<PAGE>
FILED PURSUANT TO RULE 424(B)(5)
REGISTRATION NO. 333-79453-01
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED JULY 21, 2000
$637,500,000
Wachovia Credit Card Master Trust
Class A Floating Rate Asset Backed Certificates,
Series 2000-1
The First National Bank of Atlanta d/b/a Wachovia Bank Card Services
Transferor and Servicer
<TABLE>
<S> <C>
Principal Amount $637,500,000
Price $637,500,000 (100.000%)
Underwriting Discount $1,753,125 (0.275%)
Proceeds to the Transferor $635,746,875 (99.725%)
Certificate Rate one-month LIBOR + 0.15% p.a.
Interest Payment Dates monthly on the 15th
First Interest Payment Date September 15, 2000
Scheduled Principal Payment Date July 15, 2005
</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.
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.
Lehman Brothers Wachovia Securities, Inc.
Deutsche Banc Alex. Brown
Merrill Lynch & Co.
Morgan Stanley Dean Witter
Salomon Smith Barney
The date of this Prospectus Supplement is July 25, 2000
<PAGE>
Table of Contents
Prospectus Supplement
<TABLE>
<CAPTION>
Page
----
<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
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-12
Limited Ability to Resell Certificates.................................. S-13
Issuance of Additional Series by the Trust May Affect the Timing of
Payments............................................................... S-13
Individual Certificateholders Will Have Limited Control of Trust
Actions................................................................ S-13
Wachovia's Credit Card Portfolio.......................................... S-15
General................................................................. S-15
Billing and Payments.................................................... S-16
Portfolio Acquisitions.................................................. S-16
Delinquency and Loss Experience......................................... S-16
Interchange............................................................. S-18
The Receivables........................................................... S-19
Maturity Considerations................................................... S-22
Controlled Accumulation Period.......................................... S-22
Rapid Amortization Period............................................... S-22
Pay Out Events.......................................................... S-23
Payment Rates........................................................... S-23
</TABLE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Receivable Yield Considerations............................................ S-24
Wachovia and Wachovia Corporation.......................................... S-25
Description of the Certificates............................................ S-25
General.................................................................. S-25
Exchanges................................................................ S-26
Interest Payments........................................................ S-26
Principal Payments....................................................... S-28
Postponement of Controlled Accumulation Period........................... S-29
Allocation Percentages................................................... S-30
Reallocation of Cash Flows............................................... S-32
Application of Collections............................................... S-33
Shared Excess Finance Charge Collections................................. S-38
Shared Principal Collections............................................. S-38
Required Collateral Interest............................................. S-38
Defaulted Receivables; Investor Charge-Offs.............................. S-39
Principal Funding Account................................................ S-40
Reserve Account.......................................................... S-41
Pay Out Events........................................................... S-42
Defeasance............................................................... S-43
Servicing Compensation and Payment of Expenses........................... S-43
Reports to Class A Certificateholders.................................... S-44
ERISA Considerations....................................................... S-44
Consultation with Counsel................................................ S-45
Underwriting............................................................... S-46
Index of Terms for Prospectus Supplement................................... S-48
Annex I: Other Series...................................................... S-50
</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 2000-1 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
Securities, 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 Securities, 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
<TABLE>
<S> <C>
Issuer: Wachovia Credit Card Master Trust--the "Trust"
Transferor: The First National Bank of Atlanta d/b/a Wachovia Bank
Card Services--"Wachovia" or the "Bank"
Servicer: Wachovia
Trustee: The Bank of New York (Delaware)
Pricing Date: July 25, 2000
Closing Date: August 1, 2000
Clearance and Settlement: DTC/Clearstream Luxembourg/Euroclear
Trust Assets: Receivables originated in VISA(R) and MasterCard(R)
accounts, including recoveries on charged-off accounts
</TABLE>
<TABLE>
<CAPTION>
Amount % of Total Series
------ -----------------
<S> <C> <C>
Series Structure:
Class A $637,500,000 85.0%
Class B $ 52,500,000 7.0%
Collateral interest $ 60,000,000 8.0%
Annual Servicing Fee: 2.00%
</TABLE>
<TABLE>
<CAPTION>
Class A
-------
<S> <C>
Anticipated Ratings:* Aaa/AAA/AAA
(Moody's/S&P/Fitch)
Credit Enhancement: subordination of Class B and
the collateral interest
Interest Rate: one-month LIBOR+ 0.15% p.a.
Interest Accrual Method: actual/360
Interest Payment Dates: monthly on the 15th
First Interest Payment Date: September 15, 2000
Scheduled Payment Date: July 15, 2005
Commencement of Accumulation Period (subject to
adjustment): June 30, 2004
Stated Series Termination Date: December 17, 2007
CUSIP: 929772 AH 4
ISIN: US 929772AH49
</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
2000-1. To fully understand the terms of Series 2000-1, you will need to read
both this supplement and the attached prospectus in their entirety.
The Series 2000-1 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 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. If the
collections of finance charges allocated to your series exceed interest payable
on the certificates of your series, the servicing fee payable to the servicer,
net losses allocated to the series and any other required amounts, the servicer
will share the excess with other series of certificates issued by the Trust and
in the same group of series as your series, and then distribute any remaining
excess to Wachovia. If the amount of collections of finance charges allocated
to your series is less than the amount to be paid from collections of finance
charges, excess collections of finance charges allocated to other series in
your group may be shared with your series and applied to cover shortfalls.
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. If the amount of
principal collections allocated to your series is less than the amount
scheduled to be accumulated in order to make a principal payment in any month
during an accumulation period, principal collections allocated to other series
may be shared with your series and applied to cover the shortfall. 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.
Credit Enhancement
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 Class B certificates and the collateral interest are not being offered
to you by this supplement or the attached prospectus.
The more subordinated interests will absorb any losses allocated to Series
2000-1 and make up any shortfalls in cash flow, before the more senior
interests are affected. On the closing date, there will be $52,500,000 of Class
B certificates and a $60,000,000 collateral interest, or together 15.0% 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 2000-1, your
payments of interest and principal will be reduced and you may suffer a loss of
principal.
For more detailed descriptions of the subordination provisions of Series
2000-1, 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 2000-1.
Wachovia Credit Card Master Trust
Your series is one of four series issued by Wachovia Credit Card Master
Trust which are
S-5
<PAGE>
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 2000-1;
. certificateholders of other series issued by Wachovia Credit Card Master
Trust;
. providers of credit enhancements for Series 2000-1 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 receivables in
the Trust. Wachovia, as the holder of that amount, has the right to purchase
the outstanding Series 2000-1 certificates at any time when the outstanding
amount of the Series 2000-1 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 2000-1 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 July 15, 2005 and the entire principal amount of
Class B in one payment on August 15, 2005. 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 2000-1 until it is fully repaid.
After Class A is fully repaid, the Trust will use principal collections
allocated to Series 2000-1 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 2000-1 after
Class A is fully repaid.
The collateral interest is entitled to receive principal collections during
the controlled accumulation period if all required deposits have been made to
the principal funding account for Class A and the outstanding collateral
interest is greater than the amount required by the rating agencies. The
required collateral interest amount decreases as deposits are made to the
principal funding account and principal payments are made to the Class A and
Class B certificateholders.
Prior to the commencement of an accumulation or amortization period for
Series 2000-1, 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.
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.
Minimum Yield on the Receivables; Possible Early Principal Repayment of Series
2000-1
Class A may be repaid earlier than its scheduled principal payment date if
collections of finance charge receivables, together with other amounts
available for payment to certificateholders,
S-6
<PAGE>
are too low. The minimum amount that must be available for payment to Series
2000-1 in any month, referred to as the "base rate," is the sum of the Class A
monthly interest, the Class B monthly interest, the collateral monthly interest
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 2000-1,
the Trust will commence a rapid amortization of Series 2000-1, and holders of
Series 2000-1 certificates will receive principal payments earlier than their
respective scheduled principal payment dates.
Series 2000-1 is also subject to several other pay out events, which could
cause Series 2000-1 to amortize, and which are summarized under the headings
"Maturity Considerations" and "Description of the Certificates--Pay Out Events"
in this supplement. If Series 2000-1 begins to amortize, Class A will receive
monthly payments of all principal until it is fully repaid; Class B will then
receive monthly payments of all principal until it is 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
December 17, 2007, which is the Series 2000-1 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 that 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 If the average Trust portfolio yield, net of
Delayed Payment due to losses allocated to your series, for any three
Reduced Portfolio Yield 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 2000-1, the Trust will
commence a rapid amortization of Series 2000-1,
and holders of Series 2000-1 certificates will
receive principal payments earlier than the
respective scheduled principal payment dates.
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 of finance charge receivables fall
below the minimum amount, any circumstances
that tend to reduce finance charge collections
may increase the risk of early repayment of
Series 2000-1.
Conversely, any reduction in principal
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
S-8
<PAGE>
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 to the Trust's accounts that it
exercises in handling similar matters for its
own comparable accounts.
Wachovia May Add Accounts to the Trust
Portfolio
In addition to the accounts already designated
for the 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,
credit card accounts newly designated for
inclusion in the Trust may have been originated
by Wachovia using credit criteria that differ
from those which were applied by Wachovia to
the current credit card accounts. Over time,
the new accounts and receivables may produce
higher or lower collections or charge-offs than
those exhibited by the accounts and receivables
already in the Trust and could tend to reduce
the amount of collections allocated to Series
2000-1.
Also, if Wachovia's percentage interest in the
collateral 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 certificates is based
on LIBOR. Changes in LIBOR might not be
reflected in the prime rate or the designated
index, resulting
S-9
<PAGE>
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 2000-1
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
certificates 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 certificates could increase
the risk of early repayment.
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" in this
supplement 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. If any representation or
warranty is violated and the violation
continues beyond the period of time Wachovia
has to correct the violation, the only remedy
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.
S-10
<PAGE>
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.
Allocations of Charged-Off Wachovia anticipates that it will write off as
Receivables Could Reduce uncollectible some portion of the receivables
Payments to arising in accounts in the Trust portfolio.
Certificateholders Each class of Series 2000-1 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.
Certain Liens Could Be Given Wachovia accounts for the transfer of the
Priority Over Your receivables to the Trust as a sale. However, a
Securities 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
S-11
<PAGE>
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 Under the Federal Deposit Insurance Act, as
Wachovia Could Result in amended by the Financial Institutions Reform,
Accelerated, Delayed or Recovery and Enforcement Act of 1989, if
Reduced Payments to Wachovia becomes insolvent and the FDIC is
Certificateholders 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
. 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 2000-1 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
S-12
<PAGE>
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 2000-1) 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.
