<PAGE>
Filed Pursuant to Rule 424(b)(5)
Registration No. 333-40381
PROSPECTUS SUPPLEMENT
(To Prospectus Dated February 26, 1998)
Travelers Bank Credit Card Master Trust I
$227,500,000 Class A 6.00% Asset-Backed Certificates, Series 1998-1
CC Credit Card Corporation
Transferor
Travelers Bank & Trust, fsb
Servicer
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Each Class A 6.00% Asset-Backed Certificate, Series 1998-1 (collectively,
the "Class A Certificates") offered hereby will represent an undivided interest
in certain of the assets of the Travelers Bank Credit Card Master Trust I (the
"Trust") to be created pursuant to a Pooling and Servicing Agreement among CC
Credit Card Corporation, as Transferor (the "Transferor"), Travelers Bank &
Trust, fsb, as Servicer (the "Servicer"), and The Bank of New York, as Trustee
(the "Trustee"). Concurrently with the issuance of the Class A Certificates, the
Trust will issue $12,500,000 aggregate initial principal amount of Class B
Asset-Backed Certificates, Series 1998-1 not offered hereby (collectively, the
"Class B Certificates," and, together with the Class A Certificates, the
"Certificates"), which initially will be retained by the Transferor.
(CONTINUED ON NEXT PAGE)
------------------
THERE CURRENTLY IS NO SECONDARY MARKET FOR THE CLASS A CERTIFICATES, AND
THERE IS NO ASSURANCE THAT ONE WILL DEVELOP. THE UNDERWRITERS EXPECT, BUT ARE
NOT OBLIGATED, TO MAKE A MARKET IN THE CLASS A CERTIFICATES. THERE IS NO
ASSURANCE THAT ANY SUCH MARKET WILL DEVELOP OR CONTINUE.
POTENTIAL INVESTORS SHOULD CONSIDER THE INFORMATION SET FORTH IN "RISK
FACTORS" COMMENCING ON PAGE S-16 HEREIN AND ON PAGE 18 IN THE PROSPECTUS.
THE CLASS A CERTIFICATES REPRESENT INTERESTS IN THE TRUST ONLY AND DO NOT
REPRESENT INTERESTS IN OR OBLIGATIONS OF CC CREDIT CARD CORPORATION, TRAVELERS
BANK & TRUST, FSB, THE TRAVELERS BANK USA OR ANY AFFILIATE THEREOF, EXCEPT TO
THE LIMITED EXTENT DESCRIBED HEREIN. A CLASS A CERTIFICATE IS NOT A DEPOSIT AND
IS NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION (THE "FDIC"). THE
RECEIVABLES ARE NOT INSURED OR GUARANTEED BY THE FDIC 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 SUPPLEMENT OR THE PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
PROCEEDS TO
PRICE TO UNDERWRITING THE
PUBLIC(1) DISCOUNT(2) TRANSFEROR(1)(3)
<S> <C> <C> <C>
Per Class A Certificate 99.95583% 0.300% 99.65583%
Total $227,399,513 $682,500 $226,717,013
</TABLE>
(1) Plus accrued interest, if any, at the Class A Certificate Rate from
March 6, 1998.
(2) The underwriting discount does not include a structuring fee that the
Transferor has agreed to pay to Salomon Brothers Inc in connection with
the structuring of the transactions described herein.
(3) Before deduction of expenses (not including the structuring fee) payable
by the Transferor estimated at $700,000.
------------------
The Class A Certificates are offered by the Underwriters when, as and if
issued by the Trust and accepted by the Underwriters and subject to the
Underwriters' right to reject orders in whole or in part. It is expected that
the Class A Certificates will be offered globally and delivered in book-entry
form on or about March 6, 1998, through the facilities of The Depository Trust
Company, Cedel Bank, societe anonyme and the Euroclear System.
--------------
Salomon Smith Barney Chase Securities Inc.
The date of this Prospectus Supplement is February 26, 1998
<PAGE>
(CONTINUED FROM PREVIOUS PAGE)
Concurrently with the issuance of the Certificates, the Trust will issue
$10,000,000 Class C Asset-Backed Interests, Series 1998-1 (the "Class C
Interests"), which will be subordinated to the Certificates as described herein,
and which are not being offered hereby. The Transferor will initially retain the
Class C Interests. The Transferor owns the remaining undivided interest in the
Trust not represented by the Certificates, the Class C Interests or the investor
certificates of any other Series and any other certificated or uncertificated
interests in the Trust issued as Series Enhancement. The Trust may offer from
time to time other Series of investor certificates that represent undivided
interests in certain assets of the Trust, which may have terms significantly
different from the Certificates and the Class C Interests.
The property of the Trust includes a portfolio of
VISA-Registered Trademark-* and MasterCard-Registered Trademark- credit card
receivables (the "Receivables") generated or to be generated from time to time
in the ordinary course of business in a portfolio of consumer revolving credit
card accounts (the "Accounts"), all monies due in payment of the Receivables and
certain other property which may include participation interests in pools of
assets consisting of revolving credit card receivables, as more fully described
herein, including the benefits of monies and other properties constituting
Eligible Investments, if any, on deposit in, credited to or held in certain
accounts of the Trust and earnings thereon. The Accounts to be designated will
be selected from the total portfolio of consumer credit card accounts of
Travelers Bank & Trust, fsb and The Travelers Bank USA (the "Travelers Consumer
Credit Card Portfolio"). Travelers Bank & Trust, fsb will service the
Receivables.
Interest on the Class A Certificates will accrue from March 6, 1998 (the
"Closing Date") at the rate of 6.00%. Interest will be distributed on the Class
A Certificates on the 15th day of each month or, if such 15th day is not a
Business Day (as defined herein), the next succeeding Business Day (each, a
"Distribution Date"), commencing April 15, 1998. Principal with respect to the
Class A Certificates is scheduled to be distributed to the Class A
Certificateholders on the February 2003 Distribution Date, but may be
distributed earlier or later in certain limited circumstances described herein.
The Class A Certificates initially will be represented by certificates which
will be registered in the name of Cede & Co., the nominee of The Depository
Trust Company. The interests of holders of beneficial interests in the Class A
Certificates ("Certificate Owners") will be represented by book-entries on the
records of The Depository Trust Company and participating members thereof.
Definitive Certificates will be available to Certificate Owners only under the
limited circumstances described in the Prospectus. See "Description of the
Certificates--Definitive Certificates" in the Prospectus.
Following the initial distribution of Class A Certificates, Salomon Brothers
Inc, Smith Barney Inc., or any successor thereto (the "Salomon Smith Barney
Subsidiaries"), each an indirect wholly owned subsidiary of Travelers Group
Inc., the ultimate parent of the Transferor, may offer and sell Class A
Certificates in the course of its business as a broker-dealer. Any Salomon Smith
Barney Subsidiary may act as a principal or agent in such transactions.
This Prospectus Supplement, together with an appropriate Prospectus, may be
used by any Salomon Smith Barney Subsidiary in connection with offers and sales
of an indeterminate amount of the Class A Certificates in market-making
transactions at negotiated prices related to prevailing market prices at the
time of any sale. Any Salomon Smith Barney Subsidiary may act as a principal or
agent in such transactions.
- ------------------------
* VISA-Registered Trademark- and MasterCard-Registered Trademark- are
federally registered servicemarks of Visa U.S.A., Inc. and MasterCard
International Inc., respectively.
S-2
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE CLASS A
CERTIFICATES. SUCH TRANSACTIONS MAY INCLUDE OVER-ALLOTMENT, STABILIZING
TRANSACTIONS AND COVERING TRANSACTIONS. FOR A DESCRIPTION OF THESE ACTIVITIES,
SEE "UNDERWRITING" HEREIN.
The Class A Certificates offered hereby (together with the Class B
Certificates and the Class C Interests, which are not offered hereby or by the
Prospectus) constitute a separate Series of investor certificates being offered
by the Transferor from time to time pursuant to the Prospectus dated February
26, 1998. This Prospectus Supplement does not contain complete information about
the offering of the Class A Certificates. Additional information is contained in
the Prospectus and investors are urged to read both this Prospectus Supplement
and the Prospectus in full. Sales of the Class A Certificates may not be
consummated unless the purchaser has received both this Prospectus Supplement
and the Prospectus.
S-3
<PAGE>
SUMMARY OF TERMS
The following is qualified in its entirety by reference to the detailed
information appearing elsewhere in this Prospectus Supplement and the
accompanying Prospectus. Certain capitalized terms used herein are defined
elsewhere in this Prospectus Supplement and the accompanying Prospectus. A
listing of the pages on which some of such terms are defined is found in the
"Index of Defined Terms" in this Prospectus Supplement and the accompanying
Prospectus. Other Series which may be issued pursuant to other similar
prospectus supplements and prospectuses or disclosure documents may also use
such capitalized terms in such prospectuses or documents. However, in such
cases, reference to such terms will, unless the context otherwise requires, only
be made in the context of such other Series.
<TABLE>
<S> <C>
TRUST........................ Travelers Bank Credit Card Master Trust I (the "Trust").
THE CERTIFICATES AND THE
CLASS C INTEREST............. Each of the Class A 6.00% Asset-Backed Certificates, Series
1998-1 (the "Class A Certificates") offered hereby, together
with the Class B Asset-Backed Certificates, Series 1998-1
(the "Class B Certificates," and together with the Class A
Certificates, the "Certificates") and the Class C
Asset-Backed Interests, Series 1998-1 (the "Class C Inter-
ests") represent a specified undivided interest in the Trust
Assets allocated to the Certificates and the Class C
Interests (the "Investor Interest"). The term "Class A
Certificateholders" refers to holders of the Class A
Certificates, the term "Class B Certificateholders" refers
to holders of the Class B Certificates, the term
"Certificateholders" refers to holders of the Certificates,
and the term "Series" refers to any series of investor
certificates issued by the Trust, including the series
designated as Series 1998-1 ("Series 1998-1") of which the
Certificates form a part. The Certificates will be issued
pursuant to the Pooling and Servicing Agreement (the "Master
Pooling and Servicing Agreement"), among CC Credit Card
Corporation (the "Corporation"), as Transferor (in such
capacity, the "Transferor"), Travelers Bank & Trust, fsb, as
servicer (in such capacity, the "Servicer"), and The Bank of
New York, as trustee (the "Trustee"), and a related
supplement thereto (the "Supplement" and, together with the
Master Pooling and Servicing Agreement, the "Pooling and
Servicing Agreement" (unless the context otherwise
requires)). See "Description of the Class A Certificates."
The Class B Certificates will initially be retained by the
Transferor and will be subordinated to the Class A
Certificates to the extent described herein. The Class C
Interests will also initially be retained by the Transferor
and will constitute the Series Enhancement for the
Certificates. Neither the Class B Certificates nor the Class
C Interests are being offered hereby. Initially, no interest
will accrue with respect to the Class B Certificates or the
Class C Interests, although an interest rate may be
established for either the Class B Certificates or the Class
C Interests after the Closing Date subject to the conditions
described under "Description of the Class A
Certificates--Transfer of the Class B Certificates" and
"--Transfer of the Class C Interests." Subject to the
conditions described under "Description of the Class A
Certificates--Transfer of the Class B Certificates" and
"--Transfer of
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S-4
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<S> <C>
the Class C Interests," the Transferor may transfer the
Class B Certificates or the Class C Interests without the
consent of the Class A Certificateholders.
The Class A Certificates will be available for purchase in
minimum denominations of $1,000 and in integral multiples of
$1,000 in excess thereof. Except in certain limited
circumstances as described in the Prospectus under
"Description of the Certificates-- Definitive Certifi-
cates," the Class A Certificates will only be available in
book-entry form.
The Trust Assets will be allocated among the Investor
Interest, the interests of the holders of other Series and
the interest of the holders of the Transferor Certificates
(the "Transferor's Interest"), as described below. The
aggregate amount of Principal Receivables and amounts, if
any, on deposit in the Excess Funding Account allocated to
the Certificateholders and the Class C Interests (the
"Invested Amount") will be $250,000,000 on the Closing Date
(the "Initial Invested Amount"). The Invested Amount will,
except as otherwise provided herein, remain fixed during the
remainder of the Revolving Period and decline thereafter
during the Controlled Accumulation Period or Rapid
Amortization Period as principal is deposited into the
Principal Funding Account or paid on the Certificates and
the Class C Interests. The aggregate amount of Principal
Receivables and amounts, if any, on deposit in the Excess
Funding Account allocated to the Class A Certificateholders
(the "Class A Invested Amount") will be $227,500,000 on the
Closing Date (the "Class A Initial Invested Amount"). The
aggregate amount of Principal Receivables and amounts and
other property constituting Eligible Investments, if any, on
deposit in, credited to or held in the Excess Funding
Account allocated to the Class B Certificateholders (the
"Class B Invested Amount") will be $12,500,000 on the
Closing Date (the "Class B Initial Invested Amount"). The
aggregate amount of Principal Receivables and amounts, if
any, on deposit in the Excess Funding Account allocated to
the Class C Interests (the "Class C Invested Amount") will
be $10,000,000 on the Closing Date (the "Class C Initial
Invested Amount").
The Class A Invested Amount will remain, prior to the
commencement of the Controlled Accumulation Period or Rapid
Amortization Period, fixed at the Class A Initial Invested
Amount, except if there are unreimbursed Class A Investor
Charge-Offs or if a Pay Out Event for Series 1998-1 or a Pay
Out Event for all Series occurs. In addition, the Class B
Invested Amount will decline in certain circumstances as a
result of (a) the allocation to the Class B Certificates of
Defaulted Amounts, including such amounts otherwise
allocable to the Class A Certificates, and (b) the
reallocation of collections of Principal Receivables
otherwise allocable to the Class B Certificates to fund
certain payments in respect of the Class A Certificates. Any
such reductions in the Class B Invested Amount may be
reimbursed out of Excess Spread, if any, Excess Finance
Charge Collections and Excess Transferor Finance Charge
Collections allocable to Series 1998-1, and the reallocation
of certain amounts allocable to the Class C Interests.
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S-5
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<S> <C>
The Transferor Amount will fluctuate as the amount of
Principal Receivables in the Trust, the invested amount of
each Series, the Discount Percentage and the amounts and
other property constituting Eligible Investments, if any, on
deposit in, credited to or held in the Excess Funding
Account and the Principal Funding Account change from time
to time. The Transferor's Interest will represent the right
to the assets of the Trust not allocated to the Investor
Interest or the holders of investor certificates of other
Series (the Investor Interest and the interest in the assets
of the Trust held by the holders of investor certificates of
other Series is referred to herein as the "Cer-
tificateholders' Interest").
The Class A Certificates will represent the right to receive
from the Trust Assets allocated to the Investor Interest
funds up to (but not in excess of) the amounts required to
make payments of interest on the Class A Certificates from
the Closing Date at the rate of 6.00% (such rate, the "Class
A Certificate Rate"), and payment of principal on the
February 2003 Distribution Date or, in certain limited
circumstances, monthly payments of principal during the
Rapid Amortization Period, to the extent of the Class A
Invested Amount. See "Description of the Class A
Certificates--General," "--Interest Payments" and "--Princi-
pal Payments."
The Class A Certificates represent beneficial interests in
the Trust Assets only and do not represent interests in or
obligations of CC Credit Card Corporation, either of the
Banks or any affiliate thereof except to the limited extent
provided herein. None of the Certificates, the Class C
Interests, the Accounts or the Receivables are insured or
guaranteed by the Federal Deposit Insurance Corporation (the
"FDIC") or any other governmental agency or instrumentality.
RECEIVABLES.................. The aggregate amount of Principal Receivables and Finance
Charge Receivables in the Accounts as of December 31, 1997
equaled $355,687,469.60 and $886,113.77, respectively.
Recoveries are not included as part of the Receivables. The
aggregate undivided interest in the Principal Receivables
and amounts on deposit in the Excess Funding Account, if
any, evidenced by the Certificates and the Class C Interests
will never exceed the sum of the Class A Invested Amount,
the Class B Invested Amount and the Class C Invested Amount,
regardless of the total amount of Principal Receivables in
the Trust and amounts on deposit in the Excess Funding
Account, if any, at any time. See "The Receivables."
REGISTRATION OF
CLASS A CERTIFICATES......... The Class A Certificates initially will be represented by
certificates registered in the name of Cede & Co. ("Cede"),
as the nominee of The Depository Trust Company ("DTC"). No
person acquiring a beneficial interest in the Class A
Certificates (a "Certificate Owner") will be entitled to
receive a definitive certificate representing such person's
interest (a "Definitive Certificate"), except in the event
that Definitive Certificates are issued under the limited
circumstances described herein. Class A Certificateholders
may elect to hold their Class A Certificates through DTC (in
the United States) or Cedel or Euroclear (in Europe). See
"Description of the Certificates-- Definitive Certificates"
in the Prospectus.
</TABLE>
S-6
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<S> <C>
TRANSFEROR................... CC Credit Card Corporation, a Delaware corporation and a
wholly-owned subsidiary of Commercial Credit Company.
SERVICER..................... Travelers Bank & Trust, fsb. The principal executive offices
of the Servicer are located at Christiana Corporate Center,
100 Commerce Drive, Newark, Delaware 19713.
ACCOUNT OWNERS............... Travelers Bank & Trust, fsb and The Travelers Bank USA (each
a "Bank" and, collectively, the "Banks").
COLLECTIONS.................. All collections of Receivables will be allocated by the
Servicer between amounts collected on Principal Receivables
and amounts collected on Finance Charge Receivables. All
such amounts will then be allocated in accordance with the
respective interests of the Class A Certificateholders, the
Class B Certificateholders, the Class C Interest Holder, the
holders of the Transferor Certificates and the holders of
investor certificates and uncertificated interests of other
Series, if any, in the Principal Receivables and in the
Finance Charge Receivables. Subject to certain exceptions
set forth in the Master Pooling and Servicing Agreement, the
Servicer will deposit all collections of Receivables
distributable to Certificateholders, the Class C Interest
Holder and to holders of investor certificates and
uncertificated interests of other Series, if any, in the
Collection Account no later than the day prior to the
applicable Distribution Date. See "Description of the Class
A Certificates-- Allocation Percentages" herein and "The
Pooling and Servicing Agreement Generally--Application of
Collections" in the Prospectus. The Transferor may from time
to time elect that a certain percentage of the collections
of Principal Receivables will be designated as "Discount
Option Collections" and such Discount Option Collections
will be treated as collections of Finance Charge
Receivables. Such percentage will initially be 1.5%. See
"The Pooling and Servicing Agreement Generally--Discount
Option" in the Prospectus.
INTEREST..................... Interest on the Class A Certificates for each Interest
Period will be distributed on the 15th day of each month or,
if such 15th day is not a Business Day, the next succeeding
Business Day (each, a "Distribution Date"), commencing April
15, 1998, in an amount equal to one-twelfth of the product
of (i) the Class A Certificate Rate and (ii) the outstanding
principal amount of the Class A Certificates as of the
preceding Record Date; PROVIDED, HOWEVER, that with respect
to the April 15, 1998 Distribution Date, interest on the
Class A Certificates will be equal to the interest accrued
on the outstanding principal amount of the Class A
Certificates as of the Closing Date at the Class A
Certificate Rate for the period from the Closing Date
through April 14, 1998 (assuming that the month of March has
30 days). The "Interest Period," with respect to any
Distribution Date, will be the period from the previous
Distribution Date through the day preceding such
Distribution Date, except the initial Interest Period will
be the period from the Closing Date through April 14, 1998,
the day preceding the initial Distribution Date. The term
"Business Day" means any day other than a Saturday, Sunday
or a day on which banking institutions in New York, New York
or Newark, Delaware or any other state in which the
principal executive offices of CC Credit Card Corporation or
any Additional Transferor or the Trustee are located, are
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S-7
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authorized or obligated by law, executive order or
governmental decree to be closed. The "Monthly Period," with
respect to any Distribution Date will be the period from and
including the first day of the preceding calendar month to
and including the last day of such calendar month (other
than the initial Monthly Period, which will commence on the
Closing Date and end on March 31, 1998). See "Description of
the Class A Certificates --Interest Payments."
ADDITIONAL AMOUNTS
AVAILABLE TO
CERTIFICATEHOLDERS........... If Class A Available Funds are less than the sum of (i)
current and overdue Class A Monthly Interest, (ii) current
and overdue Class A Additional Interest, (iii) current and
overdue Class A Servicing Fee and (iv) the Class A Investor
Default Amount, with respect to the related Distribution
Date, Excess Spread and Excess Finance Charge Collections
and Excess Transferor Finance Charge Collections allocable
to Series 1998-1 will be applied to fund the deficiency (the
"Class A Required Amount"). "Excess Spread" for any
Distribution Date will equal the sum of (a) the excess of
Class A Available Funds over the sum of the amounts referred
to in clauses (i), (ii), (iii) and (iv) above, (b) the
excess of Class B Available Funds over the sum of (i)
current and overdue Class B Monthly Interest, if any, (ii)
current and overdue Class B Additional Interest, if any, and
(iii) current and overdue Class B Servicing Fee and (c) the
Class C Available Funds not used, if Travelers Bank & Trust,
fsb or the Trustee is no longer the Servicer, to pay current
and overdue Class C Servicing Fee. If Excess Spread and
Excess Finance Charge Collections and Excess Transferor
Finance Charge Collections allocable to Series 1998-1 with
respect to such Distribution Date are less than the Class A
Required Amount, Reallocated Principal Collections allocable
first to the Class C Invested Amount and then the Class B
Invested Amount with respect to the related Monthly Period
will be used to fund the remaining Class A Required Amount.
If Reallocated Principal Collections with respect to such
Monthly Period are insufficient to fund the remaining Class
A Required Amount for the related Distribution Date, then a
portion of the Class C Invested Amount will be reduced by
the amount of such deficiency (but not by more than the
Class A Investor Default Amount for such Monthly Period). If
such reduction would cause the Class C Invested Amount to be
reduced below zero, the Class B Invested Amount will be
reduced by the amount by which the Class C Invested Amount
would have been reduced below zero (but not by more than the
excess of the Class A Investor Default Amount for such
Monthly Period over the amount of such reduction in the
Class C Invested Amount) to avoid a charge-off with respect
to the Class A Certificates. If the Class B Invested Amount
is reduced to zero, the Class A Invested Amount will be
reduced by the amount by which the Class A Required Amount
for any Distribution Date exceeds the sum of (i) Excess
Spread and Excess Finance Charge Collections and Excess
Transferor Finance Charge Collections allocated to Series
1998-1, and (ii) Reallocated Principal Collections for the
related Monthly Period, but not by more than the excess of
the Class A Investor Default Amount for
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S-8
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such Monthly Period over the aggregate reductions in the
Class C Invested Amount and the Class B Invested Amount with
respect to such Monthly Period, and the Class A
Certificateholders will bear directly the credit and other
risks associated with their undivided interest in the Trust.
See "Description of the Class A Certificates-- Reallocation
of Cash Flows" and "-- Allocation of Investor Default
Amount."
Excess Spread and Excess Finance Charge Collections and
Excess Transferor Finance Charge Collections allocable to
Series 1998-1 and not required to pay the Class A Required
Amount or reimburse Class A Investor Charge-Offs will be
applied to fund the Class B Required Amount. The "Class B
Required Amount" means the amount for any Distribution Date
equal to the sum of (a) the amount, if any, by which the sum
of (i) current and overdue Class B Monthly Interest, if any,
(ii) current and overdue Class B Additional Interest, if
any, and (iii) current and overdue Class B Servicing Fee
exceeds Class B Available Funds and (b) the Class B Investor
Default Amount for the related Monthly Period. If Excess
Spread and Excess Finance Charge Collections and Excess
Transferor Finance Charge Collections allocable to Series
1998-1 with respect to such Distribution Date not required
to pay the Class A Required Amount are less than the Class B
Required Amount, Reallocated Principal Collections allocable
to the Class C Invested Amount for the related Monthly
Period not required to fund the Class A Required Amount will
then be used to fund the remaining Class B Required Amount.
If Reallocated Principal Collections allocable to the Class
C Invested Amount with respect to such Monthly Period are
insufficient to fund the remaining Class B Required Amount
for the related Distribution Date, then the Class C Invested
Amount will be reduced by the amount of such deficiency (but
not by more than the Class B Investor Default Amount for
such Monthly Period). If such reduction would cause the
Class C Invested Amount to be reduced below zero, the Class
B Invested Amount will be reduced by the amount by which the
Class B Required Amount for any Distribution Date exceeds
the sum of Excess Spread and Excess Finance Charge
Collections and Excess Transferor Finance Charge Collections
allocated to Series 1998-1 and not required to pay the Class
A Required Amount and Reallocated Principal Collections not
required to pay the Class A Required Amount for the related
Monthly Period, but not by more than the excess of the Class
B Investor Default Amount for such Monthly Period over the
amount of such reduction in the Class C Invested Amount for
such Monthly Period. In the event of a reduction of the
Class A Invested Amount, the Class B Invested Amount or the
Class C Invested Amount, the amount of principal and
interest available to fund payments with respect to the
Class A Certificates and the Class B Certificates will be
decreased. See "Description of the Class A Certificates--
Reallocation of Cash Flows" and "-- Allocation of Investor
Default Amount."
EXCESS FINANCE CHARGE
COLLECTIONS.................. "Excess Finance Charge Collections" means amounts designated
by another Series for allocation to Series within Group One
and which, pursuant to the Master Pooling and Servicing
Agreement and any related supplement, are allocable to
Series 1998-1. Series 1998-1 will
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be the first Series issued by the Trust and will be the
first Series included in a group of Series ("Group One")
that may be issued by the Trust from time to time.
EXCESS TRANSFEROR FINANCE
CHARGE COLLECTIONS........... Subject to certain limitations described under "Description
of the Class A Certificates--Shared Excess Transferor
Finance Charge Collections," collections of Finance Charge
Receivables otherwise payable to the Transferor, regardless
of whether such collections were initially allocated to
another Series or the Transferor, will be applied to cover
any shortfalls in amounts payable from collections of
Finance Charge Receivables allocable to any Series,
including Series 1998-1, that has been designated to receive
Excess Transferor Finance Charge Collections, pro rata based
upon the amount of the remaining shortfall, if any, for each
such Series after the application of Excess Finance Charge
Collections to each such Series. Any Excess Transferor
Finance Charge Collections remaining after covering such
shortfalls will be applied as Shared Transferor Principal
Collections. See "Description of the Class A
Certificates--Shared Excess Transferor Finance Charge
Collections."
REQUIRED CLASS C
INVESTED AMOUNT.............. The "Required Class C Invested Amount" with respect to any
Distribution Date means, subject to certain limitations more
fully described herein, the greater of (i) the product of
(a) the sum of (I) the Class A Invested Amount and (II) the
Class B Invested Amount, each as of such Distribution Date
after taking into account distributions made on such
Distribution Date, and (b) a fraction, the numerator of
which is 4% and the denominator of which is the excess of
100% over 4% and (ii) the product of (I) $250,000,000 and
(II) 3%. With respect to any Distribution Date, if the Class
C Invested Amount is less than the Required Class C Invested
Amount, certain Excess Spread and Excess Finance Charge
Collections and Excess Transferor Finance Charge Collections
allocable to Series 1998-1 will be used to increase the
Class C Invested Amount to the extent of any prior
unreimbursed reductions in the Class C Invested Amount. See
"Description of the Class A Certificates-- Application of
Collections-- Excess Spread; Excess Finance Charge
Collections; Excess Transferor Finance Charge Collections."
On any Distribution Date, to the extent that the Class C
Invested Amount exceeds the Required Class C Invested
Amount, such excess may be paid to the Class C Interest
Holder and if paid will not be available to the
Certificateholders.
REVOLVING PERIOD............. No principal will be payable to or for the benefit of
Certificateholders during the period (the "Revolving
Period") from and including the Closing Date to but not
including the earlier of (i) the commencement of the
controlled accumulation period and (ii) the commencement of
the Rapid Amortization Period. The controlled accumulation
period with respect to the Certificates (the "Controlled
Accumulation Period"), which includes separate controlled
accumulation periods for the Class A Certificates and the
Class B Certificates, is scheduled to begin at the close of
business on January 31, 2002. Subject to the conditions set
forth herein under "Description of the Class A Certifi-
cates-- Postponement of Accumulation Period," the day on
which the
</TABLE>
S-10
<PAGE>
<TABLE>
<S> <C>
Revolving Period ends and the Controlled Accumulation Period
begins may be delayed to no later than the end of the day on
December 31, 2002. During the Revolving Period, collections
of Principal Receivables allocated to the Certificates and
the Class C Interests (other than Reallocated Principal
Collections that are used to pay any deficiency in the Class
A Required Amount or the Class B Required Amount) will
generally be paid from the Trust to the holders of the
Transferor Certificates or to amortizing or accumulating
Series in Group One or deposited into the Excess Funding
Account. See "Description of the Class A
Certificates--Principal Payments."
CONTROLLED ACCUMULATION
PERIOD; PRINCIPAL PAYMENTS... Unless a Pay Out Event shall have occurred, (a) the Class A
controlled accumulation period (the "Class A Accumulation
Period") will begin at the end of the day on the last day of
the Revolving Period and will end on the earliest of (i) the
commencement of the Rapid Amortization Period, (ii) the
payment in full to the Class A Certificateholders of the
Class A Investor Amount, and (iii) the Series 1998-1
Termination Date, and (b) the Class B controlled
accumulation period (the "Class B Accumulation Period") will
commence on the first day of the Monthly Period immediately
preceding the Class B Principal Commencement Date and end on
the earliest of (i) the commencement of the Rapid
Amortization Period, (ii) the payment in full to the Class B
Certificateholders of the Class B Invested Amount and (iii)
the Series 1998-1 Termination Date. During the Controlled
Accumulation Period, the Available Investor Principal
Collections will no longer be paid to the holders of the
Transferor Certificates or to amortizing or accumulating
Series in Group One or deposited into the Excess Funding
Account as described above but instead will be deposited
monthly, along with certain other amounts constituting
Available Investor Principal Collections, on each
Distribution Date beginning with the Distribution Date in
the month following the commencement of the Controlled
Accumulation Period in a trust account established by the
Servicer for the benefit of Certificateholders (the
"Principal Funding Account") to be accumulated for payment
to the Certificateholders as provided herein, first to the
Class A Certificateholders, which payment is anticipated to
be on the Class A Expected Final Distribution Date, and then
(following payment in full of the Class A Investor Amount)
to the Class B Certificateholders, which payment is
anticipated to be on the Class B Expected Final Distribution
Date. With respect to any Distribution Date, during either
the Rapid Amortization Period or the Controlled Accumulation
Period, until the Class B Invested Amount is paid in full
and subject to certain other exceptions, "Class C Monthly
Principal" shall mean an amount equal to the lesser of (A)
Available Investor Principal Collections not applied to
Class A Monthly Principal or Class B Monthly Principal and
(B) the excess of (i) the Class C Invested Amount over (ii)
the Required Class C Invested Amount. During the Controlled
Accumulation Period or the Rapid Amortization Period,
collections of Principal Receivables generally will be
allocated to the Invested Amount in a ratio the numerator of
which is the Invested Amount as of the last day of the
Revolving Period and the denominator of which is the greater
of (x) the sum of (I) the product of (a) the aggregate
amount of Principal
</TABLE>
S-11
<PAGE>
<TABLE>
<S> <C>
Receivables and (b) one minus the Discount Percentage and
(II) the principal amount on deposit in the Excess Funding
Account as of the last day of the prior Monthly Period and
(y) the sum of the numerators used to calculate the Series
Percentages applicable to Principal Receivables for all
Series outstanding; PROVIDED, HOWEVER, that such ratio is
subject to adjustment to give effect to designations of
Additional Accounts. See "Description of the Class A
Certificates--Allocation Percentages," "--Application of
Collections" and "--Principal Payments."
With respect to any Distribution Date relating to the
Controlled Accumulation Period, if Available Investor
Principal Collections in the prior Monthly Period are equal
to or greater than the sum of (i) the Controlled
Accumulation Amount on such Distribution Date and (ii) the
existing Deficit Controlled Accumulation Amount (as defined
below), if any, from the immediately preceding Distribution
Date (such sum for such Distribution Date, the "Controlled
Deposit Amount," provided that the Controlled Deposit Amount
on any Distribution Date after the payment in full of the
Class A Certificates shall not exceed the Class B Invested
Amount), then the Controlled Deposit Amount will be
deposited into the Principal Funding Account, and the excess
of such Available Investor Principal Collections over the
Controlled Deposit Amount and any amounts thereof applied as
Class C Monthly Principal will be paid from the Trust to the
holders of the Transferor Certificates or to other
amortizing or accumulating Series in Group One or deposited
into the Excess Funding Account. The existing "Deficit
Controlled Accumulation Amount" means, on any Distribution
Date, the excess, if any, of the Controlled Deposit Amount
from the prior Distribution Date over the Available Investor
Principal Collections.
If the Available Investor Principal Collections in the prior
Monthly Period are less than the Controlled Deposit Amount,
such remaining Available Investor Principal Collections will
be deposited into the Principal Funding Account, and the
excess of the Controlled Deposit Amount over such Available
Investor Principal Collections will be the Deficit
Controlled Accumulation Amount for the succeeding Monthly
Period. See "Description of the Class A
Certificates--Application of Collections."
All amounts in the Principal Funding Account will be
invested at the direction of the Servicer by the Trustee in
certain Eligible Investments. Investment earnings (net of
investment losses and expenses) on funds on deposit in the
Principal Funding Account (the "Principal Funding Investment
Proceeds") during the Controlled Accumulation Period will be
included in Class A Available Funds with respect to each
Distribution Date.
Funds on deposit in the Principal Funding Account will be
available to pay the Class A Certificateholders in respect
of the Class A Investor Amount on the Class A Expected Final
Distribution Date. If the aggregate principal amount of
deposits made to the Principal Funding Account are
insufficient to pay in full the Class A Investor Amount on
</TABLE>
S-12
<PAGE>
<TABLE>
<S> <C>
the Class A Expected Final Distribution Date, the Rapid
Amortization Period will commence as described below and on
each Distribution Date thereafter until the Class A Investor
Amount is paid in full the Class A Certificateholders will
receive distributions of Class A Monthly Principal. Although
it is anticipated that during the Class A Accumulation
Period, funds will be deposited in the Principal Funding
Account in an amount equal to the applicable Controlled
Accumulation Amount with respect to each Distribution Date
and that scheduled principal will be available for
distribution to the Class A Certificateholders on the Class
A Expected Final Distribution Date, no assurance can be
given in that regard. See "Maturity Assumptions" herein.
If a Pay Out Event occurs during the Controlled Accumulation
Period, the Rapid Amortization Period will commence and any
amount on deposit in the Principal Funding Account will be
paid to the Class A Certificateholders on the Distribution
Date following the Monthly Period in which the Rapid
Amortization Period commences.
CLASS A EXPECTED FINAL
DISTRIBUTION DATE............ The February 2003 Distribution Date.
RAPID AMORTIZATION PERIOD;
PRINCIPAL PAYMENTS........... During the period beginning with the occurrence of any Pay
Out Event and ending on the earlier of (i) the payment in
full to the Certificateholders of the Class A Investor
Amount and the Class B Invested Amount and payment in full
to the Class C Interest Holder of the Class C Invested
Amount and (ii) the Series 1998-1 Termination Date (the
"Rapid Amortization Period"), Available Investor Principal
Collections will no longer be paid from the Trust to the
holders of the Transferor Certificates or to amortizing or
accumulating Series in Group One or deposited into the
Excess Funding Account as described above but instead will
be distributed on each Distribution Date, first to the Class
A Certificateholders until the Class A Investor Amount has
been paid in full, then to the Class B Certificateholders
until the Class B Invested Amount is paid in full and then
to the Class C Interest Holder until the Class C Invested
Amount is paid in full. See "Description of the Class A
Certificates-- Pay Out Events" for a discussion of the
events which might lead to the commencement of the Rapid
Amortization Period. See "Description of the Class A
Certificates--Application of Collections."
SHARED COLLECTIONS OF
PRINCIPAL RECEIVABLES AND
TRANSFEROR PRINCIPAL
COLLECTIONS.................. To the extent that collections of Principal Receivables
allocated to the Certificates or the Class C Interests are
not needed to make payments to or for the benefit of
Certificateholders or the Class C Interest Holders, such
collections may be applied to cover principal payments due
to or for the benefit of other Principal Sharing Series, if
any, in Group One. Any such application of collections will
not result in a reduction of the Class A Invested Amount,
the Class B Invested Amount or the Class C Invested Amount.
In addition, during the Controlled Accumulation Period,
certain collections of Principal Receivables allocated to
other Principal Sharing Series in Group One,
</TABLE>
S-13
<PAGE>
<TABLE>
<S> <C>
to the extent such collections are not needed to make
payments in respect of such other Series, and certain Shared
Transferor Principal Collections, may be applied to cover
principal amounts payable to or for the benefit of the
Certificateholders or the Class C Interest Holders. See
"Description of the Class A Certificates--Shared Collec-
tions of Principal Receivables and Transferor Principal
Collections."
REQUIRED TRANSFEROR
PERCENTAGE................... The Required Transferor Percentage applicable to Series
1998-1 is currently 5%, provided that the Required
Transferor Percentage may be reduced to as low as 2% if the
Transferor delivers an officer's certificate stating that
such reduction will not have an Adverse Effect and the
Rating Agency Condition is satisfied.
RECORD DATE.................. For any Distribution Date, the last Business Day of the
month preceding such Distribution Date.
OPTIONAL REPURCHASE.......... The Class A Certificates will be subject to optional
repurchase by the Transferor on any Distribution Date after
the Investor Amount is less than or equal to 10% of the
Initial Investor Amount, unless certain events specified in
the Pooling and Servicing Agreement have occurred. The
repurchase price on the Distribution Date on which such
purchase occurs will be equal to the Investor Amount plus
accrued and unpaid interest on the Certificates and the
Class C Interests as described herein. If such optional
repurchase occurs it may result in an early return of the
investor's investment and no premium will be paid as a
result of any such optional repurchase and there can be no
assurance that a Class A Certificateholder will be able to
invest such early repayment amount at a similar rate of
return. See "Description of the Class A
Certificates--Optional Repurchase."
FINAL PAYMENT OF PRINCIPAL
AND INTEREST; TERMINATION OF
TRUST........................ The interest of the Certificateholders in the Trust will
terminate following the earlier of (i) the day after the
Distribution Date on which the Investor Amount is paid in
full and (ii) the earlier of the January 2005 Distribution
Date and the termination of the Trust (the "Series 1998-1
Termination Date"). All principal and interest will be due
and payable no later than the Series 1998-1 Termination
Date. See "The Pooling and Servicing Agreement
Generally--Final Payment of Principal and Interest;
Termination" in the Prospectus.
TRUSTEE...................... The Bank of New York, a New York banking corporation.
TAX STATUS................... Subject to the matters discussed under "Federal Income Tax
Consequences" in the Prospectus, Special Tax Counsel to the
Transferor is of the opinion that, under existing law, the
Class A Certificates will properly be characterized as debt
for Federal income tax purposes on the date of issuance.
Under the Pooling and Servicing Agreement, the Certificate
Owners will agree to treat the Class A Certificates as
indebtedness for income tax purposes. See "Federal Income
Tax Consequences" herein and in the Prospectus for
additional information concerning the application of Federal
income tax laws.
ERISA CONSIDERATIONS......... Subject to the considerations described below, the Class A
Certificates are eligible for purchase by employee benefit
plan investors. Under a
</TABLE>
S-14
<PAGE>
<TABLE>
<S> <C>
regulation issued by the Department of Labor, the Trust
Assets would not be deemed "plan assets" of an employee
benefit plan holding the Class A Certificates if certain
conditions are met, including that the Class A Certificates
must be held, upon completion of the public offering made
hereby, by at least 100 investors who are independent of the
Transferor and of one another. The Underwriters expect that
the Class A Certificates will be held by at least 100
independent investors at the conclusion of the offering,
although no assurance can be given, and no monitoring or
other measures will be taken to ensure that such condition
will be met. The Transferor anticipates that the other
conditions of the regulation will be met. If the Trust
Assets were deemed to be "plan assets" of an employee
benefit plan investor (e.g., if the 100 independent investor
criterion is not satisfied) violation of the "prohibited
transaction" rules of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), could result and
generate excise tax and other liabilities under ERISA and
Section 4975 of the Internal Revenue Code of 1986, as
amended (the "Code"), unless a statutory, regulatory or
administrative exemption is available. It is uncertain
whether existing exemptions from the "prohibited
transaction" rules of ERISA would apply to all transactions
involving the Trust Assets. Accordingly, employee benefit
plan fiduciaries or other persons contemplating purchasing
the Class A Certificates on behalf of or with "plan assets"
of any employee benefit plan should consult their counsel
before making a purchase. See "ERISA Considerations" in the
Prospectus.
CERTIFICATE RATINGS.......... It is a condition to the issuance of the Class A
Certificates that they be rated in the highest rating
category by at least one nationally recognized rating
agency.
The rating agency or rating agencies rating the Class A
Certificates or any other Series are collectively referred
to herein as the "Rating Agencies" or individually as a
"Rating Agency." The Class A Certificates offered hereby are
investment grade asset-backed securities within the meaning
of the Act and the rules promulgated thereunder.
</TABLE>
S-15
<PAGE>
RISK FACTORS
LIMITED LIQUIDITY. There is currently no market for the Class A
Certificates. The Underwriters expect to make a secondary market in the Class A
Certificates, but are not obligated to do so. There can be no assurance that a
secondary market will develop or, if it does develop, that such market will
provide Class A Certificateholders with liquidity of investment or that it will
continue for the life of the Class A Certificates.
LIMITED AMOUNTS OF CREDIT ENHANCEMENT. Although credit enhancement with
respect to the Class A Certificates will be provided by the subordination of the
Class B Certificates and the Class C Interests, such amounts are limited. If the
Class C Invested Amount and the Class B Invested Amount are reduced to zero,
Class A Certificateholders will bear directly the credit and other risks
associated with their undivided interest in the Trust. See "Description of the
Class A Certificates--Allocation Percentages" and "--Allocation of Investor
Default Amount."
DISCOUNT OPTION. The Pooling and Servicing Agreement provides that a
percentage (the "Discount Percentage") (which on the Closing Date will be 1.5%)
of collections of Principal Receivables will be treated as collections of
Finance Charge Receivables ("Discount Option Collections"). Pursuant to the
Pooling and Servicing Agreement, the Transferor may, without notice to or
consent of the Class A Certificateholders, from time to time, increase, reduce
or eliminate (subject to the limitations described below) the Discount
Percentage for all or any specified portion of collections of Principal
Receivables on or after the date of such change (each a "Discount Option Date").
The Transferor must provide 30 days prior written notice to the Trustee and each
Rating Agency of any such change and such change will become effective only if
(i) in the reasonable belief of the Transferor such designation would not cause
to occur a Pay Out Event (or Reinvestment Event) with respect to any Series or
an event which with notice or the lapse of time or both would constitute a Pay
Out Event (or Reinvestment Event) with respect to any Series and (ii) the Rating
Agency Condition is satisfied. See "Description of the Certificates--Discount
Option" in the Prospectus. Any such change that raises the Discount Percentage
would result in an increase in the amount of collections of Finance Charge
Receivables and a lower payment rate of collections of Principal Receivables and
will reduce the Transferor Amount (which is calculated after applying the
Discount Percentage to the aggregate amount of Principal Receivables), thereby
decreasing the likelihood that certain Pay Out Events or Reinvestment Events
based in part on the amount of collections of Finance Charge Receivables will
occur and increasing the likelihood that the Transferor will be required to
designate Additional Accounts. Any such change that reduces the Discount
Percentage will have the opposite effect.
RATING OF THE CLASS A CERTIFICATES. It is a condition to the issuance of
the Class A Certificates that they be rated in the highest rating category by at
least one nationally recognized rating agency. The rating of the Class A
Certificates is based primarily on the value of the Receivables and the
subordination of the Class B Certificates and the Class C Interests. The ratings
of the Class A Certificates are not a recommendation to purchase, hold or sell
Class A Certificates, and such ratings do not comment as to the marketability of
the Class A Certificates, or 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 any such
rating agency, if in its judgment circumstances so warrant.
BOOK-ENTRY REGISTRATION. The Class A Certificates initially will be
represented by certificates registered in the name of Cede, the nominee for DTC,
and will not be registered in the names of the Certificate Owners or their
nominees. As a result, unless and until Definitive Certificates are issued,
Certificate Owners will not be recognized by the Trustee as Class A
Certificateholders, as that term is used in the Pooling and Servicing Agreement.
Until such time, Certificate Owners will only be able to exercise the rights of
Class A Certificateholders indirectly through DTC and its participating members
(in the United States) or Cedel or Euroclear (in Europe). See "Description of
the Certificates-- Book-Entry Registration" and "--Definitive Certificates" in
the Prospectus.
S-16
<PAGE>
THE BANKS' CREDIT CARD ACTIVITIES
BILLING AND PAYMENT
Nearly all of the accounts in the Travelers Consumer Credit Card Portfolio
are subject to finance charges at either promotional rates ranging from 5.9% to
9.9% for cash advances and 0.0% to 9.9% for purchases for an introductory period
or variable rates ranging from 2.9% to 9.9% above the prime rate for purchases
and cash advances. For more information, see "The Banks' Credit Card
Activities--Billing and Payments" in the Prospectus.
DELINQUENCY AND LOSS EXPERIENCE
The following tables set forth the delinquency and loss experience for each
of the periods shown for the Travelers Consumer Credit Card Portfolio. The
Accounts in the Trust Portfolio have been selected from accounts in the
Travelers Consumer Credit Card Portfolio that meet the requirements set forth in
the definition of Eligible Accounts as set forth in the Pooling and Servicing
Agreement. See "The Receivables" herein and "The Pooling and Servicing Agreement
Generally--Representations, Warranties and Covenants" in the Prospectus. There
can be no assurance that the delinquency and loss experience for the Receivables
will be similar to the historical experience set forth below.
DELINQUENCY EXPERIENCE
TRAVELERS CONSUMER CREDIT CARD PORTFOLIO
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
------------------------------------
<S> <C> <C> <C>
1997 1996 1995
------------ ---------- ----------
Receivables Outstanding(1)................................................. $ 1,349,084 $ 903,524 $ 758,441
Receivables Contractually Delinquent
as a Percentage of Receivables Outstanding:
30-59 Days............................................................... 0.44% 0.58% 0.58%
60-89 Days............................................................... 0.31 0.36 0.38
90 or more days.......................................................... 0.90 1.08 1.01
------------ ---------- ----------
Total................................................................ 1.65% 2.02% 1.97%
------------ ---------- ----------
------------ ---------- ----------
</TABLE>
- ------------------------
(1) Receivables Outstanding consists of all amounts due from account holders as
posted to the accounts as of December 31, 1997.
LOSS EXPERIENCE
TRAVELERS CONSUMER CREDIT CARD PORTFOLIO
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------
<S> <C> <C> <C>
1997 1996 1995
------------ ---------- ----------
Average Receivables
Outstanding(1)........................................................... $ 1,098,320 $ 832,388 $ 714,490
Gross Losses(2)............................................................ 30,616 26,744 16,483
Recoveries(3).............................................................. 1,901 1,844 1,846
Net Losses(2).............................................................. 28,715 24,900 14,637
Net Losses as a Percentage of Average
Receivables Outstanding(2)............................................. 2.61% 2.99% 2.05%
</TABLE>
- ------------------------
(1) Average Receivables Outstanding is based on month-end outstandings.
(2) Losses do not include accrued finance charges that have been written off or
fraud losses.
(3) Recoveries are not included as part of the Receivables.
S-17
<PAGE>
INTERCHANGE
The Interchange attributed to the cardholder charges for merchandise and
services in the Accounts is not transferred from the Banks and does not
constitute a portion of the Receivables.
THE RECEIVABLES
The Receivables in the Initial Accounts as of the Initial Cut-Off Date will
be conveyed to the Trust on March 6, 1998 (the "Initial Closing Date"). The
Initial Accounts were selected from the Travelers Consumer Credit Card Portfolio
satisfying criteria set forth in the Pooling and Servicing Agreement (the
"Criteria") as applied on December 31, 1997 (the "Initial Cut-Off Date").
