<PAGE>
RULE NO. 424(b)(3)
REGISTRATION NO. 33-99442
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not sell these securities until a final prospectus supplement is delivered. +
+This prospectus supplement and the accompanying prospectus are not an offer +
+to sell these securities and we are not soliciting offers to buy these +
+securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Subject to Completion, dated March 12, 1999
PRELIMINARY PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED MARCH 12, 1999
$750,000,000
Wachovia Credit Card Master Trust
Class A Floating Rate Asset Backed Certificates,
Series 1999-1
The First National Bank of Atlanta d/b/a Wachovia Bank Card Services
Transferor and Servicer
<TABLE>
<S> <C>
Principal Amount $750,000,000
Price $ ( %)
Underwriting Discount $ ( %)
Proceeds to the Transferor $ ( %)
Certificate Rate one-month LIBOR + % p.a.
Interest Payment Dates monthly on the 15th
First Interest Payment Date May 17, 1999
Scheduled Principal Payment Date March 15, 2004
</TABLE>
These securities are interests in Wachovia Credit Card Master Trust and are
backed only by the assets of the Trust. Neither these securities nor the
assets of the Trust are obligations of The First National Bank of
Atlanta d/b/a Wachovia Bank Card Services or any of its affiliates,
or obligations insured by the FDIC.
These securities are highly structured. Before you purchase these securities,
be sure you understand the structure and the risks. See "Risk Factors"
beginning on page S-8 in this prospectus supplement and beginning on
page 20 in the prospectus.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed on the
adequacy or accuracy of the disclosures in this supplement and the attached
prospectus. Any representation to the contrary is a criminal offense.
These securities are offered subject to availability.
Credit Suisse First Boston Wachovia Capital Markets, Inc.
Chase Securities Inc.
J.P. Morgan & Co.
Salomon Smith Barney
The date of this Preliminary Prospectus Supplement is March 12, 1999
<PAGE>
Table of Contents
Prospectus Supplement
<TABLE>
<S> <C>
Where to Find Information in These Documents.............................. S-3
Summary of Terms.......................................................... S-4
Structural Summary........................................................ S-5
Risk Factors.............................................................. S-8
Potential Early Repayment or Delayed Payment due to Reduced Portfolio
Yield................................................................... S-8
Allocations of Charged-Off Receivables Could Reduce Payments to
Certificateholders...................................................... S-11
Limited Ability to Resell Certificates................................... S-11
Certain Liens Could Be Given Priority Over Your Securities............... S-11
Insolvency or Bankruptcy of Wachovia Could Result in Accelerated, Delayed
or Reduced Payments to Certificateholders............................... S-11
Issuance of Additional Series by the Trust May Affect the Timing of
Payments................................................................ S-12
Individual Certificateholders Will Have Limited Control of Trust Action.. S-13
Wachovia's Credit Card Portfolio.......................................... S-14
General.................................................................. S-14
Billing and Payments..................................................... S-14
Portfolio Acquisitions................................................... S-15
Delinquency and Loss Experience.......................................... S-15
Interchange.............................................................. S-17
The Receivables........................................................... S-18
Maturity Considerations................................................... S-21
Controlled Accumulation Period........................................... S-21
Rapid Amortization Period................................................ S-21
Pay Out Events........................................................... S-22
Payment Rates............................................................ S-22
</TABLE>
<TABLE>
<S> <C>
Receivable Yield Considerations........................................... S-23
Wachovia and Wachovia Corporation......................................... S-24
Description of the Certificates........................................... S-24
General.................................................................. S-24
Exchanges................................................................ S-25
Interest Payments........................................................ S-25
Principal Payments....................................................... S-27
Postponement of Controlled Accumulation Period........................... S-28
Allocation Percentages................................................... S-28
Reallocation of Cash Flows............................................... S-30
Application of Collections............................................... S-32
Shared Excess Finance Charge Collections................................. S-36
Shared Principal Collections............................................. S-36
Required Collateral Interest............................................. S-37
Defaulted Receivables; Investor Charge-Offs.............................. S-37
Principal Funding Account................................................ S-39
Reserve Account.......................................................... S-39
Pay Out Events........................................................... S-40
Defeasance............................................................... S-41
Servicing Compensation and Payment of Expenses........................... S-41
Reports to Class A Certificateholders.................................... S-42
ERISA Considerations...................................................... S-43
Consultation with Counsel................................................ S-43
Underwriting.............................................................. S-45
Index of Terms for Prospectus Supplement.................................. S-47
ANNEX I: Other Series..................................................... A-I-1
</TABLE>
S-2
<PAGE>
Where to Find Information in These Documents
The attached prospectus provides general information about Wachovia Credit
Card Master Trust, including terms and conditions that are generally applicable
to the securities issued by the trust. The specific terms of Series 1999-1 are
described in this supplement.
This supplement begins with several introductory sections describing your
series and Wachovia Credit Card Master Trust in abbreviated form:
. Summary of Terms provides important amounts, dates and other terms of
your series;
. Structural Summary gives a brief introduction of the key structural
features of your series and directions for locating further information;
and
. Risk Factors describes risks that apply to your series.
As you read through these sections, cross-references will direct you to more
detailed descriptions in the attached prospectus and elsewhere in this
supplement. You can also directly reference key topics by looking at the table
of contents pages in this supplement and the attached prospectus.
This supplement and the attached prospectus may be used by Wachovia Capital
Markets, Inc. and its successors in connection with offers and sales related to
market-making transactions in the certificates offered by this supplement and
the attached prospectus. Wachovia Capital Markets, Inc. may act as principal or
agent in those transactions. The sales will be made at varying prices related
to prevailing market prices at the time of sale.
To understand the structure of these securities, you must read carefully
the attached prospectus and this supplement in their entirety.
S-3
<PAGE>
Summary of Terms
The First National Bank of Atlanta d/b/a Wachovia
Transferor: Bank Card Services--"Wachovia" or the "Bank"
Servicer: Wachovia
Trustee: The Bank of New York (Delaware)
Pricing Date:
Closing Date:
Clearance and Settlement:
DTC/Cedelbank/Euroclear
Trust Assets: receivables originated in VISA(R) and MasterCard(R)
accounts, including recoveries on charged-off
accounts
<TABLE>
<CAPTION>
Amount % of Total Series
------------ -----------------
<S> <C> <C>
Series Structure:
Class A $750,000,000 86.5%
Class B $ 52,025,000 6.0%
Collateral interest $ 65,030,000 7.5%
Annual Servicing Fee: 2.00%
</TABLE>
<TABLE>
<CAPTION>
Class A
---------------------------
<S> <C>
Anticipated Ratings:*
(Moody's/S&P/Fitch IBCA) Aaa/AAA/AAA
Credit Enhancement: subordination of Class B
and the collateral interest
Interest Rate: one-month LIBOR+ % p.a.
Interest Accrual Method: actual/360
Interest Payment Dates: monthly (15th)
First Interest Payment Date: May 17, 1999
Scheduled Payment Date: March 15, 2004
Commencement of Accumulation Period (subject to
adjustment): February 28, 2003
Stated Series Termination Date: August 15, 2006
CUSIP: 929772 AC 5
</TABLE>
- --------
* It is a condition to issuance that one of these ratings be obtained.
S-4
<PAGE>
Structural Summary
This summary briefly describes certain major structural components of Series
1999-1. To fully understand the terms of Series 1999-1, you will need to read
both this supplement and the attached prospectus in their entirety.
The Series 1999-1 Certificates
Your certificates represent the right to a portion of collections on the
underlying Trust assets. Your certificates will also be allocated a portion of
losses on receivables, if any. Any collections of finance charges allocated to
your series will be used to make interest payments, to pay a portion of the
fees of Wachovia as servicer and to cover losses allocated to your series.
Remaining collections of finance charges allocated to your series will be
applied for the benefit of the holder of the collateral interest. Any principal
collections allocated to your series in excess of the amount owed to
certificates of your series on any distribution date will be shared with other
series of certificates issued by Wachovia Credit Card Master Trust, retained in
a trust account, or returned to Wachovia. In no case will you receive more than
the principal and interest owed to you under the terms described in this
supplement and the attached prospectus.
For further information on allocations and payments, see "Description of the
Certificates--Allocation Percentages " and "--Application of Collections" in
this supplement and "Description of the Certificates--Investor Percentage and
Transferor Percentage" and "--Application of Collections" in the attached
prospectus.
Your certificates feature credit enhancement by means of the subordination
of other interests, which is intended to protect you from losses and shortfalls
in cash flow. Credit enhancement for your series is for your series' benefit
only. Credit enhancement is provided to Class A by the following:
. subordination of Class B; and
. subordination of the collateral interest.
The more subordinated interests will absorb any losses allocated to Series
1999-1 and make up any shortfalls in cash flow, before the more senior
interests are affected. On the closing date, there will be $52,025,000 of Class
B certificates and a $65,030,000 collateral interest, or together 13.50% of the
sum of the initial Class A invested amount, the initial Class B invested amount
and the initial collateral interest amount. If the cash flow and any
subordinated interest do not cover all losses allocated to Series 1999-1, your
payments of interest and principal will be reduced and you may suffer a loss of
principal.
For a more detailed description of the subordination provisions of Series
1999-1, see "Description of the Certificates--Reallocation of Cash Flows," "--
Required Collateral Interest" and "--Defaulted Receivables; Investor Charge-
Offs" in this supplement. For a discussion of losses, see "Description of the
Certificates--Defaulted Receivables; Investor Charge-Offs" in this supplement.
See "Risk Factors" in this supplement for more detailed discussions of the
risks of investing in Series 1999-1.
Wachovia Credit Card Master Trust
Your series is one of two series issued by Wachovia Credit Card Master Trust
which are expected to be outstanding as of the closing date. Wachovia Credit
Card Master Trust is maintained by the trustee, for the benefit of:
. certificateholders of Series 1999-1;
. certificateholders of other series issued by Wachovia Credit Card Master
Trust;
. providers of credit enhancements for Series 1999-1 and other series
issued by Wachovia Credit Card Master Trust; and
. Wachovia.
For a summary of the terms of the previously issued series, see "Annex I:
Other Series."
Each series has a claim to a fixed dollar amount of Wachovia Credit Card
Master Trust's assets, regardless of the total amount of receivables in the
Trust at any time. Wachovia holds the remaining claim to Wachovia Credit Card
Master Trust's assets, which fluctuates with the total amount of
S-5
<PAGE>
receivables in the Trust. Wachovia, as the holder of that amount, has the right
to purchase the outstanding Series 1999-1 certificates at any time when the
outstanding amount of the Series 1999-1 certificateholders' interest in the
Wachovia Credit Card Master Trust is less than or equal to 5% of the original
amount of that interest. The purchase price for these outstanding Series 1999-1
certificates will be equal to the outstanding amount plus accrued and unpaid
interest on the certificates through the last day of the period on which the
repurchase occurs.
For more information on Wachovia Credit Card Master Trust's assets, see
"Wachovia's Credit Card Portfolio" and "The Receivables" in this supplement and
"Wachovia's Credit Card Activities" and "The Receivables" in the attached
prospectus.
Scheduled Principal Payments and Potential Later Payments
Wachovia Credit Card Master Trust expects to pay the entire principal amount
of Class A in one payment on March 15, 2004 and the entire principal amount of
Class B in one payment on April 15, 2004. In order to accumulate the funds to
pay Class A on its scheduled payment date, the Trust will accumulate principal
collections in a principal funding account. The Trust will deposit funds into
the principal funding account on each "transfer date." The Trust will deposit
funds into the principal funding account during a "controlled accumulation
period." The length of the controlled accumulation period may be as long as
twelve months, but will be shortened if Wachovia expects that a shorter period
will suffice for the accumulation of the Class A amount.
If Class A is not fully repaid on the scheduled payment date, Class A will
begin to amortize by means of monthly payments of all principal collections
allocated to Series 1999-1 until it is fully repaid.
After Class A is fully repaid, the Trust will use principal collections
allocated to Series 1999-1 to repay Class B. If Class B is not fully repaid on
its scheduled payment date, Class B will begin to amortize by means of monthly
payments of all monthly principal collections allocated to Series 1999-1 after
Class A is fully repaid.
For more information on scheduled principal payments and the controlled
accumulation period, see "Maturity Considerations" and "Description of the
Certificates--Principal Payments," "--Postponement of Controlled Accumulation
Period" and "--Application of Collections" in this supplement and "Maturity
Considerations" and "Description of the Certificates--Principal Payments" in
the attached prospectus.
Prior to the commencement of an accumulation or amortization period for
Series 1999-1, principal collections will be paid to Wachovia, retained in a
trust account or shared with other series that are amortizing or in an
accumulation period.
Minimum Yield on the Receivables; Possible Early Principal Repayment of Series
1999-1
Class A may be repaid earlier than its scheduled principal payment date if
collections on the underlying receivables, together with other amounts
available for payment to certificateholders, are too low. The minimum amount
that must be available for payment to Series 1999-1 in any month, referred to
as the "base rate," is the sum of the Class A interest rate, the Class B
interest rate, the collateral interest rate, and the investor servicing fee,
divided by the investor interest. If the average Trust portfolio yield, net of
losses allocated to your series, for any three consecutive months is less than
the average base rate for the same three consecutive months, a "pay out event"
will occur with respect to Series 1999-1 and the Trust will commence a rapid
amortization of Series 1999-1, and holders of Series 1999-1 certificates will
receive principal payments earlier than their scheduled principal payment date.
Series 1999-1 is also subject to several other pay out events, which could
cause Series 1999-1 to amortize, and which are summarized under the headings
"Maturity Considerations" and "Description of the Certificates--Pay Out Events"
in this supplement. If Series 1999-1 begins to amortize, Class A will receive
monthly payments of principal until it is fully repaid; Class B will then
receive monthly payments of principal until it is
S-6
<PAGE>
fully repaid. In that event, your certificates may be repaid prior to the
scheduled payment date.
The final payment of principal and interest will be made no later than
August 15, 2006, which is the Series 1999-1 Termination Date.
For more information on pay out events, the portfolio yield and base rate,
early principal payment and rapid amortization, see "Maturity Considerations,"
"Description of the Certificates--Principal Payments" and "--Pay Out Events" in
this supplement and "Description of the Certificates--Principal Payments" and
"--Final Payment of Principal; Termination" in the attached prospectus.
Tax Status of Class A
Skadden, Arps, Slate, Meagher & Flom LLP, special tax counsel to Wachovia,
is of the opinion that under existing law the Class A certificates will be
characterized as debt for U.S. federal income tax purposes.
The Transferor, the Servicer, the holders of the Class A certificates and
the owners of such certificates will agree to treat the Class A certificates as
debt for federal, state, local and foreign income and franchise tax purposes.
For further information regarding the application of U.S. federal income tax
laws, see "Certain U.S. Federal Income Tax Consequences" in the attached
prospectus.
ERISA Considerations
The underwriters anticipate that the Class A certificates will be held by at
least 100 independent persons. Wachovia expects the other requirements will be
met so that the Class A certificates will be considered "publicly-offered
securities." If so, subject to important considerations described under "ERISA
Considerations" in this supplement and "Employee Benefit Plan Considerations"
in the attached prospectus, the Class A certificates will be eligible for
purchase by persons investing assets of employee benefit plans or individual
retirement accounts.
For further information regarding the application of ERISA, see "ERISA
Considerations" in this supplement and "Employee Benefit Plan Considerations"
in the attached prospectus.
Mailing Address and Telephone Number of Principal Executive Offices
The mailing address of The First National Bank of Atlanta is 77 Read's Way,
New Castle Corporate Commons, New Castle, Delaware 19720 and the telephone
number is (302) 323-2395.
S-7
<PAGE>
Risk Factors
You should consider the following risk factors in deciding whether to
purchase the asset backed certificates described herein.
Potential Early
Repayment or Delayed
Payment due to
Reduced Portfolio
Yield If the average trust portfolio yield, net of
losses allocated to your series, for any three
consecutive months is less than the average base
rate for the same three consecutive months, a "pay
out event" will occur with respect to Series 1999-
1 and the Trust will commence a rapid amortization
of Series 1999-1, and holders of Series 1999-1
certificates will receive principal payments
earlier than the scheduled principal payment date.
Moreover, if principal collections on receivables
allocated to other series are available for
application to a rapid amortization of any
outstanding securities, the period during which
that rapid amortization occurs may be
substantially shortened. Because of the potential
for early repayment if collections on the
receivables fall below the minimum amount, any
circumstances that tend to reduce collections may
increase the risk of early repayment of Series
1999-1.
Conversely, any reduction in collections may cause
the period during which collections are
accumulated in the principal funding account for
payment of Class A to be longer than otherwise
would have been the case.
The following factors could result in
circumstances that tend to reduce collections:
Wachovia May Change the Terms and Conditions of
the Accounts
Wachovia will transfer receivables to the Wachovia
Credit Card Master Trust arising under specified
credit card accounts, but Wachovia will continue
to own those accounts. As the owner of those
accounts, Wachovia retains the right to change
various terms and conditions of those accounts,
including finance charges and other fees it
charges and the required minimum monthly payment.
Wachovia may change the terms of the accounts to
maintain its competitive position in the credit
card industry. Changes in the terms of the
accounts may reduce the amount of receivables
arising under the accounts, reduce the amount of
collections on those receivables, or otherwise
alter payment patterns.
Wachovia has agreed that it will not change the
terms of the accounts or its policies relating to
the operation of its credit card business,
including the reduction of the required minimum
monthly payment and the calculation of the amount
or the timing of finance charges, other fees and
charge-offs, unless it reasonably believes such a
change would not result in a pay out event for any
series and takes the same action on its other
substantially similar accounts, to the extent
permitted by those accounts.
As Servicer, Wachovia is also required to exercise
the same care and apply the same policies that it
exercises in handling similar matters for its own
comparable accounts.
S-8
<PAGE>
Wachovia May Add Accounts to the Trust Portfolio
In addition to the accounts already designated for
Wachovia Credit Card Master Trust, Wachovia is
permitted to designate additional accounts for the
Trust portfolio and to transfer the receivables in
those accounts to the Trust. Wachovia may
designate certain accounts and add to the Trust
the receivables in those accounts or may designate
that receivables in certain eligible accounts will
automatically be added to the Trust, subject to
certain limitations. Any new accounts and
receivables may have different terms and
conditions than the accounts and receivables
already in the Trust--such as higher or lower fees
or interest rates, or longer or shorter principal
payment terms. Credit card accounts purchased by
Wachovia may be included as additional accounts if
certain conditions are satisfied. Credit card
accounts purchased by Wachovia will have been
originated using the account originator's
underwriting criteria, not those of Wachovia. The
account originator's underwriting criteria may be
more or less stringent than those of Wachovia.
Additionally, additional credit card accounts may
have been originated by Wachovia using credit
criteria which is different from those which were
applied by Wachovia to the current credit card
accounts. The new accounts and receivables may
produce higher or lower collections or charge-offs
over time than the accounts and receivables
already in the Trust and could tend to reduce the
amount of collections allocated to Series 1999-1.
Also, if Wachovia's percentage interest in the
accounts of the Trust falls to 5% or less,
Wachovia will be required to maintain that level
by designating additional accounts for the Trust
portfolio and transferring the receivables in
those accounts to the Trust. If Wachovia is
required to add accounts to the Trust, it may not
have any accounts available to be added to the
Trust. If Wachovia fails to add accounts when
required, a "pay out event" will occur and you
could receive payment of principal sooner than
expected. See "Description of the Certificates--
Addition of Trust Assets" in the attached
prospectus.
Certificate and Receivables Interest Rate Reset
Terms May Differ
Finance charges on the accounts in the Wachovia
Credit Card Master Trust may accrue at a fixed
rate or a variable rate above a designated prime
rate or other designated index. The certificate
rate of your certificate is based on LIBOR.
Changes in LIBOR might not be reflected in the
prime rate or the designated index, resulting in a
higher or lower spread, or difference, between the
amount of collections of finance charge
receivables on the accounts and the amounts of
interest payable on Series 1999-1 and other
amounts required to be funded out of collections
of finance charge receivables. With respect to
accounts in the Trust that accrue finance charges
at a fixed rate, if LIBOR increases, the amount of
interest on your certificate and other amounts
required to be funded out of collections of
finance charge receivables will increase, while
the amount of collections of finance charge
receivables on those accounts will remain the same
until the rates on the accounts are reset.
A decrease in the spread between collections of
finance charge receivables and interest payments
on your certificate could increase the risk of
early repayment.
S-9
<PAGE>
Changes to Consumer Protection Laws May Impede
Wachovia's Collection Efforts
Federal and state consumer protection laws
regulate the creation and enforcement of consumer
loans, including credit card accounts and
receivables. Changes or additions to those
regulations could make it more difficult for the
servicer of the receivables to collect payments on
the receivables. The U.S. Congress or state or
local legislatures could pass legislation limiting
the finance charges and fees that may be charged
on credit card accounts. The impact could be a
reduction of the portfolio yield which could
result in a pay out event. See "Description of the
Certificates--Pay Out Events" and "Certain Legal
Aspects of the Receivables--Consumer Protection
Laws" in the attached prospectus.
Receivables that do not comply with consumer
protection laws may not be valid or enforceable in
accordance with their terms against the obligors
on those receivables. Wachovia makes
representations and warranties relating to the
validity and enforceability of the receivables
arising under the accounts in the Trust portfolio.
Subject to certain conditions described under
"Description of the Certificates--Representations
and Warranties" in the attached prospectus,
Wachovia must accept reassignment of each
receivable that does not comply in all material
respects with all requirements of applicable law.
However, we do not anticipate that the trustee
under the pooling and servicing agreement will
make any examination of the receivables or the
related records for the purpose of determining the
presence or absence of defects, compliance with
representations and warranties, or for any other
purpose. The only remedy if any representation or
warranty is violated, and the violation continues
beyond the period of time Wachovia has to correct
the violation, is that Wachovia must accept
reassignment of the receivables affected by the
violation, subject to certain conditions described
under "Description of the Certificates--
Representations and Warranties" in the attached
prospectus. See also "Certain Legal Aspects of the
Receivables--Consumer Protection Laws" in the
attached prospectus.
If a cardholder sought protection under federal or
state bankruptcy or debtor relief laws, a court
could reduce or discharge completely the
cardholder's obligations to repay amounts due on
its account and, as a result, the related
receivables would be written off as uncollectible.
See "Description of the Certificates-- Defaulted
Receivables; Investor Charge-Offs" in this
supplement and "Description of the Certificates--
Defaulted Receivables; Rebates and Fraudulent
Charges; Investor Charge-Offs" in the attached
prospectus.
Slower Generation of Receivables Could Reduce
Collections
The receivables transferred to the Wachovia Credit
Card Master Trust may be paid at any time. We
cannot assure the creation of additional
receivables in those accounts or that any
particular pattern of cardholder payments will
occur. A significant decline in the amount of new
receivables generated by the accounts in the Trust
could result in reduced collections. See "Maturity
Considerations" in this supplement and in the
attached prospectus.
S-10
<PAGE>
Allocations of
Charged-Off
Receivables Could
Reduce Payments to
Certificateholders
Wachovia anticipates that it will write off as
uncollectible some portion of the receivables
arising in accounts in the trust portfolio. Each
class of Series 1999-1 will be allocated a portion
of those charged-off receivables. See "Description
of the Certificates--Allocation Percentages" and
"Wachovia's Credit Card Portfolio--Delinquency and
Loss Experience" in this supplement. If the amount
of charged-off receivables allocated to any class
of certificates exceeds the amount of other funds
available for reimbursement of those charge-offs
(which could occur if the limited amount of credit
enhancement for those certificates is reduced to
zero), the holders of those certificates may not
receive the full amount of principal and interest
due to them. See "Description of the
Certificates--Reallocation of Cash Flows," "--
Application of Collections" and "--Defaulted
Receivables; Investor Charge-Offs" in this
supplement.
Limited Ability to
Resell Certificates
The underwriters may assist in resales of Class A
certificates but they are not required to do so. A
secondary market for any such securities may not
develop. If a secondary market does develop, it
might not continue or it might not be sufficiently
liquid to allow you to resell any of your
securities.
Certain Liens Could
Be Given Priority
Over Your Securities
Wachovia accounts for the transfer of the
receivables to the Trust as a sale. However, a
court could conclude that Wachovia still owns the
receivables and that the Trust holds only a
security interest. Wachovia will take steps to
give the trustee a "first priority perfected
security interest" in the receivables. If Wachovia
became insolvent and the Federal Deposit Insurance
Corporation were appointed conservator or receiver
of Wachovia, the FDIC's administrative expenses
might be paid from the receivables before the
Trust received any payments on the receivables. If
a court concludes that the transfer to the Trust
is only a grant of a security interest in the
receivables, certain liens on Wachovia's property
arising before new receivables come into existence
may get paid before the Trust's interest in those
receivables. Those liens include a tax or
government lien or other liens permitted under the
law without the consent of Wachovia. See "Certain
Legal Aspects of the Receivables--Transfer of
Receivables" and "Description of the
Certificates--Representations and Warranties" in
the attached prospectus.
Insolvency or Bankruptcy
of Wachovia Could Result
in Accelerated, Delayed
or Reduced Payments to
Certificateholders
Under the Federal Deposit Insurance Act, as
amended by the Financial Institutions Reform,
Recovery and Enforcement Act of 1989, if Wachovia
becomes insolvent and the FDIC is appointed
conservator or receiver of Wachovia, the FDIC
could--
. require The Bank of New York (Delaware), as
trustee for the Trust, to go through an
administrative claims procedure under which
the FDIC could have up to 180 days to
determine the Trustee's right to payments
collected on the receivables in the Trust;
. request a stay of up to 90 days of any
judicial action or proceeding involving
Wachovia; or
S-11
<PAGE>
. repudiate the pooling and servicing agreement
establishing the Trust up to 180 days
following the date of receivership and limit
the Trust's resulting claim to "actual direct
compensatory damages" measured as of the date
of receivership.
If the FDIC were to take any of these actions,
your payments of outstanding principal and
interest could be delayed and possibly reduced. In
this regard, among other possibilities, it is
likely that the FDIC would not pay you the
interest accrued from the date of receivership to
the date of repudiation or payment. See "Certain
Legal Aspects of the Receivables--Certain Matters
Relating to Receivership" in the attached
prospectus.
If a conservator or receiver were appointed for
Wachovia, then a "pay out event" could occur for
all outstanding series. Under the terms of the
pooling and servicing agreement, new principal
receivables would not be transferred to the Trust
and, if Series 1999-1 remains outstanding, the
trustee would sell the receivables allocated to a
series unless holders of more than 50% of the
invested amount of the series or, if the series
has more than one class, each class of the series
gave the trustee other instructions. The Trust
would terminate earlier than was planned if each
series did not vote to continue the Trust. You
could have a loss if the sale of the receivables
produced insufficient net proceeds to pay you in
full. The conservator or receiver may nonetheless
have the power--
. regardless of the terms of the pooling and
servicing agreement, (a) to prevent the
beginning of a rapid amortization period, (b)
to prevent the early sale of the receivables
and termination of the Trust or (c) to
require new principal receivables to continue
being transferred to the Trust; or
. regardless of the instructions of the
certificateholders, (a) to require the early
sale of the Trust's receivables, (b) to
require termination of the Trust and
retirement of the Trust's certificates
(including Series 1999-1) or (c) to prohibit
the continued transfer of principal
receivables to the Trust.
The FDIC as conservator or receiver would also
have the power to repudiate or refuse to perform
any obligations of Wachovia, including any
obligations of Wachovia as servicer, and to
request a stay of up to 90 days of any judicial
action or proceeding involving Wachovia. In
addition, if Wachovia, as servicer, defaults on
its obligations under the pooling and servicing
agreement solely because the FDIC is appointed
conservator or receiver for Wachovia, the FDIC
might have the power to prevent the trustee or the
certificateholders from appointing a new servicer
under the pooling and servicing agreement. See
"Certain Legal Aspects of the Receivables--Certain
Matters Relating to Receivership" in the attached
prospectus.
Issuance of Additional
Series by the Trust May
Affect the Timing of
Payments
Wachovia Credit Card Master Trust, as a master
trust, may issue series of certificates from time
to time. The Trust may issue additional series
with terms that are different from your series
without the prior review or consent of any
certificateholders. It is a condition to the
issuance of each new series that each
S-12
<PAGE>
rating agency that has rated an outstanding series
confirm in writing that the issuance of the new
series will not result in a reduction or
withdrawal of its rating of any class of any
outstanding series.
However, the terms of a new series could affect
the timing and amounts of payments on any other
outstanding series. See "Description of the
Certificates--Exchanges" in the attached
prospectus.
Individual
Certificateholders
Will Have Limited Control
of Trust Actions
Certificateholders of any series or any class
within a series may need the consent or approval
of a specified percentage of the invested amount
of other series or a class of such other series to
take or direct certain actions, including to
require the appointment of a successor servicer
after Wachovia, as servicer, defaults on its
obligations under the pooling and servicing
agreement, to amend the pooling and servicing
agreement in some cases, and to direct a
repurchase of all outstanding series after certain
violations of Wachovia's representations and
warranties. The interests of the
certificateholders of any such series may not
coincide with yours, making it more difficult for
any particular certificateholder to achieve the
desired results from such vote.
S-13
<PAGE>
Wachovia's Credit Card Portfolio
Capitalized terms are defined in the attached prospectus or in this
supplement. Definitions are indicated by boldface type. Both the attached
prospectus and this supplement contain an index of terms listing the page
numbers where definitions can be found.
General
The receivables (the "Receivables") conveyed to Wachovia Credit Card Master
Trust ("Trust I") by Wachovia pursuant to a pooling and servicing agreement
(as the same may be amended from time to time, the "Pooling and Servicing
Agreement"), between The First National Bank of Atlanta d/b/a Wachovia Bank
Card Services ("Wachovia" or the "Bank") as transferor (in such capacity, the
"Transferor") and as servicer of the Receivables (in such capacity, the
"Servicer"), and The Bank of New York (Delaware), as trustee (the "Trustee"),
as supplemented by the supplement relating to the Certificates (the "Series
1999-1 Supplement") (the term "Agreement," unless the context requires
otherwise, refers to the Pooling and Servicing Agreement as supplemented by
the Series 1999-1 Supplement) have been or will be generated from transactions
made by holders of selected MasterCard(R) and VISA(R) credit card accounts,
including premium accounts and standard accounts, from the Bank Portfolio.
Each Class A Floating Rate Asset Backed Certificate, Series 1999-1
(collectively, the "Class A Certificates"), each Class B Floating Rate Asset
Backed Certificate, Series 1999-1 (collectively, the "Class B Certificates")
and the interest in the collateral (the "Collateral Interest"; together with
the Class A Certificates and the Class B Certificates, the "Investor
Certificates") will represent the right to receive certain payments from the
Trust. As used in this prospectus supplement, the term "Class A
Certificateholders" refers to holders of the Class A Certificates, the term
"Class B Certificateholders" refers to holders of the Class B Certificates,
the term "Collateral Interest Holders" refers to the holders of the Collateral
Interest and the "Investor Certificateholders" refers to the Class A
Certificateholders, Class B Certificateholders and Collateral Interest
Holders.
Certain MasterCard and VISA credit card accounts (the "Accounts") represent
only a portion of the entire portfolio of consumer revolving credit loans
arising in the VISA and MasterCard accounts currently owned by Wachovia (such
portfolio, excluding the Wells Portfolio (as defined below), the "Bank
Portfolio"). Additional Accounts may include Accounts originated after the
date of this offering and which are selected using eligibility criteria
different from those used in selecting the Accounts presently included in the
Trust.
Wachovia is a member of VISA and MasterCard International. VISA and
MasterCard credit cards are issued as part of the worldwide VISA and
MasterCard International systems, and transactions creating the receivables
through the use of those credit cards are processed through the VISA and
MasterCard International authorization and settlement systems. If either
system were to materially curtail its activities, or if Wachovia were to cease
being a member of VISA or MasterCard International, for any reason, an Early
Amortization Event, as such term is defined in the related Series 1999-1
Supplement, could occur, and delays in payments on the Receivables and
possible reductions in the amounts thereof could also occur. The VISA and
MasterCard accounts, the receivables in which have been conveyed to the Trust,
include both standard and premium VISA and MasterCard accounts.
The VISA and MasterCard credit cards may be used to purchase merchandise
and services and to obtain cash advances. A cash advance is made when a credit
card account is used to obtain cash from a financial institution or automated
teller machine, which may be located at a financial institution, supermarket
or other business establishment. Amounts due with respect to both purchases
and cash advances will be included in the Receivables.
Billing and Payments
Wachovia, using Wachovia Operational Services Corporation ("WOSC") as its
service bureau, generates and mails to cardholders monthly statements
summarizing account activity and processes cardholder monthly payments.
Customers generally receive a 20-day grace period on purchases. Currently,
cardholders must make
S-14
<PAGE>
a minimum monthly payment at least equal to the greater of (i) 1/48th of the
statement balance plus past due amounts and (ii) a stated minimum payment
(generally $10) plus past due amounts. Certain eligible cardholders are given
the option periodically to take a payment deferral. The finance charges on
purchases assessed monthly are calculated by multiplying the account's average
daily purchase balance by the applicable monthly periodic rate. Finance
charges are calculated on purchases from the date of the purchase or the first
day of the billing cycle in which the purchase is posted to the account,
whichever is later. Monthly periodic finance charges are not assessed in most
circumstances on purchases if all balances shown in the billing statement are
paid by the due date, which is generally 20 days after the billing date.
Finance charges are calculated on cash advances (including balance transfers)
from the date of the transaction. Currently, Wachovia generally treats the
date of the cash advance check as the transaction date for the check. Wachovia
offers fixed rate and variable rate credit card accounts. Generally, fixed
annual percentage rates range from 14.98% to 17.98%, and variable rates range
from prime to prime plus 9.9% per annum. Wachovia also offers temporary
promotional rates and, under certain circumstances, the periodic finance
charges on a limited number of accounts may be less than those assessed by
Wachovia generally. In addition, certain delinquent accounts may be priced at
higher rates up to the greater of 22.99% per annum or prime plus 14.99% per
annum.
Wachovia assesses annual membership fees (generally ranging from $15 to
$98) on certain accounts, although under various marketing programs these fees
may be waived or rebated. For most credit card accounts, Wachovia also
assesses late and over limit charges (generally $29) and returned check
charges (generally $29). Wachovia generally assesses a cash advance fee,
typically 4% of the cash advance amount with a $5 minimum.
Portfolio Acquisitions
The Bank merged with Jefferson Bankshares, Inc., headquartered in
Charlottesville, Virginia, and Central Fidelity Banks, Inc., headquartered in
Richmond, Virginia (the "Virginia Banks") on October 31, 1997 and December 15,
1997, respectively. In connection with these mergers, Wachovia purchased from
Jefferson Bankshares, Inc. approximately $16 million of credit card
receivables and from Central Fidelity Banks, Inc. approximately $749 million
of credit card receivables (collectively, the "Virginia Portfolios"). On
September 4, 1998, Wachovia purchased $269 million of credit card receivables
from Wells Fargo & Co. (the "Wells Portfolio"). None of the accounts in the
Virginia Portfolios or the Wells Portfolio has been designated to have its
receivables included in the Trust I Portfolio. Such accounts were originated
using criteria different from those which were applied in originating the
Accounts designated on the initial Cut-Off Date. Consequently, there can be no
assurance that Additional Accounts designated in the future from such
accounts, if any, will be of the same credit quality as previously designated
Accounts. Additionally, it is possible that if receivables arising in accounts
in the Virginia Portfolios and/or the Wells Portfolio were added to the Trust
I Portfolio, subject to satisfaction of the Rating Agency Condition (as
defined herein), the quality of the Trust I Portfolio may change.
Delinquency and Loss Experience
An account is contractually delinquent if the minimum payment is not
received by the due date indicated on the customer's statement. Efforts to
collect contractually delinquent credit card receivables are currently made by
Wachovia's Account Management Department. Collection activities include
statement messages, telephone calls and formal collection letters. Wachovia
utilizes an automated collection system in conjunction with a power dialing
system to gain efficiencies and productivity in the collection effort of the
past due accounts. The automated collection system appends a behavioral
scoring model on accounts five days or more past due and prioritizes the
accounts for initial contact with the objective of contacting the highest risk
and balance accounts first. This information is then downloaded into the power
dialing system which sorts the accounts into the appropriate time zone and
dials the delinquent accounts in order of priority. Representatives are
automatically linked to the cardholder's account information and voice line
when contact is established.
Accounts are worked continually at each stage of delinquency through the
120 day past due level. As an account enters the 120 day delinquency level, it
is classified as a potential charge-off. Accounts failing to
S-15
<PAGE>
make a payment during the 120 day cycle are written off. Managers may defer a
charge-off of an account for another month, pending continued payment activity
or other special circumstances. Departmental manager approval is required on
all exceptions to charge-off. Accounts of cardholders in bankruptcy are
generally charged-off in the month following the receipt of notification of
the bankruptcy.
The following tables set forth the delinquency and loss experience for each
of the periods shown for the Accounts selected from the Bank Portfolio. The
Bank Portfolio's delinquency and loss experience is comprised of segments
which may, when taken individually, have delinquency and loss characteristics
different from those of the overall Bank Portfolio of credit card accounts. As
of January 29, 1999 (the "Cut-Off Date"), the Receivables in the Trust I
Portfolio represented approximately 27.4% of the Bank Portfolio. Because the
Trust I Portfolio is only a portion of the Bank Portfolio, actual delinquency
and loss experience with respect to the Receivables may be different from that
set forth below for the Bank Portfolio. There can be no assurance that the
delinquency and loss experience for the Receivables in the future will be
similar to the historical experience of the Bank Portfolio set forth below.
Delinquency Experience
Bank Portfolio
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------------------------------------------------
1998(1) 1997(1) 1996(1)
---------------------------- ---------------------------- ----------------------------
Percentage of Percentage of Percentage of
Total Total Total
Receivables Receivables Receivables Receivables Receivables Receivables
-------------- ------------- -------------- ------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Receivables
Outstanding(2)......... $6,189,588,274 100.00% $5,591,770,800 100.00% $5,407,813,397 100.00%
============== ====== ============== ====== ============== ======
Receivables Delinquent:
30-59 Days............. $ 82,356,495 1.33% $ 66,278,826 1.18% $ 53,823,867 1.00%
60-89 Days............. 44,694,277 0.72 35,537,859 0.64 27,222,566 0.50
90 or More Days........ 56,883,834 0.92 47,315,115 0.85 35,415,459 0.65
-------------- ------ -------------- ------ -------------- ------
TOTAL.................. $ 183,934,606 2.97% $ 149,131,800 2.67% $ 116,461,892 2.15%
============== ====== ============== ====== ============== ======
</TABLE>
- --------
(1) Figures shown include the Virginia Portfolios for the 1998 year end and do
not include the Wells Portfolio.
(2) The Receivables Outstanding on the accounts consist of all amounts due
from cardholders as posted to the accounts as of the end of the period
shown.
Loss Experience
Bank Portfolio
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------
1998(1) 1997(1) 1996(1)
-------------- -------------- --------------
<S> <C> <C> <C>
Average Receivables
Outstanding(2)............... $5,885,303,622 $5,398,461,407 $4,818,808,813
Total Gross Charge-Offs(3).... $ 292,516,163 $ 224,571,000 $ 171,897,000
Recoveries.................... $ 28,103,721 $ 23,184,000 $ 18,273,000
Total Net Charge-Offs as a
Percentage of Average
Receivables Outstanding...... 4.49% 3.73% 3.19%
</TABLE>
- --------
(1) Figures shown include the Virginia Portfolios from March 20, 1998 and do
not include the Wells Portfolio.
(2) Average Receivables Outstanding is the average of the daily receivable
balance during the period indicated.
(3) Total Gross Charge-Offs are total principal and interest charge-offs
before recoveries and do not include the amount of any reductions in
Average Receivables Outstanding due to fraud, returned goods and customer
disputes.
S-16
<PAGE>
Interchange
The Transferor will be required, pursuant to the terms of the Agreement, to
transfer to Trust I a percentage of the Interchange (as defined in the
attached prospectus) attributed to cardholder charges for goods and services
in the Accounts. Interchange arising under the Accounts will be allocated to
Series 1999-1 on the basis of the percentage equivalent of the ratio which the
amount of the Floating Investor Percentage of cardholder charges for goods and
services in the Accounts bears to the total amount of cardholder charges for
goods and services in the MasterCard and VISA credit card accounts owned by
Wachovia, as reasonably estimated by the Transferor. MasterCard and VISA may
from time to time change the amount of Interchange reimbursed to banks issuing
their credit cards. Interchange will be treated as collections of Finance
Charge Receivables for the purposes of determining the amount of Finance
Charge Receivables, allocating collections of Finance Charge Receivables,
making required monthly payments, and calculating the Portfolio Yield. Under
the circumstances described herein, Interchange will be used to pay a portion
of the Investor Servicing Fee required to be paid on each Transfer Date. See
"Description of the Certificates--Servicing Compensation and Payment of
Expenses" in this supplement and "Wachovia's Credit Card Activities--
Interchange" in the attached prospectus.
S-17
<PAGE>
The Receivables
The Receivables conveyed to Trust I arise in Accounts selected from the
Bank Portfolio on the basis of criteria set forth in the Agreement as applied
on the Cut-Off Date and, with respect to Additional Accounts, as of the
related date of their designation (the "Trust I Portfolio"). Pursuant to the
Agreement, the Transferor has the right, subject to certain limitations and
conditions set forth therein, to designate from time to time Additional
Accounts and Automatic Additional Accounts and to transfer to Trust I all
Receivables of such Additional Accounts and Automatic Additional Accounts,
whether such Receivables are then existing or thereafter created. Any
Additional Accounts designated pursuant to the Agreement must be Eligible
Accounts as of the date the Transferor designates such accounts as Additional
Accounts. Any Automatic Additional Accounts designated pursuant to the
Agreement must be Eligible Accounts as of the date of their creation. The
Transferor will be required to designate Additional Accounts, to the extent
available, (a) to maintain the Transferor Amount (including the principal
amount on deposit in the Excess Funding Account) so that the Transferor Amount
at the end of each calendar month (the "Monthly Period") equals or exceeds the
Minimum Transferor Amount and (b) to maintain, for so long as certificates of
any Series (including Series 1999-1) remain outstanding, the sum of (i) the
aggregate amount of Principal Receivables and (ii) the principal amount on
deposit in the Excess Funding Account equal to or greater than the Minimum
Aggregate Principal Receivables. "Minimum Transferor Amount" means 5% of the
sum of (i) the average Principal Receivables for the preceding Monthly Period
and (ii) the average principal amount on deposit in the Excess Funding Account
for such period; provided, however, that the Transferor may reduce the Minimum
Transferor Amount to not less than 2% of the sum of (i) the average Principal
Receivables for such period and (ii) the average principal amount on deposit
in the Excess Funding Account and any other account specified from time to
time pursuant to the Agreement or any Series Supplement for such period upon
satisfaction of the Rating Agency Condition and certain other conditions to be
set forth in the Agreement. "Minimum Aggregate Principal Receivables" means an
amount equal to the sum of the numerators used to calculate the Investor
Percentages with respect to the allocation of collections of Principal
Receivables for each Series then outstanding; provided, however, that the
Minimum Aggregate Principal Receivables may be reduced to a lesser amount at
any time if the Rating Agency Condition is satisfied. Further, pursuant to the
Agreement, the Transferor will have the right (subject to certain limitations
and conditions) to designate certain Removed Accounts and to require the
Trustee to reconvey all Receivables in such Removed Accounts to the
Transferor, whether such Receivables are then existing or thereafter created.
Throughout the term of Trust I, the Accounts from which the Receivables arise
will be the Accounts designated by the Transferor on the Cut-Off Date plus any
Additional Accounts and Automatic Additional Accounts minus any Removed
Accounts. As of the Cut-Off Date and, with respect to Receivables in
Additional Accounts and Automatic Additional Accounts, as of the related date
of their conveyance to Trust I, and on the date any new Receivables are
created, the Transferor will represent and warrant to Trust I that the
Receivables meet the eligibility requirements specified in the Agreement. See
"Description of the Certificates--Representations and Warranties" in the
prospectus.
The Receivables in the Trust I Portfolio, as of the Cut-Off Date, included
$1,658,618,491 of Principal Receivables and $20,544,903 of Finance Charge
Receivables. The Accounts had an average Principal Receivable balance of
$1,667 and an average credit limit of $6,992. The percentage of the aggregate
total Receivable balance to the aggregate total credit limit was 24.1%. The
average age of the Accounts was approximately 115 months. As of the Cut-Off
Date, cardholders whose Accounts are included in the Trust I Portfolio had
billing addresses in all 50 states, the District of Columbia and other United
States territories and possessions. As of the Cut-Off Date, 76.9% of the
Accounts were standard accounts and 23.1% were premium accounts, and the
aggregate total Receivable balances of standard accounts and premium accounts,
as a percentage of the aggregate total Receivables, were 67.9% and 32.1%,
respectively.
The following tables summarize the Trust I Portfolio by various criteria as
of the Cut-Off Date. Because the future composition of the Trust I Portfolio
may change over time, these tables are not necessarily indicative of the
composition of the Trust I Portfolio at any subsequent time.
S-18
<PAGE>
Composition by Account Balance
Trust I Portfolio
<TABLE>
<CAPTION>
Percentage of
Number of Total Number of Percentage of
Account Balance Range Accounts Accounts Receivables Total Receivables
- --------------------- --------- --------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Credit Balance.......... 22,578 2.27% $ (1,660,004.41) (0.10)%
No Balance.............. 469,873 47.22 0.00 0.00
$.01-$1,499.99.......... 204,142 20.51 101,480,549.40 6.04
$1,500.00-$2,999.99..... 77,781 7.82 171,991,914.06 10.24
$3,000.00-$4,499.99..... 58,752 5.90 218,767,068.68 13.03
$4,500.00-$9,999.99..... 144,735 14.54 998,822,520.71 59.49
$10,000.00 or More...... 17,323 1.74 189,761,345.22 11.30
------- ------ ----------------- ------
TOTAL.................. 995,184 100.00% $1,679,163,393.66 100.00%
======= ====== ================= ======
</TABLE>
Composition by Credit Limit
Trust I Portfolio
<TABLE>
<CAPTION>
Percentage of
Number of Total Number of Percentage of
Credit Limit Range Accounts Accounts Receivables Total Receivables
- ------------------ --------- --------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Less than or equal to
$1,500................. 62,430 6.27% $ 16,713,106.54 1.00%
$1,501-$3,000........... 72,683 7.30 45,978,872.65 2.74
$3,001-$4,500........... 69,697 7.00 70,620,765.08 4.21
$4,501-$10,000.......... 649,396 65.26 886,548,845.84 52.79
$10,001 or More......... 140,978 14.17 659,301,803.55 39.26
------- ------ ----------------- ------
TOTAL.................. 995,184 100.00% $1,679,163,393.66 100.00%
======= ====== ================= ======
</TABLE>
Composition by Period of Delinquency
Trust I Portfolio
<TABLE>
<CAPTION>
Percentage of
Period of Delinquency Number of Total Number of Percentage of
(Days Contractually Delinquent) Accounts Accounts Receivables Total Receivables
- ------------------------------- --------- --------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Not Delinquent........... 962,184 96.68% $1,540,400,028.57 91.75%
6 to 30 Days............. 21,692 2.18 93,689,824.01 5.58
31 to 60 Days............ 5,356 0.54 20,672,136.89 1.23
61 to 90 Days............ 2,816 0.28 10,997,998.36 0.65
91 to 120 Days........... 1,871 0.19 7,917,219.36 0.47
121 to 150 Days.......... 1,254 0.13 5,421,425.26 0.32
Over 150 Days............ 11 0.00 64,761.21 0.00
------- ------ ----------------- ------
TOTAL................... 995,184 100.00% $1,679,163,393.66 100.00%
======= ====== ================= ======
</TABLE>
Composition by Account Age
Trust I Portfolio
<TABLE>
<CAPTION>
Percentage of
Number of Total Number of Percentage of
Account Age Accounts Accounts Receivables Total Receivables
- ----------- --------- --------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Not More than 24
Months................. 313 0.03% $ 754,285.76 0.04%
Over 24 Months to 48
Months................. 114,866 11.54 165,072,620.70 9.83
Over 48 Months to 60
Months................. 186,325 18.72 278,192,708.58 16.57
Over 60 Months.......... 693,680 69.71 1,235,143,778.62 73.56
------- ------ ----------------- ------
TOTAL.................. 995,184 100.00% $1,679,163,393.66 100.00%
======= ====== ================= ======
</TABLE>
S-19
<PAGE>
Geographic Distribution of Accounts in the Trust I Portfolio
<TABLE>
<CAPTION>
Percentage of
Number of Total Number of Percentage of
State Accounts Accounts Receivables Total Receivables
- ----- --------- --------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Alabama................. 12,420 1.25% $ 23,844,377.57 1.42%
Alaska.................. 2,023 0.20 3,652,788.87 0.22
Arizona................. 10,374 1.04 19,069,382.04 1.14
Arkansas................ 4,131 0.42 8,093,638.05 0.48
California.............. 57,595 5.79 108,188,361.56 6.44
Colorado................ 17,094 1.72 30,984,477.36 1.85
Connecticut............. 5,082 0.51 8,894,507.84 0.53
Delaware................ 2,380 0.24 4,328,552.60 0.26
Florida................. 83,878 8.43 144,880,875.16 8.63
Georgia................. 157,054 15.78 252,345,945.89 15.03
Hawaii.................. 1,015 0.10 2,229,205.20 0.13
Idaho................... 2,332 0.23 4,363,115.96 0.26
Illinois................ 29,419 2.96 53,631,687.43 3.19
Indiana................. 11,601 1.17 22,359,313.73 1.33
Iowa.................... 4,052 0.41 7,763,290.19 0.46
Kansas.................. 6,457 0.65 12,833,785.32 0.76
Kentucky................ 8,269 0.83 13,913,671.56 0.83
Louisiana............... 7,653 0.77 13,646,798.64 0.81
Maine................... 2,474 0.25 4,233,347.66 0.25
Maryland................ 14,842 1.49 26,572,663.23 1.58
Massachusetts........... 12,206 1.23 20,760,684.71 1.24
Michigan................ 18,059 1.81 31,779,583.65 1.89
Minnesota............... 11,857 1.19 21,332,703.04 1.27
Mississippi............. 4,357 0.44 8,581,501.02 0.51
Missouri................ 13,318 1.34 25,710,851.39 1.53
Montana................. 1,615 0.16 3,092,966.40 0.18
Nebraska................ 3,561 0.36 6,072,026.33 0.36
Nevada.................. 4,119 0.41 7,628,137.11 0.45
New Hampshire........... 2,170 0.22 3,722,902.15 0.22
New Jersey.............. 21,890 2.20 37,458,324.19 2.23
New Mexico.............. 2,832 0.28 5,521,526.01 0.33
New York................ 31,792 3.19 54,012,699.70 3.22
North Carolina.......... 153,953 15.47 202,233,543.24 12.04
North Dakota............ 738 0.07 1,481,419.97 0.09
Ohio.................... 21,409 2.15 39,944,293.39 2.38
Oklahoma................ 6,843 0.69 13,266,180.60 0.79
Oregon.................. 7,191 0.72 12,264,384.64 0.73
Pennsylvania............ 29,062 2.92 49,646,205.45 2.96
Rhode Island............ 1,702 0.17 3,320,667.20 0.20
South Carolina.......... 81,705 8.21 131,133,397.16 7.81
South Dakota............ 869 0.09 1,618,186.64 0.10
Tennessee............... 22,832 2.29 42,183,829.17 2.51
Texas................... 43,777 4.40 91,339,831.27 5.44
Utah.................... 2,819 0.28 4,210,120.26 0.25
Vermont................. 1,011 0.10 1,829,721.57 0.11
Virginia................ 24,563 2.47 43,305,927.67 2.58
Washington.............. 12,931 1.30 23,001,089.12 1.37
West Virginia........... 2,807 0.28 5,212,935.81 0.31
Wisconsin............... 9,738 0.98 16,209,150.98 0.97
Wyoming................. 1,195 0.12 2,119,571.53 0.13
District of Columbia.... 1,444 0.15 2,182,330.31 0.13
Other................... 674 0.07 1,156,916.12 0.07
------- ------ ----------------- ------
TOTAL.................. 995,184 100.00% $1,679,163,393.66 100.00%
======= ====== ================= ======
</TABLE>
S-20
<PAGE>
Maturity Considerations
The Agreement provides that Class A Certificateholders will not receive
payments of principal until the March 2004 Distribution Date (the "Class A
Scheduled Payment Date"), or earlier in the event of a Pay Out Event, which
results in the commencement of the Rapid Amortization Period. The Agreement
also provides that Class B Certificateholders will not receive payments of
principal until the April 2004 Distribution Date (the "Class B Scheduled
Payment Date"), or earlier in the event of a Pay Out Event (as defined below),
which results in the commencement of the Rapid Amortization Period (in the
latter case, only after the Class A Investor Interest (as defined herein) has
been paid in full). The Class B Certificateholders will not begin to receive
payments of principal until the final principal payment on the Class A
Certificates has been made.