Limited Ability to Resell The underwriters may assist in resales of Class
Certificates A certificates but they are not required to do
so. A secondary market for any such certificates
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 certificates.
Issuance of Additional Wachovia Credit Card Master Trust, as a master
Series by the Trust May trust, may issue series of certificates from
Affect the Timing of time to time. The Trust may issue additional
Payments 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 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 of any series or any class
Certificateholders Will within a series may need the consent or approval
Have Limited Control of of a specified percentage of the invested amount
Trust Actions of other series or a class of such other series
to take or direct certain actions, including to
require the appointment
S-13
<PAGE>
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-14
<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 the Wachovia Credit Card
Master Trust (the "Trust") by Wachovia pursuant to the 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 2000-1 Supplement") (the term "Agreement," unless the context requires
otherwise, refers to the Pooling and Servicing Agreement as supplemented by the
Series 2000-1 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 2000-1 (collectively,
the "Class A Certificates"), each Class B Floating Rate Asset Backed
Certificate, Series 2000-1 (collectively, the "Class B Certificates") and the
interest in the collateral (the "Collateral Interest" and, 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 Class B Certificateholders,
together with the Class A Certificateholders, the "Certificateholders"), 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 and the Partners First Portfolio (each
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 2000-1 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.
S-15
<PAGE>
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 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 applying the
daily periodic rate for purchases to the daily balance of purchases for each
day of the billing cycle; the sum of these calculations is the total periodic
finance charge on purchases. 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 the cash advance check is processed as the
transaction date for the check. Wachovia offers fixed rate and variable rate
credit card accounts. Generally, fixed annual percentage rates range from
12.00% 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"). Certain of the accounts
in the Virginia Portfolios were designated to have their receivables included
in the Trust Portfolio on June 8, 1999. On September 4, 1998, Wachovia
purchased $269 million of credit card receivables from Wells Fargo & Co. (the
"Wells Portfolio"). On February 1, 2000, Wachovia purchased $1,964 million of
credit card receivables from Partners First Holdings LLC and its affiliates
(the "Partners First Portfolio"). A substantial portion of the Partners First
Portfolio is subject to securitization through another credit card master
trust. None of the accounts in the Wells Portfolio or the Partners First
Portfolio has been designated to have its receivables included in the Trust
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 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 Wells Portfolio or the Partners First
Portfolio were added to the Trust Portfolio, subject to satisfaction of the
Rating Agency Condition (as defined herein), the quality of the Trust 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 of past due
accounts. The
S-16
<PAGE>
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 a power dialing system that 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.
On February 10, 1999, the Federal Financial Institutions Examination Council
("FFIEC") adopted a revised Uniform Retail Credit Classification and Account
Management Policy (the "FFIEC Uniform Policy") that provides that open end
retail loans, such as credit card receivables, that become past due 180 days
should be charged off by the end of the month in which the loan becomes 180
days past due. As of September 1, 1999, the Bank changed its charge-off policy
to conform it to the FFIEC Uniform Policy. Under the Bank's new charge-off
policy, accounts are worked continually at each stage of delinquency through
the 150 day past due level. As an account enters the 150 day delinquency level,
it is classified as a potential charge-off. Accounts failing to make a payment
during the 150 day cycle are written off on or prior to becoming 180 days past
due. 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. Prior to September 1, 1999, accounts were
worked continually at each stage of delinquency through the 120 day past due
level. As an account entered the 120 day delinquency level, it was classified
as a potential charge-off. Accounts failing to make a payment during the 120
day cycle were written off on or prior to becoming 150 days past due.
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 that
may, when taken individually, have delinquency and loss characteristics
different from those of the overall Bank Portfolio of credit card accounts. As
of July 7, 2000 the Receivables in the Trust Portfolio represented
approximately 57% of the Bank Portfolio. Because the Trust 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(1)
<TABLE>
<CAPTION>
As of December 31,
As of --------------------------------------------------------------------------------
June 30, 2000 1999 1998 1997
-------------------------- -------------------------- -------------------------- --------------------------
Percentage Percentage Percentage Percentage
of Total of Total of Total of Total
Receivables Receivables Receivables Receivables Receivables Receivables Receivables Receivables
-------------- ----------- -------------- ----------- -------------- ----------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Receivables
Outstanding(2).. $6,108,565,022 100.00% $6,296,652,226 100.00% $6,189,588,274 100.00% $5,591,770,800 100.00%
============== ====== ============== ====== ============== ====== ============== ======
Receivables
Delinquent:
30-59 Days...... $ 67,615,856 1.11% $ 66,014,367 1.05% $ 82,356,495 1.33% $ 66,278,826 1.18%
60-89 Days...... 41,624,584 0.68 43,745,475 0.69 44,694,277 0.72 35,537,859 0.64
90 or More
Days(3)........ 77,001,719 1.26 77,761,655 1.24 56,883,834 0.92 47,315,115 0.85
-------------- ------ -------------- ------ -------------- ------ -------------- ------
TOTAL........... $ 186,242,159 3.05% $ 187,521,497 2.98% $ 183,934,606 2.97% $ 149,131,800 2.67%
============== ====== ============== ====== ============== ====== ============== ======
</TABLE>
--------
(1) Figures shown include the Virginia Portfolios for the 1998 and 1999 year
end and the six months ended June 30, 2000 and do not include the Wells
Portfolio or the Partners First 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.
(3) The Receivables delinquent 90 or more days as of December 31, 1999 and as
of the six months ended June 30, 2000, include Receivables that are 150 or
more days past due. For years ended prior to September 1, 1999, accounts
failing to make a payment during the 120 day cycle were written off prior
to becoming 150 days past due.
S-17
<PAGE>
Loss Experience
Bank Portfolio(1)
<TABLE>
<CAPTION>
Six Months Year Ended December 31,
Ended June 30, ----------------------------------------------
2000 1999 1998 1997
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Average Receivables
Outstanding(2)......... $6,133,067,612 $6,051,812,206 $5,885,303,622 $5,398,461,407
Total Gross Charge-
Offs(3)(5)............. $ 135,466,000 $ 265,516,000 $ 292,516,163 $ 224,571,000
Recoveries.............. $ 15,687,000 $ 31,983,000 $ 28,103,721 $ 23,184,000
Total Net Charge-Offs as
a Percentage of Average
Receivables
Outstanding............ 3.91%(4) 3.86% 4.49% 3.73%
</TABLE>
--------
(1) Figures shown include the Virginia Portfolios from March 20, 1998 and do
not include the Wells Portfolio or the Partners First Portfolio.
(2) Average Receivables Outstanding is the average of the monthly 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.
(4) Total Net Charge-Offs as a Percentage of Average Receivables Outstanding
reflected for the six months ended June 30, 2000 is on an annualized basis.
(5) In September 1999, the Bank changed its charge-off policy to conform to the
FFIEC Uniform Policy. Under the new charge-off policy a delinquent account
that fails to make a payment during the 150 day cycle is written off prior
to becoming 180 days past due.
Interchange
The Transferor will be required, pursuant to the terms of the Agreement, to
transfer to the Trust 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 2000-1 on the basis of the percentage equivalent of the ratio which
equals the amount of the Floating Investor Percentage of cardholder charges for
goods and services in the Accounts divided by 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-18
<PAGE>
The Receivables
The Receivables conveyed to the Trust arise in Accounts selected from the
Bank Portfolio (the "Trust Portfolio") on the basis of criteria set forth in
the Agreement as applied on the Cut Off Date with respect to the original
Accounts and, with respect to Additional Accounts, as of the date the Account
is selected to have its receivables added to the Trust (the "Addition Cut Off
Date"). 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
the Trust 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 (each such calendar month, a "Monthly
Period") equals or exceeds the Minimum Transferor Amount and (b) to maintain,
for so long as certificates of any Series (including Series 2000-1) 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 the Trust, the Accounts from
which the Receivables arise will be the Accounts designated by the Transferor
on the Cut Off Date plus any Additional Accounts designated by the Transferor
on any Addition Cut Off Date and Automatic Additional Accounts minus any
Removed Accounts. As of the Cut Off Date, with respect to the original
Accounts, as of the Addition Cut Off Date with respect to Receivables in
Additional Accounts and, as of the related date of their conveyance to the
Trust with respect to Automatic Additional Accounts, and on the date any new
Receivables are created, the Transferor will represent and warrant to the Trust
that the Receivables meet the eligibility requirements specified in the
Agreement. See "Description of the Certificates--Representations and
Warranties" in the attached prospectus.
The Receivables in the Trust Portfolio, as of July 7, 2000, included
approximately $3,475,328,450 of Receivables. The Accounts had an average
Receivables balance of $1,533 and an average credit limit of $6,722. The
percentage of the aggregate total Receivables' balance to the aggregate total
credit limit was 22.8%. The average age of the Accounts was approximately 97
months. As of July 7, 2000, the cardholders whose Accounts are included in the
Trust Portfolio had billing addresses in all 50 states, the District of
Columbia and other United States territories and possessions. As of July 7,
2000, 70.0% of the Accounts were standard accounts and 30.0% were premium
accounts, and the aggregate total Receivable balances of standard accounts and
premium accounts, as a percentage of the aggregate total Receivables, were
59.5% and 40.5%, respectively.
The following tables summarize the Trust Portfolio by various criteria as of
July 7, 2000. Because the future composition of the Trust Portfolio may change
over time, these tables are not necessarily indicative of the composition of
the Trust Portfolio at any subsequent time.
