SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
----------------------
CREDIT CARD RECEIVABLES FUNDING CORPORATION
(Originator of the Trust described herein)
(Exact name of registrant as specified in its charter)
BANKBOSTON CREDIT CARD MASTER TRUST
(Issuer with respect to the Certificates)
DELAWARE [application pending]
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification number)
Credit Card Receivables Funding Corporation
157 Main Street
Nashua, New Hampshire 03060
(603) 594-1802
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
GARY A. SPIESS, ESQ. JANICE B. LIVA, ESQ.
General Counsel and Clerk Assistant General Counsel and
BankBoston Corporation Assistant Clerk
100 Federal Street BankBoston Corporation
Boston, Massachusetts 02110 100 Federal Street
(617) 434-2870 Boston, Massachusetts 02110
(617) 434-8630
(Name, address, including zip code, and telephone number,
including area code, of agents for service)
----------------------
COPIES TO:
ANDREW M. FAULKNER, ESQ. EDWARD M. DESEAR, ESQ.
Skadden, Arps, Slate, Meagher & Flom LLP Orrick, Herrington &
919 Third Avenue Sutcliffe LLP
New York, New York 10022-9931 666 Fifth Avenue
(212) 735-2853 New York, New York 10103
(212) 506-5000
----------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
From time to time after this Registration Statement becomes effective
as determined by market conditions.
----------------------
If the only securities being registered on this form are to be offered
pursuant to dividend or interest reinvestment plans, please check the
following box. |_|
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection
with dividend or interest reinvestment plans, check the
following box. |X|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering.
|-| ---------------
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. |_| _______________
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. |_|
----------------------
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
- ------------------------------------------------------------------------------------------------
Proposed
Maximum
Offering Proposed
Price Maximum Amount of
TITLE OF EACH CLASS OF Amount to Per Offering Registration
SECURITIES TO BE REGISTERED be Registered Unit (1) Price (1) Fee
Asset Backed Certificates................... $1,000,000 100% $1,000,000 $303.03
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for purpose of calculating the registration fee.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A)
OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL
BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
[FLAG]
The information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with
the Securities and Exchange Commission. These securities may not be sold
nor may offers to buy be accepted prior to the time the registration
statement becomes effective. This prospectus shall not constitute an
offer to sell or the solicitation of an offer to buy nor shall there be
any sale of these securities in any State in which such offer,
solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of any such State.
SUBJECT TO COMPLETION, DATED JUNE 18, 1997
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P R O S P E C T U S
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BANKBOSTON CREDIT CARD MASTER TRUST
ASSET BACKED CERTIFICATES
CREDIT CARD RECEIVABLES FUNDING CORPORATION
TRANSFEROR
BANKBOSTON (NH), NATIONAL ASSOCIATION
SERVICER
---------------
Credit Card Receivables Funding Corporation ("CCRFC"), as transferor
(in such capacity, the "Transferor"), may sell from time to time one or
more series (each, a "Series") of asset backed certificates (the
"Certificates") evidencing undivided interests in certain assets of the
BankBoston Credit Card Master Trust (the "Trust"), to be created pursuant
to a pooling and servicing agreement (the "Pooling and Servicing
Agreement") among the Transferor, BankBoston (NH), National Association
(the "Bank"), as servicer (in such capacity, the "Servicer"), and
________________, as trustee (the "Trustee"). The property of the Trust
will include, among other things, the receivables (the "Receivables")
that are generated from time to time in a portfolio of consumer revolving
credit card accounts (the "Accounts"). The Receivables in the Accounts
are sold to CCRFC and then transferred by CCRFC to the Trust as more
fully described herein.
Certificates will be sold from time to time under this Prospectus on
terms determined for each Series at the time of the sale and described in
the related prospectus supplement (each, a "Prospectus Supplement"). Each
Series will consist of one or more classes of Certificates (each, a
"Class"). Each Certificate will represent an undivided interest in
certain assets of the Trust and the interest of the holders of each Class
or Series will include the right to receive a varying percentage of each
month's collections with respect to the Receivables at the times, in the
manner and to the extent described herein and, with respect to any Series
offered hereby, in the related Prospectus Supplement. Interest and
principal payments with respect to each Series offered hereby will be
made as specified in the related Prospectus Supplement. A Series offered
hereby (or any Class within such Series) may be entitled to the benefits
of a cash collateral account or guaranty, spread account, yield
supplement account, collateral interest, letter of credit, surety bond,
insurance policy or other form of credit enhancement as specified in the
Prospectus Supplement relating to such Series. In addition, any Series
offered hereby may include one or more Classes which are subordinated in
right and priority of payment to one or more other Classes of such Series
or another Series, in each case to the extent described in the related
Prospectus Supplement. Each Series of Certificates or Class offered
hereby will be rated in one of the four highest categories by at least
one nationally recognized statistical rating organization.
POTENTIAL INVESTORS SHOULD CONSIDER, AMONG OTHER THINGS, THE INFORMATION SET
FORTH IN "RISK FACTORS" COMMENCING ON PAGE 19 HEREIN.
---------------
THE CERTIFICATES REPRESENT BENEFICIAL INTERESTS IN THE TRUST ONLY AND DO NOT
REPRESENT INTERESTS IN OR OBLIGATIONS OF THE TRANSFEROR, THE BANK, THE
SERVICER OR ANY AFFILIATE OF ANY OF THEM. A CERTIFICATE IS NOT A
DEPOSIT AND NEITHER THE CERTIFICATES NOR THE UNDERLYING
ACCOUNTS OR RECEIVABLES ARE INSURED OR GUARANTEED
BY THE FEDERAL DEPOSIT INSURANCE CORPORATION
OR ANY OTHER GOVERNMENTAL AGENCY
OR INSTRUMENTALITY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------
Certificates may be sold by the Transferor directly to purchasers,
through agents designated from time to time, through underwriting
syndicates led by one or more managing underwriters or through one or
more underwriters acting alone. If underwriters or agents are involved in
the offering of the Certificates of any Series offered hereby, the name
of the managing underwriter or underwriters or agents will be set forth
in the related Prospectus Supplement. If an underwriter, agent or dealer
is involved in the offering of the Certificates of any Series offered
hereby, the underwriter's discount, agent's commission or dealer's
purchase price will be set forth in, or may be calculated from, the
related Prospectus Supplement, and the net proceeds to the Transferor
from such offering will be the public offering price of such Certificates
less such discount in the case of an underwriter, the purchase price of
such Certificates less such commission in the case of an agent or the
purchase price of such Certificates in the case of a dealer, and less, in
each case, the other expenses of the Transferor associated with the
issuance and distribution of such Certificates. See "Plan of
Distribution."
THIS PROSPECTUS MAY NOT BE USED TO CONSUMMATE SALES OF CERTIFICATES OF
ANY SERIES UNLESS ACCOMPANIED BY THE RELATED PROSPECTUS SUPPLEMENT.
---------------
THE DATE OF THIS PROSPECTUS IS _____ __, 1997
TABLE OF CONTENTS
Page
PROSPECTUS SUPPLEMENT................................................. 1
REPORTS TO CERTIFICATEHOLDERS......................................... 1
AVAILABLE INFORMATION................................................. 1
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE....................... 1
PROSPECTUS SUMMARY.................................................... 3
RISK FACTORS.......................................................... 19
USE OF PROCEEDS....................................................... 27
THE TRUST............................................................. 27
CREDIT CARD ACTIVITIES................................................ 28
General......................................................... 28
Business Strategy............................................... 29
Processing and Servicing of Credit Card Accounts................ 29
Account Origination............................................. 29
Underwriting Procedures......................................... 29
Additional Accounts............................................. 30
Billing and Payments............................................ 30
Interchange..................................................... 31
Collection of Delinquent Accounts............................... 32
Recoveries...................................................... 32
Competition in the Credit Card Industry......................... 32
THE BANK.............................................................. 33
CREDIT CARD RECEIVABLES FUNDING CORPORATION........................... 33
THE ACCOUNTS.......................................................... 33
DESCRIPTION OF THE CERTIFICATES....................................... 34
General......................................................... 34
Book-Entry Registration......................................... 35
Definitive Certificates......................................... 37
Interest........................................................ 38
Principal....................................................... 38
Pay Out Events and Reinvestment Events.......................... 40
Servicing Compensation and Payment of Expenses.................. 41
DESCRIPTION OF THE POOLING AND SERVICING AGREEMENT.................... 42
Conveyance of Receivables....................................... 42
Representations and Warranties.................................. 42
The Transferor Certificates..................................... 45
Additions of Accounts or Participation Interests................ 45
Removal of Accounts............................................. 46
Discount Option................................................. 46
Yield Supplement Account........................................ 47
Premium Option.................................................. 47
Indemnification................................................. 48
Collection and Other Servicing Procedures....................... 48
New Issuances................................................... 49
Collection Account.............................................. 50
Allocations..................................................... 51
Groups of Series................................................ 52
Reallocations Among Certificates of Different Series
within a Reallocation Group................................... 52
Sharing of Excess Finance Charge Collections Among Excess
Allocation Series............................................. 53
Shared Principal Collections.................................... 54
Paired Series................................................... 54
Special Funding Account......................................... 55
Funding Period.................................................. 55
Defaulted Receivables; Rebates and Fraudulent Charges........... 56
Credit Enhancement.............................................. 56
Interest Rate Swaps and Related Caps, Floors and Collars........ 58
Servicer Covenants.............................................. 58
Certain Matters Regarding the Servicer.......................... 59
Servicer Default................................................ 59
Evidence as to Compliance....................................... 60
Amendments...................................................... 61
List of Certificateholders...................................... 61
The Trustee..................................................... 61
DESCRIPTION OF THE PURCHASE AGREEMENTS................................ 62
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES.............................. 63
Transfer of Receivables......................................... 63
Certain Matters Relating to Insolvency.......................... 64
Consumer Protection Laws........................................ 66
Proposed Legislation............................................ 67
CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES.......................... 67
General......................................................... 67
Characterization of the Certificates as Indebtedness............ 67
Taxation of Interest Income of Certificateholders............... 68
Sale of a Certificate........................................... 69
Tax Characterization of the Trust............................... 69
FASIT Legislation............................................... 70
Foreign Investors............................................... 71
STATE AND LOCAL TAXATION.............................................. 72
ERISA CONSIDERATIONS.................................................. 72
PLAN OF DISTRIBUTION.................................................. 75
LEGAL MATTERS......................................................... 75
INDEX OF DEFINED TERMS................................................76
PROSPECTUS SUPPLEMENT
The Prospectus Supplement relating to any Series will, among other
things, set forth with respect to such Series: (a) the initial aggregate
principal amount of each Class of such Series; (b) the Certificate Rate
(or method of determining the Certificate Rate) of each such Class; (c)
the expected date or dates on which the Invested Amount with respect to
each such Class will have been paid to the holders of the Certificates of
such Class; (d) the extent to which any Class within a Series is
subordinated to any other Class of such Series or any other Series; (e)
the Distribution Dates for the respective Classes; (f) relevant financial
information with respect to the Receivables; (g) additional information
with respect to any Series Enhancement relating to such Series; and (h)
the plan of distribution of such Series.
REPORTS TO CERTIFICATEHOLDERS
Unless and until Definitive Certificates (as defined herein) are
issued, monthly and annual unaudited reports, containing information
concerning the Trust and prepared by the Servicer, will be sent on behalf
of the Trust to Cede & Co. ("Cede"), as nominee of The Depository Trust
Company ("DTC") and registered holder of the Certificates pursuant to the
Pooling and Servicing Agreement. Such reports will be made available by
DTC and its participants to the Certificateholders in accordance with the
rules, regulations and procedures creating and affecting DTC. See
"Description of the Pooling and Servicing Agreement - Evidence as to
Compliance". Such reports will not constitute financial statements
prepared in accordance with generally accepted accounting principles. The
Pooling and Servicing Agreement does not require the sending of, and the
Transferor does not intend to send, any of its financial reports to the
Certificateholders or to the owners of beneficial interests in the
Certificates ("Certificate Owners").
AVAILABLE INFORMATION
The Transferor, as originator of the Trust, has filed a
Registration Statement under the Securities Act of 1933, as amended (the
"Securities Act"), with the Securities and Exchange Commission (the
"Commission") with respect to the Certificates offered pursuant to this
Prospectus. For further information, reference is made to the
Registration Statement and amendments thereof and exhibits thereto, which
are available for inspection without charge at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Room
1024, Washington, D.C. 20549; Seven World Trade Center, New York, New
York 10048; and Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of the Registration Statement and
amendments thereof and exhibits thereto may be obtained from the Public
Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. The Servicer will file with
the Commission such periodic reports, if any, with respect to the Trust
as are required under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and the rules and regulations of the Commission
thereunder. In addition, the Commission maintains a public access site on
the Internet through the World Wide Web at which site reports, proxy and
information statements and other information regarding registrants,
including all electronic filings, may be viewed. The Internet address of
the Commission's World Wide Web site is http://www.sec.gov.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All reports and other documents filed by the Servicer, on behalf of
the Trust, pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange
Act subsequent to the date of this Prospectus and prior to the
termination of the offering of the Certificates offered hereby shall be
deemed to be incorporated by reference into this Prospectus and to be
part hereof. Any statement contained herein or in a document deemed to be
incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained in any other subsequently filed document which also is deemed
to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be
deemed, except as modified or superseded, to constitute a part of this
Prospectus.
The Servicer will provide without charge to each person to whom a
copy of this Prospectus is delivered, on the written or oral request of
any such person, a copy of any or all of the documents incorporated
herein by reference, except the exhibits to such documents (unless such
exhibits are specifically incorporated by reference in such documents).
Written requests for such copies should be directed to BankBoston (NH),
National Association, 157 Main Street, Nashua, New Hampshire, 03060;
Attention: _______________. Telephone requests for such copies should be
directed to (603) 594-1802.
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to
the detailed information appearing elsewhere in this Prospectus and in
any accompanying Prospectus Supplement. Reference is made to the Index of
Defined Terms for the location herein of the definitions of certain
capitalized terms used herein. Unless the context requires otherwise,
certain capitalized terms, when used herein and in any accompanying
Prospectus Supplement, relate only to the particular Series being offered
by such Prospectus Supplement.
Issuer........................ BankBoston Credit Card Master Trust (the
"Trust"). The Trust, as a master
trust, is expected to issue series of
Certificates (each, a "Series") from
time to time. See "The Trust."
Servicer...................... BankBoston (NH), National Association, a
national banking association organized
under the laws of the United States
(the "Bank"), as servicer (in such
capacity, the "Servicer"). The
Servicer will receive a fee as
servicing compensation from the Trust
in respect of each Series in the
amounts and at the times specified in
the related Prospectus Supplement (the
"Servicing Fee"). The Servicing Fee
may be payable from Finance Charge
Receivables, Interchange or other
amounts as specified in the related
Prospectus Supplement.
In certain limited circumstances, the
Bank may resign or be removed, in
which event the Trustee or, so long as
it meets certain eligibility standards
set forth in the Pooling and Servicing
Agreement, a third party servicer may
be appointed as successor servicer
(the Bank, or any such successor
servicer, is referred to herein as the
"Servicer"). In addition, in
connection with any sale of the
Accounts by the Bank to [New Bank] and
subject to satisfaction of the Rating
Agency Condition, the Bank may resign
as Servicer and [New Bank] may be
appointed as successor Servicer. The
Bank is permitted to delegate certain
of its duties as Servicer to any of
its affiliates or, subject to certain
conditions, to third party service
providers, but any such delegation
will not relieve the Servicer of its
liability and responsibility with
respect to such duties under the
Pooling and Servicing Agreement or any
Supplement. The Bank has delegated
substantially all of its servicing
duties to First Data Resources, Inc.
("FDR") and First Annapolis Marketing
Information Services Inc. ("FAMIS").
See "Description of the Certificates--
Servicing Compensation and Payment of
Expenses."
Trustee....................... _____________________ (the "Trustee"),
a________ banking corporation.
Account Owners................ On the initial Series Closing Date, Bank
of Boston Connecticut ("BKB CT"), a
state chartered bank organized under
the laws of the State of Connecticut
will sell to the Bank all of the
Accounts owned by it together with the
related Receivables. After giving
effect to such sale to the Bank, the
Bank will be the Account Owner with
respect to all of the Receivables sold
to the Transferor on the initial
Series Closing Date. The Bank may
subsequently sell the Accounts to
[Name of New Bank], a state chartered
bank to be organized under the laws of
the State of ________. Upon giving
effect to any such sale, the [New
Bank] will be the Account Owner with
respect to the Receivables sold to the
Transferor by the Bank and the Bank
will cease to be an Account Owner. See
"Description of the Purchase
Agreements." Upon any sale of the
Accounts by the Bank to [New Bank],
[New Bank] will assume all of the
Bank's obligations with respect to the
Receivables. Such obligations include
the obligation to repurchase
Receivables upon a breach of certain
representations and warranties.
Transferor.................... Credit Cared Receivables Funding
Corporation ("CCRFC"), a Delaware
corporation and a wholly owned subsidiary
of the BankBoston Corporation, as
transferor (in such capacity, the
"Transferor").
Trust Assets.................. The assets of the Trust (the "Trust
Assets") include the receivables
("Receivables") arising under certain
MasterCard(R)and VISA(R)* revolving
credit card accounts (the "Accounts"),
and the proceeds thereof, including
recoveries on charged-off Receivables,
proceeds of credit insurance policies
relating to the Receivables and may
include the right to receive
Interchange (as defined herein), if
any, allocable to the Certificates,
monies on deposit in certain accounts
of the Trust for the benefit of
Certificateholders, Participation
Interests (as defined herein), if any,
and any Series Enhancement (as defined
herein) issued with respect to a
particular Series (the drawing on or
payment of any Series Enhancement for
the benefit of a Series or Class of
Certificateholders will not be
available to the Certificateholders of
any other Series or Class).
"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. "Series Enhancement" means,
with respect to any Series or Class of
Certificates, any Credit Enhancement
(as defined herein), interest rate
swap agreement, interest rate cap
agreement or other similar arrangement
for the benefit of Certificateholders
of such Series or Class. The
subordination of any Series or Class
of Certificates to another Series or
Class of Certificates shall be deemed
to be a Series Enhancement.
"Participation Interests" means
participations representing undivided
interests in a pool of assets
primarily consisting of revolving
credit card receivables, consumer loan
receivables, charge card receivables
and other self-liquidating financial
assets.
- --------
* VISA and MasterCard are registered
trademarks of VISA USA, Inc. ("VISA")
and MasterCard International
Incorporated ("MasterCard"),
respectively.
To the extent provided in any Supplement
(as defined herein), or in an
amendment to the Pooling and Servicing
Agreement, all or a portion of the
Receivables or Participation Interests
conveyed to the Trust and all
collections received with respect
thereto may be allocated to one or
more Series or groups of Series (each
a "Group") as long as the Rating
Agency Condition (as defined herein)
shall have been satisfied with respect
to such allocation, and the Servicer
shall have delivered an officer's
certificate to the Trustee to the
effect that the Servicer reasonably
believes such allocation will not have
an Adverse Effect (as defined herein).
The Certificates.............. The Certificates will be issued in Series,
each of which will consist of one or
more Classes. The specific terms of a
Series or Class will be established as
described herein under "Description of
the Pooling and Servicing Agreement--
New Issuances." However, while the
specific terms of any Series or Class
offered hereby will be described in
the related Prospectus Supplement, the
terms of such Series or Class will not
be subject to prior review by, or
consent of, the holders of the
Certificates of any previously issued
Series.
The Certificates of a Series offered
hereby will generally be available for
purchase in minimum denominations of
$1,000 and in integral multiples
thereof, and will only be available in
book-entry form except in certain
limited circumstances as described
herein under "Description of the
Certificates-- Definitive
Certificates." Interests in the Trust
Assets will be allocated among (a) the
Certificateholders, including Credit
Enhancers (as defined herein) holding
uncertificated subordinated interests
(each, an "Enhancement Invested
Amount"), of a particular Series (the
"Certificateholders' Interest"), (b)
the Certificateholders (including such
holders of Enhancement Invested
Amounts) of other Series, if any, and
(c) the interest of the Transferor and
its permitted transferees (the
"Transferor's Interest"), as described
below. The Invested Amount of a Series
offered hereby will, except as
otherwise provided herein and except
with respect to Certificates with a
variable principal amount, remain
fixed at the aggregate initial
principal amount of the Certificates
of such Series. The Certificateholders'
Interest of a Series will include the
right to receive (but only to the
extent needed to make required
payments under the Pooling and
Servicing Agreement, including the
related Supplement, and subject to any
reallocation of such amounts if the
related Supplement so provides)
varying percentages of collections of
Finance Charge Receivables and
Principal Receivables and will be
allocated a varying percentage of the
Receivables in Defaulted Accounts with
respect to each calendar month (each,
a "Monthly Period"). See "Description
of the Certificates-- Interest" and
"--Principal." If the Certificates of
a Series offered hereby include more
than one Class of Certificates, the
collections allocable to the Invested
Amount of such Series may be further
allocated among each Class in such
Series as described in the related
Prospectus Supplement.
The Transferor's
Interest...................... The Transferor's Interest at any time
represents the right to the Trust
Assets in excess of the
Certificateholders' Interest and
Enhancement Invested Amounts of all
Series then outstanding. The principal
amount of the Transferor's Interest
(the "Transferor Amount") will
fluctuate as the amount of the
Principal Receivables held by the
Trust changes from time to time. In
addition, the Transferor intends to
cause the issuance of Series from time
to time and any such issuance will
have the effect of decreasing the
Transferor Amount to the extent of the
initial Invested Amount of such
Series. See "Risk Factors-- Issuance
of New Series."
The level of the "Required Transferor
Amount," which equals the sum of the
Series Required Transferor Amounts for
each outstanding Series, is intended
to enable the Transferor's Interest to
absorb fluctuations in the amount of
Principal Receivables held by the
Trust from time to time (due to, among
other things, seasonal purchase and
payment habits of cardmembers or
adjustments in the amount of Principal
Receivables because of rebates,
refunds, fraudulent charges or
otherwise). See "Risk Factors--
Generation of Additional Receivables;
Dependency on Cardmember Repayments"
and "Description of the Pooling and
Servicing Agreement-- Defaulted
Receivables; Rebates and Fraudulent
Charges."
Issuance of New Series........ The Pooling and Servicing Agreement
authorizes the Trustee to issue three
types of certificates: (a) one or more
Series of Certificates, (b) a
certificate evidencing the
Transferor's Interest in the Trust
retained by the Transferor (the
"Transferor Certificate"), which
Transferor Certificate will be held by
the Transferor, and (c) certificates
("Supplemental Certificates") held by
transferees of a portion of the
Transferor Certificate. The Transferor
Certificate and any Supplemental
Certificates are collectively referred
to as the "Transferor Certificates."
The Pooling and Servicing Agreement
provides that, pursuant to any one or
more supplements to the Pooling and
Servicing Agreement (each, a
"Supplement"), the Transferor may
cause the Trustee without the consent
of the Certificateholders to issue one
or more new Series and accordingly
cause a reduction in the Transferor's
Interest represented by the Transferor
Certificates. There can be no
assurance that the terms of any Series
might not have an impact on the timing
or amount of payments received by a
Certificateholder of another Series.
Under the Pooling and Servicing
Agreement, the Transferor may define,
with respect to any Series, the
Principal Terms of such Series. See
"Description of the Pooling and
Servicing Agreement-- New Issuances."
The Transferor may offer any Series to
the public or other investors under a
disclosure document (a "Disclosure
Document"), which will consist of a
Prospectus Supplement in the case of a
Series offered hereby, in transactions
either registered under the Securities
Act or exempt from registration
thereunder, directly or through one or
more underwriters or placement agents,
in fixed-price offerings or in
negotiated transactions or otherwise.
See "Plan of Distribution."
A new Series may be issued only upon
satisfaction of the conditions
described herein under "Description of
the Certificates-- New Issuances"
including, among others, that (a) such
issuance will satisfy the Rating
Agency Condition (as defined herein)
and (b) the Transferor shall have
delivered to the Trustee and certain
providers of Series Enhancement a
certificate of an authorized
representative to the effect that, in
the reasonable belief of the
Transferor, such issuance will not,
based on the facts known to such
representative at the time of such
certification, have an Adverse Effect.
The Accounts.................. The Accounts generally consist of VISA
and MasterCard consumer revolving
credit card accounts originated by an
Account Owner and designated from time
to time by the Transferor (or an
affiliate thereof), that, in each
case, meet the criteria provided in
the Pooling and Servicing Agreement
for an Eligible Account (as defined
herein), but do not include any
Removed Accounts (as defined herein).
The Accounts are not being sold or
transferred to the Trust and will
continue to be controlled and held by
the applicable Account Owner unless
transferred as described herein. See
"Credit Card Activities" and
"Description of the Purchase
Agreements."
Each of the Account Owners will enter
into separate receivables purchase
agreements (each, a "Purchase
Agreement") with the Transferor. On
the initial Series Closing Date, BKB
CT will sell to the Bank all of its
right, title and interest in the
Accounts owned by it and the related
Receivables. After giving effect to
such sale, BKB CT will cease to have
any interest in such Accounts and the
Bank will be the Account Owner with
respect to such Accounts. Pursuant to
the Purchase Agreement between the
Transferor and the Bank and the
Purchase Agreement between the
Transferor and the [New Bank], the
applicable Account Owner will sell to
the Transferor all of its right, title
and interest in the Receivables
arising in the applicable Accounts, in
the case of the Bank, arising after
the initial Series Closing Date and in
the case of the New Bank, from and
after the date on which the New Bank
begins to originate Accounts. Pursuant
to each Purchase Agreement, the
applicable Account Owner from time to
time sells to the Transferor all of
its right, title and interest in the
Receivables arising in the Accounts
owned by such Account Owner whether
such Receivables are then existing or
thereafter created and such Account
Owner is obligated to sell to the
Transferor the Receivables arising in
Additional Accounts (as defined
herein) from time to time. In
addition, each Account Owner has
assigned to the Transferor its rights
to Recoveries and Interchange
allocable to the Receivables or its
approximate equivalent in the form of
Discount Option Receivables (as
defined herein) allocable to the
Receivables. See "Description of the
Purchase Agreements." The Transferor
may in the future enter into similar
agreements with additional Account
Owners. The Transferor in turn, from
time to time, transfers such
Receivables, including the right to
Recoveries and Interchange, to the
Trust pursuant to the Pooling and
Servicing Agreement.
The Transferor conveyed to the Trust
Receivables existing on __________,
1997 (the "Initial Cut-Off Date") in
certain VISA and MasterCard consumer
revolving credit card accounts (the
"Initial Accounts") that met the
criteria provided in the Pooling and
Servicing Agreement for an Eligible
Account as of the Initial Cut-Off Date
and will convey Receivables arising in
the Initial Accounts from time to time
thereafter until the termination of
the Trust. The Initial Accounts were
either originated by BKB CT and sold
to the Bank on the initial Series
Closing Date, or were originated by
the Bank. In addition, pursuant to the
Pooling and Servicing Agreement, the
Transferor expects (subject to certain
limitations and conditions), and in
some circumstances will be obligated,
to have Additional Accounts
designated, the Receivables of which
will be included in the Trust or, in
lieu thereof or in addition thereto,
to include Participation Interests in
the Trust. Additional Accounts include
New Accounts (as defined herein) and
Aggregate Addition Accounts (as
defined herein). The Transferor will
convey to the Trust all Receivables in
Additional Accounts, whether such
Receivables are then existing or
thereafter created. The addition to
the Trust of Receivables in Aggregate
Addition Accounts or Participation
Interests will be subject to certain
conditions, including, among others,
that (a) unless such addition is a
required addition or a designation of
New Accounts, such addition will
satisfy the Rating Agency Condition
and (b) the Transferor shall have
delivered to the Trustee a certificate
of an authorized officer to the effect
that, in the reasonable belief of the
Transferor, such addition will not
have an Adverse Effect. The Transferor
will also have the right, in certain
circumstances, to remove from the
Trust all Receivables of certain
designated Accounts (the "Removed
Accounts"). See "Description of the
Pooling and Servicing Agreement--
Additions of Accounts or Participation
Interests" and "--Removal of
Accounts."
The Receivables............... The Receivables include (a) periodic
finance charges, cash advance fees,
late charges, annual membership fees,
returned check fees, over-the-limit
fees and other miscellaneous fees and
the interest portion of any
Participation Interests as determined
pursuant to the applicable Supplement
(the "Finance Charge Receivables"),
and (b) amounts charged by cardmembers
for merchandise and services, amounts
advanced to cardmembers as cash
advances and the principal portion of
any Participation Interests as
determined pursuant to the applicable
Supplement (the "Principal
Receivables"). Recoveries attributed
to charged-off Receivables (the
"Recoveries") up to the amount of
Defaulted Receivables in any Monthly
Period will be treated as Collections
of Principal Receivables. The excess,
if any, of Recoveries over Defaulted
Receivables will be treated as
Collections of Finance Charge
Receivables. In addition, certain
Interchange or its equivalent in the
form of Discount Option Receivables
attributed to cardmember charges for
merchandise and services in the
Accounts will be treated as
collections of Finance Charge
Receivables. See "Credit Card
Activities Interchange."
All new Receivables arising in the
Accounts during the term of the Trust
will automatically be sold by the
Account Owner to the Transferor and
then transferred by the Transferor to
the Trust. Accordingly, the amount of
Receivables will fluctuate from day to
day as new Receivables are generated
and as existing Receivables are
collected, charged-off as
uncollectible or otherwise adjusted.
[If so specified in the related
Prospectus Supplement] the Servicer
will establish and maintain a [Series]
Yield Supplement Account for the
benefit of the Certificateholders of
[such] [each] Series. Amounts on
deposit in the [Series] Yield
Supplement Account (together with
investment earnings thereon) will be
released and deposited into the
Collection Account in the amounts and
at the times specified in the
Prospectus Supplement for [such]
[each] Series. Each such deposit into
the Collection Account will be treated
as Collections of Finance Charge
Receivables allocable to the
Certificates [of the related Series].
On the initial Series Closing Date,
$__________ will be deposited into the
Yield Supplement Account from the
proceeds of the issuance of the
initial Series.
Clearance and
Settlement.................... Certificateholders may elect to hold their
Certificates through any of DTC (in the
United States) or Cedel Bank, societe
anonyme ("Cedel") or the Euroclear System
("Euroclear") (in Europe). See
"Description of the Certificates--
Book-Entry Registration."
