Zale Corp. Contracts
Sample Business Contracts
Indenture [Supplement] - Zale Funding Trust and The Bank of New York
EXECUTION COPY
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ZALE FUNDING TRUST
Issuer
and
THE BANK OF NEW YORK
Indenture Trustee and Securities Intermediary
on behalf of the Series 1999-A Noteholders
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SERIES 1999-A INDENTURE SUPPLEMENT
Dated as of July 15, 1999
to
INDENTURE
Dated as of July 15, 1999
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ZALE FUNDING TRUST
Floating Rate Class A Asset Backed
Variable Funding Notes, Series 1999-A
Class B Asset Backed Notes, Series 1999-A
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SERIES 1999-A INDENTURE SUPPLEMENT, dated as of July 15, 1999 (this
"Supplement"), by and between ZALE FUNDING TRUST, a Delaware business trust
(the "Issuer"), and THE BANK OF NEW YORK, a banking corporation organized and
existing under the laws of the State of New York, not in its individual
capacity, but solely as Indenture Trustee (the "Indenture Trustee") and
Securities Intermediary (in such capacity, the "Securities Intermediary") under
the Indenture, dated as of July 15, 1999 (the "Indenture"), by and between the
Issuer, the Indenture Trustee and the Securities Intermediary.
Section 2.22 of the Indenture provides, among other things, that the
Issuer and the Indenture Trustee may at any time and from time to time enter
into a supplement to the Indenture for the purpose of authorizing the issuance
by the Issuer, for execution and redelivery to the Indenture Trustee for
authentication, of one or more Series of Notes.
Pursuant to this Supplement, the Issuer shall create a new Series of
Investor Notes and shall specify the Principal Terms thereof.
ARTICLE I
CREATION OF THE SERIES 1999-A NOTES
Section 1.01. Designation. There is hereby created a Series of
Investor Notes to be issued pursuant to the Indenture and this Supplement to be
known generally as the "Series 1999-A Notes." The Series 1999-A Notes shall be
issued in two Classes, which shall be designated generally as the Floating Rate
Class A Asset Backed Variable Funding Notes, Series 1999-A (the "Class A
Notes") and the Class B Asset Backed Notes, Series 1999-A (the "Class B
Notes"). The Class A Notes shall be substantially in the form of Exhibit A-1,
and the Class B Notes shall be substantially in the form of Exhibit A-2.
[END OF ARTICLE I]
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ARTICLE II
DEFINITIONS
Section 2.01. Definitions. In the event that any term or provision
contained herein shall conflict with or be inconsistent with any provision
contained in the Indenture, the terms and provisions of this Supplement shall
govern with respect to the Series 1999-A Notes. All Article, Section or
subsection references herein shall mean Article, Section or subsections of this
Supplement except as otherwise provided herein. All capitalized terms used
herein and not otherwise defined herein shall have the meanings ascribed to
them in the Indenture. Each capitalized term defined herein shall relate only
to the Series 1999-A Notes and no other Series of Notes issued by the Trust.
"Additional Interest" shall mean, at any time of determination, the
sum of Class A Additional Interest and Class B Additional Interest.
"Adjustment Payment Shortfall" shall mean, (a) with respect to any day
during a Settlement Period, an amount equal to the product of (i) any
adjustment payments which the Seller was required to make on such day pursuant
to Section 2.06 of the Purchase and Servicing Agreement, times (ii) the
Floating Allocation Percentage for such Settlement Period, and (b) with respect
to any Settlement Period, an amount equal to the product of (i) any adjustment
payments which the Seller was required to make during such Settlement Period
pursuant to Section 2.06 of the Purchase and Servicing Agreement but failed to
make on or prior to the last day of such Settlement Period, times (ii) the
Floating Allocation Percentage as of the related Payment Date.
"Administrative Agent" shall have the meaning specified in the Class A
Purchase Agreement.
"Agent" shall have the meaning specified in the Class A Purchase
Agreement.
"Amortization Date" shall mean the earliest to occur of (i) the date
after [July 13], 2000 designated by the Issuer as the Amortization Date at any
time upon seven (7) Business Days' written notice to the Agents, the
Administrative Agent, the Indenture Trustee and the Servicer, (ii) the Early
Amortization Commencement Date and (iii) the latest Purchase Termination Date,
as such term is defined in the Class A Purchase Agreement.
"Amortization Period" shall mean, with respect to Series 1999-A, an
Early Amortization Period or a Controlled Amortization Period.
"Available Series 1999-A Finance Charge Collections" shall have the
meaning specified in subsection 4.06(a).
"Base Rate" shall mean, with respect to any Settlement Period, the sum
of (i) the average of the Class A Interest Rate and the Class B Interest Rate
weighted by the unpaid principal amount of each respective Class of Notes, plus
(ii) the Servicing Fee Rate, plus (iii) the Senior Class A Increased Costs Rate
(if any).
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"Carryover Class A Interest" shall mean, with respect to any Payment
Date, (a) any Class A Interest due but not paid on any previous Payment Date
plus (b) any Class A Additional Interest which is due and unpaid.
"Carryover Class B Interest" shall mean, with respect to any Payment
Date, (a) any Class B Interest due but not paid on any previous Payment Date
plus (b) any Class B Additional Interest.
"Carryover Interest" shall mean, with respect to any Payment Date, the
sum of Carryover Class A Interest and Carryover Class B Interest.
"Class A Additional Interest" shall have the meaning specified in
subsection 4.03(b).
"Class A Adjustment Payment Shortfall" shall mean, with respect to
each Payment Date, an amount equal to the product of (a) the Class A Percentage
for the related Settlement Period and (b) the Adjustment Payment Shortfall for
such Settlement Period.
"Class A Floating Allocation Percentage" shall mean, with respect to
any Settlement Period, the percentage equivalent of a fraction, the numerator
of which is the Class A Invested Amount as of (x) during a Revolving Period,
the close of business on the last day of the immediately preceding Settlement
Period (or, in the case of the first Settlement Period, the Class A Initial
Invested Amount) and (y) during an Amortization Period or Partial Amortization
Period (i) with respect to Collections of Finance Charges, the close of
business on the last day of the most recent Revolving Period and (ii) with
respect to the Investor Defaulted Amount, Invested Defaulted Amount Shortfall
or the Adjustment Payment Shortfall, the close of business on the last day of
the immediately preceding Settlement Period; provided, that with respect to any
Settlement Period in which a Class A Note Principal Balance Increase or a Class
A Special Reduction occurs, such numerator, on and after the date of such Class
A Note Principal Balance Increase or a Class A Special Reduction, shall be the
Class A Invested Amount on such date (after giving effect to the Class A Note
Principal Balance Increase or the Class A Special Reduction, as applicable),
and the denominator of which is the greater of (a) the total amount of
Principal Receivables in the Trust and the amounts on deposit in the Excess
Funding Account as of the close of business on such date (or, in the case of
the first Settlement Period, the total amount of Principal Receivables in the
Trust on the Closing Date) and (b) when used with respect to (x) Collections of
Finance Charges during an Amortization Period or (y) Collections of Principal
Receivables, the sum of the numerators with respect to all Classes of all
Series then outstanding used to calculate the applicable allocation percentage.
"Class A Increased Cost Amount" shall mean the aggregate amount, if
any, payable by the Issuer pursuant to Sections 2.4 or 2.5 or subsection 2.6(c)
of the Class A Purchase Agreement, together with any accrued and unpaid
interest on such amount as provided therein.
"Class A Initial Invested Amount" shall mean the aggregate initial
principal amount of the Class A Notes, which is $250,000,000.
"Class A Interest" shall mean the interest distributable in respect of
the Class A Notes as calculated in accordance with subsection 4.03(a).
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"Class A Interest Rate," with respect to any Interest Accrual Period,
shall have the meaning specified in the Class A Purchase Agreement.
"Class A Interest Shortfall" shall have the meaning specified in
subsection 4.03(b).
"Class A Invested Amount" shall mean, when used with respect to any
date of determination, an amount equal to (a) the Class A Initial Invested
Amount, plus (b) the aggregate amount of Class A Note Principal Balance
Increases on or prior to such date, minus (c) the aggregate amount of principal
payments made to Class A Noteholders prior to such date, minus (d) the
aggregate amount of Class A Investor Charge-Offs for all prior Payment Dates,
and plus (e) the sum of the aggregate amount allocated with respect to Class A
Investor Charge-Offs and available on all prior Payment Dates pursuant to
subsection 4.06(a)(vii) for the purpose of reinstating amounts reduced pursuant
to the foregoing clause (d).
"Class A Investor Charge-Offs" shall have the meaning specified in
subsection 4.09(b).
"Class A Investor Defaulted Amount" shall mean, with respect to each
Payment Date, an amount equal to the product of (a) the Class A Percentage for
the related Settlement Period and (b) the Defaulted Amount Shortfall for such
Settlement Period.
"Class A Mandatory Partial Amortization Amount" shall have the meaning
specified in the Class A Purchase Agreement.
"Class A Monthly Interest" shall have the meaning specified in the
Class A Purchase Agreement.
"Class A Note Principal Balance Increase" shall have the meaning set
forth in subsection 7.04(a).
"Class A Noteholder" shall mean the Person in whose name a Class A
Note is registered in the Note Register.
"Class A Noteholders' Interest" shall mean, with respect to any date,
the portion of the Series 1999-A Noteholders' Interest evidenced by the Class A
Notes.
"Class A Notes" shall have the meaning specified in Section 1.01.
"Class A Partial Amortization Principal" shall have the meaning
specified in subsection 4.04(d).
"Class A Percentage" shall mean (i) for any specified day, a fraction
the numerator of which is the Class A Invested Amount and the denominator of
which is the Series Invested Amount and (ii) for any specified period, a
fraction, the numerator of which is the Weighted Average Class A Invested
Amount for such period and the denominator of which is the Weighted Average
Invested Amount for such period.
"Class A Principal" shall have the meaning specified in subsection
4.04(b).
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"Class A Principal Allocation Percentage" shall mean, with respect to
any Settlement Period, the percentage equivalent of a fraction, the numerator
of which is (a) during a Revolving Period, the Class A Invested Amount as of
the close of business on the last day of the immediately preceding Settlement
Period (or, in the case of the first Settlement Period, the Closing Date);
provided, that with respect to any Settlement Period in which a Class A Note
Principal Balance Increase or Class A Special Reduction occurs, such numerator,
on and after the date of such Class A Note Principal Balance Increase or Class
A Special Reduction, shall be the Class A Invested Amount on such date (after
giving effect to the Class A Note Principal Balance Increase or Class A Special
Reduction on such date), and (b) during an Amortization Period or Partial
Amortization Period, the Class A Invested Amount as of the close of business on
the last day of the most recent Revolving Period, and the denominator of which
is the greater of (x) the sum of the total amount of Principal Receivables in
the Trust and the principal amount on deposit in the Excess Funding Account as
of the close of business on the last day of the immediately preceding
Settlement Period (or, in the case of the first Settlement Period, the Closing
Date) and (y) during an Amortization Period, the sum of the numerators used to
calculate the principal allocation percentages for all Series outstanding as of
the date as to which such determination is being made.
"Class A Purchase Agreement" shall mean that certain Note Purchase
Agreement dated as of July 15, 1999, among the Issuer, the Seller, the
Servicer, the Agents, Class A Purchasers and the Administrative Agent named
therein, as the same may be amended, supplemented, or modified from time to
time. The Indenture Trustee shall not be bound by the provisions of the Class A
Purchase Agreement and shall not be obligated to monitor the performance of or
compliance with any of the terms of the Class A Purchase Agreement by any party
thereto.
"Class A Purchaser" shall have the meaning specified in the Class A
Purchase Agreement.
"Class A Required Amount" shall mean, with respect to each Payment
Date, the amount determined by the Servicer equal to the excess, if any, of (a)
the sum of (i) Class A Interest for the related Settlement Period, (ii) any
Carryover Class A Interest, (iii) Senior Class A Increased Costs for the
related Settlement Period and any Senior Class A Increased Costs previously due
but not paid to the Class A Noteholders or the Agents on a prior Payment Date,
(iv) the unpaid portion of the Indenture Trustee Fee for the related Settlement
Period, (v) if JNB or an Affiliate of JNB is no longer the Servicer, the Class
A Servicing Fee for the related Settlement Period, (vi) the Class A Investor
Defaulted Amount Shortfall and (vii) the Class A Adjustment Payment Shortfall,
over (b) the sum of (i) the Available Series 1999-A Finance Charge Collections
plus (ii) any Excess Finance Charge Collections from other Series allocable to
Series 1999-A (less, in each case, amounts allocated as Shared Principal
Collections pursuant to 4.06(a)(v) or 4.06(a)(vi)), plus (iii) the amount
applied to fund amounts described in clause (a) above on such Payment Date from
the Reserve Account pursuant to Section 4.11.
"Class A Servicing Fee" shall have the meaning specified in Section
3.01.
"Class A Special Reduction Date" shall have the meaning specified in
subsection 7.05(a).
"Class A Special Reduction Notice" shall have the meaning specified in
subsection 7.05(b).
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"Class A Special Reduction Amount" shall have the meaning specified in
subsection 7.05(b).
"Class B Additional Interest" shall mean the amount of interest, if
any, distributable in respect of the Class B Notes as calculated pursuant to a
supplemental agreement entered into in accordance with Section 7.03.
"Class B Adjustment Payment Shortfall" shall mean, with respect to
each Payment Date, an amount equal to the product of (a) the Class B Percentage
for the related Settlement Period and (b) the Adjustment Payment Shortfall for
such Settlement Period.
"Class B Enhancement Percentage" shall mean 33%.