Receivables in Additional Accounts may be conveyed to the Trust from time to
time after the Initial Closing Date. Any Additional Accounts will be selected
from the Travelers Consumer Credit Card Portfolio satisfying the Criteria as
applied on the relevant Addition Cut-Off Date. The Initial Accounts and any
Additional Accounts designated to the Trust are hereinafter referred to as the
"Trust Portfolio." The Account Owners have broad discretion in selecting
accounts that will be designated as Additional Accounts. The "Criteria" are
requirements to qualify as an "Eligible Account" that are set forth in the
Prospectus. In order to meet the Criteria, each Account must, on the Initial
Cut-Off Date or the applicable Addition Cut-Off Date, among other things, have
been in existence and maintained by the Bank that owns such Account, have a
cardholder with a billing address in the United States, its territories or
possessions or a military address, and, except under certain circumstances, not
be an account the credit card or cards with respect to which have been reported
to the Bank that owns such Account as having been lost or stolen. See "The
Pooling and Servicing Agreement Generally-- Representations, Warranties and
Covenants" in the Prospectus. Cardholders whose accounts are included in the
Travelers Consumer Credit Card Portfolio have billing addresses in all states,
the District of Columbia, Puerto Rico, Guam and the Virgin Islands. Pursuant to
the Pooling and Servicing Agreement, the Transferor may be obligated (subject to
certain limitations and conditions) to designate Additional Accounts to be
included as Accounts and to convey to the Trust all Receivables of such
Additional Accounts, or may elect to automatically designate Additional Accounts
and convey the Receivables therein whether such Receivables are then existing or
thereafter created. See "The Pooling and Servicing Agreement Generally--Addition
of Accounts or Participation Interests" in the Prospectus. If the Transferor is
required to designate Additional Accounts under the Pooling and Servicing
Agreement, each Account Owner, under its respective Receivables Transfer
Agreement, agrees that it will designate sufficient Eligible Accounts which,
together with Additional Accounts designated by any other Account Owners, will
cause the Transferor to be in compliance with the requirements of the Pooling
and Servicing Agreement. These accounts must meet the Criteria set forth above
as of the relevant Addition Cut-Off Date. Throughout the term of the Trust, the
Accounts from which the Receivables arise will be the same VISA and MasterCard
accounts designated by the respective Account Owner on the Initial Cut-Off Date
and each Addition Cut-Off Date (plus any Additional Accounts subsequently
designated as described above). In addition, as of the Initial Cut-Off Date and
each Addition Cut-Off Date and on the date any new Receivables are created, the
Transferor will represent and warrant to the Trust that the Receivables meet the
eligibility requirements specified in the Pooling and Servicing Agreement. See
"The Pooling and Servicing Agreement Generally-- Representations, Warranties and
Covenants" in the Prospectus.
The Receivables, as of December 31, 1997, totalled $356,573,583.37 in
236,588 Accounts. The Accounts had an average credit limit of $10,182.63. The
percentage of the aggregate total Receivable balance to the aggregate total
credit limit was 14.8%. The average age of the Accounts was 45.45 months.
The following tables summarize the Trust Portfolio by various criteria as of
the close of business on December 31, 1997. Because the future composition of
the Trust Portfolio may change over time, these tables are not necessarily
indicative of future results.
S-18
<PAGE>
COMPOSITION BY ACCOUNT BALANCE
TRUST PORTFOLIO
<TABLE>
<CAPTION>
PERCENTAGE
OF TOTAL PERCENTAGE
NUMBER OF NUMBER OF OF TOTAL
ACCOUNT BALANCE ACCOUNTS ACCOUNTS RECEIVABLES RECEIVABLES
- ----------------------------------------------------- ----------- ------------- ----------------- -------------
<S> <C> <C> <C> <C>
Credit balance....................................... 4,639 1.96% $ (955,814.62) (0.27)%
No balance........................................... 105,204 44.47 0 0.00
$0.01 to $1,500.00................................... 63,600 26.88 32,168,525.59 9.02
$1,500.01 to $5,000.00............................... 39,393 16.65 120,939,844.13 33.92
$5,000.01 to $10,000.00.............................. 18,140 7.67 126,785,299.85 35.56
$10,000.01 to $20,000.00............................. 5,244 2.22 68,110,224.48 19.10
Over $20,000.00...................................... 368 0.15 9,525,503.94 2.67
----------- ------ ----------------- ------
Total................................................ 236,588 100.00% $ 356,573,583.37 100.00%
----------- ------ ----------------- ------
----------- ------ ----------------- ------
</TABLE>
COMPOSITION BY CREDIT LIMIT
TRUST PORTFOLIO
<TABLE>
<CAPTION>
PERCENTAGE
OF TOTAL PERCENTAGE
NUMBER OF NUMBER OF OF TOTAL
CREDIT LIMIT BALANCE ACCOUNTS ACCOUNTS RECEIVABLES RECEIVABLES
- ------------------------------------------------------- ----------- ------------- ----------------- -----------
<S> <C> <C> <C> <C>
$0.00 to $2,500.00..................................... 26,474 11.19% $ 9,713,186.09 2.72%
$2,500.01 to $5,000.00................................. 38,038 16.08 46,040,634.47 12.91
$5,000.01 to $6,000.00................................. 12,231 5.17 18,170,263.78 5.10
$6,000.01 to $7,000.00................................. 13,309 5.63 16,621,017.01 4.66
$7,000.01 to $8,000.00................................. 18,519 7.83 29,214,651.86 8.19
$8,000.01 to $9,000.00................................. 8,903 3.76 14,007,617.32 3.93
$9,000.01 to $10,000.00................................ 18,576 7.85 35,074,185.63 9.84
$10,000.01 to $11,000.00............................... 11,943 5.05 15,932,866.05 4.47
$11,000.01 to $12,000.00............................... 10,273 4.34 19,827,093.14 5.56
$12,000.01 to $13,000.00............................... 12,549 5.30 16,143,524.84 4.53
$13,000.01 to $14,000.00............................... 5,271 2.23 9,719,334.99 2.73
$14,000.01 to $15,000.00............................... 19,621 8.29 37,409,210.89 10.49
Over $15,000.00........................................ 40,881 17.28 88,699,997.30 24.87
----------- ------ ----------------- -----------
Total.................................................. 236,588 100.00% $ 356,573,583.37 100.00%
----------- ------ ----------------- -----------
----------- ------ ----------------- -----------
</TABLE>
S-19
<PAGE>
COMPOSITION BY PERIOD OF DELINQUENCY
TRUST PORTFOLIO
<TABLE>
<CAPTION>
PERCENTAGE
OF TOTAL PERCENTAGE
PERIOD OF DELINQUENCY (DAYS NUMBER OF NUMBER OF OF TOTAL
CONTRACTUALLY DELINQUENT) ACCOUNTS ACCOUNTS RECEIVABLES RECEIVABLES
- --------------------------------------------------------- ----------- ----------- ----------------- -----------
<S> <C> <C> <C> <C>
Not Delinquent........................................... 232,111 98.11% $ 338,511,204.72 94.94%
1 to 29 days............................................. 3,086 1.30 12,383,531.91 3.47
30 to 59 days............................................ 397 0.17 1,314,675.33 0.37
60 to 89 days............................................ 280 0.12 1,223,032.00 0.34
90 to 119 days........................................... 192 0.08 718,943.90 0.20
120 to 149 days.......................................... 189 0.08 863,596.11 0.24
150 to 179 days.......................................... 165 0.07 817,892.24 0.23
180 or more.............................................. 168 0.07 740,707.16 0.21
----------- ----------- ----------------- -----------
Total.................................................... 236,588 100.00% $ 356,573,583.37 100.00%
----------- ----------- ----------------- -----------
----------- ----------- ----------------- -----------
</TABLE>
COMPOSITION BY ACCOUNT AGE
TRUST PORTFOLIO
<TABLE>
<CAPTION>
PERCENTAGE
OF TOTAL PERCENTAGE
NUMBER OF NUMBER OF OF TOTAL
ACCOUNT AGE ACCOUNTS ACCOUNTS RECEIVABLES RECEIVABLES
- ------------------------------------------------------- ----------- ------------- ----------------- -----------
<S> <C> <C> <C> <C>
0 to 6 months.......................................... 31,213 13.19% $ 67,898,353.23 19.04%
Over 6 to 12 months.................................... 41,858 17.69 70,699,473.07 19.83
Over 12 to 24 months................................... 31,753 13.42 39,062,358.10 10.96
Over 24 to 36 months................................... 22,912 9.69 31,322,823.04 8.78
Over 36 to 48 months................................... 17,833 7.54 21,844,424.14 6.13
Over 48 to 60 months................................... 21,131 8.93 34,204,202.99 9.59
Over 60 to 84 months................................... 26,293 11.11 33,733,399.94 9.46
Over 84 months......................................... 43,595 18.43 57,808,548.86 16.21
----------- ------ ----------------- -----------
Total.................................................. 236,588 100.00% $ 356,573,583.37 100.00%
----------- ------ ----------------- -----------
----------- ------ ----------------- -----------
</TABLE>
S-20
<PAGE>
GEOGRAPHIC DISTRIBUTION OF ACCOUNTS AND RECEIVABLES
TRUST PORTFOLIO
<TABLE>
<CAPTION>
PERCENTAGE
OF TOTAL PERCENTAGE
NUMBER OF NUMBER OF OF TOTAL
STATE ACCOUNTS ACCOUNTS RECEIVABLES RECEIVABLES
- --------------------------------------------------------- ----------- ----------- ----------------- -----------
<S> <C> <C> <C> <C>
Alabama.................................................. 2,338 0.99% $ 3,533,352.88 0.99%
Alaska................................................... 360 0.15 777,604.33 0.22
Arizona.................................................. 3,868 1.63 6,459,396.03 1.81
Arkansas................................................. 1,371 0.58 2,105,774.73 0.59
California............................................... 28,967 12.24 49,669,698.14 13.93
Colorado................................................. 4,843 2.05 7,723,521.30 2.17
Connecticut.............................................. 4,253 1.80 6,890,679.73 1.93
Delaware................................................. 1,034 0.44 1,081,389.55 0.30
District of Columbia..................................... 1,116 0.47 1,952,797.35 0.55
Florida.................................................. 13,034 5.51 18,924,416.58 5.31
Georgia.................................................. 5,009 2.12 8,426,863.78 2.36
Hawaii................................................... 832 0.35 1,350,192.81 0.38
Idaho.................................................... 918 0.39 1,321,268.85 0.37
Illinois................................................. 10,225 4.32 14,729,086.99 4.13
Indiana.................................................. 4,258 1.80 6,126,783.29 1.72
Iowa..................................................... 2,405 1.02 2,931,070.61 0.82
Kansas................................................... 2,215 0.94 3,199,722.63 0.90
Kentucky................................................. 2,186 0.92 2,875,184.57 0.81
Louisiana................................................ 2,677 1.13 4,160,889.97 1.17
Maine.................................................... 1,005 0.42 1,451,048.06 0.41
Maryland................................................. 6,376 2.69 9,815,575.00 2.75
Massachusetts............................................ 8,865 3.75 13,102,472.93 3.67
Michigan................................................. 7,676 3.24 11,589,203.38 3.25
Minnesota................................................ 4,798 2.03 6,433,488.56 1.80
Mississippi.............................................. 1,341 0.57 1,987,095.98 0.56
Missouri................................................. 3,907 1.65 5,511,359.71 1.55
Montana.................................................. 715 0.30 816,864.19 0.23
Nebraska................................................. 1,231 0.52 1,290,665.92 0.36
Nevada................................................... 1,683 0.71 2,805,126.10 0.79
New Hampshire............................................ 1,453 0.61 2,033,107.71 0.57
New Jersey............................................... 12,363 5.23 17,159,740.72 4.81
New Mexico............................................... 1,439 0.61 2,254,836.82 0.63
New York................................................. 18,983 8.02 29,442,536.54 8.26
North Carolina........................................... 4,227 1.79 5,990,347.22 1.68
North Dakota............................................. 494 0.21 587,964.92 0.17
Ohio..................................................... 8,698 3.68 12,101,507.18 3.39
Oklahoma................................................. 2,413 1.02 3,652,966.02 1.02
Oregon................................................... 2,919 1.23 4,207,999.47 1.18
Pennsylvania............................................. 12,118 5.12 14,059,873.20 3.94
Rhode Island............................................. 996 0.42 1,595,949.61 0.45
South Carolina........................................... 2,111 0.89 2,936,846.56 0.82
South Dakota............................................. 486 0.21 626,352.21 0.18
Tennessee................................................ 3,327 1.41 4,749,420.24 1.33
Texas.................................................... 15,039 6.36 26,818,906.11 7.52
Utah..................................................... 1,661 0.70 2,358,191.73 0.66
Vermont.................................................. 602 0.25 861,455.50 0.24
Virginia................................................. 6,450 2.73 9,960,817.91 2.79
Washington............................................... 4,619 1.95 7,629,994.59 2.14
West Virginia............................................ 1,004 0.42 1,161,617.06 0.33
Wisconsin................................................ 5,217 2.21 6,740,990.25 1.89
Wyoming.................................................. 463 0.20 599,567.85 0.17
----------- ----------- ----------------- -----------
Total.................................................... 236,588 100.00% $ 356,573,583.37 100.00%
----------- ----------- ----------------- -----------
----------- ----------- ----------------- -----------
</TABLE>
S-21
<PAGE>
MATURITY ASSUMPTIONS
The Pooling and Servicing Agreement provides that Class A Certificateholders
will not begin to receive payments of principal until the Class A Expected Final
Distribution Date or following the occurrence of a Pay Out Event which results
in the commencement of the Rapid Amortization Period. No payments of principal
will be made on the Class B Certificates until the payment in full of the Class
A Investor Amount. Unless and until a Pay Out Event occurs, on each Distribution
Date during the Controlled Accumulation Period, monthly deposits of principal
equal to the lesser of (a) Available Investor Principal Collections and (b) the
Controlled Deposit Amount will be made into the Principal Funding Account.
Although it is anticipated that a single principal payment will be made to
Class A Certificateholders in an amount equal to the Class A Investor Amount on
the February 2003 Distribution Date (the "Class A Expected Final Distribution
Date") and that a single principal payment will be made to Class B
Certificateholders in an amount equal to the Class B Invested Amount on the
March 2003 Distribution Date (the "Class B Expected Final Distribution Date"),
no assurance can be given in that regard.
A Pay Out Event occurs, with respect to Series 1998-1 only, either
automatically or after specified notice, upon (a) failure of the Transferor to
make certain payments or transfers of funds for the benefit of the
Certificateholders within the time periods stated in the Pooling and Servicing
Agreement, (b) material breaches of certain representations, warranties or
covenants of the Transferor, (c) (i) with respect to the end of any Monthly
Period, as determined on the third Business Day preceding the related
Distribution Date (the "Determination Date"), with respect to which the
Transferor Amount is less than the Required Transferor Amount as of the last day
of such Monthly Period, the failure of the Transferor to convey Receivables in
Additional Accounts to the Trust such that the Transferor Amount is at least
equal to the Required Transferor Amount on or prior to the tenth Business Day
following such Determination Date or (ii) with respect to the end of any Monthly
Period, as determined on the related Determination Date, with respect to which
the product of (x) the aggregate amount of Principal Receivables and (y) one
minus the Discount Percentage is not at least equal to the Required Principal
Balance as of the last day of such Monthly Period, the failure of the Transferor
to convey Receivables in Additional Accounts to the Trust such that the product
of (x) the aggregate amount of Principal Receivables and (y) one minus the
Discount Percentage is at least equal to the Required Principal Balance on or
prior to the tenth Business Day following such Determination Date, (d) the
average of the Net Portfolio Yield for three consecutive Monthly Periods being a
rate which is less than the Base Rate averaged over such period, (e) the
occurrence of a Servicer Default having a material adverse effect on the
Certificateholders, or (f) failure to pay in full (i) the Class A Investor
Amount on the Class A Expected Final Distribution Date or (ii) the Class B
Invested Amount on the Class B Expected Final Distribution Date.
The term "Net Portfolio Yield" means with respect to any Monthly Period, the
annualized percentage equivalent of a fraction the numerator of which is the
sum, without duplication, of (a) the amount of collections of Finance Charge
Receivables during such Monthly Period allocable to the Certificates and the
Class C Interests, including any other amounts that are to be treated as
collections of Finance Charge Receivables under the Pooling and Servicing
Agreement, after subtracting therefrom the Investor Default Amount for such
Monthly Period, PLUS (b) the amount of any Principal Funding Investment Proceeds
for the related Distribution Date, PLUS (c) the amount of funds, if any, to be
withdrawn from the Reserve Account that, pursuant to the Supplement, are
required to be included in Class A Available Funds with respect to such
Distribution Date, and the denominator of which is the Investor Amount as of the
last day of the preceding Monthly Period. For any Monthly Period, the "Base
Rate" will be equal to the annualized percentage equivalent of a fraction, the
numerator of which is equal to the sum of (i) the Class A Monthly Interest, (ii)
the Class B Monthly Interest, if any, (iii) the Class C Monthly Interest, if
any, and (iv) the Monthly Servicing Fee, each for the related Distribution Date
and the denominator of which is the Investor Amount as of the last day of the
preceding Monthly Period.
A Pay Out Event (or Reinvestment Event) occurs, with respect to the
Certificates and each other Series, automatically upon (a) an Insolvency Event
relating to any Transferor (including any Additional
S-22
<PAGE>
Transferor) or an Account Owner, (b) the Trust becoming an "investment company"
within the meaning of the Investment Company Act of 1940, as amended (the
"Investment Company Act"), or (c) the inability of any Transferor to transfer
Receivables to the Trust in accordance with the Pooling and Servicing Agreement.
See "Description of the Class A Certificates--Pay Out Events."
In the event of the occurrence of a Pay Out Event, the Rapid Amortization
Period will begin. During the Rapid Amortization Period, first the Class A
Certificateholders and then, following the payment in full of the Class A
Investor Amount, the Class B Certificateholders will be entitled to receive
monthly payments of principal equal to the Available Investor Principal
Collections received by the Trust during the related Monthly Period (plus the
principal amount on deposit in the Principal Funding Account) until the Class A
Investor Amount or Class B Invested Amount, as applicable, are paid in full.
Allocations of Principal Receivables will be based on the Principal Allocation
Percentage. See "Description of the Class A Certificates--Allocation
Percentages."
The following table sets forth the highest and lowest cardholder monthly
payment rates for the Travelers Consumer Credit Card Portfolio during any month
in the periods shown and the average of the cardholder monthly payment rates for
all months during the period shown, in each case calculated as a percentage of
total opening monthly account balances during the periods shown. Payments shown
in the table include amounts which would be deemed payments of Principal
Receivables and Finance Charge Receivables with respect to the Accounts.
MONTHLY PAYMENT RATES
TRAVELERS CONSUMER CREDIT CARD PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Lowest............................................................. 22% 20% 19%
Highest............................................................ 27% 24% 24%
Monthly Average.................................................... 24% 22% 22%
</TABLE>
The amount of collections on the Receivables may vary from month to month
due to seasonal variations, general economic conditions, changes in tax law and
payment habits of individual cardholders. There can be no assurance that
collections of Principal Receivables with respect to the Trust Portfolio, and
thus the rate at which Class A Certificateholders could expect to accumulate or
receive payments of principal on their Class A Certificates during the
Controlled Accumulation Period or the Rapid Amortization Period, will be similar
to the historical experience set forth above. In addition, the ability of the
Class A Certificateholders to be paid the Class A Investor Amount on the Class A
Expected Final Distribution Date may be dependent upon the availability of
Shared Principal Collections and Shared Transferor Principal Collections. Since
the Trust, as a master trust, may issue additional Series from time to time,
there can be no assurance that the issuance of additional Series or the terms of
any additional Series might not have an impact on the timing of payments
received by Class A Certificateholders. Further, if a Pay Out Event occurs, the
average life and maturity of the Class A Certificates could be significantly
reduced.
RECEIVABLE YIELD CONSIDERATIONS
The yield on the Travelers Consumer Credit Card Portfolio for each of the
three years in the period ended December 31, 1997 is set forth in the following
table. The historical yield figures in the table are calculated on an accrual
basis. Collections on the Receivables will be on a cash basis and may not
reflect the historical yield experience in the table. For example, for periods
of increasing delinquencies, accrual yields may exceed cash yields as amounts
collected on credit card receivables lag behind amounts accrued and billed to
cardholders. Conversely, as delinquencies decrease, cash yields may exceed
accrual yields as amounts collected in a current period may include amounts
accrued during prior periods. Yield, on both an accrual and a cash basis will be
affected by numerous factors, including the finance charges on the Receivables,
the amount of the annual cardholder fees and other fees and charges, changes in
the
S-23
<PAGE>
delinquency rate on the Receivables and the percentage of cardholders who pay
their balances in full each month and do not incur finance charges. There can be
no assurance that the revenue from finance charges and fees for the Receivables
will be similar to the historical experience set forth below. See "Risk Factors"
in the Prospectus.
REVENUE FROM FINANCE CHARGES
TRAVELERS CONSUMER CREDIT CARD PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Average Monthly Accrued Fees and Charges(1)(2)................... $ 11.28 $ 11.20 $ 11.48
Average Account Balance(3)....................................... 1,259 1,108 1,058
Yield From Fees and Charges(1)(2)(4)............................. 10.75% 12.13% 13.02%
</TABLE>
- ------------------------
(1) The figures shown do not include revenue attributable to Interchange.
(2) Fees and Charges are comprised of finance charges, annual cardholder fees
and certain other service charges.
(3) Average Account Balance includes purchases, cash advances and billed and
unpaid finance and other charges, and is calculated based on the average of
the opening monthly account balances for accounts with balances during the
periods shown.
(4) Annualized.
The yield for the Travelers Consumer Credit Card Portfolio shown in the
above table is comprised of the following components: finance charges, annual
cardholder fees and certain other service charges. The yield related to annual
cardholder fees (on those accounts which assess such fees) and other service
charges varies with the type and volume of activity in, and the balance of each
account. Most accounts do not carry an annual cardholder fee.
The decline in yield for the period from 1995 to 1997, as demonstrated in
the above table, is the result of significant growth of new balances which have
a promotional rate assigned during the early months. This promotional rate
generally expires once the account has been on the books for six months.
The Accounts in the Trust Portfolio are randomly selected from accounts in
the Travelers Consumer Credit Card Portfolio, except that debit, corporate and
foreign accounts are excluded from the Trust Portfolio.
DESCRIPTION OF THE CLASS A CERTIFICATES
The Class A Certificates will be issued pursuant to the Pooling and
Servicing Agreement entered into among CC Credit Card Corporation, as
Transferor, Travelers Bank & Trust, fsb, as Servicer of the Accounts and the
Receivables, and The Bank of New York, as Trustee for the Certificateholders,
substantially in the form filed as an exhibit to the Registration Statement of
which the Prospectus is a part. Pursuant to the Master Pooling and Servicing
Agreement, the Transferor may execute further Series Supplements thereto among
each of the Transferor and the Trustee in order to issue additional Series. See
"Description of the Certificates--New Issuances" in the Prospectus. The Trustee
will provide a copy of the Master Pooling and Servicing Agreement (without
exhibits or schedules), including any Series Supplements, to Class A
Certificateholders without charge upon written request. The following summary
together with information contained elsewhere in this Prospectus Supplement and
information contained in the Prospectus describes the material terms of the
Class A Certificates contained in the Pooling and Servicing Agreement. The
following summary is qualified in its entirety by reference to the Pooling and
Servicing Agreement.
S-24
<PAGE>
GENERAL
The Certificates will represent undivided interests in the Trust Assets,
including the right to a floating percentage (in the case of collections of
Principal Receivables during the Revolving Period, such collections will be
allocated to the Certificates and paid to the holders of the Transferor
Certificates, to amortizing or accumulating Series in Group One or, in certain
limited circumstances described herein, to the Class C Interest Holder, or
deposited into the Excess Funding Account, and in the case of collections of
Finance Charge Receivables and Defaulted Receivables at all times) or a
resettable fixed/floating percentage (in the case of collections of Principal
Receivables during the Controlled Accumulation Period or the Rapid Amortization
Period) (each, the "Series Percentage") of all cardholder payments on the
Receivables; PROVIDED, HOWEVER, that on any Distribution Date during the
Controlled Accumulation Period, the amount to be deposited in the Principal
Funding Account in respect of collections of Principal Receivables will be
limited to the Controlled Deposit Amount on such Distribution Date. See
"--Allocation Percentages." For any Monthly Period, the portion of the Principal
Receivables and any amounts on deposit in the Excess Funding Account represented
by the Certificates and the Class C Interests (the "Invested Amount") will be
equal to the Initial Invested Amount, minus the amount of principal deposits
into the Principal Funding Account, minus (without duplication of the amount of
principal deposits into the Principal Funding Account) the amount of principal
payments paid to the Certificateholders and the Class C Interest Holder and
minus any unreimbursed reductions in the Invested Amount. See "The Pooling and
Servicing Agreement Generally--Defaulted Receivables; Rebates and Fraudulent
Charges" in the Prospectus and "--Allocation of Investor Default Amount" herein.
Each Class A Certificate represents the right to receive monthly payments of
interest for the related Interest Periods at the Class A Certificate Rate from
collections of Finance Charge Receivables and, in certain circumstances
Reallocated Principal Collections, and deposits or payments of principal during
the Controlled Accumulation Period or the Rapid Amortization Period funded from
collections of Principal Receivables allocated to the Class A Invested Amount
and the Class B Invested Amount (plus certain other amounts specified herein,
including, during the Controlled Accumulation Period, certain collections of
Principal Receivables otherwise allocable to other Series or to the Transferor,
to the extent such collections are not needed to make payments to or for the
benefit of such other Series).
The Transferor holds the interest in the Principal Receivables and the
amounts on deposit in the Excess Funding Account, if any, not represented by the
Certificates, the Class C Interests and the investor certificates of and
uncertificated interests in other Series, if any. The Transferor holds an
undivided interest in the Trust (the "Transferor's Interest"), including the
right to a percentage (the "Transferor Percentage") of all cardholder payments
on the Receivables.
During the Revolving Period, the Investor Amount will remain constant except
in certain limited circumstances. See "The Pooling and Servicing Agreement
Generally--Defaulted Receivables; Rebates and Fraudulent Charges" in the
Prospectus and "--Allocation of Investor Default Amount" herein. The amount of
Principal Receivables, however, will vary each day as new Principal Receivables
are created and others are paid. The Transferor Amount will fluctuate daily,
therefore, to reflect the changes in the amount of the Principal Receivables.
During the Controlled Accumulation Period or the Rapid Amortization Period, the
Invested Amount will decline for each Monthly Period as cardholder payments of
Principal Receivables are collected and deposited in the Principal Funding
Account or paid to the Certificateholders.
INTEREST PAYMENTS
Interest will accrue on the Class A Certificates at the Class A Certificate
Rate from the Closing Date. Interest at such rate will be paid to the Class A
Certificateholders on each Distribution Date beginning on April 15, 1998.
Interest payments on the Class A Certificates on any Distribution Date will
be calculated on the outstanding principal amount of the Class A Certificates as
of the preceding Record Date (or, in the case of the first Distribution Date, as
of the Closing Date) based upon the Class A Certificate Rate. Interest
S-25
<PAGE>
due but not paid on any Distribution Date will be payable on the next succeeding
Distribution Date together with additional interest on such amount at the Class
A Certificate Rate PLUS 2.0%.
Interest on the Class A Certificates will be calculated on the basis of a
360-day year of twelve 30-day months. The Class A Certificates will bear
interest from the Closing Date at the rate of 6.00%.
On each Distribution Date, Class A Monthly Interest and Class A Monthly
Interest previously due but not distributed to the Class A Certificateholders
will be paid to the Class A Certificateholders from Class A Available Funds for
the related Monthly Period. To the extent Class A Available Funds for such
Monthly Period are insufficient to pay such interest, Excess Spread, Excess
Finance Charge Collections and Excess Transferor Finance Charge Collections
allocated to Series 1998-1, and Reallocated Principal Collections allocable
first to the Class C Invested Amount and then the Class B Invested Amount will
be used to make such payments. "Class A Available Funds" means, with respect to
any Monthly Period, an amount equal to the sum of (a) the Class A Floating
Percentage of collections of Finance Charge Receivables allocated to Series
1998-1 with respect to such Monthly Period (including certain amounts that are
to be treated as collections of Finance Charge Receivables in accordance with
the Pooling and Servicing Agreement), (b) the amount of Principal Funding
Investment Proceeds, if any, with respect to such Distribution Date and (c) the
amount of funds, if any, to be withdrawn from the Reserve Account that, pursuant
to the Supplement, are required to be included in Class A Available Funds with
respect to such Distribution Date.
On each Distribution Date, Class B Monthly Interest, if any, and any Class B
Monthly Interest previously due but not distributed to the Class B
Certificateholders will be paid to the Class B Certificateholders from Class B
Available Funds for the related Monthly Period. To the extent Class B Available
Funds for such Monthly Period are insufficient to pay such interest, Excess
Spread, Excess Finance Charge Collections and Excess Transferor Finance Charge
Collections allocated to Series 1998-1, and Reallocated Principal Collections
allocable to the Class C Invested Amount will be used to make such payment.
"Class B Available Funds" means, with respect to any Monthly Period, an amount
equal to the Class B Floating Percentage of collections of Finance Charge
Receivables allocated to Series 1998-1 with respect to such Monthly Period
(including certain amounts that are to be treated as collections of Finance
Charge Receivables in accordance with the Pooling and Servicing Agreement).
"Class A Monthly Interest" means, with respect to any Distribution Date, an
amount equal to one-twelfth of the product of (i) the Class A Certificate Rate
and (ii) the outstanding principal amount of the Class A Certificates as of the
preceding Record Date; PROVIDED, HOWEVER, with respect to the first Distribution
Date, Class A Monthly Interest shall be equal to the interest accrued on the
outstanding principal amount of the Class A Certificates as of the Closing Date
at the Class A Certificate Rate for the period from the Closing Date through
April 14, 1998 (assuming that the month of March has 30 days).
"Class B Monthly Interest" means, initially, zero. However, the Transferor
may, subsequent to the Closing Date, set an interest rate for the Class B
Certificates without the consent of the Class A Certificateholders. See
"--Transfer of the Class B Certificates."
"Class C Available Funds" means, with respect to any Monthly Period, an
amount equal to the Class C Floating Percentage of the collections of Finance
Charge Receivables allocated to Series 1998-1 with respect to such Monthly
Period (including amounts that are to be treated as collections of Finance
Charge Receivables in accordance with the Pooling and Servicing Agreement).
"Class C Monthly Interest" means, initially, zero. However, the Transferor
may, subsequent to the Closing Date, set an interest rate for the Class C
Interests without the consent of the Class A Certificateholders. See "--Transfer
of the Class C Interests."
PRINCIPAL PAYMENTS
During the Revolving Period (which begins on the Closing Date and ends on
the day before the commencement of the Controlled Accumulation Period or, if
earlier, the Rapid Amortization Period), no principal payments will be made to
the Certificateholders. On each Distribution Date during the Revolving Period,
collections of Principal Receivables allocable to the Investor Interest will,
subject to certain
S-26
<PAGE>
limitations, including the allocation of any Reallocated Principal Collections
with respect to the related Monthly Period to pay the Class A Required Amount
and the Class B Required Amount and payments of Class C Monthly Principal, be
treated as Shared Principal Collections; provided, that certain collections of
Principal Receivables allocable to the Investor Interest may be applied to
reduce the Class C Invested Amount if the Rating Agency Condition has been met.
The first principal payment will be made to the Class A Certificateholders
on the earlier of the Class A Expected Final Distribution Date or on the
Distribution Date in the month following the month in which the Rapid
Amortization Period commences. On each Distribution Date with respect to the
Class A Accumulation Period, an amount equal to the least of (a) Available
Investor Principal Collections on deposit in the Collection Account with respect
to such Distribution Date, (b) the applicable Controlled Deposit Amount for such
Distribution Date and (c) the Class A Invested Amount, will be deposited in the
Principal Funding Account for payment to the Class A Certificateholders on the
Class A Expected Final Payment Date or on the first Distribution Date with
respect to the Rapid Amortization Period. After the Class A Investor Amount has
been paid in full, on each Distribution Date with respect to the Class B
Accumulation Period, amounts equal to the least of (a) Available Investor
Principal Collections on deposit in the Collection Account with respect to such
Distribution Date (minus the portion of such Available Investor Principal
Collections applied to Class A Monthly Principal on such Distribution Date), (b)
the applicable Controlled Deposit Amount for such Distribution Date and (c) the
Class B Invested Amount will be paid to the Class B Certificateholders until the
Class B Invested Amount has been paid in full.
"Available Investor Principal Collections" means, with respect to any
Monthly Period, an amount equal to the sum of (a) (i) an amount equal to the
Principal Allocation Percentage of all collections of Principal Receivables
received during such Monthly Period, minus (ii) the amount of Reallocated
Principal Collections with respect to such Monthly Period used to fund the Class
A Required Amount or the Class B Required Amount, plus (b) any Shared Principal
Collections with respect to other Series in Group One (including any amounts on
deposit in the Excess Funding Account that are allocated to Series 1998-1
pursuant to the Pooling and Servicing Agreement for application as Shared
Principal Collections) and any Shared Transferor Principal Collections that are
allocated to Series 1998-1, plus (c) any other amounts which pursuant to the
Supplement are to be treated as Available Investor Principal Collections with
respect to the related Distribution Date.
On each Distribution Date during the Rapid Amortization Period until the
Class A Investor Amount has been paid in full or the Series 1998-1 Termination
Date occurs, the Class A Certificateholders will be entitled to receive
Available Investor Principal Collections in an amount up to the Class A Investor
Amount. After payment in full of the Class A Investor Amount, the Class B
Certificateholders will be entitled to receive, on each such Distribution Date,
Available Investor Principal Collections until the earlier of the date the Class
B Invested Amount is paid in full and the Series 1998-1 Termination Date.
"Class A Monthly Principal" with respect to any Distribution Date relating
to the Class A Accumulation Period or the Rapid Amortization Period, will equal
the least of (i) the Available Investor Principal Collections on deposit in the
Collection Account with respect to such Distribution Date, (ii) for each
Distribution Date with respect to the Class A Accumulation Period (and on or
prior to the Class A Expected Final Distribution Date), the Controlled Deposit
Amount for such Distribution Date and (iii) the Class A Invested Amount on such
Distribution Date.
"Class B Monthly Principal" with respect to any Distribution Date, beginning
with the Class B Principal Commencement Date, will equal the least of (i) the
Available Investor Principal Collections on deposit in the Collection Account
with respect to such Distribution Date (minus the portion of such Available
Principal Collections applied to Class A Monthly Principal on such Distribution
Date), (ii) for each Distribution Date with respect to the Class B Accumulation
Period, the Controlled Deposit Amount for such Distribution Date and (iii) the
Class B Invested Amount on such Distribution Date.
"Controlled Accumulation Amount" means (a) for any Distribution Date with
respect to the Class A Accumulation Period, the Class A Initial Invested Amount
divided by twelve, subject to upward adjustment
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in connection with the postponement of the Class A Accumulation Period, and (b)
for any Distribution Date with respect to the Class B Accumulation Period, the
Class B Initial Invested Amount.
"Deficit Controlled Accumulation Amount" means (a) on the first Distribution
Date with respect to the Class A Accumulation Period or the Class B Accumulation
Period, the excess, if any, of the Controlled Accumulation Amount for such
Distribution Date over the amount distributed from the Collection Account as
Class A Monthly Principal or Class B Monthly Principal, as the case may be, for
such Distribution Date and (b) on each subsequent Distribution Date with respect
to the Class A Accumulation Period or the Class B Accumulation Period, the
excess, if any, of the Controlled Deposit Amount for such subsequent
Distribution Date over the amount distributed from the Collection Account as
Class A Monthly Principal or Class B Monthly Principal, as the case may be, for
such subsequent Distribution Date.
POSTPONEMENT OF ACCUMULATION PERIOD
Upon written notice to the Trustee, the Servicer may elect to postpone the
commencement of the Class A Accumulation Period, and extend the length of the
Revolving Period, subject to certain conditions including those set forth below.
The Servicer may make such election only if the Accumulation Period Length
(determined as described below) is less than twelve months. On each
Determination Date, until the Class A 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 Class A Expected Final Distribution Date, based on (a) the monthly
collections of Principal Receivables expected to be distributable to the
investor certificateholders of all 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 investor certificateholders of Series which are not expected to
be in their revolving periods during the Class A Accumulation Period. If the
Accumulation Period Length is less than twelve months, the Servicer may, at its
option, postpone the commencement of the Class A Accumulation Period such that
the number of months included in the Class A 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 Class A Accumulation
Period based on the investor amount of certain other Series which are scheduled
to be in their revolving periods during the Class A Accumulation Period and on
the principal payment rate being sufficient to allow such reduction in the
Accumulation Period Length. The length of the Class A Accumulation Period will
not be less than one month.
SUBORDINATION
The Class B Certificateholders' Interest and the Class C Interests will be
subordinated to the extent necessary to fund certain payments with respect to
the Class A Certificates. In addition, the Class C Interests will be
subordinated to the extent necessary to fund certain payments with respect to
the Class B Certificates. Certain principal payments otherwise allocable to the
Class B Certificateholders may be reallocated to the Class A Certificateholders
and the Class B Invested Amount may be reduced. Similarly, certain principal
payments allocable to the Class C Interests may be reallocated to the Class A
Certificateholders and the Class B Certificateholders and the Class C Invested
Amount may be reduced. To the extent the Class B Invested Amount is reduced, the
percentage of collections of Finance Charge Receivables allocated to the Class B
Certificateholders in subsequent Monthly Periods will be reduced. Moreover, to
the extent the amount of such reduction in the Class B Invested Amount is not
reimbursed, the amount of principal distributable to the Class B
Certificateholders will be reduced. See "--Allocation Percentages,"
"--Reallocation of Cash Flows," and "--Application of Collections--Excess
Spread; Excess Finance Charge Collections; Excess Transferor Finance Charge
Collections."
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TRANSFER OF THE CLASS B CERTIFICATES
The Class A Certificates will have the benefit of the subordination of the
Class B Certificates, which initially will be retained by the Transferor. The
Transferor may at any time, without the consent of the Class A
Certificateholders, sell or transfer all or a portion of the Class B
Certificates and in connection with any such sale or transfer, enter into a
supplemental agreement with the Trustee pursuant to which the Transferor may
provide that the Class B Certificates will bear interest at a specified rate,
set forth the amount of monthly interest due to the Class B Certificateholders,
provide for the payment of additional amounts for any shortfall of such interest
and provide for such other terms with respect to the Class B Certificates as may
be specified therein, provided that in each case (i) the Transferor shall have
given notice to the Trustee, the Servicer and the Rating Agencies of the
proposed sale or transfer of the Class B Certificates and such supplemental
agreement at least five Business Days prior to the consummation of such transfer
or sale and the execution of such supplemental agreement; (ii) the Trustee shall
have been notified in writing that the Rating Agency Condition has been
satisfied; (iii) no Pay Out Event shall have occurred prior to the proposed sale
or transfer or the execution of such supplemental agreement; (iv) the Transferor
shall have delivered to the Trustee a certificate of an authorized officer,
dated, the date of such sale or transfer and the execution of such supplemental
agreement, to the effect that, in the reasonable belief of the Transferor, such
sale or transfer and the effectiveness of such supplemental agreement will not,
based on the facts known to such officer at the time of such certification,
cause a Pay Out Event or Reinvestment Event to occur with respect to any Series,
including Series 1998-1; and (v) the Transferor shall have delivered a Tax
Opinion dated the date of such sale or transfer with respect to such action.
TRANSFER OF THE CLASS C INTERESTS
The Certificates will have the benefit of the subordination of the Class C
Interests, which initially will be retained by the Transferor. The Transferor
may at any time, without the consent of the Class A Certificateholders, sell or
transfer all or a portion of the Class C Interests and, in connection with any
such sale or transfer, enter into a supplemental agreement with the Trustee
pursuant to which the Transferor may provide that the Class C Interests will
bear interest at a specified rate, set forth the amount of monthly interest due
to the Class C Interest Holder, provide for the payment of additional amounts
for any shortfall of such interest and provide for such other terms with respect
to the Class C Interests as may be specified therein, provided that in each case
(i) the Transferor shall have given notice to the Trustee, the Servicer and the
Rating Agencies of the proposed sale or transfer of the Class C Interests and
such supplemental agreement at least five Business Days prior to the
consummation of such transfer or sale and the execution of such supplemental
agreement; (ii) the Trustee shall have been notified in writing that the Rating
Agency Condition has been satisfied; (iii) no Pay Out Event shall have occurred
prior to the proposed sale or transfer or the execution of such supplemental
agreement; (iv) the Transferor shall have delivered to the Trustee a certificate
of an authorized officer, dated the date of such sale or transfer and the
execution of such supplemental agreement, to the effect that, in the reasonable
belief of the Transferor, such sale or transfer and the effectiveness of such
supplemental agreement will not, based on the facts known to such officer at the
time of such certification, cause a Pay Out Event or Reinvestment Event to occur
with respect to any Series, including Series 1998-1; and (v) the Transferor
shall have delivered a Tax Opinion, dated the date of such sale or transfer,
with respect to such action.
ALLOCATION PERCENTAGES
Pursuant to the Pooling and Servicing Agreement, with respect to each
Monthly Period the Servicer will allocate among the Class A Certificates, the
Class B Certificates and the Class C Interests, the certificateholders' interest
for all other Series issued and outstanding and the Transferor's Interest all
collections of Finance Charge Receivables and Principal Receivables and the
Defaulted Amount with respect to such Monthly Period.
Collections of Finance Charge Receivables and the Defaulted Amount with
respect to any Monthly Period will be allocated to Series 1998-1 based on the
Floating Allocation Percentage. The "Floating Allocation Percentage" means, with
respect to any Monthly Period, the percentage equivalent (which
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percentage shall never exceed 100%) of a fraction, the numerator of which is the
Invested Amount as of the last day of the preceding Monthly Period (or with
respect to the first Monthly Period, the Initial Invested Amount) and the
denominator of which is the greater of (1) the sum of (x) the product of (a) the
total amount of the Principal Receivables in the Trust as of such day (or with
respect to the first Monthly Period, the total amount of Principal Receivables
in the Trust on the Closing Date) and (b) one minus the Discount Percentage in
effect on such day and (y) the principal amount on deposit in the Excess Funding
Account as of such day and (2) the sum of the numerators used to calculate the
Series Percentages with respect to Finance Charge Receivables or Defaulted
Receivables, as applicable, for all Series of investor certificates then
outstanding; PROVIDED, HOWEVER, that such ratio is subject to adjustment to give
effect to designations of Additional Accounts. Such amounts so allocated will be
further allocated between the Class A Certificateholders, the Class B
Certificateholders and the Class C Interest Holder in accordance with the Class
A Floating Percentage, the Class B Floating Percentage and the Class C Floating
Percentage, respectively.
The "Class A Floating Percentage" means, with respect to any Monthly Period,
the percentage equivalent (which percentage shall never exceed 100%) of a
fraction, the numerator of which is equal to the Class A Invested Amount as of
the close of business on the last day of the preceding Monthly Period (or with
respect to the first Monthly Period, the Class A Initial Invested Amount) and
the denominator of which is equal to the Invested Amount as of the close of
business on such day (or with respect to the first Monthly Period, the Initial
Invested Amount).
The "Class B Floating Percentage" means, with respect to any Monthly Period,
the percentage equivalent (which percentage shall never exceed 100%) of a
fraction, the numerator of which is equal to the Class B Invested Amount as of
the close of business on the last day of the preceding Monthly Period (or with
respect to the first Monthly Period, the Class B Initial Invested Amount) and
the denominator of which is equal to the Invested Amount at the close of
business on such day (or with respect to the first Monthly Period, the Initial
Invested Amount).
The "Class C Floating Percentage" means, with respect to any Monthly Period,
the percentage equivalent (which percentage shall never exceed 100%) of a
fraction, the numerator of which is equal to the Class C Invested Amount as of
the close of business on the last day of the preceding Monthly Period (or with
respect to the first Monthly Period, the Class C Initial Invested Amount) and
the denominator of which is equal to the Invested Amount as of the close of
business on such day (or with respect to the first Monthly Period, the Initial
Invested Amount).
Collections of Principal Receivables will be allocated to Series 1998-1
based on the Principal Allocation Percentage. The "Principal Allocation
Percentage" means, with respect to any Monthly Period, the percentage equivalent
(which percentage shall never exceed 100%) of a fraction, the numerator of which
is (a) during the Revolving Period, the Invested Amount as of the last day of
the immediately preceding Monthly Period (or, in the case of the first Monthly
Period, the Closing Date) and (b) during the Controlled Accumulation Period or
the Rapid Amortization Period, the Invested Amount as of the last day of the
Revolving Period, and the denominator of which is the greater of (i) the sum of
(x) the product of (a) the total amount of Principal Receivables in the Trust as
of the last day of the immediately preceding Monthly Period and (b) one minus
the Discount Percentage on such day and (y) the principal amount on deposit in
the Excess Funding Account as of such last day (or, in the case of the first
Monthly Period, the Closing Date) and (ii) the sum of the numerators used to
calculate the Series Percentages applicable to Principal Receivables for all
Series outstanding as of the date as to which such determination is being made;
PROVIDED, HOWEVER, that such ratio is subject to adjustment to give effect to
designations of Additional Accounts.
Such amounts allocated to the Certificateholders will be further allocated
between the Class A Certificateholders, the Class B Certificateholders and the
Class C Interests based on the Class A Principal Percentage, the Class B
Principal Percentage, and the Class C Principal Percentage, respectively. The
"Class A Principal Percentage" means, with respect to any Monthly Period, (a)
during the Revolving Period, the percentage equivalent (which shall never exceed
100%) of a fraction, the numerator of which is
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equal to the Class A Invested Amount as of the last day of the immediately
preceding Monthly Period (or, in the case of the first Monthly Period, the
Closing Date), and the denominator of which is equal to the Invested Amount as
of such day (or, in the case of the first Monthly Period, the Closing Date) and
(b) during the Controlled Accumulation Period or the Rapid Amortization Period,
the percentage equivalent (which shall never exceed 100%) of a fraction, the
numerator of which is the Class A Invested Amount as of the last day of the
Revolving Period, and the denominator of which is the Invested Amount as of such
last day.
The "Class B Principal Percentage" means, with respect to any Monthly
Period, (i) during the Revolving Period, the percentage equivalent (which
percentage shall never exceed 100%) of a fraction, the numerator of which is the
Class B Invested Amount as of the last day of the immediately preceding Monthly
Period (or, in the case of the first Monthly Period, the Closing Date) and the
denominator of which is the Invested Amount as of such day (or, in the case of
the first Monthly Period, the Closing Date) and (ii) during the Controlled
Accumulation Period or the Rapid Amortization Period, the percentage equivalent
(which percentage shall never exceed 100%) of a fraction, the numerator of which
is the Class B Invested Amount as of the last day of the Revolving Period, and
the denominator of which is the Invested Amount as of such last day. The "Class
C Principal Percentage" means, for any Monthly Period, a percentage (which shall
never exceed 100% or be less than 0%) equal to the difference between 100% and
the sum of the Class A Principal Percentage and the Class B Principal
Percentage.
As used herein, the following terms have the meanings indicated:
"Class A Invested Amount" for any date means an amount equal to (i) the
Class A Initial Invested Amount, minus (ii) the amount of principal payments
made to the Class A Certificateholders on or prior to such date, minus (iii) the
excess, if any, of the aggregate amount of Class A Investor Charge-Offs for all
prior Distribution Dates over the aggregate amount of any reimbursements of
Class A Investor Charge-Offs for all Distribution Dates prior to such date and
minus (iv) the principal amount on deposit in the Principal Funding Account (the
"Principal Funding Account Balance").
"Class B Invested Amount" for any date means an amount equal to (i) the
Class B Initial Invested Amount, minus (ii) the amount of principal payments
made to the Class B Certificateholders on or prior to such date, minus (iii) the
excess, if any, of the aggregate amount of Class B Investor Charge-Offs for all
prior Distribution Dates over the aggregate amount of any reimbursement of Class
B Investor Charge-Offs for all Distribution Dates prior to such date, minus (iv)
the aggregate amount of Reallocated Principal Collections for all prior
Distribution Dates which have been used to fund the Class A Required Amount with
respect to such Distribution Dates (excluding any Reallocated Principal
Collections that have resulted in a reduction of the Class C Invested Amount),
minus (v) an amount equal to the amount by which the Class B Invested Amount has
been reduced to fund the Class A Investor Default Amount on all prior
Distribution Dates as described under "--Allocation of Investor Default Amount,"
and plus (vi) the aggregate amount of Excess Spread and Excess Finance Charge
Collections and Excess Transferor Finance Charge Collections allocated to Series
1998-1 and applied on all prior Distribution Dates for the purpose of
reimbursing amounts deducted pursuant to the foregoing clauses (iii), (iv) and
(v); PROVIDED, HOWEVER, that the Class B Invested Amount may not be reduced
below zero.
