AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 7, 1997
REGISTRATION NO. 333-29495
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
AMENDMENT NO. 1
TO
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 & Orrick, Herrington & Sutcliffe LLP
Flom LLP 666 Fifth Avenue
919 Third Avenue New York, New York 10103
New York, New York 10022-9931 (212) 506-5000
(212) 735-2853
---------------------------
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. ( )
-------------------------------
CALCULATION OF REGISTRATION FEE
TITLE OF EACH AMOUNT TO PROPOSED PROPOSED AMOUNT OF
CLASS OF BE MAXIMUM MAXIMUM REGISTRATION
SECURITIES TO REGISTERED OFFERING OFFERING FEE
BE REGISTERED PRICE PRICE (1)
PER UNIT (1)
Asset Backed
Certificates . . $1,000,000 100% $1,000,000 $303.03(2)
(1) Estimated solely for purpose of calculating the registration fee.
(2) $303.03 of which was previously paid in connection with the
original filing of the Registration Statement.
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]
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 AUGUST 7, 1997
-----------------------------------------------------------------------
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 The Bank of New York, 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"), collections thereon, monies on deposit in
certain accounts of the Trust, any Participation Interests (as
defined herein) included in the Trust, collections thereon and any
Credit Enhancement (as defined herein) with respect to any particular
Series or Class as more fully described herein and, with respect to a
Series offered hereby, in the related Prospectus Supplement. 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 THE INFORMATION SET FORTH IN
"RISK FACTORS" COMMENCING ON PAGE 17 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 . . . . . . . . . . . . . . . . . . . . v
REPORTS TO CERTIFICATEHOLDERS . . . . . . . . . . . . . . . . v
AVAILABLE INFORMATION . . . . . . . . . . . . . . . . . . . . v
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE . . . . . . . v
PROSPECTUS SUMMARY . . . . . . . . . . . . . . . . . . . . . 1
RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . 17
USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . 25
THE TRUST . . . . . . . . . . . . . . . . . . . . . . . . . . 26
CREDIT CARD ACTIVITIES . . . . . . . . . . . . . . . . . . . 26
General . . . . . . . . . . . . . . . . . . . . . . . . 26
Business Strategy . . . . . . . . . . . . . . . . . . . 27
Processing and Servicing of Credit Card Accounts . . . . 27
Account Origination . . . . . . . . . . . . . . . . . . 28
Underwriting Procedures . . . . . . . . . . . . . . . . 28
Additional Accounts . . . . . . . . . . . . . . . . . . 29
Billing and Payments . . . . . . . . . . . . . . . . . . 29
Interchange . . . . . . . . . . . . . . . . . . . . . . 30
Collection of Delinquent Accounts . . . . . . . . . . . 30
Recoveries . . . . . . . . . . . . . . . . . . . . . . . 31
Fraud Prevention . . . . . . . . . . . . . . . . . . . . 31
THE BANK . . . . . . . . . . . . . . . . . . . . . . . . . . 31
CREDIT CARD RECEIVABLES FUNDING CORPORATION . . . . . . . . . 31
THE ACCOUNTS . . . . . . . . . . . . . . . . . . . . . . . . 31
DESCRIPTION OF THE CERTIFICATES . . . . . . . . . . . . . . . 32
General . . . . . . . . . . . . . . . . . . . . . . . . 32
Book-Entry Registration . . . . . . . . . . . . . . . . 33
Definitive Certificates . . . . . . . . . . . . . . . . 36
Interest . . . . . . . . . . . . . . . . . . . . . . . . 36
Principal . . . . . . . . . . . . . . . . . . . . . . . 37
Pay Out Events and Reinvestment Events . . . . . . . . . 38
Servicing Compensation and Payment of Expenses . . . . . 39
DESCRIPTION OF THE POOLING AND SERVICING AGREEMENT . . . . . 40
Conveyance of Receivables . . . . . . . . . . . . . . . 40
Representations and Warranties . . . . . . . . . . . . . 41
The Transferor Certificates . . . . . . . . . . . . . . 43
Additions of Accounts or Participation Interests . . . . 43
