairman/CFO CREDIT SUISSE FIRST BOSTON, as Administrative Agent, Collateral Agent, Swingline Bank and L/C Bank By: /s/ Jan Kofol________________________ Name: Jan Kofol Title: Director By: /s/ Didier Siffer_____________________ Name: Didier Siffer Title: Vice President BANK UNITED By: /s/ Gordon Kovacs__________________ Name: Gordon Kovacs Title: Vice President BANQUE WORMS CAPITAL CORPORATION By: __________________________ Name: Title: BANQUE PARIBAS HOUSTON AGENCY By: /s/ Albert A. Young Jr._____________ Name: Albert A. Young Jr. Title: Director By: /s/ Edward V. Canale______________ Name: Edward V. Canale Title: Managing Director BANK AUSTRIA CREDITANSTALT CORPORATE FINANCE, INC. F.K.A. Creditanstalt Corporate Finance, Inc. By: __________________________ Name: Title: By: __________________________ Name: Title: HIBERNIA NATIONAL BANK By: __________________________ Name: Title: IMPERIAL BANK, A CALIFORNIA BANKING CORPORATION By: __________________________ Name: Title: ROYAL BANK OF SCOTLAND By: /s/ Derek Bonnar_______________ Name: Derek Bonnar Title: Vice President THE FUJI BANK, LIMITED By: __________________________ Name: Title: UNION BANK OF CALIFORNIA, N.A. By: /s/ Richard P. DeGrey____________ Name: Richard P. DeGrey Title: Vice President FIRST COMMERCIAL BANK By: __________________________ Name: Title: Bankers Life & Casualty By: /s/ Eric Johnson_____________ Name: Eric Johnson Title: Vice President STEIN, ROE & FARNHAM / KEYPORT LIFE By: /s/ Jim Fellows______________ Name: Jim Fellows Title: _______________________________ 1There is a 'blank' Footer B here to retain soft page breaks EX-4.8 3 0003.txt Exhibit 4.81 CREDIT AGREEMENT among SPECIALTY RETAILERS, INC., as Borrower STAGE STORES, INC., as Guarantor THE BANKS NAMED HEREIN, and CREDIT SUISSE FIRST BOSTON, as Administrative Agent and Collateral Agent Dated as of March 6, 2000 $35,000,000 TABLE OF CONTENTS Page SECTION 1. DEFINITIONS 1 Section 1.1 Definitions 1 SECTION 2. AMOUNT AND TERMS OF CREDIT FACILITIES 25 Section 2.1 Revolving Loans 25 Section 2.2 Notice of Borrowing 25 Section 2.3 Disbursement of Funds 26 Section 2.4 Evidence of Indebtedness; Revolving Notes 26 Section 2.5 Interest 27 Section 2.6 Interest Periods 28 Section 2.7 Minimum Amount of Eurodollar Loans 28 Section 2.8 Conversion or Continuation 28 Section 2.9 Voluntary and Mandatory Reductions of Commitments 29 Section 2.10 Voluntary Prepayments 29 Section 2.11 Mandatory Prepayments 29 Section 2.12 Application of Prepayments 31 Section 2.13 Method and Place of Payment 31 Section 2.14 Fees 32 Section 2.15 Interest Rate Unascertainable, Increased Costs, Illegality 32 Section 2.16 Funding Losses 34 Section 2.17 Increased Capital 34 Section 2.18 Taxes 35 Section 2.19 Action of Affected Banks 36 Section 2.20 Use of Proceeds 36 SECTION 3. CONDITIONS PRECEDENT 36 Section 3.1 Conditions Precedent to Initial Loans 36 Section 3.2 Conditions Precedent to All Loans 39 SECTION 4. REPRESENTATIONS AND WARRANTIES 40 Section 4.1 Corporate Status 40 Section 4.2 Corporate Power and Authority 40 Section 4.3 No Violation 41 Section 4.4 Litigation 41 Section 4.5 Financial Statements; Financial Condition; etc. 41 Section 4.6 [Intentionally left blank]. 41 Section 4.7 Projections 41 Section 4.8 Material Adverse Effect 41 Section 4.9 Use of Proceeds; Margin Regulations 42 Section 4.10 Governmental Approvals 42 Section 4.11 Security Interests and Liens 42 Section 4.12 Tax Returns and Payments 42 Section 4.13 ERISA 42 Section 4.14 Investment Company Act; Public Utility Holding Company Act 43 Section 4.15 Representations and Warranties in Loan Documents 43 Section 4.16 True and Complete Disclosure 43 Section 4.17 Corporate Structure; Capitalization 43 Section 4.18 Environmental Matters 44 Section 4.19 Insurance 44 Section 4.20 Patents, Trademarks, etc. 45 Section 4.21 Ownership of Property 45 Section 4.22 No Default 45 Section 4.23 Licenses, etc. 45 Section 4.24 Compliance With Law 45 Section 4.25 No Burdensome Restrictions 45 Section 4.26 Labor Matters 45 Section 4.27 Parent Business 46 Section 4.28 Cash Balances 46 SECTION 5. AFFIRMATIVE COVENANTS 46 Section 5.1 Information Covenants 46 Section 5.2 Books, Records and Inspections 50 Section 5.3 Maintenance of Insurance 50 Section 5.4 Taxes 50 Section 5.5 Corporate Franchises 51 Section 5.6 Compliance with Law 51 Section 5.7 Performance of Obligations 51 Section 5.8 Maintenance of Properties 51 Section 5.9 Further Assurances 51 Section 5.10 Receivables Program Refinancings. 52 Section 5.11 Maintenance of Corporate Separateness 52 Section 5.12 Post Closing Opinions 52 Section 5.13 Corporate Concentration Account 52 Section 5.14 Cash Sweep 53 Section 5.15 Cash Equivalents 53 Section 5.16 Projections 53 SECTION 6. NEGATIVE COVENANTS 53 Section 6.1 Financial Covenants 53 Section 6.2 Indebtedness 55 Section 6.3 Liens 56 Section 6.4 Restriction on Fundamental Changes 57 Section 6.5 Sale of Assets 57 Section 6.6 Contingent Obligations 58 Section 6.7 Dividends 58 Section 6.8 Advances, Investments and Loans 59 Section 6.9 Transactions with Affiliates 60 Section 6.10 Limitation on Voluntary Payments and Modifications of Certain Documents 60 Section 6.11 Changes in Business 60 Section 6.12 Certain Restrictions 60 Section 6.13 Sales and Leasebacks 61 Section 6.14 Plans 61 Section 6.15 Limitation on Dispositions of Subsidiary Stock 61 Section 6.16 Fiscal Year; Fiscal Quarter 61 Section 6.17 Receivables Program 61 SECTION 7. EVENTS OF DEFAULT 62 Section 7.1 Events of Default 62 Section 7.2 Rights and Remedies 64 SECTION 8. THE ADMINISTRATIVE AGENT AND COLLATERAL AGENT 65 Section 8.1 Appointment 65 Section 8.2 Delegation of Duties 65 Section 8.3 Exculpatory Provisions 66 Section 8.4 Reliance by Agent 66 Section 8.5 Notice of Default 66 Section 8.6 Non-Reliance on Agent and Other Banks 66 Section 8.7 Indemnification 67 Section 8.8 Agent in its Individual Capacity 67 Section 8.9 Successor Agent 67 SECTION 9. MISCELLANEOUS 68 Section 9.1 Payment of Expenses, Indemnity, etc. 68 Section 9.2 Right of Setoff 69 Section 9.3 Notices 69 Section 9.4 Successors and Assigns; Participation; Assignments 70 Section 9.5 Amendments and Waivers 71 Section 9.6 No Waiver; Remedies Cumulative 72 Section 9.7 Sharing of Payments 72 Section 9.8 Governing Law; Submission to Jurisdiction 73 Section 9.9 Counterparts 73 Section 9.10 Effectiveness 73 Section 9.11 Headings Descriptive 73 Section 9.12 Marshalling; Recapture 73 Section 9.13 Severability 74 Section 9.14 Survival 74 Section 9.15 Domicile of Loans 74 Section 9.16 Limitation of Liability 74 Section 9.17 Calculations; Computations 74 Section 9.18 Waiver of Trial by Jury 75 Section 9.19 Nature of Borrowers' Obligations 75 SECTION 10. PARENT GUARANTY 76 Section 10.1 The Parent Guaranty 76 Section 10.2 Bankruptcy 76 Section 10.3 Nature of Liability 77 Section 10.4 Independent Obligation 77 Section 10.5 Authorization 77 Section 10.6 Reliance 78 Section 10.7 Subordination 78 Section 10.8 Waiver 78 Section 10.9 Maximum Liability 79 EXHIBITS Exhibit A - Form of Notice of Borrowing Exhibit B - Form of Revolving Note Exhibit C-1 - Form of Notice of Conversion Exhibit C-2 - Form of Notice of Continuation Exhibit D - Form of Security Agreement Exhibit E - Form of Subsidiary Guaranty Exhibit F - Form of Warrant Agreement Exhibit G - Form of Opinion of CW&T, counsel to the Loan Parties Exhibit H - Form of Monthly Financials Exhibit I - Form of Monthly Reports Exhibit J - Form of Compliance Certificate Exhibit K - Form of Excess Cash Flow Certificate Exhibit L - Form of Transfer Supplement Exhibit M - Form of Intercompany Note SCHEDULES Schedule I - Material Subsidiaries of Specialty and Stage Schedule II - Receivables Program Documents Schedule 4.8 - Material Adverse Changes Schedule 4.10 - Governmental Approvals Schedule 4.13 - ERISA Schedule 4.17 - Corporate Structure; Capitalization Schedule 4.18 - Environmental Matters Schedule 4.19 - Insurance Schedule 4.21 - Ownership of Property Schedule 4.26 - Labor Matters Schedule 6.2 - Existing Indebtedness Schedule 6.3 - Existing Liens Schedule 6.6 - Contingent Obligations Schedule 6.9 - Leases CREDIT AGREEMENT, dated as of March 6, 2000, among SPECIALTY RETAILERS, INC., a Texas corporation (the "Borrower"), STAGE STORES, INC., a Delaware corporation (the "Parent"), the Banks (such term and each other capitalized term used herein having the meaning assigned to such term in Section 1), and CREDIT SUISSE FIRST BOSTON, acting in its capacity as agent for the Banks (in such capacity, the "Administrative Agent") and in its capacity as collateral agent for the Banks (in such capacity, the "Collateral Agent"). The Borrower has requested that the Banks extend credit to the Borrower to enable the Borrower to borrow on a revolving basis Revolving Loans in an aggregate principal amount up to (but not to exceed) $35,000,000. The proceeds of the Revolving Loans will be used for working capital of the Borrower and its Subsidiaries. Accordingly, the Borrower, the Parent, the Banks, the Administrative Agent and the Collateral Agent hereby agree as follows: SECTION 10 DEFINITIONS. Section 1.1 Definitions. As used herein, the fol lowing terms shall have the meanings herein specified unless the context otherwise requires. Defined terms in this Agreement shall include in the singular number the plural and in the plural number the singular. "Adjusted Leverage Ratio" shall mean on any day the ratio on such day of (i) Consolidated Total Debt on such day determined on a Pro Forma Basis to (ii) Consolidated Adjusted EBITDA for the four consecutive quarters of the Parent (taken as one accounting period) most recently ended. "Administrative Agent" shall mean Credit Suisse First Boston acting in its capacity as administrative agent for the Banks and any successor agent appointed in accordance with Section 8.9. "Administrative Agent's Office" shall mean the office of the Administrative Agent located at Eleven Madison Avenue, New York, New York, 10010, or such other office as the Administrative Agent may hereafter designate in writing as such to the other parties hereto. "Affiliate" shall mean, with respect to any Person, any other Person directly or indirectly controlling (including but not limited to all directors and officers of such Person), controlled by, or under direct or indirect common control with such Person. A Person shall be deemed to control a corporation if such Person possesses, directly or indirectly, the power to (i) vote 10% or more of the securities having ordinary voting power for the election of directors of such corporation or (ii) direct or cause the direction of the management and policies of such corporation, whether through the ownership of voting securities, by contract or otherwise. "Agent" shall have the meaning provided in Section 8.1. "Agreement" shall mean this Credit Agreement as the same may from time to time hereafter be modified, supplemented, restated, or amended. "Anticipated Reinvestment Amount" shall mean, with respect to any Reinvestment Election exercised with respect to an Eligible Asset Sale, the amount specified in the Reinvestment Notice delivered by the Borrower in connection therewith as the amount of the Net Cash Proceeds from the related Eligible Asset Sale that the Borrower intends to use to purchase, construct or otherwise acquire Reinvestment Assets. "Asset Sale" shall mean the sale, transfer or other disposition (whether voluntary or involuntary) by the Parent or any of its Subsidiaries (including, without limitation, by way of the damage, destruction or condemnation thereof) to any Person other than any Loan Party of (a) any capital stock of any Subsidiary of the Parent or any of its Subsidiaries; (b) substan tially all the assets of any geographic or other division or line of business of the Parent or any of its Subsidiaries; or (c) any other asset or assets (excluding inventory and other assets pur chased for sale to others in the ordinary course of business and sales of Receivables pursuant to the Receivables Program) of the Parent or any of its Subsidiaries, provided that (i) any asset sale included in clause (c) above shall be deemed not to be an "Asset Sale" until the aggregate amount of all such sales after the Closing Date by the Parent and its Subsidiaries, taken togeth er, that have not previously become Asset Sales under this Agreement equals or exceeds $1,000,000, (ii) any asset sale or series of related asset sales described in clause (c) above having a value less than $100,000 shall not be deemed an "Asset Sale" for purposes of this Agreement and (iii) any sale of (x) the aircraft owned by the Borrower, (y) any asset sale or series of asset sales related to the sale of the C.R. Anthony Company corporate headquarters building located in Oklahoma City, Oklahoma or the sale of equipment located at the C.R. Anthony Company distribution center located in Oklahoma City, Oklahoma and (z) the sale of not more than five leasehold interests per year relating to stores closed in the ordinary course of business (so long as the value of each such leasehold interest does not exceed $500,000), shall be deemed not to be an "Asset Sale" hereunder. "Authorized Officer" shall mean with respect to any Person such Person's Chairman, President or Principal Financial Officer. "Bankruptcy Code" shall mean Title 11 of the United States Code entitled "Bankruptcy", as amended from time to time, and any successor statute or statutes, together with all rules promulgated in connection therewith. "Banks" shall mean the Persons listed on Annex 1 hereto and the Persons which from time to time become a party hereto in accordance with Section 9.4(c). "Base Rate" shall mean, for any day, a rate per annum equal to the greater of (a) the Prime Rate in effect on such day and (b) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1%. If for any reason the Administrative Agent shall have determined (which determination shall be conclusive absent manifest error) that it is unable to ascertain the Federal Funds Effective Rate for any reason, including the inability of the Administrative Agent to obtain sufficient quotations in accordance with the terms thereof, the Base Rate shall be deter mined without regard to clause (b) of the first sentence of this definition until the circumstances giving rise to such inability no longer exist. Any change in the Base Rate due to a change in the Prime Rate or the Federal Funds Effective Rate shall be effective on the effective date of such change in the Prime Rate or the Federal Funds Effective Rate, respectively, without notice to the Borrower. "Base Rate Loans" shall mean Loans made and/or being maintained at a rate of interest based upon the Base Rate. "Bealls Subordinated Notes" shall mean (i) the $14,982,914 12% Bealls Holding Subordinated Notes due 2002, (ii) the $14,312,959 7% Bealls Junior Subordinated Debentures due 2003 and (iii) the $4,381,185 7% FB Holdings Subordinated Notes due 2000. "Borrower" shall have the meaning provided in the first paragraph of this Agreement. "Borrower's Share of Excess Cash Flow" shall mean the amount of Excess Cash Flow, determined on a cumulative basis from January 30, 2000 through the last day of the fiscal year most recently ended prior to the date of determination, that is not required to be applied to the prepayment of the Loans pursuant to the Existing Credit Agreement or Section 2.11(a)(iii) minus the amount thereof previously applied to make additional Capital Expenditures pursuant to Section 6.1(d). "Borrowing" shall mean the incurrence of one Type of Loan from all the Banks on a given date (or resulting from conver sions or continuations on a given date), having in the case of Eurodollar Loans the same Interest Period. "Business Day" shall mean (i) for all purposes other than as covered by clause (ii) below, any day excluding Saturday, Sunday and any day which shall be in New York City a legal holiday or a day on which banking institutions are authorized or required by law or other government actions to close and (ii) with respect to all notices and determinations in connection with, and payments of principal and interest on, Eurodollar Loans, any day which is a Business Day described in clause (i) and which is also a day for trading by and between banks for U.S. dollar deposits in the London Interbank Eurodollar market. "Capital Expenditures" shall mean, for any period, the sum of expenditures (whether paid in cash or accrued as a liability, including the portion of Capital Leases originally incurred during such period that is capitalized on the consolidated balance sheet of the Parent and its Subsidiaries) by the Parent and its Subsidiaries during such period that, in conformity with GAAP, are included in "capital expenditures", "additions to property, plant or equipment" or comparable items in the consolidated financial statements of the Parent and its Subsidiaries. "Capital Lease" shall mean (i) any lease of property, real or personal, the obligations under which are capitalized on the consolidated balance sheet of the Parent and its Subsidiaries, and (ii) any other such lease to the extent that the then present value of the minimum rental commitment thereunder should, in accordance with GAAP, be capitalized on a balance sheet of the lessee. "Capital Lease Obligations" shall mean all obligations of the Parent and its Subsidiaries under or in respect of Capital Leases. "Cash Equivalents" shall mean (i) securities issued or directly and fully guaranteed or insured by the United States of America or any agency or instrumentality thereof (provided that the full faith and credit of the United States of America is pledged in support thereof) having maturities of not more than 365 days from the date of acquisition, (ii) time deposits and certificates of deposit of any Bank or any domestic commercial bank of recognized standing having capital and surplus in excess of $500,000,000 with maturities of not more than 365 days from the date of acquisition, (iii) fully secured repurchase obligations with a term of not more than 7 days for underlying securities of the types described in clause (i) entered into with any bank meeting the qualifications specified in clause (ii) above, and (iv) commercial paper issued by the parent corporation of any Bank or any domestic commercial bank of recognized standing having capital and surplus in excess of $500,000,000 and commercial paper rated at least A-1 or the equivalent thereof by Standard & Poor's or at least P-1 or the equivalent thereof by Moody's and in each case maturing within 270 days after the date of acquisition. "Change of Control" shall mean (a) the Parent shall cease to own, beneficially and of record, 100% of the outstanding capital stock of the Borrower, (b) any Person or group of Persons (within the meaning of Section 13 or 14 of the Exchange Act) shall have acquired beneficial ownership (within the meaning of Rule 13d-3 promulgated by the Securities and Exchange Commission under the Exchange Act) of 35% or more of the outstanding shares of any class of outstanding common stock of the Parent, (c) Continuing Directors shall cease to constitute a majority of the board of directors of the Parent. "Continuing Director" shall mean at any date a member of the Parent's board of directors who was either a member of such board on the Closing Date or was nominated for election to such board by at least two- thirds of the Continuing Directors then in office or (d) a "Change of Control" as defined in either the Senior Note Indenture or the Senior Subordinated Note Indenture. "Cleanup" shall mean all actions required to: (a) cleanup, remove, treat or remediate Materials of Environmental Concern in the indoor or outdoor environment, (b) prevent the Release of Materials of Environmental Concern so that they do not migrate, endanger or threaten to endanger public health or welfare or the indoor or outdoor environment, (c) perform pre-remedial studies and investigations and post-remedial monitoring and care, or (d) respond to any government requests for information or documents in any way relating to cleanup, removal, treatment or remediation or potential cleanup, removal, treatment or remediation of Materials of Environmental Concern in the indoor or outdoor environment. "Closing Date" shall mean the date on which the conditions precedent set forth in Section 3.1 have been satisfied. "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time, and any successor statute, together with all rules and regulations promulgated in connection therewith. "Collateral" shall mean all property and interests in property now owned or hereafter acquired in or upon which a Lien has been or is purported or intended to have been granted to the Collateral Agent under any of the Security Documents. "Collateral Agent" shall mean Credit Suisse First Boston acting in its capacity as collateral agent for the Secured Creditors under the Security Documents and any successor collater al agent appointed in accordance with Section 8.9. "Commitment" shall mean, for each Bank at any given time, its Revolving Loan Commitment. "Commitment Fee" shall have the meaning set forth in Section 2.14(b). "Commitment Letter" shall mean that certain letter agreement among the Borrower, the Parent and each of the Banks, dated as of February 18, 2000, relating to the Transactions. "Compliance Certificate" shall mean a certificate of the Principal Financial Officer of the Borrower in the form of Exhibit J hereto and delivered pursuant to Section 5.1(h) hereto. "Consolidated Adjusted EBITDA" shall mean, for any peri od, the Consolidated EBITDA for such period determined on a Pro Forma Basis. "Consolidated Cash Interest Expense" shall mean, for any period, Consolidated Interest Expense for such period minus the amount of such Consolidated Interest Expense not paid or payable in cash. "Consolidated Current Assets" shall mean, at any time, the current assets (other than cash and Cash Equivalents) of the Parent and its Subsidiaries at such time, determined on a consolidated basis in accordance with GAAP. "Consolidated Current Liabilities" shall mean, at any time, the current liabilities (other than the current portion of all long-term Indebtedness) of the Parent and its Subsidiaries at such time, determined on a consolidated basis in accordance with GAAP. "Consolidated EBITDA" shall mean, for any period, the sum, without duplication, of (i) Consolidated Net Income for such period plus (ii) Consolidated Interest Expense for such period plus (iii) amortization of deferred Indebtedness issuance costs and expenses for such period plus (iv) federal and state income taxes deducted in calculating Consolidated Net Income for such period, plus (v) to the extent deducted in the calculation of Consolidated Net Income for such period, depreciation and amorti zation expense plus (vi) to the extent deducted in the calculation of Consolidated Net Income for such period, any noncash charges related to the issuance by the Parent or any of its Subsidiaries of stock, warrants or options to any employee thereof (or any exercise of any such warrants or options) or any re-valuation of such stock, warrants or options, minus to the extent added to the calculation of Consolidated Net Income for such period, any noncash gain related to the issuance by the Parent or any of its Subsidiaries of stock, warrants or options to any employee thereof (or any exercise of any such warrants or options) or any re-valuation of such stock, warrants or options, all determined on a consolidated basis for the Parent and its Subsidiaries in accordance with GAAP plus, (vii) special charges for restructuring (consisting of store closures, downsizing and inventory and other valuation reserves) of up to $65,000,000 in the aggregate taken in the fourth quarter of fiscal year 1999 and the first two fiscal quarters of fiscal year 2000 as specified on Schedule 1 to the Fifth Amendment Agreement, dated as of February 3, 2000, to the Existing Credit Agreement, by and among the parties thereto, or other costs, expenses or losses associated with the termination of employment of such executives not to exceed amounts otherwise payable under any such executive's existing employment contract plus (viii) executive severance payments pursuant to the current terms of existing employment contracts, plus (ix) any special charges (to the extent such charges affect Consolidated EBITDA) relating to the closing of any stores other than stores listed on Schedule 1 to the Sixth Amendment Agreement, dated as of February 18, 2000, to the Existing Credit Agreement, by and among the parties thereto. "Consolidated Fixed Charges" shall mean, without duplication, for any period, the sum of (i) all Consolidated Interest Expense for such period, plus (ii) scheduled payments due in the next succeeding four quarters for principal of the Expansion Loans (as defined in the Existing Credit Agreement) and other Indebtedness (including the principal component of Capital Leases but excluding amounts due on the Final Maturity Date), plus (iii) Consolidated Rental Expense plus (iv) all federal and state income taxes paid or payable in cash during such period, all as determined on a consolidated basis in accordance with GAAP. "Consolidated Interest Expense" shall mean, for any fiscal period of the Parent, the total interest expense (including, without limitation, interest expense attributable to Capital Leases in accordance with GAAP) of the Parent and its Subsidiaries for such period, minus all interest earnings received by the Parent and its Subsidiaries in cash during such period, minus amortization of deferred Indebtedness issuance costs and expenses for such period, in each case determined on a consolidated basis in accordance with GAAP. "Consolidated Net Income" for any period, means the net income (or loss) of the Parent and its Subsidiaries on a consolidated basis for such period (taken as a single accounting period) determined in accordance with GAAP provided that there shall be excluded (a) the income (or loss) of any Person in which any other Person (other than the Borrower or any of its wholly owned Subsidiaries or any directors holding qualifying shares) has a joint interest, except to the extent of the amount of divi dends or other distributions actually paid to the Borrower or any of its wholly owned Subsidiaries by such Person during such period, (b) the income (or loss) of any Person accrued prior to the date it becomes a Subsidiary or is merged into or consolidated with the Borrower or any of its Subsidiaries or that Person's assets are acquired by the Borrower or any of its Subsidiaries, (c) the income of any Subsidiary to the extent that the declaration or payment of dividends or similar distributions by such Subsidiary of that income is not at the time permitted by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to such Subsidiary, (d) any after tax gains or losses attributable to Asset Sales and (e) (to the extent not included in clauses (a) through (d) above) any net extraordinary gains or net non-cash extraordinary losses. "Consolidated Net Tangible Assets" shall mean, at any particular time, the aggregate amount of all assets (less applicable reserves and other properly deductible items) after deducting therefrom all goodwill, trade names, trademarks, patents, unamortized debt issue costs (to the extent included in said aggregate amount of assets) and other like intangibles, as set forth on the most recent consolidated balance sheet of the Parent and its Subsidiaries and computed in accordance with GAAP. "Consolidated Rental Expense" shall mean for any period all rents accrued during such period under operating leases under which the Parent or any of its Subsidiaries is the lessee, as determined on a consolidated basis in accordance with GAAP. "Consolidated Total Debt" shall mean, at any time, all Indebtedness of the Parent and its Subsidiaries, as determined on a consolidated basis in accordance with GAAP. "Consolidated Total Senior Debt" shall mean, at any time, all Indebtedness of the Parent and its Subsidiaries other than the Senior Subordinated Notes and Indebtedness which by its terms is expressly subordinated to the Obligations and all other senior obligations of the Parent and its Subsidiaries. "Consolidated Working Capital" shall mean at any time an amount equal to Consolidated Current Assets minus Consolidated Current Liabilities at such time. "Contingent Obligation" as to any Person shall mean any obligation of such Person guaranteeing or intended to guarantee any Indebtedness, leases, dividends or other obligations ("Primary Obligations") of any other Person (the "Primary Obligor") in any manner, whether directly or indirectly, in cluding, without limitation, any obligation of such Person, whether or not contingent, (i) to purchase any such Primary Obligation or any property constituting direct or indirect security therefor, (ii) to advance or supply funds (x) for the purchase or payment of any such Primary Obligation or (y) to maintain working capital or equity capital of the Primary Obligor or otherwise to maintain the net worth or solvency of the Primary Obligor, (iii) to purchase property, securities or services primarily for the purpose of assuring the owner of any such Primary Obligation of the ability of the Primary Obligor to make payment of such Primary Obligation or (iv) otherwise to assure or hold harmless the owner of such Primary Obligation against loss in respect thereof; provided, however, that the term Contingent Obligation shall not include endorsements of instruments for deposit or collection in the ordinary course of business. The amount of any Contingent Obligation shall be deemed to be an amount equal to the stated or determinable amount of the Primary Obligation in respect of which such Contingent Obligation is made or, if not stated or determinable, the maximum anticipated liability in respect thereof (assuming such Person is required to perform thereunder) as determined by such Person in good faith. "Corporate Concentration Account" shall mean that certain deposit account at Chase Bank of Texas, account number , or the Successor Corporate Concentration Account. "Credit Exposure" shall have the meaning provided in Section 9.4(b). "Custodial Account" shall have the meaning provided in Section 4.28. "Default" shall mean any event, act or condition which with notice or lapse of time, or both, would constitute an Event of Default. "Default Rate" shall have the meaning provided in Section 2.5(c). "Dividends" shall have the meaning provided in Section 6.7. "Domestic Lending Office" shall mean, as to any Bank, the office of such Bank designated as such on Annex 1, or such other office designated by such Bank from time to time by written notice to the Administrative Agent and the Borrower. "Eligible Asset Sale" shall mean any Asset Sale, the Net Cash Proceeds of which shall not exceed 5% of Consolidated Net Tangible Assets at the time of such sale in the case of any individual Asset Sale or 10% of Consolidated Net Tangible Assets in the aggregate for all such Asset Sales. "Environmental Affiliate" shall mean, with respect to any Person, any other Person whose liability for any Environ mental Claim such Person has or may have retained, assumed or otherwise become liable for (contingently or otherwise), either contractually or by operation of law. "Environmental Approvals" shall mean any permit, license, approval, ruling, variance, exemption or other authoriza tion required under applicable Environmental Laws. "Environmental Claim" shall mean, with respect to any Person, any notice, claim, demand or similar communication (written or oral) by any other Person alleging potential lia bility for investigatory costs, cleanup costs, governmental response costs, natural resources damages, property damages, personal injuries, fines or penalties arising out of, based on or resulting from (i) the presence, or release into the environment, of any Material of Environmental Concern at any location, whether or not owned by such Person or (ii) circumstances forming the basis of any violation, or alleged violation, of any Environ mental Law. "Environmental Laws" shall mean all federal, state, local and foreign laws and regulations relating to pollution or protection of human health or the environment (including, without limitation, ambient air, surface water, ground water, land surface or subsurface strata), including without limitation, laws and regulations relating to emissions, discharges, releases or threatened releases of Materials of Environmental Concern, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Materials of Environmental Concern. "Equity Issuance" shall mean any issuance or sale by the Parent or any of its Subsidiaries of any shares of capital stock or other equity securities of such Person, or any obligations convertible into or exchangeable for, or giving any Person a right, option or warrant to acquire such securities or such convertible or exchangeable obligations, other than (a) sales or issuances to the Parent or any of its wholly owned Subsidiaries and (b) sales or issuances of common stock or options to management or employees of the Parent or any of its Subsidiaries under any employee stock option or stock purchase plan or plan established pursuant to Section 401(k) of the Code in existence from time to time. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time, together with all rules and regulations promulgated in connection therewith. Section references to ERISA are to ERISA, as in effect at the date of this Agreement and any subsequent provisions of ERISA, amendatory thereof, supplemental thereto or substituted therefor. "ERISA Controlled Group" means a group consisting of any ERISA Person and all members of a controlled group of corporations and all trades or businesses (whether or not incorpo rated) under common control with such Person that, together with such Person, are treated as a single employer under regulations of the PBGC. "ERISA Person" shall have the meaning set forth in Sec tion 3(9) of ERISA for the term "person." "ERISA Plan" means any Plan that (i) is a Multiemployer Plan or (ii) has Unfunded Benefit Liabilities in excess of $500,000. "Eurodollar Lending Office" shall mean, as to any Bank, the office of such Bank designated as such on Annex 1, or such other office designated by such Bank from time to time by written notice to the Administrative Agent and the Borrower. "Eurodollar Loans" shall mean Loans made and/or being maintained at a rate of interest based upon the Eurodollar Rate. "Eurodollar Rate" shall mean, for any Interest Period for each Eurodollar Loan, an interest rate per annum equal to the rate determined by the Administrative Agent at approximately 11:00 a.m. (London time) two Business Days before the first day of such Interest Period by reference to the British Bankers' Association Interest Settlement Rates for deposits in dollars (as set forth by any services selected by the Administrative Agent which has been nominated by the British Bankers' Association as an authorized information vendor for the purpose of displaying such rates) for a period equal to the relevant Interest Period; provided that, to the extent that an interest rate is not ascertainable pursuant to the foregoing provisions of this definition, the "Eurodollar Rate" shall be the interest rate per annum determined by the Administrative Agent to be the average (rounded upward to the nearest whole multiple of one-sixteenth of one percent (0.0625%) per annum, if such average is not such a multiple) of the rates per annum at which deposits in dollars are offered to major banks in the London interbank market in London, England by the Reference Banks at approximately 11:00 a.m. (London time) two Business Days before the first day of such Interest Period for such Interest Period. "Event of Default" shall have the meaning provided in Section 7. "Excess Cash Flow" shall mean, with respect to any fiscal period of the Borrower, an amount equal to (i) Consolidated Net Income for such fiscal period, plus (ii) depreciation and amortization expense to the extent deducted in determining Consolidated Net Income for such fiscal period, plus (iii) Consolidated Interest Expense (other than Consolidated Cash Interest Expense) during such fiscal period plus amortization of deferred Indebtedness issuance costs and expenses for such period, plus (or minus) (iv) any increase (or decrease) in deferred taxes during such fiscal period, plus (or minus) (v) decreases (or increases) in Consolidated Working Capital from the last day of the preceding fiscal period to the last day of such fiscal period (excluding, however, decreases in Consolidated Work ing Capital to the extent such decreases are attributable to Asset Sales), minus (vi) the aggregate amount paid or payable in cash by the Borrower and its Subsidiaries during such fiscal period for Capital Expenditures permitted pursuant to Section 6.1(d) (except to the extent financed with Capital Leases, the proceeds of purchase money Indebtedness, insurance proceeds, Retained Equity Proceeds, Retained Offering Proceeds or the Borrower's Share of Excess Cash Flow and except to the extent already deducted in the calculation of Excess Cash Flow for any prior period), minus (vii) all scheduled principal repayments and voluntary prepayments of the Loans (as defined in the Existing Credit Agreement) made during such fiscal period, but only to the extent accompanied by a permanent reduction in the Expansion Loan Commitment (as defined in the Existing Credit Agreement) or Revolving Loan Commitment (as defined in the Existing Credit Agreement), as the case may be, minus (vii) all regularly sched uled principal payments made during such fiscal period in respect of other Indebtedness to the extent such Indebtedness and payments are permitted to be incurred and made hereunder minus (viii) the aggregate amount actually paid in cash by the Parent and its Subsidiaries for Permitted Acquisitions (except to the extent financed with the proceeds of any Indebtedness, including the Loans, or any Equity Issuance) minus (x) all payments made in respect of the outstanding principal of the Bealls Subordinated Notes to the extent permitted pursuant to Section 6.10(a)(iii). "Excess Cash Flow Certificate" shall mean a certificate of the Principal Financial Officer of the Borrower in the form of Exhibit K hereto and delivered pursuant to Section 5.1(h) hereof. "Existing Credit Agreement" shall mean the Amended and Restated Credit Agreement, dated as of June 17, 1997, by and among Specialty Retailers, Inc., Stage Stores, Inc., the various lending institutions party thereto and Credit Suisse First Boston, as Administrative Agent, Collateral Agent, Swingline Bank, and L/C Bank, as amended and restated by the Amendment Agreement, dated as of June 26, 1997, by and among the parties thereto, the Second Amendment Agreement, dated as of October 1, 1997, by and among the parties thereto, the Third Amendment Agreement, dated as of October 7, 1998, by and among the parties thereto, the Fourth Amendment Agreement, dated as of January 27, 1999, by and among the parties thereto, the Fifth Amendment Agreement, dated as of February 3, 2000, by and among the parties thereto, and the Sixth Amendment Agreement, dated as of February 18, 2000, by and among the parties thereto and as amended, modified or otherwise supplemented from time to time. "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 that 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. "Federal Reserve Board" shall mean the Board of Gover nors of the Federal Reserve System as constituted from time to time. "Fees" shall mean all fees and other amounts payable pursuant to the Loan Documents including, without limitation, the fees payable pursuant to Section 2.14. "Final Maturity Date" shall mean June 14, 2002. "GAAP" shall mean United States generally accepted ac counting principles as in effect on the date hereof and consistent with those utilized in the preparation of the finan cial statements referred to in Section 4.5. "Guaranteed Creditors" shall mean and include each of the Administrative Agent, the Collateral Agent and the Banks to the extent such party constitutes a Secured Creditor under the Security Documents. "Guaranteed Obligations" shall mean (i) the full and prompt payment when due (whether at the stated maturity, by acceleration or otherwise) of the principal of and interest on each Note issued by the Borrower to each Bank, and Loans made, under this Agreement, together with all the other obligations (including obligations which, but for the automatic stay under Section 362(a) of the Bankruptcy Code or any similar provision, would become due) and liabilities (including, without limitation, indemnities, fees and interest thereon) of the Borrower to such Bank now existing or hereafter incurred under, arising out of or in connection with this Agreement or any other Loan Document and the due performance and compliance with all the terms, conditions and agreements contained in the Loan Documents by the Borrower and (ii) the full and prompt payment when due (whether by acceleration or otherwise) of all obligations (including obligations which, but for the automatic stay under Section 362(a) of the Bankruptcy Code, would become due) of each Guarantor owing under the Parent Guaranty or the Subsidiary Guaranty. "Guarantor" shall mean the Parent and each Material Subsidiary of the Borrower or the Parent specified on Schedule I hereto and any Material Subsidiary of the Borrower or the Parent which shall have executed and delivered a Subsidiary Guaranty pursuant to Section 5.9(c) hereof, other than the Receivables Subsidiary. "Indebtedness" of any Person shall mean, without duplication, (i) all indebtedness of such Person for borrowed money or for the deferred purchase price of property or services (other than trade payables on terms of 90 days or less incurred in the ordinary course of business of such Person), (ii) all indebtedness of such Person evidenced by a note, bond, debenture or similar instrument, (iii) the principal component of all Capital Lease Obligations of such Person, (iv) the face amount of all letters of credit issued for the account of such Person and, without duplication, all unreimbursed amounts drawn thereunder, (v) all indebtedness of any other Person secured by any Lien on any property owned by such Person, whether or not such indebtedness has been assumed, (vi) all Contingent Obligations of such Person, (vii) all net payment obligations of such Person under any interest rate protection agreement (including, without limitation, any interest rate swaps, caps, floors, collars and similar agreements) and currency swaps and similar agreements and (viii) all indebtedness created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even if the rights and remedies of the seller or lender thereunder upon a default are limited to repossession or sale of such property) . "Intercompany Note" shall mean a promissory note issued by the Parent to the Borrower substantially in the form of Exhibit M hereto evidencing the loans, if any, made by the Borrower to the Parent pursuant to Section 6.8 (b)(ii) hereof. "Interest Period" shall mean with respect to any Eurodollar Loan: (i) initially, the period commencing on the borrowing or the conversion date, as the case may be, with respect to such Eurodollar Loan and ending on the numerically corresponding calendar day in the calendar month that is one month thereafter, as selected by the Borrower in its Notice of Borrowing, Notice of Conversion or Notice of Contin uation, as the case may be, given with respect thereto; and (ii) thereafter, each period commencing on the last day of the next preceding Interest Period applicable to such Eurodollar Loan and ending one month thereafter, as selected by the Borrower by irrevocable notice to the Administrative Agent not less than three Business Days prior to the last day of the then current Interest Period with respect thereto; provided that, all of the foregoing provisions relating to Interest Periods are subject to the following: (A) if any Interest Period pertaining to a Eurodollar Loan would otherwise end on a day that is not a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless the result of such extension would be to carry such Interest Period into another calendar month in which event such Interest Period shall end on the immediately preceding Business Day; (B) no Interest Period shall extend beyond any date upon which a scheduled reduction of the Revolving Loan Commitments will be required pursuant to Section 2.9 if the aggregate principal amount of Revolving Loans having Interest Periods extending beyond such date will exceed the aggregate principal amount of the Revolving Loan Commitments after giving effect to such scheduled reduction; (C) any Interest Period that would otherwise extend beyond the Final Maturity Date shall end on the Final Maturity Date; and (D) any Interest Period pertaining to a Eurodollar Loan that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of a calendar month. "Inventory" shall mean all of the Borrower's and its Subsidiaries' inventory, including, without limitation (a) all goods, wares and merchandise held for sale or lease or leased or furnished or to be furnished under contracts of service; and (b) all goods returned to, reclaimed by or repossessed by the Borrower. "Investment" shall have the meaning provided in Section 6.8. "Lending Office" shall mean, with respect to any Bank, a collective reference to such Bank's Eurodollar Lending Office and Domestic Lending Office. "Leverage Ratio" shall mean on any day the ratio on such day of (i) Consolidated Total Debt on such day to (ii) Consolidated EBITDA for the four consecutive fiscal quarters of the Parent (taken as one accounting period) most recently ended. "Lien" shall mean any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, charge, lien (stat utory or other), or preference, priority or other security agreement of any kind or nature whatsoever, including, without limitation, any conditional sale or other title retention agree ment, any financing lease having substantially the same effect as any of the foregoing and the filing of any financing statement or similar instrument under the Uniform Commercial Code or comparable law of any jurisdiction, domestic or foreign. "Loans" shall mean the Revolving Loans. "Loan Documents" shall mean this Agreement, the Revolving Notes, the Subsidiary Guaranty, the Warrant Agreement and the Security Documents and any other documents or instruments executed or delivered in connection therewith, together with all amendments, restatements and modifications thereto or thereof. "Loan Party" shall mean and include the Borrower, the Parent and each Guarantor. "Margin Percentage" shall mean at any time that percentage (a) to be added to the Base Rate or the Eurodollar Rate, as appropriate, pursuant to Section 2.5, for purposes of determining the per annum rate of interest applicable from time to time to Base Rate Loans or Eurodollar Loans and (b) to be used in computing the Commitment Fee pursuant to Section 2.14, which in each case on any date shall be the applicable percentage set forth under the appropriate column below opposite the category in which the Adjusted Leverage Ratio, determined (subject to the last sentence hereof) as of the end of the most recent fiscal quarter for which financial statements and Compliance Certificates are required to have been delivered under Section 5.1(a), (b) and (h) (whether or not such financial statements and Compliance Certificates for any subsequent quarter shall in fact have been delivered): Adjusted Eurodollar Base Rate Leverage Margin Margin Ratio Category 1 <= 2.0 to 1.0 1.00% 0.00% Category 2 <= 3.0 to 1.0 1.50% 0.50% and > 2.0 to 1.0 Category 3 <= 3.50 to 1.0 1.75% 0.75% and > 3.0 to 1.0 Category 4 <= 4.0 to 1.0 2.00% 1.00% and > 3.50 to 1.0 Category 5 <= 4.5 to 1 2.25% 1.25% and > 4.0 to 1 Category 6 <= 5.0 to 1 3.0% 2.0% and > 4.5 to 1 Category 7 >5.0 to 1 3.25% 2.25% provided that, notwithstanding the foregoing, (i) from the Closing Date until a Compliance Certificate for the most recently ended fiscal quarter has been received, the Margin Percentage shall be determined by reference to Category 7 and (ii) at any time during which the Borrower has failed to deliver the financial statements and Compliance Certificates described in Section 5.1(a), (b) and (h) with respect to a fiscal quarter or fiscal year in accordance with the provisions thereof, or at any time during which an Event of Default shall have occurred and shall be continuing, the Margin Percentage shall be determined by reference to Category 7. Each change in the Margin Percentage shall be applicable with respect to the Commitment Fees and out standing Revolving Loans on the Business Day after the date on which the Administrative Agent shall have received the financial statements and Compliance Certificates required to be delivered pursuant to Section 5.1(a), (b) and (h) provided, however, that on the effective date of any Permitted Acquisition, the Borrower shall be required to deliver an additional Compliance Certificate (together with pro forma financial statements) which calculates the Adjusted Leverage Ratio as of such date after giving effect to such Permitted Acquisition and any other Permitted Acquisition occurring during such period and any change in the Margin Percent age shall become effective on the Business Day after the date of delivery of such additional Compliance Certificate. "Margin Stock" shall have the meaning provided such term in Regulation U and Regulation G of the Federal Reserve Board. "Material Adverse Effect" shall mean a material adverse effect upon (i) the business, operations, properties, assets or condition (financial or otherwise) of the Parent and its Subsidiaries taken as a whole or (ii) the ability of any Loan Party to perform, or of the Administrative Agent, the Collateral Agent or any of the Banks to enforce, any of the Obligations. "Materials of Environmental Concern" shall mean and include chemicals, pollutants, contaminants, wastes, toxic substances, petroleum and petroleum products. "Material Subsidiary" means, as of any date, any Subsidiary of the Parent (other than the Borrower), either alone or together with its Subsidiaries, that has assets with a fair market value of $250,000 or more as of the last day of the most recently ended fiscal quarter of the Parent or annual revenues (or annualized revenues in the case of any Person that has not been a Subsidiary of the Parent for a full year) of $1,000,000 or more as of the most recently ended fiscal quarter of the Parent. "Maximum Amount" shall have the meaning set forth in Section 6.1(d). "Moody's" shall mean Moody's Investors Service, Inc. or any of its successors. "Multiemployer Plan" shall mean a Plan which is a "multiemployer plan" as defined in Section 4001(a)(3) of ERISA. "Net Cash Proceeds" shall mean (a) with respect to any Asset Sale, the cash payments (including cash payments received by way of insurance proceeds, deferred payment pursuant to a note receivable or otherwise, but only as and when so received) received therefrom, net of (i) bona fide direct costs of sale (including payment of (x) the outstanding principal amount of, premium or penalty, if any, and interest on any Indebtedness (other than Loans) secured by or required to be repaid under the terms thereof as a result of such Asset Sale and (y) reasonable fees associated with such Asset Sale paid to Persons that are not Affiliates of the Parent and (ii) income taxes paid or reasonably estimated to be payable in the year such Asset Sale occurs or in the following year as a result thereof) and (b) with respect to any incurrence or disposition of Indebtedness or any Equity Issuance, the cash proceeds received therefrom net of underwriting commissions or placement fees and expenses directly incurred in connection therewith. "Notes" shall mean and include each Revolving Note. "Notice of Borrowing" shall mean a notice of borrowing in the form of Exhibit A hereto. "Notice of Conversion" shall mean a notice of conversion in the form of Exhibit C-1 hereto. "Notice of Continuation" shall mean a notice of continuation in the form of Exhibit C-2 hereto. "Obligations" shall mean all obligations, liabilities and indebtedness of every nature of the Borrower and the Guar antors from time to time owing to the Administrative Agent, the Collateral Agent or any Bank, under or in connection with this Agreement or any other Loan Document. "Parent" shall have the meaning provided in the first paragraph of this Agreement. "Parent Guaranty" shall mean the guaranty of the Parent pursuant to Section 10. "Participant" shall have the meaning provided in Section 9.4(b). "Payment Date" shall mean the last Business Day of each March, June, September and December of each year. "PBGC" shall mean the Pension Benefit Guaranty Corpora tion established under ERISA, or any successor thereto. "Permitted Acquired Indebtedness" shall mean Indebtedness of any Subsidiary of the Parent or the Borrower acquired pursuant to a Permitted Acquisition, which Indebtedness existed at the time of the consummation of any such acquisition and was not created in contemplation thereof (and the provisions of which were not altered in contemplation thereof), so long as (x) the Parent or the Borrower and its other respective Subsidiaries (other than the Subsidiary being so acquired) have no liability with respect to any such Indebtedness other than the assumption of any such Indebtedness in connection with a merger of such Subsidiary with, or the acquisition of all or substantially all of the assets of such Person by, the Borrower or any Subsidiary of the Parent or the Borrower and (y) any Liens securing such Indebtedness apply only to assets of the Subsidiary so acquired (and so long as additional assets of such Subsidiary are not granted as security following, or in contemplation of, the respective Permitted Acquisition). "Permitted Acquisition" shall mean the acquisition by the Parent or the Borrower of assets constituting part of or an entire business, division or product line of any Person not already a Subsidiary of the Parent or the Borrower, as the case may be, or of 100% (or such lesser amount as shall be necessary to immediately consummate a statutory "short-form" merger under the laws of the relevant jurisdiction and which merger is thereafter immediately consummated) of the capital stock of any such Person, which Person shall, as a result of such acquisition, become a Subsidiary; provided that an acquisition shall only be a Permitted Acquisition if the following terms and conditions shall be satisfied: (a) (i) the consideration paid by the Parent or the Borrower, as the case may be, consists of cash or common stock, the issuance of Indebtedness otherwise permitted in Section 6.2 and the assumption/acquisition of any Permitted Acquired Indebtedness (calculated at face value) relating to such business, division or product line of any Person which is permitted to remain outstanding in accordance with the requirements of Section 6.2; (ii) the assets acquired, or the business of the Person whose stock is acquired shall (A) be in the same line of business or reasonably incidental thereto as the business of the Parent or the Borrower, as the case may be, and (B) be merged with or into the Borrower or any Subsidiary of the Borrower or the Parent or become a direct Subsidiary of the Borrower or any Subsidiary of the Borrower or the Parent; (iii) in the case of the acquisition of 100% of the capital stock of any Person, such Person shall own no capital stock of any other Person unless such Person owns 100% of the capital stock of such other Person or such Investment is otherwise permitted by Section 6.8(h); (iv) no Default or Event of Default shall be in existence at the time of the consummation of the proposed Permitted Acquisition or immediately after giving effect thereto; (v) the Parent or the Borrower, as the case may be, shall have given the Administrative Agent at least 13 Business Days' prior written notice of any Permitted Acquisition for which the consideration to be paid is in excess of $25,000,000 or at least 8 Business Days' prior written notice of any Permitted Acquisition for which the consideration to be paid is equal to or less than $25,000,000 (such notices to include the compliance calculations referred to in clauses (vi) and (vii) below and a brief business description of the Permitted Acquisition and copies of which notices the Administrative Agent shall promptly furnish to the Banks); (vi) calculations are made by the Parent or the Borrower, as the case may be, of compliance with the covenants contained in Section 6.1 on a Pro Forma Basis for the period of four consecutive fiscal quarters (taken as one accounting period) most recently ended prior to the date of such Permitted Acquisition (each, a "Calculation Period"), as if the respective Permitted Acquisition (as well as all other Permitted Acquisitions theretofore consummated after the first day of such Calculation Period) had occurred on the first day of such Calculation Period, and such recalculations shall show that such financial covenants would have been complied with if the Permitted Acquisition had occurred on the first day of such Calculation Period (for this purpose, if the first day of the respective Calculation Period occurs prior to the Closing Date, calculated as if the covenants contained in said Section 6.1 had been applicable from the first day of the Calculation Period); provided that for the purposes of this clause (vi) and clause (vii) below the Adjusted Leverage Ratio demonstrated by such recalculations must be equal to or less than 4.0:1 from the Closing Date until the third anniversary of the Closing Date and must be equal to or less than 3.75:1 at any time thereafter; (vii) based on good faith projections prepared by the Borrower for the period from the date of the consummation of the Permitted Acquisition to the date which is one year thereafter, the level of financial performance measured by the covenants set forth in Section 6.1 shall be better than or equal to such level as would be required to provide that no Default or Event of Default would exist under the financial covenants contained in Section 6.1 as compliance with such covenants would be required through the date which is one year from the date of the consummation of the respective Permitted Acquisition; (viii) the Administrative Agent shall have been satisfied in its reasonable discretion that the proposed Permitted Acquisition could not reasonably be expected to result in materially increased tax, ERISA, environmental or other contingent liabilities with respect to the Parent, the Borrower or any of their respective Subsidiaries; (ix) all representations and warranties contained herein and in the other Loan Documents shall be true and correct in all material respects with the same effect as though such representations and warranties had been made on and as of the date of such Permitted Acquisition (both before and after giving effect thereto), unless stated to relate to a specific earlier date, in which case such representations and warranties shall be true and correct in all material respects as of such earlier date; (x) the Parent or the Borrower, as the case may be, provides to the Administrative Agent as soon as available but not later than 5 Business Days after the execution thereof, a copy of any executed purchase agreement or similar agreement with respect to such Permitted Acquisition; (xi) the Parent or the Borrower, as the case may be, shall have delivered to the Administrative Agent an officer's certificate executed by an Authorized Officer of the Borrower, certifying to the best of his knowledge, com pliance with the requirements of preceding clauses (iv) through (vii), inclusive, (ix), and containing the calcu lations required by the preceding clauses (vi) and (vii); and (xii) if the total cash purchase price (including Indebtedness assumed) of any acquisition exceeds $50,000,000, the Administrative Agent and the Required Banks shall have given their prior written consent thereto. (b) The Borrower shall cause each Material Subsidiary which it or the Parent forms to effect, or it or the Parent acquires pursuant to, a Permitted Acquisition to comply with, and to execute and deliver, all of the documentation required by, Section 5.9, to the satisfaction of the Adminis trative Agent. (c) The consummation of each Permitted Acqui sition shall be deemed to be a representation and warranty by the Parent and the Borrower that the certifications by the Borrower (or by one or more of its Authorized Officers) required by clause (a) above are true and correct and that all conditions thereto have been satisfied and that such Permitted Acquisition is permitted in accordance with the terms of this Agreement, which representation and warranty shall be deemed to be a representation and warranty for all purposes hereunder, including, without limitation, Sections 3 and 7. "Permitted Senior Debt" shall mean unsecured Indebtedness of the Borrower if (i) such Indebtedness has no amortization or required sinking fund payments and a final maturi ty no earlier than, and provisions no more onerous or restrictive on the Borrower and no less favorable to the Banks in any respect deemed material by the Required Banks than, those terms and provisions of the Senior Notes, (ii) the interest rate payable in respect of such Indebtedness shall be a market interest rate as of the time of the incurrence thereof and shall not, in case of Indebtedness bearing interest at a floating rate, exceed the rate of interest payable on the Loans, (iii) each of the covenants, events of default and other provisions thereof shall be customary for issuances of similar indebtedness by companies in a similar financial condition to the Borrower in accordance with prevailing market conditions in effect at the time of the issuance thereof and in any event shall be no more onerous or restrictive on the Borrower than those contained in the Senior Notes and (iv) the Net Cash Proceeds thereof shall have been applied to the prepayment of the Loans to the extent provided in the Existing Credit Agreement or Section 2.11(a)(ii). "Permitted Subordinated Debt" shall mean unsecured subordinated Indebtedness of the Borrower if (i) such Indebtedness has no amortization or required sinking fund payments and a final maturity no earlier than, and subordination provisions no more onerous or restrictive on the Borrower and no less favorable to the Banks in any respect deemed material by the Required Banks than, those terms and provisions of the Senior Subordinated Notes, (ii) the interest rate payable in respect of such Indebtedness shall be a market interest rate as of the time of the incurrence thereof and shall not, in case of Indebtedness bearing interest at a floating rate, exceed the rate of interest payable on the Revolving Loans, (iii) each of the covenants, events of default and other provisions thereof shall be customary for issuances of similar indebtedness by companies in a similar financial condition to the Borrower in accordance with prevailing market conditions in effect at the time of the issuance thereof and in any event shall be no more onerous or restrictive on the Borrower than those contained in the Senior Subordinated Notes and (iv) the Net Cash Proceeds thereof shall have been applied to the prepayment of the Loans to the extent provided in the Existing Credit Agreement or Section 2.11(a)(ii). "Person" shall mean and include any individual, partner ship, joint venture, firm, corporation, limited liability company, association, trust or other enterprise or any government or political subdivision or agency, department or instrumentality thereof. "Plan" means any employee benefit plan covered by Title IV of ERISA, the funding requirements of which: (a) were the responsibility of the Borrower or a member of its ERISA Controlled Group at any time within the five years immediately preceding the date hereof, (b) are currently the responsibility of the Borrower or a member of its ERISA Controlled Group, or (c) hereafter become the responsibility of the Borrower or a member of its ERISA Controlled Group, including any such plans as may have been, or may hereafter be, terminated for whatever reason. "Prime Rate" shall mean the rate of interest per annum publicly announced from time to time by the Administrative Agent as its Prime Rate in effect at its principal office in New York City. The Prime Rate is a reference rate and is not intended to be the lowest rate of interest charged by the Administrative Agent in connection with extensions of credit. Each change in the Prime Rate shall be effective on the date such change is publicly announced as being effective without notice to the Borrower or the Guarantors. "Principal Financial Officer" shall mean, with respect to any Person, such Person's Chief Financial Officer, Treasurer or Assistant Treasurer. "Pro Forma Basis" shall mean, in connection with any calculation of the Adjusted Leverage Ratio, Consolidated Adjusted EBITDA or compliance with any financial covenant or financial term, the calculation thereof after giving effect on a pro forma basis to (i) the incurrence of any Indebtedness to finance Permitted Acquisitions after the first day of the relevant Calculation Period as if such Indebtedness had been incurred (and the proceeds thereof applied) on the first day of the relevant Calculation Period; (ii) the permanent repayment of any Indebtedness after the first day of the relevant Calculation Period as if such Indebtedness had been retired or redeemed on the first day of the relevant Calculation Period; and (iii) the Permitted Acquisitions, if any, then being consummated as well as any other Permitted Acquisitions consummated after the first day of the relevant Calculation Period and on or prior to the date of the respective Permitted Acquisitions then being effected, with the following rules to apply in connection therewith: (a) all such Indebtedness (x) incurred or issued after the first day of the relevant Calculation Period shall be deemed to have been incurred or issued (and the proceeds thereof applied) on the first day of the respective Calculation Period and remain outstanding through the date of determination (and thereafter in the case of projections pursuant to clause (vii) of the definition of Permitted Acquisition) and (y) permanently retired or redeemed after the first day of the relevant Calcula tion Period shall be deemed to have been retired or redeemed on the first day of the respective Calculation Period and remain retired through the date of determination (and thereafter in the case of projections pursuant to clause (vii) of the definition of Permitted Acquisition); (b) all such Indebtedness assumed to be outstanding pursuant to the preceding clause (i) shall be deemed to have borne interest or dividends at (x) the rate applicable thereto, in the case of fixed rate indebtedness or (y) the rates which would have been applicable thereto during the respective period when same was deemed outstanding, in the case of floating rate Indebtedness (although interest or dividends expense with respect to any Indebtedness actually outstanding during the respective period shall be calculated using the actual rates applicable thereto during such period); provided that for purpos es of the calculations pursuant to clause (vii) of the definition of Permitted Acquisition, all Indebtedness (whether actually out standing or deemed outstanding) bearing interest at a floating rate of interest shall be tested on the basis of the rates applicable at the time the determination is made pursuant to said provisions; and (c) in making any determination of Consolidated Adjusted EBITDA, (i) in the case of the acquisition of 100% of the stock of a Person, pro forma effect shall be given to any Permitted Acquisition for the periods described above, taking into account, cost savings and expenses which would otherwise be accounted for as an adjustment pursuant to Article 11 of Regulation S-X under the Securities Act of 1933, as amended and as in effect on the Closing Date, as if such cost savings or expenses were realized on the first day of the relevant Calculation Period and (ii) in the case of an asset purchase, pro forma effect shall be given to any Permitted Acquisition for the period described above, taking into account, cost savings and expenses reasonably estimated to be realized based upon the good faith estimates of management, as if such cost savings and expenses were realized on the first day of the relevant Calculation Period. "Pro Rata Share" as to any Bank shall mean a fraction (expressed as a percentage), the numerator of which shall be the aggregate amount of such Bank's Revolving Loan Commitment and the denominator of which shall be the Total Revolving Loan Commit ment. "Purchasing Banks" shall have the meaning provided in Section 9.4(c). "Receivables" means accounts, general intangibles or other rights to payment from obligors arising from extensions of credit to obligors, together with any finance charges or other fees or charges related thereto, and any related assets which are transferred under the Receivables Program Documents. "Receivables Program" shall mean the receivables securitization program conducted by the Borrower, the Receivables Subsidiary and any other special purpose receivables Subsidiary that may be formed or become a Subsidiary in the future pursuant to the Receivables Program Documents as in effect from time to time in accordance with the terms hereof. "Receivables Program Documents" shall mean the documents listed on Schedule II hereto, and all other documentation, agreements and instruments entered into in connection therewith or pursuant to any other receivables financing program created in the future (including, without limitation, any such program of a Person in existence at the time such Person is acquired pursuant to a Permitted Acquisition), as the same may hereafter be amended, modified, supplemented or refinanced from time to time in accordance with the provisions hereof and thereof. "Receivables Subsidiary" shall mean the collective reference to (i) SRI Receivables Purchase Company, Inc., a Dela ware corporation, (ii) any other Subsidiary established by the Parent or the Borrower in connection with the Receivables Program and whose sole business is to implement and carry out such Receivables Program and (iii) any Subsidiary of the Borrower that is a bank formed for the sole purpose, and whose sole business is, financing any credit card program implemented by the Borrower. "Reference Banks" shall mean Credit Suisse First Boston and Union Bank of California. "Regulation D" shall mean Regulation D of the Federal Reserve Board as from time to time in effect and any successor to all or any portion thereof. "Regulation T" shall mean Regulation T of the Federal Reserve Board as from time to time in effect and any successor to all or a portion thereof. "Regulation U" shall mean Regulation U of the Federal Reserve Board from time to time in effect and any successor to all or a portion thereof. "Regulation X" shall mean Regulation X of the Federal Reserve Board as from time to time in effect and any successor to all or a portion thereof. "Reinvestment Assets" shall mean any assets to be employed in the business of the Borrower and its Subsidiaries as conducted on the date hereof. "Reinvestment Election" shall have the meaning provided in Section 2.11(a)(i). "Reinvestment Notice" shall mean a written notice signed by an authorized officer of the Borrower stating that the Borrower, in good faith, intends and expects to use all or a specified portion of the Net Cash Proceeds of an Eligible Asset Sale to purchase, construct or otherwise acquire Reinvestment Assets. "Reinvestment Prepayment Amount" shall mean, with respect to any Reinvestment Election, the amount, if any, on the Reinvestment Prepayment Date relating thereto by which (a) the Anticipated Reinvestment Amount in respect of such Reinvestment Election exceeds (b) the aggregate amount thereof expended by the Borrower and its Subsidiaries to acquire Reinvestment Assets. "Reinvestment Prepayment Date" shall mean, with respect to any Reinvestment Election, the earliest of (i) the date, if any, upon which the Administrative Agent, on behalf of the Required Banks, shall have delivered a written termination notice to the Borrower, provided that such notice may only be given while an Event of Default exists, (ii) the date occurring one year after such Reinvestment Election and (iii) the date on which the Borrower shall have determined not to, or shall have otherwise ceased to, proceed with the purchase, construction or other acquisition of Reinvestment Assets with the related Antici pated Reinvestment Amount. "Release" shall mean any release, spill, emission, discharge, leaking, pumping, injection, deposit, disposal, dis charge, dispersal, leaching or migration into the indoor or outdoor environment (including, without limitation, ambient air, surface water, groundwater, and surface or subsurface strata) or into or out of any property, including the movement of Materials of Environmental Concern through or in the air, soil, surface water, groundwater or property. "Reportable Event" has the meaning set forth in Section 4043(b) of ERISA (other than a Reportable Event as to which the provision of 30 days notice to the PBGC is waived under applicable regulations), or is the occurrence of any of the events described in Section 4068 or 4063(a) of ERISA. "Required Banks" shall mean Banks holding more than 50% of the principal amount of Loans outstanding or, if no Loans are outstanding, more than 50% of the Total Revolving Loan Commit ment. "Restricted Payment" shall mean (i) the authorization, declaration or payment of any Dividend by the Parent or any of its Subsidiaries or (ii) the making of any payment by the Borrower or any of its Subsidiaries to the Parent, including, without limitation, any payments under the Tax Sharing Agreement. "Retained Equity Proceeds" shall mean at any time the cumulative amount of Net Cash Proceeds received by the Borrower from Equity Issuances to the extent such Net Cash Proceeds are not required to be applied to the prepayment of the Revolving Loans pursuant to the Existing Credit Agreement or Section 2.11(a)(v) minus the amount thereof previously applied to make additional Capital Expenditures pursuant to Section 6.1(d). Notwithstanding the foregoing, only 75% of the first $50,000,000 of Net Cash Proceeds received from New Equity Issuances during the period from September 30, 1998 and thereafter, shall be included in Retained Equity Proceeds. "Retained Offering Proceeds" shall mean at any time the cumulative amount of (i) 30% of the Net Cash Proceeds received by the Borrower from the issuance of Permitted Senior Debt and (ii) 40% of the Net Cash Proceeds received by the Borrower from the issuance of Permitted Subordinated Debt, in each case, to the extent such Net Cash Proceeds are not required to be applied to the prepayment of the Revolving Loans pursuant to the Existing Credit Agreement or Section 2.11(a)(ii) minus the amount thereof previously applied to make additional Capital Expenditures pursuant to Section 6.1(d). "Revolving Loan Commitment" shall mean at any time, for any Bank, the amount set forth opposite such Bank's name on Annex 1 hereto under the heading "Revolving Loan Commitment," as such amount may be reduced from time to time pursuant to Sections 2.9 or 9.4(c). "Revolving Loans" shall have the meaning provided in Section 2.1(a). "Revolving Note" shall have the meaning provided in Section 2.4(b). "Secured Creditors" shall mean the Administrative Agent, the Collateral Agent and the Banks. "Secured Obligations" shall mean all Obligations owed by the Loan Parties to the Administrative Agent, the Collateral Agent and the Banks. "Security Agreement" shall have the meaning provided in Section 3.1(a)(iii) hereof. "Security Documents" shall mean and include the Security Agreement and any agreements, documents or instruments executed in connection therewith. "Senior Notes" shall mean the 81/2% Notes due 2005 issued by the Borrower pursuant to the Senior Note Indenture. "Senior Note Documents" shall mean the Senior Note Indenture, the Senior Notes and the Purchase Agreement, dated June 11, 1997, among the Parent, the Borrower, Credit Suisse First Boston Corporation, Bear, Stearns & Co. Inc, and Donaldson, Lufkin & Jenrette Securities Corporation. "Senior Note Indenture" shall mean the Indenture dated as of June 17, 1997 between the Borrower and the Senior Note Trustee pursuant to which the Borrower issued the Senior Notes. "Senior Note Trustee" shall mean State Street Bank and Trust Company, in its capacity as trustee under the Senior Note Indenture. "Senior Subordinated Notes" shall mean the 9% Notes due 2007 issued by the Borrower pursuant to the Senior Subordinated Note Indenture. "Senior Subordinated Note Documents" shall mean the Senior Subordinated Note Indenture, the Senior Subordinated Notes and the Purchase Agreement, dated June 11, 1997, among the Parent, the Borrower, Credit Suisse First Boston Corporation, Bear, Stearns & Co. Inc, and Donaldson, Lufkin & Jenrette Securities Corporation. "Senior Subordinated Note Indenture" shall mean the Indenture dated as of June 17, 1997 between the Borrower and the Senior Subordinated Note Trustee pursuant to which the Borrower issued the Senior Subordinated Notes. "Senior Subordinated Note Trustee" shall mean State Street Bank and Trust Company in its capacity as trustee under the Senior Subordinated Note Indenture. "Standard & Poor's" shall mean Standard & Poor's Rating Services, a division of the McGraw-Hill Companies, Inc. or any of its successors. "Subsidiary" of any Person shall mean and include (i) any corporation 50% or more of whose stock of any class or classes having by the terms thereof ordinary voting power to elect a majority of the directors of such corporation (irre spective of whether or not at the time stock of any class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time owned by such Person directly or indirectly through Subsidiaries and (ii) any partnership, association, joint venture, limited liability company or other entity in which such Person, directly or indirectly through Subsidiaries, is either a general partner or has a 50% or more equity interest at the time. "Subsidiary Guaranty" shall have the meaning provided in Section 3.1(a)(iv). "Successor Corporate Concentration Account" shall have the meaning provided in Section 5.13. "Tax Sharing Agreement" shall mean a tax sharing agreement among the Parent, the Borrower and its Subsidiaries, in form and substance satisfactory to the Required Banks. "Termination Event" shall mean (i) a Reportable Event, or (ii) the initiation of any action by the Borrower, any member of the Borrower's ERISA Controlled Group or any ERISA Plan fiduciary to terminate an underfunded ERISA Plan (determined on a Plan termination basis) or the treatment of an amendment to an underfunded ERISA Plan (determined on a Plan termination basis) as a termination under ERISA, or (iii) the institution of proceedings by the PBGC under Section 4042 of ERISA to terminate an ERISA Plan or to appoint a trustee to administer any ERISA Plan. "Total Revolving Loan Commitment" shall have the meaning set forth in Section 2.1(a). "Transactions" shall mean each of the transactions con templated by the Loan Documents. "Transferee" shall have the meaning provided in Section 9.4(d). "Transfer Supplement" shall have the meaning provided in Section 9.4(c). "Type" shall mean any type of Loan determined with re spect to the interest option applicable thereto, i.e., a Base Rate Loan or a Eurodollar Loan. "Unfunded Benefit Liabilities" means with respect to any Plan at any time, the amount (if any) by which (i) the actuarial present value of all benefit liabilities under such Plan as defined in Section 4001(a)(16) of ERISA, exceeds (ii) the fair market value of all Plan assets allocable to such benefits, all determined as of the then most recent valuation date for such Plan (on the basis of assumptions utilized by such Plan for minimum funding purposes under ERISA). "Warrant Agreement" shall have the meaning provided in Section 3.1(a)(v) hereof. "Weighted Average Life to Maturity" means, when applied to any Indebtedness at any date, the number of years obtained by dividing (a) the then outstanding principal amount of such Indebtedness into (b) the total of the product obtained by multiplying (x) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect thereof by (y) the number of years (calculated to the nearest one- twelfth) that will elapse between such date and the making of such payment. SECTION 2. AMOUNT AND TERMS OF CREDIT FACILITIES. Section 2.1 Revolving Loans. (a) Subject to and upon the terms and conditions herein set forth, each Bank severally and not jointly agrees, at any time and from time to time on and after the Closing Date and prior to the Final Maturity Date, to make revolving loans (collectively, "Revolving Loans") to the Borrower, which Revolving Loans shall not exceed in the aggregate principal amount at any time outstanding the Revolving Loan Commitment of such Bank at such time; provided that no Revolving Loan shall be made if, after giving effect thereto and the use of the proceeds thereof, the sum of the outstanding principal amount of Revolving Loans would exceed the sum of the Revolving Loan Commitments of all the Banks (the "Total Revolving Loan Commit ment"). The Total Revolving Loan Commitment on the Closing Date shall be $35,000,000. The Revolving Loans of each Bank shall be maintained at the option of the Borrower as Base Rate Loans and/or Eurodollar Loans, in accordance with the provisions here of. (b) Revolving Loans may be voluntarily prepaid pursuant to Section 2.10, and, subject to the other provisions of this Agreement, any amounts so prepaid may be reborrowed. Each Bank's Revolving Loan Commitment shall expire, and each Revolving Loan shall mature on, the Final Maturity Date, without further action on the part of the Banks or the Administrative Agent. (c) Each Borrowing of Revolving Loans shall be in the aggregate minimum amount of $2,000,000 (or in the aggregate minimum amount of $1,000,000 if the Borrowing of $2,000,000 is prohibited by the terms of the Senior Note Documents or the Senior Subordinated Note Documents) or any integral multiple of $100,000 in excess thereof. Section 2.2 Notice of Borrowing. (a) Whenever the Borrower desires to borrow Revolving Loans, the Borrower shall give the Administrative Agent at the Administrative Agent's Office prior to 11:00 a.m., (New York City time), at least one Business Day's prior telecopy or telephonic notice (promptly confirmed in writing) of each Base Rate Loan, and at least three Business Days' prior telecopy or telephonic notice (promptly confirmed in writing) of each Eurodollar Loan to be made here under. Each such notice (a "Notice of Borrowing") shall be irrevocable, shall be in the form of Exhibit A hereto, and in any event shall specify (i) the aggregate principal amount of the requested Revolving Loans, (ii) the date of Borrowing (which shall be a Business Day), and (iii) whether such Revolving Loans shall consist of Base Rate Loans or Eurodollar Loans and, if Eurodollar Loans, the initial Interest Period to be applicable thereto, provided that no Notice of Borrowing with respect to a Eurodollar Loan shall be delivered during any period when a Default or Event of Default shall have occurred and be continuing. (b) Promptly after receipt of a Notice of Borrow ing, the Administrative Agent shall provide each Bank with the details of the Notice of Borrowing and inform each Bank as to its Pro Rata Share of the Loans requested thereunder. Section 2.3 Disbursement of Funds. (a) No later than 12:00 p.m. (New York City time), on the date specified in each Notice of Borrowing, each Bank will make available its Pro Rata Share of the Revolving Loans requested to be made on such date, in U.S. dollars and immediately available funds, at the Administrative Agent's Office. Promptly after the Administrative Agent's receipt of the proceeds of such Revolving Loans, the Administrative Agent will make available to the Borrower by depos iting in the Borrower's account designated in writing to the Administrative Agent the aggregate of the amounts so made available in the type of funds actually received. (b) Unless the Administrative Agent shall have been notified by any Bank prior to the date of a Borrowing that such Bank does not intend to make available to the Administrative Agent its portion of the Revolving Loans to be made on such date, the Administrative Agent may assume that such Bank has made such amount available to the Administrative Agent on such date and the Administrative Agent in its sole discretion may, in reliance upon such assumption, make available to the Borrower a corresponding amount. If such corresponding amount is not in fact made avail able to the Administrative Agent by such Bank and the Administrative Agent has made such amount available to the Borrower, the Administrative Agent shall be entitled to recover such corresponding amount on demand from such Bank. If such Bank does not pay such corresponding amount forthwith upon the Administrative Agent's demand therefor, the Administrative Agent shall promptly notify the Borrower and the Borrower shall imme diately repay such corresponding amount to the Administrative Agent. The Administrative Agent shall also be entitled to recover from such Bank or the Borrower, as the case may be, interest on such corresponding amount in respect of each day from the date such corresponding amount was made available by the Administrative Agent to the Borrower to the date such corre sponding amount is recovered by the Administrative Agent, at a rate per annum equal to (a) in the case of the Borrower, the then applicable rate of interest, calculated in accordance with Section 2.5, for the respective Revolving Loans, and (b) in the case of any Bank, the Federal Funds Effective Rate. Nothing herein shall be deemed to relieve any Bank from its obligation to fulfill its commitments hereunder or to prejudice any rights which the Borrower may have against any Bank as a result of any default by such Bank hereunder. Notwithstanding anything contained herein or in any other Loan Document to the contrary, the Administrative Agent may apply all funds and proceeds of Collateral available for the payment of any Obligations first to repay any amount owing by any Bank to the Administrative Agent as a result of such Bank's failure to fund its Revolving Loans hereunder. Section 2.4 Evidence of Indebtedness; Revolving Notes. (a) Each Bank shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness to such Bank and resulting from each Revolving Loan from time to time, including the amounts of principal and interest payable and paid to such Bank from time to time under this Agreement. The Administrative Agent shall maintain accounts in which it will record (i) the amount of each Revolving Loan made hereunder, the Type of each Revolving Loan and the Interest Period applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Bank hereunder and (iii) the amount of any sum received by the Administrative Agent hereunder from the Borrower and each Bank's Pro Rata Share thereof. The entries made in the accounts maintained pursuant to this Section 2.4(a) shall be prima facie evidence of the existence and amounts of the obligations therein recorded; provided, however, that the failure of any Bank or the Administrative Agent to maintain such accounts or any error therein shall not in any manner affect the obligations of the Borrower to repay the Revolving Loans in accordance with their terms. (b) Notwithstanding the foregoing, if requested by any Bank, the Borrower's obligation to pay the principal of, and interest on, such Bank's Revolving Loans shall be evidenced by a promissory note (a "Revolving Note") duly executed and delivered by the Borrower substantially in the form of Exhibit B hereto in a principal amount equal to such Bank's Revolving Loan Commitment, with blanks appropriately completed in conformity herewith. Each Revolving Note issued to a Bank shall (x) be payable to such Bank, (y) be dated the Closing Date and (z) mature on the Final Maturity Date. (c) Each Bank is hereby authorized, at its option, either (i) to endorse on the schedule attached to its Revolving Note (or on a continuation of such schedule attached to such Revolving Note and made a part thereof) an appropriate notation evidencing the date and amount of each Revolving Loan evidenced thereby and the date and amount of each principal and interest payment in respect thereof, or (ii) to record such Revolving Loans and such payments in its books and records. Such schedule or such books and records, as the case may be, shall con stitute prima facie evidence of the accuracy of the information contained therein. Failure to make any such endorsements or recordations or any error in any such endorsements or notations shall not affect the Borrower's obligations in respect of any Revolving Loan hereunder. Section 2.5 Interest. (a) The Borrower agrees to pay interest in respect of the unpaid principal amount of each Base Rate Loan from the date of the making of such Base Rate Loan until such Base Rate Loan shall be paid in full at a rate per annum which shall be equal to the sum of the applicable Margin Percentage plus the Base Rate in effect from time to time, such rate to change as and when the Base Rate changes. (b) The Borrower agrees to pay interest in respect of the unpaid principal amount of each Eurodollar Loan from the date of the making of such Eurodollar Loan until such Eurodollar Loan shall be paid in full at a rate per annum which shall be equal to the sum of the applicable Margin Percentage plus the relevant Eurodollar Rate. (c) In the event that, and for so long as, any Event of Default shall have occurred and be continuing, the out standing principal amount of all Revolving Loans and overdue interest in respect of all Revolving Loans and interest thereon, shall bear interest at a rate per annum (the "Default Rate") equal to the greater of (i) the sum of (x) two percent (2%) and (y) the Base Rate and the highest Base Rate Margin Percentage applicable and (ii) the rate which is two percent (2%) in excess of the interest rate otherwise applicable hereunder to such principal amount in effect from time to time. (d) Interest on each Revolving Loan shall accrue from and including the date of the Borrowing thereof to but excluding the date of any repayment thereof (provided that any Revolving Loan borrowed and repaid on the same day shall accrue one day's interest) and shall be payable (i) in respect of each Base Rate Loan, quarterly in arrears on each Payment Date, (ii) in respect of each Eurodollar Loan, on the last day of each Interest Period applicable to such Loan, and (iii) in the case of all Revolving Loans, on any prepayment or conversion (on the amount prepaid or converted); provided that if such Revolving Loans are Base Rate Loans, interest accrued on such Loans shall be paid quarterly in arrears on each Payment Date, at maturity (whether by acceleration or otherwise) and, after such maturity, on demand. (e) The Administrative Agent shall, upon determining the Eurodollar Rate for any Interest Period, promptly notify the Borrower and the Banks thereof. (f) The Reference Banks shall provide to the Administrative Agent the information to be provided by them under the definition of "Eurodollar Rate" in accordance with the terms hereof. Section 2.6 Interest Periods. (a) The Borrower shall, in each Notice of Borrowing, Notice of Conversion or Notice of Continuation in respect of the making of, conversion into or continuation of a Eurodollar Loan, select the Interest Period applicable to such Eurodollar Loan. (b) If upon the expiration of any Interest Period for any Eurodollar Loan, the Borrower has failed to elect a new Interest Period to be applicable to the respective Eurodollar Loan as provided above, the Borrower shall be deemed to have elected to convert such Eurodollar Loans into Base Rate Loans effective as of the expiration date of such current Interest Period. Section 2.7 Minimum Amount of Eurodollar Loans. All borrowings, conversions, continuations, payments, prepayments and selections of Interest Periods hereunder shall be made or selected so that, after giving effect thereto, (i) the aggregate principal amount of any Borrowing comprised of Eurodollar Loans shall not be less than $2,000,000 (or in the aggregate minimum amount of $1,000,000 if the Borrowing of $2,000,000 is prohibited by the terms of the Senior Note Documents or the Senior Subordinated Note Documents) or an integral multiple of $100,000 in excess thereof, and (ii) there shall be no more than 18 Borrowings comprised of Eurodollar Loans outstanding at any time. Section 2.8 Conversion or Continuation. (a) Subject to the other provisions hereof, the Borrower shall have the option (i) to convert at any time all or any part of outstanding Base Rate Loans which comprise part of the same Borrowing to Eurodollar Loans, (ii) to convert all or any part of outstanding Eurodollar Loans which comprise part of the same Borrowing to Base Rate Loans, on the expiration date of the Interest Period applicable thereto, or (iii) to continue all or any part of outstanding Eurodollar Loans which comprise part of the same Borrowing as Eurodollar Loans for an additional Interest Period, on the expiration of the Interest Period applicable thereto; provided that no Revolving Loan may be continued as, or converted into, a Eurodollar Loan when any Default or Event of Default has occurred and is continuing. (b) In order to elect to convert or continue a Revolving Loan under this Section 2.8, the Borrower shall deliver an irrevocable Notice of Continuation or a Notice of Conversion to the Administrative Agent no later than 11:00 a.m., (New York City time), (i) at least one Business Day in advance of the proposed conversion date in the case of a conversion to a Base Rate Loan and (ii) at least three Business Days in advance of the proposed conversion or continuation date in the case of a conver sion to, or a continuation of, a Eurodollar Loan. Each Notice of Conversion or Notice of Continuation shall be in the forms of Exhibits C-1 and C-2 hereto and in any event shall specify (w) the requested conversion or continuation date (which shall be a Business Day), (x) the amount of the Revolving Loan to be converted or continued, (y) whether a conversion or continuation is requested, and (z) in the case of a conversion to, or a contin uation of, a Eurodollar Loan, the requested Interest Period. Promptly after receipt of a Notice of Conversion or Notice of Continuation under this Section 2.8(b), the Administrative Agent shall notify each Bank of the details thereof. Section 2.9 Voluntary and Mandatory Reductions of Commitments. (a) Upon at least three Business Days' prior irrevo cable written notice (or telephonic notice promptly confirmed in writing) to the Administrative Agent (which notice the Administrative Agent shall promptly transmit to each of the Banks), the Borrower shall have the right, without premium or penalty, to permanently reduce each Bank's Pro Rata Share of all or part of the Total Revolving Loan Commitment, provided that any such partial reductions shall be in a minimum aggregate amount of $1,000,000 or any integral multiple of $100,000 in excess thereof (or any lesser amounts if the Total Revolving Loan Commitment shall be reduced in full). (b) Simultaneously with any required prepayment of the Revolving Loans in accordance with the provisions of Section 2.11 or 2.12, each Bank's Total Revolving Loan Commitment shall be permanently reduced by such Bank's Pro Rata Share of the amount of such prepayment. Section 2.10 Voluntary Prepayments. The Borrower shall have the right to prepay the Revolving Loans in whole or in part from time to time on the following terms and conditions: (i) the Borrower shall give the Administrative Agent written notice (or telephonic notice promptly confirmed in writing) not later than 10:00 a.m. (New York City time), which notice shall be irrevocable, of its intent to prepay the Revolving Loans, at least three Business Days prior to a prepayment of Eurodollar Loans and at least one Business Day prior to a prepayment of Base Rate Loans, which notice shall specify the amount of such prepay ment and what Types of Revolving Loans are to be prepaid and, in the case of Eurodollar Loans, the specific Borrowing(s) pursuant to which made, and which notice the Administrative Agent shall promptly transmit to each of the Banks, (ii) each prepayment shall be in an aggregate principal amount of $1,000,000 or any integral multiple of $100,000 in excess thereof (or, any lesser amounts if all of the Loans shall be prepaid in full), and (iii) any such prepayment shall be accompanied by any additional amount due pursuant to Section 2.16 hereof. Section 2.11 Mandatory Prepayments. (a) On and after the date upon which all Obligations (as defined in the Existing Credit Agreement) then due and payable have been paid in full or the Existing Credit Agreement shall have been refinanced substantially in its entirety, mandatory prepayments shall be made hereunder with respect to the following: (i) Asset Sales. On each Business Day immediately after the date on which the Parent or any of its Subsidiaries receives any Net Cash Proceeds from an Asset Sale, the Borrower shall prepay the outstanding Revolving Loans in an amount equal to 100% of the amount of such Net Cash Proceeds, in accordance with the provisions of Section 2.12, provided that Net Cash Proceeds from Eligible Asset Sales shall not be required to be used to so repay Revolving Loans to the extent the Borrower elects, as hereinafter provided, to cause such Net Cash Proceeds to be reinvested in Reinvestment Assets (a "Reinvestment Election"). The Borrower may exercise its Reinvestment Election with respect to an Eligible Asset Sale if (x) no Default or Event of Default exists and (y) the Borrower delivers a Reinvestment Notice to the Administrative Agent on the Business Day after the date of the consummation of the respective Eligible Asset Sale, with such Reinvestment Election being effective with respect to the Net Cash Proceeds of such Eligible Asset Sale equal to the Anticipated Reinvestment Amount specified in such Reinvestment Notice. Notwithstanding the foregoing, the Borrower shall in any event prepay the Revolving Loans to the extent necessary to avoid any requirement to make an "Offer" under and as defined in Section 5.07 of the Senior Note Indenture and the Senior Subordinated Note Indenture. (ii) Issuance of Indebtedness. On each date on which the Parent or any of its Subsidiaries receives any Net Cash Proceeds from the issuance of any debt securities or the incurrence of any other Indebtedness (other than Indebtedness permitted by Section 6.2 (other than clause (g) thereof) as in effect on the Closing Date), the Borrower shall prepay the outstanding Revolving Loans in an amount equal to 50% of such Net Cash Proceeds, if on such date the Borrower's senior unsecured Indebtedness is rated less than BBB by Standard & Poor's or Baa2 by Moody's, in accordance with the provisions of Section 2.12. No prepayments under this Section shall be required if the preceding sentence is not applicable at the time such prepayment would be otherwise required hereby. (iii) Excess Cash Flow. On the date occurring 90 days after the close of each fiscal year of the Borrower (or, if earlier, the seventh day following delivery of the financial statements referred to in Section 5.1(b) in respect of such fiscal year) commencing with the fiscal year ending January 30, 2000, the Borrower shall prepay the out standing Revolving Loans in an amount equal to (i) if the Adjusted Leverage Ratio as of the last day of such fiscal year is greater than 3.5:1.0, 75% of the Excess Cash Flow for such preceding fiscal year and (ii) if the Adjusted Leverage Ratio as of the last day of such fiscal year is less than or equal to 3.5:1.0 and greater than 2.5:1.0, 50% of the Excess Cash Flow for such preceding fiscal year, each in accordance with the provisions of Section 2.12. No prepayments under this Section shall be required if neither clause (i) or (ii) hereof is applicable at the time such prepayment would be otherwise required hereby. (iv) Reinvestment Prepayment Date. On the Reinvestment Prepayment Date with respect to a Reinvestment Election, an amount equal to the Reinvestment Prepayment Amount, if any, for such Reinvestment Election shall be applied as a repayment of the principal amount of the then outstanding Revolving Loans in accordance with the provisions of Section 2.12. (v) Equity Issuances. On each date on which the Parent or any of its Subsidiaries receives any Net Cash Proceeds from any Equity Issuance (other than an Equity Issuance substantially contemporaneous with any Permitted Acquisition to the extent that the Net Cash Proceeds thereof are used to finance such Permitted Acquisition), if the Adjusted Leverage Ratio as of the last day of the fiscal quarter most recently ended prior to such date for which financial statements have been delivered pursuant to Section 5.1(a) or (b) is greater than 3.5:1.0, the Borrower shall prepay the outstanding Revolving Loans in an amount equal to 50% of such Net Cash Proceeds, in accordance with the provi sions of Section 2.12. Notwithstanding the foregoing, no prepayment of Revolving Loans under this Section 2.11(a)(v) shall be required for the first $50,000,000 of Net Cash Proceeds received by the Parent or any of its Subsidiaries from Equity Issuances other than Equity Issuances in connection with the exercise of outstanding options, warrants, purchase rights or conversion rights ("New Equity Issuances"). The amount of Net Cash Proceeds received from New Equity Issuances in excess of $50,000,000 shall be applied in accordance with the first sentence of this Section 2.11(a)(v). (vi) Store Closings. On the tenth Business Day after the end of the fiscal month after the termination of business at a store (other than the stores listed on Schedule 1 to the Sixth Amendment Agreement, dated as of February 18, 2000), the Borrower shall prepay the outstanding Revolving Loans in an amount equal to 100% of the amount of the Net Cash Proceeds in respect of such store. Notwithstanding anything to the contrary contained in this Section 2.11, no Net Cash Proceeds shall be payable under this Agreement until all prepayments required to be prepaid under the Existing Credit Agreement are made thereunder, or the Existing Credit Agreement has been substantially refinanced or the Loans (as defined in the Existing Credit Agreement) have been paid in full. (b) Voluntary and Mandatory Commitment Reductions. On each day on which the Total Revolving Loan Commitment is reduced pursuant to Section 2.9, the Borrower shall prepay the Revolving Loans, to the extent, if any, that the outstanding principal amount of the Revolving Loans at such time exceeds such reduced Total Revolving Loan Commitment. Section 2.12 Application of Prepayments. All pre payments of the Revolving Loans required by Section 2.11 shall be applied first to Base Rate Loans to the full extent thereof before application to Eurodollar Loans, in each case in a manner which minimizes the amount of any payments required to be made by the Borrower pursuant to Section 2.16. Section 2.13 Method and Place of Payment. (a) Except as otherwise specifically provided herein, all payments and prepayments under this Agreement and the Revolving Notes shall be made to the Administrative Agent for the account of the Banks entitled thereto not later than 12:00 p.m. (New York City time), on the date when due and shall be made in lawful money of the United States of America in immediately available funds at the Administrative Agent's Office, and any funds received by the Administrative Agent after such time shall, for all purposes hereof (including the following sentence), be deemed to have been paid on the next succeeding Business Day. Except as otherwise specifically provided herein, the Administrative Agent shall thereafter cause to be distributed on the date of receipt thereof to each Bank in like funds its Pro Rata Share of payments so received. (b) Whenever any payment to be made hereunder or under any Revolving Note shall be stated to be due on a day which is not a Business Day, the due date thereof shall be extended to the next succeeding Business Day and, with respect to payments of principal, interest and Fees shall be payable at the applicable rate during such extension. (c) All payments made by the Borrower hereunder and under the other Loan Documents shall be made irrespective of, and without any reduction for, any setoff or counterclaims. Section 2.14 Fees. (a) The Borrower agrees to pay to the Administrative Agent for its own account and for distribution to the Banks as separately agreed between each Bank and the Administrative Agent the fees and expenses in the amounts and on the dates specified in the Commitment Letter. (b) The Borrower agrees to pay to the Administrative Agent for the account of each Bank a commitment fee (the "Commitment Fee"), computed at a per annum rate equal to 0.50% on the average daily unused portion of such Bank's Revolving Loan Commitment, from and including the Closing Date to the Final Maturity Date, payable quarterly in arrears on each Payment Date and on the Final Maturity Date or such earlier date, if any, on which the Total Revolving Loan Commitment shall terminate in accordance with the terms hereof. Section 2.15 Interest Rate Unascertainable, Increased Costs, Illegality. (a) In the event that the Administrative Agent, in the case of clause (i) below, or any Bank, in the case of clauses (ii) and (iii) below, shall have determined (which determination shall, absent manifest error, be final and con clusive and binding upon all parties hereto): (i) on any date for determining the Eurodol lar Rate for any Interest Period, that by reason of any changes arising after the date of this Agreement affecting the interbank Eurodollar market, adequate and fair means do not exist for ascertaining the applicable interest rate on the basis provided for in the definition of the Eurodollar Rate; or (ii) at any time, that the relevant Eurodollar Rate applicable to any of its Revolving Loans shall not represent the effective pricing to such Bank for funding or maintaining a Eurodollar Loan, or such Bank shall incur increased costs or reductions in the amounts received or receivable hereunder in respect of any Eurodollar Loan, in any such case because of (x) any change since the date of this Agreement in any applicable law or governmental rule, regulation, guideline or order or any interpretation thereof and including the introduction of any new law or govern mental rule, regulation, guideline or order (such as for example but not limited to a change in official reserve re quirements, but, in all events, excluding reserves required under Regulation D to the extent included in the computation of the Eurodollar Rate), whether or not having the force of law and whether or not failure to comply therewith would be unlawful, and/or (y) other circumstances affecting such Bank or the interbank Eurodollar market or the position of such Bank in such market; or (iii) at any time, that the making or continuance by it of any Eurodollar Loan has become unlawful by compliance by such Bank in good faith with any law or governmental rule, regulation, guideline or order (whether or not having the force of law and whether or not failure to comply therewith would be unlawful) or has become impractica ble as a result of a contingency occurring after the date of this Agreement which materially and adversely affects the interbank Eurodollar market; then, and in any such event, the Administrative Agent or such Bank shall, promptly after making such determination, give notice (by telephone promptly confirmed in writing) to the Borrower and (if applicable) the Administrative Agent of such determination (which notice the Administrative Agent shall promptly transmit to each of the other Banks). Thereafter (x) in the case of clause (i) above, the Borrower's right to request Eurodollar Loans shall be suspended, and any Notice of Borrowing, Notice of Conversion or Notice of Continuation given by the Borrower with respect to any Borrowing of Eurodollar Loans, which has not yet been made shall be deemed cancelled and rescinded by the Borrower, (y) in the case of clause (ii) above, the Borrower shall pay to such Bank, upon such Bank's delivery of written demand therefor to the Borrower, with a copy to the Administrative Agent, such addition al amounts (in the form of an increased rate of interest, or a different method of calculating interest, or otherwise, as such Bank in its sole discretion shall determine) as shall be required to compensate such Bank for such increased costs or reduction in amounts received or receivable hereunder and (z) in the case of clause (iii) above, the Borrower shall take one of the actions specified in clause (b) below as promptly as possible and, in any event, within the time period required by law. The written demand provided for in clause (y) shall demonstrate in reasonable detail the calculation of the amounts demanded and shall, absent manifest error, be final and conclusive and binding upon all of the parties hereto. (b) In the case of any Eurodollar Loan or requested Eurodollar Loan affected by the circumstances described in clause (a)(ii) above, the Borrower may, and in the case of any Eurodollar Loan affected by the circumstances described in clause (a)(iii) above the Borrower shall, either (i) if any such Eurodollar Loan has not yet been made but is then the subject of a Notice of Borrowing, a Notice of Conversion or Notice of Continuation, be deemed to have cancelled and rescinded such notice, or (ii) if any such Eurodollar Loan is then outstanding, require the affected Bank to convert each such Eurodollar Loan into a Base Rate Loan at the end of the applicable Interest Period or such earlier time as may be required by law, in each case by giving the Administrative Agent notice (by telephone promptly confirmed in writing) thereof on the Business Day that the Borrower was notified by the Bank pursuant to clause (a) above; provided, however, that all Banks whose Eurodollar Loans are affected by the circumstances described in clause (a) above shall be treated in the same manner under this clause (b). (c) In the event that the Administrative Agent determines at any time following its giving of notice based on the conditions described in clause (a)(i) above that none of such conditions exist, the Administrative Agent shall promptly give notice thereof to the Borrower and the Banks, whereupon the Borrower's right to request Eurodollar Loans from the Banks and the Banks' obligation to make Eurodollar Loans shall be restored. (d) In the event that a Bank determines at any time following its giving of a notice based on the conditions described in clause (a)(iii) above that none of such conditions exist, such Bank shall promptly give notice thereof to the Borrower and the Administrative Agent, whereupon the Borrower's right to request Eurodollar Loans from such Bank and such Bank's obligation to make Eurodollar Loans shall be restored. (e) If any Bank determines that any applicable law, rule, or regulation or any change therein, or any change in the interpretation or administration thereof by any governmental authority, central bank, or comparable agency charged with the interpretation or administration thereof, or compliance by such Bank with any request or directive (whether or not having the force of law) of any such authority, central bank, or comparable agency shall make it unlawful or impossible for such Bank to maintain its Commitment, then upon notice to the Administrative Agent and the Borrower by the Bank, the Commitment of such Bank shall terminate. Section 2.16 Funding Losses. The Borrower shall compensate each Bank, upon such Bank's delivery of a written demand therefor to the Borrower, with a copy to the Adminis trative Agent (which demand shall, absent manifest error, be final and conclusive and binding upon all of the parties hereto), for all reasonable losses, expenses and liabilities (including, without limitation, any loss, expense or liability incurred by such Bank in connection with the liquidation or reemployment of deposits or funds required by it to make or carry its Eurodollar Loans but excluding anticipated profits), that such Bank sustains: (i) if for any reason (other than a default by such Bank) a Borrowing of, or conversion from or into, or a continu ation of, Eurodollar Loans does not occur on a date specified therefor in a Notice of Borrowing, Notice of Conversion or Notice of Continuation, (whether or not rescinded, cancelled or with drawn or deemed rescinded, cancelled or withdrawn, pursuant to Section 2.15(a) or 2.15(b) or otherwise), (ii) if any repayment (including, without limitation, payment after acceleration) or conversion of any of its Eurodollar Loans occurs on a date which is not the last day of the Interest Period applicable thereto, (iii) if any prepayment of any of its Eurodollar Loans is not made on any date specified in a notice of prepayment given by the Borrower, or (iv) as a consequence of any default by the Borrower in repaying its Eurodollar Loans, or any other amounts owing hereunder in respect of its Eurodollar Loans when required by the terms of this Agreement. Calculation of all amounts payable to a Bank under this Section 2.16 shall be made on the assumption that such Bank has funded its relevant Eurodollar Loan through the purchase of a Eurodollar deposit bearing interest at the Euro dollar Rate in an amount equal to the amount of such Eurodollar Loan with a maturity equivalent to the Interest Period applicable to such Eurodollar Loan, and through the transfer of such Eurodollar deposit from an offshore office of such Bank to a domestic office of such Bank in the United States of America, provided that each Bank may fund its Eurodollar Loans in any manner that it in its sole discretion chooses and the foregoing assumption shall only be made in order to calculate amounts payable under this Section 2.16. Section 2.17 Increased Capital. If at any time any Bank determines that the introduction after the Closing Date of, or any change after the Closing Date in, any applicable law or governmental rule, regulation, order, guideline, directive or request (whether or not having the force of law) concerning capital adequacy, or any change after the Closing Date in interpretation or administration thereof by any governmental authority, central bank or comparable agency, will have the effect of increasing the amount of capital required or expected to be maintained by such Bank or any corporation controlling such Bank based on the existence of such Bank's Commitments hereunder or its obligations hereunder, or shall change the basis of taxation of any amounts payable to any Bank under this Agreement or the Revolving Notes in respect of any such Revolving Loans (other than taxes imposed on the overall net income of any Bank for any of such Loans by the jurisdiction where such Bank is located) then the Borrower shall pay to such Bank, within 15 days after its written demand therefor, such additional amounts as shall be required to compensate such Bank or such other corporation for the increased cost to such Bank or such other corporation or the reduction in the rate of return to such Bank or such other corporation as a result of such increase of capital or change in basis. In determining such additional amounts, each Bank will act reasonably and in good faith and will use averaging and attribution methods which are reasonable, provided that such Bank's reasonable good faith determination of compensation owing under this Section 2.17 shall, absent manifest error, be final and conclusive and binding on all the parties hereto. Each Bank, upon determining that any additional amounts will be payable pursuant to this Section 2.17, will give prompt written notice thereof to the Borrower, which notice shall show the basis for calculation of such additional amounts, although the failure to give any such notice shall not release or diminish any of the Borrower's Obligations to pay additional amounts pursuant to this Section 2.17. Section 2.18 Taxes. (a) All payments made by the Borrower under this Agreement shall be made free and clear of, and without reduction or withholding for or on account of, any present or future income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now or hereafter imposed, levied, collected, withheld or assessed by any governmental authority excluding, in the case of the Administrative Agent and each Bank, net income and franchise taxes imposed on the Administrative Agent or such Bank by the jurisdiction under the laws of which the Administrative Agent or such Bank is organized or any political subdivision or taxing authority thereof or therein, or by any jurisdiction in which such Bank's Lending Office, as the case may be, is located or any political subdivision or taxing authority thereof or therein (all such non-excluded taxes, levies, imposts, deductions, charges or withholdings being hereinafter called "Taxes"). If any Taxes are required to be withheld from any amounts payable to the Administrative Agent or any Bank hereunder or under the Revolving Notes, the amounts so payable to the Administrative Agent or such Bank shall be increased to the extent necessary to yield to the Administrative Agent or such Bank (after payment of all Taxes) interest or any such other amounts payable hereunder at the rates or in the amounts specified in this Agreement and the Revolving Notes. Whenever any Taxes are payable by the Borrower, as promptly as possible thereafter, the Borrower shall send to the Administrative Agent for its own account or for the account of such Bank, a certified copy of an original official receipt received by the Borrower showing payment thereof or other evidence of payment reasonably satisfactory to the Administrative Agent or such Bank. If the Borrower fails to pay any Taxes when due to the appropriate taxing authority or fails to remit to the Administrative Agent the required receipts or other required documentary evidence, the Borrower shall indemnify the Administrative Agent and the Banks for any incremental taxes, interest or penalties that may become payable by the Administrative Agent or any Bank as a result of any such failure. The agreements in this Section 2.18 shall survive the termination of this Agreement and the payment of the Revolving Notes and all other Obligations. (b) Each Bank (including each Purchasing Bank that becomes a party to this Agreement pursuant to Section 9.4) that is not incorporated under the laws of the United States of America or a state thereof (a "Non-U.S. Bank") agrees that, prior to the first date on which any payment is due to it hereunder, it will deliver to the Borrower and the Administrative Agent (i) two duly completed copies of United States Internal Revenue Service Form W-8BEN or W-8ECI or successor applicable form, as the case may be, certifying in each case that such Bank is entitled to receive payments under this Agreement and the Revolving Notes payable to it, without deduction or withholding of any United States federal income taxes, or (ii) in the case of a Non-U.S. Bank claiming exemption from U.S. federal withholding taxes under Section 871(h) or 881(c) of the Code with respect to payments of "portfolio interest," an Internal Revenue Service Form W-8 or successor applicable form, as the case may be, to establish an exemption from United States backup withholding tax together with a certificate to the effect that such Non-U.S. Bank is not a bank for purposes of Section 881(c) of the Code, is not a 10 percent shareholder (within the meaning of Section 871(h)(3)(B) of the Code) of the Borrower, is not a controlled foreign corporation related to the Borrower (within the meaning of Section 864(d)(4) of the Code) and is entitled to a complete exemption from U.S. federal withholding taxes. Each Bank which delivers to the Borrower and the Administrative Agent a Form W-8BEN or W-8ECI and Form W-8 pursuant to the preceding sentence further undertakes to deliver to the Borrower and the Administrative Agent two further copies of Form W-8BEN or W-8ECI and Form W-8 (together with the accompanying certificate), or successor applicable forms, or other manner of certification, as the case may be, on or before the date that any such form expires or becomes obsolete or after the occurrence of any event requiring a change in the most recent form previously delivered by it to the Borrower, and such extensions or renewals thereof as may reasonably be requested by the Borrower, certifying in the case of a Form W-8BEN or W-8ECI that such Bank is entitled to receive payments under this Agree ment without deduction or withholding of any United States federal income taxes, unless in any such case an event (includ ing, without limitation, any change in treaty, law or regulation) has occurred prior to the date on which any such delivery would otherwise be required which renders all such forms inapplicable or which would prevent such Bank from duly completing and delivering any such form with respect to it and such Bank advises the Borrower that it is not capable of receiving payments without any deduction or withholding of United States federal income tax, and in the case of a Form W-8, establishing an exemption from United States backup withholding tax. Section 2.19 Action of Affected Banks. Upon the written request of the Borrower, each Bank agrees to use reasonable efforts (including reasonable efforts to change the lending office for its Loans) to avoid or minimize any illegality or any amounts which might otherwise be payable by the Borrower pursuant to Sections 2.15 or 2.18; provided, however, that such efforts shall not cause, in the sole determination of such Bank, the imposition on such Bank of any additional costs or legal or regulatory burdens and shall not be deemed by such Bank to be otherwise contrary to its policies. In the event that such reasonable efforts are insufficient to avoid all such illegality or all amounts that might be payable pursuant to Sections 2.15 or 2.18, then such Bank (the "Affected Bank") shall use its reasonable efforts to transfer to any other Bank (which itself is not then an Affected Bank) its Loans and Commitments, subject to the provisions of Section 9.4; provided, however, that such transfer shall not be deemed by such Affected Bank, in its sole discretion, to be disadvantageous to it or contrary to its policies. In the event that the Affected Bank is unable, or otherwise is unwilling, so to transfer its Loans and Commitments, the Borrower may designate an alternate lender (reasonably acceptable to the Administrative Agent) to purchase the Affected Bank's Loans and Commitments, at par and including accrued interest, and, subject to the provisions of Section 9.4, the Affected Bank shall transfer its Commitments to such alternate lender and such alternate lender shall become a Bank hereunder. Any fee payable to the Administrative Agent pursuant to subsection 9.4(c) in connection with such transfer shall be for the account of the Borrower. Section 2.20 Use of Proceeds. The proceeds of the Revolving Loans shall be used for working capital of the Borrower and its Subsidiaries in accordance with customary and typical past historical practice. SECTION 3. CONDITIONS PRECEDENT. Section 3.1 Conditions Precedent to Initial Loans. The obligation of each Bank to make its initial Loans, is subject to the satisfaction on the Closing Date (unless otherwise waived in writing by the Administrative Agent) of the following condi tions precedent: (a) Loan Documents. (i) Credit Agreement. The Borrower, the Parent and each other party to this Agreement shall have executed and delivered this Agreement to the Administrative Agent. (ii) Revolving Notes. The Borrower shall have executed and delivered to each Bank which has requested Revolving Notes the appropriate Revolving Notes in the amount, maturity and as otherwise provided herein. (iii) Security Agreement. Each of the Bor rower, the Parent and the Material Subsidiaries shall have executed and delivered to the Collateral Agent a security agreement substantially in the form set forth as Exhibit D hereto (as amended, modified or supplemented from time to time, the "Security Agreement"). (iv) Subsidiary Guaranty. Each of the Parent and the Material Subsidiaries shall have executed and delivered to the Collateral Agent a guaranty substantially in the form set forth as Exhibit E hereto (as amended, modified or supplemented from time to time, the "Subsidiary Guaranty"). (v) Warrant Agreement. The Parent shall have executed and delivered to the Administrative Agent separate warrant agreements for each Bank for further delivery to such Bank substantially in the form set forth as Exhibit F hereto (as amended, modified or supplemented from time to time, the "Warrant Agreement"). (b) Opinions of Counsel. (i) The Administrative Agent shall have re ceived a legal opinion, dated the Closing Date, from Cadwalader, Wickersham & Taft, counsel to the Loan Parties, substantially in the form set forth as Exhibit G hereto, and the Borrower hereby instructs such counsel to deliver such opinion. (ii) The Administrative Agent shall have received a legal opinion, dated the Closing Date, from Skadden, Arps, Slate, Meagher & Flom (Illinois), special counsel to the Administrative Agent. (c) Corporate Documents. The Administrative Agent shall have received the Articles or Certificate of Incorporation of each of the Loan Parties as amended, modified or supplemented to the Closing Date, certified to be true, correct and complete by the appropriate Secretary of State as of a date not more than five days prior to the Closing Date, together with a good standing certificate from such Secretary of State and a good standing certificate from the Secretaries of State (or the equivalent thereof) of each other State in which each of them is required to be qualified to transact business, each to be dated a date not more than five days prior to the Closing Date. (d) Certified Resolutions, etc. The Administrative Agent shall have received a certificate of the Secretary or Assistant Secretary of each of the Loan Parties and dated the Closing Date certifying (i) the names and true signatures of the incumbent officers of such Person authorized to sign the applicable Loan Documents, (ii) the By-Laws of such Person as in effect on the Closing Date, (iii) the resolutions of such Person's Board of Directors approving and authorizing the execution, delivery and performance of all Loan Documents executed by such Person, and (iv) that there have been no changes in the Articles or Certificate of Incorporation of such Person since the date of the most recent certification thereof by the appropriate Secretary of State. (e) Officer's Certificate. The Administrative Agent and the Banks shall have received a certificate of an Authorized Officer of the Borrower, dated the Closing Date, certifying that (i) each of the Loan Parties and, to the best of his or her knowledge, the other parties to the Loan Documents, have performed or complied in all material respects with all agreements and conditions contained in such Loan Documents and any agreements or documents referred to therein required to be performed or complied with by each of them on or before the Closing Date, and (ii) subject to the foregoing, neither any Loan Party nor, to the best of his or her knowledge, any such other party is in default in the performance or compliance with any of the terms or provisions thereof, except to the extent that performance thereof or compliance therewith or default has been waived with the prior written consent of the Banks. (f) Insurance. The Administrative Agent shall have received a certificate of insurance demonstrating insurance coverage in respect of each of the Loan Parties of types, in amounts, with insurers and with other terms satisfactory to the Banks. (g) Lien Search Reports. The Administrative Agent shall have received satisfactory reports of UCC and tax lien searches conducted by a search firm acceptable to the Administrative Agent and the Banks with respect to the Loan Parties in such locations as the Administrative Agent may request. (h) UCC-1 Financing Statements. The Administra tive Agent shall have received copies (or other evidence of fil ing) of each UCC-1 financing statement signed by Borrower and the other Loan Parties as debtors naming the Collateral Agent as secured party to be filed in each of the jurisdictions set forth on Annex C to the Security Agreement and such other locations as the Administrative Agent may request. (i) Financial Statements. The Administrative Agent shall have received the audited financial statements of the Parent and the Borrower for the fiscal years ending January 30, 1999, January 31, 1998 and February 1, 1997 and the unaudited financial statements of the Borrower for the fiscal period ending on October 30, 1999. (j) Environmental Matters. The Administrative Agent shall be satisfied that neither the Borrower, any of its Subsidiaries nor any Loan Party is subject to any present or contingent environmental liability which could reasonably be expected to have a Material Adverse Effect. (k) Fees and Expenses. The Administrative Agent shall have received, for its account and for the account of each Bank, as applicable, all Fees and other fees and expenses due and payable hereunder on or before the Closing Date (if then invoiced), including, without limitation, the fees and expenses set forth in the Commitment Letter and the reasonable fees and expenses accrued through the Closing Date, of Skadden, Arps, Slate, Meagher & Flom (Illinois) and its affiliates in connection with the Transactions. (l) Consents, Licenses, Approvals, etc. The Administrative Agent shall have received copies of all consents, licenses and approvals, if any, required in connection with the execution, delivery and performance by the Borrower, the Loan Parties or any of their respective Subsidiaries, and the validity and enforceability, of the Loan Documents, or in connection with any of the Transactions, and such consents, licenses and approv als shall be in full force and effect. (m) Projections. The Administrative Agent shall have received projections prepared by the Parent demonstrating the projected consolidated financial condition and results of operations of the Parent and its Subsidiaries after giving effect to the Transactions, for each fiscal year for the period commencing on the Closing Date and ending on the Final Maturity Date and for each fiscal quarter for the fiscal year ending February 3, 2001, which projections shall be accompanied by a written statement of the assumptions underlying the projections, and all of the foregoing shall be satisfactory to the Banks. (n) [Intentionally left blank.] (o) Amendment. The Administrative Agent shall have received evidence that all conditions to the effectiveness of the Sixth Amendment, dated as of February 18, 2000, to the Existing Credit Agreement have been fully satisfied or waived by the parties thereto. (p) Additional Matters. The Administrative Agent shall have received such other certificates, opinions, documents and instruments relating to the Transactions as may have been reasonably requested by the Administrative Agent or any Bank, and all corporate and other proceedings and all other documents (including, without limitation, all documents referred to herein and not appearing as exhibits hereto) and all legal matters in connection with the Transactions shall be satisfactory in form and substance to the Banks. Section 3.2 Conditions Precedent to All Loans. The obligation of each Bank to make any Revolving Loan, including the initial Revolving Loan on the Closing Date, is subject to the satisfaction on the date of such Revolving Loan of the following conditions precedent: (a) Representations and Warranties. The repre sentations and warranties contained herein and in the other Loan Documents (other than representations and warranties which expressly speak only as of a different date which representations and warranties shall be true and correct in all material respects as of such date) shall be true and correct in all material respects on such date both before and after giving effect to such Revolving Loan. (b) No Default or Event of Default. No Default or Event of Default shall have occurred and be continuing on such date either before or after giving effect to such Revolving Loan. (c) No Injunction or Litigation. No law or regulation shall have been adopted, no order, judgment or decree of any governmental authority shall have been issued, and no litigation, proceeding or investigation shall be pending or threatened, which has not been previously disclosed on or prior to February 22, 2000 and which in the reasonable judgment of the Banks would (i) enjoin, prohibit or restrain, or impose or result in the imposition of any Material Adverse Effect upon, the making or repayment of the Revolving Loans or the Transactions or (ii) affect the legality, validity or enforceability of this Agreement, any of the Loan Documents, the Transactions, or any document to be executed in connection therewith and the Banks shall be satisfied as to any other material litigation and contingent obligations to which the Borrower or its Subsidiaries may be subject. (d) No Material Adverse Effect. No event, act or condition shall have occurred from and after the Closing Date which, in the reasonable judgment of the Required Banks, has had or could reasonably be expected to have a Material Adverse Effect. (e) Notice of Borrowing. The Administrative Agent shall have received a fully executed Notice of Borrowing in respect of the Loans, if any, to be made on such date. The acceptance of the proceeds of each Revolving Loan shall constitute a representation and warranty by the Borrower to each of the Banks that all of the conditions required to be satisfied under this Section 3 in connection with the making of such Revolving Loan have been satisfied. All of the Revolving Notes, certificates, agreements, legal opinions and other documents and papers referred to in this Section 3, unless otherwise specified, shall be delivered to the Administrative Agent for the account of each of the Banks and, except for the Revolving Notes, in sufficient counterparts for each of the Banks, and shall be satisfactory in form and substance to each Bank in its sole discretion. SECTION 4. REPRESENTATIONS AND WARRANTIES. In order to induce the Administrative Agent, the Collateral Agent and Banks to enter into this Agreement and to make the Revolving Loans, each of the Parent and the Borrower makes the following representations and warranties, which shall survive the execution and delivery of this Agreement and the Revolving Notes and the making of the Revolving Loans: Section 4.1 Corporate Status. Each Loan Party (i) is a duly organized and validly existing corporation in good standing under the laws of the jurisdiction of its incorporation, (ii) has the corporate power and authority to own its property and assets and to transact the business in which it is engaged or presently proposes to engage and (iii) has duly qualified and is authorized to do business and is in good standing as a foreign corporation in every jurisdiction in which it owns or leases real property or in which the nature of its business requires it to be so qualified, except where the failure to so qualify, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect. Section 4.2 Corporate Power and Authority. Each Loan Party has the corporate power and authority to execute, deliver and carry out the terms and provisions of each of the Loan Documents to which it is a party and has taken all necessary corporate action to authorize the execution, delivery and performance by it of such Loan Documents. Each Loan Party has duly executed and delivered each such Loan Document, and each such Loan Document constitutes its legal, valid and binding obligation, enforceable in accordance with its terms. Section 4.3 No Violation. Neither the execution, delivery or performance by any Loan Party of the Loan Documents to which it is a party, nor compliance by it with the terms and provisions thereof nor the consummation of the Transactions, (i) will contravene any applicable provision of any law, statute, rule, regulation, order, writ, injunction or decree of any court or governmental instrumentality or (ii) will conflict or be inconsistent with or result in any breach of any of the terms, covenants, conditions or provisions of, or constitute a default under, or result in the creation or imposition of (or the obligation to create or impose) any Lien (except pursuant to the Security Documents) upon any of the property or assets of any Loan Party pursuant to the terms of any indenture, mortgage, deed of trust, agreement or other instrument to which such Loan Party is a party or by which it or any of its property or assets is bound or to which it may be subject, or (iii) will violate any provision of the Articles or Certificate of Incorporation or By-Laws of any Loan Party. Section 4.4 Litigation. There are no actions, suits, investigations or proceedings pending, or to the Parent's or the Borrower's best knowledge, threatened which have not been disclosed to the Administrative Agent on or before February 22, 2000 (i) with respect to any of the Loan Documents or the Transactions or (ii) that could, individually or in the aggre gate, reasonably be expected to result in a Material Adverse Effect. Section 4.5 Financial Statements; Financial Condition; etc. Each of the financial statements delivered pursuant to Section 3.1(i) were prepared in accordance with GAAP consistently applied and fairly present the financial condition and the results of operations of the entities covered thereby on the dates and for the periods covered thereby, except as disclosed in the notes thereto and, with respect to interim financial statements, subject to normally recurring year-end adjustments. As of the Closing Date, no Loan Party has any material liability (contingent or otherwise) not reflected in such financial statements or in the notes thereto other than as set forth on Schedule 6.6 hereto. Section 4.6 [Intentionally left blank.] Section 4.7 Projections. The projections delivered pursuant to Section 3.1(m) have been prepared on the basis of the assumptions accompanying them, and such projections and assumptions, as of the date of preparation thereof and as of the Closing Date, are reasonable and represent the Parent's good faith estimate of its future financial performance, it being understood that nothing contained in this Section 4.7 shall con stitute a representation or warranty that such future financial performance or results of operations will in fact be achieved. Section 4.8 Material Adverse Effect. Except as set forth on Schedule 4.8, from and after the Closing Date, there has occurred no event, act or condition which has had, or could reasonably be expected to have, a Material Adverse Effect. Section 4.9 Use of Proceeds; Margin Regulations. All proceeds of each Revolving Loan will be used by the Borrower only in accordance with the provisions of Section 2.20. No part of the proceeds of any Revolving Loan will be used by the Borrower to purchase or carry any Margin Stock or to extend credit to others for the purpose of purchasing or carrying any Margin Stock. Neither the making of any Revolving Loan nor the use of the proceeds thereof will violate or be inconsistent with the provisions of Regulations T, U or X of the Federal Reserve Board. Section 4.10 Governmental Approvals. No order, consent, approval, license, authorization, or validation of, or filing, recording or registration with, or exemption by, any governmental or public body or authority, or any subdivision thereof, is required to authorize, or is required in connection with (i) the execution, delivery and performance of any Loan Document or the consummation of any of the Transactions or (ii) the legality, validity, binding effect or enforceability of any Loan Document, except (x) those listed on Schedule 4.10 that have already been duly made or obtained and remain in full force and effect and (y) the filing of UCC-1 financing statements in the appropriate filing offices. Section 4.11 Security Interests and Liens. The Security Documents create, as security for the Secured Obli gations, valid and enforceable Liens on all of the Collateral, in favor of the Collateral Agent for the ratable benefit of the Secured Creditors, and subject to no other Liens other than Liens permitted by Section 6.3 hereunder. Upon the satisfaction of the conditions precedent described in Section 3.1(h), such Liens on the Collateral shall be superior to and prior to the rights of all third parties (except as disclosed on Schedule 6.3), and no further recordings or filings are or will be required in connec tion with the creation, perfection or enforcement of such Liens, other than the filing of continuation statements in accordance with applicable law. Section 4.12 Tax Returns and Payments. The Parent and each of its Subsidiaries has filed all tax returns required to be filed by it and has paid all taxes and assessments payable by it which have become due, other than those not yet delinquent or those that are reserved against in accordance with GAAP which are being diligently contested in good faith by appropriate proceedings. Section 4.13 ERISA. As of the Closing Date, no Loan Party has any Plans other than those listed on Schedule 4.13. No accumulated funding deficiency (as defined in Section 412 of the Code or Section 302 of ERISA) or Reportable Event has occurred with respect to any Plan. As of the Closing Date, Unfunded Benefit Liabilities under the Plans do not, in the aggregate, exceed $6,000,000. As of the Closing Date, neither the Borrower nor any member of its ERISA Controlled Group is a party to or has any responsibility, contingent or otherwise, with respect to any Multiemployer Plan. To the best knowledge of the Borrower and each member of its ERISA Controlled Group, no Multiemployer Plan is or is likely to be in reorganization (as defined in Section 4241 of ERISA or Section 418 of the Code) or is insolvent (as defined in Section 4245 of ERISA) which reorganization or insolvency could reasonably be expected to have a Material Adverse Effect. No liability to the PBGC (other than required premium payments), the Internal Revenue Service, any Plan or any trust established under Title IV of ERISA has been, or is expected by the Borrower or any member of its ERISA Controlled Group to be, incurred by the Borrower or any member of its ERISA Controlled Group which liability could reasonably be expected to result in a Material Adverse Effect. Except as otherwise disclosed on Schedule 4.13 hereto, neither the Borrower nor any member of its ERISA Controlled Group has any material contingent liability with respect to any post-retirement benefit under any "welfare plan" (as defined in Section 3(1) of ERISA), other than liability for continuation coverage under Part 6 of Title I of ERISA or other similar statute. No lien under Section 412(n) of the Code or Section 302(f) of ERISA or requirement to provide security under Section 401(a)(29) of the Code or Section 307 of ERISA has been or is reasonably expected by the Borrower or any member of its ERISA Controlled Group to be imposed on the assets of the Borrower or any member of its ERISA Controlled Group. Section 4.14 Investment Company Act; Public Utility Holding Company Act. No Loan Party nor any of its Subsidiaries is (x) an "investment company" or a company "controlled" by an "investment company," within the meaning of the Investment Company Act of 1940, as amended, (y) a "holding company" or a "subsidiary company" of a "holding company" or an "affiliate" of either a "holding company" or a "subsidiary company" within the meaning of the Public Utility Holding Company Act of 1935, as amended, or (z) subject to any other federal or state law or regulation which purports to restrict or regulate its ability to borrow money. Section 4.15 Representations and Warranties in Loan Documents. All representations and warranties made by any Loan Party in the Loan Documents, and, to the best of the Borrower's knowledge, all representations made by each other Person in such Loan Documents, are true and correct in all material respects as of the Closing Date. None of such representations and warranties are inconsistent in any material respect with the representations and warranties of any Loan Party made herein or in any other Loan Document. Section 4.16 True and Complete Disclosure. All factual information (taken as a whole) furnished by or on behalf of any Loan Party in writing to the Administrative Agent or any Bank on or prior to the Closing Date, for purposes of or in connection with this Agreement or any of the Transactions is, and all other such factual information (taken as a whole) hereafter furnished by or on behalf of any Loan Party in writing to the Administrative Agent or any Bank will be, true and accurate in all material respects on the date as of which such information is dated or furnished and not incomplete by omitting to state any material fact necessary to make such information (taken as a whole) not misleading at such time. As of the Closing Date, there are no facts, events or conditions known to the Borrower which, individually or in the aggregate, have or could reasonably be expected to have a Material Adverse Effect. Section 4.17 Corporate Structure; Capitalization. As of the Closing Date, Schedule 4.17 hereto sets forth, both before and after giving effect to the Transactions to be consummated on the Closing Date, the number of authorized and issued shares of capital stock of the Parent, the Borrower and each of its Subsidiaries, the par value thereof and, in the case of Subsidiaries, the registered owner(s) thereof. All of such issued stock has been duly and validly issued and is fully paid and non-assessable. Except as set forth in such Schedule, as of the Closing Date neither the Parent, the Borrower nor any such Subsidiary has outstanding any securities convertible into or exchangeable for its capital stock nor does the Parent, the Borrower or any such Subsidiary have outstanding any rights to subscribe for or to purchase, or any options for the purchase of, or any agreements providing for the issuance (contingent or other wise) of, or any calls, commitments or claims of any character relating to, its capital stock. Section 4.18 Environmental Matters. (a) Except as set forth in Schedule 4.18, (i) each Loan Party and its Subsidiaries are in compliance with all applicable Environmental Laws, (ii) each Loan Party and its Subsidiaries have all Environ mental Approvals required to operate their businesses as pres ently conducted or as reasonably anticipated to be conducted, all such Environmental Approvals are in effect, no appeal or other action is pending to revoke any such Environmental Approval, and each Loan Party and each of its Subsidiaries are in full compli ance with all terms and conditions of such Environmental Approv als, (iii) no Loan Party, its Subsidiaries nor any of their Envi ronmental Affiliates has received any communication (written or oral), whether from a governmental authority, citizens group, employee or otherwise, that alleges that a Loan Party or such Subsidiary or Environmental Affiliate is not in full compliance with all Environmental Laws, and (iv) to the Parent's and the Borrower's best knowledge after due inquiry, there are no circum stances that may prevent or interfere with such full compliance in the future. (b) Except as set forth in Schedule 4.18, there is no Environmental Claim pending or threatened against any Loan Party, any of its Subsidiaries or any Environmental Affiliate. (c) Except as set forth in Schedule 4.18, there are no past or present actions, activities, circumstances, condi tions, events or incidents, including, without limitation, the release, emission, discharge or disposal of any Material of Environmental Concern, that could form the basis of any Envi ronmental Claims against any Loan Party, any of its Subsidiaries or any of their Environmental Affiliates, which Environmental Claims, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. (d) No Release or Cleanup has occurred at any property currently or formerly owned or leased by any Loan Party or its Subsidiaries that could reasonably be expected to result in the assertion or creation of a Lien on said property by any governmental body or agency with respect thereto, nor has any such assertion of a Lien been made by any governmental body or agency with respect thereto. (e) The Borrower has heretofore delivered true and correct copies of all environmental studies, assessments or reports conducted of the Parent or any of its Subsidiaries and of each property currently or formerly owned or operated by the Parent or any of its Subsidiaries, including but not necessarily limited to Phase I or Phase II environmental assessments, under ground storage tank investigation reports, or asbestos surveys, that were prepared within the last five years, except that such time limitation shall not apply to asbestos surveys. (f) Without in any way limiting the generality of the foregoing, except as disclosed in Schedule 4.18, (i) there are no underground storage tanks located on property owned or leased by any Loan Party or any of its Subsidiaries and (ii) no polychlorinated biphenyls (PCB's) are used or stored at any property owned or leased by the Borrower or any of its Subsidiar ies. Section 4.19 Insurance. Schedule 4.19 sets forth a complete and accurate description of all policies of insurance maintained by the Parent and its Subsidiaries as of the Closing Date. The Borrower has paid all premiums due on or prior to the Closing Date in respect of such policies and all such policies are in full force and effect. Section 4.20 Patents, Trademarks, etc. Each Loan Party and its Subsidiaries has obtained and holds in full force and effect all patents, trademarks, servicemarks, trade names, copyrights and other such rights, free from burdensome restrictions, which are reasonably necessary for the operation of its business as presently conducted. No material product, process, method, substance, part or other material presently sold by or employed by any Loan Party or any of its Subsidiaries in connection with such business infringes any patent, trademark, service mark, trade name, copyright, license or other right owned by any other Person. There is not pending or overtly threatened any claim or litigation against or affecting any Loan Party or any of its Subsidiaries contesting its right to sell or use any such product, process, method, substance, part or other material which would be reasonably likely to have a Material Adverse Effect. Section 4.21 Ownership of Property. Schedule 4.21 sets forth all the real property owned or leased by the Parent or any of its Subsidiaries as of the Closing Date and identifies the street address, whether such property is leased or owned and, if owned, the current owner thereof. The Parent and its Subsidiaries have good and marketable fee simple title to or valid leasehold interests in all of such real property and good title or valid leasehold interests to all of their personal property subject to no Lien of any kind except Liens permitted hereby. The Parent and its Subsidiaries enjoy peaceful and undis turbed possession under all of their respective leases, except where the failure would not reasonably be expected to have a Material Adverse Effect. Section 4.22 No Default. No Loan Party nor any of its Subsidiaries is in default under or with respect to Loan Document or any other agreement, instrument or undertaking to which it is a party or by which it or any of its property is bound in any re spect which could reasonably be expected to result in a Material Adverse Effect. No Default or Event of Default exists. Section 4.23 Licenses, etc. Each Loan Party and its Subsidiaries have obtained and hold in full force and effect, all material franchises, licenses, permits, certificates, authoriza tions, qualifications, easements, rights of way and other rights, consents and approvals which are reasonably necessary for the operation of their respective businesses as presently conducted. Section 4.24 Compliance With Law. Each Loan Party and each of its Subsidiaries is in compliance with all laws, rules, regulations, orders, judgments, writs and decrees except where such non-compliance, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect. Section 4.25 No Burdensome Restrictions. No Loan Party nor any of its Subsidiaries is a party to any agreement or instrument or subject to any other obligation or any charter or corporate restriction or any provision of any applicable law, rule or regulation which, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. Section 4.26 Labor Matters. Except as set forth on Schedule 4.26, as of the Closing Date there are no collective bargaining agreements or Multiemployer Plans covering the em ployees of any Loan Party or any of its Subsidiaries. None of the Loan Parties has suffered any strikes, walkouts, work stoppages or other material labor difficulty within the last five years and to the best knowledge of such Persons, there are none now threatened. Section 4.27 Parent Business. As of the Closing Date, the Parent conducts no business other than the ownership of 100% of the capital stock of the Borrower and has no assets or liabilities other than those reflected in the financial statements previously delivered to the Banks. At any time after the Closing Date, the Parent conducts no business other than that expressly permitted by the terms of this Agreement, including, without limitation, the consummation of, and ownership of Subsidiaries purchased or created pursuant to, Permitted Acquisitions. Section 4.28 Cash Balances. The aggregate amount of readily available cash or Cash Equivalent in the Corporate Concentration Account of the Borrower and its Subsidiaries shall not at any time in the aggregate exceed $20 million, including at all such times, after giving effect to any proposed Borrowing. SECTION 5. AFFIRMATIVE COVENANTS. The Parent and the Borrower covenant and agree that on and after the Closing Date and until the Total Revolving Loan Commitment has terminated, and the Obligations are paid in full: Section 5.1 Information Covenants. With respect to the information required to be delivered pursuant to clauses (a) through (d) below, the Borrower shall furnish to the Administrative Agent sufficient copies of such information for the Administrative Agent to promptly furnish such information to the Banks and with respect to the information required to be delivered in clauses (e) through (k), the Borrower shall furnish to each Bank and to the Administrative Agent: (a) Quarterly Financial Statements. Within 45 days after the close of each quarterly accounting period in each fiscal year of the Parent (other than the fourth quarterly accounting period), the consolidated and consolidating balance sheet of the Parent and its Subsidiaries as at the end of such quarterly period and the related consolidated statements of income, cash flow and shareholders' equity and consolidating statements of income, for such quarterly period and for the elapsed portion of the fiscal year ended with the last day of such quarterly period, and in the case of such consolidated statements of income setting forth comparative figures for the related periods in the prior fiscal year. (b) Annual Financial Statements. Within 90 days after the close of each fiscal year of the Parent, the consoli dated and consolidating balance sheet of the Parent and its Subsidiaries as at the end of such fiscal year and the related consolidated statements of income, cash flow and shareholders' equity and consolidating statements of income for such fiscal year, setting forth, in the case of such consolidated financial statements, comparative figures for the preceding fiscal year and, with respect to such consolidated financial statements, certified without qualification by Price Waterhouse or any other independent certified public accountants of recognized national standing reasonably acceptable to the Required Banks, in each case together with a report of such accounting firm stating that in the course of its regular audit of the consolidated financial statements of the Borrower, which audit was conducted in accordance with generally accepted auditing standards, such accounting firm has obtained no knowledge of any Default or Event of Default under Section 6.1, or if in the opinion of such accounting firm such a Default or Event of Default has occurred and is continuing, a statement as to the nature thereof. (c) Monthly Financial Statements. Within 30 days after the end of each monthly reporting period following the Closing Date, the consolidated and consolidating balance sheet of the Parent and its Subsidiaries as at the end of such monthly reporting period and the related consolidated and consolidating statements of income for such monthly reporting period and for the elapsed portion of current fiscal year ended on the last day of such monthly reporting period, and in each case setting forth, in the case of such consolidated financial statements, compara tive figures for the related periods in the prior fiscal year, including, without limitation, a division sales analysis in the form of Exhibit H attached hereto. (d) Monthly Reporting. Within 30 days after the end of each month a monthly report and officer's certificate in the form of Exhibit I attached hereto. (e) Weekly Cash Flow Reports. Within 3 business days after the close of each calendar week, a cash flow report for the preceding week and a cash flow projection for not less than the next five weeks thereafter, in each case in form, substance and detail reasonably satisfactory to the Required Banks. (f) Management Letters. Promptly after the Borrower's or the Parent's receipt thereof, a copy of any "management letter" or other material report received by the Borrower or the Parent from its certified public accountants. (g) Budgets. Within 45 days after the first day of each fiscal year of the Parent, a quarterly budget and quarterly financial forecast of results of operations and sources and uses of cash (in form satisfactory to the Required Banks) for the Parent and its Subsidiaries and for the Borrower and its Subsidiaries prepared by the Parent for such fiscal year, accompa nied by a written statement of the assumptions used in connection therewith, together with a certificate of the Principal Financial Officer of the Parent to the effect that such budget and finan cial forecast and assumptions are reasonable and represent the Borrower's good faith estimate of its future financial requirements and performance. The financial statements required to be delivered pursuant to clauses (a), (b) and (c) above shall be accompanied by a comparison of the actual financial results set forth in such financial statements to those contained in the forecasts delivered pursuant to this clause (e) together with an explanation of any material variations from the results anticipated in such forecasts. (h) Officer's Certificates. At the time of the delivery of the financial statements under clauses (a), (b) and (c) above, a compliance certificate of the Principal Financial Officer of the Borrower in the form of Exhibit J (a "Compliance Certificate") which certifies that such financial statements fairly present the financial condition and the results of opera tions of the Parent and the Borrower and their respective Subsid iaries on the dates and for the periods indicated, subject, in the case of interim financial statements, to normally recurring year-end adjustments and at the time of delivery of the financial statements under clauses (a) and (b) above, such Compliance Certificate shall certify that such officer has reviewed the terms of the Loan Documents and has made, or caused to be made under his or her supervision, a review in reasonable detail of the business and condition of the Parent and the Borrower and their respective Subsidiaries during the accounting period covered by such financial statements, and that as a result of such review such officer has concluded that no Default or Event of Default has occurred during the period commencing at the beginning of the accounting period covered by the financial statements accompanied by such certificate and ending on the date of such certificate or, if any Default or Event of Default has occurred, specifying the nature and extent thereof and, if continuing, the action the Borrower has taken or proposes to take in respect thereof. The Compliance Certificate delivered pursuant to the financial statements delivered under clauses (a) and (b) above shall also set forth the calculations as required to establish (i) whether the Parent was in compliance with the provisions of Section 6.1 during and as at the end of the accounting period covered by the financial statements accompanied by such certificate, (ii) the Adjusted Leverage Ratio as in effect on the date of such statements for purposes of determining the Margin Percentage, and (iii) the amount of the Borrower's Share of Excess Cash Flow and Retained Equity Proceeds as of the date of such statements. At the time of delivery of the finan cial statements delivered pursuant to clause (b) above, the Borrower shall furnish a certificate in the form of Exhibit K hereto (the "Excess Cash Flow Certificate") of the Principal Financial Officer of the Borrower setting forth the calculation of the amount of Excess Cash Flow for the relevant fiscal year. (i) Notice of Default or Litigation. Promptly and in any event within three Business Days after any Loan Party obtains knowledge thereof, notice of (i) the occurrence of any Default or Event of Default, (ii) any litigation or governmental proceeding pending or threatened against any Loan Party which could reasonably be expected to result in a Material Adverse Effect and (iii) any other event, act or condition which could reasonably be expected to result in a Material Adverse Effect. (j) ERISA. (i) As soon as possible and in any event within 10 days after any Loan Party or any member of its ERISA Controlled Group knows, that: (A) any Termination Event has occurred or will occur, or (B) any condition exists with respect to a Plan which, in the case of an ERISA Plan, presents a material risk of termination of the ERISA Plan and, in the case of any Plan, presents a material risk of the imposition of a material excise tax or other liability on any Loan Party or any member of its ERISA Controlled Group, or (C) any Loan Party or any member of its ERISA Controlled Group has applied for a waiver of the mini mum funding standard under Section 412 of the Code or Section 302 of ERISA, or (D) any Loan Party or any member of its ERISA Controlled Group has engaged in a "prohibited transac tion," as defined in Section 4975 of the Code or as described in Section 406 of ERISA, that is not exempt under Section 4975 of the Code and Section 408 of ERISA where such transaction could reasonably be expected to have a Material Adverse Effect, or (E) the aggregate present value of the Unfunded Benefit Liabilities under all Plans has in any year increased to an amount in excess of $10,000,000, or (F) any condition exists with respect to a Multiemployer Plan which presents a material risk of a partial or complete withdrawal (as described in Section 4203 or 4205 of ERISA) by any Loan Party or any member of its ERISA Controlled Group from a Multiemployer Plan that would have a Material Adverse Effect, or (G) any Loan Party or any member of its ERISA Controlled Group is in "default" (as defined in Section 4219(c)(5) of ERISA) with respect to payments to a Multiemployer Plan, or (H) a Multiemployer Plan is in "reorganization" (as defined in Section 418 of the Code or Section 4241 of ERISA) or is "insolvent" (as defined in Section 4245 of ERISA), or (I) the potential withdrawal liability (as determined in accordance with Title IV of ERISA) of any Loan Party and the members of its ERISA Controlled Group with respect to all Multiemployer Plans has in any year in creased to an amount in excess of $5,000,000, or (J) there is an action brought against any Loan Party or any member of its ERISA Controlled Group under Section 502 of ERISA with respect to its failure to comply with Section 515 of ERISA, a certificate of an Authorized Officer of the Borrower setting forth the details of each of the events described in clauses (A) through (F) above as applicable and the action which the Borrower or the applicable member of its ERISA Controlled Group has taken or proposes to take with respect thereto, together with a copy of any notice or filing from the PBGC or which may be required by the PBGC or other agency of the United States government with respect to each of the events de scribed in clauses (A) through (J) above, as appli cable. (ii) As soon as possible and in any event (i) within three Business Days after the receipt by any Loan Party or (ii) within ten Business Days after the receipt by any member of its ERISA Controlled Group of a demand letter from the PBGC notifying such Loan Party or such member of its ERISA Controlled Group of its final decision finding liability and the date by which such liability must be paid, a copy of such letter, together with a certificate of the president or Principal Financial Officer of the Borrower setting forth the action which such Loan Party or such member of its ERISA Controlled Group has taken or proposes to take with respect thereto. (k) SEC Filings. Promptly upon transmission thereof, copies of all regular and periodic financial informa tion, proxy materials and other information and reports, if any, which any Loan Party shall file with the Securities and Exchange Commission or any governmental agencies substituted therefore or which any Loan Party shall send to its stockholders. (l) Environmental. Promptly and in any event within two Business Days after the existence of any of the following conditions, a certificate of an Authorized Officer of the Borrower specifying in detail the nature of such condition and the applicable Loan Party's proposed response thereto: (i) the receipt by any Loan Party of any communication (written or oral), whether from a governmental authority, citizens group, employee or otherwise, that alleges that such Loan Party or an Environmental Affiliate is not in compliance with applicable Environmental Laws, or (ii) any Loan Party shall obtain actual knowledge that there exists any Environmental Claim pending or threatened against such Loan Party or Environmental Affiliate. (m) Other Information. From time to time, such other information or documents (financial or otherwise) as the Administrative Agent or any Bank may reasonably request. Section 5.2 Books, Records and Inspections. Each Loan Party shall, and shall cause each of its Subsidiaries to, keep proper books of record and account in which full, true and correct entries in conformity with GAAP and all requirements of law shall be made of all dealings and transactions in relation to its business and activities. Each Loan Party shall, and shall cause each of its Subsidiaries to, permit officers and designated representatives of any Bank to visit and inspect any of its properties, and to examine its books of record and account, and discuss the affairs, finances and accounts of each Loan Party or any of its Subsidiaries with, and be advised as to the same by, its and their officers and independent accountants, all upon reasonable notice and at such reasonable times as such Bank may desire. Nothing contained in this Section 5.2 shall preclude any Loan Party from attending any meeting with such Loan Party's independent accountants. Section 5.3 Maintenance of Insurance. Each Loan Party shall, and shall cause each of its Subsidiaries to, maintain with financially sound and reputable insurance companies insurance on itself and its properties in at least such amounts and against at least such risks as are customarily insured against in the same general area by companies engaged in the same or a similar business, which insurance shall in any event not provide for materially less coverage than the insurance in effect on the Closing Date as set forth on Schedule 4.19. Section 5.4 Taxes. (a) Each Loan Party shall pay or cause to be paid, and shall cause each of its Subsidiaries to pay or cause to be paid, when due, all taxes, charges and assessments and all other lawful claims required to be paid by such Loan Party or such Subsidiaries, except as contested in good faith and by appropriate proceedings diligently conducted, if adequate reserves have been established with respect thereto in accordance with GAAP. (b) No Loan Party shall, and shall not permit any of its Subsidiaries to, file or consent to the filing of any consolidated tax return with any Person (other than the Borrower and its Subsidiaries and the Parent). Section 5.5 Corporate Franchises. Each Loan Party shall, and shall cause each of its Subsidiaries to, do or cause to be done, all things necessary to preserve and keep in full force and effect its existence and its patents, trademarks, servicemarks, tradenames, copyrights, franchises, licenses, permits, certificates, authorizations, qualifications, accreditation, easements, rights of way and other rights, consents and approvals except where the failure to so preserve any of the foregoing (other than existence) could not, individu ally or in the aggregate, reasonably be expected to result in a Material Adverse Effect. Section 5.6 Compliance with Law. Each Loan Party shall, and shall cause each of its Subsidiaries to, comply with all applicable laws, rules, statutes, regulations, decrees and orders of, and all applicable restrictions imposed by, all governmental bodies, domestic or foreign, in respect of the conduct of their business and the ownership of their property, including, without limitation, all Environmental Laws, except such non-compliance as could not, individually or in the aggre gate, reasonably be expected to result in a Material Adverse Effect. Section 5.7 Performance of Obligations. Each Loan Party shall, and shall cause each of its Subsidiaries to, perform all of its obligations under the terms of each mortgage, inden ture, security agreement, debt instrument, lease, undertaking and contract by which it or any of its properties is bound or to which it is a party if the failure to so perform, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect. Section 5.8 Maintenance of Properties. Each Loan Party shall, and shall cause each of its Subsidiaries to, ensure that its properties reasonably necessary to its business are kept in good repair, working order and condition, normal wear and tear excepted, except to the extent no Material Adverse Effect could result therefrom. Section 5.9 Further Assurances. (a) The Parent shall, and shall cause each Loan Party to, execute any and all further documents, financing statements, agreements and instruments, and take all further action (including filing Uniform Commercial Code and other financing statements, mortgages and deeds of trust), that may be required under applicable law or which the Required Banks, the Administrative Agent or the Collateral Agent may reasonably request, in order to effectuate the Transactions and in order to grant, preserve, protect and perfect the validity and first priority of the Liens created or intended to be created by the Security Documents. (b) In addition, from time to time, each Loan Party, at its own cost and expense, will promptly secure the Secured Obligations by pledging or creating, or causing to be pledged or created, perfected Liens with respect to its assets and properties (and the assets and properties of its Subsidiar ies) of a nature similar to the Collateral as of the Closing Date as the Administrative Agent or the Required Banks shall reasonably request (it being understood that it is the intent of the parties that the Secured Obligations shall be secured by substantially all such assets of the Loan Parties granted pursuant to the Security Documents (including those acquired subsequent to the Closing Date)). Such Liens will be created under the Security Documents or such other security agreements, mortgages, deeds of trust and other instruments and documents as are satisfactory to the Collateral Agent, and each Loan Party shall deliver or cause to be delivered to the Administrative Agent all such instruments and documents (including legal opinions, title insurance policies, surveys and lien searches) as the Collateral Agent shall reasonably request to evidence compliance with this Section 5.9. The Borrower agrees to provide such evidence as the Collateral Agent or the Required Banks shall reasonably request as to the perfection and priority status of each such Lien. (c) The Parent shall cause each Material Subsid iary incorporated or organized after the Closing Date (other than a Receivables Subsidiary) to promptly execute and deliver a counterpart of the Subsidiary Guaranty, the Security Agreement and any other instruments or documents related thereto as the Collateral Agent shall reasonably request. Section 5.10 Receivables Program Refinancings. On or prior to 45 days before the maturity date of the Receivables Program, the Borrower shall furnish evidence reasonably satisfactory to the Required Banks demonstrating either (x) that the Borrower has refinanced, extended, renewed or replaced the Receivables Program, or has written binding commitments therefor, in either case in such amounts and pursuant to such terms and provisions as are sufficient to provide the Borrower with sufficient liquidity for the twelve months following such date or (y) that on a Pro Forma Basis, it shall have sufficient liquidity for such twelve month period without the renewal, refinancing, extension or replacement of the Receivables Program. Section 5.11 Maintenance of Corporate Separateness. The Parent will, and will cause each of its Subsidiaries to, satisfy customary corporate formalities, including the holding of regular board of directors' and shareholders' meetings or action by directors or shareholders without a meeting and the maintenance of corporate offices and records. Other than pursuant to any Parent Guaranty or Subsidiary Guaranty entered into pursuant to this Agreement, neither the Parent nor any of its Subsidiaries shall make any payment to a creditor of any other Subsidiary in respect of any liability of any such Subsid iary, and no bank account of any Subsidiary shall be commingled with any bank account of the Parent or any other Subsidiary. Any financial statements distributed to any creditors of any Subsid iary shall clearly establish or indicate the corporate separateness of such Subsidiary from the Parent and its other Subsidiaries. Finally, neither the Parent nor any of its Subsidiaries shall take any action, or conduct its affairs in a manner, which is likely to result in the corporate existence of the Parent or any of its Subsidiaries being ignored, or in the assets and liabilities of the Parent or any of its Subsidiaries being substantively consolidated with those of any other such Person in a bankruptcy, reorganization or other insolvency proceeding. Section 5.12 Post Closing Opinions. On or before 10 Business Days following the Closing Date, the Administrative Agent shall have received favorable legal opinions from local counsel satisfactory to the Administrative Agent in Texas, Oklahoma, Louisiana and Arkansas with respect to the perfection of security interests in the Collateral. Section 5.13 Corporate Concentration Account. On or before 45 days following the Closing Date, the Borrower shall transfer the cash in the Corporate Concentration Account to a bank account in either California or Illinois (the "Successor Corporate Concentration Account") and shall grant the Banks (as defined in the Existing Credit Agreement) a first priority lien in the Successor Corporate Concentration Account. Section 5.14 Cash Sweep. The Borrower hereby covenants on each Business Day to sweep cash held at stores and local deposit or concentration accounts to the Corporate Concentration Account in accordance with customary and typical past historical practices of the Borrower. Section 5.15 Cash Equivalents. The Borrower and its Subsidiaries shall hold, directly or beneficially, Cash Equivalents only in a custodial account in which the Banks (as defined in the Existing Credit Agreement) have a perfected security interest held at the same institution as the Corporate Concentration Account (the "Custodial Account") and in no other account. Section 5.16 Projections. On or before 30 days following the Closing Date, the Borrower shall deliver to the Administrative Agent projections for each fiscal quarter for the fiscal year ending closest to December 31, 2001 in a form satisfactory to the Administrative Agent. SECTION 6. NEGATIVE COVENANTS. Each of the Parent and the Borrower covenants and agrees that on and after the Closing Date until the Total Revolving Loan Commitment has terminated, and the Obligations are paid in full: Section 6.1 Financial Covenants. (a) Leverage Ratios. (i) From February 3, 2001 and thereafter, the Parent shall not permit the Adjusted Leverage Ratio, as of the last day of each four consecutive fiscal quarter period then ended (taken as one accounting period), to exceed the ratio of 4.5:1. (ii) From February 3, 2001 and thereafter, the Parent shall not permit the ratio of Consolidated Total Senior Debt to Consolidated Adjusted EBITDA, as of the last day of each four consecutive fiscal quarter period then ended (taken as one accounting period) to exceed the ratio of 4.0:1. (b) Interest Coverage Ratio. The Parent shall not permit the ratio of Consolidated EBITDA to Consolidated Interest Expense for each four consecutive fiscal quarter period ended during the time periods set forth below (taken as one accounting period), to be less than the ratio set forth below: Four Fiscal Quarters Ending on Ratio February 3, 2001 2.24:1 From May 5, 2001 2.25:1 and thereafter (c) Fixed Charge Coverage Ratio. From February 3, 2001 and thereafter, the Parent shall not permit the ratio of (x) the sum of (i) Consolidated EBITDA plus (ii) Consolidated Rental Expense to (y) Consolidated Fixed Charges for each four consecutive fiscal quarter period (taken as one accounting period), ending on or after the Closing Date to be less than the ratio of 1.25:1. (d) Capital Expenditures. The Parent and the Borrower shall not make or incur (or commit to make or incur) and shall not permit any of its Subsidiaries to make or incur (or commit to make or incur) any Capital Expenditures, except Capital Expenditures of the Parent and its Subsidiaries in any fiscal year of the Borrower set forth below not in excess, in the aggregate of the amount (the "Maximum Amount") set forth below opposite such fiscal year: Fiscal Year Ending Closest to December 31 Maximum Amount 2000 $15,000,000 2001 $20,000,000 plus 2/3 of the Retained Equity Proceeds not to exceed $76,000,000 2002 $20,000,000 plus 2/3 of the Retained Equity Proceeds not to exceed $84,000,000 provided that (a) up to $15,000,000 of any Capital Expenditures permitted to be incurred during any fiscal year and not made in such fiscal year may be carried over and expended during the next succeeding fiscal year (it being understood and agreed that any Capital Expenditures made during such next succeeding fiscal year shall count, first, against the amount permitted to be carried over to such next succeeding fiscal year pursuant to this proviso and, second, against any amounts permitted to be made during such next succeeding fiscal year as set forth in the table above) and (b) the amount of Capital Expenditures permitted to be incurred during any fiscal year may be increased to the extent of the then available Retained Equity Proceeds and Retained Offering Proceeds and the Borrower's Share of Excess Cash Flow. Any Permitted Acquisition that would otherwise constitute a Capital Expenditure in accordance with GAAP shall not be included in the computation of the amount of Capital Expenditures permitted under this Section 6.1(d). Upon the occurrence of a Permitted Acquisition (the Banks hereby agree that the Maximum Amount for the fiscal year in which such Permitted Acquisition occurs (the "Subject Year") and each fiscal year thereafter will increase by $20,000 per store (net of any stores scheduled to be closed as a result of such Permitted Acquisition) being acquired pursuant to such Permitted Acquisition, with the amount of such increase for the Subject Year to be proportionately decreased by multiplying such amount by a fraction where the numerator equals the remaining number of full months remaining in the Subject Year and the denominator is twelve. (e) Minimum Consolidated EBITDA. The Parent shall not permit the Consolidated EBITDA as determined on a cumulative basis for the periods beginning on January 30, 2000, and ending on the last day of each fiscal quarter ending on a date set forth below (in each case taken as one accounting period), to be less than the amount set forth opposite such date: Minimum Consolidated Date EBITDA First Quarter $8,000,000 Second Quarter $20,000,000 Third Quarter $36,000,000 Section 6.2 Indebtedness. The Parent shall not, and shall not permit any of its Subsidiaries to, create, incur, as sume, suffer to exist or otherwise become or remain directly or indirectly liable with respect to, any Indebtedness, other than: (a) Indebtedness hereunder and under the other Loan Documents and any Indebtedness, if any, in relation to the Receivables Program; (b) Indebtedness outstanding on the Closing Date and set forth on Schedule 6.2 hereto and (without duplication) Indebtedness (whether or not outstanding) under the Existing Credit Agreement (including, without limitation and without duplication, with respect to the Existing Credit Agreement, the Senior Notes and the Senior Subordinated Notes, including the guarantees thereof by the Parent, in the aggregate principal amount not in excess of $500,000,000); (c) Indebtedness of the Borrower or any of its Subsidiaries permitted under Section 6.6; (d) Indebtedness of the Borrower or any of its Subsidiaries with respect to Capital Leases and other purchase money Indebtedness, in each case incurred to finance Capital Expenditures permitted under Section 6.1(d), not in excess of $6,000,000 in the aggregate at any one time outstanding; provided that any such Indebtedness shall not exceed the purchase price or the fair market value of the asset so financed; (e) Indebtedness owed by (x) Subsidiaries of the Borrower to the Borrower or (y) by any Loan Party to any other Loan Party; (f) Unsecured letters of credit in an aggregate stated amount equal to the L/C Sublimit (as defined in the Existing Credit Agreement) minus the Letters of Credit Outstanding (as defined in the Existing Credit Agreement); (g) Permitted Acquired Indebtedness; (h) Any other unsecured Indebtedness of the Parent and its Subsidiaries in an aggregate outstanding principal amount not to exceed at any time $1,000,000; (i) Indebtedness of the Borrower resulting from the refinancing of Indebtedness permitted by Sections (b) through (i) above; provided, however, that (i) the principal amount of any such refinancing Indebtedness (as determined as of the date of the incurrence of such refinancing Indebtedness in accordance with GAAP) does not exceed the principal or face amount of the Indebtedness refinanced thereby on such date; (ii) the Weighted Average Life to Maturity of such Indebtedness is not decreased; (iii) the covenants, defaults and similar provisions applicable to such refinancing Indebtedness or obligations are no more restrictive in any material respect than the Indebtedness being refinanced and do not conflict in any material respect with the provisions of this Agreement and (iv) such refinancing Indebtedness is otherwise upon terms and conditions no more onerous or restrictive in any material respect (as determined by the Required Banks) on the Borrower than the Indebtedness being refinanced; and (j) Indebtedness consisting of trade payables on terms of more than 90 days incurred in the ordinary course of business to the extent that such Indebtedness is being contested in good faith and by proper proceedings and appropriate reserves are being maintained with respect thereto; provided, however, the aggregate amount of such Indebtedness outstanding at any one time shall not exceed $2.5 million. Section 6.3 Liens. The Parent shall not, and shall not permit any of its Subsidiaries to, create, incur, assume or suffer to exist, directly or indirectly, any Lien on any of its property now owned or hereafter acquired, other than: (a) Liens existing on the Closing Date and set forth on Schedule 6.3 hereto; (b) Liens created or contemplated by the Re ceivables Program Documents on the Receivables of the Borrower and its Subsidiaries transferred to the Receivables Subsidiary pursuant thereto; (c) inchoate Liens for taxes, assessments or governmental charges not yet due or which are being contested in good faith by appropriate proceedings diligently conducted and with respect to which adequate reserves are being maintained in accordance with GAAP; (d) Statutory Liens of landlords and Liens of carriers, warehousemen, mechanics, materialmen and other Liens imposed by law (other than any Lien imposed by ERISA or pursuant to any Environmental Law) or created in the ordinary course of business for amounts not yet due or which are being contested in good faith by appropriate proceedings diligently conducted and with respect to which adequate bonds have been posted or which are solely informational in nature and do not, and do not purport to, create a security interest; (e) Liens (other than any Lien imposed by ERISA or pursuant to any Environmental Law) incurred or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security, or to secure the performance of tenders, statutory obligations, surety and appeal bonds, bids, leases, government contracts, performance and return-of-money bonds and other similar obligations (exclusive of obligations for the payment of borrowed money); (f) Easements (including construction, operating and reciprocal easement agreements), rights-of-way, zoning and similar restrictions and other similar charges, covenants or encumbrances not interfering with the ordinary conduct of the business of the Borrower or any of its Subsidiaries and which do not detract materially from the value of the property to which they attach or impair materially the use thereof by the Borrower or any of its Subsidiaries or materially adversely affect the Liens of the Collateral Agent or the Banks therein; (g) Liens granted to the Collateral Agent for the benefit of the Secured Creditors pursuant to the Security Documents securing the Secured Obligations; (h) Judgment Liens so long as the claims secured thereby do not exceed $10,000,000 in the aggregate and are being contested in good faith pursuant to appropriate proceedings; (i) Liens created pursuant to Capital Leases and to secure other purchase-money Indebtedness permitted pursuant to Section 6.2(d), provided that such Liens are only in respect of the property or assets subject to, and secure only, the respective Capital Lease or other purchase-money Indebtedness; (j) Liens in addition to those listed above provided that the obligations secured thereby shall not exceed $50,000 for any such Lien or $1,000,000 in the aggregate for all such Liens; and (k) Liens under the Existing Credit Agreement. Section 6.4 Restriction on Fundamental Changes. (a) The Parent shall not, and shall not permit any of its Subsidiaries to, enter into any merger or consolidation, or liquidate, wind-up or dissolve (or suffer any liquidation or dissolution), discontinue its business or convey, lease, sell, transfer or otherwise dispose of, in one transaction or series of transactions, all or any substantial part of its business or property, whether now or hereafter acquired, except (i) as otherwise permitted under Section 6.5, and (ii) any wholly-owned Subsidiary of the Borrower may merge into or convey, sell, lease or transfer all or substantially all of its assets to, the Borrower or any other wholly-owned Subsidiary of the Borrower. (b) The Parent shall not and shall not permit any of its Subsidiaries to, amend its certificate of incorporation or by-laws to the extent such amendment is adverse to the Banks in any respect. Section 6.5 Sale of Assets. The Parent shall not, and shall not permit any of its Subsidiaries to, convey, lease, sell, transfer or otherwise dispose of (or agree to do so at any future time) all or any part of its property or assets, except (i) sales of inventory in the ordinary course of business; (ii) sales in the ordinary course of business of furniture, fixtures, leasehold improvements and equipment which, consistent with past practice, is uneconomic, obsolete or no longer useful in its business; (iii) sales of Receivables pursuant to and in accordance with the provisions of the Receivables Program Documents; (iv) sales in connection with store closings provided that such party complies with the Existing Credit Agreement and Section 2.11(a)(vi) hereof; (v) sale of the Hawker 400 corporate aircraft for a fair value provided the parties comply with the Existing Credit Agreement and sales permitted under Section 6.13 hereof and (vi) sales of other assets of the Borrower and its Subsidiaries provided that (x) at least 80% of the aggregate consideration therefor shall be in the form of cash or Cash Equivalents, (y) the aggregate Net Cash Proceeds or net book value, whichever is greater, of all assets sold or otherwise disposed of pursuant to this clause (vi) shall not exceed 5% of Consolidated Net Tangible Assets during any fiscal year of the Borrower and (z) the Net Cash Proceeds of each such sale are applied in accordance with the provisions of the Existing Credit Agreement or Section 2.11(a). Section 6.6 Contingent Obligations. The Parent shall not, and shall not permit any of its Subsidiaries to, create or become or be liable with respect to any Contingent Obligation, except: (a) pursuant to the Parent Guaranty, Subsidiary Guaranty, the Security Documents or the Receivables Program Documents; and (b) Contingent Obligations which are in existence on the Closing Date and which are set forth on Schedule 6.6, including, without limitation, the guarantees, if any, by the Borrower of the obligations under the Existing Credit Agreement, of the Senior Notes and of the Senior Subordinated Notes. Section 6.7 Dividends. The Parent shall not, and shall not permit any of its Subsidiaries to (x) make any Restricted Payment or (y) declare or pay any dividends (other than dividends payable solely in common stock), or return any capital to, its stockholders or authorize or make any other distribution, payment or delivery of property or cash to its stockholders as such, or redeem, retire, purchase or otherwise ac quire, directly or indirectly, any shares of any class of its capital stock now or hereafter outstanding (or any options or warrants issued with respect to its capital stock), or set aside any funds for any of the foregoing purposes (all the foregoing "Dividends"), except that (a) Dividends may be made to the Borrower or any of its Subsidiaries by any of its wholly-owned Subsidiaries; (b) so long as there shall exist no Default or Event of Default (both before and after giving effect to the payment thereof) the Borrower may make Restricted Payments to the Parent, so long as the proceeds thereof are promptly used by the Parent to pay operating and administrative expenses in the ordinary course of business and other similar corporate overhead costs and expenses; provided that the maximum amount of Restricted Payments made pursuant to this clause (b) in any fiscal year of the Borrower shall not exceed $500,000 in the aggregate and shall only be made if there exists no Default or Event of Default (both before and after giving effect to the payment thereof); (c) so long as the Borrower is a member of the same consolidated group as the Parent for federal income tax purposes, payments required by such Person pursuant to the Tax Sharing Agreement as in effect on the Closing Date shall be permitted; and (d) the Parent may make, and the Borrower may pay cash Restricted Payments to the Parent to enable the Parent to make, payments to repurchase the Parent's common stock and/or options to purchase the Parent's common stock held by directors, executive officers, member of management or employees of the Parent or any of its Affiliates upon the death, disability, retirement or termination of such director, executive officers, member of management or employee, so long as (x) no Default or Event of Default then exists or would exist after giving effect thereto and (y) the aggregate net amount of cash expended by the Borrower and the Parent pursuant to this clause (d) in any fiscal year shall not exceed $2,000,000. Section 6.8 Advances, Investments and Loans. The Parent shall not, and shall not permit any of its Subsidiaries to, lend money or credit or make advances to any Person, or di rectly or indirectly purchase or acquire any stock, obligations or securities of, or any other interest in, or purchase all or substantially all of the assets of, or make any capital contribu tion to any Person (each an "Investment"), except that the following shall be permitted: (a) accounts receivable owned by the Parent and its Subsidiaries, if created in the ordinary course of the business of the Parent and its Subsidiaries and payable or dischargeable in accordance with customary trade terms; (b) (i) intercompany loans and advances permitted by Section 6.2(e) and (ii) loans by the Borrower to the Parent to finance the cash portion of Permitted Acquisitions, the proceeds of which shall be used within one Business Day directly or indirectly by the Parent to consummate such Permitted Acquisition, which loans shall be evidenced by an Intercompany Note pledged by the Borrower to the Collateral Agent; (c) loans and advances by the Borrower and its Subsidiaries to their employees in the ordinary course of its business not exceeding $5,000,000 in the aggregate at any one time outstanding; (d) Investments by the Borrower in the Re ceivables Subsidiary to the extent contemplated by the Receivables Program; (e) evidences of Indebtedness issued by the pur chaser of assets and received by the Borrower or any of its Subsidiaries in connection with asset sales to the extent permitted by Section 6.5(vi); (f) extensions of credit to the customers of the Parent or its Subsidiaries in the ordinary course of the business of the Parent or such Subsidiary pursuant to any credit card programs to enable such customer to purchase inventory from the Parent or any of its Subsidiaries; (g) Investments by the Parent or the Borrower constituting a Permitted Acquisition and related Investments by the Parent or the Borrower in one or more of their Subsidiaries in connection with, and substantially contemporaneously with, such Permitted Acquisition; provided that the Parent and the Borrower shall have complied with all of the terms and conditions set forth in the definition of Permitted Acquisition; (h) other Investments by the Parent, the Borrower or any Subsidiary not to exceed $5,000,000 in any fiscal year of the Borrower; (i) Investments in customers of the Parent or its Subsidiaries received in the ordinary course of business in exchange for receivables owed by such customer to the Parent or such Subsidiary as a result of the workout of such receivable or the bankruptcy of such customer; and (j) the Borrower and its Subsidiaries may acquire and hold Cash Equivalents held in the Custodial Account. Section 6.9 Transactions with Affiliates. The Parent shall not, and shall not permit any of its Subsidiaries to, enter into any transaction or series of related transactions, whether or not in the ordinary course of business, with any Affiliate (other than a Loan Party), other than (i) on terms and conditions substantially as favorable to the Parent or such Subsidiary as would be obtainable at the time in a comparable arm's-length transaction with a Person other than an Affiliate, (ii) pursuant to the Receivables Program, (iii) Restricted Payments permitted to be paid to the extent provided in Section 6.7, (iv) leases in existence on the date hereof entered into with PR Investments and described on Schedule 6.9 hereto, (v) the consulting agreement dated as of February 1, 1997, by and among the Parent and Bernie Fuchs and described on Schedule 6.9 hereto and (vi) those Investments permitted pursuant to Section 6.8. Section 6.10 Limitation on Voluntary Payments and Modifications of Certain Documents. The Parent shall not, and shall not permit any of its Subsidiaries to, (a) make any vol untary or optional payment or prepayment on or redemption or acquisition for value of (including, without limitation, by way of depositing with the trustee with respect thereto money or securities before due for the purpose of paying when due) or ex change of any Indebtedness other than (i) the Indebtedness hereunder and under the other Loan Documents, (ii) so long as no Default or Event of Default has occurred and is continuing, any Indebtedness outstanding under the Existing Credit Agreement and the Loan Documents (as defined in the Existing Credit Agreement), (b) amend, modify, supplement, or waive, or permit the amendment, modification, supplementation, or waiver of, any provision of any Transaction Document (as defined in the Existing Credit Agreement) provided, however, that any such Transaction Document may be amended, modified, supplemented or waived in a manner not materially adverse to the Administrative Agent or the Banks or (c) resign as Servicer under the Receivables Program. Section 6.11 Changes in Business. The Parent shall not, and shall not permit any of its Subsidiaries to, enter into any business which is substantially different from, or not reasonably incidental to, that conducted by the Parent or such Subsidiary, as the case may be, on the Closing Date after giving effect to the Transactions; provided that the Parent shall not incur, and shall not become liable with respect to, any Indebtedness other than as expressly permitted pursuant to Section 6.2. Section 6.12 Certain Restrictions. The Parent shall not, and shall not permit any of its Subsidiaries or any Person controlling the Borrower to, enter into any agreement (other than the Loan Documents and agreements evidencing Indebtedness outstanding on the Closing Date, in each case as in effect on the Closing Date) which restricts the ability of the Parent or any of its Subsidiaries (other than the Receivables Subsidiary) to (a) enter into amendments, modifications or waivers of the Loan Docu ments, (b) sell, transfer or otherwise dispose of its assets (other than the Receivables), (c) create, incur, assume or suffer to exist any Lien upon any of its property (other than the Receivables), (d) create, incur, assume, suffer to exist or otherwise become liable with respect to any Indebtedness, or (e) pay any Dividend, provided that Capital Leases or agreements governing purchase money Indebtedness which contain restrictions of the types referred to in clauses (b) or (c) with respect to the property covered thereby shall be permitted. The Parent shall not, and shall not permit any of its Subsidiaries or any Person controlling the Borrower to, enter into any amendment of the Receivables Program Documents as in effect on the Closing Date or any refinancing of the Receivables Program that would materially and adversely affect any Loan Party's ability to perform its Obligations under this Agreement or any other Loan Document. Section 6.13 Sales and Leasebacks. The Parent shall not, and shall not permit any of its Subsidiaries to, become lia ble, directly or indirectly, with respect to any lease, whether an operating lease or a Capital Lease, of any property (whether real or personal or mixed) whether now owned or hereafter acquired, (i) which the Parent or such Subsidiary has sold or transferred or is to sell or transfer to any other Person, or (ii) which the Parent or such Subsidiary intends to use for sub stantially the same purposes as any other property which has been or is to be sold or transferred by the Borrower or such Subsidiary to any other Person in connection with such Lease, other than such transactions the Net Cash Proceeds of which in the aggregate do not exceed $10,000,000 plus the Net Cash Proceeds from any sale, transfer or assignment of the Jacksonville Distribution Center; provided, however, notwithstanding anything contained in this Agreement, the Parent and any of its Subsidiaries may sell, transfer or assign the Jacksonville Distribution Center provided that the Net Cash Proceeds resulting therefrom are used to prepay the loans under the Existing Credit Agreement in accordance with that certain letter dated February 3, 2000. Section 6.14 Plans. The Parent shall not, nor shall it permit any member of its ERISA Controlled Group to, take any action which would increase the aggregate present value of the Unfunded Benefit Liabilities under all Plans to an amount in excess of $15,000,000. Section 6.15 Limitation on Dispositions of Subsidiary Stock. The Parent shall not, nor shall it permit any of its Subsidiaries to, directly or indirectly sell, assign, pledge or otherwise encumber or dispose of, or issue or permit any of its Subsidiaries to issue to any other Person, any shares of capital stock or other equity securities of (or warrants, rights or options to acquire shares or other equity securities of) any of their Subsidiaries except (i) to the extent permitted by the Loan Documents, (ii) to qualify directors if and to the extent required by applicable law, (iii) to the Borrower or any wholly- owned Subsidiary of the Borrower and (iv) sales of equity securi ties pursuant to the Receivables Program as in effect on the date hereof. Section 6.16 Fiscal Year; Fiscal Quarter. The Parent shall not, and shall not permit any of its Subsidiaries to, change its fiscal year or any of its fiscal quarters, except that any Subsidiary acquired after the date hereof shall be permitted to change its fiscal quarters and fiscal year to conform to the fiscal quarters and fiscal year of the Parent. Section 6.17 Receivables Program. The Borrower shall not take any action to diminish the equity value of the Receivables Subsidiary other than to pay dividends in the ordinary course of business consistent with past practice and will continue to operate the Receivables Subsidiary in the ordinary course of business consistent with past practice. Section 6.18 Custodial Account. The Borrower shall not grant any party control over, or allow any party to enter into a control agreement with respect to, the Custodial Account except for the Administrative Agent (as defined in the Existing Credit Agreement) for the benefit of the Banks (as defined in the Existing Credit Agreement). SECTION 7. EVENTS OF DEFAULT. Section 7.1 Events of Default. Each of the following events, acts, occurrences or conditions shall constitute an Event of Default under this Agreement, regardless of whether such event, act, occurrence or condition is voluntary or involuntary or results from the operation of law or pursuant to or as a result of compliance by any Person with any judgment, decree, order, rule or regulation of any court or administrative or governmental body: (a) Failure to Make Payments. The Borrower shall (i) default in the payment when due of any principal of the Revolving Loans or (ii) default, and such default shall continue unremedied for three or more Business Days, in the payment when due of any interest on the Revolving Loans or in the payment when due of any Fees or any other amounts owing hereunder. (b) Breach of Representation or Warranty. Any representation or warranty made by any Loan Party herein or in any other Loan Document or in any certificate or statement deliv ered pursuant hereto or thereto shall prove to be false or misleading in any material respect on the date as of which made or deemed made. (c) Breach of Covenants. (i) Any Loan Party shall fail to perform or observe any agreement, covenant or obligation arising under Sections 5.1(i), 5.5 or 6. (ii) Any Loan Party shall fail to perform or observe any agreement, covenant or obligation arising under this Agreement (except those described in subsections (a), (b) and (c)(i) above), and such failure shall continue for fifteen days. (iii) Any Loan Party shall fail to perform or observe any agreement, covenant or obligation arising under any provision of the Loan Documents other than this Agreement, which failure shall continue after the end of the applicable grace period, if any, provided therein. (d) Default Under Other Agreements. Any Loan Party shall default in the payment when due (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise) of any amount owing in respect of any Indebtedness (other than the Obligations or Indebtedness pursuant to Section 6.2(j) hereof) in the aggregate principal amount of $2,000,000 or more; or any Loan Party shall default in the performance or observance of any obligation or condition with respect to any such Indebted ness or any other event shall occur or condition exist, if the effect of such default, event or condition is to accelerate the maturity of any such Indebtedness or to permit (without regard to any required notice or lapse of time) the holder or holders thereof, or any trustee or agent for such holders, to accelerate the maturity of any such Indebtedness, or any such Indebtedness shall become or be declared to be due and payable prior to its stated maturity other than as a result of a regularly scheduled payment. (e) Receivables Program. Any default shall have occurred and be continuing under any Receivable Program Document and as a result of such default, the Receivables Program or any successor program may be terminated or be suspended prior to the Final Maturity Date. (f) Bankruptcy, etc. (i) Any Loan Party or any of its Subsidiaries shall commence a voluntary case concerning itself under the Bankruptcy Code; or (ii) an involuntary case is commenced against any Loan Party or any of its Subsidiaries and the petition is not controverted within 10 days, or is not dis missed within 60 days, after commencement of the case; or (iii) a custodian (as defined in the Bankruptcy Code) is appointed for, or takes charge of, all or substantially all of the property of any Loan Party or any of its Subsidiaries or any Loan Party or any of its Subsidiaries commences any other proceedings under any reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction whether now or hereafter in effect relating to any Loan Party or any of its Subsidiaries or there is commenced against any Loan Party or any of its Subsidiaries any such proceeding which remains undismissed for a period of 60 days; or (iv) any order of relief or other order approving any such case or proceeding is entered; or (v) any Loan Party or any of its Subsidiaries is adjudicated insolvent or bankrupt; or (vi) any Loan Party or any of its Subsidiaries suffers any appointment of any custodian or the like for it or any substantial part of its property which continues undischarged or unstayed for a period of 60 days; or (vii) any Loan Party or any of its Subsidiaries makes a general assignment for the benefit of creditors; or (viii) any Loan Party or any of its Subsidiaries shall fail to pay, or shall state that it is unable to pay, or shall be unable to pay, its debts generally as they become due; or (ix) any Loan Party or any of its Subsidiaries shall call a meeting of its creditors with a view to arranging a composition or adjustment of its debts; or (x) any Loan Party or any of its Subsidiaries shall by any act or failure to act consent to, approve of or acquiesce in any of the foregoing; or (xi) any corporate action is taken by any Loan Party or any of its Subsidiaries for the purpose of effecting any of the foregoing. (g) ERISA. (i) Any Termination Event shall occur, or (ii) any Plan shall incur an "accumulated funding deficiency" (as defined in Section 412 of the Code or Section 302 of ERISA), whether or not waived or (iii) any Loan Party or any member of its ERISA Controlled Group shall fail to pay when due any amount which it shall have become liable to pay to the PBGC, any Plan or a trust established under Title IV of ERISA, or (iv) a condition shall exist by reason of which the PBGC would be enti tled to obtain a decree adjudicating that, for financial reasons, an ERISA Plan must be terminated or a trustee must be appointed to administer any ERISA Plan, or (v) any Loan Party or a member of its ERISA Controlled Group is in "default" (as defined in Section 4219(c)(5) of ERISA) with respect to payments to a Multiemployer Plan, or (vi) any other event or condition shall occur or exist with respect to any Plan which could subject any Loan Party or any member of its ERISA Controlled Group to any tax, penalty or other liability, which in any such case described in clauses (i) through (vi) above could reasonably be expected to result in a Material Adverse Effect. (h) Loan Documents. Any of the Loan Documents (i) shall for any reason cease to be in full force and effect or the Borrower or any other Loan Party which is a party to any of the Loan Documents shall so assert, or (ii) shall cease to give the Administrative Agent or the Banks, as the case may be, the Liens, rights, powers and privileges purported to be created thereby including, without limitation, a perfected first priority security interest in, and Lien on, all of the Collateral in accor dance with the terms thereof. (i) Parent Guaranty and Subsidiary Guaranty. The Parent Guaranty, the Subsidiary Guaranty or any provision thereof shall cease to be in full force and effect, or any Guarantor or any Person acting by or on behalf of any Guarantor shall deny or disaffirm all or any portion of such Guarantor's obligations hereunder or under such Parent Guaranty or Subsidiary Guaranty. (j) Change of Control. A Change of Control shall have occurred. (k) Judgments. One or more judgments or decrees in an aggregate amount of $2,000,000 or more shall be entered by a court or courts of competent jurisdiction against the Parent and/or its Subsidiaries (other than any judgment as to which, and only to the extent, a reputable insurance company has acknowl edged coverage of such claim in writing) and (i) any such judgments or decrees shall not be stayed, discharged, paid, bonded or vacated within 30 days or (ii) enforcement proceedings shall be commenced by any creditor on any such judgments or decrees. (l) Environmental Matters. (i) Any Environmen tal Claim shall have been asserted against the Parent or any of its Subsidiaries or any Environmental Affiliate thereof which, if determined adversely, could be reasonably expected to have a Material Adverse Effect, or (ii) the Parent or any of its Subsid iaries or Environmental Affiliates shall have failed to obtain any Environmental Approval necessary for the management, use, con trol, ownership, or operation of its business, property or assets or any such Environmental Approval shall be revoked, terminated, or otherwise cease to be in full force and effect, in each case, if the existence of such condition could be reasonably expected to have a Material Adverse Effect. (m) Inventory Value. The value of the Inventory (at cost) as set forth on the Borrower's financial statements furnished pursuant hereto and in accordance with GAAP, shall at any time be less than $100,000,000. Section 7.2 Rights and Remedies. Upon the occurrence of any Event of Default described in Section 7.1(f) with respect to any Loan Party, the Commitments shall automatically and immedi ately terminate and the unpaid principal amount of and any and all accrued interest on the Revolving Loans and any and all accrued Fees and other Obligations shall automatically become immediately due and payable, with all additional interest from time to time accrued thereon and without presentation, demand, or protest or other requirements of any kind (including, without limitation, valuation and appraisement, diligence, presentment, notice of intent to demand or accelerate and notice of accel eration), all of which are hereby expressly waived by Borrower, and the obligation of each Bank to make any Revolving Loan hereunder shall thereupon terminate; and upon the occurrence and during the continuance of any other Event of Default, the Admin istrative Agent shall at the request, or may with the consent, of the Required Banks, by written notice to Borrower, (i) declare that the Commitments are terminated, whereupon the Commitments and the obligation of each Bank to make any Revolving Loan hereunder shall immediately terminate, and (ii) declare the unpaid principal amount of and any and all accrued and unpaid interest on the Revolving Loans and any and all accrued Fees and other Obligations to be, and the same shall thereupon be, immedi ately due and payable with all additional interest from time to time accrued thereon and without presentation, demand, or protest or other requirements of any kind (including, without limitation, valuation and appraisement, diligence, presentment, notice of intent to demand or accelerate and notice of acceleration), all of which are hereby expressly waived by the Borrower. Upon an Event of Default, each of the Parent and its Subsidiaries shall permit any designated representative or repre sentatives of the Administrative Agent, including, but not limit ed to, environmental consultants or other professionals, upon reasonable notice to the Borrower or its Subsidiaries, to enter any property owned or operated by the Borrower or its Subsidiar ies for the purpose of conducting an environmental investigation of said property. Said investigations may include, but not be limited to, testing the integrity of underground storage tanks; taking soil and groundwater borings and samples; testing for the presence of radon; and collecting samples to test for the presence of asbestos. The Borrower shall reimburse the Administrative Agent for all reasonable costs and expenses incurred in connection with any investigation conducted hereunder. SECTION 8. THE ADMINISTRATIVE AGENT AND COLLATERAL AGENT. Section 8.1 Appointment. Each Bank hereby irrevoca bly, subject to Section 8.9 hereof, designates and appoints Credit Suisse First Boston as the Administrative Agent and Credit Suisse First Boston as Collateral Agent (the Administrative Agent and the Collateral Agent for the purposes of this Section are collectively referred to as the "Agent") of such Bank under this Agreement and each other Loan Document, and each such Bank irrevocably authorizes Credit Suisse First Boston as the Agent for such Bank, to take such action on its behalf under the provi sions of this Agreement and each other Loan Document and to exercise such powers and perform such duties as are expressly delegated to the Agent by the terms of this Agreement and each other Loan Document, together with such other powers as are rea sonably incidental thereto. Notwithstanding any provision to the contrary elsewhere in this Agreement, the Agent shall not have any duties or responsibilities, except those expressly set forth herein, or any fiduciary relationship with any Bank, and no implied covenants, functions, responsibilities, duties, obliga tions or liabilities on the part of the Agent shall be read into this Agreement or otherwise exist against the Agent. The provi sions of this Section 8 are solely for the benefit of the Agent and the Banks and no Loan Party shall have any rights as a third party beneficiary or otherwise under any of the provisions hereof. In performing its functions and duties hereunder and under the other Loan Documents, the Agent shall act solely as the agent of the Banks and does not assume nor shall be deemed to have assumed any obligation or relationship of trust or agency with or for any Loan Party or any of their respective successors and permitted assigns. Section 8.2 Delegation of Duties. The Agent may execute any of its duties under this Agreement or the other Loan Documents by or through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The Agent shall not be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable care. Section 8.3 Exculpatory Provisions. The Agent shall not be (i) liable for any action lawfully taken or omitted to be taken by it or any Person described in Section 8.2 under or in connection with this Agreement or any other Loan Document (except for its own gross negligence or willful misconduct), or (ii) responsible in any manner to any of the Banks for any recitals, statements, representations or warranties made by any Loan Party contained in this Agreement or any other Loan Document or in any certificate, report, statement or other document referred to or provided for in, or received under or in connection with, this Agreement or any other Loan Document or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement, or any other Loan Document or for any failure of any Loan Party to perform their obligations hereunder or thereunder. The Agent shall not be under any obligation to any Bank to ascer tain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any other Loan Document, or to inspect the properties, books or records of any Loan Party. This Section is intended solely to govern the relationship between the Agent, on the one hand, and the Banks, on the other. Section 8.4 Reliance by Agent. The Agent shall be entitled to rely, and shall be fully protected in relying, upon any Revolving Note, writing, resolution, notice, consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype message, statement, order or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including, without limitation, counsel to any Loan Party), independent accountants and other experts selected by the Agent. The Agent may deem and treat the payee of any Revolving Note as the owner thereof for all purposes unless the Agent shall have received an executed Transfer Supplement in respect thereof. The Agent shall be fully justified in failing or refusing to take any action under this Agreement or any other Loan Document unless it shall first receive such advice or concurrence of the Required Banks as it deems appropriate or it shall first be indemnified to its satisfaction by the Banks against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement and the other Loan Documents in accordance with a request of the Required Banks, and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Banks and all future holders of the Revolving Notes. Section 8.5 Notice of Default. The Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default unless the Agent has received notice from a Bank or the Borrower referring to this Agreement, describ ing such Default or Event of Default and stating that such notice is a "notice of default". In the event that the Agent receives such a notice, the Agent shall promptly give notice thereof to the Banks. The Agent shall take such action with respect to such Default or Event of Default as shall be directed by the Required Banks; provided that unless and until the Agent shall have received such directions, the Agent may (but shall not be obli gated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as the Agent shall deem advisable and in the best interests of the Banks. Section 8.6 Non-Reliance on Agent and Other Banks. Each Bank expressly acknowledges that neither the Agent, nor any of its officers, directors, employees, agents, attorneys-in-fact or affiliates has made any representations or warranties to it and that no act by the Agent hereafter taken, including, without limitation, any review of the affairs of any Loan Party, shall be deemed to constitute any representation or warranty by the Agent. Each Bank represents and warrants to the Agent that it has, independently and without reliance upon the Agent or any other Bank and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, operations, property, prospects, financial and other conditions and creditworthiness of the Loan Parties and made its own decision to make its Loans hereunder and enter into this Agreement. Each Bank also represents that it will, independently and without reliance upon the Agent or any other Bank, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agree ment, and to make such investigation as it deems necessary to inform itself as to the business, operations, property, pros pects, financial and other condition and creditworthiness of the Loan Parties. Except for notices, reports and other documents expressly required under the Loan Documents to be furnished to the Banks by the Agent, the Agent shall not have any duty or responsibility to provide any Bank with any credit or other information concerning the business, operations, property, pros pects, financial and other condition or creditworthiness of the Loan Parties which may come into the possession of the Agent or any of its officers, directors, employees, agents, attorneys-in-fact or affiliates. Section 8.7 Indemnification. The Banks agree to indemnify the Agent and its officers, directors, employees, representatives and agents (to the extent not reimbursed by the Loan Parties and without limiting the obligation of the Loan Parties to do so), ratably according to their Pro Rata Shares, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever (including, with out limitation, the fees and disbursements of counsel for the Agent or such Person in connection with any investigative, or judicial proceeding commenced or threatened, whether or not the Agent or such Person shall be designated a party thereto) that may at any time (including, without limitation, at any time following the payment of the Obligations) be imposed on, incurred by or asserted against the Agent or such Person as a result of, or arising out of, or in any way related to or by reason of, any of the Transactions or the execution, delivery or performance of any Loan Document (but excluding any such liabilities, obliga tions, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting solely from the gross negligence or willful misconduct of the Agent or such Person as finally determined by a court of competent jurisdiction). In the event the Agent shall recover any amounts paid by any Bank pur suant to this Section 8.7, it shall reimburse such payments to each Bank on a Pro Rata basis. Section 8.8 Agent in its Individual Capacity. The Agent and its affiliates may make loans to, accept deposits from and generally engage in any kind of business with the Loan Parties as though the Agent were not the Agent hereunder or under any other Loan Document. With respect to Revolving Loans made or renewed by it and any Revolving Note issued to it, the Agent shall have the same rights and powers under this Agreement as any Bank and may exercise the same as though it were not the Agent, and the terms "Bank" and "Banks" shall include the Agent in its individual capacity. Section 8.9 Successor Agent. The Agent may resign as Agent upon 30 days' written notice to the Borrower and the Banks. If the Agent shall resign as Agent under this Agreement, then the Required Banks during such 30-day period shall appoint from among the Banks a successor agent which shall be reasonably acceptable to the Borrower. If no successor shall have been so appointed by the Required Banks and shall have accepted such appointment within 30 days after the retiring Agent gives written notice of its resignation, then the retiring Agent may, on behalf of the Banks, appoint a successor Agent, which shall be a bank with an office in New York, New York, having a combined capital and surplus of at least $500,000,000 or an Affiliate of any such bank which shall be reasonably acceptable to the Borrower. Any such successor agent shall succeed to the rights, powers and duties of the Agent and the term "Agent" shall mean such successor agent, effective upon its appointment, and the former Agent's rights, powers and duties as Agent shall be terminated, without any other or further act or deed on the part of such former Agent or any of the parties to this Agreement or any holders of the Notes. After any retiring Agent's resignation hereunder as Agent, the provisions of this Section 8 and Section 9.1 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Agreement. SECTION 9. MISCELLANEOUS. Section 9.1 Payment of Expenses, Indemnity, etc. The Parent and the Borrower shall: (a) whether or not the transactions hereby contem plated are consummated, pay all reasonable out-of-pocket costs and expenses of the Administrative Agent and the Collateral Agent in connection with the negotiation, preparation, execution or delivery of the Loan Documents and the documents and instruments referred to therein, the creation, perfection or protection of the Liens in the Collateral (including, without limitation, fees and expenses for title and lien searches and filing and recording fees); and the reasonable fees and disbursements of Skadden, Arps, Slate, Meagher & Flom (Illinois) and its affiliates, special counsel to the Administrative Agent and any other attor neys retained by the Administrative Agent); (b) pay all reasonable out-of-pocket costs and expenses of the Administrative Agent and Collateral Agent in connection with any amendment, waiver or consent relating to any of the Loan Documents (including, without limitation, the reasonable fees and disbursements of counsel for the Administra tive Agent and Collateral Agent); (c) pay all reasonable out-of-pocket costs and expenses of the Administrative Agent, the Collateral Agent and each Bank in connection with the preservation of rights under, and enforcement of, the Loan Documents and the documents and instruments referred to therein or in connection with any restructuring or rescheduling of the Obligations (including, without limitation, the reasonable fees and disbursements of counsel for each of the Administrative Agent, the Collateral Agent and each of the Banks), including, without limitation, if requested by the Administrative Agent no more than once each fiscal year, the reasonable costs and expenses of a bank audit of the assets of the Borrower and its Subsidiaries (the scope of such bank audit to be acceptable to the Administrative Agent), provided that after the occurrence of an Event of Default hereunder, the Parent and the Borrower shall pay the reasonable costs and expenses of any additional bank audit as may be requested by the Administrative Agent; (d) pay, and hold the Administrative Agent, the Collateral Agent and each of the Banks harmless from and against, any and all present and future stamp, excise and other similar taxes with respect to the foregoing matters and hold the Adminis trative Agent, the Collateral Agent and each Bank harmless from and against any and all liabilities with respect to or resulting from any delay or omission (other than to the extent attributable to such Bank) to pay such taxes; and (e) indemnify the Administrative Agent, the Collateral Agent and each Bank, its officers, directors, employees, representatives, affiliates and agents (each an "In demnitee") from, and hold each of them harmless against, any and all losses, liabilities, claims, damages, expenses, obligations, penalties, actions, judgments, suits, costs or disbursements of any kind or nature whatsoever (including, without limitation, the fees and disbursements of counsel for such Indemnitee in connec tion with any investigative, administrative or judicial proceeding commenced or threatened, whether or not such Indemnitee shall be designated a party thereto) that may at any time (including, without limitation, at any time following the payment of the Obligations) be imposed on, asserted against or in curred by any Indemnitee as a result of, or arising out of, or in any way related to or by reason of, (i) any of the Transactions or the execution, delivery or performance of any Loan Document, (ii) any violation by any Loan Party or its Environmental Affili ate of any applicable Environmental Law, (iii) any Environmental Claim arising out of the management, use, control, ownership or operation of property or assets by any of the Loan Parties or any of their Environmental Affiliates, including, without limitation, all on-site and off-site activities involving Materials of Environmental Concern, (iv) the breach of any environmental representation or warranty set forth in Section 4.18, (v) the grant to the Administrative Agent, the Collateral Agent or the Banks of any Lien in any property or assets of any of the Loan Parties or any stock or other equity interest in any of the Loan Parties, and (vi) the exercise by the Administrative Agent, the Collateral Agent or the Banks of their rights and remedies (including, without limitation, foreclosure) under any agreements creating any such Lien (but excluding, as to any Indemnitee, any such losses, liabilities, claims, damages, expenses, obligations, penalties, actions, judgments, suits, costs or disbursements incurred solely by reason of the gross negligence or willful misconduct of such Indemnitee as finally determined by a court of competent jurisdiction). The Borrower's obligations under this Section shall survive the termination of this Agreement and the payment of the Obligations. Section 9.2 Right of Setoff. In addition to any rights now or hereafter granted under applicable law or other wise, and not by way of limitation of any such rights, upon the occurrence and during the continuance of any Event of Default, each Bank is hereby authorized at any time or from time to time, without presentment, demand, protest or other notice of any kind to any Loan Party or to any other Person, any such notice being hereby expressly waived, to set off and to appropriate and apply any and all deposits (general or special, time or demand, provisional or final) and any other indebtedness at any time held or owing by such Bank (including, without limitation, by branches and agencies of such Bank wherever located) to or for the credit or the account of any Loan Party against and on account of the Obligations of the Loan Parties to such Bank under this Agreement or under any of the other Loan Documents, including, without limi tation, all interests in Obligations purchased by such Bank pursuant to Section 9.7, and all other claims of any nature or de scription arising out of or connected with this Agreement or any other Loan Document, irrespective of whether or not such Bank shall have made any demand hereunder and although said Obligations, liabilities or claims, or any of them, shall be contingent or unmatured. Section 9.3 Notices. Except as otherwise expressly provided herein, all notices, requests and demands to or upon the respective parties hereto to be effective shall be in writing (including by telecopy), and shall be deemed to have been duly given or made when delivered by hand, or five days after being sent by certified or registered United States mail, postage prepaid, or, in the case of telecopy notice, when sent, or, in the case of a nationally recognized overnight courier service, one Business Day after delivery to such courier service, ad dressed, in the case of each party hereto, at its address specified opposite its signature below or on the appropriate Transfer Supplement, or to such other address as may be desig nated by any party in a written notice to the other parties hereto, provided that notices and communications to the Administrative Agent shall not be effective until received by the Administrative Agent. Section 9.4 Successors and Assigns; Participation; Assignments. (a) Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the Parent, the Borrower, the Banks, the Administrative Agent, the Collateral Agent, all future holders of the Revolving Notes and their respec tive successors and assigns, except that neither the Parent nor the Borrower may assign or transfer any of its rights or obliga tions under this Agreement without the prior written consent of each Bank. No Bank may participate, assign or sell any of its Credit Exposure (as defined in clause (b) below) except as required by operation of law, in connection with the merger, consolidation or dissolution of any Bank or as provided in this Section 9.4. (b) Participation. Any Bank may at any time sell to one or more Persons (each a "Participant") participating inter ests in any Loan owing to such Bank, any Revolving Note held by such Bank, any Commitment of such Bank, or any other interest of such Bank hereunder (in respect of any such Bank, its "Credit Exposure"). Notwithstanding any such sale by a Bank of participating interests to a Participant, such Bank's rights and obligations under this Agreement shall remain unchanged, such Bank shall remain solely responsible for the performance thereof, such Bank shall remain the holder of any such Revolving Note for all purposes under this Agreement (except as expressly provided below), and the Borrower and the Administrative Agent shall continue to deal solely and directly with such Bank in connection with such Bank's rights and obligations under this Agreement. The Borrower agrees that if any Obligations are due and unpaid, or shall have been declared or shall have become due and payable upon the occurrence and during the continuance of an Event of De fault, each Participant shall be deemed, to the fullest extent permitted by law, to have the right of setoff in respect of its participating interest in amounts owing under this Agreement and any Revolving Note to the same extent as if the amount of its participating interest were owing directly to it as a Bank under this Agreement or any Revolving Note, provided that such right of setoff shall be subject to the obligations of such Participant to share with the Banks as provided in Section 9.7. The Borrower also agrees that each Participant shall be entitled to the benefits of Sections 2.15, 2.16, 2.17, 2.18 and 9.1, provided that no Participant shall be entitled to receive any greater amount pursuant to such sections than the transferor Bank would have been entitled to receive in respect of the amount of the participating interest transferred by such transferor Bank to such Participant had no such transfer occurred. Each Bank agrees that any agreement between such Bank and any such Participant in respect of such participating interest shall not restrict such Bank's right to agree to any amendment, supplement, waiver or modification to this Agreement or any other Loan Document, except where the result of any of the foregoing would be to extend the final maturity of any Obligation or any regularly scheduled installment thereof or reduce the rate or extend the time of payment of interest or fees thereon or reduce the principal amount thereof or release all or substantially all of the Collateral (except as expressly provided in the Loan Documents). (c) Assignments to Purchasing Banks. Any Bank may, in the ordinary course of its business and in accordance with applicable law, at any time assign to any Bank or any affiliate thereof or, with the prior written consent of the Borrower and the Administrative Agent, which consent shall not be unreasonably withheld, to any other Person ("Purchasing Banks") all or any part of its Credit Exposure pursuant to a supplement to this Agreement, substantially in the form of Exhibit L hereto (a "Transfer Supplement"), executed by such Purchasing Bank, such transferor Bank and the Administrative Agent; provided that the minimum amount of the Credit Exposure of any Bank so assigned shall not be less than $5,000,000 (or if the assignor shall assign its entire Credit Exposure, any lesser amount). Upon (i) such execution of such Transfer Supplement, (ii) delivery of an executed copy thereof to the Borrower and the Administrative Agent and (iii) payment by such Purchasing Bank to such transfer or Bank of an amount equal to the purchase price agreed between such transferor Bank and such Purchasing Bank and payment to the Administrative Agent by such Purchasing or Transferor Bank a non- refundable processing fee of $3,500, such transferor Bank shall be released from its obligations hereunder to the extent of such assignment and such Purchasing Bank shall for all purposes be a Bank party to this Agreement and shall have all the rights and obligations of a Bank under this Agreement to the same extent as if it were an original party hereto, and no further consent or action by the Borrower, the Banks or the Administrative Agent shall be required. Such Transfer Supplement shall be deemed to amend this Agreement to the extent, and only to the extent, necessary to reflect the addition of such Purchasing Bank as a Bank and the resulting adjustment of the Commitments, if any, arising from the purchase by such Purchasing Bank of all or a portion of the Credit Exposure of such transferor Bank. If the transferor Bank shall then be in possession of a Revolving Note and if requested by the Purchasing Bank, promptly after the consummation of any transfer to a Purchasing Bank pursuant hereto, the transferor Bank, the Administrative Agent and the Bor rower shall, at the expense of the Purchasing Bank, make appropri ate arrangements so that a replacement Note is issued to such transferor Bank and a new Revolving Note is issued to such Pur chasing Bank, in each case in principal amounts reflecting such transfer. (d) Disclosure of Information. The Borrower au thorizes each Bank to disclose to any Participant or Purchasing Bank (each, a "Transferee") and any prospective Transferee any and all financial and other information in such Bank's possession concerning the Borrower which has been delivered to such Bank by the Borrower pursuant to this Agreement or which has been delivered to such Bank by the Borrower in connection with such Bank's credit evaluation of the Borrower prior to entering into this Agreement. (e) Federal Reserve Banks. Notwithstanding the limitations set forth in paragraph (c) above, any Bank may at any time assign all or any portion of its rights under this Agreement or any Revolving Note for purposes of assignment to a Federal Reserve Bank without the prior written consent of the Borrower or the Administrative Agent, provided that no such assignment shall release a Bank from any of its obligations hereunder or substitute any such Federal Reserve Bank for such Bank as a party hereto. Section 9.5 Amendments and Waivers. Neither this Agreement, any Revolving Note, any other Loan Document to which the Parent or the Borrower is a party nor any terms hereof or thereof may be amended, supplemented, modified or waived except in accordance with the provisions of this Section. The Required Banks, the Parent and the Borrower may, from time to time, enter into written amendments, supplements, modifications or waivers for the purpose of adding, deleting, changing or waiving any provisions to this Agreement, the Revolving Notes, or the other Loan Documents to which the Parent or the Borrower is a party, provided that no such amendment, supplement, modification or waiver shall (a) extend the Final Maturity Date or reduce the rate or extend the time of payment of interest on any Obliga tions, or reduce the principal amount of any Obligations or re duce any fee payable to the Banks hereunder, or release all or substantially all of the Collateral (except as expressly contemplated by the Loan Documents) or change the amount of any Commitment of any Bank, or amend, modify or waive any provision of this Section 9.5 or the definition of Required Banks, or consent to or permit the assignment or transfer by the Borrower of any of its rights and obligations under this Agreement or any other Loan Document, in each case without the written consent of all the Banks effected thereby, (b) amend, modify or waive any provision of Section 8 or any other provision of any Loan Docu ment if the effect thereof is to affect the rights or duties of the Administrative Agent, without the written consent of the then Administrative Agent, or (c) release the Parent from any of its obligations under Section 10. Any such amendment, supplement, modification or waiver shall apply to each of the Banks equally and shall be binding upon the Parent, the Borrower, the Banks, the Administrative Agent and all future holders of the Revolving Notes. In the case of any waiver, the Parent, the Borrower, the Banks and the Administrative Agent shall be restored to their former position and rights hereunder and under the outstanding Notes, and any Default or Event of Default waived shall be deemed to be cured and not continuing, but no such waiver shall extend to any subsequent or other Default or Event of Default, or impair any right consequent thereon. Section 9.6 No Waiver; Remedies Cumulative. No fail ure or delay on the part of the Administrative Agent, the Collateral Agent, any Bank, or any holder of a Revolving Note in exercising any right, power or privilege hereunder or under any other Loan Document and no course of dealing between any Loan Party and the Administrative Agent, the Collateral Agent, any Bank or the holder of any Revolving Note shall operate as a waiver thereof; nor shall any single or partial exercise of any right, power or privilege hereunder or under any other Loan Document preclude any other or further exercise thereof of the exercise of any other right, power or privilege hereunder or thereunder. The rights and remedies herein expressly provided are cumulative and not exclusive of any rights or remedies which the Administrative Agent, the Collateral Agent, any Bank or the holder of any Revolving Note would otherwise have. No notice to or demand on any Loan Party in any case shall entitle any Loan Party to any other or further notice or demand in similar or other circumstances or constitute a waiver of the rights of the Administrative Agent, the Banks, the Collateral Agent or the holder of any Revolving Note to any other or further action in any circumstances without notice or demand. Section 9.7 Sharing of Payments. Each of the Banks agrees that if it should receive any amount hereunder (whether by voluntary payment, by realization upon security, by the exercise of the right of setoff or banker's lien, by counterclaim or cross action, by the enforcement of any right under the Loan Documents, or otherwise) which is applicable to the payment of any Obligations, of a sum which with respect to the related sum or sums received by other Banks is in a greater proportion than the total of such Obligation then owed and due to such Bank bears to the total of such Obligation then owed and due to all of the Banks immediately prior to such receipt, then such Bank receiving such excess payment shall purchase for cash without recourse or warranty from the other Banks an interest in such Obligations owing to such Banks in such amount as shall result in a proportional participation by all of the Banks in such amount; provided that if all or any portion of such excess amount is thereafter recovered from such Bank, such purchase shall be rescinded and the purchase price restored to the extent of such recovery, but without interest. Section 9.8 Governing Law; Submission to Jurisdiction. (a) THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL, EXCEPT AS OTHERWISE PROVIDED IN THE MORTGAGES, BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO THE PRINCIPLES THEREOF RELATING TO CONFLICTS OF LAW). (b) Any legal action or proceeding with respect to this Agreement or any other Loan Document and any action for enforcement of any judgment in respect thereof may be brought in the courts of the State of New York or of the United States of America for the Southern District of New York, and, by execution and delivery of this Agreement, the Borrower hereby accepts for itself and in respect of its property, generally and uncondi tionally, the non-exclusive jurisdiction of the aforesaid courts and appellate courts from any thereof. The Borrower irrevocably consents to the service of process out of any of the aforementioned courts in any such action or proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, the Borrower at its address set forth opposite its signature below. The Borrower hereby irrevocably waives any objection which it may now or hereafter have to the laying of venue of any of the aforesaid actions or proceedings arising out of or in connection with this Agreement or any other Loan Document brought in the courts referred to above and hereby further irrevocably waives and agrees not to plead or claim in any such court that any such action or proceeding brought in any such court has been brought in an inconvenient forum. Nothing herein shall affect the right of the Administrative Agent, any Bank, or any holder of a Revolving Note to serve process in any other manner permitted by law or to commence legal proceedings or otherwise proceed against the Borrower in any other jurisdiction. Section 9.9 Counterparts. This Agreement may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument. Section 9.10 Effectiveness. This Agreement shall become effective on the date on which all of the parties hereto shall have signed a counterpart hereof and shall have delivered the same to the Administrative Agent which delivery, in the case of the Banks, may be given to the Administrative Agent by telecopy (with the originals delivered promptly to the Adminis trative Agent via overnight courier service). Section 9.11 Headings Descriptive. The headings of the several Sections and subsections of this Agreement are inserted for convenience only and shall not in any way affect the meaning or construction of any provision of this Agreement. Section 9.12 Marshalling; Recapture. Neither the Administrative Agent, the Collateral Agent nor any Bank shall be under any obligation to marshall any assets in favor of any Loan Party or any other party or against or in payment of any or all of the Obligations. To the extent any Bank receives any payment by or on behalf of any Loan Party, which payment or any part thereof is subsequently invalidated, declared to be fraudulent or preferential, set aside or required to be repaid to such Loan Party or its estate, trustee, receiver, custodian or any other party under any bankruptcy law, state or federal law, common law or equitable cause, then to the extent of such payment or repay ment, the obligation or part thereof which has been paid, reduced or satisfied by the amount so repaid shall be reinstated by the amount so repaid and shall be included within the liabilities of such Loan Party to such Bank as of the date such initial payment, reduction or satisfaction occurred. Section 9.13 Severability. In case any provision in or obligation under this Agreement or the Notes or the other Loan Documents shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be af fected or impaired thereby. Section 9.14 Survival. All indemnities set forth herein including, without limitation, in Sections 2.15, 2.16, 2.17, 2.18, 8.7 and 9.1 and the limitation of liability set forth in Section 9.16 shall survive the execution and delivery of this Agreement and the Revolving Notes and the making and repayment of the Revolving Loans hereunder. Section 9.15 Domicile of Loans. Each Bank may transfer and carry its Revolving Loans at, to or for the account of any branch office, subsidiary or affiliate of such Bank. Section 9.16 Limitation of Liability. No claim may be made by any Loan Party or any other Person against the Administra tive Agent, the Collateral Agent, any Bank, or the Affiliates, directors, officers, employees, attorneys or agent of any of them for any special, indirect, consequential or punitive damages in respect of any claim for breach of contract or any other theory of liability arising out of or related to the transactions contem plated by this Agreement or any other Transactions, or any act, omission or event occurring in connection therewith; and each Loan Party hereby waives, releases and agrees not to sue upon any claim for any such damages, whether or not accrued and whether or not known or suspected to exist in its favor. Section 9.17 Calculations; Computations. The finan cial statements to be furnished to the Administrative Agent and the Banks pursuant hereto shall be made and prepared in accor dance with GAAP consistently applied throughout the periods involved and consistent with GAAP as used in the preparation of the financial statements referred to in Section 4.5, and, except as otherwise specifically provided herein, all computations of Excess Cash Flow, Borrower's Share of Excess Cash Flow and Retained Equity Proceeds and computations determining compliance with Section 6 hereof shall utilize GAAP. All computations of interest (other than interest calculated by reference to the Base Rate during such periods that the Base Rate is determined by reference to the Prime Rate), Commitment Fees and other Fees shall be made on the basis of a year of 360 days for the actual number of days (including the first day but excluding the last day) occurring in the period for which such interest, Commitment Fee or other Fees are payable. All computations of interest calculated by reference to the Base Rate during such periods that the Base Rate is determined by reference to the Prime Rate shall be made on the basis of a year of 365 days for the actual number of days (including the first day but excluding the last day) occurring in the period for which such interest is payable. Section 9.18 Waiver of Trial by Jury. TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH OF THE PARENT, THE BORROWER, THE ADMINISTRATIVE AGENT, THE CO-AGENTS, THE COLLATERAL AGENT AND THE BANKS HEREBY IRREVOCABLY WAIVES ALL RIGHT OF TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR ANY MATTER ARISING HEREUNDER OR THEREUNDER. Section 9.19 Nature of Borrowers' Obligations. (a) The Borrower agrees that the Obligations will be paid strictly in accordance with the terms of this Agreement, the Revolving Notes and the other Loan Documents, regardless of any law, regulation or order now or hereafter in effect in any jurisdiction affecting any of such terms or the rights of any Secured Creditor with respect thereto. The liability of the Borrower shall be absolute and unconditional, in accordance with its terms and shall remain in full force and effect without regard to, and shall not be released, suspended, discharged, terminated or otherwise affected by, any circumstance or occurrence whatsoever, including, without limitation: (i) any change in the time, place or manner of payment of, or in any other term of, all or any of the Obliga tions, any waiver, indulgence, renewal, extension, amendment or modification of, or addition, consent or supplement to, or deletion from, or any other action or inaction under, or in re spect of this Agreement, any Revolving Note, any other Loan Document or any documents, instruments or agreements relating to the Obligations or any other instrument or agreement referred to therein or any assignment or transfer of any thereof; (ii) any lack of validity or enforceability of this Agreement, any Revolving Note, any other Loan Document or any other documents, instruments or agreements referred to therein or any assignment or transfer of any thereof; (iii) any furnishing of any addi tional security to the Secured Creditors or their assignees or any acceptance thereof or any release of any security by the Secured Creditors, or their assignees; (iv) any limitation on any party's liability or obligations under any such instrument or agreement or any invalidity or unenforceability, in whole or in part, of any such instrument or agreement, or any term thereof; (v) any bankruptcy, insolvency, reorganization, composition, adjustment, dissolution, liquidation or other like proceeding relating to the Borrower, or any action taken with respect to this Agreement by any trustee or receiver, or by any court, in any such proceeding, whether or not the Borrower shall have notice or knowledge of any of the foregoing and the Borrower waives any right to the deferral or modification of its obliga tions hereunder by reason of any such proceeding; (vi) any ex change, release or nonperfection of any other collateral, or any release, or amendment or waiver of, or consent to, departure from any guaranty or security, for all or any of the Obligations; (vii) any direction as to application of payment by the Borrower or by any other party; (viii) any dissolution, termination or increase, decrease or change in personnel by the Borrower; or (ix) any other circumstance which might otherwise constitute a defense available to, or a discharge of, the Borrower. This Agreement shall continue to be effective or be reinstated, as the case may be, if at any time any payment of any of the Obligations is rescinded or must otherwise be returned by any Secured Creditor upon the insolvency, bankruptcy or reorganization of the Borrower or any Guarantor or otherwise, all as though such payment had not been made. (c) The Borrower hereby irrevocably agrees to subordinate any Subrogation Rights (as defined below) to the rights of any Secured Creditor to recover from the Borrower all Obligations. "Subrogation Rights" shall mean any and all rights of subrogation, reimbursement, exoneration, contribution or indem nification, any right to participate in any claim or remedy of the Secured Creditors or any collateral which the Administrative Agent, any other Secured Creditor or the Collateral Agent now has or hereafter acquires in connection with the payment, performance or enforcement of the Borrower's obligations under this Agreement or any Loan Document, whether or not such claim, remedy or right arises in equity, or under contract, statute or common law, including the right to take or receive, directly or indirectly, in cash or other property or by set-off or in any other manner, payment or security on account of such claim or other rights. To effectuate such subordination, the Borrower hereby agrees that it shall not be entitled to any payment by the Borrower in respect of any Subrogation Right until all of the Obligations have been indefeasibly paid in full. If any amount shall be paid to the Borrower in violation of the preceding sentence and the Obliga tions shall not have been paid in full or any commitment of any Secured Creditor under this Agreement shall not have been irrevo cably terminated, such amount shall be deemed to have been paid to the Borrower for the benefit of, and held in trust for, the Administrative Agent for the benefit of the Secured Creditors, and shall forthwith be paid to the Administrative Agent to be credited and applied to the Obligations, whether matured or unma tured. The Borrower acknowledges that it will receive direct and indirect benefits from the financing arrangements contemplated by this Agreement and that the subordination set forth in this Section is knowingly made in contemplation of such benefits. SECTION 10. PARENT GUARANTY. Section 10.1 The Parent Guaranty. In order to induce the Administrative Agent and the Banks to enter into this Agreement and to extend credit hereunder, and in recognition of the direct benefits to be received by the Parent from the proceeds of the Revolving Loans, the Parent hereby agrees with the Guaranteed Creditors as follows: the Parent hereby uncon ditionally and irrevocably guarantees as primary obligor and not merely as surety the full and prompt payment when due, whether upon maturity, acceleration or otherwise, of any and all of the Guaranteed Obligations of the Borrower to the Guaranteed Creditors. If any or all of the Guaranteed Obligations of the Borrower to the Guaranteed Creditors become due and payable hereunder, the Parent irrevocably and unconditionally promises to pay such indebtedness to the Guaranteed Creditors, or order, on demand, together with any and all expenses which may be incurred by the Guaranteed Creditors in collecting any of the Guaranteed Obligations. If claim is ever made upon any Guaranteed Creditor for repayment or recovery of any amount or amounts received in payment or on account of any of the Guaranteed Obligations and any of the aforesaid payees repays all or part of said amount by reason of (i) any judgment, decree or order of any court or administrative body having jurisdiction over such payee or any of its property or (ii) any settlement or compromise of any such claim effected by such payee with any such claimant (including the Borrower), then and in such event the Parent agrees that any such judgment, decree, order, settlement or compromise shall be binding upon the Parent, notwithstanding any revocation of this Parent Guaranty, and the Parent shall be and remain liable to the aforesaid payees hereunder for the amount so repaid or recovered to the same extent as if such amount had never originally been received by any such payee. Section 10.2 Bankruptcy. Additionally, the Parent unconditionally and irrevocably guarantees the payment of any and all of the Guaranteed Obligations to the Guaranteed Creditors whether or not due or payable by the Borrower upon the occurrence of any of the events specified in Section 7.1(f), and uncondi tionally promises to pay such indebtedness to the Guaranteed Creditors, or order, on demand, in lawful money of the United States. Section 10.3 Nature of Liability. The liability of the Parent hereunder is exclusive and independent of any security for or other guaranty of the Guaranteed Obligations whether executed by the Parent, any other guarantor or by any other party, and the liability of the Parent hereunder is not affected or impaired by (a) any direction as to application of payment by the Borrower or by any other party, or (b) any other continuing or other guaranty, undertaking or maximum liability of a guarantor or of any other party as to the Guaranteed Obligations, or (c) any payment on or in reduction of any such other guaranty or undertaking, or (d) any dissolution, termination or increase, decrease or change in personnel by the Borrower, or (e) any payment made to any Guaranteed Creditor on the Guaranteed Obliga tions which any such Guaranteed Creditor repays to the Borrower pursuant to court order in any bankruptcy, reorganization, arrangement, moratorium or other debtor relief proceeding, and Parent waives any right to the deferral or modification of its obligations hereunder by reason of any such proceeding. Section 10.4 Independent Obligation. The obligations of the Parent hereunder are independent of the obligations of any other guarantor, any other party or the Borrower, and a separate action or actions may be brought and prosecuted against the Parent whether or not action is brought against any other guar antor, any other party or the Borrower and whether or not any other guarantor, any other party or the Borrower be joined in any such action or actions. The Parent waives, to the full extent permitted by law, the benefit of any statute of limitations affecting its liability hereunder or the enforcement thereof. Any payment by the Borrower or other circumstance which operates to toll any statute of limitations as to the Borrower shall operate to toll the statute of limitations as to the Parent. This Parent Guaranty is a continuing one and all liabilities to which it applies or may apply under the terms hereof shall be conclusively presumed to have been created in reliance hereon. Section 10.5 Authorization. The Parent authorizes the Guaranteed Creditors without notice or demand (except as shall be required by applicable statute and cannot be waived), and without affecting or impairing its liability hereunder, from time to time to: (a) change the manner, place or terms of payment of, and/or change or extend the time of payment of, renew, increase, accelerate or alter, any of the Guaranteed Obligations (including any increase or decrease in the rate of interest thereon), any security therefor, or any liability incurred directly or indirectly in respect thereof, and the Parent Guaranty herein made shall apply to the Guaranteed Obligations as so changed, extended, renewed or altered; (b) take and hold security for the payment of the Guaranteed Obligations and sell, exchange, release, surrender, realize upon or otherwise deal with in any manner and in any order any property by whomsoever at any time pledged or mortgaged to secure, or howsoever securing, the Guaranteed Obligations or any liabilities (including any of those hereunder) incurred directly or indirectly in respect thereof or hereof, and/or any offset there against; (c) exercise or refrain from exercising any rights against the Borrower, any other Loan Party or others or otherwise act or refrain from acting; (d) release or substitute any one or more endorsers, guarantors, the Borrower or other obligors; (e) settle or compromise any of the Guaranteed Obligations, any security therefor or any liability (including any of those hereunder) incurred directly or indirectly in respect thereof or hereof, and may subordinate the payment of all or any part thereof to the payment of any liability (whether due or not) of the Borrower to its creditors other than the Guaran teed Creditors; (f) apply any sums by whomsoever paid or howso ever realized to any liability or liabilities of the Borrower to the Guaranteed Creditors regardless of what liability or liabili ties of the Parent, the Borrower remain unpaid; (g) consent to or waive any breach of, or any act, omission or default under, this Agreement or any of the instruments or agreements referred to herein, or otherwise amend, modify or supplement this Agreement or any of such other instruments or agreements; and/or (h) take any other action which would, under otherwise applicable principles of common law, give rise to a legal or equitable discharge of the Parent from its liabilities under this Parent Guaranty. Section 10.6 Reliance. It is not necessary for any Guaranteed Creditor to inquire into the capacity or powers of the Borrower or the officers, directors, partners or agents acting or purporting to act on their behalf, and any Guaranteed Obligations made or created in reliance upon the professed exercise of such powers shall be guaranteed hereunder. Section 10.7 Subordination. Any of the indebtedness of the Borrower now or hereafter owing to the Parent, is hereby subordinated to the Guaranteed Obligations of the Borrower owing to the Guaranteed Creditors; and if the Administrative Agent so requests at a time when an Event of Default exists, all such indebtedness of the Borrower to the Parent shall be collected, enforced and received by the Parent for the benefit of the Guaranteed Creditors and be paid over to the Administrative Agent on behalf of the Guaranteed Creditors on account of the Guaranteed Obligations of the Borrower to the Guaranteed Credi tors, but without affecting or impairing in any manner the liability of the Parent under the other provisions of this Parent Guaranty. Prior to the transfer by the Parent of any note or negotiable instrument evidencing any of the indebtedness of the Borrower to the Parent, the Parent shall mark such note or negotiable instrument with a legend that the same is subject to this subordination. Without limiting the generality of the foregoing, the Parent hereby agrees with the Guaranteed Creditors that it will not exercise any right of subrogation which it may at any time otherwise have as a result of this Parent Guaranty (whether contractual, under Section 509 of the Bankruptcy Code or otherwise) until all Guaranteed Obligations have been irrevocably paid in full in cash. Section 10.8 Waiver. (a) The Parent waives any right (except as shall be required by applicable statute and cannot be waived) to require any Guaranteed Creditor to (i) proceed against the Borrower, any other guarantor or any other party, (ii) proceed against or exhaust any security held from the Borrower, any other guarantor or any other party or (iii) pursue any other remedy in any Guaranteed Creditor's power whatsoever. The Parent waives any defense based on or arising out of any defense of the Borrower, any other guarantor or any other party, other than payment in full of the Guaranteed Obligations, based on or arising out of the disability of the Borrower, any other guarantor or any other party, or the validity, legality or unenforceability of the Guaranteed Obligations or any part thereof from any cause, or the cessation from any cause of the liability of the Borrower other than payment in full of the Guaranteed Obligations. The Guaranteed Creditors may, at their election, foreclose on any security held by the Collateral Agent, or any other Guaranteed Creditor by one or more judicial or nonjudicial sales, whether or not every aspect of any such sale is commercially reasonable (to the extent such sale is permitted by applicable law), or exercise any other right or remedy the Guaranteed Creditors may have against the Borrower, any other party or any security, without affecting or impairing in any way the liability of the Parent hereunder except to the extent the Guaranteed Obligations have been paid. The Parent waives any defense arising out of any such election by the Guaranteed Creditors, even though such election operates to impair or extin guish any right of reimbursement or subrogation or other right or remedy of the Parent against the Borrower, any other party or any security. (b) The Parent waives all presentments, demands for performance, protests and notices, including without limitation notices of nonperformance, notices of protest, notices of dishonor, notices of acceptance of this Parent Guaranty, and notices of the existence, creation or incurring of new or additional Guaranteed Obligations. The Parent assumes all responsibility for being and keeping itself informed of the Borrower's financial condition and assets, and of all other circumstances bearing upon the risk of nonpayment of the Guaranteed Obligations and the nature, scope and extent of the risks which the Parent assumes and incurs hereunder, and agrees that neither the Agents nor any Bank shall have any duty to advise the Parent of information known to them regarding such circumstances or risks. Section 10.9 Maximum Liability. It is the desire and intent of the Parent and the Guaranteed Creditors that this Parent Guaranty shall be enforced against the Parent to the fullest extent permissible under the laws and public policies applied in each jurisdiction in which enforcement is sought. If, however, and to the extent that, the obligations of the Parent under this Parent Guaranty shall be adjudicated to be invalid or unenforceable for any reason (including, without limitation, because of any applicable state or federal law relating to fraudulent conveyances or transfers), then the amount of the Guaranteed Obligations of the Parent shall be deemed to be re duced and the Parent shall pay the maximum amount of the Guaranteed Obligations which would be permissible under applicable law. IN WITNESS WHEREOF, the parties hereto have caused their duly authorized officers to execute and deliver this Agree ment as of the date first written above. SPECIALTY RETAILERS, INC., AS BORROWER By: /s/ James A. Marcum Name: James A. Marcum Title: Vice Chairman/CFO 10201 Main Street Houston, Texas 77025 Attn: James A. Marcum Telephone: (713) 669-2832 Facsimile: (713) 669-2709 STAGE STORES, INC., AS GUARANTOR By: /s/ James A. Marcum Name: James A. Marcum Title: Vice Chairman/CFO 10201 Main Street Houston, Texas 77025 Attn: James A. Marcum Telephone: (713) 669-2832 Facsimile: (713) 669-2709 CREDIT SUISSE FIRST BOSTON, as Adminis trative Agent and Collateral Agent, and as a Bank By: /s/ Julia P. Kingsbury Name: Julia P. Kingsbury Title: Vice President By: /s/ Didier Siffer Name: Didier Siffer Title: Vice President Eleven Madison Avenue New York, New York 10010-3629 Attn: Jan Kofol Telephone: (212) 325-9057 Facsimile: (212) 325-0304 BANK UNITED By: /s/ Gordon A. Kovacs Name: Gordon A. Kovacs Title: Senior Special Asset Manager & Vice President 3200 Southwest Freeway 19th Floor Houston, Texas 77027 Attn: Gordon Kovacs Telephone: (713) 543-7951 Facsimile: (713) 543-7117 PARIBAS By: /s/ Albert A. Young, Jr. Name: Albert A. Young, Jr. Title: Director By: /s/ Amy Kirschner Name: Amy Kirschner Title: Vice President 787 Seventh Avenue New York, New York 10019 Attn: Albert Young Telephone: (212) 841-2329 Facsimile: (212) 841-3565 STEIN, ROE & FARNHAM, AS AGENT FOR KEYPORT LIFE INSURANCE COMPANY By: /s/ James R. Fellows Name: James R. Fellows Title: Vice President One South Wacker Drive 33rd Floor Chicago, Illinois 60606 Attn: Jim Fellows Telephone: (312) 368-5641 Facsimile: (312) 368-7857 BANKERS LIFE AND CASUALTY COMPANY By: /s/ Eric R. Johnson Name: Eric R. Johnson Title: Vice President (By Conseco Capital Management, Inc. acting as Investment Advisor.) 