S-19
<PAGE>
Composition by Account Balance
Trust Portfolio
<TABLE>
<CAPTION>
Percentage of
Number of Total Number Percentage of
Account Balance Range Accounts of Accounts Receivables Total Receivables
--------------------- --------- ------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Credit Balance.......... 21,592 0.95% $ (2,810,546.39) (0.08)%
No Balance.............. 1,151,375 50.79 0.00 0.00
$.01-$1,499.99.......... 466,124 20.56 242,265,308.07 6.97
$1,500.00-$2,999.99..... 187,361 8.26 412,807,938.66 11.88
$3,000.00-$4,499.99..... 127,075 5.61 471,945,780.06 13.58
$4,500.00-$9,999.99..... 265,752 11.72 1,817,482,009.74 52.29
$10,000.00 or More...... 47,793 2.11 533,637,959.53 15.36
--------- ------ ----------------- ------
TOTAL................. 2,267,072 100.00% $3,475,328,449.67 100.00%
========= ====== ================= ======
Composition by Credit Limit
Trust Portfolio
<CAPTION>
Percentage of
Number of Total Number Percentage of
Credit Limit Range Accounts of Accounts Receivables Total Receivables
------------------ --------- ------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Less than or equal to
$1,500................. 198,177 8.74% $ 52,561,364.93 1.51%
$1,501-$3,000........... 232,810 10.27 153,043,086.98 4.40
$3,001-$4,500........... 200,742 8.85 196,353,590.27 5.65
$4,501-$10,000.......... 1,224,925 54.04 1,462,758,320.78 42.09
$10,001 or More......... 410,418 18.10 1,610,612,086.71 46.35
--------- ------ ----------------- ------
TOTAL................. 2,267,072 100.00% $3,475,328,449.67 100.00%
========= ====== ================= ======
Composition by Period of Delinquency
Trust Portfolio
<CAPTION>
Period of Delinquency Percentage of
(Days Contractually Number of Total Number Percentage of
Delinquent) Accounts of Accounts Receivables Total Receivables
--------------------- --------- ------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Not Delinquent.......... 2,205,178 97.27% $3,229,467,345.67 92.93%
6 to 30 Days............ 36,656 1.62 147,022,813.45 4.23
31 to 60 Days........... 9,976 0.44 35,673,130.21 1.03
61 to 90 Days........... 5,969 0.26 22,659,890.23 0.65
91 to 120 Days.......... 4,014 0.18 16,510,475.12 0.48
121 to 150 Days......... 2,958 0.13 13,356,855.12 0.38
151 to 180 Days......... 2,306 0.10 10,568,393.79 0.30
Over 180 Days........... 15 0.00 69,546.08 0.00
--------- ------ ----------------- ------
TOTAL................. 2,267,072 100.00% $3,475,328,449.67 100.00%
========= ====== ================= ======
Composition by Account Age
Trust Portfolio
<CAPTION>
Percentage of
Number of Total Number Percentage of
Account Age Accounts of Accounts Receivables Total Receivables
----------- --------- ------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Not More than 24
Months................. 320,564 14.14% $ 480,135,577.68 13.82%
Over 24 Months to 48
Months................. 373,238 16.46 433,501,414.25 12.47
Over 48 Months to 60
Months................. 212,239 9.36 294,514,038.09 8.47
Over 60 Months.......... 1,361,031 60.04 2,267,177,419.65 65.24
--------- ------ ----------------- ------
TOTAL................. 2,267,072 100.00% $3,475,328,449.67 100.00%
========= ====== ================= ======
</TABLE>
S-20
<PAGE>
Geographic Distribution of Accounts in the
Trust Portfolio
<TABLE>
<CAPTION>
Percentage of
Number of Total Number Percentage of
State Accounts of Accounts Receivables Total Receivables
----- --------- ------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Alabama................. 26,522 1.17% $ 44,424,426.93 1.28%
Alaska.................. 3,114 0.14 5,594,182.10 0.16
Arizona................. 25,403 1.12 43,389,107.65 1.25
Arkansas................ 11,204 0.49 19,043,869.08 0.55
California.............. 158,801 7.00 245,285,220.98 7.06
Colorado................ 42,287 1.87 69,818,338.44 2.01
Connecticut............. 14,723 0.65 23,203,991.14 0.67
Delaware................ 3,732 0.16 6,386,139.77 0.18
Florida................. 171,101 7.55 262,481,821.85 7.55
Georgia................. 257,669 11.38 415,195,352.28 11.96
Hawaii.................. 3,530 0.16 5,837,443.61 0.17
Idaho................... 6,224 0.27 9,418,963.85 0.27
Illinois................ 76,911 3.39 118,174,894.61 3.40
Indiana................. 32,604 1.44 50,291,270.66 1.45
Iowa.................... 14,073 0.62 19,312,201.85 0.56
Kansas.................. 16,100 0.71 26,539,030.90 0.76
Kentucky................ 21,006 0.93 30,298,653.72 0.87
Louisiana............... 20,063 0.88 29,951,886.58 0.86
Maine................... 7,014 0.31 10,079,638.56 0.29
Maryland................ 42,936 1.89 68,497,040.91 1.97
Massachusetts........... 36,457 1.61 52,184,146.28 1.50
Michigan................ 53,912 2.38 84,355,399.42 2.43
Minnesota............... 32,461 1.43 46,339,778.58 1.33
Mississippi............. 11,478 0.51 18,588,484.68 0.53
Missouri................ 35,839 1.58 55,889,318.65 1.61
Montana................. 5,010 0.22 6,884,798.81 0.20
Nebraska................ 9,639 0.43 12,926,278.58 0.37
Nevada.................. 10,973 0.48 19,036,678.21 0.55
New Hampshire........... 6,602 0.29 10,300,328.11 0.30
New Jersey.............. 49,653 2.19 75,370,877.67 2.17
New Mexico.............. 8,253 0.36 13,147,200.28 0.38
New York................ 84,530 3.73 119,738,757.74 3.45
North Carolina.......... 249,077 10.99 315,179,871.65 9.07
North Dakota............ 2,821 0.12 3,794,629.57 0.11
Ohio.................... 62,047 2.74 94,831,440.09 2.73
Oklahoma................ 18,610 0.82 30,057,846.88 0.86
Oregon.................. 20,540 0.91 30,540,497.01 0.88
Pennsylvania............ 73,451 3.24 109,286,272.34 3.14
Rhode Island............ 4,959 0.22 7,714,011.74 0.22
South Carolina.......... 138,888 6.13 210,036,122.31 6.04
South Dakota............ 3,282 0.14 4,476,257.33 0.13
Tennessee............... 43,810 1.93 72,989,888.60 2.10
Texas................... 110,865 4.89 196,668,784.02 5.66
Utah.................... 7,430 0.33 10,856,800.60 0.31
Vermont................. 3,138 0.14 4,745,497.99 0.14
Virginia................ 141,553 6.24 239,345,966.30 6.89
Washington.............. 34,487 1.52 54,959,285.50 1.58
West Virginia........... 8,745 0.39 12,296,024.61 0.35
Wisconsin............... 34,274 1.51 45,964,145.74 1.32
Wyoming................. 3,051 0.13 4,926,615.82 0.14
District of Columbia.... 4,090 0.18 6,069,771.56 0.17
Other................... 2,130 0.09 2,603,197.53 0.07
--------- ------ ----------------- ------
TOTAL.................. 2,267,072 100.00% $3,475,328,449.67 100.00%
========= ====== ================= ======
</TABLE>
S-21
<PAGE>
Maturity Considerations
The Agreement provides that Class A Certificateholders will not receive
payments of principal until the July 2005 Distribution Date (the "Class A
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. The Agreement also provides that Class B Certificateholders will not
receive payments of principal until the August 2005 Distribution Date (the
"Class B Scheduled Payment Date"), or earlier in the event of a Pay Out Event,
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 a 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 2000-1 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 Holders on each
Transfer Date (other than the Transfer Date prior to the Series 2000-1
Termination Date) and the Series 2000-1 Termination Date until the earlier of
the date the Collateral Interest has been paid in full and the Series 2000-1
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 in full
the Class A Investor Interest or the Class B Investor Interest 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 2000-1
Termination Date. After the Class A Certificates have been paid in full and if
the Series 2000-1 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 2000-1 Termination Date.
S-22
<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 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) the
Trust 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 the Trust when required by the Agreement, (g) the occurrence
of a Servicer Default that would have a material adverse effect on the Investor
Certificateholders, (h) insufficient monies in the Distribution Account to pay
in full the Class A Investor Interest or the Class B Investor Interest 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 the Trust 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 2000-1 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(1)
<TABLE>
<CAPTION>
Year Ended
Six Months December 31,
Ended June 30, -------------------
2000 1999 1998 1997
-------------- ----- ----- -----
<S> <C> <C> <C> <C>
Lowest Month................................ 10.94% 10.82% 10.62% 10.01%
Highest Month............................... 12.79% 12.48% 12.55% 11.72%
Monthly Average............................. 11.84% 11.47% 11.22% 11.07%
</TABLE>
--------
(1) Percentages shown include the Virginia Portfolios from March 20, 1998 and
do not include the Wells Portfolio or the Partners First Portfolio.
S-23
<PAGE>
Currently, cardholders must make a monthly minimum 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. 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 Portfolio will be similar to the
historical experience set forth above or that deposits into the Principal
Funding 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 to the
final Distribution Date for the Class A Certificates 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 on the Class A Scheduled Payment
Date. See "Maturity Considerations" 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, 1999 as well as the six months in the period ended June 30,
2000 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 the Trust 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, 1999
and the six months in the period ended June 30, 2000, 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.
Bank Portfolio Yield(1)
<TABLE>
<CAPTION>
Six Months Year Ended December 31,
Ended June 30, ----------------------------------------------
2000 1999 1998 1997
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Average Receivables
Outstanding(2)......... $6,133,067,612 $6,051,812,206 $5,885,303,622 $5,398,461,407
Total Finance Charges... $ 537,958,764 $1,001,952,291 $ 971,637,089 $ 855,676,589
Total Finance Charges as
a Percentage of Average
Receivables
Outstanding............ 17.54%(3) 16.56% 16.51% 15.85%
</TABLE>
--------
(1) Figures shown include the Virginia Portfolios from March 20, 1998 and do
not include the Wells Portfolio or the Partners First Portfolio.
(2) Average Receivables Outstanding is the average of the monthly receivable
balance during the period indicated.
(3) Total Finance Charges as a Percentage of Average Receivables Outstanding
reflected for the six months ended June 30, 2000 is on an annualized basis.
S-24
<PAGE>
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 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.
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 financial holding company registered under the Gramm-Leach-Bliley Act of
1999, maintaining dual headquarters in Atlanta, Georgia and Winston-Salem,
North Carolina. As of March 31, 2000, Wachovia had assets of $440,066,000 and
shareholder's equity of $56,772,000. As of March 31, 2000, WBNA had assets of
$64,274,562,000 and shareholder's equity of $6,067,581,000. As of March 31,
2000, the Corporation had assets of $68,817,488,000 and shareholders' equity of
$5,846,430,000.