Controlled Accumulation Period
On each Transfer Date during the Controlled Accumulation Period prior to
the payment of the Class A Investor Interest in full, an amount equal to, for
each Monthly Period, the least of (a) the Available Investor Principal
Collections, (b) the applicable "Controlled Deposit Amount" for such Monthly
Period, which is equal to the sum of the Controlled Accumulation Amount for
such Monthly Period and the Accumulation Shortfall, if any, for such Monthly
Period and (c) the Class A Adjusted Investor Interest prior to any deposits on
such day, will be deposited in the Principal Funding Account (the "Principal
Funding Account") established by the Servicer until the principal amount on
deposit in the Principal Funding Account (the "Principal Funding Account
Balance") equals the Class A Investor Interest. After the Class A Investor
Interest has been paid in full, or following the first Transfer Date upon
which the Principal Funding Account Balance has increased to the amount of the
Class A Investor Interest, Available Investor Principal Collections, to the
extent required, will be distributed to the Class B Certificateholders on each
Distribution Date beginning, during the Controlled Accumulation Period, on the
Class B Scheduled Payment Date, until the earlier of the date the Class B
Investor Interest (as defined herein) has been paid in full and the Series
1999-1 Termination Date. After the Class A Investor Interest and the Class B
Investor Interest have each been paid in full, Available Investor Principal
Collections, to the extent required, will be distributed to the Collateral
Interest Holder on each Transfer Date until the earlier of the date the
Collateral Interest has been paid in full and the Series 1999-1 Termination
Date. Amounts in the Principal Funding Account are expected to be available to
pay the Class A Investor Interest on the Class A Scheduled Payment Date. After
the payment of the Class A Investor Interest in full, Available Investor
Principal Collections are expected to be available to pay the Class B Investor
Interest on the Class B Scheduled Payment Date. Although it is anticipated
that collections of Principal Receivables will be available on each Transfer
Date during the Controlled Accumulation Period to make a deposit of the
applicable Controlled Deposit Amount and that the Class A Investor Interest
will be paid to the Class A Certificateholders on the Class A Scheduled
Payment Date and the Class B Investor Interest will be paid to the Class B
Certificateholders on the Class B Scheduled Payment Date, respectively, no
assurance can be given in this regard. If the amount required to pay the Class
A Investor Interest or the Class B Investor Interest in full is not available
on the Class A Scheduled Payment Date or the Class B Scheduled Payment Date,
respectively, a Pay Out Event will occur and the Rapid Amortization Period
will commence.
Rapid Amortization Period
If a Pay Out Event occurs, the "Rapid Amortization Period" will commence
and any amount on deposit in the Principal Funding Account will be paid to the
Class A Certificateholders on the Distribution Date in the month following the
commencement of the Rapid Amortization Period. In addition, to the extent that
the Class A Investor Interest has not been paid in full, the Class A
Certificateholders will be entitled to monthly payments of principal equal to
the Available Investor Principal Collections until the earlier of the date on
which the Class A Certificates have been paid in full and the Series 1999-1
Termination Date. After the Class A Certificates have been paid in full and if
the Series 1999-1 Termination Date has not occurred, Available Investor
Principal Collections will be paid to the Class B Certificates on each
Distribution Date until the earlier of the date on which the Class B
Certificates have been paid in full and the Series 1999-1 Termination Date.
S-21
<PAGE>
Pay Out Events
A "Pay Out Event" occurs, either automatically or after specified notice,
upon (a) the failure of the Transferor to make certain payments or transfers
of funds for the benefit of the Class A Certificateholders within the time
periods stated in the Agreement, (b) material breaches of certain
representations, warranties or covenants of the Transferor, (c) certain
insolvency or bankruptcy events involving the Transferor or any holder of an
interest in the Transferor Certificate (including the Transferor
Participation), (d) a reduction in the average of the Portfolio Yields for any
three consecutive Monthly Periods to a rate that is less than the average of
the Base Rates for such period, (e) Trust I becoming subject to regulation as
an "investment company" within the meaning of the Investment Company Act of
1940, as amended, (f) the failure of the Transferor to convey Receivables
arising under Additional Accounts or Participations to Trust I when required
by the Agreement, (g) the occurrence of a Servicer Default which would have a
material adverse effect on the Class A Certificateholders, (h) insufficient
monies in the Distribution Account to pay the Class A Investor Interest or the
Class B Investor Interest in full on the Class A Scheduled Payment Date or the
Class B Scheduled Payment Date, respectively, or (i) the Transferor becomes
unable for any reason to transfer Receivables to Trust I in accordance with
the provisions of the Agreement. See "Description of the Certificates--Pay Out
Events" in this supplement. The term "Base Rate" means, with respect to any
Monthly Period, the annualized percentage equivalent of a fraction, the
numerator of which is the sum of the Class A Monthly Interest, the Class B
Monthly Interest and the Collateral Monthly Interest, each for the related
Interest Period, and the Investor Servicing Fee for such Monthly Period, and
the denominator of which is the Investor Interest as of the close of business
on the last day of such Monthly Period. The term "Portfolio Yield" means, with
respect to any Monthly Period, the annualized percentage equivalent of a
fraction, the numerator of which is the sum of collections of Finance Charge
Receivables (including recoveries on charged-off Receivables), Principal
Funding Investment Proceeds and certain other investment earnings and amounts
withdrawn from the Reserve Account deposited into the Finance Charge Account
and allocable to Series 1999-1 for such Monthly Period, calculated on a cash
basis after subtracting the Investor Default Amount for such Monthly Period,
and the denominator of which is the Investor Interest as of the close of
business on the last day of such Monthly Period.
Payment Rates
The following table sets forth the highest and lowest cardholder monthly
payment rates for the Bank Portfolio during any month in the period shown and
the average cardholder monthly payment rates for all months during the periods
shown, in each case calculated as a percentage of total opening monthly
account balances during the periods shown. Payment rates shown in the table
are based on amounts which would be deemed payments of Principal Receivables
and Finance Charge Receivables with respect to the Accounts.
Cardholder Monthly Payment Rates
Bank Portfolio
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1998(1) 1997(1) 1996(1)
------- ------- -------
<S> <C> <C> <C>
Lowest Month............................................ 10.62% 10.01% 9.78%
Highest Month........................................... 12.55% 11.72% 11.53%
Monthly Average......................................... 11.22% 11.07% 10.67%
</TABLE>
- --------
(1) Figures shown include the Virginia Portfolios from March 20, 1998 and do
not include the Wells Portfolio.
Currently, cardholders must make a monthly minimum payment equal to the
greater of (i) 1/48th of the statement balance plus past due amounts and (ii)
a stated minimum payment (generally $10) plus past due amounts. There can be
no assurance that the cardholder monthly payment rates in the future will be
similar to the historical experience set forth above. In addition, the amount
of collections of Receivables may vary from month to month due to seasonal
variations, general economic conditions and payment habits of individual
cardholders. There can be no assurance that collections of Principal
Receivables with respect to the Trust I Portfolio will be similar to the
historical experience set forth above or that deposits into the Principal
Funding
S-22
<PAGE>
Account or the Distribution Account, as applicable, will be made in accordance
with the applicable Controlled Accumulation Amount. If a Pay Out Event occurs,
the average life of the Class A Certificates could be significantly reduced or
increased. Because there may be a slowdown in the payment rate below the
payment rates used to determine the Controlled Accumulation Amounts, or a Pay
Out Event may occur which would initiate the Rapid Amortization Period, there
can be no assurance that the actual number of months elapsed from the date of
issuance of the Class A Certificates and the Class B Certificates to their
respective final Distribution Dates will equal the expected number of months.
As described in this supplement under "Description of the Certificates--
Postponement of Controlled Accumulation Period," the Servicer may shorten the
Controlled Accumulation Period and, in such event, there can be no assurance
that there will be sufficient time to accumulate all amounts necessary to pay
the Class A Investor Interest and the Class B Investor Interest on the Class A
Scheduled Payment Date and the Class B Scheduled Payment Date, respectively.
See "Maturity Considerations" and "Risk Factors--Timing of Payments and
Maturity" in the attached prospectus.
Receivable Yield Considerations
The gross revenues from finance charges and fees billed to accounts in the
Bank Portfolio for each of the three calendar years contained in the period
ended December 31, 1998 are set forth in the following table. The historical
yield figures in the following table are calculated on an accrual basis.
Collections of Receivables included in Trust I will be on a cash basis and may
not reflect the historical yield experience in the table. During periods of
increasing delinquencies or periodic payment deferral programs, accrual yields
may exceed cash amounts accrued and billed to cardholders. Conversely, cash
yields may exceed accrual yields as amounts collected in a current period may
include amounts accrued during prior periods. However, the Transferor believes
that during the three calendar years contained in the period ended December
31, 1998, the yield on an accrual basis closely approximated the yield on a
cash basis. The yield on both an accrual and a cash basis will be affected by
numerous factors, including the monthly periodic finance charges on the
Receivables, the amount of the annual membership fees and other fees, changes
in the delinquency rate on the Receivables and the percentage of cardholders
who pay their balances in full each month and do not incur monthly periodic
finance charges. See "Risk Factors" in the attached prospectus.
Bank Portfolio Yield
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------
1998(1) 1997(1) 1996(1)
-------------- -------------- --------------
<S> <C> <C> <C>
Average Receivables
Outstanding(2)............... $5,885,303,622 $5,398,461,407 $4,818,808,813
Total Finance Charges......... $ 971,637,089 $ 855,676,589 $ 718,469,769
Total Finance Charges as a
Percentage of Average
Receivables Outstanding...... 16.51% 15.85% 14.91%
</TABLE>
- --------
(1) Figures shown include the Virginia Portfolios from March 20, 1998 and do
not include the Wells Portfolio.
(2) Average Receivables Outstanding is the average of the monthly receivable
balance during the period indicated.
The revenue for the Bank Portfolio of credit card accounts shown in the
above table is comprised of monthly periodic finance charges, credit card fees
and Interchange. These revenues vary for each account based on the type and
volume of activity for each account. Because the Trust I Portfolio is only a
portion of the Bank Portfolio, actual yield with respect to Receivables may be
different from that set forth above for the Bank Portfolio. See "Wachovia's
Credit Card Portfolio" in this supplement and "Wachovia's Credit Card
Activities" in the attached prospectus.
S-23
<PAGE>
Wachovia and Wachovia Corporation
Wachovia, a wholly-owned subsidiary of the Corporation, is a national
banking association located in New Castle, Delaware, which conducts nationwide
consumer lending programs principally comprised of credit card related
activities. WBNA, a wholly-owned subsidiary of the Corporation, is a national
banking association located in Winston-Salem, North Carolina. The Corporation
is a bank holding company registered under the Bank Holding Company Act of
1956, as amended, maintaining dual headquarters in Atlanta, Georgia and
Winston-Salem, North Carolina. As of December 31, 1998, Wachovia had assets of
$412,970,000 and shareholder's equity of $44,133,000. As of December 31, 1998,
WBNA had assets of $62,005,845,000 and shareholder's equity of $5,783,610,000.
As of December 31, 1998, the Corporation had assets of $64,122,842,000 and
shareholders' equity of $5,338,232,000.
Description of the Certificates
The Class A Certificates will be issued pursuant to the Agreement and the
Series 1999-1 Supplement. Pursuant to the Agreement, the Transferor and the
Trustee may execute further series supplements in order to issue additional
Series. The following summary of the Class A Certificates does not purport to
be complete and is subject to, and is qualified in its entirety by reference
to, all of the provisions of the Agreement and the Series 1999-1 Supplement.
See "Description of the Certificates" in the attached prospectus for
additional information concerning the Class A Certificates and the Agreement.
General
The Class A Certificates will represent the right to receive certain
payments from the assets of Trust I, including the right to the applicable
allocation percentage of all cardholder payments on the Receivables in Trust I
to the extent necessary to pay principal and interest on the Class A
Certificates. Trust I's assets will be allocated among the Class A
Certificateholders (the "Class A Investor Interest"), the Class B
Certificateholders (the "Class B Investor Interest"), the Collateral Interest
Holder (the Collateral Interest together with the Class A Investor Interest
and the Class B Investor Interest, the "Investor Interest"), the interest of
the holders of other undivided interests in Trust I issued pursuant to the
Agreement and applicable Series Supplements and the interest of the Transferor
(the "Transferor Interest"), as described below. The Class B Certificates and
the Collateral Interest in the initial amount of $117,055,000 (which amount
represents 13.50% of the amount of the initial Investor Interest) constitute
Credit Enhancement for the Class A Certificates. Allocations will be made to
the Collateral Interest, and the Collateral Interest Holder will have voting
and certain other rights, as if the Collateral Interest were a subordinated
class of certificates. The Transferor Interest will represent the right to the
assets of Trust I not allocated to the Class A Investor Interest, the Class B
Investor Interest, the Collateral Interest or the holders of other undivided
interests in Trust I. The principal amount of the Transferor Interest (the
"Transferor Amount") will fluctuate as the amount of Receivables in Trust I
changes from time to time.
Each Class A Certificate represents the right to receive interest at the
Class A Certificate Rate on the principal amount of the Class A Certificates
for the related Interest Period and payments of principal on the Class A
Scheduled Payment Date or, to the extent of the Class A Investor Interest, on
each Distribution Date during the Rapid Amortization Period, funded from
collections of Finance Charge Receivables and Principal Receivables,
respectively, allocated to the Class A Investor Interest and certain other
available amounts. Each Class B Certificate represents the right to receive
payments of interest at the applicable Class B Certificate Rate on the
principal amount of the Class B Certificates for the related Interest Period,
and payments of principal on the Class B Scheduled Payment Date or, to the
extent of the Class B Investor Interest, on each Distribution Date during the
Rapid Amortization Period after the Class A Certificates have been paid in
full, funded from collections of Finance Charge Receivables and Principal
Receivables, respectively, allocated to the Class B Investor Interest and
certain other available amounts. Amounts payable to the Class A
Certificateholders may be paid from collections of Finance Charge Receivables
and Principal Receivables, Excess Spread, funds on
S-24
<PAGE>
deposit in the Principal Funding Account and the Reserve Account and certain
investment earnings thereon, Reallocated Principal Collections (as defined
herein) and Shared Principal Collections (as defined herein) and certain other
available amounts (including, under certain circumstances, amounts on deposit
in the Excess Funding Account). Amounts payable to the Class B
Certificateholders may be paid from collections of Finance Charge Receivables
and Principal Receivables, Excess Spread, Reallocated Collateral Principal
Collections and Shared Principal Collections and certain other available
amounts (including, under certain circumstances, amounts on deposit in the
Excess Funding Account). Payments of interest and principal will be made, to
the extent of funds available therefor, on each Distribution Date on which
such amounts are due to Class A Certificateholders in whose names the Class A
Certificates were registered on the last business day of the calendar month
preceding such Distribution Date (each, a "Record Date").
The Transferor initially will own the Transferor Certificate. WBNA will own
a participation interest (initially 95%, but subject to change) in the
Transferor Certificate (the "Transferor Participation"). The Transferor
Certificate will represent the right to receive certain payments from the
assets of Trust I, including the right to a percentage (the "Transferor
Percentage") of all cardholder payments on the Receivables in Trust I equal to
100% minus the sum of the applicable Investor Percentages for all Series of
certificates then outstanding. The Transferor Certificate may be transferred
in whole or in part subject to certain limitations and conditions set forth in
the Agreement. See "Description of the Certificates--Certain Matters Regarding
the Transferor and the Servicer" in the attached prospectus.
The Class A Certificates initially will be represented by certificates
registered in the name of Cede, as nominee of DTC. Unless and until Definitive
Class A Certificates are issued, all references herein to actions by Class A
Certificateholders shall refer to actions taken by DTC upon instructions from
DTC Participants and all references herein to distributions, notices, reports
and statements to Class A Certificateholders shall refer to distributions,
notices, reports and statements to DTC or Cede, as the registered holder of
the Class A Certificates for distribution to Certificate Owners in accordance
with DTC procedures. Class A Certificateholders may hold their Class A
Certificates through DTC (in the United States) or Cedelbank or Euroclear (in
Europe) if they are participants of such systems, or indirectly through
organizations that are participants in such systems. Cede, as nominee for DTC,
will hold the global Class A Certificates. Cedelbank and Euroclear will hold
omnibus positions on behalf of the Cedelbank Customers and the Euroclear
Participants, respectively, through customers' securities accounts in
Cedelbank's and Euroclear's names on the books of their respective
Depositories which in turn will hold such positions in customers' securities
accounts in the Depositories' names on the books of DTC. See "Description of
the Certificates--General," "--Book-Entry Registration" and "--Definitive
Certificates" in the attached prospectus.
Exchanges
The Transferor Certificate is transferable only as provided in the
Agreement. The Agreement also provides that the holder of the Transferor
Certificate may tender the Transferor Certificate to the Trustee in exchange
for one or more new Series and a reissued Transferor Certificate as described
under "Description of the Certificates--Exchanges" in the attached prospectus.
Interest Payments
Interest will accrue on the Class A Certificates at the Class A Certificate
Rate and on the Class B Certificates at the Class B Certificate Rate from
March , 1999 (the "Closing Date"). Interest will be distributed to Class A
Certificateholders on May 17, 1999 and on the 15th day of each month
thereafter or, if such 15th day is not a business day, the next succeeding
business day (each, a "Distribution Date") in an amount equal to (i) with
respect to the Class A Certificates, the product of (a) the actual number of
days in the related Interest Period divided by 360 and (b) the Class A
Certificate Rate and (c) the outstanding principal balance of the Class A
Certificates as of the preceding Record Date (or in the case of the first
Distribution Date, an amount equal to the sum of (i) the product of (a) the
outstanding principal amount of the Class A Certificates and (b) divided by
360 and (c) the Class A Certificate Rate determined on , 1999 and (ii) the
product of (a) the outstanding principal amount of the Class A Certificates
and (b) 30 divided by 360 and (c) the Class A Certificate Rate
S-25
<PAGE>
determined on April 13, 1999) and (ii) with respect to the Class B
Certificates, the product of (a) the actual number of days in the related
Interest Period divided by 360 and (b) the Class B Certificate Rate and (c)
the outstanding principal balance of the Class B certificates as of the
preceding Record Date (or in the case of the first Distribution Date, an
amount equal to the sum of (i) the product of (a) the outstanding principal
amount of the Class B Certificates and (b) divided by 360 and (c) the Class
B Certificate Rate determined on , 1999 and (ii) the product of (a) the
outstanding principal amount of the Class B Certificates and (b) 30 divided by
360 and (c) the Class B Certificate Rate determined on April 13, 1999).
Interest due on the Class A Certificates and the Class B Certificates but not
paid on any Distribution Date will be payable on the next succeeding
Distribution Date together with additional interest on such amount at the
applicable Certificate Rate plus 2% per annum (such amount with respect to the
Class A Certificates, the "Class A Additional Interest," and such amount with
respect to the Class B Certificates, the "Class B Additional Interest").
Additional Interest shall accrue on the same basis as interest on the Class A
Certificates, and shall accrue from the Distribution Date on which such
overdue interest first became due, to but excluding the Distribution Date on
which such Additional Interest is paid. Interest payments on the Class A
Certificates on any Distribution Date will be paid from Class A Available
Funds for the related Monthly Period, and to the extent such Class A Available
Funds are insufficient to pay such interest, from Excess Spread, Excess
Finance Charge Collections from other Series and Reallocated Principal
Collections (to the extent available) for such Monthly Period. Interest
payments on the Class B Certificates on any Distribution Date will be paid
from Class B Available Funds for the related Monthly Period, and to the extent
such Class B Available Funds are insufficient to pay such interest, from
Excess Spread, Excess Finance Charge Collections from other Series and
Reallocated Collateral Principal Collections (to the extent available)
remaining after certain other payments have been made with respect to the
Class A Certificates. The "Interest Period" with respect to any Distribution
Date will be the period from the previous Distribution Date through the day
preceding such Distribution Date, except that the initial Interest Period will
be the period from the Closing Date through the day preceding the initial
Distribution Date.
"Class A Available Funds" means, with respect to any Monthly Period, an
amount equal to the sum of (a) the Class A Floating Allocation of collections
of Finance Charge Receivables allocated to the Investor Interest with respect
to such Monthly Period (excluding the portion of collections of Finance Charge
Receivables attributable to Interchange that is allocable to Servicer
Interchange), (b) Principal Funding Investment Proceeds, if any, with respect
to the related Transfer Date and (c) amounts, if any, to be withdrawn from the
Reserve Account which are required to be included in Class A Available Funds
pursuant to the Series 1999-1 Supplement with respect to such Transfer Date.
"Class B Available Funds" means, with respect to any Monthly Period, an amount
equal to the Class B Floating Allocation of collections of Finance Charge
Receivables allocated to the Investor Interest with respect to such Monthly
Period (excluding the portion of collections of Finance Charge Receivables
attributable to Interchange that is allocable to Servicer Interchange). If,
for any Transfer Date, the Principal Funding Investment Proceeds are less than
the product of (a) a fraction, the numerator of which is the actual number of
days in the related Interest Period and the denominator of which is 360, (b)
the Class A Certificate Rate in effect with respect to the related Interest
Period and (c) the Principal Funding Account Balance as of the Record Date
preceding such Transfer Date, a draw shall be made in the amount of such
difference (the "Reserve Account Draw") from the Reserve Account, to the
extent of funds on deposit therein.
The Class A Certificates will bear interest at the rate of % above LIBOR
determined as set forth below from the Closing Date through April 14, 1999,
from April 15, 1999 through May 16, 1999, and with respect to each Interest
Period thereafter (the "Class A Certificate Rate"). The Class B Certificates
will bear interest at the rate of % above LIBOR determined as set forth below
from the Closing Date through April 14, 1999, from April 15, 1999 through May
16, 1999 and with respect to each Interest Period thereafter (the "Class B
Certificate Rate").
The Trustee will determine two business days prior to the Closing Date for
the period from the Closing Date through April 14, 1999, on April 13, 1999 for
the period from April 15, 1999 through May 16, 1999, and for each Interest
Period thereafter, on the second business day prior to the Distribution Date
on which such Interest Period commences (each, a "LIBOR Determination Date").
For purposes of calculating LIBOR, a
S-26
<PAGE>
business day is any business day on which dealings in deposits in United
States dollars are transacted in the London interbank market. "LIBOR" means,
as of any LIBOR Determination Date, the rate for deposits in United States
dollars for a period equal to the relevant Interest Period which appears on
Telerate Page 3750 as of 11:00 a.m., London time, on such date. If such rate
does not appear on Telerate Page 3750, the rate for that LIBOR Determination
Date will be determined on the basis of the rates at which deposits in United
States dollars are offered by the Reference Banks at approximately 11:00 a.m.,
London time, on that day to prime banks in the London interbank market for a
period equal to the relevant Interest Period. The Trustee will request the
principal London office of each of the Reference Banks to provide a quotation
of its rate. If at least two such quotations are provided, the rate for that
LIBOR Determination Date will be the arithmetic mean of the quotations. If
fewer than two quotations are provided as requested, the rate for that LIBOR
Determination Date will be the arithmetic mean of the rates quoted by major
banks in New York City, selected by the Servicer, at approximately 11:00 a.m.,
New York City time, on that day for loans in United States dollars to leading
European banks for a period equal to the relevant Interest Period. "Telerate
Page 3750" means the display page currently so designated on the Dow Jones
Telerate Service (or such other page as may replace that page on that service
for the purpose of displaying comparable rates or prices). "Reference Banks"
means four major banks in the London interbank market selected by the
Servicer.
The Class A Certificate Rate applicable to the current and immediately
preceding Interest Period may be obtained by telephoning the Trustee at (212)
815-5368. Interest on the Class A Certificates will be calculated on the basis
of the actual number of days in the Interest Period and a 360-day year.
Principal Payments
The aggregate principal amount of the Class A Investor Interest and the
Class B Investor Interest will, except as otherwise provided herein, remain
fixed at $750,000,000 and $52,025,000, respectively. The Class A Investor
Interest will decline in certain circumstances if the Default Amounts
allocated to the Class A Certificates exceed funds allocable thereto as
described herein and the Class B Investor Interest and the Collateral Interest
are zero. The Class B Investor Interest will decline in certain circumstances
as a result of (a) the reallocation of collections of Principal Receivables
otherwise allocable to the Class B Investor Interest to fund certain payments
in respect of the Class A Certificates and (b) the allocation to the Class B
Investor Interest of certain Default Amounts, including such amounts otherwise
allocable to the Class A Investor Interest when the Collateral Interest is
zero. During the Controlled Accumulation Period, for the sole purpose of
allocating collections of Finance Charge Receivables and Default Amounts with
respect to each Monthly Period, an amount equal to the amount on deposit in
the Principal Funding Account from time to time will be subtracted from the
Class A Investor Interest (as so reduced, the "Class A Adjusted Investor
Interest" and together with the Class B Investor Interest and the Collateral
Interest, the "Adjusted Investor Interest").
On each Transfer Date relating to the period from and including the Closing
Date and ending at the commencement of the Controlled Accumulation Period or,
if earlier, the Rapid Amortization Period (the "Revolving Period"),
collections of Principal Receivables allocable to the Investor Interest will,
subject to certain limitations, including the allocation of any Reallocated
Principal Collections with respect to the related Monthly Period to pay the
Class A Required Amount and the Class B Required Amount, be treated as Shared
Principal Collections, paid to the holder of the Transferor Certificate,
deposited into the Excess Funding Account or paid to the Collateral Interest
Holder, and will not be available to Class A Certificateholders.
On each Transfer Date relating to the Controlled Accumulation Period, the
Trustee will deposit in the Principal Funding Account an amount equal to the
least of (a) Available Investor Principal Collections with respect to such
Transfer Date, (b) the applicable Controlled Deposit Amount and (c) the Class
A Adjusted Investor Interest prior to any deposits on such date. Amounts in
the Principal Funding Account will be paid to the Class A Certificateholders
on the Class A Scheduled Payment Date. After the Class A Investor Interest has
been paid in full, on each Transfer Date during the Controlled Accumulation
Period, amounts equal to the lesser of (a) Available Investor Principal
Collections with respect to such Transfer Date and (b) the Class B Investor
Interest will be deposited in the Distribution Account for distribution to the
Class B Certificateholders until the Class B Investor Interest has been paid
in full. Such amounts in the Distribution Account will be paid to the
S-27
<PAGE>
Class B Certificateholders on the Class B Scheduled Payment Date. During the
Controlled Accumulation Period until the final principal payment to the Class
B Certificateholders, the portion of Available Investor Principal Collections
not applied to Class A Monthly Principal, Class B Monthly Principal or
Collateral Monthly Principal on a Transfer Date will be treated as Shared
Principal Collections, paid to the holder of the Transferor Certificate,
deposited into the Excess Funding Account or paid to the Collateral Interest
Holder, and will not be available to Class A Certificateholders. "Available
Investor Principal Collections" means, with respect to any Monthly Period, an
amount equal to the sum of (a) (i) collections of Principal Receivables
received during such Monthly Period and certain other amounts allocable to the
Investor Interest, minus (ii) the amount of Reallocated Principal Collections
with respect to such Monthly Period used to fund the Required Amounts (as
defined herein), plus (b) any Shared Principal Collections with respect to
other Series that are allocated to Series 1999-1. On each Distribution Date
during the Rapid Amortization Period, the Class A Certificateholders will be
entitled to receive Available Investor Principal Collections for the related
Monthly Period in an amount up to the Class A Investor Interest until the
earlier of the date the Class A Certificates are paid in full and the Series
1999-1 Termination Date. The "Series 1999-1 Termination Date" is the earliest
to occur of (a) the Distribution Date on which Investor Interest is paid in
full, (b) the August 2006 Distribution Date and (c) the Trust Termination
Date. After payment in full of the Class A Investor Interest, the Class B
Certificateholders will be entitled to receive on each Distribution Date
during the Rapid Amortization Period Available Investor Principal Collections
until the earlier of the date the Class B Certificates are paid in full and
the Series 1999-1 Termination Date. After payment in full of the Class B
Investor Interest, the Collateral Interest Holder will be entitled to receive
on each Transfer Date (other than the Transfer Date prior to the Series 1999-1
Termination Date) and on the Series 1999-1 Termination Date, Available
Investor Principal Collections until the earlier of the date the Collateral
Interest is paid in full and the Series 1999-1 Termination Date. See "--Pay
Out Events" below for a discussion of events which might lead to the
commencement of the Rapid Amortization Period.
Postponement of Controlled Accumulation Period
Upon written notice to the Trustee, the Transferor may elect to postpone
the commencement of the Controlled Accumulation Period, and extend the length
of the Revolving Period, subject to certain conditions including those set
forth below. The Transferor may make such election only if the Accumulation
Period Length (determined as described below) is less than twelve months. On
the February 2002 Determination Date and on each Determination Date
thereafter, until the Controlled Accumulation Period begins, the Servicer will
determine the "Accumulation Period Length," which is the number of whole
months expected to be required to fund the Principal Funding Account up to the
initial outstanding principal amount of the Class A Certificates no later than
the Class A Scheduled Payment Date, based on (a) the expected monthly
collections of Principal Receivables expected to be distributable to the
certificateholders of all Series (excluding certain other Series), assuming a
principal payment rate no greater than the lowest monthly principal payment
rate on the Receivables for the preceding twelve months and (b) the amount of
principal expected to be distributable to certificateholders of all Series
(excluding certain other Series) which are not expected to be in their
revolving periods during the Controlled Accumulation Period. If the
Accumulation Period Length is less than twelve months, the Servicer may, at
its option, postpone the commencement of the Controlled Accumulation Period
such that the number of months included in the Controlled Accumulation Period
will be equal to or exceed the Accumulation Period Length. The effect of the
foregoing calculation is to permit the reduction of the length of the
Controlled Accumulation Period based on the investor interest of certain other
Series which are scheduled to be in their revolving periods during the
Controlled Accumulation Period and on increases in the principal payment rate
occurring after the Closing Date. The length of the Controlled Accumulation
Period will not be determined to be less than one month.
Allocation Percentages
Pursuant to the Agreement, with respect to each Monthly Period the Servicer
will allocate among the Investor Interest, the investor interest for all other
Series issued and outstanding and the Transferor Interest, all amounts
collected on Finance Charge Receivables, all amounts collected on Principal
Receivables and all Default Amounts with respect to such Monthly Period.
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Collections of Finance Charge Receivables and Default Amounts at any time
and collections of Principal Receivables during the Revolving Period will be
allocated to the Investor Interest based on the Floating Investor Percentage.
The "Floating Investor Percentage" means, with respect to any Monthly Period,
the percentage equivalent of a fraction, the numerator of which is the
Adjusted Investor Interest as of the close of business on the last day of the
preceding Monthly Period (or with respect to the first Monthly Period, the
initial Investor Interest) and the denominator of which is the greater of (x)
the sum of (A) the aggregate amount of Principal Receivables as of the close
of business on the last day of the preceding Monthly Period (or with respect
to the first Monthly Period, the aggregate amount of Principal Receivables as
of the opening of business on the Closing Date) and (B) the principal amount
on deposit in the Excess Funding Account as of the close of business on such
day and (y) the sum of the numerators used to calculate the Investor
Percentages for allocations with respect to Finance Charge Receivables,
Default Amounts or Principal Receivables, as applicable, for all outstanding
Series on such date of determination; provided, however, that with respect to
any Monthly Period in which Additional Accounts are added on a specified date
(an "Addition Date") or in which Accounts are removed on a specified date (a
"Removal Date"), the amount in clause (x)(A) above shall be (i) the aggregate
amount of Principal Receivables in Trust I as of the close of business on the
last day of the prior Monthly Period for the period from and including the
first day of such Monthly Period to but excluding the related Addition Date or
Removal Date and (ii) the aggregate amount of Principal Receivables in Trust I
as of the beginning of the day on the related Addition Date or Removal Date
after adjusting for the aggregate amount of Principal Receivables added to or
removed from Trust I on the related Addition Date or Removal Date, as the case
may be, for the period from and including the related Addition Date or Removal
Date to and including the last day of such Monthly Period. The amounts so
allocated will be further allocated between the Class A Certificateholders,
Class B Certificateholders and the Collateral Interest Holder based on the
Class A Floating Allocation, the Class B Floating Allocation and the
Collateral Floating Allocation, respectively. The "Class A Floating
Allocation" means, with respect to any Monthly Period, the percentage
equivalent (which percentage shall never exceed 100%) of a fraction, the
numerator of which is equal to the Class A Adjusted Investor Interest as of
the close of business on the last day of the preceding Monthly Period (or with
respect to the first Monthly Period, as of the Closing Date) and the
denominator of which is equal to the Adjusted Investor Interest as of the
close of business on such day. The "Class B Floating Allocation" means, with
respect to any Monthly Period, the percentage equivalent (which percentage
shall never exceed 100%) of a fraction, the numerator of which is equal to the
Class B Investor Interest as of the close of business on the last day of the
preceding Monthly Period (or with respect to the first Monthly Period, as of
the Closing Date) and the denominator of which is equal to the Adjusted
Investor Interest as of the close of business on such day. The "Collateral
Floating Allocation" means, with respect to any Monthly Period, the percentage
equivalent (which percentage shall never exceed 100%) of a fraction, the
numerator of which is equal to the Collateral Interest as of the close of
business on the last day of the preceding Monthly Period (or with respect to
the first Monthly Period, as of the Closing Date) and the denominator of which
is equal to the Adjusted Investor Interest as of the close of business on such
day.
Collections of Principal Receivables during the Controlled Accumulation
Period and Rapid Amortization Period will be allocated to the Investor
Interest based on the Fixed Investor Percentage. The "Fixed Investor
Percentage" means, with respect to any Monthly Period, the percentage
equivalent of a fraction, the numerator of which is the Investor Interest as
of the close of business on the last day of the Revolving Period and the
denominator of which is the greater of (x) the sum of (A) the aggregate amount
of Principal Receivables as of the close of business on the last day of the
prior Monthly Period and (B) the principal amount on deposit in the Excess
Funding Account as of the close of business on such day and (y) the sum of the
numerators used to calculate the Investor Percentages for allocations with
respect to Principal Receivables for all outstanding Series for such Monthly
Period; provided, however, that with respect to any Monthly Period in which an
Addition Date occurs or in which a Removal Date occurs, the amount in clause
(x)(A) above shall be (i) the aggregate amount of Principal Receivables in
Trust I as of the close of business on the last day of the prior Monthly
Period for the period from and including the first day of such Monthly Period
to but excluding the related Addition Date or Removal Date and (ii) the
aggregate amount of Principal Receivables in Trust I at the beginning of the
day on the related Addition Date or Removal Date after adjusting for the
aggregate amount of Principal Receivables added to or removed from Trust I on
the related Addition Date or Removal Date, as the case may be, for the
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period from and including the related Addition Date or Removal Date to and
including the last day of such Monthly Period. The amounts so allocated will
be further allocated between the Class A Certificateholders, the Class B
Certificateholders and the Collateral Interest Holder based on the Class A
Fixed Allocation, the Class B Fixed Allocation and the Collateral Fixed
Allocation, respectively. The "Class A Fixed Allocation" means, with respect
to any Monthly Period, the percentage equivalent (which percentage shall never
exceed 100%) of a fraction, the numerator of which is equal to the Class A
Investor Interest as of the close of business on the last day of the Revolving
Period, and the denominator of which is equal to the Investor Interest as of
the close of business on the last day of the Revolving Period. The "Class B
Fixed Allocation" means, with respect to any Monthly Period, the percentage
equivalent (which percentage shall never exceed 100%) of a fraction, the
numerator of which is equal to the Class B Investor Interest as of the close
of business on the last day of the Revolving Period, and the denominator of
which is equal to the Investor Interest as of the close of business on the
last day of the Revolving Period. The "Collateral Fixed Allocation" means,
with respect to any Monthly Period, the percentage equivalent (which
percentage shall never exceed 100%) of a fraction, the numerator of which is
equal to the Collateral Interest as of the close of business on the last day
of the Revolving Period, and the denominator of which is equal to the Investor
Interest as of the close of business on the last day of the Revolving Period.
"Class A Investor Interest" for any date means an amount equal to (a) the
aggregate initial principal amount of the Class A Certificates, minus (b) the
aggregate amount of principal payments made to Class A Certificateholders
prior to such date, minus (c) the excess, if any, of the aggregate amount of
Class A Investor Charge-Offs for all Transfer Dates preceding such date over
the aggregate amount of any reimbursements of Class A Investor Charge-Offs for
all Transfer Dates preceding such date; provided, however, that the Class A
Investor Interest may not be reduced below zero.
"Class B Investor Interest" for any date means an amount equal to (a) the
aggregate initial principal amount of the Class B Certificates, minus (b) the
aggregate amount of principal payments made to Class B Certificateholders
prior to such date, minus (c) the aggregate amount of Class B Investor Charge-
Offs for all prior Transfer Dates, minus (d) the aggregate amount of
Reallocated Class B Principal Collections for all prior Transfer Dates for
which the Collateral Interest has not been reduced, minus (e) an amount equal
to the aggregate amount by which the Class B Investor Interest has been
reduced to fund the Class A Investor Default Amount on all prior Transfer
Dates as described under "--Defaulted Receivables; Investor Charge Offs," plus
(f) the aggregate amount of Excess Spread allocated and available on all prior
Transfer Dates for the purpose of reimbursing amounts deducted pursuant to the
foregoing clauses (c), (d) and (e); provided, however, that the Class B
Investor Interest may not be reduced below zero.
"Collateral Interest" for any date means an amount equal to (a) the Initial
Collateral Interest, minus (b) the aggregate amount of principal payments made
to the Collateral Interest Holder prior to such date, minus (c) the aggregate
amount of Collateral Charge-Offs for all prior Transfer Dates, minus (d) the
aggregate amount of Reallocated Principal Collections for all prior Transfer
Dates, minus (e) an amount equal to the aggregate amount by which the
Collateral Interest has been reduced to fund the Class A Investor Default
Amount and the Class B Investor Default Amount on all prior Transfer Dates as
described under "--Defaulted Receivables; Investor Charge-Offs," plus (f) the
aggregate amount of Excess Spread allocated and available on all prior
Transfer Dates for the purpose of reimbursing amounts deducted pursuant to the
foregoing clauses (c), (d) and (e); provided, however, that the Collateral
Interest may not be reduced below zero.
Reallocation of Cash Flows
With respect to each Transfer Date, the Servicer will determine the amount
(the "Class A Required Amount"), which will be equal to the amount, if any, by
which the sum of (a) Class A Monthly Interest due on the related Distribution
Date and overdue Class A Monthly Interest and Class A Additional Interest
thereon, if any, (b) the Class A Servicing Fee for the related Monthly Period
and overdue Class A Servicing Fee, if any, and (c) the Class A Investor
Default Amount, if any, for the related Monthly Period exceeds the Class A
Available Funds for the related Monthly Period. If the Class A Required Amount
is greater than zero, Excess Spread allocated to Series 1999-1 and available
for such purpose will be used to fund the Class A Required
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Amount with respect to such Transfer Date. If such Excess Spread is
insufficient to fund the Class A Required Amount first, Reallocated Collateral
Principal Collections and, then, Reallocated Class B Principal Collections
will be used to fund the remaining Class A Required Amount. If Reallocated
Principal Collections with respect to the related Monthly Period, together
with Excess Spread, are insufficient to fund the remaining Class A Required
Amount for such related Monthly Period, then the Collateral Interest (after
giving effect to reductions for any Collateral Charge-Offs and Reallocated
Principal Collections on such Transfer Date) will be reduced by the amount of
such excess (but not by more than the Class A Investor Default Amount for such
Monthly Period). In the event that such reduction would cause the Collateral
Interest to be a negative number, the Collateral Interest will be reduced to
zero, and the Class B Investor Interest (after giving effect to reductions for
any Class B Investor Charge-Offs and any Reallocated Class B Principal
Collections for which the Collateral Interest was not reduced on such Transfer
Date) will be reduced by the amount by which the Collateral Interest would
have been reduced below zero (but not by more than the excess of the Class A
Investor Default Amount, if any, for such Monthly Period over the amount of
such reduction, if any, of the Collateral Interest with respect to such
Monthly Period). In the event that such reduction would cause the Class B
Investor Interest to be a negative number, the Class B Investor Interest will
be reduced to zero and the Class A Investor Interest will be reduced by the
amount by which the Class B Investor Interest would have been reduced below
zero (but not by more than the excess, if any, of the Class A Investor Default
Amount for such Monthly Period over the amount of the reductions, if any, of
the Collateral Interest and the Class B Investor Interest with respect to such
Monthly Period). Any such reduction in the Class A Investor Interest will have
the effect of slowing or reducing the return of principal and interest to the
Class A Certificateholders. In such case, the Class A Certificateholders will
bear directly the credit and other risks associated with their interests in
Trust I. See "--Defaulted Receivables; Investor Charge-Offs."
With respect to each Transfer Date, the Servicer will determine the amount
(the "Class B Required Amount"; together with the Class A Required Amount, the
"Required Amounts"), which will be equal to the sum of (a) the amount, if any,
by which the sum of (i) Class B Monthly Interest due on the related
Distribution Date and overdue Class B Monthly Interest and Class B Additional
Interest thereon, if any, and (ii) the Class B Servicing Fee for the related
Monthly Period and overdue Class B Servicing Fee, if any, exceeds the Class B
Available Funds for the related Monthly Period and (b) the Class B Investor
Default Amount, if any, for the related Monthly Period. If the Class B
Required Amount is greater than zero, Excess Spread allocated to Series 1999-1
not required to pay the Class A Required Amount or reimburse Class A Investor
Charge-Offs will be used to fund the Class B Required Amount with respect to
such Transfer Date. If such Excess Spread is insufficient to fund the Class B
Required Amount, Reallocated Collateral Principal Collections not required to
fund the Class A Required Amount for the related Monthly Period will be used
to fund the remaining Class B Required Amount. If such Reallocated Collateral
Principal Collections with respect to the related Monthly Period are
insufficient to fund the remaining Class B Required Amount, then the
Collateral Interest (after giving effect to reductions for any Collateral
Charge-Offs and Reallocated Principal Collections on such Transfer Date and
after any adjustments made thereto for the benefit of the Class A
Certificateholders) will be reduced by the amount of such deficiency (but not
by more than the Class B Investor Default Amount for such Monthly Period). In
the event that such a reduction would cause the Collateral Interest to be a
negative number, the Collateral Interest will be reduced to zero, and the
Class B Investor Interest will be reduced by the amount by which the
Collateral Interest would have been reduced below zero (but not by more than
the excess of the Class B Investor Default Amount for such Monthly Period over
the amount of such reduction of the Collateral Interest), and the Class B
Certificateholders will bear directly the credit and other risks associated
with their interests in Trust I. See "--Defaulted Receivables; Investor
Charge-Offs." Reductions of the Class A Investor Interest or Class B Investor
Interest described above shall be reimbursed by, and the Class A Investor
Interest or Class B Investor Interest increased to the extent of, Excess
Spread available for such purposes on each Transfer Date. See "--Application
of Collections--Excess Spread." When such reductions of the Class A Investor
Interest and Class B Investor Interest have been fully reimbursed, reductions
of the Collateral Interest shall be reimbursed until reimbursed in full in a
similar manner.
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"Reallocated Class B Principal Collections" for any Monthly Period means
collections of Principal Receivables allocable to the Class B Investor
Interest for the related Monthly Period in an amount not to exceed the amount
applied to fund the Class A Required Amount, if any; provided, however, that
such amount will not exceed the Class B Investor Interest after giving effect
to any Class B Investor Charge-Offs for the related Transfer Date.
"Reallocated Collateral Principal Collections" for any Monthly Period means
collections of Principal Receivables allocable to the Collateral Interest for
the related Monthly Period in an amount not to exceed the amount applied to
fund the Class A Required Amount and the Class B Required Amount, if any;
provided, however, that such amount will not exceed the Collateral Interest
after giving effect to any Collateral Charge-Offs for the related Transfer
Date. "Reallocated Principal Collections" for any Monthly Period means the sum
of (a) the Reallocated Class B Principal Collections for such Monthly Period,
if any, and (b) the Reallocated Collateral Principal Collections for such
Monthly Period, if any.
Application of Collections
Allocations. Except as otherwise provided below, the Servicer will deposit
into the Collection Account, no later than the second business day following
the date of processing, any payment collected by the Servicer on the
Receivables. On the same day as any such deposit is made, the Servicer will
make the deposits and payments to the accounts and parties as indicated below;
provided, however, that for as long as Wachovia remains the Servicer under the
Agreement and (a) (i) the Servicer provides to the Trustee a letter of credit
or other credit enhancement covering the risk of collection of the Servicer
acceptable to each Rating Agency and (ii) the Transferor shall not have
received a notice from any Rating Agency that reliance on such letter of
credit or other credit enhancement would result in the lowering of such Rating
Agency's then-existing rating of any Series then outstanding or (b) the
Servicer or the Corporation has and maintains a certificate of deposit or
commercial paper rating of P-1 by Moody's and of A-1 by Standard & Poor's or
makes other arrangements satisfactory to each Rating Agency rating any Series
then outstanding, then the Servicer may make such deposits and payments on the
business day immediately prior to the Distribution Date (the "Transfer Date")
in an amount equal to the net amount of such deposits and payments which would
have been made had the conditions of this proviso not applied.
With respect to the Class A Certificates and Class B Certificates and any
Monthly Period, and notwithstanding anything in the Agreement to the contrary,
whether the Servicer is required to make monthly or daily deposits from the
Collection Account into the Finance Charge Account or the Principal Account,
(i) the Servicer will only be required to deposit Collections from the
Collection Account into the Finance Charge Account or the Principal Account up
to the required amount to be deposited into any such deposit account or,
without duplication, distributed on or prior to the related Distribution Date
to Class A Certificateholders, Class B Certificateholders or to the Collateral
Interest Holder and (ii) if at any time prior to such Distribution Date the
amount of collections deposited in the Collection Account exceeds the amount
required to be deposited pursuant to clause (i) above, the Servicer will be
permitted to withdraw the excess from the Collection Account.
Payment of Interest, Fees and Other Items. On each Transfer Date, the
Trustee, acting pursuant to the Servicer's instructions, will apply the Class
A Available Funds, Class B Available Funds and Collateral Available Funds in
the Finance Charge Account in the following manner:
(a) On each Transfer Date, an amount equal to the Class A Available
Funds will be distributed in the following priority:
(i) an amount equal to Class A Monthly Interest for the related
Distribution Date, plus the amount of any overdue Class A Monthly
Interest and Class A Additional Interest thereon, if any, will be
deposited into the Distribution Account for distribution to Class A
Certificateholders on such Distribution Date;
(ii) an amount equal to the Class A Servicing Fee for the related
Monthly Period, plus the amount of any overdue Class A Servicing Fee,
will be paid to the Servicer;
(iii) an amount equal to the Class A Investor Default Amount, if
any, for the related Monthly Period will be treated as a portion of
Available Investor Principal Collections and deposited into the
Principal Account for such Transfer Date; and
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(iv) the balance, if any, will constitute a portion of Excess Spread
and will be allocated and distributed as described under "--Excess
Spread."
(b) On each Transfer Date, an amount equal to the Class B Available
Funds will be distributed in the following priority:
(i) an amount equal to Class B Monthly Interest for the related
Distribution Date, plus the amount of any overdue Class B Monthly
Interest and Class B Additional Interest thereon, if any, will be
deposited into the Distribution Account for distribution to Class B
Certificateholders on such Distribution Date;
(ii) an amount equal to the Class B Servicing Fee for the related
Monthly Period, plus the amount of any overdue Class B Servicing Fee,
will be paid to the Servicer; and
(iii) the balance, if any, will constitute a portion of Excess
Spread and will be allocated and distributed as described under "--
Excess Spread."
(c) On each Transfer Date, an amount equal to the Collateral Available
Funds will be distributed in the following priority:
(i) if Wachovia or The Bank of New York (Delaware) is no longer the
Servicer, an amount equal to the Collateral Interest Servicing Fee for
the related Monthly Period, plus the amount of any overdue Collateral
Interest Servicing Fee, will be paid to the Servicer; and
(ii) the balance, if any, will constitute a portion of Excess Spread
and will be allocated and distributed as described under "--Excess
Spread."