11825 N. Pennsylvania Street Carmel, Indiana 46032 Attn: John Nasser Telephone: (317) 817-6069 Facsimile: (317) 575-2001 UNION BANK OF CALIFORNIA, N.A. By: /s/ Richard P. DeGrey Name: Richard P. DeGrey Title: Vice President 445 South Figueroa Street 15th Floor Los Angeles, California 90071-1602 Attn: Richard P. DeGrey, Vice President Telephone: (213) 236-6064 Facsimile: (213) 236-6089 Annex 1 to Credit Agreement Banks and Commitments Name of Bank Revolving Commitment Credit Suisse First Boston $10,208,334.00 Bank United $10,208,333.00 Union Bank of California, N.A. $10,208,333.00 Paribas $ 1,750,000.00 Stein, Roe & Farnham, as agent for Keyport Life Insurance Company $ 1,750,000.00 Bankers Life and Casualty Company $ 875,000.00 Total Commitment: $35,000,000.00 _______________________________ 1FOOTER B CONTAINS FILENAME ONLY EX-4.13 4 0004.txt 12450092.9 60200 1925C 99544439 J-1 Exhibit 4.13 SRI RECEIVABLES PURCHASE CO., INC. Transferor SPECIALTY RETAILERS, INC. Servicer and BANKERS TRUST (DELAWARE) Trustee on behalf of Certificateholders of the SRI Receivables Master Trust SECOND AMENDED AND RESTATED POOLING AND SERVICING AGREEMENT Dated as of November 1, 1999 TABLE OF CONTENTS Page ARTICLE I DEFINITIONS 1 Section 1.1 Definitions 1 Section 1.2 Other Definitional Provisions 23 ARTICLE II CONVEYANCE OF RECEIVABLES;ISSUANCE OF CERTIFICATES 25 Section 2.1 Conveyance of Receivables 25 Section 2.2 Acceptance by Trustee 28 Section 2.3 Representations and Warranties of the Transferor 28 Section 2.4 Representations and Warranties of the Transferor Relating to this Agreement and the Receivables 30 Section 2.5 Covenants of the Transferor 36 Section 2.6 Addition of Accounts 38 Section 2.7 Removal of Accounts 42 Section 2.8 Discount Option 44 ARTICLE III ADMINISTRATION AND SERVICING OF RECEIVABLES 45 Section 3.1 Acceptance of Appointment and Other Matters Relating to the Servicer 45 Section 3.2 Servicing Compensation 46 Section 3.3 Representations and Warranties of the Servicer 47 Section 3.4 Reports and Records for the Trustee 49 Section 3.5 Annual Servicer's Certificate 50 Section 3.6 Annual Independent Accountants' Servicing Report 51 Section 3.7 Tax Treatment 51 Section 3.8 Adjustments 52 Section 3.9 Notices to SRI 52 ARTICLE IV RIGHTS OF CERTIFICATEHOLDERS ANDALLOCATION AND APPLICATION OF COLLECTIONS 53 Section 4.1 Rights of Certificateholders 53 Section 4.2 Establishment of Accounts 53 Section 4.3 Collections and Allocations 55 ARTICLE V [ARTICLE V IS RESERVED AND SHALL BE SPECIFIED IN ANY SUPPLEMENT WITH RESPECT TO ANY SERIES] 59 ARTICLE VI THE CERTIFICATES 60 Section 6.1 The Certificates 60 Section 6.2 Authentication of Certificates 60 Section 6.3 Registration of Transfer and Exchange of Certificates 61 Section 6.4 Mutilated, Destroyed, Lost or Stolen Certificates 63 Section 6.5 Persons Deemed Owners 63 Section 6.6 Appointment of Paying Agent 64 Section 6.7 Access to List of Certificateholders' Names and Addresses 65 Section 6.8 Authenticating Agent 65 Section 6.9 Tender of Exchangeable Transferor Certificate 66 Section 6.10 Book-Entry Certificates 68 Section 6.11 Notices to Clearing Agency 69 Section 6.12 Definitive Certificates 69 Section 6.13 Global Certificate; Euro-Certificate Exchange Date 70 ARTICLE VII OTHER MATTERS RELATING TO THE TRANSFEROR 71 Section 7.1 Liability of the Transferor 71 Section 7.2 Merger or Consolidation of, or Assumption of the Obligations of, the Transferor 71 Section 7.3 Limitation on Liability 72 Section 7.4 Liabilities 72 Section 7.5 Transferor's Records 73 ARTICLE VIII OTHER MATTERS RELATING TO THE SERVICER 74 Section 8.1 Liability of the Servicer 74 Section 8.2 Merger or Consolidation of, or Assumption of the Obligations of, the Servicer 74 Section 8.3 Limitation on Liability of the Servicer and Others 74 Section 8.4 Servicer Indemnification of the Transferor, the Trust and the Trustee 75 Section 8.5 The Servicer Not to Resign 76 Section 8.6 Access to Certain Documentation and Information Regarding the Receivables 76 Section 8.7 Delegation of Duties 76 Section 8.8 Maintenance of Property; Insurance 77 ARTICLE IX PAY OUT EVENTS 78 Section 9.1 Pay Out Events 78 ARTICLE X SERVICER DEFAULTS 79 Section 10.1 Servicer Defaults 79 Section 10.2 Trustee to Act; Appointment of Successor 81 Section 10.3 Notification to Certificateholders 82 Section 10.4 Waiver of Past Defaults 83 ARTICLE XI THE TRUSTEE 84 Section 11.1 Duties of Trustee 84 Section 11.2 Certain Matters Affecting the Trustee 85 Section 11.3 Trustee Not Liable for Recitals in Certificates 87 Section 11.4 Trustee May Own Certificates 87 Section 11.5 The Servicer to Pay Trustee's Fees and Expenses 87 Section 11.6 Eligibility Requirements for Trustee 88 Section 11.7 Resignation or Removal of Trustee 88 Section 11.8 Successor Trustee 89 Section 11.9 Merger or Consolidation of Trustee 89 Section 11.10 Appointment of Co-Trustee or Separate Trustee 89 Section 11.11 Tax Returns 90 Section 11.12 Trustee May Enforce Claims Without Possession of Certificates 91 Section 11.13 Suits for Enforcement 91 Section 11.14 Rights of Certificateholders to Direct Trustee 91 Section 11.15 Representations and Warranties of Trustee 92 Section 11.16 Maintenance of Office or Agency 92 ARTICLE XII TERMINATION 93 Section 12.1 Termination of Trust 93 Section 12.2 Optional Termination 94 Section 12.3 Final Payment with Respect to any Series 94 Section 12.4 Termination Rights of Holder of Exchangeable Transferor Certificate 96 ARTICLE XIII MISCELLANEOUS PROVISIONS 97 Section 13.1 Amendment 97 Section 13.2 Protection of Right, Title and Interest to Trust 98 Section 13.3 Limitation on Rights of Certificateholders 99 Section 13.4 Governing Law 100 Section 13.5 Notices 100 Section 13.6 Severability of Provisions 101 Section 13.7 Assignment 101 Section 13.8 Certificates Non-Assessable and Fully Paid 101 Section 13.9 Further Assurances 101 Section 13.10 No Waiver; Cumulative Remedies 101 Section 13.11 Counterparts 101 Section 13.12 Third-Party Beneficiaries 101 Section 13.13 Actions by Certificateholders 102 Section 13.14 Rule 144A Information 102 Section 13.15 Merger and Integration; Existing Agreement 102 Section 13.16 Headings 103 Section 13.17 No Bankruptcy Petition Against the Transferor or the Trust 103 EXHIBIT A Form of Exchangeable Transferor Certificate EXHIBIT B Form of Assignment of Receivables in Supplemental Accounts EXHIBIT C Form of Daily Report EXHIBIT D Form of Settlement Statement EXHIBIT E Form of Quarterly Servicer's Certificate EXHIBIT F Form of Opinion of Counsel Regarding Supplemental Accounts EXHIBIT G Form of Annual Opinion of Counsel EXHIBIT H Form of Reassignment of Receivables EXHIBIT I Form of Reconveyance of Receivables EXHIBIT J Form of Agreed-Upon Procedures This SECOND AMENDED AND RESTATED POOLING AND SERVICING AGREEMENT, dated as of November 1, 1999 (this "Agreement"), is by and among SRI RECEIVABLES PURCHASE CO., INC., a corporation organized and existing under the laws of the State of Delaware, as Transferor (the "Transferor"), SPECIALTY RETAILERS, INC., a corporation organized and existing under the laws of the State of Texas, as Servicer (the "Servicer"), and BANKERS TRUST (DELAWARE), a banking corporation organized and existing under the laws of the State of Delaware, as Trustee (the "Trustee"). WHEREAS, this Agreement was originally executed and delivered as of July 30, 1993; and WHEREAS, this Agreement was amended by the First Amendment to Pooling and Servicing Agreement dated October 7, 1994, and the Second Amendment to Pooling and Servicing Agreement dated January 31, 1995, amended and restated as of August 11, 1995, further amended by a First Amendment to Amended and Restated Pooling and Servicing Agreement dated May 30, 1996, and the Second Amendment to Amended and Restated Pooling and Servicing Agreement dated August 1, 1998, and is being amended and restated pursuant to Section 13.1(a) hereof on the date hereof (this Agreement as in effect prior to such amendment and restatement is referred to as the "Existing Agreement"). In consideration of the mutual agreements herein contained, each party agrees as follows for the benefit of the other parties and the Certificateholders: ARTICLE I DEFINITIONS Section I.1 Definitions. Whenever used in this Agreement, the following words and phrases shall have the following meanings: "Account" shall mean (a) each credit card account established pursuant to a Charge Account Agreement between an Originator and any Person, the Receivables from which are designated for sale by an Originator to the Transferor, which is identified by (i) an account number, (ii) the amount of Receivables outstanding in such Account as of its Cut-Off Date and (iii) the amount of Principal Receivables in such Account as of its Cut-Off Date, in each case in the computer file or microfiche list delivered to the Trustee or the bailee of the Trustee by the Transferor pursuant to this Agreement, (b) each Granite Original Account, (c) each Automatic Additional Account, and (d) each Supplemental Account identified in each file or list delivered to the Trustee or the bailee of the Trustee by the Transferor pursuant to subsection 2.6(e) of this Agreement. The Definition of Account shall include each Transferred Account but shall not include any Purged Accounts. The term "Account" shall be deemed to refer to a Supplemental Account only from and after the Addition Date with respect thereto, and the term "Account" shall be deemed to refer to any Removed Account only prior to the Removal Date with respect thereto. "Account Owner" shall mean the Bank or any Originator. "Account Property" shall have the meaning specified in subsection 2.1(iv). "Accumulation Account" shall have the meaning for each Series specified in the related Supplement. "Active Accounts" shall mean, as of any Business Day, any Account in which there has been either purchase or merchandise return activity within the preceding 12 Monthly Periods. "Addition Cut-off Date" shall mean each date as of which Supplemental Accounts shall be selected and specified to be included as Accounts pursuant to subsection 2.6(c) or (d). "Addition Date" shall mean each date as of which Receivables under Supplemental Accounts are included in the Trust as Accounts pursuant to subsection 2.6(c) or (d). "Additional Originator" has the meaning it is given in the Receivables Purchase Agreement. "Additional Originator Agreement" has the meaning it is given in the Receivables Purchase Agreement. "Adjusted Invested Amount" shall mean, with respect to any Series or any Class, when used with respect to any Business Day, the Invested Amount of such Series or Class, as applicable, minus any amounts then on deposit in any Accumulation Account for such Series or Class, as applicable. "Adjustment Payment" shall have the meaning specified in subsection 3.8(a). "Affiliate" means, with respect to a particular Person,(a) any Person that, directly or indirectly, is in control of, is controlled by, or is under common control with, such Person, or (b) any Person who is a director or officer or general partner (i) of such Person, (ii) of any subsidiary of such Person, or (iii) of any Person described in clause (a) above. For purposes of this definition, control of a Person shall mean the power, direct or indirect, (i) to vote 5% or more of the securities having ordinary voting power to elect the directors of such Person, or (ii) to direct or cause the direction of the management and policies of such Person whether by contract or otherwise. "Aggregate Invested Amount" shall mean, as of any date of determination, the sum of the Invested Amounts of all Series of Certificates issued and outstanding on such date of determination. "Aggregate Investor Percentage" with respect to Principal Collections, Finance Charge Collections and Receivables in Defaulted Accounts, as the case may be, shall mean, as of any date of determination, the sum of such Investor Percentages of all Series of Certificates issued and outstanding on such date of determination; provided, however, that the Aggregate Investor Percentage shall not exceed 100%. "Aggregate Principal Receivables" shall mean, for any day, the aggregate amount of Principal Receivables at the end of such day. "Agreement" shall mean this Pooling and Servicing Agreement and all amendments hereof and supplements hereto, including any Supplement. "Amortization Period" shall mean, with respect to any Series, the period following the related Revolving Period for such Series, which shall be the Amortization Period, the Early Amortization Period, or other amortization or accumulation period, in each case as defined with respect to such Series in the related Supplement. "Amortization Period Commencement Date" shall mean with respect to any Series, the date on which the Amortization Period with respect thereto commences. "Applicants" shall have the meaning specified in Section 6.7. "Assigned Property" shall have the meaning specified in subsection 2.1(iii). "Assignment" shall have the meaning specified in subsection 2.6(e)(ii). "Authorized Newspaper" shall mean a newspaper of general circulation in the Borough of Manhattan, The City of New York printed in the English language and customarily published on each Business Day, whether or not published on Saturdays, Sundays and holidays. "Automatic Additional Account" shall mean: (a) a consumer revolving credit card account (or any successor credit card account designation used by the Transferor) coming into existence after the applicable Cut-Off Date: (i) which is originated by the Bank during the normal operation of the Bank's credit card business and is not acquired by the Transferor or the Bank from another credit card issuer; (ii) which was in existence and owned by the Bank and the Receivables of which had been transferred to SRI pursuant to the Receivables Transfer Agreement and then further transferred to the Transferor pursuant to the Receivables Purchase Agreement on the date on which Receivables generated in such account are to be added to the Trust and is in existence at the close of business on the date of its designation for inclusion in the Trust; (iii) which is payable in Dollars; and (iv) the Receivables in which have not been charged off prior to the date of their designation for inclusion in the Trust; (b) a consumer revolving credit card account (or any successor credit card account designation used by the Transferor) coming into existence after the applicable Cut-Off Date: (i) which is originated by an Originator during the normal operation of such Originator's credit card business and is not acquired by the Transferor or such Originator from another credit card issuer; (ii) which was in existence and owned by such Originator and the Receivables of which had been transferred to the Transferor pursuant to the Receivables Purchase Agreement on the date on which Receivables generated in such account are to be added to the Trust and is in existence at the close of business on the date of its designation for inclusion in the Trust; (iii) which is payable in Dollars; (iv) the Receivables in which have not been charged off prior to the date of their designation for inclusion in the Trust; and (v) the Originator of which is an Originator on the date hereof or has been designated as an "Originator" by the Transferor after compliance with the requirements of paragraph (c); (c) any other consumer revolving credit card account, Receivables from which each Rating Agency permits to be added automatically to the Trust; provided that the Transferor (x) shall have received written confirmation from each Rating Agency that the inclusion of such accounts as Automatic Additional Accounts pursuant to this paragraph (c) will not result in the reduction or withdrawal of its then existing rating of any Class of Investor Certificates then issued and outstanding and (y) shall have delivered such notice to the Trustee. "Bank" means Granite National Bank, N.A., a national banking association. "Bearer Certificates" shall have the meaning specified in Section 6.1. "Bearer Rules" shall mean the provisions of the Internal Revenue Code, in effect from time to time, governing the treatment of bearer obligations, including sections 163(f), 871, 881, 1441, 1442 and 4701, and any regulations thereunder including, to the extent applicable to any Series, proposed or temporary regulations of the Internal Revenue Service. "Book-Entry Certificates" shall mean certificates evidencing a beneficial interest in the Investor Certificates, ownership and transfers of which shall be made through book entries by a Clearing Agency as described in Section 6.10; provided, that after the occurrence of a condition whereupon book-entry registration and transfer are no longer authorized and Definitive Certificates are to be issued to the Certificate Owners, such certificates shall no longer be "Book-Entry Certificates." "Business Day" shall mean any day other than a Saturday, a Sunday, or a day on which banking institutions in New York, New York (or, with respect to any Series, any additional city specified in the related Supplement) are authorized or obligated by law or executive order to be closed, and such other days in each year designated by the Servicer in writing to the Trustee by the first day of December in the preceding year; provided, however, that the Servicer shall not designate more than eight days in each year (excluding Saturdays and Sundays) as non-Business Days of which no more than four (inclusive of Saturdays and Sundays) shall be consecutive. "Cash Equivalents" shall mean, unless otherwise provided in the Supplement with respect to any Series, (a) negotiable instruments or securities represented by instruments in bearer or registered form which evidence (i) obligations of or fully guaranteed by the United States of America; (ii) time deposits, promissory notes, or certificates of deposit of any depositary institution or trust company; provided, however, that at the time of the Trust's investment or contractual commitment to invest therein, the certificates of deposit or short-term deposits of such depositary institution or trust company shall have a Satisfactory Short-Term Credit Rating; (iii) commercial paper having, at the time of the Trust's investment or contractual commitment to invest therein, a Satisfactory Short-Term Credit Rating; (iv) bankers acceptances issued by any depositary institution or trust company described in clause (a)(ii) above; and (v) investments in money market funds having the Highest Long-Term Credit Rating or otherwise approved in writing by the Rating Agency; (b) time deposits and demand deposits in the name of the Trust or the Trustee in any depositary institution or trust company referred to in clause(a)(ii) above; (c) securities not represented by an instrument that are registered in the name of the Trustee or its nominee (which may not be SRI or an Affiliate) upon books maintained for that purpose by or on behalf of the issuer thereof and identified on books maintained for that purpose by the Trustee as held for the benefit of the Trust or the Certificateholders, and consisting of (x) shares of an open end diversified investment company which is registered under the Investment Company Act which (i) invests its assets exclusively in obligations of or guaranteed by the United States of America or any instrumentality or agency thereof having in each instance a final maturity date of less than one year from their date of purchase or other Permitted Investments, (ii) seeks to maintain a constant net asset value per share, (iii) has aggregate net assets of not less than $100,000,000 on the date of purchase of such shares, and (iv) which the Rating Agency designates in writing will not result in a withdrawal or downgrading of its then current rating of any Series rated by it or (y) Eurodollar time deposits of a depository institution or trust company that has a Satisfactory Short-Term Credit Rating; and (d) any other investment if the Rating Agency confirms in writing that such investment will not adversely affect its then current rating of the Investor Certificates. "Cedelbank" shall mean Cedelbank Societe Anonyme. "Certificate" shall mean any one of the Investor Certificates of any Series or the Exchangeable Transferor Certificate. "Certificateholder" or "Holder" shall mean the Person in whose name a Certificate is registered in the Certificate Register and, if applicable, the holder of any Bearer Certificate or Coupon, as the case may be. "Certificate Interest" shall mean interest payable in respect of the Investor Certificates of any Series pursuant to Article IV of the Supplement for such Series. "Certificate Owner" shall mean, with respect to a Book-Entry Certificate, the Person who is the beneficial owner of such Book-Entry Certificate, as may be reflected on the books of the Clearing Agency, or on the books of a Person maintaining an account with such Clearing Agency (directly or as an indirect participant, in accordance with the rules of such Clearing Agency). "Certificate Principal" shall mean principal payable in respect of the Investor Certificates of any Series pursuant to Article IV of this Agreement. "Certificate Rate" shall mean, with respect to any Series of Certificates (or, for any Series with more than one Class, for each Class of such Series), the percentage (or formula on the basis of which such rate shall be determined) stated in the related Supplement; provided, that unless otherwise provided in a Supplement, such rate shall be calculated on the basis of a 360-day year consisting of twelve 30-day months. "Certificate Register" shall mean the register maintained pursuant to Section 6.3, providing for the registration of the Certificates and transfers and exchanges thereof. "Charge Account Agreement" means the agreement pursuant to which a Person is obligated to pay for purchased merchandise or services under a credit plan that permits such Person to purchase merchandise and services on credit, together with any finance charges and other charges related thereto, as such agreement may be amended, modified or supplemented from time to time; provided that only agreements between such Person and (i) an Account Owner or (ii) the creditor of an account approved by each Rating Agency as an Automatic Additional Account or Supplemental Account shall be considered a Charge Account Agreement hereunder. "Class" shall mean, with respect to any Series, any one of the classes of Certificates of that Series as specified in the related Supplement. "Clearing Agency" shall mean an organization registered as a "clearing agency" pursuant to Section 17A of the Securities Exchange Act of 1934, as amended. "Clearing Agency Participant" shall mean a broker, dealer, bank, other financial institution or other Person for whom from time to time a Clearing Agency or Foreign Clearing Agency effects book-entry transfers and pledges of securities deposited with the Clearing Agency or Foreign Clearing Agency. "Closing Date" shall mean, with respect to any Series, the date of issuance of such Series of Certificates, as specified in the related Supplement. "Collection Account" shall have the meaning specified in subsection 4.2(a). "Collections" shall mean all payments received by the Servicer in respect of the Receivables, in the form of cash, checks or any other form of payment in accordance with the Charge Account Agreement in effect from time to time on any Receivables. "Collections in Process" shall have the meaning specified in subsection 4.3(c)(iii). "Corporate Trust Office" shall mean the principal office of the Trustee at which at any particular time its corporate trust business shall be administered, which office at the date of the execution of this Agreement is located at 1011 Centre Road, suite 200, Wilmington, Delaware 19805. "Coupon" shall have the meaning specified in Section 6.1. "Credit and Collection Policy" means the credit, collection, customer relations and service policies that apply to an Eligible Account, as such policies currently exist and as such policies may be amended, modified or supplemented from time to time subject to Section 5.01(c) of the Receivables Purchase Agreement. "Cut-Off Date" shall mean, for Receivables in Accounts owned by each Initial Originator, July 30, 1993, and for Receivables in Accounts owned by each Additional Originator, the date specified as such in the Additional Originator Agreement. "Daily Report" shall mean a report in the form specified in subsection 1.2(e) as may be supplemented pursuant to any Supplement. "Date of Processing" shall mean, with respect to any transaction, the date on which such transaction is first recorded on the Servicer's computer master file of consumer revolving credit card accounts (without regard to the effective date of such recordation). "Default Amount" shall mean, on any Business Day, the aggregate amount of Principal Receivables in Accounts which became Defaulted Accounts on such Business Day; it being understood that such amount shall not exclude any Defaulted Receivables by reason of their repurchase pursuant to Section 2.4(f). "Defaulted Account" shall mean each Account with respect to which, in accordance with the Credit and Collection Policy or the Servicer's customary and usual servicing procedures, the Servicer has charged off the Receivables in such Account as uncollectible; an Account shall become a Defaulted Account on the day on which such Receivables are recorded as charged off as uncollectible on the Servicer's computer master file of consumer credit card revolving accounts. Notwithstanding any other provision hereof, any Receivables in a Defaulted Account that are Ineligible Receivables shall be treated as Ineligible Receivables rather than Receivables in Defaulted Accounts. "Defaulted Receivable" means any Receivable in a Defaulted Account. "Defaulted Receivable Receipts" shall have the meaning specified in the definition for "Recoveries." "Defaulted Receivable Repurchase Amount" shall have the meaning specified in subsection 2.4(f)(ii). "Defeasance Account" shall, if relevant to any Series, have the meaning specified in the applicable Supplement. "Definitive Certificate" shall have the meaning specified in Section 6.10. "Depositary" shall have the meaning specified in Section 6.10. "Depositary Agreement" shall mean, with respect to each Series, the agreement among the Transferor, the Trustee and the Clearing Agency, or as otherwise provided in the related Supplement. "Determination Date" shall mean the second Business Day prior to each Distribution Date. "Discount Option Receivables" shall mean, on and after the date on which the Transferor's exercise of its discount option pursuant to Section 2.8 takes effect, the result of (a) the aggregate Discount Option Receivables at the end of the prior day (which amount, prior to the date on which the Transferor's exercise of its discount option takes effect and with respect to Receivables generated prior to such date, shall be zero), plus (b) any New Discount Option Receivables created on such day, minus (c) any Discount Option Receivables Collections received on such Date of Processing. "Discount Option Receivables Collections" shall mean on any Date of Processing, on and after the date on which the Transferor's exercise of its discount option pursuant to Section 2.8 takes effect, the product of (a) a fraction the numerator of which is the amount of Discount Option Receivables and the denominator of which is the sum of the Principal Receivables and the Discount Option Receivables in each case (for both numerator and denominator) at the end of the prior Monthly Period and (b) Collections of Principal Receivables (without giving effect to the proviso in the definition of Principal Receivables) created on each Date of Processing falling on or after the date on which the Transferor exercises its discount option, received on such Date of Processing. "Discount Percentage" shall mean the fixed percentage, if any, designated by the Transferor pursuant to Section 2.8. "Distribution Account" shall have the meaning specified in subsection 4.2(c). "Distribution Date" shall mean, unless otherwise specified in any Supplement for the related Series, the fifteenth day of each month or, if such fifteenth day is not a Business Day, the next succeeding Business Day. "Dollars", "$" or "U.S. $" shall mean United States dollars. "Eligible Account" shall mean, as of the Initial Closing Date (or, with respect to Supplemental Accounts as of each Addition Date and with respect to Automatic Additional Accounts, as of the date the Receivables arising in such Accounts are designated for inclusion in the Trust), each Account owned by an Account Owner: (a) which is payable in Dollars; (b) which has not been identified by such Account Owner in its computer files as an account as to which such Account Owner or the Servicer has any confirmed record of any fraud-related activity by the Obligor; (c) which has not been sold or pledged to any other party and which does not have Receivables which have been sold or pledged to any other party; (d) which was created in accordance with the Credit and Collection Policy of such Account Owner at the time of creation of such account or the Receivables of which each Rating Agency permits to be added automatically to the Trust; (e) the Receivables in which such Account Owner has not charged off in its customary and usual manner for charging off Receivables in such Accounts as of the Initial Closing Date (or, with respect to Supplemental Accounts as of the Addition Date and with respect to Automatic Additional Accounts, as of the date the Receivables of such Accounts are first designated for inclusion in the Trust) unless such Account is subsequently reinstated; and (f) which is not an Automatic Additional Account which, during the period specified in subsection 2.6(b)(i) or (ii), is in excess of the percentage test specified in subsection 2.6(b)(i) or (ii), respectively. "Eligible Receivable" shall mean each Receivable that satisfies each of the following criteria: (a) it arises under an Eligible Account; (b) it constitutes an "account," a "general intangible" or "chattel paper" as defined in Article 9 of the UCC as then in effect in each Relevant UCC State; (c) it is at the time of its transfer to the Trust the legal, valid and binding obligation of a Person who (i) is living, (ii) is not a minor under the laws of his/her state of residence and (iii) is competent to enter into a contract and incur debt (or, with respect to obligations from Persons who do not qualify under clauses (ii) or (iii), is so guaranteed by a Person who qualifies under clauses (i), (ii) and (iii)); provided, however that no more than 6.00% of all Eligible Receivables shall be from Obligors which are non-U.S. Persons, unless the Rating Agency provides its written consent to an increase in such percentage; (d) it and the underlying Charge Account Agreement do not contravene in any material respect any laws, rules or regulations applicable thereto (including, without limitation, rules and regulations relating to truth in lending, fair credit billing, fair credit reporting, equal credit opportunity, fair debt collection practices and privacy) that could reasonably be expected to have an adverse impact on the amount of Collections thereunder, and the Account Owner under the underlying Charge Account Agreement is not in violation of any such laws, rules or regulations in any respect material to such Charge Account Agreement; (e) all material consents, licenses, or authorizations of, or registrations with, any governmental authority required to be obtained or given in connection with the creation of such Receivable or the execution, delivery, creation and performance of the underlying Charge Account Agreement have been duly obtained or given and are in full force and effect as of the date of the creation of such Receivables; (f) at the time of its transfer to the Trust, the Transferor or the Trust will have good and marketable title free and clear of all Liens and security interests arising under or through the Transferor (other than Permitted Liens); (g) it is not, at the time of its transfer to the Trust, a Receivable in a Defaulted Account or a Receivable owing from a bankrupt Obligor; and (h) it arises under a Charge Account Agreement that has been duly authorized by (i) the applicable Account Owner or (ii) the creditor of an account approved by each Rating Agency as an Automatic Additional Account or Supplemental Account, and which, together with such Receivable, is in full force and effect and constitutes the legal, valid and binding obligation of the Obligor of such Receivable enforceable against such Obligor in accordance with its terms and is not subject at the time of transfer to the Trust to any dispute, offset, counterclaim or defense whatsoever. "Enhancement" shall mean, with respect to any Series, the cash collateral account, letter of credit, insurance policy, guaranteed rate agreement, maturity guaranty facility, tax protection agreement, interest rate caps, interest rate swap, subordination of the rights of one class to another or any other contract, agreement or arrangement for the benefit of the Certificateholders of such Series (or Certificateholders of a Class within such Series) as designated in the applicable Supplement. "Enhancement Provider" shall mean, with respect to any Series, the Person, if any, designated as such in the related Supplement. "Equalization Account" shall have the meaning specified in subsection 4.2(d). "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time. "Euroclear Operator" shall mean Morgan Guaranty Trust Company of New York, Brussels, Belgium office, as operator of the Euroclear System. "Exchange" shall mean either of the procedures described in Section 6.9(b). "Exchangeable Transferor Certificate" shall mean the certificate executed by the Transferor and authenticated by the Trustee, substantially in the form of Exhibit A and exchangeable as provided in Section 6.9; provided, that at any time there shall be only one Exchangeable Transferor Certificate. "Exchange Date" shall have the meaning, with respect to any Series issued pursuant to an Exchange, specified in subsection 6.9(b). "Exchange Notice" shall have the meaning, with respect to any Series issued pursuant to an Exchange, specified in subsection 6.9(b). "Existing Agreement" shall have the meaning specified in the recitals to this Agreement. "Extended Trust Termination Date" shall have the meaning specified in subsection 12.1(a). "FDIC" shall mean the Federal Deposit Insurance Corporation, or any successor thereto. "Fitch" shall mean Fitch IBCA, Inc., or its successors. "Finance Charge Collections" shall mean, with respect to any Business Day, Collections received by the Servicer with respect to Finance Charge Receivables on such Business Day. "Finance Charge Receivables" shall mean all amounts billed from time to time to the Obligors on any Account in respect of (i) Periodic Finance Charges, (ii) over limit fees, (iii) late charges, (iv) returned check fees, (v) annual membership fees and annual service charges, if any, (vi) transaction charges and (vii) all other fees and charges, plus (x) Recoveries, (y) Discount Option Receivables, if any, and (z) investment earnings on amounts on deposit in the Equalization Account, if any. "Fixed Allocation Percentage" shall have the meaning for each Series specified in the related Supplement. "Floating Allocation Percentage" shall have the meaning for each Series specified in the related Supplement. "Foreign Clearing Agency" shall mean Cedelbank and the Euroclear Operator. "Global Certificate" shall have the meaning specified in Section 6.13. "Governmental Authority" shall mean the United States of America, any state or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. "Granite Original Accounts" means Accounts which the Bank establishes with Obligors who had Charge Account Agreements with SRI on August 1, 1998. "Highest Long-Term Credit Rating" shall mean, with respect to any investment or institution: (a) if a rating of such investment or institution is required pursuant to the terms of this Agreement, a credit rating not lower than the credit rating specified below from each Person specified below that is a Rating Agency with respect to any outstanding Series (or any successor rating designated by the applicable Rating Agency); and (b) if a rating of such investment or institution is required pursuant to the terms of a Supplement, a credit rating not lower than the credit rating specified below from each Person specified below that is a Rating Agency with respect to the Series issued pursuant to such Supplement (or any successor rating designated by the applicable Rating Agency): Rating Agency Credit Rating DCR AAA Fitch AAA Moody's Aaa Standard & Poor's AAA Notwithstanding the foregoing, if either DCR or Fitch is an applicable Rating Agency but does not maintain a credit rating on the investment or institution with respect to which such rating is required, then such investment or institution shall be deemed to have the Highest Long-Term Credit Rating if it has the applicable credit rating from the remaining applicable Rating Agencies. "Holder" or "Certificateholder" shall mean the Person in whose name a Certificate is registered in the Certificate Register, and if applicable, the holder of any Bearer Certificate or Coupon, as the case may be. "Ineligible Receivable" shall have the meaning specified in subsection 2.4(d). "Initial Closing Date" shall mean July 30, 1993. "Initial Invested Amount" shall mean, with respect to any Series of Certificates, the amount stated in the related Supplement. "Initial Originator" has the meaning it is given in the Receivables Purchase Agreement. "In-Store Payments" shall mean any payment made by an Obligor with respect to a Receivable by delivery of cash, check, money order or any other form of payment to a cashier or other employee of any SRI Store. "Interest Funding Account" shall have the meaning specified in subsection 4.2(b). "Internal Revenue Code" shall mean the Internal Revenue Code of 1986, as amended from time to time. "Invested Amount" shall have, with respect to any Series of Certificates, the meaning stated in the related Supplement. "Investment Company Act" shall mean the Investment Company Act of 1940, as amended from time to time. "Investor Account" shall mean each of the Interest Funding Account, any Principal Account, the Equalization Account, any Distribution Account and any Series Account. "Investor Certificate" shall mean any one of the certificates (including, without limitation, the Bearer Certificates or the Registered Certificates and any uncertificated certificates) issued pursuant to any Supplement. "Investor Certificateholder" shall mean the Holder of an Investor Certificate. "Investor Charge Off" shall have, with respect to each Series, the meaning specified in the applicable Supplement. "Investor Default Amount" shall have, with respect to any Series of Certificates, the meaning specified in the applicable Supplement. "Investor Exchange" shall have the meaning specified in subsection 6.9(b). "Investor Percentage" shall mean, with respect to Principal Collections, Finance Charge Collections and Receivables in Defaulted Accounts, and any Series of Certificates, the Floating Allocation Percentage or the Fixed Allocation Percentage, as applicable, pursuant to the applicable Supplement. "Late Fees" shall have, with respect to any Account, the meaning specified in the Charge Account Agreement applicable to such Account for late fees or similar charges. "Latest Rating Agency Approval Date" shall mean the most recent date of written confirmation from the Rating Agency that the addition of accounts to such date would not result in a downgrading of the Investor Certificates of such Series. "Licensed Names" shall have the meaning specified in Section 2.1. "Lien" shall mean any mortgage, deed of trust, pledge, hypothecation, assignment, participation or equity interest, deposit arrangement, encumbrance, lien (statutory or other), preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever, including, without limitation, any conditional sale or other title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing and the filing of any financing statement under the UCC (other than any such financing statement filed for informational purposes only) or comparable law of any jurisdiction to evidence any of the foregoing; provided, however, that any assignment pursuant to Section 7.2 shall not be deemed to constitute a Lien. "Merchant Agreement" means an agreement between the Bank and a merchant pursuant to which the merchant agrees to honor credit cards issued by the Bank to Obligors and the Bank agrees to make loans to Obligors for the purpose of purchasing goods and services at stores operated by the merchant. Without limiting the foregoing, the Retail Credit Services Agreement dated as of August 1, 1998 between the Transferor and the Bank is a Merchant Agreement. "Minimum Aggregate Principal Receivables" shall mean, as of any date of determination, an amount equal to the sum of (a) the Initial Invested Amounts for all outstanding Series on such date except a Series created pursuant to a Variable Funding Supplement at any time or a Paired Series during its Amortization Period, (b) with respect to a Series created pursuant to a Variable Funding Supplement, during the Revolving Period for such Series, the Invested Amount of such Series on such date of determination or, during the Amortization Period for such Series, the Invested Amount of such Series on the last day of the Revolving Period for such Series and (c) with respect to any Paired Series during its Amortization Period, the Invested Amount of such Series as of the preceding Distribution Date (after taking into account any payments or adjustments made on such Distribution Date). "Minimum Long-Term Credit Rating" shall mean, with respect to any investment or institution: (a) if a rating of such investment or institution is required pursuant to the terms of this Agreement, a credit rating not lower than the credit rating specified below from each Person specified below that is a Rating Agency with respect to any outstanding Series (or any successor rating designated by the applicable Rating Agency); and (b) if a rating of such investment or institution is required pursuant to the terms of a Supplement, a credit rating not lower than the credit rating specified below from each Person specified below that is Rating Agency with respect to the Series issued pursuant to such Supplement (or any successor rating designated by the applicable Rating Agency): Rating Agency Credit Rating DCR BBB Fitch BBB Moody's Baa2 Standard & Poor's BBB Notwithstanding the foregoing, if either DCR or Fitch is an applicable Rating Agency but does not maintain a credit rating on the investment or institution with respect to which such rating is required, then such investment or institution shall be deemed to have a Minimum Long-Term Credit Rating if it has the applicable credit rating from the remaining applicable Rating Agencies. "Minimum Retained Interest" shall mean the product of (i) the sum of (a) the Aggregate Principal Receivables and (b) the amounts on deposit in the Equalization Account and (ii) the Minimum Retained Percentage. "Minimum Retained Percentage" shall mean the highest Minimum Retained Percentage specified in any Supplement. "Minimum Transferor Interest" shall mean, as of any date of determination, the product of (i) the sum of (a) the Aggregate Principal Receivables and (b) the amounts on deposit in the Equalization Account and (ii) the Minimum Transferor Percentage on such date of determination. "Minimum Transferor Percentage" shall mean the highest Minimum Transferor Percentage specified in any Supplement. "Monthly Investor Servicing Fee" shall mean the Servicing Fee payable to the Servicer with respect to a Monthly Period. "Monthly Period" shall mean, unless otherwise defined with respect to a Series in the related Supplement, the period from and including the first day of each fiscal month of the Transferor to and including the last day of such fiscal month. "Moody's" shall mean Moody's Investors Service, Inc. or its successors. "New Discount Option Receivables" shall mean, on any Date of Processing on and after the date on which the Transferor's exercise of its discount option pursuant to Section 2.8 takes effect, the product of the amount of any Principal Receivables created on such Date of Processing (without giving effect to the proviso in the definition of Principal Receivables) and the Discount Percentage. "Notice Date" shall have the meaning specified in subsection 2.6 (e)(i). "Obligor" shall mean a Person obligated to make payments with respect to a Receivable arising under an Account pursuant to a Charge Account Agreement. "Officer's Certificate" shall mean a certificate signed by any Vice President or more senior officer of the Transferor or Servicer and delivered to the Trustee. "Opinion of Counsel" shall mean a written opinion of counsel, who may be counsel for or an employee of the Person providing the opinion, and who shall be reasonably acceptable to the Trustee. "Originators" shall mean SRI and any subsidiaries of SRI which are party from time to time to the Receivables Purchase Agreement in the capacity of an "Originator." "Outstanding Balance" shall mean, with respect to a Receivable on any day, the aggregate amount owed by the Obligor thereunder as of the close of business on the prior Business Day (net of returns and adjustments). "Paired Series" shall mean each Series which has been paired with a prefunded Series, and such prefunded Series. "Paying Agent" shall mean any paying agent appointed pursuant to Section 6.6 and shall initially be Bankers Trust (Delaware). "Pay Out Commencement Date" shall mean, with respect to each Series, the date on which (a) a Trust Pay Out Event is deemed to occur pursuant to Section 9.1 or (b) a Series Pay Out Event is deemed to occur pursuant to the Supplement for such Series. "Pay Out Event" shall mean, with respect to each Series, a Trust Pay Out Event or a Series Pay Out Event. "Periodic Finance Charges" shall have, with respect to any Account, the meaning specified in the Charge Account Agreement applicable to such Account for finance charges (due to periodic rate) or any similar term. "Permitted Lien" shall mean with respect to the Receivables: (i) Liens in favor of the Bank created pursuant to the Receivables Transfer Agreement; (ii) Liens in favor of the Transferor created pursuant to the Receivables Purchase Agreement assigned to the Trustee pursuant to this Agreement; (iii) Liens in favor of the Trustee pursuant to this Agreement; (iv) the rights to repurchase Defaulted Receivables granted to the Transferor in Section 2.4(f) and to each Originator in Section 2.04(c) of the Receivables Purchase Agreement; and (v) Liens which secure the payment of taxes, assessments and governmental charges or levies, if such taxes are either (a) not delinquent or (b) being contested in good faith by appropriate legal or administrative proceedings and as to which adequate reserves in accordance with generally accepted accounting principles shall have been established, but only so long as such proceedings could not subject the Originators, the Transferor, the Servicer or the Certificateholders to any civil or criminal penalty or liability or involve any risk of loss, sale or forfeiture of any property, rights or interests covered by this Agreement. "Person" shall mean any legal person, including any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, governmental entity or other entity of similar nature. "Portfolio Correction Distribution Amount" means the aggregate Series Portfolio Distribution Amounts for each Series then in its Revolving Period. "Portfolio Imbalance Event" will occur if, on the last day of any Monthly Period occurring during the Revolving Period (the "measuring day"), (a) on each of such day and the last day of each of the preceding eleven consecutive Monthly Periods, (i) the amount of all Cash Equivalents and other amounts on deposit in the Equalization Account exceeded 25% of (ii) the sum of all Principal Receivables and Cash Equivalents and other amounts on deposit in the Equalization Account on each such day, or (b) on each of the measurement day and the last day of the preceding Monthly Period, (i) the amount of all Cash Equivalents and other amounts on deposit in the Equalization Account exceeded 45% of (ii) the sum of Principal Receivables and Cash Equivalents and other amounts on deposit in the Equalization Account on each such day, with all such amounts calculated after giving effect to all amounts to be distributed on the Distribution Date following the last day of the applicable Monthly Period; provided, however, that no such event shall be deemed to be a Portfolio Imbalance Event if (A) the Trustee is not a Related Person at the time of such event or (B) the Transferor shall have delivered an Opinion of Counsel to the Trustee to the effect that such event will not cause the Transferor or the Trust to become an "investment company" or "controlled" by an "investment company" within the meaning of the Investment Company Act. "Principal Account" shall have the meaning specified in subsection 4.2(b). "Principal Collections" shall mean with respect to any Business Day the Collections received with respect to each Principal Receivable on such Business Day. "Principal Receivables" shall mean amounts shown on the Servicer's records as amounts payable by Obligors with respect to Eligible Receivables on any Account other than such amounts that are Finance Charge Receivables or Receivables in Defaulted Accounts and shall include, without limitation, amounts payable for purchases of goods or services; provided, however that if the Transferor shall have exercised its option pursuant to Section 2.8, Principal Receivables on any date of determination thereafter shall mean Principal Receivables as otherwise determined pursuant to this definition minus the amount of any Discount Option Receivables. A Receivable shall be deemed to have been created at the end of the day on the Date of Processing of such Receivable. In calculating the aggregate amount of Principal Receivables on any day, the amount of Principal Receivables shall be reduced by the aggregate amount of credit balances in the Accounts on such day. "Principal Shortfalls" shall mean, with respect to any Business Day, the aggregate amount for all outstanding Series which the related Supplements specify as "Principal Shortfalls" for such Business Day. "Principal Terms" shall have the meaning, with respect to any Series issued pursuant to an Exchange, specified in subsection 6.9(c). "Prior Year's Default Ratio" shall have the meaning specified in subsection 2.4(f)(i). "Pro Forma Condition" shall mean the determination by the Servicer that, as of any Distribution Date, the principal amount of Defaulted Receivables to be repurchased pursuant to Section 2.4(f) on the applicable Distribution Date is not greater than the amount by which (i) the aggregate amount of all Collections that would be allocated and distributed to the Transferor hereunder on such Distribution Date after giving pro forma effect to the repurchase of such Defaulted Receivables exceeds (ii) the aggregate amount of all Collections that would be allocated and distributed to the Transferor hereunder on such Distribution Date without giving effect to such repurchase of Defaulted Receivables. "Prospective Pay Out Event" shall have the meaning specified in subsection 2.3(l). "Purged Account" shall mean an Account that has an Outstanding Balance of zero and has been terminated pursuant to the applicable Credit and Collection Policy due to an extended period of inactivity. "Qualified Institution" shall have the meaning specified in subsection 4.2(a)(ii). "Rating Agency" shall mean, with respect to each Series, the rating agency or agencies, if any, specified in the related Supplement. "Reassignment" shall have the meaning specified in subsection 2.7(b)(i). "Reassignment Date" shall have the meaning specified in subsection 2.4(e). "Receivable" shall mean, with respect to any Obligor, any account, chattel paper or general intangible representing the indebtedness of such Obligor under a Charge Account Agreement arising in an Account from a sale of merchandise, insurance or services or from a cash advance, and includes the right to payment of any interest or finance charges and other obligations of such Obligor with respect thereto. Each Receivable includes, without limitation, all rights of the Account Owner and obligations of the Obligor under the applicable Charge Account Agreement. Each increase in the Outstanding Balance of any Receivable (other than any such increase resulting from the accrual of interest or finance charges or other fees with respect to such Receivable) shall, for purposes of Article II, constitute a separate Receivable. "Receivables Purchase Agreement" shall mean the Amended and Restated Receivables Purchase Agreement dated as of May 30, 1996, between Palais Royal, Inc., the other Originators named therein and each Additional Originator which may from time to time become a party thereto, as sellers, and the Transferor, as purchaser, as amended or otherwise modified from time to time. "Receivables Software" shall have the meaning specified in Section 8.8. "Record Date" shall mean, with respect to any Distribution Date, the last Business Day of the preceding Monthly Period. "Recoveries," shall mean, with respect to any period, an amount (which shall not be less than zero) equal to the product of (i) any amounts received during such period with respect to Receivables in Accounts which previously became Defaulted Accounts ("Defaulted Receivable Receipts") and (ii) the fraction resulting from (A) one minus (B) a fraction, the numerator of which is the aggregate Defaulted Receivable Repurchase Amount paid by the Originators during the preceding six full Monthly Periods pursuant to Section 2.4(f), and the denominator of which is the total principal amount of Receivables which became Defaulted Receivables during such six Monthly Periods. "Registered Certificates" shall have the meaning specified in Section 6.1. "Related Person" shall mean a Person who is, or is an Affiliate of, SRI, Bankers Trust Company (or any successor thereof), any Investor Certificateholder, any Enhancement Provider or any other Person whose affiliation with the Transferor or the Trust would violate the condition contained in Section (4)(i) of Rule 3-a7 under the Investment Company Act. "Related Contracts" shall have the meaning specified in Section 2.1. "Relevant UCC State" shall mean each jurisdiction in which the filing of a UCC financing statement is necessary to perfect the ownership interest of the Transferor pursuant to the Receivables Purchase Agreement or the Receivables Transfer Agreement or the ownership or security interest of the Trustee established under this Agreement. "Removal Date" shall have the meaning specified in subsection 2.7(b). "Removal Notice Date" shall mean the day, no later than the fifth Business Day prior to a Removal Date, on which the Transferor gives notice to the Trustee pursuant to Section 2.7(a) of its intention to remove Accounts from the Trust. "Removed Accounts" shall have the meaning specified in subsection 2.7(a). "Requirements of Law" for any Person shall mean the certificate of incorporation or articles of association and by-laws or other organizational or governing documents of such Person, and any law, treaty, rule or regulation, or determination of an arbitrator or Governmental Authority, in each case applicable to or binding upon such Person or to which such Person is subject, whether federal, state or local (including, without limitation, usury laws, the federal Truth in Lending Act and Regulation Z and Regulation B of the Board of Governors of the Federal Reserve System). "Responsible Officer" shall mean any officer within the Corporate Trust Office (or any successor group of the Trustee), including the President, any Vice President or any other officer of the Trustee customarily performing functions similar to those performed by any person who at the time shall be an above designated officer and who shall have direct responsibility for the administration of this Agreement. "Retained Interest" shall mean, on any date of determination, the sum of the Transferor Interest and the Invested Amount represented by any Transferor Retained Certificate. "Retained Percentage" shall mean, on any date of determination, the percentage equivalent of a fraction the numerator of which is the Retained Interest and the denominator of which is the aggregate amount of Principal Receivables at the end of the day immediately prior to such date of determination plus all amounts on deposit in the Equalization Account (but not including investment earnings on such amounts). "Revolving Period" shall have, with respect to each Series, the meaning specified in the related Supplement. "Satisfactory Short-Term Credit Rating" means, with respect to any investment or institution: (a) if a rating of such investment or institution is required pursuant to the terms of this Agreement, a credit rating not lower than the credit rating specified below from each Person specified below that is a Rating Agency with respect to any outstanding Series (or any successor rating designated by the applicable Rating Agency); and (b) if a rating of such investment or institution is required pursuant to the terms of a Supplement, a credit rating not lower than the credit rating specified below from each Person specified below that is Rating Agency with respect to the Series issued pursuant to such Supplement (or any successor rating designated by the applicable Rating Agency): Rating Agency Credit Rating DCR D-1 Fitch F-1 Moody's P-1 Standard & Poor's A-1+ Notwithstanding the foregoing, if either DCR or Fitch is an applicable Rating Agency but does not maintain a credit rating on the investment or institution with respect to which such rating is required, then such investment or institution shall be deemed to have a Satisfactory Short-Term Credit Rating if it has the applicable credit rating from the remaining applicable Rating Agencies. "Securities Act" shall mean the Securities Act of 1933, as amended. "Series" shall mean any series of Investor Certificates, which may include within any such Series a Class or Classes of Investor Certificates subordinate to another such Class or Classes of Investor Certificates. "Series Account" shall mean any account or accounts established pursuant to a Supplement for the benefit of the related Series. "Series Pay Out Event" shall have, with respect to any Series, the meaning specified in the related Supplement. "Series Portfolio Distribution Amounts" shall have, with respect to any Series, the meaning specified in the related Supplement. "Series Servicing Fee Percentage" shall mean, with respect to any Series, the amount specified as such in the related Supplement. "Series Termination Date" shall mean, with respect to any Series of s, the date stated as such in the related Supplement. "Servicer" shall mean initially SRI and thereafter any Person appointed as successor as herein provided to service the Receivables. "Servicer Default" shall have the meaning specified in Section 10.1. "Servicing Fee" shall have the meaning specified in the related Supplement. "Settlement Statement" shall mean a report in the form specified in subsection 1.2(e) as may be supplemented pursuant to any Supplement. "Shared Principal Collections" shall mean, with respect to any Business Day, the aggregate amount for all outstanding Series of Principal Collections which the related Supplements specify are to be treated as "Shared Principal Collections" for such Business Day. "SRI" shall mean Specialty Retailers, Inc., a corporation organized and existing under the laws of the State of Texas. "SRI Store" means any merchant which is a party to a Merchant Agreement with the Bank. "Standard & Poor's" shall mean Standard & Poor's Ratings Services or its successor. "Successor Servicer" shall have the meaning specified in subsection 10.2(a). "Supplement" shall mean, with respect to any Series, a supplement to this Agreement complying with the terms of Section 6.9 of this Agreement, executed in conjunction with any issuance of Certificates of such Series (or, in the case of the Issuance of Certificates on the Initial Closing Date, the supplements executed in connection with the issuance of such Certificates). "Supplemental Accounts" shall have the meaning specified in subsection 2.6(c). "Termination Notice" shall have, with respect to any Series, the meaning specified in Section 10.1. "Transfer" shall mean transfer, sell, exchange, pledge, hypothecate, participate, or otherwise assign, in whole or in part. "Transfer Agent and Registrar" shall have the meaning specified in Section 6.3 and shall initially be Bankers Trust Company, a New York banking corporation. "Transfer Date" shall mean, with respect to any Series, the Business Day immediately prior to each Distribution Date. "Transferor" shall mean SRI Receivables Purchase Co., Inc., a corporation organized and existing under the laws of the State of Delaware, and any successor thereto. "Transferor Exchange" shall have the meaning specified in subsection 6.9(b). "Transferor Fiscal Year" shall mean the approximately twelve month period ending on the Saturday nearest to January 31st. "Transferor Interest" shall mean, on any date of determination, the aggregate amount of Principal Receivables at the end of the day immediately prior to such date of determination plus all amounts on deposit in the Equalization Account (but not including investment earnings on such amounts) at the end of such immediately preceding day, minus the aggregate Adjusted Invested Amount for all Series at the end of such immediately preceding day. "Transferor Percentage" shall mean, on any date of determination, when used with respect to Principal Collections, Finance Charge Collections and Receivables in Defaulted Accounts, a percentage equal to 100% minus the Aggregate Investor Percentage with respect to such categories of Receivables. "Transferor Retained Certificates" shall mean Investor Certificates of any Series which the Transferor is required to retain pursuant to the terms of any Supplement. "Transferred Account" shall mean an Account to which a new credit account number has been issued under circumstances resulting from a lost or stolen credit card and not requiring standard application and credit evaluation procedures under the Credit and Collection Policy, and which can be traced or identified by reference to or by way of computer files or microfiche lists delivered to the Trustee or the bailee of the Trustee pursuant to Section 2.1 or 2.6 as an account into which an Account has been transferred. "Trust" shall mean the trust created by this Agreement, the corpus of which shall consist of the Trust Property. "Trust Extension" shall have the meaning specified in subsection 12.1(a). "Trust Pay Out Event" shall have, with respect to each Series, the meaning specified in Section 9.1. "Trust Property" shall have the meaning assigned in Section 2.1. "Trust Termination Date" shall mean the earlier to occur of (i) unless a Trust Extension shall have occurred, the day after the Distribution Date with respect to any Series following the date on which funds shall have been deposited in the Distribution Account or the applicable Series Account for the payment of Investor Certificateholders of each Series then issued and outstanding sufficient to pay in full the Aggregate Invested Amount plus interest accrued at the applicable Certificate Rate through the end of the day prior to the Distribution Date with respect to each such Series and certain other amounts as may be specified in any Series Supplement, (ii) if a Trust Extension shall have occurred, the Extended Trust Termination Date, and (iii) the date specified in Section 12.1. "Trustee" shall mean Bankers Trust (Delaware) and its successors and any Person resulting from or surviving any consolidation or merger to which it or its successors may be a party and any successor trustee appointed as herein provided. "UCC" shall mean the Uniform Commercial Code, as amended from time to time, as in effect in the applicable jurisdiction. "Undivided Interest" shall mean the undivided interest in the Trust evidenced by an Investor Certificate. "Unfunded Certificate" shall have the meaning assigned in Section 6.9(b). "Variable Funding Certificates" shall mean a series of Investor Certificates, in one or more Classes, issued pursuant to Section 6.9 and a Variable Funding Supplement hereto. "Variable Funding Supplement" shall mean a supplement executed in connection with the issuance of Variable Funding Certificates. "Year-to-Date Period" shall have the meaning specified in subsection 2.4(f)(i). Section I.2 Other Definitional Provisions. (a) All terms defined in any Supplement or this Agreement shall have the defined meanings when used in any certificate or other document made or delivered pursuant hereto unless otherwise defined therein. (b) As used herein and in any certificate or other document made or delivered pursuant hereto or thereto, accounting terms not defined in Section 1.1, and accounting terms partially defined in Section 1.1 to the extent not defined, shall have the respective meanings given to them under generally accepted accounting principles. To the extent that the definitions of accounting terms herein are inconsistent with the meanings of such terms under generally accepted accounting principles, the definitions contained herein shall control. (c) The agreements, representations and warranties of SRI in this Agreement and in any Supplement in its capacity as Servicer and of SRI Receivables Purchase Co., Inc. in its capacity as Transferor shall be deemed to be the agreements, representations and warranties of SRI and SRI Receivables Purchase Co., Inc. solely in each such capacity for so long as either of them acts in each such capacity under this Agreement. (d) The words "hereof," "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to any Supplement or this Agreement as a whole and not to any particular provision of this Agreement or any Supplement; and Section, subsection , Schedule and Exhibit references contained in this Agreement or any Supplement are references to Sections, subsections, Schedules and Exhibits in or to this Agreement or any Supplement unless otherwise specified. (e) The Daily Report and Settlement Statement shall be in substantially the forms of Exhibits C and D, with such changes as the Servicer may determine to be necessary or desirable; provided, however, that no such change shall serve to exclude information required by this Agreement or any Supplement. The Servicer shall, upon making such determination, deliver to the Trustee and each Rating Agency an Officer's Certificate to which shall be annexed the form of the related Exhibit, as so changed. Upon the delivery of such Officer's Certificate to the Trustee, the related Exhibit, as so changed, shall for all purposes of this Agreement constitute such Exhibit. The Trustee may conclusively rely upon such Officer's Certificate. [End of Article I] ARTICLE II CONVEYANCE OF RECEIVABLES; ISSUANCE OF CERTIFICATES Section II.1 Conveyance of Receivables. The Transferor does hereby transfer, assign, set-over, and otherwise convey to the Trust for the benefit of the Certificateholders and, if specified in any Supplement, any Enhancement Provider, without recourse, all of its right, title and interest in, to and under the following (collectively, the "Trust Property"): (i) all right, title and interest of the Transferor in and to the Receivables now existing and hereafter created and arising in connection with the Accounts and any accounts that meet the definition of Automatic Additional Accounts, including, without limitation, all accounts, contract rights, chattel paper, instruments, general intangibles and other obligations of any Obligor with respect to any such Receivables, now or hereafter existing, whether or not arising out of or in connection with the sale or lease of goods or the rendering of services, including without limitation the right to payment of any interest, Finance Charge Receivables, returned check fees or late charges and other obligations of an Obligor with respect to any such Receivables, and all rights in and to all security agreements, and other contracts securing or otherwise relating to any such accounts, contract rights, chattel paper, instruments, general intangibles or obligations (any and all such security agreements and other contracts being the "Related Contracts"); (ii) all guarantees, insurance and other agreements or arrangements of whatever character from time to time supporting or securing payment of any Receivables; (iii) the Receivables Purchase Agreement including, without limitation, (A) all rights of the Transferor to receive moneys due and to become due under or pursuant to the Receivables Purchase Agreement, whether payable as fees, expenses, costs or otherwise, (B) all rights of the Transferor to receive proceeds of any insurance, indemnity, warranty or guaranty with respect to the Receivables Purchase Agreement, (C) claims of the Transferor for damages arising out of or for breach of or default under the Receivables Purchase Agreement, (D) the right of the Transferor to amend, waive or terminate the Receivables Purchase Agreement, to perform thereunder and to compel performance and otherwise exercise all remedies thereunder and (E) all other rights, remedies, powers, privileges and claims of the Transferor under or in connection with the Receivables Purchase Agreement (the Trust Property described in this paragraph (iii) of Section 2.1 being sometimes described herein as the "Assigned Property"); (iv) the following (the "Account Property"): (A) any lock boxes maintained by the Servicer or an Account Owner, the Collection Account, any Interest Funding Account, any Principal Account, any Distribution Account and the Equalization Account, all funds, and all certificates and instruments, if any, from time to time representing or evidencing or held in any such lock boxes, the Collection Account, any Interest Funding Account, any Principal Account, any Distribution Account and the Equalization Account; (B) all eligible investments from time to time and all certificates and instruments, if any, from time to time representing or evidencing the eligible investments; (C) all notes, certificates of deposit and other instruments from time to time hereafter delivered to or otherwise possessed by the Trustee for and on behalf of the Transferor in substitution for or in addition to any of the then existing Account Property; (D) all interest, dividends, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any and all of the existing Account Property; and (E) all additional property that may from time to time hereafter be assigned or pledged to the Trustee for the benefit of the Certificateholders hereunder by the Transferor or by any Person on the Transferor's behalf; (v) proceeds of any and all of the Trust Property described in subparagraphs (i) through (iv) above (including, without limitation, Recoveries and proceeds that constitute property of the types described in clauses (i) through (iv) above) and, to the extent not otherwise included, all payments under insurance (whether or not the Trustee is the loss payee thereof), or any indemnity, warranty or guaranty, payable by reason of loss or damage to or otherwise with respect to any of such foregoing Trust Property. The foregoing transfer, assignment, set-over and conveyance does not constitute and is not intended to result in a creation or an assumption by the Trust, the Trustee or any Investor Certificateholder of any obligation of the Transferor, the Servicer or any other Person in connection with the Accounts or Receivables or any agreement or instrument relating thereto, including, without limitation, any obligation to any Obligors or insurers, or in connection with the Receivables Purchase Agreement. In connection with such transfer, assignment, set-over and conveyance, the Transferor agrees to record and file, at its own expense, one or more financing statements (including any continuation statements with respect to such financing statements when applicable) with respect to the Receivables now existing and hereafter created for the transfer of accounts or general intangibles (as defined in Section 9-106 of the UCC as in effect in the Relevant UCC State) meeting the requirements of applicable state law in such manner and in such jurisdictions as are necessary to perfect the assignment of the Receivables to the Trust, and to deliver file stamped copies of such financing statements or continuation statements or other evidence of such filing (which may, for purposes of this Section 2.1, consist of telephone confirmation of such filing) to the Trustee on or prior to the date of issuance of the Certificates, and in the case of any continuation statements filed pursuant to this Section 2.1, as soon as practicable after receipt thereof by the Transferor. The foregoing transfer, assignment, set-over and conveyance to the Trust shall be made to the Trustee, on behalf of the Trust, and each reference in this Agreement to such transfer, assignment, set-over and conveyance shall be construed accordingly. In connection with such transfer, the Transferor agrees, at its own expense, on or prior to each Cut-Off Date on which Accounts of an Account Owner are designated to the Trust (i) to annotate and indicate in its computer files that Receivables created in connection with such Accounts have been transferred to the Trust pursuant to this Agreement for the benefit of the Certificateholders and (ii) to deliver to the Trustee or the bailee of the Trustee a computer file or microfiche list containing a true and complete list of all such Accounts, identified by account number and setting forth the Outstanding Balance of each Receivable as of the applicable Cut-Off Date. Such file or list shall be marked as Schedule I to this Agreement (or as a supplement thereto), delivered to the Trustee or the bailee of the Trustee as confidential and proprietary, and is hereby incorporated into and made a part of this Agreement. The Transferor further agrees not to alter the file designation referenced in clause (i) of this paragraph with respect to any Account during the term of this Agreement unless and until such Account becomes a Removed Account. The Transferor and SRI hereby grant to the Trustee a non-exclusive and, except to the extent provided below, non-transferable license to use any tradenames that may from time to time be used by any Account Owner (collectively, the "Licensed Names") and to use the Receivables Software. This license and the rights of use hereunder are contingent on the occurrence and continuance of a Servicer Default. Following such event, these licenses and the right of use of the Licensed Names and the Receivables Software hereunder may be transferred by the Trustee to the extent necessary to collect the Receivables in a commercially reasonable manner. The rights of use granted under these licenses are limited to such uses of the Licensed Names and Receivables Software as are reasonably necessary to the collection by the Trustee in a commercially reasonable manner of the Receivables and are further subject to (i) in the case of the Receivables Software, the terms of any third-party licenses thereof and consents in relation thereto and (ii) in the case of the Licensed Names, maintaining standards of quality of the business of the Servicer as conducted prior to the Servicer Default. The licenses are limited to actions taken in accordance with the terms of this Agreement and shall expire on the expiration of a reasonable time for the collection of all Receivables. Notwithstanding any other provisions to the contrary in this Agreement or in any other agreement between the parties, no other uses or display of the Licensed Names or Receivables Software shall be made by Trustee except as granted in this paragraph. The Transferor hereby grants and transfers to the Trustee on behalf of the Trust a first priority perfected security interest in all of the Transferor's right, title and interest in, to and under the Trust Property to secure a loan in an amount equal to the unpaid principal amount of the Investor Certificates issued hereunder or to be issued pursuant to this Agreement and the interest accrued thereon at the related Certificate Rate and to secure all of the Transferor's and Servicer's obligations hereunder, including, without limitation, the Transferor's obligation to transfer Receivables hereafter created to the Trust (the "Secured Obligations"), and agrees that this Agreement shall constitute a security agreement under applicable law. Section II.2 Acceptance by Trustee. (a The Trustee hereby acknowledges its acceptance, on behalf of the Trust, of all right, title and interest previously held by the Transferor in, to and under the Trust Property and declares that it shall maintain such right, title and interest, upon the Trust herein set forth, for the benefit of all Certificateholders. The Trustee further acknowledges that, prior to or simultaneously with the initial execution and delivery of this Agreement, the Transferor delivered to the Trustee or the bailee of the Trustee the computer file or microfiche list that was represented as being the computer file or microfiche list described in the third paragraph of Section 2.1. (b The Trustee shall have no power to create, assume or incur indebtedness or other liabilities in the name of the Trust other than as contemplated in this Agreement. Section II.3 Representations and Warranties of the Transferor. The Transferor hereby represents and warrants to the Trustee, on behalf of the Trust, as of the Initial Closing Date and, with respect to any Series of Certificates, as of the date of the related Supplement and the related Closing Date for such Series: (a Organization and Good Standing. The Transferor is a corporation duly organized and validly existing in good standing under the laws of the State of Delaware and has full corporate power, authority and legal right to own its properties and conduct its business as such properties are presently owned and such business is presently conducted, and to execute, deliver and perform its obligations under this Agreement, any Supplement and the Receivables Purchase Agreement and to execute and deliver to the Trustee the Certificates pursuant hereto. (b Due Qualification. The Transferor is duly qualified to do business and is in good standing (or is exempt from such requirement) in any state required in order to conduct business, and has obtained all necessary licenses and approvals with respect to the Transferor required under federal and Delaware law; provided, however, that no representation or warranty is made with respect to any qualifications, licenses or approvals which the Trustee would have to obtain to do business in any state in which the Trustee seeks to enforce any Receivable. (c Due Authorization. The execution and delivery of this Agreement, any Supplement and the Receivables Purchase Agreement and the execution and delivery to the Trustee of the Certificates by the Transferor and the consummation of the transactions provided for in this Agreement, any Supplement and the Receivables Purchase Agreement have been duly authorized by the Transferor by all necessary corporate action on its part and this Agreement will remain, from the time of its execution, an official record of the Transferor. (d No Conflicts. The execution, delivery and performance of this Agreement, the Receivables Purchase Agreement, and any Supplement and the Certificates, the performance of the transactions contemplated by this Agreement, the Receivables Purchase Agreement, and any Supplement and the fulfillment of the terms hereof by the Transferor, do not (i) contravene its charter or By-Laws, (ii) violate any provision of, or require any filing (except for the filings under the UCC required by this Agreement, each of which has been duly made and is in full force and effect), registration, consent or approval under, any law, rule, regulation, order, writ, judgment, injunction, decree, determination or award presently in effect having applicability to the Transferor, except for such filings, registrations, consents or approvals as have already been obtained and are in full force and effect, (iii) result in a breach of or constitute a default or require any consent under any indenture or loan or credit agreement or any other agreement, lease or instrument to which the Transferor is a party or by which it or its properties may be bound or affected except those as to which a consent or waiver has been obtained and is in full force and effect and an executed copy of which has been delivered to the Trustee, or (iv) result in, or require, the creation or imposition of any Lien upon or with respect to any of the properties now owned or hereafter acquired by the Transferor other than as specifically contemplated by this Agreement. (e Taxes. The Transferor has filed on a timely basis all tax returns (federal, state and local) required to be filed and has paid or made adequate provision for the payment of all taxes, assessments and other governmental charges due from the Transferor or is contesting any such tax, assessment or other governmental charge in good faith through appropriate proceedings. The Transferor knows of no basis for any material additional tax assessment for any fiscal year for which adequate reserves have not been established. (f No Violation. The execution and delivery of this Agreement, any Supplement and the Receivables Purchase Agreement and the execution and delivery to the Trustee of the Certificates, the performance of the transactions contemplated by this Agreement and the fulfillment of the terms hereof will not conflict with or violate any Requirements of Law applicable to the Transferor. (g No Proceedings. There are no outstanding injunctions, writs or restraining orders, and no proceedings or investigations pending or, to the knowledge of the Transferor, threatened against the Transferor before any court, regulatory body, administrative agency, or other tribunal or governmental instrumentality (i) asserting the invalidity of this Agreement, any Supplement, the Receivables Purchase Agreement or the Certificates, (ii) seeking to prevent the issuance of the Certificates or the consummation of any of the transactions contemplated by this Agreement, any Supplement, the Receivables Purchase Agreement or the Certificates, (iii) seeking any determination or ruling that, in the reasonable judgment of the Transferor, would materially and adversely affect the performance by the Transferor of its obligations under this Agreement, any Supplement or the Receivables Purchase Agreement, (iv) seeking any determination or ruling that would materially and adversely affect the validity or enforceability of this Agreement, any Supplement, the Receivables Purchase Agreement or the Certificates or (v) seeking to affect adversely the income tax attributes of the Trust. (h All Consents Obtained. All approvals, authorizations, consents, orders or other actions of any Person or of any governmental body or official required in connection with the execution and delivery of this Agreement, any Supplement, the Receivables Purchase Agreement and the Certificates, the performance of the transactions contemplated by this Agreement, any Supplement and the Receivables Purchase Agreement and the fulfillment of the terms hereof, have been obtained. (i Bona Fide Receivables. Each Receivable is or will be an account receivable arising out of an Account Owner's performance (or, in the case of an Account that is an Automatic Additional Account pursuant to clause (b) of the definition of Automatic Additional Account, the performance of the originator of such Account at the time such Receivable was originated) in accordance with the terms of the Charge Account Agreement giving rise to such Receivable. The Transferor has no knowledge at the time of the initial creation of an interest of the Trust in any Eligible Receivable hereunder of any fact which should have led it to expect that such Eligible Receivable would not be enforceable against the Obligor when due. (j Place of Business. The principal place of business and chief executive office of the Transferor is in Houston, Texas. Such location has not changed within the last four months. (k Use of Proceeds. No proceeds of the issuance of any Certificate will be used by the Transferor to purchase or carry any margin security. (l Pay Out Event. As of the Initial Closing Date, no Pay Out Event and no condition that with the giving of notice and/or the passage of time would constitute a Pay Out Event (a "Prospective Pay Out Event"), has occurred and is continuing. (m Not an Investment Company. The Transferor is not an "investment company" or "controlled" by an "investment company" within the meaning of the Investment Company Act, or is exempt from all provisions of the Investment Company Act. For the purposes of the representations and warranties contained in this Section 2.3 and made by the Transferor on the Initial Closing Date, "Certificates" shall mean the Certificates issued on the Initial Closing Date. The representations and warranties set forth in this Section 2.3 shall survive the transfer and assignment of the respective Receivables to the Trust, and termination of the rights and obligations of the Servicer pursuant to Section 10.1. The Transferor hereby represents and warrants to the Trust, with respect to any Series of Certificates, as of its Closing Date, unless otherwise stated in the related Supplement, that the representations and warranties of the Transferor set forth in Section 2.3, are true and correct as of such date (for the purposes of such representations and warranties, "Certificates" shall mean the Certificates issued on the related Closing Date). Upon discovery by the Transferor, the Servicer or a Responsible Officer of the Trustee of a breach of any of the foregoing representations and warranties, the party discovering such breach shall give prompt written notice to the others. Section II.4 Representations and Warranties of the Transferor Relating to this Agreement and the Receivables. (a) Binding Obligation; Valid Transfer and Assignment. The Transferor hereby represents and warrants to the Trustee, on behalf of the Trust, that, as of the Initial Closing Date and with respect to any Series of Certificates, as of the date of its related Supplement and Closing Date, and, with respect to any Series and matters involving (X) Supplemental Accounts, as of the applicable Addition Date and (Y) Automatic Additional Accounts, as of the date the Receivables of such Accounts are first designated for inclusion in the Trust: (i The Receivables Purchase Agreement, this Agreement and any Supplement each constitutes the legal, valid and binding obligation of the Transferor, enforceable against the Transferor in accordance with its terms, except (A) as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect affecting the enforcement of creditors' rights in general, and (B) as such enforceability may be limited by general principles of equity (whether considered in a suit at law or in equity). (ii This Agreement constitutes either (A) a valid transfer, assignment, set-over and conveyance to the Trust of all right, title and interest of the Transferor in and to the Trust Property, and such Trust Property will be held by the Trust free and clear of any Lien of any Person claiming through or under the Transferor or any of its Affiliates except for (x) Permitted Liens, (y) the interest of the Transferor as Holder of the Exchangeable Transferor Certificate and any other Class of Certificates held by the Transferor from time to time and (z) the Transferor's right, if any, to interest accruing on, and investment earnings, if any, in respect of any Interest Funding Account, any Principal Account, the Equalization Account, or any Series Account, as provided in this Agreement or the related Supplement, or (B) a grant of a security interest (as defined in the UCC as in effect in the Relevant UCC State) in, to and under the Trust Property, which grant is enforceable with respect to the existing Receivables and any Receivables in Automatic Additional Accounts designated for inclusion in the Trust (other than Receivables in Supplemental Accounts) and the proceeds thereof upon execution and delivery of this Agreement, and which will be enforceable with respect to such Receivables hereafter created and the proceeds thereof, upon such creation. If this Agreement constitutes the grant of a security interest to the Trust in such property, upon the filing of the financing statement described in Section 2.1 and in the case of the Receivables hereafter created and proceeds thereof, upon such creation, the Trust shall have a first priority perfected security interest in such property, except for Permitted Liens. Except as contemplated in this Agreement or any Supplement, neither the Transferor nor any Person claiming through or under the Transferor shall have any claim to or interest in the Collection Account, any Principal Account, any Interest Funding Account, the Distribution Account, the Equalization Account, any principal funding account for any Series or any other Series Account, except for the Transferor's rights to receive interest accruing on, and investment earnings in respect of, any such account as provided in this Agreement (or, if applicable, any Series Account as provided in any Supplement) and, if this Agreement constitutes the grant of a security interest in such property, except for the interest of the Transferor in such property as a debtor for purposes of the UCC as in effect in the Relevant UCC State. The Receivables Purchase Agreement constitutes a valid transfer, assignment, set-over and conveyance to the Transferor of all right, title and interest of the Originators in and to the Receivables purported to be sold thereunder, whether then existing or thereafter created in the applicable Accounts and the proceeds thereof. (iii The Transferor is not insolvent and has adequate capital to conduct its business as it is presently being conducted. (iv The Transferor is (or, with respect to Receivables arising after the date hereof, will be) the legal and beneficial owner of all right, title and interest in and to each Receivable and each Receivable has been or will be transferred to the Trust free and clear of any Lien other than Permitted Liens. (v All consents, licenses, approvals or authorizations of or registrations or declarations with any Governmental Authority required to be obtained, effected or given by the Transferor in connection with the transfer of Trust Property to the Trust have been duly obtained, effected or given and are in full force and effect. (vi The Transferor has clearly and unambiguously marked all its computer records and all its microfiche storage files regarding the Receivables as the property of the Trust and shall maintain such records in a manner such that the Trust shall have a perfected interest in such Receivables. (vii As of the Initial Closing Date, Schedule I to this Agreement is and will be an accurate and complete listing of all Accounts in all material respects as of such day and the information contained therein with respect to the identity of each Account and the aggregate unpaid balance of the Receivables existing thereunder is and will be true and correct in all material respects as of such day; as of the close of business on the Business Day preceding the Initial Closing Date the aggregate Outstanding Balance for all Eligible Receivables was $159,131,000 and the initial deposit to the Equalization Account was $11,000,000. (viii Each Account classified as an "Eligible Account" by the Transferor in any document or report delivered hereunder will satisfy the requirements contained in the definition of Eligible Account as of the time of such document or report and each Receivable classified as an "Eligible Receivable" by the Transferor in any document or report delivered hereunder will satisfy the requirements contained in the definition of Eligible Receivable as of the time of such document or report. (ix All information with respect to the Accounts and the Receivables provided to the Trustee by the Transferor was true and correct in all material respects as of the Closing Date, or with respect to Supplemental Accounts as of each Addition Date and with respect to Automatic Additional Accounts, as of the day Receivables arising under each such Account are first designated for inclusion in the Trust, as the case may be. (x Each Receivable then existing has been conveyed to the Trust free and clear of any Lien of any Person claiming through or under the Transferor or any of its Affiliates (other than Permitted Liens) and in compliance, in all material respects, with all Requirements of Law applicable to the Transferor. (xi With respect to each Receivable then existing, all consents, licenses, approvals or authorizations of or registrations or declarations with any Governmental Authority required to be obtained, effected or given by the Transferor in connection with the conveyance of such Receivable to the Trust have been duly obtained, effected or given and are in full force and effect. (b) Daily Representations and Warranties. On each day on which any new Receivable is purchased by the Transferor, the Transferor shall be deemed to represent and warrant to the Trust that (A) each Receivable purchased by the Transferor on such day has been conveyed to the Trust in compliance, in all material respects, with all Requirements of Law applicable to the Transferor and free and clear of any Lien of any Person claiming through or under the Transferor or any of its Affiliates (other than Permitted Liens) and (B) with respect to each such Receivable, all consents, licenses, approvals or authorizations of or registrations or declarations with, any Governmental Authority required to be obtained, effected or given by the Transferor in connection with the conveyance of such Receivable to the Trust have been duly obtained, effected or given and are in full force and effect. (c) Notice of Breach. The representations and warranties set forth in this Section 2.4 shall survive the transfer and assignment of the respective Receivables to the Trust. Upon discovery by the Transferor, the Servicer or a Responsible Officer of the Trustee of a breach of any of the representations and warranties set forth in this Section 2.4, the party discovering such breach shall give prompt written notice to the other parties mentioned above. The Transferor agrees to cooperate with the Servicer and the Trustee in attempting to cure any such breach. (d) Designation of Ineligible Receivables. In the event of a breach with respect to a Receivable of any representations and warranties set forth in subsection 2.3(i) or subsections 2.4(a)(iii) through (xi) or subsection 2.4(b), or in the event that a Receivable is not an Eligible Receivable as a result of the failure to satisfy the conditions set forth in the definition of Eligible Receivable, such Receivable shall be designated an "Ineligible Receivable" and shall be assigned an Outstanding Balance of zero for the purpose of determining the aggregate amount of Principal Receivables on any day; provided however, that if such representations and warranties with respect to such Receivable shall subsequently be true and correct in all material respects as if such Receivable had been created on such day or such Receivable shall subsequently satisfy the conditions set forth in the definition of Eligible Receivable, such Receivable shall be designated an Eligible Receivable, and the principal amount of such Receivable shall be included in determining the aggregate amount of Principal Receivables on such day. On and after the date of its designation as an Ineligible Receivable, each Ineligible Receivable shall not be given credit in determining the aggregate amount of Principal Receivables used in the calculation of any Investor Percentage, the Transferor Percentage or the Transferor Interest. In the event that on any Business Day the exclusion of an Ineligible Receivable from the calculation of the Transferor Interest would cause the Transferor Interest to be reduced below the Minimum Transferor Interest, the Transferor shall immediately make a deposit in the Equalization Account (for allocation as a Principal Receivable) in immediately available funds prior to the next succeeding Business Day in an amount equal to the amount by which the Transferor Interest would be reduced below the Minimum Transferor Interest as a result of the exclusion of such Ineligible Receivable. The portion of such deposit allocated to the Investor Certificates of each Series shall be distributed to the Investor Certificateholders of each Series in the manner specified in Article IV. Such designation and reduction of the Outstanding Balance provided for above (and any Pay Out Event that occurs upon failure to make a required deposit) shall constitute the sole remedy respecting a breach of any representations and warranties set forth in subsection 2.3(i) or subsections 2.4(a)(iii) through (xi) or subsection 2.4(b) available to the Investor Certificateholders of such Series or the Trustee on behalf of the Investor Certificateholders of such Series. (e) Reassignment of Trust Portfolio. In the event of a breach of any of the representations and warranties set forth in subsections 2.3(a), (b) and (c) and 2.4(a)(i) and (ii) with respect to any Series, any of (i) the Trustee, (ii) the Holders of Investor Certificates evidencing Undivided Interests aggregating more than 50% of the Aggregate Invested Amount, (iii) if specified in any Supplement, the Holders of Investor Certificates evidencing Undivided Interests aggregating more than a specified percentage of the Invested Amount of any Series or Class, or (iv) if specified in any Supplement, an Enhancement Provider, in each case by notice then given in writing to the Transferor (and to the Trustee and the Servicer, if given by any Investor Certificateholders), may direct the Transferor to accept reassignment of an amount of Principal Receivables equal to the face amount of the Invested Amount to be repurchased (as specified below) within 60 days of such notice (or within such longer period as may be specified in such notice), and the Transferor shall be obligated to accept reassignment of such Principal Receivables on a Distribution Date specified by the Transferor (such Distribution Date, the "Reassignment Date") occurring within such applicable period on the terms and conditions set forth below; provided, however, that no such reassignment shall be required to be made, and no notice of such reassignment may be given, if, at any time during such applicable period, the representations and warranties contained in subsections 2.3(a), (b) and (c) and subsections 2.4(a)(i) and (ii) shall then be true and correct in all material respects. The Transferor shall, on the Transfer Date (in next day funds) preceding the Reassignment Date, deposit an amount equal to the reassignment deposit amount for such Series in the related Distribution Account or Series Account, as provided in the related Supplement, for distribution to the Investor Certificateholders pursuant to Article XII. The reassignment deposit amount with respect to any Series, unless otherwise stated in the related Supplement, shall be equal to (i) the Invested Amount of such Series at the end of the day on the last day of the Monthly Period preceding the Reassignment Date (less the amount, if any, previously allocated for payment of principal to such Certificateholders on the related Reassignment Date, in the Monthly Period in which the Reassignment Date occurs), provided, however, that with respect to any Series issued pursuant to a Variable Funding Supplement such amount shall be the Invested Amount of such Series as of the Reassignment Date, plus (ii) an amount equal to all interest accrued but unpaid on the Investor Certificates of such Series at the applicable Certificate Rate through the Reassignment Date, less the amount, if any, previously allocated for payment of interest to the Certificateholders of such Series on the Reassignment Date, plus any other amounts accrued and owing as specified in the applicable Supplement. Payment of the reassignment deposit amount with respect to any Series, and all other amounts in the Distribution Account or the applicable Series Account in respect of the preceding Monthly Period, shall be considered a prepayment in full of the Receivables represented by the Investor Certificates of such Series. On the Distribution Date following the Transfer Date on which such amount has been deposited in full into the Distribution Account or the applicable Series Account, the Receivables and all monies due or to become due with respect thereto and all proceeds of the Receivables allocated to the Receivables pursuant to the related Supplement shall be released to the Transferor after payment of all amounts otherwise due hereunder on or prior to such dates and the Trustee shall execute and deliver such instruments of transfer or assignment, in each case without recourse, representation or warranty, as shall be prepared by and as are reasonably requested by the Transferor to vest in the Transferor, or its designee or assignee, all right, title and interest of the Trust in and to such Receivables, all monies due or to become due with respect thereto and all proceeds of such Receivables allocated to such Series pursuant to the related Supplement. If the Trustee or the Investor Certificateholders of any Series give notice directing the Transferor to accept reassignment as provided above, the obligation of the Transferor to accept reassignment of the applicable Receivables and pay the reassignment deposit amount pursuant to this subsection 2.4(e) shall constitute the sole remedy respecting a breach of the representations and warranties contained in subsections 2.3(a), (b) and (c) and 2.4(a)(i) and (ii) available to the Investor Certificateholders of such Series or the Trustee on behalf of the Investor Certificateholders of such Series. The Trustee shall have no duty to conduct any affirmative investigation as to the occurrence of any condition requiring the repurchase of any Receivable by the Transferor pursuant to this Agreement or any Supplement or the eligibility of any Receivable for purposes of this Agreement or any Supplement. (f) Limited Repurchase of Defaulted Receivables. (i) On each Distribution Date with respect to a Monthly Period during each fiscal year of the Transferor, the Transferor shall repurchase from the Trust all Receivables transferred to the Trust by the Transferor which have theretofore become Defaulted Receivables during the period commencing on the first day of such fiscal year and ending on the last day of such Monthly Period (the "Year-to-Date Period"); provided, that (A) the Pro Forma Condition has been satisfied as of such date, (B) the Originator has elected to repurchase Defaulted Receivables pursuant to the Receivables Purchase Agreement, (C) no Amortization Period is then in effect for any Series, and (D) the Transferor shall not repurchase, with respect to any Monthly Period, an amount of Defaulted Receivables which will cause the aggregate cumulative principal amount of Defaulted Receivables repurchased by the Transferor for the Year-to-Date Period to exceed 95% of the product of (1) the cumulative principal amount of Receivables transferred pursuant to this Agreement by the Transferor during such Year-to-Date Period multiplied by (2) the percentage equivalent of a fraction, the numerator of which is the aggregate principal amount of Defaulted Receivables recorded by the Transferor during the immediately preceding fiscal year, and the denominator of which is the cumulative principal amount of Receivables transferred pursuant to this Agreement by the Transferor during the immediately preceding fiscal year (such percentage equivalent, the "Prior Year's Default Ratio"). (ii) The Transferor shall deposit, on the Transfer Date (in next day funds) preceding each Distribution Date on which Defaulted Receivables are repurchased, an amount equal to the principal amount of Defaulted Receivables being repurchased (the "Defaulted Receivable Repurchase Amount") into the Collection Account. On such Distribution Date, such repurchased Defaulted Receivables and all monies due or to become due with respect thereto and all proceeds of such repurchased Defaulted Receivables allocated to such repurchased Defaulted Receivables for which the Defaulted Receivable Repurchase Amount has been paid shall be released to the Transferor after payment of all amounts otherwise due hereunder on or prior to such dates and the Trustee shall execute and deliver such instruments of transfer or assignment, in each case without recourse, representation or warranty, as shall be prepared by and as are reasonably requested by the Transferor to vest in the Transferor or its designee or assign, all right, title and interest of the Trust in and to such repurchased Defaulted Receivables, all monies due or to become due with respect thereto and all proceeds of such repurchased Defaulted Receivables. Thereafter, such repurchased Defaulted Receivables shall not be considered Receivables for any purpose hereunder other than (x) for purposes of calculating a Prior Year's Default Ratio and (y) to the extent provided in the definition of "Default Amount." (iii) In consideration for the Transferor's repurchase of Defaulted Receivables as set forth in this subsection 2.4(f), so long as the Transferor complies with such obligation, the Transferor shall retain any amounts other than Recoveries received by the Transferor with respect to Defaulted Receivables. Section 2.5 Covenants of the Transferor. The Transferor hereby covenants that: (a Receivables to be Accounts or General Intangibles. Transferor will take no action to cause any Receivable to be evidenced by any instrument (as defined in the UCC as in effect in the Relevant UCC State). The Transferor will take no action to cause any Receivable to be anything other than an "account," "general intangible" or "chattel paper" (each as defined in the UCC as in effect in the Relevant UCC State). (b Security Interests. Except for the conveyances hereunder, the Transferor will not sell, pledge, assign or transfer to any other Person, or grant, create, incur, assume or suffer to exist any Lien, on any Receivable, whether now existing or hereafter created, or any interest therein; the Transferor will immediately notify the Trustee of the existence of any Lien on any Receivable; and the Transferor shall defend the right, title and interest of the Trust in, to and under the Receivables, whether now existing or hereafter created, against all claims of third parties claiming through or under the Transferor; provided, however, that nothing in this subsection 2.5(b) shall prevent or be deemed to prohibit the Transferor from suffering to exist upon any of the Receivables any Permitted Lien. (c Charge Account Agreements and Credit and Collection Policies. The Transferor shall comply with and perform its obligations and shall take all actions reasonably within its control to cause the Account Owners to comply with and perform their obligations under the Charge Account Agreements relating to the Accounts and the Credit and Collection Policy except insofar as any failure to comply or perform would not materially and adversely affect the rights of the Trust or the Certificateholders hereunder or under the Certificates. The Transferor may change, and permit the Account Owners to change, the terms and provisions of the Charge Account Agreements or the Credit and Collection Policy in any respect (including, without limitation, the reduction of the required minimum monthly payment, the calculation of the amount, or the timing, of charge offs and the periodic finance charges and other fees to be assessed thereon) only if such change (individually or taken together with all prior changes to the terms and provisions of the Charge Account Agreements or the Credit and Collection Policy) (i) would not, in the reasonable belief of the Transferor, cause, immediately or with the passage of time, a Pay Out Event to occur and (ii) (A) (if it owns a comparable segment of charge card accounts) is made applicable to the comparable segment of the revolving credit card accounts owned by the Transferor, if any, which have characteristics the same as, or substantially similar to, the Accounts that are the subject of such change and (B) (if it does not own such a comparable segment) will not be made with the intent to materially benefit the Transferor over the Investor Certificateholders or to materially adversely affect the Investor Certificateholders, except as otherwise restricted by an endorsement, sponsorship, or other agreement between the Transferor and an unrelated third party or by the terms of the Charge Account Agreements. (d Account Allocations. In the event that the Transferor is unable for any reason to transfer Receivables to the Trust in accordance with the provisions of this Agreement (including, without limitation, by reason of the application of an order by any Governmental Authority or any court of competent jurisdiction that the Transferor not transfer any additional Receivables to the Trust) then, in any such event, (A) the Transferor agrees to allocate and pay to the Trust, after the date of such inability, all Collections with respect to Principal Receivables, and all amounts which would have constituted Collections with respect to Principal Receivables but for the Transferor's inability to transfer such Receivables; (B) the Transferor agrees to have such amounts applied as Collections in accordance with Article IV; and (C) for only so long as all Collections and all amounts which would have constituted Collections are allocated and applied in accordance with clauses (A) and (B) above, Principal Receivables (and all amounts which would have constituted Principal Receivables but for the Transferor's inability to transfer Receivables to the Trust) that are written off as uncollectible in accordance with the applicable Credit and Collection Policy shall continue to be allocated in accordance with Article IV, and all amounts that would have constituted Principal Receivables but for the Transferor's inability to transfer Receivables to the Trust shall be deemed to be Principal Receivables for the purpose of calculating (i) the applicable Investor Percentage with respect to any Series and (ii) the Aggregate Investor Percentage thereunder. If the Transferor is unable pursuant to any Requirement of Law to allocate Collections as described above, the Transferor agrees that it shall in any such event allocate, after the occurrence of such event, payments on each Account with respect to the principal balance of such Account first to the oldest principal balance of such Account and to have such payments applied as Collections in accordance with Article IV. The parties hereto agree that Finance Charge Receivables, whenever created, accrued in respect of Principal Receivables that have been conveyed to the Trust, or that would have been conveyed to the Trust but for the above described inability to transfer such Receivables, shall continue to be a part of the Trust notwithstanding any cessation of the transfer of additional Principal Receivables to the Trust and Collections with respect thereto shall continue to be allocated and paid in accordance with Article IV. (e Delivery of Collections. In the event that the Transferor receives Collections, the Transferor agrees to deposit such Collections into the Collection Account as soon as practicable after the receipt thereof, but in no event later than two Business Days after receipt thereof. (f Conveyance of Accounts. The Transferor covenants and agrees that it will not permit the Account Owners to convey, assign, exchange or otherwise transfer any Account, unless it is a Removed Account, to any Person other than the Transferor prior to the termination of this Agreement pursuant to Article XII; provided, however, that the Transferor shall not be prohibited hereby from permitting an Account Owner to convey, assign, exchange or otherwise transfer an Account of such Account Owner (the removal of which is permitted by Section 2.7) in connection with a transaction in which such Account Owner and its successor agree to comply with provisions substantially similar to those of either Section 2.7 or Section 7.2; provided, further, that nothing set forth in this Agreement shall prevent one Account Owner from merging with another Account Owner. (g Notice of Liens. The Transferor shall notify the Trustee promptly after becoming aware of any Lien on any Receivable other than Permitted Liens. (h No Other Business. The Transferor agrees to engage in no business other than the business contemplated hereunder and under the Receivables Purchase Agreement. (i Enforcement of Receivables Purchase Agreement. The Transferor agrees to take all action necessary and appropriate to enforce its rights and claims under the Receivables Purchase Agreement. (j Separate Business. Other than with respect to In-Store Payments, the Transferor will not permit its assets to be commingled with those of SRI or any Affiliate of SRI, the Transferor shall maintain separate corporate records and books of account from those of SRI and its Affiliates, and the Transferor shall conduct its business from an independent office. The Transferor will conduct its business solely in its own name and will cause SRI and its Affiliates to conduct their business solely in their own names so as not to mislead others as to the identity of the entity with which those others are concerned. The Transferor will provide for its own operating expenses and liabilities from its own funds, except that the organizational expenses of the Transferor may be paid by SRI. The Transferor will not hold itself out, or permit itself to be held out, as having agreed to pay, or as being liable for, the debts of SRI or any of its Affiliates. The Transferor shall cause SRI and its Affiliates not to hold themselves out, or permit themselves to be held out, as having agreed to pay, or as being liable for, the debts of the Transferor. The Transferor will maintain an arm's length relationship with SRI and its Affiliates with respect to any transactions between the Transferor, on the one hand, and SRI or its Affiliates, on the other. (k Originators. The Transferor shall not acquire Receivables from any Person other than an Originator which has become a party to the Receivables Purchase Agreement. The Transferor will not permit any additional originator to become a party to the Receivables Purchase Agreement as an "Originator" except following an acquisition of Accounts or other transaction which has satisfied the requirements of clause (b) of the definition of Automatic Additional Accounts. (l Receivables Purchase Agreement Notices. The Transferor (i) shall promptly give the Trustee copies of any notices, reports or certificates given or delivered to the Transferor under the Receivables Purchase Agreement, (ii) shall not, without the consents, approvals and opinions, if any, required by Section 13.1, as if Section 13.1 related to the Receivables Purchase Agreement rather than this Agreement, enter into any amendment, supplement or other modification to, or waiver of any provision of, the Receivables Purchase Agreement and (iii) shall not permit the addition or removal of an Account or Receivable to or from the operation of the Receivables Purchase Agreement unless there is a corresponding right or obligation of the Transferor to add or remove such Account or Receivable to or from the Trust. (m Notwithstanding any other provisions of this Agreement and only at such time as a Related Person shall be Trustee hereunder, in the event that (i) the sum of cash and Cash Equivalents in the Equalization Account divided by (ii) the sum of the Aggregate Principal Receivables and the amount described in clause (i) above is greater than (A) 15% on six consecutive Determination Dates or (B) 30% on any monthly Determination Date, each after giving effect to all payments made or to be made on the monthly Distribution Date next succeeding the applicable monthly Determination Date, then such Related Person shall be replaced as Trustee, pursuant to Sections 11.7(c) and 11.8, with a successor Trustee who is not a Related Person. Section 2.6 Addition of Accounts. (a0 All Accounts which meet the definition of Automatic Additional Accounts shall be included as Accounts from and after the date upon which such Automatic Additional Accounts are created and all Receivables in such Automatic Additional Accounts, whether such Receivables are then existing or thereafter created, shall be transferred automatically to the Trust upon purchase by the Transferor. For all purposes of this Agreement, all receivables of such Automatic Additional Accounts shall be treated as Receivables upon their creation and shall be subject to the eligibility criteria specified in the definitions of "Eligible Receivable" and "Eligible Account." (b) On any day on which the Receivables in Automatic Additional Accounts are to be transferred to the Trust, such Accounts shall be included as Eligible Accounts if, in addition to satisfying the requirements of clauses (a) through (e) of the definition thereof, the following conditions are met: (i the cumulative number of Accounts the Receivables of which have been added or are designated to be added to the Trust pursuant to subsection 2.6(a) since the later of the Initial Closing Date and the first day of the twelfth preceding Monthly Period which satisfy the conditions of clause (a) of the definition of "Automatic Additional Accounts" on such date shall not be in excess of 20% of the amount equal to (w) the number of the Active Accounts as of the later of the Initial Closing Date, the Latest Rating Agency Approval Date and the last day of the twelfth preceding Monthly Period, plus (x) the number of Accounts the Receivables of which were designated to be added to the Trust pursuant to clause (c) of the definition of "Automatic Additional Accounts" on the first day of such addition after the later of the Initial Closing Date, the Latest Rating Agency Approval Date and the last day of the twelfth preceding Monthly Period, plus (y) the number of Supplemental Accounts, if any, the Receivables of which were designated to be added to the Trust after the later of the Initial Closing Date, the Latest Rating Agency Approval Date and the last day of the twelfth preceding Monthly Period, minus (z) any Removed Accounts removed after the later of the Initial Closing Date, the Latest Rating Agency Approval Date and the last day of the twelfth preceding Monthly Period; and (ii the cumulative number of Accounts the Receivables of which have been added or are designated to be added to the Trust pursuant to subsections 2.6(a) and (b) since the later of the Initial Closing Date and the first day of the second preceding Monthly Period which satisfy the conditions of clause (a) or (b) of the definition of Automatic Additional Accounts on such date shall not be in excess of 15% of the amount equal to (w) the number of the Active Accounts as of the latest of the Initial Closing Date, the Latest Rating Agency Approval Date and the first day of the second preceding Monthly Period, plus (x) the number of Accounts the Receivables of which were designated to be added to the Trust pursuant to clause (c) of the definition of "Automatic Additional Accounts" on the first day of any such addition and were added after the latest of the Initial Closing Date, the Latest Rating Agency Approval Date and the first day of the second preceding Monthly Period, plus (y) the number of Supplemental Accounts, if any, designated during the preceding three Monthly Periods and thereafter added after the later of the Initial Closing Date and the first day of the second preceding Monthly Period, minus (z) any Removed Account removed after the later of the Initial Closing Date and the first day of the second preceding Monthly Period. If any Automatic Additional Accounts would have been included as an Account but for the provisions of Section 2.6(b)(i) or (ii), they shall be included as Accounts on the first date thereafter permitted by Section 2.6(b)(i) and (ii). (c) The Transferor may elect at any time to terminate or suspend the inclusion in Accounts of Automatic Additional Accounts by delivering to the Trustee, the Servicer and the Rating Agency 15 days prior written notice of such election. If the Transferor has elected to terminate or suspend the inclusion of Automatic Additional Accounts and (i) on any Record Date, the Transferor Interest for the related Monthly Period is less than the Minimum Transferor Interest, the Transferor shall designate additional credit card accounts or any successor credit card accounts ("Supplemental Accounts") to be included as Accounts in a sufficient amount such that the Transferor Interest as a percentage of the Aggregate Principal Receivables for such Monthly Period after giving effect to such addition is at least equal to the Minimum Transferor Interest, (ii) on any Record Date, the Retained Interest for the related Monthly Period is less than the Minimum Retained Interest, the Transferor shall designate Supplemental Accounts to be included as Accounts in a sufficient amount such that the Retained Interest as a percentage of the Aggregate Principal Receivables for such Monthly Period after giving effect to such addition is at least equal to the Minimum Retained Interest, or (iii) on any Record Date, the aggregate amount of Principal Receivables is less than the Minimum Aggregate Principal Receivables, the Transferor shall designate Supplemental Accounts to be included as Accounts in a sufficient amount such that the Aggregate Principal Receivables will be equal to or greater than the Minimum Aggregate Principal Receivables. Receivables from such Supplemental Accounts shall be transferred to the Trust on or before the tenth Business Day following such Record Date. On any day on which the Receivables in Supplemental Accounts are to be transferred to the Trust, the Receivables in such Accounts shall be included as Eligible Receivables if they satisfy the requirements of the definition of "Eligible Receivables." (d) In addition to its obligation under subsection 2.6(c), if and for so long as the Transferor has elected to terminate or suspend the inclusion of Automatic Additional Accounts, the Transferor may, by giving twenty Business Days' notice to the Trustee and each Rating Agency, but shall not be obligated to, designate from time to time Supplemental Accounts of the Transferor to be included as Accounts. (e) The Transferor agrees that any such transfer of Receivables from Supplemental Accounts, under subsection 2.6(c) or (d), shall satisfy the following conditions (to the extent provided below): (i) on or before the fifth Business Day prior to the Addition Date with respect to additions pursuant to subsection 2.6(c) and on or before the twentieth Business Day prior to the Addition Date with respect to additions pursuant to subsection 2.6(d) (as applicable, the "Notice Date"), the Transferor shall give the Trustee, each Rating Agency and the Servicer written notice that such Supplemental Accounts will be included, which notice shall specify the approximate aggregate amount of the Receivables to be transferred; (ii) on or before the applicable Addition Date, the Transferor shall have delivered to the Trustee a written assignment (including an acceptance by the Trustee on behalf of the Trust for the benefit of the Investor Certificateholders) in substantially the form of Exhibit B (the "Assignment") and the Transferor shall have indicated in its computer files that the Receivables created in connection with the Supplemental Accounts have been transferred to the Trust and, within five Business Days thereafter, the Transferor shall have delivered to the Trustee or the bailee of the Trustee a computer file or microfiche list containing a true and complete list of all Supplemental Accounts, identified by account number and the Outstanding Balance of the Receivables in such Supplemental Accounts, as of the Addition Cut Off Date, which computer file or microfiche list shall be as of the date of such Assignment incorporated into and made a part of such Assignment and Schedule I to this Agreement; (iii the Transferor shall represent and warrant that (x) no selection procedure which is materially adverse to the interests of the Investor Certificateholders or any Enhancement Provider was utilized in selecting the Supplemental Accounts and (y) as of the applicable Addition Date, the Transferor is not insolvent; (iv the Transferor shall represent and warrant that, as of the Addition Date, the Assignment constitutes either (x) a valid transfer and assignment to the Trust of all right, title and interest of the Transferor in and to (A) the Receivables then existing and thereafter created in the Supplemental Accounts, the Related Contracts and all proceeds (as defined in the UCC as in effect in the Relevant UCC State) of such Receivables and (B) Recoveries, and such Receivables and all proceeds thereof will be held by the Trust free and clear of any Lien of any Person claiming through or under the Transferor or any of its Affiliates, except for (i) Permitted Liens, (ii) the interest of the Transferor as Holder of the Exchangeable Transferor Certificate and any other Class or Series of Certificates and (iii) the Transferor's right to receive interest accruing on, and investment earnings in respect of, the Collection Account and any Interest Funding Account and any Principal Account, or any Series Account as provided in this Agreement and any related Supplement or (y) a grant of a security interest (as defined in the UCC as in effect in the Relevant UCC State) in such property to the Trust, which is enforceable with respect to then existing Receivables of the Supplemental Accounts, the proceeds (as defined in the UCC as in effect in the Relevant UCC State) thereof upon the conveyance of such Receivables to the Trust, and which will be enforceable with respect to the Receivables thereafter created in respect of Supplemental Accounts conveyed on such Addition Date and the proceeds (as defined in the UCC as in effect in the Relevant UCC State) thereof upon such creation; and (z) if the Assignment constitutes the grant of a security interest to the Trust in such property, upon the filing of a financing statement as described in Section 2.1 with respect to such Supplemental Accounts and in the case of the Receivables thereafter created in such Supplemental Accounts and the proceeds (as defined in the UCC as in effect in the Relevant UCC State) thereof, upon such creation, the Trust shall have a first priority perfected security interest in such property, except for Permitted Liens; (v the Transferor shall deliver to the Trustee an Officer's Certificate substantially in the form of Schedule II to Exhibit B confirming the items set forth in paragraph (ii) above; (vi the Transferor shall deliver to the Trustee an Opinion of Counsel with respect to the Receivables in the Supplemental Accounts (with a copy to the Rating Agencies) substantially in the form of Exhibit F; and (vii the Transferor shall have received written notice from the Rating Agencies that the inclusion of such accounts as Supplemental Accounts pursuant to subsection 2.6(c) or (d), as the case may be, will not result in the reduction or withdrawal of its then existing rating of any Series of Investor Certificates then issued and outstanding and shall have delivered such notice to the Trustee. (f) The Transferor shall also comply with the requirements of clauses (v) and (vi) of subsection 2.6(e) in connection with each addition of Automatic Additional Accounts pursuant to clause (b) of the definition thereof. Section 2.7 Removal of Accounts. (a) On each Determination Date that the Transferor Interest for the related Monthly Period exceeds 5% of the Aggregate Principal Receivables in the Trust with respect to such Determination Date, the Trustee shall be deemed to have offered to the Transferor automatically and without any notice to or action by or on behalf of the Trustee, as of such Determination Date, the right to remove from the Trust all of the Trust's right, title and interest in, to and under the Receivables then existing and thereafter created, all monies then due or to become due and all amounts thereafter received with respect thereto and all proceeds thereof in or with respect to those Accounts designated by the Transferor (the "Removed Accounts") in an aggregate amount not greater than (i) at any time the excess of the Transferor Interest over the Minimum Transferor Interest, (ii) at any time the excess of the Retained Interest over the Minimum Retained Interest and (iii) if any Amortization Period has commenced and is continuing with respect to any Series, the lesser of (x) the excess of the Transferor Interest over the Minimum Transferor Interest and (y) the excess of Aggregate Principal Receivables over the Minimum Aggregate Principal Receivables. To accept such offer, the Transferor is required to furnish to the Trustee and each Rating Agency written notice by the fifth Business Day after the Determination Date specifying the approximate aggregate amount of Principal Receivables covered by the offer that the Transferor intends to accept. There shall be no more than one such removal with respect to any Monthly Period. (b) In addition to the satisfaction of the conditions set forth in subsection 2.7(a), the Transferor shall be permitted to accept reassignment to it of the Receivables from Removed Accounts only upon satisfaction of the following conditions: (i) On each date specified by the Transferor for removal of the Removed Accounts (a "Removal Date"), the Transferor shall prepare and the Trustee shall execute and deliver to the Transferor a written reassignment in substantially the form of Exhibit H (the "Reassignment") provided to the Trustee in final execution form and the Transferor shall deliver to the Trustee or the bailee of the Trustee a computer file or microfiche list containing a true and complete schedule identifying all Accounts the Receivables of which remain in the Trust specifying for each such Account, as of the Removal Notice Date, its account number and the Outstanding Balance of such Account. Such computer file or microfiche list shall be incorporated into and made part of this Agreement as of the date of such Reassignment. (ii) The Transferor shall represent and warrant as of each Removal Notice Date that (a) the list of the Accounts not removed from the Trust, as of the Removal Notice Date, complies in all material respects with the requirements of paragraph (i) above and (b) no selection procedure used by the Transferor which is materially adverse to the interests of the Investor Certificateholders or any Enhancement Provider was utilized in selecting the Removed Accounts. (iii) The Transferor shall represent and warrant that the removal of any Receivables in any Removed Accounts on any Removal Date shall not, in the reasonable belief of the Transferor, cause, immediately or with the passage of time, a Pay Out Event to occur. (iv) The Transferor shall have delivered at least 20 days' (or such lesser number as any Rating Agency may agree) prior written notice (which may be given prior to the Removal Date in expectation that the Trustee will be deemed to have made the offer described in subsection 2.7(a)) of such removal to each Rating Agency which has rated any outstanding Series and the Trustee shall have received written confirmation from each such Rating Agency that such Rating Agency will not reduce or withdraw its rating on any outstanding Series as a result of such removal. (v) The Transferor shall have delivered to the Trustee an Officer's Certificate confirming the Transferor's compliance with the items set forth in paragraphs (i) through (iv) above. The Trustee may conclusively rely on such certificate, shall have no duty to make inquiries with regard to the matters set forth therein and shall incur no liability in so relying. (c) Upon satisfaction of the conditions set forth in subsections 2.7(a) and (b), the Trustee shall execute and deliver the Reassignment to the Transferor provided to the Trustee in final execution form, and the Receivables from the Removed Accounts shall no longer constitute a part of the Trust. (d) Notwithstanding any other provisions of this Section 2.7 (but subject to having no more than one removal in any Monthly Period and maintaining the Minimum Transferor Interest), the Transferor will be permitted to designate Removed Accounts and to remove from the Trust all of the Trust's right, title and interest in, to and under the Receivables then existing in such Removed Accounts together with all monies then due or to become due and all amounts then received with respect thereto and all proceeds thereof or with respect to such Removed Accounts in connection with the sale by SRI or any Affiliate of SRI of all or substantially all of the capital stock or assets of any Account Owner or any former Account Owner if the conditions in clauses (i), (iii) and (iv) of subsection 2.7(b) have been satisfied and the Transferor shall have delivered to the Trustee an Officer's Certificate confirming compliance with such conditions; provided, however, that the Transferor will have the option under such circumstances, if it provides the Trustee with an Opinion of Counsel to the effect that the Trust will continue to have a first priority perfected security interest in all Receivables remaining in the Trust subsequent to such Reassignment, to leave in the Trust all of the Trust's right, title and interest in, to and under the Receivables then existing, together with all monies due or to become due and all amounts received with respect thereto and all proceeds thereof in or with respect to the Removed Accounts and cease, from and after the applicable Removal Date, to transfer, assign, set over or otherwise convey to the Trust the Receivables thereafter created and arising in connection with the Removed Accounts, all monies due or to become due and all amounts received with respect thereto and all proceeds thereof in or with respect to the Removed Accounts, in which case the Reassignment shall be modified accordingly. Section 2.8 Discount Option. (a) The Transferor shall have the option to designate a fixed percentage (the "Discount Percentage"), not less than 2% and not greater than 4%, of the principal balance of all Receivables, other than such amounts that are included in clauses (i) through (vii) of the definition of Finance Charge Receivables, investment earnings on amounts on deposit in the Equalization Account and Receivables in Defaulted Accounts, arising on or after the date of such designation determination to be treated as Finance Charge Receivables. The election to exercise this option shall be irrevocable. The Transferor shall provide to the Servicer, the Trustee, any Enhancement Provider and the Rating Agency 30 days' prior written notice of such designation, and such designation shall become effective on the date designated therein (i) unless such designation in the reasonable belief of the Transferor would cause a Pay Out Event to occur, or an event which, with notice or the lapse of time or both, would constitute a Pay Out Event and (ii) only if the Rating Agency shall have delivered a letter to the Transferor and the Trustee confirming that its then current rating of the Investor Certificates of any Series then outstanding will not be reduced or withdrawn as a result of such designation. (b) After the date on which the Transferor's exercise of its discount option takes effect, and with respect to Receivables generated on and after such date, the Transferor, in accordance with Section 4.3, shall deposit into the Collection Account in immediately available funds an amount equal to the amount of the Discount Option Receivables Collections processed on such day. The deposit made by the Transferor into the Collection Account under the preceding sentence shall be considered a payment of such Discount Option Receivables and shall be applied as Finance Charge Receivables in accordance with Article IV. [End of Article II] ARTICLE III ADMINISTRATION AND SERVICING OF RECEIVABLES Section III.1 Acceptance of Appointment and Other Matters Relating to the Servicer. (a) SRI agrees to act as the Servicer under this Agreement. The Investor Certificateholders of each Series by their acceptance of the related Certificates consent to SRI acting as Servicer. Notwithstanding the foregoing or any other provisions of this Agreement or any Supplement, the Investor Certificateholders consent to an Affiliate of SRI acting as Servicer hereunder, in full substitution thereof; provided that such Affiliate shall expressly assume in writing (unless such assumption occurs by operation of law), by an agreement supplemental hereto, executed and delivered to the Trustee, the performance of every covenant and obligation of the Servicer, as applicable hereunder, and shall in all respects be designated the Servicer under this Agreement; provided, further, that SRI will remain jointly and severally liable with such Affiliate. (b) The Servicer shall service and administer the Receivables and shall collect payments due under the Receivables in accordance with its customary and usual servicing procedures and the Credit and Collection Policies and shall have full power and authority, acting alone or through any party properly designated by it hereunder, to do any and all things in connection with such servicing and administration which it may deem necessary or desirable. Without limiting the generality of the foregoing and subject to Section 10.1, the Servicer is hereby authorized and empowered (i) to make withdrawals from the Collection Account as set forth in this Agreement, (ii) unless such power and authority is revoked by the Trustee on account of the occurrence of a Servicer Default pursuant to Section 10.1, to instruct the Trustee in writing to make withdrawals and payments, from any Interest Funding Account, the Equalization Account, any Principal Account and any Series Account, in accordance with such instructions as set forth in this Agreement, (iii) unless such power and authority is revoked by the Trustee on account of the occurrence of a Servicer Default pursuant to Section 10.1, to instruct the Trustee in writing to take any action permitted or required under any Enhancement at such time as set forth in this Agreement and any Supplement, (iv) to execute and deliver, on behalf of the Trust for the benefit of the Certificateholders, any and all instruments of satisfaction or cancellation, or of partial or full release or discharge, and all other comparable instruments, with respect to the Receivables and, after the delinquency of any Receivable and to the extent permitted under and in compliance with applicable law and regulations, to commence enforcement proceedings with respect to such Receivables, (v) to make any filings, reports, notices, applications, registrations with, and to seek any consents or authorizations from, the Securities and Exchange Commission and any state securities authority on behalf of the Trust as may be necessary or advisable to comply with any federal or state securities or reporting requirements and (vi) to delegate certain of its service, collection, enforcement and administrative duties hereunder with respect to the Accounts and the Receivables to any Person who agrees to conduct such duties in accordance with the Credit and Collection Policies. The Trustee agrees that it shall promptly follow the instructions of the Servicer to withdraw funds from any Principal Account, any Interest Funding Account, the Equalization Account, or any Series Account and to take any action required under any Enhancement at such time as required under this Agreement. The Trustee shall execute at the Servicer's written request such documents prepared by the Transferor and acceptable to the Trustee as the Servicer certifies are necessary or appropriate to enable the Servicer to carry out its servicing and administrative duties hereunder. (c) In the event that the Transferor is unable for any reason to transfer Receivables to the Trust in accordance with the provisions of this Agreement (including, without limitation, by reason of order of any court of competent jurisdiction that the Transferor not transfer any additional Principal Receivables to the Trust) then, in any such event, (A) the Servicer agrees to allocate, after such date, all Collections with respect to Principal Receivables, and all amounts which would have constituted Collections with respect to Principal Receivables but for the Transferor's inability to transfer such Receivables in accordance with subsection 2.5(d); (B) the Servicer agrees to apply such amounts as Collections in accordance with Article IV, and (C) for only so long as all Collections and all amounts which would have constituted Collections are allocated and applied in accordance with clauses (A) and (B) above, Principal Receivables and all amounts which would have constituted Principal Receivables but for the Transferor's inability to transfer Receivables to the Trust that are written off as uncollectible in accordance with this Agreement shall continue to be allocated in accordance with Article IV and all amounts which would have constituted Principal Receivables but for the Transferor's inability to transfer Receivables to the Trust shall be deemed to be Principal Receivables for the purpose of calculating the applicable Investor Percentage thereunder. If the Servicer is unable pursuant to any Requirement of Law to allocate payments on the Accounts as described above, the Servicer agrees that it shall in any such event allocate, after the occurrence of such event, payments on each Account with respect to the principal balance of such Account first to the oldest principal balance of such Account and to have such payments applied as Collections in accordance with Article IV. (d) The Servicer shall not be obligated to use separate servicing procedures, offices or employees for servicing the Receivables from the procedures, offices and employees used by the Servicer in connection with servicing other credit card receivables. Section III.2 Servicing Compensation. As compensation for its servicing activities hereunder and reimbursement for its expenses as set forth in the immediately following paragraph, the Servicer shall be entitled to receive a servicing fee in respect of each day prior to the termination of the Trust pursuant to Section 12.1 (the "Servicing Fee"), payable in arrears on each date and in the manner specified in the applicable Supplement, equal to the product of (i) a fraction, the numerator of which is the actual number of days in the measuring period specified in the applicable Supplement and the denominator of which is the actual number of days in the year, (ii) the weighted average Series Servicing Fee Percentage (based upon the Series Servicing Fee Percentage for each Series and the Invested Amount of such Series) and (iii) the daily average aggregate Outstanding Balance of all Principal Receivables over the term of such measuring period. The share of the Servicing Fee allocable to each Series with respect to any date of payment shall be equal to the product of (i) a fraction, the numerator of which is the actual number of days in the measuring period specified in the applicable Supplement and the denominator of which is the actual number of days in the year, (ii) the applicable Series Servicing Fee Percentage for such Series and (iii) the Invested Amount of such Series, as appropriate, as of the date of determination for such payment as specified in the applicable Supplement. The remainder of the Servicing Fee shall be paid by the Transferor, or retained by the Servicer as provided in Article IV, and in no event shall the Trust, the Trustee, any Enhancement Provider, or the Investor Certificateholders be liable for the share of the Servicing Fee to be paid by the Transferor. The Servicer shall be responsible for its own expenses, which shall include the amounts due to the Trustee pursuant to Section 11.5 and the reasonable fees and disbursements of independent public accountants and all other expenses incurred by the Servicer in connection with its activities hereunder; provided, that the Servicer shall not be liable for any liabilities, costs or expenses of the Trust, the Investor Certificateholders or the Certificate Owners arising under any tax law, including without limitation any federal, state or local income or franchise taxes or any other tax imposed on or measured by income (or any interest, penalties or additions with respect thereto or arising from a failure to comply therewith). In the event that the Servicer fails to pay any amounts due to the Trustee pursuant to Section 11.5, the Trustee shall be entitled to deduct and receive such amounts from the Servicing Fee prior to the payment thereof to the Servicer. The Servicer shall be required to pay such expenses for its own account and shall not be entitled to any payment therefor other than the Servicing Fee. Section III.3 Representations and Warranties of the Servicer. SRI, as initial Servicer, hereby makes, and any Successor Servicer by its appointment hereunder shall make, the following representations and warranties on which the Trustee has relied in accepting the Receivables in trust and in authenticating the Certificates issued on the Initial Closing Date: (a) Organization and Good Standing. The Servicer is a corporation duly organized, validly existing and in good standing under the laws of its state of incorporation and has full corporate power, authority and legal right to own its properties and conduct its business as such properties are presently owned and such business is presently conducted, and to execute, deliver and perform its obligations under this Agreement and any Supplement. (b) Due Qualification. The Servicer is duly qualified to do business and is in good standing (or is exempt from such requirements) as a foreign corporation in any state where such qualification is necessary in order to service the Receivables as required by this Agreement and any Supplement and has obtained all necessary licenses and approvals as required under Federal and state law in order to service the Receivables as required by this Agreement, and if the Servicer shall be required by any Requirement of Law to so qualify or register or obtain such license or approval, then it shall do so except where the failure to obtain such license or approval does not materially affect the Servicer's ability to perform its obligations hereunder or the enforceability of any Receivable. (c) Due Authorization. The execution, delivery, and performance of this Agreement and any Supplement have been duly authorized by the Servicer by all necessary corporate action on the part of the Servicer and this Agreement and any Supplement will remain, from the time of its execution, an official record of the Servicer. (d) Binding Obligation. This Agreement and any Supplement constitutes a legal, valid and binding obligation of the Servicer, enforceable in accordance with its terms, except as enforceability be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereinafter in effect, affecting the enforcement of creditors' rights in general and as such enforceability may be limited by general principles of equity (whether considered in a proceeding at law or in equity). (e) No Violation. The execution and delivery of this Agreement and any Supplement by the Servicer, and the performance of the transactions contemplated by this Agreement and any Supplement and the fulfillment of the terms hereof applicable to the Servicer, will not conflict with, violate, result in any breach of any of the material terms and provisions of, or constitute (with or without notice or lapse of time or both) a default under, any Requirement of Law applicable to the Servicer or any indenture, contract, agreement, mortgage, deed of trust or other instrument to which the Servicer is a party or by which it is bound. (f) No Proceedings. There are no proceedings or investigations pending or, to the knowledge of the Servicer, threatened against the Servicer before any court, regulatory body, administrative agency or other tribunal or governmental instrumentality seeking to prevent the issuance of the Certificates or the consummation of any of the transactions contemplated by this Agreement, seeking any determination or ruling that, in the reasonable judgment of the Servicer, would materially and adversely affect the performance by the Servicer of its obligations under this Agreement or any Supplement, or seeking any determination or ruling that would materially and adversely affect the validity or enforceability of this Agreement or any Supplement. (g) Compliance with Requirements of Law. The Servicer shall duly satisfy all obligations on its part to be fulfilled under or in connection with each Receivable and the related Account, will maintain in effect all qualifications required under Requirements of Law in order to service properly each Receivable and the related Account and will comply in all material respects with all other Requirements of Law in connection with servicing each Receivable and the related Account the failure to comply with which would have a material adverse effect on the Certificateholders or any Enhancement Provider. (h) Protection of Certificateholders' Rights. The Servicer shall take no action which, nor omit to take any action the omission of which, would impair the rights of Certificateholders in any Receivable or the related Account or the rights of any Enhancement Provider, nor shall it reschedule, revise or defer payments due on any Receivable except in accordance with the Credit and Collection Policies. (i) All Consents. All authorizations, consents, orders or approvals of or registrations or declarations with any Governmental Authority required to be obtained, effected or given by the Servicer in connection with the execution and delivery of this Agreement by the Servicer and the performance of the transactions contemplated by this Agreement by the Servicer, have been duly obtained, effected or given and are in full force and effect; provided, however, that the Servicer makes no representation or warranty regarding State securities or "Blue Sky" laws in connection with the distribution of the Certificates. (j) Rescission or Cancellation. The Servicer shall not permit any rescission or cancellation of any Receivable except as ordered by a court of competent jurisdiction or other Governmental Authority or in accordance with the Credit and Collection Policy or the normal operating procedures of the Servicer. (k) Receivables Not To Be Evidenced by Promissory Notes. Except in connection with its enforcement or collection of an Account (in which case any such promissory note would be made in the name of the Trust on behalf of the Certificateholders), the Servicer will take no action to cause any Receivable to be evidenced by an instrument (as defined in the UCC as in effect in the Relevant UCC State). (l) Principal Place of Business. The Servicer shall at all times maintain its principal place of business within the United States. Section III.4 Reports and Records for the Trustee. (a) Daily Records. Upon reasonable prior notice by the Trustee, the Servicer shall make available at an office of the Servicer (or other location designated by the Servicer if such records are not accessible by the Servicer at an office of the Servicer) selected by the Servicer for inspection by the Trustee or its agent (reasonably acceptable to the Servicer) on a Business Day during the Servicer's normal business hours a record setting forth (i) the Collections on each Receivable and (ii) the amount of Receivables for the Business Day preceding the date of the inspection. The Servicer shall, at all times, maintain its computer files with respect to the Receivables in such a manner so that the Receivables may be specifically identified and, upon reasonable prior request of the Trustee, shall make available to the Trustee, at an office of the Servicer (or other location designated by the Servicer if such computer files are not located at an office of the Servicer) selected by the Servicer, on any Business Day of the Servicer during the Servicer's normal business hours any computer programs necessary to make such identification. (b) Daily Report. (i) On each Business Day the Servicer shall prepare a completed Daily Report. (ii) The Servicer shall deliver to the Trustee and the Paying Agent the Daily Report by 2:30 p.m. (New York City time) on each Business Day with respect to activity in the Receivables for the prior Business Day (or, in the case of a Daily Report delivered on the second Business Day following a Saturday, Sunday or other non-Business Day, the aggregate activity for the preceding Business Day and such preceding non-Business Days). (iii) Upon discovery of any error or receipt of notice of any error in any Daily Report, the Servicer, the Transferor and the Trustee shall arrange to confer and shall agree upon any adjustments necessary to correct any such errors. If any such error is material, the Servicer or the Trustee, as the case may be, shall retain all Collections (or such lesser amount as the Trustee and the Servicer shall agree to be necessary to cover any such error) in the Collection Account until such material error is corrected. Unless the Trustee has received written notice of any error or discrepancy, the Trustee may rely on each Daily Report delivered to it for all purposes hereunder. (c) Settlement Statement. On the second Business Day prior to the fifteenth calendar day of each month, the Servicer shall, prior to 3:00 p.m. (New York City time) on such day, deliver to the Trustee and the Paying Agent the Settlement Statement for the related Monthly Period substantially in the form of Exhibit D hereto, including the following information (which, in the case of clauses (iii), (iv) and (v) below, will be stated on the basis of an original principal amount of $1,000 per Certificate): (i) the aggregate amount of Collections received in the Collection Account for the Monthly Period preceding such Determination Date and the aggregate amount of Finance Charge Collections and the aggregate amount of Principal Collections processed during such Monthly Period; (ii) the aggregate amount of the applicable Investor Percentage of Collections of Principal Receivables on the last day of the preceding Monthly Period of each Series of Certificates and the aggregate amount of the applicable Investor Percentage of Collections on the last day of the preceding Monthly Period of each Series of Certificates with respect to Finance Charge Collections and Receivables in Defaulted Accounts; (iii) for each Series and for each Class within any such Series, the total amount to be distributed to Investor Certificateholders on the next succeeding Distribution Date; (iv) for each Series and for each Class within any such Series, the amount of such distribution allocable to principal; (v) for each Series and for each Class within any such Series, the amount of such distribution allocable to interest; (vi) for each Series and each Class within a Series, the Investor Default Amount for the immediately preceding Monthly Period; (vii) for each Series and each Class within a Series, the amount of the Investor Charge-Offs and the amount of the reimbursements of Investor Charge-Offs for such Distribution Date; (viii) for each Series, the Monthly Investor Servicing Fee for such Distribution Date; (ix) for each Series, the existing deficit controlled amortization amount, if applicable; (x) the aggregate amount of Receivables in the Trust at the close of business on the last day of the Monthly Period preceding such Distribution Date; (xi) for each Series, the Invested Amount at the close of business on the last day of the Monthly Period immediately preceding such Distribution Date; (xii) the available amount of any Enhancement for each Class of each Series, if any; (xiii) whether a Pay Out Event or a Prospective Pay Out Event with respect to any Series shall have occurred during or with respect to the related Monthly Period; (xiv) the aggregate amount of Discount Option Receivables in the Trust at the close of business on the last day of the Monthly Period preceding such Distribution Date; (xv) the aggregate amount of Discount Option Receivables Collections processed during such Monthly Period; and (xvi) such other calculations as may be required by any Supplement. The Trustee shall be under no duty to recalculate, verify or recompute the information supplied to it under this Section 3.4 or such other matters as are set forth in any Settlement Statement. Section III.5 Annual Servicer's Certificate. The Servicer will deliver, as provided in Section 13.5, to the Trustee, any Enhancement Provider and the Rating Agencies on or before ninety days following the end of each year, an Officer's Certificate substantially in the form of Exhibit E stating that (a) a review of the activities of the Servicer during such year and of its performance under this Agreement was made under the supervision of the officer signing such certificate and (b) to such officer's knowledge, based on such review, the Servicer has fully performed all its obligations under this Agreement throughout such year, or, if there has been a default in the performance of any such obligation, specifying each such default known to such officer and the nature and status thereof. A copy of such certificate may be obtained by any Investor Certificateholder by a request in writing to the Trustee addressed to the Corporate Trust Office. Section III.6 Annual Independent Accountants' Servicing Report. (a) On or before the 15th day of December of each year, beginning with December 15, 1993, the Servicer shall cause a firm of nationally recognized independent public accountants (who may also render other services to the Servicer or the Transferor) to furnish a report with respect to the twelve-month period ending on last day of the August Monthly Period for such year (or, in the case of the initial such period, the August 1993 Monthly Period) to the Trustee, any Enhancement Provider and each Rating Agency, to the effect that such firm has applied certain procedures, agreed upon with the Servicer and the Trustee and substantially as set forth in Exhibit J hereto, which would re-perform certain accounting performed by the Servicer to certain documents and records relating to the servicing of Accounts under this Agreement. In addition, each report shall set forth the agreed upon procedures performed and the results of such procedures. On or before the 150th day following the end of each Transferor Fiscal Year, beginning with the Transferor Fiscal Year ending February 5, 1993, the Servicer shall also cause a firm of nationally recognized independent public accountants (who may also render other services to the Servicer or the Transferor) to furnish to the Trustee, any Enhancement Provider and each Rating Agency audited financial statements with respect to SRI, the Transferor and the Trust along with a copy of the annual management letter prepared by such auditors pertaining to SRI and its subsidiaries. A copy of each such report and set of financial statements will be sent to each Investor Certificateholder by the Trustee. (b) On or before the 15th day of December of each year, beginning with December 15, 1993, the Servicer shall cause a firm of nationally recognized independent certified public accountants (who may also render other services to the Servicer or the Transferor) to furnish a report to the Trustee, any Enhancement Provider and the Rating Agency to the effect that they have compared the mathematical calculations set forth in each of the monthly certificates forwarded by the Servicer pursuant to subsection 3.4(c) during the period covered by such report (which shall be the twelve fiscal months ending with the August Monthly Period of such year, or for the initial period, the August 1993 Monthly Period) with the computer reports which were the source of such amounts and that on the basis of such comparison, such amounts are in agreement, except for such exceptions as they believe to be immaterial and such other exceptions as shall be set forth in such report. A copy of such report may be obtained by any Investor Certificateholder by a request in writing to the Trustee. Section III.7 Tax Treatment. The Transferor has structured this Agreement and the Investor Certificates with the intention that the Investor Certificates will qualify under applicable federal, state, local and foreign tax law as indebtedness. Except to the extent expressly specified to the contrary in any Supplement, the Transferor, the Servicer, the Holder of the Exchangeable Transferor Certificate, each Investor Certificateholder, and each Certificate Owner agree to treat and to take no action inconsistent with the treatment of the Investor Certificates (or beneficial interests therein) as indebtedness for purposes of federal, state, local and foreign income or franchise taxes and any other tax imposed on or measured by income. Each Investor Certificateholder, Holder of a Variable Funding Certificate and the Holder of the Exchangeable Transferor Certificate, by acceptance of its Certificate and each Certificate Owner, by acquisition of a beneficial interest in a Certificate, agrees to be bound by the provisions of this Section 3.7. Each Certificateholder agrees that it will cause any Certificate Owner acquiring an interest in a Certificate through it to comply with this Agreement as to treatment as indebtedness under applicable tax law, as described in this Section 3.7. Section III.8 Adjustments. (a) If the Servicer adjusts downward the amount of any Receivable because of a rebate, refund, unauthorized charge or billing error to an Obligor, because such Receivable was created in respect of merchandise which was refused or returned by an Obligor, or if the Servicer otherwise adjusts downward the amount of any Receivable without receiving Collections therefor or without charging off such amount as uncollectible, then, in any such case, the Transferor Interest will be reduced and the aggregate amount of the Principal Receivables used to calculate the Floating Allocation Percentages applicable to any Series will be reduced by the principal amount of any such Receivable. Similarly, the aggregate amount of the Principal Receivables used to calculate the Floating Allocation Percentages applicable to any Series will be reduced by the amount of any Principal Receivable which was discovered as having been created through a fraudulent or counterfeit charge or with respect to which the covenant contained in subsection 2.5(b) was breached. Any adjustment required pursuant to either of the two preceding sentences shall be made on or prior to the end of the Monthly Period in which such adjustment obligation arises. In the event that, following any such reduction, the Transferor Interest would be less than the Minimum Transferor Interest, within two Business Days of the date on which such adjustment obligation arises, the Transferor shall pay to the Servicer, for deposit into the Collection Account, in immediately available funds an amount equal to the amount by which the Transferor Interest would be reduced below the Minimum Transferor Interest. Any amount deposited into the Collection Account in connection with the adjustment of a Receivable (an "Adjustment Payment") shall be applied in accordance with Article IV and the terms of each Supplement. (b) If (i) the Servicer makes a deposit into the Collection Account in respect of a Collection of a Receivable and such Collection was received in the form of a check which is not honored for any reason or (ii) the Servicer makes a mistake with respect to the amount of any Collection and deposits an amount that is less than or more than the actual amount of such Collection, the Servicer shall appropriately adjust the amount subsequently deposited into the Collection Account to reflect such dishonored check or mistake. Any Receivable in respect of which a dishonored check is received shall be deemed not to have been paid. Notwithstanding the first two sentences of this paragraph, no adjustments shall be made pursuant to this paragraph that will change any amount of Collections previously reported pursuant to subsection 3.4 (b). Section III.9 Notices to SRI. In the event that SRI or any Affiliate thereof is no longer acting as Servicer, any Successor Servicer appointed pursuant to Section 10.2 shall deliver or make available to SRI each certificate and report required to be prepared, forwarded or delivered thereafter pursuant to Sections 3.4, 3.5 and 3.6. [End of Article III] ARTICLE IV RIGHTS OF CERTIFICATEHOLDERS AND ALLOCATION AND APPLICATION OF COLLECTIONS Section IV.1 Rights of Certificateholders. (a) Each Series of Investor Certificates shall represent Undivided Interests in the Trust, including the benefits of any Enhancement issued with respect to such Series and the right to receive the Collections and other amounts at the times and in the amounts specified in this Article IV to be deposited in the Investor Accounts or to be paid to the Investor Certificateholders of such Series; provided, however, that the aggregate interest represented by such Certificates at any time in the Principal Receivables shall not exceed an amount equal to the Invested Amount of such Certificates. The Exchangeable Transferor Certificate shall represent the remaining undivided interest in the Trust, including the right to receive the Collections and other amounts at the times and in the amounts specified in this Article IV to be paid to the Holder of the Exchangeable Transferor Certificate; provided, however, that the aggregate interest represented by such Certificate at any time in the Principal Receivables shall not exceed the Transferor Interest at such time and such Certificate shall not represent any interest in the Investor Accounts, except as provided in this Agreement, or the benefits of any Enhancement issued with respect to any Series. (b) If any Series of Investor Certificates shall be defeased in full by any means permitted pursuant to the applicable Supplement, such Series shall have no right to share in or otherwise receive, any allocations of Collections of Finance Charge Receivables or Principal Receivables, and the Fixed Allocation Percentage and Floating Allocation Percentage of such Series shall equal zero. Section IV.2 Establishment of Accounts. (a) The Collection Account. The Servicer, for the benefit of the Certificateholders and, to the extent specified in any Supplement, each Enhancement Provider, shall establish in the name of the Trustee, on behalf of the Trust, a non-interest bearing segregated account (the "Collection Account") bearing a designation clearly indicating that the funds deposited therein are held in trust for the benefit of the Certificateholders, and shall cause such Collection Account to be established and maintained, (i) in a segregated trust account with the corporate trust department of a depositary institution or trust company (which may include the Trustee) organized under the laws of the United States of America or any one of the states thereof or the District of Columbia and whose deposits are insured to the limits provided by law by the FDIC having corporate trust powers and acting as trustee for funds deposited therein (provided, however, that such account need not be maintained as a segregated trust account with the corporate trust department of such institution if at all times the certificates of deposit, short-term deposits or commercial paper or the long-term unsecured debt obligations (other than such obligation whose rating is based on collateral or on the credit of a Person other than such institution or trust company) of such depositary institution or trust company shall have a Satisfactory Short-Term Credit Rating in the case of the certificates of deposit, short-term deposits or commercial paper, or the Highest Long-Term Credit Rating in the case of the long-term unsecured debt obligations) or (ii) with a depositary institution, which may include the Trustee, which is acceptable to the Rating Agency (in the case of (i) and (ii), a "Qualified Institution"). The Servicer shall give written notice to the Trustee of the location and account number of the Collection Account and shall notify the Trustee in writing prior to any subsequent change thereof. Pursuant to authority granted to it pursuant to subsection 3.1(b), the Servicer shall have the revocable power to withdraw funds from the Collection Account for the purposes of carrying out its duties hereunder. (b) The Interest Funding and Principal Accounts. The Servicer, for the benefit of the Investor Certificateholders and, to the extent specified in any Supplement, each Enhancement Provider, shall establish and maintain with a Qualified Institution in the name of the Trust two segregated trust accounts for each Series (an "Interest Funding Account" and a "Principal Account," respectively), each bearing a designation clearly indicating that the funds therein are held for the benefit of the Investor Certificateholders of such Series and, to the extent specified in the applicable Supplement, any related Enhancement Provider. The Trustee shall possess all right, title and interest in all funds on deposit from time to time in any Interest Funding Account and any Principal Account and in all proceeds thereof. Except as provided in subsection 4.2(e), each Interest Funding Account and each Principal Account shall be under the sole dominion and control of the Trustee for the benefit of the Investor Certificateholders and, to the extent specified in the applicable Supplement, any related Enhancement Provider. Pursuant to authority granted to it hereunder, the Servicer shall have the revocable power to instruct the Trustee in writing to withdraw funds from the Interest Funding Account and any Principal Account for any purpose of carrying out the Servicer's or the Trustee's duties hereunder. The Trustee at all times shall maintain accurate records reflecting each transaction in each Principal Account and each Interest Funding Account and that funds held therein shall at all times be held in trust for the benefit of the Investor Certificateholders of such Series and, to the extent specified in the applicable Supplement, any related Enhancement Provider. (c) Distribution Accounts. The Servicer, for the benefit of the Investor Certificateholders of each Series and, to the extent specified in any Supplement, each Enhancement Provider, shall cause to be established and maintained in the name of the Trust, with an office or branch of a Qualified Institution a non-interest-bearing segregated demand deposit account for each Series (a "Distribution Account") bearing a designation clearly indicating that the funds deposited therein are held in trust for the benefit of the Investor Certificateholders of such Series and, to the extent specified in the applicable Supplement, any related Enhancement Provider. The Trustee shall possess all right, title and interest in all funds on deposit from time to time in each Distribution Account and in all proceeds thereof. Each Distribution Account shall be under the sole dominion and control of the Trustee for the benefit of the Investor Certificateholders of the related Series and, to the extent specified in the applicable Supplement, any related Enhancement Provider. (d) The Equalization Account. The Servicer, for the benefit of the Certificateholders and, to the extent specified in any Supplement, each Enhancement Provider, shall cause to be established in the name of the Trustee, on behalf of the Certificateholders and, to the extent specified in any Supplement, each Enhancement Provider, with a Qualified Institution, a segregated trust account (the "Equalization Account") bearing a designation clearly indicating that the funds deposited therein are held for the benefit of the Certificateholders and, to the extent specified in the applicable Supplement, any related Enhancement Provider. The Servicer shall give written notice to the Trustee of the location and account number of the Equalization Account and shall notify the Trustee in writing prior to any subsequent change thereof. Except as provided in subsection 4.3(f), the Equalization Account shall, except as otherwise provided herein, be under the sole dominion and control of the Trustee for the benefit of the Certificateholders and, to the extent specified in the applicable Supplement, any related Enhancement Provider. Pursuant to the authority granted to the Servicer herein, the Servicer shall have the power, revocable by the Trustee, to make withdrawals and payments from the Equalization Account for the purpose of carrying out the Servicer's or Trustee's duties hereunder. (e) Administration of the Principal Accounts and the Interest Funding Accounts. Funds on deposit in each Principal Account and each Interest Funding Account shall at all times be invested by the Servicer (or, at the direction of the Transferor, by the Trustee) on behalf of the Transferor in Cash Equivalents. Any such investment shall mature and such funds shall be available for withdrawal on or prior to the Transfer Date following the Monthly Period in which such funds were processed for collection. The Trustee shall maintain for the benefit of the Investor Certificateholders and, to the extent specified in any Supplement, each Enhancement Provider, possession of the negotiable instruments or securities evidencing the Cash Equivalents described in clause (a) of the definition thereof from the time of purchase thereof until the time of sale or maturity. At the end of each month, all interest and earnings (net of losses and investment expenses) on funds on deposit in each Principal Account and each Interest Funding Account (unless otherwise specified in the applicable Supplement) shall be deposited by the Trustee in a separate deposit account with a Qualified Institution in the name of the Servicer, or a Person designated in writing by the Servicer, which shall not constitute a part of the Trust, or shall otherwise be turned over by the Trustee to the Servicer not less frequently than monthly. Subject to the restrictions set forth above, the Servicer, or a Person designated in writing by the Servicer, of which the Trustee shall have received written notification, shall have the authority to instruct the Trustee with respect to the investment of funds on deposit in any Principal Account and any Interest Funding Account. Any investment instructions to the Trustee shall be in writing and shall include a certification that the proposed investment is a Cash Equivalent that matures at or prior to the time required by this Agreement. For purposes of determining the availability of funds or the balances in any Interest Funding Account and any Principal Account for any reason under this Agreement, all investment earnings on such funds shall be deemed not to be available or on deposit. Section IV.3 Collections and Allocations. (a) Collections. Obligors shall make payments on the Receivables (i) to the Servicer who shall deposit all such payments in the Collection Account no later than the first Business Day following the date of receipt or (ii) as In-Store Payments, which shall be deposited in the Collection Account no later than the second Business Day following the date of receipt. The Servicer shall allocate such amounts to each Series of Investor Certificates and to the Holder of the Exchangeable Transferor Certificate in accordance with this Article IV and shall withdraw the required amounts from the Collection Account or pay such amounts to the Holder of the Exchangeable Transferor Certificate in accordance with this Article IV. The Servicer shall make such deposits or payments on the date indicated therein by wire transfer or as otherwise provided in the Supplement for any Series of Certificates with respect to such Series. Notwithstanding anything in this Agreement to the contrary, but subject the terms of any Supplement, for so long as, and only so long as, SRI or an Affiliate of SRI shall remain the Servicer hereunder, and (a) (i) SRI or an Affiliate of SRI provides to the Trustee a letter of credit or other form of Enhancement rated in the highest rating category by the Rating Agency covering the risk of collection of the Servicer, and (ii) the Transferor shall not have received a notice from any Rating Agency that such a letter of credit or other form of Enhancement would result in the lowering of such Rating Agency's then existing rating of the Investor Certificates, or (b) SRI shall have and maintain a Satisfactory Short-Term Credit Rating, the Servicer need not deposit Collections from the Collection Account into the Principal Account or the Interest Funding Account or any Series Account, or make payments to the Holder of the Exchangeable Transferor Certificate, prior to the close of business on the day any Collections are deposited in the Collection Account as otherwise provided in this Article IV, but may instead make such deposits, payments and withdrawals on each Transfer Date in an amount equal to the net amount of such deposits, payments and withdrawals which would have been made but for the provisions of this paragraph. The Servicer shall deposit all Defaulted Receivable Receipts into the Collection Account no later than the first Business Day following the date of receipt (unless such Defaulted Receivable Receipts are In-Store Payments, which shall be deposited no later than the second Business Day following the date of receipt). Upon its determination that any Defaulted Receivable Receipts are in the Collection Account, the Servicer shall be entitled to withdraw the portion of such Defaulted Receivable Receipts not constituting Recoveries from the Collection Account and to transfer such funds to the Transferor (or to any Person who acquired the Defaulted Receivables from the Transferor). (b) Allocations for the Exchangeable Transferor Certificate. Throughout the existence of the Trust, unless otherwise stated in any Supplement, on each Business Day the Servicer shall allocate to the Holder of the Exchangeable Transferor Certificate an amount equal to the product of (i) the Transferor Percentage as of the end of the preceding Business Day and (ii) the aggregate amount of Principal Collections and Finance Charge Collections available in the Collection Account. The Servicer shall pay such amount to the Holder of the Exchangeable Transferor Certificate on each Business Day; provided, however, that amounts payable to the Holder of the Exchangeable Transferor Certificate pursuant to this clause (b) shall instead be deposited in the Equalization Account to the extent necessary to prevent the Transferor Interest from being less than the Minimum Transferor Interest. (c) Allocation of Finance Charge Collections; Allocations to Equalization Account. (i) Any amounts received as Defaulted Receivable Repurchase Amounts shall be deemed Principal Collections which are available in the Collection Account on the applicable Distribution Date. (ii) For purposes of Section 4.3(d), the amount of Finance Charge Collections that are available in the Collection Account on any Business Day shall equal the total Collections which are available in the Collection Account on such Business Day (other than Collections representing Defaulted Receivable Repurchase Amounts) multiplied by a fraction, the numerator of which is equal to the Collections received by the Servicer with respect to Finance Charge Receivables on the immediately preceding Business Day (other than Collections representing Defaulted Receivable Repurchase Amounts), and the denominator of which is all Collections received by the Servicer on the immediately preceding Business Day. All other Collections which are available in the Collection Account on such Business Day shall be deemed Principal Collections. (iii) For the purpose of this Section 4.3, on any day which is not a Business Day, the Servicer shall be permitted to allocate to the Equalization Account a senior undivided interest in Collections previously received by the Servicer which have not yet become available funds (such Collections being "Collections in Process"). The Servicer shall be permitted to allocate Collections in Process to the Equalization Account in an amount (which may be a variable amount) sufficient to ensure that (x) the sum of the Principal Receivables held by the Trust and the amount (including any interest in Collections in Process) in the Equalization Account is equal to or greater than (y) the sum of the Aggregate Invested Amount and the Minimum Transferor Interest. As soon as Collections become available in the Collection Account thereafter, they shall be deposited into the Equalization Account in an amount sufficient to reduce the undivided interest of the Equalization Account in Collections in Process to zero. (d) Allocation for Series. On each Business Day, (i) the amount of Finance Charge Collections available in the Collection Account allocable to each Series shall be determined by multiplying the aggregate amount of such Finance Charge Collections by the Floating Allocation Percentage for such Series, (ii) the amount of Principal Collections available in the Collection Account allocable to each Series shall be determined by multiplying the aggregate amount of such Principal Collections by (x) during the Revolving Period for a Series, the Floating Allocation Percentage for such Series and (y) during any Amortization Period for a Series, the Fixed Allocation Percentage for such Series, and (iii) the Receivables in Defaulted Accounts allocable to each Series shall be determined by multiplying the aggregate amount of such Receivables in Defaulted Accounts by the Floating Allocation Percentage for such Series. The Servicer shall, prior to the close of business on the day any Collections are deposited in the Collection Account, withdraw the required amounts from the Collection Account and deposit such amounts into the applicable Principal Account, the applicable Interest Funding Account, the Equalization Account, or any Series Account or pay such amounts to the Holder of the Exchangeable Transferor Certificate in accordance with the provisions of this Article IV. (e) Shared Principal Collections: Equalization Account. On each Business Day, Shared Principal Collections shall be allocated to each outstanding Series pro rata based on the Principal Shortfall, if any, for each such Series, and then, at the option of the Transferor, any remainder may be applied as principal with respect to the Variable Funding Certificates. The Servicer shall pay any remaining Shared Principal Collections on such Business Day to the Transferor; provided, that if the Transferor Interest as determined on such Business Day does not exceed the Minimum Transferor Interest, then such remaining Shared Principal Collections shall be deposited in the Equalization Account to the extent necessary to increase the Transferor Interest above the Minimum Transferor Interest. (f) Amounts in Equalization Account. Amounts on deposit in the Equalization Account on any Business Day will be invested by the Servicer (or, at the direction of the Transferor, by the Trustee) on behalf of the Transferor in Cash Equivalents which shall mature and be available on or before the next Business Day on which amounts may be released from the Equalization Account. Earnings from such investments received shall be deposited in the Collection Account and treated as Finance Charge Collections. Any investment instructions to the Trustee shall be in writing and shall include a certification that the proposed investment is a Cash Equivalent that matures at or prior to the date required by this Agreement. If on any Business Day other than a Business Day on which a Prospective Pay Out Event has occurred and is continuing, the Transferor Interest is greater than the Minimum Transferor Interest, amounts on deposit in the Equalization Account may, at the option of the Transferor, be released to the Holder of the Exchangeable Transferor Certificate. On any Business Day falling in the Amortization Period for any Series, funds on deposit in the Equalization Account will be treated as Shared Principal Collections and applied in accordance with Section 4.3(e). (g) Portfolio Imbalance Event. On the first Business Day following a Portfolio Imbalance Event, funds on deposit in the Equalization Account will be deposited, in accordance with written instructions from the Servicer, in the Principal Account to the extent of the Portfolio Correction Distribution Amount; provided, however, that no such deposit need be made if the Transferor has furnished the Trustee with an Opinion of Counsel to the effect that failure to make such deposit and distribute the amount required to be deposited in accordance with the Supplements for any outstanding Series will not cause the Trust or the Transferor to be required to register as an investment company pursuant to the Investment Company Act. [THE REMAINDER OF ARTICLE IV IS RESERVED AND SHALL BE SPECIFIED IN ANY SUPPLEMENT WITH RESPECT TO ANY SERIES] [End of Article IV] ARTICLE V [ARTICLE V IS RESERVED AND SHALL BE SPECIFIED IN ANY SUPPLEMENT WITH RESPECT TO ANY SERIES] [End of Article V] ARTICLE VI THE CERTIFICATES Section VI.1 The Certificates. Subject to Sections 6.10 and 6.13, the Investor Certificates of each Series and any Class thereof may be issued in bearer form (the "Bearer Certificates") with attached interest coupons and a special coupon (collectively, the "Coupons") or in fully registered form (the "Registered Certificates"), and shall be substantially in the form of the exhibits with respect thereto attached to the related Supplement. The Exchangeable Transferor Certificate shall be substantially in the form of Exhibit A. The Investor Certificates and the Exchangeable Transferor Certificate shall, upon issue pursuant hereto or to Section 6.9 or Section 6.10, be executed and delivered by the Transferor to the Trustee for authentication and redelivery as provided in Sections 2.1 and 6.2. Any Investor Certificate shall be issuable in a minimum denomination of $1,000 Undivided Interest and integral multiples thereof, unless otherwise specified in any Supplement, and shall be issued upon original issuance in an original aggregate principal amount equal to the Initial Invested Amount. The Exchangeable Transferor Certificate shall be issued as a single certificate. Each Certificate shall be executed by manual or facsimile signature on behalf of the Transferor by its President or any Vice President. Certificates bearing the manual or facsimile signature of the individual who was, at the time when such signature was affixed, authorized to sign on behalf of the Transferor or the Trustee shall not be rendered invalid, notwithstanding that such individual has ceased to be so authorized prior to the authentication and delivery of such Certificates or does not hold such office at the date of such Certificates. No Certificate shall be entitled to any benefit under this Agreement, or be valid for any purpose, unless there appears on such Certificate a certificate of authentication substantially in the form provided for herein, executed by or on behalf of the Trustee by the manual signature of a duly authorized signatory, and such certificate upon any Certificate shall be conclusive evidence, and the only evidence, that such Certificate has been validly issued and duly authenticated and delivered hereunder. All Certificates shall be dated the date of their authentication except Bearer Certificates which shall be dated the applicable issuance date as provided in the related Supplement. Section VI.2 Authentication of Certificates. Contemporaneously with the initial assignment and transfer of the Receivables, whether now existing or hereafter created (other than Receivables in Additional Accounts) and the other components to the Trust, the Trustee shall authenticate and deliver the initial Series of Investor Certificates, upon the written order of the Transferor. Upon the issuance of such Investor Certificates, such Investor Certificates shall be validly issued, fully paid and non-assessable. The Trustee shall authenticate and deliver the Exchangeable Transferor Certificate to the Transferor simultaneously with its delivery of the initial Series of Investor Certificates. Upon an Exchange as provided in Section 6.9 and the satisfaction of certain other conditions specified therein, the Trustee shall authenticate and deliver the Investor Certificates of additional Series (with the designation provided in the related Supplement), upon the written order of the Transferor, to the persons designated in such Supplement. Upon the written order of the Transferor, the Certificates of any Series shall be duly authenticated by or on behalf of the Trustee, in authorized denominations equal to (in the aggregate) the Initial Invested Amount of such Series of Investor Certificates. If specified in the related Supplement for any Series, the Trustee shall authenticate and deliver outside the United States the Global Certificate that is issued upon original issuance thereof, upon the written order of the Transferor, to the Depositary. If specified in the related Supplement for any Series, the Trustee shall authenticate Book-Entry Certificates that are issued upon original issuance thereof, upon the written order of the Transferor, to a Clearing Agency or its nominee as provided in Section 6.10. Section VI.3 Registration of Transfer and Exchange of Certificates. (a) The Trustee shall cause to be kept at the office or agency to be maintained by a transfer agent and registrar (the "Transfer Agent and Registrar") in accordance with the provisions of Section 11.16, a register (the "Certificate Register") in which, subject to such reasonable regulations as it may prescribe, the Transfer Agent and Registrar shall provide for the registration of the Investor Certificates of each Series (unless otherwise provided in the related Supplement) and of transfers and exchanges of the Investor Certificates as herein provided. Bankers Trust Company is hereby initially appointed Transfer Agent and Registrar for the purposes of registering the Investor Certificates and transfers and exchanges of the Investor Certificates as herein provided. If any form of Investor Certificate is issued as a Global Certificate, Bankers Trust Company may, or if and so long as any Series of Investor Certificates are listed on a stock exchange and such exchange shall so require, Bankers Trust Company shall appoint a co-transfer agent and co-registrar, which will also be a co-paying agent, in such city as the Transferor may specify. Any reference in this Agreement to the Transfer Agent and Registrar shall include any co-transfer agent and co-registrar unless the context otherwise requires. Bankers Trust Company shall be permitted to resign as Transfer Agent and Registrar upon 30 days' written notice to the Servicer. In the event that Bankers Trust Company shall no longer be the Transfer Agent and Registrar, the Transferor shall appoint a successor Transfer Agent and Registrar. Upon surrender for registration of transfer of any Certificate at any office or agency of the Transfer Agent and Registrar, the Transferor shall execute, subject to the provisions of subsection 6.3(c), and the Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Certificates in authorized denominations of like aggregate Undivided Interests; provided, that the provisions of this paragraph shall not apply to Bearer Certificates. At the option of an Investor Certificateholder, Investor Certificates may be exchanged for other Investor Certificates of the same Series in authorized denominations of like aggregate Undivided Interests, upon surrender of the Investor Certificates to be exchanged at any such office or agency. At the option of any Holder of Registered Certificates, Registered Certificates may be exchanged for other Registered Certificates of the same Series in authorized denominations of like aggregate Undivided Interests in the Trust, upon surrender of the Registered Certificates to be exchanged at any office or agency of the Transfer Agent and Registrar maintained for such purpose. At the option of a Bearer Certificateholder, subject to applicable laws and regulations (including without limitation, the Bearer Rules), Bearer Certificates may be exchanged for other Bearer Certificates or Registered Certificates of the same Series in authorized denominations of like aggregate Undivided Interests in the Trust, in the manner specified in the Supplement for such Series, upon surrender of the Bearer Certificates to be exchanged at an office or agency of the Transfer Agent and Registrar located outside the United States. Each Bearer Certificate surrendered pursuant to this Section 6.3 shall have attached thereto (or be accompanied by) all unmatured Coupons, provided that any Bearer Certificate so surrendered after the close of business on the Record Date preceding the relevant Distribution Date after the related Series Termination Date need not have attached the Coupons relating to such Distribution Date. Whenever any Investor Certificates of any Series are so surrendered for exchange, the Transferor shall execute, and the Trustee shall authenticate and (unless the Transfer Agent and Registrar is different than the Trustee, in which case the Transfer Agent and Registrar shall) deliver, the Investor Certificates of such Series which the Certificateholder making the exchange is entitled to receive. Every Investor Certificate presented or surrendered for registration of transfer or exchange shall be accompanied by a written instrument of transfer in a form satisfactory to the Transferor and the Transfer Agent and Registrar duly executed by the Certificateholder thereof or his attorney-in-fact duly authorized in writing. The preceding provisions of this Section 6.3 notwithstanding, the Trustee or the Transfer Agent and Registrar, as the case may be, shall not be required to register the transfer or exchange of any Investor Certificate of any Series for a period of 15 days preceding the due date for any payment with respect to the Investor Certificates of such Series. Unless otherwise provided in the related Supplement, no service charge shall be made for any registration of transfer or exchange of Certificates, but the Transfer Agent and Registrar may require payment of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any transfer or exchange of Certificates. All Investor Certificates (together with any Coupons attached to Bearer Certificates) surrendered for registration of transfer or exchange shall be canceled by the Transfer Agent and Registrar and disposed of in a manner satisfactory to the Transferor. The Trustee shall cancel and destroy the Global Certificates upon its exchange in full for Definitive Certificates and shall deliver a certificate of destruction to the Transferor. Such certificate shall also state that a certificate or certificates of each Foreign Clearing Agency to the effect referred to in Section 6.13 was received with respect to each portion of the Global Certificate exchanged for Definitive Certificates. The Transferor shall execute and deliver to the Trustee or the Transfer Agent and Registrar, as applicable, Bearer Certificates and Registered Certificates in such amounts and at such times as are necessary to enable the Trustee to fulfill its responsibilities under this Agreement and the Certificates. (b) Except as provided in Section 6.9 or 7.2 or in any Supplement, in no event shall the Exchangeable Transferor Certificate or any interest therein be transferred, sold, exchanged, pledged, participated or otherwise assignment hereunder (each of the above, a "Transfer"), in whole or in part, unless (i) the Servicer shall have provided an Officer's Certificate to the Trustee to the effect that such sale, exchange, pledge, participation or assignment will not materially adversely affect the interests of the Certificateholders, (ii) such sale, exchange, pledge, participation or assignment shall not, as evidenced by an Opinion of Counsel, cause the Trust to be characterized for Federal income tax purposes as an association taxable as a corporation or otherwise have a material adverse impact on the Federal income taxation of any outstanding Series of Investor Certificates and (iii) the Servicer shall have provided at least ten Business Days prior written notice to each Rating Agency of such sale, exchange, pledge, participation or assignment and shall have received written confirmation from each Rating Agency to the effect of the original rating of any Series or any class of any Series will not be reduced or withdrawn as a result of such sale, exchange, pledge, participation or assignment, a copy of which confirmation will be provided to the Trustee. (c) Unless otherwise provided in the related Supplement, registration of transfer of Registered Certificates containing a legend relating to the restrictions on transfer of such Registered Certificates (which legend shall be set forth in the Supplement relating to such Investor Certificates) shall be effected only if the conditions set forth in such related Supplement are satisfied. Whenever a Registered Certificate containing the legend set forth in the related Supplement is presented to the Transfer Agent and Registrar for registration of transfer, the Transfer Agent and Registrar shall promptly seek instructions from the Servicer regarding such transfer. The Transfer Agent and Registrar and the Trustee shall be entitled to receive written instructions signed by a Servicing Officer prior to registering any such transfer or authenticating new Registered Certificates, as the case may be. The Servicer hereby agrees to indemnify the Transfer Agent and Registrar and the Trustee and to hold each of them harmless against any loss, liability or expense incurred without negligence or bad faith on their part arising out of or in connection with actions taken or omitted by them in reliance on any such written instructions furnished pursuant to this subsection 6.3(c). (d) The Transfer Agent and Registrar will maintain at its expense in the Borough of Manhattan, The City of New York, an office or offices or an agency or agencies where Investor Certificates of such Series may be surrendered for registration of transfer or exchange. Section VI.4 Mutilated, Destroyed, Lost or Stolen Certificates. If (a) any mutilated Certificate (together, in the case of Bearer Certificates, with all unmatured Coupons, if any, appertaining thereto) is surrendered to the Transfer Agent and Registrar, or the Transfer Agent and Registrar receives evidence to its satisfaction of the destruction, loss or theft of any Certificate and (b) there is delivered to the Transfer Agent and Registrar and the Trustee such security or indemnity as may be required by them to hold each of them and the Trust harmless, then, in the absence of notice to the Trustee that such Certificate has been acquired by a bona fide purchaser, the Transferor shall execute and the Trustee shall authenticate and (unless the Transfer Agent and Registrar is different from the Trustee, in which case the Transfer Agent and Registrar shall) deliver (in compliance with applicable law), in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Certificate, a new Certificate of like tenor and aggregate Undivided Interest. In connection with the issuance of any new Certificate under this Section 6.4, the Trustee or the Transfer Agent and Registrar may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee and the Transfer Agent and Registrar) connected therewith. Any duplicate Certificate issued pursuant to this Section 6.4 shall constitute complete and indefeasible evidence of ownership in the Trust, as if originally issued, whether or not the lost, stolen or destroyed Certificate shall be found at any time. Section VI.5 Persons Deemed Owners. Prior to due presentation of a Certificate for registration of transfer, the Trustee, the Paying Agent, the Transfer Agent and Registrar and any agent of any of them may treat the Person in whose name any Certificate is registered as the owner of such Certificate for the purpose of receiving distributions pursuant to Article V (as described in any Supplement) and Article XII and for all other purposes whatsoever, and neither the Trustee, the Paying Agent, the Transfer Agent and Registrar nor any agent of any of them shall be affected by any notice to the contrary; provided, however, that in determining whether the holders of Investor Certificates evidencing the requisite Undivided Interests have given any request, demand, authorization, direction, notice, consent or waiver hereunder, Investor Certificates owned by the Transferor, the Servicer or any Affiliate thereof shall be disregarded and deemed not to be outstanding, except that, in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Investor Certificates which a Responsible Officer in the Corporate Trust Office of the Trustee knows to be so owned shall be so disregarded. Investor Certificates so owned that have been pledged in good faith shall not be disregarded as outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to such Investor Certificates and that the pledgee is not the Transferor, the Servicer or an Affiliate thereof. In the case of a Bearer Certificate, the Trustee, the Paying Agent, the Transfer Agent and Registrar and any agent of any of them may treat the holder of a Bearer Certificate or Coupon as the owner of such Bearer Certificate or Coupon for the purpose of receiving distributions pursuant to Article V (as described in any Supplement) and Article XII and for all other purposes whatsoever, and neither the Trustee, the Paying Agent, the Transfer Agent and Registrar nor any agent of any of them shall be affected by any notice to the contrary. Certificates so owned which have been pledged in good faith shall not be disregarded and may be regarded as outstanding, if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to such Investor Certificates and that the pledgee is not the Transferor, the Servicer or an Affiliate thereof. Section VI.6 Appointment of Paying Agent. (a) The Paying Agent shall make distributions to Investor Certificateholders from the appropriate account or accounts maintained for the benefit of Certificateholders as specified in this Agreement or the related Supplement for any Series pursuant to Articles IV and V hereof. Any Paying Agent shall have the revocable power to withdraw funds from such appropriate account or accounts for the purpose of making distributions referred to above. The Trustee and the Transferor (or the Servicer if the Trustee is the Paying Agent) may revoke such power and remove the Paying Agent, if the Trustee and the Transferor (or the Servicer if the Trustee is the Paying Agent) determine (or determines) that the Paying Agent shall have failed to perform its obligations under this Agreement in any material respect or for other good cause. The Paying Agent, unless the Supplement with respect to any Series states otherwise, shall initially be the Trustee. The Trustee shall be permitted to resign as Paying Agent upon 30 days' written notice to the Servicer. In the event that the Trustee, shall no longer be the Paying Agent, the Transferor shall appoint a successor to act as Paying Agent (which shall be a bank or trust company). Any reference in this Agreement to the Paying Agent shall include any co-paying agent unless the context requires otherwise. If specified in the related Supplement for any Series, so long as the Investor Certificates of such Series are outstanding and the Paying Agent is not located in New York City, the Transferor shall maintain a co-paying agent in New York City (for Registered Certificates only) or any other city designated in such Supplement. (b) The Trustee shall cause each Paying Agent (other than itself) to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee that such Paying Agent will hold all sums, if any, held by it for payment to the Certificateholders in trust for the benefit of the Certificateholders entitled thereto and waive all rights of set off the Paying Agent may have against any sums held by it until such sums shall be paid to such Certificateholders and shall agree, and if the Trustee is the Paying Agent it hereby agrees, that it shall comply with all requirements of the Internal Revenue Code regarding the withholding by the Trustee of payments in respect of federal income taxes due from Certificate owners. Section VI.7 Access to List of Certificateholders' Names and Addresses. The Trustee will furnish or cause to be furnished by the Transfer Agent and Registrar to the Servicer or the Paying Agent, within five Business Days after receipt by the Trustee of a request therefor from the Servicer or the Paying Agent, respectively, in writing, a list in such form as the Servicer or the Paying Agent may reasonably require, of the names and addresses of the Investor Certificateholders as of the most recent Record Date for payment of distributions to Investor Certificateholders. Unless otherwise provided in the related Supplement, holders of Investor Certificates evidencing Undivided Interests aggregating not less than lot of the Invested Amount of the Investor Certificates of any Series (the "Applicants") may apply in writing to the Trustee, and if such application states that the Applicants desire to communicate with other Investor Certificateholders of any Series with respect to their rights under this Agreement or under the Investor Certificates and is accompanied by a copy of the communication which such Applicants propose to transmit, then the Trustee, after having been adequately indemnified by such Applicants for its costs and expenses, shall afford or shall cause the Transfer Agent and Registrar to afford such Applicants access during normal business hours to the most recent list of Certificateholders held by the Trustee and shall give the Servicer notice that such request has been made, within five Business Days after the receipt of such application. Such list shall be as of a date no more than 45 days prior to the date of receipt of such Applicants' request. Every Certificateholder, by receiving and holding a Certificate, agrees with the Trustee that neither the Trustee, the Transfer Agent and Registrar, nor any of their respective agents shall be held accountable by reason of the disclosure of any such information as to the names and addresses of the Certificateholders hereunder, regardless of the source from which such information was obtained. Section VI.8 Authenticating Agent. (a) The Trustee may appoint one or more authenticating agents with respect to the Certificates which shall be authorized to act on behalf of the Trustee in authenticating the Certificates in connection with the issuance, delivery, registration of transfer, exchange or repayment of the Certificates. Whenever reference is made in this Agreement to the authentication of Certificates by the Trustee or the Trustee's certificate of authentication, such reference shall be deemed to include authentication on behalf of the Trustee by an authenticating agent and a certificate of authentication executed on behalf of the Trustee by an authenticating agent. Each authenticating agent must be acceptable to the Transferor. The Trustee hereby initially appoints Bankers Trust (Delaware) as its Authenticating Agent. (b) Any institution succeeding to the corporate agency business of an authenticating agent shall continue to be an authenticating agent without the execution or filing of any paper or any further act on the part of the Trustee or such authenticating agent. (c) An authenticating agent may at any time resign by giving written notice of resignation to the Trustee and to the Transferor. The Trustee may at any time terminate the agency of an authenticating agent by giving notice of termination to such authenticating agent and to the Transferor. Upon receiving such a notice of resignation or upon such a termination, or in case at any time an authenticating agent shall cease to be acceptable to the Trustee or the Transferor, the Trustee promptly may appoint a successor authenticating agent. Any successor authenticating agent upon acceptance of its appointment hereunder shall become vested with all the rights, powers and duties of its predecessor hereunder, with like effect as if originally named as an authenticating agent. No successor authenticating agent shall be appointed unless acceptable to the Trustee and the Transferor. (d) The Servicer agrees to pay each authenticating agent from time to time reasonable compensation for its services under this Section 6.8. (e) The provisions of Sections 11.1, 11.2 and 11.3 shall be applicable to any authenticating agent. (f) Pursuant to an appointment made under this Section 6.8, the Certificates may have endorsed thereon, in lieu of the Trustee's certificate of authentication, an alternate certificate of authentication in substantially the following form: This is one of the certificates described in the Pooling and Servicing Agreement. as Authenticating Agent or the Trustee, By: Authorized Signatory Section VI.9 Tender of Exchangeable Transferor Certificate. (a) Upon any Exchange, the Transferor shall deliver to the Trustee for authentication under Section 6.2, one or more new Series of Investor Certificates. Any such Series of Investor Certificates shall be substantially in the form specified in the related Supplement and shall bear, upon its face, the designation for such Series to which it belongs, as selected by the Transferor. Except as specified in any Supplement for a related Series, all Investor Certificates of any Series shall rank pari passu and be equally and ratably entitled as provided herein to the benefits hereof (except that the Enhancement provided for any Series shall not be available for any other Series) without preference, priority or distinction on account of the actual time or times of authentication and delivery, all in accordance with the terms and provisions of this Agreement and the related Supplement. (b) The Holder of the Exchangeable Transferor Certificate may (i) tender the Exchangeable Transferor Certificate to the Trustee in exchange for (A) one or more newly issued Series of Investor Certificates or, with respect to any prefunded Series, interests therein and (B) a reissued