-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Sos39B/5nZC59yzKizFq/c6pITUtFJMv9mXQCMKHVppEMdKEqFSIO/+pjDZCJ7bg eWCotBQ3swGg4aIhSdyQeQ== 0000890566-98-001946.txt : 19981216 0000890566-98-001946.hdr.sgml : 19981216 ACCESSION NUMBER: 0000890566-98-001946 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19981031 FILED AS OF DATE: 19981215 FILER: COMPANY DATA: COMPANY CONFORMED NAME: STAGE STORES INC CENTRAL INDEX KEY: 0000006885 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-DEPARTMENT STORES [5311] IRS NUMBER: 760407711 STATE OF INCORPORATION: DE FISCAL YEAR END: 0201 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-14035 FILM NUMBER: 98769917 BUSINESS ADDRESS: STREET 1: 10201 MAIN ST CITY: HOUSTON STATE: TX ZIP: 77025 BUSINESS PHONE: 7138384244 MAIL ADDRESS: STREET 1: 10201 MAIN STREET CITY: HOUSTON STATE: TX ZIP: 77025 FORMER COMPANY: FORMER CONFORMED NAME: APPAREL RETAILERS INC DATE OF NAME CHANGE: 19930908 10-Q 1 FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 (MARK ONE) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended October 31, 1998 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 001-14035 STAGE STORES, INC. (Exact name of registrant as specified in its charter) DELAWARE (State or other jurisdiction of 76-0407711 incorporation or organization) (I.R.S. Employer Identifications No.) 10201 MAIN STREET, HOUSTON, TEXAS 77025 (Address of principal executive offices) (Zip Code) (713) 667-5601 Registrant's telephone number, including area code Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] The number of shares of common stock of Stage Stores, Inc. outstanding as of December 15, 1998 was 26,686,759 shares of Common Stock and 1,250,584 shares of Class B Common Stock. PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS STAGE STORES, INC. CONSOLIDATED CONDENSED BALANCE SHEET (in thousands, except par values) (unaudited) October 31, January 31, 1998 1998 --------- --------- ASSETS Cash and cash equivalents ............................ $ 11,226 $ 23,315 Undivided interest in accounts receivable trust ...... 58,971 61,211 Merchandise inventories, net ......................... 421,658 303,115 Prepaid expenses ..................................... 24,933 20,417 Other current assets ................................. 57,309 57,788 --------- --------- Total current assets ........................... 574,097 465,846 Property, equipment and leasehold improvements, net .. 225,121 171,654 Goodwill, net ........................................ 93,285 95,486 Other assets ......................................... 24,858 26,410 --------- --------- Total assets ................................... $ 917,361 $ 759,396 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable ..................................... $ 102,787 $ 91,799 Accrued interest ..................................... 11,859 2,044 Accrued expenses and other current liabilities ....... 128,848 53,939 --------- --------- Total current liabilities ...................... 243,494 147,782 Long-term debt ....................................... 450,311 395,248 Other long-term liabilities .......................... 10,436 11,288 --------- --------- Total liabilities .............................. 704,241 554,318 --------- --------- Preferred stock, par value $1.00, non-voting, 3 shares authorized, no shares issued or outstanding .............................. -- -- Common stock, par value $0.01, 75,000 shares authorized, 26,687 and 26,500 shares issued and outstanding, respectively ............... 266 265 Class B common stock, par value $0.01, non-voting, 3,000 shares authorized, 1,250 shares issued and outstanding ............................. 13 13 Additional paid-in capital ........................... 265,517 264,679 Accumulated deficit .................................. (52,676) (59,324) Accumulated other comprehensive income ............... -- (555) --------- --------- Stockholders' equity .............................. 213,120 205,078 --------- --------- Commitments and contingencies ........................ -- -- --------- --------- Total liabilities and stockholders' equity ..... $ 917,361 $ 759,396 ========= ========= The accompanying notes are an integral part of this statement. 2 STAGE STORES, INC. CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS (in thousands, except per share amounts) (unaudited)
Three Months Ended Nine Months Ended -------------------------- ------------------------- October 31, November 1, October 31, November 1, 1998 1997 1998 1997 ----------- ----------- ----------- ----------- Net sales ..................................... $ 271,605 $ 274,269 $ 816,198 $ 703,918 Cost of sales and related buying, occupancy and distribution expenses ......... 196,353 187,447 571,482 481,269 ----------- ----------- ----------- ----------- Gross profit .................................. 75,252 86,822 244,716 222,649 Selling, general and administrative expenses .. 65,140 69,089 194,623 163,752 Store opening and closure costs ............... 2,886 1,944 4,911 2,848 ----------- ----------- ----------- ----------- Operating income .............................. 7,226 15,789 45,182 56,049 Interest, net ................................. 12,394 9,767 34,284 28,158 ----------- ----------- ----------- ----------- Income (loss) before income tax and extraordinary item ...................... (5,168) 6,022 10,898 27,891 Income tax expense (benefit) .................. (2,016) 2,349 4,250 10,878 ----------- ----------- ----------- ----------- Income (loss) before extraordinary item ....... (3,152) 3,673 6,648 17,013 Extraordinary item - early retirement of debt . -- (150) -- (17,530) ----------- ----------- ----------- ----------- Net income (loss) ............................. $ (3,152) $ 3,523 $ 6,648 $ (517) =========== =========== =========== =========== BASIC EARNINGS (LOSS) PER COMMON SHARE DATA: Basic earnings (loss) per common share before extraordinary item ....................... $ (0.11) $ 0.13 $ 0.24 $ 0.67 Extraordinary item - early retirement of debt ....................... -- -- -- (0.69) ----------- ----------- ----------- ----------- Basic earnings (loss) per common share ........ $ (0.11) $ 0.13 $ 0.24 $ (0.02) =========== =========== =========== =========== Basic weighted average common shares outstanding ........................ $ 27,926 $ 27,364 $ 27,864 $ 25,230 =========== =========== =========== =========== DILUTED EARNINGS (LOSS) PER COMMON SHARE DATA: Diluted earnings (loss) per common share before extraordinary item ....................... $ (0.11) $ 0.13 $ 0.23 $ 0.66 Extraordinary item - early retirement of debt . -- -- -- (0.68) ----------- ----------- ----------- ----------- Diluted earnings (loss) per common share ...... $ (0.11) $ 0.13 $ 0.23 $ (0.02) =========== =========== =========== =========== Diluted weighted average common shares outstanding ....................... 28,263 28,113 28,474 25,782 =========== =========== =========== ===========
The accompanying notes are an integral part of this statement. 3 STAGE STORES, INC. CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS (in thousands) (unaudited)
Nine Months Ended ------------------------------------ October 31, 1998 November 1, 1997 ---------------- ---------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) ............................. $ 6,648 $ (517) ---------------- ---------------- Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization ........... 21,046 13,091 Deferred income taxes ................... 192 2,086 Accretion of discount ................... 820 1,085 Amortization of debt issue costs ........ 1,808 1,644 Loss on early extinguishment of debt .... -- 17,530 Changes in operating assets and liabilities: Decrease in undivided interest in accounts receivable trust ................ 2,240 16,241 Increase in merchandise inventories ....... (118,543) (92,779) Increase in other assets .................. (5,297) (19,421) Increase in accounts payable and accrued liabilities ..................... 14,909 47,041 ---------------- ---------------- Total adjustments ....................... (82,825) (13,482) ---------------- ---------------- Net cash used in operating activities ..... (76,177) (13,999) ---------------- ---------------- CASH FLOWS FROM INVESTING ACTIVITIES: Acquisitions, net of cash acquired ............ -- (4,946) Additions to property, equipment and leasehold improvements ...................... (71,202) (41,744) ---------------- ---------------- Net cash used in investing activities ..... (71,202) (46,690) ---------------- ---------------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from working capital facility ........ 134,650 46,400 Proceeds from long-term debt .................. -- 299,720 Proceeds from issuance of common stock ........ 839 21,125 Payments on long-term debt .................... (199) (297,161) Additions to debt issue costs ................. -- (12,407) ---------------- ---------------- Net cash provided by financing activities . 135,290 57,677 ---------------- ---------------- Net decrease in cash and cash equivalents ..... (12,089) (3,012) Cash and cash equivalents: Beginning of period ......................... 23,315 18,286 ================ ================ End of period ............................... $ 11,226 $ 15,274 ================ ================ SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Interest paid ................................. $ 22,433 $ 26,217 ================ ================ Income taxes paid (refunded) .................. $ (2,805) $ 3,746 ================ ================
The accompanying notes are an integral part of this statement. 4 STAGE STORES, INC. CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (in thousands) (unaudited)
Common Stock -------------------------------------------- Class B --------------------- Shares Shares Outstanding Amount Outstanding Amount ----------- ------ ----------- ------ Balance, January 31, 1998 .............. 26,500 $ 265 1,250 $ 13 Net income ............................. -- -- -- -- Adjustment for minimum pension liability -- -- -- -- Issuance of stock ...................... 187 1 -- -- ----------- ------ ----------- ------ Balance, October 31, 1998 .............. 26,687 $ 266 1,250 $ 13 =========== ====== =========== ====== Additional Accumulated Paid-in Accumulated Comprehensive Capital Deficit Income Total ----------- -------- ----------- -------- Balance, January 31, 1998 .............. $ 264,679 $(59,324) $ (555) $205,078 Net income ............................. -- 6,648 -- 6,648 Adjustment for minimum pension liability -- -- 555 555 Issuance of stock ...................... 838 -- -- 839 ----------- -------- ----------- -------- Balance, October 31, 1998 .............. $ 265,517 $(52,676) $ -- $213,120 =========== ======== =========== ========
The accompanying notes are an integral part of this statement. 5 STAGE STORES, INC. NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS 1. The accompanying unaudited consolidated condensed financial statements of Stage Stores, Inc. ("Stage Stores") have been prepared in accordance with Rule 10-01 of Regulation S-X and do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. Those adjustments, which include only normal recurring adjustments that are in the opinion of management necessary for a fair presentation of the results of the interim periods, have been made. The results of operations for such interim periods are not necessarily indicative of the results of operations for a full year. The unaudited consolidated condensed financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended January 31, 1998 filed with Stage Stores' Annual Report on Form 10-K. The fiscal years discussed herein end on the Saturday nearest to January 31 in the following calendar year. For example, references to "1998" mean the fiscal year ending January 30, 1999. Stage Stores conducts its business primarily through its wholly owned subsidiary Specialty Retailers, Inc. ("SRI") which, as of October 31, 1998, operated 670 family apparel stores predominately located in the central United States. Stage Stores and SRI are collectively referred to herein as the "Company". 2. Pursuant to the accounts receivable securitization program (the "Accounts Receivable Program"), an indirect wholly owned subsidiary of the Company, SRI Receivables Purchase Co., Inc. ("SRPC") purchases the accounts receivable generated by the Company's private label credit card program. Such accounts receivable are transferred to a master trust (the "Trust") which has issued certain certificates to third parties representing undivided interests in the Trust. SRPC owns an undivided interest in the accounts receivable not supporting the certificates issued to third parties by the Trust (the "Retained Interest"). SRPC is a separate corporate entity from the Company and SRPC's creditors have a claim on its assets prior to those assets becoming available to any creditor of the Company. During September 1998, the Company amended the revolving certificate to increase the limit that may be outstanding from $82.5 million to $165 million through March 31, 1999. The maximum outstanding under the revolving certificate will be reduced to $144.4 million from April 1, 1999 to September 30, 1999 and $82.5 million thereafter. In addition, a new class of certificates (the "Class B-2 Certificates") was created under the revolving certificate to allow for up to an additional $10 million to be outstanding from October 16, 1998 through December 24, 1998. The Class B-2 Certificates are collateralized by the accounts receivable transferred to the Trust, subordinated to certain other classes of certificates outstanding. The Class B-2 Certificates bear a floating rate of return, which was 10.25% at October 31, 1998. 3. During June 1997, SRI completed an offering of $300.0 million of long-term indebtedness consisting of $200.0 million in aggregate principal amount of 8 1/2% Senior Notes due 2005 and $100.0 million in aggregate principal amount of 9% Senior Subordinated Notes due 2007 (collectively, the "Note Offering"). The gross proceeds from the issuance of these notes (approximately $299.7 million) were used to: (i) retire the Company's existing 10% Senior Notes due 2000 and 11% Senior Subordinated Notes due 2003; (ii) pay related fees and expenses; and (iii) pay costs associated with the acquisition of C.R. Anthony Company ("CR Anthony"). Concurrently with this transaction, the Company entered into a new credit facility with a group of lenders (the "Credit Facility"). The Credit Facility provides for a $100.0 million working capital and letter of credit facility and a $100.0 million expansion revolving credit facility. The Credit Facility replaced the Company's existing $75.0 million credit facility. In connection with the above transactions, the Company recorded an extraordinary charge during the second quarter of 1997 of $17.4 million, net of applicable income taxes of $11.1 million, related to the tender premiums and write off of unamortized debt issue costs associated with the retired debt. During October 1998, the Credit Facility was amended to reduce certain covenant requirements and clarify certain defined terms contained in the Credit Facility agreement. 4. During June 1997, the Company acquired CR Anthony which operated 246 family apparel stores in small markets throughout the central and midwestern United States under the names "Anthony's" and "Anthony's Limited". The Company issued 3,607,044 shares in exchange for the outstanding common stock of CR Anthony. The purchase price for CR Anthony (including the common stock issued by the Company) was approximately $77.2 million, including acquisition costs and net of cash acquired. CR Anthony had net sales of $288.4 million and net income of $4.8 million for the year ended February 1, 1997. 5. During September 1997, the Company completed an offering of approximately 7.1 million shares of common stock, 6.4 million shares of which were secondary shares representing the shares owned by two venture capital firms. The remaining 650,000 shares were issued as primary shares, a result of an over-allotment provision. The shares sold by the Company resulted in net proceeds to the Company of approximately $20.7 million, which were used to reduce borrowings outstanding under the Company's Credit Facility. 6 6. During the first quarter of 1998, the Company adopted Statement of Financial Accounting Standards No. 130 "Reporting Comprehensive Income" ("SFAS 130"). SFAS 130 establishes standards for reporting and display of comprehensive income and its components (revenues, expenses, gains, and losses) in a full set of general-purpose financial statements. Prior period statements have been adjusted to reflect retroactive application of the provisions of SFAS 130. 7. On November 2, 1998, the Board of Directors of the Company adopted a Stockholder Rights Plan (the "Rights Plan") designed to protect Company stockholders in the event of takeover activity that would deny them the full value of their investment. As a part of the Rights Plan, the Company declared a dividend of one Preferred Stock Purchase Right (the "Right(s)") for each outstanding share of Common Stock, par value $0.01 per share, of the Company. The dividend is payable as of November 13, 1998 to stockholders of record on that date. Each Right entitles the registered holder to purchase from the Company one one-hundred thousandth (1/100,000) of a share of a new series of preferred shares of the Company, designated as Series A Junior Preferred Stock, at a price of $60.00 per one one-hundred thousandth (1/100,000) of a share, subject to certain adjustments. Such Rights will become exercisable only in the event , with certain exceptions, a person or group of affiliated or associated persons accumulate 15% or more of the Company's voting stock, or if a person or group announces an offer to acquire 15% or more of such stock. The description and terms of the Rights are set forth in a Rights Agreement between the Company and ChaseMellon Shareholder Services, L.L.C. as Rights Agent, dated as of November 11, 1998. 8. The consolidating condensed financial information for Stage Stores and its wholly owned subsidiaries is presented to satisfy disclosure requirements pursuant to Sections 13 and 15(d) of the Securities Exchange Act of 1934 with respect to wholly owned subsidiaries of Stage Stores who are individually registrants with the Securities Exchange Commission. SRI is the primary obligor under the 8 1/2% Senior Notes due 2005 and 9% Senior Subordinates Notes due 2007 (see Note 3). Stage Stores and Specialty Retailers, Inc. (NV), a wholly owned subsidiary of Stage Stores which was incorporated during June 1997, are guarantors under such indebtedness. Stage Stores has not presented separate financial statements and other disclosures concerning SRI and Specialty Retailers, Inc. (NV) because management has determined that such information is not material to investors. SRPC securitizes the credit receivables of the Company. The results of operations of SRPC are not indicative of the total operating performance of the Company's Accounts Receivable Program. For a summary of the total consolidated operating performance of the Company's Accounts Receivable Program, see Note 4 to the Company's Consolidated Financial Statements filed with Stage Stores' Annual Report on Form 10-K. The consolidating condensed financial information for Stage Stores and its wholly-owned subsidiaries are presented below. 7 CONSOLIDATING CONDENSED BALANCE SHEET OCTOBER 31, 1998 (in thousands, unaudited)
Specialty SRI Retailers, Receivables SRI SRI Inc. Purchase Co. Eliminations Consolidated ------------ ------------ ------------ ------------ ASSETS Cash and cash equivalents ........... $ 9,276 $ -- $ -- $ 9,276 Undivided interest in accounts receivable trust ................. (11,806) 70,777 -- 58,971 Merchandise inventories, net ........ 421,658 -- -- 421,658 Prepaid expenses .................... 24,194 739 -- 24,933 Other current assets ................ 51,901 5,408 -- 57,309 ------------ ------------ ------------ ------------ Total current assets ............. 495,223 76,924 -- 572,147 Property, equipment and leasehold improvements, net ................ 223,311 -- -- 223,311 Goodwill, net ....................... 93,285 -- -- 93,285 Other assets ........................ 19,337 5,461 -- 24,798 Investment in subsidiaries .......... 44,013 -- (44,013) -- ------------ ------------ ------------ ------------ $ 875,169 $ 82,385 $ (44,013) $ 913,541 ============ ============ ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable .................... $ 102,787 $ -- $ -- $ 102,787 Accrued interest .................... 10,441 1,418 -- 11,859 Accrued expenses and other current liabilities ...................... 127,225 1,443 -- 128,668 ------------ ------------ ------------ ------------ Total current liabilities ........ 240,453 2,861 -- 243,314 Long-term debt ...................... 420,311 30,000 -- 450,311 Intercompany notes/advances ......... 166,629 5,511 -- 172,140 Other long-term liabilities ......... 8,709 -- -- 8,709 ------------ ------------ ------------ ------------ Total liabilities ................ 836,102 38,372 -- 874,474 ------------ ------------ ------------ ------------ Preferred stock ..................... -- -- -- -- Common stock ........................ -- -- -- -- Class B common stock ................ -- -- -- -- Additional paid-in capital .......... 3,317 37,813 (37,813) 3,317 Accumulated earnings (deficit) ...... 35,750 6,200 (6,200) 35,750 ------------ ------------ ------------ ------------ Stockholders' equity ............. 39,067 44,013 (44,013) 39,067 ------------ ------------ ------------ ------------ $ 875,169 $ 82,385 $ (44,013) $ 913,541 ============ ============ ============ ============ Specialty Stage Retailers, Stage Stores Stores, Inc. Inc. (NV) Eliminations Consolidated ------------ ------------ ------------ ------------ ASSETS Cash and cash equivalents ........... $ 2 $ 1,948 $ -- $ 11,226 Undivided interest in accounts receivable trust ................. -- -- -- 58,971 Merchandise inventories, net ........ -- -- -- 421,658 Prepaid expenses .................... -- -- -- 24,933 Other current assets ................ -- -- -- 57,309 ------------ ------------ ------------ ------------ Total current assets ............. 2 1,948 -- 574,097 Property, equipment and leasehold improvements, net ................ -- 1,810 -- 225,121 Goodwill, net ....................... -- -- -- 93,285 Other assets ........................ -- 60 -- 24,858 Investment in subsidiaries .......... 212,344 -- (212,344) -- ------------ ------------ ------------ ------------ $ 212,346 $ 3,818 $ (212,344) $ 917,361 ============ ============ ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable .................... $ -- $ -- $ -- $ 102,787 Accrued interest .................... -- -- -- 11,859 Accrued expenses and other current liabilities ...................... 180 -- -- 128,848 ------------ ------------ ------------ ------------ Total current liabilities ........ 180 -- -- 243,494 Long-term debt ...................... -- -- -- 450,311 Intercompany notes/advances ......... (2,681) (169,459) -- -- Other long-term liabilities ......... 1,727 -- -- 10,436 ------------ ------------ ------------ ------------ Total liabilities ................ (774) (169,459) -- 704,241 ------------ ------------ ------------ ------------ Preferred stock ..................... -- -- -- -- Common stock ........................ 266 -- -- 266 Class B common stock ................ 13 -- -- 13 Additional paid-in capital .......... 265,517 159,002 (162,319) 265,517 Accumulated earnings (deficit) ...... (52,676) 14,275 (50,025) (52,676) ------------ ------------ ------------ ------------ Stockholders' equity ............. 213,120 173,277 (212,344) 213,120 ------------ ------------ ------------ ------------ $ 212,346 $ 3,818 $ (212,344) $ 917,361 ============ ============ ============ ============
8 CONSOLIDATING CONDENSED BALANCE SHEET JANUARY 31, 1998 (in thousands)
SRI Specialty Receivables SRI SRI Retailers, Inc. Purchase Co. Eliminations Consolidated --------------- ------------ ------------ ------------ ASSETS Cash and cash equivalents ............ $ 23,299 $ -- $ -- $ 23,299 Undivided interest in accounts receivable trust .................. (11,234) 72,445 -- 61,211 Merchandise inventories, net ......... 303,115 -- -- 303,115 Prepaid expenses ..................... 19,944 473 -- 20,417 Other current assets ................. 49,980 7,808 -- 57,788 --------------- ------------ ------------ ------------ Total current assets .............. 385,104 80,726 -- 465,830 Property, equipment and leasehold improvements, net ................. 170,401 -- -- 170,401 Goodwill, net ........................ 95,486 -- -- 95,486 Other assets ......................... 20,653 5,757 -- 26,410 Investment in subsidiaries ........... 40,312 -- (40,312) -- --------------- ------------ ------------ ------------ $ 711,956 $ 86,483 $ (40,312) $ 758,127 =============== ============ ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable ..................... $ 91,799 $ -- $ -- $ 91,799 Accrued interest ..................... 1,556 488 -- 2,044 Accrued expenses and other current liabilities ....................... 53,545 142 -- 53,687 --------------- ------------ ------------ ------------ Total current liabilities ......... 146,900 630 -- 147,530 Long-term debt ....................... 365,248 30,000 -- 395,248 Intercompany notes/advances .......... 149,258 14,324 -- 163,582 Other long-term liabilities .......... 9,874 1,217 -- 11,091 --------------- ------------ ------------ ------------ Total liabilities ................. 671,280 46,171 -- 717,451 --------------- ------------ ------------ ------------ Preferred stock ...................... -- -- -- -- Common stock ......................... -- -- -- -- Class B common stock ................. -- -- -- -- Additional paid-in capital ........... 3,317 34,556 (34,556) 3,317 Accumulated earnings (deficit) ....... 37,914 5,756 (5,756) 37,914 Accumulated other comprehensive income (555) -- -- (555) --------------- ------------ ------------ ------------ Stockholders' equity .............. 40,676 40,312 (40,312) 40,676 --------------- ------------ ------------ ------------ $ 711,956 $ 86,483 $ (40,312) $ 758,127 =============== ============ ============ ============ Specialty Stage Retailers, Stage Stores Stores, Inc. Inc. (NV) Eliminations Consolidated ------------ ------------ ------------ ------------ ASSETS Cash and cash equivalents ............ $ 16 $ -- $ -- $ 23,315 Undivided interest in accounts receivable trust .................. -- -- -- 61,211 Merchandise inventories, net ......... -- -- -- 303,115 Prepaid expenses ..................... -- -- -- 20,417 Other current assets ................. -- -- -- 57,788 ------------ ------------ ------------ ------------ Total current assets .............. 16 -- -- 465,846 ------------ ------------ ------------ ------------ Property, equipment and leasehold improvements, net ................. -- 1,253 -- 171,654 Goodwill, net ........................ -- -- -- 95,486 Other assets ......................... -- -- -- 26,410 Investment in subsidiaries ........... 205,075 -- (205,075) -- ------------ ------------ ------------ ------------ $ 205,091 $ 1,253 $ (205,075) $ 759,396 ============ ============ ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable ..................... $ -- $ -- $ -- $ 91,799 Accrued interest ..................... -- -- -- 2,044 Accrued expenses and other current liabilities ....................... 252 -- -- 53,939 ------------ ------------ ------------ ------------ Total current liabilities ......... 252 -- -- 147,782 Long-term debt ....................... -- -- -- 395,248 Intercompany notes/advances .......... (436) (163,146) -- -- Other long-term liabilities .......... 197 -- -- 11,288 Total liabilities ................. 13 (163,146) -- 554,318 ------------ ------------ ------------ ------------ Preferred stock ...................... -- -- -- -- Common stock ......................... 265 -- -- 265 Class B common stock ................. 13 -- -- 13 Additional paid-in capital ........... 264,679 159,002 (162,319) 264,679 Accumulated earnings (deficit) ....... (59,324) 5,397 (43,311) (59,324) Accumulated other comprehensive income (555) -- 555 (555) ------------ ------------ ------------ ------------ Stockholders' equity .............. 205,078 164,399 (205,075) 205,078 ------------ ------------ ------------ ------------ $ 205,091 $ 1,253 $ (205,075) $ 759,396 ============ ============ ============ ============
9 CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS NINE MONTHS ENDED OCTOBER 31, 1998 (in thousands, unaudited)
Specialty SRI Retailers, Receivables SRI SRI Inc. Purchase Co. Eliminations Consolidated --------------- ------------ ------------ ------------ Net sales ......................... $ 816,198 $ -- $ -- $ 816,198 Cost of sales and related buying, occupancy and distribution expenses ...................... 571,482 -- -- 571,482 --------------- ------------ ------------ ------------ Gross profit ...................... 244,716 -- -- 244,716 Selling, general and administrative expenses ...................... 196,583 204 -- 196,787 Store opening and closure costs ... 4,911 -- -- 4,911 --------------- ------------ ------------ ------------ Operating income (loss) ........... 43,222 (204) -- 43,018 Interest expense, net ............. 48,221 (2,507) -- 45,714 --------------- ------------ ------------ ------------ Income (loss) before income taxes ........................ (4,999) 2,303 -- (2,696) Income tax expense (benefit) ...... (1,384) 852 -- (532) --------------- ------------ ------------ ------------ Income (loss) before equity in net earnings of subsidiaries ...... (3,615) 1,451 -- (2,164) Equity in net earnings of subsidiaries .................. 1,451 -- (1,451) -- --------------- ------------ ------------ ------------ Net income (loss) ................. $ (2,164) $ 1,451 $ (1,451) $ (2,164) =============== ============ ============ ============ Specialty Stage Retailers, Stage Stores Stores, Inc. Inc. (NV) Eliminations Consolidated ------------ ------------ ------------ ------------ Net sales ......................... $ -- $ -- $ -- $ 816,198 Cost of sales and related buying, occupancy and distribution expenses ...................... -- -- -- 571,482 ------------ ------------ ------------ ------------ Gross profit ...................... -- -- -- 244,716 Selling, general and administrative expenses ...................... 66 (2,230) -- 194,623 Store opening and closure costs ... -- -- -- 4,911 ------------ ------------ ------------ ------------ Operating income (loss) ........... (66) 2,230 -- 45,182 Interest expense, net ............. -- (11,430) -- 34,284 ------------ ------------ ------------ ------------ Income (loss) before income taxes ........................ (66) 13,660 -- 10,898 Income tax expense (benefit) ...... -- 4,782 -- 4,250 ------------ ------------ ------------ ------------ Income (loss) before equity in net earnings of subsidiaries ...... (66) 8,878 -- 6,648 Equity in net earnings of subsidiaries .................. 6,714 -- (6,714) -- ------------ ------------ ------------ ------------ Net income (loss) ................. $ 6,648 $ 8,878 $ (6,714) $ 6,648 ============ ============ ============ ============
CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS NINE MONTHS ENDED NOVEMBER 1, 1997 (in thousands, unaudited)
SRI Specialty Receivables SRI SRI Retailers, Inc. Purchase Co. Eliminations Consolidated --------------- ------------ ------------ ------------ Net sales ............................ $ 703,918 $ -- $ -- $ 703,918 Cost of sales and related buying, occupancy and distribution expenses ......................... 481,269 -- -- 481,269 --------------- ------------ ------------ ------------ Gross profit ......................... 222,649 -- -- 222,649 Selling, general and administrative expenses ......................... 166,433 (2,717) -- 163,716 Store opening and closure costs ...... 2,848 -- -- 2,848 --------------- ------------ ------------ ------------ Operating income (loss) .............. 53,368 2,717 -- 56,085 Interest expense, net ................ 33,214 (444) -- 32,770 --------------- ------------ ------------ ------------ Income (loss) before income taxes ........................... 20,154 3,161 -- 23,315 Income tax expense (benefit) ......... 8,100 1,176 -- 9,276 --------------- ------------ ------------ ------------ Income (loss) before equity in net earnings of subsidiaries and extraordinary item ............... 12,054 1,985 -- 14,039 Equity in net earnings of subsidiaries ..................... 1,985 -- (1,985) -- --------------- ------------ ------------ ------------ Income (loss) before extraordinary item ............................ 14,039 1,985 (1,985) 14,039 Extraordinary item - early retirement of debt .............. (17,530) -- -- (17,530) --------------- ------------ ------------ ------------ Net income (loss) .................... $ (3,491) $ 1,985 $ (1,985) $ (3,491) =============== ============ ============ ============ Stage Stage Stores Stores, Inc. SRI (NV) Eliminations Consolidated ------------ ------------ ------------ ------------ Net sales ............................ $ -- $ -- $ -- $ 703,918 Cost of sales and related buying, occupancy and distribution expenses ......................... -- -- -- 481,269 ------------ ------------ ------------ ------------ Gross profit ......................... -- -- -- 222,649 Selling, general and administrative expenses ......................... 19 17 -- 163,752 Store opening and closure costs ...... -- -- -- 2,848 ------------ ------------ ------------ ------------ Operating income (loss) .............. (19) (17) -- 56,049 Interest expense, net ................ -- (4,612) -- 28,158 ------------ ------------ ------------ ------------ Income (loss) before income taxes ........................... (19) 4,595 -- 27,891 Income tax expense (benefit) ......... (7) 1,609 -- 10,878 ------------ ------------ ------------ ------------ Income (loss) before equity in net earnings of subsidiaries and extraordinary item ............... (12) 2,986 -- 17,013 Equity in net earnings of subsidiaries ..................... (505) -- 505 -- ------------ ------------ ------------ ------------ Income (loss) before extraordinary item ............................ (517) 2,986 505 17,013 Extraordinary item - early retirement of debt .............. -- -- -- (17,530) ------------ ------------ ------------ ------------ Net income (loss) .................... $ (517) $ 2,986 $ 505 $ (517) ============ ============ ============ ============
10 CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS NINE MONTHS ENDED OCTOBER 31, 1998 (in thousands, unaudited)
SRI Specialty Receivables SRI SRI Retailers, Inc. Purchase Co. Eliminations Consolidated --------------- ------------ ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net cash used in operating activities $ (70,740) $ (6,413) $ -- $ (77,153) --------------- ------------ ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Intercompany notes/advances ............ (119) -- -- (119) Additions to property, equipment and leasehold improvements ............. (71,202) -- -- (71,202) Proceeds from the sales of accounts receivable, net .................... (7,420) 7,420 -- -- Dividend from subsidiary ............... 1,007 -- (1,007) -- --------------- ------------ ------------ ------------ Net cash provided by (used in) investing activities .......... (77,734) 7,420 (1,007) (71,321) --------------- ------------ ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from working capital facility ........................... 134,650 -- -- 134,650 Proceeds from issuance of common stock .............................. -- -- -- -- Payments on long-term debt ............. (199) -- -- (199) Dividend paid .......................... -- (1,007) 1,007 -- --------------- ------------ ------------ ------------ Net cash provided by (used in) financing activities ............. 134,451 (1,007) 1,007 134,451 --------------- ------------ ------------ ------------ Net decrease in cash and cash equivalents ........................ (14,023) -- -- (14,023) Cash and cash equivalents: Beginning of period ................. 23,299 -- -- 23,299 =============== ============ ============ ============ End of period ....................... $ 9,276 $ -- $ -- $ 9,276 =============== ============ ============ ============ Specialty Stage Retailers, Stage Stores Stores, Inc. Inc. (NV) Eliminations Consolidated ------------ ------------ ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net cash used in operating activities $ (14) $ 990 $ -- $ (76,177) ------------ ------------ ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Intercompany notes/advances ............ (839) 958 -- -- Additions to property, equipment and leasehold improvements ............. -- -- -- (71,202) Proceeds from the sales of accounts receivable, net .................... -- -- -- -- Dividend from subsidiary ............... -- -- -- -- ------------ ------------ ------------ ------------ Net cash provided by (used .......... in) investing activities .......... (839) 958 -- (71,202) ------------ ------------ ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from working capital facility ........................... -- -- -- 134,650 Proceeds from issuance of common stock .............................. 839 -- 839 Payments on long-term debt ............. -- -- -- (199) Dividend paid .......................... -- -- -- -- ------------ ------------ ------------ ------------ Net cash provided by (used in) financing activities ............. 839 -- -- 135,290 ------------ ------------ ------------ ------------ Net decrease in cash and cash equivalents ........................ (14) 1,948 -- (12,089) Cash and cash equivalents: Beginning of period ................. 16 -- -- 23,315 ============ ============ ============ ============ End of period ....................... $ 2 $ 1,948 $ -- $ 11,226 ============ ============ ============ ============
11 CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS NINE MONTHS ENDED NOVEMBER 1, 1997 (in thousands, unaudited)
SRI Specialty Receivables SRI SRI Retailers, Inc. Purchase Co. Eliminations Consolidated --------------- ------------ ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net cash provided by (used in) operating activities ........... $ (439) $ (13,613) $ -- $ (14,052) --------------- ------------ ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Investment in subsidiaries .......... -- -- -- -- Acquisitions, net of cash acquired .. (4,946) -- -- (4,946) Intercompany notes/advances ......... 21,178 -- -- 21,178 Additions to property, equipment and leasehold improvements .......... (41,744) -- -- (41,744) Proceeds from the sales of accounts receivable, net ................. (13,683) 13,683 -- -- --------------- ------------ ------------ ------------ Net cash provided by (used in) investing activities .... (39,195) 13,683 -- (25,512) --------------- ------------ ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from working capital facility ........................ 46,400 -- -- 46,400 Proceeds from issuance of long-term debt ................ 299,720 -- -- 299,720 Proceeds from issuance of common stock .................. -- -- -- -- Payments on long-term debt .......... (297,161) -- -- (297,161) Proceeds from capital contributions . -- -- -- -- Additions to debt issue costs ....... (12,337) (70) -- (12,407) --------------- ------------ ------------ ------------ Net cash provided by (used in) financing activities .......... 36,622 (70) -- 36,552 --------------- ------------ ------------ ------------ Net decrease in cash and cash equivalents ..................... (3,012) -- -- (3,012) Cash and cash equivalents: Beginning of period .............. 18,270 -- -- 18,270 =============== ============ ============ ============ End of period .................... $ 15,258 $ -- $ -- $ 15,258 =============== ============ ============ ============ Stage Stage Stores Stores, Inc. SRI (NV) Eliminations Consolidated ------------ ------------ ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net cash provided by (used in) operating activities ........... $ -- $ 53 $ -- $ (13,999) ------------ ------------ ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Investment in subsidiaries .......... (21,178) -- 21,178 -- Acquisitions, net of cash acquired .. -- -- -- (4,946) Intercompany notes/advances ......... -- (21,178) -- -- Additions to property, equipment and leasehold improvements .......... -- -- -- (41,744) Proceeds from the sales of accounts receivable, net ................. -- -- -- -- ------------ ------------ ------------ ------------ Net cash provided by (used in) investing activities .... (21,178) (21,178) 21,178 (46,690) ------------ ------------ ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from working capital facility ........................ -- -- -- 46,400 Proceeds from issuance of long-term debt ................ -- -- -- 299,720 Proceeds from issuance of common stock .................. 21,178 (53) -- 21,125 Payments on long-term debt .......... -- -- -- (297,161) Proceeds from capital contributions . -- 21,178 (21,178) -- Additions to debt issue costs ....... -- -- -- (12,407) ------------ ------------ ------------ ------------ Net cash provided by (used in) financing activities .......... 21,178 21,125 (21,178) 57,677 ------------ ------------ ------------ ------------ Net decrease in cash and cash equivalents ..................... -- -- -- (3,012) Cash and cash equivalents: Beginning of period .............. 16 -- -- 18,286 ============ ============ ============ ============ End of period .................... $ 16 $ -- $ -- $ 15,274 ============ ============ ============ ============
12 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS "SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. Certain items discussed or incorporated by reference herein contain forward-looking statements that involve risks and uncertainties including, but not limited to, the seasonality of demand for apparel which can be affected by weather patterns, levels of competition, competitors' marketing strategies, changes in fashion trends and availability of product, the failure to achieve the expected results of merchandising and marketing plans or store opening or closing plans. The occurrence of any of the above could have a material adverse impact on the Company's operating results. Certain information herein contains estimates which represent management's best judgement as to the date hereof based on information currently available; however, the Company does not intend to update this information to reflect developments or information obtained after the date hereof and disclaims any legal obligation to the contrary. GENERAL OVERVIEW. The Company operates the store of choice for nationally recognized brand name family apparel, accessories, cosmetics and footwear in over 500 small towns and communities predominately located across the central United States. The Company has recognized the high level of brand awareness and demand for fashionable, quality apparel by consumers in small markets and has identified these markets as a profitable and underserved niche. The Company has developed a unique franchise focused on these small markets, differentiating itself from the competition by offering a broad range of brand name merchandise with a high level of customer service in convenient locations. The financial information, discussion and analysis that follow should be read in conjunction with the Company's Consolidated Financial Statements included in the Company's 1997 Annual Report on Form 10-K. RESULTS OF OPERATIONS Sales for the three months ended October 31, 1998 decreased 1.0% to $271.6 million from $274.3 million in the comparable period of 1997. The decline in sales was due to a 2.1% decrease in comparable store sales during the quarter as well as the inclusion in last year's sales of a non-recurring liquidation and related grand opening volumes of the 130 CR Anthony stores which were converted to the Company's format and trade names last fall partially offset by $22.5 million in sales from stores opened during 1998. Comparable store sales increased approximately 5% during the first half of the third quarter, driven by aggressive initiatives to liquidate spring and summer clearance merchandise in conjunction with back-to-school promotions. However, these increases were more than offset by declines in the last half of the quarter as the majority of the Company's markets were affected by adverse weather which reduced customer traffic in the Company's stores which continued into the fourth quarter. Sales for the nine months ended October 31, 1998 increased 16.0% to $816.2 million from $703.9 million in the comparable period of 1997. The increase in the nine months ended October 31, 1998 sales was primarily due to an approximately $55.7 million increase in sales from stores opened during 1998 and 1997 which are not included in comparable store sales, an approximately $67.2 million increase in non-comparable sales from the acquired CR Anthony stores, partly offset by a 1.3% decline in comparable store sales. Management believes the majority of the decline in comparable store sales are attributable to the extreme hot weather and drought conditions during the second quarter in a majority of the Company's market area and continued unseasonably warm weather during the third quarter. Gross profit decreased 13.3% to $75.3 million for the third quarter of 1998 from $86.8 million in the comparable period of 1997 and as a rate of sales decreased to 27.7% for the third quarter of 1998 from 31.7% in 1997. The decline in the gross profit rate was largely due to the higher levels of markdowns as a result of the aggressive initiatives undertaken to liquidate the spring and summer clearance merchandise in conjunction with back-to-school promotions, as well as softness in sales experienced in fall products during the later part of the third quarter due to the continued unseasonably warm weather in the majority of the Company's markets which traditionally produce higher margins. Also, the gross margin rate was negatively impacted due to the reductions in sales volume experienced during the third quarter of 1998 without a corresponding reduction in the buying, occupancy and distribution expense components included in cost of goods sold. Gross profit increased 9.9% to $244.7 million for the first three quarters of 1998 from $222.6 million in the comparable period of 1997. Gross profit as a rate of sales decreased to 30.0% for the first three quarters of 1998 from 31.6% in 1997. Contributing to the decline was the higher levels of markdowns associated with initiatives to stimulate traffic during the severe weather conditions in the second quarter and inventory liquidation activities during the third quarter discussed above. 13 Selling, general and administrative expenses for the third quarter ended October 31, 1998 decreased 5.8% to $65.1 million from $69.1 million in the comparable period of 1997. Selling, general and administrative expenses as a percentage of sales for the third quarter of 1998 decreased to 24.0% from 25.2% in the comparable period of 1997. Selling, general and administrative expense benefited from increased income from the Company's proprietary credit card operations as the Company's credit card bank, Granite National Bank, became fully operational during the third quarter which allowed the Company to realize the benefit of the new service charge and late fee rate structure associated with the implementation of the bank. Also included in the prior year third quarter were approximately $2.7 million of certain duplicative and one-time costs associated with the CR Anthony acquisition. Offsetting these reductions in selling, general and administrative expenses was increased advertising expense which as a percentage of sales was 5.2% and 4.4% for the third quarters of 1998 and 1997, respectively, and 4.3% and 3.9% for the first nine months of 1998 and 1997, respectively. Selling, general and administrative expenses for the nine months ended October 31, 1998 increased to $194.6 million from $163.8 million in the comparable period of 1997. Selling, general and administrative expenses as a percentage of sales for the first three quarters of 1998 increased to 23.8% from 23.3% in the comparable period of 1997. Factors contributing to the increase in selling, general and administrative expenses as a percent of sales were the comparable store sales declines during the second and third quarters and the increased advertising expense to stimulate customer traffic. Store opening and closure costs were $2.9 million for the third quarter of 1998 as compared to $1.9 million for the same period of 1997. Store opening and closure costs for the first three quarters of 1998 increased to $4.9 million from $2.8 million for the same period of 1997. The rise in store openings and closure costs was due to an increase in the number of stores opened during the first nine months of 1998 as compared to the same period in 1997. Operating income for the three months ended October 31, 1998 decreased to $7.2 million from $15.8 million for the same period of 1997. Operating income as a percent of sales for the three months ended October 31, 1998 was 2.7% as compared to 5.8% for the same period of 1997 due to the factors discussed above. Operating income for the nine months ended October 31, 1998 decreased to $45.2 million from $56.0 million for the same period of 1997. Operating income as a percent of sales for the nine months ended October 31, 1998 was 5.5% as compared to 8.0% for the same period of 1997. Net interest expense for the third quarter of 1998 increased 26.5% to $12.4 million from $9.8 million for the comparable period in 1997 due to higher levels of borrowings associated with the Company's expansion program and the impact of the reduced sales volume in the third quarter of 1998. Net interest expense for the first three quarters of 1998 increased 21.6% to $34.3 million from $28.2 million for the comparable period in 1997 due to higher levels of borrowings as noted above. As a result of the foregoing, the Company's net loss before extraordinary items for the three months ended October 31, 1998 was $3.2 million as compared to net income of $3.7 million for the comparable period in 1997. The Company's net income before extraordinary items for the nine months ended October 31, 1998 decreased to $6.6 million as compared to $17.0 million for the comparable period in 1997. SEASONALITY AND INFLATION The Company's business is seasonal and its quarterly sales and profits are traditionally lower during the first three quarters (February through October) and higher during the fourth quarter (November through January). In addition, working capital requirements fluctuate throughout the year, increasing substantially in October and November due to requirements for significantly higher inventory levels in anticipation of the holiday season. 14 The following table shows certain unaudited financial information for the Company by quarter (in thousands):
1998 1997 ------------------------------- ---------------------------------------------- Q1 Q2 Q3 Q1 Q2 Q3 Q4 -------- -------- --------- -------- --------- -------- -------- Net sales ............. $272,788 $271,805 $ 271,605 $191,512 $ 238,137 $274,269 $369,398 Gross profit .......... 87,225 82,239 75,252 61,925 73,902 86,822 120,488 Operating income ...... 25,278 12,678 7,226 20,524 19,736 15,789 38,391 Quarters' operating income as a percent of total ................ -- -- -- 22% 21% 17% 40% Income (loss) before extraordinary items ................ $ 9,035 $ 765 $ (3,152) $ 7,094 $ 6,246 $ 3,673 $ 17,527 Net income (loss) ..... $ 9,035 $ 765 $ (3,152) $ 7,094 $ (11,134) $ 3,523 $ 16,762
The Company does not believe that inflation had a material effect on its results of operations during the past two years. However, there can be no assurance that the Company's business will not be affected by inflation in the future. LIQUIDITY AND CAPITAL RESOURCES Total working capital increased $12.5 million to $330.6 million at October 31, 1998 from $318.1 million at January 31, 1998. The most significant changes in working capital were: (i) an increase in inventories associated with the 105 CR Anthony stores which the Company converted to its format and trade names during the first half of 1998 and the 76 new stores opened during the current year and the seasonal build of inventories in anticipation of the Christmas selling season; (ii) an increase in accounts payable associated with the increase in inventory; and (iii) the timing of interest payments on the Company's long-term debt. Prepaid expenses increased primarily due to the prepaid expenses associated with new store openings and the conversion of the CR Anthony stores. The increase in accrued and other current liabilities is principally due to the classification of $80.4 million of the outstanding balance under the Company's Credit Facility as short-term due to the clean-down provision of the Credit Facility. The Company's primary capital requirements are for working capital, debt service and capital expenditures. Based upon the current capital structure, management anticipates cash interest payments to be approximately $44.0 million during each of 1998 and 1999. Capital expenditures are generally for new store openings, remodeling of existing stores and facilities and customary store maintenance. Capital expenditures for the first nine months of 1998 were $71.2 million as compared to $41.7 million for the comparable period of 1997 as a result of an increase in the number of new stores opened as well as the conversion of the remaining CR Anthony stores to the Company's format and trade names. Management expects capital expenditures to be approximately $87.0 million during 1998, consisting primarily of 86 new store openings, remodeling of existing stores, the conversion of the majority of the remaining CR Anthony stores to the Company's format and the implementation of a new merchandising system. Required aggregate principal payments on debt total $2.7 million and $4.9 million for 1998 and 1999, respectively. The Company's current short-term liquidity needs are provided by (i) existing cash balances, (ii) operating cash flows, (iii) the Accounts Receivable Program and (iv) the Credit Facility. The Company expects to fund its long-term liquidity needs from its operating cash flows, the issuance of debt and/or equity securities, the securitization of its accounts receivable and bank borrowings. Outstanding borrowings under the Credit Facility were $180.4 million at October 31, 1998 as compared to $45.7 million at January 31, 1998. The Company had $7.2 million of availability under the Credit Facility at October 31, 1998. The outstanding balances under the revolving certificates associated with the Accounts Receivable Program were $81.4 million and $77.0 million at October 31, 1998 and January 31, 1998, respectively, while outstanding balances under term certificates were $165.0 million at both October 31, 1998 and January 31, 1998. The Company continually monitors its liquidity position and compliance with its various debt agreements. During the third quarter of 1998, the Company's Credit Facility was amended to reduce certain covenant requirements and clarify certain defined terms contained in the Credit Facility. The Company also amended the revolving certificates associated with the Accounts Receivable Program to increase the limit that may be outstanding from $82.5 million to $165 million through March 31, 1999 to reflect the growth in the Company's accounts receivable portfolio. The maximum outstanding under the revolving certificate will be reduced to $144.4 million from April 1, 1999 to September 30, 1999 and $82.5 million thereafter. In addition, a new class of certificates was created to allow for up to an additional $10 million to be outstanding 15 from October 16, 1998 through December 24, 1998. Management believes that funds provided by operations, together with funds available under the Credit Facility and the Accounts Receivable Program will be adequate to meet the Company's anticipated requirements for working capital, interest payments, planned capital expenditures and principal payments on debt. Estimates as to working capital needs and other expenditures may be materially affected if the foregoing sources are not available or do not otherwise provide sufficient funds to meet the Company's obligations. YEAR 2000 The Year 2000 issue relates to the way computer systems and programs define calendar dates. They could fail or make miscalculations due to interpreting a date including "00" to mean 1900, not 2000. Also, other systems and equipment may contain imbedded hardware or software that may have a time element and affect their operation. The Company began working on the Year 2000 compliance issue in 1996 and heightened its focus and resource commitment in 1997 with the establishment of a formalized project plan and management oversight function. The Company has divided its Year 2000 risk assessment and remediation efforts into the following three categories: information systems, peripheral systems and hardware, and third party vendors. The Company has completed the evaluation of its critical information systems infrastructure for Year 2000 compliance and has developed detailed work plans to achieve compliance prior to anticipated system failures. The systems have been segregated into the following five logical, manageable groups: (1) human resource, time keeping, and payroll systems (2) point-of-sale and sales audit systems (3) credit systems (4) financial reporting and accounts payable systems, and (5) merchandising systems. Year 2000 remediation is being addressed through a combination of modifications or upgrades to existing applications or replacement. The Company has dedicated in-house resources and has contracted with third party vendors to complete the necessary coding changes, testing and installation. The five groups of systems are in various stages of completion. The Company estimates Year 2000 readiness related to information systems is presently 40% complete and anticipates will be 65% complete by the end of the current fiscal year and substantially complete by the end of the second quarter of fiscal year 1999. The Company has substantially completed an inventory of its major peripheral systems and hardware and is in the process of assessing and remediating Year 2000 non-compliance issues. These include, but are not limited to, mainframe computer hardware and operating systems, communications networks, personal computers and network systems, printers, store register systems and processors, scanners, and emergency power systems. The Company estimates Year 2000 readiness related to peripheral systems and hardware is presently 50% complete and anticipates will be 75% complete by the end of the current fiscal year and substantially complete by the end of the second quarter of fiscal year 1999. The Company presently has limited information concerning the Year 2000 compliance status of its suppliers. The Company has identified its major suppliers and has sent a survey letter which will be used to evaluate the Company's vulnerability to these vendors failure to remedy their own Year 2000 issues. The necessity for contingency planning related to suppliers will be assessed upon completion and review of the survey results. The Company is installing a new merchandising system which is anticipated to be completed during the first half of 1999. If installation is not complete, the Company has made arrangements with the third party presently working on the Company's Year 2000 compliance issues to remediate the legacy system. The Company's plan is to have addressed its significant Year 2000 issues prior to being affected by them. However, if the Company identifies risks related to Year 2000 compliance or its progress deviates from the anticipated timeline, the Company will develop contingency plans as deemed necessary at that time. It is currently estimated that the aggregate cost of the Company's Year 2000 efforts paid to third parties to assist in remediation will be approximately $2.3 million, of which approximately $1.0 million has been spent. These costs are being expensed as incurred. These amounts do not include any costs associated with the implementation of contingency plans or the cost associated with the replacement of information systems, hardware or equipment, substantially all of which would be capitalized. The failure to correct a material Year 2000 problem could result in an interruption in certain normal business activities or operations. Presently, the Company does not anticipate any material disruption in its operations as a result of any failure by the Company to be in compliance. The Company has limited information concerning Year 2000 compliance status of its suppliers. In the event that the Company or any of its significant suppliers does not successfully and timely achieve Year 2000 compliance, the Company's business or operations could be adversely affected. 16 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS None. ITEM 2. CHANGES IN SECURITIES On November 2, 1998, the Board of Directors of the Company, in conjunction with the adoption of a Stockholder Rights Plan, declared a dividend of one Preferred Stock Purchase Right (the "Right(s)") for each outstanding share of Common Stock, par value $0.01 per share, of the Company. The dividend is payable as of November 13, 1998 to stockholders of record on that date. Each Right entitles the registered holder to purchase from the Company one one-hundred thousandth (1/100,000) of a share of a new series of preferred shares of the Company, designated as Series A Junior Preferred Stock, at a price of $60.00 per one one-hundred thousandth (1/100,000) of a share, subject to certain adjustments. The description and terms of the Rights are set forth in a Rights Agreement between the Company and ChaseMellon Shareholder Services, L.L.C. as Rights Agent, dated as of November 11, 1998. ITEM 3. DEFAULTS UPON SENIOR SECURITIES None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None. ITEM 5. OTHER INFORMATION None. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits 4.1 Third Amendment Agreement dated as of October 6, 1998 by and among Specialty Retailers, Inc., Stage Stores, Inc., the banks named therein and Credit Suisse First Boston to the Credit Agreement dated as of June 17, 1997. 4.2 Amended and Restated Series 1997-1 Supplement dated as of October 16, 1998 to Amended and Restated Pooling and Servicing Agreement dated as of August 11, 1995 and Amended on May 30, 1996 and August 1, 1998 by and among SRI Receivables Purchase Co., Inc., Specialty Retailers, Inc., and Bankers Trust (Delaware) on behalf of the Series 1997-1 Certificateholders. 4.3 Class B-2 Certificate Purchase Agreement dated as of October 16, 1998 by and among SRI Receivables Purchase Co., Inc., Specialty Retailers, Inc., the Class B-2 Purchasers parties thereto, and Credit Suisse First Boston. 4.4 Amendment No. 1 to Class A Certificate Purchase Agreement dated as of October 16, 1998 by and among SRI Receivables Purchase Co., Inc., Specialty Retailers, Inc., the Class A Purchasers parties thereto and Credit Suisse First Boston. 4.5 Amendment No. 1 to Class B Certificate Purchase Agreement dated as of October 16, 1998 by and among SRI Receivables Purchase Co., Inc., Specialty Retailers, Inc., the Class B Purchasers parties thereto and Credit Suisse First Boston. 27.1 Financial Data Schedule. 17 (b) Reports on Form 8-K The Company filed a News Release on Form 8-K dated September 16, 1998 related to Stage Stores, Inc. third quarter 1998 sales update. The Company filed a News Release on Form 8-K dated November 5, 1998 related to Stage Stores, Inc.'s Board adopting a rights plan and third quarter 1998 sales results. The Company filed a News Release on Form 8-K dated November 12, 1998 related to Stage Stores, Inc. announcing the resignation of the Chief Merchandising Officer. The Company filed a Form 8-K on November 12, 1998 related to the adoption of the stockholder rights plan. Filed as exhibit was the Rights Agreement dated as of November 11, 1998 between Stage Stores, Inc. and ChaseMellon Shareholder Services, L.L.C. as Rights Agent. The Company filed a News Release on Form 8-K dated November 19, 1998 related to Stage Stores, Inc. third quarter and nine months 1998 results. 18 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. STAGE STORES, INC. DECEMBER 15, 1998 /S/ CARL E. TOOKER (Date) Carl E. Tooker Chairman, Chief Executive Officer and President (principal executive officer) DECEMBER 15, 1998 /S/ JAMES A. MARCUM (Date) James A. Marcum Vice Chairman and Chief Financial Officer (principal financial and accounting officer) 19 EX-4.1 2 EXHIBIT 4.1 THIRD AMENDMENT AGREEMENT This THIRD AMENDMENT AGREEMENT, dated as of October 7, 1998 (the "Agreement"), is among Specialty Retailers, Inc. (the "Borrower"), Stage Stores, Inc. (the "Parent"), the banks named therein (the "Banks") and Credit Suisse First Boston, as Administrative Agent, Collateral Agent, Swingline Bank and L/C Bank (the "Administrative Agent"). PRELIMINARY STATEMENT WHEREAS, the Borrower, the Parent, the Banks and the Administrative Agent are parties to the Credit Agreement, dated as of June 16, 1997 (the "Credit Agreement"); WHEREAS, the Borrower has requested the amendment of certain provisions set forth in the Credit Agreement; WHEREAS, the Banks have agreed to amend the specific provisions set forth herein under the terms and conditions set forth herein; NOW, THEREFORE, the parties hereto hereby agree as follows: 1. SECTION DEFINED TERMS. Capitalized terms used and not defined herein shall have the meanings assigned to such terms in the Credit Agreement. 2. 3. SECTION AMENDMENTS. The Banks hereby agree to amend the Credit Agreement as follows: 4. (a) Section 1.1 of the Credit Agreement is hereby amended by deleting the definition of "Consolidated EBITDA" in its entirety and replacing it with the following: (b) (c) ""Consolidated EBITDA" shall mean, for any period, the sum, without duplication, of (i) Consolidated Net Income for such period PLUS (ii) Consolidated Interest Expense for such period PLUS (iii) amortization of deferred Indebtedness issuance costs and expenses for such period PLUS (iv) federal and state income taxes deducted in calculating Consolidated Net Income for such period, PLUS (v) to the extent deducted in the calculation of Consolidated Net Income for such period, depreciation and amortization expense PLUS (vi) to the extent deducted in the calculation of Consolidated Net Income for such period, any noncash charges related to the issuance by the Parent or any of its Subsidiaries of stock, warrants or options to any employee thereof (or any exercise of any such warrants or options) or any re-valuation of such stock, warrants or options, MINUS to the extent added to the calculation of Consolidated Net Income for such period, any non- cash gain related to the issuance by the Parent or any of its Subsidiaries of stock, warrants or options to any employee thereof (or any exercise of any such warrants or options) or any re-valuation of such stock, warrants or options, all determined on a consolidated basis for the Parent and its Subsidiaries in accordance with GAAP." (d) (e) Section 1.1 of the Credit Agreement is hereby amended by deleting the definition of "Consolidated Interest Expense" in its entirety and replacing it with the following: (f) (g) ""Consolidated Interest Expense" shall mean, for any fiscal period of the Parent, the total interest expense (including, without limitation, interest expense attributable to Capital Leases in accordance with GAAP) of the Parent and its Subsidiaries for such period, MINUS all interest earnings received by the Parent and its Subsidiaries in cash during such period, minus amortization of deferred Indebtedness issuance costs and expenses for such period, in each case determined on a consolidated basis in accordance with GAAP." (h) (i) The definition of "Consolidated Net Income" in Section 1.1 of the Credit Agreement is hereby amended by adding the following at the end of clause (e): (j) "and there shall be included all restructuring charges taken by the end of the fourth quarter of fiscal year 1998 of up to $16,000,000 of which no more than $2,500,000 is permitted to be charges which will be settled by the Borrower by making cash payments to any third party ("Cash Closure Charges"), determined on a consolidated basis for the Parent and its Subsidiaries in accordance with GAAP" (a) The definition of "Excess Cash Flow" in Section 1.1 of the Credit Agreement is hereby amended by (i) inserting the words "plus amortization of deferred Indebtedness issuance costs and expenses for such period" after the words "fiscal period" in clause (iii) of the definition, (ii) inserting the words ", Retained Offering Proceeds" after the words "Retained Equity Proceeds" within the parenthetical of clause (vi) of the definition and (iii) by adding the following at the end of clause (ix): (b) "MINUS (x) Cash Closure Charges of up to $2,500,000 taken by the end of the fourth quarter of fiscal year 1998" (a) Section 1.1 of the Credit Agreement is hereby amended by adding the following definition in correct alphabetical order: (b) (c) ""Permitted Senior Debt" shall mean unsecured Indebtedness of the Borrower if (i) such Indebtedness has no amortization or required sinking fund pay- ments and a final maturity no earlier than, and provisions no more onerous or restrictive on the Borrower and no less favorable to the Banks in any respect deemed material by the Required Banks than, those terms and provisions of the Senior Notes, (ii) the interest rate payable in respect of such Indebtedness shall be a market interest rate as of the time of the incurrence thereof and shall not, in case of Indebtedness bearing interest at a floating rate, exceed the rate of interest payable on the Loans and Swingline Loans, (iii) each of the covenants, events of default and other provisions thereof shall be customary for issuances of similar indebtedness by companies in a similar financial condition to the Borrower in accordance with prevailing market conditions in effect at the time of the issuance thereof and in any event shall be no more onerous or restrictive on the Borrower than those contained in the Senior Notes and (iv) the Net Cash Proceeds thereof shall have been applied to the prepayment of the Loans to the extent provided in Section 2.12(b)." (d) (e) Section 1.1 of the Credit Agreement is hereby amended by adding the following sentence to the end of the definition of "Retained Equity Proceeds": (f) (g) "Notwithstanding the foregoing, only 75% of the first $50,000,000 of Net Cash Proceeds received from New Equity Issuances during the period from September 30, 1998 through January 31, 2000, shall be included in Retained Equity Proceeds." (h) (i) Section 1.1 of the Credit Agreement is hereby amended by adding the following definition in the correct alphabetical order: (j) (k) ""Retained Offering Proceeds" shall mean at any time the cumulative amount of (i) 30% of the Net Cash Proceeds received by the Borrower from the issuance of Permitted Senior Debt and (ii) 40% of the Net Cash Proceeds received by the Borrower from the issuance of Permitted Subordinated Debt, in each case, to the extent such Net Cash Proceeds are not required to be applied to the prepayment of the Loans and Swingline Loans pursuant to Section 2.12(b) MINUS the amount thereof previously applied to make additional Capital Expenditures pursuant to Section 6.1(d)." (l) (m) Section 2.12(e) of the Credit Agreement is hereby amended by adding the following new sentence at the end thereof: (n) (o) "Notwithstanding the foregoing, for the period from October 7, 1998 through January 31, 2000, no prepayment of Expansion Loans under this Section 2.12(e) shall be required for the first $50,000,000 of Net Cash Proceeds received by the Parent or any of its Subsidiaries from Equity Issuances other than Equity Issuances in connection with the exercise of outstanding options, warrants, purchase rights or conversion rights ("New Equity Issuances") during such period. The amount of Net Cash Pro- ceeds received from New Equity Issuances in excess of $50,000,000 during this period shall be applied in accordance with the first sentence of this Section 2.12(e)." (p) (q) Section 6.1(a)(i) of the Credit Agreement is hereby amended by deleting the grid set forth therein and replacing it with the following: (r) DATE RATIO --------- ----- October 31, 1998 ................................... 5.1:1 From January 31, 1999 until the third anniversary of the Closing Date ............ 4.5:1 From the third anniversary of the Closing Date and thereafter ...................... 4.0:1 (a) Section 6.1(b) of the Credit Agreement is hereby amended by deleting the grid set forth therein and replacing it with the following: (b) DATE RATIO ---------- ------ October 31, 1998 .................................. 2.25:1 January 31, 1999 .................................. 2.25:1 April 30, 1999 .................................... 2.25:1 From July 31, 1999 until the third anniversary of the Closing Date ........... 2.5:1 From the third anniversary of the Closing Date and thereafter ..................... 3.0:1 (a) Section 6.1(d) of the Credit Agreement is hereby amended by (i) deleting the number "$63,000,000" opposite the year 1999 and replacing it with the number "$50,000,000", (ii) inserting the words "other than in fiscal year 1999" after the words "fiscal year" in the third line of the first proviso and after the words "fiscal year" in the seventh line of the proviso, (iii) inserting the words "and Retained Offering Proceeds" after the words "Retained Equity Proceeds" in clause (b) of the first proviso and (iv) adding at the end thereof the following: (b) (c) "During the fiscal year of the Parent ending closest to December 31, 1999, the usage of the maximum dollar amount set forth above is restricted in the fol- lowing manner: (i) a maximum of $20,000,000 may be used to finance capital expenditures for maintenance of existing stores and central offices and (ii) a maximum of $5,000,000 in the aggregate may be used to finance capital expenditures for new stores; PROVIDED HOWEVER, that the sum of capital expenditures for (i) and (ii) shall not exceed $12,000,000 in the first fiscal quarter of fiscal year 1999. In addition, if (a) the average outstanding Loans during December, 1998 and January, 1999 is less than $125,000,000 and (b) the Parent has Consolidated EBITDA in excess of $70,000,000 on a combined basis in the third and fourth fiscal quarters of fiscal year 1998, then the Borrower shall be permitted to make additional capital expenditures for new stores during fiscal year 1999 in an amount not to exceed $5,000,000 in the aggregate. Subject to the maximum dollar amount set forth above opposite the year 1999, during fiscal year 1999, the Borrower shall be permitted to apply up to 30% of the Net Cash Proceeds of the issuance of Permitted Senior Debt, 40% of the Net Cash Proceeds of the issuance of Permitted Subordinated Debt and, to the extent permitted under Section 2.12(e), 75% of the Net Cash Proceeds of an Equity Issuance to finance capital expenditures." (d) (e) Section 6.2(e) of the Credit Agreement is hereby amended by adding after the words "Permitted Subordinated Debt" the words "or Permitted Senior Debt". (f) (g) Except as otherwise specified above, there is no amendment of any other term, condition or provision of the Credit Agreement all of which are hereby ratified and confirmed by the Borrower and the Parent. (h) 2. SECTION REPRESENTATIONS AND WARRANTIES; NO DEFAULTS. Each Loan Party hereby represents and warrants that after giving effect to the amendments set forth in Section 2 of this Agreement, (a) the representations and warranties contained in the Credit Agreement and Loan Documents are correct on the effective date of this Agreement, and (b) no Default or Event of Default has occurred or is continuing on the date hereof and on the effective date of this Agreement. 3. 4. SECTION COUNTERPARTS. This Agreement (a) may be executed in two or more counterparts, each of which shall be deemed an original, but all of which taken together shall constitute one and the same instrument, (b) shall be effective only in this specific instance for the specific purpose set forth herein, and (c) does not allow any other or further departure from the terms of the Credit Agreement or the Loan Documents, which terms shall continue in full force and effect. 5. 6. SECTION CONDITIONS TO EFFECTIVENESS. This Agreement shall become effective as of the date hereof when (a) copies hereof, when taken together, bearing the signatures of each of the Loan Parties and the Required Banks have been received by the Administrative Agent and (b) an amendment fee of 0.25% of the Commit- ments of the Banks who have returned executed signature pages of this Agreement to the Administrative Agent by 5:00 p.m. New York City time on Wednesday, October 7, 1998 has been received from the Borrower by the Administrative Agent. 7. 8. SECTION APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their duly authorized officers, all as of the date and year first written above. SPECIALTY RETAILERS, INC. By: /S/ MARK HESS Name: Mark Hess Title: Treasurer STAGE STORES, INC. By: /S/ MARK HESS Name: Mark Hess Title: Treasurer CREDIT SUISSE FIRST BOSTON, as Administrative Agent, Collateral Agent, Swingline Bank and L/C Bank By: /S/ CHRIS T. HORGAN Name: Chris T. Horgan Title: Vice President By: /S/ GREGORY R. PERRY Name: Gregory R. Perry Title: Vice President BEAR STEARNS INVESTMENT PRODUCTS INC. By: /S/ HARRY ROSENBERG Name: Harry Rosenberg Title: Authorized Signatory BANK UNITED By: /S/ PHIL GREEN Name: Phil Green Title: Director, Financial Markets BANQUE WORMS CAPITAL CORPORATION By: /S/ F. GARNET Name: F. Garnet Title: Senior Vice President By: /S/ C. DEKLERK Name: C. deKlerk Title: Vice President PARIBAS (f/k/a BANQUE PARIBAS HOUSTON AGENCY) By: /S/ CHERYL JOHNSON Name: Cheryl Johnson Title: Assistant Vice President By: /S/ ROSINE K. MATTHEWS Name: Rosine K. Matthews Title: Vice President BANK AUSTRIA CREDITANSTALT CORPORATION FINANCE, Inc. F.K.A. Creditanstalt Corporation Finance, Inc. By: /S/ CARL G. DRAKE Name: Carl G. Drake Title: Vice President By: /S/ JOHN G. TAYLOR Name: John G. Taylor Title: Senior Associate HIBERNIA NATIONAL BANK By: /S/ TROY J. VILLAFARRA Name: Troy J. Villafarra Title: Senior Vice president IMPERIAL BANK, A CALIFORNIA BANKING CORPORATION By: /S/ JAMIE HARNEY Name: Jamie Harney Title: Vice President ROYAL BANK OF SCOTLAND By: /S/ DEREK BONNAR Name: Derek Bonnar Title: Vice President THE FUJI BANK, LIMITED By: /S/ TEIJI TERAMOTO Name: Teiji Teramoto Title: Vice President & Manager UNION BANK OF CALIFORNIA, N.A. By: /S/ RICHARD P. DEGREY Name: Richard P. Degrey Title: Vice President FIRST COMMERCIAL BANK By: /S/ VINCENT T. C. CHEN Name: Vincent T. C. Chen Title: Senior Vice President And General Manager EX-4.2 3 EXHIBIT 4.2 SRI RECEIVABLES PURCHASE CO., INC. Transferor SPECIALTY RETAILERS, INC. Servicer and BANKERS TRUST (DELAWARE) Trustee on behalf of the Series 1997-1 Certificateholders AMENDED AND RESTATED SERIES 1997-1 SUPPLEMENT Dated as of October 16, 1998 to AMENDED AND RESTATED POOLING AND SERVICING AGREEMENT Dated as of August 11, 1995 and Amended on May 30, 1996 and August 1, 1998 Class A-1 Variable Funding Certificates, Series 1997-1 Class B-1 Variable Funding Certificates, Series 1997-1 Class B-2 Variable Funding Certificates, Series 1997-1 Class C-1 Variable Funding Certificates, Series 1997-1 SRI RECEIVABLES MASTER TRUST TABLE OF CONTENTS PAGE SECTION 1. Designation 1 SECTION 2. Definitions 1 SECTION 3. Reassignment Terms 28 SECTION 4. Delivery and Payment for the Series 1997-1 Variable Funding Certificates 29 SECTION 5. Form of Delivery of Series 1997-1 Variable Funding Certificates 29 SECTION 6. Article IV of Agreement 29 ARTICLE IV: RIGHTS OF CERTIFICATEHOLDERS ANDALLOCATION AND APPLICATION OF COLLECTIONS 29 Section 4.2 Establishment of Accounts 29 Section 4.4 Rights of Certificateholders 31 Section 4.5 Collections and Allocation; Payments on Exchangeable Transferor Certificate 31 Section 4.6 Application of Funds on Deposit in the Collection Account for the Certificates 32 Section 4.7 Coverage of Required Amount and Spread Account for the Series 1997-1 Variable Funding Certificates. 42 Section 4.8 Payment of Certificate Interest and Other Amounts 45 Section 4.9 Payment of Certificate Principal 48 Section 4.10 Investor Charge-Offs 51 Section 4.11 Shared Principal Collections 52 SECTION 7. Article V of the Agreement 52 ARTICLE V: DISTRIBUTIONS AND REPORTS TO INVESTOR CERTIFICATEHOLDERS 52 Section 5.1 Distributions 52 Section 5.2 Certificateholders' Statement 55 SECTION 8. Series 1997-1 Pay Out Events 57 SECTION 9. Article VI of the Agreement 59 Section 6.15 Additional Invested Amounts 59 Section 6.16 Extension 63 SECTION 10. Series 1997-1 Termination 65 SECTION 11. Limitation on Changes in Invested Amount. 65 SECTION 12. Legends; Transfer and Exchange; Restrictions on Transfer of Series 1997-1 Variable Funding Certificates; Tax Treatment 65 SECTION 13. Successor Trustee 73 SECTION 14. Notice to Facility Agent 73 SECTION 15. Charge Account Agreements and Credit and Collection Policies 73 SECTION 16. Successor Servicer 74 SECTION 17. Series 1997-1 Investor Exchange; Certificate Defeasance 74 SECTION 18. Ratification of Agreement 75 SECTION 19. Counterparts 75 SECTION 20. GOVERNING LAW 75 SECTION 21. The Trustee 75 SECTION 22. Instructions in Writing 75 SECTION 23. Amendment 76 SECTION 24. Discount Option 76 SECTION 25. Rating Agency Condition 76 EXHIBITS EXHIBIT A-1 Form of Class A VFC EXHIBIT A-2 Form of Class B VFC EXHIBIT A-3 Form of Class B-2 VFC EXHIBIT A-4 Form of Class C VFC EXHIBIT B Form of Monthly Certificateholders' Statement EXHIBIT C Form of Extension Notice EXHIBIT D Form of Investor Certificateholder Election Notice EXHIBIT E Form of 144A Exchange Note and Certification EXHIBIT F Representation Letter THE AMENDED AND RESTATED SERIES 1997-1 SUPPLEMENT, dated as of October 16, 1998 (the "SERIES SUPPLEMENT") by and among SRI RECEIVABLES PURCHASE CO., INC., a corporation organized and existing under the laws of the State of Delaware, as Transferor (the "TRANSFEROR"), SPECIALTY RETAILERS, INC., a corporation organized and existing under the laws of Texas, as Servicer (the "SERVICER"), and BANKERS TRUST (DELAWARE), a banking corporation organized and existing under the laws of the State of Delaware as trustee (together with its successors in trust thereunder as provided in the Agreement referred to below, the "TRUSTEE") under the Amended and Restated Pooling and Servicing Agreement dated as of August 11, 1995, and amended as of May 30, 1996 and as of August 1, 1998 (as it may be amended hereafter, the "AGREEMENT"), among the Transferor, the Servicer and the Trustee. The original Series 1997-1 Supplement among the parties hereto was entered into on December 3, 1997 and was amended as of September 28, 1998. This Series Supplement amends and restates in its entirety such original Series 1997-1 Supplement, as heretofore amended. Section 6.9 of the Agreement provides, among other things, that the Transferor and the Trustee may at any time and from time to time enter into a supplement to the Agreement for the purpose of authorizing the issuance by the Trustee to the Transferor, for execution and redelivery to the Trustee for authentication, one or more Series of Certificates. Pursuant to this Series Supplement, the Transferor and the Trustee shall create a new Series of Investor Certificates and shall specify the Principal Terms thereof. SECTION 1. DESIGNATION. There is hereby created a Series of Investor Certificates to be issued pursuant to the Agreement and this Series Supplement to be known generally as the "SERIES 1997-1 VARIABLE FUNDING CERTIFICATES." The Series 1997-1 Variable Funding Certificates shall be issued in four Classes, which shall be designated generally as the Class A-1 Variable Funding Certificates, Series 1997-1 (the "CLASS A VFCS" or the "CLASS A CERTIFICATES"), the Class B-1 Variable Funding Certificates, Series 1997-1 (the "CLASS B VFCS" or the "CLASS B CERTIFICATES"), the Class B-2 Variable Funding Certificates, Series 1997-1 (the "CLASS B-2 VFCS" or the "CLASS B-2 CERTIFICATES") and the Class C-1 Variable Funding Certificates, Series 1997-1 (the "CLASS C VFCS" or the "CLASS C CERTIFICATES"). SECTION 2. DEFINITIONS. In the event that any term or provision contained herein shall conflict with or be inconsistent with any provision contained in the Agreement, the terms and provisions of this Series Supplement shall govern with respect to the Series 1997-1 Variable Funding Certificates. All Article, Section or subsection references herein shall mean Article, Section or subsections of the Agreement, as amended or supplemented by this Series Supplement, except as otherwise provided herein. All capitalized terms not otherwise defined herein are defined in the Agreement. Each capitalized term defined herein shall relate only to the Series 1997-1 Variable Funding Certificates and no other Series of Certificates issued by the Trust. "ACCOUNT CAP" shall mean, with respect to any applicable period, the sum of (i) the Account Cap Base Percentage, (ii) the Account Cap Payment Rate Adjustment Percentage and (iii) the Account Cap Dilution Rate Adjustment Percentage MINUS (iv) the Account Cap Holiday Adjustment Factor. The "ACCOUNT CAP BASE PERCENTAGE" for a Determination Date shall mean the percentage specified in column (C) of the Account Cap Base Table that corresponds to the Account Cap Base Effective Level for such Determination Date. The "ACCOUNT CAP BASE TABLE" is as follows: ------------------------------------------------------- (A) (B) (C) (D) Max ESP Min ESP ACBP Level ------------------------------------------------------- n/a 3.00% 0.00% 7 ------------------------------------------------------- 3.00% 2.50 0.50 6 ------------------------------------------------------- 2.50 2.00 1.00 5 ------------------------------------------------------- 2.00 1.50 1.50 4 ------------------------------------------------------- 1.50 1.00 2.00 3 ------------------------------------------------------- 1.00 0.50 2.50 2 ------------------------------------------------------- 0.50 n/a 3.00 1 ------------------------------------------------------- The "ACCOUNT CAP BASE EFFECTIVE LEVEL" shall mean, on any Determination Date, the Account Cap Base Last Month Level calculated on such Determination Date; provided, however, that (i) if the Account Cap Base Last Month Level calculated on such Determination Date is equal to or less than both the Account Cap Base Three Month Level and the Account Cap Base Six Month Level, as calculated on such Determination Date, then the Account Cap Base Effective Level shall mean the lower of such Account Cap Base Three Month Level and such Account Cap Base Six Month Level, or (ii) if the Account Cap Base Last Month Level calculated on such Determination Date is greater than the Account Cap Base Three Month Level calculated on such Determination Date, the Account Cap Base Effective Level shall mean such Account Cap Base Three Month Level. The "ACCOUNT CAP BASE LAST MONTH LEVEL" shall mean, on the Initial Determination Date, the Account Cap Base Three Month Level, and on any Determination Date following the Initial Determination Date, the Account Cap Base Effective Level as of the preceding Determination Date. The "ACCOUNT CAP BASE SIX MONTH LEVEL" for a Determination Date shall be the level specified in column (D) of the Account Cap Base Table at which the Six Month Excess Spread Percentage calculated on such Determination Date is less than or equal to the percentage specified in column (A) of the Account Cap Base Table but in excess of the percentage specified in column (B) of the Account Cap Base Table. The "ACCOUNT CAP BASE THREE MONTH LEVEL" for a Determination Date shall be the level specified in column (D) of the Account Cap Base Table at which the Three Month Excess Spread Percentage calculated on such Determination Date is less than or equal to the percentage specified in column (A) of the Account Cap Base Table but in excess of the percentage specified in column (B) of the Account Cap Base Table. The "ACCOUNT CAP DILUTION RATE ADJUSTMENT PERCENTAGE" for a Determination Date shall mean the percentage specified in column (C) of the Account Cap Dilution Rate Table that corresponds to the Account Cap Dilution Rate Effective Level for such Determination Date. The "ACCOUNT CAP DILUTION RATE TABLE" is as follows: ------------------------------------------------------- (A) (B) (C) (D) Max 12M DR Min 12M DR ACDRAP Level ------------------------------------------------------- n/a 4.00% 6.00% 4 ------------------------------------------------------- 4.00% 3.00% 4.00% 3 ------------------------------------------------------- 3.00 2.50 2.00 2 ------------------------------------------------------- 2.50 n/a 0.00 1 ------------------------------------------------------- The "ACCOUNT CAP DILUTION RATE CURRENT LEVEL" for a Determination Date shall be the level specified in column (D) of the Account Cap Dilution Rate Table at which the Twelve Month Dilution Rate calculated on such Determination Date is less than or equal to the percentage specified in column (A) of the Account Cap Dilution Table but in excess of the percentage specified in column (B) of the Account Cap Dilution Table. The "ACCOUNT CAP DILUTION RATE EFFECTIVE LEVEL" shall mean, on any Determination Date, the highest Account Cap Dilution Rate Current Level calculated on any of such Determination Date and the preceding five Determination Dates (or such lesser number of Determination Dates as have occurred since the Series 1997-1 Closing Date). "ACCOUNT CAP HOLIDAY ADJUSTMENT FACTOR" shall mean, for a Determination Date related to a December Monthly Period or a January Monthly Period, (i) 0.50%, if the Account Cap Base Percentage would otherwise be 0.50% and if the Default Ratio calculated on such Determination Date is equal to or less than 13.0%, and (ii) zero, otherwise. The "ACCOUNT CAP PAYMENT RATE ADJUSTMENT PERCENTAGE" for a Determination Date shall mean the percentage specified in column (C) of the Account Cap Payment Rate Table that corresponds to the Account Cap Payment Rate Effective Level for such Determination Date. The "ACCOUNT CAP PAYMENT RATE TABLE" is as follows: ------------------------------------------------------- (A) (B) (C) (D) Max PRP Min PRP ACPRAP Level ------------------------------------------------------- n/a 10.00% 0.00% 3 ------------------------------------------------------- 10.00% 8.00 1.00 2 ------------------------------------------------------- 8.00 n/a 2.00 1 ------------------------------------------------------- The "ACCOUNT CAP PAYMENT RATE EFFECTIVE LEVEL" shall mean, on the Initial Determination Date, in the Account Cap Payment Rate Three Month Level, and on any Determination Date thereafter, the Account Cap Payment Rate Last Month Level calculated on such Determination Date; provided, however, that (i) if the Account Cap Payment Rate Last Month Level calculated on such Determination Date is equal to or less than both the Account Cap Base Three Month Level and the Account Cap Base Six Month Level, as calculated on such Determination Date, then the Account Cap Payment Rate Effective Level shall mean the lower of such Account Cap Payment Rate Three Month Level and such Account Cap Base Six Month Level, or (ii) if the Account Cap Payment Rate Last Month Level calculated on such Determination Date is greater than the Account Cap Payment Rate Three Month Level calculated on such Determination Date, the Account Cap Payment Rate Effective Level shall mean such Account Cap Payment Rate Three Month Level. The "ACCOUNT CAP PAYMENT RATE LAST MONTH LEVEL" shall mean, on any Determination Date following the Initial Determination Date, the Account Cap Payment Rate Effective Level as of the preceding Determination Date. The "ACCOUNT CAP PAYMENT RATE SIX MONTH LEVEL" for a Determination Date shall be the level specified in column (D) on the Account Cap Payment Rate Table at which the Six Month Payment Rate Percentage calculated on such Determination Date is less than or equal to the percentage specified in column (A) of the Account Cap Payment Rate Table but in excess of the percentage specified in column (B) of the Account Cap Payment Rate Table. The "ACCOUNT CAP PAYMENT RATE THREE MONTH LEVEL" for a Determination Date shall be the level specified in column (D) of the Account Cap Payment Rate Table at which the Three Month Payment Rate calculated on such Determination Date is less than or equal to the percentage specified in column (A) of the Account Cap Payment Rate Table but in excess of the percentage specified in column (B) of the Account Cap Payment Rate Table. The "ACCOUNT CAP STARTUP CALCULATION RULE" shall be used in calculating the percentages specified in column (A) below using the corresponding inputs specified in column (B) below on any Determination Date (the "relevant Determination Date") on which the number of Determination Dates actually preceding the relevant Determination Date is less than the number of preceding Determination Dates (each, a "requisite Determination Date") specified in the definition of such percentage. In computing such percentage on any such relevant Determination Date, the Servicer shall employ the rate specified in column (C) below for any requisite Determination Date which preceded the Initial Determination Date: - ------------------------------------------------------------------------------- (A) (B) (C) - ------------------------------------------------------------------------------- Three Month Excess Spread Percentage Excess Spread Percentage 4.5% - ------------------------------------------------------------------------------- Six Month Excess Spread Percentage Excess Spread Percentage 4.5% - ------------------------------------------------------------------------------- Three Month Payment Rate Percentage Payment Rate 14.0% - ------------------------------------------------------------------------------- Six Month Payment Rate Percentage Payment Rate 14.0% - ------------------------------------------------------------------------------- Twelve Month Dilution Rate Dilution Rate 1.75% - ------------------------------------------------------------------------------- Thus, for example, on the seventh Determination Date, the Servicer shall compute the Twelve Month Dilution Rate as the quotient of (x) the sum of (i) the actual Dilution Rate for each of such Determination Date and the preceding six Determination Dates and (ii) the product of five and 1.75% divided by (y) twelve. "ADDITIONAL CLASS A INVESTED AMOUNT" shall have the meaning specified in Section 6.15 of the Agreement. "ADDITIONAL CLASS B INVESTED AMOUNT" shall have the meaning specified in Section 6.15 of the Agreement. "ADDITIONAL CLASS B-2 INVESTED AMOUNT" shall have the meaning specified in Section 6.15 of the Agreement. "ADDITIONAL CLASS C INVESTED AMOUNT" shall have the meaning specified in Section 6.15 of the Agreement. "ADDITIONAL INVESTED AMOUNT" shall have the meaning specified in Section 6.15 of the Agreement. "ADJUSTED INVESTED AMOUNT" shall mean the sum of the Class A Adjusted Invested Amount, the Class B Adjusted Invested Amount, the Class B-2 Adjustment Investment Amount and the Class C Adjusted Invested Amount. "AMORTIZATION PERIOD COMMENCEMENT DATE" shall mean (a) prior to an Extension, the earlier of (i) November 30, 2000 and (ii) the Pay Out Commencement Date and (b) following an Extension, the earlier of (i) the date specified as such in the Extension Notice and (ii) the Pay Out Commencement Date. "APPLICABLE MARGIN" shall mean the percentage per annum specified in the relevant Fee Letter, with respect to each Bank Rate Tranche and/or Cost of Funds Rate Tranche of the Class A Invested Amount and/or the Class B Invested Amount, respectively. "APPLICABLE RESERVE RATIO" shall mean for the November Monthly Period, the December Monthly Period and the January Monthly Period, 2.0%, and for each other Monthly Period, zero. "AVAILABLE SERIES 1997-1 FINANCE CHARGE COLLECTIONS" shall have the meaning specified in subsection 4.6(a). "BANK RATE" shall mean a fluctuating rate per annum on any date equal to 1.00% in excess of one-month LIBOR prevailing on the related Rate Determination Date; PROVIDED, HOWEVER, that the Bank Rate shall be calculated on the basis of the actual number of days elapsed in the applicable Interest Accrual Period over a year of 360 days. Changes in the Bank Rate shall take effect immediately upon their occurrence. The Facility Agent will endeavor promptly to notify the Transferor of changes in the Bank Rate. "BANK RATE TRANCHE" shall mean a portion of the Class A Principal Balance and the Class B Principal Balance held by any Senior Certificateholder which is a Committed Class A Purchaser or a Committed Class B Purchaser pursuant to the applicable Certificate Purchase Agreement, which shall accrue interest based on the Bank Rate. "BUSINESS DAY" shall have the meaning set forth in the Agreement; PROVIDED that as used in the definition of "LIBOR" and "Rate Determination Date," "Business Day" shall mean a day that is both a "Business Day" under the Agreement and a day for dealings by and between banks in Dollar deposits in the London interbank eurodollar markets. "CERTIFICATE PURCHASE AGREEMENT" shall mean, with respect to any Class A Certificates, the Class A Certificate Purchase Agreement, with respect to any Class B Certificates, the Class B Certificate Purchase Agreement and with respect to any Class B-2 Certificates, the Class B-2 Certificate Purchase Agreement. "CERTIFICATE RATE" shall mean the Class A Certificate Rate, the Class B Certificate Rate, the Class B-2 Certificate Rate or the Class C Certificate Rate, as applicable. "CLASS A ADJUSTED INVESTED AMOUNT" shall mean, when used with respect to any Business Day, the Class A Invested Amount MINUS the amount on deposit in the Principal Account allocated to the Class A Certificates. "CLASS A AGENT" shall have the meaning specified in the preamble of the Class A Certificate Purchase Agreement. "CLASS A CERTIFICATE PURCHASE AGREEMENT" shall mean the Class A Certificate Purchase Agreement, dated as of December 3, 1997 by and among Specialty Retailers, Inc. individually and as the Originator and the Servicer, SRI Receivables Purchase Co., Inc. individually and as the Transferor, Credit Suisse First Boston, New York Branch, as the Class A Agent and the Class A Purchasers, relating to the Class A Certificates. "CLASS A CERTIFICATE RATE" shall mean for any day the weighted average of the Tranche Rates with respect to each portion of the Class A Principal Balance outstanding at such time (taking into account whether such rate is calculated on a 360 or 365/6 day basis). "CLASS A CERTIFICATEHOLDER" shall mean the Person in whose name a Class A VFC is registered in the Certificate Register. "CLASS A CERTIFICATEHOLDERS' INTEREST" shall mean the portion of the Series 1997-1 Certificateholders' Interest evidenced by the Class A VFCs. "CLASS A DAILY PRINCIPAL AMOUNT" shall have the meaning specified in subsection 4.6(c)(i). "CLASS A FACILITY FEE" shall mean, for any Interest Accrual Period, the amount of "Facility Fees" specified in the Class A Fee Letter as accruing during such Interest Accrual Period. "CLASS A FEE LETTER" means the letter agreement dated as of December 3, 1997 among the Class A Agent, the Transferor and the Servicer, as amended from time to time pursuant to the Class A Certificate Purchase Agreement. "CLASS A FIXED ALLOCATION PERCENTAGE" shall mean for any Business Day the percentage equivalent of a fraction, the numerator of which is the Class A Invested Amount at the end of the last day of the Revolving Period and the denominator of which is the greater of (a) the aggregate amount of Principal Receivables in the Trust and the amount on deposit in the Equalization Account as of the end of the last day of the Revolving Period and (b) the sum of the numerators used to calculate the allocation percentages with respect to Principal Collections for all Series. "CLASS A FLOATING ALLOCATION PERCENTAGE" shall mean, with respect to any Business Day, the percentage equivalent of a fraction, the numerator of which is the Class A Adjusted Invested Amount as of the end of the preceding Business Day and the denominator of which is the greater of (a) the sum of the amount of Principal Receivables in the Trust and the amounts on deposit in the Equalization Account at the end of the preceding Business Day and (b), with respect to Principal Collections only, the sum of the numerators with respect to all Classes of all Series then outstanding on such Business Day used with respect to Principal Collections, to calculate the applicable allocation percentage. "CLASS A INITIAL INVESTED AMOUNT" shall mean the aggregate initial principal amount of the Class A Certificates, which is $54,000,000. "CLASS A INTEREST" shall have the meaning specified in subsection 4.8(a)(i). "CLASS A INVESTED AMOUNT" shall mean, when used with respect to any Business Day, an amount equal to (a) the Class A Initial Invested Amount, PLUS (b) the aggregate principal amount of any Additional Class A Invested Amounts purchased by the Class A Owners through the end of the preceding Business Day pursuant to Section 6.15, MINUS (c) the aggregate amount of principal payments made to Class A Certificateholders prior to such Business Day, MINUS (d) the aggregate amount of Class A Investor Charge-Offs for all prior Business Days, PLUS (e) the aggregate amount allocated with respect to Class A Investor Charge-Offs and available on all prior Business Days pursuant to subsection 4.6(a)(v) 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 4.10(d). "CLASS A INVESTOR PERCENTAGE" shall mean, for any Business Day, (a) with respect to Finance Charge Collections and Receivables in Defaulted Accounts at any time or Principal Collections during the Revolving Period, the Class A Floating Allocation Percentage and (b) with respect to Principal Collections during the Amortization Period, the Class A Fixed Allocation Percentage. "CLASS A OWNER" shall mean a Certificateholder or, with respect to any Class A Certificate held by the Class A Agent or any Person as nominee on behalf of a beneficial owner of such Class A Certificate, the Person that is the beneficial owner of the Class A Invested Amount represented by such Class A Certificate as reflected on the books of such nominee. "CLASS A PRINCIPAL BALANCE" shall mean, when used with respect to any Business Day, an amount equal to (a) the Class A Initial Invested Amount, PLUS (b) the aggregate principal amount of any Additional Class A Invested Amounts purchased by the Class A Owners through the end of the preceding Business Day pursuant to Section 6.15, MINUS (c) the aggregate amount of principal payments made to Class A Certificateholders prior to such Business Day. "CLASS A PURCHASE LIMIT" shall mean (i) $75,000,000 through (but excluding) September 28, 1998, (ii) $150,000,000 from and after September 28, 1998 through (but excluding) April 1, 1999, (iii) $131,250,000 from and after April 1, 1999 through but excluding) October 1, 1999, and (iv) $75,000,000 thereafter. "CLASS A PURCHASER" shall have the meaning specified in Section 1.1 of the Class A Certificate Purchase Agreement. "CLASS A VFCS" or "CLASS A CERTIFICATES" shall mean any of the certificates executed by the Transferor and authenticated by or on behalf of the Trustee, substantially in the form of Exhibit A-1 hereto. "CLASS B ADJUSTED INVESTED AMOUNT" shall mean, when used with respect to any Business Day, the Class B Invested Amount MINUS the amount on deposit in the Principal Account allocated to the Class B Certificates. "CLASS B AGENT" shall have the meaning specified in the preamble of the Class B Certificate Purchase Agreement. "CLASS B CERTIFICATE PURCHASE AGREEMENT" shall mean the Class B Certificate Purchase Agreement, dated as of December 3, 1997 by and among Specialty Retailers, Inc. individually and as the Originator and the Servicer, SRI Receivables Purchase Co., Inc. individually and as the Transferor, Credit Suisse First Boston, New York Branch as the Class B Agent and the Class B Purchasers, relating to the Class B Certificates. "CLASS B CERTIFICATE RATE" shall mean for any day the weighted average of the Tranche Rates with respect to each portion of the Class B Principal Balance outstanding at such time (taking into account whether such rate is calculated on a 360 or 365/6 day basis). "CLASS B CERTIFICATEHOLDER" shall mean the Person in whose name a Class B VFC is registered in the Certificate Register. "CLASS B CERTIFICATEHOLDERS' INTEREST" shall mean the portion of the Series 1997-1 Certificateholders' Interest evidenced by the Class B VFCs. "CLASS B DAILY PRINCIPAL AMOUNT" shall have the meaning specified in subsection 4.6(c)(ii). "CLASS B FACILITY FEE" shall mean, for any Interest Accrual Period, the amount of "Facility Fees" specified in the Class B Fee Letter as accruing during such Interest Accrual Period. "CLASS B FEE LETTER" means the letter agreement dated as of December 3, 1997 among the Class B Agent, the Transferor and the Servicer, as amended from time to time pursuant to the Class B Certificate Purchase Agreement. "CLASS B FIXED ALLOCATION PERCENTAGE" shall mean for any Business Day the percentage equivalent of a fraction, the numerator of which is the Class B Invested Amount at the end of the last day of the Revolving Period and the denominator of which is the greater of (a) the aggregate amount of Principal Receivables in the Trust and the amount on deposit in the Equalization Account at the end of the last day of the Revolving Period and (b) the sum of the numerators used to calculate allocation percentages with respect to Principal Collections for all Series. "CLASS B FLOATING ALLOCATION PERCENTAGE" shall mean, with respect to any Business Day, the percentage equivalent of a fraction, the numerator of which is the Class B Adjusted Invested Amount as of the end of the preceding Business Day and the denominator of which is the greater of (a) the sum of the amount of Principal Receivables in the Trust and the amounts on deposit in the Equalization Account as of the end of the preceding Business Day and (b) with respect to Principal Collections only, the sum of the numerators with respect to all Classes of all Series then outstanding on such Business Day used with respect to Principal Collections to calculate the applicable allocation percentage. "CLASS B INITIAL INVESTED AMOUNT" shall mean the aggregate initial principal amount of the Class B Certificates, which is $1,000,000. "CLASS B INTEREST" shall have the meaning specified in subsection 4.8(a)(ii). "CLASS B INVESTED AMOUNT" shall mean, when used with respect to any Business Day, an amount equal to (a) the Class B Initial Invested Amount, PLUS (b) the aggregate principal amount of any Additional Class B Invested Amounts purchased by the Class B Owners through the end of the preceding Business Day pursuant to Section 6.15, MINUS (c) the aggregate amount of principal payments made to Class B Certificateholders prior to such Business Day, MINUS (d) the aggregate amount of Class B Investor Charge-Offs for all prior Business Days, PLUS (e) the aggregate amount allocated with respect to Class B Investor Charge-Offs and Reallocated Class B Principal Collections and available on all prior Business Days pursuant to subsection 4.6(a)(vi) for the purpose of reinstating amounts reduced pursuant to the foregoing clause (d) MINUS (f) the amount of Reallocated Class B Principal Collections applied in accordance with subsection 4.7(i). "CLASS B INVESTOR CHARGE-OFFS" shall have the meaning specified in subsection 4.10(c). "CLASS B INVESTOR PERCENTAGE" shall mean, for any Distribution Date, (a) with respect to Finance Charge Collections and Receivables in Defaulted Accounts at any time or Principal Collections during the Revolving Period, the Class B Floating Allocation Percentage and (b) with respect to Principal Collections during the Amortization Period, the Class B Fixed Allocation Percentage. "CLASS B OWNER" shall mean a Certificateholder or, with respect to any Class B Certificate held by the Class B Agent or any Person as nominee on behalf of a beneficial owner of such Class B Certificate, the Person that is the beneficial owner of the Class B Invested Amount represented by such Class B Certificate as reflected on the books of such nominee. "CLASS B PRINCIPAL BALANCE" shall mean, when used with respect to any Business Day, an amount equal to (a) the Class B Initial Invested Amount, PLUS (b) the aggregate principal amount of any Additional Class B Invested Amounts purchased by the Class B Owners through the end of the preceding Business Day pursuant to Section 6.15, MINUS (c) the aggregate amount of principal payments made to Class B Certificateholders prior to such Business Day. "CLASS B PRINCIPAL PAYMENT COMMENCEMENT DATE" shall mean the earlier of (a) the Distribution Date in an Amortization Period on which the Class A Invested Amount is paid in full or, if there are no Principal Collections allocable to the Series 1997-1 Variable Funding Certificates remaining after payments have been made to the Class A VFCs on such Distribution Date, the Distribution Date following the Distribution Date on which the Class A Invested Amount is paid in full and (b) the Distribution Date following a sale or repurchase of the Receivables as set forth in Sections 2.4(e), 9.2, 10.2(a), 12.1 or 12.2 of the Agreement and Section 3 of this Series Supplement. "CLASS B PURCHASE LIMIT" shall mean (i) $7,500,000 through (but excluding) September 28, 1998, (ii) $15,000,000 from and after September 28, 1998 through (but excluding) April 1, 1999, (iii) $13,125,000 from and after April 1, 1999 through (but excluding) October 1, 1999, and (iv) $7,500,000 thereafter. "CLASS B PURCHASER" shall have the meaning specified in Section 1.1 of the Class B Certificate Purchase Agreement. "CLASS B VFCS" or "CLASS B CERTIFICATES" shall mean any of the certificates executed by the Transferor and authenticated by or on behalf of the Trustee, substantially in the form of Exhibit A-2 hereto. "CLASS B-2 ADJUSTED INVESTED AMOUNT" shall mean, when used with respect to any Business Day, the Class B-2 Invested Amount MINUS the amount on deposit in the Principal Account allocated to the Class B-2 Certificates. "CLASS B-2 AGENT" shall have the meaning specified in the preamble of the Class B-2 Certificate Purchase Agreement. "CLASS B-2 CERTIFICATE PURCHASE AGREEMENT" shall mean the Class B-2 Certificate Purchase Agreement, dated as of October 16, 1998 by and among Specialty Retailers, Inc. individually and as the Originator and the Servicer, SRI Receivables Purchase Co., Inc. individually and as the Transferor, Credit Suisse First Boston, New York Branch as the Class B-2 Agent and the Class B-2 Purchasers, relating to the Class B-2 Certificates. "CLASS B-2 CERTIFICATE RATE" shall have the meaning specified in subsection 2.1(f) of the Class B-2 Certificate Purchase Agreement. "CLASS B-2 CERTIFICATEHOLDER" shall mean the Person in whose name a Class B-2 VFC is registered in the Certificate Register. "CLASS B-2 CERTIFICATEHOLDERS' INTEREST" shall mean the portion of the Series 1997-1 Certificateholders' Interest evidenced by the Class B-2 VFCs. "CLASS B-2 DAILY PRINCIPAL AMOUNT" shall have the meaning specified in subsection 4.6(c)(iii). "CLASS B-2 FACILITY FEE" shall mean, for any Interest Accrual Period, the amount of "Commitment Fees" specified in the Class B-2 Fee Letter as accruing during such Interest Accrual Period. "CLASS B-2 FEE LETTER" means the letter agreement dated as of October 16, 1998 among the Class B-2 Agent, the Transferor and the Servicer, as amended from time to time pursuant to the Class B-2 Certificate Purchase Agreement. "CLASS B-2 FIXED ALLOCATION PERCENTAGE" shall mean for any Business Day the percentage equivalent of a fraction, the numerator of which is the Class B-2 Invested Amount at the end of the last day of the Revolving Period and the denominator of which is the greater of (a) the aggregate amount of Principal Receivables in the Trust and the amount on deposit in the Equalization Account at the end of the last day of the Revolving Period and (b) the sum of the numerators used to calculate allocation percentages with respect to Principal Collections for all Series. "CLASS B-2 FLOATING ALLOCATION PERCENTAGE" shall mean, with respect to any Business Day, the percentage equivalent of a fraction, the numerator of which is the Class B-2 Adjusted Invested Amount as of the end of the preceding Business Day and the denominator of which is the greater of (a) the sum of the amount of Principal Receivables in the Trust and the amounts on deposit in the Equalization Account as of the end of the preceding Business Day and (b) with respect to Principal Collections only, the sum of the numerators with respect to all Classes of all Series then outstanding on such Business Day used with respect to Principal Collections to calculate the applicable allocation percentage. "CLASS B-2 INITIAL INVESTED AMOUNT" shall mean the aggregate initial principal amount of the Class B-2 Certificates, which is zero. "CLASS B-2 INTEREST" shall have the meaning specified in subsection 4.8(a)(vii). "CLASS B-2 INTEREST ACCRUAL" shall have the meaning specified in subsection 4.6(a)(vii). "CLASS B-2 INVESTED AMOUNT" shall mean, when used with respect to any Business Day, an amount equal to (a) the Class B-2 Initial Invested Amount, PLUS (b) the aggregate principal amount of any Additional Class B-2 Invested Amounts purchased by the Class B-2 Owners through the end of the preceding Business Day pursuant to Section 6.15, MINUS (c) the aggregate amount of principal payments made to Class B-2 Certificateholders prior to such Business Day, MINUS (d) the aggregate amount of Class B-2 Investor Charge-Offs for all prior Business Days, PLUS (e) the aggregate amount allocated with respect to Class B-2 Investor Charge-Offs and Reallocated Class B-2 Principal Collections and available on all prior Business Days pursuant to subsection 4.6(a)(viii) for the purpose of reinstating amounts reduced pursuant to the foregoing clause (d) MINUS (f) the amount of Reallocated Class B-2 Principal Collections applied in accordance with subsection 4.7(h). "CLASS B-2 INVESTOR CHARGE-OFFS" shall have the meaning specified in subsection 4.10(b). "CLASS B-2 INVESTOR PERCENTAGE" shall mean, for any Distribution Date, (a) with respect to Finance Charge Collections and Receivables in Defaulted Accounts at any time or Principal Collections during the Revolving Period, the Class B-2 Floating Allocation Percentage and (b) with respect to Principal Collections during the Amortization Period, the Class B-2 Fixed Allocation Percentage. "CLASS B-2 OWNER" shall mean a Certificateholder or, with respect to any Class B-2 Certificate held by the Class B-2 Agent or any Person as nominee on behalf of a beneficial owner of such Class B-2 Certificate, the Person that is the beneficial owner of the Class B-2 Invested Amount represented by such Class B-2 Certificate as reflected on the books of such nominee. "CLASS B-2 PRINCIPAL BALANCE" shall mean, when used with respect to any Business Day, an amount equal to (a) the Class B-2 Initial Invested Amount, PLUS (b) the aggregate principal amount of any Additional Class B-2 Invested Amounts purchased by the Class B-2 Owners through the end of the preceding Business Day pursuant to Section 6.15, MINUS (c) the aggregate amount of principal payments made to Class B-2 Certificateholders prior to such Business Day. "CLASS B-2 PRINCIPAL PAYMENT COMMENCEMENT DATE" shall mean the earlier of (a) the Distribution Date in an Amortization Period on which the Class A Invested Amount and the Class B Invested Amount is each paid in full or, if there are no Principal Collections allocable to the Series 1997-1 Variable Funding Certificates remaining after payments have been made to the Class A VFCs and the Class B VFCs on such Distribution Date, the Distribution Date following the Distribution Date on which the Class A Invested Amount and the Class B Invested Amount is paid in full and (b) the Distribution Date following a sale or repurchase of the Receivables as set forth in Sections 2.4(e), 9.2, 10.2(a), 12.1 or 12.2 of the Agreement and Section 3 of this Series Supplement. "CLASS B-2 PURCHASE LIMIT" shall mean (i) $10,000,000 through and including December 24, 1998 and (ii) zero thereafter. "CLASS B-2 PURCHASER" shall have the meaning specified in Section 1.1 of the Class B-2 Certificate Purchase Agreement. "CLASS B-2 VFCS" or "CLASS B-2 CERTIFICATES" shall mean any of the certificates executed by the Transferor and authenticated by or on behalf of the Trustee, substantially in the form of Exhibit A-3 hereto. "CLASS C ADJUSTED INVESTED AMOUNT" shall mean, when used with respect to any Business Day, the Class C Invested Amount MINUS the amount on deposit in the Principal Account allocated to the Class C Certificates. "CLASS C CERTIFICATEHOLDER" shall mean the Person in whose name a Class C VFC is registered in the Certificate Register. "CLASS C CERTIFICATEHOLDERS' INTEREST" shall mean the portion of the Series 1997-1 Certificateholders' Interest evidenced by the Class C VFCs. "CLASS C CERTIFICATE RATE" shall mean 0%. "CLASS C DAILY PRINCIPAL AMOUNT" shall have the meaning specified in subsection 4.6(c)(iv). "CLASS C FIXED ALLOCATION PERCENTAGE" shall mean for any Business Day the percentage equivalent to a fraction, the numerator of which is the Class C Invested Amount at the end of the last day of the Revolving Period and the denominator of which is the greater of (a) the sum of the amount of Principal Receivables in the Trust and the amounts on deposit in the Equalization Account at the end of the last day of the Revolving Period and (b) the sum of the numerators used to calculate allocation percentages with respect to Principal Collections for all Series. "CLASS C FLOATING ALLOCATION PERCENTAGE" shall mean with respect to any Business Day the percentage equivalent to a fraction, the numerator of which is the Class C Invested Amount as of the end of the preceding Business Day and the denominator of which is the greater of (a) the sum of the amount of Principal Receivables in the Trust and the amounts on deposit in the Equalization Account at the end of the preceding Business Day and (b) with respect to Principal Collections only, the sum of the numerators with respect to all Classes of all Series then outstanding on such Business Day used with respect to Principal Collections to calculate the applicable allocation percentage. "CLASS C INITIAL INVESTED AMOUNT" shall mean the aggregate initial principal amount of the Class C Certificates, which is $17,000,000. "CLASS C INTEREST" shall mean, with respect to any day of the Interest Accrual Period, an amount equal to the aggregate amount of interest that has accrued over such period at the Class C Certificate Rate on the Class C Principal Balance, as of the close of business on the day immediately preceding such day of the Interest Accrual Period. "CLASS C INVESTED AMOUNT" shall mean, when used with respect to any Business Day, an amount equal to (a) the Class C Initial Invested Amount, PLUS (b) the aggregate principal amount of any Additional Class C Invested Amounts purchased by the Class C Certificateholders through the end of the preceding Business Day pursuant to Section 6.15, MINUS (c) the aggregate amount of principal payments made to Class C Certificateholders prior to such Business Day, MINUS (d) the aggregate amount of Class C Investor Charge-Offs for all prior Business Days, PLUS (e) the aggregate amount allocated with respect to Class C Investor Charge-Offs and Reallocated Class C Principal Collections and available on all prior Business Days pursuant to subsection 4.6(a)(ix) for the purpose of reinstating amounts reduced pursuant to the foregoing clause (d) MINUS (f) the amount of Reallocated Class C Principal Collections applied in accordance with subsection 4.7(g). "CLASS C PRINCIPAL BALANCE" shall mean, when used with respect to any Business Day, an amount equal to (a) the Class C Initial Invested Amount, PLUS (b) the aggregate principal amount of any Additional Class C Invested Amounts purchased by the Class C Certificateholders through the end of the preceding Business Day pursuant to Section 6.15, MINUS (c) the aggregate amount of principal payments made to Class C Certificateholders prior to such Business Day. "CLASS C INVESTOR CHARGE-OFFS" shall have the meaning specified in subsection 4.10(a). "CLASS C INVESTOR PERCENTAGE" shall mean, for any Business Day, (a) with respect to Finance Charge Collections and Receivables in Defaulted Accounts at any time or Principal Collections during the Revolving Period, the Class C Floating Allocation Percentage and (b) with respect to Principal Collections during the Amortization Period, the Class C Fixed Allocation Percentage. "CLASS C PRINCIPAL PAYMENT COMMENCEMENT DATE" shall mean the earlier of (a) the Distribution Date on which the Class A Invested Amount and the Class B Invested Amount (and if any Class B-2 Certificates were theretofore outstanding, the Class B-2 Invested Amount) is paid in full or, if there are no Principal Collections allocable to the Series 1997-1 Investor Certificates remaining after payments have been made to the Class A Certificates and the Class B Certificates (and, if applicable, the Class B-2 Certificates) on such Distribution Date, the Distribution Date following the Distribution Date on which the Class A Invested Amount and the Class B Invested Amount (and, if applicable, the Class B-2 Invested Amount) is paid in full and (b) the Distribution Date following a sale or repurchase of the Receivables as set forth in Sections 2.4(e), 9.2, 10.2(a), 12.1 and 12.2 of the Agreement and Section 3 of this Series Supplement. "CLASS C VFCS" or "CLASS C CERTIFICATES" shall mean any of the certificates executed by the Transferor and authenticated by or on behalf of the Trustee, substantially in the form of Exhibit A-4 hereto. "COMMITTED CLASS A PURCHASER" shall have the meaning specified in Section 1.1 of the Class A Certificate Purchase Agreement. "COMMITTED CLASS B PURCHASER" shall have the meaning specified in Section 1.1 of the Class B Certificate Purchase Agreement. "COMMITMENT" shall have the meaning specified in subsection 1.1 of the Class A Certificate Purchase Agreement, in subsection 1.1 of the Class B Certificate Purchase Agreement or in subsection 1.1 of the Class B-2 Certificate Purchase Agreement, as the case may be, which means, in general, with respect to any Class A or Class B Committed Purchaser or Class B-2 Purchaser, a commitment to purchase a portion of the Class A Invested Amount, the Class B Invested Amount or the Class B-2 Invested Amount, as the case may be, pursuant to the provisions of the Class A Certificate Purchase Agreement, the Class B Certificate Purchase Agreement or the Class B-2 Certificate Purchase Agreement, as the case may be, to which such committed purchaser is a party. "COMMITMENT PERCENTAGE" shall have the meaning specified in Section 1.1 of the Class A Purchase Agreement, the Class B Purchase Agreement or the Class B-2 Purchase Agreement, as applicable. "COST OF FUNDS RATE" shall mean, for a Noncommitted Class A Purchaser or a Noncommitted Class B Purchaser (a "NONCOMMITTED PURCHASER") and an Interest Accrual Period the sum of (a) the daily average for each day during such Interest Accrual Period of the weighted average of the following rates for such Noncommitted Purchaser: (i) to the extent that for such day such Noncommitted Purchaser has allocated its CP Notes which are then outstanding to its purchase or maintenance of the outstanding Class A Principal Balance or Class B Principal Balance (as applicable, the "INVESTOR PRINCIPAL BALANCE") or accrued and unpaid interest thereon ("ALLOCATED CP Notes"), the rate of interest per annum (or if more than one rate, the weighted average of the per annum rates) borne on such day by all Allocated CP Notes; PROVIDED that if any such rate (or rates) is a discount rate (or rates), then such rate shall be the rate (or if more than one rate, the weighted average of the rates) resulting from converting such discount rate (or rates) to an interest-bearing equivalent rate per annum; PROVIDED FURTHER that such rates shall in