"Class B Floating Allocation Percentage" shall mean, with respect to
any Settlement Period, the percentage equivalent of a fraction, the numerator
of which is the Class B Invested Amount as of (x) during a Revolving Period,
the close of business on the last day of the immediately preceding Settlement
Period (or, in the case of the first Settlement Period, the Class B Initial
Invested Amount) and (y) during an Amortization Period or Partial Amortization
Period (i) with respect to Collections of Finance Charges, the close of
business on the last day of the most recent Revolving Period and (ii) with
respect to the Investor Defaulted Amount, Investor Defaulted Amount Shortfall
or Adjustment Payment Shortfall, the close of business on the last day of the
immediately preceding Settlement Period; provided, that with respect to any
Settlement Period in which a Class B Note Principal Balance Increase or a Class
B Special Reduction occurs, such numerator, on and after the date of such Class
B Note Principal Balance Increase or date of such Class B Special Reduction,
shall be the Class B Invested Amount on such date (after giving effect to the
Class B Note Principal Balance Increase or the application of the Class B
Special Reduction Amount on such date, as applicable), and the denominator of
which is the greater of (a) the total amount of Principal Receivables in the
Trust and the amounts on deposit in the Excess Funding Account as of the close
of business on such date (or, in the case of the first Settlement Period, the
total amount of Principal Receivables in the Trust on the Closing Date) and (b)
when used with respect to (x) Collections of Finance Charges during an
Amortization Period or (y) Collections of Principal Receivables, the sum of the
numerators with respect to all Classes of all Series then outstanding used to
calculate the applicable allocation percentage.
"Class B Initial Invested Amount" shall mean the aggregate initial
principal amount of the Class B Notes, which is $123,134,328.36.
"Class B Interest" shall mean the interest, if any, distributable in
respect of the Class B Notes as may be calculated pursuant to a supplemental
agreement entered into in accordance with Section 7.03.
"Class B Interest Rate" shall mean, with respect to any Interest
Accrual Period, a per annum rate equal to 0%; provided, however such interest
rate may be increased pursuant to the terms of a supplemental agreement entered
into in accordance with Section 7.03.
"Class B Interest Shortfall" shall have the meaning specified in
Section 7.03.
"Class B Invested Amount" shall mean, when used with respect to any
date of determination, an amount equal to (a) the Class B Initial Invested
Amount, minus (b) the
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aggregate amount of principal payments made to Class B Noteholders prior to
such date, minus (c) the aggregate amount of Class B Investor Charge-Offs for
all prior Payment Dates, minus (d) the aggregate amount of Reallocated Class B
Principal Collections for which the Class B Invested Amount has been reduced
for all prior Payment Dates, and plus (e) the sum of the aggregate amount
allocated with respect to Class B Investor Charge-Offs and available on all
prior Payment Dates pursuant to subsection 4.06(a)(xi) for the purpose of
reinstating amounts reduced pursuant to the foregoing clauses (c) and (d).
"Class B Investor Charge-Offs" shall have the meaning specified in
subsection 4.09(a).
"Class B Investor Defaulted Amount" shall mean, with respect to each
Payment Date, an amount equal to the product of (a) the Class B Percentage for
the related Settlement Period and (b) the Investor Defaulted Amount Shortfall
for such Settlement Period.
"Class B Note Principal Balance Increase" shall have the meaning set
forth in subsection 7.04(d).
"Class B Noteholder" shall mean the Person in whose name a Class B
Note is registered in the Note Register.
"Class B Noteholders' Interest" shall mean, with respect to any date,
the portion of the Series 1999-A Noteholders' Interest evidenced by the Class B
Notes.
"Class B Notes" shall have the meaning specified in Section 1.01.
"Class B Partial Amortization Principal" shall have the meaning
assigned in Section 4.04(e).
"Class B Percentage" shall mean (i) for any specified day, a fraction
the numerator of which is the Class B Invested Amount and the denominator of
which is the Series Invested Amount and (ii) for any specified period, a
fraction, the numerator of which is the Weighted Average Class B Invested
Amount for such period and the denominator of which is the Weighted Average
Invested Amount for such period.
"Class B Principal" shall have the meaning specified in subsection
4.04(c).
"Class B Principal Allocation Percentage" shall mean with respect to
any Settlement Period, the percentage equivalent of a fraction, the numerator
of which is (a) during a Revolving Period, the Class B Invested Amount as of
the close of business on the last day of the immediately preceding Settlement
Period (or, in the case of the first Settlement Period, the Closing Date);
provided, that with respect to any Settlement Period in which a Class B Note
Principal Balance Increase or a Class B Special Reduction occurs, such
numerator, on and after the date of such Class B Note Principal Balance
Increase or a Class B Special Reduction Date, shall be the Class B Invested
Amount on such date (after giving effect to the Class B Note Principal Balance
Increase or the application of the Class B Special Reduction Amount on such
date, as applicable), and (b) during an Amortization Period or Partial
Amortization Period, the Class B Invested Amount as of the close of business on
the last day of the most recent Revolving Period, and the denominator of which
is the greater of (x) the sum of the total amount of Principal Receivables in
the Trust and the principal amount on deposit in the Excess Funding
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Account as of the close of business on the last day of the immediately
preceding Settlement Period (or, in the case of the first Settlement Period,
the Closing Date) and (y) during an Amortization Period, the sum of the
numerators used to calculate the principal allocation percentages for all
Series outstanding as of the date as to which such determination is being made.
"Class B Servicing Fee" shall have the meaning specified in Section
3.01.
"Class B Special Reduction Date" shall mean the date of the first
Class A Special Reduction, if such Class A Special Reduction occurs on or prior
to October 15, 1999.
"Class B Special Reduction Amount" shall mean the product of (i) the
lesser of (A) the Class A Special Reduction Amount and (B) the excess, if any,
of the Class A Invested Amount on the Class B Special Reduction Date
(determined prior to giving effect to any reduction of the Invested Amount on
such date) over $150,000,000, times (ii) a fraction, the numerator of which
equals the Class B Enhancement Percentage and the denominator of which equals
100% minus the Class B Enhancement Percentage.
"Closing Date" shall mean July 15, 1999.
"Controlled Amortization Period" shall, unless the Early Amortization
Commencement Date shall have occurred prior thereto, mean the period commencing
with the Amortization Date and ending on the first to occur of (a) the date on
which the Series Invested Amount is paid in full and (ii) the Series 1999-A
Termination Date.
"Early Amortization Commencement Date" shall mean the date on which an
Early Amortization Event occurs or is deemed to have occurred pursuant to
Section 10.01 of the Indenture or a Series 1999-A Early Amortization Event is
deemed to occur pursuant to Section 6.01.
"Early Amortization Period" shall mean the period beginning on the
Early Amortization Commencement Date, and ending on the earlier of (i) the date
on which the Series Invested Amount has been paid in full and (ii) the Series
1999-A Termination Date.
"Excess Finance Charge Collections" shall mean, with respect to any
Payment Date, as the context requires, either (x) the amount described in
subsection 4.06(a)(xv) allocated to the Series 1999-A Notes but available to
cover shortfalls in amounts paid from Collections of Finance Charges for other
Series, if any or (y) the aggregate amount of Collections of Finance Charges
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-A Notes.
"Floating Allocation Percentage" shall mean, with respect to any date
of determination, the sum of the Class A Floating Allocation Percentage and the
Class B Floating Allocation Percentage on such date.
"Increase Date" shall have the meaning set forth in subsection
7.04(b).
"Increase Notice" shall have the meaning set forth in subsection
7.04(b).
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"Indenture Trustee Fee" shall have the meaning specified in Section
3.02.
"Initial Invested Amount" shall mean the sum of the Class A Initial
Invested Amount and the Class B Initial Invested Amount.
"Interest Accrual Period" shall mean, with respect to a Payment Date,
the period from and including the preceding Payment Date to and excluding such
Payment Date; provided, however, that the initial Interest Accrual Period shall
be the period from the Closing Date to and excluding the first Payment Date.
"Investor Charge-Offs" shall mean the sum of Class A Investor
Charge-Offs and Class B Investor Charge-Offs.
"Investor Defaulted Amount" shall mean, with respect to any Settlement
Period, an amount equal to the product of the Defaulted Amount and the Floating
Allocation Percentage as of the related Payment Date.
"Investor Defaulted Amount Shortfall" shall mean, (a) with respect to
any day during a Settlement Period, an amount equal to the product of (i) the
excess, if any, of the Defaulted Amount for such day over the Issuer Amount on
such day (after giving effect to any changes in the Issuer Amount on such day),
times (ii) the Floating Allocation Percentage for such Settlement Period, and
(b) with respect to a Settlement Period, the excess, if any, of the Defaulted
Amount for such Settlement Period over the Issuer Amount on the last day of
such Settlement Period (after giving effect to any changes in the Issuer Amount
on such day), times (ii) the Floating Allocation Percentage for such Settlement
Period.
"Investor Noteholder" shall mean the holder of record of an Investor
Note.
"Investor Notes" shall mean the Class A Notes and the Class B Notes.
"Issuance Date" shall mean the Closing Date.
"Issuer Retained Notes" shall mean investor Notes of any Series,
including the Class B Notes, which the Issuer retains, but only to the extent
that and for so long as the Issuer is the holder of such Notes.
"Issuer's Percentage" shall mean 100% minus (a) the Floating
Allocation Percentage, when used at any time with respect to Finance Charge
Collections and Defaulted Receivables, and (b) the Principal Allocation
Percentage, when used at any time with respect to Principal Receivables.
"Legal Final Maturity Date" shall mean the seventy-second Payment Date
which follows the Amortization Date.
"Monthly Servicing Fee" shall have the meaning specified in Section
3.01.
"Partial Amortization Amount" shall have the meaning specified in
Section 7.02.
"Partial Amortization Notice" shall have the meaning specified in
Section 7.02.
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"Partial Amortization Period" shall mean the period from and including
the date specified in the first sentence of Section 7.02, to and including the
earlier to occur of (a) the day during a Settlement Period on which Collections
of Principal Receivables have been allocated to the Investor Noteholders (after
taking into account the aggregate amount of Collections of Principal
Receivables allocated to Investor Noteholders during any previous Settlement
Period in the related Partial Amortization Period) in an amount equal to the
Partial Amortization Amount during such Partial Amortization Period and (b) the
day immediately preceding the Amortization Date.
"Partial Expiration Event" shall have the meaning specified in the
Class A Purchase Agreement.
"Payment Date" shall mean August 16, 1999 and the fifteenth day of
each month thereafter, or if such day is not a Business Day, the next
succeeding Business Day.
"Portfolio Yield" shall mean for the Series 1999-A Notes, with respect
to any Settlement Period, the annualized percentage equivalent of a fraction,
the numerator of which is an amount equal to the sum of (i) the aggregate
amount of Available Series 1999-A Finance Charge Collections for such
Settlement Period, (ii) Investment Proceeds and (iii) Recoveries, including
without limitation, sales tax recoveries, minus the aggregate Investor
Defaulted Amount for such Settlement Period and the Series Allocation
Percentage of any adjustment payments required to be made by the Issuer
pursuant to Section 2.06 of the Purchase and Servicing Agreement but not made
on or prior to the related Payment Date, and the denominator of which is the
Weighted Average Invested Amount as of the last day of the preceding Settlement
Period.
"Principal Allocation Percentage" shall mean, with respect to any date
of determination, the sum of the Class A Principal Allocation Percentage and
the Class B Principal Allocation Percentage on such date.
"Principal Shortfalls" shall mean, on any Payment Date, (i) for Series
1999-A, the Class A Invested Amount if the Class A Notes are then receiving
principal payments after the application of Collections of Principal
Receivables on such Payment Date, plus the Class B Invested Amount if the Class
B Notes are then receiving principal payments after the application of
Collections of Principal Receivables on such Payment Date or (ii) for any other
Series, the amounts specified as such in the Indenture Supplement for such
other Series; provided that (a) for any Payment Date during a Revolving Period,
the Principal Shortfall for Series 1999-A shall be zero, and (b) for any
Payment Date during a Partial Amortization Period, the Principal Shortfall for
Series 1999-A shall equal (x) the Class A Mandatory Partial Amortization
Amount, if any, and otherwise (y) zero or such higher amount, not exceeding the
Class A Invested Amount, as shall have been specified as the Principal
Shortfall for Series 1999-A by the Issuer by notice to the Servicer and the
Indenture Trustee not later than the Business Day preceding the Determination
Date for such Payment Date.
"Rating Agency" shall mean Standard & Poor's and Moody's.
"Reallocated Principal Collections" shall have the meaning specified
in Section 4.08.
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"Reassignment Amount" shall mean, with respect to any Payment Date,
after giving effect to any deposits and distributions otherwise to be made on
such Payment Date, the sum of (i) the Series Invested Amount on such Payment
Date, plus (ii) the sum of the Class A Interest and Class B Interest for such
Payment Date, plus (iii) the amount of Carryover Interest, if any, plus (iv)
the Class A Increased Cost Amount.
"Required Amount" shall have the meaning specified in Section 4.07.
"Required Issuer Percentage" shall mean 0%.
"Reserve Account" means the account established pursuant to Section
4.11.
"Reserve Account Funding Event" shall mean a reduction of Moody's
senior implied issuer rating (if such rating is being maintained at such time)
of Zale Corporation to below "B1."
"Reserve Account Required Balance" shall mean, on any date of
determination, (i) if a Reserve Account Funding Event shall have occurred and
be continuing, 0.50% of the Series Invested Amount on such date, and (ii)
otherwise, zero.
"Revolving Period" shall mean (a) the period from and including the
Closing Date to, but not including, the earlier of (i) the commencement of a
Partial Amortization Period and (ii) the Amortization Date, and (b) each
period, if any, from, but not including, the last day of the immediately
preceding Partial Amortization Period which did not end on the Amortization
Date to, but not including, the earlier of (i) the commencement of a Partial
Amortization Period and (ii) the Amortization Date.
"Senior Class A Increased Costs" shall mean, with respect to a Payment
Date, the Class A Increased Costs for such Payment Date, to the extent such
Class A Increased Costs may be paid pursuant to subsection 4.06(a)(ii) hereof
without regard to any insufficiency of the amount of Available Series 1999-A
Finance Charge Collections.
"Senior Class A Increased Costs Rate" shall mean, with respect to a
Settlement Period, the annualized percentage equivalents of a fraction, the
numerator of which equals the Senior Class A Increased Costs for the related
Payment Date, and the denominator of which is the Weighted Average Class A
Investor Interest for such Settlement Period.
"Series Allocable Finance Charge Collections" shall mean, with respect
to the Series 1999-A Notes for any Settlement Period, the product of the Series
Allocation Percentage and the amount of the Finance Charge Collections with
respect to such Settlement Period.
"Series Allocable Principal Collections" shall mean, with respect to
the Series 1999-A Notes for any Settlement Period, the product of the Series
Allocation Percentage and the amount of the Principal Collections with respect
to such Settlement Period.
"Series Allocation Percentage" shall mean, as of any date of
determination, the percentage equivalent of a fraction, the numerator of which
is the Series Invested Amount and the denominator of which is the invested
amounts of all then outstanding Series.