Removal of Accounts . . . . . . . . . . . . . . . . . . 44
Discount Option . . . . . . . . . . . . . . . . . . . . 44
Yield Supplement Account . . . . . . . . . . . . . . . . 45
Premium Option . . . . . . . . . . . . . . . . . . . . . 45
Indemnification . . . . . . . . . . . . . . . . . . . . 46
Collection and Other Servicing Procedures . . . . . . . 46
New Issuances . . . . . . . . . . . . . . . . . . . . . 47
Collection Account . . . . . . . . . . . . . . . . . . . 48
Allocations . . . . . . . . . . . . . . . . . . . . . . 49
Groups of Series . . . . . . . . . . . . . . . . . . . . 50
Reallocations Among Certificates of Different Series
within a Reallocation Group . . . . . . . . . . . . 50
Sharing of Excess Finance Charge Collections Among
Excess Allocation Series . . . . . . . . . . . . . 52
Shared Principal Collections . . . . . . . . . . . . . . 52
Paired Series . . . . . . . . . . . . . . . . . . . . . 53
Special Funding Account . . . . . . . . . . . . . . . . 53
Funding Period . . . . . . . . . . . . . . . . . . . . . 53
Defaulted Receivables; Rebates and Fraudulent Charges . 54
Credit Enhancement . . . . . . . . . . . . . . . . . . . 54
Interest Rate Swaps and Related Caps, Floors and
Collars . . . . . . . . . . . . . . . . . . . . . . 56
Servicer Covenants . . . . . . . . . . . . . . . . . . . 57
Certain Matters Regarding the Servicer . . . . . . . . . 57
Servicer Default . . . . . . . . . . . . . . . . . . . . 58
Evidence as to Compliance . . . . . . . . . . . . . . . 59
Amendments . . . . . . . . . . . . . . . . . . . . . . . 59
List of Certificateholders . . . . . . . . . . . . . . . 60
The Trustee . . . . . . . . . . . . . . . . . . . . . . 60
DESCRIPTION OF THE PURCHASE AGREEMENTS . . . . . . . . . . . 60
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES . . . . . . . . . . 61
Transfer of Receivables . . . . . . . . . . . . . . . . 61
Certain Matters Relating to Insolvency . . . . . . . . . 62
Consumer Protection Laws . . . . . . . . . . . . . . . . 64
Proposed Legislation . . . . . . . . . . . . . . . . . . 65
U.S. FEDERAL INCOME TAX CONSEQUENCES . . . . . . . . . . . . 65
General . . . . . . . . . . . . . . . . . . . . . . . . 65
Characterization of the Certificates as Indebtedness . . 65
Taxation of Interest Income of Certificateholders . . . 66
Sale of a Certificate . . . . . . . . . . . . . . . . . 67
Tax Characterization of the Trust . . . . . . . . . . . 68
FASIT Legislation . . . . . . . . . . . . . . . . . . . 69
Foreign Investors . . . . . . . . . . . . . . . . . . . 69
STATE AND LOCAL TAXATION . . . . . . . . . . . . . . . . . . 70
ERISA CONSIDERATIONS . . . . . . . . . . . . . . . . . . . . 71
PLAN OF DISTRIBUTION . . . . . . . . . . . . . . . . . . . . 73
LEGAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . 74
INDEX OF DEFINED TERMS . . . . . . . . . . . . . . . . . . . 75
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 beginning on page
75 herein 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 Bank of New York (the
"Trustee"), a New York 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 Card 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, charge card receivables
and other self-liquidating financial
assets. See "Description of the
Pooling and Servicing Agreement --
Addition of New Accounts or
Participation Interests."
To the extent provided in any
Supplement (as defined herein), or
in an amendment to the Pooling and
Servicing Agreement, all or a
____________________
* VISA and MasterCard are registered trademarks of VISA USA,
Inc. ("VISA") and MasterCard International Incorporated
("MasterCard"), respectively.
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 or purchased 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 third 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 application 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 the following risk factors in
connection with the purchase of the Certificates.