each case be adjusted, as necessary, to give effect to commercial paper dealer or placement agent commissions, discounts and similar fees and costs which are allocated by such Noncommitted Purchaser to Allocated CP Notes, and (ii) to the extent that for such day such Noncommitted Purchaser has not allocated its CP Notes which are then outstanding to its purchase or maintenance of the outstanding Investor Principal Balance or accrued and unpaid interest thereon, the Bank Rate, plus (b) if (i) such Noncommitted Purchaser has on any date during or prior to such Interest Accrual Period received a payment of principal in respect of the Investor Principal Balance or assigned all or any portion of its interest in the Investor Principal Balance (the date of any such payment or assignment, a "PRINCIPAL REDUCTION DATE"), in either case in an amount in excess of the principal component of Allocated CP Notes maturing on such Principal Reduction Date, and (ii) Allocated CP Notes (or a portion thereof) which were allocated by such Noncommitted Purchaser to its purchase or maintenance of the repaid or assigned portion of Investor Principal Balance remain outstanding during such Interest Accrual Period, an amount equal to the excess, if any, of (A) such Noncommitted Purchaser's aggregate interest cost (determined in accordance with clause (a)(i) above) of such Allocated CP Notes (or such portion thereof) during such Interest Accrual Period, over (B) the net earnings received by such Noncommitted Purchaser during such Interest Accrual Period from investing the proceeds of such reduction or assignment of such portion of the Investor Principal Balance, such excess expressed as a per annum percentage of the daily average Principal Balance owed to such Noncommitted Purchaser during such Interest Accrual Period; PROVIDED that if on the last day of an Interest Accrual Period no Investor Principal Balance is owed to such Noncommitted Purchaser, the amount described in clause (A) above shall also include such Noncommitted Purchaser's aggregate interest cost (determined in accordance with clause (a)(i) above) of such Allocated CP Notes (or such portion thereof) after such Interest Accrual Period and prior to latest maturity date of such Allocated CP Notes, and the amount described in clause (B) above shall include the net earnings such Noncommitted Purchaser estimates in good faith that it will receive after such Interest Accrual Period and prior to latest maturity date of such Allocated CP Notes from investing the proceeds of such reduction or assignment of such portion of the Investor Principal Balance. The Cost of Funds Rate for a Noncommitted Purchaser and an Interest Accrual Period shall be determined in good faith by such Noncommitted Purchaser and notice thereof shall be given to the Servicer by such Noncommitted Purchaser (or the Facility Agent on its behalf) not later than the last day of such Interest Accrual Period. "COST OF FUNDS RATE TRANCHE" shall mean a portion of the Class A Principal Balance or the Class B Principal Balance held by an Class A Owner which is a Noncommitted Class A Purchaser or a Noncommitted Class B Purchaser pursuant to the relevant Certificate Purchase Agreement, as the case may be, which shall accrue interest based on the Cost of Funds Rate. "CP NOTE" shall mean any commercial paper note issued by any Noncommitted Purchaser. "CSFB CORPORATE BASE RATE" shall mean, for any day, the higher of (i) the base commercial lending rate per annum announced from time to time by Credit Suisse First Boston, New York Branch, in New York in effect on such day, or (ii) the interest rate per annum quoted by Credit Suisse First Boston, New York Branch, at approximately 11:00 a.m., New York City time, on such day, to dealers in the New York Federal funds market for the overnight offering of Dollars by Credit Suisse First Boston, New York Branch plus one-half of one percent (0.50%). (The CSFB Corporate Base Rate is not intended to represent the lowest rate charged by Credit Suisse First Boston, New York Branch, for extensions of credit.) "DAILY REQUIRED AMOUNT" shall mean, for any Business Day, the amount, if any, by which (x) for such Business Day, the sum of the amounts described in subsections 4.6(a)(i) through (ii) and (iv) through (xi) PLUS the Class A Floating Allocation Percentage of the amount described in subsection 4.6(a)(iii) PLUS the Class B Floating Allocation Percentage of the amount described in subsection 4.6(a)(iii) PLUS the Class B-2 Floating Allocation Percentage of the amount described in subsection 4.6(a)(iii) exceeds (y) the Finance Charge Collections available for application thereto pursuant to subsection 4.6(a) on any Business Day. "DECEMBER MONTHLY PERIOD" means the Monthly Period in each Fiscal Year ending on the Sunday closest to the last calendar day of December in such Fiscal Year. "DEFAULT RATIO" shall mean, for a Monthly Period, the percentage obtained by (i) dividing (a) the aggregate Default Amounts in all Accounts of the Trust during such Monthly Period, by (b) the aggregate amount of the Principal Receivables of the Trust outstanding as of the beginning of such Monthly Period and (ii) adjusting to a per annum equivalent. "DEFEASANCE ACCOUNT" shall have the meaning specified in subsection 17(b) hereof. "DETERMINATION DATE" shall mean the second Business Day prior to each Distribution Date. "DILUTION" with respect to a Receivable shall mean any downward adjustment of such Receivable because of a rebate, refund, unauthorized charge or billing error to an Obligor, because such Receivable was created in respect of merchandise which was refused or returned by an Obligor, or if the Servicer otherwise adjusts downward the amount of any receivable without receiving Collections therefor or without changing of such amount as uncollectible. "DILUTION RATE" shall mean, with respect to a Determination Date, a rate obtained by dividing (a) the aggregate amount of Dilution with respect to Receivables during the related Monthly Period, by (b) the total amount of the Receivables then outstanding as of the beginning of such Monthly Period. "DISTRIBUTION DATE" shall mean (i) each Monthly Distribution Date, and (ii) any date on which payments are received in the Defeasance Account. A Distribution Date shall relate to the Monthly Period and the Interest Accrual Period that ended prior to such Distribution Date and to the Determination Date immediately preceding such Distribution Date. "EARLY AMORTIZATION PERIOD" shall mean the period commencing on the Pay Out Commencement Date and ending on the earlier to occur of (i) the date of termination of the Trust pursuant to Section 12.1 of the Agreement or (ii) the Series 1997-1 Termination Date. "ELECTION NOTICE" shall have the meaning specified in subsection 6.16(a). "ENHANCEMENT" shall mean, with respect to the Class A Certificates, the subordination of the Class B Invested Amount, the Class B-2 Invested Amount and the Class C Invested Amount to the Class A Invested Amount and the reallocation of funds from the Spread Account to cover shortfalls in amounts owing in respect of the Class A VFCs; and with respect to the Class B VFCs, the subordination of the Class B-2 Invested Amount and the Class C Invested Amount to the Class A Invested Amount and the Class B Invested Amount and the reallocation of funds from the Spread Account to cover shortfalls in amounts owing in respect of the Class B VFCs; and with respect to the Class B-2 VFCs, the subordination of the Class C Invested Amount to the Class A Invested Amount, the Class B Invested Amount and the Class B-2 Invested Amount and the reallocation of funds from the Spread Account to cover shortfalls in amounts owing in respect of the Class B-2 VFCs . "EXCESS FINANCE CHARGE COLLECTIONS" shall mean, with respect to any Business Day, as the context requires, either (x) the amount described in subsections 4.6(a)(xii), 4.7(f) (clause FIRST thereof) and 4.8(a)(xiii) initially allocated to the Series 1997-1 Variable Funding Certificates but available for the purposes specified in such subsections, or (y) the aggregate amount of Finance Charge Collections allocable to other Series in excess of the amounts necessary to make required payments with respect to such Series, if any, and available to cover shortfalls with respect to the Series 1997-1 Variable Funding Certificates. "EXCESS SPREAD BASE RATE" shall mean, with respect to a Monthly Period, the higher of (x) the per annum percentage equal to the sum of (i) the result of (a) the sum of Class A Interest, Class B Interest and Program Fees which have accrued on the Class A VFCs and the Class B VFCs for the Interest Accrual Period related to such Monthly Period divided by (b) the sum of (1) the weighted average Class A Invested Amount, (2) the weighted average Class B Invested Amount and (3) the product of 0.25 and the sum of (A) the weighted average Class B-2 Invested Amount and (B) the weighted average Class C Invested Amount, each during such Interest Accrual Period, and (ii) only if SRI or its Affiliate is not the Servicer during such Monthly Period, the Series Servicing Fee Percentage, and (y) the per annum percentage equal to the sum of (i) the result of (a) the sum of Class A Interest, Class B Interest, the Class B-2 Interest, and Program Fees which have accrued on the Class A VFCs, the Class B VFCs and the Class B-2 VFCs for the Interest Accrual Period related to such Monthly Period divided by (b) the sum of (1) the weighted average Class A Invested Amount, (2) the weighted average Class B Invested Amount, (3) the weighted average Class B-2 Invested Amount and (4) the weighted average Class C Invested Amount, each during such Interest Accrual Period, and (ii) only if SRI or its Affiliate is not the Servicer during such Monthly Period, the Series Servicing Fee Percentage. "EXCESS SPREAD PERCENTAGE" shall mean, with respect to any Monthly Period, a per annum percentage equal to the remainder of (a) the Trust Portfolio Yield for such Monthly Period MINUS the Excess Spread Base Rate for such Monthly Period. "EXITING CLASS A PURCHASER" shall have the meaning specified in subsection 4.6(e). "EXITING CLASS B PURCHASER" shall have the meaning specified in subsection 4.6(e). "EXITING PURCHASER" shall have the meaning specified in subsection 4.6(e). "EXITING PURCHASERS' ALLOCATION PERCENTAGE" shall mean, with respect to all Exiting Purchasers on any Business Day, a percentage designated by the Transferor which shall (i) not be less than the percentage equivalent of a fraction, the numerator of which is the aggregate Adjusted Invested Amount of all such Exiting Purchasers on such Business Day, and the denominator of which is the greater of (a) the sum of the amount of Principal Receivables in the Trust and the amounts on deposit in the Equalization Account as of the end of the preceding Business Day and (b) the aggregate Invested Amount of all Series then outstanding on such Business Day (or, for any Series which is then in an Amortization Period, its Invested Amount as of the end of its Revolving Period) and (ii) not be greater than 100%. "EXTENSION" shall mean the procedure by which the Investor Certificateholders consent to the extension of the Revolving Period to the new Amortization Period Commencement Date set forth in the Extension Notice, pursuant to Section 6.16. "EXTENSION DATE" shall mean November 30, 2000 or if an Extension has already occurred, the date of the next Extension Date set forth in the Extension Notice relating to the Extension then in effect (or, if any such date is not a Business Day, the next preceding Business Day). "EXTENSION NOTICE" shall have the meaning specified in subsection 6.16(a) of the Agreement. "EXTENSION OPINION" shall have the meaning specified in subsection 6.16(a) of the Agreement. "EXTENSION TAX OPINION" shall have the meaning specified in subsection 6.16(a) of the Agreement. "FACILITIES COSTS" shall mean, for any Interest Accrual Period, an amount, as notified in writing by the Facility Agent to the Transferor, the Servicer and the Trustee on or prior to the related Determination Date, equal to all amounts owing by the Transferor under the applicable Certificate Purchase Agreement, including Program Fees but excluding those fees and other costs covered by the calculation of the Cost of Funds Rate. "FACILITY AGENT" shall mean the agent from time to time serving as the Facility Agent under the Certificate Purchase Agreements. "FEE LETTER" means, with respect to the Class A Certificateholders' Interest, the Class A Fee Letter, with respect to the Class B Certificateholders' Interest, the Class B Fee Letter, and with respect to the Class B-2 Certificateholders' Interest, the Class B-2 Fee Letter. "FIXED ALLOCATION PERCENTAGE" shall mean for any Business Day the percentage equivalent of a fraction, the numerator of which is the Invested Amount at the end of the last day of the Revolving Period and the denominator of which is the greater of (a) the sum of the aggregate amount of Principal Receivables in the Trust and the amount on deposit in the Equalization Account as of the end of the last day of the Revolving Period and (b) the sum of the numerators used to calculate the allocation percentages with respect to Principal Collections for all Series in their Revolving Periods on such Business Day or, with respect to any Series in its Amortization Period, for each Class to which principal is being allocated for payment on such Business Day. "FLOATING ALLOCATION PERCENTAGE" shall mean for any Business Day the sum of the applicable Class A Floating Allocation Percentage, Class B Floating Allocation Percentage, Class B-2 Floating Allocation Percentage and Class C Floating Allocation Percentage for such Business Day. "INITIAL DETERMINATION DATE" shall mean January 13, 1998. "INITIAL INVESTED AMOUNT" shall mean the aggregate initial principal amount of the Investor Certificates. "INITIAL MONTHLY DISTRIBUTION DATE" shall mean January 15, 1998. "INTEREST ACCRUAL" shall have the meaning specified in subsection 4.6(a)(i). "INTEREST ACCRUAL PERIOD" shall mean, with respect to a related Distribution Date, the period from and including the Determination Date related to the immediately preceding Distribution Date to but excluding the Determination Date preceding the related Distribution Date; PROVIDED, however, that the initial Interest Accrual Period will run from and including the Series 1997-1 Closing Date to but excluding the Initial Determination Date; and PROVIDED, FURTHER, that a final Interest Accrual Period will run from the Determination Date preceding the final Distribution Date to but excluding the final Distribution Date. An Interest Accrual Period shall relate to the Monthly Period that has the same related Distribution Date. "INTEREST ACCRUAL RATE" shall mean, with respect to an Interest Accrual Period, a per annum rate equal to LIBOR with respect to such Interest Accrual Period PLUS 0.50%. "INTEREST/PROGRAM FEE SHORTFALL" shall mean, with respect to a Determination Date, the amount, if any, by which (x) the sum of (i) the aggregate amount of unpaid interest which will have accrued on the Class A VFCs and the Class B VFCs as of such Determination Date and (ii) the aggregate unpaid Program Fees with respect to Class A VFCs and Class B VFCs which will have accrued as of such Determination Date and (iii) all unpaid interest which will have accrued on unpaid amounts described in clause (i) or (ii) above as of such Determination Date exceeds (y) the amount of funds that will have been set aside in the Interest Funding Account as of the related Transfer Date pursuant to subsections 4.6(a)(i) through (ii). "INVESTED AMOUNT" shall mean, when used with respect to any Business Day, an amount equal to the sum of (a) the Class A Invested Amount as of such Business Day, (b) the Class B Invested Amount as of such Business Day, (c) the Class B-2 Invested Amount as of such Business Day and (d) the Class C Invested Amount as of such Business Day. "INVESTED AMOUNT CHANGE" shall have the meaning specified in Section 11 below. "INVESTOR CERTIFICATEHOLDERS" shall mean all of the Holders of record of Investor Certificates of Series 1997-1. "INVESTOR CERTIFICATES" shall mean the Class A VFCs, the Class B VFCs, the Class B-2 VFCs and the Class C VFCs. "INVESTOR CHARGE-OFFS" shall mean the sum of Class A Investor Charge-Offs, Class B Investor Charge-Offs, Class B-2 Investment Charge-Offs and Class C Investor Charge-Offs. "INVESTOR DEFAULT AMOUNT" shall mean, with respect to each Business Day, an amount equal to the product of the Default Amount for such Business Day and the Floating Allocation Percentage applicable for such Business Day. "INVESTOR PERCENTAGE" shall mean for any Business Day, (a) with respect to Finance Charge Collections and Receivables in Defaulted Accounts at any time or Principal Collections during the Revolving Period, the Floating Allocation Percentage and (b) with respect to Principal Collections during the Amortization Period, the Fixed Allocation Percentage. "JANUARY MONTHLY PERIOD" means the Monthly Period in each Fiscal Year ending on the Sunday closest to the last calendar day of January in such Fiscal Year. "LIBOR" shall mean, for an Interest Accrual Period, the rate obtained by dividing (x) the offered rate for deposits in United States Dollars having an one-month maturity period which appears on the Dow Jones Telerate System, page 3750, as of 11:00 a.m. London time on the related Rate Determination Date by (y) a percentage equal to one minus the stated maximum rate (stated as a decimal) of all reserves required to be maintained against "Eurocurrency Liabilities" as specified in Regulation D (or against any other category of liabilities which includes deposits by reference to which the interest rate on LIBOR is determined or any category of extensions of credit or other assets which includes loans by a non-United States office of any bank to United States residents). In the event the rate specified in clause (x) shall not be provided, "LIBOR" shall mean (a) the arithmetic average (rounded upwards to the nearest 1/16th of l%) of the rates at which deposits in United States dollars are offered to four reference banks selected by the Facility Agent in the interbank eurodollar market at approximately 11:00 a.m. (London time) on the Rate Determination Date divided by (b) the percentage specified in clause (y) above. "MAXIMUM SPREAD ACCOUNT AMOUNT" shall have the meaning specified in subsection 4.2(g). "MEASURING PERIOD" shall mean, with respect to any day, the period from (i) the later of (a) the Series 1997-1 Closing Date and (b) the first day of the eleventh Monthly Period preceding the Monthly Period in which such day occurs through (ii) such day. "MINIMUM TRANSFEROR PERCENTAGE" shall mean the Applicable Reserve Ratio. "MONTHLY ADJUSTED REQUIRED AMOUNT" shall mean, with respect to a Determination Date, the sum of (i) the Monthly Required Amount (after giving effect to allocations on such Determination Date pursuant to subsection 4.7(f)) and (ii) the amount by which the sum of the amounts described in subsections 4.6(a)(xiii) and (xiv) exceeds the amount of Finance Charge Collections available for application thereto on such Determination Date (after making the applications described in Section 4.7(b)). "MONTHLY DISTRIBUTION DATE" shall mean the Initial Monthly Distribution Date and fifteenth day of each calendar month thereafter, or if such day is not a Business Day, the next succeeding Business Day. "MONTHLY PERIOD" shall have the meaning specified in the Agreement, except that the first Monthly Period with respect to the Series 1997-1 Variable Funding Certificates shall begin on and include the Series 1997-1 Closing Date and shall end on and include December 28, 1997. "MONTHLY REQUIRED AMOUNT" shall mean, with respect to a Determination Date, the amount, if any, by which (x) for such Determination Date, the sum of the amounts described in subsections 4.6(a)(iv) through (xi), PLUS the Class A Floating Allocation Percentage of the amount described in subsection 4.6(a)(iii), PLUS the Class B Floating Allocation Percentage of the amount described in subsection 4.6(a)(iii), PLUS the Class B-2 Floating Allocation Percentage of the amount described in subsection 4.6(a)(iii), PLUS any Interest/Program Fee Shortfall exceeds (y) the Finance Charge Collections available for application thereto pursuant to subsection 4.6(a) on such Determination Date (after making the applications described in Section 4.7(b)). "NET BORROWED EXCESS SPREAD AMOUNT" shall mean, on any Business Day during a Monthly Period, the excess, if any, of (x) the cumulative amounts of Excess Finance Charge Collections from other Series which, pursuant to subsection 4.7(b), have been allocated to the Series 1997-1 Variable Funding Certificates on such Business Day and on each prior Business Day during such Monthly Period over (y) the cumulative amounts of Available Series 1997-1 Finance Charge Collections which, pursuant to subsection 4.6(a)(xii), have been allocated to other Series on such Business Day and on each prior Business Day during such Monthly Period. "NONCOMMITTED CLASS A PURCHASER" shall have the meaning specified in Section 1.1 of the Class A Certificate Purchase Agreement. "NONCOMMITTED CLASS B PURCHASER" shall have the meaning specified in Section 1.1 of the Class B Certificate Purchase Agreement. "NONEXTENDING CLASS A PURCHASER" shall have the meaning specified in Section 1.1 of the Class A Certificate Purchase Agreement. "NONEXTENDING CLASS B PURCHASER" shall have the meaning specified in Section 1.1 of the Class B Certificate Purchase Agreement. "PARTIAL AMORTIZATION AMOUNT" shall mean, as of any date, the smallest amount that, if distributed to the Senior Certificateholders on such date, would result in (x) (i) the sum of the Class A Principal Balance and the Class B Principal Balance on such date not being greater than (ii) the sum of the Class A Purchase Limit plus the Class B Purchase Limit on such date, and (y) the Class B-2 Principal Balance on such date not being greater than the Class B-2 Purchase Limit on such date. "PAY OUT COMMENCEMENT DATE" shall mean the date on which a Trust Pay Out Event is deemed to occur pursuant to Section 9.1 of the Agreement or a Series 1997-1 Pay Out Event is deemed to occur pursuant to Section 8 of this Series Supplement. "PAYMENT RATE" shall mean for any Monthly Period the percentage obtained by dividing the aggregate amount of Principal Collections during such Monthly Period by the aggregate amount of Principal Receivables outstanding as of the beginning of such Monthly Period. "PORTFOLIO CORRECTION AMOUNT" shall mean the smallest amount which, if distributed to certificateholders of the Trust in reduction of the aggregate invested amount of all certificates upon the occurrence of a Portfolio Imbalance Event, would result in compliance with the percentage limitation in the definition of Portfolio Imbalance Event the violation of which gave rise to such Portfolio Imbalance Event. "PORTFOLIO CORRECTION DISTRIBUTION DATE" shall mean the first Distribution Date following the occurrence of a Portfolio Imbalance Event. "PORTFOLIO IMBALANCE EVENT" shall mean an event which will occur if, on the last day of any Monthly Period occurring during the Revolving Period (the "MEASUREMENT DAY"), (a) on each of such day and the last day of each of the preceding eleven consecutive Monthly Periods, (i) the amount of all Cash Equivalents and other amounts on deposit in the Equalization Account exceeded 25% of (ii) the sum of all Principal Receivables and Cash Equivalents and other amounts on deposit in the Equalization Account on each such day, or (b) on each of the measurement day and the last day of the preceding Monthly Period, (i) the amount of all Cash Equivalents and other amounts on deposit in the Equalization Account exceeded 45% of (ii) the sum of all Principal Receivables and Cash Equivalents and other amounts on deposit in the Equalization Account on each such day. All such amounts shall be calculated after giving effect to all amounts to be distributed on the Distribution Date following the last day of the applicable Monthly Period. "PRINCIPAL DISTRIBUTION DATE" shall mean (i) each Business Day during the Revolving Period on which the Transferor elects, upon not less than one Business Day's notice to the Facility Agent, to repay principal on the Investor Certificates, (ii) each Business Day on which the Transferor elects to make payments to Exiting Purchasers pursuant to subsection 4.9(c), (iii) the Business Day following each day during the Revolving Period on which the Partial Amortization Amount in respect of the Class A VFCs or the Class B VFCs exceeds zero and there are funds on deposit in the Principal Funding Account in an amount equal to or greater than $1,000,000, in respect of the aggregate of Class A VFCs and Class B VFCs, or, if such Partial Amortization Amount in respect of the aggregate of Class A VFCs and Class B VFCs is then less than $1,000,000, in an amount equal to or greater than such Partial Amortization Amount, and (iv) the Business Day following each day during the Revolving Period on which the Partial Amortization Amount in respect of the Class B-2 VFCs exceeds zero and there are funds on deposit in the Principal Funding Account in an amount equal to or greater than $500,000 or, if such Partial Amortization Amount is then less than $500,000, in an amount equal to or greater than such Partial Amortization Amount. "PRINCIPAL SHORTFALLS" shall mean on any Business Day (x) for the Series 1997-1 Variable Funding Certificates, the Adjusted Invested Amount of each class of Senior Certificates then receiving principal payments after the application of Principal Collections on such Business Day or (y) for any other Series, the amounts specified as such in the Supplement for such other Series. "PROGRAM FEES" shall mean, for any Interest Accrual Period, the sum of (a) the Class A Facility Fee for such Interest Accrual Period, (b) the Class B Facility Fee for such Interest Accrual Period (c) the Class B-2 Facility Fee for such Interest Accrual Period and (d) the Utilization Fee for such Interest Accrual Period. "PURCHASE DATE" shall mean any Business Day on which the purchase of an Additional Invested Amount is to occur pursuant to Section 6.15 of the Agreement. "RATE DETERMINATION DATE" shall mean, with respect to any Interest Accrual Period, the second Business Day before the first day of such Interest Accrual Period. "RATING AGENCY" shall mean each of Standard & Poor's Ratings Services, a Division of the McGraw-Hill Companies, and Moody's Investors Service, Inc. "REALLOCATED CLASS B PRINCIPAL COLLECTIONS" shall have the meaning specified in subsection 4.7(i). "REALLOCATED CLASS B-2 PRINCIPAL COLLECTIONS" shall have the meaning specified in subsection 4.7(h). "REALLOCATED CLASS C PRINCIPAL COLLECTIONS" shall have the meaning specified in subsection 4.7(g). "RELEASED SPREAD ACCOUNT AMOUNT" shall have the meaning specified in subsection 4.2(h). "REPAYABLE SERVICING FEE AMOUNT" shall mean, for any Business Day of a Monthly Period, only if SRI or its Affiliate is the Servicer, an amount equal to the aggregate amounts distributed to the Servicer in respect of the Servicing Fee pursuant to subsection 4.6(a)(xv) for any preceding Business Day during such Monthly Period. "REQUIRED CLASS A PURCHASERS" and "REQUIRED CLASS A OWNERS" shall have the respective meanings specified in Section 1.1 of the Class A Certificate Purchase Agreement. "REQUIRED CLASS B PURCHASERS" and "REQUIRED CLASS B OWNERS" shall have the respective meanings specified in Section 1.1 of the Class B Certificate Purchase Agreement. "REVOLVING PERIOD" shall mean the period from and including the Series 1997-1 Closing Date to, but not including, the Amortization Period Commencement Date. "SCHEDULED SERIES 1997-1 TERMINATION DATE" shall mean the December, 2003 Distribution Date. "SENIOR CERTIFICATEHOLDER" shall mean the Person in whose name a Class A VFC, a Class B VFC or a Class B-2 VFC is registered in the Certificate Register. "SENIOR CERTIFICATES" shall mean the Class A Certificates, the Class B Certificates and the Class B-2 Certificates. "SERIES 1997-1" shall mean the Series of the SRI Receivables Master Trust represented by the Series 1997-1 Variable Funding Certificates. "SERIES 1997-1 CERTIFICATEHOLDER" shall mean the holder of record of any Series 1997-1 Variable Funding Certificate. "SERIES 1997-1 CERTIFICATEHOLDERS' INTEREST" shall have the meaning specified in Section 4.4. "SERIES 1997-1 CLOSING DATE" shall mean December 3, 1997. "SERIES 1997-1 PAY OUT EVENT" shall have the meaning specified in Section 8. "SERIES 1997-1 PRINCIPAL COLLECTIONS" shall have the meaning specified in subsection 4.6(d). "SERIES 1997-1 TERMINATION DATE" shall mean the earlier to occur of (i) the day after the Distribution Date on which the Series 1997-1 Variable Funding Certificates are paid in full, or (ii) the Scheduled Series 1997-1 Termination Date. "SERIES SERVICING FEE PERCENTAGE" shall mean 2.0%. "SERVICING FEE" shall mean, for any Monthly Period, an amount equal to the product of (i) one-twelfth, (ii) the Series Servicing Fee Percentage and (iii) the Adjusted Invested Amount as of the preceding Record Date, or, in the case of the first Distribution Date, the Initial Invested Amount. "SERVICING FEE ACCRUAL" shall mean, for any Business Day of a Monthly Period, an amount equal to the product of (i) the number of days elapsed from the Business Day immediately preceding such Business Day and (ii) the quotient of (x) the Servicing Fee for such Monthly Period divided by (y) the number of days in such Monthly Period. "SHARED PRINCIPAL COLLECTIONS" shall mean, as the context requires, either (a) the amount allocated to the Series 1997-1 Variable Funding Certificates which, in accordance with subsection 4.6(d) or 4.9(g), may be applied in accordance with subsection 4.3(e) of the Agreement or (b) the amounts allocated to the investor certificates (other than Transferor Retained Certificates) of other Series which the applicable Supplements for such Series specify are to be treated as "Shared Principal Collections" and which may be applied to cover Principal Shortfalls with respect to the Series 1997-1 Variable Funding Certificates. "SIX MONTH EXCESS SPREAD PERCENTAGE" shall mean, for any Determination Date, the arithmetic average of the Excess Spread Percentages calculated on such Determination Date and the five preceding Determination Dates (calculated utilizing the Account Cap Start-up Calculation Rule). "SIX MONTH PAYMENT RATE PERCENTAGE" shall mean, for any Determination Date, the arithmetic average of the Payment Rates calculated on such Determination Date and the five preceding Determination Dates (calculated utilizing the Account Cap Start-up Calculation Rule). "SPREAD ACCOUNT" shall have the meaning specified in subsection 4.2(f). "STORED EXCESS FINANCE CHARGE COLLECTIONS" shall mean (i) with respect to any Business Day, the Finance Charge Collections that are designated as such pursuant to subsection 4.6(a)(xvi) and (ii) with respect to any Transfer Date, the cumulative amount of Finance Charge Collections designated as such during the related Monthly Period. "TERMINATION PAYMENT DATE" shall mean the earlier of the first Distribution Date following the liquidation or sale of the Receivables as a result of an Insolvency Event and the occurrence of the Scheduled Series 1997-1 Termination Date. "THREE MONTH EXCESS SPREAD PERCENTAGE" shall mean, for any Determination Date, the arithmetic average of the Excess Spread Percentages calculated on such Determination Date and the two preceding Determination Dates (calculated utilizing the Account Cap Start-up Calculation Rule). "THREE MONTH PAYMENT RATE PERCENTAGE" shall mean, for any Determination Date, the arithmetic average of the Payment Rates calculated on such Determination Date and the two preceding Determination Dates (calculated utilizing the Account Cap Start-up Calculation Rule). "TRANCHE" shall mean a Cost of Funds Rate Tranche or a Bank Rate Tranche. "TRANCHE RATE" shall mean the interest rate applicable to each portion of the Class A Principal Balance and the Class B Principal Balance, which shall be, with respect to any Cost of Funds Rate Tranche, the Cost of Funds Rate applicable thereto and with respect to any Bank Rate Tranche, the Bank Rate applicable thereto. "TRANSFEROR FINANCE CHARGE COLLECTIONS" shall mean on any Business Day the product of (a) the Finance Charge Collections for such Business Day, (b) the Transferor Percentage and (c) the Floating Allocation Percentage. "TRANSFEROR RETAINED CERTIFICATES" shall mean investor certificates of any Series, including the Class C VFCs, which the Transferor is required to retain, but only for so long as the Transferor is the Holder of such Certificates. "TRUST BASE RATE" shall mean, with respect to a Monthly Period, the per annum percentage equal to the sum of (i) the Interest Accrual Rate for the Interest Accrual Period related to such Monthly Period and (ii) the Series Servicing Fee Percentage only if SRI or its Affiliate is not the Servicer during such Monthly Period. "TRUST PORTFOLIO YIELD" shall mean, with respect to any Monthly Period, the annualized percentage equivalent of a fraction, (a) the numerator of which is an amount equal to the result, for all days during such Monthly Period, of (i) the aggregate Finance Charge Collections, MINUS (ii) the aggregate Discount Option Receivables Collections, MINUS (iii) the aggregate Default Amounts and (b) the denominator of which is the aggregate amount of Principal Receivables outstanding as of the beginning of the Monthly Period. The "TWELVE MONTH DILUTION RATE" shall mean, for any Determination Date, the arithmetic average of the Dilution Rates calculated on such Determination Date and the eleven preceding Determination Dates (calculated utilizing the Account Cap Start-up Calculation Rule). "UTILIZATION FEE" shall mean an amount, payable on each Distribution Date in the amount calculated as provided in Section 2.3(a) of each Certificate Purchase Agreement. "VFC ADDITIONAL INVESTED AMOUNT" shall mean an Additional Invested Amount (as defined in Section 6.15 of the Agreement). SECTION 3. REASSIGNMENT TERMS. (a) The Senior Certificates shall be subject to repurchase by the Transferor at its option, in accordance with the terms specified in subsection 12.2(a) of the Agreement, on any Distribution Date on or after the Distribution Date on which the sum of the Class A Invested Amount, the Class B Invested Amount and the Class B-2 Invested Amount is reduced to an amount less than or equal to 10% of the sum of the highest combined Class A Invested Amount, Class B Invested Amount and Class B-2 Invested Amount at any time during the Revolving Period. The deposit required in connection with any such repurchase and final distribution shall be equal to the sum of the Class A Principal Balance Invested Amount, the Class B Invested Amount and the Class B-2 Invested Amount PLUS any accrued and unpaid interest on such Certificates PLUS any accrued and unpaid Facilities Costs PLUS any accrued and unpaid interest on unpaid interest on Senior Certificates or unpaid Facilities Costs through the day prior to the Distribution Date on which the final distribution occurs. The deposit required to be made in connection with a sale or repurchase of the Receivables as set forth in sections 2.4(e), 9.2, 10.2(a), 12.1 or 12.2 of the Agreement shall, unless otherwise specified in the Agreement, be equal to the sum of the Class A Invested Amount and the Class C Invested Amount plus any accrued and unpaid interest on unpaid interest on Senior Certificates or unpaid Facilities Costs PLUS any accrued and unpaid interest on unpaid interest on Senior Certificates or unpaid Facilities Costs through the day prior to the Distribution Date on which the final distribution occurs. (b) Each Certificateholder, by accepting and holding such Certificate or interest therein, will be deemed to have represented and warranted that it is not (i) an employee benefit plan (as defined in Section 3(3) of ERISA) that is subject to the provisions of Title I of ERISA, (ii) a plan described in Section 4975(c)(1) of the Internal Revenue Code, or (iii) any entity whose underlying assets include plan assets by reason of a plan's investment in the entity. SECTION 4. DELIVERY AND PAYMENT FOR THE SERIES 1997-1 VARIABLE FUNDING CERTIFICATES. The Transferor shall execute and deliver the Series 1997-1 Variable Funding Certificates to the Trustee for authentication in accordance with Section 6.1 of the Agreement. The Trustee shall deliver the Series 1997-1 Variable Funding Certificates to or upon the order of the Transferor when authenticated in accordance with Section 6.2 of the Agreement. SECTION 5. FORM OF DELIVERY OF SERIES 1997-1 VARIABLE FUNDING CERTIFICATES. The Class A VFCs, the Class B VFCs, the Class B-2 VFCs and the Class C VFCs shall be delivered as Registered Certificates as provided in Section 6.1 of the Agreement. SECTION 6. ARTICLE IV OF AGREEMENT. Sections 4.l, 4.2 (a) through (e) and 4.3 of the Agreement shall read in their entirety as provided in the Agreement. Article IV of the Agreement (except for Sections 4.1, 4.2(a) through (e) and 4.3 thereof) shall read in its entirety as follows and shall be applicable only to the Series 1997-1 Variable Funding Certificates: ARTICLE IV RIGHTS OF CERTIFICATEHOLDERS AND ALLOCATION AND APPLICATION OF COLLECTIONS SECTION 4.2 ESTABLISHMENT OF ACCOUNTS. (F) THE SPREAD ACCOUNT. The Servicer, for the benefit of the Senior Certificateholders, shall cause to be established and maintained in the name of the Trustee, with an office or branch of a Qualified Institution (including Bankers Trust Company), a segregated trust account for the Series 1997-1 (the "SPREAD ACCOUNT") bearing a designation clearly indicating that the funds deposited therein are held in trust for the benefit of the Senior Certificateholders. The Servicer shall give written notice to the Trustee of the location and account number of the Spread Account and shall notify the Trustee in writing prior to any subsequent change thereof. The Trustee shall possess all right, title and interest in all funds on deposit from time to time in the Spread Account and in all proceeds thereof. The Spread Account shall be under the sole dominion and control of the Trustee for the benefit of the Senior Certificateholders. The Transferor does hereby transfer, assign, set-over, and otherwise convey to the Trust for the benefit of the Senior Certificateholders, without recourse, all of its right, title and interest in, to and under: (i) the Spread Account, all funds, and all investment property, certificates and instruments, if any, from time to time representing or evidencing or held in the Spread Account; (ii) all investments of amounts on deposit in the Spread Account from time to time and all investment property, certificates and instruments, if any, from time to time representing or evidencing such investments; (iii) all notes, certificates of deposit, investment property and other instruments from time to time hereafter delivered to or otherwise possessed by the Trustee for and on behalf of the Transferor in substitution for or in addition to any of the then existing Spread Account property; (iv) all interest, dividends, cash, investment property, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any and all of the existing Spread Account property; and (v) all additional property designated as being Spread Account property that may from time to time hereafter be assigned or pledged to the Trustee for the benefit of the Series 1997-1 Certificateholders hereunder by the Transferor or by any Person on the Transferor's behalf. (G) MAXIMUM SPREAD ACCOUNT AMOUNT. On each Determination Date, the Servicer shall compute the Account Cap and the Maximum Spread Account Amount. The Account Cap determined pursuant to the previous sentence will, except as specified in the proviso to the following sentence, be in effect from and including the related Distribution Date to but excluding the next subsequent Distribution Date. The maximum amount required to be held on deposit in the Spread Account (the "MAXIMUM SPREAD ACCOUNT AMOUNT") shall be zero until the Initial Determination Date and on any day thereafter shall equal the product of (i) the Account Cap established on the most recent Determination Date and (ii) the Invested Amount as of such day; PROVIDED, HOWEVER, that on or after the occurrence of a Series 1997-1 Pay Out Event, the Maximum Spread Account Amount for any day shall equal (i) the sum of the Class A Principal Balance, the Class B Principal Balance and the Class B-2 Principal Balance on such day, MINUS (ii) the amount of the available funds in the Principal Account as of such day after giving effect to all deposits pursuant to subsection 4.6(a)(xiii). (H) DEPOSITS INTO AND WITHDRAWALS FROM THE SPREAD ACCOUNT. On each Business Day, the Servicer shall instruct the Trustee to withdraw funds from the Collection Account in the amount specified in subsection 4.6(a)(xiii) and deposit them into the Spread Account and to withdraw from the Spread Account such amounts as are specified in subsection 4.7(d) to be withdrawn from the Spread Account and to deposit or pay such amounts as provided in subsection 4.7(d). On any Business Day, the Transferor may (but shall have no obligation to) deposit additional funds into the Spread Account. On any Purchase Date, the Servicer may cause a portion of the proceeds of the sale of Additional Invested Amount to be deposited into the Spread Account in satisfaction of the condition precedent in Section 3.2(e) of each Certificate Purchase Agreement. On any Business Day, the Servicer may instruct the Trustee to withdraw any excess, of the funds available in the Spread Account over the Maximum Spread Account Amount applicable to such Business Day from the Spread Account and pay such funds (the "RELEASED SPREAD ACCOUNT AMOUNT") to the Transferor. Funds shall be withdrawn from the Spread Account and applied as provided in Section 4.7(d). Such Related Spread Account Amount shall be treated on the next succeeding Business Day as Available Series 1997-1 Finance Charge Collections and the Transferor shall make the Released Spread Account Amount available to the Trustee on such succeeding Business Day (to the extent that other services of Available Series 1997-1 Finance Charge collections are insufficient for the uses described in subsection 4.6(a)). Funds in the Spread Account shall be invested at the direction of the Servicer in Cash Equivalents that mature at or prior to the time required by the Agreement or the Series 1997-1 Supplement. Any earnings on such invested funds shall be deposited and held in the Spread Account and applied in the same manner and priority as other amounts therein. SECTION 4.4 RIGHTS OF CERTIFICATEHOLDERS. The Series 1997-1 Variable Funding Certificates shall represent undivided interests in the Trust, consisting of the right to receive, to the extent necessary to make the required payments with respect to such Series 1997-1 Variable Funding Certificates at the times and in the amounts specified in this Agreement, (a) the Floating Allocation Percentage and Fixed Allocation Percentage (as applicable from time to time) of Collections available in the Collection Account, (b) funds allocable to the Series 1997-1 Variable Funding Certificates on deposit in the Equalization Account and (c) funds on deposit in the Interest Funding Account, the Principal Account, the Spread Account and the Distribution Account (for such Series, the "SERIES 1997-1 CERTIFICATEHOLDERS' INTEREST"). The Class B Invested Amount, the Class B-2 Invested Amount and the Class C Invested Amount shall be subordinated to the Class A VFCs, the Class B-2 Invested Amount and the Class C Invested Amount shall be subordinated to the Class A VFCs and the Class B VFCs, and the Class C Invested Amount shall be subordinated to the Class A VFCs, the Class B VFCs and the Class B-2 VFCs, in each case to the extent provided in this Article IV. SECTION 4.5 COLLECTIONS AND ALLOCATION; PAYMENTS ON EXCHANGEABLE TRANSFEROR CERTIFICATE. (A) COLLECTIONS. The Servicer will apply or will instruct the Trustee to apply all funds on deposit in the Collection Account and the Equalization Account allocable to the Series 1997-1 Variable Funding Certificates, and all funds on deposit in the Interest Funding Account, the Principal Account, the Spread Account and the Distribution Account maintained for this Series, as described in this Article IV. (B) PAYMENTS TO THE HOLDER OF THE EXCHANGEABLE TRANSFEROR CERTIFICATE. On each Business Day, the Servicer shall determine whether a Series 1997-1 Pay Out Event is deemed to have occurred with respect to the Series 1997-1 Variable Funding Certificates, and the Servicer shall allocate and pay Collections in accordance with the Daily Report with respect to such Business Day to the Holder of the Exchangeable Transferor Certificate as follows: (i) For each Business Day with respect to the Revolving Period, in addition to amounts allocated and paid to the Holder of the Exchangeable Transferor Certificate pursuant to subsection 4.3(b) of the Agreement, an amount equal to the product of the Class C Floating Allocation Percentage and the amount of Principal Collections on such Business Day (net of any Reallocated Class C Principal Collections on such Business Day). (ii) For each Business Day with respect to the Amortization Period prior to the Business Day on which an amount equal to the Class B Invested Amount has been deposited in the Principal Account in addition to amounts allocated and paid to the Holder of the Exchangeable Transferor Certificate pursuant to subsection 4.3(b) of the Agreement, an amount equal to the product of the Class C Fixed Allocation Percentage and the amount of Principal Collections on such Business Day. (iii) For each Business Day on and after the day on which Principal Collections are being deposited in the Principal Account pursuant to subsections 4.6(c)(i), (ii) and (iii), the amount of payments made to the Holder of the Exchangeable Transferor Certificate shall be determined only as provided in subsection 4.3(b) of the Agreement. Notwithstanding the foregoing, amounts payable to the Holders of the Exchangeable Transferor Certificate pursuant to subsection 4.5(b)(i) or (ii) shall instead be deposited in the Equalization Account to the extent necessary to prevent the Transferor Interest from being less than the Minimum Transferor Interest. The allocations to be made pursuant to this subsection 4.5(b) also apply to deposits into the Collection Account that are treated as Principal Collections, including Adjustment Payments, payment of the reassignment price pursuant to subsection 2.4(e) of the Agreement and proceeds from the sale, disposition or liquidation of the Receivables pursuant to Section 9.2, 10.2(a), 12.1 or 12.2 of the Agreement and Section 3 of this Series Supplement, such deposits to be treated as Collections and will be allocated as Finance Charge Receivables or Principal Receivables as provided in the Agreement. SECTION 4.6 APPLICATION OF FUNDS ON DEPOSIT IN THE COLLECTION ACCOUNT FOR THE CERTIFICATES. (a) On each Business Day, the Servicer shall deliver to the Trustee a Daily Report in which it shall instruct the Trustee to withdraw, and the Trustee, acting in accordance with such instructions, shall withdraw, to the extent of (x) the sum of (i) the Floating Allocation Percentage of Finance Charge Collections available in the Collection Account, (ii) amounts released from the Spread Account pursuant to subsection 4.2(h) and (iii) investment earnings on amounts on deposit in the Principal Account (the "AVAILABLE SERIES 1997-1 FINANCE CHARGE COLLECTIONS"), the amounts required to be withdrawn from the Collection Account, pursuant to subsections 4.6(a)(i) through 4.6(a)(xvi). (i) INTEREST ACCRUAL. On each Business Day during an Interest Accrual Period except for any Transfer Date, the Trustee, acting in accordance with instructions from the Servicer, shall withdraw from the Collection Account to the extent of the Available Series 1997-1 Finance Charge Collections for such Business Day, and deposit into the Interest Funding Account, an amount equal to the amount accrued since the preceding Business Day on the sum of the Class A Principal Balance and the Class B Principal Balance at the Interest Accrual Rate in effect for such Interest Accrual Period (the "INTEREST ACCRUAL") plus any Interest Accrual due with respect to any prior Business Day but not previously deposited in the Interest Funding Account. On each Transfer Date immediately following an Interest Accrual Period, the Trustee, acting in accordance with instructions from the Servicer, shall withdraw from the Collection Account to the extent of the Available Series 1997-1 Finance Charge Collections for such Transfer Date, and deposit into the Interest Funding Account, an amount which, when aggregated with amounts on deposit therein on such Transfer Date, shall equal to the amount of interest and Program Fees which are payable to the Senior Certificateholders on such Transfer Date pursuant to subsections 4.8(a)(i) through (iv). (ii) ADDITIONAL INTEREST ON UNPAID CLASS A INTEREST, CLASS B INTEREST AND PROGRAM FEES. On each Business Day during an Interest Accrual Period, the Trustee, acting in accordance with instructions from the Servicer, shall withdraw from the Collection Account to the extent of any Available Series 1997-1 Finance Charge Collections remaining after giving effect to the withdrawals pursuant to subsections 4.6(a)(i), and deposit into the Interest Funding Account for distribution on the next Distribution Date as provided in Section 4.8(a), the sum of (1) additional interest at the CSFB Corporate Base Rate for interest that has accrued on interest that was payable pursuant to subsection 4.8(a)(i) but was not previously paid to the Class A Certificateholders, (2) additional interest at the CSFB Corporate Base Rate on Program Fees payable to Class A Certificateholders pursuant to subsection 4.8(a)(iii) but that were not previously paid to such Class A Certificateholders, (3) additional interest at the CSFB Corporate Base Rate for interest that has accrued on interest that was payable pursuant to subsection 4.8(a)(ii) but was not previously paid to the Class B Certificateholders and (4) additional interest at the CSFB Corporate Base Rate on Program Fees due and payable to Class B Certificateholders pursuant to subsection 4.8(a)(iv) but that were not previously paid to such Class B Certificateholders. (iii) SERVICING FEE. On each Business Day on which SRI or an Affiliate of SRI is not the Servicer, the Trustee, acting in accordance with instructions from the Servicer, shall withdraw from the Collection Account and distribute to the Servicer, to the extent of any Available Series 1997-1 Finance Charge Collections remaining after giving effect to the withdrawals pursuant to subsections 4.6(a)(i) and (ii), an amount equal to the excess of (1) the Servicing Fee Accrual for such Business Day plus any unpaid Servicing Fees from prior Interest Accrual Periods over (2) any amounts with respect thereto previously distributed to the Servicer during the relevant Interest Accrual Period. (iv) INVESTOR DEFAULT AMOUNT. On each Business Day, the Trustee, acting in accordance with instructions from the Servicer, shall withdraw from the Collection Account, to the extent of any Available Series 1997-1 Finance Charge Collections remaining after giving effect to the withdrawals pursuant to subsections 4.6(a)(i) through (iii), an amount equal to the sum of (1) the aggregate Investor Default Amount for such Business Day PLUS (2) the unpaid Investor Default Amount for any previous Business Day during such Monthly Period, such amount to be (A) treated as Shared Principal Collections during the Revolving Period, (B) during the Amortization Period on and prior to the day on which an amount equal to the Class A Invested Amount is deposited in the Principal Account, deposited in the Principal Account for distribution to the Class A Certificateholders on the next Distribution Date, (C) during the Amortization Period, on and after the day on which such deposit to the Principal Account with respect to the Class A Invested Amount has been made and on and prior to the day on which an amount equal to the Class B Invested Amount is deposited in the Principal Account, deposited in the Principal Account for payment to the Class B Certificateholders on the next Distribution Date, (D) during the Amortization Period, on and after the day on which such deposit to the Principal Account with respect to the Class A Invested Amount and Class B Invested Amount has been made and on and prior to the day on which an amount equal to the Class B-2 Invested Amount is deposited in the Principal Account, deposited in the Principal Account for payment to the Class B-2 Certificateholders on the next Distribution Date, and (E) on and after such deposit to the Principal Account with respect to the Class B-2 Invested Amount has been made, paid to the Class C Certificateholders. (v) REIMBURSEMENT OF CLASS A INVESTOR CHARGE-OFFS. On each Business Day, the Trustee, acting in accordance with instructions from the Servicer, shall withdraw from the Collection Account to the extent of any Available Series 1997-1 Finance Charge Collections remaining after giving effect to the withdrawals pursuant to subsections 4.6(a)(i) through (iv), an amount equal to the unreimbursed Class A Investor Charge-Offs, such amount (A) during the Revolving Period to be treated as Shared Principal Collections, and (B) during the Amortization Period on and prior to the day on which an amount equal to the Class A Invested Amount is deposited in the Principal Account to be deposited in the Principal Account for distribution to the Class A Certificateholders on the next Distribution Date. (vi) REIMBURSEMENT OF CLASS B INVESTOR CHARGE-OFFS. On each Business Day, the Trustee, acting in accordance with instructions from the Servicer, shall withdraw from the Collection Account to the extent of any Available Series 1997-1 Finance Charge Collections remaining after giving effect to the withdrawals pursuant to subsections 4.6(a)(i) through (v), an amount equal to the sum of the unreimbursed Class B Investor Charge-Offs and the unreimbursed Reallocated Class B Principal Collections, such amount, (A) during the Revolving Period, to be treated as Shared Principal Collections, (B) during the Amortization Period, on and prior to the day on which an amount equal to the Class A Invested Amount is deposited in the Principal Account, to be deposited in the Principal Account for distribution to the Class A Certificateholders on the next Distribution Date, and (C) during the Amortization Period, on and after the day on which such deposit has been made, to be deposited in the Principal Account for payment to the Class B Certificateholders on the next Distribution Date. (vii) CLASS B-2 INTEREST ACCRUAL AND CLASS B-2 FACILITY FEE ACCRUAL. On each Business Day during an Interest Accrual Period, the Trustee, acting in accordance with instructions from the Servicer, shall withdraw from the Collection Account and deposit into the Interest Funding Account, to the extent of any Available Series 1997-1 Finance Charge Collections for such Business Day remaining after giving effect to the withdrawals and deposits pursuant to subsection 4.6(a)(i) through (vi), an amount equal to the sum of (1) the amount accrued since the preceding Business Day on the Class B-2 Principal Balance at the Class B-2 Certificate Rate in effect (the "CLASS B-2 INTEREST ACCRUAL"), plus (2) any Class B-2 Interest Accrual due with respect to any prior Business Day but not previously deposited in the Interest Funding Account, plus (3) additional interest at the Class B-2 Certificate Rate plus 2.0% for interest that has accrued on interest that was payable pursuant to subsection 4.8(a)(vii) but was not previously paid to the Class B-2 Certificateholders, plus (4) additional interest at the Class B-2 Certificate Rate plus 2.0% on Program Fees due and payable to Class B-2 Certificateholders pursuant to subsection 4.8(a)(viii) but that were not previously paid to such Class B-2 Certificateholders, plus (5) the amount of Class B-2 Facility Fees accrued since the preceding Business Day (the "CLASS B-2 FACILITY ACCRUAl"), plus (6) any Class B-2 Facility Accrual due with respect to any prior Business Day but not previously deposited in the Interest Funding Account. (viii) REIMBURSEMENT OF CLASS B-2 INVESTOR CHARGE-OFFS. On each Business Day, the Trustee, acting in accordance with instructions from the Servicer, shall withdraw from the Collection Account, to the extent of any Available Series 1997-1 Finance Charge Collections remaining after giving effect to the withdrawals and deposits pursuant to subsection 4.6(a)(i) through (vii), an amount equal to the sum of the unreimbursed Class B-2 Investor Charge-Offs and the unreimbursed Reallocated Class B-2 Principal Collections, such amount, (A) during the Revolving Period, to be treated as Shared Principal Collections, (B) during the Amortization Period, on and prior to the day on which an amount equal to the Class A Invested Amount is deposited in the Principal Account, to be deposited in the Principal Account for distribution to the Class A Certificateholders on the next Distribution Date, (C) during the Amortization Period, on and after the day on which such deposit to the Principal Account with respect to the Class A Investor Amount has been made and on and prior to the day on which an amount equal to the Class B Invested Amount is deposited in the Principal Account to be deposited in the Principal Account for payment to the Class B Certificateholders on the next Distribution Date, and (D) on and after the day of such deposit to the Principal Account with respect to Class B Invested Amount has been made, to be paid to the Class B-2 Certificateholders directly or through depositing to the Principal Account in accordance with the instructions given by the Class B-2 Certificateholders. (ix) REIMBURSEMENT OF CLASS C INVESTOR CHARGE-OFFS. On each Business Day, the Trustee, acting in accordance with instructions from the Servicer, shall withdraw from the Collection Account, to the extent of any Available Series 1997-1 Finance Charge Collections remaining after giving effect to the withdrawals and deposits pursuant to subsections 4.6(a)(i) through (viii), an amount equal to the sum of the unreimbursed Class C Investor Charge-Offs and the unreimbursed Reallocated Class C Principal Collections, such amount, (A) during the Revolving Period, to be treated as Shared Principal Collections, (B) during the Amortization Period on and prior to the day on which an amount equal to the Class A Invested Amount is deposited in the Principal Account to be deposited in the Principal Account for distribution to the Class A Certificateholders on the next Distribution Date, (C) during the Amortization Period, on and after the day on which such deposit to the Principal Account with respect to the Class A Invested Amount has been made and on and prior to the day on which an amount equal to the Class B Invested Amount is deposited in the Principal Account, to be deposited in the Principal Account for Payment to the Class B Certificateholders on the next Distribution Date, (D) during the Amortization Period and on and after the day on which an amount equal to the Class B Invested Amount is deposited in the Principal Account to be deposited in the Principal Account for payment to the Class B-2 Certificateholders on the next Distribution Date, and (E) on and after the day such deposit to the Principal Account with respect to Class B-2 Invested Amount has been made, paid to the Class C Certificateholders directly or through depositing to the Principal Account in accordance with the instructions given by the Class C Certificateholders. (x) MEZZANINE FACILITIES COSTS. On each Business Day during an Interest Accrual Period, the Trustee, acting in accordance with instructions from the Servicer, shall withdraw from the Collection Account and deposit into the Interest Funding Account, to the extent of any Available Series 1997-1 Finance Charge Collections remaining after giving effect to the withdrawals and deposits pursuant to subsections 4.6(a)(i) through (ix), an amount equal to the excess of (1) the lesser of (A) the product of (x) one-twelfth, (y) 0.50% and (z) the sum of the Class A Purchase Limit, the Class B Purchase Limit and the Class B-2 Purchase Limit as of the first day of such Interest Accrual Period and (B) the aggregate amount of unreimbursed Facilities Costs (other than Program Fees and additional interest thereon) of which the Transferor or the Servicer has theretofore received notice pursuant to a Certificate Purchase Agreement over (2) the amount previously deposited into the Interest Funding Account pursuant to this subsection 4.6(a)(x) during such Interest Accrual Period. (xi) CLASS C INTEREST. On each Business Day, the Trustee, acting in accordance with instructions from the Servicer, shall withdraw from the Collection Account and pay to the Class C Certificateholders, to the extent of any Available Series 1997-1 Finance Charge Collections remaining after giving effect to the withdrawals and deposits pursuant to subsections 4.6(a)(i) through (x), an amount equal to the sum of (1) the amount of interest which has accrued with respect to the outstanding aggregate principal amount of the Class C Certificates at the Class C Certificate Rate but which has not been paid to the Class C Certificateholders and (2) any additional interest at the Class C Certificate Rate for interest that has accrued on interest that was due during a prior Monthly Period pursuant to this subsection but not paid to the Class C Certificateholders. (xii) REIMBURSEMENT OF FUNDS ALLOCATED FROM EXCESS FINANCE CHARGE COLLECTIONS OF OTHER SERIES. On each Business Day, the Trustee, acting in accordance with instructions from the Servicer, shall withdraw from the Collection Account and make any amounts remaining in the Collection Account available to pay to Certificateholders of other Series any shortfalls in amount payable to such Certificateholders from Finance Charge Collections (but not from Excess Finance Charge Collections) allocated to