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"Series Invested Amount" shall mean, when used with respect to any
date of determination, an amount equal to the sum of (a) the Class A Invested
Amount as of such date and (b) the Class B Invested Amount as of such date.
"Series Required Issuer Amount" shall mean an amount equal to the
product of the Series Invested Amount and the Required Issuer Percentage.
"Series 1999-A" shall mean the Series of the Zale Funding Trust
represented by the Series 1999-A Notes.
"Series 1999-A Early Amortization Event" shall have the meaning
specified in Section 6.01.
"Series 1999-A Noteholder" shall mean the holder of record of any
Series 1999-A Investor Note.
"Series 1999-A Noteholders' Interest" shall have the meaning specified
in Section 4.01.
"Series 1999-A Notes" shall have the meaning specified in Section
1.01.
"Series 1999-A Termination Date" shall mean the earlier to occur of
(i) the day after the Payment Date on which the Series 1999-A Notes are paid in
full, and (ii) the Legal Final Maturity Date.
"Servicing Base Amount" shall have the meaning specified in Section
3.01.
"Servicing Fee Rate" shall mean 2% per annum.
"Shared Principal Collections" shall mean, as the context requires,
either (a) the amount allocated to the Series 1999-A Notes which, in accordance
with Section 4.04 and subsection 4.06(b), may be applied in accordance with
Section 4.05 of the Indenture or (b) the amounts allocated to the Notes (other
than Issuer Retained Notes) 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-A Notes.
"Special Reduction" shall have the meaning specified in subsection
7.05(a).
"Weighted Average Class A Invested Amount" shall mean, with respect to
any period, the sum of the Class A Invested Amount outstanding at the close of
business on each day during such period divided by the actual number of days in
such period.
"Weighted Average Class B Invested Amount" shall mean, with respect to
any period, the sum of the Class B Invested Amount outstanding at the close of
business on each day during such period divided by the actual number of days in
such period.
"Weighted Average Invested Amount" shall mean, with respect to any
period, the sum of the Series Invested Amount outstanding at the close of
business on each day during such period divided by the actual number of days in
such period.
[END OF ARTICLE II]
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ARTICLE III
SERVICER
Section 3.01. Servicing Compensation. The share of the Servicing Fee
allocable to the Series 1999-A Noteholders with respect to any Payment Date
(the "Monthly Servicing Fee") shall be equal to one-twelfth of the product of
(a) the Servicing Fee Rate and (b) (i) the Weighted Average Invested Amount for
the Settlement Period preceding such Payment Date, minus (ii) the product of
(A) the sum of the amount, if any, on deposit in the Excess Funding Account as
of the close of business on each day during such Settlement Period divided by
the actual number of days in such Settlement Period and (B) the Floating
Allocation Percentage with respect to such Settlement Period (the amount
calculated pursuant to this clause (b) is referred to as the "Servicing Base
Amount"), provided, however, that with respect to the first Payment Date, the
Monthly Servicing Fee shall be equal to the product of (a) the Servicing Fee
Rate, (b) the Servicing Base Amount and (c) a fraction, the numerator of which
is 16 and the denominator of which is 360. The share of the Monthly Servicing
Fee allocable to the Class A Noteholders with respect to any Payment Date (the
"Class A Servicing Fee") shall be equal to one-twelfth of the product of (a)
the Class A Percentage for the Settlement Period immediately preceding such
Payment Date, (b) the Servicing Fee Rate and (c) the Servicing Base Amount;
provided, however, that with respect to the first Payment Date, the Class A
Servicing Fee shall be equal to the product of (a) the Class A Percentage for
the Settlement Period preceding such Payment Date, (b) the Servicing Fee Rate,
(c) the Servicing Base Amount and (d) a fraction, the numerator of which is 16
and the denominator of which is 360. The share of the Monthly Servicing Fee
allocable to the Class B Noteholders with respect to any Payment Date (the
"Class B Servicing Fee") shall be equal to one-twelfth of the product of (a)
the Class B Percentage for the Settlement Period preceding such Payment Date,
(b) the Servicing Fee Rate and (c) the Servicing Base Amount; provided,
however, that with respect to the first Payment Date, the Class B Monthly
Servicing Fee shall be equal to the product of (a) the Class B Percentage for
the Settlement Period preceding such Payment Date, (b) the Servicing Fee Rate,
(c) the Servicing Base Amount and (d) a fraction, the numerator of which is 16
and the denominator of which is 360. The remainder of the Servicing Fee shall
be paid by the Issuer or the Noteholders of other Series (as provided in the
related Indenture Supplements) and in no event shall the Indenture Trustee or
the Series 1999-A Noteholders be liable for the share of the Servicing Fee to
be paid by the Issuer or the Noteholders of any other Series. The Monthly Class
A Servicing Fee shall be payable to the Servicer solely to the extent amounts
are available for distribution in respect thereof pursuant to subsection
4.06(a)(iv) and (xiv).
Section 3.02. Indenture Trustee Fee. The share of the regular annual
fee of the Indenture Trustee allocable to the Series 1999-A Noteholders with
respect to any Payment Date (the "Indenture Trustee Fee") shall be equal to
one-twelfth of such regular annual fee (as agreed upon in writing from time to
time by the Issuer, the Seller and the Indenture Trustee), times the Floating
Allocation Percentage with respect to such Settlement Period, provided,
however, that with respect to the first Payment Date, the Indenture Trustee Fee
shall be equal to (a) such regular annual fee, times (b) the Floating
Allocation Percentage with respect to such Settlement Period, times (c) a
fraction, the numerator of which is 16 and the denominator of which is 360. The
share of the Indenture Trustee Fee allocable to the Class A Noteholders with
respect to any Payment Date shall be equal to the Indenture Trustee Fee for
such Payment Date times the Class A Percentage for the Settlement Period
immediately preceding such Payment Date, and the share
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of the Indenture Trustee Fee allocable to the Class B Noteholders with respect
to any Payment Date shall be equal to the Indenture Trustee Fee for such
Payment Date times the Class B Percentage for the Settlement Period immediately
preceding such Payment Date. The remainder of the Servicing Fee shall be paid
by the Issuer or the Noteholders of other Series (as provided in the related
Indenture Supplements) and in no event shall the Series 1999-A Noteholders be
liable for the share of the portion of the annual fee payable to the Indenture
Trustee to be paid by the Issuer or the Noteholders of any other Series. The
Indenture Trustee Fee shall be payable to the Indenture Trustee solely to the
extent amounts are available for distribution in respect thereof pursuant to
subsection 4.06(a)(iii), and otherwise no Series 1999-A Noteholder shall have
any liability with respect thereto.
[END OF ARTICLE III]
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ARTICLE IV
RIGHTS OF NOTEHOLDERS AND
ALLOCATION AND APPLICATION OF COLLECTIONS
Section 4.01. Rights of Noteholders. The indebtedness represented by
the Series 1999-A Notes shall include the right of the Series 1999-A
Noteholders to receive, to the extent necessary to make the required payments
with respect to such Series 1999-A Notes at the times and in the amounts
specified in this Supplement, the sum of (a) the Floating Allocation Percentage
and the Principal Allocation Percentage (as applicable from time to time) of
amounts available in the Collection Account and (b) funds allocable to the
Series 1999-A Notes on deposit in the Excess Funding Account (such sum, the
"Series 1999-A Noteholders' Interest"). The Class B Invested Amount shall be
subordinated to the Class A Notes, to the extent provided in this Article IV.
The Class B Notes will not have the right to receive payments of principal
until the Class A Invested Amount has been paid in full, other than payments of
the Class B Special Reduction Amount during a Partial Amortization Period as
provided in this Supplement.
Section 4.02. Collections and Allocation; Payments on Trust
Certificate.
(a) Collections. The Servicer will apply, or will instruct
the Indenture Trustee to apply, all funds on deposit in the Collection
Account and the Excess Funding Account allocable to the Series 1999-A
Notes as described in this Article IV.
(b) Payments to the Issuer. On each day funds are deposited
into the Collection Account, the Servicer shall withdraw from the
Collection Account and pay to the Issuer the following amounts:
(i) an amount equal to the Issuer's Percentage for
the related Settlement Period of Series Allocable Finance
Charge Collections to the extent such amount is deposited in
the Collection Account; and
(ii) an amount equal to the Issuer's Percentage for
the related Settlement Period of Series Allocable Principal
Collections deposited in the Collection Account, if the
Issuer's Interest on such day is greater than the Series
Required Issuer Amount (after giving effect to all Principal
Receivables Transferred to the Trust on such day).
The withdrawals to be made from the Collection Account pursuant to
this Section 4.02(b) do not apply to deposits into the Collection Account that
do not represent Collections, including proceeds from the sale, disposition or
liquidation of Receivables pursuant to Section 9.02 or 10.03 of the Indenture.
(c) Allocations. The Servicer will apply, or will instruct
the Indenture Trustee to apply, all collections and other funds on
deposit in the Collection Account that are allocated to the Investor
Notes as follows:
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(i) Daily Allocations During a Revolving Period.
During a Revolving Period, the Servicer shall, prior to the
close of business on any Date of Processing, allocate the
following amounts as set forth below:
(x) Allocate to the Investor Noteholders and
retain in the Collection Account an amount equal to
the product of (i) the Floating Allocation
Percentage and (ii) the aggregate amount of
Collections of Finance Charges on such Date of
Processing, provided, however, that, with respect to
each Settlement Period, such amount shall only be
allocated until such time as the amount retained in
the Collection Account equals the amount of (i)
Class A Interest (based on the rate on which Class A
Interest is calculated on such day), Class B
Interest and Carryover Interest, if any, (ii) the
Class A Increased Cost Amount, if any (based, if
applicable, on the rate at which the Class A
Increased Cost Amount is calculated on such day),
(iii) at any time that JNB or an Affiliate of JNB is
not the Servicer, the Servicing Fee, due on the next
Payment Date, (iv) the Investor Defaulted Amount
Shortfall due on the next Payment Date and (v) the
Investor Uncovered Dilution Amount due on the next
Payment Date; provided further, however, that if any
rate at which any amounts described in clause (i) or
(ii) of the preceding proviso shall change during
such Settlement Period, the amount required to be
allocated and retained pursuant to this subsection
4.02(c)(i)(x) shall be appropriately adjusted.
(y) Allocate to the Investor Noteholders an
amount equal to the product of (A) the Principal
Allocation Percentage on such Date of Processing and
(B) the aggregate amount of Collections of Principal
Receivables on such Date of Processing and, after
satisfaction of any requirements of Section 4.08, if
any other Principal Sharing Series are outstanding
and in their Accumulation Period or Amortization
Period, apply such amount as Shared Principal
Collections to the extent necessary, and then pay
any remaining amount to the Trust; provided,
however, that the amount to be paid to the Trust
pursuant to this subsection 4.02(c)(i)(y) on any
Date of Processing shall be paid to the Trust only
if the Issuer's Interest on such Date of Processing
is greater than the Series Required Issuer Amount
(after giving effect to all Principal Receivables
transferred to the Trust on such day) and otherwise
shall be deposited in the Excess Funding Account to
the extent of the difference between the Issuer's
Interest and the Series Required Issuer Amount.
(ii) Daily Allocations During an Amortization Period
or Partial Amortization Period. During an Amortization Period
or any Partial Amortization Period, the Servicer shall, prior
to the close of business on any Date of Processing, allocate
the following amounts as set forth below:
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<PAGE> 18
(x) Allocate to the Investor Noteholders and
retain in the Collection Account an amount equal to
the product of (A) the Floating Allocation
Percentage on such Date of Processing and (B) the
aggregate amount of Collections of Finance Charges
on such Date of Processing.
(y) Allocate to the Investor Noteholders and
retain in the Collection Account an amount equal to
the product of (A) the Principal Allocation
Percentage on such Date of Processing and (B) the
aggregate amount of Collections of Principal
Receivables on such Date of Processing; provided,
however, that (I) during a Partial Amortization
Period so long as the Amortization Date has not
occurred, after the date on which an amount of such
Collections equal to the sum of the Partial
Amortization Amount plus the Class B Special
Reduction Amount (if any) has been deposited into
the Collection Account and allocated to the Investor
Noteholders and any requirements of Section 4.08 are
satisfied, and (II) from and after the Amortization
Date, after the date on which an amount of such
Collections equal to the Series Invested Amount has
been deposited into the Collection Account and
allocated to the Investor Noteholders and any
requirements of Section 4.08 are satisfied, the
amount determined in accordance with this subsection
4.02(c)(ii)(y) shall be first, if any other
Principal Sharing Series is outstanding and in its
Accumulation Period or Amortization Period, retained
in the Collection Account for application, to the
extent necessary, as Shared Principal Collections on
the related Payment Date, and, second, shall be paid
to the Trust only if the Issuer's Interest on such
Date of Processing is greater than the Series
Required Issuer Amount (after giving effect to all
Principal Receivables transferred to the Trust on
such day) and otherwise shall be deposited in the
Excess Funding Account to the extent of the
difference between the Issuer's Interest and the
Series Required Issuer Amount.
(d) Notwithstanding anything to the contrary in this Section
4.02, if on any date the aggregate amount of Principal Receivables is
less than the Required Minimum Principal Balance, all Collections of
Principal Receivables on such date shall, unless such Collections are
to be retained in the Collection Account, be deposited in the Excess
Funding Account in a sufficient amount such that, after giving effect
to such deposits, the aggregate amount of Principal Receivables plus
the amount so deposited equals or exceeds the Required Minimum
Principal Balance on such date.
The allocations to be made pursuant to this Section 4.02 also apply to
deposits into the Collection Account that are treated as Collections, including
adjustment payments made in accordance with Section 2.06 of the Purchase and
Servicing Agreement, payment of the reassignment price pursuant to Section 2.05
or subsection 6.10(c) of the Purchase and Servicing Agreement and proceeds from
the sale, disposition or liquidation of the Receivables pursuant to
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Sections 9.02 of the Indenture. Such deposits to be treated as Collections will
be allocated as Finance Charges or Principal Receivables as provided in the
Purchase and Servicing Agreement.
Section 4.03. Determination of Monthly Interest for the Series 1999-A
Notes.
(a) The amount of monthly interest allocable to the Class A
Notes with respect to any Interest Accrual Period shall be the Class A
Monthly Interest.