Exchangeable Transferor Certificate, (ii) request the Trustee to issue to it one or more Classes of any newly issued Series of Investor Certificates which upon payment by the purchaser thereof of the initial Invested Amount of such Certificates to a Defeasance Account, will represent an interest in the Trust equal to such Initial Invested Amount (an "Unfunded Certificate") or (iii) take a combination of the actions specified in clauses (i) and (ii) provided that the sum of the amount of Transferor Interest which is tendered under clause (i) and the amount to be paid to the Defeasance Account under clause (ii) equals the Initial Invested Amount of the Investor Certificates delivered to the Holder of the Exchangeable Transferor Certificate (any such event under clauses (i), (ii) or (iii), a "Transferor Exchange"). In addition, to the extent permitted for any Series of Investor Certificates as specified in the related Supplement, the Investor Certificateholders of such Series may tender their Investor Certificates and the Holder of the Exchangeable Transferor Certificate may tender the Exchangeable Transferor Certificate to the Trustee pursuant to the terms and conditions set forth in such Supplement in exchange for (i) one or more newly issued Series of Investor Certificates and (ii) a reissued Exchangeable Transferor Certificate (an "Investor Exchange"). The Transferor Exchange and Investor Exchange are referred to collectively herein as an "Exchange." The Holder of the Exchangeable Transferor Certificate may perform an Exchange by notifying the Trustee, in writing, at least five Business Days in advance (an "Exchange Notice") of the date upon which the Exchange is to occur (an "Exchange Date"). Any Exchange Notice shall state the designation of any Series to be issued on the Exchange Date and, with respect to each such Class or Series: (a) its Initial Invested Amount (or the method for calculating such Initial Invested Amount), which at any time may not be greater than the current principal amount of the Exchangeable Transferor Certificate at such time (or in the case of an Investor Exchange, the sum of the Invested Amount of any Class or Series of Investor Certificates to be exchanged plus the current principal amount of the Exchangeable Transferor Certificate) taking into account any Receivables transferred to the Trust simultaneous with such Exchange, (b) its Certificate Rate (or the method for allocating interest payments or other cash flows to such Series), if any, and (c) the Enhancement Provider, if any, with respect to such Series. On the Exchange Date, the Trustee shall authenticate and deliver any such Class or Classes of Series of Investor Certificates only upon delivery to it of the following: (a) a Supplement satisfying the criteria set forth in subsection 6.9(c) and in form reasonably satisfactory to the Trustee executed by the Transferor and the Servicer and specifying the Principal Terms of such Series, (b) the applicable Enhancement, if any, (c) the agreement, if any, pursuant to which the Enhancement Provider agrees to provide the Enhancement, if any, (d) an Opinion of Counsel to the effect that (i) any Class of the newly issued Series of Investor Certificates sold to third parties will be characterized as either indebtedness or partnership interests for Federal and applicable state income tax purposes, (ii) that the issuance of the newly issued Series of Investor Certificates will not adversely affect the Federal and applicable state income tax characterization of any outstanding Series of Investor Certificates and (iii) the issuance of the newly issued Series will not result in the Trust being subject to tax at the entity level for federal or applicable state tax purposes, (e) written confirmation from each Rating Agency that the Exchange will not result in such Rating Agency's reducing or withdrawing its rating on any then outstanding Series as to which it is a Rating Agency, (f) an Officer's Certificate of the Transferor, that on the Exchange Date (i) the Transferor, after giving effect to the Exchange, would not be required to add Supplemental Accounts pursuant to subsection 2.6(c), (ii) after giving effect to such Exchange, the Transferor Interest would be at least equal to the Minimum Transferor Interest, and (iii) the Retained Interest would be at least equal to the Minimum Retained Interest, (g) the existing Exchangeable Transferor Certificate or applicable Investor Certificates, as the case may be and (h) such other documents, certificates and Opinions of Counsel as may be required by the applicable Supplement. Upon satisfaction of such conditions and upon the receipt of written instructions by the Transferor, the Trustee shall cancel the existing Exchangeable Transferor Certificate or applicable Investor Certificates, as the case may be, and issue, as provided above, such Series of Investor Certificates and a new Exchangeable Transferor Certificate, dated the Exchange Date. There is no limit to the number of Exchanges that may be performed under this Agreement. (c) In conjunction with an Exchange, the parties hereto shall execute a Supplement, which shall specify the relevant terms with respect to any newly issued Series of Investor Certificates, which may include without limitation: (i) its name or designation, (ii) the Initial Invested Amount or the method of calculating the Initial Invested Amount, (iii) the Certificate Rate (or formula for the determination thereof), (iv) the Closing Date, (v) the rating agency or agencies rating such Series, (vi) the name of the Clearing Agency, if any, (vii) the rights of the Holder of the Exchangeable Transferor Certificate that have been transferred to the Holders of such Series pursuant to such Exchange (including any rights to allocations of Collections of Finance Charge Receivables and Principal Receivables), (viii) the interest payment date or dates and the date or dates from which interest shall accrue, (ix) the method of allocating Collections with respect to Principal Receivables for such Series and, if applicable, with respect to any Paired Series and the method by which the principal amount of Investor Certificates of such Series shall amortize or accrete and the method for allocating Collections with respect to Finance Charge Receivables and Receivables in Defaulted Accounts, (x) the names of any accounts to be used by such Series and the terms governing the operation of any such account, (xi) the Series Servicing Fee Percentage, (xii) the Minimum Transferor Interest, (xiii) the Series Termination Date, (xiv) the terms of any Enhancement with respect to such Series, (xv) the Enhancement Provider, if applicable, (xvi) the base rate applicable to such Series, (xvii) the terms on which the Certificates of such Series may be repurchased or remarketed to other investors, (xviii) any deposit into any account provided for such Series, (xix) the number of Classes of such Series, and if more than one Class, the rights and priorities of each such Class, (xx) whether any fees will be included in the funds available to be paid for such Series, (xxi) the subordination of such Series to any other Series, (xxii) the Minimum Aggregate Principal Receivables, (xxiii) whether such Series will be a part of a group or subject to being paired with any other Series, (xxiv) whether such Series will be prefunded, and (xxv) any other relevant terms of such Series (including whether or not such Series will be pledged as collateral for an issuance of any other securities, including commercial paper) (all such terms, the "Principal Terms" of such Series). The terms of such Supplement may modify or amend the terms of this Agreement solely as applied to such new Series. If on the date of the issuance of such Series there is issued and outstanding one or more Series of Investor Certificates and no Series of Investor Certificates is currently rated by a Rating Agency, then as a condition to such Exchange a nationally recognized investment banking firm or commercial bank shall also deliver to the Trustee an officer's certificate stating, in substance, that the Exchange will not have an adverse effect on the timing or distribution of payments to such other Series of Investor Certificates then issued and outstanding. Section VI.10 Book-Entry Certificates. Unless otherwise provided in any related Supplement, the Investor Certificates, upon original issuance, shall be issued in the form of typewritten Certificates representing the Book-Entry Certificates, to be delivered to the depositary specified in such Supplement (the "Depositary") which shall be the Clearing Agency or Foreign Clearing Agency, by or on behalf of such Series. The Investor Certificates of each Series shall, unless otherwise provided in the related Supplement, initially be registered on the Certificate Register in the name of the nominee of the Clearing Agency or Foreign Clearing Agency. No Certificate Owner will receive a Definitive Certificate representing such Certificate Owner's interest in the related Series of Investor Certificates, except as provided in Section 6.12. Unless and until definitive, fully registered Investor Certificates of any Series ("Definitive Certificates") have been issued to Certificate Owners pursuant to Section 6.12: (i) the provisions of this Section 6.10 shall be in full force and effect with respect to each such Series; (ii) the Transferor, the Servicer, the Paying Agent, the Transfer Agent and Registrar and the Trustee may deal with the Clearing Agency and the Clearing Agency Participants for all purposes (including the making of distributions on the Investor s of each such Series) as the authorized representatives of the Owners; (iii) to the extent that the provisions of this Section 6.10 conflict with any other provisions of this Agreement, the provisions of this Section 6.10 shall control with respect to each such Series; and (iv) the rights of Certificate Owners of Investor Certificates of each such Series shall be exercised only through the Clearing Agency or Foreign Clearing Agency and the applicable Clearing Agency Participants and shall be limited to those established by law and agreements between such Certificate Owners and the Clearing Agency or Foreign Clearing Agency and/or the Clearing Agency Participants. Pursuant to the Depositary Agreement applicable to a Series, unless and until Definitive Certificates of such Series are issued pursuant to Section 6.12, the initial Clearing Agency will make book-entry transfers among the Clearing Agency Participants and receive and transmit distributions of principal and interest on the Investor Certificates to such Clearing Agency Participants. Section VI.11 Notices to Clearing Agency. Whenever notice or other communication to the Certificateholders is required under this Agreement, unless and until Definitive Certificates shall have been issued to Certificate Owners pursuant to Section 6.12, the Trustee, upon written direction by the Transferor, shall give all such notices and communications specified herein to be given to Holders of the Investor Certificates to the Clearing Agency or Foreign Clearing Agency. Section VI.12 Definitive Certificates. If (i) (A) the Transferor advises the Trustee in writing that the Clearing Agency or Foreign Clearing Agency is no longer willing or able to discharge properly its responsibilities under the applicable Depositary Agreement, and (B) the Transferor is unable to locate a qualified successor, (ii) the Transferor, at its option, advises the Trustee in writing that it elects to terminate the book-entry system through the Clearing Agency or Foreign Clearing Agency with respect to any Series of Certificates or (iii) after the occurrence of a Servicer Default, Certificate Owners of a Series representing beneficial interests aggregating not less than 50% of the Invested Amount of such Series advise the Trustee and the applicable Clearing Agency or Foreign Clearing Agency through the applicable Clearing Agency Participants in writing that the continuation of a book-entry system through the applicable Clearing Agency or Foreign Clearing Agency is no longer in the best interests of the Certificate Owners, the Trustee shall notify all Certificate Owners of such Series, through the applicable Clearing Agency Participants, of the occurrence of any such event and of the availability of Definitive Certificates to Certificate Owners of such Series requesting the same. Upon surrender to the Trustee of the Investor Certificates of such Series by the applicable Clearing Agency or Foreign Clearing Agency, accompanied by registration instructions from the applicable Clearing Agency or Foreign Clearing Agency for registration, the Trustee shall issue the Definitive Certificates of such Series. Neither the Transferor nor the Trustee shall be liable for any delay in delivery of such instructions and may conclusively rely on, and shall be protected in relying on, such instructions. Upon the issuance of Definitive Certificates of such Series, all references herein to obligations imposed upon or to be performed by the applicable Clearing Agency or Foreign Clearing Agency shall be deemed to be imposed upon and performed by the Trustee, to the extent applicable with respect to such Definitive Certificates, and the Trustee shall recognize the Holders of the Definitive Certificates of such Series as Certificateholders of such Series hereunder. Section VI.13 Global Certificate; Euro-Certificate Exchange Date. If specified in the related Supplement for any Series, the Investor Certificates may be initially issued in the form of a single temporary Global Certificate (the "Global Certificate") in bearer form, without interest coupons, in the denomination of the Initial Invested Amount of such Series and substantially in the form attached to the related Supplement. Unless otherwise specified in the related Supplement, the provisions of this Section 6.13 shall apply to such Global Certificate. The Global Certificate will be authenticated by the Trustee upon the same conditions, in substantially the same manner and with the same effect as the Definitive Certificates. The Global Certificate may be exchanged in the manner described in the related Supplement for Registered or Bearer Certificates in definitive form. Section VI.14 Meetings of Certificateholders. To the extent provided by the Supplement for any Series issued in whole or in part in Bearer Certificates, the Servicer may at any time call a meeting of the Certificateholders of such Series, to be held at such time and at such place as the Servicer shall determine, for the purpose of approving a modification of or amendment to, or obtaining a waiver of, any covenant or condition set forth in this Agreement with respect to such Series or in the Certificates of such Series, subject to Section 13.1 of this Agreement. [End of Article VI] ARTICLE VII OTHER MATTERS RELATING TO THE TRANSFEROR Section VII.1 Liability of the Transferor. The Transferor shall be liable in accordance herewith solely to the extent of the obligations specifically undertaken by the Transferor. Section VII.2 Merger or Consolidation of, or Assumption of the Obligations of, the Transferor. (a) The Transferor shall not consolidate with or merge into any other corporation or convey or transfer its properties and assets substantially as an entirety to any Person, unless: (i) the corporation formed by such consolidation or into which the Transferor is merged or the Person which acquires by conveyance or transfer the properties and assets of the Transferor substantially as an entirety shall be, if the Transferor is not the surviving entity, organized and existing under the laws of the United States of America or any State or the District of Columbia and shall expressly assume, by an agreement supplemental hereto, executed and delivered to the Trustee, in form satisfactory to the Trustee, the performance of every covenant and obligation of the Transferor, as applicable hereunder and shall benefit from all the rights granted to the Transferor, as applicable hereunder. To the extent that any right, covenant or obligation of the Transferor, as applicable hereunder, is inapplicable to the successor entity, such successor entity shall be subject to such covenant or obligation, or benefit from such right, as would apply, to the extent practicable, to such successor entity; (ii) the Transferor shall have delivered to the Trustee an Officer's Certificate signed by a Vice President (or any more senior officer) of the Transferor stating that such consolidation, merger, conveyance or transfer and such supplemental agreement comply with this Section 7.2 and that all conditions precedent herein provided for relating to such transaction have been complied with and an Opinion of Counsel that such supplemental agreement is legal, valid and binding and that the entity surviving such consolidation, conveyance or transfer is organized and existing under the laws of the United States of America or any State or the District of Columbia and, subject to customary limitations and qualifications, such entity will not be substantively consolidated with any Originator or the Servicer; (iii) the Transferor shall have delivered notice to the Rating Agencies of such consolidation, merger, conveyance or transfer and the Rating Agency shall have provided written confirmation that such consolidation, merger, conveyance or transfer will not result in the Rating Agency reducing or withdrawing its rating on any then outstanding Series as to which it is a Rating Agency; (iv) the successor entity shall be a special purpose bankruptcy remote entity; and (v) if the Transferor is not the surviving entity, the Transferor shall file new UCC-1 financing statements with respect to the interest of the Trust in the Receivables. (b) The obligations of the Transferor hereunder shall not be assignable nor shall any Person succeed to the obligations of the Transferor hereunder except for mergers, consolidations, assumptions or transfers in accordance with the provisions of the foregoing paragraph. Section VII.3 Limitation on Liability. The directors, officers, employees or agents of the Transferor shall not be under any liability to the Trust, the Trustee, the Certificateholders, any Enhancement Provider or any other Person hereunder or pursuant to any document delivered hereunder, it being expressly understood that all such liability is expressly waived and released as a condition of, and as consideration for, the execution of this Agreement and any Supplement and the issuance of the Certificates; provided, however, that this provision shall not protect the officers, directors, employees, or agents of the Transferor against any liability which would otherwise be imposed upon them by reason of willful misfeasance, bad faith or negligence in the performance of duties or by reason of reckless disregard of obligations and duties hereunder. Except as provided in Sections 7.1 and 7.4 with respect to the Trust and the Trustee and its officers, directors, employees and agents, the Transferor shall not be under any liability to the Trust, the Trustee, its officers, directors, employees and agents, the Certificateholders, any Enhancement Provider or any other Person for any action taken or for refraining from the taking of any action in its capacity as Transferor pursuant to this Agreement or any Supplement whether arising from express or implied duties under this Agreement or any Supplement or otherwise; provided, however, that this provision shall not protect the Transferor against any liability which would otherwise be imposed upon it by reason of willful misfeasance, bad faith or negligence in the performance of duties or by reason of reckless disregard of obligations and duties hereunder. The Transferor and any director, officer, employee or agent may rely in good faith on any document of any kind prima facie properly executed and submitted by any Person respecting any matters arising hereunder. Section VII.4 Liabilities. (a) Subject to the limitations on liability set forth in Sections 2.4(d), (e) and 7.3, the Transferor shall indemnify and hold harmless the Trust and the Trustee from and against any loss, liability, reasonable expense, damage or injury, including, but not limited to, any judgment, award, settlement, reasonable attorneys' fees and other costs or expenses incurred in connection with the defense of any actual or threatened action, proceeding or claim, suffered or sustained by reason of any acts or omissions or alleged acts or omissions of the Transferor with respect to activities of the Trust or the Trustee for which the Transferor is responsible pursuant to this Agreement; provided, however, that the Transferor shall not indemnify or hold harmless the Trust and the Trustee if such acts, omissions or alleged acts or omissions constitute or are caused by fraud, negligence, or willful misconduct by the Trustee (or any of such Trustee's officers, directors, employees or agents) or the Investor Certificateholders; provided, further, that the Transferor shall not indemnify or hold harmless the Trust, the Investor Certificateholders or the Certificate Owners for any losses, liabilities, expenses, damages or injuries suffered or sustained by any of them with respect to any action taken by the Trustee at the request of the Investor Certificateholders; provided further, that the Transferor shall not indemnify or hold harmless the Trust, the Investor Certificateholders or the Certificate Owners as to any losses, liabilities, expenses, damages or injuries suffered or sustained by any of them in their capacities as investors, including without limitation losses incurred as a result of Defaulted Accounts or Receivables which are written off as uncollectible; provided further, that the Transferor shall not indemnify or hold harmless the Trust, the Investor Certificateholders or the Certificate Owners for any losses, liabilities, expenses, damages or injuries suffered or sustained by the Trust, the Investor Certificateholders or the Certificate Owners arising under any tax law, including without limitation, any federal, state, local or foreign income or franchise taxes or any other tax imposed on or measured by income (or any interest, penalties or additions with respect thereto or arising from a failure to comply therewith) required to be paid by the Trust, the Investor Certificateholders or the Certificate Owners in connection herewith to any taxing authority; and, provided, further, that in no event will the Transferor be liable, directly or indirectly, for or in respect of any indebtedness or obligation evidenced or created by any Certificate, recourse as to which shall be limited solely to the assets of the Trust allocated for the payment thereof as provided in this Agreement and any applicable Supplement. Section VII.5 Transferor's Records. The Transferor shall clearly and unambiguously mark its accounting records evidencing the Receivables being purchased pursuant to the Receivables Purchase Agreement with a legend stating that such Receivables have been conveyed to the Trust pursuant to this Agreement. [End of Article VII] ARTICLE VIII OTHER MATTERS RELATING TO THE SERVICER Section VIII.1 Liability of the Servicer. The Servicer shall be liable in accordance herewith only to the extent of the obligations specifically undertaken by the Servicer in such capacity herein. Section VIII.2 Merger or Consolidation of, or Assumption of the Obligations of, the Servicer. Subject to subsection 3.1(a), the Servicer shall not consolidate with or merge into any other corporation or convey or transfer its properties and assets substantially as an entirety to any Person, unless: (i) the corporation formed by such consolidation or into which the Servicer is merged or the Person which acquires by conveyance or transfer the properties and assets of the Servicer substantially as an entirety shall be a corporation organized and existing under the laws of the United States of America or any State or the District of Columbia and, if the Servicer is not the surviving entity, shall expressly assume, by an agreement supplemental hereto, executed and delivered to the Trustee in form satisfactory to the Trustee, the performance of every covenant and obligation of the Servicer hereunder (to the extent that any right, covenant or obligation of the Servicer, as applicable hereunder, is inapplicable to the successor entity, such successor entity shall be subject to such covenant or obligation, or benefit from such right, as would apply, to the extent practicable, to such successor entity); (ii) the Servicer shall have delivered to the Trustee an Officer's Certificate that such consolidation, merger, conveyance or transfer and such supplemental agreement comply with this Section 8.2 and that all conditions precedent herein provided for relating to such transaction have been complied with and an Opinion of Counsel that such supplemental agreement is legal, valid and binding with respect to the Servicer and that the entity surviving such consolidation, conveyance or transfer is organized and existing under the laws of the United States of America or any State or the District of Columbia; and (iii) the Servicer shall have delivered notice to the Rating Agency of such consolidation, merger, conveyance or transfer and the Rating Agency shall have provided written confirmation that such consolidation, merger, conveyance or transfer will not result in the Rating Agency reducing or withdrawing its rating on any then outstanding Series as to which it is a Rating Agency. Section VIII.3 Limitation on Liability of the Servicer and Others. The directors, officers, employees or agents of the Servicer shall not be under any liability to the Trust, the Trustee, the Certificateholders, any Enhancement Provider or any other Person hereunder or pursuant to any document delivered hereunder, it being expressly understood that all such liability is expressly waived and released as a condition of, and as consideration for, the execution of this Agreement and any Supplement and the issuance of the Certificates; provided, however, that this provision shall not protect the directors, officers, employees and agents of the Servicer against any liability which would otherwise be imposed upon them by reason of willful misfeasance, bad faith or negligence in the performance of duties or by reason of reckless disregard of obligations and duties hereunder. Except as provided in Sections 8.1 and 8.4 with respect to the Trustee, its officers, directors, employees and agents, the Servicer shall not be under any liability to the Trust, the Trustee, its officers, directors, employees and agents, the Certificateholders, any Enhancement Provider or any other Person for any action taken or for refraining from the taking of any action in its capacity as Servicer pursuant to this Agreement or any Supplement; provided, however, that this provision shall not protect the Servicer against any liability which would otherwise be imposed upon it by reason of willful misfeasance, bad faith or negligence in the performance of duties or by reason of its reckless disregard of its obligations and duties hereunder or under any Supplement. The Servicer may rely in good faith on any document of any kind prima facie properly executed and submitted by any Person respecting any matters arising hereunder. The Servicer shall not be under any obligation to appear in, prosecute or defend any legal action which is not incidental to its duties to service the Receivables in accordance with this Agreement which in its reasonable opinion may involve it in any expense or liability. Section VIII.4 Servicer Indemnification of the Transferor, the Trust and the Trustee. Subject to the limitations on liability set forth in Section 8.3, the Servicer shall indemnify and hold harmless the Transferor and the Trust (each, an "Indemnified Party") from and against any loss, liability, reasonable expense, damage or injury, including, but not limited to, any judgment, award, settlement, reasonable attorneys' fees and other costs or expenses incurred in connection with the defense of any actual or threatened action, proceeding or claim, suffered or sustained by reason of any acts or omissions or alleged acts or omissions of the Servicer with respect to activities of the Trust or the Trustee for which the Servicer is responsible pursuant to this Agreement; provided, however, that the Servicer shall not indemnify or hold harmless an Indemnified Party if such acts, omissions or alleged acts or omissions constitute or are caused by fraud, negligence, or willful misconduct by such Indemnified Party (or any of such Indemnified Party's officers, directors, employees or agents) or the Investor Certificateholders; provided, further, that the Servicer shall not indemnify or hold harmless the Trust, the Investor Certificateholders or the Certificate Owners for any losses, liabilities, expenses, damages or injuries suffered or sustained by any of them with respect to any action taken by the Trustee at the request of the Investor Certificateholders; provided further, that the Servicer shall not indemnify or hold harmless the Trust, the Investor Certificateholders or the Certificate Owners as to any losses, liabilities, expenses, damages or injuries suffered or sustained by any of them in their capacities as investors, including without limitation losses incurred as a result of Defaulted Accounts or Receivables which are written off as uncollectible; provided further, that the Servicer shall not indemnify or hold harmless the Transferor, the Trust, the Investor Certificateholders or the Certificate Owners for any losses, liabilities, expenses, damages or injuries suffered or sustained by the Trust, the Investor Certificateholders or the Certificate Owners arising under any tax law, including without limitation, any federal, state, local or foreign income or franchise taxes or any other tax imposed on or measured by income (or any interest, penalties or additions with respect thereto or arising from a failure to comply therewith) required to be paid by the Trust, the Investor Certificateholders or the Certificate Owners in connection herewith to any taxing authority; and, provided, further, that in no event will the Servicer be liable, directly or indirectly, for or in respect of any indebtedness or obligation evidenced or created by any Certificate, recourse as to which shall be limited solely to the assets of the Trust allocated for the payment thereof as provided in this Agreement and any applicable Supplement. Any such indemnification shall not be payable from the assets of the Trust, but the Servicer shall be subrogated to the rights of the Trust with respect to the foregoing matters if and to the extent that the Servicer shall have indemnified the Trust with respect thereto. The Servicer shall indemnify and hold harmless the Trustee and its officers, directors, employees or agents from and against any loss, liability, reasonable expense, damage or injury suffered or sustained by reason of the acceptance of this Trust by the Trustee, the issuance by the Trust of the Certificates or any of the other matters contemplated herein or in any Supplement; provided, however, that the Servicer shall not indemnify the Trustee or its officers, directors, employees or agents for any loss, liability, expense, damage or injury caused by the fraud, negligence or willful misconduct of any of them. The provisions of this indemnity shall run directly to and be enforceable by an injured party subject to the limitations hereof and shall survive the resignation or removal of the Servicer, the resignation or removal of the Trustee and/or the termination of the Trust and shall survive the termination of this Agreement. Section VIII.5 The Servicer Not to Resign. Subject to subsection 3.1(a), the Servicer shall not resign from the obligations and duties hereby imposed on it except upon determination that (i) the performance of its duties hereunder is no longer permissible under applicable law and (ii) there is no reasonable action which the Servicer could take to make the performance of its duties hereunder permissible under applicable law. Any such determination permitting the resignation of the Servicer shall be evidenced as to clause (i) above by an Opinion of Counsel to such effect delivered to the Trustee. No such resignation shall become effective until the Trustee or a Successor Servicer shall have assumed the responsibilities and obligations of the Servicer in accordance with Section 10.2 hereof. If the Trustee is unable within 120 days of the date of delivery to it of such Opinion of Counsel to appoint a Successor Servicer, the Trustee shall serve as Successor Servicer hereunder (but shall have continued authority to appoint another Person as Successor Servicer). Section VIII.6 Access to Certain Documentation and Information Regarding the Receivables. The Servicer shall provide to the Trustee and its agents (who shall be reasonably acceptable to the Servicer) access to the documentation regarding the Accounts and the Receivables in such cases where the Trustee is required in connection with the enforcement of the rights of the Investor Certificateholders, or by applicable statutes or regulations, to review such documentation, such access being afforded without charge but only (i) upon reasonable request, (ii) during normal business hours, (iii) subject to the Servicer's normal security and confidentiality procedures and (iv) at offices designated by the Servicer. Nothing in this Section 8.6 shall derogate from the obligation of the Transferor, the Trustee or the Servicer to observe any applicable law prohibiting disclosure of information regarding the Obligors and the failure of the Servicer to provide access as provided in this Section 8.6 as a result of such obligations shall not constitute a breach of this Section 8.6. Section VIII.7 Delegation of Duties. In the ordinary course of business, the Servicer may at any time delegate any duties hereunder to any Person who agrees to conduct such duties in accordance with the Credit and Collection Policies. Any such delegations shall not relieve the Servicer of its liability and responsibility with respect to such duties, and shall not constitute a resignation within the meaning of Section 8.5 hereof and the Servicer will remain jointly and severally liable with such Person for any amounts which would otherwise be payable pursuant to this Article VIII as if the Servicer had performed such duty; provided, however, that in the case of any significant delegation to a Person other than an Affiliate of SRI (i) written notice shall be given to the Trustee and to each Rating Agency of such delegation and (ii) neither Rating Agency shall have notified the Transferor or the Trustee in writing that such delegation will result in the lowering or withdrawal of its then existing rating of any Series or Class of Investor Certificates. Section VIII.8 Maintenance of Property; Insurance. The Servicer will (i) keep all property and assets useful and necessary in its business as Servicer in good working order and condition (normal wear and tear excepted), (ii) maintain, with financially sound and reputable insurance companies, insurance on all its property and assets necessary in its business as Servicer in at least such amounts and against at least such risks (and with such risk retention) in the Servicer's reasonable judgment as are usually insured against in the same general area by companies of established repute engaged in the same or a similar business, (iii) furnish to the Trustee, upon written request, full information as to the insurance carried, (iv) within five days of receipt of notice from any insurer, furnish the Trustee with a copy of any notice of cancellation or material change in coverage from that existing on the Closing Date and (v) forthwith, furnish the Trustee with notice of any cancellation or nonrenewal of coverage by the Servicer. The Servicer will (A) maintain disaster recovery systems and other information management systems that, in the Servicer's reasonable judgment, are sufficient to enable it to perform its obligations as Servicer without material interruption or loss of the Receivables or the collections, in the event of damage to, or loss or destruction of, its primary computer and information management systems and (B) furnish to the Trustee (x) full information as to such disaster recovery systems and (y) back-up computer operating systems and applications software used for the collection of Receivables (the "Receivables Software"); provided, that the Servicer shall only be obligated to use its reasonable efforts to obtain sublicenses or consents from third party licensors of such Receivables Software to the license set forth in Section 2.1 and "Receivables Software" shall not include operating systems or software licensed from such third parties unless and until such sublicense or consent has been obtained. During the continuance of a Payout Event, Prospective Payout Event, Servicer Default or event which, upon the giving of notice or passage of time, would be a Servicer Default the Trustee may (at the request of the holders of a majority of the Invested Amount, or the related Commitments, of any Class) request, and the Servicer shall provide to the Trustee, copies of back-up data regarding the Receivables, such data to be provided with such frequency as designated by the Trustee. The Transferor and the Servicer hereby represent and warrant that, upon delivery by the Servicer of the Receivables Software, the Licensed Names and the back-up data specified in the proviso to the second preceding sentence of this Section 8.8, and assuming that the third party sublicenses and consents referenced in this Section 8.8 and the amendment or new software back-up agreement referenced in the preceding sentence of this Section 8.8, the Trustee shall have adequate proprietary rights, Receivables Software and backup data to permit orderly collection of the Receivables without the participation of the Servicer. [End of Article VIII] ARTICLE IX PAY OUT EVENTS Section IX.1 Pay Out Events. If any one of the following events (each, a "Trust Pay Out Event") shall occur: (a) the Transferor, any Originator, the Bank or SRI shall consent to the appointment of a bankruptcy trustee or receiver or liquidator in any bankruptcy proceeding or any other insolvency, readjustment of debt, marshalling of assets and liabilities or similar proceedings of or relating to all or substantially all of its property; or a decree or order of a court or agency or supervisory authority having jurisdiction in the premises for the appointment of a bankruptcy trustee or receiver or liquidator in any bankruptcy proceeding or any other insolvency, readjustment of debt, marshalling of assets and liabilities or similar proceedings, or for the winding-up or liquidation of its affairs, shall have been entered against the Transferor, any Originator, the Bank or SRI; or the Transferor, any Originator, the Bank or SRI shall admit in writing its inability to pay its debts generally as they become due, file a petition to take advantage of any applicable insolvency or reorganization statute including the U.S. bankruptcy code, make an assignment for the benefit of its creditors or voluntarily suspend payment of its obligations; or the Transferor shall become unable for any reason to transfer Receivables to the Trust in accordance with the provisions of this Agreement; or (b) the Trust shall become subject to regulation by the Securities and Exchange Commission as an "investment company" within the meaning of the Investment Company Act; or (c) SRI shall fail to own or control, directly or indirectly, 100% of the issued and outstanding stock of the Transferor; then a Pay Out Event with respect to all Series of Certificates shall occur without any notice or other action on the part of the Trustee or the Investor Certificateholders immediately upon the occurrence of such event. [End of Article IX] ARTICLE X SERVICER DEFAULTS Section X.1 Servicer Defaults. If any one of the following events (a "Servicer Default") shall occur and be continuing: (a) any failure by the Servicer to make any payment, transfer or deposit or to give instructions or notice to the Trustee pursuant to Article IV or to instruct the Trustee to make any required drawing, withdrawal, or payment under any Enhancement on or before the date occurring five Business Days after the date such payment, transfer, deposit, withdrawal or drawing or such instruction or notice is required to be made or given, as the case may be, under the terms of this Agreement; (b) failure on the part of the Servicer duly to observe or perform in any respect any other covenants or agreements of the Servicer set forth in this Agreement, which has a material adverse effect on the Investor Certificateholders of any Series 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 Servicer by the Trustee, provided that the Trustee has actual knowledge of such failure, or to the Servicer and the Trustee by the Holders of Investor Certificates evidencing Undivided Interests aggregating not less than 50% of the Invested Amount of any Series materially adversely affected thereby and continues to materially adversely affect such Investor Certificateholders for such period; or the Servicer shall delegate its duties under this Agreement, except as permitted by Section 8.7; (c) any representation, warranty or certification made by the Servicer in this Agreement or in any certificate delivered pursuant to this Agreement shall prove to have been incorrect when made, which has a material adverse effect on the Investor Certificateholders of any Series and 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 Servicer by the Trustee provided that the Trustee has actual knowledge of such failure, or to the Servicer and the Trustee by the Holders of Investor Certificates evidencing Undivided Interests aggregating not less than 50% of the Invested Amount of any Series materially adversely affected thereby and continues to materially adversely affect such Investor Certificateholders for such period; or (d) the Servicer shall consent to the appointment of a bankruptcy trustee or receiver or liquidator in any bankruptcy proceeding or any other insolvency, readjustment of debt, marshalling of assets and liabilities or similar proceedings of or relating to the Servicer or of or relating to all or substantially all of its property; or a decree or order of a court or agency or supervisory authority having jurisdiction in the premises for the appointment of a bankruptcy trustee or receiver or liquidator in any bankruptcy proceeding or any other insolvency, readjustment of debt, marshalling of assets and liabilities or similar proceedings, or for the winding-up or liquidation of its affairs, shall have been entered against the Servicer, and such decree or order shall have remained in force undischarged or unstayed for a period of 60 days; or the Servicer shall admit in writing its inability to pay its debts generally as they become due, file a petition to take advantage of any applicable insolvency or reorganization statute, make any assignment for the benefit of its creditors or voluntarily suspend payment of its obligations; then, so long as such Servicer Default shall not have been remedied, any of (i) the Trustee upon written instruction by the Transferor, (ii) the Holders of Investor Certificates evidencing Undivided Interests aggregating more than 50% of the Aggregate Invested Amount, (iii) if specified in any Supplement, the Holders of Investor Certificates evidencing Undivided Interests aggregating more than a specified percentage of the Invested Amount of any Series or Class, or (iv) if specified in any Supplement, an Enhancement Provider, in each case by notice then given in writing to the Servicer (and to the Trustee if given by any Investor Certificateholders) (a "Termination Notice"), may terminate all of the rights and obligations of the Servicer as Servicer under this Agreement. The Servicer agrees that promptly after it receives such Termination Notice, the Servicer will at its own expense deliver to the Trustee or to the bailee of the Trustee a computer file or microfiche list containing a true and complete list of all Accounts, identified by account number and setting forth the Outstanding Balance of each Receivable as of the date of receipt of such Termination Notice. After receipt by the Servicer of such Termination Notice, and on the date that a Successor Servicer shall have been appointed by the Trustee pursuant to Section 10.2, all authority and power of the Servicer under this Agreement shall pass to and be vested in a Successor Servicer; and, without limitation, the Trustee is hereby authorized and empowered (upon the failure of the Servicer to cooperate) to execute and deliver, on behalf of the Servicer, as attorney-in-fact or otherwise, all documents and other instruments upon the failure of the Servicer to execute or deliver such documents or instruments, and to do and accomplish all other acts or things necessary or appropriate to effect the purposes of such transfer of servicing rights and obligations. The Servicer agrees to cooperate with the Trustee and such Successor Servicer in effecting the termination of the responsibilities and rights of the Servicer to conduct servicing hereunder including, without limitation, the transfer to such Successor Servicer of all authority of the Servicer to service the Receivables provided for under this Agreement, including, without limitation, all authority over all Collections which shall on the date of transfer be held by the Servicer for deposit, or which have been deposited by the Servicer, in the Collection Account, the Equalization Account, the Interest Funding Account or the Principal Account, and any Series Account, or which shall thereafter be received with respect to the Receivables. The Servicer shall promptly transfer its electronic records or electronic copies thereof relating to the Receivables to the Successor Servicer in such electronic form as the Successor Servicer may reasonably request and shall promptly transfer to the Successor Servicer all other records, correspondence and documents necessary for the continued servicing of the Receivables in the manner and at such times as the Successor Servicer shall reasonably request. To the extent that compliance with this Section 10.1 shall require the Servicer to disclose to the Successor Servicer information of any kind which the Servicer reasonably deems to be confidential, the Successor Servicer shall be required to enter into such customary licensing and confidentiality agreements as the Servicer shall deem necessary to protect its interests. The Servicer shall, on the date of any servicing transfer, transfer all of its rights and obligations under the Enhancement with respect to any Series to the Successor Servicer. In connection with any service transfer, all reasonable costs and expenses (including attorneys, fees) incurred in connection with transferring the records, correspondence and other documents with respect to the Receivables and the other Trust Property to the Successor Servicer and amending this Agreement to reflect such succession as Successor Servicer pursuant to this Section 10.1 and Section 10.2 shall be paid by the Servicer (unless the Trustee is acting as the Servicer on a temporary basis, in which case the original Servicer shall be responsible therefor) upon presentation of reasonable documentation of such costs and expenses. Notwithstanding the foregoing, a delay in or failure of performance referred to in subsection 10.1(a) for a period of two Business Days or under subsection 10.1(b) or (c) for a period of 60 days, shall not constitute a Servicer Default if such delay or failure could not be prevented by the exercise of reasonable diligence by the Servicer and such delay or failure was caused by an act of God or the public enemy, acts of declared or undeclared war, public disorder, rebellion, riot or sabotage, epidemics, landslides, lightning, fire, hurricanes, tornadoes, earthquakes, nuclear disasters or meltdowns, floods, power outages, computer failure or similar causes. The preceding sentence shall not relieve the Servicer from using its best efforts to perform its obligations in a timely manner in accordance with the terms of this Agreement and the Servicer shall provide the Trustee, any Enhancement Provider, the Transferor and the Holders of Investor Certificates with an Officer's Certificate giving prompt notice of such failure or delay by it, together with a description of the cause of such failure or delay and its efforts so to perform its obligations. Section X.2 Trustee to Act; Appointment of Successor. (a) On and after the receipt by the Servicer of a Termination Notice pursuant to Section 10.1, the Servicer shall continue to perform all servicing functions under this Agreement until the date specified in the Termination Notice or as otherwise specified by the Trustee in writing or, if no such date is specified in such Termination Notice, or otherwise specified by the Trustee, until a date mutually agreed upon by the Servicer and Trustee upon written direction by the Transferor. The Trustee shall notify each Rating Agency of such removal of the Servicer. The Trustee shall, as promptly as possible after the giving of a Termination Notice, appoint a successor servicer (the "Successor Servicer"), and such Successor Servicer shall accept its appointment by a written assumption in a form acceptable to the Trustee. If such Successor Servicer is unable to accept such appointment, the Trustee upon written direction by the Transferor may obtain bids from any potential successor servicer. If the Trustee is unable to obtain any bids from any potential successor servicer and the Servicer delivers an Officer's Certificate to the effect that it cannot in good faith cure the Servicer Default which gave rise to a transfer of servicing, and if the Trustee is legally unable to act as Successor Servicer, then the Trustee shall notify each Enhancement Provider of the proposed sale of the Receivables and shall provide each such Enhancement Provider an opportunity to bid on the Receivables and shall offer the Transferor the right of first refusal to purchase the Receivables on terms equivalent to the best purchase offer as determined by the Trustee, but in no event less than an amount equal to the Aggregate Invested Amount on the date of such purchase plus all interest accrued but unpaid on all of the outstanding Investor Certificates at the applicable Certificate Rate through the date of such purchase plus all amounts owed to any Enhancement Provider; provided, however, that no such purchase by the Transferor shall occur unless the Transferor shall deliver an opinion of Counsel reasonably acceptable to the Trustee that such purchase would not constitute a fraudulent conveyance of the Transferor. The proceeds of such sale shall be deposited in the Distribution Account or any Series Account, as provided in the related Supplement, for distribution to the Investor Certificateholders of each outstanding Series pursuant to Section 12.3 of this Agreement. In the event that a Successor Servicer has not been appointed and has not accepted its appointment at the time when the Servicer ceases to act as Servicer, the Trustee without further action shall automatically be appointed the Successor Servicer (but shall have continued authority to appoint another Person as Successor Servicer). The Trustee may delegate any of its servicing obligations to an affiliate or agent of the Trustee in accordance with Article III hereof. Notwithstanding the above, the Trustee shall, if it is legally unable to act, petition a court of competent jurisdiction to appoint any established financial institution having, in the case of an entity that is subject to risk-based capital adequacy requirements, risk-based capital of at least $50,000,000 or, in the case of an entity that is not subject to risk-based capital requirements, having a net worth of not less than $50,000,000 and whose regular business includes the servicing of credit card receivables as the Successor Servicer hereunder. (b) Upon its appointment, the Successor Servicer shall be the successor in all respects to the Servicer with respect to servicing functions under this Agreement and shall be subject to all the responsibilities, duties and liabilities relating thereto placed on the Servicer by the terms and provisions hereof, and all references in this Agreement to the Servicer shall be deemed to refer to the Successor Servicer. Any Successor Servicer, by its acceptance of its appointment, will automatically agree to be bound by the terms and provisions of each Enhancement. (c) In connection with such appointment and assumption, the Trustee shall be entitled to such compensation, or may make such arrangements for the compensation of the Successor Servicer out of Collections, as it and such Successor Servicer shall agree; provided, however, that no such compensation shall be in excess of the Servicing Fee permitted to the Servicer pursuant to Section 3.2. The Transferor agrees that if the Servicer is terminated hereunder, it will agree to deposit a portion of the Collections in respect of Finance Charge Receivables that it is entitled to receive pursuant to Article IV to pay its ratable share of the compensation of the Successor Servicer. (d) All authority and power granted to the Successor Servicer under this Agreement shall automatically cease and terminate upon termination of the Trust pursuant to Section 12.1 and shall pass to and be vested in the Transferor and, without limitation, the Transferor is hereby authorized and empowered to execute and deliver, on behalf of the Successor Servicer, as attorney-in-fact or otherwise, all documents and other instruments, and to do and accomplish all other acts or things necessary or appropriate to effect the purposes of such transfer of servicing rights. The Successor Servicer agrees to cooperate with the Transferor in effecting the termination of the responsibilities and rights of the Successor Servicer to conduct servicing on the Receivables. The Successor Servicer shall transfer its electronic records relating to the Receivables to the Transferor in such electronic form as the Transferor may reasonably request and shall transfer all other records, correspondence and documents to the Transferor in the manner and at such times as the Transferor shall reasonably request. To the extent that compliance with this Section 10.2 shall require the Successor Servicer to disclose to the Transferor information of any kind which the Successor Servicer deems to be confidential, the Transferor shall be required to enter into such customary licensing and confidentiality agreements as the Successor Servicer shall deem necessary to protect its interests. Section X.3 Notification to Certificateholders. Within two Business Days after the Servicer becomes aware of any Servicer Default, the Servicer shall give prompt written notice thereof to the Trustee and any Enhancement Provider and, upon receipt of such written notice, and the Trustee shall give notice to the Investor Certificateholders at their respective addresses appearing in the Certificate Register. Upon any termination or appointment of a Successor Servicer pursuant to this Article X, the Trustee upon written direction by the Transferor shall give prompt written notice thereof to Investor Certificateholders at their respective addresses appearing in the Certificate Register. Section X.4 Waiver of Past Defaults. The Holders of Investor Certificates evidencing Undivided Interests aggregating not less than 66_% of the Invested Amount of each Series materially adversely affected by any default by the Servicer or Transferor may, on behalf of all Certificateholders of such Series, waive any default by the Servicer or Transferor in the performance of its obligations hereunder and its consequences, except a default in the failure to make any required deposits or payments of interest or principal relating to such Series pursuant to Article IV, which default does not result from the failure of the Paying Agent to perform its obligations to make any required deposits or payments of interest and principal in accordance with Article IV. Upon any such waiver of a past default, such default shall cease to exist, and any default arising therefrom shall be deemed to have been remedied for every purpose of this Agreement. No such waiver shall extend to any subsequent or other default or impair any right consequent thereon except to the extent expressly so waived. [End of Article X] ARTICLE XI THE TRUSTEE Section XI.1 Duties of Trustee. (a) The Trustee, prior to the occurrence of any Servicer Default of which a Responsible Officer of the Trustee has actual knowledge and after the curing of all Servicer Defaults which may have occurred, undertakes to perform such duties and only such duties as are specifically set forth in this Agreement, and no implied covenants or duties shall be read into this Agreement against the Trustee. If a Responsible Officer has received written notice that a Servicer Default has occurred (and such Servicer Default has not been cured or waived), the Trustee shall exercise such of the rights and powers vested in it by this Agreement, and use the same degree of care and skill in its exercise, as a prudent person would exercise or use under the circumstances in the conduct of such person's own affairs; provided, however, that if the Trustee shall assume the duties of the Servicer pursuant to Section 8.5 or 10.2, the Trustee in performing such duties shall use the degree of skill and attention customarily exercised by a servicer with respect to comparable receivables that it services for itself or others. (b) The Trustee shall retain all resolutions, certificates, statements, opinions, reports, documents, orders or other instruments furnished to the Trustee which are specifically required to be furnished pursuant to any provision of this Agreement for at least one year after receipt and shall make such items available for inspection by any Investor Certificateholder at the Corporate Trust Office, such inspection to be made during regular business hours and upon reasonable prior notice to the Trustee. (c) Subject to subsection 11.1(a), no provision of this Agreement shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act or its own misconduct; provided, however, that: (i) the Trustee shall not be personally liable for an error of judgment made in good faith by a Responsible Officer or Responsible Officers of the Trustee, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts; (ii) the Trustee shall not be personally liable with respect to any action taken, suffered or omitted to be taken by it in good faith in accordance with the direction of the Holders of Investor Certificates evidencing Undivided Interests aggregating more than 50% of the Invested Amount of any Series relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee with respect to such Series, or exercising any trust or power conferred upon the Trustee with respect to such Series, under this Agreement; and (iii) the Trustee shall not be charged with knowledge of any failure by the Servicer referred to in clauses (a) and (b) of Section 10.1 or of any breach by the Servicer contemplated by clause (c) of Section 10.1 or any Pay Out Event unless a Responsible Officer of the Trustee obtains actual knowledge of such failure, breach or Pay Out Event or the Trustee receives written notice of such failure, breach or Pay Out Event from the Servicer or any Holders of Investor Certificates evidencing Undivided Interests aggregating not less than 10% of the Invested Amount of any Series adversely affected thereby. (d) The Trustee shall not be required to expend or risk its own funds or otherwise incur financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if there is reasonable ground for believing that the repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it, and none of the provisions contained in this Agreement shall in any event require the Trustee to perform, or be responsible for the manner of performance of, any of the obligations of the Servicer under this Agreement except during such time, if any, as the Trustee shall be the successor to, and be vested with the rights, duties, powers and privileges of, the Servicer in accordance with the terms of this Agreement. (e) Except for actions expressly authorized by this Agreement, the Trustee shall take no action reasonably likely to impair the interests of the Trust in any Receivable now existing or hereafter created or to impair the value of any Receivable now existing or hereafter created. (f) Except as provided in this Agreement, the Trustee shall have no power to vary the corpus of the Trust. (g) If a Responsible Officer of the Trustee has received written notice that the Paying Agent or the Transfer Agent and Registrar shall fail to perform any obligation, duty or agreement in the manner or on the day required to be performed by the Paying Agent or the Transfer Agent and Registrar, as the case may be, under this Agreement, the Trustee shall be obligated promptly upon its obtaining knowledge thereof by a Responsible Officer of the Trustee to perform such obligation, duty or agreement in the manner so required. (h) If the Transferor has agreed to transfer any of its credit card receivables (other than the Receivables) to another Person, upon the written request of the Transferor, the Trustee on behalf of the Trust will enter into such intercreditor agreements provided to the Trustee in final execution form with the transferee of such receivables as are customary and necessary to identify separately the rights, if any, of the Trust and such other Person in the Transferor's credit card receivables; provided, however, that the Trust shall not be required to enter into any intercreditor agreement which could adversely affect the interests of the Certificateholders or the Trustee and, upon the request of the Trustee, the Transferor will deliver an Opinion of Counsel on any matters relating to such intercreditor agreement, reasonably requested by the Trustee. Section XI.2 Certain Matters Affecting the Trustee. Except as otherwise provided in Section 11.1: (a) the Trustee may rely on and shall be protected in acting on, or in refraining from acting in accordance with, any assignment of Receivables in Supplemental Accounts, the initial report, the Daily Report, the Settlement Statement, the annual Servicer's certificate, the monthly payment instructions and notification to the Trustee, the monthly Certificateholder's statement, any resolution, Officer's Certificate, certificate of auditors or any other certificate, statement, instrument, opinion, report, notice, request, consent, order, appraisal, bond or other paper or document believed by it to be genuine and to have been signed or presented to it pursuant to this Agreement by the proper party or parties; (b) the Trustee may consult with counsel, and the advice or any opinion of Counsel shall be full and complete authorization and protection in respect of any action taken or suffered or omitted by it hereunder in good faith and in accordance with such advice or Opinion of Counsel; (c) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Agreement or any Enhancement, or to institute, conduct or defend any litigation hereunder or in relation hereto, at the request, order or direction of any of the Certificateholders or any Enhancement Provider, pursuant to the provisions of this Agreement, unless such Certificateholders or Enhancement Provider shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which may be incurred therein or thereby; nothing contained herein shall, however, relieve the Trustee of the obligations, upon the occurrence of any Servicer Default (which has not been cured or waived) of which a Responsible Officer of the Trustee has knowledge, to exercise such of the rights and powers vested in it by this Agreement and any Enhancement, and to use the same degree of care and skill in its exercise as a prudent person would exercise or use under the circumstances in the conduct of his own affairs; (d) the Trustee shall not be personally liable for any action taken, suffered or omitted by it in good faith and believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Agreement; (e) the Trustee shall not be bound to make any investigation into the facts of matters stated in any assignment of Receivables in Supplemental Accounts, the initial report, the Daily Report, the Settlement Statement, the annual Servicer's certificate, the monthly payment instructions and notification to the Trustee, the monthly Certificateholders statement, any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, approval, bond or other paper or document; (f) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys or a custodian, and the Trustee shall not be responsible for any misconduct or negligence on the part of any such agent, attorney or custodian appointed with due care by it hereunder; (g) except as may be required by subsection 11.1(a), the Trustee shall not be required to make any initial or periodic examination of any documents or records related to the Receivables or the Accounts for the purpose of establishing the presence or absence of defects, the compliance by the Transferor with its representations and warranties or for any other purpose; (h) whenever in the administration of this Agreement the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, rely upon an Officer's Certificate; and (i) the right of the Trustee to perform any discretionary act enumerated in this Agreement or any Supplement shall not be construed as a duty, and the Trustee shall not be answerable for performance of any such act. Section XI.3 Trustee Not Liable for Recitals in Certificates. The Trustee assumes no responsibility for the correctness of the recitals contained herein and in the Certificates (other than the certificate of authentication on the Certificates). Except as set forth in Section 11.15, the Trustee makes no representations as to the validity or sufficiency of this Agreement or of the Certificates (other than the certificate of authentication on the Certificates) or of any Receivable or related document. The Trustee shall not be accountable for the use or application by the Transferor of any of the Certificates or of the proceeds of such Certificates, or for the use or application of any funds paid to the Transferor in respect of the Receivables or deposited in or withdrawn from the Collection Account, the Equalization Account, the Principal Account or the Interest Funding Account, or any Series Account or other accounts now or hereafter established to effectuate the transactions contemplated herein and in accordance with the terms hereof. The Trustee shall have no responsibility for filing any financing or continuation statement in any public office at any time or to otherwise perfect or maintain the perfection of any security interest or Lien granted to it hereunder (unless the Trustee shall have become the Successor Servicer) or to prepare or file any Securities and Exchange Commission filing for the Trust or to record this Agreement or any Supplement. Section XI.4 Trustee May Own Certificates. The Trustee in its individual or any other capacity may become the owner or pledgee of Investor Certificates and may deal with the Transferor, the Servicer or any Enhancement Provider with the same rights as it would have if it were not the Trustee. The Trustee in its capacity as Trustee shall exercise its duties and responsibilities hereunder independent of and without reference to its investment, if any, in Investor Certificates. Section XI.5 The Servicer to Pay Trustee's Fees and Expenses. The Servicer covenants and agrees to pay to the Trustee from time to time, and the Trustee shall be entitled to receive, reasonable compensation (which shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust) for all services rendered by the Trustee in the execution of the trust hereby created and in the exercise and performance of any of the powers and duties hereunder of the Trustee, and, subject to Section 8.4, the Servicer will pay or reimburse the Trustee (without reimbursement from any Investor Account, any Series Account or otherwise) upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any of the provisions of this Agreement (including the reasonable fees and expenses of its agents and counsel) except any such expense, disbursement or advance as may arise from its own negligence or bad faith and except as provided in the following sentence. If the Trustee is appointed Successor Servicer pursuant to Section 10.2, the provisions of this Section 11.5 shall not apply to expenses, disbursements and advances made or incurred by the Trustee in its capacity as Successor Servicer (which shall be covered out of the Servicing Fee). The obligations of the Servicer under this Section 11.5 shall survive the termination of the Trust and the resignation or removal of the Trustee. Section XI.6 Eligibility Requirements for Trustee. The Trustee hereunder shall at all times be a corporation organized and doing business under the laws of the United States of America or any state thereof authorized under such laws to exercise corporate trust powers, having at least the Minimum Long-Term Credit Rating and having, in the case of an entity that is subject to risk-based capital adequacy requirements, risk-based capital of at least $50,000,000 or, in the case of an entity that is not subject to risk-based capital adequacy requirements, having a combined capital and surplus of at least $50,000,000 and subject to supervision or examination by federal or state authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the aforesaid supervising or examining authority, then for the purpose of this Section 11.6, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. In case at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section 11.6, the Trustee shall resign immediately in the manner and with the effect specified in Section 11.7. Section XI.7 Resignation or Removal of Trustee. (a) The Trustee may at any time resign and be discharged from the Trust hereby created by giving written notice thereof to the Servicer. Upon receiving such notice of resignation, the Servicer shall promptly appoint a successor trustee by written instrument, in duplicate, one copy of which instrument shall be delivered to the resigning Trustee and one copy to the successor trustee. If no successor trustee shall have been so appointed and have accepted such appointment within 30 days after the giving of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor trustee. (b) If at any time the Trustee shall cease to be eligible in accordance with the provisions of Section 11.6 hereof and shall fail to resign after written request therefor by the Transferor, or if at any time the Trustee shall be legally unable to act, or shall be adjudged a bankrupt or insolvent, or a receiver of the Trustee or of its property shall be appointed, or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, then the Transferor may, but shall not be required to, remove the Trustee and promptly appoint a successor trustee by written instrument, in duplicate, one copy of which instrument shall be delivered to the Trustee so removed and one copy to the successor trustee. (c) If at any time the Trust shall be in non-compliance with Section 2.5(m), the Trustee shall be removed and the Servicer shall promptly appoint a successor trustee by written instrument, in duplicate, one copy of which instrument shall be delivered to the Trustee so removed and one copy to the successor trustee. (d) If (i) the Trustee shall fail to perform any of its obligations hereunder, (ii) a Certificateholder shall deliver written notice of such failure to the Trustee, and (iii) the Trustee shall not have corrected such failure for 60 days thereafter, then the Holders of Investor Certificates representing more than 50% of the Invested Amount (including related commitments of holders of Variable Funding Certificates) shall have the right to remove the Trustee and (with the consent of the Transferor, which shall not be unreasonably withheld) promptly appoint a successor trustee by written instrument, in duplicate, one copy of which instrument shall be delivered to the Trustee so removed and one copy to the successor trustee. (e) Any resignation or removal of the Trustee and appointment of a successor trustee pursuant to any of the provisions of this Section 11.7 shall not become effective until acceptance of appointment by the successor trustee as provided in Section 11.8 hereof and any liability of the Trustee arising hereunder shall survive such appointment of a successor trustee. Section XI.8 Successor Trustee. (a) Any successor trustee appointed as provided in Section 11.7 hereof shall execute, acknowledge and deliver to the Transferor and to its predecessor Trustee an instrument accepting such appointment hereunder, and thereupon the resignation or removal of the predecessor Trustee shall become effective and such successor trustee, without any further act, deed or conveyance, shall become fully vested with all the rights, powers, duties and obligations of its predecessor hereunder, with the like effect as if originally named as Trustee herein. The predecessor Trustee shall deliver to the successor trustee all documents and statements held by it hereunder, and the Transferor and the predecessor Trustee shall execute and deliver such instruments and do such other things as may reasonably be required for fully and certainly vesting and confirming in the successor trustee all such rights, powers, duties and obligations. (b) No successor trustee shall accept appointment as provided in this Section 11.8 unless at the time of such acceptance such successor trustee shall be eligible under the provisions of Section 11.6 hereof. (c) Upon acceptance of appointment by a successor trustee as provided in this Section 11.8, such successor trustee shall mail notice of such succession hereunder to all Certificateholders at their addresses as shown in the Certificate Register. Section XI.9 Merger or Consolidation of Trustee. Any Person into which the Trustee may be merged or converted or with which it may be consolidated, or any Person resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any Person succeeding to all or substantially all of the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, provided such corporation shall be eligible under the provisions of Section 11.6 hereof, without the execution or filing of any paper or any further act on the part of any of the parties hereto, anything herein to the contrary notwithstanding. Section XI.10 Appointment of Co-Trustee or Separate Trustee. (a) Notwithstanding any other provisions of this Agreement, at any time, for the purpose of meeting any legal requirements of any jurisdiction in which any part of the Trust may at the time be located, the Trustee shall have the power and may execute and deliver all instruments to appoint one or more Persons to act as a co-trustee or co-trustees, or separate trustee or separate trustees, of all or any part of the Trust, and to vest in such Person or Persons, in such capacity and for the benefit of the Certificateholders, such title to the trust, or any part thereof, and, subject to the other provisions of this Section 11.10, such powers, duties, obligations, rights and trusts as the Trustee may consider necessary or desirable. No co-trustee or separate trustee hereunder shall be required to meet the terms of eligibility as a successor trustee under Section 11.6 and no notice to Certificateholders of the appointment of any co-trustee or separate trustee shall be required under Section 11.8 hereof. (b) Every separate trustee and co-trustee shall, to the extent permitted by law, be appointed and act subject to the following provisions and conditions: (i) all rights, powers, duties and obligations conferred or imposed upon the Trustee shall be conferred or imposed upon and exercised or performed by the Trustee and such separate trustee or co-trustee jointly (it being understood that such separate trustee or co-trustee is not authorized to act separately without the Trustee joining in such act), except to the extent that under any laws of any jurisdiction in which any particular act or acts are to be performed (whether as Trustee hereunder or as successor to the Servicer hereunder), the Trustee shall be incompetent or unqualified to perform such act or acts, in which event such rights, powers, duties and obligations (including the holding of title to the Trust or any portion thereof in any such jurisdiction) shall be exercised and performed singly by such separate trustee or co-trustee, but solely at the direction of the Trustee; (ii) no trustee hereunder shall be personally liable by reason of any act or omission of any other trustee hereunder; and (iii) the Trustee may at any time accept the resignation of or remove any separate trustee or co-trustee. (c) Any notice, request or other writing given to the Trustee shall be deemed to have been given to each of the then separate trustees and co-trustees, as effectively as if given to each of them. Every instrument appointing any separate trustee or co-trustee shall refer to this Agreement and the conditions of this Article XI. Each separate trustee and co-trustee, upon its acceptance of the trusts conferred, shall be vested with the estates or property specified in its instrument of appointment, either jointly with the Trustee or separately, as may be provided therein, subject to all the provisions of this Agreement, specifically including every provision of this Agreement relating to the conduct of, affecting the liability of, or affording protection to, the Trustee. Every such instrument shall be filed with the Trustee and a copy thereof given to the Servicer. (d) Any separate trustee or co-trustee may at any time constitute the Trustee as its agent or attorney-in-fact with full power and authority, to the extent not prohibited by law, to do any lawful act under or in respect to this Agreement on its behalf and in its name. If any separate trustee or co-trustee shall die, become incapable of acting, resign or be removed, all of its estates, properties, rights, remedies and trusts shall vest in and be exercised by the Trustee, to the extent permitted by law, without the appointment of a new or successor trustee. Section XI.11 Tax Returns. Consistent with Section 3.7, the Trustee shall not file any Federal tax returns on behalf of the Trust; provided, however, that if a class of Certificates is issued that will be characterized as interests in a partnership for federal income tax purposes, partnership information returns shall be prepared and signed by the Transferor, as general partner, and the Transferor shall be the "tax matter partner" as defined in subsection 6231(a)(7) of the Internal Revenue Code of 1986, as amended, and any successor statute. In the event the Trust shall be required to file tax returns, the Servicer shall at its expense prepare or cause to be prepared any tax returns required to be filed by the Trust and, to the extent possible, shall remit such returns to the Trustee for signature at least five days before such returns are due to be filed. The Trustee is hereby authorized to sign any such return on behalf of the Trust. The Servicer shall prepare or shall cause to be prepared all tax information required by law to be distributed to Certificateholders and shall deliver such information to the Trustee at least five days prior to the date it is required by law to be distributed to Certificateholders. The Trustee, upon request, will furnish the Servicer with all such information known to the Trustee as may be reasonably required in connection with the preparation of all tax returns of the Trust and shall, upon request, execute such returns. In no event shall the Trustee be liable for any liabilities, costs or expenses of the Trust, the Investor Certificateholders or the Certificate Owners arising under any tax law, including without limitation federal, state, local or foreign income or excise taxes or any other tax imposed on or measured by income (or any interest or penalty or addition with respect thereto or arising from a failure to comply therewith). Section XI.12 Trustee May Enforce Claims Without Possession of Certificates. All rights of action and claims under this Agreement or any Series of Certificates may be prosecuted and enforced by the Trustee without the possession of any of the Certificates or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Trustee shall be brought in its own name as trustee. Any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, be for the ratable benefit of any Series of Certificateholders in respect of which such judgment has been obtained. Section XI.13 Suits for Enforcement. If a Servicer Default of which a Responsible Officer of the Trustee has knowledge shall occur and be continuing, the Trustee, in its discretion may, subject to the provisions of Section 10.1, proceed to protect and enforce its rights and the rights of any Series of Certificateholders under this Agreement by a suit, action or proceeding in equity or at law or otherwise, whether for the specific performance of any covenant or agreement contained in this Agreement or in aid of the execution of any power granted in this Agreement or for the enforcement of any other legal, equitable or other remedy as the Trustee, being advised by counsel, shall deem most effectual to protect and enforce any of the rights of the Trustee or any Series of Certificateholders. Section XI.14 Rights of Certificateholders to Direct Trustee. Holders of Investor Certificates evidencing Undivided Interests aggregating more than 50% of the Aggregate Invested Amount (or, with respect to any remedy, trust or power that does not relate to all Series, 50% of the aggregate Invested Amount of the Investor Certificates of all Series to which such remedy, trust or power relates) shall have the right to direct the time, method, and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee; provided, however, that Holders of Investor Certificates aggregating more than 50% of the aggregate Invested Amount of any Class may direct the Trustee to exercise its rights under Section 8.6; provided, further, that, subject to Section 11.1, the Trustee shall have the right to decline to follow any such direction if the Trustee being advised by counsel determines that the action so directed may not lawfully be taken, or if the Trustee in good faith shall, by a Responsible Officer or Responsible Officers of the Trustee, determine that the proceedings so directed would be illegal or involve it in personal liability or be unduly prejudicial to the rights of Certificateholders not parties to such direction; and provided further, that nothing in this Agreement shall impair the right of the Trustee to take any action deemed proper by the Trustee and which is not inconsistent with such direction of such Holders of Investor Certificates. Section XI.15 Representations and Warranties of Trustee. The Trustee represents and warrants that: (i) the Trustee is a corporation organized, existing and authorized to engage in the business of banking under the laws of the State of its incorporation; (ii) the Trustee has full power, authority and right to execute, deliver and perform this Agreement, and has taken all necessary action to authorize the execution, delivery and performance by it of this Agreement; and (iii) this Agreement has been duly executed and delivered by the Trustee. Section XI.16 Maintenance of Office or Agency. The Trustee will maintain at its expense an office or offices or agency or agencies, where notices and demands to or upon the Trustee in respect of the Certificates and this Agreement may be served. The Trustee initially appoints its Corporate Trust Office as its office for such purposes. The Trustee will give prompt written notice to the Servicer and to Certificateholders (or in the case of Holders of Bearer Certificates, in the manner provided for in the related Supplement) of any change in the location of the Certificate Register or any such office or agency. [End of Article XI] ARTICLE XII TERMINATION Section XII.1 Termination of Trust. (a) The respective obligations and responsibilities of the Transferor, the Servicer and the Trustee created hereby (other than the obligation of the Trustee to make payments to Certificateholders as hereafter set forth) shall terminate, except with respect to the duties described in Section 8.4 and 11.5 and subsection 12.3(b), on the Trust Termination Date; provided, however, that the Trust shall not terminate on the date specified in clause (i) of the definition of "Trust Termination Date" if each of the Servicer and the Holder of the Exchangeable Transferor Certificate notify the Trustee in writing, not later than five Business Days preceding such date, that they desire that the Trust not terminate on such date, which notice (such notice, a "Trust Extension") shall specify the date on which the Trust shall terminate (such date, the "Extended Trust Termination Date"); provided, however, that the Extended Trust Termination Date shall be not later than the expiration of 21 years from the death of the last survivor of the descendants of Joseph P. Kennedy, the late Ambassador of the United States to the Court of St. James, living on the date of this Agreement. The Servicer and the Holder of the Exchangeable Transferor Certificate may, on any date following the Trust Extension, so long as no Series of Certificates is outstanding, deliver a notice in writing to the Trustee changing the Extended Trust Termination Date. (b) In the event that (i) the Trust has not terminated by the Distribution Date occurring in the second month preceding the Trust Termination Date, and (ii) the Invested Amount of any Series (after giving effect to all transfers, withdrawals, deposits and drawings to occur on such date and the payment of principal on any Series of Certificates to be made on the related Distribution Date during such month pursuant to Article IV) would be greater than zero or any amount shall be owed to any Enhancement Provider, the Servicer shall sell within 30 days after such Transfer Date all the Receivables if it can do so in a commercially reasonable manner. The Servicer shall notify each Enhancement Provider of the proposed sale of the Receivables and shall provide each Enhancement Provider an opportunity to bid on the Receivables. The Transferor shall have the right of first refusal to purchase the Receivables on terms equivalent to the best purchase offer as determined by the Trustee in its sole discretion. The proceeds of any such sale shall be treated as Collections on the Receivables and shall be allocated and deposited in accordance with Article IV; provided, however, that the Trustee shall determine conclusively in its sole discretion the amount of such proceeds which are allocable to Finance Charge Collections and the amount of such proceeds which are allocable to Collections of Principal Receivables. During such thirty-day period, the Servicer shall continue to collect payments on the Receivables and allocate and deposit such payments in accordance with the provisions of Article IV. (c) All principal or interest with respect to any Series of Investor Certificates shall be due and payable no later than the Series Termination Date with respect to such Series. Unless otherwise provided in a Supplement, in the event that the Invested Amount of any Series of Certificates is greater than zero on its Series Termination Date (the "Affected Series"), after giving effect to all transfers, withdrawals, deposits and drawings to occur on such date and the payment of principal to be made on such Series on such date, and the Servicer will sell or cause to be sold, and the Trustee upon written direction by the Servicer will pay the proceeds to all Certificateholders of such Series pro rata in final payment of all principal of and accrued interest on such Series of Certificates or, if any Class of such Series is subordinated, in order of their respective seniorities, an amount of Principal Receivables and the related Finance Charge Receivables (or interests therein) up to 110% of the Invested Amount of such Series at the close of business on such date (but the amount of such Principal Receivables not to be more than an amount of Receivables equal to the sum of (1) the product of (A) the Transferor Percentage, (B) the aggregate outstanding Principal Receivables and (C) a fraction the numerator of which is the Invested Amount of such Series on such date and the denominator of which is the sum of the Invested Amounts of all Series on such Date and (2) the Invested Amount of such Series). Receivables on which the Obligor has not made the full minimum payment for the prior months shall be deemed to be in default for purposes of this Section 12.1(c) to the extent that the cash allocated to any Class of Transferor Retained Certificates of such Series pursuant to a sale under Section 12.1(c) is less than the amount that would have been allocated to the Exchangeable Transferor Certificate and the Transferor Retained Certificates had the proceeds from such sale been allocated pursuant to Section 4.3. The Servicer shall notify each Enhancement Provider of the proposed sale of such Receivables and shall provide each Enhancement Provider an opportunity to bid on such Receivables. The Transferor shall be permitted to purchase such Receivables in such case and shall have a right of first refusal with respect thereto to the extent of a bona fide offer by an unrelated third party or to the extent the Receivables represent Defaulted Receivables. Any proceeds of such sale in excess of such principal and interest paid shall be paid to the Holder of the Exchangeable Transferor Certificate. Upon such Series Termination Date with respect to the applicable Series of Certificates, final payment of all amounts allocable to any Investor Certificates of such Series shall be made in the manner provided in Section 12.3. Section XII.2 Optional Termination. (a) If so provided in any Supplement, the Servicer may, but shall not be obligated to, cause a final distribution to be made in respect of the related Series of Certificates on a Distribution Date specified in such Supplement by depositing into the Distribution Account or the applicable Series Account, not later than the Transfer Date preceding such Distribution Date, for application in accordance with Section 12.3, the amount specified in such Supplement. (b) The amount deposited pursuant to subsection 12.2(a) shall be paid to the Investor Certificateholders of the related Series pursuant to Section 12.3 on the related Distribution Date following the date of such deposit. All Certificates of a Series with respect to which a final distribution has been made pursuant to subsection 12.2(a) shall be delivered by the Holder to, and be canceled by, the Transfer Agent and Registrar and be disposed of in a manner satisfactory to the Trustee and the Transferor. The Invested Amount of each Series with respect to which a final distribution has been made pursuant to subsection 12.2(a) shall, for the purposes of the definition of "Transferor Interest," be deemed to be equal to zero on the Distribution Date following the making of the deposit, and the Transferor Interest shall thereupon be deemed to have been increased by the Invested Amount of such Series. Section XII.3 Final Payment with Respect to any Series. (a) Written notice of any termination, specifying the Distribution Date upon which the Investor Certificateholders of any Series may surrender their Certificates for payment of the final distribution with respect to such Series and cancellation, shall be given (subject to at least four Business Days, prior notice from the Servicer to the Trustee) by the Trustee to Investor Certificateholders of such Series mailed not later than the fifth day of the month of such final distribution (or in the manner provided by the Supplement relating to such Series) specifying (i) the Distribution Date (which shall be the Distribution Date in the month (x) in which the deposit is made pursuant to subsection 2.4(d), 10.2(a), or 12.2(a) of this Agreement or such other section as may be specified in the related Supplement, or (y) in which the related Series Termination Date occurs) upon which final payment of such Investor Certificates will be made upon presentation and surrender of such Investor Certificates at the office or offices therein designated (which, in the case of Bearer Certificates, shall be outside the United States), (ii) the amount of any such final payment and (iii) that the Record Date otherwise applicable to such Distribution Date is not applicable, payments being made only upon presentation and surrender of the Investor Certificates at the office or offices therein specified. The Servicer's notice to the Trustee in accordance with the preceding sentence shall be accompanied by an Officer's Certificate setting forth the information specified in Article V of this Agreement covering the period during the then current calendar year through the date of such notice and setting forth the date of such final distribution. The Trustee shall give such notice to the Transfer Agent and Registrar and the Paying Agent at the time such notice is given to such Investor Certificateholders. (b) Notwithstanding the termination of the Trust pursuant to subsection 12.1(a) or the occurrence of the Series Termination Date with respect to any Series, all funds then on deposit in the Equalization Account, the Interest Funding Account, the Principal Account, the Distribution Account or any Series Account applicable to the related Series shall continue to be held in trust for the benefit of the Certificateholders of the related Series and the Paying Agent or the Trustee shall pay such funds to the Certificateholders of the related Series upon surrender of their Certificates (which surrenders and payments, in the case of Bearer Certificates, shall be made only outside the United States). In the event that all of the Investor Certificateholders of any Series shall not surrender their Certificates for cancellation within six months after the date specified in the above-mentioned written notice, the Trustee shall give a second written notice (or, in the case of Bearer Certificates, publication notice) to the remaining Investor Certificateholders of such Series upon receipt of the appropriate records from the Transfer Agent and Registrar to surrender their Certificates for cancellation and receive the final distribution with respect thereto. If within one and one half years after the second notice with respect to a Series, all the Investor Certificates of such Series shall not have been surrendered for cancellation, the Trustee may take appropriate steps or may appoint an agent to take appropriate steps, to contact the remaining Investor Certificateholders of such Series concerning surrender of their Certificates, and the cost thereof shall be paid out of the funds in the Distribution Account or any Series Account held for the benefit of such Investor Certificateholders. The Trustee and the Paying Agent shall pay to the Transferor upon written request any monies held by them for the payment of principal or interest which remains unclaimed for two years. After payment to the Transferor, Investor Certificateholders entitled to the money must look to the Transferor for payment as general creditors unless an applicable abandoned property law designates another Person. (c) All Certificates surrendered for payment of the final distribution with respect to such Certificates and cancellation shall be canceled by the Transfer Agent and Registrar and be disposed of in a manner satisfactory to the Trustee and the Transferor. Section XII.4 Termination Rights of Holder of Exchangeable Transferor Certificate. Upon the termination of the Trust pursuant to Section 12.1, and after payment of all amounts due hereunder on or prior to such termination and the surrender of the Exchangeable Transferor Certificate, the Trustee shall execute a written reconveyance substantially in the form of Exhibit H pursuant to which it shall reconvey to the Holder of the Exchangeable Transferor Certificate (without recourse, representation or warranty) all right, title and interest of the Trust in the Receivables, whether then existing or thereafter created, all moneys due or to become due with respect thereto (including all accrued interest theretofore posted as Finance Charge Receivables) allocable to the Trust pursuant to any Supplement, except for amounts held by the Trustee pursuant to subsection 12.3(b). Upon written instruction, the Trustee shall execute and deliver such instruments of transfer and assignment, delivered to it in final execution form, in each case prepared by the Transferor and without recourse, representation or warranty as shall be reasonably requested by the Holder of the Exchangeable Transferor Certificate to vest in such Holder all right, title and interest which the Trust had in the Receivables and other Trust Property. [End Of Article XII] ARTICLE XIII MISCELLANEOUS PROVISIONS Section XIII.1 Amendment. (a) This Agreement (including any Supplement) may be amended from time to time by the Servicer, the Transferor and the Trustee, without the consent of any of the Certificateholders, (i) to cure any ambiguity, to revise any exhibits or Schedules (other than Schedule I), to correct or supplement any provisions herein or thereon which may be inconsistent with any other provisions herein or thereon or (ii) to add any other provisions with respect to matters or questions raised under this Agreement which shall not be inconsistent with the provisions of this Agreement; provided, however, that such action shall not, as evidenced by an Opinion of Counsel, adversely affect in any material respect the interests of any of the Investor Certificateholders. Additionally, this Agreement may be amended from time to time by the Servicer, the Transferor and the Trustee, without the consent of any of the Certificateholders, to add to or change any of the provisions of this Agreement to provide that Bearer Certificates may be registrable as to principal, to change or eliminate any restrictions on the payment of principal of (or premium, if any) or any interest on Bearer Certificates to comply with the Bearer Rules, to permit Bearer Certificates to be issued in exchange for Registered Certificates (if then permitted by the Bearer Rules), to permit Bearer Certificates to be issued in exchange for Bearer Certificates of other authorized denominations or to permit the issuance of Certificates in uncertificated form. Section 2.7 of this Agreement may be amended from time to time by the Servicer, the Transferor and the Trustee, without the consent of any of the Certificateholders, to further restrict the right of the Transferor to designate Accounts as Removed Accounts to the extent necessary to enable the Transferor to achieve derecognition of the Receivables under generally accepted accounting principles, as evidenced by an Officer's Certificate provided by the Transferor to the Trustee. This Agreement (including any Supplement) and any schedule or exhibit thereto may also be amended from time to time by the Servicer, the Transferor and the Trustee, without the consent of any of the Certificateholders, for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Agreement, or of modifying in any manner the rights of the Holders of Certificates; provided, however, that (i) the Servicer shall have provided an Officer's Certificate to the Trustee to the effect that such amendment will not materially and adversely affect the interests of the Certificateholders, (ii) such amendment shall not, as evidenced by an Opinion of Counsel, cause the Trust to be characterized for Federal income tax purposes as an association taxable as a corporation or otherwise have any material adverse impact on the Federal income taxation of any outstanding Series of Investor Certificates or any Certificate Owner and (iii) the Servicer shall have provided at least ten Business Days prior written notice to each Rating Agency of such amendment and shall have received written confirmation from each Rating Agency to the effect that the existing rating of any Series or any class of any Series will not be reduced or withdrawn as a result of such amendment; provided, further, that such amendment shall not reduce in any manner the amount of, or delay the timing of, distributions which are required to be made on any Investor Certificate of such Series without the consent of the related Investor Certificateholder, change the definition of or the manner of calculating the interest of any Investor Certificateholder of such Series without the consent of the related Investor Certificateholder or reduce the percentage pursuant to clause (b) required to consent to any such amendment, in each case without the consent of all such Investor Certificateholders. (b) This Agreement and any Supplement may also be amended from time to time by the Servicer, the Transferor and the Trustee with the consent of the Holders of Investor Certificates evidencing Undivided Interests aggregating not less than 66 2/3% of the Invested Amount of each and every Series adversely affected, for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Agreement or of modifying in any manner the rights of the Investor Certificateholders of any Series then issued and outstanding; provided, however, that no such amendment under this subsection shall (i) reduce in any manner the amount of, or delay the timing of, distributions which are required to be made on any Investor Certificate of such Series without the consent of the related Investor Certificateholders; (ii) change the definition of or the manner of calculating the interest of any Investor Certificateholder of such Series without the consent of the related Investor Certificateholder or (iii) reduce the aforesaid percentage required to consent to any such amendment, in each case without the consent of all such Investor Certificateholders. (c) Notwithstanding anything in this Section 13.1 to the contrary, the Supplement with respect to any Series may be amended on the items and in accordance with the procedures provided in such Supplement. (d) Promptly after the execution of any such amendment (other than an amendment pursuant to paragraph (a)), the Trustee shall furnish notification of the substance of such amendment to each Investor Certificateholder of each Series adversely affected and ten Business Days prior to the proposed effective date for such amendment the Servicer shall furnish notification of the substance of such amendment to each Rating Agency providing a rating for such Series. (e) It shall not be necessary to obtain the consent of Investor Certificateholders under this Section 13.1 to approve the particular form of any proposed amendment, but it shall be sufficient if such consent shall approve the substance thereof. The manner of obtaining such consents and of evidencing the authorization of the execution thereof by Investor Certificateholders shall be subject to such reasonable requirements as the Trustee may prescribe. (f) Any Supplement executed and delivered pursuant to Section 6.9 and any amendments regarding the addition to or removal of Receivables from the Trust as provided in Sections 2.6 or 2.7, executed in accordance with the provisions hereof, shall not be considered amendments to this Agreement for the purpose of subsections 13.1(a) and (b). (g) In connection with any amendment, the Trustee may request an opinion of Counsel from the Transferor or Servicer to the effect that the amendment complies with all requirements of this Agreement. The Trustee may, but shall not be obligated to, enter into any amendment which affects the Trustee's rights, duties or immunities under this Agreement or otherwise. Section XIII.2 Protection of Right, Title and Interest to Trust. (a) The Servicer shall cause this Agreement, all amendments hereto and/or all financing statements and continuation statements and any other necessary documents covering the Certificateholders and the Trustee's right, title and interest to the Trust to be promptly recorded, registered and filed, and at all times to be kept recorded, registered and filed, all in such manner and in such places as may be required by law fully to preserve and protect the right, title and interest of the Certificateholders or the Trustee, as the case may be, hereunder to all property comprising the Trust. The Servicer shall deliver to the Trustee file-stamped copies of, or filing receipts for, any document recorded, registered or filed as provided above, as soon as available following such recording, registration or filing. The Transferor shall cooperate fully with the Servicer in connection with the obligations set forth above and will execute any and all documents reasonably required to fulfill the intent of this subsection 13.2(a). (b) Within 30 days after the Transferor makes any change in its name, identity or corporate structure which would make any financing statement or continuation statement filed in accordance with paragraph (a) above materially misleading within the meaning of Section 91-402(7) of the UCC as in effect in the Relevant UCC State, the Transferor shall give the Trustee written notice of any such change and shall file such financing statements or amendments as may be necessary to continue the perfection of the Trust's security interest in the Receivables and the proceeds thereof. (c) Each of the Transferor and the Servicer will give the Trustee prompt written notice of any relocation of any office from which it services Receivables or keeps records concerning the Receivables or of its principal executive office and whether, as a result of such relocation, the applicable provisions of the UCC would require the filing of any amendment of any previously filed financing or continuation statement or of any new financing statement and shall file such financing statements or amendments as may be necessary to continue the perfection of the Trust's security interest in the Receivables and the proceeds thereof. Each of the Transferor and the Servicer will at all times maintain each office from which it services Receivables and its principal executive office within the United States of America. (d) The Servicer will deliver to the Trustee: (i) upon each date that any Supplemental Accounts are to be included in the Accounts pursuant to subsection 2.6(c), an Opinion of Counsel substantially in the form of Exhibit F; and (ii) on or before March 31 of each year, beginning with March 31, 1994, an Opinion of Counsel substantially in the form of Exhibit G. Section XIII.3 Limitation on Rights of Certificateholders. (a) The death or incapacity of any Investor Certificateholder shall not operate to terminate this Agreement or the Trust, nor shall such death or incapacity entitle such Certificateholder's legal representatives or heirs to claim an accounting or to take any action or commence any proceeding in any court for a partition or winding up of the Trust, nor otherwise affect the rights, obligations and liabilities of the parties hereto or any of them. (b) No Investor Certificateholder shall have any right to vote (except as provided in Section 13.1 hereof) or in any manner otherwise control the operation and management of the Trust, or the obligations of the parties hereto, nor shall anything herein set forth, or contained in the terms of the Certificates, be construed so as to constitute the Certificateholders from time to time as members of an association; nor shall any Investor Certificateholder be under any liability to any third person by reason of any action taken by the parties to this Agreement pursuant to any provision hereof. (c) No Certificateholder shall have any right by virtue of any provisions of this Agreement to institute any suit, action or proceeding in equity or at law upon or under or with respect to this Agreement, unless such Certificateholder previously shall have given written notice to the Trustee, and unless the Holders of Certificates evidencing Undivided Interests aggregating more than 50% of the Invested Amount of any Series which may be adversely affected but for the institution of such suit, action or proceeding, shall have made written request upon the Trustee to institute such action, suit or proceeding in its own name as Trustee hereunder and shall have offered to the Trustee such reasonable indemnity as it may require against the costs, expenses and liabilities to be incurred therein or thereby, and the Trustee, for 60 days after its receipt of such notice, request and offer of indemnity, shall have neglected or refused to institute any such action, suit or proceeding; it being understood and intended, and being expressly covenanted by each Certificateholder with every other Certificateholder and the Trustee, that no one or more Certificateholders shall have the right in any manner whatever by virtue or by availing itself or themselves of any provisions of this Agreement to affect, disturb or prejudice the rights of the Certificateholders of any other of the Certificates, or to obtain or seek to obtain priority over or preference to any other such Certificateholder, or to enforce any right under this Agreement, except in the manner herein provided and for the equal, ratable and common benefit of all Certificateholders. For the protection and enforcement of the provisions of this Section 13.3, each and every Certificateholder and the Trustee shall be entitled to such relief as can be given either at law or in equity. Section XIII.4 Governing Law. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS. Section XIII.5 Notices. All demands, notices and communications hereunder shall be in writing and shall be deemed to have been duly given if personally delivered at, sent by facsimile to, sent by courier at or mailed by registered mail, return receipt requested, to (a) in the case of the Transferor to 10201 Main Street, Houston, Texas 77025, Attention: President, with a copy to the Servicer as provided below, (b) in the case of the Servicer, to 1020 Willow Creek, Jacksonville, Texas 75766, Attention: Chief Financial Officer and General Counsel, (c) in the case of the Trustee, to the Corporate Trust Office, (d) in the case of the Enhancement Provider for a particular Series, the address, if any, specified in the Supplement relating to such Series and (e) in the case of the Rating Agency for a particular Series, the address, if any, specified in the Supplement relating to such Series; or, as to each party, at such other address as shall be designated by such party in a written notice to each other party. Unless otherwise provided with respect to any Series in the related Supplement any notice required or permitted to be mailed to a Certificateholder shall be given by first class mail, postage prepaid, at the address of such Certificateholder as shown in the Certificate Register, or with respect to any notice required or permitted to be made to the Holders of Bearer Certificates, by publication in the manner provided in the related Supplement. If and so long as any Series or Class is listed on the Luxembourg Stock Exchange and such Exchange shall so require, any Notice to Investor Certificateholders shall be published in an authorized newspaper of general circulation in Luxembourg within the time period prescribed in this Agreement. Any notice so mailed within the time prescribed in this Agreement shall be conclusively presumed to have been duly given, whether or not the Certificateholder receives such notice. Section XIII.6 Severability of Provisions. If any one or more of the covenants, agreements, provisions or terms of this Agreement shall for any reason whatsoever be held invalid, then such covenants, agreements, provisions or terms shall be deemed severable from the remaining covenants, agreements, provisions or terms of this Agreement and shall in no way affect the validity or enforceability of the other provisions of this Agreement or of the Certificates or rights of the Certificateholders thereof. Section XIII.7 Assignment. Notwithstanding anything to the contrary contained herein, except as provided in Section 8.2, this Agreement may not be assigned by the Servicer without the prior consent of Holders of Investor Certificates evidencing Undivided Interests aggregating not less than 66_% of the Invested Amount of each Series on a Series by Series basis. Section XIII.8 Certificates Non-Assessable and Fully Paid. Except to the extent otherwise expressly provided in Section 7.4 with respect to the Transferor, it is the intention of the parties to this Agreement that the Investor Certificateholders shall not be personally liable for obligations of the Trust, that the Undivided Interests represented by the Certificates shall be non-assessable for any losses or expenses of the Trust or for any reason whatsoever, and that Certificates upon authentication thereof by the Trustee pursuant to Sections 2.1 and 6.2 are and shall be deemed fully paid. Section XIII.9 Further Assurances. The Transferor and the Servicer agree to do and perform, from time to time, any and all acts and to execute any and all further instruments required or reasonably requested by the Trustee more fully to effect the purposes of this Agreement, including, without limitation, the execution of any financing statements or continuation statements relating to the Receivables and the other Trust Property for filing under the provisions of the UCC of any applicable jurisdiction. Section XIII.10 No Waiver; Cumulative Remedies. No failure to exercise and no delay in exercising, on the part of the Trustee, any Enhancement Provider or the Investor Certificateholders, any right, remedy, power or privilege hereunder, shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided are cumulative and not exhaustive of any rights, remedies, powers and privileges provided by law. Section XIII.11 Counterparts. This Agreement may be executed in two or more counterparts (and by different parties on separate counterparts), each of which shall be an original, but all of which together shall constitute one and the same instrument. Section XIII.12 Third-Party Beneficiaries. This Agreement will inure to the benefit of and be binding upon the parties hereto, the Certificateholders and, to the extent provided in the related Supplement, to the Enhancement Provider named therein, and their respective successors and permitted assigns. Except as otherwise provided in this Article XIII, no other Person will have any right or obligation hereunder. Section XIII.13 Actions by Certificateholders. (a) Wherever in this Agreement a provision is made that an action may be taken or a notice, demand or instruction given by Investor Certificateholders, such action, notice or instruction may be taken or given by any Investor Certificateholder, unless such provision requires a specific percentage of Investor Certificateholders. (b) Any request, demand, authorization, direction, notice, consent, waiver or other act by a Certificateholder shall bind such Certificateholder and every subsequent holder of such Certificate issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done or omitted to be done by the Trustee or the Servicer in reliance thereon, whether or not notation of such action is made upon such Certificate. (c) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Agreement or any Supplement to be given or taken by Certificateholders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Certificateholders in person or by agent duly appointed in writing; and except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee and, when required, to the Transferor or the Servicer. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Agreement or any Supplement and conclusive in favor of the Trustee, the Transferor and the Servicer, if made in the manner provided in this Section. (d) The fact and date of the execution by any Certificateholder of any such instrument or writing may be proved in any reasonable manner which the Trustee deems sufficient. Section XIII.14 Rule 144A Information. For so long as any of the Investor Certificates of any Series or any Class are "restricted securities" within the meaning of Rule 144A(a)(3) under the Securities Act, each of the Transferor, the Servicer, the Trustee and the Enhancement Provider for such Series agree to cooperate with each other to provide to any Investor Certificateholders of such Series or Class and to any prospective purchaser of Certificates designated by such an Investor Certificateholder upon the request of such Investor Certificateholder or prospective purchaser, any information required to be provided to such holder or prospective purchaser to satisfy the condition set forth in Rule 144A(d)(4) under the Securities Act. Section XIII.15 Merger and Integration; Existing Agreement. (a) Except as specifically stated otherwise herein, this Agreement sets forth the entire understanding of the parties relating to the subject matter hereof, and all prior understandings, written or oral (including the Pooling and Servicing Agreement dated as of July 30, 1993, the First Amendment thereto dated as of October 7, 1994, and the Second Amendment thereto dated as of January 31, 1995, amended and restated as of August 11, 1995, further amended by a First Amendment to Amended and Restated Pooling and Servicing Agreement dated May 30, 1996, and the Second Amendment to Amended and Restated Pooling and Servicing Agreement dated August 1, 1998, are superseded by this Agreement. This Agreement may not be modified, amended, waived or supplemented except as provided herein. (b) This Agreement amends and restates the Existing Agreement effective as of the date hereof. This Agreement shall not effect a novation of the obligations of the parties to the Existing Agreement, but instead shall be merely a restatement and, where applicable, an amendment of the terms governing such obligations. Section XIII.16 Headings. The headings herein are for purposes of reference only and shall not otherwise affect the meaning or interpretation of any provision hereof. Section XIII.17 No Bankruptcy Petition Against the Transferor or the Trust. The Trustee and each Investor Certificateholder, by its acceptance of an Investor Certificate, severally and not jointly, hereby covenant and agree that, prior to the date which is one year and one day after the payment in full of all outstanding Investor Certificates issued by the Trust, none of them will institute against, or join any other Person in instituting against, the Transferor or the Trust any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings or other similar proceeding under the laws of the United States or any state of the United States. [End of Article XIII] IN WITNESS WHEREOF, the Transferor, the Servicer and the Trustee have caused this Agreement to be duly executed by their respective officers as of the day and year first above written. SRI RECEIVABLES PURCHASE CO., INC. Transferor By: /s/ Charles M. Sledge Name: Charles M. Sledge Title: SVP Finance & Treasurer SPECIALTY RETAILERS, INC. Servicer By: /s/ Charles M. Sledge Name: Charles M. Sledge Title: SVP Finance & Treasurer BANKERS TRUST (DELAWARE) Trustee By: /s/ Patricia MF Russo Name: Patricia MF Russo Title: Attorney-in-Fact EXHIBIT A FORM OF EXCHANGEABLE TRANSFEROR CERTIFICATE No. 1 One Unit SRI RECEIVABLES MASTER TRUST ASSET BACKED CERTIFICATE THIS CERTIFICATE WAS ISSUED PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY BE SOLD ONLY PURSUANT TO A REGISTRATION STATEMENT EFFECTIVE UNDER THE ACT OR AN EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE ACT. IN ADDITION, THE TRANSFER OF THIS CERTIFICATE IS SUBJECT TO RESTRICTIONS SET FORTH IN THE POOLING AND SERVICING AGREEMENT REFERRED TO HEREIN. A COPY OF THE POOLING AND SERVICING AGREEMENT WILL BE FURNISHED TO THE HOLDER OF THIS CERTIFICATE BY THE TRUSTEE UPON WRITTEN REQUEST. This Certificate represents an Undivided Interest in the SRI Receivables Master Trust 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 generated or to be generated by certain subsidiaries of Specialty Retailers, Inc. ("SRI" or the "Servicer") and other assets and interests constituting the Trust under the Pooling and Servicing Agreement described below. (Not an interest in or a recourse obligation of SRI Receivables Purchase Co., Inc., Specialty Retailers, Inc. or any Affiliate of either of them.) This certifies that SRI RECEIVABLES PURCHASE CO., INC. (the "Holder" or the "Transferor," as the context requires) is the registered owner of a fractional undivided interest in the SRI Receivables Master Trust (the "Trust") issued pursuant to the Second Amended and Restated Pooling and Servicing Agreement dated as of November 1, 1999, among the Transferor, SRI, as Servicer, and Bankers Trust (Delaware), a banking corporation organized and existing under the laws of the State of Delaware as Trustee (the "Pooling and Servicing Agreement"; such term to include any amendment or Supplement thereto). The corpus of the Trust consists of all of the Transferor's right, title and interest in, to and under (i) a portfolio of receivables (the "Receivables") now existing or hereafter created that are in substantially all of the consumer revolving credit card accounts existing from time to time (the "Accounts") as of the Cut-off Date, including Receivables arising in connection with the accounts that meet the definition of Automatic Additional Accounts and Supplemental Accounts, all moneys due or to become due with respect thereto (including all Finance Charge Receivables), all proceeds of such Receivables, (ii) the Receivables Purchase Agreement, and (iii) Recoveries, all monies due or to become due with respect thereto and all amounts received with respect to the Receivables in existence in the Accounts on the Cut-off Date or generated thereafter, all monies on deposit in the Collection Account, the Interest Funding Account, the Principal Account, the Distribution Account, and the Equalization Account (excluding any investment earnings on such deposited amounts except for such amounts as are on deposit in the Equalization Account), and all other assets and interests constituting the Trust and all proceeds of the foregoing. To the extent not defined herein, the capitalized terms used herein have the meanings assigned in the Pooling and Servicing Agreement. This Certificate is issued under and is subject to the terms, provisions and conditions of the Pooling and Servicing Agreement, to which Pooling and Servicing Agreement, as amended from time to time, the Holder by virtue of the acceptance hereof assents and by which the Holder is bound. This Certificate has not been registered or qualified under the Securities Act of 1933, as amended, or any state securities law. No sale, transfer or other disposition of this Certificate shall be permitted other than in accordance with the provisions of Sections 6.3, 6.9 or 7.2 of the Pooling and Servicing Agreement. The Receivables arise generally from amounts charged by Obligors for goods and services plus the related periodic finance charges, and amounts charged to the Accounts in respect of late fees, returned check fees and similar fees and charges. This Certificate is the Exchangeable Transferor Certificate (the "Certificate"), which represents an undivided interest in the Trust, including the right to receive the Collections and other amounts at the times and in the amounts specified in the Pooling and Servicing Agreement to be paid to the Holder of the Certificate. The aggregate interest represented by this Certificate at any time in the Principal Receivables in the Trust shall not exceed the Transferor Interest at such time. In addition to this Certificate, Series of Investor Certificates will be issued to investors pursuant to the Pooling and Servicing Agreement, each of which will represent an Undivided Interest in the Trust. This Certificate shall not represent any interest in the Investor Accounts or any Enhancement, except to the extent provided in the Pooling and Servicing Agreement. The Transferor Interest on any date of determination will be an amount equal to the aggregate amount of Principal Receivables at the end of the day immediately prior to such date of determination plus amounts on deposit in the Equalization Account (but not including any investment earnings thereon) minus the Aggregate Invested Amount at the end of such day. The Servicer shall deposit all Collections in the Collection Account as promptly as possible after the Date of Processing of such Collections. Unless otherwise stated in any Supplement, throughout the existence of the Trust, the Servicer shall allocate to the Holder of the Certificate an amount equal to the product of (A) the Transferor Percentage and (B) the aggregate amount of such Collections allocated to Principal Receivables and Finance Charge Receivables, respectively, in respect of each Monthly Period. Notwithstanding the first sentence of this paragraph, the Servicer need not deposit this amount or any other amounts so allocated to the Certificate pursuant to the Pooling and Servicing Agreement into the Collection Account and shall pay, or be deemed to pay, such amounts as collected to the Holder of the Certificate. SRI or any permitted successor or assignee, as Servicer, is entitled to receive as servicing compensation a monthly servicing fee. The portion of the servicing fee which will be allocable to the Holder of the Certificate pursuant to the Pooling and Servicing Agreement will be payable by the Holder of the Certificate and neither the Trust nor the Trustee or the Investor Certificateholders will have any obligation to pay such portion of the servicing fee. This Certificate does not represent a recourse obligation of, or any interest in, the Transferor or the Servicer. This Certificate is limited in right of payment to certain Collections respecting the Receivables, all as more specifically set forth hereinabove and in the Pooling and Servicing Agreement. Upon the termination of the Trust pursuant to Section 12.1 of the Pooling and Servicing Agreement, the Trustee shall assign and convey to the Holder of the Certificate (without recourse, representation or warranty) all right, title and interest of the Trust in the Receivables, whether then existing or thereafter created, and all proceeds relating thereto. The Trustee shall execute and deliver such instruments of transfer and assignment, in each case without recourse, as shall be reasonably requested by the Holder of the Certificate to vest in such Holder all right, title and interest which the Trustee had in the Receivables. Unless the certificate of authentication hereon has been executed by or on behalf of the Trustee, by manual signature, this Certificate shall not be entitled to any benefit under the Pooling and Servicing Agreement, or be valid for any purpose. IN WITNESS WHEREOF, the Transferor has caused this Certificate to be duly executed. SRI RECEIVABLES PURCHASE CO., INC. By: Name: Title: Attested to: By: Date: CERTIFICATE OF AUTHENTICATION This is the Exchangeable Transferor Certificate referred to in the within-mentioned Pooling and Servicing Agreement. BANKERS TRUST (DELAWARE), as Authenticating Agent for the Trustee By: Authorized Signatory EXHIBIT B FORM OF ASSIGNMENT OF RECEIVABLES IN SUPPLEMENTAL ACCOUNTS (As required by subsection 2.6(e)(ii) of the Pooling and Servicing Agreement) ASSIGNMENT No. _____ OF RECEIVABLES IN SUPPLEMENTAL ACCOUNTS, dated as of ________ __, ___ by and between SRI RECEIVABLES PURCHASE CO. INC., a corporation organized under the laws of the State of Delaware (the "Transferor"), to BANKERS TRUST (DELAWARE), a banking corporation organized and existing under the laws of the State of Delaware as Trustee (in such capacity, the "Trustee") pursuant to the Pooling and Servicing Agreement referred to below. W I T N E S S E T H : WHEREAS, the Transferor and the Trustee are parties to the Second Amended and Restated Pooling and Servicing Agreement, dated as of ___________, 1999 (the "Pooling and Servicing Agreement"; such term to include any amendment or Supplement thereto) among the Transferor, Specialty Retailers, Inc. as Servicer and the Trustee; WHEREAS, pursuant to the Pooling and Servicing Agreement, the Transferor wishes to designate Supplemental Accounts of the Transferor to be included as Accounts and to convey the Receivables of such Supplemental Accounts, whether now existing or hereafter created, to the Trust as part of the corpus of the Trust (as each such term is defined in the Pooling and Servicing Agreement); and WHEREAS, the Trustee is willing to accept such designation and conveyance subject to the terms and conditions hereof; NOW, THEREFORE, the Transferor and the Trustee hereby agree as follows: 1. Defined Terms. All terms defined in the Pooling and Servicing Agreement and used herein shall have such defined meanings when used herein, unless otherwise defined herein. "Addition Date" shall mean, with respect to the Supplemental Accounts designated hereby, __________, ______. "Notice Date" shall mean, with respect to the Supplemental Accounts designated hereby, _________, _________ (which shall be a date on or prior to the fifth Business Day prior to the Addition Date with respect to additions pursuant to subsection 2.6(c) of the Pooling and Servicing Agreement and the twentieth Business Day prior to the Addition Date with respect to additions pursuant to subsection 2.6(d) of the Pooling and Servicing Agreement). 2. Designation of Additional Accounts. The Transferor shall deliver to the Trustee not later than five Business Days after the Addition Date, a computer file or microfiche list containing a true and complete list of each consumer revolving credit card account which as of the Addition Date shall be deemed to be a Supplemental Account, such accounts being identified by account number and by the amount of Receivables in each such account as of the close of business on the Addition Date. Such file or list shall be marked as Schedule I to this Assignment and, as of the Addition Date, shall be incorporated into and made a part of this Assignment. 3. Conveyance of Receivables. The Transferor does hereby transfer, assign, set-over and otherwise convey to the Trust for the benefit of the Certificateholders, without recourse on and after the Addition Date, all right, title and interest of the Transferor in and to the Receivables now existing and hereafter created in the Supplemental Accounts designated hereby, all monies due or to become due with respect thereto (including all Finance Charge Receivables) and all proceeds of such Receivables. (a) In connection with such transfer, the Transferor agrees to record and file, at its own expense, a financing statement with respect to the Receivables now existing and hereafter created in the Supplemental Accounts designated hereby (which may be a single financing statement with respect to all such Receivables) for the transfer of accounts as defined in Section 9-106 of the UCC as in effect in the Relevant UCC State meeting the requirements of applicable state law in such manner and such jurisdictions as are necessary to perfect the assignment of such Receivables to the Trust, and to deliver a file-stamped copy of such financing statement or other evidence of such filing (which may, for purposes of this Section 3, consist of telephone confirmation of such filing) to the Trustee on or prior to the date of this Assignment. (b) In connection with such transfer, the Transferor further agrees, at its own expense, on or prior to the date of this Assignment to indicate in its computer files that Receivables created in connection with the Supplemental Accounts designated hereby have been transferred to the Trust pursuant to this Assignment for the benefit of the Certificateholders. 4. Acceptance by Trustee. The Trustee hereby acknowledges its acceptance on behalf of the Trust for the benefit of the Certificateholders of all right, title and interest previously held by the Transferor in and to the receivables now existing and hereafter created, and declares that it shall maintain such right, title and interest, upon the trust herein set forth, for the benefit of all Certificateholders. 5. Representations and Warranties of the Transferor. The Transferor hereby represents and warrants to the just as of the Addition Date: (a) Legal Valid and Binding Obligation. This Assignment constitutes a legal, valid and binding obligation of the Transferor enforceable against the Transferor in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect affecting the enforcement of creditors' rights in general and except as such enforceability may be limited by general principles of equity (whether considered in a suit at law or in equity). (b) Selection Procedures. No selection procedures believed by the Transferor to be materially adverse to the interests of the Investor Certificateholders were utilized in selecting the Supplemental Accounts designated hereby from the available Eligible Accounts held by the Trust Portfolio. (c) Insolvency. The Transferor is not insolvent and after giving effect to the conveyance set forth in Section 3 of this Assignment, will not be insolvent. (d) Security Interest. This Assignment constitutes either (i) a valid transfer and assignment to the Trust of all right, title and interest of the Transferor in and to Receivables now existing and hereafter created in the Supplemental Accounts designated hereby, and all proceeds (as defined in the UCC as in effect in the Relevant UCC State) of such Receivables, and such Receivables and any proceeds thereof will be held by the Trust free and clear of any Lien of any Person claiming through or under the Transferor or any of its Affiliates except for (x) Permitted Liens, (y) the interest of the Holder of the Exchangeable Transferor Certificate and (z) the Transferor's right to receive interest accruing on, and investment earnings in respect of, the Interest Funding Account, the Principal Account and any Series Account as provided in the Pooling and Servicing Agreement or any Series Supplement; or (ii) it constitutes a grant of a security interest (as defined in the UCC as in effect in the Relevant UCC State) in such property to the Trust, which is enforceable with respect to the existing Receivables of the Supplemental Accounts designated hereby, the proceeds (as defined in the UCC as in effect in the Relevant UCC State) thereof upon the conveyance of such Receivables to the Trust, and which will be enforceable with respect to the Receivables thereafter created in respect of Supplemental Accounts designated hereby, the proceeds (as defined in the UCC as in effect in the Relevant UCC State) thereof, upon such creation; and (iii) if this Assignment constitutes the grant of a security interest to the Trust in such property, upon the filing of a financing statement described in Section 3 of this Assignment with respect to the Supplemental Accounts designated hereby and in the case of the Receivables of such Supplemental Accounts thereafter created and the proceeds (as defined in the UCC as in effect in the Relevant UCC State) thereof, upon such creation, the Trust shall have a first priority perfected security interest in such property, except for Permitted Liens. 6. Conditions Precedent. The acceptance by the Trustee set forth in Section 4 and the amendment of the Pooling and Servicing Agreement set forth in Section 7 are subject to the satisfaction, on or prior to the Addition Date, of the following conditions precedent: (a) Officer's Certificate. The Transferor shall have delivered to the Trustee a certificate of a Vice President or more senior officer substantially in the form of Schedule II hereto, certifying that (i) all requirements set forth in Section 2.6 of the Pooling and Servicing Agreement for designating Supplemental Accounts and conveying the Receivables of such Accounts, whether now existing or hereafter created, have been satisfied and (ii) each of the representations and warranties made by the Transferor in Section 5 is true and correct as of the Addition Date. (b) Opinion of Counsel. The Transferor shall have delivered to the Trustee an Opinion of Counsel with respect to the Supplemental Accounts designated hereby substantially in the form of Exhibit F to the Pooling and Servicing Agreement. (c) Additional Information. The Transferor shall have delivered to the Trustee such information as was reasonably requested by the Trustee to satisfy itself as to the accuracy of the representation and warranty regarding the insolvency of the Transferor set forth in subsection 5(c) to this Assignment. 7. Amendment of the Pooling and Servicing Agreement. The Pooling and Servicing Agreement is hereby amended to provide that all references therein to the "Pooling and Servicing Agreement," to "this Agreement" and "herein" shall be deemed from and after the Addition Date to be a dual reference to the Pooling and Servicing Agreement as supplemented by this Assignment. Except as expressly amended hereby, all of the representations, warranties, terms, covenants and conditions of the Pooling and Servicing Agreement shall remain unamended and shall continue to be, and shall remain, in full force and effect in accordance with its terms and except as expressly provided herein shall not constitute or be deemed to constitute a waiver of compliance with or a consent to noncompliance with any term or provision of the Pooling and Servicing Agreement. 8. Counterparts. This Assignment may be executed in two or more counterparts (and by different parties on separate counterparts), each of which shall be an original, but all of which together shall constitute one and the same instrument. 9. Governing Law. THIS ASSIGNMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO ITS CONFLICT OF LAW PROVISIONS. IN WITNESS WHEREOF, the undersigned have caused this Assignment of Receivables in Supplemental Accounts to be duly executed and delivered by their respective duly authorized officers on the day and year first above written. SRI RECEIVABLES PURCHASE CO., INC. By: Name: Title BANKERS TRUST (DELAWARE), Trustee By: Name: Title: Schedule I to Assignment of Receivables in Supplemental Accounts SUPPLEMENTAL ACCOUNTS Schedule II to Assignment of Receivables in Supplemental Accounts SRI Receivables Purchase Co., Inc. SRI Receivables Master Trust Officer's Certificate ___________, a duly authorized officer of SRI Receivables Purchase Co., Inc., a corporation organized and existing under the laws of the State of Delaware (the "Transferor"), hereby certifies and acknowledges on behalf of the Transferor that to the best of his knowledge the following statements are true on _____, ______ (the "Addition Date"), and further acknowledges on behalf of the Transferor that this Officer's Certificate will be relied upon by Bankers Trust (Delaware), a banking corporation organized and existing under the laws of the State of Delaware, as Trustee (the "Trustee") of the SRI Receivables Master Trust in connection with the Trustee entering into Assignment No. ___ of Receivables in Supplemental Accounts, dated as of the Addition Date (the "Assignment"), by and between the Transferor and the Trustee, in connection with the Second Amended and Restated Pooling and Servicing Agreement, dated as of November 1, 1999 (the "Pooling and Servicing Agreement"; such term to include any amendment or supplement thereto), among the Transferor, Specialty Retailers, Inc., as Servicer, and the Trustee. The undersigned hereby certifies and acknowledges on behalf of the Transferor that: (a) Deliveries. On or prior to the Addition Date, the Transferor has delivered to the Trustee the Assignment (including an acceptance by the Trustee on behalf of the Trust for the benefit of the Investor Certificateholders) and the Transferor has indicated in its computer files that the Receivables created in connection with the Supplemental Accounts have been transferred to the Trust and within five Business Days after the Addition Date the Transferor shall deliver to the Trustee or the bailee of the Trustee a computer file or microfiche list containing a true and complete list of all Supplemental Accounts identified by account number and the aggregate amount of the Receivables in such Supplemental Accounts as of the Addition Date, which computer file or microfiche list shall be, as of the date of such Assignment, incorporated into and made a part of such Assignment and the Pooling and Servicing Agreement. (b) Legal Valid and Binding Obligation. The Assignment constitutes a legal, valid and binding obligation of the Transferor, enforceable against the Transferor in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect affecting the enforcement of creditors, rights in general and except as such enforceability may be limited by general principles of equity (whether considered in a suit at law or in equity). (c) Selection Procedures. No selection procedures believed by the Transferor to be materially adverse to the interests of the Investor Certificateholders were utilized in selecting the Supplemental Accounts designated hereby from the available Eligible Accounts in the Federated Portfolio. (d) Insolvency. The Transferor is not insolvent and, after giving effect to the conveyance set forth in Section 3 of the Assignment, will not be insolvent. (e) Security Interest. The Assignment constitutes either (i) a valid transfer and assignment to the Trust of all right, title and interest of the Transferor in and to Receivables now existing and hereafter created in the Supplemental Accounts designated pursuant to the Assignment, and all proceeds (as defined in the UCC as in effect in the Relevant UCC State) of such Receivables, and such Receivables and any proceeds thereof will be held by the Trust free and clear of any Lien of any Person claiming through or under the Transferor or any of its Affiliates except for (x) Permitted Liens, (y) the interest of the Transferor as holder of the Exchangeable Transferor Certificate and (z) the Transferor's right to receive interest accruing on, and investment earnings in respect of, the Interest Funding Account, the Principal Account or any Series Account as provided in the Pooling and Servicing Agreement and any Supplement; or (ii) a grant of a security interest (as defined in the UCC as in effect in the Relevant UCC State) in such property to the Trust, which is enforceable with respect to the existing Receivables of the Supplemental Accounts designated pursuant to the Assignment, the proceeds (as defined in the UCC as in effect in the State of Relevant UCC State) thereof upon the conveyance of such Receivables to the Trust, and which will be enforceable with respect to the Receivables thereafter created in respect of Supplemental Accounts designated pursuant to the Assignment, and the proceeds (as defined in the UCC as in effect in the Relevant UCC State) thereof, upon such creation; and (iii) if the Assignment constitutes the grant of a security interest to the Trust in such property, upon the filing of a financing statement described in Section 3 of the Assignment with respect to the Additional Accounts designated pursuant to the Assignment and in the case of the Receivables of such Additional Accounts thereafter created and the proceeds (as defined in the UCC as in effect in the Relevant UCC State) thereof, upon such creation, the Trust shall have a first priority perfected security interest in such property, except for Permitted Liens. (f) Requirements of the Pooling and Servicing Agreement. All requirements set forth in Section 2.6 of the Pooling and Servicing Agreement for designating Additional Accounts and conveying the Principal Receivables of such Accounts, whether now existing or hereafter created, have been satisfied. Initially capitalized terms used herein and not otherwise defined are used as defined in the Pooling and Servicing Agreement. IN WITNESS WHEREOF, I have hereunto set my hand this day of _________ ____. SRI RECEIVABLES PURCHASE CO., INC. By: Name: Title: EXHIBIT C FORM OF DAILY REPORT [SEE ATTACHED] EXHIBIT D FORM OF SETTLEMENT STATEMENT [SEE ATTACHED] EXHIBIT E FORM OF QUARTERLY SERVICER'S CERTIFICATE SRI RECEIVABLES PURCHASE CO., INC. SRI RECEIVABLES MASTER TRUST The undersigned, a duly authorized representative of Specialty Retailers, Inc. ("SRI"), as Servicer pursuant to the Second Amended and Restated Pooling and Servicing Agreement dated as of November 1, 1999 (the "Pooling and Servicing Agreement"; such term to include any amendment or supplement thereto), by and among SRI Receivables Purchase Co., Inc. (the "Transferor"), SRI, as Servicer and Bankers Trust (Delaware), as trustee (the "Trustee") does hereby certify that: 1. SRI is Servicer under the Pooling and Servicing Agreement. 2. The undersigned is duly authorized pursuant to the Pooling and Servicing Agreement to execute and deliver this Certificate to the Trustee. 3. This Certificate is delivered pursuant to Section 3.5 of the Pooling and Servicing Agreement. 4. A review of the activities of the Servicer during (the period from the Closing Date until) (the approximately twelve month period ended), [19][20]___ was conducted under our supervision. 5. Based on such review, the Servicer has, to the best of our knowledge, fully performed all its obligations under the Pooling and Servicing Agreement throughout such period and no default in the performance of such obligations has occurred or is continuing except as set forth in paragraph 6 below. 6. The following is a description of each default in the performance of the Servicer's obligations under the provisions of the Pooling and Servicing Agreement, including any Supplement, known to us to have been made during such period which sets forth in detail (i) the nature of each such default, (ii) the action taken by the Servicer, if any, to remedy each such default and (iii) the current status of each such default: [If applicable, insert "None."] IN WITNESS WHEREOF, the undersigned has duly executed this certificate this _____ day of __________, ______. SPECIALTY RETAILERS, INC., as Servicer Name: Title: EXHIBIT F FORM OF OPINION OF COUNSEL REGARDING SUPPLEMENTAL ACCOUNTS MATTERS TO BE COVERED IN OPINION OF COUNSEL TO BE DELIVERED PURSUANT TO SECTION 2.6(e)(vi) OF THE SECOND AMENDED AND RESTATED POOLING AND SERVICING AGREEMENT, DATED AS OF NOVEMBER 1, 1999 The opinions set forth below may be subject to certain qualifications, assumptions, limitations and exceptions taken or made in the opinion of the Transferor's counsel with respect to similar matters delivered on the Closing Date. Such counsel may rely as to factual matters on certificates of officers of the Transferor and the Servicer. (i) The Assignment has been duly authorized, executed and delivered by the Transferor and constitutes the valid and legally binding agreement of the Transferor, enforceable against the Transferor in accordance with its terms except as such enforceability may be limited by applicable bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditor's rights and except as such enforceability may be limited by general equity principles (whether considered in a suit in law or equity). (ii) The provisions of the Pooling and Servicing Agreement are effective to create, in favor of the Trustee for the benefit of the Holders of the Certificates, a valid security interest in the Receivables and the proceeds thereof. Such security interest constitutes a first priority perfected security interest in such Receivables and the proceeds thereof. Except for Permitted Liens, no other security interest of any creditor of the Transferor is equal or prior to the security interest of the Trustee in such Receivables. (iii) No filing or other action, other than the filing of a Uniform Commercial Code financing statement in the recording offices in the Relevant UCC State is necessary to perfect or maintain the security interest in the Receivables and the proceeds thereof, except that (a) appropriate Uniform Commercial Code continuation statements must be filed within the period of six months prior to the expiration of five years from the date of the original filing, (b) if the Transferor changes its name, identity or corporate structure, appropriate Uniform Commercial Code financing statements must be filed prior to the expiration of four months after the Transferor changes its name, identity or corporate structure and (c) if the Transferor changes its chief executive office or principal place of business to a jurisdiction other than the State of Delaware, such security interest must be perfected in such jurisdiction within four months of the date on which the change occurs (or earlier, if perfection under the laws of such jurisdiction would have otherwise ceased as set forth in clause (a) above). EXHIBIT G FORM OF ANNUAL OPINION OF COUNSEL The opinion set forth below, which is to be delivered pursuant to subsection 13.2(d)(ii) of the Second Amended and Restated Pooling and Servicing Agreement, dated as of November 1, 1999 may be subject to certain qualifications, assumptions, limitations and exceptions taken or made in the opinion of counsel delivered on the Initial Closing Date with respect to similar matters. No filing or other action, other than such filing or action described in such opinion, is necessary from the date of such opinion through this date of the following year to continue the perfected status of the interest of the Trust in the collateral described in the financing statements referred to in such opinion. EXHIBIT H FORM OF REASSIGNMENT OF RECEIVABLES REASSIGNMENT NO. _____ OF RECEIVABLES, dated as of ___________, by and between SRI RECEIVABLES PURCHASE CO., INC., a corporation organized and existing under the laws of the State of Delaware (the "Transferor"), and BANKERS TRUST (DELAWARE), a banking corporation organized and existing under the laws of the State of Delaware (the "Trustee") pursuant to the Pooling and Servicing Agreement referred to below. W I T N E S S E T H : WHEREAS, the Transferor and the Trustee are parties to the Second Amended and Restated Pooling and Servicing Agreement, dated as of November 1, 1999 (hereinafter as such agreement may have been, or may from time to time be, amended, supplemented or otherwise modified, the "Pooling and Servicing Agreement") by and among the Transferor, Specialty Retailers, Inc. as Servicer, and the Trustee; WHEREAS, pursuant to Section 2.7 of the Pooling and Servicing Agreement, the Transferor wishes to remove all Receivables from certain designated Accounts (collectively, the "Removed Accounts") and to cause the Trustee to reconvey the Receivables of such Removed Accounts, whether now existing or hereafter created, from the Trust to the Transferor (as each such term is defined in the Pooling and Servicing Agreement); and WHEREAS, the Trustee is willing to accept such designation and to reconvey the Receivables in the Removed Accounts subject to the terms and conditions hereof. NOW THEREFORE, the Transferor and the Trustee hereby agree as follows: 1. Defined Terms. All terms defined in the Pooling and Servicing Agreement and used herein shall have such defined meanings when used herein, unless otherwise defined herein. "Removal Date" shall mean, with respect to the Removed Accounts designated hereby, ___________, _____. "Removal Notice Date" shall mean, with respect to the Removed Accounts designated hereby, _________, ______ (which shall be a date on or prior to the fifth Business Day prior to the Removal Date). 2. Designation of Removed Accounts. The Transferor shall deliver to the Trustee or the bailee of the Trustee, not later than five Business Days after the Removal Date, a computer file or microfiche list containing a true and complete list of each revolving consumer credit card account which as of the Removal Date shall be deemed to be a Removed Account, such accounts being identified by account number and by the aggregate amount of Receivables in such accounts as of the close of business on the Removal Date. Such list shall be marked as Schedule I to this Reassignment and shall be incorporated into and made a part of this Reassignment as of the Removal Date. 3. Conveyance of Receivables. (a) The Trustee does hereby reconvey to the Transferor, without recourse, representation or warranty, on and after the Removal Date, all right, title and interest of the Trust in and to the Receivables now existing and hereafter created in the Removed Accounts designated hereby, all monies due or to become due with respect thereto (including all Finance Charge Receivables) and all proceeds (as defined in Section 9-306 of the UCC as in effect in the Relevant UCC State) of such Receivables. (b) In connection with such transfer, the Trustee agrees to execute and deliver to the Transferor on or prior to the date of this Reassignment, a termination statement with respect to the Receivables now existing and hereafter created in the Removed Accounts designated hereby evidencing the release by the Trust of its Lien on the Receivables in the Removed Accounts, and meeting the requirements of applicable state law, in such manner and such jurisdictions as are necessary to remove such Lien. 4. Representations and Warranties of the Transferor. The Transferor hereby represents and warrants to the Trust as of the Removal Date: (a) Legal, Valid and Binding Obligation. This Reassignment constitutes a legal, valid and binding obligation of the Transferor enforceable against the Transferor in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect affecting the enforcement of creditors, rights in general and except as such enforceability may be limited by general principles of equity (whether considered in a suit at law or in equity). (b) Selection Procedures. No selection procedures believed by the Transferor to be materially adverse to the interests of the Investor Certificateholders were utilized in selecting the Removed Accounts designated hereby. 5. Conditions Precedent. The amendment of the Pooling and Servicing Agreement set forth in Section 6 hereof is subject to the satisfaction, on or prior to the Removal Date, of the following condition precedent: The Transferor shall have delivered to the Trustee an Officer's Certificate certifying that (i) as of the Removal Date, all requirements set forth in Section 2.7 of the Pooling and Servicing Agreement for designating Removed Accounts and reconveying the Receivables of such Removed Accounts, whether now existing or hereafter created, have been satisfied, and (ii) each of the representations and warranties made by the Transferor in Section 4 hereof is true and correct as of the Removal Date. The Trustee may conclusively rely on such Officer's Certificate, shall have no duty to make inquiries with regard to the matters set forth therein and shall incur no liability in so relying. 6. Amendment of the Pooling and Servicing Agreement. The Pooling and Servicing Agreement is hereby amended to provide that all references therein to the "Pooling and Servicing Agreement", to "this Agreement" and "herein" shall be deemed from and after the Removal Date to be a dual reference to the Pooling and Servicing Agreement as supplemented by this Reassignment. Except as expressly amended hereby, all of the representations, warranties, terms, covenants and conditions of the Pooling and Servicing Agreement shall remain unamended and shall continue to be, and shall remain, in full force and effect in accordance with its terms and except as expressly provided herein shall not constitute or be deemed to constitute a waiver of compliance with or a consent to noncompliance with any term or provision of the Pooling and Servicing Agreement. 7. Counterparts. This Reassignment may be executed in two or more counterparts, and by different parties on separate counterparts, each of which shall be an original, but all of which together shall constitute one and the same instrument. 8. Governing Law. THIS REASSIGNMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS. IN WITNESS WHEREOF, the undersigned have caused this Reassignment of Receivables to be duly executed and delivered by their respective duly authorized officers on the day and year first above written. SRI RECEIVABLES PURCHASE CO., INC. By: Name: Title: BANKERS TRUST (DELAWARE), Trustee By: Name: Title: Schedule I to Reassignment of Receivables REMOVED ACCOUNTS EXHIBIT I FORM OF RECONVEYANCE OF RECEIVABLES RECONVEYANCE OF RECEIVABLES, dated as of __________ by and between SRI RECEIVABLES PURCHASE CO., INC., a corporation organized and existing under the laws of the State of Delaware (the "Transferor"), and BANKERS TRUST (DELAWARE), a banking corporation organized and existing under the laws of the State of Delaware (the "Trustee") pursuant to the Pooling and Servicing Agreement referred to below. W I T N E S S E T H : WHEREAS, the Transferor and the Trustee are parties to the Second Amended and Restated Pooling and Servicing Agreement dated as of November 1, 1999 (hereinafter as such agreement may have been, or may from time to time be, amended, supplemented or otherwise modified, the "Pooling and Servicing Agreement"), by and among the Transferor, Specialty Retailers, Inc. as Servicer, and the Trustee; WHEREAS, pursuant to the Pooling and Servicing Agreement, the Transferor wishes to cause the Trustee to reconvey all of the Receivables and proceeds thereof, whether now existing or hereafter created, from the Trust to the Transferor pursuant to the terms of Section 12.4 of the Pooling and Servicing Agreement upon termination of the Trust pursuant to subsection 12.1(a) of the Pooling and Servicing Agreement (as each such term is defined in the Pooling and Servicing Agreement); WHEREAS, the Trustee is willing to reconvey the Receivables subject to the terms and conditions hereof; NOW THEREFORE, the Transferor and the Trustee hereby agree as follows: 1. Defined Terms. All terms defined in the Pooling and Servicing Agreement and used herein shall have such defined meanings when used herein, unless otherwise defined herein. "Reconveyance Date" shall mean ________ __, [19][20]__. 2. Return of Lists of Accounts. The Trustee shall deliver to the Transferor or the bailee of the Transferor, not later than three Business Days after the Reconveyance Date, each and every computer file or microfiche list of Accounts delivered to the Trustee pursuant to the terms of the Pooling and Servicing Agreement. 3. Conveyance of Receivables. (a) The Trustee does hereby reconvey to the Transferor, without recourse, representation or warranty, on and after the Reconveyance Date, all right, title and interest of the Trust in and to each and every Receivable now existing and hereafter created in the Accounts, all monies due or to become due with respect thereto (including all Finance Charge Receivables), all proceeds (as defined in Section 9-306 of the UCC as in effect in the Relevant UCC State) of such Receivables, except for amounts, if any, held by the Trustee pursuant to subsection 12.3(b) of the Pooling and Servicing Agreement. (b) In connection with such transfer, the Trustee agrees to execute and deliver to the Transferor on or prior to the date of this Reconveyance, such UCC termination statements as the Transferor may reasonably request, evidencing the release by the Trust of its lien on the Receivables. 4. Counterparts. This Reconveyance may be executed in two or more counterparts (and by different parties on separate counterparts), each of which shall be an original, but all of which together shall constitute one and the same instrument. 5. Governing Law. THIS RECONVEYANCE SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS. IN WITNESS WHEREOF, the undersigned have caused this Reconveyance of Receivables to be duly executed and delivered by their respective duly authorized officers on the day and year first above written. SRI RECEIVABLES PURCHASE CO., INC. By: Name: Title: BANKERS TRUST (DELAWARE), Trustee By Name: Title: SCHEDULE I LIST OF ACCOUNTS (Deemed Incorporated) EXHIBIT J FORM OF AGREED-UPON PROCEDURES The Servicer and Trustee will engage a firm of nationally recognized independent public accountants (who may also render other services to the Servicer or any of its subsidiaries) to perform certain agreed upon procedures substantially similar to the following: 1) The accountants will obtain the schedules showing the daily roll forward of accounts receivable activity (hereinafter referred to as the daily roll forward schedule) for 3% of the days within the period and compare amounts in excess of $5,000 set forth on the daily roll forward schedule representing charge sales, returns, cash collections, finance charges, credit adjustments and daily ending accounts receivable balances with the corresponding amounts set forth in the accounts receivable subsidiary ledgers and verify the mathematical accuracy of the daily roll forward. 2) For the 3% of the days within the period, the accountants will compare the store and mail payments appearing on the daily roll forwards to a credit entry on the relevant bank statement. 3) The accountants will obtain a listing of new account applications for the period and select 25 approved accounts from the listing and compare the account scoring with the minimum account scoring required for approval as provided by the Servicer. 4) The accountants will obtain a listing of applications denied for 10 days during the period and select five accounts from the listing for each day and compare the account scoring set forth on the listing to the minimum account scoring required for approval as provided by the Servicer. 5) The accountants will report the accounts receivable agings for five cycle closings during the period and determine the aggregate customer balances in the "greater than 240 days" and "current delinquent" categories as reflected on the accounts receivable aging. 6) The accountants will select 20 individual customer statements from the period and (i) recalculate finance charges appearing on the customer statement based upon the appropriate APR and (ii) recompute the minimum payment amount based upon information contained in the standard account application. 7) For 3% of the days within the period, the accountants will compare beginning principal receivables, ending principal receivables, principal collections credit adjustments and finance charge collections, appearing on the Daily Report with the corresponding amounts appearing in the daily roll forward schedule. 8) For 3% of the days within the period, the accountants will recompute the daily allocation of principal and finance charge collections to each series based upon information appearing on the Daily Reports. 9) For 3% of the days within the period, the public accountants will agree the cash transfers indicated on the Daily Reports to entries on the relevant bank statements. 10)For each settlement statement, the accountants will compare the information appearing therein to the information appearing in the corresponding Daily Reports. 11)The public accountants will inquire as to changes in the Transferor's finance charge and minimum payment requirements. EX-4.14 5 0005.txt S-1 Exhibit 4.14 AMENDMENT AND CONSENT This AMENDMENT AND CONSENT, dated as of December 9, 1999 (this "Amendment"), is made by and among SRI RECEIVABLES PURCHASE CO., INC., a corporation organized and existing under the laws of the State of Delaware, as Transferor (the "Transferor"), SPECIALTY RETAILERS, INC., a corporation organized and existing under the laws of Texas, as Servicer (the "Servicer"), and BANKERS TRUST (DELAWARE), a 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 Second Amended and Restated Pooling and Servicing Agreement dated as of November 1, 1999 (the "Agreement"), among the Transferor, the Servicer and the Trustee. Background A. The parties named above are all parties to the Agreement and to a Series 1999-1 Supplement (the "Series Supplement") to the Agreement. Capitalized terms used and not otherwise defined in this Amendment and Consent are used as defined in the Supplement or, if not defined therein, in the Agreement. B. The Transferor wishes to amend the Agreement and the Series Supplement in connection with the issuance of the Policy and to obtain the consent of the Investor Certificateholders and other affected parties to such amendment. Amendment 1. Amendments to Agreement and Supplement. Upon execution of this Amendment and Consent by the Transferor, the Servicer and the Trustee, and acknowledgment of this Amendment and Consent by each party designated on the signature pages hereto: (a) The proviso contained in clause (c) of the definition of "Eligible Receivable" contained in the Agreement is restated in its entirety to read as follows: "provided, however that (A) no more than 6.00% of all Eligible Receivables shall be from Obligors which are non-U.S. Persons, unless the Rating Agency provides its written consent to an increase in such percentage and (B) no more than 3.00% of all Eligible Receivables shall be from obligors with billing addresses in Mexico, unless the Rating Agency provides its written consent to an increase in such percentage"; (b) Section 3.6(a) of the Agreement is amended by amending and restating the penultimate sentence of that Section to read as follows: "On or before the 150th day following the end of each Transferor Fiscal Year, beginning with the Transferor Fiscal Year ending February 5, 1993, the Servicer shall also cause a firm of nationally recognized independent public accountants (who may also render other services to the Servicer or the Transferor) to furnish to the Trustee, any Enhancement Provider and each Rating Agency audited financial statements with respect to Stage Stores, Inc. and its subsidiaries and the Transferor along with a copy of the annual management letter prepared by such auditors pertaining to Stage Stores, Inc. and its subsidiaries."; and (c) the Supplement is amended by adding all of the text marked with double underscore and deleting all scored through text appearing in the conformed copy of the Series Supplement attached as Exhibit A to this Amendment and Consent. 2. Instruction and Confirmation. The Transferor hereby instructs the Trustee to execute the Insurance Agreement (as defined in Exhibit A). The Servicer hereby confirms that the fee and indemnification provisions of the Agreement shall apply to the execution by the Trustee of this Amendment and Consent, the Enhancement Supplement and the Insurance Agreement and all actions taken by the Trustee in connection herewith and therewith. 3. Miscellaneous. THIS AMENDMENT AND CONSENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS. EACH OF THE PARTIES TO THIS AMENDMENT AND CONSENT HEREBY AGREES TO THE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK AND ANY APPELLATE COURT HAVING JURISDICTION TO REVIEW THE JUDGMENTS THEREOF. EACH OF THE PARTIES HEREBY WAIVES ANY OBJECTION BASED ON FORUM NON CONVENIENS AND ANY OBJECTION TO VENUE OF ANY ACTION INSTITUTED HEREUNDER IN ANY OF THE AFOREMENTIONED COURTS AND CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT. IN WITNESS WHEREOF, the Transferor, the Servicer and the Trustee have caused this Amendment and Consent to be duly executed by their respective officers as of the day and year first above written. SRI Receivables Purchase Co., Inc., Transferor By: /s/ Charles M. Sledge Name: Charles M. Sledge Title: SVP Finance & Treasurer Specialty Retailers, Inc., Servicer By: /s/ Charles M. Sledge Name: Charles M. Sledge Title: SVP Finance & Treasurer Bankers Trust (Delaware), not in its individual capacity but solely as Trustee By: /s/ Illegible Name: Illegible Title: AVP By its signature below, each party identified below consents to the amendments to the Agreement and the Series Supplement made by paragraph 1 above and to the terms of the Enhancement Supplement attached as Exhibit B to this Amendment and Consent, and instructs the Trustee to execute this Amendment and Consent and the Enhancement Supplement. Accepted and agreed, Credit Suisse First Boston Corporation By: /s/ Michael Raynes Name: Michael Raynes Title: Director By:_______________________________________ Name:__________________________________ Title:___________________________________ Credit Suisse First Boston, New York Branch, as Facility Agent By: /s/ Alberto Zonca Name: Alberto Zonca Title: Vice President By: /s/ Matthew J. Monaco Name: Matthew J. Monaco Title: Associate Alpine Securitization Corp., as Class A-1 Purchaser and Class B Purchaser By: Credit Suisse First Boston, New York Branch, its Attorney-in-fact By: /s/ Margoth Pilla Name: Margoth Pilla Title: Vice President By: /s/ Laura Lee Name: Laura Lee Title: Associate CDC Financial Products, Inc., as Agent and Class A-2 Purchaser By: /s/ Rarnine Rouhani By: /s/ Louis Pinto Name: Rarnine Rouhani Name:Louis Pinto Title: Managing Director Title: Director Eiffel Funding, LLC By: Global Securitization Services, LLC, as Manager By: /s/ Bernard J. Angelo Name: Bernard J. Angelo Title: Vice President Asset Guaranty Insurance Company By: /s/ Kim Nance-Meier Name: Kim Nance-Meier Title: Vice President EX-4.17 6 0006.txt -1- Exhibit 4.17 SECOND AMENDMENT TO THE AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT THIS SECOND AMENDMENT (this "Amendment") to the Amended and Restated Receivables Purchase Agreement (the "Agreement") dated as of May 30, 1996, by and among SRI Receivables Purchase Co., Inc., a Delaware corporation (the "Purchaser") and the Originators parties thereto (the "Originator") is made and entered into as of November 9, 1999 by and among the Purchaser and the Originator. WHEREAS, Specialty Retailers, Inc. desires to refinance the SRI Receivables Master Trust; WHEREAS, Specialty Retailers, Inc. (as "Servicer"), the Purchaser and Bankers Trust (Delaware) (as "Trustee") have amended and restated the Pooling and Servicing Agreement and have executed the Series 1999-1 Supplement to such Pooling and Servicing Agreement as of the date hereof; WHEREAS, the Originator and the Purchaser desire to bring certain provisions of the Agreement into conformity with certain provisions of the Pooling and Servicing Agreement, by modifying and amending certain terms of the Agreement pursuant to Section 8.01 thereof and in accordance with Section 13.1 of the Pooling and Servicing Agreement in the manner more particularly described herein below; NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged: The Originator and the Purchaser hereby agree as follows: 1. Defined Terms. Capitalized terms used herein but not otherwise defined shall have the meanings set forth in the Agreement, as amended by this Amendment. 2. Eligible Receivable. Clause (c) of the definition of Eligible Receivable shall be amended and restated to read as follows: (c) it is, at the time of its transfer to the Purchaser, the legal, valid and binding obligation of a Person or is guaranteed by a Person who (i) is living, (ii) is not a minor under the laws of his/her state of residence and (iii) is competent to enter into a contract and incur debt (or with respect to obligations from Persons who do not qualify under clauses (ii) or (iii), is so guaranteed by a Person who qualifies under clauses (i), (ii) and (iii)); provided, however that no more than 6.00% of all Eligible Receivables shall be from Obligors which are non- U.S. Persons, unless the Rating Agency provides its written consent to an increase in such percentage; 3. Receivable. The definition of Receivable shall be amended and restated to read as follows: "Receivable" means, with respect to any Obligor, any account, chattel paper or general intangible representing the indebtedness of such Obligor under a Charge Account Agreement arising in an Account from a sale of merchandise, insurance or services, or from a cash advance, and includes the right to payment of any interest or finance charges and other obligations of such Obligor with respect thereto. Each Receivable includes, without limitation, all rights of the Originator under the applicable Charge Account Agreement. Each increase in the Outstanding Balance of any Receivable (other than any such increase resulting from the accrual of interest or finance charges or other fees with respect to such Receivable) shall, for purposes of Article II, constitute a separate Principal Receivable. 4. Recoveries. The definition of Recoveries shall be amended and restated to read as follows: "Recoveries," shall mean, with respect to any period, an amount (which shall not be less than zero) equal to the product of (i) any amounts received during such period ("Defaulted Receivable Receipts") with respect to Receivables in Accounts which previously became Defaulted Accounts and (ii) the fraction resulting from (A) one minus (B) a fraction, the numerator of which is the cumulative aggregate Defaulted Receivable Repurchase Amount paid by the Originators during the preceding six full Monthly Periods pursuant to Section 2.04(c), and the denominator of which is the total principal amount of Receivables which become Defaulted Receivables during such six Monthly Periods. 5. List of Originator s. The List of Originator s on Schedule I of the Agreement shall be amended and restated to replace "Palais Royal, Inc." with "Specialty Retailers, Inc." 6. Effectiveness of Amendments. The parties hereto expressly acknowledge that the effectiveness of this Amendment is conditioned upon the receipt of written confirmation from each Rating Agency to the effect that the original rating of any Series or any class of any Series will not be reduced or withdrawn as a result of this Amendment. Upon receipt by the Trustee of such written confirmation, this Amendment shall be deemed effective on the date hereof. Except as expressly set forth above, all terms of the Agreement shall be and remain in full force and effect and shall constitute the legal, valid and binding and enforceable obligations of the parties thereto. To the extent any terms and conditions in the Agreement shall contradict or be in conflict with any provisions of this Amendment, the provisions of this Amendment shall govern. 7. Governing Law. THIS AMENDMENT AND THE AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER AND THEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS. 8. Counterparts. This Amendment may be executed in separate counterparts each of which shall be an original and all of which taken together shall constitute one and the same agreement. IN WITNESS WHEREOF, the parties thereto have executed this Second Amendment as of November 9, 1999. SPECIALTY RETAILERS, INC., Originator By: /s/ James A. Marcum_________ Its: Chief Financial Officer By: /s/ Charles M. Sledge_________ Its: Treasurer SRI RECEIVABLES PURCHASE CO., INC., Purchaser By: /s/ James A. Marcum__________ Its: Chief Financial Officer EX-4.19 7 0007.txt -1- Exhibit 4.19 FIRST AMENDMENT TO THE RECEIVABLES TRANSFER AGREEMENT THIS FIRST AMENDMENT (this "Amendment") to the Receivables Transfer Agreement (the "Agreement") dated as of August 1, 1998, by and between Specialty Retailers, Inc., a Texas corporation (the "Purchaser" or "SRI") and Granite National Bank, N.A., a national banking association (the "Bank") is made and entered into as of November 9, 1999 by and between the Purchaser and the Bank. WHEREAS, Specialty Retailers, Inc. desires to refinance the SRI Receivables Master Trust; WHEREAS, Specialty Retailers, Inc. (as "Servicer"), SRI Receivables Purchase Co., Inc. (as "Transferor") and Bankers Trust (Delaware) (as "Trustee") have amended and restated the Pooling and Servicing Agreement and have executed the Series 1999- 1 Supplement to such Pooling and Servicing Agreement as of the date hereof; WHEREAS, the Purchaser and the Bank desire to bring certain provisions of the Agreement into conformity with certain provisions of the Pooling and Servicing Agreement, by modifying and amending certain terms of the Agreement pursuant to Section 8.01 thereof and in accordance with Section 13.1 of the Pooling and Servicing Agreement in the manner more particularly described herein below; NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged: The Purchaser and the Bank hereby agree as follows: 1. Defined Terms. Capitalized terms used herein but not otherwise defined shall have the meanings set forth in the Agreement, as amended by this Amendment. 2. Receivable. The definition of Receivable shall be amended and restated to read as follows: "Receivable" means any account, chattel paper or general intangible representing the indebtedness of an Obligor under a Charge Account Agreement arising in an Account from a sale of merchandise, insurance or services or from a cash advance, and includes the right to payment of any interest or finance charges and other obligations of such Obligor with respect thereto. Each Receivable includes, without limitation, all rights of the Bank under the applicable Charge Account Agreement. 3. Effectiveness of Amendments. The parties hereto expressly acknowledge that the effectiveness of this Amendment is conditioned upon the receipt of written confirmation from each Rating Agency to the effect that the original rating of any Series or any class of any Series will not be reduced or withdrawn as a result of this Amendment. Upon receipt by the Trustee of such written confirmation, this Amendment shall be deemed effective on the date hereof. Except as expressly set forth above, all terms of the Agreement shall be and remain in full force and effect and shall constitute the legal, valid and binding and enforceable obligations of the parties thereto. To the extent any terms and conditions in the Agreement shall contradict or be in conflict with any provisions of this Amendment, the provisions of this Amendment shall govern. 4. Governing Law. THIS AMENDMENT AND THE AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER AND THEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS. 5. Counterparts. This Amendment may be executed in separate counterparts each of which shall be an original and all of which taken together shall constitute one and the same agreement. IN WITNESS WHEREOF, the parties thereto have executed this First Amendment as of November 9, 1999. SPECIALTY RETAILERS, INC., Purchaser By: /s/ Charles M. Sledge_______ Its: SVP GRANITE NATIONAL BANK, N.A., The Bank By: /s/ James A. Marcum________ Its: Vice Chairman, CFO EX-4.20 8 0008.txt SRI Receivables Master Trust G-1 Series 1999-1 Supplement Exhibit 4.20 CONFORMED COPY (including amendments as of December 9, 1999) SRI RECEIVABLES PURCHASE CO., INC. Transferor SPECIALTY RETAILERS, INC. Servicer and BANKERS TRUST (DELAWARE) Trustee on behalf of the Series 1999-1 Certificateholders and the Insurer SERIES 1999-1 SUPPLEMENT Dated as of November 9, 1999 to SECOND AMENDED AND RESTATED POOLING AND SERVICING AGREEMENT Dated as of November 1, 1999 Class A Certificates, Series 1999-1 Class B Certificates, Series 1999-1 $28,000,000 Floating Rate Class C Certificates, Series 1999-1 $18,375,000 Floating Rate Class D Certificates, Series 1999-1 $20,125,000 Class E Certificates, Series 1999-1 SRI RECEIVABLES MASTER TRUST TABLE OF CONTENTS Page SECTION 1. Designation 1 SECTION 2. Definitions 2 SECTION 3. Reassignment Terms 31 SECTION 4.Delivery and Payment for the Series 1999-1 Certificates 32 SECTION 5. Form of Delivery of Series 1999-1 Certificates 32 SECTION 6. Article IV of Agreement 35 ARTICLE IVRIGHTS OF CERTIFICATEHOLDERS ANDALLOCATION AND APPLICATION OF COLLECTIONS Section 4.4 Rights of Certificateholders 35 Section 4.5 Collections and Allocation 36 Section 4.6 Determination of Monthly Interest 36 Section 4.7 Determination of Principal Amounts 38 Section 4.8 Application of Funds on Deposit in the Collection Account for the Certificates 40 Section 4.9 Determination of Required Amounts 47 Section 4.10 Daily Applications of Excess Finance Charge Collections and Series Transferor Finance Charge Collections. 48 Section 4.11 Investor Charge-Offs; Reallocation of Principal Collections 49 Section 4.12 Payment of Certificate Interest and Other Amounts 53 Section 4.13 Payment of Certificate Principal 54 Section 4.14 Shared Principal Collections 56 Section 4.15 Allocation of Adjustment Payments 56 Section 4.16 Spread Account 57 Section 4.17 Reserve Account 59 Section 4.18 Accumulation Account 61 Section 4.19 Defeasance 61 SECTION 7. Article V of the Agreement 62 ARTICLE V DISTRIBUTIONS AND REPORTS TO INVESTOR CERTIFICATEHOLDERS Section 5.1 Distributions 62 Section 5.2 Certificateholders' Statement 63 SECTION 8. Series 1999-1 Pay Out Events 65 SECTION 9. Article VI of the Agreement 66 Section 6.15 Additional Invested Amounts 66 SECTION 10. Series 1999-1 Termination 68 SECTION 11. Periodic Finance Charges and Other Fees 68 SECTION 12. Legends; Transfer and Exchange; Restrictions on Transfer of Series 1999-1 Certificates; Tax Treatment 69 SECTION 13. Additional Series 1999-1 Provisions 77 SECTION 14. Ratification of Agreement 82 SECTION 15. Counterparts 82 SECTION 16. GOVERNING LAW 82 SECTION 17. The Trustee 82 SECTION 18. Instructions in Writing 82 SECTION 19. Provision of Information to Certificateholders 83 SECTION 20. Limitation of Liability 83 SECTION 21. Insurer as Third Party Beneficiary 83 SECTION 22. Certain Matters Relating to the Policy and the Insurer 83 EXHIBITS EXHIBIT A Form of Class E Certificate EXHIBIT B Form of Monthly Class D Certificateholders' Statement EXHIBIT C Form of Monthly Certificateholders' Statement EXHIBIT D Form of Confirmation EXHIBIT E Form of Transfer Request EXHIBIT F Form of Investment Letter EXHIBIT G Form of Receipt Letter This SERIES 1999-1 SUPPLEMENT, dated as of November 9, 1999 (this "Series Supplement"), by and among SRI RECEIVABLES PURCHASE CO., INC., a corporation organized and existing under the laws of the State of Delaware, as Transferor (the "Transferor"), SPECIALTY RETAILERS, INC., a corporation organized and existing under the laws of Texas, as Servicer (the "Servicer"), and BANKERS TRUST (DELAWARE), a 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 Second Amended and Restated Pooling and Servicing Agreement dated as of November 1, 1999 (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, one or more Series of Certificates. This Series Supplement shall be a "Supplement" as defined in and for the purposes of the Agreement. Section 4.16 of each of the Amended and Restated Series 1993-1 Supplement and the Amended and Restated Series 1995-1 Supplement, each dated as of May 30, 1996, to the Agreement permits the Servicer, upon instruction from Transferor, to cause the undivided interest in the Trust represented by the Trust's Series 1993-1 Certificates and Series 1995-1 Certificates to be conveyed to one or more Persons (who may be the holders of a new Series of Certificates issued by the Trust). Pursuant to this Series Supplement, the Transferor and the Trustee shall create a new Series of Investor Certificates and shall specify the Principal Terms thereof and cause the undivided interest in the Trust represented by the Trust's Series 1993-1 Certificates and Series 1995-1 Certificates to be conveyed to the holders of the Series 1999-1 Certificates issued pursuant to this Series Supplement. Pursuant to this Series Supplement, the Transferor and the Trustee shall create a new Series of Investor Certificates and shall specify the Principal Terms thereof. SECTION 1. Designation. There is hereby created a Series of Investor Certificates to be issued from time to time pursuant to the Agreement and this Series Supplement to be known generally as the "Series 1999-1 Certificates." The Series 1999-1 Certificates shall be issued in five Classes, which shall be designated generally as the Class A Certificates, Series 1999-1 (the "Class A Certificates"), the Class B Certificates, Series 1999-1 (the "Class B Certificates"), the Floating Rate Class C Certificates, Series 1999-1 (the "Class C Certificates"), the Floating Rate Class D Certificates, Series 1999-1 (the "Class D Certificates") and the Class E Certificates, Series 1999-1 (the "Class E Certificates"). Transferor hereby instructs the Servicer, and the Servicer hereby causes the undivided interest in the Trust represented by the Trust's Series 1993-1 Certificates and Series 1995-1 Certificates to be conveyed to the holders of the Series 1999-1 Certificates issued pursuant to this Series Supplement and evidenced by those Series 1999-1 Certificates and to the Insurer, which shall have the rights and other incidents described herein. The initial Class C Certificates, Class D Certificates and Class E Certificates will be issued on the Closing Date in initial principal amounts equal to the Class C Initial Invested Amount, the initial Class D Initial Invested Amount and the Class E Initial Invested Amount, respectively. The initial Class A Certificates and Class B Certificates are expected to be issued on the Closing Date as Variable Funding Certificates with maximum invested amounts of $217,000,000 and $66,500,000, respectively. Supplemental terms relating to any Class A Certificates and Class B Certificates issued from time to time may be specified in an Issuance Supplement (as defined below). The Trustee may also issue additional Class A Certificates, Class B Certificates, Class C Certificates, Class D Certificates and Class E Certificates from time to time pursuant to Section 6.15. SECTION 2. Definitions. If 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 1999-1 Certificates. 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 1999-1 Certificates and no other Series of Certificates issued by the Trust. "Accumulation Account" is defined in Section 4.18. "Accumulation Account Investment Proceeds" shall mean investment earnings (net of investment losses and expenses) on funds on deposit in any Accumulation Account. "Accumulation Investment Shortfall" shall mean, with respect to each Transfer Date relating to an Accumulation Period, the amount, if any, by which the Accumulation Account Investment Proceeds for such Transfer Date are less than the Covered Amount determined as of such Transfer Date. "Accumulation Period" shall mean any period specified in any Issuance Supplement in which deposits are required to be made to an Accumulation Account to provide for payment of principal on the related Class A Certificates on the related Class A Expected Final Payment Date. "Additional Class A Invested Amount" shall have the meaning specified in Section 6.15 of the Agreement. "Additional Class B Invested Amount" shall have the meaning specified in Section 6.15 of the Agreement. "Additional Class C Invested Amount" shall have the meaning specified in Section 6.15 of the Agreement. "Additional Class D Invested Amount" shall have the meaning specified in Section 6.15 of the Agreement. "Additional Class E Invested Amount" shall have the meaning specified in Section 6.15 of the Agreement. "Additional Interest" shall mean, at any time of determination, the sum of Class A Additional Interest, Class B Additional Interest, Class C Additional Interest and Class D Additional Interest. "Additional Invested Amount" shall have the meaning specified in Section 6.15 of the Agreement. "Adjusted LIBOR" shall mean, for an Interest Accrual Period, the rate obtained by dividing (x) LIBOR as of the related Rate Determination Date by (y) a percentage equal to one minus the stated maximum rate (stated as a decimal) of all reserves required to be maintained against "Eurocurrency Liabilities" as specified in Regulation D of the Board of Governors of the Federal Reserve System (or against any other category of liabilities which includes deposits by reference to which the interest rate on LIBOR is determined or any category of extensions of credit or other assets which includes loans by a non-United States office of any bank to United States residents). "Agreement" shall have the meaning specified in the first paragraph of the recitals hereto. "Amortization Period Commencement Date" shall mean the earliest of (i) the last day of the June 2002 Monthly Period, (ii) the date specified in any Issuance Supplement for the beginning of any amortization period (other than a Partial Amortization Period) for the related Class A Certificates or Class B Certificates or any Accumulation Period and (iii) the Pay Out Commencement Date. "Available Principal Collections" shall mean, as to any Monthly Period, an amount equal to (a) the aggregate Principal Collections deposited into the Principal Account during such Monthly Period pursuant to Section 4.8(c), minus (b) the amount of Reallocated Principal Collections with respect to such Monthly Period which pursuant to Section 4.11(b) are required to fund the Monthly Required Amounts and are withdrawn from the Principal Account for that purpose, plus (c) the amount of Available Series 1999-1 Finance Charge Collections, Excess Finance Charge Collections and Series Transferor Finance Charge Collections that are required to be treated as Available Principal Collections pursuant to Sections 4.8(a)(iv), (v), (vi), (vii), (ix), (x), (xii), (xiii), (xv) and (xvi) and Section 4.9(a) on any Business Day falling in that Monthly Period, plus (d) the amount of Shared Principal Collections from other Series that are allocated to Series 1999-1 for such Monthly Period and funds released from the Equalization Account that are required to be treated as Shared Principal Collections and are allocated to Series 1999-1 for such Monthly Period. "Available Reserve Account Amount" shall mean, as to any Transfer Date during any Accumulation Period, the lesser of (a) the amount on deposit in the Reserve Account on such date (after taking into account any interest and earnings retained in the Reserve Account pursuant to Section 4.17(b) on such date, but before giving effect to any deposit made or to be made pursuant to Section 4.8(a)(xvii) to the Reserve Account on such date) and (b) the Required Reserve Account Amount. "Available Series 1999-1 Finance Charge Collections" shall mean, for any Business Day, the sum of (a) the Floating Allocation Percentage of Finance Charge Collections available in the Collection Account for the first time on that Business Day, (b) investment earnings on amounts on deposit in the Principal Account and (c) any Accumulation Account Investment Proceeds. "Available Spread Account Amount" shall mean, with respect to any Distribution Date, an amount equal to the lesser of (a) the amount on deposit in the Spread Account (exclusive of Investment Earnings) on such date (before giving effect to any deposit to, or withdrawal from, the Spread Account made or to be made with respect to such date) and (b) the Required Spread Account Amount for such Distribution Date. "Base Rate" shall mean, for any Interest Accrual Period, the sum of (i) the weighted average of the Class A Certificate Rates, the Class B Certificate Rates, the Class C Certificate Rate, the Class D Certificate Rate and the Class E Certificate Rate for that Interest Accrual Period, plus (ii) the result of (a) the Facilities Costs (other than interest) which have accrued on the Class A VFCs and the Class B VFCs for that Interest Accrual Period plus the Insurance Premium for that Interest Accrual Period, divided by (b) the daily average Invested Amount for that Interest Accrual Period plus (iii) the Series Servicing Fee Percentage. "Book-Entry Register" shall mean the Certificate Register as maintained in accordance with this Series Supplement with respect to the Class C Certificates and the Class D Certificates. "Business Day" shall have the meaning set forth in the Agreement; provided that (a) no day on which the Insurer is closed (as notified to the Trustee by the Insurer) shall be a Business Day and (b) as used in the definition of "LIBOR Rate" and "Rate Determination Date," "Business Day" shall mean a day for dealings by and between banks in U.S. dollar deposits in the London interbank eurodollar markets. "Carryover Class A Carrying Costs" shall mean, on any Business Day in a Monthly Period, (a) any Class A Carrying Costs with respect to any Distribution Date relating to a prior Monthly Period which have not previously been deposited in the Interest Funding Account or paid on any previous Distribution Date, plus (b) any Class A Additional Interest, plus (c) any Class A Additional Interest relating to a prior Monthly Period which has not previously been deposited in the Interest Funding Account or paid on any previous Distribution Date. "Carryover Class B Carrying Costs" shall mean, on any Business Day in a Monthly Period, (a) any Class B Carrying Costs with respect to any Distribution Date relating to a prior Monthly Period which has not previously been deposited in the Interest Funding Account or paid on any previous Distribution Date, plus (b) any Class B Additional Interest, plus (c) any Class B Additional Interest relating to a prior Monthly Period which has not previously been deposited in the Interest Funding Account or paid on any previous Distribution Date. "Carryover Class C Interest" shall mean, on any Business Day in a Monthly Period, (a) any Class C Interest with respect to any Distribution Date relating to a prior Monthly Period which has not previously been deposited in the Interest Funding Account or paid on any previous Distribution Date, plus (b) any Class C Additional Interest, plus (c) any Class C Additional Interest relating to a prior Monthly Period which has not previously been deposited in the Interest Funding Account or paid on any previous Distribution Date. "Carryover Class D Interest" shall mean, on any Business Day in a Monthly Period, (a) any Class D Interest with respect to any Distribution Date relating to a prior Monthly Period which has not previously been deposited in the Interest Funding Account or paid on any previous Distribution Date, plus (b) any Class D Additional Interest, plus (c) any Class D Additional Interest relating to a prior Monthly Period which has not previously been deposited in the Interest Funding Account or paid on any previous Distribution Date. "Carryover Class E Interest" shall mean zero; provided that, in connection with the transfer of all or part of the Class E Certificates, the Transferor and the Trustee may amend this definition without the consent of any Certificateholder so long as each Rating Agency confirms that doing so will not cause that Rating Agency to downgrade or withdraw its rating on any Class of the Series 1999-1 Certificates. "Class A Additional Interest" shall have the meaning specified in subsection 4.6(a). "Class A Adjusted Invested Amount" shall mean the Class A Invested Amount minus the principal amount on deposit in any Accumulation Account; provided, that the "Class A Adjusted Invested Amount" shall in no event be less than zero. "Class A Carrying Cost Rate" shall mean for any Class A VFCs and any Distribution Date, a rate per annum equal to the sum of Adjusted LIBOR for the related Interest Accrual Period plus 1.00% plus the Class A Program Fee Rate (as defined in the Issuance Supplement). "Class A Carrying Costs" shall mean, for any Distribution Date, an amount equal to the sum of the Class A Interest, any other Senior Facilities Costs with respect to the Class A VFCs and any Carryover Class A Carrying Costs for that Distribution Date. "Class A Carrying Cost Shortfall" shall have the meaning specified in subsection 4.6(a). "Class A Carrying Cost Target" shall mean, for any Business Day falling in any Monthly Period, an amount equal to the sum of the following amounts calculated with respect to the Class A Certificates: (a) as to any Class A VFCs, the product of (i) the Class A Carrying Cost Rate for the most recent Distribution Date, (ii) the expected daily average Class A Invested Amount allocable to those Class A VFCs for the Interest Accrual Period relating to the Distribution Date relating to such Monthly Period and (iii) a fraction the numerator of which is the number of days in such Interest Accrual Period and the denominator of which is 360; (b) as to any other Class A Certificates, (i) if such Business Day falls prior to the Rate Determination Date for the related Distribution Date, an amount equal to 125% of the sum of the Class A Interest and any Carryover Class A Interest on those Class A Certificates for the Distribution Date relating to the prior Monthly Period and (ii) if such Business Day falls on or after the Rate Determination Date for the related Distribution Date, an amount equal to the sum of the Class A Interest and any Carryover Class A Interest on those Class A Certificates for that Distribution Date. "Class A Certificateholder" shall mean any Person in whose name a Class A Certificate is registered in the Certificate Register. "Class A Certificate Rate" shall mean, for all or any portion of the Class A Certificates outstanding from time to time, the rate set forth in the applicable Issuance Supplement. "Class A Certificates" shall mean any of the certificates from time to time executed by the Transferor and authenticated by or on behalf of the Trustee, as part of Series 1999-1 that are designated as Class A Certificates in the related Issuance Supplement, and shall include Class A VFCs. "Class A Expected Final Payment Date" shall, with respect to the Class A Certificates or any portion thereof, be defined in the applicable Issuance Supplement, but shall not be later than the Class A/B VFC Expected Final Payment Date. "Class A Fixed Allocation Percentage" shall mean, for any Business Day following the Revolving Period, the percentage equivalent of a fraction, the numerator of which is the Class A Invested Amount at the end of the last day of the Revolving Period and the denominator of which is the greater of (a) the sum of the aggregate amount of Principal Receivables in the Trust and the amount on deposit in the Equalization Account at the end of the last day of the Revolving Period and (b) the sum of the numerators used to calculate the allocation percentages with respect to Principal Collections for all Classes of all Series on such Business Day; provided that if Series 1999-1 is paired with a Paired Series and a pay out event occurs with respect to such Paired Series during the Scheduled Amortization Period, the Transferor may, by written notice delivered to the Trustee and the Servicer, designate a different numerator (provided that such numerator is not less than the Class A Invested Amount (less the balance on deposit in any Accumulation Account and the Principal Account that is not subject to being treated as Reallocated Principal Collections or Shared Principal Collections) as of the last day of the revolving period for such Paired Series). A Class A Fixed Allocation Percentage (as defined in an applicable Issuance Supplement) may also apply during a Partial Amortization Period to the extent provided in the applicable Issuance Supplement. "Class A Floating Allocation Percentage" shall mean, for any Monthly Period, the percentage equivalent of a fraction, the numerator of which is the Class A Invested Amount (or, during an Accumulation Period, the Class A Adjusted Invested Amount) at the end of the previous Monthly Period and the denominator of which is the greater of (a) the sum of the amount of Principal Receivables in the Trust and the amounts on deposit in the Equalization Account and (b) the sum of the numerators used to calculate the allocation percentages with respect to Principal Collections, Finance Charge Collections, Default Amounts or Uncovered Dilution Amounts, as applicable, for all Classes of all Series, in the case of each of clause (a) and clause (b) determined as of the end of the most recent Monthly Period; provided, that if one or more Reset Dates occur in a Monthly Period, the Class A Floating Allocation Percentage for the portion of the Monthly Period falling after each such Reset Date (the "subject Reset Date") and prior to or on any subsequent Reset Date will be determined using a denominator equal to the greater of the amounts specified in clauses (a) and (b) above determined as of the close of business on the subject Reset Date. "Class A Initial Invested Amount" shall mean the aggregate initial principal amount of the Class A Certificates, which will be specified in the Issuance Supplement for the initial Class A Certificates. "Class A Interest" shall have the meaning specified in subsection 4.6(a). "Class A Invested Amount" shall mean, for any Business Day, an amount equal to (a) the Class A Initial Invested Amount, plus (b) the initial principal amount of any Additional Class A Invested Amounts issued through the end of the preceding Business Day pursuant to Section 6.15, minus (c) the aggregate amount of principal payments made to Class A Certificateholders prior to such Business Day, minus (d) the aggregate amount of Class A Investor Charge-Offs for all prior Business Days, plus (e) the aggregate amount allocated with respect to Class A Investor Charge-Offs and available on all prior Business Days pursuant to subsection 4.8(a)(v), for the purpose of reinstating amounts reduced pursuant to the foregoing clause (d). "Class A Investor Charge-Offs" shall mean, on any Business Day, any reduction in the Class A Invested Amount made pursuant to Section 4.11(a). "Class A Investor Default Amount" shall mean, for any Business Day falling in a Monthly Period, the product of (a) the Default Amount for such Business Day and (b) the Class A Floating Allocation Percentage for such Monthly Period. "Class A Principal" shall mean the principal distributable in respect of the Class A Certificates as calculated in accordance with subsection 4.7(a). "Class A Reduction Amount" shall have the meaning specified in subsection 4.11(a). "Class A Servicing Fee Share" shall have the meaning specified in subsection 4.9(b). "Class A Uncovered Dilution Amount" shall mean, for any Business Day falling in a Monthly Period, an amount equal to the product of (a) the Uncovered Dilution Amount for such day and (b) the Class A Floating Allocation Percentage for such Monthly Period. "Class A VFCs" shall mean any Class A Certificates that may from time to time be issued as part of Series 1999-1 that are Variable Funding Certificates. "Class A/B VFC Expected Final Payment Date" shall mean the August 2002 Distribution Date. "Class B Additional Interest" shall have the meaning specified in subsection 4.6(b). "Class B Carrying Cost Rate" shall mean for any Class B VFCs and any Distribution Date, a rate per annum equal to the sum of Adjusted LIBOR for the related Interest Accrual Period plus 1.00% plus the Class B Program Fee Rate (as defined in the Issuance Supplement). "Class B Carrying Costs" shall mean, for any Distribution Date, an amount equal to the sum of the Class B Interest, any other Senior Facilities Costs with respect to the Class B VFCs and any Carryover Class B Carrying Costs for that Distribution Date. "Class B Carrying Cost Shortfall" shall have the meaning specified in subsection 4.6(b). "Class B Carrying Cost Target" shall mean, for any Business Day falling in any Monthly Period, an amount equal to the sum of the following amounts calculated with respect to the Class B Certificates: (a) as to any Class B VFCs, the product of (i) the Class B Carrying Cost Rate for the most recent Distribution Date, (ii) the expected daily average Class B Invested Amount allocable to those Class B VFCs for the Interest Accrual Period relating to the Distribution Date relating to such Monthly Period and (iii) a fraction the numerator of which is the number of days in such Interest Accrual Period and the denominator of which is 360; (b) as to any other Class B Certificates, (i) if such Business Day falls prior to the Rate Determination Date for the related Distribution Date, an amount equal to 125% of the sum of the Class B Interest and any Carryover Class B Interest on those Class B Certificates for the Distribution Date relating to the prior Monthly Period and (ii) if such Business Day falls on or after the Rate Determination Date for the related Distribution Date, an amount equal to the sum of the Class B Interest and any Carryover Class B Interest on those Class B Certificates for that Distribution Date. "Class B Certificateholder" shall mean any Person in whose name a Class B Certificate is registered in the Certificate Register. "Class B Certificate Rate" shall mean, for all or any portion of the Class B Certificates outstanding from time to time, the rate set forth in the applicable Issuance Supplement. "Class B Certificates" shall mean any of the certificates from time to time executed by the Transferor and authenticated by or on behalf of the Trustee, as part of Series 1999-1 that are designated as Class B Certificates in the related Issuance Supplement, and shall include Class B VFCs. "Class B Expected Final Payment Date" shall, with respect to the Class B Certificates or any portion thereof, be defined in the applicable Issuance Supplement, but shall not be later than the Class A/B VFC Expected Final Payment Date. "Class B Fixed Allocation Percentage" shall mean, for any Business Day following the Revolving Period, the percentage equivalent of a fraction, the numerator of which is the Class B Invested Amount at the end of the last day of the Revolving Period and the denominator of which is the greater of (a) the sum of the aggregate amount of Principal Receivables in the Trust and the amount on deposit in the Equalization Account at the end of the last day of the Revolving Period and (b) the sum of the numerators used to calculate the allocation percentages with respect to Principal Collections for all Classes of all Series on such Business Day; provided that if Series 1999-1 is paired with a Paired Series and a pay out event occurs with respect to such Paired Series during the Scheduled Amortization Period, the Transferor may, by written notice delivered to the Trustee and the Servicer, designate a different numerator (provided that such numerator is not less than the Class B Invested Amount (less, if the Class A Fixed Allocation Percentage is zero, the balance on deposit in the Principal Account that is not subject to being treated as Reallocated Principal Collections or Shared Principal Collections, to the extent not subtracted in reducing the Class A Fixed Allocation Percentage to zero) as of the last day of the revolving period for such Paired Series). A Class B Fixed Allocation Percentage (as defined in an applicable Issuance Supplement) may also apply during a Partial Amortization Period to the extent provided in the applicable Issuance Supplement. "Class B Floating Allocation Percentage" shall mean, for any Monthly Period, the percentage equivalent of a fraction, the numerator of which is the Class B Invested Amount at the end of the previous Monthly Period and the denominator of which is the greater of (a) the sum of the amount of Principal Receivables in the Trust and the amounts on deposit in the Equalization Account and (b) the sum of the numerators used to calculate the allocation percentages with respect to Principal Collections, Finance Charge Collections, Default Amounts or Uncovered Dilution Amounts, as applicable, for all Classes of all Series, in the case of each of clause (a) and clause (b), determined as of the end of the most recent Monthly Period; provided, that if one or more Reset Dates occur in a Monthly Period, the Class B Floating Allocation Percentage for the portion of the Monthly Period falling after each such Reset Date (the "subject Reset Date") and prior to or on any subsequent Reset Date will be determined using a denominator equal to the greater of the amounts specified in clauses (a) and (b) above determined as of the close of business on the subject Reset Date. "Class B Initial Invested Amount" shall mean the aggregate initial principal amount of the Class B Certificates, which will be specified in the Issuance Supplement for the initial Class B Certificates. "Class B Interest" shall have the meaning specified in subsection 4.6(b). "Class B Invested Amount" shall mean, for any Business Day, an amount equal to (a) the Class B Initial Invested Amount, plus (b) the initial principal amount of any Additional Class B Invested Amounts issued through the end of the preceding Business Day pursuant to Section 6.15, minus (c) the aggregate amount of principal payments made to Class B Certificateholders prior to such Business Day, minus (d) the aggregate amount of Class B Investor Charge-Offs for all prior Business Days, plus (e) the aggregate amount allocated with respect to Class B Investor Charge-Offs and available on all prior Business Days pursuant to subsection 4.8(a)(vii) for the purpose of reinstating amounts reduced pursuant to the foregoing clause (d). "Class B Investor Charge-Offs" shall mean, on any Business Day, any reduction in the Class B Invested Amount made pursuant to Section 4.11. "Class B Investor Default Amount" shall mean, for any Business Day falling in a Monthly Period, the product of (a) the Default Amount for such Business Day and (b) the Class B Floating Allocation Percentage for such Monthly Period. "Class B Principal" shall mean the principal distributable in respect of the Class B Certificates as calculated in accordance with subsection 4.7(b). "Class B Principal Payment Commencement Date" shall mean, for all or any portion of the Class B Certificates, the earlier of (a) the date specified in the applicable Issuance Supplement and (b) the Distribution Date following a sale or repurchase of the Receivables as set forth in Section 2.4(e), 9.2, 10.2(a), 12.1 or 12.2 of the Agreement and Section 3 of this Series Supplement. "Class B Reduction Amount" shall have the meaning specified in subsection 4.11(a). "Class B Servicing Fee Share" shall have the meaning specified in subsection 4.9(c). "Class B Uncovered Dilution Amount" shall mean, for any Business Day falling in a Monthly Period, an amount equal to the product of (a) the Uncovered Dilution Amount for such day and (b)the Class B Floating Allocation Percentage for such Monthly Period. "Class B VFCs" shall mean any Class B Certificates that may from time to time be issued as part of Series 1999-1 that are Variable Funding Certificates. "Class C Additional Interest" shall have the meaning specified in subsection 4.6(c). "Class C Certificate Assignment" shall have the meaning specified in Section 12(h). "Class C Certificateholder" shall mean any Person in whose name a Class C Certificate is registered in the Certificate Register. "Class C Certificate Rate" shall mean, with respect to the Class C Certificates, 8.40375% per annum with respect to the initial Interest Accrual Period and, with respect to each subsequent Interest Accrual Period a per annum rate of 3.00% in excess of LIBOR prevailing on the related Rate Determination Date; provided however that, notwithstanding anything herein to the contrary (including Section 13.1 of the Agreement), upon the written agreement of the Transferor and the Class C Certificateholders, the Class C Certificate Rate may be reduced without further action. "Class C Certificates" shall mean any of the class of certificates with that designation issued pursuant to this Series Supplement. "Class C Expected Final Payment Date" shall mean the September 2002 Distribution Date. "Class C Fixed Allocation Percentage" shall mean, for any Business Day following the Revolving Period, the percentage equivalent of a fraction, the numerator of which is the Class C 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 in the Trust and the amount on deposit in the Equalization Account at the end of the last day of the Revolving Period and (b) the sum of the numerators used to calculate the allocation percentages with respect to Principal Collections for all Classes of all Series on such Business Day; provided that if Series 1999-1 is paired with a Paired Series and a pay out event occurs with respect to such Paired Series during the Scheduled Amortization Period, the Transferor may, by written notice delivered to the Trustee and the Servicer, designate a different numerator (provided that such numerator is not less than the Class C Invested Amount (less, if the Class B Fixed Allocation Percentage is zero, the balance on deposit in the Principal Account that is not subject to being treated as Reallocated Principal Collections or Shared Principal Collections, to the extent not subtracted in reducing the Class B Fixed Allocation Percentage or the Class A Fixed Allocation Percentage to zero) as of the last day of the revolving period for such Paired Series). A Class C Fixed Allocation Percentage (as defined in an applicable Issuance Supplement) may also apply during a Partial Amortization Period to the extent provided in the applicable Issuance Supplement. "Class C Floating Allocation Percentage" shall mean, for any Monthly Period, the percentage equivalent of a fraction, the numerator of which is the Class C Invested Amount at the end of the previous Monthly Period and the denominator of which is the greater of (a) the sum of the amount of Principal Receivables in the Trust and the amounts on deposit in the Equalization Account and (b) the sum of the numerators used to calculate the allocation percentages with respect to Principal Collections, Finance Charge Collections, Default Amounts or Uncovered Dilution Amounts, as applicable, for all Classes of all Series, in the case of each of clause (a) and clause (b), determined as of the end of the most recent Monthly Period; provided, that if one or more Reset Dates occur in a Monthly Period, the Class C Floating Allocation Percentage for the portion of the Monthly Period falling after each such Reset Date (the "subject Reset Date") and prior to or on any subsequent Reset Date will be determined using a denominator equal to the greater of the amounts specified in clauses (a) and (b) above determined as of the close of business on the subject Reset Date. "Class C Initial Invested Amount" shall mean the aggregate initial principal amount of the Class C Certificates, which is $28,000,000. "Class C Interest" shall have the meaning specified in subsection 4.6(c). "Class C Interest Shortfall" shall have the meaning specified in subsection 4.6(c). "Class C Invested Amount" shall mean, for any Business Day, an amount equal to (a) the Class C Initial Invested Amount, plus (b) the initial principal amount of any Additional Class C Invested Amounts issued through the end of the preceding Business Day pursuant to Section 6.15, minus (c) the aggregate amount of principal payments made to Class C Certificateholders prior to such Business Day, minus (d) the aggregate amount of Class C Investor Charge-Offs for all prior Business Days, and plus (e) the aggregate amount allocated with respect to Class C Investor Charge-Offs and available on all prior Business Days pursuant to subsection 4.8(a)(x), for the purpose of reinstating amounts reduced pursuant to the foregoing clause (d). "Class C Investor Charge-Offs" shall mean, on any Business Day, any reduction in the Class C Invested Amount made pursuant to Section 4.11. "Class C Investor Default Amount" shall mean, for any Business Day falling in a Monthly Period, the product of (a) the Default Amount for such Business Day and (b) the Class C Floating Allocation Percentage for such Monthly Period. "Class C Principal" shall mean the principal distributable in respect of the Class C Certificates as calculated in accordance with subsection 4.7(c). "Class C Principal Payment Commencement Date" shall mean the earliest of (a) the Distribution Date in the Scheduled Amortization Period after the one on which the Class B Invested Amount is paid in full, (b) the Distribution Date in a Rapid Amortization Period on which the Class B Invested Amount is paid in full or, if there are no Principal Collections allocable to the Series 1999-1 Investor Certificates remaining after payments have been made to the Class B Certificates on such Distribution Date, the Distribution Date following the Distribution Date on which the Class B Invested Amount is paid in full and (c) the Distribution Date following a sale or repurchase of the Receivables as set forth in Sections 2.4(e), 9.2, 10.2(a), 12.1 or 12.2 of the Agreement and Section 3 of this Series Supplement. "Class C Reduction Amount" shall have the meaning specified in subsection 4.11(a). "Class C Servicing Fee Share" shall have the meaning specified in subsection 4.9(d). "Class C Uncovered Dilution Amount" shall mean, for any Business Day falling in a Monthly Period, an amount equal to the product of (a) the Uncovered Dilution Amount for such day and (b) the Class C Floating Allocation Percentage for such Monthly Period. "Class D Additional Interest" shall have the meaning specified in subsection 4.6(d). "Class D Certificate Assignment" shall have the meaning specified in Section 12(h). "Class D Certificateholder" shall mean any Person in whose name a Class D Certificate is registered in the Certificate Register. "Class D Certificate Rate" shall mean, with respect to the Class D Certificates, 12.40375% per annum with respect to the initial Interest Accrual Period and, with respect to each subsequent Interest Accrual Period a per annum rate of 3.20% in excess of LIBOR prevailing on the related Rate Determination Date; provided however that, notwithstanding anything herein to the contrary (including Section 13.1 of the Agreement), upon the written agreement of the Transferor and the Class D Certificateholders, the Class D Certificate Rate may be reduced without further action. "Class D Certificates" shall mean any of the class of certificates with that designation issued pursuant to this Series Supplement. "Class D Expected Final Payment Date" shall mean the October 2002 Distribution Date. "Class D Fixed Allocation Percentage" shall mean, for any Business Day following the Revolving Period, 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 aggregate amount of Principal Receivables in the Trust and the amount on deposit in the Equalization Account as of the end of the last day of the Revolving Period and (b) the sum of the numerators used to calculate the allocation percentages with respect to Principal Collections for all Classes of all Series on such Business Day; provided that if Series 1999-1 is paired with a Paired Series and a pay out event occurs with respect to such Paired Series during the Scheduled Amortization Period, the Transferor may, by written notice delivered to the Trustee and the Servicer, designate a different numerator (provided that such numerator is not less than the Class D Invested Amount (less, if the Class C Fixed Allocation Percentage is zero, the balance on deposit in the Principal Account that is not subject to being treated as Reallocated Principal Collections or Shared Principal Collections, to the extent not subtracted in reducing the Class C Fixed Allocation Percentage, the Class B Fixed Allocation Percentage or the Class A Fixed Allocation Percentage to zero) as of the last day of the revolving period for such Paired Series). A Class D Fixed Allocation Percentage (as defined in an applicable Issuance Supplement) may also apply during a Partial Amortization Period to the extent provided in the applicable Issuance Supplement. "Class D Floating Allocation Percentage" shall mean, for any Monthly Period, the percentage equivalent of a fraction, the numerator of which is the Class D Invested Amount at the end of the previous Monthly Period and the denominator of which is the greater of (a) the sum of the amount of Principal Receivables in the Trust and the amounts on deposit in the Equalization Account and (b) the sum of the numerators used to calculate the allocation percentages with respect to Principal Collections, Finance Charge Collections, Default Amounts or Uncovered Dilution Amounts, as applicable, for all Classes of all Series, in the case of each of clause (a) and clause (b), determined as of the end of the most recent Monthly Period; provided, that if one or more Reset Dates occur in a Monthly Period, the Class D Floating Allocation Percentage for the portion of the Monthly Period falling after each such Reset Date (the "subject Reset Date") and prior to or on any subsequent Reset Date will be determined using a denominator equal to the greater of the amounts specified in clauses (a) and (b) above determined as of the close of business on the subject Reset Date. "Class D Initial Invested Amount" shall mean the aggregate initial principal amount of the Class D Certificates, which is $18,375,000. "Class D Interest" shall have the meaning specified in subsection 4.6(d). "Class D Interest Shortfall" shall have the meaning specified in subsection 4.6(d). "Class D Invested Amount" shall mean, for any Business Day, an amount equal to (a) the Class D Initial Invested Amount, plus (b) the initial principal amount of any Additional Class D Invested Amounts issued through the end of the preceding Business Day pursuant to Section 6.15, minus (c) the aggregate amount of principal payments made to Class D Certificateholders prior to such Business Day (excluding principal payments made pursuant to Section 4.16), minus (d) the aggregate amount of Class D Investor Charge-Offs for all prior Business Days, and plus (e) the aggregate amount allocated with respect to Class D Investor Charge-Offs and available on all prior Business Days pursuant to subsection 4.8(a)(xiii), for the purpose of reinstating amounts reduced pursuant to the foregoing clause (d). "Class D Investor Charge-Offs" shall mean, on any Business Day, any reduction in the Class D Invested Amount made pursuant to Section 4.11. "Class D Investor Default Amount" shall mean, for any Business Day falling in a Monthly Period, the product of (a) the Default Amount for such Business Day and (b) the Class D Floating Allocation Percentage for such Monthly Period. "Class D Investor Principal Balance" shall mean, with respect to any date of determination, an amount equal to (a) the Class D Initial Invested Amount, plus (b) the aggregate principal amount of any Additional Class D Invested Amounts issued through the end of the preceding Business Day pursuant to Section 6.15, minus (c) the aggregate amount of principal payments made to the Class D Certificateholders prior to such date (including payments in respect of principal made to the Class D Certificateholders from the proceeds of any draw on the Spread Account pursuant to Section 4.16 or from the Policy). "Class D Principal" shall mean the principal distributable in respect of the Class D Certificates as calculated in accordance with subsection 4.7(d). "Class D Principal Payment Commencement Date" shall mean the earliest of (a) the Distribution Date in the Scheduled Amortization Period after the one on which the Class C Invested Amount is paid in full, (b) the Distribution Date in a Rapid Amortization Period on which the Class C Invested Amount is paid in full or, if there are no Principal Collections allocable to the Series 1999-1 Investor Certificates remaining after payments have been made to the Class C Certificates on such Distribution Date, the Distribution Date following the Distribution Date on which the Class C Invested Amount is paid in full and (c) the Distribution Date following a sale or repurchase of the Receivables as set forth in Sections 2.4(e), 9.2, 10.2(a), 12.1 or 12.2 of the Agreement and Section 3 of this Series Supplement. "Class D Reduction Amount" shall have the meaning specified in subsection 4.11(a). "Class D Release Date" shall mean the date that is the earlier of (a) the date on which the Class A Invested Amount, the Class B Invested Amount and the Class C Invested Amount have been reduced to zero (including the date of the application of liquidation proceeds or termination of the interest of Series 1999-1 in the Trust pursuant to Sections 2.4(e), 9.2, 12.1 or 12.2 of the Agreement and Section 3 of this Series Supplement) and (b) the Series 1999-1 Termination Date. "Class D Servicing Fee Share" shall have the meaning specified in subsection 4.9(e). "Class D Uncovered Dilution Amount" shall mean, for any Business Day, an amount equal to the product of (a) the Uncovered Dilution Amount for such day and (b) the Class D Floating Allocation Percentage for such day. "Class E Certificateholder" shall mean any Person in whose name a Class E Certificate is registered in the Certificate Register. "Class E Certificate Rate" shall mean 0.00% per annum, provided that in connection with the transfer of all or part of the Class E Certificates, the Transferor may designate an interest rate for all, or the transferred portion, of the Class E Certificates so long as each Rating Agency confirms that doing so will not cause that Rating Agency to downgrade or withdraw its rating on any Class of the Series 1999-1 Certificates. "Class E Certificates" shall mean any of the certificates executed by the Transferor and authenticated by or on behalf of the Trustee, substantially in the form of Exhibit A-3. "Class E Fixed Allocation Percentage" shall mean, for any Business Day following the Revolving Period, the percentage equivalent of a fraction, the numerator of which is the Class E 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 in the Trust and the amount on deposit in the Equalization Account at the end of the last day of the Revolving Period and (b) the sum of the numerators used to calculate the allocation percentages with respect to Principal Collections for all Classes of all Series on such Business Day; provided that if Series 1999-1 is paired with a Paired Series and a pay out event occurs with respect to such Paired Series during the Scheduled Amortization Period, the Transferor may, by written notice delivered to the Trustee and the Servicer, designate a different numerator (provided that such numerator is not less than the Class E Invested Amount (less, if the Class D Fixed Allocation Percentage is zero, the balance on deposit in the Principal Account that is not subject to being treated as Reallocated Principal Collections or Shared Principal Collections, to the extent not subtracted in reducing the Class D Fixed Allocation Percentage, the Class C Fixed Allocation Percentage, the Class B Fixed Allocation Percentage or the Class A Fixed Allocation Percentage to zero) as of the last day of the revolving period for such Paired Series). A Class E Fixed Allocation Percentage (as defined in an applicable Issuance Supplement) may also apply during a Partial Amortization Period to the extent provided in the applicable Issuance Supplement. "Class E Floating Allocation Percentage" shall mean, for any Monthly Period, the percentage equivalent of a fraction, the numerator of which is the Class E Invested Amount at the end of the previous Monthly Period and the denominator of which is the greater of (a) the sum of the amount of Principal Receivables in the Trust and the amounts on deposit in the Equalization Account and (b) the sum of the numerators used to calculate the allocation percentages with respect to Principal Collections, Finance Charge Collections, Default Amounts or Uncovered Dilution Amounts, as applicable, for all Classes of all Series, in the case of each of clause (a) and clause (b), determined as of the end of the most recent Monthly Period; provided, that if one or more Reset Dates occur in a Monthly Period, the Class E Floating Allocation Percentage for the portion of the Monthly Period falling after each such Reset Date (the "subject Reset Date") and prior to or on any subsequent Reset Date will be determined using a denominator equal to the greater of the amounts specified in clauses (a) and (b) above determined as of the close of business on the subject Reset Date. "Class E Initial Invested Amount" shall mean the aggregate initial principal amount of the Class E Certificates, which is $20,125,000. "Class E Invested Amount" shall mean, for any Business Day, an amount equal to (a) the Class E Initial Invested Amount, plus (b) the initial principal amount of any Additional Class E Invested Amounts issued through the end of the preceding Business Day pursuant to Section 6.15, minus (c) the aggregate amount of principal payments made to Class E Certificateholders prior to such Business Day, minus (d) the aggregate amount of Class E Investor Charge-Offs for all prior Business Days and plus (e) the aggregate amount allocated with respect to Class E Investor Charge-Offs and available on all prior Business Days pursuant to subsection 4.8(a)(xvi), for the purpose of reinstating amounts reduced pursuant to the foregoing clause (d). "Class E Investor Charge-Offs" shall mean, on any Business Day, any reduction in the Class E Invested Amount made pursuant to Section 4.11. "Class E Investor Default Amount" shall mean, for any Business Day falling in a Monthly Period, the product of (a) the Default Amount for such Business Day and (b) the Class E Floating Allocation Percentage for such Monthly Period. "Class E Principal" shall mean the principal distributable in respect of the Class E Certificates as calculated in accordance with subsection 4.7(e). "Class E Principal Payment Commencement Date" shall mean the Distribution Date on which the Class D Invested Amount is paid in full or, if there are no Principal Collections allocable to the Series 1999-1 Investor Certificates remaining after payments have been made to the Class D Certificates on such Distribution Date, the Distribution Date following the Distribution Date on which the Class D Invested Amount is paid in full. "Class E Reduction Amount" shall have the meaning specified in subsection 4.11(a). "Class E Uncovered Dilution Amount" shall mean, for any Business Day falling in a Monthly Period, an amount equal to the product of (a) the Uncovered Dilution Amount for such day and (b) the Class E Floating Allocation Percentage for such Monthly Period. "Covered Amount" shall mean an amount determined as of each Transfer Date with respect to any Interest Accrual Period relating to an Accumulation Period as the product of (a) (i) a fraction the numerator of which is the number of days in the related Interest Accrual Period and the denominator of which is 360, times (ii) the applicable Class A Certificate Rate for that Interest Accrual Period, and (b) the balance of the Accumulation Account as of the Determination Date preceding such Transfer Date. "Daily Required Amount" shall have the meaning specified in Section 4.9(a). "Deficiency Amount" shall mean (a) for any Distribution Date other than the Scheduled Series 1999-1 Termination Date, the excess of the sum of the Class D Interest and the Carryover Class D Interest, if any, for such Distribution Date over any amounts with respect thereto previously deposited into the Interest Funding Account on any prior Business Day during the related Monthly Period and (b) for the Scheduled Series 1999-1 Termination Date, the sum of (i) the excess of the sum of the Class D Interest and the Carryover Class D Interest, if any, for such Distribution Date over any amounts with respect thereto previously deposited into the Interest Funding Account on any prior Business Day during the related Monthly Period and (ii) the excess of the Class D Investor Principal Balance over the funds on deposit in the Principal Account that are available to cover such amount, in each case, after giving effect to the application of any amounts on deposit in the Spread Account. "Determination Date" shall mean the second Business Day prior to each Distribution Date. "Distribution Date" shall mean each Monthly Distribution Date, provided that with respect to the Class A Certificates and the Class B Certificates, (i) the initial regular Distribution Date shall be the December 1999 Distribution Date and (ii) additional Distribution Dates may be specified in the applicable Issuance Supplement. "Enhancement" shall mean, with respect to the Class A Certificates, the subordination of the Class B Invested Amount, the Class C Invested Amount, the Class D Invested Amount, and the Class E Invested Amount; with respect to the Class B Certificates, the subordination of the Class C Invested Amount, the Class D Invested Amount, and the Class E Invested Amount; with respect to the Class C Certificates, the subordination of the Class D Invested Amount and the Class E Invested Amount; with respect to the Class D Certificates, the subordination of the Class E Invested Amount and the Spread Account and, after the Enhancement Date, the Policy. "Enhancement Date" shall mean December 9, 1999. "Enhancement Percentage" shall mean, for any Class of Certificates and any Business Day, the percentage equivalent of a fraction (a) the numerator of which is the sum of the invested amounts of each Class of Certificates junior to that Class and (b) the denominator of which is the Invested Amount. "Enhancement Supplement" shall mean the supplement to this Series Supplement dated as of December 8, 1999 and entered into among the Transferor, the Servicer, the Trustee and the Insurer in connection with the issuance of the Policy. "Excess Finance Charge Collections" shall mean, for any Business Day, as the context requires, either (a) the amount described in subsection 4.8(a)(xxii) allocated to the Series 1999-1 Certificates but available to cover shortfalls in amounts paid from Finance Charge Collections for other Series, if any, or (b) 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 1999-1 Certificates. "Excess Spread Percentage" shall mean, with respect to any Distribution Date, the amount, if any, by which the Portfolio Yield for the preceding Monthly Period exceeds the Base Rate for the preceding Interest Accrual Period, provided that (a) the Excess Spread Percentage for the October 1999 Distribution Date shall equal 8.237%, (b) the Excess Spread Percentage for the November 1999 Distribution Date shall be determined on a pro forma basis using the relevant Portfolio Yield for the Series 1997-1 Certificates and a Base Rate equal to 8.168% and (c) the Excess Spread Percentage for the December 1999 Distribution Date shall be determined on a pro forma basis, assuming that the Series 1999-1 Certificates were issued on November 1, 1999, using a Base Rate equal to LIBOR plus the applicable program fee rates (determined by reference to the applicable fee letters relating to the Class A VFCs and the Class B VFCs). "Facilities Costs" shall mean for any Interest Accrual Period the related Senior Facilities Costs, Mezzanine Facilities Costs and Junior Facilities costs. "Fixed Allocation Percentage" shall mean, for any Business Day following the Revolving Period, the percentage equivalent of a fraction, the numerator of which is the Invested Amount at the end of the last day of the Revolving Period and the denominator of which is the greater of (a) the sum of the aggregate amount of Principal Receivables in the Trust and the amount on deposit in the Equalization Account as of the end of the last day of the Revolving Period and (b) the sum of the numerators used to calculate the allocation percentages with respect to Principal Collections for all Series on such Business Day; provided, however, if, as of the Determination Date falling in the Monthly Period after the Monthly Period in which sufficient funds are deposited into the Accumulation Account and the Principal Account to reduce the Class A Invested Amount and, if the Class B Expected Final Payment Date is the same as the Class A Expected Final Payment Date, the Class B Invested Amount to zero on the related Distribution Date (i) the Rapid Amortization Period has not commenced and (ii) there have not been any Investor Charge-Offs with respect to any Class of Series 1999-1 Certificates during the preceding twelve Monthly Periods, then for each Monthly Period after the Monthly Period in which sufficient funds are deposited into the Principal Account and the Accumulation Account to reduce the Class A Invested Amount and, if the Class B Expected Final Payment Date is the same as the Class A Expected Final Payment Date, the Class B Invested Amount to zero on the related Distribution Date, the numerator for determining the Fixed Allocation Percentage shall be reduced by an amount equal to the Class A Invested Amount at the end of the Revolving Period; provided further that if Series 1999-1 is paired with a Paired Series and a pay out event occurs with respect to such Paired Series during the Scheduled Amortization Period, the Transferor may, by written notice delivered to the Trustee, the Insurer and the Servicer, designate a different numerator (provided that such numerator is not less than the Invested Amount (less the balance on deposit in any Accumulation Account and the Principal Account that is not subject to being treated as Reallocated Principal Collections or Shared Principal Collections) as of the last day of the revolving period for such Paired Series). A Fixed Allocation Percentage (as defined in an applicable Issuance Supplement) may also apply during a Partial Amortization Period to the extent provided in the applicable Issuance Supplement. "Floating Allocation Percentage" shall mean, for any Business Day, the sum of the applicable Class A Floating Allocation Percentage, Class B Floating Allocation Percentage, Class C Floating Allocation Percentage, Class D Floating Allocation Percentage and Class E Floating Allocation Percentage for such Business Day. "Initial Invested Amount" shall mean an amount equal to the sum of (a) the Class A Initial Invested Amount, (b) the Class B Initial Invested Amount, (c) the Class C Initial Invested Amount, (d) the Class D Initial Invested Amount and (e) the Class E Initial Invested Amount. "Insurance Agreement" shall mean the Insurance and Indemnity Agreement dated as of December 8, 1999 among R.V.I. Guaranty Co., Ltd., as Insurer, the Transferor, the Servicer and the Trustee. "Insurance Premium" shall mean, for any Distribution Date falling after the Enhancement Date, the monthly premium payable to the Insurer on such Distribution Date as set forth in the Insurance Agreement. "Insured Payment" shall mean, for any Distribution Date falling after the Enhancement Date, the Deficiency Amount for such Distribution Date. "Insurer" shall mean R.V.I. Guaranty Co., Ltd., a company organized under the laws of the Island of Bermuda. "Interest Accrual Period" shall mean, for each Distribution Date: (a) with respect to all or a portion of the Class A Certificates and Class B Certificates, the period specified in the applicable Issuance Supplement; and (b) with respect to the Class C Certificates, the Class D Certificates and the Class E Certificates, the period from and including the preceding Distribution Date to and excluding such Distribution Date; provided, however, that the initial Interest Accrual Period will run from the Series 1999-1 Closing Date to and excluding the initial Distribution Date. "Invested Amount" shall mean, for 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, (d) the Class D Invested Amount as of such Business Day and (e) the Class E Invested Amount as of such Business Day. "Investment Earnings" shall mean, with respect to any Distribution Date, all interest and earnings on Cash Equivalents included in the Spread Account (net of losses and investment expenses) during the period commencing on and including the Distribution Date immediately preceding such Distribution Date and ending on but excluding such Distribution Date. "Investment Letter" shall have the meaning specified in Section 12(f). "Investor Certificateholder" shall mean the Holder of record of an Investor Certificate of Series 1999-1. "Investor Certificates" shall mean the Class A Certificates, the Class B Certificates, the Class C Certificates, the Class D Certificates and the Class E Certificates. "Investor Charge-Offs" shall mean the sum of Class A Investor Charge-Offs, Class B Investor Charge-Offs, Class C Investor Charge-Offs, Class D Investor Charge-Offs and the Class E Investor Charge-Offs. "Investor Default Amount" shall mean, for each Business Day, an amount equal to the sum of the Class A Investor Default Amount, the Class B Investor Default Amount, the Class C Investor Default Amount, the Class D Investor Default Amount and the Class E Investor Default Amount for such Business Day. "Issuance Supplement" shall mean a supplement to this Series Supplement entered into among the Transferor, the Servicer