such other Series, to the extent of any Available Series 1997-1 Finance Charge Collections remaining after giving effect to the withdrawals and deposits pursuant to subsections 4.6(a)(i) through (xi), the lesser of (1) the aggregate amount of such shortfalls and (2) the Net Borrowed Excess Spread Amount for such Business Day. (xiii) MAXIMUM SPREAD ACCOUNT AMOUNT. On each Business Day, the Trustee, acting in accordance with instructions from the Servicer, shall withdraw from the Collection Account any Available Series 1997-1 Finance Charge Collections remaining after giving effect to the withdrawals pursuant to subsections 4.6(a)(i) through (xii), and shall deposit such funds into the Spread Account until the amount therein equals the Maximum Spread Account Amount as of such Business Day. (xiv) OTHER REMAINING FACILITIES COSTS. On each Business Day during an Interest Accrual Period, the Trustee acting in accordance with instructions from the Servicer, shall withdraw from the Collection Account and deposit into the Interest Funding Account, to the extent of Available Series 1997-1 Finance Charge Collections remaining after giving effect to the withdrawals pursuant to subsections 4.6(a)(i) through (xiii), the excess of (1) the unreimbursed Facilities Costs (other than Program Fees and additional interest thereon) as to which the Transferor or the Servicer has theretofore received notice pursuant to a Certificate Purchase Agreement over (2) the aggregate amount previously deposited into the Interest Funding Account pursuant to subsection 4.6(a)(x) and this subsection 4.6(a)(xiv) during such Interest Accrual Period. (xv) SERVICING FEE. On each Business Day, if SRI or an Affiliate of SRI is the Servicer, the Trustee, acting in accordance with instructions from the Servicer, shall withdraw from the Collection Account and distribute to the Servicer, to the extent of Available Series 1997-1 Finance Charge Collections for such Business Day remaining after giving effect to the withdrawals and deposits pursuant to subsections 4.6(a)(i) through (xiv), an amount equal to the excess of (1) the Servicing Fee Accrual for such Business Day plus any unpaid Servicing Fees from prior Monthly Periods over (2) any amounts with respect thereto previously distributed to the Servicer during the relevant Monthly Period. (xvi) STORED EXCESS FINANCE CHARGE COLLECTIONS. Any amounts remaining in the Collection Account to the extent of any Available Series 1997-1 Finance Charge Collections remaining after giving effect to the withdrawals and deposits pursuant to subsection 4.6(a)(i) through (xv) shall be treated as Stored Excess Finance Charge Collections, and the Servicer shall direct the Trustee in writing on each Business Day to withdraw such amounts from the Collection Account and pay them to the Servicer. (b) For each Business Day with respect to the Revolving Period, the funds on deposit in the Collection Account to the extent of the product of (i) the sum of the Class A Floating Allocation Percentage, the Class B Floating Allocation Percentage and the Class B-2 Floating Allocation Percentage and (ii) Principal Collections with respect to such Business Day will be treated as Shared Principal Collections and applied, pursuant to the written direction of the Servicer in the Daily Report for such Business Day, as provided in subsection 4.3(e) of the Agreement. (c) For each Business Day on and after the Amortization Period Commencement Date, the amount of funds available in the Collection Account as described below will be distributed, pursuant to the written direction of the Servicer in the Daily Report for such Business Day, in the following priority: (i) on and prior to the day on which an amount equal to the Class A Invested Amount has been deposited in the Principal Account to be applied to the payment of Class A Principal, an amount (not in excess of the Class A Invested Amount) equal to the sum of (w) the product of the Class A Fixed Allocation Percentage and Principal Collections in the Collection Account at the end of the preceding Business Day, (x) any amount on deposit in the Equalization Account allocated to the Class A VFCs on such Business Day pursuant to subsection 4.6(f), (y) amounts to be paid pursuant to subsections 4.6(a)(iv), (v), (vi), (viii) and (ix) on such Business Day and (z) the amount of Shared Principal Collections allocated to the Series 1997-1 Variable Funding Certificates in accordance with Section 4.11 on such Business Day (such sum, the "CLASS A DAILY PRINCIPAL AMOUNT"), will be deposited into the Principal Account to be applied to the payment of the Class A Invested Amount; (ii) on and after the day on which an amount equal to the Class A Invested Amount has been deposited in the Principal Account to be applied to the payment of Class A Principal, an amount (not in excess of the Class B Invested Amount) equal to the sum of (w) an amount equal to the product of the Class B Fixed Allocation Percentage and Principal Collections in the Collection Account at the end of the preceding Business Day, (x) any amount on deposit in the Equalization Account allocated to the Class B VFCs on such Business Day pursuant to subsection 4.6(f), (y) the amount, if any, allocated to be paid to the Class B VFCs pursuant to subsections 4.6(a)(iv), (vi), (viii) and (ix) with respect to such Business Day and (z) the amount of Shared Principal Collections allocated to the Series 1997-1 Variable Funding Certificates in accordance with Section 4.11 on such Business Day (such sum, the "CLASS B DAILY PRINCIPAL AMOUNT") will be deposited into the Principal Account to be applied to the payment of the Class B Invested Amount); (iii) on and after the day on which an amount equal to the Class B Invested Amount has been deposited in the Principal Account to be applied to the payment of Class B Principal, an amount (not in excess of the Class B-2 Invested Amount) equal to the sum of (w) an amount equal to the product of the Class B-2 Fixed Allocation Percentage and Principal Collections in the Collection Account at the end of the preceding Business Day, (x) any amount on deposit in the Equalization Account allocated to the Class B-2 VFCs on such Business Day pursuant to subsection 4.6(f), (y) the amount, if any, allocated to be paid to the Class B-2 VFCs pursuant to subsections 4.6(a)(iv), (viii) and (ix) with respect to such Business Day and (z) the amount of Shared Principal Collections allocated to the Series 1997-1 Variable Funding Certificates in accordance with Section 4.11 on such Business Day (such sum, the "CLASS B-2 DAILY PRINCIPAL AMOUNT") will be deposited in the Principal Account to be applied to the payment of the Class B-2 Invested Amount; (iv) on and after the day on which an amount equal to the Class B-2 Invested Amount has been deposited in the Principal Account to be applied to the payment of Class B-2 Principal, an amount equal to the sum of (w) an amount equal to the product of the Class C Fixed Allocation Percentage and Principal Collections in the Collection Account at the end of the preceding Business Day, (x) any amount on deposit in the Equalization Account allocated to the Class C VFCs on such Business Day pursuant to subsection 4.6(f), (y) the amount, if any, allocated to be paid to the Class C VFCs pursuant to subsections 4.6(a)(iv) and (ix) with respect to such Business Day and (z) the amount of Shared Principal Collections allocated to the Series 1997-1 Variable Funding Certificates in accordance with Section 4.11 on such Business Day (such sum, the "CLASS C DAILY PRINCIPAL AMOUNT") will be distributed to the Class C Certificateholders; and (v) an amount equal to the excess, if any, of (A) the product of (x) the sum of the Class A Fixed Allocation Percentage, the Class B Fixed Allocation Percentage and the Class B-2 Fixed Allocation Percentage and (y) Principal Collections in the Collection Account at the end of the preceding Business Day over (B) the sum of the amounts deposited in the Principal Account pursuant to clauses (i)(w), (ii)(w) and (iii)(w) above will be treated as Shared Principal Collections and applied as provided in subsection 4.3(e) of the Agreement. (d) Prior to the Amortization Period Commencement Date, pursuant to subsection 4.3(e) of the Agreement, the Transferor may at its option apply Shared Principal Collections after the applications with respect thereto specified in the provisions of subsection 4.3(e) of the Agreement, to make payments of principal or deposits to the Principal Account with respect to the Series 1997-1 Variable Funding Certificates. Such Shared Principal Collections allocated to the Series 1997-1 Variable Funding Certificates (the "SERIES 1997-1 PRINCIPAL COLLECTIONS") may be applied on each Business Day with respect to the Revolving Period, at the option of the Transferor and in an amount to be determined by the Transferor, to make deposits to the Principal Account, for payment as provided in Sections 4.9 and 5.1. (e) Notwithstanding the foregoing provisions of this Section 4.6, but subject to the provisions of subsection 4.6(i) below, if: (x) if both (1) any Class A Purchaser does not elect to approve an Extension hereunder (an "EXITING CLASS A PURCHASER"), as provided in subsection 6.16(a) of this Agreement, and (2) the Class A VFC held by such Exiting Class A Purchaser has not been acquired by another Class A Purchaser who agreed to the Extension, or (y) both (1) any Class B Purchaser does not elect to approve an Extension hereunder (an "EXITING CLASS B PURCHASER"), as provided in subsection 6.16(a) of this Agreement, and (2) (A) the Class B VFC held by such Exiting Class B Purchaser has not been acquired by another Class B Purchaser who agreed to the Extension and (B) the Class C Invested Amount has not been increased on or prior to the original Extension Date before the Extension so that the new Class B Invested Amount plus the Class B-2 Invested Amount plus the new Class C Invested Amount is no less than the greater of (I) 25% of the new Invested Amount on the Business Day preceding the original Extension Date or (II) 5% of the highest Invested Amount at any point during the preceding 180 days, then, commencing on the original Extension Date and on each Business Day thereafter during the Revolving Period on which there remains a positive Adjusted Invested Amount for any Exiting Class A Purchaser or Exiting Class B Purchaser (either, an "EXITING PURCHASER"), the Servicer shall instruct the Trustee in writing to deposit, and the Trustee, acting in accordance with such instructions, shall deposit into the Principal Account for payment to the Exiting Purchasers pursuant to subsection 5.1(e), the Exiting Purchasers' Allocation Percentage of the Shared Principal Collections allocable to the Series 1997-1 Investor Certificates pursuant to subsection 4.3(e) of the Agreement (until such time as the amount on deposit therein equals the aggregate Invested Amount of all Exiting Purchasers) PLUS, if any Exiting Purchaser is a Class B Purchaser, that additional amount of Shared Principal Collections which (upon concurrent application in reduction of the Class A Invested Amount and taking into account any concurrent increase in the Class B-2 Invested Amount and the Class C Invested Amount) will result in the sum of the Class B Invested Amount, the Class B-2 Invested Amount and the Class C Invested Amount being at least 25% of the Invested Amount. Upon making any such deposit into the Principal Account, the Transferor may, at its option, apply amounts allocable to the Transferor pursuant to subsection 4.5(b) or allocable to the Transferor with respect to any other Transferor Retained Class pursuant to any other Supplement to make a payment to the Class C VFCs in an amount not to exceed the amount which would (after giving effect to the payments of principal to be made to the Exiting Purchasers) cause (1) the sum of the Class C Invested Amount, the Class B-2 Invested Amount and the Class B Invested Amount to be at least equal to 25% of the Invested Amount, (2) the Class C Invested Amount to be at least equal to 17.5/25ths of the sum of the Class B Invested Amount and the Class C Invested Amount, and (3) the Class C Invested Amount to be at least 5% of the highest Invested Amount during the immediately preceding 180 days. (f) On the first Business Day of the Amortization Period funds on deposit in the Equalization Account will be deposited in the Principal Account to the extent of the lesser of (x) the Adjusted Invested Amount and (y) the product of (i) the product of (A) 100% minus the Transferor Percentage minus the fixed allocation percentage represented by any Transferor Retained Certificates and (B) the amount on deposit in the Equalization Account at the beginning of the Amortization Period and (ii) the Senior Equalization Account Percentage with respect to Series 1997-1. Any funds in the Equalization Account on any subsequent day will be allocated to the Class A VFCs, the Class B VFCs and the Class B-2 VFCs, to the extent that Default Amounts allocated to the Transferor Interest or adjustments as described in Section 3.8 of the Agreement would cause the Transferor Interest to be less than the Minimum Transferor Interest and, with respect to any credit adjustment, the Transferor has not made an Adjustment Payment to the Collection Account, in an amount equal to the least of (i) the product of (A) the amount of such reduction below the Minimum Transferor Interest and (B) the Senior Equalization Account Percentage with respect to Series 1997-1, (ii) the product of (A) the amount of funds available in the Equalization Account and (B) the Senior Equalization Account Percentage and (iii) the sum of the Class A Adjusted Invested Amount, Class B Adjusted Invested Amount and the Class B-2 Adjusted Invested Amount. On any Determination Date that occurs during the Amortization Period and prior to the Class C Principal Payment Commencement Date on which a Class C Investor Charge-Off is recorded, funds in the Equalization Account shall be allocated to the Senior Certificates in an amount equal to the least of (i) the amount of such Class C Investor Charge-Off, (ii) the product of (A) the amount of funds available in the Equalization Account and (B) the Senior Equalization Account Percentage with respect to Series 1997-1 and (iii) the aggregate remaining Class A Adjusted Invested Amount, Class B Adjusted Invested Amount and Class B-2 Adjusted Invested Amount. The amounts allocated in the preceding two sentences will be allocated, in accordance with written instructions from the Servicer, in the following order of priority: (i) to the Class A VFCs in an amount not to exceed the Class A Invested Amount after subtracting therefrom any amounts to be deposited in the Principal Account with respect thereto pursuant to subsections 4.6(c)(i)(w) and (y), and (ii) to the Class B VFCs in an amount not to exceed the Class B Invested Amount after subtracting therefrom any amounts to be deposited in the Principal Account with respect thereto pursuant to subsections 4.6(c)(ii)(w) and (y), and (iii) to the Class B-2 VFCs in an amount not to exceed the Class B-2 Invested Amount after subtracting therefrom any amounts to be deposited in the Principal Account with respect thereto pursuant to subsections 4.6(c)(iii)(w) and (y). On the day on which an amount equal to the sum of the Class A Invested Amount, the Class B Invested Amount and the Class B-2 Invested Amount has been deposited in the Principal Account to be applied to the payment of Class A Principal, Class B Principal and Class B-2 Principal, as applicable, amounts remaining on deposit in the Equalization Account will be allocated to the Series 1997-1 Variable Funding Certificates and deposited in the Principal Account in an amount not to exceed the lesser of (i) the Class C Invested Amount after subtracting therefrom any amounts to be deposited in the Principal Account with respect thereto pursuant to subsections 4.6(c)(iv)(w) and (y) and (ii) the product of (A) such amounts remaining on deposit and (B) a fraction, the numerator of which is the Class C Invested Amount and the denominator of which is the sum of the invested amounts of all Transferor Retained Classes of Series then in amortization periods on such day. (g) Any application of funds pursuant to subsections 4.6(a)(xvi) or 4.6(f) shall not discharge the Transferor from its obligation to make any Adjustment Payment pursuant to Section 3.8 of the Agreement. (h) The Transferor shall maintain the Class C Adjusted Invested Amount at an amount greater than zero at any time that any of the Class A Invested Amount, the Class B Invested Amount or the Class B-2 Invested Amount is greater than zero. (i) Notwithstanding the provisions of subsections 4.6(a) through 4.6(e), if during the Revolving Period there is any Partial Amortization Amount on any Business Day, the Servicer shall instruct the Trustee in writing to deposit, and the Trustee, acting in accordance with such instructions, shall deposit into the Principal Account for payment to the Senior Certificateholders pursuant subsections 4.9(b) and 5.1(e), all Shared Principal Collections allocable to the Series 1997-1 Investor Certificates pursuant to subsection 4.3(e) of the Agreement, until the amount on deposit therein equals the Partial Amortization Amount. Upon making any such deposit into the Principal Account, the Transferor may, at its option, apply amounts allocable to the Transferor pursuant to subsection 4.5(b) or allocable to the Transferor with respect to any other Transferor Retained Class pursuant to any other Supplement to make a payment to the Class C VFCs in an amount not to exceed the amount which would (after giving effect to the payments of principal to be made to the Senior Certificateholder) cause (1) the sum of the Class C Invested Amount, the Class B-2 Invested Amount and the Class B Invested Amount to be at least equal to 25% of the Invested Amount, (2) the sum of the Class C Invested Amount and the Class B-2 Invested Amount to be at least equal to 17.5/25ths of the sum of the Class B Invested Amount, the Class B-2 Invested Amount and the Class C Invested Amount, (3) the Class B-2 Invested Amount to be no greater than 10% of the Invested Amount, (4) the Class C Invested Amount to be at least equal to 7.5/17.5ths of the sum of the Class B-2 Invested Amount and the Class C Invested Amount, and (5) the sum of the Class B-2 Invested Amount and the Class C Invested Amount to be at least 5% of the highest Invested Amount during the immediately preceding 180 days. The allocations pursuant to this paragraph shall be made prior to any deposits described in subsection 4.6(e). SECTION 4.7 COVERAGE OF REQUIRED AMOUNT AND SPREAD ACCOUNT FOR THE SERIES 1997-1 VARIABLE FUNDING CERTIFICATES. (a) On each Business Day, the Servicer shall determine the Daily Required Amount, if any. On each Determination Date, the Servicer shall determine the Monthly Required Amount, if any. (b) In the event that the Daily Required Amount for a Business Day is greater than zero, the Servicer shall reflect such positive Daily Required Amount on the Daily Report for such Business Day. To the extent of any Daily Required Amount, the Servicer shall apply all or a portion of the Excess Finance Charge Collections of other Series with respect to such Business Day allocable to the Series 1997-1 Variable Funding Certificates in an amount equal to the Daily Required Amount for such Business Day in the manner specified in subsections 4.6(a)(i) through (xi). (c) Excess Finance Charge Collections allocated to the Series 1997-1 Variable Funding Certificates for any Business Day shall mean an amount equal to the product of (i) Excess Finance Charge Collections available from all other Series for such Business Day and (ii) a fraction, the numerator of which is the Daily Required Amount for such Business Day remaining after the application of Transferor Finance Charge Collections and the denominator of which is the aggregate amount of shortfalls in required amounts or other amounts to be paid from Finance Charge Collections for all Series for such Business Day. (d) In the event that a Monthly Adjusted Required Amount exists on any Determination Date, on the related Transfer Date to the extent of the lesser of (i) such Monthly Adjusted Required Amount and (ii) the Stored Excess Finance Charge Collections for the relevant Monthly Period, the Servicer shall, from its own funds, FIRST, deposit into the Interest Funding Account an amount equal to any Interest/Program Fee Shortfall, and SECOND, pay the remaining amount in the manner specified in subsections 4.6(a)(iii) through (xi), (xiii) and (xiv). If such Monthly Adjusted Required Amount exceeds the amount so deposited and paid by the Servicer pursuant to the immediately preceding sentence, on such Transfer Date to the extent of the lesser of (i) such excess and (ii) the Repayable Servicing Fee Amount for the relevant Monthly Period, the Servicer shall, from its own funds, FIRST, deposit into the Interest Funding Account an amount equal to any remaining Interest/Program Fee Shortfall, and SECOND, pay the remaining amount in the manner specified in subsections 4.6(a)(iii) through (xi), (xiii) and (xiv). Then, if there is any remaining excess of such Monthly Adjusted Required Amount (excluding for purposes of this sentence any remaining amount thereof arising due to shortfalls in the amounts payable pursuant to clauses (xi) through (xiv) of subsection 4.6(a)), over the aggregate amounts so deposited and paid by the Transferor and the Servicer pursuant to the immediately preceding two sentences, the Servicer shall withdraw from the Spread Account an amount equal to the lesser of (i) such net Monthly Adjusted Required Amount and (ii) the available funds in the Spread Account, and shall apply such funds on such Determination Date, FIRST, by depositing into the Interest Funding Account an amount equal to any remaining Interest/Program Fee Shortfall, and SECOND, to the extent of any funds remaining after the application described in the preceding clause first, in the manner specified in subsections 4.6(a)(iii) through (x). (e) On each Transfer Date, following the applications described in subsection 4.7(d), the Servicer shall deposit from its own funds into the Spread Account an amount equal to the lesser of (i) the excess of the Maximum Spread Account Amount on such Transfer Date over the amount of funds then on deposit in the Spread Account and (ii) the Stored Excess Finance Charge Collections for the related Monthly Period remaining after the application described in subsection 4.7(d). (f) Any Stored Excess Finance Charge Collections with respect to a Monthly Period remaining on a Transfer Date after the prior applications described in this Section 4.7 shall be treated as Excess Finance Charge Collections and shall be, FIRST, made available on such Transfer Date by the Servicer to pay to Certificateholders of other Series to the extent of shortfalls, if any, in amounts payable to such Certificateholders from Finance Charge Collections (but not Excess Finance Charge Collections) allocated to such other Series, SECOND, applied by the Servicer to make any required payment by the Transferor pursuant to Section 2.4(d) or any overdue required Adjustment Payment pursuant to Section 3.8(a) of the Agreement with respect to any preceding Monthly Period, and THIRD, transferred by the Servicer to the Transferor. Any Repayable Servicing Fee Amount with respect to a Monthly Period remaining on a Transfer Date after the applications described in this Section 4.7 shall be retained by the Servicer. No such remaining Stored Excess Finance Charge Collections or Repayable Servicing Fee Amount shall be subject to further applications hereunder. (g) In the event that the Monthly Required Amount (excluding for purposes of this subsection 4.7(g) any remaining amount thereof arising due to shortfalls in the amounts payable pursuant to clause (ix) of subsection 4.6(a)) for a Transfer Date exceeds the amount of Stored Excess Finance Charge Collections, Repayable Servicer Fee Amount and Spread Account funds allocated thereto or to the Monthly Adjusted Required Amount on such Transfer Date, a portion of the Series 1997-1 Principal Collections allocable to the Class C VFCs in an amount equal to the lesser of such excess and the product of (i)(x) during the Revolving Period, the Class C Floating Allocation Percentage or (y) during the Amortization Period, the Class C Fixed Allocation Percentage and (ii) the amount of Principal Collections in the Collection Account with respect to such Transfer Date shall be allocated to the Senior Certificates and applied on such Transfer Date in accordance with the provisions of subsections 4.6(a)(i) through (viii); provided, however, that with respect to amounts applied pursuant to subsections 4.6(a)(iii), such amounts shall be applied only to the extent of the product of (x) the Class A Floating Allocation Percentage plus the Class B Floating Allocation Percentage plus the Class B-2 Floating Allocation Percentage and (y) the shortfall arising pursuant to such subsections (any such amount so applied, "REALLOCATED CLASS C PRINCIPAL COLLECTIONS"). (h) In the event that the Monthly Required Amount (excluding for purposes of this subsection 4.7(h) any remaining amount thereof arising due to shortfalls in the amounts payable pursuant to clause (viii) of subsection 4.6(a)) for a Transfer Date exceeds the amount of Stored Excess Finance Charge Collections, Repayable Servicer Fee Amount, Spread Account funds and Reallocated Class C Principal Collections allocated thereto or to the Monthly Adjusted Required Amount on such Transfer Date, a portion of the Series 1997-1 Principal Collections allocable to the Class B-2 VFCs in an amount equal to the lesser of such excess and the product of (i)(x) during the Revolving Period, the Class B-2 Floating Allocation Percentage or (y) during the Amortization Period, the Class B-2 Fixed Allocation Percentage and (ii) the amount of Principal Collections in the Collection Account with respect to such Transfer Date shall be allocated to the Class A Certificates and Class B Certificates and applied on such Transfer Date in accordance with the provisions of subsections 4.6(a)(i) through (vi); provided, however, that with respect to amounts applied pursuant to subsection 4.6(a)(iii), such amounts shall be applied only to the extent of the product of (x) the Class A Floating Allocation Percentage plus the Class B Floating Allocation Percentage and (y) the shortfall arising pursuant to such subsections (any such amount so applied, "REALLOCATED CLASS B-2 PRINCIPAL COLLECTIONS"). (i) In the event that the Monthly Required Amount (excluding for purposes of this subsection 4.7(i) any remaining amount thereof arising due to shortfalls in the amounts payable pursuant to clause (vi) of subsection 4.6(a)) for a Transfer Date exceeds the amount of Stored Excess Finance Charge Collections, Repayable Servicer Fee Amount, Spread Account funds and Reallocated Class C Principal Collections and Reallocated Class B-2 Principal Collections allocated thereto or to the Monthly Adjusted Required Amount on such Transfer Date, a portion of the Series 1997-1 Principal Collections allocable to the Class B VFCs in an amount equal to the lesser of such excess and the product of (i)(x) during the Revolving Period, the Class B Floating Allocation Percentage or (y) during the Amortization Period, the Class B Fixed Allocation Percentage and (ii) the amount of Principal Collections in the Collection Account with respect to such Transfer Date shall be allocated to the Class A Certificates and applied on such Transfer Date in accordance with the provisions of subsections 4.6(a)(i) through (v); provided, however, that with respect to amounts applied pursuant to subsection 4.6(a)(iii), such amounts shall be applied only to the extent of the product of (x) the Class A Floating Allocation Percentage and (y) the shortfall arising pursuant to such subsections (any such amount so applied, "REALLOCATED CLASS B PRINCIPAL COLLECTIONS"). SECTION 4.8 PAYMENT OF CERTIFICATE INTEREST AND OTHER AMOUNTS. (a) On the Transfer Date immediately prior to each Distribution Date, the Trustee, acting in accordance with instructions from the Servicer set forth in the Daily Report for such Transfer Date, shall for the purpose of making payments for the relevant Monthly Period and Interest Accrual Period, as the case may be, allocable to the Series 1997-1 Variable Funding Certificates, take the following actions: (i) CLASS A INTEREST. First, withdraw from the Interest Funding Account (and, if applicable, the Defeasance Account) to the extent of the funds available therein as of such Transfer Date, for payment to Class A Certificateholders, an amount equal to the interest accrued on each Tranche of the Class A Principal Balance at the applicable Tranche Rate for the period of time such Tranche was outstanding during the Interest Accrual Period with respect to the Distribution Date (the "CLASS A INTEREST" for such Interest Accrual Period) PLUS any Class A Interest due with respect to any prior Interest Accrual Period pursuant to this subsection but not previously deposited in the Distribution Account plus interest on such undeposited amounts as described in clause (1) of subsection 4.6(a)(ii). Notwithstanding anything to the contrary herein, Class A Interest shall be payable or distributable to Class A Certificateholders only to the extent permitted by applicable law. (ii) CLASS B INTEREST. Second, withdraw from the Interest Funding Account (and, if applicable, the Defeasance Account) to the extent of the funds available therein remaining after giving effect to the withdrawal pursuant to subsection 4.8(a)(i), and deposit into the Distribution Account for payment to Class B Certificateholders, an amount equal to the interest accrued on each Tranche of the Class B Principal Balance at the applicable Tranche Rate for the period of time such Tranche was outstanding during the Interest Accrual Period with respect to the Distribution Date (the "CLASS B INTEREST" for such Interest Accrual Period) PLUS any Class B Interest due with respect to any prior Interest Accrual Period pursuant to this subsection but not previously deposited in the Distribution Account plus interest on such undeposited amounts as described in clause (3) of subsection 4.6(a)(ii). Notwithstanding anything to the contrary herein, Class B Interest shall be payable or distributable to Class B Certificateholders only to the extent permitted by applicable law. (iii) CLASS A PROGRAM FEES. Third, withdraw from the Interest Funding Account, to the extent of the funds available therein remaining after giving effect to the withdrawals pursuant to subsections 4.8(a)(i) and (ii), an amount equal to all unpaid Program Fees which have accrued during such Interest Accrual Period with respect to the Class A VFCs plus interest on such undeposited amounts as described in clause (2) of subsection 4.6(a)(ii), and deposit such amount into the Distribution Account for payment to the Class A Certificateholders. (iv) CLASS B PROGRAM FEES. Fourth, withdraw from the Interest Funding Account, to the extent of the funds available therein remaining after giving effect to the withdrawals pursuant to subsections 4.8(a)(i) through (iii), an amount equal to all unpaid Program Fees which have accrued during such Interest Accrual Period with respect to the Class B VFCs plus interest on such undeposited amounts as described in clause (4) of subsection 4.6(a)(ii), and deposit such amount into the Distribution Account for payment to the Class B Certificateholders. (v) CLASS A MEZZANINE FACILITIES COSTS. Fifth, withdraw from the Interest Funding Account, to the extent of the funds available therein remaining after giving effect to the withdrawals pursuant to subsections 4.8(a)(i) through (iv), an amount equal to all unpaid Facilities Costs (other than Program Fees) which have accrued during such Interest Accrual Period with respect to the Class A VFCs, and deposit such amount into the Distribution Account for payment to the Class A Certificateholders (ratably as provided in the Class A Certificate Purchase Agreement); PROVIDED that there shall not be distributed pursuant to this clause (v) on any Distribution Date an amount in excess of the amounts then on deposit in the Interest Funding Account which were allocated to such Facilities Costs pursuant to subsection 4.6(a)(x). (vi) CLASS B MEZZANINE FACILITIES COSTS. Sixth, withdraw from the Interest Funding Account, to the extent of the funds available therein remaining after giving effect to the withdrawals pursuant to subsections 4.8(a)(i) through (v), an amount equal to all unpaid Facilities Costs (other than Program Fees) which have accrued during such Interest Accrual Period with respect to the Class B VFCs, and deposit such amount into the Distribution Account for payment to the Class B Certificateholders (ratably as provided in the Class B Certificate Purchase Agreement); PROVIDED that there shall not be distributed pursuant to this clause (vi) on any Distribution Date an amount in excess of the amounts then on deposit in the Interest Funding Account which were allocated to such Facilities Costs pursuant to subsection 4.6(a)(x). (vii) CLASS B-2 INTEREST. Seventh, withdraw from the Interest Funding Account (and, if applicable, the Defeasance Account) to the extent of the funds available therein remaining after giving effect to the withdrawal pursuant to subsections 4.8(a)(i) through (vi), and deposit into the Distribution Account for payment to Class B-2 Certificateholders, an amount equal to the aggregate of the daily interest accrued on the Class B-2 Principal Balance on each day of the Interest Accrual Period with respect to the Distribution Date at the Class B-2 Certificate Rate on such day (the "CLASS B-2 INTEREST" for such Interest Accrual Period) PLUS any Class B-2 Interest due with respect to any prior Interest Accrual Period pursuant to this subsection but not previously deposited in the Distribution Account plus interest on such undeposited amounts as described in clause (3) of subsection 4.6(a)(vii). Notwithstanding anything to the contrary herein, Class B-2 Interest shall be payable or distributable to Class B-2 Certificateholders only to the extent permitted by applicable law. (viii) CLASS B-2 PROGRAM FEES. Eighth, withdraw from the Interest Funding Account, to the extent of the funds available therein remaining after giving effect to the withdrawals pursuant to subsections 4.8(a)(i) through (vii), an amount equal to all unpaid Program Fees which have accrued during such Interest Accrual Period with respect to the Class B-2 VFCs plus interest on such undeposited amounts as described in clause (4) of subsection 4.6(a)(vii), and deposit such amount into the Distribution Account for payment to the Class B-2 Certificateholders. (ix) REMAINING CLASS A FACILITIES COSTS. Ninth, withdraw from the Interest Funding Account, to the extent of the funds available therein remaining after giving effect to the withdrawals pursuant to subsections 4.8(a)(i) through (viii), an amount equal to all remaining unpaid Facilities Costs (other than Program Fees) which have accrued during such Interest Accrual Period with respect to the Class A VFCs, and deposit such amount into the Distribution Account for payment to the Class A Certificateholders (ratably as provided in the Class A Certificate Purchase Agreement). (x) REMAINING CLASS B FACILITIES COSTS. Tenth, withdraw from the Interest Funding Account, to the extent of the funds available therein remaining after giving effect to the withdrawals pursuant to subsections 4.8(a)(i) through (ix), an amount equal to all remaining unpaid Facilities Costs (other than Program Fees) which have accrued during such Interest Accrual Period with respect to the Class B VFCs, and deposit such amount into the Distribution Account for payment to the Class B Certificateholders (ratably as provided in the Class B Certificate Purchase Agreement). (xi) CLASS B-2 FACILITIES COSTS. Eleventh, withdraw from the Interest Funding Account, to the extent of the funds available therein remaining after giving effect to the withdrawals pursuant to subsections 4.8(a)(i) through (x), an amount equal to all unpaid Facilities Costs (other than Program Fees) which have accrued during such Interest Accrual Period with respect to the Class B-2 VFCs, and deposit such amount into the Distribution Account for payment to the Class B-2 Certificateholders (ratably as provided in the Class B-2 Certificate Purchase Agreement). (xii) MAXIMUM SPREAD ACCOUNT AMOUNT. Twelfth, withdraw from the Interest Funding Account, to the extent of the funds available therein remaining after giving effect to the withdrawals pursuant to subsections 4.8(a)(i) through (xii), and deposit into the Spread Account until the amount therein equals the Maximum Spread Account Amount as of such Transfer Date. (xiii) Any amounts available in the Interest Funding Account remaining after giving effect to the payments pursuant to subsections 4.8(a)(i) through (xii) shall be treated as Excess Finance Charge Collections on such Transfer Date and the Servicer shall direct the Trustee to make such Excess Finance Charge Collections available on such date for the applications described in subsection 4.7(f). (b) On each Distribution Date, the Paying Agent shall pay in accordance with Section 5.1 of the Agreement to (w) the Class A Certificateholders from the Distribution Account such amount deposited into the Distribution Account on the related Transfer Date allocable thereto pursuant to subsection 4.8(a)(i), (x) the Class B Certificateholders from the Distribution Account the amount deposited into the Distribution Account allocable thereto pursuant to subsection 4.8(a)(ii), (y) the Class B-2 Certificateholders from the Distribution Account the amount deposited into the Distribution Account allocable thereto pursuant to subsection 4.8(a)(vii) and (z) the Facility Agent from the Distribution Account the amount deposited into the Distribution Account allocable thereto pursuant to subsection 4.8(a)(iii), (iv), (v), (vi), (viii), (ix), (x) and (xi). SECTION 4.9 PAYMENT OF CERTIFICATE PRINCIPAL. (a) No later than 10:00 a.m. on the Business Day immediately prior to each Principal Distribution Date, the Transferor shall provide written notice to the Trustee and the Facility Agent of such Principal Distribution Date and of the amount of principal to be repaid on such Principal Distribution Date. (b) On the Business Day preceding each Principal Distribution Date during the Revolving Period, the Trustee, in accordance with the instructions from the Servicer set forth in the Daily Report for such day, shall withdraw from the Principal Account and deposit in the Distribution Account, to the extent of the funds deposited in the Principal Account pursuant to subsection 4.6(d) and available therein as of such Business Day, an amount equal to the largest multiple of US$50,000 that is available. On each Principal Distribution Date with respect to the Revolving Period, the Paying Agent shall pay the amount so deposited in the Distribution Account in accordance with Section 5.1 to the Investor Certificateholders, in accordance with the instructions of the Transferor, as set forth by the Servicer on its behalf in the Daily Report for such Business Day, which instructions satisfy one or more of the following provisions: (A) the Transferor may apply all such funds to the reduction of the Class A Invested Amount; or (B) the Transferor may apply all such funds to the reduction of the Class A Invested Amount, the Class B Invested Amount, the Class B-2 Invested Amount and the Class C Invested Amount in such proportions as it selects if, after giving effect to the principal payments to be made on such Principal Distribution Date, (1) no Series 1997-1 Pay Out Event has occurred and is continuing, (2) the sum of the Class C Invested Amount, the Class B-2 Invested Amount and the Class B Invested Amount to be at least equal to 25% of the Invested Amount, (3) the Class B-2 Invested Amount to be no greater than 10% of the Invested Amount, (4) the sum of the Class C Invested Amount and the Class B-2 Invested Amount to be at least equal to 17.5/25ths of the sum of the Class B Invested Amount, the Class B-2 Invested Amount and the Class C Invested Amount, (5) the Class C Invested Amount to be at least equal to 7.5/17.5ths of the sum of the Class B-2 Invested Amount and the Class C Invested Amount, and (6) the sum of the Class B-2 Invested Amount and the Class C Invested Amount to be at least 5% of the highest Invested Amount during the immediately preceding 180 days. Notwithstanding the foregoing, at the option of the Transferor and to the extent specified in the Daily Report, such amounts on deposit in the Principal Account may, on any Business Day prior to such Transfer Date, be applied to the purchase of VFC Additional Invested Amounts if the conditions precedent thereto pursuant to Section 6.15 of the Agreement and Section 3.2 of the Class A Certificate Purchase Agreement, Class B Certificate Purchase Agreement or Class B-2 Certificate Purchase Agreement, as the case may be, have been met on such Business Day and the Transferor has delivered an Officer's Certificate to such effect to the Trustee and the Servicer. (c) Notwithstanding the provisions of subsection 4.9(b) above, if subsection 4.6(e) is applicable, on the original Extension Date before the relevant Extension occurs and on each Distribution Date thereafter during the Revolving Period while subsection 4.6(e) remains applicable (and on such other dates as the Transferor may elect with one day prior written notice to the Facility Agent), the Trustee, in accordance with the instructions from the Servicer set forth in the Daily Report for such day, shall withdraw from the Principal Account and deposit in the Distribution Account, to the extent of the funds deposited in the Principal Account pursuant to subsection 4.6(e) and available therein as of such Business Day, an amount equal to the largest multiple of US$50,000 that is available. (d) On the Transfer Date preceding each Distribution Date with respect to the Amortization Period, the Trustee, acting in accordance with instructions from the Servicer set forth in the Daily Report for such day, shall withdraw from the Principal Account and deposit in the Distribution Account an amount equal to the lesser of the Class A Invested Amount (after taking into account amounts set aside or paid with respect thereof pursuant to Sections 4.6 and 4.7) and the amount available in the Principal Account allocable to the Series 1997-1 Variable Funding Certificates, and on each Distribution Date with respect to the Amortization Period until the Class A Invested Amount is paid in full, the Paying Agent shall pay in accordance with Section 5.1 to the Class A Certificateholders from the Distribution Account such amount deposited into the Distribution Account on the related Transfer Date. (e) On the Transfer Date preceding the Class B Principal Payment Commencement Date and each Distribution Date thereafter, the Trustee, acting in accordance with instructions from the Servicer set forth in the Daily Report for such day, shall withdraw from the Principal Account and deposit in the Distribution Account an amount equal to the lesser of the Class B Invested Amount (after taking into account amounts set aside or paid with respect thereof pursuant to Sections 4.6 and 4.7) and the amount on deposit in the Principal Account allocable to the Series 1997-1 Variable Funding Certificates (after giving effect to transfers pursuant to subsection 4.9(a)). On the Class B Principal Payment Commencement Date, after the payment of any principal amounts with respect to the Class A Certificates on such day, and on each Distribution Date thereafter until the Class B Invested Amount is paid in full, the Paying Agent shall pay in accordance with Section 5.1 to the Class B Certificateholders from the Distribution Account such amount deposited into the Distribution Account on the related Transfer Date. (f) On the Transfer Date preceding the Class B-2 Principal Payment Commencement Date and each Distribution Date thereafter, the Trustee, acting in accordance with instructions from the Servicer set forth in the Daily Report for such day, shall withdraw from the Principal Account and deposit in the Distribution Account an amount equal to the lesser of the Class B-2 Invested Amount (after taking into account amounts set aside or paid with respect thereof pursuant to Sections 4.6 and 4.7) and the amount on deposit in the Principal Account allocable to the Series 1997-1 Variable Funding Certificates (after giving effect to transfers pursuant to subsection 4.9(a)). On the Class B-2 Principal Payment Commencement Date, after the payment of any principal amounts with respect to the Class A Certificates and Class B Certificates on such day, and on each Distribution Date thereafter until the Class B-2 Invested Amount is paid in full, the Paying Agent shall pay in accordance with Section 5.1 to the Class B-2 Certificateholders from the Distribution Account such amount deposited into the Distribution Account on the related Transfer Date. (g) On the Class C Principal Payment Commencement Date and each Business Day thereafter, the Trustee, acting in accordance with instructions from the Servicer set forth in the Daily Report for such day, shall make payments of principal to the Class C Certificateholder in accordance with subsection 4.6(c)(iv). (h) On the Business Day preceding each Principal Distribution Date, the Trustee, acting in accordance with instructions from the Servicer set forth in the Daily Report for such day, shall withdraw from the Principal Account and deposit into the Distribution Account, the amount of funds deposited in the Principal Account pursuant to subsection 4.6(i) and available therein as of such Business Day. On each Principal Distribution Date with respect to the Revolving Period, the Paying Agent shall pay the amount so deposited in the Distribution Account in accordance with Section 5.1 to the Investor Certificateholders, in accordance with instructions of the Transferor, as set forth by the Servicer on its behalf in the Daily Report for such Business Day, which instructions shall satisfy one or more of the following provisions: (i) the Transferor shall first apply all such funds to the reduction of the Class A Invested Amount until either (A) the Partial Amortization Amount has been reduced to zero or (B) the sum of the Class C Invested Amount, the Class B-2 Invested Amount and the Class B Invested Amount is at least equal to 25% of the Invested Amount; (ii) after giving effect to the application of funds, if any, pursuant to clause (i) above, the Transferor shall apply all such funds to the reduction of the Class A Invested Amount and the Class B Invested Amount, pro rata based on, in the case of the Class A Certificates, the excess of the Class A Principal Balance over the Class A Purchase Limit and, in the case of the Class B Certificates, the excess of the Class B Principal Balance over the Class B Purchase Limit, until the partial Amortization Amounts in respect of each of the Class A VFCs and the Class B VFCs have been reduced to zero; (iii) after giving effect to the application of funds, if any, pursuant to clause (i) and (ii) above, the Transferor shall apply all such funds to the reduction of the Class B-2 Invested Amount, until the Partial Amortization Amounts in respect of the Class B-2 VFCs has been reduced to zero; and (iv) the Transferor may apply any such remaining funds to the reduction of the Class A Invested Amount, the Class B Invested Amount, the Class B-2 Invested Amount and the Class C Invested Amount in such proportions as it selects if, after giving effect to the principal payments to be made on such Principal Distribution Date, (1) no Series 1997-1 Pay Out Event has occurred and is continuing, (2) the sum of the Class C Invested Amount, the Class B-2 Invested Amount and the Class B Invested Amount to be at least equal to 25% of the Invested Amount, (3) the Class B-2 Invested Amount to be no greater than 10% of the Invested Amount, (4) the sum of the Class C Invested Amount and the Class B-2 Invested Amount to be at least equal to 17.5/25ths of the sum of the Class B Invested Amount, the Class B-2 Invested Amount and the Class C Invested Amount, (5) the Class C Invested Amount to be at least equal to 7.5/17.5ths of the sum of the Class B-2 Invested Amount and the Class C Invested Amount, and (6) the sum of the Class B-2 Invested Amount and the Class C Invested Amount to be at least 5% of the highest Invested Amount during the immediately preceding 180 days. Any amounts remaining in the Principal Account and allocable to the Series 1997-1 Variable Funding Certificates, after the Class C Invested Amount has been paid in full, will be treated as Shared Principal Collections and applied in accordance with subsection 4.3(e) of the Agreement. SECTION 4.10 INVESTOR CHARGE-OFFS. (a) If, on any Determination Date with respect to a Distribution Date on or prior to the Class C Principal Payment Commencement Date, the aggregate Investor Default Amount, if any, for each Business Day in the preceding Monthly Period exceeded the Available Series 1997-1 Finance Charge Collections allocated to the payment thereof pursuant to subsection 4.6(a)(iv) and the amount of Excess Finance Charge Collections, Stored Excess Finance Charge Collections, Repayable Service Fee Amount, Spread Account funds, Reallocated Class C Principal Collections, Reallocated Class B-2 Principal Collections and Reallocated Class B Principal Collections allocated thereto pursuant to subsection 4.7, the Class C Invested Amount will be reduced by the amount by which such aggregate Investor Default Amount exceeds the amount applied with respect thereto during such preceding Monthly Period or on the Transfer Date in respect of such Monthly Period (the "CLASS C INVESTOR CHARGE-OFFS"). To the extent that on any subsequent Business Day there is a positive balance of Available Series 1997-1 Finance Charge Collections after giving effect to subsections 4.6(a)(i) through (viii), the Servicer will apply such Excess Finance Charge Collections as provided in subsection 4.6(a)(ix) to reimburse the aggregate amount of Class C Investor Charge-Offs not previously reimbursed, up to the amount so available. (b) In the event that any such reduction of the Class C Invested Amount would cause the Class C Invested Amount to be a negative number, the Class C Invested Amount will be reduced to zero, and the Class B-2 Invested Amount will be reduced by the amount by which the Class C Invested Amount would have been reduced below zero, but not more than the aggregate Investor Default Amount for such Monthly Period (the "CLASS B-2 INVESTOR CHARGE-OFFS"). To the extent that on any subsequent Business Day there is a positive balance of Available Series 1997-1 Finance Charge Collections after giving effect to subsections 4.6(a)(i) through (vii), the Servicer will apply such Excess Finance Charge Collections as provided in subsection 4.6(a)(viii) to reimburse the aggregate amount of Class B-2 Investor Charge-Offs not previously reimbursed, up to the amount so available. (c) In the event that any such reduction of the Class B-2 Invested Amount would cause the Class B-2 Invested Amount to be a negative number, the Class B-2 Invested Amount will be reduced to zero, and the Class B Invested Amount will be reduced by the amount by which the Class B-2 Invested Amount would have been reduced below zero, but not more than the aggregate Investor Default Amount for such Monthly Period (the "CLASS B INVESTOR CHARGE-OFFS"). To the extent that on any subsequent Business Day there is a positive balance of Available Series 1997-1 Finance Charge Collections after giving effect to subsections 4.6(a)(i) through (v), the Servicer will apply such Excess Finance Charge Collections as provided in subsection 4.6(a)(vi) to reimburse the aggregate amount of Class B Investor Charge-Offs not previously reimbursed, up to the amount so available. (d) In the event that any such reduction of the Class B Invested Amount would cause the Class B Invested Amount to be a negative number, the 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 aggregate Investor Default Amount for such Monthly Period (the "CLASS A INVESTOR CHARGE-OFFS"). To the extent that on any subsequent Business Day there is a positive balance of Available Series 1997-1 Finance Charge Collections after giving effect to subsections 4.6(a)(i) through (iv), the Servicer will apply such Excess Finance Charge Collections as provided in subsection 4.6(a)(v) to reimburse the aggregate amount of Class A Investor Charge-Offs not previously reimbursed, up to the amount so available. SECTION 4.11 SHARED PRINCIPAL COLLECTIONS. Shared Principal Collections allocated to the Series 1997-1 Variable Funding Certificates and to be applied pursuant to subsections 4.6(c)(i)(z), 4.6(c)(ii)(z), 4.6(c)(iii)(z) and 4.6(c)(iv)(z) for any Business Day with respect to the Amortization Period shall mean an amount equal to the product of (x) Shared Principal Collections for all Series for such Business Day and (y) a fraction, the numerator of which is the Principal Shortfall for the Series 1997-1 Variable Funding Certificates for such Business Day and the denominator of which is the aggregate amount of Principal Shortfalls for all Series for such Business Day. SECTION 7. ARTICLE V OF THE AGREEMENT. Article V of the Agreement shall read in its entirety as follows and shall be applicable only to the Series 1997-1 Variable Funding Certificates: ARTICLE V DISTRIBUTIONS AND REPORTS TO INVESTOR CERTIFICATEHOLDERS SECTION 5.1 DISTRIBUTIONS. (a) On each Distribution Date during the Revolving Period (other than a Principal Distribution Date), the Paying Agent shall distribute (in accordance with the Settlement Statement delivered by the Servicer to the Trustee and the Paying Agent pursuant to subsection 3.4(c) of the Agreement) to each Class A Certificateholder of record on the preceding Record Date (other than as provided in subsection 2.4(d) or in Section 12.3 of the Agreement respecting a final distribution) such Certificateholder's applicable share (as directed by the Facility Agent) of such amounts on deposit in the Distribution Account as are payable to the Class A Certificateholders pursuant to Section 4.8 hereof by wire transfer to each Class A Certificateholder to an account or accounts designated by such Class A Certificateholder by written notice given to the Paying Agent not less than five days prior to the related Distribution Date; PROVIDED, however, that the final payment in retirement of the Class A VFCs will be made only upon presentation and surrender of the Class A VFCs at the office or offices specified in the notice of such final distribution delivered by the Trustee pursuant to Section 12.3 of the Agreement. (b) On each Distribution Date during the Revolving Period (other than a Principal Distribution Date), the Paying Agent shall distribute (in accordance with the Settlement Statement delivered by the Servicer to the Trustee and the Paying Agent pursuant to subsection 3.4(c) of the Agreement) to each Class B Certificateholder of record on the preceding Record Date (other than as provided in subsection 2.4(d) or in Section 12.3 of the Agreement respecting a final distribution) such Certificateholder's applicable share (as directed by the Facility Agent) of amounts on deposit in the Distribution Account as are payable to the Class B Certificateholders pursuant to Section 4.8 hereof by wire transfer to each Class B Certificateholder to an account or accounts designated by such Class B Certificateholder by written notice given to the Paying Agent not less than five days prior to the related Distribution Date; PROVIDED, HOWEVER, that the final payment in retirement of the Class B VFCs will be made only upon presentation and surrender of the Class B VFCs at the office or offices specified in the notice of such final distribution delivered by the Trustee pursuant to Section 12.3 of the Agreement. (c) On each Distribution Date during the Revolving Period (other than a Principal Distribution Date), the Paying Agent shall distribute (in accordance with the Settlement Statement delivered by the Servicer to the Trustee and the Paying Agent pursuant to subsection 3.4(c) of the Agreement) to each Class B-2 Certificateholder of record on the preceding Record Date (other than as provided in subsection 2.4(d) or in Section 12.3 of the Agreement respecting a final distribution) such Certificateholder's applicable share (as directed by the Facility Agent) of amounts on deposit in the Distribution Account as are payable to the Class B-2 Certificateholders pursuant to Section 4.8 hereof by wire transfer to each Class B-2 Certificateholder to an account or accounts designated by such Class B-2 Certificateholder by written notice given to the Paying Agent not less than five days prior to the related Distribution Date; PROVIDED, HOWEVER, that the final payment in retirement of the Class B-2 VFCs will be made only upon presentation and surrender of the Class B-2 VFCs at the office or offices specified in the notice of such final distribution delivered by the Trustee pursuant to Section 12.3 of the Agreement. (d) On each Distribution Date during the Revolving Period (other than a Principal Distribution Date), the Paying Agent shall distribute (in accordance with the Settlement Statement delivered by the Servicer to the Trustee and the Paying Agent pursuant to subsection 3.4(c) of the Agreement) to each Class C Certificateholder of record on the preceding Record Date (other than as provided in subsection 2.4(d) or in Section 12.3 of the Agreement respecting a final distribution) such Certificateholder's PRO RATA share (based on the aggregate Undivided interests represented by Class C VFCs held by such Certificateholder) of amounts on deposit in the Distribution Account as are payable to the Class C Certificateholders pursuant to Section 4.9 hereof by wire transfer to each Class C Certificateholder to an account or accounts designated by such Class C Certificateholder by written notice given to the Paying Agent not less than five days prior to the related Distribution Date; PROVIDED, HOWEVER, that the final payment in retirement of the Class C VFCs will be made only upon presentation and surrender of the Class C VFCs at the office or offices specified in the notice of such final distribution delivered by the Trustee pursuant to Section 12.3 of the Agreement. (e) On each Principal Distribution Date and on each Distribution Date following the Amortization Period Commencement Date, the Paying Agent shall distribute (in accordance with instructions from the Servicer on behalf of the Transferor pursuant to subsection 4.9(a) or 4.9(d), as applicable) to each Class A Certificateholder, Class B Certificateholder and Class B-2 Certificateholder of record on the preceding Record Date (other than as provided in subsection 2.4(d) or in Section 12.3 of the Agreement respecting a final distribution) such Certificateholder's PRO RATA share (based on the aggregate Undivided Interests represented by Class A VFCs, Class B VFCs or Class B-2 VFCs, as the case may be, held by such Certificateholder) of amounts on deposit in the Distribution Account as are payable to the Class A Certificateholders, the Class B Certificateholders and the Class B-2 Certificateholders, as applicable, pursuant to Section 4.9 hereof by wire transfer to each of such Certificateholders to an account or accounts designated by the Facility Agent by written notice given to the Paying Agent not less than five days prior to the related Distribution Date, subject to the following special provisions: (i) no payment in respect of Class A Invested Amount or Class B Invested Amount for a Bank Rate Tranche shall be made on a date other than a Monthly Distribution Date; (ii) if, during the Revolving Period, one or more Bank Rate Tranches and one or more Cost of Funds Tranches are outstanding with respect to the Class A Certificates or the Class B Certificates, then payments to Class A Certificateholders or Class B Certificateholders shall be made in the priority specified in subsection 2.1(e) of the applicable Certificate Purchase Agreement; (iii) if, during the Revolving Period, on such Principal Distribution Date, one or more Nonextending Class A Purchasers or Nonextending Class B Purchasers has a remaining Class A Invested Amount or Class B Invested Amount, as applicable, then the Transferor may elect (as reflected in the instructions of the Servicer delivered pursuant to Section 4.9(a) and subject to the requirements of subsection 4.9(b)) to allocate any or all amounts available for distribution in respect of Class A Invested Amount to such Nonextending Class A Purchasers (ratably among all such Nonextending Class A Purchasers) and to allocate any or all amounts available for distribution in respect of Class B Invested Amount to such Nonextending Class B Purchasers (ratably among all such Nonextending Class B Purchasers), so long as the amount allocated to any such Nonextending Class A Purchasers or Nonextending Class B Purchasers is not less than the PRO RATA share specified above; (iv) if, during the Revolving Period, on such Principal Distribution Date there are one or more Exiting Purchasers in respect of whom funds have been deposited in the Principal Account pursuant to Section 4.6(e), then such funds shall be paid, FIRST, to the Exiting Class A Purchasers, PRO RATA in accordance with their respective Class A Invested Amounts, until such Exiting Class A Purchasers' respective Class A Invested Amounts have been reduced to zero, SECOND, to the extent required by subsection 4.6(e), to Class A Purchasers who are not Exiting Class A Purchasers, PRO RATA in accordance with their respective Class A Invested Amounts, and THIRD, to the Exiting Class B Purchasers, PRO RATA in accordance with their respective Class B Invested Amounts, until such Exiting Class B Purchasers' respective Class B Invested Amounts have been reduced to zero; and (v) the final payment in retirement of the Class A VFCs, Class B VFCs and Class B-2 VFCs will be made only upon presentation and surrender of the Class A VFCs, Class B VFCs and Class B-2 VFCs at