"Class C Invested Amount" means an amount equal to (i) the Class C Initial
Invested Amount, minus (ii) the aggregate amount of principal payments made with
respect to the Class C Interests prior to the date of determination, minus (iii)
the aggregate amount of Reallocated Principal Collections allocable to the Class
C Invested Amount for all prior Distribution Dates which have been used to fund
the Class A Required Amount or the Class B Required Amount, minus (iv) an amount
equal to the aggregate amount by which the Class C Invested Amount has been
reduced to fund the Class A Investor Default Amount and the Class B Investor
Default Amount on all prior Distribution Dates as described under "-- Allocation
of Investor Default Amount," minus (v) an amount equal to the product of the
Class C Floating Percentage and the Investor Default Amount (the "Class C
Default Amount") with respect to any Distribution Date that is not funded out of
Excess Spread and Excess Finance Charge Collections and Excess Transferor
Finance Charge Collections allocated to Series 1998-1 and available for such
purpose on such Distribution
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Date, and plus (vi) the aggregate amount of Excess Spread and Excess Finance
Charge Collections and Excess Transferor Finance Charge Collections allocated to
Series 1998-1 and applied to reimburse amounts deducted pursuant to the
foregoing clauses (iii), (iv) and (v); PROVIDED, HOWEVER, that the Class C
Invested Amount may not be reduced below zero.
"Invested Amount," for any date means an amount equal to the sum of the
Class A Invested Amount, the Class B Invested Amount and the Class C Invested
Amount.
"Class A Investor Amount" for any date means an amount equal to the sum of
the Class A Invested Amount plus the Principal Funding Account Balance.
"Investor Amount," for any date means an amount equal to the sum of the
Class A Investor Amount, the Class B Invested Amount and Class C Invested
Amount.
"Series Investor Amount" for any date means an amount equal to the numerator
of the Principal Allocation Percentage on such date.
REALLOCATION OF CASH FLOWS
With respect to each Distribution Date, on each Determination Date, the
Servicer will determine the amount (the "Class A Required Amount"), which will
be equal to the amount, if any, by which (a) the sum of (i) Class A Monthly
Interest for such Distribution Date, (ii) any Class A Monthly Interest
previously due but not paid to Class A Certificateholders on a prior
Distribution Date, (iii) any Class A Additional Interest and any Class A
Additional Interest previously due but not paid to the Class A
Certificateholders on a prior Distribution Date, (iv) the Class A Servicing Fee
for such Distribution Date and any unpaid Class A Servicing Fee and (v) the
Class A Investor Default Amounts for the related Monthly Period exceeds (b) the
Class A Available Funds. If the Class A Required Amount is greater than zero,
Excess Spread, Excess Finance Charge Collections and Excess Transferor Finance
Charge Collections allocated to Series 1998-1 and available for such purpose
will be used to fund the Class A Required Amount with respect to such
Distribution Date. If such Excess Spread, Excess Finance Charge Collections and
Excess Transferor Finance Charge Collections are insufficient to fund the Class
A Required Amount, collections of Principal Receivables allocable first to the
Class C Interests and then to the Class B Certificates for the related Monthly
Period ("Reallocated Principal Collections") will then be used to fund the
remaining Class A Required Amount. If Reallocated Principal Collections with
respect to the related Monthly Period, together with Excess Spread, Excess
Finance Charge Collections and Excess Transferor Finance Charge Collections
allocated to Series 1998-1 are insufficient to fund the Class A Required Amount
for such related Monthly Period, then the Class C Invested Amount will be
reduced by the amount of such excess (but not by more than the Class A Investor
Default Amount for such Distribution Date). In the event that such reduction
would cause the Class C Invested Amount to be a negative number, the Class C
Invested Amount will be reduced to zero, and the Class B Invested Amount will be
reduced by the amount by which the Class C Invested Amount would have been
reduced below zero (but not by more than the excess of the Class A Investor
Default Amount, if any, for such Distribution Date over the amount of such
reduction, if any, of the Class C Invested Amount with respect to such
Distribution Date). In the event that such reduction would cause the Class B
Invested Amount to be a negative number, the Class B Invested Amount will be
reduced to zero, and the Class A Invested Amount will be reduced by the amount
by which the Class B Invested Amount would have been reduced below zero, but not
by more than the excess, if any, of the Class A Investor Default Amount for such
Distribution Date over the amount of the reductions, if any, of the Class C
Invested Amount and the Class B Invested Amount with respect to such
Distribution Date as described above. Any such reduction in the Class A Invested
Amount will have the effect of slowing or reducing the return of principal and
interest to the Class A Certificateholders. In such case, the Class A
Certificateholders will bear directly the credit and other risks associated with
their interest in the Trust. See "--Allocation of Investor Default Amount."
With respect to each Distribution Date, on each Determination Date, the
Servicer will determine the amount (the "Class B Required Amount"), which will
be equal to the sum of (a) the amount, if any, by which the sum of (i) Class B
Monthly Interest, if any, for such Distribution Date, (ii) any Class B Monthly
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Interest previously due but not paid to the Class B Certificateholders on a
prior Distribution Date, (iii) any Class B Additional Interest and any Class B
Additional Interest previously due but not paid to Class B Certificateholders on
a prior Distribution Date and (iv) the Class B Servicing Fee for such
Distribution Date and any unpaid Class B Servicing Fee exceeds the Class B
Available Funds and (b) the Class B Investor Default Amount for the related
Monthly Period. If the Class B Required Amount is greater than zero, Excess
Spread, Excess Finance Charge Collections and Excess Transferor Finance Charge
Collections allocated to Series 1998-1 not required to pay the Class A Required
Amount or reimburse Class A Investor Charge-Offs will be used to fund the Class
B Required Amount with respect to such Distribution Date. If such Excess Spread,
Excess Finance Charge Collections and Excess Transferor Finance Charge
Collections available to fund the remaining Class B Required Amount with respect
to such Distribution Date are less than the Class B Required Amount, Reallocated
Principal Collections allocable to the Class C Interests not required to pay the
Class A Required Amount for the related Monthly Period will then be used to fund
the remaining Class B Required Amount. If such Reallocated Principal Collections
allocable to the Class C Interests with respect to the related Monthly Period
are insufficient to fund the remaining Class B Required Amount, then the Class C
Invested Amount remaining after any adjustments made thereto for the benefit of
the Class A Certificateholders will be reduced by the amount of such
insufficiency (but not by more than the Class B Investor Default Amount for such
Distribution Date). In the event that such a reduction would cause the Class C
Invested Amount to be a negative number, the Class C Invested Amount will be
reduced to zero, and the Class B Invested Amount will be reduced by the amount
by which the Class C Invested Amount would have been reduced below zero (but not
by more than the excess of the Class B Investor Default Amount for such
Distribution Date over the amount of such reduction of the Class C Invested
Amount). See "--Allocation of Investor Default Amount."
Reductions of the Class A Invested Amount or Class B Invested Amount shall
thereafter be reimbursed and the Class A Invested Amount or Class B Invested
Amount increased to the extent of Excess Spread, Excess Finance Charge
Collections and Excess Transferor Finance Charge Collections allocated to Series
1998-1 and Reallocated Principal Collections available for such purposes on each
Distribution Date. See "--Application of Collections--Excess Spread; Excess
Finance Charge Collections; Excess Transferor Finance Charge Collections." When
such reductions of the Class A Invested Amount and Class B Invested Amount have
been fully reimbursed, reductions of the Class C Invested Amount shall be
reimbursed until reimbursed in full in a similar manner.
APPLICATION OF COLLECTIONS
APPLICATION OF COLLECTIONS TO THE COLLECTION ACCOUNT. Unless the Servicer
is allowed to make a single monthly deposit in the Collection Account under the
circumstances described in "The Pooling and Servicing Agreement
Generally--Application of Collections" in the Prospectus, in which case the
Servicer will apply, or will instruct the Trustee to apply, the following
amounts for the entire Monthly Period no later than the day prior to the related
Distribution Date, the Servicer will apply, or will instruct the Trustee to
apply, on or prior to the close of business on the second Business Day following
the date of processing of any collections, all collections and other funds to be
deposited into the Collection Account that are allocated to the Certificates and
the Class C Interests as follows:
(1) during the Revolving Period, an amount equal to the Floating
Allocation Percentage of the collections of Finance Charge Receivables
processed on such date will be allocated to the Certificates and the Class C
Interests, and of that allocation, an amount equal to the Monthly Interest
for the related Distribution Date (plus, if Travelers Bank & Trust, fsb is
not the Servicer, the Monthly Servicing Fee) will be deposited and retained
in the Collection Account;
(2) during the Controlled Accumulation Period or Rapid Amortization
Period, an amount equal to the Floating Allocation Percentage of the
collections of Finance Charge Receivables processed on such date will be
allocated to the Certificates and the Class C Interests and deposited and
retained in the Collection Account;
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(3) during the Revolving Period, an amount equal to the Principal
Allocation Percentage of collections of Principal Receivables processed on
such date will be allocated to the Certificates and the Class C Interests
and first, if any other Principal Sharing Series in Group One is outstanding
and in its amortization period or accumulation period, retained in the
Collection Account for application, to the extent necessary, as Shared
Principal Collections to other Series in Group One on the related
Distribution Date, and second paid to the holders of the Transferor
Certificates; provided that such amount will be paid to the holders of the
Transferor Certificates only if the Transferor Amount is greater than the
Required Transferor Amount and the product of (x) the aggregate amount of
Principal Receivables and (y) one minus the Discount Percentage is greater
than the Required Principal Balance and otherwise will be deposited in the
Excess Funding Account until the Transferor Amount is greater than the
Required Transferor Amount and the product of (x) the aggregate amount of
Principal Receivables and (y) one minus the Discount Percentage is greater
than the Required Principal Balance, and the remainder will be paid to the
holders of the Transferor Certificates; provided further, that if the Class
C Invested Amount is less than the Required Class C Invested Amount, an
amount equal to the sum of (x) the Class C Principal Percentage of the
product of the Principal Allocation Percentage and the collections of
Principal Receivables and (y) the Class B Principal Percentage of the
product of the Principal Allocation Percentage and the collections of
Principal Receivables ("Subordinate Principal Collections") will be
deposited and retained in the Collection Account;
(4) during the Controlled Accumulation Period, an amount equal to the
Principal Allocation Percentage of collections of Principal Receivables
processed on such date (for any such date, a "Percentage Allocation") will
be allocated to the Certificates and the Class C Interests and deposited and
retained in the Collection Account; provided, however, that if the sum of
such Percentage Allocations with respect to the same Monthly Period exceeds
the Controlled Deposit Amount for the related Distribution Date, then such
excess shall not be treated as a Percentage Allocation and shall be first,
if any other Principal Sharing Series in Group One is outstanding and in its
amortization period or accumulation period, retained in the Collection
Account for application, to the extent necessary, as Shared Principal
Collections to other Series in Group One on the related Distribution Date,
and second paid to the holders of the Transferor Certificates only if the
Transferor Amount on such Date of Processing is greater than the Required
Transferor Amount and the product of (x) the aggregate amount of Principal
Receivables and (y) one minus the Discount Percentage is greater than the
Required Principal Balance and otherwise will be deposited in the Excess
Funding Account until the Transferor Amount is greater than the Required
Transferor Amount and the product of (x) the aggregate amount of Principal
Receivables and (y) one minus the Discount Percentage is greater than the
Required Principal Balance and the remainder will be paid to the holders of
the Transferor Certificates; provided further, however, that if the Class C
Invested Amount is less than the Required Class C Invested Amount,
Subordinate Principal Collections will be retained in the Collection
Account; and
(5) during the Rapid Amortization Period, an amount equal to the
Principal Allocation Percentage of the collections of Principal Receivables
processed on such date will be allocated to the Certificates and the Class C
Interests and deposited and retained in the Collection Account; provided,
however, that after the date on which an amount of such Collections equal to
the Investor Amount has been deposited into the Collection Account and
allocated to the Certificates and the Class C Interests, such amount in
excess of the Investor Amount will be first, if any other Principal Sharing
Series in Group One is outstanding and in its amortization period or
accumulation period, retained in the Collection Account for application, to
the extent necessary, as Shared Principal Collections to other Series in
Group One on the related Distribution Date, and second paid to the holders
of the Transferor Certificates only if the Transferor Amount is greater than
the Required Transferor Amount and the product of (x) the aggregate amount
of Principal Receivables and (y) one minus the Discount Percentage is
greater than the Required Principal Balance and otherwise will be deposited
in the Excess Funding Account until the Transferor Amount is greater than
the Required Transferor Amount and the product of (x) the aggregate amount
of Principal Receivables and (y) one minus the
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Discount Percentage is greater than the Required Principal Balance and the
remainder will be paid to the holders of the Transferor Certificates.
WITHDRAWALS FROM SERIES ACCOUNTS. On or before each Distribution Date, the
Servicer will direct the Trustee to make the following withdrawals from the
following Series Accounts:
(1) on each Distribution Date with respect to the Class A Accumulation
Period beginning on the second such Distribution Date and on the first
Distribution Date with respect to the Rapid Amortization Period, if
applicable, all Principal Funding Investment Proceeds then on deposit in the
Principal Funding Account will be withdrawn from the Principal Funding
Account and deposited into the Collection Account for distribution as a
portion of Class A Available Funds for such Distribution Date;
(2) on each Distribution Date after the Reserve Account Funding Date,
all net investment income accrued since the preceding Distribution Date on
funds on deposit in the Reserve Account will be retained in the Reserve
Account (to the extent that the amount on deposit in the Reserve Account is
less than the Required Reserve Account Amount) and the balance, if any, will
be deposited in the Collection Account for distribution as collections of
Finance Charge Receivables allocable to the Certificateholders and the Class
C Interest Holder; and
(3) on or before each Distribution Date with respect to the Class A
Accumulation Period and on the first Distribution Date with respect to the
Rapid Amortization Period, if applicable, an amount equal to the lesser of
(a) the Available Reserve Account Amount with respect to such Distribution
Date and (b) the excess, if any, of a portion of the Class A Monthly
Interest determined in accordance with the Pooling and Servicing Agreement
over the Principal Funding Investment Proceeds with respect to such
Distribution Date (provided that the amount of such withdrawal will be
reduced to the extent that funds otherwise would be available to be
deposited in the Reserve Account on such Distribution Date) will be
withdrawn from the Reserve Account and deposited in the Collection Account
for distribution as a portion of Class A Available Funds for such
Distribution Date.
PAYMENT OF INTEREST, FEES AND OTHER ITEMS. On each Distribution Date, the
Trustee, acting pursuant to the Servicer's instructions, will apply the Class A
Available Funds, Class B Available Funds and Class C Available Funds (see
"--Interest Payments" above) in the following priority:
(A) On each Distribution Date, an amount equal to the Class A Available
Funds with respect to such Distribution Date will be withdrawn from the
Collection Account and distributed in the following priority:
(1) an amount equal to Class A Monthly Interest for such Distribution
Date, plus the amount of any Class A Monthly Interest previously due but
not paid to the Class A Certificateholders on a prior Distribution Date,
plus any additional interest with respect to interest amounts that were
due but not paid to the Class A Certificateholders on a prior
Distribution Date at a rate equal to the Class A Certificate Rate PLUS 2%
per annum ("Class A Additional Interest"), will be distributed to the
Class A Certificateholders;
(2) an amount equal to the Class A Servicing Fee for such
Distribution Date, plus the amount of any Class A Servicing Fee
previously due but not distributed to the Servicer on a prior
Distribution Date, will be distributed to the Servicer (unless such
amount has been netted against deposits to the Collection Account);
(3) an amount equal to the Class A Investor Default Amount for such
Distribution Date will be treated as a portion of Available Investor
Principal Collections for such Distribution Date; and
(4) the balance, if any, shall constitute Excess Spread and shall be
allocated and distributed as described under "--Excess Spread; Excess
Finance Charge Collections; Excess Transferor Finance Charge Collections"
below.
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(B) On each Distribution Date, an amount equal to the Class B Available
Funds with respect to such Distribution Date will be withdrawn from the
Collection Account and distributed in the following priority:
(1) an amount equal to Class B Monthly Interest, if any, for such
Distribution Date, plus the amount of any Class B Monthly Interest
previously due but not paid to the Class B Certificateholders on a prior
Distribution Date, plus any additional interest with respect to interest
amounts that were due but not paid to the Class B Certificateholders on a
prior Distribution Date at a rate equal to the rate specified in the
supplemental agreement entered into in connection with the transfer or
sale of the Class B Certificates ("Class B Additional Interest"), will be
distributed to the Class B Certificateholders;
(2) an amount equal to the Class B Servicing Fee for such
Distribution Date, plus the amount of any Class B Servicing Fee
previously due but not distributed to the Servicer on a prior
Distribution Date, will be distributed to the Servicer (unless such
amount has been netted against deposits to the Collection Account); and
(3) the balance, if any, shall constitute Excess Spread and shall be
allocated and distributed as described under "--Excess Spread; Excess
Finance Charge Collections; Excess Transferor Finance Charge Collections"
below.
(C) On each Distribution Date, an amount equal to the Class C Available
Funds with respect to such Distribution Date will be withdrawn from the
Collection Account and distributed in the following priority:
(1) if Travelers Bank & Trust, fsb or the Trustee is no longer the
Servicer, an amount equal to the Class C Servicing Fee for such
Distribution Date, plus the amount of any Class C Servicing Fee
previously due but not distributed to the Servicer on a prior
Distribution Date, will be distributed to the Servicer (unless such
amount has been netted against deposits to the Collection Account); and
(2) the balance, if any, shall constitute Excess Spread and shall be
allocated and distributed as described under "--Excess Spread; Excess
Finance Charge Collections; Excess Transferor Finance Charge Collections"
below.
"Excess Spread" means, with respect to any Distribution Date, an amount
equal to the sum of the amounts described in clause (A) (4) above, clause (B)
(3) above and clause (C) (2) above under "-- Payment of Interest, Fees and Other
Items."
EXCESS SPREAD; EXCESS FINANCE CHARGE COLLECTIONS; EXCESS TRANSFEROR FINANCE
CHARGE COLLECTIONS. On each Distribution Date, the Trustee, acting pursuant to
the Servicer's instructions, will apply Excess Spread and Excess Finance Charge
Collections and Excess Transferor Finance Charge Collections allocated to Series
1998-1 with respect to the related Monthly Period to make the following
distributions in the following priority:
(1) an amount equal to any deficiency pursuant to clauses (A) (1), (2)
and (3) above under "-- Payment of Interest, Fees and Other Items" will be
used to fund such deficiency, provided that, in the event such deficiency
exceeds the amount of Excess Spread and Excess Finance Charge Collections
and Excess Transferor Finance Charge Collections allocated to Series 1998-1,
such Excess Spread and Excess Finance Charges and Excess Transferor Finance
Charge Collections shall be applied first to pay amounts due with respect to
such Distribution Date pursuant to clause (A)(1) above under "-- Payment of
Interest, Fees and Other Items," second to pay the Class A Servicing Fee
pursuant to clause (A)(2) above under "--Payment of Interest, Fees and Other
Items" and third to pay the Class A Investor Default Amount for such
Distribution Date pursuant to clause (A)(3) above under "-- Payment of
Interest, Fees and Other Items;"
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(2) an amount equal to the aggregate amount of Class A Investor
Charge-Offs which have not been previously reimbursed will be treated as a
portion of Available Investor Principal Collections for such Distribution
Date as described under "--Payments of Principal" below;
(3) an amount equal to any deficiency pursuant to clauses (B)(1) and (2)
above under "-- Payment of Interest, Fees and Other Items" will be used to
fund such deficiency, provided, that in the event such deficiency for such
Distribution Date exceeds the remaining amount of Excess Spread, Excess
Finance Charge Collections and Excess Transferor Finance Charge Collections
allocated to Series 1998-1, such Excess Spread, Excess Finance Charge
Collections and Excess Transferor Finance Charge Collections shall be
applied first to pay amounts due with respect to such Distribution Date
pursuant to clause (B)(1) above under "--Payment of Interest, Fees and Other
Items," and second to pay the Class B Servicing Fee pursuant to clause
(B)(2) above under "-- Payment of Interest, Fees and Other Items;"
(4) an amount equal to the Class B Investor Default Amount for such
Distribution Date will be treated as a portion of Available Investor
Principal Collections for such Distribution Date as described under
"--Payments of Principal" below;
(5) an amount equal to the aggregate amount by which the Class B
Invested Amount has been reduced pursuant to clauses (iii), (iv) and (v) of
the definition of "Class B Invested Amount" under "--Allocation Percentages"
above (but not in excess of the aggregate amount of such reductions which
have not been previously reimbursed) shall be treated as a portion of
Available Investor Principal Collections for such Distribution Date;
(6) an amount equal to Class C Monthly Interest, if any, for such
Distribution Date, plus the amount of any Class C Monthly Interest
previously due but not paid to the Class C Interest Holder on a prior
Distribution Date, plus any additional interest with respect to amounts that
were due but not paid to the Class C Interest Holder on a prior Distribution
Date at a rate equal to the rate specified in the supplemental agreement
entered into in connection with the transfer or sale of the Class C
Interests ("Class C Additional Interest"), will be distributed to the Class
C Interest Holder in accordance with the supplement entered into upon the
transfer of the Class C Interests from the Transferor;
(7) an amount equal to the Class C Servicing Fee due but not paid to the
Servicer on such Distribution Date or a prior Distribution Date shall be
paid to the Servicer;
(8) an amount equal to the Class C Default Amount for such Distribution
Date shall be treated as a portion of Available Investor Principal
Collections with respect to such Distribution Date;
(9) an amount equal to the aggregate amount by which the Class C
Invested Amount has been reduced pursuant to clauses (iii), (iv) and (v) of
the definition of "Class C Invested Amount" under "--Allocation Percentages"
above (but not in excess of the aggregate amount of such reductions which
have not been previously reimbursed) shall be treated as a portion of
Available Investor Principal Collections for such Distribution Date; and
(10) an amount up to the excess, if any, of the Required Reserve Account
Amount over the principal amount on deposit in the Reserve Account will be
deposited in the Reserve Account.
(11) the balance, if any, will constitute a portion of Excess Finance
Charge Collections for such Distribution Date and will be available for
allocation to other Series in Group One or to the holders of the Transferor
Certificates as described in "Description of the Certificates--Sharing of
Excess Finance Charge Collections" in the Prospectus.
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REALLOCATED PRINCIPAL COLLECTIONS. On or before each Distribution Date
after giving effect to the distributions above under "--Excess Spread; Excess
Finance Charge Collections; Excess Transferor Finance Charge Collections," the
Trustee, acting pursuant to the Servicer's instructions, will apply the
Reallocated Principal Collections for the related Monthly Period to make the
following distributions in the following priority:
(1) if the amount of Excess Spread, Excess Finance Charge Collections
and Excess Transferor Finance Charge Collections allocated to Series 1998-1
for the related Monthly Period is less than the Class A Required Amount,
Reallocated Principal Collections, up to the amount of such deficiency, will
be withdrawn from the Collection Account and distributed to fund such
deficiency in the order of priority set forth in clause (1) above under
"--Excess Spread, Excess Finance Charge Collections; Excess Transferor
Finance Charge Collections"; and
(2) if the amount of Excess Spread, Excess Finance Charge Collections
and Excess Transferor Finance Charge Collections allocated to Series 1998-1
for the related Monthly Period not required to fund the Class A Required
Amount or reimburse Class A Investor Charge-Offs is less than the Class B
Required Amount, Reallocated Principal Collections allocable to the Class C
Interests not required to fund the Class A Required Amount, up to the amount
of such deficiency, will be withdrawn from the Collection Account and
distributed to fund such deficiency in the order of priority set forth in
clauses (3) and (4) above under "--Excess Spread; Excess Finance Charge
Collections; Excess Transferor Finance Charge Collections."
PAYMENTS OF PRINCIPAL. On each Distribution Date, the Trustee, acting
pursuant to the Servicer's instructions, will distribute Available Investor
Principal Collections (see "--Principal Payments" above) in the following
priority:
(1) on each Distribution Date with respect to the Revolving Period, all
such Available Investor Principal Collections will be applied in the
following order of priority: (i) an amount equal to the excess, if any, of
the Class C Invested Amount over the Required Class C Invested Amount will
be paid to the Class C Interest Holder; and (ii) the balance will be treated
as Shared Principal Collections and applied as described under "Description
of the Certificates --Shared Principal Collections and Transferor Principal
Collections" in the Prospectus;
(2) on each Distribution Date with respect to the Controlled
Accumulation Period or the Rapid Amortization Period, all such Available
Investor Principal Collections will be distributed or deposited in the
following priority:
(i) an amount equal to Class A Monthly Principal will be deposited in
the Principal Funding Account for payment to the Class A
Certificateholders on each Distribution Date beginning on the earlier to
occur of the Class A Expected Final Distribution Date or the first
Distribution Date with respect to the Rapid Amortization Period;
(ii) an amount equal to Class B Monthly Principal will be paid to the
Class B Certificateholders on each Distribution Date beginning on the
Distribution Date on which the Class A Investor Amount is paid in full
(the "Class B Principal Commencement Date"); PROVIDED, that if the Class
A Investor Amount is paid in full on the Class A Expected Final
Distribution Date and the Rapid Amortization Period has not commenced,
the Class B Principal Commencement Date will be the Class B Expected
Final Distribution Date;
(iii) for each Distribution Date prior to the Distribution Date on
which the Class B Invested Amount is paid in full, an amount equal to the
excess, if any, of the Class C Invested Amount over the Required Class C
Invested Amount will be paid to the Class C Interest Holder;
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(iv) for each Distribution Date on or after the Distribution Date on
which the Class B Invested Amount is paid in full, an amount up to the
Class C Invested Amount will be paid to the Class C Interest Holder; and
(v) the balance, if any, will be treated as Shared Principal
Collections and applied as described under "Description of the
Certificates--Shared Principal Collections and Transferor Principal
Collections" in the Prospectus.
PRINCIPAL FUNDING ACCOUNT
Pursuant to the Supplement, the Servicer will cause to be established and
maintained the principal funding account as a Qualified Account in the name of
the Trustee for the benefit of the Class A Certificateholders (the "Principal
Funding Account"). During the Class A Accumulation Period, the Trustee at the
direction of the Servicer will transfer Available Investor Principal Collections
to the Principal Funding Account as described under "--Application of
Collections--Payments of Principal."
Funds on deposit in the Principal Funding Account will be invested by the
Trustee or its nominee at the direction of the Servicer in Eligible Investments.
Investment earnings (net of investment losses and expenses) on funds on deposit
in the Principal Funding Account (the "Principal Funding Investment Proceeds")
will be included in Class A Available Funds with respect to each Distribution
Date.
RESERVE ACCOUNT
Pursuant to the Supplement, the Servicer will cause to be established and
maintained the reserve account as a Qualified Account in the name of the Trustee
for the benefit of the Class A Certificateholders (the "Reserve Account"). The
Reserve Account is established to assist with the subsequent distribution of
interest on the Class A Certificates during the Class A Accumulation Period.
With respect to each Distribution Date from and after the Reserve Account
Funding Date, but prior to the termination of the Reserve Account, the Trustee,
acting pursuant to the Servicer's instructions, will apply Excess Spread, Excess
Finance Charge Collections and Excess Transferor Finance Charge Collections
allocated to Series 1998-1 (to the extent described above under "--Application
of Collections--Excess Spread; Excess Finance Charge Collections; Excess
Transferor Finance Charge Collections") to increase the amount on deposit in the
Reserve Account (to the extent such amount is less than the Required Reserve
Account Amount). The "Reserve Account Funding Date" will be the Distribution
Date with respect to the Monthly Period which commences no later than three
months prior to the Monthly Period in which, as of the related Determination
Date, the Class A Accumulation Period is scheduled to commence, or such earlier
date as the Servicer may determine. The "Required Reserve Account Amount" with
respect to any Distribution Date on or after the Reserve Account Funding Date
will be equal to (a) the product of (i) 0.5% of the Class A Investor Amount as
of the preceding Distribution Date (after giving effect to all changes therein
on such date) and (ii) a fraction, the numerator of which is the number of
Monthly Periods scheduled to be included in the Class A Accumulation Period as
of such date, and the denominator of which is twelve, provided that if such
numerator is one, the Required Reserve Account Amount will be zero, or (b) any
other amount designated by the Transferor, PROVIDED, that if such designation is
of a lesser amount, the Transferor shall have provided the Servicer and the
Trustee with evidence that the Rating Agency Condition has been satisfied and
the Transferor shall have delivered to the Trustee a certificate of an
authorized officer to the effect that, based on the facts known to such officer
at such time, in the reasonable belief of the Transferor, such designation will
not cause a Pay Out Event or an event that, after the giving of notice or the
lapse of time, would cause a Pay Out Event to occur. On each Distribution Date,
after giving effect to any deposit to be made to, and any withdrawal to be made
from the Reserve Account, the Trustee will withdraw from the Reserve Account an
amount equal to the excess, if any, of the amount on deposit in the Reserve
Account over the Required Reserve Account Amount and will pay such amount to the
holders of the Transferor Certificates.
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Provided that the Reserve Account has not terminated as described below, all
amounts on deposit in the Reserve Account with respect to any Distribution Date
(after giving effect to any deposits to or withdrawals from, the Reserve Account
to be made on such Distribution Date) will be invested by the Trustee or its
nominee at the direction of the Servicer in Eligible Investments. The interest
and other investment income (net of investment expenses and losses) earned on
such investments will be retained in the Reserve Account (to the extent the
amount on deposit is less than the Required Reserve Account Amount) or deposited
in the Collection Account and treated as collections of Finance Charge
Receivables allocable to Series 1998-1.
On or before each Distribution Date with respect to the Class A Accumulation
Period and on the first Distribution Date with respect to the Rapid Amortization
Period, a withdrawal will be made from the Reserve Account, and the amount of
such withdrawal will be deposited in the Collection Account and included in
Class A Available Funds in an amount equal to the lesser of (a) the Available
Reserve Account Amount with respect to such Distribution Date and (b) the
excess, if any, of a portion of the Class A Monthly Interest determined in
accordance with the Pooling and Servicing Agreement over the Principal Funding
Investment Proceeds with respect to such Distribution Date; provided, that the
amount of such withdrawal shall be reduced to the extent that funds otherwise
would be available to be deposited in the Reserve Account on such Distribution
Date. On each Distribution Date, the amount available to be withdrawn from the
Reserve Account (the "Available Reserve Account Amount") will be equal to the
lesser of the amount on deposit in the Reserve Account (before giving effect to
any deposit to be made to the Reserve Account on such Distribution Date) and the
Required Reserve Account Amount for such Distribution Date.
The Reserve Account will be terminated following the earlier to occur of (a)
the termination of the Trust pursuant to the Pooling and Servicing Agreement,
(b) the date on which the Class A Investor Amount is paid in full and (c) if the
Class A Accumulation Period has not commenced, the occurrence of a Pay Out Event
or, if the Class A Accumulation Period has commenced, the earlier of the first
Distribution Date with respect to the Rapid Amortization Period and the Class A
Expected Final Distribution Date. Upon the termination of the Reserve Account,
all amounts on deposit therein (after giving effect to any withdrawal from the
Reserve Account on such date as described above) will be distributed to the
holders of the Transferor Certificates. Any amounts withdrawn from the Reserve
Account and distributed to the holders of the Transferor Certificates as
described above will not be available for distribution to the Class A
Certificateholders.
COMPANION SERIES
The Certificates are subject to being paired with one or more later issued
Series (each, a "Companion Series") on or after the commencement of the
Controlled Accumulation Period or the Rapid Amortization Period. A Companion
Series will be pre-funded with an initial deposit to a funding account or may
have a variable principal amount. Any such funding account will be held for the
benefit of such Companion Series and not for the benefit of the
Certificateholders. Upon payment in full of the Certificates and the Class C
Interests, assuming that there have been no unreimbursed charge-offs with
respect to any related Companion Series, the aggregate investor amount of such
Companion Series will have been increased by an amount up to an aggregate amount
equal to the Investor Amount. The issuance of a Companion Series will be subject
to the conditions described under "Description of the Certificates-- New
Issuances" in the Prospectus.
There can be no assurance that the terms of any Companion Series might not
have an impact on the calculation of the Series Percentage or the timing or
amount of payments received by a Class A Certificateholder. The full extent by
which the timing or amount of payments received by a Class A Certificateholder
may be affected will be dependent on a number of factors and will not be readily
determinable by the change which may occur in the Series Percentage.
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SHARED EXCESS TRANSFEROR FINANCE CHARGE COLLECTIONS
Collections of Finance Charge Receivables allocable to the Transferor's
Interest in excess of the amounts necessary to make required payments with
respect to any Supplemental Certificates and all other amounts otherwise payable
to the Transferor with respect to collections of Finance Charge Receivables
regardless of whether such collections were initially allocated to the
Transferor or any Series (the "Excess Transferor Finance Charge Collections")
will be applied to cover any shortfalls (after giving effect to the application
of Excess Finance Charge Collections) with respect to amounts payable from
collections of Finance Charge Receivables allocable to each Series designated in
the applicable Series Supplement as being entitled to receive Excess Transferor
Finance Charge Collections, pro rata based upon the amount of the shortfall
(after giving effect to the application of Excess Finance Charge Collections),
if any, with respect to each other Series designated in the applicable Series
Supplement as being entitled to receive Excess Transferor Finance Charge
Collections, including Series 1998-1. In all cases, any Excess Transferor
Finance Charge Collections remaining after covering shortfalls with respect to
all designated Series will be treated as Shared Transferor Principal
Collections. Excess Transferor Finance Charge Collections permit coverage of
shortfalls with respect to amounts payable from collections of Finance Charge
Receivables and Excess Finance Charge Collections allocable to Series 1998-1 by
using collections of Finance Charge Receivables which would otherwise be paid to
the Transferor.
SHARED COLLECTIONS OF PRINCIPAL RECEIVABLES AND TRANSFEROR PRINCIPAL COLLECTIONS
To the extent that collections of Principal Receivables allocated to the
Certificates or the Class C Interests are not needed to make distributions to or
for the benefit of the Certificateholders or the Class C Interest Holder, such
collections may be applied to cover principal payments due to or for the benefit
of other Principal Sharing Series in Group One. Any such application of
collections will not result in a reduction of the Invested Amount of the
Certificates and the Class C Interests. Similarly, certain collections of
Principal Receivables allocated to other Principal Sharing Series in Group One,
to the extent such collections are not needed to make distributions to or for
the benefit of investor certificateholders of such other Series (together with
collections of Principal Receivables allocated to Series 1998-1 applied to other
Principal Sharing Series in Group One, "Shared Principal Collections"), will be
applied, if necessary, to cover payments of principal due to Certificateholders
during the Controlled Accumulation Period and the Rapid Amortization Period that
have not been covered out of collections of Principal Receivables allocated to
Series 1998-1 and certain other amounts. If Principal Shortfalls for Principal
Sharing Series in Group One exceed Shared Principal Collections for any Monthly
Period, Shared Principal Collections will be allocated pro rata among the
Principal Sharing Series in Group One based on the Principal Shortfalls for each
such Series.
In addition, the Servicer will, under the terms of the Pooling and Servicing
Agreement, determine the amount of collections of Principal Receivables for any
Monthly Period allocated to the Transferor's Interest but not due to the holder
of any Supplemental Certificate and other amounts payable to the Transferor with
respect to collections of Principal Receivables plus the amount of Excess
Transferor Finance Charge Collections remaining after application to amounts
payable from collections of Finance Charge Receivables ("Shared Transferor
Principal Collections"). Such Shared Transferor Principal Collections, will be
applied, if necessary, to cover payments of principal due to Certificateholders
during the Controlled Accumulation Period and the Rapid Amortization Period that
have not been covered out of collections of Principal Receivables allocated to
Series 1998-1 and certain other amounts and Shared Principal Collections. If
Principal Shortfalls for Series designated to receive Shared Transferor
Principal Collections exceed Shared Principal Collections allocable to each such
Series and Shared Transferor Principal Collections, for any Monthly Period,
Shared Transferor Principal Collections will be allocated to each such Series
pro rata based on the remaining Principal Shortfalls for each such Series.
There can be no assurance that such Shared Principal Collections or Shared
Transferor Principal Collections will be available to cover payments of
principal or deposits due on any Distribution Date
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during the Controlled Accumulation Period or the Rapid Amortization Period. If
no such Shared Principal Collections or Shared Transferor Principal Collections
were available to the Certificates, the Class A Investor Amount might not be
paid in full by the Class A Expected Final Distribution Date.
REQUIRED CLASS C INVESTED AMOUNT
The "Required Class C Invested Amount" for any Distribution Date means the
greater of (i) the product of (a) the sum of (I) the Class A Invested Amount and
(II) the Class B Invested Amount, each as of such Distribution Date after taking
into account distributions made on such Distribution Date, and (b) a fraction,
the numerator of which is 4% and the denominator of which is the excess of 100%
over 4% and (ii) the product of (A) $250,000,000 and (B) 3%; PROVIDED, HOWEVER,
that (i) if a Pay Out Event with respect to Series 1998-1 occurs or if there are
certain reductions in the Class C Invested Amount, the Required Class C Invested
Amount for such Distribution Date shall equal the Required Class C Invested
Amount for the Distribution Date immediately preceding the occurrence of such
Pay Out Event or reduction in the Class C Invested Amount, (ii) in no event
shall the Required Class C Invested Amount exceed the sum of the Class A
Invested Amount and the Class B Invested Amount on such date, and (iii) the
Required Class C Invested Amount may be reduced without the consent of the Class
A Certificateholders, if the Transferor shall have received written notice that
the Rating Agency Condition has been satisfied for such reduction and the
Transferor shall have delivered a certificate of an authorized officer to the
effect that, based on the facts known to such officer at such time, in the
reasonable belief of the Transferor, such reduction will not cause a Pay Out
Event with respect to Series 1998-1 or an event that, after the giving of notice
or the lapse of time, would constitute a Pay Out Event with respect to Series
1998-1.
ALLOCATION OF INVESTOR DEFAULT AMOUNT
On each Determination Date, the Servicer will calculate the Investor Default
Amount for the preceding Monthly Period. The term "Investor Default Amount"
means, for any Monthly Period, the product of (i) the Floating Allocation
Percentage with respect to such Monthly Period and (ii) the Defaulted Amount for
such Monthly Period. A portion of the Investor Default Amount will be allocated
to the Class A Certificateholders (the "Class A Investor Default Amount") on
each Distribution Date in an amount equal to the product of the Class A Floating
Percentage applicable during the related Monthly Period and the Investor Default
Amount for such Monthly Period. A portion of the Investor Default Amount will be
allocated to the Class B Certificateholders (the "Class B Investor Default
Amount") in an amount equal to the product of the Class B Floating Percentage
applicable during the related Monthly Period and the Investor Default Amount for
such Monthly Period. A portion of the Investor Default Amount will be allocated
to the Class C Interest Holder in an amount equal to the Class C Default Amount.
An amount equal to the Class A Investor Default Amount for each Monthly Period
will be paid from Class A Available Funds, Excess Spread, Excess Finance Charge
Collections and Excess Transferor Finance Charge Collections allocated to Series
1998-1 or from Reallocated Principal Collections and applied as described above
in "--Application of Collections--Payment of Interest, Fees and Other Items,"
"--Application of Collections--Excess Spread; Excess Finance Charge Collections;
Excess Transferor Finance Charge Collections" and "-- Reallocation of Cash
Flows." An amount equal to the Class B Investor Default Amount for each Monthly
Period will be paid from Excess Spread, Excess Finance Charge Collections and
Excess Transferor Finance Charge Collections allocated to Series 1998-1 or from
Reallocated Principal Collections allocable to the Class C Invested Amount and
applied as described above in "--Application of Collections--Excess Spread;
Excess Finance Charge Collections; Excess Transferor Finance Charge Collections"
and "--Reallocation of Cash Flows."
On each Distribution Date, if the Class A Required Amount for such
Distribution Date exceeds the sum of Excess Spread, Excess Finance Charge
Collections and Excess Transferor Finance Charge Collections allocable to Series
1998-1 and Reallocated Principal Collections, the Class C Invested Amount will
be reduced by the amount of such excess, but not by more than the Class A
Investor Default Amount for such
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Distribution Date. In the event that such reduction would cause the Class C
Invested Amount to be a negative number, the Class C Invested Amount will be
reduced to zero, and the Class B Invested Amount will be reduced by the amount
by which the Class C Invested Amount would have been reduced below zero, but not
by more than the excess, if any, of the Class A Investor Default Amount for such
Distribution Date over the amount of such reduction, if any, of the Class C
Invested Amount with respect to such Distribution Date. In the event that such
reduction would cause the Class B Invested Amount to be a negative number, the
Class B Invested Amount will be reduced to zero, and the Class A Invested Amount
will be reduced by the amount by which the Class B Invested Amount would have
been reduced below zero, but not by more than the excess, if any, of the Class A
Investor Default Amount for such Distribution Date over the amount of the
reductions, if any, of the Class C Invested Amount and the Class B Invested
Amount with respect to such Distribution Date as described above (a "Class A
Investor Charge-Off"), which will have the effect of slowing or reducing the
return of principal to the Class A Certificateholders. If the Class A Invested
Amount has been reduced by the amount of any Class A Investor Charge-Offs, it
will thereafter be increased on any Distribution Date (but not by an amount in
excess of the aggregate Class A Investor Charge-Offs) by the amount of Excess
Spread, Excess Transferor Finance Charge Collections and Excess Finance Charge
Collections allocated to Series 1998-1 and available for such purpose as
described under "--Application of Collections--Excess Spread; Excess Finance
Charge Collections; Excess Transferor Finance Charge Collections."
On each Distribution Date, if the Class B Required Amount for such
Distribution Date exceeds the sum of Excess Spread, Excess Finance Charge
Collections, Excess Transferor Finance Charge Collections allocable to Series
1998-1 and not required to pay the Class A Required Amount and Reallocated
Principal Collections allocable to the Class C Interests and not required to pay
the Class A Required Amount, then the Class C Invested Amount will be reduced by
the amount of such excess. In the event that such reduction would cause the
Class C Invested Amount to be a negative number, the Class C Invested Amount
will be reduced to zero, and the Class B Invested Amount will be reduced by the
amount by which the Class C Invested Amount would have been reduced below zero,
but not by more than the excess, if any, of the Class B Investor Default Amount
for such Distribution Date over the amount of such reduction, if any, of the
Class C Invested Amount with respect to such Distribution Date (a "Class B
Investor Charge-Off"). If the Class B Invested Amount has been reduced by the
amount of any Class B Investor Charge-Offs, it will thereafter be increased on
any Distribution Date (but not by an amount in excess of the aggregate Class B
Investor Charge-Offs) by the amount of Excess Spread, Excess Finance Charge
Collections and Excess Transferor Finance Charge Collections allocated to Series
1998-1 and available for such purpose as described under "--Application of
Collections--Excess Spread; Excess Finance Charge Collections; Excess Transferor
Finance Charge Collections."
OPTIONAL REPURCHASE
On the Distribution Date occurring on or after the date that the Investor
Amount is reduced to 10% or less of the initial Investor Amount, the Transferor
will have the option (to be exercised in its sole discretion) to repurchase the
Certificates. The purchase price of the Certificates and the Class C Interests
will be equal to the Investor Amount as of the last day of the Monthly Period
preceding the Distribution Date on which such purchase occurs plus accrued and
unpaid interest on the unpaid principal amount of the Certificates plus accrued
and unpaid interest, if any, on the Class C Interests. Following any such
repurchase, the Certificateholders will have no further rights with respect to
the Receivables.
Any such optional repurchase may result in an early repayment of the Class A
Certificateholders' investment without any prepayment penalty and there can be
no assurance that a Class A Certificateholder will be able to invest such early
repayment amount at a similar rate of return.
S-43
<PAGE>
PAY OUT EVENTS
The Revolving Period will continue through January 31, 2002 (or such later
date resulting from postponement of the Class A Accumulation Period), unless a
Pay Out Event occurs prior to such date. A "Pay Out Event" for Series 1998-1
refers to any of the following events, which are applicable only to Series
1998-1 (although other Series may have similar or identical pay out events):
(a) failure on the part of the Transferor (i) to make any payment or deposit
on the date required under the Pooling and Servicing Agreement on or before the
date occurring five Business Days after the date such payment or deposit is
required to be made; or (ii) duly to observe or perform in any material respect
any other covenants or agreements of the Transferor in the Pooling and Servicing
Agreement, which failure has a material adverse effect on the Certificateholders
(which determination will be made, for so long as the Class C Invested Amount is
greater than zero, without reference to whether any funds are available pursuant
to any Series Enhancement) and continues unremedied for a period of 60 days
after written notice of such failure shall have been given to the Transferor by
the Trustee, or to the Transferor and the Trustee by the holders of Certificates
aggregating not less than 50% of the outstanding principal balance of the
Certificates;
(b) any representation or warranty made by the Transferor in the Pooling and
Servicing Agreement or any information required to be given by the Servicer on
behalf of the Transferor to identify the Accounts proves to have been incorrect
in any material respect when made or delivered and continues to be incorrect in
any material respect for a period of 60 days after written notice of such
failure shall have been given to the Transferor by the Trustee, or to the
Transferor and the Trustee by the holders of Certificates aggregating not less
than 50% of the outstanding principal balance of the Certificates and as a
result the interests of the Certificateholders are materially and adversely
affected (which determination shall be made, for so long as the Class C Invested
Amount is greater than zero, without reference to whether any funds are
available pursuant to any Series Enhancement); provided, however, that a Pay Out
Event shall not be deemed to have occurred under this subparagraph (b) if the
Transferor has accepted reassignment of the related Receivable or all such
Receivables, if applicable, during such period (or such longer period as the
Trustee may specify) in accordance with the provisions of the Pooling and
Servicing Agreement;
(c) with respect to the end of any Monthly Period, as determined on the
related Determination Date, (i) with respect to which the Transferor Amount is
less than the Required Transferor Amount, the failure of the Transferor to
convey on or prior to the tenth Business Day following the related Determination
Date Receivables in Additional Accounts to the Trust such that the Transferor
Amount is at least equal to the Required Transferor Amount or (ii) with respect
to which the product of (x) the aggregate amount of Principal Receivables and
(y) one minus the Discount Percentage is less than the Required Principal
Balance, the failure of the Transferor to convey on or prior to the tenth
Business Day following the related Determination Date Receivables in Additional
Accounts to the Trust such that the product of (x) the aggregate amount of
Principal Receivables and (y) one minus the Discount Percentage is at least
equal to the Required Principal Balance;
(d) the Net Portfolio Yield averaged over three consecutive Monthly Periods
is less than the Base Rate averaged over such period;
(e) any Servicer Default occurs which would have a material adverse effect
on the Certificateholders (which determination shall be made, for so long as the
Class C Invested Amount is greater than zero, without reference to whether any
funds are available pursuant to any Series Enhancement); or
(f) the Class A Investor Amount shall not be paid in full on the Class A
Expected Final Distribution Date or the Class B Invested Amount shall not be
paid in full on the Class B Expected Final Distribution Date.
A Pay Out Event (or Reinvestment Event) for all Series (including for Series
1998-1) refers to any of the following events, which are applicable to the
Certificates and other Series:
S-44
<PAGE>
(g) an Insolvency Event relating to the Transferor (including any Additional
Transferor) or an Account Owner;
(h) the Trust becomes an "investment company" within the meaning of the
Investment Company Act; or
(i) the inability of the Transferor (including any Additional Transferor)
for any reason to transfer Receivables to the Trust in accordance with the
provisions of the Pooling and Servicing Agreement.
In the case of any event described in subparagraphs (a), (b) or (e), a Pay
Out Event will be deemed to have occurred only if, after any applicable grace
period described in such clauses, the Trustee or Certificateholders or Class C
Interest Holders evidencing undivided interests aggregating not less than 50% of
the aggregate unpaid principal amount of the Certificates and the Class C
Interests, by written notice to the Transferor and the Servicer (and to the
Trustee if given by the Certificateholders or the Class C Interest Holders),
declare that a Pay Out Event has occurred with respect to the Certificates and
the Class C Interests and is continuing as of the date of such notice, and in
the case of any event described in subparagraphs (c), (d), (f), (g), (h) or (i),
a Pay Out Event for Series 1998-1 or a Pay Out Event (or Reinvestment Event) for
all Series will be deemed to have occurred without any notice or other action on
the part of the Trustee, or the Certificateholders or the Class C Interest
Holders immediately upon the occurrence of such event. Upon the occurrence of a
Pay Out Event, the Rapid Amortization Period will commence. In such event,
distributions of principal to the Certificateholders in the priority provided
for above will begin on the first Distribution Date following the month in which
the Pay Out Event occurred.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
The share of the Servicing Fee allocable to the Certificates and the Class C
Interests with respect to any Distribution Date (the "Monthly Servicing Fee")
will be equal to one-twelfth of the product of (a) 2.0% (the "Servicing Fee
Rate") and (b) the Invested Amount as of the last day of the Monthly Period
preceding such Distribution Date (the amount calculated pursuant to this clause
(b) is referred to as the "Servicing Base Amount"); PROVIDED, HOWEVER, with
respect to the first Distribution Date, the Monthly Servicing Fee will be
$347,222.