Limited Liquidity. It is anticipated that, to the extent
permitted, the underwriters of any Series of Certificates offered
hereby will make a market in such Certificates, but in no event
will any such underwriter be under an obligation to do so. There
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 Federal Deposit Insurance Corporation ("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. The
Transferor has been advised by its counsel, Skadden, Arps, Slate,
Meagher & Flom LLP, that the facts of Octagon are
distinguishable from those in the sale transactions between the
Account Owners and the Transferor and between the Transferor and
the Trust and that 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 the
Transferor consents or fails to object to the appointment of a
bankruptcy trustee or conservator, receiver or liquidator in any
bankruptcy, insolvency or similar proceedings of or relating to
the Transferor, or the commencement of an action for the
appointment of a bankruptcy trustee or conservator, receiver or
liquidator in any insolvency or similar proceedings, or for the
winding-up, insolvency, bankruptcy, reorganization,
conservatorship, receivership or liquidation of the Transferor's
affairs, or notwithstanding an objection by the Transferor any
such action remains undischarged or unstayed for a period of 60
days; or the Transferor admits in writing its inability to pay
its debts generally as they become due, files, or consents or
fails to object (or objects without dismissal of any such filing
within 60 days of such filing) to the filing of, a petition to
take advantage of any applicable bankruptcy, insolvency or
reorganization, receivership or conservatorship statute, makes an
assignment for the benefit of its creditors or voluntarily
suspends payment of its obligations (any such event 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. The proceeds of any such reassignment
will be deposited in the Collection Account and treated as
Collections of Principal Receivables. If the proceeds from such
reassignment and any amounts on deposit in the Collection
Account, the Reserve Account and any amounts available from any
Credit Enhancement are not sufficient to pay any Certificates in
full, the amount of principal returned to Certificateholders will
be reduced and some or all of the Certificateholders will incur a
loss. In addition, because the proceeds of any such reassignment
will be distributed to Certificateholders as principal prior to
the scheduled date of such repayment, Certificateholders would
not receive the benefit of the interest rate on the Certificates
specified in the applicable Prospectus Supplement for the period
of time originally expected on the amount of such early
repayment, and accordingly, Certificateholders will bear the
reinvestment risk resulting from faster payment of principal of
the Certificates. There can be no assurance that a
Certificateholder would be able to reinvest such early repayment
amount at a similar rate of return. 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, Technological, Economic and Other Factors.
Changes in card use and payment patterns by cardmembers result
from a variety of social, legal, technological and economic
factors. Social factors include potential changes in consumers'
attitudes towards financing purchases with debt. Technological
factors include new methods of payment, such as debit cards,
electronic billing and payment services and personal computer
banking services. Legal factors include changes in the laws
affecting creditor's rights. Economic factors include the rate
of inflation, unemployment levels, tax law changes, bankruptcy
levels 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."
Pre-Funding Account. With respect to any Series having a
Pre-Funding Account, in the event there is an insufficient amount
of Principal Receivables in the Trust at the end of the
applicable Funding Period, the Certificateholders of such Series
will be repaid principal from amounts on deposit in the Pre-
Funding Account (to the extent of such insufficiency) following
the end of such Funding Period, as described more fully in the
Prospectus Supplement. As a result of such repayment,
Certificateholders would receive a principal payment earlier than
they expected. In addition, Certificateholders would not receive
the benefit of the interest rate on the Certificates specified in
the applicable Prospectus Supplement for the period of time
originally expected on the amount of such early repayment and,
accordingly, Certificateholders will bear the reinvestment risk
resulting from faster payment of principal of the Certificates.
There can be no assurance that a Certificateholder would be able
to reinvest such early repayment amount at a similar return.
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 Massachusetts, Rhode Island, northern Connecticut
and southern New Hampshire, 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 pre-set 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 (net of out-of-
pocket costs of collections), including insurance proceeds, 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. In the Pooling and Servicing Agreement the Transferor is
required to make certain representations and warranties with
respect to the Accounts and the Receivables as of each Series
Closing Date (or as of the related addition date with respect to
Additional Accounts). In the event of a breach of any such
representation or warranty by the Transferor, the Transferor may
be required to accept reassignment of the related Receivables
and, to the extent such breach relates to an Account, such
Account will no longer be included as an Account. See
"Description of the Pooling and Servicing Agreement--
Representations and Warranties."