the office or offices specified in the notice of such final distribution delivered by the Trustee pursuant to Section 12.3 of the Agreement. The provisions of clause (iii) above shall not apply for any Principal Distribution Date until the Partial Amortization Amount has been reduced to zero. SECTION 5.2 CERTIFICATEHOLDERS' STATEMENT. (a) On each Distribution Date, the Paying Agent shall forward to each Certificateholder a statement substantially in the form of Exhibit B prepared by the Servicer and delivered to the Trustee and the Paying Agent on the preceding Determination Date setting forth the following information: (i) the total amount distributed; (ii) the amount of such distribution allocable to Certificate Principal; (iii) the amount of such distribution allocable to Certificate Interest; (iv) the amount of the Series 1997-1 Principal Collections received in the Collection Account during the preceding Monthly Period and the three preceding Monthly Periods and allocated in respect of the Class A Certificates, the Class B Certificates, the Class B-2 Certificates and the Class C Certificates, respectively; (v) the amount of Finance Charge Collections received during the three preceding Monthly Periods and allocated in respect of the Class A Certificates, the Class B Certificates, the Class B-2 Certificates and the Class C Certificates, respectively; (vi) the Invested Amount, the Class A Invested Amount, the Class B Invested Amount, the Class B-2 Invested Amount and the Class C Invested Amount, the Floating Allocation Percentage and, during the Amortization Period, the Class A Fixed Allocation Percentage, the Class B Fixed Allocation Percentage, or the Class B-2 Fixed Allocation Percentage as applicable, with respect to the Principal Receivables in the Trust as of the end of the day on the Record Date; (vii) the aggregate outstanding balance of Accounts which are current, current/delinquent, 30, 60, 90, 120, 150 and 180 days delinquent as of the end of the day on the Record Date; (viii) the aggregate Investor Default Amount and the Default Amount for the related Monthly Period and the two preceding Monthly Periods; (ix) the aggregate amount of Class A Investor Charge-Offs, Class B Investor Charge-Offs, Class B-2 Investor Charge-Offs and Class C Investor Charge-Offs for the related Monthly Period and the two preceding Monthly Periods; (x) the aggregate amount of the Servicing Fee and for the related Monthly Period and the two preceding Monthly Periods; (xi) the calculation of the Account Cap; (xii) the Invested Amount of each Series then outstanding; (xiii) the Transferor Interest; (xiv) the Aggregate Principal Receivables, the amount on deposit in the Equalization Account and the Eligible Principal Receivables; and (xv) the Partial Amortization Amount, if any for each of the Class A Certificates, the Class B Certificates and the Class B-2 Certificates. (b) ANNUAL CERTIFICATEHOLDERS' TAX STATEMENT. On or before January 31 of each calendar year, beginning with calendar year 1998, the Trustee shall distribute to each Person who at any time during the preceding calendar year was a Series 1997-1 Certificateholder, a statement prepared by the Servicer containing the information required to be contained in the regular report to Series 1997-1 Certificateholders, as set forth in subclauses (i), (ii) and (iii) of Section 5.2(a) above, aggregated for such calendar year or the applicable portion thereof during which such Person was a Series 1997-1 Certificateholder, together with such other customary information (consistent with the treatment of the Certificates as debt) as the Trustee or the Servicer deems necessary or desirable to enable the Series 1997-1 Certificateholders to prepare their tax returns. Such obligations of the Trustee shall be deemed to have been satisfied to the extent that substantially comparable information shall be provided by the Trustee pursuant to any requirements of the Internal Revenue Code as from time to time in effect. SECTION 8. SERIES 1997-1 PAY OUT EVENTS. The Pay Out Events which can cause the commencement of the Amortization Period with respect to the Series 1997-1 Variable Funding Certificates include the Trust Pay Out Events described in Section 9.1 of the Agreement and the Series 1997-1 Pay Out Events described in the following sentence. If any one of the following events shall occur with respect to the Series 1997-1 Variable Funding Certificates: (a) failure: (x) on the part of the Transferor or the Servicer to make any payment or deposit required to be made by the Transferor or the Servicer by the terms of (A) the Agreement, or a Certificate Purchase Agreement, or (B) this Series Supplement, in each case on or before the date occurring five (5) Business Days after the date on which written notice of such failure requiring the same to be remedied, shall have been given to the Transferor or the Servicer, as applicable, by the Trustee, or to the Transferor or the Servicer, as applicable, and to the Trustee by the Facility Agent, (y) on the part of the Originator to make any payment or deposit required to be made by the Originator by the terms of the Receivables Purchase Agreement (other than any payment or deposit in respect of any Defaulted Receivable Repurchase) on or before the date occurring five (5) Business Days after the date on which written notice of such failure, requiring the same to be remedied, shall have been given to the Originator by the Trustee, or to the Originator and the Trustee by the Facility Agent, or (z) on the part of the Transferor or the Originator duly to observe or perform in any material respect any covenants or agreements of the Transferor set forth in the Agreement, the Receivables Purchase Agreement or a Certificate Purchase Agreement or this Series Supplement, which failure has a material adverse effect on the Series 1997-1 Certificateholders and which continues unremedied for a period of 60 days after the date on which written notice of such failure, requiring the same to be remedied, shall have been given to the Transferor or the Originator, as applicable, by the Trustee, or to the Transferor or the Originator, as applicable, and the Trustee by the Facility Agent, and continues to affect materially and adversely the interests of the Series 1997-1 Certificateholders for such period; (b) any representation or warranty made by the Transferor in the Agreement or a Certificate Purchase Agreement, other than as covered by clause (1) below, or this Series Supplement, or by the Originator in the Receivables Purchase Agreement, or any information contained in a computer file or microfiche list required to be delivered by the Transferor pursuant to Section 2.1 or 2.6 of the Agreement, (x) shall prove to have been incorrect in any material respect when made or when delivered, which continues to be incorrect in any material respect for a period of 60 days after the date on which written notice of such failure, requiring the same to be remedied, shall have been given to the Transferor or the Originator, as applicable, by the Trustee, or to the Transferor and the Trustee by the Facility Agent, and (y) as a result of which the interests of the Series 1997-1 Certificateholders are materially and adversely affected and continue to be materially and adversely affected for such period; PROVIDED, HOWEVER, that a Series 1997-1 Pay Out Event pursuant to this subsection 8(b) shall not be deemed to have occurred hereunder (1) with respect to the representations and warranties made by the Transferor referenced in Section 2.4 of the Agreement, if the Transferor has assigned a zero balance to an Ineligible Receivable or has made a deposit to the Equalization Account with respect thereto as required by subsection 2.4(d) of the Agreement or has accepted reassignment of the related Receivable, or all of such Receivables, if applicable, during such period in accordance with the provisions of the Agreement, or (2) with respect to the representations and warranties made by the Originator referenced in Section 2.04 of the Receivables Purchase Agreement, if the Originator shall have performed its obligations under such Section 2.04; (c) the average of the Trust Portfolio Yields for any three consecutive Monthly Periods is reduced to a rate which is less than the weighted average of the Trust Base Rates for such three consecutive Monthly Periods; (d) the Transferor Interest shall be less than the Minimum Transferor Interest for five consecutive days; (e) any Servicer Default shall occur which would have, or would reasonably be expected to have, a material adverse effect on the Series 1997-1 Certificateholders; (f) failure on the part of the Servicer to deliver the Daily Report or Settlement Statement to the Trustee when due, which failure continues for a period of five Business Days after the date on which written notice of such failure, requiring the same to be remedied, shall have been given by the Trustee to the Servicer; (g) failure on the part of the Servicer duly to observe or perform in any respect any covenants or agreements of the Servicer set forth in the Agreement or a Certificate Purchase Agreement (other than those set forth in subsection 10.1(a) thereof), which has a material adverse effect on the Holders of the Senior Certificates and which continues unremedied for a period of 30 days after the date on which written notice of such failure, requiring the same to be remedied, has been given to the Servicer by the Trustee, or to the Servicer and the Trustee by the Facility Agent and continues to materially adversely affect the Holders of the Senior Certificates for such period; or the Servicer shall delegate its duties under the Agreement, except as permitted by Section 8.7 thereof; or any representation, warranty or certification made by the Servicer in the Agreement or in any certificate delivered pursuant to the Agreement shall prove to have been incorrect when made, which has a material adverse effect on the Holders of the Senior Certificates and which continues to be incorrect in any material respect for a period of 45 days after the date on which written notice of such failure, requiring the same to be remedied, shall have been given to the Servicer by the Trustee, or to the Servicer and the Trustee by the Required Class A Purchasers or the Facility Agent and continues to materially adversely affect such Certificateholders for such period; and (h) if for any three consecutive Monthly Periods, (A) the sum of (I) the aggregate daily amount of the Floating Allocation Percentage of Finance Charge Collections for such day which are available in the Collection Account, PLUS (II) the aggregate daily amount of Excess Finance Charge Collections of all other Series which were available during such period to be allocated to the Series 1997-1 Variable Funding Certificates pursuant to subsection 4.7(c), is less than (B) the sum for such period of (I) the aggregate amount of Class A Interest, Class B Interest and Class B-2 Interest accrued on the Series 1997-1 Certificates, PLUS (II) the aggregate Facility Costs accrued or (without duplication) became payable, PLUS (III) the aggregate Investor Default Amount, PLUS (IV) the aggregate Servicing Fee Accrual for each Business Day on which neither SRI nor an Affiliate of SRI was the Servicer, PLUS (V) the aggregate Class A Investor Charge-Offs, Class B Investor Charge-Offs, Class B-2 Investor Charge-Offs and Class C Investor Charge-Offs (each determined without duplication of amounts included in clause (III) above); then, in the case of any event described in subparagraphs (a) through (h) after the applicable grace period, if any, set forth in such subparagraphs or below, either the Trustee, the Facility Agent by notice then given in writing to the Transferor and the Servicer (and to the Trustee if given by the Facility Agent) may declare that a pay out event (a "SERIES 1997-1 PAY OUT EVENT") has occurred as of the date of such notice. Notwithstanding the foregoing, a delay in or failure of performance referred to in subsection 8(f) or (g) for a period of 60 days (less the applicable grace periods specified in such subsections), shall not constitute a Series 1997-1 Pay Out Event if such delay or failure could not be prevented by the exercise of reasonable diligence by the Servicer and such delay or failure was caused by an act of God or the public enemy, acts of declared or undeclared war, public disorder, rebellion, riot or sabotage, epidemics, landslides, lightning, fire, hurricanes, tornadoes, earthquakes, nuclear disasters or meltdowns, floods, power outages, computer failure or similar causes; PROVIDED, HOWEVER, that the Servicer shall not be excused by reason of any of the foregoing events from causing the Trustee to make timely payment of amounts required to be paid pursuant to Sections 4.8 and 4.9. The preceding sentence shall not relieve the Servicer from using its best efforts to perform its obligations in a timely manner in accordance with the terms of this Agreement and the Servicer shall provide the Trustee, the Transferor and the Holders of the Senior Certificates with an Officer's Certificate giving prompt notice of such failure or delay by it, together with a description of the cause of such failure or delay and its efforts so to perform its obligations. SECTION 9. ARTICLE VI OF THE AGREEMENT. Article VI (except for Sections 6.1 through 6.14 thereof) shall read in its entirety as follows and shall be applicable only to the Series 1997-1 Variable Funding Certificates: SECTION 6.15 ADDITIONAL INVESTED AMOUNTS. (a) Each Series 1997-1 Certificateholder agrees (or, if such Series 1997-1 Certificateholder is a nominee for Class A Owners, Class B Owners or Class B-2 Owners, such Class A Owners, Class B Owners or Class B-2 Owners agree in lieu of such Series 1997-1 Certificateholder), by acceptance of its Series 1997-1 Variable Funding Certificate, that the Transferor may, from time to time prior to the Termination Date (as defined in the applicable Certificate Purchase Agreement) for such Certificateholder or Owner, subject to Section 11 hereof, upon satisfaction of the conditions set forth in Section 3.2 of the Class A Certificate Purchase Agreement (or Section 3.2 of the Class B Certificate Purchase Agreement or Section 3.2 of the Class B-2 Purchase Agreement, as the case may be) request that each Noncommitted Class A Purchaser and Noncommitted Class B Purchaser acquire, and require that each Committed Class A Purchaser, Committed Class B Purchaser and Class B-2 Purchaser, acquire, as of any Business Day additional undivided interests in the Trust in specified amounts (such amounts, respectively, the "ADDITIONAL CLASS A INVESTED AMOUNT," the "ADDITIONAL CLASS B INVESTED AMOUNT" and the "ADDITIONAL CLASS B-2 INVESTED AMOUNT") and require that each Class C Certificateholder acquire, as of any Business Day, additional undivided interests in the Trust in specified amounts (the "ADDITIONAL CLASS C INVESTED AMOUNT" and, collectively with the Additional Class A Invested Amount, the Additional Class B Invested Amount and the Additional Class B-2 Invested Amount, the "ADDITIONAL INVESTED AMOUNTS"). The VFC Additional Invested Amounts on any Business Day shall not exceed an amount equal to the excess of the aggregate amount of Principal Receivables and amounts on deposit in the Equalization Account (other than investment earnings thereon) over the greater of (a) the sum of (i) the aggregate Invested Amount of each Series, including the Series 1997-1 Variable Funding Certificates, then outstanding after giving effect to the additions of such Additional Invested Amounts, MINUS amounts on deposit in the principal funding account for any Series, if any, and (ii) the Minimum Transferor Interest and (b) the Minimum Aggregate Principal Receivables. The aggregate Additional Class A Invested Amounts and Additional Class B Invested Amounts to be purchased shall have a minimum aggregate amount of $1,000,000 or more, and shall be in integral multiples of $250,000, but in no event shall the aggregate Additional Class A Invested Amounts exceed the aggregate Available Commitments (prior to such additions) of all Committed Class A Purchasers or the aggregate Additional Class B Invested Amounts exceed the aggregate Available Commitments (prior to such additions) of all Committed Class B Purchasers. The aggregate Additional Class B-2 Invested Amount to be purchased shall have a minimum amount of $500,000 or more, and shall be in integral multiples of $100,000, but in no event shall the aggregate Additional Class B-2 Invested Amounts exceed the aggregate Available Commitments (prior to such additions) of all Class B-2 Purchasers. (b) The Transferor shall give to each Facility Agent by no later than 4:00 p.m. New York City time on the Business Day immediately prior to the Purchase Date, written notice of the sale of Additional Class A Invested Amounts, Additional Class B Invested Amounts and Additional Class B-2 Invested Amounts specifying (i) the aggregate amount of requested Additional Class A Invested Amounts, Additional Class B Invested Amounts and Additional Class B-2 Invested Amounts, (ii) the applicable Purchase Date (which shall be a Business Day) and (iii) wire transfer instructions as to the account(s) to which the purchase price therefore should be delivered. On the Business Day immediately after the Purchase Date, the Facility Agent shall report to the Transferor, the Servicer and the Trustee (i) the amount of the Additional Class A Invested Amounts purchased by the Noncommitted Class A Purchasers, (ii) the amount of the Additional Class B Invested Amounts purchased by the Noncommitted Class B Purchasers, (iii) the amount of the Additional Class A Invested Amounts which have been purchased by the Committed Class A Purchasers, (iv) the amount of the Additional Class B Invested Amounts which have been purchased by the Committed Class B Purchasers and (v) the amount of the Additional Class B-2 Invested Amounts which have been purchased by the Class B-2 Purchasers. (c) Each Noncommitted Class A Purchaser may, but shall not be obligated to, purchase its Noncommitted Purchaser Percentage (as defined in the Class A Certificate Purchase Agreement) of any Additional Class A Invested Amount offered by the Transferor pursuant to subsection 6.15(b). Each Committed Class A Purchaser shall purchase its share of the Additional Class A Invested Amount not so purchased by the Noncommitted Class A Purchasers pursuant to the immediately previous sentence in accordance with the applicable Certificate Purchase Agreement. In no event shall any Additional Class A Invested Amount be purchased if, after giving effect thereto, the Class A Invested Amount on the applicable Purchase Date (after giving effect to those purchases which are made on the applicable Purchase Date) exceeds (i) the Class A Purchase Limit or (ii) the amount which would result in the sum of the Class B Invested Amount, the Class B-2 Invested Amount and the Class C Invested Amount being less than 25% of the Invested Amount on such Purchase Date. (d) The Class C Certificateholder by acceptance of its Class C Certificate agrees that it shall be deemed to purchase Additional Class C Invested Amounts at the same time as (x) either Class A Certificateholders, the Class B Certificateholders or the Class B-2 Certificateholders purchase any Additional Class A Invested Amount, any Additional Class B Invested Amount or any the Additional Class B-2 Invested Amount or (y) a Partial Amortization Amount in respect of the Class B-2 VFCs shall be paid to the Class B-2 Certificateholders. The Class C Certificateholder shall be deemed to purchase the Additional Class C Interest in an amount that is not less than the amount which would result in the sum of Class B-2 Invested Amount and Class C Invested Amount, (calculated after giving effect to any distribution of a Partial Amortization Amount pursuant to section 4.9(h)), being at least equal to the greater of 17.5% of the Invested Amount on such Purchase Date or (together with the Class B-2 Invested Amount) 5% of the highest Invested Amount during the 180 days preceding such Purchase Date, and shall pay the Trust the purchase price for such Additional Class C Invested Amount, in an amount equal to such Additional Class C Invested Amount in immediately available funds. In addition, the Class C Certificateholder may at any time purchase an Additional Class C Invested Amount, by payment to the Trust in immediately available funds of the purchase price therefore, which shall be an amount equal to such Additional Class C invested Amount. (e) Each Noncommitted Class B Purchaser may, but shall not be obligated to, purchase its Noncommitted Purchaser Percentage (as defined in the Class B Certificate Purchase Agreement) of any Additional Class B Invested Amount offered by the Transferor pursuant to subsection 6.15(b). Each Committed Class B Purchaser shall purchase its share of the Additional Class B Invested Amount not so purchased by the Noncommitted Class B Purchasers pursuant to the immediately previous sentence in accordance with the applicable Certificate Purchase Agreement. In no event shall any Additional Class B Invested Amount be purchased if, after giving effect thereto, the Class B Invested Amount on the applicable Purchase Date (after giving effect to those purchases which are made on the applicable Purchase Date) exceeds (i) the Class B Purchase Limit or (ii) the amount which would result in the sum of the Class B-2 Invested Amount and the Class C Invested Amount being less than 17.5% of the Invested Amount on such Purchase Date. (f) Each Class B-2 Purchaser shall purchase its share of the Additional Class B-2 Invested Amount in accordance with the applicable Certificate Purchase Agreement. In no event shall the Class B-2 Invested Amount on the applicable Purchase Date (after giving effect to those purchases which shall be made on the applicable Purchase Date) exceed the lowest of (i) 10.0% of the Invested Amount, (ii) the Class B-2 Purchase Limit or (iii) the amount which would result in the Class C Invested Amount being less than 7.5% of the Invested Amount on such Purchase Date. (g) If the Class A Certificateholders acquire such additional interest, then in consideration of such Class A Certificateholders' payments of the Additional Class A Invested Amount, the Servicer shall appropriately note such Additional Class A Invested Amount on the related Daily Report and direct the Trustee to pay to the Transferor such Additional Class A Invested Amounts, and the Invested Amount of the Class A Certificates will be equal to the Invested Amount of the Class A Certificates stated in such Daily Report. If the Class B Certificateholders acquire such additional interest, then in consideration of such Class B Certificateholders' payments of the Additional Class B Invested Amount, the Servicer shall appropriately note such Additional Class B Invested Amount on the related Daily Report and direct the Trustee to pay to the Transferor such Additional Class B Invested Amounts, and the Invested Amount of the Class B Certificates will be equal to the Invested Amount of the Class B Certificates stated in such Daily Report. If the Class B-2 Certificateholders acquire such additional interest, then in consideration of such Class B-2 Certificateholders' payments of the Additional Class B-2 Invested Amount, the Servicer shall appropriately note such Additional Class B-2 Invested Amount on the related Daily Report and direct the Trustee to pay to the Transferor such Additional Class B-2 Invested Amounts, and the Invested Amount of the Class B-2 Certificates will be equal to the Invested Amount of the Class B-2 Certificates stated in such Daily Report. If the Class C Certificateholders acquire such additional interest, then in consideration of such Class C Certificateholders' payments of the Additional Class C Invested Amount, the Servicer shall appropriately note such Additional Class C Invested Amount on the related Daily Report and direct the Trustee to pay to the Transferor such Additional Invested Amounts, and the Invested Amount of the Class C Certificates will be equal to the Invested Amount of the Class C Certificates stated in such Daily Report. (h) Subject to the provisions of subsections 6.15(c) through (f), the failure of any Holder of the Senior Certificates to purchase any Additional Class A Invested Amount, any Additional Class B Invested Amount or any Additional Class B-2 Invested Amount in accordance with Section 6.15 and the applicable Certificate Purchase Agreement shall not in itself relieve any other Series 1997-1 Certificateholder of its obligation to purchase any Additional Invested Amounts. Notwithstanding any provision to the contrary contained in this Section 6.15, no Senior Certificateholder shall be required to purchase any Additional Class A Invested Amounts, any Additional Class B Invested Amounts or any Additional Class B-2 Invested Amount unless the conditions to such purchase contained in the applicable Certificate Purchase Agreement (including without limitation Section 3.2 thereof) have been satisfied. (i) The outstanding amounts of any Additional Class A Invested Amount purchased by each Class A Certificateholder shall be evidenced by a Class A Certificate to be issued on the Closing Date substantially in the form of EXHIBIT A-1 hereto. Each Class A Certificateholder shall and is hereby authorized to record on the grid attached to its Class A Certificate (or at such Class A Certificateholder's option, in its internal books and records) the date and amount of any Additional Class A Invested Amount purchased by it, and each repayment thereof; PROVIDED that failure to make any such recordation on such grid or any error in such grid shall not adversely affect such Class A Certificateholder's rights with respect to its Class A Invested Amount and its right to receive interest payments in respect of the Class A Invested Amount held by such Class A Certificateholder. (j) The outstanding amounts of any Additional Class B Invested Amount purchased by each Class B Certificateholder shall be evidenced by a Class B Certificate to be issued on the Closing Date substantially in the form of EXHIBIT A-2 hereto. Each Class B Certificateholder shall and is hereby authorized to record on the grid attached to its Class B Certificate (or at such Class B Certificateholder's option, in its internal books and records) the date and amount of any Additional Class B Invested Amount purchased by it, and each repayment thereof; PROVIDED that failure to make any such recordation on such grid or any error in such grid shall not adversely affect such Class B Certificateholder's rights with respect to its Class B Invested Amount and its right to receive interest payments in respect of the Class B Invested Amount held by such Class B Certificateholder. (k) The outstanding amounts of any Additional Class B-2 Invested Amount purchased by each Class B-2 Certificateholder shall be evidenced by a Class B-2 Certificate to be issued on the Closing Date substantially in the form of EXHIBIT A-3 hereto. Each Class B-2 Certificateholder shall and is hereby authorized to record on the grid attached to its Class B-2 Certificate (or at such Class B-2 Certificateholder's option, in its internal books and records) the date and amount of any Additional Class B-2 Invested Amount purchased by it, and each repayment thereof; PROVIDED that failure to make any such recordation on such grid or any error in such grid shall not adversely affect such Class B-2 Certificateholder's rights with respect to its Class B-2 Invested Amount and its right to receive interest payments in respect of the Class B-2 Invested Amount held by such Class B-2 Certificateholder. SECTION 6.16 EXTENSION. (a) If a Series 1997-1 Pay Out Event has not occurred or has occurred but has been waived or remedied on or before the 30th Business Day preceding the Extension Date, the Transferor, in its sole discretion, may deliver to the Trustee on or before such date a notice substantially in the form of Exhibit C (the "EXTENSION NOTICE") to this Supplement. The Trustee shall deliver a copy of the Extension Notice and all documents annexed thereto to the Investor Certificateholders of record on the date of receipt thereof. The Transferor shall state in the Extension Notice that it intends to extend the Revolving Period until the later Amortization Period Commencement Date set forth in the Extension Notice. The Extension Notice shall also set forth the next Extension Date. The following documents shall be annexed to the Extension Notice: (i) a form of the Opinion of Counsel addressed to the Transferor and the Trustee to the effect that despite the Extension the Trust will not be treated as an association taxable as a corporation (the "EXTENSION TAX OPINION"); (ii) a form of the Opinion of Counsel addressed to the Transferor and the Trustee (the "EXTENSION OPINION") to the effect that (A) the Transferor has the corporate power and authority to effect the Extension, and (B) the Extension has been duly authorized by the Transferor; and (iii) a form of Investor Certificateholder Election Notice substantially in the form of Exhibit D (the "ELECTION NOTICE") to this Supplement. In addition, the Extension Notice shall state that any Investor Certificateholder electing to approve the Extension must do so on or before the Election Date (as defined below) by returning the annexed Election Notice properly executed to the Trustee in the manner described below. The Extension Notice shall also state that an Investor Certificateholder may withdraw any such election in whole or in part on or before the Election Date, and the Transferor, in its sole discretion, may, prior to the Election Date, withdraw its election to extend the Revolving Period. Any Holder that elects to approve an Extension hereunder shall deliver a duly executed Election Notice to the Trustee at the address designated in the Extension Notice on or before 3:00 p.m., New York City time, on or before the fifth Business Day preceding the Extension Date (such Business Day constituting the "ELECTION DATE"). (b) No Extension shall occur until prior satisfaction of the following conditions at the close of business on the Election Date: (i) no Pay Out Event shall have occurred and be continuing, (ii) there shall have been delivered to the Trustee (A) the Extension Tax Opinion and the Extension Opinion, each addressed to the Trustee and (B) written confirmation from any Rating Agency rating that the Extension will not cause such Rating Agency to lower or withdraw its ratings of either class of Senior Certificates, (iii) at least one Holder of the Senior Certificates shall have elected to approve the Extension by returning to the Trustee on or before the Election Date the executed Election Notice annexed to the Extension Notice delivered to such Holder of the Senior Certificates pursuant to subsection 6.16(a) of the Agreement, (iv) all of the Holders of the Class C Certificates shall have elected to approve of the Extension by returning to the Trustee on or before the Election Date the executed form of Election Notice annexed to the Extension Notice delivered to such Class C Certificateholders pursuant to subsection 6.16(a) and (v) (1) the sum of Class B Invested Amount and the Class C Invested Amount will equal or exceed 25% of the Invested Amount on the Election Date and (2) the Class C Invested Amount on the Election Date will equal or exceed 17.5% of the Invested Amount. If not all of the Holders of the Senior Certificates give written notice of such agreement, then the Transferor shall re-notify the Holders of the Senior Certificates willing to so extend in writing that one or more Senior Certificateholders have declined to so extend and such remaining Holders of the Senior Certificates willing to extend have the option of extending only for such Holders of the Senior Certificates so consenting to such extension and the outstanding Invested Amount of such non-extending Holders of the Senior Certificates shall not be extended. If, by the close of business on the Election Date, all of the conditions stated in this subsection 6.16(b) have not been satisfied and all such documents delivered to the Trustee pursuant to this subsection 6.16(b) are not in form satisfactory to it, or if the Transferor has notified the Trustee, prior to the Election Date, that the Transferor has exercised its right to withdraw its election of an Extension, no Extension shall occur. (c) The execution by the Holders of the Senior Certificates of the applicable Election Notice and return thereof to the Trustee by the required date and time, the continued election by the Transferor to extend the Revolving Period at the Election Date, and the compliance with all of the provisions of this Section 6.16, shall evidence an extension or renewal of the obligations represented by the Investor Certificates delivered in exchange therefor, and not a novation or extinguishment of such obligations or a substitution with respect thereto. SECTION 10. SERIES 1997-1 TERMINATION. The right of the Series 1997-1 Certificateholders to receive payments from the Trust will terminate on the first Business Day following the Series 1997-1 Termination Date unless such Series is an Affected Series as specified in Section 12.1(c) of the Agreement and the sale contemplated therein has not occurred by such date, in which event the Series 1997-1 Certificateholders shall remain entitled to receive proceeds of such sale when such sale occurs. SECTION 11. LIMITATION ON CHANGES IN INVESTED AMOUNT. The Transferor shall not effect more than two "Invested Amount Changes" and two "B-2 Invested Amount Changes" in any calendar week. An "INVESTED AMOUNT CHANGE" shall mean a sale of Class A Additional Invested Amounts or Class B Additional Invested Amounts pursuant to Section 6.15 or a repayment of any Class A Invested Amount or Class B Invested Amount pursuant to subsection 5.1(e). A "B-2 INVESTED AMOUNT CHANGE" shall mean a sale of Class B-2 Additional Invested Amounts pursuant to Section 6.15 or a repayment of any Class B-2 Invested Amount pursuant to subsection 5.1(e). SECTION 12. LEGENDS; TRANSFER AND EXCHANGE; RESTRICTIONS ON TRANSFER OF SERIES 1997-1 VARIABLE FUNDING CERTIFICATES; TAX TREATMENT. (a) Each Series 1997-1 Certificate will bear a legend substantially in the following form: THIS CERTIFICATE (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAW OF ANY STATE AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED UNLESS REGISTERED PURSUANT TO OR EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT AND ANY OTHER APPLICABLE SECURITIES LAW. EACH HOLDER OF THIS CERTIFICATE AGREES FOR THE BENEFIT OF SRI RECEIVABLES PURCHASE CO., INC. THAT (A) NO RESALE OR OTHER TRANSFER OF THIS CERTIFICATE MAY BE MADE EXCEPT (1) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, (2) IN A TRANSACTION EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE SECURITIES OR "BLUE SKY" LAWS, OR (3) TO THE TRANSFEROR, AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS NOTE FROM IT OF THE TRANSFER RESTRICTIONS REFERRED TO ABOVE. EACH PURCHASER REPRESENTS AND WARRANTS FOR THE BENEFIT OF SRI RECEIVABLES PURCHASE CO., INC. THAT SUCH PURCHASER IS NOT (I) AN EMPLOYEE BENEFIT PLAN (AS DEFINED IN SECTION 3(3) OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA")) THAT IS SUBJECT TO THE PROVISIONS OF TITLE I OF ERISA, (II) A PLAN DESCRIBED IN SECTION 4975(E)(1) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED, OR (III) AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE PLAN ASSETS BY REASON OF A PLAN'S INVESTMENT IN THE ENTITY. (b) Upon surrender for registration of transfer of any Series 1997-1 Variable Funding Certificate at the office of the Transfer Agent and Registrar, accompanied by a certification by the Series 1997-1 Certificateholder substantially in the form attached as Exhibit E if the new purchaser is a "qualified institutional buyer" as defined in Rule 144A under the Securities Act of 1933, or in the form attached as Exhibit F if the new purchaser is not a "qualified institutional buyer," and by a written instrument of transfer in the form approved by the Transferor and the Trustee (it being understood that, until notice to the contrary is given to Series 1997-1 Certificateholders, the Transferor and the Trustee shall each be deemed to have approved the form of instrument of transfer, if any printed on any definitive Series 1997-1 Certificate), executed by the registered owner, in person or by such Series 1997-1 Certificateholder's attorney thereunto duly authorized in writing, such Series 1997-1 Certificate shall be transferred upon the register, and the Transferor shall execute, and the Trustee shall authenticate and deliver, in the name of the designated transferees one or more new registered Series 1997-1 Certificate of any authorized denominations and of a like aggregate principal amount and tenor. Transfers and exchanges of Series 1997-1 Variable Funding Certificates shall be subject to such restrictions as shall be set forth in the text of the Series 1997-1 Variable Funding Certificates and such reasonable regulations as may be prescribed by the Transferor. Successive registrations and registrations of transfers as aforesaid may be made from time to time as desired, and each such registration shall be noted on the register. (c) In no event shall the Class C Certificates or any interest therein be transferred, sold, exchanged, pledged, participated or otherwise assigned hereunder, in whole or in part, unless: (i) the Servicer shall have provided an Officer's Certificate to the Trustee to the effect that such sale, exchange, pledge, participation and assignment will not materially adversely affect the interests of the Certificateholders and is permitted by each Certificate Purchase Agreement, (ii) the Trustee shall have been delivered an Opinion of Counsel to the effect that (A) any securities or interests issued in conjunction with such sale, exchange, pledge, participation and assignment and sold to third parties will be characterized as either indebtedness or partnership interests (other than interests in a publicly traded partnership) for Federal and applicable state income tax purposes, (B) such sale, exchange, pledge, participation and assignment or such issuance will not adversely affect the Federal and applicable state income tax characterization of any outstanding Series of Investor Certificates (other than the Class C VFCs, as to the characterization of which Counsel shall express no opinion), and (C) such sale, exchange, pledge, participation and assignment or such issuance will not result in the Trust being subject to tax at the entity level for Federal or applicable state income tax purposes, (iii) the Servicer shall have provided at least ten Business Days prior written notice to each Rating Agency and the Trustee of such sale, exchange, pledge, participation and assignment and shall have received written confirmation from each Rating Agency to the effect of the original rating of any Series or any class of any Series will not be reduced or withdrawn as a result of such sale, exchange, pledge, participation and assignment, and (iv) the holders of any securities or interests issued in conjunction with such sale, exchange, pledge, participation and assignment (or any trustee or collateral agent on their behalf) (A) will have no right to foreclose upon the Class C VFCs or exercise any voting rights as a Class C Certificateholder unless and until all outstanding Investor Certificates (other than the Class C VFCs) and all outstanding investor certificates (other than any Transferor Retained Certificates) have been paid in full and (B) covenant and agree that, prior to the date which is one year and one day after the payment in full of all outstanding investor certificates issued by the Trust, none of them will institute against, or join any other Person in instituting against, the Transferor any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings or other similar proceeding under the laws of the United States or any state of the United States, and the Trustee shall have received an Officer's Certificate to that effect. (d) Each Certificateholder, by accepting and holding such Certificate or interest therein, will be deemed to have represented and warranted that it is not (i) an employee benefit plan (as defined in Section 3(3) of ERISA) that is subject to the provisions of Title I of ERISA, (ii) a plan described in Section 4975(e)(1) of the Code, or (iii) any entity whose underlying assets include plan assets by reason of a plan's investment in the entity. (e) Each Class B-2 Certificateholder, by its holding of an interest in a Class B-2 Certificate, hereby severally represents, warrants and covenants, and each Class B-2 Certificateholder that acquires an interest in a Class B-2 Certificate shall be deemed to have severally represented, warranted and covenanted upon such acquisition, that: (i) such Class B-2 Certificateholder has not acquired and shall not sell, trade or transfer any interest in the Class B-2 Certificates, nor cause any interest in the Class B-2 Certificates to be marketed, on or through either (A) an established securities market within the meaning of Section 7704(b)(1) of the Code (including, but not limited to, an interdealer quotation system that regularly disseminates firm buy or sell quotations by identified brokers or dealers by electronic means or otherwise), or (B) a secondary market (or the substantial equivalent thereof) within the meaning of Section 7704(b)(2) of the Code (including, but not limited to, a market wherein interests in the Class B-2 Certificates are regularly quoted by any person making a market in such interests and a market wherein any person regularly makes available bid or offer quotes with respect to interests in the Class B-2 Certificates and stands ready to effect buy or sell transactions at the quoted prices for itself or on behalf of others); and (ii) unless the Transferor consents otherwise, such Class B-2 Certificateholder (A) is properly classified as, and shall remain classified as, a "corporation" as defined in Section 7701(a)(3) of the Code and (B) is not, and shall not become, an "S corporation" as described in Section 1361 of the Code. The consent of the Transferor described in clause (ii) immediately above shall not be unreasonably withheld, subject to the limitations discussed below if such transfer would cause the number of Private Holders to exceed 80. Each Class B-2 Certificateholder represents, warrants and covenants that it shall cause each of its Participants to make representations, warranties and covenants similar to those described in (i) and (ii) above for the benefit of the Transferor and the Trust at the time such Participant becomes a Participant. In the event of any breach of the representation, warranty and covenant of a Class B-2 Certificateholder or its Participant that such Certificateholder or Participant shall remain classified as a corporation other than an S corporation (unless the Transferor otherwise consents), such Class B-2 Certificateholder shall notify the Transferor promptly upon such Class B-2 Certificateholder's becoming aware thereof, and thereupon such Class B-2 Certificateholder agrees to use reasonable efforts to procure a replacement investor not so affected in accordance with the Class B-2 Certificate Purchase Agreement. In any such event, the Transferor shall also have the right to procure a replacement investor permitted under and otherwise in accordance with the Class B-2 Certificate Purchase Agreement. Each affected Class B-2 Certificateholder hereby agrees to take all actions reasonably necessary to permit a replacement investor to succeed to its rights and obligations hereunder. Each Class B-2 Certificateholder that has a Participant that has breached its representation, warranty and covenant that it shall remain classified as a corporation other than an S corporation (unless the Transferor otherwise consents) hereby agrees (without limiting the right of the Transferor to procure a replacement investor for such Class B-2 Certificateholder as provided above in this paragraph or to pursue other remedies) to notify the Transferor of such breach promptly upon such Class B-2 Certificateholder's becoming aware thereof and to use reasonable efforts to procure a replacement Participant not so affected in accordance with the Class B-2 Certificate Purchase Agreement. Any Class B-2 Certificateholder or assignee Class B-2 Certificateholder that is an S corporation described in Code Section 1361 hereby further agrees that, in the event its owners shall be treated as Private Holders under Treasury Regulations promulgated under Code Section 7704, it shall take such reasonable measures as shall be agreed upon with the Transferor as shall reduce the risk that the Trust would be treated as a publicly traded partnership pursuant to Code Section 7704. Any such Class B-2 Certificateholder or assignee Certificateholder which has a Participant which is an S corporation described in Code Section 1361 additionally agrees that, in the event the owners of such Participant shall be treated as Private Holders under Treasury Regulations promulgated under Code Section 7704, it shall take such reasonable measures as shall be agreed upon with the Transferor as shall reduce the risk that the Trust would be treated as a publicly traded partnership pursuant to Section 7704 of the Code. Each Class B-2 Certificateholder shall notify the Transferor of its sale, transfer or assignment of any interest in a Class B-2 Certificate to any Participant, and the Transferor shall maintain a register of each Participant and the amount of each Participation. No Participant shall be entitled to sell, transfer, assign or otherwise dispose of less than its entire interest in its participation in the Class B-2 Certificates (including by means of a pledge, hypothecation or subparticipation thereof), without the prior written consent of the Transferor. At no time shall the aggregate number of Class B-2 Certificateholders and Participants exceed five (5) Private Holders or such greater number as to which the Transferor shall consent in writing, which consent shall not be unreasonably withheld. In the event that, after giving effect to such consent or after any other transfer, the number of Private Holders would exceed 80, the Transferor shall not grant such consent and shall not permit such transfer unless the Transferor has provided to the Trustee an Opinion of Counsel to the effect that the transfers would not cause the Trust to be treated as a "publicly traded partnership" taxable as a corporation under Section 7704 of the Code. Any transfer of an interest in a Class B-2 Certificate in contravention of this paragraph shall be void AB INITIO. Notwithstanding any provisions of this subsection 12(e) to the contrary, each Class B-2 Certificateholder and any of its Participants may pledge its interest in the Class B-2 Certificates to any Federal Reserve Bank as collateral in accordance with applicable law. As used in this subsection 12(e): "PARTICIPANT" means each Person that has been granted a participation interest by a Class B-2 Certificateholder in all or part of its Class B-2 Certificates. "PRIVATE HOLDER" means each holder of a right to receive interest or principal in respect of any direct or indirect interest in the Trust, including any financial instrument or contract the value of which is determined in whole or part by reference to the Trust (including the Trust's assets, income of the Trust or distributions made by the Trust), but excluding any interest in the Trust represented by any Series or Class of Certificates or any other interest as to which the Transferor has provided to the Trustee an Opinion of Counsel to the effect that such Series, Class or other interest will be treated as debt or otherwise not as an equity interest in either the Trust or the Receivables for federal income tax purposes, in each case, provided such interest is not convertible or exchangeable into an interest in the Trust or the Trust's income or equivalent value. Notwithstanding the immediately preceding sentence, "Private Holder" shall also include any other Person that the Transferor determines is, or may be or may become, a "partner" within the meaning of Section 1.7704-1(h)(l)(ii) of the United States Treasury Regulations (including by reason of Section 1.7704-1(h)(3)). The holders of (i) the Transferor Interest, (ii) the interest of the Servicer, (iii) any similar interests in the Trust represented by any other Class of any Series of Certificates, and (iv) any interest described in Section 12.1(b) of the Pooling and Servicing Agreement shall be treated as Private Holders. Any Person holding more than one interest in the Trust each of which separately would cause such Person to be a Private Holder shall be treated as a single Private Holder. Each holder of an interest in a Private Holder which is a partnership, an S corporation or a grantor trust under the Code shall be treated as a Private Holder unless excepted with the consent of the Transferor (which consent shall be based on an Opinion of Counsel generally to the effect that the action taken pursuant to the consent will not cause the Trust to become a "publicly traded partnership" taxable as a corporation under Section 7704 of the Code). (f) Each Class B Certificateholder, by its holding of an interest in a Class B Certificate, hereby severally represents, warrants and covenants, and each Class B Certificateholder that acquires an interest in a Class B Certificate shall be deemed to have severally represented, warranted and covenanted upon such acquisition, that: (i) such Class B Certificateholder has not acquired and shall not sell, trade or transfer any interest in the Class B Certificates, nor cause any interest in the Class B Certificates to be marketed, on or through either (A) an established securities market within the meaning of Section 7704(b)(1) of the Code (including, but not limited to, an interdealer quotation system that regularly disseminates firm buy or sell quotations by identified brokers or dealers by electronic means or otherwise), or (B) a secondary market (or the substantial equivalent thereof) within the meaning of Section 7704(b)(2) of the Code (including, but not limited to, a market wherein interests in the Class B Certificates are regularly quoted by any person making a market in such interests and a market wherein any person regularly makes available bid or offer quotes with respect to interests in the Class B Certificates and stands ready to effect buy or sell transactions at the quoted prices for itself or on behalf of others); and (ii) unless the Transferor consents otherwise, such Class B Certificateholder (A) is properly classified as, and shall remain classified as, a "corporation" as defined in Section 7701(a)(3) of the Code and (B) is not, and shall not become, an "S corporation" as described in Section 1361 of the Code. The consent of the Transferor described in clause (ii) immediately above shall not be unreasonably withheld, subject to the limitations discussed below if such transfer would cause the number of Private Holders to exceed 80. Each Class B Certificateholder represents, warrants and covenants that it shall cause each of its Participants and each of its Support Parties to make representations, warranties and covenants similar to those described in (i) and (ii) above for the benefit of the Transferor and the Trust at the time such Participant becomes a Participant or Support Party, as the case may be. In the event of any breach of the representation, warranty and covenant of a Class B Certificateholder or any of its Participants or Support Parties that such Certificateholder or its Participant or Support Party shall remain classified as a corporation other than an S corporation (unless the Transferor otherwise consents), such Class B Certificateholder shall notify the Transferor promptly upon such Class B Certificateholder's becoming aware thereof, and thereupon such Class B Certificateholder agrees to use reasonable efforts to procure a replacement investor not so affected in accordance with the Class B Certificate Purchase Agreement. In any such event, the Transferor shall also have the right to procure a replacement investor permitted under and otherwise in accordance with the Class B Certificate Purchase Agreement. Each affected Class B Certificateholder hereby agrees to take all actions reasonably necessary to permit a replacement investor to succeed to its rights and obligations hereunder. Each Class B Certificateholder that has a Participant or Support Party that has breached its representation, warranty and covenant that it shall remain classified as a corporation other than an S corporation (unless the Transferor otherwise consents) hereby agrees (without limiting the right of the Transferor to procure a replacement investor for such Class B Certificateholder as provided above in this paragraph or to pursue other remedies) to notify the Transferor of such breach promptly upon such Class B Certificateholder's becoming aware thereof and to use reasonable efforts to procure a replacement Participant or Support Party, as the case may be, not so affected in accordance with the Class B Certificate Purchase Agreement. Any Class B Certificateholder or assignee Class B Certificateholder that is an S corporation described in Code Section 1361 hereby further agrees that, in the event its owners shall be treated as Private Holders under Treasury Regulations promulgated under Code Section 7704, it shall take such reasonable measures as shall be agreed upon with the Transferor as shall reduce the risk that the Trust would be treated as a publicly traded partnership pursuant to Code Section 7704. Any such Class B Certificateholder or assignee Certificateholder which has a Participant which is an S corporation described in Code Section 1361 additionally agrees that, in the event the owners of such Participant shall be treated as Private Holders under Treasury Regulations promulgated under Code Section 7704, it shall take such reasonable measures as shall be agreed upon with the Transferor as shall reduce the risk that the Trust would be treated as a publicly traded partnership pursuant to Section 7704 of the Code. Each Class B Certificateholder shall notify the Transferor of its sale, transfer or assignment of any interest in a Class B Certificate to any Participant, and the Transferor shall maintain a register of each Participant and the amount of each Participation. No Participant shall be entitled to sell, transfer, assign or otherwise dispose of less than its entire interest in its participation in the Class B Certificates (including by means of a pledge, hypothecation or subparticipation thereof), without the prior written consent of the Transferor. At no time shall the aggregate number of Class B Certificateholders, Participants and Support Parties exceed five (5) Private Holders or such greater number as to which the Transferor shall consent in writing, which consent shall not be unreasonably withheld. In the event that, after giving effect to such consent or after any other transfer, the number of Private Holders would exceed 80, the Transferor shall not grant such consent and shall not permit such transfer unless the Transferor has provided to the Trustee an Opinion of Counsel to the effect that the transfers would not cause the Trust to be treated as a "publicly traded partnership" taxable as a corporation under Section 7704 of the Code. Any transfer of an interest in a Class B Certificate in contravention of this paragraph shall be void AB INITIO. Notwithstanding any provisions of this subsection 12(e) to the contrary, (i) each Class B Certificateholder and any of its Participants may pledge its interest in the Class B Certificates to any Federal Reserve Bank as collateral in accordance with applicable law, and (ii) each Class B Certificateholder may at any time and from time to time sell, transfer or assign all or any interest in its Class B Certificates or any portion thereto to any of its Support Parties. As used in this subsection 12(f): "PARTICIPANT" means each Person that has been granted a participation interest by a Class B Certificateholder in all or part of its Class B Certificates. "PRIVATE HOLDER" means each holder of a right to receive interest or principal in respect of any direct or indirect interest in the Trust, including any financial instrument or contract the value of which is determined in whole or part by reference to the Trust (including the Trust's assets, income of the Trust or distributions made by the Trust), but excluding any interest in the Trust represented by any Series or Class of Certificates or any other interest as to which the Transferor has provided to the Trustee an Opinion of Counsel to the effect that such Series, Class or other interest will be treated as debt or otherwise not as an equity interest in either the Trust or the Receivables for federal income tax purposes, in each case, provided such interest is not convertible or exchangeable into an interest in the Trust or the Trust's income or equivalent value. Notwithstanding the immediately preceding sentence, "Private Holder" shall also include any other Person that the Transferor determines is, or may be or may become, a "partner" within the meaning of Section 1.7704-1(h)(l)(ii) of the United States Treasury Regulations (including by reason of Section 1.7704-1(h)(3)). The holders of (i) the Transferor Interest, (ii) the interest of the Servicer, (iii) any similar interests in the Trust represented by any other Class of any Series of Certificates, and (iv) any interest described in Section 12.1(b) of the Pooling and Servicing Agreement shall be treated as Private Holders. Any Person holding more than one interest in the Trust each of which separately would cause such Person to be a Private Holder shall be treated as a single Private Holder. Each holder of an interest in a Private Holder which is a partnership, an S corporation or a grantor trust under the Code shall be treated as a Private Holder unless excepted with the consent of the Transferor (which consent shall be based on an Opinion of Counsel generally to the effect that the action taken pursuant to the consent will not cause the Trust to become a "publicly traded partnership" taxable as a corporation under Section 7704 of the Code). "SUPPORT PARTY" means any bank or other financial institution extending or having a commitment to extend funds to or for the account of a Class B Certificateholder or other owner of an interest in Class B Certificates (including by agreement to purchase an assignment of or participation in Class B Certificates) under any liquidity or credit support agreement which relates to the Class B Certificates. SECTION 13. SUCCESSOR TRUSTEE. Section 11.7 of the Agreement shall read in its entirety as provided in the Agreement and, in addition, the following sentence shall be added to the end of subsection 11.7(c) of the Agreement and shall be applicable only to the Series 1997-1 Variable Funding Certificates: "Any successor trustee appointed pursuant to this Section 11.7 shall be subject to the written consent of the Facility Agent, which consent shall not be unreasonably withheld." SECTION 14. NOTICE TO FACILITY AGENT. A copy of each notice, demand, direction, report, Officer's Certificate or other certificate, election and opinion required to be sent or delivered to the Rating Agency or the Trustee shall also be sent or delivered and, in the case of opinions or letters of reliance thereon, shall be addressed to the Facility Agent. SECTION 15. CHARGE ACCOUNT AGREEMENTS AND CREDIT AND COLLECTION POLICIES . Section 2.5(c) of the Agreement shall read in its entirety as set forth below and as so amended and restated shall be applicable only with respect to the Series 1997-1 Variable Funding Certificates: "The Transferor shall comply with and perform its obligations and shall cause the Originators to comply with and perform their obligations under the Charge Account Agreements relating to the Accounts and the Credit and Collection Policy except insofar as any failure to comply or perform would not materially and adversely affect the rights of the Trust or the Certificateholders hereunder or under the Certificates. The Transferor may change the terms and provisions of the Charge Account Agreements or the Credit and Collection Policy in any respect (including the reduction of the required minimum monthly payment, the calculation of the amount, or the timing, or charge offs and the periodic finance charges and other fees to be assessed thereon) only if such change (i) would not, in the reasonable belief of the Transferor, cause, immediately or with the passage of time, a Series 1997-1 Pay Out Event to occur, (ii) it will not make any such change with the intent to materially benefit the Transferor or any Originator over the Investor Certificateholders, except as otherwise restricted by an endorsement, sponsorship, or other agreement between the Transferor and an unrelated third party or by the terms of the Charge Account Agreements, and (iii) if the Servicer is servicing charge card accounts owned by an unrelated third party, such change would not result in the Servicer's applying a materially higher standard of care to the servicing of such accounts than it applies under this Agreement." SECTION 16. SUCCESSOR SERVICER. Section 10.2 of the Agreement shall read in its entirety as provided in the Agreement and, in addition, the following sentence should be inserted in the fifteenth line of Section 10.2(a) between the phrase "acceptable to the Trustee." and "If such Successor Servicer is" and shall be applicable only with respect to the Series 1997-1 Variable Funding Certificates: "Any Successor Servicer must either (A) be approved by the Facility Agent or (B) be a Person which (i) has a tangible net worth of at least $50,000,000, (ii) has serviced an average of at least $1,000,000,000 of credit or charge card receivables outstanding during the previous 12 months and (iii) has a senior long-term debt rating, as determined by at least one nationally recognized statistical rating organization, of at least "BBB" or its equivalent, provided, that if such Successor Servicer has no long term debt or such debt is not rated by a nationally recognized