"Class A Monthly Interest" with respect to any Distribution Date will equal
the product of (i) the Class A Certificate Rate for the related Interest
Period, (ii) the actual number of days in such Interest Period divided by 360
and (iii) the outstanding principal balance of the Class A Certificates as of
the related Record Date; provided, however, with respect to the first
Distribution Date, Class A Monthly Interest will be equal to the interest
accrued on the initial outstanding principal balance of the Class A
Certificates at the applicable Class A Certificate Rate for the period from
the Closing Date through May 16, 1999.
"Class B Monthly Interest" with respect to any Distribution Date will equal
the product of (i) the Class B Certificate Rate for the related Interest
Period, (ii) the actual number of days in such Interest Period divided by 360
and (iii) the outstanding principal balance of the Class B Certificates as of
the related Record Date; provided, however, with respect to the first
Distribution Date, Class B Monthly Interest will be equal to the interest
accrued on the initial outstanding principal balance of the Class B
Certificates at the applicable Class B Certificate Rate for the period from
the Closing Date through May 16, 1999.
"Collateral Available Funds" means, with respect to any Monthly Period, an
amount equal to the Collateral Floating Allocation of collections of Finance
Charge Receivables allocated to the Investor Interest with respect to such
Monthly Period (excluding the portion of collections of Finance Charge
Receivables attributable to Interchange that is allocable to Servicer
Interchange).
"Excess Spread"means, with respect to any Transfer Date, an amount equal to
the sum of the amounts described in clause (a) (iv), clause (b) (iii) and
clause (c) (ii) above. To the extent such amounts are insufficient to make the
distributions required by subparagraphs (a) through (j) below under "--Excess
Spread," Excess Spread shall also be deemed to include any Excess Finance
Charge Collections allocable to other Series available to Series 1999-1 in
accordance with the Agreement.
Excess Spread. On each Transfer Date, the Trustee, acting pursuant to the
Servicer's instructions, will apply Excess Spread with respect to the related
Monthly Period, to make the following distributions in the following priority:
(a) an amount equal to the Class A Required Amount, if any, with respect
to such Transfer Date will be used to fund the Class A Required Amount;
provided, that in the event the Class A Required Amount for such Transfer
Date exceeds the amount of Excess Spread, such Excess Spread shall be
applied first to pay amounts due with respect to such Transfer Date
pursuant to clause (a) (i) above under "--Payment of
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Interest, Fees and Other Items," second to pay amounts due with respect to
such Transfer Date pursuant to clause (a) (ii) above under "--Payment of
Interest, Fees and Other Items" and third to pay amounts due with respect
to such Transfer Date pursuant to clause (a) (iii) above under "--Payment
of Interest, Fees and Other Items";
(b) an amount equal to the aggregate amount of Class A Investor Charge-
Offs which have not been previously reimbursed (after giving effect to the
allocation on such Transfer Date of certain other amounts applied for that
purpose) will be deposited into the Principal Account and treated as a
portion of Available Investor Principal Collections for such Transfer Date
as described under "--Payments of Principal" below;
(c) an amount equal to the Class B Required Amount, if any, with respect
to such Transfer Date will be used to fund the Class B Required Amount and
will be applied first to pay amounts due with respect to such Transfer Date
pursuant to clause (b) (i) above under "--Payment of Interest, Fees and
Other Items," second to pay amounts due with respect to such Transfer Date
pursuant to clause (b) (ii) above under "--Payment of Interest, Fees and
Other Items" and third, the amount remaining, up to the Class B Investor
Default Amount, will be deposited into the Principal Account and treated as
a portion of Available Investor Principal Collections for such Transfer
Date as described under "--Payments of Principal" below;
(d) an amount equal to the aggregate amount by which the Class B
Investor Interest has been reduced below the initial Class B Investor
Interest for reasons other than the payment of principal to the Class B
Certificateholders (but not in excess of the aggregate amount of such
reductions which have not been previously reimbursed) will be deposited
into the Principal Account and treated as a portion of Available Investor
Principal Collections for such Transfer Date as described under "--Payments
of Principal" below;
(e) an amount equal to the Collateral Monthly Interest for such Transfer
Date, plus the amount of any Collateral Monthly Interest previously due but
not distributed to the Collateral Interest Holder on a prior Transfer Date,
will be distributed to the Collateral Interest Holder for distribution in
accordance with the loan agreement to be dated the Closing Date, among the
Trustee, the Transferor, the Servicer, the Collateral Interest Holders and
the agent acting on their behalf (the "Loan Agreement");
(f) if Wachovia or The Bank of New York (Delaware) is the Servicer, an
amount equal to the Collateral Interest Servicing Fee for the related
Monthly Period, plus the amount of any overdue Collateral Interest
Servicing Fee, will be paid to the Servicer;
(g) an amount equal to the aggregate Collateral Default Amount, if any,
for such Transfer Date will be deposited into the Principal Account and
treated as a portion of Available Investor Principal Collections for such
Transfer Date as described under "--Payments of Principal" below;
(h) an amount equal to the aggregate amount by which the Collateral
Interest has been reduced below the Required Collateral Interest for
reasons other than the payment of principal to the Collateral Interest
Holder (but not in excess of the aggregate amount of such reductions which
have not been previously reimbursed) will be deposited into the Principal
Account and treated as a portion of Available Investor Principal
Collections for such Transfer Date as described under "--Payments of
Principal" below;
(i) on each Transfer Date from and after the Reserve Account Funding
Date, but prior to the date on which the Reserve Account terminates as
described under "--Reserve Account," an amount up to the excess, if any, of
the Required Reserve Account Amount over the Available Reserve Account
Amount will be deposited into the Reserve Account;
(j) an amount equal to the aggregate of any other amounts then due to
the Collateral Interest Holder pursuant to the Loan Agreement or otherwise
required to be applied in accordance with the Loan Agreement will be
distributed for application in accordance with the Loan Agreement; and
(k) the balance, if any, after giving effect to the payments made
pursuant to subparagraphs (a) through (j) above, first will be treated as
"Excess Finance Charge Collections" to be applied to cover shortfalls, if
any, with respect to amounts payable from collections of Finance Charge
Receivables with respect to other Series in accordance with the Agreement,
and then the balance, if any, remaining after such sharing will be paid to
the holder of the Transferor Certificate.
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"Collateral Monthly Interest" with respect to any Transfer Date will equal
the product of (a) an amount equal to LIBOR plus 1.25% per annum, or such
lesser amount as may be designated in the Loan Agreement (the "Collateral
Rate"), (b) the actual number of days in the related Interest Period divided
by 360 and (c) the Collateral Interest as of the related Record Date or, with
respect to the first Transfer Date, the Initial Collateral Interest.
Payments of Principal. On each Transfer Date, the Trustee, acting pursuant
to the Servicer's instructions, will distribute Available Investor Principal
Collections (see "--Principal Payments" above) on deposit in the Principal
Account in the following manner:
(a) on each Transfer Date with respect to the Revolving Period, all such
Available Investor Principal Collections will be distributed or deposited
in the following priority:
(i) an amount equal to the Collateral Monthly Principal will be paid
to the Collateral Interest Holder in accordance with the Loan
Agreement; and
(ii) the balance will be treated as Shared Principal Collections and
applied as described under "Description of the Certificates--Shared
Principal Collections" herein and in the attached prospectus;
(b) on each Transfer Date with respect to the Controlled Accumulation
Period or the Rapid Amortization Period, all such Available Investor
Principal Collections will be distributed or deposited in the following
priority:
(i) an amount equal to Class A Monthly Principal will be deposited
in the Principal Funding Account (during the Controlled Accumulation
Period) or distributed to the Class A Certificateholders (during the
Rapid Amortization Period); and
(ii) for each Transfer Date after the Class A Investor Interest has
been paid in full (after taking into account payments to be made on the
related Distribution Date), an amount equal to the Class B Monthly
Principal for such Transfer Date will be distributed to the Class B
Certificateholders;
(c) on each Transfer Date with respect to the Controlled Accumulation
Period and the Rapid Amortization Period in which a reduction in the
Required Collateral Interest has occurred, Available Investor Principal
Collections not applied to Class A Monthly Principal or Class B Monthly
Principal will be applied to reduce the Collateral Interest until the sum
of the Collateral Interest equals the Required Collateral Interest; and
(d) on each Transfer Date with respect to the Controlled Accumulation
Period and the Rapid Amortization Period, the balance of Available Investor
Principal Collections not applied pursuant to (b) and (c) above, if any,
will be treated as Shared Principal Collections and applied as described
under "Description of the Certificates--Shared Principal Collections"
herein and in the attached prospectus.
"Class A Monthly Principal" with respect to any Transfer Date relating to
the Controlled Accumulation Period or the Rapid Amortization Period, prior to
the payment in full of the Class A Investor Interest, will equal the least of
(i) the Available Investor Principal Collections on deposit in the Principal
Account with respect to such Transfer Date, (ii) for each Transfer Date with
respect to the Controlled Accumulation Period, prior to the payment in full of
the Class A Investor Interest, and on or prior to the Class A Scheduled
Payment Date, the applicable Controlled Deposit Amount for such Transfer Date
and (iii) the Class A Adjusted Investor Interest prior to any deposits on such
Transfer Date.
"Class B Monthly Principal" with respect to any Transfer Date relating to
the Controlled Accumulation Period or the Rapid Amortization Period, after the
Class A Certificates have been paid in full (after taking into account
payments to be made on the related Distribution Date), will equal the lesser
of (i) the Available Investor Principal Collections on deposit in the
Principal Account with respect to such Transfer Date (minus the portion of
such Available Investor Principal Collections applied to Class A Monthly
Principal on such Transfer Date) and (ii) the Class B Investor Interest for
such Transfer Date.
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"Collateral Monthly Principal" means (a) with respect to any Transfer Date
relating to the Revolving Period an amount equal to the lesser of (i) the
excess, if any, of the sum of the Collateral Interest (after giving effect to
reductions for any Collateral Charge-Offs and Reallocated Principal
Collections on such Transfer Date and after giving effect to any adjustments
thereto for the benefit of the Class A Certificateholders and the Class B
Certificateholders on such Transfer Date) over the Required Collateral
Interest on such Transfer Date, and (ii) the Available Investor Principal
Collections on such Transfer Date or (b) with respect to any Transfer Date
relating to the Controlled Accumulation Period or Rapid Amortization Period an
amount equal to the lesser of (i) the excess, if any, of the sum of the
Collateral Interest (after giving effect to reductions for any Collateral
Charge-Offs and Reallocated Principal Collections on such Transfer Date and
after giving effect to any adjustments thereto for the benefit of the Class A
Certificateholders and the Class B Certificateholders on such Transfer Date)
over the Required Collateral Interest on such Transfer Date, and (ii) the
excess, if any, of (A) the Available Investor Principal Collections on such
Transfer Date over (B) the sum of the Class A Monthly Principal and the Class
B Monthly Principal for such Transfer Date.
"Controlled Accumulation Amount" means (a) for any Transfer Date with
respect to the Controlled Accumulation Period, prior to the payment in full of
the Class A Investor Interest, $62,500,000; provided, however, that if the
commencement of the Controlled Accumulation Period is delayed as described
above under "--Postponement of Controlled Accumulation Period," the Controlled
Accumulation Amount may be higher than the amount stated above for each
Transfer Date with respect to the Controlled Accumulation Period and will be
determined by the Servicer in accordance with the Agreement based on the
principal payment rates for the Accounts and on the investor interest of other
Series (other than certain excluded Series) which are scheduled to be in their
revolving periods and then scheduled to create Shared Principal Collections
during the Controlled Accumulation Period and (b) for any Transfer Date with
respect to the Controlled Accumulation Period after the payment in full of the
Class A Investor Interest, an amount equal to the Class B Investor Interest on
such Transfer Date.
"Accumulation Shortfall" means (a) on the first Transfer Date with respect
to the Controlled Accumulation Period, the excess, if any, of the Controlled
Accumulation Amount for such Transfer Date over the amount distributed from
the Principal Account as Class A Monthly Principal for such Transfer Date and
(b) on each subsequent Transfer Date with respect to the Controlled
Accumulation Period, the excess, if any, of the applicable Controlled
Accumulation Amount for such subsequent Transfer Date plus any Accumulation
Shortfall for the prior Transfer Date over the amount distributed from the
Principal Account as Class A Monthly Principal for such subsequent Transfer
Date.
Shared Excess Finance Charge Collections
To the extent that collections of Finance Charge Receivables allocated to
the Investor Interest (and any other amounts that are to be treated as
collections of Finance Charge Receivables allocated to the Investor Interest)
are not needed to make payments in respect of the Investor Interest as
described above under "--Application of Collections--Payment of Interest, Fees
and Other Items" and "--Excess Spread," such Excess Finance Charge Collections
will be applied to make payments in respect of other Series entitled to share
therein in accordance with the Agreement. In addition, Excess Finance Charge
Collections with respect to certain other Series, to the extent not required
to make payments in respect of such Series, may be applied to cover shortfalls
in amounts payable from Excess Spread as described above under "--Application
of Collections--Excess Spread" (as well as shortfalls experienced by other
Series).
Shared Principal Collections
Collections of Principal Receivables for any Monthly Period allocated to
the Investor Interest will first be used to cover, with respect to any Monthly
Period during the Controlled Accumulation Period, deposits of the applicable
Controlled Deposit Amount to the Principal Funding Account or the Distribution
Account, and during the Rapid Amortization Period, payments to the Class A
Certificateholders and Class B Certificateholders and then under certain
circumstances payments to the Collateral Interest Holder. The Servicer will
determine the amount of collections of Principal Receivables for any Monthly
Period allocated to the Investor Interest
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remaining after covering required payments to the Class A Certificateholders
and Class B Certificateholders and any similar amount remaining for any other
Series ("Shared Principal Collections"). The Servicer will allocate the Shared
Principal Collections to cover any scheduled or permitted principal
distributions to certificateholders and deposits to principal funding
accounts, if any, for any Series entitled thereto which have not been covered
out of the collections of Principal Receivables allocable to such Series and
certain other amounts for such Series ("Principal Shortfalls"). Shared
Principal Collections will not be used to cover investor charge-offs for any
Series. If Principal Shortfalls exceed Shared Principal Collections for any
Monthly Period, Shared Principal Collections will be allocated pro rata among
the applicable Series based on the relative amounts of Principal Shortfalls.
To the extent that Shared Principal Collections exceed Principal Shortfalls,
the balance will be paid to the holder of the Transferor Certificate or, under
certain circumstances, deposited into the Excess Funding Account.
Required Collateral Interest
The "Required Collateral Interest" with respect to any Transfer Date means
(i) initially $65,030,000 (the "Initial Collateral Interest") and (ii)
thereafter on each Transfer Date, an amount equal to the greater of (i) 7.50%
of the sum of the Class A Adjusted Investor Interest, the Class B Investor
Interest and the Collateral Interest on such Transfer Date, after taking into
account deposits into the Principal Funding Account on such Transfer Date and
payments to be made on the related Distribution Date, and the Collateral
Interest on the prior Transfer Date after any adjustments made on such
Transfer Date, but not less than $26,011,650; provided, however, (1) that if
certain reductions in the Collateral Interest are made or if a Pay Out Event
occurs, the Required Collateral Interest for such Transfer Date shall equal
the Required Collateral Interest for the Transfer Date immediately preceding
the occurrence of such reduction or Pay Out Event, (2) in no event shall the
Required Collateral Interest exceed the unpaid principal amount of the Class A
Certificates as of the last day of the Monthly Period preceding such Transfer
Date after taking into account payments to be made on the related Distribution
Date and (3) the Required Collateral Interest may be reduced to a lesser
amount at any time if the Rating Agency Condition is satisfied.
"Rating Agency Condition" means the notification in writing by each Rating
Agency that a proposed action will not result in such Rating Agency reducing
or withdrawing its then existing rating of the investor certificates of any
outstanding Series or Class with respect to which it is a Rating Agency.
With respect to any Transfer Date, if the Collateral Interest is less than
the Required Collateral Interest, certain Excess Spread, if available, will be
allocated to increase the Collateral Interest to the extent of certain
unreimbursed reductions thereof. Any of such Excess Spread not required to be
so allocated or deposited into the Reserve Account with respect to any
Transfer Date will be applied in accordance with the Loan Agreement. See "--
Application of Collections--Excess Spread."
Defaulted Receivables; Investor Charge-Offs
On or before each Transfer Date, the Servicer will calculate the Investor
Default Amount for the preceding Monthly Period. The term "Investor Default
Amount" means, for any Monthly Period, the product of (a) the Floating
Investor Percentage with respect to such Monthly Period and (b) the aggregate
amount of Receivables in Defaulted Accounts (the "Default Amount") for such
Monthly Period. A portion of the Investor Default Amount will be allocated to
the Class A Certificateholders (the "Class A Investor Default Amount") on each
Transfer Date in an amount equal to the product of the Class A Floating
Allocation applicable during the related Monthly Period and the Investor
Default Amount for such Monthly Period. A portion of the Investor Default
Amount will be allocated to the Class B Certificateholders (the "Class B
Investor Default Amount") on each Transfer Date in an amount equal to the
product of the Class B Floating Allocation applicable during the related
Monthly Period and the Investor Default Amount for such Monthly Period. A
portion of the Investor Default Amount will be allocated to the Collateral
Interest Holder (the "Collateral Default Amount") on each Transfer Date in an
amount equal to the product of the Collateral Floating Allocation applicable
during the related Monthly Period and the Investor Default Amount for such
Monthly Period.
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On each Transfer Date, if the Class A Investor Default Amount for such
Transfer Date exceeds the amount of Excess Spread and Reallocated Principal
Collections available to fund such amount with respect to the Monthly Period
immediately preceding such Transfer Date, the Collateral Interest (after
giving effect to reductions for any Collateral Charge-Offs and any Reallocated
Principal Collections on such Transfer Date) will be reduced by the amount of
such excess, but not more than the lesser of the Class A Investor Default
Amount and the Collateral Interest (after giving effect to reductions for any
Collateral Charge-Offs and any Reallocated Principal Collections on such
Transfer Date) for such Transfer Date. In the event that such reduction would
cause the Collateral Interest to be a negative number, the Collateral Interest
will be reduced to zero, and the Class B Investor Interest (after giving
effect to reductions for any Class B Investor Charge-Offs and any Reallocated
Class B Principal Collections on such Transfer Date) will be reduced by the
amount by which the Collateral Interest would have been reduced below zero. In
the event that such reduction would cause the Class B Investor Interest to be
a negative number, the Class B Investor Interest will be reduced to zero, and
the Class A Investor Interest will be reduced by the amount by which the Class
B Investor Interest would have been reduced below zero, but not more than the
Class A Investor Default Amount for such Transfer Date (a "Class A Investor
Charge-Off"), which will have the effect of slowing or reducing the return of
principal and interest to the Class A Certificateholders. If the Class A
Investor Interest has been reduced by the amount of any Class A Investor
Charge-Offs, it will be reimbursed on any Transfer Date (but not by an amount
in excess of the aggregate Class A Investor Charge-Offs) by the amount of
Excess Spread allocated and available for such purpose as described under "--
Application of Collections--Excess Spread."
On each Transfer Date, if the Class B Investor Default Amount for such
Transfer Date exceeds the amount of Excess Spread and Reallocated Collateral
Principal Collections which are allocated and available to fund such amount
with respect to the Monthly Period preceding such Transfer Date, the
Collateral Interest (after giving effect to reductions for any Collateral
Charge-Offs and any Reallocated Principal Collections on such Transfer Date
and after giving effect to any adjustments with respect thereto as described
in the preceding paragraph) will be reduced by the amount of such excess, but
not more than the lesser of the Class B Investor Default Amount and the
Collateral Interest (after giving effect to reductions for any Collateral
Charge-Offs and any Reallocated Principal Collections on such Transfer Date
and after giving effect to any adjustments with respect thereto as described
in the preceding paragraph) for such Transfer Date. In the event that such
reduction would cause the Collateral Interest to be a negative number, the
Collateral Interest will be reduced to zero, and the Class B Investor Interest
will be reduced by the amount by which the Collateral Interest would have been
reduced below zero, but not more than the Class B Investor Default Amount for
such Transfer Date (a "Class B Investor Charge-Off"). The Class B Investor
Interest will also be reduced by the amount of Reallocated Class B Principal
Collections in excess of the Collateral Interest (after giving effect to
reductions for any Collateral Charge-Offs and any Reallocated Collateral
Principal Collections on such Transfer Date) and the amount of any portion of
the Class B Investor Interest allocated to the Class A Certificates to avoid a
reduction in the Class A Investor Interest. The Class B Investor Interest will
thereafter be reimbursed (but not in excess of the unpaid principal balance of
the Class B Certificates) on any Transfer Date by the amount of Excess Spread
allocated and available for that purpose as described under "--Application of
Collections--Excess Spread."
On each Transfer Date, if the Collateral Default Amount for such Transfer
Date exceeds the amount of Excess Spread which is allocated and available to
fund such amount as described under "--Application of Collections--Excess
Spread," the Collateral Interest will be reduced by the amount of such excess
but not more than the lesser of the Collateral Default Amount and the
Collateral Interest for such Transfer Date (a "Collateral Charge-Off"). The
Collateral Interest will also be reduced by the amount of Reallocated
Principal Collections and the amount of any portion of the Collateral Interest
allocated to the Class A Certificates to avoid a reduction in the Class A
Investor Interest or to the Class B Certificates to avoid a reduction in the
Class B Investor Interest. The Collateral Interest will thereafter be
reimbursed on any Transfer Date by the amount of Excess Spread allocated and
available for that purpose as described under "--Application of Collections--
Excess Spread."
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Principal Funding Account
Pursuant to the Series 1999-1 Supplement, the Trustee will establish and
maintain with a Qualified Institution a segregated trust account held for the
benefit of the Class A Certificateholders (the "Principal Funding Account").
During the Controlled Accumulation Period, the Trustee, at the direction of
the Servicer, will transfer collections in respect of Principal Receivables
(other than Reallocated Principal Collections) and Shared Principal
Collections from other Series, if any, allocated to Series 1999-1 from the
Principal Account to the Principal Funding Account as described under "--
Application of Collections." Such collections will be retained in the
Principal Funding Account and ultimately used to pay principal of the Class A
Certificates on the Class A Scheduled Payment Date or the first Distribution
Date with respect to the Rapid Amortization Period, whichever occurs earlier.
Funds on deposit in the Principal Funding Account will be invested to the
following Transfer Date by the Trustee at the direction of the Servicer in
Permitted Investments. Investment earnings (net of investment losses and
expenses) on funds on deposit in the Principal Funding Account (the "Principal
Funding Investment Proceeds") will be applied on each Transfer Date as Class A
Available Funds.
Reserve Account
Pursuant to the Series 1999-1 Supplement, the Trustee will establish and
maintain with a Qualified Institution a segregated trust account held for the
benefit of the Class A Certificateholders (the "Reserve Account"). The Reserve
Account is established to assist with the subsequent distribution of interest
on the Class A Certificates during the Controlled Accumulation Period. On each
Transfer Date from and after the Reserve Account Funding Date, but prior to
the termination of the Reserve Account, the Trustee, acting pursuant to the
Servicer's instructions, will apply Excess Spread allocated to the Class A
Certificates (to the extent described above under "--Application of
Collections--Excess Spread") to increase the amount on deposit in the Reserve
Account (to the extent such amount is less than the Required Reserve Account
Amount). The "Reserve Account Funding Date" will be the Transfer Date with
respect to the Monthly Period which commences no later than three months prior
to the commencement of the Controlled Accumulation Period, or such earlier
date as the Servicer may determine. The "Required Reserve Account Amount" for
any Transfer Date on or after the Reserve Account Funding Date will be equal
to (a) 0.5% of the outstanding principal balance of the Class A Certificates
or (b) any other amount designated by the Transferor; provided, however, that
if such designation is of a lesser amount, the Transferor shall have provided
the Servicer, the Collateral Interest Holder and the Trustee with evidence
that the Rating Agency Condition has been satisfied and the Transferor shall
have delivered to the Trustee a certificate of an authorized officer to the
effect that, based on the facts known to such officer at such time, in the
reasonable belief of the Transferor, such designation will not cause a Pay Out
Event or an event that, after the giving of notice or the lapse of time, would
cause a Pay Out Event to occur with respect to Series 1999-1. On each Transfer
Date, after giving effect to any deposit to be made to, and any withdrawal to
be made from, the Reserve Account on such Transfer Date, the Trustee will
withdraw from the Reserve Account an amount equal to the excess, if any, of
the amount on deposit in the Reserve Account over the Required Reserve Account
Amount and distribute such excess to the Collateral Interest Holder for
application in accordance with the terms of the Loan Agreement.
Provided that the Reserve Account has not terminated as described below,
all amounts on deposit in the Reserve Account on any Transfer Date (after
giving effect to any deposits to, or withdrawals from, the Reserve Account to
be made on such Transfer Date) will be invested to the following Transfer Date
by the Trustee at the direction of the Servicer in Permitted Investments. The
interest and other investment income (net of investment expenses and losses)
earned on such investments will be retained in the Reserve Account (to the
extent the amount on deposit is less than the Required Reserve Account Amount)
or deposited in the Finance Charge Account and treated as Class A Available
Funds.
On or before each Transfer Date with respect to the Controlled Accumulation
Period and on the first Transfer Date with respect to the Rapid Amortization
Period, a withdrawal will be made from the Reserve Account, and the amount of
such withdrawal will be deposited in the Finance Charge Account and included
in collections of Finance Charge Receivables to be applied to the payment of
the Class A Monthly Interest for such
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Transfer Date in an amount equal to the lesser of (a) the Available Reserve
Account Amount with respect to such Transfer Date and (b) the Reserve Account
Draw with respect to such Transfer Date; provided, that the amount of such
withdrawal shall be reduced to the extent that funds otherwise would be
available to be deposited in the Reserve Account on such Transfer Date. On
each Transfer Date, the amount available to be withdrawn from the Reserve
Account (the "Available Reserve Account Amount") will be equal to the lesser
of the amount on deposit in the Reserve Account (before giving effect to any
deposit to be made to the Reserve Account on such Transfer Date) and the
Required Reserve Account Amount for such Transfer Date.
The Reserve Account will be terminated upon the earlier to occur of (a) the
termination of Trust I pursuant to the Pooling and Servicing Agreement and (b)
if the Controlled Accumulation Period has not commenced, the first Transfer
Date with respect to the Rapid Amortization Period or, if the Controlled
Accumulation Period has commenced, the earlier to occur of (i) the first
Transfer Date with respect to the Rapid Amortization Period and (ii) the
Transfer Date immediately preceding the Class A Scheduled Payment Date. Upon
the termination of the Reserve Account, all amounts on deposit therein (after
giving effect to any withdrawal from the Reserve Account on such date as
described above) will be distributed to the Collateral Interest Holder for
application in accordance with the terms of the Loan Agreement. Any amounts
withdrawn from the Reserve Account and distributed to the Collateral Interest
Holder as described above will not be available for distribution to the Class
A Certificateholders.
Pay Out Events
As described above, the Revolving Period will continue through February 28,
2003 (unless such date is postponed as described under "--Postponement of
Controlled Accumulation Period"), unless a Pay Out Event occurs prior to such
date. A "Pay Out Event" refers to any of the following events:
(a) failure on the part of the Transferor (i) to make any payment or
deposit on the date required under the Agreement (or within the applicable
grace period which shall not exceed five days) or (ii) to observe or
perform in any material respect any other covenants or agreements of the
Transferor set forth in the Agreement or the Series 1999-1 Supplement,
which failure has a material adverse effect on the Investor
Certificateholders (which determination shall be made without regard to the
existence of the Collateral Interest) and which continues unremedied for a
period of 60 days after written notice and continues to materially and
adversely affect the interests of the Investor Certificateholders (which
determination shall be made without regard to the existence of the
Collateral Interest) for such period;
(b) any representation or warranty made by the Transferor in the
Agreement or the Series 1999-1 Supplement, or any information required to
be given by the Transferor to the Trustee to identify the Accounts proves
to have been incorrect in any material respect when made and which
continues to be incorrect in any material respect for a period of 60 days
after written notice and as a result of which the interests of the Investor
Certificateholders are materially and adversely affected (which
determination shall be made without regard to the existence of the
Collateral Interest) and continue to be materially and adversely affected
for such period; provided, however, that a Pay Out Event pursuant to this
clause (b) shall not be deemed to occur thereunder if the Transferor has
accepted reassignment of the related Receivable or all such Receivables, if
applicable, during such period (or such longer period as the Trustee may
specify) in accordance with the provisions of the Agreement;
(c) any reduction of the average of the Portfolio Yields for any three
consecutive Monthly Periods to a rate which is less than the average of the
Base Rates for such period;
(d) a failure by the Transferor to convey Receivables arising under
Additional Accounts, or Participations, to Trust I when required by the
Agreement;
(e) any Servicer Default occurs which would have a material adverse
effect on the Investor Certificateholders;
(f) insufficient moneys in the Distribution Account to pay the Class A
Investor Interest on the Class A Scheduled Payment Date or the Class B
Investor Interest on the Class B Scheduled Payment Date;
(g) certain events of insolvency, conservatorship, receivership or
bankruptcy relating to the Transferor or any holder of an interest in the
Transferor Certificate (including the Transferor Participation);
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(h) the Transferor becomes unable for any reason to transfer Receivables
to Trust I in accordance with the provisions of the Agreement; or
(i) Trust I becomes subject to regulation as an "investment company"
within the meaning of the Investment Company Act of 1940, as amended.
In the case of any event described in clause (a), (b) or (e) above, a Pay
Out Event will be deemed to have occurred with respect to the Investor
Certificates only if, after any applicable grace period, either the Trustee or
Investor Certificateholders evidencing undivided interests aggregating more
than 50% of the Investor Interest, by written notice to the Transferor and the
Servicer (and to the Trustee if given by the Investor Certificateholders)
declare that a Pay Out Event has occurred with respect to the Investor
Certificates as of the date of such notice. In the case of any event described
in clause (g), (h) or (i), a Pay Out Event with respect to all Series then
outstanding, and in the case of any event described in clause (c), (d) or (f),
a Pay Out Event with respect to only the Investor Certificates, will be deemed
to have occurred without any notice or other action on the part of the Trustee
or the Investor Certificateholders or all certificateholders, as appropriate,
immediately upon the occurrence of such event. On the date on which a Pay Out
Event is deemed to have occurred, the Rapid Amortization Period will commence.
In such event, distributions of principal to the Class A Certificateholders
will begin on the first Distribution Date following the month in which such
Pay Out Event occurred. If, because of the occurrence of a Pay Out Event, the
Rapid Amortization Period begins earlier than the Monthly Period preceding the
month in which the Class A Scheduled Payment Date occurs, Class A
Certificateholders will begin receiving distributions of principal earlier
than they otherwise would have, which may shorten the average life of the
Class A Certificates. See "Description of the Certificates--Pay Out Events" in
the attached prospectus for an additional discussion of the consequences of an
insolvency, conservatorship or receivership of the Transferor.
Defeasance
On the date that the following conditions shall have been satisfied: (i)
the Transferor shall have deposited (x) in the Principal Funding Account an
amount equal to the sum of the outstanding principal balance of the Class A
Certificates, the Class B Certificates and the Collateral Interest which
amount shall be invested in Permitted Investments and (y) in the Reserve
Account an amount equal to or greater than the amount of interest to accrue on
the Class A Certificates, the Class B Certificates and the Collateral
Interest, as estimated by the Transferor, for the period from the date of the
deposit to the Principal Funding Account through the expected final payment
date for the Collateral Interest; (ii) the Transferor shall have delivered to
the Trustee an opinion of counsel to the effect that such deposit and
termination of obligations will not result in the Trust being required to
register as an "investment company" within the meaning of the Investment
Company Act of 1940, as amended and an opinion of counsel to the effect that
following such deposit none of Trust I, the Reserve Account or the Principal
Funding Account will be deemed to be an association (or publicly traded
partnership) taxable as a corporation; (iii) the Transferor shall have
delivered to the Trustee a certificate of an officer of the Transferor stating
that the Transferor reasonably believes that such deposit and termination of
its obligations will not constitute a Pay Out Event or any event that, with
the giving of notice or the lapse of time, would cause a Pay Out Event to
occur; and (iv) the Rating Agency Condition will be satisfied with respect to
such event; then, the Class A Certificates will no longer be entitled to the
security interest of Trust I in the Receivables and, except those set forth in
clause (i) above, other Trust assets, and the percentages applicable to the
allocation to the Investor Certificates of collections on Principal
Receivables and Finance Charge Receivables and Defaulted Accounts will be
reduced to zero.
Servicing Compensation and Payment of Expenses
The share of the Servicing Fee (as defined herein) allocable to the
Investor Interest with respect to any Transfer Date (the "Investor Servicing
Fee") shall be equal to one-twelfth of the product of (a) 2.0% and (b) the
Adjusted Investor Interest as of the last day of the Monthly Period preceding
such Transfer Date. On each Transfer Date, but only if Wachovia or The Bank of
New York (Delaware) is the Servicer, Servicer Interchange with respect to the
related Monthly Period that is on deposit in the Finance Charge Account will
be withdrawn
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from the Finance Charge Account and paid to the Servicer in payment of a
portion of the Investor Servicing Fee with respect to such Monthly Period. The
"Servicer Interchange" for any Monthly Period for which Wachovia or The Bank
of New York (Delaware) is the Servicer will be an amount equal to the portion
of collections of Finance Charge Receivables allocated to the Investor
Interest with respect to such Monthly Period that is attributable to
Interchange; provided, however, that Servicer Interchange for a Monthly Period
shall not exceed one-twelfth of the product of (i) the Adjusted Investor
Interest, as of the last day of such Monthly Period and (ii) 1.0%. In the case
of any insufficiency of Servicer Interchange on deposit in the Finance Charge
Account, a portion of the Investor Servicing Fee with respect to such Monthly
Period will not be paid to the extent of such insufficiency and in no event
shall Trust I, the Trustee or the Investor Certificateholders be liable for
the share of the Servicing Fee to be paid out of Servicer Interchange.
The share of the Investor Servicing Fee allocable to the Class A
Certificateholders with respect to any Transfer Date (the "Class A Servicing
Fee") shall be equal to one-twelfth of the product of (a) the Class A Floating
Allocation, (b) 1.0%, or if Wachovia or The Bank of New York (Delaware) is not
the Servicer, 2.0% (the "Net Servicing Fee Rate") and (c) the Adjusted
Investor Interest as of the last day of the Monthly Period preceding such
Transfer Date. The share of the Investor Servicing Fee allocable to the Class
B Certificateholders with respect to any Transfer Date (the "Class B Servicing
Fee") shall be equal to one-twelfth of the product of (a) the Class B Floating
Allocation, (b) the Net Servicing Fee Rate and (c) the Adjusted Investor
Interest as of the last day of the Monthly Period preceding such Transfer
Date. The share of the Investor Servicing Fee allocable to the Collateral
Interest Holder with respect to any Transfer Date (the "Collateral Interest
Servicing Fee"; together with the Class A Servicing Fee and Class B Servicing
Fee, the "Servicing Fee") shall be equal to one-twelfth of the product of (a)
the Collateral Floating Allocation, (b) the Net Servicing Fee Rate and (c) the
Adjusted Investor Interest as of the last day of the Monthly Period preceding
such Transfer Date. The remainder of the Servicing Fee shall be paid by the
holder of the Transferor Certificate or other Series (as provided in the
related Series Supplements) or, to the extent of any insufficiency of Servicer
Interchange as described above, not be paid. In no event shall Trust I, the
Trustee or the Investor Certificateholders be liable for the share of the
Servicing Fee to be paid out of Servicer Interchange. The Class A Servicing
Fee and the Class B Servicing Fee shall be payable to the Servicer solely to
the extent amounts are available for distribution in respect thereof as
described under "--Application of Collections."
The Servicer will pay from its servicing compensation certain expenses
incurred in connection with servicing the Receivables including, without
limitation, payment of the fees and disbursements of the Trustee and
independent certified public accountants and other fees which are not
expressly stated in the Agreement to be payable by Trust I or the Investor
Certificateholders other than federal, state and local income and franchise
taxes, if any, of Trust I.
Reports to Class A Certificateholders
On each Transfer Date, the Trustee will forward to each Class A
Certificateholder of record, a statement prepared by the Servicer setting
forth the items described in "Description of the Certificates--Reports to
Certificateholders" in the attached prospectus. In addition, such statement
will include (a) the amount, if any, withdrawn from the Principal Funding
Account for such Transfer Date, and (b) the Collateral Interest, if any, for
such Transfer Date.
S-42
<PAGE>
ERISA Considerations
Section 406 of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") and Section 4975 of the Code prohibit certain pension,
profit sharing or other employee benefit plans, individual retirement accounts
or annuities and employee annuity plans and Keogh plans (collectively,
"Plans") from engaging in certain transactions involving "plan assets" with
persons that are "parties in interest" under ERISA or "disqualified persons"
under the Code (collectively, "Parties in Interest") with respect to the Plan.
A violation of these "prohibited transaction" rules may generate excise tax
and other liabilities under ERISA and Section 4975 of the Code for such
persons, unless a statutory, regulatory or administrative exemption is
available. Plans that are governmental plans (as defined in section 3(32) of
ERISA) and certain church plans (as defined in section 3(33) of ERISA) are not
subject to ERISA requirements.
A violation of the prohibited transaction rules could occur if the Class A
Certificates were to be purchased with assets of any Plan if the Transferor,
the Trustee, any underwriters of such Series or any of their affiliates were a
Party in Interest with respect to such Plan, unless a statutory, regulatory or
administrative exemption is available or an exception applies under a
regulation (the "Plan Asset Regulation") issued by the Department of Labor
("DOL"). The Transferor, the Trustee, any underwriters of a Series and their
affiliates are likely to be Parties in Interest with respect to many Plans.
Before purchasing the Class A Certificates, a Plan fiduciary or other Plan
investor should consider whether a prohibited transaction might arise by
reason of the relationship between the Plan and the Transferor, the Trustee,
any underwriters of such Series or any of their affiliates and consult their
counsel regarding the purchase in light of the considerations described below
and in the attached prospectus.
Under certain circumstances, the Plan Asset Regulation treats the assets of
an entity in which a Plan holds an equity interest as "plan assets" of such
Plan. Because the Class A Certificates will represent beneficial interests in
Trust I, and despite the agreement of the Transferor and the Certificate
Owners to treat the Class A Certificates as debt instruments, the Class A
Certificates are likely to be considered equity interests in the Trust for
purposes of the Plan Asset Regulation, with the result that the assets of
Trust I are likely to be treated as "plan assets" of the investing Plans for
purposes of ERISA and Section 4975 of the Code, unless the exception for
"publicly-offered securities" is applicable as described in the attached
prospectus. The Underwriters anticipate that the Class A Certificates will be
held by at least 100 independent persons. Wachovia expects the other
requirements will be met so that the Class A certificates will be considered,
"publicly-offered securities" as described in the attached prospectus. No
restrictions will be imposed on the transfer of the Class A Certificates. It
is expected that the Class A Certificates will be held by at least 100 or more
investors who were independent of the issuer and of one another ("Independent
Investors") at the conclusion of the initial public offering although no
assurance can be given, and no monitoring or other measures will be taken to
ensure, that such condition is met. The Class A Certificates will be sold as
part of an offering pursuant to an effective registration statement under the
Securities Act and then will be timely registered under the Exchange Act.
If the foregoing exception under the Plan Asset Regulation were not
satisfied, transactions involving Trust I and Parties in Interest with respect
to a Plan that purchases or holds Class A Certificates might be prohibited
under Section 406 of ERISA and/or Section 4975 of the Code and result in
excise tax and other liabilities under ERISA and Section 4975 of the Code
unless an exemption were available. The five DOL class exemptions described in
the attached prospectus may not provide relief for all transactions involving
the assets of the Trust even if they would otherwise apply to the purchase of
a Class A Certificate by a Plan.
Consultation with Counsel
In light of the foregoing, fiduciaries or other persons contemplating
purchasing the Class A Certificates on behalf or with "plan assets" of any
Plan should consult their own counsel regarding whether the Trust assets
represented by the Class A Certificates would be considered "plan assets," the
consequences that would apply if the Trust's assets were considered "plan
assets," and the possibility of exemptive relief from the prohibited
transaction rules.
S-43
<PAGE>
Finally, Plan fiduciaries and other Plan investors should consider the
fiduciary standards under ERISA or other applicable law in the context of the
Plan's particular circumstances before authorizing an investment of a portion
of the Plan's assets in the Class A Certificates. Accordingly, among other
factors, Plan fiduciaries and other Plan investors should consider whether the
investment (i) satisfies the diversification requirement of ERISA or other
applicable law, (ii) is in accordance with the Plan's governing instruments,
and (iii) is prudent in light of the "Risk Factors" and other factors
discussed in this prospectus supplement.
S-44
<PAGE>
Underwriting
Subject to the terms and conditions set forth in the Underwriting Agreement
dated , 1999 (the "Underwriting Agreement") between Wachovia and the
underwriters named below (the "Underwriters"), Wachovia has agreed to sell to
the Underwriters and the Underwriters have agreed to purchase, the principal
amount of the Class A Certificates offered hereby if any of the Class A
Certificates are purchased.
<TABLE>
<CAPTION>
Principal
Amount of
Class A
Underwriters Certificates
------------ ------------
<S> <C>
Credit Suisse First Boston Corporation.......................... $
Wachovia Capital Markets, Inc...................................
Chase Securities Inc. ..........................................
J.P. Morgan Securities Inc. ....................................
Salomon Smith Barney Inc. ......................................
------------
Total........................................................... $750,000,000
============
</TABLE>
The price to public, Underwriters' discounts and commissions, the
concessions that the Underwriters may allow to certain dealers, and the
discounts that such dealers may reallow to certain other dealers, each
expressed as a percentage of the principal amount of the Class A Certificates,
shall be as follows:
<TABLE>
<CAPTION>
Selling
Underwriting concessions, Reallowance,
Price to discount and not to not to
public commissions exceed exceed
-------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Class A Certificates............ % % % %
</TABLE>
After the offering is completed, Wachovia will receive the proceeds, after
deduction of the underwriting and other expenses, listed below:
<TABLE>
<CAPTION>
Proceeds to
Transferor (as % of
the principal amount Underwriting
Proceeds to of the discounts and
Transferor Class A Certificates) commissions
----------- --------------------- -------------
<S> <C> <C> <C>
Class A Certificates............ $ % $
</TABLE>
After the public offering, the public offering price and other selling
terms may be changed by the Underwriters.
The Underwriters may engage in over-allotment transactions, stabilizing
transactions, syndicate covering transactions and penalty bids with respect to
the Class A Certificates in accordance with Regulation M under the Exchange
Act. Over-allotment transactions involve syndicate sales in excess of the
offering size, which create a syndicate short position. Stabilizing
transactions permit bids to purchase the Class A Certificates so long as the
stabilizing bids do not exceed a specified maximum. Syndicate covering
transactions involve purchases of the Class A Certificates in the open market
after the distribution has been completed in order to cover syndicate short
positions. Penalty bids permit the Underwriters to reclaim a selling
concession from a syndicate member when the Class A Certificates originally
sold by such syndicate member are purchased in a syndicate covering
transaction to cover syndicate short positions. Such over-allotment
transactions, stabilizing transactions, syndicate covering transactions and
penalty bids may cause the price of the Class A Certificates to be higher than
it would otherwise be in the absence of such transactions. Neither the
Transferor nor the Underwriters represent that the Underwriters will engage in
any such transactions or that such transactions, once commenced, will not be
discontinued without notice at any time.
S-45
<PAGE>
The Transferor has been advised by each Underwriter that it proposes
initially to offer the Class A Certificates to the public at the price set
forth on the cover page hereof and to certain dealers at such price less
concessions not in excess of % of the principal amount of the Class A
Certificates. Each Underwriter may allow, and such dealers may reallow,
concessions not in excess of % of the principal amount of the Class A
Certificates to certain brokers and dealers. Each Underwriter may sell some or
all of the Class A Certificates to a trust or other type of special purpose
vehicle.
Each Underwriter has represented and agreed that (a) it has only issued or
passed on and will only issue or pass on in the United Kingdom any document
received by it in connection with the issue of the Class A Certificates to a
person who is of a kind described in Article 11(3) of the Financial Services
Act 1986 (Investment Advertisements) (Exemptions) Order 1996 (as amended) or
who is a person to whom the document may otherwise lawfully be issued or
passed on, (b) it has complied and will comply with all applicable provisions
of the Financial Services Act 1986 and other applicable laws and regulations
with respect to anything done by it in relation to the Class A Certificates
in, from or otherwise involving the United Kingdom and (c) if the Underwriter
is an authorized person under the Financial Services Act 1986, it has only
promoted and will only promote (as that term is defined in Regulation 1.02 of
the Financial Services (Promotion of Unregulated Schemes) Regulations 1991) to
any person in the United Kingdom the scheme described herein if that person is
of a kind described either in Section 76(2) of the Financial Services Act 1986
or in Regulation 1.04 of the Financial Services (Promotion of Unregulated
Schemes) Regulations 1991.
The Transferor will indemnify each Underwriter against certain liabilities,
including liabilities under the Securities Act or contribute to payments the
Underwriter may be required to make in respect thereof. Each Underwriter has
agreed to reimburse the Transferor for certain expenses incurred in connection
with the issuance and distribution of the Class A Certificates.
In the ordinary course of business, each Underwriter and its affiliates
have engaged and may engage in investment banking and/or commercial banking
transactions with the Transferor, its affiliates and the Trust. In addition,
each Underwriter may from time to time take positions in the Class A
Certificates and other certificates issued by the Trust.
Wachovia Capital Markets, Inc. ("WCM") is an affiliate of the Transferor.
Any obligations of WCM are the sole obligations of WCM and do not create any
obligations on the part of any of its affiliates.
WCM may from time to time purchase or acquire a position in the Class A
Certificates and may, at its option, hold or resell such Class A Certificates.
WCM expects to offer and sell previously issued Class A Certificates in the
course of its business as a broker-dealer. WCM may act as a principal or agent
in such transactions. This supplement and the attached prospectus may be used
by WCM and its successors in connection with such transactions. Such sales, if
any, will be made at varying prices related to prevailing market prices at the
time of sale.
S-46
<PAGE>
Index of Terms for Prospectus Supplement
<TABLE>
<S> <C>
Accounts............................................................. S-14
Accumulation Period Length........................................... S-28
Accumulation Shortfall............................................... S-36
Addition Date........................................................ S-29
Adjusted Investor Interest........................................... S-27
Agreement............................................................ S-14
Available Investor Principal Collections............................. S-28
Available Reserve Account Amount..................................... S-40
Bank................................................................. S-14
Bank Portfolio....................................................... S-14
Base Rate............................................................ S-22
Class A Additional Interest.......................................... S-26
Class A Adjusted Investor Interest................................... S-27
Class A Available Funds.............................................. S-26
Class A Certificate Rate............................................. S-26
Class A Certificateholders........................................... S-14
Class A Certificates................................................. S-14
Class A Fixed Allocation............................................. S-30
Class A Floating Allocation.......................................... S-29
Class A Investor Charge-Off.......................................... S-38
Class A Investor Default Amount...................................... S-37
Class A Investor Interest............................................ S-24, S-30
Class A Monthly Interest............................................. S-33
Class A Monthly Principal............................................ S-35
Class A Required Amount.............................................. S-30
Class A Scheduled Payment Date....................................... S-21
Class A Servicing Fee................................................ S-42
Class B Additional Interest.......................................... S-26
Class B Available Funds.............................................. S-26
Class B Certificate Rate............................................. S-26
Class B Certificateholders........................................... S-14
Class B Certificates................................................. S-14
Class B Fixed Allocation............................................. S-30
Class B Floating Allocation.......................................... S-29
Class B Investor Charge-Off.......................................... S-38
Class B Investor Default Amount...................................... S-37
Class B Investor Interest............................................ S-24, S-30
Class B Monthly Interest............................................. S-33
Class B Monthly Principal............................................ S-35
Class B Required Amount.............................................. S-31
Class B Scheduled Payment Date....................................... S-21
Class B Servicing Fee................................................ S-42
Closing Date......................................................... S-25
Collateral Available Funds........................................... S-33
Collateral Charge-Off................................................ S-38
Collateral Default Amount............................................ S-37
Collateral Fixed Allocation.......................................... S-30
Collateral Floating Allocation....................................... S-29
Collateral Interest.................................................. S-14, S-30
</TABLE>
S-47
<PAGE>
<TABLE>
<S> <C>
Collateral Interest Holders.......................................... S-14
Collateral Interest Servicing Fee.................................... S-42
Collateral Monthly Interest.......................................... S-35
Collateral Monthly Principal......................................... S-36
Collateral Rate...................................................... S-35
Controlled Accumulation Amount....................................... S-36
Controlled Deposit Amount............................................ S-21
Cut-Off Date......................................................... S-16
Default Amount....................................................... S-37
Distribution Date.................................................... S-25
DOL.................................................................. S-43
ERISA................................................................ S-43
Excess Finance Charge Collections.................................... S-34
Excess Spread........................................................ S-33
Fixed Investor Percentage............................................ S-29
Floating Investor Percentage......................................... S-29
Independent Investors................................................ S-43
Initial Collateral Interest.......................................... S-37
Investor Certificateholders.......................................... S-14
Investor Certificates................................................ S-14
Investor Default Amount.............................................. S-37
Investor Interest.................................................... S-24
Investor Servicing Fee............................................... S-41
LIBOR................................................................ S-27
LIBOR Determination Date............................................. S-26
Loan Agreement....................................................... S-34
Minimum Aggregate Principal Receivables.............................. S-18
Minimum Transferor Amount............................................ S-18
Monthly Period....................................................... S-18
Net Servicing Fee Rate............................................... S-42
Parties in Interest.................................................. S-43
Pay Out Event........................................................ S-22, S-40
Plan Asset Regulation................................................ S-43
Plans................................................................ S-43
Pooling and Servicing Agreement...................................... S-14
Portfolio Yield...................................................... S-22
Principal Funding Account............................................ S-21, S-39
Principal Funding Account Balance.................................... S-21
Principal Funding Investment Proceeds................................ S-39
Principal Shortfalls................................................. S-37
Rapid Amortization Period............................................ S-21
Rating Agency Condition.............................................. S-37
Reallocated Class B Principal Collections............................ S-32
Reallocated Collateral Principal Collections......................... S-32
Reallocated Principal Collections.................................... S-32
Receivables.......................................................... S-14
Record Date.......................................................... S-25
Reference Banks...................................................... S-27
Removal Date......................................................... S-29
Required Amounts..................................................... S-31
Required Collateral Interest......................................... S-37
</TABLE>
S-48
<PAGE>
<TABLE>
<S> <C>
Required Reserve Account Amount............................................ S-39
Reserve Account............................................................ S-39
Reserve Account Draw....................................................... S-26
Reserve Account Funding Date............................................... S-39
Revolving Period........................................................... S-27
Series 1999-1 Supplement................................................... S-14
Series 1999-1 Termination Date............................................. S-28
Servicer................................................................... S-14
Servicer Interchange....................................................... S-42
Servicing Fee.............................................................. S-42
Shared Principal Collections............................................... S-37
Telerate Page 3750......................................................... S-27
Transfer Date.............................................................. S-32
Transferor................................................................. S-14
Transferor Amount.......................................................... S-24
Transferor Interest........................................................ S-24
Transferor Participation................................................... S-25
Transferor Percentage...................................................... S-25
Trust I.................................................................... S-14
Trust I Portfolio.......................................................... S-18
Trustee.................................................................... S-14
Underwriters............................................................... S-45
Underwriting Agreement..................................................... S-45
Virginia Banks............................................................. S-15
Virginia Portfolios........................................................ S-15
Wachovia................................................................... S-14
WCM........................................................................ S-46
Wells Portfolio............................................................ S-15
WOSC....................................................................... S-14
</TABLE>
S-49
<PAGE>
ANNEX I
Other Series
The Trust has previously issued one other Series that the Transferor
anticipates will remain outstanding on the Closing Date. The table below sets
forth the principal characteristics of such Series: Series 1995-1. For more
specific information with respect to any Series, any prospective investor
should contact the Servicer at (336) 732-7729. The Servicer will provide,
without charge, to any prospective purchaser of the Class A Certificates, a
copy of the Disclosure Documents for any previous publicly issued Series.