Description of the Certificates
The Class A Certificates will be issued pursuant to the Agreement and the
Series 2000-1 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 2000-1 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 the Trust, including the right to the applicable
allocation percentage of all cardholder payments on the Receivables in the
Trust to the extent necessary to pay principal and interest on the Class A
Certificates. The Trust'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
Holders (the "Collateral Interest", and 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 the Trust issued
pursuant to the Agreement and applicable Series Supplements and the interest of
the Transferor (the "Transferor Interest"), as described below. The Transferor
Interest will represent the right to the assets of the Trust not allocated to
the Class A Investor Interest, the Class B Investor Interest, the Collateral
Interest or the holders of other undivided interests in the Trust. The
principal amount of the Transferor Interest (the "Transferor Amount") will
fluctuate as the amount of Receivables in the Trust 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
S-25
<PAGE>
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
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 such 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 the Trust, including the right to a percentage (the "Transferor
Percentage") of all cardholder payments on the Receivables in the Trust 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, as the case may be, 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 Clearstream
Luxembourg 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.
Clearstream Luxembourg and Euroclear will hold omnibus positions on behalf of
the Clearstream Luxembourg Customers and the Euroclear Participants,
respectively, through customers' securities accounts in Clearstream
Luxembourg's and Euroclear's names on the books of their respective
Depositaries which in turn will hold such positions in customers' securities
accounts in the Depositaries' 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
August 1, 2000 (the "Closing Date"). Interest will be
S-26
<PAGE>
distributed to Class A Certificateholders on September 15, 2000 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
initial outstanding principal amount of the Class A Certificates and (b) 14
divided by 360 and (c) the Class A Certificate Rate determined on July 28, 2000
and (ii) the product of (a) the outstanding principal amount of the Class A
Certificates and (b) 31 divided by 360 and (c) the Class A Certificate Rate
determined on August 11, 2000) 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 initial outstanding principal amount of
the Class B Certificates and (b) 14 divided by 360 and (c) the Class B
Certificate Rate determined on July 28, 2000 and (ii) the product of (a) the
initial outstanding principal amount of the Class B Certificates and (b) 31
divided by 360 and (c) the Class B Certificate Rate determined on August 11,
2000). Interest due on the Class A 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 2000-1 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).
The Class A Certificates will bear interest at the rate of 0.15% above LIBOR
determined (as set forth below) from the Closing Date through August 14, 2000,
from August 15, 2000 through September 14, 2000, and with respect to each
Interest Period thereafter (the "Class A Certificate Rate").
S-27
<PAGE>
The Class B Certificates will bear interest at the rate of 0.38% above LIBOR
(determined as set forth below) from the Closing Date through August 14, 2000,
from August 15, 2000 through September 14, 2000, and with respect to each
Interest Period thereafter (the "Class B Certificate Rate").
The Trustee will determine LIBOR two business days prior to the Closing Date
for the period from the Closing Date through August 14, 2000, on August 11,
2000 for the period from August 15, 2000 through September 14, 2000, 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 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 Periods may be obtained by telephoning the Trustee at (212)
815-5737. 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 $637,500,000 and $52,500,000, 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 Holders, as
applicable, and will not be available to Class A Certificateholders.
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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 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 Holders, 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 2000-1. 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 2000-1 Termination Date.
The "Series 2000-1 Termination Date" is the earliest to occur of (a) the
Distribution Date on which Investor Interest is paid in full, (b) the December
2007 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 2000-1 Termination
Date. After payment in full of the Class B Investor Interest, the Collateral
Interest Holders will be entitled to receive on each Transfer Date (other than
the Transfer Date prior to the Series 2000-1 Termination Date) and on the
Series 2000-1 Termination Date, Available Investor Principal Collections until
the earlier of the date the Collateral Interest is paid in full and the Series
2000-1 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 June
2003 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
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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.
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 the Trust 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 the Trust 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 the Trust 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 Holders 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
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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 the Trust 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 the Trust 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 the Trust 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, the Class B Certificateholders and the Collateral Interest
Holders 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 Holders 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
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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 2000-1 and available for such
purpose will be used to fund the Class A Required 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 the Trust. 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 2000-1 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
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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 the Trust. 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.
"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 Investor 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 Investor Certificateholders 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.
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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
(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 September 14, 2000.
"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 September 14, 2000.
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"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 2000-1 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 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 Holders on a prior Transfer
Date, will be distributed to the Collateral Interest Holders 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;
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(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
Holders (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 Holders 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.
"Collateral Monthly Interest" with respect to any Transfer Date will equal
the product of (a) an amount equal to LIBOR plus 1.0% 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 Initial Collateral Interest as of the related Record Date minus the
aggregate amount of principal payments made to the Collateral Interest Holders
prior to such Transfer Date.
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 Holders 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
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(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.
"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 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
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, $53,125,000; 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, (b) for any Transfer Date with
respect to the Controlled Accumulation Period after the payment in full of the
Class A Investor Interest and prior to the payment in full of the Class B
Investor Interest, an amount equal to the Class B Investor Interest on such
Transfer Date and (c) for any Transfer Date with respect to the Controlled
Accumulation Period after the payment in full of the Class B Investor Interest,
an amount equal to the Collateral 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
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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
Any Series may be included in a Group of Series which may be issued by the
Trust from time to time. Series 2000-1 will be included in a Group ("Group I").
Each previously issued and outstanding Series listed on Annex I hereto
currently is, and other Series may in the future be, included in Group I. Group
I is currently the only Group in the Trust. Each Series in Group I will be
entitled to share Excess Finance Charge Collections in the manner, and to the
extent, described below with each other Series, if any, in Group I. The Series
Supplement with respect to each Series will specify whether such Series will be
included in a Group. Collections of Finance Charge Receivables and certain
other amounts allocable to the Investor Interest of any Series that is included
in Group I in excess of the amounts necessary to make required payments with
respect to such Series (including payments to any related Credit Enhancement
Providers) that are payable out of collections of Finance Charge Receivables
(any such excess, the "Excess Finance Charge Collections") will be applied to
cover any shortfalls with respect to amounts payable from collections of
Finance Charge Receivables allocable to any other Series included in Group I
pro rata based upon the amount of the shortfall, if any, with respect to each
other Series in Group I. In all cases, any Excess Finance Charge Collections
remaining after covering shortfalls with respect to all outstanding Series in a
Group will be paid to the holder of the Transferor Certificate. While any
Series offered hereby may be included in a Group, there can be no assurance
that (a) any other Series will be included in such Group or (b) there will be
any Excess Finance Charge Collections with respect to such Group for any
Monthly Period. Excess Finance Charge Collections permit coverage of shortfalls
with respect to amounts payable from Excess Spread (as described above under
"--Application of Collections--Excess Spread") using Excess Finance Charge
Collections available to be shared from other Series that would otherwise be
paid to the Transferor.
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
Certificateholders and then under certain circumstances payments to the
Collateral Interest Holders. The Servicer will determine the amount of
collections of Principal Receivables for any Monthly Period allocated to the
Investor Interest remaining after covering required payments to the Investor
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" means (i) initially $60,000,000 (the
"Initial Collateral Interest") and (ii) thereafter on each Transfer Date, an
amount equal to 8.0% of the sum of (x) the Class A Adjusted Investor Interest
and the Class B Investor 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 (y) the Collateral
Interest on the prior Transfer Date after any adjustments made on such Transfer
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Date, but not less than $22,500,000; 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 sum of the unpaid principal amount of
the Class A Certificates and Class B 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 (a) the Class A Floating Allocation
applicable with respect to the related Monthly Period and (b) 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 (a) the Class B Floating Allocation applicable with respect to the
related Monthly Period and (b) the Investor Default Amount for such Monthly
Period. A portion of the Investor Default Amount will be allocated to the
Collateral Interest Holders (the "Collateral Default Amount") on each Transfer
Date in an amount equal to the product of (a) the Collateral Floating
Allocation applicable with respect to the related Monthly Period and (b) the
Investor Default Amount for such Monthly Period.
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 by 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 by 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
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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 by 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 by 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."
Principal Funding Account
Pursuant to the Series 2000-1 Supplement, the Trustee will establish and
maintain with a Qualified Institution a segregated trust account held for the
benefit of the 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 2000-1 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.
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Reserve Account
Pursuant to the Series 2000-1 Supplement, the Trustee will establish and
maintain with a Qualified Institution a segregated trust account held for the
benefit of the Investor Certificateholders (the "Reserve Account"). The Reserve
Account is established to assist with the subsequent distribution of interest
on the Investor 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 (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
Holders 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 2000-1. 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 Holders 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.
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.
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 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.
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The Reserve Account will be terminated upon the earlier to occur of (a) the
termination of the Trust 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 Holders for
application in accordance with the terms of the Loan Agreement. Any amounts
withdrawn from the Reserve Account and distributed to the Collateral Interest
Holders 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 June 30, 2004
(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 2000-1 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 2000-1 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 periods;
(d) a failure by the Transferor to convey Receivables arising under
Additional Accounts, or Participations, to the Trust 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 in full 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);
(h) the Transferor becomes unable for any reason to transfer Receivables
or Participations to the Trust in accordance with the provisions of the
Agreement; or
(i) the Trust becomes subject to regulation as an "investment company"
within the meaning of the Investment Company Act of 1940, as amended.
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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 Investor 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, 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 the Trust, 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 the Trust
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 of Principal Receivables and Finance Charge
Receivables and Defaulted Amounts will be reduced to zero.
Servicing Compensation and Payment of Expenses
The share of the Servicing Fee (as defined below) 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 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
S-43
<PAGE>
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 the Trust, 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
Holders 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 the Trust, 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 the Trust or the Investor
Certificateholders other than Federal, state and local income and franchise
taxes, if any, of the Trust.
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.
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.
S-44
<PAGE>
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
the Trust, 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 the
Trust 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 (as defined herein) 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 the Trust 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.
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-45
<PAGE>
Underwriting
Subject to the terms and conditions set forth in the Underwriting Agreement
dated July 25, 2000 (the "Underwriting Agreement") between Wachovia and the
underwriters of the Class A Certificates (the "Underwriters") named below,
Wachovia has agreed to sell to the Underwriters and each of the Underwriters
has severally agreed to purchase, the principal amount of the Class A
Certificates set forth opposite its name.
<TABLE>
<CAPTION>
Principal
Amount of
Class A
Underwriters Certificates
------------ ------------
<S> <C>
Lehman Brothers Inc. ........................................ $106,250,000
Wachovia Securities, Inc. ................................... 106,250,000
Deutsche Bank Securities Inc. ............................... 106,250,000
Merrill Lynch, Pierce, Fenner & Smith Incorporated........... 106,250,000
Morgan Stanley & Co. Incorporated............................ 106,250,000
Salomon Smith Barney Inc. ................................... 106,250,000
------------
Total...................................................... $637,500,000
============
</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>
Underwriting Selling
Price to discounts and concessions, Reallowance,
public commissions not to exceed not to exceed
-------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Class A Certificates.... 100% 0.275% 0.165% 0.075%
</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 Underwriting
Proceeds to amount of the Class A discounts and
Transferor Certificates) commissions
------------ ---------------------- -------------
<S> <C> <C> <C>
Class A Certificates..... $637,746,875 99.725% $1,753,125
</TABLE>
After the public offering, the public offering price and other selling terms
may be changed by the Underwriters. Additional offering expenses are estimated
to be $850,000.