Interest...................... Interest will accrue on the Invested
Amount or outstanding principal amount
of the Certificates of a Series or
Class offered hereby at the per annum
rate either specified in or determined
in the manner specified in the related
Prospectus Supplement. Except as
otherwise provided herein, collections
of Finance Charge Receivables and
certain other amounts allocable to the
Invested Amount of a Series offered
hereby will generally be used to make
interest payments to Certificateholders
of such Series on each Interest
Payment Date with respect thereto;
provided that if an Early Amortization
Period commences with respect to such
Series, thereafter interest will be
distributed to such Certificateholders
monthly on each Special Payment Date
(defined herein). If the Interest
Payment Dates for a Series or Class
occur less frequently than monthly,
such collections or other amounts (or
the portion thereof allocable to such
Class) will be deposited in one or
more trust accounts (each, an
"Interest Funding Account") and used
to make interest payments to
Certificateholders of such Series or
Class on the following Interest
Payment Date with respect thereto. If
a Series has more than one Class of
Certificates, each such Class may have
a separate Interest Funding Account.
See "Description of the Certificates--
Interest."
Principal..................... The principal of the Certificates of
each Series offered hereby will be
scheduled to be paid either (a) in
full on an expected date specified in
the related Prospectus Supplement (the
"Expected Final Payment Date"), in
which case such Series will have a
Controlled Accumulation Period as
described below under "--Controlled
Accumulation Period," or (b) in
installments commencing on a date
specified in the related Prospectus
Supplement (the "Principal
Commencement Date"), in which case
such Series will have a Controlled
Amortization Period as described below
under "--Controlled Amortization
Period." If a Series has more than one
Class of Certificates, each class may
have a different method of paying
principal, Expected Final Payment Date
or Principal Commencement Date. The
payment of principal with respect to
the Certificates of a Series or Class
may commence earlier than the
applicable Expected Final Payment Date
or Principal Commencement Date, and
the final principal payment with
respect to the Certificates of a
Series or Class may be made later than
the applicable Expected Final Payment
Date or other expected date, if a Pay
Out Event occurs with respect to such
Series or Class or under certain other
circumstances described herein. See
"Risk Factors-- Generation of
Additional Receivables; Dependency on
Cardmember Repayments" for a
description of factors that may affect
the timing of principal payments on
Certificates. See "Description of the
Certificates--Principal."
Revolving Period.............. The Certificates of each Series offered
hereby will have a revolving period
(the "Revolving Period") that will
commence on the date of issuance of
the related Series (the "Series
Closing Date") or on a date prior
thereto specified in the related
Supplement and, for a Series offered
hereby, the related Prospectus
Supplement (the "Series Cut-Off Date")
and continue until the earlier of (a)
the commencement of the Early
Amortization Period or Early
Accumulation Period with respect to
such Series and (b) the date specified
in the related Prospectus Supplement
as the end of the Revolving Period
with respect to such Series. If the
related Prospectus Supplement provides
that a Series is a Principal Sharing
Series (as defined herein), during the
Revolving Period with respect to such
Series, collections of Principal
Receivables and certain other amounts
otherwise allocable to the
Certificateholders' Interest of such
Series will be treated as Shared
Principal Collections and will be
distributed to, or for the benefit of,
the Certificateholders of other
Principal Sharing Series or the
holders of the Transferor Certificates
or deposited into the Special Funding
Account, as more fully described in
the related Prospectus Supplement. If
the related Prospectus Supplement
provides that a Series is not a
Principal Sharing Series, during the
Revolving Period with respect to such
Series, collections of Principal
Receivables and certain other amounts
otherwise allocable to the
Certificateholders' Interest of such
Series will be paid to the holders of
the Transferor Certificates or
deposited into the Special Funding
Account, as more fully described in
the related Prospectus Supplement. See
"Description of the Certificates--
Principal," and "--Pay Out Events and
Reinvestment Events" for a discussion
of the events that might lead to the
termination of the Revolving Period
with respect to a Series prior to its
scheduled date.
Controlled Accumulation
Period........................ If the related Prospectus Supplement so
specifies, unless an Early
Amortization Period or, if so
specified in the related Prospectus
Supplement, an Early Accumulation
Period commences with respect to a
Series offered hereby, the
Certificates of such Series will have
a scheduled accumulation period (the
"Controlled Accumulation Period") that
will commence at the close of business
on the date or dates specified in or
determined as specified in such
Prospectus Supplement and continue
until the earliest of (a) the
commencement of the Early Amortization
Period or, if so specified in the
related Prospectus Supplement, an
Early Accumulation Period with respect
to such Series, (b) payment in full of
the Invested Amount, including the
Enhancement Invested Amount, if any,
of the Certificates of such Series,
and (c) the series termination date
with respect to such Series (the
"Series Termination Date"). The
Controlled Accumulation Period may be
postponed under the conditions set
forth in "Description of the
Certificates--Principal." During the
Controlled Accumulation Period with
respect to a Series, collections of
Principal Receivables and, if so
specified in the related Prospectus
Supplement, certain other amounts
allocable to the Certificateholders'
Interest of such Series (including
Shared Principal Collections (as
defined herein), if any, allocable to
such Series) will be deposited on each
Distribution Date in a trust account
established for the benefit of the
Certificateholders of such Series
(each, a "Principal Funding Account")
and used to make principal
distributions to the
Certificateholders of such Series or
any Class thereof when due. The amount
to be deposited in the Principal
Funding Account (the "Controlled
Deposit Amount") for any Series
offered hereby on any Distribution
Date may, but will not necessarily, be
limited to an amount equal to an
amount specified in or determined as
specified in the related Prospectus
Supplement (the "Controlled
Accumulation Amount") plus any
existing deficit controlled
accumulation amount arising from prior
Distribution Dates. If the Prospectus
Supplement for a Series so specifies,
the amount to be deposited in the
Principal Funding Account on a
Distribution Date may be a variable
amount. If a Series has more than one
Class of Certificates, each Class may
have a separate Principal Funding
Account and Controlled Accumulation
Amount and the Controlled Accumulation
Period with respect to each Class may
commence on different dates. In
addition, the related Prospectus
Supplement may describe certain
priorities among such Classes with
respect to deposits of principal into
such Principal Funding Accounts.
Early 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
Reinvestment Event (as defined herein)
has occurred, until the earliest of
(a) the commencement of the Early
Amortization Period (if any), (b)
payment in full of the Invested
Amount, including the Enhancement
Invested Amount, if any, of the
Certificates of such Series, and (c)
the Series Termination Date with
respect to such Series (the "Early
Accumulation Period"), collections of
Principal Receivables and, if so
specified in the related Prospectus
Supplement, certain other amounts
allocable to the Certificateholders'
Interest of such Series (including
Shared Principal Collections, if any,
allocable to such Series) will be
deposited on each
Distribution Date in the Principal
Funding Account and used to make
distributions of principal to the
Certificateholders of such Series or
any Class thereof on the Expected
Final Payment Date. The amount to be
deposited in the Principal Funding
Account during the Early Accumulation
Period will not be limited to any
Controlled Deposit Amount. See
"Description of the Certificates --
Pay Out Events and Reinvestment
Events" for a discussion of the events
which might lead to commencement of an
Early Accumulation Period.
Controlled Amortization
Period........................ If the related Prospectus Supplement so
specifies, unless an Early
Amortization Period commences with
respect to a Series offered hereby,
the Certificates of such Series will
have an amortization period (the
"Controlled Amortization Period") that
will commence at the close of business
on the date specified in such
Prospectus Supplement and continue
until the earliest of (a) the
commencement of the Early Amortization
Period with respect to such Series,
(b) payment in full of the Invested
Amount, including the Enhancement
Invested Amount, if any, of the
Certificates of such Series and (c)
the Series Termination Date with
respect to such Series. During the
Controlled Amortization Period with
respect to a Series, collections of
Principal Receivables and certain
other amounts allocable to the
Certificateholders' Interest of such
Series (including Shared Principal
Collections, if any, allocable to such
Series) will be used on each
Distribution Date to make principal
distributions to Certificateholders of
such Series or any Class thereof then
scheduled to receive such
distributions. The amount to be
distributed to Certificateholders of
any Series offered hereby on any
Distribution Date may, but will not
necessarily, be limited to an amount
(the "Controlled Distribution Amount")
equal to an amount (the "Controlled
Amortization Amount") specified in the
related Prospectus Supplement 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 different
Controlled Amortization Amount. In
addition, the related Prospectus
Supplement may describe certain
priorities among such Classes with
respect to such distributions.
Early Amortization
Period........................ During the period from the day on which
a Pay Out Event has occurred with
respect to a Series to the date on
which the Invested Amount, including
the Enhancement Invested Amount, if
any, of the Certificates of such
Series has been paid in full or the
related Series Termination Date has
occurred (the "Early Amortization
Period"), collections of Principal
Receivables and certain other amounts
allocable to the Certificateholders'
Interest of such Series (including
Shared Principal Collections, if any,
allocable to such Series) will be
distributed as principal payments to
the Certificateholders of such Series
monthly on each Distribution Date
beginning with the first Special
Payment Date with respect to such
Series. During the Early Amortization
Period with respect to a Series,
distributions of principal to
Certificateholders will not be subject
to any Controlled Deposit Amount or
Controlled Distribution Amount. In
addition, upon the commencement of the
Early Amortization Period with respect
to a Series, any funds on deposit in a
Principal Funding Account with respect
to such Series will be paid to the
Certificateholders of the relevant
Class or Series on the first Special
Payment Date with respect to such
Series. See "Description of the
Certificates--Pay Out Events and
Reinvestment Events" for a discussion
of the events that might lead to the
commencement of the Early Amortization
Period with respect to a Series.
Allocations Among Series...... Pursuant to the Pooling and Servicing
Agreement, during each Monthly Period,
the Servicer is required to first
allocate to each Series collections of
Principal Receivables and Finance
Charge Receivables and the Defaulted
Receivables with respect to such
Monthly Period based on the Series
Allocation Percentage (as defined
herein). See "Description of the
Pooling and Servicing Agreement--
Allocations." Subject to reallocation
among Series in a Reallocation Group,
such amounts allocated to each Series
are then further allocated within each
Series to the Certificateholders, any
Series Enhancement and the holders of
the Transferor Certificates pursuant
to the terms of the related
Supplement.
Sharing of Excess Finance
Charge Collections Among
Excess Allocation Series...... If the Prospectus Supplement for a
Series so provides, any Series may be
designated as a Series that shares
with other Series similarly
designated, subject to certain
limitations, certain Excess Finance
Charge Collections (as defined herein)
allocable to any such Series (an
"Excess Allocation Series"). Subject
to certain limitations described under
"Description of the Pooling and
Servicing Agreement--Sharing of
Excess Finance Charge Collections
Among Excess Allocation Series,"
collections of Finance Charge
Receivables and certain other amounts
allocable to the Certificateholders'
Interest of any Series that is
designated as an Excess Allocation
Series in excess of the amounts
necessary to make required payments
with respect to such Series (including
payments to the provider of any
related Series Enhancement) will be
applied to cover shortfalls with
respect to amounts payable from
collections of Finance Charge
Receivables allocable to any other
Series designated as an Excess
Allocation Series, in each case pro
rata based upon the Invested Amount of
each such Series that has such a
shortfall with respect to the related
Monthly Period. See "Description of
the Pooling and Servicing Agreement--
Sharing of Excess Finance Charge
Collections Among Excess Allocation
Series."
Shared Principal
Collections................... If the Prospectus Supplement for a
Series so provides, any Series may be
designated as a Series that shares
with other Series similarly
designated, subject to certain
limitations, certain excess
collections of Principal Receivables
and certain other amounts allocable to
the Certificateholders' Interest of
such Series (a "Principal Sharing
Series"). To the extent that
collections of Principal Receivables
and certain other amounts that are
allocated to the Certificateholders'
Interest of any Principal Sharing
Series are not needed to make payments
to the Certificateholders of such
Series or required to be deposited in
a Principal Funding Account for such
Series, such collections may be
applied to cover principal payments
due to or for the benefit of
Certificateholders of another
Principal Sharing Series. Any such
reallocation will not result in a
reduction in the Invested Amount of
the Series to which such collections
were initially allocated. See
"Description of the Pooling and
Servicing Agreement--Shared Principal
Collections."
Reallocations Among Series
in a Reallocation Group....... If so specified in the related Prospectus
Supplement, the Certificates of a
Series may be included in a Group that
will be subject to reallocations of
collections of Finance Charge
Receivables and other amounts or
obligations among the Series in such
Group (a "Reallocation Group").
Collections of Finance Charge
Receivables allocable to each Series
in a Reallocation Group will be
aggregated and made available for
certain required payments for all
Series in such Group. Consequently,
the issuance of new Series in such
Group may have the effect of reducing
or increasing the amount of
collections of Finance Charge
Receivables allocable to the
Certificates of other Series in such
Group. See "Risk Factors--Issuance of
New Series."
Paired Series................. If so specified in the related Prospectus
Supplement, a Series of Certificates
may be issued (a "Paired Series") that
is paired with one or more other
Series or a portion of one or more
other Series previously issued by the
Trust (a "Prior Series"). A Paired
Series may be issued at or after the
commencement of a Controlled
Accumulation Period or Controlled
Amortization Period for a Prior
Series. As the Invested Amount of the
Prior Series having a Paired Series is
reduced, the Invested Amount of the
Paired Series will increase by an
equal amount. Upon payment in full of
such Prior Series, the Invested Amount
of the Paired Series will be equal to
the amount of the Invested Amount paid
to Certificateholders of such Prior
Series. If a Pay Out Event or
Reinvestment Event occurs with respect
to the Prior Series having a Paired
Series or with respect to the Paired
Series when such Prior Series is in a
Controlled Amortization Period or
Controlled Accumulation Period, the
percentage specified in the applicable
Prospectus Supplement for the
allocation of collections of Principal
Receivables to the Certificateholders'
Interest of such Prior Series (the
"Principal Allocation Percentage") and
the Series Allocation Percentage for
the Prior Series and the Principal
Allocation Percentage and the Series
Allocation Percentage for the Paired
Series will be reset as specified in
the related Prospectus Supplement and
the Controlled Amortization Period,
Controlled Accumulation Period, Early
Amortization Period or Early
Accumulation Period for such Prior
Series could be lengthened.
Special Funding Account....... If on any date the Transferor Amount is
less than or equal to the Required
Transferor Amount, the Servicer shall
not distribute to the holders of the
Transferor Certificates any
Collections of Principal Receivables
that otherwise would be distributed to
the holders of the Transferor
Certificates, but shall deposit such
funds in the Special Funding Account.
Funds on deposit in the Special
Funding Account will be withdrawn and
paid to the holders of the Transferor
Certificates on any Distribution Date
to the extent that, after giving
effect to such payment, the Transferor
Amount exceeds the Required Transferor
Amount on such date; provided,
however, that if a Controlled
Accumulation Period, Early
Accumulation Period, Controlled
Amortization Period or Early
Amortization Period commences with
respect to any Series, any funds on
deposit in the Special Funding Account
will be released and treated as
Collections of Principal Receivables
to the extent needed to cover
principal payments due to or for the
benefit of such Series.
Funding Period................ The Prospectus Supplement relating to a
Series of Certificates may specify
that for a period beginning on the
Series Closing Date and ending on a
specified date before the commencement
of a Controlled Amortization Period or
Controlled Accumulation Period with
respect to such Series (the "Funding
Period"), the aggregate amount of
Principal Receivables in the Trust
allocable to such Series may be less
than the aggregate principal amount of
the Certificates of such Series and an
amount equal to the amount of such
deficiency (the "Pre-Funding Amount")
will be held in a trust account
established with the 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 Invested
Amounts of other Series issued by the
Trust. The related Prospectus
Supplement will specify the initial
Invested Amount on the Series Closing
Date with respect to such Series, the
aggregate principal amount of the
Certificates of such Series (the "Full
Invested Amount") and the date by
which the Invested Amount is expected
to equal the Full Invested Amount. The
Invested Amount will increase as
Principal Receivables are delivered to
the Trust or as the Invested Amounts
of other Series of the Trust are
reduced. The Invested Amount may also
decrease due to the occurrence of a
Pay Out Event as specified in the
related Prospectus Supplement.
During the Funding Period, funds on
deposit in the Pre-Funding Account for
a Series of Certificates will be
withdrawn and paid to the Transferor
to the extent of any increases in the
Invested Amount. In the event that the
Invested Amount does not for any
reason equal the Full Invested Amount
by the end of the Funding Period, any
amount remaining in the Pre-Funding
Account and any additional amounts
specified in the related Prospectus
Supplement will be payable to the
Certificateholders of such Series in a
manner and at such time as set forth
in the related Prospectus Supplement.
If so specified in the related
Prospectus Supplement, monies in the
Pre-Funding Account with respect to
any Series will be invested by the
Trustee in Eligible Investments or
will be subject to a guaranteed rate
or investment agreement or other
similar arrangement, and investment
earnings and any applicable payment
under any such investment arrangement
will be applied to pay interest on the
Certificates of such Series.
Credit Enhancement............ The credit enhancement (the "Credit
Enhancement") with respect to a Series
offered hereby may include a letter of
credit, a cash collateral account or
guarantee, spread account, a
collateral interest, a surety bond, an
insurance policy, guaranteed rate
agreement, maturity liquidity
facility, tax protection agreement or
any other form of credit enhancement
described in the related Prospectus
Supplement. Credit Enhancement may
also be provided to a Class or Classes
of a Series or to a Series by
subordination provisions which require
that distributions of principal or
interest be made with respect to the
Certificates of such Class or Classes
or such Series before distributions
are made to one or more other Classes
of such Series or to another Series
(if the Supplement for such Series so
provides).
The type, characteristics and amount
of the Credit Enhancement with respect
to any Series will be determined based
on several factors, including the
characteristics of the Receivables and
Accounts underlying or comprising the
Trust Assets as of the Series Closing
Date with respect thereto, and will be
established on the basis of
requirements of each applicable Rating
Agency. The terms of the Credit
Enhancement with respect to any Series
offered hereby will be described in
the related Prospectus Supplement. If
so specified in the Prospectus
Supplement for a Series, the level of
Credit Enhancement for such Series may
be reduced if such reduction satisfies
the Rating Agency Condition. See
"Description of the Pooling and
Servicing Agreement--Credit
Enhancement" and "Risk Factors--
Limited Nature of Rating."
Servicing..................... The Bank, in its capacity as Servicer
under the Pooling and Servicing
Agreement, is the initial Servicer for
the Trust. The Servicer is responsible
for servicing, managing and making
collections on the Receivables. The
"Distribution Date" for a Series will
be the day occurring in each month
(or, if such day is not a business
day, the next business day) or such
other date specified in the Supplement
for a Series. The "Transfer Date" for
a Series will be the business day
preceding each Distribution Date or
such other date specified in the
Supplement for a Series. On the
earlier of (a) the second business day
following the Date of Processing and
(b) the day on which the Servicer
deposits any collections into the
Collection Account, subject to certain
exceptions described herein, the
Servicer will pay to the holders of
the Transferor Certificates their
allocable portion of any collections
then held by the Servicer. The "Date
of Processing" is the business day on
which a record of any transaction is
first recorded pursuant to the
Servicer's data processing procedures.
The "Determination Date" for a Series
will be the second business day
preceding the Distribution Date in
each Monthly Period, or such other
date specified in the Supplement for a
Series. On each Determination Date,
the Servicer will calculate the
amounts to be allocated to the
Certificateholders of each Class or
Series and the holders of the
Transferor Certificates as described
herein in respect of collections of
Receivables received with respect to
the preceding Monthly Period.
Income Tax Withholding........ Interest on the Certificates will be
subject to United States withholding
tax and backup withholding unless the
holder complies with applicable IRS
identification requirements.
Tax Status.................... Except to the extent otherwise specified
in the related Prospectus Supplement,
it is anticipated that special tax
counsel will be of the opinion that
the Certificates of each Class offered
hereby of each Series will be
characterized as indebtedness for
Federal income tax purposes. Except
to the extent otherwise specified in
the related Prospectus Supplement, the
Certificate Owners will agree to treat
the Certificates offered hereby as
debt for Federal income tax purposes.
See "Certain U.S. Federal Income Tax
Consequences" for additional
information concerning the applica-
tion of Federal income tax laws.
ERISA Considerations.......... See "ERISA Considerations" herein and in
the applicable Prospectus Supplement.
Certificate Rating............ It will be a condition to the issuance
of each Series of Certificates or
Class thereof offered pursuant to this
Prospectus and the related Prospectus
Supplement that they be rated in one
of the four highest applicable rating
categories by at least one nationally
recognized statistical rating
organization selected by the
Transferor, as specified in the
applicable Supplement (each rating
agency rating any Series, a "Rating
Agency"). The rating or ratings
applicable to the Certificates of each
such Series or Class thereof will be
set forth in the related Prospectus
Supplement. A security rating should
be evaluated independently of similar
ratings of different types of
securities. A rating is not a
recommendation to buy, sell or hold
securities and may be subject to
revision or withdrawal at any time by
the assigning Rating Agency. Each
rating should be evaluated
independently of any other rating. See
"Risk Factors--Limited Nature of
Rating."
Listing....................... If so specified in the Prospectus
Supplement relating to a Series,
application will be made to list the
Certificates of such Series, or all or a
portion of any Class thereof, on the
Luxembourg Stock Exchange or any other
specified exchange.
RISK FACTORS
Investors should consider, among other things, the following
factors in connection with the purchase of the Certificates.
Limited Liquidity. It is anticipated that, to the extent permitted,
the underwriters of any Series of Certificates offered hereby will make a
market in such Certificates, but in no event will any such underwriter be
under an obligation to do so. There can be no assurance that a secondary
market will develop or, if a secondary market does develop, that it will
provide Certificateholders of any Series offered hereby with liquidity of
investment or that it will continue for the life of such Certificates.
Limited Operating History. BKB CT and the Bank began originating
and servicing credit card accounts in September 1995 and April 1997,
respectively. Each of the Bank and BKB CT thus has limited underwriting
and servicing experience, and limited delinquency, default and loss
experience with respect to the Accounts.
Limited History of Trust and Transferor. The Transferor was formed
in June 1997, and the Trust will be formed on the initial Series Closing
Date. The Transferor and the Trust will have no substantial assets other
than their respective interests in the Receivables and the proceeds
thereof as described herein.
Limited History of Portfolio. The Trust's assets will consist
primarily of Receivables generated from Accounts originated since August
1995. Approximately 24% of the Receivables in the Trust Portfolio have
been originated within the last twelve months. As a result, the current
portfolio history may not be indicative of the portfolio performance as
the Receivables and Accounts mature.
Non-Recourse to the Bank, BKB CT, [New Bank], BankBoston
Corporation, Transferor or Affiliates Thereof. No Certificateholders will
have recourse for payment of its Certificates to any assets of the Bank,
BKB CT, [New Bank], the Transferor (other than the Transferor
Certificate, to the extent described herein), BankBoston Corporation, or
any affiliates thereof. Consequently, Certificateholders must rely solely
upon payments on the Receivables for the payment of principal of and
interest on the Certificates. Furthermore, under the Pooling and
Servicing Agreement, the Certificateholders have an interest in the
Receivables and Collections only to the extent of the Certificateholders'
Interest and, to the limited extent described herein, the Transferor
Interest. Should the Certificates not be paid in full on a timely basis,
Certificateholders may not look to any assets of any of the Bank, BKB CT,
[New Bank], the Transferor (other than the Transferor Certificate, to the
extent described herein), BankBoston Corporation or any affiliates
thereof to satisfy their claims.
Characteristics as a Sale; Insolvency and Receivership Risks. Each
Account Owner represents and warrants in the applicable Purchase
Agreement that the transfer of all Receivables pursuant thereto to the
Transferor is a valid sale and assignment of such Receivables from such
party to the Transferor. In addition, each Account Owner and the
Transferor have agreed that if, notwithstanding their intent, the
respective sales of Receivables to the Transferor are not treated as
sales, the Purchase Agreements will be deemed to create a security
interest in the Receivables. In a receivership or conservatorship of an
Account Owner, if the conveyance of the Receivables is not treated as a
sale, but is deemed to create a security interest in the Receivables, the
Transferor's interest in the Receivables may be subject to tax or other
governmental liens relating to the applicable Account Owner arising
before the subject Receivables came into existence and to certain
administrative expenses of the receivership, conservatorship or
bankruptcy proceeding. The Account Owners have taken or will take certain
actions required to perfect the Transferor's interest in the Receivables.
A conservator or receiver would have the power under the Financial
Institutions Reform, Recovery and Enforcement Act of 1989 ("FIRREA") to
repudiate contracts of, and to request a stay of up to 90 days of any
judicial action or proceeding involving, an Account Owner. However,
notwithstanding the insolvency of, or the appointment of a receiver or
conservator for, an Account Owner, subject to certain qualifications, a
valid perfected security interest of the Transferor in the Receivables
should be enforceable (to the extent of the Transferor's "actual direct
compensatory damages" (as described below)) and payments to the
Transferor with respect to the Receivables (up to the amount of such
damages) should not be subject to an automatic stay of payment or to
recovery by such a conservator or receiver. If, however, the conservator
or receiver were to assert that the security interest was unperfected or
unenforceable, or were to require the Transferor to establish its right
to those payments by submitting to and completing the administrative
claims procedure established under FIRREA, or the conservator or receiver
were to request a stay of proceedings with respect to an Account Owner as
provided under FIRREA, delays in payments to the Trust and on the
Certificates and possible reductions in the amount of those payments
could occur. In the event of a repudiation of obligations by a
conservator or receiver, FIRREA provides that a claim for the repudiated
obligation is limited to "actual direct compensatory damages" determined
as of the date of the appointment of the conservator or receiver (which
in most cases are expected to include the outstanding principal on the
Certificates plus interest accrued thereon to the date of payment). The
FDIC has not adopted a formal policy statement on payment of principal
and interest on collateralized borrowings of banks that are repudiated.
The Transferor believes that the general practice of the FDIC in such
circumstances is to permit the collateral to be applied to pay the
principal owed plus interest at the contract rate up to the date of
payment, together with the costs of liquidation of the collateral if
provided for in the contract. In one case involving the repudiation by
the Resolution Trust Corporation (the "RTC") of certain secured
zero-coupon bonds issued by a savings association, a United States
federal district court held that "actual direct compensatory damage" in
the case of a marketable security meant the value of the repudiated bonds
as of the date of repudiation. If that court's view were applied to
determine the Transferor's "actual direct compensatory damages" in the
event a conservator or receiver of an Account Owner repudiated the
applicable Purchase Agreement, the amount paid to Certificateholders
could, depending upon circumstances existing on the date of the
repudiation, be less than the principal of the Certificates and the
interest accrued thereon to the date of payment. See "Certain Legal
Aspects of the Receivables-Certain Matters Relating to Insolvency." In
addition, 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 exists, the conservator or
receiver may have the power to prevent either the Trustee or the majority
of the Certificateholders from effecting a transfer of servicing to a
successor Servicer.
Although the Pooling and Servicing Agreement provides that the
Transferor will transfer all of its right, title, and interest in and to
the Receivables to the Trust, a court could treat such transactions as an
assignment of collateral as security for the benefit of holders of
certificates issued by the Trust. It is possible that the risk of such
treatment may be increased by the retention by the Transferor of the
Exchangeable Transferor Certificate and any other class of Certificates
that may be issued and retained by the Transferor. The Transferor
represents and warrants in the Pooling and Servicing Agreement that the
transfer of the Receivables to the Trust is either a valid transfer and
assignment of the Receivables to the Trust or the grant to the Trust of a
security interest in the Receivables. The Transferor has taken and will
take certain actions required to perfect the Trust's interest in the
Receivables and warrants that if the transfer to the Trust is deemed to
be a grant to the Trust of a security interest in the Receivables, the
Trustee will have a first priority perfected security interest therein,
subject only to Permitted Liens. If the transfer of the Receivables to
the Trust is deemed to create a security interest therein under the UCC,
a tax or government lien on property of the Transferor arising before
Receivables come into existence may have priority over the Trust's
interest in such Receivables. In the event of the insolvency of the
Transferor, certain administrative expenses may also have priority over
the Trust's interest in such Receivables. See "Certain Legal Aspects of
the Receivables-Transfer of Receivables."
To the extent that the Transferor is deemed to have granted a
security interest in the Receivables to the Trust and such security
interest was validly perfected before any insolvency of the Transferor
and was not granted or taken in contemplation of insolvency or with the
intent to hinder, delay, or defraud the Transferor or its creditors, such
security interest should not be subject to avoidance in the event of
insolvency or receivership of the Transferor, and payments to the Trust
with respect to the Receivables should not be subject to recovery by a
bankruptcy trustee or receiver of the Transferor. If, however, such a
bankruptcy trustee or receiver were to assert a contrary position, delays
in payments on the Certificates and possible reductions in the amount of
those payments could occur.
In Octagon Gas Systems, Inc. v. Rimmer, 995 F.2d 948 (10th Cir.
1993), cert. denied, 114 S. Ct. 554 (1993), the United States Court of
Appeals for the 10th Circuit suggested that even where a transfer of
accounts from a seller to a buyer constitutes a "true sale," the accounts
would nevertheless constitute property of the seller's estate in a
bankruptcy of the seller. If the Transferor were to become subject to a
bankruptcy proceeding or if an Account Owner were to become subject to a
receivership and a court were to follow the 10th Circuit's reasoning,
Certificateholders might experience delays in payment or possibly losses
in their investment in the Certificates. Counsel to the Transferor has
advised the Transferor that the facts of Octagon are distinguishable from
those in the sale transactions between the Account Owners and the
Transferor and the Transferor and the Trust and the reasoning of the 10th
Circuit appears to be inconsistent with established precedent and the
UCC. See "Certain Legal Aspects of the Receivables-Certain Matters
Relating to Insolvency."
In the event of a Servicer Default relating to the bankruptcy or
insolvency of the Servicer, and no Servicer Default other than such
bankruptcy or insolvency-related Servicer Default exists, the bankruptcy
trustee or receiver may have the power to prevent either the Trustee or
the majority of the Certificateholders from appointing a successor
Servicer. If certain events occur relating to the bankruptcy,
conservatorship, receivership or insolvency of the Transferor (any such
event with respect to CCRFC being an "Insolvency Event"), new Principal
Receivables would not be transferred by the Transferor to the Trust. In
the event of an Insolvency Event, the Trustee would sell the Receivables
(unless Holders (as defined herein) of Certificates evidencing undivided
interests aggregating more than 50% of the aggregate unpaid principal
amount of each Series (or with respect to any Series with two or more
Classes, 50% of the unpaid principal amount of each Class) and certain
other persons specified in the Supplement for a Series instruct otherwise
and provided that a trustee for the Transferor does not order a sale
despite such instructions not to sell), thereby causing early termination
of the Trust. The entire proceeds of such sale or liquidation will be
treated as collections of Receivables and allocated accordingly among
Series. Upon the occurrence of a Pay Out Event, if a trustee, receiver or
conservator is appointed for the Transferor and no Pay Out Event other
than such insolvency of the Transferor exists, the trustee may have the
power to prevent the early sale, liquidation or disposition of the
Receivables and the commencement of the Early Amortization Period or
Early Accumulation Period and may be able to require that new Principal
Receivables be transferred to the Trust. In addition, the trustee,
receiver or conservator for the Transferor may have the power to cause
early sale of the Receivables and the early payment of the Certificates
or to prohibit the continued transfer of Receivables to the Trust. See
"Certain Legal Aspects of the Receivables -- Certain Matters Relating to
Insolvency."