Series 1995-1
<TABLE>
<S> <C>
1. Class A Certificates
Initial Invested Amount................. $446,250,000
Certificate Rate........................ One Month LIBOR + 0.170%
Controlled Accumulation Amount (subject
to adjustment)......................... $37,187,500
Commencement of Controlled Accumulation
Period (subject to adjustment)......... September 30, 1999
Annual Servicing Fee Percentage......... 2.0%
Initial Collateral Invested Amount...... $10,000,000
Other Enhancement....................... cash collateral account and
subordination of Class B
Certificates and collateral interest
Expected Final Payment Date............. October 2000
Scheduled Series Termination Date....... March 2003
Series Issuance Date.................... October 17, 1995
2. Class B Certificates
Initial Invested Amount................. $26,250,000
Certificate Rate........................ One Month LIBOR + 0.275%
Annual Servicing Fee Percentage......... Same as above for Class A
Certificates
Initial Collateral Invested Amount...... Same as above for Class A
Certificates
Other Enhancement....................... cash collateral account and
subordination of the collateral
interest
Expected Final Payment Date............. November 2000
Scheduled Series Termination Date....... Same as above for Class A
Certificates
Series Issuance Date.................... Same as above for Class A
Certificates
</TABLE>
A-I-1
<PAGE>
Prospectus
Wachovia Credit Card Master Trust
Asset Backed Certificates
The First National Bank of Atlanta d/b/a Wachovia Bank Card Services
Transferor and Servicer
The Asset Backed Certificates (collectively, the "Certificates") described
herein may be sold from time to time in one or more series (each, a "Series"),
in amounts, at prices and on terms to be determined at the time of sale and
which are set forth in a supplement to this Prospectus (a "Prospectus
Supplement"). The Certificates of each Series will represent an undivided
interest in a specified Wachovia Credit Card Master Trust (each, a "Trust"). A
Trust formed pursuant to a pooling and servicing agreement between The First
National Bank of Atlanta d/b/a/ Wachovia Bank Card Services ("Wachovia" or the
"Bank"), as transferor and servicer, and The Bank of New York (Delaware), as
trustee. Additional Trusts may be formed from time to time, each pursuant to a
pooling and servicing agreement to be entered into between the Bank, as
transferor and servicer, and a trustee identified in the Prospectus Supplement
relating to the Series of Certificates representing interests in such Trust.
The property of each Trust will include receivables (the "Receivables")
generated from time to time in a portfolio of consumer revolving credit card
accounts (the "Accounts"), all monies due or to become due in payment of the
Receivables, all proceeds of the Receivables and proceeds of credit insurance
policies relating to the Receivables, any enhancements and all monies on
deposit in certain bank accounts of the Trust (including any Permitted
Investments in which any such monies are invested) held in the Trust, as more
fully described herein and, with respect to any Series offered hereby, in the
related Prospectus Supplement. Certain capitalized terms used herein are
defined elsewhere in this Prospectus. A listing of the pages on which such
terms are defined is found in the "Index of Terms for Prospectus" beginning on
page 71. The Bank initially will own the remaining undivided interest in each
Trust not represented by the Certificates issued by such Trust and will
service the related Receivables.
Each Series will consist of one or more classes of Certificates (each, a
"Class"), one or more of which may be fixed rate certificates, floating rate
certificates or other type of certificates, as specified in the related
Prospectus Supplement. Each Certificate will represent an undivided interest
in the related Trust and the interest of the Certificateholders of each Class
or Series will include the right to receive a varying percentage of each
month's collections with respect to the Receivables of such Trust at the
times, in the manner and to the extent described herein and, with respect to
any Series offered hereby, in the related Prospectus Supplement. Interest and
principal payments with respect to each Series offered hereby will be made as
specified in the related Prospectus Supplement. One or more Classes of a
Series offered hereby may be entitled to the benefits of a cash collateral
account or guaranty, a collateral interest, a letter of credit, a surety bond,
an insurance policy or other form of Enhancement as specified in the
Prospectus Supplement relating to such Series. In addition, any Series offered
hereby may include one or more Classes which are subordinated in right and
priority to payment of principal of, and/or interest on, one or more other
Classes of such Series or another Series, in each case to the extent described
in the related Prospectus Supplement. Each Series of Certificates or Class
thereof offered hereby will be rated in one of the four highest rating
categories by at least one nationally recognized rating organization.
While the specific terms of any Series in respect of which this Prospectus is
being delivered are described in the related Prospectus Supplement, the terms
of such Series are not subject to prior review by, or consent of, the
Certificateholders of any previously issued Series.
Potential investors should consider, among other things, the information set
forth in "Risk
Factors" beginning on page 20 herein.
THE CERTIFICATES WILL REPRESENT INTERESTS IN THE RELATED TRUSTS ONLY AND WILL
NOT REPRESENT INTERESTS IN OR RECOURSE OBLIGATIONS OF THE FIRST NATIONAL BANK
OF ATLANTA D/B/A WACHOVIA BANK CARD SERVICES OR ANY AFFILIATE THEREOF. A
CERTIFICATE IS NOT A DEPOSIT AND NEITHER THE CERTIFICATES NOR THE UNDERLYING
ACCOUNTS OR RECEIVABLES ARE INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The Certificates may be sold by the Bank directly to purchasers, through
agents designated from time to time, through underwriting syndicates led by
one or more managing underwriters or through one or more underwriters acting
alone. If underwriters or agents are involved in the offering of the
Certificates of any Series offered hereby, the name of the managing
underwriter or underwriters or agents is set forth in the related Prospectus
Supplement. If an underwriter, agent or dealer is involved in the offering of
the Certificates of any Series offered hereby, the underwriter's discount,
agent's commission or dealer's purchase price is set forth in, or may be
calculated from, the related Prospectus Supplement, and the net proceeds to
the Bank from such offering will be the public offering price of such
Certificates less such discount in the case of an underwriter, the purchase
price of such Certificates less such commission in the case of an agent or the
purchase price of such Certificates in the case of a dealer, and less, in each
case, the other expenses of the Bank associated with the issuance and
distribution of such Certificates. See "Plan of Distribution".
This Prospectus may not be used to consummate sales of any Series of
Certificates unless accompanied by the related Prospectus Supplement.
The date of this Prospectus is March 12, 1999.
<PAGE>
TABLE OF CONTENTS
Prospectus
<TABLE>
<S> <C>
PROSPECTUS SUPPLEMENT................ 3
REPORTS TO CERTIFICATEHOLDERS........ 3
AVAILABLE INFORMATION................ 3
INCORPORATION OF CERTAIN DOCUMENTS
BY REFERENCE........................ 4
PROSPECTUS SUMMARY................... 5
RISK FACTORS......................... 20
Limited Liquidity.................. 20
Certain Legal Aspects.............. 20
Transferor's Ability to Change
Terms of the Receivables.......... 22
Effects of Consumer Protection
Laws.............................. 22
Competition in the Credit Card
Industry.......................... 23
Timing of Payments and Maturity.... 23
Pre-Funding Account................ 23
Effect of Subordination............ 23
Certificate Rating................. 24
Limited Credit Enhancement......... 24
Basis Risk......................... 24
Master Trust Consideration......... 25
Effect of Addition of Trust Assets
on Credit Quality................. 25
Control of Action Under Agreement.. 25
Social, Legal and Economic
Factors........................... 25
Effects of Book-Entry
Registration...................... 26
THE TRUSTS........................... 26
WACHOVIA'S CREDIT CARD ACTIVITIES.... 26
General............................ 26
Acquisition and Use of Credit Card
Accounts.......................... 26
Description of Wachovia Operational
Services Corporation.............. 27
Interchange........................ 27
THE RECEIVABLES...................... 28
MATURITY CONSIDERATIONS.............. 28
USE OF PROCEEDS...................... 28
WACHOVIA AND WACHOVIA CORPORATION.... 29
General............................ 29
Year 2000 Compliance............... 29
DESCRIPTION OF THE CERTIFICATES...... 30
General............................ 31
Book-Entry Registration............ 32
Definitive Certificates............ 35
Interest Payments.................. 36
Principal Payments................. 36
Transfer and Assignment of
Receivables....................... 37
Exchanges.......................... 37
Representations and Warranties..... 38
Addition of Trust Assets........... 40
Removal of Accounts................ 42
Collection and Other Servicing
Procedures........................ 42
Discount Option.................... 43
</TABLE>
<TABLE>
<S> <C>
Trust Accounts.................... 43
Funding Period.................... 44
Investor Percentage and Transferor
Percentage....................... 44
Application of Collections........ 45
Shared Excess Finance Charge
Collections...................... 46
Excess Funding Account............ 46
Shared Principal Collections...... 47
Paired Series..................... 47
Defaulted Receivables; Rebates and
Fraudulent Charges; Investor
Charge-Offs...................... 47
Defeasance........................ 48
Final Payment of Principal;
Termination...................... 48
Pay Out Events.................... 49
Servicing Compensation and Payment
of Expenses...................... 50
Certain Matters Regarding the
Transferor and the Servicer...... 50
Servicer Default.................. 51
Reports to Certificateholders..... 52
Evidence as to Compliance......... 53
Amendments........................ 53
List of Certificateholders........ 54
The Trustee....................... 54
CREDIT ENHANCEMENT.................. 54
General........................... 54
Subordination..................... 55
Cash Collateral Guaranty or
Account.......................... 55
Collateral Interest............... 56
Letter of Credit.................. 56
Surety Bond or Insurance Policy... 56
Spread Account.................... 56
Reserve Account................... 56
CERTAIN LEGAL ASPECTS OF THE
RECEIVABLES........................ 57
Transfer of Receivables........... 57
Certain Matters Relating to
Receivership..................... 57
Consumer Protection Laws.......... 59
Industry Litigation............... 60
CERTAIN U.S. FEDERAL INCOME TAX
CONSEQUENCES....................... 60
General........................... 60
Characterization of the
Certificates as Indebtedness..... 60
Taxation of Interest Income of
Certificateholders............... 61
Sale or Other Disposition of a
Certificate...................... 62
Tax Characterization of the
Trust............................ 63
FASIT Legislation................. 64
Foreign Investors................. 64
STATE AND LOCAL TAXATION............ 66
EMPLOYEE BENEFIT PLAN
CONSIDERATIONS..................... 67
PLAN OF DISTRIBUTION................ 69
LEGAL MATTERS....................... 70
INDEX OF TERMS FOR PROSPECTUS....... 71
ANNEX I: Global Clearance,
Settlement and Tax Documentation
Procedures....................... A-1
</TABLE>
2
<PAGE>
PROSPECTUS SUPPLEMENT
The Prospectus Supplement relating to a Series to be offered thereby and
hereby, among other things, sets forth with respect to such Series: (a) the
initial aggregate principal amount of each Class of such Series; (b) the
Certificate interest rate (or method for determining it) of each Class of such
Series; (c) certain information concerning the Receivables allocated to such
Series; (d) the expected date or dates on which the principal amount of the
Certificates will be paid to holders of each Class of Certificates (the
"Certificateholders"); (e) the extent to which any Class within a Series is
subordinated to any other Class of such Series or any other Series; (f) the
identity of each Class of floating rate Certificates and fixed rate
Certificates included in such Series, if any, or such other type of Class of
Certificates; (g) the Distribution Dates for the respective Classes; (h)
relevant financial information with respect to the Receivables; (i) additional
information with respect to any Enhancement relating to such Series; and (j)
the plan of distribution of such Series.
REPORTS TO CERTIFICATEHOLDERS
Unless and until Definitive Certificates are issued, monthly and annual
reports, containing information concerning each Trust and prepared by the
Servicer, will be sent on behalf of such Trust to Cede & Co. ("Cede"), as
nominee of The Depository Trust Company ("DTC") and registered holder of the
related Certificates, pursuant to the related Agreement. See "Description of
the Certificates--Book-Entry Registration," "--Reports to Certificateholders"
and "--Evidence as to Compliance." Such reports will not constitute financial
statements prepared in accordance with generally accepted accounting
principles. The Transferor does not intend to send any of its financial
reports to Certificateholders or to the owners of beneficial interests in the
Certificates ("Certificate Owners"). The Servicer will file with the
Securities and Exchange Commission (the "Commission") such periodic reports
with respect to each Trust as are required under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), and the rules and regulations of the
Commission thereunder.
AVAILABLE INFORMATION
This Prospectus, which forms a part of the Registration Statement, omits
certain information contained in such Registration Statement pursuant to the
rules and regulations of the Commission. For further information, reference is
made to the Registration Statement (including any amendments thereof and
exhibits thereto) and any reports and other documents incorporated herein by
reference as described below under "Incorporation of Certain Documents by
Reference," which are available for inspection without charge at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549; 7 World Trade Center, New York, New York 10048; and
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-
2511. Copies of such material may be obtained from the Public Reference
Section of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. In addition, the Commission maintains a Web site at
"http://www.sec.gov" that contains information regarding registrants that file
electronically with the Commission.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All reports and other documents filed by the Servicer, on behalf of each
Trust, pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act
subsequent to the date of this Prospectus and prior to the termination of the
offering of the Certificates shall be deemed to be incorporated by reference
into this Prospectus and to be part hereof. Any statement contained herein or
in a document incorporated or deemed to be incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Prospectus
to the extent that a statement contained herein or in any subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
The Servicer will provide without charge to each person to whom a copy of
this Prospectus is delivered, on the written or oral request of any such
person, a copy of any or all of the documents incorporated herein by
reference, except the exhibits to such documents (unless such exhibits are
specifically incorporated by reference in such documents). Requests for such
copies should be directed to Investor Relations, Wachovia Corporation, 100
North Main Street, Winston-Salem, North Carolina 27150-3099, telephone number
(336) 732-5432.
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PROSPECTUS SUMMARY
The following is qualified in its entirety by reference to the detailed
information appearing elsewhere in this Prospectus and in the accompanying
Prospectus Supplement. Certain capitalized terms used in this summary are
defined elsewhere in this Prospectus and in the accompanying Prospectus
Supplement. A listing of the pages on which such terms are defined is found in
the "Index of Terms for Prospectus" beginning on page 71. Unless the context
requires otherwise, capitalized terms used in this Prospectus and in the
accompanying Prospectus Supplement refer only to the particular Series being
offered by such Prospectus Supplement.
Type of Securities.......... Asset Backed Certificates (the
"Certificates") evidencing an undivided
interest in the assets of a Wachovia Credit
Card Master Trust (each, a "Trust") may be
issued from time to time in one or more
series (each, a "Series") which will consist
of one or more classes of Certificates
(each, a "Class").
Trusts...................... A Trust ("Trust I") has been formed pursuant
to a pooling and servicing agreement (the
"Agreement") between The First National Bank
of Atlanta d/b/a/ Wachovia Bank Card
Services ("Wachovia" or the "Bank"), as
transferor (in such capacity, the
"Transferor") and servicer (in such
capacity, the "Servicer"), and The Bank of
New York (Delaware), as trustee. Additional
Trusts (each such Trust, a "New Trust") may
be formed from time to time, each pursuant
to a pooling and servicing agreement (each
such agreement, a "New Agreement," and each
New Agreement and the Agreement, an
"Agreement") to be entered into between the
Bank, as transferor and servicer, and a
trustee to be identified in the Prospectus
Supplement relating to the Series of
Certificates representing interests in such
Trust (each trustee under an Agreement, a
"Trustee"). Trust I and each New Trust will
be created as a master trust under which one
or more Series will be issued pursuant to a
series supplement to the related Agreement
(a "Series Supplement"). A Series issued by
a Trust may be offered pursuant to this
Prospectus, or may be offered pursuant to
another disclosure document in a transaction
exempt from the registration requirements of
the Securities Act of 1933, as amended (the
"Securities Act"). Each Prospectus
Supplement identifies the related Trust and
all Series previously issued by such Trust.
Trust Assets................ The assets of Trust I and each New Trust will
include receivables (the "Receivables")
arising under certain MasterCard(R) and
VISA(R) revolving credit card accounts (the
"Accounts"), including any Additional
Accounts following their designation and any
Automatic Additional Accounts following
their creation, selected from the portfolio
of MasterCard and VISA accounts owned by the
Bank (the "Bank Portfolio") and all monies
due or to become due in payment of the
Receivables, all proceeds of the Receivables
and proceeds of credit insurance policies
relating to the Receivables, and may include
the right to receive Interchange, if any,
allocable to the Certificates of a Series
and
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all monies on deposit in certain bank
accounts of the Trust (including any
Permitted Investments in which any such
monies are invested, but excluding
investment earnings on such amounts unless
otherwise specified in the related
Prospectus Supplement), and any Enhancement
with respect to any particular Series or
Class, as described in the related
Prospectus Supplement. See "The Receivables"
and "Description of the Certificates--
Addition of Trust Assets." "Interchange"
consists of certain fees received by the
Bank from VISA and MasterCard as partial
compensation for taking credit risk,
absorbing fraud losses and funding
receivables for a limited period prior to
initial billing. The term "Enhancement"
means, with respect to any Series or Class
thereof, any Credit Enhancement, guaranteed
rate agreement, maturity liquidity facility,
interest rate cap agreement, interest rate
swap agreement or other similar arrangement
for the benefit of the Certificateholders of
such Series or Class. The term "Credit
Enhancement" means, with respect to any
Series or Class thereof, any cash collateral
guaranty or account, collateral interest,
letter of credit, surety bond, insurance
policy, spread account, reserve account or
other similar arrangement for the benefit of
the Certificateholders of such Series or
Class. Credit Enhancement may also take the
form of subordination of one or more Classes
of a Series to any other Class or Classes of
a Series or a cross-support feature which
requires collections on Receivables of one
Series to be paid as principal and/or
interest with respect to another Series.
Certificate Interest and Each Series of Certificates will represent an
Principal................... undivided interest in the assets of the
related Trust. Each Certificate of a Series
will represent the right to receive payments
of (i) interest at the specified rate or
rates per annum (each, a "Certificate
Rate"), which may be fixed, floating or
other type of rate and (ii) payments of
principal during the Controlled Amortization
Period, the Principal Amortization Period,
or, under certain limited circumstances, the
Rapid Amortization Period (each, an
"Amortization Period"), or on Scheduled
Payment Dates, in which case such Series
will have a Controlled Accumulation Period
and, under certain limited circumstances if
so specified in the related Prospectus
Supplement, a Rapid Accumulation Period
(each, an "Accumulation Period"), as well
as, under certain limited circumstances, a
Rapid Amortization Period, all as specified
in the related Prospectus Supplement.
Each Series of Certificates will consist of
one or more Classes, one or more of which
may be senior Certificates ("Senior
Certificates") and one or more of which may
be subordinated Certificates ("Subordinated
Certificates"). Each Class of a Series may
evidence the right to receive a specified
portion of each distribution of principal
or interest or both. The Certificates of a
Class may also differ from Certificates of
other Classes of
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<PAGE>
the same Series in, among other things, the
amounts allocated to principal payments,
priority of payments, payment dates,
maturity, interest rates, interest rate
computation and availability and form of
Enhancement.
The assets of each Trust will be allocated
among the Certificateholders of each Series
of such Trust and the holder of the
Transferor Certificate of such Trust and, in
certain circumstances, the related Credit
Enhancement Provider. With respect to a
Trust, the aggregate principal amount of the
interest of the Certificateholders of a
Series in such Trust is referred to herein
as the "Investor Interest" and is based on
the aggregate amount of the Principal
Receivables in such Trust allocated to such
Series. If specified in any Prospectus
Supplement, the term "Investor Interest"
with respect to the related Series includes
the Collateral Interest with respect to such
Series. The aggregate principal amount of
the interest represented by the Transferor
Certificate in a Trust is referred to herein
as the "Transferor Amount," and is based on
the sum of the aggregate amount of Principal
Receivables in such Trust not allocated to
the Certificateholders or any Credit
Enhancement Provider with respect to such
Trust and the principal amount, if any, on
deposit in the Excess Funding Account for
such Trust. On the initial Closing Date for
Trust I, the Transferor set a participation
interest in the Trust I Transferor
Certificate (the "Transferor Participation")
to its affiliate, Wachovia Bank, N.A.
("WBNA"). See "Description of the
Certificates--General."
The Certificateholders of each Series will
have the right to receive (but only to the
extent needed to make required payments
under the related Agreement and the related
Series Supplement and subject to any
reallocation of such amounts if the related
Series Supplement so provides) varying
percentages of the collections of Finance
Charge Receivables and Principal Receivables
for each month and will be allocated a
varying percentage of the amount of
Receivables in Accounts which were written
off as uncollectible by the Servicer
("Defaulted Accounts") for such month (each
such percentage, an "Investor Percentage").
The related Prospectus Supplement specifies
the Investor Percentages with respect to the
allocation of collections of Principal
Receivables, Finance Charge Receivables and
Receivables in Defaulted Accounts during the
Revolving Period, any Amortization Period
and any Accumulation Period, as applicable.
If the Certificates of a Series offered
hereby include more than one Class of
Certificates, the assets of the related
Trust allocable to the Certificates of such
Series may be further allocated among each
Class in such Series as described in the
related Prospectus Supplement. See
"Description of the Certificates--Investor
Percentage and Transferor Percentage."
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<PAGE>
Receivables................. The Receivables held in each Trust will arise
in Accounts selected from the Bank Portfolio
based on criteria provided in the related
Agreement and described in the related
Prospectus Supplement as applied initially
on the date (the "Cut-Off Date") specified
in the related Prospectus Supplement and,
with respect to certain Additional Accounts
and Automatic Additional Accounts, if any,
on subsequent dates.
The Receivables will consist of amounts
charged by cardholders for goods and
services and cash advances (the "Principal
Receivables"), plus the related periodic
finance charges and amounts charged to the
Accounts in respect of certain credit card
fees (the "Finance Charge Receivables");
provided, however, that if the Transferor
exercises the Discount Option (as defined
herein) with respect to a Trust, an amount
equal to the product of the Discount
Percentage and the amount of Receivables
arising in the related Accounts on and after
the date such option is exercised that
otherwise would be Principal Receivables
will be treated as Finance Charge
Receivables. See "Description of the
Certificates--Discount Option." In addition,
if so specified in the related Prospectus
Supplement, certain amounts of Interchange
attributed to cardholder charges for goods
and services in the Accounts may be
allocated to the Certificates of a Series or
any Class thereof and treated as collections
of Finance Charge Receivables for purposes
of such Series or Class thereof or may be
applied in some other manner as described in
the related Prospectus Supplement. See
"Wachovia's Credit Card Activities--
Interchange."
During the term of each Trust, all new
Receivables arising in the Accounts relating
to such Trust will be transferred
automatically to such Trust by the
Transferor. The total amount of Receivables
in any Trust will fluctuate from day to day,
because the amount of new Receivables
arising in the Accounts and the amount of
payments collected on existing Receivables
usually differ each day. It will not be
required or anticipated that the Trustee
will make any initial or periodic general
examination of the Receivables or any
records relating to the Receivables for the
presence or absence of defects, compliance
with the Transferor's representations and
warranties or for any other purpose.
Pursuant to each Agreement, the Transferor
will have the right (subject to certain
limitations and conditions), and in some
circumstances, such as the maintenance of
the Transferor Amount at a specified minimum
level (the "Minimum Transferor Amount"),
will be obligated, to designate additional
eligible revolving credit card accounts to
be included as Additional Accounts and to
convey to the related Trust all of the
Receivables in the Additional Accounts,
whether such Receivables are then existing
or thereafter created or to designate
Participations to be included in the related
Trust in lieu thereof or in addition
thereto. See "Description of the
Certificates--Addition of Trust Assets."
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<PAGE>
Pursuant to each Agreement, the Transferor
will have the right (subject to certain
limitations and conditions) to designate
certain Accounts and to accept the
reconveyance of all the Receivables in such
Accounts (the "Removed Accounts"), whether
such Receivables are then existing or
thereafter created. See "Description of the
Certificates--Removal of Accounts."
Exchanges................... The Agreement and each New Agreement will
authorize the related Trustee to issue two
types of certificates: (i) one or more
Series of Certificates that will be
transferable and have the characteristics
described below and (ii) a certificate that
evidences the Transferor's interest in the
Trust (the "Transferor Certificate"), which
will be transferable only as provided in the
related Agreement. Pursuant to any one or
more Series Supplements to the related
Agreement, the holder of the Transferor
Certificate may tender the Transferor
Certificate or, if provided in the relevant
Series Supplement, Certificates representing
any Series (which may include Series offered
pursuant to this Prospectus) issued by such
Trust and the Transferor Certificate, to the
Trustee in exchange for one or more new
Series (which may include Series offered
pursuant to this Prospectus) and a reissued
Transferor Certificate (any such tender, an
"Exchange"). Any such Series may be offered
to the public or other investors under a
prospectus or other disclosure document (a
"Disclosure Document") in offerings pursuant
to this Prospectus or in transactions either
registered under the Securities Act or
exempt from registration thereunder,
directly or through one or more other
underwriters or placement agents, in fixed-
price offerings or in negotiated
transactions or otherwise. See "Description
of the Certificates--Exchanges."
Denominations............... Beneficial interests in the Certificates will
be offered for purchase in denominations of
$1,000 and integral multiples thereof or
such other denominations specified in the
Prospectus Supplement.
Registration of The Certificates of each Series offered
Certificates................ hereby initially will be represented by
Certificates registered in the name of Cede,
as the nominee of DTC. No Certificate Owner
will be entitled to receive a definitive
certificate representing such person's
interest, except in the event that
Certificates in fully registered,
certificated form ("Definitive
Certificates") are issued under the limited
circumstances described herein. See
"Description of the Certificates--Definitive
Certificates."
Clearance and Settlement.... Unless otherwise provided in the related
Prospectus Supplement, Certificate Owners of
each Series offered hereby may elect to hold
their Certificates through any of DTC (in
the United States) or Cedelbank or Euroclear
(in Europe). Transfers within DTC, Cedelbank
or Euroclear, as the case may be, will be
made in accordance with the usual rules and
operating procedures of the
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<PAGE>
relevant system. Cross-market transfers
between persons holding directly or
indirectly through DTC, on the one hand, and
counterparties holding directly or
indirectly through Cedelbank or Euroclear,
on the other, will be effected in DTC
through the relevant Depositories of
Cedelbank or Euroclear. See "Description of
the Certificates--Book-Entry Registration."
Transferor and Servicer..... The First National Bank of Atlanta d/b/a
Wachovia Bank Card Services. The principal
executive offices of the Bank are located at
New Castle, Delaware, telephone number (302)
323-2359. The Bank is a wholly-owned
subsidiary of Wachovia Corporation (the
"Corporation"). See "Wachovia and Wachovia
Corporation." In certain limited
circumstances, the Bank as Servicer may
resign or be removed, in which event the
Trustee or a third party servicer may be
appointed as successor servicer (the Bank,
or any such successor servicer, is referred
to herein as the "Servicer").
Collections................. Except in circumstances specified in the
related Prospectus Supplement, the Servicer
will deposit all collections of Receivables
in an account required to be established for
such purpose by the related Agreement (the
"Collection Account"). All amounts deposited
in the Collection Account with respect to a
Trust will be allocated by the Servicer
between amounts collected on Principal
Receivables and amounts collected on Finance
Charge Receivables. If so specified in the
related Prospectus Supplement, Principal
Receivables and/or Finance Charge
Receivables may be otherwise characterized.
See "Description of the Certificates--
Discount Option." All such amounts will then
be allocated in accordance with the
respective interests of the
Certificateholders of each Series of
Certificates or Class thereof and the holder
of the Transferor Certificate and, in
certain circumstances, certain providers of
Enhancement. See "Description of the
Certificates--Investor Percentage and
Transferor Percentage."
Interest Payments........... Interest on each Series of Certificates or
Class thereof for each accrual period (each,
an "Interest Period") specified in the
related Prospectus Supplement will be
distributed in the amounts and on the dates
(which may be monthly, quarterly,
semiannually or otherwise as specified in
the related Prospectus Supplement) (each, a
"Distribution Date") specified in the
related Prospectus Supplement. Interest
payments on each Distribution Date will be
funded from collections of Finance Charge
Receivables allocated to the Investor
Interest during the preceding monthly period
or periods (each, a "Monthly Period"), as
described in the related Prospectus
Supplement, and may be funded from certain
investment earnings on funds in certain
accounts of the related Trust and from any
applicable Enhancement, if necessary, or
certain other amounts as specified in the
related Prospectus
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Supplement. If the Distribution Dates for
payment of interest for a Series or Class
occur less frequently than monthly, such
collections or other amounts allocable to
such Series or Class will be deposited in
one or more trust accounts or held by the
Servicer pending distribution to the
Certificateholders of such Series or Class,
all as described in the related Prospectus
Supplement. See "Description of the
Certificates--Application of Collections,"
"--Shared Excess Finance Charge
Collections," "Credit Enhancement" and "Risk
Factors--Limited Credit Enhancement."
Revolving Period............ Unless otherwise specified in the related
Prospectus Supplement, with respect to each
Series and any Class thereof, no principal
will be payable to Certificateholders until
the Principal Commencement Date or the
Scheduled Payment Date with respect to such
Series or Class, as described below. For the
period beginning on the date of issuance of
the related Series (the "Closing Date") and
ending with the commencement of an
Amortization Period or an Accumulation
Period (the "Revolving Period"), collections
of Principal Receivables otherwise allocable
to the Investor Interest will, subject to
certain limitations, be paid to the holder
of the Transferor Certificate or deposited
in the Excess Funding Account for such Trust
or, under certain circumstances and if so
specified in the related Prospectus
Supplement, treated as Shared Principal
Collections and paid to the holders of other
Series of Certificates issued by such Trust,
as described herein and in the related
Prospectus Supplement. See "Description of
the Certificates--Pay Out Events" for a
discussion of the events which might lead to
early termination of the Revolving Period.
Principal Payments.......... The principal of the Certificates of each
Series offered hereby will be scheduled to
be paid either in installments commencing on
a date specified in the related Prospectus
Supplement (the "Principal Commencement
Date"), in which case such Series will have
either a Controlled Amortization Period or a
Principal Amortization Period, as described
below, or on an expected date specified in,
or determined in the manner specified in,
the related Prospectus Supplement (the
"Scheduled Payment Date"), in which case
such Series will have an Accumulation
Period, as described below. If a Series has
more than one Class of Certificates, a
different method of paying principal,
Principal Commencement Date or Scheduled
Payment Date may be assigned to each Class.
The payment of principal with respect to the
Certificates of a Series or Class may
commence earlier than the applicable
Principal Commencement Date or Scheduled
Payment Date, and the final principal
payment with respect to the Certificates of
a Series or Class may be made later than the
applicable expected payment date, Scheduled
Payment Date or other expected date, if a
Pay Out Event occurs and the Rapid
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Amortization Period commences with respect
to such Series or Class or under certain
other circumstances described herein or in
the related Prospectus Supplement. See
"Description of the Certificates--Principal
Payments."
Controlled Amortization If the Prospectus Supplement relating to a
Period...................... Series so specifies, unless a Rapid
Amortization Period with respect to such
Series commences, the Certificates of such
Series or any Class thereof will have an
amortization period (the "Controlled
Amortization Period") during which
collections of Principal Receivables
allocable to the Investor Interest of such
Series (and certain other amounts if so
specified in the related Prospectus
Supplement) will be used on each
Distribution Date to make principal
distributions in scheduled amounts to the
Certificateholders of such Series or any
Class of such Series then scheduled to
receive such distributions. The amount to be
distributed on any Distribution Date during
the Controlled Amortization Period will be
limited to an amount (the "Controlled
Distribution Amount") equal to an amount
specified in the related Prospectus
Supplement (the "Controlled Amortization
Amount") plus any existing deficit
controlled amortization amount arising from
prior Distribution Dates. If a Series has
more than one Class of Certificates, each
Class may have a separate Controlled
Amortization Amount. In addition, the
related Prospectus Supplement may describe
certain priorities among such Classes with
respect to such distributions. The
Controlled Amortization Period will commence
at the close of business on a date specified
in the related Prospectus Supplement and
continue until the earliest of (a) the
commencement of the Rapid Amortization
Period, (b) payment in full of the Investor
Interest of the Certificates of such Series
or Class and, if so specified in the related
Prospectus Supplement, of the Collateral
Interest, if any, with respect to such
Series, and (c) the Series Termination Date
with respect to such Series.
Principal Amortization If the Prospectus Supplement relating to a
Period...................... Series so specifies, unless a Rapid
Amortization Period with respect to such
Series commences, the Certificates of such
Series or any Class thereof will have an
amortization period (the "Principal
Amortization Period") during which
collections of Principal Receivables
allocable to the Investor Interest of such
Series (and certain other amounts if so
specified in the related Prospectus
Supplement) will be used on each
Distribution Date to make principal
distributions to the Certificateholders of
such Series or any Class of such Series then
scheduled to receive such distributions. If
a Series has more than one Class of
Certificates, the related Prospectus
Supplement may describe certain priorities
among such Classes with respect to such
distributions. The Principal Amortization
Period will commence at the close of
business on a date specified in the related
Prospectus Supplement and continue until the
earliest of
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(a) the commencement of the Rapid
Amortization Period, (b) payment in full of
the Investor Interest of the Certificates of
such Series or Class and, if so specified in
the related Prospectus Supplement, of the
Collateral Interest, if any, with respect to
such Series, and (c) the Series Termination
Date with respect to such Series.
Controlled Accumulation If the Prospectus Supplement relating to a
Period...................... Series so specifies, unless a Rapid
Amortization Period or, if so specified in
the related Prospectus Supplement, a Rapid
Accumulation Period with respect to such
Series commences, the Certificates of such
Series or any Class thereof will have an
accumulation period (the "Controlled
Accumulation Period") during which
collections of Principal Receivables
allocable to the Investor Interest of such
Series (and certain other amounts if so
specified in the related Prospectus
Supplement) will be deposited on the
business day immediately prior to each
Distribution Date or other business day
specified in the related Prospectus
Supplement (each, a "Transfer Date") in a
trust account established for the benefit of
the Certificateholders of such Series or
Class (a "Principal Funding Account") and
used to make distributions of principal to
the Certificateholders of such Series or
Class on the Scheduled Payment Date. The
amount to be deposited in the Principal
Funding Account on any Transfer Date will be
limited to an amount (the "Controlled
Deposit Amount") equal to an amount
specified in the related Prospectus
Supplement (the "Controlled Accumulation
Amount") plus any deficit Controlled
Accumulation Amount arising from prior
Distribution Dates. If a Series has more
than one Class of Certificates, each Class
may have a separate Principal Funding
Account and Controlled Accumulation Amount.
In addition, the related Prospectus
Supplement may describe certain priorities
among such Classes with respect to deposits
of principal into such Principal Funding
Accounts. The Controlled Accumulation Period
will commence at the close of business on a
date specified in or determined in the
manner specified in the related Prospectus
Supplement and continue until the earliest
of (a) the commencement of the Rapid
Amortization Period or, if so specified in
the related Prospectus Supplement, the Rapid
Accumulation Period, (b) payment in full of
the Investor Interest of the Certificates of
such Series or Class and, if so specified in
the related Prospectus Supplement, of the
Collateral Interest, if any, with respect to
such Series and (c) the Series Termination
Date with respect to such Series.
Funds on deposit in any Principal Funding
Account may be invested in Permitted
Investments or subject to a guaranteed rate or
investment contract or other arrangement
intended to assure a minimum rate of return on
the investment of such funds. Investment
earnings on such funds may be applied to pay
interest
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on the related Series of Certificates. In order
to enhance the likelihood of payment in full of
principal at the end of an Accumulation Period
with respect to a Series of Certificates, such
Series or any Class thereof may be subject to a
principal payment guaranty or other similar
arrangement.
Rapid Accumulation Period... If so specified and under the conditions set
forth in the Prospectus Supplement relating
to a Series having a Controlled Accumulation
Period, during the period from the day on
which a Pay Out Event has occurred until the
earliest of (a) the commencement of the
Rapid Amortization Period, (b) payment in
full of the Investor Interest of the
Certificates of such Series and, if so
specified in the related Prospectus
Supplement, of the Collateral Interest, if
any, with respect to such Series and (c) the
related Series Termination Date (the "Rapid
Accumulation Period"), collections of
Principal Receivables allocable to the
Investor Interest of such Series (and
certain other amounts if so specified in the
related Prospectus Supplement) will be
deposited on each Transfer Date in the
Principal Funding Account and used to make
distributions of principal to the
Certificateholders of such Series or Class
on the Scheduled Payment Date. The amount to
be deposited in the Principal Funding
Account during the Rapid Accumulation Period
will not be limited to the Controlled
Deposit Amount. The Rapid Accumulation
Period is intended to result in the fastest
possible accumulation of funds available to
make principal distributions to
Certificateholders of a Series following a
Pay Out Event with respect to such Series in
order to better assure the repayment of
principal to such Certificateholders. The
term "Pay Out Event" with respect to a
Series of Certificates issued by a Trust
means any of the events identified as such
in the related Prospectus Supplement and any
of the following: (a) certain events of
insolvency, receivership or bankruptcy
relating to the Transferor and any other
holder of an interest in the Transferor
Certificate (including any Transferor
Participation), (b) the Transferor being
unable for any reason to transfer
Receivables to such Trust in accordance with
the provisions of the related Agreement or
(c) such Trust becoming subject to
regulation as an "investment company" within
the meaning of the Investment Company Act of
1940, as amended. See "Description of the
Certificates--Pay Out Events" for a
discussion of the events which might lead to
commencement of a Rapid Accumulation Period.
During the Rapid Accumulation Period, funds on
deposit in any Principal Funding Account may be
invested in Permitted Investments or subject to
a guaranteed rate or investment contract or
other arrangement intended to assure a minimum
return on the investment of such funds.
Investment earnings on such funds may be
applied to pay interest on the related Series
of Certificates or make other payments as
specified in the related Prospectus
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Supplement. In order to enhance the likelihood
of payment in full of principal at the end of
the Rapid Accumulation Period with respect to a
Series of Certificates, such Series or any
Class thereof may be subject to a principal
payment guaranty or other similar arrangement.
Rapid Amortization During the period from the day on which a Pay
Period...................... Out Event has occurred with respect to a
Series or, if so specified in the Prospectus
Supplement relating to a Series with a
Controlled Accumulation Period, from such
time specified in the related Prospectus
Supplement after a Pay Out Event has
occurred and the Rapid Accumulation Period
has commenced, to the earlier of (a) the
date on which the Investor Interest of the
Certificates of such Series and the
Collateral Interest or the Enhancement
Invested Amount, if any, with respect to
such Series have been paid in full and (b)
the related Series Termination Date (the
"Rapid Amortization Period"), collections of
Principal Receivables allocable to the
Investor Interest of such Series (and
certain other amounts if so specified in the
related Prospectus Supplement) will be
distributed as principal payments to the
Certificateholders of such Series and, in
certain circumstances, to the Credit
Enhancement Provider, monthly on each
Distribution Date with respect to such
Series in the manner and order of priority
set forth in the related Prospectus
Supplement. During the Rapid Amortization
Period with respect to a Series,
distributions of principal will not be
limited by any Controlled Deposit Amount or
Controlled Distribution Amount. In addition,
upon the commencement of the Rapid
Amortization Period with respect to a
Series, any funds on deposit in a Principal
Funding Account with respect to such Series
or any Class thereof will be paid to the
Certificateholders of such Series or Class
on the first Distribution Date in the Rapid
Amortization Period. The Rapid Amortization
Period is intended to result in the fastest
possible distribution of principal to
Certificateholders of a Series following a
Pay Out Event with respect to such Series in
order to better assure the repayment of
principal to such Certificateholders. See
"Description of the Certificates--Pay Out
Events" for a discussion of the events which
might lead to commencement of a Rapid
Amortization Period.
Shared Excess Finance
Charge Collections..........
Any Series offered hereby may be included in
a group of Series (a "Group"). If so
specified in the related Prospectus
Supplement, the Certificateholders of a
Series within a Group or any Class thereof
may be entitled to receive all or a portion
of Excess Finance Charge Collections with
respect to another Series or Class thereof
within such Group to cover any shortfalls
with respect to amounts payable from
collections of Finance Charge Receivables
allocable to such Series or Class. See
"Description of the Certificates--
Application of Collections," "--Shared
Excess
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<PAGE>
Finance Charge Collections," and "--
Defaulted Receivables; Rebates and
Fraudulent Charges; Investor Charge-Offs."
Excess Funding Account...... If on any date the Transferor Amount is less
than the Minimum Transferor Amount, the
Servicer will not distribute to the holder
of the Transferor Certificate any
collections of Principal Receivables that
otherwise would be so distributed, but will
instead deposit such funds in an account
required to be established for such purpose
by the related Agreement (the "Excess
Funding Account"). Funds on deposit in the
Excess Funding Account will be withdrawn and
paid to the holder of the Transferor
Certificate on any date to the extent that
the Transferor Amount exceeds the Minimum
Transferor Amount on such date; provided,
however, that if a Controlled Accumulation
Period, Controlled Amortization Period,
Principal Amortization Period, Rapid
Amortization Period or Rapid Accumulation
Period commences with respect to any Series
in a Group entitled to the benefits of
Shared Principal Collections, any funds on
deposit in the Excess Funding Account not
released to the holder of the Transferor
Certificate will be treated as Shared
Principal Collections to the extent needed
to cover principal payments due to or for
the benefit of such Series, if the Series
Supplement with respect to such Series so
provides. See "Description of the
Certificates--Excess Funding Account."
Shared Principal If so specified in the related Prospectus
Collections................. Supplement, to the extent that collections
of Principal Receivables that are allocated
to the Investor Interest of any Series are
not needed to make payments or deposits with
respect to such Series, such collections
("Shared Principal Collections") will be
applied to cover principal payments due to
or for the benefit of Certificateholders of
another Series. If so specified in the
related Prospectus Supplement, the
allocation of Shared Principal Collections
may be among Series within a Group. Any such
reallocation will not result in a reduction
in the Investor Interest of the Series to
which such collections were initially
allocated.
Paired Series............... If so specified in the Prospectus Supplement
relating to a Series, such Series may be
paired with another Series (each, a "Paired
Series"), such that a reduction in the
Investor Interest of one such Series results
in an increase in the Investor Interest of
the other such Series. See "Description of
the Certificates--Paired Series."
Funding Period.............. The Prospectus Supplement relating to a
Series of Certificates may specify that for
a period beginning on the Closing Date and
ending on a specified date before the
commencement of an Amortization Period or
Accumulation Period with respect to such
Series (the "Funding Period"), which period
is expected to be less than a year, the
aggregate amount of Principal Receivables in
the related Trust allocable to such Series
may be less than the
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<PAGE>
aggregate principal amount of the
Certificates of such Series and that the
amount of such deficiency (the "Pre-Funding
Amount") will be held in a trust account
established with the related Trustee for the
benefit of Certificateholders of such Series
(the "Pre-Funding Account") pending the
transfer of additional Principal Receivables
to the Trust or pending the reduction of the
Investor Interests of other Series issued by
the related Trust. The Pre-Funded Amount may
be up to 100% of the principal amount of the
Certificates of a Series. The related
Prospectus Supplement specifies the initial
Investor Interest on the Closing Date with
respect to such a Series, the aggregate
principal amount of the Certificates of such
Series (the "Full Investor Interest") and
the date by which the Investor Interest is
expected to equal the Full Investor
Interest. The Investor Interest will
increase as Principal Receivables are added
to the related Trust or as the Investor
Interests of other Series of the related
Trust are reduced.
During the Funding Period, funds on deposit in
the Pre-Funding Account for a Series of
Certificates will be withdrawn and paid to the
holder of the Transferor Certificate to the
extent of any increases in the Investor
Interest. In the event that the Investor
Interest does not for any reason equal the Full
Investor Interest by the end of the Funding
Period, any amount remaining in the Pre-Funding
Account will be payable to the
Certificateholders of such Series in a manner
and at such time as set forth in the related
Prospectus Supplement. Such payment will reduce
the aggregate principal amount of such
Certificates. In addition, a prepayment premium
or penalty or similar amount may be payable to
Certificateholders of such Series, if specified
in the related Prospectus Supplement.
If so specified in the related Prospectus
Supplement, funds on deposit in the Pre-Funding
Account may be invested in Permitted
Investments or subject to a guaranteed rate or
investment agreement or other similar
arrangement, and investment earnings and any
applicable payment under any such investment
arrangement will be applied to pay interest on
the Certificates of such Series. See
"Description of the Certificates--Funding
Period."
Credit Enhancement.......... Credit Enhancement with respect to a Series
or any Class thereof may be provided in the
form or forms of subordination, a cash
collateral account or guaranty, a collateral
interest, a letter of credit, a surety bond,
an insurance policy, a spread account, a
reserve account or other form of support as
specified in the related Prospectus
Supplement. Credit Enhancement may also be
provided to a Class or Classes of different
Series by a cross-support feature which
requires that distributions of principal
and/or interest be made with respect to
Certificates of one or more
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<PAGE>
Classes of a particular Series before
distributions are made to one or more
Classes of another Series.
The type, characteristics and amount of the
Credit Enhancement will be determined based on
several factors, including the characteristics
of the Receivables and Accounts included in the
Trust Portfolio as of the Closing Date with
respect to any Series, and will be established
on the basis of requirements of each Rating
Agency rating the Certificates of such Series.
If so specified in the related Prospectus
Supplement, any such Credit Enhancement will
apply only in the event of certain types of
losses and the protection against losses
provided by such Credit Enhancement will be
limited. The terms of the Credit Enhancement
with respect to a Series, and the conditions
under which the Credit Enhancement may be
increased, reduced or replaced, are described
in the related Prospectus Supplement. See
"Credit Enhancement"and "Risk Factors--
Certificate Rating."
Optional Repurchase......... With respect to each Series of Certificates,
the Investor Interest will be subject to
optional repurchase by the Transferor on any
Distribution Date after the Investor
Interest and the Enhancement Invested
Amount, if any, with respect to such Series
is reduced to an amount less than or equal
to 5% of the initial Investor Interest, if
any, or such other amount specified in the
related Prospectus Supplement, if certain
conditions set forth in the related
Agreement are met. The repurchase price will
be equal to the Investor Interest (less the
amount, if any, on deposit in any Principal
Funding Account with respect to such
Series), plus the Enhancement Invested
Amount, if any, with respect to such Series,
plus accrued and unpaid interest on the
Certificates and interest or other amounts
payable on the Collateral Interest or the
Enhancement Invested Amount, if any, through
the day preceding the Distribution Date on
which the repurchase occurs. See
"Description of the Certificates--Final
Payment of Principal; Termination."
Tax Status.................. Except to the extent otherwise specified in
the related Prospectus Supplement, it is
anticipated that Special Tax Counsel will
render an opinion that the Offered
Certificates (as defined herein) of such
Series will be characterized as indebtedness
for Federal income tax purposes. Except to
the extent otherwise specified in the
related Prospectus Supplement, the
Certificate Owners will agree to treat the
Offered Certificates as debt for Federal
income tax purposes. See "Certain U.S.
Federal Income Tax Consequences" for
additional information concerning the
application of Federal income tax laws.
ERISA Considerations........ Under regulations issued by the Department of
Labor, the Trust's assets would not be
deemed "plan assets" of any employee benefit
plan holding interests in the Certificates
of a Series if
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certain conditions are met. If a Trust's
assets were deemed to be "plan assets" of an
employee benefit plan, there is uncertainty
as to whether existing exemptions from the
"prohibited transaction" rules of the
Employee Retirement Income Security Act of
1974, as amended ("ERISA"), would apply to
all transactions involving such Trust's
assets. No assurance can be made with
respect to any offering of the Certificates
of any Series that the conditions which
would allow the Trust assets not to be
deemed "plan assets" will be met, although
the intention of the underwriters (but not
their assurance) as to whether the
Certificates of a particular Series will be
"publicly-offered securities", and therefore
eligible for an ERISA exemption, is set
forth in the related Prospectus Supplement.
Accordingly, employee benefit plans
contemplating purchasing interests in
Certificates should consult their counsel
before making a purchase. See "Employee
Benefit Plan Considerations."
Certificate Rating.......... It will be a condition to the issuance of the
Certificates of each Series or Class thereof
offered pursuant to this Prospectus and the
related Prospectus Supplement that they be
rated in one of the four highest rating
categories by at least one nationally
recognized rating organization (each such
rating organization selected by the
Transferor to rate any Series, a "Rating
Agency"). The rating or ratings applicable
to the Certificates of each Series or Class
thereof offered hereby is set forth in the
related Prospectus Supplement.
A rating is not a recommendation to buy, sell
or hold securities and may be subject to
revision or withdrawal at any time by the
assigning Rating Agency. Each rating should be
evaluated independently of any other rating.
See "Risk Factors--Certificate Rating."