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-46
<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 0.165% of the principal amount of the Class A
Certificates. Each Underwriter may allow, and such dealers may reallow,
concessions not in excess of 0.075% of the principal amount of the Class A
Certificates to certain brokers and dealers.
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 Securities, Inc. ("WSI") is an affiliate of the Transferor. Any
obligations of WSI are the sole obligations of WSI and do not create any
obligations on the part of any of its affiliates.
WSI 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.
WSI expects to offer and sell previously issued Class A Certificates in the
course of its business as a broker-dealer. WSI may act as a principal or agent
in such transactions. This supplement and the attached prospectus may be used
by WSI 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-47
<PAGE>
Index of Terms for Prospectus Supplement
<TABLE>
<CAPTION>
Term Page
---- ----
<S> <C>
Accounts..................... S-15
Accumulation Period Length... S-29
Accumulation Shortfall....... S-37
Addition Cut-Off Date........ S-19
Addition Date................ S-30
Adjusted Investor Interest... S-28
Agreement.................... S-15
Available Investor Principal
Collections................. S-29
Available Reserve Account
Amount...................... S-41
Bank......................... S-15
Bank Portfolio............... S-15
Base Rate.................... S-23
Certificateholders........... S-15
Class A Additional Interest.. S-27
Class A Adjusted Investor
Interest.................... S-28
Class A Available Funds...... S-27
Class A Certificate Rate..... S-27
Class A Certificateholders... S-15
Class A Certificates......... S-15
Class A Fixed Allocation..... S-31
Class A Floating Allocation.. S-30
Class A Investor Charge-Off.. S-39
Class A Investor Default
Amount...................... S-39
Class A Investor Interest.... S-25, S-31
Class A Monthly Interest..... S-34
Class A Monthly Principal.... S-37
Class A Required Amount...... S-32
Class A Scheduled Payment
Date........................ S-22
Class A Servicing Fee........ S-44
Class B Additional Interest.. S-27
Class B Available Funds...... S-27
Class B Certificate Rate..... S-28
Class B Certificateholders... S-15
Class B Certificates......... S-15
Class B Fixed Allocation..... S-31
Class B Floating Allocation.. S-30
Class B Investor Charge-Off.. S-40
Class B Investor Default
Amount...................... S-39
Class B Investor Interest.... S-25, S-31
Class B Monthly Interest..... S-34
Class B Monthly Principal.... S-37
Class B Required Amount...... S-32
Class B Scheduled Payment
Date........................ S-22
Class B Servicing Fee........ S-44
Closing Date................. S-26
Collateral Available Funds... S-35
Collateral Charge-Off........ S-40
Collateral Default Amount.... S-39
</TABLE>
<TABLE>
<CAPTION>
Term Page
---- ----
<S> <C>
Collateral Fixed Allocation S-31
Collateral Floating
Allocation.................. S-30
Collateral Interest.......... S-15, S-25,
S-31
Collateral Interest Holders.. S-15
Collateral Interest Servicing
Fee......................... S-44
Collateral Monthly Interest.. S-36
Collateral Monthly
Principal................... S-37
Collateral Rate.............. S-36
Controlled Accumulation
Amount...................... S-37
Controlled Deposit Amount.... S-22
Default Amount............... S-39
Distribution Date............ S-27
DOL.......................... S-45
ERISA........................ S-44
Excess Finance Charge
Collections................. S-38
Excess Spread................ S-35
Fixed Investor Percentage.... S-30
FFIEC........................ S-17
FFIEC Uniform Policy......... S-17
Floating Investor
Percentage.................. S-30
Group I...................... S-38
Independent Investors........ S-45
Initial Collateral Interest.. S-38
Interest Period.............. S-27
Investor Certificateholders.. S-15
Investor Certificates........ S-15
Investor Default Amount...... S-39
Investor Interest............ S-25
Investor Servicing Fee....... S-43
LIBOR........................ S-28
LIBOR Determination Date..... S-28
Loan Agreement............... S-35
Minimum Aggregate Principal
Receivables................. S-19
Minimum Transferor Amount.... S-19
Monthly Period............... S-19
Net Servicing Fee Rate....... S-44
Parties in Interest.......... S-44
Partners First Portfolio..... S-16
Pay Out Event................ S-23, S-42
Plan Asset Regulation........ S-45
Plans........................ S-44
Pooling and Servicing
Agreement................... S-15
Portfolio Yield.............. S-23
Principal Funding Account.... S-22, S-40
Principal Funding Account
Balance..................... S-22
Principal Funding Investment
Proceeds.................... S-40
</TABLE>
S-48
<PAGE>
<TABLE>
<CAPTION>
Term Page
---- ----
<S> <C>
Principal Shortfalls............... S-38
Rapid Amortization Penod........... S-22
Rating Agency Condition............ S-39
Reallocated Class B Principal
Collections....................... S-33
Reallocated Collateral Principal
Collections....................... S-33
Reallocated Principal Collections.. S-33
Receivables........................ S-15
Record Date........................ S-26
Reference Banks.................... S-28
Removal Date....................... S-30
Required Amounts................... S-32
Required Collateral Interest....... S-38
Required Reserve Account Amount.... S-41
Reserve Account.................... S-41
Reserve Account Draw............... S-41
Reserve Account Funding Date....... S-41
Revolving Period................... S-28
Series 2000-1 Supplement........... S-15
Series 2000-1 Termination Date..... S-29
Servicer........................... S-15
</TABLE>
<TABLE>
<CAPTION>
Term Page
---- ----
<S> <C>
Servicer Interchange................ S-43
Servicing Fee....................... S-44
Shared Principal Collections........ S-38
Telerate Page 3750.................. S-28
Transfer Date....................... S-33
Transferor.......................... S-15
Transferor Amount................... S-25
Transferor Interest................. S-25
Transferor Participation............ S-26
Transferor Percentage............... S-26
Trust............................... S-15
Trust Portfolio..................... S-19
Trustee............................. S-15
Underwriters........................ S-46
Underwriting Agreement.............. S-46
Virginia Banks...................... S-16
Virginia Portfolios................. S-16
Wachovia............................ S-15
Wells Portfolio..................... S-16
WOSC................................ S-16
WSI................................. S-47
</TABLE>
S-49
<PAGE>
Annex I
Other Series
The Trust has previously issued three 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, Series 1999-
1 and Series 1999-2. 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.
<TABLE>
<S> <C>
Series 1995-1
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...... $27,500,000
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 26, 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
Series 1999-1
1.Class A Certificates
Initial Invested
Amount............... $775,000,000
Certificate Rate...... One Month LIBOR + 0.15%
Controlled
Accumulation Amount
(subject to
adjustment).......... $64,583,333.33
Commencement of
Controlled
Accumulation Period
(subject to
adjustment).......... February 28, 2003
Annual Servicing Fee
Percentage........... 2.0%
Initial Collateral
Interest............. $67,169,550
Other Enhancement..... subordination of Class B Certificates and collateral interest
Scheduled Payment
Date................. March 2004
Stated Series
Termination Date..... August 2006
Series Issuance Date.. March 24, 1999
</TABLE>
S-50
<PAGE>
<TABLE>
<S> <C>
2.Class B Certificates
Initial Invested
Amount............... $53,757,250
Certificate Rate...... One Month LIBOR + 0.40%
Annual Servicing Fee
Percentage........... Same as above for Class A Certificates
Initial Collateral
Interest............. Same as above for Class A Certificates
Other Enhancement..... subordination of the collateral interest
Scheduled Payment
Date................. April 2004
Stated Series
Termination Date..... August 2006
Series Issuance Date.. March 24, 1999
Series 1999-2
1.Class A Certificates
Initial Invested
Amount............... $432,500,000
Certificate Rate...... One Month LIBOR + 0.18%
Controlled
Accumulation Amount
(subject to
adjustment).......... $36,041,667
Commencement of
Controlled
Accumulation Period
(subject to
adjustment).......... August 31, 2000
Annual Servicing Fee
Percentage........... 2.0%
Initial Collateral
Interest............. $37,500,000
Other Enhancement..... subordination of Class B Certificates and collateral interest
Scheduled Payment
Date................. September 2001
Stated Series
Termination Date..... February 2004
Series Issuance Date.. September 21, 1999
2.Class B Certificates
Initial Invested
Amount............... $30,000,000
Certificate Rate...... One Month LIBOR + 0.42%
Annual Servicing Fee
Percentage........... Same as above for Class A Certificates
Initial Collateral
Interest............. Same as above for Class A Certificates
Other Enhancement..... subordination of the collateral interest
Scheduled Payment
Date................. October 2001
Stated Series
Termination Date..... February 2004
Series Issuance Date.. September 21, 1999
</TABLE>
S-51
<PAGE>
Prospectus
Wachovia Credit Card Master Trust
Issuer
The First National Bank of Atlanta d/b/a Wachovia A certificate is
Bank Card Services 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.
Transferor and Servicer
Asset Backed Certificates
The trust--
. may periodically issue asset backed certificates in
one or more series with one or more classes; and
. will own--
. receivables in a portfolio of consumer revolving credit card accounts;
. payments due on those receivables; and
. other property described in this prospectus and in the prospectus
supplement.
The certificates
will represent
interests in the
trust only and
will not
represent
interests in or
obligations of
The First
National Bank of
Atlanta d/b/a
Wachovia Bank
Card Services,
the servicer or
any of its
affiliates.
This prospectus
may be used to
offer and sell
any series of
certificates
only if
accompanied by
the prospectus
supplement for
that series.
The certificates--
. will represent interests in a trust and will be paid only from the assets of
the trust;
. offered by this prospectus will be rated in one of the four highest rating
categories by at least one nationally recognized rating organization;
. may have one or more forms of enhancement; and
. will be issued as part of a designated series which may include one or more
classes of certificates and enhancement.
The certificateholders--
. will receive interest and principal payments from a varying percentage of
credit card account collections.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined
whether this prospectus is truthful or complete. Any representation to the
contrary is a criminal offense.