While the Bank is the Servicer, cash collections held by the Bank
may, subject to certain conditions, be commingled and used for the
benefit of the Bank prior to each Transfer Date and, in the event of the
bankruptcy, insolvency or receivership of the Bank or, in certain
circumstances, the lapse of certain time periods, the Trust may not have
a perfected security interest in such collections. The Bank will be
allowed to make monthly rather than daily deposits of collections to the
Collection Account if either (i) the Bank obtains a commercial paper
rating of at least A-1 and P-1 (or its equivalent) by the applicable
Rating Agency or (ii) or the Bank makes other arrangements that satisfy
the Rating Agency Condition. Unless otherwise provided in the related
Prospectus Supplement, if either of the foregoing conditions are not
satisfied, then the Bank will, within five business days, commence the
deposit of collections directly into the Collection Account within two
business days of the Date of Processing.
Consumer Protection Laws. The Accounts and Receivables are subject
to numerous federal and state consumer protection laws which impose
requirements on the solicitation, making, enforcement and collection of
consumer loans. Such laws, as well as any new laws or rulings which may
be adopted (including, but not limited to, federal or state interest rate
caps on credit cards), may adversely affect the Servicer's ability to
collect on the Receivables or maintain the required level of periodic
finance charges, annual membership fees and other fees. In addition,
failure by the Servicer to comply with such requirements could adversely
affect the Servicer's ability to enforce the Accounts or Receivables.
Pursuant to the Pooling and Servicing Agreement, the Transferor
makes certain representations and warranties relating to the validity and
enforceability of the Accounts and the Receivables and pursuant to the
applicable Purchase Agreement the Account Owners make similar
representations and warranties with respect to the Receivables. However,
it is not anticipated that the Trustee will make any examination of the
Receivables or the records relating thereto for the purpose of
establishing the presence or absence of defects, compliance with such
representations and warranties, or for any other purpose. The sole remedy
if any such representation or warranty is not complied with and such
noncompliance continues beyond the applicable cure period, is that the
Receivables affected thereby will be reassigned to the Transferor (for
reassignment, in turn, to the applicable Account Owners pursuant to the
Purchase Agreement between such Account Owner and the Transferor) or
assigned to the Servicer, as the case may be. In addition, in the event
of the breach of certain representations and warranties, the Transferor
may be obligated to accept the reassignment of the entire Trust
portfolio. See "Description of the Pooling and Servicing Agreement
Representations and Warranties" and "-- Servicer Covenants" and "Certain
Legal Aspects of the Receivables -- Consumer Protection Laws."
Application of federal and state bankruptcy and debtor relief laws
would affect the interests of Certificateholders in the Receivables if
such laws result in any Receivables being written off as uncollectible
when there are no funds available pursuant to any applicable Credit
Enhancement or other sources. See "Description of the Pooling and
Servicing Agreement -- Defaulted Receivables; Rebates and Fraudulent
Charges."
Proposed Legislation -- Limitation on Finance Charges. The United
States Congress and the states may enact new laws and amendments to
existing laws to regulate further the credit card industry or to reduce
finance charges or other fees or charges applicable to credit card
accounts. The potential effect of any such legislation could be to reduce
the yield on the Accounts. If such yield is reduced, a Pay Out Event or
Reinvestment Event could occur, and an Early Amortization Period or Early
Accumulation Period may commence. See "Description of the Certificates --
Pay Out Events and Reinvestment Events."
Generation of Additional Receivables; Dependency on Cardmember
Repayments. The Receivables may be paid at any time and there is no
assurance that there will be additional Receivables created in the
Accounts, that Receivables will be added to the Trust from Additional
Accounts designated to the Trust, or that any particular pattern of
cardmember repayments will occur. The commencement and continuation of a
Controlled Amortization Period or a Controlled Accumulation Period will
be dependent upon the continued generation of new Receivables to be
conveyed to the Trust. A significant decline in the amount of Receivables
generated could result in the occurrence of a Pay Out Event or
Reinvestment Event and the commencement of the Early Amortization Period
or the Early Accumulation Period. The full payment of the Invested Amount
of a Series or Class is dependent on cardmember repayments and will not
be made if such repayment amounts are insufficient to pay such Series or
Class its Invested Amount in full by the Series Termination Date. The
Pooling and Servicing Agreement provides that the Transferor will be
required, and the Purchase Agreement provides that Account Owners will be
required (subject to certain conditions), to designate Additional
Accounts, the Receivables of which will be added to the Trust in the
event that the amount of the Principal Receivables is not maintained at
the Required Minimum Principal Balance or if the Transferor Amount is
less than the Required Transferor Amount. If Additional Accounts are not
designated by the Transferor and the Account Owners when required, a Pay
Out Event or Reinvestment Event may occur and result in the commencement
of an Early Amortization Period or Early Accumulation Period. In
addition, a decrease in the effective yield on the Receivables due to,
among other things, a change in the annual percentage rates applicable to
the Accounts, an increase in the level of delinquencies or an increase in
convenience use (i.e., where cardmembers pay their Receivables early and
thus avoid all finance charges on purchases) could cause the commencement
of an Early Amortization Period or Early Accumulation Period as well as
result in decreased protection to Certificateholders against defaults
under the Accounts.
Social, Legal, Economic and Other Factors. Changes in card use and
payment patterns by cardmembers result from a variety of social, legal
and economic factors. Economic factors include the rate of inflation,
unemployment levels, tax law changes and relative interest rates. The use
of incentive programs (e.g., gift awards for card usage) may also affect
card use. The Transferor and the Bank are unable to determine and have no
basis to predict whether or to what extent legal, economic or social
factors will affect card use or repayment patterns. See "The Accounts."
Competition in the Credit Card Industry. The credit card industry
is highly competitive and operates in a legal and regulatory environment
increasingly focused on the cost of services charged for credit cards. As
new credit card issuers seek to enter the market and issuers seek to
expand their market share, there is increased use of advertising, target
marketing and pricing competition. The United States Congress and the
states may enact new laws and amendments to existing laws to regulate
further the credit card industry or to reduce finance charges or other
fees or charges applicable to credit card accounts. In addition, certain
credit card issuers assess annual percentage rates or other fees or
charges at rates lower than the rate currently being assessed on most of
the Accounts. If cardmembers choose to utilize competing sources of
credit, the rate at which new Receivables are generated in the Accounts
may be reduced and certain purchase and payment patterns with respect to
Receivables may be affected. The Trust will be dependent upon the
continued ability of the Account Owners to generate new Receivables. If
the rate at which new Receivables are generated declines significantly
and the Account Owners do not designate Additional Accounts, a Pay Out
Event or Reinvestment Event could occur, in which event an Early
Amortization Period or Early Accumulation Period would commence.
In September 1994, the United States Court of Appeals for the Tenth
Circuit reversed a 1992 Utah federal court decision that the VISA
association violated antitrust laws when it denied membership in VISA to
a subsidiary of Sears Roebuck & Co., on the basis that another former
Sears subsidiary at the time was the issuer of the Discover credit card,
a competitor of the VISA credit card. In June 1995, the United States
Supreme Court declined to review the decision of the court of appeals.
MasterCard has settled a similar lawsuit. This settlement by MasterCard
or a similar lawsuit against VISA could result in increased competition
among issuers of VISA and MasterCard credit cards and thereby have
adverse consequences for members of the MasterCard and VISA associations,
such as the Account Owners.
Ability of Account Owners to Change Terms of the Accounts; Decrease
in Finance Charges. Pursuant to the Pooling and Servicing Agreement, the
Transferor is not transferring to the Trust the Accounts but only the
Receivables arising in the Accounts. As owner of the Accounts, the
Account Owners have the right to determine the annual percentage rates
and the fees which are applicable from time to time to the Accounts, to
alter the minimum monthly payment required under the Accounts and to
change various other terms with respect to the Accounts. A decrease in
the annual percentage rates or a reduction in fees would decrease the
effective yield on the Accounts and could result in the occurrence of a
Pay Out Event or Reinvestment Event and the commencement of an Early
Amortization Period or Early Accumulation Period. An alteration of
payment terms may result in fewer payments on Receivables being made in
any month. Under the applicable Purchase Agreement, each Account Owner
agrees that, unless required by law or unless it deems it necessary to
maintain on a competitive basis its credit card business or a program
operated by such credit card business based on a good faith assessment by
it of the nature of the competition with respect to the credit card
business or such program, it will not take any action which would have
the effect of reducing the Portfolio Yield (as defined herein) to a level
that could reasonably be expected to cause any Series to experience a Pay
Out Event or Reinvestment Event based on the insufficiency of the Series
adjusted Portfolio Yield or any similar test or take any action that
would have the effect of reducing the Portfolio Yield to less than the
highest Average Rate (as defined herein) for any Group. "Portfolio Yield"
means, with respect to the Trust as a whole and, with respect to any
Monthly Period, the annualized percentage equivalent of a fraction (a)
the numerator of which is the aggregate of the sum of the Series
Allocable Finance Charge Collections (as defined herein) for all Series
during the immediately preceding Monthly Period calculated on a cash
basis after subtracting therefrom the Series Allocable Defaulted Amount
(as defined herein) for all Series for such Monthly Period and (b) the
denominator of which is the total amount of Principal Receivables as of
the last day of such immediately preceding Monthly Period. Unless
otherwise provided in the Prospectus Supplement with respect to any
Series, "Average Rate" means, with respect to any Group, the percentage
equivalent of a decimal equal to the sum of the amounts for each
outstanding Series (or each Class within a Series consisting of more than
one Class) within such Group obtained by multiplying (a) the certificate
rate for such Series or Class (adjusted to take into account any payments
made pursuant to any interest rate agreements) and (b) a fraction, the
numerator of which is the aggregate unpaid principal amount of the
Certificates of such Series or Class and the denominator of which is the
aggregate unpaid principal amount of all Certificates within such Group.
In addition, each Account Owner also agrees that, unless required by law
and except as provided above, such Account Owner will take no action with
respect to the applicable credit card agreements or the applicable credit
card guidelines that, at the time of such action, such Account Owner
reasonably believes will have a material adverse effect on the Transferor
or the Certificateholders. In servicing the Accounts, each of the
Servicer and any successor servicer will be required to exercise the same
care and apply the same policies that it exercises in handling similar
matters for its own or other comparable accounts. Except as specified
above, there are no restrictions specified in the Purchase Agreement on
the ability of an Account Owner to change the terms of its Accounts.
There can be no assurances that changes in applicable law, changes
in the marketplace or prudent business practice might not result in a
determination by an Account Owner to decrease customer finance charges or
otherwise take actions which would change other Account terms. Under
certain circumstances, the Transferor will have the right and may be
required from time to time to require an Account Owner to designate
Receivables from time to time existing in Additional Accounts or
Participation Interests for inclusion in the Trust. However, such
Additional Accounts or Participation Interests may not be of the same
credit quality or have the same characteristics as the Accounts, the
Receivables of which have been conveyed to the Trust. See "Description of
the Pooling and Servicing Agreement -- Additions of Accounts or
Participation Interests."
Basis Risk. The Accounts generally have finance charges set at a
variable rate above the prime rate or other specified index. Any Class of
Certificates offered hereby may bear interest at a floating rate based on
a different floating rate index. If there is a decline in the Prime Rate
or such other specified index, the amount of collections of Finance
Charge Receivables on the Accounts may be reduced, whereas the amounts
payable as interest with respect to the Certificates and other amounts
required to be funded out of collections of Finance Charge Receivables
may not be similarly reduced.
Risks of Swaps. The Trustee on behalf of the Trust may enter into
interest rate swaps and related caps, floors and collars to minimize the
risk to Certificateholders from adverse changes in interest rates.
However, such transactions will not eliminate fluctuations in the value
of the Receivables or prevent such losses if the value of the Receivables
decline.
The Trust's ability to hedge all or a portion of its portfolio of
Receivables through transactions in Swaps (as defined herein) depends on
the degree to which interest rate movements in the market generally
correlate with interest rate movements in the Receivables.
The Trust's ability to engage in transactions involving Swaps will
depend on the degree to which the Trust can identify acceptable
counterparties (as defined herein). There can be no assurance that
acceptable counterparties will be available for a specific Swap at any
specific time.
The costs to the Trust of hedging transactions vary among the
various hedging techniques and also depend on such factors as market
conditions and the length of the contract. Furthermore the Trust's
ability to engage in hedging transactions may be limited by tax
considerations.
Swaps are not traded on markets regulated by the Commission or the
Commodity Futures Trading Commission, but are arranged through financial
institutions acting as principals or agents. In an over-the-counter
environment, many of the protections afforded to exchange participants
are not available. For example, there are no daily fluctuation limits,
and adverse market movements could therefore continue to an unlimited
extent over a period of time. Because the performance of over-the-counter
Swaps is not guaranteed by any settlement agency, there is a risk of
counterparty default.
The Trust may consider taking advantage of investment opportunities
in Swaps that are not presently contemplated for use by the Trust or that
are not currently available but that may be developed, to the extent such
opportunities are both consistent with the Trust's objectives and legally
permissible investments for the Trust. Such opportunities, if they arise,
may involve risks that differ from or exceed those involved in the
activities described above and will be more fully described in the
applicable Prospectus Supplement.
Limited Nature of Rating. Any rating assigned to the Certificates
of a Series or a Class by a Rating Agency will reflect such Rating
Agency's assessment of the likelihood that Certificateholders of such
Series or Class will receive the payments of interest and principal
required to be made under the Pooling and Servicing Agreement and the
related Supplement and will be based primarily on the value of the
Receivables in the Trust and the availability of any Credit Enhancement
with respect to such Series or Class. Any such rating will therefore
generally address credit risk and will not, unless otherwise specified in
the related Prospectus Supplement with respect to any Class or Series
offered hereby, address the likelihood that the principal of, or interest
on, any Certificates of such Class or Series will be prepaid, paid on a
scheduled date or paid on any particular date before the applicable
Series Termination Date. In addition, any such rating will not address
the possibility of the occurrence of a Pay Out Event or Reinvestment
Event with respect to such Class or Series or the possibility of the
imposition of United States withholding tax with respect to non-U.S.
Certificateholders. Further, the available amount of any Credit
Enhancement with respect to any such Series or Class will be limited and
will be subject to reduction from time to time as described in the
related Prospectus Supplement. In addition, the rating of any Series or
Class may be dependent upon the rating of any provider of Series
Enhancement for such Series or Class. The rating of the Certificates of a
Class or Series will not be a recommendation to purchase, hold or sell
such Certificates, and such rating will not comment as to the
marketability of such Certificates, any market price or suitability for a
particular investor. There is no assurance that any rating will remain
for any given period of time or that any rating will not be lowered or
withdrawn entirely by a Rating Agency if in such Rating Agency's judgment
circumstances so warrant.
Issuance of New Series. The Trust, as a master trust, is expected
to issue new Series from time to time. While the terms of any Series will
be specified in a Supplement, the provisions of a Supplement and,
therefore, the terms of any new Series, will not be subject to the prior
review or consent of holders of the Certificates of any previously issued
Series. Such terms may include methods for determining applicable
investor percentages and allocating collections, provisions creating
different or additional security or other Series Enhancements, provisions
subordinating such Series to other Series or subordinating other Series
(if the Supplement relating to such Series so permits) to such Series,
and any other amendment or supplement to the Pooling and Servicing
Agreement which is made applicable only to such Series. The obligation of
the Trustee to issue any new Series is subject to the following
conditions, among others: (a) such issuance will not result in any Rating
Agency reducing or withdrawing its then existing rating of the
Certificates of any outstanding Series or Class with respect to which it
is a Rating Agency (the notification in writing by each Rating Agency to
the Transferor, the Servicer and the Trustee that any action will not
result in such a reduction or withdrawal is referred to herein as the
"Rating Agency Condition") and (b) the Transferor shall have delivered to
the Trustee a certificate of an authorized officer to the effect that, in
the reasonable belief of the Transferor, such issuance will not (i)
result in the occurrence of a Pay Out Event or Reinvestment Event or (ii)
materially adversely affect the timing or amount of payments to
Certificateholders of any Series or Class (any of the conditions referred
to in the preceding clauses (i) and (ii) are referred to herein as an
"Adverse Effect"). There can be no assurance, however, that the issuance
of any other Series, including any Series issued from time to time
hereafter, might not have an impact on the timing or amount of payments
received by a Certificateholder. In addition, the Supplements relating to
Series which are part of a Group as described herein may provide that
collections of Receivables allocable to such Series will be reallocated
among all Series in the Group. Consequently, the issuance of new Series
in a Group may have the effect of reducing the amount of collections of
Receivables which are reallocated to the Certificates of existing Series
in such Group. For example, in a Reallocation Group, which will provide
for the reallocation of collections of Finance Charge Receivables
allocable to a Series among all Series in such Group, an additional
Series which is issued with a larger claim with respect to monthly
interest than that of previously issued Series in such Group (due to a
higher certificate rate) will receive a proportionately larger
reallocation of collections of Finance Charge Receivables. Such issuance
will reduce the amount of collections of Finance Charge Receivables which
are reallocated to the existing Series in such Group. Furthermore, there
can be no assurance that, for any Series in a Group, the Trust will issue
any other Series in such Group. Accordingly, the anticipated benefits of
sharing or reallocation collections of Receivables may not be realized.
See "Description of the Pooling and Servicing Agreement -- Groups of
Series."
Addition of Trust Assets. The Transferor may from time to time
designate Participation Interests to be conveyed to the Trust or may
designate Additional Accounts, the Receivables in which will be conveyed
to the Trust. In addition, under certain circumstances, the Transferor
will be obligated to designate Aggregate Addition Accounts or, at the
Transferor's option, Participation Interests for inclusion in the Trust.
"Aggregate Addition Accounts" means revolving credit card accounts
established pursuant to a credit card agreement between an Account Owner
and the person or persons obligated to make payments thereunder,
excluding any merchant, which is designated by the Transferor to be
included as an Account. Aggregate Addition Accounts may be subject to
different eligibility criteria than the Accounts, the Receivables of
which are currently included in the Trust, and may include accounts
originated using criteria different from those which were applied to the
Accounts, the Receivables of which were initially included in the Trust,
because such accounts were originated at a later date or were part of a
portfolio of credit card accounts which were not part of the Accounts or
which were acquired from another credit card issuer. Moreover, Aggregate
Addition Accounts may not be accounts of the same type previously
included in the Trust. Consequently, there can be no assurance that such
Aggregate Addition Accounts will be of the same credit quality as the
Accounts, the Receivables of which were initially included in the Trust.
In addition, such Aggregate Addition Accounts may consist of credit card
accounts which have different terms than the Accounts, the Receivables of
which are now included in the Trust, including lower periodic finance
charges, which may have the effect of reducing the average yield on the
portfolio of Accounts. The designation of Aggregate Addition Accounts
will be subject to the satisfaction of certain conditions, including that
(a) such addition will satisfy the Rating Agency Condition and (b) the
Transferor shall have delivered to the Trustee a certificate of an
authorized officer to the effect that, in the reasonable belief of the
Transferor, such addition will not have an Adverse Effect. The Transferor
expects to convey from time to time to the Trust the Receivables arising
in certain Aggregate Addition Accounts in accordance with the provisions
of the Pooling and Servicing Agreement.
After obtaining the consent of each Rating Agency, the Transferor may
also, from time to time, at its sole discretion, designate newly originated
Eligible Accounts to be included as Accounts ("New Accounts") subject to the
limitations and conditions specified in this paragraph. For purposes of the
definition of New Accounts, Eligible Accounts will be deemed to include only
types of revolving credit card accounts which are included as Initial Accounts
or which have previously been included in any Aggregate Addition if the
assignment related to such Aggregate Addition provides that such type of
revolving credit card account is permitted to be designated as a New Account.
Until such time as each applicable Rating Agency otherwise consents, the
number of New Accounts may be subject to certain restrictions. To the extent
New Accounts are designated for inclusion in the Trust, the Transferor will
deliver to the Trustee, at least semiannually, an opinion of counsel with
respect to the New Accounts included as Accounts confirming the validity and
perfection of each transfer of such New Accounts. If such opinion of counsel
with respect to any New Accounts is not so received, all Receivables arising
in the New Accounts to which such failure relates will be removed from the
Trust. The Transferor will designate New Accounts subject to the following
conditions, among others: (a) the New Accounts will all be Eligible Accounts;
(b) such conveyance will not result in the occurrence of a Pay Out Event or
Reinvestment Event; and (c) such conveyance will not have been made in
contemplation of an insolvency event with respect to the Transferor or any
Account Owner. New Accounts and Aggregate Addition Accounts are collectively
referred to herein as "Additional Accounts."
Any Participation Interests to be included as Trust Assets or any
Eligible Accounts, other than New Accounts, to be included as Accounts after
the Initial Cut-Off Date, are collectively referred to herein as an "Aggregate
Addition." "Eligible Account" means a revolving credit card account owned by
an Account Owner and its successors and permitted assigns which, as of the
respective date of designation (a) is a revolving credit card account in
existence and maintained by an Account Owner or such successors or assignees,
(b) is payable in United States dollars, (c) has a cardmember whose address is
in the United States or its territories or possessions or a military address,
(d) except as provided below has a cardmember who has not been identified by
the Servicer in its computer files as being involved in any voluntary or
involuntary bankruptcy proceeding, (e) has not been identified as an account
with respect to which the related card has been lost or stolen, (f) has not
been sold or pledged to any other party except for any other Account Owner
that has entered into a receivables purchase agreement, (g) does not have
receivables which have been sold or pledged by an Account Owner to any other
party other than the Transferor, (h) except as provided below, does not have
receivables that are Defaulted Receivables, (i) does not have any receivables
that have been identified by the Servicer or the related cardmember as having
been incurred as a result of fraudulent use of any related credit card, (j)
was created in accordance with the credit card guidelines of the applicable
Account Owner, and (k) with respect to Additional Accounts, certain other
accounts which shall have satisfied the Rating Agency Condition. Accounts
which relate to bankrupt obligors or certain charged-off receivables may be
designated as Accounts provided that the amount of Principal Receivables in
any such Account is deemed to be zero for purposes of all allocations under
the Pooling and Servicing Agreement.
Allocations. To the extent provided in any Supplement, or any
amendment to the Pooling and Servicing Agreement, portions of the
Receivables or Participation Interests conveyed to the Trust and all
collections received with respect thereto may be allocated to one or more
Series or Groups as long as the Rating Agency Condition shall have been
satisfied with respect to such allocation and the Servicer shall have
delivered an officer's certificate to the Trustee to the effect that the
Servicer reasonably believes such allocation will not have an Adverse
Effect.
USE OF PROCEEDS
Unless otherwise specified in the related Prospectus Supplement,
the net proceeds from the sale of the Certificates of any Series offered
hereby, before the deduction of expenses, will be paid to the Transferor.
Unless otherwise specified in the related Prospectus Supplement, the
Transferor will use such proceeds to pay the Account Owners the purchase
price of the Receivables.
THE TRUST
The Trust will be formed pursuant to the Pooling and Servicing
Agreement. The Trust does not and will not engage in any business
activity other than acquiring and holding the Receivables and the other
assets of the Trust and proceeds therefrom, issuing Certificates, the
Transferor Certificate and any Supplemental Certificate and making
payments thereon and on any Series Enhancements and related activities.
As a consequence, the Trust does not and is not expected to have any
source of capital other than the Trust Assets. The Trust is administered
in accordance with the laws of the State of Delaware.
The Transferor conveyed to the Trust, without recourse, its
interests in all Receivables existing in the Initial Accounts at the
close of business on the Initial Cut-Off Date, and will convey to the
Trust, without recourse, its interest in all Receivables arising under
such Accounts thereafter, in exchange for the net cash proceeds from the
sale of one or more Series of Certificates plus the Transferor
Certificate representing the Transferor's Interest. In addition, the
Transferor may convey from time to time to the Trust, without recourse,
except as provided in the Pooling and Servicing Agreement, its interests
in all Receivables existing in certain Additional Accounts and
Participation Interests, if any, at the close of business on each
applicable date of designation thereof. The Trust Assets consist of the
Receivables and any Participation Interests conveyed to the Trust, all
monies due or to become due thereunder, the proceeds of the Receivables,
all monies on deposit in certain accounts maintained for the benefit of
the Certificateholders, and the right to receive Recoveries and
Interchange allocable to the Trust for the benefit of the
Certificateholders. Pursuant to the Purchase Agreement, the Transferor
has the right (subject to certain limitations and conditions) and in some
circumstances under the Pooling and Servicing Agreement is obligated, to
require each Account Owner to designate from time to time Additional
Accounts to be included as Accounts and the Transferor will convey to the
Trust, pursuant to the Pooling and Servicing Agreement, its interests in
all Receivables of such Additional Accounts or Participation Interests.
Under the Pooling and Servicing Agreement, the Transferor may convey
Participation Interests to the Trust. See "Description of the Pooling and
Servicing Agreement -- Additions of Accounts or Participation Interests."
In addition, the Transferor may, but is not obligated to, designate from
time to time Participation Interests or Receivables from Accounts to be
removed from the Trust. See "Description of the Pooling and Servicing
Agreement -- Removal of Accounts."
CREDIT CARD ACTIVITIES
GENERAL
Pursuant to the Purchase Agreements, the Account Owners sold to the
Transferor, and the Transferor in turn transferred to the Trust pursuant
to the Pooling and Servicing Agreement, its respective ownership interest
in the receivables which have or will be generated from transactions made
and cash advances obtained by holders of certain credit card accounts
originated and owned by the Account Owners (the "Accounts").
The Receivables to be conveyed to the Trust pursuant to the Pooling
and Servicing Agreement have been or will be generated from transactions
made by holders of certain credit card accounts (the "Trust Portfolio")
that have been selected from the total portfolio of VISA and MasterCard
accounts serviced by the Bank (the "Bank Portfolio") on the basis of
criteria set forth in the Pooling and Servicing Agreement. The
Receivables also will include all fees billed to the Accounts. The
accounts were generated under the VISA and MasterCard associations of
which the Bank is a member. The Accounts and Receivables are primarily
serviced by First Data Resources, Inc. ("FDR") and First Annapolis
Marketing Information Services Inc. ("FAMIS").
The Bank Portfolio includes VISA Classic and MasterCard standard
accounts, which are standard accounts, and VISA Gold and Gold MasterCard
accounts, which are premium accounts. Premium accounts are generally
subject to stricter underwriting criteria than standard accounts,
including higher income requirements. Premium Accounts generally have
higher credit limits and provide cardholders with services not available
to standard accounts. The Bank applies the same finance charges to its
premium and standard accounts. More than three-quarters of the accounts
in the Bank Portfolio are assessed an annual membership fee, although the
Bank has waived the annual membership fee for certain premium and
standard accounts. For accounts with an annual membership fee, premium
accounts are assessed a higher fee than standard accounts.
Cardholders may use their VISA and MasterCard credit cards for
three types of transactions: credit card purchases, cash advances and
convenience checks issued by the Bank. Cardholders obtain cash advances
when they use their VISA or MasterCard credit card to obtain cash from a
financial institution or via an automated teller machine. Cardholders
may also effect balance consolidations by transferring their balances
from credit card accounts at other financial institutions to their credit
card account at the Bank. The balances so transferred are then
consolidated with the account at the Bank. Balance consolidations, which
are treated by the Bank in the same manner as purchases, may be done by
cardholders either at the time an account is originated or anytime
thereafter. Cardholders also receive and may utilize special convenience
checks issued by the Bank. Convenience checks may be used by cardholders
to draw against their VISA and MasterCard credit card accounts at any
time. The Bank treats such draws in the same manner as cash advances. All
amounts due with respect to purchases, cash advances and convenience
checks will be included in the Receivables.
Each cardholder is subject to an agreement with the Bank governing
the terms and conditions of the related VISA or MasterCard credit card
account. Pursuant to each such agreement, except as described herein, the
Bank reserves the right, subject to advance notice to the cardholder as
may be required by law, to add to, delete or change the terms and
conditions of its VISA or MasterCard credit card accounts at any time,
including increasing or decreasing periodic finance charges, fees, other
charges or minimum monthly payment requirements.
BUSINESS STRATEGY
The Bank designs and markets its credit card program based on an
empirical analysis of the credit card business at the level of the
individual card-holder. The Bank collects information about its
competitors, the consumer credit market, and current as well as
historical behavior of individual customers and prospects from both
internal and external sources. Factors considered by the Bank include
credit scores, balance amounts, purchase types and amounts, finance
charges paid and other indicia of cardholder behavior over time.
PROCESSING AND SERVICING OF CREDIT CARD ACCOUNTS
The Bank has delegated both the credit card processing and account
servicing functions to FDR, a subsidiary of First Data Corp. ("FDC"),
which performs such functions for the Bank under an eight-year,
automatically renewable contract entered into in June 1995. FDR
facilities currently located in Omaha, Nebraska, Tulsa, Oklahoma and
Atlanta, Georgia are utilized to clear transactions through the VISA and
MasterCard systems, post transactions to cardholder accounts, create
billing statements and provide credit processing, operational support
(including customer service) and perform collections activity on
delinquent accounts according to the policies and procedures prescribed
by the Bank. Transactions creating the Receivables flow through both the
VISA and MasterCard systems and the FDR processing system. If FDR should
fail to perform its functions or become insolvent, or should either the
VISA or MasterCard system materially curtail its activities, or should
the Bank cease to be a member of either VISA or MasterCard for any
reason, a Pay Out Event could occur and delays in payments on the
Receivables and possible reductions in the dollar amounts thereof could
also occur.
The Bank also has delegated the database management functions, data
mining activities, predictive model creating and daily oversight of FDC
and FDR activities to FAMIS, a wholly-owned subsidiary of First Annapolis
Consulting Inc. The Bank entered into a six-year contract with FAMIS in
June 1995 to perform these services.