and the Trustee to specify the terms of Class A Certificates or Class B Certificates, or both, to be included as part of Series 1999-1. "Junior Facilities Costs" shall be defined, for any VFCs, in the applicable Issuance Supplement. "Late Payment Rate" shall have the meaning specified in the Insurance Agreement. "LIBOR" shall mean, as of any Rate Determination Date, the rate for deposits in United States dollars for a period equal in length to the Interest Accrual Period which appears on the Telerate Page 3750 as of 11:00 a.m, London time, on such date as determined by the Trustee. If such rate does not appear on Telerate Page 3750, the rate for that Rate Determination Date shall be determined on the basis of the rates at which deposits in United States dollars are offered by four reference banks selected by the Trustee at approximately 11:00 a.m., London time, on that day to prime banks in the London interbank market for a period of the Interest Accrual Period. The Trustee shall request the principal London office of each of the reference banks it selects to provide a quotation of such rate. If at least two such quotations are provided, the rate for that Rate Determination Date shall be the arithmetic mean of such quotations. If fewer than two quotations are provided as requested, the rate for that Rate Determination Date shall be the arithmetic mean of the rates of four reference banks selected by the Trustee at approximately 11:00 a.m., New York City time, on that day for loans in United States dollars to leading European banks for a period of the Interest Accrual Period. "Mezzanine Facilities Costs" shall be defined, for any VFCs, in the applicable Issuance Supplement, provided that any such Mezzanine Facilities Costs for any Interest Accrual Period may not exceed: (i) for the Class A Certificates, the product of (a) the daily average Class A Invested Amount for such Interest Accrual Period, (b) 0.75% and (c) the number of days in such Interest Accrual Period divided by 360, and (ii) for the Class B Certificates, the product of (a) the daily average Class B Invested Amount for such Interest Accrual Period, (b) 0.75% and (c) the number of days in such Interest Accrual Period divided by 360; provided further, that greater amounts of Mezzanine Facilities Costs may apply if each Rating Agency confirms that doing so will not cause such Rating Agency to downgrade or withdraw its rating on any Class of Certificates. "Minimum Transferor Percentage" shall mean (a) 2.00% for any day falling in a December Monthly Period or a January Monthly Period and (b) 0.00% for any other day. "Monthly Class A Required Amount" shall have the meaning specified in Section 4.9(b). "Monthly Class B Required Amount" shall have the meaning specified in Section 4.9(c). "Monthly Class C Required Amount" shall have the meaning specified in Section 4.9(d). "Monthly Class D Required Amount" shall have the meaning specified in Section 4.9(e). "Monthly Distribution Date" shall mean December 15, 1999, and the fifteenth day of each calendar month thereafter, or if such day is not a Business Day, the next succeeding Business Day. "Monthly Period" shall have the meaning specified in the Agreement, except that the first Monthly Period with respect to the Series 1999-1 Certificates shall begin on and include the Series 1999-1 Closing Date and shall end on and include November 30, 1999. "Monthly Principal" shall mean: (a) for any Distribution Date falling in the Scheduled Amortization Period and prior to the Class A/B VFC Expected Final Payment Date, the aggregate of such amounts as may be specified in any Issuance Supplements (which shall not exceed the sum of the Class A Adjusted Invested Amount and the Class B Invested Amount as of the related Transfer Date); (b) for the Class A/B VFC Expected Final Payment Date (so long as the Rapid Amortization Period has not commenced), the sum of the Class A Invested Amount and the Class B Invested Amount at the end of the prior Distribution Date, minus any amounts on deposit in any Accumulation Account; (c) for the Class C Expected Final Payment Date (so long as the Rapid Amortization Period has not commenced), the Class C Invested Amount; (d) for the Class D Expected Final Payment Date (so long as the Rapid Amortization Period has not commenced), the Class D Invested Amount; and (e) for any Distribution Date falling in the Rapid Amortization Period, the Invested Amount. "Partial Amortization Period" shall have the meaning specified in any Issuance Supplement. "Pay Out Commencement Date" shall mean the date on which a Trust Pay Out Event is deemed to occur pursuant to Section 9.1 of the Agreement or a Series 1999-1 Pay Out Event is deemed to occur pursuant to Section 8 of this Series Supplement. "Policy" shall mean the certificate guaranty insurance policy issued by the Insurer and covering the Class D Certificates issued on the Closing Date and referred to in the Insurance Agreement. "Portfolio Correction Amount" shall mean the smallest amount which, if distributed to certificateholders of the Trust in reduction of the aggregate invested amount of all certificates upon the occurrence of a Portfolio Imbalance Event, would result in compliance with the percentage limitation in the definition of Portfolio Imbalance Event the violation of which gave rise to such Portfolio Imbalance Event. "Portfolio Correction Distribution Date" shall mean the first Distribution Date following the occurrence of a Portfolio Imbalance Event. "Portfolio Yield" shall mean, for any Monthly Period, the annualized percentage equivalent of a fraction, the numerator of which is the sum of (a) the aggregate amount of Available Series 1999-1 Finance Charge Collections for such Monthly Period calculated on a cash basis after subtracting the Investor Default Amount and Uncovered Dilution Amount applicable to any outstanding Class of Series 1999-1 Certificates for such Monthly Period and (b) any amount withdrawn from the Reserve Account and treated as Available Series 1999-1 Finance Charge Collections on the related Transfer Date, and the denominator of which is the average daily Invested Amount during the preceding Monthly Period. "Principal Shortfalls" shall mean, on any Business Day, the Monthly Principal for the related Distribution Date, minus the funds on deposit in the Principal Account that are available to cover the Monthly Principal on such Distribution Date, excluding Subordinated Principal Collections. "Private Holder" shall mean each holder of a right to receive interest or principal in respect of any direct or indirect interest in the Trust including any financial instrument or contract the value of which is determined in whole or part by reference to the Trust (including the Trust's assets, income of the Trust or distributions made by the Trust), excluding any interest in the Trust represented by any Series or Class of Certificates or any other interest as to which the Transferor has provided to the Trustee an Opinion of Counsel to the effect that such Series, Class or other interest will be treated as debt or otherwise not as an equity interest in either the Trust or the Receivables for federal income tax purposes, in each case provided such Series, Class or other interest is not convertible or exchangeable into an interest in the Trust or the Trust's income or equivalent value. Notwithstanding the immediately preceding sentence, (i) "Private Holder" shall also include any other Person that the Transferor determines is, may be, or may become a "partner" within the meaning of Section 1.7704- 1(h)(1)(ii) of the United States Treasury Regulations (including by reason of Section 1.7704-1(h)(3)) and (ii) unless the Transferor otherwise determines, "Private Holder" shall not include any holder that would otherwise be considered a Private Holder solely by reason of having acquired a direct or indirect interest in the Trust issued prior to December 4, 1995. Private Holders include, without limitation, the Holders of the Transferor Certificates or any interest therein, the interest of the Servicer and any similar interests in the Trust represented by any other Class of any Series of Certificates issued on or after December 4, 1995. Any Person holding more than one interest in the Trust each of which separately would cause such Person to be a Private Holder shall be treated as a single Private Holder. Each holder of an interest in a Private Holder that is a partnership, S Corporation or a grantor trust under the Internal Revenue Code shall be treated as a Private Holder, unless excepted with the consent of the Transferor. "Qualified Institutional Buyer" has the meaning assigned to that term in Rule 144A. "Quarterly Excess Spread Percentage" shall mean, with respect to the each Distribution Date, the percentage equivalent of a fraction, the numerator of which is the sum of the Excess Spread Percentages for such Distribution Date and the immediately preceding two Distribution Dates and the denominator of which is three. "Rapid Amortization Period" shall mean the period commencing on the Pay Out Commencement Date and ending on the earlier to occur of (i) the date of termination of the Trust pursuant to Section 12.1 of the Agreement or (ii) the Series 1999-1 Termination Date. "Rate Determination Date" shall mean, with respect to any Interest Accrual Period, the second Business Day before the first day of such Interest Accrual Period. "Rating Agency" shall mean (a) for the Class A Certificates, the Class B Certificates and the Class C Certificates, each of Moody's, Fitch and Standard and Poor's and (b) for the Class D Certificates, each of Duff & Phelps Credit Rating Co., Fitch and Standard and Poor's. "Reallocated Principal Collections" shall have the meaning specified in Section 4.11(b)(iv). "Reimbursement Amount" shall mean the sum of (a) any unreimbursed payments made by an Insurer under the related Policy and (b) all other amounts owed to such Insurer under this Series Supplement or the Insurance Agreement, in each case together with interest on such amounts at the applicable Late Payment Rate. "Required Reserve Account Amount" shall mean, with respect to any Distribution Date prior to the Reserve Account Funding Date, $0, and on or after the Reserve Account Funding Date, an amount equal to (a) 0.5% of the Class A Invested Amount subject to accumulation as of the preceding Distribution Date (after giving effect to all changes therein on such date) or (b) any other amount designated by the Transferor, provided that, if such designation is of a lesser amount, the Transferor shall have received written notice from each Rating Agency that such designation will not result in the reduction or withdrawal of the rating of the Series 1999-1 Certificates and shall have delivered copies of each such written notice to the Servicer and the Trustee. "Required Spread Account Amount" shall mean, for each Distribution Date commencing with the December 1999 Distribution Date, the product of (a) the Spread Account Percentage in effect for such date and (b) during (i) the Revolving Period or the Scheduled Amortization Period, the Invested Amount, and (ii) during the Rapid Amortization Period, the Invested Amount as of the last day before the beginning of the Rapid Amortization Period; provided, that in no event will the Required Spread Account Amount exceed the Class D Investor Principal Balance (after taking into account any payments to be made on such Distribution Date). "Reserve Account" is defined in Section 4.17(a). "Reserve Account Funding Date" shall mean the first Business Day in the Monthly Period which commences no later than 3 months prior to the commencement of any scheduled Accumulation Period. "Reserve Account Surplus" shall mean, as of any Transfer Date following the Reserve Account Funding Date, the amount, if any, by which the amount on deposit in the Reserve Account exceeds the Required Reserve Account Amount. "Reserve Draw Amount" is defined in Section 4.17(c). "Reset Date" shall mean each day that is: (a) an Additional Cut-off Date; (b) a Removal Date; (c) the last day prior to any day on which a Series is issued; and (d) the last day prior to any day on which there is an increase or decrease in the invested amount of any outstanding Series of Certificates. "Revolving Period" shall mean the period from and including the Closing Date to, but not including, the Amortization Period Commencement Date. "Rule 144A" shall mean Rule 144A under the Securities Act, as amended. "Scheduled Amortization Period" shall mean, with respect to the Series 1999-1 Certificates, unless a Pay Out Event shall have occurred with respect to such Series prior thereto, the period commencing on the Amortization Period Commencement Date and ending upon the earliest to occur of (a) the payment in full to the Investor Certificateholders of the Invested Amount, (b) the Series 1999-1 Termination Date and (c) the Pay Out Commencement Date. "Scheduled Series 1999-1 Termination Date" shall mean the August 2006 Distribution Date. "Senior Facilities Costs" shall mean for any Interest Accrual Period and the Class A Certificates or Class B Certificates, the sum of Class A Interest or Class B Interest, as the case may be, and other amounts specified in the applicable Issuance Supplements; provided that the aggregate Senior Facilities Costs for any Interest Accrual Period may not exceed: (i) for the Class A Certificates, the product of (a) the daily average Class A Invested Amount for such Interest Accrual Period, (b) Adjusted LIBOR plus 2.25% and (c) the number of days in such Interest Accrual Period divided by 360 and (ii) for the Class B Certificates, the product of (a) the daily average Class B Invested Amount for such Interest Accrual Period, (b) Adjusted LIBOR plus 2.25% and (c) the number of days in such Interest Accrual Period divided by 360; and provided further, that greater amounts of Senior Facilities Costs may apply if each Rating Agency confirms that doing so will not cause such Rating Agency to downgrade or withdraw its rating on any Class of Certificates. "Series Portfolio Correction Distribution Amount" shall mean, with respect to Series 1999-1, the product of (a) the Portfolio Correction Amount and (b) a fraction, the numerator of which is the Floating Allocation Percentage, and the denominator of which is the sum of the floating allocation percentages for each Series which is then in its Revolving Period. "Series 1999-1" shall mean the Series of the SRI Receivables Master Trust represented by the Series 1999-1 Certificates. "Series 1999-1 Certificateholder" shall mean the holder of record of any Series 1999-1 Investor Certificate. "Series 1999-1 Closing Date" shall mean November 9, 1999. "Series 1999-1 Pay Out Event" shall have the meaning specified in Section 8. "Series 1999-1 Termination Date" shall mean the earlier to occur of (i) the day after the Distribution Date on which the Series 1999-1 Certificates are paid in full, or (ii) the Scheduled Series 1999-1 Termination Date. "Series Servicing Fee Percentage" shall mean 2.0%. "Series Supplement" shall have the meaning specified in the first paragraph of the recitals hereto. "Series 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) a fraction, the numerator of which is the numerator used to calculate the allocation percentage for Series 1999-1 with respect to Finance Charge Collections at the end of the most recent Reset Date and the denominator of which is the sum of the numerators used to calculate the allocation percentages with respect to Finance Charge Collections for all Series outstanding on such Business Day. "Series Transferor Principal Collections" shall mean, on any Business Day, the product of (a) the Principal Collections for such Business Day, (b) the Transferor Percentage and (c) a fraction, the numerator of which is the numerator used in determining the Fixed Allocation Percentage at the end of the prior Monthly Period and the denominator of which is the sum of the numerators used to calculate the allocation percentages with respect to Principal Collections for all Series outstanding on such Business Day. "Servicer" shall have the meaning specified in the first paragraph of the recitals hereto. "Servicing Fee" shall mean, for any Monthly Period, an amount equal to the product of (i) one-twelfth, (ii) the Series Servicing Fee Percentage and (iii) the Invested Amount as of the preceding Record Date, or, in the case of the first Distribution Date, the Initial Invested Amount. "Shared Principal Collections" shall mean, as the context requires, either (a) the amount allocated to the Series 1999-1 Investor Certificates which, in accordance with subsections 4.8(b) and 4.8(c)(i), may be applied in accordance with Section 4.3(e) of the Agreement or (b) the amounts allocated to the investor certificates (other than Transferor Retained Certificates) of other Series which the applicable Supplements for such Series specify are to be treated as "Shared Principal Collections" and which may be applied to cover Principal Shortfalls with respect to the Series 1999-1 Investor Certificates. "Spread Account" shall have the meaning specified in subsection 4.16(a). "Spread Account Deficiency" shall mean the excess, if any, of the Required Spread Account Amount over the Available Spread Account Amount. "Spread Account Percentage" shall mean for any Distribution Date commencing with the December 1999 Distribution Date, (a) zero if the Quarterly Excess Spread Percentage on such Distribution Date is greater than or equal to 5.0%, (b)1.5% if the Quarterly Excess Spread Percentage on such Distribution Date is less than 5.0% and greater than or equal to 4.5%, (c) 1.75% if the Quarterly Excess Spread Percentage on such Distribution Date is less than 4.5% and greater than or equal 4.0%, (d) 2.25% if the Quarterly Excess Spread Percentage on such Distribution Date is less than 4.0% and greater than 3.5%, (e) 3.0% if the Quarterly Excess Spread Percentage on such Distribution Date is less than 3.5% and greater than or equal to 3.0%, and (f) 4.0% if the Quarterly Excess Spread Percentage on such Distribution Date is less than 3.0%, provided, that if a Trust Pay Out Event or a Series 1999-1 Pay Out Event is deemed to occur, the Spread Account Percentage shall be 4.0%. "Spread Account Residual Interest Holders" shall mean the Holder of the Transferor Certificate or its designees or assignees. "Subordinated Principal Collections" shall mean, for any Monthly Period, the aggregate amount of Principal Collections that were deposited into the Principal Account pursuant to Section 4.8(c)(ii) or Section 4.8(d)(i) or allocated and paid to the Holder of the Exchangeable Transferor Certificate pursuant to Section 4.8(b)(ii) during that Monthly Period. "Telerate Page 3750" shall mean the display page designated as such at the Series 1999-1 Closing Date on the Bridge Information Systems Telerate Service (or such other page as may replace such page on such service for the purpose of displaying comparable rates or prices). "Transferor" shall have the meaning specified in the first paragraph of the recitals hereto. "Transferor Retained Certificates" shall mean investor certificates of any Series, including the Class E Certificates, which the Transferor is required to retain, but only for so long as the Transferor is the Holder of such Certificates. "Trustee" shall have the meaning specified in the first paragraph of the recitals hereto. "Uncovered Dilution Amount" shall mean, for each Business Day, an amount equal to the lesser of (a) the aggregate Adjustment Payments required to be deposited in the Collection Account on that Business Day pursuant to Section 3.8(a) of the Agreement that have not been made and (b) the amount, if any, by which the Transferor Interest is less than zero on such Business Day, after giving effect to the event that gave rise to the requirement that the unmade Adjustment Payment be made. "VFCs" shall mean the Class A VFCs and the Class B VFCs, collectively. SECTION 3. Reassignment Terms. The Class A Certificates, Class B Certificates, Class C Certificates and Class D Certificates shall be subject to repurchase by the Servicer at its option, in accordance with the terms specified in subsection 12.2(a) of the Agreement, on any Distribution Date on or after the Distribution Date on which the sum of the Class A Invested Amount, the Class B Invested Amount, the Class C Invested Amount and the Class D Invested Amount is reduced to an amount less than or equal to 10% of the sum of the highest combined Class A Invested Amount, the Class B Invested Amount, the Class C Invested Amount and Class D Invested Amount at any time during the Revolving Period. The deposit required in connection with any such repurchase and final distribution shall be equal to the sum of the Class A Invested Amount, the Class B Invested Amount, the Class C Invested Amount and the Class D Invested Amount, plus any accrued and unpaid interest on the Certificates and other Facilities Costs through the day prior to the Distribution Date on which the final distribution occurs, plus any unpaid Reimbursement Amounts. The deposit required to be made in connection with a sale or repurchase of the Receivables as set forth in Section 2.4(e), 9.2, 10.2(a), 12.1 or 12.2 of the Agreement shall, unless otherwise specified in the Agreement, be equal to the sum of the Class A Invested Amount, the Class B Invested Amount, the Class C Invested Amount and the Class D Invested Amount plus any accrued and unpaid interest on the Certificates and other Facilities Costs plus all unpaid Reimbursement Amounts through the day prior to the Distribution Date on which the final distribution occurs. SECTION 4. Delivery and Payment for the Series 1999-1 Certificates. The Transferor shall execute and deliver the Class A Certificates, the Class B Certificates and the Class E Certificates to the Trustee for authentication in accordance with Section 6.1 of the Agreement. The Trustee shall deliver the Class A Certificates, the Class B Certificates and the Class E Certificates 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 1999-1 Certificates. (a) The Class A Certificates and the Class B Certificates shall be delivered in the form and in such minimum denominations specified in the applicable Issuance Supplement. (b) On the closing date, each purchaser of the Class C Certificates and the Class D Certificates will receive confirmation of its interest in the applicable Certificates. (c) The Class C Certificates and the Class D Certificates shall be issued in uncertificated form in denominations of $2,000,000 and greater integral multiples of $1,000. The Class E Certificates shall be delivered as Registered Certificates as provided in Section 6.1 of the Agreement and not as Book-Entry Certificates. (d) The Class C Certificates and the Class D Certificates shall be entitled to the benefits of the Agreement and this Series Supplement and shall be valid for all purposes, upon receipt by the Trustee of a written instruction of the Transferor to issue the Class C Certificates and the Class D Certificates in the names and in the principal amounts specified in such instruction, the entry of such information in the Book-Entry Register by the Transfer Agent and Registrar and the delivery of confirmations of issuance of the Class C Certificates and the Class D Certificates by the Transfer Agent and Registrar substantially in the form of Exhibit D hereto. Such confirmations shall be conclusive evidence that the Class C Certificates and the Class D Certificates have been duly issued and delivered hereunder. All the Class C Certificates and the Class D Certificates shall be dated the date of the making of an entry relating to the issuance or transfer thereof, as applicable, in the Book-Entry Register. (e) On the Closing Date, the Transfer Agent and Registrar shall make entries in the Book-Entry Register and to issue confirmations of the issuance of the Class C Certificates and the Class D Certificates that are issued upon original issuance to or upon the order of the Transferor against payment to the Transferor of the purchase price thereof. (f) References in the Agreement or in this Series Supplement to the "authentication of the Investor Certificates" or words to similar effect shall, with respect to the Class C Certificates and the Class D Certificates, be deemed to refer to the making of appropriate entries by the Transfer Agent and Registrar in the Book-Entry Register to evidence the issuance or transfer of the Class C Certificates or the Class D Certificates. (g) The Transfer Agent and Registrar shall provide for the registration of the Class C Certificates and the Class D Certificates and of transfers thereof in the Book-Entry Register as provided in Section 6.3(a) of the Agreement with respect to Investor Certificates that are Registered Certificates; provided, that (a) in lieu of surrender of an Investor Certificate for registration of transfer, transfers of Class C Certificates and the Class D Certificates shall be effected as provided herein and (b) authentication requirements shall not be applicable to the Class C Certificates and the Class D Certificates. Ownership of Class C Certificates and the Class D Certificates will be evidenced solely by entries in the Book-Entry Register maintained by the Transfer Agent and Registrar on behalf of the Trust. (h) The Transfer Agent and Registrar shall record (i) the date, principal amount and transferee with respect to each transfer of an interest in the Class C Certificates or Class D Certificates, as applicable, (ii) the date and amount of each payment of principal of and interest on the Class C Certificates and the Class D Certificates, (iii) for each Interest Accrual Period the Class C Certificate Rate or Class D Certificate Rate (as applicable) applicable to such Interest Accrual Period, in the Book-Entry Register in such manner as is customary for the Transfer Agent and Registrar. The Transfer Agent and Registrar will not be required to register the transfer of Class C Certificates and the Class D Certificates for a period of fifteen days preceding the due date for any payment with respect to the Class C Certificates and the Class D Certificates. A certificate of an officer of the Transfer Agent and Registrar, setting forth in reasonable detail the information so recorded, shall constitute, with respect to each Class C Certificateholder or Class D Certificateholder, prima facie evidence of the accuracy of the information so recorded; provided, that the failure to make any such recording shall not in any way affect the obligations of the Trust to make distributions in respect of the Class C Certificates and the Class D Certificates as provided herein and in the Agreement and this Series Supplement or the obligations of the Transferor or the Servicer under the Agreement or hereunder; provided, further, that the obligation of the Transfer Agent and Registrar to record such information shall not affect the rights of any Class C Certificateholder or Class D Certificateholder to transfer such interest, except that (A) any such transfer, and the right to receive principal or interest hereunder, shall be subject to and conditioned upon the due recordation of such transfer, (B) such transfer shall not be effective prior to such recordation, and (C) the Transfer Agent and Registrar may require a person attempting to transfer such interest to deliver to the Transfer Agent and Registrar a fully executed Investment Letter in the form set forth in Exhibit F executed by the transferee, and the written consent of the Transferor, failing delivery of which the Transfer Agent and Registrar may refuse to register any transfer and no transfer shall be deemed to have occurred. Each Person so recorded as the owner of an interest as described herein shall be deemed and treated as the owner thereof for all purposes, and none of the Trust, the Trustee, the Transferor, the Transfer Agent and Registrar or any other Person shall be affected by notice to the contrary. A Class C Certificateholder or Class D Certificateholder may request that the Transfer Agent and Registrar issue a statement showing such Holder's ownership of Class C Certificates and the Class D Certificates as shown on the Book-Entry Register. (i) Transfers of Class C Certificates and the Class D Certificates may be effected only through appropriate entries made in the Book-Entry Register, and subject to the restrictions on transfer of the Class C Certificates and the Class D Certificates described herein. Class C Certificates and the Class D Certificates will be transferable at the office of the Transfer Agent and Registrar by presenting in writing (which may be facsimile) a properly completed transfer request in the form attached hereto as Exhibit E together with any other documentation required hereunder (including the Investment Letter). (j) The Trustee, the Paying Agent, the Transfer Agent, the Insurer and Registrar and any agent of any of them may, prior to due presentation of a request to transfer Class C Certificates and the Class D Certificates on the Book-Entry Register, treat the Person in whose name Class C Certificates and the Class D Certificates are registered as the owner of such Class C Certificates and the Class D Certificates for the purpose of receiving distributions pursuant to the terms hereof and for all other purposes whatsoever; and none of the Trustee, the Paying Agent, the Transfer Agent, the Insurer and Registrar or any agent of any of them shall be affected by any notice to the contrary. Notwithstanding the foregoing, in determining whether the Holders of the requisite Investor Certificates have given any request, demand, authorization, direction, notice, consent or waiver under the Agreement or hereunder, Class C Certificates and the Class D Certificates owned by any of the Transferor, the Servicer, any other Holder of a Transferor Certificate, the Trustee or any Affiliate thereof shall be disregarded and deemed not to be outstanding, except that, in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Class C Certificates and the Class D Certificates that the Trustee actually knows to be so owned shall be so disregarded. Class C Certificates and the Class D Certificates so owned that have been pledged in good faith shall not be disregarded and may be regarded as outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee's right to so act with respect to such Class C Certificates and the Class D Certificates and that the pledgee is not the Transferor, the Servicer, any other Holder of the Transferor Certificate, the Trustee or any Affiliate thereof. (k) The provisions of the Agreement relating to Bearer Certificates, Book-Entry Certificates, notices to Clearing Agencies, Definitive Certificates and Global Certificates shall not be applicable to the Class C Certificates and the Class D Certificates. (l) All rights of action and claims under the Agreement or the Class C Certificates and the Class D Certificates may be prosecuted and enforced by the Trustee without the registration of the Class C Certificates and the Class D Certificates in the name of the Trustee or the possession of any receipt or confirmation relating to any of the Class C Certificates and the Class D Certificates or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Trustee shall be brought in its own name as trustee. (m) Notwithstanding Section 12.3 of the Agreement, final payment with respect to the Class C Certificates and the Class D Certificates shall be made to the Class C Certificateholders and Class D Certificateholders, as applicable, as of the related Record Date. The Trustee will provide notice of the final distribution in respect of the Class C Certificates and the Class D Certificates to the Class C Certificateholders and Class D Certificateholders, as applicable, mailed not later than the fifth day of the month of such final distribution. (n) The ownership and transfer, sale or other assignment of any interest in the Class C Certificates and the Class D Certificates, as applicable, shall be subject to the restrictions described in Section 12. SECTION 6. Article IV of Agreement. Sections 4.l, 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 1999-1 Certificates: ARTICLE IV RIGHTS OF CERTIFICATEHOLDERS AND ALLOCATION AND APPLICATION OF COLLECTIONS Section 4.4 Rights of Certificateholders. The Series 1999-1 Certificates shall represent undivided interests in the Trust, consisting of the right to receive, to the extent necessary to make the required payments with respect to such Series 1999-1 Certificates at the times and in the amounts specified in this Agreement, (a) the Floating Allocation Percentage and Fixed Allocation Percentage (as applicable from time to time) of Collections available in the Collection Account, (b) funds allocable to the Series 1999-1 Certificates on deposit in the Equalization Account and (c) funds on deposit in the Interest Funding Account, the Principal Account and the Distribution Account. The Class B Invested Amount, the Class C Invested Amount, the Class D Invested Amount and the Class E Invested Amount shall be subordinated to the Class A Certificates; the Class C Invested Amount, the Class D Invested Amount and the Class E Invested Amount shall be subordinated to the Class B Certificates; the Class D Invested Amount and the Class E Invested Amount shall be subordinated to the Class C Certificates; and the Class E Invested Amount shall be subordinated to the Class D Certificates, in each case to the extent provided in this Article IV. Section 4.5 Collections and Allocation. The Servicer shall apply or shall instruct the Trustee in writing to apply all funds on deposit in the Collection Account and the Equalization Account allocable to the Series 1999-1 Certificates, and all funds on deposit in the Interest Funding Account, the Principal Account and the Distribution Account maintained for this Series, as described in this Article IV. The allocations to be made pursuant to this Article IV also apply to deposits into the Collection Account that are treated as Collections, including Adjustment Payments, payment of the reassignment price pursuant to Section 2.4(e) of the Agreement and proceeds from the sale, disposition or liquidation of the Receivables pursuant to Section 9.2, 10.2(a), 12.1 or 12.2 of the Agreement and Section 3 of this Series Supplement, such deposits to be treated as Collections and to be allocated as Finance Charge Receivables or Principal Receivables as provided in the Agreement. Section 4.6 Determination of Monthly Interest. (a) The amount of monthly interest (the "Class A Interest") payable on the Class A Certificates on each Distribution Date shall equal the sum of (x) for any Class A VFCs, the amount specified in the applicable Issuance Supplement and (y) for any other Class A Certificates, the product of (i) the applicable Class A Certificate Rate, (ii) the principal balance of the Class A Certificates as of the close of business on the first day of the related Interest Accrual Period and (iii) a fraction, the numerator of which is the number of days in the Interest Accrual Period and the denominator of which is 360; provided that the Class A Interest for the first Distribution Date for any Class A Certificates may be specified in the applicable Issuance Supplement. On the Determination Date preceding each Distribution Date, the Servicer shall determine an amount (the "Class A Carrying Cost Shortfall") equal to the excess, if any, of (x) the sum of the Class A Interest and the Senior Facilities Costs relating to the Class A Certificates for the Distribution Date, over (y) the amount available to be paid to the Class A Certificateholders in respect of such Class A Interest and such Senior Facilities Costs on such Distribution Date. If there is a Class A Carrying Cost Shortfall with respect to any Distribution Date, an additional amount ("Class A Additional Interest") shall be payable as provided herein with respect to the Class A Certificates on each Distribution Date following such Distribution Date, to and including the Distribution Date on which such Class A Carrying Cost Shortfall is paid to the Class A Certificateholders in full. Class A Additional Interest shall accrue on the balance of the Class A Carrying Cost Shortfall relating to any Class A Certificates at the applicable Class A Certificate Rate (or such other rate as may be specified in the applicable Issuance Supplement) during the related Interest Accrual Period, on the basis of the number of days in that Interest Accrual Period and a year of 360 days. Notwithstanding anything to the contrary herein, Class A Additional Interest shall be payable or distributed to Class A Certificateholders only to the extent permitted by applicable law. (b) The amount of monthly interest (the "Class B Interest") payable on the Class B Certificates on each Distribution Date shall equal the sum of (x) for any Class B VFCs, the amount specified in the applicable Issuance Supplement and (y) for any other Class B Certificates, the product of (i) the applicable Class B Certificate Rate, (ii) the principal balance of the Class B Certificates as of the close of business on the first day of the related Interest Accrual Period and (iii) a fraction, the numerator of which is the number of days in the Interest Accrual Period and the denominator of which is 360; provided that the Class B Interest for the first Distribution Date for any Class B Certificates may be specified in the applicable Issuance Supplement. On the Determination Date preceding each Distribution Date, the Servicer shall determine an amount (the "Class B Carrying Cost Shortfall") equal to the excess, if any, of (x) the sum of the Class B Interest and the Senior Facilities Costs relating to the Class B Certificates for the Distribution Date, over (y) the amount available to be paid to the Class B Certificateholders in respect of such Class B Interest and such Senior Facilities Costs on such Distribution Date. If there is a Class B Carrying Cost Shortfall with respect to any Distribution Date, an additional amount ("Class B Additional Interest") shall be payable as provided herein with respect to the Class B Certificates on each Distribution Date following such Distribution Date, to and including the Distribution Date on which such Class B Carrying Cost Shortfall is paid to the Class B Certificateholders in full. Class B Additional Interest shall accrue on the balance of the Class B Carrying Cost Shortfall relating to any Class B Certificates at the applicable Class B Certificate Rate (or such other rate as may be specified in the applicable Issuance Supplement) during the related Interest Accrual Period, on the basis of the number of days in that Interest Accrual Period and a year of 360 days. Notwithstanding anything to the contrary herein, Class B Additional Interest shall be payable or distributed to Class B Certificateholders only to the extent permitted by applicable law. (c) The amount of monthly interest (the "Class C Interest") payable on the Class C Certificates on each Distribution Date shall equal the product of (i) the applicable Class C Certificate Rate, (ii) the principal balance of the Class C Certificates as of the close of business on the first day of the related Interest Accrual Period and (iii) a fraction, the numerator of which is the number of days in the Interest Accrual Period and the denominator of which is 360. On the Determination Date preceding each Distribution Date, the Servicer shall determine an amount (the "Class C Interest Shortfall") equal to the excess, if any, of (x) the Class C Interest for the Distribution Date, over (y) the amount available to be paid to the Class C Certificateholders in respect of such Class C Interest on such Distribution Date. If there is a Class C Interest Shortfall with respect to any Distribution Date, an additional amount ("Class C Additional Interest") shall be payable as provided herein with respect to the Class C Certificates on each Distribution Date following such Distribution Date, to and including the Distribution Date on which such Class C Interest Shortfall is paid to Class C Certificateholders in full, equal to the product of (A) the applicable Class C Certificate Rate, (B) such Class C Interest Shortfall remaining unpaid and (C) a fraction, the numerator of which is the number of days in the related Interest Accrual Period and the denominator of which is 360. Notwithstanding anything to the contrary herein, Class C Additional Interest shall be payable or distributed to Class C Certificateholders only to the extent permitted by applicable law. (d) The amount of monthly interest (the "Class D Interest") payable on the Class D Certificates on each Distribution Date shall equal the product of (i) the applicable Class D Certificate Rate, (ii) the principal balance of the Class D Certificates as of the close of business on the first day of the related Interest Accrual Period and (iii) a fraction, the numerator of which is the number of days in the Interest Accrual Period and the denominator of which is 360. On the Determination Date preceding each Distribution Date, the Servicer shall determine an amount (the "Class D Interest Shortfall") equal to the excess, if any, of (x) the Class D Interest for the Distribution Date, over (y) the amount available to be paid to the Class D Certificateholders in respect of such Class D Interest on such Distribution Date (including pursuant to Section 4.16 and the Policy). If there is a Class D Interest Shortfall with respect to any Distribution Date, an additional amount ("Class D Additional Interest") shall be payable as provided herein with respect to the Class D Certificates on each Distribution Date following such Distribution Date, to and including the Distribution Date on which such Class D Interest Shortfall is paid to Class D Certificateholders in full, equal to the product of (A) the applicable Class D Certificate Rate, (B) such Class D Interest Shortfall remaining unpaid and (C) a fraction, the numerator of which is the number of days in the related Interest Accrual Period and the denominator of which is 360. Notwithstanding anything to the contrary herein, Class D Additional Interest shall be payable or distributed to Class D Certificateholders only to the extent permitted by applicable law. Section 4.7 Determination of Principal Amounts. No principal shall be distributable on the Series 1999-1 Certificates during the Revolving Period except that payments of principal may be made on any Class A VFCs and Class B VFCs as specified in the applicable Issuance Supplements. During the Scheduled Amortization Period or the Rapid Amortization Period, the amount of principal distributable on each Distribution Date shall be determined as follows: (a) The amount of monthly principal distributable on all or any portion of the Class A Certificates on each Distribution Date or required to be deposited into an Accumulation Account ("Class A Principal"), beginning with the Distribution Date following the month in which the Scheduled Amortization Period or, if earlier, the Rapid Amortization Period, begins, shall be equal to the least of (i) the Available Principal Collections with respect to the related Monthly Period, (ii) for each Distribution Date with respect to the Scheduled Amortization Period, the amount specified in the applicable Issuance Supplement and (iii) for each Distribution Date with respect to the Rapid Amortization Period, the Class A Invested Amount prior to any distributions on such Distribution Date. (b) The amount of monthly principal distributable on the Class B Certificates (the "Class B Principal") shall be zero until the Distribution Date that is the Class B Principal Payment Commencement Date and on such Distribution Date and each Distribution Date thereafter shall equal the least of (i) the amount specified in the applicable Issuance Supplement, (ii) the excess, if any, of (A) the Available Principal Collections with respect to the related Monthly Period, over (B) any Class A Principal for such Distribution Date, and (iii) the Class B Invested Amount (after taking into account any adjustments to be made on such Distribution Date pursuant to Section 4.11) on such Distribution Date. (c) The amount of monthly principal distributable on the Class C Certificates (the "Class C Principal") shall be zero until the Distribution Date that is the Class C Principal Payment Commencement Date and on such Distribution Date and each Distribution Date thereafter shall equal the lesser of (i) the excess, if any, of (A) the Available Principal Collections with respect to the related Monthly Period, over (B) any Class A Principal and Class B Principal for such Distribution Date, and (ii) the Class C Invested Amount (after taking into account any adjustments to be made on such Distribution Date pursuant to Section 4.11) on such Distribution Date. (d) The amount of monthly principal distributable on the Class D Certificates (the "Class D Principal") shall be zero until the Distribution Date that is the Class D Principal Payment Commencement Date and on such Distribution Date and each Distribution Date thereafter shall equal the lesser of (i) the excess, if any, of (A) the Available Principal Collections with respect to the related Monthly Period, over (B) any Class A Principal, Class B Principal and Class C Principal for such Distribution Date, and (ii) the Class D Invested Amount (after taking into account any adjustments to be made on such Distribution Date pursuant to Section 4.11) on such Distribution Date. (e) The amount of monthly principal distributable on the Class E Certificates (the "Class E Principal") shall be zero until the Distribution Date that is the Class E Principal Payment Commencement Date and on such Distribution Date and each Distribution Date thereafter shall equal the lesser of (i) the excess, if any, of (A) the Available Principal Collections with respect to the related Monthly Period, over (B) any Class A Principal, Class B Principal, Class C Principal and Class D Principal for such Distribution Date, and (ii) the Class E Invested Amount (after taking into account any adjustments to be made on such Distribution Date pursuant to Section 4.11) on such Distribution Date. Section 4.8 Application of Funds on Deposit in the Collection Account for the Certificates. (a) On each Business Day, the Servicer shall deliver to the Trustee and the Insurer a Daily Report in which it shall instruct the Trustee to, and the Trustee, acting in accordance with such instructions shall, withdraw the Available Series 1999-1 Finance Charge Collections from the Collection Account and apply the same as follows, in each case to the extent of such funds available after giving effect to all of the prior applications: (i) Class A Carrying Costs. Deposit into the Interest Funding Account for distribution on the related Distribution Date to the Class A Certificateholders an amount equal to the excess of (A) the Class A Carrying Cost Target for the related Distribution Date, over (B) any amounts with respect thereto previously deposited into the Interest Funding Account on any prior Business Day during such Monthly Period. If the actual Class A Carrying Costs for the related Distribution Date can be determined with certainty by the Servicer, and the aggregate amount of funds so deposited in any Monthly Period exceeds the actual Class A Carrying Costs for the related Distribution Date, then the excess funds shall be withdrawn from the Interest Funding Account and applied to the items specified below in this Section 4.8(a) with respect to the related Monthly Period or Interest Accrual Period. (ii) Class B Carrying Costs. Deposit into the Interest Funding Account for distribution on the related Distribution Date to the Class B Certificateholders an amount equal to the excess of (A) the Class B Carrying Cost Target for the related Distribution Date, over (B) any amounts with respect thereto previously deposited into the Interest Funding Account on any prior Business Day during such Monthly Period. If the actual Class B Carrying Costs for the related Distribution Date can be determined with certainty by the Servicer, and the aggregate amount of funds so deposited in any Monthly Period exceeds the actual Class B Carrying Costs for the related Distribution Date, then the excess funds shall be withdrawn from the Interest Funding Account and applied to the items specified below in this Section 4.8(a) with respect to the related Monthly Period or Interest Accrual Period. (iii) Investor Servicing Fee. On each Business Day on which SRI or an Affiliate of SRI is not the Servicer, distribute to the Servicer an amount equal to the excess of (A) the Servicing Fee for such Monthly Period, plus any unpaid Servicing Fees from prior Monthly Periods, over (B) any amounts with respect thereto previously distributed to the Servicer on any prior Business Day during such Monthly Period. (iv) Class A Investor Default Amount and Class A Uncovered Dilution Amount. During the Revolving Period, treat as Shared Principal Collections, and during the Amortization Period, deposit in the Principal Account and treat as part of the Available Principal Collections on the related Distribution Date, an amount equal to the sum of (A) the Class A Investor Default Amount for such Business Day, plus (B) any unpaid Class A Investor Default Amount for any previous Business Day during such Monthly Period, plus (C) the Class A Uncovered Dilution Amount for such Business Day, plus (D) any unpaid Class A Uncovered Dilution Amount for any previous Business Day during such Monthly Period. (v) Reimbursement of Class A Investor Charge-Offs. During the Revolving Period, treat as Shared Principal Collections and during the Amortization Period, deposit in the Principal Account and treat as part of the Available Principal Collections on the related Distribution Date, an amount equal to the unreimbursed Class A Investor Charge-Offs. (vi) Class B Investor Default Amount and Class B Uncovered Dilution Amount. During the Revolving Period, treat as Shared Principal Collections, and during the Amortization Period, deposit in the Principal Account and treat as part of the Available Principal Collections on the related Distribution Date, an amount equal to the sum of (A) the Class B Investor Default Amount for such Business Day, plus (B) any unpaid Class B Investor Default Amount for any previous Business Day during such Monthly Period, plus (C) the Class B Uncovered Dilution Amount for such Business Day, plus (D) any unpaid Class B Uncovered Dilution Amount for any previous Business Day during such Monthly Period. (vii) Reimbursement of Class B Investor Charge-Offs. During the Revolving Period, treat as Shared Principal Collections and during the Amortization Period, deposit in the Principal Account and treat as part of the Available Principal Collections on the related Distribution Date, an amount equal to the unreimbursed Class B Investor Charge-Offs. (viii) Class C Interest. Deposit into the Interest Funding Account for distribution on the related Distribution Date to the Class C Certificateholders an amount equal to the excess of (A) the sum of Class C Interest and Carryover Class C Interest for the related Distribution Date, over (B) any amounts with respect thereto previously deposited into the Interest Funding Account on any prior Business Day during such Monthly Period. (ix) Class C Investor Default Amount and Class C Uncovered Dilution Amount. During the Revolving Period, treat as Shared Principal Collections, and during the Amortization Period, deposit in the Principal Account and treat as part of the Available Principal Collections on the related Distribution Date, an amount equal to the sum of (A) the Class C Investor Default Amount for such Business Day, plus (B) any unpaid Class C Investor Default Amount for any previous Business Day during such Monthly Period, plus (C) the Class C Uncovered Dilution Amount for such Business Day, plus (D) any unpaid Class C Uncovered Dilution Amount for any previous Business Day during such Monthly Period. (x) Reimbursement of Class C Investor Charge-Offs. During the Revolving Period, treat as Shared Principal Collections and during the Amortization Period, deposit in the Principal Account and treat as part of the Available Principal Collections on the related Distribution Date, an amount equal to the unreimbursed Class C Investor Charge-Offs. (xi) Class D Interest. Deposit into the Interest Funding Account for distribution on the related Distribution Date first to the Class D Certificateholders and then to the Insurer (as Insurance Premium and Reimbursement Amounts), as applicable, an amount equal to the excess of (A) the sum of (X) Class D Interest and Carryover Class D Interest for the related Distribution Date, (Y) the Insurance Premium for the related Distribution Date and (Z) any outstanding Reimbursement Amount, over (B) any amounts with respect thereto previously deposited into the Interest Funding Account on any prior Business Day during such Monthly Period. (xii) Class D Investor Default Amount and Class D Uncovered Dilution Amount. During the Revolving Period, treat as Shared Principal Collections, and during the Amortization Period, deposit in the Principal Account and treat as part of the Available Principal Collections on the related Distribution Date, an amount equal to the sum of (A) the Class D Investor Default Amount for such Business Day, plus (B) the unpaid Class D Investor Default Amount for any previous Business Day during such Monthly Period, plus (C) the Class D Uncovered Dilution Amount for such Business Day, plus (D) Class D Uncovered Dilution Amount for any previous Business Day during such Monthly Period. (xiii) Reimbursement of Class D Investor Charge-Offs. During the Revolving Period, treat as Shared Principal Collections and during the Amortization Period, deposit in the Principal Account and treat as part of the Available Principal Collections on the related Distribution Date, an amount equal to the unreimbursed Class D Investor Charge-Offs. (xiv) Class E Interest. Deposit into the Interest Funding Account for distribution on the related Distribution Date to the Class E Certificateholders an amount equal to the excess of (A) the sum of interest payable on the Class E Certificates and Carryover Class E Interest for the related Distribution Date, over (B) any amounts with respect thereto previously deposited into the Interest Funding Account on any prior Business Day during such Monthly Period. (xv) Class E Investor Default Amount and Class E Uncovered Dilution Amount. During the Revolving Period, treat as Shared Principal Collections, and during the Amortization Period, deposit in the Principal Account and treat as part of the Available Principal Collections on the related Distribution Date, an amount equal to the sum of (A) the Class E Investor Default Amount for such Business Day, plus (B) any unpaid Class E Investor Default Amount for any previous Business Day during such Monthly Period, plus (C) the Class E Uncovered Dilution Amount for such Business Day, plus (D) any Class E Uncovered Dilution Amount for any previous Business Day during such Monthly Period. (xvi) Reimbursement of Class E Investor Charge-Offs. During the Revolving Period, treat as Shared Principal Collections and during the Amortization Period, deposit in the Principal Account and treat as part of the Available Principal Collections on the related Distribution Date, an amount equal to the unreimbursed Class E Investor Charge-Offs. (xvii) Reserve Account. Apply as provided in Section 4.17. (xviii) Mezzanine Facilities Costs. Deposit into the Interest Funding Account an amount equal to the Mezzanine Facilities Costs for the related Distribution Date. (xix) Spread Account. Apply as provided in Section 4.16. (xx) Junior Facilities Costs. Deposit into the Interest Funding Account an amount equal to the Junior Facilities Costs for the related Distribution Date. (xxi) Investor Servicing Fee. If SRI or an Affiliate of SRI is the Servicer, distribute to the Servicer the sum of (A) the Investor Servicing Fee accrued since the preceding Business Day, plus (B) any Investor Servicing Fee due with respect to any prior Business Day but not distributed to the Servicer. (xxii) Excess Finance Charge Collections. Any Available Series 1999-1 Finance Charge Collections remaining in the Collection Account or amounts released from the Interest Funding Account pursuant to the second sentence of Section 4.8(a)(i) or (ii) and not required for the applications listed in Sections 4.8(a)(ii) through (xxi) shall be treated as Excess Finance Charge Collections, and the Servicer shall direct the Trustee in writing on each Business Day to make such amounts available to pay to Certificateholders of other Series to the extent of shortfalls, if any, in amounts payable to such Certificateholders from Finance Charge Collections (but not from Excess Finance Charge Collections) allocated to such other Series; provided, however, that on any Business Day during any Rapid Amortization Period, the Trustee shall deposit any Series 1999-1 Finance Charge Collections remaining in the Collection Account and any remaining amounts released from the Interest Funding Account pursuant to the second sentence of Section 4.8(a)(i) or (ii), into the Interest Funding Account and shall add such funds to the Available Series 1999-1 Finance Charge Collections on each subsequent Business Day in such Monthly Period until the last Business Day of the related Monthly Period, when the aggregate amount of such remaining Available Series 1999-1 Finance Charge Collections shall be distributed as Excess Finance Charge Collections in accordance with this subsection (xxii) (without giving effect to this proviso). (b) On each Business Day in the Revolving Period: (i) Class A Principal Collections. Except as otherwise provided in any Issuance Supplement, funds on deposit in the Collection Account to the extent of the product of the Class A Floating Allocation Percentage and Principal Collections with respect to such Business Day 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. (ii) Class B, Class C, Class D and Class E Principal Collections. Except as otherwise provided in any Issuance Supplement, funds on deposit in the Collection Account to the extent of the product of (i) the sum of the Class B Floating Allocation Percentage, the Class C Floating Allocation Percentage, the Class D Floating Allocation Percentage and the Class E Floating Allocation Percentage and (ii) Principal Collections with respect to such Business Day shall be allocated and paid to the Holder of the Exchangeable Transferor Certificate pursuant to (and subject to the limitations stated in) Section 4.3(b). Notwithstanding the foregoing: (x) amounts payable to the Holder of the Exchangeable Transferor Certificate pursuant to this subsection 4.8(b)(ii) shall instead be deposited in the Equalization Account to the extent necessary to prevent the Transferor Interest from being less than the Minimum Transferor Interest; and (y) the Holder of the Exchangeable Transferor Certificate shall be required to make amounts allocated and paid to the Holder of the Exchangeable Transferor Certificate pursuant to this subsection 4.8(b)(ii) available for use in the following priority: first as Reallocated Principal Collections, and second as Shared Principal Collections, in each case to the extent needed for that purpose on the related Transfer Date. (c) On each Business Day on and after the Amortization Period Commencement Date until the Monthly Period after the Monthly Period in which sufficient funds are deposited into the Accumulation Account and Principal Account collectively to reduce the Class A Adjusted Invested Amount and, if the Class B Expected Final Payment Date is the same as the Class A Expected Final Payment Date, the Class B Invested Amount to zero on the related Distribution Date: (i) Class A Principal Collections. Funds on deposit in the Collection Account to the extent of the product of (A) the Class A Fixed Allocation Percentage and (B) the amount of Principal Collections available in the Collection Account with respect to such Business Day shall (x) first be deposited into the Principal Account until the amount so deposited pursuant to subsections 4.8(c)(i), 4.8(c)(ii) and 4.8(c)(iii) during any Monthly Period equals the Monthly Principal for the related Distribution Date and (y) thereafter be treated as Shared Principal Collections. (ii) Class B, Class C, Class D and Class E Principal Collections. Funds on deposit in the Collection Account to the extent of the product of (A) the sum of the Class B Fixed Allocation Percentage, the Class C Fixed Allocation Percentage, the Class D Fixed Allocation Percentage and the Class E Fixed Allocation Percentage and (B) the amount of Principal Collections available in the Collection Account with respect to such Business Day shall (x) first be deposited into the Principal Account until the amount so deposited pursuant to subsections 4.8(c)(i), 4.8(c)(ii) and 4.8(c)(iii) during any Monthly Period equals the Monthly Principal for the related Distribution Date and (y) thereafter be allocated and paid to the Holder of the Exchangeable Transferor Certificate pursuant to (and subject to the limitations stated in) Section 4.3(b). (iii) Series Transferor Principal Collections. If such day falls in the Scheduled Amortization Period, funds on deposit in the Collection Account representing the Series Transferor Principal Collections shall be deposited into the Principal Account until the amount so deposited pursuant to subsections 4.8(c)(i), 4.8(c)(ii) and 4.8(c)(iii) during any Monthly Period equals the Monthly Principal for the related Distribution Date. Any additional Series Transferor Principal Collections for such Monthly Period shall be allocated and paid to the Holder of the Exchangeable Transferor Certificate pursuant to (and subject to the limitations stated in) Section 4.3(b). Notwithstanding the foregoing: (x) amounts payable to the Holder of the Exchangeable Transferor Certificate pursuant to subsection 4.8(c)(ii) shall instead be deposited in the Equalization Account to the extent necessary to prevent the Transferor Interest from being less than the Minimum Transferor Interest; and (y) the Holder of the Exchangeable Transferor Certificate shall be required to make amounts allocated and paid to the Holder of the Exchangeable Transferor Certificate pursuant to subsection 4.8(c)(ii) available for use in the following priority: first as Reallocated Principal Collections, and second as Shared Principal Collections, in each case to the extent needed for that purpose on the related Transfer Date. (d) On each Business Day on and after the Amortization Period Commencement Date and after the Monthly Period in which sufficient funds are deposited into the Accumulation Account and the Principal Account collectively to reduce the Class A Adjusted Invested Amount and, if the Class B Expected Final Payment Date is the same as the Class A Expected Final Payment Date, the Class B Invested Amount to zero on the related Distribution Date: (i) Investor Principal Collections. Funds on deposit in the Collection Account to the extent of the product of (A) the Fixed Allocation Percentage and (B) the amount of Principal Collections available in the Collection Account with respect to such Business Day shall (x) first be deposited into the Principal Account until the amount so deposited pursuant to subsections 4.8(d)(i) and 4.8(d)(ii) during any Monthly Period equals the Monthly Principal and (y) thereafter be treated as Shared Principal Collections. (ii) Series Transferor Principal Collections. If such Business Day falls in the Scheduled Amortization Period, funds on deposit in the Collection Account representing the Series Transferor Principal Collections shall be deposited into the Principal Account until the amount so deposited pursuant to subsections 4.8(d)(i) and 4.8(d)(ii) during any Monthly Period equals the Monthly Principal for the related Distribution Date. Any additional Series Transferor Principal Collections for such Monthly Period shall be allocated and paid to the Holder of the Exchangeable Transferor Certificate pursuant to (and subject to the limitations stated in) Section 4.3(b). (e) Prior to the Amortization Period Commencement Date, pursuant to subsection 4.3(e) of the Agreement, the Transferor may at its option, or shall be required to, in each case to the extent specified in the applicable Issuance Supplement, apply Shared Principal Collections, after the applications with respect thereto specified in the provisions of subsection 4.3(e) of the Agreement, to make payments of principal or deposits to the Principal Account with respect to the Class A Certificates and Class B Certificates. Such Shared Principal Collections allocat ed to the Series 1999-1 Certificates may be applied on each Busi ness Day with respect to the Revolving Period, at the option of the Transferor and in an amount to be determined by the Transferor, to make deposits to the Principal Account, for payment as provided in Sections 4.13 and 5.1. (f) On the first Business Day following the occurrence of a Portfolio Imbalance Event, funds on deposit in the Equalization Account shall, in accordance with written instructions from the Servicer, be deposited in the Principal Account and allocated to Series 1999-1 to the extent of the Series Portfolio Correction Distribution Amount. Section 4.9 Determination of Required Amounts. (a) On each Business Day, the Servicer shall determine the amount (the "Daily Required Amount"), if any, by which (x) the sum of (i) the Class A Carrying Cost Target for the related Distribution Date, (ii) the Class B Carrying Cost Target for the related Distribution Date, (iii) the Servicing Fee for the current Monthly Period, plus any unpaid Servicing Fees from prior Monthly Periods, (iv) the sum of (A) the Class A Investor Default Amount for such Business Day, plus (B) any unpaid Class A Investor Default Amount for any previous Business Day during such Monthly Period, plus (C) the Class A Uncovered Dilution Amount for such Business Day, plus (D) any unpaid Class A Uncovered Dilution Amount for any previous Business Day during such Monthly Period, (v) any unreimbursed Class A Investor Charge-Offs, (vi) the sum of (A) the Class B Investor Default Amount for such Business Day, plus (B) any unpaid Class B Investor Default Amount for any previous Business Day during such Monthly Period, plus (C) the Class B Uncovered Dilution Amount for such Business Day, plus (D) any unpaid Class B Uncovered Dilution Amount for any previous Business Day during such Monthly Period, (vii) any unreimbursed Class B Investor Charge-Offs, (viii) the sum of Class C Interest and any Carryover Class C Interest for the related Distribution Date, (ix) the sum of (A) the Class C Investor Default Amount for such Business Day, plus (B) any unpaid Class C Investor Default Amount for any previous Business Day during such Monthly Period, plus (C) the Class C Uncovered Dilution Amount for such Business Day, plus (D) any unpaid Class C Uncovered Dilution Amount for any previous Business Day during such Monthly Period, (x) any unreimbursed Class C Investor Charge-Offs, (xi) the sum of Class D Interest, any Carryover Class D Interest, the Insurance Premium and any unpaid Reimbursement Amounts for the related Distribution Date, (xii) the sum of (A) the Class D Investor Default Amount for such Business Day, plus (B) the unpaid Class D Investor Default Amount for any previous Business Day during such Monthly Period, plus (C) the Class D Uncovered Dilution Amount for such Business Day, plus (D) Class D Uncovered Dilution Amount for any previous Business Day during such Monthly Period, (xiii) any unreimbursed Class D Investor Charge-Offs, (xiv) the sum of (A) the Class E Investor Default Amount for such Business Day, plus (B) any unpaid Class E Investor Default Amount for any previous Business Day during such Monthly Period, plus (C) the Class E Uncovered Dilution Amount for such Business Day, plus (D) any Class E Uncovered Dilution Amount for any previous Business Day during such Monthly Period, (xv) any unreimbursed Class E Investor Charge-Offs and (xvi) Mezzanine Facilities Costs and Junior Facilities Costs exceeds (y) the net amount applied with respect to such amounts from Available Series 1999-1 Finance Charge Collections on such Business Day and all prior Business Days in the same Monthly Period and applied pursuant to Section 4.10 on all prior Business Days in the same Monthly Period. (b) On each Determination Date, the Servicer shall determine the amount (the "Monthly Class A Required Amount"), if any, by which (x) the sum of (i) the sum of Class A Carrying Costs for the related Distribution Date, (ii) the Class A Floating Allocation Percentage of the sum of the Servicing Fee for the related Monthly Period, plus any unpaid Servicing Fees from prior Monthly Periods (the "Class A Servicing Fee Share") and (iii) Mezzanine Facilities Costs relating to the Class A Certificates, exceeds (y) the net amount deposited with respect to such amounts from Available Series 1999-1 Finance Charge Collections, Excess Finance Charge Collections and Series Transferor Finance Charge Collections pursuant to Sections 4.8(a) and 4.10 during the related Monthly Period. (c) On each Determination Date, the Servicer shall determine the amount (the "Monthly Class B Required Amount"), if any, by which (x) the sum of (i) the sum of Class B Carrying Costs for the related Distribution Date, (ii) the Class B Floating Allocation Percentage of the sum of the Servicing Fee for the related Monthly Period, plus any unpaid Servicing Fees from prior Monthly Periods (the "Class B Servicing Fee Share") and (iii) Mezzanine Facilities Costs relating to the Class B Certificates, exceeds (y) the net amount deposited with respect to such amounts from Available Series 1999-1 Finance Charge Collections, Excess Finance Charge Collections and Series Transferor Finance Charge Collections pursuant to Sections 4.8(a) and 4.10 during the related Monthly Period. (d) On each Determination Date, the Servicer shall determine the amount (the "Monthly Class C Required Amount"), if any, by which (x) the sum of (i) the sum of Class C Interest and any Carryover Class C Interest for the related Distribution Date, and (ii) the Class C Floating Allocation Percentage of the sum of the Servicing Fee for the related Monthly Period, plus any unpaid Servicing Fees from prior Monthly Periods (the "Class C Servicing Fee Share"), exceeds (y) the net amount deposited with respect to such amounts from Available Series 1999-1 Finance Charge Collections, Excess Finance Charge Collections and Series Transferor Finance Charge Collections pursuant to Sections 4.8(a) and 4.10 during the related Monthly Period. (e) On each Determination Date, the Servicer shall determine the amount (the "Monthly Class D Required Amount"), if any, by which (x) the sum of (i) the sum of Class D Interest, any Carryover Class D Interest, the Insurance Premium and any unpaid Reimbursement Amounts for the related Distribution Date, and (ii) the Class D Floating Allocation Percentage of the sum of the Servicing Fee for the related Monthly Period, plus any unpaid Servicing Fees from prior Monthly Periods (the "Class D Servicing Fee Share"), exceeds (y) the net amount deposited with respect to such amounts from Available Series 1999-1 Finance Charge Collections, Excess Finance Charge Collections and Series Transferor Finance Charge Collections pursuant to Sections 4.8(a) and 4.10 during the related Monthly Period. Section 4.10 Daily Applications of Excess Finance Charge Collections and Series Transferor Finance Charge Collections. If on any Business Day the Daily Required Amount is greater than zero, the Servicer shall apply Excess Finance Charge Collections allocated to Series 1999-1 and Series Transferor Finance Charge Collections to cover the Daily Required Amount by applying such funds to any uncovered amounts in the priority listed in Section 4.8(a). In addition, if on any Business Day, the Daily Required Amount is greater than the amount of Excess Finance Charge Collections allocated to Series 1999-1 and Series Transferor Finance Charge Collections, and any Finance Charge Collections allocable to Series 1999-1 have been released to the Transferor on any earlier Business Day in the same Monthly Period, then the Transferor shall make an amount equal to the amount so released (and not previously made available pursuant to this sentence) to cover the Daily Required Amount by applying such funds to any uncovered amounts in the priority listed in Section 4.8(a). Excess Finance Charge Collections allocated to the Series 1999-1 Certificates 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 Daily 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 Investor Charge-Offs; Reallocation of Principal Collections. (a) On or before each Transfer Date, the Servicer shall take the following steps: (i) The Servicer shall calculate the sum of the Class E Investor Default Amounts and the Class E Uncovered Dilution Amounts for all Business Days in the related Monthly Period (such sum being the "Class E Reduction Amount"). If on any Transfer Date, the Class E Reduction Amount for the prior Monthly Period exceeds the sum of the amounts allocated with respect thereto pursuant to Sections 4.8(a)(xv) and 4.10 with respect to such Monthly Period, the Class E Invested Amount will be reduced by the amount of such excess, but not below zero, on such Transfer Date. Any such reduction shall be taken into account prior to any further reductions called for below. (ii) The Servicer shall calculate the sum of the Class D Investor Default Amounts and the Class D Uncovered Dilution Amounts for all Business Days in the related Monthly Period (such sum being the "Class D Reduction Amount"). If on any Transfer Date, the Class D Reduction Amount for the prior Monthly Period exceeds the sum of the amounts allocated with respect thereto pursuant to Sections 4.8(a)(xii) and 4.10 with respect to such Monthly Period, the Class E Invested Amount will be reduced by the amount of such excess, but not below zero, on such Transfer Date. If such reduction would cause the Class E Invested Amount to be a negative number, the Class E Invested Amount will be reduced to zero, and the Class D Invested Amount will be reduced by the amount by which the Class E Invested Amount would have been reduced below zero, but shall not be reduced below zero itself. Any such reduction shall be taken into account prior to any further reductions called for below. (iii) The Servicer shall calculate the sum of the Class C Investor Default Amounts and the Class C Uncovered Dilution Amounts for all Business Days in the related Monthly Period (such sum being the "Class C Reduction Amount"). If on any Transfer Date, the Class C Reduction Amount for the prior Monthly Period exceeds the sum of the amounts allocated with respect thereto pursuant to Sections 4.8(a)(ix) and 4.10 with respect to such Monthly Period, the Class E Invested Amount will be reduced by the amount of such excess, but not below zero, on such Transfer Date. If such reduction would cause the Class E Invested Amount to be a negative number, the Class E Invested Amount will be reduced to zero, and the Class D Invested Amount will be reduced by the amount by which the Class E Invested Amount would have been reduced below zero, but shall not be reduced below zero itself. If 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, but shall not be reduced below zero itself. Any such reductions shall be taken into account prior to any further reductions called for below. (iv) The Servicer shall calculate the sum of the Class B Investor Default Amounts and the Class B Uncovered Dilution Amounts for all Business Days in the related Monthly Period (such sum being the "Class B Reduction Amount"). If on any Transfer Date, the Class B Reduction Amount for the prior Monthly Period exceeds the sum of the amounts allocated with respect thereto pursuant to Sections 4.8(a)(vi) and 4.10 with respect to such Monthly Period, the Class E Invested Amount will be reduced by the amount of such excess, but not below zero, on such Transfer Date. If such reduction would cause the Class E Invested Amount to be a negative number, the Class E Invested Amount will be reduced to zero, and the Class D Invested Amount will be reduced by the amount by which the Class E Invested Amount would have been reduced below zero, but shall not be reduced below zero itself. If 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, but shall not be reduced below zero itself. If such reduction would cause the Class C Invested Amount to be a negative number, the Class C Invested Amount will be reduced to zero, and the Class B Invested Amount will be reduced by the amount by which the Class C Invested Amount would have been reduced below zero, but shall not be reduced below zero itself. Any such reductions shall be taken into account prior to any further reductions called for below. (v) The Servicer shall calculate the sum of the Class A Investor Default Amounts and the Class A Uncovered Dilution Amounts for all Business Days in the related Monthly Period (such sum being the "Class A Reduction Amount"). If on any Transfer Date, the Class A Reduction Amount for the prior Monthly Period exceeds the sum of the amounts allocated with respect thereto pursuant to Sections 4.8(a)(iv) and 4.10 with respect to such Monthly Period, the Class E Invested Amount will be reduced by the amount of such excess, but not below zero, on such Transfer Date. If such reduction would cause the Class E Invested Amount to be a negative number, the Class E Invested Amount will be reduced to zero, and the Class D Invested Amount will be reduced by the amount by which the Class E Invested Amount would have been reduced below zero, but shall not be reduced below zero itself. If 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, but shall not be reduced below zero itself. If such reduction would cause the Class C Invested Amount to be a negative number, the Class C Invested Amount will be reduced to zero, and the Class B Invested Amount will be reduced by the amount by which the Class C Invested Amount would have been reduced below zero, but shall not be reduced below zero itself. If such reduction 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 shall not be reduced below zero itself. Any such reductions shall be taken into account prior to any further reductions called for below. (b) On or before each Transfer Date, the Holder of the Exchangeable Transferor Certificate shall deposit into the Principal Account any Subordinated Principal Collections received by such Holder during the related Monthly Period that are required for purposes of reallocation as described below, and the Servicer shall instruct the Trustee in writing to, and the Trustee in accordance with such instructions shall, withdraw from the Principal Account and apply Subordinated Principal Collections, to make the following distributions on such Transfer Date in the following priority, in each case to the extent of Subordinated Principal Collections available after giving effect to all of the prior distributions: (i) an amount equal to any positive Monthly Class A Required Amount shall be applied pursuant to Sections 4.8(a)(i), (iii) (but only to the extent of the Class A Servicing Fee Share) and (xviii) (but only as to Mezzanine Facilities Costs described in such Section relating to the Class A Certificates); (ii) an amount equal to any positive Monthly Class B Required Amount shall be applied pursuant to Sections 4.8(a)(ii), (iii) (but only to the extent of the Class B Servicing Fee Share) and (xviii) (but only as to Mezzanine Facilities Costs described in such Section relating to the Class B Certificates); (iii) an amount equal to any positive Monthly Class C Required Amount shall be applied pursuant to Sections 4.8(a)(iii) (but only to the extent of the Class C Servicing Fee Share) and (viii); and (iv) an amount equal to any positive Monthly Class D Required Amount shall be applied pursuant to Sections 4.8(a)(iii) (but only to the extent of the Class D Servicing Fee Share) and (xi); provided, that: (1) the aggregate amount of Subordinated Principal Collections distributed pursuant to clauses (i) through (iv) above (the "Reallocated Principal Collections") shall not exceed the sum of the Class B Invested Amount, the Class C Invested Amount, the Class D Invested Amount and the Class E Invested Amount, in each case as of the date of application after giving effect to any reductions in the Invested Amount made pursuant to Section 4.11(a) on such Transfer Date; (2) the aggregate amount of Subordinated Principal Collections distributed pursuant to clauses (ii) through (iv) above shall not exceed the sum of the Class C Invested Amount, the Class D Invested Amount and the Class E Invested Amount after giving effect to any reductions in the Invested Amount made pursuant to Section 4.11(a) on such Transfer Date; (3) the aggregate amount of Subordinated Principal Collections distributed pursuant to clauses (iii) and (iv) above shall not exceed the sum of the Class D Invested Amount and the Class E Invested Amount after giving effect to any reductions in the Invested Amount made pursuant to Section 4.11(a) on such Transfer Date; and (4) the aggregate amount of Subordinated Principal Collections distributed pursuant to clause (iv) above shall not exceed the Class E Invested Amount after giving effect to any reductions in the Invested Amount made pursuant to Section 4.11(a) on such Transfer Date. (c) On each Transfer Date, the Class E Invested Amount shall be reduced, but not below zero, by the amount of Reallocated Principal Collections for such Transfer Date. If such reduction would cause the Class E Invested Amount to be a negative number, the Class E Invested Amount shall be reduced to zero, and the Class D Invested Amount shall be reduced by the amount by which the Class E Invested Amount would have been reduced below zero, but shall not be reduced below zero itself. If such reduction would cause the Class D Invested Amount to be a negative number, the Class D Invested Amount shall be reduced to zero, and the Class C Invested Amount shall be reduced by the amount by which the Class D Invested Amount would have been reduced below zero, but shall not be reduced below zero itself. If such reduction would cause the Class C Invested Amount to be a negative number, the Class C Invested Amount shall be reduced to zero, and the Class B Invested Amount shall be reduced by the amount by which the Class C Invested Amount would have been reduced below zero, but shall not be reduced below zero itself. (d) Any reduction to the invested amount of any Class pursuant to this Section 4.11 shall be applied on a pro rata basis, without preference or priority, among all Certificates then outstanding in that Class. Section 4.12 Payment of Certificate Interest and Other Amounts. On each Transfer Date, the Trustee, acting in accordance with written instructions from the Servicer set forth in the Daily Report for such day, shall withdraw the amounts on deposit in the Interest Funding Account with respect to the prior Monthly Period allocable to the Series 1999-1 Certificates and deposit such amounts in the Distribution Account in the following priority: (a) for payment to the Class A Certificateholders on account of Class A Carrying Costs, the lesser of the amount of such Class A Carrying Costs and the net amounts deposited into the Interest Funding Account with respect to the related Monthly Period (including from Excess Finance Charge Collections, Series Transferor Finance Charge Collections or Reallocated Principal Collections) pursuant to subsection 4.8(a)(i); and if such deposited amount is less than the total Class A Carrying Costs, the available funds shall be allocated first to Class A Interest on all Class A Certificates on a pro rata basis, without preference or priority, and any remaining available funds shall be allocated to pay other Class A Carrying Costs relating to the Class A Certificates, on a pro rata basis; (b) for payment to the Class B Certificateholders on account of Class B Carrying Costs, the lesser of the amount of such Class B Carrying Costs and the net amount deposited into the Interest Funding Account with respect to the related Monthly Period (including from Excess Finance Charge Collections, Series Transferor Finance Charge Collections or Reallocated Principal Collections) pursuant to subsection 4.8(a)(ii); and if such deposited amount is less than the total Class B Carrying Costs, the available funds shall be allocated first to Class B Interest on all Class B Certificates on a pro rata basis, without preference or priority, and any remaining available funds shall be allocated to pay other Class B Carrying Costs relating to the Class B Certificates, on a pro rata basis; (c) for payment to the Class C Certificateholders on account of Class C Interest and any Carryover Class C Interest, the net amount deposited into the Interest Funding Account with respect to the related Monthly Period (including from Excess Finance Charge Collections, Series Transferor Finance Charge Collections or Reallocated Principal Collections) pursuant to subsection 4.8(a)(viii); and if such deposited amount is less than the total Class C Interest and any Carryover Class C Interest, the available funds shall be allocated among such amounts owed with respect to all Class C Certificates on a pro rata basis, without preference or priority; (d) for payment to the Class D Certificateholders on account of Class D Interest and any Carryover Class D Interest, the net amount deposited into the Interest Funding Account with respect to the related Monthly Period (including from Excess Finance Charge Collections, Series Transferor Finance Charge Collections or Reallocated Principal Collections) pursuant to subsection 4.8(a)(xi); and if such deposited amount is less than the total Class D Interest and any Carryover Class D Interest, the available funds shall be allocated among such amounts owed with respect to all Class D Certificates on a pro rata basis, without preference or priority; (e) for payment to the Class E Certificateholders on account of interest and other amounts payable with respect to the Class E Certificates; (f) for payment of Mezzanine Facilities Costs with respect to first the Class A Certificates and then the Class B Certificates, the net amount deposited into the Interest Funding Account with respect to the related Monthly Period (including from Excess Finance Charge Collections, Series Transferor Finance Charge Collections or Reallocated Principal Collections) pursuant to subsection 4.8(a)(xviii); and (g) for payment of Junior Facilities Costs with respect to first the Class A Certificates and then the Class B Certificates, the net amount deposited into the Interest Funding Account with respect to the related Monthly Period (including from Excess Finance Charge Collections or Series Transferor Finance Charge Collections) pursuant to subsection 4.8(a)(xx). On each Distribution Date, the Paying Agent shall pay such amounts to the applicable Certificateholders in accordance with Section 5.1 of the Agreement. Section 4.13 Payment of Certificate Principal. The Trustee, acting in accordance with written instructions from the Servicer set forth in the Daily Report for such day, shall withdraw from the Principal Account and deposit in the Accumulation Account or the Distribution Account, as applicable, in the following priority, in each case to the extent of funds available in the Principal Account after giving effect to all of the prior applications: (a) On the Transfer Date preceding each Distribution Date with respect to any Accumulation Period, an amount equal to the Class A Principal for such Distribution Date shall be deposited into the Accumulation Account. On each Class A Expected Final Payment Date or, if earlier, on the first Distribution Date with respect to the Rapid Amortization Period, the principal balance on deposit in the Accumulation Account shall be transferred to the Distribution Account. On each Distribution Date with respect to the Rapid Amortization Period or a Scheduled Amortization Period when no Accumulation Period is in progress, an amount equal to the Class A Principal for such Distribution Date shall be deposited into the Distribution Account. On the Class A Expected Final Payment Date and on each Distribution Date with respect to the Rapid Amortization Period or a Scheduled Amortization Period when no Accumulation Period is in progress, the Paying Agent shall pay in accordance with Section 5.1 to the Class A Certificateholders from the Distribution Account such amounts deposited into the Distribution Account on the related Transfer Date. (b) On the Transfer Date preceding the Class B Principal Payment Commencement Date and each Distribution Date thereafter, an amount equal to the Class B Principal for such Distribution Date. On the Class B Principal Payment Commencement Date, after the payment of any principal amounts to the Class A Certificates on such day, and on each Distribution Date thereafter until the Class B Invested Amount is paid in full, the Paying Agent shall pay in accordance with Section 5.1 to the Class B Certificateholders from the Distribution Account such amount deposited into the Distribution Account on the related Transfer Date. (c) On the Transfer Date preceding the Class C Principal Payment Commencement Date and each Distribution Date thereafter, an amount equal to the Class C Principal for such Distribution Date. On the Class C Principal Payment Commencement Date, after the payment of any principal amounts to the Class B Certificates on such day, and on each Distribution Date thereafter until the Class C Invested Amount is paid in full, the Paying Agent shall pay in accordance with Section 5.1 to the Class C Certificateholders from the Distribution Account such amount deposited into the Distribution Account on the related Transfer Date. (d) On the Transfer Date preceding the Class D Principal Payment Commencement Date and each Distribution Date thereafter, an amount equal to the Class D Principal for such Distribution Date. On the Class D Principal Payment Commencement Date, after the payment of any principal amounts to the Class C Certificates 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 to the Class D Certificateholders from the Distribution Account such amount deposited into the Distribution Account on the related Transfer Date. (e) On the Transfer Date preceding the Class E Principal Payment Commencement Date and each Distribution Date thereafter, an amount equal to the Class E Principal for such Distribution Date. On the Class E Principal Payment Commencement Date, after the payment of any principal amounts to the Class D Certificates on such day, and on each Distribution Date thereafter until the Class E Invested Amount is paid in full, the Paying Agent shall pay in accordance with Section 5.1 to the Class E Certificateholders from the Distribution Account such amount deposited into the Distribution Account on the related Transfer Date. (f) In addition, during the Revolving Period, Shared Principal Collections shall be applied to make principal payments on any Class A VFCs and Class B VFCs to the extent elected by the Transferor, or required, in each case in accordance with the applicable Issuance Supplement. (g) On the Transfer Date preceding a Portfolio Correction Distribution Date, an amount equal to the Series Portfolio Correction Distribution Amount. On the Portfolio Correction Distribution Date, the Paying Agent shall pay in accordance with Section 5.1 to the Class A Certificateholders (and, if the Class A Invested Amount has been paid in full, to the Class B Certificateholders and the Certificateholders of each more junior Class sequentially, in each case to the extent that the invested amount of each more senior class has been paid in full) from the Distribution Account such amount deposited into the Distribution Account on the related Transfer Date. Any amounts allocable to the Series 1999-1 Certificates and to any Monthly Period that remain in the Principal Account on the related Distribution Date after all applications for the benefit of Series 1999-1 required on that Distribution Date shall be treated as Shared Principal Collections and applied in accordance with Section 4.3(e) of the Agreement on that Distribution Date. Section 4.14 Shared Principal Collections. The amount of Shared Principal Collections allocated to the Series 1999-1 Certificates and to be treated as Available Principal Collections for any Business Day with respect to the Amortization Period shall equal the product of (a) Shared Principal Collections for all Series for such Business Day and (b) a fraction, the numerator of which is the Principal Shortfall for the Series 1999-1 Certificates for such Business Day and the denominator of which is the aggregate amount of Principal Shortfalls for all Series for such Business Day. For any Business Day with respect to the Revolving Period, Shared Principal Collections allocated to the Series 1999-1 Certificates shall be zero. Section 4.15 Allocation of Adjustment Payments. All Adjustment Payments that are paid when due shall be treated as Principal Collections. All Adjustment Payments that are made after such payments are due shall be treated as Finance Charge Collections. Section 4.16 Spread Account. (a) On or prior to the Closing Date, the Servicer shall establish and maintain with a Qualified Institution, which may be the Trustee, on behalf of the Trust, for the benefit of the Class D Certificateholders and the Spread Account Residual Interest Holders, a segregated account (the "Spread Account") bearing a designation clearly indicating that the funds deposited therein are held for the benefit of the Class D Certificateholders, the Insurer and the Spread Account Residual Interest Holders. Except as otherwise provided in this Section 4.16, the Trustee shall possess all right, title and interest in all funds on deposit from time to time in the Spread Account and in all proceeds thereof. The Spread Account shall be under the sole dominion and control of the Trustee for the benefit of the Class D Certificateholders and the Spread Account Residual Interest Holders. If at any time the institution holding the Spread Account ceases to be a Qualified Institution, the Transferor shall notify the Trustee, and the Trustee upon being notified (or the Servicer on its behalf) shall, within ten (10) Business Days (or such longer period as to which the Rating Agency rating the Class D Certificates may consent) establish a new Spread Account meeting the conditions specified above with a Qualified Institution and shall transfer any cash or any investments to such new Spread Account. (b) Funds on deposit in the Spread Account shall be invested at the written direction of the Servicer by the Trustee in Cash Equivalents. Funds on deposit in the Spread Account on any Distribution Date, after giving effect to any withdrawals from and deposits to the Spread Account on such Distribution Date, shall be invested in such investments that will mature so that such funds will be available for withdrawal on or prior to the following Distribution Date. The Trustee shall maintain, for the benefit of the Class D Certificateholders, the Insurer and the Spread Account Residual Interest Holders, possession of the instruments or securities, if any, evidencing the investment of funds in the Spread Account in Cash Equivalents. On each Distribution Date (but subject to subsections 14.16(c), (d) and (e)), the Investment Earnings, if any, accrued since the preceding Distribution Date on funds on deposit in the Spread Account shall be paid by the Trustee upon the written instruction of the Servicer: first, to the Insurer to the extent of any unpaid Insurance Premium and Reimbursement Amounts, and second, to the Spread Account Residual Interest Holder. For purposes of determining the availability of funds or the balance in the Spread Account for any reason hereunder (subject to subsections 14.16(c), (d) and (e)), all Investment Earnings shall be determined not to be available or on deposit. (c) If, on any Distribution Date, the aggregate amount available (i) for distribution to the Class D Certificate holders pursuant to subsection 4.12(d) and Section 5.1 and (ii) to cover the Insurance Premium and the Reimbursement Amounts to the Insurer pursuant to Section 22, is less than the Class D Interest and Carryover Class D Interest and any unpaid Insurance Premium and Reimbursement Amounts for that Distribution Date, the Trustee, at the written direction of the Servicer, shall withdraw from the Spread Account the amount of such deficiency up to the Available Spread Account Amount and, if the Available Spread Account Amount is less than such deficiency, Investment Earnings credited to the Spread Account, and distribute such amount to the Paying Agent for payment to the Class D Certificateholders in respect of interest on the Class D Certificates and to the Insurer to cover any unpaid Insurance Premium and Reimbursement Amounts. (d) On the Class D Release Date, if the Class D Investor Principal Balance is greater than the Class D Invested Amount, then the Trustee, at the written instruction of the Servicer, shall withdraw from the Spread Account the amount of such excess, up to the Available Spread Account Amount (after giving effect to the application of amounts from the Spread Account pursuant to subsection 4.16(c) on such Distribution Date) and, if the Available Spread Account Amount is less than such deficiency, Investment Earnings credited to the Spread Account, and pay such amount to the Paying Agent for distribution to the Class D Certificateholders in respect of principal of the Class D Certificates. (e) On and after the Class D Release Date, if the sum of the Class D Investor Default Amount and any Class D Uncovered Dilution Amount on any Business Day exceeds the Available Series 1999-1 Finance Charge Collections and Excess Finance Charge Collections available to fund such amount pursuant to subsection 4.8(xii) and Section 4.9, then the Trustee, at the written instruction of the Servicer, shall withdraw from the Spread Account the amount of such excess, up to the Available Spread Account Amount (after giving effect to the application of amounts from the Spread Account pursuant to subsections 14.16(c) and 4.16(d) on such Distribution Date) and, if the Available Spread Account Amount is less than such deficiency, Investment Earnings credited to the Spread Account, and shall apply such amounts as provided in subsection 4.8(xii). (f) If on any Business Day, after giving effect to all withdrawals from the Spread Account, the Available Spread Account Amount is less than the Required Spread Account Amount as of the most recent Distribution Date, Available Series 1999-1 Finance Charge Collections and Excess Finance Charge Collections shall be deposited into the Spread Account pursuant to subsection 4.8(xix) and Section 4.9 in the amount of the Spread Account Deficiency (or, if less, the full amount available). (g) After the Spread Account Percentage has been increased to a percentage above zero, the Spread Account Percentage shall remain at such percentage until the Distribution Date on which the Quarterly Excess Spread Percentage has increased to a level that is associated with a lower Spread Account Percentage, in which case the Spread Account Percentage shall be decreased to the appropriate percentage, but never by more than one level per Monthly Period, even if the Quarterly Excess Spread percentage has increased to a level that is otherwise associated with a Spread Account Percentage that is two or more levels lower. Notwithstanding the foregoing, if a Pay Out Event with respect to Series 1999-1 has occurred, the Spread Account Percentage shall equal 4% (as provided in the definition of Spread Account Percentage) and shall no longer be subject to reduction. (h) If on any Distribution Date, after giving effect to all withdrawals from and deposits to the Spread Account, the amount on deposit in the Spread Account would exceed the Required Spread Account Amount then in effect, the Trustee shall, at the written direction of the Servicer, release, or direct the holder of the Spread Account to release, such excess first to the Insurer to pay unpaid Insurance Premiums and Reimbursement Amounts and second to the Spread Account Residual Interest Holders. On the date on which the Class D Investor Principal Balance has been paid in full, the Trustee, at the written direction of the Servicer, shall withdraw from the Spread Account all amounts then remaining in the Spread Account and pay such amounts first to the Insurer to pay unpaid Insurance Premiums and Reimbursement Amounts and second to the Spread Account Residual Interest Holders. (i) The Transferor shall not sell, transfer or assign any interest in the Spread Account unless (i) it has delivered to the Trustee an Opinion of Counsel to the effect that such sale, transfer or assignment will not cause the Trust to be characterized for Federal income tax purposes as an association taxable as a corporation or otherwise have a material adverse impact on the Federal income taxation of any outstanding Series of Investor Certificates and (ii) it has received the prior written consent of the Insurer. Section 4.17 Reserve Account. (a) If any Class A Certificates are issued with an Accumulation Period, then on or prior to the Reserve Account Funding Date, the Servicer shall establish and maintain with a Qualified Institution, which may be the Trustee, in the name of the Trust, on behalf of the Trust, for the benefit of the Certificateholders, a segregated trust account (the "Reserve Account"), bearing a designation clearly indicating that the funds deposited therein are held for the benefit of the Certificateholders. The Trustee shall possess all right, title and interest in all funds on deposit from time to time in the Reserve Account and in all proceeds thereof. The Reserve Account shall be under the sole dominion and control of the Trustee for the benefit of the Certificateholders. If at any time a Qualified Institution holding the Reserve Account ceases to be a Qualified Institution, the Transferor shall notify the Trustee in writing, and the Trustee upon being notified (or the Servicer on its behalf) shall, within 10 Business Days, establish a new Reserve Account meeting the conditions specified above, and shall transfer any cash or any investments to such new Reserve Account. The Trustee, at the written direction of the Servicer, shall (i) make withdrawals from the Reserve Account from time to time in an amount up to the Available Reserve Account Amount at such time, for the purposes set forth in this Series Supplement, and (ii) on each Transfer Date (from and after the Reserve Account Funding Date) prior to termination of the Reserve Account make a deposit into the Reserve Account in the amount specified in, and otherwise in accordance with, Section 4.8(a)(xvii). (b) Funds on deposit in the Reserve Account shall be invested by the Trustee in Cash Equivalents pursuant to the written direction of the Servicer. Funds on deposit in the Reserve Account on any Transfer Date, after giving effect to any withdrawals from the Reserve Account on such Transfer Date, shall be invested in such investments that will mature so that such funds will be available for withdrawal on or prior to the following Transfer Date. The Trustee shall maintain for the benefit of the Certificateholders possession of the negotiable instruments or securities, if any, evidencing such Cash Equivalents. No Cash Equivalents shall be disposed of prior to its maturity unless the Servicer so directs and either (i) such disposal will not result in a loss of all or part of the principal portion of such Cash Equivalents or (ii) prior to the maturity of such Cash Equivalents, a default occurs in the payment of principal, interest or any other amount with respect to such Cash Equivalents. On each Transfer Date, all interest and earnings (net of losses and investment expenses) accrued since the preceding Transfer Date on funds on deposit in the Reserve Account shall be retained in the Reserve Account (to the extent that the Available Reserve Account Amount is less than the Required Reserve Account Amount) and the balance, if any, shall be paid to the Transferor. For purposes of determining the availability of funds or the balance in the Reserve Account for any reason under this Series Supplement, except as otherwise provided in the preceding sentence, investment earnings on such funds shall be deemed not to be available or on deposit. (c) On or before each Transfer Date with respect to any Accumulation Period prior to the payment in full of the Class A Invested Amount and on or before the first Transfer Date with respect to the Rapid Amortization Period, the Servicer shall calculate the "Reserve Draw Amount" which shall be equal to the Accumulation Investment Shortfall with respect to each Transfer Date with respect to such Accumulation Period or the first Transfer Date with respect to the Rapid Amortization Period. (d) If the Reserve Draw Amount for any Transfer Date in the Scheduled Amortization Period up to and including the Transfer Date relating to the Class A/B VFC Expected Final Payment Date is greater than zero, the Reserve Draw Amount, up to the Available Reserve Account Amount, shall be withdrawn from the Reserve Account on such Transfer Date by the Trustee (acting in accordance with the written instructions of Servicer), and treated as Available Series 1999-1 Finance Charge Collections with respect to the related Monthly Period. (e) If the Reserve Account Surplus on any Transfer Date, after giving effect to all deposits to and withdrawals from the Reserve Account with respect to such Transfer Date, is greater than zero, the Trustee, acting in accordance with the written instructions of the Servicer, shall withdraw from the Reserve Account, and pay an amount equal to such Reserve Account Surplus first to the Insurer in respect of any unpaid Reimbursement Amounts and then to the Transferor. (f) Upon the earliest to occur of (i) the termination of the Trust pursuant to the Agreement, (ii) the first Distribution Date relating to the Rapid Amortization Period and (iii) the Distribution Date immediately preceding the Class A Expected Final Payment Date for the Class A Certificates that are subject to accumulation, the Trustee, acting in accordance with the instructions of the Servicer, after the prior payment of all amounts owing to the Series 1999-1 Certificateholders that are payable from the Reserve Account as provided herein, shall withdraw from the Reserve Account and pay all amounts, if any, on deposit in the Reserve Account first to the Insurer in respect of any unpaid Reimbursement Amounts and then to the Transferor and the Reserve Account shall be deemed to have terminated for purposes of this Series Supplement. Section 4.18 Accumulation Account. In connection with the issuance of any Class A Certificates that are subject to an Accumulation Period, the Trustee may establish and maintain with a Qualified Institution, which may be the Trustee, in the name of the Trust, on behalf of the Trust, for the benefit of the Certificateholders, a segregated trust account (an "Accumulation Account") to provide for the payment of the Class A Invested Amount. Section 4.19 Defeasance. On any Business Day falling prior to the Series 1999-1 Termination Date (but with not less than ten (10) Business Days' prior written notice from the Servicer to the Trustee and the Insurer), the Servicer may, upon instruction from Transferor, cause the undivided interest in the Trust represented by the Series 1999-1 Certificates to be conveyed to one or more Persons (who may be the holders of a new Series issued substantially contemporaneously with such prepayment, which new Series may have a greater undivided interest in the Trust than Series 1999-1) for a cash purchase price in an amount equal to the sum of (a) the Invested Amount, plus (b) to the extent not available from the Interest Funding Account, interest accrued and to accrue on the Series 1999-1 Certificates and other Facilities Costs through the date of final payment of each Class as specified below (after giving effect to any derivative instrument referred to below), plus (c) all unpaid Reimbursement Amounts. Any such conveyance shall be effective upon the date that the purchase price is deposited into the Principal Account as described below, and following such deposit the Series 1999-1 Certificates shall have no further interest in the Receivables. No such conveyance shall, however, be permitted if as a result thereof Transferor or any of its Affiliates would increase its undivided interest in the Receivables, and the Trustee shall be entitled to receive and rely on an Officer's Certificate to the effect that no such increase will result therefrom, nor shall such conveyance be permitted unless each Rating Agency confirms that it will not result in a downgrade or withdrawal of such Rating Agency's rating of any Class of Certificates. The purchase price shall be directly deposited in the Principal Account for distribution to the Holders on the next upcoming Distribution Date or, if later, with respect to each Class of Certificates, on its respective expected final payment date. In connection with any such conveyance, the Transferor shall transfer to the Trustee, for the Benefit of the holder of the Series 1999-1 Certificates and the Insurer one or more interest rate derivative instruments that, when combined with investment earnings on the cash purchase price deposited pursuant to this Section 4.19 will provide sufficient funds to assure timely payment of interest on the Certificates and other Facilities Costs and any Insurance Premium and unpaid Reimbursement Amounts until paid in full, and the Servicer shall cause such investment earnings and the proceeds of such derivatives to be applied to make interest payments and pay other Facilities Costs on the Certificates and any Insurance Premium, in accordance with the priorities in Section 4.8(a), on each Distribution Date. The Policy will terminate upon any such defeasance. 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 1999-1 Certificates: ARTICLE V DISTRIBUTIONS AND REPORTS TO INVESTOR CERTIFICATEHOLDERS Section 5.1 Distributions. On each Distribution Date, the Paying Agent shall distribute (in accordance with the Settlement Statement delivered by the Servicer to the Trustee and the Paying Agent pursuant to subsection 3.4(c) of the Agreement) to each Series 1999-1 Certificateholder of record on the immediately preceding Record Date (other than as provided in subsection 2.4(d) or in Section 12.3 of the Agreement respecting a final distribution) by wire transfer to such Series 1999-1 Certificateholder to an account designated by such Series 1999-1 Certificateholder by written notice given to the Paying Agent not less than five (5) Business Days prior to the related Distribution Date such Certificateholder's pro rata share (based on the aggregate Undivided Interests represented by Certificates held by such Certificateholder) of the following amounts: (i) to Class A Certificateholders, the amounts on deposit in the Distribution Account as are payable to the Class A Certificateholders pursuant to Sections 4.12 and 4.13; (ii) to Class B Certificateholders, the amounts on deposit in the Distribution Account as are payable to the Class B Certificateholders pursuant to Sections 4.12 and 4.13; (iii) to the Class C Certificateholders amounts on deposit in the Distribution Account as are payable to the Class C Certificateholders pursuant to Section 4.12 and 4.13; (iv) to the Class D Certificateholders amounts on deposit in the Distribution Account as are payable to the Class D Certificateholders pursuant to Section 4.12 and 4.13 of the Agreement and Section 22 of this Series Supplement; and (v) to the Class E Certificateholders amounts on deposit in the Distribution Account as are payable to the Class E Certificateholders pursuant to Section 4.12 and 4.13. Section 5.2 Certificateholders' Statement. (a) On the 15th day of each calendar month (or if such day is not a Business Day the next succeeding Business Day), the Paying Agent shall forward to each Certificateholder, the Insurer and the Rating Agency 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 (which, in the case of subclauses (i), (ii) and (iii) below, shall be stated on the basis of an original principal amount of $1,000 per Certificate and, in the case of subclauses (ix) and (x) below, shall be stated on an aggregate basis and on the basis of an original principal amount of $1,000 per Certificate): (i) the total amount distributed; (ii) the amount of such distribution allocable to Certificate Principal; (iii) the amount of such distribution allocable to Certificate Interest; (iv) the amount of Principal Collections received in the Collection Account during the preceding Monthly Period and allocated in respect of the Class A Certificates, the Class B Certificates, the Class C Certificates, the Class D Certificates and the Class E Certificates, respectively; (v) the amount of Finance Charge Collections processed during the preceding Monthly Period and allocated in respect of the Class A Certificates, the Class B Certificates, the Class C Certificates, the Class D Certificates and the Class E Certificates, respectively; (vi) 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 Class E Invested Amount, the Floating Allocation Percentage and, during the Amortization Period, the Class A Fixed Allocation Percentage, Class B Fixed Allocation Percentage, Class C Fixed Allocation Percentage, the Class D Fixed Allocation Percentage or the Class E Fixed Allocation Percentage, as applicable, with respect to the Principal Receivables in the Trust as of the end of the day on the Record Date; (vii) the aggregate outstanding balance of Accounts which are current, 30, 60, 90, 120, 150, 180 and 210 days delinquent as of the end of the day on the Record Date; (viii) the aggregate Investor Default Amount and the Default Amount for the preceding Monthly Period; (ix) the aggregate amount of Class A Investor Charge-Offs, Class B Investor Charge-Offs, Class C Investor Charge-Offs, Class D Investor Charge-Offs and Class E Investor Charge-Offs for the preceding Monthly Period; (x) the aggregate amount of the Servicing Fees for the preceding Monthly Period; (xi) the current rating from each Rating Agency for each Class of Investor Certificates; (xii) the aggregate amount of funds in the Equalization Account as of the last day of the Monthly Period immediately preceding the Determination Date; (xiii) the Class C Certificate Rate and the Class D Certificate Rate for the preceding Monthly Period; (xiv) the amount of any draws on the Policy, payments of Insurance Premium and unreimbursed Reimbursement Amounts; and (xv) the Deficiency Amount, if any, for such Monthly Period. (b) Annual Certificateholders' Tax Statement. On or before January 31 of each calendar year, beginning with calendar year 2000, the Servicer shall distribute to each Person who at any time during the preceding calendar year was a Series 1999-1 Certificateholder, a statement prepared by the Servicer containing the information required to be contained in the regular report to Series 1999-1 Certificateholders, as set forth in clauses (i), (ii) and (iii) above, aggregated for such calendar year or the applicable portion thereof during which such Person was a Series 1999-1 Certificateholder, together with such other customary information (consistent with the treatment of the Certificates as debt) as the Servicer deems necessary or desirable to enable the Series 1999-1 Certificateholders to prepare their tax returns. Such obligations of the Servicer shall be deemed to have been satisfied to the extent that substantially comparable information shall be provided by the Servicer pursuant to any requirements of the Internal Revenue Code as from time to time in effect. (c) Monthly Class D Certificateholders' Statement. Not later than each Transfer Date, the Servicer shall deliver a certificate substantially in the form of Exhibit B with respect to the immediately preceding Monthly Period to the Trustee, the Paying Agent, the Insurer and the Rating Agency. On each Distribution Date, the Paying Agent, on behalf of the Trustee, shall forward to each Class D Certificateholder such certificate prepared by the Servicer with respect to the immediately preceding Monthly Period. SECTION 8. Series 1999-1 Pay Out Events. If any one of the following events shall occur with respect to the Series 1999-1 Certificates: (a) failure on the part of the Transferor (i) to make any payment or deposit required to be made by the Transferor by the terms of (A) the Agreement or (B) this Series Supplement, on or before the date occurring five (5) Business Days after the date such payment or deposit is required to be made herein or (ii) 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 1999-1 Certificateholders (without regard to the Policy) or the Insurer 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 provided that the Trustee has actual knowledge of such failure, or to the Transferor and the Trustee by the Holders of Series 1999-1 Certificates evidencing Undivided Interests aggregating not less than 50% of the Invested Amount of this Series 1999-1 or the Insurer, and continues to affect materially and adversely the interests of the Series 1999-1 Certificateholders (without regard to the Policy) or the Insurer for such period; (b) any representation or warranty made by the Transferor in the Agreement or this Series Supplement, or any information contained in a computer file or microfiche list required to be delivered by the Transferor pursuant to Section 2.1 or Section 2.6 of the Agreement, (i) shall prove to have been incorrect in any material respect when made or when delivered, which continues to be incorrect in any material respect for a period of 60 days after the date on which written notice of such failure, requiring the same to be remedied, shall have been given to the Transferor by the Trustee provided that the Trustee has actual knowledge of such failure, or to the Transferor and the Trustee by the Holders of the Series 1999-1 Certificates evidencing Undivided Interests aggregating more than 50% of the Invested Amount of this Series 1999-1 or the Insurer, and (ii) as a result of which the interests of the Series 1999-1 Certificateholders (without regard to the Policy) or the Insurer are materially and adversely affected and continue to be materially and adversely affected for such period; provided, however, that a Series 1999-1 Pay Out Event pursuant to this subsection 8(b) shall not be deemed to have occurred hereunder if the Transferor has accepted reassignment of the related Receivable, or all of such Receivables, if applicable, during such period in accordance with the provisions of the Agreement; (c) the average of the Portfolio Yields for any three consecutive Monthly Periods is reduced to a rate which is less than the weighted average of the Base Rates for the three related Interest Accrual Periods; (d) (i) the Transferor Interest shall be less than the Minimum Transferor Interest, (ii) the amount of Principal Receivables in the Trust and the amount on deposit in the Equalization Account shall be less than the Minimum Aggregate Principal Receivables or (iii) the Class E Invested Amount shall be less than 3.00% of the Invested Amount, in each case for 4 consecutive days; (e) any Servicer Default shall occur which would have a material adverse effect on the Series 1999-1 Certificateholders (without regard to the Policy) or the Insurer; or (f) the Class A Invested Amount or the Class B Invested Amount is not reduced to zero by the Class A/B VFC Expected Final Payment Date or any earlier applicable Class A Expected Final Payment Date or Class B Expected Final Payment Date, the Class C Invested Amount is not reduced to zero by the Class C Expected Final Payment Date or the Class D Invested Amount is not reduced to zero by the Class D Expected Final Payment Date; then, in the case of any event described in subparagraph (a), (b) or (e) above, after the applicable grace period, if any, set forth in such subparagraphs, the Holders of Series 1999-1 Certificates evidencing Undivided Interests aggregating more than 66 2/3% of the Invested Amount or the Insurer by notice then given in writing to the Trustee, the Transferor and the Servicer may declare that a pay out event (a "Series 1999-1 Pay Out Event") has occurred as of the date of such notice, and in the case of any event described in subparagraphs (c), (d) or (f) above, a Series 1999-1 Pay Out Event shall occur without any notice or other action on the part of the Trustee, the Series 1999-1 Certificateholders or the Insurer immediately upon the occurrence of such event. SECTION 9. Article VI of the Agreement. Article VI (except for Sections 6.1 through 6.14 thereof) shall read in its entirety as follows and shall be applicable only to the Series 1999-1 Certificates: Section 6.15 Additional Invested Amounts. The Transferor may on the Series 1999-1 Closing Date and from time to time thereafter issue and, when applicable, cause the Trustee to authenticate Class A Certificates, Class B Certificates, and additional Class C Certificates, Class D Certificates and Class E Certificates which shall be part of Series 1999-1, subject to the following limitations: (a) Class A Certificates and Class B Certificates may be issued as Variable Funding Certificates or as conventional term certificates. Either type of issuance will cause an increase in the Class A Invested Amount (an "Additional Class A Invested Amount") or the Class B Invested Amount (an "Additional Class B Invested Amount") as follows. In the case of conventional term certificates, the Additional Class A Invested Amount or Additional Class B Invested Amount will equal the initial principal amount of the applicable Certificates. In the case of Variable Funding Certificates, Additional Class A Invested Amounts or Additional Class B Invested Amounts may be issued from time to time and evidenced by such Certificates, in accordance with the applicable Issuance Supplement. All or a portion of the proceeds from issuances of Class A Certificates and Class B Certificates may be used to refinance any then outstanding Class A Certificates and Class B Certificates to the extent permitted by each applicable Issuance Supplement, and no such additional Certificates may have an expected final payment date later than the Class A/B VFC Expected Final Payment Date. (b) (i) No more than $217,000,000 of Class A Certificates and $66,500,000 of Class B Certificates may be outstanding in Series 1999-1 at any time unless (x) the Insurer consents to any amount in excess of either of the foregoing amounts and (y) additional Class C Certificates, Class D Certificates and Class E Certificates are issued in amounts such that each Class of Certificates will have an Enhancement Percentage of not less than the required percentage specified for such Class below. Class of Required Certificates Enhancement Percentage Class A 38% Class B 19% Class C 11% Class D 5.75% (ii) If more than $217,000,000 of Class A Certificates or $66,500,000 of Class B Certificates are outstanding, the Servicer shall give the Rating Agencies prompt written notice of such event. (c) The Transferor may issue and cause the Trustee to issue (i) additional Class C Certificates representing an increase in the Class C Invested Amount (an "Additional Class C Invested Amount"), (ii) with the consent of the Insurer, additional Class D Certificates representing an increase in the Class D Invested Amount (an "Additional Class D Invested Amount") (each such additional Class C Certificate and Class D Certificate having terms identical to those of the initial Class C Certificates and Class D Certificates) and (iii) additional Class E Certificates representing an increase in the Class E Invested Amount (an "Additional Class E Invested Amount" and, collectively with the Additional Class A Invested Amounts, the Additional Class B Invested Amounts, the Additional Class C Invested Amounts and the Additional Class D Invested Amounts, the "Additional Invested Amounts") subject to the respective percentages set forth in (b) above. No Class C Certificateholder, Class D Certificateholder or Class E Certificateholder has committed to purchase Certificates evidencing Additional Invested Amounts, and any such Certificates may be sold to a Person that is not a Certificateholder prior to completing its purchase. If such additional Class C Certificates, Class D Certificates or Class E Certificates are issued, then in consideration of payment by the holder(s) of such new Certificates of the agreed upon purchase prices, the Servicer shall appropriately note such Additional Invested Amounts on the related Daily Report and direct the Trustee in writing to pay to the Transferor such purchase prices, and the Invested Amount of each applicable Class of Certificates will be equal to the Invested Amount of such Class stated in such Daily Report. The Policy shall not cover any Additional Class D Invested Amount. (d) Except for Additional Class A Invested Amounts and Additional Class B Invested Amounts relating to any Class A VFCs or Class B VFCs, respectively, no additional Certificates of any Class may be issued unless each Rating Agency confirms in writing that the issuance of the new Certificates will not result in a reduction or withdrawal of its rating of any class of certificates or, to the extent agreed in any Certificate Purchase Agreement (as defined in any Issuance Supplement), of any commercial paper notes issued by any purchaser of the Class A Certificates and the Class B Certificates that it has rated. SECTION 10. Series 1999-1 Termination. The right of the Series 1999-1 Certificateholders to receive payments from the Trust will terminate on the first Business Day following the Series 1999-1 Termination Date unless such Series is an Affected Series as specified in Section 12.1(c) of the Agreement and the sale contemplated therein has not occurred by such date, in which event the Series 1999-1 Certificateholders shall remain entitled to receive proceeds of such sale when such sale occurs. SECTION 11. Periodic Finance Charges and Other Fees. The Transferor hereby agrees that, except as otherwise required by any Requirement of Law, or as is deemed by the Transferor to be necessary in order for the Transferor to maintain its credit card business, based upon a good faith assessment by the Transferor, in its sole discretion, of the nature of the competition in the credit card business, it shall not at any time reduce the Periodic Finance Charges assessed on any Receivable or other fees on any Account if, as a result of such reduction, the Transferor's reasonable expectation of the Portfolio Yield as of such date would be less than the Base Rate. SECTION 12. Legends; Transfer and Exchange; Restrictions on Transfer of Series 1999-1 Certificates; Tax Treatment. (a) Each Class A Certificate and Class B Certificate shall bear a legend substantially in the following form: THIS CERTIFICATE (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). THIS CERTIFICATE 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. THIS CERTIFICATE IS NOT INSURED BY R. V. I. GUARANTY CO., LTD. EACH PURCHASER AND HOLDER OF THIS CERTIFICATE REPRESENTS AND WARRANTS FOR THE BENEFIT OF SRI RECEIVABLES PURCHASE CO., INC. AND SPECIALTY RETAILERS, INC., THAT SUCH PURCHASER OR HOLDER EITHER (A) IS NOT (I) AN EMPLOYEE BENEFIT PLAN (AS DEFINED IN SECTION 3(3) OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA")) THAT IS SUBJECT TO THE PROVISIONS OF TITLE I OF ERISA, (II) A PLAN OR OTHER ARRANGEMENT (INCLUDING AN INDIVIDUAL RETIREMENT ACCOUNT OR KEOGH PLAN) THAT IS SUBJECT TO SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), OR (III) A "BENEFIT PLAN INVESTOR" (AS DEFINED IN UNITED STATES DEPARTMENT OF LABOR ("DOL") REGULATION SECTION 2510.3-101) OR (B) IS AN INSURANCE COMPANY ACTING ON BEHALF OF ITS GENERAL ACCOUNT AND (I) ON THE DATE IT ACQUIRES THIS CERTIFICATE, LESS THAN 25% OF THE ASSETS OF SUCH GENERAL ACCOUNT (AS DETERMINED BY SUCH INSURANCE COMPANY) CONSTITUTE "PLAN ASSETS" FOR PURPOSES OF TITLE I OF ERISA OR SECTION 4975 OF THE CODE, (II) IF AFTER THE INITIAL ACQUISITION OF THIS CERTIFICATE, DURING ANY CALENDAR QUARTER 25% OR MORE OF THE ASSETS OF SUCH GENERAL ACCOUNT (AS DETERMINED BY SUCH INSURANCE COMPANY) CONSTITUTE "PLAN ASSETS" FOR PURPOSES OF TITLE I OF ERISA OR SECTION 4975 OF THE CODE AND NO EXEMPTION OR EXCEPTION FROM THE PROHIBITED TRANSACTION RULES APPLIES TO THE CONTINUED HOLDING OF THIS CERTIFICATE UNDER SECTION 401(c) OF ERISA AND FINAL REGULATIONS THEREUNDER OR AN EXEMPTION OR REGULATION ISSUED BY THE DOL UNDER ERISA, THEN SUCH INSURANCE COMPANY WILL DISPOSE OF ALL OF THE CERTIFICATES THEN HELD IN ITS GENERAL ACCOUNT BY THE END OF THE NEXT FOLLOWING CALENDAR QUARTER, AND (III) ON THE DATE IT ACQUIRES THIS CERTIFICATE AND THROUGHOUT THE PERIOD THAT IT HOLDS THEM IT MEETS ALL THE REQUIREMENTS OF AND IS ELIGIBLE FOR EXEMPTIVE RELIEF UNDER PTCE 95-60. (b) Each confirmation of issuance or sale of a Class C Certificate and Class D Certificate shall bear a legend substantially in the following form: EACH PURCHASER AND HOLDER OF THIS CERTIFICATE REPRESENTS AND WARRANTS FOR THE BENEFIT OF SRI RECEIVABLES PURCHASE CO., INC. AND SPECIALTY RETAILERS, INC., [ADD THE FOLLOWING TO THE CLASS D CERTIFICATE ONLY [R. V. I. GUARANTY CO., LTD.]] THAT SUCH PURCHASER OR HOLDER EITHER (A) IS NOT (I) AN EMPLOYEE BENEFIT PLAN (AS DEFINED IN SECTION 3(3) OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA")) THAT IS SUBJECT TO THE PROVISIONS OF TITLE I OF ERISA, (II) A PLAN OR OTHER ARRANGEMENT (INCLUDING AN INDIVIDUAL RETIREMENT ACCOUNT OR KEOGH PLAN) THAT IS SUBJECT TO SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), OR (III) A "BENEFIT PLAN INVESTOR" (AS DEFINED IN UNITED STATES DEPARTMENT OF LABOR ("DOL") REGULATION SECTION 2510.3-101) OR (B) IS AN INSURANCE COMPANY ACTING ON BEHALF OF ITS GENERAL ACCOUNT AND (I) ON THE DATE IT ACQUIRES THIS CERTIFICATE, LESS THAN 25% OF THE ASSETS OF SUCH GENERAL ACCOUNT (AS DETERMINED BY SUCH INSURANCE COMPANY) CONSTITUTE "PLAN ASSETS" FOR PURPOSES OF TITLE I OF ERISA OR SECTION 4975 OF THE CODE, (II) IF AFTER THE INITIAL ACQUISITION OF THIS CERTIFICATE, DURING ANY CALENDAR QUARTER 25% OR MORE OF THE ASSETS OF SUCH GENERAL ACCOUNT (AS DETERMINED BY SUCH INSURANCE COMPANY) CONSTITUTE "PLAN ASSETS" FOR PURPOSES OF TITLE I OF ERISA OR SECTION 4975 OF THE CODE AND NO EXEMPTION OR EXCEPTION FROM THE PROHIBITED TRANSACTION RULES APPLIES TO THE CONTINUED HOLDING OF THIS CERTIFICATE UNDER SECTION 401(c) OF ERISA AND FINAL REGULATIONS THEREUNDER OR AN EXEMPTION OR REGULATION ISSUED BY THE DOL UNDER ERISA, THEN SUCH INSURANCE COMPANY WILL DISPOSE OF ALL OF THE CLASS C CERTIFICATES AND CLASS D CERTIFICATES THEN HELD IN ITS GENERAL ACCOUNT BY THE END OF THE NEXT FOLLOWING CALENDAR QUARTER, AND (III) ON THE DATE IT ACQUIRES THIS CERTIFICATE AND THROUGHOUT THE PERIOD THAT IT HOLDS THEM IT MEETS ALL THE REQUIREMENTS OF AND IS ELIGIBLE FOR EXEMPTIVE RELIEF UNDER PTCE 95-60. [ADD THE FOLLOWING TO THE CLASS C CERTIFICATE ONLY [THIS CERTIFICATE IS NOT INSURED BY R. V. I. GUARANTY CO., LTD.] ] THIS CERTIFICATE MAY NOT BE ACQUIRED, SOLD, TRADED OR TRANSFERRED, NOR MAY AN INTEREST IN THIS CERTIFICATE 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 (OR THE SUBSTANTIAL EQUIVALENT THEREOF)" WITHIN THE MEANING OF SECTION 7704(b)(2) OF THE CODE AND ANY TREASURY REGULATION THEREUNDER, INCLUDING A MARKET WHEREIN INTERESTS IN THIS CERTIFICATE, 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 THIS CERTIFICATE, AS APPLICABLE AND STANDS READY TO EFFECT BUY OR SELL TRANSACTIONS AT THE QUOTED PRICES FOR ITSELF OR ON BEHALF OF OTHERS. [ADD THE FOLLOWING TO THE CLASS D CERTIFICATES ONLY] [NEITHER THIS CERTIFICATE NOR THE POLICY HAS BEEN OR WILL] [ADD THE FOLLOWING TO THE CLASS C CERTIFICATES ONLY] [THIS CERTIFICATE HAS BEEN AND WILL NOT] BE REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAW. THE HOLDER OF THIS CERTIFICATE, BY PURCHASING THIS CERTIFICATE, AGREES THAT SUCH CERTIFICATE MAY BE REOFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY IN COMPLIANCE WITH THE SECURITIES ACT AND OTHER APPLICABLE LAWS AND ONLY TO THE TRANSFEROR OR PURSUANT TO RULE 144A UNDER THE SECURITIES ACT TO A PERSON THAT THE HOLDER OF SUCH CERTIFICATE REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A ("QIB") PURCHASING FOR ITS OWN ACCOUNT, IN ACCORDANCE WITH RULE 144A, WHOM THE HOLDER OF SUCH CERTIFICATE HAS INFORMED THAT THE REOFFER, RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A AND AFTER DELIVERY OF THE DOCUMENTATION REQUIRED BY THE AGREEMENT AND THE SERIES 1999-1 SUPPLEMENT. EACH OWNER OF THIS CERTIFICATE BY ACCEPTING A DIRECT OWNERSHIP INTEREST IN OR A BENEFICIAL INTEREST IN A SUCH CERTIFICATE IS DEEMED TO REPRESENT THAT IT IS A QIB PURCHASING FOR ITS OWN ACCOUNT. THIS CERTIFICATE WILL NOT BE ACCEPTED FOR REGISTRATION OF TRANSFER EXCEPT UPON PRESENTATION OF EVIDENCE SATISFACTORY TO THE TRANSFER AGENT AND REGISTRAR THAT THE RESTRICTIONS ON TRANSFER SET FORTH IN THE AGREEMENT AND THE SERIES 1999-1 SUPPLEMENT HAVE BEEN COMPLIED WITH. THIS CERTIFICATE MAY NOT BE REOFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHOUT THE PRIOR WRITTEN CONSENT OF THE TRANSFEROR AND UNLESS AND UNTIL THE TRUSTEE AND THE TRANSFEROR SHALL HAVE RECEIVED THE CERTIFICATIONS REQUIRED BY THE AGREEMENT AND THE SERIES 1999-1 SUPPLEMENT. THIS CERTIFICATE IS ALSO SUBJECT TO RESTRICTIONS ON THE PURCHASE, OWNERSHIP AND DISPOSITION OF SUCH SECURITIES OR ANY INTEREST THEREIN, INCLUDING THE CONSENT OF THE TRANSFEROR AND THE DELIVERY OF AN INVESTOR REPRESENTATION LETTER. SUCH RESTRICTIONS ARE SET FORTH IN THE AGREEMENT AND THE SERIES 1999-1 SUPPLEMENT, COPIES OF WHICH ARE AVAILABLE FROM THE TRUSTEE. (c) In no event shall the Class E Certificates or any interest therein be transferred, sold, exchanged, pledged, participated or otherwise assigned in whole or in part, unless: (i) the Trustee and the Insurer shall have been delivered an Opinion of Counsel to the effect that (A) any securities or interests issued in conjunction with such sale, exchange, pledge, participation and assignment and sold to third parties will be characterized as either indebtedness or partnership interests (other than interests in a publicly traded partnership) for Federal and applicable state income tax purposes, (B) such sale, exchange, pledge, participation and assignment or such issuance will not adversely affect the Federal and applicable state income tax characterization of any outstanding Series of Investor Certificates (other than the Class E Certificates, as to the characterization of which Counsel shall express no opinion), and (C) such sale, exchange, pledge, participation and assignment or such issuance will not result in the Trust being subject to tax at the entity level for Federal or applicable state income tax purposes; (ii) the holders of any securities or interests issued in conjunction with such sale, exchange, pledge, participation and assignment (or any trustee or collateral agent on their behalf) covenant and agree that, prior to the date which is one year and one day after the payment in full of all outstanding investor certificates issued by the Trust, none of them will institute against, or join any other Person in instituting against, the Transferor any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings or other similar proceeding under the laws of the United States or any state of the United States, and the Trustee shall have received an Officer's Certificate to that effect; (iii) if the Person to whom the Class E Certificates or any interest therein is transferred, sold, exchanged, pledged, participated or otherwise assigned in whole or in part is SRI or any of its Affiliates and the Enhancement Date has occurred, the Insurer shall have received true sale and no-substantive consolidation opinions as to the same transfers and entities as are covered by the opinion of Kirkland & Ellis on such matters delivered on the Series 1999-1 Closing Date, issued by Kirkland & Ellis or other nationally recognized counsel to the Transferor; and (iv) if the Person to whom the Class E Certificates or any interest therein is transferred, sold, exchanged, pledged, participated or otherwise assigned in whole or in part is not SRI or any of its Affiliates and the Enhancement Date has occurred, the Insurer shall have consented to such transfer, sale, exchange, pledge, participation or assignment (such consent not to be unreasonably withheld or delayed), provided that no consent from the Insurer shall be required in connection with any pledge of the cash flows from the Class E Certificates that complies with the other requirements above. The Servicer shall give the Rating Agencies prompt written notice of the transfer, sale, exchange, pledge, participation or other assignment of the Class E Certificates or any interest therein. (d) Notwithstanding anything to the contrary herein, the Servicer shall be entitled to withhold any amount that it determines in its sole discretion is required to be withheld pursuant to Section 1446 of the Internal Revenue Code and the Paying Agent or the Trustee shall be entitled to withhold any amount that it is directed in writing by the Servicer to withhold pursuant to Section 1446 of the Internal Revenue Code and any such amount withheld shall be deemed to have been paid for all purposes of this Series Supplement with respect to the Class C Certificates and the Class D Certificates. (e) Each initial purchaser of the Class C Certificates or the Class D Certificates or any interest therein and any assignee thereof pursuant to Exhibit E shall certify, represent and warrant to Transferor, the Servicer, the Trustee and the Insurer that it is either (A)(i) a citizen or resident of the United States, (ii) a corporation, partnership or other entity created or organized in or under the laws of the United States or any political subdivision thereof which, if such entity is a tax- exempt entity, recognizes that payments with respect to such Certificates may constitute unrelated business taxable income or (iii) an entity not described in (ii) whose ownership of such Certificates is effectively connected with such purchaser's or such assignee's conduct of a trade or business within the United States (within the meaning of the Internal Revenue Code) or (B)(i) an estate, the income of which is includible in gross income for United States Federal income tax purposes, regardless of its source, or (ii) a trust if a U.S. court is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust or if the trust has made an election to be treated as a U.S. person. Each Class C Certificateholder and Class D Certificateholder agrees that upon its purchase or the transfer to it of a Class C Certificate or a Class D Certificate, as applicable and prior to the date on which the first interest payment on the such Certificate is due to such holder, it will provide to the Servicer and the Trustee (i) if such Certificateholder is created or organized in or under the laws of a jurisdiction outside the United States, two duly completed copies of United States Internal Revenue Service Form 4224 or new Form W-8ECI or any successor applicable or required forms, (ii) a duly completed copy of United States Internal Revenue Service Form W-9 or any successor applicable or required forms, and (iii) such other forms and information as may be required to confirm the availability of any applicable exemption from United States Federal, state or local withholding taxes. Each Class C Certificateholder and Class D Certificateholder agrees to provide to the Servicer and the Trustee like additional subsequent duly completed forms satisfactory in the determination of the Servicer on or before the date that any such form expires or becomes obsolete, or upon the occurrence of any event requiring an amendment, resubmission or change in the most recent form previously delivered by it, and to provide such extensions or renewals as may be reasonably requested by the Servicer or the Trustee. Each Class C Certificateholder and Class D Certificate holder shall, in the Investment Letter set forth in Exhibit F, certify, represent and warrant that as of the Closing Date, or in the case of a Class C Certificateholder and Class D Certificate holder that is an assignee, as of the date of the related Class C Certificate Assignment or Class D Certificate Assignment, as applicable, that (a) its ownership of a Class C Certificate or Class D Certificate, as applicable, will not result in any withholding obligation with respect to any payments with respect to such Certificate with respect to any Person and (b) unless otherwise consented to by the Transferor, if such Class C Certificateholder and Class D Certificateholder is incorporated or organized under the laws of a jurisdiction outside of the United States, it has (x) a rating of "BBB" or better from Fitch IBCA, Inc. or "Baa2" or better from Moody's Investors Service, Inc. and (y) balance sheet assets at least $100 million of which are effectively connected with its conduct of a trade or business in the United States within the meaning of the Internal Revenue Code. (f) Each Class C Certificateholder and Class D Certificateholder agrees with the Transferor and the Trustee that: (i) such Certificateholder will deliver to the Transferor and the Trustee and, only with respect to the Class D Certificates, to the Insurer on or before the Closing Date, and on or before the effective date of any Class C Certificate Assignment or Class D Certificate Assignment, as applicable, a letter in the form annexed hereto as Exhibit F (an "Investment Letter"), executed by the such Certificateholder, or such assignee Class C Certificateholder and Class D Certificateholder, in the case of a Class C Certificate Assignment or Class D Certificate Assignment, as applicable, with respect to the purchase by such Certificateholder of an interest relating to the Class C Certificate or Class D Certificate, as applicable, and (ii) all of the statements made by such Certificateholder in its Investment Letter shall be true and correct as of the date made. (g) Each Class C Certificateholder and Class D Certificateholder pursuant to its Investment Letter shall severally represent, warrant and covenant that: (i) such Certificateholder has not acquired and shall not sell, trade or transfer any interest in the Class C Certificates or Class D Certificates, as applicable, nor cause any interest in the Class C Certificates or Class D Certificates, as applicable, to be marketed, on or through either (A) 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 or (B) a "secondary market" (or the substantial equivalent thereof)" within the meaning of Section 7704(b)(2) of the Internal Revenue Code and any Treasury regulation thereunder, including a market wherein interests in the Class C Certificates or Class D Certificates, as applicable, 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 Certificates or Class D Certificates, as applicable, and stands ready to effect buy or sell transactions at the quoted price for itself or on behalf of others, and (ii) unless the Transferor consents otherwise, such Certificateholder is not, and shall not become, a partnership, an "S" corporation" or a grantor trust, in each case as described in the Internal Revenue Code. In the event of any breach of the representation, warranty and covenant of any such Certificateholder that such Certificateholder shall remain classified as other than a partnership, an S corporation or a grantor trust, such Certificateholder shall notify the Transferor promptly upon such Certificateholder's becoming aware of such breach, and thereupon such Certificateholder hereby agrees to use reasonable efforts to produce a replacement investor which is acceptable to the Transferor to replace such affected Certificateholder. In any such event, the Transferor shall also have the right to procure a replacement investor. Each affected Class C Certificateholder and Class D Certificateholder hereby agrees to take all actions necessary to permit a replacement investor to succeed to its rights and obligations hereunder. Each Class C Certificateholder and Class D Certificateholder shall acknowledge in the Investment Letter that the portion of the Tax Opinion to the effect that the Trust will not be treated as a publicly traded partnership taxable as a corporation is dependent in part on the accuracy of the certifications described above. (h) No Class C Certificateholder or Class D Certificateholder may sell, convey, assign, hypothecate, pledge, participate or otherwise transfer its Class C Certificates or Class D Certificates or any interest in the Class C Certificates or Class D Certificates (each, a "Class C Certificate Assignment" or "Class D Certificate Assignment," as applicable), to any Person, unless (i) the Transferor shall have granted its prior written consent (which consent shall not be unreasonably withheld, it being understood, however, that the Transferor may disapprove such Class C Certificate Assignment or Class D Certificate Assignment to an assignee that is a competitor in the credit card business and that, in addition, such consent need not be granted if, among other things, the Transferor determines in its sole and absolute discretion that such assignment would create or increase a 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); provided; however, that any attempted Class C Certificate Assignment or Class D Certificate Assignment shall be void unless (i) such proposed assignee Certificateholder shall comply with this Section 12(i) and shall have delivered to the Trustee and the Transferor, prior to the effectiveness of such assignment, a copy of the Investment Letter under which such assignee Certificateholder has made the representations, warranties and covenants required to be made pursuant to Section 12, (ii) such proposed assignee shall provide the forms described in clauses (i), (ii) and (iii) of subsection 12(f) in the manner described therein, (iii) the number of Private Holders would not exceed, as of the date of the proposed Class C Certificate Assignment or Class D Certificate Assignment, eighty (80), and (iv) the number of Private Holders owning interests in the Class C Certificates or Class D Certificates would not exceed, as of the date of the proposed Class C Certificate Assignment and Class D Certificate Assignment, six (6) or such greater number as may be consented to by the Transferor in its sole and absolute discretion; provided further, that the Transferor agrees to hold the Trustee harmless against any damage attributable to a Class C Certificate Assignment or Class D Certificate Assignment which is voided by reason of clause (iii) or (iv) of the preceding provisions. In connection with any Class C Certificate Assignment or Class D Certificate Assignment, the assignor Certificateholder shall submit a request in writing to the Trustee (who shall promptly deliver it to the Transferor) for the written consent of the Transferor, and the Transferor shall respond to any such request within ten (10) Business Days after its receipt, it being understood that the obtaining of such consent is a condition to the effectiveness of such Class C Certificate Assignment or Class D Certificate Assignment. Each assignee Certificateholder is subject to the terms and conditions of subsection 12(f) on an ongoing basis and shall make the certifications, representations and warranties contained therein, and the assigning Certificateholder shall certify, represent and warrant that its assignee's certifications, representations and warranties thereunder are true. It shall be a condition to the completion of any Class D Certificate Assignment that the Insurer shall be entitled to the benefits of all representations and warranties made, and any indemnities provided, in connection with such assignment. (i) None of the Class C Certificates, the Class D Certificates or any interest therein may be offered or sold except to a Person whom the transferor of the Class C Certificates or Class D Certificates, as applicable, reasonably believes is a Qualified Institutional Buyer purchasing for its own account in accordance with Rule 144A under the Securities Act. Prospective investors in the Class C Certificates and the Class D Certificates are hereby notified that transferors of the Class C Certificates and the Class D Certificates are relying on the exemption from the provisions of the Securities Act provided by Rule 144A. Each of the Class C Certificateholder and the Class D Certificateholder and each beneficial owner of Class C Certificates and Class D Certificates, by its acceptance thereof or of such beneficial interest, will be deemed to have represented and agreed as follows: (i) such Holder or owner understands that the Class C Certificates and the Class D Certificates and, only with respect to the Class D Certificates, the Policy have not been and will not be registered under the Securities Act or any state or other applicable securities law and may not be offered, sold or otherwise transferred unless registered pursuant to, or exempt from registration under, the Securities Act and any other applicable securities laws, (ii) such Holder or owner will not offer, sell, pledge or otherwise transfer such Class C Certificates or such Class D Certificates or any interest therein at any time except to the Transferor or to a Person whom such transferor of the Class C Certificates or the Class D Certificates reasonably believes is a Qualified Institutional Buyer purchasing for its own account in accordance with Rule 144A to whom notice is given that the reoffer, resale, pledge or other transfer is being made in reliance on Rule 144A and after delivery of the documentation required by the Agreement and this Series Supplement, (iii) such Holder or owner is a Qualified Institutional Buyer purchasing for its own account in accordance with Rule 144A under the Securities Act and has received notice that the reoffer, resale, pledge or other transfer is being made in reliance on Rule 144A, and (iv) such Holder or owner acknowledges that confirmations of the issuance and transfer of the Class C Certificates or the Class D Certificates will bear a legend as provided in Section 12(b) hereof. (j) No Class C Certificates, Class D Certificates or other interest therein may be transferred (including in the initial offering) unless the transferee shall have executed and delivered an Investment Letter and the Transferor shall have granted its prior written consent thereto. SECTION 13. Additional Series 1999-1 Provisions. (a) Any Issuance Supplement may include provisions granting consent, notice or other rights to the holders of the Class A Certificates or Class B Certificates issued thereunder or to an agent of such holders or imposing additional requirements upon the Transferor or the Servicer. (b) Section 10.1 of the Agreement shall read in its entirety as provided in the Agreement, and, in addition, the following clause (e) shall be added after clause (d) of such Section and shall be applicable only to the Series 1999-1 Certificates: "(e) the Servicer shall fail to promptly pay the reasonable fees and expenses of the Trustee in connection with the identification and appointment of a back-up servicer or to pay the reasonable fees and expenses of the back-up servicer in accordance with Section 3.4(e).". (c) Section 3.4 of the Agreement shall read in its entirety as provided in the Agreement, and, in addition, the following clauses (d) and (e) shall be added after clause (c) of such Section and shall be applicable only to the Series 1999-1 Certificates: "(d) Back-up Data. (i) The Servicer shall provide to the Trustee not later than the fifth Business Day of each calendar month computer readable copies of back-up data regarding the Receivables sufficient to enable the recipient of such back- up data to service the Receivables. The Trustee shall take all actions necessary to confirm that the back-up data is computer readable, and shall promptly provide a letter of receipt to the Servicer and the Insurer substantially in the form of Exhibit G confirming that such back-up data is computer readable. The Trustee shall retain such back-up data for a period of not less than three months, and may thereafter return the back-up data to the Servicer. (ii) After the appointment of a back-up servicer by the Trustee, the Servicer shall provide to such back-up servicer not later than the 5th Business Day of each calendar month copies of back-up data regarding the Receivables sufficient to enable the recipient of such back- up data to service the Receivables. Upon its receipt of the back-up data from the Servicer, the back-up servicer will be required to promptly perform specified computations with respect to the data and to verify the results of such computations with the Servicer. Any discrepancy in the results must be promptly reported by the Servicer to the Insurer. (e) The Insurer may direct the Trustee in writing to appoint a back-up servicer upon the occurrence of any of the following events: (A) the Rapid Amortization Period commences; (B) as of any Determination Date, the Quarterly Excess Spread Percentage for the related Distribution Date is less than 1%; or (C) the long-term senior debt rating of Stage Stores Inc. falls below B3 by Moody's or B- by Standard & Poor's or is withdrawn by either Moody's or Standard & Poor's.". (d) Upon the occurrence of a Servicer Default, and so long as such Servicer Default has not been remedied, the Insurer may terminate all of the rights of and obligations of the Servicer as servicer under the Agreement by written notice to the Servicer and to the Trustee and require that a Successor Servicer be appointed (which will be back-up servicer referred to above if one has been appointed). (e) Without the consent of the Insurer (which consent shall not be unreasonably withheld or delayed and shall not be conditioned upon the payment of any consent fee, however denominated) and, in the case of clause (i) below, notice to each Rating Agency, the Transferor, the Servicer or the Trustee, as applicable, shall not (i) reduce the numerators used to determine the Class A Fixed Allocation Percentage, the Class B Fixed Allocation Percentage, the Class C Fixed Allocation Percentage, the Class D Fixed Allocation Percentage, the Class E Fixed Allocation Percentage or the Fixed Allocation Percentage in connection with any paired Series, (ii) establish a Class E Certificate Rate that is greater than zero or amend the definition of "Carryover Class E Interest," (iii) invest in any Cash Equivalent pursuant to clause (d) of the definition of "Cash Equivalents" in the Agreement, (iv) reduce the Required Reserve Account Amount, (v) increase the percentage of Principal Receivables referred to in the proviso to clause (c) of the definition of "Eligible Receivable" in the Agreement, (vi) remove the Trustee pursuant to clause (b), (c) or (d) of Section 11.7 of the Agreement or (vii) increase the amount of Senior Facilities Costs or Mezzanine Facilities Costs that may be paid for any Interest Accrual Period. (f) When the taking of any action contemplated by the Agreement or this Series Supplement is conditioned upon a determination from the Rating Agency then rating any Class of Certificates that such action will not cause such Rating Agency to downgrade or withdraw its rating of such Class of Certificates, with respect to the Class D Certificates such determination shall be made without regard to the Policy by those Rating Agencies that have issued a rating of the Class D Certificates without regard to the Policy. (g) A copy of each notice required to be sent to the Rating Agency or required to be delivered pursuant to Section 2.5(l) or 2.7(b)(iv) of the Agreement, and a copy of each letter obtained from any Rating Agency pursuant to Section 2.8(a)(ii) of the Agreement, shall also be sent or delivered to the Insurer. (h) The Insurer shall have the right to (A) access any records of the Servicer to which the Trustee is given access and (B) receive the Daily Report, in each case on the same terms as the Trustee. (i) The Insurer shall have the right to vote in the stead of the Class D Certificateholders on all matters set forth in the Agreement or this Series Supplement for which the Class D Certificateholders are entitled to vote. (j) Any Trust Account maintained for the benefit of the Certificateholders shall also be maintained for the benefit of the Insurer, as its interests may appear. (k) Notwithstanding anything herein or in the Agreement to the contrary, the Holders of Series 1999-1 Certificates evidencing Undivided Interests aggregating more than 66 2/3% of the Invested Amount (and not any lesser percentage) or the Insurer may (i) direct the Transferor to accept reassignment of Receivables as set forth in Section 2.6(e) of the Agreement and (ii) terminate all the rights of the Servicer as set forth in Section 10.1 of the Agreement. (l) For the purposes of this Series only, Section 12.1(c) of the Agreement shall read in its entirety as follows: "(c) All principal or interest with respect to the Series 1999-1 Certificates shall be due and payable no later than the Series Termination Date with respect to such Series. In the event that the Invested Amount of such Series of Certificates is greater than zero on its Series Termination Date (the "Affected Series") or there are any unpaid Reimbursement Amounts, after giving effect to all transfers, withdrawals, deposits and drawings to occur on such date and the payment of principal to be made on such Series on such date, the Servicer will sell or cause to be sold, and the Trustee upon written direction by the Servicer will pay the proceeds to all Certificateholders (other than the Class E Certificateholders) of such Series in order of their respective seniorities, then to the Insurer the amount of any unpaid Reimbursement Amounts, and then to the Class E Certificateholders an amount of Principal Receivables and the related Finance Charge Receivables (or interests therein) up to 110% of the Invested Amount of such Series at the close of business on such date (but the amount of such Principal Receivables not to be more than an amount of Receivables equal to the sum of (1) the product of (A) the Transferor Percentage, (B) the aggregate outstanding Principal Receivables and (C) a fraction the numerator of which is the Invested Amount of such Series on such date and the denominator of which is the sum of the Invested Amounts of all Series on such Date and (2) the Invested Amount of such Series). Receivables on which the Obligor has not made the full minimum payment for the prior months shall be deemed to be in default for purposes of this Section 12.1(c) to the extent that the cash allocated to any Class of Transferor Retained Certificates of such Series pursuant to a sale under Section 12.1(c) is less than the amount that would have been allocated to the Exchangeable Transferor Certificate and the Transferor Retained Certificates had the proceeds from such sale been allocated pursuant to Section 4.3. The Servicer shall notify the Insurer of the proposed sale of such Receivables and shall provide the Insurer an opportunity to bid on such Receivables. The Transferor shall be permitted to purchase such Receivables in such case and shall have a right of first refusal with respect thereto to the extent of a bona fide offer by an unrelated third party or to the extent the Receivables represent Defaulted Receivables. Any proceeds of such sale in excess of such principal and interest and unpaid Reimbursement Amounts paid shall be paid to the Holder of the Exchangeable Transferor Certificate. Upon such Series Termination Date with respect to the applicable Series of Certificates, final payment of all amounts allocable to any Investor Certificates of such Series shall be made in the manner provided in Section 12.3.". (m) For purposes of this Series only, Section 2.5(c) of the Agreement shall read in its entirety as follows: "(c) Charge Account Agreements and Credit and Collection Policies. The Transferor shall comply with and perform its obligations and shall take all actions reasonably within its control to cause the Account Owners to comply with and perform their obligations under the Charge Account Agreements relating to the Accounts and the Credit and Collection Policy except insofar as any failure to comply or perform would not materially and adversely affect the rights of the Trust, the Certificateholders or the Insurer hereunder or under the Certificates. The Transferor may change, and permit the Account Owners to change, the terms and provisions of the Charge Account Agreements or the Credit and Collection Policy in any respect (including, without limitation, the reduction of the required minimum monthly payment, the calculation of the amount, or the timing, of charge offs and the periodic finance charges and other fees to be assessed thereon) only if such change (individually or taken together with all prior changes to the terms and provisions of the Charge Account Agreements or the Credit and Collection Policy) (i) would not, in the reasonable belief of the Transferor, cause, immediately or with the passage of time, a Pay Out Event to occur and (ii) (A) (if it owns a comparable segment of charge card accounts) is made applicable to the comparable segment of the revolving credit card accounts owned by the Transferor, if any, which have characteristics the same as, or substantially similar to, the Accounts that are the subject of such change and (B) (if it does not own such a comparable segment) will not be made with the intent to materially benefit the Transferor over the Investor Certificateholders or the Insurer or to materially adversely affect the Investor Certificateholders or the Insurer, except as otherwise restricted by an endorsement, sponsorship, or other agreement between the Transferor and an unrelated third party or by the terms of the Charge Account Agreements. If any such change (individually or taken together with all prior changes to the terms and provisions of the Charge Account Agreements or the Credit and Collection Policy made after the later of the Enhancement Date and the date of the last Officer's Certificate delivered pursuant to the following requirement) affects more than 10% of the Accounts, the Transferor shall not make such change effective until the Transferor has delivered an Officer's Certificate of the Transferor to the Trustee and the Insurer to the effect of clauses (i) and (ii) above.". (n) The Transferor and the Servicer shall not enter into any amendment to the Agreement or this Supplement pursuant to Section 13.1(a) of the Agreement unless the Servicer shall have provided an Officer's Certificate to the Insurer to the effect that such amendment will not materially and adversely affect the interests of the Insurer or the Certificateholders (without regard to the Policy). (o) The Insurer shall have the right to notify the Servicer and the Trustee of any event described in Section 10.1(b) or 10.1(c) of the Agreement, and such notice shall have the same effect as a notice of such event given under the relevant Section by Holders of Investor Certificates evidencing Undivided Interests aggregating not less than 50% of the Invested Amount of any Series materially adversely affected by such event. (p) For purposes of Section 8.4 of the Agreement, the Insurer shall be an "Indemnified Party," and the Servicer shall indemnify the Insurer against the matters specified in such Section 8.4 on the same terms as if the Insurer were named as an "Indemnified Party" directly in such Section. SECTION 14. 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 15. 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 16. GOVERNING LAW. THIS SERIES SUPPLEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS. SECTION 17. The Trustee. The Trustee shall not be responsible in any manner whatsoever for or in respect of the sufficiency of this Series Supplement or for or in respect of the Preliminary Statement contained herein, all of which recitals are made solely by the Transferor. SECTION 18. Instructions in Writing. All instructions or other communications given by the Servicer or any other person to the Trustee pursuant to this Series Supplement shall be in writing, and, with respect to the Servicer, may be included in a Daily Report or Settlement Statement. SECTION 19. Provision of Information to Certificateholders. For so long as the Series 1999-1 Certificates are outstanding, the Servicer shall provide or cause to be provided to any Series 1999-1 Certificateholder and any prospective purchaser of Series 1999-1 Certificates designated by such Series 1999-1 Certificateholder, upon the request of such Series 1999-1 Certificateholder or prospective purchaser, the information required to be provided to such Series 1999-1 Certificateholder or prospective purchaser pursuant to Rule 144A(d)(4) promulgated under the Securities Act. SECTION 20. Limitation of Liability. It is expressly understood and agreed by the parties hereto that (a) this Series Supplement is executed and delivered by Bankers Trust (Delaware), not individually or personally but solely as Trustee under this Series Supplement, in the exercise of the powers and authority conferred and vested in it under the Trust Agreement, (b) each of the representations, undertakings and agreements herein made on the part of the Trustee is made and intended not as personal representations, undertakings and agreements by Bankers Trust (Delaware) but is made and intended for the purpose for binding only the Trustee and (c) under no circumstances shall Bankers Trust (Delaware) be personally liable for the payment of any indebtedness or expenses of the Trustee or be liable for the breach or failure of any obligation, representation, warranty or covenant made or undertaken by the Trustee under this Series Supplement or the other related documents. SECTION 21. Insurer as Third Party Beneficiary. The Insurer and its successors and assigns shall be third party beneficiaries to the provisions of this Series Supplement and the Agreement, and shall be entitled to rely upon and directly to enforce such provisions of this Series Supplement and the Agreement. SECTION 22. Certain Matters Relating to the Policy and the Insurer. Pursuant to the Enhancement Supplement, the Servicer and the Transferor have made representations and warranties to the Insurer as set forth therein. All of the Investor Certificateholders as of the Enhancement Date have consented to the terms of the Enhancement Supplement. After the Enhancement Date: (a) Prior to 12:00 noon, Bermuda time, on the third Business Day preceding each Distribution Date, the Servicer shall determine whether there will be a Deficiency Amount on the following Distribution Date. If the Servicer determines that there will be a Deficiency Amount on the following Distribution Date, the Servicer shall complete the notice in the form set forth as an exhibit to the related Policy (the "Notice") and submit such Notice in accordance with the Policy to the Insurer no later than 3:00 p.m., Bermuda time, on such Business Day, as a claim for an Insured Payment in an amount equal to such Deficiency Amount. The Insurer shall remit or cause to be remitted to the Trustee such Deficiency Amount in accordance with the terms of the Policy. Any payment made by the Insurer under the Policy shall be applied solely to the payment of the Class D Certificates, and for no other purpose. (b) The Trustee shall (i) receive as attorney-in-fact of the applicable owners an Insured Payment from the Insurer and (ii) deposit the same in the Distribution Account for distribution to the Class D Certificateholders as provided in Sections 4.12 and 4.13 hereof. All such amounts in the Distribution Account shall remain uninvested. Any and all Insured Payments disbursed by the Trustee from claims made under the Policy shall not be considered payment by the Trust with respect to the Class D Certificates nor shall such payments discharge the obligation of the Trust with respect to the Class D Certificates and the Insurer shall become the owner of such unpaid amounts due from the Trust in respect of Insured Payments as the deemed assignee of the Class D Certificates, as hereinafter provided. The Trustee, on behalf of each Class D Certificateholder, hereby agrees for the benefit of the Insurer that it recognizes that to the extent the Insurer pays Insured Payments, either directly or indirectly (as by paying through the Trustee), to the Class D Certificateholders, the Insurer (A) will be subrogated to the rights of the Class D Certificateholders with respect to such Insured Payment and (B) shall receive available funds in accordance with Sections 4.12 and 4.13 hereof until all such Insured Payments by the Insurer are repaid in full. To evidence such subrogation, the Transfer Agent and Registrar shall note the Insurer's rights as subrogee on the registration books maintained by the Transfer Agent and Registrar upon receipt from the Insurer of proof of payment of any Insured Payment. If on any Distribution Date, the Trustee or the Servicer determines that the Insurer has paid more under the Policy than is required by the terms hereof, the Trustee shall promptly return such excess to the Insurer. The Trustee shall keep a complete and accurate record of the amount of the Insured Payments paid into the Distribution Account. The Insurer shall have the right to inspect such record during normal business hours upon prior notice to the Trustee. (d) Upon written direction from the Servicer, the Trustee shall transfer funds deposited into the Interest Funding Account for the purpose of paying Insurance Premiums and any Reimbursement Amounts during any Monthly Period to the Insurer by wire transfer of immediately available funds at such account as the Insurer shall from time to time designate in accordance with the Insurance Agreement. [Signatures Follow] IN WITNESS WHEREOF, the Transferor, the Servicer and the Trustee have caused this Series 1999-1 Supplement to be duly executed by their respective officers as of the day and year first above written. SRI Receivables Purchase Co., Inc., Transferor By: /s/ Charles M. Sledge Name: Charles M. Sledge Title: Senior Vice President Specialty Retailers, Inc., Servicer By: /s/ James A. Marcum Name: James A. Marcum Title: Vice Chairman/Chief Financial Officer Bankers Trust (Delaware), not in its individual capacity but solely as Trustee By: /s/ Patricia M.F. Russo Name: Patricia M.F. Russo Title: Attorney in Fact Exhibit A [FORM OF CLASS E INVESTOR CERTIFICATE] THIS CERTIFICATE WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). THIS CERTIFICATE 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 AND THE ADDITIONAL CONDITIONS TO TRANSFER SPECIFIED IN THE AGREEMENT REFERRED TO BELOW SHALL HAVE BEEN SATISFIED. EACH PURCHASER REPRESENTS AND WARRANTS FOR THE BENEFIT OF SRI RECEIVABLES PURCHASE CO., INC. THAT SUCH PURCHASER IS NOT (I) AN EMPLOYEE BENEFIT PLAN (AS DEFINED IN SECTION 3(3) OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA")) THAT IS SUBJECT TO THE PROVISIONS OF TITLE I OF ERISA, (II) A PLAN DESCRIBED IN SECTION 4975(E)(1) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED, OR (III) AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE PLAN ASSETS BY REASON OF A PLAN'S INVESTMENT IN THE ENTITY. No. ___ $________ SRI RECEIVABLES MASTER TRUST FLOATING RATE CLASS E CERTIFICATE, SERIES 1999-1 Evidencing an undivided interest in a trust, the corpus of which consists of receivables generated from time to time in the ordinary course of business from a portfolio of consumer revolving credit card accounts generated or to be generated by certain subsidiaries (collectively, the "SRI Subsidiaries") of Specialty Retailers, Inc. ("SRI" or the "Servicer") and other assets and interests constituting the Trust under the Agreement described below. (Not an interest in or a recourse obligation of SRI Receivables Purchase Co., Inc., SRI or any affiliate of either of them.) This certifies that SRI Receivables Purchase Co., Inc. (the "Certificateholder") is the registered owner of a fractional undivided interest in the SRI Receivables Master Trust (the "Trust") issued pursuant to the Second Amended and Restated Pooling and Servicing Agreement, dated as of November 1, 1999 (the "Pooling and Servicing Agreement"; such term to include any amendment or Supplement thereto) by and between SRI Receivables Purchase Co., Inc., as Transferor (the "Transferor"), SRI as the Servicer, and Bankers Trust (Delaware), as Trustee (the "Trustee"), and the Series 1999-1 Supplement, dated as of November 9, 1999 (the "Series 1999-1 Supplement"), among the Transferor, SRI as Servicer and the Trustee. The Pooling and Servicing Agreement, as supplemented by the Series 1999-1 Supplement, is herein referred to as the "Agreement." The corpus of the Trust consists of all of the Transferor's right, title and interest in, to and under the Trust Property (as defined in the Agreement). This Certificate does not purport to summarize the Agreement and reference is made to that Agreement for information with respect to the interests, rights, benefits, obligations, proceeds, and duties evidenced hereby and the rights, duties and obligations of the Trustee. To the extent not defined herein, the capitalized terms used herein have the meanings ascribed to them in the Agreement. This Certificate is one of a Series of Certificates entitled "SRI Receivables Master Trust Floating Rate Class E Certificates, Series 1999-1" (the "Class E Certificates"), 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 Certificateholder by virtue of the acceptance hereof assents and by which the Certificateholder is bound. By acceptance of this Certificate or any interest herein, each Class E Certificateholder agrees that it shall in no event permit the Class E Certificates or any interest therein to be transferred, sold, exchanged, pledged, participated or otherwise assigned hereunder, in whole or in part, except under the conditions specified in the Series 1999-1 Supplement. No principal will be payable to the Class E Certificateholders until the Class E Principal Payment Commencement Date, which is the Distribution Date either on or following the Distribution Date on which the Class D Invested Amount had been paid in full. No principal will be payable to the Class E Certificateholders until all principal payments have first been made to the Class A Certificateholders and then on and after the Class B Principal Payment Commencement Date, after all principal payments have been made to the Class B Certificateholders, then on and after the Class C Principal Payment Commencement Date, after all principal payments have been made to the Class D Certificateholders and then on and after the Class D Principal Payment Commencement Date, after all payments have been made to the Class D Certificateholders. Interest will accrue on the unpaid principal amount of the Class E Certificates at a per annum rate equal to 0.00% per annum or such other rate designated by the Transferor with the approval of each Rating Agency (the "Class E Certificate Rate"). Subject to the Agreement, payments of principal are limited to the unpaid Class D Invested Amount of the Class E Certificates, which may be less than the unpaid balance of the Class E Certificates pursuant to the terms of the Agreement. All principal of and interest on the Class E Certificates is due and payable no later than the [__________] Distribution Date (or if such day is not a Business Day, the next succeeding Business Day) (the "Series Termination Date"). After the Series Termination Date neither the Trust nor the Transferor will have any further obligation to distribute principal or interest on the Class E Certificates. In the event that the Class E Invested Amount is greater than zero on the Series Termination Date, the Trustee shall 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, the Class D Invested Amount and the Class E Invested Amount at the close of business on such date (but not more than the total amount of Receivables allocable to the Investor Certificates), and shall pay the proceeds to the Class A Certificateholders pro rata in final payment of the Class A Certificates, then to the Class B Certificateholders pro rata in final payment of the Class B Certificates, then to the Class C Certificateholders pro rata in final payment of the Class C Certificates, then to the Class D Certificateholders pro rata in final payment of the Class D Certificates and finally to the Class E Certificateholders pro rata in final payment of the Class E Certificates. It is expressly understood and agreed by the parties hereto that (a) this Certificate is executed and delivered by Bankers Trust (Delaware), not individually or personally but solely as Trustee, (b) each of the representations, undertakings and agreements herein made on the part of the Trustee is made and intended not as personal representations, undertakings and agreements by Bankers Trust (Delaware) but is made and intended for the purpose for binding only the Trustee and (c) under no circumstances shall Bankers Trust (Delaware) be personally liable for the payment of any indebtedness or expenses of the Trustee or be liable for the breach or failure of any obligation, representation, warranty or covenant made or undertaken by the Trustee under this Certificate. Unless the certificate of authentication hereon has been executed by or on behalf of the Trustee, by manual signature, this Certificate shall not be entitled to any benefit under the Agreement, or be valid for any purpose. IN WITNESS WHEREOF, the Transferor has caused this Certificate to be duly executed under its official seal. SRI Receivables Purchase Co., Inc., Transferor By: Name: Title: CERTIFICATE OF AUTHENTICATION This is one of the Class E Certificates referred to in the within-mentioned Pooling and Servicing Agreement. Date: November 9, 1999 bankers Trust (Delaware), not in its individual capacity but solely as Trustee By:_____________________________________ Authorized Signatory Exhibit B [Form of ]Monthly Class D Certificateholders' Statement SRI RECEIVABLES MASTER TRUST, SERIES 1999-1 Month Ending __________, ____ This document shall be a supplement to the Monthly Certificateholders' Statement, the form of which is included as Exhibit C to the Series 1999-1 Supplement, and shall include the following supplemental information for the immediately preceding Monthly Period and the related Distribution Date: Class D Certificates Class D Invested Amount $_________ Class D Investor Default Amount $_________ Class D Uncovered Dilution Amount $_________ Other Reductions of Class D Invested Amount$_________ Class D Floating Allocation Percentage ____% Spread Account Available Spread Account Amount $_________ Investment Earnings $_________ Required Spread Account Amount $_________ Spread Account Deficiency $_________ Spread Account Percentage ____% Quarterly Excess Spread Percentage ____% Excess Spread Percentage ____% Withdrawals from Spread Account To Class D Investors: Interest Deficiency $_________ Reimbursement of Reduction of Class D Investor Principal Balance $_________ Class D Investor Default Amount or Class D Uncovered Dilution Amount $_________ To Spread Account Residual Interest Holders: Excess of Spread Account Amount over Required Spread Account Amount $_________ Investment Earnings $_________ Insured Payment $________ Unreimbursed Insured Payment $________ Exhibit C Form of Monthly Certificateholders' Statement [To Come] Exhibit D FORM OF CONFIRMATION Bankers Trust Company 4 Albany Street New York, New York 10006 [Purchaser] [Address] Tax ID: TRANSACTION STATEMENT This statement serves to confirm your account position maintained on books of Bankers Trust Company as Transfer Agent and Registrar for: ISSUE: SRI Receivables Master Trust, Series 1999-1 ISSUE ID: [Class C][Class D] Certificates, Series 1999-1 HOLDER AS OF DATE PRINCIPAL AMOUNT SRI RECEIVABLES MASTER TRUST By: BANKERS TRUST COMPANY, as Transfer Agent and Registrar Name: Title: SEE ATTACHED INFORMATION REGARDING CERTAIN PROVISIONS REGARDING RESTRICTIONS ON TRANSFERS OF THE CLASS C CERTIFICATES AND THE CLASS D CERTIFICATES. THIS STATEMENT IS MERELY A RECORD OF THE RIGHTS OF THE ADDRESSEE AS OF THE TIME OF ITS ISSUANCE. DELIVERY OF THIS STATEMENT, OF ITSELF, CONFERS NO RIGHTS ON THE RECIPIENT. THIS STATEMENT IS NEITHER A NEGOTIABLE INSTRUMENT NOR A SECURITY. SRI RECEIVABLES MASTER TRUST CONFIRMATION OF ISSUANCE AND TRANSFER OF CLASS C AND CLASS D FLOATING RATE ASSET BACKED CERTIFICATES, SERIES 1999-1 THIS STATEMENT IS MERELY A STATEMENT OF CERTAIN PROVISIONS REGARDING RESTRICTIONS ON TRANSFER OF THE CLASS C CERTIFICATES AND THE CLASS D CERTIFICATES. DELIVERY OF THIS STATEMENT, OF ITSELF, CONFERS NO RIGHTS ON THE RECIPIENT. THIS STATEMENT IS NEITHER A NEGOTIABLE INSTRUMENT NOR A SECURITY. EACH PURCHASER AND HOLDER OF A CLASS C CERTIFICATE OR CLASS D CERTIFICATE REPRESENTS AND WARRANTS FOR THE BENEFIT OF SRI RECEIVABLES PURCHASE CO., INC. AND SPECIALTY RETAILERS, INC., [ADD THE FOLLOWING WITH RESPECT TO CLASS D CERTIFICATES ONLY] [AND R.V.I. GUARANTY CO., LTD.] THAT SUCH PURCHASER OR HOLDER EITHER (A) IS NOT (I) AN EMPLOYEE BENEFIT PLAN (AS DEFINED IN SECTION 3(3) OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA")) THAT IS SUBJECT TO THE PROVISIONS OF TITLE I OF ERISA, (II) A PLAN OR OTHER ARRANGEMENT (INCLUDING AN INDIVIDUAL RETIREMENT ACCOUNT OR KEOGH PLAN) THAT IS SUBJECT TO SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), OR (III) A "BENEFIT PLAN INVESTOR" (AS DEFINED IN UNITED STATES DEPARTMENT OF LABOR ("DOL") REGULATION SECTION 2510.3-101) OR (B) IS AN INSURANCE COMPANY ACTING ON BEHALF OF ITS GENERAL ACCOUNT AND (I) ON THE DATE IT ACQUIRES A CLASS C CERTIFICATE OR A CLASS D CERTIFICATE, LESS THAN 25% OF THE ASSETS OF SUCH GENERAL ACCOUNT (AS DETERMINED BY SUCH INSURANCE COMPANY) CONSTITUTE "PLAN ASSETS" FOR PURPOSES OF TITLE I OF ERISA OR SECTION 4975 OF THE CODE, (II) IF AFTER THE INITIAL ACQUISITION OF THE CLASS C CERTIFICATES OR CLASS D CERTIFICATES, DURING ANY CALENDAR QUARTER 25% OR MORE OF THE ASSETS OF SUCH GENERAL ACCOUNT (AS DETERMINED BY SUCH INSURANCE COMPANY) CONSTITUTE "PLAN ASSETS" FOR PURPOSES OF TITLE I OF ERISA OR SECTION 4975 OF THE CODE AND NO EXEMPTION OR EXCEPTION FROM THE PROHIBITED TRANSACTION RULES APPLIES TO THE CONTINUED HOLDING OF THE CLASS C CERTIFICATES OR CLASS D CERTIFICATES UNDER SECTION 401(c) OF ERISA AND FINAL REGULATIONS THEREUNDER OR AN EXEMPTION OR REGULATION ISSUED BY THE DOL UNDER ERISA, THEN SUCH INSURANCE COMPANY WILL DISPOSE OF ALL OF THE CLASS C CERTIFICATES AND CLASS D CERTIFICATES THEN HELD IN ITS GENERAL ACCOUNT BY THE END OF THE NEXT FOLLOWING CALENDAR QUARTER, AND (III) ON THE DATE IT ACQUIRES THE CLASS C CERTIFICATES OR CLASS D CERTIFICATES AND THROUGHOUT THE PERIOD THAT IT HOLDS THEM IT MEETS ALL THE REQUIREMENTS OF AND IS ELIGIBLE FOR EXEMPTIVE RELIEF UNDER PTCE 95-60. THE CLASS C CERTIFICATES AND THE CLASS D CERTIFICATES MAY NOT BE ACQUIRED, SOLD, TRADED OR TRANSFERRED, NOR MAY AN INTEREST IN THE CLASS C CERTIFICATES OR THE CLASS D CERTIFICATES 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 (OR THE SUBSTANTIAL EQUIVALENT THEREOF)" WITHIN THE MEANING OF SECTION 7704(b)(2) OF THE CODE AND ANY TREASURY REGULATION THEREUNDER, INCLUDING A MARKET WHEREIN INTERESTS IN THE CLASS C CERTIFICATES OR THE CLASS D CERTIFICATES, AS APPLICABLE, 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 CERTIFICATES OR THE CLASS D CERTIFICATES, AS APPLICABLE AND STANDS READY TO EFFECT BUY OR SELL TRANSACTIONS AT THE QUOTED PRICES FOR ITSELF OR ON BEHALF OF OTHERS. THE CLASS C CERTIFICATES AND THE CLASS D CERTIFICATES [ADD THE FOLLOWING TO THE CLASS D CERTIFICATES ONLY] [AND THE POLICY] HAVE 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 OF A CLASS C CERTIFICATE OR A CLASS D CERTIFICATE, BY PURCHASING A CLASS C CERTIFICATE OR A CLASS D CERTIFICATE, AGREES THAT SUCH CERTIFICATES MAY BE REOFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY IN COMPLIANCE WITH THE SECURITIES ACT AND OTHER APPLICABLE LAWS AND ONLY TO THE TRANSFEROR OR PURSUANT TO RULE 144A UNDER THE SECURITIES ACT TO A PERSON THAT THE HOLDER OF SUCH CERTIFICATE REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A ("QIB") PURCHASING FOR ITS OWN ACCOUNT, IN ACCORDANCE WITH RULE 144A, WHOM THE HOLDER OF SUCH CERTIFICATE HAS INFORMED THAT THE REOFFER, RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A AND AFTER DELIVERY OF THE DOCUMENTATION REQUIRED BY THE AGREEMENT AND THE SERIES 1999-1 SUPPLEMENT. EACH OWNER OF A CLASS C CERTIFICATE OR A CLASS D CERTIFICATE BY ACCEPTING A DIRECT OWNERSHIP INTEREST IN OR A BENEFICIAL INTEREST IN A SUCH CERTIFICATE IS DEEMED TO REPRESENT THAT IT IS A QIB PURCHASING FOR ITS OWN ACCOUNT. THE CLASS C CERTIFICATES AND THE CLASS D CERTIFICATES WILL NOT BE ACCEPTED FOR REGISTRATION OF TRANSFER EXCEPT UPON PRESENTATION OF EVIDENCE SATISFACTORY TO THE TRANSFER AGENT AND REGISTRAR THAT THE RESTRICTIONS ON TRANSFER SET FORTH IN THE AGREEMENT AND THE SERIES 1999-1 SUPPLEMENT HAVE BEEN COMPLIED WITH. THE CLASS C CERTIFICATES AND THE CLASS D CERTIFICATES MAY NOT BE REOFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHOUT THE PRIOR WRITTEN CONSENT OF THE TRANSFEROR AND UNLESS AND UNTIL THE TRUSTEE AND THE TRANSFEROR SHALL HAVE RECEIVED THE CERTIFICATIONS REQUIRED BY THE AGREEMENT AND THE SERIES 1999-1 SUPPLEMENT. THE CLASS C CERTIFICATES AND THE CLASS D CERTIFICATES ARE ALSO SUBJECT TO RESTRICTIONS ON THE PURCHASE, OWNERSHIP AND DISPOSITION OF SUCH SECURITIES OR ANY INTEREST THEREIN, INCLUDING THE CONSENT OF THE TRANSFEROR AND THE DELIVERY OF AN INVESTOR REPRESENTATION LETTER. SUCH RESTRICTIONS ARE SET FORTH IN THE AGREEMENT AND THE SERIES 1999-1 SUPPLEMENT, COPIES OF WHICH ARE AVAILABLE FROM THE TRUSTEE. EXHIBIT E FORM OF TRANSFER REQUEST REGISTRATION OF TRANSFER Dated __________, ____ ISSUER INFORMATION: Name: SRI RECEIVABLES MASTER TRUST Address: c/o Bankers Trust Company, as Trustee and as Transfer Agent and Registrar 4 Albany Street New York, New York 10006 Attention: Corporate Trust and Agency Group REGISTERED OWNER INFORMATION Name: Address: TRANSFER INSTRUCTION: You are hereby instructed to register a transfer of the following securities in the manner indicated: 1. Transferred Interest: (a) Type of Interest: Class [C][D] Floating Rate Asset Backed Certificates, Series 1999-1 (b) Principal Amount to be Transferred: $______________ (c) Name of Issuer: SRI RECEIVABLES MASTER TRUST (d) Issuer's jurisdiction of organization: New York 2. Transfer Instructions: You are instructed by the undersigned Registered Owner, to transfer the above described securities in the principal amount specified above to _______ (the "Transferee") as indicated below, who upon such transfer shall be the Registered Holder of such interests, with all rights incident thereto. Payment Instructions: The Taxpayer Identification Number of the Transferee is: You are further instructed promptly to inform the Transferor of this proposed Registration of Transfer and to request the Transferor's consent to such Transfer pursuant to Section 12 of the Series 1999-1 Supplement. All notices and communications to the Transferee in connection with this Transfer should be sent to: Name: Address: 3. Warranties: The undersigned hereby warrants that: (a) It is an appropriate entity to originate this instruction; (b) It is entitled to effect the instruction hereby given, and (c) Its Taxpayer Identification Number is: 4. Authentication: In witness of this Instruction to Register Transfer, the undersigned Registered Owner has executed this instruction as of the ____ day of __________, ____. By: EXHIBIT F FORM OF INVESTMENT LETTER Bankers Trust Company 4 Albany Street, 10th Floor New York, NY 10006 Attention: Corporate Trust and Agency Group SRI Receivables Purchase Co., Inc. 10201 Main Street Houston, TX 77025 Attention: Treasurer [Add Insurer address for Class D Certificates] [Date] Re: SRI RECEIVABLES MASTER TRUST, Series 1999-1 Purchase of Class Certificates/1 Ladies and Gentlemen: This letter (the "Investment Letter") is delivered by the undersigned (the "Purchaser") pursuant to the Series 1999-1 Supplement, dated as of ______________, 1999 (the "Series Supplement"), by and among SRI Receivables Purchase Co., Inc., a corporation organized and existing under the laws of the State of Delaware, as Transferor (the "Transferor"), Specialty Retailers, Inc., a corporation organized and existing under the laws of Texas, as Servicer (the "Servicer"), and Bankers Trust (Delaware), a 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 Second Amended and Restated Pooling and Servicing Agreement dated as of __________, 1999 (the "Agreement"), among the Transferor, the Servicer and the Trustee. Capitalized terms used herein without definition shall have the meanings provided in the Agreement or the Series Supplement. The Purchaser hereby represents, warrants and covenants to the Transferor as follows: The Purchaser represents and warrants that it understands that the Certificates referenced in the caption above (the "Purchased Certificates") [add the following with respect to the Class D Certificates only][and the Policy] (i) have not been and will not be registered under the Securities Act of 1933, as amended (the "Securities Act"), or any state or other applicable securities law, and (ii) are being offered only in a transaction not involving a public offering within the meaning of the Securities Act and may not be offered, sold or otherwise transferred unless registered pursuant to, or exempt from registration under, the Securities Act and any other applicable securities law. The Purchaser represents and warrants that it is a "qualified institutional buyer" (as defined in Rule 144A ("Rule 144A") under the Securities Act), that it is aware that the offer and sale of the Purchased Certificates to it are being made in reliance on Rule 144A and that it is purchasing the Purchased Certificates for its own account. The Purchaser represents, warrants and covenants that it will not offer, sell, convey, assign, hypothecate, pledge, participate or otherwise transfer (each, a "Transfer") the Purchased Certificates or any interest therein at any time except (i) to the Transferor or (ii) pursuant to Rule 144A to a person whom the Transferor reasonably believes is a qualified institutional buyer within the meaning of Rule 144A purchasing for its own account, in accordance with Rule 144A, whom the Transferor has informed that the Transfer is being made in reliance on Rule 144A. The Purchaser represents, warrants and covenants that either (a) it is not (i) an employee benefit plan (as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA") that is subject to the provisions of Title I of ERISA, (ii) a plan or other arrangement (including an individual retirement account or Keogh plan) that is subject to Section 4975 of the Internal Revenue Code of 1986, as amended (the "Code"), or (iii) an entity whose underlying assets include "plan assets" by reason of any such plan's investment in the entity and the application of United States Department of Labor ("DOL") Regulation Section 2510.3-101 or (b) it is an insurance company acting on behalf of its general account and (i) on the date it acquires the Purchased Certificates, less than 25% of the assets of such general account (as determined by such insurance company) constitute "plan assets" for purposes of Title I of ERISA or Section 4975 of the Code, (ii) if, after the initial acquisition of the Purchased Certificates, during any calendar quarter 25% or more of the assets of such general account (as determined by such insurance company) constitute "plan assets" for purposes of Title I of ERISA or Section 4975 of the Code and no exemption or exception from the prohibited transaction rules applies to the continued holding of the Purchased Certificates under Section 401(c) of ERISA and final regulations thereunder or an exemption or regulation issued by the DOL under ERISA, then such insurance company will dispose of all of the Purchased Certificates then held in its general account by the end of the next following calendar quarter and (iii) on the date it acquires the Purchased Certificates and throughout the period that it holds them it meets all the requirements of and is eligible for exemptive relief under Part I of PTCE 95-60. The Purchaser represents, warrants and covenants that no Purchased Certificates or any interest therein may be Transferred to any Person unless such Person has executed and delivered the Investment Letter to the Transferor and the Trustee and the Transferor has granted its prior written consent to such Transfer. The Purchaser certifies, represents and warrants to the Transferor, the Servicer, and the Trustee [add the following with respect to the Class D Certificates only] [and the Insurer] that it is either (A)(i) a citizen or resident of the United States, (ii) a corporation, partnership or other entity created or organized in or under the laws of the United States or any political subdivision thereof which, if such entity is a tax- exempt entity, recognizes that payments with respect to the Purchased Certificates may constitute unrelated business taxable income or (iii) an entity not described in (ii) whose ownership of the Purchased Certificates is effectively connected with its conduct of a trade or business within the United States (within the meaning of the Code) or (B)(i) an estate, the income of which is includible in gross income for United States Federal income tax purposes, regardless of its source, or (ii) a trust if a U.S. court is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust or if the trust has made an election to be treated as a U.S. person. The Purchaser represents, warrants and covenants that upon its purchase or the transfer to it of a Purchased Certificate and prior to the date on which the first interest payment on the Purchased Certificates is due to the Purchaser, it will provide to the Servicer and the Trustee (i) if the Purchaser is created or organized in or under the laws of a jurisdiction outside the United States, two duly completed copies of United States Internal Revenue Service Form 4224 or new Form W-8ECI or any successor applicable or required forms, (ii) a duly completed copy of United States Internal Revenue Service Form W-9 or any successor applicable or required forms, and (iii) such other forms and information as may be required to confirm the availability of any applicable exemption from United States Federal, state or local withholding taxes. The Purchaser agrees to provide to the Servicer and the Trustee like additional subsequent duly completed forms satisfactory to the Servicer and the Trustee on or before the date that any such form expires or becomes obsolete, or upon the occurrence of any event requiring an amendment, resubmission or change in the most recent form previously delivered by it, and to provide such extensions or renewals as may be reasonably requested by the Servicer or the Trustee. The Purchaser certifies, represents and warrants that as of the date hereof (a) its ownership of the Purchased Certificates will not result in any withholding obligation with respect to any payments with respect to the Purchased Certificates with respect to any Person, and (b) unless otherwise consented to by the Transferor, if the Purchaser is incorporated or organized under the laws of a jurisdiction outside the United States, it has (x) a rating of "BBB" or better from Fitch IBCA, Inc. or "Baa2" or better from Moody's Investors Service, Inc. and (y) balance sheet assets at least $100 million of which are effectively connected with its conduct of a trade or business in the United States within the meaning of the Code. The Purchaser represents, warrants and covenants that it has not acquired any interest in the Purchased Certificates, and shall not Transfer any interest in the Purchased Certificates or cause any such interest to be marketed, on or through (i) an "established securities market" within the meaning of Section 7704(b)(1) of the Code and any Treasury Regulations 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 (or the substantial equivalent thereof)" within the meaning of Section 7704(b) (2) of the Code and any Treasury Regulations thereunder, including a market wherein interests in the Purchased Certificates 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 Purchased Certificates and stands ready to effect buy or sell transactions at the quoted prices for itself or on behalf of others. The Purchaser represents, warrants and covenants that it is not, and will not become, a partnership, an "S corporation" or a grantor trust, in each case, as described in the Code. In the event of any breach of the representation, warranty and covenant of the Purchaser that such Purchaser shall remain classified as other than a partnership, an S corporation or a grantor trust, such Purchaser shall (i) notify the Transferor promptly upon such Purchaser's becoming aware of such breach, and thereupon the Purchaser hereby agrees to use reasonable efforts to procure a replacement investor not so affected that is acceptable to the Transferor to replace such affected Purchaser, and (ii) take all actions necessary to permit a replacement investor to succeed to its rights and obligations under the Agreement and the Supplement. The Purchaser hereby acknowledges that the portion of the Tax Opinion to the effect that the Trust will not be treated as a publicly traded partnership taxable as a corporation is dependent in part on the accuracy of the certifications described above. The Purchaser represents and warrants that it understands that the Purchased Certificates will be uncertificated securities and will not be represented by any certificate and will not be held through The Depository Trust Company or any other depositary or clearing corporation. The Purchaser hereby notifies the Paying Agent that all distributions of principal and interest on the Purchased Certificates to the Purchaser shall be made by wire transfer to its account specified in Schedule 1, or to such other account as it shall specify in writing to the Paying Agent in accordance with the Supplement. Very truly yours, (type name of Purchaser above) By: Name: Title: SCHEDULE I Name of Purchaser: Principal Amount of Purchased Certificates: (i) All payments on or in respect of the Purchased Certificates shall be made by wire transfer to: Bank: ABA #: Account #: For further credit to Account #: Ref: (ii) Address for all notices in respect of payment: (iii) Address for all other communications: (iv) Taxpayer ID #: EXHIBIT G FORM OF RECEIPT LETTER Specialty Retailers, Inc. 10201 Main Street Houston, Texas 77025 Attention: Treasurer CNA Guaranty & Credit 40 Wall Street, 8th Floor New York, New York 10005 Attention: John P. Verel Ladies and Gentlemen: Please refer to the Series 1999-1 Supplement, dated as of November 9, 1999 and amended as of December 8, 1999 (the "Supplement"), among SRI Receivables Purchase Co., Inc., as Transferor, Specialty Retailers, Inc., and Bankers Trust (Delaware), as Trustee. Capitalized terms used and not otherwise defined herein are used as defined in the Supplement or, if not defined therein, as defined in the Agreement referred to in the Supplement. This is to confirm that: (a) We received a computer file from the Servicer on the date specified below, which the Servicer identified in its transmittal letter as containing computer readable copies of back-up data regarding the Receivables sufficient to enable the recipient of such back-up data to service the Receivables. Date of receipt: ____________________ (b) We have opened the file on our computer system and confirmed that it was computer readable. We are holding the file in accordance with the terms of Section 3.4(d) of the Agreement. We have made no investigation as to the content of the file and make no representation as to the compliance thereof with the requirements listed in the Agreement. Bankers Trust (Delaware) shall incur no liability in connection with the file referred to herein. Very truly yours, BANKERS TRUST (DELAWARE), not in its individual capacity but solely as Trustee By: _____________________________________ Name:___________________________________ Title:__________________________________ __ _______________________________ 1/Insert appropriate Class of Certificate EX-4.21 9 0009.txt SRI Receivables Master Trust Exhibit B-1A, Page 4 Series 1999-1, Issuance Supplement I Exhibit 4.21 SRI RECEIVABLES PURCHASE CO., INC. Transferor SPECIALTY RETAILERS, INC. Servicer and BANKERS TRUST (DELAWARE) Trustee on behalf of the Series 1999-1 Certificateholders ISSUANCE SUPPLEMENT I Dated as of November 9, 1999 to SERIES 1999-1 SUPPLEMENT Dated as of November 9, 1999 to SECOND AMENDED AND RESTATED POOLING AND SERVICING AGREEMENT Dated as of November 1, 1999 Class A Variable Funding Certificates, Series 1999-1 Class B Variable Funding Certificates, Series 1999-1 SRI RECEIVABLES MASTER TRUST TABLE OF CONTENTS Page SECTION 1. Designation 1 SECTION 2. Definitions 1 SECTION 3. Delivery and Payment for the VFCs; Form of Delivery 10 SECTION 4. Carrying Cost Terms of the VFCs 10 SECTION 5. Amortization Terms of the VFCs 12 SECTION 6. Variable Funding Terms of the VFCs 17 SECTION 7. [Reserved] 19 SECTION 8. Mandatory Partial Amortization Events 19 SECTION 9. Additional VFC Provisions 21 SECTION 10. Ratification of Agreement 22 SECTION 11. Counterparts 22 SECTION 12. GOVERNING LAW 23 SECTION 13. The Trustee 23 SECTION 14. Limitation of Liability 23 SECTION 15. Instructions in Writing 23 LIST OF EXHIBITS EXHIBIT A-1 Form of Class A-1 Certificate EXHIBIT A-2 Form of Class A-2 Certificate EXHIBIT A-3 Form of Class B Certificate EXHIBIT B-1 Class A-1 Interest Calculations EXHIBIT B-2 Class A-2 Interest Calculations EXHIBIT B-3 Class B Interest Calculations EXHIBIT C Form of Monthly Certificateholders' Statement EXHIBIT D Form of Daily Report This ISSUANCE SUPPLEMENT I dated as of November 9, 1999 (this "Issuance Supplement") to SERIES 1999-1 SUPPLEMENT, dated as of November 9, 1999 (the "Series Supplement"), by and among SRI RECEIVABLES PURCHASE CO., INC., a corporation organized and existing under the laws of the State of Delaware, as Transferor (the "Transferor"), SPECIALTY RETAILERS, INC., a corporation organized and existing under the laws of Texas, as Servicer (the "Servicer"), and BANKERS TRUST (DELAWARE), a 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 Second Amended and Restated Pooling and Servicing Agreement dated as of November 1, 1999 (as amended 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, one or more Series of Certificates. Pursuant to the Series Supplement, the Transferor and the Trustee have created a Series of Investor Certificates to be issued from time to time pursuant to the Agreement and the Series Supplement to be known generally as the "Series 1999-1 Certificates." Pursuant to this Issuance Supplement, the Transferor and the Trustee will create two classes of Variable Funding Certificates to be included among the Class A Certificates and one class of Variable Funding Certificates to be included among the Class B Certificates, respectively, making up part of the Series 1999-1 Certificates. SECTION 1. Designation. There are hereby created three Classes of Investor Certificates, which shall be designated generally as: (a) the Class A-1 Variable Funding Certificates, Series 1999-1 (the "Class A-1 VFCs"), which shall form part of the Class A Certificates in Series 1999-1; (b) the Class A-2 Variable Funding Certificates, Series 1999-1 (the "Class A-2 VFCs"), which shall form part of the Class A Certificates in Series 1999-1; and (c) the Class B Variable Funding Certificates, Series 1999-1 (the "Class B VFCs"), which shall form part of the Class B Certificates in Series 1999-1. SECTION 2. Definitions. If any term or provision contained herein shall conflict with or be inconsistent with any provision contained in the Agreement or the Series Supplement, the terms and provisions of this Issuance Supplement shall govern with respect to the Class A-1 VFCs, Class A-2 VFCs and Class B VFCs. All Article, Section or subsection references herein shall mean Article, Section or subsections of the Agreement, as amended or supplemented by the Series Supplement, except as otherwise provided herein. All capitalized terms not otherwise defined herein are defined in the Series Supplement or, if not defined in the Series Supplement, in the Agreement. Each capitalized term defined herein shall relate only to the Class A-1 VFCs, Class A-2 VFCs and Class B VFCs and no other Series or Class of Certificates issued by the Trust. "Additional Class A Invested Amount" shall have the meaning specified in subsection 6(a) of this Issuance Supplement. "Additional Class A-1 Invested Amount" shall have the meaning specified in subsection 6(a) of this Issuance Supplement. "Additional Class A-2 Invested Amount" shall have the meaning specified in subsection 6(a) of this Issuance Supplement. "Additional Class B Invested Amount" shall have the meaning specified in subsection 6(a) of this Issuance Supplement. "Agent" shall mean any person designated as an "Agent" in any Certificate Purchase Agreement. "Certificate Purchase Agreement" shall mean, collectively, the Class A-1 Certificate Purchase Agreement, the Class A-2 Certificate Purchase Agreement and the Class B Certificate Purchase Agreement. "Class Additional Interest" shall mean: (a) as to the Class A-1 VFCs, the Class A-1 Additional Interest; (b) as to the Class A-2 VFCs, the Class A-2 Additional Interest; and (c) as to the Class B VFCs, the Class B Additional Interest. "Class A Certificateholder" shall mean a Class A-1 Certificateholder or a Class A-2 Certificateholder. "Class A Certificate Rate" shall mean for any day the weighted average of the interest rates with respect to each portion of the Class A VFC Principal Balance outstanding at such time (taking into account whether such rates are calculated on a 360 or 365/6 day basis). "Class A Expected Final Payment Date" shall mean the Class A/B VFC Expected Final Payment Date. "Class A Owner" shall mean any Class A-1 Owner and any Class A-2 Owner. "Class A Initial Invested Amount" shall mean the sum of the Class A-1 Initial Invested Amount and the Class A-2 Initial Invested Amount. "Class A Program Fee Rate" shall mean the weighted average annual rate (calculated based on the Class A-1 Purchase Limit and the Class A-2 Purchase Limit) at which the Class A-1 Program Fee (as defined in the Class A-1 Certificate Purchase Agreement) and the Class A-2 Program Fee (as defined in the Class A-2 Certificate Purchase Agreement) is calculated pursuant to the applicable Certificate Purchase Agreement. "Class A Purchaser" shall mean a Class A-1 Purchaser or a Class A-2 Purchaser. "Class A VFCs" shall mean the Class A-1 VFCs and Class A-2 VFCs collectively. "Class A VFC Principal Balance" shall mean, when used with respect to any Business Day, an amount equal to the sum of the Class A-1 VFC Principal Balance and the Class A-2 VFC Principal Balance. "Class A-1 Carrying Cost Shortfall" shall have the meaning specified in subsection 4(a) of this Issuance Supplement. "Class A-1 Certificate Purchase Agreement" shall mean the Class A-1 Certificate Purchase Agreement, dated as of November 9, 1999, by and among the Transferor, SRI, one or more purchasers of Class A-1 VFCs, one or more Agents and the Facility Agent, relating to the purchase of Class A-1 VFCs, as it may be amended, supplemented or otherwise modified from time to time and including any replacement agreement therefor. "Class A-1 Certificateholder" shall mean a Certificateholder of a Class A-1 VFC. "Class A-1 Exiting Purchaser Amortization Amount" shall have the meaning specified in the Class A-1 Certificate Purchase Agreement. "Class A-1 Initial Invested Amount" shall mean $28,350,000. "Class A-1 Interest" shall have the meaning specified in subsection 4(a) of this Issuance Supplement. "Class A-1 Invested Amount" shall mean, for any day, (i) the Class A-1 VFC Principal Balance minus (ii) the aggregate Unreimbursed Class A-1 Investor Charge-Offs. "Class A-1 Owner" shall mean a Certificateholder of a Class A-1 VFC or, with respect to any Class A-1 VFC held by an Agent or any Person as nominee on behalf of a beneficial owner of such Class A-1 Certificate, the Person that is the beneficial owner of the Class A Invested Amount represented by such Class A-1 VFC as reflected on the books of such nominee. "Class A-1 Percentage" shall mean, for any day, the percentage equivalent of a fraction, the numerator of which equals the Class A-1 VFC Principal Balance on such day, and the denominator of which equals the sum of (i) the Class A Initial Invested Amount, plus (ii) the initial principal amount of any Additional Class A Invested Amounts issued through the end of the preceding Business Day pursuant to Section 6.15 of the Series Supplement or this Issuance Supplement, minus (iii) the aggregate amount of principal payments made to the Class A Certificateholders prior to such day. "Class A-1 Purchase Limit" shall have the meaning specified in the Class A-1 Certificate Purchase Agreement. "Class A-1 Purchaser" shall have the meaning specified in the Class A-1 Certificate Purchase Agreement. "Class A-1 VFC Principal Balance" shall mean, when used with respect to any Business Day, an amount equal to (a) the Class A-1 Initial Invested Amount, plus (b) the aggregate principal amount of any Additional Class A-1 Invested Amounts purchased by the Class A-1 Owners through the end of the preceding Business Day pursuant to Section 6 of this Issuance Supplement, minus (c) the aggregate amount of principal payments made to Class A-1 VFC Owners prior to such Business Day. "Class A-1 VFCs" shall have the meaning specified in Section 1 of this Issuance Supplement. The Class A-1 VFCs shall be substantially in the form of Exhibit A-1 to this Issuance Supplement. "Class A-2 Carrying Cost Shortfall" shall have the meaning specified in subsection 4(a) of this Issuance Supplement. "Class A-2 Certificate Purchase Agreement" shall mean the Class A-2 Certificate Purchase Agreement, dated as of November 9, 1999, by and among the Transferor, SRI, one or more purchasers of Class A-2 VFCs, one or more Agents and the Facility Agent, relating to the purchase of Class A-2 VFCs, as it may be amended, supplemented or otherwise modified from time to time and including any replacement agreement therefor. "Class A-2 Certificateholder" shall mean a Certificateholder of a Class A-2 VFC. "Class A-2 Exiting Purchaser Amortization Amount" shall have the meaning specified in the Class A-2 Certificate Purchase Agreement. "Class A-2 Initial Invested Amount" shall mean $150,000,000. "Class A-2 Interest" shall have the meaning specified in subsection 4(a) of this Issuance Supplement. "Class A-2 Invested Amount" shall mean, for any day, (i) the Class A-2 Principal Balance minus (ii) the aggregate Unreimbursed Class A-2 Investor Charge-Offs. "Class A-2 Owner" shall mean a Certificateholder of a Class A-2 VFC or, with respect to any Class A-2 VFC held by an Agent or any Person as nominee on behalf of a beneficial owner of such Class A-2 Certificate, the Person that is the beneficial owner of the Class A Invested Amount represented by such Class A-2 VFC as reflected on the books of such nominee. "Class A-2 Percentage" shall mean, for any day, the percentage equivalent of a fraction, the numerator of which equals the Class A-2 VFC Principal Balance on such day, and the denominator of which equals the sum of (i) the Class A Initial Invested Amount, plus (ii) the initial principal amount of any Additional Class A Invested Amounts issued through the end of the preceding Business Day pursuant to Section 6.15 of the Series Supplement or this Issuance Supplement, minus (iii) the aggregate amount of principal payments made to the Class A Certificateholders prior to such day. "Class A-2 Purchaser" shall have the meaning specified in the Class A-2 Certificate Purchase Agreement. "Class A-2 Purchase Limit"shall have the meaning specified in the Class A-2 Certificate Purchase Agreement. "Class A-2 VFC Principal Balance" shall mean, when used with respect to any Business Day, an amount equal to (a) the Class A-2 Initial Invested Amount, plus (b) the aggregate principal amount of any Additional Class A-2 Invested Amounts purchased by the Class A-2 Owners through the end of the preceding Business Day pursuant to Section 6 of this Issuance Supplement, minus (c) the aggregate amount of principal payments made to Class A-2 VFC Owners prior to such Business Day. "Class A-2 VFCs" shall have the meaning specified in Section 1 of this Issuance Supplement. The Class A-2 VFCs shall be substantially in the form of Exhibit A-2 to this Issuance Supplement. "Class B Carrying Cost Shortfall" shall have the meaning specified in subsection 4(a) of this Issuance Supplement. "Class B Certificate Purchase Agreement" shall mean the Class B Certificate Purchase Agreement, dated as of November 9, 1999, by and among the Transferor, SRI, one or more purchasers of Class B VFCs, one or more Agents and the Facility Agent, relating to the purchase of Class B VFCs, as it may be amended, supplemented or otherwise modified from time to time and including any replacement agreement therefor. "Class B Certificateholder" shall mean a Certificateholder of a Class B VFC. "Class B Certificate Rate" shall mean for any day the weighted average of the interest rates with respect to each portion of the Class B VFC Principal Balance outstanding at such time (taking into account whether such rates are calculated on a 360 or 365/6 day basis). "Class B Exiting Purchaser Amortization Amount" shall have the meaning specified in the Class B Certificate Purchase Agreement. "Class B Expected Final Payment Date" shall mean the Class A/B VFC Expected Final Payment Date. "Class B Initial Invested Amount" shall mean $66,500,000. "Class B Interest" shall have the meaning specified in subsection 4(b) of this Issuance Supplement. "Class B Owner" shall mean a Certificateholder of a Class B VFC or, with respect to any Class B VFC held by an Agent or any Person as nominee on behalf of a beneficial owner of such Class B VFC, the Person that is the beneficial owner of the Class B Invested Amount represented by such Class B VFC as reflected on the books of such nominee. "Class B Program Fee Rate" shall mean the annual rate at which the Class B Program Fee (as defined in the Class B Certificate Purchase Agreement) is calculated pursuant to the Class B Purchase Agreement. "Class B Purchaser" shall have the meaning specified in the Class B Certificate Purchase Agreement. "Class B Purchase Limit" shall have the meaning specified in the Class B Certificate Purchase Agreement. "Class B VFC Principal Balance" 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 Owners through the end of the preceding Business Day pursuant to Section 6 of this Issuance Supplement, minus (c) the aggregate amount of principal payments made to Class B VFC Owners prior to such Business Day. "Class B VFCs" shall have the meaning specified in Section 1 of this Issuance Supplement. The Class B VFCs shall be substantially in the form of Exhibit A-3 to this Issuance Supplement. "Class Carrying Cost Shortfall"shall mean: (a) as to the Class A-1 VFCs, the Class A-1 Carrying Cost Shortfall; (b) as to the Class A-2 VFCs, the Class A-2 Carrying Cost Shortfall; and (c) as to the Class B VFCs, the Class B Carrying Cost Shortfall. "Class Interest"shall mean: (a) as to the Class A-1 VFCs, the Class A-1 Interest; (b) as to the Class A-2 VFCs, the Class A-2 Interest; and (c) as to the Class B VFCs, the Class B Interest. "Commitment Termination Date" shall mean, (a) with respect to a Class A-1 Purchaser, the date specified as such in the Class A-1 Certificate Purchase Agreement, subject to extension as provided therein, (b) with respect to a Class A-2 Purchaser, the date specified as such in the Class A-2 Certificate Purchase Agreement, subject to extension as provided therein, and (c) with respect to a Class B Purchaser, the date specified as such in the Class B Certificate Purchase Agreement, subject to extension as provided therein. "Daily Report" shall mean a report substantially in the form of Exhibit D to this Issuance Supplement delivered by the Servicer to the Trustee, each Agent and the Facility on each Business Day. "Exiting Class A-1 Purchaser" shall have the meaning specified in the Class A-1 Certificate Purchase Agreement. "Exiting Class A-2 Purchaser" shall have the meaning specified in the Class A-2 Certificate Purchase Agreement. "Exiting Class B Purchaser"shall have the meaning specified in the Class B Certificate Purchase Agreement. "Exiting Purchaser" shall mean an Exiting Class A-1 Purchaser, an Exiting Class A-2 Purchaser or an Exiting Class B Purchaser. "Exiting Purchaser Amortization Amount" shall mean: (a) for an Exiting Class A-1 Purchaser, such Exiting Purchaser's Class A-1 Exiting Purchaser Amortization Amount, (b) for an Exiting Class A-2 Purchaser, such Exiting Purchaser's Class A-2 Exiting Purchaser Amortization Amount, and (c) for an Exiting Class B Purchaser, such Exiting Purchaser's Class B Exiting Purchaser Amortization Amount. "Exiting Purchasers' Allocation Percentage" shall mean, with respect to each Exiting Purchaser on any Business Day, a percentage designated by the Transferor which shall (a) not be less than the percentage equivalent of a fraction, the numerator of which is the Exiting Purchaser Amortization Amount for such Exiting Purchaser and the denominator of which is the greater of (i) the sum of the aggregate amount of Principal Receivables in the Trust and the amount on deposit in the Equalization Account at the end of such Exiting Purchaser's Commitment Termination Date and (ii) the sum of the numerators used to calculate the allocation percentages with respect to Principal Collections for all Classes of all Series on such Business Day, and (b) not be greater than 100%. "Facility Agent" shall mean the agent from time to time serving as the Facility Agent under the Certificate Purchase Agreements. "Fixed Allocation Percentage" shall mean, for any Business Day in the Mandatory Partial Amortization Period, the percentage equivalent of a fraction, the numerator of which is the Invested Amount at the end of the last day prior to the beginning of the Mandatory Partial Amortization Period and the denominator of which is the greater of (a) the sum of the aggregate amount of Principal Receivables in the Trust and the amount on deposit in the Equalization Account at the end of the last Business Day preceding the commencement of such Mandatory Partial Amortization Period and (b) the sum of the numerators used to calculate the allocation percentages with respect to Principal Collections for all Classes of all Series on the Business Day for which the Fixed Allocation Percentage is being determined. "Junior Facilities Costs" shall mean the portion of Total Facilities Costs described as such in subsection 4(c) of this Issuance Supplement. "Late Payment Rate" shall mean (a) with respect to the Class A-1 Certificates, the Risk Rate, as defined in Exhibit B-1 hereto, (b) with respect to the Class A-2 Certificates, the Risk Rate, as defined in Exhibit B-2 hereto, and (c) with respect to the Class B Certificates, the Risk Rate, as defined in Exhibit B-3 hereto. "Mandatory Partial Amortization Event" shall have the meaning specified in Section 8 of this Issuance Supplement. "Mandatory Partial Amortization Period" shall mean the period commencing on the date on which a Mandatory Partial Amortization Event is deemed to occur and ending on the earlier to occur of (i) the commencement of the Amortization Period pursuant to the Series Supplement or (ii) the day on which the Class A Invested Amount and the Class B Invested Amount allocable to the VFCs have been paid in full. "Mezzanine Facilities Costs" shall mean the portion of Total Facilities Costs described as such in subsection 4(c) of this Issuance Supplement. "New Issuance" shall mean (i) the issuance by the Trust of any newly issued Series of Investor Certificates (or, with respect to a prefunded Series, interests therein) other than Series 1999-1, the proceeds of which newly issued Series or such new class will be applied to reduce the Class A Invested Amount or the Class B Invested Amount, or (ii) the specification of the terms of any new class or subclass of Series 1999-1 Certificates pursuant to any amendment or modification to this Issuance Supplement (other than an increase in the Class A Invested Amount or the Class B Invested Amount pursuant to Section 6 of this Issuance Supplement and the applicable Certificate Purchase Agreement) or any additional Issuance Supplement entered into pursuant to the Series Supplement. "Parity Class" shall mean, with respect to the Class A Certificates or the Class B Certificates, a class or subclass of Series 1999-1 Certificates which are on a parity with the Class A Certificates or the Class B Certificates, as the case may be, as to allocations of Available Series 1999-1 Finance Charge Collections, Excess Finance Charge Collections, Series Transferor Finance Charge Collections, Reallocated Principal Collections or Available Principal Collections. "Partial Amortization Amount" shall mean, as of any date, the sum of the unpaid Class A-1 Exiting Purchaser Amortization Amount, the unpaid Class A-2 Exiting Purchaser Amortization Amount and the unpaid Class B Exiting Purchaser Amortization Amount. "Partial Amortization Adjustment Amount" has the meaning specified in subsection 5(c) of this Issuance Supplement. "Principal Distribution Date" shall mean each Business Day during the Revolving Period on which the Transferor elects, upon not less than two Business Days' notice to each Agent and the Facility Agent, to repay principal on the Class A-1 VFCs, Class A-2 VFCs or Class B VFCs; provided that there may not be more than two days in any calendar week in which there is a change in the Class A Invested Amount or the Class B Invested Amount unless each affected Class A Purchaser, Class A Owner, Class B Purchaser and Class B Owner otherwise consents; and provided further that if the Partial Amortization Amount exceeds zero, the Transferor shall elect to designate at least one Business Day in each calendar week as a Principal Distribution Date if there are funds on deposit in the Principal Funding Account on such Business Day in an amount equal to or greater than $1,000,000 in respect of the VFCs, or, if less, in an amount equal to the Partial Amortization Amount. "Purchase Date" shall mean any Business Day on which the purchase of an Additional Invested Amount is to occur pursuant to Section 6 of this Issuance Supplement. "Senior Facilities Costs" shall have the meaning specified in the Series Supplement and shall also include the portion of Total Facilities Costs described as such in subsection 4(c) of this Issuance Supplement. "Total Facilities Costs" shall have the meaning specified in subsection 4(c) of this Issuance Supplement. "Unreimbursed Class A-1 Charge-Offs" shall mean, for any day, the excess, if any, of (i) the sum for each of the prior Business Days of the Class A-1 Percentage of the amount of Class A Investor Charge-Offs on such Business Day, over (ii) the sum for each of the prior Business Days of the Class A-1 Percentage of the aggregate amount allocated with respect to Class A Investor Charge-Offs and available on such Business Day pursuant to subsection 4.8(a)(v) of the Series Supplement, for the purpose of reinstating reductions of the Class A Invested Amount pursuant to clause (e) of the definition of the term "Class A Invested Amount" in the Series Supplement. "Unreimbursed Class A-2 Charge-Offs" shall mean, for any day, the excess, if any, of (i) the sum for each of the prior Business Days of the Class A-2 Percentage of the amount of Class A Investor Charge-Offs on such Business Day, over (ii) the sum for each of the prior Business Days of the Class A-2 Percentage of the aggregate amount allocated with respect to Class A Investor Charge-Offs and available on such Business Day pursuant to subsection 4.8(a)(v) of the Series Supplement, for the purpose of reinstating reductions of the Class A Invested Amount pursuant to clause (e) of the definition of the term "Class A Invested Amount" in the Series Supplement. "Unreimbursed Class B Charge-Offs" shall mean, for any day, the excess, if any, of (i) the sum for each of the prior Business Days of the amount of Class B Investor Charge- Offs on such Business Day, over (ii) the sum for each of the prior Business Days of the aggregate amount allocated with respect to Class B Investor Charge-Offs and available on such Business Day pursuant to subsection 4.8(a)(vii) of the Series Supplement, for the purpose of reinstating reductions of the Class B Invested Amount pursuant to clause (e) of the definition of the term "Class B Invested Amount" in the Series Supplement. "VFC Additional Invested Amount" shall have the meaning specified in subsection 6(a) of this Issuance Supplement. "VFC Certificateholder" shall mean a Certificateholder of VFCs. "VFCs" shall mean the Class A-1 VFCs, Class A-2 VFCs and the Class B VFCs, collectively. SECTION 3. Delivery and Payment for the VFCs; Form of Delivery. (a) The Transferor shall execute and deliver the Class A-1 VFCs, Class A-2 VFCs and the Class B VFCs to the Trustee for authentication in accordance with Section 6.1 of the Agreement. The Trustee shall deliver the Class A-1 VFCs, Class A-2 VFCs and the Class B VFCs to or upon the order of the Transferor when authenticated in accordance with Section 6.2 of the Agreement. (b) The Class A-1 VFCs, Class A-2 VFCs and the Class B VFCs shall be delivered as Registered Certificates as provided in Section 6.1 of the Agreement and not as Book-Entry Certificates. The VFCs shall not be subject to any minimum denominations. SECTION 4. Carrying Cost Terms of the VFCs. (a) The amount of monthly interest (the "Class A-1 Interest") payable on the Class A-1 VFCs on each Distribution Date shall be calculated as provided on Exhibit B-1. The amount of monthly interest (the "Class A-2 Interest") payable on the Class A-2 VFCs on each Distribution Date shall be calculated as provided on Exhibit B-2. On the Determination Date preceding each Distribution Date, the Servicer shall determine, separately for the Class A-1 VFCs and the Class A-2 VFCs, an amount (the "Class A-1 Carrying Cost Shortfall" and "Class A-2 Carrying Cost Shortfall," respectively) equal to the excess, if any, of (x) the applicable Senior Facilities Costs for the Distribution Date, over (y) the amount available to be paid to the applicable Class A Certificateholders in respect of such Senior Facilities Costs on such Distribution Date. If there is a Class A-1 Carrying Cost Shortfall or Class A-2 Carrying Cost Shortfall with respect to any Distribution Date, an additional amount ("Class A-1 Additional Interest" and "Class A-2 Additional Interest," respectively) shall be payable as provided herein with respect to the applicable Class A VFCs on each Distribution Date following such Distribution Date, to and including the Distribution Date on which such Class A-1 Carrying Cost Shortfall or Class A-2 Carrying Cost Shortfall is paid to the applicable Class A Certificateholders in full. Class A-1 Additional Interest and Class A-2 Additional Interest shall accrue on the balance of the Class A-1 Carrying Cost Shortfall or Class A-2 Carrying Cost Shortfall at the applicable Late Payment Rate during the related Interest Accrual Period, on the basis of the number of days in that Interest Accrual Period and a year of 365/6 days. Notwithstanding anything to the contrary herein, Class A-1 Additional Interest and Class A-2 Additional Interest shall be payable or distributed to the applicable Class A Certificateholders only to the extent permitted by applicable law. (b) The amount of monthly interest (the "Class B Interest") payable on the Class B VFCs on each Distribution Date shall be calculated as provided on Exhibit B-3. On the Determination Date preceding each Distribution Date, the Servicer shall determine for the Class B VFCs an amount (the "Class B Carrying Cost Shortfall") equal to the excess, if any, of (x) the applicable Senior Facilities Costs for such Distribution Date, over (y) the amount available to be paid to the Class B Certificateholders in respect of such Senior Facilities Costs on such Distribution Date. If there is a Class B Carrying Cost Shortfall with respect to any Distribution Date, an additional amount ("Class B Additional Interest") shall be payable as provided herein with respect to the Class B VFCs on each Distribution Date following such Distribution Date, to and including the Distribution Date on which such Class B Carrying Cost Shortfall is paid to the Class B Certificateholders in full. Class B Additional Interest shall accrue on the balance of the Class B Carrying Cost Shortfall at the applicable Late Payment Rate during the related Interest Accrual Period, on the basis of the number of days in that Accrual Period and a year of 365/6 days. Notwithstanding anything to the contrary herein, Class B Additional Interest shall be payable or distributed to Class B Certificateholders only to the extent permitted by applicable law. (c) "Total Class Facilities Costs" for each Distribution Date shall equal (i) for the Class A-1 VFCs, the Class A-1 Interest and any Class A-1 Additional Interest for such Distribution Date, plus the aggregate amount of Class A-1 Program Fees and Class A-1 Utilization Fees (each as defined in the Class A-1 Certificate Purchase Agreement) due and payable on such Distribution Date pursuant to the Class A-1 Certificate Purchase Agreement, plus all other amounts due and payable on such Distribution Date by the Transferor (individually or as Transferor) to any Class A-1 Purchaser or Agent or the Facility Agent pursuant to the Class A-1 Certificate Purchase Agreement (including without limitation pursuant to Section 2.3, 2.4, 2.5 or 2.6 thereof), each determined without regard to the provisions of subsection 9.11(a) of the Class A-1 Certificate Purchase Agreement, (ii) for the Class A-2 VFCs, the Class A-2 Interest and any Class A-2 Additional Interest for such Distribution Date, plus the aggregate amount of Class A-2 Program Fees and Class A-2 Utilization Fees (each as defined in the Class A-2 Certificate Purchase Agreement) due and payable on such Distribution Date pursuant to the Class A-2 Certificate Purchase Agreement, plus all other amounts due and payable on such Distribution Date by the Transferor (individually or as Transferor) to any Class A-2 Purchaser or Agent or the Facility Agent pursuant to the Class A-2 Certificate Purchase Agreement (including without limitation pursuant to Section 2.3, 2.4, 2.5 or 2.6 thereof), each determined without regard to the provisions of subsection 9.11(a) of the Class A-2 Certificate Purchase Agreement, and (iii) for the Class B VFCs, the Class B Interest and any Class B Additional Interest for such Distribution Date, plus the aggregate amount of Class B Program Fees and Class B Utilization Fees (each as defined in the Class B Certificate Purchase Agreement) due and payable on such Distribution Date pursuant to the Class B Certificate Purchase Agreement, plus all other amounts due and payable on such Distribution Date by the Transferor (individually or as Transferor) to any Class B Purchaser or Agent or the Facility Agent pursuant to the Class B Certificate Purchase Agreement (including without limitation pursuant to Section 2.3, 2.4, 2.5 or 2.6 thereof), each determined without regard to the provisions of subsection 9.11(a) of the Class B Certificate Purchase Agreement, as determined by the applicable Agents in accordance with the respective Certificate Purchase Agreements and, if applicable, subsection 4(a) of this Issuance Supplement. For purposes of determining Senior Facilities Costs, Mezzanine Facilities Costs and Junior Facilities Costs as to each Class: (i) the Total Class Facilities Costs for any Distribution Date shall constitute Senior Facilities Costs for such Class to the extent that the Total Class Facilities Costs do not exceed the product of (A) the daily average Class A-1 Invested Amount, Class A-2 Invested Amount or Class B Invested Amount (as applicable) for such Interest Accrual Period, (B) Adjusted LIBOR plus 2.25% and (C) the number of days in such Interest Accrual Period divided by 360; (ii) any excess Total Class Facilities Costs for any Distribution Date shall constitute Mezzanine Facilities Costs for such Class to the extent that the excess does not exceed the product of (A) the daily average Class A-1 Invested Amount, Class A-2 Invested Amount or Class B Invested Amount (as applicable) for such Interest Accrual Period, (B) 0.75% and (C) the number of days in such Interest Accrual Period divided by 360; and (iii) any remaining excess Total Class Facilities Costs for any Distribution Date shall constitute Junior Facilities Costs for such Class. (d) The Interest Accrual Period for the VFCs for each Distribution Date shall be the period from and including the preceding Distribution Date to and excluding such Distribution Date; provided, however, that the initial Interest Accrual Period will run from the Series 1999-1 Closing Date to and excluding the initial Distribution Date. SECTION 5. Amortization Terms of the VFCs. Principal payments shall be made on the VFCs: (i) during the Amortization Period, if any VFCs then remain outstanding, as specified in the Series Supplement as supplemented by subsection 5(a) below; (ii) during the portions of the Revolving Period which do not include any Mandatory Partial Amortization Period and on which the Partial Amortization Amount is zero, to the extent specified in subsection 5(b) below; (iii) during the portions of the Revolving Period which do not include any Mandatory Partial Amortization Period and on which the Partial Amortization Amount exceeds zero, to the extent specified in subsection 5(c) below; and (iv) during any Mandatory Partial Amortization Period, as specified in subsection 5(d) below. (a) Subject to the terms of any future Issuance Supplement, the Amortization Period shall commence on the date determined in accordance with the definition of "Amortization Period Commencement Date" in the Series Supplement, without reference to clause (ii) of that definition. However, nothing contained herein shall be deemed to constitute a commitment by any Class A-1 Purchaser, Class A-2 Purchaser or Class B Purchaser to extend its Commitment Expiration Date. Neither the Class A-1 VFCs nor the Class A-2 VFCs are subject to an Accumulation Period. Clause (a) of the definition of "Monthly Principal" in the Series Supplement shall not apply to the VFCs. (b) (i) No later than 12:00 noon on the second Business Day immediately prior to each Principal Distribution Date during the Revolving Period, the Transferor shall provide written notice to the Trustee, each Agent and the Facility Agent of such Principal Distribution Date and of the amount of principal to be repaid on such Principal Distribution Date. (ii) On the Business Day preceding each Principal Distribution Date during the Revolving Period, if the funds deposited in the Principal Account pursuant to subsection 4.8(e) of the Series Supplement and available therein as of such Business Day equal or exceed $1,000,000 (or such lesser amount as may be designated by the Transferor, as set forth by the Servicer on its behalf in the Daily Report for such Business Day, and consented to by the Facility Agent, the Class A-1 Purchasers, the Class A-2 Purchasers and the Class B Purchasers), the Trustee, in accordance with the 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 the largest multiple of $250,000 that is available (or such other available amount as may be designated by the Transferor, as set forth by the Servicer on its behalf in such Daily Report, and consented to by the Facility Agent, the Class A-1 Purchasers, the Class A-2 Purchasers and the Class B Purchasers). Notwithstanding the provisions of Section 5.1 of the Series Supplement, on each Principal Distribution Date with respect to the Revolving Period, the Paying Agent shall pay the amount so deposited in the Distribution Account to the VFC Certificateholders, in accordance with the instructions of the Transferor, as set forth by the Servicer on its behalf in the Daily Report for such Business Day, which instructions satisfy one or more of the following provisions: (A)the Transferor may apply all such funds to the reduction of the Class A VFC Principal Balance; or (B)the Transferor may apply all such funds to the reduction of the Class A VFC Principal Balance and the Class B VFC Principal Balance in such proportions as it selects if, after giving effect to the principal payments to be made on such Principal Distribution Date, (1) no Series 1999-1 Pay Out Event, Trust Pay Out Event or Mandatory Partial Amortization Event has occurred and is continuing, and (2) the Enhancement Percentage for the Class A Certificates shall be not less than 38%. So long as no Series 1999-1 Pay Out Event, Trust Pay Out Event or Mandatory Partial Amortization Event has occurred and is continuing, funds to be applied to the reduction of the Class A VFC Principal Balance pursuant to this clause (ii) shall be applied first to the reduction of the Class A -1 VFC Principal Balance, until the Class A-1 VFC Principal Balance equals zero, and then to the reduction of the Class A-2 VFC Principal Balance, unless each Class A Owner otherwise consents. (iii) On any Business Day, the Transferor may cause the proceeds of a New Issuance to be deposited in the Distribution Account, in an amount equal to the largest multiple of $250,000 that is available (or such other available amount as may be designated by the Transferor, as set forth by the Servicer on its behalf in such Daily Report, and consented to by the Facility Agent, the Class A-1 Purchasers, the Class A-2 Purchasers and the Class B Purchasers). Notwithstanding the provisions of Section 5.1 of the Series Supplement, on the next following Principal Distribution Date with respect to the Revolving Period, the Paying Agent shall pay the amount so deposited in the Distribution Account to the VFC Certificateholders, in accordance with the instructions of the Transferor, as set forth by the Servicer on its behalf in the Daily Report for such Business Day, which instructions satisfy one or more of the following provisions: (A)if and to the extent such proceeds are from a New Issuance which is a Parity Class with the Class A VFC, the Transferor shall apply all such funds to the reduction of the Class A VFC Principal Balance; (B)if and to the extent such proceeds are from a New Issuance which is a Parity Class with the Class B VFC, the Transferor shall apply all such funds to the reduction of the Class B VFC Principal Balance; or (C)otherwise (1)the Transferor may apply all such funds to the reduction of the Class A VFC Principal Balance; or (2)the Transferor may apply all such funds to the reduction of the Class A VFC Principal Balance and the Class B VFC Principal Balance in such proportions as it selects if, after giving effect to the principal payments to be made on such Principal Distribution Date, (x) no Series 1999-1 Pay Out Event, Trust Pay Out Event or Mandatory Partial Amortization Event has occurred and is continuing, and (y) the Enhancement Percentage for the Class A Certificates shall be not less than 38%. So long as no Series 1999-1 Pay Out Event, Trust Pay Out Event or Mandatory Partial Amortization Event has occurred and is continuing, funds to be applied to the reduction of the Class A VFC Principal Balance pursuant to this clause (iii) shall be applied first to the reduction