(b) On the Determination Date preceding each Payment Date,
the Servicer shall determine an amount (the "Class A Interest
Shortfall") equal to the excess, if any, of (x) the Class A Monthly
Interest for the Interest Accrual Period applicable to the Payment
Date over (y) the amount available to be paid to the Class A
Noteholders in respect of interest on such Payment Date. If there is a
Class A Interest Shortfall with respect to any Payment Date, an
additional amount ("Class A Additional Interest") shall be payable as
provided herein with respect to the Class A Notes on each Payment Date
following such Payment Date, to and including the Payment Date on
which such Class A Interest Shortfall is paid to Class A Noteholders,
at the applicable rate or rates specified in the Class A Purchase
Agreement. Notwithstanding anything to the contrary herein, Class A
Additional Interest shall be payable or distributed to Class A
Noteholders only to the extent permitted by applicable law.
Section 4.04. Determination of Principal Amounts.
(a) No later than 1:00 p.m. (New York City time) on the Legal
Final Maturity Date, the Issuer shall deposit funds into the
Collection Account in the amounts required to pay to the Series 1999-A
Noteholders the Series Invested Amount in accordance with Section
5.01.
(b) The amount of principal (the "Class A Principal") to be
deposited into the Collection Account with respect to the Class A
Notes on each Payment Date with respect to an Amortization Period
shall be equal to an amount calculated by the Servicer as follows: the
sum of (i) an amount equal to the product of the Principal Allocation
Percentage and the aggregate amount of Collections of Principal
Receivables with respect to the preceding Settlement Period, (ii) any
amount on deposit in the Excess Funding Account allocated to the Class
A Notes pursuant to subsection 4.06(d) with respect to the preceding
Settlement Period, (iii) the amount, if any, allocated to the Class A
Notes pursuant to subsections 4.06(a)(v), (vi) and (vii), and (iv) the
amount of Shared Principal Collections allocated to the Class A Notes
with respect to the preceding Settlement Period pursuant to Section
4.05 of the Indenture; provided, however, that (i) with respect to any
Payment Date, Class A Principal shall not exceed the Class A Invested
Amount and (ii) with respect to the Legal Final Maturity Date, the
Class A Principal shall be an amount equal to the Class A Invested
Amount.
(c) The amount of principal (the "Class B Principal") to be
deposited into the Collection Account with respect to the Class B
Notes on each Payment Date with respect to an Amortization Period
shall equal an amount calculated by the Servicer as follows: the sum
of (i) an amount equal to the product of the Class B
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<PAGE> 20
Principal Allocation Percentage and the aggregate amount of
Collections of Principal Receivables with respect to the preceding
Settlement Period, (ii) any amount on deposit in the Excess Funding
Account allocated to the Class B Notes pursuant to subsection 4.06(d)
with respect to the preceding Settlement Period, (iii) the amount, if
any, allocated to the Class B Notes pursuant to subsections
4.06(a)(xi), (xii) and (xiii) with respect to such Payment Date, and
(iv) the amount of Shared Principal Collections allocated to the Class
B Notes with respect to the preceding Settlement Period pursuant to
Section 4.05 of the Indenture on and after the date on which the Class
A Invested Amount is paid in full; provided, however, that (i) prior
to the date on which the Class A Invested Amount is paid in full, the
Class B Principal shall equal zero, (ii) with respect to any Payment
Date, Class B Principal shall not exceed the Class B Invested Amount
and (iii) with respect to the Legal Final Maturity Date, the Class B
Principal shall be an amount equal to the Class B Invested Amount.
(d) The amount of principal (the "Class A Partial
Amortization Principal") to be deposited into the Collection Account
with respect to the Class A Notes on each Payment Date with respect to
a Partial Amortization Period shall be equal to the lesser of (i) the
Partial Amortization Amount for such Partial Amortization Period, and
(ii) an amount calculated by the Servicer as follows: the sum of (A)
an amount equal to the product of the Principal Allocation Percentage
and the aggregate amount of Collections of Principal Receivables with
respect to the preceding Settlement Period, (B) any amount on deposit
in the Excess Funding Account allocated to the Class A Notes pursuant
to subsection 4.06(d) with respect to the preceding Settlement Period,
(C) the amount, if any, allocated to the Class A Notes pursuant to
subsections 4.06(a)(v), (vi) and (vii), and (D) the amount of Shared
Principal Collections allocated to the Class A Notes with respect to
the preceding Settlement Period pursuant to Section 4.05 of the
Indenture, over (B) the Class B Special Reduction Amount (if any);
provided, however, that with respect to any Payment Date, the Class A
Partial Amortization Principal shall not exceed the Class A Invested
Amount.
(e) The amount of principal (the "Class B Partial
Amortization Principal") to be deposited into the Collection Account
with respect to the Class B Notes on each Payment Date with respect to
a Partial Amortization Period shall be equal to the lesser of (i) the
Class B Special Reduction Amount, if any, for such Partial
Amortization Period, and (ii) an amount calculated as follows: the sum
of (A) an amount equal to the product of the Class B Principal
Allocation Percentage and the aggregate amount of Collections of
Principal Receivables with respect to the preceding Settlement Period,
(B) any amount on deposit in the Excess Funding Account allocated to
the Class B Notes pursuant to subsection 4.06(d) with respect to the
preceding Settlement Period, (C) the amount, if any, allocated to the
Class B Notes pursuant to subsections 4.06(a)(xi), (xii) and (xiii),
and (D) the amount of Shared Principal Collections allocated to the
Class B Notes with respect to the preceding Settlement Period pursuant
to Section 4.05 of the Indenture; provided, however, that with respect
to any Payment Date, the Class B Partial Amortization Principal shall
not exceed the Class B Invested Amount.
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Section 4.05. Shared Principal Collections. Shared Principal
Collections allocated to the Series 1999-A Notes and to be applied pursuant to
subsections 4.04(b), (c) and (d) shall mean an amount equal to the product of
(x) Shared Principal Collections for all Series for such date and (y) a
fraction, the numerator of which is the Principal Shortfall for the Series
1999-A Notes for such date (determined after giving effect to reduction of the
Invested Amount otherwise occurring on such date) and the denominator of which
is the aggregate amount of Principal Shortfalls for all Series for such date.
For any Payment Date with respect to any Revolving Period, Shared Principal
Collections allocated to the Series 1999-A Notes shall be zero.
Section 4.06. Application of Funds on Deposit in the Collection
Account for the Notes.
(a) On each Payment Date, the Servicer shall instruct the
Indenture Trustee to withdraw, and the Indenture Trustee, acting in
accordance with such instructions, shall withdraw, to the extent of
the Floating Allocation Percentage of Collections of Finance Charges
available in the Collection Account with respect to the preceding
Settlement Period (the "Available Series 1999-A Finance Charge
Collections"), in the following priority:
(i) Class A Interest. An amount equal to the lesser
of (x) the Available Series 1999-A Finance Charge Collections
and (y) the sum of Class A Interest and Carryover Class A
Interest shall be paid to the Class A Noteholders in
accordance with Section 5.01.
(ii) Senior Class A Increased Costs. To the extent
of any Available Series 1999-A Finance Charge Collections
remaining after giving effect to the withdrawal pursuant to
subsection 4.06(a)(i), an amount equal to the lesser of (x)
any such remaining Available Series 1999-A Finance Charge
Collections and (y) the Class A Increased Costs shall be paid
to the applicable Agents for the account of the parties under
the Class A Purchase Agreement to which such Class A
Increased Costs are payable; provided, the amount determined
pursuant to this subsection 4.06(a)(ii) shall not exceed
one-twelfth of the product of (x) 0.50% and (y) the Weighted
Average Class A Invested Amount for such Settlement Period.
(iii) Indenture Trustee Fee. To the extent of any
Available Series 1999-A Finance Charge Collections remaining
after giving effect to the withdrawals pursuant to
subsections 4.06(a)(i) and (ii), an amount equal to the
lesser of (x) any such remaining Available Series 1999-A
Finance Charge Collections and (y) the excess of (i) the
Indenture Trustee Fee, if any, for such Settlement Period
plus any unpaid portion of the Indenture Trustee Fee from
prior Settlement Periods over (ii) any amounts with respect
thereto previously distributed to the Indenture Trustee
during such Settlement Period shall be paid to the Indenture
Trustee; provided that the aggregate amount determined
pursuant to this subsection 4.06(a)(iii) for any calendar
year shall not exceed $20,000.
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(iv) Servicing Fee. On each Payment Date on which
JNB or an Affiliate of JNB is not the Servicer, to the extent
of any Available Series 1999-A Finance Charge Collections
remaining after giving effect to the withdrawals pursuant to
subsections 4.06(a)(i) and (iii), an amount equal to the
lesser of (x) any such remaining Available Series 1999-A
Finance Charge Collections and (y) the excess of (i) the
Monthly Servicing Fee for such Settlement Period plus any
unpaid Monthly Servicing Fees from prior Settlement Periods
over (ii) any amounts with respect thereto previously
distributed to the Servicer during such Settlement Period
shall be paid to the Servicer.
(v) Class A Investor Defaulted Amount Shortfalls. To
the extent of any Available Series 1999-A Finance Charge
Collections remaining after giving effect to the withdrawals
pursuant to subsections 4.06(a)(i) through (iv), an amount
equal to the lesser of (x) any such remaining Available
Series 1999-A Finance Charge Collections and (y) the
aggregate Class A Investor Defaulted Amount Shortfall for
such Settlement Period, shall be treated as Shared Principal
Collections and applied in accordance with Section 4.05 of
the Indenture and Section 4.05 of this Supplement.
(vi) Class A Adjustment Payment Shortfalls. To the
extent of any Available Series 1999-A Finance Charge
Collections remaining after giving effect to the withdrawals
pursuant to subsections 4.06(a)(i) through (v), an amount
equal to the lesser of (x) any such remaining Available
Series 1999-A Finance Charge Collections and (y) the Class A
Adjustment Payment Shortfall for such Settlement Period,
shall be treated as Shared Principal Collections and applied
in accordance with Section 4.05 of the Indenture and Section
4.05 of this Supplement.
(vii) Reimbursement of Class A Investor Charge-Offs.
To the extent of any Available Series 1999-A Finance Charge
Collections remaining after giving effect to the withdrawals
pursuant to subsections 4.06(a)(i) through (vi), an amount
equal to the lesser of (x) any such remaining Available
Series 1999-A Finance Charge Collections and (y) the
unreimbursed Class A Investor Charge-Offs, if any, will be
applied to reimburse Class A Investor Charge-Offs and shall
be treated as Shared Principal Collections and applied in
accordance with Section 4.05 of the Indenture and Section
4.05 of this Supplement.
(viii) Reserve Account. To the extent of any
Available Series 1999-A Finance Charge Collections remaining
after giving effect to the withdrawals pursuant to
subsections 4.06(a)(i) and (vii), an amount equal to the
lesser of (x) any such remaining Available Series 1999-A
Finance Charge Collections and (y) the excess, if any, of (i)
the Reserve Account Required Balance over (ii) the amount on
deposit in the Reserve Account.
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(ix) Remaining Class A Increased Costs. To the
extent of any Available Series 1999-A Finance Charge
Collections remaining after giving effect to the withdrawals
pursuant to subsection 4.06(a)(i) through (viii), an amount
equal to the lesser of (x) any such remaining Available
Series 1999-A Finance Charge Collections and (y) any Class A
Increased Costs remaining unpaid shall be paid to the
applicable Agents for the account of the parties under the
Class A Purchase Agreement to which such Class A Increased
Costs are payable.
(x) Unpaid Class B Interest. To the extent of any
Available Series 1999-A Finance Charge Collections remaining
after giving effect to the withdrawals pursuant to
subsections 4.06(a)(i) through (ix), an amount equal to the
lesser of (x) any such remaining Available Series 1999-A
Finance Charge Collections and (y) the sum of (1) the amount
of interest which has accrued with respect to the outstanding
aggregate principal amount of the Class B Notes at the Class
B Interest Rate but which has not been paid to the Class B
Noteholders and (2) any Class B Additional Interest shall be
paid to the Class B Noteholders in accordance with Section
5.01.
(xi) Class B Investor Defaulted Amount Shortfalls.
To the extent of any Available Series 1999-A Finance Charge
Collections remaining after giving effect to the withdrawals
pursuant to subsections 4.06(a)(i) through (x), an amount
equal to the lesser of (x) any such remaining Available
Series 1999-A Finance Charge Collections and (y) the Class B
Investor Defaulted Amount Shortfall for such Settlement
Period, shall be treated as Shared Principal Collections and
applied in accordance with Section 4.05 of the Indenture and
Section 4.05 of this Supplement.
(xii) Class B Adjustment Payment Shortfalls. To the
extent of any Available Series 1999-1 Finance Charge
Collections remaining after giving effect to the withdrawals
pursuant to subsections 4.06(a)(i) through (xi), an amount
equal to the lesser of (x) any such remaining Available
Series 1999-1 Finance Charge Collections and (y) the Class B
Adjustment Payment Shortfall for such Settlement Period,
shall be treated as Shared Principal Collections and applied
in accordance with Section 4.05 of the Indenture and Section
4.05 of this Supplement.
(xiii) Reimbursement of Class B Investor
Charge-Offs. To the extent of any Available Series 1999-A
Finance Charge Collections remaining after giving effect to
the withdrawals pursuant to subsections 4.06(a)(i) through
(xii), an amount equal to the lesser of (x) any such
remaining Available Series 1999-A Finance Charge Collections
and (y) the unreimbursed amount by which the Class B Invested
Amount has been reduced on prior Payment Dates pursuant to
clauses (c) and (d) of the definition of Class B Invested
Amount, if any, shall be treated as Shared
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Principal Collections and applied in accordance with Section
4.05 of the Indenture and Section 4.05 of this Supplement.
(xiv) Servicing Fee. On each Payment Date on which
JNB or an Affiliate of JNB is the Servicer, to the extent of
Available Series 1999-A Finance Charge Collections for such
Payment Date (after giving effect to the withdrawals pursuant
to subsections 4.06(a)(i) through (xiii)), the Servicing Fee
accrued since the preceding Payment Date plus any Servicing
Fee due with respect to any prior Payment Date but not
distributed to the Servicer shall be paid to the Servicer.