ACCOUNT ORIGINATION
BKB CT and the Bank began originating credit card accounts in
August 1995 and April 1997, respectively. The Bank's credit card business
has generally focused on relationship customers of the Bank in its branch
trade area, while BKB CT has generally focused, on a national basis, on
creditworthy consumers who utilize credit cards to borrow. On the initial
Issuance Date, BKB CT will sell all of its Accounts to the Bank. The VISA
and MasterCard credit card accounts originated by the Bank as well as
those acquired by from BKB CT were principally generated through (i)
direct mail solicitations of individuals residing in the United States
who have been prescreened at credit bureaus on the basis of criteria
furnished by the Bank; (ii) direct mail solicitations of individuals
residing in the United States without prescreening; and (iii) applicant
initiated requests made at the Bank's branch offices or by telephone or
via written letter. The Bank applies the same credit criteria without
distinction among the foregoing sources of applications, as described
below in "--Underwriting Procedures." In addition, the Bank purchased a
credit card portfolio consisting of approximately 324,000 accounts with
outstanding principal receivables of approximately $311 million in July
1996 from BayBank, N.A. and may purchase additional credit card
portfolios in the future.
UNDERWRITING PROCEDURES
The Bank reviews all applications for accounts for completeness and
creditworthiness based on credit underwriting criteria established by the
Bank. The Bank uses credit reports issued by independent credit reporting
agencies and, in the event of any discrepancies between the application and
the credit report and in certain other circumstances, the Bank may verify
certain information regarding applicants.
The primary new account source for the Bank is prescreened direct
mail solicitation of qualified prospective cardholders. Underwriting
criteria established by the Bank are utilized at the credit bureaus to
generate a list of qualifying prospective cardholders. The Bank also
obtains credit scores using scoring models licensed by the credit bureaus
from Fair Isaac & Company ("FICO"), which specializes in developing
credit scoring models. The credit scoring models used by the Bank are
intended to provide a general indication, based on the information
available, of the applicant's willingness and ability to repay the
applicant's obligations. Credit scoring evaluates a potential
cardholder's credit profile and certain of the information provided by
the applicant in the credit application in order to statistically
quantify credit risk. Models for credit scoring are developed by using
statistics to evaluate common characteristics and their correlation with
credit risk. From time to time, the credit scoring models used by the
Bank are reviewed and are periodically updated to reflect more current
statistical data.
The Bank also uses information obtained from various third-party
sources and its own internal database and then applies its various
predictive models to the list of potential cardholders supplied by the
credit bureaus to determine the most creditworthy and more profitable
prospects to solicit by mail. Potential cardholders who receive direct
mail solicitations are required to complete and return an acceptance
certificate. The information supplied by the potential cardholder on the
acceptance certificate is used by the Bank to verify the potential
cardholder's credit information. As part of the verification process the
Bank reviews a new credit bureau report and credit score which are
updated based on the information supplied by the applicant and
established lending criteria. Credit lines are established after this
verification process has been completed and are commensurate with the new
cardholder's updated credit profile, credit score and income.
Non-prescreened applicants for credit cards are reviewed for
completeness and accuracy. The Bank credit scores all non-prescreened
applicants utilizing a FICO supplied credit scorecard. Applicants who
score above or below pre-set thresholds are accepted or rejected
accordingly. Applicants whose credit score lies between these preset
thresholds are reviewed manually by a credit analyst who will make the
determination as to the applicant's creditworthiness. Credit analysts
have the ability to override decisions made by the scorecard upon receipt
of additional information from the applicant. Credit lines are assigned
based upon the cardholders credit score, income and credit profile.
The Bank generally issues credit cards that expire two years after
issuance and reissues credit cards with two-year expiration dates, so
long as the payment history of the cardholder satisfies certain criteria.
ADDITIONAL ACCOUNTS
Receivables from Additional Accounts, if needed, will be added to
the Trust from accounts originated or acquired by the Account Owners
through pre-approved applications and other sources, as described above.
See "Risk Factors -- Addition of Trust Assets."
BILLING AND PAYMENTS
The VISA and MasterCard credit card accounts of the Bank are
currently grouped into twenty-one billing cycles (each a "Billing Cycle")
ending on various days throughout each month. Each Billing Cycle has its
own monthly billing date, at which time the activity in the related
accounts during the month ending on such billing date is processed and
mailed to cardholders. A monthly billing statement is sent by FDR to each
cardholder with a debit or credit balance of at least one dollar at the
end of the Billing Cycle or when a finance charge has been imposed.
Generally, each month, cardholders must make at least a minimum
payment equal to the sum of (i) the greater of 2.5% of the new balance of
purchases and $10, or if the new balance of purchases is less than $10,
the amount of the new balance of purchases, (ii) the greater of 2.5% of
the new balance of cash advances and $10, or if the new balance of cash
advances is less than $10, the amount of the new balance of cash
advances, (iii) any past due amount from prior months, and (iv) at the
option of the Bank, the excess of the unpaid balance for an account over
the assigned credit limit (the "Minimum Monthly Payment"). Outstanding
account balances of less than $10 are due in full.
The Bank may, in unusual circumstances, at its option, allow
individual cardholders or groups of cardholders to skip their Minimum
Monthly Payments for one or more months. Finance charges in connection
with such skipped payments continue to accrue, and the amount of the next
Minimum Monthly Payment is determined as described above, based on the
account balance at the end of the next Billing Cycle. The effect of
skipped payments is to increase the amount of Finance Charge Receivables
and to decrease the rate of payments of Principal Receivables during the
Billing Cycles for which the offers apply.
The Monthly periodic finance charges are calculated for both cash
advances and purchases by multiplying the applicable monthly periodic
rate by the average daily cash advance balance or average daily purchase
balance, respectively. Monthly Periodic Finance Charges are calculated on
Cash Advances and Purchases (including certain fees and unpaid finance
charges) from the date of the transaction or the first day of the Billing
Cycle in which the transaction is posted to the account (whichever is
later). Monthly periodic finance charges are not assessed in most
circumstances on Purchases if the purchases new balance shown in the
billing statement is paid by the next statement closing date, or if the
purchases previous balance is zero. The next statement closing date is on
average 25-28 days after the billing date. The average annual percentage
rates for purchases and cash advances are variable rates. The current
annual percentage rate for purchases is a variable rate based on The Wall
Street Journal prime rate plus a spread generally ranging from 3.75% to
7.90%. The current annual percentage rate for cash advances is a
variable rate based on The Wall Street Journal prime rate plus a spread
generally ranging from 5.75% to 9.90%.
For accounts with an annual membership fee, generally the annual
membership fee is $18.00 for standard accounts and $28.00 for premium
accounts. The annual membership fee is non-refundable, except that such
fee need not be paid if the cardholder closes the account within 30 days
of the mailing of the billing statement on which such customer is billed
for such fee. The Bank may waive the annual membership fee, or a portion
thereof, at its discretion, in connection with solicitations for new
accounts, or when the Bank determines a waiver to be necessary to operate
its credit card business on a competitive basis. In addition to the
annual membership fee, the Bank may charge accounts certain other fees
including: (i) a late fee, generally in the amount of $18.50 with respect
to any monthly payment if the required minimum monthly payment is not
received by the payment due date shown on the monthly billing statement;
(ii) a cash advance fee of 2.5% of the amount of the advance subject to a
minimum fee of $3.50 per transaction, (iii) a returned check charge,
generally in the amount of $18.50 and (iv) an over-the-limit fee,
generally in the amount of $18.50 with respect to any account more than a
specified amount over its credit limit at the time the monthly billing
statement is created.
Payments by cardholders to the Bank are processed and applied first
to any billed fees and other amounts not subject to finance charges, next
to billed and unpaid finance charges and then to billed and unpaid
transactions in the order determined by the Bank. Any excess is applied
to unbilled transactions in the order determined by the Bank and then to
unbilled finance charges. There can be no assurance that monthly periodic
finance charges, fees, and other charges imposed by the Bank will remain
at current levels in the future.
INTERCHANGE
Members participating in the VISA and MasterCard International
associations receive certain fees ("Interchange") as partial compensation
for taking credit risk, absorbing fraud losses, and funding receivables
for a limited period prior to initial billing. Under the VISA and
MasterCard systems, a portion of this Interchange in connection with
cardholder charges for merchandise and services is passed from banks
which clear the transactions for merchants to credit card-issuing banks.
Interchange ranges from approximately 1% to 2% of the transaction amount,
although VISA and MasterCard International may from time to time change
the amount of Interchange reimbursed to banks issuing their credit cards.
Interchange will be allocated to the Trust on the basis of the percentage
equivalent of the ratio which the amount of cardholder sales charges in
the Accounts bears to the total amount of cardholder sales charges for
all accounts in the Account Owner's entire portfolio. This percentage is
an estimate of the actual Interchange and may be greater or less than the
actual amount of the Interchange relating to the Accounts from time to
time. Unless otherwise stated in the related Prospectus Supplement,
Interchange will be included in collections of Finance Charge Receivables
for purposes of calculating the Portfolio Yield for a Series.
COLLECTION OF DELINQUENT ACCOUNTS
The Bank generally considers an account delinquent if a minimum
payment due thereunder is not received by the Bank by the time the
cardholder's next billing statement is generated, which is generally
within five days after the due date printed in the previous statement.
Delinquent accounts are routed to the pre-collections system at FDC where
they are prioritized and early stage collection efforts are initiated.
These early efforts include the printing of the overdue amount on the
next billing statement and either a telephone call or letter requesting
payment of the past due amount. In the event these early stage collection
efforts are ineffective, contact by telephone and/or mail is escalated
and efforts to collect past due amounts are made more frequently subject
to all applicable legal requirements.
In general, an account is restricted and charging privileges are
suspended when the account becomes fifteen (15) to thirty (30) days past
due, or when a cardholder exceeds the account's credit limit within
pre-set parameters. At sixty (60) days past due, no additional extensions
of credit will be authorized for any reason. At its sole discretion, the
Bank may enter into agreements with delinquent cardholders to extend or
otherwise change an account's payment schedule. A delinquent account may
be re-aged once in any twelve (12) month period if the delinquent
cardholder makes a payment equal to three minimum payments over a ninety
(90) day period.
The current policy of the Bank is to charge-off as uncollectible any
account which is six (6) billing cycles past due (i.e.180 days delinquent).
However, if the Bank receives notice that a cardholder has filed for
bankruptcy then the account is charged-off as soon as is practicable but
generally no later than 25 days after receipt of such notice. The Bank's
credit evaluation, servicing and charge-off policies and collection practices
may change over time in accordance with the business judgment of the Bank,
applicable law, guidelines established by applicable regulatory authorities
and market conditions .
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 Servicer with respect to Defaulted
Receivables, including amounts received by the Transferor or the Servicer
from the purchaser or transferee with respect to the sale or other
disposition of Defaulted Receivables ("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. Collections of Recoveries
will be treated as collections of Principal Receivables; provided,
however, that to the extent the aggregate amount of Recoveries received
with respect to any monthly period exceeds the aggregate amount of
Principal Receivables (other than Ineligible Receivables) on the day such
Receivables became Defaulted Receivables for each day in such monthly
period, the amount of such excess will be treated as collections of
Finance Charge Receivables.
The Bank utilizes FDR's facilities to administer the recovery of
defaulted receivables. The Bank prioritizes defaulted receivables
according to the likelihood of successful recovery and then selects a
collection method based on the information supplied by FDC. Included
among the collection methods utilized by the Bank are primary and
secondary third-party collection agencies, which are retained to recover
the defaulted receivables. As compensation for their services, the
collection agencies receive a percentage of the amounts they collect.
FRAUD PREVENTION
The Bank reviews all applications for potential fraud by comparing
the information on the credit card application against the information
supplied by the credit bureaus. In addition, all applications are checked
against information supplied by the Issuers Clearinghouse, a national
fraud database maintained jointly by VISA and MasterCard. Once an account
is approved, transactions are monitored by FDR which scores each
transaction based upon its likelihood of being fraudulent. Potential
fraudulent activity is researched by investigators and, dependent upon
their findings, accounts may be blocked or closed.
THE BANK
BankBoston (NH), National Association is a national banking
association organized under the laws of the United States. Its principal
executive office is located at 157 Main Street, Nashua, New Hampshire
03060, and its telephone number is (603) 594-1802. The Servicer is a
wholly owned subsidiary of BankBoston Corporation. The Prospectus
Supplement for each Series will provide additional information relating
to the Servicer.
CREDIT CARD RECEIVABLES FUNDING CORPORATION
CCRFC was incorporated under the laws of the State of Delaware on
June 4, 1997 and is a special purpose wholly owned subsidiary of
BankBoston Corporation. Its principal office is currently located at 157
Main Street, Nashua, New Hampshire 03060, and its telephone number is
(603) 594-1802. The Transferor was organized for the limited purposes of
facilitating the type of transactions described herein, purchasing,
holding, owning and selling receivables, and any activities incidental to
and necessary or convenient for the accomplishment of such purposes.
Neither the Bank nor the Transferor's board of directors intends to
change the business purpose of the Transferor.
THE ACCOUNTS
The Receivables arise in certain credit card accounts that have
been selected from the total portfolio of MasterCard and VISA accounts
serviced by the Bank on the basis of criteria set forth in the Pooling
and Servicing Agreement. An account in the Bank Portfolio must be an
Eligible Account to be included in the Trust Portfolio. The Trust
Portfolio represents approximately 63% of the Eligible Accounts in the
Bank Portfolio.
Pursuant to the Purchase Agreements and the Pooling and Servicing
Agreement, the Transferor has the right or is obligated (subject to
certain limitations and conditions) to require and the Account Owners are
obligated (subject to certain limitations and conditions) to designate,
from time to time, additional qualifying VISA and MasterCard consumer
revolving credit card accounts to be included as Accounts and to convey
to the Transferor for ultimate conveyance to the Trust all Receivables of
such Additional Accounts, whether such Receivables are then existing or
thereafter created. Those Accounts must meet the eligibility criteria set
forth in the Pooling and Servicing Agreement as of the date the Bank
designates such Accounts as Additional Accounts. The Account Owners will
convey the Receivables then existing or thereafter created under such
Additional Accounts to the Transferor which in turn will convey such
Receivables to the Trust. Under the Pooling and Servicing Agreement, the
Transferor also has the right to convey Participation Interests to the
Trust subject to the conditions described in the Pooling and Servicing
Agreement. See "Description of the Pooling and Servicing Agreement --
Additions of Accounts or Participation Interests."
As of each date with respect to which Additional Accounts are
designated, each applicable Account Owner will represent and warrant to
the Transferor that the Receivables generated under the Additional
Accounts meet the eligibility requirements set forth in the applicable
Purchase Agreement and the Transferor will represent and warrant to the
Trust that such Receivables or Participation Interests, if any, meet the
eligibility requirements set forth in the Pooling and Servicing
Agreement. See "Description of the Pooling and Servicing Agreement --
Conveyance of Receivables." Because the Initial Accounts were designated
as of the Initial Cut-Off Date and subsequent Aggregate Addition Accounts
may be designated from time to time, there can be no assurance that all
of such Accounts will continue to meet the eligibility requirements as of
any Series Closing Date.
Subject to certain limitations and restrictions, the Transferor may
also designate certain Accounts or Participation Interests, if any, for
removal from the Trust, in which case such Participation Interests or the
Receivables of the Removed Accounts will be reassigned to the Transferor.
Throughout the term of the Trust, the Receivables in the Trust will
consist of Receivables generated under the Accounts, Participation
Interests, if any, and the Receivables generated under Additional
Accounts, but will not include the Receivables generated under Removed
Accounts or removed Participation Interests.
The Prospectus Supplement relating to a Series will provide certain
information about the Trust Portfolio as of the date specified. Such
information will include the amount of Principal Receivables, the amount
of Finance Charge Receivables, the range of principal balances of the
Accounts and the average thereof, the range of credit lines of the
Accounts and the average thereof, the range of ages of the Accounts and
the average thereof, information with respect to the geographic
distribution of the Accounts, the types of Accounts and delinquency
statistics relating to the Accounts.
DESCRIPTION OF THE CERTIFICATES
GENERAL
The Certificates will be issued pursuant to the Pooling and
Servicing Agreement and the related Supplement substantially in the forms
filed as exhibits to the Registration Statement of which this Prospectus
is a part. The following summary describes certain terms of the Pooling
and Servicing Agreement and the related Supplement and is qualified in
its entirety by reference to the Pooling and Servicing Agreement and the
related Supplement.
The Certificates will evidence undivided beneficial interests in
the Trust Assets allocated to such Certificates, representing the right
to receive from such Trust Assets funds up to (but not in excess of) the
amounts required to make payments of interest and principal in the manner
described below.
The Certificates will initially be represented by one or more
Certificates registered in the name of the nominee of DTC (together with
any successor depository selected by the Transferor, the "Depository"),
except as set forth below. Unless otherwise stated in the related
Prospectus Supplement, the Certificates will be available for purchase in
minimum denominations of $1,000 and integral multiples thereof in
book-entry form. 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 the Certificates. Except under the limited
circumstances described herein, no Certificateholder will be entitled to
receive a Certificate in fully registered, certificated form ("Definitive
Certificates") representing such person's interest in the Certificates.
Unless and until Definitive Certificates are issued under the limited
circumstances described herein, all references herein to actions by
Certificateholders shall refer to actions taken by DTC upon instructions
from its Participants (as defined herein), and all references herein to
distributions, notices, reports and statements to Certificateholders
shall refer to distributions, notices, reports and statements to Cede, as
the registered holder of the Certificates, for distribution to the
beneficial owners of the Certificates in accordance with DTC procedures.
See "-- Book-Entry Registration" and "-- Definitive Certificates."
Payments of interest and principal will be made on each related
Interest Payment Date to the Certificateholders in whose names the
Certificates were registered on the last day of the calendar month
preceding such Interest Payment Date, unless otherwise specified in the
related Prospectus Supplement (each, a "Record Date").
BOOK-ENTRY REGISTRATION
Unless otherwise specified in the related Prospectus Supplement,
Certificateholders may hold their Certificates through DTC (in the United
States) or Cedel or Euroclear (in Europe) if they are participants of
such systems, or indirectly through organizations which are participants
in such systems.
Cede, as nominee for DTC, will hold the global Certificate or
Certificates. Cedel and Euroclear will hold omnibus positions on behalf
of their participants through customers' securities accounts in Cedel's
and Euroclear's names on the books of their respective Depositaries (as
defined herein) which in turn will hold such positions in customers'
securities accounts in the Depositaries' names on the books of DTC.
Citibank, N.A. will act as depositary for Cedel and Morgan Guaranty Trust
Company of New York will act as depositary for Euroclear (in such
capacities, the "Depositaries").
DTC is a limited-purpose trust company organized under the laws of
the State of New York, a member of the Federal Reserve System, a
"clearing corporation" within the meaning of the UCC and a "clearing
agency" registered pursuant to the provisions of Section 17A of the
Exchange Act. DTC was created to hold securities for its participating
organizations ("Participants") and facilitate the settlement of
securities transactions between Participants through electronic
book-entry changes in accounts of its Participants, thereby eliminating
the need for physical movement of certificates. Participants include
underwriters, securities brokers and dealers, banks, trust companies and
clearing corporations and may include certain other organizations.
Indirect access to the DTC system also is available to others such as
banks, brokers, dealers and trust companies that clear through or
maintain a custodial relationship with a Participant, either directly or
indirectly ("Indirect Participants").
Transfers between Participants will occur in accordance with DTC
rules. Transfers between Cedel Participants (as defined herein) and
Euroclear Participants (as defined herein) will occur in accordance with
their respective rules and operating procedures.
Cross-market transfers between persons holding directly or
indirectly through DTC, on the one hand, and directly or indirectly
through Cedel Participants or Euroclear Participants, on the other, will
be effected in DTC in accordance with DTC rules on behalf of the relevant
European international clearing systems by its Depositary. 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. Cedel Participants and
Euroclear Participants may not deliver instructions directly to the
Depositaries.
Because of time-zone differences, credits of securities received in
Cedel or Euroclear as a result of a transaction with a Participant will
be made during subsequent securities settlement processing and dated the
business day following the DTC settlement date. Such credits or any
transactions in such securities settled during such processing will be
reported to the relevant Euroclear or Cedel Participants on such business
day. Cash received in Cedel or Euroclear as a result of sales of
securities by or through a Cedel Participant or a Euroclear Participant
to a Participant will be received with value on the DTC settlement date
but will be available in the relevant Cedel or Euroclear cash account
only as of the business day following settlement in DTC.
Certificateholders that are not Participants or Indirect
Participants but desire to purchase, sell or otherwise transfer ownership
of, or other interests in, Certificates may do so only through
Participants and Indirect Participants. In addition, Certificateholders
will receive all distributions of principal and interest on the
Certificates from the Trustee through DTC and its Participants. Under a
book-entry format, Certificateholders will receive payments after the
related Distribution Date, as the case may be, because, while payments
are required to be forwarded to Cede, as nominee for DTC, on each such
date, DTC will forward such payments to its Participants, which
thereafter will be required to forward them to Indirect Participants or
holders of beneficial interests in the Certificates. It is anticipated
that the only "Certificateholder" will be Cede, as nominee of DTC, and
that holders of beneficial interests in the Certificates will not be
recognized by the Trustee as Certificateholders under the Pooling and
Servicing Agreement. Holders of beneficial interests in the Certificates
will only be permitted to exercise the rights of Certificateholders under
the Pooling and Servicing Agreement indirectly through DTC and its
Participants who in turn will exercise their rights through DTC. The
Trustee, the Transferor, the Servicer and any paying agent, transfer
agent or registrar may treat the registered holder in whose name any
Certificate is registered (expected to be Cede) as the absolute owner
thereof (whether or not such Certificate shall be overdue and
notwithstanding any notice of ownership or writing thereon or any notice
to the contrary) for the purpose of making payment and for all other
purposes.
Under the rules, regulations and procedures creating and affecting
DTC and its operations, DTC is required to make book-entry transfers
among 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. Participants and Indirect
Participants with which holders of beneficial interests in the
Certificates have accounts similarly are required to make book-entry
transfers and receive and transmit such payments on behalf of these
respective holders.
Because DTC can only act on behalf of Participants, who in turn act
on behalf of Indirect Participants and certain banks, the ability of
holders of beneficial interests in the Certificates 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 Definitive Certificate for such
Certificates.
DTC has advised the Transferor that it will take any action
permitted to be taken by a Certificateholder under the Pooling and
Servicing Agreement and the related Supplement only at the direction of
one or more Participants to whose account with DTC the Certificates are
credited. Additionally, DTC has advised the Transferor that it may take
actions with respect to the Certificateholders' Interest that conflict
with other of its actions with respect thereto.
Cedel is incorporated under the laws of Luxembourg as a
professional depository. Cedel holds securities for its participating
organizations ("Cedel Participants") and facilitates the clearance and
settlement of securities transactions between Cedel Participants through
electronic book-entry changes in accounts of Cedel Participants, thereby
eliminating the need for physical movement of certificates. Transactions
may be settled in Cedel in any of 36 currencies, including United States
dollars. Cedel provides to Cedel Participants, among other things,
services for safekeeping, administration, clearance and settlement of
internationally traded securities and securities lending and borrowing.
Cedel interfaces with domestic markets in several countries. As a
professional depository, Cedel is subject to regulation by the Luxembourg
Monetary Institute. Cedel Participants are recognized financial
institutions around the world, including underwriters, securities brokers
and dealers, banks, trust companies, clearing corporations and certain
other organizations. Indirect access to Cedel is also available to
others, such as banks, brokers, dealers and trust companies that clear
through or maintain a custodial relationship with a Cedel Participant,
either directly or indirectly.
Euroclear was created in 1968 to hold securities for participants
of Euroclear ("Euroclear Participants") and to clear and settle
transactions between Euroclear Participants through simultaneous
electronic book-entry delivery against payment, thereby eliminating the
need for physical movement of certificates and any risk from lack of
simultaneous transfers of securities and cash. Transactions may now be
settled in any of 34 currencies, including United States dollars.
Euroclear 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. Euroclear is operated by the Brussels, Belgium office of
Morgan Guaranty Trust Company of New York (the "Euroclear Operator"),
under contract with Euroclear Clearance Systems 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
Euroclear on behalf of Euroclear Participants. Euroclear Participants
include banks (including central banks), underwriters, securities brokers
and dealers and other professional financial intermediaries. Indirect
access to Euroclear 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 "Euroclear Provisions").
The Euroclear Provisions govern transfers of securities and cash within
Euroclear, withdrawals of securities and cash from Euroclear, and
receipts of payments with respect to securities in Euroclear. All
securities in Euroclear are held on a fungible basis without attribution
of specific certificates to specific securities clearance accounts. The
Euroclear Operator acts under the Euroclear Provisions 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 Cedel or
Euroclear will be credited to the cash accounts of Cedel Participants 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 -- Foreign Investors." Cedel or the Euroclear Operator, as
the case may be, will take any other action permitted to be taken by a
Certificateholder under the Pooling and Servicing Agreement and the
related Supplement on behalf of a Cedel Participant 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, Cedel and Euroclear have agreed to the foregoing
procedures in order to facilitate transfers of Certificates among
participants of DTC, Cedel and Euroclear, they are under no obligation to
perform or continue to perform such procedures and such procedures may be
discontinued at any time.
DEFINITIVE CERTIFICATES
Unless otherwise specified in the related Prospectus Supplement,
the Certificates of each Series will be issued as Definitive Certificates
in fully registered certificated form to Certificate Owners or their
nominees rather than to DTC or its nominee, only if (i) the Transferor
advises the Trustee 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,
elects to terminate the book-entry system through DTC or (iii) after the
occurrence of a Servicer Default, Certificate Owners evidencing not less
than 50% of the aggregate unpaid principal amount of the Certificates,
advise the Trustee and DTC through Participants in writing that the
continuation of a book-entry system through DTC (or a successor thereto)
is no longer in the best interests of the Certificate Owners.
Upon the occurrence of any of the events described in the
immediately preceding paragraph, DTC is required to notify all
Participants of the availability through DTC of Definitive Certificates.
Upon surrender by DTC of the definitive certificates representing the
Certificates and instructions for reregistration, the Trustee will issue
the Certificates in the form of Definitive Certificates, and thereafter
the Trustee will recognize the holders of such Definitive Certificates as
Certificateholders under the Pooling and Servicing Agreement and the
related Supplement ("Holders").
Distribution of principal and interest on the Certificates will be
made by the Trustee directly to Holders in accordance with the procedures
set forth herein and in the Pooling and Servicing Agreement and the
related Prospectus Supplement. Interest payments and principal payments
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. The final
payment on any Certificate (whether Definitive Certificates or
Certificates registered in the name of Cede), however, will be made only
upon presentation and surrender of such Certificate on the final payment
date at such office or agency as is 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 the final distribution.
Definitive Certificates will be transferable and exchangeable at
the offices of the transfer agent and registrar, which will 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.
INTEREST
Interest will accrue on the Certificates of a Series or Class
offered hereby at the per annum rate either specified in or determined in
the manner specified in the related Prospectus Supplement. Except as
otherwise provided herein, collections of Finance Charge Receivables and
certain other amounts allocable to the Certificateholders' Interest of a
Series or Class offered hereby will generally be used to make interest
payments to Certificateholders of such Series or Class on each Interest
Payment Date specified in the related Prospectus Supplement; provided
that after the commencement of an Early Amortization Period with respect
to such Series, interest will be distributed to such Certificateholders
monthly on each Special Payment Date. If the Interest Payment Dates for a
Series or Class occur less frequently than monthly, such collections or
other amounts (or the portion thereof allocable to such Class) will be
deposited in one or more Interest Funding Accounts and used to make
interest payments to Certificateholders of such Series or Class on the
following Interest Payment Date. If a Series has more than one Class of
Certificates, each such Class may have a separate Interest Funding
Account. Funds on deposit in an Interest Funding Account will be invested
in Eligible Investments. Any earnings (net of losses and investment
expenses) on funds in an Interest Funding Account will be paid to, or at
the direction of, the Transferor except as otherwise specified in any
Supplement. Interest with respect to the Certificates of each Series
offered hereby will accrue and be calculated on the basis described in
the related Prospectus Supplement.
PRINCIPAL
The Certificates of each Series will have a Revolving Period during
which collections of Principal Receivables and certain other amounts
otherwise allocable to the Invested Amount of such Series will, (x) if
such Series is a Principal Sharing Series, be treated as Shared Principal
Collections and will be distributed to, or for the benefit of, the
Certificateholders of other Series in such Group or, if not required for
such purpose, the holders of the Transferor Certificates or deposited
into the Special Funding Account or (y) if such Series is not a Principal
Sharing Series, paid to the holders of the Transferor Certificates or
deposited into the Special Funding Account, as more fully described in
the related Prospectus Supplement. Unless an Early Amortization Period or
Early Accumulation Period commences with respect to a Series, following
the Revolving Period with respect to such Series, such Series will have
either a Controlled Accumulation Period or a Controlled Amortization
Period.
During the Controlled Accumulation Period, if any, with respect to
a Series, collections of Principal Receivables and certain other amounts
allocable to the Certificateholders' Interest of such Series (including
Shared Principal Collections, if any, allocable to such Series) will be
deposited on each Distribution Date in a Principal Funding Account and
used to make principal distributions to the Certificateholders of such
Series or any Class thereof when due. If so specified in the related
Prospectus Supplement, the amount to be deposited in a Principal Funding
Account for any Series offered hereby on any Distribution Date may, but
will not necessarily, be limited to an amount equal to a Controlled
Accumulation Amount specified in such Prospectus Supplement plus any
existing deficit controlled accumulation amount arising from prior
Distribution Dates. If the Prospectus Supplement for a Series so
specifies, the amount to be deposited in the Principal Funding Account on
a Distribution Date may be a variable amount. 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.
Subject to certain conditions including those set forth below, upon
written notice to the Trustee, the Servicer may elect to postpone the
commencement of the Accumulation Period with respect to a Series, and to
extend the length of the Revolving Period of such Series. The Servicer may
make such election only if the Accumulation Period Length (determined as
described below) is less than the number of months specified in the
Prospectus Supplement for such Series. On each Determination Date, until
the Accumulation Period begins, the Servicer will determine the
"Accumulation Period Length," which is the number of months expected to be
required to fully fund the Principal Funding Account no later than the
Scheduled Payment Date for such Series, based on (a) the expected monthly
collections of Principal Receivables expected to be distributable to the
Certificateholders of all Series (unless such Series is not a Principal
Sharing 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 Series (which may exclude certain other Series)
which are not expected to be in their Revolving Periods during the
Accumulation Period of the Series in respect of which the Accumulation
Period Length is being determined. If the Accumulation Period Length is
less than the number of months specified in the Prospectus Supplement for
such Series, the Servicer may, at its option, postpone the commencement of
the Accumulation Period such that the number of months included in the
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 Accumulation Period of a Series based on the Invested
Amounts of certain other Series which are scheduled to be in their
Revolving Periods during the Accumulation Period for such Series and on
increases in the principal payment rate occurring after the Series for such
Series Closing Date. The length of the Accumulation Period for any Series
will not be less than one month. If the Accumulation Period of a Series is
postponed in accordance with the foregoing, and if a Pay Out Event occurs
after the date originally scheduled as the commencement of the Accumulation
Period, it is probable that Certificateholders would receive some of their
principal later than if the Accumulation Period had not been so postponed.