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
payable from Interchange with respect to any Series will be an
amount equal to the portion of collections of Finance Charge
Receivables allocated to the Certificateholders' Interest of such
Series 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, the Transferor
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.
"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 subsequent transfer or assignment of a Supplemental
Certificate by a person other than the Transferor will be 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. Participation Interests
may, for example, include rights in transferors' interests in, or
certain credit card backed securities issued by, other trusts
which have as their primary assets revolving credit card
receivables originated or purchased by the Bank or another
Account Owner. To the extent required pursuant to the Securities
Act, any Participation Interests transferred to the Trust will
either have been registered under the Securities Act or will have
been entitled to an exemption from the registration requirements
of the Securities Act. There currently are no such Participation
Interests held by the Trust, and Participation Interests may be
added to the Trust only upon satisfaction of certain conditions
specified in the Pooling and Servicing Agreement. "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, 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
The Bank of New York will act as trustee under the Pooling
and Servicing Agreement. The corporate trust office of The Bank
of New York is located at 101 Barclay Street, New York, New York
10286. 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. The
Transferor has been advised by its counsel, Skadden, Arps, Slate,
Meagher & Flom LLP, that the facts of the Octagon case were
distinguishable from those in the sale transactions between the
Account Owners and the Transferor and between the Transferor and
the Trust and that the reasoning of the Octagon case appears to
be inconsistent with established precedent and the UCC. In
addition, because the 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."
U.S. FEDERAL INCOME TAX CONSEQUENCES
GENERAL
The following discussion, summarizing certain anticipated
Federal income tax consequences 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, issue an opinion to 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 "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
issue an opinion to 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)
Account Owners . . . . . . . . . . . . . . . . . . . . . . . . 1
Accounts . . . . . . . . . . . . . . . . . . . . . . . i, 2, 26
Accumulation Period Length . . . . . . . . . . . . . . . . . 37
Additional Accounts . . . . . . . . . . . . . . . . . . . . . 25
Adverse Effect . . . . . . . . . . . . . . . . . . . . . 24, 43
Aggregate Addition . . . . . . . . . . . . . . . . . . . . . 25
Aggregate Addition Accounts . . . . . . . . . . . . . . . . . 24
Average Rate . . . . . . . . . . . . . . . . . . . . . . . . 22
Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . i, 1
Bank Portfolio . . . . . . . . . . . . . . . . . . . . . . . 26
Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . 71
Billing Cycle . . . . . . . . . . . . . . . . . . . . . . . . 29
BKB CT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Cash Collateral Account . . . . . . . . . . . . . . . . . . . 56
Cash Collateral Guaranty . . . . . . . . . . . . . . . . . . 56
CCRFC . . . . . . . . . . . . . . . . . . . . . . . . . . . i, 2
Cede . . . . . . . . . . . . . . . . . . . . . . . . . . . v, 33
Cedel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Cedel Participants . . . . . . . . . . . . . . . . . . . . . 35
Certificate Owner . . . . . . . . . . . . . . . . . . . . . . 66
Certificate Owners . . . . . . . . . . . . . . . . . . . . . . v
Certificateholders' Interest . . . . . . . . . . . . . . . . . 3
Certificates . . . . . . . . . . . . . . . . . . . . . . . . . i