statistical rating organization, the long term debt rating of its parent must be at least "BBB" or its equivalent." SECTION 17. SERIES 1997-1 INVESTOR EXCHANGE; CERTIFICATE DEFEASANCE. (a) Pursuant to subsection 6.9(b), the Class A Certificateholders may tender their Class of Series 1997-1 Certificates (and with the consent of all Class A Certificateholders so may the Class B Certificateholders, and with the consent of all Class A Certificateholders and Class B Certificateholders so may the Class B-2 Certificateholders, and with the consent of all Senior Certificateholders so may the Class C Certificateholders), and the Holders of the Exchangeable Transferor Certificate may tender the Exchangeable Transferor Certificate, in exchange for (i) one or more newly issued classes of Investor Certificates and (ii) a reissued Exchangeable Transferor Certificate in accordance with the terms and conditions contained in a notice of exchange delivered to the Series 1997-1 Certificateholders. Such notice of exchange will specify, among other things: (a) the amount and Classes of Series 1997-1 Certificates that may be tendered, (b) the Certificate Rate with respect to the new Series, (c) the term of the Series, (d) the method of computing the investor percentage, (e) the manner of Enhancement, if any, with respect to the Series and (f) the time and the manner at which the tender and cancellation of the Series 1997-1 Certificates and the issuance of the new class of Certificates will be effectuated. Upon satisfaction of the conditions contained in subsections 6.9(b) and 6.9(c), and the receipt by the Trustee of the exchange notice and the related Supplement, the Trustee shall cancel the existing Exchangeable Transferor Certificate and the applicable class of Series 1997-1 Certificates, and shall issue such Series of Investor Certificates and a new Exchangeable Transferor Certificate, each dated the Exchange Date. (b) The Trustee, for the benefit of the Series 1997-1 Certificateholders, shall establish and maintain with a Qualified Institution in the name of the Trust, a certain segregated trust account (the "DEFEASANCE ACCOUNT"). At the option of the Transferor, all amounts received by the Trustee from the issuance of new Certificates of another Series (or any class within any such other Series) on the settlement date for such issuance shall be deposited in the Defeasance Account. (c) Amounts on deposit in the Defeasance Account shall be applied as Collections allocable to the Series 1997-1 Variable Funding Certificates in payment of, the Class A Invested Amount and accrued and unpaid interest thereon, the Class B Invested Amount and accrued and unpaid interest thereon the Class B-2 Invested Amount and accrued and unpaid interest thereon, accrued and unpaid Program Fees and other Facilities Costs and interest on overdue payments of the foregoing, in accordance with and subject to the priorities set forth in Sections 4.8 and 4.9 of the Agreement. Any day upon which payments are received in the Defeasance Account shall be a Distribution Date. Any funds remaining in the Defeasance Account after all amounts payable to the Senior Certificateholders pursuant to Section 4.8 and 4.9 have been paid in full shall be paid to the Transferor. SECTION 18. RATIFICATION OF AGREEMENT. As supplemented by this Series Supplement, the Agreement is in all respects ratified and confirmed and the Agreement as so supplemented by this Series Supplement shall be read, taken, and construed as one and the same instrument. SECTION 19. COUNTERPARTS. This Series Supplement may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all of such counterparts shall together constitute but one and the same instrument. SECTION 20. GOVERNING LAW. THIS SERIES SUPPLEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS. SECTION 21. THE TRUSTEE. The Trustee shall not be responsible in any manner whatsoever for or in respect of the sufficiency of this Series Supplement or for or in respect of the Preliminary Statement contained herein, all of which recitals are made solely by the Transferor. SECTION 22. INSTRUCTIONS IN WRITING. All instructions or other communications given by the Servicer or any other person to the Trustee pursuant to this Series Supplement shall be in writing, and, with respect to the Servicer, may be included in a Daily Report or Settlement Statement. SECTION 23. AMEMDMENT. The Agreement (including any Supplement) shall not be amended by the Servicer, the Transferor and the Trustee in reliance on the second paragraph of Section 13.1(a) without the consent of (i) Holders of Investor Certificates evidencing Undivided Interests aggregating not less than 66 2/3% of the Invested Amount of the Series 1997-1 Variable Funding Certificates (ii) the Required Class A Purchasers and the Required Class A Owners, (iii) the Required Class B Purchasers and the Required Class B Owners and (iv) the Required Class B-2 Purchasers. SECTION 24. DISCOUNT OPTION. The Transferor shall not exercise its option to designate a Discount Percentage under Section 2.8 of the Agreement unless it has obtained the consent of the Facility Agent, which will not unreasonably be withheld. The Transferor shall not withdraw such designation of a Discount Percentage thereafter unless (i) it has obtained the consent of the Facility Agent, which will not unreasonably be withheld, or (ii) the Excess Spread Percentage for each of the three most recently completed Monthly Periods exceeds 3.0%. The Transferor shall not reduce the Discount Percentage more than once in any twelve month period. SECTION 25. RATING AGENCY CONDITION. For purposes of any provision of the Agreement or the Supplement which requires that any Rating Agency confirm that an action or condition would not result in a reduction or withdrawal of its rating of Series 1997-1 Certificates or any class thereof (if such Series were rated by such Rating Agency), such requirement shall mean for purposes of Series 1997-1 that (a) for each class of Series 1997-1 Certificates then rated by such Rating Agency, if any, that such action or condition would not result in a reduction or withdrawal of its rating of such class of Series 1997-1 Certificates, and (b) that each of Moody's and Standard & Poor's has confirmed in writing to the Facility Agent that such action or condition would not result in a reduction or withdrawal of such Rating Agency's then applicable rating of the CP Notes issued by any Noncommitted Class A Purchaser or Noncommitted Class B Purchaser, without giving effect to any increase in any letter of credit or other enhancement provided to such Noncommitted Class A Purchaser or Noncommitted Class B Purchaser (other than, in the case of a purchase of Additional Class A Invested Amounts or Additional Class B Invested Amounts, as applicable, an increase in liquidity support provided to such Noncommitted Class A Purchaser, Noncommitted Class B Purchaser by Liquidity Providers (as defined in the applicable Certificate Purchase Agreement). IN WITNESS WHEREOF, the Transferor, the Servicer and the Trustee have caused this Series 1997-1 Supplement to be duly executed by their respective officers as of the day and year first above written. SRI RECEIVABLES PURCHASE CO., INC. Transferor By: /S/ MARK A. HESS Mark A. Hess Treasurer THE FOREGOING SPECIALTY RETAILERS, INC. AMENDED AND RESTATED Servicer SERIES 1997-1 SUPPLEMENT IS HEREBY CONSENTED TO: By: /S/ JAMES A. MARCUM SRI RECEIVABLES PURCHASE CO., James A. Marcum INC., as Class C Certificateholders Vice Chairman and Chief Financial Officer (principal financial and By: /S/ MARK A. HESS accounting officer) Name: Mark A. Hess Title: Treasurer BANKERS TRUST (DELAWARE) Trustee CREDIT SUISSE FIRST BOSTON New York Branch, as Class A Agent and Class B Agent, acting as Class A By: /S/ JAMES H. STALLKAMP Certificateholder and Class B James H. Stallkamp Certificateholder President By: /S/ DENNIS J. KNITOWSKI Name: Dennis J. Knitowski Title: Associate By: /S/ ALBERTO ZONCA Name: Alberto Zonca Title: Associate EX-4.3 4 EXHIBIT 4.3 CLASS B-2 CERTIFICATE PURCHASE AGREEMENT Dated as of October 16, 1998 among SRI RECEIVABLES PURCHASE CO., INC., individually and as Transferor, SPECIALTY RETAILERS, INC., individually and as Originator and Servicer, THE CLASS B-2 PURCHASERS PARTIES HERETO, and CREDIT SUISSE FIRST BOSTON, NEW YORK BRANCH, Class B-2 Agent and Facility Agent -------------------- Relating to SRI Receivables Master Trust Series 1997-1 -------------------- TABLE OF CONTENTS PAGE SECTION 1. DEFINITIONS 2 1.1 Definitions 2 1.2 Other Definitional Provisions 6 SECTION 2. AMOUNT AND TERMS OF COMMITMENTS 6 2.1 Purchases 7 2.2 Termination of Commitments 8 2.3 Fees, Expenses, Payments, Etc 8 2.4 Requirements of Law 9 2.5 Taxes 10 2.6 Indemnification 13 SECTION 3. CONDITIONS PRECEDENT 15 3.1 Condition to Effectiveness 15 3.2 Condition to Additional Purchase 17 SECTION 4. REPRESENTATIONS AND WARRANTIES 18 4.1 Representations and Warranties of SRPC 18 4.2 Representations and Warranties of SRI 20 4.3 Representations and Warranties of the Class B-2 Agent, the Facility Agent and the Class B-2 Purchasers 22 SECTION 5. COVENANTS 22 5.1 Covenants of SRPC 22 SECTION 6. MUTUAL COVENANTS REGARDING CONFIDENTIALITY 25 6.1 Covenants of SRPC, Etc. 25 6.2 Covenants of Class B-2 Purchasers 26 SECTION 7. THE AGENTS 26 7.1 Appointment 26 7.2 Delegation of Duties 27 7.3 Exculpatory Provisions 27 7.4 Reliance by Agent 27 7.5 Notices 28 7.6 Non-Reliance on Agent and Other Class B-2 Purchasers 28 7.7 Indemnification 28 7.8 Agents in Their Individual Capacities 29 7.9 Successor Agent 29 SECTION 8. SECURITIES LAWS; TRANSFERS; TAX TREATMENT 30 8.1 Transfers of Class B-2 Certificates 30 8.2 Tax Characterization 33 SECTION 9. MISCELLANEOUS 33 9.1 Amendments and Waivers 33 9.2 Notices 34 9.3 No Waiver; Cumulative Remedies 35 9.4 Successors and Assigns 35 9.5 Successors to Servicer 35 9.6 Counterparts 36 9.7 Severability 37 9.8 Integration 37 9.9 Governing Law 37 9.10 Termination 37 9.11 Limited Recourse; No Proceedings 37 9.12 Survival of Representations and Warranties 38 9.13 Submission to Jurisdiction; Waivers 38 9.14 WAIVERS OF JURY TRIAL 39 LIST OF EXHIBITS EXHIBIT A Form of Investment Letter EXHIBIT B Form of Transfer Supplement CLASS B-2 CERTIFICATE PURCHASE AGREEMENT, dated as of October 16, 1998, by and among SRI RECEIVABLES PURCHASE CO., INC., a Delaware corporation ("SRPC"), individually and as Transferor (as defined in the Master Pooling and Servicing Agreement referred to below), SPECIALTY RETAILERS, INC., a Texas corporation ("SRI"), individually and as Servicer (as defined in the Master Pooling and Servicing Agreement referred to below), the CLASS B-2 PURCHASERS from time to time parties hereto (collectively, the "CLASS B-2 PURCHASERS") and CREDIT SUISSE FIRST BOSTON, a Swiss banking corporation acting through its New York Branch, as agent for the Class B-2 Purchasers (together with its successors in such capacity, the "CLASS B-2 AGENT") and as facility agent for the Class B-2 Purchasers, the Class A Purchasers and the Class B Purchasers, each as defined below (together with its successors in such capacity, the "FACILITY AGENT"). W I T N E S S E T H: WHEREAS, SRPC, as Transferor, SRI, as Servicer, and Bankers Trust (Delaware), a Delaware banking corporation, as trustee (together with its successors in such capacity, the "TRUSTEE"), are parties to a certain Amended and Restated Pooling and Servicing Agreement dated as of August 11, 1995, and amended as of May 30, 1996 and as of August 1, 1998 (as the same may from time to time be further amended or otherwise modified, the "MASTER POOLING AND SERVICING AGREEMENT"), pursuant to which the Transferor has created the SRI Receivables Master Trust (the "TRUST"), and to a Series 1997-1 Supplement thereto, dated as of December 3, 1997, as amended as of September 28, 1998 and as further amended and restated as set forth in the Amended and Restated Series 1997-1 Supplement, dated as of October 16, 1998 (the "RESTATED SUPPLEMENT"; such Series 1997-1 Supplement, as so amended and restated and as the same may from time to time be further amended or otherwise modified, the "SUPPLEMENT" and, together with the Master Pooling and Servicing Agreement, the "POOLING AND SERVICING AGREEMENT"); WHEREAS, the Trust has issued its Class A-1 Variable Funding Certificates, Series 1997-1 (the "CLASS A CERTIFICATES"), its Class B-1 Variable Funding Certificates, Series 1997-1 (the "CLASS B CERTIFICATES") and its Class C-1 Variable Funding Certificates, Series 1997-1 (the "CLASS C CERTIFICATES") pursuant to the Pooling and Servicing Agreement; WHEREAS, the Trust proposes to issue its Class B-2 Variable Funding Certificates, Series 1997-1 (the "CLASS B-2 CERTIFICATES" and, together with the Class A Certificates, the Class B Certificates and the Class C Certificates, the "SERIES 1997-1 CERTIFICATES"); and WHEREAS, the Class B-2 Purchasers are willing to purchase the Class B-2 Certificates on the Closing Date and from time to time thereafter to purchase Additional Class B-2 Invested Amounts (as defined in the Supplement) thereunder on the terms and conditions provided for herein; -1- NOW THEREFORE, in consideration of the mutual covenants herein contained, and other good and valuable consideration, the receipt and adequacy of which are hereby expressly acknowledged, the parties hereto agree as follows: I. SECTION DEFINITIONS A. DEFINITIONS. All capitalized terms used herein as defined terms and not defined herein shall have the meanings given to them in the Pooling and Servicing Agreement. Each capitalized term defined herein shall relate only to the Series 1997-1 and to no other Series of Investor Certificates issued by the Trust. "ADJUSTED BASE RATE" shall mean, for any day, a rate per annum equal to the sum of (i) the CSFB Corporate Base Rate in effect for such day, plus (ii) the Class B-2 Margin. "AGREEMENT" shall mean this Class B-2 Certificate Purchase Agreement, as amended, supplemented or otherwise modified from time to time. "ASSIGNEE" and "ASSIGNMENT" have the respective meanings specified in subsection 8.1(e) of this Agreement. "AVAILABLE COMMITMENT" shall mean, on any day for a Class B-2 Purchaser, such Class B-2 Purchaser's Commitment in effect on such day MINUS such Class B-2 Purchaser's Percentage Interest of the Class B-2 Principal Balance on such day. "CLASS A CERTIFICATES" has the meaning specified in the recitals to this Agreement. "CLASS A PURCHASE AGREEMENT" shall mean the Class A Certificate Purchase Agreement, dated as of December 3, 1997, among SRPC, individually and as Transferor, SRI, individually and as Servicer, the Class A Purchasers parties thereto, the Class A Agent referred to therein and the Facility Agent, as modified as of September 28, 1998 and amended as of the date hereof, and as further amended, modified or otherwise supplemented from time to time. "CLASS A PURCHASERS" has the meaning specified in the Class A Purchase Agreement. "CLASS B PURCHASE AGREEMENT" shall mean the Class B Certificate Purchase Agreement, dated as of December 3, 1997, among SRPC, individually and as Transferor, SRI, individually and as Servicer, the Class B Purchasers parties thereto, the Class B Agent referred to therein and the Facility Agent, as modified as of September 28, 1998 and amended as of the date hereof, and as further amended, modified or otherwise supplemented from time to time. -2- "CLASS B PURCHASERS" has the meaning specified in the Class B Purchase Agreement. "CLASS B-2 AGENT" has the meaning specified in the preamble to this Agreement. "CLASS B-2 CERTIFICATE RATE" has the meaning specified in subsection 2.1(f) of this Agreement. "CLASS B-2 CERTIFICATES" has the meaning specified in the recitals to this Agreement. "CLASS B-2 COMMITMENT FEE" shall mean the ongoing commitment fees payable to the Class B-2 Agent or the Class B-2 Purchasers in the amounts and on the dates set forth in the Class B-2 Fee Letter. "CLASS B-2 FEE LETTER" shall mean that certain letter agreement, designated therein as the Series 1997-1 Class B-2 Fee Letter and dated as of the date hereof, among the Class B-2 Agent, SRPC and SRI, as such letter agreement may be amended or otherwise modified from time to time. "CLASS B-2 MARGIN" has the meaning specified in the Class B-2 Fee Letter. "CLASS B-2 OWNERS" shall mean the Class B-2 Purchasers that are owners of record of the Class B-2 Certificates or, with respect to any Class B-2 Certificate held by the Class B-2 Agent hereunder as nominee on behalf of Class B-2 Purchasers, the Class B-2 Purchasers that are owners of the Class B-2 Invested Amount represented by such Class B-2 Certificate as reflected on the books of the Class B-2 Agent in accordance with this Agreement. "CLASS B-2 PURCHASE LIMIT" shall mean $10,000,000. "CLASS B-2 PURCHASER" has the meaning specified in the preamble to this Agreement. "CLASS B-2 REPAYMENT AMOUNT" shall mean the sum of all amounts payable with respect to (i) the Class B-2 Invested Amount, (ii) Class B-2 Interest and (iii) all amounts payable pursuant to Section 2.4 or 2.5 hereof. "CLASS C CERTIFICATES" has the meaning specified in the recitals to this Agreement. "CLOSING DATE" shall mean October 16, 1998. "CODE" shall mean the Internal Revenue Code of 1986, as amended. -3- "COMMITMENT" shall mean, for any Class B-2 Purchaser, the maximum amount of such Class B-2 Purchaser's commitment to purchase a portion of the Class B-2 Invested Amount, as set forth opposite such Class B-2 Purchaser's signature to this Agreement or the Transfer Supplement by which such Class B-2 Purchaser became a party to this Agreement or assumed the Commitment (or a portion thereof) of another Class B-2 Purchaser, as such amount may be adjusted from time to time pursuant to Transfer Supplement(s) executed by such Class B-2 Purchaser and its Assignee(s) and delivered pursuant to Section 8.1 of this Agreement or pursuant to Section 2.2 of this Agreement.. "COMMITMENT EXPIRATION DATE" shall mean December 24, 1998. "COMMITMENT PERCENTAGE" shall mean, for a Class B-2 Purchaser, such Class B-2 Purchaser's Commitment as a percentage of the aggregate Commitments of all Class B-2 Purchasers. "EXCLUDED TAXES" has the meaning specified in subsection 2.5(a) of this Agreement. "GOVERNMENTAL AUTHORITY" shall mean any nation or government, any state or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. "GRANITE" shall mean Granite National Bank, N.A., a national banking association, which is a subsidiary of Stage. "INDEMNITEE" has the meaning specified in subsection 2.6(a) of this Agreement. "INDEMNITOR" has the meaning specified in subsection 2.6(a) of this Agreement. "INVESTING OFFICE" shall mean initially, the office of any Class B-2 Purchaser (if any) designated as such, in the case of the initial Class B-2 Purchaser, as set forth opposite its signature to this Agreement or, in the case of an Assignee, in the related Transfer Supplement, and thereafter, such other office of such Class B-2 Purchaser or such Assignee as may be designated in writing to the Class B-2 Agent, the Transferor, the Servicer and the Trustee by such Class B-2 Purchaser or Assignee. "INVESTMENT LETTER" has the meaning specified in subsection 8.1(a) of this Agreement. "MASTER POOLING AND SERVICING AGREEMENT" has the meaning specified in the recitals to this Agreement. -4- "PARTICIPANT" has the meaning specified in subsection 8.1(d) of this Agreement. "PARTICIPATION" has the meaning specified in subsection 8.1(d) of the Agreement. "PERCENTAGE INTEREST" shall mean, for a Class B-2 Purchaser on any day, the percentage equivalent of (a) the sum of (i) the portion of the Class B-2 Initial Invested Amount (if any) purchased by such Class B-2 Purchaser, PLUS (ii) the aggregate Additional Class B-2 Invested Amounts (if any) purchased by such Class B-2 Purchaser prior to such day pursuant to Section 6.15 of the Pooling and Servicing Agreement, PLUS (iii) any portion of the Class B-2 Principal Balance acquired by such Class B-2 Purchaser as an Assignee from another Class B-2 Purchaser pursuant to a Transfer Supplement executed and delivered pursuant to Section 8.1 of this Agreement, MINUS (iv) the aggregate amount of principal payments made to such Class B-2 Purchaser prior to such day, MINUS (v) any portion of the Class B-2 Principal Balance assigned by such Class B-2 Purchaser to an Assignee pursuant to a Transfer Supplement executed and delivered pursuant to Section 8.1 of this Agreement, DIVIDED BY (b) the aggregate Class B-2 Principal Balance on such day. "POOLING AND SERVICING AGREEMENT" has the meaning specified in the recitals to this Agreement. "PURCHASE DATE" shall mean the Closing Date and each Business Day on which the purchase of an Additional Class B-2 Invested Amount is to occur in accordance with Section 6.15 of the Pooling and Servicing Agreement and Section 2.1 hereof. "RECEIVABLES TRANSFER AGREEMENT" shall mean the Receivables Transfer Agreement, dated as of August 1, 1998, between SRI, as purchaser, and Granite, as transferor, as the same may from time to time be amended or otherwise modified. "REGULATORY CHANGE" shall mean, as to each Class B-2 Purchaser, any change occurring after the date of the execution and delivery of this Agreement or, in the case of an Assignee, of the Transfer Supplement by which it became party to this Agreement and, as to each Participant, any change occurring after the date on which its Participation became effective, in any (or the adoption after such date of any new): (i) United States Federal or state law or foreign law applicable to such Class B-2 Purchaser or Participant; or (ii) regulation, interpretation, directive, guideline or request (whether or not having the force of law) applicable to such Class B-2 Purchaser or Participant of any court or other judicial authority or any Governmental Authority charged with the interpretation or administration of any law referred to in clause (i) or of any fiscal, monetary or other Governmental Authority or central bank having jurisdiction over such Class B-2 Purchaser or Participant. -5- "RELATED DOCUMENTS" shall mean, collectively, this Agreement (including the Class B-2 Fee Letter and all Transfer Supplements), the Class A Purchase Agreement, the Class B Purchase Agreement, the Master Pooling and Servicing Agreement, the Supplement, the Series 1997-1 Certificates, the Receivables Purchase Agreement and the Receivables Transfer Agreement. "REQUIRED CLASS B-2 PURCHASERS" shall mean, at any time, Class B-2 Purchasers having Commitments aggregating greater than 66-2/3% of the aggregate Commitments of all Class B-2 Purchasers or, if the Commitments have terminated, having Percentage Interests aggregating greater than 66-2/3%. "REQUIREMENT OF LAW" shall mean, as to any Person, any law, treaty, rule or regulation, or determination of an arbitrator or Governmental Authority, in each case applicable to or binding upon such Person or to which such Person is subject, whether federal, state or local (including usury laws, the Federal Truth in Lending Act and Regulation Z and Regulation B of the Board of Governors of the Federal Reserve System). "RESTATED SUPPLEMENT" has the meaning specified in the recitals to this Agreement. "RISK RATE" shall mean, for any day, a rate per annum equal to the sum of (i) the Adjusted Base Rate in effect for such day, plus (ii) 2.00%. "SECURITIES ACT" shall mean the Securities Act of 1933, as amended. "SERIES 1997-1 CERTIFICATES" has the meaning specified in the recitals to this Agreement. "SRI" has the meaning specified in the preamble to this Agreement and, as used herein (except to the extent that the context otherwise requires), shall mean SRI in its individual capacity (including its capacity as Originator). "STAGE" shall mean Stage Stores, Inc., a Delaware corporation which is the parent of SRI. "TAXES" has the meaning specified in subsection 2.5(a) of this Agreement. "TERMINATION DATE" shall mean the first to occur of (i) the Commitment Expiration Date or (ii) the Amortization Period Commencement Date. "TERMINATION EVENT" shall mean the occurrence of a Trust Pay Out Event, a Series 1997-1 Pay Out Event or a Servicer Default, or the occurrence of an event or condition which would be a Trust Pay Out Event, a Series 1997-1 Pay Out Event or a -6- Servicer Default but for a waiver of or failure to declare or determine such event by the Certificateholders or the Trustee. "TRANSFER" has the meaning specified in subsection 8.1(c) of this Agreement. "TRANSFEREE" has the meaning specified in subsection 8.1(c) of this Agreement. "TRANSFER SUPPLEMENT" has the meaning specified in subsection 8.1(e) of this Agreement. "TRUST" has the meaning specified in the recitals to this Agreement. "TRUSTEE" has the meaning specified in the recitals to this Agreement. "UTILIZATION FEE" has the meaning specified in the Class B-2 Fee Letter. "WRITTEN" or "IN WRITING" (and other variations thereof) shall mean any form of written communication or a communication by means of telex, telecopier device, telegraph or cable. A. OTHER DEFINITIONAL PROVISIONS. (a) Unless otherwise specified therein, all terms defined in this Agreement shall have the defined meanings when used in any certificate or other document made or delivered pursuant hereto. (b) The words "hereof", "herein", and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement; and Section, subsection and Exhibit references are to this Agreement, unless otherwise specified. The words "including" and "include" shall be deemed to be followed by the words "without limitation". I. SECTION AMOUNT AND TERMS OF COMMITMENTS A. PURCHASES. (a) On and subject to the terms and conditions of this Agreement, and in consideration of the Commitment of the Class B-2 Purchasers set forth herein, the Transferor agrees to sell to the Class B-2 Purchasers, and each Class B-2 Purchaser, severally, agrees to purchase its Commitment Percentage of, the Class B-2 Certificates on the Closing Date. The Class B-2 Initial Invested Amount shall be $0. The Class B-2 Purchasers hereby direct that the Class B-2 Certificates be registered in the name of the Class B-2 Agent, as nominee on behalf of the Class B-2 Purchasers from time to time hereunder. (b) On and subject to the terms and conditions of this Agreement and prior to the Termination Date, each Class B-2 Purchaser, severally, agrees to purchase its Commitment Percentage of any Additional Class B-2 Invested Amount offered for -7- purchase pursuant to Section 6.15 of the Pooling and Servicing Agreement, in each case for a purchase price equal to the Additional Class B-2 Invested Amount so purchased; PROVIDED that in no event shall a Class B-2 Purchaser be required on any date to purchase an Additional Class B-2 Invested Amount exceeding its Available Commitment, determined prior to giving effect to such purchase. Such purchase price shall be made available to the Transferor, subject to the satisfaction of the conditions specified in Section 3.2 hereof, at or prior to 11:00 a.m. New York City time on the applicable Purchase Date by deposit of immediately available funds to an account or accounts specified in writing by the Transferor to the Class B-2 Agent. (c) Each purchase of any Additional Class B-2 Invested Amount on the applicable Purchase Date shall be made on prior notice from the Transferor received by the Class B-2 Agent not later than 2:00 p.m. New York City time on the Business Day immediately preceding such Purchase Date. Each such notice shall be irrevocable and shall specify (i) the aggregate Additional Class B-2 Invested Amount to be purchased (which shall be an amount equal to $500,000 or an integral multiple of $100,000 in excess of such amount), (ii) the applicable Purchase Date (which shall be a Business Day), and (iii) instructions as to the deposit of the proceeds of the purchase. The Class B-2 Agent shall promptly forward a copy of such notice to each Class B-2 Purchaser. Unless the Required Class B-2 Purchasers and the Class B-2 Agent shall otherwise consent, there may not be more than two (2) Purchase Dates in any calendar week. (d) In no event may any Additional Class B-2 Invested Amount be offered for purchase hereunder or under Section 6.15 of the Pooling and Servicing Agreement, nor shall any Class B-2 Purchaser be obligated to purchase any Additional Class B-2 Invested Amount, to the extent that such Additional Class B-2 Invested Amount would exceed the aggregate Available Commitments. (e) The Class B-2 Certificates shall be paid as provided in the Pooling and Servicing Agreement, and the Class B-2 Agent shall allocate to the Class B-2 Owners each payment in respect of the Class B-2 Certificates received by the Class B-2 Agent in its capacity as Class B-2 Certificateholder as provided therein. Payments in reduction of the Class B-2 Principal Balance shall be applied to Class B-2 Owners pro rata based on their respective Percentage Interests of the Class B-2 Principal Balance, or in any such case in such other proportions as each affected Class B-2 Purchaser may agree upon in writing from time to time with the Facility Agent, the Class B-2 Agent, SRPC and SRI. (f) For purposes of the Supplement, a portion of the Class B-2 Principal Balance equal to the Class B-2 Invested Amount shall bear interest on each day at a rate per annum equal to the Adjusted Base Rate for such day, and the remaining portion of the Class B-2 Principal Balance shall bear interest on each such day at a rate per annum equal to the Risk Rate for such day. For purposes of the Supplement, the "CLASS B-2 CERTIFICATE RATE" shall mean, for each day, the weighted average of the Adjusted Base Rate and the Risk Rate for such day (based on said respective portions of the Class B-2 Principal Balance), and, for each Interest Accrual Period, the average of the Class B-2 Certificate -8- Rates for each day during such Interest Accrual Period. Such calculations of interest shall be based on the actual number of days elapsed in a year having 365 or 366 days (as the case may be). A. TERMINATION OF COMMITMENTS. On the Termination Date, all Commitments shall be reduced to zero and terminate. A. FEES, EXPENSES, PAYMENTS, ETC. (a) SRPC agrees to pay to the Class B-2 Agent for the account of the Class B-2 Purchasers the Class B-2 Commitment Fee and other amounts set forth in the Class B-2 Fee Letter at the times specified therein. (b) SRPC further agrees to pay within 30 days following receipt of an invoice therefor to the Class B-2 Agent, the Facility Agent and the initial Class B-2 Purchasers all reasonable costs and expenses in connection with the preparation, execution, delivery, initial syndication, administration (including any requested amendments, waivers or consents of any of the Related Documents) of this Agreement, and the other documents to be delivered hereunder or in connection herewith, including the reasonable fees and out-of-pocket expenses of counsel for the Class B-2 Agent, the Facility Agent and each of the initial Class B-2 Purchasers with respect thereto. (c) SRI agrees to pay to the Class B-2 Agent, the Facility Agent and each Class B-2 Purchaser, promptly following presentation of an invoice therefor, all reasonable costs and expenses (including reasonable fees and expenses of counsel), if any, in connection with the enforcement of any of the Related Documents, and the other documents delivered thereunder or in connection therewith. (d) SRI further agrees to pay on demand any and all stamp, transfer and other taxes (other than Taxes covered by Section 2.5) and governmental fees payable in connection with the execution, delivery, filing and recording of any of the Related Documents or the other documents and agreements to be delivered hereunder and thereunder or otherwise in connection with the issuance of Series 1997-1, and agrees to save each Class B-2 Purchaser and the Class B-2 Agent and the Facility Agent harmless from and against any liabilities with respect to or resulting from any delay in paying or any omission to pay such taxes and fees. (e) Periodic fees or other periodic amounts payable hereunder shall be calculated, unless otherwise specified in the Class B-2 Fee Letter, on the basis of a 360-day year and for the actual days elapsed. (f) All payments to be made hereunder or under the Supplement, whether on account of principal, interest, fees or otherwise, shall be made without setoff or counterclaim and shall be made prior to 2:30 p.m., New York City time, on the due date thereof to the Class B-2 Agent's account specified in subsection 9.2(b) hereof, in United States dollars and in immediately available funds. Payments received by the Class B-2 Agent after 2:30 p.m. New York City time shall be deemed to have been made on the next Business Day. Notwithstanding anything herein to the contrary, if any payment due hereunder becomes due and payable on a day other than a Business Day, the payment -9- date thereof shall be extended to the next succeeding Business Day and interest shall accrue thereon at the applicable rate during such extension. To the extent that (i) the Trustee, SRPC, SRI, the Transferor or the Servicer makes a payment to the Class B-2 Agent, the Facility Agent or a Class B-2 Purchaser or (ii) the Class B-2 Agent, the Facility Agent or a Class B-2 Purchaser receives or is deemed to have received any payment or proceeds for application to an obligation, which payment or proceeds or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside or required to be repaid to a trustee, receiver or any other party under any bankruptcy or insolvency law, state or Federal law, common law, or for equitable cause, then, to the extent such payment or proceeds are set aside, the obligation or part thereof intended to be satisfied shall be revived and continue in full force and effect, as if such payment or proceeds had not been received or deemed received by the Class B-2 Agent, the Facility Agent or the Class B-2 Purchaser, as the case may be. (g) The obligations of SRPC under this Section 2.3 are subject to subsection 9.11(a) hereof. 1. REQUIREMENTS OF LAW. In the event that any Class B-2 Purchaser shall have reasonably determined that any Regulatory Change shall: (i) subject such Class B-2 Purchaser to any tax of any kind whatsoever with respect to this Agreement, its Commitment or its beneficial interest in the Class B-2 Certificates, or change the basis of taxation of payments in respect thereof (except for Taxes covered by Section 2.5 and taxes included in the definition of Excluded Taxes in subsection 2.5(a) and changes in the rate of tax on the overall net income of such Class B-2 Purchaser); or (ii) impose, modify or hold applicable any reserve, special deposit, compulsory loan or similar requirement against assets held by, deposits or other liabilities in or for the account of, advances, loans or other extensions of credit by, or any other acquisition of funds by, such Class B-2 Purchaser; and the result of any of the foregoing is to increase the cost to such Class B-2 Purchaser, by an amount which such Class B-2 Purchaser deems to be material, of maintaining its Commitment or its interest in the Class B-2 Certificates or to reduce any amount receivable in respect thereof, THEN, in any such case, after submission by such Class B-2 Purchaser to the Class B-2 Agent of a written request therefor and the submission by the Class B-2 Agent to the Transferor and the Servicer of such written request therefor, the Transferor (subject to subsection 9.11(a) hereof) shall pay to the Class B-2 Agent for the account of such Class B-2 Purchaser any additional amounts necessary to compensate such Class B-2 Purchaser for such increased cost or reduced amount receivable, together with interest on each such amount from the Distribution Date following receipt by the Transferor of such request for compensation under this subsection 2.4(a), if such request is received by the Transferor at least five Business Days prior to the Determination Date related to such Distribution Date, and otherwise from the following Distribution Date, -10- until payment in full thereof (after as well as before judgment) at the Risk Rate in effect from time to time. 1. In the event that any Class B-2 Purchaser shall have determined that any Regulatory Change regarding capital adequacy has the effect of reducing the rate of return on such Class B-2 Purchaser's capital or on the capital of any corporation controlling such Class B-2 Purchaser as a consequence of its obligations hereunder or its maintenance of its Commitment or its interest in the Class B-2 Certificates to a level below that which such Class B-2 Purchaser or such corporation could have achieved but for such Regulatory Change (taking into consideration such Class B-2 Purchaser's or such corporation's policies with respect to capital adequacy) by an amount deemed by such Class B-2 Purchaser to be material, THEN, from time to time, after submission by such Class B-2 Purchaser to the Class B-2 Agent of a written request therefor and submission by the Class B-2 Agent to the Transferor and the Servicer of such written request therefor, the Transferor (subject to subsection 9.11(a) hereof) shall pay to the Class B-2 Agent for the account of such Class B-2 Purchaser such additional amount or amounts as will compensate such Class B-2 Purchaser for such reduction, together with interest on each such amount from the Distribution Date following receipt by the Transferor of such request for compensation under this subsection 2.4(b), if such request is received by the Transferor at least five Business Days prior to the Determination Date related to such Distribution Date, and otherwise from the following Distribution Date, until payment in full thereof (after as well as before judgment) at the Risk Rate in effect from time to time. 1. Each Class B-2 Purchaser agrees that it shall use its reasonable efforts to reduce or eliminate any claim for compensation pursuant to subsections 2.4(a) and 2.4(b), including but not limited to designating a different Investing Office for its Class B-2 Certificates (or any interest therein) if such designation will avoid the need for, or reduce the amount of, any increased amounts referred to in subsection 2.4(a) or 2.4(b) and will not, in the reasonable opinion of such Class B-2 Purchaser, be unlawful or otherwise disadvantageous to such Class B-2 Purchaser or inconsistent with its policies or result in an unreimbursed cost or expense to such Class B-2 Purchaser or in an increase in the aggregate amount payable under both subsections 2.4(a) and 2.4(b). 1. Each Class B-2 Purchaser claiming increased amounts described in subsection 2.4(a) or 2.4(b) will furnish to the Class B-2 Agent (together with its request for compensation) a certificate prepared in good faith setting forth the basis and the calculation of the amount (in reasonable detail) of each request by such Class B-2 Purchaser for any such increased amounts referred to in subsection 2.4(a) or 2.4(b). Any such certificate shall be conclusive absent manifest error, and the Class B-2 Agent shall deliver a copy thereof to the Transferor and the Servicer. Failure on the part of any Class B-2 Purchaser to demand compensation for any amount pursuant to subsection 2.4(a) or 2.4(b) with respect to any period shall not constitute a waiver of such Class B-2 Purchaser's right to demand compensation with respect to such period. -11- (a) TAXES. All payments made to the Class B-2 Purchasers, the Facility Agent or the Class B-2 Agent under this Agreement and the Pooling and Servicing Agreement (including all amounts payable with respect to the Class B-2 Certificates) shall, to the extent allowed by law, be made free and clear of, and without deduction or withholding for or on account of, any present or future income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now or hereafter imposed, levied, collected, withheld or assessed by any Governmental Authority (collectively, "TAXES"), excluding (i) income taxes (including branch profit taxes, minimum taxes and taxes computed under alternative methods, at least one of which is based on or measured by net income), franchise taxes (imposed in lieu of income taxes), or any other taxes based on or measured by the net income of the Class B-2 Purchaser, the Facility Agent or the Class B-2 Agent (as the case may be) or the gross receipts or income of the Class B-2 Purchaser, the Facility Agent or the Class B-2 Agent (as the case may be); (ii) any Taxes that would not have been imposed but for the failure of such Class B-2 Purchaser, the Facility Agent or the Class B-2 Agent, as applicable, to provide and keep current (to the extent legally able) any certification or other documentation required to qualify for an exemption from, or reduced rate of, any such Taxes or required by this Agreement to be furnished by such Class B-2 Purchaser, the Facility Agent or the Class B-2 Agent, as applicable; and (iii) any Taxes imposed as a result of a change by any Class B-2 Purchaser of the Investing Office (other than changes mandated by this Agreement, including subsection 2.4(c) hereof, or required by law) (all such excluded taxes being hereinafter called "EXCLUDED TAXES"). If any Taxes, other than Excluded Taxes, are required to be withheld from any amounts payable to a Class B-2 Purchaser, the Facility Agent or the Class B-2 Agent hereunder or under the Pooling and Servicing Agreement, THEN after submission by any Class B-2 Purchaser to the Class B-2 Agent (in the case of an amount payable to a Class B-2 Purchaser) and by the Facility Agent or the Class B-2 Agent to the Transferor and the Servicer of a written request therefor, the amounts so payable to such Class B-2 Purchaser, the Facility Agent or the Class B-2 Agent, as applicable, shall be increased and the Transferor shall be liable to pay to the Class B-2 Agent for the account of the Facility Agent or such Class B-2 Purchaser or for its own account, as applicable, the amount of such increase) to the extent necessary to yield to such Class B-2 Purchaser, the Facility Agent or the Class B-2 Agent, as applicable (after payment of all such Taxes) interest or any such other amounts payable hereunder or thereunder at the rates or in the amounts specified in this Agreement and the Pooling and Servicing Agreement; provided, HOWEVER, that the amounts so payable to such Class B-2 Purchaser, the Facility Agent or the Class B-2 Agent shall not be increased pursuant to this subsection 2.5(a) if such requirement to withhold results from the failure of such Person to comply with subsection 2.5(c) hereof. Whenever any Taxes are payable on or with respect to amounts distributed to a Class B-2 Purchaser, the Facility Agent or the Class B-2 Agent, as promptly as possible thereafter the Servicer shall send to the Class B-2 Agent, on behalf of such Class B-2 Purchaser (if applicable), a certified copy of an original official receipt showing payment thereof. If the Trustee, upon the direction of the Servicer, fails to pay any Taxes when due to the appropriate taxing authority or fails to remit to the Class B-2 Agent, on behalf of itself or the Facility Agent or such Class B-2 Purchaser (as applicable), the required receipts or other required documentary evidence, subject to subsection 9.11(a), the Transferor shall pay to the -12- Class B-2 Agent on behalf of such Class B-2 Purchaser or the Facility Agent or for its own account, as applicable, any incremental taxes, interest or penalties that may become payable by such Class B-2 Purchaser, the Facility Agent or the Class B-2 Agent, as applicable, as a result of any such failure. (a) A Class B-2 Purchaser or the Facility Agent claiming increased amounts under subsection 2.5(a) for Taxes paid or payable by such Class B-2 Purchaser or the Facility Agent, as applicable, will furnish to the Class B-2 Agent a certificate prepared in good faith setting forth the basis and amount of each request by such Class B-2 Purchaser or the Facility Agent, as applicable, for such Taxes, and the Class B-2 Agent shall deliver a copy thereof to the Transferor and the Servicer. The Class B-2 Agent claiming increased amounts under subsection 2.5(a) for its own account for Taxes paid or payable by the Class B-2 Agent will furnish to the Transferor and the Servicer a certificate prepared in good faith setting forth the basis and amount of each request by the Class B-2 Agent for such Taxes. Any such certificate of a Class B-2 Purchaser, the Facility Agent or the Class B-2 Agent shall be conclusive absent manifest error. Failure on the part of any Class B-2 Purchaser, the Facility Agent or the Class B-2 Agent to demand additional amounts pursuant to subsection 2.5(a) with respect to any period shall not constitute a waiver of the right of such Class B-2 Purchaser, the Facility Agent or the Class B-2 Agent, as the case may be, to demand compensation with respect to such period. All such amounts shall be due and payable to the Class B-2 Agent on behalf of the Facility Agent or such Class B-2 Purchaser or for its own account, as the case may be, on the Distribution Date following receipt by the Transferor of such certificate, if such certificate is received by the Transferor at least five Business Days prior to the Determination Date related to such Distribution Date and otherwise shall be due and payable on the following Distribution Date (or, if earlier, on the Series 1997-1 Termination Date). (a) Each Class B-2 Purchaser and each Participant holding an interest in Class B-2 Certificates agrees that prior to the date on which the first interest or fee payment hereunder is due thereto, it will deliver to the Transferor, the Servicer, the Trustee and the Class B-2 Agent (i) if such Class B-2 Purchaser or Participant is not incorporated under the laws of the United States or any State thereof, two duly completed copies of the U.S. Internal Revenue Service Form 4224 or successor applicable forms required to evidence that the Class B-2 Purchaser's or Participant's income from this Agreement or the Class B-2 Certificates is "effectively connected" with the conduct of a trade or business in the United States, and (ii) a duly completed U.S. Internal Revenue Service Form W-8 or W-9 or successor applicable or required forms. Each Class B-2 Purchaser or Participant holding an interest in Class B-2 Certificates also agrees to deliver to the Transferor, the Servicer, the Trustee and the Class B-2 Agent two further copies of such Form 4224 and Form W-8 or W-9, or such successor applicable forms or other manner of certification, as the case may be, on or before the date that any such form expires or becomes obsolete or after the occurrence of any event requiring a change in the most recent form previously delivered by it hereunder, and such extensions or renewals thereof as may reasonably be requested by the Servicer or the Class B-2 Agent, unless in any such case, solely as a result of a change in treaty, law or regulation occurring prior to -13- the date on which any such delivery would otherwise be required, and assuming that Section 1446 of the Code does not apply, the Class B-2 Purchaser is no longer eligible to deliver the then-applicable form set forth above and so advises the Servicer and the Class B-2 Agent. Each initial Class B-2 Purchaser certifies, represents and warrants as of the effective date of this Agreement, and each Assignee and each Participant shall certify, represent and warrant as a condition of acquiring its Assignment or Participation as of the effect date of the Transfer Supplement to which it is a party or of such Participation, as the case may be, that (x) in the case of Form 4224 (if applicable), its income from this Agreement or the Class B-2 Certificates is effectively connected with a United States trade or business and (y) that it is entitled to an exemption from United States backup withholding tax. Further, each Class B-2 Purchaser and each Participant acquiring an interest in a Class B-2 Certificate covenants that for so long as it shall own Class B-2 Certificates or such Participation, such Class B-2 Certificates or Participation shall be held in such manner that the income therefrom shall be effectively connected with the conduct of a United States trade or business. 1. INDEMNIFICATION. SRI and SRPC (each such Person being referred to as an "INDEMNITOR"), jointly and severally, agree to indemnify and hold harmless the Class B-2 Agent, the Facility Agent and each Class B-2 Purchaser and any directors, officers, employees, agents, attorneys, auditors or accountants of the Class B-2 Agent, the Facility Agent or Class B-2 Purchaser (each such Person being referred to as an "INDEMNITEE") from and against any and all claims, damages, losses, liabilities, costs or expenses whatsoever (including reasonable fees and expenses of legal counsel) which such Indemnitee may incur (or which may be claimed against such Indemnitee) arising out of, by reason of or in connection with the execution and delivery of, or payment or other performance under, or the failure to make payments or perform under, any Related Document or the issuance of the Series 1997-1 Certificates (including in connection with the preparation for defense of any investigation, litigation or proceeding arising out of, related to or in connection with such execution, delivery, payment, performance or issuance), except (i) to the extent that any such claim, damage, loss, liability, cost or expense is shall be caused by the willful misconduct, bad faith, recklessness or gross negligence of such Indemnitee, (ii) to the extent that any such claim, damage, loss, liability, cost or expense is covered by subsection 2.3(c) or Section 2.4 or 2.5 hereof or relates to any Excluded Taxes, (iii) to the extent that any such claim, damage, loss, liability, cost or expense relates to disclosure made by the Class B-2 Agent or a Class B-2 Purchaser in connection with an Assignment or Participation pursuant to Section 8.1 of this Agreement which disclosure is not based on information given to the Class B-2 Agent or such Class B-2 Purchaser by or on behalf of SRPC, SRI, the Transferor or the Servicer or any affiliate thereof or by or on behalf of the Trustee or (iv) to the extent that such claim, damage, loss, liability, cost or expense shall be caused by a charge off of Receivables. The foregoing indemnity shall include any claims, damages, losses, liabilities, costs or expenses to which any such Indemnitee may become subject under Securities Act, the Securities Exchange Act of 1934, as amended, the Investment Company Act of 1940, as amended, or other federal or state law or regulation arising out of or based upon any untrue statement or alleged untrue statement of a material fact in any disclosure document relating to the Series 1997-1 Certificates or any amendments -14- thereof or supplements thereto (other than statements provided by the Indemnitee expressly for inclusion therein) or arising out of, or based upon, the omission or the alleged omission to state a material fact necessary to make the statements therein or any amendment thereof or supplement thereto, in light of the circumstances in which they were made, not misleading (other than with respect to statements provided by the Indemnitee expressly for inclusion therein). 1. Promptly after the receipt by an Indemnitee of a notice of the commencement of any action against an Indemnitee, such Indemnitee will notify the Class B-2 Agent and the Class B-2 Agent will, if a claim in respect thereof is to be made against an Indemnitor pursuant to subsection 2.6(a), notify such Indemnitor in writing of the commencement thereof; but the omission so to notify such party will not relieve such party from any liability which it may have to such Indemnitee pursuant to the preceding paragraph. If any such action is brought against an Indemnitee and it notifies an Indemnitor of its commencement, such Indemnitor will be entitled to participate in and, to the extent that it so elects by delivering written notice to the Indemnitee promptly after receiving notice of the commencement of the action from the Indemnitee to assume the defense of any such action, with counsel mutually satisfactory to such Indemnitor and each affected Indemnitee. After receipt of such notice by an Indemnitor from an Indemnitee, such Indemnitor will not be liable to such Indemnitee for any legal or other expenses except as provided below and except for the reasonable costs of investigation subsequently incurred by the Indemnitee in connection with the defense of such action. Each Indemnitee will have the right to employ its own counsel in any such action, but the fees, expenses and other charges of such counsel will be at the expense of such Indemnitee unless (i) the employment of such counsel by such Indemnitee has been authorized in writing by such Indemnitor, (ii) such Indemnitor shall have failed to assume the defense and employ counsel, (iii) the named parties to any such action or proceeding (including any impleaded parties) include both such Indemnitee and either an Indemnitor or another person or entity that may be entitled to indemnification from an Indemnitor (by virtue of this Section 2.6 or otherwise) and such Indemnitee shall have been advised by counsel that there may be one or more legal defenses available to such Indemnitee which are different from or additional to those available to an Indemnitor or such other party or shall otherwise have reasonably determined that the co-representation would present such counsel with a conflict of interest (in which case the Indemnitor will not have the right to direct the defense of such action on behalf of the Indemnitee). In any such case, the reasonable fees, disbursements and other charges of counsel will be at the expense of the Indemnitor; it being understood that in no event shall the Companies be liable for the fees, disbursements and other charges of more than two counsel (in addition to any local counsel) for all Indemnitees in connection with any one action or separate but similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances. An Indemnitor shall not be liable for any settlement of any such action, suit or proceeding effected without its written consent, which shall not be unreasonably withheld, but if settled with the written consent of an Indemnitor or if there shall be a final judgment for the plaintiff in any such action, suit or proceeding, such Indemnitor agrees to indemnify and hold harmless any Indemnitee to the extent set forth in this letter from and against any loss, claim, damage, liability or expense by reason of -15- such settlement or judgement. Notwithstanding the immediately preceding sentence, if in any case where the fees and expenses of counsel are at the expense of an Indemnitor and an Indemnitee shall have requested such Indemnitor to reimburse such Indemnitee for such fees and expenses of counsel as incurred, such Indemnitor agrees that it shall be liable for any settlement of any action effected without its written consent if (i) such settlement is entered into more than ten business days after the receipt by such Indemnitor of the aforesaid request and (ii) such Indemnitor shall have failed to reimburse the Indemnitee in accordance with such request for reimbursement prior to the date of such settlement. No Indemnitor shall, without the prior written consent of an Indemnitee, settle or compromise or consent to the entry of any judgment in any pending or threatened claim, action, suit or proceeding in respect of which indemnification may be sought hereunder, if such settlement, compromise or consent includes an admission of culpability or wrong-doing on the part of such Indemnitee or the entry or an order, injunction or other equitable or nonmonetary relief (including any administrative or other sanctions or disqualifications) against such Indemnitee or if such settlement, compromise or consent does not includes an unconditional release of such Indemnitee from all liability arising out of such claim, action, suit or proceeding. 1. Subject to the limitations on liability set forth in Section 8.3 of the Pooling and Servicing Agreement, the Servicer shall indemnify and hold harmless each Indemnitee from and against any and all claims, damages, losses, liabilities, costs or expenses whatsoever which such Indemnitee may incur (or which may be claimed against such Indemnitee) by reason of any acts or omissions or alleged acts or omissions of the Servicer hereunder or with respect to activities of the Trust or the Trustee for which the Servicer is responsible under the Pooling and Servicing Agreement or hereunder, subject, with respect to the obligations of the Servicer in respect of activities of the Trust or the Trustee for which the Servicer is responsible under the Pooling and Servicing Agreement, to the provisos set forth in Section 8.4 of the Pooling and Servicing Agreement. Subject to Section 9.5, any Successor Servicer, by accepting its appointment pursuant to the Pooling and Servicing Agreement, (i) shall agree to be bound by the terms, covenants and conditions contained herein applicable to the Servicer and to be subject to the duties and obligations of the Servicer hereunder, (ii) as of the date of its acceptance, shall be deemed to have made with respect to itself the representations and warranties made by the SRI in subsections 4.2(a) through (f) (in the case of subsection 4.2(a), with appropriate factual changes) and (iii) shall agree to indemnify and hold harmless any Indemnitee from and against any and all claims, damages, losses, liabilities, costs or expenses (including reasonable fees and expenses of counsel) whatsoever which any such Indemnitee may incur (or which may be claimed against such Indemnitee) by reason of any acts or omissions or alleged acts or omissions of the Servicer hereunder or with respect to activities of the Trust or the Trustee for which the Servicer is responsible under the Pooling and Servicing Agreement or hereunder. 1. Subject to the subsection 9.11(a) hereof in the case of the Transferor, the obligations of SRPC, SRI, the Transferor and the Servicer under this Agreement shall be absolute, unconditional and irrevocable and shall be performed strictly in accordance with the terms of this Agreement. Without limiting the foregoing, -16- neither the lack of validity or enforceability of, or any modification to, any Related Document nor the existence of any claim, setoff, defense or other right which SRPC, SRI, the Trust, the Trustee, on behalf of the Trust, the Transferor and the Servicer may have at any time against each other, the Class B-2 Agent, the Facility Agent, any Class B-2 Purchaser or any other Person, whether in connection with any Related Document or any unrelated transactions, shall constitute a defense to such obligations. I. SECTION CONDITIONS PRECEDENT A. CONDITION TO EFFECTIVENESS. The following shall be conditions precedent to the effectiveness of the Commitment of each Class B-2 Purchaser hereunder: 1. the representations and warranties of SRPC and SRI set forth or referred to in Section 4.1 and 4.2 hereof shall be true and correct in all material respects on the Closing Date as though made on and as of the Closing Date, and no event which of itself or with the giving of notice or lapse of time, or both, would constitute a Termination Event shall have occurred and be continuing on the Closing Date; 2. the Restated Supplement shall have been duly executed and delivered by all parties thereto and shall be in form and substance satisfactory to the Class B-2 Purchasers; 1. the Master Pooling and Servicing Agreement, the Receivables Purchase Agreement and the Receivables Transfer Agreement shall not have been amended or otherwise modified, other than as disclosed to the Class B-2 Purchasers in writing prior to the Closing Date; 1. the sum of the Class B Invested Amount and the Class C Invested Amount shall be at least equal to 25% of the Invested Amount, and the Class C Invested Amount shall be at least equal to the higher of 17.5% of the Invested Amount and 5% of the highest Invested Amount during the immediately preceding 180 days; 1. [reserved]; 1. arrangements satisfactory to the initial Class B-2 Purchasers and the Class B-2 Agent shall have been made for the payment of amounts required to be paid by SRPC pursuant to Section 2.3(b) with respect to the preparation, execution, delivery and initial syndication of this Agreement and the other documents to be delivered hereunder or in connection herewith; 1. [reserved]; and 1. the Class B-2 Agent on behalf of the Class B-2 Purchasers shall have received on the Closing Date the following items, each of which shall be in form and substance satisfactory to the Class B-2 Agent: -17- a) an Officer's Certificate of SRPC or SRI, as applicable, confirming the satisfaction of the conditions set forth in clause (a), (c) and (d), above; a) a copy of (A) the certificates of incorporation and by-laws of, and an incumbency certificate with respect to its officers executing any of the Related Documents on the Closing Date on behalf of, part of SRPC and SRI certified by its authorized officer, (B) good standing certificates from the appropriate Governmental Authority as of a recent date with respect to each of SRPC and SRI and (C) resolutions of the Board of Directors (or an authorized committee thereof) of each of SRPC and SRI with respect to the Related Documents to which it is party, certified by its authorized officer; a) the favorable written opinions of counsel for SRPC and SRI addressed to the Class B-2 Agent, the Facility Agent and the Class B-2 Purchasers, or accompanied by a letter providing that the Class B-2 Agent, the Facility Agent and the Class B-2 Purchasers may rely on such opinions as if they were addressed to them, and dated the Closing Date, covering general corporate matters, the due execution and delivery of, and the enforceability of, each of the Related Documents to which SRPC or SRI (individually or as Transferor or Servicer) is party, sale/security interest matters, tax matters and such other matters as the Class B-2 Agent may request; a) [reserved]; a) evidence of the due execution and delivery by the Trustee of the Related Documents to which it is party; a) an executed copy of the Restated Supplement and a conformed copy of the Master Pooling and Servicing Agreement, the Receivables Purchase Agreement and the Receivables Transfer Agreement; a) executed copies of all opinions required by Article VI of the Pooling and Servicing Agreement or by any Rating Agency in connection with the issuance or sale of the Class B-2 Certificates or the amendments to the Supplement contained in the Restated Supplement (each such opinion, unless otherwise agreed to by the Class B-2 Agent, to be addressed to the Class B-2 Agent on behalf of the Class B-2 Purchasers and the Facility Agent or accompanied by a letter providing that the Class B-2 Agent on behalf of the Class B-2 Purchasers and the Facility Agent may rely on such opinion as if it were addressed to it), and such additional documents, instruments, certificates or letters as the Class B-2 Agent may reasonably request; and a) the duly executed Class B-2 Certificate(s) registered in the name of the Class B-2 Agent as nominee on behalf of the Class B-2 Owners. A. CONDITION TO ADDITIONAL PURCHASES. The following shall be conditions precedent to each purchase by any Class B-2 Purchasers of Additional Class B-2 Invested Amounts hereunder: -18- 1. the Transferor shall have timely delivered a notice of purchase pursuant to subsection 2.1(c) of this Agreement; 1. the representations and warranties of SRPC and SRI set forth or referred to in Section 4.1 and 4.2 hereof shall be true and correct in all material respects on the date of such purchase as though made on and as of such date; no event which of itself or with the giving of notice or lapse of time, or both, would constitute a Termination Event shall have occurred and be continuing on such date, and there shall exist no unreimbursed Class C Investor Charge-Offs; 1. after giving effect to such purchase of Additional Class B-2 Invested Amount, the aggregate Class B-2 Principal Balance shall not exceed the lesser of the aggregate Commitments of the Class B-2 Purchasers or the Class B-2 Purchase Limit; (d) after giving effect to such purchase,(i) the Class B-2 Invested Amount will be equal to or less than the lower of the Class B-2 Purchase Limit and 10% of the Invested Amount, (ii) the sum of the Class B Invested Amount, Class B-2 Invested Amount and the Class C Invested Amount shall be at least equal to 25% of the Invested Amount, and (iii) the sum of the Class B-2 Invested Amount and the Class C Invested Amount shall be at least equal to the higher of 17.5% of the Invested Amount and 5% of the highest Invested Amount during the immediately preceding 180 days, and (iv) the Class C Invested Amount shall be at least equal to 7.5% of the Invested Amount; (e) after giving effect to such purchase and the application of the proceeds thereof as provided herein and in subsection 4.2(h) of the Pooling and Servicing Agreement, the amount on deposit in the Spread Account, expressed as a percentage of the Invested Amount, after giving effect to such purchase and the application of the proceeds thereof as provided herein as in subsection 4.2(h) of the Pooling and Servicing Agreement, shall be not less than such percentage determined prior to giving effect to such purchase and application; (f) the applicable Utilization Fee (if any) specified in the Class A Fee Letter shall have been paid by the Transferor to the Class B-2 Agent for the account of the Class B-2 Purchasers; and (g) the conditions set forth in Section 6.15 of the Pooling and Servicing Agreement to the issuance of such Additional Class B-2 Invested Amount shall have been satisfied. -19- I. SECTION REPRESENTATIONS AND WARRANTIES A. REPRESENTATIONS AND WARRANTIES OF SRPC. SRPC repeats and reaffirms to the Class B-2 Purchasers and the Class B-2 Agent the representations and warranties of the Transferor set forth in Sections 2.3 of the Pooling and Servicing Agreement, and represents and warrants that such representations and warranties are true and correct as of the date hereof. SRPC further represents and warrants to, and agrees with, the Class B-2 Agent and each Class B-2 Purchaser that, as of the date hereof: 1. SRPC is a duly organized and validly existing corporation in good standing under the laws of the State of Delaware, with corporate power and authority to own its properties and to transact the business in which it is now engaged. SRPC is duly qualified to do business (or is exempt from such qualification) and is in good standing in each State of the United States where the nature of its business requires it to be so qualified. 