During the Controlled Amortization Period, if any, with respect to
a Series, collections of Principal Receivables and certain other amounts
allocable to the Certificateholders' Interest of such Series (including
Shared Principal Collections, if any, allocable to such Series) will be
used on each Distribution Date to make principal distributions to any
Class of Certificateholders then scheduled to receive such distributions.
If so specified in the related Prospectus Supplement, the amount to be
distributed to Certificateholders of any Series offered hereby on any
Distribution Date may be limited to an amount equal to the Controlled
Amortization Amount specified in such Prospectus Supplement 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.
During the Early Accumulation Period, if any, with respect to a
Series, collections of Principal Receivables and certain other amounts
allocable to the Certificateholders' Interest of such Series (including
Shared Principal Collections, if any, allocated to such Series) will be
deposited on each Distribution Date in a Principal Funding Account and
used to make distributions of principal to the Certificateholders of such
Series or Class on the Expected Final Payment Date. The amount to be
deposited in the Principal Funding Account will not be limited to any
Controlled Deposit Amount.
During the Early Amortization Period with respect to a Series,
collections of Principal Receivables and certain other amounts allocable
to the Certificateholders' Interest of such Series (including Shared
Principal Collections, if any, allocable to such Series) will be
distributed as principal payments to the applicable Certificateholders
monthly on each Distribution Date beginning with the first Special
Payment Date. During the Early Amortization Period with respect to a
Series, distributions of principal to Certificateholders of such Series
will not be subject to any Controlled Deposit Amount or Controlled
Distribution Amount. In addition, upon the commencement of the Early
Amortization Period, any funds on deposit in a Principal Funding Account
with respect to such Series will be paid to the Certificateholders of the
relevant Class or Series on the first Special Payment Date.
Funds on deposit in any Principal Funding Account established with
respect to a Class or Series offered hereby will be invested in Eligible
Investments and may be subject to a guarantee or guaranteed investment
contract or a deposit account or other mechanism specified in the related
Prospectus Supplement intended to assure a minimum rate of return on the
investment of such funds. In order to enhance the likelihood of the
payment in full of the principal amount of a Class of Certificates
offered hereby at the end of a Controlled Accumulation Period or Early
Accumulation Period with respect thereto, such Class may be subject to a
maturity liquidity facility or a deposit account or other similar
mechanism specified in the relevant Prospectus Supplement.
PAY OUT EVENTS AND REINVESTMENT EVENTS
The Revolving Period with respect to a Series will continue through
the date specified in the applicable Prospectus Supplement and the
Controlled Amortization Period or Controlled Accumulation Period will
begin at such time, unless a Pay Out Event or Reinvestment Event occurs.
The Early Amortization Period with respect to such Series will commence
when a Pay Out Event occurs or is deemed to occur and the Early
Accumulation Period will occur when a Reinvestment Event occurs or is
deemed to occur. A "Pay Out Event" may occur with respect to any specific
Series upon the occurrence of any event specified in the related
Prospectus Supplement. Such events may include, but are not required to
include nor are they limited to, (i) certain events of bankruptcy or
insolvency, relating to the Transferor and the Account Owners, (ii) the
Trust becoming subject to regulation as an "investment company" within
the meaning of the Investment Company Act of 1940, as amended, (iii) the
failure by the Transferor to make any payment or deposit required under
the Pooling and Servicing Agreement within a specified period of the date
such payment or deposit is required to be made, (iv) the breach of
certain other covenants, representations or warranties contained in the
Pooling and Servicing Agreement, after any applicable notice and cure
period (and, if so specified in the related Prospectus Supplement, only
to the extent such breach has a material adverse effect on the related
Certificateholders), (v) the failure by the Transferor to make a required
designation of Additional Accounts for the Trust within a specified time
after the date such addition is required to be made, (vi) a reduction in
the Series adjusted Portfolio Yield below the rates, and for the period,
specified in the related Prospectus Supplement and (vii) the occurrence
of a Servicer Default. The Early Amortization Period with respect to a
Series will commence on the day on which a Pay Out Event occurs or is
deemed to occur with respect thereto. If an Early Amortization Period
commences, monthly distributions of principal to the Certificateholders
of such Series will begin on the Distribution Date in the Monthly Period
following the Monthly Period in which such Pay Out Event occurs (such
Distribution Date and each following Distribution Date with respect to
such Series, a "Special Payment Date"). Any amounts on deposit in a
Principal Funding Account or an Interest Funding Account with respect to
such Series at such time will be distributed on such first Special
Payment Date to the Certificateholders of such Series. If, because of the
occurrence of a Pay Out Event, the Early Amortization Period begins
earlier than the scheduled commencement of a Controlled Amortization
Period or prior to an Expected Final Payment Date, Certificateholders
will begin receiving distributions of principal earlier than they
otherwise would have and such distributions will not be subject to the
Controlled Deposit Amount or the Controlled Distribution Amount. As a
result, the average life of the Certificates may be reduced or increased.
If a Series has more than one Class of Certificates, each Class may have
different Pay Out Events which, in the case of any Series of Certificates
offered hereby, will be described in the related Prospectus Supplement.
A particular Series may have no Pay Out Events or only limited Pay
Out Events, but may have in lieu thereof specified events ("Reinvestment
Events") that end the reinvestment of the Trust in new Receivables and
apply available collections of Principal Receivables to the purchase of
Eligible Investments. A Reinvestment Event may include all or some of the
events that constitute Pay Out Events for other Series. The Early
Accumulation Period with respect to a Series will commence on the day on
which a Reinvestment Event occurs or is deemed to occur with respect
thereto. If a Series has more than one Class of Certificates, each Class
may have different Reinvestment Events (or may have only Pay Out Events)
which, in the case of any Series of Certificates offered hereby, will be
described in the related Prospectus Supplement.
In addition to the consequences of a Pay Out Event or Reinvestment
Event discussed above, if an Insolvency Event shall occur, immediately on
the day of such event the Transferor will cease to transfer Principal
Receivables to the Trust and promptly give notice to the Trustee of such
event. Under the terms of the Pooling and Servicing Agreement, as soon as
possible but in any event within 15 days, the Trustee will publish a
notice of the occurrence of the Insolvency Event stating that the Trustee
intends to sell, dispose of, or otherwise liquidate the Receivables in a
commercially reasonable manner unless instructions otherwise are received
within a specified period from Certificateholders holding Certificates
evidencing more than 50% of the Invested Amount of each Series of
Certificates issued and outstanding (or, with respect to any Series with
two or more Classes, 50% of the Invested Amount of each Class) and each
Enhancement Invested Amount and possibly the vote of other persons
specified in the Supplement for a Series and, for a Series offered
hereby, the related Prospectus Supplement to the effect that such
Certificateholders disapprove of the liquidation of Receivables and wish
to continue having Principal Receivables transferred to the Trust as
before such Insolvency Event. The Trustee will sell, dispose of, or
otherwise liquidate the Receivables in a commercially reasonable manner
and on commercially reasonable terms. The proceeds from the sale,
disposition or liquidation of the Receivables will be treated as
collections on the Receivables and applied as provided above and in each
Prospectus Supplement.
If the only Pay Out Event or Reinvestment Event to occur with
respect to any Series is the bankruptcy of the Transferor, the Trustee
may not be permitted to suspend transfers of Receivables to the Trust,
and the instructions to sell the Receivables may not be given effect.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
The Servicer's compensation for its servicing activities and
reimbursement for its expenses is a monthly servicing fee (the "Servicing
Fee"). The Servicing Fee will be allocated among the Transferor's
Interest (the "Transferor Servicing Fee"), and Certificateholders of each
Series. The portion of the Servicing Fee allocable to each Series of
Certificates on any Distribution Date (the "Monthly Servicing Fee") will
generally be equal to one-twelfth of the product of (a) the applicable
servicing fee percentage with respect to such Series and (b) the Invested
Amount (as it may be adjusted in accordance with the related Supplement)
of such Series with respect to the related Monthly Period. A portion of
the Monthly Servicing Fee with respect to a particular Series may be
payable from Interchange allocated to such Series as specified in the
related Supplement and, for a Series offered hereby, the related
Prospectus Supplement. For any Monthly Period, the portion of the Monthly
Servicing Fee with respect to any Series will be an amount equal to the
portion of collections of Finance Charge Receivables allocated to the
Investor Interest with respect to such Monthly Period that is
attributable to Interchange (the "Servicer Interchange"); provided,
however, that Servicer Interchange for a Monthly Period may not exceed
one-twelfth of the product of (i) the Series Adjusted Investor Amount, as
of the last day of such Monthly Period and (ii) __%. In the case of any
insufficiency of Servicer Interchange with respect to any Monthly Period,
a portion of the Monthly 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 Certificateholders be liable
for the share of the Servicing Fee to be paid out of Servicer
Interchange.
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,
paying agent, transfer agent and registrar and independent accountants
and other fees which are not expressly stated in the Pooling and
Servicing Agreement to be payable by the Trust or the Transferor other
than federal, state and local income and franchise taxes, if any, of the
Trust.
DESCRIPTION OF THE POOLING AND SERVICING AGREEMENT
CONVEYANCE OF RECEIVABLES
On the initial Series Closing Date, BKB CT will sell and assign to
the Transferor for assignment to the Trust all of its interest in all
Receivables in the Accounts existing as of the Initial Cut-Off Date. BKB
CT will then sell and assign to the Bank all of its right, title and
interest in all of such Accounts. On the initial Series Closing Date, the
Bank will sell and assign to the Transferor for assignment to the Trust
all of its interests in all Receivables then existing and thereafter
created under the Accounts, all Recoveries and Interchange allocable to
the Trust, and the proceeds of all of the foregoing. The Account Owners
may also sell and assign from time to time to the Transferor for
conveyance to the Trust Receivables in designated Additional Accounts,
and the Transferor may from time to time sell and assign to the Trust its
interest in Participation Interests, all Recoveries and Interchange
allocable to the Trust and the proceeds of all of the foregoing.
On each Series Closing Date, the Trustee will authenticate and
deliver one or more certificates representing the Series or Class of
Certificates, in each case against payment to the Transferor of the net
proceeds of the sale of the Certificates. In the case of the initial
Series Closing Date, the Trustee also delivered to the Transferor the
Transferor Certificate, representing the Transferor's Interest.
In connection with the transfer of the Receivables to the Trust,
each Account Owner will indicate in its computer records that the
Receivables have been conveyed from such Account Owner to the Transferor
and the Transferor will indicate in its records that the Receivables have
been conveyed from the Transferor to the Trust. In addition, the
Transferor will provide or cause to be provided to the Trustee a computer
file or a microfiche list containing a true and complete list showing for
each Account, as of the applicable date of designation, (i) its account
number, (ii) the aggregate amount outstanding in such Account and (iii)
except in the case of New Accounts, the aggregate amount of Principal
Receivables in such Account. The Transferor will retain and will not
deliver to the Trustee any other records or agreements relating to the
Accounts or the Receivables. Except as set forth above, the records and
agreements relating to the Accounts and the Receivables will not be
segregated from those relating to other credit card accounts and
receivables, and the physical documentation relating to the Accounts or
Receivables will not be stamped or marked to reflect the transfer of
Receivables to the Transferor or the Trust. The Transferor will file UCC
financing statements with respect to the transfer of the Receivables from
the Transferor to the Trust meeting the requirements of applicable state
law. See "Risk Factors" and "Certain Legal Aspects of the Receivables."
As described below under "-- Additions of Accounts or Participation
Interests," the Transferor has the right (subject to certain limitations
and conditions), and in some circumstances is obligated, to require each
Account Owner to designate from time to time Additional Accounts to be
included as Accounts and to convey to the Transferor (for conveyance by
the Transferor to the Trust) all Receivables in such Additional Accounts,
whether such Receivables are then existing or thereafter created. Each
such Additional Account must be an Eligible Account. In respect of any
designation of Additional Accounts, the Transferor will follow the
procedures set forth in the preceding paragraph, except the list will
show information for such Additional Accounts as of the date such
Additional Accounts are identified and selected. Aggregate Addition
Accounts will be selected by the Transferor in a manner which they
reasonably believe will not be materially adverse to the
Certificateholders. The Transferor has the right (subject to certain
conditions described under "-- Additions of Accounts or Participation
Interests") to convey Participation Interests to the Trust. In addition,
theTransferor may (under certain circumstances and subject to certain
limitations and conditions) remove the Participation Interests and the
Receivables in certain Accounts as described under "-- Removal of
Accounts."
REPRESENTATIONS AND WARRANTIES
The Transferor makes representations and warranties to the Trust in
the Pooling and Servicing Agreement relating to the Accounts and the
Receivables as of each Series Closing Date (or as of the related addition
date with respect to Additional Accounts) to the effect, among other
things, that as of each applicable date of designation, (a) each Account
was an Eligible Account, (b) each of the Receivables then existing in the
Initial Accounts or in the Additional Accounts, as applicable, is an
Eligible Receivable and (c) thereafter, on the date of creation of any
new Receivable, such Receivable is an Eligible Receivable. If the
Transferor breaches any representation and warranty described in this
paragraph in any material respect and such breach remains uncured for 60
days, or such longer period as may be agreed to by the Trustee and the
Servicer, after the earlier to occur of the discovery of such breach by
the Transferor or receipt of written notice of such breach by the
Transferor and such breach has a material adverse effect on the
Certificateholders' Interest in such Receivable, all Receivables with
respect to the Account affected ("Ineligible Receivables") will be
reassigned to the Transferor on the terms and conditions set forth below
and such Account shall no longer be included as an Account. If there is
an Additional Transferor, the obligation to accept reassignment of the
Receivables will be several and not joint with respect to the Receivables
transferred by each Transferor to the Trust.
"Eligible Receivable" means each receivable, or interest therein as
contemplated by each Purchase Agreement, (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 related Account
Owner at the time of the creation of such Receivable and which was
created pursuant to a credit card agreement which complies in all
material respects with all requirements of law applicable to the related
Account Owner at the time of the creation of such receivable and the
requirements of law applicable to any subsequent Account Owner with
respect to such Receivable; (c) with respect to which all material
consents, licenses, approvals or authorizations of, or registrations or
declarations with, any governmental authority required to be obtained,
effected or given in connection with the creation of such Receivable or
the execution, delivery, creation and performance by the applicable
Account Owner of the related credit card agreements pursuant to which
such Receivable was created have been duly obtained or given and are in
full force and effect, (d) as to which at the time of its transfer to the
Trust, the Transferor or the Trust will have good and marketable title,
free and clear of all liens, encumbrances, charges and security interests
(other than any lien for municipal or other local taxes if such taxes are
not then due and payable or if the Transferor is then contesting the
validity thereof in good faith by appropriate proceedings and has set
aside on its books adequate reserves with respect thereto); (e) which is
the legal, valid and binding payment obligation of the related cardmember
enforceable against such cardmember in accordance with its terms, subject
to certain bankruptcy or insolvency related exceptions, (f) which is not
at the time of its transfer to the Trust subject to any right of
rescission, setoff, counterclaim or defense (including the defense of
usury), other than certain bankruptcy and insolvency related defenses,
and (g) which constitutes either an "account" or a "general intangible"
under the applicable UCC as then in effect.
An Ineligible Receivable will be reassigned to the Transferor on or
before the end of the Monthly Period in which such reassignment
obligation arises by the Transferor directing the Servicer to deduct the
portion of such Ineligible Receivable which is a Principal Receivable
from the aggregate amount of the Principal Receivables used to calculate
the Transferor Amount. In the event that the exclusion of the principal
portion of an Ineligible Receivable from the calculation of the
Transferor Amount would cause the Transferor Amount to be less than the
Required Transferor Amount, on the Distribution Date following the
Monthly Period in which such reassignment obligation arises the
Transferor will make a deposit into the Special Funding Account in
immediately available funds in an amount equal to the amount by which the
Transferor Amount would be reduced below the Required Transferor Amount.
The reassignment of any Ineligible Receivable to the Transferor, and the
obligation of the Transferor to make any deposits into the Special
Funding Account as described in this paragraph, is the sole remedy
respecting any breach of the representations and warranties described in
the preceding paragraph with respect to such Receivable available to the
Certificateholders or the Trustee on behalf of Certificateholders. Each
of the Bank and [New Bank] will agree, in its respective Purchase
Agreement, to repurchase from the Transferor any Ineligible Receivables
which shall arise in Accounts owned by the Bank or [New Bank], as
applicable, and which shall be reassigned to the Transferor and to
provide the Transferor any amounts necessary to enable the Transferor to
make the deposit referred to above. Such obligations of the Bank will
include an obligation to accept assignment of any Ineligible Receivables
sold by BKB CT to the Transferor on the initial Series Closing Date which
arose in the Accounts sold by BKB CT to the Bank. The term "Transferor
Amount" means at any time of determination, an amount equal to the sum of
(i) total aggregate amount of Principal Receivables in the Trust and (ii)
the amount on deposit in the Special Funding Account at such time minus
the aggregate Invested Amounts for all outstanding Series at such time.
The Transferor also makes representations and warranties to the
Trust to the effect, among other things, that as of each Series Closing
Date it is a corporation validly existing under the laws of the State of
Delaware, it has the authority to consummate the transactions
contemplated by the Pooling and Servicing Agreement and each Supplement
and will further represent to the Trust on each Series Closing Date and,
with respect to the Additional Accounts, as of each addition date (a) the
Pooling and Servicing Agreement and each Supplement constitutes a valid,
binding and enforceable agreement of the Transferor and (b) the Pooling
and Servicing Agreement and each Supplement constitutes either a valid
sale, transfer and assignment to the Trust of all right, title and
interest of the Transferor in the Receivables, whether then existing or
thereafter created and the proceeds thereof (including proceeds in any of
the accounts established for the benefit of the Certificateholders) and
in Recoveries and Interchange allocable to the Trust or the grant of a
first priority perfected security interest under the applicable UCC in
such Receivables and the proceeds thereof (including proceeds in any of
the accounts established for the benefit of the Certificateholders) and
in Recoveries and Interchange allocable to the Trust, which is effective
as to each Receivable then existing on such date. In the event of a
material breach of any of the representations and warranties described in
this paragraph that has a material adverse effect on the
Certificateholders' Interest in the Receivables or the availability of
the proceeds thereof to the Trust (which determination will be made
without regard to whether funds are then available pursuant to any Series
Enhancement), either the Trustee or Certificateholders holding
Certificates evidencing not less than 50% of the aggregate unpaid
principal amount of all outstanding Certificates, by written notice to
the Transferor and the Servicer (and to the Trustee if given by the
Certificateholders), may direct the Transferor to accept the reassignment
of the Receivables in the Trust within 60 days of such notice, or within
such longer period specified in such notice. The Transferor will be
obligated to accept the reassignment of such Receivables on the
Distribution Date following the Monthly Period in which such reassignment
obligation arises. Such reassignment will not be required to be made,
however, if at the end of such applicable period, the representations and
warranties shall then be true and correct in all material respects and
any material adverse effect caused by such breach shall have been cured.
The price for such reassignment will be an amount equal to the sum of the
amounts specified therefor with respect to each Series in the related
Supplement. The payment of such reassignment price in immediately
available funds, will be considered a payment in full of the
Certificateholders' Interest and such funds will be distributed upon
presentation and surrender of the Certificates. If the Trustee or
Certificateholders give a notice as provided above, 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
Certificateholders or the Trustee on behalf of Certificateholders. Under
their respective Purchase Agreement, the Bank and [New Bank] will
repurchase from the Transferor Receivables purchased by the Transferor in
accordance with this paragraph if the Bank or [New Bank], as applicable,
breaches certain its similar representations and warranties under their
respective Purchase Agreement. See "Description of the Purchase Agreement
- -- Purchase Agreement -- Representations and Warranties."
It is not 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 purpose of establishing the presence
or absence of defects, compliance with each of the Account Owners' and
the Transferor's representations and warranties or for any other purpose.
In addition, it is not anticipated or required that the Trustee will make
any initial or periodic general examination of the Servicer for the
purpose of establishing the compliance by the Servicer with its
representations or warranties or the performance by the Servicer of its
obligations under the Pooling and Servicing Agreement, any Supplement or
for any other purpose. The Servicer, however, will deliver to the Trustee
on or before [March 31] of each calendar year an opinion of counsel with
respect to the validity of the interest of the Trust in and to the
Receivables and certain other components of the Trust.
THE TRANSFEROR CERTIFICATES
The Pooling and Servicing Agreement provides that the Transferor
may exchange a portion of the Transferor Certificate for one or more
additional certificates (each, a "Supplemental Certificate") for transfer
or assignment to a person designated by the Transferor upon the execution
and delivery of a supplement to the Pooling and Servicing Agreement
(which supplement shall be subject to the amendment section of the
Pooling and Servicing Agreement to the extent that it amends any of the
terms of the Pooling and Servicing Agreement; see "-- Amendments");
provided, that (a) the Rating Agency Condition is satisfied for such
exchange, (b) such exchange will not result in any Adverse Effect and the
Transferor shall have delivered to the Trustee an officer's certificate
to the effect that the Transferor reasonably believes that such exchange
will not, based on the facts known to such officer at the time of such
certification, have an Adverse Effect, (c) the Transferor shall have
delivered to the Trustee a Tax Opinion (as defined herein) with respect
to such exchange and (d) the aggregate amount of Principal Receivables in
the Trust as of the date of such exchange will be greater than the
Required Minimum Principal Balance as of such date. Any transfer or
assignment of a Supplemental Certificate is subject to the condition set
forth in clause (c) above.
ADDITIONS OF ACCOUNTS OR PARTICIPATION INTERESTS
The Transferor has the right under the Purchase Agreements to
require each Account Owner to designate from time to time Additional
Accounts to be included as Accounts. Each Account Owner will convey to
the Transferor, which in turn will convey to the Trust, its interest in
all Receivables arising from the Additional Accounts conveyed by such
Account Owner, whether such Receivables are then existing or thereafter
created, subject to the following conditions, among others: (i) each such
Additional Account must be an Eligible Account; and (ii) except for the
addition of New Accounts (a) the selection of the Aggregate Addition
Accounts is done in a manner which it reasonably believes will not result
in an Adverse Effect; and (b) except for the addition of New Accounts,
the Rating Agency Condition shall have been satisfied. "Adverse Effect"
means any action that will result in the occurrence of a Pay Out Event or
Reinvestment Event or materially adversely affect the amount or timing of
distributions to the Certificateholders of any Series or Class. The
Transferor will be obligated to require each Account Owner to designate
Additional Accounts (to the extent available) if (a) the aggregate amount
of Principal Receivables in the Trust on the last business day of any
calendar month is less than the Required Minimum Principal Balance as of
such last day or (b) the Transferor Amount on the last business day of
any calendar month is less than the Required Transferor Amount as of such
last day. In lieu of adding Additional Accounts, the Transferor may
convey Participation Interests to the Trust. "Required Minimum Principal
Balance" as of any date of determination means the sum of the Series
Invested Amounts for all outstanding Series minus the amount on deposit
in the Special Funding Account. The "Series Invested Amount" for a Series
will be the amount set forth in the related Supplement and, for each
Series offered hereby, in the related Prospectus Supplement for such
Series, but will generally equal the initial Invested Amount for a
Series.
Each Additional Account must be an Eligible Account at the time of
its designation. However, since Additional Accounts or Participation
Interests created after the Initial Cut-Off Date may not have been a part
of the portfolio of accounts of the Account Owners as of the Initial
Cut-Off Date, they may not be of the same credit quality as the Initial
Accounts because such Additional Accounts or Participation Interests may
have been originated at a later date using credit criteria different from
those which were applied to the Initial Accounts or may have been
acquired from another credit card issuer or entity who had different
credit criteria. Consequently, the performance of such Additional
Accounts or Participation Interests may be better or worse than the
performance of the Initial Accounts.
REMOVAL OF ACCOUNTS
Subject to the conditions set forth in the next succeeding
sentence, the Transferor may on any day of any Monthly Period, but shall
not be obligated to, acquire all Receivables and proceeds thereof with
respect to Removed Accounts and Participation Interests. The Transferor
is permitted to designate and require reassignment to it of the
Receivables from Removed Accounts and Participation Interests only upon
satisfaction of the following conditions: (i) the Transferor shall have
delivered to the Trustee a computer file or microfiche list containing a
true and complete list of all Removed Accounts, such Accounts to be
identified by, among other things, account number and their aggregate
amount of Principal Receivables; (ii) the Transferor shall have delivered
an officer's certificate to the Trustee to the effect that (a) either (x)
no selection procedure reasonably believed by the Transferor to be
materially adverse to the interests of the Certificateholders or the
Transferor was utilized in removing the Removed Accounts from among any
pool of Accounts of a similar type or (y) a random selection procedure
was used by the Transferor in selecting the accounts to be removed and
(b) in the reasonable belief of Transferor such removal will not have an
Adverse Effect; and (iii) the Transferor shall have delivered prior
written notice of the removal to each Rating Agency, the Trustee and the
Servicer and prior to the date on which such Receivables are to be
removed the Rating Agency Condition shall have been satisfied with
respect to such removal. The foregoing conditions may be amended with the
consent of each Rating Agency but without the consent of
Certificateholders if such amendment is required to comply with any
accounting or regulatory restrictions to which the Trust, the Transferor
or any Account Owner may become subject.
DISCOUNT OPTION
The Pooling and Servicing Agreement provides that the Transferor
may at any time and from time to time, but without any obligation to do
so, designate a specified fixed or variable percentage based on a formula
(the "Discount Percentage") of the amount of Receivables arising in all
or any specified portion of the Accounts on and after the date such
designation becomes effective that otherwise would have been treated as
Principal Receivables to be treated as Finance Charge Receivables (the
"Discount Option Receivables"). Although there can be no assurance that
the Transferor will do so, such designation may occur because the
Transferor determines that the exercise of the discount option is needed
to provide a sufficient yield on the Receivables to cover interest and
other amounts due and payable from collections of Finance Charge
Receivables or to avoid the occurrence of a Pay Out Event or Reinvestment
Event relating to the reduction of the average yield on the portfolio of
Accounts in the Trust, if the related Supplement provides for such a Pay
Out Event or Reinvestment Event. After any such designation, pursuant to
the Pooling and Servicing Agreement, the Transferor may, without notice
to or consent of the Certificateholders, from time to time reduce or
withdraw the Discount Percentage; provided, however, that such reduction
or withdrawal will occur only if the Transferor delivers to the Trustee
and, in connection with certain Series, providers of Series Enhancement a
certificate of an authorized representative to the effect that, in the
reasonable belief of the Transferor, such reduction or withdrawal would
not have adverse regulatory or other accounting implications for the
Transferor. The Transferor must provide 30 days prior written notice to
the Servicer, the Trustee, each Rating Agency and, in connection with
certain Series, providers of Series Enhancement of any such designation
or reduction or withdrawal, and such designation or reduction or
withdrawal will become effective on the date specified therein only if
(a) the Transferor has delivered to the Trustee and any such providers of
Series Enhancement a certificate of an authorized representative to the
effect that, based on the facts known to such representative at the time,
the Transferor reasonably believes that such designation or reduction or
withdrawal will not at the time of its occurrence cause a Pay Out Event
or Reinvestment Event or an event that, with notice or the lapse of time
or both, would constitute a Pay Out Event or Reinvestment Event, to occur
with respect to any Series and (b) the Transferor has received written
notice from each Rating Agency that such designation or reduction or
withdrawal will satisfy the Rating Agency Condition. On the Date of
Processing of any collections on or after the date the exercise of the
discount option takes effect, the product of (i) a fraction the numerator
of which is the amount of Discount Option Receivables and the denominator
of which is the amount of all of the Principal Receivables (including
Discount Option Receivables) at the end of the prior Monthly Period and
(ii) 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. Any such designation would result in
an increase in the amount of collections of Finance Charge Receivables, a
reduction in the balance of Principal Receivables and a reduction in the
Transferor Amount.
YIELD SUPPLEMENT ACCOUNT
[If so specified in the Prospectus Supplement for any Series] the
Servicer will establish and maintain an account in the name of the
Trustee, on behalf of the Trust, with an Eligible Institution for the
benefit of the Certificateholders of [such] [each] Series (the "[Series]
Yield Supplement Account"). Amounts on deposit in the [Series] Yield
Supplement Account (together with investment earnings thereon) will be
released and deposited into the Collection Account in the amounts and at
the times specified in the Prospectus Supplement for [such] [each]
Series. Each such deposit into the Collection Account will be treated as
collections of Finance Charge Receivables allocable to the Certificates
[of the related Series]. On the initial Series Closing Date, $__________
will be deposited into the Yield Supplement Account from the proceeds of
the issuance of the initial Series.
PREMIUM OPTION
The Pooling and Servicing Agreement provides that the Transferor
may at any time and from time to time, but without any obligation to do
so, designate a specified fixed or variable percentage based on a formula
as specified in the related Prospectus Supplement (the "Premium
Percentage") of the amount of Receivables arising in all or any specified
portion of the Accounts on and after the date such designation becomes
effective that otherwise would have been treated as Finance Charge
Receivables to be treated as Principal Receivables (the "Premium Option
Receivables"). After any such designation, pursuant to the Pooling and
Servicing Agreement, the Transferor may, without notice to or consent of
the Certificateholders, from time to time reduce or withdraw the Premium
Percentage; provided, however, that such reduction or withdrawal will
occur only if the Transferor delivers to the Trustee and, in connection
with certain Series, providers of Series Enhancement a certificate of an
authorized representative to the effect that, in the reasonable belief of
the Transferor, such reduction or withdrawal would not have adverse
regulatory or other accounting implications for the Transferor. The
Transferor must provide 30 days prior written notice to the Servicer, the
Trustee, each Rating Agency and any such provider of Series Enhancement
of any such designation or reduction or withdrawal, and such designation
or reduction or withdrawal will become effective on the date specified
therein only if (a) the Transferor has delivered to the Trustee and any
such providers of Series Enhancement a certificate of an authorized
representative to the effect that, based on the facts known to such
representative at the time, the Transferor reasonably believes that such
designation or reduction or withdrawal will not at the time of its
occurrence cause a Pay Out Event or Reinvestment Event or an event that,
with notice or the lapse of time or both, would constitute a Pay Out
Event or Reinvestment Event, to occur with respect to any Series and (b)
the Transferor has received written notice from each Rating Agency that
such designation or reduction or withdrawal will satisfy the Rating
Agency Condition. On the Date of Processing of any collections on or
after the date the exercise of the premium option takes effect, the
product of (i) a fraction the numerator of which is the amount of Premium
Option Receivables and the denominator of which is the amount of all of
the Finance Charge Receivables (including Premium Option Receivables) at
the end of the prior Monthly Period and (ii) collections of Receivables
that arise in the Accounts on such day on or after the date such option
is exercised that otherwise would be Finance Charge Receivables will be
deemed collections of Principal Receivables and will be applied
accordingly, unless otherwise provided in the related Prospectus
Supplement. Any such designation would result in an increase in the
amount of collections of Principal Receivables and a lower portfolio
yield with respect to collections of Finance Charge Receivables than
would otherwise occur.