Class . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Collateral Interest . . . . . . . . . . . . . . . . . . . . . 56
Collection Account . . . . . . . . . . . . . . . . . . . . . 48
Commission . . . . . . . . . . . . . . . . . . . . . . . . . . v
Controlled Accumulation Amount . . . . . . . . . . . . . . . . 9
Controlled Accumulation Period . . . . . . . . . . . . . . . . 9
Controlled Amortization Amount . . . . . . . . . . . . . . . 11
Controlled Amortization Period . . . . . . . . . . . . . . . 10
Controlled Deposit Amount . . . . . . . . . . . . . . . . . . . 9
Controlled Distribution Amount . . . . . . . . . . . . . . . 11
Cooperative . . . . . . . . . . . . . . . . . . . . . . . . . 35
Credit Enhancement . . . . . . . . . . . . . . . . . . . . . 14
Credit Enhancer . . . . . . . . . . . . . . . . . . . . . . . 55
Date of Processing . . . . . . . . . . . . . . . . . . . . . 15
Defaulted Amount . . . . . . . . . . . . . . . . . . . . . . 54
Defaulted Receivables . . . . . . . . . . . . . . . . . . . . 54
Definitive Certificates . . . . . . . . . . . . . . . . . . . 33
Depositaries . . . . . . . . . . . . . . . . . . . . . . . . 33
Depository . . . . . . . . . . . . . . . . . . . . . . . . . 33
Determination Date . . . . . . . . . . . . . . . . . . . . . 15
Disclosure Document . . . . . . . . . . . . . . . . . . . . . . 4
Discount Option Receivables . . . . . . . . . . . . . . . . . 44
Discount Percentage . . . . . . . . . . . . . . . . . . . . . 44
Distribution Date . . . . . . . . . . . . . . . . . . . . . . 15
DOL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
DTC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . v
Early Accumulation Period . . . . . . . . . . . . . . . . . . 10
Early Amortization Period . . . . . . . . . . . . . . . . . . 11
Eligible Account . . . . . . . . . . . . . . . . . . . . . . 25
Eligible Institution . . . . . . . . . . . . . . . . . . . . 48
Eligible Investments . . . . . . . . . . . . . . . . . . . . 49
Eligible Receivable . . . . . . . . . . . . . . . . . . . . . 41
Enhancement Invested Amount . . . . . . . . . . . . . . . . 3, 55
ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Euroclear . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Euroclear Operator . . . . . . . . . . . . . . . . . . . . . 35
Euroclear Participants . . . . . . . . . . . . . . . . . . . 35
Euroclear Provisions . . . . . . . . . . . . . . . . . . . . 35
Excess Allocation Series . . . . . . . . . . . . . . . . . . 12
Excess Finance Charge Collections . . . . . . . . . . . . . . 52
Exchange Act . . . . . . . . . . . . . . . . . . . . . . . . . v
Expected Final Payment Date . . . . . . . . . . . . . . . . . . 8
FAMIS . . . . . . . . . . . . . . . . . . . . . . . . . . . 1, 26
FASIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
FDC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
FDIA . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
FDIC . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
FDR . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1, 26
FICO . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Final Regulation . . . . . . . . . . . . . . . . . . . . . . 71
Finance Charge Receivables . . . . . . . . . . . . . . . . . . 6
FIRREA . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Floating Allocation Percentage . . . . . . . . . . . . . . . 50
Foreign Investors . . . . . . . . . . . . . . . . . . . . . . 69
Full Invested Amount . . . . . . . . . . . . . . . . . . . . 14
Funding Period . . . . . . . . . . . . . . . . . . . . . . . 14
General Account Regulations . . . . . . . . . . . . . . . . . 73
Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Group Investor Additional Amounts . . . . . . . . . . . . . . 51
Group Investor Default Amount . . . . . . . . . . . . . . . . 51
Group Investor Finance Charge Collections . . . . . . . . . . 51
Group Investor Monthly Fees . . . . . . . . . . . . . . . . . 51
Group Investor Monthly Interest . . . . . . . . . . . . . . . 51
Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Indirect Participants . . . . . . . . . . . . . . . . . . . . 33