The share of the Monthly Servicing Fee allocable to the Class A
Certificateholders with respect to any Distribution Date (the "Class A Servicing
Fee") will be equal to one-twelfth of the product of (a) the Class A Floating
Percentage, (b) the Servicing Fee Rate and (c) the Servicing Base Amount;
PROVIDED, HOWEVER, that with respect to the first Distribution Date, the Class A
Servicing Fee will be $315,972. The share of the Monthly Servicing Fee allocable
to the Class B Certificateholders with respect to any Distribution Date (the
"Class B Servicing Fee") will be equal to one-twelfth of the product of (a) the
Class B Floating Percentage, (b) the Servicing Fee Rate and (c) the Servicing
Base Amount; PROVIDED, HOWEVER, that with respect to the first Distribution
Date, the Class B Servicing Fee will be equal to $17,361. The Class A Servicing
Fee and the Class B Servicing Fee shall be payable to the Servicer solely to the
extent amounts are available for distribution in respect thereof as described
under "--Application of Collections-- Payment of Interest, Fees and Other Items"
above.
FEDERAL INCOME TAX CONSEQUENCES
Based on the application of existing law to the facts as set forth in the
Pooling and Servicing Agreement and other relevant documents, Orrick, Herrington
& Sutcliffe LLP, special counsel to the Transferor ("Special Tax Counsel"), is
of the opinion that the Class A Certificates will properly be treated as
indebtedness for Federal income tax purposes. See "Federal Income Tax
Consequences" in the Prospectus.
UNDERWRITING
Subject to the terms and conditions set forth in the underwriting agreement
relating to the Class A Certificates (the "Underwriting Agreement"), the
Transferor has agreed to sell to the underwriters named
S-45
<PAGE>
below (the "Underwriters"), and each of the Underwriters has agreed to purchase
from the Transferor, the principal amount of Class A Certificates set forth
opposite its name below:
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
OF
CLASS A
UNDERWRITER CERTIFICATES
- ---------------------------------------------------------------------- ------------------
<S> <C>
Salomon Brothers Inc.................................................. $ 205,000,000
Chase Securities Inc.................................................. 22,500,000
------------------
Total........................................................... $ 227,500,000
------------------
------------------
</TABLE>
The Transferor has been advised by the Underwriters that the Underwriters
propose initially to offer the Class A Certificates to the public at the prices
set forth on the cover page of this Prospectus Supplement and to certain dealers
at such price less a concession not in excess of .200% of the principal amount
of the Class A Certificates. The Underwriters may allow and such dealers may
reallow a concession not in excess of .150% of the principal amount of the Class
A Certificates to certain other dealers. After the initial public offering, the
public offering price and such concessions may be changed. The Transferor has
agreed that it will indemnify the Underwriters against certain liabilities,
including liabilities under the Act, or contribute to payments the Underwriters
may be required to make in respect thereof. The Transferor has agreed to pay a
structuring fee to Salomon Brothers Inc in connection with the structuring of
the transactions described herein.
The Underwriters may engage in over-allotment, stabilizing transactions and
covering transactions in accordance with Regulation M under the Securities
Exchange Act of 1934, as amended. Over-allotment involves sales in excess of the
offering size, which creates a short position for the Underwriters. Stabilizing
transactions involve bids to purchase the underlying security so long as the
stabilizing bids do not exceed a specified maximum. Covering transactions
involve purchases of the Class A Certificates in the open market after the
distribution has been completed in order to cover short positions. Such
stabilizing transactions and covering transactions may cause the price of the
Class A Certificates to be higher than it would otherwise be in the absence of
such transactions. No representation is made hereby that the Underwriters will
engage in such transactions or that such transactions, once commenced, will not
be discontinued without notice.
Because each Salomon Smith Barney Subsidiary is an affiliate of the
Transferor, and a member of the National Association of Securities Dealers, Inc.
("NASD"), the offering of the Class A Certificates will be conducted pursuant to
the applicable sections of Rule 2810 of the Conduct Rules of the NASD.
Accordingly, the Underwriters may not confirm sales to any discretionary account
without the prior specific written approval of a customer.
This Prospectus Supplement, together with an appropriate Prospectus, may be
used by any Salomon Smith Barney Subsidiary in connection with offers and sales
of an indeterminate amount of the Class A Certificates in market-making
transactions at negotiated prices related to prevailing market prices at the
time of any sale. Any Salomon Smith Barney Subsidiary may act as a principal or
agent in such transactions. No Salomon Smith Barney Subsidiary has any
obligation to make a market in any of the Class A Certificates and any such
Salomon Smith Barney Subsidiary may discontinue any market-making activities at
any time without notice, in its sole discretion.
LEGAL MATTERS
Certain legal matters relating to the issuance of the Class A Certificates
will be passed upon for the Transferor and the Banks by A. Keith McClung, Esq.,
General Counsel of Commercial Credit Company. Certain legal matters relating to
the issuance of the Class A Certificates under the laws of the State of Delaware
will be passed upon for the Transferor by Richards, Layton & Finger, Wilmington,
Delaware and, with respect to the federal tax consequences of such issuance, by
Orrick, Herrington & Sutcliffe LLP, Washington, D.C. Certain legal matters will
be passed upon for the Underwriters by Orrick, Herrington & Sutcliffe LLP.
S-46
<PAGE>
INDEX OF DEFINED TERMS
<TABLE>
<CAPTION>
TERM PAGE NO.
- -------------------------------------------------------------------------------------------- --------------------
<S> <C>
Accounts.................................................................................... S-2
Accumulation Period Length.................................................................. S-28
Available Investor Principal Collections.................................................... S-27
Available Reserve Account Amount............................................................ S-40
Bank or Banks............................................................................... S-7
Base Rate................................................................................... S-22
Business Day................................................................................ S-7
Cede........................................................................................ S-6
Certificate Owner........................................................................... S-6
Certificate Owners.......................................................................... S-2
Certificateholders.......................................................................... S-4
Certificateholders' Interest................................................................ S-6
Certificates................................................................................ S-1, S-4
Class A Accumulation Period................................................................. S-11
Class A Additional Interest................................................................. S-35
Class A Available Funds..................................................................... S-26
Class A Certificate Rate.................................................................... S-6
Class A Certificateholders.................................................................. S-4
Class A Certificates........................................................................ S-1, S-4
Class A Expected Final Distribution Date.................................................... S-22
Class A Floating Percentage................................................................. S-30
Class A Initial Invested Amount............................................................. S-5
Class A Invested Amount..................................................................... S-5, S-31
Class A Investor Amount..................................................................... S-32
Class A Investor Charge-Off................................................................. S-43
Class A Investor Default Amount............................................................. S-42
Class A Monthly Interest.................................................................... S-26
Class A Monthly Principal................................................................... S-27
Class A Principal Percentage................................................................ S-30
Class A Required Amount..................................................................... S-8, S-32
Class A Servicing Fee....................................................................... S-45
Class B Accumulation Period................................................................. S-11
Class B Additional Interest................................................................. S-36
Class B Available Funds..................................................................... S-26
Class B Certificateholders.................................................................. S-4
Class B Certificates........................................................................ S-1, S-4
Class B Expected Final Distribution Date.................................................... S-22
Class B Floating Percentage................................................................. S-30
Class B Initial Invested Amount............................................................. S-5
Class B Invested Amount..................................................................... S-5, S-31
Class B Investor Charge-Off................................................................. S-43
Class B Investor Default Amount............................................................. S-42
Class B Monthly Interest.................................................................... S-26
Class B Monthly Principal................................................................... S-27
Class B Principal Commencement Date......................................................... S-38
Class B Principal Percentage................................................................ S-31
Class B Required Amount..................................................................... S-9, S-32
</TABLE>
S-47
<PAGE>
<TABLE>
<CAPTION>
TERM PAGE NO.
- -------------------------------------------------------------------------------------------- --------------------
<S> <C>
Class B Servicing Fee....................................................................... S-45
Class C Additional Interest................................................................. S-37
Class C Available Funds..................................................................... S-26
Class C Default Amount...................................................................... S-31
Class C Floating Percentage................................................................. S-30
Class C Initial Invested Amount............................................................. S-5
Class C Interests........................................................................... S-2, S-4
Class C Invested Amount..................................................................... S-5, S-31, S-37
Class C Monthly Interest.................................................................... S-26
Class C Monthly Principal................................................................... S-11
Class C Principal Percentage................................................................ S-31
Closing Date................................................................................ S-2
Code........................................................................................ S-15
Companion Series............................................................................ S-40
Controlled Accumulation Amount.............................................................. S-27
Controlled Accumulation Period.............................................................. S-10
Controlled Deposit Amount................................................................... S-12
Corporation................................................................................. S-4
Criteria.................................................................................... S-18
Deficit Controlled Accumulation Amount...................................................... S-12, S-28
Definitive Certificate...................................................................... S-6
Determination Date.......................................................................... S-22
Discount Option Collections................................................................. S-7, S-16
Discount Option Date........................................................................ S-16
Discount Percentage......................................................................... S-16
Distribution Date........................................................................... S-7
DTC......................................................................................... S-6
Eligible Account............................................................................ S-18
ERISA....................................................................................... S-15
Excess Finance Charge Collections........................................................... S-9
Excess Transferor Finance Charge Collections................................................ S-41
Excess Spread............................................................................... S-8, S-36
FDIC........................................................................................ S-1, S-6
Floating Allocation Percentage.............................................................. S-29
Group One................................................................................... S-10
Initial Closing Date........................................................................ S-18
Initial Cut-Off Date........................................................................ S-18
Initial Invested Amount..................................................................... S-5
Interest Period............................................................................. S-7
Invested Amount............................................................................. S-5, S-25, S-32
Investment Company Act...................................................................... S-23
Investor Amount............................................................................. S-32
Investor Default Amount..................................................................... S-42
Investor Interest........................................................................... S-4
Master Pooling and Servicing Agreement...................................................... S-4
Monthly Period.............................................................................. S-8
Monthly Servicing Fee....................................................................... S-45
NASD........................................................................................ S-46
Net Portfolio Yield......................................................................... S-22
Pay Out Event............................................................................... S-44
</TABLE>
S-48
<PAGE>
<TABLE>
<CAPTION>
TERM PAGE NO.
- -------------------------------------------------------------------------------------------- --------------------
<S> <C>
Percentage Allocation....................................................................... S-34
Pooling and Servicing Agreement............................................................. S-4
Principal Allocation Percentage............................................................. S-30
Principal Funding Account................................................................... S-11, S-39
Principal Funding Account Balance........................................................... S-31
Principal Funding Investment Proceeds....................................................... S-12, S-39
Rapid Amortization Period................................................................... S-13
Rating Agencies............................................................................. S-15
Rating Agency............................................................................... S-15
Reallocated Principal Collections........................................................... S-32
Receivables................................................................................. S-2
Required Class C Invested Amount............................................................ S-10, S-42
Required Reserve Account Amount............................................................. S-39
Reserve Account............................................................................. S-39
Reserve Account Funding Date................................................................ S-39
Revolving Period............................................................................ S-10
Salomon Smith Barney Subsidiaries........................................................... S-2
Series...................................................................................... S-4
Series 1998-1 Termination Date.............................................................. S-14
Series 1998-1............................................................................... S-4
Series Investor Amount...................................................................... S-32
Series Percentage........................................................................... S-25
Servicer.................................................................................... S-1, S-4
Servicing Base Amount....................................................................... S-45
Servicing Fee Rate.......................................................................... S-45
Shared Principal Collections................................................................ S-41
Shared Transferor Principal Collections..................................................... S-41
Special Tax Counsel......................................................................... S-45
Subordinate Principal Collections........................................................... S-34
Supplement.................................................................................. S-4
Transferor.................................................................................. S-1, S-4
Transferor Percentage....................................................................... S-25
Transferor's Interest....................................................................... S-5, S-25
Travelers Consumer Credit Card Portfolio.................................................... S-2
Trust....................................................................................... S-1, S-4
Trust Portfolio............................................................................. S-18
Trustee..................................................................................... S-1, S-4
Underwriters................................................................................ S-46
Underwriting Agreement...................................................................... S-45
</TABLE>
S-49
<PAGE>
PROSPECTUS
TRAVELERS BANK CREDIT CARD MASTER TRUST I
ASSET-BACKED CERTIFICATES, ISSUABLE IN SERIES
CC CREDIT CARD CORPORATION
TRANSFEROR
TRAVELERS BANK & TRUST, FSB
SERVICER
This Prospectus relates to certain Asset-Backed Certificates (the
"Certificates") that may be issued from time to time by the Travelers Bank
Credit Card Master Trust I (the "Trust") in one or more series (each a
"Series"). The Trust will be formed pursuant to a pooling and servicing
agreement among CC Credit Card Corporation, as Transferor, Travelers Bank &
Trust, fsb, as Servicer (the "Servicer"), and The Bank of New York, as Trustee
(the "Trustee"). The property of the Trust (the "Trust Assets") includes and
will include the receivables described herein (the "Receivables") generated from
time to time in the ordinary course of business in a portfolio of consumer
revolving credit card accounts (the "Accounts") owned by Travelers Bank & Trust,
fsb and The Travelers Bank USA (each a "Bank" and, collectively, the "Banks")
and all monies due in payment of the Receivables and certain other property,
which may include participation interests in pools of revolving credit card
receivables as more fully described herein and, with respect to any Series, in
the related Prospectus Supplement. The Receivables in the Accounts will be first
sold by the Banks to the Transferor and then transferred by the Transferor to
the Trust as more fully described herein.
The Certificates will be offered from time to time under this Prospectus on
terms determined for each Series at the time of the sale and as described in the
related prospectus supplement (each, a "Prospectus Supplement"). Each Series
will consist of one or more classes of Certificates (each, a "Class"), one or
more of which may be fixed-rate Certificates, floating-rate Certificates or
other types of Certificates as specified in the related Prospectus Supplement.
Payments of interest on each Class will be made on each Distribution Date
specified in the related Prospectus Supplement. Principal payments on each Class
will be made as specified in the related Prospectus Supplement. Any Series may
include one or more Classes that are subordinated in right and priority to the
extent described in the related Prospectus Supplement to payment of principal or
interest to one or more other Classes of such Series.
Each Certificate will represent an undivided interest in the Trust Assets and
each Certificateholder will be entitled to receive a varying percentage of each
month's collections with respect to the Receivables at the times and in the
manner described herein and, with respect to any Series, in the related
Prospectus Supplement. One or more Classes of a Series may be entitled to the
benefits of a cash collateral guaranty or account, letter of credit, surety
bond, insurance policy or other form of enhancement as specified in the
Prospectus Supplement relating to such Series.
THE CERTIFICATES WILL REPRESENT INTERESTS IN THE TRUST ASSETS AND WILL NOT
REPRESENT INTERESTS IN OR RECOURSE OBLIGATIONS OF CC CREDIT CARD CORPORATION,
TRAVELERS BANK & TRUST, FSB, THE TRAVELERS BANK USA OR ANY AFFILIATE THEREOF. A
CERTIFICATE IS NOT A DEPOSIT AND IS NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION (THE "FDIC"). THE RECEIVABLES ARE NOT INSURED OR GUARANTEED BY THE
FDIC 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.
POTENTIAL INVESTORS SHOULD CONSIDER THE INFORMATION SET FORTH IN "RISK FACTORS"
COMMENCING ON PAGE 18 HEREIN AND IN THE RELATED PROSPECTUS SUPPLEMENT.
The Certificates offered by this Prospectus and by the related Prospectus
Supplement are offered by the underwriters, if any, subject to prior sale, to
withdrawal, cancellation or modification of the offer without notice, to
delivery to and acceptance by the underwriters, if any, and certain further
conditions. Retain this Prospectus for future reference.
Certain capitalized terms used herein are defined elsewhere in the Prospectus. A
listing of the pages on which such terms are defined can be found in "Index of
Defined Terms" beginning on page 76 herein.
Each Series of Certificates or Class of Certificates offered hereby will be
rated in one of the four highest rating categories by at least one nationally
recognized statistical rating organization.
THIS PROSPECTUS MAY NOT BE USED TO CONSUMMATE SALES OF THE SECURITIES OFFERED
HEREBY UNLESS ACCOMPANIED BY A PROSPECTUS SUPPLEMENT.
February 26, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
PROSPECTUS SUPPLEMENT....................... 2
REPORTS TO CERTIFICATEHOLDERS............... 2
AVAILABLE INFORMATION....................... 2
INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE................................. 3
PROSPECTUS SUMMARY.......................... 4
RISK FACTORS................................ 18
USE OF PROCEEDS............................. 24
THE TRUST................................... 24
THE BANKS' CREDIT CARD ACTIVITIES........... 25
General..................................... 25
Acquisition and Use of Credit Cards......... 25
Billing and Payments........................ 26
Delinquencies............................... 27
Interchange................................. 27
Competition................................. 28
THE BANKS................................... 28
THE TRANSFEROR.............................. 29
THE ACCOUNTS................................ 29
DESCRIPTION OF THE
CERTIFICATES.............................. 29
General..................................... 30
Book-Entry Registration..................... 31
Definitive Certificates..................... 34
The Transferor Certificate; Additional
Transferors............................... 34
Interest Payments........................... 35
Principal Payments.......................... 36
Shared Principal Collections and
Transferor Principal Collections.......... 36
Sharing of Excess Finance Charge
Collections............................... 37
Optional Repurchase......................... 37
Companion Series............................ 37
Groups...................................... 38
New Issuances............................... 38
THE RECEIVABLES TRANSFER
AGREEMENTS................................ 39
Sale of Receivables......................... 39
Addition of Accounts........................ 40
Purchase Price of Receivables............... 40
Representations and Warranties.............. 40
THE POOLING AND SERVICING AGREEMENT
GENERALLY................................. 40
Trust Assets................................ 40
Transfer and Assignment of Receivables...... 41
Additional Transferors...................... 41
Cessation of Transfer of Receivables........ 41
Representations, Warranties and Covenants... 41
Addition of Accounts or Participation
Interests................................. 46
Automatic Account Additions................. 48
Removal of Accounts......................... 49
Servicing Procedures........................ 49
Discount Option............................. 50
Trust Accounts.............................. 50
Series Percentage and Transferor
Percentage................................ 51
Application of Collections.................. 51
Operation of Excess Funding Account......... 52
Defaulted Receivables; Rebates and
Fraudulent Charges........................ 52
Final Payment of Principal and
Interest; Termination..................... 53
Pay Out Events and Reinvestment Events...... 53
Servicing Compensation and Payment of
Expenses.................................. 54
Certain Matters Regarding the Servicer...... 55
Indemnification............................. 55
Servicer Default............................ 56
Reports to Certificateholders............... 57
Evidence as to Compliance................... 58
Amendments.................................. 58
Interest Rate Swaps and Related Caps, Floors
and Collars............................... 59
Defeasance.................................. 59
List of Certificateholders.................. 60
The Trustee................................. 60
SERIES ENHANCEMENT.......................... 60
General..................................... 60
Subordination............................... 61
Letter of Credit............................ 61
Cash Collateral Guaranty or Account......... 61
Collateral Interest......................... 61
Surety Bond or Insurance Policy............. 62
Spread Account.............................. 62
CERTAIN LEGAL ASPECTS OF THE
RECEIVABLES............................... 62
Transfer of Receivables..................... 62
Certain Matters Relating to Insolvency...... 63
Consumer Protection Laws.................... 65
Proposed Legislation........................ 65
Recent Litigation........................... 65
FEDERAL INCOME TAX
CONSEQUENCES.............................. 66
General..................................... 66
Treatment of the Certificates as Debt....... 66
Treatment of the Trust...................... 67
Taxation of Interest Income of U.S.
Certificate Owners........................ 69
Sale or Exchange of Certificates............ 69
Non-U.S. Certificate Owners................. 70
Information Reporting and Backup
Withholding............................... 71
State and Local Taxation.................... 71
ERISA CONSIDERATIONS........................ 72
PLAN OF DISTRIBUTION........................ 74
LEGAL MATTERS............................... 75
</TABLE>
i
<PAGE>
PROSPECTUS SUPPLEMENT
Each Prospectus Supplement relating to a Series to be offered thereby and
hereby will, among other things, set forth with respect to such Series: (a) the
initial aggregate principal amount, the certificate interest rate (or method for
determining it) of each Class of such Series; (b) certain information concerning
the Receivables and other property, if any, allocated to such Series; (c) the
expected date or dates on which the principal amount of the Certificates will be
paid to Certificateholders; (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
identity of each Class of floating-rate Certificates and fixed-rate Certificates
included in such Series, if any, or such other type of Class of Certificates;
(f) the Distribution Dates for the respective Classes; (g) relevant financial
information with respect to the Receivables and other property, if any; (h)
additional information with respect to any Series Enhancement, guaranteed
investment contract or other agreement relating to such Series; and (i) the plan
of distribution of such Series.
REPORTS TO CERTIFICATEHOLDERS
Unless and until Definitive Certificates 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., as registered
holder of the Certificates, pursuant to the Pooling and Servicing Agreement. See
"Description of the Certificates--Book Entry Registration," and "The Pooling and
Servicing Agreement Generally--Reports to Certificateholders" and "--Evidence as
to Compliance." Such reports will not constitute financial statements prepared
in accordance with generally accepted accounting principles. None of CC Credit
Card Corporation, Travelers Bank & Trust, fsb, The Travelers Bank USA or any of
their affiliates intend to send any of their financial reports to
Certificateholders. Travelers Bank & Trust, fsb, as Servicer will file with the
Securities and Exchange Commission (the "Commission") such reports 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.
AVAILABLE INFORMATION
CC Credit Card Corporation, as Transferor (in such capacity, the
"Transferor") and as originator of the Trust, has filed a Registration Statement
under the Securities Act of 1933, as amended (the "Act"), with the Commission on
behalf of the Trust with respect to the Certificates offered pursuant to this
Prospectus. This Prospectus, which forms part of the Registration Statement,
does not contain all of the information contained in the Registration Statement
and amendments thereof and exhibits thereto. 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.,
Washington, D.C. 20549; the Commission's regional offices at Seven World Trade
Center, 13th Floor, New York, New York 10048; and Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of the
Registration Statement and amendments thereof and exhibits thereto may be
obtained from the Public Reference Section of the Commission, 450 Fifth Street,
N.W., Washington, D.C. 20549, at prescribed rates. In addition, the Commission
maintains a 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 filing, may be viewed. The
Internet address of the Commission's World Wide Web site is http:// www.sec.gov.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All reports and other documents filed with the Commission by the Servicer
with respect to 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 incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
The Servicer will provide without charge to each person to whom a copy of
this Prospectus is delivered, on the written or oral request of any such person,
a copy of any or all of the documents incorporated herein by reference, except
the exhibits to such documents (unless such exhibits are specifically
incorporated by reference in such documents). Written requests for such copies
should be directed to the Servicer at Christiana Corporate Center, 100 Commerce
Drive, Newark, Delaware, 19713 Attention: Chief Financial Officer. Telephone
requests for such copies should be directed to Travelers Bank & Trust, fsb, as
the Servicer at (302) 454-5500.
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PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE
DETAILED INFORMATION APPEARING ELSEWHERE IN THIS PROSPECTUS AND IN THE
PROSPECTUS SUPPLEMENT WITH RESPECT TO THE SERIES OFFERED THEREBY. CERTAIN
CAPITALIZED TERMS USED HEREIN ARE DEFINED ELSEWHERE IN THIS PROSPECTUS. A
LISTING OF THE PAGES ON WHICH SUCH TERMS ARE DEFINED IS FOUND IN THE "INDEX OF
DEFINED TERMS." OTHER SERIES THAT MAY BE ISSUED PURSUANT TO OTHER SIMILAR
PROSPECTUSES OR DISCLOSURE DOCUMENTS MAY ALSO USE SUCH CAPITALIZED TERMS IN SUCH
PROSPECTUSES OR DOCUMENTS. HOWEVER, IN SUCH CASES, REFERENCE TO SUCH TERMS WILL,
UNLESS THE CONTEXT OTHERWISE REQUIRES, ONLY BE MADE IN THE CONTEXT OF SUCH OTHER
SERIES.
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TRUST............................. The Travelers Bank Credit Card Master Trust I (the
"Trust") will be formed pursuant to the pooling and
servicing agreement (the "Pooling and Servicing
Agreement") among CC Credit Card Corporation, as
Transferor, Travelers Bank & Trust, fsb, as Servicer
(the "Servicer") and The Bank of New York, as Trustee
(the "Trustee").
TRUST ASSETS...................... The assets of the Trust (the "Trust Assets") will
include a portfolio of receivables (the "Receivables")
arising under selected consumer revolving credit card
accounts (the "Accounts") in portfolios of consumer
revolving credit card accounts originated by Travelers
Bank & Trust, fsb, The Travelers Bank USA or
affiliates of one of the Banks, which accounts are
currently MasterCard-Registered Trademark-* and
VISA-Registered Trademark-* credit card accounts but
may include consumer revolving credit card accounts
affiliated with other programs or private-label credit
card accounts, all monies due or to become due and all
amounts received with respect thereto, all proceeds of
the Receivables (not including, however, amounts
recovered from Accounts in which the Receivables have
been written off as uncollectible), proceeds of credit
insurance policies relating to the Receivables, all
monies and other property constituting Eligible
Investments, if any, on deposit in, credited to or
held in certain accounts of the Trust and, if
applicable, the benefits of any type of enhancement
("Series Enhancement") issued with respect to any
Series (the drawing on or payment of such Series
Enhancement being available only to Certificateholders
of a specified Series or Class unless otherwise
indicated in the related Prospectus Supplement). The
subordination of any Series or Class of Certificates
to another Series or Class of Certificates will be
deemed to be a Series Enhancement. The Trust Assets
may also include participations (including 100%
participations) representing undivided interests in a
pool of assets consisting of revolving consumer credit
card receivables and any interests in such type of
receivables, including securities representing or
backed by such type of receivables owned by Travelers
Bank & Trust, fsb or The Travelers Bank USA or any
affiliate of a Bank and collections thereon
(collectively, "Participation Interests"). At the time
of formation of the Trust, each of the Banks will
convey to the
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* MasterCard and VISA are registered trademarks of MasterCard International
Incorporated and VISA USA, Inc., respectively.
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Transferor all Receivables existing under certain
designated Accounts and all Receivables arising under
such Accounts from time to time thereafter and the
Transferor will convey such Receivables to the Trust.
In addition, in the future Additional Accounts
(including Automatic Additional Accounts) may be
designated and the Receivables in such Additional
Accounts as of the cut-off date with respect to such
Additional Accounts and all Receivables arising
thereafter in such Additional Accounts will be
conveyed by an Account Owner to the Transferor and by
the Transferor to the Trust.
ACCOUNT OWNERS.................... On the date of formation of the Trust, Travelers Bank &
Trust, fsb, and The Travelers Bank USA. Each Bank will
enter into a separate Receivables Transfer Agreement
with the Transferor and, pursuant to such respective
Receivables Transfer Agreements, convey Receivables to
the Transferor. In the future, affiliates of the Banks
may enter into receivables transfer agreements and
transfer Receivables to the Transferor. Each of the
Banks and each affiliate that owns an Account and
transfers the Receivables therein to the Transferor
pursuant to a Receivables Transfer Agreement is an
"Account Owner."
TRANSFEROR........................ CC Credit Card Corporation, a Delaware corporation and a
wholly-owned subsidiary of Commercial Credit Company.
Subject to certain conditions described herein under
"The Pooling and Servicing Agreement
Generally--Additional Transferors," the Transferor may
designate one or more of its affiliates to transfer
Receivables or Participation Interests to the Trust
from time to time, whereupon any such affiliate will
become a "Transferor" for purposes of the Pooling and
Servicing Agreement.
SERVICER.......................... Travelers Bank & Trust, fsb, a federally-chartered
savings bank, is the servicer (in such capacity, the
"Servicer") and is a wholly-owned subsidiary of
Commercial Credit Company.
TRUSTEE........................... The Bank of New York, a New York banking corporation.
THE CERTIFICATES.................. The investor certificates issued by the Trust, including
any investor certificates offered pursuant to this
Prospectus and any Prospectus Supplement (the
"Certificates"), represent undivided interests in the
Trust Assets, which, with respect to each Series,
shall consist of the right to receive, to the extent
necessary to make the required payments with respect
to the Certificates of such Series at the times and in
the amounts specified in the series supplement to the
Pooling and Servicing Agreement for such Series (each,
a "Series Supplement," and collectively with the
Pooling and Servicing Agreement sometimes referred to
herein as the "Pooling and Servicing Agreement"), the
portion of collections allocable to Certificateholders
of such Series pursuant to the Pooling and Servicing
Agreement and the related Series Supplement, funds on
deposit in the Collection Account and the Excess
Funding Account allocable to Certificateholders of
such
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Series pursuant to the Pooling and Servicing Agreement
and the related Series Supplement, funds and other
property on deposit in or credited to any deposit,
trust, escrow or similar account maintained for the
benefit of such Series or any Class of such Series
(each, a "Series Account") and, if specified in the
related Prospectus Supplement, funds available
pursuant to any related Series Enhancement
(collectively, with respect to all Series, the
"Certificateholders' Interest"), it being understood
that the Certificates of any Series or Class shall not
represent any interest in any Series Account or Series
Enhancement for the benefit of any other Series or
Class. The Certificates may be issued from time to
time pursuant to the Pooling and Servicing Agreement
and a related Series Supplement. Each Series will
consist of one or more classes (each a "Class"), one
or more of which may be Classes of fixed-rate
Certificates or floating-rate Certificates or other
types of Certificates. Each Class may differ in, among
other things, the priority of principal payments, the
maturity date, distribution dates and rate of
interest. Additionally, the Certificates of one or
more Classes may be subordinated to the Certificates
of one or more other Classes with respect to the right
to receive payments of principal, interest, or both
under the circumstances and in such amounts as
described herein and in the related Prospectus
Supplement. The Transferor may, with respect to any
Series, retain one or more subordinated Classes of the
Certificates. The term "Certificateholders" refers to
holders of the Certificates (including, if applicable,
the Transferor), and the term "Series" refers to any
series of Certificates issued by the Trust. See
"Description of the Certificates."
Unless otherwise specified in the related Prospectus
Supplement, the Certificates of a Series will be
available for purchase in minimum denominations of
$1,000 and in integral multiples of $1,000 in excess
thereof and will be available only in book-entry form,
except in certain limited circumstances. The Trust
Assets will be allocated among the Certificateholders'
Interest of each Series, including, if applicable,
certain providers of Series Enhancement holding
certificated or uncertificated subordinated interests,
and the interest of the holders of the Transferor
Certificates (the "Transferor's Interest"). The
Transferor's Interest represents the right to the
assets of the Trust not allocated to the
Certificateholders' Interest. The term "Transferor
Amount" refers to, at any time of determination, an
amount equal to the sum of (a) the product of the
aggregate amount of Principal Receivables in the Trust
at such time and one minus the Discount Percentage in
effect at such time and (b) the principal amount on
deposit in the Excess Funding Account at such time,
minus the sum of the amount of Principal Receivables
and the amount on deposit in the Excess Funding
Account allocated to each Series then outstanding (for
each
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Series, its "Invested Amount"). The Transferor Amount
will fluctuate as the amount of Principal Receivables
in the Trust changes from time to time. The term
"Investor Amount" for a Series will be set forth in
the Series Supplement for such Series and, for a
Series offered hereby, the related Prospectus
Supplement, and generally refers to the principal
amount of the Certificateholders' Interest in the
assets of the Trust.
The Certificates of a Class offered hereby and pursuant
to a Prospectus Supplement will represent the right to
receive, from the assets of the Trust allocated to the
applicable Series, funds up to (but not in excess of)
the amounts required to make payments of interest on
the Certificates of such Class at the rate specified
in the related Prospectus Supplement, and payments of
principal during any related Amortization Period to
the extent specified in the related Prospectus
Supplement.
Each Class of Certificates will include the right to
receive (but only to the extent needed to make
required payments under the Pooling and Servicing
Agreement) varying percentages of collections of
Finance Charge Receivables and Principal Receivables
for the related Monthly Period. During the Revolving
Period relating to a Class, subject to certain
limitations, collections of Principal Receivables
allocable to the Certificates of such Class will
generally be allocated and paid to the holders of the
Transferor Certificates or to other Series. During any
Amortization Period relating to such Class,
collections of Principal Receivables will be allocated
to such Class as provided herein and in the related
Prospectus Supplement.
The Certificates of each Series represent the right to
receive payments from the Trust only and do not
represent interests in or recourse obligations of CC
Credit Card Corporation, either of the Banks or any
affiliate thereof. None of the Certificates, the
Accounts, the Receivables or the Participation
Interests are insured or guaranteed by the Federal
Deposit Insurance Corporation (the "FDIC") or any
other governmental agency or instrumentality.
NEW ISSUANCES..................... The Pooling and Servicing Agreement authorizes the
Trustee to issue three types of certificates: (i) one
or more Series of Certificates which will have the
characteristics described below, (ii) a certificate
evidencing the Transferor's interest in the Trust (the
"Transferor Certificate"), which will initially be
held by the Transferor, and (iii) Supplemental
Certificates delivered in exchange for a portion of
the Transferor Certificate under certain circumstances
described in the Pooling and Servicing Agreement
(each, a "Supplemental Certificate" and, together with
the Transferor Certificate, the "Transferor
Certificates").
Following the issuance of the initial Series of
Certificates, a new issuance of Certificates (a "New
Issuance") may occur only upon satisfaction of the
following conditions: (i) on or before the fifth day
immediately preceding the date of such New
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Issuance, the Transferor shall have given notice of
such issuance and its date to the Trustee and the
Servicer; and on or before the tenth day immediately
preceding the date of such New Issuance, the
Transferor shall have given each Rating Agency notice
of such issuance and (ii) the Transferor shall have
delivered to the Trustee (a) the related Series
Supplement specifying the Principal Terms of the new
Series, (b) if applicable, the agreement relating to
the Series Enhancement, (c) written confirmation from
each Rating Agency that the New Issuance will not
result in the Rating Agency reducing or withdrawing
its rating of any outstanding Series or Class (with
the respect to any action or proposed series of
actions, the "Rating Agency Condition"), (d) an
officer's certificate from the Transferor stating that
the Transferor reasonably believes that such New
Issuance will not cause a Pay Out Event or a
Reinvestment Event to occur with respect to any
Series, and (e) an opinion of counsel to the effect
that, for Federal income tax purposes, (i) the New
Issuance will not adversely affect the tax
characterization of Certificates of any outstanding
Series or Class that were characterized as debt at the
time of their issuance, (ii) the New Issuance will not
cause the Trust to be deemed to be an association (or
publicly traded partnership) taxable as a corporation
and (iii) such New Issuance will not cause an event in
which gain or loss would be recognized by any
Certificateholder or the Trust (an opinion of counsel
to the effect referred to in clauses (i), (ii) and
(iii) with respect to any action is referred to herein
as a "Tax Opinion"). The Transferor may offer a Series
to the public or other investors under a prospectus or
other disclosure document (a "Disclosure Document") in
transactions either registered under the 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.
THE ACCOUNTS...................... The Accounts consist of consumer revolving credit card
accounts owned by one of the Banks, or under certain
conditions described in the Pooling and Servicing
Agreement, an affiliate of one of the Banks (in each
case, each Bank and any such affiliate, an "Account
Owner"). The Accounts are not being sold or
transferred to the Trust and will continue to be
controlled and held by the applicable Account Owner.
At the time of formation of the Trust, each Bank will
enter into a receivables transfer agreement and any
additional Account Owners will enter into a
substantially similar agreement (each a "Receivables
Transfer Agreement") with the Transferor. Pursuant to
the applicable Receivables Transfer Agreement, the
Account Owner will, from time to time, sell to the
Transferor all of the Account Owner's right, title and
interest in the Receivables in designated Accounts.
The Transferor, in
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turn, from time to time, will transfer such
Receivables to the Trust pursuant to the Pooling and
Servicing Agreement.
THE RECEIVABLES................... The Receivables arise in the Accounts and consist of
amounts charged by cardholders for merchandise and
services, cash advances and check advances
(collectively, the "Principal Receivables"), plus the
related periodic finance charges, annual membership
fees and annual service charges, late fees, overlimit
fees, cash advance fees, all other fees and charges
with respect to Accounts designated by the Transferor
to be included as Finance Charge Receivables
(collectively, the "Finance Charge Receivables");
provided, however, that an amount equal to the product
of the Discount Percentage and the amount of
collections of Principal Receivables will be treated
as collections of Finance Charge Receivables. See "The
Pooling and Servicing Agreement Generally--Discount
Option." All new Receivables arising in Accounts will
be conveyed to the Trust, except as described herein,
but will not affect the amount of the initial Investor
Amount of a Series. The total amount of Receivables
will fluctuate from day to day, because the amount of
new Receivables arising in the Accounts and the amount
of payments collected on existing Receivables will
usually differ each day. Because the Transferor's
Interest represents the interest in the Principal
Receivables not represented by the Certificates of any
Series, the amount of the Transferor's Interest in
Principal Receivables will fluctuate daily as
Receivables are collected and new Receivables are
conveyed to the Trust. See "The Receivables" in the
Prospectus Supplement.
REGISTRATION OF CERTIFICATES...... Unless otherwise specified in the related Prospectus
Supplement, the Certificates of each Series initially
will be represented by certificates registered in the
name of Cede & Co. ("Cede"), as the nominee of The
Depository Trust Company ("DTC"). No person acquiring
a beneficial interest in the Certificates of a Series
(a "Certificate Owner") will be entitled to receive a
definitive certificate representing such person's
interest (a "Definitive Certificate"), except in the
event that Definitive Certificates of such Series are
issued under the limited circumstances described
herein and in the related Prospectus Supplement. See
"Description of the Certificates--Definitive
Certificates."
CLEARANCE AND SETTLEMENT.......... Unless otherwise provided in the related Prospectus
Supplement, Certificate Owners of each Series offered
hereby may elect to hold their Certificates through
any of (i) DTC (in the United States) or (ii) Cedel or
Euroclear (in Europe). Transfers within DTC, Cedel or
Euroclear, as the case may be, will be made in
accordance with the usual rules and operating
procedures of the relevant system. Cross-market
transfers between persons holding directly or
indirectly through DTC, on the one hand, and
counterparties holding directly or indirectly through
Cedel or Euroclear, on the other, will be effected in
DTC through the relevant Depositaries of Cedel
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or Euroclear. See "Description of the
Certificates--Book-Entry Registration."
COLLECTIONS....................... All collections of Receivables and Participation
Interests, if any, will be allocated by the Servicer
between amounts collected on Principal Receivables and
amounts collected on Finance Charge Receivables;
provided, however, that the Transferor has the option
(the "Discount Option") to designate from time to
time, subject to certain conditions, a percentage
(which initially will be 1.5%) of all or a portion of
the amount of Principal Receivables collected that
will instead be treated as collections of Finance
Charge Receivables. See "The Pooling and Servicing
Agreement Generally--Discount Option." All such
amounts will then be allocated in accordance with the
respective interests of the Certificateholders of each
Class of each Series as described in the related
Prospectus Supplement. The Servicer will deposit all
collections of Receivables and Participation
Interests, if any, distributable to Certificateholders
in an eligible account (including any subaccounts
thereof) established for such purpose (the "Collection
Account") no later than the day prior to the
applicable Distribution Date. The "Distribution Date"
for a Series will usually be the fifteenth day of each
month (or, if such day is not a business day, the next
business day) or such other date specified in the
Series Supplement for a Series. See "The Pooling and
Servicing Agreement Generally--Series Percentage and
Transferor Percentage" herein and "Description of the
Certificates--Allocation Percentages" in the
Prospectus Supplement.
INTEREST.......................... Interest on the Certificates for each Interest Period
with respect to a Series will be distributed as set
forth in the related Prospectus Supplement. Interest
payments in respect of a Series will generally be
funded from the portion of Finance Charge Receivables
collected during the related Monthly Period allocable
to such Series and, if necessary and if specified in
the related Prospectus Supplement, from any Series
Enhancement available for such Series. The terms
"Interest Period" and "Monthly Period" have the
meanings specified in the Prospectus Supplement
relating to each Series. See "Description of the
Certificates--Interest Payments" and "Risk
Factors--Ability to Change Terms of the Receivables;
Decrease in Finance Charges."
REVOLVING PERIOD.................. During the period from the closing date with respect to
a Series (the "Relevant Closing Date") and ending on
the day immediately preceding the commencement of an
Amortization Period with respect to such Series (the
"Revolving Period"), collections of Principal
Receivables allocated to the Certificates of such
Series will be paid from the Trust to the holders of
the Transferor Certificates, to other Series or
deposited in the Excess Funding Account (except in
certain limited circumstances).
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AMORTIZATION PERIODS; PRINCIPAL
PAYMENTS OR ACCUMULATION........ Unless otherwise specified in the Prospectus Supplement
relating to any Class, at the end of any Revolving
Period for a Class, collections of Principal
Receivables that had been allocated to
Certificateholders of such Class but had been paid to
the holders of the Transferor Certificates, to other
Series or deposited in the Excess Funding Account
shall instead be either paid directly to such
Certificateholders or accumulated for payment to such
Certificateholders, in each case as specified in the
Prospectus Supplement relating to such Class. The
Revolving Period for a Series shall end and an
amortization period shall commence either upon the
occurrence of a Pay Out Event with respect to such
Series (a "Rapid Amortization Period"), a Reinvestment
Event with respect to such Series (a "Rapid
Accumulation Period") or at a scheduled date (a
"Scheduled Amortization Date") set forth in the
Prospectus Supplement applicable to such Series (a
"Controlled Amortization Period," "Limited
Amortization Period," "Principal Amortization Period,"
"Optional Amortization Period," "Controlled
Accumulation Period" or other like period,
collectively referred to herein as an "Amortization
Period," in each case as described in the related
Prospectus Supplement). In the event of a Rapid
Amortization Period, collections of Principal
Receivables allocated to Certificateholders will
generally be paid directly to such Certificateholders,
subject to any subordination provisions specified in
the related Prospectus Supplement. In the event of a
Rapid Accumulation Period, collections of Principal
Receivables allocated to Certificateholders will
generally be accumulated in the Principal Funding
Account and paid to the Certificateholders on the
expected final payment date. See "The Pooling and
Servicing Agreement Generally--Pay Out Events and
Reinvestment Events" for a discussion of the events
which might lead to a Rapid Amortization Period or a
Rapid Accumulation Period. In the event of another
Amortization Period with respect to a Class,
collections of Principal Receivables will either be
paid directly to Certificateholders in specified
amounts on a monthly or other periodic basis or
accumulated in a Series Account for the benefit of
Certificateholders or otherwise applied, in each case,
as set forth in the Prospectus Supplement relating to
such Class.
Funds on deposit in the Collection Account shall, at the
direction of the Servicer, be invested by the Trustee
in Eligible Investments selected by the Servicer.
SHARED PRINCIPAL COLLECTIONS AND
TRANSFEROR PRINCIPAL
COLLECTIONS..................... On each Distribution Date, (a) the Servicer shall
allocate Shared Principal Collections to each Series
entitled thereto (each, a "Principal Sharing Series"),
pro rata, in proportion to the Principal Shortfalls,
if any, with respect to each such Series and (b) the
Servicer shall withdraw from the
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Collection Account and pay to the holders of the
Transferor Certificates an amount equal to the excess,
if any, of (x) the aggregate amount for all
outstanding Series of collections of Principal
Receivables which the related Series Supplements
specify are to be treated as "Shared Principal
Collections" for such Distribution Date over (y) the
aggregate amount for all outstanding Principal Sharing
Series which the related Series Supplements specify
are "Principal Shortfalls" for such Distribution Date;
provided, however, that if on any Distribution Date
the Transferor Amount is less than or equal to the
Required Transferor Amount or the product of (x) the
aggregate amount of Principal Receivables and (y) one
minus the Discount Percentage is less than the
Required Principal Balance, the Servicer will not
distribute to the holders of the Transferor
Certificates any Shared Principal Collections that
otherwise would be distributed to the holders of the
Transferor Certificates, but shall deposit such funds
in the Excess Funding Account. Any such reallocation
will not result in a reduction in the Invested Amount
of the Series to which such collections were initially
allocated. In addition, if so specified in the related
Prospectus Supplement, collections otherwise payable
to the Transferor may be designated to be paid to the
Certificateholders of the applicable Series.
SHARING OF EXCESS COLLECTIONS OF
FINANCE CHARGE RECEIVABLES...... Collections of Finance Charge Receivables allocable to
any Class in excess of the amounts necessary to make
required payments with respect to such Class may, if
specified in the related Series Supplement, be applied
to cover shortfalls, if any, with respect to amounts
payable from collections of Finance Charge Receivables
allocable to any other Class or Series then
outstanding, pro rata based upon the amount of the
shortfall as provided in the related Series
Supplement. In addition, if so specified in the
related Prospectus Supplement, collections of Finance
Charge Receivables otherwise payable to the Transferor
may be designated to be paid to the Certificateholders
of the applicable Series.
COMPANION SERIES.................. If specified in the Prospectus Supplement relating to a
Series, a Series of Certificates may be issued (each,
a "Companion 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"),
such that a reduction in the Invested Amount of the
Prior Series results in an increase in the Invested
Amount of the Companion Series. If a Pay Out Event or
Reinvestment Event occurs with respect to the Prior
Series or the Companion Series when the Prior Series
is in an Amortization Period, the percentage specified
in the applicable Prospectus Supplement for the
allocation of collections of Principal Receivables for
the Prior Series may be reset to a lower percentage as
set forth in the Prospectus Supplement for the Prior
Series and the Amortization Period for the Prior
Series may be lengthened.
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GROUPS............................ If specified in the Prospectus Supplements relating to
any group of Series (each, a "Group"), such Series may
be allocated all collections with respect to certain
portions of the Receivables and any Participation
Interests may be allocated to such Series, provided
that the Rating Agency Condition is satisfied and that
such grouping will not result in the occurrence of a
Pay Out Event or Reinvestment Event with respect to
any Series or materially adversely affect the amount
or timing of distributions to be made to any Series or
Class (an "Adverse Effect").
FUNDING PERIOD.................... The Prospectus Supplement relating to a Series of
Certificates may specify that for a period beginning
on the Relevant Closing Date for such Series and
ending on a specified date before the commencement of
an Amortization 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 Relevant Closing Date, 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 Amount of other Series of the
Trust are reduced. The Invested Amount may also
decrease due to the occurrence of a Pay Out Event or
Reinvestment 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 amount 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
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will be applied to pay interest on the Certificates of
such Series.
SERIES ENHANCEMENT................ Enhancement with respect to one or more Classes of a
Series ("Series Enhancement") may be provided in the
form of subordination, a letter of credit, a cash
collateral guaranty, a cash collateral account, a
collateral interest, a surety bond, insurance policy
or other form of support or any combination of the
above as specified in the related Prospectus
Supplement. Series Enhancement may also be provided to
a Class or Classes of different Series by a
cross-support feature which requires that
distributions of principal or interest be made with
respect to Certificates of one or more Classes of a
particular Series before distributions are made to one
or more Classes of another Series.
The type, characteristics and amount of the Series
Enhancement will be determined based on several
factors, including the characteristics of the
Receivables and Accounts and other property underlying
or comprising the Trust assets as of the Relevant
Closing Date with respect to any Series, and will be
established on the basis of requirements of each
Rating Agency rating the Certificates of such Series.
The terms of the Series 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
Series Enhancement for such Series may be reduced if
such reduction satisfies the Rating Agency Condition.
If so specified in the related Prospectus Supplement,
any such Series Enhancement may apply only in the
event of certain types of losses and the protection
against losses provided by such Series Enhancement
will be limited. See "Series Enhancement" and "Risk
Factors--Limited Nature of Rating."
A. SUBORDINATION................ A Series of Certificates may include one or more Classes
of Certificates which are subordinate to one or more
other Classes of such Series. The rights of the
holders of any such subordinated Certificates to
receive distributions on any Distribution Date for
such Series will be subordinate in right and priority
to the rights of the holders of Certificates which are
senior to such subordinated Certificates, but only to
the extent set forth in the related Prospectus
Supplement. If so specified in the related Prospectus
Supplement, subordination may apply only in the event
of certain types of losses not covered by another
Series Enhancement. 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, 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
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Certificates which are senior to such subordinated
Certificates. If cash flows otherwise distributable to
holders of a subordinated Class of a Series will be
used as support for a Class of another Series, the
related Prospectus Supplement will specify the manner
and conditions for applying such a cross-support
feature. See "Series Enhancement-- Subordination."
B. LETTER OF CREDIT............. If so specified in the related Prospectus Supplement,
support for a Series or one or more Classes of a
Series may be provided by one or more letters of
credit. A letter of credit may provide limited
protection against certain losses in addition to or in
lieu of another Series Enhancement. The issuer of the
letter of credit (the "L/C Bank") will be obligated to
honor demands with respect to such letter of credit,
to the extent of the amount available thereunder, to
provide funds under the circumstances and subject to
such conditions as are specified in the related
Prospectus Supplement. The liability of the L/C Bank
under its letter of credit may be reduced by the
amount of unreimbursed payments thereunder.