Listing..................... If so specified in the Prospectus Supplement
relating to a Series, application will be
made to list the Certificates of such
Series, or all or a portion of any Class
thereof, on the Luxembourg Stock Exchange or
any other specified exchange.
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<PAGE>
RISK FACTORS
Potential investors should consider, among other things, the following risk
factors in connection with the purchase of the Certificates.
Limited Liquidity. It is anticipated that, to the extent permitted, the
underwriters of any Series of Certificates offered hereby will make a market
in such Certificates, but in no event will any such underwriter be under an
obligation to do so. There is no assurance that a secondary market will
develop with respect to the Certificates of any Series offered hereby, or if
it does develop, that it will provide Certificateholders with liquidity of
investment or that it will continue for the life of such Certificates.
Certain Legal Aspects. While the Transferor has transferred and will
transfer interests in the Receivables to the Trust, a court could treat such
transactions as an assignment of collateral as security for the benefit of
holders of certificates issued by the Trust. The Transferor represents and
warrants in the Agreement that the transfer of the Receivables to the Trust is
either a valid transfer and assignment of the Receivables to the Trust or the
grant to the Trust of a security interest in the Receivables. The Transferor
has taken and will take certain actions as are required to perfect the Trust's
security interest in the Receivables and warrants that if the transfer to the
Trust is deemed to be a grant to the Trust of a security interest in the
Receivables, the Trustee will have a first priority perfected security
interest therein. Nevertheless, if the transfer of the Receivables to the
Trust is deemed to create a security interest therein, a tax or government
lien on property of the Transferor arising before Receivables come into
existence may have priority over the Trust's interest in such Receivables,
and, if the Federal Deposit Insurance Corporation ("FDIC") were appointed
receiver of the Transferor, the receiver's administrative expenses may also
have priority over the Trust's interest in such Receivables. In Octagon Gas
Systems, Inc. v. Rimmer, 995 F.2d 948 (10th Cir. 1993), cert. denied, 114 S.
Ct. 554 (1993), the United States Court of Appeals for the 10th Circuit
suggested that even where a transfer of accounts from a seller to a buyer
constitutes a "true sale," the accounts would nevertheless constitute property
of the seller's estate in a bankruptcy of the seller. If the Transferor were
to be placed into receivership and a court were to follow the Octagon court's
reasoning, Certificateholders might experience delays in payment or possibly
losses in their investment in the Certificates. Counsel to the Transferor has
advised the Transferor that the facts of the Octagon case are distinguishable
from those in the sale transactions between the Transferor and the Trust and
the reasoning of the Octagon case appears to be inconsistent with established
precedent and the Uniform Commercial Code. See "Certain Legal Aspects of the
Receivables--Transfer of Receivables."
If, upon the insolvency of the Transferor, the Transferor were to be placed
into conservatorship or receivership, the FDIC as conservator or receiver
would have the power to repudiate contracts of, and to request a stay of up to
90 days of any judicial action or proceeding involving, the Transferor. With
respect to the appointment of a receiver or conservator for the Transferor,
subject to certain qualifications, a valid perfected security interest of the
Trustee in the Receivables should be enforceable (to the extent of the Trust's
"actual direct compensatory damages" as described below) and payments to the
Trust with respect to the Receivables (up to the amount of such damages)
should not be subject to an automatic stay of payment or to recovery by such a
conservator or receiver. If, however, the FDIC were to assert that the
security interest was unperfected or unenforceable, or were to require the
Trustee to establish its right to those payments by submitting to and
completing the statutory administrative claims procedure, or the FDIC were to
request a stay of judicial proceedings with respect to the Transferor, delays
in payments on the Certificates and possible reductions in the amount of those
payments could occur. The FDIA does not define the term "actual and direct
compensatory damages." The FDIC has stated that a claim for "actual direct
compensatory damages" is limited to such damages determined as of the date of
appointment of the FDIC as conservator or receiver. Since the FDIC may delay
repudiation or disaffirmation for up to 180 days following such appointment,
investors may not have a claim for interest accrued during this 180 day
period. On December 18, 1998, the FDIC proposed a statement of policy
regarding the treatment of asset-backed securitization transactions in the
event of conservatorship or receivership. In addition, in one case involving
the repudiation by the Resolution Trust Corporation of certain secured zero-
coupon bonds issued by a savings association, a United States federal district
court held that "actual direct compensatory damages" in the case of a
marketable security meant the market value of the repudiated
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<PAGE>
bonds as of the date of repudiation. If that court's view were applied to
determine the Trust's "actual direct compensatory damages" in the event the
FDIC repudiated the Transferor's obligations under the Agreement, the amount
paid to Certificateholders could, depending upon circumstances existing on the
date of the repudiation, be less than the principal of the Certificates and
the interest accrued thereon to the date of payment. See "Certain Legal
Aspects of the Receivables--Certain Matters Relating to Receivership."
If the FDIC were appointed as conservator or receiver for the Transferor,
under the Agreement new Principal Receivables would not be transferred to the
Trust and, for so long as Series 1995-1 remains outstanding, the Trustee would
sell the portion of the Receivables allocable in accordance with the Agreement
to each Series (unless holders of more than 50% of the principal amount of
each Class of such Series instruct otherwise), thereby causing early
termination of the Trust and a loss to certificateholders (including the
Certificateholders) if the net proceeds allocable to certificateholders from
such sale, if any, were insufficient to pay certificateholders (including the
Certificateholders) in full. Upon the occurrence of a Pay Out Event, if the
FDIC were appointed as conservator or receiver for the Transferor and no Pay
Out Event other than such conservatorship, receivership or insolvency of the
Transferor exists, the FDIC may have the power to prevent the early sale,
liquidation or disposition of the Receivables and the commencement of the
Rapid Amortization Period. In addition, the FDIC as conservator or receiver
for the Transferor may have the power to cause early payment of the
Certificates. See "Certain Legal Aspects of the Receivables--Certain Matters
Relating to Receivership."
If, upon the insolvency of the Servicer, the Servicer were to be placed
into conservatorship or receivership, the FDIC as conservator or receiver
would have the power to repudiate and refuse to perform any obligations,
including servicing obligations, of the Servicer under the Agreement or any
other contract, and to request a stay of up to 90 days of any judicial action
or proceeding involving the Servicer. In the event of a Servicer Default, if
the FDIC were appointed as conservator or receiver for the Servicer, and no
Servicer Default other than such conservatorship or receivership or insolvency
of the Servicer exists, the FDIC may have the power to prevent a transfer of
servicing to a successor Servicer or to appoint a successor Servicer chosen by
the FDIC.
The Accounts and the Receivables are subject to numerous Federal and state
consumer protection laws which impose requirements on the making and
collection of consumer loans. Such laws, as well as any new laws or rulings
which may be adopted, may adversely affect the Servicer's ability to collect
on the Receivables or maintain previous levels of finance charges, annual
cardholder fees and other fees, and failure by the Servicer to comply with
such requirements also could adversely affect the Servicer's ability to
collect on the Receivables. Pursuant to the Agreement, the Transferor has
covenanted to accept the transfer of all Receivables in an Account if any
Receivable in such Account does not comply with all requirements of law or if
the proceeds of any Receivable in such Account are not available to the Trust.
The Transferor has made and will make certain other representations and
warranties relating to the validity and enforceability of the Accounts and the
Receivables. However, the Trustee has not made and will not make any
examination of the Receivables or the records relating thereto for the purpose
of establishing the presence or absence of defects, compliance with such
representations and warranties, or for any other purpose. The sole remedy if
any such representation or warranty is breached and such breach continues
beyond the applicable cure period, if any, is that the Transferor will
generally be obligated to accept the transfer of all Receivables in the
Account affected thereby. In addition, in the event of a breach of certain
representations and warranties, the Transferor may be obligated to accept the
reassignment and transfer of the entire Trust Portfolio. See "Description of
the Certificates--Representations and Warranties" and "Certain Legal Aspects
of the Receivables--Consumer Protection Laws."
Application of Federal and state bankruptcy and debtor relief laws would
affect the interests of the Certificateholders in the Receivables, if such
laws result in any Receivables being written off as uncollectible. See
"Description of the Certificates--Defaulted Receivables; Rebates and
Fraudulent Charges; Investor Charge-Offs."
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<PAGE>
From time to time Congress and certain state and local legislatures have
considered legislation that would limit the finance charges and fees that may
be charged on credit card accounts. Although such legislation has not been
enacted, there can be no assurance that such legislation will not become law
in the future. The potential effect of any legislation which limits the amount
of finance charges or fees that may be charged on credit card balances could
be to reduce the Portfolio Yield on the Accounts. If such Portfolio Yield is
reduced, a Pay Out Event with respect to a Series may occur. See "Description
of the Certificates--Pay Out Events." There can be no assurance as to whether
any federal or state legislation will be promulgated which would impose
additional limitations on the monthly periodic finance charges or fees
relating to the Accounts. See "Certain Legal Aspects of the Receivables--
Consumer Protection Laws."
Transferor's Ability to Change Terms of the Receivables. Pursuant to the
Agreement, the Transferor does not transfer the Accounts to the Trust, but
only the Receivables arising in the Accounts. As owner of the Accounts, the
Transferor has the right to determine the monthly periodic finance charges and
other fees which will be applicable from time to time to the Accounts, to
alter the minimum monthly payment required on the Accounts and to change
various other terms with respect to the Accounts. A decrease in the monthly
periodic finance charge and other fees would decrease the Portfolio Yield on
the Accounts and could result in the occurrence of a Pay Out Event with
respect to a Series and the commencement of the Rapid Amortization Period with
respect to a Series. In addition, under the Agreement, the Transferor may
change the terms of the contracts relating to the Accounts or its policies and
procedures with respect to the servicing thereof (including without limitation
the reduction of the required minimum monthly payment and the calculation of
the amount or the timing of finance charges, fees, and charge-offs), if such
change (i) would not, in the reasonable belief of the Transferor, cause a Pay
Out Event for any Series to occur, and (ii) is made applicable to the
comparable segment of revolving credit card accounts owned and serviced by the
Transferor which have characteristics the same as or substantially similar to
the Accounts which are subject to such change. In servicing the Accounts, the
Servicer is also required to exercise the same care and apply the same
policies that it exercises in handling similar matters for its own comparable
accounts. Except as specified above, there are no restrictions in the
Agreement on the Transferor's ability to change the terms of the Accounts.
There can be no assurance that changes in applicable law, changes in the
marketplace or prudent business practice might not result in a determination
by the Transferor to take actions which would change other Account terms.
Effects of Consumer Protection Laws. Federal and state consumer protection
laws impose requirements on the making and enforcement of consumer loans.
Congress and the states may enact new laws and amendments to existing laws to
regulate further the credit card and consumer credit industry or to reduce
finance charges or other fees or charges applicable to credit card accounts.
Such laws, as well as any new laws or rulings which may be adopted, may
adversely affect the Servicer's ability to collect on the Receivables or
maintain previous levels of monthly periodic finance charges and other credit
card fees. One effect of any legislation which regulates the amount of
interest and other charges that may be assessed on credit card account
balances would be to reduce the Portfolio Yield on the Accounts. If such
legislation were to result in a significant reduction in the Portfolio Yield,
a Pay Out Event could occur, in which case the Rapid Amortization Period or,
if so specified in the related Prospectus Supplement, the Rapid Accumulation
Period would commence. Certificateholders of an affected Series might then
receive principal payments earlier than expected. See "Description of the
Certificates--Pay Out Events."
Pursuant to each Agreement, the Transferor will covenant to accept
reassignment, subject to certain conditions described under "Description of
the Certificates--Representations and Warranties," of each Receivable that
does not comply in all material respects with all requirements of applicable
law. The Transferor will make certain other representations and warranties
relating to the validity and enforceability of the Receivables. However, it is
not anticipated that the Trustee will make any examination of the related
Receivables or the records relating thereto for the purpose of establishing
the presence or absence of defects, compliance with such representations and
warranties, or for any other purpose. The sole remedy if any such
representation
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<PAGE>
or warranty is breached and such breach continues beyond the applicable cure
period is that the Transferor will be obligated to accept reassignment,
subject to certain conditions described under "Description of the
Certificates--Representations and Warranties," of the Receivables affected
thereby. Such Receivables will be reassigned to the Transferor without any
cost, direct or indirect, incurred by Certificateholders. See "Description of
the Certificates --Representations and Warranties" and "Certain Legal Aspects
of the Receivables--Consumer Protection Laws."
Application of federal and state bankruptcy and debtor relief laws would
affect the interests of the Certificateholders in the Receivables if such laws
result in any Receivables being written off as uncollectible when there are no
funds available from any Credit Enhancement or other sources to cover any
resulting shortfalls in amounts payable to Certificateholders. See
"Description of the Certificates--Defaulted Receivables; Rebates and
Fraudulent Charges; Investor Charge-Offs."
Competition in the Credit Card Industry. The credit card industry is highly
competitive. As new credit card issuers enter the market and all issuers seek
to expand their share of the market, there is increased use of advertising,
target marketing and pricing competition. Each Trust will be dependent upon
the Transferor's continued ability to generate new Receivables. If the rate at
which new Receivables are generated declines significantly and the Transferor
is unable to designate Additional Accounts with respect to a Trust, a Pay Out
Event could occur with respect to each Series relating to such Trust, in which
case the Rapid Amortization Period or, if so specified in the related
Prospectus Supplement, the Rapid Accumulation Period with respect to each such
Series would commence. Certificateholders might then receive principal
payments earlier than expected.
Timing of Payments and Maturity. The Receivables may be paid at any time
and there is no assurance that there will be additional Receivables created in
the Accounts or that any particular pattern of cardholder repayments will
occur. The commencement and continuation of a Controlled Amortization Period,
a Principal Amortization Period, or a Controlled Accumulation Period for a
Series or Class thereof with respect to a Trust will be dependent upon the
continued generation of new Receivables to be conveyed to such Trust. A
significant decline in the amount of Receivables generated could result in the
occurrence of a Pay Out Event for one or more Series and the commencement of
the Rapid Amortization Period or, if so specified in the related Prospectus
Supplement, the Rapid Accumulation Period for each such Series.
Certificateholders might then receive principal payments earlier than
expected. Certificateholders should be aware that the Transferor's ability to
continue to compete in the current industry environment will affect the
Transferor's ability to generate new Receivables to be conveyed to each Trust
and may also affect payment patterns. In addition, changes in periodic finance
charges can alter the monthly payment rates of cardholders. A significant
decrease in such monthly payment rate could slow the return or accumulation of
principal payable to Certificateholders during an Amortization Period or
Accumulation Period. No assurance can be given that payments of principal will
be made as expected during the Controlled Amortization Period or the Principal
Amortization Period, or with respect to an Accumulation Period, on the
Scheduled Payment Date, as applicable.
Pre-Funding Account. With respect to any Series having a Pre-Funding
Account, in the event that there is an insufficient amount of Principal
Receivables in the related Trust at the end of the applicable Funding Period,
the Certificateholders of such Series will be repaid principal from amounts on
deposit in the Pre-Funding Account (to the extent of such insufficiency)
following the end of such Funding Period, as described more fully in the
Prospectus Supplement. Such repayment of principal would be prior to the
scheduled date of such repayment. As a result of such repayment,
Certificateholders would receive a principal payment earlier than they
expected. In addition, Certificateholders would not receive the benefit of the
applicable Certificate Rate for the period of time originally expected on the
amount of such early repayment. There can be no assurance that
Certificateholders would be able to reinvest such early repayment amount at a
similar rate of return.
Effect of Subordination. With respect to Certificates of a Series having a
Class or Classes of Subordinated Certificates, except in the circumstances
specified in the related Prospectus Supplement, payments of principal in
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respect of the Subordinated Certificates of a Series will not commence until
after the final principal payment with respect to the Senior Certificates of
such Series. In addition, if so specified in the related Prospectus
Supplement, if collections of Finance Charge Receivables allocable to the
Certificates of a Series are insufficient to cover required amounts due with
respect to the Senior Certificates of such Series, the Investor Interest with
respect to the Subordinated Certificates will be reduced, resulting in a
reduction of the portion of collections of Finance Charge Receivables
allocable to the Subordinated Certificates in future periods and a possible
delay or reduction in principal and interest payments on the Subordinated
Certificates. Moreover, if so specified in the related Prospectus Supplement,
in the event of a sale of Receivables in a Trust due to certain events of
insolvency or bankruptcy of the Transferor or any other holder of an interest
in the Transferor Certificate (including the Transferor Participation) or the
appointment of a conservator or receiver for the Transferor or any other
holder of an interest in the Transferor Certificate (including the Transferor
Participation), or due to the inability of the Trustee to act as or find a
successor Servicer after a Servicer Default, the portion of the net proceeds
of such sale allocable to pay principal to the Certificates of a Series will
be used first to pay amounts due to the holders of Senior Certificates and any
remainder will be used to pay amounts due to the holders of Subordinated
Certificates.
Certificate Rating. Any rating assigned to the Certificates of a Series or
a Class by a Rating Agency will reflect such Rating Agency's assessment of the
likelihood that Certificateholders of such Series or Class will receive the
payments of interest and principal required to be made under the Agreement
(including amounts payable from any Pre-Funding Account) and will be based
primarily on the value of the Receivables in the Trust and the availability of
any Enhancement with respect to such Series or Class. However, any such rating
will not, unless specified in the related Prospectus Supplement with respect
to any Class or Series offered hereby, address the likelihood that the
principal of, or interest on, any Certificates of such Class or Series will be
paid on a scheduled date. In addition, any such rating will not address the
possibility of the occurrence of a Pay Out Event with respect to such Class or
Series or the possibility of the imposition of United States withholding tax
with respect to non-U.S. Certificateholders. The rating will not be a
recommendation to purchase, hold or sell Certificates of such Series or Class,
and such rating will not comment as to the marketability of such Certificates,
any market price or suitability for a particular investor. There is no
assurance that any rating will remain for any given period of time or that any
rating will not be lowered or withdrawn entirely by a Rating Agency if in such
Rating Agency's judgment circumstances so warrant.
The Transferor will request a rating of the Certificates offered hereby of
each Series by at least one Rating Agency. There can be no assurance as to
whether any rating agency not requested to rate the Certificates will
nonetheless issue a rating with respect to any Series of Certificates or Class
thereof, and, if so, what such rating would be. A rating assigned to any
Series of Certificates or Class thereof by a rating agency that has not been
requested by the Transferor to do so may be lower than the rating assigned by
a Rating Agency pursuant to the Transferor's request.
Limited Credit Enhancement. Although Credit Enhancement may be provided
with respect to a Series of Certificates or any Class thereof, the amount
available will be limited and will be subject to certain reductions. If the
amount available under any Credit Enhancement is reduced to zero, or the
Credit Enhancement is otherwise not available to cover a loss,
Certificateholders of the Series or Class thereof covered by such Credit
Enhancement will bear directly the credit and other risks associated with
their undivided interest in the Trust and will be more likely to suffer a
loss. See "Credit Enhancement."
Basis Risk. If so specified in the related Prospectus Supplement, a portion
of the Accounts in a Trust will have finance charges set at a variable rate
above a designated prime rate or other designated index. A Series of
Certificates issued by such Trust may bear interest at a fixed rate or at a
floating rate based on an index other than such prime rate or other designated
index. If there is a decline in such prime rate or other designated index, the
amount of collections of Finance Charge Receivables on such Accounts may be
reduced, whereas the amounts payable as Monthly Interest on such Series of
Certificates and other amounts required to be funded out of collections of
Finance Charge Receivables with respect to such Series may not be similarly
reduced. Such an event could result in the occurrence of a Pay Out Event, in
which case the Rapid Amortization Period or, if so
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specified in the related Prospectus Supplement, the Rapid Accumulation Period
would commence. Certificateholders of an affected Series might then receive
principal payments earlier than expected.
Master Trust Considerations. Trust I is a master trust and is expected to
issue additional Series from time to time. Each New Trust, as a master trust,
may issue Series from time to time. While the Principal Terms of any Series
will be specified in a Series Supplement, the provisions of a Series
Supplement and, therefore, the terms of any additional Series, will not be
subject to the prior review by or consent of, holders of the Certificates of
any previously issued Series. Such Principal Terms may include methods for
determining applicable investor percentages and allocating collections,
provisions creating different or additional security, provisions subordinating
such Series to another Series or other Series (if the Series Supplement
relating to such Series so permits) to such Series, and any other amendment or
supplement to the related Agreement which is made applicable only to such
Series. It is a condition precedent to the issuance of any additional Series
by a Trust that each Rating Agency that has rated any outstanding Series
issued by such Trust deliver written confirmation to the Trustee that the
Exchange will not result in such Rating Agency reducing or withdrawing its
rating on any outstanding Series. There can be no assurance, however, that the
Principal Terms of any other Series, including any Series issued from time to
time hereafter, might not have an impact on the timing and amount of payments
received by the Certificateholders of any other Series. See "Description of
the Certificates--Exchanges."
Effect of Addition of Trusts Assets on Credit Quality. The Transferor
expects, and in some cases will be obligated, to designate Automatic
Additional Accounts and Additional Accounts, the Receivables in which will be
conveyed to a Trust. Such Automatic Additional Accounts and Additional
Accounts may include accounts originated using criteria different from those
which were applied to the Accounts designated on the Cut-Off Date related to
such Trust or to previously-designated Additional Accounts or Automatic
Additional Accounts, because such accounts were originated at a different date
or were purchased or otherwise acquired from another institution.
Consequently, there can be no assurance that Automatic Additional Accounts and
Additional Accounts designated in the future will be of the same credit
quality as previously-designated Accounts. In addition, the Agreement provides
that the Transferor may add Participations to a Trust. The designation of
Automatic Additional Accounts and Additional Accounts and Participations will
be subject to the satisfaction of certain conditions described herein under
"Description of the Certificates--Addition of Trust Assets"; however, there is
no mechanism to assure consistent credit quality from time to time.
Control of Action Under Agreement. The Certificateholders generally have
limited control over the administration of the Trust or the applicable Series.
The Certificateholders of each Series may take certain actions, or direct
certain actions to be taken, under the related Agreement or the related Series
Supplement. However, the related Agreement or related Series Supplement may
provide that under certain circumstances the consent or approval of a
specified percentage of the aggregate Investor Interest of other Series or of
the Investor Interest of a specified Class of such other Series will be
required to direct certain actions, including requiring the appointment of a
successor Servicer following a Servicer Default, amending the related
Agreement in certain circumstances and directing a repurchase of all
outstanding Series upon the breach of certain representations and warranties
by the Transferor. Certificateholders of such other Series or Class may have
interests which do not coincide in any way with the interests of
Certificateholders of the subject Series. In addition, Certificateholders of
different Classes of the same Series may have interests which do not coincide.
In such instances, it may be difficult for the Certificateholders of any such
Series or Class to achieve the results from the vote that they desire.
Social, Legal and Economic Factors. Changes in use of credit and payment
patterns by customers may result from a variety of social, legal and economic
factors. Economic factors include the rate of inflation, unemployment levels
and relative interest rates. Cardholders whose accounts are included in the
Bank Portfolio have addresses in all 50 states, the District of Columbia and
other United States territories and possessions. Social, legal and economic
factors in the states of California, South Carolina, Texas, Georgia, Florida
and North Carolina may have a disproportionate effect on a Trust because of
the concentration of Accounts in such areas. See "The Receivables" in the
Prospectus Supplement. The Transferor, however, is unable to determine and has
no basis to predict whether, or to what extent, social, legal or economic
factors in California, South Carolina, Texas, Georgia, Florida, North Carolina
or elsewhere will affect future use of credit or repayment patterns.
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Effects of Book-Entry Registration. Unless otherwise specified in the
related Prospectus Supplement, the Certificates of each Series initially will
be represented by one or more certificates registered in the name of Cede, the
nominee for DTC, and will not be registered in the names of the Certificate
Owners or their nominees. Unless and until Definitive Certificates are issued
for a Series, Certificate Owners relating to such Series will not be
recognized by the Trustee as Certificateholders, as that term will be used in
each Agreement. Hence, until such time, Certificate Owners will only be able
to exercise the rights of Certificateholders indirectly through DTC, Cedelbank
or Euroclear and their participating organizations. See "Description of the
Certificates--Book-Entry Registration" and "--Definitive Certificates."
THE TRUSTS
Trust I and each New Trust will be formed in accordance with the laws of
the State of Delaware pursuant to an Agreement. No Trust will engage in any
business activity other than acquiring and holding Receivables, issuing Series
of Certificates and the related Transferor Certificate, making payments
thereon and engaging in related activities (including, with respect to any
Series, obtaining any Enhancement and entering into an Enhancement agreement
relating thereto). As a consequence, no Trust is expected to have any need for
additional capital resources other than the assets of such Trust and there is
no reasonable potential for such need to develop. Furthermore, no such
additional capital resources will be available.
WACHOVIA'S CREDIT CARD ACTIVITIES
General
With respect to each Series of Certificates, the Receivables conveyed or to
be conveyed to a Trust by the Bank pursuant to the related Agreement have been
or will be generated from transactions made by holders of selected MasterCard
and VISA credit card accounts, including premium accounts and standard
accounts, from the Bank Portfolio. Generally, both premium and standard
accounts undergo the same credit analysis, but premium accounts generally
carry higher credit limits and offer a wider variety of services to the
cardholders. The Bank currently services the Bank Portfolio in the manner
described in the related Prospectus Supplement. Certain data processing and
administrative functions associated with the servicing of the Bank Portfolio
are performed on behalf of the Bank by Wachovia Operational Services
Corporation. See "--Description of Wachovia Operational Services Corporation."
Acquisition and Use of Credit Card Accounts
Wachovia primarily relies on nationally targeted direct marketing in the
acquisition of new credit card accounts. Normally marketing campaigns are
based on product pricing and targeted individuals that are more likely to be
revolvers as opposed to convenience users. Wachovia also targets WBNA's
existing customer base in the states in which WBNA operates through branch
promotions and cross-selling campaigns.
Credit applications are processed by an automated application processing
system that utilizes credit scorecards and specific credit policy rules and
fraud detection criteria. Those applications that are not decisioned by the
automated application processing system are reviewed by a Wachovia credit
analyst who makes a credit and limit assignment decision based on a review of
(i) the information contained in the application, (ii) a credit report
obtained through an independent credit reporting agency, and (iii) an analysis
of the applicant's capacity to repay. For some programs, Wachovia uses a pre-
screening method to acquire new accounts. These applications are also
processed by an automated application processing system that utilizes a credit
report obtained through an independent credit reporting agency and specific
credit policy rules and fraud detection criteria. Those pre-screened
applications that are not decisioned by the automated application processing
system are reviewed by a Wachovia credit analyst who makes a credit and limit
assignment decision based on a review of (i) the information contained in the
application, (ii) the credit report obtained through an independent credit
reporting agency, and (iii) an analysis of the applicant's capacity to repay.
Certain applications, selected on the basis of management reports, are
independently reviewed by loan administration officials to ensure quality and
consistency.
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Credit card accounts that have been purchased by the Transferor were
originally opened using criteria established by institutions other than
Wachovia and may not have been subject to the same level of credit review as
accounts originally established by Wachovia. From time to time the Transferor
may add to the Trust receivables from portfolios of credit card accounts
purchased by the Transferor from other credit card issuers.
Each cardholder is subject to an agreement with Wachovia governing the
terms and conditions of the related MasterCard or VISA account. Pursuant to
each such agreement, Wachovia reserves the right, upon advance notice to the
cardholders, to add or to change any terms, conditions, services or features
of its MasterCard or VISA accounts at any time, including increasing or
decreasing periodic finance charges, other charges or minimum payment terms.
The agreement with each cardholder provides that Wachovia may apply such
changes, when applicable, to current outstanding balances as well as to future
transactions. The cardholder can avoid certain changes in terms by giving
timely written notification to Wachovia and by not using the account.
A cardholder may use the credit card for two types of transactions:
purchases and cash advances. Cardholders make purchases when using the credit
card to buy goods or services. A cash advance is made when a credit card is
used to obtain cash from a financial institution or an automated teller
machine. Cardholders may use special cash advance checks issued by Wachovia to
draw against their MasterCard or VISA credit lines. Cardholders may also draw
against their credit lines issued by Wachovia by transferring balances owed to
other creditors to such accounts.
The Bank has made portfolio acquisitions in the past and such acquisitions
are possible in the future. See "Wachovia and Wachovia Corporation--General."
Prior to acquiring a portfolio, the Bank reviews the historical performance
and seasoning of the portfolio and the policies and practices of the selling
institution, but individual accounts are not requalified by the Bank. There
can be no assurance that accounts so acquired were originated in a manner
consistent with the Bank's policies or that the underwriting and qualification
of such accounts conformed to any given standards. Such accounts and any
accounts acquired in the future may become Additional Accounts provided that,
at such time, they constitute Eligible Accounts. See "The Receivables,"
"Description of the Certificates--Transfer and Assignment of Receivables" and
"--Representations and Warranties."
Description of Wachovia Operational Services Corporation
Credit card processing services performed by Wachovia Operational Services
Corporation ("WOSC"), a wholly-owned subsidiary of the Corporation, include
data processing and network services. WOSC's data network provides an
interface to MasterCard International Incorporated and VISA USA, Inc. for
performing authorizations and funds transfers.
Interchange
Creditors participating in the VISA and MasterCard associations receive
Interchange as partial compensation for taking credit risk, absorbing fraud
losses and funding receivables for a limited period prior to initial billing.
Under the VISA and MasterCard systems, a portion of this Interchange in
connection with cardholder charges for goods and services is passed from banks
which clear the transactions for merchants to credit card issuing banks.
Interchange fees are set annually by MasterCard and VISA and are based on the
number of credit card transactions and the amount charged per transaction. The
Transferor may be required, as described in the related Prospectus Supplement,
to transfer to a Trust a percentage of the Interchange attributed to
cardholder charges for goods and services in the related Accounts. If so
required to be transferred, Interchange arising under the Accounts will be
allocated to the related Certificates of any Series in the manner provided in
the related Prospectus Supplement, and, unless otherwise provided in the
related Prospectus Supplement, will be treated as collections of Finance
Charge Receivables and will be used to pay required monthly payments including
interest on the related Series of Certificates, and, in some cases, to pay all
or a portion of the Servicing Fee to the Servicer.
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THE RECEIVABLES
The Receivables conveyed to each Trust will arise in Accounts selected from
the Bank Portfolio on the basis of criteria set forth in the related Agreement
as applied on the relevant Cut-Off Date and, with respect to Additional
Accounts, as of the related date of their designation (the "Trust Portfolio").
The Transferor will have the right (subject to certain limitations and
conditions set forth in the related Agreement), and in some circumstances will
be obligated, to designate from time to time Additional Accounts and to
transfer to the related Trust all Receivables of such Additional Accounts,
whether such Receivables are then existing or thereafter created, or to
transfer Participations in lieu of such Receivables or in addition thereto.
Any Additional Accounts designated pursuant to an Agreement must be Eligible
Accounts as of the date the Transferor designates such accounts as Additional
Accounts. The Transferor will also have the right to designate Eligible
Accounts to be included automatically as Accounts upon their creation
("Automatic Additional Accounts"), subject to certain limitations set forth in
the Agreement. The Transferor may discontinue the inclusion of Automatic
Additional Accounts at any time, at its sole discretion. Furthermore, pursuant
to each Agreement, the Transferor has the right (subject to certain
limitations and conditions) to designate certain Accounts as Removed Accounts
and to require the Trustee to reconvey all receivables in such Removed
Accounts to the Transferor, whether such Receivables are then existing or
thereafter created. Throughout the term of each Trust, the related Accounts
from which the Receivables arise will be the Accounts designated by the
Transferor on the relevant Cut-Off Date plus any Additional Accounts and
Automatic Additional Accounts minus any Removed Accounts. With respect to each
Series of Certificates, the Transferor will represent and warrant to the
related Trust that, as of the Closing Date and the date Receivables are
conveyed to the Trust, such Receivables meet certain eligibility requirements.
See "Description of the Certificates--Representations and Warranties."
The Prospectus Supplement relating to each Series of Certificates will
provide certain information about the related Trust Portfolio as of the date
specified. Such information will include, but not be limited to, the amount of
Principal Receivables, the amount of Finance Charge Receivables, the range of
principal balances of the Accounts and the average thereof, the range of
credit limits of the Accounts and the average thereof, the range of ages of
the Accounts and the average thereof, the geographic distribution of the
Accounts, the types of Accounts and delinquency statistics relating to the
Accounts.
MATURITY CONSIDERATIONS
For each Series, following the Revolving Period, collections of Principal
Receivables are expected to be distributed to the Certificateholders of such
Series or any specified Class thereof on each specified Distribution Date
during the Controlled Amortization Period or the Principal Amortization
Period, or are expected to be accumulated for payment to Certificateholders of
such Series or any specified Class thereof during an Accumulation Period and
distributed on a Scheduled Payment Date; provided, however, that, if the Rapid
Amortization Period commences, collections of Principal Receivables will be
paid to Certificateholders in the manner described herein and in the related
Prospectus Supplement. The related Prospectus Supplement specifies when the
Controlled Amortization Period, the Principal Amortization Period or an
Accumulation Period, as applicable, will commence, the principal payments
expected or available to be received or accumulated during such Controlled
Amortization Period, Principal Amortization Period or Accumulation Period, or
on the Scheduled Payment Date, as applicable, the manner and priority of
principal accumulations and payments among the Classes of a Series of
Certificates, the payment rate assumptions on which such expected principal
accumulations and payments are based and the Pay Out Events which, if any were
to occur, would lead to the commencement of a Rapid Amortization Period or, if
so specified in the related Prospectus Supplement, a Rapid Accumulation
Period.
USE OF PROCEEDS
Unless otherwise specified in the Related Prospectus Supplement, the net
proceeds from the sale of each Series of Certificates offered hereby will be
paid to the Transferor. The Transferor will use such proceeds for its general
corporate purposes or for such other purpose specified in the Prospectus
Supplement.
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WACHOVIA AND WACHOVIA CORPORATION
General
Wachovia, a wholly-owned subsidiary of the Corporation, is a national
banking association located in New Castle, Delaware which conducts nationwide
consumer lending programs principally comprised of credit card related
activities. WBNA, a wholly-owned subsidiary of the Corporation, is a national
banking association located in Winston-Salem, North Carolina. The Corporation
is a bank holding company registered under the Bank Holding Company Act of
1956, as amended, maintaining dual headquarters in Atlanta, Georgia and
Winston-Salem, North Carolina. The Prospectus Supplement for each Series of
Certificates contains additional information, including financial information,
relating to Wachovia, Wachovia's credit card activities, WBNA and the
Corporation.
Year 2000 Compliance
The change in date to the year 2000 from 1999 will cause data recognition
problems in computers, software and facility operations dependent on computer
chip devices due to programming standards that historically limited data date
fields to two digits. In late 1995, the Corporation initiated a formal
evaluation of Year 2000 issues, establishing in the early months of 1996 a
full-time project team to assess and address both internal and external risks
associated with the change in date event. The project team is in the latter
stages of executing a Year 2000 readiness plan consisting of five phases:
problem awareness; identification of affected systems, functions and
facilities; conversion or replacement of identified areas to Year 2000
compliant standards; testing; and implementation.
The Corporation's readiness plan encompasses both information technology
systems and computer chip embedded functions, such as those operating
facilities including elevators, security systems and building heating and
cooling. In 1996, the Corporation completed its awareness and identification
phases, extending and completing the processes in 1997 and 1998 for recent
merger partners. As of December 31, 1998, virtually all of the Corporation's
information technology systems had been converted. While regulatory guidelines
require conversion only of mission critical systems, the Corporation has
worked to convert all information technology systems. For computer chip
embedded functions, the Corporation has replaced and tested noncompliant
functions essential to business operations.
In-house testing of information technology systems currently is underway,
with testing completed on approximately 81 percent of all applications at
year-end 1998. Management expects to complete testing of all of its
information systems by March 31, 1999. Testing is done in both a 21st century
and 20th century date environment before systems are returned to production to
ensure data accuracy and consistency. All exceptions to testing results are
resolved before further testing is permitted. Management has chosen to
implement converted systems back into production as systems are tested to
permit greater flexibility in the event of future system flaws or failures.
The percentage of systems implemented, therefore, closely approximates the
percentage tested.
The Corporation also is working to assess and address Year 2000 readiness
on the part of external entities, particularly critical vendors and
significant credit customers. Identification and monitoring of external
entities began in 1996 and includes surveys with follow-up reviews and
contacts. Substantially all of the Corporation's vendors have responded to
management's surveys regarding Year 2000 readiness, with approximately 73
percent compliant as of December 31, 1998. The project team is continuing to
monitor the progress of remaining noncompliant vendors as well as the status
of large corporate borrowers identified as potentially at risk. The
Corporation will conduct testing with external entities in 1999 as they become
Year 2000 ready, with some limited testing having occurred in 1998.
Management estimates that total Year 2000 project costs will be
approximately $80 million, with $66 million having been spent through December
31, 1998 including $28 million in 1998. The total projected cost is up from
$55 million estimated earlier due to additional expenditures for internal
testing. The Corporation's remaining Year 2000 project costs are not expected
to have a material impact on the Corporation's results of operations,
liquidity or capital resources.
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The Corporation faces a number of risks related to the year 2000 date
change event including project management risks, legal risks and financial
risks. Project management risks refer primarily to the failure to adequately
assess Year 2000 planning and resource needs, resulting in under- or over-
allotment of resources assigned to complete the project work, missed deadlines
and estimation errors. Legal risks include the failure to meet contractual
service agreements, leading to possible punitive actions including those of a
regulatory nature. Financial risks concern the possibility of lost revenues,
asset quality deterioration or even business failure. The Corporation
conducted a project management risk assessment in early 1997 and is in the
process of addressing its legal and financial risks.
Management of the date change event entails additional risks separate from
those of project management. Major risks associated with the date change event
include a shutdown of voice and data communication systems due to failure by
switching systems, satellites or telephone companies; excessive cash
withdrawal activity; cash couriers delayed or not available; automated teller
machine ("ATM") failures; problems with international accounts or offices,
including inaccurate or delayed information or inaccessibility to account
data; and government offices or facilities not opening or operating.
The Corporation has identified 60 risks associated with the date change
event and is in the process of finalizing formal contingency plans for each
major risk. Management views contingency planning as part of an overall
strategy for managing the date change event and post-event risks and considers
pre-implementation mitigating actions as critical components to successful
contingency planning. In the event of a voice and data communication system
shutdown, contingency plans include deploying cellular and field phones to
communicate between established command posts. To reduce expected cash
withdrawal demands while simultaneously preparing for higher fund withdrawal
activity, the Corporation is sponsoring public awareness programs on
appropriate cash reserve levels, applying for increased borrowing limits from
the Federal Reserve, and broadening its regular liquidity management reviews.
Standing agreements with cash courier services are being reviewed to identify
and resolve potential courier service problems prior to the date change event.
To minimize ATM failures, the Corporation has upgraded its entire network
of ATMs, including their primary and backup computer processors. Alternate
cash access plans include using existing communication channels to direct
customers to working ATMs in the event of localized ATM failures and extending
branch office hours where needed. To reduce potential problems in
international offices, the Corporation has converted and is in the process of
testing the information systems of its Sao Paulo, Brazil, and London, England,
offices. Separate contingency plans have been developed by each foreign office
to assist independent operations. In addition to its contingency planning,
management has mapped all information systems to its core business processes
as part of its preimplementation mitigating action plan. This will enable the
Corporation to identify and localize affected business processes should data
information problems occur during the changeover to calendar year 2000 and in
the time period immediately following.
The Corporation believes the actions it is taking should reduce the risks
posed by Year 2000 challenges to its own systems. Management recognizes that
date change event problems will occur with external entities, impacting the
Corporation due to the interrelatedness of its business.
DESCRIPTION OF THE CERTIFICATES
The Certificates will be issued in Series. Each Series will represent an
interest in the specified Trust other than the interests represented by any
other Series of Certificates issued by such Trust (which may include Series
offered pursuant to this Prospectus) and the Transferor Certificate. Each
Series will be issued pursuant to an Agreement entered into by the Bank and
the Trustee named in the related Prospectus Supplement, a copy of the form of
which is filed as an exhibit to the Registration Statement of which this
Prospectus is a part, and a Series Supplement to the Agreement. The Prospectus
Supplement for each Series describes any provisions of the particular
Agreement relating to such Series which may differ materially from the
Agreement filed as an exhibit to the Registration Statement. The following
summaries describe certain provisions common to each Series of Certificates.
The summaries do not purport to be complete and are subject to, and are
qualified in their entirety by reference to, all of the provisions of the
related Agreement and Series Supplement.
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General
The Certificates of each Series will represent undivided interests in
certain assets of the related Trust, including the right to the applicable
Investor Percentage of all cardholder payments on the Receivables in such
Trust. The Investor Interest for each Series of Certificates on any date will
be equal to the initial Investor Interest as of the related Closing Date for
such Series (increased by the principal balance of any Certificates of such
Series issued after the Closing Date for such Series) minus the amount of
principal paid to the related Certificateholders prior to such date and minus
the amount of unreimbursed Investor Charge-Offs with respect to such
Certificates prior to such date. If so specified in the Prospectus Supplement
relating to any Series of Certificates, under certain circumstances the
Investor Interest may be further adjusted by the amount of principal allocated
to Certificateholders, the funds on deposit in any specified account, and any
other amount specified in the related Prospectus Supplement.
Each Series of Certificates may consist of one or more Classes, one or more
of which may be Senior Certificates and one or more of which may be
Subordinated Certificates. Each Class of a Series will evidence the right to
receive a specified portion of each distribution of principal or interest or
both. The Investor Interest with respect to a Series with more than one Class
will be allocated among the Classes as described in the related Prospectus
Supplement. The Certificates of a Class may differ from Certificates of other
Classes of the same Series in, among other things, the amounts allocated to
principal payments, maturity date, Certificate Rate and the availability of
Enhancement.
For each Series of Certificates, payments of interest and principal will be
made on Distribution Dates specified in the related Prospectus Supplement to
Certificateholders in whose names the Certificates were registered on the
record dates (each, a "Record Date") specified in the related Prospectus
Supplement. Interest will be distributed to Certificateholders in the amounts,
for the periods and on the dates specified in the related Prospectus
Supplement.
For each Series of Certificates, the Transferor initially will own the
Transferor Certificate. The Transferor Certificate will represent the
undivided interest in each Trust not represented by the Certificates issued
and outstanding under such Trust or the rights, if any, of any Credit
Enhancement Providers to receive payments from each Trust. The holder of the
Transferor Certificate will have the right to a percentage (the "Transferor
Percentage") of all cardholder payments from the Receivables in the Trust. If
provided in the related Agreement, the Transferor Certificate may be
transferred in whole or in part subject to the limitations and conditions set
forth therein. The ability to transfer the Transferor Certificate or an
interest therein is intended to allow the Transferor to assign a portion of
its interest in a Trust and property of such Trust (including the Receivables)
to another entity. The Transferor intends to transfer an interest in the
Transferor Certificate only to its affiliates in privately negotiated
transactions pursuant to a contract between the Transferor and any such
affiliate. Certificateholders will not incur any costs, direct or indirect,
associated with any such transfer. On the initial Closing Date for Trust I,
the Transferor sold a participation interest in the Trust I Transferor
Certificate (the "Transferor Participation") to its affiliate, Wachovia Bank,
N.A. ("WBNA"), a wholly-owned subsidiary of the Corporation. Such interest
represents the right to receive 95% of the amounts payable to the Transferor
as holder of the Transferor Certificate. See "--Certain Matters Regarding the
Transferor and the Servicer."
Unless otherwise specified in the related Prospectus Supplement, during the
Revolving Period, the amount of the Investor Interest with respect to each
Series of Certificates will remain constant except under certain limited
circumstances. See "--Defaulted Receivables; Rebates and Fraudulent Charges;
Investor Charge-Offs." The amount of Principal Receivables in each Trust,
however, will vary each day as new Principal Receivables are created and
others are paid. The amount of the Transferor Amount will fluctuate each day,
to reflect the changes in the amount of the Principal Receivables in the Trust
(and amounts, if any, on deposit in the Excess Funding Account). When a Series
is amortizing, the Investor Interest of such Series will decline as customer
payments of Principal Receivables are collected and distributed to or
accumulated for distribution to the Certificateholders. As a result, the
Transferor Amount will generally increase to reflect reductions in the
Investor Interest for such Series and will also change to reflect the
variations in the amount of Principal Receivables in the related Trust. The
Transferor Amount in each Trust may also be reduced as the result of an
Exchange. See "--Exchanges."
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Unless otherwise specified in the related Prospectus Supplement,
Certificates of each Series initially will be represented by certificates
registered in the name of the nominee of DTC (together with any successor
depository selected by the Transferor, the "Depository"), except as set forth
below. Unless otherwise specified in the related Prospectus Supplement, with
respect to each Series of Certificates, beneficial interests in the
Certificates will be available for purchase in minimum denominations of $1,000
and integral multiples thereof in book-entry form only. The Transferor has
been informed by DTC that DTC's nominee will be Cede. Accordingly, Cede is
expected to be the holder of record of each Series of Certificates. No
Certificate Owner acquiring an interest in the Certificates will be entitled
to receive a certificate representing such person's interest in the
Certificates. Unless and until Definitive Certificates are issued for any
Series under the limited circumstances described herein, all references herein
to actions by Certificateholders shall refer to actions taken by DTC upon
instructions from DTC Participants (as defined below), and all references
herein to distributions, notices, reports and statements to Certificateholders
shall refer to distributions, notices, reports and statements to DTC or Cede,
as the registered holder of the Certificates, as the case may be, for
distribution to Certificate Owners in accordance with DTC procedures. See "--
Book-Entry Registration" and "--Definitive Certificates."
If so specified in the Prospectus Supplement relating to a Series,
application will be made to list the Certificates of such Series, or all or a
portion of any Class thereof, on the Luxembourg Stock Exchange or any other
specified exchange.
Book-Entry Registration
Unless otherwise specified in the related Prospectus Supplement, with
respect to each Series of Certificates in book-entry form, Certificateholders
may hold their Certificates through DTC (in the United States) or Cedelbank or
Euroclear (in Europe) which in turn hold through DTC, if they are participants
of such systems, or indirectly through organizations that are participants in
such systems.
Cede, as nominee for DTC, will hold the global Certificates. Cedelbank and
Euroclear will hold omnibus positions on behalf of the Cedelbank Participants
and the Euroclear Participants, respectively, through customers' securities
accounts in Cedelbank's and Euroclear's names on the books of their respective
depositories (collectively, the "Depositories") which in turn will hold such
positions in customers' securities accounts in the Depositories' names on the
books of DTC.
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law,
a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). DTC holds securities
that its participating organizations ("DTC Participants") deposit with DTC.
DTC also facilitates the clearance and settlement among DTC Participants of
securities transactions, such as transfers and pledges, in deposited
securities through electronic book-entry changes in DTC Participants'
accounts, thereby eliminating the need for physical movement of securities
certificates. DTC Participants include securities brokers and dealers, banks,
trust companies and clearing corporations and may include certain other
organizations. DTC is owned by a number of its DTC Participants and the New
York Stock Exchange, Inc., the American Stock Exchange, Inc. and the National
Association of Securities Dealers, Inc. Indirect access to the DTC system is
also available to others such as securities brokers and dealers, banks, and
trust companies that clear through or maintain a custodial relationship with a
DTC Participant, either directly or indirectly ("Indirect Participants"). The
rules applicable to DTC and DTC Participants are on file with the Securities
and Exchange Commission (the "SEC").
DTC management is aware that some computer applications and systems used
for processing data were written using two digits rather than four to define
the applicable year, and therefore may not recognize a date using "00" as the
year 2000. This could result in the inability of these systems to properly
process transactions with dates in the year 2000 and thereafter. DTC has
developed and is implementing a program to address this problem so that its
applications and systems as the same relate to the timely payment of
distributions (including
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principal and interest payments) to security holders, book-entry deliveries
and settlement of trades within DTC continue to function properly. This
program includes a technical assessment and a remediation plan, each of which
is complete. Additionally, DTC plans to implement a testing phase of this
program which is expected to be completed within appropriate time frames.
In addition, DTC is contacting (and will continue to contact) third party
vendors that provide services to DTC to determine the extent of their year
2000 compliance, and DTC will develop contingency plans as it deems
appropriate to address failures in year 2000 compliance on the part of third
party vendors. However, there can be no assurance that the systems of third
party vendors will be timely converted and will not adversely affect the
proper functioning of DTC's services.
The information set forth in the preceding two paragraphs has been provided
by DTC for informational purposes only and is not intended to serve as a
representation, warranty or contract modification of any kind. The Transferor
makes no representations as to the accuracy or completeness of such
information.
Transfers between DTC Participants will occur in accordance with DTC rules.
Transfers between Cedelbank Customers and Euroclear Participants will occur in
the ordinary way in accordance with their applicable rules and operating
procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC in the United States, on the one hand, and directly or indirectly
through Cedelbank Customers or Euroclear Participants, on the other, will be
effected in DTC in accordance with DTC rules on behalf of the relevant
European international clearing system by its Depository; however, such cross-
market transactions will require delivery of instructions to the relevant
European international clearing system by the counterparty in such system in
accordance with its rules and procedures and within its established deadlines
(European time). The relevant European international clearing system will, if
the transaction meets its settlement requirements, deliver instructions to its
Depository to take action to effect final settlement on its behalf by
delivering or receiving securities in DTC, and making or receiving payment in
accordance with normal procedures for same-day funds settlement applicable to
DTC. Cedelbank Customers and Euroclear Participants may not deliver
instructions directly to the Depositories.
Because of time-zone differences, credits of securities in Cedelbank or
Euroclear as a result of a transaction with a DTC Participant will be made
during the subsequent securities settlement processing, dated the business day
following the DTC settlement date, and such credits or any transactions in
such securities settled during such processing will be reported to the
relevant Cedelbank Customer or Euroclear Participant on such business day.
Cash received in Cedelbank or Euroclear as a result of sales of securities by
or through a Cedelbank Customer or a Euroclear Participant will be received
with value on the DTC settlement date but will be available in the relevant
Cedelbank or Euroclear cash account only as of the business day following
settlement in DTC.
Certificate Owners that are not DTC Participants or Indirect Participants
but desire to purchase, sell or otherwise transfer ownership of, or other
interest in, Certificates may do so only through DTC Participants and Indirect
Participants. In addition, Certificate Owners will receive all distributions
of principal and interest on the Certificates from the Trustee through DTC
Participants who in turn will receive them from DTC. Under a book-entry
format, Certificate Owners may experience some delay in their receipt of
payments, since such payments will be forwarded by the Trustee to Cede, as
nominee for DTC. DTC will forward such payments to DTC Participants which
thereafter will forward them to Indirect Participants or Certificate Owners.