Ineligible Receivables . . . . . . . . . . . . . . . . . . . 41
Initial Accounts . . . . . . . . . . . . . . . . . . . . . . . 6
Initial Cut-Off Date . . . . . . . . . . . . . . . . . . . . . 6
Insolvency Event . . . . . . . . . . . . . . . . . . . . . . 19
Interchange . . . . . . . . . . . . . . . . . . . . . . . . 2, 30
Interest Funding Account . . . . . . . . . . . . . . . . . . . 8
Interest Payment Date . . . . . . . . . . . . . . . . . . . . 47
Invested Amount . . . . . . . . . . . . . . . . . . . . . . . 47
Investor Finance Charge Collections . . . . . . . . . . . . . 51
IRA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
IRS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
L/C Issuer . . . . . . . . . . . . . . . . . . . . . . . . . 55
LIBOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
MasterCard . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Minimum Monthly Payment . . . . . . . . . . . . . . . . . . . 29
Monthly Period . . . . . . . . . . . . . . . . . . . . . . . . 3
Monthly Servicing Fee . . . . . . . . . . . . . . . . . . . . 40
New Accounts . . . . . . . . . . . . . . . . . . . . . . . . 25
New Issuance . . . . . . . . . . . . . . . . . . . . . . . . 47
Offered Certificates . . . . . . . . . . . . . . . . . . . . 66
OID . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Paired Series . . . . . . . . . . . . . . . . . . . . . . . . 13
Participants . . . . . . . . . . . . . . . . . . . . . . . . 33
Participation Interests . . . . . . . . . . . . . . . . . . . . 2
Pay Out Event . . . . . . . . . . . . . . . . . . . . . . . . 38
Pooling and Servicing Agreement . . . . . . . . . . . . . . . . i
Portfolio Yield . . . . . . . . . . . . . . . . . . . . . . . 22
Pre-Funding Account . . . . . . . . . . . . . . . . . . . . . 14
Pre-Funding Amount . . . . . . . . . . . . . . . . . . . . . 14
Premium Option Receivables . . . . . . . . . . . . . . . . . 45
Premium Percentage . . . . . . . . . . . . . . . . . . . . . 45
Prepayable Instrument . . . . . . . . . . . . . . . . . . . . 67
Principal Allocation Percentage . . . . . . . . . . . . . 13, 50
Principal Commencement Date . . . . . . . . . . . . . . . . . . 8
Principal Funding Account . . . . . . . . . . . . . . . . . . . 9
Principal Receivables . . . . . . . . . . . . . . . . . . . . . 7
Principal Sharing Series . . . . . . . . . . . . . . . . . . 12
Principal Shortfalls . . . . . . . . . . . . . . . . . . . . 52
Principal Terms . . . . . . . . . . . . . . . . . . . . . . . 47
Prior Series . . . . . . . . . . . . . . . . . . . . . . . . 13
Proposed Regulations . . . . . . . . . . . . . . . . . . . . 70
Prospectus Supplement . . . . . . . . . . . . . . . . . . . . . i
PTE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Purchase Agreement . . . . . . . . . . . . . . . . . . . . . . 5
Rating Agency . . . . . . . . . . . . . . . . . . . . . . . . 16
Rating Agency Condition . . . . . . . . . . . . . . . . . . . 24
Reallocated Investor Finance Charge Collections . . . . . . . 51
Reallocation Group . . . . . . . . . . . . . . . . . . . . . 12
Receivables . . . . . . . . . . . . . . . . . . . . . . . . i, 2
Record Date . . . . . . . . . . . . . . . . . . . . . . . . . 33
Recoveries . . . . . . . . . . . . . . . . . . . . . . . . 7, 31
Regulations . . . . . . . . . . . . . . . . . . . . . . . . . 66
Reinvestment Events . . . . . . . . . . . . . . . . . . . . . 39
Removed Accounts . . . . . . . . . . . . . . . . . . . . . . . 6
Required Minimum Principal Balance . . . . . . . . . . . . . 44
Required Transferor Amount . . . . . . . . . . . . . . . . . . 4
Revolving Period . . . . . . . . . . . . . . . . . . . . . . . 8
RTC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
RTC Policy Statement . . . . . . . . . . . . . . . . . . . . 63
Securities Act . . . . . . . . . . . . . . . . . . . . . . . . v
Series . . . . . . . . . . . . . . . . . . . . . . . . . . i, 1
Series Adjusted Invested Amount . . . . . . . . . . . . . . . 49
Series Allocable Defaulted Amount . . . . . . . . . . . . . . 49
Series Allocable Finance Charge Collections . . . . . . . 49, 51