The maximum liability of a L/C Bank under its letter of
credit will generally be an amount equal to a
percentage specified in the related Prospectus
Supplement of the initial Investor Amount of a Series
or a Class of such Series. The maximum amount
available at any time to be paid under a letter of
credit will be determined in the manner specified
therein and in the related Prospectus Supplement. See
"Series Enhancement--Letter of Credit."
C. CASH COLLATERAL
GUARANTY OR ACCOUNT........... If so specified in the related Prospectus Supplement,
support for a Series or one or more Classes of a
Series may 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 the 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.
D. COLLATERAL INTEREST.......... If so specified in the related Prospectus Supplement,
support for a Series or one or more Classes of a
Series may be provided initially by an uncertificated,
subordinated interest in the Trust (the "Collateral
Interest") in an amount initially equal to a
percentage specified in the related Prospectus
Supplement of the initial Investor Amount.
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E. SURETY BOND OR INSURANCE
POLICY........................ If so specified in the related Prospectus Supplement,
support for a Series or one or more Classes of a
Series may be provided by the posting of a surety bond
or the issuance of insurance by an insurance company,
in each instance designed to assure the distribution
of interest or principal on the Certificates of such
Class or Series in the manner and amount specified in
the related Prospectus Supplement.
F. SPREAD ACCOUNT............... If so specified in the related Prospectus Supplement,
support for a Series or one or more Classes of a
Series may be provided by the periodic deposit of
certain available excess cash flow from the Trust
assets into an account (the "Spread Account") intended
to assure the subsequent distribution of interest or
principal on the Certificates of such Class or Series
in the manner specified in the related Prospectus
Supplement.
RECORD DATE....................... The last day of the month preceding any Distribution
Date, except as otherwise specified with respect to a
Series in the related Prospectus Supplement.
OPTIONAL REPURCHASE............... If specified in a Prospectus Supplement, the Investor
Amount of a Series may be subject to optional
repurchase by the Transferor on any Distribution Date
after such Investor Amount is less than or equal to a
certain specified level, unless certain events as
specified in the Pooling and Servicing Agreement have
occurred. The purchase price on the Distribution Date
on which such repurchase occurs will be as specified
in the related Prospectus Supplement and, together
with any amounts on deposit in any Series Accounts
held for the benefit of the Certificateholders of such
Series, will be not less than an amount equal to the
Investor Amount plus accrued and unpaid interest on
the applicable Certificates. See "Description of the
Certificates--Optional Repurchase" in this Prospectus
and in the related Prospectus Supplement.
FINAL PAYMENT OF PRINCIPAL AND
INTEREST; TERMINATION OF
TRUST........................... The interest of the Certificateholders of a Series in
the Trust will terminate following the earliest of (i)
the day after the Distribution Date on which the
Investor Amount of such Series is paid in full, (ii) a
date specified in the Series Supplement for such
Series (the "Stated Series Termination Date") and
(iii) the termination of the Trust (the "Trust
Termination Date"). All principal and interest will be
due and payable no later than the Stated Series
Termination Date.
RISK FACTORS...................... There are material risks associated with investment in
the Certificates. Investors should consider the factors
set forth under the caption "Risk Factors" beginning
on page 18.
TAX STATUS........................ Except to the extent otherwise specified in the related
Prospectus Supplement, Special Tax Counsel to the
Transferor is of the opinion that the Certificates of
each Series (or certain Classes thereof) will be
properly characterized as indebtedness for Federal
income tax purposes. Except as otherwise specified in
the related Prospectus Supplement, the
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Certificate Owners of each Class as to which such
opinion is rendered will be deemed to agree to treat
the Certificates as indebtedness for tax purposes. See
"Federal Income Tax Consequences" for additional
information concerning the application of Federal
income tax laws.
ERISA CONSIDERATIONS.............. Under a regulation issued by the Department of Labor,
the Trust Assets would not be deemed "plan assets" of
any employee benefit plan holding interests in a Class
of the Certificates of a Series if certain conditions
are met. If the Trust Assets were deemed to be "plan
assets" of an employee benefit plan, there is
uncertainty as to whether existing exemptions from the
"prohibited transaction" rules of the Employee
Retirement Income Security Act of 1974, as amended
("ERISA"), would apply to all transactions involving
the Trust Assets. No assurance can be made with
respect to any offering of any Class of the
Certificates of any Series that the conditions which
would allow the Trust Assets not to be "plan assets"
will be met, although the intention of the
Underwriters (but not their assurance) as to whether
any Class of the Certificates of a particular Series
will be "publicly-offered securities," and therefore
eligible for an ERISA exemption, will be set forth in
the related Prospectus Supplement. Accordingly,
fiduciaries or other persons contemplating purchasing
interests in the Certificates of any Series with "plan
assets" of any employee benefit plan should consult
their counsel before making a purchase. See "ERISA
Considerations."
CERTIFICATE RATING................ It will be a condition to the issuance of the
Certificates offered by 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 (each
such rating organization rating any Series, a "Rating
Agency"). The rating or ratings applicable to the
Certificates of each Class will be as set forth in the
related Prospectus Supplement. The Certificates
offered pursuant to this Prospectus and the related
Prospectus Supplement must be investment grade
asset-backed securities within the meaning of the Act
and the rules promulgated thereunder.
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
organization. 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 for a
Series, application will be made to list the
Certificates of such Series, or all or a portion of
any Class thereof, on the Luxembourg Stock Exchange or
any other specified exchange.
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RISK FACTORS
INVESTORS SHOULD CONSIDER THE FOLLOWING FACTORS IN CONNECTION WITH THE
PURCHASE OF CERTIFICATES.
LIMITED LIQUIDITY. There can be no assurance that a secondary market for
the Certificates of any Series will develop or, if it does develop, that such
market will provide Certificateholders with liquidity of investment or that it
will continue for the life of the Certificates of such Series. 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.
CHARACTERISTICS AS A SALE; POTENTIAL EFFECT OF INSOLVENCY AND RECEIVERSHIP
OF THE ACCOUNT OWNERS. Each Account Owner will represent and warrant in its
respective Receivables Transfer Agreement that the transfer of the Receivables
to the Transferor pursuant thereto will be a valid sale and assignment of all of
the Account Owner's right, title and interest in the Receivables and all
proceeds thereof to the Transferor. Each Account Owner will file appropriate
Uniform Commercial Code ("UCC") financing statements to evidence such sale and
perfect the Transferor's interest in such Receivables. While each Account Owner
and the Transferor will treat the Transactions described in the respective
Receivables Transfer Agreement as a sale of the Receivables to the Transferor,
under applicable federal and state law, nevertheless a tax, government lien or
other nonconsensual lien on property of an Account Owner arising before
Receivables come into existence or are transferred to the Transferor may have
priority over the Transferor's and, therefore, the Trust's interest in such
Receivables, and if the Federal Deposit Insurance Corporation ("FDIC") were
appointed conservator or receiver of an Account Owner or the Delaware State Bank
Commissioner, with respect to The Travelers Bank USA, certain administrative
expenses of the conservator or receiver or the Delaware State Bank Commissioner
with respect to The Travelers Bank USA and certain borrowings made by such
conservator or receiver or the Delaware State Bank Commissioner with respect to
The Travelers Bank USA may also have priority over the Transferor's interest
and, therefore, the Trust's interest in such Receivables. If a conservatorship
or receivership proceeding were to be commenced involving an Account Owner and
the conservator or receiver of the Account Owner or the Delaware State Bank
Commissioner with respect to The Travelers Bank USA were to take the position
that the transfer of the Receivables from the Account Owner to the Transferor
should be characterized as a pledge of such Receivables, then delays in
distributions on the Certificates and reductions in such distributions could
result. In addition, while Travelers Bank & Trust, fsb is the Servicer, cash
collections held by the Servicer may, subject to certain conditions, be
commingled and used for the benefit of Travelers Bank & Trust, fsb prior to the
date on which such collections are required to be deposited in the Collection
Account as described under "The Pooling and Servicing Agreement
Generally--Application of Collections." In the event of the conservatorship or
receivership of Travelers Bank & Trust, fsb or, in certain circumstances, the
lapse of certain time periods, the Transferor (and therefore the Trust) may not
have a perfected interest in such collections and, in such event, the Trust may
suffer a loss of all or part of such collections which may result in a loss to
Certificateholders. See "Certain Legal Aspects of the Receivables--Transfer of
Receivables."
To the extent that the Account Owners have granted a security interest in
the Receivables to the Transferor and that security interest was validly
perfected before the insolvency of an Account Owner and was not granted or taken
in contemplation of insolvency or with the intent to hinder, delay or defraud
the relevant Account Owner or its creditors, the Federal Deposit Insurance Act
("FDIA"), as amended by the Financial Institutions Reform, Recovery and
Enforcement Act of 1989, as amended ("FIRREA"), provides that such security
interest should not be subject to avoidance by the FDIC, as conservator or
receiver for the relevant Account Owner. Positions taken by the FDIC staff prior
to the passage of FIRREA do not suggest that the FDIC, as conservator or
receiver for the relevant Account Owner, would interfere with the timely
transfer to the Transferor (and, therefore, to the Trust) of payments collected
on the Receivables. If, however, the FDIC were to assert a contrary position,
such as requiring the Transferor to establish its right to those payments by
submitting to and completing the administrative claims procedure under the FDIA,
or the conservator or receiver were to request a stay of proceedings with
respect to such Account Owner as
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provided under the FDIA, delays in payments on the related Series of
Certificates and possible reductions in the amount of those payments could
occur. In addition, the FDIC, if appointed as conservator or receiver for an
Account Owner, has the power under the FDIA to repudiate contracts, including
secured contracts of the Account Owners. The FDIA provides that a claim for
damages arising from the repudiation of a contract is limited to "actual direct
compensatory damages." In the event the FDIC were to be appointed as conservator
or receiver of an Account Owner and were to repudiate the Receivables Transfer
Agreement entered into by such Account Owner, then the amount payable out of
available collateral to the Certificateholders could be lower than the
outstanding principal and accrued interest on the Certificates. The Pooling and
Servicing Agreement provides that, upon the commencement of an Insolvency Event
with respect to the Transferor or an Account Owner, the Transferor will promptly
give notice thereof to the Trustee, and a Pay Out Event or Reinvestment Event
with respect to all Series will occur. Under the Pooling and Servicing
Agreement, the Transferor will thereafter stop transferring new Principal
Receivables to the Trust. Upon the occurrence of a Pay Out Event or a
Reinvestment Event, if a conservator or receiver is appointed for the Transferor
or an Account Owner and no Pay Out Event or Reinvestment Event other than such
conservatorship or receivership or insolvency of the Transferor or such Account
Owner exists, the conservator or receiver may have the power to prevent the
commencement of a Rapid Amortization Period or Rapid Accumulation Period with
respect to any outstanding Series. In addition, a conservator or receiver for
the Transferor or an Account Owner may have the power to cause the early sale of
the Receivables and the early payment of the Certificates or to prohibit the
continued transfer of Principal Receivables to the Trust. In the event of a
Servicer Default, if a conservator or receiver is appointed for the Servicer,
and no Servicer Default other than such conservatorship or receivership or
insolvency of the Servicer exists, the conservator or receiver may have the
power to prevent either the Trustee or Certificateholders from effecting a
transfer of servicing to a successor Servicer.
The Transferor represents and warrants in the Pooling and Servicing
Agreement that the transfer of the Receivables by it to the Trust pursuant to
the Pooling and Servicing Agreement is either an absolute sale and assignment of
such Receivables to the Trust or the grant to the Trust by the Transferor of a
security interest in such Receivables. The Transferor will file appropriate UCC
financing statements to evidence this sale and perfect the Trust's right, title
and interest in such Receivables. Nevertheless, a tax or government lien or
other nonconsensual lien on property of the Transferor arising before a
receivable is transferred to the Trust may have priority over the Trust's
ownership or security interest in such Receivable. If the Transferor were to
become a debtor in a bankruptcy case and a bankruptcy trustee (including the
transferor as debtor in possession) or a creditor of the Transferor were to take
the position that the transfer of the Receivables from the Transferor to the
trust should be characterized as a pledge of such Receivables, then delays in
distributions on the Certificates and possible reductions in such distributions
could result. See "Certain Legal Aspects of the Receivables--Certain Matters
Relating to Insolvency."
ABILITY TO CHANGE TERMS OF THE RECEIVABLES; DECREASE IN FINANCE
CHARGES. Pursuant to the Receivables Transfer Agreements, the Account Owners
are not transferring to the Transferor and, therefore, the Transferor is not and
cannot transfer 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 finance charges and the other fees and charges which will be
applicable from time to time on the Accounts, to alter the minimum monthly
payment required under the Accounts and to change various other terms of their
respective agreements with cardholders with respect to the Accounts. A decrease
in the finance charges and the other fees and charges assessed on the Accounts
would decrease the effective yield on the Accounts and could result in the
occurrence of a Pay Out Event or Reinvestment Event for one or more Series and
commencement of the Rapid Amortization Period or Rapid Accumulation Period for
each such Series. Under the Receivables Transfer Agreement, each Account Owner
will agree that, unless required by law or as is otherwise necessary, in its
sole discretion, to maintain its lending business on a competitive basis based
on a good faith assessment by such Account Owner of the nature of its
competition in the lending business, it will not reduce the annual percentage
rate at which finance charges are assessed on the
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Receivables or the other fees and charges assessed on any of the Accounts owned
by it, if, as a result of such reduction, either (i) such Account Owner's
reasonable expectation is that such reduction will cause a Pay Out Event or
Reinvestment Event to occur, or (ii) such reduction is not also applied to any
comparable segments of consumer revolving credit card accounts owned by such
Account Owner which have character-
istics the same as, or substantially similar to, such Accounts. Each Account
Owner also covenants that it will change the terms relating to any of the
accounts owned by it only if the change is made applicable to the comparable
segment of the consumer revolving credit card accounts owned by such Account
Owner with characteristics the same as or substantially similar to such
Accounts, subject to compliance with all requirements of law. In servicing the
Accounts, the Servicer will be required to exercise the same care and apply the
same policies that it exercises in handling similar matters for its own
comparable accounts. Except as set forth above, neither the Pooling and
Servicing Agreement nor any Receivables Transfer Agreement contains any
restrictions on the ability of an Account Owner to change the terms of the
Accounts or the Receivables. See "The Pooling and Servicing Agreement
Generally--Representations, Warranties and Covenants." There can be no assurance
that changes in applicable law, changes in the marketplace or prudent business
practice might not result in a determination by an Account Owner to decrease
finance charges or other fees and charges for existing accounts, or take actions
which would otherwise change the terms of the Accounts. In addition, there can
be no assurance that a change made in the terms of the Accounts would not result
in the downgrade of the rating of the Certificates.
EFFECTS OF CONSUMER PROTECTION LAWS ON CERTIFICATEHOLDERS. The Accounts and
the Receivables are subject to numerous federal and state consumer protection
laws and regulations that impose requirements on the making 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 or fee
caps on credit cards), may adversely affect the Servicer's ability to collect on
the Receivables or maintain previous levels of finance charges, annual
cardholder fees and other fees, and failure by the Servicer to comply with such
requirements also could adversely affect the Servicer's ability to collect on
the Receivables. Pursuant to the Pooling and Servicing Agreement, the Transferor
will covenant to accept the transfer of all Receivables in an Account upon the
breach of certain representations and warranties relating to requirements of law
applicable to the Account Owner, if, as a result of such breach, any Receivable
in such Account becomes a Defaulted Receivable or the Trust's rights in, to or
under such Receivables are impaired or the proceeds thereof are not available to
the Trust free and clear of any lien ( other than those permitted by the Pooling
and Servicing Agreement and subject to certain cure periods). The Transferor
also will make certain other representations and warranties relating to the
validity and enforceability of the Accounts and the Receivables. The Account
Owners will make similar covenants and representations and warranties in the
respective Receivables Transfer Agreements. However, the Trustee will not make
any examination of the Receivables or the records relating thereto for the
purpose of establishing the presence or absence of defects, compliance with such
representations and warranties, or for any other purpose. The sole remedy if any
such representation or warranty is breached and such breach continues beyond the
applicable cure period, if any, is that the Transferor will generally be
obligated to accept the transfer of all Receivables in the Account affected
thereby (for transfer to the applicable Account Owner under its Receivables
Transfer Agreement). In addition, in the event of a breach of certain
representations and warranties, the Servicer may be obligated to accept the
reassignment and transfer of the Receivables transferred by it to the Trust,
which reassignment will constitute the sole remedy available to
Certificateholders with respect to any such breach. See "The Pooling and
Servicing Agreement Generally--Representations, Warranties and 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 the Certificateholders in the Receivables, if such laws
result in any Receivables being written off as uncollectible. See "The Pooling
and Servicing Agreement Generally--Defaulted Receivables; Rebates and Fraudulent
Charges."
COMPETITION IN THE BANK CREDIT CARD INDUSTRY. The bank credit card industry
is highly competitive. There is increased competitive use of advertising, target
marketing and pricing competition in interest
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rates and annual cardholder fees as both traditional and new credit card issuers
seek to expand or to enter the market. As a result of this competition, the
industry is undergoing significant consolidation. This consolidation may have
the effect of making some of the largest credit card issuers more cost
efficient. In addition, the competition for high credit quality individuals
results in a significant number of solicitations for a finite number of
prospects. The use of introductory or promotional rates has led to an increased
number of individuals shopping among credit cards and, therefore, a lowered
loyalty to any one credit card. The Account Owners' ability to compete in the
credit card industry will affect their ability 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 a Rapid Amortization Period or
Rapid Accumulation Period would commence. See "The Banks' Credit Card
Activities--Competition."
TIMING OF PRINCIPAL PAYMENTS OTHER THAN AT EXPECTED MATURITY. The
Receivables in the Trust may be paid at any time and there is no assurance that
there will be additional Receivables created in the Accounts the Receivables of
which are included in the Trust or that any particular pattern of cardholder
repayments will occur. The continuation of the Revolving Period of a Series will
be dependent upon the continued generation of new Receivables for the Trust. The
Pooling and Servicing Agreement provides that the Transferor will be required
and the Receivables Transfer Agreements provide that the applicable Account
Owner 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 Transferor Amount or the amount of the Principal Receivables is not
maintained at a certain minimum amount. If Additional Accounts are not
designated by the Transferor and the Account Owners when required, a Pay Out
Event or Reinvestment Event for one or more Series may occur and result in the
commencement of a Rapid Amortization Period or Rapid Accumulation Period for
such Series. See "The Pooling and Servicing Agreement Generally--Pay Out Events
and Reinvestment Events" herein and "Description of the Certificates--Pay Out
Events and Reinvestment Events" in the Prospectus Supplement for a discussion of
other events which might lead to the commencement of the Rapid Amortization
Period or Rapid Accumulation Period for a Series. If the rate of reborrowing by
credit card holders declines significantly, resulting in a significant decline
in the amount of Receivables generated in the Accounts, and the Transferor does
not designate sufficient Additional Accounts, a Pay Out Event or Reinvestment
Event for one or more Series could result causing the commencement of the Rapid
Amortization Period or Rapid Accumulation Period for each such Series. In
addition, increased convenience use, where cardholders pay their Account
balances in full on or prior to the due date and thus avoid all finance charges
on purchases, would decrease the effective yield on the Accounts, and could
cause the commencement of the Rapid Amortization Period or Rapid Accumulation
Period for one or more Series, as well as decreased protection to holders of
Certificates against defaults under the Accounts. Convenience use is more common
among cardholders who are not assessed any annual cardholder fee than among
those who pay such fees, and a substantial majority of the cardholders on the
Accounts are not charged an annual cardholder fee. A decrease in the rate of
payment by cardholders or a decline in reborrowing could delay the return of
principal to the Certificateholders during the Amortization Periods for each
Series. See "Receivable Yield Considerations" in the Prospectus Supplement. A
significant portion of the Receivables which will be transferred to the Trust
exist or will arise in Accounts resulting from two large affinity and co-branded
credit card programs.While the Banks have enjoyed a long relationship with such
groups, the possibility exists that the groups could move their endorsement to
another institution. In such case, the Banks would expect to reissue credit
cards to the cardholders; however, it is not possible to predict how many of the
Accounts would be closed. This could affect the amount of Receivables in the
Trust and, if the Transferor failed to designate Additional Accounts when
required, could result in the occurrence of a Pay Out Event or Reinvestment
Event for one or more Series.
PROPOSED LEGISLATION--LIMITATION ON FINANCE CHARGES. 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
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could be to reduce the yield on the Accounts. If such yield is reduced, a Pay
Out Event or Reinvestment Event could occur, and a Rapid Amortization Period or
Rapid Accumulation Period may commence. See "The Pooling and Servicing Agreement
Generally--Pay Out Events and Reinvestment Events."
RISKS PRESENTED BY SOCIAL, GEOGRAPHIC AND ECONOMIC FACTORS. Changes in card
use, payment patterns and the rate of defaults by cardholders may result from a
variety of social, economic and geographic factors. Social factors include
changes in consumer confidence levels and attitudes regarding incurring debt,
the public's perception of the use of credit cards, and changing attitudes
regarding the stigma of personal bankruptcy. Economic factors include the rate
of inflation, the unemployment rates and relative interest rates offered for
various types of loans. Adverse changes in economic conditions in any states
where cardholders are located could have a direct impact on the timing and
amount of payments on the Certificates of any Series. See "The Banks' Credit
Card Activities" herein and in the Prospectus Supplement. For a detailed
discussion of geographic factors, see "Risk Factors--Risks Associated with
Geographic Concentration" herein. Neither the Account Owners nor the Transferor
are able to determine and have no basis to predict whether, or to what extent,
economic, social or geographic factors will affect
future card use or repayment patterns.
EFFECT OF ADDITION OF TRUST ASSETS ON CREDIT QUALITY. The Transferor and
the Account Owners expect, and in some cases will be obligated (subject to
certain exceptions) to designate Additional Accounts, the Receivables of which
will be conveyed to the Trust. Such Additional Accounts may include accounts
originated using criteria different from those that were applied to the Accounts
designated on an earlier date, because such accounts were originated at a
different date or were acquired from another institution. Consequently, there
can be no assurance that Additional Accounts designated in the future will be of
the same credit quality as Accounts designated on an earlier date. In addition,
the Pooling and Servicing Agreement provides that the Transferor may add
Participation Interests to the Trust. The designation of Additional Accounts and
Participation Interests will be subject to the satisfaction of certain
conditions described herein under "The Pooling and Servicing Agreement
Generally--Addition of Accounts or Participation Interests."
BASIS RISK. The Accounts generally have finance charges set at a variable
rate above the prime rate or other specified index. Any Class of Certificates
offered hereby may bear interest at a fixed-rate or 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.
IMPACT OF DISCOUNT OPTION; SLOWER PAYMENT RATE. Pursuant to the Pooling and
Servicing Agreement, the Transferor will designate a percentage of collections
of Principal Receivables to be treated as collections of Finance Charge
Receivables. Such designation will result in an increase in the amount of
collections of Finance Charge Receivables and a lower amount of collections in
respect of Principal Receivables than otherwise would occur. The Transferor may,
without notice to or the consent of Certificateholders, increase, reduce or
eliminate the percentage of collections of Principal Receivables treated as
collections of Finance Charge Receivables. See "The Pooling and Servicing
Agreement Generally--Discount Option." Any such change that raises the Discount
Percentage would result in an increase in the amount of collections of Finance
Charge Receivables and a lower payment rate of collections of Principal
Receivables and will reduce the Transferor Amount (which is calculated after
applying the Discount Percentage to the aggregate amount of Principal
Receivables), thereby making certain Pay Out Events or Reinvestment Events based
in part on the amount of collections of Finance Charge Receivables less likely
to occur and increasing the likelihood that the Transferor will be required to
designate Additional Accounts. Any such change that reduces or eliminates the
Discount Percentage will have the opposite effect.
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LIMITED NATURE OF RATING. Any rating assigned to the Certificates of a
Series or a Class of a Series by a Rating Agency will reflect such Rating
Agency's assessment solely of the likelihood that Certificateholders will
receive the payments of interest and principal required to be made under the
Pooling and Servicing Agreement and will be based primarily on the value of the
Receivables in the Trust and the availability of any Series Enhancement with
respect to such Series or Class of such Series. 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 Stated 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 Series Enhancement for any such Series or Class may be limited and may be
subject to reduction from time to time as described in the related Prospectus
Supplement. The rating will not be a recommendation to purchase, hold or sell
Certificates of such Series or Class of such Series, and such rating will not
comment as to the marketability of such Certificates, any market price or
suitability for a particular investor.
REDUCTION OR WITHDRAWAL OF RATINGS. 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 based upon the risk factors described
herein or, if in such Rating Agency's judgment, any other circumstances or
combination thereof so warrant. Any such reduction or withdrawal of a rating, if
it were to occur could adversely affect the market value of the Certificates.
OPTIONAL REPURCHASE. The terms of any Series of Certificates may provide
that, at such time as the amount of the Certificates has been reduced to a
stated percentage of the original Investor Amount of such Series, the Transferor
will be entitled to repurchase the remaining Certificates of such Series. The
amount of the Certificates of a Series which may remain outstanding at the time
of a repurchase will be specified on a Series by Series basis and, with respect
to any given Series, subject to the specific terms of such Series, it is
possible that the repurchase option could be exercised when 10% or more of the
principal amount of the Certificates of such Series remained outstanding. Such
repurchase may result in an early return of the Certificateholder's investment.
It is not expected that any premium will be paid to the Certificateholders in
the event of the exercise of the repurchase option and there can be no assurance
that a Certificateholder will be able to invest such early repayment amount at a
similar rate of return.
ISSUANCE OF NEW SERIES; EFFECT ON TIMING OR AMOUNT OF PAYMENTS TO
CERTIFICATEHOLDERS AND VOTING RIGHTS. The Trust, as a master trust, is expected
to issue an initial Series of Certificates and to issue additional Series from
time to time thereafter. While the Principal Terms of any Series will be
specified in a Series Supplement, the provisions of a Series Supplement and,
therefore, the terms of any additional Series, will not be subject to the prior
review or consent of holders of the Certificates of any previously issued
Series. Such Principal Terms may include methods for determining applicable
investor percentages and allocating collections, provisions creating different
or additional security or other Series Enhancement, provisions subordinating
such Series to another Series or other Series (if the Series Supplement relating
to such Series so permits) to such Series, and any other amendment or supplement
to the Pooling and Servicing Agreement which is made applicable only to such
Series. Such Principal Terms, including any subordination or other relationship
of a Series to other subsequently or previously issued Series, will be described
in the Prospectus Supplement relating to such Series. The issuance of any
additional Series is subject to the Rating Agency Condition and, if any Series
outstanding was characterized as debt at the time of its issuance, the delivery
of a Tax Opinion. There can be no assurance, however, that the Principal Terms
of any Series issued from time to time might not have an impact on the timing
and amount of payments received by a Certificateholder of any other Series. No
Series Supplement relating to a Series may change the terms of the Pooling and
Servicing Agreement applicable to the Certificates of any other Series, whether
such other Series have been issued before or after the Series to which such
Series Supplement
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relates. However, the Certificateholders of any Series issued in addition to
outstanding Series will have voting rights which, with respect to certain votes,
waivers or consents under the Pooling and Servicing Agreement, will reduce the
percentage interest represented by the Certificates of the outstanding Series of
the aggregate unpaid principal amount of the Certificates of all Series that are
entitled to vote. Such votes, waivers and consents include directing the
appointment of a successor Servicer following a Servicer Default, amending the
Pooling and Servicing Agreement and directing a reassignment of the entire
portfolio of Accounts. See "Description of the Certificates--New Issuances."
RISKS ASSOCIATED WITH GEOGRAPHIC CONCENTRATION. If the Trust contains a
high concentration of Receivables relating to cardholders located within a
single state or region in the United States, events in that state or region may
have a magnified effect on the Trust due to such concentration. The Prospectus
Supplement relating to a Series to be offered thereby and hereby will set forth
a then-current detailed geographic breakdown of the number of Receivables and
the amount of Receivables, each relating to cardholders with addresses in each
applicable state containing a concentration of cardholders. See "The
Receivables--Geographic Distribution of Accounts and Receivables" in the related
Prospectus Supplement. The Transferor, however, is unable to determine and has
no basis to predict, with respect to any state or region, whether any such
events have occurred or may occur, or to what extent such events may affect the
Receivables or the payment of the Certificates, or what effect a change in the
geographic distribution of the Receivables in the future may have on the
Certificates.
ALLOCATIONS OF TRUST ASSETS AMONG ONE OR MORE SERIES OR GROUPS. To the
extent provided in any Series 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
is satisfied for such allocation and the Servicer shall have delivered an
officer's certificate to the Trustee to the effect that the Servicer reasonably
believes that such allocation will not have an Adverse Effect.
USE OF PROCEEDS
The net proceeds from the sale of each Series offered hereby and by the
related Prospectus Supplement will be paid to the Transferor. Unless otherwise
specified in the related Prospectus Supplement, the Transferor will use such
proceeds to purchase additional Receivables and repay loans made by Commercial
Credit Company or its affiliates.
THE TRUST
The Trust will be formed, in accordance with the laws of the State of
Delaware, pursuant to the Pooling and Servicing Agreement. The Trust will not
engage in any activity other than acquiring and holding the Receivables and any
other assets of the Trust and proceeds therefrom, issuing Certificates with
respect to each Series issued by the Trust, the Transferor Certificate and any
Supplemental Certificates and making payments thereon, obtaining Series
Enhancement applicable to any Series and activities related thereto. As a
consequence, the Trust does not have and is not expected to have any source of
capital resources other than the Trust Assets.
The Transferor will convey to the Trust, without recourse, its interest in
all Receivables existing on a date designated prior to the issuance of the first
Series of Certificates (the "Initial Cut-Off Date") in certain VISA and
MasterCard consumer revolving credit card Accounts (the "Initial Accounts") that
meet the criteria provided in the Pooling and Servicing Agreement for an
Eligible Account as of the Initial Cut-Off Date, and will convey to the Trust,
without recourse, its interest in all Receivables arising under such Initial
Accounts thereafter, in exchange for the net cash proceeds from the sale of such
first Series of Certificates plus the Transferor Certificate representing the
Transferor's Interest and other certificated or uncertificated interests in the
Trust Assets. 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 interest in all Receivables existing in designated accounts
("Additional Accounts"), if any, at the close of business on the
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applicable cut-off date and Receivables thereafter arising in such Additional
Accounts, and the Transferor may, from time to time, convey Participation
Interests to the Trust. The Trust Assets consist of the Receivables arising
under selected credit card accounts or other consumer revolving credit card
accounts originated by Travelers Bank & Trust, fsb, The Travelers Bank USA or
affiliates of the Banks, all monies due or to become due and all amounts
received with respect thereto, all proceeds of the Receivables, proceeds of
credit insurance policies relating to the Receivables, all monies and other
property constituting Eligible Investments, if any, on deposit in, credited to
or held in certain accounts of the Trust and the benefits of any type of Series
Enhancement. The Receivables, the proceeds thereof and the Trust Assets do not,
however, include amounts recovered ("Recoveries") from Accounts in which the
Receivables have
been written off as uncollectable. The Trust Assets may also include
Participation Interests. Under the Receivables Transfer Agreements, the
Transferor will have the right (subject to certain limitations and restrictions)
and, in some circumstances, under the Pooling and Servicing Agreement will be
obligated to require the Account Owners to designate Additional Accounts to be
included as Accounts and the Transferor will convey to the Trust, pursuant to
the Pooling and Servicing Agreement, its interest in all Receivables of such
Additional Accounts. See "The Pooling and Servicing Agreement Generally--
Addition of Accounts or Participation Interests." In addition, the Transferor
may, but is not obligated to, designate, from time to time, Participation
Interests or Receivables to be removed from the Trust. See "The Pooling and
Servicing Agreement Generally--Removal of Accounts."
THE BANKS' CREDIT CARD ACTIVITIES
GENERAL
The Receivables which the Banks have conveyed or will convey to the
Transferor pursuant to the respective Receivables Transfer Agreements have been
or will be, except as otherwise described in the Prospectus Supplement,
generated from transactions made by holders of selected VISA and MasterCard
credit card accounts, including regular and premium accounts, from the Travelers
Consumer Credit Card Portfolio. Both premium and regular accounts undergo the
same credit analysis, but premium accounts have higher initial credit limits
because of the higher incomes of the cardholders. In addition, premium accounts
generally offer a wider variety of services to the cardholders. Servicing of the
Travelers Consumer Credit Card Portfolio is performed primarily by the Banks;
however, certain data processing and administrative functions associated with
the servicing of the Travelers Consumer Credit Card Portfolio are currently
performed on behalf of the Banks by First Data Resources, Inc. ("FDR"). See
"Description of FDR." If FDR were to fail or become insolvent, delays in
processing and recovery of information with respect to charges incurred by
cardholders could occur, and the replacement of the services that FDR currently
provides to the Banks could be time consuming. As a result, delays in payments
to Certificateholders of any Series outstanding at such time could occur.
Set forth below is certain information relating to the activities of the
Banks. The Prospectus Supplement may amend, modify or supplement such
information. To the extent the Trust assets include any Participation Interests
or Receivables other than those of the type described herein, the Prospectus
Supplement will describe the nature and characteristics of such Participation
Interests or Receivables.
ACQUISITION AND USE OF CREDIT CARDS
Substantially all of the Banks' new accounts are generated through direct
mail and telemarketing solicitations of potential cardholders. The Banks
marketing efforts are directed towards affinity groups (such as nationwide
professional associations, fraternal organizations and affiliates of Travelers)
and individuals. The Banks utilize a number of methods to identify potential
cardholders who meet their respective credit and demographic criteria, including
acquiring lists of potential cardholders from credit bureaus and other various
sources.
Since 1995, the criteria applied by the Banks to evaluate potential
cardholders have included credit scoring using a custom model developed by the
Fair, Isaac's Companies, an independent firm experienced in developing credit
scoring models. Credit scoring evaluates a potential cardholder's credit profile
to
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arrive at an estimate of the associated credit risk. Credit scoring models are
developed by statistically evaluating common characteristics and their
correlation with credit risk. Prior to 1995, the Banks used generic scorecards
to evaluate applicant credit risk.
Potential cardholders must meet minimum credit and income level standards
established by the Banks to receive a specific credit limit. Cardholders not
meeting the minimum standards for the initial product offer are offered a
reduced credit limit for which they qualify or their application is declined.
Cardholders may request to have their credit line increased upon completion of a
full application. After a review of the full application and credit bureau
report, the Banks decide whether to extend additional credit. Also, the Banks
periodically initiate credit line increases for cardholders meeting minimum
standards for usage and payment history established by the Banks.
Accounts are opened with an initial term of three years. At the anniversary
date, accounts which meet certain criteria for usage and payment history are
reissued for three year terms.
Each cardholder is subject to an agreement governing the terms and
conditions of the related VISA or MasterCard account. Pursuant to each such
agreement, the Bank that owns the Account reserves the right, upon advance
notice to the cardholders to change or terminate any terms, conditions, services
or features of its VISA and MasterCard accounts at any time, including
increasing or decreasing finance charges, other fees and charges or minimum
payment terms. The agreement with each cardholder provides that the relevant
Bank may apply such changes, when applicable, to current outstanding balances as
well as to future transactions. However, the laws of the state in which
particular cardholders reside may impact the ability of the relevant Bank to
apply changes. Under state law certain fees and charges may be limited. See
"Risk Factors--Effect of Consumer Protection Laws on Certificateholders" and
"Certain Legal Aspects of the Receivables--Consumer Protection Laws."
A cardholder may use the credit card for either purchases, cash advances or
to transfer balances from other credit card accounts. Cardholders make purchases
when using the credit card to buy goods or services. A cash advance is made when
a credit card is used to obtain cash from a financial institution or an
automated teller machine or when the cardholder uses special drafts issued by
the relevant Bank to draw against the cardholder's credit line. The Banks do not
generally limit the amount of credit available for cash advances on new accounts
other than the total credit line available for such account.
When a cardholder uses the credit card issued by a bank under contract with
VISA or MasterCard (a "member bank"), the seller of goods or services or the
provider of cash advances generally sells the resulting receivable to a merchant
bank, which in turn sells the receivable (usually indirectly, through a clearing
corporation and its agent bank) to the member bank for its face amount less
interchange and other fees. The member bank is usually required by its contracts
with VISA and MasterCard to purchase and pay daily for all receivables generated
by use of credit cards issued by the member bank. If the member bank were to
fail to perform such obligations, VISA or MasterCard would have the right to
cancel the credit cards issued by the member bank.
BILLING AND PAYMENTS
Each Bank, using FDR as its service bureau, generates and mails to
cardholders monthly statements summarizing account activity. Cardholders receive
a grace period on purchases of 20 to 25 days. Cardholders must make a minimum
monthly payment equal to 1/50th of their total account balance (which includes
their principal balance and finance and other charges). If such amount is less
than a stated minimum monthly payment (generally $15), the stated minimum
monthly payment is due.
All fees, charges and credit insurance premiums assessed by the Banks are
automatically charged to an account and are included in the account balance at
the end of each billing cycle. The finance charges assessed by the Banks are
calculated by multiplying the average daily balances of cash advances and
previously billed unpaid purchases in an account by the applicable periodic
rate. Finance charges are not assessed in most circumstances on purchases if all
balances shown in the billing statement are paid by the
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due date. Under certain conditions related to customer performance, the Banks
may immediately convert the Annual Percentage Rate applicable to existing and
future balances to a higher rate.
The Banks primarily offer cards to customers without an annual fee. The
Banks do, however, assess miscellaneous transaction fees, including cash advance
and draft fees, late and over limit charges, and returned check, returned draft,
and draft stop payment charges. Such miscellaneous fees are not expected to
constitute a material portion of Finance Charge Receivables.
Certain data processing and administrative functions associated with the
servicing of the Travelers Consumer Credit Card Portfolio are currently being
performed on behalf of the Banks by FDR. FDR is located in Omaha, Nebraska and
provides computer data processing services primarily to the bankcard industry.
FDR is a subsidiary of First Data Corp.
DELINQUENCIES
Each account is billed monthly on or about the same day of the month. An
account is "contractually delinquent" if the minimum payment indicated on the
cardholder's statement is not received by the due date. For purposes of
determining the delinquency of an account, the period from one monthly billing
statement to the next is considered a period of 30 days, regardless of the
actual number of days elapsed. Efforts to collect contractually delinquent
credit card receivables currently are made by the personnel of Commercial Credit
Corporation, on behalf of the Banks, who are dedicated to the servicing of the
portfolios of the Banks. Collection activities include statement messages,
formal collection letters and telephone calls. Collection personnel initiate
telephone contact with cardholders as early as 5 days contractually delinquent.
The intensity at which collection activity is pursued depends on the risk the
account presents to the Bank that owns such account which is determined by
credit bureau scoring, behavioral scoring and adaptive control techniques. In
the event that initial telephone contact fails to resolve the delinquency, the
Bank that owns such account continues to contact the cardholder by telephone and
by mail. Although such arrangements are made infrequently, the Banks may also
enter into arrangements with cardholders to extend or otherwise change payment
schedules based on demonstrated financial need. Delinquency levels are regularly
monitored by management of the Banks. Accounts are charged off in the month
following the date in which they bill 180 days contractually delinquent. Non-
bankrupt accounts are scored using a custom recovery score. Accounts with a low
collectibility score are assigned to outside collection agencies within 30 days.
Each of the Banks may continue to employ its standard collection procedures for
up to one year for those accounts which do not receive a low collectibility
score. The Banks charge-off accounts within 30 days after receipt of official
notice that the customer has died (a death certificate) or of discharge in
bankruptcy, and within 90 days after receipt of any notice of fraudulent charges
within such account. The credit evaluation, servicing and charge-off policies
and collection practices of the Banks may change from time to time in accordance
with each Bank's business judgment and applicable laws and regulations.
Information with respect to the delinquency and loss experience of the
consumer credit card portfolio of the Account Owners is contained in the
Prospectus Supplement. Such information sets forth delinquencies grouped by the
number of days Receivables are delinquent and the percentage of the portfolio
which is delinquent. The loss experience information will show the Receivables
outstanding, the charge-offs in dollars and as a percentage of the Receivables
outstanding. In addition, the Prospectus Supplement will include information on
the composition of the Trust Portfolio by period of delinquency.
INTERCHANGE
Creditors participating in VISA and MasterCard systems receive certain fees
("Interchange") as partial compensation for processing transactions, 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
the 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 approximates 1.4% of the transaction
amount. VISA and MasterCard may from time to time change the amount of
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Interchange reimbursed to banks issuing their credit cards. The Finance Charge
Receivables transferred to the Trust do not and are currently not anticipated to
include Interchange.
COMPETITION
The bank credit card industry is highly competitive. There is increased
competitive use of advertising, target marketing and pricing competition in
interest rates and annual cardholder fees as both traditional and new credit
card issuers seek to expand or to enter the market. The Banks issue VISA and
MasterCard credit cards to customers nationwide competing with certain money
center banks and other large nationwide issuers, as well as with regional and
local banks, savings and loan associations, and other depository institutions,
many of whom have sizable branch systems through which credit cards are marketed
to the institutions' customer bases. Many of these competitors have larger
credit card portfolios than either Bank. Certain major credit card issuers are
more aggressive than the Banks regarding the solicitation of new accounts
through direct mail and telemarketing. The Banks have primarily responded to the
increased competition by marketing cards to affinity groups (including
affiliates of Travelers) and by offering promotional rates on new accounts and
on balance transfers from existing accounts.
The Trust will be dependent upon the Banks' continued ability to generate
new Receivables. The Banks' ability to compete in the credit card industry will
directly affect its ability to generate new Receivables. If the rate at which
new Receivables are generated declines significantly, a Pay Out or Reinvestment
Event with respect to a Series or all Series could occur and the Rapid
Amortization Period or Rapid Accumulation Period could commence.
THE BANKS
Each of the Banks is a wholly-owned subsidiary of Commercial Credit Company
("Commercial Credit"), which is a wholly-owned subsidiary of Travelers Group
Inc. ("Travelers"). Travelers Bank & Trust, fsb is a federally-chartered savings
bank granted a charter as such on November 25, 1997 by conversion of The
Travelers Bank, a Delaware state-chartered bank whose predecessor had been
initially formed in February 1963. The Travelers Bank USA is a Delaware
state-chartered bank formed in September 1989.
The Travelers Bank USA, a credit card bank, must undergo periodic
examination, by the Delaware State Bank Commissioner and the FDIC. Travelers
Bank & Trust, fsb is subject to regulation and examination by the Office of
Thrift Supervision. The Banks are subject to regulations relating to
capitalization, leverage, reporting, dividends, permitted assets and liability
products, and the Banks are also subject to the Community Reinvestment Act,
which assesses the records of the Banks in helping to meet the credit needs in
the delineated community of the Banks including low and moderate income
neighborhoods, consistent with a safe and sound banking operation. In addition,
a number of federal and state consumer protection laws and regulations are
applicable to the Banks including the Truth in Lending Act, which requires
consumer disclosure of the cost of credit and governs billing dispute
resolution, the Equal Credit Opportunity Act, which prohibits discrimination in
any aspect of a credit transaction based on race, color, national origin, sex,
marital status, age, income from public assistance programs and exercise of
rights under the Consumer Protection Act and the Fair Credit Reporting Act,
which is aimed at ensuring the accuracy and fairness of the mechanism by which
consumer credit and other information on consumers is assembled and evaluated.
Each Bank's deposits are insured by the FDIC.
The principal executive office of Travelers Bank & Trust, fsb is located at
Christiana Corporate Center, 100 Commerce Drive, Newark, Delaware 19713
(telephone: (302) 454-5500). The principal executive office of the Travelers
Bank USA is located at Christiana Corporate Center, 100 Commerce Drive, Newark,
Delaware 19713 (telephone: (302) 454-5500).
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THE TRANSFEROR
CC Credit Card Corporation is a Delaware corporation incorporated on
November 7, 1997. Its principal executive office is located at 100 Commerce
Drive, Suite No. 300B, Newark, Delaware 19713 and its telephone number is (302)
451-6456. The Transferor is a subsidiary of Commercial Credit Company. The
Prospectus Supplement for each Series will provide additional information
relating to the Transferor.
THE ACCOUNTS
The Receivables will arise in certain credit card accounts designated by the
Banks pursuant to the respective Receivables Transfer Agreements (the "Trust
Portfolio") and selected from the total portfolio of VISA and MasterCard
accounts of Travelers Bank & Trust, fsb and The Travelers Bank USA (the
"Travelers Consumer Credit Card Portfolio"). An account in the Travelers
Consumer Credit Card Portfolio must be an Eligible Account to be selected for
inclusion in the Trust Portfolio.
For information concerning the origination of accounts in the Travelers
Consumer Credit Card Portfolio see "The Banks' Credit Card Activities." For
Information concerning the designation of Accounts and the representations and
warranties made by the Account Owners, see "The Receivables Transfer
Agreements." Under the Receivables Transfer Agreements, the Account Owners have
broad discretion in selecting accounts to be designated as accounts from which
Receivables will be transferred. The primary restriction is that the accounts
qualify as "Eligible Accounts." See "The Pooling and Servicing Agreement
Generally--Representations, Warranties and Covenants" for a description of
Eligible Accounts.
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 account balances of the Accounts, 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. The Prospectus Supplement will also include information concerning
the Travelers Consumer Credit Card Portfolio including delinquency and loss
experience for the Travelers Consumer Credit Card Portfolio.
DESCRIPTION OF THE CERTIFICATES
The Certificates will be issued in Series pursuant to the Pooling and
Servicing Agreement (as supplemented by a Series Supplement relating to such
Series) entered into among CC Credit Card Corporation, as Transferor, Travelers
Bank & Trust, fsb, as Servicer of the Accounts and the Receivables, and The Bank
of New York, as Trustee for the Certificateholders of each Series. Pursuant to
the Pooling and Servicing Agreement, the Transferor may execute further Series
Supplements among the Transferor, the Servicer and the Trustee in order to issue
additional Series. See "--New Issuances." The Trustee will provide a copy of the
Pooling and Servicing Agreement (without exhibits or schedules), including any
Series Supplements, to Certificateholders of any Series without charge upon
written request. A copy of the form of Pooling and Servicing Agreement has been
filed with the Commission as an exhibit to the Registration Statement of which
this Prospectus forms a part.
The following summaries describe certain provisions common to each Series.
Information specific to a Series will be contained in the related Prospectus
Supplement. The following summaries together with information included elsewhere
in this Prospectus and the information with respect to a specific Series
contained in the related Prospectus Supplement describes the material terms of
the Certificates. Such summaries do not purport to be complete and are subject
to, and are qualified in their entirety by reference to, the provisions of the
Pooling and Servicing Agreement and the Series Supplement relating to each
Series. When particular provisions or terms used in the Pooling and Servicing
Agreement or any Series Supplement are referred to herein, such provisions or
terms shall be as specified in the Pooling and Servicing Agreement or Series
Supplement.
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GENERAL
The Pooling and Servicing Agreement does not limit the amount of
Certificates that can be issued thereunder and provides that any Series may be
issued thereunder up to the aggregate principal amount specified in the related
Series Supplement that may be entered into among the Transferor, the Servicer
and the Trustee. Each Series will consist of one or more Classes, one or more of
which may be floating-rate Certificates or fixed-rate Certificates or other type
of Certificates as specified in the related Prospectus Supplement. A Series may
include a Class or Classes that are subordinated in right of payment of
principal and/or interest to another Class or other Classes of such Series or
any other Series. If so specified in a related Prospectus Supplement, such
subordinated Class or Classes may be offered hereby and by the related
Prospectus Supplement or may be retained by the Transferor or an affiliate of
the Transferor.
The Certificates of any Series will generally represent the right to
receive, to the extent of amounts then payable on the applicable Series of
Certificates, from the Trust Assets, a floating percentage (in the case of
Principal Receivables during the Revolving Period of a Series and Finance Charge
Receivables and Defaulted Receivables during the Revolving Period and the
Amortization Period of a Series) or a percentage calculated as a fraction with a
fixed numerator, subject to certain exceptions (in the case of Principal
Receivables during any Amortization Period for a Series) (each, the "Series
Percentage") of all cardholder payments on the Receivables.
The Transferor holds the interest in the Principal Receivables not
represented by the Certificates of all outstanding Series. The Transferor holds
an undivided interest in the Trust (the "Transferor's Interest"), including the
right to a percentage (the "Transferor Percentage") of all cardholder payments
on the Receivables.