INDEMNIFICATION
The Pooling and Servicing Agreement provides that the Servicer will
indemnify the Trust and the Trustee from and against any loss, liability,
expense, damage or injury suffered or sustained arising out of certain of
the Servicer's actions or omissions with respect to the Trust pursuant to
the Pooling and Servicing Agreement.
Under the Pooling and Servicing Agreement, CCRFC, in its capacity
as a Transferor, has agreed to be liable directly to an injured party for
the entire amount of any liabilities of the Trust (other than those
incurred by a Certificateholder in the capacity of an investor in the
Certificates of any Series) arising out of or based on the arrangement
created by the Pooling and Servicing Agreement or the actions of the
Servicer taken pursuant thereto as though the Pooling and Servicing
Agreement created a partnership under the New York Uniform Partnership
Act in which the Transferor was a general partner.
Except as provided in the preceding two paragraphs, the Pooling and
Servicing Agreement provides 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 Trust, the Trustee, the
Certificateholders, any Credit Enhancer or any other person for any
action taken, or for refraining from taking any action, in good faith
pursuant to the Pooling and Servicing Agreement. However, neither the
Transferor nor the Servicer 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 their duties or by reason of reckless disregard of
their obligations and duties thereunder.
In addition, the Pooling and Servicing Agreement provides 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 Pooling and Servicing Agreement. The Servicer
may, in its sole discretion, undertake any such legal action which it may
deem necessary or desirable for the benefit of Certificateholders with
respect to the Pooling and Servicing Agreement and the rights and duties
of the parties thereto and the interests of the Certificateholders
thereunder.
COLLECTION AND OTHER SERVICING PROCEDURES
Pursuant to the Pooling and Servicing Agreement, the Servicer is
responsible for servicing, collecting, enforcing and administering the
Receivables in accordance with customary and usual procedures for
servicing credit card receivables, but in any event at least comparable
with the policies and procedures and the degree of skill and care applied
or exercised with respect to any other credit card receivables it, or its
affiliates, service.
Pursuant to the Purchase Agreements, except as otherwise required
by any requirement of law or as is deemed by the applicable Account Owner
(or any successor to such Account Owner under such agreement) to be
necessary in order for it to maintain its credit card business or a
program operated by such credit card business on a competitive basis
based on a good faith assessment by it of the nature of the competition
in the credit card business or such program, an Account Owner will not
take any action that will have the effect of reducing the Portfolio Yield
to a level that could reasonably be expected to cause any Series to
experience a Pay Out Event or Reinvestment Event based on the
insufficiency of the Series adjusted Portfolio Yield or take any action
that would have the effect of reducing the Portfolio Yield to less than
the highest Average Rate for any Group. The related Account Owner also
covenants that unless required by law and except as provided above, such
Account Owner will take no action with respect to the applicable credit
card agreements or the applicable credit card guidelines that, at the
time of such action, such Account Owner reasonably believes will have a
material adverse effect on CCRFC or the Certificateholders.
Servicing activities to be performed by the Servicer include
collecting and recording payments, communicating with cardmembers,
investigating payment delinquencies, evaluating the increase of credit
limits and the issuance of credit cards, providing billing and tax
records to cardmembers and maintaining internal records with respect to
each Account. Managerial and custodial services performed by the Servicer
on behalf of the Trust include providing assistance in any inspections of
the documents and records relating to the Accounts and Receivables by the
Trustee pursuant to the Pooling and Servicing Agreement, maintaining the
agreements, documents and files relating to the Accounts and Receivables
as custodian for the Trust and providing related data processing and
reporting services for Certificateholders and on behalf of the Trustee.
The Pooling and Servicing Agreement provides that the Servicer may
delegate its duties under that agreement to any entity that agrees to
conduct such duties in accordance with the Pooling and Servicing
Agreement and the credit card guidelines. Notwithstanding any such
delegation the Servicer will continue to be liable for all of its
obligations under the Pooling and Servicing Agreement.
NEW ISSUANCES
The Pooling and Servicing Agreement provides that, pursuant to any
one or more Supplements, the Transferor may direct the Trustee to
authenticate from time to time new Series subject to the conditions
described below (each such issuance, a "New Issuance"). Each New Issuance
will have the effect of decreasing the Transferor Amount to the extent of
the initial Invested Amount of such new Series. Under the Pooling and
Servicing Agreement, the Transferor may designate, with respect to any
newly issued Series: (a) its name or designation; (b) its initial
principal amount (or method for calculating such amount) and its invested
amount in the Trust (the "Invested Amount"), which is generally based on
the aggregate amount of Principal Receivables in the Trust allocated to
such Series, and its Series Invested Amount; (c) its certificate rate (or
formula for the determination thereof); (d) the interest payment date or
dates (each, an "Interest Payment Date") and the date or dates from which
interest shall accrue; (e) the method for allocating collections to
Certificateholders of such Series; (f) any bank accounts to be used by
such Series and the terms governing the operation of any such bank
accounts; (g) the percentage used to calculate the Monthly Servicing
Fees; (h) the provider and terms of any form of Series Enhancement with
respect thereto; (i) the terms on which the Certificates of such Series
may be repurchased; (j) the Series Termination Date; (k) the number of
Classes of Certificates of such Series, and if such Series consists of
more than one Class, the rights and priorities of each such Class; (l)
the extent to which the Certificates of such Series will be issuable in
temporary or permanent global form (and, in such case, the depositary for
such global certificate or certificates, the terms and conditions, if
any, upon which such global certificate or certificates may be exchanged,
in whole or in part, for definitive certificates, and the manner in which
any interest payable on such global certificate or certificates will be
paid); (m) whether the Certificates of such Series may be issued in
bearer form and any limitations imposed thereon; (n) the priority of such
Series with respect to any other Series; (o) the Group, if any, in which
such Series will be included; and (p) any other relevant terms (all such
terms, the "Principal Terms" of such Series). None of the Transferor, the
Servicer, the Trustee or the Trust is required or intends to obtain the
consent of any Certificateholder of any
outstanding Series to issue any additional Series. The Transferor
may offer any Series to the public under a Prospectus Supplement or other
Disclosure Document in transactions either registered under the
Securities Act or exempt from registration thereunder, directly, through
one or more underwriters or placement agents, in fixed-price offerings or
in negotiated transactions or otherwise. See "Plan of Distribution." Any
such Series may be issued in fully registered or book-entry form in
minimum denominations determined by the Transferor. The Transferor
intends to offer, from time to time, additional Series.
The Pooling and Servicing Agreement provides that the Transferor
may designate Principal Terms such that each Series has a Controlled
Accumulation Period or a Controlled Amortization Period that may have a
different length and begin on a different date than such periods for any
other Series. Further, one or more Series may be in their Controlled
Accumulation Period or Controlled Amortization Period while other Series
are not. Moreover, each Series may have the benefits of Series
Enhancement issued by enhancement providers different from the providers
of Series Enhancement with respect to any other Series. Under the Pooling
and Servicing Agreement, the Trustee shall hold any such Series
Enhancement only on behalf of the Certificateholders of the Series to
which such Series Enhancement relates. With respect to each such Series
Enhancement, the Transferor may deliver a different form of Series
Enhancement agreement. The Transferor also has the option under the
Pooling and Servicing Agreement to vary among Series the terms upon which
a Series may be repurchased by the Transferor. There is no limit to the
number of New Issuances the Transferor may cause under the Pooling and
Servicing Agreement. The Trust will terminate only as provided in the
Pooling and Servicing Agreement. There can be no assurance that the terms
of any Series might not have an impact on the timing and amount of
payments received by a Certificateholder of another Series.
Under the Pooling and Servicing Agreement and pursuant to a
Supplement, a New Issuance may only occur upon the satisfaction of
certain conditions provided in the Pooling and Servicing Agreement. The
obligation of the Trustee to authenticate the Certificates of such new
Series and to execute and deliver the related Supplement is subject to
the satisfaction of the following conditions: (a) on or before the fifth
day immediately preceding the date upon which the New Issuance is to
occur, the Transferor shall have given the Trustee, the Servicer and each
Rating Agency written notice of such New Issuance and the date upon which
the New Issuance is to occur; (b) the Transferor shall have delivered to
the Trustee the related Supplement, in form satisfactory to the Trustee,
executed by each party to the Pooling and Servicing Agreement other than
the Trustee; (c) the Transferor shall have delivered to the Trustee any
related Series Enhancement agreement executed by each of the parties to
such agreement; (d) the Trustee shall have received confirmation from
each Rating Agency that such New Issuance will satisfy the Rating Agency
Condition; (e) the Transferor shall have delivered to the Trustee and
certain providers of Series Enhancement a certificate of an authorized
representative, dated the date upon which the New Issuance is to occur,
to the effect that the Transferor reasonably believes that such issuance
will not, based on the facts known to such representative at the time of
such certification, have an Adverse Effect; (f) the Transferor shall have
delivered to the Trustee, each Rating Agency and certain providers of
Series Enhancement an opinion of counsel acceptable to the Trustee that
for federal income tax purposes: (i) following such New Issuance the
Trust will not be deemed to be an association (or publicly traded
partnership) taxable as a corporation; (ii) such New Issuance 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; (iii) such New Issuance will not cause or constitute
an event in which gain or loss would be recognized by any
Certificateholders; and (iv) except as is otherwise provided in a
Supplement with respect to any Series or Class thereof, the Certificates
of such Series or the specified Classes thereof will be properly
characterized as debt (an opinion of counsel to the effect referred to in
clauses (i), (ii) (iii) with respect to any action is referred to herein
as a "Tax Opinion"); (g) the aggregate amount of Principal Receivables
plus the principal amount of any Participation Interest shall be greater
than the Required Minimum Principal Balance as of the date upon which the
New Issuance is to occur after giving effect to such issuance; and any
other conditions specified in any Supplement. Upon satisfaction of the
above conditions, the Trustee shall execute the Supplement and issue to
the Transferor the Certificates of such new Series for execution and
redelivery to the Trustee for authentication.
COLLECTION ACCOUNT
The Servicer has established and maintains, or has caused to be
established and maintains, for the benefit of the Certificateholders in
the name of the Trustee, on behalf of the Trust, an account (the
"Collection Account") with an Eligible Institution. "Eligible
Institution" means any depository institution (which may be the Trustee)
organized under the laws of the United States or any one of the states
thereof, which at all times has a certificate of deposit rating
acceptable to each Rating Agency or a long-term unsecured debt rating
acceptable to each Rating Agency, except that no such rating will be
required of an institution which maintains a trust fund in a fully
segregated trust account with the corporate trust department of such
institution as long as such institution maintains the credit rating of
the Rating Agency in one of its generic credit rating categories which
signifies investment grade and is a member of the FDIC. Notwithstanding
the preceding sentence, any institution the appointment of which
satisfies the Rating Agency Condition will be an Eligible Institution.
Funds in the Collection Account generally will be invested in (i)
obligations issued or fully guaranteed by the United States of America or
any instrumentality or agency thereof when such obligations are backed by
the full faith and credit of the United States of America, (ii) demand
deposits, time deposits or certificates of deposit of depository
institutions or trust companies incorporated under the laws of the United
States of America or any state thereof and subject to supervision and
examination by federal or state banking or depository institution
authorities; provided that at the time of the Trust's investment or
contractual commitment to invest therein, the short-term debt rating of
such depository institution or trust company shall be in the highest
rating category of the applicable Rating Agency, (iii) commercial paper
or other short-term obligations having, at the time of the Trust's
investment or a contractual commitment to invest, a rating in the highest
rating category of the applicable Rating Agency, (iv) demand deposits,
time deposits or certificates of deposit which are fully insured by the
FDIC having, at the time of the Trust's investment therein, a rating in
the highest rating category of the applicable Rating Agency, (v) bankers'
acceptances issued by any depository institution or trust company
described in (ii) above, (vi) money market funds having, at the time of
the Trust's investment therein, a rating in the highest rating category
of the applicable Rating Agency, (vii) time deposits, other than as
referred to in (iv) above, with an entity, the commercial paper of such
entity having a credit rating in the highest rating category of the
applicable Rating Agency, (viii) certain repurchase agreements meeting
the requirements set forth in the Pooling and Servicing Agreement, and
(ix) any other investment if the Rating Agency Condition has been
satisfied (collectively, "Eligible Investments"). Any earnings (net of
losses and investment expenses) on funds in the Collection Account will
be paid to the Transferor. The Servicer has the revocable power to
withdraw funds from the Collection Account and to instruct the Trustee to
make withdrawals and payments from the Collection Account for the purpose
of carrying out its duties under the Pooling and Servicing Agreement and
any Supplement.
ALLOCATIONS
Pursuant to the Pooling and Servicing Agreement, during each
Monthly Period the Servicer will allocate to each outstanding Series its
Series Allocable Finance Charge Collections, Series Allocable Principal
Collections and Series Allocable Defaulted Amount.
"Series Adjusted Invested Amount" means, with respect to any Series
and for any Monthly Period, the Series Invested Amount for such Series
for such Monthly Period, less the excess, if any, of the cumulative
amount (calculated in accordance with the terms of the related Supplement
and, with respect to any Series offered hereby, the related Prospectus
Supplement) of investor charge-offs allocable to the Invested Amount for
such Series as of the last day of the immediately preceding Monthly
Period over the aggregate reimbursement of such investor charge-offs as
of such last day, or such lesser amount as may be provided in the
Supplement for such Series and, with respect to any Series offered
hereby, the related Prospectus Supplement.
"Series Allocable Finance Charge Collections," "Series Allocable
Principal Collections" and "Series Allocable Defaulted Amount" mean, with
respect to any Series and for any Monthly Period, the product of (a) the
Series Allocation Percentage and (b) the amount of collections of Finance
Charge Receivables deposited in the Collection Account, the amount of
collections of Principal Receivables deposited in the Collection Account
and the amount of all Defaulted Amounts with respect to such Monthly
Period, respectively.
"Series Allocation Percentage" means, with respect to any Series
and for any Monthly Period, the percentage equivalent of a fraction, the
numerator of which is the Series Adjusted Invested Amount as of the last
day of the immediately preceding Monthly Period plus the Series Required
Transferor Amount as of the last day of the immediately preceding Monthly
Period and the denominator of which is the Trust Adjusted Invested Amount
plus the sum of all Series Required Transferor Amounts as of such last
day.
"Series Required Transferor Amount" means for any Series an amount
specified in the Supplement for such Series and, for any Series offered
hereby, the related Prospectus Supplement.
"Trust Adjusted Invested Amount" means, with respect to any Monthly
Period, the sum of the Series Adjusted Invested Amounts (as adjusted in
any Supplement) for all outstanding Series.
The Servicer will then allocate amounts initially allocated to a
particular Series between the Certificateholders' Interest and the
Transferor's Interest for such Monthly Period as follows:
(a) the Series Allocable Finance Charge Collections and the Series
Allocable Defaulted Amount will at all times be allocated to the
Invested Amount of a Series based on the Floating Allocation Percentage
of such Series; and
(b) the Series Allocable Principal Collections will at all times be
allocated to the Invested Amount of such Series based on the Principal
Allocation Percentage of such Series.
The "Floating Allocation Percentage" and the "Principal Allocation
Percentage" with respect to any Series will be determined as set forth in
the related Supplement and, with respect to each Series offered hereby,
in the related Prospectus Supplement. Amounts not allocated to the
Invested Amount of any Series as described above will be allocated to the
Transferor's Interest.
GROUPS OF SERIES
If so specified in the related Prospectus Supplement, the
Certificates of a Series may be included in a Reallocation Group, which
is a Group of Series subject to reallocations of collections of Finance
Charge Receivables and other amounts or obligations among Series in such
Group in the manner described below under "-- Reallocations Among
Certificates of Different Series within a Reallocation Group."
Collections of Finance Charge Receivables allocable to each Series in a
Reallocation Group will be aggregated and made available for certain
required payments for all Series in such Group. Consequently, the
issuance of new Series in such Group may have the effect of reducing or
increasing the amount of collections of Finance Charge Receivables
allocable to the Certificates of other Series in such Group. See "Risk
Factors -- Issuance of New Series." The Prospectus Supplement with
respect to a Series offered hereby will specify whether such Series will
be included in a Reallocation Group or another type of Group, whether any
previously issued Series have been included in such a Group and whether
any such Series or any previously issued Series may be removed from such
a Group.
REALLOCATIONS AMONG CERTIFICATES OF DIFFERENT SERIES WITHIN A
REALLOCATION GROUP
Group Investor Finance Charge Collections. Any Series offered
hereby may, if so specified in the related Prospectus Supplement, be
included in a Reallocation Group. Other Series issued in the future may
also be included in such Group.
The Servicer will calculate for each Monthly Period Group Investor
Finance Charge Collections (as defined herein) for a particular
Reallocation Group and on the following Distribution Date will allocate
such amount among the Certificateholders' Interest (including any
Enhancement Invested Amount) for all Series in such Group in the
following priority:
(i) Group Investor Monthly Interest (as defined herein);
(ii) Group Investor Default Amounts (as defined herein);
(iii) Group Investor Monthly Fees (as defined herein);
(iv) Group Investor Additional Amounts (as defined herein); and
(v) the balance pro rata among each Series in such Group based
on the current Invested Amount of each such Series.
In the case of clauses (i), (ii), (iii) and (iv), if the amount of
Group Investor Finance Charge Collections is not sufficient to cover each
such amount in full, the amount available will be allocated among the
Series in such Group pro rata, based on the claim that each Series has
under the applicable clause. This means, for example, that if the amount
of Group Investor Finance Charge Collections is not sufficient to cover
Group Investor Monthly Interest, each Series in such Group will share
such amount pro rata, and any Series in such Group with a claim with
respect to monthly interest, overdue monthly interest and interest on
such overdue monthly interest, if applicable, which is larger than the
claim for such amounts for any other Series in such Group (due to a
higher certificate rate) will receive a proportionately larger allocation
than such other Series.
The amount of Group Investor Finance Charge Collections allocated
to the Certificateholders' Interest (including any Enhancement Invested
Amount) for a particular Series offered hereby as described above is
referred to herein as "Reallocated Investor Finance Charge Collections."
"Group Investor Additional Amounts" means for any Distribution Date
the sum of the amounts determined with respect to each Series in such
Group equal to (a) an amount equal to the amount by which the Invested
Amount of any Class of Certificates or any Enhancement Invested Amounts
have been reduced as a result of investor charge-offs, subordination of
principal collections and funding the investor default amount for any
other Class of Certificates or Enhancement Invested Amounts of such
Series and (b) if the related Supplement so provides, the amount of
interest at the applicable certificate rate that has accrued on the
amount described in the preceding clause (a).
"Group Investor Default Amount" means for any Distribution Date the
sum of the amounts determined with respect to each Series in such Group
equal to the product of the Series Allocable Defaulted Amount for such
Distribution Date and the applicable Floating Allocation Percentage for
such Distribution Date.
"Group Investor Finance Charge Collections" means for any
Distribution Date the aggregate amount of Investor Finance Charge
Collections for such Distribution Date for all Series in such Group.
"Group Investor Monthly Fees" means for any Distribution Date the
Monthly Servicing Fee for each Series in such Group, any Series
Enhancement fees and any other similar fees which are paid out of
Reallocated Investor Finance Charge Collections for such Series pursuant
to the applicable Supplement.
"Group Investor Monthly Interest" means for any Distribution Date
the sum of the aggregate amount of monthly interest, including overdue
monthly interest and interest on such overdue monthly interest, if
applicable, for all Series in such Group for such Distribution Date.
Finance Charge Receivables may be allocated and reallocated among
Series in a Group as described below.
Step 1 - total collections of Finance Charge Receivables are
allocated among Series based on the Series Allocation Percentage for each
Series. The amounts allocated to each Series pursuant to Step 1 are
referred to as "Series Allocable Finance Charge Collections." See "--
Allocations" above.
Step 2 - the amount of collections of Finance Charge Receivables
allocable to the Invested Amount (including any Enhancement Invested
Amount) of a Series (the "Investor Finance Charge Collections") is
determined by multiplying Series Allocable Finance Charge Collections for
each Series by the applicable Floating Allocation Percentages. See "--
Allocations" above.
Step 3 - Investor Finance Charge Collections for all Series in a
particular Reallocation Group (or Group Investor Finance Charge
Collections) are pooled for reallocation to each such Series.
Step 4 - Group Investor Finance Charge Collections are reallocated
to each Series in such Group based on the Series' respective claim with
respect to interest payable on the Certificates or Enhancement Invested
Amount (if any) of such Series, the Defaulted Amount allocable to the
Certificateholders' Interest of such Series and the Monthly Servicing Fee
and certain other amounts in respect to such Series. The excess is
allocated pro rata among the Series in such Group based on their
respective Invested Amounts.
SHARING OF EXCESS FINANCE CHARGE COLLECTIONS AMONG EXCESS ALLOCATION SERIES
Any Series offered hereby may be designated as an Excess Allocation
Series (including a Series in a Reallocation Group or other type of
Group). Collections of Finance Charge Receivables and certain other
amounts allocable to the Certificateholders' Interest of any Excess
Allocation Series in excess of the amounts necessary to make required
payments with respect to such Series (including payments to the provider
of any related Series Enhancement) that are payable out of collections of
Finance Charge Receivables (any such excess, the "Excess Finance Charge
Collections") may be applied to cover any shortfalls with respect to
amounts payable from collections of Finance Charge Receivables allocable
to any other Excess Allocation Series, pro rata based upon the amount of
the shortfall, if any, with respect to each other Excess Allocation
Series; provided, however, that the sharing of Excess Finance Charge
Collections among Excess Allocation Series will cease if the Transferor
shall deliver to the Trustee a certificate of an authorized
representative to the effect that, in the reasonable belief of the
Transferor, the continued sharing of Excess Finance Charge Collections
among Excess Allocation Series would have adverse regulatory implications
with respect to the Transferor or any Account Owner. Following the
delivery by the Transferor of any such certificate to the Trustee there
will not be any further sharing of Excess Finance Charge Collections
among such Series in any such Group. In all cases, any Excess Finance
Charge Collections remaining after covering shortfalls with respect to
all outstanding Excess Allocation Series will be paid to the holders of
the Transferor Certificates. While any Series offered hereby may be
designated as an Excess Allocation Series, there can be no assurance that
(a) any other Series will be designated as an Excess Allocation Series,
(b) there will be any Excess Finance Charge Collections with respect to
any such other Series for any Monthly Period, (c) any agreement relating
to any Series Enhancement will not be amended in such a manner as to
increase payments to the providers of Series Enhancement and thereby
decrease the amount of Excess Finance Charge Collections available from
such Series or (d) the Transferor will not at any time deliver a
certificate as described above. While the Transferor believes that, based
upon applicable rules and regulations as currently in effect, the sharing
of Excess Finance Charge Collections among Excess Allocation Series will
not have adverse regulatory implications for it or any Account Owner,
there can be no assurance that this will continue to be true in the
future.
SHARED PRINCIPAL COLLECTIONS
If the Prospectus Supplement for the related Series provides that
such Series is a Principal Sharing Series, collections of Principal
Receivables for any Monthly Period allocated to the Certificateholders'
Interest of any such Series will first be used to cover certain amounts
described in the related Prospectus Supplement (including any required
deposits into a Principal Funding Account or required distributions to
Certificateholders of such Series in respect of principal). The Servicer
will determine the amount of collections of Principal Receivables for any
Monthly Period (plus certain other amounts described in the related
Prospectus Supplement) allocated to such Series remaining after covering
such required deposits and distributions and any similar amount remaining
for any other Principal Sharing Series (collectively, "Shared Principal
Collections"). The Servicer will allocate the Shared Principal
Collections to cover any principal distributions to Certificateholders
and deposits to Principal Funding Accounts for any Principal Sharing
Series that are either scheduled or permitted and that have not been
covered out of collections of Principal Receivables and certain other
amounts allocable to the Certificateholders' Interest of such Series
(collectively, "Principal Shortfalls"). 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 respective Principal Shortfalls of such Series. To the extent that
Shared Principal Collections exceed Principal Shortfalls, the balance
will be allocated to the holders of the Transferor Certificates, provided
that (a) such Shared Principal Collections will be distributed to the
holders of the Transferor Certificates only to the extent that the
Transferor Amount is greater than the Required Transferor Amount and (b)
in certain circumstances described below under "-- Special Funding
Account," such Shared Principal Collections will be deposited in the
Special Funding Account. Any such reallocation of collections of
Principal Receivables will not result in a reduction in the Invested
Amount of the Series to which such collections were initially allocated.
There can be no assurance that there will be any Shared Principal
Collections with respect to any Monthly Period or that any Series will be
designated as Principal Sharing Series.
PAIRED SERIES
If so provided in the related Supplement, a Prior Series may be
paired with a Paired Series issued by the Trust at or after the
commencement of the Controlled Amortization Period or Controlled
Accumulation Period for such Prior Series. As the Invested Amount of the
Prior Series is reduced, the Invested Amount in the Trust of the Paired
Series will increase by an equal amount. Upon payment in full of the
Prior Series, the Invested Amount of such Paired Series will be equal to
the Invested Amount paid to Certificateholders of such Prior Series. If a
Pay Out Event or Reinvestment Event occurs with respect to the Prior
Series or with respect to the Paired Series when the Prior Series is in a
Controlled Amortization Period or Controlled Accumulation Period, the
Series Allocation Percentage and the Principal Allocation Percentage for
the Prior Series and the Series Allocation Percentage and the Principal
Allocation Percentage for the Paired Series will be reset as provided in
the related Supplement and the Early Amortization Period or Early
Accumulation Period for such Series could be lengthened.
SPECIAL FUNDING ACCOUNT
If, on any date, the Transferor Amount is less than or equal to the
Required Transferor Amount, the Servicer shall not distribute to the
holders of the Transferor Certificates any collections of Principal
Receivables allocable to a Series or a Group that otherwise would be
distributed to such holders, but shall deposit such funds in an account
with an Eligible Institution established and maintained by the Servicer
for the benefit of the Certificateholders of each Series, in the name of
the Trustee, on behalf of the Trust, and bearing a designation clearly
indicating that the funds deposited therein are held for the benefit of
the Certificateholders of each Series (the "Special Funding Account").
Funds on deposit in the Special Funding Account will be withdrawn and
paid to the holders of the Transferor Certificates on any Distribution
Date to the extent that, after giving effect to such payment, the
Transferor Amount exceeds the Required Transferor Amount on such date;
provided, however, that if a Controlled Accumulation Period, Early
Accumulation Period, Controlled Amortization Period or Early Amortization
Period commences with respect to any Series, any funds on deposit in the
Special Funding Account will be released from the Special Funding
Account, deposited in the Collection Account and treated as collections
of Principal Receivables to the extent needed to make principal payments
due to or for the benefit of the Certificateholders of such Series.
Funds on deposit in the Special Funding Account will be invested by
the Trustee, at the direction of the Servicer, in Eligible Investments.
Any earnings (net of losses and investment expenses) earned on amounts on
deposit in the Special Funding Account during any Monthly Period will be
withdrawn from the Special Funding Account and treated as collections of
Finance Charge Receivables with respect to such Monthly Period.
FUNDING PERIOD
For any Series of Certificates, the related Prospectus Supplement
may specify that during a Funding Period, the Pre-Funding Amount will be
held in a Pre-Funding Account pending the transfer of additional
Receivables to the Trust or pending the reduction of the Invested Amounts
of other Series issued by the Trust. The related Prospectus Supplement
will specify the initial Invested Amount with respect to such Series, the
Full Invested Amount and the date by which the Invested Amount is
expected to equal the Full Invested Amount. The Invested Amount will
increase as Receivables are delivered to the Trust or as the Invested
Amounts of other Series of the Trust are reduced. The Invested Amount may
also decrease due to the occurrence of a Pay Out Event with respect to
such Series as provided in the related Prospectus Supplement.
During the Funding Period, funds on deposit in the Pre-Funding
Account for a Series of Certificates will be withdrawn and paid to the
Transferor to the extent of any increases in the Invested Amount. If the
Invested Amount does not for any reason equal the Full Invested Amount by
the end of the Funding Period, any amount remaining in the Pre-Funding
Account and any additional amounts specified in the related Prospectus
Supplement will be payable to the Certificateholders of such Series in
the manner and at such time as set forth in the related Prospectus
Supplement.
If so specified in the related Prospectus Supplement, moneys in the
Pre-Funding Account will be invested by the Trustee in Eligible
Investments or 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 Collection Account for distribution
in respect of interest on the Certificates of the related Series in the
manner specified in the related Prospectus Supplement.
DEFAULTED RECEIVABLES; REBATES AND FRAUDULENT CHARGES
"Defaulted Receivables" for any Monthly Period are Principal
Receivables that were charged-off as uncollectible in such Monthly
Period. The "Defaulted Amount" for any Monthly Period will be an amount
(not less than zero) equal to (a) the excess, if any, of the amount of
Defaulted Receivables for such Monthly Period over the Recoveries for
such Monthly Period, minus (b) the amount of any Defaulted Receivables
the assignment or reassignment of which the Transferor or the Servicer
becomes obligated to accept during such Monthly Period (unless an event
relating to bankruptcy, receivership or insolvency has occurred with
respect to the Transferor or the Servicer, in which event the amount of
such Defaulted Receivables will not be added to the sum so subtracted).
Receivables in any Account will be charged-off as uncollectible in
accordance with the credit card guidelines and the Servicer's customary
and usual policies and procedures for servicing revolving credit card and
other revolving credit account receivables comparable to the Receivables.
The current policy of the Account Owners is to charge-off the receivables
in an account when that account becomes 181 days delinquent (or sooner in
the event of receipt of notice of death or bankruptcy of the cardmember),
but such policy may change in the future to conform with regulatory
requirements and applicable law.
If the Servicer adjusts downward the amount of any Principal
Receivable (other than Ineligible Receivables that have been, or are to
be, reassigned to the Transferor) because of a rebate, refund,
counterclaim, defense, error, fraudulent charge or counterfeit charge to
a cardmember, or such Principal Receivable was created in respect of
merchandise that was refused or returned by a cardmember or if the
Servicer otherwise adjusts downward the amount of any Principal
Receivable without receiving collections therefor or charging off such
amount as uncollectible, the amount of the Principal Receivables in the
Trust with respect to the Monthly Period in which such adjustment takes
place will be reduced by the amount of the adjustment. Furthermore, in
the event that the exclusion of any such Receivables would cause the
Transferor Amount at such time to be less than the Required Transferor
Amount, the Transferor will be required to pay an amount equal to such
deficiency into the Special Funding Account.