(xv) Excess Finance Charge Collections. Any
Available Series 1999-A Finance Charge Collections remaining
after giving effect to the withdrawals pursuant to subsection
4.06(a)(i) through (xiv), shall be treated as Excess Finance
Charge Collections, and the Servicer shall direct the
Indenture Trustee in writing on each Payment Date to withdraw
such amounts from the Collection Account and to first make
such amounts available to pay to Noteholders of other Series
to the extent of shortfalls, if any, in amounts payable to
such Noteholders from Collections of Finance Charges
allocated to such other Series, and then pay any remaining
Excess Finance Charge Collections to the Issuer.
(b) For each Payment Date with respect to a Revolving Period,
the product of (i) the Floating Allocation Percentage and (ii)
Collections of Principal Receivables with respect to such Payment Date
(subtracting from such product the amount of Reallocated Class B
Principal Collections on such Payment Date) will be treated as Shared
Principal Collections and applied, for such Payment Date, as provided
in Section 4.05 of the Indenture.
(c) For each Payment Date during an Amortization Period, the
Indenture Trustee, acting pursuant to the Servicer's instructions,
will distribute the amount of funds on deposit in the Collection
Account available for payment of principal to Series 1999-A
Noteholders in accordance with Section 4.04 in the following priority:
(i) to the Class A Noteholders, an amount equal to
Class A Principal, subject to the proviso in subsection
4.04(b);
(ii) to the Class B Noteholders, on and after the
Class A Invested Amount has been reduced to zero, an amount
equal to Class B Principal, subject to the proviso in
subsection 4.04(c);
(iii) an amount equal to the excess, if any, of (A)
the sum of the amounts described in subsections 4.04(b)(i)
and (iii) and 4.04(c)(i) and (iii) over (B) the sum of Class
A Principal and Class B Principal shall be treated as Shared
Principal Collections and applied as provided in Section 4.05
of the Indenture.
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(d) On the first Payment Date of an Amortization Period,
funds on deposit in the Excess Funding Account allocable to Series
1999-A will be deposited in the Collection Account. Such amounts will
be allocated in the following order of priority:
(i) to the Class A Noteholders an amount equal to
Class A Principal, subject to the proviso in subsection
4.04(b); and
(ii) to the Class B Noteholders, on and after the
Class A Invested Amount has been reduced to zero, an amount
equal to Class B Principal, subject to the proviso in
subsection 4.04(c).
(e) On each Payment Date during a Partial Amortization
Period, the Indenture Trustee, acting pursuant to the Servicer's
instructions, will distribute the amount of funds on deposit in the
Collection Account available for the payment of principal to the
Series 1999-A Noteholders in accordance with Section 4.04 in the
following priority:
(i) to the Class A Noteholders, an amount equal to
Class A Partial Amortization Principal, subject to the
proviso in subsection 4.04(b); and
(ii) to the Class B Noteholders, an amount equal to
Class B Partial Amortization Principal, subject to the
proviso in subsection 4.04(c); and
(iii) an amount equal to the excess, if any, of (A)
the sum of (x) the Principal Allocation Percentage and the
aggregate amount of Collections of Principal Receivables with
respect to the preceding Settlement Period, plus (y) the
amount, if any, allocated to the Series 1999-A Notes pursuant
to subsections 4.06(a)(v), (vi), (vii), (viii), (xi), (xii),
and (xiii), over (B) the sum of Class A Partial Amortization
Principal and Class B Partial Amortization Principal shall be
treated as Shared Principal Collections and applied as
provided in Section 4.05 of the Indenture.
Section 4.07. Coverage of Required Amount for the Series 1999-A Notes.
To the extent that on any Payment Date payments are being made pursuant to any
of subsections 4.06(a)(i) through (xiv), respectively, and the full amount to
be paid pursuant to any such subsection on such Payment Date is not paid in
full on such Payment Date, the Servicer shall apply all or a portion of the
Excess Finance Charge Collections from other Series with respect to such
Payment Date allocable to the Series 1999-A Notes in an amount equal to the
excess of the full amount to be allocated or paid pursuant to the applicable
subsection over the amount applied with respect thereto from Available Series
1999-A Finance Charge Collections on such Payment Date (the "Required Amount").
Excess Finance Charge Collections allocated to the Series 1999-A Notes for any
Payment Date shall mean an amount equal to the product of (x) Excess Finance
Charge Collections available from all other Series for such Payment Date and
(y) a fraction, the numerator of which is the Required Amount for such Payment
Date and the denominator of
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which is the aggregate amount of shortfalls in required amounts or other
amounts to be paid from Collections of Finance Charges for all Series for such
Payment Date.
Section 4.08. Reallocated Principal Collections for the Series 1999-A
Notes On each Payment Date, the Servicer will apply or cause the Indenture
Trustee to apply an amount equal to the lesser of (i) the Class B Invested
Amount, (ii) the product of (x)(I) during a Revolving Period, the Class B
Floating Allocation Percentage or (II) during an Amortization Period or Partial
Amortization Period, the Class B Principal Allocation Percentage and (y) the
amount of Collections of Principal Receivables with respect to such Payment
Date and (iii) an amount equal to the Class A Required Amount for such Payment
Date (such amount called "Reallocated Class B Principal Collections") in the
same priority as amounts are applied to such components from Available Series
1999-A Finance Charge Collections pursuant to subsection 4.06(a).
Section 4.09. Investor Charge-Offs.
(a) If, on any Determination Date, the aggregate Investor
Defaulted Amount Shortfall plus the aggregate Investor Adjustment
Payment Shortfall for the related Settlement Period exceeded the
Available Series 1999-A Finance Charge Collections applied to the
payment thereof pursuant to subsections 4.06(a)(v), (vi), (xi), and
(xii) and the amount of Excess Finance Charge Collections allocated
thereto pursuant to Section 4.07, and the amount of Reallocated
Principal Collections applied with respect thereto pursuant to Section
4.08(a), the Class B Invested Amount will be reduced by the amount by
which the remaining aggregate Investor Defaulted Amount Shortfall plus
the aggregate Investor Adjustment Payment Shortfall for the related
Settlement Period exceed the amount applied with respect thereto
during such preceding Settlement Period (a "Class B Investor
Charge-Off").
(b) In the event that any such reduction of the Class B
Invested Amount would cause the Class B Invested Amount to be a
negative number, the Class B Invested Amount will be reduced to zero,
and, the Class A Invested Amount will be reduced by the amount by
which the Class B Invested Amount would have been reduced below zero,
but not more than the remaining aggregate Investor Defaulted Amount
Shortfall plus the aggregate Investor Adjustment Payment Shortfall for
the related Settlement Period (a "Class A Investor Charge-Off").
Section 4.10. Discount Option Percentage. The Issuer may increase,
reduce or withdraw the Discount Percentage applicable to Receivables arising
after the date of such change, at any time and from time to time. Any such
increase, reduction or withdrawal shall become effective on the date designated
therein only if:
(a) the Issuer shall have delivered to the Indenture Trustee
an Officer's Certificate of the Issuer stating that the Issuer
reasonably believes that such increase, reduction or withdrawal will
not, based on the facts at the time of such certification, cause an
Early Amortization Event or any event that, after the giving of notice
or the lapse of time, would constitute an Early Amortization Event
with respect to any Series;
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(b) if such designation would cause the Discount Percentage
to be less than 6% or more than 8%, the Rating Agency Condition shall
have been satisfied; and
(c) with respect to any reduction of the Discount Option
Percentage, the Issuer shall have delivered to the Indenture Trustee
an Officer's Certificate stating that the Issuer reasonably believes
that such reduction of the Discount Option Percentage will not, based
on the facts known to such officer at the time of such certification,
cause the Servicing Fee to exceed Available Series 1999-A Finance
Charge Collections allocable to the Servicing Fee.
Section 4.11. Establishment of Reserve Account . Within five Business
Days following the occurrence of a Reserve Account Funding Event, the Issuer,
for the benefit of the Series 1999-A Noteholders, shall establish and maintain
with the Indenture Trustee or its nominee in the name of the Indenture Trustee,
on behalf of the Trust, a Qualified Account (including any subaccount thereof)
bearing a designation clearly indicating that the funds and other property
credited thereto are held for the benefit of the Series 1999-A Noteholders (the
"Reserve Account"). The Reserve Account shall consist of two segregated
subaccounts: (a) the "Reserve Account Securities Subaccount" to which financial
assets credited to the Reserve Account shall be credited, and as to which
financial assets the Securities Intermediary undertakes to treat the Indenture
Trustee as entitled to exercise the rights that comprise such financial assets;
and (b) the "Reserve Account Cash Subaccount" to which money or instruments
deposited in the Reserve Account shall be credited. The Indenture Trustee shall
possess all right, title and interest in all monies, instruments, securities,
documents, certificates of deposit and other property credited from time to
time to the Reserve Account and in all proceeds, earnings, income, revenue,
dividends and distributions thereof for the benefit of the Series 1999-A
Noteholders to the extent of any amounts owing with respect to the Series
1999-A Notes.
The Reserve Account shall be under the sole dominion and control of
the Indenture Trustee for the benefit of the Series 1999-A Noteholders to the
extent of any amounts owing with respect to the Series 1999-A Notes. Except as
expressly provided in this Supplement, the Servicer agrees that it shall have
no right of setoff or banker's lien against, and no right to otherwise deduct
from, any funds held in the Reserve Account for any amount owed to it by the
Indenture Trustee, the Trust, or any Series 1999-A Noteholder. If, at any time,
the Reserve Account ceases to be a Qualified Account, the Indenture Trustee (or
the Servicer on its behalf) shall within 10 Business Days (or such longer
period, not to exceed 30 calendar days, as to which each Rating Agency may
consent) of its obtaining actual knowledge that the Reserve Account is no
longer a Qualified Account establish a new Reserve Account meeting the
conditions specified above, transfer any monies, documents, instruments,
securities, security entitlements, certificates of deposit and other property
to such new Reserve Account and from the date such new Reserve Account is
established, it shall be the "Reserve Account."
Funds on deposit in the Reserve Account shall at the written direction
of the Servicer be invested by the Indenture Trustee or its nominee (including
the Securities Intermediary) in Eligible Investments selected by the Servicer.
All such Eligible Investments shall be held by the Indenture Trustee for the
benefit of the Series 1999-A Noteholders. The Indenture Trustee shall cause
each Eligible Investment to be delivered to it or its nominee to the extent of
any amounts owing with respect to the Series 1999-A Notes (including the
Securities
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Intermediary) and will be credited to the Reserve Account Securities Subaccount
maintained by the Indenture Trustee with the Securities Intermediary. Funds in
the Reserve Account shall be invested in Eligible Investments that will mature
so that such funds will be available no later than the close of business on
each monthly Transfer Date following such Settlement Period in amounts
sufficient, to the extent of such funds, to make the required distributions on
the following Payment Date. No such Eligible Investment shall be disposed of
prior to its maturity; provided, however, that the Indenture Trustee may sell,
liquidate or dispose of any such Eligible Investment before its maturity, at
the written direction of the Servicer, if such sale, liquidation or disposal
would not result in a loss of all or part of the principal portion of such
Eligible Investment or if, prior to the maturity of such Eligible Investment, a
default occurs in the payment of principal, interest or any other amount with
respect to such Eligible Investment. Unless directed by the Servicer in
writing, funds deposited in the Reserve Account on a Transfer Date with respect
to the immediately succeeding Payment Date shall not be required to be invested
overnight. The Indenture Trustee shall bear no responsibility or liability for
any losses resulting from investment or reinvestment of any funds in accordance
with this Section 4.11 nor for the selection of Eligible Investments in
accordance with the provisions of this Supplement except to the extent of any
gross negligence or willful misconduct of the Indenture Trustee.
On each Determination Date, the Servicer shall direct the Indenture
Trustee to withdraw from the Reserve Account and apply and, in accordance with
such directions, the Indenture Trustee on the related Payment Date shall
withdraw from the Reserve Account and apply, an amount equal to the lesser of
(a) amounts then on deposit in the Reserve Account and (b) the amount
determined by the Servicer equal to the excess, if any, of (x) the sum of (i)
Class A Interest for the related Settlement Period, (ii) any Carryover Class A
Interest, (iii) Senior Class A Increased Costs for the related Settlement
Period and any Senior Class A Increased Costs previously due but not paid to
the Class A Noteholders or the Agents on a prior Payment Date, (iv) the
Indenture Trustee Fee for the related Settlement Period, (v) if JNB or an
Affiliate of JNB is no longer the Servicer, the Class A Servicing Fee for the
related Settlement Period, (vi) the Class A Investor Defaulted Amount and (vii)
the Class A Adjustment Payment Shortfall, over (y) the Available Series 1999-A
Finance Charge Collections plus any Excess Finance Charge Collections from
other Series allocable to Series 1999-A (less, in each case, amounts allocated
as Shared Principal Collections pursuant to subsection 4.06(a)(v) or
4.06(a)(vi)), in the same priority as amounts are applied to such components
from Available Series 1999-A Finance Charge Collections pursuant to subsection
4.06(a). In addition, on each Determination Date with respect to a Payment Date
prior to the Early Amortization Commencement Date, the Servicer shall direct
the Indenture Trustee to withdraw from the Reserve Account and apply and, in
accordance with such directions, the Indenture Trustee on the related Payment
Date shall withdraw from the Reserve Account and apply, an amount equal to the
excess, if any, of (i) the amount remaining on deposit in the Reserve Account
after giving effect to withdrawals therefrom pursuant to the preceding sentence
on such Payment Date, over (ii) the Reserve Account Required Balance.
[END OF ARTICLE IV]
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ARTICLE V
DISTRIBUTIONS AND REPORTS TO SERIES 1999-A INVESTOR
NOTEHOLDERS
Section 5.01. Distributions.
(a) On each Payment Date, the Indenture Trustee, at the
direction of the Servicer, shall distribute to each Class A Noteholder
of record on the related Record Date such Class A Noteholder's share,
as determined pursuant to the Class A Purchase Agreement, of the
amounts that are allocated and available on such Payment Date to pay
interest on the Class A Notes pursuant to this Supplement.
(b) On each Payment Date, the Indenture Trustee shall, at the
direction of the Servicer, distribute to each Class A Noteholder of
record on the related Record Date or to each Agent, such Class A
Noteholder's or such Agent's share, as determined pursuant to the
Class A Purchase Agreement, of the amounts that are allocated and
available on such Payment Date to pay Class A Increased Costs pursuant
to this Supplement.