The date of this Prospectus is July 21, 2000
<PAGE>
Table of Contents
Prospectus
<TABLE>
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Important Notice About Information
Presented in this Prospectus and the
Prospectus Supplement................ 3
The Trusts............................ 4
Wachovia's Credit Card Activities..... 4
General.............................. 4
Acquisition and Use of Credit Card
Accounts........................... 4
Description of Wachovia Operational
Services Corporation............... 5
Interchange.......................... 6
Recoveries........................... 6
The Receivables....................... 7
Maturity Considerations............... 8
Use of Proceeds....................... 9
Wachovia and Wachovia Corporation..... 9
Description of the Certificates....... 10
General.............................. 10
Book-Entry Registration.............. 12
Definitive Certificates.............. 15
Interest Payments.................... 16
Principal Payments................... 16
Controlled Amortization Period....... 17
Principal Amortization Period........ 17
Controlled Accumulation Period....... 17
Rapid Accumulation Period............ 18
Rapid Amortization Period............ 19
Transfer and Assignment of
Receivables.......................... 19
Exchanges............................ 19
Representations and Warranties....... 21
Addition of Trust Assets............. 23
Removal of Accounts.................. 24
Collection and other Servicing
Procedures........................... 25
Discount Option...................... 25
Trust Accounts....................... 25
Funding Period....................... 26
Investor Percentage and Transferor
Percentage......................... 27
Application of Collections........... 27
Shared Excess Finance Charge
Collections.......................... 29
Excess Funding Account............... 29
Shared Principal Collections......... 30
Paired Series........................ 30
Defaulted Receivables; Rebates and
Fraudulent Charges; Investor
Charge-Offs........................ 30
Defeasance........................... 31
Final Payment of Principal;
Termination.......................... 31
Pay Out Events....................... 32
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Servicing Compensation and Payment
of
Expenses.......................... 33
Certain Matters Regarding the
Transferor
and the Servicer.................. 33
Servicer Default.................... 34
Reports to Certificateholders....... 35
Evidence as to Compliance........... 36
Amendments.......................... 36
List of Certificateholders.......... 37
The Trustee......................... 37
Credit Enhancement................... 38
General............................. 38
Subordination....................... 38
Cash Collateral Guaranty or
Account............................. 39
Collateral Interest................. 39
Letter of Credit.................... 39
Surety Bond or Insurance Policy..... 40
Spread Account...................... 40
Reserve Account..................... 40
Certificate Ratings.................. 41
Certain Legal Aspects of the
Receivables......................... 42
Transfer of Receivables............. 42
Certain Matters Relating to
Receivership........................ 42
Consumer Protection Laws............ 44
Industry Litigation................. 45
Certain U.S. Federal Income Tax
Consequences........................ 46
General............................. 46
Characterization of the Certificates
as Indebtedness.................... 46
Taxation of Interest Income of
Certificateholders................ 47
Sale or Other Disposition of a
Certificate......................... 48
Tax Characterization of the Trust... 48
FASIT Legislation................... 50
Foreign Investors................... 50
State and Local Taxation............. 52
Employee Benefit Plan
Considerations...................... 53
Plan of Distribution................. 56
Legal Matters........................ 57
Reports to Certificateholders........ 58
Where You Can Find More Information.. 59
Index of Terms for Prospectus........ 60
Annex I: Global Clearance, Settlement
and Tax Documentation Procedures.... A-1
Initial Settlement.................. A-1
Secondary Market Trading............ A-1
Certain U.S. Federal Income Tax
Documentation Requirements........ A-3
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Important Notice About Information Presented in this
Prospectus and the Prospectus Supplement
We provide information to you about the certificates in two separate
documents that progressively provide more detail: (a) this prospectus, which
provides general information, some of which may not apply to a particular
series of certificates, including your series, and (b) the prospectus
supplement, which will describe the specific terms of your series of
certificates, including:
. the timing and amount of interest and principal payments;
. information about the receivables;
. information about credit enhancement for each offered class;
. credit ratings; and
. the method for selling the certificates.
Whenever information in the prospectus supplement is more specific than the
information in this prospectus, you should rely on the information in the
prospectus supplement.
You should rely only on the information provided in this prospectus and the
prospectus supplement, including the information incorporated by reference. We
have not authorized anyone to provide you with different information.
We include cross-references in this prospectus and in the prospectus
supplement to captions in these materials where you can find further related
discussions. The preceding table of contents and the table of contents included
in the prospectus supplement provide the pages on which these captions are
located.
You can find a listing of the pages where capitalized terms are defined
under the caption "Index of Terms for Prospectus" beginning on page 60 in this
prospectus.
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The Trusts
The Wachovia Credit Card Master Trust ("Trust I") has been formed in
accordance with the laws of the State of Delaware pursuant to a pooling and
servicing agreement (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 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 Pooling and
Servicing 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.
No Trust will engage in any business activity other than as described herein
and in the related supplement to this Prospectus (the "Prospectus Supplement").
Each Trust will hold the Receivables, issue asset backed certificates (the
"Certificates") evidencing an undivided interest in the assets of a Wachovia
Credit Card Master Trust (each, a "Trust") which 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") and the related Transferor
Certificate, make payments thereon and engage in related activities (including,
with respect to any Series, obtaining any Enhancement (as defined herein) 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(R) and VISA(R)/1/ credit card accounts (the "Accounts"), including
premium accounts and standard accounts, from the portfolio of accounts owned by
the Bank (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 the existing
customer base of Wachovia Bank, N.A. ("WBNA") in the states in which WBNA
operates through branch promotions and cross-selling campaigns.
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/1/MasterCard(R) and VISA(R) are registered trademarks of MasterCard
International Incorporated and Visa U.S.A., Inc., respectively.
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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.
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
("ATM"). 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's Credit Card Portfolio--Portfolio
Acquisitions" in the attached Prospectus Supplement. 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 (as defined herein). 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 U.S.A., Inc. for performing
authorizations and funds transfers.
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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.
"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.
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 (as
defined herein) 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 (as defined herein) to the Servicer.
Recoveries
The Transferor and the Servicer will be required, pursuant to the terms of
the Pooling and Servicing Agreement, to transfer to the Trust all amounts
received by the Transferor or the Servicer with respect to Receivables in
Defaulted Accounts, including amounts received by the Transferor or the
Servicer from the purchaser or transferee with respect to the sale or other
disposition of Receivables in Defaulted Accounts ("Recoveries"). In the event
of any such sale or other disposition of Receivables, Recoveries will not
include amounts received by the purchaser or transferee of such Receivables but
will be limited to amounts received by the Transferor or the Servicer from the
purchaser or transferee.
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The Receivables
The assets of Trust I and each New Trust will include receivables (the
"Receivables") conveyed to each such Trust arising in Accounts selected from
the Bank Portfolio (the "Trust Portfolio") on the basis of criteria set forth
in the related Agreement as applied on the relevant date (the "Cut Off Date")
specified in the related Prospectus Supplement and, with respect to Additional
Accounts (as defined herein), as of the related date of their selection to be
added to the Trust (the "Addition Cut Off Date"). 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 (as defined herein) 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.
The Transferor will have the right (subject to certain limitations and
conditions set forth in the related Agreement), 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 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 to be included 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 Accounts (the "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 date the
Receivables are selected to be added to the Trust or as of the date of creation
of new Receivables, such Receivables meet certain eligibility requirements. See
"Description of the Certificates--Representations and Warranties," "--Addition
of Trust Assets" and "--Removal of Accounts."
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
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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 (as defined herein),
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 (as defined herein) during the amortization period
(the "Controlled Amortization Period") or the Principal Amortization Period (as
defined herein), 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.
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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.
Wachovia and Wachovia Corporation
Wachovia, a wholly-owned subsidiary of Wachovia Corporation (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 principal executive offices of the Bank are located at New
Castle, Delaware, telephone number (302) 323-2395. The Corporation is a
financial holding company registered under the Gramm-Leach-Bliley Act of 1999,
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.
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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.
General
Each Series of Certificates will represent an undivided interest in the
assets of the related Trust, including the right to the applicable Investor
Percentage of all cardholder payments on the Receivables in such 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 a fixed, floating or other type of rate and (ii) principal during
the Controlled Amortization Period, the Principal Amortization Period, or,
under certain limited circumstances, the Rapid Amortization Period (each, as
defined herein, an "Amortization Period"), or on Scheduled Payment Dates (as
defined herein), 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.
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 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 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 (as defined herein).
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
collections 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 that apply with respect to the allocation of collections of
Principal Receivables, Finance Charge Receivables and Receivables in Defaulted
Accounts during the Revolving Period (as defined herein), any Amortization
Period and any Accumulation Period, as applicable. If
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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 "--Investor Percentage and
Transferor Percentage."
For each Series of Certificates, payments of interest and principal will be
made on Distribution Dates specified in the related Prospectus Supplement to
holders of Certificates in whose names the Certificates were registered
("Certificateholders") 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, 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."
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.
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."
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 The Depository Trust Company
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("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 & Co. ("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 Clearstream
Luxembourg 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. Clearstream
Luxembourg and Euroclear will hold omnibus positions on behalf of the
Clearstream Luxembourg Customers and the Euroclear Participants, respectively,
through customers' securities accounts in Clearstream Luxembourg's and
Euroclear's names on the books of their respective depositaries (collectively,
the "Depositaries") which in turn will hold such positions in customers'
securities accounts in the Depositaries' 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").
Transfers between DTC Participants will occur in accordance with DTC rules.
Transfers between Clearstream Luxembourg 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 Clearstream Luxembourg Customers or Euroclear Participants,
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on the other, will be effected in DTC in accordance with DTC rules on behalf of
the relevant European international clearing system by its Depositary; 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 Depositary 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. Clearstream Luxembourg Customers and Euroclear Participants
may not deliver instructions directly to the Depositaries.
Because of time-zone differences, credits of securities in Clearstream
Luxembourg 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 Clearstream Luxembourg Customer or Euroclear Participant on
such business day. Cash received in Clearstream Luxembourg or Euroclear as a
result of sales of securities by or through a Clearstream Luxembourg Customer
or a Euroclear Participant will be received with value on the DTC settlement
date but will be available in the relevant Clearstream Luxembourg 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
interests 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 of and interest on
the Certificates. DTC Participants 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.