of the Class A -2 VFC Principal Balance, until the Class A-2 VFC Principal Balance equals zero, and then to the reduction of the Class A-1 VFC Principal Balance, unless each Class A Owner otherwise consents. (c) Notwithstanding the provisions of subsection 4.8(b) of the Series Supplement and subsection 5(b) of this Issuance Supplement, if on any Business Day during any portion of the Revolving Period which is not a Mandatory Partial Amortization Period, the aggregate Partial Amortization Amount exceeds zero, until sufficient funds are deposited into the Principal Account collectively to reduce the aggregate Partial Amortization Amount plus any Partial Amortization Adjustment Amount to zero on the related Distribution Date, funds on deposit in the Collection Account to the extent of the product of (i) the aggregate Exiting Purchasers' Allocation Percentage and (ii) the amount of Principal Collections available in the Collection Account with respect to such Business Day shall (x) first be deposited into the Principal Account until the amount so deposited equals the aggregate Partial Amortization Amount plus any related Partial Amortization Adjustment Amount, and (y) thereafter be applied as provided in subsection 4.8(b) of the Series Supplement. Notwithstanding the provisions of Section 5.1 of the Series Supplement, on each Distribution Date on which the Partial Amortization Amount exceeds zero (and on such other Business Days as the Transferor may elect with two Business Days' prior written notice to each Agent and the Facility Agent; provided that no more than two changes in the Class A Invested Amount or Class B Invested Amount would occur in any calendar week as a result of such election), the Trustee, in accordance with the instructions from the Servicer set forth in the Daily Report for such day, shall withdraw funds deposited in the Principal Account pursuant to this subsection (c) and pay to (i) (A) the applicable Class A-1 Certificateholder, in the case of Partial Amortization Amounts relating to Exiting Class A-1 Purchasers, (B) the applicable Class A-2 Certificateholder, in the case of Partial Amortization Amounts relating to Exiting Class A-2 Purchasers, or (C) the applicable Class B Certificateholder, in the case of Partial Amortization Amounts relating to Exiting Class B Purchasers, in each case for allocation in accordance with the applicable Certificate Purchase Agreement, to the extent of the amounts so deposited, other than in respect of the Partial Amortization Adjustment Amount, and available therein as of such Business Day, and (ii) to the Class A VFC Certificateholders, to the extent of funds so deposited in respect of the Partial Amortization Adjustment Amount and available therein as of such Business Day; provided that, after giving effect to such payment, the Enhancement Percentage for Class A will remain at least equal to 38%; and provided further that no such payment shall be made unless the amount thereof exceeds $1,000,000 and is in an integral multiple of $250,000 (or such amount less than $1,000,000 as shall equal the sum of the Partial Amortization Amount and the Partial Amortization Adjustment Amount on such Business Day), or such other available amount as may be designated by the Transferor, as set forth by the Servicer on its behalf in the applicable Daily Report, and consented to by the Facility Agent, the Class A-1 Purchasers, the Class A-2 Purchasers and the Class B Purchasers. Funds to be so applied in respect of any Partial Amortization Adjustment Amount to the reduction of the Class A VFC Principal Balance shall be applied first to the reduction of the Class A-1 VFC Principal Balance, until the Class A-1 VFC Principal Balance equals zero, and then to the reduction of the Class A-2 VFC Principal Balance, unless each Class A Owner otherwise consents. If any Exiting Purchaser is a Class B Purchaser, the "Partial Amortization Adjustment Amount" shall equal the amount, if any, by which the Class A Invested Amount must be reduced (taking into account a reduction of the Class B Invested Amount by such Class B Purchaser's Exiting Purchaser Amortization Amount and any concurrent changes in the Class A Invested amount, the Class B Invested Amount or the Invested Amount of any more junior Class) so that the Enhancement Percentage for Class A will not be less than 38%. (d) If a Mandatory Partial Amortization Period commences during the Revolving Period, then notwithstanding the provisions of subsection 4.8(b) of the Series Supplement and subsections 5(b) and 5(c) of this Issuance Supplement, on each Business Day during the Mandatory Partial Amortization Period until sufficient funds are deposited into the Principal Account collectively to reduce the portion of the Class A Invested Amount and the Class B Invested Amount allocable to the VFCs to zero on the related Distribution Date, funds on deposit in the Collection Account to the extent of the product of (i) the Fixed Allocation Percentage and (ii) the amount of Principal Collections available in the Collection Account with respect to such Business Day shall (x) first be deposited into the Principal Account until the amount so deposited equals the sum of the portion of the Class A Invested Amount allocable to the Class A VFCs and the portion of the Class B Invested Amount allocable to the Class B VFCs and (y) thereafter be applied as provided in subsection 4.8(b) of the Series Supplement. For purposes of subsection 4.3(e) of the Agreement, on each Business Day during a Mandatory Partial Amortization Period, the sum of the portion of the Class A Invested Amount allocable to the Class A VFCs and the portion of the Class B Invested Amount allocable to the Class B VFCs, minus the funds on deposit in the Principal Account that are available to cover the such portions of the Invested Amount on the related Distribution Date, shall constitute a Principal Shortfall with respect to the Series 1999-1 Investor Certificates and, notwithstanding the provisions of subsection 4.8(e) of the Series Supplement, Shared Principal Collections allocated to the Series 1999-1 Investor Certificates shall be deposited into the Principal Account and applied as provided in this paragraph until the amount on deposit therein equals the sum of the portion of the Class A Invested Amount allocable to the Class A VFCs and the portion of the Class B Invested Amount allocable to the Class B VFCs. Amounts deposited in the Principal Account pursuant to this paragraph shall be applied on each Distribution Date to make payments of principal to the Class A Certificateholders (pro rata based on the respective portions of the Class A Invested Amount held by each) until the portion of the Class A Invested Amount allocable to the Class A VFCs has been reduced to zero and then to make payments of principal to the Class B Certificateholders (pro rata based on the respective portions of the Class B Invested Amount held by each) until the portion of the Class B Invested Amount allocable to the Class B VFCs has been reduced to zero. (e) The following date is hereby specified for purposes of clause (a) of the definition of "Class B Principal Payment Commencement Date" in the Series Supplement: the Distribution Date on which the Class A Invested Amount is paid in full or, if there are no Principal Collections allocable to the Series 1999-1 Investor Certificates remaining after payments have been made to the Class A Certificates on such Distribution Date, the Distribution Date following the Distribution Date on which the Class A Invested Amount is paid in full. (f) Any principal payments made to any VFC Certificateholder pursuant to this Section 5 shall be made by wire transfer to such VFC Certificateholder to an account designated by such VFC Certificateholder by written notice given to the Paying Agent not less than five (5) Business Days prior to the related payment date no later than 2:30 p.m., New York City time, on such payment date. SECTION 6. Variable Funding Terms of the VFCs. (a) The Transferor may offer for purchase by Class A-1 Purchasers, Class A-2 Purchasers or Class B Purchasers additional undivided interests in the Trust in specified amounts (any such amounts, respectively, an "Additional Class A-1 Invested Amount," an "Additional Class A-2 Invested Amount" or an "Additional Class B Invested Amount" and, collectively, a "VFC Additional Invested Amounts," and any "Additional Class A-1 Invested Amount" and "Additional Class A-2 Invested Amount," collectively, an "Additional Class A Invested Amount") in accordance with the applicable Certificate Purchase Agreements and this Section 6. The VFC Additional Invested Amounts on any Business Day shall not exceed an amount equal to the excess of the aggregate amount of Principal Receivables and amounts on deposit in the Equalization Account (other than investment earnings thereon) over the greater of (a) the sum of (i) the aggregate Invested Amount of each Series, including the Series 1999-1 Certificates, then out standing prior to giving effect to the additions of such VFC Additional Invested Amounts, minus amounts on deposit in the principal funding account for any Series, if any, and (ii) the Minimum Transferor Interest and (b) the Minimum Aggregate Principal Receivables. The aggregate Additional Class A Invested Amounts and Additional Class B Invested Amounts to be purchased shall have a minimum aggregate amount of $1,000,000 or more, and shall be in integral multiples of $250,000 (or such other amount designated by the Transferor). In no event shall (i) an Additional Class A-1 Invested Amount be offered for purchase if, after giving effect to such purchase, the Class A-1 VFC Principal Balance would exceed the Class A-1 Purchase Limit, (ii) an Additional Class A-2 Invested Amount be offered for purchase if, after giving effect to such purchase, the Class A-2 VFC Principal Balance would exceed the Class A-2 Purchase Limit, or (iii) an Additional Class B Invested Amount be offered for purchase if, after giving effect to such purchase, the Class B VFC Principal Balance would exceed the Class B Purchase Limit. Without the consent of each affected Class A Purchaser and Class B Purchaser, the Transferor shall not effect sales of Class A Additional Invested Amounts or Class B Additional Invested Amounts pursuant to this Section 6, if, as a result thereof, there would be more than two changes in the Class A Invested Amount or the Class B Invested Amount in any calendar week. Without the consent of the Class A-2 Purchasers, an Additional Class A-1 Invested Amount be not offered for purchase except to the extent that, after giving effect to such purchase and any concurrent purchases of Additional Class A-2 Invested Amounts, the Class A-2 VFC Principal Balance would equal the Class A-2 Purchase Limit. (b) If Class A-1 Purchasers acquire an Additional Class A-1 Invested Amount, then in consideration of such Class A-1 Purchasers' payments of an amount equal to such Additional Class A-1 Invested Amount, the Servicer shall appropriately note such Additional Class A-1 Invested Amount on the related Daily Report and direct the Trustee to pay to the Transferor such Additional Class A-1 Invested Amount, and the Invested Amount of the Class A-1 Certificates will be equal to the Invested Amount of the Class A-1 Certificates stated in such Daily Report. If Class A-2 Purchasers acquire an Additional Class A-2 Invested Amount, then in consideration of such Class A-2 Purchasers' payments of an amount equal to such Additional Class A-2 Invested Amount, the Servicer shall appropriately note such Additional Class A-2 Invested Amount on the related Daily Report and direct the Trustee to pay to the Transferor such Additional Class A-2 Invested Amounts, and the Invested Amount of the Class A-2 Certificates will be equal to the Invested Amount of the Class A-2 Certificates stated in such Daily Report. If Class B Purchasers acquire an Additional Class B Invested Amount, then in consideration of such Class B Purchasers' payments of an amount equal to such Additional Class B Invested Amount, the Servicer shall appropriately note such Additional Class B Invested Amount on the related Daily Report and direct the Trustee to pay to the Transferor such Additional Class B Invested Amounts, and the Invested Amount of the Class B Certificates will be equal to the Invested Amount of the Class B Certificates stated in such Daily Report. (c) The outstanding amounts of any Additional Class A-1 Invested Amount purchased by each Class A-1 Purchaser shall be evidenced by the Class A-1 Certificate issued on the Closing Date substantially in the form of Exhibit A-1 (or thereafter issued in replacement or exchange therefor). Each Class A-1 Certificate holder shall and is hereby authorized to record on the grid attached to its Class A-1 Certificate (or at such Class A-1 Certificateholder's option, in its internal books and records) the date and amount of any Additional Class A-1 Invested Amount purchased by it, and each repayment thereof; provided that failure to make any such recordation on, or any error in, such grid (or in such books and records) shall not adversely affect such Class A-1 Certificateholder's rights with respect to its Class A-1 VFC Principal Balance and its right to receive interest payments in respect of the Class A-1 VFC Principal Balance held by such Class A-1 Certificateholder. (d) The outstanding amounts of any Additional Class A-2 Invested Amount purchased by each Class A-2 Purchaser shall be evidenced by the Class A-2 Certificate issued on the Closing Date substantially in the form of Exhibit A-2 (or thereafter issued in replacement or exchange therefor). Each Class A-2 Certificate holder shall and is hereby authorized to record on the grid attached to its Class A-2 Certificate (or at such Class A-2 Certificateholder's option, in its internal books and records) the date and amount of any Additional Class A-2 Invested Amount purchased by it, and each repayment thereof; provided that failure to make any such recordation on, or any error in, such grid (or in such books and records) shall not adversely affect such Class A-2 Certificateholder's rights with respect to its Class A-2 VFC Principal Balance and its right to receive interest payments in respect of the Class A-2 VFC Principal Balance held by such Class A-2 Certificateholder. (e) The outstanding amounts of any Additional Class B Invested Amount purchased by each Class B Purchaser shall be evidenced by a Class B Certificate to be issued on the Closing Date substantially in the form of Exhibit A-3 (or thereafter issued in replacement or exchange therefor). Each Class B Certificateholder shall and is hereby authorized to record on the grid attached to its Class B Certificate (or at such Class B Certificateholder's option, in its internal books and records) the date and amount of any Additional Class B Invested Amount purchased by it, and each repayment thereof; provided that failure to make any such recordation on, or any error in, such grid (or in such books and records) shall not adversely affect such Class B Certificateholder's rights with respect to its Class B VFC Principal Balance and its right to receive interest payments in respect of the Class B VFC Principal Balance held by such Class B Certificateholder. SECTION 7. [Reserved] SECTION 8. Mandatory Partial Amortization Events. The following shall constitute "Mandatory Partial Amortization Events" for the VFCs: (a) failure: (i)on the part of the Transferor or the Servicer to make any payment or deposit required to be made by the Transferor or the Servicer by the terms of a Certificate Purchase Agreement, the Agreement, the Series Supplement or this Issuance Supplement on or before the date occurring five (5) Business Days after the date on which written notice of such failure requiring the same to be remedied, shall have been given to the Transferor or the Servicer, as applicable, by the Trustee, the Facility Agent or any Agent (subject to the last sentence of this Section 8), (ii) on the part of the Originator to make any payment or deposit required to be made by the Originator by the terms of the Receivables Purchase Agreement or on the part of the Bank to make any payment or deposit required to be made by the Bank by the terms of the Receivables Transfer Agreement (in either case other than any payment or deposit in respect of any Defaulted Receivable Repurchase) on or before the date occurring five (5) Business Days after the date on which written notice of such failure, requiring the same to be remedied, shall have been given to the Originator or the Bank, as applicable, by the Trustee, the Facility Agent or any Agent (subject to the last sentence of this Section 8), or (iii) on the part of the Transferor, the Originator or the Bank duly to observe or perform in any material respect any covenants or agreements of the Transferor, the Originator or the Bank set forth in the Receivables Purchase Agreement, the Receivables Transfer Agreement, a Certificate Purchase Agreement, the Agreement, the Series Supplement or this Issuance Supplement, which failure has a material adverse effect on the VFC Certi ficateholders 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 reme died, shall have been given to the Transferor, the Originator or the Bank, as applicable, by the Trustee, the Facility Agent or any Agent (subject to the last sentence of this Section 8), and continues to affect materially and adversely the interests of the VFC Certi ficateholders for such period; (b) any representation or warranty made by the Transferor in a Certificate Purchase Agreement or by the Transferor, the Originator or the Bank in the Receivables Purchase Agreement or the Receivables Transfer Agreement, (i) shall prove to have been incorrect in any material re spect when made or when delivered, which continues to be in correct 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, the Originator or the Bank, as applicable, by the Trustee, the Facility Agent or any Agent (subject to the last sentence of this Section 8), and (ii) as a result of which the interests of the VFC Certificateholders are materially and adversely affected and continue to be materially and adversely affected for such period; provided, however, that a Mandatory Partial Amortization Event pursu ant to this subsection 8(b) shall not be deemed to have occurred hereunder with respect to the representations and warranties made by the Originator referenced in Section 2.04 of the Receivables Purchase Agreement or the Bank referenced in Section 2.04 of the Receivables Transfer Agreement if the Originator shall have performed its related obligations under Section 2.04 of the Receivables Purchase Agreement; or (c) failure on the part of the Servicer duly to observe or perform in any respect any covenants or agreements of the Servicer set forth in the Agreement, the Series Supplement, this Issuance Supplement or a Certificate Purchase Agreement (other than those set forth in subsection 10.1(a) thereof), which has a material adverse effect on the VFC Certificateholders and which continues unremedied for a period of 30 days after the date on which written notice of such failure, requiring the same to be remedied, has been given to the Servicer by the Trustee, the Facility Agent or any Agent (subject to the last sentence of this Section 8) and continues to materially adversely affect the VFC Certificateholders for such period; or the Servicer shall delegate its duties under the Agreement, except as permitted by Section 8.7 thereof; or any representation, warranty or certification made by the Servicer in the Agreement or a Certificate Purchase Agreement or in any certificate delivered pursuant to the Agreement or a Certificate Purchase Agreement shall prove to have been incorrect when made, which has a material adverse effect on the VFC Certificateholders and which continues to be incorrect in any material respect for a period of 45 days after the date on which written notice of such failure, requiring the same to be remedied, shall have been given to the Servicer by the Trustee, the Facility Agent or any Agent (subject to the last sentence of this Section 8) and continues to materially adversely affect such Certificateholders for such period. Notwithstanding the foregoing, a delay in or failure of performance referred to in subsection 8(c) for a period of 60 days (less the applicable grace periods specified in such subsections), shall not constitute a Mandatory Partial Amortization Event if such delay or failure could not be prevented by the exercise of reasonable diligence by the Servicer and such delay or failure was caused by an act of God or the public enemy, acts of declared or undeclared war, public disorder, rebellion, riot or sabotage, epidemics, landslides, lightning, fire, hurricanes, tornadoes, earthquakes, nuclear disasters or meltdowns, floods, power outages, computer failure or similar causes; provided, however, that the Servicer shall not be excused by reason of any of the foregoing events from causing the Trustee to make timely payment of amounts required to be paid pursuant to Sections 4.12 and 4.13 of the Series Supplement. The preceding sentence shall not relieve the Servicer from using its best efforts to perform its obligations in a timely manner, and the Servicer shall provide the Trustee, the Transferor, the Facility Agent and each Agent with an Officer's Certificate giving prompt notice of such failure or delay by it, together with a description of the cause of such failure or delay and its efforts so to perform its obligations. In no event shall the Trustee, the Facility Agent or any Agent have any obligation to give any notice described above in this Section 8 unless such Person shall have actual knowledge of the event or circumstance permitting such notice to be given and, in the case of the Facility Agent or any Agent, such Person shall be required to give such notice pursuant to the applicable Certificate Purchase Agreement. SECTION 9. Additional VFC Provisions. (a) Section 10.2 of the Agreement shall read in its entirety as provided in the Agreement and, in addition, the following sentence should be inserted in the fifteenth line of subsection 10.2(a) between the phrase "acceptable to the Trustee." and "If such Successor Servicer is" and shall be applicable only with respect to the VCFs: "Any Successor Servicer must either (A) be approved by the Facility Agent, the Class A-1 Purchasers, the Class A-2 Purchasers and the Class B Purchasers or (B) be a Person which (i) has a tangible net worth of at least $50,000,000, (ii) has serviced an average of at least $1,000,000,000 of credit or charge card receivables outstanding during the previous 12 months and (iii) has a senior long-term debt rating, as determined by at least one nationally recognized statistical rating organization, of at least "BBB" or its equivalent, provided, that if such Successor Servicer has no long term debt or such debt is not rated by a nationally recognized statistical rating organization, the long term debt rating of its parent must be at least "BBB" or its equivalent." (b) Section 11.7 of the Agreement shall read in its entirety as provided in the Agreement and, in addition, the following sentence shall be added to the end of subsection 11.7(c) of the Agreement and shall be applicable only to the VFCs: "Any successor trustee appointed pursuant to this Section 11.7 shall be subject to the written consents of the Facility Agent, the Class A-1 Purchasers, the Class A-2 Purchasers and the Class B Purchasers, which consents shall not be unreasonably withheld." (c) A copy of each notice, demand, direction, report, Officer's Certificate or other certificate, election and opinion required to be sent or delivered to the Rating Agency or the Trustee shall also be sent or delivered and, in the case of opinions or letters of reliance thereon, shall be addressed to the Facility Agent and each Agent, for the benefit of itself and each related Class A-1 Purchaser, Class A-2 Purchaser and Class B Purchasers. (d) For purposes of any provision of the Agreement or the Series Supplement which requires that any Rating Agency confirm that an action or condition would not result in a reduction or withdrawal of its rating of the Series 1999-1 Certificates or any class thereof, such requirement shall mean, with respect to the VFCs, that (i) each Rating Agency shall have confirmed that such action or condition would not result in a reduction or withdrawal of its rating of any Class of the VFCs, and (ii) that each of Moody's, Standard & Poor's and, if applicable, Fitch IBCA, Inc. shall have confirmed to each Conduit Purchaser (as defined in each applicable Certificate Purchase Agreement) that such action or condition would not result in a reduction or withdrawal of its rating of any commercial paper notes or other obligations issued by such Conduit Purchaser, without giving effect to any increase of any credit or liquidity enhancement provided to such Conduit Purchaser (other than, in the case of a purchase of Additional Class A Invested Amounts or Additional Class B Invested Amounts, as applicable, a proportionate increase in the liquidity support provided to such Conduit Purchaser by its related Liquidity Purchasers (as defined in the applicable Certificate Purchase Agreement) in respect of its interest in the VFCs). (e) The Transferor and the Servicer shall not permit a New Issuance to occur in violation of the terms of any Certificate Purchase Agreement. (f) For purposes of this Issuance Supplement, (i) consents required to be given by the Class A-1 Purchasers shall be deemed to have been given if provided (A) by Class A-1 Certificateholders holding Undivided Interests aggregating more than 50% of the portion of the Invested Amount represented by the Class A-1 Certificates or (B) by one or more Agents under the Class A-1 Certificate Purchase Agreement which certify that they are entitled to give such consent on behalf of Class A-1 Purchasers as provided in the Class A-1 Certificate Purchase Agreement; (ii) consents required to be given by the Class A-2 Purchasers shall be deemed to have been given if provided (A) by Class A-2 Certificateholders holding Undivided Interests aggregating more than 50% of the portion of the Invested Amount represented by the Class A-2 Certificates or (B) by one or more Agents under the Class A-2 Certificate Purchase Agreement which certify that they are entitled to give such consent on behalf of Class A-2 Purchasers as provided in the Class A-2 Certificate Purchase Agreement; and (iii) consents required to be given by the Class B Purchasers shall be deemed to have been given if provided (A) by Class B Certificateholders holding Undivided Interests aggregating more than 50% of the portion of the Invested Amount represented by the Class B Certificates or (B) by one or more Agents under the Class B Certificate Purchase Agreement which certify that they are entitled to give such consent on behalf of Class B Purchasers as provided in the Class B Certificate Purchase Agreement. (g) The Transferor shall not deposit funds in any Defeasance Account with respect to the VFCs of any Class which is a Parity Class with respect to VFCs unless either (i) each Rating Agency shall have confirmed that such deposit would not result in a reduction or withdrawal of its rating on each Class of VFCs, or (ii) each Class A Purchaser and Class B Purchaser shall have consented to such deposit. SECTION 10. Ratification of Agreement. As supplemented by this Issuance Supplement, the Agreement is in all respects ratified and confirmed and the Agreement as so supplemented by this Issuance Supplement shall be read, taken, and construed as one and the same instrument. SECTION 11. Counterparts. This Issuance 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 12. GOVERNING LAW. THIS ISSUANCE SUPPLEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS. SECTION 13. The Trustee. The Trustee shall not be responsible in any manner whatsoever for or in respect of the sufficiency of this Issuance Supplement or for or in respect of the Preliminary Statement contained herein, all of which recitals are made solely by the Transferor. SECTION 14. Limitation of Liability. It is expressly understood and agreed by the parties hereto that (a) this Issuance Supplement is executed and delivered by Bankers Trust (Delaware), not individually or personally but solely as Trustee under this Issuance Supplement, in the exercise of the powers and authority conferred and vested in it under the Agreement, (b) each of the representations, undertakings and agreements herein made on the part of the Trustee is made and intended not as personal representations, undertakings and agreements by Bankers Trust (Delaware) but is made and intended for the purpose for binding only the Trustee and (c) under no circumstances shall Bankers Trust (Delaware) be personally liable for the payment of any indebtedness or expenses of the Trustee or be liable for the breach or failure of any obligation, representation, warranty or covenant made or undertaken by the Trustee under this Issuance Supplement or the other related documents. SECTION 15. Instructions in Writing. All instructions or other communications given by the Servicer or any other person to the Trustee pursuant to this Issuance Supplement shall be in writing, and, with respect to the Servicer, may be included in a Daily Report or Settlement Statement. [Signatures Follow] IN WITNESS WHEREOF, the Transferor, the Servicer and the Trustee have caused this Issuance Supplement to be duly executed by their respective officers as of the day and year first above written. SRI Receivables Purchase Co., Inc., Transferor By: /s/ Charles M. Sledge Name: Charles M. Sledge Title: SVP Specialty Retailers, Inc., Servicer By: /s/ James A. Marcum Name: James A. Marcum Title: Vice Chairman, CFO Bankers Trust (Delaware), not in its individual capacity but solely as Trustee By: /s/ Patricia M F Russo Name: Patricia M F Russo Title: Attorney in Fact Exhibit A-1 No. ___ FORM OF CLASS A-1 VARIABLE FUNDING CERTIFICATE THIS CERTIFICATE (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). THIS CERTIFICATE 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. EACH PURCHASER AND HOLDER OF THIS CERTIFICATE REPRESENTS AND WARRANTS FOR THE BENEFIT OF SRI RECEIVABLES PURCHASE CO., INC. AND SPECIALTY RETAILERS, INC., THAT SUCH PURCHASER OR HOLDER EITHER (A) IS NOT (I) AN EMPLOYEE BENEFIT PLAN (AS DEFINED IN SECTION 3(3) OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA") THAT IS SUBJECT TO THE PROVISIONS OF TITLE I OF ERISA, (II) A PLAN OR OTHER ARRANGEMENT (INCLUDING AN INDIVIDUAL RETIREMENT ACCOUNT OR KEOGH PLAN) THAT IS SUBJECT TO SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), OR (III) A "BENEFIT PLAN INVESTOR" (AS DEFINED IN UNITED STATES DEPARTMENT OF LABOR ("DOL") REGULATION SECTION 2510.3-101) OR (B) IS AN INSURANCE COMPANY ACTING ON BEHALF OF ITS GENERAL ACCOUNT AND (I) ON THE DATE IT ACQUIRES THIS CERTIFICATE, LESS THAN 25% OF THE ASSETS OF SUCH GENERAL ACCOUNT (AS DETERMINED BY SUCH INSURANCE COMPANY) CONSTITUTE "PLAN ASSETS" FOR PURPOSES OF TITLE I OF ERISA OR SECTION 4975 OF THE CODE, (II) IF AFTER THE INITIAL ACQUISITION OF THIS CERTIFICATE, DURING ANY CALENDAR QUARTER 25% OR MORE OF THE ASSETS OF SUCH GENERAL ACCOUNT (AS DETERMINED BY SUCH INSURANCE COMPANY) CONSTITUTE "PLAN ASSETS" FOR PURPOSES OF TITLE I OF ERISA OR SECTION 4975 OF THE CODE AND NO EXEMPTION OR EXCEPTION FROM THE PROHIBITED TRANSACTION RULES APPLIES TO THE CONTINUED HOLDING OF THIS CERTIFICATE UNDER SECTION 401(c) OF ERISA AND FINAL REGULATIONS THEREUNDER OR AN EXEMPTION OR REGULATION ISSUED BY THE DOL UNDER ERISA, THEN SUCH INSURANCE COMPANY WILL DISPOSE OF ALL OF THE CERTIFICATES THEN HELD IN ITS GENERAL ACCOUNT BY THE END OF THE NEXT FOLLOWING CALENDAR QUARTER, AND (III) ON THE DATE IT ACQUIRES THIS CERTIFICATE AND THROUGHOUT THE PERIOD THAT IT HOLDS THEM IT MEETS ALL THE REQUIREMENTS OF AND IS ELIGIBLE FOR EXEMPTIVE RELIEF UNDER PTCE 95-60. SRI RECEIVABLES MASTER TRUST CLASS A-1 VARIABLE FUNDING CERTIFICATE, SERIES 1999-1 Evidencing an undivided interest in a trust, the corpus of which consists of receivables generated from time to time in the ordinary course of business from a portfolio of consumer revolving credit card accounts of Specialty Retailers, Inc. ("SRI"), Granite National Bank, N.A. or subsidiaries of SRI and other assets and interests constituting the Trust under the Agreement described below. (Not an interest in or a recourse obligation of SRI Receivables Purchase Co., Inc., SRI or any affiliate of either of them.) This certifies that [________________________] (the "Certificateholder") is the registered owner of a fractional undivided interest in the SRI Receivables Master Trust (the "Trust") issued pursuant to the Second Amended and Restated Pooling and Servicing Agreement, dated as of November 1, 1999 (the "Pooling and Servicing Agreement"; such term to include any amendment or supplement thereto) by and among SRI Receivables Purchase Co., Inc., as Transferor (the "Transferor"), SRI, as the Servicer (together with its successors and assigns in such capacity, the "Servicer"), and Bankers Trust (Delaware), as Trustee (together with its successors in such capacity, the "Trustee"), the Series 1999-1 Supplement, dated as of November 9, 1999 (the "Series 1999-1 Supplement"), among the Transferor, SRI, as Servicer, and the Trustee and the Issuance Supplement I, dated as of November 9, 1999 (the "Issuance Supplement") among the Transferor, SRI, as Servicer, and the Trustee. The Pooling and Servicing Agreement, as supplemented by the Series 1999-1 Supplement and the Issuance Supplement, is herein referred to as the "Agreement". The corpus of the Trust consists of all of the Transferor's right, title and interest in, to and under the Trust Property (as defined in the Agreement). This Certificate 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 Certificate is one of a Series of Certificates entitled "SRI Receivables Master Trust Class A-1 Variable Funding Certificates, Series 1999-1" (the "Class A-1 Certificates"), 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 Certificateholder by virtue of the acceptance hereof assents and by which the Certificateholder is bound. Pursuant to the Agreement, the Trust has also issued a classes of certificates entitled the "SRI Receivables Master Trust Class A-2 Variable Funding Certificates, Series 1999-1" (the "Class A-2 Certificates" and, together with the Class A-1 Certificates, the "Class A Certificates"), the "SRI Receivables Master Trust Class B Variable Funding Certificates, Series 1999-1" (the "Class B Certificates"), the "SRI Receivables Master Trust Floating Rate Class C Certificates, Series 1999-1" (the "Class C Certificates"), the "SRI Receivables Master Trust Floating Rate Class D Certificates, Series 1999-1" (the "Class D Certificates") and the "SRI Receivables Master Trust Class E Certificates, Series 1999-1" (the "Class E Certificates"). The Class A-2 Certificates are on a parity with the Class A-1 Certificates, and the Class B Certificates, the Class C Certificates, the Class D Certificates and the Class E Certificates are subordinated to the Class A Certificates as and to the extent provided in the Agreement. The principal of and interest on this Certificate will be payable as and to the extent provided in the Agreement. The Class A-1 Initial Invested Amount of this Certificate is set forth on the grid attached hereto. The Class A-1 Certificateholder or its agent is authorized from time to time to record the amount and date of each Additional Class A-1 Invested Amount evidenced by this Certificate and each payment of principal of this Certificate on such grid or on a continuation thereof which shall be attached thereto and made a part thereof, and any such notation shall constitute prima facie evidence of the accuracy of the information so recorded; provided that failure to make any such recordation on such grid or any error in such grid shall not adversely affect such Class A-1 Certificateholder's rights with respect to its Class A-1 VFC Principal Balance and its right to receive interest payments in respect of this Certificate. The Transferor has structured the Agreement and the Certificates with the intention that the Class A-1 Certificates will qualify under applicable tax law as debt, and the Transferor and each holder of a Class A-1 Certificate or of any interest therein by acceptance of its Class A-1 Certificate or any interest therein, agrees to treat the Class A-1 Certificates for purposes of federal, state and local income or franchise taxes and any other tax imposed on or measured by income, as debt. It is expressly understood and agreed by the parties hereto that (a) this Certificate is executed and delivered by Bankers Trust (Delaware), not individually or personally but solely as Trustee, (b) each of the representations, undertakings and agreements herein made on the part of the Trustee is made and intended not as personal representations, undertakings and agreements by Bankers Trust (Delaware) but is made and intended for the purpose for binding only the Trustee and (c) under no circumstances shall Bankers Trust (Delaware) be personally liable for the payment of any indebtedness or expenses of the Trustee or be liable for the breach or failure of any obligation, representation, warranty or covenant made or undertaken by the Trustee under this Certificate. Unless the certificate of authentication hereon has been executed by or on behalf of the Trustee, by manual signature, this Certificate shall not be entitled to any benefit under the Agreement, or be valid for any purpose. IN WITNESS WHEREOF, the Transferor has caused this Certificate to be duly executed under its official seal. SRI RECEIVABLES PURCHASE CO., INC., Transferor By:_____________________________________ _ Name: Title: CERTIFICATE OF AUTHENTICATION This is one of the Class A-1 Certificates referred to in the within-mentioned Pooling and Servicing Agreement. Date: BANKERS TRUST (DELAWARE), not in its individual capacity but solely as Trustee By: [______________], as Authenticating Agent By: ____________________________________ Authorized Signatory GRID TO CLASS A-1 CERTIFICATE NO. ____ Date of Additional Amount of Notation Made Transaction Class A-1 Principal By Invested Payment Amount $ N/A N/A (Class A-1 Initial Invested Amount) Exhibit A-2 No. ___ CLASS A-2 VARIABLE FUNDING CERTIFICATE THIS CERTIFICATE (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). THIS CERTIFICATE 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. EACH PURCHASER AND HOLDER OF THIS CERTIFICATE REPRESENTS AND WARRANTS FOR THE BENEFIT OF SRI RECEIVABLES PURCHASE CO., INC. AND SPECIALTY RETAILERS, INC., THAT SUCH PURCHASER OR HOLDER EITHER (A) IS NOT (I) AN EMPLOYEE BENEFIT PLAN (AS DEFINED IN SECTION 3(3) OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA") THAT IS SUBJECT TO THE PROVISIONS OF TITLE I OF ERISA, (II) A PLAN OR OTHER ARRANGEMENT (INCLUDING AN INDIVIDUAL RETIREMENT ACCOUNT OR KEOGH PLAN) THAT IS SUBJECT TO SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), OR (III) A "BENEFIT PLAN INVESTOR" (AS DEFINED IN UNITED STATES DEPARTMENT OF LABOR ("DOL") REGULATION SECTION 2510.3-101) OR (B) IS AN INSURANCE COMPANY ACTING ON BEHALF OF ITS GENERAL ACCOUNT AND (I) ON THE DATE IT ACQUIRES THIS CERTIFICATE, LESS THAN 25% OF THE ASSETS OF SUCH GENERAL ACCOUNT (AS DETERMINED BY SUCH INSURANCE COMPANY) CONSTITUTE "PLAN ASSETS" FOR PURPOSES OF TITLE I OF ERISA OR SECTION 4975 OF THE CODE, (II) IF AFTER THE INITIAL ACQUISITION OF THIS CERTIFICATE, DURING ANY CALENDAR QUARTER 25% OR MORE OF THE ASSETS OF SUCH GENERAL ACCOUNT (AS DETERMINED BY SUCH INSURANCE COMPANY) CONSTITUTE "PLAN ASSETS" FOR PURPOSES OF TITLE I OF ERISA OR SECTION 4975 OF THE CODE AND NO EXEMPTION OR EXCEPTION FROM THE PROHIBITED TRANSACTION RULES APPLIES TO THE CONTINUED HOLDING OF THIS CERTIFICATE UNDER SECTION 401(c) OF ERISA AND FINAL REGULATIONS THEREUNDER OR AN EXEMPTION OR REGULATION ISSUED BY THE DOL UNDER ERISA, THEN SUCH INSURANCE COMPANY WILL DISPOSE OF ALL OF THE CERTIFICATES THEN HELD IN ITS GENERAL ACCOUNT BY THE END OF THE NEXT FOLLOWING CALENDAR QUARTER, AND (III) ON THE DATE IT ACQUIRES THIS CERTIFICATE AND THROUGHOUT THE PERIOD THAT IT HOLDS THEM IT MEETS ALL THE REQUIREMENTS OF AND IS ELIGIBLE FOR EXEMPTIVE RELIEF UNDER PTCE 95-60. SRI RECEIVABLES MASTER TRUST CLASS A-2 VARIABLE FUNDING CERTIFICATE, SERIES 1999-1 Evidencing an undivided interest in a trust, the corpus of which consists of receivables generated from time to time in the ordinary course of business from a portfolio of consumer revolving credit card accounts of Specialty Retailers, Inc. ("SRI"), Granite National Bank, N.A. or subsidiaries of SRI and other assets and interests constituting the Trust under the Agreement described below. (Not an interest in or a recourse obligation of SRI Receivables Purchase Co., Inc., SRI or any affiliate of either of them.) This certifies that [________________________] (the "Certificateholder") is the registered owner of a fractional undivided interest in the SRI Receivables Master Trust (the "Trust") issued pursuant to the Second Amended and Restated Pooling and Servicing Agreement, dated as of November 1, 1999 (the "Pooling and Servicing Agreement"; such term to include any amendment or supplement thereto) by and among SRI Receivables Purchase Co., Inc., as Transferor (the "Transferor"), SRI, as the Servicer (together with its successors and assigns in such capacity, the "Servicer"), and Bankers Trust (Delaware), as Trustee (together with its successors in such capacity, the "Trustee"), the Series 1999-1 Supplement, dated as of November 9, 1999 (the "Series 1999-1 Supplement"), among the Transferor, SRI, as Servicer, and the Trustee and the Issuance Supplement I, dated as of November 9, 1999 (the "Issuance Supplement") among the Transferor, SRI, as Servicer, and the Trustee. The Pooling and Servicing Agreement, as supplemented by the Series 1999-1 Supplement and the Issuance Supplement, is herein referred to as the "Agreement". The corpus of the Trust consists of all of the Transferor's right, title and interest in, to and under the Trust Property (as defined in the Agreement). This Certificate 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 Certificate is one of a Series of Certificates entitled "SRI Receivables Master Trust Class A-2 Variable Funding Certificates, Series 1999-1" (the "Class A-2 Certificates"), 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 Certificateholder by virtue of the acceptance hereof assents and by which the Certificateholder is bound. Pursuant to the Agreement, the Trust has also issued a classes of certificates entitled the "SRI Receivables Master Trust Class A-1 Variable Funding Certificates, Series 1999-1" (the "Class A-1 Certificates" and, together with the Class A-2 Certificates, the "Class A Certificates"), the "SRI Receivables Master Trust Class B Variable Funding Certificates, Series 1999-1" (the "Class B Certificates"), the "SRI Receivables Master Trust Floating Rate Class C Certificates, Series 1999-1" (the "Class C Certificates"), the "SRI Receivables Master Trust Floating Rate Class D Certificates, Series 1999-1" (the "Class D Certificates") and the "SRI Receivables Master Trust Class E Certificates, Series 1999-1" (the "Class E Certificates"). The Class A-1 Certificates are on a parity with the Class A-2 Certificates, and the Class B Certificates, the Class C Certificates, the Class D Certificates and the Class E Certificates are subordinated to the Class A Certificates as and to the extent provided in the Agreement. The principal of and interest on this Certificate will be payable as and to the extent provided in the Agreement. The Class A-2 Initial Invested Amount of this Certificate is set forth on the grid attached hereto. The Class A-2 Certificateholder or its agent is authorized from time to time to record the amount and date of each Additional Class A-2 Invested Amount evidenced by this Certificate and each payment of principal of this Certificate on such grid or on a continuation thereof which shall be attached thereto and made a part thereof, and any such notation shall constitute prima facie evidence of the accuracy of the information so recorded; provided that failure to make any such recordation on such grid or any error in such grid shall not adversely affect such Class A-2 Certificateholder's rights with respect to its Class A-2 VFC Principal Balance and its right to receive interest payments in respect of this Certificate. The Transferor has structured the Agreement and the Certificates with the intention that the Class A-2 Certificates will qualify under applicable tax law as debt, and the Transferor and each holder of a Class A-2 Certificate or of any interest therein by acceptance of its Class A-2 Certificate or any interest therein, agrees to treat the Class A-2 Certificates for purposes of federal, state and local income or franchise taxes and any other tax imposed on or measured by income, as debt. It is expressly understood and agreed by the parties hereto that (a) this Certificate is executed and delivered by Bankers Trust (Delaware), not individually or personally but solely as Trustee, (b) each of the representations, undertakings and agreements herein made on the part of the Trustee is made and intended not as personal representations, undertakings and agreements by Bankers Trust (Delaware) but is made and intended for the purpose for binding only the Trustee and (c) under no circumstances shall Bankers Trust (Delaware) be personally liable for the payment of any indebtedness or expenses of the Trustee or be liable for the breach or failure of any obligation, representation, warranty or covenant made or undertaken by the Trustee under this Certificate. Unless the certificate of authentication hereon has been executed by or on behalf of the Trustee, by manual signature, this Certificate shall not be entitled to any benefit under the Agreement, or be valid for any purpose. IN WITNESS WHEREOF, the Transferor has caused this Certificate to be duly executed under its official seal. SRI RECEIVABLES PURCHASE CO., INC., Transferor By:_____________________________________ _ Name: Title: CERTIFICATE OF AUTHENTICATION This is one of the Class A-2 Certificates referred to in the within-mentioned Pooling and Servicing Agreement. Date: BANKERS TRUST (DELAWARE), not in its individual capacity but solely as Trustee By: [______________], as Authenticating Agent By: ____________________________________ Authorized Signatory GRID TO CLASS A-2 CERTIFICATE NO. ____ Date of Additional Amount of Notation Made Transaction Class A-2 Principal By Invested Payment Amount $ N/A N/A (Class A-2 Initial Invested Amount) Exhibit A-3 No. ____ CLASS B VARIABLE FUNDING CERTIFICATE THIS CERTIFICATE (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). THIS CERTIFICATE 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. EACH PURCHASER AND HOLDER OF THIS CERTIFICATE REPRESENTS AND WARRANTS FOR THE BENEFIT OF SRI RECEIVABLES PURCHASE CO., INC. AND SPECIALTY RETAILERS, INC., THAT SUCH PURCHASER OR HOLDER EITHER (A) IS NOT (I) AN EMPLOYEE BENEFIT PLAN (AS DEFINED IN SECTION 3(3) OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA") THAT IS SUBJECT TO THE PROVISIONS OF TITLE I OF ERISA, (II) A PLAN OR OTHER ARRANGEMENT (INCLUDING AN INDIVIDUAL RETIREMENT ACCOUNT OR KEOGH PLAN) THAT IS SUBJECT TO SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), OR (III) A "BENEFIT PLAN INVESTOR" (AS DEFINED IN UNITED STATES DEPARTMENT OF LABOR ("DOL") REGULATION SECTION 2510.3-101) OR (B) IS AN INSURANCE COMPANY ACTING ON BEHALF OF ITS GENERAL ACCOUNT AND (I) ON THE DATE IT ACQUIRES THIS CERTIFICATE, LESS THAN 25% OF THE ASSETS OF SUCH GENERAL ACCOUNT (AS DETERMINED BY SUCH INSURANCE COMPANY) CONSTITUTE "PLAN ASSETS" FOR PURPOSES OF TITLE I OF ERISA OR SECTION 4975 OF THE CODE, (II) IF AFTER THE INITIAL ACQUISITION OF THIS CERTIFICATE, DURING ANY CALENDAR QUARTER 25% OR MORE OF THE ASSETS OF SUCH GENERAL ACCOUNT (AS DETERMINED BY SUCH INSURANCE COMPANY) CONSTITUTE "PLAN ASSETS" FOR PURPOSES OF TITLE I OF ERISA OR SECTION 4975 OF THE CODE AND NO EXEMPTION OR EXCEPTION FROM THE PROHIBITED TRANSACTION RULES APPLIES TO THE CONTINUED HOLDING OF THIS CERTIFICATE UNDER SECTION 401(c) OF ERISA AND FINAL REGULATIONS THEREUNDER OR AN EXEMPTION OR REGULATION ISSUED BY THE DOL UNDER ERISA, THEN SUCH INSURANCE COMPANY WILL DISPOSE OF ALL OF THE CERTIFICATES THEN HELD IN ITS GENERAL ACCOUNT BY THE END OF THE NEXT FOLLOWING CALENDAR QUARTER, AND (III) ON THE DATE IT ACQUIRES THIS CERTIFICATE AND THROUGHOUT THE PERIOD THAT IT HOLDS THEM IT MEETS ALL THE REQUIREMENTS OF AND IS ELIGIBLE FOR EXEMPTIVE RELIEF UNDER PTCE 95-60. SRI RECEIVABLES MASTER TRUST CLASS B VARIABLE FUNDING CERTIFICATE, SERIES 1999-1 Evidencing an undivided interest in a trust, the corpus of which consists of receivables generated from time to time in the ordinary course of business from a portfolio of consumer revolving credit card accounts of Specialty Retailers, Inc. ("SRI"), Granite National Bank, N.A. or subsidiaries of SRI and other assets and interests constituting the Trust under the Agreement described below. (Not an interest in or a recourse obligation of SRI Receivables Purchase Co., Inc., SRI or any affiliate of either of them.) This certifies that [________________________] (the "Certificateholder") is the registered owner of a fractional undivided interest in the SRI Receivables Master Trust (the "Trust") issued pursuant to the Second Amended and Restated Pooling and Servicing Agreement, dated as of November 1, 1999 (the "Pooling and Servicing Agreement"; such term to include any amendment or supplement thereto) by and among SRI Receivables Purchase Co., Inc., as Transferor (the "Transferor"), SRI, as the Servicer (together with its successors and assigns in such capacity, the "Servicer"), and Bankers Trust (Delaware), as Trustee (together with its successors in such capacity, the "Trustee"), the Series 1999-1 Supplement, dated as of November 9, 1999 (the "Series 1999-1 Supplement"), among the Transferor, SRI, as Servicer, and the Trustee and the Issuance Supplement I, dated as of November 9, 1999 (the "Issuance Supplement") among the Transferor, SRI, as Servicer, and the Trustee. The Pooling and Servicing Agreement, as supplemented by the Series 1999-1 Supplement and the Issuance Supplement, is herein referred to as the "Agreement". The corpus of the Trust consists of all of the Transferor's right, title and interest in, to and under the Trust Property (as defined in the Agreement). This Certificate 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 Certificate is one of a Series of Certificates entitled "SRI Receivables Master Trust Class B Variable Funding Certificates, Series 1999-1" (the "Class B Certificates"), 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 Certificateholder by virtue of the acceptance hereof assents and by which the Certificateholder is bound. Pursuant to the Agreement, the Trust has also issued a classes of certificates entitled the "SRI Receivables Master Trust Class A-1 Variable Funding Certificates, Series 1999-1" (the "Class A-1 Certificates"), the "SRI Receivables Master Trust Class A-2 Variable Funding Certificates, Series 1999-1" (the "Class A-2 Certificates" and, together with the Class A-1 Certificates, the "Class A Certificates"), the "SRI Receivables Master Trust Floating Rate Class C Certificates, Series 1999-1" (the "Class C Certificates"), the "SRI Receivables Master Trust Floating Rate Class D Certificates, Series 1999-1" (the "Class D Certificates") and the "SRI Receivables Master Trust Class E Certificates, Series 1999-1" (the "Class E Certificates"). The Class B Certificates are subordinate to the Class A Certificates, and the Class C Certificates, the Class D Certificates and the Class E Certificates are subordinate to the Class A Certificates and the Class B Certificates as and to the extent provided in the Agreement. The principal of and interest on this Certificate will be payable as and to the extent provided in the Agreement. The Class B Initial Invested Amount of this Certificate is set forth on the grid attached hereto. The Class B Certificateholder or its agent is authorized from time to time to record the amount and date of each Additional Class B Invested Amount evidenced by this Certificate and each payment of principal of this Certificate on such grid or on a continuation thereof which shall be attached thereto and made a part thereof, and any such notation shall constitute prima facie evidence of the accuracy of the information so recorded; provided that failure to make any such recordation on such grid or any error in such grid shall not adversely affect such Class B Certificateholder's rights with respect to its Class B VFC Principal Balance and its right to receive interest payments in respect of this Certificate. The Transferor has structured the Agreement and the Certificates with the intention that the Class B Certificates will qualify under applicable tax law as debt, and the Transferor and each holder of a Class B Certificate or of any interest therein by acceptance of its Class B Certificate or any interest therein, agrees to treat the Class B Certificates for purposes of federal, state and local income or franchise taxes and any other tax imposed on or measured by income, as debt. It is expressly understood and agreed by the parties hereto that (a) this Certificate is executed and delivered by Bankers Trust (Delaware), not individually or personally but solely as Trustee, (b) each of the representations, undertakings and agreements herein made on the part of the Trustee is made and intended not as personal representations, undertakings and agreements by Bankers Trust (Delaware) but is made and intended for the purpose for binding only the Trustee and (c) under no circumstances shall Bankers Trust (Delaware) be personally liable for the payment of any indebtedness or expenses of the Trustee or be liable for the breach or failure of any obligation, representation, warranty or covenant made or undertaken by the Trustee under this Certificate. Unless the certificate of authentication hereon has been executed by or on behalf of the Trustee, by manual signature, this Certificate shall not be entitled to any benefit under the Agreement, or be valid for any purpose. IN WITNESS WHEREOF, the Transferor has caused this Certificate to be duly executed under its official seal. SRI RECEIVABLES PURCHASE CO., INC., Transferor By:_____________________________________ _ Name: Title: CERTIFICATE OF AUTHENTICATION This is one of the Class B Certificates referred to in the within-mentioned Pooling and Servicing Agreement. Date: BANKERS TRUST (DELAWARE), not in its individual capacity but solely as Trustee By: [______________], as Authenticating Agent By: ____________________________________ Authorized Signatory GRID TO CLASS B CERTIFICATE NO. ____ Date of Additional Amount of Notation Made Transaction Class B Principal By Invested Payment Amount $ N/A N/A (Class B Initia l Invested Amount) Exhibit B-1 Class A-1 Interest Calculations Terms used in this Exhibit which are not defined in the Agreement, this Issuance Supplement or this Exhibit are used as defined in the Class A-1 Certificate Purchase Agreement. (a) "Class A-1 Interest" shall mean, with respect to any Distribution Date, the sum of (i) interest on the Class A-1 VFC Principal Balance for the immediately preceding Interest Accrual Period computed pursuant to subsection (b) and, if applicable, subsection (c), below, plus or minus (as the case may be) (ii) any Estimated Interest Adjustment with respect to the previous Distribution Date. (b) Interest shall accrue on the Covered Portion of the Class A-1 VFC Principal Balance during each Interest Accrual Period at the following rates: (i) Except as otherwise provided in clause (ii) or (iv) below, the Conduit Purchaser's Percentage Interest of the Covered Portion shall bear interest at a rate per annum equal to the Commercial Paper Rate from time to time in effect. (ii) If and to the extent that, and for so long as, a Conduit Purchaser at any time determines in good faith that it is unable to raise or is precluded or prohibited from raising, or that it is not advisable to raise, funds through the issuance of Commercial Paper Notes in the commercial paper market of the United States to finance its purchase or maintenance of its Percentage Interest of the Covered Portion or any portion thereof (which determination may be based on any allocation method employed in good faith by the Conduit Purchaser), including by reason of market conditions or by reason of insufficient availability under any of its Support Facilities or the downgrading of any of its Support Parties, except as otherwise provided in clause (iv) below, such portion of such Conduit Purchaser's Percentage Interest of the Covered Portion shall bear interest at a rate per annum equal to the Alternative Rate from time to time in effect. (iii) Except as otherwise provided in clause (iv) below, the Percentage Interest of the Covered Portion of the Class A-1 VFC Principal Balance held by each Committed Purchaser and Liquidity Purchaser shall bear interest at a rate per annum equal to the Alternative Rate from time to time in effect. (iv) Notwithstanding the provisions of clauses (i), (ii) or (iii) above, from and after the occurrence of a Trust Pay Out Event or a Series 1999-1 Pay Out Event, the entire Covered Portion shall bear interest at a rate per annum equal to the Risk Rate from time to time in effect. (c) For each portion of each Interest Accrual Period with respect to which there were Unreimbursed Class A-1 Investor Charge-Offs, interest shall accrue on the portion of the Class A-1 VFC Principal Balance equal to the amount of the Unreimbursed Class A-1 Investor Charge-Offs at a rate per annum equal to the Risk Rate from time to time in effect. (d) The Agent for the Class A-1 Owners shall notify the Servicer on each Certificate Rate Determination Date of the Commercial Paper Rate, the Alternative Rate and the Risk Rate, as applicable, and the Class A-1 Interest for the related Interest Accrual Period for its related Purchaser Group substantially in the form of Exhibit B-1A (or such other form which may be mutually acceptable to the applicable Agent and the Servicer from time to time). For such purposes, such Agent may rely conclusively on notices from the Conduit Purchasers as to the interest rate or rates from time to time applicable to its Percentage Interest of the Class A-1 VFC Principal Balance. Such notification from an Agent may be based on a Conduit Purchaser's estimate of the Commercial Paper Rate as provided to such Agent and upon estimates of the Class A-1 Interest if the actual amount is not then known to such Agent. In any such case, such Agent shall notify the Servicer on or before the following Certificate Rate Determination Date of the amount of any variation between the estimated Class A-1 Interest and the actual Class A-1 Interest for the preceding Interest Accrual Period. The amount of any shortfall in interest based on such variation shall be a positive "Estimated Interest Adjustment" for such Interest Accrual Period, and the amount of any overpayment of interest based on such variation shall be a negative "Estimated Interest Adjustment" for such Interest Accrual Period. Subject to any Estimated Interest Adjustment, each determination of the Commercial Paper Rate, the Alternative Rate, the Risk Rate and the Class A-1 Interest by any Agent shall be conclusive and binding on the Class A-1 Certificateholders, the Transferor, the Servicer and the Trustee in the absence of manifest error. (e) Interest calculated by reference to the Commercial Paper Rate or the Class A-1 Adjusted Eurodollar Rate shall be calculated on the basis of a 360-day year for the actual days elapsed. Any interest calculated by reference to the Corporate Base Rate shall be calculated on the basis of a 365- or 366-day year, as applicable, for the actual days elapsed. Definitions "Alternative Rate" shall mean, for each Class A-1 Purchaser, (i) for any Interest Accrual Period, if such Class A-1 Purchaser shall have received at least two London Business Days notice prior to the commencement of such Interest Accrual Period that the applicable portion of its share of the Covered Portion of the Class A-1 VFC Principal Balance would bear interest by reference to the Class A-1 Adjusted Eurodollar Rate for such Interest Accrual Period, an interest rate per annum equal to the sum of 1.00% plus Adjusted Eurodollar Rate for such Interest Accrual Period, and (ii) otherwise, an interest rate per annum equal to the Corporate Base Rate in effect from time to time during such Interest Accrual Period. "Class A-1 Adjusted Eurodollar Rate" shall mean (i) 5.55520% for the initial Interest Accrual Period, and thereafter (ii) for any Interest Accrual Period or portion thereof, a rate per annum (rounded upwards, if necessary, to the nearest 1/100th of 1%) equivalent to the rate determined pursuant to the following formula: Class A-1 Adjusted Eurodollar Rate = LIBOR Rate 1-LIBOR Reserve Percentage on the first day of such Interest Accrual Period. For purposes of this definition, (a) "LIBOR Rate" shall mean, with respect to any Interest Accrual Period or portion thereof, the rate per annum shown on page 3750 of the Bridge Information Systems Telerate screen or any successor page as the composite offered rate for London interbank deposits for a period equal to such Interest Accrual Period (or portion) thereof, as shown under the heading "USD" as of 11:00 a.m., London time, two London Business Days prior to the first day of such Interest Accrual Period; provided that in the event no such rate is shown, the LIBOR Rate shall be the rate per annum (rounded upwards, if necessary, to the nearest 1/100th of one percent) based on the rates at which Dollar deposits for a period equal to such Interest Accrual Period (or portion thereof) are displayed on page "LIBOR" of the Reuters Monitor Money Rates Service or such other page as may replace the LIBOR page on that service for the purpose of displaying London interbank offered rates, of major banks as of 11:00 a.m., London time, two London Business Days prior to the first day of such Interest Accrual Period (it being understood that if at least two such rates appear on such page, the rate will be the arithmetic mean of such displayed rates); provided further that in the event fewer than two such rates are displayed, or if no such rate is relevant, the LIBOR Rate shall be the rate per annum equal to the average of the rates at which deposits in Dollars are offered by the Reference Banks at approximately 11:00 a.m., London time, two London Business Days prior to the first day of such Interest Accrual Period to prime banks in the London interbank market for a period equal to such Interest Accrual Period (or portion thereof), it being understood that if at least two such quotations are provided, the rate shall be the arithmetic mean of such provided rates; provided further that if fewer than two such rates are provided, the rate shall be the arithmetic mean of the rates quoted by major banks in New York City, selected by Credit Suisse First Boston, at approximately 11:00 a.m., New York City time, on the first day of such Interest Accrual Period to leading European banks for Dollar deposits for a period equal to such Interest Accrual Period (or portion thereof); provided further that if the LIBOR Rate is not established for any such Interest Accrual Period as otherwise provided above, the LIBOR Rate for such Interest Accrual Period shall equal the LIBOR Rate for the immediately preceding Interest Accrual Period, (b) "LIBOR Reserve Percentage" shall mean, with respect to any Interest Accrual Period or portion thereof, a percentage (expressed as a decimal) equal to the weighted average of the percentages in effect during such Interest Accrual Period, as prescribed by the Federal Reserve Board (or any successor thereto) for determining the maximum reserve requirements applicable to "Eurocurrency liabilities" pursuant to Regulation D or any other applicable regulation of the Federal Reserve Board (or any successor thereto) which prescribes reserve requirements applicable to "Eurocurrency liabilities" as currently defined in Regulation D, and (c) "Reference Banks" shall mean the principal London offices of Credit Suisse First Boston and two other major banks in the London interbank market selected by the Servicer with the consent of the Agents under the Class A-1 Certificate Purchase Agreement. "Commercial Paper Notes" shall mean, with respect to the Conduit Purchaser, the short-term promissory notes issued by the Conduit Purchaser which are allocated by the Conduit Purchaser as its funding for its Percentage Interest of the Class A-1 VFC Principal Balance. "Commercial Paper Rate" shall mean, (a) for any day to the extent the Conduit Purchaser funds its Percentage Interest of the Class A-1 VFC Principal Balance on such day with outstanding Commercial Paper Notes, the sum of (i) the rate (or if more than one rate, the weighted average of the rates) per annum at which such Commercial Paper Notes were sold by any placement agent or commercial paper dealer selected by or on behalf of the Conduit Purchaser, as agreed between each such agent or dealer and the Conduit Purchaser; provided that if any rate as agreed between any such agent or dealer and the Conduit Purchaser is a discount rate, then such rate shall be the rate (or if more than one rate, the weighted average of the rates) resulting from converting such discount rate (or rates) to an interest-bearing equivalent rate per annum, plus (ii) dealer commissions (computed at the rate of 0.05% on a discount basis, or such higher rate as has become customary and usual in the commercial paper industry), placement agent fees and commissions and Commercial Paper Note issuance costs, expressed as an annualized rate in respect of the principal component of such Commercial Paper Notes, or (b) otherwise, for any day, the Alternative Rate for the applicable Interest Accrual Period. "Committed Purchaser" shall have the meaning specified in the Class A-1 Certificate Purchase Agreement. "Conduit Purchaser" shall have the meaning specified in the Class A-1 Certificate Purchase Agreement. "Corporate Base Rate" shall mean, for any day, the higher of (i) the base commercial lending rate per annum announced from time to time by Credit Suisse First Boston in New York in effect on such day, or (ii) the interest rate per annum quoted by Credit Suisse First Boston at approximately 11:00 a.m., New York City time, on such day, to dealers in the New York Federal funds market for the overnight offering of Dollars by Credit Suisse First Boston plus one-half of one percent (0.50%). (The Corporate Base Rate is not intended to represent the lowest rate charged by Credit Suisse First Boston for extensions of credit.) "Covered Portion" shall mean, with respect to the Class A-1 VFC Principal Balance, a portion thereof equal to the Class A-1 Invested Amount. "Liquidity Purchaser" shall have the meaning specified in the Class A-1 Certificate Purchase Agreement. "London Business Day" shall mean any Business Day other than a day on which banking institutions in London, England trading in Dollar deposits in the London interbank market are authorized or obligated by law or executive order to be closed. "Percentage Interest", with respect to a Class A-1 Purchaser, shall be determined in accordance with the Class A-1 Certificate Purchase Agreement. "Risk Rate" shall mean 2.00% in excess of the Corporate Base Rate in effect from time to time. "Support Facility" shall have the meaning specified in the Class A-1 Certificate Purchase Agreement. "Support Party" shall have the meaning specified in the Class A-1 Certificate Purchase Agreement. Exhibit B-1A SRI RECEIVABLES MASTER TRUST, SERIES 1999-1 Interest Accrual Period: __________, ____ to __________, ____ Transfer Date: __________, ____ Distribution Date: __________, ____ Purchaser Group: _________________________________ I. Class A-1 VFC Principal Balance (for Purchaser Group) 1. Covered Portion of the Class A-1 Principal Balance (as set forth in Daily Report) $__________ 2. Unreimbursed Class A-1 Charge-Offs Portion of the Class A-1 VFC Principal Balance (as set forth in Daily Report) $__________ 3. Total Class A-1 VFC Principal Balance for Purchaser Group (1+2) $__________ II. Computation of Class A-1 Interest A. B. Portion of C. Interest Rat Class A-1 VFC Amount e Principal Balance 1 Commercial Paper __% $__________ $__________ . Rate 2 LIBOR Rate __% . Class A-1 Adjusted __% Eurodollar Rate Corporate Base __% Rate Alternative __% $__________ $__________ Rate 3 Risk Rate __% $__________ $__________ . 4 Total Interest $__________ . (sum of items 1C, 2C and 3C) III. Computation of Class A-1 Interest for Purchaser Group: 1. Interest on Class A-1 VFC Principal Balance (item II.4C) $__________ 2. Estimated Interest Adjustment (if any) from prior Monthly Period $__________ 3. Class A-1 Interest (sum of items 1 and 2) $__________ Exhibit B-2 Class A-2 Interest Calculations Terms used in this Exhibit which are not defined in the Agreement, this Issuance Supplement or this Exhibit are used as defined in the Class A-2 Certificate Purchase Agreement. (a) "Class A-2 Interest" shall mean, with respect to any Distribution Date, the sum of (i) interest on the Class A-2 VFC Principal Balance for the immediately preceding Interest Accrual Period computed pursuant to subsection (b) and, if applicable, subsection (c), below, plus or minus (as the case may be) (ii) any Estimated Interest Adjustment with respect to the previous Distribution Date. (b) Interest shall accrue on the Covered Portion of the Class A-2 VFC Principal Balance during each Interest Accrual Period at the following rates: (i) Except as otherwise provided in clause (ii) or (iv) below, the Conduit Purchaser's Percentage Interest of the Covered Portion shall bear interest at a rate per annum equal to the Commercial Paper Rate from time to time in effect. (ii) If and to the extent that, and for so long as, a Conduit Purchaser at any time determines in good faith that it is unable to raise or is precluded or prohibited from raising, or that it is not advisable to raise, funds through the issuance of Commercial Paper Notes in the commercial paper market of the United States to finance its purchase or maintenance of its Percentage Interest of the Covered Portion or any portion thereof (which determination may be based on any allocation method employed in good faith by the Conduit Purchaser), including by reason of market conditions or by reason of insufficient availability under any of its Support Facilities or the downgrading of any of its Support Parties, except as otherwise provided in clause (iv) below, such portion of such Conduit Purchaser's Percentage Interest of the Covered Portion shall bear interest at a rate per annum equal to the Alternative Rate from time to time in effect. (iii) Except as otherwise provided in clause (iv) below, the Percentage Interest of the Covered Portion of the Class A-2 VFC Principal Balance held by each Committed Purchaser and Liquidity Purchaser shall bear interest at a rate per annum equal to the Alternative Rate from time to time in effect. (iv) Notwithstanding the provisions of clauses (i), (ii) or (iii) above, from and after the occurrence of a Trust Pay Out Event or a Series 1999-1 Pay Out Event, the entire Covered Portion shall bear interest at a rate per annum equal to the Risk Rate from time to time in effect. (c) For each portion of each Interest Accrual Period with respect to which there were Unreimbursed Class A-2 Investor Charge-Offs, interest shall accrue on the portion of the Class A-2 VFC Principal Balance equal to the amount of the Unreimbursed Class A-2 Investor Charge-Offs at a rate per annum equal to the Risk Rate from time to time in effect. (d) The Agent for the Class A-1 Owners shall notify the Servicer on each Certificate Rate Determination Date of the Commercial Paper Rate, the Alternative Rate and the Risk Rate, as applicable, and the Class A-2 Interest for the related Interest Accrual Period for its related Purchaser Group substantially in the form of Exhibit B-2A (or such other form which may be mutually acceptable to the applicable Agent and the Servicer from time to time). For such purposes, such Agent may rely conclusively on notices from the Conduit Purchasers as to the interest rate or rates from time to time applicable to its Percentage Interest of the Class A-2 VFC Principal Balance. Such notification from an Agent may be based on the Conduit Purchaser's estimate of the Commercial Paper Rate as provided to such Agent and upon estimates of the Class A-2 Interest if the actual amount is not then known to such Agent. In any such case, such Agent shall notify the Servicer on or before the following Certificate Rate Determination Date of the amount of any variation between the estimated Class A-2 Interest and the actual Class A-2 Interest for the preceding Interest Accrual Period. The amount of any shortfall in interest based on such variation shall be a positive "Estimated Interest Adjustment" for such Interest Accrual Period, and the amount of any overpayment of interest based on such variation shall be a negative "Estimated Interest Adjustment" for such Interest Accrual Period. Subject to any Estimated Interest Adjustment, each determination of the Commercial Paper Rate, the Alternative Rate, the Risk Rate and the Class A-2 Interest by any Agent shall be conclusive and binding on the Class A-2 Certificateholders, the Transferor, the Servicer and the Trustee in the absence of manifest error. (e) Interest calculated by reference to the Commercial Paper Rate or the Class A-2 Adjusted Eurodollar Rate shall be calculated on the basis of a 360-day year for the actual days elapsed. Any interest calculated by reference to the Prime Rate shall be calculated on the basis of a 365- or 366-day year, as applicable, for the actual days elapsed. Definitions "Alternative Rate" shall mean, for each Class A-2 Purchaser, (i) for any Interest Accrual Period, if such Class A-2 Purchaser shall have received at least two London Business Days notice prior to the commencement of such Interest Accrual Period that the applicable portion of its share of the Covered Portion of the Class A-2 VFC Principal Balance would bear interest by reference to the Class A-2 Adjusted Eurodollar Rate for such Interest Accrual Period, an interest rate per annum equal to the sum of 1.00% plus Adjusted Eurodollar Rate for such Interest Accrual Period, and (ii) otherwise, an interest rate per annum equal to the Prime Rate in effect from time to time during such Interest Accrual Period, plus, in either case, related costs associated with the funding of such portion of the Class A-2 VFC Principal Balance expressed as a percentage of the face amount thereof and converted to an interest-bearing equivalent rate per annum. "Class A-2 Adjusted Eurodollar Rate" shall mean (i) 5.55520% for the initial Interest Accrual Period, and thereafter (ii) for any Interest Accrual Period or portion thereof, a rate per annum (rounded upwards, if necessary, to the nearest 1/100th of 1%) equivalent to the rate determined pursuant to the following formula: Class A-2 Adjusted Eurodollar Rate = LIBOR Rate 1-LIBOR Reserve Percentage on the first day of such Interest Accrual Period. For purposes of this definition, (a) "LIBOR Rate" shall mean, with respect to any Interest Accrual Period or portion thereof, the rate determined by the applicable Class A-2 Purchaser on the related Interest Determination Date on the basis of the offered rates of the Reference Banks for one-month United States dollar deposits, as such rates appear on the Telerate Page 3750, as of 11:00 a.m. (London time) on such Interest Determination Date. If such rate does not appear on Telerate Page 3750, the rate for that day will be determined on the basis of the rates at which deposits in United States dollars are offered by the Reference Banks at approximately 11:00 a.m., London time, on that day to prime banks in the London interbank market for a period equal to the relevant Interest Period (commencing on the first day of such Interest Period). The applicable Class A-2 Purchaser will request the principal London office of each of the Reference Banks to provide a quotation of its rate. If at least two such quotations are provided, the rate for that day will be the arithmetic mean of the quotations. If fewer than two quotations are provided as requested, the rate for that day will be the arithmetic mean of the rates quoted by major banks in New York City, selected by the Trustee, at approximately 11:00 a.m., New York City time, on that day for loans in United States dollars to leading European banks for a period equal to the relevant Interest Accrual Period (commencing on the first day of such period) (the establishment of the LIBOR Rate on each Interest Determination Date by the Class A-2 Purchaser shall (in the absence of manifest error) be final and binding, (b) "LIBOR Reserve Percentage" shall mean, with respect to any Interest Accrual Period or portion thereof, a percentage (expressed as a decimal) equal to the weighted average of the percentages in effect during such Interest Accrual Period, as prescribed by the Federal Reserve Board (or any successor thereto) for determining the maximum reserve requirements applicable to "Eurocurrency liabilities" pursuant to Regulation D or any other applicable regulation of the Federal Reserve Board (or any successor thereto) which prescribes reserve requirements applicable to "Eurocurrency liabilities" as currently defined in Regulation D, (c) "Reference Banks" shall mean four prime banks in the London interbank market selected by the Program Administrator, and (d) "Interest Determination Date" shall mean two London Business Days prior to the commencement of an Interest Accrual Period. "Commercial Paper Notes" shall mean, with respect to a Conduit Purchaser, the commercial paper notes issued by such Conduit Purchaser. "Commercial Paper Rate" shall mean, for any day to the extent the Conduit Purchaser funds its Percentage Interest of the Class A-2 VFC Principal Balance on such day with outstanding Commercial Paper Notes, a rate per annum equal to the sum of (i) the rate or, if more than one rate, the weighted average of the rates, determined by converting to an interest-bearing equivalent rate per annum the discount rate (or rates) at which Commercial Paper Notes outstanding on such day allocated to the funding of the Class A-2 Investor VFC Principal Balance were sold by any placement agent or commercial paper dealer of the such Conduit Purchaser's Commercial Paper Notes, plus (ii) the commissions and charges charged by such placement agent or commercial paper dealer with respect to such Commercial Paper Notes expressed as a percentage of the face amount thereof and converted to an interest-bearing equivalent rate per annum, plus (iii) related costs associated with the issuance of Commercial Paper Notes expressed as a percentage of the face amount thereof and converted to an interest-bearing equivalent rate per annum. "Committed Purchaser" shall have the meaning specified in the Class A-2 Certificate Purchase Agreement. "Conduit Purchaser" shall have the meaning specified in the Class A-2 Certificate Purchase Agreement. "Covered Portion" shall mean, with respect to the Class A-2 VFC Principal Balance, a portion thereof equal to the Class A-2 Invested Amount. "Liquidity Purchaser" shall have the meaning specified in the Class A-2 Certificate Purchase Agreement. "London Business Day" shall mean any Business Day other than a day on which banking institutions in London, England trading in Dollar deposits in the London interbank market are authorized or obligated by law or executive order to be closed. "Percentage Interest", with respect to a Class A-2 Purchaser, shall be determined in accordance with the Class A-2 Certificate Purchase Agreement. "Prime Rate" shall mean, for any day, the rate set forth in H.15(519) opposite the caption "Bank Prime Loan" for such day. The Prime Rate is also available on Telerate, currently at page 125. If any discrepancy arises between Telerate and the printed version of H.15(519), the printed version of H.15(519) will take precedence. If the Prime Rate is not published in H.15(519), then the Prime Rate will be determined by calculating the arithmetic mean of the rates of interest publicly announced by each bank named on Telerate under the heading "Prime Rate Top 30 U.S. Banks," currently at page 38, as such bank's U.S. dollar prime rate or base lending rate as in effect on such day at 3:30 p.m. (New York City time). If fewer than four such rates appear on Telerate for such Reset date, then the Prime Rate shall be the arithmetic mean of the rate of interest publicly announced by three major banks in New York City, selected by the Program Administrator, as their U.S. dollar prime rate or base lending rate as in effect for such day. "Program Administrator" means CDC Financial Products, Inc., or its successors and assigns. "Risk Rate" shall mean 2.00% in excess of the Prime Rate in effect from time to time. Exhibit B-2A SRI RECEIVABLES MASTER TRUST, SERIES 1999-1 Interest Accrual Period: __________, ____ to __________, ____ Transfer Date: __________, ____ Distribution Date: __________, ____ Purchaser Group: _________________________________ I. Class A-2 VFC Principal Balance (for Purchaser Group) 1. Covered Portion of the Class A-2 Principal Balance (as set forth in Daily Report) $__________ 2. Unreimbursed Class A-2 Charge-Offs Portion of the Class A-2 VFC Principal Balance (as set forth in Daily Report)$__________ 3. Total Class A-2 VFC Principal Balance for Purchaser Group (1+2) $__________ II. Computation of Class A-2 Interest A. B. Portion of C. Interest Rat Class A-2 VFC Amount e Principal Balance 1 Commercial Paper __% $__________ $__________ . Rate 2 LIBOR Rate __% . Class A-2 Adjusted __% Eurodollar Rate Prime Rate __% Alternative __% $__________ $__________ Rate 3 Risk Rate __% $__________ $__________ . 4 Total Interest $__________ . (sum of items 1C, 2C and 3C) III. Computation of Class A-2 Interest for Purchaser Group: 1. Interest on Class A-2 VFC Principal Balance (item II.4C) $__________ 2. Estimated Interest Adjustment (if any) from prior Monthly Period $__________ 3. Class A-2 Interest (sum of items 1 and 2) $__________ Exhibit B-3 Class B Interest Calculations Terms used in this Exhibit which are not defined in the Agreement, this Issuance Supplement or this Exhibit are used as defined in the Class B Certificate Purchase Agreement. (a) "Class B Interest" shall mean, with respect to any Distribution Date, the sum of (i) interest on the Class B VFC Principal Balance for the immediately preceding Interest Accrual Period computed pursuant to subsection (b) and, if applicable, subsection (c), below, plus or minus (as the case may be) (ii) any Estimated Interest Adjustment with respect to the previous Distribution Date. (b) Interest shall accrue on the Covered Portion of the Class B VFC Principal Balance during each Interest Accrual Period at the following rates: (i) Except as otherwise provided in clause (ii), (iii) or (iv) below, the Conduit Purchaser's Percentage Interest of the Covered Portion shall bear interest at a rate per annum equal to the Commercial Paper Rate from time to time in effect. (ii) If and to the extent that, and for so long as, a Conduit Purchaser at any time determines in good faith that it is unable to raise or is precluded or prohibited from raising, or that it is not advisable to raise, funds through the issuance of Commercial Paper Notes in the commercial paper market of the United States to finance its purchase or maintenance of its Percentage Interest of the Covered Portion or any portion thereof (which determination may be based on any allocation method employed in good faith by the Conduit Purchaser), including by reason of market conditions or by reason of insufficient availability under any of its Support Facilities or the downgrading of any of its Support Parties, except as otherwise provided in clause (iv) below, such portion of such Conduit Purchaser's Percentage Interest of the Covered Portion shall bear interest at a rate per annum equal to the Alternative Rate from time to time in effect. (iii) Except as otherwise provided in clause (iv) below, the Percentage Interest of the Covered Portion of the Class B VFC Principal Balance held by each Committed Purchaser and Liquidity Purchaser shall bear interest at a rate per annum equal to the Alternative Rate from time to time in effect. (iv) Notwithstanding the provisions of clauses (i), (ii) or (iii) above, from and after the occurrence of a Trust Pay Out Event or a Series 1999-1 Pay Out Event, the entire Covered Portion shall bear interest at a rate per annum equal to the Risk Rate from time to time in effect. (c) For each portion of each Interest Accrual Period with respect to which there were Unreimbursed Class B Investor Charge- Offs, interest shall accrue on the portion of the Class B VFC Principal Balance equal to the amount of the Unreimbursed Class B Investor Charge-Offs at a rate per annum equal to the Risk Rate from time to time in effect. (d) The Agent for the Class B Owners shall notify the Servicer on each Certificate Rate Determination Date of the Commercial Paper Rate, the Alternative Rate and the Risk Rate, as applicable, and the Class B Interest for the related Interest Accrual Period for its related Purchaser Group substantially in the form of Exhibit B-3A (or such other form which may be mutually acceptable to the applicable Agent and the Servicer from time to time). For such purposes, such Agent may rely conclusively on notices from the Conduit Purchasers as to the interest rate or rates from time to time applicable to its Percentage Interest of the Class B VFC Principal Balance. Such notification from an Agent may be based on a Conduit Purchaser's estimate of the Commercial Paper Rate as provided to such Agent and upon estimates of the Class B Interest if the actual amount is not then known to such Agent. In any such case, such Agent shall notify the Servicer on or before the following Certificate Rate Determination Date of the amount of any variation between the estimated Class B Interest and the actual Class B Interest for the preceding Interest Accrual Period. The amount of any shortfall in interest based on such variation shall be a positive "Estimated Interest Adjustment" for such Interest Accrual Period, and the amount of any overpayment of interest based on such variation shall be a negative "Estimated Interest Adjustment" for such Interest Accrual Period. Subject to any Estimated Interest Adjustment, each determination of the Commercial Paper Rate, the Alternative Rate, the Risk Rate and the Class B Interest by any Agent shall be conclusive and binding on the Class B Certificateholders, the Transferor, the Servicer and the Trustee in the absence of manifest error. (e) Interest calculated by reference to the Commercial Paper Rate or the Class B Adjusted Eurodollar Rate shall be calculated on the basis of a 360-day year for the actual days elapsed. Any interest calculated by reference to the Corporate Base Rate shall be calculated on the basis of a 365- or 366-day year, as applicable, for the actual days elapsed. Definitions "Alternative Rate" shall mean, for each Class B Purchaser, (i) for any Interest Accrual Period, if such Class B Purchaser shall have received at least two London Business Days notice prior to the commencement of such Interest Accrual Period that the applicable portion of its share of the Covered Portion of the Class B VFC Principal Balance would bear interest by reference to the Class B Adjusted Eurodollar Rate for such Interest Accrual Period, an interest rate per annum equal to the sum of 1.00% plus Adjusted Eurodollar Rate for such Interest Accrual Period, and (ii) otherwise, an interest rate per annum equal to the Corporate Base Rate in effect from time to time during such Interest Accrual Period. "Class B Adjusted Eurodollar Rate" shall mean (i) 5.55520% for the initial Interest Accrual Period, and thereafter (ii) for any Interest Accrual Period or portion thereof, a rate per annum (rounded upwards, if necessary, to the nearest 1/100th of 1%) equivalent to the rate determined pursuant to the following formula: Class B Adjusted Eurodollar Rate = LIBOR Rate 1-LIBOR Reserve Percentage on the first day of such Interest Accrual Period. For purposes of this definition, (a) "LIBOR Rate" shall mean, with respect to any Interest Accrual Period or portion thereof, the rate per annum shown on page 3750 of the Bridge Information Systems Telerate screen or any successor page as the composite offered rate for London interbank deposits for a period equal to such Interest Accrual Period (or portion) thereof, as shown under the heading "USD" as of 11:00 a.m., London time, two London Business Days prior to the first day of such Interest Accrual Period; provided that in the event no such rate is shown, the LIBOR Rate shall be the rate per annum (rounded upwards, if necessary, to the nearest 1/100th of one percent) based on the rates at which Dollar deposits for a period equal to such Interest Accrual Period (or portion thereof) are displayed on page "LIBOR" of the Reuters Monitor Money Rates Service or such other page as may replace the LIBOR page on that service for the purpose of displaying London interbank offered rates, of major banks as of 11:00 a.m., London time, two London Business Days prior to the first day of such Interest Accrual Period (it being understood that if at least two such rates appear on such page, the rate will be the arithmetic mean of such displayed rates); provided further that in the event fewer than two such rates are displayed, or if no such rate is relevant, the LIBOR Rate shall be the rate per annum equal to the average of the rates at which deposits in Dollars are offered by the Reference Banks at approximately 11:00 a.m., London time, two London Business Days prior to the first day of such Interest Accrual Period to prime banks in the London interbank market for a period equal to such Interest Accrual Period (or portion thereof), it being understood that if at least two such quotations are provided, the rate shall be the arithmetic mean of such provided rates; provided further that if fewer than two such rates are provided, the rate shall be the arithmetic mean of the rates quoted by major banks in New York City, selected by Credit Suisse First Boston, at approximately 11:00 a.m., New York City time, on the first day of such Interest Accrual Period to leading European banks for Dollar deposits for a period equal to such Interest Accrual Period (or portion thereof); provided further that if the LIBOR Rate is not established for any such Interest Accrual Period as otherwise provided above, the LIBOR Rate for such Interest Accrual Period shall equal the LIBOR Rate for the immediately preceding Interest Accrual Period, (b) "LIBOR Reserve Percentage" shall mean, with respect to any Interest Accrual Period or portion thereof, a percentage (expressed as a decimal) equal to the weighted average of the percentages in effect during such Interest Accrual Period, as prescribed by the Federal Reserve Board (or any successor thereto) for determining the maximum reserve requirements applicable to "Eurocurrency liabilities" pursuant to Regulation D or any other applicable regulation of the Federal Reserve Board (or any successor thereto) which prescribes reserve requirements applicable to "Eurocurrency liabilities" as currently defined in Regulation D, and (c) "Reference Banks" shall mean the principal London offices of Credit Suisse First Boston and two other major banks in the London interbank market selected by the Servicer with the consent of the Agents under the Class B Certificate Purchase Agreement. "Commercial Paper Notes" shall mean, with respect to the Conduit Purchaser, the short-term promissory notes issued by the Conduit Purchaser which are allocated by the Conduit Purchaser as its funding for its Percentage Interest of the Class B VFC Principal Balance. "Commercial Paper Rate" shall mean, (a) for any day to the extent the Conduit Purchaser funds its Percentage Interest of the Class B VFC Principal Balance on such day with outstanding Commercial Paper Notes, the sum of (i) the rate (or if more than one rate, the weighted average of the rates) per annum at which such Commercial Paper Notes were sold by any placement agent or commercial paper dealer selected by or on behalf of the Conduit Purchaser, as agreed between each such agent or dealer and the Conduit Purchaser; provided that if any rate as agreed between any such agent or dealer and the Conduit Purchaser is a discount rate, then such rate shall be the rate (or if more than one rate, the weighted average of the rates) resulting from converting such discount rate (or rates) to an interest-bearing equivalent rate per annum, plus (ii) dealer commissions (computed at the rate of 0.05% on a discount basis, or such higher rate as has become customary and usual in the commercial paper industry), placement agent fees and commissions and Commercial Paper Note issuance costs, expressed as an annualized rate in respect of the principal component of such Commercial Paper Notes, or (b) otherwise, for any day, the Alternative Rate for the applicable Interest Accrual Period. "Committed Purchaser" shall have the meaning specified in the Class B Certificate Purchase Agreement. "Conduit Purchaser" shall have the meaning specified in the Class B Certificate Purchase Agreement. "Corporate Base Rate" shall mean, for any day, the higher of (i) the base commercial lending rate per annum announced from time to time by Credit Suisse First Boston in New York in effect on such day, or (ii) the interest rate per annum quoted by Credit Suisse First Boston at approximately 11:00 a.m., New York City time, on such day, to dealers in the New York Federal funds market for the overnight offering of Dollars by Credit Suisse First Boston plus one-half of one percent (0.50%). (The Corporate Base Rate is not intended to represent the lowest rate charged by Credit Suisse First Boston for extensions of credit.) "Covered Portion" shall mean, with respect to the Class B VFC Principal Balance, a portion thereof equal to the Class B Invested Amount. "Liquidity Purchaser" shall have the meaning specified in the Class B Certificate Purchase Agreement. "London Business Day" shall mean any Business Day other than a day on which banking institutions in London, England trading in Dollar deposits in the London interbank market are authorized or obligated by law or executive order to be closed. "Percentage Interest", with respect to a Class B Purchaser, shall be determined in accordance with the Class B Certificate Purchase Agreement. "Risk Rate" shall mean 2.00% in excess of the Corporate Base Rate in effect from time to time. Exhibit B-3A SRI RECEIVABLES MASTER TRUST, SERIES 1999-1 Interest Accrual Period: __________, ____ to __________, ____ Transfer Date: __________, ____ Distribution Date: __________, ____ Purchaser Group: _________________________________ I. Class B VFC Principal Balance (for Purchaser Group) 1. Covered Portion of the Class B Principal Balance (as set forth in Daily Report) $__________ 2. Unreimbursed Class B Charge-Offs Portion of the Class B VFC Principal Balance (as set forth in Daily Report) $__________ 3. Total Class B VFC Principal Balance for Purchaser Group (1+2) $__________ II. Computation of Class B Interest A. B. Portion of C. Interest Rat Class B VFC Amount e Principal Balance 1 Commercial Paper __% $__________ $__________ . Rate 2 LIBOR Rate __% . Class B Adjusted __% Eurodollar Rate Corporate Base __% Rate Alternative __% $__________ $__________ Rate 3 Risk Rate __% $__________ $__________ . 4 Total Interest $__________ . (sum of items 1C, 2C and 3C) III. Computation of Class B Interest for Purchaser Group: 1. Interest on Class B VFC Principal Balance (item II.4C) $__________ 2. Estimated Interest Adjustment (if any) from prior Monthly Period $__________ 3. Class B Interest (sum of items 1 and 2) $__________ EX-4.22 10 0010.txt Exhibit 4.22 R.V.I. GUARANTY CO., LTD., as Insurer SRI RECEIVABLES PURCHASE CO., INC., as Transferor SPECIALTY RETAILERS, INC., as Originator and Servicer and BANKERS TRUST (DELAWARE), as Trustee INSURANCE AND INDEMNITY AGREEMENT SRI Receivables Master Trust $18,375,000 Class D Floating Rate Asset Backed Certificates, Series 1999-1 Dated as of December 9, 1999 INSURANCE AND INDEMNITY AGREEMENT THIS INSURANCE AND INDEMNITY AGREEMENT (this "Insurance Agreement"), dated as of December 9, 1999 by and among R.V.I. GUARANTY CO., LTD. (the "Insurer"), SRI RECEIVABLES PURCHASE CO., INC. (together with its permitted successors and assigns, the "Transferor"), SPECIALTY RETAILERS, INC. as Originator (together with its permitted successors and assigns, the "Originator") and as Servicer under the Agreement described below (together with its permitted successors and assigns, the "Servicer") and BANKERS TRUST (DELAWARE) not in its individual capacity but solely as Trustee (together with its permitted successors and assigns, the "Trustee"). WHEREAS, the Series 1999-1 Supplement dated as of November 9, 1999 by and among the Transferor, the Servicer and the Trustee (the "Supplement") relating to the SRI Receivables Master Trust, $18,375,000 Class D Floating Rate Asset Backed Certificates, Series 1999-1 (the "Securities") provides for, among other things, the issuance of the Securities, and the Insurer has issued its certificate guaranty insurance policy (the "Policy") that guarantees certain payments due on the Securities; and WHEREAS, the Insurer shall be paid an insurance premium pursuant to the Supplement, and the details of such premium are set forth herein; and WHEREAS, the Transferor, the Trustee, the Originator and the Servicer have undertaken certain obligations in consideration for the Insurer's issuance of the Policy. NOW, THEREFORE, in consideration of the premises and the mutual agreements herein contained, the parties hereto agree as follows: ARTICLE I DEFINITIONS The terms defined in this Article I shall have the meanings provided herein for all purposes of this Insurance Agreement, unless the context clearly requires otherwise, in both singular and plural form, as appropriate. Unless the context clearly requires otherwise, all capitalized terms used herein and not otherwise defined in this Article I shall have the meanings assigned to them in the Supplement. All words used herein shall be construed to be of such gender or number as the circumstances require. This "Insurance Agreement" shall mean this Insurance Agreement as a whole and as the same may, from time to time hereafter, be amended, supplemented or modified. The words "herein," "hereby," "hereof," "hereto," "hereinabove" and "hereinbelow," and words of similar import, refer to this Insurance Agreement as a whole and not to any particular paragraph, clause or other subdivision hereof, unless otherwise specifically noted. "Agreement" means the Second Amended and Restated Pooling and Servicing Agreement among the Transferor, SRI, as servicer, and Bankers Trust (Delaware), as Trustee, dated as of November 1, 1999. "Amendment" means the Amendment and Consent among the Transferor, the Servicer and the Trustee, dated as of December 9, 1999. "Business Day" means any day other than a Saturday, a Sunday or a day on which the Insurer is closed or a day on which banking institutions or trust companies in Bermuda, the States of New York, Delaware or Texas or in the city in which the corporate trust office of the Trustee under the Supplement is located are authorized or obligated by law, regulation or executive order to remain closed. "Code" means the Internal Revenue Code of 1986, including, unless the context otherwise requires, the rules and regulations thereunder, as amended from time to time. "Commission" means the Securities and Exchange Commission. "Consolidation Facts" means the facts set forth on Schedule I hereto. "Credit Agreement" means the Credit Agreement, dated as of June 16, 1997, among Specialty Retailers, Inc., as borrower, Stage Stores, Inc., as parent, the banks named therein, and Credit Suisse First Boston, as administrative agent. "Date of Issuance" means the date on which the Policy is issued as specified therein. "Default" means any event which results, or which with the giving of notice or the lapse of time or both would result, in an Event of Default. "Distribution Date" means December 15, 1999, and the fifteenth day of each calendar month thereafter, or if such day is not a Business Day, the next succeeding Business Day. "Duff & Phelps" means Duff & Phelps Credit Rating Co., and any successor thereto, and, if such corporation shall for any reason no longer perform the functions of a securities rating agency, "Duff & Phelps" shall be deemed to refer to any other nationally recognized rating agency designated by the Insurer. "Enhancement Supplement" means the Enhancement Supplement among the Transferor, the Servicer and the Trustee dated as of December 9, 1999. "Event of Default" means any event of default specified in Section 5.01 hereof. "Exchange Act" means the Securities Exchange Act of 1934, as amended. Financial Statements" means, with respect to the Transferor or Stage the balance sheets and the statements of income, retained earnings and cash flows and the notes thereto. "Fitch" means Fitch IBCA, Inc., and any successor thereto, and, if such corporation shall for any reason no longer perform the functions of a securities rating agency, "Fitch" shall be deemed to refer to any other nationally recognized rating agency designated by the Insurer. "Initial Purchaser" means Credit Suisse First Boston Corporation. "Insurer Information" means the information contained in the Offering Memorandum as of the date thereof under the caption "The Policy and The Insurer" and the financial statements of the Insurer contained in Exhibit C to the Offering Memorandum. "Investment Company Act" means the Investment Company Act of 1940, including, unless the context otherwise requires, the rules and regulations thereunder, as amended. "Late Payment Rate" means, for any date of determination, the higher of (i) the base commercial lending rate per annum announced from time to time by Credit Suisse First Boston Corporation in New York in effect on such day, plus two percent (2.00%) or (ii) the interest rate per annum quoted by Credit Suisse First Boston Corporation at approximately 11:00 a.m., New York City time, on such day, to dealers in the New York Federal funds market for the overnight offering of dollars by Credit Suisse First Boston Corporation plus two and one-half percent (2.50%). The Late Payment Rate shall be computed on the basis of a year of 365 days, calculating the actual number of days elapsed. In no event shall the Late Payment Rate exceed the maximum rate permissible under any applicable law limiting interest rates. "Liabilities" shall have the meaning ascribed to such term in Section 3.04(a) hereof. "Losses" means (a) any actual out-of-pocket loss paid by the Insurer or its respective parents, subsidiaries and affiliates or any shareholder, director, officer, employee, agent or any "controlling person" (as such term is used in the Securities Act) of any of the foregoing, and (b) any actual out-of-pocket costs and expenses paid by such party, including reasonable fees and expenses of its counsel, to the extent not paid, satisfied or reimbursed from funds provided by any other Person (provided that the foregoing shall not create or imply any obligation to pursue recourse against any such other Person). "Material Adverse Change" means, in respect of any Person, a material adverse change in (a) the business, financial condition, results of operations or properties of such Person or (b) the ability of such Person to perform its obligations under any of the Transaction Documents. "Obligor" means the original obligor under each Receivable, including any guarantor of such obligor and their respective successors. "Offering Documents" means the Offering Memorandum of the Transferor in respect of the Securities (and any amendment or supplement thereto) and any other offering documents in respect of the Securities prepared by the Transferor that makes reference to the Policy. "Offering Memorandum" means the Offering Memorandum, dated December 9, 1999, of the Transferor in respect of the Securities (and any amendment or supplement thereto). "Opinion Facts and Assumptions" means with respect to the opinions delivered by Kirkland & Ellis in connection with the Transaction, the facts and assumptions contained in the insolvency opinion dated November 9, 1999 by Kirkland & Ellis insofar as they relate to the Transferor and the Originator. "Owners" means registered holders of Securities. "Person" means an individual, joint stock company, trust, unincorporated association, joint venture, corporation, business or owner trust, limited liability company, partnership or other organization or entity (whether governmental or private). "Premium" means the premium payable in accordance with Section 3.02 hereof which, with respect to any Payment Date, is equal to the product of (a) 1/12th the Premium Percentage and (b) the Class D Investor Principal Amount for such Payment Date (prior to giving effect to payments of principal on such Payment Date). "Premium Percentage" shall mean 3.80% per annum. "Purchase Agreement" means the Purchase Agreement dated November 9, 1999 among the Initial Purchaser, Stage and the Transferor with respect to the offer and sale of the Securities, as the same may be amended from time to time. "Receivables" shall have the meaning assigned such term in the Agreement. "Receivables Purchase Agreement" means the Receivables Purchase Agreement dated as of May 30, 1996 between SRI, as Originator, and the Transferor, as amended by the second amendment thereto dated as of November 9, 1999. "Securities Act" means the Securities Act of 1933, including, unless the context otherwise requires, the rules and regulations thereunder, as amended from time to time. "SRI" means Specialty Retailers, Inc., a Texas corporation. "Stage" means Stage Stores, Inc., a Delaware corporation. "Term of the Insurance Agreement" shall be determined as provided in Section 4.01 hereof. "Transaction" means the transactions contemplated by the Transaction Documents, including the transactions described in the Offering Documents. "Transaction Documents" means this Insurance Agreement, the Agreement, the Supplement, the Offering Memorandum, the Securities, the Receivables Purchase Agreement, the Enhancement Supplement, the Amendment and the Purchase Agreement. "Trust" has the meaning assigned to such term in the Agreement. "Trust Indenture Act" means the Trust Indenture Act of 1939, including, unless the context otherwise requires, the rules and regulations thereunder, as amended from time to time. "Trust Property" shall have the meaning assigned thereto in the Agreement. "Trustee" means Bankers Trust (Delaware), not in its individual capacity but solely as Trustee under the Agreement and the Supplement, and any successor to the Trustee under the Agreement and the Supplement. ARTICLE II REPRESENTATIONS, WARRANTIES AND COVENANTS Section 2.01. Representation and Warranties of the Transferor and the Originator. Each of the Transferor (as to itself) and the Originator (as to itself and as to the Transferor) represent, warrant and covenant as of the Date of Issuance, as follows: (a) Due Organization and Qualification. Each of the Transferor and the Originator is a corporation duly organized, validly existing and in good standing under the laws of its respective jurisdiction of formation. Each of the Transferor and the Originator is duly qualified to do business, is in good standing and has obtained all licenses, permits, charters, registrations and approvals (together, "approvals") necessary for the conduct of its business as currently conducted and as described in the Offering Documents and the performance of its obligations under the Transaction Documents in each jurisdiction in which the failure to be so qualified or to obtain such approvals would render any Transaction Document unenforceable in any respect or would have a material adverse effect upon the Transaction, the Owners or the Insurer. (b) Power and Authority. Each of the Transferor and the Originator has all necessary corporate power and authority to conduct its business as currently conducted and, as described in the Transaction Documents, to execute, deliver and perform its obligations under the Transaction Documents and to consummate the Transaction. (c) Due Authorization. The execution, delivery and performance by the Transferor and the Originator of the Transaction Documents to which they are parties have been duly authorized by all necessary corporate action and do not require any additional approvals or consents of, or other action by or any notice to or filing with, any Person, including, without limitation, any governmental entity or the Transferor's or the Originator's equityholders, which have not been previously obtained or given. (d) Noncontravention. None of the execution and delivery of the Transaction Documents by the Transferor or the Originator, the consummation of the transactions contemplated thereby or the satisfaction of the terms and conditions of the Transaction Documents: (i) conflicts with or results in any breach or violation of any provision of the organizational documents of the Transferor or the Originator or any law, rule, regulation, order, writ, judgment, injunction, decree, determination or award currently in effect having applicability to the Transferor or the Originator or any of their material properties, including regulations issued by an administrative agency or other governmental authority having supervisory powers over the Transferor or the Originator; (ii) constitutes a default by the Transferor or the Originator under or a breach of any provision of any loan agreement, mortgage, indenture or other agreement or instrument to which the Transferor or the Originator is a party or by which any of its or their respective properties, which are individually or in the aggregate material to the Transferor or the Originator, is or may be bound or affected; or (iii) results in or requires the creation of any lien upon or in respect of any assets of the Transferor or the Originator, except as contemplated by the Transaction Documents. (e) Legal Proceedings. There is no action, proceeding or investigation by or before any court, governmental or administrative agency or arbitrator against or affecting the Transferor or the Originator or any of its or their subsidiaries, or any properties or rights of the Transferor or the Originator or any of its or their subsidiaries, pending or, to the Transferor's or the Originator's knowledge after reasonable inquiry, threatened, which in any case could reasonably be expected to result in a Material Adverse Change with respect to the Transferor or the Originator, other than those (if any) disclosed in the Transferor's or Stage's filings with the Commission pursuant to the Exchange Act. (f) Valid and Binding Obligations. The Securities, when executed, authenticated and issued in accordance with the Supplement, and the Transaction Documents (other than the Securities), when executed and delivered by the Transferor, the Originator or the Trustee, as applicable, will constitute the legal, valid and binding obligations of the Transferor and the Originator, as applicable, enforceable in accordance with their respective terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors' rights generally and general equitable principles. Neither the Transferor nor the Originator will at any time in the future deny that the Transaction Documents constitute the legal, valid and binding obligations of the parties thereto. (g) Financial Statements. The Financial Statements of the Transferor and Stage (i) are, as of the dates and for the periods referred to therein, complete and correct in all material respects, (ii) present fairly the financial condition and results of operations of the Transferor and Stage as of the dates and for the periods indicated and (iii) have been prepared in accordance with generally accepted accounting principles consistently applied, except as noted therein (subject as to interim statements to normal year-end adjustments). Since the date of the most recent Financial Statements, there has been no Material Adverse Change in respect of the Transferor or Stage, other than changes (if any) disclosed in the Transferor's or Stage's filings with the Commission pursuant to the Exchange Act. (h) Compliance With Law, Etc. No practice, procedure or policy employed, or proposed to be employed, by the Transferor or the Originator in the conduct of its business violates any law, regulation, judgment, agreement, order or decree applicable to any of them that, if enforced, could reasonably be expected to result in a Material Adverse Change with respect to the Transferor or the Originator. Neither the Transferor nor the Originator is in breach of or in default under any applicable law or administrative regulation of its respective jurisdiction of formation, or any department, division, agency or instrumentality thereof or of the United States or any applicable judgment or decree or any loan agreement, note, resolution, certificate, agreement or other instrument to which the Transferor or the Originator is a party or is otherwise subject which, if enforced, would have a material adverse effect on the ability of the Transferor or the Originator, as the case may be, to perform its respective obligations under the Transaction Documents. (i) Taxes. The Transferor and the Originator and the Transferor's and the Originator's parent company or companies have filed prior to the date hereof all federal and state tax returns that are required to be filed and paid all taxes, including any assessments received by them that are not being contested in good faith, to the extent that such taxes have become due, except for any failures to file or pay that, individually or in the aggregate, would not result in a Material Adverse Change with respect to the Transferor or the Originator. (j) Accuracy of Information. None of (i) the Transaction Documents or (ii) the information furnished by the Transferor and the Originator to the Insurer regarding the Transferor, SRI, Stage or the Transaction, contains any statement of a material fact which was untrue or misleading in any material adverse respect when made. Except as described in its filings with the Commission pursuant to the Exchange Act, neither the Transferor nor the Originator has any knowledge of circumstances that it reasonably expects to cause a Material Adverse Change with respect to the Transferor, Stage or SRI. Since the furnishing of the Transaction Documents, there has been no change or any development or event involving a prospective change known to the Transferor and the Originator that would render any of the Transaction Documents untrue or misleading in any material respect. (k) Compliance With Securities Laws. The offer and sale of the Securities complied in all material respects with all requirements of law, including all applicable securities laws. Without limitation of the foregoing, the Offering Memorandum does not contain any untrue statement of a material fact and does not omit to state a material fact necessary to make the statements made therein, in light of the circumstances under which they were made, not misleading; provided, however, that no representation is made with respect to the Insurer Information. Assuming the accuracy of the representations and warranties of the Initial Purchaser in the Purchase Agreement, neither the offer nor the sale of the Securities to the Initial Purchaser has been or will be in violation of the Securities Act or any other federal or state securities laws. The Agreement and the Supplement are not required to be qualified under the Trust Indenture Act of 1939. The Transferor is not required to be registered as an "investment company" under the Investment Company Act. (l) Documents. Each of the representations and warranties of the Transferor and the Originator contained in the Transaction Documents is true and correct in all material respects when made and as of the date hereof, and the Transferor and the Originator hereby makes each such representation and warranty to, and for the benefit of, the Insurer as if the same were set forth in full herein. (m) Solvency; Fraudulent Conveyance. Each of the Transferor and the Originator is solvent and will not be rendered insolvent by the Transaction and, after giving effect to the Transaction, neither the Transferor nor the Originator will be left with an unreasonably small amount of capital with which to engage in its business, nor does the Transferor intend to incur, or believe that it has incurred, debts beyond its ability to pay as they mature. Neither the Transferor nor the Originator contemplates the commencement of insolvency, bankruptcy, liquidation or consolidation proceedings or the appointment of a receiver, liquidator, conservator, trustee or similar official in respect of the Transferor, the Originator or any of their respective assets. The amount of consideration being received by the Originator upon the transfer of the Receivables to the Transferor constitutes reasonably equivalent value and fair consideration for the Receivables. The amount of consideration being received by the Transferor upon the sale of the Receivables to the Trust constitutes reasonably equivalent value and fair consideration for the Receivables. Neither the Originator nor the Transferor is transferring the Receivables, as provided in the Transaction Documents, with any intent to hinder, delay or defraud any of their respective creditors. (n) Principal Place of Business. The principal place of business of the Transferor and the Originator is located in Houston, Texas. (o) Opinion Facts and Assumptions. The Opinion Facts and Assumptions insofar as they relate to the Transferor and the Originator are true and correct in all material respects as of the Date of Issuance. Section 2.02. Affirmative Covenants of the Transferor and the Originator. The Transferor and the Originator hereby agree that during the Term of the Insurance Agreement, unless the Insurer shall otherwise expressly consent in writing: (a) Compliance With Agreements and Applicable Laws. The Transferor and the Originator shall not be in default in any material respect under the Transaction Documents and shall comply with all material requirements of any law, rule or regulation applicable to them. Neither the Transferor nor the Originator shall agree to any amendment to or modification of the terms of any Transaction Documents except in accordance with their terms. (b) Corporate Existence. Except as otherwise provided in the Transaction Documents, each of the Transferor, the Originator, and each successor and assign of the Transferor or the Originator, shall maintain, except as permitted by the Transaction Documents, its respective existence and shall at all times continue to be duly organized under the laws of its respective jurisdictions of organization and duly qualified and duly authorized (as described in Section 2.01 (a), (b) and (c) hereof) and shall conduct its respective business in accordance with the terms of its respective organizational documents in a manner that does not materially adversely affect its ability to perform its respective obligations under the Transaction Documents or materially adversely affect (i) the Trustee's security interest in the Trust Property or (ii) the Insurer's interest under the Transaction Documents. (c) Financial Statements; Accountants' Reports; Other Information. The Transferor and the Originator shall keep or cause to be kept in reasonable detail books and records of account of their assets and business, including, but not limited to, books and records relating to the Transaction. The Transferor and the Originator shall furnish or cause to be furnished to the Insurer: (i) Annual Financial Statements. Upon the request of the Insurer, as soon as available, and in any event within 120 days after the close of each fiscal year of the Transferor and Stage, the audited consolidated balance sheets of the Transferor, Stage and their subsidiaries as of the end of such fiscal year and the related audited consolidated statements of income, changes in member's equity and cash flows for such fiscal year, all in reasonable detail and stating in comparative form the respective figures for the corresponding date and period in the preceding fiscal year, prepared in accordance with generally accepted accounting principles consistently applied and accompanied by the audit opinion of the Transferor's and Stage's independent accountants (which shall be nationally recognized independent public accounting firms) and by the certificates specified in Section 2.02(d) hereof. (ii) Certain Information. Upon the reasonable request of the Insurer, the Transferor and the Originator shall promptly provide copies of any requested proxy statements, if any, financial statements, reports and registration statements which the Transferor or the Originator files with, or delivers to, the Commission or any national securities exchange relating to the Securities. (iii) Other Information. Promptly upon receipt thereof, copies of all schedules, financial statements or other similar reports delivered to or by the Transferor or the Originator pursuant to the terms of the Transaction Documents and, promptly upon request, such other data relating to the Securities as the Insurer may reasonably request. The Insurer agrees that it and its agents, accountants and attorneys shall keep confidential all financial statements, reports and other information delivered by the Transferor or the Originator pursuant to this Section 2.02(c) to the extent provided in Section 2.02(e) hereof. (d) Compliance Certificate. The Transferor and the Originator shall deliver to the Insurer, concurrently with the delivery of the financial statements required pursuant to Section 2.02(c)(i) and (ii) hereof, one or more certificates signed by an officer of the Transferor or the Originator, as applicable, authorized to execute such certificates on behalf of the Transferor or the Originator, as applicable, stating that: (i) to the best of such individual's knowledge following reasonable inquiry, no Default or Event of Default has occurred or, if a Default or Event of Default has occurred, specifying the nature thereof; and (ii) the attached financial statements submitted in accordance with Section 2.02(c)(i) or (ii) hereof, as the case may be, are complete and correct in all material respects and present fairly the financial condition and results of operations of the Transferor or Stage, as applicable, as of the dates and for the periods indicated, in accordance with generally accepted accounting principles consistently applied. (e) Access to Records; Discussions With Officers and Accountants. On a quarterly basis, or upon the occurrence of a Material Adverse Change, the Transferor and the Originator shall, upon the reasonable request of the Insurer, permit the Insurer or its authorized agents: (i) to inspect the books and records of the Transferor and the Originator as they may relate to the Securities, or the obligations of the Transferor and the Originator under the Transaction Documents, and the Transaction; (ii) to discuss the affairs, finances and accounts of the Transferor and the Originator with a senior officer of the Transferor and the Originator; and (iii) with the Transferor's or the Originator's consent, as applicable, which consent shall not be unreasonably withheld, to discuss the affairs, finances and accounts of the Transferor or the Originator with the Transferor's or the Originator's independent accountants, provided that an officer of the Transferor or the Originator shall have the right to be present during such discussions. Such inspections and discussions shall be conducted during normal business hours and shall not unreasonably disrupt the business of the Transferor or the Originator. The books and records of the Transferor and the Originator shall be maintained at the address of the Transferor and the Originator designated herein for receipt of notices, unless the Transferor or the Originator shall otherwise advise the parties hereto in writing. Annual discussions with the independent accountants referred to in clause (iii) above shall be without cost to the Insurer. The reasonable expenses relating to discussions with the independent accountants referred to in clause (iii) above made on a quarterly basis (other than an annual discussion or a discussion upon the occurrence of a Material Adverse Change) shall be payable by the Insurer. The Insurer agrees that it and its shareholders, directors, agents, accountants and attorneys shall keep confidential any matter of which it becomes aware through such inspections or discussions (unless readily available from public sources), except as may be otherwise required by regulation, law or court order or requested by appropriate governmental authorities or as necessary to preserve its rights or security under or to enforce the Transaction Documents, provided that the foregoing shall not limit the right of the Insurer to make such information available to its regulators, securities rating agencies, reinsurers, credit and liquidity providers, counsel and accountants. (f) Notice of Material Events. The Transferor and the Originator shall be obligated promptly to inform the Insurer in writing of the occurrence of any of the following: (i) the submission of any claim or the initiation or threat of any legal process, litigation or administrative or judicial investigation or rule making or disciplinary proceeding by or against the Transferor or the Originator that (A) is required to be disclosed to the Commission or to the Transferor's or the Originator's shareholders or (B) in the reasonable judgment of the Transferor or the Originator is reasonably likely to result in a Material Adverse Change with respect to the Transferor or the Originator, or the promulgation of any proceeding or any proposed or final rule which would result in a Material Adverse Change with respect to the Transferor or the Originator; (ii) the institution or threat of any legal process, litigation or administrative or judicial investigation in any federal, state or local court or before any arbitration board, or any such proceeding threatened by any government agency, against the Transferor or the Originator or in which the Transferor or the Originator becomes a party which, if adversely determined, would have a material adverse effect on the Transferor, the Owners, the Originator, or the Insurer; provided, however, that the Transferor and the Originator are required to give notice to the Insurer of any threatened legal process, litigation or administrative or judicial investigation only if, in the Transferor's or the Originator's reasonable judgment, such threatened legal process, litigation or administrative or judicial investigation is reasonably likely to have a material adverse effect on the Transferor, the Owners, the Originator or the Insurer; (iii) any change in the location of the Transferor's or the Originator's principal office or any change in the location of the Transferor's or the Originator's books and records; (iv) the occurrence of any material Default or Event of Default or of any event which, in the judgment of the Transferor or the Originator, would reasonably be expected to constitute a Material Adverse Change; (v) the commencement of any proceedings by or against the Transferor or the Originator under any applicable bankruptcy, reorganization, liquidation, rehabilitation, insolvency or other similar law now or hereafter in effect or of any proceeding in which a receiver, liquidator, conservator, trustee or similar official shall have been, or may be, appointed or requested for the Transferor or the Originator or any of its assets; (vi) the receipt of notice that (A) the Transferor or the Originator is being placed under regulatory supervision, (B) any license, permit, charter, registration or approval necessary for the conduct of the Transferor's or the Originator's business is to be or may be suspended or revoked, or (C) the Transferor or the Originator is to cease and desist any practice, procedure or policy employed by the Transferor or the Originator in the conduct of its business, and such cessation may result in a Material Adverse Change with respect to the Transferor or the Originator as it relates to the Transaction and its ability to perform their obligations under the Transaction Documents; or (vii) The Originator shall deliver to the Insurer a copy of each amendment to the Credit Agreement entered into on or after the date hereof no later than the earlier of (i) two Business Days after making any filing with the Commission under the Exchange Act which discloses such amendment and (ii) the 30th day following the execution thereof. (g) Financing Statements and Further Assurances. The Transferor and the Originator shall cause to be filed all necessary financing statements or other instruments, and any amendments or continuation statements relating thereto, necessary to be kept and filed in such manner and in such places as may be required by law to preserve and protect fully the interest of the Trustee in the Trust Property. The Transferor and the Originator shall, upon the request of the Insurer, from time to time, execute, acknowledge and deliver, or cause to be executed, acknowledged and delivered, within 10 days of such request, such amendments hereto and such further instruments and take such further action as may be reasonably necessary to effectuate such interest of the Trustee. In addition, the Transferor and the Originator agree to cooperate with Rating Agencies in connection with any review of the Transaction that may be undertaken by Rating Agencies after the date hereof and to provide all information reasonably requested by Rating Agencies. (h) Maintenance of Licenses. The Transferor and the Originator or any successors thereof shall maintain or cause to be maintained all licenses, permits, charters and registrations which are material to the conduct of its business which could affect its obligations under the Transaction Documents. (i) Redemption of Securities. The Transferor and the Originator shall instruct the Trustee in writing, upon payment in full of all of the Securities pursuant to the Supplement or otherwise, to furnish to the Insurer a notice of such payment in full and, upon a payment in full of all of the Securities, to surrender the Policy to the Insurer for cancellation. (j) Closing Documents. The Transferor and the Originator shall provide or cause to be provided to the Insurer a velobound volume or volumes of the Transaction Documents and an executed original copy, if available, or a copy of each document executed in connection with the Transaction within 60 days after the date of closing. (k) Compliance. Each of the Transferor and the Originator shall comply with all terms and provisions of its organizational documents. (l) Maintenance of Trust. On or before each March 31st beginning in 2001, so long as any of the Securities are outstanding, the Transferor and the Originator shall furnish to the Insurer and the Trustee the opinion of counsel required to be delivered pursuant to Section 13.2(d)(ii) of the Agreement. The Transferor will use its best efforts to cause any necessary recordings or filings to be made with respect to the Trust Property. (m) Consolidation Facts. Each of the Transferor and the Originator shall comply with, or maintain the adequacy of, the Consolidation Facts during the term of this Insurance Agreement. Section 2.03. Negative Covenants of the Transferor. The Transferor and the Originator hereby agree that during the Term of the Insurance Agreement, unless the Insurer shall otherwise expressly consent in writing: (a) Impairment of Rights. Neither the Transferor nor the Originator shall take any action, or fail to take any action, if such action or failure to take action would reasonably be expected to result in a Material Adverse Change as described in clause (b) of the definition of Material Adverse Change with respect to the Transferor or the Originator, or would reasonably be expected to interfere with the enforcement of any rights of the Insurer under or with respect to the Transaction Documents. The Transferor and the Originator shall give the Insurer written notice of any such action or failure to act on the earlier of (i) the date upon which any publicly available filing or release is made with respect to such action or failure to act or (ii) promptly after the date of consummation of such action or failure to act. The Transferor and the Originator shall furnish to the Insurer all information requested by it that is reasonably necessary to determine compliance with this subsection (a). (b) Waiver, Amendments, Etc. Neither the Transferor nor the Originator shall waive, modify or amend, or consent to any waiver, modification or amendment of, any of the terms, provisions or conditions of any of the Transaction Documents except in accordance with Section 13.1 of the Agreement. Except upon the prior written consent of the Insurer, neither the Transferor nor the Originator shall transfer, modify or amend, or consent to any transfer, modification or amendment of the Insurer's interest in the Trust Property. (c) Restrictions on Liens. Neither the Transferor nor the Originator shall, except as contemplated by the Transaction Documents, (i) create, incur or suffer to exist, or agree to create, incur or suffer to exist, or consent to cause or permit in the future (upon the happening of a contingency or otherwise) the creation, incurrence, or existence of any lien or restriction on the Trust Property or (ii) sign or file under the Uniform Commercial Code of any jurisdiction any financing statement which names the Transferor or the Originator as a debtor, or sign any security agreement authorizing any secured party thereunder to file such financing statement, with respect to the Trust Property. (d) Successors. Neither the Transferor nor the Originator shall remove or replace, or cause to be removed or replaced the Trustee without the prior approval of the Insurer. (e) No Mergers. Neither the Transferor nor the Originator shall consolidate with or merge into any Person or transfer all or any material amount of its assets to any Person, liquidate or dissolve except as permitted by or as contemplated by the Agreement. (f) Other Activities. Neither the Transferor nor the Originator shall (i) sell, pledge, transfer, exchange or otherwise dispose of any of its assets in violation of the Transaction Documents or (ii) engage in any business or activity in violation of the Transaction Documents. (g) Other Activities. Neither the Transferor nor the Originator shall engage in any business or activity except as permitted by its certificate or articles of incorporation. Section 2.04. Representations, Warranties and Covenants of Trustee. (A) Representations and Warranties. The Trustee represents and warrants, as of the Date of Issuance, and covenant with the other parties hereto as follows: (a) Due Organization and Qualification. The Trustee is a Delaware banking corporation, and is duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation. (b) Due Authorization. The execution, delivery and performance of the Agreement, the Supplement and the Insurance Agreement by the Trustee have been duly authorized by all necessary corporate action and do not require any additional approvals or consents of, or other action by or any notice to or filing with, any Person, including, without limitation, any governmental entity or the Trustee's stockholders, which have not previously been obtained or given by the Trustee. (c) Valid and Binding Obligations. The Transaction Documents (other than the Securities) to which it is a party, when executed and delivered by the Trustee, will constitute the legal, valid and binding obligations of the Trustee, enforceable in accordance with their respective terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors' rights generally and general equitable principles. (d) Transaction Documents. Each of the representations and warranties of the Trustee contained in the Transaction Documents is true and correct in all material respects, and the Trustee hereby makes each such representation and warranty to, and for the benefit of, the Insurer as if the same were set forth in full herein. (B). Covenants. The Trustee shall comply in all material respects with the terms and conditions of the Transaction Documents to which it is a party. Section 2.05. Representations and Warranties of the Servicer. The Servicer represents, warrants and covenants as of the Date of Issuance, each as to those matters relating to itself and as to the Transaction Documents only as to the Transaction Documents to which it is a party and not to the Securities or the Offering Memorandum, as follows: (a) Due Organization and Qualification. The Servicer is a corporation duly organized, validly existing and in good standing under the laws of its respective jurisdiction of incorporation. The Servicer is duly qualified to do business, is in good standing and has obtained all licenses, permits, charters, registrations and approvals (together, "approvals") necessary for the conduct of its business as currently conducted and as described in the Offering Documents and the performance of its obligations under the Transaction Documents in each jurisdiction in which the failure to be so qualified or to obtain such approvals would render any Transaction Document unenforceable in any respect or would have a material adverse effect upon the Transaction, the Owners or the Insurer. (b) Power and Authority. The Servicer has all necessary corporate power and authority to conduct its business as currently conducted and, as described in the Transaction Documents, and to execute, deliver and perform its obligations under the Transaction Documents and to consummate the Transaction. (c) Due Authorization. The execution, delivery and performance of the Transaction Documents by the Servicer have been duly authorized by all necessary corporate action and do not require any additional approvals or consents of, or other action by or any notice to or filing with, any Person, including, without limitation, any governmental entity or the Servicer's stockholders, which have not previously been obtained or given by the Servicer. (d) Noncontravention. None of the execution and delivery of the Transaction Documents by the Servicer, the consummation of the transactions contemplated thereby or the satisfaction of the terms and conditions of the Transaction Documents: (i) conflicts with or results in any breach or violation of any provision of the certificate of incorporation or bylaws of the Servicer or any law, rule, regulation, order, writ, judgment, injunction, decree, determination or award currently in effect having applicability to the Servicer or any of their material properties, including regulations issued by an administrative agency or other governmental authority having supervisory powers over the Servicer; (ii) constitutes a default by the Servicer under or a breach of any provision of any receivables agreement, indenture or other agreement or instrument to which the Servicer is a party or by which any of its or their respective properties, which are individually or in the aggregate material to the Servicer, is or may be bound or affected; or (iii) results in or requires the creation of any lien upon or in respect of any assets of the Servicer, except as contemplated by the Transaction Documents. (e) Legal Proceedings. There is no action, proceeding or investigation by or before any court, governmental or administrative agency or arbitrator against or affecting, the Servicer or any of its subsidiaries, or any properties or rights of the Servicer or any of its subsidiaries, pending or, to the Servicer's knowledge after reasonable inquiry, threatened, which in any case could reasonably be expected to result in a Material Adverse Change with respect to the Servicer other than those (if any) disclosed in Stage's filings with the Commission pursuant to the Exchange Act. (f) Valid and Binding Obligations. This Insurance Agreement and the Transaction Documents, when executed and delivered by the Servicer will constitute the legal, valid and binding obligations of the Servicer, enforceable in accordance with their respective terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors' rights generally and general equitable principles. The Servicer will not at any time in the future deny that the Transaction Documents constitute the legal, valid and binding obligations of the Servicer. (g) Financial Statements. The Financial Statements of Stage (i) are, as of the dates and for the periods referred to therein, complete and correct in all material respects, (ii) present fairly the financial condition and results of operations of Stage as of the dates and for the periods indicated and (iii) have been prepared in accordance with generally accepted accounting principles consistently applied, except as noted therein (subject as to interim statements to normal year-end adjustments). Since the date of the most recent Financial Statements of Stage, there has not been any Material Adverse Change in the condition of Stage, other than changes (if any) disclosed in Stage's filings with the Commission pursuant to the Exchange Act. (h) Compliance With Law, Etc. No practice, procedure or policy employed, or proposed to be employed, by the Servicer in the conduct of its business violates any law, regulation, judgment, agreement, order or decree applicable to any of them that, if enforced, could reasonably be expected to result in a Material Adverse Change with respect to the Servicer. The Servicer is not in breach of or in default under any applicable law or administrative regulation of its respective jurisdiction of incorporation, or any department, division, agency or instrumentality thereof or of the United States or any applicable judgment or decree or any receivables agreement, note, resolution, certificate, agreement or other instrument to which the Servicer is a party or is otherwise subject which, if enforced, would have a material adverse effect on the ability of the Servicer, as the case may be, to perform its respective obligations under the Transaction Documents. (i) Taxes. The Servicer and its parent company or companies have filed prior to the date hereof all federal and state tax returns that are required to be filed and paid all taxes, including any assessments received by them that are not being contested in good faith, to the extent that such taxes have become due, except for any failures to file or pay that, individually or in the aggregate, would not result in a Material Adverse Change with respect to the Servicer. (j) Accuracy of Information. None of (i) the Transaction Documents or (ii) the information relating to the Receivables, contains any statement of a material fact by the Servicer which was untrue or misleading in any material adverse respect when made. Except as described in its filings with the Commission under the Exchange Act, the Servicer has no knowledge of circumstances that it reasonably be expects to cause a Material Adverse Change with respect to the Servicer. Since the furnishing of the information in clauses (i) and (ii) of the preceding sentence, there has been no change or any development or event involving a prospective change known to the Servicer that would render any of the such documents untrue or misleading in any material respect. (k) Compliance With Securities Laws. The Offering Memorandum (excluding any Insurer Information contained therein) does not contain any untrue statement of a material fact and does not omit to state a material fact necessary to make the statements made therein, in light of the circumstances under which they were made, not misleading. (l) Documents. Each of the representations and warranties of the Servicer contained in the Transaction Documents is true and correct in all material respects, and the Servicer hereby makes each such representation and warranty to, and for the benefit of, the Insurer as if the same were set forth in full herein. (m) Solvency; Fraudulent Conveyance. The Servicer is solvent and will not be rendered insolvent by the Transaction and, after giving effect to the Transaction, the Servicer will not be left with an unreasonably small amount of capital with which to engage in its business, nor does the Servicer intend to incur, or believe that it has incurred, debts beyond its ability to pay as they mature. The Servicer does not contemplate the commencement of insolvency, bankruptcy, liquidation or consolidation proceedings or the appointment of a receiver, liquidator, conservator, trustee or similar official in respect of the Servicer or any of its assets. (n) Principal Place of Business. The principal place of business of the Servicer is located in Houston, Texas. Section 2.06. Affirmative Covenants of the Servicer. The Servicer hereby agrees that during the Term of the Insurance Agreement, unless the Insurer shall otherwise expressly consent in writing: (a) Compliance With Agreements and Applicable Laws. The Servicer shall not be in default under the Transaction Documents and shall comply with all material requirements of any law, rule or regulation applicable to it. The Servicer shall not agree to any amendment to or modification of the terms of any Transaction Documents except in accordance with the terms thereof. (b) Corporate Existence. The Servicer or its successors and assigns shall maintain its respective existence and shall at all times continue to be duly organized under the laws of its respective jurisdictions of incorporation and duly qualified and duly authorized (as described in Section 2.05 (a), (b) and (c) hereof) and shall conduct its respective business in accordance with the terms of its respective certificate or articles of incorporation and bylaws. (c) Financial Statements; Accountants' Reports; Other Information. The Servicer shall keep or cause to be kept in reasonable detail books and records of account of their assets and business, including, but not limited to, books and records relating to the Transaction. The Servicer shall furnish or cause to be furnished to the Insurer: (i) Annual Financial Statements. As soon as available, and in any event within 120 days after the close of each fiscal year of Stage, the audited consolidated balance sheets of Stage and its subsidiaries as of the end of such fiscal year and the related audited consolidated statements of income, changes in shareholders' equity and cash flows for such fiscal year, all in reasonable detail and stating in comparative form the respective figures for the corresponding date and period in the preceding fiscal year, prepared in accordance with generally accepted accounting principles consistently applied and accompanied by the audit opinion of Stage's independent accountants (which shall be nationally recognized independent public accounting firms) and by the certificates specified in Section 2.06(d) hereof. (ii) Quarterly Financial Statements. As soon as available, and in any event within 120 days after each of the first three fiscal quarters of each fiscal year of Stage, the unaudited consolidated balance sheets of Stage, and its subsidiaries as of the end of such fiscal quarter and the related unaudited consolidated statements of income, changes in shareholders' equity and cash flows for such fiscal quarter, all in reasonable detail and stating in comparative form the respective figures for the corresponding date and period in the preceding fiscal year, prepared in a manner consistent with generally accepted accounting principles, excluding notes to the consolidated financial statements, consistently applied and accompanied by the certificates specified in Section 2.06(d) hereof. (iii) Certain Information. Upon the reasonable request of the Insurer, Stage shall promptly provide copies of any requested proxy statements, financial statements, reports and registration statements which Stage files with, or delivers to, the Commission or any national securities exchange. (iv) Other Information. Promptly upon receipt thereof, copies of all schedules, financial statements or other similar reports delivered to or by the Servicer pursuant to the terms of the Transaction Documents and, promptly upon request, such other data as the Insurer may reasonably request. The Insurer agrees that it and its agents, accountants and attorneys shall keep confidential all financial statements, reports and other information delivered by the Transferor pursuant to this Section 2.06(c) to the extent provided in Section 2.06(f) hereof. (d) Compliance Certificate. The Servicer shall deliver to the Insurer, concurrently with the delivery of the financial statements required pursuant to Section 2.06(c)(i) and (ii) hereof, one or more certificates signed by an officer of the Servicer authorized to execute such certificates on behalf of the Servicer stating that: (i) to the best of such individual's knowledge following reasonable inquiry, no Default or Event of Default has occurred or, if a Default or Event of Default has occurred, specifying the nature thereof; and (ii) the attached financial statements submitted in accordance with Section 2.06(c)(i) or (ii) hereof, as the case may be, are complete and correct in all material respects and present fairly the financial condition and results of operations of the Servicer as of the dates and for the periods indicated, in accordance with generally accepted accounting principles consistently applied. (e) Access to Records; Discussions With Officers and Accountants. On a quarterly basis, or upon the occurrence of a Material Adverse Change, the Servicer shall, upon the reasonable request of the Insurer and upon receiving reasonable notification, permit the Insurer or its authorized agents: (i) to inspect the books and records of the Servicer as they may relate to the Receivables or the obligations of the Servicer under the Transaction Documents, and the Transaction; (ii) to discuss the affairs, finances and accounts of the Servicer with the chief executive officer and the chief financial officer of the Servicer; and (iii) with the Servicer's consent, which consent shall not be unreasonably withheld, to discuss the affairs, finances and accounts of the Servicer with the Servicer's independent accountants, provided that the chief financial officer of the Servicer shall have the right to be present during such discussions. Such inspections and discussions shall be conducted during normal business hours and shall not unreasonably disrupt the business of the Servicer. The books and records of the Servicer shall be maintained at the address of the Servicer designated herein for receipt of notices, unless the Servicer shall otherwise advise the parties hereto in writing. Annual discussions with the independent accountants referred to in clause (iii) above shall be without cost to the Insurer. The reasonable expenses relating to discussions with the independent accountants referred to in clause (iii) above made on a quarterly basis (other than an annual discussion or a discussion upon the occurrence of a Material Adverse Change) shall be payable by the Insurer. The Insurer agrees that it and its shareholders, directors, agents, accountants and attorneys shall keep confidential any matter of which it becomes aware through such inspections or discussions (unless readily available from public sources), except as may be otherwise required by regulation, law or court order or requested by appropriate governmental authorities or as necessary to preserve its rights or security under or to enforce the Transaction Documents, provided that the foregoing shall not limit the right of the Insurer to make such information available to its regulators, securities rating agencies, reinsurers, credit and liquidity providers, counsel and accountants. (f) Notice of Material Events. The Servicer shall be obligated promptly to inform the Insurer in writing of the occurrence of any of the following: (i) the submission of any claim or the initiation or threat of any legal process, litigation or administrative or judicial investigation or rule making or disciplinary proceeding by or against the Servicer that (A) is required to be disclosed to the Commission or to the Servicer's shareholders or (B) in the reasonable judgment of the Servicer is reasonably likely to result in a Material Adverse Change with respect to the Servicer, or the promulgation of any proceeding or any proposed or final rule which would result in a Material Adverse Change with respect to the Servicer; (ii) the institution or threat of any legal process, litigation or administrative or judicial investigation in any federal, state or local court or before any arbitration board, or any such proceeding threatened by any government agency, against the Servicer or in which the Servicer becomes a party which, if adversely determined, would have a material adverse effect on the Servicer, the Owners or the Insurer; provided, however, that the Servicer is required to give notice to the Insurer of any threatened legal process, litigation or administrative or judicial investigation only if, in the Servicer's reasonable judgment, such threatened legal process, litigation or administrative or judicial investigation is reasonably likely to have a material adverse effect on the Servicer, the Owners or the Insurer; (iii) any change in the location of the Servicer's principal office or any change in the location of the Servicer's books and records; (iv) the occurrence of any material Default or Event of Default or of any event which in the judgment of the Servicer, would be expected to constitute a Material Adverse Change; (v) the commencement of any proceedings by or against the Servicer under any applicable bankruptcy, reorganization, liquidation, rehabilitation, insolvency or other similar law now or hereafter in effect or of any proceeding in which a receiver, liquidator, conservator, trustee or similar official shall have been, or may be, appointed or requested for the Servicer or any of its assets; (vi) the receipt of notice that (A) the Servicer is being placed under regulatory supervision, (B) any license, permit, charter, registration or approval necessary for the conduct of the Servicer's business is to be or may be suspended or revoked, or (C) the Servicer is to cease and desist any practice, procedure or policy employed by the Servicer in the conduct of its business, and such cessation is reasonably likely to result in a Material Adverse Change with respect to the Servicer as it relates to the Transaction and their ability to perform their obligations under the Transaction Documents; or (vii) The Servicer shall deliver to the Insurer a copy of each amendment to the Credit Agreement entered into on or after the date hereof no later than the earlier of (i) two Business Days after making any filing with the Commission under the Exchange Act which discloses such amendment and (ii) the 30th day following the execution thereof.. (g) Financing Statements and Further Assurances. The Servicer shall cause to be filed all necessary financing statements or other instruments, and any amendments or continuation statements relating thereto, necessary to be kept and filed in such manner and in such places as may be required by law to preserve and protect fully the interest of the Trustee in the Trust Property. The Servicer shall, upon the request of the Insurer, from time to time, execute, acknowledge and deliver, or cause to be executed, acknowledged and delivered, within 10 days of such request, such amendments thereto and such further instruments and take such further action as may be reasonably necessary to effectuate the intention, performance and provisions of the Transaction Documents. In addition, the Servicer agrees to cooperate with Rating Agencies in connection with any review of the Transaction that may be undertaken by Rating Agencies after the date hereof and to provide all information reasonably requested by Rating Agencies. (h) Maintenance of Licenses. The Servicer or any successors thereof shall maintain or cause to be maintained all licenses, permits, charters and registrations which are material to the conduct of its business which could reasonably be expected to affect its obligations under the Transaction Documents. (i) Servicing of the Receivables. The Servicer shall perform such actions with respect to the Receivables as are required by the Agreement. (j) Year 2000 Program. The description of the Servicer's current status with respect to Year 2000 compliance in the Offering Memorandum and the filings of Stage with the Commission pursuant to the Exchange Act is true and correct in all material respects and does not omit a statement necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. (k) Consolidation Facts. The Servicer shall comply with, or maintain the adequacy of, the Consolidation Facts during the term of this Insurance Agreement. Section 2.07. Negative Covenants of the Servicer. The Servicer hereby agrees that during the Term of this Insurance Agreement, unless the Insurer shall otherwise expressly consent in writing and as to the Transaction Documents only with respect to the Transaction Documents to which it is a party and not the Securities: (a) Impairment of Rights. The Servicer shall not take any action, or fail to take any action, if such action or failure to take action would reasonably be expected to result in a Material Adverse Change as described in clause (b) of the definition of Material Adverse Change with respect to the Servicer, or would reasonably be expected to interfere with the enforcement of any rights of the Insurer under or with respect to the Transaction Documents. The Servicer shall give the Insurer written notice of any such action or failure to act on the earlier of (i) the date upon which any publicly available filing or release is made with respect to such action or failure to act or (ii) promptly after the date of consummation of such action or failure to act. The Servicer shall furnish to the Insurer all information requested by it that is reasonably necessary to determine compliance with this subsection (a). (b) Waiver, Amendments, Etc. The Servicer shall not waive, modify or amend, or consent to any waiver, modification or amendment of, any of the terms, provisions or conditions of any of the Transaction Documents without the prior written consent of the Insurer. (c) Credit Card Receivable Agreements; Charge-off Policy. The Servicer will comply with all covenants in the Agreement with respect to its collection policies and its charge-off policies. ARTICLE III THE POLICY; REIMBURSEMENT Section 3.01. Issuance of the Policy. The Insurer agrees to issue the Policy on the Closing Date subject to satisfaction of the conditions precedent set forth below: (a) Payment of Expenses. The Transferor and the Originator shall agree to reimburse or pay directly other fees and expenses identified in Section 3.02 hereof as payable. (b) Documents. The Insurer shall have received a copy of each of the Transaction Documents, duly authorized, executed and delivered by each of the parties thereto. (c) Certified Documents and Resolutions. The Insurer shall have received a copy of (i) the certificate or articles of incorporation and bylaws of the Transferor, (ii) the resolutions of the Transferor's Board of Directors authorizing the sale of the Securities and the execution, delivery and performance by the Transferor of the Transaction Documents and the transactions contemplated thereby, certified by the Secretary or an Assistant Secretary of the Transferor (which certificate shall state that such certificate of incorporation, bylaws and resolutions are in full force and effect without modification on the Date of Issuance), (iii) the certificate or articles of incorporation and bylaws of the Originator and Servicer and (iv) the resolutions of the Servicer's and Originator's Board of Directors authorizing the sale of the Receivables and the execution, delivery and performance by the Servicer and Originator of the Transaction Documents and the transactions contemplated thereby, certified by the Secretary or an Assistant Secretary of the Servicer and the Originator (which certificate shall state that such certificate or articles of incorporation, bylaws and resolutions are in full force and effect without modification on the Date of Issuance). (d) Incumbency Certificate. The Insurer shall have received a certificate of the Secretary or an Assistant Secretary of the Transferor certifying the names and signatures of the officers of the Transferor authorized to execute and deliver the Transaction Documents. The Insurer shall have received a certificate of the Secretary or an Assistant Secretary of the Originator and Servicer certifying the names and signatures of the officers of the Servicer authorized to execute and deliver the Transaction Documents. (e) Representations and Warranties; Certificate. The representations and warranties of the Transferor, the Originator and the Servicer set forth or incorporated by reference in this Insurance Agreement shall be true and correct as of the Date of Issuance as if made on the Date of Issuance, and the Insurer shall have received a certificate of appropriate officers of the Transferor, the Originator and the Servicer to that effect. (f) Representations and Warranties of the Originator, Certificate. The Originator shall have agreed in the Receivables Purchase Agreement that the Insurer shall be a third party beneficiary in respect of the Receivables Purchase Agreement. (g) Opinions of Counsel. (i) The law firm of Kirkland & Ellis or internal counsel shall have issued its favorable opinion, in form and substance acceptable to the Insurer and its counsel, regarding the corporate existence and authority of the Transferor, the Originator and the Servicer and the validity and enforceability of the Transaction Documents against such parties. (ii) The law firm of Kirkland & Ellis shall have furnished its opinions, in form and substance acceptable to the Insurer and its counsel, regarding the tax treatment of payments on the Securities under federal tax laws. (iii) The law firm of Kirkland & Ellis shall have furnished its opinions, in form and substance acceptable to the Insurer and its counsel, regarding the transfer of the Receivables. (iv) The Insurer shall have been furnished with all of the opinions of counsel delivered in connection with the Transaction and such opinions shall either be addressed to the Insurer or state therein that the Insurer may rely thereon. (v) The Insurer shall have received such other opinions of counsel, in form and substance acceptable to the Insurer and its counsel, addressing such other matters as the Insurer may reasonably request. Each opinion of counsel delivered in connection with the Transaction shall be addressed to and delivered to the Insurer. (h) Approvals, Etc. The Insurer shall have received true and correct copies of all approvals, licenses and consents, if any, including, without limitation, any required approval of the shareholders of the Transferor, the Originator and the Servicer, required in connection with the Transaction. (i) No Litigation, Etc. No suit, action or other proceeding, investigation or injunction, or final judgment relating thereto, shall be pending or threatened before any court or governmental agency in which it is sought to restrain or prohibit or to obtain damages or other relief in connection with the Transaction Documents or the consummation of the Transaction. (j) Legality. No statute, rule, regulation or order shall have been enacted, entered or deemed applicable by any government or governmental or administrative agency or court that would make the transactions contemplated by any of the Transaction Documents illegal or otherwise prevent the consummation thereof. (k) Issuance of Ratings. The Insurer shall have received confirmation that the Securities are currently rated at least "BBB-" by each of Fitch and Duff & Phelps. (l) No Default. No Default or Event of Default shall have occurred. (m) Additional Items. The Insurer shall have received such other documents, instruments, approvals or opinions requested by the Insurer or its counsel as may be reasonably necessary to effect the Transaction, including, but not limited to, evidence satisfactory to the Insurer and its counsel that the conditions precedent, if any, in the Transaction Documents have been satisfied. (n) Conform to Documents. The Insurer and its counsel shall have determined that all documents, certificates and opinions to be delivered in connection with the Securities conform to the terms of the Transaction Documents. (o) Satisfaction of Conditions of the Purchase Agreement. All conditions in the Purchase Agreement relating to the Initial Purchaser's obligation to purchase the Securities shall have been satisfied. (p) Purchase Agreement. The Insurer shall have received copies of each of the documents, and shall be entitled to rely on each of the documents, required to be delivered to the Initial Purchaser pursuant to the Purchase Agreement. Section 3.02. Payment of Fees and Premium. (a) Legal and Accounting Fees. The Transferor shall pay or cause to be paid, on the Date of Issuance, legal fees and disbursements incurred by the Insurer in connection with the issuance of the Policy for which invoices have been provided at least one Business Day prior thereto. (b) Premium. In consideration of the issuance by the Insurer of the Policy, the Insurer shall be entitled to receive the Premium as and when due in accordance with the terms of this Insurance Agreement and the Agreement monthly pursuant to the Agreement; provided, however, that the Premium payable on the Policy from the Date of Issuance shall be offset against the payment of $100,000 paid to the Insurer prior to the Date of Issuance until such offset has reduced such amount to zero. The Premium paid hereunder or under the Agreement shall be nonrefundable without regard to whether the Insurer makes any payment under the Policy or any other circumstances relating to the Securities or provision being made for payment of the Securities prior to maturity. The Trustee shall make all payments of Premium to be made by it by wire transfer to an account designated from time to time by the Insurer by written notice to the Trustee. Section 3.03. Reimbursement and Additional Payment Obligation. (a) In accordance with the priorities and at the times established in the Supplement and payable only as provided therein the Insurer shall be entitled to reimbursement for any payment made by the Insurer under the Policy with respect to Insured Payments, which reimbursement shall be due and payable on the date that any amount is to be paid pursuant to a Notice (as defined in the Policy), in an amount equal to the amount to be so paid and all amounts previously paid that remain unreimbursed, together with interest on any and all amounts remaining unreimbursed (to the extent permitted by law, if in respect of any unreimbursed amounts representing interest) from the date such amounts became due until paid in full (after as well as before judgment), at a rate of interest equal to the Late Payment Rate. (b) The Insurer shall be entitled to reimbursement for any and all charges and expenses which the Insurer may pay or incur in connection with the enforcement of this Insurance Agreement, the Transaction Documents or any other agreement between the Transferor and the Insurer or upon foreclosure upon, sale or other disposition of the Trust Property, including but not limited to the fees and expenses of counsel, plus interest on any such amounts at the Late Payment Rate from the date of payment by the Insurer until the payment thereof in full; and (c) The Insurer shall be entitled to reimbursement for all other payments made by the Insurer on behalf of the Transferor, plus interest on any such amounts at the Late Payment Rate from the date of payment by the Insurer until the payment thereof in full. All amounts payable pursuant to clause (a) above are to be immediately due and payable without demand and in accordance with the Transaction Documents and all amounts payable pursuant to clauses (b) and (c) above are payable on demand. Section 3.04. Indemnification; Limitation of Liability. (a) In addition to any and all rights of indemnification or any other rights of the Insurer pursuant hereto or under law or equity, the Transferor (as to itself) and the Servicer and the Originator, jointly and severally, and any successors thereto agree to pay, and to protect, indemnify and save harmless, the Insurer and its officers, directors, shareholders, employees, agents and each person, if any, who controls the Insurer within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act from and against any and all claims, Losses, liabilities (including penalties), actions, suits, judgments, demands, damages, costs or reasonable expenses (including penalties), actions, suits, judgments, demands, damages, costs or reasonable expenses (including, without limitation, reasonable fees and expenses of attorneys, consultants and auditors and reasonable costs of investigations) or obligations whatsoever paid by the Insurer (herein collectively referred to as "Liabilities") of any nature arising out of or relating to the Transaction by reason of: (i) any untrue statement or alleged untrue statement of a material fact contained in the Offering Memorandum (other than the Insurer Information) or in any amendment or supplement thereto or arising out of or based upon any omission or alleged omission to state therein a material fact necessary to make the statements therein not misleading; (ii) to the extent not covered by clause (i) above any act or omission of the Transferor, the Originator or the Servicer, or the allegation thereof, in connection with the offering, issuance or sale or delivery of the Securities other than by reason of false or misleading information in the Insurer Information; (iii) the misfeasance or malfeasance of, or negligence or theft committed by, any director, officer, employee or agent of the Transferor, the Originator or the Servicer; (iv) the violation by the Transferor, the Originator or the Servicer of any federal or state laws, rules or regulations relating to the Transaction, including without limitation, the maximum amount of interest permitted to be received on account of any loan of money; (v) the breach by the Transferor, the Originator or the Servicer of any of its respective obligations under this Insurance Agreement or any of the other Transaction Documents; and (vi) the breach by the Transferor, the Originator or the Servicer of any representation or warranty on its part contained in the Transaction Documents or in any certificate or report furnished or delivered to the Insurer thereunder. This indemnity provision shall not be affected by any limitations with respect to remedies of any party in any other Transaction Document. This indemnity provision shall survive the termination of this Insurance Agreement and shall survive until the statute of limitations has run on any causes of action which arise from one of these reasons and until all suits filed as a result thereof have been finally concluded. (b) Any party which proposes to assert the right to be indemnified under this Section 3.04 will, promptly after receipt of notice of commencement of any action, suit or proceeding against such party in respect of which a claim is to be made against the Transferor, the Originator or the Servicer under this Section 3.04, notify the Transferor, the Originator or the Servicer of the commencement of such action, suit or proceeding, enclosing a copy of all papers served. In case any action, suit or proceeding shall be brought against any indemnified party and it shall notify the Transferor, the Originator or the Servicer of the commencement thereof, the Transferor, the Originator or the Servicer shall be entitled to participate in, and, to the extent that it shall wish, to assume the defense thereof, with counsel satisfactory to such indemnified party, and after notice from the Transferor, the Originator or the Servicer to such indemnified party of its election so to assume the defense thereof, the Transferor, the Originator or the Servicer shall not be liable to such indemnified party for any legal or other expenses other than reasonable costs of investigation subsequently incurred by such indemnified party in connection with the defense thereof. The indemnified party shall have the right to employ its counsel in any such action the defense of which is assumed by the Transferor, the Originator or the Servicer in accordance with the terms of this subsection (b), but the fees and expenses of such counsel shall be at the expense of such indemnified party unless (i) such party has agreed to pay such fees and expenses or (ii) the named parties to such action or proceeding include both the indemnified party and the Transferor, the Originator or the Servicer, and the indemnified party has been advised by counsel that there may be one or more defenses available to it that are different from or additional to those available to the Transferor, the Originator or the Servicer. All Indemnified Parties are limited to one counsel in each applicable jurisdiction. The Transferor, the Originator or the Servicer shall not be liable for any settlement of any action or claim effected without its consent but if settled with their written consent, or if there be a final judgment for the plaintiff in any such action or proceeding, the Transferor, the Originator or the Servicer agrees to indemnify and hold harmless the indemnified party harmless from and against any loss or liability by reasons of such judgment or settlement. This indemnity in this section shall survive the termination of this Insurance Agreement and shall survive until the statute of limitations has run on any causes of action which arise from one of these reasons and until all suits filed as a result thereof have been finally concluded. Section 3.05. Payment Procedure. In the event of any payment by the Insurer, the Trustee, the Transferor, the Originator and the Servicer agree to accept the voucher or other evidence of payment as prima facie evidence of the propriety thereof and the liability therefor to the Insurer, subject to the terms of the Transaction Documents. All payments to be made to the Insurer under this Insurance Agreement shall be made to the Insurer in lawful currency of the United States of America in immediately available funds at the notice address for the Insurer as specified in Section 6.02 hereof on the date when due or as the Insurer shall otherwise direct by written notice to the other parties hereto. In the event that the date of any payment to the Insurer or the expiration of any time period hereunder occurs on a day which is not a Business Day, then such payment or expiration of time period shall be made or occur on the next succeeding Business Day with the same force and effect as if such payment was made or time period expired on the scheduled date of payment or expiration date. Payments to be made to the Insurer under this Insurance Agreement shall bear interest at the Late Payment Rate from the date when due to the date paid. ARTICLE IV FURTHER AGREEMENTS Section 4.01. Effective Date; Term of the Insurance Agreement. This Insurance Agreement shall take effect on the Date of Issuance and shall remain in effect until the later of (a) such time as the Insurer is no longer subject to a claim under the Policy and the Policy shall have been surrendered to the Insurer for cancellation and (b) all amounts payable to the Insurer by the Trustee, the Transferor, the Originator and the Servicer and from any other source under the Transaction Documents and all amounts payable under the Securities have been paid in full; provided, however, that the provisions of Sections 3.02, 3.03, 3.04 and 4.06 hereof shall survive any termination of this Insurance Agreement. Section 4.02. Further Assurances and Corrective Instruments. (a) Except during the time when an Insurer Default shall exist, none of the Transferor, the Trustee, the Originator or the Servicer shall grant any waiver of rights under any of the Transaction Documents except in accordance with the terms of such documents, and any such waiver not in accordance with such terms shall be null and void and of no force or effect. (b) To the extent permitted by law and the Transaction Documents, the Transferor, the Trustee, the Originator and the Servicer agree that they will, from time to time, execute, acknowledge and deliver, or cause to be executed, acknowledged and delivered, such supplements hereto and such further instruments as the Insurer may request and as may be required in the Insurer's reasonable judgment to effectuate the intention of or facilitate the performance of this Insurance Agreement. Section 4.03. Obligations Absolute. (a) The obligations of the Transferor, the Trustee, the Originator and the Servicer hereunder shall be absolute and unconditional and shall be paid or performed strictly in accordance with this Insurance Agreement under all circumstances irrespective of: (i) any lack of validity or enforceability of, or any amendment or other modifications of, or waiver with respect to any of the Transaction Documents, the Securities or the Policy; (ii) any exchange or release of any other obligations hereunder; (iii) the existence of any claim, setoff, defense, reduction, abatement or other right that the Transferor, the Trustee, the Originator or the Servicer may have at any time against the Insurer or any other Person; (iv) any document presented in connection with the Policy proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; (v) any payment by the Insurer under the Policy against presentation of a certificate or other document that does not strictly comply with terms of the Policy; (vi) any failure of the Transferor, the Trustee, the Originator or the Servicer to receive the proceeds from the sale of the Securities; or (vii) any breach by the Transferor, the Trustee, the Originator or the Servicer of any representation, warranty or covenant contained in any of the Transaction Documents. (b) the Transferor, the Trustee, the Servicer, the Originator and any and all others who are now or may become liable for all or part of the obligations of the Transferor, the Trustee, the Originator or the Servicer under this Insurance Agreement agree to be bound by this Insurance Agreement and waive all rights of abatement, diminution, postponement or deduction, or any defense other than payment, or any right of setoff or recoupment arising out of any breach under any of the Transaction Documents by any party thereto or any beneficiary thereof, or out of any obligation at any time owing to the Transferor, the Trustee, the Originator or the Servicer. (c) Nothing herein shall be construed as prohibiting the Transferor, the Trustee, the Originator or the Servicer from pursuing any rights or remedies it may have against any other Person in a separate legal proceeding. Section 4.04. Assignments; Reinsurance; Third Party Rights. (a) This Insurance Agreement shall be a continuing obligation of the parties hereto and shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. None of the Transferor, the Trustee, the Originator or the Servicer may assign its rights under this Insurance Agreement, or delegate any of its duties hereunder, without the prior written consent of the Insurer. Any assignment made in violation of this Insurance Agreement shall be null and void. (b) The Insurer shall have the right to give participations in its rights under this Insurance Agreement and to enter into contracts of reinsurance with respect to the Policy upon such terms and conditions as the Insurer may in its discretion determine; provided, however, that no such participation or reinsurance agreement or arrangement shall relieve the Insurer of any of its obligations hereunder or under the Policy. (c) In addition, the Insurer shall be entitled to assign or pledge to any bank or other lender providing liquidity or credit with respect to the Transaction or the obligations of the Insurer in connection therewith any rights of the Insurer under the Transaction Documents or with respect to any real or personal property or other interests pledged to the Insurer, or in which the Insurer has a security interest, in connection with the Transaction. (d) Except as provided herein with respect to participants and reinsurers, nothing in this Insurance Agreement shall confer any right, remedy or claim, express or implied, upon any Person, including, particularly, any Owner, other than the Insurer against the Transferor, or the Servicer, pursuant to Section 3.02, 3.03 or 3.04 hereof, the Trustee, and all the terms, covenants, conditions, promises and agreements contained herein shall be for the sole and exclusive benefit of the parties hereto and their successors and permitted assigns. Neither the Trustee nor any Owner shall have any right to payment from any Premiums paid or payable hereunder or under the Agreement or from any amounts paid by the Transferor, the Trustee, the Originator or the Servicer pursuant to Section 3.02, 3.03 or 3.04 hereof. (e) The Transferor, the Trustee, the Originator and the Servicer agree that the Insurer shall have all rights of a third-party beneficiary in respect of the Agreement and each other Transaction Document to which the Insurer is not a signing party and hereby incorporate and restate their representations, warranties and covenants as set forth therein for the benefit of the Insurer. Section 4.05. Liability of the Insurer. Neither the Insurer nor any of its officers, directors or employees shall be liable or responsible for (a) the use that may be made of the Policy by the Trustee or for any acts or omissions of the Trustee in connection therewith or (b) the validity, sufficiency, accuracy or genuineness of documents delivered to the Insurer in connection with any claim under the Policy, or of any signatures thereon, even if such documents or signatures should in fact prove to be in any or all respects invalid, insufficient, fraudulent or forged (unless the Insurer shall have actual knowledge thereof). In furtherance and not in limitation of the foregoing, the Insurer may accept documents that appear on their face to be in order, without responsibility for further investigation. Section 4.06. Parties Will Not Institute Insolvency Proceedings. So long as this Insurance Agreement is in effect, and for one year and one day following the last day on which any rated security of the Transferor or the Trust is outstanding, none of the parties hereto will file any involuntary petition or otherwise institute any bankruptcy, reorganization, arrangement, insolvency or liquidation proceeding or other proceedings under any federal or state bankruptcy or similar law against the Transferor. Section 4.07. Trustee, Transferor, Originator and Servicer to Join in Enforcement Action. To the extent necessary to enforce any right of the Insurer in or remedy of the Insurer under any Document, the Trustee on behalf of the Trust, the Transferor, the Originator and the Servicer agree to join in any action initiated by the Trust or the Insurer for the protection of such right or exercise of such remedy. The foregoing sentence shall apply with respect to the Servicer only to the extent that the Servicer is a party to the applicable Transaction Document. Section 4.08. Subrogation. To the extent of any payments under the Policy, the Insurer shall be fully subrogated to any remedies available to the Trustee under the Agreement or other Transaction Documents against the Transferor and the Originator or in respect of the Transaction Documents. The Trustee acknowledges such subrogation and, further, agrees to execute such instruments prepared by the Insurer and to take such reasonable actions as, in the sole judgment of the Insurer, are necessary to evidence such subrogation and to perfect the rights of the Insurer to receive any moneys paid or payable under the Supplement in respect of such subrogated amounts. ARTICLE V DEFAULTS; REMEDIES Section 5.01. Defaults. The occurrence of any of the following events shall constitute an Event of Default hereunder (with respect to the defaulting party or parties only): (a) any representation or warranty made by the Transferor, the Originator, or the Servicer hereunder or under the Transaction Documents, or in any certificate furnished hereunder or under the Transaction Documents, shall prove to be incorrect in any material respect as of the time when the same shall have been made and the incorrectness of such representation, warranty or statement could reasonably be expected to result in a Material Adverse Change in any such Person or the Trust or the interest of the Insurer and such representation, warranty or statement shall not have been eliminated or otherwise cured within 60 days of the date on which any such Person shall have been given notice of such failure by the Insurer; (b) (i) The Transferor, the Originator, or the Servicer shall fail to pay when due any amount payable by the Transferor, the Originator, or the Servicer hereunder or under any Transaction Document on or before the date occurring five (5) Business Days after the date such amount is required to be paid hereunder or (ii) a legislative body has enacted any law that declares or a court of competent jurisdiction shall find or rule that any Transaction Document is not valid and binding on the Transferor, the Originator, or the Servicer; (c) the occurrence and continuance of an "Event of Default" under the Agreement (as defined therein); (d) any failure on the part of the Transferor, the Originator, or the Servicer duly to observe or perform in any material respect any other of the covenants or agreements on the part of the Transferor, the Originator, or the Servicer contained in this Insurance Agreement or in any other Transaction Document which continues unremedied for a period of 60 days with respect to this Insurance Agreement, or, with respect to any other Transaction Document, beyond any cure period provided for therein, after the date on which written notice of such failure, requiring the same to be remedied, shall have been given to the Transferor, the Originator or the Servicer, as applicable, by the Insurer (with a copy to the Trustee) or by the Trustee (with a copy to the Insurer); (e) a decree or order of a court or agency or supervisory authority having jurisdiction in the premises in an involuntary case under any present or future federal or state bankruptcy, insolvency or similar law or the appointment of a conservator or receiver or liquidator or other similar official in any insolvency, readjustment of debt, marshalling of assets and liabilities or similar proceedings, or for the winding-up or liquidation of its affairs, shall have been entered against the Transferor, the Originator or the Servicer and such decree or order shall have remained in force undischarged or unstayed for a period of 90 consecutive days; (f) the Transferor, the Originator or the Servicer shall consent to the appointment of a conservator or receiver or liquidator or other similar official in any insolvency, readjustment of debt, marshalling of assets and liabilities or similar proceedings of or relating to the Transferor, the Originator or the Servicer or of or relating to all or substantially all of the property of either; (g) the Transferor, the Originator or the Servicer shall admit in writing its inability to pay its debts generally as they become due, file a petition to take advantage of or otherwise voluntarily commence a case or proceeding under any applicable bankruptcy, insolvency, reorganization or other similar statute, make an assignment for the benefit of its creditors or voluntarily suspend payment of its obligations; or (h) the failure of the Transferor, the Originator or the Servicer to comply with, or maintain the adequacy of, the Consolidation Facts, which failure continues for a period of 15 days after the date on which notice of such failure, requiring the same to be remedied, shall have been given to the Transferor, the Originator or the Servicer, as applicable, by the Insurer (with a copy to the Trustee) or by the Trustee (with a copy to the Insurer) and which failure is reasonably likely, in the judgment of the Insurer, to have a material adverse effect on the conclusions contained in the opinion of Kirkland & Ellis referred to in Section 3.01(g)(iii) hereof. Notwithstanding the foregoing, a failure under clause (h) above shall not be an Event of Default if the Transferor, the Originator or the Servicer shall provide to the Insurer an opinion of counsel of Kirkland & Ellis affirming its conclusions in the creditors' rights opinion referred to in Section 3.01(g)(iii) hereof, notwithstanding such failure. Section 5.02. Remedies; No Remedy Exclusive. (a) Upon the occurrence of an Event of Default, the Insurer may exercise any one or more of the rights and remedies set forth below: (i) exercise any rights and remedies accorded to the Insurer under the related Transaction Documents in accordance with the terms of the related Transaction Documents or direct the Trustee to exercise such remedies in accordance with the terms of the related Transaction Documents; or (ii) take whatever action at law or in equity as may appear necessary or desirable in its judgment to collect the amounts then due to it under the related Transaction Documents or to enforce performance and observance of any obligation, agreement or covenant of the Transferor, the Trustee, or the Servicer under the related Transaction Documents. (b) Unless otherwise expressly provided, no remedy herein conferred upon or reserved is intended to be exclusive of any other available remedy, but each remedy shall be cumulative and shall be in addition to other remedies given under the Transaction Documents or existing at law or in equity. No delay or omission to exercise any right or power accruing under the Transaction Documents upon the happening of any event set forth in Section 5.01 hereof shall impair any such right or power or shall be construed to be a waiver thereof, but any such right and power may be exercised from time to time and as often as may be deemed expedient. In order to entitle the Insurer to exercise any remedy reserved to the Insurer in this Article, it shall not be necessary to give any notice other than such notice as may be required in this Article V. Section 5.03. Waivers. (a) No failure by the Insurer to exercise, and no delay by the Insurer in exercising, any right hereunder shall operate as a waiver thereof. The exercise by the Insurer of any right hereunder shall not preclude the exercise of any other right, and the remedies provided herein to the Insurer are declared in every case to be cumulative and not exclusive of any remedies provided by law or equity. (b) The Insurer shall have the right, to be exercised in its complete discretion, to waive any Event of Default hereunder, by a writing setting forth the terms, conditions and extent of such waiver signed by the Insurer and delivered to the Transferor, the Trustee, the Originator or the Servicer. Unless such writing expressly provides to the contrary, any waiver so granted shall extend only to the specific event or occurrence which gave rise to the Event of Default so waived and not to any other similar event or occurrence which occurs subsequent to the date of such waiver. ARTICLE VI MISCELLANEOUS Section 6.01. Amendments, Etc. This Insurance Agreement may be amended, modified or terminated only by written instrument or written instruments signed by the parties hereto. The Transferor agrees to promptly provide a copy of any amendment to this Insurance Agreement to the Trustee and the Rating Agencies. No act or course of dealing shall be deemed to constitute an amendment, modification or termination hereof. Section 6.02. Notices. All demands, notices and other communications to be given hereunder shall be in writing (except as otherwise specifically provided herein) and shall be mailed by registered mail or personally delivered or telecopied to the recipient as follows: (a) To the Insurer: R.V.I. Guaranty Co., Ltd. 20 Reid Street, 3rd Floor Williams House Hamilton HM HX, Bermuda Attention: Adrienne Hintz Telecopy No.: (441) 292-8062 Confirmation: (441) 295-1646 with a copy to in all situations other than a Notice of Claim under the Policy to: CNA Guaranty & Credit 40 Wall Street, 8th Floor New York, New York 10005 Attention: John P. Verel Telecopy No.: (212) 440-3880 Confirmation: (212) 440-7669 (b) To the Transferor: SRI Receivables Purchase Co., Inc. 10201 Main Street Houston, Texas 77025 Attention: President Telecopy No.: (713) 669-2709 Confirmation: (713) 669-2832 (c) To the Trustee: Bankers Trust (Delaware) 1011 Centre Road, Suite 200 Wilmington, Delaware 19805 Attention: [] Telecopy No.: [] Confirmation: [] With a copy to: Bankers Trust Company 4 Albany Street, 10th Floor New York, New York 10006 Attention: Patricia Russo (d) To the Servicer or the Originator: Specialty Retailers, Inc. 10201 Main Street Houston, Texas 77025 Attention: Chief Financial Officer Telecopy No.: (713) 669-2709 Confirmation: (713) 669-2832 A party may specify an additional or different address or addresses by writing mailed or delivered to the other parties as aforesaid. All such notices and other communications shall be effective upon receipt. Section 6.03. [Reserved.] Section 6.04. Agreement with respect to Section 1213(c)(1) of the New York Insurance Law. Each of the parties hereto agrees that it will not seek to require the Insurer to have to post a bond, securities or cash in order to enforce its rights or to respond to an action in the New York courts as described in Section 1213(c)(1) of the New York Insurance Law and similar laws. Section 6.05. Severability. In the event that any provision of this Insurance Agreement shall be held invalid or unenforceable by any court of competent jurisdiction, the parties hereto agree that such holding shall not invalidate or render unenforceable any other provision hereof. The parties hereto further agree that the holding by any court of competent jurisdiction that any remedy pursued by any party hereto is unavailable or unenforceable shall not affect in any way the ability of such party to pursue any other remedy available to it. Section 6.06. Governing Law. THIS INSURANCE AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CHOICE OF LAW PROVISIONS. Section 6.07. Consent to Jurisdiction. (a) The parties hereto hereby irrevocably submit to the jurisdiction of the United States District Court for the Southern District of New York and any court in the State of New York located in the City and County of New York, and any appellate court from any thereof, in any action, suit or proceeding brought against it and to or in connection with any of the Transaction Documents or the transactions contemplated thereunder or for recognition or enforcement of any judgment, and the parties hereto hereby irrevocably and unconditionally agree that all claims in respect of any such action or proceeding may be heard or determined in such New York state court or, to the extent permitted by law, in such federal court. The parties hereto agree that a final judgment in any such action, suit or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. To the extent permitted by applicable law, the parties hereto hereby waive and agree not to assert by way of motion, as a defense or otherwise in any such suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of such courts, that the suit, action or proceeding is brought in an inconvenient forum, that the venue of the suit, action or proceeding is improper or that the related documents or the subject matter thereof may not be litigated in or by such courts. (b) To the extent permitted by applicable law, the parties hereto shall not seek and hereby waive the right to any review of the judgment of any such court by any court of any other nation or jurisdiction which may be called upon to grant an enforcement of such judgment. (c) Except as provided in Section 4.06 herein, nothing contained in this Insurance Agreement shall limit or affect the Insurer's right to serve process in any other manner permitted by law or to start legal proceedings relating to any of the Transaction Documents against any party hereto or its or their property in the courts of any jurisdiction. Section 6.08. Consent of the Insurer. In the event that the consent of the Insurer is required under any of the Transaction Documents, the determination whether to grant or withhold such consent shall be made by the Insurer in its sole discretion without any implied duty towards any other Person. Section 6.09. Counterparts. This Insurance Agreement may be executed in counterparts by the parties hereto, and all such counterparts shall constitute one and the same instrument. Section 6.10. Headings. The headings of Articles and Sections and the Table of Contents contained in this Insurance Agreement are provided for convenience only. They form no part of this Insurance Agreement and shall not affect its construction or interpretation. Unless otherwise indicated, all references to Articles and Sections in this Insurance Agreement refer to the corresponding Articles and Sections of this Insurance Agreement. Section 6.11. Trial by Jury Waived. Each party hereto hereby waives, to the fullest extent permitted by law, any right to a trial by jury in respect of any litigation arising directly or indirectly out of, under or in connection with any of the Transaction Documents or any of the transactions contemplated thereunder. Each party hereto (a) certifies that no representative, agent or attorney of any party hereto has represented, expressly or otherwise, that it would not, in the event of litigation, seek to enforce the foregoing waiver and (b) acknowledges that it has been induced to enter into the Transaction Documents to which it is a party by, among other things, this waiver. Section 6.12. Limited Liability. No recourse under any Transaction Document shall be had against, and no personal liability shall attach to, any officer, employee, director, affiliate or shareholder of any party hereto, as such, by the enforcement of any assessment or by any legal or equitable proceeding, by virtue of any statute or otherwise in respect of any of the Transaction Documents, the Securities or the Policy, it being expressly agreed and understood that each Transaction Document is solely a corporate obligation of each party hereto, and that any and all personal liability, either at common law or in equity, or by statute or constitution, of every such officer, employee, director, affiliate or shareholder for breaches by any party hereto of any obligations under any Transaction Document is hereby expressly waived as a condition of and in consideration for the execution and delivery of this Insurance Agreement. With respect to the Trustee, it is expressly understood and agreed by the parties hereto that this Insurance Agreement is executed and delivered by Bankers Trust (Delaware), not individually or personally but solely as Trustee under this Insurance Agreement, in the exercise of the powers and authority conferred and vested in it under the Agreement, (b) each of the representations, undertakings and agreements herein made on the part of the Trustee is made and intended not as personal representations, undertakings and agreements by Bankers Trust (Delaware) but is made and intended for the purpose for binding only the Trustee and (c) under no circumstances shall Bankers Trust (Delaware) be personally liable for the payment of any indebtedness or expenses of the Trustee or be liable for the breach or failure of any obligation, representation, warranty or covenant made or undertaken by the Trustee under this Insurance Agreement or the other related documents. Section 6.13. Entire Agreement. The Transaction Documents and the Policy set forth the entire agreement between the parties with respect to the subject matter thereof, and this Insurance Agreement supersedes and replaces any agreement or understanding that may have existed between the parties prior to the date hereof in respect of such subject matter. [Remainder of page intentionally blank.] IN WITNESS WHEREOF, the parties hereto have executed this Insurance Agreement, all as of the day and year first above mentioned. R.V.I. GUARANTY CO., LTD., as Insurer By: /s/ Peter Strong Title: Authorized Representative SRI RECEIVABLES PURCHASE CO., INC., as Transferor By: /s/ Charles M. Sledge Title: SVP Finance and Treasurer SPECIALTY RETAILERS, INC., as Servicer and Originator By: /s/ Charles M. Sledge Title: SVP Finance and Treasurer BANKERS TRUST (DELAWARE), not in its individual capacity but solely as Trustee By: /s/ Francisco B. Talavera Title: AVP Facts Relating to Consolidation 1. The Transferor will not amend its Certificate of Incorporation in any manner which would affect its restricted activities. 2. The Transferor's Certificate of Incorporate provides that its Board of Directors shall at all times include at least one "Independent Director." The Independent Director must be an individual who, except in his or her capacity as an Independent Director, (a) is not at such time, and shall not have been at any time during the preceding five years a director, officer or employee of the Originator or any of its subsidiaries or affiliates (other than the Transferor); (b) is not (and is not affiliated with a company or a firm that is) a significant advisor or consultant to the Originator or any of its subsidiaries and affiliates; (c) is not a affiliated with a significant customer or supplier of the Originator or any of its subsidiaries or affiliates; (d) is not affiliated with a company of which the Originator or any of its subsidiaries is a significant customer or supplier; (e) does not have any significant personal services contract(s) with the Originator or any of its subsidiaries and affiliates; (f) is not affiliated with a tax-exempt entity that receives significant contributions from the Originator or any of its subsidiaries or affiliates; (g) is not at such time (or at any time thereafter while serving as an Independent Director) the beneficial owner of shares of common stock of the Originator or any affiliate of the Originator; and (h) is not a spouse, parent, sibling or child of any person described by (a) through (g) above. Each Independent Director has been and shall be paid director's fees by the Transferor in amounts mutually acceptable to such Independent Director and to the Transferor. Whenever necessary, the Transferor will observe all requirements of the Delaware General Corporation Law, its Certificate of Incorporation and its by-laws. 3. The Transferor's books and records have been and will be maintained separately from those of the Originator. Any consolidated financial statements of the Originator which include the Transferor have contained and will contain detailed notes clearly stating that the Receivables have been sold to a third party and that collections under the Receivables are available only to the holders of the Certificates. Each of the Transferor and the Originator will conduct its business solely in its respective corporate name and in such a separate manner so as not to mislead others with whom it is dealing. 4. Neither the Originator nor the Transferor has concealed or will conceal from any interested party any transfers contemplated by the Transaction Documents. Neither the Transferor nor the Originator has itself removed or concealed, and will not itself remove or conceal, from creditors any of its assets and has not participated and will not participate in removing or concealing the assets of any other entity. The Obligors on the Receivables will not be notified of the transfer of the Receivables to the Transferor, in part, because such notification could cause confusion that could disrupt collections on the Receivables to the detriment of the holders of the investor certificates. The Originator will indicated in its computer files that the Receivables have been sold to the Transferor. The Transferor's books and records shall indicate that such Receivables have further been sold by the Transferor to the Trust. In addition, the Originator will provide to the Transferor a true and complete list of all the accounts relating to such Receivables, identified by number. 5. The Transferor does and will maintain its own books of account and corporate records separate from those of the Originator or any of their subsidiaries or affiliates, including separate audited financial statements. 6. The Transferor does and will at all times cause the Independent Director(s) to be elected and compensated as described above. 7. Any allocations of direct, indirect or overhead expenses for items shared between the Transferor and the Originator have been and will be made to the extent practical on the basis of actual use or value of services rendered and otherwise on a basis reasonably related to actual use or the value of services rendered. 8. The Transferor has paid and will pay (or the Originator will pay and the Transferor will reimburse the Originator for) its own operating expenses and liabilities from its own funds, except the Originator paid the organizational expenses of the Transferor and will pay a portion of the expenses incurred in connection with the Transactions. The Transferor also has paid and will pay a portion of the expense related to the Transactions. 9. The Transferor prepares and has made available to holders of the investor certificates its separate audited financial statements, and the Transferor's separate financial statements have and will disclose that the Receivables have been sold. 10. The Transferor does and will maintain its assets in such a manner that it is not costly or difficult to segregate, ascertain or otherwise identify its individual assets from or as against those of the Originator or any of their subsidiaries or affiliates. 11. The Transferor does not and will not commingle or pool its funds or other assets with those of the Originator or any other subsidiaries or affiliates of the Originator, except as specifically provided in the Agreement. The Transferor does not and will not maintain any joint bank account or other depository account to which the Originator or any of their other subsidiaries or affiliates, other than the Originator in its capacity as Servicer, has independent access. 12. The Transferor does and will maintain arm's length relationships with the Originator and all their other affiliates. Neither the Transferor, on the one hand, nor the Originator or any of their other affiliates, on the other hand, is or will be, or holds or will hold itself out to be, responsible for the debts of the other or the decisions or actions respecting the daily business and affairs of the other. 13. The Transferor is not named, and has not entered into any agreement to be named, directly or indirectly, as a direct or contingent beneficiary or loss payee on any insurance policy covering the property of the Originator. 14. Each officer and director of the Transferor shall discharge his or her respective fiduciary duties and obligations to the Transferor in accordance with all applicable laws. 15. All of the Transferor's transactions with the Originator and any of their subsidiaries and affiliates will be fully documented and will reflect arm's-length transactions undertaken in good faith for bona fide business purposes. EX-4.23 11 0011.txt C-77 Exhibit 4.23 EXECUTION COPY CLASS A-1 CERTIFICATE PURCHASE AGREEMENT Dated as of November 9, 1999 among SRI RECEIVABLES PURCHASE CO., INC., individually and as Transferor, SPECIALTY RETAILERS, INC., individually and as Originator and Servicer, THE CLASS A-1 PURCHASERS PARTIES HERETO, and CREDIT SUISSE FIRST BOSTON, NEW YORK BRANCH, Facility Agent ____________________ Relating to SRI Receivables Master Trust Class A-1 Variable Funding Certificates, Series 1999-1 ____________________ TABLE OF CONTENTS Page SECTION 1. DEFINITIONS 2 1.1 Definitions 2 1.2 Other Definitional Provisions 10 SECTION 2. AMOUNT AND TERMS OF COMMITMENTS 10 2.1 Purchases 10 2.2 Reductions, Increases and Extensions of Commitments 13 2.3 Calculation of Interest, Fees, Expenses, Payments, Etc 16 2.4 Requirements of Law 18 2.5 Taxes 20 2.6 Indemnification 22 SECTION 3. CONDITIONS PRECEDENT 26 3.1 Condition to Initial Purchase 26 3.2 Condition to Additional Purchase 28 SECTION 4. REPRESENTATIONS AND WARRANTIES 29 4.1 Representations and Warranties of SRPC 29 4.2 Representations and Warranties of SRI 32 4.3 Representations and Warranties of the Agents, the Facility Agent and the Class A-1 Purchasers 34 SECTION 5. COVENANTS 35 5.1 Covenants of SRPC and SRI 35 SECTION 6. MUTUAL COVENANTS REGARDING CONFIDENTIALITY 40 6.1 Covenants of SRPC, Etc. 40 6.2 Covenants of Class A-1 Purchasers 40 SECTION 7. THE AGENTS 41 7.1 Appointment 41 7.2 Delegation of Duties 41 7.3 Exculpatory Provisions 41 7.4 Reliance by Agent 42 7.5 Notices 42 7.6 Non-Reliance on Agent and Other Class A-1 Purchasers 42 7.7 Indemnification 43 7.8 Agents in Their Individual Capacities 43 7.9 Successor Agent 44 SECTION 8. SECURITIES LAWS; TRANSFERS; TAX TREATMENT 45 8.1 Transfers of Class A-1 Certificates 45 8.2 Tax Characterization 49 SECTION 9. MISCELLANEOUS 49 9.1 Amendments and Waivers 49 9.2 Notices 50 9.3 No Waiver; Cumulative Remedies 52 9.4 Successors and Assigns 52 9.5 Successors to Servicer 52 9.6 Counterparts 53 9.7 Severability 53 9.8 Integration 53 9.9 Governing Law 54 9.10 Termination 54 9.11 Limited Recourse; No Proceedings 54 9.12 Survival of Representations and Warranties 55 9.13 Submission to Jurisdiction; Waivers 55 9.14 WAIVERS OF JURY TRIAL 56 LIST OF EXHIBITS EXHIBIT A Form of Investment Letter EXHIBIT B Form of Joinder Supplement EXHIBIT C Form of Transfer Supplement CLASS A-1 CERTIFICATE PURCHASE AGREEMENT, dated as of November 9, 1999, by and among SRI RECEIVABLES PURCHASE CO., INC., a Delaware corporation ("SRPC"), individually and as Transferor (as defined in the Master Pooling and Servicing Agreement referred to below), SPECIALTY RETAILERS, INC., a Texas corporation ("SRI"), individually and as Servicer (as defined in the Master Pooling and Servicing Agreement referred to below), the CLASS A-1 PURCHASERS (as hereinafter defined) from time to time parties hereto, the AGENTS for the Purchaser Groups from time to time parties hereto (each such party, together with their respective successors in such capacity, an "Agent"), and CREDIT SUISSE FIRST BOSTON, a Swiss banking corporation acting through its New York Branch ("CSFB"), as facility agent for the Class A-1 Purchasers and for the Class A-2 Purchasers and the Class B Purchasers, each as defined below (together with its successors in such capacity, the "Facility Agent"). W I T N E S S E T H: WHEREAS, SRPC, as Transferor, SRI, as Servicer, and Bankers Trust (Delaware), a Delaware banking corporation, as trustee (together with its successors in such capacity, the "Trustee"), are parties to a certain Second Amended and Restated Pooling and Servicing Agreement dated as of November 1, 1999 (as the same may from time to time be amended or otherwise modified, the "Master Pooling and Servicing Agreement"), pursuant to which the Transferor has created the SRI Receivables Master Trust (the "Trust"); WHEREAS, pursuant to a Series 1999-1 Supplement to the Master Pooling and Servicing Agreement, dated as of November 9, 1999 (as the same may from time to time be amended, supplemented or otherwise modified, the "Supplement") the Trust has issued its Class C Floating Rate Certificates, Series 1999-1 (the "Class C Certificates"), having a Class C Initial Invested Amount (as defined in the Supplement) equal to $28,000,000, its Class D Floating Rate Certificates, Series 1999-1 (the "Class D Certificates"), having a Class D Initial Invested Amount (as defined in the Supplement) equal to $18,375,000 and its Class E Certificates, Series 1999-1 (the "Class E Certificates"), having a Class E Initial Invested Amount (as defined in the Supplement) equal to $20,125,000; WHEREAS, pursuant to the Supplement, as supplemented by the Issuance Supplement thereto, dated as of November 9, 1999 (as the same may from time to time be amended or otherwise modified, the "Issuance Supplement"; and the Supplement, as supplemented by the Issuance Supplement, together with the Master Pooling and Servicing Agreement, the "Pooling and Servicing Agreement") the Trust proposes to issue its Class A-1 Variable Funding Certificates, Series 1999-1 (the "Class A-1 Certificates"), its Class A-2 Variable Funding Certificates, Series 1999-1 (the "Class A-2 Certificates") and its Class B Variable Funding Certificates, Series 1999-1 (the "Class B Certificates"); and WHEREAS, the Class A-1 Purchasers are willing to purchase the Class A-1 Certificates on the Closing Date and from time to time thereafter to purchase Additional Class A-1 Invested Amounts (as defined in the Supplement) thereunder on the terms and conditions provided for herein; NOW THEREFORE, in consideration of the mutual covenants herein contained, and other good and valuable consideration, the receipt and adequacy of which are hereby expressly acknowledged, the parties hereto agree as follows: SECTION 1. DEFINITIONS 1.1 Definitions. All capitalized terms used herein as defined terms and not defined herein shall have the meanings given to them in the Pooling and Servicing Agreement. Each capitalized term defined herein shall relate only to the Series 1999-1 and to no other Series of Investor Certificates issued by the Trust. "Adjusted Commitment" shall mean on any date of determination, with respect to a Liquidity Purchaser for a Conduit Purchaser, such Liquidity Purchaser's Commitment minus the aggregate outstanding principal amount of its Support Advances to such Conduit Purchaser (excluding any portion thereof advanced to such Conduit Purchaser to fund interest, discount, fees, expenses or similar amounts in respect of Commercial Paper Notes or other indebtedness of such Conduit Purchaser or in respect of the Class A-1 Certificates). "Affected Party" shall mean, with respect to any Conduit Purchaser, any Support Party of such Conduit Purchaser. "Agent" has the meaning specified in the preamble to this Agreement. "Agreement" shall mean this Class A-1 Certificate Purchase Agreement, as amended, supplemented or otherwise modified from time to time. "Alternative Rate" has the meaning specified in Exhibit B-1 of the Issuance Supplement. "Assignee" and "Assignment" have the respective meanings specified in subsection 8.1(e) of this Agreement. "Certificate Rate Determination Date" shall mean, for any Interest Accrual Period, the Second Business Day prior to the Distribution Date with respect to such Interest Accrual Period. "Class A-1 Certificates" has the meaning specified in the recitals to this Agreement. "Class A-1 Exiting Purchaser Amortization Amount" shall mean, with respect to a Purchase Termination Date, the sum of (i) the aggregate Percentage Interests of all Committed Purchasers and Liquidity Purchasers which became Exiting Purchasers on such date, times the Class A-1 Principal Balance on such date, plus, with respect to each of the Conduit Purchasers, (ii) the product of (A) the aggregate Liquidity Percentages of all Liquidity Purchasers with respect to such Conduit Purchaser which became Exiting Purchasers on such date, times (B) the Percentage Interest of such Conduit Purchaser times the Class A-1 Principal Balance on such date, in each case determined after giving effect to any purchases of Additional Class A-1 Invested Amounts occurring, any Assignments which became effective and any Support Advances made on such date. "Class A-1 Fee Letter" shall mean that certain letter agreement, designated therein as the Series 1999-1 Class A-1 Fee Letter and dated as of the date hereof, among the Agent for each Purchaser Group, the Facility Agent, SRPC and SRI, as such letter agreement may be amended or otherwise modified from time to time. "Class A-1 Owners" shall mean the Class A-1 Purchasers that are owners of record of the Class A-1 Certificates or, with respect to any Class A-1 Certificate held by the an Agent hereunder as nominee on behalf of Class A-1 Purchasers in a Purchaser Group, the Class A-1 Purchasers that are owners of the Class A-1 Invested Amount represented by such Class A-1 Certificate as reflected on the books of the such Agent in accordance with this Agreement. "Class A-1 Program Fees" shall mean the ongoing program fees payable to Class A-1 Purchasers in respect of the Class A-1 Purchase Limit, in the amounts and on the dates set forth in the Class A-1 Fee Letter. "Class A-1 Purchasers" shall mean, collectively, the Conduit Purchasers, the Liquidity Purchasers and the Committed Purchasers. "Class A-1 Purchase Limit" shall mean, on any date of determination, the aggregate Commitments of the Committed Purchasers and the Liquidity Purchasers. "Class A-1 Utilization Fees" shall mean the ongoing utilization fees payable to Class A-1 Purchasers in respect of the Class A-1 Principal Balance, in the amounts and on the dates set forth in the Class A-1 Fee Letter. "Class A-2 Certificates" has the meaning specified in the recitals to this Agreement. "Class A-2 Purchase Agreement" shall mean the Class A-2 Certificate Purchase Agreement, dated as of the date hereof, among SRPC, individually and as Transferor, SRI, individually and as Servicer, the Class A-2 Purchasers parties thereto, the agents for the purchaser groups referred to therein and the Facility Agent, as amended, modified or otherwise supplemented from time to time. "Class A-2 Purchasers" has the meaning specified in the Class A-2 Purchase Agreement. "Class B Certificates" has the meaning specified in the recitals to this Agreement. "Class B Purchase Agreement" shall mean the Class B Certificate Purchase Agreement, dated as of the date hereof, among SRPC, individually and as Transferor, SRI, individually and as Servicer, the Class B Purchasers parties thereto, the agents for the purchaser groups referred to therein and the Facility Agent referred to therein, as amended, modified or otherwise supplemented from time to time. "Class B Purchasers" has the meaning specified in the Class B Purchase Agreement. "Class C Certificates" has the meaning specified in the recitals to this Agreement. "Class D Certificates" has the meaning specified in the recitals to this Agreement. "Class E Certificates" has the meaning specified in the recitals to this Agreement. "Closing Date" shall mean November 9, 1999. "Code" shall mean the Internal Revenue Code of 1986, as amended. "Commercial Paper Notes" shall mean, with respect to a Conduit Purchaser, the short-term promissory notes issued by such Conduit Purchaser which are allocated by such Conduit Purchaser as its funding for its purchasing or maintaining its Percentage Interest of the Class A-1 Principal Balance hereunder. "Commercial Paper Rate" has the meaning specified in Exhibit B-1 of the Issuance Supplement. "Commitment" shall mean, for any Committed Purchaser or Liquidity Purchaser, the maximum amount of such Class A-1 Purchaser's commitment to purchase a portion of the Class A-1 Initial Invested Amount or Additional Class A-1 Invested Amounts, as set forth opposite such Class A-1 Purchaser's name in the Joinder Supplement or Transfer Supplement by which such Committed Purchaser became a party to this Agreement or assumed the Commitment (or a portion thereof) of another Class A-1 Purchaser, as such amount may be adjusted from time to time pursuant to Transfer Supplement(s) executed by such Class A-1 Purchaser and its Assignee(s) and delivered pursuant to Section 2.2 of this Agreement or pursuant to Section 8.1 of this Agreement. In the event that a Class A-1 Purchaser is both a Committed Purchaser and a Liquidity Purchaser, or is a Liquidity Purchaser which maintains a portion of its Commitment hereunder in relation to more than one Conduit Purchaser, such Class A-1 Purchaser shall be deemed to hold separate Commitments hereunder in each such capacity. "Commitment Expiration Date" shall mean, with respect to a Committed Purchaser or Liquidity Purchaser, November 7, 2000, as such date may be extended from time to time with respect to such Class A-1 Purchaser in accordance with subsection 2.2(e) hereof. "Committed Purchaser" shall mean any Class A-1 Purchaser which is designated as a Committed Purchaser in the Joinder Supplement or Transfer Supplement pursuant to which it became a party to this Agreement, and any Assignee of such Class A-1 Purchaser to the extent of the portion of such Commitment assumed by such Assignee pursuant to its respective Transfer Supplement. "Conduit Purchaser" shall mean shall mean any Class A-1 Purchaser which is designated as a Conduit Purchaser in the Joinder Supplement or Transfer Supplement pursuant to which it became a party to this Agreement. "Consented Assignee" shall mean each Class A-1 Purchaser and each Agent (in its individual capacity) which is a party to any Joinder Supplement, each Class A-2 Purchaser, each Class B Purchaser, each Person listed in the Consented Assignee Letter as in effect on the date on which such Person became or agreed to become an Assignee, a Participant or a Support Party, and each other Person who has been consented to as an Assignee or potential Assignee by SRPC, which consent shall not be unreasonably withheld in the case of an assignment by a Conduit Purchaser of its interest in the Class A-1 Certificates and its rights and obligations under this Agreement and the Pooling and Servicing Agreement to any other Conduit Purchaser which is administered by the same Person as the assignor Conduit Purchaser. "Corporate Base Rate" shall mean, for any day, the higher of (i) the base commercial lending rate per annum announced from time to time by Credit Suisse First Boston in New York in effect on such day, or (ii) the interest rate per annum quoted by Credit Suisse First Boston at approximately 11:00 a.m., New York City time, on such day, to dealers in the New York Federal funds market for the overnight offering of United States dollars by Credit Suisse First Boston plus one-half of one percent (0.50%). (The Corporate Base Rate is not intended to represent the lowest rate charged by the Credit Suisse First Boston for extensions of credit.) "Dissenting Purchaser" has the meaning specified in subsection 2.2(e) of this Agreement. "Downgraded Purchaser" has the meaning specified in subsection 8.1(j) of this Agreement. "Estimated Interest Adjustment" has the meaning specified in Exhibit B-1 to the Issuance Supplement. "Excluded Taxes" has the meaning specified in subsection 2.5(a) of this Agreement. "Exiting Purchaser" has the meaning specified in subsection 2.2(e) of this Agreement. "Extension Date" has the meaning specified in subsection 2.2(e) hereof. "Extension Notice Deadline" has the meaning specified in subsection 2.2(e) of this Agreement. "Granite" shall mean Granite National Bank, N.A., a national banking association, which is a subsidiary of Stage. "Governmental Authority" shall mean any nation or government, any state or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. "Indemnitee" has the meaning specified in subsection 2.6(a) of this Agreement. "Indemnitor" has the meaning specified in subsection 2.6(a) of this Agreement. "Intended Characterization" has the meaning specified in Section 8.2 of this Agreement. "Investing Office" shall mean initially, the office of any Class A-1 Purchaser (if any) designated as such in the Joinder Supplement or Transfer Supplement by which it became a party hereto, and thereafter, such other office of such Class A-1 Purchaser as may be designated in writing to the Class A-1 Agent, the Transferor, the Servicer and the Trustee by such Class A-1 Purchaser. "Investment Letter" has the meaning specified in subsection 8.1(a) of this Agreement. "Joinder Supplement" has the meaning specified in subsection 2.2(d) of this Agreement. "Liquidity Percentage" shall mean, for a Liquidity Purchaser for a Conduit Purchaser, such Liquidity Purchaser's Adjusted Commitment with respect to such Conduit Purchaser as a percentage of the aggregate Adjusted Commitments of all Liquidity Purchasers for such Conduit Purchaser. "Liquidity Purchaser" shall mean, with respect to a Conduit Purchaser, each Class A-1 Purchaser identified as a Liquidity Purchaser for such Conduit Purchaser in the Joinder Supplement or Transfer Supplement pursuant to which such Conduit Purchaser became a party hereto, and any Assignee of such Class A-1 Purchaser to the extent such Assignee has assumed, pursuant to a Transfer Supplement, the Commitment of such Class A-1 Purchaser. "Master Pooling and Servicing Agreement" has the meaning specified in the recitals to this Agreement. "Maximum Purchase Amount" shall mean, for any Conduit Purchaser, the aggregate Commitments of its Liquidity Purchasers. "New Issuance" has the meaning specified in subsection 5.1(p) of this Agreement. "Notes" has the meaning specified in subsection 9.11(b) of this Agreement. "Parity Class" shall mean, with respect to the Class A Certificates or the Class B Certificates, a class or subclass of Series 1999-1 Certificates which are on a parity with the Class A Certificates or the Class B Certificates, as the case may be, as to allocations of Available Series 1999-1 Finance Charge Collections, Excess Finance Charge Collections, Series Transferor Finance Charge Collections, Reallocated Principal Collections or Available Principal Collections. "Partial Expiration Date" shall mean any date on which the Commitment Expiration Date for some, but not all, of Committed Purchasers and Liquidity Purchasers occurs. "Participant" has the meaning specified in subsection 8.1(d) of this Agreement. "Participation" has the meaning specified in subsection 8.1(d) of the Agreement. "Percentage Interest" shall mean, for a Class A-1 Purchaser on any day, the percentage equivalent of (a) the sum of (i) the portion of the Class A-1 Initial Invested Amount (if any) purchased by such Class A-1 Purchaser, plus (ii) the aggregate Additional Class A-1 Invested Amounts (if any) purchased by such Class A-1 Purchaser prior to such day pursuant to Section 6.15 of the Pooling and Servicing Agreement, plus (iii) any portion of the Class A-1 Principal Balance acquired by such Class A-1 Purchaser as an Assignee from another Class A-1 Purchaser pursuant to a Transfer Supplement executed and delivered pursuant to Section 8.1 of this Agreement, minus (iv) the aggregate amount of principal payments made to such Class A-1 Purchaser prior to such day, minus (v) any portion of the Class A-1 Principal Balance assigned by such Class A-1 Purchaser to an Assignee pursuant to a Transfer Supplement executed and delivered pursuant to Section 8.1 of this Agreement, divided by (b) the aggregate Class A-1 Principal Balance on such day. "Person" shall mean an individual, partnership, corporation, business trust, joint stock company, trust, unincorporated association, joint venture, governmental authority or other entity of whatever nature. "Pooling and Servicing Agreement" has the meaning specified in the recitals to this Agreement. "Purchase Date" shall mean the Closing Date and each Business Day on which the purchase of an Additional Class A-1 Invested Amount is to occur in accordance with Section 6.15 of the Pooling and Servicing Agreement and Section 2.1 hereof. "Purchase Termination Date" shall mean, for a Class A-1 Purchaser, the first to occur of (i) in the case of a Committed Purchaser or Liquidity Purchaser, the Commitment Expiration Date for such Class A-1 Purchaser or, in the case of a Conduit Purchaser, the latest Commitment Expiration Date for any of its Liquidity Purchasers, (ii) the Amortization Period Commencement Date, or (iii) the date on which a Mandatory Partial Amortization Event is deemed to have occurred. "Purchaser Group" shall mean each group of Class A-1 Purchasers consisting of (i) a Conduit Purchaser, (ii) the Liquidity Purchasers with respect to such Conduit Purchaser, and (iii) any Committed Purchasers which are assignees of such Conduit Purchaser or any such Liquidity Providers. "Purchaser Percentage" shall mean, with respect to a Committed Purchaser or Conduit Purchaser, its Commitment or Maximum Purchase Amount, as the case may be, as a percentage of the Class A-1 Purchase Limit. "Receivables Transfer Agreement" shall mean the Receivables Transfer Agreement, dated as of August 1, 1998, between SRI, as purchaser, and Granite, as transferor, as the same may from time to time be amended or otherwise modified. "Regulatory Change" shall mean, as to each Class A-1 Purchaser, any change occurring after the date of the execution and delivery of the Joinder Supplement or the Transfer Supplement by which it became party to this Agreement; in the case of a Participant, any change occurring after the date on which its Participation became effective, or in the case of an Affected Party, any change occurring after the date it became such an Affected Party, in any (or the adoption after such date of any new): (i) United States Federal or state law or foreign law applicable to such Class A-1 Purchaser, Affected Party or Participant or any entity controlling such Class A-1 Purchaser, Affected Party or Participant; or (ii) regulation, interpretation, directive, guideline or request (whether or not having the force of law) applicable to such Class A-1 Purchaser, Affected Party or Participant or any entity controlling such Class A-1 Purchaser, Affected Party or Participant of any court or other judicial authority or any Governmental Authority charged with the interpretation or administration of any law referred to in clause (i) or of any fiscal, monetary or other Governmental Authority or central bank having jurisdiction over such Class A-1 Purchaser, Affected Party or Participant or any entity controlling such Class A-1 Purchaser, Affected Party or Participant. "Related Documents" shall mean, collectively, this Agreement (including the Class A-1 Fee Letter and all Joinder Supplements and Transfer Supplements), the Class A-2 Purchase Agreement (including each fee letter, joinder supplement and transfer supplement thereunder), the Class B Purchase Agreement (including each fee letter, joinder supplement and transfer supplement thereunder), the Master Pooling and Servicing Agreement, the Supplement, the Issuance Supplement, the Series 1999-1 Certificates, the Receivables Purchase Agreement and the Receivables Transfer Agreement. "Required Class A-1 Owners" shall mean, at any time, Class A-1 Owners having Percentage Interests aggregating greater than 50%. "Required Class A-1 Purchasers" shall mean, at any time, Committed Purchasers and Liquidity Purchasers having Commitments aggregating greater than 50% of the Class A-1 Purchase Limit. "Requirement of Law" shall mean, as to any Person, any law, treaty, rule or regulation, or determination of an arbitrator or Governmental Authority, in each case applicable to or binding upon such Person or to which such Person is subject, whether federal, state or local (including usury laws, the Federal Truth in Lending Act and Regulation Z and Regulation B of the Board of Governors of the Federal Reserve System). "Risk Rate" shall mean, for any day, a rate per annum equal to the sum of (i) the Corporate Base Rate in effect for such day, plus (ii) 2.00%. "Securities Act" shall mean the Securities Act of 1933, as amended. "Series 1999-1 Certificates" has the meaning specified in the recitals to this Agreement. "SRI" has the meaning specified in the preamble to this Agreement and, as used herein (except to the extent that the context otherwise requires), shall mean SRI in its individual capacity (including its capacity as Originator). "Stage" shall mean Stage Stores, Inc., a Delaware corporation which is the parent of SRI. "Supplement" has the meaning specified in the recitals to this Agreement. "Support Facility" shall mean any liquidity or credit support agreement or other facility with a Conduit Purchaser which relates, either generally or specifically, to this Agreement (including any agreement to purchase an assignment of or participation in, or to make loans or other advances in respect of, Class A-1 Certificates). "Support Party" shall mean any bank, insurance company or other entity extending or having a commitment to extend funds to or for the account of a Conduit Purchaser (including by agreement to purchase an assignment of or participation in, or to make loans or other advances in respect of, Class A-1 Certificates) under a Support Facility. Each Liquidity Purchaser for a Conduit Purchaser shall be deemed to be a Support Party for such Conduit Purchaser. "Taxes" has the meaning specified in subsection 2.5(a) of this Agreement. "Termination Event" shall mean the occurrence of a Trust Pay Out Event, a Series 1999-1 Pay Out Event, Mandatory Partial Amortization Event or a Servicer Default, or the occurrence of an event or condition which would be a Trust Pay Out Event, a Series 1999-1 Pay Out Event, Mandatory Partial Amortization Event or a Servicer Default but for a waiver of or failure to declare or determine such event by the Certificateholders or the Trustee. "Transfer" has the meaning specified in subsection 8.1(c) of this Agreement. "Transferee" has the meaning specified in subsection 8.1(c) of this Agreement. "Transfer Supplement" has the meaning specified in subsection 8.1(e) of this Agreement. "Trust" has the meaning specified in the recitals to this Agreement. "Trustee" has the meaning specified in the recitals to this Agreement. "written" or "in writing" (and other variations thereof) shall mean any form of written communication or a communication by means of telex, telecopier device, telegraph or cable. 