(c) On each Payment Date during a Partial Amortization Period
until the Payment Date on which the aggregate amount paid pursuant to
this subsection 5.01(c) with respect to such Partial Amortization
Period shall have equaled the Partial Amortization Amount for such
Partial Amortization Period, the Indenture Trustee shall, at the
direction of the Servicer, distribute the amounts on deposit in the
Collection Account or otherwise held by the Indenture Trustee that are
allocated and available on such date to pay principal of the Class A
Notes pursuant to this Supplement up to a maximum amount on any such
date equal to the unpaid portion of such Partial Amortization Amount
on such date, to the Class A Noteholders of record on the related
Record Date which are entitled to receive such payments in accordance
with the Class A Purchase Agreement; provided that, if there has been
an optional redemption of the Series 1999-A Noteholders' Interest
pursuant to Section 7.01, the provisions of this subsection 5.01(c)
shall not apply to such Payment Date.
(d) On each Payment Date following the Amortization Date or
in respect of which there has been an optional redemption of the
Series 1999-1 Noteholders' Interest pursuant to Section 7.01, the
Indenture Trustee, at the direction of the Servicer, shall distribute
to each Class A Noteholder of record on the related Record Date the
amounts on deposit in the Collection Account and Excess Funding
Account or otherwise held by the Indenture Trustee that are allocated
and available on such date to pay principal of the Class A Notes
pursuant to this Supplement up to a maximum amount on any such date
equal to the Class A Invested Amount on such date (unless there has
been an optional redemption of the Series 1999-A Noteholders' Interest
pursuant to Section 7.01, in which event the foregoing limitation will
not apply).
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(e) On each Payment Date, the Indenture Trustee shall, at the
direction of the Servicer, distribute to each Class B Noteholder of
record on the related Record Date such Class B Noteholder's pro rata
share of the amounts that are allocated and available on such Payment
Date to pay interest on the Class B Notes pursuant to this Supplement.
(f) On each Payment Date during a Partial Amortization Period
as to which there is a Class B Special Reduction Amount until the
Payment Date on which the aggregate amount paid pursuant to this
subsection 5.01(f) with respect to such Partial Amortization Period
equals the Class B Special Reduction Amount, the Indenture Trustee, at
the direction of the Servicer, shall distribute to the Class B
Noteholder of record on the related Record Date the amounts on deposit
in the Collection Account or otherwise held by the Indenture Trustee
that are allocated and available on such date to pay principal of the
Class B Notes pursuant to this Supplement up to a maximum amount on
any such date equal to the unpaid portion of such Class B Special
Reduction Amount on such date; provided that, if there has been an
optional redemption of the Series 1999-A Noteholders' Interest
pursuant to Section 7.01, the provisions of this subsection 5.01(f)
shall not apply to such Payment Date.
(g) On each Payment Date (i) which follows the Amortization
Date or in respect of which there has been an optional redemption of
the Series 1999-A Noteholders' Interest pursuant to Section 7.01 and
(ii) prior to which the Class A Invested Amount was paid in full, the
Indenture Trustee shall, at the direction of the Servicer, distribute
to each Class B Noteholder of record on the related Record Date the
amounts on deposit in the Collection Account and Excess Funding
Account or otherwise held by the Indenture Trustee that are allocated
and available on such date to pay principal of the Class B Notes
pursuant to this Supplement up to a maximum amount on any such date
equal to the Class B Invested Amount on such date (unless there has
been an optional redemption of the Series 1999-A Noteholders' Interest
pursuant to Section 7.01, in which event the foregoing limitation will
not apply).
(h) The distributions to be made pursuant to this Section
5.01 are subject to the provisions of Section 10.03 of the Indenture
and Section 8.01.
(i) The Servicer shall direct that distributions to Class A
Noteholders or the Agents hereunder shall be made as provided in the
Class A Purchase Agreement. Distributions to Class B Noteholders
hereunder shall be made by check mailed to each Class B Noteholder at
such Class B Noteholder's address appearing in the Note Register
without presentation or surrender of any Class B Note or the making of
any notation thereon or as otherwise agreed between the Indenture
Trustee and such Class B Noteholder.
Section 5.02. Reports and Statements to Series 1999-A Noteholders.
(a) On each Payment Date, the Indenture Trustee shall forward
to each Class A Noteholder and each Class B Noteholder, a statement
substantially in the form of Exhibit B prepared by the Servicer.
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(b) Not later than each Determination Date, the Servicer
shall deliver to the Indenture Trustee and each Rating Agency (i)
statements substantially in the form of Exhibit B prepared by the
Servicer and (ii) a certificate of a Servicing Officer substantially
in the form of Exhibit C.
(c) On or before January 31 of each calendar year, beginning
with calendar year 2000, the Indenture Trustee shall furnish or cause
to be furnished to each Person who at any time during the preceding
calendar year was a Series 1999-A Noteholder, a statement prepared by
the Servicer containing such information as is required to be provided
by an issuer of indebtedness under the Code with respect to such
calendar year; provided, however, that such information need not be
provided with respect to the Class B Notes prior to any transfer
thereof pursuant to Section 7.03(b). Such obligation of the Servicer
shall be deemed to have been satisfied to the extent that
substantially comparable information shall be provided by the
Indenture Trustee pursuant to any requirements of the Code as from
time to time in effect.
[END OF ARTICLE V]
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ARTICLE VI
EARLY AMORTIZATION EVENTS
Section 6.01. Series 1999-A Early Amortization Events. If any one of
the following events shall occur with respect to the Series 1999-A Notes:
(a) failure on the part of the Issuer (i) to make any payment
or deposit required to be made by the Issuer by the terms of the
Indenture or this Supplement, on or before the date occurring two
Business Days after the date such payment or deposit is required to be
made herein, (ii) to perform in all material respects the Issuer's
covenant not to sell, pledge, assign, or transfer to any person, or
grant any unpermitted lien on, any Purchased Receivable; or (iii) duly
to observe or perform in any material respect any covenants or
agreements of the Issuer set forth in the Indenture or this
Supplement, which failure has a material adverse effect on the Series
1999-A Noteholders or the Class A Noteholders 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, shall have
been given to the Issuer by the Indenture Trustee, or to the Issuer
and the Indenture Trustee by Series 1999-A Noteholders evidencing
undivided interests aggregating more than 40% of the Series Invested
Amount;
(b) any representation or warranty made by the Issuer in the
Purchase and Servicing Agreement, Indenture or this Supplement (i)
shall prove to have been incorrect in any material respect when made,
which continues to be incorrect in any material respect for a period
of 30 days after the date on which written notice of such failure,
requiring the same to be remedied, shall have been given to the Issuer
by the Indenture Trustee, or to the Issuer and the Indenture Trustee
by Series 1999-A Noteholders evidencing undivided interests
aggregating more than 40% of the Series Invested Amount and (ii) as a
result of which the interests of the Series 1999-A Noteholders or the
Class A Noteholders are materially and adversely affected; provided,
however, that a Series 1999-A Early Amortization Event pursuant to
this subsection 6.01(b) shall not be deemed to have occurred hereunder
if the Issuer has accepted reassignment of the related Receivable, or
all of such Receivables, if applicable, during such period in
accordance with the provisions of the Purchase and Servicing Agreement
or a purchase price adjustment has been made pursuant to Section 2.05
of the Purchase and Servicing Agreement during such period;
(c) failure on the part of the Servicer to make any payment
or deposit or to give any instruction relating to payments required to
be made by the Servicer by the terms of the Indenture, this Supplement
or the Purchase and Servicing Agreement, on or before the date
occurring two Business Days after the date such payment or deposit is
required to be made or such instruction is required to be given herein
or therein,
(d)(i) failure on the part of the Issuer, the Servicer or the
Seller duly to observe or perform in any material respect any of the
covenants set forth in
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subsections (k), (l), (m), (o) or (s) of Section 5.1 of the Class A
Purchase Agreement or subsection 5.02(a) of the Purchase and Servicing
Agreement, or (iii) failure on the part of the Issuer, the Servicer or
the Seller duly to observe or perform in any material respect any
other covenants or agreements of the Issuer, the Servicer or the
Seller set forth in the Class A Purchase Agreement or the Purchase and
Servicing Agreement, which failure has a material adverse effect on
the Series 1999-A Noteholders 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, shall have been given to
the Issuer, the Seller and the Servicer by Class A Noteholders holding
undivided interests aggregating more than 40% of the Class A Invested
Amount;
(e) any representation or warranty made by the Issuer, the
Servicer or the Seller in the Class A Purchase Agreement (i) shall
prove to have been incorrect in any material respect when made, which
continues to be incorrect in any material respect for a period of 30
days after the date on which written notice of such failure, requiring
the same to be remedied, shall have been given to the Issuer by Class
A Noteholders holding undivided interests aggregating more than 40% of
the Class A Invested Amount, and (ii) as a result of which the
interests of the Class A Noteholders are materially and adversely
affected;
(f) the average of the Portfolio Yields for any three
consecutive Settlement Periods is reduced to a rate which is less than
the average of the Base Rates for such three consecutive Settlement
Periods;
(g) any Servicer Default shall occur which would have a
material adverse effect on the Series 1999-A Noteholders or the Class
A Noteholders;
(h) the failure or inability of Z Del to transfer Receivables
to the Trust in accordance with the Purchase and Servicing Agreement;
(i) the Issuer Amount shall be less than the Required Issuer
Amount for a period of more than two consecutive Business Days; or
(j) the occurrence and continuation of any event of default
or other circumstance (and the expiration of any applicable grace
period with respect thereto), the result of which will permit the
acceleration of any outstanding indebtedness of Zale Corporation or
its consolidated subsidiaries in an amount greater than $10,000,000;
then, the Indenture Trustee shall, within five Business Days of obtaining
knowledge of such event, provide to the Series 1999-A Noteholders written
notification of such Early Amortization Event and in the case of any event
described in subparagraph (a), (b), (c), (d) or (e), after the applicable grace
period, if any, set forth in such subparagraphs, the Series 1999-A Noteholders
evidencing undivided interests aggregating more than 50% of the Series Invested
Amount by notice then given in writing to the Indenture Trustee, the Issuer and
the Servicer may declare that an early amortization event (a "Series 1999-A
Early Amortization Event") has occurred with respect to Series 1999-A as of the
date of such notice, and in the case of any event described in subparagraphs
(f) or (h), a Series 1999-A Early Amortization Event shall occur without any
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notice or other action on the part of the Indenture Trustee or the Series
1999-A Noteholders immediately upon the occurrence of such event.
[END OF ARTICLE VI]
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ARTICLE VII
OPTIONAL REDEMPTION; PARTIAL AMORTIZATION;
PRINCIPAL BALANCE INCREASES
Section 7.01. Optional Redemption. The Series 1999-A Notes shall be
subject to redemption in full by the Issuer at its option on any Payment Date
on or after July 13, 2000, upon notice delivered to the Indenture Trustee, the
Servicer and the Agents not later than 5:00 p.m. (New York City time) on the
second Business Day prior to the redemption date. The deposit required in
connection with any such redemption and final distribution shall be equal to
(i) the sum of the Class A Invested Amount and the Class B Invested Amount,
plus (ii) accrued and unpaid interest and (without duplication) Carryover
Interest on the Series 1999-A Notes through the day prior to the Payment Date
on which the final distribution occurs, plus (iii) all unpaid Class A Increased
Costs.
Section 7.02. Partial Amortization. A Partial Amortization Period
shall commence (i) subject to the terms and conditions of the Class A Purchase
Agreement, on any date specified by the Seller prior to the Amortization Date
at its election by notice given to each of the Indenture Trustee, the Issuer,
the Servicer, the Administrative Agent and each Agent not more than 30 days,
and not later than 5:00 p.m. (New York City time) on the second Business Day,
prior to such date, (ii) on the date on which any Partial Expiration Event
shall occur and (iii) on any date specified by the Seller prior to the
Amortization Date at its election by not less than five Business Days' prior
notice given to each of the Indenture Trustee, the Issuer, the Servicer, the
Administrative Agent and each Agent if, on or prior to such date the Class B
Special Reduction Date (if any) has occurred and the Class B Special Reduction
Amount exceeds zero; provided that the Seller may designate only one Partial
Amortization Period pursuant to this clause (iii). The Seller shall give notice
to each of the Indenture Trustee, the Servicer, the Administrative Agent and
each Agent on or before each date on which any Partial Expiration Event shall
occur (such notice and any notice given pursuant to clause (i) or clause (iii)
of the preceding sentence, a "Partial Amortization Notice"). Each Partial
Amortization Notice shall specify (A) the date on which the related Partial
Amortization Period commenced or will commence, (B) the Partial Amortization
Amount for such Partial Amortization Period, (C) the Class B Special Reduction
Amount, if any, and (D) whether a Partial Expiration Event shall have occurred
upon the commencement of such Partial Amortization Period. The "Partial
Amortization Amount" for a Partial Amortization Period shall be equal to the
amount by which the Class A Invested Amount is to be reduced in respect of such
Partial Amortization Period, as specified by the Issuer in the related Partial
Amortization Notice, which shall equal at least $5,000,000 and be an integral
multiple of $1,000,000; provided that if a Partial Expiration Event shall have
occurred, the Partial Amortization Amount shall at least equal the Class A
Mandatory Partial Amortization Amount specified in or pursuant to the Class A
Note Purchase Agreement in respect of such Partial Expiration Event. The Issuer
shall have the right from time to time to increase or decrease the Partial
Amortization Amount with respect to a Partial Amortization Period by giving at
least two Business Day's prior notice to the Indenture Trustee, the Servicer
and each Agent; provided that the Partial Amortization Amount shall not be
reduced below the applicable Class A Mandatory Partial Amortization Amount, if
any.