It is anticipated that the only ("Certificateholders") of Certificates in
book-entry form will be Cede, as nominee of DTC. Certificate Owners will not
be recognized by the Trustee as Certificateholders, as such term is used in
the Agreement, and Certificate Owners will only be permitted to exercise the
rights of Certificateholders indirectly through DTC Participants who in turn
will exercise the rights of Certificateholders through DTC.
Under the rules, regulations and procedures creating and affecting DTC and
its operations, DTC is required to make book-entry transfers among DTC
Participants on whose behalf it acts with respect to the Certificates and is
required to receive and transmit distributions of principal and interest on
the Certificates. DTC Participants
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and Indirect Participants with which Certificate Owners have accounts with
respect to the Certificates similarly are required to make book-entry
transfers and receive and transmit such payments on behalf of their respective
Certificate Owners. Accordingly, although Certificate Owners will not possess
Certificates, Certificate Owners will receive payments and will be able to
transfer their interests.
Because DTC can only act on behalf of DTC Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of a
Certificate Owner to pledge Certificates to persons or entities that do not
participate in the DTC system, or otherwise take actions in respect of such
Certificates, may be limited due to the lack of a physical certificate for
such Certificates.
DTC has advised the Transferor that it will take any action permitted to be
taken by a Certificateholder under the Agreement only at the direction of one
or more DTC Participants to whose account with DTC the Certificates are
credited. Additionally, DTC has advised the Transferor that it will take such
actions with respect to specified percentages of the Investor Interest only at
the direction of and on behalf of DTC Participants whose holdings include
undivided interests that satisfy such specified percentages. DTC may take
conflicting actions with respect to other undivided interests to the extent
that such actions are taken on behalf of DTC Participants whose holdings
include such undivided interests.
Cedelbank, societe anonyme ("Cedelbank") is incorporated under the laws of
Luxembourg as a professional depository. Cedelbank holds securities for its
participating organizations ("Cedelbank Customers") and facilitates the
clearance and settlement of securities transactions between Cedelbank
Customers through electronic book-entry changes in accounts of Cedelbank
Customers, thereby eliminating the need for physical movement of securities.
Transactions may be settled in Cedelbank in any of 36 currencies, including
United States dollars. Cedelbank provides to its Cedelbank Customers, among
other things, services for safekeeping, administration, clearance and
settlement of internationally traded securities and securities lending and
borrowing. Cedelbank deals with domestic securities markets in over 30
countries through established depository and custodial relationships.
Cedelbank has established an electronic bridge with Morgan Guaranty Trust as
the Operator of the Euroclear System ("MGT/EOC") in Brussels to facilitate
settlement of trades between Cedelbank and MGT/EOC. Cedelbank currently
accepts over 110,000 securities issues on its books. As a professional
depository, Cedelbank is subject to regulation by the Luxembourg Commission
for the Supervision of the Financial Sector, which supervises Luxembourg
banks. Cedelbank Customers are recognized financial institutions around the
world, including underwriters, securities brokers and dealers, banks, trust
companies, clearing corporations and certain other organizations and may
include the underwriters of any Series of Certificates. Cedelbank Customers in
the United States are limited to securities brokers and dealers and banks.
Currently, Cedelbank has approximately 2,000 customers located in over 80
countries, including all major European countries, Canada and the United
States. Indirect access to Cedelbank is also available to others, such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a Cedelbank Customer, either directly or
indirectly.
The Euroclear System (the "Euroclear System") was created in 1968 to hold
securities for participants of the Euroclear System ("Euroclear Participants")
and to clear and settle transactions between Euroclear Participants through
simultaneous electronic book-entry delivery against payment, thereby
eliminating the need for physical movement of certificates and any risk from
lack of simultaneous transfers of securities and cash. Transactions may now be
settled in any of 34 currencies, including United States dollars. The
Euroclear System includes various other services, including securities lending
and borrowing and interfaces with domestic markets in several countries
generally similar to the arrangements for cross-market transfers with DTC
described above. The Euroclear System is operated by Morgan Guaranty Trust
Company of New York's Brussels, Belgium office (the "Euroclear Operator" or
"Euroclear"), under contract with Euroclear Clearance System, S.C., a Belgian
cooperative corporation (the "Cooperative"). All operations are conducted by
the Euroclear Operator, and all Euroclear securities clearance accounts and
Euroclear cash accounts are accounts with the Euroclear Operator, not the
Cooperative. The Cooperative establishes policy for the Euroclear System on
behalf of Euroclear Participants. Euroclear Participants include banks
(including central banks), securities brokers and dealers and
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other professional financial intermediaries and may include the underwriters
of any Series of Certificates. Indirect access to the Euroclear System is also
available to other firms that clear through or maintain a custodial
relationship with a Euroclear Participant, either directly or indirectly.
The Euroclear Operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such, it
is regulated and examined by the Board of Governors of the Federal Reserve
System and the New York State Banking Department, as well as the Belgian
Banking Commission.
Securities clearance accounts and cash accounts with the Euroclear Operator
are governed by the Terms and Conditions Governing Use of Euroclear and the
related Operating Procedures of the Euroclear System and applicable Belgian
law (collectively, the "Terms and Conditions"). The Terms and Conditions
govern transfers of securities and cash within the Euroclear System,
withdrawal of securities and cash from the Euroclear System, and receipts of
payments with respect to securities in the Euroclear System. All securities in
the Euroclear System are held on a fungible basis without attribution of
specific certificates to specific securities clearance accounts. The Euroclear
Operator acts under the Terms and Conditions only on behalf of Euroclear
Participants and has no record of or relationship with persons holding through
Euroclear Participants.
Distributions with respect to Certificates held through Cedelbank or
Euroclear will be credited to the cash accounts of Cedelbank Customers or
Euroclear Participants in accordance with the relevant system's rules and
procedures, to the extent received by its Depository. Such distributions will
be subject to tax reporting in accordance with relevant United States tax laws
and regulations. See "Certain U.S. Federal Income Tax Consequences." Cedelbank
or the Euroclear Operator, as the case may be, will take any other action
permitted to be taken by a Certificateholder under the Agreement on behalf of
a Cedelbank Customer or Euroclear Participant only in accordance with its
relevant rules and procedures and subject to its Depository's ability to
effect such actions on its behalf through DTC.
Although DTC, Cedelbank and Euroclear have agreed to the foregoing
procedures in order to facilitate transfers of Certificates among participants
of DTC, Cedelbank and Euroclear, they are under no obligation to perform or
continue to perform such procedures and such procedures may be discontinued at
any time.
Definitive Certificates
Unless otherwise specified in the related Prospectus Supplement, the
Certificates of each Series will be issued as Definitive Certificates in fully
registered, certificated form to Certificate Owners or their nominees rather
than to DTC or its nominee, only if (i) the Transferor advises the Trustee for
such Series in writing that DTC is no longer willing or able to discharge
properly its responsibilities as Depository with respect to such Series of
Certificates, and the Trustee or the Transferor is unable to locate a
qualified successor, (ii) the Transferor, at its option, advises the Trustee
in writing that it elects to terminate the book-entry system through DTC or
(iii) after the occurrence of a Servicer Default, Certificate Owners
representing not less than 50% (or such other percentage specified in the
related Prospectus Supplement) of the Investor Interest advise the Trustee and
DTC through DTC Participants in writing that the continuation of a book-entry
system through DTC (or a successor thereto) is no longer in the best interest
of the Certificate Owners.
Upon the occurrence of any of the events described in the immediately
preceding paragraph, DTC is required to notify all Participants of the
availability through DTC of Definitive Certificates. Upon surrender by DTC of
the definitive certificate representing the Certificates and instructions for
reregistration, the Trustee will issue the Certificates as Definitive
Certificates, and thereafter the Trustee will recognize the holders of such
Definitive Certificates as holders under the Agreement ("Holders").
Distribution of principal and interest on the Certificates will be made by
the Trustee directly to Holders of Definitive Certificates in accordance with
the procedures set forth herein and in the Agreement. Interest payments and
any principal payments on each Distribution Date will be made to Holders in
whose names the Definitive Certificates were registered at the close of
business on the related Record Date. Distributions will be made by
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check mailed to the address of such Holder as it appears on the register
maintained by the Trustee or, if such Holder holds more than an aggregate
principal amount of such Definitive Certificates specified in the related
Series Supplement, by wire transfer to such Holder's account. The final
payment on any Certificate (whether Definitive Certificates or the
Certificates registered in the name of Cede representing the Certificates),
will be made only upon presentation and surrender of such Certificate at the
office or agency specified in the notice of final distribution to
Certificateholders. The Trustee will provide such notice to registered
Certificateholders not later than the fifth day of the month of such final
distributions.
Definitive Certificates will be transferable and exchangeable at the
offices of the Transfer Agent and Registrar, which shall initially be the
Trustee. No service charge will be imposed for any registration of transfer or
exchange, but the Transfer Agent and Registrar may require payment of a sum
sufficient to cover any tax or other governmental charge imposed in connection
therewith. The Transfer Agent and Registrar shall not be required to register
the transfer or exchange of Definitive Certificates for a period of fifteen
days preceding the due date for any payment with respect to such Definitive
Certificates.
Interest Payments
For each Series of Certificates and Class thereof, interest will accrue
from the date specified in the applicable Prospectus Supplement on the
applicable Investor Interest at the applicable Certificate Rate, which may be
a fixed, floating or other type of rate as specified in the related Prospectus
Supplement. Interest will be distributed to Certificateholders on the
Distribution Dates specified in the related Prospectus Supplement. Interest
payments on any Distribution Date will be funded from collections of Finance
Charge Receivables allocated to the Investor Interest during the preceding
Monthly Period or Periods and may be funded from certain investment earnings
on funds held in accounts of the related Trust and from any applicable Credit
Enhancement, if necessary, or certain other amounts as specified in the
related Prospectus Supplement. If the Distribution Dates for payment of
interest for a Series or Class occur less frequently than monthly, such
collections or other amounts (or the portion thereof allocable to such Class)
may be deposited in one or more trust accounts (each, an "Interest Funding
Account") pending distribution to the Certificateholders of such Series or
Class, as described in the related Prospectus Supplement. If a Series has more
than one Class of Certificates, each such Class may have a separate Interest
Funding Account. The Prospectus Supplement relating to each Series of
Certificates describes the amounts and sources of interest payments to be
made; the Certificate Rate for each Class thereof; for a Series or Class
thereof bearing interest at a floating Certificate Rate, the initial
Certificate Rate, the dates and the manner for determining subsequent
Certificate Rates, and the formula, index or other method by which such
Certificate Rates are determined and any limitations on any such Certificate
Rate.
Principal Payments
Except in the circumstances specified in the related Prospectus Supplement,
during the Revolving Period for each Series of Certificates (which begins on
the related Closing Date and ends on the day before an Amortization Period or
Accumulation Period begins), no principal payments will be made to the
Certificateholders of such Series. During the Controlled Amortization Period
or Principal Amortization Period, as applicable, which will be scheduled to
begin on the date specified in, or determined in the manner specified in, the
related Prospectus Supplement, and during the Rapid Amortization Period, which
will begin upon the occurrence of a Pay Out Event or, if so specified in the
Prospectus Supplement, following the Rapid Accumulation Period, principal will
be paid to the Certificateholders in the amounts and on Distribution Dates
specified in the related Prospectus Supplement. During an Accumulation Period,
principal will be accumulated in a Principal Funding Account for later
distribution to Certificateholders on the Scheduled Payment Date in the
amounts specified in the related Prospectus Supplement. Principal payments for
any Series or Class thereof will be funded from collections of Principal
Receivables received during the related Monthly Period or Periods as specified
in the related Prospectus Supplement and allocated to such Series or Class, in
certain circumstances from amounts on deposit in the Excess Funding Account
and from certain other sources specified in the related Prospectus Supplement.
In the case of a Series with more than one Class of Certificates, the
Certificateholders of one or more Classes may receive payments of principal at
different times. The related Prospectus Supplement describes the manner,
timing and priority of payments of principal to Certificateholders of each
Class.
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Funds on deposit in any Principal Funding Account applicable to a Series
may be subject to a guaranteed rate agreement or investment contract or other
arrangement specified in the related Prospectus Supplement intended to assure
a minimum rate of return on the investment of such funds. In order to enhance
the likelihood of the payment in full of the principal amount of a Series of
Certificates or Class thereof at the end of an Accumulation Period, such
Series of Certificates or Class thereof may be subject to a principal payment
guaranty or other similar arrangement specified in the related Prospectus
Supplement.
Transfer and Assignment of Receivables
With respect to Trust I and with respect to any New Trust, the Transferor
will transfer and assign at the time of formation of each such Trust all of
its right, title and interest in and to the Receivables in the related
Accounts and all Receivables thereafter created in such Accounts, except for
the Interest of the Transferor as holder of the Transferor Certificate.
In connection with each transfer of Receivables to a Trust, the Transferor
will indicate in its computer files that the related Receivables have been
conveyed to such Trust. In addition, the Transferor will provide to the
Trustee, with respect to Trust I and each New Trust, computer files or
microfiche lists, containing a true and complete list showing each related
Account, identified by account number and by total outstanding balance on the
date of transfer. The Transferor will not deliver to the related Trustee any
other records or agreements relating to the Accounts or the Receivables,
except in connection with additions or removals of Accounts. Except as stated
above, the records and agreements relating to the Accounts and the Receivables
maintained by the Transferor or the Servicer are not and will not be
segregated by the Transferor or the Servicer from other documents and
agreements relating to other credit card accounts and receivables and are not
and will not be stamped or marked to reflect the transfer of the Receivables
to a Trust, but the computer records of the Transferor are and will be
required to be marked to evidence such transfer. The Transferor will file with
respect to Trust I and each New Trust Uniform Commercial Code financing
statements with respect to the Receivables meeting the requirements of
Delaware state law. See "Risk Factors--Certain Legal Aspects" and "Certain
Legal Aspects of the Receivables--Transferor of Receivables."
Exchanges
For each Series of Certificates, the related Agreement will provide for the
related Trustee to issue two types of certificates: (i) one or more Series of
Certificates that are transferable and have the characteristics described
below and (ii) the Transferor Certificate, a certificate which evidences the
Transferor's interest in the related Trust (the "Transferor Interest"), which
initially will be held by the Transferor and will be transferable only as
provided in the related Agreement. The related Agreement will also provide
that, pursuant to any one or more Series Supplements, the holder of the
Transferor Certificate may tender such Transferor Certificate, or the
Transferor Certificate and the Certificates evidencing any Series of
Certificates issued by such Trust, to the related Trustee in exchange for one
or more new Series (which may include Series offered pursuant to this
Prospectus) and a reissued Transferor Certificate. This exchange feature
permits the creation of new Series to be issued from an already existing
trust. Pursuant to each Agreement, the holder of the Transferor Certificate
may define, with respect to any newly issued Series, all Principal Terms of
such new Series. Upon the issuance of an additional Series of Certificates,
none of the Transferor, the Servicer, the Trustee or the related Trust will be
required or will intend to obtain the consent of any Certificateholder of any
other Series previously issued by such Trust. However, as a condition of an
Exchange, the holder of the Transferor Certificate will deliver to the Trustee
written confirmation that the Exchange will not result in the reduction or
withdrawal by any Rating Agency of its rating of any outstanding Series. The
Transferor may offer any Series under a Disclosure Document in offerings
pursuant to this Prospectus or in transactions either registered under the
Securities Act or exempt from registration thereunder directly, through one or
more other underwriters or placement agents, in fixed-price offerings or in
negotiated transactions or otherwise.
The holder of the Transferor Certificate may perform Exchanges and define
Principal Terms such that each Series issued under a Trust has a period during
which amortization or accumulation of the principal amount thereof is intended
to occur which may have a different length and begin on a different date than
such period for
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any other Series. Further, one or more Series may be in their amortization or
accumulation periods while other Series are not. Moreover, each Series may
have the benefit of a Credit Enhancement which is available only to such
Series. Under the related Agreement, the Trustee shall hold any such form of
Credit Enhancement only on behalf of the Series to which it relates. The
holder of the Transferor Certificate may deliver a different form of Credit
Enhancement agreement with respect to any Series. The holder of the Transferor
Certificate may specify different certificate rates and monthly servicing fees
with respect to each Series (or a particular Class within such Series). The
holder of the Transferor Certificate will also have the option under the
related Agreement to vary between Series the terms upon which a Series (or a
particular Class within such Series) may be repurchased by the Transferor or
remarketed to other investors. There will be no limit to the number of
Exchanges that may be performed under a related Agreement.
An Exchange may only occur upon the satisfaction of certain conditions
provided in the related Agreement. Under each Agreement, the holder of the
Transferor Certificate may perform an Exchange by notifying the Trustee at
least five days in advance of the date upon which the Exchange is to occur
stating the Series to be issued on the date of the Exchange and, with respect
to each such Series (and, if applicable, each Class thereof): (i) its initial
principal amount (or method for calculating such amount), (ii) its certificate
rate (or method of calculating such rate) and (iii) the "Credit Enhancement
Provider," if any, which is expected to provide support with respect to it.
Each Agreement will provide that on the date of the Exchange the Trustee will
authenticate any such Series only upon delivery to it of the following, among
others, (i) a Series Supplement specifying the principal terms of such Series
(the "Principal Terms"), (ii) (a) an opinion of counsel to the effect that,
unless otherwise stated in the related Series Supplement, the certificates of
such Series will be characterized as indebtedness for Federal income tax
purposes and (b) an opinion of counsel to the effect that, for federal income
tax purposes, (1) such issuance will not adversely affect the Federal income
tax characterization as debt of Certificates of any outstanding Series or
Class that were characterized as debt at the time of their issuance,
(2) following such issuance the Trust will not be deemed to be an association
(or publicly traded partnership) taxable as a corporation for Federal income
tax purposes and (3) such issuance will not cause or constitute an event in
which gain or loss would be recognized by any Certificateholder (an opinion of
counsel with respect to any matter to the effect referred to in clause (b)
with respect to any action is referred to herein as a "Tax Opinion"), (iii) if
required by the related Series Supplement, the form of Credit Enhancement,
(iv) if Credit Enhancement is required by the Series Supplement, an
appropriate Credit Enhancement agreement executed by the Transferor and the
issuer of the Credit Enhancement, (v) written confirmation from each Rating
Agency that the Exchange will not result in such Rating Agency's reducing or
withdrawing its rating on any then outstanding Series rated by it, (vi) an
officer's certificate of the Transferor to the effect that after giving effect
to the Exchange the Transferor would not be required to add Additional
Accounts pursuant to the related Agreement and the Transferor Amount would be
at least equal to the Minimum Transferor Amount and (vii) the existing
Transferor Certificate and, if applicable, the certificates representing the
Series to be exchanged. Upon satisfaction of such conditions, the Trustee will
cancel the existing Transferor Certificate and the certificates of the
exchanged Series, if applicable, and authenticate the new Series and a new
Transferor Certificate.
Representations and Warranties
The Transferor will make in the Agreement and each New Agreement certain
representations and warranties to the Trust to the effect that, among other
things, (a) as of the Closing Date, the Transferor was duly incorporated and
in good standing and that it has the authority to consummate the transactions
contemplated by the related Agreement and (b) as of the relevant Cut-Off Date
(or as of the date of the designation of Additional Accounts or the creation
of Automatic Additional Accounts), each Account was an Eligible Account (as
defined below). If so provided in the related Prospectus Supplement, if (i)
any of these representations and warranties proves to have been incorrect in
any material respect when made, and continues to be incorrect for 60 days
after notice to the Transferor by the related Trustee or to the Transferor and
the related Trustee by the Certificateholders holding more than 50% of the
Investor Interest of the related Series, and (ii) as a result the interests of
the Certificateholders are materially and adversely affected, and continue to
be materially and adversely affected during such period, then the Trustee or
Certificateholders holding more than 50% of the
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Investor Interest may give notice to the Transferor (and to the related
Trustee in the latter instance) declaring that a Pay Out Event has occurred,
thereby commencing the Rapid Amortization Period or, if so specified in the
related Prospectus Supplement, the Rapid Accumulation Period.
The Transferor will make in the Agreement and each New Agreement
representations and warranties to the related Trust relating to the
Receivables in such Trust to the effect, among other things, that (a) as of
the Closing Date of the initial Series of Certificates issued by such Trust,
each of the Receivables then existing is an Eligible Receivable (as defined
below) and (b) as of the date of creation of any new Receivable, such
Receivable is an Eligible Receivable and the representation and warranty set
forth in clause (b) in the immediately following paragraph is true and correct
with respect to such Receivable. In the event (i) of a breach of any
representation and warranty set forth in this paragraph, within 60 days, or
such longer period as may be agreed to by the Trustee, of the earlier to occur
of the discovery of such breach by the Transferor or Servicer or receipt by
the Transferor of written notice of such breach given by the Trustee, or, with
respect to certain breaches relating to prior liens, immediately upon the
earlier to occur of such discovery or notice and (ii) that as a result of such
breach, the Receivables in the related Accounts are charged off as
uncollectible, the Trust's rights in, to or under the Receivables or its
proceeds are impaired or the proceeds of such Receivables are not available
for any reason to the Trust free and clear of any lien, the Transferor shall
accept reassignment of each Principal Receivable as to which such breach
relates (an "Ineligible Receivable") on the terms and conditions set forth
below; provided, however, that no such reassignment shall be required to be
made with respect to such Ineligible Receivable if, on any day within the
applicable period (or such longer period as may be agreed to by the Trustee),
the representations and warranties with respect to such Ineligible Receivable
shall then be true and correct in all material respects. The Transferor shall
accept reassignment of each such Ineligible Receivable by directing the
Servicer to deduct the amount of each such Ineligible Receivable from the
aggregate amount of Principal Receivables used to calculate the Transferor
Amount. In the event that the exclusion of an Ineligible Receivable from the
calculation of the Transferor Amount would cause the Transferor Amount to be a
negative number, on the date of reassignment of such Ineligible Receivable the
Transferor shall make a deposit in the Excess Funding Account in immediately
available funds in an amount equal to the amount by which the Transferor
Amount would be reduced below zero. Any such deduction or deposit shall be
considered a repayment in full of the Ineligible Receivable. The obligation of
the Transferor to accept reassignment of any Ineligible Receivable is the sole
remedy respecting any breach of the representations and warranties set forth
in this paragraph with respect to such Receivable available to the
Certificateholders or the Trustee on behalf of Certificateholders.
Certificateholders will not incur any costs, direct or indirect, related to
any such reassignment to the Transferor.
The Transferor will make in the Agreement and each New Agreement
representations and warranties to the related Trust to the effect, among other
things, that as of the Closing Date of the initial Series of Certificates
issued by such Trust (a) the related Agreement will constitute a legal, valid
and binding obligation of the Transferor and (b) the transfer of Receivables
by it to the Trust under the Agreement will constitute either a valid transfer
and assignment to the Trust of all right, title and interest of the Transferor
in and to the Receivables (other than Receivables in Additional Accounts),
whether then existing or thereafter created and the proceeds thereof
(including amounts in any of the accounts established for the benefit of
Certificateholders) or the grant of a first priority perfected security
interest in such Receivables (except for certain tax liens) and the proceeds
thereof (including amounts in any of the accounts established for the benefit
of Certificateholders), which is effective as to each such Receivable upon the
creation thereof. In the event of a breach of any of the representations and
warranties described in this paragraph, either the Trustee or the Holders of
Certificates evidencing undivided interests in the Trust aggregating more than
50% of the aggregate Investor Interest of all Series outstanding under such
Trust may direct the Transferor to accept reassignment of the Trust Portfolio
within 60 days of such notice, or within such longer period specified in such
notice. The Transferor will be obligated to accept reassignment of such
Receivables on a Distribution Date occurring within such applicable period.
Such reassignment will not be required to be made, however, if at any time
during such applicable period, or such longer period, the representations and
warranties shall then be true and correct in all material respects. The
deposit amount for such reassignment will be equal to the Investor Interest
and Enhancement Invested Amount, if any, for each Series outstanding under
such Trust on the last day of the Monthly Period preceding
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the Distribution Date on which the reassignment is scheduled to be made less
the amount, if any, previously allocated for payment of principal to such
Certificateholders or such holders of the Enhancement Invested Amount or the
Collateral Interest, if any, on such Distribution Date, plus an amount equal
to all accrued and the unpaid interest less the amount, if any, previously
allocated for payment of such interest on such Distribution Date. The payment
of the reassignment deposit amount and the transfer of all other amounts
deposited for the preceding month in the Distribution Account will be
considered a payment in full of the Investor Interest and the Enhancement
Invested Amount, if any, for each such Series required to be repurchased and
will be distributed upon presentation and surrender of the Certificates for
each such Series. The obligation of the Transferor to make any such deposit
will constitute the sole remedy respecting a breach of the representations and
warranties available to the Trustee or Certificateholders. The
Certificateholders will not incur any costs, direct or indirect, related to
the reassignment of the Trust Portfolio to the Transferor.
An "Eligible Account" means, as of the relevant Cut-Off Date (or, with
respect to Additional Accounts, as of their date of designation for inclusion
in the related Trust, or with respect to Automatic Additional Accounts, as of
their date of creation), each Account owned by the Transferor (a) which was in
existence and maintained with the Transferor, (b) which is payable in United
States dollars, (c) the customer of which has provided, as his most recent
billing address, an address located in the United States or its territories or
possessions, (d) which has not been classified by the Transferor as cancelled,
counterfeit, deleted, fraudulent, stolen or lost, and (e) which has either
been originated by the Transferor or acquired by the Transferor from other
institutions. Under the Agreement and each New Agreement, the definition of
Eligible Account may be changed by amendment to such Agreement without the
consent of the related Certificateholders if (i) the Transferor delivers to
the Trustee a certificate of an authorized officer to the effect that, in the
reasonable belief of the Transferor, such amendment will not as of the date of
such amendment adversely affect in any material respect the interest of such
Certificateholders, and (ii) such amendment will not result in a withdrawal or
reduction of the rating of any outstanding Series under the related Trust.
An "Eligible Receivable" means each Receivable (a) which has arisen under
an Eligible Account, (b) which was created in compliance, in all material
respects, with all requirements of law applicable to the Transferor, and
pursuant to a credit card agreement which complies in all material respects
with all requirements of law applicable to the Transferor, (c) with respect to
which all consents, licenses or authorizations of, or registrations with, any
governmental authority required to be obtained or given by the Transferor in
connection with the creation of such Receivable or the execution, delivery,
creation and performance by the Transferor of the related credit card
agreement have been duly obtained or given and are in full force and effect as
of the date of the creation of such Receivable, (d) as to which, at the time
of its creation, the Transferor or the related Trust had good and marketable
title free and clear of all liens and security interests arising under or
through the Transferor (other than certain tax liens for taxes not then due or
which the Transferor is contesting), (e) which is the legal, valid and binding
payment obligation of the obligor thereon, legally enforceable against such
obligor in accordance with its terms (with certain bankruptcy-related
exceptions) and (f) which constitutes an "account" under Article 9 of the
Uniform Commercial Code as then in effect in the State of Delaware.
Unless otherwise specified in the Prospectus Supplement relating to a
Series of Certificates, the Trustee will not make any initial or periodic
general examination of the Receivables or any records relating to the
Receivables for the purpose of establishing the presence or absence of
defects, compliance with the Transferor's representations and warranties or
for any other purpose. The Servicer, however, will deliver to the Trustee on
or before October 31 of each year (or such other date specified in the related
Prospectus Supplement) an opinion of counsel with respect to the validity of
the security interest of the Trust in and to the Receivables and certain other
components of the Trust.
Addition of Trust Assets
As described above under "The Receivables," the Transferor will have the
right to designate for each Trust, from time to time, additional eligible
revolving credit card accounts to be included as Accounts (the "Additional
Accounts") with respect to such Trust. In addition, the Transferor will be
required to designate Additional
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Accounts under the circumstances and in the amounts specified in the related
Prospectus Supplement. The Transferor will convey to the related Trust its
interest in all Receivables of such Additional Accounts, whether such
Receivables are then existing or thereafter created. This feature permits the
Transferor to increase the amount of Principal Receivables in a Trust over the
amount that would otherwise be included, thereby permitting the issuance of
additional Series or avoiding the occurrence of certain Pay Out Events with
respect to existing Series. Certificateholders will not incur any costs,
direct or indirect, as a result of the exercise of this feature.
Each Additional Account must be an Eligible Account at the time of its
designation. However, Additional Accounts may not be of the same credit
quality as the initial Accounts. Additional Accounts may have been originated
by the Transferor using credit criteria different from those which were
applied by the Transferor to the initial Accounts or may have been acquired by
the Transferor from an institution which may have had different credit
criteria.
In addition to or in lieu of Additional Accounts, the Transferor under the
Agreement and each New Agreement will be permitted to add to the related Trust
participations representing undivided interests in a pool of assets primarily
consisting of receivables arising under consumer revolving credit card
accounts and collections thereon ("Participations"). Each Participation must
(a) have been (i) previously registered under the Securities Act or (ii) held
for the holding period required under Rule 144(k) under the Securities Act and
(b) be acquired in a bona fide secondary market transaction and not from the
Transferor or an affiliate thereof, in each case to the extent required by the
Securities Act. Participations may be evidenced by one or more certificates of
ownership issued under a separate pooling and servicing agreement or similar
agreement (a "Participation Agreement") which entitles the Certificateholder
to receive percentages of collections generated by the pool of assets subject
to such Participation Agreement from time to time and to certain other rights
and remedies specified therein. Participations may have their own credit
enhancement, pay out events, servicing obligations and servicer defaults, all
of which are likely to be enforceable by a separate trustee under the
Participation Agreement and may be different from those specified herein. The
rights and remedies of the related Trust as the holder of a Participation (and
therefore the Certificateholders) will be subject to all the terms and
provisions of the related Participation Agreement. The Agreement and each New
Agreement may be amended to permit the addition of a Participation in a Trust
without the consent of the related Certificateholders if (i) the Transferor
delivers to the Trustee a certificate of an authorized officer to the effect
that, in the reasonable belief of the Transferor, such amendment will not as
of the date of such amendment adversely affect in any material respect the
interest of such Certificateholders, and (ii) such amendment will not result
in a withdrawal or reduction of the rating of any outstanding Series under the
related Trust.
A conveyance by the Transferor to a Trust of Receivables in Additional
Accounts or Participations is subject to the following conditions, among
others: (i) the Transferor shall give the Trustee, each Rating Agency and the
Servicer written notice that such Additional Accounts or Participations will
be included, which notice shall specify the approximate aggregate amount of
the Receivables or interests therein to be transferred; (ii) the Transferor
shall have delivered to the Trustee a written assignment (including an
acceptance by the Trustee on behalf of the Trust for the benefit of the
Certificateholders) as provided in the Agreement relating to such Additional
Accounts or Participations (the "Assignment") and, the Transferor shall have
delivered to the Trustee a computer file or microfiche list, dated the date of
such Assignment, containing a true and complete list of such Additional
Accounts or Participations; (iii) the Transferor shall represent and warrant
that (x) each Additional Account is, as of the date Additional Accounts are
added (the "Addition Date"), an Eligible Account, and each Receivable in such
Additional Account is, as of the Addition Date, an Eligible Receivable, (y) no
selection procedures believed by the Transferor to be materially adverse to
the interests of the Certificateholders were utilized in selecting the
Additional Accounts from the available Eligible Accounts from the Bank
Portfolio, and (z) as of the Addition Date, the Transferor is not insolvent;
(iv) the Transferor shall deliver certain opinions of counsel with respect to
the transfer of the Receivables in the Additional Accounts or the
Participations to the Trust; and (v) under certain circumstances with respect
to Additional Accounts, and in all cases with respect to Participations, each
Rating Agency then rating any Series of Certificates outstanding under such
Trust shall have consented to the addition of such Additional Accounts or
Participations.
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The Transferor may from time to time, at its sole discretion, designate
Eligible Accounts to be included as Accounts ("Automatic Additional
Accounts"), subject to the limitations specified in this paragraph and in the
applicable Agreement. Unless each Rating Agency otherwise consents, the number
of Automatic Additional Accounts shall not either (i) with respect to any
three consecutive Monthly Periods, exceed 15% of the number of Accounts as of
the end of the ninth Monthly Period preceding the commencement of such three
Monthly Periods (or, the Cut-Off Date, whichever is later) and (ii) with
respect to any twelve Monthly Periods, exceed 20% of the number of Accounts as
of the first day of such twelve Monthly Periods (or, the Cut-Off Date,
whichever is later) (the "Aggregate Addition Limit"). On a semi-annual basis,
or more frequently if required by any Rating Agency, the Transferor shall have
delivered to the Trustee, each Rating Agency and certain providers of Credit
Enhancement an opinion of counsel with respect to the Automatic Additional
Accounts included as Accounts during the preceding three-month period
confirming the validity and perfection of the transfer of the Receivables of
such Automatic Additional Accounts. Such opinion of counsel shall be provided
by outside counsel. If such opinion of counsel with respect to any Automatic
Additional Accounts is not so received, the ability of the Bank to designate
Automatic Additional Accounts will be suspended until such time as each Rating
Agency otherwise consents in writing or affected Accounts are removed from the
Trust. The Transferor may discontinue the inclusion of Automatic Additional
Accounts at any time, at its sole discretion.
In addition to the periodic reports otherwise required to be filed by the
Servicer with the Commission pursuant to the Exchange Act, the Servicer
intends to file, on behalf of each Trust, a Report on Form 8-K with respect to
any addition to a Trust of Receivables in Additional Accounts or
Participations that would have a material effect on the composition of the
assets of such Trust.
Removal of Accounts
Subject to the conditions set forth in the next succeeding sentence, the
Transferor may, but shall not be obligated to, designate from time to time
certain Accounts to be Removed Accounts, all Receivables in which shall be
subject to deletion and removal from the related Trust. This feature is
intended to permit the Transferor to obtain unencumbered ownership of
Receivables not needed to support any Series of Certificates.
Certificateholders will not incur any cost, direct or indirect, as a result of
the exercise of this feature. The Transferor will be permitted to designate
and require reassignment to it of the Receivables from Removed Accounts only
upon satisfaction of the following conditions: (i) the removal of any
Receivables of any Removed Accounts shall not, in the reasonable belief of the
Transferor, cause a Pay Out Event to occur; (ii) the Transferor shall have
delivered to the related Trustee for execution a written assignment and a
computer file or microfiche list containing a true and complete list of all
Removed Accounts identified by account number and the aggregate amount of the
Receivables in such Removed Accounts; (iii) the Transferor shall represent and
warrant that no selection procedures believed by the Transferor to be
materially adverse to the interests of the holders of any Series of
Certificates outstanding under such Trust were utilized in selecting the
Removed Accounts to be removed from such Trust; (iv) the Transferor shall have
received notice from each such Rating Agency that such proposed removal will
not result in a downgrade of its then current rating for any such Series; (v)
the Principal Receivables of the Removed Accounts shall not equal or exceed
the percentage specified in the related Prospectus Supplement of the aggregate
amount of the Principal Receivables in such Trust at such time; provided, that
if any Series has been paid in full, the Principal Receivables in such Removed
Accounts may equal or approximately equal the initial Investor Interest or
Full Investor Interest, as applicable, of such Series; (vi) such other
conditions as are specified in the related Prospectus Supplement; and (vii)
the Transferor shall have delivered to the Trustee an officer's certificate
confirming the items set forth in clauses (i) through (vi) above.
Notwithstanding the above, the Transferor will be permitted to designate as a
Removed Account without the consent of the related Trustee, Certificateholders
or Rating Agencies any Account that has a zero balance and which the
Transferor will remove from its computer file.
Collection and Other Servicing Procedures
For each Series of Certificates, the Servicer will be responsible for
servicing and administering the Receivables in accordance with the Servicer's
policies and procedures for servicing credit card receivables comparable to
the Receivables. The Servicer will be required to maintain or cause to be
maintained fidelity bond
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coverage insuring against losses through wrongdoing of its officers and
employees who are involved in the servicing of credit card receivables
covering such actions and in such amounts as the Servicer believes to be
reasonable from time to time.
Discount Option
The Transferor may at any time designate a specified fixed or variable
percentage as specified in the related Prospectus Supplement (the "Discount
Percentage") of the amount of Receivables arising in the Accounts with respect
to the related Trust on and after the date such option is exercised (the
"Discount Option") that otherwise would have been treated as Principal
Receivables to be treated as Finance Charge Receivables. Such designation will
become effective upon satisfaction of the requirements set forth in the
related Agreement, including written confirmation by each Rating Agency in
writing of its then current rating on each outstanding Series of the related
Trust. On the date of processing of any collections, the product of the
Discount Percentage and collections of Receivables that arise in the Accounts
on such day on or after the date such option is exercised that otherwise would
be Principal Receivables will be deemed collections of Finance Charge
Receivables and will be applied accordingly, unless otherwise provided in the
related Prospectus Supplement. Such feature is intended to permit the
Transferor to increase the Portfolio Yield and thereby decrease the risk of
the occurrence of a Pay Out Event. Certificateholders will not incur any cost,
direct or indirect, as a result of the exercise of this feature.
Trust Accounts
The related Trustee will establish and maintain in the name of the Trust
two separate accounts in a segregated trust account, a "Finance Charge
Account" and a "Principal Account," for the benefit of the Certificateholders
of all related Series, including any Series offered pursuant to this
Prospectus. Each Agreement will provide that the Trustee shall have the power
to establish series accounts in Series Supplements, including an Interest
Funding Account, a Principal Funding Account, a Pre-Funding Account or such
other account specified in the related Series Supplement, each of which series
accounts shall be held for the benefit of the Certificateholders of the
related Series and for the purposes set forth in the related Prospectus
Supplement. The Trustee will also establish a "Distribution Account," which
shall be a non-interest bearing segregated demand deposit account established
with a Qualified Institution other than the Transferor. The Servicer will
establish and maintain, in the name of the Trust, for the benefit of
Certificateholders of all Series issued thereby including any Series offered
pursuant to this Prospectus, a Collection Account, which will be a non-
interest bearing segregated account established and maintained with the
Servicer or with a "Qualified Institution," defined as a depository
institution or trust company, which may include the related Trustee, organized
under the laws of the United States or any one of the states thereof, which at
all times has a short-term unsecured debt rating of P-1 by Moody's Investors
Service, Inc. ("Moody's") and of A-l+ by Standard & Poor's Ratings Services
("Standard & Poor's"), or a depository institution, which may include the
Trustee, which is acceptable to the Rating Agency. The Servicer will also
establish and maintain, with respect to each Trust, the Excess Funding
Account, as more fully described herein. Funds in the Principal Account and
the Finance Charge Account for each Trust will be invested, at the direction
of the Servicer, in (i) obligations fully guaranteed by the United States of
America, (ii) demand deposits, time deposits or certificates of deposit of
depository institutions or trust companies, the certificates of deposit of
which have the highest rating from Moody's and Standard & Poor's, (iii)
commercial paper having, at the time of the Trust's investment, a rating in
the highest rating category from Moody's and Standard & Poor's, (iv) bankers'
acceptances issued by any depository institution or trust company described in
clause (ii) above, (v) certain repurchase agreements transacted with either
(a) an entity subject to the United States federal bankruptcy code or (b) a
financial institution insured by the FDIC or any broker-dealer with "retail
customers" that is under the jurisdiction of the Securities Investors
Protection Corp. and (vi) any other investment if the Rating Agency confirms
in writing that such investment will not adversely affect its then current
rating or ratings of the Investor Certificates, provided that such investment
will not cause the Trust to be treated as an investment company within the
meaning of the Investment Company Act of 1940, as amended (such investments,
"Permitted Investments"). Any earnings (net of losses and investment expenses)
on funds in the Finance Charge Account or the Principal Account will be paid
to the Transferor, or used for another purpose if
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specified in the related Prospectus Supplement. Funds in any other series
account established by a Series Supplement may be invested in Permitted
Investments or otherwise as provided in the related Prospectus Supplement. The
Servicer will have the revocable power to withdraw funds from the Collection
Account and to instruct the Trustee to make withdrawals and payments from the
Finance Charge Account and the Principal Account for the purpose of carrying
out the Servicer's duties under the Agreement. The Trustee will be the paying
agent and will have the revocable power to withdraw funds from the
Distribution Account for the purpose of making distributions to the
Certificateholders.
Funding Period
For any Series of Certificates, the related Prospectus Supplement may
specify that during a Funding Period, all or a portion of the principal amount
of such Series (the "Pre-Funding Amount") will be held in a Pre-Funding
Account pending the transfer of additional Receivables to the Trust or pending
the reduction of the Investor Interests of other Series issued by the related
Trust. The related Prospectus Supplement will specify the initial Investor
Interest with respect to such Series, the Full Investor Interest and the date
by which the Investor Interest is expected to equal the Full Investor
Interest. The Investor Interest will increase as Receivables are added to the
related Trust or as the Investor Interests of other Series of the related
Trust are reduced. See "--Addition of Trust Assets." This feature is intended
to permit the Transferor to issue a new Series of Certificates at an opportune
time, if the Investor Interest of existing Series are expected to be reduced
or additional Principal Receivables are expected to be included in a Trust at
a subsequent time. Certificateholders will not incur any costs, direct or
indirect, as a result of the exercise of this feature. If the Investor
Interest does not equal the Full Investor Interest by the end of the Funding
Period, Certificateholders of the affected Series will receive principal
repayments prior the expected date of receipt. See "Risk Factors--Pre-Funding
Account." Any designation of Additional Accounts (or Participations) or
Automatic Additional Accounts during the Funding Period will be subject to the
same conditions and protections applicable at any other time.
During the Funding Period, funds on deposit in the Pre-Funding Account for
a Series of Certificates will be withdrawn and paid to the holder of the
Transferor Certificate to the extent of any increases in the Investor
Interest. In the event that the Investor Interest does not for any reason
equal the Full Investor Interest by the end of the Funding Period, any amount
remaining in the Pre-Funding Account will be payable to the Certificateholders
of such Series in the manner and at such time as set forth in the related
Prospectus Supplement. Such payment will reduce the aggregate principal amount
of such Certificates. In addition, if so specified in the related Prospectus
Supplement, a prepayment premium or penalty or similar amount may be payable
to the Certificateholders of such Series.
Monies in the Pre-Funding Account will be invested by the Trustee in
Permitted Investments and, if so specified in the related Prospectus
Supplement, will be subject to a guaranteed rate or investment agreement or
other similar arrangement, and, in connection with each Distribution Date
during the Funding Period, investment earnings on funds in the Pre-Funding
Account during the related Monthly Period will be withdrawn from the Pre-
Funding Account and deposited, together with any applicable payment under a
guaranteed rate or investment agreement or other similar arrangement, into the
Finance Charge Account for distribution in respect of interest on the
Certificates of the related Series in the manner specified in the related
Prospectus Supplement.
Investor Percentage and Transferor Percentage
For each Trust, the Servicer will allocate between the Investor Interest of
each Series issued by such Trust (and between each Class of each Series) and
the Transferor Interest, and, in certain circumstances, the interest of
certain Credit Enhancement Providers, all amounts collected on Finance Charge
Receivables, all amounts collected on Principal Receivables and all
Receivables in Defaulted Accounts. The Servicer will make each allocation by
reference to the applicable Investor Percentage of each Series and the
Transferor Percentage, and, in certain circumstances, the percentage interest
of certain providers of Enhancement (the "Credit
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Enhancement Percentage") with respect to such Series. The Prospectus
Supplement relating to a Series specifies the Investor Percentage and, if
applicable, the Credit Enhancement Percentage (or the method of calculating
such percentages) with respect to the allocations of collections of Principal
Receivables, Finance Charge Receivables and Receivables in Defaulted Accounts
during the Revolving Period, any Amortization Period and any Accumulation
Period, as applicable. In addition, for each Series of Certificates having
more than one Class, the related Prospectus Supplement specifies the method of
allocation between each Class.
The Transferor Percentage will, in all cases, be equal to 100% minus the
aggregate Investor Percentages and, if applicable, the Credit Enhancement
Percentages, for all Series then outstanding.
Application of Collections
Except as otherwise provided below, the Servicer will deposit into the
Collection Account for the related Trust no later than the second business day
(or such other day specified in the related Prospectus Supplement) following
the date of processing, any payment collected by the Servicer on the
Receivables. On the same day as any such deposit is made, the Servicer will
make the deposits and payments to the accounts and parties as indicated below;
provided, however, that for as long as the Bank or an affiliate thereof
remains the Servicer under the related Agreement, and (a) the Servicer
provides to the Trustee a letter of credit or other credit support acceptable
to each Rating Agency or (b) the Servicer or the Corporation has and maintains
a certificate of deposit or commercial paper rating of P-1 by Moody's and of
A-1 by Standard & Poor's, then the Servicer may make such deposits and
payments on a monthly or other periodic basis on the Transfer Date in an
amount equal to the net amount of such deposits and payments which would have
been made.
Notwithstanding anything in the related Agreement to the contrary, whether
the Servicer is required to make monthly or daily deposits from the Collection
Account into the Finance Charge Account or the Principal Account, with respect
to any Monthly Period, (i) the Servicer will only be required to deposit
collections from the Collection Account into the Finance Charge Account, the
Principal Account or any series account established by a related Series
Supplement up to the required amount to be deposited into any such account or,
without duplication, distributed on or prior to the related Distribution Date
to Certificateholders or to the provider of Enhancement and (ii) if at any
time prior to such Distribution Date the amount of collections deposited in
the Collection Account exceeds the amount required to be deposited pursuant to
clause (i) above, the Servicer will be permitted to withdraw the excess from
the Collection Account.
The Servicer will withdraw the following amounts from the Collection
Account for application as indicated:
(a) an amount equal to the Transferor Percentage of the aggregate amount
of such deposits in respect of Principal Receivables and Finance Charge
Receivables, respectively, will be paid or held for payment to the holder
of the Transferor Certificate (or, in certain limited circumstances,
deposited in the Excess Funding Account);
(b) an amount equal to the applicable Investor Percentage of the
aggregate amount of such deposits in respect of Finance Charge Receivables
will be deposited into the Finance Charge Account for allocation and
distribution as described in the related Prospectus Supplement;
(c) during the Revolving Period, an amount equal to the applicable
Investor Percentage of the aggregate amount of such deposits in respect of
Principal Receivables will be paid or held for payment to the holder of the
Transferor Certificate, provided that if after giving effect to the
inclusion in the related Trust of all Receivables on or prior to such date
of processing and the application of payments referred to in paragraph (a)
above the Transferor Amount is less than the Minimum Transferor Amount, the
excess will be deposited in the Excess Funding Account or other specified
account and will be used as described in the related Prospectus Supplement,
including for payment to other Series of Certificates issued by the related
Trust;
(d) during the Controlled Amortization Period, Controlled Accumulation
Period or Rapid Accumulation Period, as applicable, an amount equal to the
applicable Investor Percentage of such deposits in respect of Principal
Receivables up to the amount, if any, as specified in the related
Prospectus
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Supplement will be deposited in the Principal Account or Principal Funding
Account, as applicable, for allocation and distribution to
Certificateholders as described in the related Prospectus Supplement,
provided that if collections of Principal Receivables exceed the principal
payments that may be allocated or distributed to Certificateholders, the
amount of such excess will be paid to the holder of the Transferor
Certificate until the Transferor Amount is reduced to the Minimum
Transferor Amount, and thereafter will be deposited in the Excess Funding
Account or other specified account and will be used as described in the
related Prospectus Supplement, including for payment to other Series of
Certificates issued by the related Trust; and
(e) during the Principal Amortization Period, if applicable, and the
Rapid Amortization Period, an amount equal to the applicable Investor
Percentage of such deposits in respect of Principal Receivables will be
deposited into the Principal Account for application and distribution as
provided in the related Prospectus Supplement.
In the case of a Series of Certificates having more than one Class, the
amounts in the Collection Account will be allocated and applied to each Class
in the manner and order of priority described in the related Prospectus
Supplement.
Shared Excess Finance Charge Collections
Any Series offered hereby may be included in a Group. The Prospectus
Supplement relating to a Series specifies whether such Series will be included
in a Group and identifies any previously issued Series included in such Group.
If so specified in the related Prospectus Supplement, the Certificateholders
of a Series within a Group or any Class thereof may be entitled to receive all
or a portion of Excess Finance Charge Collections with respect to another
Series or Class thereof within such Group to cover any shortfalls with respect
to amounts payable from collections of Finance Charge Receivables allocable to
such Series or Class. With respect to any Series, "Excess Finance Charge
Collections" for any Monthly Period will equal the excess of collections of
Finance Charge Receivables, and certain other amounts allocated to the
Investor Interest of such Series or Class over the sum of (i) interest accrued
for the current month ("Monthly Interest") and overdue Monthly Interest on the
Certificates of such Series or Class (together with, if applicable, interest
on overdue Monthly Interest at the rate specified in the related Prospectus
Supplement, ("Additional Interest"), (ii) accrued and unpaid Investor
Servicing Fees with respect to such Series or Class payable from collections
of Finance Charge Receivables, (iii) the Investor Default Amount with respect
to such Series or Class, (iv) unreimbursed Investor Charge-Offs with respect
to such Series or Class and (v) other amounts specified in the related
Prospectus Supplement. The term "Investor Servicing Fee" for any Series of
Certificates or Class thereof means the Servicing Fee allocable to the
Investor Interest with respect to such Series or Class, as specified in the
related Prospectus Supplement. The term "Investor Default Amount" means, for
any Monthly Period and for any Series or Class thereof, the aggregate amount
of the applicable Investor Percentage of Receivables in Defaulted Accounts.
The term "Investor Charge-Off" means, for any Monthly Period and for any
Series or Class thereof, the amount by which (a) the related Monthly Interest
and overdue Monthly Interest (together with, if applicable, Additional
Interest), accrued and unpaid Investor Servicing Fees payable from collections
of Finance Charge Receivables, the Investor Default Amount and any required
fees exceeds (b) amounts available to pay such amounts out of collections of
Finance Charge Receivables, available Credit Enhancement amounts, if any, and
other sources specified in the related Prospectus Supplement, but not more
than such Investor Default Amount. This feature permits amounts that would
otherwise be payable to the holder of the Transferor Certificate to be used
for the benefit of Series of Certificates that would otherwise experience
shortfalls in amounts payable from collections of Finance Charge Receivables
or from Credit Enhancement. See "--Application of Collections" and "--
Defaulted Receivables; Rebates and Fraudulent Charges; Investor Charge-Offs."