1.2 Other Definitional Provisions. (a) Unless otherwise specified therein, all terms defined in this Agreement shall have the defined meanings when used in any certificate or other document made or delivered pursuant hereto. (b) The words "hereof", "herein", and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement; and Section, subsection and Exhibit references are to this Agreement, unless otherwise specified. The words "including" and "include" shall be deemed to be followed by the words "without limitation". SECTION 2. AMOUNT AND TERMS OF COMMITMENTS 2.1 Purchases. (a) On and subject to the terms and conditions of this Agreement, (i) each Conduit Purchaser may purchase its Purchaser Percentage of the Class A-1 Certificates on the Closing Date for a purchase price equal to its Purchaser Percentage of the Class A-1 Initial Invested Amount, and (ii) each Liquidity Purchaser for each Purchaser Group, severally, agrees to purchase on the Closing Date its Liquidity Percentage of the portion of the Class A-1 Initial Invested Amount not purchased by the Conduit Purchaser in such Purchaser Group pursuant to clause (i), in each case for a purchase price equal to the portion of the Class A-1 Initial Invested Amount so purchased. (b) On and subject to the terms and conditions of this Agreement and prior to its Purchase Termination Date, (i) each Conduit Purchaser may purchase its Purchaser Percentage of any Additional Class A-1 Invested Amount offered for purchase pursuant to Section 6.15 of the Pooling and Servicing Agreement, and (ii) each Committed Purchaser (if any), severally, agrees to purchase its Purchaser Percentage of the Additional Class A-1 Invested Amount so offered for purchase, in each case for a purchase price equal to the Additional Class A-1 Invested Amount so purchased. (c) The purchase of the Class A-1 Initial Invested Amount shall be made on prior notice from the Transferor to the Facility Agent and each Agent received not later than 4:00 p.m. New York City time on the Business Day preceding the Closing Date. Each purchase of any Additional Class A-1 Invested Amount on the applicable Purchase Date shall be made on prior notice from the Transferor received by the Facility Agent and each Agent not later than 2:00 p.m. New York City time on the Business Day immediately preceding such Purchase Date. Each such notice shall be irrevocable and shall specify (i) the aggregate Class A-1 Initial Invested Amount or Additional Class A-1 Invested Amount to be purchased, (ii) the applicable Purchase Date (which shall be a Business Day), and (iii) instructions as to the deposit of the proceeds of the purchase. Each Agent shall promptly forward a copy of each such notice received by it to each Class A-1 Purchaser in its Purchaser Group. (d) Each Conduit Purchaser shall notify the Agent for its Purchaser Group by 9:30 a.m., New York City time, on the applicable Purchase Date whether it has determined to make the purchase offered to it pursuant to subsection 2.1(a) or 2.1(b), as applicable. In the event that a Conduit Purchaser shall not have timely provided such notice such Conduit Purchaser shall be deemed to have determined not to make such purchase. Such Agent shall notify the Transferor, the Servicer and each Liquidity Purchaser for such Conduit Purchaser on or prior to 10:00 a.m., New York City time, on the applicable Purchase Date if such Conduit Purchaser has not determined to purchase its entire share of the Class A-1 Initial Invested Amount or the Additional Class A-1 Invested Amount, as the case may be, and shall specify in such notice (i) the identity of such Conduit Purchaser, (ii) the portion of the Class A-1 Initial Invested Amount or the Additional Class A-1 Invested Amount, as the case may be, which such Conduit Purchaser has not elected to purchase as provided above, and (iii) the respective Liquidity Percentages of such Liquidity Purchasers on such Purchase Date (as determined by such Agent in good faith; for purposes of such determination, such Agent shall be entitled to rely conclusively on the most recent information provided by such Conduit Purchaser or its agent or by the agent for its Support Parties). Subject to receiving such notice and to the satisfaction of the applicable conditions set forth in Article 3 hereof, each of such Conduit Purchaser's Liquidity Purchasers shall on the applicable Purchase Date purchase a portion of the Class A-1 Initial Invested Amount or the Additional Class A-1 Invested Amount, as the case may be, which such Conduit Purchaser has not elected to purchase in an amount equal to its Liquidity Percentage thereof, for a purchase price equal to the a portion of the Class A-1 Initial Invested Amount or the Additional Class A-1 Invested Amount, as the case may be, so purchased. (e) Each Class A-1 Purchaser's purchase price payable pursuant to subsection 2.1(a), 2.1(b) or 2.1(d) of this Agreement shall be made available to the Agent for its Purchaser Group, subject to the fulfillment of the applicable conditions set forth in Article 3 hereof, at or prior to 2:00 p.m., New York City time, on the applicable Purchase Date, by deposit of immediately available funds to an account of such Agent specified in subsection 9.2(b) of this Agreement. Such Agent shall promptly notify the Transferor in the event that any Class A-1 Purchaser either fails to make such funds available to such Agent before such time or notifies such Agent that it will not make such funds available to such Agent before such time. Subject to (i) such Agent's receipt of such funds and (ii) the fulfillment of the applicable conditions set forth in Article 3 hereof, as determined by such Agent, such Agent will not later than 3:00 p.m., New York City time, on such Purchase Date make such funds available, in the same type of funds received, by wire transfer thereof to the account of Transferor in the United States specified in the applicable purchase notice given pursuant to subsection 2.1(c) or, in the case of the purchase on the Closing Date, specified in writing by the Transferor to such Agent not later than the Business Day prior to the Closing Date. (f) In the event that notwithstanding the fulfillment of the applicable conditions set forth in Article 3 hereof with respect to a purchase, a Conduit Purchaser elected to make a purchase on a Purchase Date but failed to make its purchase price available to the Agent for its Purchaser Group when required by subsection 2.1(e) of this Agreement, such Conduit Purchaser shall be deemed to have rescinded its election to make such purchase, and neither the Transferor nor any other party shall have any claim against such Conduit Purchaser by reason for its failure to timely make such purchase. In any such case, such Agent shall give notice of such failure not later than noon, New York City time, on the Purchase Date to each Liquidity Purchaser for such Conduit Purchaser, which notice shall specify (i) the identity of such Conduit Purchaser, (ii) the amount of the purchase which it had elected but failed to make and (iii) the respective Liquidity Percentages of such Liquidity Purchasers on such Purchase Date (as determined by such Agent in good faith; for purposes of such determination, such Agent shall be entitled to rely conclusively on the most recent information provided by such Conduit Purchaser or its agent or by the agent for its Support Parties). Subject to receiving such notice, each of such Conduit Purchaser's Liquidity Purchasers shall purchase a portion of the Class A-1 Invested Amount in an amount equal to its Liquidity Percentage of the amount described in clause (ii) above at or before 4:00 p.m., New York City time, on such Purchase Date and otherwise in accordance with subsection 2.1(d) of this Agreement. Subject to such Agent's receipt of such funds, such Agent will not later than 5:00 p.m., New York City time, on such Purchase Date make such funds available, in the same type of funds received, by wire transfer thereof to the account of the Transferor described in subsection 2.1(e) of this Agreement, which payment shall be deemed to be timely for purposes of this Agreement. (g) The Agent for each Purchaser Group shall notify the Transferor, the Servicer and each Class A-1 Purchaser in its Purchaser Group on the Closing Date (in the case of the purchase of the Class A-1 Initial Invested Amount) or not later than the Business Day following the applicable Increase Date (in the case of any purchases of Additional Class A-1 Invested Amounts) of the identity of each Class A-1 Purchaser in such Purchaser Group which purchased any portion of the Class A-1 Initial Invested Amount or any Additional Class A-1 Invested Amount on such Purchase Date, whether such Class A-1 Purchaser was a Conduit Purchaser, a Committed Purchaser or a Liquidity Purchaser and the portion of the Class A-1 Initial Invested Amount or Additional Class A-1 Invested Amount purchased by such Class A-1 Purchaser. (h) In no event shall a Committed Purchaser be required on any date to purchase an Additional Class A-1 Invested Amount which would result in its Percentage Interest of the Class A-1 Principal Balance, determined after giving effect to such purchase, exceeding its Commitment, and in no event shall a Liquidity Purchaser be required on any date to purchase an Additional Class A-1 Invested Amount which would result in its Percentage Interest of the Class A-1 Principal Balance, determined after giving effect to such purchase, exceeding its Adjusted Commitment. In no event may any Additional Class A-1 Invested Amount be offered for purchase hereunder or under Section 6.15 of the Supplement, nor shall any Class A-1 Purchaser be obligated to purchase any Additional Class A-1 Invested Amounts, to the extent that, after giving effect to such purchase, the Class A-1 Principal Balance would exceed the Class A-1 Purchase Limit. (i) The Class A-1 Purchasers in each Purchaser Group hereby direct that the Class A-1 Certificates be registered in the name of the Agent for such Purchaser Group, as nominee on behalf of the Class A-1 Purchasers in such Purchaser Group from time to time hereunder. (j) The Class A-1 Certificates and interest thereon shall be paid as provided in the Pooling and Servicing Agreement, and each Agent shall allocate to the Class A-1 Owners in its Purchaser Group each payment in respect of the Class A-1 Certificates received by such Agent in its capacity as Class A-1 Certificateholder as provided herein. Payments in reduction of the Class A-1 Invested Amount shall be allocated and applied to Class A-1 Owners pro rata based on their respective Percentage Interests of the Class A-1 Principal Balance, or in any such case in such other proportions as each affected Class A-1 Purchaser may agree upon in writing from time to time with such Agent and the Transferor; provided that from and after a Partial Expiration Date until the earlier to occur of (i) the Purchase Termination Date for all Class A-1 Purchasers and (ii) the date on which (A) the aggregate amount of payments in reduction of the Class A-1 Principal Balance made after such Partial Expiration Date equals (B) the aggregate Class A-1 Exiting Purchaser Amortization Amount for such Partial Expiration Date, payments on a Class A-1 Certificate in reduction of the portion of the Class A-1 Principal Balance evidenced by such Class A-1 Certificate shall be allocated and applied to Class A-1 Owners of such Class A-1 Certificate which are Exiting Purchasers pro rata based on their respective Percentage Interests of the Class A-1 Principal Balance. Payments of interest in respect of the portion of the Class A-1 Principal Balance evidenced by a Class A-1 Certificate shall be allocated and applied to Class A-1 Owners of such Class A-1 Certificate pro rata based upon the respective amounts of interest owed to them, determined as provided in Section 2.3 and the Issuance Supplement. For purposes of this Agreement, amounts distributed from the Interest Funding Account to the Class A-1 Certificateholders shall first be allocated to the accrued and unpaid Class A-1 Program Fee. 2.2 Reductions, Increases and Extensions of Commitments. (a) At any time the Transferor may, upon at least 10 Business Days' prior written notice to each Agent and the Facility Agent, reduce the Class A-1 Purchase Limit. Each such partial reduction shall be in an aggregate amount of $5,000,000 or integral multiples thereof (or such other amount requested by the Transferor to which each Agent and the Facility Agent consents). Reductions of the Class A-1 Purchase Limit pursuant to this subsection 2.2(a) shall be allocated to the Commitment of each Committed Purchaser and the Maximum Purchase Amount of each Conduit Purchaser, pro rata based on the Purchaser Percentage represented by such Commitment or Maximum Purchase Amount. Any such reduction in the Maximum Purchase Amount of the Conduit Purchaser in a Purchaser Group shall automatically result in a reduction of the aggregate Commitments of the Liquidity Providers in such Purchaser Group, which shall be allocated among such Liquidity Purchasers pro rata based on their respective Liquidity Percentages. (b) On the Purchase Termination Date for a Committed Purchaser or Liquidity Purchaser, the Commitment of such Class A-1 Purchaser shall be automatically reduced to zero. (c) The Class A-1 Purchase Limit may be increased from time to time through the increase of the Commitment of one or more Committed Purchasers or Liquidity Purchasers; provided, however, that no such increase shall have become effective unless (i) the Agent for each applicable Purchaser Group, the Facility Agent and the Transferor shall have given their written consent thereto, (ii) in the case of an increase in the Commitment of a Liquidity Purchaser in a Purchaser Group, the Conduit Purchaser in such Purchaser Group shall have consented thereto and agreed to increase its Maximum Purchase Amount, (iii) such increasing Committed Purchaser or Liquidity Purchaser shall have entered into an appropriate amendment or supplement to this Agreement reflecting such increased Commitment and (iv) such conditions, if any, as the Agent for such Purchaser Group or such Conduit Purchaser shall have required in connection with its consent (including the delivery of legal opinions with respect to such Class A-1 Purchaser and, in the case of a Liquidity Purchaser, the agreement of such Liquidity Purchaser to become a Support Party for the Conduit Purchaser in its Purchaser Group and approvals from rating agencies which rate debt issued by such Conduit Purchaser) shall have been satisfied. The Transferor may also increase the Class A-1 Purchase Limit from time to time by adding additional Committed Purchasers or Liquidity Purchasers in accordance with subsection 2.2(d). (d) Subject to the provisions of subsections 8.1(a) and 8.1(b) applicable to initial purchasers of Class A-1 Certificates, any Person may from time to time with the consent of the Facility Agent, each Agent and the Transferor become a party to this Agreement as an initial or an additional Conduit Purchaser or an initial or an additional Committed Purchaser or Liquidity Purchaser by (i) delivering to the Transferor an Investment Letter and (ii) entering into an agreement substantially in the form attached hereto as Exhibit B hereto (a "Joinder Supplement"), with the Transferor, acknowledged by the Servicer, which shall specify (A) the name and address of such Person for purposes of Section 9.2 hereof, (B) whether such Person will be a Conduit Purchaser, a Liquidity Purchaser or a Committed Purchaser, (C) if such Person will be a Liquidity Purchaser or a Committed Purchaser, its Commitment and Commitment Expiration Date, (D) if such Person is a Conduit Purchaser, its Maximum Purchase Amount and the identity of the Liquidity Purchasers in its Purchaser Group and their respective initial Liquidity Percentages, (E) if such Person is a Liquidity Purchaser, the Conduit Purchaser for which it is acting as such, (F) the applicable Purchaser Group for such Person, (G) if such Purchaser Group is a new Purchaser Group, the name of the Agent therefor (which shall be a party to such Joinder Supplement), and (H) the other information provided for in such form of Joinder Supplement. Upon its receipt of a duly executed Joinder Supplement, the Facility Agent shall on the effective date determined pursuant thereto give notice of such effectiveness to each Agent, the Transferor, the Servicer and the Trustee, and the Servicer will provide notice thereof to each Rating Agency (if required). It shall be a condition to the effectiveness of any Joinder Supplement for an additional Class A-1 Purchaser after the Closing Date that each existing Class A-1 Purchaser sell to the additional Class A-1 Purchaser and that the additional Class A-1 Purchaser purchase from each applicable existing Class A-1 Purchaser an interest in the Class A-1 Certificates for a purchase price equal to the portion of the Class A-1 Principal Balance purchased, so that, after giving effect to such purchase and sale, (i) the aggregate Percentage Interest of the members of each Purchaser Group shall be proportionate to the aggregate Commitments of members of each Purchaser Group, and (ii) the Percentage Interest of each Committed Purchaser in a Purchaser Group and of the Conduit Purchaser in such Purchaser Group shall be proportionate to their respective Commitments or Maximum Purchase Amount, as applicable (the Percentage Interest of any Liquidity Purchaser in such Purchaser Group being deemed for such purpose to be held by such Conduit Purchaser). (e) The Commitment Expiration Date for any Committed Purchaser or Liquidity Purchaser may be extended from time to time to time at the request of the Transferor and with the consent of such Class A-1 Purchaser, the Facility Agent, the Agent for the applicable Purchaser Group and, in the case of a Liquidity Purchaser, the related Conduit Purchaser; provided that no such extension shall become effective if, prior to the effective date thereof, a Termination Event shall have occurred. Any Committed Purchaser or Liquidity Purchaser shall become an "Exiting Purchaser" after its scheduled Commitment Expiration Date unless such date has been extended. If (i) the Transferor, not more than 180 and no less than 90 days prior to a Commitment Expiration Date for a Committed Purchaser or Liquidity Purchaser, has requested such Class A-1 Purchaser (by notice to such Class A-1 Purchaser with a copy to the Agent for its Purchaser Group, the Facility Agent and, in the case of a Liquidity Purchaser, to its related Conduit Purchaser), to extend such Commitment Expiration Date to the date which is 364 days after the effective date requested by the Transferor (the "Extension Date"), which shall not be earlier than 60 days after the date of such request nor later than the Commitment Expiration Date then in effect, (ii) such Committed Purchaser or Liquidity Purchaser, as applicable, shall not have notified the Transferor, the Agent for its Purchaser Group, the Facility Agent and, in the case of a Liquidity Purchaser, its related Conduit Purchaser of its willingness in its sole discretion to so extend its Commitment Expiration Date at least 30 days (such 30th day, the "Extension Notice Deadline") prior to the proposed Extension Date, and (iii) no Termination Event shall have occurred, such Committed Purchaser or Liquidity Purchaser, as applicable, shall be a "Dissenting Purchaser" from and after such Extension Notice Deadline. (f) Promptly after an Extension Notice Deadline, the Agent for a Purchaser Group containing a Dissenting Purchaser shall promptly notify each other Class A-1 Purchaser in such Purchaser Group, each other Agent (which shall thereupon notify each Class A-1 Purchaser in its Purchaser Group), the Facility Agent, the Transferor and the Servicer of the identity of each Dissenting Purchaser in such Agent's Purchaser Group and the amount of its Commitment. Either such Agent or the Transferor, with the consent of such Agent and, if the Dissenting Purchaser is a Liquidity Purchaser, each affected Conduit Purchaser, may (but shall not be required to) request that one or more other Class A-1 Purchasers, or another entity acceptable to such Agent and the Facility Agent in their reasonable discretion, and, if the Dissenting Purchaser is a Liquidity Purchaser, each affected Conduit Purchaser in its sole discretion, acquire all or a portion of the Commitment of the Dissenting Purchaser and all amounts payable to it hereunder and under the Pooling and Servicing Agreement in accordance with Section 8.1. Each Dissenting Purchaser hereby agrees to assign all or a portion of its Commitment and the amounts payable to it hereunder and under the Pooling and Servicing Agreement to a replacement investor identified by the applicable Agent in accordance with the preceding sentence, subject to ratable payment such Dissenting Purchaser's Percentage Interest of the Class A-1 Principal Balance, together with all accrued and unpaid interest thereon, and a ratable portion of all fees and other amounts due to it hereunder. 2.3 Calculation of Interest, Fees, Expenses, Payments, Etc. (a) SRPC agrees to pay to each Agent for the account of the Class A-1 Purchasers in its Purchaser Group the Class A-1 Program Fees, the Class A-1 Utilization Fees and other amounts set forth in the Class A-1 Fee Letter at the times specified therein. (b) SRPC further agrees to pay within 30 days following receipt of an invoice therefor to the initial Agent, the Facility Agent and the initial Class A-1 Purchasers all reasonable costs and expenses in connection with the preparation, execution, delivery and initial syndication, of this Agreement and each related Support Facility, and the other documents to be delivered hereunder or in connection herewith, including the reasonable fees and out-of-pocket expenses of counsel for the initial Agent, the Facility Agent and each of the initial Class A-1 Purchasers with respect thereto. SRI further agrees to pay to each Agent, the Facility Agent and each Class A-1 Purchaser, promptly following presentation of an invoice therefor, all reasonable costs and expenses (including reasonable fees and expenses of counsel), if any, in connection with the administration (including any requested amendments, waivers or consents of any of the Related Documents or Support Facilities) hereof or of any of the Related Documents or Support Facilities and the other documents delivered thereunder or in connection therewith. (c) SRI agrees to pay to each Agent, the Facility Agent and each Class A-1 Purchaser, promptly following presentation of an invoice therefor, all reasonable costs and expenses (including reasonable fees and expenses of counsel), if any, in connection with the enforcement hereof or of any of the Related Documents or Support Facilities and the other documents delivered thereunder or in connection therewith. (d) SRI further agrees to pay on demand any and all stamp, transfer and other taxes (other than Taxes covered by Section 2.5) and governmental fees payable in connection with the execution, delivery, filing and recording of any of the Related Documents and each related Support Facility or the other documents and agreements to be delivered hereunder and thereunder or otherwise in connection with the issuance of Series 1999-1, and agrees to save each Class A-1 Purchaser and Agent and the Facility Agent harmless from and against any liabilities with respect to or resulting from any delay in paying or any omission to pay such taxes and fees. (e) Periodic fees or other periodic amounts payable hereunder shall be calculated, unless otherwise specified in the Class A-1 Fee Letter, on the basis of a 360-day year and for the actual days elapsed. Interest calculated by reference to the Corporate Base Rate shall be calculated on the basis of a 365- or 366-day year, as applicable, for the actual days elapsed. (f) Each Class A-1 Purchaser shall be allocated the share of interest on the Class A-1 Principal Balance for each Interest Accrual Period which is determined for its Percentage Interest thereof pursuant to Section 4(a) of and Exhibit B-1 to the Issuance Supplement. At or before 5:00 p.m., New York City time, on each Certificate Rate Determination Date, each Conduit Purchaser shall notify the Agent for its Purchaser Group of (i) the Commercial Paper Rate, if applicable, in effect for the related Interest Accrual Period, and (ii) the date on which the Alternative Rate became applicable to its Invested Percentage of the Covered Portion of the Class A-1 Principal Balance or a portion thereof pursuant to the Issuance Supplement. Such notification may be based on such Conduit Purchaser's estimate of the Commercial Paper Rate if the actual rate is not then known to such Conduit Purchaser, and in such case, such Conduit Purchaser shall notify such Agent at or before 12:00 noon, New York City time, on the following Certificate Rate Determination Date of the amount of any variation between interest payable to such Conduit Purchaser for the applicable Interest Accrual Period based on such estimate and interest which should have been payable to such Conduit Purchaser for such Interest Accrual Period based on its final determination of the applicable Commercial Paper Rate. The amount of any shortfall in interest based on such variation shall be deferred (without interest thereon) and be included in the portion of Class A-1 Interest payable to such Conduit Purchaser for the following Interest Accrual Period, and the amount of any overpayment of interest to such Conduit Purchaser based on such variation shall be credited (without interest thereon), dollar for dollar, against the portion of Class A-1 Interest otherwise payable to such Conduit Purchaser for the following Interest Accrual Period. Each determination by the Conduit Purchaser of its applicable Commercial Paper Rate pursuant to this Agreement shall be conclusive and binding on the Class A-1 Purchasers, the Agents, the Transferor, the Servicer and the Trustee in the absence of manifest error. In the event that a Conduit Purchaser issues Commercial Paper Notes in good faith in order to prefund the purchasing or maintaining of its Percentage Interest of the Class A-1 Principal Balance hereunder, it is understood that the portion of the Commercial Paper Rate attributable to such Commercial Paper Notes, as otherwise determined in accordance with the Issuance Supplement, shall be reduced to give effect to any earnings (net of any investment losses and expenses) received on a cash basis by such Conduit Purchaser from the temporary investment of the proceeds thereof prior to the application of such proceeds to fund its purchasing or maintaining such Percentage Interest. Each Agent shall notify the Servicer on each Certificate Rate Determination Date of the Commercial Paper Rate, the Alternative Rate and the Risk Rate, as applicable, and the Class A-1 Interest for the related Interest Accrual Period substantially in the form of Exhibit B-1A to the Issuance supplement (or such other form which may be mutually acceptable to the applicable Agent and the Servicer from time to time). For such purposes, each Agent may rely conclusively on notices from the Conduit Purchasers pursuant to this subsection as to the interest rate or rates from time to time applicable to its Percentage Interest of the Class A-1 Principal Balance. Such notification from an Agent may be based on the Conduit Purchaser's estimate of the Commercial Paper Rate as provided to such Agent and upon estimates of the Class A-1 Interest if the actual amount is not then known to such Agent. In any such case, such Agent shall notify the Servicer on or before the following Certificate Rate Determination Date of the amount of any variation between the estimated Class A-1 Interest and the actual Class A-1 Interest for the preceding Interest Accrual Period. Subject to any Estimated Interest Adjustment, each determination of the Commercial Paper Rate, the Alternative Rate, the Risk Rate and the Class A-1 Interest by any Agent shall be conclusive and binding on the Class A-1 Purchasers, the Transferor, the Servicer and the Trustee in the absence of manifest error. (g) All payments to be made hereunder or under the Pooling and Servicing Agreement, whether on account of principal, interest, fees or otherwise, shall be made without setoff or counterclaim and shall be made prior to 2:30 p.m., New York City time, on the due date thereof in United States dollars and in immediately available funds (i) in the case of payments to the Facility Agent, to its account specified in subsection 9.2(b) hereof or (ii) in the case of payments to a Class A-1 Purchaser or an Agent in a Purchaser Group, to such Agent's account specified in subsection 9.2(b) hereof. Any such payment received after 2:30 p.m. New York City time shall be deemed to have been made on the next Business Day. Notwithstanding anything herein to the contrary, if any payment due hereunder becomes due and payable on a day other than a Business Day, the payment date thereof shall be extended to the next succeeding Business Day and interest shall accrue thereon at the applicable rate during such extension. To the extent that (i) the Trustee, SRPC, SRI, the Transferor or the Servicer makes a payment to an Agent, the Facility Agent or a Class A-1 Purchaser or (ii) such Agent, the Facility Agent or such Class A-1 Purchaser receives or is deemed to have received any payment or proceeds for application to an obligation, which payment or proceeds or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside or required to be repaid to a trustee, receiver or any other party under any bankruptcy or insolvency law, state or federal law, common law, or for equitable cause, then, to the extent such payment or proceeds are set aside, the obligation or part thereof intended to be satisfied shall be revived and continue in full force and effect, as if such payment or proceeds had not been received or deemed received by such Agent, the Facility Agent or such Class A-1 Purchaser, as the case may be. (h) The obligations of SRPC under this Section 2.3 are subject to subsection 9.11(a) hereof. 2.4 Requirements of Law. (a) In the event that any Class A-1 Purchaser shall have reasonably determined that any Regulatory Change shall: (i) subject such Class A-1 Purchaser to any tax of any kind whatsoever with respect to this Agreement, its Commitment or its beneficial interest in the Class A-1 Certificates, or change the basis of taxation of payments in respect thereof (except for Taxes covered by Section 2.5 and taxes included in the definition of Excluded Taxes in subsection 2.5(a) and changes in the rate of tax on the overall net income of such Class A-1 Purchaser); or (ii) impose, modify or hold applicable any reserve, special deposit, compulsory loan or similar requirement against assets held by, deposits or other liabilities in or for the account of, advances, loans or other extensions of credit by, or any other acquisition of funds by, such Class A-1 Purchaser; and the result of any of the foregoing is to increase the cost to such Class A-1 Purchaser, by an amount which such Class A-1 Purchaser deems to be material, of maintaining its Commitment or its interest in the Class A-1 Certificates or to reduce any amount receivable in respect thereof, then, in any such case, after submission by such Class A-1 Purchaser to the Agent in its Purchaser Group of a written request therefor and the submission by such Agent to the Transferor and the Servicer of such written request therefor (with a copy to the Facility Agent), the Transferor (subject to subsection 9.11(a) hereof) shall pay to the such Agent for the account of such Class A-1 Purchaser any additional amounts necessary to compensate such Class A-1 Purchaser for such increased cost or reduced amount receivable, together with interest on each such amount from the Distribution Date following receipt by the Transferor of such request for compensation under this subsection 2.4(a), if such request is received by the Transferor at least five Business Days prior to the Determination Date related to such Distribution Date, and otherwise from the following Distribution Date, until payment in full thereof (after as well as before judgment) at the Risk Rate in effect from time to time. (bi In the event that any Class A-1 Purchaser shall have determined that any Regulatory Change regarding capital adequacy has the effect of reducing the rate of return on such Class A-1 Purchaser's capital or on the capital of any entity controlling such Class A-1 Purchaser as a consequence of its obligations hereunder or its maintenance of its Commitment or its interest in the Class A-1 Certificates to a level below that which such Class A-1 Purchaser or such entity could have achieved but for such Regulatory Change (taking into consideration such Class A-1 Purchaser's or such entity's policies with respect to capital adequacy) by an amount deemed by such Class A-1 Purchaser to be material, then, from time to time, after submission by such Class A-1 Purchaser to the Agent in its Purchaser Group of a written request therefor and submission by such Agent to the Transferor and the Servicer of such written request therefor (with a copy to the Facility Agent), the Transferor (subject to subsection 9.11(a) hereof) shall pay to the such Agent for the account of such Class A-1 Purchaser such additional amount or amounts as will compensate such Class A-1 Purchaser or such entity for such reduction, together with interest on each such amount from the Distribution Date following receipt by the Transferor of such request for compensation under this subsection 2.4(b), if such request is received by the Transferor at least five Business Days prior to the Determination Date related to such Distribution Date, and otherwise from the following Distribution Date, until payment in full thereof (after as well as before judgment) at the Risk Rate in effect from time to time. (ci Each Class A-1 Purchaser agrees that it shall use its reasonable efforts to reduce or eliminate any claim for compensation pursuant to subsections 2.4(a) and 2.4(b), including but not limited to designating a different Investing Office for its Class A-1 Certificates (or any interest therein) if such designation will avoid the need for, or reduce the amount of, any increased amounts referred to in subsection 2.4(a) or 2.4(b) and will not, in the reasonable opinion of such Class A-1 Purchaser, be unlawful or otherwise disadvantageous to such Class A-1 Purchaser or inconsistent with its policies or result in an unreimbursed cost or expense to such Class A-1 Purchaser or in an increase in the aggregate amount payable under both subsections 2.4(a) and 2.4(b). (di Each Class A-1 Purchaser claiming increased amounts described in subsection 2.4(a) or 2.4(b) will furnish to the Agent for its Purchaser Group (together with its request for compensation) a certificate prepared in good faith setting forth the basis and the calculation of the amount (in reasonable detail) of each request by such Class A-1 Purchaser for any such increased amounts referred to in subsection 2.4(a) or 2.4(b). Any such certificate shall be conclusive absent manifest error, and such Agent shall deliver a copy thereof to the Transferor, the Servicer and the Facility Agent. Failure on the part of any Class A-1 Purchaser to demand compensation for any amount pursuant to subsection 2.4(a) or 2.4(b) with respect to any period shall not constitute a waiver of such Class A-1 Purchaser's right to demand compensation with respect to such period. 2.5 Taxes. (a) All payments made to the Class A-1 Purchasers, the Facility Agent or the Agents under this Agreement and the Pooling and Servicing Agreement (including all amounts payable with respect to the Class A-1 Certificates) shall, to the extent allowed by law, be made free and clear of, and without deduction or withholding for or on account of, any present or future income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now or hereafter imposed, levied, collected, withheld or assessed by any Governmental Authority (collectively, "Taxes"), excluding (i) income taxes (including branch profit taxes, minimum taxes and taxes computed under alternative methods, at least one of which is based on or measured by net income), franchise taxes (imposed in lieu of income taxes), or any other taxes based on or measured by the net income of the Class A-1 Purchaser, the Facility Agent or the Agent (as the case may be) or the gross receipts or income of the Class A-1 Purchaser, the Facility Agent or the Agent (as the case may be); (ii) any Taxes that would not have been imposed but for the failure of such Class A-1 Purchaser, the Facility Agent or the Agent, as applicable, to provide and keep current (to the extent legally able) any certification or other documentation required to qualify for an exemption from, or reduced rate of, any such Taxes or required by this Agreement to be furnished by such Class A-1 Purchaser, the Facility Agent or such Agent, as applicable; and (iii) any Taxes imposed as a result of a change by any Class A-1 Purchaser of the Investing Office (other than changes mandated by this Agreement, including subsection 2.4(c) hereof, or required by law) (all such excluded taxes being hereinafter called "Excluded Taxes"). If any Taxes, other than Excluded Taxes, are required to be withheld from any amounts payable to a Class A-1 Purchaser, the Facility Agent or an Agent hereunder or under the Pooling and Servicing Agreement, then after submission by any Class A-1 Purchaser to the Agent for its Purchaser Group (in the case of an amount payable to a Class A-1 Purchaser) and such Agent to the Transferor and the Servicer of a written request therefor (with a copy thereof to the Facility Agent), or after submission by the Facility Agent or any Agent to the Transferor or the Servicer of a written request therefor with a copy thereof to the Facility Agent (in the case of an Agent), the amounts so payable to such Class A-1 Purchaser, the Facility Agent or such Agent, as applicable, shall be increased and the Transferor shall be liable to pay to such Class A-1 Purchaser or for its own account, as applicable, the amount of such increase) to the extent necessary to yield to such Class A-1 Purchaser, the Facility Agent or such Agent, as applicable (after payment of all such Taxes) interest or any such other amounts payable hereunder or thereunder at the rates or in the amounts specified in this Agreement and the Pooling and Servicing Agreement; provided, however, that the amounts so payable to such Class A-1 Purchaser, the Facility Agent or such Agent shall not be increased pursuant to this subsection 2.5(a) if such requirement to withhold results from the failure of such Person to comply with subsection 2.5(c) hereof. Whenever any Taxes are payable on or with respect to amounts distributed to a Class A-1 Purchaser, the Facility Agent or an Agent, as promptly as possible thereafter the Servicer shall send to the applicable Agent, on behalf of such Class A-1 Purchaser (if applicable), or to the Facility Agent, a certified copy of an original official receipt showing payment thereof. If the Trustee, upon the direction of the Servicer, fails to pay any Taxes when due to the appropriate taxing authority or fails to remit to the Facility Agent or to the applicable Agent, on behalf of itself or such Class A-1 Purchaser (as applicable), the required receipts or other required documentary evidence, subject to subsection 9.11(a), the Transferor shall pay to such Agent on behalf of such Class A-1 Purchaser or for its own account, as applicable, any incremental taxes, interest or penalties that may become payable by the Facility Agent or by such Class A-1 Purchaser or Agent, as applicable, as a result of any such failure. In addition to the foregoing, the Transferor hereby agrees, subject to subsection 9.11(a), to indemnify and hold harmless, on an after-tax basis, each Class A-1 Purchaser and Agent and the Facility Agent from and against any and all Taxes (including Excluded Taxes) imposed on such party solely by reason of any tax treatment of the Class A-1 Certificates that is inconsistent with the characterization thereof as indebtedness for federal, state and local income tax purposes or by reason of the failure of the Transferor or the owner of the Exchangeable Transferor Certificate to file any federal, state or local income tax returns or reports on the basis that Class A-1 Certificates are indebtedness for federal, state and local income tax purposes. (b0 A Class A-1 Purchaser or Agent or the Facility Agent claiming increased amounts under subsection 2.5(a) for Taxes paid or payable by such Class A-1 Purchaser or Agent or the Facility Agent, as applicable, will furnish to the Transferor and the Servicer a certificate prepared in good faith setting forth the basis and amount of each request by such Class A-1 Purchaser or the Facility Agent, as applicable, for such Taxes. Any such certificate of a Class A-1 Purchaser, the Facility Agent or an Agent shall be conclusive absent manifest error. Failure on the part of any Class A-1 Purchaser, the Facility Agent or any Agent to demand additional amounts pursuant to subsection 2.5(a) with respect to any period shall not constitute a waiver of the right of such Class A-1 Purchaser, the Facility Agent or such Agent, as the case may be, to demand compensation with respect to such period. All such amounts shall be due and payable to the Facility Agent or to such Agent on behalf of such Class A-1 Purchaser or for its own account, as the case may be, on the Distribution Date following receipt by the Transferor of such certificate, if such certificate is received by the Transferor at least five Business Days prior to the Determination Date related to such Distribution Date and otherwise shall be due and payable on the following Distribution Date (or, if earlier, on the Series 1999-1 Termination Date). (c0 Each Class A-1 Purchaser and each Participant holding an interest in Class A-1 Certificates agrees that prior to the date on which the first interest or fee payment hereunder is due thereto, it will deliver to the Transferor, the Servicer, the Trustee and the Agent for its Purchaser Group (i) if such Class A-1 Purchaser or Participant is not incorporated under the laws of the United States or any State thereof, two duly completed copies of the U.S. Internal Revenue Service Form 4224 or successor applicable forms required to evidence that the Class A-1 Purchaser's or Participant's income from this Agreement or the Class A-1 Certificates is "effectively connected" with the conduct of a trade or business in the United States, and (ii) a duly completed U.S. Internal Revenue Service Form W-8 or W-9 or successor applicable or required forms. Each Class A-1 Purchaser or Participant holding an interest in Class A-1 Certificates also agrees to deliver to the Transferor, the Servicer, the Trustee and the Agent for its Purchaser Group two further copies of such Form 4224 and Form W-8 or W-9, or such successor applicable forms or other manner of certification, as the case may be, on or before the date that any such form expires or becomes obsolete or after the occurrence of any event requiring a change in the most recent form previously delivered by it hereunder, and such extensions or renewals thereof as may reasonably be requested by the Servicer or the applicable Agent, unless in any such case, solely as a result of a change in treaty, law or regulation occurring prior to the date on which any such delivery would otherwise be required, and assuming that Section 1446 of the Code does not apply, the Class A-1 Purchaser is no longer eligible to deliver the then-applicable form set forth above and so advises the Servicer and the applicable Agent. Each Class A-1 Purchaser which is a party to a Joinder Supplement certifies, represents and warrants as of the effective date of such Joinder Supplement, each Assignee and each Participant (in either case other than a Support Party) shall certify, represent and warrant as a condition of acquiring its Assignment or Participation as of the effect date of the Transfer Supplement to which it is a party or of such Participation, as the case may be, and each Support Party shall certify, represent and warrant as of the effective date of its becoming a Support Party, that (x) in the case of Form 4224 (if applicable), its income from this Agreement or the Class A-1 Certificates is effectively connected with a United States trade or business and (y) that it is entitled to an exemption from United States backup withholding tax. Further, each Class A-1 Purchaser and each Participant acquiring an interest in a Class A-1 Certificate covenants that for so long as it shall own Class A-1 Certificates or such Participation, such Class A-1 Certificates or Participation shall be held in such manner that the income therefrom shall be effectively connected with the conduct of a United States trade or business. 2.6 Indemnification. (a) SRI and SRPC (each such Person being referred to as an "Indemnitor"), jointly and severally, agree to indemnify and hold harmless each Agent, the Facility Agent and each Class A-1 Purchaser and any directors, officers, employees, agents, attorneys, auditors or accountants of each Agent, the Facility Agent or Class A-1 Purchaser (each such Person being referred to as an "Indemnitee") from and against any and all claims, damages, losses, liabilities, costs or expenses whatsoever (including reasonable fees and expenses of legal counsel) which such Indemnitee may incur (or which may be claimed against such Indemnitee) arising out of, by reason of or in connection with the execution and delivery of, or payment or other performance under, or the failure to make payments or perform under, any Related Document or the issuance of the Series 1999-1 Certificates (including in connection with the preparation for defense of any investigation, litigation or proceeding arising out of, related to or in connection with such execution, delivery, payment, performance or issuance), except (i) to the extent that any such claim, damage, loss, liability, cost or expense is shall be caused by the willful misconduct, bad faith, recklessness or gross negligence of such Indemnitee, (ii) to the extent that any such claim, damage, loss, liability, cost or expense is covered by subsection 2.3(c) or Section 2.4 or 2.5 hereof or relates to any Excluded Taxes, (iii) to the extent that any such claim, damage, loss, liability, cost or expense relates to disclosure made by an Agent or a Class A-1 Purchaser in connection with an Assignment or Participation pursuant to Section 8.1 of this Agreement which disclosure is not based on information given to such Agent or such Class A-1 Purchaser by or on behalf of SRPC, SRI, the Transferor or the Servicer or any affiliate thereof or by or on behalf of the Trustee or (iv) to the extent that such claim, damage, loss, liability, cost or expense shall be caused by a charge off of Receivables. The foregoing indemnity shall include any claims, damages, losses, liabilities, costs or expenses to which any such Indemnitee may become subject under Securities Act, the Securities Exchange Act of 1934, as amended, the Investment Company Act of 1940, as amended, or other federal or state law or regulation arising out of or based upon any untrue statement or alleged untrue statement of a material fact in any disclosure document relating to the Series 1999-1 Certificates or any amendments thereof or supplements thereto (other than statements provided by the Indemnitee expressly for inclusion therein) or arising out of, or based upon, the omission or the alleged omission to state a material fact necessary to make the statements therein or any amendment thereof or supplement thereto, in light of the circumstances in which they were made, not misleading (other than with respect to statements provided by the Indemnitee expressly for inclusion therein). (bi Promptly after the receipt by an Indemnitee of a notice of the commencement of any action against an Indemnitee, such Indemnitee will notify the Agent for its Purchaser Group and such Agent will, if a claim in respect thereof is to be made against an Indemnitor pursuant to subsection 2.6(a), notify such Indemnitor in writing of the commencement thereof; but the omission so to notify such party will not relieve such party from any liability which it may have to such Indemnitee pursuant to the preceding paragraph. If any such action is brought against an Indemnitee and it notifies an Indemnitor of its commencement, such Indemnitor will be entitled to participate in and, to the extent that it so elects by delivering written notice to the Indemnitee promptly after receiving notice of the commencement of the action from the Indemnitee to assume the defense of any such action, with counsel mutually satisfactory to such Indemnitor and each affected Indemnitee. After receipt of such notice by an Indemnitor from an Indemnitee, such Indemnitor will not be liable to such Indemnitee for any legal or other expenses except as provided below and except for the reasonable costs of investigation subsequently incurred by the Indemnitee in connection with the defense of such action. Each Indemnitee will have the right to employ its own counsel in any such action, but the fees, expenses and other charges of such counsel will be at the expense of the such Indemnitee unless (i) the employment of such counsel by such Indemnitee has been authorized in writing by such Indemnitor, (ii) such Indemnitor shall have failed to assume the defense and employ counsel, or (iii) the named parties to any such action or proceeding (including any impleaded parties) include both such Indemnitee and either an Indemnitor or another person or entity that may be entitled to indemnification from an Indemnitor (by virtue of this Section 2.6 or otherwise) and such Indemnitee shall have been advised by counsel that there may be one or more legal defenses available to such Indemnitee which are different from or additional to those available to an Indemnitor or such other party or shall otherwise have reasonably determined that the co-representation would present such counsel with a conflict of interest (in which case the Indemnitor will not have the right to direct the defense of such action on behalf of the Indemnitee). In any such case, the reasonable fees, disbursements and other charges of counsel will be at the expense of the Indemnitor; it being understood that in no event shall the Indemnitors be liable for the fees, disbursements and other charges of more than two counsel (in addition to any local counsel) for all Indemnitees in connection with any one action or separate but similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances. An Indemnitor shall not be liable for any settlement of any such action, suit or proceeding effected without its written consent, which shall not be unreasonably withheld, but if settled with the written consent of an Indemnitor or if there shall be a final judgment for the plaintiff in any such action, suit or proceeding, such Indemnitor agrees to indemnify and hold harmless any Indemnitee to the extent set forth in this letter from and against any loss, claim, damage, liability or expense by reason of such settlement or judgement. Notwithstanding the immediately preceding sentence, if in any case where the fees and expenses of counsel are at the expense of an Indemnitor and an Indemnitee shall have requested such Indemnitor to reimburse such Indemnitee for such fees and expenses of counsel as incurred, such Indemnitor agrees that it shall be liable for any settlement of any action effected without its written consent if (i) such settlement is entered into more than ten business days after the receipt by such Indemnitor of the aforesaid request and (ii) such Indemnitor shall have failed to reimburse the Indemnitee in accordance with such request for reimbursement prior to the date of such settlement. No Indemnitor shall, without the prior written consent of an Indemnitee, settle or compromise or consent to the entry of any judgment in any pending or threatened claim, action, suit or proceeding in respect of which indemnification may be sought hereunder, if such settlement, compromise or consent includes an admission of culpability or wrong-doing on the part of such Indemnitee or the entry or an order, injunction or other equitable or nonmonetary relief (including any administrative or other sanctions or disqualifications) against such Indemnitee or if such settlement, compromise or consent does not include an unconditional release of such Indemnitee from all liability arising out of such claim, action, suit or proceeding. (ci Subject to the limitations on liability set forth in Section 8.3 of the Pooling and Servicing Agreement, the Servicer shall indemnify and hold harmless each Indemnitee from and against any and all claims, damages, losses, liabilities, costs or expenses whatsoever which such Indemnitee may incur (or which may be claimed against such Indemnitee) by reason of any acts or omissions or alleged acts or omissions of the Servicer hereunder or with respect to activities of the Trust or the Trustee for which the Servicer is responsible under the Pooling and Servicing Agreement or hereunder, subject, with respect to the obligations of the Servicer in respect of activities of the Trust or the Trustee for which the Servicer is responsible under the Pooling and Servicing Agreement, to the provisos set forth in Section 8.4 of the Pooling and Servicing Agreement. Subject to Section 9.5, any Successor Servicer, by accepting its appointment pursuant to the Pooling and Servicing Agreement, (i) shall agree to be bound by the terms, covenants and conditions contained herein applicable to the Servicer and to be subject to the duties and obligations of the Servicer hereunder, (ii) as of the date of its acceptance, shall be deemed to have made with respect to itself the representations and warranties made by the SRI in subsections 4.2(a) through (f) (in the case of subsection 4.2(a), with appropriate factual changes) and (iii) shall agree to indemnify and hold harmless any Indemnitee from and against any and all claims, damages, losses, liabilities, costs or expenses (including reasonable fees and expenses of counsel) whatsoever which any such Indemnitee may incur (or which may be claimed against such Indemnitee) by reason of any acts or omissions or alleged acts or omissions of the Servicer hereunder or with respect to activities of the Trust or the Trustee for which the Servicer is responsible under the Pooling and Servicing Agreement or hereunder. (di (i) In the event that for any reason, (A) the basis for calculation of interest on any Conduit Purchaser's Percentage Interest of the Class A-1 Principal Balance shall change from the Commercial Paper Rate to the Alternative Rate, or (B) any Conduit Purchaser receives any repayment of its share of the Class A-1 Principal Balance, and the date of such change or of such repayment is not the maturity date for all Commercial Paper Notes allocated by such Conduit Purchaser to funding its purchase or maintenance of the affected portion of its Percentage Interest of the Class A-1 Principal Balance, or (ii) in the event that for any reason, (A) the basis for calculation of interest on any Class A-1 Purchaser's Percentage Interest of the Class A-1 Principal Balance shall change from the Alternative Rate to the Risk Rate, (B) the basis for calculation of the Alternative Rate shall change from the Class A-1 Adjusted Eurodollar Rate to the Corporate Base Rate, or (C) any Class A-1 Purchaser receives any repayment of its share of the Class A-1 Principal Balance which bears interest calculated by reference to the Class A-1 Adjusted Eurodollar Rate and the date of such repayment is not a Distribution Date, then in any such case the Transferor agrees to indemnify each affected Class A-1 Purchaser against, and to promptly pay on demand directly to such Class A-1 Purchaser the amount equal to any loss or reasonable out-of-pocket expense suffered by such Class A-1 Purchaser as a result of such change or such repayment, including any loss, cost or expense suffered by reason of its issuance of Commercial Paper Notes (in the case of a Conduit Purchaser) or the incurrence of other obligations allocated by such Class A-1 Purchaser to its funding or the maintenance of its funding of its share of the Class A-1 Principal Balance, or deploying the funds prepaid or repaid in amounts which correspond to its share of the Class A-1 Principal Balance. In the event that for any reason (other than a default by a Committed Purchaser or Liquidity Purchaser hereunder) the purchase of the entire Class A-1 Initial Invested Amount does not occur on the Closing Date or, after notice of a purchase of an Additional Class A-1 Invested Amount has been given pursuant to subsection 2.1(c), the purchase of the entire amount of such Additional Class A-1 Invested Amount does not occur on the applicable Purchase Date, then in any such case SRI agrees to indemnify each affected Class A-1 Purchaser against, and to promptly pay on demand directly to such Class A-1 Purchaser the amount equal to any loss or reasonable out-of-pocket expense suffered by such Class A-1 Purchaser as a result of such change or such repayment, including any loss, cost or expense suffered by reason of its issuance of Commercial Paper Notes (in the case of a Conduit Purchaser) or the incurrence of other obligations allocated by such Class A-1 Purchaser to its funding or the maintenance of its funding of its share of the Class A-1 Principal Balance (including in liquidating or employing deposits acquired to fund or maintain the funding of its share of the Class A-1 Principal Balance which would have borne interest by reference to the Adjusted Eurodollar Rate). A statement setting forth in reasonable detail the calculations of any additional amounts payable pursuant to this Section submitted by a Class A-1 Purchaser or Agent on its behalf, to the Transferor or SRI, as applicable, and the Servicer and shall be conclusive absent manifest error. The obligations of the Transferor under this subsection 2.6(d) are subject to subsection 9.11(a) hereof. (ei Subject to subsection 9.11(a) hereof in the case of the Transferor, the obligations of SRPC, SRI, the Transferor and the Servicer under this Agreement shall be absolute, unconditional and irrevocable and shall be performed strictly in accordance with the terms of this Agreement. Without limiting the foregoing, neither the lack of validity or enforceability of, or any modification to, any Related Document nor the existence of any claim, setoff, defense or other right which SRPC, SRI, the Trust, the Trustee, on behalf of the Trust, the Transferor and the Servicer may have at any time against each other, any Agent, the Facility Agent, any Class A-1 Purchaser, any Support Party or any other Person, whether in connection with any Related Document or any unrelated transactions, shall constitute a defense to such obligations. SECTION 3. CONDITIONS PRECEDENT 3.1 Condition to Initial Purchase. The following shall be conditions precedent to the initial purchase by any Class A-1 Purchasers of the Class A-1 Certificates: (ai the representations and warranties of SRPC and SRI set forth or referred to in Section 4.1 and 4.2 hereof shall be true and correct in all material respects on Closing Date as though made on and as of the Closing Date, and no event which of itself or with the giving of notice or lapse of time, or both, would constitute a Termination Event shall have occurred and be continuing on the Closing Date; (bi the Master Pooling and Servicing Agreement, the Supplement and the Issuance Supplement shall have been duly executed and delivered by all parties thereto and shall be in form and substance satisfactory to the Class A-1 Purchasers; (ci the Receivables Purchase Agreement and the Receivables Transfer Agreement shall not have been amended or otherwise modified, other than as disclosed to the Class A-1 Purchasers in writing prior to the Closing Date; (di Class B Certificates, Class C Certificates, Class D Certificates and Class E Certificates shall have been duly issued in accordance with the Pooling and Servicing Agreement which have a Class B Initial Invested Amount, Class C Initial Invested Amount, Class D Initial Invested Amount and Class E Initial Invested Amount which aggregates at least 38% of the Initial Invested Amount; (ei arrangements satisfactory to the Class A-1 Purchasers shall have been made for the repayment and defeasance in full of the Trust's Series 1993-1 Certificates, Series 1995-1 Certificates and Series 1997-1 Certificates and the Transferor's 12.5% Series B Trust Certificate-Backed Notes; (fi all up front fees and expenses agreed and specified in the Class A-1 Fee Letter shall have been paid by SRPC on the Closing Date, and arrangements satisfactory to the initial Class A-1 Purchasers and the initial Agent shall have been made for the payment of amounts required to be paid by SRPC pursuant to subsection 2.3(b) with respect to the preparation, execution, delivery and initial syndication of this Agreement and each related Support Facility and the other documents to be delivered hereunder or in connection herewith; (gi with respect to each Conduit Purchaser, its Support Facilities shall be in full force and effect; and (hi the initial Agent on behalf of the Class A-1 Purchasers shall have received on the Closing Date the following items, each of which shall be in form and substance satisfactory to such Agent: (i0 an Officer's Certificate of SRPC or SRI, as applicable, confirming the satisfaction of the conditions set forth in clause (a) and clauses (c) through (f), inclusive, above; (ii0 a copy of (A) the charter and by-laws of SRPC, SRI and Granite, certified by its authorized officer, (B) an incumbency certificate with respect to its officers executing any of the Related Documents on the Closing Date on behalf of, part of SRPC and SRI certified by its authorized officer, (C) good standing certificates from the appropriate Governmental Authority as of a recent date with respect to each of SRPC, SRI and Granite and (D) resolutions of the Board of Directors (or an authorized committee thereof) of each of SRPC, SRI and Granite with respect to the Related Documents to which it is party, certified by its authorized officer; (iii0 the favorable written opinions of counsel for SRPC, SRI and Granite addressed to the Agents, the Facility Agent, the Class A-1 Purchasers and the Support Parties, or accompanied by a letter providing that the Agents, the Facility Agent, the Class A-1 Purchasers and the Support Parties may rely on such opinions as if they were addressed to them, and dated the Closing Date, covering general corporate matters, the due execution and delivery of, and the enforceability of, each of the Related Documents to which SRPC and SRI (individually or as Transferor or Servicer) is party, sale/security interest and nonconsolidation matters, tax matters and such other matters as the initial Agent may request; (iv0 [reserved]; (v0 evidence of the due execution and delivery by the Trustee of the Related Documents to which it is party; (vi0 an executed copy of the Supplement and the Issuance Supplement and a conformed copy of the Master Pooling and Servicing Agreement, the Receivables Purchase Agreement and the Receivables Transfer Agreement; (vii0 executed copies of all opinions required by Article VI of the Pooling and Servicing Agreement or by any Rating Agency in connection with the issuance, sale or rating of the Series 1999-1 (each such opinion, unless otherwise agreed to by the initial Agent, to be addressed to such Agent, on behalf of itself and the Class A-1 Purchasers in its Purchaser Group, and to the Facility Agent or accompanied by a letter providing that such Agent, on behalf of itself and the Class A-1 Purchasers in its Purchaser Group, the Facility Agent and the Support Parties may rely on such opinion as if it were addressed to it), and such additional documents, instruments, certificates or letters as such Agent may reasonably request; (viii0 the duly executed Class A-1 Certificate(s) registered in the name of the initial Agent as nominee on behalf of the Class A-1 Owners; (ix0 evidence satisfactory to the initial Agent that the Class A-1 Certificates and the Class A-2 Certificates are rated Aaa by Moody's and AAA by Fitch IBCA, Inc. and that the Class B Certificates are rated not less than A1 by Moody's and not less than A by Fitch IBCA, Inc.; and (x0 evidence satisfactory to each Conduit Purchaser that Moody's and Standard & Poor's has confirmed in writing that the purchase by it of Class A-1 Certificates (including Additional Class A-1 Invested Amounts thereunder) would not result in a reduction or withdrawal of such rating agency's then applicable rating of the commercial paper of such Conduit Purchaser, without giving effect to any increase in any letter of credit or other enhancement provided to such Conduit Purchaser (other than liquidity support provided to such Conduit Purchaser by Liquidity Providers). 3.2 Condition to Additional Purchases. The following shall be conditions precedent to each purchase by any Class A-1 Purchasers of Additional Class A-1 Invested Amounts hereunder: (ai the Transferor shall have timely delivered a notice of purchase pursuant to subsection 2.1(c) of this Agreement; (bi the representations and warranties of SRPC and SRI set forth or referred to in Section 4.1 and 4.2 hereof shall be true and correct in all material respects on the date of such purchase as though made on and as of such date; (ci (i) all interest, fees, expenses and all other amounts then due and payable to any Agent or Class A-1 Purchaser or to the Facility Agent hereunder (including any amounts owed under Sections 2.3, 2.4, 2.5 or 2.6, but excluding the Class A-1 Principal Balance) shall have been paid, and (ii) no event which of itself or with the giving of notice or lapse of time, or both, would constitute a Termination Event shall have occurred and be continuing on such date; (di after giving effect to such purchase of Additional Class A-1 Invested Amount, (i) the Class A-1 Principal Balance shall not exceed the Class A-1 Purchase Limit, and (ii) the aggregate Class A-1 Principal Balance, minus the aggregate unpaid portion of all Class A-1 Exiting Purchaser Amortization Amounts, shall not exceed the aggregate Commitments of the Committed Purchasers and Liquidity Purchasers; (ei after giving effect to such purchase, (i) the sum of the Class B Invested Amount, the Class C Invested Amount, the Class D Invested Amount and the Class E Invested Amount shall equal not less than 38% of the Invested Amount on the applicable Purchase Date, and (ii) the sum of the Class C Invested Amount, the Class D Invested Amount and the Class E Invested Amount shall equal not less than 19% of the Invested Amount on the applicable Purchase Date; (fi there shall exist no unreimbursed Class E Investor Charge-Offs; (gi the Class A-1 Certificates and the Class A-2 Certificates remain rated Aaa by Moody's and AAA by Fitch IBCA, Inc. and the Class B Certificates remain rated not less than A1 by Moody's and not less than A by Fitch IBCA, Inc; (hi the conditions set forth in Section 6.15 of the Pooling and Servicing Agreement to the issuance of such Additional Class A-1 Invested Amount shall have been satisfied; (ii the Additional Class A-1 Invested Amount, when aggregated with additional invested amounts being purchased on such Purchase Date pursuant to the Class A-2 Purchase Agreement and the Class B Purchase Agreement, shall equal a minimum amount of $1,000,000 and be shall be in an integral multiple of $250,000; (ji after giving effect to such purchase of Additional Class A-1 Invested Amount, no more than two changes in the Class A Invested Amount or the Class B Invested Amount shall have occurred in any calendar week; (ki with respect to each Conduit Purchaser, its Support Facilities shall be in full force and effect; and (li in the case of each Increase Date, the Transferor shall have delivered to the Facility Agent and each Agent an Officer's Certificate dated such Purchase Date certifying (i) that the conditions described in clauses (a) through (j) above have been satisfied and (ii) that based on the facts known to the officer signing such Officer's Certificate at such time, in the reasonable belief of the Transferor, the purchases of the Additional Class A-1 Invested Amounts and any other purchases with respect to the Series 1999-1 Certificates to be purchased on such Purchase Date will not cause a Pay Out Event, a Series 1999-1 Pay Out Event or a Mandatory Partial Amortization Event or an event that, after the giving of notice or the lapse of time, would constitute an Pay Out Event, a Series 1999-1 Pay Out Event or a Mandatory Partial Amortization Event to occur. SECTION 4. REPRESENTATIONS AND WARRANTIES 4.1 Representations and Warranties of SRPC. SRPC repeats and reaffirms to the Class A-1 Purchasers, the Agents and the Facility Agent the representations and warranties of the Transferor set forth in Sections 2.3 of the Pooling and Servicing Agreement, and represents and warrants that such representations and warranties are true and correct as of the date hereof. SRPC further represents and warrants to, and agrees with, each Agent and Class A-1 Purchaser and the Facility Agent that, as of the date hereof: (ai SRPC is a duly organized and validly existing corporation in good standing under the laws of the State of Delaware, with corporate power and authority to own its properties and to transact the business in which it is now engaged. SRPC is duly qualified to do business (or is exempt from such qualification) and is in good standing in each State of the United States where the nature of its business requires it to be so qualified. (bi SRPC has the full corporate power, authority and legal right to make, execute, deliver and perform the Related Documents to which it is party (individually or as Transferor) and all of the transactions contemplated thereby and to issue the Series 1999-1 Certificates from the Trust and has taken all necessary corporate action to authorize the execution, delivery and performance of the Related Documents to which it is party and such issuance. Each of the Related Documents to which SRPC is party (individually or as Transferor) constitutes its legal, valid and binding agreement enforceable in accordance with its terms (subject to applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of the rights of creditors generally and except as such enforceability may be limited by general principles of equity, whether considered in a proceeding at law or in equity). (ci SRPC is not required to obtain the consent of any other party or any consent, license, approval or authorization of, or registration with, any Governmental Authority in connection with the execution, delivery or performance of each of the Related Documents to which it is party (individually or as Transferor) that has not been duly obtained and which is not and will not be in full force and effect on the Closing Date. (di SRPC's execution, delivery and performance of the Related Documents to which it is party (individually or as Transferor) do not violate or conflict with any provision of any existing law or regulation applicable to SRPC or any order or decree of any court to which SRPC is subject or the Certificate of Incorporation or Bylaws of SRPC, or any mortgage, security agreement, indenture, contract or other agreement to which SRPC is a party or by which SRPC or any significant portion of its properties is bound. (ei There is no litigation, investigation or administrative proceeding before any court, tribunal, regulatory body or governmental body presently pending, or, to the knowledge of SRPC, threatened, with respect to any of the Related Documents, the transactions contemplated thereby, or the issuance of the Series 1999-1 Certificates and there is no such litigation or proceeding against SRPC or any significant portion of its properties which would, individually or in the aggregate, have a material adverse effect on the transactions contemplated by any of the Related Documents or the ability of SRPC to perform its obligations thereunder. (fi SRPC is not insolvent or the subject of any insolvency or liquidation proceeding. The financial statements of SRPC delivered to each Agent are complete and correct in all material respects and fairly present the financial condition of SRPC as of date of such statements and the results of operations of SRPC for the period then ended, all in accordance with United States generally accepted accounting principles consistently applied. Since the date of the most recent audited financial statements of SRPC delivered to each Agent, there has not been any material adverse change in the condition (financial or otherwise) of SRPC. (gi There are no outstanding comments from the most recent report prepared by the independent public accountants for SRPC (individually or in its capacity as Transferor) in connection with its credit card receivables. (hi No Trust Pay Out Event, Series 1999-1 Pay Out Event, Mandatory Partial Amortization Event, Servicer Default or Termination Event has occurred and is continuing, and no event, act or omission has occurred and is continuing which, with the lapse of time, the giving of notice, or both, would constitute such an event or default. (ii The Pooling and Servicing Agreement is not required to be qualified under the Trust Indenture Act of 1939, as amended, and neither the Trust nor SRPC is required to be registered under the Investment Company Act of 1940, as amended. (ji The Receivables conveyed by SRPC to the Trust under the Pooling and Servicing Agreement are in an aggregate amount, determined as of November 9, 1999, of $340,005,003, consisting of $319,054,670 of Principal Receivables and $20,950,333 of Finance Charge Receivables. The Receivables Purchase Agreement is in full force and effect on the date hereof and no material default by any party exists thereunder. As of the Closing Date, after giving effect to the payments and defeasances contemplated by subsection 3.1(e), there will be no Investor Certificates of the Trust, other than the Series 1999-1 Certificates, outstanding. (ki The Trust is duly created and existing under the laws of the State of New York. Simultaneous with the closing hereunder, all conditions to the issuance and sale of the Series 1999-1 Certificates set forth in the Pooling and Servicing Agreement have been satisfied and the Series 1999-1 Certificates have been duly issued by the Trust. (li Neither SRPC nor any of its Affiliates has directly, or through any agent, (i) sold, offered for sale, solicited offers to buy or otherwise negotiated in respect of, any "security" (as defined in the Securities Act) that is or will be integrated with the sale of the any Series 1999-1 Certificates in a manner that would require the registration under the Securities Act of the offering of the Series 1999-1 Certificates or (ii) engaged in any form of general solicitation or general advertising (as those terms are used in Regulation D under the Securities Act) in connection with the offering of the Series 1999-1 Certificates or in any manner involving a public offering thereof within the meaning of Section 4(2) of the Securities Act. Assuming the accuracy of the representations and warranties of each Class A-1 Purchaser in its Investment Letter and of each purchaser of Class A-2 Certificates, Class B Certificates, Class C Certificates and Class D Certificates in their respective investment letters, the offer and sale of the Series 1999-1 Certificates are transactions which are exempt from the registration requirements of the Securities Act. (mi All written factual information heretofore furnished by SRPC to, or for delivery to, any Agent or Class A-1 Purchaser for purposes of or in connection with this Agreement, including information relating to the Accounts, the Receivables, and SRI's credit card business, was true and correct in all material respects on the date as of which such information was stated or certified and remains true and correct in all material respects (unless such information specifically relates to an earlier date in which case such information shall have been true and correct in all material respects on such earlier date). 4.2 Representations and Warranties of SRI. SRI repeats and reaffirms to the Class A-1 Purchasers, the Agents and the Facility Agent the representations and warranties of the Servicer set forth in Section 3.3 of the Pooling and Servicing Agreement, and represents and warrants that such representations and warranties are true and correct as of the date hereof. SRI further represents and warrants to, and agree with, each Agent and Class A-1 Purchaser and the Facility Agent that, as of the date hereof: (a) SRI is a duly organized and validly existing corporation in good standing under the laws of the State of Texas, with corporate power and authority to own its properties and to transact the business in which it is now engaged. SRI is duly qualified to do business (or is exempt from such qualification) and is in good standing in each State of the United States where the nature of its business requires it to be so qualified. (b) SRI has the full corporate power, authority and legal right to make, execute, deliver and perform the Related Documents to which it is party (individually or as Servicer) and all of the transactions contemplated thereby and has taken all necessary corporate action to authorize the execution, delivery and performance of the Related Documents to which it is party and such issuance. Each of the Related Documents to which SRI is party (individually or as Servicer) constitutes its legal, valid and binding agreement enforceable in accordance with its terms (subject to applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of the rights of creditors of national banking associations generally and except as such enforceability may be limited by general principles of equity, whether considered in a proceeding at law or in equity). (c) SRI is not required to obtain the consent of any other party or any consent, license, approval or authorization of, or registration with, any Governmental Authority in connection with the execution, delivery or performance of each of the Related Documents to which it is party (individually or as Servicer) that has not been duly obtained and which is not and will not be in full force and effect on the Closing Date. (d) The execution, delivery and performance by SRI of the Related Documents to which it is party (individually or as Servicer) do not violate or conflict with any provision of any existing law or regulation applicable to SRI or any order or decree of any court to which SRI is subject or the Certificate of Incorporation or Bylaws of SRI, or any mortgage, security agreement, indenture, contract or other agreement to which SRI is a party or by which SRI or any significant portion of its properties is bound. (e) There is no litigation, investigation or administrative proceeding before any court, tribunal, regulatory body or governmental body presently pending, or, to the knowledge of SRI, threatened, with respect to any of the Related Documents, the transactions contemplated thereby, or the issuance of the Series 1999-1 Certificates, and there is no such litigation or proceeding against SRI or any significant portion of its properties which would, individually or in the aggregate, have a material adverse effect on the transactions contemplated by any of the Related Documents or the ability of SRI to perform its obligations thereunder. (f) SRI is not insolvent or the subject of any insolvency or liquidation proceeding. The financial statements of SRI delivered to any Agent or Class A-1 Purchaser are complete and correct in all material respects and fairly present the financial condition of SRI as of date of such statements and its results of operations for the period then ended, all in accordance with United States generally accepted accounting principles consistently applied. Since the date of the most recent audited financial statements of SRI delivered to the Agents and the Class A-1 Purchasers through the Closing Date, there has not been any material adverse change in the condition (financial or otherwise) of SRI, other than changes (if any) disclosed in Stage's filings with the SEC pursuant to the Securities Exchange Act of 1934, as amended, or disclosed in a writing addressed to the Facility Agent and the initial Agent. (g) There are no outstanding comments from the most recent report prepared by the independent public accountants for SRI (individually or in its capacity as Servicer) in connection with its credit card receivables. (h) No Trust Pay Out Event, Series 1999-1 Pay Out Event, Mandatory Partial Amortization Event, Servicer Default or Termination Event has occurred and is continuing, and no event, act or omission has occurred and is continuing which, with the lapse of time, the giving of notice, or both, would constitute such an event or default. (i) The Pooling and Servicing Agreement is not required to be qualified under the Trust Indenture Act of 1939, as amended, and neither the Trust, SRPC nor SRI is required to be registered under the Investment Company Act of 1940, as amended. (j) The Receivables Purchase Agreement is in full force and effect on the date hereof and no material default by any party exists thereunder. (k) The Trust is duly created and existing under the laws of the State of New York. Simultaneous with the closing hereunder, all conditions to the issuance and sale of the Series 1999-1 Certificates set forth in the Pooling and Servicing Agreement have been satisfied and the Series 1999-1 Certificates have been duly issued by the Trust. (l) To the knowledge of SRI, the representations and warranties of SRPC set forth in Section 4.1 above are true and correct in all material respects. (m) The representations and warranties of Granite set forth in Section 4.02 and 4.03 of the Receivables Transfer Agreement are true and correct in all material respects. (n) The Servicer and the Transferor have each (i) initiated a review and assessment of all areas within its business and operations (including those affected by suppliers, vendors and customers) that could be adversely affected by the risk that computer applications used by the Servicer or the Transferor (or suppliers, vendors and customers) may be unable to recognize and perform properly date-sensitive functions involving certain dates prior to and any date after December 31, 1999 (the "Year 2000 Problem"), (ii) developed a plan and timeline for addressing the Year 2000 Problem on a timely basis, and (iii) to date, implemented that plan in accordance with that timetable. Based on the foregoing, the Servicer and the Transferor each believe that all computer applications (including those of its suppliers, vendors and customers) that are material to its business and operations are reasonably expected on a timely basis to be able to perform properly date-sensitive functions for all dates before and after January 1, 2000 (that is, be "Year 2000 Compliant"), except to the extent that a failure to do so could not reasonably be expected (a) to have a material adverse effect on the financial condition or operations of the Servicer or the Transferor or on the transactions documented under this Agreement or any Related Document, or (b) to result in a Termination Event. Each of the Transferor and the Servicer (i) has completed a review and assessment of all computer applications (including, but not limited to those of its suppliers, vendors, customers and any third party servicers), which are related to or involved in the origination, collection, management or servicing of the Accounts and the Receivables (the "Contract Systems") and (ii) has determined that such Contract Systems are Year 2000 Compliant. The costs of all assessment, remediation, testing and integration related to the plans of the Servicer and the Transferor for becoming Year 2000 Compliant will not have a material adverse effect on the financial condition or operations of the Servicer or the Transferor. (o) All written factual information heretofore furnished by SRPC, SRI, Granite or Stage to, or for delivery to, any Agent or Class A-1 Purchaser for purposes of or in connection with this Agreement, including information relating to the Accounts, the Receivables and the credit card business of SRPC, Granite or SRI, was true and correct in all material respects on the date as of which such information was stated or certified and remains true and correct in all material respects (unless such information specifically relates to an earlier date in which case such information shall have been true and correct in all material respects on such earlier date). 4.3 Representations and Warranties of the Agents, the Facility Agent and the Class A-1 Purchasers. Each Agent, the Facility Agent and each Committed Purchaser and the Liquidity Purchaser severally (each with respect to itself only) represents and warrants to, and agrees with, the Transferor and the Servicer, that: (a) It is duly authorized to enter into and perform this Agreement and, in the case of the Class A-1 Purchasers, to purchase its Purchaser Percentage or Liquidity Percentage (if any) of the Class A-1 Certificates, and has duly executed and delivered this Agreement; and the person signing this Agreement on behalf of such Agent, the Facility Agent or such Class A-1 Purchaser, as the case may be, has been duly authorized to do so. (b) This Agreement constitutes the legal, valid and binding obligation of such Agent, the Facility Agent or such Class A-1 Purchaser, enforceable in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, conservatorship or other similar laws now or hereafter in effect affecting the enforcement of creditors' rights in general, and except as such enforceability may be limited by general principles of equity (whether considered in a proceeding at law or in equity). (c) No registration with or consent or approval of or other action by any state or local governmental authority or regulatory body having jurisdiction over such Agent, the Facility Agent or such Class A-1 Purchaser is required in connection with its execution, delivery or performance of this Agreement, other than as may be required under the blue sky laws of any state. (d) The execution, delivery or performance by such Agent, the Facility Agent or such Class A-1 Purchaser of this Agreement do not violate or conflict with any provision of any existing law or regulation applicable to it or any order or decree of any court to which it is subject, its charter or bylaws, or any mortgage, security agreement, indenture, contract or other agreement to which such it is a party or by which it or any significant portion of its properties is bound, in any such case if such violation or conflict would have an adverse affect on its right or ability to execute, deliver or perform its obligations under this Agreement. SECTION 5. COVENANTS 5.1 Covenants of SRPC and SRI. SRPC (individually or, as set forth below, as the Transferor) and SRI (individually and, as set forth below, as the Servicer), each as to itself in such capacity or capacities, and subject to subsection 9.11(a) in the case of the Transferor, covenants and agrees, through the Purchase Termination Date for all Class A-1 Purchasers and thereafter so long as any amount of the Class A-1 Principal Balance shall remain outstanding or any monetary obligation arising hereunder shall remain unpaid, unless the Required Class A-1 Owners and the Required Class A-1 Purchasers shall otherwise consent in writing, that: (a) each of SRPC, SRI, the Transferor and the Servicer shall perform in all material respects each of the respective agreements, warranties and indemnities applicable to it and comply in all material respects with each of the respective terms and provisions applicable to it under the other Related Documents to which it is party, which agreements, warranties and indemnities are hereby incorporated by reference into this Agreement as if set forth herein in full; and each of SRPC, SRI, the Transferor and the Servicer shall take all reasonable action to enforce the obligations of each of the other parties to such Related Documents which are contained therein; (b) the Transferor and the Servicer shall furnish to each Agent (i) a copy of each opinion, certificate, report, statement, notice or other communication (other than investment instructions) relating to the Series 1999-1 Certificates which is furnished by or on behalf of either of them to Certificateholders, to any Rating Agency or to the Trustee, a copy of each notice, demand or other communication relating to the Series 1999-1 Certificates, this Agreement or the Pooling and Servicing Agreement received by the Transferor or the Servicer from the Trustee, any Rating Agency or 10% or more of the Series 1999-1 Certificateholders (to the extent such notice, demand or communication relates to the Accounts, the Receivables, any Servicer Default, any Trust Pay Out Event, any Series 1999-1 Pay Out Event or any Mandatory Partial Amortization Event); and (ii) such other information, documents records or reports respecting the Trust, the Accounts, the Receivables, the Transferor or the Servicer as any Agent may from time to time reasonably request without unreasonable expense to the Transferor or the Servicer; (c) the Servicer shall furnish to each Agent on or before the date such reports are due under the Pooling and Servicing Agreement copies of each of the reports and certificates required by subsection 3.4(c) or Section 3.5 or 3.6 of the Pooling and Servicing Agreement (which, in the case of the reports pursuant to Section 3.6, shall be addressed to the Facility Agent and each Agent); (d) the Servicer shall promptly furnish to each Agent a copy, addressed to such Agent, of each opinion of counsel delivered to the Trustee pursuant to subsection 13.2(d) of the Pooling and Servicing Agreement; (e) SRI shall furnish to each Agent (i) promptly when publicly available, the annual (audited) and quarterly (unaudited) consolidated and consolidating financial statements of each of Stage and SRPC, the publicly available portions of Granite's quarterly and annual consolidated reports of condition and income and such other publicly available financial information, if any, as to Stage, SRI, Granite or SRPC as such Agent may request, and (ii) promptly after known to SRI, information with respect to any action, suit or proceeding involving SRI or any of its Affiliates by or before any court or any Governmental Authority which, if adversely determined, would materially adversely affect the business, results of operation or financial condition of SRPC, SRI or Granite; (f) the Servicer shall furnish to each Agent a certificate concurrently with its delivery of its annual certificate pursuant to Section 3.5 of the Pooling and Servicing Agreement stating that no Termination Event or event or condition which with the passage of time or the giving of notice, or both, would constitute a Termination Event has occurred or, if such a Termination Event, event or condition has occurred, identifying the same in reasonable detail; (g) the Transferor shall not exercise its right to accept optional reassignment of the Receivables or repurchase the Series 1999-1 Certificates pursuant to Section 12.2 of the Pooling and Servicing Agreement, unless the Class A-1 Purchasers, each Agent and the Facility Agent have been paid, or will be paid upon such repurchase or in connection with such optional reassignment, the Class A-1 Principal Balance, all interest thereon and all other amounts owing hereunder in full; (h) the Transferor and the Servicer shall at any time from time to time during regular business hours, on reasonable notice to the Transferor or the Servicer, as the case may be, permit each Agent and the Facility Agent, or its agents or representatives to: (i) examine all books, records and documents (including computer tapes and disks) in its possession or under its control relating to the Receivables, and (ii) visit its offices and property for the purpose of examining such materials described in clause (i) above. The information obtained by any Agent, the Facility Agent or any Class A-1 Purchaser pursuant to this subsection shall be held in confidence in accordance with Section 6.2 hereof; (i) the Transferor and the Servicer shall use reasonable efforts to cooperate with each Agent (including affording reasonable inspection rights, assisting in the preparation of syndication material, attending investor meetings providing access to its officers and providing reliance letters with respect to opinions delivered in connection with the issuance of the Series 1999-1 Certificates on the Closing Date) in its effort to syndicate the Commitments; (j) the Servicer shall furnish to each Agent, promptly after the occurrence of any Servicer Default, Termination Event, Trust Pay Out Event, Mandatory Partial Amortization Event or Series 1999-1 Pay Out Event, a certificate of an appropriate officer of the Servicer setting forth the circumstances of such Servicer Default, Termination Event, Trust Pay Out Event, Mandatory Partial Amortization Event or Series 1999-1 Pay Out Event and any action taken or proposed to be taken by the Servicer or the Transferor with respect thereto; (k) the Transferor and the Servicer shall timely make all payments, deposits or transfers and give all instructions to transfer required by this Agreement, the Pooling and Servicing Agreement and the Receivables Purchase Agreement; (l) neither the Transferor, the Servicer nor the Originator shall terminate (except in accordance with the terms thereof), amend, waive or otherwise modify the Master Pooling and Servicing Agreement, the Supplement or the Issuance Supplement, unless (i) such amendment, waiver or modification shall not, as evidenced by an Officer's Certificate of the Transferor delivered to each Agent, adversely affect in any material respect the interests of any Agent, the Facility Agent or the Class A-1 Purchasers under any Related Document, and will not result in a reduction or withdrawal of the then current rating by any Rating Agency of any commercial paper notes issued by any Conduit Purchaser without giving effect to any increase in any letter of credit or other enhancement provided to such Conduit Purchaser; and (ii) all of the applicable provisions of Section 13.1 of the Pooling and Servicing Agreement have been complied with; (m) the Transferor and the Servicer shall execute and deliver to each Agent, the Facility Agent or the Trustee all such documents and instruments and do all such other acts and things as may be necessary or reasonably required by any Agent, the Facility Agent or the Trustee to enable any of them to exercise and enforce their respective rights under the Related Documents and to realize thereon, and record and file and rerecord and refile all such documents and instruments, at such time or times, in such manner and at such place or places, all as may be necessary or required by the Trustee, the Facility Agent or any Agent to validate, preserve, perfect and protect the position of the Trustee under the Pooling and Servicing Agreement; (n) neither the Transferor nor the Servicer will consolidate with or merge into any other Person or convey or transfer its properties and assets substantially as an entirety to any Person, except (i) in accordance with Section 7.2 or 8.2 of the Pooling and Servicing Agreement, and (ii) with the prior written consent of the Required Class A-1 Owners and the Required Class A-1 Purchasers; (o) SRI will not (i) resign as Servicer, unless (A) the performance of its duties under the Pooling and Servicing Agreement is no longer permissible pursuant to Requirements of Law and there is no reasonable action which it could take to make the performance of such duties permissible under such Requirements of Law, or (B) the Required Class A-1 Owners and the Required Class A-1 Purchasers shall have consented thereto, (ii) delegate any of its material duties under the Pooling and Servicing Agreement except as permitted by Section 8.7 of the Pooling and Servicing Agreement and unless the Person to which such delegation is made is a wholly owned subsidiary (directly or indirectly) of Stage, is legally qualified and licensed (to the extent required) to perform the duties delegated to it, owns or holds under valid leases or (in the case of software) licenses all computer equipment and software and other equipment and rights which are required for such Person to perform such duties, and employs sufficient and adequately trained personnel to perform such duties, or (iii) appoint or permit the appointment of a Successor Servicer other than the Trustee under the provisions of the Pooling and Servicing Agreement without consultation with the Facility Agent; (p) The Transferor and the Servicer shall not permit any newly issued Series of Investor Certificates (or, with respect to a prefunded Series, interests therein) other than Series 1999-1 to be issued by the Trust or the terms of any new class or subclass of Series 1999-1 Certificates other than the Class A-1 Certificates, Class A-2 Certificates, Class B Certificates, Class C Certificates, Class D Certificates and Class E Certificates to be specified pursuant to any amendment or modification to the Issuance Supplement or any additional issuance supplement, the proceeds of which newly issued Series or such new class will be applied to reduce the Class A Invested Amount or the Class B Invested Amount (each, a "New Issuance"), unless (i) [reserved]; (ii) such proceeds are applied in accordance with subsection 5(b)(iii) of the Issuance Supplement; (iii) in the case of the issuance of a new class or subclass which does not consist of Variable Funding Certificates and which is a Parity Class in relation to the Class A Certificates, there shall be concurrently issued a new class or subclass which (A) does not consist of Variable Funding Certificates, (B) is a Parity Class with respect to the Class B Certificates and (C) has an initial invested amount equal to 19/81st of the aggregate initial invested amount of such two Parity Classes; (iv) the Transferor shall have a delivered (A) notice of the estimated date and amount of such New Issuance to the Facility Agent and each Agent (which shall promptly forward a copy of such notice to each Class A-1 Purchaser in its Purchaser Group) not less than 20 days prior to such estimated date, and (B) notice of the actual date and amount of such New Issuance to the Facility Agent and each Agent (which shall promptly forward a copy of such notice to each Class A-1 Purchaser in its Purchaser Group) not less than three Business Days prior to such date; (v) on the date on which the Transferor has sold such New Issuance, all interest, fees, expenses and all other amounts then due and payable to any Agent or Class A-1 Purchaser or to the Facility Agent hereunder (including any amounts owed under Sections 2.3, 2.4, 2.5 or 2.6, but excluding the Class A-1 Principal Balance) shall have been paid; (vi) on the date on which the Transferor has sold such New Issuance, no Termination Event shall have occurred and be continuing, and there shall exist no unreimbursed Class E Investor Charge-Offs; (vii) the Facility Agent shall have received confirmation that, after giving effect to such New Issuance, the Class A-1 Certificates and the Class A-2 Certificates remain rated Aaa by Moody's and AAA by Fitch IBCA, Inc. and the Class B Certificates remain rated not less than A1 by Moody's and not less than A by Fitch IBCA, Inc; (viii) the conditions set forth in Section 6.15 of the Pooling and Servicing Agreement or in the Issuance Supplement to the New Issuance shall have been satisfied; and (ix) on the date on which the Transferor has sold such New Issuance, the Transferor shall have delivered to the Facility Agent and each Agent an Officer's Certificate dated such date certifying (A) that the conditions described in clauses (i) through (viii) above have been satisfied and (B) that based on the facts known to the officer signing such Officer's Certificate at such time, in the reasonable belief of the Transferor, the New Issuance will not cause a Pay Out Event, a Series 1999-1 Pay Out Event or a Mandatory Partial Amortization Event or an event that, after the giving of notice or the lapse of time, would constitute an Pay Out Event, a Series 1999-1 Pay Out Event or a Mandatory Partial Amortization Event to occur. The Transferor and the Servicer shall not permit any newly issued Series of Investor Certificates (or, with respect to a prefunded Series, interests therein) other than Series 1999-1 to be issued by the Trust or the terms of any new class or subclass of Series 1999-1 Certificates other than the Class A-1 Certificates, Class A-2 Certificates, Class B Certificates, Class C Certificates, Class D Certificates and Class E Certificates to be specified pursuant to any amendment or modification to the Issuance Supplement or any additional issuance supplement, if such newly issued Series or new class or subclass would be senior to the Class A Certificates as to allocations of Available Series 1999-1 Finance Charge Collections, Excess Finance Charge Collections, Series Transferor Finance Charge Collections, Reallocated Principal Collections or Available Principal Collections without the consent of the Facility Agent, each Agent and each Class A-1 Purchaser. If, as the result of a New Issuance, the Class A-2 Invested Amount is reduced to zero, the Transferor agrees to terminate all commitments under the Class A-2 Purchase Agreement at the request of the Facility Agent in its discretion. SECTION 6. MUTUAL COVENANTS REGARDING CONFIDENTIALITY 6.1 Covenants of SRPC, Etc. SRPC, SRI, the Transferor and the Servicer shall hold in confidence, and not disclose to any Person, the terms of any fees payable in connection with this Agreement except they may disclose such information (i) to their officers, directors, employees, agents, counsel, accountants, auditors, advisors or representatives, (ii) with the consent of the Required Class A-1 Purchasers and each Agent, or (iii) to the extent SRPC, SRI, Granite, the Transferor or the Servicer or any Affiliate of either of them should be required by any law or regulation applicable to it or requested by any Governmental Authority to disclose such information; provided, that, in the case of clause (iii), SRPC, Granite, the Transferor or the Servicer, as the case may be, will use all reasonable efforts to maintain confidentiality and will (unless otherwise prohibited by law) notify each Agent of its intention to make any such disclosure prior to making such disclosure. 6.2 Covenants of Class A-1 Purchasers. Each Agent, the Facility Agent and each Class A-1 Purchaser, severally and with respect to itself only, covenants and agrees that any information obtained by such Agent, the Facility Agent or such Class A-1 Purchaser pursuant to this Agreement shall be held in confidence (it being understood that documents provided to an Agent hereunder may in all cases be distributed by such Agent or the Facility Agent to the Class A-1 Purchasers), except that such Agent, the Facility Agent or such Class A-1 Purchaser may disclose such information (i) to its officers, directors, employees, agents, counsel, accountants, auditors, advisors or representatives, (ii) to the extent such information has become available to the public other than as a result of a disclosure by or through such Agent, the Facility Agent or such Class A-1 Purchaser, (iii) to the extent such information was available to such Agent, the Facility Agent or such Class A-1 Purchaser on a nonconfidential basis prior to its disclosure to such Agent, the Facility Agent or such Class A-1 Purchaser hereunder, (iv) with the consent of the Transferor, (v) to the extent permitted by Section 8.1, (vi) to the extent such Agent, the Facility Agent or such Class A-1 Purchaser should be (A) required in connection with any legal or regulatory proceeding or (B) requested by any Governmental Authority to disclose such information or (vii) in the case of any Class A-1 Purchaser that is a Conduit Purchaser, to placement agents and providers of liquidity and credit support who agree to hold such information in confidence and to rating agencies; provided, that, in the case of clause (vi) above, such Agent, the Facility Agent or such Class A-1 Purchaser, as applicable, will use all reasonable efforts to maintain confidentiality and, in the case of clause (vi)(A) above, will (unless otherwise prohibited by law) notify the Transferor of its intention to make any such disclosure prior to making any such disclosure. SECTION 7. THE AGENTS 7.1 Appointment. (a) Each Class A-1 Purchaser hereby irrevocably designates and appoints the Agent for its Purchaser Group as the agent of such Class A-1 Purchaser under this Agreement, and each such Class A-1 Purchaser irrevocably authorizes such Agent, as the agent for such Class A-1 Purchaser, to take such action on its behalf under the provisions of the Related Documents and to exercise such powers and perform such duties thereunder as are expressly delegated to such by the terms of the Related Documents, together with such other powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary elsewhere in this Agreement, no Agent shall have any duties or responsibilities, except those expressly set forth herein, or any fiduciary relationship with any Class A-1 Purchaser, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or otherwise exist against any Agent. (b) Each Class A-1 Purchaser hereby irrevocably designates and appoints the Facility Agent as the agent of such Class A-1 Purchaser under the Pooling and Servicing Agreement and hereunder, and each such Class A-1 Purchaser irrevocably authorizes the Facility Agent, as the agent for such Class A-1 Purchaser, to take such action on its behalf under the provisions of the Pooling and Servicing Agreement and hereunder and to exercise such powers and perform such duties thereunder and hereunder as are expressly granted to the Facility Agent by the terms of the Pooling and Servicing Agreement or hereby, subject to the terms and conditions of this Agreement, together with such other powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary elsewhere in this Agreement, the Facility Agent shall not have any duties or responsibilities, except those expressly set forth herein or in the Pooling and Servicing Agreement or herein, or any fiduciary relationship with any Class A-1 Purchaser, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or otherwise exist against the Facility Agent. 7.2 Delegation of Duties. Each Agent and the Facility Agent may execute any of its duties under any of the Related Documents by or through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. Neither any Agent nor the Facility Agent shall be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable care. 7.3 Exculpatory Provisions. Neither any Agent nor the Facility Agent nor any of their respective officers, directors, employees, agents, attorneys-in-fact or Affiliates shall be (a) liable to any of the Class A-1 Purchasers for any action lawfully taken or omitted to be taken by it or such Person under or in connection with any of the other Related Documents (except for its or such Person's own gross negligence or willful misconduct) or (b) responsible in any manner to any of the Class A-1 Purchasers for any recitals, statements, representations or warranties made by SRPC, SRI, Stage, Granite, the Transferor, the Servicer or the Trustee or any officer thereof contained in any of the other Related Documents or in any certificate, report, statement or other document referred to or provided for in, or received by any Agent or the Facility Agent under or in connection with, any of the other Related Documents or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any of the other Related Documents or for any failure of SRPC, SRI, Stage, Granite, the Transferor, the Servicer or the Trustee to perform its obligations thereunder. Neither any Agent nor the Facility Agent shall be under any obligation to any Class A-1 Purchaser to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, any of the other Related Documents, or to inspect the properties, books or records of SRPC, SRI, Stage, Granite, the Transferor, the Servicer, the Trustee or the Trust. 7.4 Reliance by Agent. Each Agent and the Facility Agent shall be entitled to rely, and shall be fully protected in relying, upon any writing, resolution, notice, consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype message, written statement, order or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including counsel to any Agent or the Facility Agent), independent accountants and other experts selected by any Agent or the Facility Agent. Each Agent and the Facility Agent shall be fully justified in failing or refusing to take any action under any of the Related Documents unless it shall first receive such advice or concurrence of the Required Class A-1 Owners and the Required Class A-1 Purchasers as it deems appropriate or it shall first be indemnified to its satisfaction by the Class A-1 Purchasers or by the Committed Class A-1 Purchasers against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. Each Agent and the Facility Agent shall in all cases be fully protected in acting, or in refraining from acting, under any of the Related Documents in accordance with a request of the Required Class A-1 Owners and the Required Class A-1 Purchasers and such request and any action taken or failure to act pursuant thereto shall be binding upon all present and future Class A-1 Purchasers. 7.5 Notices. No Agent shall be deemed to have knowledge or notice of the occurrence of any breach of this Agreement or the occurrence of any Trust Pay Out Event, Series 1999-1 Pay Out Event, Mandatory Partial Amortization Event or Termination Event unless such Agent has received notice from the Transferor, the Servicer, the Trustee or any Class A-1 Purchaser referring to this Agreement, describing such event. In the event that an Agent receives such a notice, such Agent promptly shall give notice thereof to the Class A-1 Purchasers in its Purchaser Group. Such Agent shall take such action with respect to such event as shall be reasonably directed by the Required Class A-1 Owners and the Required Class A-1 Purchasers; provided that unless and until an Agent shall have received such directions, such Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such event as it shall deem advisable in the best interests of the Class A-1 Purchasers. 7.6 Non-Reliance on Agent and Other Class A-1 Purchasers. Each Class A-1 Purchaser expressly acknowledges that neither any Agent nor the Facility Agent nor any of their respective officers, directors, employees, agents, attorneys-in- fact or Affiliates has made any representations or warranties to it and that no act by any Agent or the Facility Agent hereafter taken, including any review of the affairs of SRPC, SRI, Stage, Granite, the Transferor, the Servicer, the Trustee or the Trust shall be deemed to constitute any representation or warranty by any Agent or the Facility Agent to any Class A-1 Purchaser. Each Class A-1 Purchaser represents to each Agent and the Facility Agent that it has, independently and without reliance upon any Agent, the Facility Agent or any other Class A-1 Purchaser, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, operations, property, financial and other condition and creditworthiness of the Trust, the Trustee, SRPC, SRI, Stage, Granite, the Transferor and the Servicer and made its own decision to purchase its interest in the Class A-1 Certificates hereunder and enter into this Agreement. Each Class A-1 Purchaser also represents that it will, independently and without reliance upon any Agent or the Facility Agent or any other Class A-1 Purchaser, and based on such documents and information as it shall deem appropriate at the time, continue to make its own analysis, appraisals and decisions in taking or not taking action under any of the Related Documents, and to make such investigation as it deems necessary to inform itself as to the business, operations, property, financial and other condition and creditworthiness of the Trust, the Trustee, SRPC, SRI, Stage, Granite, the Transferor and the Servicer. Except, in the case of an Agent, for notices, reports and other documents received by such Agent under Section 5 hereof, neither any Agent nor the Facility Agent shall have any duty or responsibility to provide any Class A-1 Purchaser with any credit or other information concerning the business, operations, property, condition (financial or otherwise), prospects or creditworthiness of the Trust, the Trustee, SRPC, SRI, Stage, Granite, the Transferor or the Servicer which may come into the possession of any Agent or the Facility Agent or any of its respective officers, directors, employees, agents, attorneys-in-fact or Affiliates. 7.7 Indemnification. (i) The Committed Purchasers and the Liquidity Purchasers agree to indemnify the Facility Agent in its capacity as such (without limiting the obligation (if any) of SRPC, SRI, the Transferor, the Trust or the Servicer to reimburse the Facility Agent for any such amounts), ratably according to their respective Commitments (or, if the Commitments have terminated, Percentage Interests), and (ii) the Committed Purchasers and the Liquidity Purchasers in each Purchaser Group agree to indemnify the Agent for such Purchaser Group in its capacity as such (without limiting the obligation (if any) of SRPC, SRI, the Transferor, the Trust or the Servicer to reimburse such Agent for any such amounts), ratably according to their respective Commitments (or, if the Commitments have terminated, Percentage Interests), in each case from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever which may at any time (including at any time following the payment of the obligations under this Agreement, including the Class A-1 Principal Balance) be imposed on, incurred by or asserted against such Agent in any way relating to or arising out of this Agreement, or any documents contemplated by or referred to herein or the transactions contemplated hereby or any action taken or omitted by the Agent under or in connection with any of the foregoing; provided that no Class A-1 Purchaser shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of an Agent or the Facility Agent resulting from its own gross negligence or willful misconduct. The agreements in this subsection shall survive the payment of the obligations under this Agreement, including the Class A-1 Principal Balance. 7.8 Agents in Their Individual Capacities. Each Agent, the Facility Agent and their Affiliates may make loans to, accept deposits from and generally engage in any kind of business with the Trust, the Trustee, SRPC, SRI, Stage, Granite, the Servicer and the Transferor as though such Agent and the Facility Agent were not the agents hereunder. Each Class A-1 Purchaser acknowledges that Credit Suisse First Boston may act (i) as administrator and agent for one or more Conduit Purchasers and in such capacity acts and may continue to act on behalf of each such Conduit Purchaser in connection with its business, (ii) as the agent for certain financial institutions under the liquidity and credit enhancement agreements relating to this Agreement to which any such Conduit Purchaser is party and in various other capacities relating to the business of any such Conduit Purchaser under various agreements, and (iii) as agent for other Classes of Series 1999-1 Certificates. Credit Suisse First Boston in its capacity as an Agent or the Facility Agent shall not, by virtue of its acting in any such other capacities, be deemed to have duties or responsibilities hereunder or be held to a standard of care in connection with the performance of its duties as an Agent or the Facility Agent other than as expressly provided in this Agreement. Credit Suisse First Boston may act as an Agent and the Facility Agent without regard to and without additional duties or liabilities arising from its role as such administrator or agent or arising from its acting in any such other capacity. 7.9 Successor Agent. (a) An Agent may resign as Agent upon ten days' notice to the Class A-1 Purchasers in its Purchaser Group, the Facility Agent, each other Agent, the Trustee, the Transferor and the Servicer with such resignation becoming effective upon a successor agent succeeding to the rights, powers and duties of such Agent pursuant to this subsection 7.9(a). Any Agent may resign as Agent upon ten days' notice to the Class A-1 Purchasers in its Purchaser Group, the Facility Agent and each other Agent, the Transferor, the Servicer and the Trustee with such resignation becoming effective upon a successor agent succeeding to the rights, powers and duties of the Agent pursuant to this Section 7.9. If an Agent shall resign as Agent under this Agreement, then (i) Class A-1 Owners in its Purchaser Group having Percentage Interests aggregating greater than 50% of the aggregate Percentage Interests of all Class A-1 Owners in such Purchaser Group, and (ii) Committed Purchasers and Liquidity Purchasers in its Purchaser Group having Commitments aggregating greater than 50% of the aggregate Commitments of all Committed Purchasers and Liquidity Purchasers in such Purchaser Group shall appoint from among the Committed Purchasers in such Purchaser Group a successor agent for such Purchaser Group. Any successor administrative agent or agent shall succeed to the rights, powers and duties of resigning Agent, and the term "Agent," as applicable, shall mean such successor agent effective upon its appointment, and the former Agent's rights, powers and duties as Agent shall be terminated, without any other or further act or deed on the part of such former Agent or any of the parties to this Agreement. After the retiring Agent's resignation as Agent, the provisions of this Section 7 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Agreement. (b) The Facility Agent may resign as Facility Agent upon ten days' notice to the Class A-1 Purchasers, the Class A-2 Purchasers, the Class B Purchasers, the Trustee, the Transferor, the Servicer and each Agent with such resignation becoming effective upon a successor agent succeeding to the rights, powers and duties of the Facility Agent pursuant to this subsection 7.9(b). If the Facility Agent shall resign as Facility Agent under this Agreement, then the Required Class A-1 Purchasers and the Required Class A-1 Owners shall appoint from among the Committed Purchasers or Liquidity Purchasers hereunder or the committed purchasers or liquidity purchasers under the Class A-2 Certificate Purchase Agreement or the Class B Certificate Purchase Agreement a successor Facility Agent of the Class A-1 Certificateholders, the Class A-2 Certificateholders and the Class B Certificateholders; provided that no such appointment shall be effective unless such successor is also appointed as successor Facility Agent under the Class A-2 Certificate Purchase Agreement and the Class B Certificate Purchase Agreement. The successor agent shall succeed to the rights, powers and duties of the Facility Agent, and the term "Facility Agent" shall mean such successor agent effective upon its appointment, and the former Facility Agent's rights, powers and duties as Facility Agent shall be terminated, without any other or further act or deed on the part of such former Facility Agent or any of the parties to this Agreement. After the retiring Facility Agent's resignation as Facility Agent, the provisions of this Section 7 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Facility Agent under this Agreement. SECTION 8. SECURITIES LAWS; TRANSFERS; TAX TREATMENT 8.1 Transfers of Class A-1 Certificates. (a) Each Class A-1 Owner agrees that the beneficial interest in the Class A-1 Certificates purchased by it will be acquired for investment only and not with a view to any public distribution thereof, and that such Class A-1 Owner will not offer to sell or otherwise dispose of any Class A-1 Certificate acquired by it (or any interest therein) in violation of any of the registration requirements of the Securities Act or any applicable state or other securities laws. Each Class A-1 Owner acknowledges that it has no right to require the Transferor to register, under the Securities Act or any other securities law, the Class A-1 Certificates (or the beneficial interest therein) acquired by it pursuant to this Agreement or any Transfer Supplement. Each Class A-1 Owner hereby confirms and agrees that in connection with any transfer or syndication by it of an interest in the Class A-1 Certificates, such Class A-1 Owner has not engaged and will not engage in a general solicitation or general advertising including advertisements, articles, notices or other communications published in any newspaper, magazine or similar media or broadcast over radio or television, or any seminar or meeting whose attendees have been invited by any general solicitation or general advertising. Each Class A-1 Purchaser which executes a Joinder Agreement agrees that it will execute and deliver to the Transferor, the Servicer, the Trustee and the applicable Agent on or before the effective date of its Joinder Agreement a letter in the form attached hereto as Exhibit A (an "Investment Letter") with respect to the purchase by such Class A-1 Purchaser of an interest in the Class A-1 Certificates. (b) Each initial purchaser of a Class A-1 Certificate or any interest therein and any Assignee thereof or Participant therein shall certify to the Transferor, the Servicer, the Trustee and the Agent for its Purchaser Group that it 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 which, if such entity is a tax-exempt entity, recognizes that payments with respect to the Class A-1 Certificates may constitute unrelated business taxable income or (iii) a person not described in (i) or (ii) whose income from the Class A-1 Certificates is and will be effectively connected with the conduct of a trade or business within the United States (within the meaning of the Code) and whose ownership of any interest in a Class A-1 Certificate will not result in any withholding obligation with respect to any payments with respect to the Class A-1 Certificates by any Person (other than withholding, if any, under Section 1446 of the Code) and who will furnish to the Agent for its Purchaser Group, the Servicer and the Trustee, and to the Class A-1 Owner making the Transfer a properly executed U.S. Internal Revenue Service Form 4224 (and to agree (to the extent legally able) to provide a new Form 4224 upon the expiration or obsolescence of any previously delivered form and comparable statements in accordance with applicable United States laws) or (B) an estate or trust the income of which is includible in gross income for United States federal income tax purposes. (c) Any sale, transfer, assignment, participation, pledge, hypothecation or other disposition (a "Transfer") of a Class A-1 Certificate or any interest therein may be made only in accordance with this Section 8.1. Any Transfer of an interest in a Class A-1 Certificate otherwise permitted by this Section 8.1 will be permitted only if it consists of a pro rata percentage interest in all payments made with respect to the Class A-1 Purchaser's beneficial interest in such Class A-1 Certificate. No Class A-1 Certificate or any interest therein may be Transferred by Assignment or Participation to any Person (each, a "Transferee") unless prior to the transfer the Transferee shall have executed and delivered to the applicable Agent and the Transferor an Investment Letter. Each of SRPC and SRI authorizes each Class A-1 Purchaser to disclose to any Transferee and Support Party and any prospective Transferee or Support Party any and all financial information in the Class A-1 Purchaser's possession concerning the Trust, SRPC, SRI, Granite and Stage which has been delivered to any Agent, the Facility Agent or such Class A-1 Purchaser pursuant to the Related Documents (including information obtained pursuant to rights of inspection granted hereunder) or which has been delivered to such Class A-1 Purchaser by or on behalf of the Trust, SRPC, SRI, Granite, Stage, the Transferor or the Servicer in connection with such Class A-1 Purchaser's credit evaluation of the Trust, SRPC, SRI, Granite, Stage, the Transferor or the Servicer prior to becoming a party to, or purchasing an interest in this Agreement or the Class A-1 Certificates; provided that prior to any such disclosure, such Transferee or Support Party or prospective Transferee or Support Party shall have executed an agreement agreeing to be bound by the provisions of Section 6.2 hereof. (d) Each Class A-1 Purchaser may, in accordance with applicable law, at any time grant participations in all or part of its Commitment or its interest in the Class A-1 Certificates, including the payments due to it under this Agreement and the Pooling and Servicing Agreement (each, a "Participation"), to any Person (each, a "Participant"); provided, however, that no Participation shall be granted to any Person unless and until the Agent for such Class A-1 Purchaser's Purchaser Group shall have consented thereto and the conditions to Transfer specified in this Agreement, including in subsection 8.1(c) hereof, shall have been satisfied and that such Participation consists of a pro rata percentage interest in all payments made with respect to such Class A-1 Purchaser's beneficial interest (if any) in the Class A-1 Certificates. In connection with any such Participation, the Agent for each Purchaser Group shall maintain a register of each Participant of Class A-1 Purchasers or such Purchaser Group and the amount of each of their Participation. Each Class A-1 Purchaser hereby acknowledges and agrees that (A) any such Participation will not alter or affect such Class A-1 Purchaser's direct obligations hereunder, and (B) neither the Trustee, the Transferor nor the Servicer shall have any obligation to have any communication or relationship with any Participant. Each Class A-1 Purchaser and each Participant shall comply with the provisions of subsection 2.5(c). No Participant shall be entitled to Transfer all or any portion of its Participation, without the prior written consent of the Agent for the applicable Purchaser Group. Each Participant shall be entitled to receive additional amounts and indemnification pursuant to Sections 2.4, 2.5 and 2.6 as if such Participant were a Class A-1 Purchaser and such Sections applied to its Participation; provided, in the case of Section 2.5, that such Participant has complied with the provisions of subsection 2.5(c) as if it were a Class A-1 Purchaser. Each Class A-1 Purchaser shall give the Agent for its Purchaser Group notice of the consummation of any sale by it of a Participation and such Agent (upon receipt of notice from the related Class A-1 Purchaser) shall promptly notify the Transferor, the Servicer and the Trustee. (e) Each Class A-1 Purchaser may, with the consent of the Agent for its Purchaser Group and in accordance with applicable law, sell or assign (each, an "Assignment"), to any Consented Assignee (each, an "Assignee") all or any part of its Commitment or its interest in the Class A-1 Certificates and its rights and obligations under this Agreement and the Pooling and Servicing Agreement pursuant to an agreement substantially in the form attached hereto as Exhibit C hereto (a "Transfer Supplement"), executed by such Assignee and the Class A-1 Purchaser and delivered to the Agent for its Purchaser Group for its acceptance and consent; provided, however, that no such assignment or sale shall be effective unless and until the conditions to Transfer specified in this Agreement, including in subsection 8.1(c) hereof, shall have been satisfied. From and after the effective date determined pursuant to such Transfer Supplement, (x) the Assignee thereunder shall be a party hereto and, to the extent provided in such Transfer Supplement, have the rights and obligations of a Class A-1 Purchaser hereunder as set forth therein and (y) the transferor Class A-1 Purchaser shall, to the extent provided in such Transfer Supplement, be released from its Commitment and other obligations under this Agreement; provided, however, that after giving effect to each such Assignment, the obligations released by any such Class A-1 Purchaser shall have been assumed by an Assignee or Assignees. Such Transfer Supplement shall be deemed to amend this Agreement to the extent, and only to the extent, necessary to reflect the addition of such Assignee and the resulting adjustment of Percentage Interests, Purchaser Percentages, Commitments and Maximum Purchase Amounts arising from the Assignment. Upon its receipt and acceptance of a duly executed Transfer Supplement, such Agent shall on the effective date determined pursuant thereto give notice of such acceptance to the Transferor, the Servicer and the Trustee and the Servicer will provide notice thereof to each Rating Agency (if required). Upon instruction to register a transfer of a Class A-1 Purchaser's beneficial interest in the Class A-1 Certificates (or portion thereof) and surrender for registration of transfer such Class A-1 Purchaser's Class A-1 Certificate(s) (if applicable) and delivery to the Transferor and the Trustee of an Investment Letter, executed by the registered owner (and the beneficial owner if it is a Person other than the registered owner), and receipt by the Trustee of a copy of the duly executed related Transfer Supplement and such other documents as may be required under this Agreement, such beneficial interest in the Class A-1 Certificates (or portion thereof) shall be transferred in the records of the Trustee and the Agent for the applicable Purchaser Group and, if requested by the Assignee, new Class A-1 Certificates shall be issued to the Assignee and, if applicable, the transferor Class A-1 Purchaser in amounts reflecting such Transfer as provided in the Pooling and Servicing Agreement. Such Transfers of Class A-1 Certificates (and interests therein) shall be subject to this Section 8.1 in lieu of any regulations which may be prescribed under Section 6.3 of the Pooling and Servicing Agreement. Successive registrations of Transfers as aforesaid may be made from time to time as desired, and each such registration of a transfer to a new registered owner shall be noted on the Certificate Register. (f) Each Class A-1 Purchaser may pledge its interest in the Class A-1 Certificates to any Federal Reserve Bank as collateral in accordance with applicable law. (g) Any Class A-1 Purchaser shall have the option to change its Investing Office, provided that such Class A-1 Purchaser shall have prior to such change in office complied with the provisions of subsection 2.5(c) and provided further that such Class A-1 Purchaser shall not be entitled to any amounts otherwise payable under Section 2.4 or 2.5 resulting solely from such change in office unless such change in office was mandated by applicable law or by such Class A-1 Purchaser's compliance with the provisions of this Agreement. (h) Each Affected Party shall be entitled to receive additional payments and indemnification pursuant to Sections 2.4, 2.5 and 2.6 hereof as though it were a Class A-1 Purchaser and such Section applied to its interest in or commitment to acquire an interest in the Class A-1 Certificates; provided that such Affected Party shall not be entitled to additional payments pursuant to (i) Section 2.4 by reason of Regulatory Changes which occurred prior to the date it became an Affected Party or (ii) Section 2.5 attributable to its failure to satisfy the requirements of subsection 2.5(c) as if it were a Class A-1 Purchaser. (i) Each Affected Party claiming increased amounts described in Sections 2.4 or 2.5 shall furnish, through its related Conduit Purchaser, to the Trustee, the Agent for the applicable Purchaser Group, the Facility Agent, the Servicer and the Transferor a certificate setting forth the basis and amount of each request by such Affected Party for any such amounts referred to in Sections 2.4 or 2.5, such certificate to be conclusive with respect to the factual information set forth therein absent manifest error. (j) In the event that a Liquidity Purchaser is a Downgraded Purchaser, the related Conduit Purchaser shall have the right to replace such Liquidity Purchaser with a replacement Liquidity Purchaser, which replacement purchaser shall succeed to the rights of such Liquidity Purchaser under this Agreement in respect of its Commitment as a Liquidity Purchaser, and such Liquidity Purchaser shall assign such Commitment and its interest in the Class A-1 Certificates to such replacement Liquidity Purchaser in accordance with the provisions of this Section 8.1; provided, that (A) such Liquidity Purchaser shall not be replaced hereunder with a new investor until such Liquidity Purchaser has been paid in full its Percentage Interest of the Class A-1 Principal Balance and all accrued and unpaid interest thereon by such new investor and all other amounts (including all amounts owing under Sections 2.4 and 2.5) owed to it and to all Participants with respect to such Liquidity Purchaser pursuant to this Agreement, and (ii) if the Liquidity Purchaser to be replaced is an Agent or the Facility Agent, a replacement Agent or Facility Agent, as the case may be, shall have been appointed in accordance with Section 7.9, and the Agent or Facility Agent, as the case may be, to be replaced shall have been paid all amounts owing to it as Agent or Facility Agent, as the case may be, pursuant to this Agreement. For purposes of this subsection, a Liquidity Purchaser shall be a "Downgraded Purchaser" if and so long as the credit rating assigned to its short-term obligations by Moody's or Standard & Poor's on the date on which it became a party to this Agreement shall have been reduced or withdrawn, unless otherwise agreed between such Liquidity Purchaser and the Conduit Purchaser in its Purchaser Group. (k) In the event that a Class A-1 Purchaser has requested payment of additional amounts referred to in subsection 2.4(a), 2.4(b) or 2.5 and payment thereof hereunder shall not be waived by such Class A-1 Purchaser within 30 days following a request for such waiver from the Transferor, the Transferor shall have the right to replace such Class A-1 Purchaser and, if such Class A-1 Purchaser is a Conduit Purchaser, each of its Liquidity Purchasers hereunder with replacement purchaser or purchasers which shall succeed to the rights of such Class A-1 Purchaser or Class A-1 Purchasers under this Agreement. Any such replacement purchaser shall be (i) reasonably acceptable to the Agent for the applicable Purchaser Group, (ii) if such Class A-1 Purchaser is a Liquidity Purchaser, acceptable to the related Conduit Purchaser in its sole discretion, and (iii) if such Class A-1 Purchaser is a Conduit Purchaser, each Liquidity Purchaser in its Purchaser Group shall be concurrently replaced as provided in this subsection unless such Liquidity Purchaser otherwise consents in its sole discretion. Such Class A-1 Purchaser shall assign its Commitment hereunder and its beneficial interest in the Class A-1 Certificates to such replacement purchaser in accordance with the provisions of Section 8.1; provided, that (A) such Class A-1 Purchaser shall not be replaced hereunder with a replacement purchaser until such Class A-1 Purchaser has been paid in full its Percentage Interest of the Class A-1 Principal Balance and all accrued and unpaid interest thereon by such replacement purchaser and all other amounts (including all amounts owing under Section 2.4 and 2.5) owed to it pursuant to this Agreement and (B) if the Class A-1 Purchaser to be replaced is an Agent or the Facility Agent or, unless the Agent for the Applicable Purchaser Group and the Facility Agent otherwise agree, a Conduit Purchaser sponsored or administered by such Agent or the Facility Agent (in its individual capacity), a replacement such Agent or the Facility Agent, as the case may be, shall have been appointed in accordance with Section 7.9 and the Agent or the Facility Agent, as the case may be, to be replaced shall have been paid all amounts owing to it as Agent or the Facility Agent, as the case may be, pursuant to this Agreement; provided, further, that such Class A-1 Purchaser shall not be replaced hereunder with a replacement purchaser unless the Transferor shall have provided to such Class A-1 Purchaser and the Agent for the applicable Purchaser Group with an Officer's Certificate stating that such replacement purchaser is not subject to, or has agreed not to seek, the additional amounts which Class A-1 Purchaser requested pursuant to subsection 2.4(a), 2.4(b) or 2.5, as the case may be. 8.2 Tax Characterization. It is the intention of the parties hereto that the Class A-1 Certificates be treated for tax purposes as indebtedness. SECTION 9. MISCELLANEOUS 9.1 Amendments and Waivers. This Agreement may not be amended, supplemented or modified nor may any provision hereof be waived except in accordance with the provisions of this Section 9.1. With the written consent of the Required Class A-1 Owners and the Required Class A-1 Purchasers, the Facility Agent, SRPC and SRI may, from time to time, enter into written amendments, supplements, waivers or modifications hereto for the purpose of adding any provisions to this Agreement or changing in any manner the rights of any party hereto or waiving, on such terms and conditions as may be specified in such instrument, any of the requirements of this Agreement; provided, however, that no such amendment, supplement, waiver or modification shall (i) reduce the amount of or extend the maturity of any Class A-1 Certificate or reduce the rate or extend the time of payment of interest thereon, or reduce or alter the timing of any other amount payable to any Class A-1 Purchaser hereunder or under the Pooling and Servicing Agreement, in each case without the consent of the Class A-1 Purchaser affected thereby, (ii) amend, modify or waive any provision of this Section 9.1, or, if such amendment would have a material adverse effect on the Class A-1 Purchasers, the definition of "Class A-1 Invested Amount" or "Class A-1 Principal Balance", or reduce the percentage specified in the definition of Required Class A-1 Owners or Required Class A-1 Purchasers, in each case without the written consent of all Class A-1 Purchasers or (iii) amend, modify or waive any provision of Section 7 of this Agreement or any other provision of this Agreement affecting the Agents or the Facility Agent without the written consent of each Agent adversely affected thereby and the Facility Agent. Any waiver of any provision of this Agreement shall be limited to the provisions specifically set forth therein for the period of time set forth therein and shall not be construed to be a waiver of any other provision of this Agreement. Each party hereto agrees that, on a one-time basis following the initial review of the Related Documents by Standard & Poor's on behalf of Class A-1 Purchasers which are Conduit Purchasers, it will at the request of its related Agent enter into or to consent to, as applicable, any amendments or other modifications to the Related Documents, other than those requiring the consent of all Class A-1 Purchasers as provided above in this subsection and other than those which would have an adverse effect on any other Class or Series of Certificates, as shall reasonably be determined by such Agent to be required (i) for the Class A-1 Certificate to be rated AAA by Standard & Poor's or (ii) for any initial Class A-1 Purchaser which is a Conduit Purchaser to obtain or maintain a rating of the Class A-1 Certificate which will permit such Conduit Purchaser's commercial paper notes to maintain at least the rating from Standard & Poor's as in effect immediately prior to such Conduit Purchaser's becoming a Class A-1 Purchaser after giving effect to its initial purchase of the Class A-1 Certificates and to purchases from time to time by such Conduit Purchaser of Additional Class A-1 Invested Amounts as contemplated by this Agreement, without giving effect to any increase in any letter of credit or other enhancement provided to such Conduit Purchaser (other than the liquidity support provided to such Conduit Purchaser by Liquidity Providers). The Facility Agent may cast any vote or give any direction under the Pooling and Servicing Agreement on behalf of the Class A Certificateholders if it has been directed to do so by (i) the Required Class A-1 Purchasers and the Required Class A-1 Owners, (ii) the Class A-2 Purchasers required under the terms of Section 9.1 of the Class A-2 Certificate Purchase Agreement Purchasers, and (iii) the Class B Purchasers required under the terms of Section 9.1 of the Class B Certificate Purchase Agreement. 9.2 Notices. (a) All notices, requests and demands to or upon the respective parties hereto to be effective shall be in writing (including by telecopy), and, unless otherwise expressly provided herein, shall be deemed to have been duly given or made when delivered by hand, or, in the case of mail or telecopy notice, when received, addressed as follows or, with respect to a Class A-1 Purchaser, as set forth in its respective Joinder Supplement or Transfer Supplement, or to such other address as may be hereafter notified by the respective parties hereto: SRPC: SRI Receivables Purchase Co., Inc. 10201 Main Street Houston, Texas 77025 Attention: Treasurer Telephone: (713) 669-2601 Telecopy: (713) 669-2621 SRI: Specialty Retailers, Inc. 10201 Main Street Houston, Texas 77025 Attention: Treasurer Telephone: (713) 669-2601 Telecopy: (713) 669-2621 The Trustee: Bankers Trust (Delaware) 1011 Centre Road, Suite 200 Wilmington, Delaware 19805-1266 Attention: Corporate Trust and Agency Group Telephone: (302) 636-3300 Telefax: (302) 636-3222 Mailing Address: P.O. Box 8795 Wilmington, Delaware 19899-8795 with a copy to: 4 Albany Street - 10th Floor New York, New York 10006 Attention: Corporate Trust and Agency Group Telephone: (212) 250-2500 Telefax: (212) 250-6439 The Facility Credit Suisse First Boston, New York Branch Agent: Eleven Madison Avenue New York, New York 10010 Attention: Asset Finance Department Telephone: (212) 325-9076 Telefax: (212) 325-6677 (b) All payments to be made to an Agent or any Class A-1 Purchaser in a Purchaser Group hereunder shall be made in United States dollars, and, unless otherwise specifically provided herein, shall be made to such Agent for the account of one or more of the Class A-1 Purchasers or for its own account, as the case may be. Unless otherwise directed by an Agent or Class A-1 Purchaser, all payments to it shall be made by federal wire to the account specified in the Joinder Supplement or Transfer Supplement by which it became a party hereto. All payments to be made to the Facility Agent hereunder shall be made in United States dollars, and, unless otherwise directed by the Facility Agent all such payments shall be made by federal wire to The Bank of New York (BONY), ABA #021-000-018, for credit to Credit Suisse First Boston CSFBNY -- Loan Clearing Account #8900329262, reference SRI Receivables Master Trust Series 1999-1, with telephone notice (including federal wire number) to the Asset Finance Department of CSFB (212-325-9070). (c) Any notices permitted or required hereunder to be given by SRPC shall be effective if given on behalf of SRPC by the Servicer. 9.3 No Waiver; Cumulative Remedies. No failure to exercise and no delay in exercising, on the part of any Agent, the Facility Agent or any Class A-1 Purchaser, any right, remedy, power or privilege under any of the Related Documents shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege under any of the Related Documents preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges provided in the Related Documents are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law. 9.4 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of SRPC, SRI, the Transferor, the Servicer, each Agent, the Facility Agent, the Class A-1 Purchasers, any Assignee and their respective successors and assigns, except that SRPC, SRI, the Transferor and the Servicer may not assign or transfer any of their respective rights or obligations under this Agreement except as provided herein and in the Pooling and Servicing Agreement, without the prior written consent of the Required Class A-1 Owners and the Required Class A-1 Purchasers. This Agreement is also intended to benefit the Support Parties, Affected Parties, Participants and Indemnities, and their respective successors and assigns, to the extent provided herein. 9.5 Successors to Servicer. (a) In the event that a transfer of servicing occurs under Article VIII or Article X of the Pooling and Servicing Agreement, (i) from and after the effective date of such transfer, the Successor Servicer shall be the successor in all respects to the Servicer and shall be responsible for the performance of all functions to be performed by the Servicer from and after such date, except as provided in the Pooling and Servicing Agreement, and shall be subject to all the responsibilities, duties and liabilities relating thereto placed on the Servicer by the terms and provisions hereof, and all references in this Agreement to the Servicer shall be deemed to refer to the Successor Servicer, and (ii) as of the date of such transfer, the Successor Servicer shall be deemed to have made with respect to itself the representations and warranties made in Section 4.2 (in the case of subsection 4.2(a) with appropriate factual changes); provided, however, that the references to the Servicer contained in Section 5.1 of this Agreement shall be deemed to refer to the Servicer with respect to responsibilities, duties and liabilities arising out of an act or acts, or omission, or an event or events giving rise to such responsibilities, duties and liabilities and occurring during such time that the Servicer was Servicer under this Agreement and shall be deemed to refer to the Successor Servicer with respect to responsibilities, duties and liabilities arising out of an act or acts, or omission, or an event or events giving rise to such responsibilities, duties and liabilities and occurring during such time that the Successor Servicer acts as Servicer under this Agreement; provided, however, to the extent that an obligation to indemnify the Class A-1 Purchasers under Section 2.6 arises as a result of any act or failure to act of any Successor Servicer in the performance of servicing obligations under the Pooling and Servicing Agreement, such indemnification obligation shall be of the Successor Servicer and not its predecessor. Upon the transfer of servicing to a Successor Servicer, such Successor Servicer shall furnish to each Agent copies of its audited annual financial statements for each of the three preceding fiscal years or if the Trustee or any other banking institution becomes the Successor Servicer, such Successor Servicer shall provide, in lieu of the audited financial statements required in the immediately preceding clause, complete and correct copies of the publicly available portions of its Consolidated Reports of Condition and Income as submitted to the FDIC for the two most recent year end periods. (b) In the event that any Person becomes the successor to the Transferor pursuant to Article VII of the Pooling and Servicing Agreement, from and after the effective date of such transfer, such successor to the Transferor shall be the successor in all respects to the Transferor and shall be responsible for the performance of all functions to be performed by the Transferor from and after such date, except as provided in the Pooling and Servicing Agreement, and shall be subject to all the responsibilities, duties and liabilities relating thereto placed on the Transferor by the terms and provisions hereof, and all references in this Agreement to the Transferor shall be deemed to refer to the successor to the Transferor; provided, however, that the references to the Transferor contained in Sections 2.5, 2.6 and 5.1 of this Agreement shall be deemed to refer to SRPC with respect to responsibilities, duties and liabilities arising out of an act or acts, or omission, or an event or events giving rise to such responsibilities, duties and liabilities and occurring during such time that SRPC was Transferor under this Agreement and shall be deemed to refer to the successor to SRPC as Transferor with respect to responsibilities, duties and liabilities arising out of an act or acts, or omission, or an event or events giving rise to such responsibilities, duties and liabilities and occurring during such time that the successor to SRPC acts as Transferor under this Agreement. 9.6 Counterparts. This Agreement may be executed by one or more of the parties to this Agreement on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. 9.7 Severability. Any provisions of this Agreement which are prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provisions in any other jurisdiction. 9.8 Integration. This Agreement and the Class A-1 Fee Letter represent the agreement of each Agent, the Facility Agent, SRPC, SRI, the Transferor, the Servicer and the Class A-1 Purchasers with respect to the subject matter hereof, and there are no promises, undertakings, representations or warranties by any Class A-1 Purchaser, any Agent or the Facility Agent relative to subject matter hereof not expressly set forth or referred to herein or therein. 9.9 Governing Law. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. 9.10 Termination. This Agreement shall remain in full force and effect until the earlier to occur of (a) payment in full of the Class A-1 Principal Balance, all accrued and unpaid Class A-1 Interest, Class A-1 Program Fees and Class A-1 Utilization Fees, all amounts payable by pursuant to Sections 2.3, 2.4, 2.5 or 2.6 hereof and all other amounts payable to the Class A-1 Purchasers, the Agents and the Facility Agent hereunder and the termination of all Commitments and (b) the Series Termination Date; provided, however, that the provisions of Sections 2.4, 2.5, 2.6, 6.1, 6.2, 7.7, 8.2, 9.11, 9.13 and 9.14 shall survive termination of this Agreement and any amounts payable to the Facility Agent, the Agents, Class A-1 Purchasers or any Affected Party thereunder shall remain payable thereto. 9.11 Limited Recourse; No Proceedings. (a) The obligations of SRPC, SRI, the Transferor and the Servicer under this Agreement are several (except as specifically provided herein) and are solely the corporate obligations of SRPC, SRI, the Transferor or the Servicer, as applicable. No recourse shall be had for the payment of any fee or other obligation or claim arising out of or relating to this Agreement or any other agreement, instrument, document or certificate executed and delivered or issued by SRPC, SRI, the Transferor and the Servicer or any officer of any of them in connection therewith, against any stockholder, employee, officer, director or incorporator of SRPC, SRI, the Transferor or the Servicer. With respect to obligations of the Transferor, neither any Agent, the Facility Agent nor any Class A-1 Purchaser shall look to any property or assets of the Transferor, other than to (a) amounts payable to an Agent, the Facility Agent or a Class A-1 Purchaser or to the Transferor under the Receivables Purchase Agreement or the Pooling and Servicing Agreement and (b) any other assets of the Transferor not pledged to third parties or otherwise encumbered in any manner permitted by the Transferor's Certificate of Incorporation. Each Class A-1 Purchaser, the Facility Agent and each Agent hereby agrees that to the extent such funds are insufficient or unavailable to pay any amounts owing to it by the Transferor pursuant to this Agreement, prior to the earlier of the Trust Termination Date or the commencement of a bankruptcy or insolvency proceeding by or against the Transferor, it shall not constitute a claim against the Transferor. Nothing in this paragraph shall limit or otherwise affect the liability of the Servicer with respect to any amounts owing by it hereunder or the right of any Agent, the Facility Agent or any Class A-1 Purchaser to enforce such liability against the Servicer or any of its assets. (b) Each of SRPC, SRI, the Transferor, the Servicer, each Agent, the Facility Agent and each Class A-1 Purchaser hereby agrees that it shall not institute or join against any Conduit Purchaser any bankruptcy, reorganization, arrangement, insolvency or liquidation proceeding, or other proceeding under any federal or state bankruptcy or similar law, for one year and a day after the latest maturing commercial paper note, medium term note or other debt security issued by such Conduit Purchaser (collectively, "Notes") is paid. (c) Notwithstanding any provisions contained in this Agreement to the contrary, no Conduit Purchaser shall pay, or be obligated to pay, any amount pursuant to this Agreement unless (i) such Conduit Purchaser has received funds which may be used to make such payment and which funds are not required to repay its Notes when due and (ii) after giving effect to such payment, either (A) Conduit Purchaser could issue Notes to refinance all its outstanding Notes (assuming such outstanding Notes matured at such time) in accordance with the program documents governing such Conduit Purchaser's Note issuance program or (B) all Notes of such Conduit Purchaser are paid in full. Payments by a Conduit Purchaser hereunder are expressly limited to the amount available therefor in accordance with the terms of such Conduit Purchaser's program documents, and no recourse shall be had against such Conduit Purchaser or any other Person in respect of any deficiency in such amounts. Any amount which a Conduit Purchaser does not pay pursuant to the operation of this subsection shall not constitute a claim (as defined in 101 of the Bankruptcy Code) against or corporate obligation of such Conduit Purchaser for any such insufficiency unless and until such Conduit Purchaser satisfies the provisions of clauses (i) and (ii) above. This subsection shall survive for one year and a day after the latest maturing Note issued by such Conduit Purchaser is paid. 9.12 Survival of Representations and Warranties. All representations and warranties made hereunder and in any document, certificate or statement delivered pursuant hereto or in connection herewith shall survive the execution and delivery of this Agreement, the purchase of the Class A-1 Certificates hereunder and the termination of this Agreement. 9.13 Submission to Jurisdiction; Waivers. EACH OF SRPC, SRI, THE TRANSFEROR, THE SERVICER, THE FACILITY AGENT, EACH AGENT AND EACH CLASS A-1 PURCHASER HEREBY IRREVOCABLY AND UNCONDITIONALLY: (A) SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT TO WHICH IT IS A PARTY, OR FOR RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT IN RESPECT THEREOF, TO THE NON-EXCLUSIVE GENERAL JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND APPELLATE COURTS FROM ANY THEREOF; (B) CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE BROUGHT IN SUCH COURTS AND WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT OR THAT SUCH ACTION OR PROCEEDING WAS BROUGHT IN AN INCONVENIENT COURT AND AGREES NOT TO PLEAD OR CLAIM THE SAME; (C) AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR PROCEEDING MAY BE EFFECTED BY MAILING A COPY THEREOF BY REGISTERED OR CERTIFIED MAIL (OR ANY SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE PREPAID, TO SUCH PARTY AT ITS ADDRESS SET FORTH IN SECTION 9.2 OR AT SUCH OTHER ADDRESS OF WHICH THE AGENT SHALL HAVE BEEN NOTIFIED PURSUANT THERETO; AND (D) AGREES THAT NOTHING HEREIN SHALL AFFECT THE RIGHT TO EFFECT SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT TO SUE IN ANY OTHER JURISDICTION. 9.14 WAIVERS OF JURY TRIAL. EACH OF SRPC, SRI, THE TRANSFEROR, THE SERVICER, THE FACILITY AGENT, THE AGENTS AND THE CLASS A-1 PURCHASERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING DIRECTLY OR INDIRECTLY TO THIS AGREEMENT OR ANY OTHER DOCUMENT OR INSTRUMENT RELATED HERETO AND FOR ANY COUNTERCLAIM THEREIN. IN WITNESS WHEREOF, the parties hereto have caused this Certificate Purchase Agreement to be duly executed by their respective officers as of the day and year first above written. SRI RECEIVABLES PURCHASE CO., INC., individually and as Transferor By: /s/Charles M. Sledge Name: Charles M. Sledge Title: Senior Vice President SPECIALTY RETAILERS, INC., individually and as Servicer By: /s/James A. Marcum Name: James A. Marcum Title: Vice Chairman, CFO CREDIT SUISSE FIRST BOSTON, NEW YORK BRANCH, as Facility Agent By: /s/Alberto Zonca Name: Alberto Zonca Title: Vice President By: /s/Matthew J. Monaco Name: Matthew J. Monaco Title: Associate EXHIBIT A FORM OF INVESTMENT LETTER [Date] SRI Receivables Purchase Co., Inc. 10201 Main Street Houston, Texas 77025 Attention: Treasurer Re SRI Receivables Master Trust Class A-1 Variable Funding Certificates, Series 1999-1 Ladies and Gentlemen: This letter (the "Investment Letter") is delivered by the undersigned (the "Purchaser") pursuant to subsection 8.1(a) of the Class A-1 Certificate Purchase Agreement dated as of November 9, 1999 (as in effect, the "Certificate Purchase Agreement"), among SRI Receivables Purchase Co., Inc., as Transferor, Specialty Retailers, Inc., as Servicer, the Class A-1 Purchasers and Agents parties thereto and Credit Suisse First Boston, New York Branch, as Agent and Facility Agent. Capitalized terms used herein without definition shall have the meanings set forth in the Certificate Purchase Agreement. The Purchaser represents to and agrees with the Transferor as follows: (a) The Purchaser is authorized [to enter into the Certificate Purchase Agreement and to perform its obligations thereunder and to consummate the transactions contemplated thereby] [to purchase a participation in obligations under the Certificate Purchase Agreement]. (b) The Purchaser has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of its investment in the Class A-1 Certificates and is able to bear the economic risk of such investment. The Purchaser has been afforded the opportunity to ask such questions as it deems necessary to make an investment decision, and has received all information it has requested in connection with making such investment decision. The Purchaser has, independently and without reliance upon any Agent, the Facility Agent or any other Class A-1 Purchaser, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, operations, property, financial and other condition and creditworthiness of the Trust, SRPC, SRI, Stage, the Transferor and the Servicer and made its own decision to purchase its interest in the Class A-1 Certificates, and will, independently and without reliance upon any Agent, the Facility Agent or any other Class A-1 Purchaser, and based on such documents and information as it shall deem appropriate at the time, continue to make its own analysis, appraisals and decisions in taking or not taking action under the Certificate Purchase Agreement, and to make such investigation as it deems necessary to inform itself as to the business, operations, property, financial and other condition and creditworthiness of the Trust, SRPC, SRI, Stage, Granite, the Transferor and the Servicer. (c) The Purchaser is an "accredited investor", as defined in Rule 501, promulgated by the Securities and Exchange Commission (the "Commission") under the Securities Act of 1933, as amended (the "Securities Act"), or is a sophisticated institutional investor. The Purchaser understands that the offering and sale of the Class A-1 Certificates has not been and will not be registered under the Securities Act and has not and will not be registered or qualified under any applicable "Blue Sky" law, and that the offering and sale of the Class A-1 Certificate has not been reviewed by, passed on or submitted to any federal or state agency or commission, securities exchange or other regulatory body. (d) The Purchaser is acquiring an interest in Class A-1 Certificates without a view to any distribution, resale or other transfer thereof except, with respect to any Class A-1 Purchaser Interest or any interest or participation therein, as contemplated in the following sentence. The Purchaser will not resell or otherwise transfer any interest or participation in the Class A-1 Purchaser Interest, except in accordance with Section 8.1 of the Certificate Purchase Agreement and (i) in a transaction exempt from the registration requirements of the Securities Act of 1933, as amended, and applicable state securities or "blue sky" laws; (ii) to the Transferor or any affiliate of the Transferor; or (iii) to a person who the Purchaser reasonably believes is a qualified institutional buyer (within the meaning thereof in Rule 144A under the Securities Act) that is aware that the resale or other transfer is being made in reliance upon Rule 144A. In connection therewith, the Purchaser hereby agrees that it will not resell or otherwise transfer the Class A-1 Certificates or any interest therein unless the purchaser thereof provides to the addressee hereof a letter substantially in the form hereof. (e) This Investment Letter has been duly executed and delivered and constitutes the legal, valid and binding obligation of the Purchaser, enforceable against the Purchaser in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws or equitable principles affecting the enforcement of creditors' rights generally and general principles of equity. Very truly yours, [NAME OF PURCHASER] By:___________________________ Name: Title: EXHIBIT B FORM OF JOINDER SUPPLEMENT JOINDER SUPPLEMENT, dated as of the date set forth in Item 1 of Schedule I hereto, among SRI Receivables Purchase Co., Inc. (the "Transferor"), Specialty Retailers, Inc., as Servicer (the "Servicer"), the Class A-1 Purchaser set forth in Item 2 of Schedule I hereto (the "Additional Class A-1 Purchaser"), the Agent set forth in Item 3 of Schedule I hereto for the Class A-1 Purchasers in the Purchaser Group set forth in Item 4 of Schedule I hereto (in such capacity, the "Agent"), and Credit Suisse First Boston, New York Branch, as Facility Agent for the Class A-1 Purchasers under, and as defined in, the Certificate Purchase Agreement described below (in such capacity, the "Facility Agent"). W I T N E S S E T H WHEREAS, this Supplement is being executed and delivered in accordance with subsection 2.2(d) of the Class A-1 Certificate Purchase Agreement, dated as of November 9, 1999, among SRI Receivables Purchase Co., Inc., as Transferor, Specialty Retailers, Inc., as Servicer, the Class A-1 Purchasers and Agents parties thereto and Credit Suisse First Boston, New York Branch, as Facility Agent (as from time to time amended, supplemented or otherwise modified in accordance with the terms thereof, the "Certificate Purchase Agreement"; unless otherwise defined herein, terms defined in the Certificate Purchase Agreement are used herein as therein defined); and WHEREAS, the Additional Class A-1 Purchaser (if it is not already a Class A-1 Purchaser party to the Certificate Purchase Agreement) wishes to become a Class A-1 Purchaser party to the Certificate Purchase Agreement and the Agent (if it is not already the Agent party to the Certificate Purchase Agreement) wishes to become an Agent party to the Certificate Purchase Agreement; NOW, THEREFORE, the parties hereto hereby agree as follows: (a) Upon receipt by the Agent of five counterparts of this Supplement, to each of which is attached a fully completed Schedule I and Schedule II, each of which has been executed by the Additional Class A-1 Purchaser, the Agent, the Transferor and the Facility Agent, the Agent will transmit to the Servicer, the Transferor, the Trustee, the Facility Agent and the Additional Class A-1 Purchaser a Joinder Effective Notice, substantially in the form of Schedule III to this Supplement (a "Joinder Effective Notice"). Such Joinder Effective Notice shall be executed by the Agent and shall set forth, inter alia, the date on which the transfer effected by this Supplement shall become effective (the "Joinder Effective Date"). From and after the Joinder Effective Date, the Additional Class A-1 Purchaser shall be a Class A-1 Purchaser party to the Certificate Purchase Agreement for all purposes thereof and shall be a Conduit Purchaser, Liquidity Purchaser or Committed Purchaser, as specified on such Schedule II, having an initial Maximum Purchase Amount or Commitment, as applicable, as set forth in such Schedule II. The Additional Class A-1 Purchaser shall be a member of the Purchaser Group set forth in Item 4 of Schedule I hereto. If the Additional Class A-1 Purchaser is a Conduit Purchaser, then (i) such Schedule II identifies its related Liquidity Purchasers and (ii) each such Liquidity Purchaser has executed and delivered (or is concurrently herewith executing and delivering) its own Joinder Supplement with respect to such Additional Class A-1 Purchaser. If the Additional Class A-1 Purchaser is a Liquidity Purchaser, such Schedule II identifies its related Conduit Purchaser. From and after the Joinder Effective Date, the Agent, if it is not already an "Agent" under the Certificate Purchase Agreement, shall be an Agent thereunder for the Purchaser Group set forth in Item 4 of Schedule I hereto. (b) Concurrently with the execution and delivery hereof, the Additional Class A-1 Purchaser will deliver to the Transferor and the Trustee an executed Investment Letter in the form of Exhibit A to the Certificate Purchase Agreement. (c) Each of the parties to this Supplement agrees and acknowledges that at any time and from time to time upon the written request of any other party, it will execute and deliver such further documents and do such further acts and things as such other party may reasonably request in order to effect the purposes of this Supplement. (d) By executing and delivering this Supplement, the Additional Class A-1 Purchaser confirms to and agrees with each Agent, the Facility Agent and each Class A-1 Purchaser as follows: (i) neither the Agent, the Facility Agent nor any other Class A-1 Purchaser makes any representation or warranty or assumes any responsibility with respect to any statements, warranties or representations made in or in connection with the Certificate Purchase Agreement (other then representations or warranties made by such respective parties) or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Certificate Purchase Agreement or any other instrument or document furnished pursuant thereto, or with respect to the Trust, the financial condition of SRPC, SRI, Granite, Stage, the Servicer, the Transferor or the Trustee, or the performance or observance by SRPC, SRI, Granite, Stage, the Servicer, the Transferor or the Trustee of any of their respective obligations under the Certificate Purchase Agreement or the Pooling and Servicing Agreement or any other instrument or document furnished pursuant hereto; (ii) the Additional Class A-1 Purchaser confirms that it has received a copy of such documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Supplement; (iii) the Additional Class A-1 Purchaser will, independently and without reliance upon any Agent, the Facility Agent or any other Class A-1 Purchaser and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Certificate Purchase Agreement; (iv) each Purchasing Class A-1 Purchaser appoints and authorizes the Agent and the Facility Agent to take such action as agent on its behalf and to exercise such powers under the Certificate Purchase Agreement and the Pooling and Servicing Agreement as are delegated to such Agent or the Facility Agent, as applicable, by the terms thereof, together with such powers as are reasonably incidental thereto, all in accordance with Section 7 of the Certificate Purchase Agreement; and (v) the Additional Class A-1 Purchaser agrees (for the benefit of each Agent, the Facility Agent, each other Class A-1 Purchaser, the Servicer and the Transferor) that (A) if it is a Conduit Purchaser, it will perform in accordance with their terms all of the obligations which by the terms of the Certificate Purchase Agreement are required to be performed by it as a Class A-1 Purchaser which is a Conduit Purchaser, (B) if it is a Committed Purchaser, it will perform in accordance with their terms all of the obligations which by the terms of the Certificate Purchase Agreement are required to be performed by it as a Class A-1 Purchaser which is a Committed Purchaser, and (C) if it is a Liquidity Purchaser, it will perform in accordance with their terms all of the obligations which by the terms of the Certificate Purchase Agreement are required to be performed by it as a Class A-1 Purchaser which is a Liquidity Purchaser. By executing and delivering this Supplement, the Agent, if it not already an "Agent" under the Certificate Purchase Agreement, agrees (for the benefit of each other Agent, the Facility Agent, each Class A-1 Purchaser, the Servicer and the Transferor) that it will perform in accordance with their terms all of the obligations which by the terms of the Certificate Purchase Agreement are required to be performed by it as an Agent for its Purchaser Group. (e) Schedule II hereto sets forth the Maximum Purchase Amount or the Commitment, as applicable, the Commitment Expiration Date, if applicable, and the initial Investing Office of the Additional Class A-1 Purchaser, as well as administrative information with respect to the Additional Class A-1 Purchaser, including the address of Additional Class A-1 Purchaser for purposes of notices, requests and demands pursuant to subsection 9.2(a) of the Certificate Purchase Agreement and the identification of the account for certain payments to the Additional Class A-1 Purchaser for purposes of subsection 9.2(b) of the Certificate Purchase Agreement. (f) Schedule II hereto also sets forth the address of the Agent for purposes of notices, requests and demands pursuant to subsection 9.2(a) of the Certificate Purchase Agreement and the identification of the account for certain payments to the Agent for purposes of subsection 9.2(b) of the Certificate Purchase Agreement. (g) THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. IN WITNESS WHEREOF, the parties hereto have caused this Supplement to be executed by their respective duly authorized officers on Schedule I hereto as of the date set forth in Item 1 of Schedule I hereto. SCHEDULE I TO JOINDER SUPPLEMENT Completion of Information And Signatures For Joinder Supplement Re: Class A-1 Certificate Purchase Agreement, dated as of November 9, 1999, among SRI Receivables Purchase Co., Inc., as Transferor, Specialty Retailers, Inc., as Servicer, the Class A-1 Purchasers and Agent to party thereto and Credit Suisse First Boston, New York Branch, as Agent and as Facility Agent. Item 1: Date of Joinder Supplement: Item 2: Additional Class A-1 Purchaser: Item 3: Agent: Item 4.: Purchaser Group: Item 5: Signatures of Parties to Agreement: as Additional Class A-1 Purchaser By: Name: Title: as Agent By: Name: Title: SRI RECEIVABLES PURCHASE CO., INC. as Transferor By: Name: Title: ACCEPTED BY: CREDIT SUISSE FIRST BOSTON, NEW YORK BRANCH, as Facility Agent By: Name: Title: By: Name: Title: SCHEDULE II TO JOINDER SUPPLEMENT List of Percentages, Maximum Purchase Amount or Commitment, Commitment Expiration Date, Addresses For Notices and Payment Instructions and Investing Offices [NAME OF CLASS A-1 PURCHASER], as Class A-1 Purchaser Type of Purchaser: [Conduit/Liquidity/Committed Purchaser] For Conduit Purchaser: (if applicable) Initial Purchaser Percentage: _______% Maximum Purchase Amount: $____________ Related Liquidity Purchasers, Commitment Expiration Dates and Initial Liquidity Percentages: ______________________ ____________, ____ _______% ______________________ ____________, ____ _______% ______________________ ____________, ____ _______% For Liquidity Purchaser: (if applicable) Initial Liquidity Percentage: _______% Commitment: $____________ Commitment Expiration Date: ____________, ____ Related Conduit Purchaser: _______________________ For Committed Purchaser: (if applicable) Initial Purchaser Percentage: _______% Commitment: $_______ Commitment Expiration Date: ________, ____ Address for Notices: Payment Instructions: Investing Office: [NAME OF AGENT], as Agent Address for Notices: Payment Instructions: SCHEDULE III TO JOINDER SUPPLEMENT Form of Joinder Effective Notice To: [Name and address of Transferor, Servicer, Trustee, Facility Agent and Additional Class A-1 Purchaser] The undersigned, as Agent under the Class A-1 Certificate Purchase Agreement, dated as of November 9, 1999, among SRI Receivables Purchase Co., Inc., as Transferor, Specialty Retailers, Inc., as Servicer, the Class A-1 Purchasers and Agents parties thereto and Credit Suisse First Boston, New York Branch, as Facility Agent thereunder, acknowledges receipt of five executed counterparts of a completed Joinder Supplement. [Note: attach copies of Schedules I and II from such Agreement.] Terms defined in such Supplement are used herein as therein defined. Pursuant to such Supplement, you are advised that the Joinder Effective Date will be _____________, 199_. Very truly yours, [NAME OF AGENT] By:_______________________ Name: Title: EXHIBIT C FORM OF TRANSFER SUPPLEMENT TRANSFER SUPPLEMENT, dated as of the date set forth in Item 1 of Schedule I hereto, among the Transferor Class A-1 Purchaser set forth in Item 2 of Schedule I hereto (the "Transferor Class A-1 Purchaser"), the Purchasing Class A-1 Purchaser set forth in Item 3 of Schedule I hereto (the "Purchasing Class A-1 Purchaser"), the Agent set forth in Item 4 of Schedule I hereto for the Class A-1 Purchasers in the Purchaser Group set forth in Item 5 of Schedule I hereto (in such capacity, the "Agent"), and Credit Suisse First Boston, New York Branch, as Facility Agent for the Class A-1 Purchasers under, and as defined in, the Certificate Purchase Agreement described below (in such capacity, the "Facility Agent"). W I T N E S S E T H: WHEREAS, this Supplement is being executed and delivered in accordance with subsection 8.1(e) of the Class A-1 Certificate Purchase Agreement, dated as of November 9, 1999, among SRI Receivables Purchase Co., Inc., as Transferor, Specialty Retailers, Inc., as Servicer, the Class A-1 Purchasers and Agents parties thereto and Credit Suisse First Boston, New York Branch, as Facility Agent (as from time to time amended, supplemented or otherwise modified in accordance with the terms thereof, the "Certificate Purchase Agreement"; unless otherwise defined herein, terms defined in the Certificate Purchase Agreement are used herein as therein defined); WHEREAS, the Purchasing Class A-1 Purchaser (if it is not already a Class A-1 Purchaser party to the Certificate Purchase Agreement) wishes to become a Class A-1 Purchaser party to the Certificate Purchase Agreement and the Purchasing Class A-1 Purchaser wishes to acquire and assume from the Transferor Class A-1 Purchaser, certain of the rights, obligations and commitments under the Certificate Purchase Agreement; and WHEREAS, the Transferor Class A-1 Purchaser wishes to sell and assign to the Purchasing Class A-1 Purchaser, certain of its rights, obligations and commitments under the Certificate Purchase Agreement. NOW, THEREFORE, the parties hereto hereby agree as follows: (a) Upon receipt by the Agent of five counterparts of this Supplement, to each of which is attached a fully completed Schedule I and Schedule II, each of which has been executed by the Transferor Class A-1 Purchaser, the Purchasing Class A-1 Purchaser and the Agent, the Agent will transmit to the Servicer, the Transferor, the Trustee, the Transferor Class A-1 Purchaser and the Purchasing Class A-1 Purchaser a Transfer Effective Notice, substantially in the form of Schedule III to this Supplement (a "Transfer Effective Notice"). Such Transfer Effective Notice shall be executed by the Agent and shall set forth, inter alia, the date on which the transfer effected by this Supplement shall become effective (the "Transfer Effective Date"). From and after the Transfer Effective Date the Purchasing Class A-1 Purchaser shall be a Class A-1 Purchaser party to the Certificate Purchase Agreement for all purposes thereof as a Conduit Purchaser, Liquidity Purchaser or Committed Purchaser, as applicable, as specified on Schedule II to this Supplement, and shall be a member of the Purchaser Group set forth in Item 5 of Schedule I hereto. (b) At or before 12:00 Noon, local time of the Transferor Class A-1 Purchaser, on the Transfer Effective Date, the Purchasing Class A-1 Purchaser shall pay to the Transferor Class A-1 Purchaser, in immediately available funds, an amount equal to the purchase price, as agreed between the Transferor Class A-1 Purchaser and such Purchasing Class A-1 Purchaser (the "Purchase Price"), of the portion set forth on Schedule II hereto being purchased by such Purchasing Class A-1 Purchaser of the outstanding Class A-1 Invested Amount under the Class A-1 Certificate owned by the Transferor Class A-1 Purchaser (such Purchasing Class A-1 Purchaser's "Purchase Percentage") and other amounts owing to the Transferor Class A-1 Purchaser under the Certificate Purchase Agreement or otherwise in respect of the Class A-1 Certificates. Effective upon receipt by the Transferor Class A-1 Purchaser of the Purchase Price from the Purchasing Class A-1 Purchaser, the Transferor Class A-1 Purchaser hereby irrevocably sells, assigns and transfers to the Purchasing Class A-1 Purchaser, without recourse, representation or warranty, and the Purchasing Class A-1 Purchaser hereby irrevocably purchases, takes and assumes from the Transferor Class A-1 Purchaser, the Purchasing Class A-1 Purchaser's Purchase Percentage of (i) the presently outstanding Class A-1 Invested Amount under the Class A-1 Certificates owned by the Transferor Class A-1 Purchaser and other amounts owing to the Transferor Class A-1 Purchaser in respect of the Class A-1 Certificates, together with all instruments, documents and collateral security pertaining thereto, and (ii) the Purchasing Class A-1 Purchaser's Purchase Percentage of (A) if the Transferor Class A-1 Purchaser is a Conduit Purchaser, the Purchaser Percentage and the Maximum Purchaser Amount of the Transferor Class A-1 Purchaser and the other rights and duties of the Transferor Class A-1 Purchaser under the Certificate Purchase Agreement, (B) if the Transferor Class A-1 Purchaser is a Committed Purchaser, the Purchaser Percentage and the Commitment of the Transferor Class A-1 Purchaser and other rights, duties and obligations of the Transferor Class A-1 Purchaser under the Certificate Purchase Agreement, or (C) if the Transferor Class A-1 Purchaser is a Liquidity Purchaser, the Liquidity Percentage and the Commitment of the Transferor Class A-1 Purchaser and other rights, duties and obligations of the Transferor Class A-1 Purchaser under the Certificate Purchase Agreement. This Supplement is intended by the parties hereto to effect a purchase by the Purchasing Class A-1 Purchaser and sale by the Transferor Class A-1 Purchaser of interests in the Class A-1 Certificates, and it is not to be construed as a loan or a commitment to make a loan by the Purchasing Class A-1 Purchaser to the Transferor Class A-1 Purchaser. The Transferor Class A-1 Purchaser hereby confirms that the amount of the Class A-1 Invested Amount is $___________ and its Percentage Interest thereof is ___%, which equals $___________ as of _________, ___. Upon and after the Transfer Effective Date (until further modified in accordance with the Certificate Purchase Agreement), the Purchaser Percentage or Liquidity Percentage, as applicable, of the Transferor Class A-1 Purchaser and the Purchasing Class A-1 Purchaser, the Maximum Purchaser Amount or Commitment, as applicable, of the Transferor Class A-1 Purchaser and the Purchasing Class A-1 Purchaser and the Percentage Interest of the Transferor Class A-1 Purchaser and the Purchasing Class A-1 Purchaser shall be as set forth in Schedule II to this Supplement. (c) The Transferor Class A-1 Purchaser has made arrangements with the Purchasing Class A-1 Purchaser with respect to (i) the portion, if any, to be paid, and the date or dates for payment, by the Transferor Class A-1 Purchaser to the Purchasing Class A-1 Purchaser of any fees heretofore received by the Transferor Class A-1 Purchaser pursuant to the Certificate Purchase Agreement prior to the Transfer Effective Date and (ii) the portion, if any, to be paid, and the date or dates for payment, by the Purchasing Class A-1 Purchaser to the Transferor Class A-1 Purchaser of fees or interest received by the Purchasing Class A-1 Purchaser pursuant to the Certificate Purchase Agreement or otherwise in respect of the Class A-1 Certificates from and after the Transfer Effective Date. (d) (i) All principal payments that would otherwise be payable from and after the Transfer Effective Date to or for the account of the Transferor Class A-1 Purchaser in respect of the Class A-1 Certificates shall, instead, be payable to or for the account of the Transferor Class A-1 Purchaser and the Purchasing Class A-1 Purchaser, as the case may be, in accordance with their respective interests as reflected in this Supplement. (ii) All interest, fees and other amounts that would otherwise accrue for the account of the Transferor Class A-1 Purchaser from and after the Transfer Effective Date pursuant to the Certificate Purchase Agreement or in respect of the Class A-1 Certificates shall, instead, accrue for the account of, and be payable to or for the account of, the Transferor Class A-1 Purchaser and the Purchasing Class A-1 Purchaser, as the case may be, in accordance with their respective interests as reflected in this Supplement. In the event that any amount of interest, fees or other amounts accruing prior to the Transfer Effective Date was included in the Purchase Price paid by the Purchasing Class A-1 Purchaser, the Transferor Class A-1 Purchaser and the Purchasing Class A-1 Purchaser will make appropriate arrangements for payment by the Transferor Class A-1 Purchaser to the Purchasing Class A-1 Purchaser of such amount upon receipt thereof from the Agent. (e) Concurrently with the execution and delivery hereof, the Purchasing Class A-1 Purchaser will deliver to Agent, the Transferor and the Trustee an executed Investment Letter in the form of Exhibit A to the Certificate Purchase Agreement and the forms, if any, required by subsection 2.5(c) of the Certificate Purchase Agreement. (f) Each of the parties to this Supplement agrees and acknowledges that (i) at any time and from time to time upon the written request of any other party, it will execute and deliver such further documents and do such further acts and things as such other party may reasonably request in order to effect the purposes of this Supplement, and (ii) the Agent shall apply each payment made to it under the Certificate Purchase Agreement, whether in its individual capacity or as Agent, in accordance with the provisions of the Certificate Purchase Agreement, as appropriate. (g) By executing and delivering this Supplement, the Transferor Class A-1 Purchaser and the Purchasing Class A-1 Purchaser confirm to and agree with each other, the Facility Agent, each Agent and each Class A-1 Purchaser as follows: (i) other than the representation and warranty that it is the legal and beneficial owner of the interest being assigned hereby free and clear of any adverse claim, the Transferor Class A-1 Purchaser makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Certificate Purchase Agreement or the Pooling and Servicing Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Certificate Purchase Agreement or any other instrument or document furnished pursuant thereto; (ii) the Transferor Class A-1 Purchaser makes no representation or warranty and assumes no responsibility with respect to the Trust, the financial condition of SRPC, SRI, Granite, Stage, the Servicer, the Transferor or the Trustee, or the performance or observance by SRPC, SRI, Granite, Stage, the Servicer, the Transferor or the Trustee of any of their respective obligations under the Certificate Purchase Agreement, the Pooling and Servicing Agreement or any other instrument or document furnished pursuant hereto; (iii) each Purchasing Class A-1 Purchaser confirms that it has received a copy of such documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Supplement; (iv) each Purchasing Class A-1 Purchaser will, independently and without reliance upon the Facility Agent, any Agent, the Transferor Class A-1 Purchaser or any other Class A-1 Purchaser and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Certificate Purchase Agreement or the Pooling and Servicing Agreement; (v) each Purchasing Class A-1 Purchaser appoints and authorizes the Agent and the Facility Agent to take such action as agent on its behalf and to exercise such powers under the Certificate Purchase Agreement and the Pooling and Servicing Agreement as are delegated to the Agent or the Facility Agent, as the case may be, by the terms thereof, together with such powers as are reasonably incidental thereto, all in accordance with Section 7 of the Certificate Purchase Agreement; and (vi) each Purchasing Class A-1 Purchaser agrees (for the benefit of the Transferor Class A-1 Purchaser, each Agent, the Facility Agent, each Class A-1 Purchaser, the Servicer and the Transferor) that (A) if it is a Conduit Purchaser, it will perform in accordance with their terms all of the obligations which by the terms of the Certificate Purchase Agreement are required to be performed by it as a Class A-1 Purchaser which is a Conduit Purchaser, (B) if it is a Committed Purchaser, it will perform in accordance with their terms all of the obligations which by the terms of the Certificate Purchase Agreement are required to be performed by it as a Class A-1 Purchaser which is a Committed Purchaser, and (C) if it is a Liquidity Purchaser, it will perform in accordance with their terms all of the obligations which by the terms of the Certificate Purchase Agreement are required to be performed by it as a Class A-1 Purchaser which is a Liquidity Purchaser. (h) Schedule II hereto sets forth the revised Maximum Purchase Amount or the revised Commitment, as applicable, and the Commitment Expiration Date, if applicable, of the Transferor Class A-1 Purchaser, as well as administrative information with respect to the Transferor Class A-1 Purchaser, including the address of Transferor Class A-1 Purchaser for purposes of notices, requests and demands pursuant to subsection 9.2(a) of the Certificate Purchase Agreement and the identification of the account for certain payments to the Transferor Class A-1 Purchaser for purposes of subsection 9.2(b) of the Certificate Purchase Agreement. Schedule II hereto also sets forth the Maximum Purchase Amount or the Commitment, as applicable, the Commitment Expiration Date, if applicable, and the initial Investing Office of the Purchasing Class A-1 Purchaser, as well as administrative information with respect to the Purchasing Class A-1 Purchaser, including the address of Purchasing Class A-1 Purchaser for purposes of notices, requests and demands pursuant to subsection 9.2(a) of the Certificate Purchase Agreement and the identification of the account for certain payments to the Purchasing Class A-1 Purchaser for purposes of subsection 9.2(b) of the Certificate Purchase Agreement. (i) THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. IN WITNESS WHEREOF, the parties hereto have caused this Supplement to be executed by their respective duly authorized officers on Schedule I hereto as of the date set forth in Item 1 of Schedule I hereto. SCHEDULE I TO TRANSFER SUPPLEMENT Completion of Information and Signatures for Transfer Supplement Re: Class A-1 Certificate Purchase Agreement, dated as of November 9, 1999, among SRI Receivables Purchase Co., Inc., as Transferor, Specialty Retailers, Inc., as Servicer, the Class A-1 Purchasers and Agents party thereto and Credit Suisse First Boston, New York Branch, as Facility Agent. Item 1: Date of Transfer Supplement: Item 2: Transferor Class A-1 Purchaser: Item 3: Purchasing Class A-1 Purchaser: Item 4: Agent: Item 5: Purchaser Group: Item 6: Signatures of Parties to Agreement: as Transferor Class A-1 Purchaser By: Name: Title: as Purchasing Class A-1 Purchaser By: Name: Title: CONSENTED TO AND ACCEPTED BY: CREDIT SUISSE FIRST BOSTON, NEW YORK BRANCH, as Facility Agent By: Name: Title: By: Name: Title: SCHEDULE II TO TRANSFER SUPPLEMENT List of Percentages, Maximum Purchase Amount or Commitment, Commitment Expiration Date, Addresses For Notices and Payment Instructions and Investing Offices [NAME OF TRANSFEROR CLASS A-1 PURCHASER] Type of Purchaser: [Conduit/Liquidity/Committed Purchaser] For Conduit Purchaser: (if applicable) Maximum Purchase Amount Prior to Sale: $____________ Maximum Purchase Amount Sold: $____________ Maximum Purchase Amount Retained: $____________ Purchaser Percentage Prior to Sale: _______% Purchaser Percentage Sold: _______% Purchaser Percentage Retained: _______% Related Liquidity Purchasers, Commitment Expiration Dates and Liquidity Percentages: ______________________ ____________, ____ _______% ______________________ ____________, ____ _______% ______________________ ____________, ____ _______% For Liquidity Purchaser: (if applicable) Commitment Prior to Sale: $____________ Commitment Sold: $____________ Commitment Retained: $____________ Liquidity Percentage Prior to Sale: _______% Liquidity Percentage Sold: _______% Liquidity Percentage Retained: _______% Commitment Expiration Date: ________, ____ Related Conduit Purchaser: _______________________ For Committed Purchaser: (if applicable) Commitment Prior to Sale: $____________ Commitment Sold: $____________ Commitment Retained: $____________ Purchaser Percentage Prior to Sale: _______% Purchaser Percentage Sold: _______% Purchaser Percentage Retained: _______% Commitment Expiration Date: ____________, ____ [NAME OF PURCHASING CLASS A-1 PURCHASER] Type of Purchaser: [Conduit/Liquidity/Committed Purchaser] For Conduit Purchaser: (if applicable) Maximum Purchase Amount Prior to Sale: $____________ Maximum Purchase Amount Purchased: $____________ Maximum Purchase Amount After Sale: $____________ Purchaser Percentage Prior to Sale: _______% Purchaser Percentage Purchased: _______% Purchaser Percentage After Sale: _______% Related Liquidity Purchasers, Commitment Expiration Dates and Liquidity Percentages: ______________________ ____________, ____ _______% ______________________ ____________, ____ _______% ______________________ ____________, ____ _______% For Liquidity Purchaser: (if applicable) Commitment Prior to Sale: $____________ Commitment Purchased: $____________ Commitment After Sale: $____________ Liquidity Percentage Prior to Sale: _______% Liquidity Percentage Purchased: _______% Liquidity Percentage After Sale: _______% Commitment Expiration Date: ____________, ____ Related Conduit Purchaser: _______________________ For Committed Purchaser: (if applicable) Commitment Prior to Sale: $____________ Commitment Purchased: $____________ Commitment After Sale: $____________ Purchaser Percentage Prior to Sale: _______% Purchaser Percentage Purchased: _______% Purchaser Percentage After Sale: _______% Commitment Expiration Date: ____________, ____ Address for Notices: Payment Instructions: Investing Office: SCHEDULE III TO TRANSFER SUPPLEMENT Form of Transfer Effective Notice To: [Name and address of Transferor, Servicer, Trustee, Facility Agent, Transferor Class A-1 Purchaser and Purchasing Class A-1 Purchaser] The undersigned, as Agent under the Class A-1 Certificate Purchase Agreement, dated as of November 9, 1999, among SRI Receivables Purchase Co., Inc., as Transferor, Specialty Retailers, Inc., as Servicer, the Class A-1 Purchasers and Agents parties thereto and Credit Suisse First Boston, New York Branch, as Facility Agent thereunder, acknowledges receipt of five executed counterparts of a completed Transfer Supplement. [Note: attach copies of Schedules I and II from such Agreement.] Terms defined in such Supplement are used herein as therein defined. Pursuant to such Supplement, you are advised that the Transfer Effective Date will be _____________, 199_. Very truly yours, [NAME OF AGENT] By:_______________________ Name: Title: EX-4.24 12 0012.txt 1-104 Exhibit 4.24 EXECUTION COPY CLASS A-2 CERTIFICATE PURCHASE AGREEMENT Dated as of November 9, 1999 among SRI RECEIVABLES PURCHASE CO., INC., individually and as Transferor, SPECIALTY RETAILERS, INC., individually and as Originator and Servicer, THE CLASS A-2 PURCHASERS PARTIES HERETO, and CREDIT SUISSE FIRST BOSTON, NEW YORK BRANCH, Facility Agent ____________________ Relating to SRI Receivables Master Trust Class A-2 Variable Funding Certificates, Series 1999-1 ____________________ TABLE OF CONTENTS Page SECTION 1. DEFINITIONS 2 1.1 Definitions 2 1.2 Other Definitional Provisions 10 SECTION 2. AMOUNT AND TERMS OF COMMITMENTS 10 2.1 Purchases 10 2.2 Reductions, Increases and Extensions of Commitments 13 2.3 Calculation of Interest, Fees, Expenses, Payments, Etc 16 2.4 Requirements of Law 18 2.5 Taxes 20 2.6 Indemnification 22 SECTION 3. CONDITIONS PRECEDENT 26 3.1 Condition to Initial Purchase 26 3.2 Condition to Additional Purchase 28 SECTION 4. REPRESENTATIONS AND WARRANTIES 30 4.1 Representations and Warranties of SRPC 30 4.2 Representations and Warranties of SRI 32 4.3 Representations and Warranties of the Agents, the Facility Agent and the Class A-2 Purchasers 34 SECTION 5. COVENANTS 35 5.1 Covenants of SRPC and SRI 35 SECTION 6. MUTUAL COVENANTS REGARDING CONFIDENTIALITY 40 6.1 Covenants of SRPC, Etc. 40 6.2 Covenants of Class A-2 Purchasers 40 SECTION 7. THE AGENTS 41 7.1 Appointment 41 7.2 Delegation of Duties 41 7.3 Exculpatory Provisions 41 7.4 Reliance by Agent 42 7.5 Notices 42 7.6 Non-Reliance on Agent and Other Class A-2 Purchasers 43 7.7 Indemnification 43 7.8 Agents in Their Individual Capacities 44 7.9 Successor Agent 44 SECTION 8. SECURITIES LAWS; TRANSFERS; TAX TREATMENT 45 8.1 Transfers of Class A-2 Certificates 45 8.2 Tax Characterization 49 SECTION 9. MISCELLANEOUS 49 9.1 Amendments and Waivers 49 9.2 Notices 50 9.3 No Waiver; Cumulative Remedies 52 9.4 Successors and Assigns 52 9.5 Successors to Servicer 52 9.6 Counterparts 53 9.7 Severability 53 9.8 Integration 53 9.9 Governing Law 53 9.10 Termination 54 9.11 Limited Recourse; No Proceedings 54 9.12 Survival of Representations and Warranties 55 9.13 Submission to Jurisdiction; Waivers 55 9.14 WAIVERS OF JURY TRIAL 56 LIST OF EXHIBITS AND ANNEX EXHIBIT A Form of Investment Letter EXHIBIT B Form of Joinder Supplement EXHIBIT C Form of Transfer Supplement ANNEX I Supplemental Definitions CLASS A-2 CERTIFICATE PURCHASE AGREEMENT, dated as of November 9, 1999, by and among SRI RECEIVABLES PURCHASE CO., INC., a Delaware corporation ("SRPC"), individually and as Transferor (as defined in the Master Pooling and Servicing Agreement referred to below), SPECIALTY RETAILERS, INC., a Texas corporation ("SRI"), individually and as Servicer (as defined in the Master Pooling and Servicing Agreement referred to below), the CLASS A-2 PURCHASERS (as hereinafter defined) from time to time parties hereto, the AGENTS for the Purchaser Groups from time to time parties hereto (each such party, together with their respective successors in such capacity, an "Agent"), and CREDIT SUISSE FIRST BOSTON, a Swiss banking corporation acting through its New York Branch ("CSFB"), as facility agent for the Class A-2 Purchasers and for the Class A-1 Purchasers and the Class B Purchasers, each as defined below (together with its successors in such capacity, the "Facility Agent"). W I T N E S S E T H: WHEREAS, SRPC, as Transferor, SRI, as Servicer, and Bankers Trust (Delaware), a Delaware banking corporation, as trustee (together with its successors in such capacity, the "Trustee"), are parties to a certain Second Amended and Restated Pooling and Servicing Agreement dated as of November 1, 1999 (as the same may from time to time be amended or otherwise modified, the "Master Pooling and Servicing Agreement"), pursuant to which the Transferor has created the SRI Receivables Master Trust (the "Trust"); WHEREAS, pursuant to a Series 1999-1 Supplement to the Master Pooling and Servicing Agreement, dated as of November 9, 1999 (as the same may from time to time be amended, supplemented or otherwise modified, the "Supplement") the Trust has issued its Class C Floating Rate Certificates, Series 1999-1 (the "Class C Certificates"), having a Class C Initial Invested Amount (as defined in the Supplement) equal to $28,000,000, its Class D Floating Rate Certificates, Series 1999-1 (the "Class D Certificates"), having a Class D Initial Invested Amount (as defined in the Supplement) equal to $18,375,000 and its Class E Certificates, Series 1999-1 (the "Class E Certificates"), having a Class E Initial Invested Amount (as defined in the Supplement) equal to $20,125,000; WHEREAS, pursuant to the Supplement, as supplemented by the Issuance Supplement thereto, dated as of November 9, 1999 (as the same may from time to time be amended or otherwise modified, the "Issuance Supplement"; and the Supplement, as supplemented by the Issuance Supplement, together with the Master Pooling and Servicing Agreement, the "Pooling and Servicing Agreement") the Trust proposes to issue its Class A-2 Variable Funding Certificates, Series 1999-1 (the "Class A-2 Certificates"), its Class A-1 Variable Funding Certificates, Series 1999-1 (the "Class A-1 Certificates") and its Class B Variable Funding Certificates, Series 1999-1 (the "Class B Certificates"); and WHEREAS, the Class A-2 Purchasers are willing to purchase the Class A-2 Certificates on the Closing Date and from time to time thereafter to purchase Additional Class A-2 Invested Amounts (as defined in the Supplement) thereunder on the terms and conditions provided for herein; NOW THEREFORE, in consideration of the mutual covenants herein contained, and other good and valuable consideration, the receipt and adequacy of which are hereby expressly acknowledged, the parties hereto agree as follows: SECTION 1. DEFINITIONS 1.1 Definitions. All capitalized terms used herein as defined terms and not defined herein shall have the meanings given to them in the Pooling and Servicing Agreement. Each capitalized term defined herein shall relate only to the Series 1999-1 and to no other Series of Investor Certificates issued by the Trust. "Adjusted Commitment" shall mean on any date of determination, with respect to a Liquidity Purchaser for a Conduit Purchaser, such Liquidity Purchaser's Commitment minus the aggregate outstanding principal amount of its Support Advances to such Conduit Purchaser (excluding any portion thereof advanced to such Conduit Purchaser to fund interest, discount, fees, expenses or similar amounts in respect of Commercial Paper Notes or other indebtedness of such Conduit Purchaser or in respect of the Class A-2 Certificates). "Affected Party" shall mean, with respect to any Conduit Purchaser, any Support Party of such Conduit Purchaser. "Agent" has the meaning specified in the preamble to this Agreement. "Agreement" shall mean this Class A-2 Certificate Purchase Agreement, as amended, supplemented or otherwise modified from time to time. "Alternative Rate" has the meaning specified in Exhibit B-2 of the Issuance Supplement. "Assignee" and "Assignment" have the respective meanings specified in subsection 8.1(e) of this Agreement. "Certificate Rate Determination Date" shall mean, for any Interest Accrual Period, the Second Business Day prior to the Distribution Date with respect to such Interest Accrual Period. "Class A-1 Certificates" has the meaning specified in the recitals to this Agreement. "Class A-1 Purchase Agreement" shall mean the Class A-1 Certificate Purchase Agreement, dated as of the date hereof, among SRPC, individually and as Transferor, SRI, individually and as Servicer, the Class A-1 Purchasers parties thereto, the agents for the purchaser groups referred to therein and the Facility Agent, as amended, modified or otherwise supplemented from time to time. "Class A-1 Purchasers" has the meaning specified in the Class A-1 Purchase Agreement. "Class A-2 Certificates" has the meaning specified in the recitals to this Agreement. "Class A-2 Exiting Purchaser Amortization Amount" shall mean, with respect to a Purchase Termination Date, the sum of (i) the aggregate Percentage Interests of all Committed Purchasers and Liquidity Purchasers which became Exiting Purchasers on such date, times the Class A-2 Principal Balance on such date, plus, with respect to each of the Conduit Purchasers, (ii) the product of (A) the aggregate Liquidity Percentages of all Liquidity Purchasers with respect to such Conduit Purchaser which became Exiting Purchasers on such date, times (B) the Percentage Interest of such Conduit Purchaser times the Class A-2 Principal Balance on such date, in each case determined after giving effect to any purchases of Additional Class A-2 Invested Amounts occurring, any Assignments which became effective and any Support Advances made on such date. "Class A-2 Fee Letter" shall mean that certain letter agreement, designated therein as the Series 1999-1 Class A-2 Fee Letter and dated as of the date hereof, among the Agent for each Purchaser Group, the Facility Agent, SRPC and SRI, as such letter agreement may be amended or otherwise modified from time to time. "Class A-2 Owners" shall mean the Class A-2 Purchasers that are owners of record of the Class A-2 Certificates or, with respect to any Class A-2 Certificate held by a nominee on behalf of Class A-2 Purchasers, the Class A-2 Purchasers that are owners of the Class A-2 Invested Amount represented by such Class A-2 Certificate as reflected on the books of the such Agent in accordance with this Agreement. "Class A-2 Program Fees" shall mean the ongoing program fees payable to Class A-2 Purchasers in respect of the Class A-2 Purchase Limit, in the amounts and on the dates set forth in the Class A-2 Fee Letter. "Class A-2 Purchasers" shall mean, collectively, the Conduit Purchasers, the Liquidity Purchasers and the Committed Purchasers. "Class A-2 Purchase Limit" shall mean, on any date of determination, the aggregate Commitments of the Committed Purchasers and the Liquidity Purchasers. "Class A-2 Utilization Fees" shall mean the ongoing utilization fees payable to Class A-2 Purchasers in respect of the Class A-2 Principal Balance, in the amounts and on the dates set forth in the Class A-2 Fee Letter. "Class B Certificates" has the meaning specified in the recitals to this Agreement. "Class B Purchase Agreement" shall mean the Class B Certificate Purchase Agreement, dated as of the date hereof, among SRPC, individually and as Transferor, SRI, individually and as Servicer, the Class B Purchasers parties thereto, the agents for the purchaser groups referred to therein and the Facility Agent referred to therein, as amended, modified or otherwise supplemented from time to time. "Class B Purchasers" has the meaning specified in the Class B Purchase Agreement. "Class C Certificates" has the meaning specified in the recitals to this Agreement. "Class D Certificates" has the meaning specified in the recitals to this Agreement. "Class E Certificates" has the meaning specified in the recitals to this Agreement. "Closing Date" shall mean November 9, 1999. "Code" shall mean the Internal Revenue Code of 1986, as amended. "Commercial Paper Notes" shall mean, with respect to a Conduit Purchaser, the short-term promissory notes issued by such Conduit Purchaser which are allocated by such Conduit Purchaser as its funding for its purchasing or maintaining its Percentage Interest of the Class A-2 Principal Balance hereunder. "Commercial Paper Rate" has the meaning specified in Exhibit B-2 of the Issuance Supplement. "Commitment" shall mean, for any Committed Purchaser or Liquidity Purchaser, the maximum amount of such Class A-2 Purchaser's commitment to purchase a portion of the Class A-2 Initial Invested Amount or Additional Class A-2 Invested Amounts, as set forth opposite such Class A-2 Purchaser's name in the Joinder Supplement or Transfer Supplement by which such Committed Purchaser became a party to this Agreement or assumed the Commitment (or a portion thereof) of another Class A-2 Purchaser, as such amount may be adjusted from time to time pursuant to Transfer Supplement(s) executed by such Class A-2 Purchaser and its Assignee(s) and delivered pursuant to Section 2.2 of this Agreement or pursuant to Section 8.1 of this Agreement. In the event that a Class A-2 Purchaser is both a Committed Purchaser and a Liquidity Purchaser, or is a Liquidity Purchaser which maintains a portion of its Commitment hereunder in relation to more than one Conduit Purchaser, such Class A-2 Purchaser shall be deemed to hold separate Commitments hereunder in each such capacity. "Commitment Expiration Date" shall mean, with respect to a Committed Purchaser or Liquidity Purchaser, November 7, 2000, as such date may be extended from time to time with respect to such Class A-2 Purchaser in accordance with subsection 2.2(e) hereof. "Committed Purchaser" shall mean any Class A-2 Purchaser which is designated as a Committed Purchaser in the Joinder Supplement or Transfer Supplement pursuant to which it became a party to this Agreement, and any Assignee of such Class A-2 Purchaser to the extent of the portion of such Commitment assumed by such Assignee pursuant to its respective Transfer Supplement. "Conduit Purchaser" shall mean shall mean any Class A-2 Purchaser which is designated as a Conduit Purchaser in the Joinder Supplement or Transfer Supplement pursuant to which it became a party to this Agreement. "Consented Assignee" shall mean each Class A-2 Purchaser and each Agent (in its individual capacity) which is a party to any Joinder Supplement, each Class A-1 Purchaser, each Class B Purchaser, each Person listed in the Consented Assignee Letter as in effect on the date on which such Person became or agreed to become an Assignee, a Participant or a Support Party, and each other Person who has been consented to as an Assignee or potential Assignee by SRPC, which consent shall not be unreasonably withheld in the case of an assignment by a Conduit Purchaser of its interest in the Class A-2 Certificates and its rights and obligations under this Agreement and the Pooling and Servicing Agreement to any other Conduit Purchaser which is administered by the same Person as the assignor Conduit Purchaser. "Corporate Base Rate" shall mean, for any day, the rate set forth in H.15(519) opposite the caption "Bank Prime Loan" for such day. The Corporate Base Rate is also available on Telerate, currently at page 125. If any discrepancy arises between Telerate and the printed version of H.15(519), the printed version of H.15(519) will take precedence. If the Corporate Base Rate is not published in H.15(519), then the Corporate Base Rate will be determined by calculating the arithmetic mean of the rates of interest publicly announced by each bank named on Telerate under the heading "Prime Rate Top 30 U.S. Banks," currently at page 38, as such bank's U.S. dollar prime rate or base lending rate as in effect on such day at 3:30 p.m. (New York City time). If fewer than four such rates appear on Telerate for such day, then the Corporate Base Rate shall be the arithmetic mean of the rate of interest publicly announced by three major banks in New York City, selected by CDC Financial Products, Inc. or its successors or assigns, as their U.S. dollar prime rate or base lending rate as in effect for such day. "Dissenting Purchaser" has the meaning specified in subsection 2.2(e) of this Agreement. "Downgraded Purchaser" has the meaning specified in subsection 8.1(j) of this Agreement. "Estimated Interest Adjustment" has the meaning specified in Exhibit B-2 to the Issuance Supplement. "Excluded Taxes" has the meaning specified in subsection 2.5(a) of this Agreement. "Exiting Purchaser" has the meaning specified in subsection 2.2(e) of this Agreement. "Extension Date" has the meaning specified in subsection 2.2(e) hereof. "Extension Notice Deadline" has the meaning specified in subsection 2.2(e) of this Agreement. "Granite" shall mean Granite National Bank, N.A., a national banking association, which is a subsidiary of Stage. "Governmental Authority" shall mean any nation or government, any state or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. "Indemnitee" has the meaning specified in subsection 2.6(a) of this Agreement. "Indemnitor" has the meaning specified in subsection 2.6(a) of this Agreement. "Intended Characterization" has the meaning specified in Section 8.2 of this Agreement. "Investing Office" shall mean initially, the office of any Class A-2 Purchaser (if any) designated as such in the Joinder Supplement or Transfer Supplement by which it became a party hereto, and thereafter, such other office of such Class A-2 Purchaser as may be designated in writing to the Class A-2 Agent, the Transferor, the Servicer and the Trustee by such Class A-2 Purchaser. "Investment Letter" has the meaning specified in subsection 8.1(a) of this Agreement. "Joinder Supplement" has the meaning specified in subsection 2.2(d) of this Agreement. "Liquidity Percentage" shall mean, for a Liquidity Purchaser for a Conduit Purchaser, such Liquidity Purchaser's Adjusted Commitment with respect to such Conduit Purchaser as a percentage of the aggregate Adjusted Commitments of all Liquidity Purchasers for such Conduit Purchaser. "Liquidity Purchaser" shall mean, with respect to a Conduit Purchaser, each Class A-2 Purchaser identified as a Liquidity Purchaser for such Conduit Purchaser in the Joinder Supplement or Transfer Supplement pursuant to which such Conduit Purchaser became a party hereto, and any Assignee of such Class A-2 Purchaser to the extent such Assignee has assumed, pursuant to a Transfer Supplement, the Commitment of such Class A-2 Purchaser. "Master Pooling and Servicing Agreement" has the meaning specified in the recitals to this Agreement. "Maximum Purchase Amount" shall mean, for any Conduit Purchaser, the aggregate Commitments of its Liquidity Purchasers. "New Issuance" has the meaning specified in subsection 5.1(p) of this Agreement. "Notes" has the meaning specified in subsection 9.11(b) of this Agreement. "Parity Class" shall mean, with respect to the Class A Certificates or the Class B Certificates, a class or subclass of Series 1999-1 Certificates which are on a parity with the Class A Certificates or the Class B Certificates, as the case may be, as to allocations of Available Series 1999-1 Finance Charge Collections, Excess Finance Charge Collections, Series Transferor Finance Charge Collections, Reallocated Principal Collections or Available Principal Collections. "Partial Expiration Date" shall mean any date on which the Commitment Expiration Date for some, but not all, of Committed Purchasers and Liquidity Purchasers occurs. "Participant" has the meaning specified in subsection 8.1(d) of this Agreement. "Participation" has the meaning specified in subsection 8.1(d) of the Agreement. "Percentage Interest" shall mean, for a Class A-2 Purchaser on any day, the percentage equivalent of (a) the sum of (i) the portion of the Class A-2 Initial Invested Amount (if any) purchased by such Class A-2 Purchaser, plus (ii) the aggregate Additional Class A-2 Invested Amounts (if any) purchased by such Class A-2 Purchaser prior to such day pursuant to Section 6.15 of the Pooling and Servicing Agreement, plus (iii) any portion of the Class A-2 Principal Balance acquired by such Class A-2 Purchaser as an Assignee from another Class A-2 Purchaser pursuant to a Transfer Supplement executed and delivered pursuant to Section 8.1 of this Agreement, minus (iv) the aggregate amount of principal payments made to such Class A-2 Purchaser prior to such day, minus (v) any portion of the Class A-2 Principal Balance assigned by such Class A-2 Purchaser to an Assignee pursuant to a Transfer Supplement executed and delivered pursuant to Section 8.1 of this Agreement, divided by (b) the aggregate Class A-2 Principal Balance on such day. "Person" shall mean an individual, partnership, corporation, business trust, joint stock company, trust, unincorporated association, joint venture, governmental authority or other entity of whatever nature. "Pooling and Servicing Agreement" has the meaning specified in the recitals to this Agreement. "Purchase Date" shall mean the Closing Date and each Business Day on which the purchase of an Additional Class A-2 Invested Amount is to occur in accordance with Section 6.15 of the Pooling and Servicing Agreement and Section 2.1 hereof. "Purchase Termination Date" shall mean, for a Class A-2 Purchaser, the first to occur of (i) in the case of a Committed Purchaser or Liquidity Purchaser, the Commitment Expiration Date for such Class A-2 Purchaser or, in the case of a Conduit Purchaser, the latest Commitment Expiration Date for any of its Liquidity Purchasers, (ii) the Amortization Period Commencement Date, or (iii) the date on which a Mandatory Partial Amortization Event is deemed to have occurred. "Purchaser Group" shall mean each group of Class A-2 Purchasers consisting of (i) a Conduit Purchaser, (ii) the Liquidity Purchasers with respect to such Conduit Purchaser, and (iii) any Committed Purchasers which are assignees of such Conduit Purchaser or any such Liquidity Providers. "Purchaser Percentage" shall mean, with respect to a Committed Purchaser or Conduit Purchaser, its Commitment or Maximum Purchase Amount, as the case may be, as a percentage of the Class A-2 Purchase Limit. "Receivables Transfer Agreement" shall mean the Receivables Transfer Agreement, dated as of August 1, 1998, between SRI, as purchaser, and Granite, as transferor, as the same may from time to time be amended or otherwise modified. "Regulatory Change" shall mean, as to each Class A-2 Purchaser, any change occurring after the date of the execution and delivery of the Joinder Supplement or the Transfer Supplement by which it became party to this Agreement; in the case of a Participant, any change occurring after the date on which its Participation became effective, or in the case of an Affected Party, any change occurring after the date it became such an Affected Party, in any (or the adoption after such date of any new): (i) United States Federal or state law or foreign law applicable to such Class A-2 Purchaser, Affected Party or Participant or any entity controlling such Class A-2 Purchaser, Affected Party or Participant; or (ii) regulation, interpretation, directive, guideline or request (whether or not having the force of law) applicable to such Class A-2 Purchaser, Affected Party or Participant or any entity controlling such Class A-2 Purchaser, Affected Party or Participant of any court or other judicial authority or any Governmental Authority charged with the interpretation or administration of any law referred to in clause (i) or of any fiscal, monetary or other Governmental Authority or central bank having jurisdiction over such Class A-2 Purchaser, Affected Party or Participant or any entity controlling such Class A-2 Purchaser, Affected Party or Participant. "Related Documents" shall mean, collectively, this Agreement (including the Class A-2 Fee Letter and all Joinder Supplements and Transfer Supplements), the Class A-1 Purchase Agreement (including each fee letter, joinder supplement and transfer supplement thereunder), the Class B Purchase Agreement (including each fee letter, joinder supplement and transfer supplement thereunder), the Master Pooling and Servicing Agreement, the Supplement, the Issuance Supplement, the Series 1999-1 Certificates, the Receivables Purchase Agreement and the Receivables Transfer Agreement. "Required Class A-2 Owners" shall mean, at any time, Class A-2 Owners having Percentage Interests aggregating greater than 50%. "Required Class A-2 Purchasers" shall mean, at any time, Committed Purchasers and Liquidity Purchasers having Commitments aggregating greater than 50% of the Class A-2 Purchase Limit. "Requirement of Law" shall mean, as to any Person, any law, treaty, rule or regulation, or determination of an arbitrator or Governmental Authority, in each case applicable to or binding upon such Person or to which such Person is subject, whether federal, state or local (including usury laws, the Federal Truth in Lending Act and Regulation Z and Regulation B of the Board of Governors of the Federal Reserve System). "Risk Rate" shall mean, for any day, a rate per annum equal to the sum of (i) the Corporate Base Rate in effect for such day, plus (ii) 2.00%. "Securities Act" shall mean the Securities Act of 1933, as amended. "Series 1999-1 Certificates" has the meaning specified in the recitals to this Agreement. "SRI" has the meaning specified in the preamble to this Agreement and, as used herein (except to the extent that the context otherwise requires), shall mean SRI in its individual capacity (including its capacity as Originator). "Stage" shall mean Stage Stores, Inc., a Delaware corporation which is the parent of SRI. "Supplement" has the meaning specified in the recitals to this Agreement. "Support Facility" shall mean any liquidity or credit support agreement or other facility with a Conduit Purchaser which relates, either generally or specifically, to this Agreement (including any agreement to purchase an assignment of or participation in, or to make loans or other advances in respect of, Class A-2 Certificates). "Support Party" shall mean any bank, insurance company or other entity extending or having a commitment to extend funds to or for the account of a Conduit Purchaser (including by agreement to purchase an assignment of or participation in, or to make loans or other advances in respect of, Class A-2 Certificates) under a Support Facility. Each Liquidity Purchaser for a Conduit Purchaser shall be deemed to be a Support Party for such Conduit Purchaser. "Taxes" has the meaning specified in subsection 2.5(a) of this Agreement. "Termination Event" shall mean the occurrence of a Trust Pay Out Event, a Series 1999-1 Pay Out Event, Mandatory Partial Amortization Event or a Servicer Default, or the occurrence of an event or condition which would be a Trust Pay Out Event, a Series 1999-1 Pay Out Event, Mandatory Partial Amortization Event or a Servicer Default but for a waiver of or failure to declare or determine such event by the Certificateholders or the Trustee. "Transfer" has the meaning specified in subsection 8.1(c) of this Agreement. "Transferee" has the meaning specified in subsection 8.1(c) of this Agreement. "Transfer Supplement" has the meaning specified in subsection 8.1(e) of this Agreement. "Trust" has the meaning specified in the recitals to this Agreement. "Trustee" has the meaning specified in the recitals to this Agreement. "written" or "in writing" (and other variations thereof) shall mean any form of written communication or a communication by means of telex, telecopier device, telegraph or cable. 1.2 Other Definitional Provisions. (a) Unless otherwise specified therein, all terms defined in this Agreement shall have the defined meanings when used in any certificate or other document made or delivered pursuant hereto. (b) The words "hereof", "herein", and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement; and Section, subsection and Exhibit and Annex references are to this Agreement, unless otherwise specified. The words "including" and "include" shall be deemed to be followed by the words "without limitation". (c) The definitions contained in Annex 1 hereto are hereby incorporated by reference herein for the benefit of the initial Purchaser Group; provided that, in the event of any conflict between the meaning of a defined term set forth in such Schedule and the meaning thereof set forth in this Agreement or in the Pooling and Servicing Agreement, the latter meaning shall govern for purposes of the application of the provisions of this Agreement and the Pooling and Servicing Agreement. SECTION 2. AMOUNT AND TERMS OF COMMITMENTS 2.1 Purchases. (a) On and subject to the terms and conditions of this Agreement, (i) each Conduit Purchaser may purchase its Purchaser Percentage of the Class A-2 Certificates on the Closing Date for a purchase price equal to its Purchaser Percentage of the Class A-2 Initial Invested Amount, and (ii) each Liquidity Purchaser for each Purchaser Group, severally, agrees to purchase on the Closing Date its Liquidity Percentage of the portion of the Class A-2 Initial Invested Amount not purchased by the Conduit Purchaser in such Purchaser Group pursuant to clause (i), in each case for a purchase price equal to the portion of the Class A-2 Initial Invested Amount so purchased. (b) On and subject to the terms and conditions of this Agreement and prior to its Purchase Termination Date, (i) each Conduit Purchaser may purchase its Purchaser Percentage of any Additional Class A-2 Invested Amount offered for purchase pursuant to Section 6.15 of the Pooling and Servicing Agreement, and (ii) each Committed Purchaser (if any), severally, agrees to purchase its Purchaser Percentage of the Additional Class A-2 Invested Amount so offered for purchase, in each case for a purchase price equal to the Additional Class A-2 Invested Amount so purchased. (c) The purchase of the Class A-2 Initial Invested Amount shall be made on prior notice from the Transferor to the Facility Agent and each Agent received not later than 4:00 p.m. New York City time on the second Business Day preceding the Closing Date. Each purchase of any Additional Class A-2 Invested Amount on the applicable Purchase Date shall be made on prior notice from the Transferor received by the Facility Agent and each Agent not later than 2:00 p.m. New York City time on the second Business Day immediately preceding such Purchase Date. Each such notice shall be irrevocable and shall specify (i) the aggregate Class A-2 Initial Invested Amount or Additional Class A-2 Invested Amount to be purchased, (ii) the applicable Purchase Date (which shall be a Business Day), and (iii) instructions as to the deposit of the proceeds of the purchase. Each Agent shall promptly forward a copy of each such notice received by it to each Class A-2 Purchaser in its Purchaser Group. (d) Each Conduit Purchaser shall notify the Agent for its Purchaser Group by 9:30 a.m., New York City time, on the applicable Purchase Date whether it has determined to make the purchase offered to it pursuant to subsection 2.1(a) or 2.1(b), as applicable. In the event that a Conduit Purchaser shall not have timely provided such notice such Conduit Purchaser shall be deemed to have determined not to make such purchase. Such Agent shall notify the Transferor, the Servicer and each Liquidity Purchaser for such Conduit Purchaser on or prior to 10:00 a.m., New York City time, on the applicable Purchase Date if such Conduit Purchaser has not determined to purchase its entire share of the Class A-2 Initial Invested Amount or the Additional Class A-2 Invested Amount, as the case may be, and shall specify in such notice (i) the identity of such Conduit Purchaser, (ii) the portion of the Class A-2 Initial Invested Amount or the Additional Class A-2 Invested Amount, as the case may be, which such Conduit Purchaser has not elected to purchase as provided above, and (iii) the respective Liquidity Percentages of such Liquidity Purchasers on such Purchase Date (as determined by such Agent in good faith; for purposes of such determination, such Agent shall be entitled to rely conclusively on the most recent information provided by such Conduit Purchaser or its agent or by the agent for its Support Parties). Subject to receiving such notice and to the satisfaction of the applicable conditions set forth in Article 3 hereof, each of such Conduit Purchaser's Liquidity Purchasers shall on the applicable Purchase Date purchase a portion of the Class A-2 Initial Invested Amount or the Additional Class A-2 Invested Amount, as the case may be, which such Conduit Purchaser has not elected to purchase in an amount equal to its Liquidity Percentage thereof, for a purchase price equal to the a portion of the Class A-2 Initial Invested Amount or the Additional Class A-2 Invested Amount, as the case may be, so purchased. (e) Each Class A-2 Purchaser's purchase price payable pursuant to subsection 2.1(a), 2.1(b) or 2.1(d) of this Agreement shall be made available to the Agent for its Purchaser Group, subject to the fulfillment of the applicable conditions set forth in Article 3 hereof, at or prior to 2:00 p.m., New York City time, on the applicable Purchase Date, by deposit of immediately available funds to an account of such Agent specified in subsection 9.2(b) of this Agreement. Such Agent shall promptly notify the Transferor in the event that any Class A-2 Purchaser either fails to make such funds available to such Agent before such time or notifies such Agent that it will not make such funds available to such Agent before such time. Subject to (i) such Agent's receipt of such funds and (ii) the fulfillment of the applicable conditions set forth in Article 3 hereof, as determined by such Agent, such Agent will not later than 3:00 p.m., New York City time, on such Purchase Date make such funds available, in the same type of funds received, by wire transfer thereof to the account of Transferor in the United States specified in the applicable purchase notice given pursuant to subsection 2.1(c) or, in the case of the purchase on the Closing Date, specified in writing by the Transferor to such Agent not later than the second Business Day prior to the Closing Date. (f) In the event that notwithstanding the fulfillment of the applicable conditions set forth in Article 3 hereof with respect to a purchase, a Conduit Purchaser elected to make a purchase on a Purchase Date but failed to make its purchase price available to the Agent for its Purchaser Group when required by subsection 2.1(e) of this Agreement, such Conduit Purchaser shall be deemed to have rescinded its election to make such purchase, and neither the Transferor nor any other party shall have any claim against such Conduit Purchaser by reason for its failure to timely make such purchase. In any such case, such Agent shall give notice of such failure not later than noon, New York City time, on the Purchase Date to each Liquidity Purchaser for such Conduit Purchaser, which notice shall specify (i) the identity of such Conduit Purchaser, (ii) the amount of the purchase which it had elected but failed to make and (iii) the respective Liquidity Percentages of such Liquidity Purchasers on such Purchase Date (as determined by such Agent in good faith; for purposes of such determination, such Agent shall be entitled to rely conclusively on the most recent information provided by such Conduit Purchaser or its agent or by the agent for its Support Parties). Subject to receiving such notice, each of such Conduit Purchaser's Liquidity Purchasers shall purchase a portion of the Class A-2 Invested Amount in an amount equal to its Liquidity Percentage of the amount described in clause (ii) above at or before 4:00 p.m., New York City time, on such Purchase Date and otherwise in accordance with subsection 2.1(d) of this Agreement. Subject to such Agent's receipt of such funds, such Agent will not later than 5:00 p.m., New York City time, on such Purchase Date make such funds available, in the same type of funds received, by wire transfer thereof to the account of the Transferor described in subsection 2.1(e) of this Agreement, which payment shall be deemed to be timely for purposes of this Agreement. (g) The Agent for each Purchaser Group shall notify the Transferor, the Servicer and each Class A-2 Purchaser in its Purchaser Group on the Closing Date (in the case of the purchase of the Class A-2 Initial Invested Amount) or not later than the second Business Day following the applicable Increase Date (in the case of any purchases of Additional Class A-2 Invested Amounts) of the identity of each Class A-2 Purchaser in such Purchaser Group which purchased any portion of the Class A-2 Initial Invested Amount or any Additional Class A-2 Invested Amount on such Purchase Date, whether such Class A-2 Purchaser was a Conduit Purchaser, a Committed Purchaser or a Liquidity Purchaser and the portion of the Class A-2 Initial Invested Amount or Additional Class A-2 Invested Amount purchased by such Class A-2 Purchaser. (h) In no event shall a Committed Purchaser be required on any date to purchase an Additional Class A-2 Invested Amount which would result in its Percentage Interest of the Class A-2 Principal Balance, determined after giving effect to such purchase, exceeding its Commitment, and in no event shall a Liquidity Purchaser be required on any date to purchase an Additional Class A-2 Invested Amount which would result in its Percentage Interest of the Class A-2 Principal Balance, determined after giving effect to such purchase, exceeding its Adjusted Commitment. In no event may any Additional Class A-2 Invested Amount be offered for purchase hereunder or under Section 6.15 of the Supplement, nor shall any Class A-2 Purchaser be obligated to purchase any Additional Class A-2 Invested Amounts, to the extent that, after giving effect to such purchase, the Class A-2 Principal Balance would exceed the Class A-2 Purchase Limit. (i) The initial Class A-2 Purchasers hereby direct that the Class A-2 Certificates be registered in the name of Auer & Co., as nominee on behalf of such Class A-2 Purchasers. (j) The Class A-2 Certificates and interest thereon shall be paid as provided in the Pooling and Servicing Agreement, and each Agent shall allocate to the Class A-2 Owners in its Purchaser Group each payment in respect of the Class A-2 Certificates received by such Agent in its capacity as Class A-2 Certificateholder as provided herein. Payments in reduction of the Class A-2 Invested Amount shall be allocated and applied to Class A-2 Owners pro rata based on their respective Percentage Interests of the Class A-2 Principal Balance, or in any such case in such other proportions as each affected Class A-2 Purchaser may agree upon in writing from time to time with such Agent and the Transferor; provided that from and after a Partial Expiration Date until the earlier to occur of (i) the Purchase Termination Date for all Class A-2 Purchasers and (ii) the date on which (A) the aggregate amount of payments in reduction of the Class A-2 Principal Balance made after such Partial Expiration Date equals (B) the aggregate Class A-2 Exiting Purchaser Amortization Amount for such Partial Expiration Date, payments on a Class A-2 Certificate in reduction of the portion of the Class A-2 Principal Balance evidenced by such Class A-2 Certificate shall be allocated and applied to Class A-2 Owners of such Class A-2 Certificate which are Exiting Purchasers pro rata based on their respective Percentage Interests of the Class A-2 Principal Balance. Payments of interest in respect of the portion of the Class A-2 Principal Balance evidenced by a Class A-2 Certificate shall be allocated and applied to Class A-2 Owners of such Class A-2 Certificate pro rata based upon the respective amounts of interest owed to them, determined as provided in Section 2.3 and the Issuance Supplement. 2.2 Reductions, Increases and Extensions of Commitments. (a) At any time the Transferor may, upon at least 10 Business Days' prior written notice to each Agent and the Facility Agent, reduce the Class A-2 Purchase Limit. Each such partial reduction shall be in an aggregate amount of $5,000,000 or integral multiples thereof (or such other amount requested by the Transferor to which each Agent and the Facility Agent consents). Unless otherwise agreed by each affected Class A-2 Purchaser, the Class A-2 Purchase Limit shall automatically reduce, dollar for dollar, by the amount of any reduction in the Class A-2 Principal Balance from the application of the proceeds of any New Issuance pursuant to subsection 5(b)(iii) of the Issuance Supplement. Reductions of the Class A-2 Purchase Limit pursuant to this subsection 2.2(a) shall be allocated to the Commitment of each Committed Purchaser and the Maximum Purchase Amount of each Conduit Purchaser, pro rata based on the Purchaser Percentage represented by such Commitment or Maximum Purchase Amount. Any such reduction in the Maximum Purchase Amount of the Conduit Purchaser in a Purchaser Group shall automatically result in a reduction of the aggregate Commitments of the Liquidity Providers in such Purchaser Group, which shall be allocated among such Liquidity Purchasers pro rata based on their respective Liquidity Percentages. (b) On the Purchase Termination Date for a Committed Purchaser or Liquidity Purchaser, the Commitment of such Class A-2 Purchaser shall be automatically reduced to zero. (c) The Class A-2 Purchase Limit may be increased from time to time through the increase of the Commitment of one or more Committed Purchasers or Liquidity Purchasers; provided, however, that no such increase shall have become effective unless (i) the Agent for each applicable Purchaser Group, the Facility Agent and the Transferor shall have given their written consent thereto, (ii) in the case of an increase in the Commitment of a Liquidity Purchaser in a Purchaser Group, the Conduit Purchaser in such Purchaser Group shall have consented thereto and agreed to increase its Maximum Purchase Amount, (iii) such increasing Committed Purchaser or Liquidity Purchaser shall have entered into an appropriate amendment or supplement to this Agreement reflecting such increased Commitment and (iv) such conditions, if any, as the Agent for such Purchaser Group or such Conduit Purchaser shall have required in connection with its consent (including the delivery of legal opinions with respect to such Class A-2 Purchaser and, in the case of a Liquidity Purchaser, the agreement of such Liquidity Purchaser to become a Support Party for the Conduit Purchaser in its Purchaser Group and approvals from rating agencies which rate debt issued by such Conduit Purchaser) shall have been satisfied. The Transferor may also increase the Class A-2 Purchase Limit from time to time by adding additional Committed Purchasers or Liquidity Purchasers in accordance with subsection 2.2(d). (d) Subject to the provisions of subsections 8.1(a) and 8.1(b) applicable to initial purchasers of Class A-2 Certificates, any Person may from time to time with the consent of the Facility Agent, each Agent and the Transferor become a party to this Agreement as an initial or an additional Conduit Purchaser or an initial or an additional Committed Purchaser or Liquidity Purchaser by (i) delivering to the Transferor an Investment Letter and (ii) entering into an agreement substantially in the form attached hereto as Exhibit B hereto (a "Joinder Supplement"), with the Transferor, acknowledged by the Servicer, which shall specify (A) the name and address of such Person for purposes of Section 9.2 hereof, (B) whether such Person will be a Conduit Purchaser, a Liquidity Purchaser or a Committed Purchaser, (C) if such Person will be a Liquidity Purchaser or a Committed Purchaser, its Commitment and Commitment Expiration Date, (D) if such Person is a Conduit Purchaser, its Maximum Purchase Amount and the identity of the Liquidity Purchasers in its Purchaser Group and their respective initial Liquidity Percentages, (E) if such Person is a Liquidity Purchaser, the Conduit Purchaser for which it is acting as such, (F) the applicable Purchaser Group for such Person, (G) if such Purchaser Group is a new Purchaser Group, the name of the Agent therefor (which shall be a party to such Joinder Supplement), and (H) the other information provided for in such form of Joinder Supplement. Upon its receipt of a duly executed Joinder Supplement, the Facility Agent shall on the effective date determined pursuant thereto give notice of such effectiveness to each Agent, the Transferor, the Servicer and the Trustee, and the Servicer will provide notice thereof to each Rating Agency (if required). It shall be a condition to the effectiveness of any Joinder Supplement for an additional Class A-2 Purchaser after the Closing Date that each existing Class A-2 Purchaser sell to the additional Class A-2 Purchaser and that the additional Class A-2 Purchaser purchase from each applicable existing Class A-2 Purchaser an interest in the Class A-2 Certificates for a purchase price equal to the portion of the Class A-2 Principal Balance purchased, so that, after giving effect to such purchase and sale, (i) the aggregate Percentage Interest of the members of each Purchaser Group shall be proportionate to the aggregate Commitments of members of each Purchaser Group, and (ii) the Percentage Interest of each Committed Purchaser in a Purchaser Group and of the Conduit Purchaser in such Purchaser Group shall be proportionate to their respective Commitments or Maximum Purchase Amount, as applicable (the Percentage Interest of any Liquidity Purchaser in such Purchaser Group being deemed for such purpose to be held by such Conduit Purchaser). (e) The Commitment Expiration Date for any Committed Purchaser or Liquidity Purchaser may be extended from time to time to time at the request of the Transferor and with the consent of such Class A-2 Purchaser, the Facility Agent, the Agent for the applicable Purchaser Group and, in the case of a Liquidity Purchaser, the related Conduit Purchaser; provided that no such extension shall become effective if, prior to the effective date thereof, a Termination Event shall have occurred. Any Committed Purchaser or Liquidity Purchaser shall become an "Exiting Purchaser" after its scheduled Commitment Expiration Date unless such date has been extended. If (i) the Transferor, not more than 180 and no less than 90 days prior to a Commitment Expiration Date for a Committed Purchaser or Liquidity Purchaser, has requested such Class A-2 Purchaser (by notice to such Class A-2 Purchaser with a copy to the Agent for its Purchaser Group, the Facility Agent and, in the case of a Liquidity Purchaser, to its related Conduit Purchaser), to extend such Commitment Expiration Date to the date which is 364 days after the effective date requested by the Transferor (the "Extension Date"), which shall not be earlier than 60 days after the date of such request nor later than the Commitment Expiration Date then in effect, (ii) such Committed Purchaser or Liquidity Purchaser, as applicable, shall not have notified the Transferor, the Agent for its Purchaser Group, the Facility Agent and, in the case of a Liquidity Purchaser, its related Conduit Purchaser of its willingness in its sole discretion to so extend its Commitment Expiration Date at least 30 days (such 30th day, the "Extension Notice Deadline") prior to the proposed Extension Date, and (iii) no Termination Event shall have occurred, such Committed Purchaser or Liquidity Purchaser, as applicable, shall be a "Dissenting Purchaser" from and after such Extension Notice Deadline. (f) Promptly after an Extension Notice Deadline, the Agent for a Purchaser Group containing a Dissenting Purchaser shall promptly notify each other Class A-2 Purchaser in such Purchaser Group, each other Agent (which shall thereupon notify each Class A-2 Purchaser in its Purchaser Group), the Facility Agent, the Transferor and the Servicer of the identity of each Dissenting Purchaser in such Agent's Purchaser Group and the amount of its Commitment. Either such Agent or the Transferor, with the consent of such Agent and, if the Dissenting Purchaser is a Liquidity Purchaser, each affected Conduit Purchaser, may (but shall not be required to) request that one or more other Class A-2 Purchasers, or another entity acceptable to such Agent and the Facility Agent in its reasonable discretion, and, if the Dissenting Purchaser is a Liquidity Purchaser, each affected Conduit Purchaser in its sole discretion, acquire all or a portion of the Commitment of the Dissenting Purchaser and all amounts payable to it hereunder and under the Pooling and Servicing Agreement in accordance with Section 8.1. Each Dissenting Purchaser hereby agrees to assign all or a portion of its Commitment and the amounts payable to it hereunder and under the Pooling and Servicing Agreement to a replacement investor identified by the applicable Agent in accordance with the preceding sentence, subject to ratable payment such Dissenting Purchaser's Percentage Interest of the Class A-2 Principal Balance, together with all accrued and unpaid interest thereon, and a ratable portion of all fees and other amounts due to it hereunder. 2.3 Calculation of Interest, Fees, Expenses, Payments, Etc. (a) SRPC agrees to pay to each Agent for the account of the Class A-2 Purchasers in its Purchaser Group the Class A-2 Program Fees, the Class A-2 Utilization Fees and other amounts set forth in the Class A-2 Fee Letter at the times specified therein. (b) SRPC further agrees to pay within 30 days following receipt of an invoice therefor to the initial Agent, the Facility Agent and the initial Class A-2 Purchasers all reasonable costs and expenses in connection with the preparation, execution, delivery and initial syndication, of this Agreement and each related Support Facility, and the other documents to be delivered hereunder or in connection herewith, including the reasonable fees and out-of-pocket expenses of counsel for the initial Agent, the Facility Agent and each of the initial Class A-2 Purchasers with respect thereto. SRI further agrees to pay to each Agent, the Facility Agent and each Class A-2 Purchaser, promptly following presentation of an invoice therefor, all reasonable costs and expenses (including reasonable fees and expenses of counsel), if any, in connection with the administration (including any requested amendments, waivers or consents of any of the Related Documents or Support Facilities) hereof or of any of the Related Documents or Support Facilities and the other documents delivered thereunder or in connection therewith. (c) SRI agrees to pay to each Agent, the Facility Agent and each Class A-2 Purchaser, promptly following presentation of an invoice therefor, all reasonable costs and expenses (including reasonable fees and expenses of counsel), if any, in connection with the enforcement hereof or of any of the Related Documents or Support Facilities and the other documents delivered thereunder or in connection therewith. (d) SRI further agrees to pay on demand any and all stamp, transfer and other taxes (other than Taxes covered by Section 2.5) and governmental fees payable in connection with the execution, delivery, filing and recording of any of the Related Documents and each related Support Facility or the other documents and agreements to be delivered hereunder and thereunder or otherwise in connection with the issuance of Series 1999-1, and agrees to save each Class A-2 Purchaser and Agent and the Facility Agent harmless from and against any liabilities with respect to or resulting from any delay in paying or any omission to pay such taxes and fees. (e) Periodic fees or other periodic amounts payable hereunder shall be calculated, unless otherwise specified in the Class A-2 Fee Letter, on the basis of a 360-day year and for the actual days elapsed. Interest calculated by reference to the Corporate Base Rate shall be calculated on the basis of a 365- or 366-day year, as applicable, for the actual days elapsed. (f) Each Class A-2 Purchaser shall be allocated the share of interest on the Class A-2 Principal Balance for each Interest Accrual Period which is determined for its Percentage Interest thereof pursuant to Section 4(a) of and Exhibit B-2 to the Issuance Supplement. At or before 5:00 p.m., New York City time, on each Certificate Rate Determination Date, each Conduit Purchaser shall notify the Agent for its Purchaser Group of (i) the Commercial Paper Rate, if applicable, in effect for the related Interest Accrual Period, and (ii) the date on which the Alternative Rate became applicable to its Invested Percentage of the Covered Portion of the Class A-2 Principal Balance or a portion thereof pursuant to the Issuance Supplement. Such notification may be based on such Conduit Purchaser's estimate of the Commercial Paper Rate if the actual rate is not then known to such Conduit Purchaser, and in such case, such Conduit Purchaser shall notify such Agent at or before 12:00 noon, New York City time, on the following Certificate Rate Determination Date of the amount of any variation between interest payable to such Conduit Purchaser for the applicable Interest Accrual Period based on such estimate and interest which should have been payable to such Conduit Purchaser for such Interest Accrual Period based on its final determination of the applicable Commercial Paper Rate. The amount of any shortfall in interest based on such variation shall be deferred (without interest thereon) and be included in the portion of Class A-2 Interest payable to such Conduit Purchaser for the following Interest Accrual Period, and the amount of any overpayment of interest to such Conduit Purchaser based on such variation shall be credited (without interest thereon), dollar for dollar, against the portion of Class A-2 Interest otherwise payable to such Conduit Purchaser for the following Interest Accrual Period. Each determination by the Conduit Purchaser of its applicable Commercial Paper Rate pursuant to this Agreement shall be conclusive and binding on the Class A-2 Purchasers, the Agents, the Transferor, the Servicer and the Trustee in the absence of manifest error. In the event that a Conduit Purchaser issues Commercial Paper Notes in good faith in order to prefund the purchasing or maintaining of its Percentage Interest of the Class A-2 Principal Balance hereunder, it is understood that the portion of the Commercial Paper Rate attributable to such Commercial Paper Notes, as otherwise determined in accordance with the Issuance Supplement, shall be reduced to give effect to any earnings (net of any investment losses and expenses) received on a cash basis by such Conduit Purchaser from the temporary investment of the proceeds thereof prior to the application of such proceeds to fund its purchasing or maintaining such Percentage Interest. The parties acknowledge that the initial Conduit Purchaser does not expect that its initial funding of the purchase of the Class A-2 Initial Invested Amount will be through the issuance of Commercial Paper Notes. Each Agent shall notify the Servicer on each Certificate Rate Determination Date of the Commercial Paper Rate, the Alternative Rate and the Risk Rate, as applicable, and the Class A-2 Interest for the related Interest Accrual Period substantially in the form of Exhibit B-2A to the Issuance supplement (or such other form which may be mutually acceptable to the applicable Agent and the Servicer from time to time). For such purposes, each Agent may rely conclusively on notices from the Conduit Purchasers pursuant to this subsection as to the interest rate or rates from time to time applicable to its Percentage Interest of the Class A-2 Principal Balance. Such notification from an Agent may be based on the Conduit Purchaser's estimate of the Commercial Paper Rate as provided to such Agent and upon estimates of the Class A-2 Interest if the actual amount is not then known to such Agent. In any such case, such Agent shall notify the Servicer on or before the following Certificate Rate Determination Date of the amount of any variation between the estimated Class A-2 Interest and the actual Class A-2 Interest for the preceding Interest Accrual Period. Subject to any Estimated Interest Adjustment, each determination of the Commercial Paper Rate, the Alternative Rate, the Risk Rate and the Class A-2 Interest by any Agent shall be conclusive and binding on the Class A-2 Purchasers, the Transferor, the Servicer and the Trustee in the absence of manifest error. (g) All payments to be made hereunder or under the Pooling and Servicing Agreement, whether on account of principal, interest, fees or otherwise, shall be made without setoff or counterclaim and shall be made prior to 2:30 p.m., New York City time, on the due date thereof in United States dollars and in immediately available funds (i) in the case of payments to the Facility Agent, to its account specified in subsection 9.2(b) hereof or (ii) in the case of payments to a Class A-2 Purchaser or an Agent in a Purchaser Group, to such Agent's account specified in subsection 9.2(b) hereof. Any such payment received after 2:30 p.m. New York City time shall be deemed to have been made on the next Business Day. Notwithstanding anything herein to the contrary, if any payment due hereunder becomes due and payable on a day other than a Business Day, the payment date thereof shall be extended to the next succeeding Business Day and interest shall accrue thereon at the applicable rate during such extension. To the extent that (i) the Trustee, SRPC, SRI, the Transferor or the Servicer makes a payment to an Agent, the Facility Agent or a Class A-2 Purchaser or (ii) such Agent, the Facility Agent or such Class A-2 Purchaser receives or is deemed to have received any payment or proceeds for application to an obligation, which payment or proceeds or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside or required to be repaid to a trustee, receiver or any other party under any bankruptcy or insolvency law, state or federal law, common law, or for equitable cause, then, to the extent such payment or proceeds are set aside, the obligation or part thereof intended to be satisfied shall be revived and continue in full force and effect, as if such payment or proceeds had not been received or deemed received by such Agent, the Facility Agent or such Class A-2 Purchaser, as the case may be. (h) The obligations of SRPC under this Section 2.3 are subject to subsection 9.11(a) hereof. 