Section 7.03. Designation of Class B Note Terms; Sale of Class B
Notes. The Issuer may at any time, subject to the provisions of the Class A
Purchase Agreement, (i) sell or
34
<PAGE> 36
transfer all or a portion of the Class B Notes and (ii) in connection with any
such sale or transfer, enter into a supplemental agreement with the Indenture
Trustee pursuant to which the Issuer may amend the Class B Interest Rate, set
forth the amount of monthly interest due Class B Noteholders (the "Class B
Interest"), provide for the payment of additional amounts to the Class B
Noteholders (the "Class B Additional Interest") with respect to any shortfall
in such Class B Interest (the "Class B Interest Shortfall") and provide for
such other provisions with respect to the Class B Notes as may be specified in
each such supplemental agreement, provided that in each such case (A) the
Issuer shall have given notice to the Indenture Trustee, the Servicer and the
Rating Agencies of such proposed sale or transfer of the Class B Notes and each
such supplemental agreement at least five Business Days prior to the
consummation of each such sale or transfer and the execution of such proposed
supplemental agreement; (B) the Rating Agency Condition shall have been
satisfied; (C) no Early Amortization Event shall have occurred prior to the
consummation of such proposed sale or transfer of Class B Notes or the
execution of either such supplemental agreement; (D) the Issuer shall have
delivered an Officer's Certificate, dated the date of the consummation of
either such sale or transfer and the effectiveness of either such supplemental
agreement, to the effect that, in the reasonable belief of the Issuer, such
action will not, based on the facts at the time of such certification, cause an
Early Amortization Event to occur with respect to any Series, (E) the Issuer
will have delivered a Tax Opinion, dated the date of such certificate with
respect to such action; provided, further, as a condition to the sale or
transfer of all or a portion of the Class B Notes the transferee shall be
required to agree not to institute against, or join any other Person in
instituting against, the Issuer any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceeding, or other proceeding under any federal or
state bankruptcy or similar law, for one year and one day after all Investor
Notes are paid in full and (F) the Issuer shall have delivered to the Indenture
Trustee an Officer's Certificate and an Opinion of Counsel to the effect that
all conditions precedent to the execution of such supplemental agreement have
been complied with.
Section 7.04. Note Principal Balance Increases.
(a) Subject to the terms and conditions of the Indenture,
this Supplement and the Class A Purchase Agreement, the Seller may
from time to time request an increase on any Payment Date during the
Revolving Period in the outstanding principal balance of the Class A
Notes to an amount not exceeding the Class A Purchase Limit then in
effect, (any such increase being referred to herein as a "Class A Note
Principal Balance Increase").
(b) A request for a Class A Note Principal Balance Increase
shall be made by notice (an "Increase Notice") from the Seller to each
Agent, with a copy thereof concurrently delivered to the Servicer and
the Indenture Trustee, no later than 5:00 p.m. (New York City time) on
the fourth Business Day prior to the Payment Date on which such
increase is to occur (an "Increase Date"), which notice shall be
irrevocable unless waived in accordance with the Class A Purchase
Agreement. Any Increase Notice shall be substantially in the form of
Exhibit D, and shall specify (i) the aggregate amount of the requested
Class A Note Principal Balance Increase, which shall equal $5,000,000
or an integral multiple of $1,000,000 in excess of such amount, (ii)
the Purchaser Group or Purchaser Groups (as defined in the Class A
Purchase Agreement) which are requested to purchase such requested
Class A Note Principal Balance Increase, and the portion
35
<PAGE> 37
thereof requested from each such Purchaser Group, as determined by the
Issuer; provided that the portion of such Class A Note Principal
Balance Increase requested from any Purchaser Group shall equal
$5,000,000 or an integral multiple of $1,000,000 in excess of such
amount, (iii) the date on which such Class A Note Principal Balance
Increase is to occur (an "Increase Date"), which shall be the next
following Payment Date, and (iv) the payment instructions for
remittance of the proceeds of such requested Class A Note Principal
Balance Increase, in each case subject to the provisions of the Class
A Purchase Agreement.
(c) On the Increase Date for such Class A Note Principal
Balance Increase, after satisfaction of all conditions to such Class A
Note Principal Balance Increase herein and in the Class A Purchase
Agreement, the Class A Noteholders shall remit the amount of such
Class A Note Principal Balance Increase, to the extent it has
otherwise agreed or committed to fund such Class A Note Principal
Balance Increase, no later than 4:00 p.m. (New York City time) in
immediately available funds in accordance with the payment
instructions specified in the request with respect to such Class A
Note Principal Balance Increase, and upon such remittance the
aggregate outstanding principal balance of the Class A Notes shall be
increased by the amount of such remittance in respect of the Class A
Note Principal Balance Increase. Nothing in this Supplement or any
Series 1999-A Note shall be construed as constituting a commitment on
the part of the Series 1999-A Noteholders to fund any Note Principal
Balance Increase, except as otherwise set forth in, and subject to the
terms and conditions of, the Class A Purchase Agreement.
(d) Subject to the terms and conditions of the Indenture,
this Supplement, the Issuer may from time to time request an increase
on any Payment Date during the Revolving Period in the outstanding
principal balance of the Class B Notes (any such increase being
referred to herein as a "Class B Note Principal Balance Increase"). A
request for a Class B Note Principal Balance Increase shall be made by
notice from the Seller to the Issuer and the Indenture Trustee, with a
copy thereof concurrently delivered to the Servicer, the
Administrative Agent and each Agent, no later than 5:00 p.m. (New York
City time) on the Business Day prior to the Payment Date on which such
increase is to occur. Any Increase Notice shall specify the aggregate
amount of the requested Class B Note Principal Balance Increase and
the requested date thereof. On the requested date for such Class B
Note Principal Balance Increase, the Class B Noteholders may elect
(but shall not be obligated) to remit the amount of such Class B Note
Principal Balance Increase in immediately available funds as agreed
upon among the Issuer, the the Seller and the Indenture Trustee. It
shall be a condition to any Class B Note Principal Balance Increase
that the sum of the Class B Note Principal Balance Increase, plus the
amount of any Class A Note Principal Balance Increase to be purchased
on the date thereof, shall not exceed an amount equal to the excess of
the aggregate amount of Principal Receivables in the Trust over the
Required Minimum Principal Balance.
Section 7.05. Special Reduction of Class A Invested Amount.
36
<PAGE> 38
(a) The outstanding principal amount of Class A Notes may be
prepaid in whole or in part, without premium or penalty, but together
with accrued and unpaid interest on the principal amount prepaid, from
time to time during the Revolving Period at the option of the Trust
(each, a "Class A Special Reduction"), on any Business Day (a "Class A
Special Reduction Date") occurring not earlier than three Business
Days after the related Special Reduction Notice has been given in
accordance with this Section 7.05 from the proceeds of the issuance by
the Trust of one or more other Series of Notes. In the event of a
prepayment in part, the aggregate principal amount to be prepaid shall
be allocated pro rata in accordance with the outstanding principal
amount of each Class A Note. It shall be a condition to any Class A
Special Reduction that, after giving effect to the payments being made
on the applicable Class A Special Reduction Date by the Issuer
pursuant to Section 5.01 or by the Seller pursuant to the Class A
Purchase Agreement, (i) there shall be no Early Amortization Event,
Series 1999-A Early Amortization Event or Servicer Default, or the
occurrence of an event or condition which would be an Early
Amortization Event, Series 1999-A Early Amortization Event or Servicer
Default, and (ii) the Seller shall concurrently pay with such Special
Reduction any related amount payable pursuant to subsection 2.6(c) of
the Class A Purchase Agreement.
(b) The Issuer, at its expense, shall provide a written
notice thereof to the Indenture Trustee and each Agent not less than
three Business Days prior to the Class A Special Reduction Date (a
"Class A Special Reduction Notice"), which Special Reduction Notice
shall be irrevocable and shall specify the principal amount of Class A
Notes to be prepaid on the Class A Special Reduction Date (the "Class
A Special Reduction Amount").
(c) Not later than 10:00 a.m. (New York City time) on the
Class A Special Reduction Date, the Issuer shall deposit or cause to
be deposited with the Indenture Trustee, an amount of immediately
available funds equal to the Class A Special Reduction Amount, and the
Trustee shall distribute to each Class A Noteholder of record on the
related Record Date such Class A Noteholders' pro rata share thereof
as determined pursuant to subsection 7.05(a) above.
[END OF ARTICLE VII]
37
<PAGE> 39
ARTICLE VIII
FINAL DISTRIBUTION
Section 8.01. Sale of Receivables or Noteholders' Interest pursuant to
Section 2.05 of the Purchase and Servicing Agreement and Section 10.03 of the
Indenture.
(a) The amount to be paid by the Issuer or the Seller with
respect to Series 1999-A in connection with a purchase of the
Receivables pursuant to Section 6.10(c) of the Purchase and Servicing
Agreement shall equal the Reassignment Amount for the first Payment
Date following the Settlement Period in which the reassignment
obligation arises under the Purchase and Servicing Agreement.
(b) With respect to the Reassignment Amount deposited into
the Collection Account pursuant to this Section 8.01, the Issuer
shall, not later than 10:00 a.m., New York City time, on the related
Payment Date, make deposits or distributions of the following amounts
(in the priority set forth below and, in each case after giving effect
to any deposits and distributions otherwise to be made on such date)
in immediately available funds: (i) (x) the Class A Invested Amount on
such Payment Date will be distributed to the Indenture Trustee for
payment to the Class A Noteholders and (y) an amount equal to the sum
of (A) Class A Interest for such Payment Date, and (B) any Class A
Carryover Interest will be distributed to the Indenture Trustee for
payment to the Class A Noteholders, and (z) an amount equal to all
unpaid Class A Increased Costs will be distributed to the Indenture
Trustee for payment to the Class A Noteholders or the Agents, as
applicable, at the direction of the Servicer in accordance with the
Class A Purchase Agreement; (ii) (x) the Class B Invested Amount on
such Payment Date will be distributed to the Indenture Trustee for
payment to the Class B Noteholders and (y) an amount equal to the sum
of (A) Class B Interest for such Payment Date, and (B) any Class B
Carryover Interest will be distributed to the Indenture Trustee for
payment to the Class B Noteholders, and (iii) the balance, if any,
will be distributed to the Trust.
(c) Notwithstanding anything to the contrary in this
Supplement or the Agreement, all amounts distributed to the Indenture
Trustee pursuant to subsection 8.01(b) for payment to the Series
1999-A Noteholders shall be deemed distributed in full to the Series
1999-A Noteholders on the date on which such funds are distributed to
the Indenture Trustee pursuant to this Section and shall be deemed to
be a final distribution pursuant to Section 12.01 of the Indenture.
[END OF ARTICLE VIII]
38
<PAGE> 40
ARTICLE IX
MISCELLANEOUS PROVISIONS
Section 9.01. Delivery and Payment for the Series 1999-A Notes. The
Issuer shall execute and deliver the Series 1999-A Notes to the Indenture
Trustee for authentication in accordance with Section 2.03 of the Indenture.
The Indenture Trustee shall deliver the Series 1999-A Notes to or upon the
order of the Issuer when authenticated in accordance with Section 2.03 of the
Indenture.
Section 9.02. Legend on Series 1999-A Notes.
Each Series 1999-A Note will bear a legend substantially in the
following form:
THIS NOTE (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION
EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"). THIS NOTE 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.
Section 9.03. Ratification of Indenture. As supplemented by this
Supplement, the Indenture is in all respects ratified and confirmed and the
Indenture as so supplemented by this Supplement shall be read, taken, and
construed as one and the same instrument.
Section 9.04. Counterparts. This 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 9.05. GOVERNING LAW. THIS SUPPLEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
39
<PAGE> 41
Section 9.06. Instructions in Writing. All instructions, notices or
other communications given by the Servicer, the Issuer or any other Person to
the Indenture Trustee pursuant to this Supplement shall be in writing and shall
be effective upon actual receipt by an Authorized Officer of the Indenture
Trustee.
Section 9.07. Tax Treatment. The Issuer has entered into this
Supplement with the intention that, for federal, state and local income and
franchise tax purposes, the Class A Notes will be characterized as indebtedness
of the Seller secured by the Receivables, and, prior to the occurrence of a
transfer under Section 7.03 hereof, the Class B Notes will not be treated as
having been issued. Clauses (a) and (c) of the definitions of Tax Opinion shall
be inapplicable with respect to such Class B Notes prior to any such issuance.
40
<PAGE> 42
IN WITNESS WHEREOF, the Issuer has caused this Note to be duly
executed.
ZALE FUNDING TRUST
Issuer
By: Wilmington Trust Company, not in its
individual capacity but solely as Owner Trustee
under the Amended and Restated Trust Agreement
dated as of July 15, 1999
By: /s/ JAMES P. LAWLER
-----------------------------------
Name:
Title:
THE BANK OF NEW YORK
Indenture Trustee and Securities Intermediary
By: /s/ ERWIN SORIANO
-----------------------------------
Name:
Title:
<PAGE> 43
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE I CREATION OF THE SERIES 1999-A NOTES............................1
Section 1.01. Designation..........................................1
ARTICLE II DEFINITIONS....................................................2
Section 2.01. Definitions..........................................2
ARTICLE III SERVICER......................................................13
Section 3.01. Servicing Compensation..............................13
Section 3.02. Indenture Trustee Fee...............................13
ARTICLE IV RIGHTS OF NOTEHOLDERS AND ALLOCATION
AND APPLICATION OF COLLECTIONS................................15
Section 4.01. Rights of Noteholders...............................15
Section 4.02. Collections and Allocation; Payments on Trust
Certificate.........................................15
Section 4.03. Determination of Monthly Interest for the Series
1999-A Notes........................................18
Section 4.04. Determination of Principal Amounts..................18
Section 4.05. Shared Principal Collections........................20
Section 4.06. Application of Funds on Deposit in the Collection
Account for the Notes...............................20
Section 4.07. Coverage of Required Amount for the Series
1999-A Notes........................................24
Section 4.08. Reallocated Principal Collections for the Series
1999-A Notes........................................25
Section 4.09. Investor Charge-Offs................................25
Section 4.10. Discount Option Percentage..........................25
Section 4.11. Establishment of Reserve Account....................26
ARTICLE V DISTRIBUTIONS AND REPORTS TO SERIES 1999-A INVESTOR
NOTEHOLDERS...................................................28
Section 5.01. Distributions.......................................28
Section 5.02. Reports and Statements to Series 1999-A
Noteholders.........................................29
ARTICLE VI EARLY AMORTIZATION EVENTS.....................................31
Section 6.01. Series 1999-A Early Amortization Events.............31
ARTICLE VII OPTIONAL REDEMPTION; PARTIAL AMORTIZATION; PRINCIPAL
BALANCE INCREASES.............................................34
Section 7.01. Optional Redemption.................................34
Section 7.02. Partial Amortization................................34
Section 7.03. Designation of Class B Note Terms; Sale of Class B
Notes...............................................34
Section 7.04. Note Principal Balance Increases....................35
</TABLE>
<PAGE> 44
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C>
Section 7.05. Special Reduction of Class A Invested Amount........36
ARTICLE VIII FINAL DISTRIBUTION............................................38
Section 8.01. Sale of Receivables or Noteholders' Interest pursuant
to Section 2.05 of the Purchase and Servicing
Agreement and Section 10.03 of the
Indenture...........................................38
ARTICLE IX MISCELLANEOUS PROVISIONS......................................39
Section 9.01. Delivery and Payment for the Series 1999-A Notes....39
Section 9.02. Legend on Series 1999-A Notes.......................39
Section 9.03. Ratification of Indenture...........................39
Section 9.04. Counterparts........................................39
Section 9.05. GOVERNING LAW.......................................39
Section 9.06. Instructions in Writing.............................40
Section 9.07. Tax Treatment.......................................40
</TABLE>
-II-
<PAGE> 45
CLASS A NOTE
THIS NOTE (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT
FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"). THIS NOTE 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.