Series Allocable Principal Collections . . . . . . . . . . . 49
Series Allocation Percentage . . . . . . . . . . . . . . . . 49
Series Closing Date . . . . . . . . . . . . . . . . . . . . . . 8
Series Cut-Off Date . . . . . . . . . . . . . . . . . . . . . . 8
Series Enhancement . . . . . . . . . . . . . . . . . . . . . . 2
Series Invested Amount . . . . . . . . . . . . . . . . . . . 44
Series Required Transferor Amount . . . . . . . . . . . . . . 50
Series Termination Date . . . . . . . . . . . . . . . . . . . . 9
Service Transfer . . . . . . . . . . . . . . . . . . . . . . 58
Servicer . . . . . . . . . . . . . . . . . . . . . . . . . i, 1
Servicer Default . . . . . . . . . . . . . . . . . . . . . . 58
Servicer Interchange . . . . . . . . . . . . . . . . . . . . 40
Servicing Fee . . . . . . . . . . . . . . . . . . . . . . . 1, 39
Shared Principal Collections . . . . . . . . . . . . . . . . 52
Special Funding Account . . . . . . . . . . . . . . . . . . . 53
Special Payment Date . . . . . . . . . . . . . . . . . . . . 39
Special Tax Counsel . . . . . . . . . . . . . . . . . . . . . 65
Supplement . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Supplemental Certificate . . . . . . . . . . . . . . . . . . 43
Supplemental Certificates . . . . . . . . . . . . . . . . . . . 4
Swaps . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Tax Opinion . . . . . . . . . . . . . . . . . . . . . . . . . 48
Termination Notice . . . . . . . . . . . . . . . . . . . . . 58
Transfer Date . . . . . . . . . . . . . . . . . . . . . . . . 15
Transferor . . . . . . . . . . . . . . . . . . . . . . . . i, 2
Transferor Amount . . . . . . . . . . . . . . . . . . . . . 4, 42
Transferor Certificate . . . . . . . . . . . . . . . . . . . . 4
Transferor Certificates . . . . . . . . . . . . . . . . . . . . 4
Transferor Servicing Fee . . . . . . . . . . . . . . . . . . 40
Transferor's Interest . . . . . . . . . . . . . . . . . . . . . 3
Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . i, 1
Trust Adjusted Invested Amount . . . . . . . . . . . . . . . 50
Trust Assets . . . . . . . . . . . . . . . . . . . . . . . . . 2
Trust Portfolio . . . . . . . . . . . . . . . . . . . . . . . 26
Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . i, 1
VISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Yield Supplement Account . . . . . . . . . . . . . . . . . . . 7
[Series] Yield Supplement Account . . . . . . . . . . . 7, 45, 56
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 SECTION 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.**
____________________
* To be filed by amendment.
**Previously filed.
(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 Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the
City of Boston, Commonwealth of Massachusetts, on August 5, 1997.
CREDIT CARD RECEIVABLES FUNDING CORPORATION
(Registrant)
By /s/ Jeff H. Slawsky
____________________________
Name: Jeff H. Slawsky
Title: President
Pursuant to the Requirements of the Securities Act of 1933,
this Amendment No. 1 to the Registration Statement has been signed
by the following persons in the capacities and on the dates
indicated.
CREDIT CARD RECEIVABLES FUNDING CORPORATION
SIGNATURE TITLE
*
________________________
Kathleen M. McGillycuddy Chairman August 5, 1997
(Principal Executive
Officer)
and Director
*
_________________________
Jeff H. Slawsky President and Director August 5, 1997
*
__________________________
Rhanna Kidwell Secretary and Treasurer August 5, 1997
(Principal Financial
Officer Principal
Accounting Officer)
*
__________________________
William M. Parent Director August 5, 1997
The undersigned, by signing his name hereto, does sign and
execute this Amendment No. 1 to the Registration Statement pursuant
to the Power of Attorney executed by the above named officers and
directors.
By /s/ Jeff H. Slawsky
___________________________
Name: Jeff H. Slawsky
Attorney-in-Fact
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 **
____________________
* To be filed by amendment.
** Previously filed.