During the Revolving Period for any Series, the Invested Amount for such
Series will generally remain constant except in certain limited circumstances
(such as a Series with a Pre-Funding Account) as specified in the related
Prospectus Supplement. See "The Pooling and Servicing Agreement
Generally--Defaulted Receivables; Rebates and Fraudulent Charges." The amount of
Principal Receivables, however, will vary each day as new Principal Receivables
are created and others are paid. The Transferor Amount will fluctuate daily,
therefore, to reflect the changes in the amount of the Principal Receivables. In
addition, the Transferor Amount will be reduced by the effect of the Discount
Percentage in effect from time to time. When a Series is amortizing, the
Invested Amount for such Series will generally decline for each Monthly Period
as cardholder payments of Principal Receivables allocated to such Series are
collected and held for distribution to the Certificateholders or deposited in a
Series Account for the benefit of such Series or a Class of such Series for
payment to the applicable Certificateholders when due. As a result, the
Transferor Amount will generally increase each month to reflect the reductions
in the Invested Amount of a Series and will also change to reflect the
variations in the amount of Principal Receivables.
Unless otherwise specified in the related Prospectus Supplement,
Certificates of each Series initially will be represented by certificates
registered in the name of the nominee of DTC (together with any successor
depository selected by the Transferor, the "Depository") except as set forth
below. Unless otherwise specified in the related Prospectus Supplement, with
respect to each Series of Certificates, beneficial interests in the Certificates
will be available for purchase in minimum denominations of $1,000 and integral
multiples of $1,000 in excess thereof in book-entry form only. The Transferor
has been informed by DTC that DTC's nominee will be Cede & Co. ("Cede").
Accordingly, Cede is expected to be the holder of record of each Series of
Certificates. No Certificate Owner acquiring an interest in the Certificates
will be entitled to receive a certificate representing such person's interest in
the Certificates. Unless and until Definitive Certificates are issued for any
Series under the limited circumstances described herein, all references herein
to actions by Certificateholders shall refer to actions taken by DTC upon
instructions from its Participants (as defined below), and all references herein
to distributions, notices, reports and statements to Certificateholders shall
refer to distributions, notices, reports and statements to DTC or Cede, as the
registered holder of the Certificates, as the case may be, for distribution to
Certificate
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Owners in accordance with DTC procedures. See "--Book-Entry Registration" and
"--Definitive Certificates."
If so specified in the Prospectus Supplement relating to a Series,
application will be made to list the Certificates of such Series, or all or a
portion of any Class thereof, on the Luxembourg Stock Exchange or any other
specified exchange.
BOOK-ENTRY REGISTRATION
Unless otherwise specified in the related Prospectus Supplement, with
respect to each Series of Certificates, Certificateholders may hold their
Certificates through DTC (in the United States) or Cedel or Euroclear (in
Europe) if they are participants of such systems.
Cede, as nominee for DTC, will hold the global Certificates. Cedel and
Euroclear will hold omnibus positions on behalf of the Cedel Participants and
the Euroclear Participants, respectively, through customers' securities accounts
in Cedel's and Euroclear's names on the books of their respective depositaries
(collectively, the "Depositaries") which in turn will hold such positions in
customers' securities accounts in the Depositaries' names on the books of DTC.
Unless and until Definitive Certificates are issued, it is anticipated that
the only Certificateholder of the Certificates will be Cede as nominee of DTC.
No Certificate Owner acquiring an interest in Certificates of a Series which
have been issued in book-entry form will be entitled to receive a certificate
representing such person's interest in the Certificates of such Series unless
and until Definitive Certificates are issued under the limited circumstances
described herein. All references herein to actions by Certificateholders of a
Series shall refer (unless Definitive Certificates are so issued with respect to
such Series) to actions taken by DTC, Cedel or Euroclear upon instructions from
DTC Participants, Cedel Participants or Euroclear Participants, respectively,
and all references herein to distributions, notices, reports and statements to
Certificateholders shall refer to distributions, notices, reports and statements
to DTC or Cede, as the registered holder of the Certificates of such Series, as
the case may be, for distribution to Certificate Owners of such Series in
accordance with DTC procedures. See "--Definitive Certificates." Distributions
will be made to DTC in immediately available funds.
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 New York UCC, and a "clearing agency" registered
pursuant to the provisions of Section 17A of the Securities Exchange Act of
1934, as amended. DTC was created to hold securities for its participating
organizations ("Participants") and facilitate the clearance and 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 securities brokers and
dealers (including the Underwriters), banks, trust companies and clearing
corporations and may include certain other organizations. Indirect access to the
DTC system also is available to others ("Indirect Participants") such as banks,
brokers, dealers and trust companies that clear through, or maintain a custodial
relationship with, Participants, either directly or indirectly.
Transfers between DTC Participants will occur in accordance with DTC rules.
Transfers between Cedel Participants and Euroclear Participants will occur in
the ordinary way in accordance with their applicable rules and operating
procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC (other than Cedel Participants and Euroclear Participants), 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 system by its
Depositary; however, such cross-market transactions will require delivery of
instructions to the relevant European international
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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 in Cedel or
Euroclear as a result of a transaction with a DTC Participant will be made
during the subsequent securities settlement processing, dated the business day
following the DTC settlement date, and such credits or any transactions in such
securities settled during such processing will be reported to the relevant Cedel
Participant or Euroclear Participant 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 DTC 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.
Certificate Owners of a Series that are not Participants or Indirect
Participants but desire to purchase, sell or otherwise transfer ownership of, or
other interests in, Certificates of such Series may do so only through
Participants and Indirect Participants. In addition, Certificate Owners of a
Series will receive all distributions of principal of and interest on the
Certificates of such Series from the Paying Agent through the Participants who
in turn will receive them from DTC. Under a book-entry system, Certificate
Owners of a Series may experience some delay in their receipt of payments, since
such payments will be forwarded by the Trustee to Cede, as nominee for DTC. DTC
will forward such payments to its Participants, which thereafter will forward
the payments to Indirect Participants or Certificate Owners of such Series.
Certificate Owners of a Series will not be recognized by the Trustee as
Certificateholders of such Series, as such term is used in the Pooling and
Servicing Agreement, and Certificate Owners of a Series will only be permitted
to exercise the rights of Certificateholders of such Series indirectly through
DTC and its Participants, who in turn will exercise the rights of
Certificateholders of such Series through DTC.
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 of a Series and is
required to receive and transmit distributions of principal of and interest on
the Certificates of such Series. Participants and Indirect Participants with
which Certificate Owners of a Series have accounts with respect to the
Certificates of such Series similarly are required to make book-entry transfers
and receive and transmit such payments on behalf of their respective Certificate
Owners. Accordingly, although Certificate Owners of a Series will not possess
Certificates of such Series, such Certificate Owners will receive payments and
will be able to transfer their interests.
Because DTC may only act on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of a Certificate
Owner of a Series to pledge Certificates to persons or entities that do not
participate in the DTC system, or otherwise take actions in respect of such
Certificates, may be limited due to the lack of a physical certificate for such
Certificates.
DTC has advised the Servicer that it will take any action permitted to be
taken by a Certificateholder of a Series under the Pooling and Servicing
Agreement only at the direction of one or more Participants to whose account
with DTC the Certificates of such Series are credited. Additionally, DTC has
advised the Servicer that it will take such actions with respect to specified
percentages of the applicable Investor Amount only at the direction of and on
behalf of Participants whose holdings include undivided interests that
constitute such specified percentages. DTC may take conflicting actions with
respect to other undivided interests to the extent that such actions are taken
on behalf of Participants whose holdings include such undivided interests.
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Cedel Bank, societe anonyme ("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 28 currencies, including United States dollars. Cedel
provides to its 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 and may include the underwriters of any Series
of Certificates. 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.
The Euroclear System was created in 1968 to hold securities for participants
of the Euroclear System ("Euroclear Participants") and to clear and settle
transactions between Euroclear Participants through simultaneous electronic
book-entry delivery against payment, thereby eliminating the need for physical
movement of certificates and any risk from lack of simultaneous transfers of
securities and cash. Transactions may now be settled in any of 32 currencies,
including United States dollars. The Euroclear System includes various other
services, including securities lending and borrowing and interfaces with
domestic markets in several countries generally similar to the arrangement for
cross-market transfers with DTC described above. The Euroclear System is
operated by Morgan Guaranty Trust Company of New York, Brussels, Belgium office
(the "Euroclear Operator" or "Euroclear"), under contract with Euroclear
Clearance System, S.C., a Belgian cooperative corporation (the "Cooperative").
All operations are conducted by the Euroclear Operator, and all Euroclear
securities clearance accounts and Euroclear cash accounts are accounts with the
Euroclear Operator, not the Cooperative. The Cooperative establishes policy for
the Euroclear System on behalf of Euroclear Participants. Euroclear Participants
include banks (including central banks), securities brokers and dealers and
other professional financial intermediaries and may include the underwriters of
any Series of Certificates. Indirect access to the Euroclear System is also
available to other firms that clear through or maintain a custodial relationship
with a Euroclear Participant, either directly or indirectly.
The Euroclear Operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such, it is
regulated and examined by the Board of Governors of the Federal Reserve System
and the New York State Banking Department, as well as the Belgian Banking
Commission.
Securities clearance accounts and cash accounts with the Euroclear Operator
are governed by the Terms and Conditions Governing Use of Euroclear and the
related Operating Procedures of the Euroclear System and applicable Belgian law
(collectively, the "Terms and Conditions"). The Terms and Conditions govern
transfers of securities and cash within the Euroclear System, withdrawal of
securities and cash from the Euroclear System, and receipts of payments with
respect to securities in the Euroclear System. All securities in the Euroclear
System are held on a fungible basis without attribution of specific certificates
to specific securities clearance accounts. The Euroclear Operator acts under the
Terms and Conditions only on behalf of Euroclear Participants and has no record
of or relationship with persons holding through Euroclear Participants.
Distributions with respect to Certificates held through 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 "Federal Income Tax Consequences."
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Cedel or the Euroclear Operator, as the case may be, will take any other action
permitted to be taken by a Certificateholder under a related agreement 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
Book-entry Certificates of a Series will be re-issued in fully registered,
certificated form ("Definitive Certificates") to Certificate Owners of such
Series or their respective 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 properly to discharge its responsibilities as Depository with respect to
any Class of Certificates of such Series, and the Trustee or the Transferor is
unable to locate a qualified successor, (ii) the Transferor, at its option,
advises the Trustee that it elects to terminate the book-entry system with
respect to such Series or Class through DTC, or (iii) after the occurrence of a
Servicer Default, Certificate Owners of such Series or Class evidencing more
than 50% of the aggregate unpaid principal amount of such Series or Class advise
the Trustee and DTC through Participants in writing that the continuation of a
book-entry system with respect to the Certificates of such Series or Class
through DTC (or a successor thereto) is no longer in the best interest of the
Certificate Owners of such Certificates.
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 of such Series. Upon
surrender by DTC of the definitive certificates representing the Certificates of
such Series or Class and instructions for re-registration, the Transferor will
execute and the Trustee will authenticate and deliver such Certificates as
Definitive Certificates, and thereafter the Trustee will recognize the holders
of such Definitive Certificates as holders under the Pooling and Servicing
Agreement ("Holders").
Distribution of principal and interest on the Definitive Certificates of a
Series will be made by the Paying Agent for such Series directly to Holders of
such Series in accordance with the procedures set forth herein and in the
Pooling and Servicing Agreement. Interest payments and any principal payments on
each Distribution Date will be made to Holders in whose names the Definitive
Certificates were registered at the close of business on the related Record Date
for a Series. 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 the Certificates
registered in the name of Cede representing the Certificates), however, will be
made only upon presentation and surrender of such Certificate at the office or
agency specified in the notice of final distribution to respective
Certificateholders. The Trustee will provide such notice to registered
Certificateholders of such Series not later than the fifth day of the month of
such final distribution.
Definitive Certificates of a Series will be transferable and exchangeable at
the offices of the Transfer Agent and Registrar for such Series. No service
charge will be imposed for any registration of transfer or exchange, but the
Transfer Agent and Registrar of such Series may require payment of a sum
sufficient to cover any tax or other governmental charge imposed in connection
therewith.
THE TRANSFEROR CERTIFICATE; ADDITIONAL TRANSFERORS
The Pooling and Servicing Agreement provides that the Transferor may
surrender the Transferor Certificate to the Trustee in exchange for a newly
issued Transferor Certificate and 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
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(which supplement will 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 "The Pooling and Servicing Agreement Generally --
Amendments"); provided, that (a) the Transferor shall have given written notice
to each Rating Agency of such exchange, (b) the Transferor Amount (excluding the
interest represented by any Supplemental Certificate) shall not be less than 2%
of the total amount of Principal Receivables as of the date of, and after giving
effect to, such exchange and (c) if any Series of Certificates are outstanding
that were characterized as debt at the time of their issuance, the Transferor
shall have delivered to the Trustee and each Rating Agency a Tax Opinion, dated
the date of such exchange (or transfer or exchange as provided below), with
respect thereto. Any transfer or exchange of a Supplemental Certificate is
subject to the conditions set forth in clauses (b) and (c) above.
The Transferor Certificate (or any interest therein) may be transferred to
an entity that is a member of the "affiliated group" of which Travelers Group
Inc. is the "common parent" (as such terms are defined in Section 1504(a) of the
Code); provided, that (i) the Transferor shall have delivered to the Trustee and
each Rating Agency a Tax Opinion, and (ii) any such transferee will be deemed to
be a "Transferor" for certain limited purposes of the Pooling and Servicing
Agreement.
The Transferor may designate affiliates of Commercial Credit Company to be
included as a Transferor ("Additional Transferors") under the Pooling and
Servicing Agreement (by means of an amendment to the Pooling and Servicing
Agreement that will not require the consent of any Certificateholder; see "The
Pooling and Servicing Agreement Generally --Amendments") and, in connection with
such designation, the Transferor shall surrender the Transferor Certificate to
the Trustee in exchange for a newly issued Transferor Certificate modified to
reflect such Additional Transferor's interest in the Transferor's Interest;
provided, however, that (i) the conditions set forth in the preceding two
paragraphs with respect to the issuance of a Supplemental Certificate or the
transfer of the Transferor Certificate, as applicable, shall have been satisfied
with respect thereto prior to such designation and exchange and (ii) any
applicable conditions described in "The Pooling and Servicing Agreement
Generally -- Addition of Accounts or Participation Interests" shall have been
satisfied with respect to the transfer of Receivables or Participation Interests
by any Additional Transferor to the Trust. Following the inclusion of an
Additional Transferor, the Additional Transferor will be treated in the same
manner as a Transferor and each Additional Transferor generally will have the
same obligations and rights as the initial Transferor described herein.
INTEREST PAYMENTS
Each Class of a Series will accrue interest at the rate per annum specified
in, or in the manner determined in, the related Prospectus Supplement
(calculated on the basis specified in the related Prospectus Supplement).
Interest on all Certificates will be due and payable on the Distribution Dates
specified in the related Prospectus Supplement. Unless otherwise specified in
the related Prospectus Supplement, interest for a Class of a Series will be
calculated based on the outstanding principal balance of such Class at the end
of the rate determination period preceding the applicable Distribution Date.
To the extent provided in the related Prospectus Supplement, a Series may
include one or more Classes of floating-rate Certificates. The interest rate on
floating-rate Certificates will be a variable or adjustable rate. It is the
Transferor's present intention, subject to changing market conditions, that the
floating interest rate formula or index be based on an established financial
index in the national or international financial markets. The Distribution Dates
for floating-rate Certificates will be set forth in the related Prospectus
Supplement and need not be the same as the Distribution Dates for the other
Certificates of such Series, but may be either more or less frequent. For each
Class of floating-rate Certificates, the related Prospectus Supplement will set
forth the initial floating-rate certificate interest rate (or the method of
determining it), the dates or the method for determining the dates on which the
floating-rate certificate interest rate is adjusted, and the formula, index or
other method by which such interest rate is determined on such dates.
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PRINCIPAL PAYMENTS
Unless otherwise specified in the related Prospectus Supplement, the
Revolving Period for a Class of Certificates begins on the Relevant Closing Date
and ends on the day before an Amortization Period begins for such Class. On each
Distribution Date with respect to the Revolving Period, collections of Principal
Receivables allocable to the Certificateholders' Interest of a Series will,
subject to certain limitations, be paid to the holders of the Transferor
Certificates, to amortizing or accumulating Series or deposited in the Excess
Funding Account. After an Amortization Period begins with respect to any Class
of Certificates, collections of Principal Receivables allocable to such Class
will no longer be paid to the holders of the Transferor Certificates, to
amortizing or accumulating Series or deposited in the Excess Funding Account but
will generally either be deposited in the Collection Account or a Series Account
to be distributed to Certificateholders on a date or dates specified in the
related Prospectus Supplement or paid to such Certificateholders on the
Distribution Dates specified in the related Prospectus Supplement following the
commencement of the Amortization Period. To the extent that collections of
Principal Receivables are available, subject to any controlled distribution
amount or controlled deposit amount or other limitation set forth in the related
Prospectus Supplement, payments of principal will be paid to Certificateholders
of a Class until the Investor Amount of such Class has been paid in full;
provided, that if one or more Classes is subordinated in right of payment of
principal to another Class or Classes, the Certificateholders of such
subordinated Class or Classes will, to the extent provided in the related
Prospectus Supplement, receive payment only after the Investor Amount of the
senior Class or Classes has been paid in part or in full. The extent of
subordination of a Class of subordinated Certificates may be limited as
described in the related Prospectus Supplement.
Funds on deposit in the Collection Account or Series Account may be subject
to a guaranteed rate agreement or guaranteed investment contract 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 at the end of an Accumulation Period, such Class of Certificates
may be subject to a maturity guaranty or other similar mechanism specified in
the related Prospectus Supplement.
SHARED PRINCIPAL COLLECTIONS AND TRANSFEROR PRINCIPAL COLLECTIONS
On each Distribution Date, (a) the Servicer will allocate Shared Principal
Collections to each Principal Sharing Series, pro rata, in proportion to the
Principal Shortfalls, if any, with respect to each such Series and (b) the
Servicer will withdraw from the Collection Account and pay to the holders of the
Transferor Certificates an amount equal to the excess, if any, of (x) the
aggregate amount for all outstanding Series of collections of Principal
Receivables which the related Series Supplements specify are to be treated as
"Shared Principal Collections" for such Distribution Date over (y) the aggregate
amount for all outstanding Principal Sharing Series which the related Series
Supplements specify are "Principal Shortfalls" for such Distribution Date;
provided, however, that if on any Distribution Date the Transferor Amount is
less than or equal to the Required Transferor Amount or if the product of (x)
the aggregate amount of Principal Receivables and (y) one minus the Discount
Percentage is less than the Required Principal Balance, the Servicer will not
distribute to the holders of the Transferor Certificates any Shared Principal
Collections that otherwise would be distributed to the holders of the Transferor
Certificates, but will deposit such funds in the Excess Funding Account. There
can be no assurance that there will be any Shared Principal Collections with
respect to any Monthly Period.
The Servicer will determine the amount of collections of Principal
Receivables for any Monthly Period allocated to the Transferor's Interest but
not due to the holder of any Supplemental Certificate and other amounts payable
to the Transferor with respect to collections of Principal Receivables,
regardless of whether such Collections were initially allocated to the
Transferor or any Series, plus the amount of Excess Transferor Finance Charge
Collections, if applicable, remaining after application to amounts payable from
collections of Finance Charge Receivables (collectively, "Shared Transferor
Principal Collections"). The Servicer will allocate the Shared Transferor
Principal Collections to cover any Principal Shortfalls that have
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not been covered out of the Shared Principal Collections allocated to each
Series that has been designated in the applicable Series Supplement as being
entitled to receive Shared Transferor Principal Collections. If Principal
Shortfalls remaining after the application of Shared Principal Collections
exceed Shared Transferor Principal Collections for any Monthly Period, Shared
Transferor Principal Collections will be allocated pro rata among each Series
which in accordance with the Series Supplement for such Series is designated as
being entitled to receive Shared Transferor Principal Collections. Shared
Transferor Principal Collections permit coverage of Principal Shortfalls
remaining after the application of Shared Principal Collections by using
collections that would have been paid to the Transferor and in certain
circumstances may allow an Amortization Period to be shortened. There can be no
assurance that there will be any Shared Transferor Principal Collections with
respect to any Monthly Period.
SHARING OF EXCESS FINANCE CHARGE COLLECTIONS
Collections of Finance Charge Receivables allocable to any Series in excess
of the amounts necessary to make required payments with respect to such Series
("Excess Finance Charge Collections") may, if specified in the related Series
Supplement, be applied to cover shortfalls, if any, with respect to amounts
payable from collections of Finance Charge Receivables allocable to any other
Series then outstanding as provided in the related Series Supplement.
If specified in the Prospectus Supplement for a Series, collections of
Finance Charge Receivables allocable to the Transferor's Interest in excess of
the amounts necessary to make required payments with respect to any Supplemental
Certificates and all other amounts otherwise payable to the Transferor with
respect to collections of Finance Charge Receivables regardless of whether such
collections were initially allocated to the Transferor or any Series (the
"Excess Transferor Finance Charge Collections") will be applied to cover any
shortfalls (after giving effect to the application of Excess Finance Charge
Collections) with respect to amounts payable from collections of Finance Charge
Receivables allocable to each Series designated in the applicable Series
Supplement as being entitled to receive Excess Transferor Finance Charge
Collections, pro rata based upon the amount of the shortfall (after giving
effect to the application of Excess Finance Charge Collections), if any, with
respect to each other Series designated in the applicable Series Supplement as
being entitled to receive Excess Transferor Finance Charge Collections. In all
cases, any Excess Transferor Finance Charge Collections remaining after covering
shortfalls with respect to all designated Series will be treated as Shared
Transferor Principal Collections. Excess Transferor Finance Charge Collections
permit coverage of shortfalls with respect to amounts payable from collections
of Finance Charge Receivables and Excess Finance Charge Collections allocable to
a Series by using collections of Finance Charge Receivables which would
otherwise be paid to the Transferor.
OPTIONAL REPURCHASE
If specified in the Prospectus Supplement relating to a Series, the
Certificates of such Series will be subject to repurchase at the option of the
Transferor when the outstanding amount of the Certificates of such Series has
been reduced to a specified level. With respect to any Series of Certificates,
the percentage of the original amount of the Certificates of such Series
remaining outstanding when an optional repurchase is permitted will be
determined in the discretion of the Transferor as one of the specific terms of
such Series and will be set forth in the related Prospectus Supplement. The
factors which influence the Transferor's selection of the optional repurchase
threshold may vary from one Series to another.
COMPANION SERIES
If specified in the Prospectus Supplement relating to a Series, a Prior
Series may be paired with a later issued Series (each, a "Companion Series"),
such that a reduction in the Invested Amount of the Prior Series results in an
increase in the Invested Amount of the Companion Series. In general, a Series
may be issued as a Companion Series to enable the Trust to fund the amount by
which the Prior Series has amortized and will amortize in the future. If a Pay
Out Event or Reinvestment Event occurs with respect to the Prior Series or the
Companion Series when the Prior Series is in an Amortization Period, the Series
Percentage for the allocation of collections of Principal Receivables for the
Prior Series may be reset
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to a lower percentage as set forth in the Prospectus Supplement for the Prior
Series and the Amortization Period for the Prior Series may be lengthened. The
full extent by which the Amortization Period for the Prior Series may be
lengthened will be dependent on a variety of factors and will not be readily
determinable by the extent by which the Series Percentage has been changed. See
"Risk Factors--Timing of Principal Payments Other Than at Expected Maturity" in
the Prospectus and "Maturity Assumptions" in the Prospectus Supplement for a
discussion of such factors.
GROUPS
Any Series offered hereby may be included in a group of Series (together, a
"Group"). The Prospectus Supplement relating to a Series will specify whether
such Series will be included in a Group and will identify any previously issued
Series included in such Group. If specified in the related Prospectus
Supplement, the Certificateholders of a Series within a Group or any Class
thereof may be entitled to share in their pro rata portion of excess collections
of Finance Charge Receivables generated by other Series within such Group to
cover certain shortfalls in amounts payable from collections of Finance Charge
Receivables allocated to such Group.
NEW ISSUANCES
The Pooling and Servicing Agreement authorizes the Transferor to execute and
direct the Trustee to authenticate and deliver three types of certificates: (i)
one or more Series of Certificates which are transferable and have the
characteristics described below, (ii) a Transferor Certificate, evidencing the
Transferor's Interest in the Trust, which will initially be held by the
Transferor and which is transferable in certain circumstances to members of the
affiliated group of which Travelers Group Inc. is the ultimate common parent and
(iii) Supplemental Certificates delivered in exchange for a portion of the
Transferor Certificate under certain circumstances described in the Pooling and
Servicing Agreement (each, a "Supplemental Certificate," and, together with the
Transferor Certificate, the "Transferor Certificates"). The Transferor
Certificate and the Supplemental Certificates represent the ownership interest
in the remainder of the Trust Assets not allocated pursuant to the Pooling and
Servicing Agreement to the Certificateholders' Interest, including certain
rights to receive collections with respect to the Receivables and other amounts
pursuant to the Pooling and Servicing Agreement (the "Transferor's Interest").
The Series Supplement for a Series will specify the following principal terms
with respect to any new Series: (i) its name or designation, (ii) its initial
Investor Amount and Series Investor Amount (or method for calculating such
amounts), (iii) its certificate rate (or method for the determination thereof),
(iv) the payment date or dates and the date or dates from which interest shall
accrue, (v) the method for allocating collections to Certificateholders of such
Series, (vi) the designation of any Series Accounts to be used by such Series
and the terms governing the operation of any such Series Accounts, (vii) the
method of calculating the servicing fee with respect thereto, (viii) the terms
of any form of Series Enhancement with respect thereto, (ix) the terms on which
the Certificates of such Series may be exchanged for Certificates of another
Series, repurchased by the Transferor or remarketed to other investors, (x) the
Stated Series Termination Date of such Series, (xi) the number of Classes of
such Series and, if such Series consists of more than one Class, the rights and
priorities of each such Class, (xii) 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 may be exchanged, in
whole or in part, for Definitive Certificates, and the manner in which any
interest payable on a temporary or global Certificate will be paid), (xiii)
whether such Certificates may be issued as bearer certificates and any
limitations imposed thereon, (xiv) the priority of such Series with respect to
any other Series, (xv) the Group, if any, to which such Series belongs, (xvi)
whether or not such Series is a Principal Sharing Series, and (xvii) any other
terms of such Series (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. However, as a condition of a New Issuance, the
Rating Agency Condition must be satisfied and if any outstanding Series was
characterized as debt at the time of its issuance, the Transferor must deliver a
Tax Opinion. The
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Transferor may offer any Series under a Disclosure Document in transactions
either registered under the 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. Any such Series may be
issued in fully registered or book-entry form in minimum denominations
determined by the Transferor.
The Pooling and Servicing Agreement permits New Issuances such that each
Series has a period during which amortization or accumulation of the principal
amount thereof is intended to occur which may have a different length and begin
on a different date than such periods for any other Series. Further, one or more
Series may be in their Amortization Periods while other Series are not. Thus,
certain Series may not be amortizing or accumulating, while other Series are
amortizing or accumulating. Moreover, one or more Series, or Classes of a
Series, may have the benefits of forms of Series Enhancement different from the
forms of Series Enhancement available with respect to another Class or Classes
of any other Series. Under the Pooling and Servicing Agreement, the Trustee will
hold any form of Series Enhancement only on behalf of the Certificateholders of
the Series (or Class) with respect to which it relates. Collections allocated to
Finance Charge Receivables not used to pay interest on the Certificates will be
allocated as provided in the related Series Supplement. There is no limit to the
number of New Issuances that the Transferor may perform under the Pooling and
Servicing Agreement. The Trust will terminate only as provided in the Pooling
and Servicing Agreement.
Under the Pooling and Servicing Agreement and pursuant to a Series
Supplement, a New Issuance may occur only upon satisfaction of the following
conditions: (i) on or before the fifth day immediately preceding the Relevant
Closing Date, the Transferor shall have given the Trustee and the Servicer
notice of such issuance and its date; and on or before the tenth day immediately
preceding the Relevant Closing Date, the Transferor shall have given each Rating
Agency notice of such issuance and its date and (ii) the Transferor shall have
delivered to the Trustee (a) a related Series Supplement specifying the
Principal Terms of the new Series, (b) any agreement relating to the Series
Enhancement, (c) written confirmation from each Rating Agency that the New
Issuance will not result in the Rating Agency reducing or withdrawing its rating
of any outstanding Series or Class (the "Rating Agency Condition"), (d) an
officer's certificate from the Transferor stating that the Transferor reasonably
believes that such issuance will not cause a Pay Out Event or Reinvestment Event
to occur with respect to any Series, and (e) a Tax Opinion. Upon satisfaction of
such conditions, the Trustee will execute the related Series Supplement and
authenticate the Certificates of the new Series upon execution thereof by the
Transferor.
THE RECEIVABLES TRANSFER AGREEMENTS
The following summary as well other pertinent information included elsewhere
in this Prospectus and the related Prospectus Supplement describes the material
terms of the Receivables Transfer Agreements to be entered into by each of the
Banks at the time of formation of the Trust and by any additional Account Owners
at the time any such additional Account Owner commences transfers to the
Transferor. A form of the Receivables Transfer Agreement has been filed as an
Exhibit to the Registration Statement of which this Prospectus forms a part.
This summary does not purport to be complete and is subject to and is qualified
in its entirety by reference to, the provisions of the respective Receivables
Transfer Agreement. When particular provisions or terms used in a Receivables
Transfer Agreement are referred to herein, such provisions or terms shall be as
specified in the respective Receivables Transfer Agreement.
SALE OF RECEIVABLES
At the time of formation of the Trust, each Bank will enter into a
Receivables Transfer Agreement and will, pursuant to the terms thereof, sell,
transfer, assign, set over and otherwise convey to the Transferor all of such
Bank's right, title and interest in, to and under the Receivables existing at
the close of business on the Initial Cut-Off Date, in the case of Receivables
arising in the Initial Accounts and on each Addition Cut-Off Date, in the case
of Receivables arising in Additional Accounts and, in each case, Receivables
thereafter created from time to time in such Accounts and all monies due and or
to become due and all
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amounts received with respect thereto and all proceeds thereof (except that the
right to receive Recoveries with respect to such Receivables is not being
transferred).
ADDITION OF ACCOUNTS
In each Receivables Transfer Agreement, the Account Owner agrees that, if
the Transferor becomes obligated to designate Additional Accounts pursuant to
the Pooling and Servicing Agreement, then the Transferor may, at its option,
give the Account Owner written notice thereof and upon receipt of such notice
the Account Owner shall on or before the Addition Date, designate sufficient
Eligible Accounts which, together with Additional Accounts designated by any
other Account Owners will cause the Transferor to be in compliance with the
requirements of the Pooling and Servicing Agreement and, from time to time,
Additional Accounts may be designated to be included as Additional Accounts upon
the mutual agreement of the Transferor and the respective Account Owner. In any
such event, the Account Owner shall have the sole responsibility for selecting
the Additional Accounts.
PURCHASE PRICE OF RECEIVABLES
The purchase price for the Receivables in the Initial Accounts as of the
Initial Cut-Off Date conveyed to the Transferor under the Receivables Transfer
Agreement, shall be an amount equal to a percentage of the aggregate balance of
the Principal Receivables in those Accounts as of the Initial Cut-Off Date,
adjusted to reflect such factors as the respective Bank and the Transferor
mutually agree will result in a purchase price determined to be not less than
the fair market value of such Receivables. The purchase price for receivables to
be conveyed to the Transferor after the initial closing, shall be an amount
equal to a percentage of the aggregate balance of the Principal Receivables so
conveyed adjusted to reflect such factors as the Bank and the Transferor
mutually agree will result in a purchase price determined to be not less than
the fair market value of such new Principal Receivables.
REPRESENTATIONS AND WARRANTIES
The Account Owners represent and warrant, among other things, that (i) each
Receivable has been conveyed to the Transferor free and clear of any lien (with
an exception for certain permitted liens); (ii) on the Initial Cut-Off Date,
each Account is an Eligible Account and, in the case of each Additional Account,
on the Addition Cut-Off Date, each related Additional Account is an Eligible
Account, (iii) on the Initial Cut-Off Date, each Receivable conveyed to the
Transferor is an Eligible Receivable and, in the case of Additional Accounts, on
the applicable Addition Cut-Off Date, each Receivable contained in such Account
and conveyed to the Transferor is an Eligible Receivable and as of the date of
the creation of any new Receivable, such Receivable is an Eligible Receivable
and (iv) no selection procedures believed by the Account Owner to be materially
adverse to the interests of the Transferor or the Certificateholders have been
used in selecting the Accounts.
THE POOLING AND SERVICING AGREEMENT GENERALLY
The following summary, as well as other pertinent information included
elsewhere in this Prospectus and the related Prospectus Supplement, describes
the material terms of the Pooling and Servicing Agreement. A form of the Pooling
and Servicing Agreement has been filed as an Exhibit to the Registration
Statement of which this Prospectus forms a part. This summary does not purport
to be complete and is subject to, and is qualified in its entirety by reference
to, the provisions of the Pooling and Servicing Agreement. When particular
provisions or terms used in the Pooling and Servicing Agreement are referred to
herein, such provisions or terms shall be as specified in the Pooling and
Servicing Agreement.
TRUST ASSETS
The Trust Assets will include the Receivables, all monies due or to become
due thereunder and all amounts received with respect thereto, all proceeds of
the Receivables (not including, however, the right to receive Recoveries),
proceeds of credit insurance policies relating to the Receivables, all monies
and other
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property constituting Eligible Investments, if any, on deposit in or credited to
or held in certain accounts of the Trust and the benefits of any Series
Enhancement issued with respect to any Series (the drawing on or payment of such
Series Enhancement being available only to Certificateholders of such Series or
Class of such Series). The Trust Assets may also include Participation
Interests.
TRANSFER AND ASSIGNMENT OF RECEIVABLES
Pursuant to the Pooling and Servicing Agreement, the Transferor will
transfer and assign to the Trust all of its right, title and interest in and to
specifically identified Receivables existing in the designated Accounts owned by
the Account Owners on the day of the relevant transfer and assignment and in and
to all Receivables created in such Accounts thereafter and all proceeds thereof.
In connection with a transfer of the Receivables to the Trust, the
Transferor will indicate in its computer files that the Receivables have been
conveyed to the Trust for the benefit of the Certificateholders. In addition,
the Transferor will provide to the Trustee a computer file or a microfiche list
containing a true and complete list of all Accounts the Receivables of which
have been designated for inclusion in the Trust which specifies for each such
Account, its account number, the aggregate amount outstanding and the aggregate
amount of Principal Receivables outstanding as of the Initial Cut-Off Date or
Addition Cut-Off Date, as applicable. The Transferor will not deliver to the
Trustee any other records or agreements relating to such Accounts or the
Receivables. The records and agreements relating to such Accounts and the
Receivables maintained by the Account Owners, the Transferor or the Servicer
will not be segregated from other documents and agreements relating to other
credit card accounts and receivables and will not be stamped or marked to
reflect the transfer of the Receivables to the Trust. The Transferor will file
UCC financing statements meeting the requirements of applicable state law with
respect to the Receivables. See "Risk Factors -- Characteristics as a Sale;
Potential Effect of Insolvency and Receivership of the Account Owners" and
"Certain Legal Aspects of the Receivables."
ADDITIONAL TRANSFERORS
As described under the caption "Description of the Certificates--The
Transferor Certificate; Additional Transferors," the Transferor may designate
affiliates of Commercial Credit Company to be included as Transferors
("Additional Transferors") under the Pooling and Servicing Agreement. An
additional Transferor may be added by amendment to the Pooling and Servicing
Agreement without the consent of any Certificateholder. If an Additional
Transferor or Additional Transferors are added, references herein to the
Transferor shall refer, collectively, to the initial and all Additional
Transferors.
CESSATION OF TRANSFER OF RECEIVABLES
If an Insolvency Event occurs with respect to the Transferor, the Transferor
will immediately cease to transfer Principal Receivables to the Trust and
promptly notify the Trustee thereof. Notwithstanding any cessation of the
transfer to the Trust of additional Principal Receivables, Principal Receivables
transferred to the Trust prior to the occurrence of such Insolvency Event and
collections in respect of such Principal Receivables and Finance Charge
Receivables whenever created, accrued in respect of such Principal Receivables,
shall continue to be a part of the Trust.
The collections from the Receivables shall be immediately deposited in the
Collection Account, and shall be allocated and distributed to Certificateholders
in accordance with the terms of each Series Supplement.
REPRESENTATIONS, WARRANTIES AND COVENANTS
The Transferor makes representations and warranties relating to the
Receivables as of the Relevant Closing Date and, with respect to Receivables in
Additional Accounts, as of the related Addition Date, to the effect, among other
things, that (i) the Pooling and Servicing Agreement, each Series Supplement
each Receivables Transfer Agreement to which it is a party and, in the case of
Additional Accounts, the related assignment document, each constitute legal,
valid and binding obligations of the Transferor enforceable
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against the Transferor in accordance with their terms, subject to bankruptcy,
insolvency, reorganization, moratorium and similar laws of general applicability
relating to or affecting the enforcement of creditors' rights in general and
except as such enforceability may be limited by general principles of equity
(whether considered in a suit at law or in equity), (ii) the schedule of
Accounts referred to in the Pooling and Servicing Agreement is an accurate and
complete listing in all material respects of the Accounts designated as an
Account as of the Initial Cut-Off Date or Addition Cut-Off Date, as applicable,
and the information contained therein with respect to the identity of such
Accounts and the Receivables existing thereunder is true and correct in all
material respects as of the Initial Cut-Off Date or Addition Cut-Off Date, as
applicable, (iii) each Receivable conveyed to the Trust by the Transferor has
been conveyed to the Trust free and clear of any lien other than liens permitted
by the Pooling and Servicing Agreement, (iv) all authorizations, consents,
orders or approvals of or registrations or declarations with any governmental
authority required to be obtained, effected or given by the Transferor in
connection with the conveyance by the Transferor of Receivables to the Trust
have been duly obtained, effected or given and are in full force and effect, (v)
either the Pooling and Servicing Agreement and, in the case of Additional
Accounts, the related assignment document, each constitute a valid sale,
transfer and assignment to the Trust of all right, title and interest of the
Transferor in the Receivables conveyed to the Trust by the Transferor and the
proceeds thereof or, if the transfer pursuant to the Pooling and Servicing
Agreement or the related assignment document does not constitute an absolute
sale of such property, it constitutes a grant of a "security interest" (as
defined in the UCC) in such property to the Trust, which, in the case of
Receivables then existing and the proceeds thereof, is enforceable upon
execution and delivery of the Pooling and Servicing Agreement or the related
assignment document as of the applicable date and which will be enforceable with
respect to such Receivables thereafter created and the proceeds thereof upon
such creation and that upon the filing of financing statements required pursuant
to the Pooling and Servicing Agreement, the Trust shall have a first priority
perfected security or ownership interest in such property and proceeds except
for (x) liens permitted under the Pooling and Servicing Agreement, (y) the
interest of the Transferor as holder of the Transferor Certificate or any
Supplemental Certificate and (z) the Transferor's right to receive interest
accruing on and investment earnings, if any, in respect of the Collection
Account or any Series Account, as provided in the Pooling and Servicing
Agreement or the related Series Supplement, (vi) except as otherwise expressly
provided in the Pooling and Servicing Agreement or the related Series
Supplement, neither the Transferor nor any person claiming through or under the
Transferor has any claim to or interest in the Collection Account, the Excess
Funding Account, any Series Account or any Series Enhancement, (vii) as of the
Initial Cut-Off Date or Addition Cut-Off Date, as applicable, each Initial
Account or Additional Account is an Eligible Account, (viii) as of the Initial
Cut-Off Date or Addition Cut-Off Date, as applicable, each Receivable contained
in any related Account being designated on such date is an Eligible Receivable,
(ix) as of the date of the creation of any new Receivable in an Account, such
Receivable is an Eligible Receivable, and (x) no selection procedure has been
utilized by the Transferor which it reasonably believes would result in the
selection of an Account that would be materially adverse to the interests of
Certificateholders of any Series.
In the event (i) any representation or warranty of the Transferor contained
in clause (ii), (iii), (iv), (vii), (viii), (ix) or (x) above is not true and
correct in any material respect as of the date specified therein with respect to
any Receivable transferred to the Trust by the Transferor or the related Account
and as a result of such breach any Receivables in the related Account become
Defaulted Receivables or the Trust's rights in, to or under such Receivables or
the proceeds of such Receivables are impaired or such proceeds are not for any
reason available to the Trust free and clear of any lien, unless cured within 60
days (or such longer period, not in excess of 150 days, as may be agreed to by
the Trustee) after the earlier to occur of the discovery thereof by the
Transferor or receipt by the Transferor of notice thereof given by the Trustee,
or (ii) a Receivable is evidenced by an instrument or chattel paper to the
extent (and subject to the limitations) provided in the Pooling and Servicing
Agreement with respect to any Receivables transferred to the Trust by the
Transferor, then the Transferor shall accept reassignment of all Receivables in
the related Account ("Ineligible Receivables") on the terms and conditions set
forth below; provided, however, that such Receivables will not be deemed to be
Ineligible Receivables and will not be reassigned to the
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Transferor if, on any day prior to the end of such 60-day or longer period, (x)
either (A) in the case of an event described in clause (i) above the relevant
representation and warranty shall be true and correct in all material respects
as if made on such day or (B) in the case of an event described in clause (ii)
above the circumstances causing such Receivable to become an Ineligible
Receivable shall no longer exist and (y) the Transferor shall have delivered to
the Trustee an officer's certificate describing the nature of such breach and
the manner in which the relevant representation and warranty became true and
correct. Such Ineligible Receivables shall be automatically removed from the
Trust by the Servicer deducting the portion of the Ineligible Receivables
reassigned to the Transferor which are Principal Receivables from the aggregate
amount of Principal Receivables used to calculate the Transferor Amount, the
Series Percentages and any other percentage used to allocate within or among
Series that is applicable to any Series. In the event that, following the
exclusion of such Principal Receivables from the calculation of the Transferor
Amount, the Transferor Amount would be less than the Required Transferor Amount,
not later than 12:00 noon, New York City time, on the first Distribution Date
following the Monthly Period in which such reassignment obligation arises, the
Transferor shall make a deposit into the Excess 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 (up to the amount of such
Principal Receivables).
Upon the deposit, if any, required to be made to the Excess Funding Account
as provided in the Pooling and Servicing Agreement and the reassignment of
Ineligible Receivables, the Trustee, on behalf of the Trust, shall automatically
and without further action be deemed to sell, transfer, assign, set over and
otherwise convey to the Transferor or its designee, without recourse,
representation or warranty, all the right, title and interest of the Trust in
and to such Ineligible Receivables, all monies due or to become due and all
amounts received with respect thereto and all proceeds thereof. The Trustee
shall execute such documents and instruments of transfer or assignment and take
such other actions as shall reasonably be requested by the Transferor to effect
the conveyance of Ineligible Receivables. The obligation of the Transferor to
accept reassignment of any Ineligible Receivables, and to make the deposits, if
any, required to be made to the Excess Funding Account as provided in the
Pooling and Servicing Agreement, shall constitute the sole remedy respecting the
event giving rise to such obligation available to Certificateholders (or the
Trustee on behalf of the Certificateholders.) The obligations of the Transferor
(including any Additional Transferor) to accept reassignment of the Receivables
will be several and not joint with respect to the Receivables transferred by
such Transferor to the Trust. Under the Receivables Transfer Agreements, each
Bank will covenant to repurchase from the Transferor Receivables purchased by
the Transferor in accordance with the second preceding paragraph if such Bank
breaches certain of its similar representations and warranties under its
respective Receivable Transfer Agreement.
The Transferor also makes representations and warranties to the Trust to the
effect, among other things, that as of the Relevant Closing Date with respect to
each Series (i) it is a corporation duly organized and validly existing in good
standing under the laws of the jurisdiction of its organization or incorporation
and has full corporate power, authority and legal right to own its property and
conduct its consumer revolving lending business as such properties are presently
owned and such business is presently conducted, and to execute, deliver and
perform its obligations under the Pooling and Servicing Agreement, each
Receivables Transfer Agreement and each Series Supplement and to execute and
deliver to the Trustee the Certificates pursuant thereto; (ii) it is duly
qualified to do business and is in good standing as a foreign corporation (or is
exempt from such requirements), and has obtained all necessary licenses and
approvals in each jurisdiction in which failure to so qualify or to obtain such
licenses and approvals would have a material adverse effect on the
Certificateholders of any Series; provided, however, that no representation or
warranty will be made with respect to any qualification, licenses or approvals
which the Trustee has or may be required at any time to obtain, if any, in
connection with the transactions contemplated by the Pooling and Servicing
Agreement; (iii) the execution and delivery of the Pooling and Servicing
Agreement, each Receivables Transfer Agreement and each Series Supplement by the
Transferor and the execution and delivery to the Trustee of the Certificates,
and the consummation of the transactions provided for in the Pooling and
Servicing Agreement, each Receivables Transfer Agreement and each
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Series Supplement have been duly authorized by the Transferor by all necessary
corporate action on the part of the Transferor and the Pooling and Servicing
Agreement, each Receivables Transfer Agreement and each Series Supplement will
remain, from the time of its execution, an official record of the Transferor;
(iv) the execution and delivery by the Transferor of the Pooling and Servicing
Agreement, each Receivables Transfer Agreement each Series Supplement, the
Certificates, the performance by the Transferor of the transactions contemplated
by the Pooling and Servicing Agreement, each Receivables Transfer Agreement and
each Series Supplement and the fulfillment by the Transferor of the terms
thereof, will not conflict with, result in any breach of any of the material
terms and provisions of, or constitute (with or without notice or lapse of time
or both) a material default under, any indenture, contract, agreement, mortgage,
deed of trust or other instrument to which the Transferor is a party or by which
it or any of its properties are bound; (v) the execution and delivery by it of
the Pooling and Servicing Agreement, each Receivables Transfer Agreement each
Series Supplement and the Certificates, the performance by the Transferor of the
transactions contemplated by the Pooling and Servicing Agreement, each
Receivables Transfer Agreement and each Series Supplement and the fulfillment by
the Transferor of the terms thereof will not conflict with or violate any
requirements of law applicable to the Transferor, (vi) there are no proceedings
or investigations, pending or, to the best knowledge of the Transferor,
threatened against it, before any court, regulatory body, administrative agency,
or other tribunal or governmental instrumentality (a) asserting the invalidity
of the Pooling and Servicing Agreement, each Receivables Transfer Agreement or
any Series Supplement or the Certificates, (b) seeking to prevent the issuance
of the Certificates or the consummation of any of the transactions contemplated
by the Pooling and Servicing Agreement each Receivables Transfer Agreement or,
any Series Supplement or the Certificates, (c) seeking any determination or
ruling that, in the reasonable judgment of the Transferor, would materially and
adversely affect the performance by it of its obligations with respect to any
Series under the Pooling and Servicing Agreement, Receivables Transfer Agreement
or any Series Supplement, (d) seeking any determination or ruling that would
materially and adversely affect the validity or enforceability of the Pooling
and Servicing Agreement, each Receivables Transfer Agreement, any Series
Supplement or the Certificates, or (e) seeking to affect adversely the income
tax attributes of the Trust or the Certificates of any Series under the United
States federal or Delaware state income or franchise tax systems; (vii) all
approvals, authorizations, consents, orders or other actions of any person or of
any governmental body or official required in connection with the execution and
delivery by the Transferor of the Pooling and Servicing Agreement, each
Receivables Transfer Agreement, each Series Supplement and the Certificates, the
performance by the Transferor of the transactions contemplated by the Pooling
and Servicing Agreement, each Receivables Transfer Agreement and each Series
Supplement and the fulfillment by it of the terms thereof, have been obtained,
except such as may be required by state securities or "blue sky" laws in
connection with the distribution of the Certificates; (viii) no Insolvency Event
with respect to the Transferor has occurred and the transfer of the Receivables
by the Transferor to the Trust has not been made in contemplation of the
occurrence thereof; and (ix) the Transferor is a bankruptcy-remote entity.
The Pooling and Servicing Agreement provides that the representations and
warranties set forth in the immediately preceding paragraph will survive the
transfer and assignment by the Transferor of the Receivables to the Trust. Upon
discovery by the Transferor, the Servicer or the Trustee of a breach of any of
the representations and warranties by the Transferor set forth in the preceding
paragraph, the party discovering such breach will give prompt written notice to
the others and the Transferor will cooperate with the Servicer and the Trustee
in attempting to cure the breach.