ZALE FUNDING TRUST
SERIES 1999-A
FLOATING RATE CLASS A
ASSET BACKED VARIABLE FUNDING NOTE
REGISTERED
No. RA-1
ZALE FUNDING TRUST, a Delaware business trust (the "Issuer") hereby
promises to pay to the order of CREDIT SUISSE FIRST BOSTON, NEW YORK BRANCH, AS
AGENT, or registered assigns (the "Noteholder"), the outstanding principal
balance of this Note, as determined pursuant to Indenture, dated as of July 15,
1999 (as amended or otherwise modified from time to time, the "Base
Indenture"), as supplemented by the Series 1999-A Indenture Supplement, dated
as of July 15, 1999 (as amended or otherwise modified from time to time, the
"Supplement;" the Base Indenture, as so supplemented, the "Indenture") between
the Issuer and The Bank of New York, as Indenture Trustee (in such capacity,
the "Indenture Trustee"), and to pay interest on the outstanding principal
balance of this Note at the rate or rates and at the times specified in the
Indenture. The outstanding principal balance of this Note shall be repaid from
time to time on the dates and in the manner set forth in the Indenture, and in
any event on Legal Final Maturity Date (as defined in the Indenture).
The Class A Initial Invested Amount of this Note is set forth on the
grid attached hereto. The Noteholder or its agent is authorized from time to
time to record the amount and date of each Class A Note Principal Balance
Increase and each payment of principal of this Note 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 the failure to make any such
notations shall not affect the validity of the Issuer's obligations hereunder
or under the Indenture Note or the validity of any payment or prepayment
hereof.
This Note does not purport to summarize the Indenture 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 Issuer and the
<PAGE> 46
Indenture Trustee. To the extent not defined herein, the capitalized terms used
herein have the meanings ascribed to them in the Indenture. This Note is one of
a series and class of Notes entitled "Zale Funding Trust Floating Rate Class A
Asset Backed Variable Funding Notes, Series 1999-A" (the "Class A Notes"),
issued under and is subject to the terms, provisions and conditions of the
Indenture, to which Indenture the Noteholder by virtue of the acceptance hereof
assents and by which the Noteholder is bound. The Issuer has also issued its
"Zale Funding Trust Class B Asset Backed Notes, Series 1999-A" (the "Class B
Notes" and collectively with the Class A Notes, the "Series 1999-A Notes")
pursuant to the Indenture. The Class B Notes are subordinated to the Class A
Notes as and to the extent provided in the Indenture.
The indebtedness represented by the Series 1999-A Notes shall include
the right of the Series 1999-A Noteholders to receive, to the extent necessary
to make the required payments with respect to such Series 1999-A Notes at the
times and in the amounts specified in the Supplement, the Series 1999-A
Noteholders' Interest. In general, payments of principal with respect to the
Class A Notes are limited to the Class A Invested Amount, which may be less
than the unpaid principal balance of the Class A Notes. The Class B Notes are
subordinated to the Class A Notes, to the extent provided in the Supplement.
The Class B Notes will not have the right to receive payments of principal
until the Class A Invested Amount has been paid in full, other than payments of
the Class B Special Reduction Amount during a Partial Amortization Period as
provided in the Supplement.
The Seller has structured the Indenture and the Series 1999-A Notes
and with the intention that the Class A Notes will qualify under applicable tax
law as debt, and the Seller, the Issuer and each holder of a Note or of any
interest therein by acceptance of its Note or any interest therein, agrees to
treat the Class A Notes for purposes of federal, state and local income or
franchise taxes and any other tax imposed on or measured by income, as debt.
The obligations of the Issuer under this Note, the Indenture or any
other agreement, instrument, document or certificate executed and delivered or
issued by the Issuer in connection herewith are solely the corporate
obligations of the Issuer. Except as expressly provided for in Sections 7.03,
7.08 or 8.04(b) of the Trust Agreement, no recourse shall be had for the
payment of any fee or any other obligations or claim arising out of or based
upon this Note, the Indenture or any other agreement, instrument, document or
certificate executed and delivered or issued by the Issuer in connection
herewith against any holder of a Trust Certificate, employee, officer,
director, incorporator, agent or trustee of the Issuer or any Affiliate of the
Issuer.
It is expressly understood and agreed by the parties hereto that (i)
this Note and the Indenture are executed and delivered by Wilmington Trust
Company, not individually or personally but solely as the Owner Trustee of the
Issuer under the Trust Agreement, in the exercise of the powers and authority
conferred and vested in it, (ii) each of the representations, undertakings and
agreements made on the part of the Issuer in this Note or the Indenture is made
and intended not as personal representations, undertakings and agreements by
Wilmington Trust Company but is made and intended for the purpose of binding
only the Issuer, (iii) nothing herein or in the Indenture contained shall be
construed as creating any liability on Wilmington
-2-
<PAGE> 47
Trust Company, individually or personally, to perform any covenant either
expressed or implied contained herein, all such liability, if any, being
expressly waived by the Indenture Trustee and by any Person claiming by,
through or under the Indenture Trustee and (iv) under no circumstances shall
Wilmington Trust Company be personally liable for the payment of any
indebtedness or expenses of the Issuer or be liable for the breach or failure
of any obligation, representation, warranty or covenant made or undertaken by
the Issuer under this Note, the Indenture or the other Transaction Documents.
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF NEW YORK WITHOUT REFERENCE TO ITS CONFLICTS OF LAW PROVISIONS, AND THE
OBLIGATIONS, RIGHTS AND REMEDIES OF THE ISSUER AND THE NOTEHOLDER SHALL BE
DETERMINED IN ACCORDANCE WITH SUCH LAWS.
Unless the Note of authentication hereon has been executed by or on
behalf of the Trustee, by manual signature, this Note shall not be entitled to
any benefit under the Indenture, or be valid for any purpose.
[Remainder of page intentionally left blank]
-3-
<PAGE> 48
IN WITNESS WHEREOF, the Issuer has caused this Note to be duly
executed.
ZALE FUNDING TRUST
By: Wilmington Trust Company, not in its
individual capacity but solely as Owner Trustee
under the Amended and Restated Trust Agreement
dated as of July 15, 1999
By: /s/ JAMES P. LAWLER
-----------------------------------
Name:
Title:
Dated: July 15, 1999
-4-
<PAGE> 49
CERTIFICATE OF AUTHENTICATION
This is one of the Class A Notes referred to in the within-mentioned Indenture.
THE BANK OF NEW YORK
By: /s/ ERWIN SORIANO
-----------------------------------
Name:
Title:
-5-
<PAGE> 50
GRID TO CLASS A NOTE NO. RA-1
<TABLE>
<CAPTION>
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Class A Note Principal
Date of Transaction Balance Increase Amount of Payment Notation Made By
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
July 15, 1999 $250,000,000 (Class A N/A N/A
Initial Invested Amount)
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</TABLE>
-6-
<PAGE> 51
CLASS B NOTE
THIS NOTE (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT
FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"). THIS NOTE 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.
ZALE FUNDING TRUST
SERIES 1999-A
CLASS B
ASSET BACKED NOTE
REGISTERED
No. RB-1
ZALE FUNDING TRUST, a Delaware business trust (the "Issuer") hereby
promises to pay to the order of ZALE FUNDING TRUST, or registered assigns (the
"Noteholder"), the outstanding principal balance of this Note, as determined
pursuant to Indenture, dated as of July 15, 1999 (as amended or otherwise
modified from time to time, the "Base Indenture"), as supplemented by the
Series 1999-A Indenture Supplement, dated as of July 15, 1999 (as amended or
otherwise modified from time to time, the "Supplement;" the Base Indenture, as
so supplemented, the "Indenture") between the Issuer and The Bank of New York,
as Indenture Trustee (in such capacity, the "Indenture Trustee"), and to pay
interest on the outstanding principal balance of this Note at the rate or rates
and at the times specified in the Indenture. The outstanding principal balance
of this Note shall be repaid from time to time on the dates and in the manner
set forth in the Indenture, and in any event on Legal Final Maturity Date (as
defined in the Indenture).
The Class B Initial Invested Amount of this Note is set forth on the
grid attached hereto. The Noteholder or its agent is authorized from time to
time to record the amount and date of each payment of principal of this Note 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 the failure to make
any such notations shall not affect the validity of the Issuer's obligations
hereunder or under the Indenture Note or the validity of any payment or
prepayment hereof.
This Note does not purport to summarize the Indenture and reference is
made to that Agreement for information with respect to the interests, rights,
benefits, obligations,
<PAGE> 52
proceeds, and duties evidenced hereby and the rights, duties and obligations of
the Issuer and the Indenture Trustee. To the extent not defined herein, the
capitalized terms used herein have the meanings ascribed to them in the
Indenture. This Note is one of a series and class of Notes entitled "Zale
Funding Trust Class B Asset Backed Notes, Series 1999-A" (the "Class B Notes"),
issued under and is subject to the terms, provisions and conditions of the
Indenture, to which Indenture the Noteholder by virtue of the acceptance hereof
assents and by which the Noteholder is bound. The Issuer has also issued its
"Zale Funding Trust Floating Rate Class A Asset Backed Variable Funding Notes,
Series 1999-A" (the "Class A Notes" and collectively with the Class B Notes,
the "Series 1999-A Notes") pursuant to the Indenture. The Class B Notes are
subordinated to the Class A Notes as and to the extent provided in the
Indenture.
The indebtedness represented by the Series 1999-A Notes shall include
the right of the Series 1999-A Noteholders to receive, to the extent necessary
to make the required payments with respect to such Series 1999-A Notes at the
times and in the amounts specified in the Supplement, the Series 1999-A
Noteholders' Interest. In general, payments of principal with respect to the
Class B Notes are limited to the Class B Invested Amount, which may be less
than the unpaid principal balance of the Class B Notes. The Class B Notes are
subordinated to the Class A Notes, to the extent provided in the Supplement.
The Class B Notes will not have the right to receive payments of principal
until the Class A Invested Amount has been paid in full, other than payments of
the Class B Special Reduction Amount during a Partial Amortization Period as
provided in the Supplement.
The Seller has structured the Indenture and the Series 1999-A Notes
and with the intention that the Class A Notes will qualify under applicable tax
law as debt, and the Seller, the Issuer and each holder of a Note or of any
interest therein by acceptance of its Note or any interest therein, agrees to
treat the Class A Notes for purposes of federal, state and local income or
franchise taxes and any other tax imposed on or measured by income, as debt.
The obligations of the Issuer under this Note, the Indenture or any
other agreement, instrument, document or certificate executed and delivered or
issued by the Issuer in connection herewith are solely the corporate
obligations of the Issuer. Except as expressly provided for in Sections 7.03,
7.08 or 8.04(b) of the Trust Agreement, no recourse shall be had for the
payment of any fee or any other obligations or claim arising out of or based
upon this Note, the Indenture or any other agreement, instrument, document or
certificate executed and delivered or issued by the Issuer in connection
herewith against any holder of a Trust Certificate, employee, officer,
director, incorporator, agent or trustee of the Issuer or any Affiliate of the
Issuer.
It is expressly understood and agreed by the parties hereto that (i)
this Note and the Indenture are executed and delivered by Wilmington Trust
Company, not individually or personally but solely as the Owner Trustee of the
Issuer under the Trust Agreement, in the exercise of the powers and authority
conferred and vested in it, (ii) each of the representations, undertakings and
agreements made on the part of the Issuer in this Note or the Indenture is made
and intended not as personal representations, undertakings and agreements by
Wilmington Trust Company but is made and intended for the purpose of binding
only the Issuer, (iii) nothing
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<PAGE> 53
herein or in the Indenture contained shall be construed as creating any
liability on Wilmington Trust Company, individually or personally, to perform
any covenant either expressed or implied contained herein, all such liability,
if any, being expressly waived by the Indenture Trustee and by any Person
claiming by, through or under the Indenture Trustee and (iv) under no
circumstances shall Wilmington Trust Company be personally liable for the
payment of any indebtedness or expenses of the Issuer or be liable for the
breach or failure of any obligation, representation, warranty or covenant made
or undertaken by the Issuer under this Note, the Indenture or the other
Transaction Documents.
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF NEW YORK WITHOUT REFERENCE TO ITS CONFLICTS OF LAW PROVISIONS, AND THE
OBLIGATIONS, RIGHTS AND REMEDIES OF THE ISSUER AND THE NOTEHOLDER SHALL BE
DETERMINED IN ACCORDANCE WITH SUCH LAWS.
Unless the Note of authentication hereon has been executed by or on
behalf of the Trustee, by manual signature, this Note shall not be entitled to
any benefit under the Indenture, or be valid for any purpose.
[Remainder of page intentionally left blank]
3
<PAGE> 54
IN WITNESS WHEREOF, the Issuer has caused this Note to be duly executed.
ZALE FUNDING TRUST
By: Wilmington Trust Company, not in its
individual capacity but solely as Owner Trustee
under the Amended and Restated Trust Agreement
dated as of July 15, 1999
By: /s/ JAMES P. LAWLER
-----------------------------------
Name:
Title:
Dated: July 15, 1999
4
<PAGE> 55
CERTIFICATE OF AUTHENTICATION
This is one of the Class B Notes referred to in the within-mentioned Indenture.
THE BANK OF NEW YORK
By: /s/ ERWIN SORIANO
-----------------------------------
Name:
Title:
5
<PAGE> 56
GRID TO CLASS B NOTE NO. RB-1
<TABLE>
<CAPTION>
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Class B Initial
Date of Transaction Invested Amount Amount of Payment Notation Made By
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<S> <C> <C> <C>
July 15, 1999 $123,134,328.36 N/A N/A
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</TABLE>
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