2.4 Requirements of Law. (a) In the event that any Class A-2 Purchaser shall have reasonably determined that any Regulatory Change shall: (i) subject such Class A-2 Purchaser to any tax of any kind whatsoever with respect to this Agreement, its Commitment or its beneficial interest in the Class A-2 Certificates, or change the basis of taxation of payments in respect thereof (except for Taxes covered by Section 2.5 and taxes included in the definition of Excluded Taxes in subsection 2.5(a) and changes in the rate of tax on the overall net income of such Class A-2 Purchaser); or (ii) impose, modify or hold applicable any reserve, special deposit, compulsory loan or similar requirement against assets held by, deposits or other liabilities in or for the account of, advances, loans or other extensions of credit by, or any other acquisition of funds by, such Class A-2 Purchaser; and the result of any of the foregoing is to increase the cost to such Class A-2 Purchaser, by an amount which such Class A-2 Purchaser deems to be material, of maintaining its Commitment or its interest in the Class A-2 Certificates or to reduce any amount receivable in respect thereof, then, in any such case, after submission by such Class A-2 Purchaser to the Agent in its Purchaser Group of a written request therefor and the submission by such Agent to the Transferor and the Servicer of such written request therefor (with a copy to the Facility Agent), the Transferor (subject to subsection 9.11(a) hereof) shall pay to the such Agent for the account of such Class A-2 Purchaser any additional amounts necessary to compensate such Class A-2 Purchaser for such increased cost or reduced amount receivable, together with interest on each such amount from the Distribution Date following receipt by the Transferor of such request for compensation under this subsection 2.4(a), if such request is received by the Transferor at least five Business Days prior to the Determination Date related to such Distribution Date, and otherwise from the following Distribution Date, until payment in full thereof (after as well as before judgment) at the Risk Rate in effect from time to time. (bi In the event that any Class A-2 Purchaser shall have determined that any Regulatory Change regarding capital adequacy has the effect of reducing the rate of return on such Class A-2 Purchaser's capital or on the capital of any entity controlling such Class A-2 Purchaser as a consequence of its obligations hereunder or its maintenance of its Commitment or its interest in the Class A-2 Certificates to a level below that which such Class A-2 Purchaser or such entity could have achieved but for such Regulatory Change (taking into consideration such Class A-2 Purchaser's or such entity's policies with respect to capital adequacy) by an amount deemed by such Class A-2 Purchaser to be material, then, from time to time, after submission by such Class A-2 Purchaser to the Agent in its Purchaser Group of a written request therefor and submission by such Agent to the Transferor and the Servicer of such written request therefor (with a copy to the Facility Agent), the Transferor (subject to subsection 9.11(a) hereof) shall pay to the such Agent for the account of such Class A-2 Purchaser such additional amount or amounts as will compensate such Class A-2 Purchaser or such entity for such reduction, together with interest on each such amount from the Distribution Date following receipt by the Transferor of such request for compensation under this subsection 2.4(b), if such request is received by the Transferor at least five Business Days prior to the Determination Date related to such Distribution Date, and otherwise from the following Distribution Date, until payment in full thereof (after as well as before judgment) at the Risk Rate in effect from time to time. (ci Each Class A-2 Purchaser agrees that it shall use its reasonable efforts to reduce or eliminate any claim for compensation pursuant to subsections 2.4(a) and 2.4(b), including but not limited to designating a different Investing Office for its Class A-2 Certificates (or any interest therein) if such designation will avoid the need for, or reduce the amount of, any increased amounts referred to in subsection 2.4(a) or 2.4(b) and will not, in the reasonable opinion of such Class A-2 Purchaser, be unlawful or otherwise disadvantageous to such Class A-2 Purchaser or inconsistent with its policies or result in an unreimbursed cost or expense to such Class A-2 Purchaser or in an increase in the aggregate amount payable under both subsections 2.4(a) and 2.4(b). (di Each Class A-2 Purchaser claiming increased amounts described in subsection 2.4(a) or 2.4(b) will furnish to the Agent for its Purchaser Group (together with its request for compensation) a certificate prepared in good faith setting forth the basis and the calculation of the amount (in reasonable detail) of each request by such Class A-2 Purchaser for any such increased amounts referred to in subsection 2.4(a) or 2.4(b). Any such certificate shall be conclusive absent manifest error, and such Agent shall deliver a copy thereof to the Transferor, the Servicer and the Facility Agent. Failure on the part of any Class A-2 Purchaser to demand compensation for any amount pursuant to subsection 2.4(a) or 2.4(b) with respect to any period shall not constitute a waiver of such Class A-2 Purchaser's right to demand compensation with respect to such period. 2.5 Taxes. (a) All payments made to the Class A-2 Purchasers, the Facility Agent or the Agents under this Agreement and the Pooling and Servicing Agreement (including all amounts payable with respect to the Class A-2 Certificates) shall, to the extent allowed by law, be made free and clear of, and without deduction or withholding for or on account of, any present or future income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now or hereafter imposed, levied, collected, withheld or assessed by any Governmental Authority (collectively, "Taxes"), excluding (i) income taxes (including branch profit taxes, minimum taxes and taxes computed under alternative methods, at least one of which is based on or measured by net income), franchise taxes (imposed in lieu of income taxes), or any other taxes based on or measured by the net income of the Class A-2 Purchaser, the Facility Agent or the Agent (as the case may be) or the gross receipts or income of the Class A-2 Purchaser, the Facility Agent or the Agent (as the case may be); (ii) any Taxes that would not have been imposed but for the failure of such Class A-2 Purchaser, the Facility Agent or the Agent, as applicable, to provide and keep current (to the extent legally able) any certification or other documentation required to qualify for an exemption from, or reduced rate of, any such Taxes or required by this Agreement to be furnished by such Class A-2 Purchaser, the Facility Agent or such Agent, as applicable; and (iii) any Taxes imposed as a result of a change by any Class A-2 Purchaser of the Investing Office (other than changes mandated by this Agreement, including subsection 2.4(c) hereof, or required by law) (all such excluded taxes being hereinafter called "Excluded Taxes"). If any Taxes, other than Excluded Taxes, are required to be withheld from any amounts payable to a Class A-2 Purchaser, the Facility Agent or an Agent hereunder or under the Pooling and Servicing Agreement, then after submission by any Class A-2 Purchaser to the Agent for its Purchaser Group (in the case of an amount payable to a Class A-2 Purchaser) and such Agent to the Transferor and the Servicer of a written request therefor (with a copy thereof to the Facility Agent), or after submission by the Facility Agent or any Agent to the Transferor or the Servicer of a written request therefor with a copy thereof to the Facility Agent (in the case of an Agent), the amounts so payable to such Class A-2 Purchaser, the Facility Agent or such Agent, as applicable, shall be increased and the Transferor shall be liable to pay to such Class A-2 Purchaser or for its own account, as applicable, the amount of such increase) to the extent necessary to yield to such Class A-2 Purchaser, the Facility Agent or such Agent, as applicable (after payment of all such Taxes) interest or any such other amounts payable hereunder or thereunder at the rates or in the amounts specified in this Agreement and the Pooling and Servicing Agreement; provided, however, that the amounts so payable to such Class A-2 Purchaser, the Facility Agent or such Agent shall not be increased pursuant to this subsection 2.5(a) if such requirement to withhold results from the failure of such Person to comply with subsection 2.5(c) hereof. Whenever any Taxes are payable on or with respect to amounts distributed to a Class A-2 Purchaser, the Facility Agent or an Agent, as promptly as possible thereafter the Servicer shall send to the applicable Agent, on behalf of such Class A-2 Purchaser (if applicable), or to the Facility Agent, a certified copy of an original official receipt showing payment thereof. If the Trustee, upon the direction of the Servicer, fails to pay any Taxes when due to the appropriate taxing authority or fails to remit to the Facility Agent or to the applicable Agent, on behalf of itself or such Class A-2 Purchaser (as applicable), the required receipts or other required documentary evidence, subject to subsection 9.11(a), the Transferor shall pay to such Agent on behalf of such Class A-2 Purchaser or for its own account, as applicable, any incremental taxes, interest or penalties that may become payable by the Facility Agent or by such Class A-2 Purchaser or Agent, as applicable, as a result of any such failure. In addition to the foregoing, the Transferor hereby agrees, subject to subsection 9.11(a), to indemnify and hold harmless, on an after-tax basis, each Class A-2 Purchaser and Agent and the Facility Agent from and against any and all Taxes (including Excluded Taxes) imposed on such party solely by reason of any tax treatment of the Class A-2 Certificates that is inconsistent with the characterization thereof as indebtedness for federal, state and local income tax purposes or by reason of the failure of the Transferor or the owner of the Exchangeable Transferor Certificate to file any federal, state or local income tax returns or reports on the basis that Class A-2 Certificates are indebtedness for federal, state and local income tax purposes. (b0 A Class A-2 Purchaser or Agent or the Facility Agent claiming increased amounts under subsection 2.5(a) for Taxes paid or payable by such Class A-2 Purchaser or Agent or the Facility Agent, as applicable, will furnish to the Transferor and the Servicer a certificate prepared in good faith setting forth the basis and amount of each request by such Class A-2 Purchaser or the Facility Agent, as applicable, for such Taxes. Any such certificate of a Class A-2 Purchaser, the Facility Agent or an Agent shall be conclusive absent manifest error. Failure on the part of any Class A-2 Purchaser, the Facility Agent or any Agent to demand additional amounts pursuant to subsection 2.5(a) with respect to any period shall not constitute a waiver of the right of such Class A-2 Purchaser, the Facility Agent or such Agent, as the case may be, to demand compensation with respect to such period. All such amounts shall be due and payable to the Facility Agent or to such Agent on behalf of such Class A-2 Purchaser or for its own account, as the case may be, on the Distribution Date following receipt by the Transferor of such certificate, if such certificate is received by the Transferor at least five Business Days prior to the Determination Date related to such Distribution Date and otherwise shall be due and payable on the following Distribution Date (or, if earlier, on the Series 1999-1 Termination Date). (c0 Each Class A-2 Purchaser and each Participant holding an interest in Class A-2 Certificates agrees that prior to the date on which the first interest or fee payment hereunder is due thereto, it will deliver to the Transferor, the Servicer, the Trustee and the Agent for its Purchaser Group (i) if such Class A-2 Purchaser or Participant is not incorporated under the laws of the United States or any State thereof, two duly completed copies of the U.S. Internal Revenue Service Form 4224 or successor applicable forms required to evidence that the Class A-2 Purchaser's or Participant's income from this Agreement or the Class A-2 Certificates is "effectively connected" with the conduct of a trade or business in the United States, and (ii) a duly completed U.S. Internal Revenue Service Form W-8 or W-9 or successor applicable or required forms. Each Class A-2 Purchaser or Participant holding an interest in Class A-2 Certificates also agrees to deliver to the Transferor, the Servicer, the Trustee and the Agent for its Purchaser Group two further copies of such Form 4224 and Form W-8 or W-9, or such successor applicable forms or other manner of certification, as the case may be, on or before the date that any such form expires or becomes obsolete or after the occurrence of any event requiring a change in the most recent form previously delivered by it hereunder, and such extensions or renewals thereof as may reasonably be requested by the Servicer or the applicable Agent, unless in any such case, solely as a result of a change in treaty, law or regulation occurring prior to the date on which any such delivery would otherwise be required, and assuming that Section 1446 of the Code does not apply, the Class A-2 Purchaser is no longer eligible to deliver the then-applicable form set forth above and so advises the Servicer and the applicable Agent. Each Class A-2 Purchaser which is a party to a Joinder Supplement certifies, represents and warrants as of the effective date of such Joinder Supplement, each Assignee and each Participant (in either case other than a Support Party) shall certify, represent and warrant as a condition of acquiring its Assignment or Participation as of the effect date of the Transfer Supplement to which it is a party or of such Participation, as the case may be, and each Support Party shall certify, represent and warrant as of the effective date of its becoming a Support Party, that (x) in the case of Form 4224 (if applicable), its income from this Agreement or the Class A-2 Certificates is effectively connected with a United States trade or business and (y) that it is entitled to an exemption from United States backup withholding tax. Further, each Class A-2 Purchaser and each Participant acquiring an interest in a Class A-2 Certificate covenants that for so long as it shall own Class A-2 Certificates or such Participation, such Class A-2 Certificates or Participation shall be held in such manner that the income therefrom shall be effectively connected with the conduct of a United States trade or business. 2.6 Indemnification. (a) SRI and SRPC (each such Person being referred to as an "Indemnitor"), jointly and severally, agree to indemnify and hold harmless each Agent, the Facility Agent and each Class A-2 Purchaser and any directors, officers, employees, agents, attorneys, auditors or accountants of each Agent, the Facility Agent or Class A-2 Purchaser (each such Person being referred to as an "Indemnitee") from and against any and all claims, damages, losses, liabilities, costs or expenses whatsoever (including reasonable fees and expenses of legal counsel) which such Indemnitee may incur (or which may be claimed against such Indemnitee) arising out of, by reason of or in connection with the execution and delivery of, or payment or other performance under, or the failure to make payments or perform under, any Related Document or the issuance of the Series 1999-1 Certificates (including in connection with the preparation for defense of any investigation, litigation or proceeding arising out of, related to or in connection with such execution, delivery, payment, performance or issuance), except (i) to the extent that any such claim, damage, loss, liability, cost or expense is shall be caused by the willful misconduct, bad faith, recklessness or gross negligence of such Indemnitee, (ii) to the extent that any such claim, damage, loss, liability, cost or expense is covered by subsection 2.3(c) or Section 2.4 or 2.5 hereof or relates to any Excluded Taxes, (iii) to the extent that any such claim, damage, loss, liability, cost or expense relates to disclosure made by an Agent or a Class A-2 Purchaser in connection with an Assignment or Participation pursuant to Section 8.1 of this Agreement which disclosure is not based on information given to such Agent or such Class A-2 Purchaser by or on behalf of SRPC, SRI, the Transferor or the Servicer or any affiliate thereof or by or on behalf of the Trustee or (iv) to the extent that such claim, damage, loss, liability, cost or expense shall be caused by a charge off of Receivables. The foregoing indemnity shall include any claims, damages, losses, liabilities, costs or expenses to which any such Indemnitee may become subject under Securities Act, the Securities Exchange Act of 1934, as amended, the Investment Company Act of 1940, as amended, or other federal or state law or regulation arising out of or based upon any untrue statement or alleged untrue statement of a material fact in any disclosure document relating to the Series 1999-1 Certificates or any amendments thereof or supplements thereto (other than statements provided by the Indemnitee expressly for inclusion therein) or arising out of, or based upon, the omission or the alleged omission to state a material fact necessary to make the statements therein or any amendment thereof or supplement thereto, in light of the circumstances in which they were made, not misleading (other than with respect to statements provided by the Indemnitee expressly for inclusion therein). (bi Promptly after the receipt by an Indemnitee of a notice of the commencement of any action against an Indemnitee, such Indemnitee will notify the Agent for its Purchaser Group and such Agent will, if a claim in respect thereof is to be made against an Indemnitor pursuant to subsection 2.6(a), notify such Indemnitor in writing of the commencement thereof; but the omission so to notify such party will not relieve such party from any liability which it may have to such Indemnitee pursuant to the preceding paragraph. If any such action is brought against an Indemnitee and it notifies an Indemnitor of its commencement, such Indemnitor will be entitled to participate in and, to the extent that it so elects by delivering written notice to the Indemnitee promptly after receiving notice of the commencement of the action from the Indemnitee to assume the defense of any such action, with counsel mutually satisfactory to such Indemnitor and each affected Indemnitee. After receipt of such notice by an Indemnitor from an Indemnitee, such Indemnitor will not be liable to such Indemnitee for any legal or other expenses except as provided below and except for the reasonable costs of investigation subsequently incurred by the Indemnitee in connection with the defense of such action. Each Indemnitee will have the right to employ its own counsel in any such action, but the fees, expenses and other charges of such counsel will be at the expense of the such Indemnitee unless (i) the employment of such counsel by such Indemnitee has been authorized in writing by such Indemnitor, (ii) such Indemnitor shall have failed to assume the defense and employ counsel, or (iii) the named parties to any such action or proceeding (including any impleaded parties) include both such Indemnitee and either an Indemnitor or another person or entity that may be entitled to indemnification from an Indemnitor (by virtue of this Section 2.6 or otherwise) and such Indemnitee shall have been advised by counsel that there may be one or more legal defenses available to such Indemnitee which are different from or additional to those available to an Indemnitor or such other party or shall otherwise have reasonably determined that the co-representation would present such counsel with a conflict of interest (in which case the Indemnitor will not have the right to direct the defense of such action on behalf of the Indemnitee). In any such case, the reasonable fees, disbursements and other charges of counsel will be at the expense of the Indemnitor; it being understood that in no event shall the Indemnitors be liable for the fees, disbursements and other charges of more than two counsel (in addition to any local counsel) for all Indemnitees in connection with any one action or separate but similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances. An Indemnitor shall not be liable for any settlement of any such action, suit or proceeding effected without its written consent, which shall not be unreasonably withheld, but if settled with the written consent of an Indemnitor or if there shall be a final judgment for the plaintiff in any such action, suit or proceeding, such Indemnitor agrees to indemnify and hold harmless any Indemnitee to the extent set forth in this letter from and against any loss, claim, damage, liability or expense by reason of such settlement or judgement. Notwithstanding the immediately preceding sentence, if in any case where the fees and expenses of counsel are at the expense of an Indemnitor and an Indemnitee shall have requested such Indemnitor to reimburse such Indemnitee for such fees and expenses of counsel as incurred, such Indemnitor agrees that it shall be liable for any settlement of any action effected without its written consent if (i) such settlement is entered into more than ten business days after the receipt by such Indemnitor of the aforesaid request and (ii) such Indemnitor shall have failed to reimburse the Indemnitee in accordance with such request for reimbursement prior to the date of such settlement. No Indemnitor shall, without the prior written consent of an Indemnitee, settle or compromise or consent to the entry of any judgment in any pending or threatened claim, action, suit or proceeding in respect of which indemnification may be sought hereunder, if such settlement, compromise or consent includes an admission of culpability or wrong-doing on the part of such Indemnitee or the entry or an order, injunction or other equitable or nonmonetary relief (including any administrative or other sanctions or disqualifications) against such Indemnitee or if such settlement, compromise or consent does not include an unconditional release of such Indemnitee from all liability arising out of such claim, action, suit or proceeding. (ci Subject to the limitations on liability set forth in Section 8.3 of the Pooling and Servicing Agreement, the Servicer shall indemnify and hold harmless each Indemnitee from and against any and all claims, damages, losses, liabilities, costs or expenses whatsoever which such Indemnitee may incur (or which may be claimed against such Indemnitee) by reason of any acts or omissions or alleged acts or omissions of the Servicer hereunder or with respect to activities of the Trust or the Trustee for which the Servicer is responsible under the Pooling and Servicing Agreement or hereunder, subject, with respect to the obligations of the Servicer in respect of activities of the Trust or the Trustee for which the Servicer is responsible under the Pooling and Servicing Agreement, to the provisos set forth in Section 8.4 of the Pooling and Servicing Agreement. Subject to Section 9.5, any Successor Servicer, by accepting its appointment pursuant to the Pooling and Servicing Agreement, (i) shall agree to be bound by the terms, covenants and conditions contained herein applicable to the Servicer and to be subject to the duties and obligations of the Servicer hereunder, (ii) as of the date of its acceptance, shall be deemed to have made with respect to itself the representations and warranties made by the SRI in subsections 4.2(a) through (f) (in the case of subsection 4.2(a), with appropriate factual changes) and (iii) shall agree to indemnify and hold harmless any Indemnitee from and against any and all claims, damages, losses, liabilities, costs or expenses (including reasonable fees and expenses of counsel) whatsoever which any such Indemnitee may incur (or which may be claimed against such Indemnitee) by reason of any acts or omissions or alleged acts or omissions of the Servicer hereunder or with respect to activities of the Trust or the Trustee for which the Servicer is responsible under the Pooling and Servicing Agreement or hereunder. (di (i) In the event that for any reason, (A) the basis for calculation of interest on any Conduit Purchaser's Percentage Interest of the Class A-2 Principal Balance shall change from the Commercial Paper Rate to the Alternative Rate, or (B) any Conduit Purchaser receives any repayment of its share of the Class A-2 Principal Balance, and the date of such change or of such repayment is not the maturity date for all Commercial Paper Notes allocated by such Conduit Purchaser to funding its purchase or maintenance of the affected portion of its Percentage Interest of the Class A-2 Principal Balance, or (ii) in the event that for any reason, (A) the basis for calculation of interest on any Class A-2 Purchaser's Percentage Interest of the Class A-2 Principal Balance shall change from the Alternative Rate to the Risk Rate, (B) the basis for calculation of the Alternative Rate shall change from the Class A-2 Adjusted Eurodollar Rate to the Corporate Base Rate, or (C) any Class A-2 Purchaser receives any repayment of its share of the Class A-2 Principal Balance which bears interest calculated by reference to the Class A-2 Adjusted Eurodollar Rate and the date of such repayment is not a Distribution Date, then in any such case the Transferor agrees to indemnify each affected Class A-2 Purchaser against, and to promptly pay on demand directly to such Class A-2 Purchaser the amount equal to any loss or reasonable out-of-pocket expense suffered by such Class A-2 Purchaser as a result of such change or such repayment, including any loss, cost or expense suffered by reason of its issuance of Commercial Paper Notes (in the case of a Conduit Purchaser) or the incurrence of other obligations allocated by such Class A-2 Purchaser to its funding or the maintenance of its funding of its share of the Class A-2 Principal Balance, or deploying the funds prepaid or repaid in amounts which correspond to its share of the Class A-2 Principal Balance. In the event that for any reason (other than a default by a Committed Purchaser or Liquidity Purchaser hereunder) the purchase of the entire Class A-2 Initial Invested Amount does not occur on the Closing Date or, after notice of a purchase of an Additional Class A-2 Invested Amount has been given pursuant to subsection 2.1(c), the purchase of the entire amount of such Additional Class A-2 Invested Amount does not occur on the applicable Purchase Date, then in any such case SRI agrees to indemnify each affected Class A-2 Purchaser against, and to promptly pay on demand directly to such Class A-2 Purchaser the amount equal to any loss or reasonable out-of-pocket expense suffered by such Class A-2 Purchaser as a result of such change or such repayment, including any loss, cost or expense suffered by reason of its issuance of Commercial Paper Notes (in the case of a Conduit Purchaser) or the incurrence of other obligations allocated by such Class A-2 Purchaser to its funding or the maintenance of its funding of its share of the Class A-2 Principal Balance (including in liquidating or employing deposits acquired to fund or maintain the funding of its share of the Class A-2 Principal Balance which would have borne interest by reference to the Adjusted Eurodollar Rate). A statement setting forth in reasonable detail the calculations of any additional amounts payable pursuant to this Section submitted by a Class A-2 Purchaser or Agent on its behalf, to the Transferor or SRI, as applicable, and the Servicer and shall be conclusive absent manifest error. The obligations of the Transferor under this subsection 2.6(d) are subject to subsection 9.11(a) hereof. (ei Subject to subsection 9.11(a) hereof in the case of the Transferor, the obligations of SRPC, SRI, the Transferor and the Servicer under this Agreement shall be absolute, unconditional and irrevocable and shall be performed strictly in accordance with the terms of this Agreement. Without limiting the foregoing, neither the lack of validity or enforceability of, or any modification to, any Related Document nor the existence of any claim, setoff, defense or other right which SRPC, SRI, the Trust, the Trustee, on behalf of the Trust, the Transferor and the Servicer may have at any time against each other, any Agent, the Facility Agent, any Class A-2 Purchaser, any Support Party or any other Person, whether in connection with any Related Document or any unrelated transactions, shall constitute a defense to such obligations. SECTION 3. CONDITIONS PRECEDENT 3.1 Condition to Initial Purchase. The following shall be conditions precedent to the initial purchase by any Class A-2 Purchasers of the Class A-2 Certificates: (ai the representations and warranties of SRPC and SRI set forth or referred to in Section 4.1 and 4.2 hereof shall be true and correct in all material respects on Closing Date as though made on and as of the Closing Date, and no event which of itself or with the giving of notice or lapse of time, or both, would constitute a Termination Event shall have occurred and be continuing on the Closing Date; (bi the Master Pooling and Servicing Agreement, the Supplement and the Issuance Supplement shall have been duly executed and delivered by all parties thereto and shall be in form and substance satisfactory to the Class A-2 Purchasers; (ci the Receivables Purchase Agreement and the Receivables Transfer Agreement shall not have been amended or otherwise modified, other than as disclosed to the Class A-2 Purchasers in writing prior to the Closing Date; (di Class B Certificates, Class C Certificates, Class D Certificates and Class E Certificates shall have been duly issued in accordance with the Pooling and Servicing Agreement which have a Class B Initial Invested Amount, Class C Initial Invested Amount, Class D Initial Invested Amount and Class E Initial Invested Amount which aggregates at least 38% of the Initial Invested Amount; (ei arrangements satisfactory to the Class A-2 Purchasers shall have been made for the repayment and defeasance in full of the Trust's Series 1993-1 Certificates, Series 1995-1 Certificates and Series 1997-1 Certificates and the Transferor's 12.5% Series B Trust Certificate-Backed Notes; (fi all up front fees and expenses agreed and specified in the Class A-2 Fee Letter shall have been paid by SRPC on the Closing Date, and arrangements satisfactory to the initial Class A-2 Purchasers and the initial Agent shall have been made for the payment of amounts required to be paid by SRPC pursuant to subsection 2.3(b) with respect to the preparation, execution, delivery and initial syndication of this Agreement and each related Support Facility and the other documents to be delivered hereunder or in connection herewith; (gi with respect to each Conduit Purchaser, its Support Facilities shall be in full force and effect; and (hi the initial Agent on behalf of the Class A-2 Purchasers shall have received on the Closing Date the following items, each of which shall be in form and substance satisfactory to such Agent: (i0 an Officer's Certificate of SRPC or SRI, as applicable, confirming the satisfaction of the conditions set forth in clause (a) and clauses (c) through (f), inclusive, above; (ii0 a copy of (A) the charter and by-laws of SRPC, SRI and Granite, certified by its authorized officer, (B) an incumbency certificate with respect to its officers executing any of the Related Documents on the Closing Date on behalf of, part of SRPC and SRI certified by its authorized officer, (C) good standing certificates from the appropriate Governmental Authority as of a recent date with respect to each of SRPC, SRI and Granite and (D) resolutions of the Board of Directors (or an authorized committee thereof) of each of SRPC, SRI and Granite with respect to the Related Documents to which it is party, certified by its authorized officer; (iii0 the favorable written opinions of counsel for SRPC, SRI and Granite addressed to the Agents, the Facility Agent, the Class A-2 Purchasers and the Support Parties, or accompanied by a letter providing that the Agents, the Facility Agent, the Class A-2 Purchasers and the Support Parties may rely on such opinions as if they were addressed to them, and dated the Closing Date, covering general corporate matters, the due execution and delivery of, and the enforceability of, each of the Related Documents to which SRPC and SRI (individually or as Transferor or Servicer) is party, sale/security interest and nonconsolidation matters, tax matters and such other matters as the initial Agent may request; (iv0 [reserved]; (v0 evidence of the due execution and delivery by the Trustee of the Related Documents to which it is party; (vi0 an executed copy of the Supplement and the Issuance Supplement and a conformed copy of the Master Pooling and Servicing Agreement, the Receivables Purchase Agreement and the Receivables Transfer Agreement; (vii0 executed copies of all opinions required by Article VI of the Pooling and Servicing Agreement or by any Rating Agency in connection with the issuance, sale or rating of the Series 1999-1 (each such opinion, unless otherwise agreed to by the initial Agent, to be addressed to such Agent, on behalf of itself and the Class A-2 Purchasers in its Purchaser Group, and to the Facility Agent or accompanied by a letter providing that such Agent, on behalf of itself and the Class A-2 Purchasers in its Purchaser Group, the Facility Agent and the Support Parties may rely on such opinion as if it were addressed to it), and such additional documents, instruments, certificates or letters as such Agent may reasonably request; (viii0 the duly executed Class A-2 Certificate(s) registered in the name of the Auer & Co, as nominee on behalf of the Class A-2 Owners; (ix0 evidence satisfactory to the initial Agent that the Class A-2 Certificates and the Class A-1 Certificates are rated Aaa by Moody's and AAA by Fitch IBCA, Inc. and that the Class B Certificates are rated not less than A1 by Moody's and not less than A by Fitch IBCA, Inc.; and (x0 evidence satisfactory to each Conduit Purchaser that Moody's, Standard & Poor's and Fitch IBCA, Inc. has confirmed in writing that the purchase by it of Class A-2 Certificates (including Additional Class A-2 Invested Amounts thereunder) would not result in a reduction or withdrawal of such rating agency's then applicable rating of the commercial paper of such Conduit Purchaser, without giving effect to any increase in any letter of credit or other enhancement provided to such Conduit Purchaser (other than liquidity support provided to such Conduit Purchaser by Liquidity Providers). 3.2 Condition to Additional Purchases. The following shall be conditions precedent to each purchase by any Class A-2 Purchasers of Additional Class A-2 Invested Amounts hereunder: (ai the Transferor shall have timely delivered a notice of purchase pursuant to subsection 2.1(c) of this Agreement; (bi the representations and warranties of SRPC and SRI set forth or referred to in Section 4.1 and 4.2 hereof shall be true and correct in all material respects on the date of such purchase as though made on and as of such date; (c) (i) all interest, fees, expenses and all other amounts then due and payable to any Agent or Class A-2 Purchaser or to the Facility Agent hereunder (including any amounts owed under Sections 2.3, 2.4, 2.5 or 2.6, but excluding the Class A-2 Principal Balance) shall have been paid, and (ii) no event which of itself or with the giving of notice or lapse of time, or both, would constitute a Termination Event shall have occurred and be continuing on such date; (d) after giving effect to such purchase of Additional Class A-2 Invested Amount, (i) the Class A-2 Principal Balance shall not exceed the Class A-2 Purchase Limit, and (ii) the aggregate Class A-2 Principal Balance, minus the aggregate unpaid portion of all Class A-2 Exiting Purchaser Amortization Amounts, shall not exceed the aggregate Commitments of the Committed Purchasers and Liquidity Purchasers; (e) after giving effect to such purchase, (i) the sum of the Class B Invested Amount, the Class C Invested Amount, the Class D Invested Amount and the Class E Invested Amount shall equal not less than 38% of the Invested Amount on the applicable Purchase Date, and (ii) the sum of the Class C Invested Amount, the Class D Invested Amount and the Class E Invested Amount shall equal not less than 19% of the Invested Amount on the applicable Purchase Date; (f) there shall exist no unreimbursed Class E Investor Charge-Offs; (g) the Class A-2 Certificates and the Class A-1 Certificates remain rated Aaa by Moody's and AAA by Fitch IBCA, Inc. and the Class B Certificates remain rated not less than A1 by Moody's and not less than A by Fitch IBCA, Inc; (h) the conditions set forth in Section 6.15 of the Pooling and Servicing Agreement to the issuance of such Additional Class A-2 Invested Amount shall have been satisfied; (i) the Additional Class A-2 Invested Amount, when aggregated with additional invested amounts being purchased on such Purchase Date pursuant to the Class A-1 Purchase Agreement and the Class B Purchase Agreement, shall equal a minimum amount of $1,000,000 and be shall be in an integral multiple of $250,000; (j) after giving effect to such purchase of Additional Class A-2 Invested Amount, no more than two changes in the Class A Invested Amount or the Class B Invested Amount shall have occurred in any calendar week; (k) with respect to each Conduit Purchaser, its Support Facilities shall be in full force and effect; and (l) in the case of each Increase Date, the Transferor shall have delivered to the Facility Agent and each Agent an Officer's Certificate dated such Purchase Date certifying (i) that the conditions described in clauses (a) through (j) above have been satisfied and (ii) that based on the facts known to the officer signing such Officer's Certificate at such time, in the reasonable belief of the Transferor, the purchases of the Additional Class A-2 Invested Amounts and any other purchases with respect to the Series 1999-1 Certificates to be purchased on such Purchase Date will not cause a Pay Out Event, a Series 1999-1 Pay Out Event or a Mandatory Partial Amortization Event or an event that, after the giving of notice or the lapse of time, would constitute an Pay Out Event, a Series 1999-1 Pay Out Event or a Mandatory Partial Amortization Event to occur. SECTION 4. REPRESENTATIONS AND WARRANTIES 4.1 Representations and Warranties of SRPC. SRPC repeats and reaffirms to the Class A-2 Purchasers, the Agents and the Facility Agent the representations and warranties of the Transferor set forth in Sections 2.3 of the Pooling and Servicing Agreement, and represents and warrants that such representations and warranties are true and correct as of the date hereof. SRPC further represents and warrants to, and agrees with, each Agent and Class A-2 Purchaser and the Facility Agent that, as of the date hereof: (a) SRPC is a duly organized and validly existing corporation in good standing under the laws of the State of Delaware, with corporate power and authority to own its properties and to transact the business in which it is now engaged. SRPC is duly qualified to do business (or is exempt from such qualification) and is in good standing in each State of the United States where the nature of its business requires it to be so qualified. (b) SRPC has the full corporate power, authority and legal right to make, execute, deliver and perform the Related Documents to which it is party (individually or as Transferor) and all of the transactions contemplated thereby and to issue the Series 1999-1 Certificates from the Trust and has taken all necessary corporate action to authorize the execution, delivery and performance of the Related Documents to which it is party and such issuance. Each of the Related Documents to which SRPC is party (individually or as Transferor) constitutes its legal, valid and binding agreement enforceable in accordance with its terms (subject to applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of the rights of creditors generally and except as such enforceability may be limited by general principles of equity, whether considered in a proceeding at law or in equity). (c) SRPC is not required to obtain the consent of any other party or any consent, license, approval or authorization of, or registration with, any Governmental Authority in connection with the execution, delivery or performance of each of the Related Documents to which it is party (individually or as Transferor) that has not been duly obtained and which is not and will not be in full force and effect on the Closing Date. (d) SRPC's execution, delivery and performance of the Related Documents to which it is party (individually or as Transferor) do not violate or conflict with any provision of any existing law or regulation applicable to SRPC or any order or decree of any court to which SRPC is subject or the Certificate of Incorporation or Bylaws of SRPC, or any mortgage, security agreement, indenture, contract or other agreement to which SRPC is a party or by which SRPC or any significant portion of its properties is bound. (e) There is no litigation, investigation or administrative proceeding before any court, tribunal, regulatory body or governmental body presently pending, or, to the knowledge of SRPC, threatened, with respect to any of the Related Documents, the transactions contemplated thereby, or the issuance of the Series 1999-1 Certificates and there is no such litigation or proceeding against SRPC or any significant portion of its properties which would, individually or in the aggregate, have a material adverse effect on the transactions contemplated by any of the Related Documents or the ability of SRPC to perform its obligations thereunder. (f) SRPC is not insolvent or the subject of any insolvency or liquidation proceeding. The financial statements of SRPC delivered to each Agent are complete and correct in all material respects and fairly present the financial condition of SRPC as of date of such statements and the results of operations of SRPC for the period then ended, all in accordance with United States generally accepted accounting principles consistently applied. Since the date of the most recent audited financial statements of SRPC delivered to each Agent, there has not been any material adverse change in the condition (financial or otherwise) of SRPC. (g) There are no outstanding comments from the most recent report prepared by the independent public accountants for SRPC (individually or in its capacity as Transferor) in connection with its credit card receivables. (h) No Trust Pay Out Event, Series 1999-1 Pay Out Event, Mandatory Partial Amortization Event, Servicer Default or Termination Event has occurred and is continuing, and no event, act or omission has occurred and is continuing which, with the lapse of time, the giving of notice, or both, would constitute such an event or default. (i) The Pooling and Servicing Agreement is not required to be qualified under the Trust Indenture Act of 1939, as amended, and neither the Trust nor SRPC is required to be registered under the Investment Company Act of 1940, as amended. (j) The Receivables conveyed by SRPC to the Trust under the Pooling and Servicing Agreement are in an aggregate amount, determined as of November 9, 1999, of $340,005,003, consisting of $319,054,670 of Principal Receivables and $20,950,333 of Finance Charge Receivables. The Receivables Purchase Agreement is in full force and effect on the date hereof and no material default by any party exists thereunder. As of the Closing Date, after giving effect to the payments and defeasances contemplated by subsection 3.1(e), there will be no Investor Certificates of the Trust, other than the Series 1999-1 Certificates, outstanding. (k) The Trust is duly created and existing under the laws of the State of New York. Simultaneous with the closing hereunder, all conditions to the issuance and sale of the Series 1999-1 Certificates set forth in the Pooling and Servicing Agreement have been satisfied and the Series 1999-1 Certificates have been duly issued by the Trust. (l) Neither SRPC nor any of its Affiliates has directly, or through any agent, (i) sold, offered for sale, solicited offers to buy or otherwise negotiated in respect of, any "security" (as defined in the Securities Act) that is or will be integrated with the sale of the any Series 1999-1 Certificates in a manner that would require the registration under the Securities Act of the offering of the Series 1999-1 Certificates or (ii) engaged in any form of general solicitation or general advertising (as those terms are used in Regulation D under the Securities Act) in connection with the offering of the Series 1999-1 Certificates or in any manner involving a public offering thereof within the meaning of Section 4(2) of the Securities Act. Assuming the accuracy of the representations and warranties of each Class A-2 Purchaser in its Investment Letter and of each purchaser of Class A-1 Certificates, Class B Certificates, Class C Certificates and Class D Certificates in their respective investment letters, the offer and sale of the Series 1999-1 Certificates are transactions which are exempt from the registration requirements of the Securities Act. (m) All written factual information heretofore furnished by SRPC to, or for delivery to, any Agent or Class A-2 Purchaser for purposes of or in connection with this Agreement, including information relating to the Accounts, the Receivables, and SRI's credit card business, was true and correct in all material respects on the date as of which such information was stated or certified and remains true and correct in all material respects (unless such information specifically relates to an earlier date in which case such information shall have been true and correct in all material respects on such earlier date). 4.2 Representations and Warranties of SRI. SRI repeats and reaffirms to the Class A-2 Purchasers, the Agents and the Facility Agent the representations and warranties of the Servicer set forth in Section 3.3 of the Pooling and Servicing Agreement, and represents and warrants that such representations and warranties are true and correct as of the date hereof. SRI further represents and warrants to, and agree with, each Agent and Class A-2 Purchaser and the Facility Agent that, as of the date hereof: (a) SRI is a duly organized and validly existing corporation in good standing under the laws of the State of Texas, with corporate power and authority to own its properties and to transact the business in which it is now engaged. SRI is duly qualified to do business (or is exempt from such qualification) and is in good standing in each State of the United States where the nature of its business requires it to be so qualified. (b) SRI has the full corporate power, authority and legal right to make, execute, deliver and perform the Related Documents to which it is party (individually or as Servicer) and all of the transactions contemplated thereby and has taken all necessary corporate action to authorize the execution, delivery and performance of the Related Documents to which it is party and such issuance. Each of the Related Documents to which SRI is party (individually or as Servicer) constitutes its legal, valid and binding agreement enforceable in accordance with its terms (subject to applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of the rights of creditors of national banking associations generally and except as such enforceability may be limited by general principles of equity, whether considered in a proceeding at law or in equity). (c) SRI is not required to obtain the consent of any other party or any consent, license, approval or authorization of, or registration with, any Governmental Authority in connection with the execution, delivery or performance of each of the Related Documents to which it is party (individually or as Servicer) that has not been duly obtained and which is not and will not be in full force and effect on the Closing Date. (d) The execution, delivery and performance by SRI of the Related Documents to which it is party (individually or as Servicer) do not violate or conflict with any provision of any existing law or regulation applicable to SRI or any order or decree of any court to which SRI is subject or the Certificate of Incorporation or Bylaws of SRI, or any mortgage, security agreement, indenture, contract or other agreement to which SRI is a party or by which SRI or any significant portion of its properties is bound. (e) There is no litigation, investigation or administrative proceeding before any court, tribunal, regulatory body or governmental body presently pending, or, to the knowledge of SRI, threatened, with respect to any of the Related Documents, the transactions contemplated thereby, or the issuance of the Series 1999-1 Certificates, and there is no such litigation or proceeding against SRI or any significant portion of its properties which would, individually or in the aggregate, have a material adverse effect on the transactions contemplated by any of the Related Documents or the ability of SRI to perform its obligations thereunder. (f) SRI is not insolvent or the subject of any insolvency or liquidation proceeding. The financial statements of SRI delivered to any Agent or Class A-2 Purchaser are complete and correct in all material respects and fairly present the financial condition of SRI as of date of such statements and its results of operations for the period then ended, all in accordance with United States generally accepted accounting principles consistently applied. Since the date of the most recent audited financial statements of SRI delivered to the Agents and the Class A-2 Purchasers through the Closing Date, there has not been any material adverse change in the condition (financial or otherwise) of SRI, other than changes (if any) disclosed in Stage's filings with the SEC pursuant to the Securities Exchange Act of 1934, as amended, or disclosed in a writing addressed to the Facility Agent and the initial Agent. (g) There are no outstanding comments from the most recent report prepared by the independent public accountants for SRI (individually or in its capacity as Servicer) in connection with its credit card receivables. (h) No Trust Pay Out Event, Series 1999-1 Pay Out Event, Mandatory Partial Amortization Event, Servicer Default or Termination Event has occurred and is continuing, and no event, act or omission has occurred and is continuing which, with the lapse of time, the giving of notice, or both, would constitute such an event or default. (i) The Pooling and Servicing Agreement is not required to be qualified under the Trust Indenture Act of 1939, as amended, and neither the Trust, SRPC nor SRI is required to be registered under the Investment Company Act of 1940, as amended. (j) The Receivables Purchase Agreement is in full force and effect on the date hereof and no material default by any party exists thereunder. (k) The Trust is duly created and existing under the laws of the State of New York. Simultaneous with the closing hereunder, all conditions to the issuance and sale of the Series 1999-1 Certificates set forth in the Pooling and Servicing Agreement have been satisfied and the Series 1999-1 Certificates have been duly issued by the Trust. (l) To the knowledge of SRI, the representations and warranties of SRPC set forth in Section 4.1 above are true and correct in all material respects. (m) The representations and warranties of Granite set forth in Section 4.02 and 4.03 of the Receivables Transfer Agreement are true and correct in all material respects. (n) The Servicer and the Transferor have each (i) initiated a review and assessment of all areas within its business and operations (including those affected by suppliers, vendors and customers) that could be adversely affected by the risk that computer applications used by the Servicer or the Transferor (or suppliers, vendors and customers) may be unable to recognize and perform properly date-sensitive functions involving certain dates prior to and any date after December 31, 1999 (the "Year 2000 Problem"), (ii) developed a plan and timeline for addressing the Year 2000 Problem on a timely basis, and (iii) to date, implemented that plan in accordance with that timetable. Based on the foregoing, the Servicer and the Transferor each believe that all computer applications (including those of its suppliers, vendors and customers) that are material to its business and operations are reasonably expected on a timely basis to be able to perform properly date-sensitive functions for all dates before and after January 1, 2000 (that is, be "Year 2000 Compliant"), except to the extent that a failure to do so could not reasonably be expected (a) to have a material adverse effect on the financial condition or operations of the Servicer or the Transferor or on the transactions documented under this Agreement or any Related Document, or (b) to result in a Termination Event. Each of the Transferor and the Servicer (i) has completed a review and assessment of all computer applications (including, but not limited to those of its suppliers, vendors, customers and any third party servicers), which are related to or involved in the origination, collection, management or servicing of the Accounts and the Receivables (the "Contract Systems") and (ii) has determined that such Contract Systems are Year 2000 Compliant. The costs of all assessment, remediation, testing and integration related to the plans of the Servicer and the Transferor for becoming Year 2000 Compliant will not have a material adverse effect on the financial condition or operations of the Servicer or the Transferor. (o) All written factual information heretofore furnished by SRPC, SRI, Granite or Stage to, or for delivery to, any Agent or Class A-2 Purchaser for purposes of or in connection with this Agreement, including information relating to the Accounts, the Receivables and the credit card business of SRPC, Granite or SRI, was true and correct in all material respects on the date as of which such information was stated or certified and remains true and correct in all material respects (unless such information specifically relates to an earlier date in which case such information shall have been true and correct in all material respects on such earlier date). 4.3 Representations and Warranties of the Agents, the Facility Agent and the Class A-2 Purchasers. Each Agent, the Facility Agent and each Committed Purchaser and the Liquidity Purchaser severally (each with respect to itself only) represents and warrants to, and agrees with, the Transferor and the Servicer, that: (a) It is duly authorized to enter into and perform this Agreement and, in the case of the Class A-2 Purchasers, to purchase its Purchaser Percentage or Liquidity Percentage (if any) of the Class A-2 Certificates, and has duly executed and delivered this Agreement; and the person signing this Agreement on behalf of such Agent, the Facility Agent or such Class A-2 Purchaser, as the case may be, has been duly authorized to do so. (b) This Agreement constitutes the legal, valid and binding obligation of such Agent, the Facility Agent or such Class A-2 Purchaser, enforceable in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, conservatorship or other similar laws now or hereafter in effect affecting the enforcement of creditors' rights in general, and except as such enforceability may be limited by general principles of equity (whether considered in a proceeding at law or in equity). (c) No registration with or consent or approval of or other action by any state or local governmental authority or regulatory body having jurisdiction over such Agent, the Facility Agent or such Class A-2 Purchaser is required in connection with its execution, delivery or performance of this Agreement, other than as may be required under the blue sky laws of any state. (d) The execution, delivery or performance by such Agent, the Facility Agent or such Class A-2 Purchaser of this Agreement do not violate or conflict with any provision of any existing law or regulation applicable to it or any order or decree of any court to which it is subject, its charter or bylaws, or any mortgage, security agreement, indenture, contract or other agreement to which such it is a party or by which it or any significant portion of its properties is bound, in any such case if such violation or conflict would have an adverse affect on its right or ability to execute, deliver or perform its obligations under this Agreement. SECTION 5. COVENANTS 5.1 Covenants of SRPC and SRI. SRPC (individually or, as set forth below, as the Transferor) and SRI (individually and, as set forth below, as the Servicer), each as to itself in such capacity or capacities, and subject to subsection 9.11(a) in the case of the Transferor, covenants and agrees, through the Purchase Termination Date for all Class A-2 Purchasers and thereafter so long as any amount of the Class A-2 Principal Balance shall remain outstanding or any monetary obligation arising hereunder shall remain unpaid, unless the Required Class A-2 Owners and the Required Class A-2 Purchasers shall otherwise consent in writing, that: (a) each of SRPC, SRI, the Transferor and the Servicer shall perform in all material respects each of the respective agreements, warranties and indemnities applicable to it and comply in all material respects with each of the respective terms and provisions applicable to it under the other Related Documents to which it is party, which agreements, warranties and indemnities are hereby incorporated by reference into this Agreement as if set forth herein in full; and each of SRPC, SRI, the Transferor and the Servicer shall take all reasonable action to enforce the obligations of each of the other parties to such Related Documents which are contained therein; (b) the Transferor and the Servicer shall furnish to each Agent (i) a copy of each opinion, certificate, report, statement, notice or other communication (other than investment instructions) relating to the Series 1999-1 Certificates which is furnished by or on behalf of either of them to Certificateholders, to any Rating Agency or to the Trustee, a copy of each notice, demand or other communication relating to the Series 1999-1 Certificates, this Agreement or the Pooling and Servicing Agreement received by the Transferor or the Servicer from the Trustee, any Rating Agency or 10% or more of the Series 1999-1 Certificateholders (to the extent such notice, demand or communication relates to the Accounts, the Receivables, any Servicer Default, any Trust Pay Out Event, any Series 1999-1 Pay Out Event or any Mandatory Partial Amortization Event); and (ii) such other information, documents records or reports respecting the Trust, the Accounts, the Receivables, the Transferor or the Servicer as any Agent may from time to time reasonably request without unreasonable expense to the Transferor or the Servicer; (c) the Servicer shall furnish to each Agent on or before the date such reports are due under the Pooling and Servicing Agreement copies of each of the reports and certificates required by subsection 3.4(c) or Section 3.5 or 3.6 of the Pooling and Servicing Agreement (which, in the case of the reports pursuant to Section 3.6, shall be addressed to the Facility Agent and each Agent); (d) the Servicer shall promptly furnish to each Agent a copy, addressed to such Agent, of each opinion of counsel delivered to the Trustee pursuant to subsection 13.2(d) of the Pooling and Servicing Agreement; (e) SRI shall furnish to each Agent (i) promptly when publicly available, the annual (audited) and quarterly (unaudited) consolidated and consolidating financial statements of each of Stage and SRPC, the publicly available portions of Granite's quarterly and annual consolidated reports of condition and income and such other publicly available financial information, if any, as to Stage, SRI, Granite or SRPC as such Agent may request, and (ii) promptly after known to SRI, information with respect to any action, suit or proceeding involving SRI or any of its Affiliates by or before any court or any Governmental Authority which, if adversely determined, would materially adversely affect the business, results of operation or financial condition of SRPC, SRI or Granite; (f) the Servicer shall furnish to each Agent a certificate concurrently with its delivery of its annual certificate pursuant to Section 3.5 of the Pooling and Servicing Agreement stating that no Termination Event or event or condition which with the passage of time or the giving of notice, or both, would constitute a Termination Event has occurred or, if such a Termination Event, event or condition has occurred, identifying the same in reasonable detail; (g) the Transferor shall not exercise its right to accept optional reassignment of the Receivables or repurchase the Series 1999-1 Certificates pursuant to Section 12.2 of the Pooling and Servicing Agreement, unless the Class A-2 Purchasers, each Agent and the Facility Agent have been paid, or will be paid upon such repurchase or in connection with such optional reassignment, the Class A-2 Principal Balance, all interest thereon and all other amounts owing hereunder in full; (h) the Transferor and the Servicer shall at any time from time to time during regular business hours, on reasonable notice to the Transferor or the Servicer, as the case may be, permit each Agent and the Facility Agent, or its agents or representatives to: (i) examine all books, records and documents (including computer tapes and disks) in its possession or under its control relating to the Receivables, and (ii) visit its offices and property for the purpose of examining such materials described in clause (i) above. The information obtained by any Agent, the Facility Agent or any Class A-2 Purchaser pursuant to this subsection shall be held in confidence in accordance with Section 6.2 hereof; (i) the Transferor and the Servicer shall use reasonable efforts to cooperate with each Agent (including affording reasonable inspection rights, assisting in the preparation of syndication material, attending investor meetings providing access to its officers and providing reliance letters with respect to opinions delivered in connection with the issuance of the Series 1999-1 Certificates on the Closing Date) in its effort to syndicate the Commitments; (j) the Servicer shall furnish to each Agent, promptly after the occurrence of any Servicer Default, Termination Event, Trust Pay Out Event, Mandatory Partial Amortization Event or Series 1999-1 Pay Out Event, a certificate of an appropriate officer of the Servicer setting forth the circumstances of such Servicer Default, Termination Event, Trust Pay Out Event, Mandatory Partial Amortization Event or Series 1999-1 Pay Out Event and any action taken or proposed to be taken by the Servicer or the Transferor with respect thereto; (k) the Transferor and the Servicer shall timely make all payments, deposits or transfers and give all instructions to transfer required by this Agreement, the Pooling and Servicing Agreement and the Receivables Purchase Agreement; (l) neither the Transferor, the Servicer nor the Originator shall terminate (except in accordance with the terms thereof), amend, waive or otherwise modify the Master Pooling and Servicing Agreement, the Supplement or the Issuance Supplement, unless (i) such amendment, waiver or modification shall not, as evidenced by an Officer's Certificate of the Transferor delivered to each Agent, adversely affect in any material respect the interests of any Agent, the Facility Agent or the Class A-2 Purchasers under any Related Document, and will not result in a reduction or withdrawal of the then current rating by any Rating Agency of any commercial paper notes issued by any Conduit Purchaser without giving effect to any increase in any letter of credit or other enhancement provided to such Conduit Purchaser; and (ii) all of the applicable provisions of Section 13.1 of the Pooling and Servicing Agreement have been complied with; (m) the Transferor and the Servicer shall execute and deliver to each Agent, the Facility Agent or the Trustee all such documents and instruments and do all such other acts and things as may be necessary or reasonably required by any Agent, the Facility Agent or the Trustee to enable any of them to exercise and enforce their respective rights under the Related Documents and to realize thereon, and record and file and rerecord and refile all such documents and instruments, at such time or times, in such manner and at such place or places, all as may be necessary or required by the Trustee, the Facility Agent or any Agent to validate, preserve, perfect and protect the position of the Trustee under the Pooling and Servicing Agreement; (n) neither the Transferor nor the Servicer will consolidate with or merge into any other Person or convey or transfer its properties and assets substantially as an entirety to any Person, except (i) in accordance with Section 7.2 or 8.2 of the Pooling and Servicing Agreement, and (ii) with the prior written consent of the Required Class A-2 Owners and the Required Class A-2 Purchasers; (o) SRI will not (i) resign as Servicer, unless (A) the performance of its duties under the Pooling and Servicing Agreement is no longer permissible pursuant to Requirements of Law and there is no reasonable action which it could take to make the performance of such duties permissible under such Requirements of Law, or (B) the Required Class A-2 Owners and the Required Class A-2 Purchasers shall have consented thereto, (ii) delegate any of its material duties under the Pooling and Servicing Agreement except as permitted by Section 8.7 of the Pooling and Servicing Agreement and unless the Person to which such delegation is made is a wholly owned subsidiary (directly or indirectly) of Stage, is legally qualified and licensed (to the extent required) to perform the duties delegated to it, owns or holds under valid leases or (in the case of software) licenses all computer equipment and software and other equipment and rights which are required for such Person to perform such duties, and employs sufficient and adequately trained personnel to perform such duties, or (iii) appoint or permit the appointment of a Successor Servicer other than the Trustee under the provisions of the Pooling and Servicing Agreement without consultation with the Facility Agent; (p) The Transferor and the Servicer shall not permit any newly issued Series of Investor Certificates (or, with respect to a prefunded Series, interests therein) other than Series 1999-1 to be issued by the Trust or the terms of any new class or subclass of Series 1999-1 Certificates other than the Class A-1 Certificates, Class A-2 Certificates, Class B Certificates, Class C Certificates, Class D Certificates and Class E Certificates to be specified pursuant to any amendment or modification to the Issuance Supplement or any additional issuance supplement, the proceeds of which newly issued Series or such new class will be applied to reduce the Class A Invested Amount or the Class B Invested Amount (each, a "New Issuance"), unless (i) [reserved]; (ii) such proceeds are applied in accordance with subsection 5(b)(iii) of the Issuance Supplement; (iii) in the case of the issuance of a new class or subclass which does not consist of Variable Funding Certificates and which is a Parity Class in relation to the Class A Certificates, there shall be concurrently issued a new class or subclass which (A) does not consist of Variable Funding Certificates, (B) is a Parity Class with respect to the Class B Certificates and (C) has an initial invested amount equal to 19/81st of the aggregate initial invested amount of such two Parity Classes; (iv) the Transferor shall have a delivered (A) notice of the estimated date and amount of such New Issuance to the Facility Agent and each Agent (which shall promptly forward a copy of such notice to each Class A-2 Purchaser in its Purchaser Group) not less than 20 days prior to such estimated date, and (B) notice of the actual date and amount of such New Issuance to the Facility Agent and each Agent (which shall promptly forward a copy of such notice to each Class A-2 Purchaser in its Purchaser Group) not less than three Business Days prior to such date; (v) on the date on which the Transferor has sold such New Issuance, all interest, fees, expenses and all other amounts then due and payable to any Agent or Class A-2 Purchaser or to the Facility Agent hereunder (including any amounts owed under Sections 2.3, 2.4, 2.5 or 2.6, but excluding the Class A-2 Principal Balance) shall have been paid; (vi) on the date on which the Transferor has sold such New Issuance, no Termination Event shall have occurred and be continuing, and there shall exist no unreimbursed Class E Investor Charge-Offs; (vii) the Facility Agent shall have received confirmation that, after giving effect to such New Issuance, the Class A-2 Certificates and the Class A-1 Certificates remain rated Aaa by Moody's and AAA by Fitch IBCA, Inc. and the Class B Certificates remain rated not less than A1 by Moody's and not less than A by Fitch IBCA, Inc; (viii) the conditions set forth in Section 6.15 of the Pooling and Servicing Agreement or in the Issuance Supplement to the New Issuance shall have been satisfied; and (ix) on the date on which the Transferor has sold such New Issuance, the Transferor shall have delivered to the Facility Agent and each Agent an Officer's Certificate dated such date certifying (A) that the conditions described in clauses (i) through (viii) above have been satisfied and (B) that based on the facts known to the officer signing such Officer's Certificate at such time, in the reasonable belief of the Transferor, the New Issuance will not cause a Pay Out Event, a Series 1999-1 Pay Out Event or a Mandatory Partial Amortization Event or an event that, after the giving of notice or the lapse of time, would constitute an Pay Out Event, a Series 1999-1 Pay Out Event or a Mandatory Partial Amortization Event to occur. The Transferor and the Servicer shall not permit any newly issued Series of Investor Certificates (or, with respect to a prefunded Series, interests therein) other than Series 1999-1 to be issued by the Trust or the terms of any new class or subclass of Series 1999-1 Certificates other than the Class A-2 Certificates, Class A-2 Certificates, Class B Certificates, Class C Certificates, Class D Certificates and Class E Certificates to be specified pursuant to any amendment or modification to the Issuance Supplement or any additional issuance supplement, if such newly issued Series or new class or subclass would be senior to the Class A Certificates as to allocations of Available Series 1999-1 Finance Charge Collections, Excess Finance Charge Collections, Series Transferor Finance Charge Collections, Reallocated Principal Collections or Available Principal Collections without the consent of the Facility Agent, each Agent and each Class A-2 Purchaser. SECTION 6. MUTUAL COVENANTS REGARDING CONFIDENTIALITY 6.1 Covenants of SRPC, Etc. SRPC, SRI, the Transferor and the Servicer shall hold in confidence, and not disclose to any Person, the terms of any fees payable in connection with this Agreement except they may disclose such information (i) to their officers, directors, employees, agents, counsel, accountants, auditors, advisors or representatives, (ii) with the consent of the Required Class A-2 Purchasers and each Agent, or (iii) to the extent SRPC, SRI, Granite, the Transferor or the Servicer or any Affiliate of either of them should be required by any law or regulation applicable to it or requested by any Governmental Authority to disclose such information; provided, that, in the case of clause (iii), SRPC, Granite, the Transferor or the Servicer, as the case may be, will use all reasonable efforts to maintain confidentiality and will (unless otherwise prohibited by law) notify each Agent of its intention to make any such disclosure prior to making such disclosure. 6.2 Covenants of Class A-2 Purchasers. Each Agent, the Facility Agent and each Class A-2 Purchaser, severally and with respect to itself only, covenants and agrees that any information obtained by such Agent, the Facility Agent or such Class A-2 Purchaser pursuant to this Agreement shall be held in confidence (it being understood that documents provided to an Agent hereunder may in all cases be distributed by such Agent or the Facility Agent to the Class A-2 Purchasers), except that such Agent, the Facility Agent or such Class A-2 Purchaser may disclose such information (i) to its officers, directors, employees, agents, counsel, accountants, auditors, advisors or representatives, (ii) to the extent such information has become available to the public other than as a result of a disclosure by or through such Agent, the Facility Agent or such Class A-2 Purchaser, (iii) to the extent such information was available to such Agent, the Facility Agent or such Class A-2 Purchaser on a nonconfidential basis prior to its disclosure to such Agent, the Facility Agent or such Class A-2 Purchaser hereunder, (iv) with the consent of the Transferor, (v) to the extent permitted by Section 8.1, (vi) to the extent such Agent, the Facility Agent or such Class A-2 Purchaser should be (A) required in connection with any legal or regulatory proceeding or (B) requested by any Governmental Authority to disclose such information or (vii) in the case of any Class A-2 Purchaser that is a Conduit Purchaser, to placement agents and providers of liquidity and credit support who agree to hold such information in confidence and to rating agencies; provided, that, in the case of clause (vi) above, such Agent, the Facility Agent or such Class A-2 Purchaser, as applicable, will use all reasonable efforts to maintain confidentiality and, in the case of clause (vi)(A) above, will (unless otherwise prohibited by law) notify the Transferor of its intention to make any such disclosure prior to making any such disclosure. SECTION 7. THE AGENTS 7.1 Appointment. (a) Each Class A-2 Purchaser hereby irrevocably designates and appoints the Agent for its Purchaser Group as the agent of such Class A-2 Purchaser under this Agreement, and each such Class A-2 Purchaser irrevocably authorizes such Agent, as the agent for such Class A-2 Purchaser, to take such action on its behalf under the provisions of the Related Documents and to exercise such powers and perform such duties thereunder as are expressly delegated to such by the terms of the Related Documents, together with such other powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary elsewhere in this Agreement, no Agent shall have any duties or responsibilities, except those expressly set forth herein, or any fiduciary relationship with any Class A-2 Purchaser, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or otherwise exist against any Agent. (b) Each Class A-2 Purchaser hereby irrevocably designates and appoints the Facility Agent as the agent of such Class A-2 Purchaser under the Pooling and Servicing Agreement and hereunder, and each such Class A-2 Purchaser irrevocably authorizes the Facility Agent, as the agent for such Class A-2 Purchaser, to take such action on its behalf under the provisions of the Pooling and Servicing Agreement and hereunder and to exercise such powers and perform such duties thereunder and hereunder as are expressly granted to the Facility Agent by the terms of the Pooling and Servicing Agreement or hereby, subject to the terms and conditions of this Agreement, together with such other powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary elsewhere in this Agreement, the Facility Agent shall not have any duties or responsibilities, except those expressly set forth herein or in the Pooling and Servicing Agreement or herein, or any fiduciary relationship with any Class A-2 Purchaser, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or otherwise exist against the Facility Agent. 7.2 Delegation of Duties. Each Agent and the Facility Agent may execute any of its duties under any of the Related Documents by or through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. Neither any Agent nor the Facility Agent shall be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable care. 7.3 Exculpatory Provisions. Neither any Agent nor the Facility Agent nor any of their respective officers, directors, employees, agents, attorneys-in-fact or Affiliates shall be (a) liable to any of the Class A-2 Purchasers for any action lawfully taken or omitted to be taken by it or such Person under or in connection with any of the other Related Documents (except for its or such Person's own gross negligence or willful misconduct) or (b) responsible in any manner to any of the Class A-2 Purchasers for any recitals, statements, representations or warranties made by SRPC, SRI, Stage, Granite, the Transferor, the Servicer or the Trustee or any officer thereof contained in any of the other Related Documents or in any certificate, report, statement or other document referred to or provided for in, or received by any Agent or the Facility Agent under or in connection with, any of the other Related Documents or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any of the other Related Documents or for any failure of SRPC, SRI, Stage, Granite, the Transferor, the Servicer or the Trustee to perform its obligations thereunder. Neither any Agent nor the Facility Agent shall be under any obligation to any Class A-2 Purchaser to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, any of the other Related Documents, or to inspect the properties, books or records of SRPC, SRI, Stage, Granite, the Transferor, the Servicer, the Trustee or the Trust. 7.4 Reliance by Agent. Each Agent and the Facility Agent shall be entitled to rely, and shall be fully protected in relying, upon any writing, resolution, notice, consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype message, written statement, order or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including counsel to any Agent or the Facility Agent), independent accountants and other experts selected by any Agent or the Facility Agent. Each Agent and the Facility Agent shall be fully justified in failing or refusing to take any action under any of the Related Documents unless it shall first receive such advice or concurrence of the Required Class A-2 Owners and the Required Class A-2 Purchasers as it deems appropriate or it shall first be indemnified to its satisfaction by the Class A-2 Purchasers or by the Committed Class A-2 Purchasers against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. Each Agent and the Facility Agent shall in all cases be fully protected in acting, or in refraining from acting, under any of the Related Documents in accordance with a request of the Required Class A-2 Owners and the Required Class A-2 Purchasers and such request and any action taken or failure to act pursuant thereto shall be binding upon all present and future Class A-2 Purchasers. 7.5 Notices. No Agent shall be deemed to have knowledge or notice of the occurrence of any breach of this Agreement or the occurrence of any Trust Pay Out Event, Series 1999-1 Pay Out Event, Mandatory Partial Amortization Event or Termination Event unless such Agent has received notice from the Transferor, the Servicer, the Trustee or any Class A-2 Purchaser referring to this Agreement, describing such event. In the event that an Agent receives such a notice, such Agent promptly shall give notice thereof to the Class A-2 Purchasers in its Purchaser Group. Such Agent shall take such action with respect to such event as shall be reasonably directed by the Required Class A-2 Owners and the Required Class A-2 Purchasers; provided that unless and until an Agent shall have received such directions, such Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such event as it shall deem advisable in the best interests of the Class A-2 Purchasers. 7.6 Non-Reliance on Agent and Other Class A-2 Purchasers. Each Class A-2 Purchaser expressly acknowledges that neither any Agent nor the Facility Agent nor any of their respective officers, directors, employees, agents, attorneys-in- fact or Affiliates has made any representations or warranties to it and that no act by any Agent or the Facility Agent hereafter taken, including any review of the affairs of SRPC, SRI, Stage, Granite, the Transferor, the Servicer, the Trustee or the Trust shall be deemed to constitute any representation or warranty by any Agent or the Facility Agent to any Class A-2 Purchaser. Each Class A-2 Purchaser represents to each Agent and the Facility Agent that it has, independently and without reliance upon any Agent, the Facility Agent or any other Class A-2 Purchaser, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, operations, property, financial and other condition and creditworthiness of the Trust, the Trustee, SRPC, SRI, Stage, Granite, the Transferor and the Servicer and made its own decision to purchase its interest in the Class A-2 Certificates hereunder and enter into this Agreement. Each Class A-2 Purchaser also represents that it will, independently and without reliance upon any Agent or the Facility Agent or any other Class A-2 Purchaser, and based on such documents and information as it shall deem appropriate at the time, continue to make its own analysis, appraisals and decisions in taking or not taking action under any of the Related Documents, and to make such investigation as it deems necessary to inform itself as to the business, operations, property, financial and other condition and creditworthiness of the Trust, the Trustee, SRPC, SRI, Stage, Granite, the Transferor and the Servicer. Except, in the case of an Agent, for notices, reports and other documents received by such Agent under Section 5 hereof, neither any Agent nor the Facility Agent shall have any duty or responsibility to provide any Class A-2 Purchaser with any credit or other information concerning the business, operations, property, condition (financial or otherwise), prospects or creditworthiness of the Trust, the Trustee, SRPC, SRI, Stage, Granite, the Transferor or the Servicer which may come into the possession of any Agent or the Facility Agent or any of its respective officers, directors, employees, agents, attorneys-in-fact or Affiliates. 7.7 Indemnification. (i) The Committed Purchasers and the Liquidity Purchasers agree to indemnify the Facility Agent in its capacity as such (without limiting the obligation (if any) of SRPC, SRI, the Transferor, the Trust or the Servicer to reimburse the Facility Agent for any such amounts), ratably according to their respective Commitments (or, if the Commitments have terminated, Percentage Interests), and (ii) the Committed Purchasers and the Liquidity Purchasers in each Purchaser Group agree to indemnify the Agent for such Purchaser Group in its capacity as such (without limiting the obligation (if any) of SRPC, SRI, the Transferor, the Trust or the Servicer to reimburse such Agent for any such amounts), ratably according to their respective Commitments (or, if the Commitments have terminated, Percentage Interests), in each case from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever which may at any time (including at any time following the payment of the obligations under this Agreement, including the Class A-2 Principal Balance) be imposed on, incurred by or asserted against such Agent in any way relating to or arising out of this Agreement, or any documents contemplated by or referred to herein or the transactions contemplated hereby or any action taken or omitted by the Agent under or in connection with any of the foregoing; provided that no Class A-2 Purchaser shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of an Agent or the Facility Agent resulting from its own gross negligence or willful misconduct. The agreements in this subsection shall survive the payment of the obligations under this Agreement, including the Class A-2 Principal Balance. 7.8 Agents in Their Individual Capacities. Each Agent, the Facility Agent and their Affiliates may make loans to, accept deposits from and generally engage in any kind of business with the Trust, the Trustee, SRPC, SRI, Stage, Granite, the Servicer and the Transferor as though such Agent and the Facility Agent were not the agents hereunder. Each Class A-2 Purchaser acknowledges that Credit Suisse First Boston may act (i) as administrator and agent for one or more Conduit Purchasers and in such capacity acts and may continue to act on behalf of each such Conduit Purchaser in connection with its business, (ii) as the agent for certain financial institutions under the liquidity and credit enhancement agreements relating to this Agreement to which any such Conduit Purchaser is party and in various other capacities relating to the business of any such Conduit Purchaser under various agreements, and (iii) as agent for other Classes of Series 1999-1 Certificates. Credit Suisse First Boston in its capacity as an Agent or the Facility Agent shall not, by virtue of its acting in any such other capacities, be deemed to have duties or responsibilities hereunder or be held to a standard of care in connection with the performance of its duties as an Agent or the Facility Agent other than as expressly provided in this Agreement. Credit Suisse First Boston may act as an Agent and the Facility Agent without regard to and without additional duties or liabilities arising from its role as such administrator or agent or arising from its acting in any such other capacity. 7.9 Successor Agent. (a) An Agent may resign as Agent upon ten days' notice to the Class A-2 Purchasers in its Purchaser Group, the Facility Agent, each other Agent, the Trustee, the Transferor and the Servicer with such resignation becoming effective upon a successor agent succeeding to the rights, powers and duties of such Agent pursuant to this subsection 7.9(a). Any Agent may resign as Agent upon ten days' notice to the Class A-2 Purchasers in its Purchaser Group, the Facility Agent and each other Agent, the Transferor, the Servicer and the Trustee with such resignation becoming effective upon a successor agent succeeding to the rights, powers and duties of the Agent pursuant to this Section 7.9. If an Agent shall resign as Agent under this Agreement, then (i) Class A-2 Owners in its Purchaser Group having Percentage Interests aggregating greater than 50% of the aggregate Percentage Interests of all Class A-2 Owners in such Purchaser Group, and (ii) Committed Purchasers and Liquidity Purchasers in its Purchaser Group having Commitments aggregating greater than 50% of the aggregate Commitments of all Committed Purchasers and Liquidity Purchasers in such Purchaser Group shall appoint from among the Committed Purchasers in such Purchaser Group a successor agent for such Purchaser Group. Any successor administrative agent or agent shall succeed to the rights, powers and duties of resigning Agent, and the term "Agent," as applicable, shall mean such successor agent effective upon its appointment, and the former Agent's rights, powers and duties as Agent shall be terminated, without any other or further act or deed on the part of such former Agent or any of the parties to this Agreement. After the retiring Agent's resignation as Agent, the provisions of this Section 7 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Agreement. (b) The Facility Agent may resign as Facility Agent upon ten days' notice to the Class A-2 Purchasers, the Class A-1 Purchasers, the Class B Purchasers, the Trustee, the Transferor, the Servicer and each Agent with such resignation becoming effective upon a successor agent succeeding to the rights, powers and duties of the Facility Agent pursuant to this subsection 7.9(b). If the Facility Agent shall resign as Facility Agent under this Agreement, then the Required Class A-2 Purchasers and the Required Class A-2 Owners shall appoint from among the Committed Purchasers or Liquidity Purchasers hereunder or the committed purchasers or liquidity purchasers under the Class A-1 Certificate Purchase Agreement or the Class B Certificate Purchase Agreement a successor Facility Agent of the Class A-2 Certificateholders, the Class A-1 Certificateholders and the Class B Certificateholders; provided that no such appointment shall be effective unless such successor is also appointed as successor Facility Agent under the Class A-1 Certificate Purchase Agreement and the Class B Certificate Purchase Agreement. The successor agent shall succeed to the rights, powers and duties of the Facility Agent, and the term "Facility Agent" shall mean such successor agent effective upon its appointment, and the former Facility Agent's rights, powers and duties as Facility Agent shall be terminated, without any other or further act or deed on the part of such former Facility Agent or any of the parties to this Agreement. After the retiring Facility Agent's resignation as Facility Agent, the provisions of this Section 7 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Facility Agent under this Agreement. SECTION 8. SECURITIES LAWS; TRANSFERS; TAX TREATMENT 8.1 Transfers of Class A-2 Certificates. (a) Each Class A-2 Owner agrees that the beneficial interest in the Class A-2 Certificates purchased by it will be acquired for investment only and not with a view to any public distribution thereof, and that such Class A-2 Owner will not offer to sell or otherwise dispose of any Class A-2 Certificate acquired by it (or any interest therein) in violation of any of the registration requirements of the Securities Act or any applicable state or other securities laws. Each Class A-2 Owner acknowledges that it has no right to require the Transferor to register, under the Securities Act or any other securities law, the Class A-2 Certificates (or the beneficial interest therein) acquired by it pursuant to this Agreement or any Transfer Supplement. Each Class A-2 Owner hereby confirms and agrees that in connection with any transfer or syndication by it of an interest in the Class A-2 Certificates, such Class A-2 Owner has not engaged and will not engage in a general solicitation or general advertising including advertisements, articles, notices or other communications published in any newspaper, magazine or similar media or broadcast over radio or television, or any seminar or meeting whose attendees have been invited by any general solicitation or general advertising. Each Class A-2 Purchaser which executes a Joinder Agreement agrees that it will execute and deliver to the Transferor, the Servicer, the Trustee and the applicable Agent on or before the effective date of its Joinder Agreement a letter in the form attached hereto as Exhibit A (an "Investment Letter") with respect to the purchase by such Class A-2 Purchaser of an interest in the Class A-2 Certificates. (b) Each initial purchaser of a Class A-2 Certificate or any interest therein and any Assignee thereof or Participant therein shall certify to the Transferor, the Servicer, the Trustee and the Agent for its Purchaser Group that it 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 which, if such entity is a tax-exempt entity, recognizes that payments with respect to the Class A-2 Certificates may constitute unrelated business taxable income or (iii) a person not described in (i) or (ii) whose income from the Class A-2 Certificates is and will be effectively connected with the conduct of a trade or business within the United States (within the meaning of the Code) and whose ownership of any interest in a Class A-2 Certificate will not result in any withholding obligation with respect to any payments with respect to the Class A-2 Certificates by any Person (other than withholding, if any, under Section 1446 of the Code) and who will furnish to the Agent for its Purchaser Group, the Servicer and the Trustee, and to the Class A-2 Owner making the Transfer a properly executed U.S. Internal Revenue Service Form 4224 (and to agree (to the extent legally able) to provide a new Form 4224 upon the expiration or obsolescence of any previously delivered form and comparable statements in accordance with applicable United States laws) or (B) an estate or trust the income of which is includible in gross income for United States federal income tax purposes. (c) Any sale, transfer, assignment, participation, pledge, hypothecation or other disposition (a "Transfer") of a Class A-2 Certificate or any interest therein may be made only in accordance with this Section 8.1. Any Transfer of an interest in a Class A-2 Certificate otherwise permitted by this Section 8.1 will be permitted only if it consists of a pro rata percentage interest in all payments made with respect to the Class A-2 Purchaser's beneficial interest in such Class A-2 Certificate. No Class A-2 Certificate or any interest therein may be Transferred by Assignment or Participation to any Person (each, a "Transferee") unless prior to the transfer the Transferee shall have executed and delivered to the applicable Agent and the Transferor an Investment Letter. Each of SRPC and SRI authorizes each Class A-2 Purchaser to disclose to any Transferee and Support Party and any prospective Transferee or Support Party any and all financial information in the Class A-2 Purchaser's possession concerning the Trust, SRPC, SRI, Granite and Stage which has been delivered to any Agent, the Facility Agent or such Class A-2 Purchaser pursuant to the Related Documents (including information obtained pursuant to rights of inspection granted hereunder) or which has been delivered to such Class A-2 Purchaser by or on behalf of the Trust, SRPC, SRI, Granite, Stage, the Transferor or the Servicer in connection with such Class A-2 Purchaser's credit evaluation of the Trust, SRPC, SRI, Granite, Stage, the Transferor or the Servicer prior to becoming a party to, or purchasing an interest in this Agreement or the Class A-2 Certificates; provided that prior to any such disclosure, such Transferee or Support Party or prospective Transferee or Support Party shall have executed an agreement agreeing to be bound by the provisions of Section 6.2 hereof. (d) Each Class A-2 Purchaser may, in accordance with applicable law, at any time grant participations in all or part of its Commitment or its interest in the Class A-2 Certificates, including the payments due to it under this Agreement and the Pooling and Servicing Agreement (each, a "Participation"), to any Person (each, a "Participant"); provided, however, that no Participation shall be granted to any Person unless and until the Agent for such Class A-2 Purchaser's Purchaser Group shall have consented thereto and the conditions to Transfer specified in this Agreement, including in subsection 8.1(c) hereof, shall have been satisfied and that such Participation consists of a pro rata percentage interest in all payments made with respect to such Class A-2 Purchaser's beneficial interest (if any) in the Class A-2 Certificates. In connection with any such Participation, the Agent for each Purchaser Group shall maintain a register of each Participant of Class A-2 Purchasers or such Purchaser Group and the amount of each of their Participation. Each Class A-2 Purchaser hereby acknowledges and agrees that (A) any such Participation will not alter or affect such Class A-2 Purchaser's direct obligations hereunder, and (B) neither the Trustee, the Transferor nor the Servicer shall have any obligation to have any communication or relationship with any Participant. Each Class A-2 Purchaser and each Participant shall comply with the provisions of subsection 2.5(c). No Participant shall be entitled to Transfer all or any portion of its Participation, without the prior written consent of the Agent for the applicable Purchaser Group. Each Participant shall be entitled to receive additional amounts and indemnification pursuant to Sections 2.4, 2.5 and 2.6 as if such Participant were a Class A-2 Purchaser and such Sections applied to its Participation; provided, in the case of Section 2.5, that such Participant has complied with the provisions of subsection 2.5(c) as if it were a Class A-2 Purchaser. Each Class A-2 Purchaser shall give the Agent for its Purchaser Group notice of the consummation of any sale by it of a Participation and such Agent (upon receipt of notice from the related Class A-2 Purchaser) shall promptly notify the Transferor, the Servicer and the Trustee. (e) Each Class A-2 Purchaser may, with the consent of the Agent for its Purchaser Group and in accordance with applicable law, sell or assign (each, an "Assignment"), to any Consented Assignee (each, an "Assignee") all or any part of its Commitment or its interest in the Class A-2 Certificates and its rights and obligations under this Agreement and the Pooling and Servicing Agreement pursuant to an agreement substantially in the form attached hereto as Exhibit C hereto (a "Transfer Supplement"), executed by such Assignee and the Class A-2 Purchaser and delivered to the Agent for its Purchaser Group for its acceptance and consent; provided, however, that no such assignment or sale shall be effective unless and until the conditions to Transfer specified in this Agreement, including in subsection 8.1(c) hereof, shall have been satisfied. From and after the effective date determined pursuant to such Transfer Supplement, (x) the Assignee thereunder shall be a party hereto and, to the extent provided in such Transfer Supplement, have the rights and obligations of a Class A-2 Purchaser hereunder as set forth therein and (y) the transferor Class A-2 Purchaser shall, to the extent provided in such Transfer Supplement, be released from its Commitment and other obligations under this Agreement; provided, however, that after giving effect to each such Assignment, the obligations released by any such Class A-2 Purchaser shall have been assumed by an Assignee or Assignees. Such Transfer Supplement shall be deemed to amend this Agreement to the extent, and only to the extent, necessary to reflect the addition of such Assignee and the resulting adjustment of Percentage Interests, Purchaser Percentages, Commitments and Maximum Purchase Amounts arising from the Assignment. Upon its receipt and acceptance of a duly executed Transfer Supplement, such Agent shall on the effective date determined pursuant thereto give notice of such acceptance to the Transferor, the Servicer and the Trustee and the Servicer will provide notice thereof to each Rating Agency (if required). Upon instruction to register a transfer of a Class A-2 Purchaser's beneficial interest in the Class A-2 Certificates (or portion thereof) and surrender for registration of transfer such Class A-2 Purchaser's Class A-2 Certificate(s) (if applicable) and delivery to the Transferor and the Trustee of an Investment Letter, executed by the registered owner (and the beneficial owner if it is a Person other than the registered owner), and receipt by the Trustee of a copy of the duly executed related Transfer Supplement and such other documents as may be required under this Agreement, such beneficial interest in the Class A-2 Certificates (or portion thereof) shall be transferred in the records of the Trustee and the Agent for the applicable Purchaser Group and, if requested by the Assignee, new Class A-2 Certificates shall be issued to the Assignee and, if applicable, the transferor Class A-2 Purchaser in amounts reflecting such Transfer as provided in the Pooling and Servicing Agreement. Such Transfers of Class A-2 Certificates (and interests therein) shall be subject to this Section 8.1 in lieu of any regulations which may be prescribed under Section 6.3 of the Pooling and Servicing Agreement. Successive registrations of Transfers as aforesaid may be made from time to time as desired, and each such registration of a transfer to a new registered owner shall be noted on the Certificate Register. (f) Each Class A-2 Purchaser may pledge its interest in the Class A-2 Certificates to any Federal Reserve Bank as collateral in accordance with applicable law. (g) Any Class A-2 Purchaser shall have the option to change its Investing Office, provided that such Class A-2 Purchaser shall have prior to such change in office complied with the provisions of subsection 2.5(c) and provided further that such Class A-2 Purchaser shall not be entitled to any amounts otherwise payable under Section 2.4 or 2.5 resulting solely from such change in office unless such change in office was mandated by applicable law or by such Class A-2 Purchaser's compliance with the provisions of this Agreement. (h) Each Affected Party shall be entitled to receive additional payments and indemnification pursuant to Sections 2.4, 2.5 and 2.6 hereof as though it were a Class A-2 Purchaser and such Section applied to its interest in or commitment to acquire an interest in the Class A-2 Certificates; provided that such Affected Party shall not be entitled to additional payments pursuant to (i) Section 2.4 by reason of Regulatory Changes which occurred prior to the date it became an Affected Party or (ii) Section 2.5 attributable to its failure to satisfy the requirements of subsection 2.5(c) as if it were a Class A-2 Purchaser. (i) Each Affected Party claiming increased amounts described in Sections 2.4 or 2.5 shall furnish, through its related Conduit Purchaser, to the Trustee, the Agent for the applicable Purchaser Group, the Facility Agent, the Servicer and the Transferor a certificate setting forth the basis and amount of each request by such Affected Party for any such amounts referred to in Sections 2.4 or 2.5, such certificate to be conclusive with respect to the factual information set forth therein absent manifest error. (j) In the event that a Liquidity Purchaser is a Downgraded Purchaser, the related Conduit Purchaser shall have the right to replace such Liquidity Purchaser with a replacement Liquidity Purchaser, which replacement purchaser shall succeed to the rights of such Liquidity Purchaser under this Agreement in respect of its Commitment as a Liquidity Purchaser, and such Liquidity Purchaser shall assign such Commitment and its interest in the Class A-2 Certificates to such replacement Liquidity Purchaser in accordance with the provisions of this Section 8.1; provided, that (A) such Liquidity Purchaser shall not be replaced hereunder with a new investor until such Liquidity Purchaser has been paid in full its Percentage Interest of the Class A-2 Principal Balance and all accrued and unpaid interest thereon by such new investor and all other amounts (including all amounts owing under Sections 2.4 and 2.5) owed to it and to all Participants with respect to such Liquidity Purchaser pursuant to this Agreement, and (ii) if the Liquidity Purchaser to be replaced is an Agent or the Facility Agent, a replacement Agent or Facility Agent, as the case may be, shall have been appointed in accordance with Section 7.9, and the Agent or Facility Agent, as the case may be, to be replaced shall have been paid all amounts owing to it as Agent or Facility Agent, as the case may be, pursuant to this Agreement. For purposes of this subsection, a Liquidity Purchaser shall be a "Downgraded Purchaser" if and so long as the credit rating assigned to its short-term obligations by Moody's or Standard & Poor's on the date on which it became a party to this Agreement shall have been reduced or withdrawn, unless otherwise agreed between such Liquidity Purchaser and the Conduit Purchaser in its Purchaser Group. 8.2 Tax Characterization. It is the intention of the parties hereto that the Class A-2 Certificates be treated for tax purposes as indebtedness. SECTION 9. MISCELLANEOUS 9.1 Amendments and Waivers. This Agreement may not be amended, supplemented or modified nor may any provision hereof be waived except in accordance with the provisions of this Section 9.1. With the written consent of the Required Class A-2 Owners and the Required Class A-2 Purchasers, the Facility Agent, SRPC and SRI may, from time to time, enter into written amendments, supplements, waivers or modifications hereto for the purpose of adding any provisions to this Agreement or changing in any manner the rights of any party hereto or waiving, on such terms and conditions as may be specified in such instrument, any of the requirements of this Agreement; provided, however, that no such amendment, supplement, waiver or modification shall (i) reduce the amount of or extend the maturity of any Class A-2 Certificate or reduce the rate or extend the time of payment of interest thereon, or reduce or alter the timing of any other amount payable to any Class A-2 Purchaser hereunder or under the Pooling and Servicing Agreement, in each case without the consent of the Class A-2 Purchaser affected thereby, (ii) amend, modify or waive any provision of this Section 9.1, or, if such amendment would have a material adverse effect on the Class A-2 Purchasers, the definition of "Class A-2 Invested Amount" or "Class A-2 Principal Balance", or reduce the percentage specified in the definition of Required Class A-2 Owners or Required Class A-2 Purchasers, in each case without the written consent of all Class A-2 Purchasers or (iii) amend, modify or waive any provision of Section 7 of this Agreement or any other provision of this Agreement affecting the Agents or the Facility Agent without the written consent of each Agent adversely affected thereby and the Facility Agent. Any waiver of any provision of this Agreement shall be limited to the provisions specifically set forth therein for the period of time set forth therein and shall not be construed to be a waiver of any other provision of this Agreement. Notwithstanding the foregoing, no amendment to this Agreement which materially and adversely affects a Conduit Purchaser shall become effective unless Standard & Poor's shall have confirmed to such Conduit Purchaser or its administrator that such amendment will not result in a reduction or withdrawal of the ratings assigned by such rating agency to Notes issued by such Conduit Purchaser. Each party hereto agrees that, on a one-time basis following the initial review of the Related Documents by Standard & Poor's on behalf of Class A-2 Purchasers which are Conduit Purchasers, it will at the request of its related Agent enter into or to consent to, as applicable, any amendments or other modifications to the Related Documents, other than those requiring the consent of all Class A-2 Purchasers as provided above in this subsection and other than those which would have an adverse effect on any other Class or Series of Certificates, as shall reasonably be determined by such Agent to be required (i) for the Class A-2 Certificate to be rated AAA by Standard & Poor's or (ii) for any initial Class A-2 Purchaser which is a Conduit Purchaser to obtain or maintain a rating of the Class A-2 Certificate which will permit such Conduit Purchaser's commercial paper notes to maintain at least the rating from Standard & Poor's as in effect immediately prior to such Conduit Purchaser's becoming a Class A-2 Purchaser after giving effect to its initial purchase of the Class A-2 Certificates and to purchases from time to time by such Conduit Purchaser of Additional Class A-2 Invested Amounts as contemplated by this Agreement, without giving effect to any increase in any letter of credit or other enhancement provided to such Conduit Purchaser (other than the liquidity support provided to such Conduit Purchaser by Liquidity Providers). The Facility Agent may cast any vote or give any direction under the Pooling and Servicing Agreement on behalf of the Class A Certificateholders if it has been directed to do so by (i) the Required Class A-2 Purchasers and the Required Class A-2 Owners, (ii) the Class A-1 Purchasers required under the terms of Section 9.1 of the Class A-1 Certificate Purchase Agreement Purchasers, and (iii) the Class B Purchasers required under the terms of Section 9.1 of the Class B Certificate Purchase Agreement. 9.2 Notices. (a) All notices, requests and demands to or upon the respective parties hereto to be effective shall be in writing (including by telecopy), and, unless otherwise expressly provided herein, shall be deemed to have been duly given or made when delivered by hand, or, in the case of mail or telecopy notice, when received, addressed as follows or, with respect to a Class A-2 Purchaser, as set forth in its respective Joinder Supplement or Transfer Supplement, or to such other address as may be hereafter notified by the respective parties hereto: SRPC: SRI Receivables Purchase Co., Inc. 10201 Main Street Houston, Texas 77025 Attention: Treasurer Telephone: (713) 669-2601 Telecopy: (713) 669-2621 SRI: Specialty Retailers, Inc. 10201 Main Street Houston, Texas 77025 Attention: Treasurer Telephone: (713) 669-2601 Telecopy: (713) 669-2621 The Trustee: Bankers Trust (Delaware) 1011 Centre Road, Suite 200 Wilmington, Delaware 19805-1266 Attention: Corporate Trust and Agency Group Telephone: (302) 636-3300 Telefax: (302) 636-3222 Mailing Address: P.O. Box 8795 Wilmington, Delaware 19899-8795 with a copy to: 4 Albany Street - 10th Floor New York, New York 10006 Attention: Corporate Trust and Agency Group Telephone: (212) 250-2500 Telefax: (212) 250-6439 The Facility Credit Suisse First Boston, New York Branch Agent: Eleven Madison Avenue New York, New York 10010 Attention: Asset Finance Department Telephone: (212) 325-9076 Telefax: (212) 325-6677 (b) All payments to be made to an Agent or any Class A-2 Purchaser in a Purchaser Group hereunder shall be made in United States dollars, and, unless otherwise specifically provided herein, shall be made to such Agent for the account of one or more of the Class A-2 Purchasers or for its own account, as the case may be. Unless otherwise directed by an Agent or Class A-2 Purchaser, all payments to it shall be made by federal wire to the account specified in the Joinder Supplement or Transfer Supplement by which it became a party hereto. All payments to be made to the Facility Agent hereunder shall be made in United States dollars, and, unless otherwise directed by the Facility Agent all such payments shall be made by federal wire to The Bank of New York (BONY), ABA #021-000-018, for credit to Credit Suisse First Boston CSFBNY -- Loan Clearing Account #8900329262, reference SRI Receivables Master Trust Series 1999-1, with telephone notice (including federal wire number) to the Asset Finance Department of CSFB (212-325-9070). (c) Any notices permitted or required hereunder to be given by SRPC shall be effective if given on behalf of SRPC by the Servicer. 9.3 No Waiver; Cumulative Remedies. No failure to exercise and no delay in exercising, on the part of any Agent, the Facility Agent or any Class A-2 Purchaser, any right, remedy, power or privilege under any of the Related Documents shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege under any of the Related Documents preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges provided in the Related Documents are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law. 9.4 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of SRPC, SRI, the Transferor, the Servicer, each Agent, the Facility Agent, the Class A-2 Purchasers, any Assignee and their respective successors and assigns, except that SRPC, SRI, the Transferor and the Servicer may not assign or transfer any of their respective rights or obligations under this Agreement except as provided herein and in the Pooling and Servicing Agreement, without (i) the prior written consent of the Required Class A-2 Owners and the Required Class A-2 Purchasers and (ii) the confirmation by Standard & Poor's to each Conduit Purchaser or its administrator that such assignment or transfer will not result in a reduction or withdrawal of the ratings assigned by such rating agency to Notes issued by such Conduit Purchaser. This Agreement is also intended to benefit the Support Parties, Affected Parties, Participants and Indemnities, and their respective successors and assigns, to the extent provided herein. 9.5 Successors to Servicer. (a) In the event that a transfer of servicing occurs under Article VIII or Article X of the Pooling and Servicing Agreement, (i) from and after the effective date of such transfer, the Successor Servicer shall be the successor in all respects to the Servicer and shall be responsible for the performance of all functions to be performed by the Servicer from and after such date, except as provided in the Pooling and Servicing Agreement, and shall be subject to all the responsibilities, duties and liabilities relating thereto placed on the Servicer by the terms and provisions hereof, and all references in this Agreement to the Servicer shall be deemed to refer to the Successor Servicer, and (ii) as of the date of such transfer, the Successor Servicer shall be deemed to have made with respect to itself the representations and warranties made in Section 4.2 (in the case of subsection 4.2(a) with appropriate factual changes); provided, however, that the references to the Servicer contained in Section 5.1 of this Agreement shall be deemed to refer to the Servicer with respect to responsibilities, duties and liabilities arising out of an act or acts, or omission, or an event or events giving rise to such responsibilities, duties and liabilities and occurring during such time that the Servicer was Servicer under this Agreement and shall be deemed to refer to the Successor Servicer with respect to responsibilities, duties and liabilities arising out of an act or acts, or omission, or an event or events giving rise to such responsibilities, duties and liabilities and occurring during such time that the Successor Servicer acts as Servicer under this Agreement; provided, however, to the extent that an obligation to indemnify the Class A-2 Purchasers under Section 2.6 arises as a result of any act or failure to act of any Successor Servicer in the performance of servicing obligations under the Pooling and Servicing Agreement, such indemnification obligation shall be of the Successor Servicer and not its predecessor. Upon the transfer of servicing to a Successor Servicer, such Successor Servicer shall furnish to each Agent copies of its audited annual financial statements for each of the three preceding fiscal years or if the Trustee or any other banking institution becomes the Successor Servicer, such Successor Servicer shall provide, in lieu of the audited financial statements required in the immediately preceding clause, complete and correct copies of the publicly available portions of its Consolidated Reports of Condition and Income as submitted to the FDIC for the two most recent year end periods. (b) In the event that any Person becomes the successor to the Transferor pursuant to Article VII of the Pooling and Servicing Agreement, from and after the effective date of such transfer, such successor to the Transferor shall be the successor in all respects to the Transferor and shall be responsible for the performance of all functions to be performed by the Transferor from and after such date, except as provided in the Pooling and Servicing Agreement, and shall be subject to all the responsibilities, duties and liabilities relating thereto placed on the Transferor by the terms and provisions hereof, and all references in this Agreement to the Transferor shall be deemed to refer to the successor to the Transferor; provided, however, that the references to the Transferor contained in Sections 2.5, 2.6 and 5.1 of this Agreement shall be deemed to refer to SRPC with respect to responsibilities, duties and liabilities arising out of an act or acts, or omission, or an event or events giving rise to such responsibilities, duties and liabilities and occurring during such time that SRPC was Transferor under this Agreement and shall be deemed to refer to the successor to SRPC as Transferor with respect to responsibilities, duties and liabilities arising out of an act or acts, or omission, or an event or events giving rise to such responsibilities, duties and liabilities and occurring during such time that the successor to SRPC acts as Transferor under this Agreement. 9.6 Counterparts. This Agreement may be executed by one or more of the parties to this Agreement on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. 9.7 Severability. Any provisions of this Agreement which are prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provisions in any other jurisdiction. 9.8 Integration. This Agreement and the Class A-2 Fee Letter represent the agreement of each Agent, the Facility Agent, SRPC, SRI, the Transferor, the Servicer and the Class A-2 Purchasers with respect to the subject matter hereof, and there are no promises, undertakings, representations or warranties by any Class A-2 Purchaser, any Agent or the Facility Agent relative to subject matter hereof not expressly set forth or referred to herein or therein. 9.9 Governing Law. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. 9.10 Termination. This Agreement shall remain in full force and effect until the earlier to occur of (a) payment in full of the Class A-2 Principal Balance, all accrued and unpaid Class A-2 Interest, Class A-2 Program Fees and Class A-2 Utilization Fees, all amounts payable by pursuant to Sections 2.3, 2.4, 2.5 or 2.6 hereof and all other amounts payable to the Class A-2 Purchasers, the Agents and the Facility Agent hereunder and the termination of all Commitments and (b) the Series Termination Date; provided, however, that the provisions of Sections 2.4, 2.5, 2.6, 6.1, 6.2, 7.7, 8.2, 9.11, 9.13 and 9.14 shall survive termination of this Agreement and any amounts payable to the Facility Agent, the Agents, Class A-2 Purchasers or any Affected Party thereunder shall remain payable thereto. 9.11 Limited Recourse; No Proceedings. (a) The obligations of SRPC, SRI, the Transferor and the Servicer under this Agreement are several (except as specifically provided herein) and are solely the corporate obligations of SRPC, SRI, the Transferor or the Servicer, as applicable. No recourse shall be had for the payment of any fee or other obligation or claim arising out of or relating to this Agreement or any other agreement, instrument, document or certificate executed and delivered or issued by SRPC, SRI, the Transferor and the Servicer or any officer of any of them in connection therewith, against any stockholder, employee, officer, director or incorporator of SRPC, SRI, the Transferor or the Servicer. With respect to obligations of the Transferor, neither any Agent, the Facility Agent nor any Class A-2 Purchaser shall look to any property or assets of the Transferor, other than to (a) amounts payable to an Agent, the Facility Agent or a Class A-2 Purchaser or to the Transferor under the Receivables Purchase Agreement or the Pooling and Servicing Agreement and (b) any other assets of the Transferor not pledged to third parties or otherwise encumbered in any manner permitted by the Transferor's Certificate of Incorporation. Each Class A-2 Purchaser, the Facility Agent and each Agent hereby agrees that to the extent such funds are insufficient or unavailable to pay any amounts owing to it by the Transferor pursuant to this Agreement, prior to the earlier of the Trust Termination Date or the commencement of a bankruptcy or insolvency proceeding by or against the Transferor, it shall not constitute a claim against the Transferor. Nothing in this paragraph shall limit or otherwise affect the liability of the Servicer with respect to any amounts owing by it hereunder or the right of any Agent, the Facility Agent or any Class A-2 Purchaser to enforce such liability against the Servicer or any of its assets. (b) Each of SRPC, SRI, the Transferor, the Servicer, each Agent, the Facility Agent and each Class A-2 Purchaser hereby agrees that it shall not institute or join against any Conduit Purchaser any bankruptcy, reorganization, arrangement, insolvency or liquidation proceeding, or other proceeding under any federal or state bankruptcy or similar law, for one year and a day after the latest maturing commercial paper note, medium term note or other debt security issued by such Conduit Purchaser (collectively, "Notes") is paid. (c) Notwithstanding any provisions contained in this Agreement to the contrary, no Conduit Purchaser shall pay, or be obligated to pay, any amount pursuant to this Agreement unless (i) such Conduit Purchaser has received funds which may be used to make such payment and which funds are not required to repay its Notes when due and (ii) after giving effect to such payment, either (A) Conduit Purchaser could issue Notes to refinance all its outstanding Notes (assuming such outstanding Notes matured at such time) in accordance with the program documents governing such Conduit Purchaser's Note issuance program or (B) all Notes of such Conduit Purchaser are paid in full. Payments by a Conduit Purchaser hereunder are expressly limited to the amount available therefor in accordance with the terms of such Conduit Purchaser's program documents, and no recourse shall be had against such Conduit Purchaser or any other Person in respect of any deficiency in such amounts. Any amount which a Conduit Purchaser does not pay pursuant to the operation of this subsection shall not constitute a claim (as defined in 101 of the Bankruptcy Code) against or corporate obligation of such Conduit Purchaser for any such insufficiency unless and until such Conduit Purchaser satisfies the provisions of clauses (i) and (ii) above. This subsection shall survive for one year and a day after the latest maturing Note issued by such Conduit Purchaser is paid 9.12 Survival of Representations and Warranties. All representations and warranties made hereunder and in any document, certificate or statement delivered pursuant hereto or in connection herewith shall survive the execution and delivery of this Agreement, the purchase of the Class A-2 Certificates hereunder and the termination of this Agreement. 9.13 Submission to Jurisdiction; Waivers. EACH OF SRPC, SRI, THE TRANSFEROR, THE SERVICER, THE FACILITY AGENT, EACH AGENT AND EACH CLASS A-2 PURCHASER HEREBY IRREVOCABLY AND UNCONDITIONALLY: (A) SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT TO WHICH IT IS A PARTY, OR FOR RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT IN RESPECT THEREOF, TO THE NON-EXCLUSIVE GENERAL JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND APPELLATE COURTS FROM ANY THEREOF; (B) CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE BROUGHT IN SUCH COURTS AND WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT OR THAT SUCH ACTION OR PROCEEDING WAS BROUGHT IN AN INCONVENIENT COURT AND AGREES NOT TO PLEAD OR CLAIM THE SAME; (C) AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR PROCEEDING MAY BE EFFECTED BY MAILING A COPY THEREOF BY REGISTERED OR CERTIFIED MAIL (OR ANY SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE PREPAID, TO SUCH PARTY AT ITS ADDRESS SET FORTH IN SECTION 9.2 OR AT SUCH OTHER ADDRESS OF WHICH THE AGENT SHALL HAVE BEEN NOTIFIED PURSUANT THERETO; AND (D) AGREES THAT NOTHING HEREIN SHALL AFFECT THE RIGHT TO EFFECT SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT TO SUE IN ANY OTHER JURISDICTION. 9.14 WAIVERS OF JURY TRIAL. EACH OF SRPC, SRI, THE TRANSFEROR, THE SERVICER, THE FACILITY AGENT, THE AGENTS AND THE CLASS A-2 PURCHASERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING DIRECTLY OR INDIRECTLY TO THIS AGREEMENT OR ANY OTHER DOCUMENT OR INSTRUMENT RELATED HERETO AND FOR ANY COUNTERCLAIM THEREIN. IN WITNESS WHEREOF, the parties hereto have caused this Certificate Purchase Agreement to be duly executed by their respective officers as of the day and year first above written. SRI RECEIVABLES PURCHASE CO., INC., individually and as Transferor By: /s/Charles M. Sledge Name: Charles M. Sledge Title: Senior Vice President SPECIALTY RETAILERS, INC., individually and as Servicer By/s/ James A. Marcum__________________ Name: James A. Marcum Title: Vice Chairman, CFO CREDIT SUISSE FIRST BOSTON, NEW YORK BRANCH, as Facility Agent By: /s/ Alberto Zonca__________________ Name: Alberto Zonca Title: Vice President By: /s/ Matthew J. Monaco______________ Name: Matthew J. Monaco Title: Associate EXHIBIT A FORM OF INVESTMENT LETTER [Date] SRI Receivables Purchase Co., Inc. 10201 Main Street Houston, Texas 77025 Attention: Treasurer Re SRI Receivables Master Trust Class A-2 Variable Funding Certificates, Series 1999-1 Ladies and Gentlemen: This letter (the "Investment Letter") is delivered by the undersigned (the "Purchaser") pursuant to subsection 8.1(a) of the Class A-2 Certificate Purchase Agreement dated as of November 9, 1999 (as in effect, the "Certificate Purchase Agreement"), among SRI Receivables Purchase Co., Inc., as Transferor, Specialty Retailers, Inc., as Servicer, the Class A-2 Purchasers and Agents parties thereto and Credit Suisse First Boston, New York Branch, as Agent and Facility Agent. Capitalized terms used herein without definition shall have the meanings set forth in the Certificate Purchase Agreement. The Purchaser represents to and agrees with the Transferor as follows: (a) The Purchaser is authorized [to enter into the Certificate Purchase Agreement and to perform its obligations thereunder and to consummate the transactions contemplated thereby] [to purchase a participation in obligations under the Certificate Purchase Agreement]. (b) The Purchaser has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of its investment in the Class A-2 Certificates and is able to bear the economic risk of such investment. The Purchaser has been afforded the opportunity to ask such questions as it deems necessary to make an investment decision, and has received all information it has requested in connection with making such investment decision. The Purchaser has, independently and without reliance upon any Agent, the Facility Agent or any other Class A-2 Purchaser, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, operations, property, financial and other condition and creditworthiness of the Trust, SRPC, SRI, Stage, the Transferor and the Servicer and made its own decision to purchase its interest in the Class A-2 Certificates, and will, independently and without reliance upon any Agent, the Facility Agent or any other Class A-2 Purchaser, and based on such documents and information as it shall deem appropriate at the time, continue to make its own analysis, appraisals and decisions in taking or not taking action under the Certificate Purchase Agreement, and to make such investigation as it deems necessary to inform itself as to the business, operations, property, financial and other condition and creditworthiness of the Trust, SRPC, SRI, Stage, Granite, the Transferor and the Servicer. (c) The Purchaser is an "accredited investor", as defined in Rule 501, promulgated by the Securities and Exchange Commission (the "Commission") under the Securities Act of 1933, as amended (the "Securities Act"), or is a sophisticated institutional investor. The Purchaser understands that the offering and sale of the Class A-2 Certificates has not been and will not be registered under the Securities Act and has not and will not be registered or qualified under any applicable "Blue Sky" law, and that the offering and sale of the Class A-2 Certificate has not been reviewed by, passed on or submitted to any federal or state agency or commission, securities exchange or other regulatory body. (d) The Purchaser is acquiring an interest in Class A-2 Certificates without a view to any distribution, resale or other transfer thereof except, with respect to any Class A-2 Purchaser Interest or any interest or participation therein, as contemplated in the following sentence. The Purchaser will not resell or otherwise transfer any interest or participation in the Class A-2 Purchaser Interest, except in accordance with Section 8.1 of the Certificate Purchase Agreement and (i) in a transaction exempt from the registration requirements of the Securities Act of 1933, as amended, and applicable state securities or "blue sky" laws; (ii) to the Transferor or any affiliate of the Transferor; or (iii) to a person who the Purchaser reasonably believes is a qualified institutional buyer (within the meaning thereof in Rule 144A under the Securities Act) that is aware that the resale or other transfer is being made in reliance upon Rule 144A. In connection therewith, the Purchaser hereby agrees that it will not resell or otherwise transfer the Class A-2 Certificates or any interest therein unless the purchaser thereof provides to the addressee hereof a letter substantially in the form hereof. (e) This Investment Letter has been duly executed and delivered and constitutes the legal, valid and binding obligation of the Purchaser, enforceable against the Purchaser in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws or equitable principles affecting the enforcement of creditors' rights generally and general principles of equity. Very truly yours, [NAME OF PURCHASER] By:___________________________ Name: Title: EXHIBIT B FORM OF JOINDER SUPPLEMENT JOINDER SUPPLEMENT, dated as of the date set forth in Item 1 of Schedule I hereto, among SRI Receivables Purchase Co., Inc. (the "Transferor"), Specialty Retailers, Inc., as Servicer (the "Servicer"), the Class A-2 Purchaser set forth in Item 2 of Schedule I hereto (the "Additional Class A-2 Purchaser"), the Agent set forth in Item 3 of Schedule I hereto for the Class A-2 Purchasers in the Purchaser Group set forth in Item 4 of Schedule I hereto (in such capacity, the "Agent"), and Credit Suisse First Boston, New York Branch, as Facility Agent for the Class A-2 Purchasers under, and as defined in, the Certificate Purchase Agreement described below (in such capacity, the "Facility Agent"). W I T N E S S E T H WHEREAS, this Supplement is being executed and delivered in accordance with subsection 2.2(d) of the Class A-2 Certificate Purchase Agreement, dated as of November 9, 1999, among SRI Receivables Purchase Co., Inc., as Transferor, Specialty Retailers, Inc., as Servicer, the Class A-2 Purchasers and Agents parties thereto and Credit Suisse First Boston, New York Branch, as Facility Agent (as from time to time amended, supplemented or otherwise modified in accordance with the terms thereof, the "Certificate Purchase Agreement"; unless otherwise defined herein, terms defined in the Certificate Purchase Agreement are used herein as therein defined); and WHEREAS, the Additional Class A-2 Purchaser (if it is not already a Class A-2 Purchaser party to the Certificate Purchase Agreement) wishes to become a Class A-2 Purchaser party to the Certificate Purchase Agreement and the Agent (if it is not already the Agent party to the Certificate Purchase Agreement) wishes to become an Agent party to the Certificate Purchase Agreement; NOW, THEREFORE, the parties hereto hereby agree as follows: (a) Upon receipt by the Agent of five counterparts of this Supplement, to each of which is attached a fully completed Schedule I and Schedule II, each of which has been executed by the Additional Class A-2 Purchaser, the Agent, the Transferor and the Facility Agent, the Agent will transmit to the Servicer, the Transferor, the Trustee, the Facility Agent and the Additional Class A-2 Purchaser a Joinder Effective Notice, substantially in the form of Schedule III to this Supplement (a "Joinder Effective Notice"). Such Joinder Effective Notice shall be executed by the Agent and shall set forth, inter alia, the date on which the transfer effected by this Supplement shall become effective (the "Joinder Effective Date"). From and after the Joinder Effective Date, the Additional Class A-2 Purchaser shall be a Class A-2 Purchaser party to the Certificate Purchase Agreement for all purposes thereof and shall be a Conduit Purchaser, Liquidity Purchaser or Committed Purchaser, as specified on such Schedule II, having an initial Maximum Purchase Amount or Commitment, as applicable, as set forth in such Schedule II. The Additional Class A-2 Purchaser shall be a member of the Purchaser Group set forth in Item 4 of Schedule I hereto. If the Additional Class A-2 Purchaser is a Conduit Purchaser, then (i) such Schedule II identifies its related Liquidity Purchasers and (ii) each such Liquidity Purchaser has executed and delivered (or is concurrently herewith executing and delivering) its own Joinder Supplement with respect to such Additional Class A-2 Purchaser. If the Additional Class A-2 Purchaser is a Liquidity Purchaser, such Schedule II identifies its related Conduit Purchaser. From and after the Joinder Effective Date, the Agent, if it is not already an "Agent" under the Certificate Purchase Agreement, shall be an Agent thereunder for the Purchaser Group set forth in Item 4 of Schedule I hereto. (b) Concurrently with the execution and delivery hereof, the Additional Class A-2 Purchaser will deliver to the Transferor and the Trustee an executed Investment Letter in the form of Exhibit A to the Certificate Purchase Agreement. (c) Each of the parties to this Supplement agrees and acknowledges that at any time and from time to time upon the written request of any other party, it will execute and deliver such further documents and do such further acts and things as such other party may reasonably request in order to effect the purposes of this Supplement. (d) By executing and delivering this Supplement, the Additional Class A-2 Purchaser confirms to and agrees with each Agent, the Facility Agent and each Class A-2 Purchaser as follows: (i) neither the Agent, the Facility Agent nor any other Class A-2 Purchaser makes any representation or warranty or assumes any responsibility with respect to any statements, warranties or representations made in or in connection with the Certificate Purchase Agreement (other then representations or warranties made by such respective parties) or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Certificate Purchase Agreement or any other instrument or document furnished pursuant thereto, or with respect to the Trust, the financial condition of SRPC, SRI, Granite, Stage, the Servicer, the Transferor or the Trustee, or the performance or observance by SRPC, SRI, Granite, Stage, the Servicer, the Transferor or the Trustee of any of their respective obligations under the Certificate Purchase Agreement or the Pooling and Servicing Agreement or any other instrument or document furnished pursuant hereto; (ii) the Additional Class A-2 Purchaser confirms that it has received a copy of such documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Supplement; (iii) the Additional Class A-2 Purchaser will, independently and without reliance upon any Agent, the Facility Agent or any other Class A-2 Purchaser and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Certificate Purchase Agreement; (iv) each Purchasing Class A-2 Purchaser appoints and authorizes the Agent and the Facility Agent to take such action as agent on its behalf and to exercise such powers under the Certificate Purchase Agreement and the Pooling and Servicing Agreement as are delegated to such Agent or the Facility Agent, as applicable, by the terms thereof, together with such powers as are reasonably incidental thereto, all in accordance with Section 7 of the Certificate Purchase Agreement; and (v) the Additional Class A-2 Purchaser agrees (for the benefit of each Agent, the Facility Agent, each other Class A-2 Purchaser, the Servicer and the Transferor) that (A) if it is a Conduit Purchaser, it will perform in accordance with their terms all of the obligations which by the terms of the Certificate Purchase Agreement are required to be performed by it as a Class A-2 Purchaser which is a Conduit Purchaser, (B) if it is a Committed Purchaser, it will perform in accordance with their terms all of the obligations which by the terms of the Certificate Purchase Agreement are required to be performed by it as a Class A-2 Purchaser which is a Committed Purchaser, and (C) if it is a Liquidity Purchaser, it will perform in accordance with their terms all of the obligations which by the terms of the Certificate Purchase Agreement are required to be performed by it as a Class A-2 Purchaser which is a Liquidity Purchaser. By executing and delivering this Supplement, the Agent, if it not already an "Agent" under the Certificate Purchase Agreement, agrees (for the benefit of each other Agent, the Facility Agent, each Class A-2 Purchaser, the Servicer and the Transferor) that it will perform in accordance with their terms all of the obligations which by the terms of the Certificate Purchase Agreement are required to be performed by it as an Agent for its Purchaser Group. (e) Schedule II hereto sets forth the Maximum Purchase Amount or the Commitment, as applicable, the Commitment Expiration Date, if applicable, and the initial Investing Office of the Additional Class A-2 Purchaser, as well as administrative information with respect to the Additional Class A-2 Purchaser, including the address of Additional Class A-2 Purchaser for purposes of notices, requests and demands pursuant to subsection 9.2(a) of the Certificate Purchase Agreement and the identification of the account for certain payments to the Additional Class A-2 Purchaser for purposes of subsection 9.2(b) of the Certificate Purchase Agreement. (f) Schedule II hereto also sets forth the address of the Agent for purposes of notices, requests and demands pursuant to subsection 9.2(a) of the Certificate Purchase Agreement and the identification of the account for certain payments to the Agent for purposes of subsection 9.2(b) of the Certificate Purchase Agreement. (g) THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. IN WITNESS WHEREOF, the parties hereto have caused this Supplement to be executed by their respective duly authorized officers on Schedule I hereto as of the date set forth in Item 1 of Schedule I hereto. SCHEDULE I TO JOINDER SUPPLEMENT Completion of Information And Signatures For Joinder Supplement Re: Class A-2 Certificate Purchase Agreement, dated as of November 9, 1999, among SRI Receivables Purchase Co., Inc., as Transferor, Specialty Retailers, Inc., as Servicer, the Class A-2 Purchasers and Agent to party thereto and Credit Suisse First Boston, New York Branch, as Agent and as Facility Agent. Item 1: Date of Joinder Supplement: Item 2: Additional Class A-2 Purchaser: Item 3: Agent: Item 4.: Purchaser Group: Item 5: Signatures of Parties to Agreement: as Additional Class A-2 Purchaser By: Name: Title: as Agent By: Name: Title: SRI RECEIVABLES PURCHASE CO., INC. as Transferor By: Name: Title: ACCEPTED BY: CREDIT SUISSE FIRST BOSTON, NEW YORK BRANCH, as Facility Agent By: Name: Title: By: Name: Title: SCHEDULE II TO JOINDER SUPPLEMENT List of Percentages, Maximum Purchase Amount or Commitment, Commitment Expiration Date, Addresses For Notices and Payment Instructions and Investing Offices [NAME OF CLASS A-2 PURCHASER], as Class A-2 Purchaser Type of Purchaser: [Conduit/Liquidity/Committed Purchaser] For Conduit Purchaser: (if applicable) Initial Purchaser Percentage: _______% Maximum Purchase Amount: $____________ Related Liquidity Purchasers, Commitment Expiration Dates and Initial Liquidity Percentages: ______________________ ____________, ____ _______% ______________________ ____________, ____ _______% ______________________ ____________, ____ _______% For Liquidity Purchaser: (if applicable) Initial Liquidity Percentage: _______% Commitment: $____________ Commitment Expiration Date: ____________, ____ Related Conduit Purchaser: _______________________ For Committed Purchaser: (if applicable) Initial Purchaser Percentage: _______% Commitment: $_______ Commitment Expiration Date: ________, ____ Address for Notices: Payment Instructions: Investing Office: [NAME OF AGENT], as Agent Address for Notices: Payment Instructions: SCHEDULE III TO JOINDER SUPPLEMENT Form of Joinder Effective Notice To: [Name and address of Transferor, Servicer, Trustee, Facility Agent and Additional Class A-2 Purchaser] The undersigned, as Agent under the Class A-2 Certificate Purchase Agreement, dated as of November 9, 1999, among SRI Receivables Purchase Co., Inc., as Transferor, Specialty Retailers, Inc., as Servicer, the Class A-2 Purchasers and Agents parties thereto and Credit Suisse First Boston, New York Branch, as Facility Agent thereunder, acknowledges receipt of five executed counterparts of a completed Joinder Supplement. [Note: attach copies of Schedules I and II from such Agreement.] Terms defined in such Supplement are used herein as therein defined. Pursuant to such Supplement, you are advised that the Joinder Effective Date will be _____________, 199_. Very truly yours, [NAME OF AGENT] By:_______________________ Name: Title: EXHIBIT C FORM OF TRANSFER SUPPLEMENT TRANSFER SUPPLEMENT, dated as of the date set forth in Item 1 of Schedule I hereto, among the Transferor Class A-2 Purchaser set forth in Item 2 of Schedule I hereto (the "Transferor Class A-2 Purchaser"), the Purchasing Class A-2 Purchaser set forth in Item 3 of Schedule I hereto (the "Purchasing Class A-2 Purchaser"), the Agent set forth in Item 4 of Schedule I hereto for the Class A-2 Purchasers in the Purchaser Group set forth in Item 5 of Schedule I hereto (in such capacity, the "Agent"), and Credit Suisse First Boston, New York Branch, as Facility Agent for the Class A-2 Purchasers under, and as defined in, the Certificate Purchase Agreement described below (in such capacity, the "Facility Agent"). W I T N E S S E T H: WHEREAS, this Supplement is being executed and delivered in accordance with subsection 8.1(e) of the Class A-2 Certificate Purchase Agreement, dated as of November 9, 1999, among SRI Receivables Purchase Co., Inc., as Transferor, Specialty Retailers, Inc., as Servicer, the Class A-2 Purchasers and Agents parties thereto and Credit Suisse First Boston, New York Branch, as Facility Agent (as from time to time amended, supplemented or otherwise modified in accordance with the terms thereof, the "Certificate Purchase Agreement"; unless otherwise defined herein, terms defined in the Certificate Purchase Agreement are used herein as therein defined); WHEREAS, the Purchasing Class A-2 Purchaser (if it is not already a Class A-2 Purchaser party to the Certificate Purchase Agreement) wishes to become a Class A-2 Purchaser party to the Certificate Purchase Agreement and the Purchasing Class A-2 Purchaser wishes to acquire and assume from the Transferor Class A-2 Purchaser, certain of the rights, obligations and commitments under the Certificate Purchase Agreement; and WHEREAS, the Transferor Class A-2 Purchaser wishes to sell and assign to the Purchasing Class A-2 Purchaser, certain of its rights, obligations and commitments under the Certificate Purchase Agreement. NOW, THEREFORE, the parties hereto hereby agree as follows: (a) Upon receipt by the Agent of five counterparts of this Supplement, to each of which is attached a fully completed Schedule I and Schedule II, each of which has been executed by the Transferor Class A-2 Purchaser, the Purchasing Class A-2 Purchaser and the Agent, the Agent will transmit to the Servicer, the Transferor, the Trustee, the Transferor Class A-2 Purchaser and the Purchasing Class A-2 Purchaser a Transfer Effective Notice, substantially in the form of Schedule III to this Supplement (a "Transfer Effective Notice"). Such Transfer Effective Notice shall be executed by the Agent and shall set forth, inter alia, the date on which the transfer effected by this Supplement shall become effective (the "Transfer Effective Date"). From and after the Transfer Effective Date the Purchasing Class A-2 Purchaser shall be a Class A-2 Purchaser party to the Certificate Purchase Agreement for all purposes thereof as a Conduit Purchaser, Liquidity Purchaser or Committed Purchaser, as applicable, as specified on Schedule II to this Supplement, and shall be a member of the Purchaser Group set forth in Item 5 of Schedule I hereto. (b) At or before 12:00 Noon, local time of the Transferor Class A-2 Purchaser, on the Transfer Effective Date, the Purchasing Class A-2 Purchaser shall pay to the Transferor Class A-2 Purchaser, in immediately available funds, an amount equal to the purchase price, as agreed between the Transferor Class A-2 Purchaser and such Purchasing Class A-2 Purchaser (the "Purchase Price"), of the portion set forth on Schedule II hereto being purchased by such Purchasing Class A-2 Purchaser of the outstanding Class A-2 Invested Amount under the Class A-2 Certificate owned by the Transferor Class A-2 Purchaser (such Purchasing Class A-2 Purchaser's "Purchase Percentage") and other amounts owing to the Transferor Class A-2 Purchaser under the Certificate Purchase Agreement or otherwise in respect of the Class A-2 Certificates. Effective upon receipt by the Transferor Class A-2 Purchaser of the Purchase Price from the Purchasing Class A-2 Purchaser, the Transferor Class A-2 Purchaser hereby irrevocably sells, assigns and transfers to the Purchasing Class A-2 Purchaser, without recourse, representation or warranty, and the Purchasing Class A-2 Purchaser hereby irrevocably purchases, takes and assumes from the Transferor Class A-2 Purchaser, the Purchasing Class A-2 Purchaser's Purchase Percentage of (i) the presently outstanding Class A-2 Invested Amount under the Class A-2 Certificates owned by the Transferor Class A-2 Purchaser and other amounts owing to the Transferor Class A-2 Purchaser in respect of the Class A-2 Certificates, together with all instruments, documents and collateral security pertaining thereto, and (ii) the Purchasing Class A-2 Purchaser's Purchase Percentage of (A) if the Transferor Class A-2 Purchaser is a Conduit Purchaser, the Purchaser Percentage and the Maximum Purchaser Amount of the Transferor Class A-2 Purchaser and the other rights and duties of the Transferor Class A-2 Purchaser under the Certificate Purchase Agreement, (B) if the Transferor Class A-2 Purchaser is a Committed Purchaser, the Purchaser Percentage and the Commitment of the Transferor Class A-2 Purchaser and other rights, duties and obligations of the Transferor Class A-2 Purchaser under the Certificate Purchase Agreement, or (C) if the Transferor Class A-2 Purchaser is a Liquidity Purchaser, the Liquidity Percentage and the Commitment of the Transferor Class A-2 Purchaser and other rights, duties and obligations of the Transferor Class A-2 Purchaser under the Certificate Purchase Agreement. This Supplement is intended by the parties hereto to effect a purchase by the Purchasing Class A-2 Purchaser and sale by the Transferor Class A-2 Purchaser of interests in the Class A-2 Certificates, and it is not to be construed as a loan or a commitment to make a loan by the Purchasing Class A-2 Purchaser to the Transferor Class A-2 Purchaser. The Transferor Class A-2 Purchaser hereby confirms that the amount of the Class A-2 Invested Amount is $___________ and its Percentage Interest thereof is ___%, which equals $___________ as of _________, ___. Upon and after the Transfer Effective Date (until further modified in accordance with the Certificate Purchase Agreement), the Purchaser Percentage or Liquidity Percentage, as applicable, of the Transferor Class A-2 Purchaser and the Purchasing Class A-2 Purchaser, the Maximum Purchaser Amount or Commitment, as applicable, of the Transferor Class A-2 Purchaser and the Purchasing Class A-2 Purchaser and the Percentage Interest of the Transferor Class A-2 Purchaser and the Purchasing Class A-2 Purchaser shall be as set forth in Schedule II to this Supplement. (c) The Transferor Class A-2 Purchaser has made arrangements with the Purchasing Class A-2 Purchaser with respect to (i) the portion, if any, to be paid, and the date or dates for payment, by the Transferor Class A-2 Purchaser to the Purchasing Class A-2 Purchaser of any fees heretofore received by the Transferor Class A-2 Purchaser pursuant to the Certificate Purchase Agreement prior to the Transfer Effective Date and (ii) the portion, if any, to be paid, and the date or dates for payment, by the Purchasing Class A-2 Purchaser to the Transferor Class A-2 Purchaser of fees or interest received by the Purchasing Class A-2 Purchaser pursuant to the Certificate Purchase Agreement or otherwise in respect of the Class A-2 Certificates from and after the Transfer Effective Date. (d) (i) All principal payments that would otherwise be payable from and after the Transfer Effective Date to or for the account of the Transferor Class A-2 Purchaser in respect of the Class A-2 Certificates shall, instead, be payable to or for the account of the Transferor Class A-2 Purchaser and the Purchasing Class A-2 Purchaser, as the case may be, in accordance with their respective interests as reflected in this Supplement. (ii) All interest, fees and other amounts that would otherwise accrue for the account of the Transferor Class A-2 Purchaser from and after the Transfer Effective Date pursuant to the Certificate Purchase Agreement or in respect of the Class A-2 Certificates shall, instead, accrue for the account of, and be payable to or for the account of, the Transferor Class A-2 Purchaser and the Purchasing Class A-2 Purchaser, as the case may be, in accordance with their respective interests as reflected in this Supplement. In the event that any amount of interest, fees or other amounts accruing prior to the Transfer Effective Date was included in the Purchase Price paid by the Purchasing Class A-2 Purchaser, the Transferor Class A-2 Purchaser and the Purchasing Class A-2 Purchaser will make appropriate arrangements for payment by the Transferor Class A-2 Purchaser to the Purchasing Class A-2 Purchaser of such amount upon receipt thereof from the Agent. (e) Concurrently with the execution and delivery hereof, the Purchasing Class A-2 Purchaser will deliver to Agent, the Transferor and the Trustee an executed Investment Letter in the form of Exhibit A to the Certificate Purchase Agreement and the forms, if any, required by subsection 2.5(c) of the Certificate Purchase Agreement. (f) Each of the parties to this Supplement agrees and acknowledges that (i) at any time and from time to time upon the written request of any other party, it will execute and deliver such further documents and do such further acts and things as such other party may reasonably request in order to effect the purposes of this Supplement, and (ii) the Agent shall apply each payment made to it under the Certificate Purchase Agreement, whether in its individual capacity or as Agent, in accordance with the provisions of the Certificate Purchase Agreement, as appropriate. (g) By executing and delivering this Supplement, the Transferor Class A-2 Purchaser and the Purchasing Class A-2 Purchaser confirm to and agree with each other, the Facility Agent, each Agent and each Class A-2 Purchaser as follows: (i) other than the representation and warranty that it is the legal and beneficial owner of the interest being assigned hereby free and clear of any adverse claim, the Transferor Class A-2 Purchaser makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Certificate Purchase Agreement or the Pooling and Servicing Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Certificate Purchase Agreement or any other instrument or document furnished pursuant thereto; (ii) the Transferor Class A-2 Purchaser makes no representation or warranty and assumes no responsibility with respect to the Trust, the financial condition of SRPC, SRI, Granite, Stage, the Servicer, the Transferor or the Trustee, or the performance or observance by SRPC, SRI, Granite, Stage, the Servicer, the Transferor or the Trustee of any of their respective obligations under the Certificate Purchase Agreement, the Pooling and Servicing Agreement or any other instrument or document furnished pursuant hereto; (iii) each Purchasing Class A-2 Purchaser confirms that it has received a copy of such documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Supplement; (iv) each Purchasing Class A-2 Purchaser will, independently and without reliance upon the Facility Agent, any Agent, the Transferor Class A-2 Purchaser or any other Class A-2 Purchaser and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Certificate Purchase Agreement or the Pooling and Servicing Agreement; (v) each Purchasing Class A-2 Purchaser appoints and authorizes the Agent and the Facility Agent to take such action as agent on its behalf and to exercise such powers under the Certificate Purchase Agreement and the Pooling and Servicing Agreement as are delegated to the Agent or the Facility Agent, as the case may be, by the terms thereof, together with such powers as are reasonably incidental thereto, all in accordance with Section 7 of the Certificate Purchase Agreement; and (vi) each Purchasing Class A-2 Purchaser agrees (for the benefit of the Transferor Class A-2 Purchaser, each Agent, the Facility Agent, each Class A-2 Purchaser, the Servicer and the Transferor) that (A) if it is a Conduit Purchaser, it will perform in accordance with their terms all of the obligations which by the terms of the Certificate Purchase Agreement are required to be performed by it as a Class A-2 Purchaser which is a Conduit Purchaser, (B) if it is a Committed Purchaser, it will perform in accordance with their terms all of the obligations which by the terms of the Certificate Purchase Agreement are required to be performed by it as a Class A-2 Purchaser which is a Committed Purchaser, and (C) if it is a Liquidity Purchaser, it will perform in accordance with their terms all of the obligations which by the terms of the Certificate Purchase Agreement are required to be performed by it as a Class A-2 Purchaser which is a Liquidity Purchaser. (h) Schedule II hereto sets forth the revised Maximum Purchase Amount or the revised Commitment, as applicable, and the Commitment Expiration Date, if applicable, of the Transferor Class A-2 Purchaser, as well as administrative information with respect to the Transferor Class A-2 Purchaser, including the address of Transferor Class A-2 Purchaser for purposes of notices, requests and demands pursuant to subsection 9.2(a) of the Certificate Purchase Agreement and the identification of the account for certain payments to the Transferor Class A-2 Purchaser for purposes of subsection 9.2(b) of the Certificate Purchase Agreement. Schedule II hereto also sets forth the Maximum Purchase Amount or the Commitment, as applicable, the Commitment Expiration Date, if applicable, and the initial Investing Office of the Purchasing Class A-2 Purchaser, as well as administrative information with respect to the Purchasing Class A-2 Purchaser, including the address of Purchasing Class A-2 Purchaser for purposes of notices, requests and demands pursuant to subsection 9.2(a) of the Certificate Purchase Agreement and the identification of the account for certain payments to the Purchasing Class A-2 Purchaser for purposes of subsection 9.2(b) of the Certificate Purchase Agreement. (i) THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. IN WITNESS WHEREOF, the parties hereto have caused this Supplement to be executed by their respective duly authorized officers on Schedule I hereto as of the date set forth in Item 1 of Schedule I hereto. SCHEDULE I TO TRANSFER SUPPLEMENT Completion of Information and Signatures for Transfer Supplement Re: Class A-2 Certificate Purchase Agreement, dated as of November 9, 1999, among SRI Receivables Purchase Co., Inc., as Transferor, Specialty Retailers, Inc., as Servicer, the Class A-2 Purchasers and Agents party thereto and Credit Suisse First Boston, New York Branch, as Facility Agent. Item 1: Date of Transfer Supplement: Item 2: Transferor Class A-2 Purchaser: Item 3: Purchasing Class A-2 Purchaser: Item 4: Agent: Item 5: Purchaser Group: Item 6: Signatures of Parties to Agreement: as Transferor Class A-2 Purchaser By: Name: Title: as Purchasing Class A-2 Purchaser By: Name: Title: CONSENTED TO AND ACCEPTED BY: CREDIT SUISSE FIRST BOSTON, NEW YORK BRANCH, as Facility Agent By: Name: Title: By: Name: Title: SCHEDULE II TO TRANSFER SUPPLEMENT List of Percentages, Maximum Purchase Amount or Commitment, Commitment Expiration Date, Addresses For Notices and Payment Instructions and Investing Offices [NAME OF TRANSFEROR CLASS A-2 PURCHASER] Type of Purchaser: [Conduit/Liquidity/Committed Purchaser] For Conduit Purchaser: (if applicable) Maximum Purchase Amount Prior to Sale: $____________ Maximum Purchase Amount Sold: $____________ Maximum Purchase Amount Retained: $____________ Purchaser Percentage Prior to Sale: _______% Purchaser Percentage Sold: _______% Purchaser Percentage Retained: _______% Related Liquidity Purchasers, Commitment Expiration Dates and Liquidity Percentages: ______________________ ____________, ____ _______% ______________________ ____________, ____ _______% ______________________ ____________, ____ _______% For Liquidity Purchaser: (if applicable) Commitment Prior to Sale: $____________ Commitment Sold: $____________ Commitment Retained: $____________ Liquidity Percentage Prior to Sale: _______% Liquidity Percentage Sold: _______% Liquidity Percentage Retained: _______% Commitment Expiration Date: ________, ____ Related Conduit Purchaser: _______________________ For Committed Purchaser: (if applicable) Commitment Prior to Sale: $____________ Commitment Sold: $____________ Commitment Retained: $____________ Purchaser Percentage Prior to Sale: _______% Purchaser Percentage Sold: _______% Purchaser Percentage Retained: _______% Commitment Expiration Date: ____________, ____ [NAME OF PURCHASING CLASS A-2 PURCHASER] Type of Purchaser: [Conduit/Liquidity/Committed Purchaser] For Conduit Purchaser: (if applicable) Maximum Purchase Amount Prior to Sale: $____________ Maximum Purchase Amount Purchased: $____________ Maximum Purchase Amount After Sale: $____________ Purchaser Percentage Prior to Sale: _______% Purchaser Percentage Purchased: _______% Purchaser Percentage After Sale: _______% Related Liquidity Purchasers, Commitment Expiration Dates and Liquidity Percentages: ______________________ ____________, ____ _______% ______________________ ____________, ____ _______% ______________________ ____________, ____ _______% For Liquidity Purchaser: (if applicable) Commitment Prior to Sale: $____________ Commitment Purchased: $____________ Commitment After Sale: $____________ Liquidity Percentage Prior to Sale: _______% Liquidity Percentage Purchased: _______% Liquidity Percentage After Sale: _______% Commitment Expiration Date: ____________, ____ Related Conduit Purchaser: _______________________ For Committed Purchaser: (if applicable) Commitment Prior to Sale: $____________ Commitment Purchased: $____________ Commitment After Sale: $____________ Purchaser Percentage Prior to Sale: _______% Purchaser Percentage Purchased: _______% Purchaser Percentage After Sale: _______% Commitment Expiration Date: ____________, ____ Address for Notices: Payment Instructions: Investing Office: SCHEDULE III TO TRANSFER SUPPLEMENT Form of Transfer Effective Notice To: [Name and address of Transferor, Servicer, Trustee, Facility Agent, Transferor Class A-2 Purchaser and Purchasing Class A-2 Purchaser] The undersigned, as Agent under the Class A-2 Certificate Purchase Agreement, dated as of November 9, 1999, among SRI Receivables Purchase Co., Inc., as Transferor, Specialty Retailers, Inc., as Servicer, the Class A-2 Purchasers and Agents parties thereto and Credit Suisse First Boston, New York Branch, as Facility Agent thereunder, acknowledges receipt of five executed counterparts of a completed Transfer Supplement. [Note: attach copies of Schedules I and II from such Agreement.] Terms defined in such Supplement are used herein as therein defined. Pursuant to such Supplement, you are advised that the Transfer Effective Date will be _____________, 199_. Very truly yours, [NAME OF AGENT] By:_______________________ Name: Title: ANNEX 1 SUPPLEMENTAL DEFINITIONS "Additional Transferred Asset" means any Additional Class A-2 Invested Amounts (as defined in the Pooling and Servicing Agreement) acquired in respect of the Class A-2 Certificate after the Closing Date. "Asset Transfer Agreement" means the Class A-2 Certificate Purchase Agreement to which this list of supplemental definitions is annexed. "Class A-2 Certificate" means the SRI Receivables Master Trust Class A-2 Certificate, Series 1999-1 acquired pursuant to the Asset Transfer Agreement. "Collateral" means the Class A-2 Certificate. "Defaulted Asset" means, as of any date of determination, the combined amounts by which any circumstances or events, other than previous principal repayments or distributions of principal on or in respect of the Transferred Assets and Additional Transferred Assets actually received by Eiffel Funding LLC and applied to the reduction of the Transferee Investment, have reduced the stated amount of such repayments or distributions to which the holder of the Transferred Assets and Additional Transferred Assets would be otherwise entitled in accordance with the agreements creating and governing the Transferred Assets and Additional Transferred Assets. "Net Aggregate Losses" means, as of any date of determination, the principal amount of the Transferred Assets and any Additional Transferred Assets which was a Defaulted Asset as of such date minus the amount of recoveries with respect to such Defaulted Asset as of such date. "Outstanding Balance" means as of any date of determination, the Transferee Investment minus, to the extent not already distributed to Eiffel Funding LLC, any accrued interest that was included in the purchase price for the Transferred Asset and Additional Transferred Assets. "Pooling and Servicing Agreement" shall have the meaning set forth in the Asset Transfer Agreement. "Transferee Investment" means, as of any date of determination, the aggregate of the purchase price or prices paid for the Transferred Assets and Additional Transferred Assets minus any repayment of accrued interest that was included in a purchase price, any principal repayments thereof or distributions thereon actually received by Eiffel Funding LLC and any Net Aggregate Losses on and as of such date. "Transferred Asset" means the Class A-2 Certificate purchased on the Closing Date. "Yield" means, with respect to the commercial paper issued by Eiffel Funding LLC for any period, the interest that has accrued and will accrue on the commercial paper during such period at the Commercial Paper Rate (as defined in the Pooling and Servicing Agreement) and, with respect to any liquidity funding, the interest that has accrued and will accrue on the funding amount during the funding period at the Alternative Rate (as defined in the Pooling and Servicing Agreement). EX-4.25 13 0013.txt C-30 Exhibit 4.25 EXECUTION COPY CLASS B CERTIFICATE PURCHASE AGREEMENT Dated as of November 9, 1999 among SRI RECEIVABLES PURCHASE CO., INC., individually and as Transferor, SPECIALTY RETAILERS, INC., individually and as Originator and Servicer, THE CLASS B PURCHASERS PARTIES HERETO, and CREDIT SUISSE FIRST BOSTON, NEW YORK BRANCH, Facility Agent ____________________ Relating to SRI Receivables Master Trust Class B Variable Funding Certificates, Series 1999-1 ____________________ TABLE OF CONTENTS Page SECTION 1. DEFINITIONS 2 1.1 Definitions 2 1.2 Other Definitional Provisions 10 SECTION 2. AMOUNT AND TERMS OF COMMITMENTS 10 2.1 Purchases 10 2.2 Reductions, Increases and Extensions of Commitments 13 2.3 Calculation of Interest, Fees, Expenses, Payments, Etc 16 2.4 Requirements of Law 18 2.5 Taxes 20 2.6 Indemnification 22 SECTION 3. CONDITIONS PRECEDENT 25 3.1 Condition to Initial Purchase 25 3.2 Condition to Additional Purchase 28 SECTION 4. REPRESENTATIONS AND WARRANTIES 29 4.1 Representations and Warranties of SRPC 29 4.2 Representations and Warranties of SRI 31 4.3 Representations and Warranties of the Agents, the Facility Agent and the Class B Purchasers 34 SECTION 5. COVENANTS 34 5.1 Covenants of SRPC and SRI 34 SECTION 6. MUTUAL COVENANTS REGARDING CONFIDENTIALITY 39 6.1 Covenants of SRPC, Etc. 39 6.2 Covenants of Class B Purchasers 39 SECTION 7. THE AGENTS 40 7.1 Appointment 40 7.2 Delegation of Duties 40 7.3 Exculpatory Provisions 40 7.4 Reliance by Agent 41 7.5 Notices 41 7.6 Non-Reliance on Agent and Other Class B Purchasers 41 7.7 Indemnification 42 7.8 Agents in Their Individual Capacities 42 7.9 Successor Agent 43 SECTION 8. SECURITIES LAWS; TRANSFERS; TAX TREATMENT 44 8.1 Transfers of Class B Certificates 44 8.2 Tax Characterization 48 SECTION 9. MISCELLANEOUS 48 9.1 Amendments and Waivers 48 9.2 Notices 49 9.3 No Waiver; Cumulative Remedies 51 9.4 Successors and Assigns 51 9.5 Successors to Servicer 51 9.6 Counterparts 52 9.7 Severability 52 9.8 Integration 52 9.9 Governing Law 53 9.10 Termination 53 9.11 Limited Recourse; No Proceedings 53 9.12 Survival of Representations and Warranties 54 9.13 Submission to Jurisdiction; Waivers 54 9.14 WAIVERS OF JURY TRIAL 55 LIST OF EXHIBITS EXHIBIT A Form of Investment Letter EXHIBIT B Form of Joinder Supplement EXHIBIT C Form of Transfer Supplement CLASS B CERTIFICATE PURCHASE AGREEMENT, dated as of November 9, 1999, by and among SRI RECEIVABLES PURCHASE CO., INC., a Delaware corporation ("SRPC"), individually and as Transferor (as defined in the Master Pooling and Servicing Agreement referred to below), SPECIALTY RETAILERS, INC., a Texas corporation ("SRI"), individually and as Servicer (as defined in the Master Pooling and Servicing Agreement referred to below), the CLASS B PURCHASERS (as hereinafter defined) from time to time parties hereto, the AGENTS for the Purchaser Groups from time to time parties hereto (each such party, together with their respective successors in such capacity, an "Agent"), and CREDIT SUISSE FIRST BOSTON, a Swiss banking corporation acting through its New York Branch ("CSFB"), as facility agent for the Class B Purchasers and for the Class A-1 Purchasers and the Class A-2 Purchasers, each as defined below (together with its successors in such capacity, the "Facility Agent"). W I T N E S S E T H: WHEREAS, SRPC, as Transferor, SRI, as Servicer, and Bankers Trust (Delaware), a Delaware banking corporation, as trustee (together with its successors in such capacity, the "Trustee"), are parties to a certain Second Amended and Restated Pooling and Servicing Agreement dated as of November 1, 1999 (as the same may from time to time be amended or otherwise modified, the "Master Pooling and Servicing Agreement"), pursuant to which the Transferor has created the SRI Receivables Master Trust (the "Trust"); WHEREAS, pursuant to a Series 1999-1 Supplement to the Master Pooling and Servicing Agreement, dated as of November 9, 1999 (as the same may from time to time be amended, supplemented or otherwise modified, the "Supplement") the Trust has issued its Class C Floating Rate Certificates, Series 1999-1 (the "Class C Certificates"), having a Class C Initial Invested Amount (as defined in the Supplement) equal to $28,000,000, its Class D Floating Rate Certificates, Series 1999-1 (the "Class D Certificates"), having a Class D Initial Invested Amount (as defined in the Supplement) equal to $18,375,000 and its Class E Certificates, Series 1999-1 (the "Class E Certificates"), having a Class E Initial Invested Amount (as defined in the Supplement) equal to $20,125,000; WHEREAS, pursuant to the Supplement, as supplemented by the Issuance Supplement thereto, dated as of November 9, 1999 (as the same may from time to time be amended or otherwise modified, the "Issuance Supplement"; and the Supplement, as supplemented by the Issuance Supplement, together with the Master Pooling and Servicing Agreement, the "Pooling and Servicing Agreement") the Trust proposes to issue its Class B Variable Funding Certificates, Series 1999-1 (the "Class B Certificates"), its Class A-1 Variable Funding Certificates, Series 1999-1 (the "Class A-1 Certificates") and its Class A-2 Variable Funding Certificates, Series 1999-1 (the "Class A-2 Certificates"); and WHEREAS, the Class B Purchasers are willing to purchase the Class B Certificates on the Closing Date and from time to time thereafter to purchase Additional Class B Invested Amounts (as defined in the Supplement) thereunder on the terms and conditions provided for herein; NOW THEREFORE, in consideration of the mutual covenants herein contained, and other good and valuable consideration, the receipt and adequacy of which are hereby expressly acknowledged, the parties hereto agree as follows: SECTION 1. DEFINITIONS 1.1 Definitions. All capitalized terms used herein as defined terms and not defined herein shall have the meanings given to them in the Pooling and Servicing Agreement. Each capitalized term defined herein shall relate only to the Series 1999-1 and to no other Series of Investor Certificates issued by the Trust. "Adjusted Commitment" shall mean on any date of determination, with respect to a Liquidity Purchaser for a Conduit Purchaser, such Liquidity Purchaser's Commitment minus the aggregate outstanding principal amount of its Support Advances to such Conduit Purchaser (excluding any portion thereof advanced to such Conduit Purchaser to fund interest, discount, fees, expenses or similar amounts in respect of Commercial Paper Notes or other indebtedness of such Conduit Purchaser or in respect of the Class B Certificates). "Affected Party" shall mean, with respect to any Conduit Purchaser, any Support Party of such Conduit Purchaser. "Agent" has the meaning specified in the preamble to this Agreement. "Agreement" shall mean this Class B Certificate Purchase Agreement, as amended, supplemented or otherwise modified from time to time. "Alternative Rate" has the meaning specified in Exhibit B-3 of the Issuance Supplement. "Assignee" and "Assignment" have the respective meanings specified in subsection 8.1(e) of this Agreement. "Certificate Rate Determination Date" shall mean, for any Interest Accrual Period, the Second Business Day prior to the Distribution Date with respect to such Interest Accrual Period. "Class A-1 Certificates" has the meaning specified in the recitals to this Agreement. "Class A-1 Purchase Agreement" shall mean the Class A-1 Certificate Purchase Agreement, dated as of the date hereof, among SRPC, individually and as Transferor, SRI, individually and as Servicer, the Class A-1 Purchasers parties thereto, the agents for the purchaser groups referred to therein and the Facility Agent referred to therein, as amended, modified or otherwise supplemented from time to time. "Class A-1 Purchasers" has the meaning specified in the Class A-1 Purchase Agreement. "Class A-2 Certificates" has the meaning specified in the recitals to this Agreement. "Class A-2 Purchase Agreement" shall mean the Class A-2 Certificate Purchase Agreement, dated as of the date hereof, among SRPC, individually and as Transferor, SRI, individually and as Servicer, the Class A-2 Purchasers parties thereto, the agents for the purchaser groups referred to therein and the Facility Agent, as amended, modified or otherwise supplemented from time to time. "Class A-2 Purchasers" has the meaning specified in the Class A-2 Purchase Agreement. "Class B Certificates" has the meaning specified in the recitals to this Agreement. "Class B Exiting Purchaser Amortization Amount" shall mean, with respect to a Purchase Termination Date, the sum of (i) the aggregate Percentage Interests of all Committed Purchasers and Liquidity Purchasers which became Exiting Purchasers on such date, times the Class B Principal Balance on such date, plus, with respect to each of the Conduit Purchasers, (ii) the product of (A) the aggregate Liquidity Percentages of all Liquidity Purchasers with respect to such Conduit Purchaser which became Exiting Purchasers on such date, times (B) the Percentage Interest of such Conduit Purchaser times the Class B Principal Balance on such date, in each case determined after giving effect to any purchases of Additional Class B Invested Amounts occurring, any Assignments which became effective and any Support Advances made on such date. "Class B Fee Letter" shall mean that certain letter agreement, designated therein as the Series 1999-1 Class B Fee Letter and dated as of the date hereof, among the Agent for each Purchaser Group, the Facility Agent, SRPC and SRI, as such letter agreement may be amended or otherwise modified from time to time. "Class B Owners" shall mean the Class B Purchasers that are owners of record of the Class B Certificates or, with respect to any Class B Certificate held by the an Agent hereunder as nominee on behalf of Class B Purchasers in a Purchaser Group, the Class B Purchasers that are owners of the Class B Invested Amount represented by such Class B Certificate as reflected on the books of the such Agent in accordance with this Agreement. "Class B Program Fees" shall mean the ongoing program fees payable to Class B Purchasers in respect of the Class B Purchase Limit, in the amounts and on the dates set forth in the Class B Fee Letter. "Class B Purchasers" shall mean, collectively, the Conduit Purchasers, the Liquidity Purchasers and the Committed Purchasers. "Class B Purchase Limit" shall mean, on any date of determination, the aggregate Commitments of the Committed Purchasers and the Liquidity Purchasers. "Class B Utilization Fees" shall mean the ongoing utilization fees payable to Class B Purchasers in respect of the Class B Principal Balance, in the amounts and on the dates set forth in the Class B Fee Letter. "Class C Certificates" has the meaning specified in the recitals to this Agreement. "Class D Certificates" has the meaning specified in the recitals to this Agreement. "Class E Certificates" has the meaning specified in the recitals to this Agreement. "Closing Date" shall mean November 9, 1999. "Code" shall mean the Internal Revenue Code of 1986, as amended. "Commercial Paper Notes" shall mean, with respect to a Conduit Purchaser, the short-term promissory notes issued by such Conduit Purchaser which are allocated by such Conduit Purchaser as its funding for its purchasing or maintaining its Percentage Interest of the Class B Principal Balance hereunder. "Commercial Paper Rate" has the meaning specified in Exhibit B-3 of the Issuance Supplement. "Commitment" shall mean, for any Committed Purchaser or Liquidity Purchaser, the maximum amount of such Class B Purchaser's commitment to purchase a portion of the Class B Initial Invested Amount or Additional Class B Invested Amounts, as set forth opposite such Class B Purchaser's name in the Joinder Supplement or Transfer Supplement by which such Committed Purchaser became a party to this Agreement or assumed the Commitment (or a portion thereof) of another Class B Purchaser, as such amount may be adjusted from time to time pursuant to Transfer Supplement(s) executed by such Class B Purchaser and its Assignee(s) and delivered pursuant to Section 2.2 of this Agreement or pursuant to Section 8.1 of this Agreement. In the event that a Class B Purchaser is both a Committed Purchaser and a Liquidity Purchaser, or is a Liquidity Purchaser which maintains a portion of its Commitment hereunder in relation to more than one Conduit Purchaser, such Class B Purchaser shall be deemed to hold separate Commitments hereunder in each such capacity. "Commitment Expiration Date" shall mean, with respect to a Committed Purchaser or Liquidity Purchaser, November 7, 2000, as such date may be extended from time to time with respect to such Class B Purchaser in accordance with subsection 2.2(e) hereof. "Committed Purchaser" shall mean any Class B Purchaser which is designated as a Committed Purchaser in the Joinder Supplement or Transfer Supplement pursuant to which it became a party to this Agreement, and any Assignee of such Class B Purchaser to the extent of the portion of such Commitment assumed by such Assignee pursuant to its respective Transfer Supplement. "Conduit Purchaser" shall mean shall mean any Class B Purchaser which is designated as a Conduit Purchaser in the Joinder Supplement or Transfer Supplement pursuant to which it became a party to this Agreement. "Consented Assignee" shall mean each Class B Purchaser and each Agent (in its individual capacity) which is a party to any Joinder Supplement, each Class A-1 Purchaser, each Class A-2 Purchaser, each Person listed in the Consented Assignee Letter as in effect on the date on which such Person became or agreed to become an Assignee, a Participant or a Support Party, and each other Person who has been consented to as an Assignee or potential Assignee by SRPC, which consent shall not be unreasonably withheld in the case of an assignment by a Conduit Purchaser of its interest in the Class B Certificates and its rights and obligations under this Agreement and the Pooling and Servicing Agreement to any other Conduit Purchaser which is administered by the same Person as the assignor Conduit Purchaser. "Corporate Base Rate" shall mean, for any day, the higher of (i) the base commercial lending rate per annum announced from time to time by Credit Suisse First Boston in New York in effect on such day, or (ii) the interest rate per annum quoted by Credit Suisse First Boston at approximately 11:00 a.m., New York City time, on such day, to dealers in the New York Federal funds market for the overnight offering of United States dollars by Credit Suisse First Boston plus one-half of one percent (0.50%). (The Corporate Base Rate is not intended to represent the lowest rate charged by the Credit Suisse First Boston for extensions of credit.) "Dissenting Purchaser" has the meaning specified in subsection 2.2(e) of this Agreement. "Downgraded Purchaser" has the meaning specified in subsection 8.1(j) of this Agreement. "Estimated Interest Adjustment" has the meaning specified in Exhibit B-3 to the Issuance Supplement. "Excluded Taxes" has the meaning specified in subsection 2.5(a) of this Agreement. "Exiting Purchaser" has the meaning specified in subsection 2.2(e) of this Agreement. "Extension Date" has the meaning specified in subsection 2.2(e) hereof. "Extension Notice Deadline" has the meaning specified in subsection 2.2(e) of this Agreement. "Granite" shall mean Granite National Bank, N.A., a national banking association, which is a subsidiary of Stage. "Governmental Authority" shall mean any nation or government, any state or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. "Indemnitee" has the meaning specified in subsection 2.6(a) of this Agreement. "Indemnitor" has the meaning specified in subsection 2.6(a) of this Agreement. "Intended Characterization" has the meaning specified in Section 8.2 of this Agreement. "Investing Office" shall mean initially, the office of any Class B Purchaser (if any) designated as such in the Joinder Supplement or Transfer Supplement by which it became a party hereto, and thereafter, such other office of such Class B Purchaser as may be designated in writing to the Class B Agent, the Transferor, the Servicer and the Trustee by such Class B Purchaser. "Investment Letter" has the meaning specified in subsection 8.1(a) of this Agreement. "Joinder Supplement" has the meaning specified in subsection 2.2(d) of this Agreement. "Liquidity Percentage" shall mean, for a Liquidity Purchaser for a Conduit Purchaser, such Liquidity Purchaser's Adjusted Commitment with respect to such Conduit Purchaser as a percentage of the aggregate Adjusted Commitments of all Liquidity Purchasers for such Conduit Purchaser. "Liquidity Purchaser" shall mean, with respect to a Conduit Purchaser, each Class B Purchaser identified as a Liquidity Purchaser for such Conduit Purchaser in the Joinder Supplement or Transfer Supplement pursuant to which such Conduit Purchaser became a party hereto, and any Assignee of such Class B Purchaser to the extent such Assignee has assumed, pursuant to a Transfer Supplement, the Commitment of such Class B Purchaser. "Master Pooling and Servicing Agreement" has the meaning specified in the recitals to this Agreement. "Maximum Purchase Amount" shall mean, for any Conduit Purchaser, the aggregate Commitments of its Liquidity Purchasers. "New Issuance" has the meaning specified in subsection 5.1(p) of this Agreement. "Notes" has the meaning specified in subsection 9.11(b) of this Agreement. "Parity Class" shall mean, with respect to the Class A Certificates or the Class B Certificates, a class or subclass of Series 1999-1 Certificates which are on a parity with the Class A Certificates or the Class B Certificates, as the case may be, as to allocations of Available Series 1999-1 Finance Charge Collections, Excess Finance Charge Collections, Series Transferor Finance Charge Collections, Reallocated Principal Collections or Available Principal Collections. "Partial Expiration Date" shall mean any date on which the Commitment Expiration Date for some, but not all, of Committed Purchasers and Liquidity Purchasers occurs. "Participant" has the meaning specified in subsection 8.1(d) of this Agreement. "Participation" has the meaning specified in subsection 8.1(d) of the Agreement. "Percentage Interest" shall mean, for a Class B Purchaser on any day, the percentage equivalent of (a) the sum of (i) the portion of the Class B Initial Invested Amount (if any) purchased by such Class B Purchaser, plus (ii) the aggregate Additional Class B Invested Amounts (if any) purchased by such Class B Purchaser prior to such day pursuant to Section 6.15 of the Pooling and Servicing Agreement, plus (iii) any portion of the Class B Principal Balance acquired by such Class B Purchaser as an Assignee from another Class B Purchaser pursuant to a Transfer Supplement executed and delivered pursuant to Section 8.1 of this Agreement, minus (iv) the aggregate amount of principal payments made to such Class B Purchaser prior to such day, minus (v) any portion of the Class B Principal Balance assigned by such Class B Purchaser to an Assignee pursuant to a Transfer Supplement executed and delivered pursuant to Section 8.1 of this Agreement, divided by (b) the aggregate Class B Principal Balance on such day. "Person" shall mean an individual, partnership, corporation, business trust, joint stock company, trust, unincorporated association, joint venture, governmental authority or other entity of whatever nature. "Pooling and Servicing Agreement" has the meaning specified in the recitals to this Agreement. "Purchase Date" shall mean the Closing Date and each Business Day on which the purchase of an Additional Class B Invested Amount is to occur in accordance with Section 6.15 of the Pooling and Servicing Agreement and Section 2.1 hereof. "Purchase Termination Date" shall mean, for a Class B Purchaser, the first to occur of (i) in the case of a Committed Purchaser or Liquidity Purchaser, the Commitment Expiration Date for such Class B Purchaser or, in the case of a Conduit Purchaser, the latest Commitment Expiration Date for any of its Liquidity Purchasers, (ii) the Amortization Period Commencement Date, or (iii) the date on which a Mandatory Partial Amortization Event is deemed to have occurred. "Purchaser Group" shall mean each group of Class B Purchasers consisting of (i) a Conduit Purchaser, (ii) the Liquidity Purchasers with respect to such Conduit Purchaser, and (iii) any Committed Purchasers which are assignees of such Conduit Purchaser or any such Liquidity Providers. "Purchaser Percentage" shall mean, with respect to a Committed Purchaser or Conduit Purchaser, its Commitment or Maximum Purchase Amount, as the case may be, as a percentage of the Class B Purchase Limit. "Receivables Transfer Agreement" shall mean the Receivables Transfer Agreement, dated as of August 1, 1998, between SRI, as purchaser, and Granite, as transferor, as the same may from time to time be amended or otherwise modified. "Regulatory Change" shall mean, as to each Class B Purchaser, any change occurring after the date of the execution and delivery of the Joinder Supplement or the Transfer Supplement by which it became party to this Agreement; in the case of a Participant, any change occurring after the date on which its Participation became effective, or in the case of an Affected Party, any change occurring after the date it became such an Affected Party, in any (or the adoption after such date of any new): (i) United States Federal or state law or foreign law applicable to such Class B Purchaser, Affected Party or Participant or any entity controlling such Class B Purchaser, Affected Party or Participant; or (ii) regulation, interpretation, directive, guideline or request (whether or not having the force of law) applicable to such Class B Purchaser, Affected Party or Participant or any entity controlling such Class B Purchaser, Affected Party or Participant of any court or other judicial authority or any Governmental Authority charged with the interpretation or administration of any law referred to in clause (i) or of any fiscal, monetary or other Governmental Authority or central bank having jurisdiction over such Class B Purchaser, Affected Party or Participant or any entity controlling such Class B Purchaser, Affected Party or Participant. "Related Documents" shall mean, collectively, this Agreement (including the Class B Fee Letter and all Joinder Supplements and Transfer Supplements), the Class A-1 Purchase Agreement (including each fee letter, joinder supplement and transfer supplement thereunder), the Class A-2 Purchase Agreement (including each fee letter, joinder supplement and transfer supplement thereunder), the Master Pooling and Servicing Agreement, the Supplement, the Issuance Supplement, the Series 1999-1 Certificates, the Receivables Purchase Agreement and the Receivables Transfer Agreement. "Required Class B Owners" shall mean, at any time, Class B Owners having Percentage Interests aggregating greater than 50%. "Required Class B Purchasers" shall mean, at any time, Committed Purchasers and Liquidity Purchasers having Commitments aggregating greater than 50% of the Class B Purchase Limit. "Requirement of Law" shall mean, as to any Person, any law, treaty, rule or regulation, or determination of an arbitrator or Governmental Authority, in each case applicable to or binding upon such Person or to which such Person is subject, whether federal, state or local (including usury laws, the Federal Truth in Lending Act and Regulation Z and Regulation B of the Board of Governors of the Federal Reserve System). "Risk Rate" shall mean, for any day, a rate per annum equal to the sum of (i) the Corporate Base Rate in effect for such day, plus (ii) 2.00%. "Securities Act" shall mean the Securities Act of 1933, as amended. "Series 1999-1 Certificates" has the meaning specified in the recitals to this Agreement. "SRI" has the meaning specified in the preamble to this Agreement and, as used herein (except to the extent that the context otherwise requires), shall mean SRI in its individual capacity (including its capacity as Originator). "Stage" shall mean Stage Stores, Inc., a Delaware corporation which is the parent of SRI. "Supplement" has the meaning specified in the recitals to this Agreement. "Support Facility" shall mean any liquidity or credit support agreement or other facility with a Conduit Purchaser which relates, either generally or specifically, to this Agreement (including any agreement to purchase an assignment of or participation in, or to make loans or other advances in respect of, Class B Certificates). "Support Party" shall mean any bank, insurance company or other entity extending or having a commitment to extend funds to or for the account of a Conduit Purchaser (including by agreement to purchase an assignment of or participation in, or to make loans or other advances in respect of, Class B Certificates) under a Support Facility. Each Liquidity Purchaser for a Conduit Purchaser shall be deemed to be a Support Party for such Conduit Purchaser. "Taxes" has the meaning specified in subsection 2.5(a) of this Agreement. "Termination Event" shall mean the occurrence of a Trust Pay Out Event, a Series 1999-1 Pay Out Event, Mandatory Partial Amortization Event or a Servicer Default, or the occurrence of an event or condition which would be a Trust Pay Out Event, a Series 1999-1 Pay Out Event, Mandatory Partial Amortization Event or a Servicer Default but for a waiver of or failure to declare or determine such event by the Certificateholders or the Trustee. "Transfer" has the meaning specified in subsection 8.1(c) of this Agreement. "Transferee" has the meaning specified in subsection 8.1(c) of this Agreement. "Transfer Supplement" has the meaning specified in subsection 8.1(e) of this Agreement. "Trust" has the meaning specified in the recitals to this Agreement. "Trustee" has the meaning specified in the recitals to this Agreement. "written" or "in writing" (and other variations thereof) shall mean any form of written communication or a communication by means of telex, telecopier device, telegraph or cable. 1.2 Other Definitional Provisions. (a) Unless otherwise specified therein, all terms defined in this Agreement shall have the defined meanings when used in any certificate or other document made or delivered pursuant hereto. (b) The words "hereof", "herein", and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement; and Section, subsection and Exhibit references are to this Agreement, unless otherwise specified. The words "including" and "include" shall be deemed to be followed by the words "without limitation". SECTION 2. AMOUNT AND TERMS OF COMMITMENTS 2.1 Purchases. (a) On and subject to the terms and conditions of this Agreement, (i) each Conduit Purchaser may purchase its Purchaser Percentage of the Class B Certificates on the Closing Date for a purchase price equal to its Purchaser Percentage of the Class B Initial Invested Amount, and (ii) each Liquidity Purchaser for each Purchaser Group, severally, agrees to purchase on the Closing Date its Liquidity Percentage of the portion of the Class B Initial Invested Amount not purchased by the Conduit Purchaser in such Purchaser Group pursuant to clause (i), in each case for a purchase price equal to the portion of the Class B Initial Invested Amount so purchased. (b) On and subject to the terms and conditions of this Agreement and prior to its Purchase Termination Date, (i) each Conduit Purchaser may purchase its Purchaser Percentage of any Additional Class B Invested Amount offered for purchase pursuant to Section 6.15 of the Pooling and Servicing Agreement, and (ii) each Committed Purchaser (if any), severally, agrees to purchase its Purchaser Percentage of the Additional Class B Invested Amount so offered for purchase, in each case for a purchase price equal to the Additional Class B Invested Amount so purchased. (c) The purchase of the Class B Initial Invested Amount shall be made on prior notice from the Transferor to the Facility Agent and each Agent received not later than 4:00 p.m. New York City time on the Business Day preceding the Closing Date. Each purchase of any Additional Class B Invested Amount on the applicable Purchase Date shall be made on prior notice from the Transferor received by the Facility Agent and each Agent not later than 2:00 p.m. New York City time on the Business Day immediately preceding such Purchase Date. Each such notice shall be irrevocable and shall specify (i) the aggregate Class B Initial Invested Amount or Additional Class B Invested Amount to be purchased, (ii) the applicable Purchase Date (which shall be a Business Day), and (iii) instructions as to the deposit of the proceeds of the purchase. Each Agent shall promptly forward a copy of each such notice received by it to each Class B Purchaser in its Purchaser Group. (d) Each Conduit Purchaser shall notify the Agent for its Purchaser Group by 9:30 a.m., New York City time, on the applicable Purchase Date whether it has determined to make the purchase offered to it pursuant to subsection 2.1(a) or 2.1(b), as applicable. In the event that a Conduit Purchaser shall not have timely provided such notice such Conduit Purchaser shall be deemed to have determined not to make such purchase. Such Agent shall notify the Transferor, the Servicer and each Liquidity Purchaser for such Conduit Purchaser on or prior to 10:00 a.m., New York City time, on the applicable Purchase Date if such Conduit Purchaser has not determined to purchase its entire share of the Class B Initial Invested Amount or the Additional Class B Invested Amount, as the case may be, and shall specify in such notice (i) the identity of such Conduit Purchaser, (ii) the portion of the Class B Initial Invested Amount or the Additional Class B Invested Amount, as the case may be, which such Conduit Purchaser has not elected to purchase as provided above, and (iii) the respective Liquidity Percentages of such Liquidity Purchasers on such Purchase Date (as determined by such Agent in good faith; for purposes of such determination, such Agent shall be entitled to rely conclusively on the most recent information provided by such Conduit Purchaser or its agent or by the agent for its Support Parties). Subject to receiving such notice and to the satisfaction of the applicable conditions set forth in Article 3 hereof, each of such Conduit Purchaser's Liquidity Purchasers shall on the applicable Purchase Date purchase a portion of the Class B Initial Invested Amount or the Additional Class B Invested Amount, as the case may be, which such Conduit Purchaser has not elected to purchase in an amount equal to its Liquidity Percentage thereof, for a purchase price equal to the a portion of the Class B Initial Invested Amount or the Additional Class B Invested Amount, as the case may be, so purchased. (e) Each Class B Purchaser's purchase price payable pursuant to subsection 2.1(a), 2.1(b) or 2.1(d) of this Agreement shall be made available to the Agent for its Purchaser Group, subject to the fulfillment of the applicable conditions set forth in Article 3 hereof, at or prior to 2:00 p.m., New York City time, on the applicable Purchase Date, by deposit of immediately available funds to an account of such Agent specified in subsection 9.2(b) of this Agreement. Such Agent shall promptly notify the Transferor in the event that any Class B Purchaser either fails to make such funds available to such Agent before such time or notifies such Agent that it will not make such funds available to such Agent before such time. Subject to (i) such Agent's receipt of such funds and (ii) the fulfillment of the applicable conditions set forth in Article 3 hereof, as determined by such Agent, such Agent will not later than 3:00 p.m., New York City time, on such Purchase Date make such funds available, in the same type of funds received, by wire transfer thereof to the account of Transferor in the United States specified in the applicable purchase notice given pursuant to subsection 2.1(c) or, in the case of the purchase on the Closing Date, specified in writing by the Transferor to such Agent not later than the Business Day prior to the Closing Date. (f) In the event that notwithstanding the fulfillment of the applicable conditions set forth in Article 3 hereof with respect to a purchase, a Conduit Purchaser elected to make a purchase on a Purchase Date but failed to make its purchase price available to the Agent for its Purchaser Group when required by subsection 2.1(e) of this Agreement, such Conduit Purchaser shall be deemed to have rescinded its election to make such purchase, and neither the Transferor nor any other party shall have any claim against such Conduit Purchaser by reason for its failure to timely make such purchase. In any such case, such Agent shall give notice of such failure not later than noon, New York City time, on the Purchase Date to each Liquidity Purchaser for such Conduit Purchaser, which notice shall specify (i) the identity of such Conduit Purchaser, (ii) the amount of the purchase which it had elected but failed to make and (iii) the respective Liquidity Percentages of such Liquidity Purchasers on such Purchase Date (as determined by such Agent in good faith; for purposes of such determination, such Agent shall be entitled to rely conclusively on the most recent information provided by such Conduit Purchaser or its agent or by the agent for its Support Parties). Subject to receiving such notice, each of such Conduit Purchaser's Liquidity Purchasers shall purchase a portion of the Class B Invested Amount in an amount equal to its Liquidity Percentage of the amount described in clause (ii) above at or before 4:00 p.m., New York City time, on such Purchase Date and otherwise in accordance with subsection 2.1(d) of this Agreement. Subject to such Agent's receipt of such funds, such Agent will not later than 5:00 p.m., New York City time, on such Purchase Date make such funds available, in the same type of funds received, by wire transfer thereof to the account of the Transferor described in subsection 2.1(e) of this Agreement, which payment shall be deemed to be timely for purposes of this Agreement. (g) The Agent for each Purchaser Group shall notify the Transferor, the Servicer and each Class B Purchaser in its Purchaser Group on the Closing Date (in the case of the purchase of the Class B Initial Invested Amount) or not later than the Business Day following the applicable Increase Date (in the case of any purchases of Additional Class B Invested Amounts) of the identity of each Class B Purchaser in such Purchaser Group which purchased any portion of the Class B Initial Invested Amount or any Additional Class B Invested Amount on such Purchase Date, whether such Class B Purchaser was a Conduit Purchaser, a Committed Purchaser or a Liquidity Purchaser and the portion of the Class B Initial Invested Amount or Additional Class B Invested Amount purchased by such Class B Purchaser. (h) In no event shall a Committed Purchaser be required on any date to purchase an Additional Class B Invested Amount which would result in its Percentage Interest of the Class B Principal Balance, determined after giving effect to such purchase, exceeding its Commitment, and in no event shall a Liquidity Purchaser be required on any date to purchase an Additional Class B Invested Amount which would result in its Percentage Interest of the Class B Principal Balance, determined after giving effect to such purchase, exceeding its Adjusted Commitment. In no event may any Additional Class B Invested Amount be offered for purchase hereunder or under Section 6.15 of the Supplement, nor shall any Class B Purchaser be obligated to purchase any Additional Class B Invested Amounts, to the extent that, after giving effect to such purchase, the Class B Principal Balance would exceed the Class B Purchase Limit. (i) The Class B Purchasers in each Purchaser Group hereby direct that the Class B Certificates be registered in the name of the Agent for such Purchaser Group, as nominee on behalf of the Class B Purchasers in such Purchaser Group from time to time hereunder. (j) The Class B Certificates and interest thereon shall be paid as provided in the Pooling and Servicing Agreement, and each Agent shall allocate to the Class B Owners in its Purchaser Group each payment in respect of the Class B Certificates received by such Agent in its capacity as Class B Certificateholder as provided herein. Payments in reduction of the Class B Invested Amount shall be allocated and applied to Class B Owners pro rata based on their respective Percentage Interests of the Class B Principal Balance, or in any such case in such other proportions as each affected Class B Purchaser may agree upon in writing from time to time with such Agent and the Transferor; provided that from and after a Partial Expiration Date until the earlier to occur of (i) the Purchase Termination Date for all Class B Purchasers and (ii) the date on which (A) the aggregate amount of payments in reduction of the Class B Principal Balance made after such Partial Expiration Date equals (B) the aggregate Class B Exiting Purchaser Amortization Amount for such Partial Expiration Date, payments on a Class B Certificate in reduction of the portion of the Class B Principal Balance evidenced by such Class B Certificate shall be allocated and applied to Class B Owners of such Class B Certificate which are Exiting Purchasers pro rata based on their respective Percentage Interests of the Class B Principal Balance. Payments of interest in respect of the portion of the Class B Principal Balance evidenced by a Class B Certificate shall be allocated and applied to Class B Owners of such Class B Certificate pro rata based upon the respective amounts of interest owed to them, determined as provided in Section 2.3 and the Issuance Supplement. 2.2 Reductions, Increases and Extensions of Commitments. (a) At any time the Transferor may, upon at least 10 Business Days' prior written notice to each Agent and the Facility Agent, reduce the Class B Purchase Limit. Each such partial reduction shall be in an aggregate amount of $5,000,000 or integral multiples thereof (or such other amount requested by the Transferor to which each Agent and the Facility Agent consents). Reductions of the Class B Purchase Limit pursuant to this subsection 2.2(a) shall be allocated to the Commitment of each Committed Purchaser and the Maximum Purchase Amount of each Conduit Purchaser, pro rata based on the Purchaser Percentage represented by such Commitment or Maximum Purchase Amount. Any such reduction in the Maximum Purchase Amount of the Conduit Purchaser in a Purchaser Group shall automatically result in a reduction of the aggregate Commitments of the Liquidity Providers in such Purchaser Group, which shall be allocated among such Liquidity Purchasers pro rata based on their respective Liquidity Percentages. (b) On the Purchase Termination Date for a Committed Purchaser or Liquidity Purchaser, the Commitment of such Class B Purchaser shall be automatically reduced to zero. (c) The Class B Purchase Limit may be increased from time to time through the increase of the Commitment of one or more Committed Purchasers or Liquidity Purchasers; provided, however, that no such increase shall have become effective unless (i) the Agent for each applicable Purchaser Group, the Facility Agent and the Transferor shall have given their written consent thereto, (ii) in the case of an increase in the Commitment of a Liquidity Purchaser in a Purchaser Group, the Conduit Purchaser in such Purchaser Group shall have consented thereto and agreed to increase its Maximum Purchase Amount, (iii) such increasing Committed Purchaser or Liquidity Purchaser shall have entered into an appropriate amendment or supplement to this Agreement reflecting such increased Commitment and (iv) such conditions, if any, as the Agent for such Purchaser Group or such Conduit Purchaser shall have required in connection with its consent (including the delivery of legal opinions with respect to such Class B Purchaser and, in the case of a Liquidity Purchaser, the agreement of such Liquidity Purchaser to become a Support Party for the Conduit Purchaser in its Purchaser Group and approvals from rating agencies which rate debt issued by such Conduit Purchaser) shall have been satisfied. The Transferor may also increase the Class B Purchase Limit from time to time by adding additional Committed Purchasers or Liquidity Purchasers in accordance with subsection 2.2(d). (d) Subject to the provisions of subsections 8.1(a) and 8.1(b) applicable to initial purchasers of Class B Certificates, any Person may from time to time with the consent of the Facility Agent, each Agent and the Transferor become a party to this Agreement as an initial or an additional Conduit Purchaser or an initial or an additional Committed Purchaser or Liquidity Purchaser by (i) delivering to the Transferor an Investment Letter and (ii) entering into an agreement substantially in the form attached hereto as Exhibit B hereto (a "Joinder Supplement"), with the Transferor, acknowledged by the Servicer, which shall specify (A) the name and address of such Person for purposes of Section 9.2 hereof, (B) whether such Person will be a Conduit Purchaser, a Liquidity Purchaser or a Committed Purchaser, (C) if such Person will be a Liquidity Purchaser or a Committed Purchaser, its Commitment and Commitment Expiration Date, (D) if such Person is a Conduit Purchaser, its Maximum Purchase Amount and the identity of the Liquidity Purchasers in its Purchaser Group and their respective initial Liquidity Percentages, (E) if such Person is a Liquidity Purchaser, the Conduit Purchaser for which it is acting as such, (F) the applicable Purchaser Group for such Person, (G) if such Purchaser Group is a new Purchaser Group, the name of the Agent therefor (which shall be a party to such Joinder Supplement), and (H) the other information provided for in such form of Joinder Supplement. Upon its receipt of a duly executed Joinder Supplement, the Facility Agent shall on the effective date determined pursuant thereto give notice of such effectiveness to each Agent, the Transferor, the Servicer and the Trustee, and the Servicer will provide notice thereof to each Rating Agency (if required). It shall be a condition to the effectiveness of any Joinder Supplement for an additional Class B Purchaser after the Closing Date that each existing Class B Purchaser sell to the additional Class B Purchaser and that the additional Class B Purchaser purchase from each applicable existing Class B Purchaser an interest in the Class B Certificates for a purchase price equal to the portion of the Class B Principal Balance purchased, so that, after giving effect to such purchase and sale, (i) the aggregate Percentage Interest of the members of each Purchaser Group shall be proportionate to the aggregate Commitments of members of each Purchaser Group, and (ii) the Percentage Interest of each Committed Purchaser in a Purchaser Group and of the Conduit Purchaser in such Purchaser Group shall be proportionate to their respective Commitments or Maximum Purchase Amount, as applicable (the Percentage Interest of any Liquidity Purchaser in such Purchaser Group being deemed for such purpose to be held by such Conduit Purchaser). (e) The Commitment Expiration Date for any Committed Purchaser or Liquidity Purchaser may be extended from time to time to time at the request of the Transferor and with the consent of such Class B Purchaser, the Facility Agent, the Agent for the applicable Purchaser Group and, in the case of a Liquidity Purchaser, the related Conduit Purchaser; provided that no such extension shall become effective if, prior to the effective date thereof, a Termination Event shall have occurred. Any Committed Purchaser or Liquidity Purchaser shall become an "Exiting Purchaser" after its scheduled Commitment Expiration Date unless such date has been extended. If (i) the Transferor, not more than 180 and no less than 90 days prior to a Commitment Expiration Date for a Committed Purchaser or Liquidity Purchaser, has requested such Class B Purchaser (by notice to such Class B Purchaser with a copy to the Agent for its Purchaser Group, the Facility Agent and, in the case of a Liquidity Purchaser, to its related Conduit Purchaser), to extend such Commitment Expiration Date to the date which is 364 days after the effective date requested by the Transferor (the "Extension Date"), which shall not be earlier than 60 days after the date of such request nor later than the Commitment Expiration Date then in effect, (ii) such Committed Purchaser or Liquidity Purchaser, as applicable, shall not have notified the Transferor, the Agent for its Purchaser Group, the Facility Agent and, in the case of a Liquidity Purchaser, its related Conduit Purchaser of its willingness in its sole discretion to so extend its Commitment Expiration Date at least 30 days (such 30th day, the "Extension Notice Deadline") prior to the proposed Extension Date, and (iii) no Termination Event shall have occurred, such Committed Purchaser or Liquidity Purchaser, as applicable, shall be a "Dissenting Purchaser" from and after such Extension Notice Deadline. (f) Promptly after an Extension Notice Deadline, the Agent for a Purchaser Group containing a Dissenting Purchaser shall promptly notify each other Class B Purchaser in such Purchaser Group, each other Agent (which shall thereupon notify each Class B Purchaser in its Purchaser Group), the Facility Agent, the Transferor and the Servicer of the identity of each Dissenting Purchaser in such Agent's Purchaser Group and the amount of its Commitment. Either such Agent or the Transferor, with the consent of such Agent and, if the Dissenting Purchaser is a Liquidity Purchaser, each affected Conduit Purchaser, may (but shall not be required to) request that one or more other Class B Purchasers, or another entity acceptable to such Agent and the Facility Agent in their reasonable discretion, and, if the Dissenting Purchaser is a Liquidity Purchaser, each affected Conduit Purchaser in its sole discretion, acquire all or a portion of the Commitment of the Dissenting Purchaser and all amounts payable to it hereunder and under the Pooling and Servicing Agreement in accordance with Section 8.1. Each Dissenting Purchaser hereby agrees to assign all or a portion of its Commitment and the amounts payable to it hereunder and under the Pooling and Servicing Agreement to a replacement investor identified by the applicable Agent in accordance with the preceding sentence, subject to ratable payment such Dissenting Purchaser's Percentage Interest of the Class B Principal Balance, together with all accrued and unpaid interest thereon, and a ratable portion of all fees and other amounts due to it hereunder. 2.3 Calculation of Interest, Fees, Expenses, Payments, Etc. (a) SRPC agrees to pay to each Agent for the account of the Class B Purchasers in its Purchaser Group the Class B Program Fees, the Class B Utilization Fees and other amounts set forth in the Class B Fee Letter at the times specified therein. (b) SRPC further agrees to pay within 30 days following receipt of an invoice therefor to the initial Agent, the Facility Agent and the initial Class B Purchasers all reasonable costs and expenses in connection with the preparation, execution, delivery and initial syndication, of this Agreement and each related Support Facility, and the other documents to be delivered hereunder or in connection herewith, including the reasonable fees and out-of-pocket expenses of counsel for the initial Agent, the Facility Agent and each of the initial Class B Purchasers with respect thereto. SRI further agrees to pay to each Agent, the Facility Agent and each Class B Purchaser, promptly following presentation of an invoice therefor, all reasonable costs and expenses (including reasonable fees and expenses of counsel), if any, in connection with the administration (including any requested amendments, waivers or consents of any of the Related Documents or Support Facilities) hereof or of any of the Related Documents or Support Facilities and the other documents delivered thereunder or in connection therewith. (c) SRI agrees to pay to each Agent, the Facility Agent and each Class B Purchaser, promptly following presentation of an invoice therefor, all reasonable costs and expenses (including reasonable fees and expenses of counsel), if any, in connection with the enforcement hereof or of any of the Related Documents or Support Facilities and the other documents delivered thereunder or in connection therewith. (d) SRI further agrees to pay on demand any and all stamp, transfer and other taxes (other than Taxes covered by Section 2.5) and governmental fees payable in connection with the execution, delivery, filing and recording of any of the Related Documents and each related Support Facility or the other documents and agreements to be delivered hereunder and thereunder or otherwise in connection with the issuance of Series 1999-1, and agrees to save each Class B Purchaser and Agent and the Facility Agent harmless from and against any liabilities with respect to or resulting from any delay in paying or any omission to pay such taxes and fees. (e) Periodic fees or other periodic amounts payable hereunder shall be calculated, unless otherwise specified in the Class B Fee Letter, on the basis of a 360-day year and for the actual days elapsed. Interest calculated by reference to the Corporate Base Rate shall be calculated on the basis of a 365- or 366-day year, as applicable, for the actual days elapsed. (f) Each Class B Purchaser shall be allocated the share of interest on the Class B Principal Balance for each Interest Accrual Period which is determined for its Percentage Interest thereof pursuant to Section 4(a) of and Exhibit B-3 to the Issuance Supplement. At or before 5:00 p.m., New York City time, on each Certificate Rate Determination Date, each Conduit Purchaser shall notify the Agent for its Purchaser Group of (i) the Commercial Paper Rate, if applicable, in effect for the related Interest Accrual Period, and (ii) the date on which the Alternative Rate became applicable to its Invested Percentage of the Covered Portion of the Class B Principal Balance or a portion thereof pursuant to the Issuance Supplement. Such notification may be based on such Conduit Purchaser's estimate of the Commercial Paper Rate if the actual rate is not then known to such Conduit Purchaser, and in such case, such Conduit Purchaser shall notify such Agent at or before 12:00 noon, New York City time, on the following Certificate Rate Determination Date of the amount of any variation between interest payable to such Conduit Purchaser for the applicable Interest Accrual Period based on such estimate and interest which should have been payable to such Conduit Purchaser for such Interest Accrual Period based on its final determination of the applicable Commercial Paper Rate. The amount of any shortfall in interest based on such variation shall be deferred (without interest thereon) and be included in the portion of Class B Interest payable to such Conduit Purchaser for the following Interest Accrual Period, and the amount of any overpayment of interest to such Conduit Purchaser based on such variation shall be credited (without interest thereon), dollar for dollar, against the portion of Class B Interest otherwise payable to such Conduit Purchaser for the following Interest Accrual Period. Each determination by the Conduit Purchaser of its applicable Commercial Paper Rate pursuant to this Agreement shall be conclusive and binding on the Class B Purchasers, the Agents, the Transferor, the Servicer and the Trustee in the absence of manifest error. In the event that a Conduit Purchaser issues Commercial Paper Notes in good faith in order to prefund the purchasing or maintaining of its Percentage Interest of the Class B Principal Balance hereunder, it is understood that the portion of the Commercial Paper Rate attributable to such Commercial Paper Notes, as otherwise determined in accordance with the Issuance Supplement, shall be reduced to give effect to any earnings (net of any investment losses and expenses) received on a cash basis by such Conduit Purchaser from the temporary investment of the proceeds thereof prior to the application of such proceeds to fund its purchasing or maintaining such Percentage Interest. Each Agent shall notify the Servicer on each Certificate Rate Determination Date of the Commercial Paper Rate, the Alternative Rate and the Risk Rate, as applicable, and the Class B Interest for the related Interest Accrual Period substantially in the form of Exhibit B-3A to the Issuance supplement (or such other form which may be mutually acceptable to the applicable Agent and the Servicer from time to time). For such purposes, each Agent may rely conclusively on notices from the Conduit Purchasers pursuant to this subsection as to the interest rate or rates from time to time applicable to its Percentage Interest of the Class B Principal Balance. Such notification from an Agent may be based on the Conduit Purchaser's estimate of the Commercial Paper Rate as provided to such Agent and upon estimates of the Class B Interest if the actual amount is not then known to such Agent. In any such case, such Agent shall notify the Servicer on or before the following Certificate Rate Determination Date of the amount of any variation between the estimated Class B Interest and the actual Class B Interest for the preceding Interest Accrual Period. Subject to any Estimated Interest Adjustment, each determination of the Commercial Paper Rate, the Alternative Rate, the Risk Rate and the Class B Interest by any Agent shall be conclusive and binding on the Class B Purchasers, the Transferor, the Servicer and the Trustee in the absence of manifest error. (g) All payments to be made hereunder or under the Pooling and Servicing Agreement, whether on account of principal, interest, fees or otherwise, shall be made without setoff or counterclaim and shall be made prior to 2:30 p.m., New York City time, on the due date thereof in United States dollars and in immediately available funds (i) in the case of payments to the Facility Agent, to its account specified in subsection 9.2(b) hereof or (ii) in the case of payments to a Class B Purchaser or an Agent in a Purchaser Group, to such Agent's account specified in subsection 9.2(b) hereof. Any such payment received after 2:30 p.m. New York City time shall be deemed to have been made on the next Business Day. Notwithstanding anything herein to the contrary, if any payment due hereunder becomes due and payable on a day other than a Business Day, the payment date thereof shall be extended to the next succeeding Business Day and interest shall accrue thereon at the applicable rate during such extension. To the extent that (i) the Trustee, SRPC, SRI, the Transferor or the Servicer makes a payment to an Agent, the Facility Agent or a Class B Purchaser or (ii) such Agent, the Facility Agent or such Class B Purchaser receives or is deemed to have received any payment or proceeds for application to an obligation, which payment or proceeds or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside or required to be repaid to a trustee, receiver or any other party under any bankruptcy or insolvency law, state or federal law, common law, or for equitable cause, then, to the extent such payment or proceeds are set aside, the obligation or part thereof intended to be satisfied shall be revived and continue in full force and effect, as if such payment or proceeds had not been received or deemed received by such Agent, the Facility Agent or such Class B Purchaser, as the case may be. (h) The obligations of SRPC under this Section 2.3 are subject to subsection 9.11(a) hereof. 2.4 Requirements of Law. (a) In the event that any Class B Purchaser shall have reasonably determined that any Regulatory Change shall: (i) subject such Class B Purchaser to any tax of any kind whatsoever with respect to this Agreement, its Commitment or its beneficial interest in the Class B Certificates, or change the basis of taxation of payments in respect thereof (except for Taxes covered by Section 2.5 and taxes included in the definition of Excluded Taxes in subsection 2.5(a) and changes in the rate of tax on the overall net income of such Class B Purchaser); or (ii) impose, modify or hold applicable any reserve, special deposit, compulsory loan or similar requirement against assets held by, deposits or other liabilities in or for the account of, advances, loans or other extensions of credit by, or any other acquisition of funds by, such Class B Purchaser; and the result of any of the foregoing is to increase the cost to such Class B Purchaser, by an amount which such Class B Purchaser deems to be material, of maintaining its Commitment or its interest in the Class B Certificates or to reduce any amount receivable in respect thereof, then, in any such case, after submission by such Class B Purchaser to the Agent in its Purchaser Group of a written request therefor and the submission by such Agent to the Transferor and the Servicer of such written request therefor (with a copy to the Facility Agent), the Transferor (subject to subsection 9.11(a) hereof) shall pay to the such Agent for the account of such Class B Purchaser any additional amounts necessary to compensate such Class B Purchaser for such increased cost or reduced amount receivable, together with interest on each such amount from the Distribution Date following receipt by the Transferor of such request for compensation under this subsection 2.4(a), if such request is received by the Transferor at least five Business Days prior to the Determination Date related to such Distribution Date, and otherwise from the following Distribution Date, until payment in full thereof (after as well as before judgment) at the Risk Rate in effect from time to time. (bi In the event that any Class B Purchaser shall have determined that any Regulatory Change regarding capital adequacy has the effect of reducing the rate of return on such Class B Purchaser's capital or on the capital of any entity controlling such Class B Purchaser as a consequence of its obligations hereunder or its maintenance of its Commitment or its interest in the Class B Certificates to a level below that which such Class B Purchaser or such entity could have achieved but for such Regulatory Change (taking into consideration such Class B Purchaser's or such entity's policies with respect to capital adequacy) by an amount deemed by such Class B Purchaser to be material, then, from time to time, after submission by such Class B Purchaser to the Agent in its Purchaser Group of a written request therefor and submission by such Agent to the Transferor and the Servicer of such written request therefor (with a copy to the Facility Agent), the Transferor (subject to subsection 9.11(a) hereof) shall pay to the such Agent for the account of such Class B Purchaser such additional amount or amounts as will compensate such Class B Purchaser or such entity for such reduction, together with interest on each such amount from the Distribution Date following receipt by the Transferor of such request for compensation under this subsection 2.4(b), if such request is received by the Transferor at least five Business Days prior to the Determination Date related to such Distribution Date, and otherwise from the following Distribution Date, until payment in full thereof (after as well as before judgment) at the Risk Rate in effect from time to time. (ci Each Class B Purchaser agrees that it shall use its reasonable efforts to reduce or eliminate any claim for compensation pursuant to subsections 2.4(a) and 2.4(b), including but not limited to designating a different Investing Office for its Class B Certificates (or any interest therein) if such designation will avoid the need for, or reduce the amount of, any increased amounts referred to in subsection 2.4(a) or 2.4(b) and will not, in the reasonable opinion of such Class B Purchaser, be unlawful or otherwise disadvantageous to such Class B Purchaser or inconsistent with its policies or result in an unreimbursed cost or expense to such Class B Purchaser or in an increase in the aggregate amount payable under both subsections 2.4(a) and 2.4(b). (di Each Class B Purchaser claiming increased amounts described in subsection 2.4(a) or 2.4(b) will furnish to the Agent for its Purchaser Group (together with its request for compensation) a certificate prepared in good faith setting forth the basis and the calculation of the amount (in reasonable detail) of each request by such Class B Purchaser for any such increased amounts referred to in subsection 2.4(a) or 2.4(b). Any such certificate shall be conclusive absent manifest error, and such Agent shall deliver a copy thereof to the Transferor, the Servicer and the Facility Agent. Failure on the part of any Class B Purchaser to demand compensation for any amount pursuant to subsection 2.4(a) or 2.4(b) with respect to any period shall not constitute a waiver of such Class B Purchaser's right to demand compensation with respect to such period. 2.5 Taxes. (a) All payments made to the Class B Purchasers, the Facility Agent or the Agents under this Agreement and the Pooling and Servicing Agreement (including all amounts payable with respect to the Class B Certificates) shall, to the extent allowed by law, be made free and clear of, and without deduction or withholding for or on account of, any present or future income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now or hereafter imposed, levied, collected, withheld or assessed by any Governmental Authority (collectively, "Taxes"), excluding (i) income taxes (including branch profit taxes, minimum taxes and taxes computed under alternative methods, at least one of which is based on or measured by net income), franchise taxes (imposed in lieu of income taxes), or any other taxes based on or measured by the net income of the Class B Purchaser, the Facility Agent or the Agent (as the case may be) or the gross receipts or income of the Class B Purchaser, the Facility Agent or the Agent (as the case may be); (ii) any Taxes that would not have been imposed but for the failure of such Class B Purchaser, the Facility Agent or the Agent, as applicable, to provide and keep current (to the extent legally able) any certification or other documentation required to qualify for an exemption from, or reduced rate of, any such Taxes or required by this Agreement to be furnished by such Class B Purchaser, the Facility Agent or such Agent, as applicable; and (iii) any Taxes imposed as a result of a change by any Class B Purchaser of the Investing Office (other than changes mandated by this Agreement, including subsection 2.4(c) hereof, or required by law) (all such excluded taxes being hereinafter called "Excluded Taxes"). If any Taxes, other than Excluded Taxes, are required to be withheld from any amounts payable to a Class B Purchaser, the Facility Agent or an Agent hereunder or under the Pooling and Servicing Agreement, then after submission by any Class B Purchaser to the Agent for its Purchaser Group (in the case of an amount payable to a Class B Purchaser) and such Agent to the Transferor and the Servicer of a written request therefor (with a copy thereof to the Facility Agent), or after submission by the Facility Agent or any Agent to the Transferor or the Servicer of a written request therefor with a copy thereof to the Facility Agent (in the case of an Agent), the amounts so payable to such Class B Purchaser, the Facility Agent or such Agent, as applicable, shall be increased and the Transferor shall be liable to pay to such Class B Purchaser or for its own account, as applicable, the amount of such increase) to the extent necessary to yield to such Class B Purchaser, the Facility Agent or such Agent, as applicable (after payment of all such Taxes) interest or any such other amounts payable hereunder or thereunder at the rates or in the amounts specified in this Agreement and the Pooling and Servicing Agreement; provided, however, that the amounts so payable to such Class B Purchaser, the Facility Agent or such Agent shall not be increased pursuant to this subsection 2.5(a) if such requirement to withhold results from the failure of such Person to comply with subsection 2.5(c) hereof. Whenever any Taxes are payable on or with respect to amounts distributed to a Class B Purchaser, the Facility Agent or an Agent, as promptly as possible thereafter the Servicer shall send to the applicable Agent, on behalf of such Class B Purchaser (if applicable), or to the Facility Agent, a certified copy of an original official receipt showing payment thereof. If the Trustee, upon the direction of the Servicer, fails to pay any Taxes when due to the appropriate taxing authority or fails to remit to the Facility Agent or to the applicable Agent, on behalf of itself or such Class B Purchaser (as applicable), the required receipts or other required documentary evidence, subject to subsection 9.11(a), the Transferor shall pay to such Agent on behalf of such Class B Purchaser or for its own account, as applicable, any incremental taxes, interest or penalties that may become payable by the Facility Agent or by such Class B Purchaser or Agent, as applicable, as a result of any such failure. In addition to the foregoing, the Transferor hereby agrees, subject to subsection 9.11(a), to indemnify and hold harmless, on an after-tax basis, each Class B Purchaser and Agent and the Facility Agent from and against any and all Taxes (including Excluded Taxes) imposed on such party solely by reason of any tax treatment of the Class B Certificates that is inconsistent with the characterization thereof as indebtedness for federal, state and local income tax purposes or by reason of the failure of the Transferor or the owner of the Exchangeable Transferor Certificate to file any federal, state or local income tax returns or reports on the basis that Class B Certificates are indebtedness for federal, state and local income tax purposes. (b0 A Class B Purchaser or Agent or the Facility Agent claiming increased amounts under subsection 2.5(a) for Taxes paid or payable by such Class B Purchaser or Agent or the Facility Agent, as applicable, will furnish to the Transferor and the Servicer a certificate prepared in good faith setting forth the basis and amount of each request by such Class B Purchaser or the Facility Agent, as applicable, for such Taxes. Any such certificate of a Class B Purchaser, the Facility Agent or an Agent shall be conclusive absent manifest error. Failure on the part of any Class B Purchaser, the Facility Agent or any Agent to demand additional amounts pursuant to subsection 2.5(a) with respect to any period shall not constitute a waiver of the right of such Class B Purchaser, the Facility Agent or such Agent, as the case may be, to demand compensation with respect to such period. All such amounts shall be due and payable to the Facility Agent or to such Agent on behalf of such Class B Purchaser or for its own account, as the case may be, on the Distribution Date following receipt by the Transferor of such certificate, if such certificate is received by the Transferor at least five Business Days prior to the Determination Date related to such Distribution Date and otherwise shall be due and payable on the following Distribution Date (or, if earlier, on the Series 1999-1 Termination Date). (c0 Each Class B Purchaser and each Participant holding an interest in Class B Certificates agrees that prior to the date on which the first interest or fee payment hereunder is due thereto, it will deliver to the Transferor, the Servicer, the Trustee and the Agent for its Purchaser Group (i) if such Class B Purchaser or Participant is not incorporated under the laws of the United States or any State thereof, two duly completed copies of the U.S. Internal Revenue Service Form 4224 or successor applicable forms required to evidence that the Class B Purchaser's or Participant's income from this Agreement or the Class B Certificates is "effectively connected" with the conduct of a trade or business in the United States, and (ii) a duly completed U.S. Internal Revenue Service Form W-8 or W-9 or successor applicable or required forms. Each Class B Purchaser or Participant holding an interest in Class B Certificates also agrees to deliver to the Transferor, the Servicer, the Trustee and the Agent for its Purchaser Group two further copies of such Form 4224 and Form W-8 or W-9, or such successor applicable forms or other manner of certification, as the case may be, on or before the date that any such form expires or becomes obsolete or after the occurrence of any event requiring a change in the most recent form previously delivered by it hereunder, and such extensions or renewals thereof as may reasonably be requested by the Servicer or the applicable Agent, unless in any such case, solely as a result of a change in treaty, law or regulation occurring prior to the date on which any such delivery would otherwise be required, and assuming that Section 1446 of the Code does not apply, the Class B Purchaser is no longer eligible to deliver the then-applicable form set forth above and so advises the Servicer and the applicable Agent. Each Class B Purchaser which is a party to a Joinder Supplement certifies, represents and warrants as of the effective date of such Joinder Supplement, each Assignee and each Participant (in either case other than a Support Party) shall certify, represent and warrant as a condition of acquiring its Assignment or Participation as of the effect date of the Transfer Supplement to which it is a party or of such Participation, as the case may be, and each Support Party shall certify, represent and warrant as of the effective date of its becoming a Support Party, that (x) in the case of Form 4224 (if applicable), its income from this Agreement or the Class B Certificates is effectively connected with a United States trade or business and (y) that it is entitled to an exemption from United States backup withholding tax. Further, each Class B Purchaser and each Participant acquiring an interest in a Class B Certificate covenants that for so long as it shall own Class B Certificates or such Participation, such Class B Certificates or Participation shall be held in such manner that the income therefrom shall be effectively connected with the conduct of a United States trade or business. 