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Clearstream Banking, societe anonyme ("Clearstream Luxembourg") is
incorporated under the laws of Luxembourg. Clearstream Luxembourg holds
securities for its participating organizations ("Clearstream Luxembourg
Customers") and facilitates the clearance and settlement of securities
transactions between Clearstream Luxembourg Customers through electronic book-
entry changes in accounts of Clearstream Luxembourg Customers, thereby
eliminating the need for physical movement of securities. Transactions may be
settled in Clearstream Luxembourg in any of 36 currencies, including United
States dollars. Clearstream Luxembourg provides to its Clearstream Luxembourg
Customers, among other things, services for safekeeping, administration,
clearance and settlement of internationally traded securities and securities
lending and borrowing. Clearstream Luxembourg deals with domestic securities
markets in over 30 countries through established depository and custodial
relationships. Clearstream Luxembourg 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 Clearstream Luxembourg and
MGT/EOC. Clearstream Luxembourg currently accepts over 110,000 securities
issues on its books. Clearstream Luxembourg is subject to regulation by the
Luxembourg Commission for the Supervision of the Financial Sector, which
supervises Luxembourg banks. Clearstream Luxembourg 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. Clearstream Luxembourg Customers in the United States are limited
to securities brokers and dealers and banks. Currently, Clearstream Luxembourg
has approximately 2,000 customers located in over 80 countries, including all
major European countries, Canada and the United States. Indirect access to
Clearstream Luxembourg is also available to others, such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a Clearstream Luxembourg 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 securities 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 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
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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 Clearstream
Luxembourg or Euroclear will be credited to the cash accounts of Clearstream
Luxembourg Customers or Euroclear Participants in accordance with the relevant
system's rules and procedures, to the extent received by its Depositary. 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." Clearstream Luxembourg 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 Clearstream Luxembourg Customer or Euroclear
Participant only in accordance with its relevant rules and procedures and
subject to its Depositary's ability to effect such actions on its behalf
through DTC.
Although DTC, Clearstream Luxembourg and Euroclear have agreed to the
foregoing procedures in order to facilitate transfers of Certificates among
participants of DTC and Euroclear and Clearstream Luxembourg Customers, 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 ("Definitive Certificates") 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 DTC 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 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 distribution.
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
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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
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, semi-annually or otherwise as specified in the related
Prospectus Supplement) (each, a "Distribution Date") specified in the related
Prospectus Supplement. Interest will accrue 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 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 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 (the "Principal Commencement Date"), 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
expected date specified in, or determined in the manner specified in, the
related Prospectus Supplement (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.
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
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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.
Controlled Amortization Period
If the Prospectus Supplement relating to a 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 (as
defined herein), if any, with respect to such Series and (c) the Series
Termination Date (as defined herein) with respect to such Series.
Principal Amortization Period
If the Prospectus Supplement relating to a 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 (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 Period
If the Prospectus Supplement relating to a 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
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"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
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 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 "--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 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.
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Rapid Amortization Period
During the period from the day on which a Pay 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 (as defined herein), if
any, with respect to such Series have been paid in full and (b) the 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 (as defined
herein), 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 "--Pay Out Events" for a discussion of the events which
might lead to commencement of a Rapid Amortization Period.
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 "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) a certificate (the "Transferor Certificate") that 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
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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 (any such tender, an "Exchange"). 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 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, 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 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
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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 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.
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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 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 the relevant Addition Cut Off Date, 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
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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 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
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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 Addition Cut Off Date, an Eligible Account,
and each Receivable in such Additional Account is, as of the Addition Cut Off
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.
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 SEC 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
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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 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. 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.
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
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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 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 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
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 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-Funding 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. See "--
Addition of Trust Assets." This feature is intended to
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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 to the expected date of receipt. 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 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
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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 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.
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Shared Excess Finance Charge Collections
Any Series offered hereby may be included in a group of Series (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 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.
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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 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
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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 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 earliest 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.
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Pay Out Events
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. The "Revolving 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, 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 Series Supplement) issued
and outstanding, the Trustee will sell, dispose of, or otherwise liquidate the
Receivables in a commercially reasonable manner and on 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 "Certain Legal
Aspects of the Receivables--Certain Matters Relating to Receivership."
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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 fee payable at the times and in the amounts specified
in the related Prospectus Supplement (the "Servicing Fee"). 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, or any such successor
servicer, is referred to herein as the "Servicer"). 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 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
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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.
"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
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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 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
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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--FASIT Legislation."
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
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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.
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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, 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. 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.
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
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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.
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.
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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, 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.
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Certificate Ratings
Any rating of the Certificates by a Rating Agency will indicate:
. its view on the likelihood that Certificateholders will receive required
interest and principal payments; and
. its evaluation of the Receivables and the availability of any
Enhancement for the Certificates.
Among the things a rating will not indicate are:
. the likelihood that principal payments will be made on a scheduled
payment date;
. the likelihood that a Pay Out Event will occur;
. the likelihood that a United States withholding tax will be imposed on
non-U.S. Certificateholders;
. the marketability of the Certificates;
. the market price of the Certificates; or
. whether the Certificates are an appropriate investment for any
purchaser.
A rating will not be a recommendation to buy, sell or hold the Certificates.
A rating may be lowered or withdrawn at any time by a Rating Agency.
The Transferor will request a rating of the Certificates offered by this
Prospectus and the related Prospectus Supplement from at least one Rating
Agency. It will be a condition to the issuance of the Certificates of each
Series or Class offered pursuant to this Prospectus and the related Prospectus
Supplement (including each Series that includes a Pre-Funding Account) that
they be rated in one of the four highest rating categories by at least one
nationally recognized rating organization (each such rating agency selected by
the Transferor to rate any Series, a "Rating Agency"). The rating or ratings
applicable to the Certificates of each Series or Class offered hereby will be
set forth in the related Prospectus Supplement. Rating agencies other than
those requested could assign a rating to the Certificates and such a rating
could be lower than any rating assigned by a Rating Agency chosen by the
Transferor.
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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 Federal Deposit Insurance Corporation ("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 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
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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. 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 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.
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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 particular, on May 5, 1999 an amendment
to the Federal Truth-in-Lending Act was passed by the House of Representatives
as a part of the bankruptcy reform bill and referred to the Senate. This
amendment, among other things, requires (i) disclosure as to the time it would
take a consumer to repay a balance in the consumer makes only the minimum
payments, (ii) disclosure as to when any introductory rate will expire, as well
as the rate that will then apply and (iii) disclose in internet based
solicitations identical to that contained in direct mail solicitations. In
addition, on May 4, 1999, President Clinton proposed similar legislation to
require additional disclosure in credit cards bills and solicitations.
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.
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."
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Industry Litigation
The United States Department of Justice (the "DOJ") is currently litigating
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") The DOJ alleges that the two credit
card associations restrain competition and limit consumer choice. The DOJ is
challenging, 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. Both
VISA and MasterCard International are contesting the DOJ's allegations. The
Bank is unable to predict the effect of the 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.
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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
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.
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President Clinton's Fiscal Year 2000 Budget Proposal included a provision
that would preclude a corporate taxpayer (but not the IRS) 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. Although the proposal was not enacted,
similar proposals may be made in the future.
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
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.
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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.
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
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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 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.
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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"). 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), (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 (or the applicable
replacement form) 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 (or the applicable
replacement form), 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.
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The Department of the Treasury has 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, 2000, 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 paragraph are 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 any such
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 the
Employee Retirement Income Security Act of 1974, as amended ("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 SEC) 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.
53
<PAGE>
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.
54
<PAGE>
Any purchaser of Certificates of any Series that is an insurance company
using the assets of an insurance company general account should note that Small
Business Job Protection Act of 1996, 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
issued final regulations, effective January 5, 2000 (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. As a result of
these regulations, assets of an insurance company general account will not be
treated as "plan assets" for purposes of the fiduciary responsibility
provisions of ERISA and Section 4975 of the Code to the extent such assets
relate to contracts issued on or before December 31, 1998 and the insurer
satisfies various conditions. 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 of the Code 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 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.
55
<PAGE>
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.
56
<PAGE>
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, a member
of Richards, Layton & Finger, is a member of the Board of Directors of The
First National Bank of Atlanta and owns 100 shares of the Corporation's common
stock. 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.
57
<PAGE>
Reports to Certificateholders
Unless and until Definitive Certificates are issued, monthly and annual
reports, containing information concerning the Trust and prepared by the
Servicer, will be sent on behalf of the Trust to Cede as nominee of DTC and
registered holder of the related Certificates, pursuant to the 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 financial
reports of the Bank to Certificateholders or to the owners of beneficial
interests in the Certificates (the "Certificate Owners"). The Servicer will
file with the SEC such periodic reports with respect to the Trust as are
required under the Exchange Act and the rules and regulations of the SEC
thereunder.
58
<PAGE>
Where You Can Find More Information
We filed a registration statement relating to the Certificates with the SEC.
This Prospectus is part of the registration statement, but the registration
statement includes additional information.
The Servicer will file with the SEC all required annual, monthly and special
SEC reports and other information about the Trust.
You may read and copy any reports, statements or other information we file
at the SEC's public reference room at 450 Fifth Street, N.W., Washington, D.C.
20549. You may request copies of these documents, upon payment of a duplicating
fee, by writing to the SEC. Please call the SEC at (800) SEC-0330 for further
information on the operation of the public reference rooms. Our SEC filings are
also available to the public on the SEC Internet site (http://www.sec.gov).
The SEC allows us to "incorporate by reference" information we file with it,
which means that we can disclose important information to you by referring you
to those documents. The information incorporated by reference is considered to
be part of this Prospectus. Information that we file later with the SEC will
automatically update the information in this Prospectus. In all cases, you
should rely on the later information over different information included in
this Prospectus or the related Prospectus Supplement. We incorporate by
reference any future annual, monthly and special SEC reports and proxy
materials filed by or on behalf of the Trust until we terminate our offering of
the Certificates.
As a recipient of this Prospectus, you may request a copy of any document we
incorporate by reference, except exhibits to the documents (unless the exhibits
are specifically incorporated by reference), at no cost, by writing or calling
us at: Investor Relations, Wachovia Corporation, 100 North Main Street,
Winston-Salem, North Carolina 27150-3099, telephone number (336) 732-6520.