CREDIT ENHANCEMENT
General. For any Series, Credit Enhancement may be provided with
respect to one or more Classes thereof. Credit Enhancement with respect
to one or more Classes of a Series offered hereby may include a letter of
credit, a cash collateral account or guaranty, a spread account, a yield
supplement account, a collateral interest, a surety bond, an insurance
policy or any other form of credit enhancement described in the related
Prospectus Supplement, or any combination of the foregoing. Credit
Enhancement may also be provided to a Class or Classes of a Series or to
a Series by subordination provisions that require distributions of
principal or interest to be made with respect to the Certificates of such
Class or Classes or such Series before distributions are made to one or
more Classes of such Series or to another Series (if the Supplement for
such Series so provides). If so specified in the related Prospectus
Supplement, any form of Credit Enhancement may be available to more than
one Class or Series to the extent described therein.
The presence of Credit Enhancement with respect to a Class is
intended to enhance the likelihood of receipt by Certificateholders of
such Class of the full amount of principal and interest with respect
thereto and to decrease the likelihood that such Certificateholders will
experience losses. However, unless otherwise specified in the related
Prospectus Supplement, the Credit Enhancement, if any, with respect
thereto 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 that exceed the amount
covered by the Credit Enhancement or that are not covered by the Credit
Enhancement, Certificateholders will bear their allocable share of such
losses. In addition, if specific Credit Enhancement is provided for the
benefit of more than one Class or Series, Certificateholders of any such
Class or Series will be subject to the risk that such Credit Enhancement
will be exhausted by the claims of Certificateholders of other Classes or
Series.
If Credit Enhancement is provided with respect to a Series offered
hereby, the related Prospectus Supplement will include 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 provisions of any agreement relating to such Credit
Enhancement material to the Certificateholders of such Series.
Additionally, in certain cases, the related Prospectus Supplement may set
forth certain information with respect to the provider of any third-party
Credit Enhancement (the "Credit Enhancer"), including (i) a brief
description of its principal business activities, (ii) its principal
place of business, place of incorporation or the jurisdiction under which
it is chartered or licensed to do business, (iii) if applicable, the
identity of regulatory agencies that exercise primary jurisdiction over
the conduct of its business and (iv) its total assets, and its
stockholders' or policyholders' surplus, if applicable, as of a date
specified in the Prospectus Supplement. If so described in the related
Prospectus Supplement, Credit Enhancement with respect to a Series
offered hereby may be available to pay principal of the Certificates of
such Series following the occurrence of certain Pay Out Events or
Reinvestment Events with respect to such Series. In such event, the
Credit Enhancer will have an interest in certain cash flows in respect of
the Receivables to the extent described in such Prospectus Supplement (an
"Enhancement Invested Amount") and may be entitled to the benefit of the
Trustee's security interest in the Receivables, in each case subordinated
to the interest of the Certificateholders of such Series.
Subordination. If so specified in the related Prospectus
Supplement, one or more Classes of a Series offered hereby may be
subordinated to one or more other Classes of such Series or a Series may
be subordinated to another Series. If so specified in the related
Prospectus Supplement, the rights of the holders of the subordinated
Certificates to receive distributions of principal or interest on any
payment date will be subordinated to such rights of the holders of the
Certificates that are senior to such subordinated Certificates to the
extent set forth in the related Prospectus Supplement. The related
Prospectus Supplement will also set forth information concerning the
amount of subordination of a Class or Classes of subordinated
Certificates in a Series or of the subordinated Certificates of another
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 Certificates that are senior to such
subordinated Certificates. The amount of subordination will decrease
whenever amounts otherwise payable to the holders of subordinated
Certificates are paid to the holders of the Certificates that are senior
to such subordinated Certificates.
Letter of Credit. If so specified in the related Prospectus
Supplement, a letter of credit with respect to a Series or Class of
Certificates offered hereby may be issued by a bank or financial
institution specified in the related Prospectus Supplement (the "L/C
Issuer"). Subject to the terms and conditions specified in the related
Prospectus Supplement, the L/C Issuer will be obligated to honor drawings
under a letter of credit in an aggregate dollar amount (which may be
fixed or may be reduced as described in the related Prospectus
Supplement), net of unreimbursed payments thereunder, equal to the amount
described in the related Prospectus Supplement. The amount available
under a letter of credit will be reduced to the extent of the
unreimbursed payments thereunder.
Cash Collateral 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 will set 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.
Yield Supplement Account. [If so specified in the related
Prospectus Supplement] the Servicer will establish and maintain a
[Series] Yield Supplement Account for the benefit of the
Certificateholders of [such] [each] Series. Amounts on deposit in the
[Series] Yield Supplement Account (together with investment earnings
thereon) will be released and deposited into the Collection Account in
the amounts and at the times specified in the Prospectus Supplement for
[such] [each] Series. Each such deposit into the Collection Account will
be treated as collections of Finance Charge Receivables allocable to the
Certificates [of the related Series]. On the initial Series Closing Date,
$__________ will be deposited into the Yield Supplement Account from the
proceeds of the issuance of the initial Series.
Collateral Interest. If so specified in the related Prospectus
Supplement, support for a Series of Certificates or one or more Classes
thereof may be provided initially by an uncertificated, subordinated
interest in the Trust (the "Collateral Interest") in an amount initially
equal to a percentage of the Certificates of such Series specified in the
Prospectus Supplement. References to Enhancement Invested Amounts herein
include Collateral Interests, if any.
Surety Bond or Insurance Policy. If so specified in the related
Prospectus Supplement, insurance with respect to a Series or Class of
Certificates offered hereby may 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
may be purchased for the benefit of the holders of any Series or Class of
Certificates offered hereby 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 of a Series
offered hereby may be provided by the periodic deposit of certain
available excess cash flow from the Trust Assets into a spread account
intended to assure the subsequent distributions of interest and principal
on the Certificates of such Class or Series in the manner specified in
the related Prospectus Supplement.
INTEREST RATE SWAPS AND RELATED CAPS, FLOORS AND COLLARS
The Trustee on behalf of the Trust may enter into interest rate
swaps and related caps, floors and collars to minimize the risk to
Certificateholders from adverse changes in interest rates (collectively,
"Swaps").
An interest rate Swap is an agreement between two parties
("counterparties") to exchange a stream of interest payments on an agreed
hypothetical or "notional" principal amount. No principal amount is
exchanged between the counterparties to an interest rate Swap. In the
typical Swap, one party agrees to pay a fixed rate on a notional
principal amount, while the counterparty pays a floating rate based on
one or more reference interest rates such as the London Interbank Offered
Rate ("LIBOR"), a specified bank's prime rate, or U.S. Treasury Bill
rates. Interest rate Swaps also permit counterparties to exchange a
floating rate obligation based upon one reference interest rate (such as
LIBOR) for a floating rate obligation based upon another referenced
interest rate (such as U.S. Treasury Bill rates).
The Swap market has grown substantially in recent years with a
significant number of banks and financial service firms acting both as
principals and as agents utilizing standardized Swap documentation. Caps,
floors and collars are more recent innovations, and they are less liquid
than other Swaps. There can be no assurance that the Trust will be able
to enter into or offset Swaps at any specific time or at prices or on
other terms that are advantageous. In addition, although the terms of
Swaps may provide for termination under certain circumstances, there can
be no assurance that the Trust will be able to terminate or offset a Swap
on favorable terms.
SERVICER COVENANTS
In the Pooling and Servicing Agreement, the Servicer has agreed as
to each Receivable and related Account that it will: (a) duly fulfill all
obligations on its part to be fulfilled under or in connection with the
Receivables or the related Accounts, and will maintain in effect all
qualifications required and comply in all material respects with all
requirements of law in order to service the Receivables and Accounts, the
failure to maintain or comply with which would have a material adverse
effect on the Certificateholders; (b) not permit any rescission or
cancellation of the Receivables except as ordered by a court of competent
jurisdiction or other governmental authority; (c) do nothing to impair
the rights of the Certificateholders in the Receivables or the related
Accounts; and (d) not reschedule, revise or defer payments due on the
Receivables except in accordance with its guidelines for servicing
receivables.
Under the terms of the Pooling and Servicing Agreement, all
Receivables in an Account will be assigned and transferred to the
Servicer and such Account will no longer be included as an Account if the
Servicer discovers, or receives written notice from the Trustee, that any
covenant of the Servicer set forth above has not been complied with in
all material respects and such noncompliance has not been cured within 60
days (or such longer period as may be agreed to by the Trustee and the
Transferor) thereafter and has a material adverse effect on the
Certificateholders' Interest in such Receivables. Such assignment and
transfer will be made when the Servicer deposits an amount equal to the
amount of such Receivables in the Collection Account on the business day
preceding the Distribution Date following the Monthly Period during which
such obligation arises. This transfer and assignment to the Servicer
constitutes the sole remedy available to the Certificateholders if such
covenant or warranty of the Servicer is not satisfied and the Trust's
interest in any such assigned Receivables will be automatically assigned
to the Servicer.
CERTAIN MATTERS REGARDING THE SERVICER
The Servicer may not resign from its obligations and duties under
the Pooling and Servicing Agreement except (i) upon determination that
the performance of such duties is no longer permissible under applicable
law or (ii) if such obligations and duties are assumed by any entity that
has satisfied the Rating Agency Condition. 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 Pooling
and Servicing Agreement. Notwithstanding the foregoing, [the Bank] may
assign part or all of its obligations and duties as Servicer under the
Pooling and Servicing Agreement to an affiliate of [the Bank] as long as
[the Bank] shall have fully guaranteed the performance of such
obligations and duties under the Pooling and Servicing Agreement.
Any person into which, in accordance with the Pooling and Servicing
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 be the successor to the
Transferor or the Servicer, as the case may be, under the Pooling and
Servicing Agreement.
SERVICER DEFAULT
In the event of any Servicer Default (as defined below), either the
Trustee or Certificateholders holding Certificates evidencing more than
50% of the aggregate unpaid principal amount of all Certificates, by
written notice to the Servicer (and to the Trustee if given by the
Certificateholders) (a "Termination Notice"), may terminate all of the
rights and obligations of the Servicer, as Servicer, under the Pooling
and Servicing Agreement and in and to the Receivables and the proceeds
thereof and the Trustee will appoint a new Servicer (a "Service
Transfer"). The rights and interest of the Transferor under the Pooling
and Servicing Agreement in the Transferor's Interest will not be affected
by any Termination Notice or Service Transfer. If within 60 days of
receipt of a Termination Notice the Trustee does not receive any bids
from eligible servicers to act as successor Servicer and receives an
officer's certificate from the Transferor to the effect that the Servicer
cannot in good faith cure the Servicer Default which gave rise to the
Termination Notice, the Trustee shall grant a right of first refusal to
the Transferor which would permit the Transferor at its option to
purchase the Certificateholders' Interest on the Distribution Date in the
next calendar month. The purchase price for the Certificateholders'
Interest shall be equal to the sum of the amounts specified therefor with
respect to each outstanding Series in the related Supplement, and for any
Certificates offered hereby, in the Prospectus Supplement.
The Trustee will as promptly as possible, after the giving of a
Termination Notice, appoint a successor Servicer and if no successor
Servicer has been appointed by the Trustee and has accepted such
appointment by the time the Servicer ceases to act as Servicer, all
rights, authority, power and obligations of the Servicer under the
Pooling and Servicing Agreement will be vested in the Trustee. Prior to
any Service Transfer, the Trustee will seek to obtain bids from potential
servicers meeting certain eligibility requirements set forth in the
Pooling and Servicing Agreement to serve as a successor Servicer for
servicing compensation not in excess of the Servicing Fee plus any
amounts payable to the Transferor pursuant to the Pooling and Servicing
Agreement.
A "Servicer Default" 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 any
payment, transfer or deposit, on the date the Servicer is required
to do so under the Pooling and Servicing Agreement or any
Supplement, which is not cured within a five business day grace
period;
(b) failure on the part of the Servicer duly to observe or perform
in any material respect any other covenants or agreements of the
Servicer in the Pooling and Servicing Agreement or any Supplement
which has an Adverse Effect and which continues unremedied for a
period of 60 days after written notice, or the Servicer assigns its
duties under the Pooling and Servicing Agreement, except as
specifically permitted thereunder;
(c) any representation, warranty or certification made by the
Servicer in the Pooling and Servicing Agreement, any Supplement or
in any certificate delivered pursuant to the Pooling and Servicing
Agreement or any Supplement proves to have been incorrect in any
material respect when made, which has an Adverse Effect on the
rights of the Certificateholders of any Series, and which Adverse
Effect continues for a period of 60 days after written notice; or
(d) the occurrence of certain events of bankruptcy, insolvency or
receivership with respect to the Servicer.
Notwithstanding the foregoing, a delay in or failure of performance
referred to under clause (a) above for a period of ten business days
after the applicable grace period or referred to under clauses (b) or (c)
for a period of 60 business days after the applicable grace period, will
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 will not
be relieved from using its best efforts to perform its obligations in a
timely manner in accordance with the terms of the Pooling and Servicing
Agreement and the Servicer must provide the Trustee, the Transferor and
any provider of Series Enhancement prompt notice of such failure or delay
by it, together with a description of its efforts to so perform its
obligations.
EVIDENCE AS TO COMPLIANCE
The Pooling and Servicing Agreement provides that on or before
March 31 of each calendar year, the Servicer will cause a firm of
nationally recognized independent public accountants (who may also render
other services to the Servicer or the Transferor and any affiliates
thereof) to furnish a report to the effect that such firm has applied
certain procedures agreed upon with the Servicer and examined certain
documents and records relating to the servicing of the Accounts and that,
on the basis of such agreed-upon procedures, nothing has come to the
attention of such firm that caused them to believe that such servicing
was not conducted in compliance with the Pooling and Servicing Agreement
and applicable provisions of each Supplement 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. Such report will set
forth the agreed-upon procedures performed.
The Pooling and Servicing Agreement provides for delivery to the
Trustee on or before March 31 of each calendar year of a statement signed
by an officer of the Servicer to the effect that the Servicer has, or has
caused to be, fully performed its obligations in all material respects
under the Pooling and Servicing 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.
Copies of all statements, certificates and reports furnished to the
Trustee may be obtained by a request in writing delivered to the Trustee.
AMENDMENTS
The Pooling and Servicing Agreement and any Supplement may be
amended from time to time (including in connection with the issuance of a
Supplemental Certificate, addition of a Participation Interest,
allocation of assets in the Trust to a Series or Group, the designation
of an Additional Transferor, or to change the definition of Monthly
Period, Determination Date or Distribution Date) by the Servicer, the
Transferor and the Trustee, and without the consent of the
Certificateholders of any Series, provided that (i) an opinion of counsel
for the Transferor is addressed and delivered to the Trustee to the
effect that the conditions precedent to any such amendment have been
satisfied, (ii) the Transferor shall have delivered to the Trustee a
certificate of an officer of the Transferor to the effect that the
Transferor reasonably believes that such amendment will not have an
Adverse Effect and (iii) the Rating Agency Condition shall have been
satisfied with respect thereto.
The Pooling and Servicing Agreement or any Supplement may be
amended by the Transferor, the Servicer and the Trustee with the consent
of the Certificateholders evidencing not less than 66 2/3% of the
aggregate unpaid principal amount of the Certificates of all affected
Series for which the Transferor has not delivered an officer's
certificate stating that there will be no Adverse Effect, for the purpose
of adding any provisions to or changing in any manner or eliminating any
of the provisions of the Pooling and Servicing Agreement or any
Supplement or of modifying in any manner the rights of
Certificateholders. No such amendment, however, may (a) reduce in any
manner the amount of, or delay the timing of, deposits or distributions
on any Certificate without the consent of each Certificateholder, (b) (i)
change the definition or the manner of calculating the
Certificateholders' Interest or the Invested Amount or (ii) reduce the
aforesaid percentage of the aggregate unpaid principal amount of the
Certificates the holders of which are required to consent to any such
amendment, in each case without the consent of each Certificateholder or
(c) adversely affect the rating of any Series or Class by the Rating
Agency without the consent of the holders of Certificates of such Series
or Class evidencing not less than 66 2/3% of the aggregate unpaid
principal amount of the Certificates of such Series or Class. Promptly
following the execution of any amendment to the Pooling and Servicing
Agreement (other than an amendment described in the preceding paragraph),
the Trustee will furnish written notice of the substance of such
amendment to each Certificateholder. Notwithstanding the foregoing, any
Supplement executed in connection with the issuance of one or more new
Series of Certificates will not be considered an amendment to the Pooling
and Servicing Agreement.
LIST OF CERTIFICATEHOLDERS
Upon written request of any Holder or group of Holders of
Certificates of any Series or of all outstanding Series of record holding
Certificates evidencing not less than 10% of the aggregate unpaid
principal amount of the Certificates of such Series or all Series, as
applicable, the Trustee will afford such Holder or Holders of
Certificates access during business hours to the current list of
Certificateholders of such Series or of all outstanding Series, as the
case may be, for purposes of communicating with other Holders of
Certificates with respect to their rights under the Pooling and Servicing
Agreement. See "Description of the Certificates -- Book-Entry
Registration" and "-- Definitive Certificates."
The Pooling and Servicing Agreement does not provide for any annual
or other meetings of Certificateholders.
THE TRUSTEE
____________________ will act as trustee under the Pooling and
Servicing Agreement. The corporate trust office of ____________________
is located at __________________________________________. The Transferor
and 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 or the Transferor may hold Certificates in
their own names; however, any Certificates so held shall not be entitled
to participate in any decisions made or instructions given to the Trustee
by the Certificateholders as a group. 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 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.
DESCRIPTION OF THE PURCHASE AGREEMENTS
Sale of Receivables. On the initial Series Closing Date BKB CT will
sell all of the Accounts owned by it, together with the related
Receivables, to the Bank. After giving effect to such sale BKB CT will
cease to have any interest in such Accounts or the related Receivables
and the Bank will be the Account Owner with respect to such Accounts.
Pursuant to the Purchase Agreement to be entered into between the Bank
and the Transferor and the Purchase Agreement between [New Bank] and the
Transferor, each such Account Owner sells to the Transferor all its
right, title and interest in and to (i) all of the Receivables in the
Accounts owned by such Account Owner and all of the Receivables created
in such Accounts following the initial Series Closing Date in the case of
the Bank and upon origination of Accounts by [New Bank] and (ii) the
Receivables in each Additional Account owned by such Account Owner
designated from time to time for inclusion as an Account as of the date
of such designation, whether such Receivables shall then be existing or
shall thereafter be created.
In connection with such sale of the Receivables to the Transferor,
each Account Owner will indicate in its computer records that the
Receivables have been sold to CCRFC by such Account Owner and CCRFC will
indicate in its files that such Receivables will be sold or transferred
by it to the Trust. In addition, each Account Owner will provide or cause
to be provided to the Transferor a computer file or a microfiche list
containing a true and complete list showing each Account owned by such
Account Owner, identified by account number and by total outstanding
balance of the related Receivables on the applicable Series date of
designation or addition date for Additional Accounts, as the case may be.
The records and agreements relating to the Accounts and Receivables may
not be segregated by the Account Owners from other documents and
agreements relating to other credit card accounts and receivables and may
not be stamped or marked to reflect the sale or transfer of the
Receivables to the Transferor, but the records of the Account Owners will
be marked to evidence such sale or transfer. Each Account Owner as
debtor/seller will file UCC financing statements meeting the requirements
of applicable state law in each of the jurisdictions in which the books
and records relating to the Accounts owned by such Account Owners are
maintained with respect to the Receivables. See "Risk Factors --
Characteristics as a Sale; Insolvency and Receivership Risks" and
"Certain Legal Aspects of the Receivables."
Pursuant to the Purchase Agreements, the Transferor will, subject
to certain conditions, if the Transferor is required to cause the Account
Owners to designate Additional Accounts under the Pooling and Servicing
Agreement, designate Additional Accounts to be included as Accounts under
the Purchase Agreement. See "Description of the Pooling and Servicing
Agreement -- Additions of Accounts or Participation Interests."
Representations and Warranties. In its respective Purchase
Agreement, each Account Owner represents and warrants to the Transferor
to the effect that, among other things, (a) as of the date of the
Purchase Agreement and as of each date of designation of Additional
Accounts under the Purchase Agreement, it is duly organized and in good
standing and that it has the authority to consummate the transactions
contemplated by the Purchase Agreement, (b) as of the Initial Cut-Off
Date and as of each date of designation of Additional Accounts under the
Purchase Agreement, each Additional Account will be an Eligible Account
and (c) as of the Initial Cut-Off Date and as of each date of designation
of Additional Accounts under the Purchase Agreement, each Receivable
generated thereunder is, on such date of designation, an Eligible
Receivable. In the event of a breach of any representation and warranty
set forth in the Purchase Agreement which results in the requirement that
the Transferor accept retransfer of an Ineligible Receivable, then the
applicable Account Owner shall repurchase such Ineligible Receivable
under the Pooling and Servicing Agreement from the Transferor on the date
of such retransfer. The purchase price for such Ineligible Receivables
shall be the principal amount thereof plus applicable finance charges.
The Bank shall be obligated to effect any such repurchase with respect to
the Receivables sold by BKB CT to the Bank and then sold by the Bank to
Transferor on the initial Series Closing Date. Following a sale of the
Accounts by the Bank to the [New Bank], the [New Bank] will assume such
obligation of the Bank with respect to the Receivables sold to the
Transferor by the Bank.
Each Account Owner also represents and warrants to the Transferor
that, among other things, as of the date of the Purchase Agreement and as
of each date of designation of Additional Accounts under the applicable
Purchase Agreement (a) the Purchase Agreement constitutes a valid and
binding obligation of the applicable Account Owner and (b) the Purchase
Agreement constitutes a valid sale to the Transferor of all right, title
and interest of such Account Owner in and to the Receivables then
existing and, with respect to the Bank and [New Bank] only, thereafter
created in the Accounts owned by such Account Owner and in the proceeds
thereof. If the breach of any of the representations and warranties
described in this paragraph results in the obligation of the Transferor
under the Pooling and Servicing Agreement to accept retransfer of the
Receivables, the applicable Account Owners will repurchase the
Receivables retransferred to the Transferor for an amount of cash at
least equal to the amount of cash the Transferor is required to deposit
under the Pooling and Servicing Agreement in connection with such
retransfer. The Bank shall be obligated to effect any such repurchase
with respect to the Receivables sold by BKB CT to the Bank and then sold
by the Bank to Transferor on the initial Series Closing Date. Following a
sale of the Accounts by the Bank to the [New Bank], the [New Bank] will
assume such obligation of the Bank with respect to the Receivables sold
to the Transferor by the Bank.
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES
TRANSFER OF RECEIVABLES
Under the Purchase Agreements, the Account Owners sell the
Receivables to the Transferor and the Transferor, in turn, transfers the
Receivables to the Trust. Each Account Owner and the Transferor
represents and warrants that its respective transfers constitute valid
sales and assignments of all of its respective right, title and interest
in and to the Receivables. The Transferor also represents and warrants
that, if the transfer of Receivables by the Transferor to the Trust is
deemed to create a security interest under the UCC, there exists a valid,
subsisting and enforceable first priority perfected security interest in
the Receivables in existence at the time of the formation of the Trust or
at the date of designation of any Additional Accounts, as the case may
be, in favor of the Trust and a valid, subsisting and enforceable first
priority perfected security interest in the Receivables created
thereafter in favor of the Trust on and after their creation, in each
case until termination of the Trust. For a discussion of the Trust's
rights arising from these representations and warranties not being
satisfied, see "Description of the Pooling and Servicing Agreement --
Representations and Warranties."
Each Account Owner and the Transferor represents that the
Receivables are "accounts" or "general intangibles" for purposes of the
UCC. Both the sale 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 or statements is required to
perfect the interest of the Trust in the Receivables. If a transfer of
general intangibles is deemed to create a security interest rather than a
sale, Article 9 of the UCC applies and filing an appropriate financing
statement or statements is also required in order to perfect the security
interest of the Trust. Financing statements covering the Receivables will
be filed under the UCC to protect the Transferor and the Trust if any of
the transfers by an Account Owner, or the Transferor is deemed to be
subject to the UCC. If a transfer of general intangibles is deemed to be
a sale, then the UCC is not applicable and no further action under the
UCC is required to protect the Trust's interest from third parties.
There are certain limited circumstances under the UCC in which
prior or subsequent transferees of Receivables coming into existence
after the initial Series Closing Date could have an interest in such
Receivables with priority over the Trust's interest. A tax or other
government lien or other nonconsensual lien on property of the Transferor
or an Account Owner arising prior to the time a Receivable comes into
existence may also have priority over the interest of the Trust in such
Receivable. Furthermore, if the FDIC were appointed as a conservator or
receiver of an Account Owner, the conservator's or receiver's
administrative expenses may also have priority over the interest of the
Trust in such related Receivables. Under the Purchase Agreement, however,
each Account Owner warrants that it has transferred the Receivables to
the Transferor free and clear of the lien of any third party. In
addition, each Account Owner covenants that it will not sell, pledge,
assign, transfer or grant any lien on any Receivable (or any interest
therein) other than to the Transferor.
CERTAIN MATTERS RELATING TO INSOLVENCY
The Transferor will not engage in any activities except purchasing
accounts receivable from the Account Owners, forming trusts, transferring
such accounts receivable to such trusts, issuing notes or certificates
and engaging in activities incident to, or necessary or convenient to
accomplish, the foregoing. The Transferor has no intention of filing a
voluntary petition under the United States Bankruptcy Code or any similar
applicable state law so long as the Transferor is solvent and does not
reasonably foresee becoming insolvent.
Each Account Owner has represented and warranted to the Transferor
that the transfer of Receivables pursuant to its respective Purchase
Agreement is a valid sale of the Receivables by such Account Owner to the
Transferor. In addition, each Account Owner and the Transferor have
treated and will treat the transaction described in the Purchase
Agreements as sales of the Receivables to the Transferor and each Account
Owner has taken or will take all actions that are required under the UCC
to perfect the Transferor's ownership interest in the Receivables.
However, in the event of an insolvency, receivership or conservatorship
of an Account Owner it is possible that a receiver or conservator could
attempt to recharacterize the transaction between such Account Owner and
the Transferor as a pledge of the Receivables rather than a true sale.
The Federal Deposit Insurance Act ("FDIA"), as amended by FIRREA, which
became effective August 9, 1989, sets forth certain powers that the FDIC
could exercise if it were appointed as conservator or receiver of an
Account Owner. 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, an Account
Owner.
To the extent that (i) an Account Owner granted a security interest
in the Receivables to the Transferor, (ii) the interest was validly
perfected before such Account Owner's insolvency, (iii) the interest was
not taken or granted in contemplation of such Account Owner's insolvency
or with the intent to hinder, delay or defraud such Account Owner or its
creditors, (iv) the applicable Purchase Agreement is continuously a
record of such Account Owner, and (v) the applicable Purchase Agreement
represents a bona fide and arm's length transaction undertaken for
adequate consideration in the ordinary course of business, such valid
perfected security interest of the Transferor should be enforceable (to
the extent the Transferor's "actual direct compensatory damages")
notwithstanding the insolvency of, or the appointment of a receiver or
conservator for, such Account Owner 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 such Account Owner. If, however, the FDIC were
to require the Transferor to establish its right to those payments by
submitting to and completing the administrative claims procedure
established under FIRREA, or the conservator or receiver were to request
a stay of proceedings with respect to such Account Owner 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." On April 10, 1990,
the RTC, formerly a sister agency of the FDIC, adopted a statement of
policy (the "RTC Policy Statement") with respect to the payment of
interest on collateralized borrowings. The RTC Policy Statement states
that interest on such borrowings will be payable at the contract rate up
to the date of the redemption or payment by the conservator, receiver, or
the trustee of an amount equal to the principal owed plus the contract
rate of interest up to the date of such payment or redemption, plus any
expenses of liquidation if provided for in the contract, to the extent
secured by the collateral. In a 1993 case involving zero-coupon bonds,
however, a federal district court held that the RTC was instead obligated
to pay bondholders the fair market value of repudiated bonds as of the
date of repudiation. The FDIC itself has not adopted a policy statement
on payment of interest on collateralized borrowings.
In Octagon Gas Systems, Inc. v. Rimmer, 995 F.2d 948 (10th Cir.
1993), cert. denied, 114 S. Ct. 554 (1993), the United States Court of
Appeals for the 10th Circuit suggested that even where a transfer of
accounts from a seller to a buyer constitutes a "true sale," the accounts
would nevertheless constitute property of the seller's bankruptcy estate
in a bankruptcy of the seller. If the Transferor were to become subject
to a bankruptcy proceeding or if an Account Owner were to become subject
to a receivership and a court were to follow the 10th Circuit's
reasoning, Certificateholders might experience delays in payment or
possibly losses in their investment in the Certificates. Counsel to the
Transferor has advised the Transferor that the facts of the Octagon case
were distinguishable from those in the sale transactions between the
Account Owners and the Transferor and 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 Account
Owners, the Transferor, the Trust and the transactions governed by the
Purchase Agreements and the Pooling and Servicing Agreement do not have
any particular link to the 10th Circuit, it is unlikely that the Account
Owners or 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.
In addition, in the event of an insolvency, receivership or
conservatorship of an Account Owner and a creditor conservator of the
Bank were to request a court to order that the Bank should be
substantively consolidated with the Transferor, delays in payments on the
Certificates and possible reductions in such payments could result.
The Transferor will take all actions that are required under the
UCC to perfect the Trust's interest in the Receivables and the Transferor
has warranted to the Trust that the Trust will have a first priority
security interest therein and, with certain exceptions, in the proceeds
thereof. Nevertheless, a tax or government lien or other nonconsensual
lien on property of the Transferor arising prior to the time a Receivable
is conveyed to the Trust may have priority over the interest of the Trust
in such Receivable. The Transferor has been structured such that (i) the
voluntary or involuntary application for relief under the Bankruptcy Code
or similar applicable state laws, and (ii) the substantive consolidation
of the Transferor and the Bank are unlikely. The Transferor is a
separate, limited purpose subsidiary, the certificate of incorporation of
which provides that it shall not file a voluntary petition for relief
under the Bankruptcy Code without the unanimous affirmative vote of all
of its directors. Pursuant to the Pooling and Servicing Agreement, the
Trustee covenants that it will not at any time institute against the
Transferor any bankruptcy, reorganization or other proceedings under any
federal or state bankruptcy or similar law. In addition, certain other
steps will be taken to avoid the Transferor's becoming a debtor in a
bankruptcy case. Notwithstanding such steps, if the Transferor were to
become a debtor in a bankruptcy case, and a bankruptcy trustee for the
Transferor or a creditor of the Transferor or the Transferor itself were
to take the position that the transfer of the Receivables from the
Transferor to the Trust should be recharacterized as a pledge of such
Receivables, then delays in payments on the Certificates and possible
reductions in the amount of such payments could result.