An "Eligible Account" is defined in the Pooling and Servicing Agreement to
mean a consumer revolving credit card account owned by Travelers Bank & Trust,
fsb or The Travelers Bank USA, in the case of the Initial Accounts, or Travelers
Bank & Trust, fsb, The Travelers Bank USA, or any additional Account Owner, in
the case of Additional Accounts, which account is identified by the relevant
Account Owner as of the Initial Cut-Off Date or Addition Cut-Off Date, as
applicable, as having the following characteristics (a) is in existence and
maintained by Travelers Bank & Trust, fsb or The Travelers Bank USA, in the case
of the Initial Accounts, or Travelers Bank & Trust, fsb, The Travelers Bank USA
or any additional Account
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Owner, in the case of Additional Accounts; (b) is payable in United States
dollars; (c) is not a corporate account; (d) except as provided below, has not
been identified as an account the credit card or cards with respect to which
have been reported as having been lost or stolen; (e) the obligor of which has
provided, as his or her billing address, an address located in the United States
(or its territories or possession or military address); (f) except as provided
below, does not have any Receivables which are Defaulted Receivables; and (g)
except as provided below, does not have any Receivables which have been
identified as having been incurred as a result of fraudulent use of any related
credit card.
The Pooling and Servicing Agreement provides that Eligible Accounts may
include Accounts, the Receivables of which have been written off, or with
respect to which the Transferor believes the related obligor is bankrupt, or as
to which certain Receivables have been identified by the obligor as having been
incurred as a result of fraudulent use of any credit cards, or as to which any
credit cards have been reported as lost or stolen, in each case as of the
Initial Cut-Off Date or Addition Cut-Off Date, as applicable; provided that (a)
the balance of all Receivables included in such Accounts is treated for purposes
of the Pooling and Servicing Agreement as "zero," and (b) charging privileges
with respect to all such Accounts have been canceled in accordance with the
relevant credit card guidelines.
An "Eligible Receivable" is defined in the Pooling and Servicing Agreement
to mean each Receivable (a) which has arisen under an Eligible Account, (b)
which was created in compliance with all requirements of law applicable to the
Account Owner that transferred such Receivable to the Transferor, the failure to
comply with which would have a material adverse effect upon Certificateholders
and pursuant to a credit card agreement which complies with all requirements of
law applicable to such Account Owner, the failure to comply with which would
have a material adverse effect upon Certificateholders, (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 or given by the relevant Account Owner in connection with the creation
of such Receivable or the execution, delivery and performance by the relevant
Account Owner of its obligations, if any, under the related credit card
agreement have been duly obtained or given and are in full force and effect as
of such date of creation of such Receivable, (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
(except for liens permitted by the Pooling and Servicing Agreement), (e) which
has been the subject of either (i) a valid transfer and assignment from the
Transferor to the Trust of all of the Transferor's right, title and interest
therein or (ii) the grant of a first priority perfected security interest
therein (and in the proceeds thereof), effective until the termination of the
Trust, (f) which at and after the time of transfer to the Trust is the legal,
valid and binding payment obligation of the obligor thereon, legally enforceable
against such obligor in accordance with its terms, except as such enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or other similar laws, now or hereafter in effect, affecting the enforcement of
creditors' rights in general and except as such enforceability may be limited by
general principles of equity (whether considered in a suit at law or in equity);
(g) which constitutes either an "account" or a "general intangible" under and as
defined in Article 9 of the UCC; (h) which, at the time of its transfer to the
Trust, has not been waived or modified except as permitted in accordance with
the credit card guidelines and which waiver or modification is reflected in the
Servicer's computer file of revolving credit card accounts; (i) which, at the
time of its transfer to the Trust, is not subject to any right of rescission,
setoff, counterclaim or any other defense of the obligor (including the defense
of usury), other than defenses arising out of applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights in general and except as such enforceability may be limited by
general principles of equity (whether considered in a suit at law or equity) or
as to which the Servicer is required by the Pooling and Servicing Agreement to
make an adjustment; (j) as to which, at the time of its transfer to the Trust,
the Transferor has satisfied all obligations to be fulfilled by the Transferor
at the time it is transferred to the Trust; and (k) as to which, at the time of
its transfer to the Trust, the Transferor has not taken any action which, or
failed to take any action the omission of which, would, at the time of its
transfer to the Trust, impair the rights of the Trust or the Certificateholders
therein.
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The Trustee will not make any initial or periodic general examination of the
Receivables or any records relating to the Receivables for the purpose of
establishing the presence or absence of defects, compliance with the
Transferor's representations and warranties or for any other purpose. The
Servicer, however, has agreed to deliver to the Trustee on or before March 31 of
each year commencing in 1999 an opinion of counsel with respect to the validity
of the security interest of the Trust in and to the Receivables and certain
other components of the Trust.
The Transferor covenants in the Pooling and Servicing Agreement that it will
at all times enforce the covenants and agreements of the Account Owners under
the terms of the Receivables Transfer Agreements, including the covenants on the
part of the Account Owners, that except as otherwise required by any requirement
of law, or as is deemed by the Account Owner in its sole discretion to be
necessary in order for the Account Owner to maintain its credit card business on
a competitive basis, based on a good faith assessment by the Account Owner of
the nature of the competition in the credit card business, the Account Owner
will not at any time reduce the annual percentage rate at which periodic finance
charges are assessed on any Receivable or the other fees and charges assessed on
the Accounts owned by it if, as a result of such reduction, either (i) the
Account Owner's reasonable expectation is that such reduction would cause a Pay
Out Event or Reinvestment Event to occur or (ii) such reduction is not also
applied to any comparable segments of consumer revolving credit card accounts
owned by the Account Owner which have characteristics the same as, or
substantially similar to, such Accounts.
ADDITION OF ACCOUNTS OR PARTICIPATION INTERESTS
The Transferor has the right under each of the Receivables Transfer
Agreements (subject to certain exceptions) to require the Account Owner
thereunder to designate from time to time additional Eligible Accounts to be
included as Accounts ("Additional Accounts"). The Account Owners will, in their
sole discretion, select those Accounts which will be designated as Additional
Accounts and will convey to the Transferor, who, in turn, will convey to the
Trust, its interest in all Receivables arising from such Additional Accounts,
whether such Receivables are then existing or thereafter created. Each
Additional Account must be an Eligible Account as of the date such Additional
Accounts were selected (the "Addition Cut-Off Date"). No selection procedures
believed by an Account Owner to be adverse to the interests of the
Certificateholders will be utilized in selecting Additional Accounts from the
available Eligible Accounts in such Account Owner's portfolio. However, since
Additional Accounts may not have been part of the Travelers Consumer Credit Card
Portfolio at the time of the initial transfer of Receivables in the Initial
Accounts to the Trust, Receivables in the Additional Accounts may not be of the
same credit quality as the Initial Accounts. Additional Accounts may have been
originated by the Account Owners at a later date using credit criteria different
from those that were applied to the Initial Accounts or may have been acquired
by the Account Owners from another credit card issuer that had different credit
criteria. Each date on which Receivables in Additional Accounts are first
transferred to the Trust is referred to herein as an "Addition Date."
REQUIRED ADDITIONS. Generally, if either (x) the Transferor Amount is less
than the Required Transferor Amount or (y) the product of (x) the aggregate
amount of Principal Receivables and (y) one minus the Discount Percentage is
less than the Required Principal Balance, the Transferor will be required to
cause the Account Owners to designate additional Eligible Accounts to be
included as Accounts in a sufficient amount such that, after giving effect to
such addition, the Transferor Amount as of the close of business on the
applicable Addition Date is at least equal to the Required Transferor Amount on
such date and the product of (x) the aggregate amount of Principal Receivables
and (y) one minus the Discount Percentage exceeds the Required Principal
Balance. In lieu of, or in addition to, so designating Additional Accounts, the
Transferor may, subject to the conditions specified below and in the Pooling and
Servicing Agreement, convey to the Trust participations (including 100%
participations) representing undivided interests in a pool of assets consisting
of revolving credit card receivables and any interests in such type of
receivables, including securities representing or backed by such type of
receivables owned by the Transferor or any affiliate of the Transferor and
collections thereon ("Participation Interests").
"Required Transferor Amount" means, with respect to any date, (i) the
product of the Required Transferor Percentage and (ii)(a) the aggregate amount
of Principal Receivables times (b) one minus the Discount Percentage.
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"Required Transferor Percentage" currently means 5%, provided the Required
Transferor Percentage may be reduced to as low as 2% if the Transferor delivers
an officer's certificate stating that such reduction will not have an Adverse
Effect and the Rating Agency Condition is satisfied.
"Required Principal Balance" means, with respect to any date, the sum of the
Series Investor Amounts for each Series minus the amount on deposit in the
Excess Funding Account.
"Series Investor Amount" means, for any Series, the amount set forth in the
related Series Supplement and, for each Series offered hereby, in the Prospectus
Supplement for such Series, but will generally be an amount equal to the
numerator of the Series Percentage for allocating collections of Principal
Receivables for such Series. That numerator for the majority of Series of
Certificates offered hereby will generally be the initial Investor Amount.
RESTRICTED ADDITIONS. The Transferor may from time to time, at its sole
discretion, subject to the conditions specified below, designate additional
Eligible Accounts to be included as Accounts or Participation Interests to be
included as Trust Assets, in either case as of the applicable Addition Date.
CONDITIONS TO REQUIRED AND RESTRICTED ADDITIONS. On the Addition Date with
respect to any Additional Accounts or Participation Interests, the Trust shall
purchase the Receivables in such Additional Accounts or shall purchase such
Participation Interests, in each case as of the close of business on the
applicable Addition Date, subject to the satisfaction of the following
conditions: (i) on or before the tenth business day immediately preceding the
Addition Date, the Transferor shall have given the Trustee and each Rating
Agency written notice that the Additional Accounts or Participation Interests
will be included and specifying the applicable Addition Date, the Addition
Cut-Off Date, and the approximate number of accounts expected to be added and
the approximate aggregate balances expected to be outstanding in the accounts to
be added (in case of Additional Accounts); (ii) in the case of Additional
Accounts, the Transferor shall have delivered to the Trustee copies of UCC-1
financing statements covering such Additional Accounts, if necessary to perfect
the Trust's interest in the Receivables arising therein; (iii) as of each of the
Addition Cut-Off Date and the Addition Date, no Insolvency Event with respect to
Transferor or the Account Owner of the Additional Accounts shall have occurred
nor shall the transfer of the Receivables arising in the Additional Accounts or
of the Participation Interests to the Trust have been made in contemplation of
the occurrence thereof; (iv) except in the case of certain required Additions,
the Rating Agency Condition shall have been satisfied; (v) the Transferor shall
have delivered to the Trustee an officer's certificate, dated the Addition Date,
stating that (x) in the case of Additional Accounts, as of the applicable
Addition Cut-Off Date, the Additional Accounts are all Eligible Accounts, (y) to
the extent applicable, the conditions set forth in clauses (ii) through (iv)
above have been satisfied and (z) the Transferor reasonably believes that the
addition by the Transferor of the Receivables arising in the Additional Accounts
or of the Participation Interests to the Trust will not, based on the facts
known to such officer at the time of such addition, then or thereafter cause a
Pay Out Event or Reinvestment Event to occur with respect to any Series; (vi)
the Transferor shall have delivered to the Trustee and each Rating Agency an
opinion of counsel stating the validity and perfection of the transfer of the
Collections received in such Additional Accounts to the Trustee; (vii) in the
case of designation of Additional Accounts, the Transferor shall have delivered
to the Trustee (x) the computer file or microfiche list containing a true and
complete list of such Additional Accounts and (y) a duly executed, written
assignment; and (viii) unless each Rating Agency otherwise consents, the number
of Additional Accounts so designated with respect to a required addition with
respect to any of the three consecutive Monthly Periods commencing in January,
April, July and October of each calendar year, commencing in January 1998, shall
not exceed 15% of the number of Accounts as of the first day of the calendar
year during which such Monthly Periods commence and the number of Additional
Accounts so designated during any calendar year shall not exceed 20% of the
number of Accounts as of the first day of such calendar year.
ACQUISITION OF PARTICIPATION INTERESTS. If the Transferor designates
Participation Interests to be included in the Trust and such Participation
Interests are issued by an entity other than the Transferor or
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any affiliate thereof, then such Participation Interests will (i) either (a)
have been previously registered under the Securities Act of 1933, or (b) be
eligible for sale under Rule 144(k); and (ii) will be acquired in bona fide
secondary market transactions not from the Transferor or an affiliate.
AUTOMATIC ACCOUNT ADDITIONS
(i) The Transferor may from time to time, at its sole discretion, subject to
and in compliance with the limitations specified in clause (ii) below and the
applicable conditions specified in clauses (iii) through (vii) below, designate
Eligible Accounts ("Automatic Additional Accounts") to be included as Accounts
as of the applicable Addition Date. For purposes of this paragraph, Eligible
Accounts are deemed to include only consumer revolving credit card accounts that
are originated or acquired by one of the Banks or any affiliate of one of the
Banks.
(ii) Unless each Rating Agency otherwise consents, the number of Automatic
Additional Accounts designated with respect to any of the three consecutive
Monthly Periods commencing in January, April, July and October of each calendar
year, commencing in January 1998 shall not exceed 15% of the number of Accounts
as of the first day of the calendar year during which such Monthly Periods
commence and the number of Automatic Additional Accounts designated during any
such calendar year will not exceed 20% of the number of Accounts as of the first
day of such calendar year.
(iii) Within 30 days after the Addition Date with respect to any Automatic
Additional Accounts, the Transferor will deliver to the Trustee and each Rating
Agency an opinion of counsel with respect to the Automatic Additional Accounts
included as Accounts on such Addition Date, confirming the validity and
perfection of the transfer of such Automatic Additional Accounts. If such
opinion of counsel with respect to any Automatic Additional Accounts is not so
received, the ability of the Transferor to designate Automatic Additional
Accounts will be suspended until such time as each Rating Agency otherwise
consents in writing. If the Transferor is unable to deliver an opinion of
counsel with respect to any Automatic Additional Account, such inability shall
be deemed to be a breach of the representation with respect to the Receivables
in such Automatic Additional Account, provided that the cure period for such
breach will not exceed 30 days.
(iv) The Transferor shall have delivered to the Trustee copies of UCC-1
financing statements covering such Automatic Additional Accounts, if necessary
to perfect the Trust's interest in the Receivables arising therein.
(v) As of each of the Addition Cut-Off Date and the Addition Date, no
Insolvency Event with respect to the Transferor or any Account Owner shall have
occurred nor shall the transfer of the Receivables arising in the Automatic
Additional Accounts to the Trust have been made in contemplation of the
occurrence thereof.
(vi) The Transferor shall have delivered to the Trustee an officer's
certificate, dated the Addition Date, stating that (x) as of the applicable
Addition Cut-Off Date, such Automatic Additional Accounts are all Eligible
Accounts, (y) to the extent applicable, the conditions set forth in clauses (ii)
through (v) above have been satisfied and (z) the Transferor reasonably believes
that the addition of the Receivables arising in such Automatic Additional
Accounts will not, based on the facts known to such officer at the time of such
addition, then or thereafter cause a Pay Out Event or Reinvestment Event to
occur with respect to any Series.
(vii) The Transferor shall have delivered to the Trustee (x) a computer file
or microfiche list containing a true and complete list of such Automatic
Additional Accounts and (y) a duly executed assignment of the Receivables
arising in such Automatic Additional Accounts.
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REMOVAL OF ACCOUNTS
Unless otherwise specified in the Prospectus Supplement relating to a Series
of Certificates, subject to the conditions set forth below, on any day of any
Monthly Period (unless the exercise of such right is restricted to certain
periods specified in the related Prospectus Supplement), the Transferor shall
have the right to designate certain Accounts to be removed as Accounts and to
require the reassignment to it or its designee of all the Trust's right, title
and interest in, to and under the Receivables then existing and thereafter
created in such removed Accounts, all monies due or to become due and all
amounts received with respect thereto and all proceeds thereof in or with
respect to such Accounts. The Accounts specified for removal shall be set forth
in a Receivables Transfer Agreement (the "Removed Accounts"). The following
conditions apply to the removal of Accounts and the removal of Participation
Interests designated by the Transferor:
(a) on or before the fifth business day immediately preceding the
Removal Date (the "Removal Notice Date"), the Transferor shall have given
the Trustee, the Servicer, each Rating Agency and the provider of any Series
Enhancement written notice of such removal, specifying the date for removal
of the Removed Accounts or Participation Interests (the "Removal Date");
(b) with respect to Removed Accounts, on or prior to the Removal Date,
the Transferor will deliver to the Trustee a computer file or microfiche
list containing a true and complete list of the Removed Accounts specifying
for each such Account, as of the last day of the Monthly Period preceding
the Removal Notice Date (the "Removal Cut-Off Date"), its account number,
the aggregate amount outstanding in such Account and the aggregate amount of
Principal Receivables outstanding in such Account;
(c) with respect to Removed Accounts, the Transferor shall have
represented and warranted as of the Removal Date that the list of Removed
Accounts delivered pursuant to paragraph (b) above, as of the Removal
Cut-Off Date, is true and complete in all material respects;
(d) the Rating Agency Condition shall have been satisfied with respect
to such removal;
(e) the Transferor shall have delivered to the Trustee an officer's
certificate, dated the Removal Date, to the effect that the Transferor
reasonably believes that (i) such removal will not, based on the facts known
to such officer at the time of such certification, then or thereafter cause
a Pay Out Event or Reinvestment Event to occur with respect to any Series
and (ii) no selection procedure was utilized which would result in a
selection of Removed Accounts or Participation Interests that would be
materially adverse to the interests of the Certificateholders of any Series
as of the Removal Date;
(f) as of the Removal Cut-Off Date, no more than 10% of the Receivables
outstanding are more than thirty days contractually delinquent; and
(g) such other conditions as are specified in the related Prospectus
Supplement.
Upon satisfaction of the above conditions, the Trustee will execute and
deliver to the Transferor or its designee a written reassignment and will,
without further action, be deemed to sell, transfer, assign, set over and
otherwise convey to the Transferor or its designee, effective as of the Removal
Date, without recourse, representation or warranty, all the right, title and
interest of the Trust in and to the Participation Interests or Receivables
arising in the Removed Accounts, all monies due and to become due and all
amounts received with respect thereto and all proceeds thereof.
SERVICING PROCEDURES
Pursuant to the Pooling and Servicing Agreement, the Servicer will be
responsible for servicing and administering the Receivables in accordance with
the Servicer's customary and usual servicing procedures for servicing credit
card receivables comparable to the Receivables and in accordance with its credit
card guidelines.
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DISCOUNT OPTION
The Pooling and Servicing Agreement provides that a percentage (the
"Discount Percentage") (which on the Relevant Closing Date for the first Series
of Certificates issued by the Trust will be 1.50%) of collections of Principal
Receivables will be treated as collections of Finance Charge Receivables (the
"Discount Option Collections"). The Transferor may, without notice to or consent
of the Certificateholders, from time to time, increase, reduce or eliminate
(subject to the limitations described below) the Discount Percentage for all or
any specified portion of collections of Principal Receivables on or after the
date of such change (each, a "Discount Option Date"). The Transferor must
provide 30 days prior written notice to the Trustee and each Rating Agency of
any such change and such change will become effective only if (i) in the
reasonable belief of the Transferor based on facts known to the Transferor at
such time, such designation would not cause a Pay Out Event or Reinvestment
Event with respect to any Series to occur, or an event which, with notice or the
lapse of time or both, would constitute a Pay Out Event or Reinvestment Event
with respect to any Series and (ii) the Rating Agency Condition is satisfied. On
the date of processing of any collections, the product of the Discount
Percentage and collections that otherwise would be collections of Principal
Receivables will be deemed Discount Option Collections. An amount equal to the
product of (i) the Series Percentage with respect to Finance Charge Receivables
for each Series of Certificates issued and outstanding and (ii) the amount of
such Discount Option Collections will be deposited by the Servicer into the
Collection Account and an amount equal to the product of (iii) the Transferor
Percentage and (iv) the amount of the Discount Option Collections will be paid
to the holders of the Transferor Certificates or, if applicable, applied as
Excess Transferor Finance Charge Collections. The former amount deposited into
the Collection Account will be applied as provided below regarding collections
of Finance Charge Receivables. Any such designation that raises the Discount
Percentage will result in an increase in the amount of collections of Finance
Charge Receivables and a lower payment rate of collections of Principal
Receivables and will reduce the Transferor Amount (which is calculated after
applying the Discount Percentage to the aggregate amount of Principal
Receivables), thereby decreasing the likelihood that certain Pay Out Events or
Reinvestment Events based in part on the amount of collections of Finance Charge
Receivables will occur and increasing the likelihood that the Transferor will be
required to designate Additional Accounts. Any such designation that reduces the
Discount Percentage will have the opposite effect. Unless otherwise specified,
all references herein and in any Prospectus Supplement to collections of
Principal Receivables or Finance Charge Receivables are references to such
collections as defined above.
TRUST ACCOUNTS
The Servicer will cause to be established and maintained in the name of the
Trustee, for the benefit of Certificateholders of all Series, a "Collection
Account," which shall be either (a) a segregated trust account established with
the corporate trust department of a Securities Intermediary or (b) a segregated
account with a Securities Intermediary that is an Eligible Institution (a
"Qualified Account"). The Servicer will also cause to be established and
maintained with a Securities Intermediary in the name of the Trustee, an "Excess
Funding Account," which also is required to be a Qualified Account. References
to the "Securities Intermediary" shall refer to the Bank of New York or to any
other entity which is a person, including a bank or broker, that in the ordinary
course of its business maintains securities in accounts for others and is acting
in that capacity and which is also a depository institution organized under the
laws of the United States or any one of the states thereof, including the
District of Columbia (or any domestic branch of a foreign bank), which has a
credit rating from each Rating Agency in one of its generic credit rating
categories which signifies investment grade. An "Eligible Institution" is
defined as (I) a depository institution, which may be the Trustee, organized
under the laws of the United States or any one of the states thereof, including
the District of Columbia (or any domestic branch of a foreign bank) which at all
times (a) has either (i) long-term unsecured debt rating of A-1 or better by
Moody's Investors Service Inc. ("Moody's") or (ii) a certificate of deposit
rating of P-1 by Moody's, (b) has either (i) a long-term unsecured debt rating
of AAA by Standard & Poor's Ratings Group ("Standard & Poor's") or (ii) a
certificate of deposit rating of A-1+ by Standard & Poor's and (c) is a member
of the FDIC or (II) any
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other institution that is acceptable to each Rating Agency. If so qualified, the
Trustee or the Servicer may be considered an Eligible Institution.
Funds in the Collection Account and the Excess Funding Account will be
assets of the Trust and will be invested, at the direction of the Servicer, in
"Eligible Investments" consisting of securities, instruments, security
entitlements or other investment property which evidence: (a) direct obligations
of, and obligations fully guaranteed as to timely payment of principal and
interest by, the United States of America; (b) demand deposits, time deposits or
certificates of deposit (having original maturities of no more than 365 days) of
depository institutions or trust companies incorporated under the laws of the
United States of America or any state thereof (or domestic branches of foreign
banks) 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
investment category of each Rating Agency; (c) commercial paper or other
short-term obligations having, at the time of the Trust's investment or
contractual commitment to invest therein, a rating from each Rating Agency in
its highest investment category; (d) notes or bankers' acceptances (having
original maturities of no more than 365 days) issued by any depository
institution or trust company referred to in (b) above; (e) investments in money
market funds rated in the highest investment category by each Rating Agency or
otherwise approved in writing by each Rating Agency; (f) time deposits, other
than as referred to in clause (e) above, with a person the commercial paper of
which has a credit rating from each Rating Agency in its highest investment
category; or (g) any other investments approved in writing by each Rating
Agency. The Trustee, acting as the initial paying agent (together with any
successor thereto in such capacity and any entity specified in a Series
Supplement to act in such capacity for the related Series, collectively, the
"Paying Agent"), shall have the revocable power to withdraw funds from the
Collection Account for the purpose of making distributions to the
Certificateholders of any Series pursuant to the related Series Supplement.
SERIES PERCENTAGE AND TRANSFEROR PERCENTAGE
Pursuant to the Pooling and Servicing Agreement, the Servicer will allocate
among the Series, including each Class of each Series, and the Transferor's
Interest all amounts collected with respect to Finance Charge Receivables,
Principal Receivables and all Defaulted Receivables. The Servicer will make each
allocation by reference to the applicable Series Percentage for each Series and
the Transferor Percentage in each case. The Series Percentages for each Series
will be as set forth in the related Series Supplement and, with respect to each
Series offered hereby, in each Prospectus Supplement.
The Transferor Percentage in all cases means the excess of 100% over the
aggregate Series Percentages of all Series then outstanding for each category of
Receivables.
APPLICATION OF COLLECTIONS
Except as provided below or in a Series Supplement, the Servicer will
deposit into the Collection Account, no later than the second business day
following the date of processing, any payment collected by the Servicer on the
Receivables; provided, however, that the Servicer need not deposit amounts
allocated to the Transferor Certificates and certain amounts allocated to
Certificateholders of a Series, as specified in the related Series Supplement,
into the Collection Account, and provided, further, that for so long as
Travelers Bank & Trust, fsb remains the Servicer and (x) Travelers Bank & Trust,
fsb maintains a certificate of deposit rating of A-1 or better by Standard &
Poor's and P-1 by Moody's (or such other rating below A-1 or P-1, as the case
may be, that is satisfactory to each Rating Agency), (y) Commercial Credit
Company has a commercial paper rating of at least A-1 and P-1 by Standard &
Poor's and Moody's, Travelers Bank & Trust, fsb remains a direct or indirect
majority-owned Travelers Group Inc. subsidiary and certain other arrangements
are made satisfactory to each Rating Agency or (z) any other arrangement that
satisfies the Rating Agency Condition, the Servicer need not make daily deposits
of collections into the Collection Account, but may make a single monthly
deposit into the Collection Account in immediately available funds. In order to
allow the Servicer to make a single monthly deposit into the Collection Account
by
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satisfying the conditions in clause (y) of the preceding sentence, Commercial
Credit Company will enter into a performance guaranty agreement whereby
Commercial Credit Company will guarantee certain of the servicing obligations of
the Servicer, a form of which agreement has been filed as an Exhibit to the
Registration Statement of which this Prospectus forms a part.
OPERATION OF EXCESS FUNDING ACCOUNT
On any Distribution Date on which the Transferor Amount is less than the
Required Transferor Amount or on which the product of (x) the aggregate amount
of Principal Receivables and (y) one minus the Discount Percentage is less than
the Required Principal Balance, the Servicer will deposit any Shared Principal
Collections that would otherwise be distributed to the holders of the Transferor
Certificates into the Excess Funding Account. On each Business Day on which
funds are on deposit in the Excess Funding Account, the Servicer will determine
the lesser of (x) the amount by which the Transferor Amount exceeds the Required
Transferor Amount and (y) the amount by which the product of (i) the aggregate
amount of Principal Receivables and (ii) one minus the Discount Percentage
exceeds the Required Principal Balance, and will instruct the Trustee to
withdraw such lesser amount, if any, from the Excess Funding Account, to the
extent of the principal amount of funds on deposit therein, and pay such amount
to the holders of the Transferor Certificates. The Servicer will determine, with
respect to each Distribution Date on which one or more Series is in an
Amortization Period, the aggregate amount of Principal Shortfalls, if any, with
respect to each Series that is a Principal Sharing Series and will instruct the
Trustee to withdraw such amount from the Excess Funding Account, to the extent
of the principal amount of funds on deposit therein, and allocate such amount
among each such Series as Shared Principal Collections.
DEFAULTED RECEIVABLES; REBATES AND FRAUDULENT CHARGES
The term "Defaulted Receivables" means, for any Monthly Period, all
Principal Receivables which are charged off as uncollectible in such Monthly
Period in accordance with the Servicer's credit card guidelines and customary
and usual servicing procedures for servicing consumer revolving credit card and
other revolving credit account receivables comparable to the Receivables. A
Principal Receivable shall become a Defaulted Receivable on the day on which
such Principal Receivable is recorded as charged off on the Servicer's computer
master file of consumer revolving credit card accounts but, in any event, shall
be deemed a Defaulted Receivable no later than the month following the day on
which the related Account becomes 180 days contractually delinquent unless the
obligor cures such default by making a partial payment which satisfies the
criteria for curing delinquencies set forth in the Servicer's applicable credit
card guidelines. The term "Defaulted Amount" means, with respect to any Monthly
Period, an amount (which shall not be less than zero) equal to (a) the amount of
Principal Receivables which became Defaulted Receivables in such Monthly Period,
minus (b) the amount of any Defaulted Receivables included in any Account the
Receivables in which the Transferor or the Servicer became obligated to accept
reassignment or assignment in accordance with the terms of the Pooling and
Servicing Agreement during such Monthly Period; provided, however, that, if an
Insolvency Event occurs with respect to the Transferor, the amount of such
Defaulted Receivables which are subject to reassignment to the Transferor in
accordance with the terms of the Pooling and Servicing Agreement shall not be
added to the sum so subtracted and, if certain events involving insolvency occur
with respect to the Servicer, the amount of such Defaulted Receivables which are
subject to reassignment or assignment to the Servicer in accordance with the
terms of the Pooling and Servicing Agreement shall not be added to the sum so
subtracted.
On each day that the Servicer adjusts downward the amount of any Receivable
because of a rebate, refund, unauthorized charge or billing error to a
cardholder, or because such Receivable was created in respect of merchandise
which was refused or returned by a cardholder, or if the Servicer otherwise
adjusts downward the amount of any Receivable without receiving collections
therefor or charging off such amount as uncollectible, then, in any such case,
the amount of Principal Receivables used to calculate the Transferor Amount, the
Series Percentages and any other percentages used to allocate within or among
Series will be reduced by the amount of the adjustment. Similarly, the amount of
Principal Receivables used to calculate the Transferor Amount, the Series
Percentages and any other percentage used to allocate
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within or among Series will be reduced by the amount of any Receivable
discovered to have been created through a fraudulent or counterfeit charge.
Furthermore, in the event that the exclusion of such Principal Receivables from
the calculation of the Transferor Amount at such time would cause the Transferor
Amount to be less than the Required Transferor Amount or the product of (x) the
aggregate amount of Principal Receivables and (y) one minus the Discount
Percentage to be less than the Required Principal Balance, the Transferor shall
be required to pay an amount equal to such deficiency into the Excess Funding
Account (up to the amount of such Principal Receivables).
FINAL PAYMENT OF PRINCIPAL AND INTEREST; TERMINATION
Subject to prior termination as described herein and in the Prospectus
Supplement, the interest of the Certificateholders of a Series in the Trust will
terminate following the earliest of (i) the day after the Distribution Date on
which the final payment of principal and interest is made to the
Certificateholders of such Series, (ii) the date specified for termination in
the applicable Series Supplement ("Stated Series Termination Date" for such
Series) and (iii) the Trust Termination Date. In the event the Investor Amount
of any Series would be greater than zero on the Stated Series Termination Date
for such Series or such earlier date specified in the related Series Supplement,
the Trustee will sell or cause to be sold Principal Receivables and the related
Finance Charge Receivables (or interests therein), as specified in the Pooling
and Servicing Agreement and the related Series Supplement, in an amount equal to
100% of the Investor Amount of the Certificates of such Series and accrued and
unpaid interest thereon on such date (but not more than the applicable Series
Percentages of Receivables on such date for the Certificates of such Series).
The proceeds of such sale will be allocated and distributed in accordance with
the applicable Series Supplement.
The Trust will terminate only on the earliest to occur of (a) the day
following the payment date on which the aggregate Investor Amount and Series
Enhancement investor amounts, if any, of each Series is zero (provided that the
Transferor has delivered a written notice to the Trustee electing to terminate
the Trust) and (b) January 1, 2044 (the "Trust Termination Date"). Upon
termination of the Trust, all right, title and interest in the Receivables and
other funds of the Trust (other than amounts in accounts maintained by the Trust
for the final payment of principal and interest to Certificateholders) will be
conveyed and transferred to the Transferor.
PAY OUT EVENTS AND REINVESTMENT EVENTS
The Revolving Period for a Series will continue through the date specified
in the applicable Prospectus Supplement and the Amortization Period will begin
at such time, unless a Pay Out Event or Reinvestment Event occurs prior to such
time. All Series will commence either a Rapid Amortization Period or (if so
provided in the Series Supplement) a Rapid Accumulation Period upon the
occurrence of a Pay Out Event with respect to all Series. If so provided in the
related Series Supplement, a Pay Out Event with respect to such Series may be
treated as a Reinvestment Event. With respect to each Series, additional events
described in the Prospectus Supplement may constitute a Pay Out Event or
Reinvestment Event. The Rapid Amortization Period for a Series will commence
when a Pay Out Event for such Series occurs and the Rapid Accumulation Period
for a Series will commence when a Pay Out Event with respect to all Series
deemed to constitute a "Reinvestment Event" with respect to such Series or a
Reinvestment Event for such Series as described in the Prospectus Supplement
occurs. A "Pay Out Event" with respect to all Series happens upon the occurrence
of any of the following:
(a) an Insolvency Event relating to the Transferor or an Account Owner;
(b) the Trust shall become subject to regulation by the Commission as an
"investment company" within the meaning of the Investment Company Act of
1940, as amended; or
(c) the Transferor is unable for any reason to transfer Receivables to
the Trust in accordance with the provisions of the Pooling and Servicing
Agreement.
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In addition, a Pay Out Event or Reinvestment Event may occur with respect to
a specific Series if a Pay Out Event or Reinvestment Event affecting such
Series, as specified in the related Series Supplement and described in the
related Prospectus Supplement, occurs with respect to such Series. On the date
on which a Pay Out Event with respect to a Series is deemed to have occurred,
the Rapid Amortization Period with respect to such Series will commence, and on
the date on which a Reinvestment Event with respect to a Series is deemed to
have occurred, the Rapid Accumulation Period with respect to such Series will
commence. If a Rapid Amortization Period commences with respect to a Series,
distributions of principal will be made to the Certificateholders of such Series
in the priority provided for in the related Series Supplement and described in
the related Prospectus Supplement. If, because of the occurrence of a Pay Out
Event, the Rapid Amortization Period begins earlier than the Scheduled
Amortization Date or the expected final payment date of such Series,
Certificateholders of such Series will begin receiving distributions of
principal earlier than they otherwise would have, which may shorten the final
maturity of the Certificates of such Series. If a Rapid Accumulation Period
commences with respect to a Series, collections of Principal Receivables will be
deposited into the Principal Funding Account and used to make distributions of
principal to the Certificateholders of such Series or a Class of such Series on
the expected final payment date for such Series or Class unless a Rapid
Amortization Event subsequently occurs with respect to such Series.
An "Insolvency Event" shall occur if the Transferor, any Additional
Transferor, any Account Owner (including any Additional Account Owner) shall
consent to the appointment of a conservator or receiver or liquidator in any
insolvency, readjustment of debt, marshaling of assets and liabilities or
similar proceedings of or relating to such Transferor or Account Owner or of or
relating to all or substantially all of its property, or a decree or order of a
court or agency or supervisory authority having jurisdiction in the premises for
the appointment of a conservator or receiver or liquidator in any insolvency,
readjustment of debt, marshaling of assets and liabilities or similar
proceedings, or for the winding-up or liquidation of its affairs, shall have
been entered against the Transferor or Account Owner; or the Transferor or an
Account Owner shall admit in writing its inability to pay its debts generally as
they become due, file a petition to take advantage of any applicable insolvency
or reorganization statute, make any assignment for the benefit of its creditors
or voluntarily suspend payment of its obligations.
If an Insolvency Event occurs with respect to the Transferor or an Account
Owner, the Transferor will immediately cease to transfer Principal Receivables
to the Trust and promptly notify the Trustee thereof.
If the portion of such proceeds allocated to the Certificateholders and the
proceeds of any collections on the Receivables in the Collection Account and the
amounts available under any Series Enhancement are not sufficient to pay in full
the remaining amount due on the Certificates, the Certificateholders will suffer
a corresponding loss. See "Certain Legal Aspects of the Receivables--Certain
Matters Relating to Insolvency" for a discussion of the impact of Federal
legislation on the Trustee's ability to liquidate the Receivables.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
The Servicer's compensation for its servicing activities and reimbursement
for its expenses for any Monthly Period will be a servicing fee (the "Servicing
Fee") payable monthly on the related Distribution Date in an amount equal to
one-twelfth of the product of (a) the weighted average of the applicable
servicing fee rates with respect to each Series outstanding (based upon the
applicable servicing fee rate for each Series and the Investor Amount of such
Series or other amount specified in the applicable Series Supplement) and (b)
the amount of Principal Receivables outstanding on the last day of the prior
Monthly Period. The Servicing Fee will be allocated among the Transferor's
Interest and the Certificateholders' Interests of all Series. The share of the
Servicing Fee allocable to the Certificateholders' Interest of a particular
Series (the "Monthly Servicing Fee") will be determined in accordance with the
applicable Series Supplement. The remainder of the Servicing Fee shall be paid
by the Certificateholders of other Series and by the holders of the Transferor
Certificates and in no event shall the Trust, the Trustee or the
Certificateholders of any Series be liable for the share of the Servicing Fee to
be paid by the holders of the Transferor Certificates. Unless otherwise provided
in any Series Supplement, in the case of the first
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Monthly Period with respect to any Series, the Monthly Servicing Fee will accrue
from the Relevant Closing Date.
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, any Paying
Agent and 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 Certificateholders of a Series other than Federal,
state, local and foreign income, franchise or other taxes, if any, or any
interest or penalties with respect thereto, imposed upon the Trust.
CERTAIN MATTERS REGARDING THE SERVICER
The Servicer may not resign from its obligations and duties under the
Pooling and Servicing Agreement, except upon determination that (i) the
performance of its duties under the Pooling and Servicing Agreement is no longer
permissible under applicable law and (ii) there is no reasonable action which
the Servicer could take to make the performance of its duties thereunder
permissible under applicable law. Any such determination permitting the
resignation of the Servicer will be evidenced by an opinion of counsel to such
effect delivered to the Trustee. No such resignation will become effective until
the Trustee or a successor Servicer that is an Eligible Servicer shall have
assumed the responsibilities and obligations of the Servicer in accordance with
the Pooling and Servicing Agreement.
"Eligible Servicer" means the Trustee, or if the Trustee is not acting as
Servicer, an entity which, at the time of its appointment as Servicer, (i) is
servicing a portfolio of revolving credit card accounts, (ii) is legally
qualified and has the capacity to service the Accounts, (iii) has demonstrated
the ability to professionally and completely service a portfolio of similar
accounts in accordance with high standards of skill and care, (iv) is qualified
to use the software that is then being used to service the Accounts or obtains
the right to use, or has its own software, which is adequate to perform its
duties under the Pooling and Servicing Agreement, and (v) has a net worth or
capital and surplus of at least $50,000,000 as of the end of its most recent
fiscal quarter.
Pursuant to the Pooling and Servicing Agreement, Travelers Bank & Trust,
fsb, as Servicer has the right to delegate any of its responsibilities and
obligations as Servicer to any entity that agrees to conduct such duties in
accordance with the Pooling and Servicing Agreement and the Account Owners'
credit card guidelines; provided, that in the case of a significant delegation
to an entity other than an Account Owner, or any affiliate of an Account Owner,
(i) at least 30 days' prior written notice must be given to the Trustee and each
Rating Agency of such delegation and (ii) at or prior to the end of such 30-day
period the Servicer must determine that the Rating Agency Condition has been
met.
INDEMNIFICATION
The Pooling and Servicing Agreement provides that the Servicer will
indemnify and hold harmless the Trust and the Trustee from and against any loss,
liability, expense, damage or injury suffered or sustained by reason of any acts
or omissions of the Servicer with respect to the Trust pursuant to the Pooling
and Servicing Agreement, including any judgment, award, settlement, reasonable
attorneys' fees and other costs or expenses incurred in connection with the
defense of any action, proceeding or claim; provided, however, that the Servicer
will not indemnify: (i) the Trustee if such acts or omissions constitute or are
caused by fraud, negligence, or willful misconduct by the Trustee; (ii) the
Trust, the Certificateholders or the Certificate Owners for any liabilities,
costs or expenses of the Trust with respect to any action taken by the Trustee
at the request of the Certificateholders; (iii) the Trust, the
Certificateholders or the Certificate Owners as to any losses, claims or damages
incurred by any of them in their capacities as investors, including without
limitation losses incurred as a result of Defaulted Receivables; or (iv) the
Trust, Certificateholders or Certificate Owners for any liabilities, costs or
expenses of the Trust, the Certificateholders or the Certificate Owners arising
under any tax law, including without limitation, any Federal, state, local or
foreign income or franchise taxes or any other tax imposed on or measured by
income (or any interest or penalties with respect thereto) required to be paid
by the Trust, the Certificateholders or the Certificate Owners in connection
herewith to any taxing authority. Any such indemnifications will not
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be payable from the Trust Assets; provided further, however, that the Servicer
shall indemnify the Trust for any property, sales, excise or similar taxes
imposed on or with respect to the Receivables.
SERVICER DEFAULT
In the event of any Servicer Default, so long as the Servicer Default shall
not have been remedied, the Trustee, or Certificateholders evidencing more than
50% of the aggregate Investor Amount of the Certificates of all Series, by
notice to the Servicer (and to the Trustee if given by Certificateholders) (a
"Termination Notice"), may terminate all but not less than 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. The rights and
interest of the Transferor under the Pooling and Servicing Agreement and in the
Transferor Certificates will not be affected by such termination; provided,
however, if within 60 days of receipt of a Termination Notice, the Trustee does
not receive any bids from Eligible Servicers in accordance with the Pooling and
Servicing Agreement to act as a successor Servicer and receives an officer's
certificate of the Servicer to the effect that the Servicer cannot in good faith
cure the Servicer Default which gave rise to the Termination Notice, then the
Trustee will offer the Transferor the right at its option to purchase the
Certificateholders' Interest on the next succeeding Distribution Date. The
purchase price for the Certificateholders' Interest will be equal to the sum of
the amounts specified therefor in the related Series Supplements. The Transferor
will notify the Trustee in writing prior to the Record Date for the Distribution
Date of the purchase if it is exercising such option. If the Transferor
exercises such option, the Transferor will (i) if the Transferor's short-term
deposits or long-term unsecured debt obligations are not rated at the time at
least P-3 or Baa3, respectively, by Moody's, deliver to the Trustee an opinion
of counsel (which must be an independent outside counsel), to the effect that
the purchase would not be considered a fraudulent conveyance and (ii) deposit
the purchase price into the Collection Account on such Distribution Date in
immediately available funds.
A "Servicer Default" refers to any of the following events:
(a) any failure by the Servicer to make any payment, transfer or deposit
or to give instructions or notice to the Trustee pursuant to the Pooling and
Servicing Agreement or any Series Supplement on or before the date occurring
five business days after the date such payment, transfer, deposit or such
instruction or notice is required to be made or given, as the case may be,
under the terms of the Pooling and Servicing Agreement or any Series
Supplement;
(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 set
forth in the Pooling and Servicing Agreement or any Series Supplement, which
has a material adverse effect on the Certificateholders of any Series or
Class and which failure continues unremedied for a period of 60 days after
the date on which written notice of such failure, requiring the same to be
remedied, shall have been given to the Servicer by the Trustee, or to the
Servicer and the Trustee by Certificateholders evidencing more than 50% of
the aggregate Investor Amount of all Series then outstanding (or, with
respect to any failure that does not relate to all Series, the Series to
which such failure relates); or the Servicer shall delegate its duties under
the Pooling and Servicing Agreement except as permitted under the terms
thereof, a responsible officer of the Trustee has actual knowledge of such
delegation and such delegation continues unremedied for 15 days after the
date on which written notice thereof, requiring the same to be remedied,
shall have been given to the Servicer by the Trustee, or to the Servicer and
the Trustee by Certificateholders evidencing more than 50% of the aggregate
Investor Amount of all Series;
(c) any representation, warranty or certification made by the Servicer
in the Pooling and Servicing Agreement or any Series Supplement or in any
certificate delivered pursuant to the Pooling and Servicing Agreement or any
Series Supplement shall prove to have been incorrect when made, which has a
material adverse effect on the Certificateholders of any Series or Class and
which continues to be incorrect in any material respect for a period of 60
days after the date on which written notice of such failure, requiring the
same to be remedied, shall have been given to the Servicer by the Trustee,
or to the Servicer and the Trustee by Certificateholders evidencing more
than 50% of
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the aggregate Investor Amount of all Series then outstanding (or, with
respect to any such representation, warranty or certification that does not
relate to all Series, the Series to which such representation, warranty or
certification relates); or
(d) the Servicer shall consent to the appointment of a conservator or
receiver or liquidator in any insolvency, readjustment of debt, marshalling
of assets and liabilities or similar proceedings of or relating to the
Servicer or of or relating to all or substantially all of its property, or a
decree or order of a court or agency or supervisory authority having
jurisdiction in the premises for the appointment of a conservator or
receiver or liquidator in any insolvency, readjustment of debt, marshalling
of assets and liabilities or similar proceedings, or for the winding-up or
liquidation of its affairs, shall have been entered against the Servicer and
such decree or order shall have remained in force undischarged or unstayed
for a period of 60 days; or the Servicer shall admit in writing its
inability to pay its debts generally as they become due, file a petition to
take advantage of any applicable insolvency or reorganization statute, make
any assignment for the benefit of its creditors or voluntarily suspend
payment of its obligations.
Notwithstanding the foregoing, a delay in or failure of performance under
clauses (a), (b) or (c), will not, for certain limited periods, constitute a
Servicer Default if such delay or failure (i) could not be prevented by the
exercise of reasonable diligence by the Servicer and (ii) was caused by an act
of God or the public enemy, acts of declared or undeclared war, terrorism,
public disorder, rebellion or sabotage, epidemics, landslides, lightning, fire,
hurricanes, earthquakes, floods or similar causes. The preceding sentence will
not relieve the Servicer from using its best efforts to perform its respective
obligations in a timely manner in accordance with the terms of the Pooling and
Servicing Agreement and any Series Supplement and the Servicer will provide the
Trustee, each Rating Agency, the holders of the Transferor Certificates and the
Certificateholders of all Series with an officer's certificate giving prompt
notice of such failure or delay by it, together with a description of its
efforts to so perform its obligations.
REPORTS TO CERTIFICATEHOLDERS
Unless otherwise specified in the related Prospectus Supplement, on each
Distribution Date of a Series, the Paying Agent will forward to each
Certificateholder of record of such Series a statement prepared by the Servicer
setting forth, among other things, (a) the total amount distributed to
Certificateholders of each Class of such Series, (b) the amount of any
distribution allocable to principal on such Certificates including the amount,
if any, distributed from any Pre-Funding Account created for such Series, (c)
the amount of such distribution allocable to interest on such Certificates, (d)
the aggregate amount of collections processed during the prior Monthly Period
and allocated in respect of the Certificates, (e) the amount of collections of
Principal Receivables processed during the prior Monthly Period and allocated in
respect of the Certificates, (f) the amount of collections of Finance Charge
Receivables processed during the prior Monthly Period and allocated in respect
of the Certificates, (g) the Series Percentage with respect to each Class of
Certificates with respect to Principal Receivables and Finance Charge
Receivables, each as of the end of the last day of the prior Monthly Period, (h)
the aggregate outstanding balance of Accounts which are 30 or more days
contractually delinquent, by class of delinquency, as of the end of the last day
of the prior Monthly Period, (i) the Defaulted Amount for the prior Monthly
Period, (j) the amount of the Monthly Servicing Fee for each Class for the prior
Monthly Period, (k) the amount of any Series Enhancement, if any, available with
respect to each Class as of the close of business on such Distribution Date ,
(l) the amount remaining on deposit in the Pre-Funding Account, if any and (m)
the Investor Amount after giving effect to payments on such Distribution Date
including any payments made from any Pre-Funding Account.
On or before a date of each calendar year specified in the related
Prospectus Supplement, ending in the year following the date a Series
terminates, the Paying Agent will furnish to each person who at any time during
the preceding calendar year was a Certificateholder of record of such Series a
statement prepared by the Servicer containing the information required to be
contained in the regular monthly report to Certificateholders of such Series, as
set forth in clauses (a), (b) and (c) above, aggregated for such calendar year
or the applicable portion thereof during which such person was a
Certificateholder, together
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with such other customary information (consistent with the treatment of the
Certificates as debt) as the Trustee or the Servicer deems necessary or
desirable to enable the Certificateholders of such Series to prepare their tax
returns.