Excess Funding Account
If on any date the Transferor Amount would be less than the Minimum
Transferor Amount (after giving effect to any addition of Principal
Receivables to the applicable Trust) if the Servicer were to distribute to the
holder of the Transferor Certificate any collections of Principal Receivables
that otherwise would be distributed
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to the holder of the Transferor Certificate, the Servicer will not distribute
such amounts, but shall instead deposit such funds in a segregated account
established and maintained by the Servicer, in the name of the Trust, for the
benefit of Certificateholders of all Series issued by such Trust, with the
Servicer or with a Qualified Institution (the "Excess Funding Account") .
Funds on deposit in the Excess Funding Account will be withdrawn and paid to
the holder of the Transferor Certificate on any date to the extent that the
Transferor Amount exceeds the Minimum Transferor Amount on such date;
provided, however, that if a Controlled Accumulation Period, Controlled
Amortization Period, Principal Amortization Period, Rapid Amortization Period
or Rapid Accumulation Period commences with respect to any Series in a Group
entitled to the benefits of Shared Principal Collections, any funds on deposit
in the Excess Funding Account not released to the holder of the Transferor
Certificate will be treated as Shared Principal Collections to the extent
needed to cover principal payments due to or for the benefit of such Series,
if the Series Supplement with respect to such Series so provides. This feature
is intended to avoid or forestall the occurrence of a Pay Out Event (and thus
certain unexpected prepayments of the Certificates) at a time when adequate
Principal Receivables are not being generated in the Accounts in a Trust by
retaining collections of Principal Receivables in the Trust for the benefit of
Certificateholders. Certificateholders will not incur any costs, direct or
indirect, as a result of the inclusion of this feature.
Funds on deposit in the Excess Funding Account will be invested by the
Trustee, at the direction of the Servicer, in Permitted Investments. Any
earnings (net of losses and investment expenses) earned on amounts on deposit
in the Excess Funding Account during any Monthly Period will be withdrawn from
the Excess Funding Account and treated as collections of Finance Charge
Receivables with respect to such Monthly Period for the applicable Trust.
Shared Principal Collections
If so specified in the related Prospectus Supplement, to the extent that
collections of Principal Receivables and certain other amounts that are
allocated to the Investor Interest of any Series are not needed to make
payments or deposits with respect to such Series, such collections will
constitute Shared Principal Collections and will be applied to cover principal
payments due to or for the benefit of Certificateholders of other Series. If
so specified in the related Prospectus Supplement, the allocation of Shared
Principal Collections may be among Series within a Group. Any such
reallocation will not result in a reduction in the Investor Interest of the
Series to which such collections were initially allocated. This feature
permits amounts that would otherwise be payable to the holder of the
Transferor Certificate to be used for the benefit of Series of Certificates
that would otherwise experience a shortfall or delay in the payment of
principal thereon.
Paired Series
If specified in the Prospectus Supplement relating to a Series, such Series
may be paired with another Series (each, a "Paired Series") , such that a
reduction in the Investor Interest of one such Series results in an increase
in the Investor Interest of the other such Series. The effects of this feature
are discussed in the related Prospectus Supplements of the Paired Series.
Defaulted Receivables; Rebates and Fraudulent Charges; Investor Charge-Offs
For each Series of Certificates, on the business day preceding each
Transfer Date (the "Determination Date") , the Servicer will calculate the
aggregate Investor Default Amount for the preceding Monthly Period, which will
be equal to the aggregate amount of the Investor Percentage of Receivables in
Defaulted Accounts; that is, Accounts which in such Monthly Period were
written off as uncollectible in accordance with the Servicer's policies and
procedures for servicing credit card receivables comparable to the
Receivables. In the case of a Series of Certificates having more than one
Class, the Investor Default Amount will be allocated among the Classes in the
manner described in the related Prospectus Supplement. If so provided in the
related Prospectus Supplement, an amount equal to the Investor Default Amount
for any Monthly Period may be paid from other amounts, including collections
in the Finance Charge Account or from Credit Enhancement, and applied to pay
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principal to Certificateholders or the holder of the Transferor Certificate,
as appropriate. In the case of a Series of Certificates having one or more
Classes of Subordinated Certificates, the related Prospectus Supplement may
provide that all or a portion of amounts otherwise allocable to such
Subordinated Certificates may be paid to the holders of Senior Certificates to
make up any Investor Default Amount allocable to such holders of Senior
Certificates.
With respect to each Series of Certificates, the Investor Interest with
respect to such Series will be reduced by the amount of Investor Charge-Offs
for any Monthly Period. Investor Charge-Offs will be reimbursed on any
Distribution Date to the extent amounts on deposit in the Finance Charge
Account and otherwise available therefor exceed such interest, fees and any
aggregate Investor Default Amount payable on such date. Such reimbursement of
Investor Charge-Offs will result in an increase in the Investor Interest with
respect to such Series. In the case of a Series of Certificates having more
than one Class, the related Prospectus Supplement describes the manner and
priority of allocating Investor Charge-Offs and reimbursements thereof among
the Investor Interests of the several Classes.
If the Servicer adjusts the amount of any Principal Receivable because of
transactions occurring in respect of a rebate or refund to a cardholder, or
because such Principal Receivable was created in respect of merchandise which
was refused or returned by a cardholder, then the amount of the Transferor
Amount in the related Trust will be reduced, on a net basis, by the amount of
the adjustment. In addition, the Transferor Amount in such Trust will be
reduced, on a net basis, as a result of transactions in respect of any
Principal Receivable which was discovered as having been created through a
fraudulent or counterfeit charge. Furthermore, in the event that the exclusion
of such Receivables from the calculation of the Transferor Amount at such time
would cause the Transferor Amount to be less than the Minimum Transferor
Amount, the Transferor shall be required to pay an amount equal to such
deficiency into the Excess Funding Account.
Defeasance
If so specified in the Prospectus Supplement relating to a Series, the
Transferor may terminate its substantive obligations in respect of such Series
or the related Trust by depositing with the Trustee, from amounts
representing, or acquired with, collections of Receivables, money or Permitted
Investments sufficient to make all remaining scheduled interest and principal
payments on such Series or all outstanding Series of Certificates of such
Trust, as the case may be, on the dates scheduled for such payments and to pay
all amounts owing to any Credit Enhancement Provider with respect to such
Series or all outstanding Series, as the case may be, if such action would not
result in a Pay Out Event for any Series. Prior to its first exercise of its
right to substitute money or Permitted Investments for Receivables, the
Transferor will deliver to the Trustee (i) an opinion of counsel to the effect
that such deposit and termination of obligations will not result in the
related Trust being required to register as an "investment company" within the
meaning of the Investment Company Act of 1940, as amended, and (ii) a Tax
Opinion.
Final Payment of Principal; Termination
With respect to each Series, the Certificates will be subject to optional
repurchase by the Transferor on any Distribution Date after the total Investor
Interest of such Series and the Enhancement Invested Amount, if any, with
respect to such Series, is reduced to an amount less than or equal to 5% of
the initial Investor Interest (or such other amount specified in the related
Prospectus Supplement), if certain conditions set forth in the related
Agreement are met. The repurchase price will be equal to the total Investor
Interest of such Series (less the amount, if any, on deposit in any Principal
Funding Account with respect to such Series), plus the Enhancement Invested
Amount, if any, with respect to such Series, plus accrued and unpaid interest
on the Certificates and interest or other amounts payable on the Enhancement
Invested Amount or the Collateral Interest, if any, through the day preceding
the Distribution Date on which the repurchase occurs.
The Certificates of each Series will be retired on the day following the
Distribution Date on which the final payment of principal is scheduled to be
made to the Certificateholders, whether as a result of optional reassignment
to the Transferor or otherwise. Each Prospectus Supplement specifies the final
date on which
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principal and interest with respect to the related Series of Certificates will
be scheduled to be distributed (the "Series Termination Date"); provided,
however, that the Certificates may be subject to prior termination as provided
above. If the Investor Interest is greater than zero on the Series Termination
Date, the Trustee or Servicer may be required to sell or cause to be sold
certain Receivables in the manner provided in the related Agreement and Series
Supplement and to pay the net proceeds of such sale and any collections on the
Receivables, in an amount at least equal to the sum of the Investor Interest
and the Enhancement Invested Amount, if any, with respect to such Series plus
accrued interest due thereon.
Unless the Servicer and the holder of the Transferor Certificate instruct
the Trustee otherwise, each Trust will terminate on the earlier of (a) the day
after the Distribution Date on which the aggregate Investor Interest and
Enhancement Invested Amount or Collateral Interest, if any, with respect to
each Series outstanding is zero, (b) October 26, 2045, or (c) if the
Receivables are sold, disposed of or liquidated following the occurrence of an
Insolvency Event, immediately following such sale, disposition or liquidation
(such date, the "Trust Termination Date"). Upon the termination of each Trust
and the surrender of the Transferor Certificate, the Trustee shall convey to
the holder of the Transferor Certificate all right, title and interest of the
Trust in and to the Receivables and other funds of the Trust.
Pay Out Events
Unless otherwise specified in the related Prospectus Supplement, as
described above, the Revolving Period will continue through the date specified
in the related Prospectus Supplement unless a Pay Out Event occurs prior to
such date. A Pay Out Event occurs with respect to all Series issued by a Trust
upon the occurrence of any of the following events:
(a) certain events of insolvency, receivership or bankruptcy relating to
the Transferor or any holder of an interest in the Transferor Certificate,
as defined in the Agreement (an "Insolvency Event") (including the
Transferor Participation);
(b) the Transferor is unable for any reason to transfer Receivables to
such Trust in accordance with the provisions of the related Agreement; or
(c) such Trust becomes subject to regulation as an "investment company"
within the meaning of the Investment Company Act of 1940, as amended.
In addition, a Pay Out Event may occur with respect to any Series upon the
occurrence of any other event specified in the related Prospectus Supplement.
On the date on which a Pay Out Event is deemed to have occurred, the Rapid
Amortization Period or, if so specified in the related Prospectus Supplement,
the Rapid Accumulation Period will commence. If, because of the occurrence of
a Pay Out Event, the Rapid Amortization Period begins earlier than the
scheduled commencement of a Controlled Amortization Period or prior to a
Scheduled Payment Date, Certificateholders will begin receiving distributions
of principal earlier than they otherwise would have, which may shorten the
average life of the Certificates.
In addition to the consequences of a Pay Out Event discussed above, unless
otherwise specified in the related Prospectus Supplement, if an Insolvency
Event occurs with respect to the Transferor or any holder of an interest in
the Transferor Certificate (including the Transferor Participation), on the
day of such event (the "Appointment Date") the Transferor will immediately
cease to transfer Principal Receivables to the Trust and promptly give notice
to the Trustee of such event. If such event occurs while any of the Series
1995-1 Certificates remain outstanding, within 15 days, the Trustee will
publish a notice of the liquidation or the appointment stating that the
Trustee intends to sell, dispose of, or otherwise liquidate the Receivables in
a commercially reasonable manner. Unless otherwise instructed within a
specified period by Certificateholders representing undivided interests
aggregating more than 50% of the Investor Interest of each Series (or if any
Series has more than one Class, of each Class, and any holder of the
Transferor Certificate (including any Transferor Participation) with respect
to which the Insolvency Event has not occurred, each provider of Enhancement,
if any, and any other person entitled to give such instructions pursuant to
any Supplement) issued and outstanding, the Trustee will sell, dispose of, or
otherwise liquidate the Receivables in a commercially reasonable manner and on
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commercially reasonable terms. If the Trustee is instructed not to liquidate
the Receivables as described in the preceding sentence, the Trustee will
retain the Receivables and apply collections thereon in accordance with the
Agreement; provided, however, that the Trustee shall nevertheless liquidate
any remaining Receivables no later than three years after the Appointment
Date. The proceeds from the sale, disposition or liquidation of the
Receivables will be treated as collections of the Receivables and applied as
specified above in "--Application of Collections" and in the related
Prospectus Supplement.
If the only Pay Out Event to occur is either the insolvency of the
Transferor or the appointment of a conservator or receiver for the Transferor,
the conservator or receiver may have the power to prevent the early sale,
liquidation or disposition of the Receivables and the commencement of a Rapid
Amortization Period or, if applicable with respect to a Series as specified in
the related Prospectus Supplement, a Rapid Accumulation Period. In addition, a
conservator or receiver may have the power to cause the early sale of the
Receivables and the early retirement of the Certificates. See "Risk Factors--
Certain Legal Aspects" and "Certain Legal Aspects of the Receivables--Certain
Matters Relating to Receivership."
Servicing Compensation and Payment of Expenses
For each Series of Certificates, the Servicer's compensation for its
servicing activities and reimbursement for its expenses will take the form of
the payment to it of the Servicing Fee payable at the times and in the amounts
specified in the related Prospectus Supplement. The Investor Servicing Fee
will be funded from collections of Finance Charge Receivables allocated to the
Investor Interest and will be paid each month, or on such other specified
periodic basis, from amounts so allocated and on deposit in the Finance Charge
Account (which, if so specified in the related Prospectus Supplement, may
include all or a portion of the Interchange arising from the Accounts) or, in
certain limited circumstances, from amounts available from Enhancement and
other sources, if any. The remainder of the servicing fee for each Trust will
be allocable to the Transferor Interest, the Investor Interests of any other
Series issued by such Trust and the interest represented by the Collateral
Interest or the Enhancement Invested Amount, if any, with respect to such
Series, as described in the related Prospectus Supplement. Neither the Trust
nor the Certificateholders will have any obligation to pay the portion of the
servicing fee allocable to the Transferor Interest.
The Servicer will pay from its servicing compensation certain expenses
incurred in connection with servicing the Receivables including, without
limitation, payment of the fees and disbursements of the Trustee and
independent certified public accountants and other fees which are not
expressly stated in the Agreement to be payable by the related Trust or the
Certificateholders other than federal, state and local income and franchise
taxes, if any, of the Trust.
Certain Matters Regarding the Transferor and the Servicer
With respect to each Series of Certificates, the Servicer may not resign
from its obligations and duties under the related Agreement, except upon
determination that performance of its duties is no longer permissible under
applicable law. No such resignation will become effective until the Trustee or
a successor to the Servicer has assumed the Servicer's responsibilities and
obligations under the related Agreement. The Bank, as initial Servicer,
intends to delegate some of its servicing duties to WOSC; however, such
delegation will not relieve it of its obligation to perform such duties in
accordance with the related Agreement.
The Agreement and each New Agreement will provide that the Servicer will
indemnify the related Trust and Trustee from and against any reasonable loss,
liability, expense, damage or injury suffered or sustained by reason of any
acts or omissions or alleged acts or omissions of the Servicer with respect to
the activities of the Trust or the Trustee; provided, however, that the
Servicer shall not indemnify (a) the Trustee for liabilities imposed by reason
of fraud, negligence, or willful misconduct by the Trustee in the performance
of its duties under the Agreement, (b) the Trust, the Certificateholders or
the Certificate Owners for liabilities arising from actions taken by the
Trustee at the request of Certificateholders, (c) the Trust, the
Certificateholders or the Certificate Owners for any losses, claims, damages
or liabilities incurred by any of them in their capacities as
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investors, including without limitation, losses incurred as a result of
defaulted Receivables or Receivables which are written off as uncollectible,
or (d) the Trust, the Certificateholders or the Certificate Owners for any
liabilities, costs or expenses of the Trust, the Certificateholders or the
Certificate Owners arising under any tax law, including without limitation,
any federal, state or local income or franchise tax or any other tax imposed
on or measured by income (or any interest or penalties with respect thereto or
arising from a failure to comply therewith) required to be paid by the Trust,
the Certificateholders or the Certificate Owners in connection with the
Agreement to any taxing authority.
In addition, the Agreement and each New Agreement will provide that,
subject to certain exceptions, the Transferor and any holder of an interest in
the Transferor Certificate (including any Transferor Participation) will
indemnify an injured party for any losses, claims, damages or liabilities
(other than those incurred by a Certificateholder as an investor in the
Certificates) arising out of or based upon the arrangement created by the
Agreement as though the Agreement created a partnership under the Delaware
Uniform Partnership Law in which the Transferor and any such holder of an
interest in the Transferor Certificate (including any Transferor
Participation) are general partners.
The Agreement and each New Agreement will provide that neither the
Transferor nor the Servicer nor any of their respective directors, officers,
employees or agents will be under any other liability to the related Trust,
Trustee, Certificateholders or any other person for any action taken, or for
refraining from taking any action, in good faith pursuant to the Agreement.
Neither the Transferor, the Servicer, nor any of their respective directors,
officers, employees or agents will be protected against any liability which
would otherwise be imposed by reason of willful misfeasance, bad faith or
gross negligence of the Transferor, the Servicer or any such person in the
performance of its duties or by reason of reckless disregard of obligations
and duties thereunder. In addition, the Agreement and each New Agreement will
provide that the Servicer is not under any obligation to appear in, prosecute
or defend any legal action which is not incidental to its servicing
responsibilities under the Agreement and which in its opinion may expose it to
any expense or liability.
The Agreement and each New Agreement will provide that, in addition to
Exchanges, if applicable, the Transferor may transfer its interest in all or a
portion of the Transferor Certificate, provided that prior to any such
transfer (a) the Trustee receives written notification from each Rating Agency
that such transfer will not result in a lowering of its then-existing rating
of the Certificates of each outstanding Series rated by it and (b) the Trustee
receives a Tax Opinion.
Any person into which, in accordance with each Agreement, the Transferor or
the Servicer may be merged or consolidated or any person resulting from any
merger or consolidation to which the Transferor or the Servicer is a party, or
any person succeeding to the business of the Transferor or the Servicer will,
upon compliance with the applicable provisions of the Agreement, be the
successor to the Transferor or the Servicer, as the case may be, under the
Agreement.
Servicer Default
In the event of any Servicer Default (as defined below), either the Trustee
or Certificateholders representing undivided interests aggregating more than
50% of the Investor Interests for all Series of Certificates of the related
Trust, by written notice to the Servicer (and to the Trustee if given by the
Certificateholders), may terminate all of the rights and obligations of the
Servicer as servicer under the Agreement and in and to the Receivables and the
proceeds thereof and the Trustee may appoint a new Servicer (a "Service
Transfer"). The rights and interest of the Transferor under the related
Agreement and in the Transferor Interest will not be affected by such
termination. The related Trustee shall as promptly as possible appoint a
successor Servicer. If no such Servicer has been appointed and has accepted
such appointment by the time the Servicer ceases to act as Servicer, all
authority, power and obligations of the Servicer under the Agreement shall
pass to and be vested in the Trustee. If the Trustee is unable to obtain any
bids from eligible servicers and the Servicer delivers an officer's
certificate to the effect that it cannot in good faith cure the Servicer
Default which gave rise to a transfer of servicing, and if the Trustee is
legally unable to act as successor Servicer, then the Trustee shall give the
Transferor the right of first refusal to purchase the Receivables on terms
equivalent to the best purchase offer as determined by the Trustee.
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"Servicer Default" under any Agreement refers to any of the following
events:
(a) failure by the Servicer to make any payment, transfer or deposit, or
to give instructions to the Trustee to make certain payments, transfers or
deposits, on the date the Servicer is required to do so under the related
Agreement or any Series Supplement (or within the applicable grace period,
which shall not exceed 10 business days);
(b) failure on the part of the Servicer duly to observe or perform in
any respect any other covenants or agreements of the Servicer which has a
material adverse effect on the Certificateholders of any Series issued and
outstanding under such Trust and which continues unremedied for a period of
60 days after written notice and continues to have a material adverse
effect on such Certificateholders; or the delegation by the Servicer of its
duties under the Agreement, except as specifically permitted thereunder;
(c) Any representation, warranty or certification made by the Servicer
in the Agreement, or in any certificate delivered pursuant to the
Agreement, proves to have been incorrect when made which has a material
adverse effect on the Certificateholders of any Series issued and
outstanding under such Trust, and which continues to be incorrect in any
material respect for a period of 60 days after written notice and continues
to have a material adverse effect on such Certificateholders;
(d) the occurrence of certain events of bankruptcy, insolvency or
receivership of the Servicer; or
(e) such other event specified in the related Prospectus Supplement.
Unless otherwise stated in the related Prospectus Supplement,
notwithstanding the foregoing, a delay in or failure of performance referred
to in clause (a) above for a period of 10 business days, or referred to under
clause (b) or (c) for a period of 60 business days, shall not constitute a
Servicer Default if such delay or failure could not be prevented by the
exercise of reasonable diligence by the Servicer and such delay or failure was
caused by an act of God or other similar occurrence. Upon the occurrence of
any such event, the Servicer shall not be relieved from using its best efforts
to perform its obligations in a timely manner in accordance with the terms of
the Agreement, and the Servicer shall provide the Trustee, any provider of
Enhancement, the Transferor and the holders of Certificates of each Series
issued and outstanding under the related Trust prompt notice of such failure
or delay by it, together with a description of the cause of such failure or
delay and its efforts to perform its obligations.
In the event of a Servicer Default, if a conservator or receiver is
appointed for the Servicer and no Servicer Default other than such
conservatorship or receivership or the insolvency of the Servicer exists, the
conservator or receiver may have the power to prevent either the Trustee or
the majority of the Certificateholders from effecting a Service Transfer.
Reports to Certificateholders
Unless otherwise specified in the related Prospectus Supplement, for each
Series of Certificates, on each Distribution Date, or as soon thereafter as is
practicable, as specified in the related Prospectus Supplement, the Trustee as
the paying agent (the "Paying Agent") will forward to each Certificateholder
of record a statement prepared by the Servicer setting forth, among other
things: (a) the total amount distributed, (b) the amount of the distribution
on such Distribution Date allocable to principal on the Certificates, (c) the
amount of such distribution allocable to interest on the Certificates, (d) the
amount of collections of Principal Receivables processed during the preceding
month or months since the last Distribution Date and allocated in respect of
the Certificates, (e) the aggregate amount of Principal Receivables, the
Investor Interest and the Investor Interest as a percentage of the aggregate
amount of the Principal Receivables in the Trust as of the end of the last day
of the preceding Monthly Period or Periods since the last Distribution Date,
(f) the aggregate outstanding balance of Accounts which are 30-59, 60-89 and
90 or more days delinquent (or a similar classification of delinquency) as of
the end of the last day of the preceding Monthly Period or Periods since the
last Distribution Date, (g) the aggregate Investor Default Amount for the
preceding Monthly Period or Periods since the last Distribution Date, (h) the
amount of Investor Charge-Offs for the preceding Monthly Period or Periods
since the last Distribution
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Date and the amount of reimbursements of previous Investor Charge-Offs for the
preceding Monthly Period or Periods since the last Distribution Date, (i) the
amount of the Investor Servicing Fee for the preceding Monthly Period or
Periods since the last Distribution Date, (j) the amount available under any
Enhancement and Credit Enhancement, if any, as of the close of business on
such Distribution Date, (k) the "pool factor" as of the end of the related
Record Date (consisting of a seven-digit decimal expressing the ratio of the
Investor Interest to the initial Investor Interest), (1) the aggregate amount
of collections on Finance Charge Receivables and annual membership fees
processed during the preceding Monthly Period or Periods since the last
Distribution Date, (m) the Portfolio Yield for the preceding Monthly Period or
Periods since the last Distribution Date, and (n) certain information relating
to the floating or variable Certificate Rates, if applicable, for the Monthly
Period or Periods ending on such Distribution Date. In the case of a Series of
Certificates having more than one Class, the statements forwarded to
Certificateholders will provide information as to each Class of Certificates,
as appropriate.
On or before January 31 of each calendar year or such other date as
specified in the related Prospectus Supplement, the Paying Agent will furnish
to each person who at any time during the preceding calendar year was a
Certificateholder of record, a statement prepared by the Servicer containing
the information required to be contained in the regular monthly report to
Certificateholders, as set forth in clauses (a), (b) and (c) above aggregated
for such calendar year or the applicable portion thereof during which such
person was a 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 Certificateholders to
prepare their United States tax returns.
Evidence as to Compliance
The Agreement and each New Agreement will provide that on or before October
31 of each calendar year or such other date as specified in the related
Prospectus Supplement, the Servicer will cause a firm of independent certified
public accountants to furnish a report to the effect that such accounting firm
has made a study and evaluation of the Servicer's internal accounting controls
relative to the servicing of the Accounts and that, on the basis of such
examination, such firm is of the opinion that, assuming the accuracy of
reports by the Servicer's third party agents, the system of internal
accounting controls in effect on the date of such statement relating to
servicing procedures performed by the Servicer, taken as a whole, was
sufficient for the prevention and detection of errors and irregularities in
amounts that would be material to the financial statements of the Servicer and
that such servicing was conducted in compliance with the sections of the
related Agreement during the period covered by such report (which shall be the
period from October 1 (or for the initial period, the relevant Closing Date)
of the preceding calendar year to and including September 30 of such calendar
year), except for such exceptions or errors as such firm shall believe to be
immaterial and such other exceptions as shall be set forth in such statement.
The Agreement and each New Agreement will provide for delivery to the
Trustee on or before October 31 of each calendar year or such other date as
specified in the related Prospectus Supplement, of an annual statement signed
by an officer of the Servicer to the effect that the Servicer has fully
performed its obligations under the Agreement throughout the preceding year,
or, if there has been a default in the performance of any such obligation,
specifying the nature and status of the default.
Amendments
Each Agreement and any Series Supplement may be amended by the Transferor,
the Servicer and the related Trustee, without the consent of
Certificateholders of any Series then outstanding, for any purpose, provided
that (i) the Transferor delivers to the Trustee a certificate of an authorized
officer of the Transferor to the effect that such amendment will not adversely
affect in any material respect the interest of such Certificateholders, (ii)
the Transferor delivers a Tax Opinion to the Trustee and (iii) such amendment
will not result in a withdrawal or reduction of the rating of any outstanding
Series under the related Trust by any Rating Agency. Such an amendment may be
entered into in order to comply with or obtain the benefits of certain recent
and future tax legislation (such as legislation creating FASITs), as described
below under "Certain U.S. Federal Income Tax Consequences--Recent
Legislation."
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Each Agreement and the related Series Supplement may be amended by the
Transferor, the Servicer and the related Trustee with the consent of the
holders of Certificates evidencing undivided interests aggregating not less
than 66 2/3% (or such other percentage specified in the related Prospectus
Supplement) of the Investor Interests for all Series of the related Trust, for
the purpose of adding any provisions to, changing in any manner or eliminating
any of the provisions of the Agreement or the related Series Supplement or of
modifying in any manner the rights of Certificateholders of any outstanding
Series of the Trust. No such amendment, however, may (a) reduce in any manner
the amount of, or delay the timing of, distributions required to be made on
the related Series or any Series, (b) change the definition of or the manner
of calculating the interest of any Certificateholder of such Series or any
Certificateholder of any other Series issued by the Trust or (c) reduce the
aforesaid percentage of undivided interests the holders of which are required
to consent to any such amendment, in each case without the consent of all
Certificateholders of the related Series and Certificateholders of all Series
adversely affected. Promptly following the execution of any amendment to the
Agreement, the Trustee will furnish written notice of the substance of such
amendment to each Certificateholder. Any Series Supplement and any amendments
regarding the addition or removal of Receivables or Participations from the
Trust will not be considered an amendment requiring Certificateholder consent
under the provisions of the related Agreement and any Series Supplement.
List of Certificateholders
With respect to each Series of Certificates, upon written request of
Certificateholders of record representing undivided interests in the Trust
aggregating not less than 10% (or such other percentage specified in the
related Prospectus Supplement) of the Investor Interest, the Trustee after
having been adequately indemnified by such Certificateholders for its costs
and expenses, and having given the Servicer notice that such request has been
made, will afford such Certificateholders access during business hours to the
current list of Certificateholders of the Trust for purposes of communicating
with other Certificateholders with respect to their rights under the
Agreement. See "--Book-Entry Registration" and "--Definitive Certificates"
above.
The Trustee
The Prospectus Supplement for each Series specifies the Trustee under the
related Agreement. The Transferor, the Servicer and their respective
affiliates may from time to time enter into normal banking and trustee
relationships with the Trustee and its affiliates. The Trustee, the
Transferor, the Servicer and any of their respective affiliates may hold
Certificates in their own names. In addition, for purposes of meeting the
legal requirements of certain local jurisdictions, the Trustee shall have the
power to appoint a co-trustee or separate trustees of all or any part of the
Trust. In the event of such appointment, all rights, powers, duties and
obligations conferred or imposed upon the Trustee by the Agreement shall be
conferred or imposed upon the Trustee and such separate trustee or co-trustee
jointly, or, in any jurisdiction in which the Trustee shall be incompetent or
unqualified to perform certain acts, singly upon such separate trustee or co-
trustee who shall exercise and perform such rights, powers, duties and
obligations solely at the direction of the Trustee.
The Trustee may resign at any time, in which event the Transferor will be
obligated to appoint a successor Trustee. The Transferor may also remove the
Trustee if the Trustee ceases to be eligible to continue as such under the
Agreement or if the Trustee becomes insolvent. In such circumstances, the
Transferor will be obligated to appoint a successor Trustee. Any resignation
or removal of the Trustee and appointment of a successor Trustee does not
become effective until acceptance of the appointment by the successor Trustee.
CREDIT ENHANCEMENT
General
For any Series, Credit Enhancement may be provided with respect to one or
more Classes thereof. Credit Enhancement may be in the form of the
subordination of one or more Classes of the Certificates of such Series, the
establishment of a cash collateral guaranty or account, a collateral interest,
a letter of credit, a surety bond,
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an insurance policy, a spread account, a reserve account, the use of cross-
support features or another method of
Credit Enhancement described in the related Prospectus Supplement, or any
combination of the foregoing. If so specified in the related Prospectus
Supplement, any form of Credit Enhancement may be structured so as to be drawn
upon by more than one Class to the extent described therein.
Unless otherwise specified in the related Prospectus Supplement for a
Series, the Credit Enhancement will not provide protection against all risks
of loss and will not guarantee repayment of the entire principal balance of
the Certificates and interest thereon. If losses occur which exceed the amount
covered by the Credit Enhancement or which are not covered by the Credit
Enhancement, Certificateholders will bear their allocable share of
deficiencies.
If Credit Enhancement is provided with respect to a Series, the related
Prospectus Supplement includes a description of (a) the amount payable under
such Credit Enhancement, (b) any conditions to payment thereunder not
otherwise described herein, (c) the conditions (if any) under which the amount
payable under such Credit Enhancement may be reduced and under which such
Credit Enhancement may be terminated or replaced and (d) any material
provision of any agreement relating to such Credit Enhancement. Additionally,
the related Prospectus Supplement may set forth certain information with
respect to any provider of Credit Enhancement (a "Credit Enhancement
Provider"), including (i) a brief description of its principal business
activities, (ii) its principal place of business, place of incorporation and
the jurisdiction under which it is chartered or licensed to do business, (iii)
if applicable, the identity of regulatory agencies which exercise primary
jurisdiction over the conduct of its business and (iv) its total assets, and
its stockholders' or policy holders' surplus, if applicable, and other
appropriate financial information as of the date specified in the Prospectus
Supplement. If so specified in the related Prospectus Supplement, Credit
Enhancement with respect to a Series may be available to pay principal of the
Certificates of such Series following the occurrence of certain Pay Out Events
with respect to such Series. In such event, the Credit Enhancement Provider
may have an interest in certain cash flows in respect of the Receivables to
the extent described in such Prospectus Supplement (the "Enhancement Invested
Amount").
Subordination
If so specified in the related Prospectus Supplement, one or more Classes
of any Series will be subordinated as described in the related Prospectus
Supplement to the extent necessary to fund payments with respect to the Senior
Certificates. The rights of the holders of any such Subordinated Certificates
to receive distributions of principal and/or interest on any Distribution Date
for such Series will be subordinate in right and priority to the rights of the
holders of Senior Certificates, but only to the extent set forth in the
related Prospectus Supplement. If so specified in the related Prospectus
Supplement, subordination may apply only in the event of certain types of
losses not covered by another Credit Enhancement. The related Prospectus
Supplement also sets forth any applicable information concerning the amount of
subordination of a Class or Classes of Subordinated Certificates in a Series,
the circumstances in which such subordination will be applicable, the manner,
if any, in which the amount of subordination will decrease over time, and the
conditions under which amounts available from payments that would otherwise be
made to holders of such Subordinated Certificates will be distributed to
holders of Senior Certificates. If collections of Receivables otherwise
distributable to holders of a subordinated Class of a Series will be used as
support for a Class of another Series, the related Prospectus Supplement
specifies the manner and conditions for applying such a cross-support feature.
Cash Collateral Guaranty or Account
If so specified in the related Prospectus Supplement, support for a Series
or one or more Classes thereof will be provided by a guaranty (the "Cash
Collateral Guaranty") secured by the deposit of cash or certain permitted
investments in an account (the "Cash Collateral Account") reserved for the
beneficiaries of the Cash Collateral Guaranty or by a Cash Collateral Account
alone. The amount available pursuant to the Cash Collateral Guaranty or the
Cash Collateral Account will be the lesser of amounts on deposit in the Cash
Collateral Account and an amount specified in the related Prospectus
Supplement. The related Prospectus Supplement sets forth the circumstances
under which payments are made to beneficiaries of the Cash Collateral Guaranty
from the Cash Collateral Account or from the Cash Collateral Account directly.
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Collateral Interest
If so specified in the related Prospectus Supplement, support for a Series
or one or more Classes thereof will be provided initially by an undivided
interest in the Trust (the "Collateral Interest") in an amount initially equal
to a percentage of the Certificates of such Series as specified in the
Prospectus Supplement. Such Series may also have the benefit of a Cash
Collateral Guaranty or Cash Collateral Account with an initial amount on
deposit therein, if any, as specified in the related Prospectus Supplement
which will be increased (i) to the extent the Transferor elects, subject to
certain conditions specified in such Prospectus Supplement, to apply
collections of Principal Receivables allocable to the Collateral Interest to
decrease the Collateral Interest, (ii) to the extent collections of Principal
Receivables allocable to the Collateral Interest are required to be deposited
into the Cash Collateral Account as specified in such Prospectus Supplement
and (iii) to the extent excess collections of Finance Charge Receivables are
required to be deposited into the Cash Collateral Account as specified in such
Prospectus Supplement. The total amount of the Credit Enhancement available
pursuant to the Collateral Interest and, if applicable, the Cash Collateral
Guaranty or Cash Collateral Account will be the lesser of the sum of the
Collateral Interest and the amount on deposit in the Cash Collateral Account
and an amount specified in the related Prospectus Supplement. The related
Prospectus Supplement sets forth the circumstances under which payments which
otherwise would be made to holders of the Collateral Interest will be
distributed to holders of Certificates and, if applicable, the circumstances
under which payment will be made under the Cash Collateral Guaranty or under
the Cash Collateral Account.
Letter of Credit
If so specified in the related Prospectus Supplement, support for a Series
or one or more Classes thereof will be provided by one or more letters of
credit. A letter of credit may provide limited protection against certain
losses in addition to or in lieu of other Credit Enhancement. The issuer of
the letter of credit will be obligated to honor demands with respect to such
letter of credit, to the extent of the amount available thereunder, to provide
funds under the circumstances and subject to such conditions as are specified
in the related Prospectus Supplement.
The maximum liability of the issuer of the letter of credit under such
letter of credit will generally be an amount equal to a percentage specified
in the related Prospectus Supplement of the initial Investor Interest of a
Series or a Class of such Series. The maximum amount available at any time to
be paid under a letter of credit will be determined in the manner specified
therein and in the related Prospectus Supplement.
Surety Bond or Insurance Policy
If so specified in the related Prospectus Supplement, insurance with
respect to a Series or one or more Classes thereof will be provided by one or
more insurance companies. Such insurance will guarantee, with respect to one
or more Classes of the related Series, distributions of interest or principal
in the manner and amount specified in the related Prospectus Supplement. If so
specified in the related Prospectus Supplement, a surety bond will be
purchased for the benefit of the holders of any Series or Class of such Series
to assure distributions of interest or principal with respect to such Series
or Class of Certificates in the manner and amount specified in the related
Prospectus Supplement.
Spread Account
If so specified in the related Prospectus Supplement, support for a Series
or one or more Classes thereof will be provided by the periodic deposit of
certain available excess cash flow from the Trust assets into an account (the
"Spread Account") intended to assist with subsequent distribution of interest
and principal on the Certificates of such Class or Series in the manner
specified in the related Prospectus Supplement.
Reserve Account
If so specified in the related Prospectus Supplement, support for a Series
or one or more Classes thereof or any Enhancement related thereto will be
provided by the establishment of a reserve account (the "Reserve Account").
The Reserve Account may be funded, to the extent provided in the related
Prospectus Supplement,
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by an initial cash deposit, the retention of certain periodic distributions of
principal or interest or both otherwise payable to one or more Classes of
Certificates, including the Subordinated Certificates, or the provision of a
letter of credit, guaranty, insurance policy or other form of credit or any
combination thereof. The Reserve Account will be established to assist with
the subsequent distribution of principal or interest on the Certificates of
such Series or Class thereof or such other amount owing on any Enhancement
thereto in the manner provided in the related Prospectus Supplement.
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES
Transfer of Receivables
The Transferor will represent and warrant in the Agreement and each New
Agreement that the transfer of Receivables by it to the related Trust is
either a valid transfer and assignment to such Trust of all right, title and
interest of the Transferor in and to the related Receivables, except for the
interest of the Transferor as holder of the Transferor Certificate, or the
grant to the Trust of a security interest in such Receivables. The Transferor
also will represent and warrant in the Agreement and each New Agreement that,
in the event the transfer of Receivables by the Transferor to the related
Trust is deemed to create a security interest under the Uniform Commercial
Code, as in effect in the State of Delaware (the "UCC"), there will exist a
valid, subsisting and enforceable first priority perfected security interest
in such Receivables created thereafter in favor of such Trust on and after
their creation, except for certain tax and other governmental liens. For a
discussion of the Trust's rights arising from a breach of these warranties,
see "Description of the Certificates--Representations and Warranties."
The Transferor will represent as to Receivables to be conveyed that the
Receivables are "accounts" for purposes of the UCC. Both the transfer and
assignment of accounts and the transfer of accounts as security for an
obligation are treated under Article 9 of the UCC as creating a security
interest therein and are subject to its provisions, and the filing of an
appropriate financing statement is required to perfect the security interest
of the related Trust. Financing statements covering the Receivables have been
and will be filed with the appropriate governmental authority to protect the
interests of the related Trust in the Receivables.
There are certain limited circumstances under the UCC in which a prior or
subsequent transferee of Receivables coming into existence after a Closing
Date could have an interest in such Receivables with priority over such
Trust's interest. Under the Agreement and each New Agreement, however, the
Transferor will represent and warrant that it transferred the Receivables to
the Trust free and clear of the lien of any third party. In addition, the
Transferor will covenant that it will not sell, pledge, assign, transfer or
grant any lien on any Receivable (or any interest therein) other than to the
Trust. A tax or government lien or other nonconsensual lien on property of the
Transferor arising prior to the time a Receivable comes into existence may
also have priority over the interest of the Trust in such Receivable. In
addition, if the FDIC were appointed as receiver of the Transferor, certain
administrative expenses of the receiver may also have priority over the
interest of the Trust in such Receivable.
Certain Matters Relating to Receivership
The Federal Deposit Insurance Act ("FDIA"), as amended by the Financial
Institutions Reform, Recovery and Enforcement Act of 1989 ("FIRREA"), sets
forth certain powers that the FDIC could exercise if it were appointed as
conservator or receiver of the Transferor or the Servicer. Among other things,
the FDIA grants such a conservator or receiver the power to repudiate
contracts of, and to request a stay of up to 90 days of any judicial action or
proceeding involving, the Transferor or the Servicer.
To the extent that (i) the Transferor granted a security interest in the
Receivables to the Trust, (ii) the interest was validly perfected before the
Transferor's insolvency, (iii) the interest was not taken or granted in
contemplation of the Transferor's insolvency or with the intent to hinder,
delay or defraud the Transferor or its creditors, (iv) the Agreement is
continuously a record of the Bank, and (v) the Agreement represents a bona
fide and arm's length transaction undertaken for adequate consideration in the
ordinary course of business and that
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the Trustee is the secured party and is not an insider or affiliate of the
Transferor, such valid perfected security interest of the Trustee should be
enforceable (to the extent of the Trust's "actual direct compensatory
damages") notwithstanding the insolvency of, or the appointment of a receiver
or conservator for, the Transferor and payments to the Trust with respect to
the Receivables (up to the amount of such damages) should not be subject to an
automatic stay of payment or to recovery by the FDIC as conservator or
receiver of the Transferor. If, however, the FDIC were to assert that the
security interest was unperfected or unenforceable or were to require the
Trustee to establish its right to those payments by submitting to and
completing the statutory administrative claims procedure established under
FIRREA or the FDIC as conservator or receiver were to request a stay of
proceedings with respect to the Transferor as provided under FIRREA, delays in
payments on the Certificates and possible reductions in the amount of those
payments could occur. The FDIA does not define the term "actual direct
compensatory damages." The FDIC has stated that a claim for "actual direct
compensatory damages" is limited to such damages determined as of the date of
appointment of the FDIC as conservator or receiver. Since the FDIC may delay
repudiation or disaffirmation for up to 180 days following such appointment,
investors may not have a claim for interest accrued during this 180 day
period. On December 18, 1998, the FDIC proposed a statement of policy
regarding the treatment of asset-backed securitization transactions in the
event of conservatorship or receivership. In addition, in one case involving
the repudiation by the Resolution Trust Corporation of certain secured zero-
coupon bonds issued by a savings association, a United States federal district
court held that "actual direct compensatory damages" in the case of a
marketable security meant the market value of the repudiated bonds as of the
date of repudiation. If that court's view were applied to determine the
Trust's "actual direct compensatory damages" in the event the FDIC repudiated
the Transferor's obligations under the Agreement, the amount paid to
Certificateholders could, depending upon circumstances existing on the date of
the repudiation, be less than the principal of the Certificates and the
interest accrued thereon to the date of payment.
The Agreement provides that, upon the appointment of a conservator or
receiver or upon a voluntary liquidation with respect to the Transferor, the
Transferor will promptly give notice thereof to the Trustee and a Pay Out
Event will occur with respect to all Series then outstanding. Pursuant to the
Agreement, newly created Principal Receivables would not be transferred to the
Trust on and after any such appointment or voluntary liquidation, and the
Trustee would proceed to sell, dispose of or otherwise liquidate the
Receivables in a commercially reasonable manner and on commercially reasonable
terms, unless otherwise instructed within a specified period by holders of
certificates representing undivided interests aggregating more than 50% of the
investor interest of each outstanding Series (or with respect to each Series
with two or more Classes, 50% of each Class), or unless otherwise required by
the FDIC as receiver or conservator of the Transferor. Under the Agreement,
the proceeds from the sale of the Receivables allocable to the Certificates
would be treated as collections of the Receivables and would be distributed to
the Certificateholders. This procedure could be delayed, as described above.
If the only Pay Out Event to occur is either the insolvency of the Transferor
or the appointment of a conservator or receiver for the Transferor, the FDIC
as conservator or receiver may have the power to prevent the early sale,
liquidation or disposition of the Receivables and the commencement of the
Rapid Amortization Period. See "Description of the Certificates--Pay Out
Events."
If, upon the insolvency of the Servicer, the Servicer were to be placed
into conservatorship or receivership, the FDIC as conservator or receiver
would have the power to repudiate and refuse to perform any obligations,
including servicing obligations, of the Servicer under the Agreement or any
other contract, and to request a stay of up to 90 days of any judicial action
or proceeding involving the Servicer. In the event of a Servicer Default, if
the FDIC were appointed as conservator or receiver for the Servicer, and no
Servicer Default other than such conservatorship or receivership or insolvency
of the Servicer exists, the FDIC may have the power to prevent a transfer of
servicing to a successor Servicer or to appoint a successor Servicer chosen by
the FDIC.
In Octagon Gas Systems, Inc. v. Rimmer, 995 F.2d 948 (10th Cir. 1993),
cert. denied, 114 S. Ct. 554 (1993) ("Octagon"), the United States Court of
Appeals for the 10th Circuit suggested that even where a transfer of accounts
from a seller to a buyer constitutes a "true sale," the accounts would
nevertheless constitute property
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of the seller's bankruptcy estate in a bankruptcy of the seller. If the
Transferor were to be placed into receivership and a court were to follow the
Octagon court's reasoning, Certificateholders might experience delays in
payment or possibly losses in their investment in the Certificates. Counsel
has advised the Transferor that the facts of the Octagon case are
distinguishable from those in the sale transactions between the Transferor and
the Trust and that the reasoning of the Octagon case appears to be
inconsistent with established precedent and the UCC. In addition, because the
Transferor, the Trust and the transactions governed by the Agreement do not
have any particular link to the 10th Circuit, it is unlikely that the
Transferor would be subject to a receivership proceeding in the 10th Circuit.
Accordingly, the Octagon case should not be binding precedent on a court in a
receivership proceeding.
Consumer Protection Laws
The relationship of the cardholder and credit card issuer is extensively
regulated by Federal and state consumer protection laws. With respect to
credit cards issued by the Bank, the most significant of these laws include
the Federal Truth in Lending Act, Equal Credit Opportunity Act, Fair Debt
Collection Practices Act, Fair Credit Reporting Act and Electronic Funds
Transfer Act. These statutes impose disclosure requirements when a credit card
account is advertised, when it is opened, at the end of monthly billing
cycles, upon account renewal for accounts on which annual fees are assessed,
and at year end and, in addition, limit cardholder liability for unauthorized
use, prohibit certain discriminatory practices in extending credit, and impose
certain limitations on the type of account-related charges that may be
assessed. Federal legislation requires credit card issuers to disclose to
consumers the interest rates, annual cardholder fees, grace periods, balance
calculation methods, and other features associated with their credit card
accounts. Cardholders are entitled under current law to have payments and
credits applied to the credit card account promptly, to receive prescribed
notices and to have billing errors resolved promptly.
The Trust may be liable for certain violations of consumer protection laws
that apply to the Receivables, either as assignee of the Transferor with
respect to obligations arising before transfer of the Receivables to the Trust
or as a party directly responsible for obligations arising after the transfer.
In addition, a cardholder may be entitled to assert such violations by way of
set-off against his obligation to pay the amount of Receivables owing. The
Transferor covenants in the Agreement to accept the transfer of all
Receivables in an Account if any Receivable in such Account has not been
created in compliance with the requirements of such laws. The Bank has also
agreed in the Agreement to indemnify the Trust for, among other things, any
liability arising from such violations. See "Description of the Certificates--
Representations and Warranties."
Various proposed laws and amendments to existing laws have from time to
time been introduced in Congress and certain state and local legislatures
that, if enacted, would further regulate the credit card industry, certain of
which would, among other things, impose a ceiling on the rate at which a
financial institution may assess finance charges and fees on credit card
accounts that would be substantially below the rates of the finance charges
and fees the Bank currently assesses on its accounts. In March 1999, bills
were introduced into the United States Senate and the House of Representatives
containing proposed amendments to the Truth in Lending Act specifically
related to credit card issues. The bills, although not identical in scope,
seek, among other things, to prohibit the imposition of, or increases in, any
periodic rates or fees, under certain circumstances, including "inactivity
fees," over limit fees for transactions approved by a credit card issuer and
fees on cardholders who routinely pay monthly balances in full. Both bills
also require additional disclosure to credit cardholders in various
circumstances, including certain specific disclosure when "teaser" rates are
offered to a consumer, upon a proposed increase in periodic rates or fees or
upon the issuance of balance transfer checks. The Transferor cannot predict
whether these bills (whether in their present form or a modified form) or any
other similar legislation may ultimately be enacted as law. If such
legislation is enacted, it may, in part, limit the ability of the Transferor
and Servicer to impose or charge periodic charges and fees on certain
accounts. The potential effect of any legislation which limits the amount of
finance charges and fees that may be charged on credit cards could be to
reduce the portfolio yield on the Accounts. If such portfolio yield is
reduced, a Pay Out Event may occur and the Rapid Amortization Period would
commence.
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The Soldiers' and Sailors' Civil Relief Act of 1940 allows individuals on
active duty in the military to cap the interest rate on debts incurred before
the call to active duty to 6% per annum. In addition, subject to judicial
discretion, any action or court proceeding in which an individual in military
service is involved may be stayed if the individual's rights would be
prejudiced by denial of such stay.
Application of Federal and state bankruptcy and debtor relief laws would
affect the interests of the Certificateholders if such laws result in any
Receivables being written off as uncollectible when the applicable Enhancement
is equal to zero. See "Description of the Certificates--Defaulted Receivables;
Rebates and Fraudulent Charges; Investor Charge-Offs."
Industry Litigation
In October 1998, the United States Department of Justice (the "DOJ") filed
an antitrust lawsuit in federal court in New York City against VISA U.S.A.,
Inc., VISA International Inc. (together, "VISA") and MasterCard International
Incorporated ("MasterCard International") alleging that the two credit card
associations restrain competition and limit consumer choice. The DOJ in such
lawsuit challenges, among other things, the control of both VISA and
MasterCard International by the same set of banks, the ability of banks to
issue both MasterCard and VISA cards as well as the rules adopted by the two
associations prohibiting members from offering credit cards of certain
competitors. In public statements, both VISA and MasterCard International have
contested the DOJ's allegations. The Bank is unable to predict the effect of
such lawsuit on the Bank's credit card business. A final adverse decision
against VISA and MasterCard International, or a similar settlement with the
DOJ by the two associations, could result in changes in the current
associations and the Bank's ability to issue both MasterCard and VISA cards as
well as cards of certain other competitors.
CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES
General
The following discussion, summarizing certain anticipated U.S. Federal
income tax aspects of the purchase, ownership and disposition of the
Certificates of a Series, is based upon the provisions of the Internal Revenue
Code of 1986, as amended (the "Code"), proposed, temporary and final Treasury
regulations thereunder, and published rulings and court decisions in effect as
of the date hereof, all of which are subject to change, possibly
retroactively. This discussion does not address every aspect of the Federal
income tax laws that may be relevant to Certificate Owners of a Series in
light of their personal investment circumstances or to certain types of
Certificate Owners of a Series subject to special treatment under the U.S.
Federal income tax laws (for example, banks and life insurance companies).
Each prospective Certificate Owner is urged to consult its own tax advisor in
determining the Federal, state, local and foreign income and any other tax
consequence of the purchase, ownership and disposition of a Certificate.
Characterization of the Certificates as Indebtedness
Unless otherwise specified in the related Prospectus Supplement, special
tax counsel to the Bank ("Special Tax Counsel") will, upon issuance of a
Series of Certificates, advise the Bank based on the assumptions and
qualifications set forth in the opinion that the Certificates of such Series
that are offered pursuant to a Prospectus Supplement (the "Offered
Certificates;" and for purposes of this section "Certain U.S. Federal Income
Tax Consequences" the term "Certificate Owner" refers to a holder of a
beneficial interest in an Offered Certificate) will be treated as indebtedness
for Federal income tax purposes. However, opinions of counsel are not binding
on the Internal Revenue Service (the "IRS") and there can be no assurance that
the IRS could not successfully challenge this conclusion.