1. SRPC has the full corporate power, authority and legal right to make, execute, deliver and perform the Related Documents to which it is party (individually or as Transferor) and all of the transactions contemplated thereby and to issue the Series 1997-1 Certificates from the Trust and has taken all necessary corporate action to authorize the execution, delivery and performance of the Related Documents to which it is party and such issuance. Each of the Related Documents to which SRPC is party (individually or as Transferor) constitutes its legal, valid and binding agreement enforceable in accordance with its terms (subject to applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of the rights of creditors generally and except as such enforceability may be limited by general principles of equity, whether considered in a proceeding at law or in equity). 1. SRPC is not required to obtain the consent of any other party or any consent, license, approval or authorization of, or registration with, any Governmental Authority in connection with the execution, delivery or performance of each of the Related Documents to which it is party (individually or as Transferor) that has not been duly obtained and which is not and will not be in full force and effect on the Closing Date. 2. SRPC's execution, delivery and performance of the Related Documents to which it is party (individually or as Transferor) do not violate or conflict with any provision of any existing law or regulation applicable to SRPC or any order or decree of any court to which SRPC is subject or the Certificate of Incorporation or Bylaws of SRPC, or any mortgage, security agreement, indenture, contract or other agreement to which SRPC is a party or by which SRPC or any significant portion of its properties is bound. 1. There is no litigation, investigation or administrative proceeding before any court, tribunal, regulatory body or governmental body presently pending, or, to the knowledge of SRPC, threatened, with respect to any of the Related -20- Documents, the transactions contemplated thereby, or the issuance of the Series 1997-1 Certificates and there is no such litigation or proceeding against SRPC or any significant portion of its properties which would, individually or in the aggregate, have a material adverse effect on the transactions contemplated by any of the Related Documents or the ability of SRPC to perform its obligations thereunder. 1. SRPC is not insolvent or the subject of any insolvency or liquidation proceeding. The financial statements of SRPC delivered to the Class B-2 Agent are complete and correct in all material respects and fairly present the financial condition of SRPC as of date of such statements and the results of operations of SRPC for the period then ended, all in accordance with United States generally accepted accounting principles consistently applied. Since the date of the most recent audited financial statements of SRPC delivered to the Class B-2 Agent, there has not been any material adverse change in the condition (financial or otherwise) of SRPC. 1. There are no outstanding comments from the most recent report prepared by the independent public accountants for SRPC (individually or in its capacity as Transferor) in connection with its credit card receivables. 1. No Trust Pay Out Event, Series 1997-1 Pay Out Event, Servicer Default or Termination Event has occurred and is continuing, and no event, act or omission has occurred and is continuing which, with the lapse of time, the giving of notice, or both, would constitute such an event or default. 1. The Pooling and Servicing Agreement is not required to be qualified under the Trust Indenture Act of 1939, as amended, and neither the Trust nor SRPC is required to be registered under the Investment Company Act of 1940, as amended. 1. The Receivables conveyed by SRPC to the Trust under the Pooling and Servicing Agreement are in an aggregate amount, determined as of October 9, 1998, of $308,790,012.76, consisting of $297,153,016.48 of Principal Receivables and $11,636,996.28 of Finance Charge Receivables. The Receivables Purchase Agreement is in full force and effect on the date hereof and no material default by any party exists thereunder. 1. The Trust is duly created and existing under the laws of the State of New York. Simultaneous with the closing hereunder, all conditions to the issuance and sale of the Class B-2 Certificates set forth in the Pooling and Servicing Agreement have been satisfied and the Class B-2 Certificates have been duly issued by the Trust. 1. Neither SRPC nor any of its Affiliates has directly, or through any agent, (i) sold, offered for sale, solicited offers to buy or otherwise negotiated in respect of, any "security" (as defined in the Securities Act) that is or will be integrated with the sale of the any Series 1997-1 Certificates in a manner that would -21- require the registration under the Securities Act of the offering of the Series 1997-1 Certificates or (ii) engaged in any form of general solicitation or general advertising (as those terms are used in Regulation D under the Securities Act) in connection with the offering of the Series 1997-1 Certificates or in any manner involving a public offering thereof within the meaning of Section 4(2) of the Securities Act. Assuming the accuracy of the representations and warranties of each Class B-2 Purchaser in its Investment Letter and of each purchaser of Class A Certificates and Class B Certificates in their respective investment letters, the offer and sale of the Series 1997-1 Certificates are transactions which are exempt from the registration requirements of the Securities Act. 1. All written factual information heretofore furnished by SRPC to, or for delivery to, the Class B-2 Agent for purposes of or in connection with this Agreement, including information relating to the Accounts, the Receivables, and SRI's credit card business, was true and correct in all material respects on the date as of which such information was stated or certified and remains true and correct in all material respects (unless such information specifically relates to an earlier date in which case such information shall have been true and correct in all material respects on such earlier date). A. REPRESENTATIONS AND WARRANTIES OF SRI. SRI repeats and reaffirms to the Class B-2 Purchasers and the Class B-2 Agent the representations and warranties of the Servicer set forth in Sections 3.3 of the Pooling and Servicing Agreement, and represents and warrants that such representations and warranties are true and correct as of the date hereof. SRI further represents and warrants to, and agree with, the Class B-2 Agent and each Class B-2 Purchaser that, as of the date hereof: 1. SRI is a duly organized and validly existing corporation in good standing under the laws of the State of Texas, with corporate power and authority to own its properties and to transact the business in which it is now engaged. SRI is duly qualified to do business (or is exempt from such qualification) and is in good standing in each State of the United States where the nature of its business requires it to be so qualified. 1. SRI has the full corporate power, authority and legal right to make, execute, deliver and perform the Related Documents to which it is party (individually or as Servicer) and all of the transactions contemplated thereby and has taken all necessary corporate action to authorize the execution, delivery and performance of the Related Documents to which it is party and such issuance. Each of the Related Documents to which SRI is party (individually or as Servicer) constitutes its legal, valid and binding agreement enforceable in accordance with its terms (subject to applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of the rights of creditors of national banking associations generally and except as such enforceability may be limited by general principles of equity, whether considered in a proceeding at law or in equity). 1. SRI is not required to obtain the consent of any other party or any consent, license, approval or authorization of, or registration with, any -22- Governmental Authority in connection with the execution, delivery or performance of each of the Related Documents to which it is party (individually or as Servicer) that has not been duly obtained and which is not and will not be in full force and effect on the Closing Date. 1. The execution, delivery and performance by SRI of the Related Documents to which it is party (individually or as Servicer) do not violate or conflict with any provision of any existing law or regulation applicable to SRI or any order or decree of any court to which SRI is subject or the Certificate of Incorporation or Bylaws of SRI, or any mortgage, security agreement, indenture, contract or other agreement to which SRI is a party or by which SRI or any significant portion of its properties is bound. 1. There is no litigation, investigation or administrative proceeding before any court, tribunal, regulatory body or governmental body presently pending, or, to the knowledge of SRI, threatened, with respect to any of the Related Documents, the transactions contemplated thereby, or the issuance of the Series 1997-1 Certificates, and there is no such litigation or proceeding against SRI or any significant portion of its properties which would, individually or in the aggregate, have a material adverse effect on the transactions contemplated by any of the Related Documents or the ability of SRI to perform its obligations thereunder. 1. SRI is not insolvent or the subject of any insolvency or liquidation proceeding. The financial statements of SRI delivered to the Class B-2 Agent are complete and correct in all material respects and fairly present the financial condition of SRI as of date of such statements and its results of operations for the period then ended, all in accordance with United States generally accepted accounting principles consistently applied. Since the date of the most recent audited financial statements of SRI delivered to the Class B-2 Agent through the Closing Date, there has not been any material adverse change in the condition (financial or otherwise) of SRI. 1. There are no outstanding comments from the most recent report prepared by the independent public accountants for SRI (individually or in its capacity as Servicer) in connection with its credit card receivables. 1. No Trust Pay Out Event, Series 1997-1 Pay Out Event, Servicer Default, Termination Event has occurred and is continuing, and no event, act or omission has occurred and is continuing which, with the lapse of time, the giving of notice, or both, would constitute such an event or default. 1. The Pooling and Servicing Agreement is not required to be qualified under the Trust Indenture Act of 1939, as amended, and neither the Trust, SRPC nor SRI is required to be registered under the Investment Company Act of 1940, as amended. -23- 1. The Receivables Purchase Agreement is in full force and effect on the date hereof and no material default by any party exists thereunder. 1. The Trust is duly created and existing under the laws of the State of New York. Simultaneous with the closing hereunder, all conditions to the issuance and sale of the Series 1997-1 Certificates set forth in the Pooling and Servicing Agreement have been satisfied and the Series 1997-1 Certificates have been duly issued by the Trust. 1. To the knowledge of SRI, the representations and warranties of SRPC set forth in Section 4.1 above are true and correct in all material respects. 1. The representations and warranties of Granite set forth in Section 4.02 and 4.03 of the Receivables Transfer Agreement are true and correct in all material respects. 1. All written factual information heretofore furnished by SRPC, SRI, Granite or Stage to, or for delivery to, the Class B-2 Agent for purposes of or in connection with this Agreement, including information relating to the Accounts, the Receivables and the credit card business of SRPC, SRI or Granite, was true and correct in all material respects on the date as of which such information was stated or certified and remains true and correct in all material respects (unless such information specifically relates to an earlier date in which case such information shall have been true and correct in all material respects on such earlier date). A. REPRESENTATIONS AND WARRANTIES OF THE CLASS B-2 AGENT, THE FACILITY AGENT AND THE CLASS B-2 PURCHASERS. Each of the Class B-2 Agent, the Facility Agent and the Class B-2 Purchasers severally (each with respect to itself only) represents and warrants to, and agrees with, the Transferor and the Servicer, that: 1. It is duly authorized to enter into and perform this Agreement and, in the case of the Class B-2 Purchasers, to purchase its Commitment Percentage (if any) of the Class B-2 Certificates, and has duly executed and delivered this Agreement; and the person signing this Agreement on behalf of the Class B-2 Agent, the Facility Agent or such Class B-2 Purchaser, as the case may be, has been duly authorized to do so. 1. This Agreement constitutes the legal, valid and binding obligation of the Class B-2 Agent, the Facility Agent or such Class B-2 Purchaser, enforceable in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, conservatorship or other similar laws now or hereafter in effect affecting the enforcement of creditors' rights in general, and except as such enforceability may be limited by general principles of equity (whether considered in a proceeding at law or in equity). -24- 1. No registration with or consent or approval of or other action by any state or local governmental authority or regulatory body having jurisdiction over the Class B-2 Agent, the Facility Agent or such Class B-2 Purchaser is required in connection with its execution, delivery or performance of this Agreement, other than as may be required under the blue sky laws of any state. 1. The execution, delivery or performance by the Class B-2 Agent, the Facility Agent or such Class B-2 Purchaser of this Agreement do not violate or conflict with any provision of any existing law or regulation applicable to it or any order or decree of any court to which it is subject, its charter or bylaws, or any mortgage, security agreement, indenture, contract or other agreement to which such it is a party or by which it or any significant portion of its properties is bound, in any such case if such violation or conflict would have an adverse affect on its right or ability to execute, deliver or perform its obligations under this Agreement. I. SECTION COVENANTS A. COVENANTS OF SRPC. SRPC (individually or, as set forth below, as the Transferor) and SRI (individually and, as set forth below, as the Servicer), each as to itself in such capacity or capacities, and subject to subsection 9.11(a) in the case of the Transferor, covenants and agrees, through the Termination Date for all Class B-2 Purchasers and thereafter so long as any amount of the Class B-2 Principal Balance shall remain outstanding or any monetary obligation arising hereunder shall remain unpaid, unless the Required Class B-2 Purchasers shall otherwise consent in writing, that: 1. each of SRPC, SRI, the Transferor and the Servicer shall perform in all material respects each of the respective agreements, warranties and indemnities applicable to it and comply in all material respects with each of the respective terms and provisions applicable to it under the other Related Documents to which it is party, which agreements, warranties and indemnities are hereby incorporated by reference into this Agreement as if set forth herein in full; and each of SRPC, SRI, the Transferor and the Servicer shall take all reasonable action to enforce the obligations of each of the other parties to such Related Documents which are contained therein; a) the Transferor and the Servicer shall furnish to the Class B-2 Agent a copy of each opinion, certificate, report, statement, notice or other communication (other than investment instructions) relating to the Series 1997-1 Certificates which is furnished by or on behalf of either of them to Certificateholders, to any Rating Agency or to the Trustee and furnish to the Class B-2 Agent after receipt thereof, a copy of each notice, demand or other communication relating to the Series 1997-1 Certificates, this Agreement or the Pooling and Servicing Agreement received by the Transferor or the Servicer from the Trustee, any Rating Agency or 10% or more of the Series 1997-1 Certificateholders (to the extent such notice, demand or communication relates to the Accounts, the Receivables, any Servicer Default, any Trust Pay Out Event or any Series 1997-1 Pay Out Event); and (ii) such other information, documents records or reports respecting the Trust, the Accounts, the Receivables, the Transferor or the -25- Servicer as the Class B-2 Agent may from time to time reasonably request without unreasonable expense to the Transferor or the Servicer; 1. the Servicer shall furnish to the Class B-2 Agent on or before the date such reports are due under the Pooling and Servicing Agreement copies of each of the reports and certificates required by subsection 3.4(c) or Section 3.5 or 3.6 of the Pooling and Servicing Agreement; 1. the Servicer shall promptly furnish to the Class B-2 Agent a copy, addressed to the Class B-2 Agent, of each opinion of counsel delivered to the Trustee pursuant to subsection 13.2(d) of the Pooling and Servicing Agreement; 1. SRI shall furnish to the Class B-2 Agent (i) promptly when publicly available, the annual (audited) and quarterly (unaudited) consolidated and consolidating financial statements of each of Stage and SRPC, the publicly available portions of Granite's quarterly and annual consolidated reports of condition and income and such other publicly available financial information, if any, as to Stage, SRI, Granite or SRPC as the Class B-2 Agent may request, and (ii) promptly after known to SRI, information with respect to any action, suit or proceeding involving SRI or any of its Affiliates by or before any court or any Governmental Authority which, if adversely determined, would materially adversely affect the business, results of operation or financial condition of SRPC, SRI or Granite; 1. the Servicer shall furnish to the Class B-2 Agent a certificate concurrently with its delivery of its annual certificate pursuant to Section 3.5 of the Pooling and Servicing Agreement stating that no Termination Event or event or condition which with the passage of time or the giving of notice, or both, would constitute a Termination Event has occurred or, if such a Termination Event, event or condition has occurred, identifying the same in reasonable detail; 1. the Transferor shall not exercise its right to accept optional reassignment of the Receivables or repurchase the Series 1997-1 Certificates pursuant to Section 12.2 of the Pooling and Servicing Agreement, unless the Class B-2 Purchasers and the Class B-2 Agent have been paid, or will be paid upon such repurchase or in connection with such optional reassignment, the Class B-2 Principal Balance, all interest thereon and all other amounts owing hereunder in full; 1. the Transferor and the Servicer shall at any time from time to time during regular business hours, on reasonable notice to the Transferor or the Servicer, as the case may be, permit the Class B-2 Agent, or its agents or representatives to: a) examine all books, records and documents (including computer tapes and disks) in its possession or under its control relating to the Receivables, and -26- a) visit its offices and property for the purpose of examining such materials described in clause (i) above. The information obtained by the Class B-2 Agent or any Class B-2 Purchaser pursuant to this subsection shall be held in confidence in accordance with Section 6.2 hereof; 1. the Transferor and the Servicer shall use reasonable efforts to cooperate with the Class B-2 Agent (including affording reasonable inspection rights, assisting in the preparation of syndication material, attending investor meetings and providing access to its officers) in its effort to syndicate the Commitments; 1. the Servicer shall furnish to the Class B-2 Agent, promptly after the occurrence of any Servicer Default, Termination Event, Trust Pay Out Event or Series 1997-1 Pay Out Event, a certificate of an appropriate officer of the Servicer setting forth the circumstances of such Servicer Default, Termination Event, Trust Pay Out Event or Series 1997-1 Pay Out Event and any action taken or proposed to be taken by the Servicer or the Transferor with respect thereto; 1. the Transferor and the Servicer shall timely make all payments, deposits or transfers and give all instructions to transfer required by this Agreement, the Pooling and Servicing Agreement, the Receivables Purchase Agreement and the Receivables Transfer Agreement; 1. neither Transferor, the Servicer nor the Originator shall terminate (except in accordance with the terms thereof), amend, waive or otherwise modify the Master Pooling and Servicing Agreement or the Supplement, unless (i) such amendment, waiver or modification shall not, as evidenced by an Officer's Certificate of the Transferor delivered to the Class B-2 Agent, adversely affect in any material respect the interests of the Class B-2 Agent, the Facility Agent or the Class B-2 Purchasers under any Related Document; and (ii) all of the applicable provisions of Section 13.1 of the Pooling and Servicing Agreement have been complied with; 1. the Transferor and the Servicer shall execute and deliver to the Class B-2 Agent, the Facility Agent or the Trustee all such documents and instruments and do all such other acts and things as may be necessary or reasonably required by the Class B-2 Agent, the Facility Agent or the Trustee to enable any of them to exercise and enforce their respective rights under the Related Documents and to realize thereon, and record and file and rerecord and refile all such documents and instruments, at such time or times, in such manner and at such place or places, all as may be necessary or required by the Trustee, the Facility Agent or the Class B-2 Agent to validate, preserve, perfect and protect the position of the Trustee under the Pooling and Servicing Agreement; 1. neither the Transferor nor the Servicer will consolidate with or merge into any other Person or convey or transfer its properties and assets substantially as an entirety to any Person, except (i) in accordance with Section 7.2 or 8.2 -27- of the Pooling and Servicing Agreement, and (ii) with the prior written consent of the Required Class B-2 Purchasers; PROVIDED that such consent shall not be required in the case of the Servicer if, after giving effect to such consolidation, merger, conveyance or transfer, the Class B Certificates are rated at least "BBB" by Standard & Poor's or at least "Baa3" by Moody's Investors Services, Inc.; 1. SRI will not (i) resign as Servicer, unless (A) the performance of its duties under the Pooling and Servicing Agreement is no longer permissible pursuant to Requirements of Law and there is no reasonable action which it could take to make the performance of such duties permissible under such Requirements of Law, or (B) the Required Class B-2 Purchasers shall have consented thereto, or (ii) assign the Pooling and Servicing Agreement (unless such assignment is permitted pursuant to Section 8.2 of the Pooling and Servicing Agreement and subsection 5.1(n) hereof), (iii) delegate any of its material duties under the Pooling and Servicing Agreement except as permitted by Section 8.7 of the Pooling and Servicing Agreement and unless the Person to which such delegation is made is a wholly owned subsidiary (directly or indirectly) of Stage, is legally qualified and licensed (to the extent required) to perform the duties delegated to it, owns or holds under valid leases or (in the case of software) licenses all computer equipment and software and other equipment and rights which are required for such Person to perform such duties, and employs sufficient and adequately trained personnel to perform such duties, or (iv) appoint or permit the appointment of a Successor Servicer other than the Trustee under the provisions of the Pooling and Servicing Agreement without consultation with the Facility Agent; and 1. the Transferor will not incur, permit or suffer to exist any lien, charge or other adverse claim on any Class C Certificate. I. SECTION MUTUAL COVENANTS REGARDING CONFIDENTIALITY A. COVENANTS OF SRPC, ETC. SRPC, SRI, the Transferor and the Servicer shall hold in confidence, and not disclose to any Person, the terms of any fees payable in connection with this Agreement except they may disclose such information (i) to their officers, directors, employees, agents, counsel, accountants, auditors, advisors or representatives, (ii) with the consent of the Required Class B-2 Purchasers and Class B-2 Agent, or (iii) to the extent SRPC, SRI, Granite, the Transferor or the Servicer or any Affiliate of either of them should be required by any law or regulation applicable to it or requested by any Governmental Authority to disclose such information; PROVIDED, that, in the case of clause (iii), SRPC, the Transferor, SRI, Granite or the Servicer, as the case may be, will use all reasonable efforts to maintain confidentiality and will (unless otherwise prohibited by law) notify the Class B-2 Agent of its intention to make any such disclosure prior to making such disclosure. A. COVENANTS OF CLASS B-2 PURCHASERS. The Class B-2 Agent, the Facility Agent and each Class B-2 Purchaser, severally and with respect to itself only, covenants and agrees that any information obtained by the Class B-2 Agent, the Facility -28- Agent or such Class B-2 Purchaser pursuant to this Agreement shall be held in confidence (it being understood that documents provided to the Class B-2 Agent hereunder may in all cases be distributed by the Class B-2 Agent or the Facility Agent to the Class B-2 Purchasers) except that the Class B-2 Agent, the Facility Agent or such Class B-2 Purchaser may disclose such information (i) to its officers, directors, employees, agents, counsel, accountants, auditors, advisors or representatives, (ii) to the extent such information has become available to the public other than as a result of a disclosure by or through the Class B-2 Agent, the Facility Agent or such Class B-2 Purchaser, (iii) to the extent such information was available to the Class B-2 Agent, the Facility Agent or such Class B-2 Purchaser on a nonconfidential basis prior to its disclosure to the Class B-2 Agent, the Facility Agent or such Class B-2 Purchaser hereunder, (iv) with the consent of the Transferor, (v) to the extent permitted by Section 8.1, or (vi) to the extent the Class B-2 Agent, the Facility Agent or such Class B-2 Purchaser should be (A) required in connection with any legal or regulatory proceeding or (B) requested by any Governmental Authority to disclose such information; PROVIDED, that, in the case of clause (vi) above, the Class B-2 Agent, the Facility Agent or such Class B-2 Purchaser, as applicable, will use all reasonable efforts to maintain confidentiality and, in the case of clause (vi)(A) above, will (unless otherwise prohibited by law) notify the Transferor of its intention to make any such disclosure prior to making any such disclosure. I. SECTION THE AGENTS A. APPOINTMENT. (a) Each Class B-2 Purchaser hereby irrevocably designates and appoints the Class B-2 Agent as the agent of such Class B-2 Purchaser under this Agreement, and each such Class B-2 Purchaser irrevocably authorizes the Class B-2 Agent, as the agent for such Class B-2 Purchaser, to take such action on its behalf under the provisions of the Related Documents and to exercise such powers and perform such duties thereunder as are expressly delegated to the Class B-2 Agent by the terms of the Related Documents, together with such other powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary elsewhere in this Agreement, the Class B-2 Agent shall not have any duties or responsibilities, except those expressly set forth herein, or any fiduciary relationship with any Class B-2 Purchaser, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or otherwise exist against the Class B-2 Agent. (b) Each Class B-2 Purchaser hereby irrevocably designates and appoints the Facility Agent as the agent of such Class B-2 Purchaser under the Pooling and Servicing Agreement, and each such Class B-2 Purchaser irrevocably authorizes the Facility Agent, as the agent for such Class B-2 Purchaser, to take such action on its behalf under the provisions of the Pooling and Servicing Agreement and to exercise such powers and perform such duties thereunder as are expressly granted to the Facility Agent by the terms of the Pooling and Servicing Agreement, subject to the terms and conditions of this Agreement, together with such other powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary elsewhere in this Agreement, the Facility Agent shall not have any duties or responsibilities, except those expressly set forth herein or in the Pooling and Servicing Agreement, or any fiduciary relationship with any -29- Class B-2 Purchaser, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or otherwise exist against the Facility Agent. A. DELEGATION OF DUTIES. The Class B-2 Agent and the Facility Agent may execute any of its duties under any of the Related Documents by or through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. Neither the Class B-2 Agent nor the Facility Agent shall be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable care. A. EXCULPATORY PROVISIONS. Neither the Class B-2 Agent nor the Facility Agent nor any of their respective officers, directors, employees, agents, attorneys-in-fact or Affiliates shall be (a) liable to any of the Class B-2 Purchasers for any action lawfully taken or omitted to be taken by it or such Person under or in connection with any of the other Related Documents (except for its or such Person's own gross negligence or willful misconduct) or (b) responsible in any manner to any of the Class B-2 Purchasers for any recitals, statements, representations or warranties made by SRPC, SRI, Granite, Stage, the Transferor, the Servicer or the Trustee or any officer thereof contained in any of the other Related Documents or in any certificate, report, statement or other document referred to or provided for in, or received by the Class B-2 Agent or the Facility Agent under or in connection with, any of the other Related Documents or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any of the other Related Documents or for any failure of SRPC, SRI, Granite, Stage, the Transferor, the Servicer or the Trustee to perform its obligations thereunder. Neither the Class B-2 Agent nor the Facility Agent shall be under any obligation to any Class B-2 Purchaser to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, any of the other Related Documents, or to inspect the properties, books or records of SRPC, SRI, Stage, the Transferor, the Servicer, the Trustee or the Trust. A. RELIANCE BY AGENT. The Class B-2 Agent and the Facility Agent shall be entitled to rely, and shall be fully protected in relying, upon any writing, resolution, notice, consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype message, written statement, order or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including counsel to the Class B-2 Agent or the Facility Agent), independent accountants and other experts selected by the Class B-2 Agent or the Facility Agent. The Class B-2 Agent and the Facility Agent shall be fully justified in failing or refusing to take any action under any of the Related Documents unless it shall first receive such advice or concurrence of the Required Class B-2 Purchasers as it deems appropriate or it shall first be indemnified to its satisfaction by the Class B-2 Purchasers or by the Class B-2 Purchasers against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Class B-2 Agent and the Facility Agent shall in all cases be fully protected in acting, or in refraining from acting, under any of the -30- Related Documents in accordance with a request of the Required Class B-2 Purchasers and such request and any action taken or failure to act pursuant thereto shall be binding upon all present and future Class B-2 Purchasers. A. NOTICES. The Class B-2 Agent shall not be deemed to have knowledge or notice of the occurrence of any breach of this Agreement or the occurrence of any Pay Out Event or any Termination Event unless the Class B-2 Agent has received notice from the Transferor, the Servicer, the Trustee or any Class B-2 Purchaser referring to this Agreement, describing such event. In the event that the Class B-2 Agent receives such a notice, the Class B-2 Agent promptly shall give notice thereof to the Class B-2 Purchasers. The Class B-2 Agent shall take such action with respect to such event as shall be reasonably directed by the Required Class B-2 Purchasers; PROVIDED that unless and until the Class B-2 Agent shall have received such directions, the Class B-2 Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such event as it shall deem advisable in the best interests of the Class B-2 Purchasers. A. NON-RELIANCE ON AGENT AND OTHER CLASS B-2 PURCHASERS. Each Class B-2 Purchaser expressly acknowledges that neither the Class B-2 Agent nor the Facility Agent nor any of their respective officers, directors, employees, agents, attorneys-in-fact or Affiliates has made any representations or warranties to it and that no act by the Class B-2 Agent or the Facility Agent hereafter taken, including any review of the affairs of SRPC, SRI, Granite, Stage, the Transferor, the Servicer, the Trustee or the Trust shall be deemed to constitute any representation or warranty by the Class B-2 Agent or the Facility Agent to any Class B-2 Purchaser. Each Class B-2 Purchaser represents to the Class B-2 Agent and the Facility Agent that it has, independently and without reliance upon the Class B-2 Agent, the Facility Agent or any other Class B-2 Purchaser, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, operations, property, financial and other condition and creditworthiness of the Trust, the Trustee, SRPC, SRI, Granite, Stage, the Transferor and the Servicer and made its own decision to purchase its interest in the Class B-2 Certificates hereunder and enter into this Agreement. Each Class B-2 Purchaser also represents that it will, independently and without reliance upon the Class B-2 Agent or the Facility Agent or any other Class B-2 Purchaser, and based on such documents and information as it shall deem appropriate at the time, continue to make its own analysis, appraisals and decisions in taking or not taking action under any of the Related Documents, and to make such investigation as it deems necessary to inform itself as to the business, operations, property, financial and other condition and creditworthiness of the Trust, the Trustee, SRPC, SRI, Granite, Stage, the Transferor and the Servicer. Except, in the case of the Class B-2 Agent, for notices, reports and other documents received by the Class B-2 Agent under Section 5 hereof, neither the Class B-2 Agent nor the Facility Agent shall have any duty or responsibility to provide any Class B-2 Purchaser with any credit or other information concerning the business, operations, property, condition (financial or otherwise), prospects or creditworthiness of the Trust, the Trustee, SRPC, SRI, Granite, Stage, the Transferor or the Servicer which may come -31- into the possession of the Class B-2 Agent or the Facility Agent or any of its respective officers, directors, employees, agents, attorneys-in-fact or Affiliates. A. INDEMNIFICATION. The Class B-2 Purchasers agree to indemnify the Class B-2 Agent and the Facility Agent in its capacity as such (without limiting the obligation (if any) of SRPC, SRI, Granite, the Transferor, the Trust or the Servicer to reimburse the Class B-2 Agent or the Facility Agent for any such amounts), ratably according to their respective Commitment Percentages (or, if the Commitments have terminated, Percentage Interests), from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever which may at any time (including at any time following the payment of the obligations under this Agreement, including the Class B-2 Principal Balance) be imposed on, incurred by or asserted against the Class B-2 Agent or the Facility Agent in any way relating to or arising out of this Agreement, or any documents contemplated by or referred to herein or the transactions contemplated hereby or any action taken or omitted by the Class B-2 Agent or the Facility Agent under or in connection with any of the foregoing; PROVIDED that no Class B-2 Purchaser shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of the Class B-2 Agent or the Facility Agent resulting from its own gross negligence or willful misconduct. The agreements in this subsection shall survive the payment of the obligations under this Agreement, including the Class B-2 Principal Balance. A. AGENTS IN THEIR INDIVIDUAL CAPACITIES. The Class B-2 Agent, the Facility Agent and their Affiliates may make loans to, accept deposits from and generally engage in any kind of business with the Trust, the Trustee, SRPC, SRI, Granite, Stage, the Servicer and the Transferor as though the Class B-2 Agent and the Facility Agent were not the agents hereunder. Each Class B-2 Purchaser acknowledges that Credit Suisse First Boston may act (i) as administrator and agent for one or more purchasers under Related Documents and in such capacity acts and may continue to act on behalf of each such purchaser in connection with its business, (ii) as the agent for certain financial institutions under the liquidity and credit enhancement agreements relating to certain Related Documents to which any such purchaser is party and in various other capacities relating to the business of any such purchasers under various agreements, and (iii) as agent for other Classes of Series 1997-1 Certificates. Credit Suisse First Boston in its capacity as the Class B-2 Agent or the Facility Agent shall not, by virtue of its acting in any such other capacities, be deemed to have duties or responsibilities hereunder or be held to a standard of care in connection with the performance of its duties as the Class B-2 Agent or the Facility Agent other than as expressly provided in this Agreement. Credit Suisse First Boston may act as the Class B-2 Agent and the Facility Agent without regard to and without additional duties or liabilities arising from its role as such administrator or agent or arising from its acting in any such other capacity. A. SUCCESSOR AGENT. (a) The Class B-2 Agent may resign as Class B-2 Agent upon ten days' notice to the Class B-2 Purchasers, the Trustee, the Transferor and the Servicer with such resignation becoming effective upon a successor -32- agent succeeding to the rights, powers and duties of the Class B-2 Agent pursuant to this subsection 7.9(a). If the Class B-2 Agent shall resign as Class B-2 Agent under this Agreement, then the Required Class B-2 Purchasers shall appoint from among the Class B-2 Purchasers a successor agent for the Class B-2 Purchasers. The successor agent shall succeed to the rights, powers and duties of the Class B-2 Agent, and the term "Class B-2 Agent" shall mean such successor agent effective upon its appointment, and the former Class B-2 Agent's rights, powers and duties as Class B-2 Agent shall be terminated, without any other or further act or deed on the part of such former Class B-2 Agent or any of the parties to this Agreement. After the retiring Class B-2 Agent's resignation as Class B-2 Agent, the provisions of this Section 7 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Class B-2 Agent under this Agreement. (b) The Facility Agent may resign as Facility Agent upon ten days' notice to the Class B-2 Purchasers, the Class A Purchasers (as defined in the Class A Certificate Purchase Agreement), the Trustee, the Transferor and the Servicer with such resignation becoming effective upon a successor agent succeeding to the rights, powers and duties of the Facility Agent pursuant to this subsection 7.9(b). If the Facility Agent shall resign as Facility Agent under this Agreement, then the Required Class B-2 Purchasers shall appoint from among the Committed Class A Purchasers under the Class A Certificate Purchase Agreement or the Committed Class B Purchasers under the Class B Certificate Purchase Agreement a successor Facility Agent of the Class B-2 Certificateholders, the Class B Certificateholders and the Class A Certificateholders as provided in the Supplement; PROVIDED that no such appointment shall be effective unless such successor is also appointed as successor Facility Agent under the Class A Certificate Purchase Agreement and the Class B Certificate Purchase Agreement. The successor agent shall succeed to the rights, powers and duties of the Facility Agent, and the term "Facility Agent" shall mean such successor agent effective upon its appointment, and the former Facility Agent's rights, powers and duties as Facility Agent shall be terminated, without any other or further act or deed on the part of such former Facility Agent or any of the parties to this Agreement. After the retiring Facility Agent's resignation as Facility Agent, the provisions of this Section 7 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Facility Agent under this Agreement. -33- I. SECTION SECURITIES LAWS; TRANSFERS; TAX TREATMENT 1. TRANSFERS OF CLASS B-2 CERTIFICATES. Each Class B-2 Purchaser agrees that the beneficial interest in the Class B-2 Certificates purchased by it will be acquired for investment only and not with a view to any public distribution thereof, and that such Class B-2 Purchaser will not offer to sell or otherwise dispose of any Class B-2 Certificate acquired by it (or any interest therein) in violation of any of the registration requirements of the Securities Act or any applicable state or other securities laws. Each Class B-2 Purchaser acknowledges that it has no right to require the Transferor to register, under the Securities Act or any other securities law, the Class B-2 Certificates (or the beneficial interest therein) acquired by it pursuant to this Agreement or any Transfer Supplement. Each Class B-2 Purchaser hereby confirms and agrees that in connection with any transfer or syndication by it of an interest in the Class B-2 Certificates, such Class B-2 Purchaser has not engaged and will not engage in a general solicitation or general advertising including advertisements, articles, notices or other communications published in any newspaper, magazine or similar media or broadcast over radio or television, or any seminar or meeting whose attendees have been invited by any general solicitation or general advertising. Each initial Class B-2 Purchaser agrees that it will execute and deliver to the Transferor, the Servicer, the Trustee and the Class B-2 Agent on or before the Closing Date a letter in the form attached hereto as EXHIBIT A (an "INVESTMENT LETTER") with respect to the purchase by such Class B-2 Purchaser of an interest in the Class B-2 Certificates. 1. Each initial purchaser of a Class B-2 Certificate or any interest therein and any Assignee thereof or Participant therein shall certify to the Transferor, the Servicer, the Trustee and the Class B-2 Agent that it is either (A)(i) a citizen or resident of the United States, (ii) a corporation or other entity organized in or under the laws of the United States or any political subdivision thereof which, if such entity is a tax-exempt entity, recognizes that payments with respect to the Class B-2 Certificates may constitute unrelated business taxable income or (iii) a person not described in (i) or (ii) whose income from the Class B-2 Certificates is and will be effectively connected with the conduct of a trade or business within the United States (within the meaning of the Code) and whose ownership of any interest in a Class B-2 Certificate will not result in any withholding obligation with respect to any payments with respect to the Class B-2 Certificates by any Person (other than withholding, if any, under Section 1446 of the Code) and who will furnish to the Class B-2 Agent, the Servicer and the Trustee, and to the Class B-2 Owner making the Transfer a properly executed U.S. Internal Revenue Service Form 4224 (and to agree (to the extent legally able) to provide a new Form 4224 upon the expiration or obsolescence of any previously delivered form and comparable statements in accordance with applicable United States laws) or (B) an estate or trust the income of which is includible in gross income for United States federal income tax purposes. -34- 1. Any sale, transfer, assignment, participation, pledge, hypothecation or other disposition (a "TRANSFER") of a Class B-2 Certificate or any interest therein may be made only in accordance with this Section 8.1. Any Transfer of an interest in a Class B-2 Certificate or a Commitment shall be in respect of at least $2,000,000 in the aggregate, which may be composed of (i) Class B-2 Principal Balance or (ii) to the extent in excess of the Class B-2 Principal Balance subject to such Transfer, Commitment hereunder. Any Transfer of an interest in a Class B-2 Certificate otherwise permitted by this Section 8.1 will be permitted only if it consists of a PRO RATA percentage interest in all payments made with respect to the Class B-2 Purchaser's beneficial interest in such Class B-2 Certificate. No Class B-2 Certificate or any interest therein may be Transferred by Assignment or Participation to any Person (each, a "TRANSFEREE") unless prior to the transfer the Transferee shall have executed and delivered to the Class B-2 Agent and the Transferor an Investment Letter. Each of SRPC and SRI authorizes each Class B-2 Purchaser to disclose to any Transferee or prospective Transferee any and all financial information in the Class B-2 Purchaser's possession concerning the Trust, SRPC, SRI, Granite and Stage which has been delivered to the Class B-2 Agent, the Facility Agent or such Class B-2 Purchaser pursuant to the Related Documents (including information obtained pursuant to rights of inspection granted hereunder) or which has been delivered to such Class B-2 Purchaser by or on behalf of the Trust, SRPC, SRI, Granite Stage, the Transferor or the Servicer in connection with such Class B-2 Purchaser's credit evaluation of the Trust, SRPC, SRI, Granite, Stage, the Transferor or the Servicer prior to becoming a party to, or purchasing an interest in this Agreement or the Class B-2 Certificates; PROVIDED that prior to any such disclosure, such Transferee or prospective Transferee shall have executed an agreement agreeing to be bound by the provisions of Section 6.2 hereof. 1. Each Class B-2 Purchaser may, in accordance with applicable law, at any time grant participations in all or part of its Commitment or its interest in the Class B-2 Certificates, including the payments due to it under this Agreement and the Pooling and Servicing Agreement (each, a "PARTICIPATION"), to any Person (each, a "PARTICIPANT"); PROVIDED, HOWEVER, that no Participation shall be granted to any Person unless and until the Class B-2 Agent shall have consented thereto and the conditions to Transfer specified in this Agreement, including in subsection 8.1(c) hereof, shall have been satisfied and that such Participation consists of a PRO RATA percentage interest in all payments made with respect to such Class B-2 Purchaser's beneficial interest (if any) in the Class B-2 Certificates. In connection with any such Participation, the Class B-2 Agent shall maintain a register of each Participant and the amount of each Participation. Each Class B-2 Purchaser hereby acknowledges and agrees that (A) any such Participation will not alter or affect such Class B-2 Purchaser's direct obligations hereunder, and (B) neither the Trustee, the Transferor nor the Servicer shall have any obligation to have any communication or relationship with any Participant. Each Class B-2 Purchaser and each Participant shall comply with the provisions of subsection 2.5(c). No Participant shall be entitled to Transfer all or any portion of its Participation, without the prior written consent of the Class B-2 Agent. Each Participant shall be entitled to receive additional amounts and indemnification pursuant to Sections 2.4, 2.5 -35- and 2.6 as if such Participant were a Class B-2 Purchaser and such Sections applied to its Participation; PROVIDED, in the case of Section 2.5, that such Participant has complied with the provisions of subsection 2.5(c) as if it were a Class B-2 Purchaser. Each Class B-2 Purchaser shall give the Class B-2 Agent notice of the consummation of any sale by it of a Participation and the Class B-2 Agent (upon receipt of notice from the related Class B-2 Purchaser) shall promptly notify the Transferor, the Servicer and the Trustee. 1. Each Class B-2 Purchaser may, with the consent of the Class B-2 Agent and SRPC and in accordance with applicable law, sell or assign (each, an "ASSIGNMENT"), to any Person (each, an "ASSIGNEE") all or any part of its Commitment or its interest in the Class B-2 Certificates and its rights and obligations under this Agreement and the Pooling and Servicing Agreement pursuant to an agreement substantially in the form attached hereto as EXHIBIT B hereto (a "TRANSFER SUPPLEMENT"), executed by such Assignee and the Class B-2 Purchaser and delivered to the Class B-2 Agent for its acceptance and consent; PROVIDED, HOWEVER, that no such assignment or sale shall be effective unless and until the conditions to Transfer specified in this Agreement, including in subsection 8.1(c) hereof, shall have been satisfied. From and after the effective date determined pursuant to such Transfer Supplement, (x) the Assignee thereunder shall be a party hereto and, to the extent provided in such Transfer Supplement, have the rights and obligations of a Class B-2 Purchaser hereunder as set forth therein and (y) the transferor Class B-2 Purchaser shall, to the extent provided in such Transfer Supplement, be released from its Commitment and other obligations under this Agreement; PROVIDED, HOWEVER, that after giving effect to each such Assignment, the obligations released by any such Class B-2 Purchaser shall have been assumed by an Assignee or Assignees. Such Transfer Supplement shall be deemed to amend this Agreement to the extent, and only to the extent, necessary to reflect the addition of such Assignee and the resulting adjustment of Percentage Interests or Commitment Percentages arising from the Assignment. Upon its receipt and acceptance of a duly executed Transfer Supplement, the Class B-2 Agent shall on the effective date determined pursuant thereto give notice of such acceptance to the Transferor, the Servicer and the Trustee and the Servicer will provide notice thereof to each Rating Agency (if required). Upon instruction to register a transfer of a Class B-2 Purchaser's beneficial interest in the Class B-2 Certificates (or portion thereof) and surrender for registration of transfer such Class B-2 Purchaser's Class B-2 Certificate(s) (if applicable) and delivery to the Transferor and the Trustee of an Investment Letter, executed by the registered owner (and the beneficial owner if it is a Person other than the registered owner), and receipt by the Trustee of a copy of the duly executed related Transfer Supplement and such other documents as may be required under this Agreement, such beneficial interest in the Class B-2 Certificates (or portion thereof) shall be transferred in the records of the Trustee and the Class B-2 Agent and, if requested by the Assignee, new Class B-2 Certificates shall be issued to the Assignee and, if applicable, the transferor Class B-2 Purchaser in amounts reflecting such Transfer as provided in the Pooling and Servicing Agreement. Such Transfers of Class B-2 Certificates (and interests therein) shall be subject to this Section 8.1 in lieu of any regulations which may be prescribed -36- under Section 6.3 of the Pooling and Servicing Agreement. Successive registrations of Transfers as aforesaid may be made from time to time as desired, and each such registration of a transfer to a new registered owner shall be noted on the Certificate Register. 1. Each Class B-2 Purchaser may pledge its interest in the Class B-2 Certificates to any Federal Reserve Bank as collateral in accordance with applicable law. 1. Any Class B-2 Purchaser shall have the option to change its Investing Office, PROVIDED that such Class B-2 Purchaser shall have prior to such change in office complied with the provisions of subsection 2.5(c) and PROVIDED FURTHER that such Class B-2 Purchaser shall not be entitled to any amounts otherwise payable under Section 2.4 or 2.5 resulting solely from such change in office unless such change in office was mandated by applicable law or by such Class B-2 Purchaser's compliance with the provisions of this Agreement. A. TAX CHARACTERIZATION. It is the intention of the parties hereto that the Class B-2 Certificates be treated for tax purposes as indebtedness. I. SECTION MISCELLANEOUS A. AMENDMENTS AND WAIVERS. This Agreement may not be amended, supplemented or modified nor may any provision hereof be waived except in accordance with the provisions of this Section 9.1. With the written consent of the Required Class B-2 Purchasers, the Class B-2 Agent, the Facility Agent, SRPC and SRI may, from time to time, enter into written amendments, supplements, waivers or modifications hereto for the purpose of adding any provisions to this Agreement or changing in any manner the rights of any party hereto or waiving, on such terms and conditions as may be specified in such instrument, any of the requirements of this Agreement; PROVIDED, HOWEVER, that no such amendment, supplement, waiver or modification shall (i) reduce the amount of or extend the maturity of any Class B-2 Certificate or reduce the rate or extend the time of payment of interest thereon, or reduce or alter the timing of any other amount payable to any Class B-2 Purchaser hereunder or under the Supplement, in each case without the consent of the Class B-2 Purchaser affected thereby, (ii) amend, modify or waive any provision of this Section 9.1, or, if such amendment would have a material adverse effect on the Class B-2 Purchasers, the definition of "Class B-2 Invested Amount" or "Class B-2 Principal Balance", or reduce the percentage specified in the definition of Required Class B-2 Purchasers, in each case without the written consent of all Class B-2 Purchasers or (iii) amend, modify or waive any provision of Section 7 of this Agreement without the written consent of the Class B-2 Agent, the Facility Agent and Required Class B-2 Purchasers. Any waiver of any provision of this Agreement shall be limited to the provisions specifically set forth therein for the period of time set forth therein and shall not be construed to be a waiver of any other provision of this Agreement. -37- The Facility Agent may cast any vote or give any direction under the Pooling and Servicing Agreement on behalf of the Class B-2 Certificateholders if it has been directed to do so by (i) the Required Class B-2 Purchasers, (ii) the Class B Purchasers (as defined in the Class B Purchase Agreement) required under the terms of Section 9.1 of the Class B Certificate Purchase Agreement, and (iii) by the Class A Purchasers (as defined in the Class A Certificate Purchase Agreement) required under the terms of Section 9.1 of the Class A Certificate Purchase Agreement. A. NOTICES. (a) All notices, requests and demands to or upon the respective parties hereto to be effective shall be in writing (including by telecopy), and, unless otherwise expressly provided herein, shall be deemed to have been duly given or made when delivered by hand, or, in the case of mail or telecopy notice, when received, addressed as follows or, with respect to a Class B-2 Purchaser, as set forth opposite its signature to this Agreement or in the Transfer Supplement, or to such other address as may be hereafter notified by the respective parties hereto: SRPC: SRI Receivables Purchase Co., Inc. 10201 Main Street Houston, Texas 77025 Attention: Treasurer Telephone: (713) 669-2601 Telecopy: (713) 669-2621 SRI: Specialty Retailers, Inc. 10201 Main Street Houston, Texas 77025 Attention: Treasurer Telephone: (713) 669-2601 Telecopy: (713) 669-2621 The Trustee: Bankers Trust (Delaware) 1011 Centre Road, Suite 200 Wilmington, Delaware 19805-1266 Attention: Corporate Trust and Agency Group Telephone: (302) 636-3300 Telefax: (302) 636-3222 Mailing Address: P.O. Box 8795 Wilmington, Delaware 19899-8795 -38- The Class B-2 Credit Suisse First Boston, New York Branch Agent or the Eleven Madison Avenue Facility New York, New York 10010 Agent: Attention: Asset Finance Department Telephone: (212) 325-9076 Telefax: (212) 325-6677 Moody's: Moody's Investors Service, Inc. 99 Church Street New York, New York 10007 Attention: ABS Monitoring Department, 4th Floor Telephone: (212) 553-3607 Telefax: (212) 553-4773 Standard Standard & Poor's Ratings Services & Poor's: 26 Broadway, 15th Floor New York, New York 10004 Attention: Asset-Backed Surveillance Department Telephone: (212) 208-1892 Telefax: (212) 412-0323 (b) All payments to be made to the Class B-2 Agent or any Class B-2 Purchaser hereunder shall be made in United States dollars and in immediately available funds not later than 2:30 p.m. New York City time on the date payment is due, and, unless otherwise specifically provided herein, shall be made to the Class B-2 Agent, for the account of one or more of the Class B-2 Purchasers or for its own account, as the case may be. Unless otherwise directed by the Class B-2 Agent, all payments to it shall be made by federal wire (ABA #0260-0917-9) and telegraph name (CR SUISSE NY), to account number 904996-02, reference SRI Receivables Master Trust, Series 1997-1, with telephone notice (including federal wire number) to the Asset Finance Department of Credit Suisse First Boston (212-325-9081). (c) Any notices permitted or required hereunder to be given by SRPC shall be effective if given on behalf of SRPC by the Servicer. A. No Waiver; Cumulative Remedies. No failure to exercise and no delay in exercising, on the part of the Class B-2 Agent, the Facility Agent or any Class B-2 Purchaser, any right, remedy, power or privilege under any of the Related Documents shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege under any of the Related Documents preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges provided in the Related Documents are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law. -39- A. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of SRPC, SRI, the Transferor, the Servicer, the Class B-2 Agent, the Facility Agent, the Class B-2 Purchasers, any Assignee and their respective successors and assigns, except that SRPC, SRI, the Transferor and the Servicer may not assign or transfer any of their respective rights or obligations under this Agreement except as provided herein and in the Pooling and Servicing Agreement, without the prior written consent of the Required Class B-2 Purchasers. A. Successors to Servicer. (a) In the event that a transfer of servicing occurs under Article VIII or Article X of the Pooling and Servicing Agreement, (i) from and after the effective date of such transfer, the Successor Servicer shall be the successor in all respects to the Servicer and shall be responsible for the performance of all functions to be performed by the Servicer from and after such date, except as provided in the Pooling and Servicing Agreement, and shall be subject to all the responsibilities, duties and liabilities relating thereto placed on the Servicer by the terms and provisions hereof, and all references in this Agreement to the Servicer shall be deemed to refer to the Successor Servicer, and (ii) as of the date of such transfer, the Successor Servicer shall be deemed to have made with respect to itself the representations and warranties made in Section 4.2 (in the case of subsection 4.2(a) with appropriate factual changes); PROVIDED, HOWEVER, that the references to the Servicer contained in Section 5.1 of this Agreement shall be deemed to refer to the Servicer with respect to responsibilities, duties and liabilities arising out of an act or acts, or omission, or an event or events giving rise to such responsibilities, duties and liabilities and occurring during such time that the Servicer was Servicer under this Agreement and shall be deemed to refer to the Successor Servicer with respect to responsibilities, duties and liabilities arising out of an act or acts, or omission, or an event or events giving rise to such responsibilities, duties and liabilities and occurring during such time that the Successor Servicer acts as Servicer under this Agreement; PROVIDED, HOWEVER, to the extent that an obligation to indemnify the Class B-2 Purchasers under Section 2.6 arises as a result of any act or failure to act of any Successor Servicer in the performance of servicing obligations under the Pooling and Servicing Agreement or the Supplement, such indemnification obligation shall be of the Successor Servicer and not its predecessor. Upon the transfer of servicing to a Successor Servicer, such Successor Servicer shall furnish to the Class B-2 Agent copies of its audited annual financial statements for each of the three preceding fiscal years or if the Trustee or any other banking institution becomes the Successor Servicer, such Successor Servicer shall provide, in lieu of the audited financial statements required in the immediately preceding clause, complete and correct copies of the publicly available portions of its Consolidated Reports of Condition and Income as submitted to the FDIC for the two most recent year end periods. (b) In the event that any Person becomes the successor to the Transferor pursuant to Article VII of the Pooling and Servicing Agreement, from and after the effective date of such transfer, such successor to the Transferor shall be the successor in all respects to the Transferor and shall be responsible for the performance of all functions to be performed by the Transferor from and after such date, except as -40- provided in the Pooling and Servicing Agreement, and shall be subject to all the responsibilities, duties and liabilities relating thereto placed on the Transferor by the terms and provisions hereof, and all references in this Agreement to the Transferor shall be deemed to refer to the successor to the Transferor; PROVIDED, however, that the references to the Transferor contained in Sections 2.5, 2.6 and 5.1 of this Agreement shall be deemed to refer to SRPC with respect to responsibilities, duties and liabilities arising out of an act or acts, or omission, or an event or events giving rise to such responsibilities, duties and liabilities and occurring during such time that SRPC was Transferor under this Agreement and shall be deemed to refer to the successor to SRPC as Transferor with respect to responsibilities, duties and liabilities arising out of an act or acts, or omission, or an event or events giving rise to such responsibilities, duties and liabilities and occurring during such time that the successor to SRPC acts as Transferor under this Agreement. A. Counterparts. This Agreement may be executed by one or more of the parties to this Agreement on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. A. Severability. Any provisions of this Agreement which are prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provisions in any other jurisdiction. B. Integration. This Agreement and the Class B-2 Fee Letter represent the agreement of the Class B-2 Agent, the Facility Agent, SRPC, SRI, the Transferor, the Servicer and the Class B-2 Purchasers with respect to the subject matter hereof, and there are no promises, undertakings, representations or warranties by the Class B-2 Purchasers, the Class B-2 Agent or the Facility Agent relative to subject matter hereof not expressly set forth or referred to herein or therein. A. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. A. Termination. This Agreement shall remain in full force and effect until the earlier to occur of (a) payment in full of the Class B-2 Repayment Amount and all other amounts payable to the Class B-2 Purchasers, the Class B-2 Agent and the Facility Agent hereunder and the termination of all Commitments and (b) the Series Termination Date; PROVIDED, HOWEVER, that if the Class B-2 Repayment Amount and all other amounts payable to the Class B-2 Purchasers hereunder are paid in full and all Commitments have terminated prior to the Series Termination Date, the Class B-2 Agent shall notify the Trustee that thereafter all amounts otherwise payable to the Class B-2 Purchasers hereunder shall be payable to the Transferor or any Person designated thereby; and PROVIDED, FURTHER, that the provisions of Sections 2.4, 2.5, 2.6, 6.1, 6.2, 7.7, 8.2, 9.11, 9.13 and 9.14 shall survive termination of this Agreement and any amounts payable to the -41- Facility Agent, the Class B-2 Agent or Class B-2 Purchasers thereunder shall remain payable thereto. A. Limited Recourse; No Proceedings. The obligations of SRPC, SRI, the Transferor and the Servicer under this Agreement are several (except as specifically provided herein) and are solely the corporate obligations of SRPC, SRI, the Transferor or the Servicer, as applicable. No recourse shall be had for the payment of any fee or other obligation or claim arising out of or relating to this Agreement or any other agreement, instrument, document or certificate executed and delivered or issued by SRPC, SRI, the Transferor and the Servicer or any officer of any of them in connection therewith, against any stockholder, employee, officer, director or incorporator of SRPC, SRI, the Transferor or the Servicer. With respect to obligations of the Transferor, neither the Class B-2 Agent, the Facility Agent nor any Class B-2 Purchaser shall look to any property or assets of the Transferor, other than to (a) amounts payable to the Class B-2 Agent, the Facility Agent or a Class B-2 Purchaser or to the Transferor under the Receivables Purchase Agreement, any Supplement or the Pooling and Servicing Agreement and (b) any other assets of the Transferor not pledged to third parties or otherwise encumbered in any manner permitted by the Transferor's Certificate of Incorporation. Each Class B-2 Purchaser, the Facility Agent and the Class B-2 Agent hereby agrees that to the extent such funds are insufficient or unavailable to pay any amounts owing to it by the Transferor pursuant to this Agreement, prior to the earlier of the Trust Termination Date or the commencement of a bankruptcy or insolvency proceeding by or against the Transferor, it shall not constitute a claim against the Transferor. Nothing in this paragraph shall limit or otherwise affect the liability of the Servicer with respect to any amounts owing by it hereunder or the right of the Class B-2 Agent, the Facility Agent or any Class B-2 Purchaser to enforce such liability against the Servicer or any of its assets. A. Survival of Representations and Warranties. All representations and warranties made hereunder and in any document, certificate or statement delivered pursuant hereto or in connection herewith shall survive the execution and delivery of this Agreement, the purchase of the Class B-2 Certificates hereunder and the termination of this Agreement. A. SUBMISSION TO JURISDICTION; WAIVERS. EACH OF SRPC, SRI, THE TRANSFEROR, THE SERVICER, THE FACILITY AGENT, THE CLASS B-2 AGENT AND EACH CLASS B-2 PURCHASER HEREBY IRREVOCABLY AND UNCONDITIONALLY: (A) SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT TO WHICH IT IS A PARTY, OR FOR RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT IN RESPECT THEREOF, TO THE NON-EXCLUSIVE GENERAL JURISDICTION OF THE COURTS OF -42- THE STATE OF NEW YORK AND THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND APPELLATE COURTS FROM ANY THEREOF; (B) CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE BROUGHT IN SUCH COURTS AND WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT OR THAT SUCH ACTION OR PROCEEDING WAS BROUGHT IN AN INCONVENIENT COURT AND AGREES NOT TO PLEAD OR CLAIM THE SAME; (C) AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR PROCEEDING MAY BE EFFECTED BY MAILING A COPY THEREOF BY REGISTERED OR CERTIFIED MAIL (OR ANY SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE PREPAID, TO SUCH PARTY AT ITS ADDRESS SET FORTH IN SECTION 9.2 OR AT SUCH OTHER ADDRESS OF WHICH THE AGENT SHALL HAVE BEEN NOTIFIED PURSUANT THERETO; AND (D) AGREES THAT NOTHING HEREIN SHALL AFFECT THE RIGHT TO EFFECT SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT TO SUE IN ANY OTHER JURISDICTION. A. WAIVERS OF JURY TRIAL. EACH OF SRPC, SRI, THE TRANSFEROR, THE SERVICER, THE FACILITY AGENT, THE CLASS B-2 AGENT AND THE CLASS B-2 PURCHASERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING DIRECTLY OR INDIRECTLY TO THIS AGREEMENT OR ANY OTHER DOCUMENT OR INSTRUMENT RELATED HERETO AND FOR ANY COUNTERCLAIM THEREIN. -43- IN WITNESS WHEREOF, the parties hereto have caused this Certificate Purchase Agreement to be duly executed by their respective officers as of the day and year first above written. SRI RECEIVABLES PURCHASE CO., INC., individually and as Transferor By: /S/ MARK A. HESS Name: Mark A. Hess Title: Treasurer SPECIALTY RETAILERS, INC., individually and as Servicer By: /S/ JAMES A. MARCUM Name: James A. Marcum Title: Vice Chairman and Chief Financial Officer (principal financial and accounting officer) -44- CREDIT SUISSE FIRST BOSTON, NEW YORK BRANCH, as Class B-2 Agent and as Facility Agent By: /S/ DENNIS J. KNITOWSKI Name: Dennis J. Knitowski Title: Associate By: /S/ ALBERTO ZONCA Name: Alberto Zonca Title: Associate COMMITMENT: $10,000,000 CREDIT SUISSE FIRST BOSTON, ADDRESS FOR NOTICES: NEW YORK BRANCH, as Class B-2 Purchaser Eleven Madison Avenue New York, New York 10010-3629 Attention:Asset Finance Department By: /S/ DENNIS J. KNITOWSKI Telephone: (212) 325-9086 Name: Dennis J. Knitowski Telecopy: (212) 325-6677 Title: Associate INVESTING OFFICE: Eleven Madison Avenue By: /S/ ALBERTO ZONCA New York, New York 10010-3629 Name: Alberto Zonca Title: Associate -45- EXHIBIT A FORM OF INVESTMENT LETTER [Date] SRI Receivables Purchase Co., Inc. 10201 Main Street Houston, Texas 77025 Attention: Treasurer Re SRI Receivables Master Trust Class B-2 FLOATING RATE VARIABLE FUNDING CERTIFICATES, SERIES 1997-1 Ladies and Gentlemen: This letter (the "Investment Letter") is delivered by the undersigned (the "Purchaser") pursuant to subsection 8.1(a) of the Class B-2 Certificate Purchase Agreement dated as of October 16, 1998 (as in effect, the "Certificate Purchase Agreement"), among SRI Receivables Purchase Co., Inc., as Transferor, Specialty Retailers, Inc., as Servicer, the Class B-2 Purchasers parties thereto and Credit Suisse First Boston, New York Branch, as Agent and Facility Agent. Capitalized terms used herein without definition shall have the meanings set forth in the Certificate Purchase Agreement. The Purchaser represents to and agrees with the Transferor as follows: (a) The Purchaser is authorized [to enter into the Certificate Purchase Agreement and to perform its obligations thereunder and to consummate the transactions contemplated thereby] [to purchase a participation in obligations under the Certificate Purchase Agreement]. (b) The Purchaser has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of its investment in the Class B-2 Certificates and is able to bear the economic risk of such investment. The Purchaser has been afforded the opportunity to ask such questions as it deems necessary to make an investment decision, and has received all information it has requested in connection with making such investment decision. The Purchaser has, independently and without reliance upon the Agent, the Facility Agent or any other Class B-2 Purchaser, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, operations, property, financial and other condition and creditworthiness of the Trust, SRPC, SRI, Granite, Stage, the Transferor and the Servicer and made its own decision to purchase its interest in the Class B-2 Certificates, and will, independently and without reliance upon the Agent, the Facility Agent or any other Class B-2 Purchaser, and based on such -46- documents and information as it shall deem appropriate at the time, continue to make its own analysis, appraisals and decisions in taking or not taking action under the Certificate Purchase Agreement, and to make such investigation as it deems necessary to inform itself as to the business, operations, property, financial and other condition and creditworthiness of the Trust, SRPC, SRI, Granite, Stage, the Transferor and the Servicer. (c) The Purchaser is an "accredited investor", as defined in Rule 501, promulgated by the Securities and Exchange Commission (the "Commission") under the Securities Act of 1933, as amended (the "Securities Act"), or is a sophisticated institutional investor. The Purchaser understands that the offering and sale of the Class B-2 Certificates has not been and will not be registered under the Securities Act and has not and will not be registered or qualified under any applicable "Blue Sky" law, and that the offering and sale of the Class B-2 Certificate has not been reviewed by, passed on or submitted to any federal or state agency or commission, securities exchange or other regulatory body. (d) The Purchaser is acquiring an interest in Class B-2 Certificates without a view to any distribution, resale or other transfer thereof except, with respect to any Class B-2 Purchaser Interest or any interest or participation therein, as contemplated in the following sentence. The Purchaser will not resell or otherwise transfer any interest or participation in the Class B-2 Purchaser Interest, except in accordance with Section 8.1 of the Certificate Purchase Agreement and (i) in a transaction exempt from the registration requirements of the Securities Act of 1933, as amended, and applicable state securities or "blue sky" laws; (ii) to the Transferor or any affiliate of the Transferor; or (iii) to a person who the Purchaser reasonably believes is a qualified institutional buyer (within the meaning thereof in Rule 144A under the Securities Act) that is aware that the resale or other transfer is being made in reliance upon Rule 144A. In connection therewith, the Purchaser hereby agrees that it will not resell or otherwise transfer the Class B-2 Certificates or any interest therein unless the purchaser thereof provides to the addressee hereof a letter substantially in the form hereof. -47- (e) This Investment Letter has been duly executed and delivered and constitutes the legal, valid and binding obligation of the Purchaser, enforceable against the Purchaser in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws or equitable principles affecting the enforcement of creditors' rights generally and general principles of equity. Very truly yours, [NAME OF PURCHASER] By:___________________________ Name: Title: -48- EXHIBIT B FORM OF TRANSFER SUPPLEMENT TRANSFER SUPPLEMENT, dated as of the date set forth in Item 1 of Schedule I hereto, among the Transferor Class B-2 Purchaser set forth in Item 2 of Schedule I hereto (the "TRANSFEROR CLASS B-2 PURCHASER"), the Purchasing Class B-2 Purchaser set forth in Item 3 of Schedule I hereto (the "PURCHASING CLASS B-2 PURCHASER"), and Credit Suisse First Boston, New York Branch, as Class B-2 Agent for the Class B-2 Purchasers under, and as defined in, the Certificate Purchase Agreement described below (in such capacity, the "CLASS B-2 AGENT"). W I T N E S S E T H: WHEREAS, this Supplement is being executed and delivered in accordance with subsection 8.1(e) of the Class B-2 Certificate Purchase Agreement, dated as of October 16, 1998, among SRI Receivables Purchase Co., Inc., as Transferor, Specialty Retailers, Inc., as Servicer, the Class B-2 Purchasers parties thereto, the Class B-2 Agent and Credit Suisse First Boston, New York Branch, as Facility Agent (as from time to time amended, supplemented or otherwise modified in accordance with the terms thereof, the "CERTIFICATE PURCHASE AGREEMENT"; unless otherwise defined herein, terms defined in the Certificate Purchase Agreement are used herein as therein defined); WHEREAS, the Purchasing Class B-2 Purchaser (if it is not already a Class B-2 Purchaser party to the Certificate Purchase Agreement) wishes to become a Class B-2 Purchaser party to the Certificate Purchase Agreement and the Purchasing Class B-2 Purchaser wishes to acquire and assume from the Transferor Class B-2 Purchaser, certain of the rights, obligations and commitments under the Certificate Purchase Agreement; and WHEREAS, the Transferor Class B-2 Purchaser wishes to sell and assign to the Purchasing Class B-2 Purchaser, certain of its rights, obligations and commitments under the Certificate Purchase Agreement. NOW, THEREFORE, the parties hereto hereby agree as follows: (a) Upon receipt by the Class B-2 Agent of five counterparts of this Supplement, to each of which is attached a fully completed Schedule I and Schedule II, each of which has been executed by the Transferor Class B-2 Purchaser, the Purchasing Class B-2 Purchaser and the Class B-2 Agent, the Class B-2 Agent will transmit to the Servicer, the Transferor, the Trustee, the Transferor Class B-2 Purchaser and the Purchasing Class B-2 Purchaser a Transfer Effective Notice, substantially in the form of Schedule III to this Supplement (a "TRANSFER -49- EFFECTIVE NOTICE"). Such Transfer Effective Notice shall be executed by the Class B-2 Agent and shall set forth, INTER ALIA, the date on which the transfer effected by this Supplement shall become effective (the "TRANSFER EFFECTIVE DATE"). From and after the Transfer Effective Date the Purchasing Class B-2 Purchaser shall be a Class B-2 Purchaser party to the Certificate Purchase Agreement for all purposes thereof. (b) At or before 12:00 Noon, local time of the Transferor Class B-2 Purchaser, on the Transfer Effective Date, the Purchasing Class B-2 Purchaser shall pay to the Transferor Class B-2 Purchaser, in immediately available funds, an amount equal to the purchase price, as agreed between the Transferor Class B-2 Purchaser and such Purchasing Class B-2 Purchaser (the "PURCHASE PRICE"), of the portion set forth on Schedule II hereto being purchased by such Purchasing Class B-2 Purchaser of the outstanding Class B-2 Invested Amount under the Class B-2 Certificate owned by the Transferor Class B-2 Purchaser (such Purchasing Class B-2 Purchaser's "PURCHASE Percentage") and other amounts owing to the Transferor Class B-2 Purchaser under the Certificate Purchase Agreement or otherwise in respect of the Class B-2 Certificates. Effective upon receipt by the Transferor Class B-2 Purchaser of the Purchase Price from the Purchasing Class B-2 Purchaser, the Transferor Class B-2 Purchaser hereby irrevocably sells, assigns and transfers to the Purchasing Class B-2 Purchaser, without recourse, representation or warranty, and the Purchasing Class B-2 Purchaser hereby irrevocably purchases, takes and assumes from the Transferor Class B-2 Purchaser, the Purchasing Class B-2 Purchaser's Purchase Percentage of (i) the presently outstanding Class B-2 Invested Amount under the Class B-2 Certificates owned by the Transferor Class B-2 Purchaser and other amounts owing to the Transferor Class B-2 Purchaser in respect of the Class B-2 Certificates, together with all instruments, documents and collateral security pertaining thereto, and (ii) the Purchasing Class B-2 Purchaser's Purchase Percentage of the Commitment Percentage and the Commitment of the Transferor Class B-2 Purchaser and other rights, duties and obligations of the Transferor Class B-2 Purchaser under the Certificate Purchase Agreement. This Supplement is intended by the parties hereto to effect a purchase by the Purchasing Class B-2 Purchaser and sale by the Transferor Class B-2 Purchaser of interests in the Class B-2 Certificates, and it is not to be construed as a loan or a commitment to make a loan by the Purchasing Class B-2 Purchaser to the Transferor Class B-2 Purchaser. The Transferor Class B-2 Purchaser hereby confirms that the amount of the Class B-2 Invested Amount is $ and its Percentage Interest thereof is ___%, which equals $ as of , 199_. Upon and after the Transfer Effective Date (until further modified in accordance with the Certificate Purchase Agreement), the Commitment Percentage and Commitment of the Transferor Class B-2 Purchaser and the Purchasing Class B-2 Purchaser shall be as set forth in Schedule II to this Supplement. (c) The Transferor Class B-2 Purchaser has made arrangements with the Purchasing Class B-2 Purchaser with respect to (i) the portion, if any, to be paid, and the date or dates for payment, by the Transferor Class B-2 Purchaser to the Purchasing Class B-2 Purchaser of any fees heretofore received by the Transferor Class B-2 Purchaser pursuant to the Certificate Purchase Agreement prior to the Transfer Effective Date and (ii) the portion, if any, to be paid, and the date or dates for payment, by the Purchasing Class B-2 Purchaser to the Transferor Class B-2 Purchaser of fees or interest received by the Purchasing Class B-2 Purchaser pursuant to the Certificate Purchase -50- Agreement or otherwise in respect of the Class B-2 Certificates from and after the Transfer Effective Date. (d) (i) All principal payments that would otherwise be payable from and after the Transfer Effective Date to or for the account of the Transferor Class B-2 Purchaser in respect of the Class B-2 Certificates shall, instead, be payable to or for the account of the Transferor Class B-2 Purchaser and the Purchasing Class B-2 Purchaser, as the case may be, in accordance with their respective interests as reflected in this Supplement. (ii) All interest, fees and other amounts that would otherwise accrue for the account of the Transferor Class B-2 Purchaser from and after the Transfer Effective Date pursuant to the Certificate Purchase Agreement or in respect of the Class B-2 Certificates shall, instead, accrue for the account of, and be payable to or for the account of, the Transferor Class B-2 Purchaser and the Purchasing Class B-2 Purchaser, as the case may be, in accordance with their respective interests as reflected in this Supplement. In the event that any amount of interest, fees or other amounts accruing prior to the Transfer Effective Date was included in the Purchase Price paid by the Purchasing Class B-2 Purchaser, the Transferor Class B-2 Purchaser and the Purchasing Class B-2 Purchaser will make appropriate arrangements for payment by the Transferor Class B-2 Purchaser to the Purchasing Class B-2 Purchaser of such amount upon receipt thereof from the Class B-2 Agent. (e) Concurrently with the execution and delivery hereof, the Purchasing Class B-2 Purchaser will deliver to Class B-2 Agent, the Transferor and the Trustee an executed Investment Letter in the form of Exhibit A to the Certificate Purchase Agreement and the forms, if any, required by subsection 2.5(c) of the Certificate Purchase Agreement. (f) Each of the parties to this Supplement agrees and acknowledges that (i) at any time and from time to time upon the written request of any other party, it will execute and deliver such further documents and do such further acts and things as such other party may reasonably request in order to effect the purposes of this Supplement, and (ii) the Class B-2 Agent shall apply each payment made to it under the Certificate Purchase Agreement, whether in its individual capacity or as Class B-2 Agent, in accordance with the provisions of the Certificate Purchase Agreement, as appropriate. (g) By executing and delivering this Supplement, the Transferor Class B-2 Purchaser and the Purchasing Class B-2 Purchaser confirm to and agree with each other, the Facility Agent and the Class B-2 Agent and the Class B-2 Purchasers as follows: (i) other than the representation and warranty that it is the legal and beneficial owner of the interest being assigned hereby free and clear of any adverse claim, the Transferor Class B-2 Purchaser makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Certificate Purchase Agreement or the Pooling and Servicing Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Certificate Purchase Agreement or any other instrument or document -51- furnished pursuant thereto; (ii) the Transferor Class B-2 Purchaser makes no representation or warranty and assumes no responsibility with respect to the Trust, the financial condition of SRPC, SRI, Granite, Stage, the Servicer, the Transferor or the Trustee, or the performance or observance by SRPC, SRI, Granite, Stage, the Servicer, the Transferor or the Trustee of any of their respective obligations under the Certificate Purchase Agreement, the Pooling and Servicing Agreement or any other instrument or document furnished pursuant hereto; (iii) each Purchasing Class B-2 Purchaser confirms that it has received a copy of such documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Supplement; (iv) each Purchasing Class B-2 Purchaser will, independently and without reliance upon the Class B-2 Agent, the Transferor Class B-2 Purchaser or any other Class B-2 Purchaser and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Certificate Purchase Agreement or the Pooling and Servicing Agreement; (v) each Purchasing Class B-2 Purchaser appoints and authorizes the Class B-2 Agent and the Facility Agent to take such action as agent on its behalf and to exercise such powers under the Certificate Purchase Agreement and the Pooling and Servicing Agreement as are delegated to the Class B-2 Agent or the Facility Agent, as the case may be, by the terms thereof, together with such powers as are reasonably incidental thereto, all in accordance with Section 7 of the Certificate Purchase Agreement; and (vi) each Purchasing Class B-2 Purchaser agrees (for the benefit of the Transferor Class B-2 Purchaser, the Class B-2 Agent, the Facility Agent, the Class B-2 Purchasers, the Trustee, the Servicer and the Transferor) that it will perform in accordance with their terms all of the obligations which by the terms of the Certificate Purchase Agreement are required to be performed by it as a Class B-2 Purchaser. (h) Schedule II hereto sets forth the revised Commitment Percentage and Commitment of the Transferor Class B-2 Purchaser, the Commitment Percentage and the Purchasing Class B-2 Purchaser and the initial Investing Office of the Purchasing Class B-2 Purchaser, as well as administrative information with respect to the Purchasing Class B-2 Purchaser. (i) THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. IN WITNESS WHEREOF, the parties hereto have caused this Supplement to be executed by their respective duly authorized officers on Schedule I hereto as of the date set forth in Item 1 of Schedule I hereto. -52- SCHEDULE I TO TRANSFER SUPPLEMENT COMPLETION OF INFORMATION AND SIGNATURES FOR TRANSFER SUPPLEMENT Re: Class B-2 Certificate Purchase Agreement, dated as of October 16, 1998, among SRI Receivables Purchase Co., Inc., as Transferor, Specialty Retailers, Inc., as Servicer, the Class B-2 Purchasers party thereto and Credit Suisse First Boston, New York Branch, as Class B-2 Agent and as Facility Agent. Item 1: Date of Transfer Supplement: Item 2: Transferor Class B-2 Purchaser: Item 3: Purchasing Class B-2 Purchaser: Item 4: Signatures of Parties to Agreement: as Transferor Class B-2 Purchaser BY: Name: Title: BY: Name: Title: -53- as Purchasing Class B-2 Purchaser BY: Name: Title: BY: Name: Title: CONSENTED TO AND ACCEPTED BY: CREDIT SUISSE FIRST BOSTON, NEW YORK BRANCH, as Class B-2 Agent By: Name: Title: By: Name: Title: -54- SCHEDULE II TO TRANSFER SUPPLEMENT LIST OF INVESTING OFFICES, ADDRESSES FOR NOTICES, ASSIGNED INTERESTS AND COMMITMENT PERCENTAGES [TRANSFEROR CLASS B-2 PURCHASER] A. COMMITMENT PERCENTAGE: Transferor Commitment Percentage Prior to Sale: _____% Commitment Percentage Sold: _____% Commitment Percentage Retained: _____% B. COMMITMENT: Transferor Class B-2 Purchaser Commitment Prior to Sale: $________ Commitment Sold: $________ Commitment Retained: $________ C. CLASS B-2 PRINCIPAL BALANCE: Transferor Class B-2 Purchaser Class B-2 Principal Balance Prior to Sale: $________ Class B-2 Principal Balance Sold: $________ Class B-2 Principal Balance Retained: $________ [PURCHASING CLASS B-2 PURCHASER] A. Commitment Percentage: _____% B. Commitment: $________ C. Class B-2 Principal Balance Owned Immediately After Sale: $________ -55- ADDRESS FOR NOTICES: INVESTING OFFICE: -56- SCHEDULE III TO TRANSFER SUPPLEMENT Form of TRANSFER EFFECTIVE NOTICE To: [Name and address of Transferor, Servicer, Trustee, the Transferor Class B-2 Purchaser and the Purchasing Class B-2 Purchaser] The undersigned, as Class B-2 Agent under the Class B-2 Certificate Purchase Agreement, dated as of October 16, 1998, among SRI Receivables Purchase Co., Inc., as Transferor, Specialty Retailers, Inc., as Servicer, the Class B-2 Purchasers parties thereto and Credit Suisse First Boston, New York Branch, as Class B-2 Agent for the Class B-2 Purchasers and as Facility Agent thereunder, acknowledges receipt of five executed counterparts of a completed Transfer Supplement. [Note: attach copies of Schedules I and II from such Agreement.] Terms defined in such Supplement are used herein as therein defined. Pursuant to such Supplement, you are advised that the Transfer Effective Date will be _____________, 199_. Very truly yours, CREDIT SUISSE FIRST BOSTON, NEW YORK BRANCH, as Class B-2 Agent By:_______________________ Name: Title: By:_______________________ Name: Title: -57- EX-4.4 5 EXHIBIT 4.4 AMENDMENT NO. 1 TO CLASS A CERTIFICATE PURCHASE AGREEMENT THIS AMENDMENT NO. 1, dated as of October 16, 1998 by and among SRI RECEIVABLES PURCHASE CO., INC., a Delaware corporation ("SRPC"), individually and as Transferor (as defined below), SPECIALTY RETAILERS, INC., a Texas corporation ("SRI"), individually and as Servicer (as defined below), the CLASS A PURCHASERS parties hereto (collectively, the "CLASS A PURCHASERS") and CREDIT SUISSE FIRST BOSTON, a Swiss banking corporation acting through its New York Branch ("CSFB"), as Class A Agent and as Facility Agent (each as defined below). W I T N E S S E T H: WHEREAS, the parties hereto are parties to the Class A Certificate Purchase Agreement, dated as of December 3, 1997, as modified by the increase and extension of commitment thereunder dated as of September 28, 1998 (as so modified, the "CERTIFICATE PURCHASE AGREEMENT"; terms used in this Amendment and not otherwise defined herein being used as defined in, or for purposes of, the Certificate Purchase Agreement), relating to the purchase by the Class A Purchasers of the Class A Initial Invested Amount and from time to time of Additional Class A Invested Amounts in respect of the Class A Variable Funding Certificates, Series 1997-1 issued by the SRI Receivables Master Trust; and WHEREAS, the Transferor has requested that the Class B Purchasers consent to a proposed Amended and Restated Supplement to be dated as of October 16, 1998, which would amend and, as so amended, restate the Supplement (as so amended and restated, the "RESTATED SUPPLEMENT"); and WHEREAS, pursuant to the Restated Supplement, the Trust proposes to issue its Class B-2 Variable Funding Certificates, Series 1997-1 (the "CLASS B-2 CERTIFICATES"), which would be sold to certain purchasers (the "CLASS B-2 PURCHASERS") pursuant to a Class B-2 Certificate Purchase Agreement, dated as of October 16, 1998, among SRPC, individually and as Transferor, SRI, individually and as Servicer, the Class B-2 Purchasers, CSFB, as Class B-2 Agent (in such capacity, the "CLASS B-2 AGENT"), and the Facility Agent; and WHEREAS, in connection with the Restated Supplement and the issuance of the Class B-2 Certificates, the Transferor has requested that the other parties hereto amend the Certificate Purchase Agreement in certain respects and that the Class A Purchasers, the Class A Agent and the Facility Agent consent to the amendments to and restatement of the Supplement set forth in the Restated Supplement; and WHEREAS, the other parties hereto are willing to consent to such amendments and to such restatement on the terms and conditions provided for herein; NOW THEREFORE, in consideration of the mutual covenants herein contained, and other good and valuable consideration, the receipt and adequacy of which are hereby expressly acknowledged, the parties hereto agree as follows: I. SECTION AMENDMENTS TO SECTION 1.1. A. The definition of "Related Documents" contained in Section 1.1 is hereby amended and restated to read in its entirety as follows: "RELATED DOCUMENTS" shall mean, collectively, this Agreement (including the Class A Fee Letter and all Joinder Supplements and Transfer Supplements), the Class B Purchase Agreement, the Class B-2 Purchase Agreement, the Master Pooling and Servicing Agreement, the Supplement, the Series 1997-1 Certificates, the Receivables Purchase Agreement and the Receivables Transfer Agreement. A. The following definitions are hereby added to Section 1.1 of the Certificate Purchase Agreement in their appropriate alphabetical order: "CLASS B-2 CERTIFICATE PURCHASE AGREEMENT" shall mean the Class B-2 Certificate Purchase Agreement, dated as of October 16, 1998 among SRPC, individually and as Transferor, SRI, individually and as Servicer, the Class B-2 Purchasers parties thereto, the Class B-2 Agent referred to therein and the Facility Agent, as amended, modified or otherwise supplemented from time to time. "CLASS B-2 CERTIFICATES" shall mean the Trust's Class B-2 Variable Funding Certificates, Series 1997-1. "GRANITE" shall mean Granite National Bank, N.A., a national banking association, which is a subsidiary of Stage. "RECEIVABLES TRANSFER AGREEMENT" shall mean the Receivables Transfer Agreement, dated as of August 1, 1998, between SRI, as purchaser, and Granite, as transferor, as the same may from time to time be amended or otherwise modified. I. SECTION AMENDMENT TO SUBSECTION 3.2. Subsection 3.2(d) of the Certificate Purchase Agreement is hereby amended and restated to read in its entirety as follows: (d) after giving effect to such purchase, (i) the sum of the Class B Invested Amount, the Class B-2 Invested Amount and the Class C Invested Amount shall equal not less than 25% of the Invested Amount on the applicable Purchase Date and (ii) the sum of the Class B-2 Invested Amount and the Class C Invested Amount shall not be less than 5% of the highest Invested Amount during the 180 days preceding such Purchase Date; I. SECTION AMENDMENT TO SECTION 4.2. Subsection (m) of Section 4.2 of the Certificate Purchase Agreement is hereby replaced by the following new subsections (m) and (n): (m) The representations and warranties of Granite set forth in Section 4.02 and 4.03 of the Receivables Transfer Agreement are true and correct in all material respects. (n) All written factual information heretofore furnished by SRPC, SRI, Granite or Stage to, or for delivery to, the Class A Agent for purposes of or in connection with this Agreement, including information relating to the Accounts, the Receivables and the credit card business of SRPC, SRI or Granite, was true and correct in all material respects on the date as of which such information was stated or certified and remains true and correct in all material respects (unless such information specifically relates to an earlier date in which case such information shall have been true and correct in all material respects on such earlier date). I. SECTION AMENDMENTS TO SECTION 5.1. A. Subsection 5.1(e) of the Certificate Purchase Agreement is hereby amended and restated to read as follows: (e) SRI shall furnish to the Class A Agent (i) promptly when publicly available, the annual (audited) and quarterly (unaudited) consolidated and consolidating financial statements of each of Stage and SRPC, the publicly available portions of Granite's quarterly and annual consolidated reports of condition and income and such other publicly available financial information, if any, as to Stage, SRI, Granite or SRPC as the Class A Agent may request, and (ii) promptly after known to SRI, information with respect to any action, suit or proceeding involving SRI or any of its Affiliates by or before any court or any Governmental Authority which, if adversely determined, would materially adversely affect the business, results of operation or financial condition of SRPC, SRI or Granite; A. Subsection 5.1(k) of the Certificate Purchase Agreement is hereby amended and restated to read as follows: (k) the Transferor and the Servicer shall timely make all payments, deposits or transfers and give all instructions to transfer required by this Agreement, the Pooling and Servicing Agreement, the Receivables Purchase Agreement and the Receivables Transfer Agreement; I. SECTION AMENDMENT TO SECTION 6.1. Section 6.1 of the Certificate Purchase Agreement is hereby amended and restated to read as follows: 6.1 COVENANTS OF SRPC, ETC. SRPC, SRI, the Transferor and the Servicer shall hold in confidence, and not disclose to any Person, the terms of any fees payable in connection with this Agreement except they may disclose such information (i) to their officers, directors, employees, agents, counsel, accountants, auditors, advisors or representatives, (ii) with the consent of the Required Class B-2 Purchasers and Class B-2 Agent, or (iii) to the extent SRPC, SRI, Granite, the Transferor or the Servicer or any Affiliate of either of them should be required by any law or regulation applicable to it or requested by any Governmental Authority to disclose such information; PROVIDED, that, in the case of clause (iii), SRPC, the Transferor, SRI, Granite or the Servicer, as the case may be, will use all reasonable efforts to maintain confidentiality and will (unless otherwise prohibited by law) notify the Class A Agent of its intention to make any such disclosure prior to making such disclosure. I. SECTION AMENDMENTS TO ARTICLE 7. A. Sections 7.3, 7.6 and 7.7 of the Certificate Purchase Agreement are hereby amended to add "Granite," after "SRI," each time such word appears therein. A. Subsection 7.9(b) of the Certificate Purchase Agreement is hereby amended and restated to read as follows: (b) The Facility Agent may resign as Facility Agent upon ten days' notice to the Class A Purchasers, the Class B Purchasers (as defined in the Class B Certificate Purchase Agreement), the Class B-2 Purchasers (as defined in the Class B-2 Certificate Purchase Agreement), the Trustee, the Transferor and the Servicer with such resignation becoming effective upon a successor agent succeeding to the rights, powers and duties of the Facility Agent pursuant to this subsection 7.9(b). If the Facility Agent shall resign as Facility Agent under this Agreement, then the Required Class A Purchasers and the Required Class A Owners shall appoint from among the Committed Class A Purchasers hereunder or the Committed Class B Purchasers under the Class B Certificate Purchase Agreement a successor Facility Agent of the Class A Certificateholders and the Class B Certificateholders as provided in the Supplement; PROVIDED that no such appointment shall be effective unless such successor is also appointed as successor Facility Agent under the Class B Certificate Purchase Agreement and the Class B-2 Certificate Purchase Agreement. The successor agent shall succeed to the rights, powers and duties of the Facility Agent, and the term "Facility Agent" shall mean such successor agent effective upon its appointment, and the former Facility Agent's rights, powers and duties as Facility Agent shall be terminated, without any other or further act or deed on the part of such former Facility Agent or any of the parties to this Agreement. After the retiring Facility Agent's resignation as Facility Agent, the provisions of this Section 7 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Facility Agent under this Agreement. I. SECTION CONSENT. Each Class A Purchaser, Alpine Securitization Corp., as the Class A Owner and the Class A Agent hereby consent to the Restated Supplement and to the issuance of the Class B-2 Certificates thereunder and hereby direct the Facility Agent to consent thereto. The Class A Agent hereby certifies that its records reflect that Alpine Securitization Corp. is the sole Class A Owner. I. SECTION REPRESENTATIONS AND WARRANTIES. In order to induce each Class A Purchaser, the Class A Agent and the Facility Agent to enter into this Amendment and to grant the consent set forth in Section 7 above, A. SRPC hereby confirms that, after giving effect to this Amendment and the Restated Supplement and to the transactions contemplated by the Class B-2 Certificate Purchase Agreement, its representations and warranties set forth or referred to in the Certificate Purchase Agreement are true and correct in all material respects as of the date hereof, as though made on and as of such date, and that no event or condition which of itself or with the giving of notice or the lapse of time or both would constitute a Termination Event has occurred and is continuing; and A. SRI hereby confirms that, after giving effect to this Amendment and the Restated Supplement and to the transactions contemplated by the Class B-2 Certificate Purchase Agreement, its representations and warranties set forth or referred to in the Certificate Purchase Agreement are true and correct in all material respects as of the date hereof, as though made on and as of such date, and that no event or condition which of itself or with the giving of notice or the lapse of time or both would constitute a Termination Event has occurred and is continuing. I. SECTION MISCELLANEOUS. A. As amended by this Amendment, the Certificate Purchase Agreement is in all respects ratified and confirmed, and the Certificate Purchase Agreement as amended by this Amendment shall be read, taken and construed as one and the same instrument. A. This Amendment shall be effective as of the date first above written when executed by SRPC, SRI, each Class A Purchaser, the Class A Owner, the Class A Agent and the Facility Agent, subject to (i) the satisfaction of the conditions precedent set forth in Section 3.1 of the Class B-2 Certificate Purchase Agreement, and (ii) receipt by the Class A Agent of executed copies of all opinions, certificates, letters and other documents required under Section 3.1 of the Class B-2 Certificate Purchase Agreement to be delivered to the Class B-2 Agent (each such opinion, unless otherwise agreed to by the Class A Agent, to be addressed to the Class A Agent on behalf of the Class A Purchasers and the Facility Agent or accompanied by a letter providing that the Class A Agent on behalf of the Class A Purchasers and the Facility Agent may rely on such opinion as if it were addressed to it), and such additional documents, instruments, certificates or letters as the Class A Agent may reasonably request. A. This Amendment shall be binding upon and inure to the benefit of SRPC, SRI, the Transferor, the Servicer, the Class A Agent, the Facility Agent, the Class A Purchasers, any Assignee and their respective successors and assigns, subject to the provisions of Sections 8.1 and 9.4 of the Certificate Purchase Agreement. A. This Amendment may be executed by one or more of the parties to this Amendment on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. A. Any provisions of this Amendment which are prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provisions in any other jurisdiction. A. This Amendment may be amended from time to time only if the conditions set forth in Section 9.1 of the Certificate Purchase Agreement are satisfied. A. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed by their respective officers as of the day and year first above written. SRI RECEIVABLES PURCHASE CO., INC., individually and as Transferor By: /s/ MARK A. HESS Name: Mark A. Hess Title: Treasurer SPECIALTY RETAILERS, INC., individually and as Servicer By: /s/ JAMES A. MARCUM Name: James A. Marcum Title: Vice Chairman and Chief Financial Officer (principal financial and accounting officer) CREDIT SUISSE FIRST BOSTON, NEW YORK BRANCH, as Class A Agent and as Facility Agent By: /s/ DENNIS J. KNITOWSKI Name: Dennis J. Knitowski Title: Associate By: /s/ ALBERTO ZONCA Name: Alberto Zonca Title: Associate THE FOREGOING IS HEREBY CONSENTED TO: ALPINE SECURITIZATION CORP. as a Class A Purchaser and as Class A Owner By Credit Suisse First Boston, New York Branch, its attorney-in-fact By: /s/ AIMEE SEVILLA Name: Aimee Sevilla Title: Associate By: /s/ MARGOTH PILLA Name: Margoth Pilla Title: Vice President CREDIT SUISSE FIRST BOSTON, NEW YORK BRANCH, as Class A Purchaser By: /s/ DENNIS J. KNITOWSKI Name: Dennis J. Knitowski Title: Associate By: /s/ ALBERTO ZONCA Name: Alberto Zonca Title: Associate EX-4.5 6 EXHIBIT 4.5 AMENDMENT NO. 1 TO CLASS B CERTIFICATE PURCHASE AGREEMENT THIS AMENDMENT NO. 1, dated as of October 16, 1998 by and among SRI RECEIVABLES PURCHASE CO., INC., a Delaware corporation ("SRPC"), individually and as Transferor (as defined below), SPECIALTY RETAILERS, INC., a Texas corporation ("SRI"), individually and as Servicer (as defined below), the CLASS B PURCHASERS parties hereto (collectively, the "CLASS B Purchasers") and CREDIT SUISSE FIRST BOSTON, a Swiss banking corporation acting through its New York Branch ("CSFB"), as Class B Agent and as Facility Agent (each as defined below). W I T N E S S E T H: WHEREAS, the parties hereto are parties to the Class B Certificate Purchase Agreement, dated as of December 3, 1997, as modified by the increase and extension of commitment thereunder dated as of September 28, 1998 (as so modified, the "CERTIFICATE PURCHASE AGREEMENT"; terms used in this Amendment and not otherwise defined herein being used as defined in, or for purposes of, the Certificate Purchase Agreement), relating to the purchase by the Class B Purchasers of the Class B Initial Invested Amount and from time to time of Additional Class B Invested Amounts in respect of the Class B Variable Funding Certificates, Series 1997-1 issued by the SRI Receivables Master Trust; and WHEREAS, the Transferor has requested that the Class B Purchasers consent to a proposed Amended and Restated Supplement to be dated as of October 16, 1998, which would amend and, as so amended, restate the Supplement (as so amended and restated, the "RESTATED SUPPLEMENT"); and WHEREAS, pursuant to the Restated Supplement, the Trust proposes to issue its Class B-2 Variable Funding Certificates, Series 1997-1 (the "CLASS B-2 CERTIFICATES"), which would be sold to certain purchasers (the "CLASS B-2 PURCHASERS") pursuant to a Class B-2 Certificate Purchase Agreement, dated as of October 16, 1998, among SRPC, individually and as Transferor, SRI, individually and as Servicer, the Class B-2 Purchasers, CSFB, as Class B-2 Agent (in such capacity, the "CLASS B-2 AGENT"), and the Facility Agent; and WHEREAS, in connection with the Restated Supplement and the issuance of the Class B-2 Certificates, the Transferor has requested that the other parties hereto amend the Certificate Purchase Agreement in certain respects and that the Class B Purchasers, the Class B Agent and the Facility Agent consent to the amendments to and restatement of the Supplement set forth in the Restated Supplement; and WHEREAS, the other parties hereto are willing to consent to such amendments and to such restatement on the terms and conditions provided for herein; NOW THEREFORE, in consideration of the mutual covenants herein contained, and other good and valuable consideration, the receipt and adequacy of which are hereby expressly acknowledged, the parties hereto agree as follows: I. SECTION AMENDMENTS TO SECTION 1.1. A. The definition of "Related Documents" contained in Section 1.1 is hereby amended and restated to read in its entirety as follows: "RELATED DOCUMENTS" shall mean, collectively, this Agreement (including the Class B Fee Letter and all Joinder Supplements and Transfer Supplements), the Class A Purchase Agreement, the Class B-2 Purchase Agreement, the Master Pooling and Servicing Agreement, the Supplement, the Series 1997-1 Certificates, the Receivables Purchase Agreement and the Receivables Transfer Agreement. A. The following definitions are hereby added to Section 1.1 of the Certificate Purchase Agreement in their appropriate alphabetical order: "CLASS B-2 CERTIFICATE PURCHASE AGREEMENT" shall mean the Class B-2 Certificate Purchase Agreement, dated as of October 16, 1998 among SRPC, individually and as Transferor, SRI, individually and as Servicer, the Class B-2 Purchasers parties thereto, the Class B-2 Agent referred to therein and the Facility Agent, as amended, modified or otherwise supplemented from time to time. "CLASS B-2 CERTIFICATES" shall mean the Trust's Class B-2 Variable Funding Certificates, Series 1997-1. "GRANITE" shall mean Granite National Bank, N.A., a national banking association, which is a subsidiary of Stage. "RECEIVABLES TRANSFER AGREEMENT" shall mean the Receivables Transfer Agreement, dated as of August 1, 1998, between SRI, as purchaser, and Granite, as transferor, as the same may from time to time be amended or otherwise modified. I. SECTION AMENDMENT TO SUBSECTION 3.2. Subsection 3.2(d) of the Certificate Purchase Agreement is hereby amended and restated to read in its entirety as follows: (d) after giving effect to such purchase, the sum of the Class B-2 Invested Amount and the Class C Invested Amount shall equal not less than the greater of (i) 17.5% of the Invested Amount on the applicable Purchase Date and (ii) 5% of the highest Invested Amount during the 180 days preceding such Purchase Date; I. SECTION AMENDMENT TO SECTION 4.2. Subsection (m) of Section 4.2 of the Certificate Purchase Agreement is hereby replaced by the following new subsections (m) and (n): (m) The representations and warranties of Granite set forth in Section 4.02 and 4.03 of the Receivables Transfer Agreement are true and correct in all material respects. (n) All written factual information heretofore furnished by SRPC, SRI, Granite or Stage to, or for delivery to, the Class B Agent for purposes of or in connection with this Agreement, including information relating to the Accounts, the Receivables and the credit card business of SRPC, SRI or Granite, was true and correct in all material respects on the date as of which such information was stated or certified and remains true and correct in all material respects (unless such information specifically relates to an earlier date in which case such information shall have been true and correct in all material respects on such earlier date). I. SECTION AMENDMENTS TO SECTION 5.1. A. Subsection 5.1(e) of the Certificate Purchase Agreement is hereby amended and restated to read as follows: (e) SRI shall furnish to the Class B Agent (i) promptly when publicly available, the annual (audited) and quarterly (unaudited) consolidated and consolidating financial statements of each of Stage and SRPC, the publicly available portions of Granite's quarterly and annual consolidated reports of condition and income and such other publicly available financial information, if any, as to Stage, SRI, Granite or SRPC as the Class B Agent may request, and (ii) promptly after known to SRI, information with respect to any action, suit or proceeding involving SRI or any of its Affiliates by or before any court or any Governmental Authority which, if adversely determined, would materially adversely affect the business, results of operation or financial condition of SRPC, SRI or Granite; A. Subsection 5.1(k) of the Certificate Purchase Agreement is hereby amended and restated to read as follows: (k) the Transferor and the Servicer shall timely make all payments, deposits or transfers and give all instructions to transfer required by this Agreement, the Pooling and Servicing Agreement, the Receivables Purchase Agreement and the Receivables Transfer Agreement; I. SECTION AMENDMENT TO SECTION 6.1. Section 6.1 of the Certificate Purchase Agreement is hereby amended and restated to read as follows: 6.1 COVENANTS OF SRPC, ETC. SRPC, SRI, the Transferor and the Servicer shall hold in confidence, and not disclose to any Person, the terms of any fees payable in connection with this Agreement except they may disclose such information (i) to their officers, directors, employees, agents, counsel, accountants, auditors, advisors or representatives, (ii) with the consent of the Required Class B-2 Purchasers and Class B-2 Agent, or (iii) to the extent SRPC, SRI, Granite, the Transferor or the Servicer or any Affiliate of either of them should be required by any law or regulation applicable to it or requested by any Governmental Authority to disclose such information; PROVIDED, that, in the case of clause (iii), SRPC, the Transferor, SRI, Granite or the Servicer, as the case may be, will use all reasonable efforts to maintain confidentiality and will (unless otherwise prohibited by law) notify the Class B Agent of its intention to make any such disclosure prior to making such disclosure. I. SECTION AMENDMENTS TO ARTICLE 7. A. Sections 7.3, 7.6 and 7.7 of the Certificate Purchase Agreement are hereby amended to add "Granite," after "SRI," each time such word appears therein. A. Subsection 7.9(b) of the Certificate Purchase Agreement is hereby amended and restated to read as follows: (b) The Facility Agent may resign as Facility Agent upon ten days' notice to the Class B Purchasers, the Class A Purchasers (as defined in the Class A Certificate Purchase Agreement), the Class B-2 Purchasers (as defined in the Class B-2 Certificate Purchase Agreement), the Trustee, the Transferor and the Servicer with such resignation becoming effective upon a successor agent succeeding to the rights, powers and duties of the Facility Agent pursuant to this subsection 7.9(b). If the Facility Agent shall resign as Facility Agent under this Agreement, then the Required Class B Purchasers and the Required Class B Owners shall appoint from among the Committed Class B Purchasers hereunder or the Committed Class A Purchasers under the Class A Certificate Purchase Agreement a successor Facility Agent of the Class A Certificateholders and the Class B Certificateholders as provided in the Supplement; PROVIDED that no such appointment shall be effective unless such successor is also appointed as successor Facility Agent under the Class B Certificate Purchase Agreement and the Class B-2 Certificate Purchase Agreement. The successor agent shall succeed to the rights, powers and duties of the Facility Agent, and the term "Facility Agent" shall mean such successor agent effective upon its appointment, and the former Facility Agent's rights, powers and duties as Facility Agent shall be terminated, without any other or further act or deed on the part of such former Facility Agent or any of the parties to this Agreement. After the retiring Facility Agent's resignation as Facility Agent, the provisions of this Section 7 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Facility Agent under this Agreement. I. SECTION CONSENT. Each Class B Purchaser, Alpine Securitization Corp., as the Class B Owner and the Class B Agent hereby consent to the Restated Supplement and to the issuance of the Class B-2 Certificates thereunder and hereby direct the Facility Agent to consent thereto. The Class B Agent hereby certifies that its records reflect that Alpine Securitization Corp. is the sole Class B Owner. I. SECTION REPRESENTATIONS AND WARRANTIES. In order to induce each Class B Purchaser, the Class B Agent and the Facility Agent to enter into this Amendment and to grant the consent set forth in Section 7 above, A. SRPC hereby confirms that, after giving effect to this Amendment and the Restated Supplement and to the transactions contemplated by the Class B-2 Certificate Purchase Agreement, its representations and warranties set forth or referred to in the Certificate Purchase Agreement are true and correct in all material respects as of the date hereof, as though made on and as of such date, and that no event or condition which of itself or with the giving of notice or the lapse of time or both would constitute a Termination Event has occurred and is continuing; and A. SRI hereby confirms that, after giving effect to this Amendment and the Restated Supplement and to the transactions contemplated by the Class B-2 Certificate Purchase Agreement, its representations and warranties set forth or referred to in the Certificate Purchase Agreement are true and correct in all material respects as of the date hereof, as though made on and as of such date, and that no event or condition which of itself or with the giving of notice or the lapse of time or both would constitute a Termination Event has occurred and is continuing. I. SECTION MISCELLANEOUS. A. As amended by this Amendment, the Certificate Purchase Agreement is in all respects ratified and confirmed, and the Certificate Purchase Agreement as amended by this Amendment shall be read, taken and construed as one and the same instrument. A. This Amendment shall be effective as of the date first above written when executed by SRPC, SRI, each Class B Purchaser, the Class B Owner, the Class B Agent and the Facility Agent, subject to (i) the satisfaction of the conditions precedent set forth in Section 3.1 of the Class B-2 Certificate Purchase Agreement, and (ii) receipt by the Class B Agent of executed copies of all opinions, certificates, letters and other documents required under Section 3.1 of the Class B-2 Certificate Purchase Agreement to be delivered to the Class B-2 Agent (each such opinion, unless otherwise agreed to by the Class B Agent, to be addressed to the Class B Agent on behalf of the Class B Purchasers and the Facility Agent or accompanied by a letter providing that the Class B Agent on behalf of the Class B Purchasers and the Facility Agent may rely on such opinion as if it were addressed to it), and such additional documents, instruments, certificates or letters as the Class B Agent may reasonably request. A. This Amendment shall be binding upon and inure to the benefit of SRPC, SRI, the Transferor, the Servicer, the Class B Agent, the Facility Agent, the Class B Purchasers, any Assignee and their respective successors and assigns, subject to the provisions of Sections 8.1 and 9.4 of the Certificate Purchase Agreement. A. This Amendment may be executed by one or more of the parties to this Amendment on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. A. Any provisions of this Amendment which are prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provisions in any other jurisdiction. A. This Amendment may be amended from time to time only if the conditions set forth in Section 9.1 of the Certificate Purchase Agreement are satisfied. A. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed by their respective officers as of the day and year first above written. SRI RECEIVABLES PURCHASE CO., INC., individually and as Transferor By: /s/ MARK A. HESS Name: Mark A. Hess Title: Treasurer SPECIALTY RETAILERS, INC., individually and as Servicer By: /s/ JAMES A. MARCUM Name: James A. Marcum Title: Vice Chairman and Chief Financial Officer (principal financial and accounting officer) CREDIT SUISSE FIRST BOSTON, NEW YORK BRANCH, as Class B Agent and as Facility Agent By: /s/ DENNIS J. KNITOWSKI Name: Dennis J. Knitowski Title: Associate By: /s/ ALBERTO ZONCA Name: Alberto Zonca Title: Associate THE FOREGOING IS HEREBY CONSENTED TO: ALPINE SECURITIZATION CORP. as a Class B Purchaser and as Class B Owner By Credit Suisse First Boston, New York Branch, its attorney-in-fact By: /s/ AIMEE SEVILLA Name: Aimee Sevilla Title: Associate By: /s/ MARGOTH PILLA Name: Margoth Pilla Title: Vice President CREDIT SUISSE FIRST BOSTON, NEW YORK BRANCH, as Class B Purchaser By: /s/ DENNIS J. KNITOWSKI Name: Title: Associate By: /s/ ALBERTO ZONCA Name: Title: Associate EX-27 7
5 THE RESTATED FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE STAGE STORES, INC. CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 9-MOS JAN-30-1999 OCT-31-1998 11,226 0 0 0 421,658 574,097 225,121 0 917,361 243,494 450,311 279 0 0 212,841 917,361 816,198 816,198 571,482 571,482 0 0 34,284 10,898 4,250 6,648 0 0 0 6,648 0.24 0.23
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