2.6 Indemnification. (a) SRI and SRPC (each such Person being referred to as an "Indemnitor"), jointly and severally, agree to indemnify and hold harmless each Agent, the Facility Agent and each Class B Purchaser and any directors, officers, employees, agents, attorneys, auditors or accountants of each Agent, the Facility Agent or Class B Purchaser (each such Person being referred to as an "Indemnitee") from and against any and all claims, damages, losses, liabilities, costs or expenses whatsoever (including reasonable fees and expenses of legal counsel) which such Indemnitee may incur (or which may be claimed against such Indemnitee) arising out of, by reason of or in connection with the execution and delivery of, or payment or other performance under, or the failure to make payments or perform under, any Related Document or the issuance of the Series 1999-1 Certificates (including in connection with the preparation for defense of any investigation, litigation or proceeding arising out of, related to or in connection with such execution, delivery, payment, performance or issuance), except (i) to the extent that any such claim, damage, loss, liability, cost or expense is shall be caused by the willful misconduct, bad faith, recklessness or gross negligence of such Indemnitee, (ii) to the extent that any such claim, damage, loss, liability, cost or expense is covered by subsection 2.3(c) or Section 2.4 or 2.5 hereof or relates to any Excluded Taxes, (iii) to the extent that any such claim, damage, loss, liability, cost or expense relates to disclosure made by an Agent or a Class B Purchaser in connection with an Assignment or Participation pursuant to Section 8.1 of this Agreement which disclosure is not based on information given to such Agent or such Class B Purchaser by or on behalf of SRPC, SRI, the Transferor or the Servicer or any affiliate thereof or by or on behalf of the Trustee or (iv) to the extent that such claim, damage, loss, liability, cost or expense shall be caused by a charge off of Receivables. The foregoing indemnity shall include any claims, damages, losses, liabilities, costs or expenses to which any such Indemnitee may become subject under Securities Act, the Securities Exchange Act of 1934, as amended, the Investment Company Act of 1940, as amended, or other federal or state law or regulation arising out of or based upon any untrue statement or alleged untrue statement of a material fact in any disclosure document relating to the Series 1999-1 Certificates or any amendments thereof or supplements thereto (other than statements provided by the Indemnitee expressly for inclusion therein) or arising out of, or based upon, the omission or the alleged omission to state a material fact necessary to make the statements therein or any amendment thereof or supplement thereto, in light of the circumstances in which they were made, not misleading (other than with respect to statements provided by the Indemnitee expressly for inclusion therein). (bi Promptly after the receipt by an Indemnitee of a notice of the commencement of any action against an Indemnitee, such Indemnitee will notify the Agent for its Purchaser Group and such Agent will, if a claim in respect thereof is to be made against an Indemnitor pursuant to subsection 2.6(a), notify such Indemnitor in writing of the commencement thereof; but the omission so to notify such party will not relieve such party from any liability which it may have to such Indemnitee pursuant to the preceding paragraph. If any such action is brought against an Indemnitee and it notifies an Indemnitor of its commencement, such Indemnitor will be entitled to participate in and, to the extent that it so elects by delivering written notice to the Indemnitee promptly after receiving notice of the commencement of the action from the Indemnitee to assume the defense of any such action, with counsel mutually satisfactory to such Indemnitor and each affected Indemnitee. After receipt of such notice by an Indemnitor from an Indemnitee, such Indemnitor will not be liable to such Indemnitee for any legal or other expenses except as provided below and except for the reasonable costs of investigation subsequently incurred by the Indemnitee in connection with the defense of such action. Each Indemnitee will have the right to employ its own counsel in any such action, but the fees, expenses and other charges of such counsel will be at the expense of the such Indemnitee unless (i) the employment of such counsel by such Indemnitee has been authorized in writing by such Indemnitor, (ii) such Indemnitor shall have failed to assume the defense and employ counsel, or (iii) the named parties to any such action or proceeding (including any impleaded parties) include both such Indemnitee and either an Indemnitor or another person or entity that may be entitled to indemnification from an Indemnitor (by virtue of this Section 2.6 or otherwise) and such Indemnitee shall have been advised by counsel that there may be one or more legal defenses available to such Indemnitee which are different from or additional to those available to an Indemnitor or such other party or shall otherwise have reasonably determined that the co-representation would present such counsel with a conflict of interest (in which case the Indemnitor will not have the right to direct the defense of such action on behalf of the Indemnitee). In any such case, the reasonable fees, disbursements and other charges of counsel will be at the expense of the Indemnitor; it being understood that in no event shall the Indemnitors be liable for the fees, disbursements and other charges of more than two counsel (in addition to any local counsel) for all Indemnitees in connection with any one action or separate but similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances. An Indemnitor shall not be liable for any settlement of any such action, suit or proceeding effected without its written consent, which shall not be unreasonably withheld, but if settled with the written consent of an Indemnitor or if there shall be a final judgment for the plaintiff in any such action, suit or proceeding, such Indemnitor agrees to indemnify and hold harmless any Indemnitee to the extent set forth in this letter from and against any loss, claim, damage, liability or expense by reason of such settlement or judgement. Notwithstanding the immediately preceding sentence, if in any case where the fees and expenses of counsel are at the expense of an Indemnitor and an Indemnitee shall have requested such Indemnitor to reimburse such Indemnitee for such fees and expenses of counsel as incurred, such Indemnitor agrees that it shall be liable for any settlement of any action effected without its written consent if (i) such settlement is entered into more than ten business days after the receipt by such Indemnitor of the aforesaid request and (ii) such Indemnitor shall have failed to reimburse the Indemnitee in accordance with such request for reimbursement prior to the date of such settlement. No Indemnitor shall, without the prior written consent of an Indemnitee, settle or compromise or consent to the entry of any judgment in any pending or threatened claim, action, suit or proceeding in respect of which indemnification may be sought hereunder, if such settlement, compromise or consent includes an admission of culpability or wrong-doing on the part of such Indemnitee or the entry or an order, injunction or other equitable or nonmonetary relief (including any administrative or other sanctions or disqualifications) against such Indemnitee or if such settlement, compromise or consent does not include an unconditional release of such Indemnitee from all liability arising out of such claim, action, suit or proceeding. (ci Subject to the limitations on liability set forth in Section 8.3 of the Pooling and Servicing Agreement, the Servicer shall indemnify and hold harmless each Indemnitee from and against any and all claims, damages, losses, liabilities, costs or expenses whatsoever which such Indemnitee may incur (or which may be claimed against such Indemnitee) by reason of any acts or omissions or alleged acts or omissions of the Servicer hereunder or with respect to activities of the Trust or the Trustee for which the Servicer is responsible under the Pooling and Servicing Agreement or hereunder, subject, with respect to the obligations of the Servicer in respect of activities of the Trust or the Trustee for which the Servicer is responsible under the Pooling and Servicing Agreement, to the provisos set forth in Section 8.4 of the Pooling and Servicing Agreement. Subject to Section 9.5, any Successor Servicer, by accepting its appointment pursuant to the Pooling and Servicing Agreement, (i) shall agree to be bound by the terms, covenants and conditions contained herein applicable to the Servicer and to be subject to the duties and obligations of the Servicer hereunder, (ii) as of the date of its acceptance, shall be deemed to have made with respect to itself the representations and warranties made by the SRI in subsections 4.2(a) through (f) (in the case of subsection 4.2(a), with appropriate factual changes) and (iii) shall agree to indemnify and hold harmless any Indemnitee from and against any and all claims, damages, losses, liabilities, costs or expenses (including reasonable fees and expenses of counsel) whatsoever which any such Indemnitee may incur (or which may be claimed against such Indemnitee) by reason of any acts or omissions or alleged acts or omissions of the Servicer hereunder or with respect to activities of the Trust or the Trustee for which the Servicer is responsible under the Pooling and Servicing Agreement or hereunder. (di (i) In the event that for any reason, (A) the basis for calculation of interest on any Conduit Purchaser's Percentage Interest of the Class B Principal Balance shall change from the Commercial Paper Rate to the Alternative Rate, or (B) any Conduit Purchaser receives any repayment of its share of the Class B Principal Balance, and the date of such change or of such repayment is not the maturity date for all Commercial Paper Notes allocated by such Conduit Purchaser to funding its purchase or maintenance of the affected portion of its Percentage Interest of the Class B Principal Balance, or (ii) in the event that for any reason, (A) the basis for calculation of interest on any Class B Purchaser's Percentage Interest of the Class B Principal Balance shall change from the Alternative Rate to the Risk Rate, (B) the basis for calculation of the Alternative Rate shall change from the Class B Adjusted Eurodollar Rate to the Corporate Base Rate, or (C) any Class B Purchaser receives any repayment of its share of the Class B Principal Balance which bears interest calculated by reference to the Class B Adjusted Eurodollar Rate and the date of such repayment is not a Distribution Date, then in any such case the Transferor agrees to indemnify each affected Class B Purchaser against, and to promptly pay on demand directly to such Class B Purchaser the amount equal to any loss or reasonable out- of-pocket expense suffered by such Class B Purchaser as a result of such change or such repayment, including any loss, cost or expense suffered by reason of its issuance of Commercial Paper Notes (in the case of a Conduit Purchaser) or the incurrence of other obligations allocated by such Class B Purchaser to its funding or the maintenance of its funding of its share of the Class B Principal Balance, or deploying the funds prepaid or repaid in amounts which correspond to its share of the Class B Principal Balance. In the event that for any reason (other than a default by a Committed Purchaser or Liquidity Purchaser hereunder) the purchase of the entire Class B Initial Invested Amount does not occur on the Closing Date or, after notice of a purchase of an Additional Class B Invested Amount has been given pursuant to subsection 2.1(c), the purchase of the entire amount of such Additional Class B Invested Amount does not occur on the applicable Purchase Date, then in any such case SRI agrees to indemnify each affected Class B Purchaser against, and to promptly pay on demand directly to such Class B Purchaser the amount equal to any loss or reasonable out-of-pocket expense suffered by such Class B Purchaser as a result of such change or such repayment, including any loss, cost or expense suffered by reason of its issuance of Commercial Paper Notes (in the case of a Conduit Purchaser) or the incurrence of other obligations allocated by such Class B Purchaser to its funding or the maintenance of its funding of its share of the Class B Principal Balance (including in liquidating or employing deposits acquired to fund or maintain the funding of its share of the Class B Principal Balance which would have borne interest by reference to the Adjusted Eurodollar Rate). A statement setting forth in reasonable detail the calculations of any additional amounts payable pursuant to this Section submitted by a Class B Purchaser or Agent on its behalf, to the Transferor or SRI, as applicable, and the Servicer and shall be conclusive absent manifest error. The obligations of the Transferor under this subsection 2.6(d) are subject to subsection 9.11(a) hereof. (ei Subject to subsection 9.11(a) hereof in the case of the Transferor, the obligations of SRPC, SRI, the Transferor and the Servicer under this Agreement shall be absolute, unconditional and irrevocable and shall be performed strictly in accordance with the terms of this Agreement. Without limiting the foregoing, neither the lack of validity or enforceability of, or any modification to, any Related Document nor the existence of any claim, setoff, defense or other right which SRPC, SRI, the Trust, the Trustee, on behalf of the Trust, the Transferor and the Servicer may have at any time against each other, any Agent, the Facility Agent, any Class B Purchaser, any Support Party or any other Person, whether in connection with any Related Document or any unrelated transactions, shall constitute a defense to such obligations. SECTION 3. CONDITIONS PRECEDENT 3.1 Condition to Initial Purchase. The following shall be conditions precedent to the initial purchase by any Class B Purchasers of the Class B Certificates: (ai the representations and warranties of SRPC and SRI set forth or referred to in Section 4.1 and 4.2 hereof shall be true and correct in all material respects on Closing Date as though made on and as of the Closing Date, and no event which of itself or with the giving of notice or lapse of time, or both, would constitute a Termination Event shall have occurred and be continuing on the Closing Date; (bi the Master Pooling and Servicing Agreement, the Supplement and the Issuance Supplement shall have been duly executed and delivered by all parties thereto and shall be in form and substance satisfactory to the Class B Purchasers; (ci the Receivables Purchase Agreement and the Receivables Transfer Agreement shall not have been amended or otherwise modified, other than as disclosed to the Class B Purchasers in writing prior to the Closing Date; (di Class C Certificates, Class D Certificates and Class E Certificates shall have been duly issued in accordance with the Pooling and Servicing Agreement which have a Class C Initial Invested Amount, Class D Initial Invested Amount and Class E Initial Invested Amount which aggregates at least 19% of the Initial Invested Amount; (ei arrangements satisfactory to the Class B Purchasers shall have been made for the repayment and defeasance in full of the Trust's Series 1993-1 Certificates, Series 1995-1 Certificates and Series 1997-1 Certificates and the Transferor's 12.5% Series B Trust Certificate-Backed Notes; (fi all up front fees and expenses agreed and specified in the Class B Fee Letter shall have been paid by SRPC on the Closing Date, and arrangements satisfactory to the initial Class B Purchasers and the initial Agent shall have been made for the payment of amounts required to be paid by SRPC pursuant to subsection 2.3(b) with respect to the preparation, execution, delivery and initial syndication of this Agreement and each related Support Facility and the other documents to be delivered hereunder or in connection herewith; (gi with respect to each Conduit Purchaser, its Support Facilities shall be in full force and effect; and (hi the initial Agent on behalf of the Class B Purchasers shall have received on the Closing Date the following items, each of which shall be in form and substance satisfactory to such Agent: (i0 an Officer's Certificate of SRPC or SRI, as applicable, confirming the satisfaction of the conditions set forth in clause (a) and clauses (c) through (f), inclusive, above; (ii0 a copy of (A) the charter and by-laws of SRPC, SRI and Granite, certified by its authorized officer, (B) an incumbency certificate with respect to its officers executing any of the Related Documents on the Closing Date on behalf of, part of SRPC and SRI certified by its authorized officer, (C) good standing certificates from the appropriate Governmental Authority as of a recent date with respect to each of SRPC, SRI and Granite and (D) resolutions of the Board of Directors (or an authorized committee thereof) of each of SRPC, SRI and Granite with respect to the Related Documents to which it is party, certified by its authorized officer; (iii0 the favorable written opinions of counsel for SRPC, SRI and Granite addressed to the Agents, the Facility Agent, the Class B Purchasers and the Support Parties, or accompanied by a letter providing that the Agents, the Facility Agent, the Class B Purchasers and the Support Parties may rely on such opinions as if they were addressed to them, and dated the Closing Date, covering general corporate matters, the due execution and delivery of, and the enforceability of, each of the Related Documents to which SRPC and SRI (individually or as Transferor or Servicer) is party, sale/security interest and nonconsolidation matters, tax matters and such other matters as the initial Agent may request; (iv0 [reserved]; (v0 evidence of the due execution and delivery by the Trustee of the Related Documents to which it is party; (vi0 an executed copy of the Supplement and the Issuance Supplement and a conformed copy of the Master Pooling and Servicing Agreement, the Receivables Purchase Agreement and the Receivables Transfer Agreement; (vii0 executed copies of all opinions required by Article VI of the Pooling and Servicing Agreement or by any Rating Agency in connection with the issuance, sale or rating of the Series 1999-1 (each such opinion, unless otherwise agreed to by the initial Agent, to be addressed to such Agent, on behalf of itself and the Class B Purchasers in its Purchaser Group, and to the Facility Agent or accompanied by a letter providing that such Agent, on behalf of itself and the Class B Purchasers in its Purchaser Group, the Facility Agent and the Support Parties may rely on such opinion as if it were addressed to it), and such additional documents, instruments, certificates or letters as such Agent may reasonably request; (viii0 the duly executed Class B Certificate(s) registered in the name of the initial Agent as nominee on behalf of the Class B Owners; (ix0 evidence satisfactory to the initial Agent that the Class A-1 Certificates and the Class A-2 Certificates are rated Aaa by Moody's and AAA by Fitch IBCA, Inc. and that the Class B Certificates are rated not less than A1 by Moody's and not less than A by Fitch IBCA, Inc.; and (x0 evidence satisfactory to each Conduit Purchaser that Moody's and Standard & Poor's has confirmed in writing that the purchase by it of Class B Certificates (including Additional Class B Invested Amounts thereunder) would not result in a reduction or withdrawal of such rating agency's then applicable rating of the commercial paper of such Conduit Purchaser, without giving effect to any increase in any letter of credit or other enhancement provided to such Conduit Purchaser (other than liquidity support provided to such Conduit Purchaser by Liquidity Providers). 3.2 Condition to Additional Purchases. The following shall be conditions precedent to each purchase by any Class B Purchasers of Additional Class B Invested Amounts hereunder: (ai the Transferor shall have timely delivered a notice of purchase pursuant to subsection 2.1(c) of this Agreement; (bi the representations and warranties of SRPC and SRI set forth or referred to in Section 4.1 and 4.2 hereof shall be true and correct in all material respects on the date of such purchase as though made on and as of such date; (ci (i) all interest, fees, expenses and all other amounts then due and payable to any Agent or Class B Purchaser or to the Facility Agent hereunder (including any amounts owed under Sections 2.3, 2.4, 2.5 or 2.6, but excluding the Class B Principal Balance) shall have been paid, and (ii) no event which of itself or with the giving of notice or lapse of time, or both, would constitute a Termination Event shall have occurred and be continuing on such date; (di after giving effect to such purchase of Additional Class B Invested Amount, (i) the Class B Principal Balance shall not exceed the Class B Purchase Limit, and (ii) the aggregate Class B Principal Balance, minus the aggregate unpaid portion of all Class B Exiting Purchaser Amortization Amounts, shall not exceed the aggregate Commitments of the Committed Purchasers and Liquidity Purchasers; (ei after giving effect to such purchase, the sum of the Class C Invested Amount, the Class D Invested Amount and the Class E Invested Amount shall equal not less than 19% of the Invested Amount on the applicable Purchase Date; (fi there shall exist no unreimbursed Class E Investor Charge-Offs; (gi the Class A-1 Certificates and the Class A-2 Certificates remain rated Aaa by Moody's and AAA by Fitch IBCA, Inc. and the Class B Certificates remain rated not less than A1 by Moody's and not less than A by Fitch IBCA, Inc; (hi the conditions set forth in Section 6.15 of the Pooling and Servicing Agreement to the issuance of such Additional Class B Invested Amount shall have been satisfied; (ii the Additional Class B Invested Amount, when aggregated with additional invested amounts being purchased on such Purchase Date pursuant to the Class A-1 Purchase Agreement and the Class A-2 Purchase Agreement, shall equal a minimum amount of $1,000,000 and be shall be in an integral multiple of $250,000; (ji after giving effect to such purchase of Additional Class B Invested Amount, no more than two changes in the Class A Invested Amount or the Class B Invested Amount shall have occurred in any calendar week; (ki with respect to each Conduit Purchaser, its Support Facilities shall be in full force and effect; and (li in the case of each Increase Date, the Transferor shall have delivered to the Facility Agent and each Agent an Officer's Certificate dated such Purchase Date certifying (i) that the conditions described in clauses (a) through (j) above have been satisfied and (ii) that based on the facts known to the officer signing such Officer's Certificate at such time, in the reasonable belief of the Transferor, the purchases of the Additional Class B Invested Amounts and any other purchases with respect to the Series 1999-1 Certificates to be purchased on such Purchase Date will not cause a Pay Out Event, a Series 1999-1 Pay Out Event or a Mandatory Partial Amortization Event or an event that, after the giving of notice or the lapse of time, would constitute an Pay Out Event, a Series 1999-1 Pay Out Event or a Mandatory Partial Amortization Event to occur. SECTION 4. REPRESENTATIONS AND WARRANTIES 4.1 Representations and Warranties of SRPC. SRPC repeats and reaffirms to the Class B Purchasers, the Agents and the Facility Agent the representations and warranties of the Transferor set forth in Sections 2.3 of the Pooling and Servicing Agreement, and represents and warrants that such representations and warranties are true and correct as of the date hereof. SRPC further represents and warrants to, and agrees with, each Agent and Class B Purchaser and the Facility Agent that, as of the date hereof: (ai SRPC is a duly organized and validly existing corporation in good standing under the laws of the State of Delaware, with corporate power and authority to own its properties and to transact the business in which it is now engaged. SRPC is duly qualified to do business (or is exempt from such qualification) and is in good standing in each State of the United States where the nature of its business requires it to be so qualified. (bi SRPC has the full corporate power, authority and legal right to make, execute, deliver and perform the Related Documents to which it is party (individually or as Transferor) and all of the transactions contemplated thereby and to issue the Series 1999-1 Certificates from the Trust and has taken all necessary corporate action to authorize the execution, delivery and performance of the Related Documents to which it is party and such issuance. Each of the Related Documents to which SRPC is party (individually or as Transferor) constitutes its legal, valid and binding agreement enforceable in accordance with its terms (subject to applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of the rights of creditors generally and except as such enforceability may be limited by general principles of equity, whether considered in a proceeding at law or in equity). (ci SRPC is not required to obtain the consent of any other party or any consent, license, approval or authorization of, or registration with, any Governmental Authority in connection with the execution, delivery or performance of each of the Related Documents to which it is party (individually or as Transferor) that has not been duly obtained and which is not and will not be in full force and effect on the Closing Date. (di SRPC's execution, delivery and performance of the Related Documents to which it is party (individually or as Transferor) do not violate or conflict with any provision of any existing law or regulation applicable to SRPC or any order or decree of any court to which SRPC is subject or the Certificate of Incorporation or Bylaws of SRPC, or any mortgage, security agreement, indenture, contract or other agreement to which SRPC is a party or by which SRPC or any significant portion of its properties is bound. (ei There is no litigation, investigation or administrative proceeding before any court, tribunal, regulatory body or governmental body presently pending, or, to the knowledge of SRPC, threatened, with respect to any of the Related Documents, the transactions contemplated thereby, or the issuance of the Series 1999-1 Certificates and there is no such litigation or proceeding against SRPC or any significant portion of its properties which would, individually or in the aggregate, have a material adverse effect on the transactions contemplated by any of the Related Documents or the ability of SRPC to perform its obligations thereunder. (fi SRPC is not insolvent or the subject of any insolvency or liquidation proceeding. The financial statements of SRPC delivered to each Agent are complete and correct in all material respects and fairly present the financial condition of SRPC as of date of such statements and the results of operations of SRPC for the period then ended, all in accordance with United States generally accepted accounting principles consistently applied. Since the date of the most recent audited financial statements of SRPC delivered to each Agent, there has not been any material adverse change in the condition (financial or otherwise) of SRPC. (gi There are no outstanding comments from the most recent report prepared by the independent public accountants for SRPC (individually or in its capacity as Transferor) in connection with its credit card receivables. (hi No Trust Pay Out Event, Series 1999-1 Pay Out Event, Mandatory Partial Amortization Event, Servicer Default or Termination Event has occurred and is continuing, and no event, act or omission has occurred and is continuing which, with the lapse of time, the giving of notice, or both, would constitute such an event or default. (ii The Pooling and Servicing Agreement is not required to be qualified under the Trust Indenture Act of 1939, as amended, and neither the Trust nor SRPC is required to be registered under the Investment Company Act of 1940, as amended. (ji The Receivables conveyed by SRPC to the Trust under the Pooling and Servicing Agreement are in an aggregate amount, determined as of November 9, 1999, of $340,005,003, consisting of $319,054,670 of Principal Receivables and $20,950,333 of Finance Charge Receivables. The Receivables Purchase Agreement is in full force and effect on the date hereof and no material default by any party exists thereunder. As of the Closing Date, after giving effect to the payments and defeasances contemplated by subsection 3.1(e), there will be no Investor Certificates of the Trust, other than the Series 1999-1 Certificates, outstanding. (ki The Trust is duly created and existing under the laws of the State of New York. Simultaneous with the closing hereunder, all conditions to the issuance and sale of the Series 1999-1 Certificates set forth in the Pooling and Servicing Agreement have been satisfied and the Series 1999-1 Certificates have been duly issued by the Trust. (li Neither SRPC nor any of its Affiliates has directly, or through any agent, (i) sold, offered for sale, solicited offers to buy or otherwise negotiated in respect of, any "security" (as defined in the Securities Act) that is or will be integrated with the sale of the any Series 1999-1 Certificates in a manner that would require the registration under the Securities Act of the offering of the Series 1999-1 Certificates or (ii) engaged in any form of general solicitation or general advertising (as those terms are used in Regulation D under the Securities Act) in connection with the offering of the Series 1999-1 Certificates or in any manner involving a public offering thereof within the meaning of Section 4(2) of the Securities Act. Assuming the accuracy of the representations and warranties of each Class B Purchaser in its Investment Letter and of each purchaser of Class A-1 Certificates, Class A-2 Certificates, Class C Certificates and Class D Certificates in their respective investment letters, the offer and sale of the Series 1999-1 Certificates are transactions which are exempt from the registration requirements of the Securities Act. (mi All written factual information heretofore furnished by SRPC to, or for delivery to, any Agent or Class B Purchaser for purposes of or in connection with this Agreement, including information relating to the Accounts, the Receivables, and SRI's credit card business, was true and correct in all material respects on the date as of which such information was stated or certified and remains true and correct in all material respects (unless such information specifically relates to an earlier date in which case such information shall have been true and correct in all material respects on such earlier date). 4.2 Representations and Warranties of SRI. SRI repeats and reaffirms to the Class B Purchasers, the Agents and the Facility Agent the representations and warranties of the Servicer set forth in Section 3.3 of the Pooling and Servicing Agreement, and represents and warrants that such representations and warranties are true and correct as of the date hereof. SRI further represents and warrants to, and agree with, each Agent and Class B Purchaser and the Facility Agent that, as of the date hereof: (ai SRI is a duly organized and validly existing corporation in good standing under the laws of the State of Texas, with corporate power and authority to own its properties and to transact the business in which it is now engaged. SRI is duly qualified to do business (or is exempt from such qualification) and is in good standing in each State of the United States where the nature of its business requires it to be so qualified. (bi SRI has the full corporate power, authority and legal right to make, execute, deliver and perform the Related Documents to which it is party (individually or as Servicer) and all of the transactions contemplated thereby and has taken all necessary corporate action to authorize the execution, delivery and performance of the Related Documents to which it is party and such issuance. Each of the Related Documents to which SRI is party (individually or as Servicer) constitutes its legal, valid and binding agreement enforceable in accordance with its terms (subject to applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of the rights of creditors of national banking associations generally and except as such enforceability may be limited by general principles of equity, whether considered in a proceeding at law or in equity). (c) SRI is not required to obtain the consent of any other party or any consent, license, approval or authorization of, or registration with, any Governmental Authority in connection with the execution, delivery or performance of each of the Related Documents to which it is party (individually or as Servicer) that has not been duly obtained and which is not and will not be in full force and effect on the Closing Date. (d) The execution, delivery and performance by SRI of the Related Documents to which it is party (individually or as Servicer) do not violate or conflict with any provision of any existing law or regulation applicable to SRI or any order or decree of any court to which SRI is subject or the Certificate of Incorporation or Bylaws of SRI, or any mortgage, security agreement, indenture, contract or other agreement to which SRI is a party or by which SRI or any significant portion of its properties is bound. (e) There is no litigation, investigation or administrative proceeding before any court, tribunal, regulatory body or governmental body presently pending, or, to the knowledge of SRI, threatened, with respect to any of the Related Documents, the transactions contemplated thereby, or the issuance of the Series 1999-1 Certificates, and there is no such litigation or proceeding against SRI or any significant portion of its properties which would, individually or in the aggregate, have a material adverse effect on the transactions contemplated by any of the Related Documents or the ability of SRI to perform its obligations thereunder. (f) SRI is not insolvent or the subject of any insolvency or liquidation proceeding. The financial statements of SRI delivered to any Agent or Class B Purchaser are complete and correct in all material respects and fairly present the financial condition of SRI as of date of such statements and its results of operations for the period then ended, all in accordance with United States generally accepted accounting principles consistently applied. Since the date of the most recent audited financial statements of SRI delivered to the Agents and the Class B Purchasers through the Closing Date, there has not been any material adverse change in the condition (financial or otherwise) of SRI, other than changes (if any) disclosed in Stage's filings with the SEC pursuant to the Securities Exchange Act of 1934, as amended, or disclosed in a writing addressed to the Facility Agent and the initial Agent. (g) There are no outstanding comments from the most recent report prepared by the independent public accountants for SRI (individually or in its capacity as Servicer) in connection with its credit card receivables. (h) No Trust Pay Out Event, Series 1999-1 Pay Out Event, Mandatory Partial Amortization Event, Servicer Default or Termination Event has occurred and is continuing, and no event, act or omission has occurred and is continuing which, with the lapse of time, the giving of notice, or both, would constitute such an event or default. (i) The Pooling and Servicing Agreement is not required to be qualified under the Trust Indenture Act of 1939, as amended, and neither the Trust, SRPC nor SRI is required to be registered under the Investment Company Act of 1940, as amended. (j) The Receivables Purchase Agreement is in full force and effect on the date hereof and no material default by any party exists thereunder. (k) The Trust is duly created and existing under the laws of the State of New York. Simultaneous with the closing hereunder, all conditions to the issuance and sale of the Series 1999-1 Certificates set forth in the Pooling and Servicing Agreement have been satisfied and the Series 1999-1 Certificates have been duly issued by the Trust. (l) To the knowledge of SRI, the representations and warranties of SRPC set forth in Section 4.1 above are true and correct in all material respects. (m) The representations and warranties of Granite set forth in Section 4.02 and 4.03 of the Receivables Transfer Agreement are true and correct in all material respects. (n) The Servicer and the Transferor have each (i) initiated a review and assessment of all areas within its business and operations (including those affected by suppliers, vendors and customers) that could be adversely affected by the risk that computer applications used by the Servicer or the Transferor (or suppliers, vendors and customers) may be unable to recognize and perform properly date-sensitive functions involving certain dates prior to and any date after December 31, 1999 (the "Year 2000 Problem"), (ii) developed a plan and timeline for addressing the Year 2000 Problem on a timely basis, and (iii) to date, implemented that plan in accordance with that timetable. Based on the foregoing, the Servicer and the Transferor each believe that all computer applications (including those of its suppliers, vendors and customers) that are material to its business and operations are reasonably expected on a timely basis to be able to perform properly date-sensitive functions for all dates before and after January 1, 2000 (that is, be "Year 2000 Compliant"), except to the extent that a failure to do so could not reasonably be expected (a) to have a material adverse effect on the financial condition or operations of the Servicer or the Transferor or on the transactions documented under this Agreement or any Related Document, or (b) to result in a Termination Event. Each of the Transferor and the Servicer (i) has completed a review and assessment of all computer applications (including, but not limited to those of its suppliers, vendors, customers and any third party servicers), which are related to or involved in the origination, collection, management or servicing of the Accounts and the Receivables (the "Contract Systems") and (ii) has determined that such Contract Systems are Year 2000 Compliant. The costs of all assessment, remediation, testing and integration related to the plans of the Servicer and the Transferor for becoming Year 2000 Compliant will not have a material adverse effect on the financial condition or operations of the Servicer or the Transferor. (o) All written factual information heretofore furnished by SRPC, SRI, Granite or Stage to, or for delivery to, any Agent or Class B Purchaser for purposes of or in connection with this Agreement, including information relating to the Accounts, the Receivables and the credit card business of SRPC, Granite or SRI, was true and correct in all material respects on the date as of which such information was stated or certified and remains true and correct in all material respects (unless such information specifically relates to an earlier date in which case such information shall have been true and correct in all material respects on such earlier date). 4.3 Representations and Warranties of the Agents, the Facility Agent and the Class B Purchasers. Each Agent, the Facility Agent and each Committed Purchaser and the Liquidity Purchaser severally (each with respect to itself only) represents and warrants to, and agrees with, the Transferor and the Servicer, that: (a) It is duly authorized to enter into and perform this Agreement and, in the case of the Class B Purchasers, to purchase its Purchaser Percentage or Liquidity Percentage (if any) of the Class B Certificates, and has duly executed and delivered this Agreement; and the person signing this Agreement on behalf of such Agent, the Facility Agent or such Class B Purchaser, as the case may be, has been duly authorized to do so. (b) This Agreement constitutes the legal, valid and binding obligation of such Agent, the Facility Agent or such Class B Purchaser, enforceable in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, conservatorship or other similar laws now or hereafter in effect affecting the enforcement of creditors' rights in general, and except as such enforceability may be limited by general principles of equity (whether considered in a proceeding at law or in equity). (c) No registration with or consent or approval of or other action by any state or local governmental authority or regulatory body having jurisdiction over such Agent, the Facility Agent or such Class B Purchaser is required in connection with its execution, delivery or performance of this Agreement, other than as may be required under the blue sky laws of any state. (d) The execution, delivery or performance by such Agent, the Facility Agent or such Class B Purchaser of this Agreement do not violate or conflict with any provision of any existing law or regulation applicable to it or any order or decree of any court to which it is subject, its charter or bylaws, or any mortgage, security agreement, indenture, contract or other agreement to which such it is a party or by which it or any significant portion of its properties is bound, in any such case if such violation or conflict would have an adverse affect on its right or ability to execute, deliver or perform its obligations under this Agreement. SECTION 5. COVENANTS 5.1 Covenants of SRPC and SRI. SRPC (individually or, as set forth below, as the Transferor) and SRI (individually and, as set forth below, as the Servicer), each as to itself in such capacity or capacities, and subject to subsection 9.11(a) in the case of the Transferor, covenants and agrees, through the Purchase Termination Date for all Class B Purchasers and thereafter so long as any amount of the Class B Principal Balance shall remain outstanding or any monetary obligation arising hereunder shall remain unpaid, unless the Required Class B Owners and the Required Class B Purchasers shall otherwise consent in writing, that: (a) each of SRPC, SRI, the Transferor and the Servicer shall perform in all material respects each of the respective agreements, warranties and indemnities applicable to it and comply in all material respects with each of the respective terms and provisions applicable to it under the other Related Documents to which it is party, which agreements, warranties and indemnities are hereby incorporated by reference into this Agreement as if set forth herein in full; and each of SRPC, SRI, the Transferor and the Servicer shall take all reasonable action to enforce the obligations of each of the other parties to such Related Documents which are contained therein; (b) the Transferor and the Servicer shall furnish to each Agent (i) a copy of each opinion, certificate, report, statement, notice or other communication (other than investment instructions) relating to the Series 1999-1 Certificates which is furnished by or on behalf of either of them to Certificateholders, to any Rating Agency or to the Trustee, a copy of each notice, demand or other communication relating to the Series 1999-1 Certificates, this Agreement or the Pooling and Servicing Agreement received by the Transferor or the Servicer from the Trustee, any Rating Agency or 10% or more of the Series 1999-1 Certificateholders (to the extent such notice, demand or communication relates to the Accounts, the Receivables, any Servicer Default, any Trust Pay Out Event, any Series 1999-1 Pay Out Event or any Mandatory Partial Amortization Event); and (ii) such other information, documents records or reports respecting the Trust, the Accounts, the Receivables, the Transferor or the Servicer as any Agent may from time to time reasonably request without unreasonable expense to the Transferor or the Servicer; (c) the Servicer shall furnish to each Agent on or before the date such reports are due under the Pooling and Servicing Agreement copies of each of the reports and certificates required by subsection 3.4(c) or Section 3.5 or 3.6 of the Pooling and Servicing Agreement (which in the case of the reports pursuant to Section 3.6, shall be addressed to the Facility Agent and each Agent); (d) the Servicer shall promptly furnish to each Agent a copy, addressed to such Agent, of each opinion of counsel delivered to the Trustee pursuant to subsection 13.2(d) of the Pooling and Servicing Agreement; (e) SRI shall furnish to each Agent (i) promptly when publicly available, the annual (audited) and quarterly (unaudited) consolidated and consolidating financial statements of each of Stage and SRPC, the publicly available portions of Granite's quarterly and annual consolidated reports of condition and income and such other publicly available financial information, if any, as to Stage, SRI, Granite or SRPC as such Agent may request, and (ii) promptly after known to SRI, information with respect to any action, suit or proceeding involving SRI or any of its Affiliates by or before any court or any Governmental Authority which, if adversely determined, would materially adversely affect the business, results of operation or financial condition of SRPC, SRI or Granite; (f) the Servicer shall furnish to each Agent a certificate concurrently with its delivery of its annual certificate pursuant to Section 3.5 of the Pooling and Servicing Agreement stating that no Termination Event or event or condition which with the passage of time or the giving of notice, or both, would constitute a Termination Event has occurred or, if such a Termination Event, event or condition has occurred, identifying the same in reasonable detail; (g) the Transferor shall not exercise its right to accept optional reassignment of the Receivables or repurchase the Series 1999-1 Certificates pursuant to Section 12.2 of the Pooling and Servicing Agreement, unless the Class B Purchasers, each Agent and the Facility Agent have been paid, or will be paid upon such repurchase or in connection with such optional reassignment, the Class B Principal Balance, all interest thereon and all other amounts owing hereunder in full; (h) the Transferor and the Servicer shall at any time from time to time during regular business hours, on reasonable notice to the Transferor or the Servicer, as the case may be, permit each Agent and the Facility Agent, or its agents or representatives to: (i) examine all books, records and documents (including computer tapes and disks) in its possession or under its control relating to the Receivables, and (ii) visit its offices and property for the purpose of examining such materials described in clause (i) above. The information obtained by any Agent, the Facility Agent or any Class B Purchaser pursuant to this subsection shall be held in confidence in accordance with Section 6.2 hereof; (i) the Transferor and the Servicer shall use reasonable efforts to cooperate with each Agent (including affording reasonable inspection rights, assisting in the preparation of syndication material, attending investor meetings, providing access to its officers and providing reliance letters with respect to opinions delivered in connection with the issuance of the Series 1999-1 Certificates on the Closing Date) in its effort to syndicate the Commitments; (j) the Servicer shall furnish to each Agent, promptly after the occurrence of any Servicer Default, Termination Event, Trust Pay Out Event, Mandatory Partial Amortization Event or Series 1999-1 Pay Out Event, a certificate of an appropriate officer of the Servicer setting forth the circumstances of such Servicer Default, Termination Event, Trust Pay Out Event, Mandatory Partial Amortization Event or Series 1999-1 Pay Out Event and any action taken or proposed to be taken by the Servicer or the Transferor with respect thereto; (k) the Transferor and the Servicer shall timely make all payments, deposits or transfers and give all instructions to transfer required by this Agreement, the Pooling and Servicing Agreement and the Receivables Purchase Agreement; (l) neither the Transferor, the Servicer nor the Originator shall terminate (except in accordance with the terms thereof), amend, waive or otherwise modify the Master Pooling and Servicing Agreement, the Supplement, or the Issuance Supplement unless (i) such amendment, waiver or modification shall not, as evidenced by an Officer's Certificate of the Transferor delivered to each Agent, adversely affect in any material respect the interests of any Agent, the Facility Agent or the Class B Purchasers under any Related Document, and will not result in a reduction or withdrawal of the then current rating by any Rating Agency of any commercial paper notes issued by any Conduit Purchaser without giving effect to any increase in any letter of credit or other enhancement provided to such Conduit Purchaser; and (ii) all of the applicable provisions of Section 13.1 of the Pooling and Servicing Agreement have been complied with; (m) the Transferor and the Servicer shall execute and deliver to each Agent, the Facility Agent or the Trustee all such documents and instruments and do all such other acts and things as may be necessary or reasonably required by any Agent, the Facility Agent or the Trustee to enable any of them to exercise and enforce their respective rights under the Related Documents and to realize thereon, and record and file and rerecord and refile all such documents and instruments, at such time or times, in such manner and at such place or places, all as may be necessary or required by the Trustee, the Facility Agent or any Agent to validate, preserve, perfect and protect the position of the Trustee under the Pooling and Servicing Agreement; (n) neither the Transferor nor the Servicer will consolidate with or merge into any other Person or convey or transfer its properties and assets substantially as an entirety to any Person, except (i) in accordance with Section 7.2 or 8.2 of the Pooling and Servicing Agreement, and (ii) with the prior written consent of the Required Class B Owners and the Required Class B Purchasers; (o) SRI will not (i) resign as Servicer, unless (A) the performance of its duties under the Pooling and Servicing Agreement is no longer permissible pursuant to Requirements of Law and there is no reasonable action which it could take to make the performance of such duties permissible under such Requirements of Law, or (B) the Required Class B Owners and the Required Class B Purchasers shall have consented thereto, (ii) delegate any of its material duties under the Pooling and Servicing Agreement except as permitted by Section 8.7 of the Pooling and Servicing Agreement and unless the Person to which such delegation is made is a wholly owned subsidiary (directly or indirectly) of Stage, is legally qualified and licensed (to the extent required) to perform the duties delegated to it, owns or holds under valid leases or (in the case of software) licenses all computer equipment and software and other equipment and rights which are required for such Person to perform such duties, and employs sufficient and adequately trained personnel to perform such duties, or (iii) appoint or permit the appointment of a Successor Servicer other than the Trustee under the provisions of the Pooling and Servicing Agreement without consultation with the Facility Agent; (p) The Transferor and the Servicer shall not permit any newly issued Series of Investor Certificates (or, with respect to a prefunded Series, interests therein) other than Series 1999-1 to be issued by the Trust or the terms of any new class or subclass of Series 1999-1 Certificates other than the Class A-1 Certificates, Class A-2 Certificates, Class B Certificates, Class C Certificates, Class D Certificates and Class E Certificates to be specified pursuant to any amendment or modification to the Issuance Supplement or any additional issuance supplement, the proceeds of which newly issued Series or such new class will be applied to reduce the Class A Invested Amount or the Class B Invested Amount (each, a "New Issuance"), unless (i) [reserved]; (ii) such proceeds are applied in accordance with subsection 5(b)(iii) of the Issuance Supplement; (iii) the Transferor shall have a delivered (A) notice of the estimated date and amount of such New Issuance to the Facility Agent and each Agent (which shall promptly forward a copy of such notice to each Class B Purchaser in its Purchaser Group) not less than 20 days prior to such estimated date, and (B) notice of the actual date and amount of such New Issuance to the Facility Agent and each Agent (which shall promptly forward a copy of such notice to each Class B Purchaser in its Purchaser Group) not less than three Business Days prior to such date; (iv) on the date on which the Transferor has sold such New Issuance, all interest, fees, expenses and all other amounts then due and payable to any Agent or Class B Purchaser or to the Facility Agent hereunder (including any amounts owed under Sections 2.3, 2.4, 2.5 or 2.6, but excluding the Class B Principal Balance) shall have been paid; (v) on the date on which the Transferor has sold such New Issuance, no Termination Event shall have occurred and be continuing, and there shall exist no unreimbursed Class E Investor Charge-Offs; (vi) the Facility Agent shall have received confirmation that, after giving effect to such New Issuance, the Class A-1 Certificates and the Class A-2 Certificates remain rated Aaa by Moody's and AAA by Fitch IBCA, Inc. and the Class B Certificates remain rated not less than A1 by Moody's and not less than A by Fitch IBCA, Inc; (vii) the conditions set forth in Section 6.15 of the Pooling and Servicing Agreement or in the Issuance Supplement to the New Issuance shall have been satisfied; and (viii) on the date on which the Transferor has sold such New Issuance, the Transferor shall have delivered to the Facility Agent and each Agent an Officer's Certificate dated such date certifying (A) that the conditions described in clauses (i) through (viii) above have been satisfied and (B) that based on the facts known to the officer signing such Officer's Certificate at such time, in the reasonable belief of the Transferor, the New Issuance will not cause a Pay Out Event, a Series 1999-1 Pay Out Event or a Mandatory Partial Amortization Event or an event that, after the giving of notice or the lapse of time, would constitute an Pay Out Event, a Series 1999-1 Pay Out Event or a Mandatory Partial Amortization Event to occur. If, as the result of a New Issuance, the Class A-2 Invested Amount is reduced to zero, the Transferor agrees to terminate all commitments under the Class A-2 Purchase Agreement at the request of the Facility Agent in its discretion. SECTION 6. MUTUAL COVENANTS REGARDING CONFIDENTIALITY 6.1 Covenants of SRPC, Etc. SRPC, SRI, the Transferor and the Servicer shall hold in confidence, and not disclose to any Person, the terms of any fees payable in connection with this Agreement except they may disclose such information (i) to their officers, directors, employees, agents, counsel, accountants, auditors, advisors or representatives, (ii) with the consent of the Required Class B Purchasers and each Agent, or (iii) to the extent SRPC, SRI, Granite, the Transferor or the Servicer or any Affiliate of either of them should be required by any law or regulation applicable to it or requested by any Governmental Authority to disclose such information; provided, that, in the case of clause (iii), SRPC, Granite, the Transferor or the Servicer, as the case may be, will use all reasonable efforts to maintain confidentiality and will (unless otherwise prohibited by law) notify each Agent of its intention to make any such disclosure prior to making such disclosure. 6.2 Covenants of Class B Purchasers. Each Agent, the Facility Agent and each Class B Purchaser, severally and with respect to itself only, covenants and agrees that any information obtained by such Agent, the Facility Agent or such Class B Purchaser pursuant to this Agreement shall be held in confidence (it being understood that documents provided to an Agent hereunder may in all cases be distributed by such Agent or the Facility Agent to the Class B Purchasers), except that such Agent, the Facility Agent or such Class B Purchaser may disclose such information (i) to its officers, directors, employees, agents, counsel, accountants, auditors, advisors or representatives, (ii) to the extent such information has become available to the public other than as a result of a disclosure by or through such Agent, the Facility Agent or such Class B Purchaser, (iii) to the extent such information was available to such Agent, the Facility Agent or such Class B Purchaser on a nonconfidential basis prior to its disclosure to such Agent, the Facility Agent or such Class B Purchaser hereunder, (iv) with the consent of the Transferor, (v) to the extent permitted by Section 8.1, (vi) to the extent such Agent, the Facility Agent or such Class B Purchaser should be (A) required in connection with any legal or regulatory proceeding or (B) requested by any Governmental Authority to disclose such information or (vii) in the case of any Class B Purchaser that is a Conduit Purchaser, to placement agents and providers of liquidity and credit support who agree to hold such information in confidence and to rating agencies; provided, that, in the case of clause (vi) above, such Agent, the Facility Agent or such Class B Purchaser, as applicable, will use all reasonable efforts to maintain confidentiality and, in the case of clause (vi)(A) above, will (unless otherwise prohibited by law) notify the Transferor of its intention to make any such disclosure prior to making any such disclosure. SECTION 7. THE AGENTS 7.1 Appointment. (a) Each Class B Purchaser hereby irrevocably designates and appoints the Agent for its Purchaser Group as the agent of such Class B Purchaser under this Agreement, and each such Class B Purchaser irrevocably authorizes such Agent, as the agent for such Class B Purchaser, to take such action on its behalf under the provisions of the Related Documents and to exercise such powers and perform such duties thereunder as are expressly delegated to such by the terms of the Related Documents, together with such other powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary elsewhere in this Agreement, no Agent shall have any duties or responsibilities, except those expressly set forth herein, or any fiduciary relationship with any Class B Purchaser, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or otherwise exist against any Agent. (b) Each Class B Purchaser hereby irrevocably designates and appoints the Facility Agent as the agent of such Class B Purchaser under the Pooling and Servicing Agreement and hereunder, and each such Class B Purchaser irrevocably authorizes the Facility Agent, as the agent for such Class B Purchaser, to take such action on its behalf under the provisions of the Pooling and Servicing Agreement and hereunder and to exercise such powers and perform such duties thereunder and hereunder as are expressly granted to the Facility Agent by the terms of the Pooling and Servicing Agreement or hereby, subject to the terms and conditions of this Agreement, together with such other powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary elsewhere in this Agreement, the Facility Agent shall not have any duties or responsibilities, except those expressly set forth herein or in the Pooling and Servicing Agreement or herein, or any fiduciary relationship with any Class B Purchaser, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or otherwise exist against the Facility Agent. 7.2 Delegation of Duties. Each Agent and the Facility Agent may execute any of its duties under any of the Related Documents by or through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. Neither any Agent nor the Facility Agent shall be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable care. 7.3 Exculpatory Provisions. Neither any Agent nor the Facility Agent nor any of their respective officers, directors, employees, agents, attorneys-in-fact or Affiliates shall be (a) liable to any of the Class B Purchasers for any action lawfully taken or omitted to be taken by it or such Person under or in connection with any of the other Related Documents (except for its or such Person's own gross negligence or willful misconduct) or (b) responsible in any manner to any of the Class B Purchasers for any recitals, statements, representations or warranties made by SRPC, SRI, Stage, Granite, the Transferor, the Servicer or the Trustee or any officer thereof contained in any of the other Related Documents or in any certificate, report, statement or other document referred to or provided for in, or received by any Agent or the Facility Agent under or in connection with, any of the other Related Documents or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any of the other Related Documents or for any failure of SRPC, SRI, Stage, Granite, the Transferor, the Servicer or the Trustee to perform its obligations thereunder. Neither any Agent nor the Facility Agent shall be under any obligation to any Class B Purchaser to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, any of the other Related Documents, or to inspect the properties, books or records of SRPC, SRI, Stage, Granite, the Transferor, the Servicer, the Trustee or the Trust. 7.4 Reliance by Agent. Each Agent and the Facility Agent shall be entitled to rely, and shall be fully protected in relying, upon any writing, resolution, notice, consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype message, written statement, order or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including counsel to any Agent or the Facility Agent), independent accountants and other experts selected by any Agent or the Facility Agent. Each Agent and the Facility Agent shall be fully justified in failing or refusing to take any action under any of the Related Documents unless it shall first receive such advice or concurrence of the Required Class B Owners and the Required Class B Purchasers as it deems appropriate or it shall first be indemnified to its satisfaction by the Class B Purchasers or by the Committed Class B Purchasers against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. Each Agent and the Facility Agent shall in all cases be fully protected in acting, or in refraining from acting, under any of the Related Documents in accordance with a request of the Required Class B Owners and the Required Class B Purchasers and such request and any action taken or failure to act pursuant thereto shall be binding upon all present and future Class B Purchasers. 7.5 Notices. No Agent shall be deemed to have knowledge or notice of the occurrence of any breach of this Agreement or the occurrence of any Trust Pay Out Event, Series 1999-1 Pay Out Event, Mandatory Partial Amortization Event or Termination Event unless such Agent has received notice from the Transferor, the Servicer, the Trustee or any Class B Purchaser referring to this Agreement, describing such event. In the event that an Agent receives such a notice, such Agent promptly shall give notice thereof to the Class B Purchasers in its Purchaser Group. Such Agent shall take such action with respect to such event as shall be reasonably directed by the Required Class B Owners and the Required Class B Purchasers; provided that unless and until an Agent shall have received such directions, such Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such event as it shall deem advisable in the best interests of the Class B Purchasers. 7.6 Non-Reliance on Agent and Other Class B Purchasers. Each Class B Purchaser expressly acknowledges that neither any Agent nor the Facility Agent nor any of their respective officers, directors, employees, agents, attorneys-in- fact or Affiliates has made any representations or warranties to it and that no act by any Agent or the Facility Agent hereafter taken, including any review of the affairs of SRPC, SRI, Stage, Granite, the Transferor, the Servicer, the Trustee or the Trust shall be deemed to constitute any representation or warranty by any Agent or the Facility Agent to any Class B Purchaser. Each Class B Purchaser represents to each Agent and the Facility Agent that it has, independently and without reliance upon any Agent, the Facility Agent or any other Class B Purchaser, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, operations, property, financial and other condition and creditworthiness of the Trust, the Trustee, SRPC, SRI, Stage, Granite, the Transferor and the Servicer and made its own decision to purchase its interest in the Class B Certificates hereunder and enter into this Agreement. Each Class B Purchaser also represents that it will, independently and without reliance upon any Agent or the Facility Agent or any other Class B Purchaser, and based on such documents and information as it shall deem appropriate at the time, continue to make its own analysis, appraisals and decisions in taking or not taking action under any of the Related Documents, and to make such investigation as it deems necessary to inform itself as to the business, operations, property, financial and other condition and creditworthiness of the Trust, the Trustee, SRPC, SRI, Stage, Granite, the Transferor and the Servicer. Except, in the case of an Agent, for notices, reports and other documents received by such Agent under Section 5 hereof, neither any Agent nor the Facility Agent shall have any duty or responsibility to provide any Class B Purchaser with any credit or other information concerning the business, operations, property, condition (financial or otherwise), prospects or creditworthiness of the Trust, the Trustee, SRPC, SRI, Stage, Granite, the Transferor or the Servicer which may come into the possession of any Agent or the Facility Agent or any of its respective officers, directors, employees, agents, attorneys-in-fact or Affiliates. 7.7 Indemnification. (i) The Committed Purchasers and the Liquidity Purchasers agree to indemnify the Facility Agent in its capacity as such (without limiting the obligation (if any) of SRPC, SRI, the Transferor, the Trust or the Servicer to reimburse the Facility Agent for any such amounts), ratably according to their respective Commitments (or, if the Commitments have terminated, Percentage Interests), and (ii) the Committed Purchasers and the Liquidity Purchasers in each Purchaser Group agree to indemnify the Agent for such Purchaser Group in its capacity as such (without limiting the obligation (if any) of SRPC, SRI, the Transferor, the Trust or the Servicer to reimburse such Agent for any such amounts), ratably according to their respective Commitments (or, if the Commitments have terminated, Percentage Interests), in each case from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever which may at any time (including at any time following the payment of the obligations under this Agreement, including the Class B Principal Balance) be imposed on, incurred by or asserted against such Agent in any way relating to or arising out of this Agreement, or any documents contemplated by or referred to herein or the transactions contemplated hereby or any action taken or omitted by the Agent under or in connection with any of the foregoing; provided that no Class B Purchaser shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of an Agent or the Facility Agent resulting from its own gross negligence or willful misconduct. The agreements in this subsection shall survive the payment of the obligations under this Agreement, including the Class B Principal Balance. 7.8 Agents in Their Individual Capacities. Each Agent, the Facility Agent and their Affiliates may make loans to, accept deposits from and generally engage in any kind of business with the Trust, the Trustee, SRPC, SRI, Stage, Granite, the Servicer and the Transferor as though such Agent and the Facility Agent were not the agents hereunder. Each Class B Purchaser acknowledges that Credit Suisse First Boston may act (i) as administrator and agent for one or more Conduit Purchasers and in such capacity acts and may continue to act on behalf of each such Conduit Purchaser in connection with its business, (ii) as the agent for certain financial institutions under the liquidity and credit enhancement agreements relating to this Agreement to which any such Conduit Purchaser is party and in various other capacities relating to the business of any such Conduit Purchaser under various agreements, and (iii) as agent for other Classes of Series 1999-1 Certificates. Credit Suisse First Boston in its capacity as an Agent or the Facility Agent shall not, by virtue of its acting in any such other capacities, be deemed to have duties or responsibilities hereunder or be held to a standard of care in connection with the performance of its duties as an Agent or the Facility Agent other than as expressly provided in this Agreement. Credit Suisse First Boston may act as an Agent and the Facility Agent without regard to and without additional duties or liabilities arising from its role as such administrator or agent or arising from its acting in any such other capacity. 7.9 Successor Agent. (a) An Agent may resign as Agent upon ten days' notice to the Class B Purchasers in its Purchaser Group, the Facility Agent, each other Agent, the Trustee, the Transferor and the Servicer with such resignation becoming effective upon a successor agent succeeding to the rights, powers and duties of such Agent pursuant to this subsection 7.9(a). Any Agent may resign as Agent upon ten days' notice to the Class B Purchasers in its Purchaser Group, the Facility Agent and each other Agent, the Transferor, the Servicer and the Trustee with such resignation becoming effective upon a successor agent succeeding to the rights, powers and duties of the Agent pursuant to this Section 7.9. If an Agent shall resign as Agent under this Agreement, then (i) Class B Owners in its Purchaser Group having Percentage Interests aggregating greater than 50% of the aggregate Percentage Interests of all Class B Owners in such Purchaser Group, and (ii) Committed Purchasers and Liquidity Purchasers in its Purchaser Group having Commitments aggregating greater than 50% of the aggregate Commitments of all Committed Purchasers and Liquidity Purchasers in such Purchaser Group shall appoint from among the Committed Purchasers in such Purchaser Group a successor agent for such Purchaser Group. Any successor administrative agent or agent shall succeed to the rights, powers and duties of resigning Agent, and the term "Agent," as applicable, shall mean such successor agent effective upon its appointment, and the former Agent's rights, powers and duties as Agent shall be terminated, without any other or further act or deed on the part of such former Agent or any of the parties to this Agreement. After the retiring Agent's resignation as Agent, the provisions of this Section 7 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Agreement. (b) The Facility Agent may resign as Facility Agent upon ten days' notice to the Class A-1 Purchasers, the Class A-2 Purchasers, the Class B Purchasers, the Trustee, the Transferor, the Servicer and each Agent with such resignation becoming effective upon a successor agent succeeding to the rights, powers and duties of the Facility Agent pursuant to this subsection 7.9(b). If the Facility Agent shall resign as Facility Agent under this Agreement, then the Required Class B Purchasers and the Required Class B Owners shall appoint from among the Committed Purchasers or Liquidity Purchasers hereunder or the committed purchasers or liquidity purchasers under the Class A-1 Certificate Purchase Agreement or the Class A-2 Certificate Purchase Agreement a successor Facility Agent of the Class B Certificateholders, the Class A-1 Certificateholders and the Class A-2 Certificateholders; provided that no such appointment shall be effective unless such successor is also appointed as successor Facility Agent under the Class A-1 Certificate Purchase Agreement and the Class A-2 Certificate Purchase Agreement. The successor agent shall succeed to the rights, powers and duties of the Facility Agent, and the term "Facility Agent" shall mean such successor agent effective upon its appointment, and the former Facility Agent's rights, powers and duties as Facility Agent shall be terminated, without any other or further act or deed on the part of such former Facility Agent or any of the parties to this Agreement. After the retiring Facility Agent's resignation as Facility Agent, the provisions of this Section 7 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Facility Agent under this Agreement. SECTION 8. SECURITIES LAWS; TRANSFERS; TAX TREATMENT 8.1 Transfers of Class B Certificates. (a) Each Class B Owner agrees that the beneficial interest in the Class B Certificates purchased by it will be acquired for investment only and not with a view to any public distribution thereof, and that such Class B Owner will not offer to sell or otherwise dispose of any Class B Certificate acquired by it (or any interest therein) in violation of any of the registration requirements of the Securities Act or any applicable state or other securities laws. Each Class B Owner acknowledges that it has no right to require the Transferor to register, under the Securities Act or any other securities law, the Class B Certificates (or the beneficial interest therein) acquired by it pursuant to this Agreement or any Transfer Supplement. Each Class B Owner hereby confirms and agrees that in connection with any transfer or syndication by it of an interest in the Class B Certificates, such Class B Owner has not engaged and will not engage in a general solicitation or general advertising including advertisements, articles, notices or other communications published in any newspaper, magazine or similar media or broadcast over radio or television, or any seminar or meeting whose attendees have been invited by any general solicitation or general advertising. Each Class B Purchaser which executes a Joinder Agreement agrees that it will execute and deliver to the Transferor, the Servicer, the Trustee and the applicable Agent on or before the effective date of its Joinder Agreement a letter in the form attached hereto as Exhibit A (an "Investment Letter") with respect to the purchase by such Class B Purchaser of an interest in the Class B Certificates. (b) Each initial purchaser of a Class B Certificate or any interest therein and any Assignee thereof or Participant therein shall certify to the Transferor, the Servicer, the Trustee and the Agent for its Purchaser Group that it 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 which, if such entity is a tax-exempt entity, recognizes that payments with respect to the Class B Certificates may constitute unrelated business taxable income or (iii) a person not described in (i) or (ii) whose income from the Class B Certificates is and will be effectively connected with the conduct of a trade or business within the United States (within the meaning of the Code) and whose ownership of any interest in a Class B Certificate will not result in any withholding obligation with respect to any payments with respect to the Class B Certificates by any Person (other than withholding, if any, under Section 1446 of the Code) and who will furnish to the Agent for its Purchaser Group, the Servicer and the Trustee, and to the Class B Owner making the Transfer a properly executed U.S. Internal Revenue Service Form 4224 (and to agree (to the extent legally able) to provide a new Form 4224 upon the expiration or obsolescence of any previously delivered form and comparable statements in accordance with applicable United States laws) or (B) an estate or trust the income of which is includible in gross income for United States federal income tax purposes. (c) Any sale, transfer, assignment, participation, pledge, hypothecation or other disposition (a "Transfer") of a Class B Certificate or any interest therein may be made only in accordance with this Section 8.1. Any Transfer of an interest in a Class B Certificate otherwise permitted by this Section 8.1 will be permitted only if it consists of a pro rata percentage interest in all payments made with respect to the Class B Purchaser's beneficial interest in such Class B Certificate. No Class B Certificate or any interest therein may be Transferred by Assignment or Participation to any Person (each, a "Transferee") unless prior to the transfer the Transferee shall have executed and delivered to the applicable Agent and the Transferor an Investment Letter. Each of SRPC and SRI authorizes each Class B Purchaser to disclose to any Transferee and Support Party and any prospective Transferee or Support Party any and all financial information in the Class B Purchaser's possession concerning the Trust, SRPC, SRI, Granite and Stage which has been delivered to any Agent, the Facility Agent or such Class B Purchaser pursuant to the Related Documents (including information obtained pursuant to rights of inspection granted hereunder) or which has been delivered to such Class B Purchaser by or on behalf of the Trust, SRPC, SRI, Granite, Stage, the Transferor or the Servicer in connection with such Class B Purchaser's credit evaluation of the Trust, SRPC, SRI, Granite, Stage, the Transferor or the Servicer prior to becoming a party to, or purchasing an interest in this Agreement or the Class B Certificates; provided that prior to any such disclosure, such Transferee or Support Party or prospective Transferee or Support Party shall have executed an agreement agreeing to be bound by the provisions of Section 6.2 hereof. (d) Each Class B Purchaser may, in accordance with applicable law, at any time grant participations in all or part of its Commitment or its interest in the Class B Certificates, including the payments due to it under this Agreement and the Pooling and Servicing Agreement (each, a "Participation"), to any Person (each, a "Participant"); provided, however, that no Participation shall be granted to any Person unless and until the Agent for such Class B Purchaser's Purchaser Group shall have consented thereto and the conditions to Transfer specified in this Agreement, including in subsection 8.1(c) hereof, shall have been satisfied and that such Participation consists of a pro rata percentage interest in all payments made with respect to such Class B Purchaser's beneficial interest (if any) in the Class B Certificates. In connection with any such Participation, the Agent for each Purchaser Group shall maintain a register of each Participant of Class B Purchasers or such Purchaser Group and the amount of each of their Participation. Each Class B Purchaser hereby acknowledges and agrees that (A) any such Participation will not alter or affect such Class B Purchaser's direct obligations hereunder, and (B) neither the Trustee, the Transferor nor the Servicer shall have any obligation to have any communication or relationship with any Participant. Each Class B Purchaser and each Participant shall comply with the provisions of subsection 2.5(c). No Participant shall be entitled to Transfer all or any portion of its Participation, without the prior written consent of the Agent for the applicable Purchaser Group. Each Participant shall be entitled to receive additional amounts and indemnification pursuant to Sections 2.4, 2.5 and 2.6 as if such Participant were a Class B Purchaser and such Sections applied to its Participation; provided, in the case of Section 2.5, that such Participant has complied with the provisions of subsection 2.5(c) as if it were a Class B Purchaser. Each Class B Purchaser shall give the Agent for its Purchaser Group notice of the consummation of any sale by it of a Participation and such Agent (upon receipt of notice from the related Class B Purchaser) shall promptly notify the Transferor, the Servicer and the Trustee. (e) Each Class B Purchaser may, with the consent of the Agent for its Purchaser Group and in accordance with applicable law, sell or assign (each, an "Assignment"), to any Consented Assignee (each, an "Assignee") all or any part of its Commitment or its interest in the Class B Certificates and its rights and obligations under this Agreement and the Pooling and Servicing Agreement pursuant to an agreement substantially in the form attached hereto as Exhibit C hereto (a "Transfer Supplement"), executed by such Assignee and the Class B Purchaser and delivered to the Agent for its Purchaser Group for its acceptance and consent; provided, however, that no such assignment or sale shall be effective unless and until the conditions to Transfer specified in this Agreement, including in subsection 8.1(c) hereof, shall have been satisfied. From and after the effective date determined pursuant to such Transfer Supplement, (x) the Assignee thereunder shall be a party hereto and, to the extent provided in such Transfer Supplement, have the rights and obligations of a Class B Purchaser hereunder as set forth therein and (y) the transferor Class B Purchaser shall, to the extent provided in such Transfer Supplement, be released from its Commitment and other obligations under this Agreement; provided, however, that after giving effect to each such Assignment, the obligations released by any such Class B Purchaser shall have been assumed by an Assignee or Assignees. Such Transfer Supplement shall be deemed to amend this Agreement to the extent, and only to the extent, necessary to reflect the addition of such Assignee and the resulting adjustment of Percentage Interests, Purchaser Percentages, Commitments and Maximum Purchase Amounts arising from the Assignment. Upon its receipt and acceptance of a duly executed Transfer Supplement, such Agent shall on the effective date determined pursuant thereto give notice of such acceptance to the Transferor, the Servicer and the Trustee and the Servicer will provide notice thereof to each Rating Agency (if required). Upon instruction to register a transfer of a Class B Purchaser's beneficial interest in the Class B Certificates (or portion thereof) and surrender for registration of transfer such Class B Purchaser's Class B Certificate(s) (if applicable) and delivery to the Transferor and the Trustee of an Investment Letter, executed by the registered owner (and the beneficial owner if it is a Person other than the registered owner), and receipt by the Trustee of a copy of the duly executed related Transfer Supplement and such other documents as may be required under this Agreement, such beneficial interest in the Class B Certificates (or portion thereof) shall be transferred in the records of the Trustee and the Agent for the applicable Purchaser Group and, if requested by the Assignee, new Class B Certificates shall be issued to the Assignee and, if applicable, the transferor Class B Purchaser in amounts reflecting such Transfer as provided in the Pooling and Servicing Agreement. Such Transfers of Class B Certificates (and interests therein) shall be subject to this Section 8.1 in lieu of any regulations which may be prescribed under Section 6.3 of the Pooling and Servicing Agreement. Successive registrations of Transfers as aforesaid may be made from time to time as desired, and each such registration of a transfer to a new registered owner shall be noted on the Certificate Register. (f) Each Class B Purchaser may pledge its interest in the Class B Certificates to any Federal Reserve Bank as collateral in accordance with applicable law. (g) Any Class B Purchaser shall have the option to change its Investing Office, provided that such Class B Purchaser shall have prior to such change in office complied with the provisions of subsection 2.5(c) and provided further that such Class B Purchaser shall not be entitled to any amounts otherwise payable under Section 2.4 or 2.5 resulting solely from such change in office unless such change in office was mandated by applicable law or by such Class B Purchaser's compliance with the provisions of this Agreement. (h) Each Affected Party shall be entitled to receive additional payments and indemnification pursuant to Sections 2.4, 2.5 and 2.6 hereof as though it were a Class B Purchaser and such Section applied to its interest in or commitment to acquire an interest in the Class B Certificates; provided that such Affected Party shall not be entitled to additional payments pursuant to (i) Section 2.4 by reason of Regulatory Changes which occurred prior to the date it became an Affected Party or (ii) Section 2.5 attributable to its failure to satisfy the requirements of subsection 2.5(c) as if it were a Class B Purchaser. (i) Each Affected Party claiming increased amounts described in Sections 2.4 or 2.5 shall furnish, through its related Conduit Purchaser, to the Trustee, the Agent for the applicable Purchaser Group, the Facility Agent, the Servicer and the Transferor a certificate setting forth the basis and amount of each request by such Affected Party for any such amounts referred to in Sections 2.4 or 2.5, such certificate to be conclusive with respect to the factual information set forth therein absent manifest error. (j) In the event that a Liquidity Purchaser is a Downgraded Purchaser, the related Conduit Purchaser shall have the right to replace such Liquidity Purchaser with a replacement Liquidity Purchaser, which replacement purchaser shall succeed to the rights of such Liquidity Purchaser under this Agreement in respect of its Commitment as a Liquidity Purchaser, and such Liquidity Purchaser shall assign such Commitment and its interest in the Class B Certificates to such replacement Liquidity Purchaser in accordance with the provisions of this Section 8.1; provided, that (A) such Liquidity Purchaser shall not be replaced hereunder with a new investor until such Liquidity Purchaser has been paid in full its Percentage Interest of the Class B Principal Balance and all accrued and unpaid interest thereon by such new investor and all other amounts (including all amounts owing under Sections 2.4 and 2.5) owed to it and to all Participants with respect to such Liquidity Purchaser pursuant to this Agreement, and (ii) if the Liquidity Purchaser to be replaced is an Agent or the Facility Agent, a replacement Agent or Facility Agent, as the case may be, shall have been appointed in accordance with Section 7.9, and the Agent or Facility Agent, as the case may be, to be replaced shall have been paid all amounts owing to it as Agent or Facility Agent, as the case may be, pursuant to this Agreement. For purposes of this subsection, a Liquidity Purchaser shall be a "Downgraded Purchaser" if and so long as the credit rating assigned to its short-term obligations by Moody's or Standard & Poor's on the date on which it became a party to this Agreement shall have been reduced or withdrawn, unless otherwise agreed between such Liquidity Purchaser and the Conduit Purchaser in its Purchaser Group. (k) In the event that a Class B Purchaser has requested payment of additional amounts referred to in subsection 2.4(a), 2.4(b) or 2.5 and payment thereof hereunder shall not be waived by such Class B Purchaser within 30 days following a request for such waiver from the Transferor, the Transferor shall have the right to replace such Class B Purchaser and, if such Class B Purchaser is a Conduit Purchaser, each of its Liquidity Purchasers hereunder with replacement purchaser or purchasers which shall succeed to the rights of such Class B Purchaser or Class B Purchasers under this Agreement. Any such replacement purchaser shall be (i) reasonably acceptable to the Agent for the applicable Purchaser Group, (ii) if such Class B Purchaser is a Liquidity Purchaser, acceptable to the related Conduit Purchaser in its sole discretion, and (iii) if such Class B Purchaser is a Conduit Purchaser, each Liquidity Purchaser in its Purchaser Group shall be concurrently replaced as provided in this subsection unless such Liquidity Purchaser otherwise consents in its sole discretion. Such Class B Purchaser shall assign its Commitment hereunder and its beneficial interest in the Class B Certificates to such replacement purchaser in accordance with the provisions of Section 8.1; provided, that (A) such Class B Purchaser shall not be replaced hereunder with a replacement purchaser until such Class B Purchaser has been paid in full its Percentage Interest of the Class B Principal Balance and all accrued and unpaid interest thereon by such replacement purchaser and all other amounts (including all amounts owing under Section 2.4 and 2.5) owed to it pursuant to this Agreement and (B) if the Class B Purchaser to be replaced is an Agent or the Facility Agent or, unless the Agent for the Applicable Purchaser Group and the Facility Agent otherwise agree, a Conduit Purchaser sponsored or administered by such Agent or the Facility Agent (in its individual capacity), a replacement such Agent or the Facility Agent, as the case may be, shall have been appointed in accordance with Section 7.9 and the Agent or the Facility Agent, as the case may be, to be replaced shall have been paid all amounts owing to it as Agent or the Facility Agent, as the case may be, pursuant to this Agreement; provided, further, that such Class B Purchaser shall not be replaced hereunder with a replacement purchaser unless the Transferor shall have provided to such Class B Purchaser and the Agent for the applicable Purchaser Group with an Officer's Certificate stating that such replacement purchaser is not subject to, or has agreed not to seek, the additional amounts which Class B Purchaser requested pursuant to subsection 2.4(a), 2.4(b) or 2.5, as the case may be. 8.2 Tax Characterization. It is the intention of the parties hereto that the Class B Certificates be treated for tax purposes as indebtedness. SECTION 9. MISCELLANEOUS 9.1 Amendments and Waivers. This Agreement may not be amended, supplemented or modified nor may any provision hereof be waived except in accordance with the provisions of this Section 9.1. With the written consent of the Required Class B Owners and the Required Class B Purchasers, the Facility Agent, SRPC and SRI may, from time to time, enter into written amendments, supplements, waivers or modifications hereto for the purpose of adding any provisions to this Agreement or changing in any manner the rights of any party hereto or waiving, on such terms and conditions as may be specified in such instrument, any of the requirements of this Agreement; provided, however, that no such amendment, supplement, waiver or modification shall (i) reduce the amount of or extend the maturity of any Class B Certificate or reduce the rate or extend the time of payment of interest thereon, or reduce or alter the timing of any other amount payable to any Class B Purchaser hereunder or under the Pooling and Servicing Agreement, in each case without the consent of the Class B Purchaser affected thereby, (ii) amend, modify or waive any provision of this Section 9.1, or, if such amendment would have a material adverse effect on the Class B Purchasers, the definition of "Class B Invested Amount" or "Class B Principal Balance", or reduce the percentage specified in the definition of Required Class B Owners or Required Class B Purchasers, in each case without the written consent of all Class B Purchasers or (iii) amend, modify or waive any provision of Section 7 of this Agreement or any other provision of this Agreement affecting the Agents or the Facility Agent without the written consent of each Agent adversely affected thereby and the Facility Agent. Any waiver of any provision of this Agreement shall be limited to the provisions specifically set forth therein for the period of time set forth therein and shall not be construed to be a waiver of any other provision of this Agreement. Each party hereto agrees that, on a one-time basis following the initial review of the Related Documents by Standard & Poor's on behalf of Class B Purchasers which are Conduit Purchasers, it will at the request of its related Agent enter into or to consent to, as applicable, any amendments or other modifications to the Related Documents, other than those requiring the consent of all Class B Purchasers as provided above in this subsection and other than those which would have an adverse effect on any other Class or Series of Certificates, as shall reasonably be determined by such Agent to be required (i) for the Class B Certificate to be rated A by Standard & Poor's or (ii) for any initial Class B Purchaser which is a Conduit Purchaser to obtain or maintain an informal rating of the Class B Certificate which will permit such Conduit Purchaser's commercial paper notes to maintain at least the rating from Standard & Poor's as in effect immediately prior to such Conduit Purchaser's becoming a Class B Purchaser after giving effect to its initial purchase of the Class B Certificates and to purchases from time to time by such Conduit Purchaser of Additional Class B Invested Amounts as contemplated by this Agreement, without giving effect to any increase in any letter of credit or other enhancement provided to such Conduit Purchaser (other than the liquidity support provided to such Conduit Purchaser by Liquidity Providers). The Facility Agent may cast any vote or give any direction under the Pooling and Servicing Agreement on behalf of the Class A Certificateholders if it has been directed to do so by (i) Class A-1 Purchasers and Class A-2 Purchasers required under the terms of the Class A-2 Purchase Agreement or the Class A-2 Purchase Agreement, respectively, and (ii) by the Required Class B Owners and the Required Class B Purchasers. 9.2 Notices. (a) All notices, requests and demands to or upon the respective parties hereto to be effective shall be in writing (including by telecopy), and, unless otherwise expressly provided herein, shall be deemed to have been duly given or made when delivered by hand, or, in the case of mail or telecopy notice, when received, addressed as follows or, with respect to a Class B Purchaser, as set forth in its respective Joinder Supplement or Transfer Supplement, or to such other address as may be hereafter notified by the respective parties hereto: SRPC: SRI Receivables Purchase Co., Inc. 10201 Main Street Houston, Texas 77025 Attention: Treasurer Telephone: (713) 669-2601 Telecopy: (713) 669-2621 SRI: Specialty Retailers, Inc. 10201 Main Street Houston, Texas 77025 Attention: Treasurer Telephone: (713) 669-2601 Telecopy: (713) 669-2621 The Trustee: Bankers Trust (Delaware) 1011 Centre Road, Suite 200 Wilmington, Delaware 19805-1266 Attention: Corporate Trust and Agency Group Telephone: (302) 636-3300 Telefax: (302) 636-3222 Mailing Address: P.O. Box 8795 Wilmington, Delaware 19899-8795 with a copy to: 4 Albany Street - 10th Floor New York, New York 10006 Attention: Corporate Trust and Agency Group Telephone: (212) 250-2500 Telefax: (212) 250-6439 The Facility Credit Suisse First Boston, New York Branch Agent: Eleven Madison Avenue New York, New York 10010 Attention: Asset Finance Department Telephone: (212) 325-9076 Telefax: (212) 325-6677 (b) All payments to be made to an Agent or any Class B Purchaser in a Purchaser Group hereunder shall be made in United States dollars, and, unless otherwise specifically provided herein, shall be made to such Agent for the account of one or more of the Class B Purchasers or for its own account, as the case may be. Unless otherwise directed by an Agent or Class B Purchaser, all payments to it shall be made by federal wire to the account specified in the Joinder Supplement or Transfer Supplement by which it became a party hereto. All payments to be made to the Facility Agent hereunder shall be made in United States dollars, and, unless otherwise directed by the Facility Agent all such payments shall be made by federal wire to The Bank of New York (BONY), ABA #021-000-018, for credit to Credit Suisse First Boston CSFBNY -- Loan Clearing Account #8900329262, reference SRI Receivables Master Trust Series 1999-1, with telephone notice (including federal wire number) to the Asset Finance Department of CSFB (212-325-9070). (c) Any notices permitted or required hereunder to be given by SRPC shall be effective if given on behalf of SRPC by the Servicer. 9.3 No Waiver; Cumulative Remedies. No failure to exercise and no delay in exercising, on the part of any Agent, the Facility Agent or any Class B Purchaser, any right, remedy, power or privilege under any of the Related Documents shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege under any of the Related Documents preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges provided in the Related Documents are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law. 9.4 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of SRPC, SRI, the Transferor, the Servicer, each Agent, the Facility Agent, the Class B Purchasers, any Assignee and their respective successors and assigns, except that SRPC, SRI, the Transferor and the Servicer may not assign or transfer any of their respective rights or obligations under this Agreement except as provided herein and in the Pooling and Servicing Agreement, without the prior written consent of the Required Class B Owners and the Required Class B Purchasers. This Agreement is also intended to benefit the Support Parties, Affected Parties, Participants and Indemnities, and their respective successors and assigns, to the extent provided herein. 9.5 Successors to Servicer. (a) In the event that a transfer of servicing occurs under Article VIII or Article X of the Pooling and Servicing Agreement, (i) from and after the effective date of such transfer, the Successor Servicer shall be the successor in all respects to the Servicer and shall be responsible for the performance of all functions to be performed by the Servicer from and after such date, except as provided in the Pooling and Servicing Agreement, and shall be subject to all the responsibilities, duties and liabilities relating thereto placed on the Servicer by the terms and provisions hereof, and all references in this Agreement to the Servicer shall be deemed to refer to the Successor Servicer, and (ii) as of the date of such transfer, the Successor Servicer shall be deemed to have made with respect to itself the representations and warranties made in Section 4.2 (in the case of subsection 4.2(a) with appropriate factual changes); provided, however, that the references to the Servicer contained in Section 5.1 of this Agreement shall be deemed to refer to the Servicer with respect to responsibilities, duties and liabilities arising out of an act or acts, or omission, or an event or events giving rise to such responsibilities, duties and liabilities and occurring during such time that the Servicer was Servicer under this Agreement and shall be deemed to refer to the Successor Servicer with respect to responsibilities, duties and liabilities arising out of an act or acts, or omission, or an event or events giving rise to such responsibilities, duties and liabilities and occurring during such time that the Successor Servicer acts as Servicer under this Agreement; provided, however, to the extent that an obligation to indemnify the Class B Purchasers under Section 2.6 arises as a result of any act or failure to act of any Successor Servicer in the performance of servicing obligations under the Pooling and Servicing Agreement, such indemnification obligation shall be of the Successor Servicer and not its predecessor. Upon the transfer of servicing to a Successor Servicer, such Successor Servicer shall furnish to each Agent copies of its audited annual financial statements for each of the three preceding fiscal years or if the Trustee or any other banking institution becomes the Successor Servicer, such Successor Servicer shall provide, in lieu of the audited financial statements required in the immediately preceding clause, complete and correct copies of the publicly available portions of its Consolidated Reports of Condition and Income as submitted to the FDIC for the two most recent year end periods. (b) In the event that any Person becomes the successor to the Transferor pursuant to Article VII of the Pooling and Servicing Agreement, from and after the effective date of such transfer, such successor to the Transferor shall be the successor in all respects to the Transferor and shall be responsible for the performance of all functions to be performed by the Transferor from and after such date, except as provided in the Pooling and Servicing Agreement, and shall be subject to all the responsibilities, duties and liabilities relating thereto placed on the Transferor by the terms and provisions hereof, and all references in this Agreement to the Transferor shall be deemed to refer to the successor to the Transferor; provided, however, that the references to the Transferor contained in Sections 2.5, 2.6 and 5.1 of this Agreement shall be deemed to refer to SRPC with respect to responsibilities, duties and liabilities arising out of an act or acts, or omission, or an event or events giving rise to such responsibilities, duties and liabilities and occurring during such time that SRPC was Transferor under this Agreement and shall be deemed to refer to the successor to SRPC as Transferor with respect to responsibilities, duties and liabilities arising out of an act or acts, or omission, or an event or events giving rise to such responsibilities, duties and liabilities and occurring during such time that the successor to SRPC acts as Transferor under this Agreement. 9.6 Counterparts. This Agreement may be executed by one or more of the parties to this Agreement on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. 9.7 Severability. Any provisions of this Agreement which are prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provisions in any other jurisdiction. 9.8 Integration. This Agreement and the Class B Fee Letter represent the agreement of each Agent, the Facility Agent, SRPC, SRI, the Transferor, the Servicer and the Class B Purchasers with respect to the subject matter hereof, and there are no promises, undertakings, representations or warranties by any Class B Purchaser, any Agent or the Facility Agent relative to subject matter hereof not expressly set forth or referred to herein or therein. 9.9 Governing Law. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. 9.10 Termination. This Agreement shall remain in full force and effect until the earlier to occur of (a) payment in full of the Class B Principal Balance, all accrued and unpaid Class B Interest, Class B Program Fees and Class B Utilization Fees, all amounts payable by pursuant to Sections 2.3, 2.4, 2.5 or 2.6 hereof and all other amounts payable to the Class B Purchasers, the Agents and the Facility Agent hereunder and the termination of all Commitments and (b) the Series Termination Date; provided, however, that the provisions of Sections 2.4, 2.5, 2.6, 6.1, 6.2, 7.7, 8.2, 9.11, 9.13 and 9.14 shall survive termination of this Agreement and any amounts payable to the Facility Agent, the Agents, Class B Purchasers or any Affected Party thereunder shall remain payable thereto. 9.11 Limited Recourse; No Proceedings. (a) The obligations of SRPC, SRI, the Transferor and the Servicer under this Agreement are several (except as specifically provided herein) and are solely the corporate obligations of SRPC, SRI, the Transferor or the Servicer, as applicable. No recourse shall be had for the payment of any fee or other obligation or claim arising out of or relating to this Agreement or any other agreement, instrument, document or certificate executed and delivered or issued by SRPC, SRI, the Transferor and the Servicer or any officer of any of them in connection therewith, against any stockholder, employee, officer, director or incorporator of SRPC, SRI, the Transferor or the Servicer. With respect to obligations of the Transferor, neither any Agent, the Facility Agent nor any Class B Purchaser shall look to any property or assets of the Transferor, other than to (a) amounts payable to an Agent, the Facility Agent or a Class B Purchaser or to the Transferor under the Receivables Purchase Agreement, or the Pooling and Servicing Agreement and (b) any other assets of the Transferor not pledged to third parties or otherwise encumbered in any manner permitted by the Transferor's Certificate of Incorporation. Each Class B Purchaser, the Facility Agent and each Agent hereby agrees that to the extent such funds are insufficient or unavailable to pay any amounts owing to it by the Transferor pursuant to this Agreement, prior to the earlier of the Trust Termination Date or the commencement of a bankruptcy or insolvency proceeding by or against the Transferor, it shall not constitute a claim against the Transferor. Nothing in this paragraph shall limit or otherwise affect the liability of the Servicer with respect to any amounts owing by it hereunder or the right of any Agent, the Facility Agent or any Class B Purchaser to enforce such liability against the Servicer or any of its assets. (b) Each of SRPC, SRI, the Transferor, the Servicer, each Agent, the Facility Agent and each Class B Purchaser hereby agrees that it shall not institute or join against any Conduit Purchaser any bankruptcy, reorganization, arrangement, insolvency or liquidation proceeding, or other proceeding under any federal or state bankruptcy or similar law, for one year and a day after the latest maturing commercial paper note, medium term note or other debt security issued by such Conduit Purchaser (collectively, "Notes") is paid. (c) Notwithstanding any provisions contained in this Agreement to the contrary, no Conduit Purchaser shall pay, or be obligated to pay, any amount pursuant to this Agreement unless (i) such Conduit Purchaser has received funds which may be used to make such payment and which funds are not required to repay its Notes when due and (ii) after giving effect to such payment, either (A) Conduit Purchaser could issue Notes to refinance all its outstanding Notes (assuming such outstanding Notes matured at such time) in accordance with the program documents governing such Conduit Purchaser's Note issuance program or (B) all Notes of such Conduit Purchaser are paid in full. Payments by a Conduit Purchaser hereunder are expressly limited to the amount available therefor in accordance with the terms of such Conduit Purchaser's program documents, and no recourse shall be had against such Conduit Purchaser or any other Person in respect of any deficiency in such amounts. Any amount which a Conduit Purchaser does not pay pursuant to the operation of this subsection shall not constitute a claim (as defined in 101 of the Bankruptcy Code) against or corporate obligation of such Conduit Purchaser for any such insufficiency unless and until such Conduit Purchaser satisfies the provisions of clauses (i) and (ii) above. This subsection shall survive for one year and a day after the latest maturing Note issued by such Conduit Purchaser is paid. 9.12 Survival of Representations and Warranties. All representations and warranties made hereunder and in any document, certificate or statement delivered pursuant hereto or in connection herewith shall survive the execution and delivery of this Agreement, the purchase of the Class B Certificates hereunder and the termination of this Agreement. 9.13 Submission to Jurisdiction; Waivers. EACH OF SRPC, SRI, THE TRANSFEROR, THE SERVICER, THE FACILITY AGENT, EACH AGENT AND EACH CLASS B PURCHASER HEREBY IRREVOCABLY AND UNCONDITIONALLY: (A) SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT TO WHICH IT IS A PARTY, OR FOR RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT IN RESPECT THEREOF, TO THE NON-EXCLUSIVE GENERAL JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND APPELLATE COURTS FROM ANY THEREOF; (B) CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE BROUGHT IN SUCH COURTS AND WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT OR THAT SUCH ACTION OR PROCEEDING WAS BROUGHT IN AN INCONVENIENT COURT AND AGREES NOT TO PLEAD OR CLAIM THE SAME; (C) AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR PROCEEDING MAY BE EFFECTED BY MAILING A COPY THEREOF BY REGISTERED OR CERTIFIED MAIL (OR ANY SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE PREPAID, TO SUCH PARTY AT ITS ADDRESS SET FORTH IN SECTION 9.2 OR AT SUCH OTHER ADDRESS OF WHICH THE AGENT SHALL HAVE BEEN NOTIFIED PURSUANT THERETO; AND (D) AGREES THAT NOTHING HEREIN SHALL AFFECT THE RIGHT TO EFFECT SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT TO SUE IN ANY OTHER JURISDICTION. 9.14 WAIVERS OF JURY TRIAL. EACH OF SRPC, SRI, THE TRANSFEROR, THE SERVICER, THE FACILITY AGENT, THE AGENTS AND THE CLASS B PURCHASERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING DIRECTLY OR INDIRECTLY TO THIS AGREEMENT OR ANY OTHER DOCUMENT OR INSTRUMENT RELATED HERETO AND FOR ANY COUNTERCLAIM THEREIN. IN WITNESS WHEREOF, the parties hereto have caused this Certificate Purchase Agreement to be duly executed by their respective officers as of the day and year first above written. SRI RECEIVABLES PURCHASE CO., INC., individually and as Transferor By: /s/Charles M. Sledge Name: Charles M. Sledge Title: Senior Vice President SPECIALTY RETAILERS, INC., individually and as Servicer By: /s/ James A. Marcum________________ Name: James A. Marcum Title: Vice Chairman, CFO CREDIT SUISSE FIRST BOSTON, NEW YORK BRANCH, as Facility Agent By: /s/ Alberto Zonca______________ Name: Alberto Zonca Title: Vice President By: /s/ Matthew J. Monaco__________ Name: Matthew J. Monaco Title: Associate EXHIBIT A FORM OF INVESTMENT LETTER [Date] SRI Receivables Purchase Co., Inc. 10201 Main Street Houston, Texas 77025 Attention: Treasurer Re SRI Receivables Master Trust Class B Variable Funding Certificates, Series 1999-1 Ladies and Gentlemen: This letter (the "Investment Letter") is delivered by the undersigned (the "Purchaser") pursuant to subsection 8.1(a) of the Class B Certificate Purchase Agreement dated as of November 9, 1999 (as in effect, the "Certificate Purchase Agreement"), among SRI Receivables Purchase Co., Inc., as Transferor, Specialty Retailers, Inc., as Servicer, the Class B Purchasers and Agents parties thereto and Credit Suisse First Boston, New York Branch, as Agent and Facility Agent. Capitalized terms used herein without definition shall have the meanings set forth in the Certificate Purchase Agreement. The Purchaser represents to and agrees with the Transferor as follows: (a) The Purchaser is authorized [to enter into the Certificate Purchase Agreement and to perform its obligations thereunder and to consummate the transactions contemplated thereby] [to purchase a participation in obligations under the Certificate Purchase Agreement]. (b) The Purchaser has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of its investment in the Class B Certificates and is able to bear the economic risk of such investment. The Purchaser has been afforded the opportunity to ask such questions as it deems necessary to make an investment decision, and has received all information it has requested in connection with making such investment decision. The Purchaser has, independently and without reliance upon any Agent, the Facility Agent or any other Class B Purchaser, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, operations, property, financial and other condition and creditworthiness of the Trust, SRPC, SRI, Stage, the Transferor and the Servicer and made its own decision to purchase its interest in the Class B Certificates, and will, independently and without reliance upon any Agent, the Facility Agent or any other Class B Purchaser, and based on such documents and information as it shall deem appropriate at the time, continue to make its own analysis, appraisals and decisions in taking or not taking action under the Certificate Purchase Agreement, and to make such investigation as it deems necessary to inform itself as to the business, operations, property, financial and other condition and creditworthiness of the Trust, SRPC, SRI, Stage, Granite, the Transferor and the Servicer. (c) The Purchaser is an "accredited investor", as defined in Rule 501, promulgated by the Securities and Exchange Commission (the "Commission") under the Securities Act of 1933, as amended (the "Securities Act"), or is a sophisticated institutional investor. The Purchaser understands that the offering and sale of the Class B Certificates has not been and will not be registered under the Securities Act and has not and will not be registered or qualified under any applicable "Blue Sky" law, and that the offering and sale of the Class B Certificate has not been reviewed by, passed on or submitted to any federal or state agency or commission, securities exchange or other regulatory body. (d) The Purchaser is acquiring an interest in Class B Certificates without a view to any distribution, resale or other transfer thereof except, with respect to any Class B Purchaser Interest or any interest or participation therein, as contemplated in the following sentence. The Purchaser will not resell or otherwise transfer any interest or participation in the Class B Purchaser Interest, except in accordance with Section 8.1 of the Certificate Purchase Agreement and (i) in a transaction exempt from the registration requirements of the Securities Act of 1933, as amended, and applicable state securities or "blue sky" laws; (ii) to the Transferor or any affiliate of the Transferor; or (iii) to a person who the Purchaser reasonably believes is a qualified institutional buyer (within the meaning thereof in Rule 144A under the Securities Act) that is aware that the resale or other transfer is being made in reliance upon Rule 144A. In connection therewith, the Purchaser hereby agrees that it will not resell or otherwise transfer the Class B Certificates or any interest therein unless the purchaser thereof provides to the addressee hereof a letter substantially in the form hereof. (e) This Investment Letter has been duly executed and delivered and constitutes the legal, valid and binding obligation of the Purchaser, enforceable against the Purchaser in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws or equitable principles affecting the enforcement of creditors' rights generally and general principles of equity. Very truly yours, [NAME OF PURCHASER] By:___________________________ Name: Title: EXHIBIT B FORM OF JOINDER SUPPLEMENT JOINDER SUPPLEMENT, dated as of the date set forth in Item 1 of Schedule I hereto, among SRI Receivables Purchase Co., Inc. (the "Transferor"), Specialty Retailers, Inc., as Servicer (the "Servicer"), the Class B Purchaser set forth in Item 2 of Schedule I hereto (the "Additional Class B Purchaser"), the Agent set forth in Item 3 of Schedule I hereto for the Class B Purchasers in the Purchaser Group set forth in Item 4 of Schedule I hereto (in such capacity, the "Agent"), and Credit Suisse First Boston, New York Branch, as Facility Agent for the Class B Purchasers under, and as defined in, the Certificate Purchase Agreement described below (in such capacity, the "Facility Agent"). W I T N E S S E T H WHEREAS, this Supplement is being executed and delivered in accordance with subsection 2.2(d) of the Class B Certificate Purchase Agreement, dated as of November 9, 1999, among SRI Receivables Purchase Co., Inc., as Transferor, Specialty Retailers, Inc., as Servicer, the Class B Purchasers and Agents parties thereto and Credit Suisse First Boston, New York Branch, as Facility Agent (as from time to time amended, supplemented or otherwise modified in accordance with the terms thereof, the "Certificate Purchase Agreement"; unless otherwise defined herein, terms defined in the Certificate Purchase Agreement are used herein as therein defined); and WHEREAS, the Additional Class B Purchaser (if it is not already a Class B Purchaser party to the Certificate Purchase Agreement) wishes to become a Class B Purchaser party to the Certificate Purchase Agreement and the Agent (if it is not already the Agent party to the Certificate Purchase Agreement) wishes to become an Agent party to the Certificate Purchase Agreement; NOW, THEREFORE, the parties hereto hereby agree as follows: (a) Upon receipt by the Agent of five counterparts of this Supplement, to each of which is attached a fully completed Schedule I and Schedule II, each of which has been executed by the Additional Class B Purchaser, the Agent, the Transferor and the Facility Agent, the Agent will transmit to the Servicer, the Transferor, the Trustee, the Facility Agent and the Additional Class B Purchaser a Joinder Effective Notice, substantially in the form of Schedule III to this Supplement (a "Joinder Effective Notice"). Such Joinder Effective Notice shall be executed by the Agent and shall set forth, inter alia, the date on which the transfer effected by this Supplement shall become effective (the "Joinder Effective Date"). From and after the Joinder Effective Date, the Additional Class B Purchaser shall be a Class B Purchaser party to the Certificate Purchase Agreement for all purposes thereof and shall be a Conduit Purchaser, Liquidity Purchaser or Committed Purchaser, as specified on such Schedule II, having an initial Maximum Purchase Amount or Commitment, as applicable, as set forth in such Schedule II. The Additional Class B Purchaser shall be a member of the Purchaser Group set forth in Item 4 of Schedule I hereto. If the Additional Class B Purchaser is a Conduit Purchaser, then (i) such Schedule II identifies its related Liquidity Purchasers and (ii) each such Liquidity Purchaser has executed and delivered (or is concurrently herewith executing and delivering) its own Joinder Supplement with respect to such Additional Class B Purchaser. If the Additional Class B Purchaser is a Liquidity Purchaser, such Schedule II identifies its related Conduit Purchaser. From and after the Joinder Effective Date, the Agent, if it is not already an "Agent" under the Certificate Purchase Agreement, shall be an Agent thereunder for the Purchaser Group set forth in Item 4 of Schedule I hereto. (b) Concurrently with the execution and delivery hereof, the Additional Class B Purchaser will deliver to the Transferor and the Trustee an executed Investment Letter in the form of Exhibit A to the Certificate Purchase Agreement. (c) Each of the parties to this Supplement agrees and acknowledges that at any time and from time to time upon the written request of any other party, it will execute and deliver such further documents and do such further acts and things as such other party may reasonably request in order to effect the purposes of this Supplement. (d) By executing and delivering this Supplement, the Additional Class B Purchaser confirms to and agrees with each Agent, the Facility Agent and each Class B Purchaser as follows: (i) neither the Agent, the Facility Agent nor any other Class B Purchaser makes any representation or warranty or assumes any responsibility with respect to any statements, warranties or representations made in or in connection with the Certificate Purchase Agreement (other then representations or warranties made by such respective parties) or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Certificate Purchase Agreement or any other instrument or document furnished pursuant thereto, or with respect to the Trust, the financial condition of SRPC, SRI, Granite, Stage, the Servicer, the Transferor or the Trustee, or the performance or observance by SRPC, SRI, Granite, Stage, the Servicer, the Transferor or the Trustee of any of their respective obligations under the Certificate Purchase Agreement or the Pooling and Servicing Agreement or any other instrument or document furnished pursuant hereto; (ii) the Additional Class B Purchaser confirms that it has received a copy of such documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Supplement; (iii) the Additional Class B Purchaser will, independently and without reliance upon any Agent, the Facility Agent or any other Class B Purchaser and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Certificate Purchase Agreement; (iv) each Purchasing Class B Purchaser appoints and authorizes the Agent and the Facility Agent to take such action as agent on its behalf and to exercise such powers under the Certificate Purchase Agreement and the Pooling and Servicing Agreement as are delegated to such Agent or the Facility Agent, as applicable, by the terms thereof, together with such powers as are reasonably incidental thereto, all in accordance with Section 7 of the Certificate Purchase Agreement; and (v) the Additional Class B Purchaser agrees (for the benefit of each Agent, the Facility Agent, each other Class B Purchaser, the Servicer and the Transferor) that (A) if it is a Conduit Purchaser, it will perform in accordance with their terms all of the obligations which by the terms of the Certificate Purchase Agreement are required to be performed by it as a Class B Purchaser which is a Conduit Purchaser, (B) if it is a Committed Purchaser, it will perform in accordance with their terms all of the obligations which by the terms of the Certificate Purchase Agreement are required to be performed by it as a Class B Purchaser which is a Committed Purchaser, and (C) if it is a Liquidity Purchaser, it will perform in accordance with their terms all of the obligations which by the terms of the Certificate Purchase Agreement are required to be performed by it as a Class B Purchaser which is a Liquidity Purchaser. By executing and delivering this Supplement, the Agent, if it not already an "Agent" under the Certificate Purchase Agreement, agrees (for the benefit of each other Agent, the Facility Agent, each Class B Purchaser, the Servicer and the Transferor) that it will perform in accordance with their terms all of the obligations which by the terms of the Certificate Purchase Agreement are required to be performed by it as an Agent for its Purchaser Group. (e) Schedule II hereto sets forth the Maximum Purchase Amount or the Commitment, as applicable, the Commitment Expiration Date, if applicable, and the initial Investing Office of the Additional Class B Purchaser, as well as administrative information with respect to the Additional Class B Purchaser, including the address of Additional Class B Purchaser for purposes of notices, requests and demands pursuant to subsection 9.2(a) of the Certificate Purchase Agreement and the identification of the account for certain payments to the Additional Class B Purchaser for purposes of subsection 9.2(b) of the Certificate Purchase Agreement. (f) Schedule II hereto also sets forth the address of the Agent for purposes of notices, requests and demands pursuant to subsection 9.2(a) of the Certificate Purchase Agreement and the identification of the account for certain payments to the Agent for purposes of subsection 9.2(b) of the Certificate Purchase Agreement. (g) THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. IN WITNESS WHEREOF, the parties hereto have caused this Supplement to be executed by their respective duly authorized officers on Schedule I hereto as of the date set forth in Item 1 of Schedule I hereto. SCHEDULE I TO JOINDER SUPPLEMENT Completion of Information And Signatures For Joinder Supplement Re: Class B Certificate Purchase Agreement, dated as of November 9, 1999, among SRI Receivables Purchase Co., Inc., as Transferor, Specialty Retailers, Inc., as Servicer, the Class B Purchasers and Agent to party thereto and Credit Suisse First Boston, New York Branch, as Agent and as Facility Agent. Item 1: Date of Joinder Supplement: Item 2: Additional Class B Purchaser: Item 3: Agent: Item 4.: Purchaser Group: Item 5: Signatures of Parties to Agreement: as Additional Class B Purchaser By: Name: Title: as Agent By: Name: Title: SRI RECEIVABLES PURCHASE CO., INC. as Transferor By: Name: Title: ACCEPTED BY: CREDIT SUISSE FIRST BOSTON, NEW YORK BRANCH, as Facility Agent By: Name: Title: By: Name: Title: SCHEDULE II TO JOINDER SUPPLEMENT List of Percentages, Maximum Purchase Amount or Commitment, Commitment Expiration Date, Addresses For Notices and Payment Instructions and Investing Offices [NAME OF CLASS B PURCHASER], as Class B Purchaser Type of Purchaser: [Conduit/Liquidity/Committed Purchaser] For Conduit Purchaser: (if applicable) Initial Purchaser Percentage: _______% Maximum Purchase Amount: $____________ Related Liquidity Purchasers, Commitment Expiration Dates and Initial Liquidity Percentages: ______________________ ____________, ____ _______% ______________________ ____________, ____ _______% ______________________ ____________, ____ _______% For Liquidity Purchaser: (if applicable) Initial Liquidity Percentage: _______% Commitment: $____________ Commitment Expiration Date: ____________, ____ Related Conduit Purchaser: _______________________ For Committed Purchaser: (if applicable) Initial Purchaser Percentage: _______% Commitment: $________ Commitment Expiration Date: ____________, ____ Address for Notices: Payment Instructions: Investing Office: [NAME OF AGENT], as Agent Address for Notices: Payment Instructions: SCHEDULE III TO JOINDER SUPPLEMENT Form of Joinder Effective Notice To: [Name and address of Transferor, Servicer, Trustee, Facility Agent and Additional Class B Purchaser] The undersigned, as Agent under the Class B Certificate Purchase Agreement, dated as of November 9, 1999, among SRI Receivables Purchase Co., Inc., as Transferor, Specialty Retailers, Inc., as Servicer, the Class B Purchasers and Agents parties thereto and Credit Suisse First Boston, New York Branch, as Facility Agent thereunder, acknowledges receipt of five executed counterparts of a completed Joinder Supplement. [Note: attach copies of Schedules I and II from such Agreement.] Terms defined in such Supplement are used herein as therein defined. Pursuant to such Supplement, you are advised that the Joinder Effective Date will be _____________, 199_. Very truly yours, [NAME OF AGENT] By:_______________________ Name: Title: EXHIBIT C FORM OF TRANSFER SUPPLEMENT TRANSFER SUPPLEMENT, dated as of the date set forth in Item 1 of Schedule I hereto, among the Transferor Class B Purchaser set forth in Item 2 of Schedule I hereto (the "Transferor Class B Purchaser"), the Purchasing Class B Purchaser set forth in Item 3 of Schedule I hereto (the "Purchasing Class B Purchaser"), the Agent set forth in Item 4 of Schedule I hereto for the Class B Purchasers in the Purchaser Group set forth in Item 5 of Schedule I hereto (in such capacity, the "Agent"), and Credit Suisse First Boston, New York Branch, as Facility Agent for the Class B Purchasers under, and as defined in, the Certificate Purchase Agreement described below (in such capacity, the "Facility Agent"). W I T N E S S E T H: WHEREAS, this Supplement is being executed and delivered in accordance with subsection 8.1(e) of the Class B Certificate Purchase Agreement, dated as of November 9, 1999, among SRI Receivables Purchase Co., Inc., as Transferor, Specialty Retailers, Inc., as Servicer, the Class B Purchasers and Agents parties thereto and Credit Suisse First Boston, New York Branch, as Facility Agent (as from time to time amended, supplemented or otherwise modified in accordance with the terms thereof, the "Certificate Purchase Agreement"; unless otherwise defined herein, terms defined in the Certificate Purchase Agreement are used herein as therein defined); WHEREAS, the Purchasing Class B Purchaser (if it is not already a Class B Purchaser party to the Certificate Purchase Agreement) wishes to become a Class B Purchaser party to the Certificate Purchase Agreement and the Purchasing Class B Purchaser wishes to acquire and assume from the Transferor Class B Purchaser, certain of the rights, obligations and commitments under the Certificate Purchase Agreement; and WHEREAS, the Transferor Class B Purchaser wishes to sell and assign to the Purchasing Class B Purchaser, certain of its rights, obligations and commitments under the Certificate Purchase Agreement. NOW, THEREFORE, the parties hereto hereby agree as follows: (a) Upon receipt by the Agent of five counterparts of this Supplement, to each of which is attached a fully completed Schedule I and Schedule II, each of which has been executed by the Transferor Class B Purchaser, the Purchasing Class B Purchaser and the Agent, the Agent will transmit to the Servicer, the Transferor, the Trustee, the Transferor Class B Purchaser and the Purchasing Class B Purchaser a Transfer Effective Notice, substantially in the form of Schedule III to this Supplement (a "Transfer Effective Notice"). Such Transfer Effective Notice shall be executed by the Agent and shall set forth, inter alia, the date on which the transfer effected by this Supplement shall become effective (the "Transfer Effective Date"). From and after the Transfer Effective Date the Purchasing Class B Purchaser shall be a Class B Purchaser party to the Certificate Purchase Agreement for all purposes thereof as a Conduit Purchaser, Liquidity Purchaser or Committed Purchaser, as applicable, as specified on Schedule II to this Supplement, and shall be a member of the Purchaser Group set forth in Item 5 of Schedule I hereto. (b) At or before 12:00 Noon, local time of the Transferor Class B Purchaser, on the Transfer Effective Date, the Purchasing Class B Purchaser shall pay to the Transferor Class B Purchaser, in immediately available funds, an amount equal to the purchase price, as agreed between the Transferor Class B Purchaser and such Purchasing Class B Purchaser (the "Purchase Price"), of the portion set forth on Schedule II hereto being purchased by such Purchasing Class B Purchaser of the outstanding Class B Invested Amount under the Class B Certificate owned by the Transferor Class B Purchaser (such Purchasing Class B Purchaser's "Purchase Percentage") and other amounts owing to the Transferor Class B Purchaser under the Certificate Purchase Agreement or otherwise in respect of the Class B Certificates. Effective upon receipt by the Transferor Class B Purchaser of the Purchase Price from the Purchasing Class B Purchaser, the Transferor Class B Purchaser hereby irrevocably sells, assigns and transfers to the Purchasing Class B Purchaser, without recourse, representation or warranty, and the Purchasing Class B Purchaser hereby irrevocably purchases, takes and assumes from the Transferor Class B Purchaser, the Purchasing Class B Purchaser's Purchase Percentage of (i) the presently outstanding Class B Invested Amount under the Class B Certificates owned by the Transferor Class B Purchaser and other amounts owing to the Transferor Class B Purchaser in respect of the Class B Certificates, together with all instruments, documents and collateral security pertaining thereto, and (ii) the Purchasing Class B Purchaser's Purchase Percentage of (A) if the Transferor Class B Purchaser is a Conduit Purchaser, the Purchaser Percentage and the Maximum Purchaser Amount of the Transferor Class B Purchaser and the other rights and duties of the Transferor Class B Purchaser under the Certificate Purchase Agreement, (B) if the Transferor Class B Purchaser is a Committed Purchaser, the Purchaser Percentage and the Commitment of the Transferor Class B Purchaser and other rights, duties and obligations of the Transferor Class B Purchaser under the Certificate Purchase Agreement, or (C) if the Transferor Class B Purchaser is a Liquidity Purchaser, the Liquidity Percentage and the Commitment of the Transferor Class B Purchaser and other rights, duties and obligations of the Transferor Class B Purchaser under the Certificate Purchase Agreement. This Supplement is intended by the parties hereto to effect a purchase by the Purchasing Class B Purchaser and sale by the Transferor Class B Purchaser of interests in the Class B Certificates, and it is not to be construed as a loan or a commitment to make a loan by the Purchasing Class B Purchaser to the Transferor Class B Purchaser. The Transferor Class B Purchaser hereby confirms that the amount of the Class B Invested Amount is $___________ and its Percentage Interest thereof is ___%, which equals $___________ as of _________, ___. Upon and after the Transfer Effective Date (until further modified in accordance with the Certificate Purchase Agreement), the Purchaser Percentage or Liquidity Percentage, as applicable, of the Transferor Class B Purchaser and the Purchasing Class B Purchaser, the Maximum Purchaser Amount or Commitment, as applicable, of the Transferor Class B Purchaser and the Purchasing Class B Purchaser and the Percentage Interest of the Transferor Class B Purchaser and the Purchasing Class B Purchaser shall be as set forth in Schedule II to this Supplement. (c) The Transferor Class B Purchaser has made arrangements with the Purchasing Class B Purchaser with respect to (i) the portion, if any, to be paid, and the date or dates for payment, by the Transferor Class B Purchaser to the Purchasing Class B Purchaser of any fees heretofore received by the Transferor Class B Purchaser pursuant to the Certificate Purchase Agreement prior to the Transfer Effective Date and (ii) the portion, if any, to be paid, and the date or dates for payment, by the Purchasing Class B Purchaser to the Transferor Class B Purchaser of fees or interest received by the Purchasing Class B Purchaser pursuant to the Certificate Purchase Agreement or otherwise in respect of the Class B Certificates from and after the Transfer Effective Date. (d) (i) All principal payments that would otherwise be payable from and after the Transfer Effective Date to or for the account of the Transferor Class B Purchaser in respect of the Class B Certificates shall, instead, be payable to or for the account of the Transferor Class B Purchaser and the Purchasing Class B Purchaser, as the case may be, in accordance with their respective interests as reflected in this Supplement. (ii) All interest, fees and other amounts that would otherwise accrue for the account of the Transferor Class B Purchaser from and after the Transfer Effective Date pursuant to the Certificate Purchase Agreement or in respect of the Class B Certificates shall, instead, accrue for the account of, and be payable to or for the account of, the Transferor Class B Purchaser and the Purchasing Class B Purchaser, as the case may be, in accordance with their respective interests as reflected in this Supplement. In the event that any amount of interest, fees or other amounts accruing prior to the Transfer Effective Date was included in the Purchase Price paid by the Purchasing Class B Purchaser, the Transferor Class B Purchaser and the Purchasing Class B Purchaser will make appropriate arrangements for payment by the Transferor Class B Purchaser to the Purchasing Class B Purchaser of such amount upon receipt thereof from the Agent. (e) Concurrently with the execution and delivery hereof, the Purchasing Class B Purchaser will deliver to Agent, the Transferor and the Trustee an executed Investment Letter in the form of Exhibit A to the Certificate Purchase Agreement and the forms, if any, required by subsection 2.5(c) of the Certificate Purchase Agreement. (f) Each of the parties to this Supplement agrees and acknowledges that (i) at any time and from time to time upon the written request of any other party, it will execute and deliver such further documents and do such further acts and things as such other party may reasonably request in order to effect the purposes of this Supplement, and (ii) the Agent shall apply each payment made to it under the Certificate Purchase Agreement, whether in its individual capacity or as Agent, in accordance with the provisions of the Certificate Purchase Agreement, as appropriate. (g) By executing and delivering this Supplement, the Transferor Class B Purchaser and the Purchasing Class B Purchaser confirm to and agree with each other, the Facility Agent, each Agent and each Class B Purchaser as follows: (i) other than the representation and warranty that it is the legal and beneficial owner of the interest being assigned hereby free and clear of any adverse claim, the Transferor Class B Purchaser makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Certificate Purchase Agreement or the Pooling and Servicing Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Certificate Purchase Agreement or any other instrument or document furnished pursuant thereto; (ii) the Transferor Class B Purchaser makes no representation or warranty and assumes no responsibility with respect to the Trust, the financial condition of SRPC, SRI, Granite, Stage, the Servicer, the Transferor or the Trustee, or the performance or observance by SRPC, SRI, Granite, Stage, the Servicer, the Transferor or the Trustee of any of their respective obligations under the Certificate Purchase Agreement, the Pooling and Servicing Agreement or any other instrument or document furnished pursuant hereto; (iii) each Purchasing Class B Purchaser confirms that it has received a copy of such documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Supplement; (iv) each Purchasing Class B Purchaser will, independently and without reliance upon the Facility Agent, any Agent, the Transferor Class B Purchaser or any other Class B Purchaser and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Certificate Purchase Agreement or the Pooling and Servicing Agreement; (v) each Purchasing Class B Purchaser appoints and authorizes the Agent and the Facility Agent to take such action as agent on its behalf and to exercise such powers under the Certificate Purchase Agreement and the Pooling and Servicing Agreement as are delegated to the Agent or the Facility Agent, as the case may be, by the terms thereof, together with such powers as are reasonably incidental thereto, all in accordance with Section 7 of the Certificate Purchase Agreement; and (vi) each Purchasing Class B Purchaser agrees (for the benefit of the Transferor Class B Purchaser, each Agent, the Facility Agent, each Class B Purchaser, the Servicer and the Transferor) that (A) if it is a Conduit Purchaser, it will perform in accordance with their terms all of the obligations which by the terms of the Certificate Purchase Agreement are required to be performed by it as a Class B Purchaser which is a Conduit Purchaser, (B) if it is a Committed Purchaser, it will perform in accordance with their terms all of the obligations which by the terms of the Certificate Purchase Agreement are required to be performed by it as a Class B Purchaser which is a Committed Purchaser, and (C) if it is a Liquidity Purchaser, it will perform in accordance with their terms all of the obligations which by the terms of the Certificate Purchase Agreement are required to be performed by it as a Class B Purchaser which is a Liquidity Purchaser. (h) Schedule II hereto sets forth the revised Maximum Purchase Amount or the revised Commitment, as applicable, and the Commitment Expiration Date, if applicable, of the Transferor Class B Purchaser, as well as administrative information with respect to the Transferor Class B Purchaser, including the address of Transferor Class B Purchaser for purposes of notices, requests and demands pursuant to subsection 9.2(a) of the Certificate Purchase Agreement and the identification of the account for certain payments to the Transferor Class B Purchaser for purposes of subsection 9.2(b) of the Certificate Purchase Agreement. Schedule II hereto also sets forth the Maximum Purchase Amount or the Commitment, as applicable, the Commitment Expiration Date, if applicable, and the initial Investing Office of the Purchasing Class B Purchaser, as well as administrative information with respect to the Purchasing Class B Purchaser, including the address of Purchasing Class B Purchaser for purposes of notices, requests and demands pursuant to subsection 9.2(a) of the Certificate Purchase Agreement and the identification of the account for certain payments to the Purchasing Class B Purchaser for purposes of subsection 9.2(b) of the Certificate Purchase Agreement. (i) THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. IN WITNESS WHEREOF, the parties hereto have caused this Supplement to be executed by their respective duly authorized officers on Schedule I hereto as of the date set forth in Item 1 of Schedule I hereto. SCHEDULE I TO TRANSFER SUPPLEMENT Completion of Information and Signatures for Transfer Supplement Re: Class B Certificate Purchase Agreement, dated as of November 9, 1999, among SRI Receivables Purchase Co., Inc., as Transferor, Specialty Retailers, Inc., as Servicer, the Class B Purchasers and Agents party thereto and Credit Suisse First Boston, New York Branch, as Facility Agent. Item 1: Date of Transfer Supplement: Item 2: Transferor Class B Purchaser: Item 3: Purchasing Class B Purchaser: Item 4: Agent: Item 5: Purchaser Group: Item 6: Signatures of Parties to Agreement: as Transferor Class B Purchaser By: Name: Title: as Purchasing Class B Purchaser By: Name: Title: CONSENTED TO AND ACCEPTED BY: CREDIT SUISSE FIRST BOSTON, NEW YORK BRANCH, as Facility Agent By: Name: Title: By: Name: Title: SCHEDULE II TO TRANSFER SUPPLEMENT List of Percentages, Maximum Purchase Amount or Commitment, Commitment Expiration Date, Addresses For Notices and Payment Instructions and Investing Offices [NAME OF TRANSFEROR CLASS B PURCHASER] Type of Purchaser: [Conduit/Liquidity/Committed Purchaser] For Conduit Purchaser: (if applicable) Maximum Purchase Amount Prior to Sale: $____________ Maximum Purchase Amount Sold: $____________ Maximum Purchase Amount Retained: $____________ Purchaser Percentage Prior to Sale: _______% Purchaser Percentage Sold: _______% Purchaser Percentage Retained: _______% Related Liquidity Purchasers, Commitment Expiration Dates and Liquidity Percentages: ______________________ ____________, ____ _______% ______________________ ____________, ____ _______% ______________________ ____________, ____ _______% For Liquidity Purchaser: (if applicable) Commitment Prior to Sale: $____________ Commitment Sold: $____________ Commitment Retained: $____________ Liquidity Percentage Prior to Sale: _______% Liquidity Percentage Sold: _______% Liquidity Percentage Retained: _______% Commitment Expiration Date: ________, ____ Related Conduit Purchaser: _______________________ For Committed Purchaser: (if applicable) Commitment Prior to Sale: $____________ Commitment Sold: $____________ Commitment Retained: $____________ Purchaser Percentage Prior to Sale: _______% Purchaser Percentage Sold: _______% Purchaser Percentage Retained: _______% Commitment Expiration Date: ____________, ____ [NAME OF PURCHASING CLASS B PURCHASER] Type of Purchaser: [Conduit/Liquidity/Committed Purchaser] For Conduit Purchaser: (if applicable) Maximum Purchase Amount Prior to Sale: $____________ Maximum Purchase Amount Purchased: $____________ Maximum Purchase Amount After Sale: $____________ Purchaser Percentage Prior to Sale: _______% Purchaser Percentage Purchased: _______% Purchaser Percentage After Sale: _______% Related Liquidity Purchasers, Commitment Expiration Dates and Liquidity Percentages: ______________________ ____________, ____ _______% ______________________ ____________, ____ _______% ______________________ ____________, ____ _______% For Liquidity Purchaser: (if applicable) Commitment Prior to Sale: $____________ Commitment Purchased: $____________ Commitment After Sale: $____________ Liquidity Percentage Prior to Sale: _______% Liquidity Percentage Purchased: _______% Liquidity Percentage After Sale: _______% Commitment Expiration Date: ____________, ____ Related Conduit Purchaser: _______________________ For Committed Purchaser: (if applicable) Commitment Prior to Sale: $____________ Commitment Purchased: $____________ Commitment After Sale: $____________ Purchaser Percentage Prior to Sale: _______% Purchaser Percentage Purchased: _______% Purchaser Percentage After Sale: _______% Commitment Expiration Date: ____________, ____ Address for Notices: Payment Instructions: Investing Office: SCHEDULE III TO TRANSFER SUPPLEMENT Form of Transfer Effective Notice To: [Name and address of Transferor, Servicer, Trustee, Facility Agent, Transferor Class B Purchaser and Purchasing Class B Purchaser] The undersigned, as Agent under the Class B Certificate Purchase Agreement, dated as of November 9, 1999, among SRI Receivables Purchase Co., Inc., as Transferor, Specialty Retailers, Inc., as Servicer, the Class B Purchasers and Agents parties thereto and Credit Suisse First Boston, New York Branch, as Facility Agent thereunder, acknowledges receipt of five executed counterparts of a completed Transfer Supplement. [Note: attach copies of Schedules I and II from such Agreement.] Terms defined in such Supplement are used herein as therein defined. Pursuant to such Supplement, you are advised that the Transfer Effective Date will be _____________, 199_. Very truly yours, [NAME OF AGENT] By:_______________________ Name: Title: EX-4.26 14 0014.txt SRI Receivables Master Trust Exh. B-33 Purchase Agreement Exhibit 4.26 EXECUTION COPY SRI RECEIVABLES MASTER TRUST CLASS C AND CLASS D CERTIFICATES, SERIES 1999-1 PURCHASE AGREEMENT November 9, 1999 Credit Suisse First Boston Corporation Eleven Madison Avenue New York, New York 10010 Ladies and Gentlemen: Section 1. Introductory. SRI Receivables Purchase Co., Inc., a Delaware Corporation ("Transferor"), proposes to sell to you ("Initial Purchaser") the following classes of securities in the aggregate initial principal amount indicated for each below (collectively the "Certificates"): $28,000,000 Class C Floating Rate Asset Backed Certificates, Series 1999-1; and $18,375,000 Class D Floating Rate Asset Backed Certificates, Series 1999-1. The Certificates will represent beneficial interests in the SRI Receivables Master Trust (the "Trust"). The property of the Trust consists primarily of Receivables arising from certain consumer revolving credit card accounts. The Certificates will be issued pursuant to the Second Amended and Restated Pooling and Servicing Agreement dated as of November 1, 1999 (the "P&S"), among Transferor, as Transferor, Specialty Retailers, Inc. ("SRI") as Servicer, and Bankers Trust (Delaware), as Trustee (the "Trustee"), and the Series 1999-1 Supplement to the P&S, to be dated as of the Closing Date (the "Supplement"), among the same parties. The P&S and the Supplement are referred to herein collectively as the "Pooling and Servicing Agreement". Capitalized terms used herein (including in this Section 1) that are not otherwise defined shall have the meanings ascribed thereto in the Pooling and Servicing Agreement. The sale of the Certificates to Initial Purchaser will be made without registration of the Certificates under the Securities Act of 1933, as amended (the "Securities Act"), in reliance upon the exemption from the registration requirements of the Securities Act provided by Section 4(2) thereof. You have advised Transferor that you will make an offering of the Certificates purchased by you hereunder in accordance with Section 4 on the terms set forth in the Offering Memoranda (as defined below), as soon as you deem advisable after this Agreement has been executed and delivered. In connection with the sale of the Certificates, Transferor has prepared a first Preliminary Offering Memorandum, dated September 14, 1999 (the "Preliminary Memorandum"), and, pursuant to Section 5(a) hereof, the Transferor will prepare a second Preliminary Offering Memorandum on the terms set forth therein (the "Second Preliminary Memorandum") and a final Offering Memorandum on the terms set forth therein (the "Final Memorandum", and together with the Preliminary Memorandum and the Second Preliminary Memorandum, the "Offering Memoranda"). The Offering Memoranda set forth certain information concerning Transferor, its affiliates and the Certificates. Transferor hereby confirms that it has authorized the use of the Offering Memoranda in connection with the offering and resale by Initial Purchaser of the Certificates. Any references herein to the Offering Memoranda shall be deemed to include all exhibits thereto. Section 2. Representations and Warranties of Transferor. (a) Transferor represents and warrants to, and agrees with, Initial Purchaser as set forth in this Section 2. (i) The Preliminary Memorandum as of its date did not, and the Second Preliminary Memorandum and the Final Memorandum as of their respective dates will not (in each case, as amended or supplemented as of such dates) contain any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. This representation and warranty does not apply to statements in or omissions from the Offering Memoranda made in reliance on and in conformity with written information furnished to Transferor by Initial Purchaser expressly for use in connection with the preparation of the Offering Memoranda (and any amendment or supplement thereof or thereto). Transferor acknowledges and agrees that the only information so furnished by the Initial Purchaser is the first sentence of the last paragraph of the cover page of the respective Offering Memoranda (the "Initial Purchaser Information"). (ii) Neither Transferor nor any affiliate (as defined in Rule 501(b) of Regulation D under the Securities Act ("Regulation D")) of Transferor has directly, or through any agent, engaged in any form of general solicitation or general advertising (within the meaning of Regulation D) in connection with the offering of the Certificates. (iii) The Certificates satisfy the requirements set forth in Rule 144A(d)(3) under the Securities Act. (iv) Transferor is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, and has all requisite power, authority and legal right to own its properties and conduct its business as described in the Offering Memoranda and to execute, deliver and perform this Agreement, the Pooling and Servicing Agreement, and the Receivables Purchase Agreement (collectively the "Specified Agreements"), to authorize the issuance of the Certificates and to consummate the transactions contemplated hereby. (v) Transferor is duly qualified to do business and is in good standing (or is exempt from such requirement) in any state required in order to conduct its business, and has obtained all necessary licenses and approvals with respect to Transferor required under applicable law. (vi) The execution, delivery and performance by Transferor of the Specified Agreements, the issuance of the Certificates and the consummation of the transactions contemplated hereby and thereby have been duly and validly authorized by all necessary action or proceedings. (vii) This Agreement has been duly executed and delivered by Transferor. (viii) The execution, delivery and performance by Transferor of the Specified Agreements, the issuance of the Certificates and the fulfillment of the terms hereof and thereof will not conflict with, result in any breach of any of the terms and provisions of, or constitute (with or without notice or lapse of time or both) a default under, or (other than the Lien of the Pooling and Servicing Agreement) result in the creation or imposition of any Lien under any material indenture, contract, agreement, mortgage, deed of trust or other instrument to which Transferor is a party or by which it or any of its properties are bound. (ix) The execution, delivery and performance by Transferor of the Specified Agreements, the issuance of the Certificates and the fulfillment of the terms hereof and thereof, will not conflict with or violate any Requirements of Law applicable to Transferor. (x) Except as disclosed in the Offering Memoranda, there are no proceedings or investigations pending or, to the best knowledge of Transferor, threatened against Transferor before any court, regulatory body, administrative agency, arbitrator or other tribunal or governmental instrumentality (A) asserting the invalidity of any Specified Agreement or the Certificates, (B) seeking to prevent the issuance of the Certificates or the consummation of any of the transactions contemplated by the Specified Agreements, (C) seeking any determination or ruling that, in the reasonable judgment of Transferor, would materially and adversely affect the performance by Transferor of its obligations under any Specified Agreement, (D) seeking any determination or ruling that would materially and adversely affect the validity or enforceability of any Specified Agreements or the Certificates, or (E) seeking to affect adversely the income tax attributes of the Trust, as described in the Offering Memoranda under the heading "U.S. Federal Income Tax Matters". (xi) All approvals, authorizations, consents, orders and other actions of any Person or of any governmental body or official required in connection with the execution and delivery of the Specified Agreements, the issuance of the Certificates and the performance of the transactions contemplated hereby and thereby and the fulfillment of the terms hereof and thereof, have been obtained. (xii) Transferor has delivered to Initial Purchaser true, complete and correct copies of the January 30, 1998 and January 31, 1999 audited consolidated financial statements of Stage Stores, Inc. ("Stage"). Except as otherwise set forth therein, since the date of the latest such financial statements (A) there has been no material adverse change in the condition (financial or otherwise) of Transferor or Stage and (B) there have been no transactions entered into by either of Transferor or Stage, other than those in the ordinary course of its business, that are material with respect to Transferor or Stage, as applicable, other than changes in condition or transactions entered into, if any, disclosed in Transferor's or Stage's filings, as applicable, with the SEC pursuant to the Securities Exchange Act of 1934, as amended, or disclosed in a writing addressed to the Initial Purchaser. (xiii) Any taxes, fees and other governmental charges in connection with the execution, delivery and performance of the Specified Agreements and the Certificates have been paid by Transferor or will be paid by Transferor at or prior to the Closing Date to the extent then due. (xiv) The Certificates have been duly and validly authorized. The Certificates, when validly authenticated, issued and delivered in accordance with the Pooling and Servicing Agreement and sold to Initial Purchaser as provided herein will be duly and validly issued and outstanding and entitled to the benefits of the Pooling and Servicing Agreement, and, together with the Pooling and Servicing Agreement, will conform in all material respects to the descriptions thereof and the statements in relation thereto contained in the Offering Memoranda. (xv) Assuming the due authorization, execution and delivery thereof by the other parties thereto, the P&S and the Receivables Purchase Agreement constitute, and the Supplement when executed and delivered, and the Certificates when validly authenticated, issued and delivered in accordance with the Pooling and Servicing Agreement and sold to Initial Purchaser as provided herein will constitute, the legal, valid and binding agreement of Transferor enforceable in accordance with their respective terms, except as the enforceability thereof may be limited by bankruptcy, insolvency, moratorium, reorganization or other similar laws affecting enforcement of creditors' rights generally and by general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). (xvi) On the Closing Date, Initial Purchaser will obtain from Transferor good and marketable title to the Certificates, free and clear of all Liens (other than any Liens created by Initial Purchaser) when validly authenticated, issued and delivered in accordance with the Pooling and Servicing Agreement and sold to Initial Purchaser as provided herein. (xvii) Neither the Transferor nor the Trust is and, after giving effect to the offering and sale of the Certificates and the application of the proceeds thereof as described in the Offering Memoranda, will not be either (A) an open-end investment company, unit investment trust or face-amount certificate company that is or is required to be registered under Section 8 of the United States Investment Company Act of 1940 (the "Investment Company Act") or (B) an "investment company" or "controlled" by an "investment company" as such terms are defined in the Investment Company Act. (xviii) As of the Closing Date each of the representations and warranties of Transferor deemed made pursuant to the Pooling and Servicing Agreement will be true and correct, and Initial Purchaser may rely on such representations and warranties as if they were set forth herein in full. (b) Any Officer's Certificate signed by any officer of Transferor and delivered to Initial Purchaser or its counsel shall be deemed a representation and warranty of Transferor to Initial Purchaser as to the matters covered thereby. Section 3. Purchase and Sale. On the basis of the representations, warranties and agreements herein contained, but subject to the terms and conditions herein set forth, Transferor agrees to sell to Initial Purchaser, and Initial Purchaser agrees to purchase the Certificates, at a purchase price, for each Class of Certificates, equal to the percentage specified below of the aggregate initial principal amount thereof: Class C 100% (par) Class D 100% (par) The Certificates will be issued in uncertificated form and will be evidenced and transferred only by entries on a register maintained by the Trustee. Transferor shall cause the Trustee to deliver confirmations evidencing the registration of Initial Purchaser, its nominee or its designees as owner of the entire initial principal balance of the Class C and Class D Certificates, against payment by Initial Purchaser of the purchase price therefor to or upon the order of Transferor in immediately available funds at the office of Mayer, Brown & Platt, New York, New York at or about 2:00 p.m., New York City time, on November 9, 1999 (the "Closing Date"). Forms of these confirmations will be made available for checking at the above office of Mayer Brown & Platt at least 24 hours prior to the Closing Date. Section 4. Offering by Initial Purchaser; Restrictions on Transfer. Initial Purchaser represents and warrants to, and agrees with, Transferor that: (i) it has not solicited and will not solicit any offer to buy or offer to sell the Certificates by means of any form of general solicitation or general advertising (within the meaning of Regulation D) or in any manner involving a public offering within the meaning of Section 4(2) of the Securities Act; (ii) it has solicited and will solicit offers to buy the Certificates only from, and has offered and will offer, sell or deliver the Certificates only to persons who it reasonably believes after due inquiry to be qualified institutional buyers (as defined in Rule 144A under the Securities Act) or, if any such person is buying for one or more institutional accounts for which such person is acting as fiduciary or agent, only when such person has represented to Initial Purchaser that each such account is a qualified institutional buyer, to whom notice has been given that such sale or delivery is being made in reliance on Rule 144A, and, in each case, in transactions under Rule 144A and who provide to Initial Purchaser a letter in the form of Appendix 2; (iii) in connection with the offer and sale contemplated by this Agreement, it will deliver to each purchaser of Certificates a copy of the Final Memorandum and any supplements and amendments thereof or thereto; (iv) it is an "accredited investor" (as defined in Rule 501 of Regulation D); (v) it will not offer or sell any of the Certificates in any jurisdiction except under circumstances that will result in compliance with the applicable laws thereof, and it understands that no action has been taken to permit a public offering in any jurisdiction where action would be required for such purpose; and (vi) it will not sell Certificates to any purchaser for less than the applicable minimum face amount specified in the Offering Memoranda. Section 5. Certain Agreements of Transferor. Transferor covenants and agrees with Initial Purchaser that: (a) Both before and after the Closing Date, the Transferor shall use its best efforts to (i) procure at its expense the issuance of an insurance policy by a financial entity rated at or above "A" or its equivalent by each of DCR and Fitch, and otherwise acceptable to the Initial Purchaser, to fully support the timely payment of interest and the ultimate payment of principal with respect to the Class D Certificates and (ii) facilitate the offer and resale of the Certificates by the Initial Purchaser, in each case, on terms satisfactory to the Initial Purchaser; provided, however, that notwithstanding anything herein to the contrary, the Transferor shall be under no obligation to take any action pursuant to this Section 5(a) if such action would cause the economics related to the Class D Certificates, in the aggregate and after taking into account the issuance of the Policy, to have changed adversely with respect to the Transferor. The Transferor shall also cooperate fully with the Initial Purchaser in the preparing, printing, reproducing and the distribution of (A) the Second Preliminary Memorandum, which shall include financial information updated from the date of the Preliminary Offering Memorandum with respect to the Transferor, its affiliates, the Certificates and the Receivables, in each case, in form and substance satisfactory to the Initial Purchaser and which shall reflect any changes in the disclosure since the date of the Preliminary Memorandum with respect to or necessitated by: (x) modifications to the Specified Agreements, (y) the insuring of the Certificates as set forth above or (z) such other matters as determined by the Initial Purchaser, and (B) the Final Memorandum, in each case, at the time and in the form requested by the Initial Purchaser. In connection with distribution of the Final Memorandum, the Transferor shall cause Kirkland & Ellis (or such other nationally recognized counsel acceptable to the Initial Purchaser) to issue a favorable opinion on the date of the Final Memorandum as to certain securities disclosure matters regarding the Second Preliminary Memorandum and the Final Offering Memorandum in form and substance satisfactory to the Initial Purchaser. (b) Transferor will furnish to Initial Purchaser, without charge, during the period mentioned in Section 5(d), as many copies of the Offering Memoranda and any supplements and amendments thereof or thereto as Initial Purchaser may reasonably request. (c) Before amending or supplementing the Offering Memoranda with respect to the Certificates, Transferor will furnish a copy thereof to Initial Purchaser and its counsel and consult with them with respect to any comments they may have on each such proposed amendment or supplement thereto. (d) If, at any time during the period commencing on the Closing Date and ending on the completion of the initial sale of the Certificates by Initial Purchaser, any event occurs as a result of which the Offering Memoranda as then amended or supplemented would include any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein in light of the circumstances under which they were made not misleading, or if it shall be necessary at any time to amend or supplement the Offering Memoranda to comply with applicable law, Transferor promptly will prepare and provide, at its own expense, to Initial Purchaser pursuant to Section 5(b) an amendment or supplement which will correct such statement or omission or effect such compliance. Neither the consent of Initial Purchaser to, nor the delivery by Initial Purchaser of, any such amendment or supplement shall constitute a waiver of any of the conditions set forth in Section 6 hereof. Initial Purchaser shall notify Transferor in writing of the date of the completion of the initial sale of the Certificates by Initial Purchaser. (e) Transferor will arrange for the qualification of the Certificates for sale under the laws of such jurisdictions in the United States as Initial Purchaser may reasonably designate and will continue such qualifications in effect so long as required for the distribution of the Certificates, provided that Transferor shall not be obligated to qualify to do business nor become subject to service of process generally, but only to the extent required for such qualification, in any jurisdiction in which it is not currently so qualified, and will arrange for the determination of the legality of the Certificates for purchase by institutional investors. (f) Neither Transferor nor any affiliate of Transferor will solicit any offer to buy or offer or sell the Certificates by means of any form of general solicitation or general advertising (within the meaning of Regulation D). (g) Transferor shall, during any period in which a purchaser of the Certificates is subject to the resale restrictions set forth in "Investor Representations and Restrictions on Resale" in Appendix 1 and in which Transferor is not subject to Section 13 or 15(d) of the Exchange Act, make available, upon request, to any holder of such Certificates in connection with any sale thereof and any prospective purchaser of Certificates from such holder the information ("Rule 144A Information") specified in Rule 144A(d)(4) under the Securities Act. (h) Neither Transferor nor any affiliate of Transferor will sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as defined in the Securities Act) the offering of which security will be integrated with the sale of the Certificates in a manner which would require the registration of the Certificates under the Securities Act. (i) Transferor shall include in each Offering Memoranda information substantially in the form set forth in Appendix 1 hereto. (j) So long as any of the Certificates are outstanding, Transferor will deliver or cause to be delivered to Initial Purchaser (i) copies of each report mailed to the Trustee or the Series 1999-1 Holders, as soon as such report is mailed to the Trustee or such Holders, (ii) the annual statement as to compliance and the annual statement of a firm of independent public accountants furnished to the Trustee pursuant to Sections 3.5 and 3.6 of the Pooling and Servicing Agreement, as soon as such statements are furnished to the Trustee, (iii) copies of all documents required to be filed with the Commission pursuant to the Exchange Act or any order of the Commission thereunder, and (iv) such other information concerning Transferor, the Certificates or the Trust as Initial Purchaser may reasonably request from time to time. (k) Transferor will pay all expenses incident to the performance of its obligations under this Agreement, including without limitation, (i) expenses of preparing, printing, reproducing and distributing each Offering Memorandum and each amendment thereto, the Pooling and Servicing Agreement, and the Certificates, (ii) the fees and disbursements of the Trustee and its counsel, (iii) the fees and disbursements of the independent public accountants of Transferor and, to the extent previously agreed, fees and disbursements of counsel to Transferor, (iv) the fees charged by each Rating Agency in connection with the rating of the Certificates, (v) the fees and expenses of Mayer, Brown & Platt, counsel to Initial Purchaser and (vi) expenses incurred in distributing each Offering Memoranda (including any amendments and supplements thereto) to Initial Purchaser, and will reimburse Initial Purchaser for any expenses (including reasonable fees and disbursements of counsel) incurred by Initial Purchaser pursuant to Section 5(e) hereof in connection with the qualification of the Certificates for sale and determination of their eligibility for investment under the laws of such jurisdictions in the United States as Initial Purchaser may designate. (l) On or before the Closing Date, Transferor shall cause its books and records (including any computer records) to be marked relating to the Receivables to be transferred to the Trust, to show the transfer to the Trust of such Receivables, and from and after the Closing Date Transferor shall not take any action inconsistent with the transfer to the Trust of such Receivables, other than as permitted by the Pooling and Servicing Agreement. (m) Until the earlier of (i) 90 days from the date hereof and (ii) fifteen (15) days after the Initial Purchaser has sold all of the Certificates to other purchasers, none of Transferor or any of its affiliates or any trust formed by it or any of its affiliates will, without the prior written consent of Initial Purchaser, directly or indirectly, offer, sell or contract to sell or announce the offering of, in a public or private transaction, any other collateralized securities similar to the Certificates representing interests in consumer credit card receivables other than any additional sale of the Trust's series 1997-1 Certificates to the entities that currently hold such certificates or any other sale of such Certificates arranged by the Initial Purchasers. (n) So long as any Certificates are outstanding, Transferor will cause to be delivered to Initial Purchaser a reliance letter relating to each Opinion of Counsel delivered to the Trustee or any Rating Agency by counsel to Transferor pursuant to the Pooling and Servicing Agreement at the time such opinion is delivered. (o) To the extent, if any, that the rating provided with respect to the Certificates by any Rating Agency is conditional upon the furnishing of documents or the taking of any other actions by Transferor, Transferor shall use its best efforts to furnish such documents and take any such other actions as may be required. (p) During the period of three years after the Closing Date Transferor will not and will not permit any of its affiliates (as defined in Rule 144 of the Securities Act) to resell any of the Certificates that have been acquired by any of them. Section 6. Conditions of the Obligations of Initial Purchaser. The obligation of Initial Purchaser to purchase and pay for the Certificates will be subject to the accuracy of the representations and warranties on the part of Transferor herein as of the date hereof and the Closing Date, to the accuracy of the statements of the officers of Transferor made pursuant to the provisions hereof, to the performance by Transferor of its obligations hereunder and to the following additional conditions precedent: (a) (i) On the date of this Agreement, Initial Purchaser and Transferor shall have received a letter, dated the date of delivery thereof, of PriceWaterhouseCoopers, LLP, substantially in the form of the draft to which Initial Purchaser have previously agreed and otherwise in form and substance satisfactory to Initial Purchaser and counsel for Initial Purchaser, and (ii) on the date of the Final Offering Memorandum, Initial Purchaser and Transferor shall have received a letter, dated as of such date, from PriceWaterhouseCoopers, LLP updating the letter referred to in clause (i) above, in form and substance satisfactory to Initial Purchaser and counsel for Initial Purchaser. (b) Subsequent to the execution and delivery of this Agreement, there shall not have occurred (i) any change, or any development involving a prospective change, in or affecting particularly the business or properties of Transferor which, in the judgment of Initial Purchaser materially impairs the investment quality of the Certificates; (ii) any downgrading in the rating of any debt securities of Stage or any of its direct or indirect subsidiaries or any Certificates issued by the Trust by any "nationally recognized statistical rating organization" (as defined for purposes of Rule 436(g) under the Securities Act), or any public announcement that any such organization has under surveillance or review its rating of any such securities (other than an announcement with positive implications of a possible upgrading, and no implication of a possible downgrading, of such rating); (iii) any suspension or limitation of trading in securities generally on the New York Stock Exchange or any setting of minimum prices for trading on such exchange, or any suspension of trading of any securities of Transferor on any exchange or in the over-the-counter market; (iv) any banking moratorium declared by Federal, New York, Ohio or Texas authorities; or (v) any outbreak or escalation of major hostilities in which the United States is involved, any declaration of war by Congress or any other substantial national or international calamity or emergency if, in the judgment of Initial Purchaser, the effect of any such outbreak, escalation, declaration, calamity or emergency makes it impractical or inadvisable to proceed with completion of the sale of and payment for the Certificates. (c) Initial Purchaser shall have received: (1) the favorable opinion or opinions of Kirkland & Ellis, counsel for Transferor and SRI, in form and substance satisfactory to the Initial Purchaser and counsel to the Initial Purchaser, dated the Closing Date, addressed to the Initial Purchaser and substantially in the form or forms attached hereto as Exhibit A. (2) the favorable opinion of Hirsh & Westheimer, P.C., special Texas Counsel to Transferor and SRI, in form and substance satisfactory to the Initial Purchaser and counsel to the Initial Purchaser, dated the Closing Date, addressed to the Initial Purchaser and substantially in the form attached hereto as Exhibit B. (3) the favorable opinion of Thompson, Hine & Flory, LLP, special Ohio counsel to SRI, in form and substance satisfactory to the Initial Purchaser and counsel to the Initial Purchaser, dated the Closing Date, addressed to the Initial Purchaser and substantially in the form attached hereto as Exhibit C. (4) the favorable opinion of Counsel to the Trustee, in form and substance satisfactory to the Initial Purchaser and counsel to the Initial Purchaser, dated the Closing Date and addressed to the Initial Purchaser, to the effect that: (i) the Trustee has been duly incorporated and is validly existing and in good standing as a banking corporation under the laws of the state of Delaware; (ii) the execution, delivery and performance by the Trustee of the Pooling and Servicing Agreement and the issuance of the Certificates by the Trustee have been duly authorized by all necessary corporate action on the part of the Trustee, and under present laws do not and will not contravene any law or governmental regulation or order presently binding on the Trustee or the charter or the by- laws of the Trustee or contravene any provision of or constitute a default under any indenture, contract or other instrument to which the Trustee is a party or by which the Trustee is bound; (iii) the execution, delivery and performance by the Trustee of the Pooling and Servicing Agreement and the issuance of the Certificates by the Trustee do not require the consent or approval of, the giving of notice to, the registration with, or the taking of any other action in respect of any Federal, state or other governmental agency or authority which has not previously been effected; (iv) the Pooling and Servicing Agreement has been duly authorized, executed and delivered by the Trustee; (v) each of the Certificates has been duly authenticated and delivered by the Trustee and each of the Certificates and the Pooling and Servicing Agreement constitute legal, valid and binding agreements of the Trustee, enforceable against the Trustee in accordance with its terms (subject to applicable bankruptcy, insolvency and similar laws affecting creditors' rights generally); (vi) no approval, authorization or other action by, or filing with, any governmental authority of the United States of America or the State of Delaware having jurisdiction over the banking or trust powers of the Trustee is required in connection with its execution and delivery of the Pooling and Servicing Agreement or the performance by the Trustee of the terms of the Pooling and Servicing Agreement. In rendering such opinion counsel may rely as to matters of fact, to the extent deemed proper and as stated therein, on certificates of responsible officers of the Trust, Transferor and public officials. (5) Reliance letters relating to each opinion rendered to the Trustee or any Rating Agency by any counsel to Transferor in connection with the rating of the Certificates. (d) Initial Purchaser shall have received a certificate dated the Closing Date of the President, any Vice President, the Treasurer or any Assistant Treasurer, of Transferor in which such officer shall state that (i) the representations and warranties of Transferor in this Agreement are true and correct, and that Transferor has complied with all agreements and satisfied all conditions on its part to be performed or satisfied hereunder at or prior to the Closing Date and (ii) subsequent to the date of the most recent financial statements of Transferor delivered to Initial Purchaser hereunder, there has been no material adverse change in the condition, financial or otherwise, whether or not arising from transactions in the ordinary course of business, of Transferor except as set forth in or contemplated by the Offering Memoranda. (e) The Class C Certificates shall be rated "Baa2" by Moody's and "BBB" by Fitch. The Class D Certificates shall be rated "BBB-" by Fitch and "BBB-" by DCR. (f) Subsequent to the respective dates as of which information is given in the Offering Memoranda, there shall not have been any change, or any development involving a prospective change, in or affecting the business or properties of the Trust or Transferor the effect of which, in any case referred to above, is, in the judgment of Initial Purchaser, so material and adverse as to make it impractical or inadvisable to proceed with the offering or the delivery of the Certificates as contemplated by the Offering Memoranda (and any supplements thereto). Section 7. Indemnification and Contribution. (a) Transferor and Stage each will jointly and severally indemnify and hold harmless Initial Purchaser and each Person who controls Initial Purchaser within the meaning of the Securities Act against any losses, claims, damages or liabilities, joint or several, to which Initial Purchaser may become subject, under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the Offering Memoranda or any amendment or supplement thereto, or any related preliminary memorandum, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse Initial Purchaser and each Person who controls Initial Purchaser within the meaning of the Securities Act for any actual legal or other expenses reasonably incurred by Initial Purchaser in connection with investigating or defending any such loss, claim, damage, liability or action as such expenses are incurred; provided, however, that neither Transferor nor Stage each will be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement in or omission or alleged omission from any of such documents in reliance upon and in conformity with the Initial Purchaser Information. (b) Initial Purchaser agrees to indemnify and hold harmless Transferor and Stage against any losses, claims, damages or liabilities to which Transferor or Stage may become subject, under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the Offering Memoranda (including Exhibit B thereto) or any amendment or supplement thereto, or any related preliminary memorandum, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with the Initial Purchaser Information, and will reimburse any actual legal or other expenses reasonably incurred by Transferor or by Stage in connection with investigating or defending any such loss, claim, damage, liability or action as such expenses are incurred. (c) Promptly after receipt by an indemnified party under this Section of notice of the commencement of any action or the assertion by a third party of a claim, such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under subsection (a) or (b) above, notify the indemnifying party of the commencement thereof; but the omission so to notify the indemnifying party will not relieve it from any liability which it may have to any indemnified party except and to the extent of any prejudice to such indemnifying party arising from such failure to provide such notice. In case any such action is brought against any indemnified party and it notifies the indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate therein and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel reasonably satisfactory to such indemnified party (who shall not, except with the consent of the indemnified party, be counsel to the indemnifying party), and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party will not be liable to such indemnified party under this Section for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened action in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party unless such settlement (i) includes an unconditional release of such indemnified party from all liability on any claims that are the subject matter of any action, and (ii) does not include a statement as to, or an admission of, fault, culpability, or a failure to act on behalf of an indemnified party. (d) If the indemnification provided for in this Section is unavailable or insufficient to hold harmless an indemnified party under subsection (a) or (b) above, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of the losses, claims, damages or liabilities referred to in subsection (a) or (b) above (i) in such proportion as is appropriate to reflect the relative benefits received by Transferor or by Stage on the one hand and Initial Purchaser on the other from the offering of the Certificates or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of Transferor or of Stage on the one hand and Initial Purchaser on the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities as well as any other relevant equitable considerations. The relative benefits received by Transferor or by Stage on the one hand and Initial Purchaser on the other shall be deemed to be in the same proportion as the total net proceeds from the offering of the Certificates (before deducting expenses) received by Transferor and by Stage bear to the total discounts and commissions received by Initial Purchaser. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by Transferor, Stage or Initial Purchaser and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such untrue statement or omission. The amount paid by an indemnified party as a result of the losses, claims, damages or liabilities referred to in the first sentence of this subsection (d) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any action or claim which is the subject of this subsection (d). Notwithstanding the provisions of this subsection (d), Initial Purchaser shall not be required to contribute any amount in excess of the discount applicable to the Certificates purchased by Initial Purchaser hereunder. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. (e) The obligations of Transferor and of Stage under this Section shall be in addition to any liability that Transferor and Stage, respectively, may otherwise have and shall extend, upon the same terms and conditions, to each Person, if any, who controls Initial Purchaser within the meaning of the Securities Act; and the obligations of Initial Purchaser under this Section shall be in addition to any liability that Initial Purchaser may otherwise have and shall extend, upon the same terms and conditions, to each director of Transferor and of Stage, to each officer of Transferor and of Stage and to each Person, if any, who controls Transferor or Stage within the meaning of the Securities Act. Section 8. Survival of Certain Representations and Obligations. The respective indemnities, agreements, representations, warranties and other statements of Transferor or its officers and of Initial Purchaser set forth in or made pursuant to this Agreement will remain in full force and effect, regardless of any investigation or statement as to the results thereof, made by or on behalf of Initial Purchaser, Transferor or any of their respective representatives, officers or directors or any controlling Person, and will survive delivery of and payment for the Certificates. If for any reason the purchase of the Certificates by Initial Purchaser is not consummated, Transferor shall remain responsible for the expenses to be paid or reimbursed by Transferor pursuant to Section 5(j) hereof and the respective obligations of Transferor and Initial Purchaser pursuant to Section 7 hereof shall remain in effect. If the purchase of the Certificates by Initial Purchaser is not consummated for any reason other than solely because of the occurrence of any event specified in clause (iii), (iv) or (v) of Section 6(b) hereof or as a result of any failure by Initial Purchaser to perform its obligations hereunder, Transferor will reimburse Initial Purchaser for all actual out-of-pocket expenses reasonably incurred by Initial Purchaser in connection with the offering of the Certificates. Section 9. Notices. All communications hereunder will be in writing and, if sent to Initial Purchaser, will be mailed, delivered or telegraphed and confirmed to Credit Suisse First Boston Corporation, Eleven Madison Avenue, New York, New York 10010, Attention: Investment Banking Department - Transactions Advisory Group; or if sent to Transferor will be mailed, delivered or telegraphed and confirmed to it at 10201 Main Street, Houston, TX 77025, Attention: President. Section 10. Successors. This Agreement will inure to the benefit of and be binding upon the parties hereto and their respective successors and the officers and directors and controlling Persons referred to in Section 7 hereof, and no other Person will have any right or obligation hereunder. Section 11. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all such counterparts shall together constitute one and the same Agreement. Section 12. Applicable Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO ANY OTHERWISE APPLICABLE PRINCIPLES OF CONFLICTS OF LAWS. Section 13. Miscellaneous. Neither this Agreement nor any term hereof may be changed, waived, discharged or terminated orally, but only by an instrument in writing signed by the party against whom enforcement of the change, waiver, discharge or termination is sought. The headings in this Agreement are for purposes of reference only and shall not limit or otherwise affect the meaning hereof. [Signature Page Follows] If the foregoing is in accordance with your understanding of our agreement, kindly sign and return to us one of the counterparts duplicate hereof, whereupon it will become a binding agreement among Transferor, Stage and Initial Purchaser in accordance with its terms. Very truly yours, SRI RECEIVABLES PURCHASE CO., INC. By: /s/ Charles M. Sledge Name: Charles M. Sledge Title: Senior Vice President STAGE STORES, INC. By: /s/ James A. Marcum Name: James A. Marcum Title: Vice Chairman, CFO The foregoing Purchase Agreement is hereby confirmed and accepted, as of the date first above written: CREDIT SUISSE FIRST BOSTON CORPORATION By: /s/ Michael Raynes Name: Michael Raynes Title: Director APPENDIX 1 Offers and Sales by Initial Purchaser INVESTOR REPRESENTATIONS AND RESTRICTIONS ON RESALE Each investor in the Offered Certificates in making its purchase will be deemed to have acknowledged, represented and agreed as follows: (1) The Offered Certificates have not been and will not be registered under the Securities Act or the securities laws of any jurisdiction. Consequently, the Offered Certificates are not transferable other than pursuant to an exemption from the registration requirements of the Securities Act and satisfaction of certain other provisions of the Pooling and Servicing Agreement. (2) Such purchaser is (i) a "qualified institutional buyer" within the meaning of Rule 144A under the Securities Act ("QIB") and is purchasing for its own account (and not for the account of others) or as a fiduciary or agent for others (which others also are QIBs) or (ii) is otherwise purchasing Offered Certificates in the United States in compliance with Rule 144 if available (in which case such purchaser has delivered an opinion of counsel in form satisfactory to Transferor and the Trustee) or (iii) is Transferor. Such purchaser is aware that it (or any account for which it is purchasing) may be required to bear the economic risk of an investment in the Offered Certificates, as the case may be, for an indefinite period, and it (or such account) is able to bear such risk for an indefinite period. (3) No sale, pledge or other transfer of any Offered Certificate may be made by any person unless either (i) such sale, pledge or other transfer is made to Transferor, (ii) so long as such Offered Certificates are eligible for resale pursuant to Rule 144A under the Securities Act, such sale, pledge or other transfer is made to a person whom the seller reasonably believes after due inquiry is a QIB acting for its own account (and not for the account of others) or as a fiduciary or agent for others (which others also are QIBs) to whom notice is given that the sale, pledge or transfer is being made in reliance on Rule 144A or (iii) such sale, pledge or other transfer is made in the United States in compliance with Rule 144 if available (in which case such purchaser has delivered an opinion of counsel in form satisfactory to Transferor and the Trustee) of the Securities Act. (4) Either (A) such purchaser is not (i) an "employee benefit plan" (as defined in section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")) that is subject to the provisions of Title I of ERISA, (ii) a plan described in Section 4975(e)(1) of the Code or (iii) any entity whose underlying assets include plan assets by reason of a plan's investment in the entity (each, a "Benefit Plan") or (B) such purchaser is an insurance company general account that, at the time of acquisition and throughout the period it holds the Offered Certificates, (i) is eligible for and meets the requirements of Department of Labor Prohibited Transaction Class Exemption 95-60, (ii) holds assets of which less than 25% are assets (or represent assets) of a "plan" (as defined in ERISA) and (iii) is not a servicer to the Trust or an affiliate of such servicer, and would not otherwise be excluded under 29 CFR 2510.3-101(f)(1). (5) Assignments of Offered Certificates will require the consent of Transferor. Although that consent may not be unreasonably withheld, Transferor may disapprove an assignment to an assignee that is a competitor in the apparel retail business or if, among other things, Transferor determines that the assignment would create or increase a 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. Also, the total number of holders of the Offered Certificates will be limited to not more than 20, and the total number of holders of the Offered Certificates, together with other interests in the Trust as to which no opinion has been delivered that such interests would be treated as debt for Federal income tax purposes, will be limited to 80. (6) The Offered Certificates will be issued in uncertificated form and will be evidenced and transferred only by entries on a register maintained by the Trustee. Confirmations of issuance and transfer of the Offered Certificates will bear a legend to the following effect unless Transferor determines otherwise consistent with applicable law: THESE SECURITIES HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR UNDER THE SECURITIES OR BLUE SKY LAWS OF ANY STATE IN THE UNITED STATES OR ANY FOREIGN SECURITIES LAWS. BY ITS ACCEPTANCE OF THESE SECURITIES THE HOLDER OF THESE SECURITIES IS DEEMED TO REPRESENT TO THE TRANSFEROR AND THE TRUSTEE THAT IT IS (I) A "QUALIFIED INSTITUTIONAL BUYER" WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT (A "QIB") AND IS ACQUIRING SUCH SECURITIES FOR ITS OWN ACCOUNT (AND NOT FOR THE ACCOUNT OF OTHERS) OR AS A FIDUCIARY OR AGENT FOR OTHERS (WHICH OTHERS ALSO ARE QIBS) TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A OR (II) IS OTHERWISE ACQUIRING THESE SECURITIES IN THE UNITED STATES IN COMPLIANCE WITH RULE 144 IF AVAILABLE (IN WHICH CASE THE PURCHASER HAS DELIVERED AN OPINION OF COUNSEL IN FORM SATISFACTORY TO THE TRANSFEROR AND THE TRUSTEE) OF THE SECURITIES ACT OR (III) IS THE TRANSFEROR. NO SALE, PLEDGE OR OTHER TRANSFER OF THESE SECURITIES MAY BE MADE BY ANY PERSON UNLESS EITHER (I) SUCH SALE, PLEDGE OR OTHER TRANSFER IS MADE TO THE TRANSFEROR, (II) SO LONG AS THESE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT, SUCH SALE, PLEDGE OR OTHER TRANSFER IS MADE TO A PERSON WHOM THE TRANSFEROR REASONABLY BELIEVES AFTER DUE INQUIRY IS A QIB ACTING FOR ITS OWN ACCOUNT (AND NOT FOR THE ACCOUNT OF OTHERS) OR AS A FIDUCIARY OR AGENT FOR OTHERS (WHICH OTHERS ALSO ARE QIBS) TO WHOM NOTICE IS GIVEN THAT THE SALE, PLEDGE OR TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A OR (III) SUCH SALE, PLEDGE OR OTHER TRANSFER IS MADE IN THE UNITED STATES IN COMPLIANCE WITH RULE 144 IF AVAILABLE (IN WHICH CASE THE PURCHASER HAS DELIVERED AN OPINION OF COUNSEL IN FORM SATISFACTORY TO THE TRANSFEROR AND THE TRUSTEE) OF THE SECURITIES ACT. NO SALE, PLEDGE OR OTHER TRANSFER OF THESE SECURITIES MAY BE MADE WITHOUT THE CONSENT OF THE TRANSFEROR (NOT TO BE UNREASONABLY WITHHELD) AND DELIVERY OF THE DOCUMENTATION REQUIRED BY THE POOLING AND SERVICING AGREEMENT AND THE SERIES 1999-1 SUPPLEMENT THERETO. THESE SECURITIES WILL NOT BE ACCEPTED FOR REGISTRATION OF TRANSFER EXCEPT UPON PRESENTATION OF EVIDENCE SATISFACTORY TO THE TRANSFER AGENT AND REGISTRAR THAT THE RESTRICTIONS ON TRANSFER SET FORTH IN THE POOLING AND SERVICING AGREEMENT AND THE SERIES 1999-1 SUPPLEMENT HAVE BEEN COMPLIED WITH. BY ACCEPTING AND HOLDING THESE SECURITIES, EACH PURCHASER OR HOLDER OF THESE SECURITIES REPRESENTS THAT EITHER (A) IT IS NOT (I) AN "EMPLOYEE BENEFIT PLAN" (AS DEFINED IN SECTION 3(3) OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED, ("ERISA")), THAT IS SUBJECT TO THE PROVISIONS OF TITLE I OF ERISA, (II) A PLAN DESCRIBED IN SECTION 4975(E)(1) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") OR (III) ANY ENTITY WHOSE UNDERLYING ASSETS INCLUDE PLAN ASSETS BY REASON OF A PLAN'S INVESTMENT IN THE ENTITY OR (B) IT IS AN INSURANCE COMPANY GENERAL ACCOUNT THAT REPRESENTS AND WARRANTS THAT AT THE TIME OF ACQUISITION AND THROUGHOUT THE PERIOD IT HOLDS THE SECURITIES (I) IT IS ELIGIBLE FOR AND MEETS THE REQUIREMENTS OF THE DEPARTMENT OF LABOR PROHIBITED TRANSACTION CLASS EXEMPTION 95-60, AND (II) LESS THAN 25% OF THE ASSETS IN SUCH ACCOUNT ARE ASSETS (OR REPRESENT ASSETS) OF A PLAN AND (III) IT IS NOT A SERVICER TO THE TRUST OR AN AFFILIATE OF SUCH A SERVICER, AND WOULD NOT OTHERWISE BE EXCLUDED UNDER 29 CFR 2510-101(f)(1). THESE SECURITIES MAY NOT BE ACQUIRED, SOLD, TRADED OR TRANSFERRED, NOR MAY AN INTEREST IN THESE SECURITIES 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 AN OVER-THE-COUNTER MARKET OR AN INTERDEALER QUOTATION SYSTEM THAT REGULARLY DISSEMINATES FIRM BUY OR SELL QUOTATIONS OR (II) A "SECONDARY MARKET" (OR THE SUBSTANTIAL EQUIVALENT THEREOF) WITHIN THE MEANING OF SECTION 7704(b) (2) OF THE CODE AND ANY TREASURY REGULATION THEREUNDER, INCLUDING A MARKET WHEREIN INTERESTS IN THESE 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 THESE SECURITIES AND STANDS READY TO EFFECT BUY OR SELL TRANSACTIONS AT THE QUOTED PRICES FOR ITSELF OR ON BEHALF OF OTHERS. (7) If such investor is acquiring any Offered Certificates as a fiduciary or agent for one or more accounts, such investor represents that it has sole investment discretion with respect to each such account and that it has full power to make the foregoing acknowledgments, representations and agreements with respect to each such account as set forth in this Notice to Investors. APPENDIX 2 Form of Representation Letter Bankers Trust Company 4 Albany Street, 10th Floor New York, NY 10006 Attention: Corporate Trust and Agency Group SRI Receivables Purchase Co., Inc. 10201 Main Street Houston, TX 77025 Attention: Treasurer [date] Re: SRI RECEIVABLES MASTER TRUST, Series 1999-1 Purchase of Class Certificates /1 Ladies and Gentlemen: This letter (the "Investment Letter") is delivered by the undersigned (the "Purchaser") pursuant to the Series 1999-1 Supplement, dated as of November 9, 1999 (the "Series Supplement"), by and among SRI Receivables Purchase Co., Inc., a corporation organized and existing under the laws of the State of Delaware, as Transferor (the "Transferor"), Specialty Retailers, Inc., a corporation organized and existing under the laws of Texas, as Servicer (the "Servicer"), and Bankers Trust (Delaware), a 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 Second Amended and Restated Pooling and Servicing Agreement dated as of November 1, 1999 (the "Agreement"), among the Transferor, the Servicer and the Trustee. Capitalized terms used herein without definition shall have the meanings provided in the Agreement or the Series Supplement. The Purchaser hereby represents, warrants and covenants to the Transferor as follows: 1. The Purchaser understands that the Certificates referenced in the caption above (the "Purchased Certificates") (i) have not been and will not be registered under the Securities Act of 1933, as amended (the "Securities Act"), or any state or other applicable securities law, and (ii) are being offered only in a transaction not involving a public offering within the meaning of the Securities Act and may not be offered, sold or otherwise transferred unless registered pursuant to, or exempt from registration under, the Securities Act and any other applicable securities law. 2. The Purchaser is a "qualified institutional buyer" (as defined in Rule 144A ("Rule 144A") under the Securities Act), that it is aware that the offer and sale of the Purchased Certificates to it are being made in reliance on Rule 144A and that it is purchasing the Purchased Certificates for its own account. 3. The Purchaser has been given a reasonable opportunity to ask questions of and receive answers from Stage, SRI and the Transferor relating to the terms and conditions of this offering, the Certificates and other matters as the Purchaser deems material. 4. The Purchaser will not offer, sell, convey, assign, hypothecate, pledge, participate or otherwise transfer (each, a "Transfer") the Purchased Certificates or any interest therein at any time except (i) to the Transferor or (ii) pursuant to Rule 144A to a person whom the Purchaser reasonably believes is a qualified institutional buyer within the meaning of Rule 144A purchasing for its own account, in accordance with Rule 144A, whom the Purchaser has informed that the Transfer is being made in reliance on Rule 144A. 5. The Purchaser either (a) is not (i) an employee benefit plan (as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA") that is subject to the provisions of Title I of ERISA, (ii) a plan or other arrangement (including an individual retirement account or Keogh plan) that is subject to Section 4975 of the Internal Revenue Code of 1986, as amended (the "Code"), or (iii) an entity whose underlying assets include "plan assets" by reason of any such plan's investment in the entity and the application of United States Department of Labor ("DOL") Regulation Section 2510.3-101 or (b) is an insurance company acting on behalf of its general account and (i) on the date it acquires the Purchased Certificates, less than 25% of the assets of such general account (as determined by such insurance company) constitute "plan assets" for purposes of Title I of ERISA or Section 4975 of the Code, (ii) if, after the initial acquisition of the Purchased Certificates, during any calendar quarter 25% or more of the assets of such general account (as determined by such insurance company) constitute "plan assets" for purposes of Title I of ERISA or Section 4975 of the Code and no exemption or exception from the prohibited transaction rules applies to the continued holding of the Purchased Certificates under Section 401(c) of ERISA and final regulations thereunder or an exemption or regulation issued by the DOL under ERISA, then such insurance company will dispose of all of the Purchased Certificates then held in its general account by the end of the next following calendar quarter and (iii) on the date it acquires the Purchased Certificates and throughout the period that it holds them it meets all the requirements of and is eligible for exemptive relief under Part I of PTCE 95-60. 6. Purchased Certificates or any interest therein may be Transferred to any Person unless such Person has executed and delivered the Investment Letter to the Transferor and the Trustee and the Transferor has granted its prior written consent to such Transfer. 7. The Purchaser is either (A)(i) a citizen or resident of the United States, (ii) a corporation, partnership or other entity created or organized in or under the laws of the United States or any political subdivision thereof which, if such entity is a tax-exempt entity, recognizes that payments with respect to the Purchased Certificates may constitute unrelated business taxable income or (iii) an entity not described in (ii) whose ownership of the Purchased Certificates is effectively connected with its conduct of a trade or business within the United States (within the meaning of the Code) or (B) an estate or trust the income of which is includible in gross income for United States Federal income tax purposes. The Purchaser represents, warrants and covenants that upon its purchase or the transfer to it of a Purchased Certificates and prior to the date on which the first interest payment on the Purchased Certificates is due to the Purchaser, it will provide to the Servicer and the Trustee (i) if the Purchaser is created or organized in or under the laws of a jurisdiction outside the United States, two duly completed copies of United States Internal Revenue Service Form 4224 or any successor applicable or required forms, (ii) a duly completed copy of United States Internal Revenue Service Form W-9 or any successor applicable or required forms, and (iii) such other forms and information as may be required to confirm the availability of any applicable exemption from United States Federal, state or local withholding taxes. The Purchaser agrees to provide to the Servicer and the Trustee like additional subsequent duly completed forms satisfactory to the Servicer and the Trustee on or before the date that any such form expires or becomes obsolete, or upon the occurrence of any event requiring an amendment, resubmission or change in the most recent form previously delivered by it, and to provide such extensions or renewals as may be reasonably requested by the Servicer or the Trustee. 8. The Purchaser's ownership of the Purchased Certificates will not result in any withholding obligation with respect to any payments with respect to the Purchased Certificates with respect to any Person, and unless otherwise consented to by the Transferor, if the Purchaser is incorporated or organized under the laws of a jurisdiction outside the United States, it has (x) a rating of "BBB" or better from Fitch IBCA, Inc. or "Baa2" or better from Moody's Investors Service, Inc. and (y) balance sheet assets at least $100 million of which are effectively connected with its conduct of a trade or business in the United States within the meaning of the Code. 9. The Purchaser has not acquired any interest in the Purchased Certificates, and shall not Transfer any interest in the Purchased Certificates or cause any such interest to be marketed, on or through (i) an "established securities market" within the meaning of Section 7704(b)(1) of the Code and any Treasury Regulations 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 (or the substantial equivalent thereof)" within the meaning of Section 7704(b)(2) of the Code and any Treasury Regulations thereunder, including a market wherein interests in the Purchased Certificates 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 Purchased Certificates and stands ready to effect buy or sell transactions at the quoted prices for itself or on behalf of others. 10. The Purchaser is not, and will not become, a partnership, an "S corporation" or a grantor trust, in each case as described in the Code. In the event of any breach of the representation, warranty and covenant of the Purchaser that such Purchaser shall remain classified as other than a partnership, an S corporation or a grantor trust, such Purchaser shall (i) notify the Transferor promptly upon such Purchaser's becoming aware of such breach, and thereupon the Purchaser hereby agrees to use reasonable efforts to procure a replacement investor not so affected that is acceptable to the Transferor to replace such affected Purchaser, and (ii) take all actions necessary to permit a replacement investor to succeed to its rights and obligations under the Pooling and Servicing Agreement and the Series 1999-1 Supplement. The Purchaser hereby acknowledges that the portion of the Tax Opinion to the effect that the Trust will not be treated as a publicly traded partnership taxable as a corporation is dependent in part on the accuracy of the certifications described above. 11. The Purchaser understands that the Purchased Certificates will be uncertificated securities and will not be represented by any certificate and will not be held through The Depository Trust Company or any other depositary or clearing corporation. 12. In making its investment decision, the Purchaser has relied solely on the Final Memorandum, and no other representations or warranties have been made to the Purchaser with respect to this offering. The Purchaser hereby notifies the Paying Agent that all distributions of principal and interest on the Purchased Certificates to the Purchaser shall be made by wire transfer to its account specified in Schedule 1, or to such other account as it shall specify in writing to the Paying Agent in accordance with the Series 1999-1 Supplement. Very truly yours, (type name of Purchaser above) By: Name: Title: SCHEDULE I Name of Purchaser: Principal Amount of Purchased Certificates: (i) All payments on or in respect of the Purchased Certificates shall be made by wire transfer to: Bank: ABA #: Account #: For further credit to Account #: Ref: (ii) Address for all notices in respect of payment: (iii) Address for all other communications: (iv) Taxpayer ID #: EXHIBIT A [Attach Kirkland & Ellis Opinions] EXHIBIT B [Attach Hirsh & Westheimer, P.C. Opinion] EXHIBIT C [Attach Thompson, Hine & Flory, LLP Opinion] _______________________________ 1/Insert appropriate Class of Certificate EX-10.9 15 0015.txt EXHIBIT 10.9 EMPLOYMENT AGREEMENT This Employment Agreement ("Agreement") is entered into effective as of the 22 day of February, 2000 (the "Effective Date") between Stage Stores, Inc., a Delaware corporation (the "Company"), and John J. Wiesner, an individual (the "Executive"). WHEREAS, the Executive presently serves as a Director of the Company and has extensive experience in the retail clothing industry and previously served as the Chairman and Chief Executive Officer of C.R. Anthony Company, an Oklahoma corporation which was acquired by the Company and merged into Specialty Retailers, Inc., a subsidiary of the Company; and WHEREAS, the position of Chief Executive Officer and President is presently vacant within the Company; and WHEREAS, the Company's Board of Directors has determined that it is appropriate and in the best interests of the Company to hire the Executive on the terms and conditions set forth in this Agreement to perform the duties of the Chief Executive Officer of the Company on a temporary basis while the Board conducts a search for a new Chief Executive Officer for the Company; and WHEREAS, the Executive is willing to serve as the Chief Executive Officer on the terms and conditions set forth in this Agreement. NOW, THEREFORE, in consideration of the promises and mutual agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows: 1. Definitions. For purposes of this Agreement, the following capitalized terms shall have the following meanings: (a) "Accelerated Severance Payment" shall have the meaning ascribed to such term in Section 7 below. (b) "Death" shall mean the death of the Executive. (c) "Disability" shall have the same meaning as is then applicable under the Company's welfare benefit plan governing long term disability income payments. If no such plan is in effect at the time of any determination of Disability, then Disability shall mean the Executive's absence as a result of physical or mental illness from his duties with the Company on a full-time basis for three (3) months. (d) "Executive Benefits" shall have the meaning ascribed to such term in Section 4 below. (e) "Health Benefits" shall mean any policy, plan or program available to executive officers of the Company which: (i) provides insurance or indemnity against or reimbursement for expenses or loss of income incurred as a result of or arising out of any accident, sickness, illness, disability or other change in the physical, emotional or mental well being of the executive officer or members of the executive officer's immediate family; or (ii) constitutes, contains or provides life insurance or any other similar benefit for the benefit of the executive officer or members of the executive officer's immediate family. (f) "Guaranteed Term" shall mean that period of time commencing on the Effective Date and concluding on the date which is six (6) months after the Effective Date or the effective date of a Termination Notice voluntarily submitted by Executive to the Company, whichever is earlier. The Guaranteed Term shall not be shortened by termination of the Executive's employment by the Company or by Death, Disability or any other reason. (g) "Option" shall have the meaning ascribed to such term in Section 6 below. (h) "Salary" shall have the meaning ascribed to such term in Section 3 below. (i) "Termination Notice" shall have the meaning ascribed to such term in Section 2 below. 2. Term of Executive's Employment. Executive's employment with the Company shall commence as of the Effective Date and, unless earlier terminated in accordance with the terms and provisions of Section 9 below, shall be terminable at will by either party upon thirty (30) days advance, written notice served upon the other party at any time (a "Termination Notice"). During the term of Executive's employment with the Company, Executive shall have the title, perform the duties, and have the rights and benefits which are usual and customary of the Chairman of the Board, Chief Executive Officer and President of the Company. Upon termination of Executive's employment with the Company, executive shall retain the title, perform the duties and have the rights and benefits which are usual and customary of the Chairman of the Board of the Company until his successor in such position is duly elected and qualified. Executive shall devote such time and attention to the performance of such duties on behalf of the Company as he deems reasonable or necessary in the exercise of his reasonable business judgment. Executive may perform such duties from such places as he deems appropriate in the exercise of his reasonable business judgment. The Company recognizes and understands that Executive has other business activities and commitments which are unrelated to the Company and agrees that nothing in this Agreement shall prevent or prohibit Executive from conducting such activities or fulfilling such commitments. As an inducement to Executive to enter into this Agreement, the Company has agreed to provide certain rights and benefits to Executive which, in accordance with the terms and conditions set forth in this Agreement, may extend beyond the term of Executive's employment with the Company. Therefore, except as expressly provided by the terms and provisions of this Agreement, the terms and provisions of this Agreement shall survive the termination of Executive's employment with the Company. The phrase "Guaranteed Term" is used in this Agreement to denote the term or duration of certain rights and benefits extended to Executive and shall not be construed as a guarantee of any certain minimum term of employment with the Company. 3. Executive Compensation. During the Guaranteed Term and for such period of time thereafter in which the Executive remains employed by the Company, the Company shall pay Executive the sum of Fifty Thousand Dollars ($50,000) per month payable in equal semi-monthly installments, and prorated at the same rate for any fractional periods thereof ("Salary"). 4. Executive Benefits. During the Guaranteed Term and for such period of time thereafter in which the Executive remains employed by the Company: (i) Executive shall be entitled to participate in any retirement plan or arrangement and any insurance or other welfare benefit plan, program or arrangement made generally available to the executive officers of the Company and on a basis reasonable in relation to the basis on which the other executive officers of the Company are eligible to participate; and (ii) Company shall make one hundred percent (100%) of the premium or contribution payments necessary to maintain the right of the Executive and his spouse to receive Health Benefits; and (iii) Company shall reimburse Executive for all expenses incurred by Executive in the performance of his duties as Chairman of the Board or Chief Executive Officer of the Company. In light of the contemplated temporary term of Executive's employment as Chief Executive Officer, such expenses shall include but not limited to airfare and any rental or leasing expense of automobiles or housing incurred by Executive for use when Executive travels on behalf of the Company to any point more than forty-five (45) miles away from Executive's primary residence in Oklahoma City, Oklahoma. In the event Executive remains employed by the Company after the Guaranteed Term, in addition to the benefits described in Sections 4(a) and 4(b), the Company also shall establish performance goals, target bonuses and other incentive awards for Executive that are reasonable in relation to the performance goals, bonuses and awards established for the Company's other executive officers. The benefits and payments provided for in this Section 4 are collectively referred to in this Agreement as the "Executive Benefits". 5. Continuation of Health Benefits. (a) Health Benefits for Executive. Following the termination of Executive's employment with the Company for any reason whatsoever, including without limitation Disability, Company shall continue to make one hundred percent (100%) of the premium or contribution payments necessary to maintain the right of Executive to receive the Health Benefits until Executive's 65th birthday or Death, whichever is the earlier to occur. (b) Health Benefits for Executive's Spouse. Following the termination of Executive's employment with the Company for any reason whatsoever, including without limitation Death or Disability, Company shall continue to make one hundred percent (100%) of the premium or contribution payments necessary to maintain the right of Executive's spouse to receive the Health Benefits until her 65th birthday or her death, whichever is the earlier to occur. 6. Stock Options. Upon Executive's execution and delivery of this Agreement to the Company, Company shall execute and deliver to the Executive a Stock Option Agreement dated as of the Effective Date in the form attached hereto as Exhibit "A" (the "Option"). 7. Acceleration of Severance Benefits. Upon Executive's execution and delivery of this Agreement to the Company, Company shall pay to Executive the sum of Eighty-Seven Thousand Five Hundred Dollars ($87,500) in immediately available funds (the "Accelerated Severance Payment"). Executive agrees that upon Executive's receipt of the Accelerated Severance Payment, that certain Amended Severance Agreement between Executive and the Company dated April 7, 1997, a copy of which is attached hereto as Exhibit "B" shall be deemed terminated and all of the obligations of the Company under such Amended Severance Agreement shall be deemed fully performed and discharged. 8. Immediate Vesting. The following rights shall be fully earned and vested as of the Effective Date and may not be rescinded, canceled or terminated for any reason and shall survive any termination of Executive's employment with the Company: (i) the right of Executive to receive the Salary during the Guaranteed Term and for such period of time thereafter in which the Executive remains employed by the Company; and (ii) the right of the Executive to receive the Executive Benefits; and (iii) the right of the Executive to receive the Option; and (iv) the right of the Executive to receive Accelerated Severance Payment. Provided further, to the extent allowable under the terms of the plans, programs or policies by or under which the Executive Benefits are provided, termination of the Executive's employment with the Company shall not result in a forfeiture of the right to receive payment of any bonus, payment or contribution which, but for the termination of Executive's employment would have been made to or on behalf of Executive within one (1) year after the termination of the Executive's employment. 9. Effect of Death or Disability. Executive's employment with the Company shall terminate automatically and immediately upon Death and may be terminated on thirty (30) days advance written notice to the Executive following a determination of Disability provided that within thirty (30) days after written notice is given to the Executive, the Executive shall not have returned to the full-time performance of the Executive's duties with the Company. Provided, however, that Company shall continue to obligated to make any payments and provide any benefits which were vested in accordance with the terms of Section 8 of this Agreement or otherwise at the time of Death or Disability. In the event of Death, any payments which would have been made to or on behalf of Executive but for Death, shall be paid in accordance with the terms of this Agreement to the Executive's devisee, legatee or other designee or if there be no such designee to the Executive's estate. In the event of Disability any payments which would have been to or on behalf of Executive but for such Disability, shall be paid to Executive or his guardian or personal representative as the case may be. Any payments or contributions necessary to maintain the right of Executive, if living, and Executive's spouse, if living, to receive the Health Benefits in accordance with the provisions of Section 5 above shall be made directly to the plan, trust, fund or insurance company or other entity as may be necessary. 10. Representations and Warranties by the Company. Company and the person who signs this Agreement on behalf of the Company each represent and warrant to Executive that the person who signs this Agreement on behalf of the Company has the actual power and authority to bind Company to each of the covenants and obligations contained in this Agreement. Company further represents and warrants that it has the actual power and authority to enter into and perform each of the covenants and obligations contained in this Agreement and has obtained any necessary resolutions of the Company's Board of Directors or Stockholders to enter into and perform each of the obligations of the Company arising under this Agreement and the agreements and other documents delivered to Executive in connection with this Agreement, including but not limited to the Option. 11. Successor to the Company. Company shall cause any successor or assign (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company, by agreement in form and substance satisfactory to the Executive, expressly, absolutely and unconditionally to assume and agree to this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession or assignment had taken place. 12. Assignability. Neither this Agreement nor any rights of the Executive hereunder shall be assignable or transferable by the Executive; provided, however, this Agreement shall inure to the benefit of and be enforceable by the Executive's personal and legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. 13. Notices. For purposes of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States certified mail, return receipt requested, postage prepaid, as follows: If to the Company: Stage Stores, Inc. 10201 Main Street Houston, Texas 77002 If to the Executive: John J. Wiesner 6349 Harden Drive Oklahoma City, Oklahoma 73118 or such other address as either party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt. 14. Miscellaneous. No provisions of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in a writing signed by the Executive and the Company. No waiver by either party hereto at any time of any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior and contemporaneous agreements relating hereto, and no agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not set forth expressly in this Agreement. This Agreement shall be governed by and construed in accordance with the laws of State of Oklahoma. The invalidity, or unenforceability of any provisions of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. Company represents and warrants that it has the right and authority to enter into this Agreement and to grant the rights and render the performances contemplated hereunder. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. "COMPANY" STAGE STORES, INC., a Delaware corporation By: /s/ James A. Marcum "EXECUTIVE" By: /s/ John J. Wiesner John J. Wiesner, an individual EXHIBIT "A" STAGE STORES, INC. STOCK OPTION AGREEMENT This STOCK OPTION AGREEMENT is made this 22 day of February, 2000 (the "Grant Date"), by and between Stage Stores, Inc., a Delaware corporation (the "Company"), and John J. Wiesner, (the "Optionee"), as an employee of the Company. The Board, or the Compensation Committee as defined in Section 2 of the Stage Stores, Inc. Amended and Restated 1996 Equity Incentive Plan (the "Plan"), has determined that Optionee is a key employee of the Company, and that the objectives of the Plan will be furthered by the grant of the "Option" (defined below) pursuant to this Agreement. Capitalized terms defined in the Plan and not otherwise defined herein shall have the meaning given such terms in the Plan. In consideration of the foregoing and of the mutual undertakings set forth in this Stock Option Agreement, the Company and Optionee agrees as follows: SECTION 1. Grant of Option. 1.1 The Company hereby affirms the grant to Optionee of an option (the "Option") to purchase Two Hundred Thousand (200,000) shares of Common Stock, par value $0.01 per share ("Common Stock") of the Company, at a purchase price of which shall be equal to the closing price of the Common Stock of the Company on the Grant Date, as such price is reported by the Wall Street Journal (Southwest Edition). 1.2 The Option granted hereunder shall be a "nonqualified" stock option, and is not an "incentive stock option" within the meaning of Section 422 of the Code, subject to Section 83 of the Code. SECTION 2. Exercisability Vesting. 2.1 As of the date hereof, one hundred percent (100%) of the Option is vested. 2.2 Unless terminated earlier in accordance with the terms of the Plan, the Option will terminate 10 years after the date of this Agreement (the "Option Expiration Date"). In the event the expiration dated described in Section 5(d)(i) of the Plan is amended, the Option Expiration Date of this Agreement shall be automatically amended to be consistent with such amended date. 2.3 The Stock Option shall be exercisable in whole or in part, in one or more transactions, in accordance with the terms and conditions of this Agreement and the Plan, and the time within which this Option may be exercised shall expire on the Option Expiration Date, unless terminated earlier in accordance with the terms of the Plan. 2.4 Within twelve (12) months after the date on which Optionee ceases to be an employee of the Company, the Company shall convene a meeting of the Compensation Committee to consider extending the period in which Optionee may exercise the Option in accordance with Section 5(d)(iii)(C) of the Plan. SECTION 3 Method of Exercise. 3.1 The Option or any part thereof may be exercised only by giving written notice to the Company, which notice shall: (i) state the election to exercise the Option and the number of whole shares of Common Stock with respect to which the Option is being exercised; and (ii) include payment in full of the purchase price or written notice of such payment form and terms for the shares being acquired pursuant to such exercise in accordance with Section 3.2. 3.2 Unless the Compensation Committee agrees to another payment form or other terms in accordance with Section 5(d)(iii) of the Plan, payment of the purchase price shall be made by a check made payable to the Company. In any event, the check, or written notice describing another payment form or other terms agreed to by the Compensation Committee, shall be included in the written exercise notice as required under Section 3.1. As soon as practicable after the Company has received payment of the purchase price or the Compensation Committee has agreed to such other payment form or terms, the Company shall have delivered to Optionee a certificate for the shares of Common Stock acquired pursuant to the Option. SECTION 4 Nonassignability. No right granted to Optionee under the Plan or this Agreement shall be assignable or transferable (whether by operation of law or otherwise and whether voluntary or involuntary), other than by will or by the laws of descent and distribution. All rights granted to the Option under the Plan or this Agreement shall be exercisable only by Optionee or his estate, heirs or personal representatives. SECTION 5. Right of Discharge Reserved. Nothing in the Plan or this Agreement shall confer upon Optionee any right to continue in the employ or service of the Company or affect any right which the Company may have to terminate the employment or services of Optionee. SECTION 6. Plan Provisions to Prevail. This Agreement shall be subject to all of the terms and provisions of the Plan, which are incorporated hereby and made a part hereof. In the event there is any inconsistency between the provisions if thus Agreement and the Plan, the provisions of the Plan shall govern. SECTION 7. Optionee's Agreements and Acknowledgements. By entering into this Agreement, Optionee agrees and acknowledges that (a) he has received and read a copy of the Plan and accepts this Option subject to the terms and provisions of the Plan, and (b) that no member of the Board of Directors or the Committee shall be liable for any action or determination made in good faith with respect to the Plan or any award thereunder. As a condition to the issuance of shares of Common Stock under this Option, Optionee authorizes the Company to withhold in accordance with applicable law from any regular cash compensation payable to him any taxes required to be withheld by the Company under federal, state or local law as a result of his exercise of this Option. SECTION 8. Notices. Any notice to be given to the Company hereunder shall be in writing and shall be addressed to the Controller of the Company at 10201 Main Street, Houston, Texas 77025, or at such other address as the Company may hereinafter designate to Optionee by notice as provided herein. Any notice to be given to Optionee shall be given at the address set forth below, or at such other address as Optionee may hereinafter designate to the Company by notice as provided herein. Notices hereunder shall be deemed to have been duly given when personally delivered or mailed by registered or certified mail to the party entitled to receive them. To Optionee: John J. Wiesner 6349 Harden Drive Oklahoma City, Oklahoma 73118 SECTION 9. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties hereto and the successors and assigns of the Company and, to the extent set forth in Section 4, the heirs and personal representatives of Optionee. SECTION 10. Governing Law. This Agreement shall be construed in accordance with and governed by applicable federal law and to the extent otherwise applicable, the laws of the State of Delaware. SECTION 11. Entire Agreement. This Agreement hereby supersedes all prior agreements, either written or oral, between Optionee and the Company with respect to any grant of the Option by the Company to Optionee. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. "COMPANY" STAGE STORES, INC. By: James Marcum, Vice Chairman, Chief Financial Officer "OPTIONEE" By: JOHN J. WIESNER 381572.2/SCG/31035-001 EXHIBIT "B" Amended Severance Agreement between Stage Stores, Inc. and John J. Wiesner dated April 7, 1997 AMENDED SEVERANCE AGREEMENT This Amended Severance Agreement ("Agreement") is entered into as of the 7th day of April, 1997 and effective as of the "Closing Date" (defined below), between Stage Stores, Inc., a Delaware corporation (the "Company"), and John J. Wiesner (the "Executive"). WHEREAS, the Company's Board of Directors has determined that it is appropriate and in the best interests of the Company to retain certain members of the Executive Management Team of C.R. Anthony Company, including the Executive, as employees of the Company following the Closing Date; WHEREAS, the Company's Board of Directors has determined that it is appropriate and in the best interest of the Company to offer the Amended Severance Payment (defined below) to the Executive as an inducement to encourage Executive to cancel and forfeit any rights that the Executive may have under that certain Executive Severance Compensation Agreement between C.R. Anthony Company and Executive dated April 1, 1995 (the "Anthony's Severance Rights"); and WHEREAS, the Executive has agreed to waive and forfeit the Anthony's Severance Rights in exchange for the payment of the Amended Severance Payment on the terms set forth in this Agreement. NOW, THEREFORE, in consideration of the promises and mutual agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows: 1. Definitions. For purposes of this Agreement, the following capitalized terms shall have the following meanings: (a) "Closing Date" shall have the meaning ascribed to such term in Section 2(d)(i) of that certain Agreement and Plan of Merger between Stage Stores, Inc. and C.R. Anthony Company dated March 5, 1997. (b) "Death" shall mean the death of the Executive. (c) "Disability" shall have the same meaning as is then applicable under the Company's welfare benefit plan governing long term disability income payments. If no such plan is in effect at the time of any determination of Disability, then Disability shall mean the Executive's absence as a result of physical or mental illness from his duties with the Company on a full-time basis for three (3) months. (d) "Amended Severance Payment" shall have the meaning ascribed to such term in Section 3 below. 2. Waiver of Severance Rights. Executive waives and relinquishes any rights under that certain Executive Severance Compensation Agreement between C.R. Anthony Company and Executive dated April 1, 1995. Executive further agrees to execute any documents necessary to evidence the cancellation or termination of such agreement or the waiver or relinquishment of Executive's rights thereunder as Company may reasonably request. 3. Amended Severance Payment. Company shall pay Executive One Million One Hundred Thirty-Eight Thousand Three Hundred Thirty-Three and No/100s Dollars ($1,138,333) as follows: (a) Four Hundred Sixty-Three Thousand Three Hundred Thirty-Three and No/100s Dollars ($463,333) in good funds on January 5, 1998; and (b) Six Hundred Seventy-Five Thousand and No/100s Dollars ($675,000) in twenty-seven (27) equal installments of Twenty Five Thousand and No/100s Dollars ($25,000) per month payable in good funds on the 5th calendar day of each month beginning February 5, 1998. The payments provided for in this Section 3 are collectively referred to herein as the "Amended Severance Payment". 4. Immediate Vesting. The right of the Executive to receive the Amended Severance Payment shall immediately vest as of the Closing Date and may not be rescinded, canceled, terminated or forfeited for any reason. 5. Effect of Death or Disability. Neither Death nor Disability shall affect the right of the Executive to receive the Amended Severance Payment. In the event of Death, any payments which would have been made to Executive but for Death, shall be paid in accordance with the terms of this Agreement to the Executive's devisee, legatee or other designee or if there be no such designee to the Executive's estate. In the event of Disability any payments which would have been to Executive but for such Disability, shall be paid to Executive or his guardian or personal representative as the case may be. 6. Successor to the Company. Company shall cause any successor or assign (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company, by agreement in form and substance satisfactory to the Executive, expressly, absolutely and unconditionally to assume and agree to this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession or assignment had taken place. 7. Assignability. Executive's right to receive the Amended Severance Payment shall be freely assignable by Executive. 8. Notices. For purposes of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States certified mail, return receipt requested, postage prepaid, as follows: If to the Company: Stage Stores, Inc. 10201 Main Street Houston, Texas 77002 If by mail or delivery to the Executive: John J. Wiesner 6349 Harden Drive Oklahoma City, Oklahoma 73118 or such other address as either party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt. 9. Miscellaneous. No provisions of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in a writing signed by the Executive and the Company. No waiver by either party hereto at any time of any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior and contemporaneous agreements relating hereto, and no agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not set forth expressly in this Agreement. This Agreement shall be governed by and construed in accordance with the laws of State of Oklahoma. The invalidity, or unenforceability of any provisions of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. "COMPANY" STAGE STORES, INC., a Delaware corporation By: /s/ Carl E. Tooker Carl E. Tooker, President and Chief Executive Officer "EXECUTIVE" By:/s/ John J. Wiesner John J. Wiesner EX-10.10 16 0016.txt DRAFT -4- FIRST AMENDMENT TO EMPLOYMENT AGREEMENT This First Amendment to Employment Agreement (the "Amendment") is entered into and made effective as of this 5th day of May, 2000, by and between Stage Stores, Inc., a Delaware corporation (the "Company"), and John J. Wiesner, an individual (the "Executive"). WITNESSETH: WHEREAS, the Company and Executive entered into, executed and delivered a certain Employment Agreement dated February 22, 2000 (the "Agreement"), under which Agreement the Company hired the Executive to perform the duties of Chairman, Chief Executive Officer and President of the Company on a temporary basis subject to the terms and conditions as described therein; and WHEREAS, since the execution and delivery of the Agreement, the Company has experienced financial difficulties which were not anticipated at such time, and due to such financial difficulties, the Company has determined that it is in the best interest of the Company for the Executive to remain in his present capacity with the Company a period of time beyond that described in the Agreement including but not limited to any potential reorganization process; and WHEREAS, the Company desires to amend the Agreement in order for the Executive to remain with the Company; and the Executive desires to remain with the Company in his current capacity upon the terms and conditions set forth in this Amendment. NOW, THEREFORE, in consideration of the promises and mutual agreements herein contained, the parties hereby agree as follows: 1. The definition of "Guaranteed Term" in Section 1(f) is hereby amended in its entirety to read as follows: "(f) "Guaranteed Term" shall mean that period of time commencing on the Effective Date and concluding on the date of consummation of the confirmation of any plan of reorganization or the effective date of a Termination Notice voluntarily submitted by Executive to the Company, whichever is earlier. The Guaranteed Term shall not be shortened by termination of the Executive's employment by the Company or by Death, Disability or any other reason." 2. The definition of "Option" in Section 1(g) is hereby deleted in its entirety. 3. Section 6 "Stock Options" is hereby deleted in its entirety. 4. Section 8(iii) is hereby deleted in its entirety. 5. In section 10, the last clause of ", including but not limited to the Option" is hereby deleted. 6. Section 4(iv) is hereby added to the Agreement and shall read in its entirety as follows: "(iv) In the event the Company completes a successful reorganization, the Company shall pay the Executive a bonus in an amount approved by the applicable bankruptcy court, and such amount shall be paid to the Executive in a lump sum payment, less applicable withholding for taxes, which payment shall be due and payable on the date such bonus is approved by the applicable bankruptcy court." 7. Section 4(v) is hereby added to the Agreement and shall read in its entirety as follows: "(v) Company shall indemnify and hold the Executive harmless from and against any and all claims or liabilities, of whatever nature, asserted by Carl Tooker, Steve Lovell or any other present or past officer, director or employee of the Company, to the fullest extent permitted by law and the Company's Articles of Incorporation, as amended, and Bylaws, as amended, including but not limited to advancing any and all necessary costs and expenses for defending any such claims as the same are incurred." 8. The Company and Executive hereby voluntarily, unconditionally and irrevocably agree to: (i) terminate, rescind and revoke any and all options, warrants or other instruments which may be or are convertible into securities of the Company or any of its subsidiaries or affiliates, including but not limited to that certain Incentive Stock Option Agreement dated February 22, 2000, and (ii) release and forever discharge the other from any and all duties, obligations, liabilities or responsibilities owed or accruing to the other under any such options including but not limited to any duties, obligations, liabilities or responsibilities as a result of the termination, rescission and revocation of such options. 9. All of the terms, conditions, covenants, representations, warranties and agreements contained in the Agreement, except as to the extent amended by this Amendment, and all other documents, instruments and agreements made and delivered in connection therewith, shall remain in full force and effect and continue to be binding upon the parties hereto and thereto according to their respective terms. By executing and delivering this Amendment, the Company and Executive hereby expressly ratify and reaffirm the terms and conditions of the Agreement. 10. Governing Law. All issues and questions concerning the construction, validity, enforcement and interpretation of this Amendment shall be governed by, and construed in accordance with, the laws of the State of Texas, without giving effect to any choice of law or conflict of law rules or provisions (whether of the State of Texas or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Texas. Accordingly, the internal law of the State of Texas shall control the interpretation and construction of this Amendment, even if under the jurisdiction's choice of law or conflict of law analysis, the substantive law of some other jurisdiction would ordinarily apply. 11. Successors and Assigns. This Amendment shall be binding upon the successors, assigns, heirs, legatees, devisees, executors, administrators, receivers, trustees and representatives of Executive and shall inure to the benefit of the Company and its subsidiaries and their respective successors, assigns, administrators, receivers, trustees and representatives. 12. Multiple Counterparts. This Amendment may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same agreement. 13. Further Assurances. Executive and the Company covenant and agree that each will execute any additional instruments and take any actions as may be reasonably requested by the other party to confirm or perfect or otherwise to carry out the intent and purpose of this Amendment. 14. Entire Agreement. This Amendment contains and constitutes the entire agreement between Executive and the Company and supersedes and cancels any prior agreements, representations, warranties, or communications, whether oral or written, between Executive and the Company relating to the subject matter hereof in any way. IN WITNESS WHEREOF, the parties hereto have executed and delivered this Amendment effective as of the day and year first above written. "COMPANY" STAGE STORES, INC., a Delaware corporation By: /s/Ron Lucas Name: Ron Lucas Title: EVP, Human Resources "EXECUTIVE" By: /s/ John J. Wiesner JOHN J. WIESNER, an individual EX-23.1 17 0017.txt 1 Exhibit 23.1 Consent of Independent Accountants We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (No. 333-15981) of Stage Stores, Inc. of our report dated March 9, 2000, except as to Notes 2, 6, 11, 13 and 14 to the financial statements, which are as of June 1, 2000, appearing on page F-1 of this Form 10-K. PricewaterhouseCoopers LLP Houston, Texas June 1, 2000 EX-27.1 18 0018.txt
5 THE FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE STAGE STORES, INC. CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1000 12-MOS Jan-29-2000 Jan-29-2000 20,179 0 0 0 261,104 357,074 181,834 0 554,687 615,355 0 281 0 0 (75,248) 554,687 1,121,567 1,121,567 897,117 897,117 0 0 48,634 (256,986) 20,217 (277,203) 0 (749) (3,938) (281,890) (10.06) (10.06)
-----END PRIVACY-ENHANCED MESSAGE-----