59
<PAGE>
Index of Terms for Prospectus
<TABLE>
<CAPTION>
Term Page
---- ----
<S> <C>
Accounts.......................... 4
Accumulation Period............... 10
Addition Cut Off Date............. 7
Additional Accounts............... 7, 23
Additional Interest............... 29
Aggregate Addition Limit.......... 24
Agreement......................... 4
Amortization Period............... 10
Appointment Date.................. 32
Assignment........................ 24
ATM............................... 5
Automatic Additional Accounts..... 7, 24
Bank.............................. 4
Bank Portfolio.................... 4
Benefit Plans..................... 53
Cash Collateral Account........... 39
Cash Collateral Guaranty.......... 39
Cede.............................. 12
Certificate Owner................. 46
Certificate Owners................ 58
Certificate Rate.................. 10
Certificateholders................ 11
Certificates...................... 4
Class............................. 4
Clearstream Luxembourg............ 14
Clearstream Luxembourg Customers.. 14
Closing Date...................... 32
Code.............................. 46
Collateral Interest............... 39
Collection Account................ 25
Controlled Accumulation Amount.... 18
Controlled Accumulation Period.... 17
Controlled Amortization Amount.... 17
Controlled Amortization Period.... 8, 17
Controlled Deposit Amount......... 17
Controlled Distribution Amount.... 17
Cooperative....................... 14
Corporation....................... 9
Credit Enhancement................ 38
Credit Enhancement Percentage..... 27
Credit Enhancement Provider....... 38
Cut Off Date...................... 7
Defaulted Accounts................ 10
Definitive Certificates........... 15
Depositaries...................... 12
Depository........................ 12
Determination Date................ 30
Disclosure Document............... 20
Discount Option................... 25
</TABLE>
<TABLE>
<CAPTION>
Term Page
---- ----
<S> <C>
Discount Percentage.......... 25
Distribution Account......... 26
Distribution Date............ 16
DOJ.......................... 45
DOL.......................... 53
DTC.......................... 12, A-1
DTC Participants............. 12
Eligible Account............. 22
Eligible Receivable.......... 22
Enhancement.................. 38
Enhancement Invested Amount.. 38
ERISA........................ 53
Euroclear.................... 14
Euroclear Operator........... 14
Euroclear Participants....... 14
Euroclear System............. 14
Excess Finance Charge
Collections................. 29
Excess Funding Account....... 29
Exchange..................... 20
Exchange Act................. 12
FASIT........................ 50
FDIA......................... 42
FDIC......................... 42
Finance Charge Account....... 25
Finance Charge Receivables... 7
FIRREA....................... 42
Foreign Investors............ 50
Full Investor Interest....... 26
Funding Period............... 26
General Account Regulations.. 55
Global Securities............ A-1
Group........................ 29
Holders...................... 15
Indirect Participants........ 12
Ineligible Receivable........ 21
Insolvency Event............. 32
Interchange.................. 6
Interest Funding Account..... 16
Interest Period.............. 16
Investor Charge-Off.......... 29
Investor Default Amount...... 29
Investor Interest............ 11
Investor Percentage.......... 10
Investor Servicing Fee....... 29
IRA.......................... 53
IRS.......................... 46
John Hancock................. 54
MasterCard International..... 45
MGT/EOC...................... 14
</TABLE>
60
<PAGE>
<TABLE>
<CAPTION>
Term Page
---- ----
<S> <C>
Minimum Transferor Amount........ 7
Monthly Interest................. 29
Monthly Period................... 16
Moody's.......................... 26
New Agreement.................... 4
New Regulations.................. 51
New Trust........................ 4
Octagon.......................... 43
Offered Certificates............. 46
OID.............................. 47
Paired Series.................... 30
Participation Agreement.......... 23
Participations................... 23
Pay Out Event.................... 18
Paying Agent..................... 35
Permitted Investments............ 26
Plan Asset Regulation............ 53
Pooling and Servicing Agreement.. 4
Pre-Funding Account.............. 26
Pre-Funding Amount............... 26
Prepayable Instrument............ 47
Principal Account................ 25
Principal Amortization Period.... 17
Principal Commencement Date...... 16
Principal Funding Account........ 17
Principal Receivables............ 7
Principal Terms.................. 20
Prospectus Supplement............ 4
PTE.............................. 54
Qualified Institution............ 26
Rapid Accumulation Period........ 18
Rapid Amortization Period........ 19
Rating Agency.................... 41
Receivables...................... 7
Record Date...................... 11
Recoveries....................... 6
Regulations...................... 47
Remaining Redemption Amount...... 48
Removed Accounts................. 7
</TABLE>
<TABLE>
<CAPTION>
Term Page
---- ----
<S> <C>
Reserve Account..................................................... 40
Revolving Period.................................................... 32
Scheduled Payment Date.............................................. 16
SEC................................................................. 12
Securities Act...................................................... 4
Senior Certificates................................................. 10
Series.............................................................. 4, A-1
Series Supplement................................................... 4
Series Termination Date............................................. 31
Service Transfer.................................................... 34
Servicer............................................................ 4, 33
Servicer Default.................................................... 34
Servicing Fee....................................................... 33
Shared Principal Collections........................................ 30
Special Tax Counsel................................................. 46
Spread Account...................................................... 40
Standard & Poor's................................................... 26
Subordinated Certificates........................................... 10
Tax Opinion......................................................... 20
Terms and Conditions................................................ 14
Transfer Date....................................................... 17
Transferor.......................................................... 4
Transferor Amount................................................... 11
Transferor Certificate.............................................. 19
Transferor Interest................................................. 19
Transferor Participation............................................ 11
Transferor Percentage............................................... 11
Trust............................................................... 4
Trust I............................................................. 4
Trust Portfolio..................................................... 7
Trust Termination Date.............................................. 31
Trustee............................................................. 4
U.S. Person......................................................... A-4
UCC................................................................. 42
Underwriting Agreement.............................................. 56
VISA................................................................ 45
Wachovia............................................................ 4
WBNA................................................................ 4
WOSC................................................................ 5
</TABLE>
61
<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"), Clearstream
Luxembourg 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
Clearstream Luxembourg 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 Clearstream Luxembourg or Euroclear
and DTC Participants holding Certificates will be effected on a delivery-
against-payment basis through the respective Depositaries of Clearstream
Luxembourg 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, Clearstream Luxembourg
and Euroclear will hold positions on behalf of their participants through their
respective Depositaries, 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.
Investors' 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 Clearstream
Luxembourg 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.
A-1
<PAGE>
Trading Between Clearstream Luxembourg Customers and/or Euroclear
Participants. Secondary market trading between Clearstream Luxembourg Customers
or Euroclear Participants will be settled using the procedures applicable to
conventional eurobonds in same-day funds.
Trading Between DTC Seller and Clearstream Luxembourg or Euroclear
Purchaser. When Global Securities are to be transferred from the account of a
DTC Participant to the account of a Clearstream Luxembourg Customer or a
Euroclear Participant, the purchaser will send instructions to Clearstream
Luxembourg or Euroclear through a Clearstream Luxembourg Customer or Euroclear
Participant at least one business day prior to settlement. Clearstream
Luxembourg or Euroclear will instruct the respective Depositary, 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 Depositary 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 Clearstream
Luxembourg 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 Clearstream Luxembourg or Euroclear cash debit will be valued
instead as of the actual settlement date.
Clearstream Luxembourg 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 Clearstream
Luxembourg or Euroclear. Under this approach, they may take on credit exposure
to Clearstream Luxembourg or Euroclear until the Global Securities are credited
to their accounts one day later.
As an alternative, if Clearstream Luxembourg or Euroclear has extended a
line of credit to them, Clearstream Luxembourg 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, Clearstream
Luxembourg 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 Clearstream Luxembourg 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 Depositary for the benefit of Clearstream Luxembourg 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 Clearstream Luxembourg or Euroclear Seller and DTC
Purchaser. Due to time zone differences in their favor, Clearstream Luxembourg
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 Depositary, to a DTC Participant. The
seller will send instructions to Clearstream Luxembourg or Euroclear through a
Clearstream Luxembourg Customer or Euroclear Participant at least one business
day prior to settlement. In these cases, Clearstream Luxembourg or Euroclear
will instruct the respective Depositary, 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 Clearstream Luxembourg Customer or Euroclear Participant
the following day, and receipt of the cash proceeds in the
A-2
<PAGE>
Clearstream Luxembourg 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 Clearstream Luxembourg Customer or
Euroclear Participant 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 Clearstream
Luxembourg Customer's or Euroclear Participant's account would instead be
valued as of the actual settlement date. Finally, day traders that use
Clearstream Luxembourg or Euroclear and that purchase Global Securities from
DTC Participants for delivery to Clearstream Luxembourg Customers or Euroclear
Participants should 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 Clearstream Luxembourg or Euroclear for one day
(until the purchase side of the day trade is reflected in their Clearstream
Luxembourg 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 Clearstream Luxembourg
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 Clearstream
Luxembourg Customer or Euroclear Participant.
Certain U.S. Federal Income Tax Documentation Requirements
A beneficial owner of Global Securities holding securities through
Clearstream Luxembourg 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).
A-3
<PAGE>
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). The procedures described above would be changed under new
Treasury regulations which are effective for payments made after December 31,
2000. The new Treasury regulations would combine several existing forms,
including Form W-8, Form 4224 and Form 1001, into a single, expanded Form W-8.
The new Forms W-8 are Form W-8BEN, Certificate of Foreign Status of Beneficial
Owner for U.S. Tax Withholding, that replaces the existing Form W-8; Form W-
8ECI, Certificate of Foreign Person's Claim for Exemption From Withholding on
Income Effectively Connected With the Conduct Of a Trade or Business in the
United States, that replaces the existing Form 4224; Revised Form W-8 used as a
substitute for existing Form 1001 to secure treaty benefits; Form W-8EXP,
Certificate of Foreign Government Or Other Foreign Organization for United
States Tax Withholding; and Form W-8IMY, Certificate of Foreign Intermediary,
Foreign Partnership, or Certain U.S. Branches for U.S. Tax Withholding.
Certifications currently made on Forms W-8, 4224 or 1001 remains valid until
they expire under the existing regulations, but not after December 31, 2000,
and a beneficial owner of a Global Security would have to timely sign the
appropriate W-8 Form to avoid withholding at a rate of 30% in respect of
payments of interest (including original issue discount) made after December
31, 2000, or after the expiration of the current certificate.
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 advisers for
specific tax advice concerning their holding and disposing of the Global
Securities.
A-4
<PAGE>
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$637,500,000
Wachovia Credit Card Master Trust
Issuer
Class A Floating Rate Asset Backed Certificates,
Series 2000-1
The First National Bank of Atlanta d/b/a Wachovia Bank Card Services
Transferor and Servicer
----------------
PROSPECTUS SUPPLEMENT
----------------
Lehman Brothers
Wachovia Securities, Inc.
Deutsche Banc Alex. Brown
Merrill Lynch & Co.
Morgan Stanley Dean Witter
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 these 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 these certificates and with respect to their unsold allotments
or subscriptions. In addition, all dealers selling these certificates will
deliver a prospectus supplement and prospectus until October 25, 2000.
Dated July 25, 2000
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