Upon the appointment of a bankruptcy trustee, receiver or
conservator or upon the commencement of a bankruptcy, receivership,
conservatorship or similar proceeding with respect to CCRFC will promptly
give notice thereof to the Trustee and a Pay Out Event or Reinvestment
Event may occur with respect to a Series (or all of the Series). Pursuant
to the Pooling and Servicing Agreement, newly created Receivables will
not be transferred to the Trust on and after any such appointment or
voluntary liquidation. In the event of an Insolvency Event, the Trustee
will proceed to sell, dispose of or otherwise liquidate the Receivables
in a commercially reasonable manner and on commercially reasonable terms,
unless within a specified period of time Certificateholders representing
undivided interests aggregating more than 50% of the Invested Amount of
each Series of Certificates issued and outstanding (or, with respect to
any Series with two or more Classes, 50% of the Invested Amount of each
Class) and possibly certain other persons specified in the Supplement for
a Series instruct otherwise (assuming that the bankruptcy trustee,
conservator or receiver does not order such a sale despite such
instructions). The proceeds from the sale of the Receivables would be
treated as collections of the Receivables and deposited into the
Collection Account and after distribution of such amounts the Trust will
terminate. This procedure could be delayed, as described above. In
addition, upon the occurrence of a Pay Out Event or Reinvestment Event,
if a trustee in bankruptcy, a conservator or receiver is appointed for
the Transferor and no Pay Out Event or Reinvestment Event other than such
conservatorship or receivership or bankruptcy or insolvency of the
Transferor exists, the bankruptcy trustee, conservator or receiver may
have the power to prevent the early sale, liquidation or disposition of
the Receivables and the commencement of the Early Amortization Period or
Early Accumulation Period and may be able to require that new Principal
Receivables be transferred to the Trust. In addition, the trustee,
receiver or conservator for the Transferor may have the power to cause
early sale of the Receivables and the early payment of the Certificates
or to prohibit the continued transfer of Receivables to the Trust. See
"Description of the Certificates -- Pay Out Events and Reinvestment
Events."
While the Bank is the Servicer, cash collections held by the Bank
may, subject to certain conditions, be commingled and used for the
benefit of the Bank prior to each Distribution Date and, in the event of
the insolvency, receivership or conservatorship of the Bank or, in
certain circumstances, the lapse of certain time periods, the Trust may
not have a perfected interest in such collections and accordingly, be
entitled to such collections. The Bank will be allowed to make monthly
rather than daily deposits of collections to the Collection Account if
either the Bank obtains a commercial paper rating of at least A-1 and P-1
(or its equivalent) by the applicable Rating Agency or the Bank makes
other arrangements that satisfy the Rating Agency Condition. If either of
the foregoing conditions are not satisfied, then the Bank will, within
five business days, commence the deposit of collections directly into the
Collection Account within two business days of the Date of Processing.
In the event of a Servicer Default relating to the bankruptcy or
insolvency of the Servicer, and no Servicer Default other than such
bankruptcy or insolvency related Servicer Default exists, the bankruptcy
trustee, conservator or receiver may have the power to prevent either the
Trustee or the Certificateholders from appointing a successor Servicer.
See "Description of the Pooling and Servicing Agreement -- Servicer
Default."
CONSUMER PROTECTION LAWS
The relationship of the cardmember and credit card issuer is
extensively regulated by federal and state consumer protection laws. With
respect to credit cards issued by the Account Owners, the most
significant federal laws include the Federal Truth-in-Lending, Equal
Credit Opportunity, Fair Credit Billing, Equal Credit Opportunity,
Electronic Funds Transfer, Fair Credit Reporting and Fair Debt Collection
Practices Acts. These statutes impose various disclosure requirements
either before or when an Account is opened, or both, and at the end of
monthly billing cycles, and, in addition, limit cardmember liability for
unauthorized use, prohibit certain discriminatory practices in extending
credit, and regulate practices followed in collections. In addition,
cardmembers are entitled under these laws to have payments and credits
applied to the credit card account promptly and to request prompt
resolution of billing errors. Congress and the states may enact new laws
and amendments to existing laws to regulate further the credit card
industry. The Trust may be liable for certain violations of consumer
protection laws that apply to the Receivables, either as assignee from
the Transferor (as the applicable Account Owner's assignee) with respect
to obligations arising before transfer of the Receivables to the Trust or
as the party directly responsible for obligations arising after the
transfer. In addition, a cardmember may be entitled to assert such
violations by way of set-off against the obligation to pay the amount of
Receivables owing. All Receivables that were not created in compliance in
all material respects with the requirements of such laws (if such
noncompliance has a material adverse effect on the Certificateholders'
interest therein) will be reassigned to the Transferor and ultimately
back to the Account Owners. The Servicer has also agreed in the Pooling
and Servicing Agreement to indemnify the Trust, among other things, for
any liability arising from such violations. For a discussion of the
Trust's rights if the Receivables were not created in compliance in all
material respects with applicable laws, see "Description of the Pooling
and Servicing Agreement -- Representations and Warranties."
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 charged off as uncollectible. See "Description
of the Pooling and Servicing Agreement -- Defaulted Receivables; Rebates
and Fraudulent Charges."
PROPOSED LEGISLATION
Congress and the states may enact new laws and amendments to
existing laws to regulate further the credit card industry or to reduce
finance charges or other fees or charges applicable to credit card
accounts. The potential effect of any such legislation could be to reduce
the yield on the Accounts. If such yield is reduced, a Pay Out Event or
Reinvestment Event could occur, and the Early Amortization Period or
Early Accumulation Period would commence. See "Description of the
Certificates -- Pay Out Events and Reinvestment Events."
CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES
GENERAL
The following discussion, summarizing certain anticipated 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 Federal income tax laws (for example, banks and life
insurance companies). PROSPECTIVE INVESTORS ARE ADVISED TO CONSULT THEIR
OWN TAX ADVISORS WITH REGARD TO THE FEDERAL TAX CONSEQUENCES OF THE
PURCHASE, OWNERSHIP, OR DISPOSITION OF INTERESTS IN CERTIFICATES, AS WELL
AS THE TAX CONSEQUENCES ARISING UNDER THE LAWS OF ANY STATE, FOREIGN
COUNTRY, OR OTHER TAXING JURISDICTION.
CHARACTERIZATION OF THE CERTIFICATES AS INDEBTEDNESS
Unless otherwise specified in the related Prospectus Supplement,
special tax counsel to the Transferor ("Special Tax Counsel") specified
in such Prospectus Supplement will, upon issuance of a Series of
Certificates, advise the Transferor 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 Pooling and Servicing 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 Pooling and Servicing 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 debt obligation.
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
indebtedness 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.
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
Transferor 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 when
received (in the case of a cash basis taxpayer) or accrued (in the case
of an accrual basis taxpayer) 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 not clear), the
amount of OID which will accrue in any given "accrual period" may either
increase or decrease depending upon the actual prepayment rate.
Accordingly, each Certificate Owner should consult its own tax advisor
regarding the impact to it of the OID rules if the Offered Certificates
are issued with OID. Under the Regulations, a holder of a Certificate
issued with de minimis OID must include such OID in income
proportionately as principal payments are made on a Class of
Certificates.
A holder 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 Offered
Certificate.
A subsequent holder who purchases an Offered Certificate at a
premium may elect to amortize and deduct this premium over the remaining
term of the Offered Certificate in accordance with rules set forth in
Section 171 of the Code.
SALE 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 (as 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 Pooling and Servicing 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, the
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 certain classes of
Certificateholders are partners, and which has issued debt represented by
other Classes of Certificates (including, unless otherwise specified in a
Supplement, the Offered Certificates). In connection with the issuance of
Certificates of any Series, Special Tax Counsel will render an opinion to
the Transferor, 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 Trust to be characterized for Federal
income tax purposes as an association (or publicly traded partnership)
taxable as a corporation.
The opinion of Special Tax Counsel with respect to Offered
Certificates and the Trust will not be binding on the courts or the IRS.
It is possible that the IRS could assert that, for purposes of the Code,
the transaction contemplated by this Prospectus and a related 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 Transferor
and some or all of the Certificate Owners or Certificateholders of one or
more Series resulting from the transaction is that of a partnership
(including a publicly traded 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 or corporation (unless, as is permitted by the Pooling and
Servicing Agreement, an interest in the Trust is issued or sold that is
intended to be classified as an interest in a partnership).
If the 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 intends to take measures designed to reduce the risk that the
Trust could be classified as a publicly traded partnership taxable as a
corporation by reason of trading of interests in the 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. Although the Transferor expects that such measures
would be successful, there can be no absolute assurance that the 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 or Certificateholders 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 or Certificateholders 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, 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) might, under certain
circumstances, constitute "unrelated business taxable income" which
generally would be taxable to the holder under the Code. 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, the 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)
generally would be treated as dividends for tax purposes to the extent of
such deemed corporation's earnings and profits.
FASIT LEGISLATION
Recently enacted provisions of the Code provide for the creation of
a new type of entity for federal income tax purposes, the "financial
asset securitization investment trust" ("FASIT"). However, these
provisions are not effective until September 1, 1997, and many technical
issues concerning FASITs must be addressed by Treasury regulations.
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. The Pooling and Servicing 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 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
Trust will not be deemed to be an association (or 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 the 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 the income
of which is includible in gross income for U.S. Federal income tax
purposes, regardless of its source or, for tax years beginning after
December 31, 1996 (and, if a trustee so elects, for tax years ending
after August 20, 1996), 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. fiduciaries 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 evidenced by 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; (y) the Foreign Investor delivers
IRS Form 1001, signed by the Certificate Owner or such Certificate
Owner's agent, claiming exemption from withholding under an applicable
tax treaty; or (z) 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 percent 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 the
Trust if 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 Exchangeable Transferor Certificate other than the
Transferor or any holder of the Certificates of any Series not properly
characterized as debt. Applicable identification requirements generally
will be satisfied if there is delivered to a securities clearing
organization (i) IRS Form W-8 signed under penalties of perjury by the
Certificate Owner, stating that the Certificate Owner is not a U.S.
person and providing such Certificate Owner's name and address. In the
case of (x), (y) or (z) the appropriate form will be effective provided
that (a) the applicable form is delivered pursuant to applicable
procedures and is properly transmitted to the United States entity
otherwise required to withhold tax and (b) none of the entities receiving
the form has actual knowledge that the Certificate Owner is a U.S.
person.
Recently proposed Treasury regulations (the "Proposed Regulations")
could affect the procedures to be followed by a Foreign Investor in
complying with United States Federal withholding, backup withholding and
information reporting rules. The Proposed Regulations are not currently
effective but, if finalized in their current form, would be effective for
payments made after December 31, 1997. Prospective investors are urged to
consult their tax advisors regarding the effect, if any, of the Proposed
Regulations on the purchase, ownership, and disposition of the Offered
Certificates.
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 the 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.
STATE AND LOCAL TAXATION
The discussion above does not address the tax treatment of the
Trust, the Certificates of any Series, or the Certificate Owners of any
Series under state or local tax laws. Prospective investors are urged to
consult their own 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.
ERISA CONSIDERATIONS
Section 406 of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA") and Section 4975 of the Code prohibit a pension,
profit sharing or other employee benefit plan from engaging in certain
transactions involving "plan assets" with persons that are "parties in
interest" under ERISA or "disqualified persons" under the Code with
respect to the plan. ERISA also imposes certain duties on persons who are
fiduciaries of plans subject to ERISA and prohibits certain transactions
between a plan and parties in interest with respect to such plans. Under
ERISA, any person who exercises any authority or control respecting the
management or disposition of the assets of a plan is considered to be a
fiduciary of such plan (subject to certain exceptions not here relevant).
A violation of these "prohibited transaction" rules may generate excise
tax and other liabilities under ERISA and the Code for such persons.
Plan fiduciaries must determine whether the acquisition and holding
of the Certificates of a Series and the operations of the Trust would
result in direct or indirect prohibited transactions under ERISA and the
Code. The operations of the Trust could result in prohibited transactions
if Benefit Plans that purchase the Certificates of a Series are deemed to
own an interest in the underlying assets of the Trust. There may also be
an improper delegation of the responsibility to manage Benefit Plan
assets if Benefit Plans that purchase the Certificates are deemed to own
an interest in the underlying assets of the Trust.
Pursuant to a final regulation (the "Final 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 Section 4975 of 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 Final Regulation is applicable to the Trust.
The Final 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 in the Trust, the Final
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 at the conclusion of the offering and (iii) either is (A) part of
a class of securities registered under Section 12(b) or 12(g) of the
Exchange Act or (B) sold to the Benefit Plan as part of an offering of
securities to the public pursuant to an effective registration statement
under the Securities Act and the class of securities of which such
security is a part is registered under the Exchange Act within 120 days
(or such later time as may be allowed by the Commission) after the end of
the fiscal year of the issuer during which the offering of such
securities to the public occurred.
In addition, the Final 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, 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 Final 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 Final 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 any such plan's
investment in the entity.
It is anticipated that interests in the Certificates of a Series
will meet the criteria of publicly-offered securities as set forth above.
The underwriters expect (although no assurances can be given) that
interests in certain Classes of Certificates of each Series, as specified
in the related Prospectus Supplement, 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 Classes of such Series; and interests in the
Certificates of such Classes 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 and investment by benefit plan
investors is or becomes significant so that 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 Benefit Plans might be
prohibited under Section 406 of ERISA and Section 4975 of the Code unless
an exemption is applicable. 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 Section 4975 of the Code unless
such investment is subject to a statutory or administrative exemption.
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. 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
interests in 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, 510 U.S. 86 (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 of the transactions that could occur as the result of the
acquisition and holding of interests in Certificates of a Series by an
insurance company general account from the penalties normally associated
with prohibited transactions. Accordingly, investors should analyze
whether John Hancock and PTE 95-60 or any other exemption may have an
impact with respect to their purchase of the Certificates of any Series.
In addition, insurance companies considering the purchase of
Certificates using assets of a general account should consult their own
employee benefits counsel or other appropriate counsel with respect to
the effect of the Small Business Job Protection Act of 1996 which added a
new Section 401(c) to ERISA relating to the status of the assets of
insurance company general accounts under ERISA and Section 4975 of the
Code. Pursuant to Section 401(c), the DOL is required to issue final
regulations (the "General Account Regulations") not later than December
31, 1997 with respect to insurance policies issued on or before December
31, 1998 that are supported by an insurer's general account. The General
Account Regulations are intended to provide guidance on which assets held
by the insurer constitute "plan assets" for purposes of the fiduciary
responsibility provisions of ERISA and Section 4975 of the Code. Section
401(c) also provides that, except in the case of avoidance of the General
Account Regulations and actions brought by the Secretary of Labor
relating to certain breaches of fiduciary duties that also constitute
breaches of state or Federal criminal law, until the date that is 18
months after the General Account Regulations become final, no liability
under the fiduciary responsibility and prohibited transaction provisions
of ERISA and Section 4975 may result on the basis of a claim that the
assets of the general account of an insurance company constitute the plan
assets of any Benefit Plan. The 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 OF DISTRIBUTION
The Transferor may sell Certificates (a) through underwriters or
dealers, (b) directly to one or more purchasers, or (c) through agents.
The related Prospectus Supplement will set forth the terms of the
offering of any Certificates offered hereby, including, without
limitation, the 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 public offering price and any discounts or
concessions allowed or reallowed or paid to dealers.
If underwriters are used in a sale of any Certificates of a Series
offered hereby, such Certificates will be acquired by the underwriters
for their own account and may be resold from time to time in one or more
transactions, including negotiated transactions, at a fixed public
offering price or at varying prices to be determined at the time of sale
or at the time of commitment therefor. Such Certificates may be offered
to the public either through underwriting syndicates represented by
managing underwriters or by underwriters without a syndicate. Unless
otherwise set forth in the related Prospectus Supplement, the obligations
of the underwriters to purchase such Certificates will be subject to
certain conditions precedent, and the underwriters will be obligated to
purchase all of such Certificates if any of such Certificates are
purchased. Any initial public offering price and any discounts or
concessions allowed or reallowed or paid to dealers may be changed from
time to time.
Certificates may also be sold directly by the Transferor or through
agents designated by the Transferor from time to time. Any agent involved
in the offer or sale of Certificates will be named, and any commissions
payable by the Transferor to such agent will be set forth, in the related
Prospectus Supplement. Unless otherwise indicated in the related
Prospectus Supplement, any such agent will act on a best efforts basis
for the period of its appointment.
Any underwriters, agents or dealers participating in the
distribution of Certificates may be deemed to be underwriters, and any
discounts or commissions received by them on the sale or resale of
Certificates may be deemed to be underwriting discounts and commissions,
under the Securities Act. Agents and underwriters may be entitled under
agreements entered into with the Transferor and [the Bank] to
indemnification by the Transferor and [the Bank] against certain civil
liabilities, including liabilities under the Securities Act, or to
contribution with respect to payments that the agents or underwriters may
be required to make in respect thereof. Agents and underwriters may be
affiliates or customers of, engage in transactions with, or perform
services for, the Transferor and [the Bank] or their affiliates in the
ordinary course of business.
LEGAL MATTERS
Certain legal matters relating to the Certificates will be passed
upon for the Transferor and the Trust by Skadden, Arps, Slate, Meagher &
Flom LLP, New York, New York. Certain legal matters will be passed upon
for the Underwriters by the counsel named in the Prospectus Supplement.
INDEX OF DEFINED TERMS
Terms Page(s)
Accounts .......................................................1, 27
Accumulation Period Length............................................39
Additional Accounts...................................................26
Adverse Effect....................................................25, 40
Aggregate Addition....................................................26
Aggregate Addition Accounts...........................................25
Average Rate..........................................................23
Bank ........................................................1, 3
Bank Portfolio........................................................28
Billing Cycle.........................................................30
BKB CT ...........................................................4
CCRFC................................................................ 1
Cede .......................................................1, 30
Cedel ...........................................................9
Cedel Participants....................................................31
Certificate Owner.....................................................62
Certificate Owners.....................................................1
Certificateholders' Interest...........................................5
Certificates...........................................................1
Class ...........................................................1
Code ..........................................................61
Collateral Interest...................................................52
Collection Account....................................................45
Commission ...........................................................1
Controlled Accumulation Amount........................................11
Controlled Accumulation Period........................................11
Controlled Amortization Amount........................................12
Controlled Amortization Period........................................12
Controlled Deposit Amount.............................................11
Controlled Distribution Amount........................................12
Cooperative ..........................................................32
Credit Enhancement....................................................16
Credit Enhancer.......................................................51
Date of Processing....................................................17
Defaulted Amount......................................................50
Defaulted Receivables.................................................50
Definitive Certificates...............................................30
Depositaries..........................................................30
Depository ..........................................................29
Determination Date....................................................17
Disclosure Document....................................................7
Discount Option Receivables...........................................41
Discount Percentage...................................................41
Distribution Date.....................................................17
DTC ...........................................................1
Early Accumulation Period.............................................12
Early Amortization Period.............................................13
Eligible Account......................................................26
Eligible Institution..................................................45
Eligible Investments..................................................45
Eligible Receivable...................................................37
Enhancement Invested Amount........................................5, 51
ERISA.................................................................67
Euroclear ...........................................................9
Euroclear Operator....................................................32
Euroclear Participants................................................32
Euroclear Provisions..................................................32
Excess Allocation Series..............................................13
Excess Finance Charge Collections.....................................48
Exchange Act...........................................................1
Expected Final Payment Date...........................................10
FAMIS.................................................................28
FASIT ..........................................................65
FDC...................................................................29
FDR................................................................3, 28
FICO..................................................................29
Finance Charge Receivables.............................................9
Floating Allocation Percentage........................................46
Foreign Investors.....................................................65
Full Invested Amount..................................................16
Funding Period........................................................15
Group ...........................................................5
Group Investor Additional Amounts.....................................47
Group Investor Default Amount.........................................47
Group Investor Finance Charge Collections.............................47
Group Investor Monthly Fees...........................................47
Group Investor Monthly Interest.......................................47
Holders ..........................................................33
Indirect Participants.................................................30
Ineligible Receivables................................................37
Initial Accounts.......................................................8
Initial Cut-Off Date...................................................8
Insolvency Event......................................................20
Interchange ......................................................28, 31
Interest Funding Account...............................................9
Interest Payment Date.................................................43
Invested Amount.......................................................43
Investor Finance Charge Collections...................................48
IRS ..........................................................62
L/C Issuer ..........................................................52
LIBOR ..........................................................52
MasterCard ...........................................................4
Minimum Monthly Payment...............................................30
Monthly Period.........................................................6
Monthly Servicing Fee.................................................36
New Accounts..........................................................26
New Issuance..........................................................43
Offered Certificates..................................................61
OID ..........................................................62
Paired Series.........................................................14
Participants..........................................................30
Participation Interests................................................5
Pay Out Event.........................................................35
Pooling and Servicing Agreement........................................1
Portfolio Yield.......................................................23
Pre-Funding Account...................................................16
Pre-Funding Amount....................................................16
Premium Option Receivables............................................41
Premium Percentage....................................................41
Prepayable Instrument.................................................63
Principal Allocation Percentage...................................15, 46
Principal Commencement Date...........................................10
Principal Funding Account.............................................11
Principal Receivables..................................................9
Principal Sharing Series..............................................14
Principal Shortfalls..................................................49
Principal Terms.......................................................44
Prior Series..........................................................15
Proposed Regulations..................................................66
Prospectus Supplement..................................................1
PTE ..........................................................68
Purchase Agreement.....................................................7
Rating Agency.........................................................18
Rating Agency Condition...............................................25
Reallocated Investor Finance Charge Collections.......................47
Reallocation Group....................................................14
Receivables ........................................................1, 4
Record Date ..........................................................30
Recoveries .......................................................9, 32
Regulations ..........................................................62
Reinvestment Events...................................................35
Removed Accounts.......................................................8
Required Minimum Principal Balance....................................40
Required Transferor Amount.............................................6
Revolving Period......................................................10
Securities Act.........................................................1
Series ........................................................1, 3
Series Adjusted Invested Amount.......................................45
Series Allocable Defaulted Amount.....................................45
Series Allocable Finance Charge Collections.......................45, 47
Series Allocable Principal Collections................................45
Series Allocation Percentage..........................................46
Series Closing Date...................................................10
Series Cut-Off Date...................................................10
Series Enhancement.....................................................4
Series Invested Amount................................................40
Series Required Transferor Amount.....................................46
Series Termination Date...............................................11
[Series] Yield Supplement Account.....................................47
Service Transfer......................................................54
Servicer ........................................................1, 3
Servicer Default......................................................54
Servicer Interchange..................................................41
Servicing Fee.........................................................36
Shared Principal Collections..........................................48
Special Funding Account...............................................49
Special Payment Date..................................................35
Special Tax Counsel...................................................61
Supplement ...........................................................6
Supplemental Certificate..............................................39
Supplemental Certificates..............................................6
Swaps ..........................................................52
Tax Opinion ..........................................................44
Termination Notice....................................................54
Transfer Date.........................................................17
Transferor ........................................................1, 4
Transferor Amount..................................................6, 38
Transferor Certificate.................................................6
Transferor Certificates................................................6
Transferor Servicing Fee..............................................36
Transferor's Interest..................................................5
Trust ........................................................1, 3
Trust Adjusted Invested Amount........................................46
Trust Assets...........................................................4
Trust Portfolio.......................................................28
Trustee ........................................................1, 3
VISA ...........................................................4
Yield Supplement Account...............................................9
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following is an itemized list of the estimated expenses to be
incurred in connection with the offering of the securities being offered
hereunder other than underwriting discounts and commissions.
Registration Fee........................................... $303.03
Printing and Engraving..................................... *
Trustee's Fees............................................. *
Legal Fees and Expenses.................................... *
Accountant's Fees and Expenses............................. *
Rating Agency Fees......................................... *
Miscellaneous Fees......................................... *
--------------
Total ................................................... *
==============
* To be supplied by amendment.
ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS
Article IX of the Registrant's Certificate of Incorporation
("Article IX") provides that no person shall be personally liable to the
Registrant or its stockholders for monetary damages for breach of
fiduciary duty as a director; provided, however, that the foregoing does
not eliminate or limit the liability of a director (i) for any breach of
the director's duty of loyalty to the Registrant or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174 of
the General Corporation Law of the State of Delaware or any successor
provision or (iv) for any transaction from which the director derived an
improper personal benefit. Article IX also provides that, if the General
Corporation Law of the State of Delaware is amended to authorize
corporate action further eliminating or limiting the personal liability
of directors, then the liability of a director of the Transferor shall be
eliminated or limited to the fullest extent permitted by the General
Corporation Law of the State of Delaware, as so amended from time to
time. The right of indemnification provided in Article IX is not
exclusive of any other rights to which any person seeking indemnification
may otherwise be entitled, and will be applicable to matters otherwise
within its scope whether or not such matters arose or arise before or
after the adoption of Article IX. Without limiting the generality or the
effect of the foregoing, the Registrant may adopt by-laws, or enter into
one or more agreements with any person, which provide for indemnification
greater or different than that provided in Article IX. No repeal or
modification of Article IX by the stockholders of the Registrant may
adversely affect any right or protection of a director of the Registrant
existing by virtue of Article IX at the time of such repeal or
modification.
Section 145 of the Delaware General Corporation Law provides
generally and in pertinent part that a Delaware corporation may indemnify
its directors and officers against expenses, judgments, fines and
settlements actually and reasonably incurred by them in connection with
any civil, criminal, administrative, or investigative suit or action,
except actions by or in the right of the corporation if, in connection
with the matters in issue, they acted in good faith and in a manner they
reasonably believed to be in or not opposed to the best interests of the
corporation, and in connection with any criminal suit or proceeding, if
in connection with the matters in issue, they had no reasonable cause to
believe their conduct was unlawful. Section 145 further provides that in
connection with the defense or settlement of any action by or in the
right of the corporation, a Delaware corporation may indemnify its
directors and officers against any expenses actually and reasonably
incurred by them if, in connection with the matters in issue, they acted
in good faith in a manner they reasonably believed to be in or not
opposed to the best interests of the corporation, except that no
indemnification may be made with respect to any claim, issue or matter as
to which such person has been adjudged liable to the corporation unless
the Court of Chancery or the court in which such action or suit is
brought approves such indemnification. Section 145 further permits a
Delaware corporation to grant its directors and officers additional
rights of indemnification through bylaw provisions and otherwise, and to
purchase indemnity insurance on behalf of its directors and officers.
Section 102(b)(7) of the Delaware General Corporation Law provides
that a Delaware corporation may eliminate or limit the personal liability
of a director to the corporation or its stockholders for monetary damages
for breach of fiduciary duty as director, provided that such corporation
shall not eliminate or limit the liability of a director: (i) for any
breach of the director's duty of loyalty to the corporation or its
stockholders; (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law; (iii) under
ss. 174 of the Delaware General Corporation Law; or (iv) for any
transaction from which the director derived an improper personal benefit.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
1.1 Form of Underwriting Agreement.*
4.1 Pooling and Servicing Agreement and related agreements as exhibits
thereto.*
5.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP with respect
to legality.*
8.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP with
respect to tax matters.*
23.1 Consent of Skadden, Arps, Slate, Meagher & Flom LLP included in
his opinions, filed as Exhibit 5.1.*
23.2 Consent of Skadden, Arps, Slate, Meagher & Flom LLP included in its
opinions filed as Exhibit 8.1.*
24 Power of Attorney (included on page II-2).
--------------------
* To be filed by amendment.
(b) Financial Statements
All financial statements, schedules and historical financial
information have been omitted as they are not applicable.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes as follows:
(i) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement: (i) to
include any prospectus required by Section 10(a)(3) of the Securities
Act; (ii) to reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in
the registration statement; (iii) to include any material information
with respect to the plan of distribution not previously disclosed in the
registration statement or any material change to such information in the
registration statement; provided, however, that (a)(i) and (a)(ii) will
not apply if the information required to be included in a post-effective
amendment by those sub-paragraphs is contained in periodic reports filed
by the registrant pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in this
registration statement.
(ii) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(iii) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
(iv) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the registrant's annual report
pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934
(and, where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Securities Exchange Act of 1934)
that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form S-3 and has duly caused
this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Boston,
Commonwealth of Massachusetts, on June 17, 1997.
CREDIT CARD RECEIVABLES FUNDING CORPORATION
(Registrant)
By /s/ Jeff H. Slawsky
Name: Jeff H. Slawsky
Title: President
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned does
hereby constitute and appoint each of Jeff H. Slawsky, Paul A. Auerbach
and Rhanna Kidwell his or her true and lawful attorney-in-fact and agent,
each with full power of substitution, for him or her and on his or her
behalf to sign, execute and file this Registration Statement and any or
all amendments (including, without limitation, post-effective amendments
and any amendment or amendments increasing the amount of securities for
which registration is being sought) to this Registration Statement, with
all exhibits and any and all documents required to be filed with respect
thereto, with the Securities and Exchange Commission or any regulatory
authority, granting unto such attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises in order to effectuate the
same as fully to all intents and purposes as he or she might or could do
if personally present, hereby ratifying and confirming all that such
attorney-in-fact and agents may lawfully do or cause to be done.
Pursuant to the Requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
CREDIT CARD RECEIVABLES FUNDING CORPORATION
SIGNATURE TITLE
/s/ Kathleen M. McGillycuddy
- ----------------------------
Kathleen M. McGillycuddy Chairman of the June 17, 1997
(Principal Executive
Officer) and Director
/s/ Jeff H. Slawsky
- ----------------------------
Jeff H. Slawsky President and Director June 17, 1997
/s/ Rhanna Kidwell
- ----------------------------
Rhanna Kidwell Secretary and Treasurer June 17, 1997
(Principal Financial
Officer Principal
Accounting Officer)
/s/ William M. Parent
- ----------------------------
William M. Parent Director June 17, 1997
EXHIBIT INDEX
Exhibit No. Description Page No.
1.1 Form of Underwriting Agreement*
4.1 Pooling and Servicing Agreement and related agreements as
exhibits thereto; the first, second and third amendments
thereto; and the fourth and fifth amendments thereto*
5.1 Opinion of Skadden, Arps, Slate,
Meagher & Flom LLP*
8.1 Opinion of Skadden, Arps, Slate,
Meagher & Flom LLP with respect to tax
matters*
23.1 Consent of Skadden, Arps, Slate,
Meagher & Flom LLP (included in its
opinion filed as Exhibit 5.1)*
24 Power of Attorney (included on page
II-2)
--------------------
* To be filed by amendment.