The Transferor expresses in the Agreement its intent that for Federal,
state and local income or franchise tax purposes, the Offered Certificates of
each Series will be indebtedness secured by the Receivables. The Transferor
agrees and each Certificateholder and Certificate Owner, by acquiring an
interest in an Offered Certificate, agrees or will be deemed to agree to treat
the Offered Certificates of such Series as indebtedness for Federal, state and
local income or franchise tax purposes. However, because different criteria
are used to
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determine the non-tax accounting characterization of the transactions
contemplated by the Agreement, the Transferor expects to treat such
transaction, for regulatory and financial accounting purposes, as a sale of an
ownership interest in the Receivables and not as a secured loan.
In general, whether for Federal income tax purposes a transaction
constitutes a sale of property or a loan, the repayment of which is secured by
the property, is a question of fact, the resolution of which is based upon the
economic substance of the transaction rather than its form or the manner in
which it is labeled. While the IRS and the courts have set forth several
factors to be taken into account in determining whether the substance of a
transaction is a sale of property or a secured loan for Federal income tax
purposes, the primary factor in making this determination is whether the
transferee has assumed the risk of loss or other economic burdens relating to
the property and has obtained the benefits of ownership thereof. Unless
otherwise set forth in a Prospectus Supplement, it is expected that, as set
forth in its opinion, Special Tax Counsel will analyze and rely on several
factors in reaching its opinion that the weight of the benefits and burdens of
ownership of the Receivables has not been transferred to the Certificate
Owners.
In some instances, courts have held that a taxpayer is bound by a
particular form it has chosen for a transaction, even if the substance of the
transaction does not accord with its form. Unless otherwise specified in a
Prospectus Supplement, it is expected that Special Tax Counsel will advise
that the rationale of those cases will not apply to the transaction evidenced
by a Series of Certificates, because the form of the transaction, as reflected
in the operative provisions of the documents, either is not inconsistent with
the characterization of the Offered Certificates of such Series as debt for
Federal income tax purposes or otherwise makes the rationale of those cases
inapplicable to this situation.
President Clinton's Fiscal Year 2000 Budget Proposal includes a provision
that would preclude a corporate taxpayer (but not the Internal Revenue
Service) from taking any position that the Federal income tax treatment of a
transaction is different from that dictated by its "form" if a "tax
indifferent person" has a direct or indirect interest in such transaction,
unless the taxpayer discloses the inconsistent position on its tax return. The
statutory language of the provision has not been drafted, and accordingly it
is unclear to what extent, if any, the provision would apply to the
Certificates. As drafted, however, the provision would apply only to
transactions entered into after the date of first "committee" action in
Congress.
Taxation of Interest Income of Certificateholders
As set forth above, it is expected that, unless otherwise specified in a
Prospectus Supplement, Special Tax Counsel will advise the Bank that the
Offered Certificates will constitute indebtedness for Federal income tax
purposes, and accordingly, interest thereon will be includible in income by
Certificate Owners as ordinary income in accordance with their respective
methods of tax accounting. Interest received on the Offered Certificates may
also constitute "investment income" for purposes of certain limitations of the
Code concerning the deductibility of investment interest expense.
While it is not anticipated that the Offered Certificates will be issued at
a greater than de minimis discount, under applicable Treasury regulations (the
"Regulations") the Offered Certificates may nevertheless be deemed to have
been issued with original issue discount ("OID"). This could be the case, for
example, if interest payments for a Series are not treated as "qualified
stated interest" because the IRS determines that (i) no reasonable legal
remedies exist to compel timely payment and (ii) the Offered Certificates do
not have terms and conditions that make the likelihood of late payment (other
than a late payment that occurs within a reasonable grace period) or
nonpayment a remote contingency. Applicable regulations provide that, for
purposes of the foregoing test, the possibility of nonpayment due to default,
insolvency, or similar circumstances, is ignored. Although this provision does
not directly apply to the Offered Certificates (because they have no actual
default provisions) the Transferor intends to take the position that, because
nonpayment can occur only as a result of events beyond its control
(principally, loss rates and payment delays on the Receivables substantially
in excess of those anticipated), nonpayment is a remote contingency. Based on
the foregoing, and on the fact that generally interest will accrue on the
Offered Certificates at a "qualified floating rate," the Transferor intends to
take the
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position that interest payments on the Offered Certificates constitute
qualified stated interest. If, however, interest payments for a Series were
not classified as "qualified stated interest," all of the taxable income to be
recognized with respect to the Offered Certificates would be includible in
income as OID but would not be includible again when the interest is actually
received.
If the Offered Certificates are in fact issued at a greater than de minimis
discount or are treated as having been issued with OID under the Regulations,
the following rules will apply. The excess of the "stated redemption price at
maturity" of an Offered Certificate over the original issue price (in this
case, the initial offering price at which a substantial amount of the Offered
Certificates are sold to the public) will constitute OID. A Certificate Owner
must include OID in income as interest over the term of the Offered
Certificate under a constant yield method. In general, OID must be included in
income in advance of the receipt of cash representing that income. In the case
of a debt instrument as to which the repayment of principal may be accelerated
as a result of the prepayment of other obligations securing the debt
instrument (a "Prepayable Instrument"), the periodic accrual of OID is
determined by taking into account both the prepayment assumptions used in
pricing the debt instrument and the prepayment experience. If this provision
applies to a Class of Certificates (which is unlikely, but not entirely free
from doubt), the amount of OID which will accrue in any given "accrual period"
may either increase or decrease depending upon the actual prepayment rate.
Accordingly, each Certificate Owner should consult its own tax advisor
regarding the impact to it of the OID rules if the Offered Certificates are
issued with OID. Under the Regulations, a holder of a Certificate issued with
de minimis OID must include such OID in income proportionately as principal
payments are made on a Class of Certificates.
A Certificate Owner who purchases an Offered Certificate at a discount from
its adjusted issue price may be subject to the "market discount" rules of the
Code. These rules provide, in part, for the treatment of gain attributable to
accrued market discount as ordinary income upon the receipt of partial
principal payments or on the sale or other disposition of the Offered
Certificate, and for the deferral of interest deductions with respect to debt
incurred to acquire or carry the market discount Offered Certificate.
A Certificate Owner who purchases an Offered Certificate for an amount in
excess of the sum of all amounts payable on such Certificate after the
purchase date other than payment of qualified stated interest (the "Remaining
Redemption Amount") shall be considered to have purchased the Certificate at a
premium. Such Certificate Owner may generally elect to amortize such premium
(as an offset to interest income), using a constant yield method, over the
remaining term of the Certificate.
A Certificate Owner who purchases an Offered Certificate that was issued
with OID for an amount less than or equal to the Remaining Redemption Amount
but in excess of the Certificate adjusted issue price (any such excess being
"acquisition premium") generally is permitted to reduce the daily portion of
OID otherwise includible in such Certificate Owner's taxable income.
Sale or Other Disposition of a Certificate
In general, a Certificate Owner will recognize gain or loss upon the sale,
exchange, redemption, or other taxable disposition of an Offered Certificate
measured by the difference between (i) the amount of cash and the fair market
value of any property received (other than amounts attributable to, and
taxable as, accrued interest) and (ii) the Certificate Owner's tax basis in
the Offered Certificate (which is equal, in general, to the purchase price of
the Certificate increased by any OID or market discount previously included in
income by the holder and decreased by any deductions previously allowed for
amortizable bond premium and by any payments reflecting principal or OID
received with respect to such Certificate). Subject to the market discount
rules discussed above and to the one-year holding requirement for long-term
capital gain treatment, any such gain or loss generally will be long-term
capital gain, provided that the Offered Certificate was held as a capital
asset and provided, further, that if the rules applicable to Prepayable
Instruments apply, any OID not previously accrued will be treated as ordinary
income. The maximum ordinary income rate for individuals, estates, and trusts
exceeds the maximum long-term capital gains rate for such taxpayers. In
addition, capital losses generally may be used only to offset capital gains.
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Tax Characterization of the Trust
The Agreement permits the issuance of Classes of Certificates that are
treated for Federal income tax purposes either as indebtedness or as an
interest in a partnership. Accordingly, a Trust could be characterized either
as (i) a security device to hold Receivables securing the repayment of the
Certificates of all Series or (ii) a partnership in which the Transferor and
holders of certain Classes of Certificates are partners, and which has issued
debt represented by other Classes of Certificates (including, unless otherwise
specified in a Series Supplement, the Offered Certificates). In connection
with the issuance of Certificates of any Series, Special Tax Counsel will
render an opinion to the Bank, based on the assumptions and qualifications set
forth therein, that under then current law, the issuance of the Certificates
of such Series will not cause the applicable Trust to be characterized for
Federal income tax purposes as an association (or publicly traded partnership)
taxable as a corporation. The assumptions and qualifications set forth in such
opinion will include the qualification that the opinion is limited to the
issuance of the Certificates of such Series by such Trust and an assumption
that any secondary transactions entered into with respect to any Class of
Certificates (such as the deposit of Certificates into a second trust and the
issuance of securities out of that trust) will not adversely affect the
Federal income tax status of such Trust.
The opinion of Special Tax Counsel with respect to Offered Certificates and
a Trust will not be binding on the courts or the IRS. It is possible that the
IRS could assert that, for purposes of the Code, the transaction contemplated
by this Prospectus and a Prospectus Supplement constitutes a sale of the
Receivables (or an interest therein) to the Certificate Owners of one or more
Series or Classes and that the proper classification of the legal relationship
between the Bank and some or all of the Certificate Owners or
Certificateholders of one or more Series resulting from the transaction is
that of a partnership or a publicly traded partnership taxable as a
corporation. The Transferor currently does not intend to comply with the
Federal income tax reporting requirements that would apply if any Classes of
Certificates were treated as interests in a partnership (unless, as is
permitted by the Agreement, an interest in the applicable Trust which is
issued or sold is intended to be classified as an interest in a partnership).
If a Trust were treated in whole or in part as a partnership in which some
or all Certificate Owners of one or more Series were partners, that
partnership could be classified as a publicly traded partnership taxable as a
corporation. A partnership will be classified as a publicly traded partnership
taxable as a corporation if equity interests therein are traded on an
"established securities market," or are "readily tradeable" on a "secondary
market" or its "substantial equivalent" unless certain exceptions apply. One
such exception would apply if the Trust is not engaged in a "financial
business" and 90% or more of its income consists of interest and certain other
types of passive income. Because Treasury regulations do not clarify the
meaning of a "financial business" for this purpose, it is unclear whether this
exception applies. The Transferor has taken and intends to take measures
designed to reduce the risk that a Trust could be classified as a publicly
traded partnership taxable as a corporation by reason of trading of interests
in such Trust other than the Offered Certificates and other certificates with
respect to which an opinion is rendered that such certificates constitute debt
for Federal income tax purposes. However, there can be no assurance that a
Trust could not become a publicly traded partnership, because certain of the
actions necessary to comply with such exceptions are not fully within the
control of the Transferor.
If a transaction were treated as creating a partnership between the
Transferor and the Certificate Owners of one or more Series, the partnership
itself would not be subject to Federal income tax (unless it were to be
characterized as a publicly traded partnership taxable as a corporation);
rather, the partners of such partnership, including the Certificate Owners of
such Series, would be taxed individually on their respective distributive
shares of the partnership's income, gain, loss, deductions and credits. The
amount and timing of items of income and deductions of a Certificate Owner
could differ if the Offered Certificates were held to constitute partnership
interests, rather than indebtedness. Moreover, unless the partnership were
treated as engaged in a trade or business, an individual's share of expenses
of the partnership would be miscellaneous itemized deductions that, in the
aggregate, are allowed as deductions only to the extent they exceed two
percent of the individual's adjusted gross income, and would be subject to
reduction under Section 68 of the Code if the individual's adjusted gross
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income exceeded certain limits. As a result, the individual might be taxed on
a greater amount of income than the stated rate on the Offered Certificates.
Finally, if the partnership were a publicly traded partnership that qualifies
for exemption from taxation as a corporation, all or a portion of any taxable
income allocated to a Certificate Owner that is a pension, profit-sharing or
employee benefit plan or other tax-exempt entity (including an individual
retirement account) may, under certain circumstances, constitute "unrelated
business taxable income" which generally would be taxable to the holder.
Partnership characterization also may have adverse state and local income or
franchise tax consequences for a Certificate Owner.
If it were determined that a transaction created an entity classified as an
association or as a publicly traded partnership taxable as a corporation, a
Trust would be subject to Federal income tax at corporate income tax rates on
the income it derives from the Receivables, which would reduce the amounts
available for distribution to the Certificate Owners, possibly including
Certificate Owners of a Class that is treated as indebtedness. Such
classification may also have adverse state and local tax consequences that
would reduce amounts available for distribution to Certificate Owners. Cash
distributions to the Certificate Owners (except any Class not recharacterized
as an equity interest in an association) generally would be treated as
dividends for tax purposes to the extent of such deemed corporation's earnings
and profits.
FASIT Legislation
Certain provisions of the Code provide for the creation of a new type of
entity for Federal income tax purposes, the "financial asset securitization
investment trust" ("FASIT"). However, although these provisions were effective
September 1, 1997, many technical issues concerning FASITs must be addressed
by Treasury regulations which have not yet been issued. Although transition
rules permit an entity in existence on August 31, 1997, to elect FASIT status,
at the present time it is not clear how outstanding interests of such an
entity would be treated subsequent to such an election. An Agreement may be
amended in accordance with the provisions thereof to provide that the
Transferor may cause a FASIT election to be made for the related Trust if the
Transferor delivers to the Trustee an opinion of counsel to the effect that,
for Federal income tax purposes, (i) the issuance of FASIT regular interests
will not adversely affect the tax characterization as debt of Certificates of
any outstanding Series or Class that were characterized as debt at the time of
their issuance, (ii) following such issuance the applicable Trust will not be
deemed to be a publicly traded partnership taxable as a corporation and (iii)
such issuance will not cause or constitute an event in which gain or loss
would be recognized by any Certificateholder or such Trust.
Foreign Investors
As set forth above, it is expected that Special Tax Counsel will render an
opinion, upon issuance, that the Offered Certificates will be treated as debt
for U.S. Federal income tax purposes. The following information describes the
U.S. Federal income tax treatment of investors that are not U.S. persons
("Foreign Investors") if the Offered Certificates are treated as debt. The
term "Foreign Investor" means any person other than (i) a citizen or resident
of the United States, (ii) a corporation, partnership or other entity
organized in or under the laws of the United States or any political
subdivision thereof, (iii) an estate the income of which is includible in
gross income for U.S. Federal income tax purposes, regardless of its source or
(iv) a trust if a U.S. court is able to exercise primary supervision over the
administration of such trust and one or more U.S.persons have the authority to
control all substantial decisions of such trust.
Interest, including OID, paid to a Foreign Investor will be subject to U.S.
withholding taxes at a rate of 30% unless (x) the income is "effectively
connected" with the conduct by such Foreign Investor of a trade or business in
the United States or (y) the Foreign Investor and each securities clearing
organization, bank, or other financial institution that holds the Offered
Certificates on behalf of the customer in the ordinary course of its trade or
business, in the chain between the Certificate Owner and the U.S. person
otherwise required to withhold the U.S. tax, complies with applicable
identification requirements and, in addition (i) the non-U.S. Certificate
Owner does not actually or constructively own 10% or more of the total
combined voting power of all classes of stock of the Transferor entitled to
vote (or of a profits or capital interest of a trust characterized as a
partnership),
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(ii) the non-U.S. Certificate Owner is not a controlled foreign corporation
that is related to the Transferor (or a trust treated as a partnership)
through stock ownership, (iii) the non-U.S. Certificate Owner is not a bank
receiving interest described in Code Section 881(c)(3)(A), (iv) such interest
is not contingent interest described in Code Section 871(h)(4), and (v) the
non-U.S. Certificate Owner does not bear certain relationships to any holder
of the Transferor Certificate other than the Transferor or any holder of the
Certificates of any Series not properly characterized as debt. Applicable
identification requirements generally will be satisfied if there is delivered
to a securities clearing organization (i) IRS Form W-8 signed under penalties
of perjury by the Certificate Owner, stating that the Certificate Owner is not
a U.S.person and providing such Certificate Owner's name and address, (ii) IRS
Form 1001, signed by the Certificate Owner or such Certificate Owner's agent,
claiming exemption from withholding under an applicable tax treaty, or (iii)
IRS Form 4224 signed by the Certificate Owner or such owner's agent, claiming
exemption from withholding of tax on income effectively connected with the
conduct of a trade or business in the United States; provided that in any such
case (x) the applicable form is delivered pursuant to applicable procedures
and is properly transmitted to the United States entity otherwise required to
withhold tax and (y) none of the entities receiving the form has actual
knowledge that the Certificate Owner is a U.S. person.
On October 6, 1997, the Department of the Treasury issued new regulations
(the "New Regulations") which make certain modifications to the withholding,
backup withholding and information reporting rules described above. The New
Regulations attempt to unify certification requirements and modify reliance
standards. The New Regulations will generally be effective for payments made
after December 31, 1999, subject to certain transition rules. Prospective
investors are urged to consult their own tax advisors regarding the New
Regulations.
A Certificate Owner that is a nonresident alien or foreign corporation will
not be subject to U.S. Federal income tax on gain realized upon the sale,
exchange, or redemption of an Offered Certificate, provided that (i) such gain
is not effectively connected with the conduct of a trade or business in the
United States, (ii) in the case of a Certificate Owner that is an individual,
such Certificate Owner is not present in the United States for 183 days or
more during the taxable year in which such sale, exchange, or redemption
occurs, and (iii) in the case of gain representing accrued interest, the
conditions described in the second preceding paragraphare satisfied.
If the interests of the Certificate Owners of a Series were reclassified as
interests in a partnership (not taxable as a corporation), such
recharacterization could cause a Foreign Investor to be treated as engaged in
a trade or business in the United States. In such event the Certificate Owner
of such Series would be required to file a Federal income tax return and, in
general, would be subject to Federal income tax, including branch profits tax
in the case of a Certificateholder that is a corporation, on its net income
from the partnership. Further, the partnership would be required, on a
quarterly basis, to pay withholding tax equal to the sum, for each foreign
partner, of such foreign partner's distributive share of "effectively
connected" income of the partnership multiplied by the highest rate of tax
applicable to that foreign partner. The tax withheld from each foreign partner
would be credited against such foreign partner's U.S.Federal income tax
liability.
If a Trust were taxable as a corporation, distributions to foreign persons,
to the extent treated as dividends, would generally be subject to withholding
at the rate of 30%, unless such rate were reduced by an applicable tax treaty.
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STATE AND LOCAL TAXATION
The Trustee is located in the State of Delaware and servicing of the
Receivables will take place in Delaware. Unless otherwise specified in the
Prospectus Supplement, Special Tax Counsel will render its opinion that the
Offered Certificates will be treated as indebtedness for Delaware income tax
purposes and Certificate Owners not otherwise subject to taxation in Delaware
will not become subject to taxation in Delaware solely because of Certificate
Owner's ownership of an Offered Certificate. Assuming that the Trust is not
subject to Federal income taxes at the entity level, the Trust will not be
subject to Delaware income tax at the entity level.
THE DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL INFORMATION ONLY AND
DOES NOT PURPORT TO ADDRESS THE APPLICABILITY OF STATE TAX LAWS OTHER THAN THE
TREATMENT OF THE OFFERED CERTIFICATES AND THE CERTIFICATE OWNERS UNDER THE
LAWS OF DELAWARE AND MAY NOT BE APPLICABLE DEPENDING UPON A PARTICULAR
CERTIFICATE OWNER'S TAX SITUATION. PROSPECTIVE INVESTORS ARE URGED TO CONSULT
THEIR TAX ADVISORS REGARDING STATE AND LOCAL TAX TREATMENT OF THE TRUST AND
THE CERTIFICATES OF ANY SERIES, AND THE CONSEQUENCES OF PURCHASE, OWNERSHIP OR
DISPOSITION OF THE CERTIFICATES OF ANY SERIES UNDER ANY STATE OR LOCAL TAX
LAW.
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EMPLOYEE BENEFIT PLAN CONSIDERATIONS
Section 406 of ERISA and Section 4975 of the Code prohibit a pension,
profit sharing or other employee benefit plan from engaging in certain
transactions involving "plan assets" with persons that are "parties in
interest" under ERISA or "disqualified persons" under the Code with respect to
the plan. ERISA also imposes certain duties on persons who are fiduciaries of
plans subject to ERISA and prohibits certain transactions between a plan and
parties in interest with respect to such plans. Under ERISA, any person who
exercises any authority or control respecting the management or disposition of
the assets of a plan is considered to be a fiduciary of such plan (subject to
certain exceptions not here relevant). A violation of these "prohibited
transaction" rules may generate excise tax and other liabilities under ERISA
and the Code for such persons.
Plan fiduciaries must determine whether the acquisition and holding of the
Certificates of a Series and the operations of the Trust would result in
direct or indirect prohibited transactions under ERISA and the Code. The
operations of the Trust could result in prohibited transactions if Benefit
Plans that purchase the Certificates of a Series are deemed to own an interest
in the underlying assets of the Trust. There may also be an improper
delegation of the responsibility to manage Benefit Plan assets if Benefit
Plans that purchase the Certificates are deemed to own an interest in the
underlying assets of the Trust.
Pursuant to a regulation (the "Plan Asset Regulation") issued by the
Department of Labor ("DOL") concerning the definition of what constitutes the
"plan assets" of an employee benefit plan subject to ERISA or the Code, or an
individual retirement account ("IRA") (collectively referred to as "Benefit
Plans"), the assets and properties of certain entities in which a Benefit Plan
makes an equity investment could be deemed to be assets of the Benefit Plan in
certain circumstances. Accordingly, if Benefit Plans purchase Certificates of
a Series, the Trust could be deemed to hold plan assets unless one of the
exceptions under the Plan Asset Regulation is applicable to the Trust.
The Plan Asset Regulation only applies to the purchase by a Benefit Plan of
an "equity interest" in an entity. Assuming that interests in Certificates of
a Series are equity interests, the Plan Asset Regulation contains an exception
that provides that if a Benefit Plan acquires a "publicly-offered security,"
the issuer of the security is not deemed to hold plan assets. A publicly-
offered security is a security that is (i) freely transferable, (ii) part of a
class of securities that is owned by 100 or more investors independent of the
issuer and of one another and (iii) either (A) part of a class of securities
registered under Section 12(b) or 12(g) of the Exchange Act or (B) sold to the
plan as part of an offering of securities to the public pursuant to an
effective registration statement under the Securities Act and the class of
securities of which such security is a part is registered under the Exchange
Act within 120 days (or such later time as may be allowed by the Commission)
after the end of the fiscal year of the issuer during which the offering of
such securities to the public occurred. In addition, the Plan Asset Regulation
provides that if a Benefit Plan invests in an "equity interest" of an entity
that is neither a "publicly-offered security" nor a security issued by an
investment company registered under the Investment Company Act of 1940, as
amended, the Benefit Plan's assets include both the equity interest and an
undivided interest in each of the entity's underlying assets, unless it is
established that equity participation by "benefit plan investors" is not
"significant" or that another exception applies.
Under the Plan Asset Regulation, equity participation in an entity by
"benefit plan investors" is "significant" on any date if, immediately after
the most recent acquisition of any equity interest in the entity (other than a
publicly-offered class of equity), 25% or more of the value of any class of
equity interests in the entity (other than a publicly-offered class) is held
by "benefit plan investors." For purposes of this determination, the value of
equity interests held by a person (other than a benefit plan investor) that
has discretionary authority or control with respect to the assets of the
entity or that provides investment advice for a fee with respect to such
assets (or any affiliate of such person) is disregarded. The term "benefit
plan investor" is defined in the Plan Asset Regulation as (a) any employee
benefit plan (as defined in Section 3(3) of ERISA) , whether or not it is
subject to the provisions of Title I of ERISA, (b) any plan described in
Section 4975(e)(1) of the Code and (c) any entity whose underlying assets
include plan assets by reason of a plan's investment in the entity.
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Unless otherwise specified in the related Prospectus Supplement, it is
anticipated that interests in the Certificates of a Series will meet the
criteria of publicly-offered securities as set forth above. Unless otherwise
specified in the related Prospectus Supplement, the underwriters expect
(although no assurances can be given) that interests in each Class of
Certificates of each Series offered hereby will be held by at least 100
independent investors at the conclusion of the offering for such Series; there
are no restrictions imposed on the transfer of interests in the Certificates
of such Series; and interests in the Certificates of such Series will be sold
as part of an offering pursuant to an effective registration statement under
the Securities Act and then will be timely registered under the Exchange Act.
If interests in the Certificates of a Series fail to meet the criteria of
publicly-offered securities or investment by benefit plan investors becomes
significant and the Trust's assets are deemed to include assets of Benefit
Plans that are Certificateholders, transactions involving the Trust and
"parties in interest" or "disqualified persons" with respect to such plans
might be prohibited under Section 406 of ERISA and Section 4975 of the Code.
In addition, the Transferor or any underwriter of such Series may be
considered to be a party in interest, disqualified person or fiduciary with
respect to an investing Benefit Plan. Accordingly, an investment by a Benefit
Plan in Certificates may be a prohibited transaction under ERISA and the Code.
Thus, for example, if a participant in any Benefit Plan is a cardholder of one
of the Accounts, under DOL interpretations the purchase of interests in
Certificates by such plan could constitute a prohibited transaction. Such
transferors may now be subject to certain statutory or administrative
exemptions from the penalties normally associated with prohibited
transactions. Five class exemptions issued by the DOL that could apply in such
event are DOL Prohibited Transaction Exemption ("PTE") 84-14 (Class Exemption
for Plan Asset Transactions Determined by Independent Qualified Professional
Asset Managers), 91-38 (Class Exemption for Certain Transactions Involving
Bank Collective Investment Funds), 90-1 (Class Exemption for Certain
Transactions Involving Insurance Company Pooled Separate Accounts), 95-60
(Class Exemption for Certain Transactions Involving Insurance Company General
Accounts) and 96-23 (Class Exemption for Plan Asset Transactions Determined by
In-House Asset Managers). There is no assurance that these exemptions, even if
all of the conditions specified therein are satisfied, or any other exemption
will apply to all transactions involving the Trust's assets.
IN LIGHT OF THE FOREGOING, FIDUCIARIES OF A BENEFIT PLAN CONSIDERING THE
PURCHASE OF INTERESTS IN CERTIFICATES OF ANY SERIES SHOULD CONSULT THEIR OWN
COUNSEL AS TO WHETHER THE ASSETS OF THE TRUST WHICH ARE REPRESENTED BY SUCH
INTERESTS WOULD BE CONSIDERED PLAN ASSETS, AND WHETHER, UNDER THE GENERAL
FIDUCIARY STANDARDS OF INVESTMENT PRUDENCE AND DIVERSIFICATION, AN INVESTMENT
IN CERTIFICATES OF ANY SERIES IS APPROPRIATE FOR THE BENEFIT PLAN TAKING INTO
ACCOUNT THE OVERALL INVESTMENT POLICY OF THE BENEFIT PLAN AND THE COMPOSITION
OF THE BENEFIT PLAN'S INVESTMENT PORTFOLIO. In addition, fiduciaries should
consider the consequences that would apply if the Trust's assets were
considered plan assets, the applicability of exemptive relief from the
prohibited transaction rules and whether all conditions for such exemptive
relief would be satisfied.
In particular, insurance companies considering the purchase of Certificates
of any Series should consult their own employee benefits counsel or other
appropriate counsel with respect to the United States Supreme Court's decision
in John Hancock Mutual Life Insurance Co. v. Harris Trust & Savings Bank, 114
S. Ct. 517 (1993) ("John Hancock") and the applicability of PTE 95-60. In John
Hancock, the Supreme Court held that assets held in an insurance company's
general account may be deemed to be "plan assets" under certain circumstances;
however, PTE 95-60 may exempt some or all of the transactions that could occur
as the result of the acquisition and holding of the Certificates of a Series
by an insurance company general account from the penalties normally associated
with prohibited transactions. Accordingly, investors should analyze whether
John Hancock and PTE 95-60 or any other exemption may have an impact with
respect to their purchase of the Certificates of any Series.
In addition, insurance companies considering the purchase of Certificates
using assets of a general account should consult their own employee benefits
counsel or other appropriate counsel with respect to the effect of the
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Small Business Job Protection Act of 1996, which added a new Section 401(c) of
ERISA relating to the status of the assets of insurance company general
accounts under ERISA and Section 4975 of the Code. Pursuant to Section 401(c),
the DOL is required to issue final regulations (the "General Account
Regulations") with respect to insurance policies issued on or before December
31, 1998 that are supported by an insurer's general account. The General
Account Regulations are intended to provide guidance on which assets held by
the insurer constitute "plan assets" for purposes of the fiduciary
responsibility provisions of ERISA and Section 4975 of the Code. Section
401(c) also provides that, except in the case of avoidance of the General
Account Regulations and actions brought by the Secretary of Labor relating to
certain breaches of fiduciary duties that also constitute breaches of state or
Federal criminal law, until the date that is 18 months after the General
Account Regulations become final, no liability under the fiduciary
responsibility and prohibited transaction provisions of ERISA and Section 4975
may result on the basis of a claim that the assets of the general account of
an insurance company constitute the plan assets of any Benefit Plan. The DOL
has recently issued proposed regulations under Section 401(c). It should be
noted that if the General Account Regulations are adopted substantially in the
form in which proposed, the General Account Regulations may not exempt the
assets of insurance company general accounts from treatment as "plan assets"
after December 31, 1998. The plan asset status of insurance company separate
accounts is unaffected by new Section 401(c) of ERISA, and separate account
assets continue to be treated as the plan assets of any Benefit Plan invested
in a separate account. Plan investors considering the purchase of Certificates
of any Series on behalf of an insurance company general account should consult
their legal advisors regarding the effect of the General Account Regulations
on such purchase.
PLAN OF DISTRIBUTION
The Transferor may sell Certificates (i) through underwriters or dealers,
(ii) directly to one or more purchasers; or (iii) through agents. The related
Prospectus Supplement in respect of a Series offered hereby sets forth the
terms of the offering of such Certificates, including the name or names of any
underwriters, the purchase price of such Certificates and the proceeds to the
Transferor from such sale, any underwriting discounts and other items
constituting underwriters' compensation, any initial offering price and any
discounts or concessions allowed or reallowed or paid to dealers. Only
underwriters so named in such Prospectus Supplement shall be deemed to be
underwriters in connection with the Certificates offered thereby.
Subject to the terms and conditions set forth in an underwriting agreement
(an "Underwriting Agreement") to be entered into with respect to each series
of Certificates, the Transferor will agree to sell to each of the underwriters
named therein and in the related Prospectus Supplement, and each of such
underwriters will severally agree to purchase from the Transferor, the
principal amount of Certificates set forth therein and in the related
Prospectus Supplement (subject to proportional adjustment on the terms and
conditions set forth in the related Underwriting Agreement in the event of an
increase or decrease in the aggregate amount of Certificates offered hereby
and by the related Prospectus Supplement).
In each Underwriting Agreement, the several underwriters will agree,
subject to the terms and conditions set forth therein, to purchase all the
Certificates offered hereby and by the related Prospectus Supplement if any of
such Certificates are purchased. In the event of a default by any underwriter,
each Underwriting Agreement will provide that, in certain circumstances,
purchase commitments of the nondefaulting underwriters may be increased or the
Underwriting Agreement may be terminated.
Each Underwriting Agreement will provide that the Transferor will indemnify
the related underwriters against certain liabilities, including liabilities
under the Securities Act of 1933, as amended.
The place and time of delivery for any Series of Certificates in respect of
which this Prospectus is delivered are set forth in the accompanying
Prospectus Supplement.
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LEGAL MATTERS
Certain legal matters relating to the issuance of the Certificates will be
passed upon for the Transferor by Richards, Layton & Finger, Wilmington,
Delaware. Certain legal matters relating to the issuance of the Certificates
will be passed upon by Richards, Layton & Finger. Martin I. Lubaroff, of
counsel to Richards, Layton & Finger, is a member of the Board of Directors of
The First National Bank of Atlanta. Certain other legal matters relating to
the issuance of the Certificates and certain legal matters relating to the
Federal tax consequences of the issuance of the Certificates will be passed
upon for the Transferor by Skadden, Arps, Slate, Meagher & Flom LLP, New York,
New York, special counsel to the Transferor. Certain legal matters relating to
the issuance of the Certificates will be passed upon for the Underwriters by
Skadden, Arps, Slate, Meagher & Flom LLP, New York, New York.
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INDEX OF TERMS FOR PROSPECTUS
<TABLE>
<S> <C>
Accounts................................................................. 1, 5
Accumulation Period...................................................... 6
acquisition premium...................................................... 62
Addition Date............................................................ 41
Additional Accounts...................................................... 40
Additional Interest...................................................... 46
Aggregate Addition Limit................................................. 42
Agreement................................................................ 5
Amortization Period...................................................... 6
Appointment Date......................................................... 49
Assignment............................................................... 41
ATM...................................................................... 30
Automatic Additional Accounts............................................ 28, 42
Bank..................................................................... 1, 5
Bank Portfolio........................................................... 5
Benefit Plans............................................................ 67
Cash Collateral Account.................................................. 55
Cash Collateral Guaranty................................................. 55
Cede..................................................................... 3
Cedelbank................................................................ 34
Cedelbank Customers...................................................... 34
Certificate Owner........................................................ 60
Certificate Owners....................................................... 3
Certificate Rate......................................................... 6
Certificateholders....................................................... 3
Certificates............................................................. 1, 5
Class.................................................................... 1, 5
Closing Date............................................................. 11
Code..................................................................... 60
Collateral Interest...................................................... 56
Collection Account....................................................... 10
Commission............................................................... 3
Controlled Accumulation Amount........................................... 13
Controlled Accumulation Period........................................... 13
Controlled Amortization Amount........................................... 12
Controlled Amortization Period........................................... 12
Controlled Deposit Amount................................................ 13
Controlled Distribution Amount........................................... 12
Cooperative.............................................................. 34
Corporation.............................................................. 10
Credit Enhancement....................................................... 6
Credit Enhancement Percentage............................................ 44
Credit Enhancement Provider.............................................. 55
Cut-Off Date............................................................. 8
Defaulted Accounts....................................................... 7
Definitive Certificates.................................................. 9
Depositories............................................................. 32
Depository............................................................... 32
Determination Date....................................................... 47
Disclosure Document...................................................... 9
</TABLE>
71
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<TABLE>
<S> <C>
Discount Percentage...................................................... 43
Distribution Account..................................................... 43
Distribution Date........................................................ 10
DOJ...................................................................... 60
DOL...................................................................... 67
DTC...................................................................... 3, 32
DTC Participants......................................................... 32
Eligible Account......................................................... 40
Eligible Receivable...................................................... 40
Enhancement.............................................................. 6
Enhancement Invested Amount.............................................. 55
ERISA.................................................................... 19
Euroclear................................................................ 34
Euroclear Operator....................................................... 34
Euroclear Participants................................................... 34
Euroclear System......................................................... 34
Excess Finance Charge Collections........................................ 46
Excess Funding Account................................................... 16, 47
Exchange................................................................. 9
Exchange Act............................................................. 3, 32
FASIT.................................................................... 64
FDIA..................................................................... 57
FDIC..................................................................... 20
Finance Charge Account................................................... 43
Finance Charge Receivables............................................... 8
FIRREA................................................................... 57
Foreign Investors........................................................ 64
Full Investor Interest................................................... 17
Funding Period........................................................... 16
General Account Regulations.............................................. 69
Group.................................................................... 15
Holders.................................................................. 35
Indirect Participants.................................................... 32
Ineligible Receivable.................................................... 39
Insolvency Event......................................................... 49
Interchange.............................................................. 6
Interest Funding Account................................................. 36
Interest Period.......................................................... 10
Investor Charge-Off...................................................... 46
Investor Default Amount.................................................. 46
Investor Interest........................................................ 7
Investor Percentage...................................................... 7
Investor Servicing Fee................................................... 46
IRA...................................................................... 67
IRS...................................................................... 60
John Hancock............................................................. 68
MasterCard International................................................. 60
MGT/EOC.................................................................. 34
Minimum Transferor Amount................................................ 8
Monthly Interest......................................................... 46
Monthly Period........................................................... 10
</TABLE>
72
<PAGE>
<TABLE>
<S> <C>
Moody's.................................................................. 43
New Agreement............................................................ 5
New Regulations.......................................................... 65
New Trust................................................................ 5
Octagon.................................................................. 58
Offered Certificates..................................................... 60
OID...................................................................... 61
Paired Series............................................................ 16, 47
Participation Agreement.................................................. 41
Participations........................................................... 41
Paying Agent............................................................. 52
Pay Out Event............................................................ 14
Permitted Investments.................................................... 43
Plan Asset Regulation.................................................... 67
Pre-Funding Account...................................................... 17
Pre-Funding Amount....................................................... 17, 44
Prepayable Instrument.................................................... 62
Principal Account........................................................ 43
Principal Amortization Period............................................ 12
Principal Commencement Date.............................................. 11
Principal Funding Account................................................ 13
Principal Receivables.................................................... 8
Principal Terms.......................................................... 38
Prospectus Supplement.................................................... 1
PTE...................................................................... 68
Qualified Institution.................................................... 43
Rapid Accumulation Period................................................ 14
Rapid Amortization Period................................................ 15
Rating Agency............................................................ 19
Receivables.............................................................. 1, 5
Record Date.............................................................. 31
Regulations.............................................................. 61
Remaining Redemption Amount.............................................. 62
Removed Accounts......................................................... 9
Reserve Account.......................................................... 56
Revolving Period......................................................... 11
Scheduled Payment Date................................................... 11
SEC...................................................................... 32
Securities Act........................................................... 5
Senior Certificates...................................................... 6
Series................................................................... 1, 5
Series Supplement........................................................ 5
Series Termination Date.................................................. 49
Service Transfer......................................................... 51
Servicer................................................................. 5, 10
Servicer Default......................................................... 52
Shared Principal Collections............................................. 16
Special Tax Counsel...................................................... 60
Spread Account........................................................... 56
Standard & Poor's........................................................ 43
Subordinated Certificates................................................ 6
</TABLE>
73
<PAGE>
<TABLE>
<S> <C>
Tax Opinion............................................................... 38
Terms and Conditions...................................................... 35
Transfer Date............................................................. 13
Transferor................................................................ 5
Transferor Amount......................................................... 7
Transferor Certificate.................................................... 9
Transferor Interest....................................................... 37
Transferor Participation.................................................. 7, 31
Transferor Percentage..................................................... 31
Trust..................................................................... 1, 5
Trust I................................................................... 5
Trust Portfolio........................................................... 28
Trust Termination Date.................................................... 49
Trustee................................................................... 5
UCC....................................................................... 57
Underwriting Agreement.................................................... 69
U.S. Person............................................................... A-3
VISA...................................................................... 60
Wachovia.................................................................. 1, 5
WBNA...................................................................... 7, 31
WOSC...................................................................... 27
</TABLE>
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<PAGE>
ANNEX I
GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the globally offered Wachovia
Credit Card Master Trust Asset Backed Certificates (the "Global Securities")
to be issued in series from time to time (each, a "Series") will be available
only in book-entry form. Investors in the Global Securities may hold such
Global Securities through any of The Depository Trust Company ("DTC"),
Cedelbank or Euroclear. The Global Securities will be tradeable as home market
instruments in both the European and U.S. domestic markets. Initial settlement
and all secondary trades will settle in same-day funds.
Secondary market trading between investors holding Global Securities
through Cedelbank and Euroclear will be conducted in the ordinary way in
accordance with their normal rules and operating procedures and in accordance
with conventional eurobond practice.
Secondary market trading between investors holding Global Securities
through DTC will be conducted according to the rules and procedures applicable
to U.S. corporate debt obligations.
Secondary cross-market trading between Cedelbank or Euroclear and DTC
Participants holding Certificates will be effected on a delivery-against-
payment basis through the respective Depositories of Cedelbank and Euroclear
(in such capacity) and as DTC Participants.
Non-U.S. holders (as described below) of Global Securities will be subject
to U.S. withholding taxes unless such holders meet certain requirements and
deliver appropriate U.S. tax documents to the securities clearing
organizations or their participants.
Initial Settlement
All Global Securities will be held in book-entry form by DTC in the name of
Cede & Co. as nominee of DTC. Investors' interests in the Global Securities
will be represented through financial institutions acting on their behalf as
direct and indirect participants in DTC. As a result, Cedelbank and Euroclear
will hold positions on behalf of their participants through their respective
Depositories, which in turn will hold such positions in accounts as DTC
Participants.
Investors electing to hold their Global Securities through DTC will follow
the settlement practices applicable to U.S. corporate debt obligations.
Investor securities custody accounts will be credited with their holdings
against payment in same-day funds on the settlement date.
Investors electing to hold their Global Securities through Cedelbank or
Euroclear accounts will follow the settlement procedures applicable to
conventional eurobonds, except that there will be no temporary global security
and no "lock-up" or restricted period. Global Securities will be credited to
the securities custody accounts on the settlement date against payment in
same-day funds.
Secondary Market Trading
Since the purchaser determines the place of delivery, it is important to
establish at the time of the trade where both the purchaser's and seller's
accounts are located to ensure that settlement can be made on the desired
value date.
Trading Between DTC Participants. Secondary market trading between DTC
Participants will be settled using the procedures applicable to U.S. corporate
debt obligations in same-day funds.
Trading Between Cedelbank Customers/or Euroclear Participants. Secondary
market trading between Cedelbank Customers or Euroclear Participants will be
settled using the procedures applicable to conventional eurobonds in same-day
funds.
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Trading Between DTC Seller and Cedelbank or Euroclear Purchaser. When
Global Securities are to be transferred from the account of a DTC Participant
to the account of a Cedelbank Customer or a Euroclear Participant, the
purchaser will send instructions to Cedelbank or Euroclear through a Cedelbank
Customer or Euroclear Participant at least one business day prior to
settlement. Cedelbank or Euroclear will instruct the respective Depository, as
the case may be, to receive the Global Securities against payment. Payment
will include interest accrued on the Global Securities from and including the
last coupon payment date to and excluding the settlement date. Payment will
then be made by the respective Depository to the DTC Participant's account
against delivery of the Global Securities. After settlement has been
completed, the Global Securities will be credited to the respective clearing
system and by the clearing system, in accordance with its usual procedures, to
the Cedelbank Customer's or Euroclear Participant's account. The Global
Securities credit will appear the next day (European time) and the cash debit
will be back-valued to, and the interest on the Global Securities will accrue
from, the value date (which would be the preceding day when settlement
occurred in New York). If settlement is not completed on the intended value
date (i.e., the trade fails), the Cedelbank or Euroclear cash debit will be
valued instead as of the actual settlement date.
Cedelbank Customers and Euroclear Participants will need to make available
to the respective clearing systems the funds necessary to process same-day
funds settlement. The most direct means of doing so is to pre-position funds
for settlement, either from cash on hand or existing lines of credit, as they
would for any settlement occurring within Cedelbank or Euroclear. Under this
approach, they may take on credit exposure to Cedelbank or Euroclear until the
Global Securities are credited to their accounts one day later.
As an alternative, if Cedelbank or Euroclear has extended a line of credit
to them, Cedelbank Customers or Euroclear Participants can elect not to pre-
position funds and allow that credit line to be drawn upon the finance
settlement. Under this procedure, Cedelbank Customers or Euroclear
Participants purchasing Global Securities would incur overdraft charges for
one day, assuming they cleared the overdraft when the Global Securities were
credited to their accounts. However, interest on the Global Securities would
accrue from the value date. Therefore, in many cases the investment income on
the Global Securities earned during that one-day period may substantially
reduce or offset the amount of such overdraft charges, although this result
will depend on each Cedelbank Customer's or Euroclear Participant's particular
cost of funds.
Since the settlement is taking place during New York business hours, DTC
Participants can employ their usual procedures for sending Global Securities
to the respective Depository for the benefit of Cedelbank Customers or
Euroclear Participants. The sale proceeds will be available to the DTC seller
on the settlement date. Thus, to the DTC Participant a cross-market
transaction will settle no differently than a trade between two DTC
Participants.
Trading Between Cedelbank or Euroclear Seller and DTC Purchaser. Due to
time zone differences in their favor, Cedelbank Customers and Euroclear
Participants may employ their customary procedures for transactions in which
Global Securities are to be transferred by the respective clearing system,
through the respective Depository, to a DTC Participant. The seller will send
instructions to Cedelbank or Euroclear through a Cedelbank Customer or
Euroclear Participant at least one business day prior to settlement. In these
cases, Cedelbank or Euroclear will instruct the respective Depository, as
appropriate, to deliver the bonds to the DTC Participant's account against
payment. Payment will include interest accrued on the Global Securities from
and including the last coupon payment date to and excluding the settlement
date. The payment will then be reflected in the account of the Cedelbank
Customer or Euroclear Participant the following day, and receipt of the cash
proceeds in the Cedelbank Customer's or Euroclear Participant's account would
be back-valued to the value date (which would be the preceding day, when
settlement occurred in New York). Should the Cedelbank Participant or
Euroclear Customer have a line of credit with its respective clearing system
and elect to be in debit in anticipation of receipt of the sale proceeds in
its account, the back-valuation will extinguish any overdraft charges incurred
over that one-day period. If settlement is not completed on the intended value
date (i.e., the trade fails), receipt of the cash proceeds in the Cedelbank
Customer's or Euroclear Participant's account would instead be valued as of
the actual settlement date. Finally, day traders that use Cedelbank or
Euroclear and that purchase Global Securities from DTC Participants for
delivery to Cedelbank Customers or Euroclear Participants should
A-2
<PAGE>
note that these trades would automatically fail on the sale side unless
affirmative action were taken. At least three techniques should be readily
available to eliminate this potential problem:
(a) borrowing through Cedelbank or Euroclear for one day (until the
purchase side of the day trade is reflected in their Cedelbank or Euroclear
accounts) in accordance with the clearing system's customary procedures;
(b) borrowing the Global Securities in the U.S. from a DTC Participant
no later than one day prior to settlement, which would give the Global
Securities sufficient time to be reflected in their Cedelbank or Euroclear
account in order to settle the sale side of the trade; or
(c) staggering the value dates for the buy and sell sides of the trade
so that the value date for the purchase from the DTC Participant is at
least one day prior to the value date for the sale to the Cedelbank
Customer or Euroclear Participant.
Certain U.S. Federal Income Tax Documentation Requirements
A beneficial owner of Global Securities holding securities through
Cedelbank or Euroclear (or through DTC if the holder has an address outside
the U.S.) will be subject to the 30% U.S. withholding tax that generally
applies to payments of interest (including original issue discount) on
registered debt issued by U.S. Persons, unless (i) each clearing system, bank
or other financial institution that holds customers' securities in the
ordinary course of its trade or business in the chain of intermediaries
between such beneficial owner and the U.S. entity required to withhold tax
complies with applicable certification requirements and (ii) such beneficial
owner takes one of the following steps to obtain an exemption or reduced tax
rate:
Exemption for Non-U.S. Persons (Form W-8). Beneficial owners of
Certificates that are non-U.S. Persons can obtain a complete exemption from
the withholding tax by filing a signed Form W-8 (Certificate of Foreign
Status). If the information shown on Form W-8 changes, a new Form W-8 must be
filed within 30 days of such change.
Exemption for Non-U.S. Persons with Effectively Connected Income (Form
4224). A non-U.S. Person, including a non-U.S. corporation or bank with a U.S.
branch, for which the interest income is effectively connected with its
conduct of a trade or business in the United States, can obtain an exemption
from the withholding tax by filing Form 4224 (Exemption from Withholding of
Tax on Income Effectively Connected with the Conduct of a Trade or Business in
the United States).
Exemption or Reduced Rate for Non-U.S. Persons Resident in Treaty Countries
(Form 1001). Non-U.S. Persons that are Certificate Owners residing in a
country that has a tax treaty with the United States can obtain an exemption
or reduced tax rate (depending on the treaty terms) by filing Form 1001
(Ownership, Exemption or Reduced Rate Certificate). If the treaty provides
only for a reduced rate, withholding tax will be imposed at that rate unless
the filer alternatively files Form W-8. Form 1001 may be filed by the
Certificate Owner or his agent.
Exemption for U.S. Persons (Form W-9). U.S. Persons can obtain a complete
exemption from the withholding tax by filing Form W-9 (Payer's Request for
Taxpayer Identification Number and Certification).
U.S. Federal Income Tax Reporting Procedure. The Certificate Owner of a
Global Security or in the case of a Form 1001 or a Form 4224 filer, his agent,
files by submitting the appropriate form to the person through whom it holds
(the clearing agency, in the case of persons holding directly on the books of
the clearing agency). Form W-8 and Form 1001 are effective for three calendar
years and Form 4224 is effective for one calendar year.
The term "U.S. Person" means (i) a citizen or resident of the United
States, (ii) a corporation or partnership organized in or under the laws of
the United States or any political subdivision thereof or (iii) an estate or
trust the income of which is included in gross income for United States tax
purposes, regardless of its source. This summary does not deal with all
aspects of U.S. Federal income tax withholding that may be relevant to foreign
holders of the Global Securities. Investors are advised to consult their own
tax advisors for specific tax advice concerning their holding and disposing of
the Global Securities.
A-3
<PAGE>
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$750,000,000
Wachovia Credit Card Master Trust
Class A Floating Rate Asset Backed Certificates,
Series 1999-1
The First National Bank of Atlanta d/b/a Wachovia Bank Card Services
Transferor and Servicer
PRELIMINARY
PROSPECTUS SUPPLEMENT
March 12, 1999
Underwriters of the Class A Certificates
Credit Suisse First Boston
Wachovia Capital Markets, Inc.
Chase Securities Inc.
J.P. Morgan & Co.
Salomon Smith Barney
You should rely only on the information contained or incorporated by reference
in this prospectus supplement and the attached prospectus. We have not
authorized anyone to provide you with different information.
We are not offering the certificates in any state where the offer is not
permitted.
We do not claim the accuracy of the information in this prospectus supplement
and the prospectus as of any date other than the dates stated on their
respective covers.
Dealers will deliver a prospectus supplement and prospectus when acting as
underwriters of the Class A Certificates and with respect to their unsold
allotments or subscriptions. In addition, all dealers selling the certificates
will deliver a prospectus supplement and prospectus until .
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