EVIDENCE AS TO COMPLIANCE
The Pooling and Servicing Agreement provides that on or before March 31 of
each calendar year (beginning in 1999), the Servicer will cause a firm of
nationally recognized independent public accountants (who may also render other
services to the Servicer, the Transferor or any Account Owner) to furnish a
report (addressed to the Trustee) to the effect that such firm has applied
certain agreed-upon procedures to certain documents and records relating to the
servicing of the Receivables for the prior calendar year and that, based upon
such agreed-upon procedures, no matters came to their attention that caused them
to believe that such servicing (including the allocations of collections) was
not conducted in compliance with certain applicable terms and conditions set
forth in the Pooling and Servicing Agreement and any Series Supplements except
for such exceptions 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 (beginning in 1999) of a statement
signed by an authorized 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 and any Series Supplements
throughout the preceding year or, if there has been a default in the performance
of any such obligations, 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 or any Series Supplement may be amended
from time to time (including, among other things, in connection with the
provision of additional Series Enhancement for the benefit of the
Certificateholders of any Series or the reduction of such Series Enhancement,
the issuance of a Supplemental Certificate, the addition of a Participation
Interest to the Trust or the designation of an Additional Transferor) by the
Transferor, the Servicer and the Trustee, without Certificateholder consent,
provided that the Transferor has delivered to the Trustee an officer's
certificate to the effect that the Transferor reasonably believes that such
amendment will not have an Adverse Effect and that the Rating Agency Condition
has been satisfied. In addition, the Pooling and Servicing Agreement or any
Series Supplement may be amended from time to time without notice to or consent
of the Certificateholders and without satisfaction of the Rating Agency
Condition to (i) enable all or a portion of the Trust to qualify as a "financial
asset securitization investment trust" under the Code or (ii) to enable the
trust to qualify as a partnership for purposes of any state tax laws.
The Pooling and Servicing Agreement or any Series Supplement may also be
amended by the Transferor, the Servicer and the Trustee with the consent of the
holders of Certificates evidencing not less than 66 2/3% of the aggregate
Investor Amount of all adversely affected Series of Certificates for the purpose
of adding any provisions to, changing in any manner or eliminating any of the
provisions of the Pooling and Servicing Agreement or any Series 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
distributions to be made to Certificateholders or deposits of amounts to be so
distributed or the amount available under any Series Enhancement without the
consent of each affected Certificateholder, (b) change the definition of or the
manner of calculating the interest of any Certificateholder without the consent
of each affected Certificateholder, (c) reduce the aforesaid percentage required
to consent to any such amendment without the consent of each Certificateholder
or (d) adversely affect the rating of any Series or Class by any Rating Agency
without the consent of Certificateholders of such Series or Class evidencing not
less than 66 2/3% of the aggregate Investor Amount of such Series or Class. Any
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amendment shall be deemed not to adversely affect any outstanding Series with
respect to which the Transferor delivers an opinion of counsel that such
amendment will not have an Adverse Effect with respect to such Series. Promptly
following the execution of any such amendment, the Trustee will furnish written
notice (provided to the Trustee by the Servicer) of the substance of such
amendment to each Certificateholder.
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.
DEFEASANCE
Pursuant to the Pooling and Servicing Agreement, the Transferor may
terminate its substantive obligations in respect of any Series or all
outstanding Series (the "Defeased Series") by depositing with the Trustee (such
deposit to be made from other than the Transferor's or any affiliate of the
Transferor's funds), under the terms of an irrevocable trust agreement
satisfactory to the Trustee, monies or Eligible Investments (or a combination
thereof) sufficient to make all remaining scheduled interest and principal
payments on the Defeased Series on the dates scheduled for such payments and to
pay all amounts owing to any provider of Series Enhancement with respect to such
Defeased Series. To achieve that end, the Transferor has the right to use
collections on Receivables allocated to the Defeased Series and available to
purchase additional Receivables to be applied to purchase Eligible Investments
rather than additional Receivables. Prior to the first exercise of the right to
substitute monies or Eligible Investments for Receivables, the Transferor shall
deliver to the Trustee an opinion of counsel to the effect that such deposit and
termination of obligations will not cause the Trust to be an association or
publicly traded partnership taxable as a corporation, and shall deliver to the
Servicer and the Trustee written notice from each Rating Agency that the Rating
Agency Condition shall have been satisfied. In addition, the Transferor must
comply with certain other requirements set forth in the Pooling and Servicing
Agreement, including requirements that the Transferor deliver to the Trustee an
opinion of counsel to the effect that the deposit and termination of obligations
will not require the Trust to register as an "investment company" within the
meaning of the Investment Company Act of 1940, as amended, and that the
Transferor deliver to the Trustee and certain providers of Series Enhancement a
certificate of an authorized officer stating that, based on the facts known to
such officer at the time, in the reasonable opinion of the Transferor, such
deposit and termination of obligations will not at the time of its occurrence
cause a Pay Out Event or Reinvestment Event or an event that, after the giving
of notice or the lapse of time, would constitute a Pay Out Event or Reinvestment
Event to occur with respect to any Series. If the Transferor discharges its
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substantive obligations in respect of the Defeased Series, any Series
Enhancement for the affected Series might no longer be available to make
payments with respect thereto.
LIST OF CERTIFICATEHOLDERS
Upon application of Certificateholders of record representing undivided
interests in the Trust aggregating not less than 10% of the aggregate unpaid
principal amount of any Series or all Series, as applicable, the Trustee will,
having been adequately indemnified by such Certificateholders, within five
business days of such request, afford such Certificateholders access during
business hours to the current list of registered Certificateholders of such
Series or all Series, as applicable, for purposes of communicating with other
Certificateholders with respect to their rights under the Pooling and Servicing
Agreement or any Series Supplement or the Certificates.
THE TRUSTEE
The Bank of New York, a New York banking corporation, will be Trustee under
the Pooling and Servicing Agreement. The Transferor, the Servicer and their
respective affiliates may from time to time enter into normal banking and
trustee relationships with the Trustee and its affiliates. The Trustee, the
Transferor, the Servicer and any of their respective affiliates may hold
Certificates in their own names. In addition, for purposes of meeting the legal
requirements of certain local jurisdictions, the Trustee shall have the power to
appoint a co-trustee or separate trustees of all or any part of the Trust. In
the event of such appointment, all rights, powers, duties and obligations
conferred or imposed upon the Trustee by the Pooling and Servicing Agreement
shall be conferred or imposed upon the Trustee and such separate trustee or
co-trustee jointly, or, in any jurisdiction in which the Trustee shall be
incompetent or unqualified to perform certain acts, singly upon such separate
trustee or co-trustee who shall exercise and perform such rights, powers, duties
and obligations solely at the direction of the Trustee.
The Trustee may resign at any time, in which event the Servicer will be
obligated to appoint a successor Trustee. The Servicer may also remove the
Trustee if the Trustee ceases to be eligible to continue as such under the
Pooling and Servicing Agreement, is legally unable to act or if the Trustee
becomes bankrupt or insolvent. In such circumstances, the Servicer will be
obligated to appoint a successor Trustee. Any resignation or removal of the
Trustee and appointment of a successor Trustee does not become effective until
acceptance of the appointment by the successor Trustee.
SERIES ENHANCEMENT
GENERAL
For any Series, Series Enhancement may be provided with respect to one or
more Classes thereof. Series Enhancement may be in the form of the subordination
of one or more Classes of the Certificates of such Series, a letter of credit,
the establishment of a cash collateral guaranty or account, a collateral
interest, a surety bond, insurance, the use of cross support features or another
method of Series Enhancement described in the related Prospectus Supplement, or
any combination of the foregoing. If so specified in the related Prospectus
Supplement, any form of Series Enhancement may be structured so as to be drawn
upon by more than one Class to the extent described therein.
Unless otherwise specified in the related Prospectus Supplement for a
Series, the Series Enhancement will not provide protection against all risks of
loss and will not guarantee repayment of the entire principal balance of the
Certificates and interest thereon. If losses occur which exceed the amount
covered by the Series Enhancement or which are not covered by the Series
Enhancement, Certificateholders will bear their allocable share of deficiencies.
If Series Enhancement is provided with respect to a Series, the related
Prospectus Supplement will include a description of (a) the amount payable under
such Series Enhancement, (b) any conditions to payment thereunder not otherwise
described herein, (c) the conditions (if any) under which the amount payable
under such Series Enhancement may be reduced and under which such Series
Enhancement may be terminated or replaced and (d) any provisions of any
agreement relating to such Series Enhancement material to the Certificateholders
of such Series. Additionally, the related Prospectus Supplement may set
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forth certain information with respect to the issuer of any third-party Series
Enhancement, including (i) a brief description of its principal business
activities, (ii) its principal place of business, place of incorporation and the
jurisdiction under which it is chartered or licensed to do business, (iii) if
applicable, the identity of regulatory agencies which exercise primary
jurisdiction over the conduct of its business and (iv) its total assets, and its
stockholders' or policyholders' surplus, if applicable, as of the date specified
in the Prospectus Supplement.
SUBORDINATION
If so specified in the related Prospectus Supplement, one or more Classes of
a Series may be subordinated to one or more other Classes of a Series. If so
specified in the related Prospectus Supplement, the rights of the holders of the
subordinated Class or Classes to receive distributions of principal and/or
interest on any Distribution Date will be subordinated to such rights of the
holders of the Class or Classes which are senior to such subordinated Class or
Classes to the extent set forth in the related Prospectus Supplement. The amount
of subordination may decrease whenever certain amounts otherwise payable to the
holders of subordinated Class or Classes are paid to the holders of the Class or
Classes that are senior to such subordinated Class or Classes.
LETTER OF CREDIT
If so specified in the related Prospectus Supplement, a letter of credit
with respect to a Series or Class of Certificates may be issued by the bank or
financial institution specified in the related Prospectus Supplement (the "L/C
Bank"). Under the letter of credit, the L/C Bank will be obligated to honor
drawings thereunder in an aggregate fixed dollar amount, net of unreimbursed
payments thereunder, equal to the amount described in the related Prospectus
Supplement. The amount available under the letter of credit will be reduced to
the extent of the unreimbursed payments thereunder.
CASH COLLATERAL GUARANTY OR ACCOUNT
If specified in the related Prospectus Supplement, the Certificates of any
Class or Series may have the benefit of a Cash Collateral Guaranty issued
pursuant to a trust agreement between a cash collateral depositor, a cash
collateral trustee and the Transferor and the Servicer or a Cash Collateral
Account directly. The Cash Collateral Guaranty will generally be an obligation
of the cash collateral trust and not of the cash collateral depositor, the cash
collateral trustee (except to the extent of amounts on deposit in the cash
collateral account), the Trustee, the Transferor, the Servicer or any Account
Owner.
The Servicer will determine on each Determination Date with respect to the
Series enhanced by the Cash Collateral Guaranty or the Cash Collateral Account
whether a deficiency exists with respect to the payment of interest and/or
principal on the Certificates so enhanced. If the Servicer determines that a
deficiency exists, it shall instruct the Trustee to draw an amount equal to such
deficiency from the Cash Collateral Guaranty or the Cash Collateral Account, up
to the maximum amount available thereunder.
COLLATERAL INTEREST
If so specified in the Prospectus Supplement, support for a Series of
Certificates or one or more Classes thereof may be provided initially by a
certificated or 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.
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SURETY BOND OR INSURANCE POLICY
If so specified in the related Prospectus Supplement, insurance with respect
to a Series or Class of Certificates 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 such Series
to assure distributions of interest or principal with respect to such Series or
Class of Certificates in the manner and amount specified in the related
Prospectus Supplement.
SPREAD ACCOUNT
If so specified in the related Prospectus Supplement, support for a Series
or one or more Classes of a Series may be provided by the periodic deposit of
certain available excess cash flow from the Trust Assets into an account (the
"Spread Account") intended to assure the subsequent distribution of interest and
principal on the Certificates of such Class or Series in the manner specified in
the related Prospectus Supplement.
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES
TRANSFER OF RECEIVABLES
Under the Receivables Transfer Agreements, the Banks, and any Additional
Account Owners, will sell the Receivables to the Transferor and the Transferor,
in turn, will transfer the Receivables to the Trust. Each Account Owner and the
Transferor represents and warrants that its respective transfer constitutes a
valid sale and assignment 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 Uniform Commercial Code ("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 any designation of 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.
Each Account Owner and the Transferor represents and warrants 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
appropriate financing statements is required to perfect the security interest of
the Trust. If a transfer of general intangibles is deemed to create a security
interest, the UCC applies and filing of an appropriate financing statement is
also required in order to perfect the Trust's security interest in the
Receivables. Financing statements covering the Receivables will be filed with
the appropriate governmental authority to protect the interests of the Trust in
the Receivables. If a transfer of general intangibles is deemed not to create a
security interest, the filing of a financing statement is not required to
protect the Trust's interest from third parties, although some other action
under applicable state law may be required.
There are certain limited circumstances in which a prior or subsequent
transferee of Receivables coming into existence after the date on which such
Receivables are transferred to the Trust could have an interest in such
Receivables with priority over the Trust's interest. Under the Receivables
Transfer Agreement, each Account Owner warrants, and under the Pooling and
Servicing Agreement, the Transferor warrants, that it has transferred the
Receivables free and clear of the lien of any third party, except for certain
tax and governmental liens and other nonconsensual liens. In addition, each of
the Account Owners and the Transferor covenants that, except as permitted by the
Pooling and Servicing Agreement, it
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will not sell, pledge, assign, transfer or grant any lien on any Receivable (or
any interest therein) other than to the Transferor or the Trust. A tax or other
government lien or other nonconsensual lien on property of the Transferor
arising prior to the time a Receivable comes into existence may, however, have
priority over the interest of the Trust in such Receivable. In addition, if the
FDIC were appointed as receiver or conservator of one of the Banks, certain
administrative expenses of the receiver or conservator or, with respect to The
Travelers Bank USA, the Delaware State Bank Commissioner, and certain borrowings
made by the receiver or conservator or, with respect to The Travelers Bank USA,
the Delaware State Bank Commissioner, may also have priority over the interest
of the Trust in the Receivables arising from the Accounts owned by such Bank.
CERTAIN MATTERS RELATING TO INSOLVENCY
The Travelers Bank USA is chartered as a Delaware banking corporation and is
subject to regulation and supervision by the Delaware State Bank Commissioner.
If The Travelers Bank USA becomes insolvent or is in an unsound condition or if
certain other circumstances occur, the Delaware State Bank Commissioner may
request the Attorney General of Delaware to apply to the Delaware Court of
Chancery for an order appointing a receiver for such Bank. Since The Travelers
Bank USA is a FDIC-insured bank, Delaware law would require that the FDIC be
appointed receiver and, as a matter of federal law, the FDIC would be
authorized, but not obligated, to accept such appointment.
Travelers Bank & Trust, fsb is a federally-chartered savings bank and is
subject to regulation and examination by the Office of Thrift Supervision. If
Travelers Bank & Trust, fsb were to become insolvent or if certain other
circumstances were to occur, the Director of the Office of Thrift Supervision is
empowered to appoint a conservator or receiver. The FDIC could be appointed as a
conservator or receiver of Travelers Bank & Trust, fsb.
The FDIA, as amended by FIRREA, sets forth certain powers that the FDIC
could exercise if it were appointed as receiver or conservator of a Bank.
Positions taken by the FDIC staff prior to the passage of FIRREA do not suggest
that the FDIC, as conservator or receiver for the relevant Bank, would interfere
with the timely transfer to a Trust of payments collected on the related
Receivables. If, however, the FDIC were to assert a contrary position, such as
requiring the Transferor or the Trustee to establish its right to those payments
by submitting to and completing the administrative claims procedure under the
FDIA, or the conservator or receiver were to request a stay of proceedings with
respect to the Transferor or the Trust as provided under the FDIA, delays in
payments on the related Series of Certificates and possible reductions in the
amount of those payments could occur. In addition, the FDIC, if appointed as
conservator or receiver for a Bank, has the power under the FDIA to repudiate
contracts, including secured contracts of such Bank. The FDIA provides that a
claim for damages arising from the repudiation of a contract is limited to
"actual direct compensatory damages." In the event the FDIC were to be appointed
as conservator or receiver of a Bank and were to repudiate the Receivables
Transfer Agreement, then the amount payable out of available collateral to the
Certificateholders could be lower than the outstanding principal and accrued
interest on the Certificates.
The U.S. Court of Appeals for the Tenth Circuit, in OCTAGON GAS SYSTEM, INC.
V. RIMMER decided May 27, 1993, concluded that "accounts," as defined under the
UCC, and which could include the Receivables, may properly be included in the
bankruptcy estate of a transferor regardless of whether the transfer of such
Receivables is treated as a sale or a secured loan. The circumstances under
which the OCTAGON ruling would apply are not fully known and the extent to which
the OCTAGON decision will be followed in other courts or outside of the Tenth
Circuit is not certain. If the findings in the OCTAGON case were applied in a
bankruptcy of the Transferor, the Receivables would be part of its bankruptcy
estate, would be subject to claims of certain creditors and would be subject to
the potential delays and reductions in payments to the Trust and the
Certificateholders even if the transfer is treated as a sale.
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
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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 Commercial
Credit Company are unlikely. In addition, if Commercial Credit Company were to
become a debtor in a bankruptcy case and a creditor or bankruptcy trustee of
Commercial Credit Company or Commerical Credit Company itself were to request a
bankruptcy court to order that the Transferor be substantively consolidated with
Commercial Credit Company, delays in and reductions in the amount of
distributions on the Certificates could occur. 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.
While Travelers Bank & Trust, fsb is the Servicer, cash collections held by
the Servicer may, subject to certain conditions, be commingled and used for the
benefit of Travelers Bank & Trust, fsb prior to each Distribution Date and, in
the event of the bankruptcy, insolvency or receivership of Travelers Bank &
Trust, fsb or, in certain circumstances, the lapse of certain time periods, the
Trust may not have a perfected interest in such collections and accordingly, may
not be entitled to such collections. The Servicer will be allowed to make
monthly rather than daily deposits of collections to the Collection Account if
any of the following conditions are satisfied: (i) Travelers Bank & Trust, fsb
maintains a commercial paper rating of at least A-1 and P-1 by Standard & Poor's
and Moody's, as applicable, (for such other rating below A-1 or P-1, as the case
may be, that is acceptable to each Rating Agency), (ii) Commercial Credit
Company has a commercial paper rating of at least A-1 and P-1 by Standard &
Poor's and Moody's, Travelers Bank & Trust, fsb remains a direct or indirect
majority-owned Travelers Group Inc. subsidiary and certain other arrangements
are made satisfactory to each Rating Agency or (iii) any other arrangement that
satisfies the Rating Agency Condition. If none of the foregoing conditions are
satisfied, then Travelers Bank & Trust, fsb will, within five business days,
commence the deposit of collections directly into the Collection Account within
two business days of the Date of Processing.
The Pooling and Servicing Agreement provides that, upon the commencement of
an Insolvency Event with respect to the Transferor or an Account Owner, the
Transferor will promptly give notice thereof to the Trustee, and a Pay Out Event
with respect to all Series will occur. Under the Pooling and Servicing
Agreement, no new Principal Receivables will be transferred to the Trust. Upon
the occurrence of a Pay Out Event or a Reinvestment Event, if a conservator or
receiver is appointed for the Transferor or an Account Owner, and no Pay Out
Event or Reinvestment Event other than such conservatorship or receivership or
insolvency of the Transferor or such Account Owner exists, the conservator or
receiver may have the power to prevent the commencement of a Rapid Amortization
Period or Rapid Accumulation Period with respect to any outstanding Series. In
addition, a conservator or receiver for the Transferor or such Account Owner may
have the power to cause the early sale of the Receivables and the early payment
of the Certificates or to prohibit the continued transfer of Principal
Receivables to the Trust.
In the event of a Servicer Default, if a conservator or receiver is
appointed for the Servicer, and no Servicer Default other than such
conservatorship or receivership or insolvency of the Servicer exists, the
conservator or receiver may have the power to prevent either the Trustee or
Certificateholders from effecting a transfer of servicing to a successor
Servicer.
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CONSUMER PROTECTION LAWS
The relationship of the cardholder and credit card issuer is extensively
regulated by federal and state consumer protection laws. With respect to credit
cards issued by the Banks, the most significant of these laws include the
Federal Truth-in-Lending Act, Equal Credit Opportunity Act, Fair Credit
Reporting Act, Fair Debt Collection Practices Act and Electronic Funds Transfer
Act, and comparable statutes in the states in which cardholders reside. These
statutes impose disclosure requirements when a credit card account is
advertised, when it is opened, at the end of monthly billing cycles, upon
account renewal for accounts on which annual fees are assessed, and at year end
and, in addition, limit cardholder liability for unauthorized use, prohibit
certain discriminatory practices in extending credit, and impose certain
limitations on the type of account-related charges that may be assessed. Federal
legislation requires credit card issuers to disclose to consumers the interest
rates, annual cardholder fees and other related fees, and balance calculation
methods associated with their credit card accounts. Cardholders are entitled
under current law to have payments and credits applied to the credit card
account promptly, to receive prescribed notices and to have billing errors
resolved promptly. 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 of the Account Owner with
respect to obligations arising before transfer of the Receivables to the Trust
or as a party directly responsible for obligations arising after the transfer.
In addition, a cardholder may be entitled to assert such violations by way of
set-off against his obligation to pay the amount of Receivables owing. 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 applicable Account Owner. The Servicer has
also agreed in the Pooling and Servicing Agreement to indemnify the Trust for,
among other things, any liability arising from such violations. See "The Pooling
and Servicing Agreement Generally--Representations, Warranties and Covenants."
Application of Federal and state bankruptcy and debtor relief laws would
adversely affect the interests of the Certificateholders if such laws result in
any Receivables being written off as uncollectible. See "The Pooling and
Servicing Agreement Generally--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
Rapid Amortization Period or Rapid Accumulation Period would commence. See "The
Pooling and Servicing Agreement Generally-- Pay Out Events and Reinvestment
Events."
RECENT LITIGATION
Since October 1991, a number of lawsuits and administrative actions have
been filed in several states against out-of-state banks (both federally-insured
state-chartered banks and federally-insured national banks) which issued credit
cards. These actions challenge various fees and charges (such as late fees,
over-the-limit fees, returned check charges and annual membership fees) assessed
against residents of the states in which such suits were filed, based on
restrictions or prohibitions under such states' laws alleged to be applicable to
the out-of-state credit card issuers. The Supreme Courts of California, Colorado
and New Jersey have recently issued decisions in such actions. The California
and Colorado Supreme Courts opined that federal law governed late fees and found
for the respective defendant banks, while the New Jersey Supreme Court found
that late payment fees are not interest and that, therefore, state law is not
preempted by federal law with respect to such fees. On June 3, 1996, the United
States Supreme Court upheld the decision of the California Supreme Court,
holding that the late payment fees in question were
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"interest" and as such were governed by federal law, which authorizes
federally-insured state banks to charge out-of-state customers an interest rate
allowed by the bank's home state.
FEDERAL INCOME TAX CONSEQUENCES
GENERAL
The following is a general discussion of material federal income tax
consequences relating to the purchase, ownership and disposition of a
Certificate offered hereunder which discussion has been prepared by Orrick,
Herrington & Sutcliffe LLP, special federal income tax counsel to the Transferor
("Special Tax Counsel"). Additional material federal income tax considerations,
if any, relevant to a particular Series will be set forth in the related
Prospectus Supplement. Special Tax Counsel is of the opinion that this
discussion is correct in all material respects. As more fully described below,
Special Tax Counsel is also of the opinion that the offered Certificates will be
characterized as debt for federal income tax purposes and that the Trust will
not be treated as an association or publicly traded partnership taxable as a
corporation for such purposes. Except as provided in a related Prospectus
Supplement, Special Tax Counsel will render no other opinions to the Transferor
with respect to the offered Certificates or the Trust. This discussion is
intended as an explanatory discussion of the possible effects of the
classification of the offered Certificates as debt to investors generally and
related tax matters affecting investors generally, but does not purport to
furnish information in the level of detail or with the attention to an
investor's specific tax circumstances that would be provided by an investor's
tax advisor. This discussion is based on current law, which is subject to
changes that could prospectively or retroactively modify or adversely affect the
tax consequences summarized below. The discussion does not address all of the
tax consequences relevant to a particular Certificate Owner in light of that
Certificate Owner's circumstances, and some Certificate Owners may be subject to
special tax rules and limitations not discussed below. Each prospective
Certificate Owner is urged to consult its own tax adviser in determining the
federal, state, local and foreign income and any other tax consequences of the
purchase, ownership and disposition of a Certificate.
For purposes of this discussion, "U.S. Person" means a citizen or resident
of the United States, a corporation or partnership organized in or under the
laws of the United States, any state thereof, or any political subdivision of
either (including the District of Columbia), or an estate or trust the income of
which is includible in gross income for U.S. federal income tax purposes
regardless of its source. The term "U.S. Certificate Owner" means any U.S.
Person and any other person to the extent that the income attributable to its
interest in a Certificate is effectively connected with that person's conduct of
a U.S. trade or business.
TREATMENT OF THE CERTIFICATES AS DEBT
The Transferor and the Certificateholders express in the Pooling and
Servicing Agreement the intent that for federal, state and local income and
franchise tax purposes, the Certificates will be debt secured by the
Receivables. The Transferor, by entering into the Pooling and Servicing
Agreement, and each investor, by the acceptance of a beneficial interest in a
Certificate, will agree to treat the Certificates as debt for federal, state and
local income and franchise tax purposes. However, the Pooling and Servicing
Agreement generally refers to the transfer of Receivables as a "sale," and
because different criteria are used in determining the non-tax accounting
treatment of the transaction, the Transferor will treat the Pooling and
Servicing Agreement for certain non-tax accounting purposes as causing a
transfer of an ownership interest in the Receivables and not as creating a debt
obligation.
A basic premise of federal income tax law is that the economic substance of
a transaction generally determines its tax consequences. The form and non-tax
characterization of a transaction, while relevant factors, are not conclusive
evidence of its economic substance. In appropriate circumstances, the courts
have allowed taxpayers as well as the Internal Revenue Service (the "IRS") to
treat a transaction in
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accordance with its economic substance as determined under federal income tax
law, even though the participants in the transaction have characterized it
differently for non-tax purposes.
The determination of whether the economic substance of a purchase of an
interest in property is instead a loan secured by the transferred property has
been made by the IRS and the courts on the basis of numerous factors designed to
determine whether the Transferor has relinquished (and the purchaser has
obtained) substantial incidents of ownership in the property. Among those
factors, the primary ones examined are whether the purchaser has the opportunity
to gain if the property increases in value, and has the risk of loss if the
property decreases in value. Except to the extent otherwise specified in the
related Prospectus Supplement, Special Tax Counsel is of the opinion that, under
current law as in effect on the Relevant Closing Date, although no transaction
closely comparable to that contemplated herein has been the subject of any
Treasury regulation, revenue ruling or judicial decision, for federal income tax
purposes the Certificates offered hereunder will not constitute an ownership
interest in the Receivables, but properly will be characterized as debt. Except
where indicated to the contrary, the following discussion assumes that the
Certificates offered hereunder are debt for federal income tax purposes.
TREATMENT OF THE TRUST
GENERAL. The Pooling and Servicing Agreement permits the issuance of
Certificates and certain other interests in the Trust (including Collateral
Interests), each of which may be treated for federal income tax purposes either
as debt or as equity interests in the Trust. If all of the Certificates and
other interests (other than the Transferor Certificate) in the Trust were
characterized as debt, the Trust might be characterized as a security
arrangement for debt collateralized by the Receivables and issued directly by
the Transferor (or other holders of the Transferor Certificate). Under such a
view, the Trust would be disregarded for federal income tax purposes.
Alternatively, if some of the Certificates or other interests in the Trust
(other than the Transferor Certificate) were characterized as equity, the Trust
might be characterized as a separate entity owning the Receivables, issuing its
own debt, and jointly owned by the Transferor (or other holder of the Transferor
Certificate) and the other holders of equity interests in the Trust. However,
Special Tax Counsel is of the opinion that, under current law as in effect on
the Relevant Closing Date, any such entity constituted by the Trust will not be
an association or publicly traded partnership taxable as a corporation.
POSSIBLE TREATMENT OF THE TRUST AS A PARTNERSHIP OR A PUBLICLY TRADED
PARTNERSHIP. Although, as described above, Special Tax Counsel is of the
opinion that the Certificates will properly be treated as debt for federal
income tax purposes and that the Trust will not be treated as an association or
publicly traded partnership taxable as a corporation for such purposes, such
opinion will not bind the IRS and thus no assurance can be given that such
treatment will prevail. If the IRS were to contend successfully that some or all
of the Certificates or any other interest in the Trust (other than the
Transferor Certificate, but including any Collateral Interest) were not debt
obligations for federal income tax purposes, all or a portion of the Trust could
be classified as a partnership or a publicly traded partnership taxable as a
corporation for such purposes. Because Special Tax Counsel is of the opinion
that the Certificates will be characterized as debt for federal income tax
purposes and because any holder of an interest in a Collateral Interest will
agree to treat that interest as debt for such purposes, no attempt will be made
to comply with any tax reporting requirements that would apply as a result of
such alternative characterizations.
If the Trust were treated in whole or in part as a partnership in which some
or all holders of interests in the publicly offered Certificates were partners,
that partnership could be classified as a publicly traded partnership and so
could be taxable as a corporation. Further, regulations published by the
Treasury Department (the "Regulations") could cause the Trust to constitute a
publicly traded partnership even if all holders of interests in publicly offered
Certificates are treated as holding debt. If the Trust were classified as a
publicly traded partnership, whether by reason of the treatment of publicly
offered Certificates as equity or by reason of the Regulations, it would avoid
taxation as a corporation if its income was not derived in the conduct of a
"financial business;" however, whether the income of the Trust would be so
classified is unclear.
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Under the Code and the Regulations, a partnership will be classified as a
publicly traded partnership if equity interests therein are traded on an
"established securities market," or are "readily tradable" on a "secondary
market" or its "substantial equivalent." The Transferor intends to take measures
designed to reduce the risk that the Trust could be classified as a publicly
traded partnership by reason of interests in the Trust other than the publicly
traded Certificates. Although the Transferor expects such measures will
ultimately be successful, certain of the actions that may be necessary for
avoiding the treatment of such interests as "readily tradable" on a "secondary
market" or its "substantial equivalent" are not fully within the control of the
Transferor. As a result, there can be no assurance that the measures the
Transferor intends to take will in all circumstances be sufficient to prevent
the Trust from being classified as a publicly traded partnership under the
Regulations.
If the Trust were treated as a partnership other than a publicly traded
partnership taxable as a corporation, that partnership would not be subject to
federal income tax. Rather, each item of income, gain, loss and deduction of the
partnership generated through the ownership of the related Receivables would be
taken into account directly in computing taxable income of the Transferor (or
the holder of the Transferor Certificate) and any Certificate Owners treated as
partners in accordance with their respective partnership interests therein. The
amounts and timing of income reportable by any Certificate Owners treated as
partners would likely differ from that reportable by such Certificate Owners had
they been treated as owning debt. In addition, if the Trust were treated in
whole or in part as a partnership other than a publicly traded partnership,
income derived from the partnership by any Certificate Owner that is a pension
fund or other tax-exempt entity may be treated as unrelated business taxable
income. Partnership characterization also may have adverse state and local
income or franchise tax consequences for a Certificate Owner. Further, if the
Trust were treated in whole or in part as a partnership and the number of
holders of interests in the publicly offered Certificates and other interests in
the Trust treated as partners equaled or exceeded 100, the Transferor may cause
that Trust to elect to be an "electing large partnership." The consequence of
such election to investors could include the determination of certain tax items
at the partnership level and the disallowance of otherwise allowable deductions.
No representation is made as to whether any such election will be made.
If the arrangement created by the Pooling and Servicing Agreement were
treated in whole or in part as a publicly traded partnership taxable as a
corporation, that entity would be subject to federal income tax at corporate tax
rates on its taxable income generated by ownership of the related Receivables.
That tax could result in reduced distributions to Certificate Owners. No
distributions from the Trust would be deductible in computing the taxable income
of the corporation, except to the extent that any Certificates were treated as
debt of the corporation and distributions to the related Certificate Owners were
treated as payments of interest thereon. In addition, distributions to
Certificate Owners not treated as holding debt would be dividend income to the
extent of the current and accumulated earnings and profits of the corporation
(and Certificate Owners may not be entitled to any dividends received deduction
in respect of such income).
FASIT ELECTION. Upon satisfying certain conditions set forth in the Pooling
and Servicing Agreement, the Transferor will be permitted to amend the Pooling
and Servicing Agreement and any Supplement in order to enable all or a portion
of a Trust to qualify under the Code as a "financial asset securitization
investment trust" or "FASIT" and to permit a FASIT election to be made with
respect thereto. See "The Pooling and Servicing Agreement
Generally--Amendments." Under the FASIT provisions of the Code, a FASIT
generally would avoid federal income taxation and could issue securities
substantially similar to the Certificates, and those securities would be treated
as debt for federal income tax purposes. However, there can be no assurance that
the Transferor will or will not cause any permissible FASIT election to be made
with respect to the Trust, or amend the Pooling and Servicing Agreement or any
Supplement in connection with any election. Regulations needed to implement the
FASIT legislation have not yet been issued and, until such regulations are
issued and become effective, the Transferor is unable to provide specific
information concerning any such election or amendment or the probability that
any such election or amendment would be made. However, if such an election is
made, it may cause a holder to recognize gain
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with respect to its Certificate, even though Special Tax Counsel is of the
opinion that a Certificate will be treated as debt for federal income tax
purposes without regard to the election and the Certificate would be treated as
debt following the election, because the holder could be treated as surrendering
one debt instrument in exchange for another. Any such gain would be equal to the
excess of the value of the Certificate over the holder's basis therein at the
time of the election; any loss similarly determined would likely be disallowed
under the "wash sale" rules of Section 1091 of the Code. Additionally, any such
election and any related amendments to the Pooling and Servicing Agreement and
any Supplement may have other tax and non-tax consequences to
Certificateholders. Accordingly, prospective Certificateholders should consult
their tax advisors with regard to the effects of any such election and any
permitted related amendments on them in their particular circumstances.
TAXATION OF INTEREST INCOME OF U.S. CERTIFICATE OWNERS
GENERAL. Stated interest on a beneficial interest in a Certificate will be
includible in gross income in accordance with a U.S. Certificate Owner's method
of accounting.
ORIGINAL ISSUE DISCOUNT. If the Certificates are issued with original issue
discount ("OID"), the provisions of sections 1271 through 1273 and 1275 of the
Internal Revenue Code of 1986 (the "Code") will apply to the Certificates. Under
those provisions, a U.S. Certificate Owner (including a cash basis holder)
generally would be required to accrue the OID on its interest in a Certificate
in income for federal income tax purposes on a constant yield basis, resulting
in the inclusion of OID in income somewhat in advance of the receipt of cash
attributable to that income. In general, a Certificate will be treated as having
OID to the extent that its "stated redemption price" exceeds its "issue price,"
if such excess is more than 0.25 percent multiplied by the weighted average life
of the Certificate (determined by taking into account only the number of
complete years following issuance until payment is made for any partial
principal payments). Under section 1272(a)(6) of the Code, special provisions
apply to debt instruments on which payments may be accelerated due to
prepayments of other obligations securing those debt instruments. However, no
regulations have been issued interpreting those provisions, and the manner in
which those provisions would apply to the Certificates is unclear. Additionally,
the IRS could take the position based on Treasury regulations that none of the
interest payable on a Certificate is "unconditionally payable" and hence that
all of such interest should be included in the Certificate's stated redemption
price at maturity. If sustained, such treatment should not significantly affect
the tax liability of most Certificate Owners, but prospective U.S. Certificate
Owners should consult their own tax advisers concerning the impact to them in
their particular circumstances.
MARKET DISCOUNT. A U.S. Certificate Owner who purchases an interest in a
Certificate at a discount that exceeds any unamortized OID may be subject to the
"market discount" rules of sections 1276 through 1278 of the Code. These rules
provide, in part, that gain on the sale or other disposition of a Certificate
and partial principal payments on a Certificate are treated as ordinary income
to the extent of accrued market discount. The market discount rules also provide
for deferral of interest deductions with respect to debt incurred to purchase or
carry a Certificate that has market discount.
MARKET PREMIUM. A U.S. Certificate Owner who purchases an interest in a
Certificate at a premium may elect to offset the premium against interest income
over the remaining term of the Certificate in accordance with the provisions of
section 171 of the Code.
SALE OR EXCHANGE OF CERTIFICATES
Upon a disposition of an interest in a Certificate, a U.S. Certificate Owner
generally will recognize gain or loss equal to the difference between the amount
realized on the disposition and the U.S. Certificate Owner's adjusted basis in
its interest in the Certificate. A taxable exchange of a Certificate also could
occur as a result of the Transferor's substitution of money or investments for
Receivables; see "The Pooling and Servicing Agreement Generally--Defeasance."
The adjusted basis in the interest in the Certificate will equal its cost,
increased by any OID or market discount includible in income with respect to the
interest in
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the Certificate prior to its sale and reduced by any principal payments
previously received with respect to the interest in the Certificate and any
amortized premium. Subject to the market discount rules, gain or loss will be
capital gain or loss if the interest in the Certificate was held as a capital
asset. Capital losses generally may be used only to offset capital gains.
NON-U.S. CERTIFICATE OWNERS
In general, a non-U.S. Certificate Owner will not be subject to U.S. federal
income tax on interest (including OID) on a beneficial interest in a Certificate
unless (i) the non-U.S. Certificate Owner actually or constructively owns 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
a controlled foreign corporation that is related to the Transferor (or the Trust
if treated as a partnership) through stock ownership, (iii) the non-U.S.
Certificate Owner is a bank described in Code Section 881(c)(3)(A), (iv) such
interest is contingent interest described in Code Section 871(h)(4), or (v) the
non-U.S. Certificate Owner bears certain relationships to any holder of either
the Transferor Certificate other than the Transferor or any other interest in
the Trust not properly characterized as debt. To qualify for the exemption from
taxation, under currently applicable procedures the last U.S. Person in the
chain of payment prior to payment to a non-U.S. Certificate Owner (the
"Withholding Agent") must have received (in the year in which a payment of
interest or principal occurs or in either of the two preceding years) a
statement that (i) is signed by the non-U.S. Certificate Owner under penalties
of perjury, (ii) certifies that the non-U.S. Certificate Owner is not a U.S.
Person and (iii) provides the name and address of the non-U.S. Certificate
Owner. The statement may be made on a Form W-8 or substantially similar
substitute form, and the non-U.S. Certificate Owner must inform the Withholding
Agent of any change in the information on the statement within 30 days of the
change. If a Certificate is held through a securities clearing organization or
certain other financial institutions, the organization or institution may
provide a signed statement to the Withholding Agent. However, in that case, the
signed statement must be accompanied by a Form W-8 or substitute form provided
by the non-U.S. Certificate Owner to the organization or institution holding the
Certificate on behalf of the non-U.S. Certificate Owner. The U.S. Treasury
Department is considering implementation of further certification requirements
aimed at determining whether the issuer of a debt obligation is related to
holders thereof. The U.S. Treasury Department recently issued final regulations
which will revise some of the foregoing procedures whereby a non-U.S.
Certificate may establish an exemption from withholding beginning January 1,
1999. Non-U.S. Certificate Owners should consult their tax advisers concerning
the impact to them, if any, of such procedures.
Generally, any gain or income realized by a non-U.S. Certificate Owner upon
retirement or disposition of an interest in a Certificate will not be subject to
U.S. federal income tax, provided that (i) 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 retirement or
disposition occurs and (ii) in the case of gain representing accrued interest,
the conditions described in the preceding paragraph for exemption from
withholding are satisfied. Certain exceptions may be applicable, and an
individual non-U.S. Certificate Owner should consult a tax adviser.
If the Certificates were treated as an interest in a partnership, the
recharacterization could cause a non-U.S. Certificate Owner to be treated as
engaged in a trade or business in the United States. In that event, the non-U.S.
Certificate Owner would be required to file a federal income tax return and, in
general, would be subject to U.S. federal income tax (including the branch
profits tax) on its net income from the partnership. Further, certain
withholding obligations apply with respect to income allocable or distributions
made to a foreign partner. That withholding may be at a rate as high as 39.6
percent. If some or all of the Certificates were treated as stock in a
corporation, any related dividend distributions to a non-U.S. Certificate Owner
generally would be subject to withholding of tax at the rate of 30 percent,
unless that rate were reduced by an applicable tax treaty.
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INFORMATION REPORTING AND BACKUP WITHHOLDING
Backup withholding of U.S. federal income tax at a rate of 31 percent may
apply to payments made in respect of a Certificate to a registered owner who is
not an "exempt recipient" and who fails to provide certain identifying
information (such as the registered owner's taxpayer identification number) in
the manner required. Generally, individuals are not exempt recipients whereas
corporations and certain other entities are exempt recipients. Payments made in
respect of a U.S. Certificate Owner must be reported to the IRS, unless the U.S.
Certificate Owner is an exempt recipient or otherwise establishes an exemption.
Compliance with the identification procedures (described in the preceding
section) would establish an exemption from backup withholding for a non-U.S.
Certificate Owner who is not an exempt recipient.
In addition, upon the sale of a Certificate to (or through) a "broker," the
broker must withhold 31 percent of the entire purchase price, unless either (i)
the broker determines that the Transferor is a corporation or other exempt
recipient or (ii) the Transferor provides certain identifying information in the
required manner, and in the case of a non-U.S. Certificate Owner certifies that
the Transferor is a non-U.S. Certificate Owner (and certain other conditions are
met). Such a sale must also be reported by the broker to the IRS, unless either
(i) the broker determines that the Transferor is an exempt recipient or (ii) the
Transferor certifies its non-U.S. status (and certain other conditions are met).
Certification of the registered owner's non-U.S. status normally would be made
on Form W-8 under penalties of perjury, although in certain cases it may be
possible to submit other documentary evidence. As defined by Treasury
regulations, the term "broker" includes all persons who stand ready to effect
sales made by others in the ordinary course of a trade or business, as well as
brokers and dealers registered as such under the laws of the United States or a
state. These requirements generally will apply to a U.S. office of a broker, and
the information reporting requirements generally will apply to a foreign office
of a U.S. broker as well as to a foreign office of a foreign broker (i) that is
a controlled foreign corporation within the meaning of section 957(a) of the
Code or (ii) 50 percent or more of whose gross income from all sources for the
three year period ending with the close of its taxable year preceding the
payment (or for such part of the period that the foreign broker has been in
existence) was effectively connected with the conduct of a trade or business
within the United States.
Any amounts withheld under the backup withholding rules from a payment to a
Certificate Owner would be allowed as a refund or a credit against such
Certificate Owner's U.S. federal income tax, provided that the required
information is furnished to the IRS.
Recently issued final Treasury regulations will revise some of the foregoing
information reporting and backup withholding procedures beginning January 1,
1999. Certificate Owners should consult their tax advisers concerning the impact
to them, if any, of such revised procedures.
STATE AND LOCAL TAXATION
The discussion above does not address the taxation of the Trust or the tax
consequences of the purchase, ownership or disposition of an interest in the
Certificates under any state or local tax law. Each investor should consult its
own tax adviser regarding state and local tax consequences.
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ERISA CONSIDERATIONS
This section provides a brief summary of the material provisions of ERISA
and the Code which should be considered by potential investors if such investors
contemplate acquisition of the Certificates as an investment of a Plan, as
defined below. Additional information with respect to each Series and the
Classes thereof will be included in the related Prospectus Supplement.
Section 406 of ERISA and Section 4975 of the Code prohibit certain pension,
profit sharing or other employee benefit plans, individual retirement accounts
or annuities, employee annuity plans and Keogh plans (each, a "Plan") from
engaging in certain transactions involving "plan assets" with persons that are
"parties in interest" under ERISA or "disqualified persons" under the Code
(collectively, "Parties in Interest") with respect to the Plan. ERISA also
imposes certain duties on persons who are fiduciaries of Plans subject to ERISA
or Section 4975 of the Code 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
Section 4975 of the Code for such persons, unless a statutory regulatory or
administrative exemption is available. Plans that are governmental plans (as
defined in Section 3(32) of ERISA) and certain church plans (as defined in
Section 3(33) of ERISA) are not subject to ERISA requirements.
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 or Section 4975 of the Code. The
operations of the Trust could result in prohibited transactions if 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 Plan assets if Plans that purchase the Certificates are
deemed to own an interest in the underlying assets of the Trust.
Pursuant to a regulation (the "Regulation") issued by the Department of
Labor ("DOL") concerning the definition of what constitutes the "plan assets" of
a Plan, the assets and properties of certain entities (including certain
insurance company general accounts) in which a Plan makes an equity investment
could be deemed to be assets of the Plan in certain circumstances. Accordingly,
if Plans purchase Certificates of a Series, the Trust could be deemed to hold
"plan assets" unless one of the exceptions under the Regulation is applicable to
the Trust.
The Regulation only applies to the purchase by a Plan of an "equity
interest" in an entity. Because the Certificates will represent beneficial
interests in a Trust, and despite the agreement of the Transferor and the
Certificate Owners to treat each Series of Certificates as debt instruments, the
Certificates are likely to be considered equity interests in the Trust for
purposes of the Regulation, with the result that the Trust Assets are likely to
be treated as "plan assets" of the investing Plans for purposes of ERISA and
Section 4975 of the Code, unless either of the following exceptions applies. The
Regulation contains an exception that provides that if a 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
initial public offering of such securities 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 Plan as part of an offering of securities to the public
pursuant to an effective registration statement under the 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 Regulation provides that, if
at all times more than 75% of the value of each Class of equity interests in the
Trust (e.g., each Class of Certificates) is held by investors other than
"benefit plan investors" (which is defined in the Regulation as including Plans
and other employee benefit plans not subject to ERISA, such as governmental or
foreign
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plans, as well as entities holding assets deemed to be "plan assets"), the
investing Plan's assets will not include any of the underlying Trust Assets.
No assurance can be made with respect to any offering of any Class of the
Certificates of any Series that the conditions which would allow the Trust
Assets not to be "plan assets" will be met, although the intention of the
Underwriters (but not their assurance) as to whether interests in each Class of
the Certificates of a particular Series will be held by at least 100 independent
investors at the conclusion of the offering for such Series, and therefore
qualify as publicly-offered securities eligible for the exception under the
Regulation, will be set forth in the related Prospectus Supplement.
If interests in a Class of the Certificates of a Series fail to meet the
criteria of publicly-offered securities and the Trust Assets are deemed to
include assets of Plans that hold Certificates of such Class, transactions
involving the Trust and Parties in Interest with respect to such Plans might be
prohibited under Section 406 of ERISA and Section 4975 of the Code unless an
exemption is applicable. In addition, any Transferor or any Underwriter of such
Series may be considered to be a Party in Interest or fiduciary with respect to
an investing Plan. Accordingly, an investment of "plan assets" of a Plan in such
Class of Certificates may result in 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 Plan is a
cardholder of one of the Accounts, under DOL interpretations the purchase of
interests in such Class of 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 ("PTCE") 96-23 (Class
Exemption for Plan Asset Transactions Determined by In-House Asset Managers),
PTCE 95-60 (Class Exemption for Certain Transactions Involving Insurance Company
General Accounts), PTCE 91-38 (Class Exemption for Certain Transactions
Involving Bank Collective Investment Funds), PTCE 90-1 (Class Exemption for
Certain Transactions Involving Insurance Company Pooled Separate Accounts) and
PTCE 84-14 (Class Exemption for Plan Asset Transactions Determined by
Independent Qualified Professional 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
Assets.
In light of the foregoing, fiduciaries or other persons contemplating
purchasing the Certificates (or any interest therein) on behalf or with "plan
assets" of any Plan should consult their own counsel regarding whether the Trust
Assets represented by the Certificates would be considered "plan assets," the
consequences that would apply if the Trust Assets were considered "plan assets,"
and the possibility of exemptive relief from the prohibited transaction rules.
The Small Business Job Protection Act of 1996 added new Section 401(c) of
ERISA relating to the status of the assets of insurance company general accounts
under ERISA and Section 4975 of the Code. Pursuant to Section 401(c), the DOL
was required to issue final regulations (the "General Account Regulations") not
later than December 31, 1997 with respect to insurance policies or annuity
contracts issued on or before December 31, 1998 that are supported by an
insurer's general account. The General Account Regulations are 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. The DOL issued proposed regulations under Section 401(c) on December
22, 1997, but the required final regulations have not been issued as of the date
hereof. The assets of a general account that support insurance polices or
annuity contracts (other than "guaranteed benefit polices" within the meaning of
Section 401(b)(2) of ERISA) (i) issued to Plans after December 31, 1998 or (ii)
issued to Plans on or before December 31, 1998 for which the insurance company
does not comply with the General Account Regulations, may be treated as "plan
assets." However, 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 Plan. The "plan assets" status of insurance
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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 such
Plan invested in a separate account.
If the assets of a general account invested in the Certificates are treated
as "plan assets" of any Plan or the protections of Section 401(c) of ERISA
become unavailable, certain violations of the prohibited transaction rules may
be deemed to occur as a result of the operation of the Trust. Insurance
companies contemplating the investment of general account assets in the
Certificates should consult with their legal advisors concerning the impact of
Section 401(c) of ERISA, including the status of assets of the general account
as "plan assets" after December 31, 1998, and accordingly, the general account's
ability to continue to hold the Certificates after the date that is 18 months
after the General Account Regulations become final.
Finally, Plan fiduciaries and other Plan investors should consider the
fiduciary standards under ERISA or other applicable law in the context of the
Plan's particular circumstances before authorizing an investment of a portion of
the Plan's assets in the Certificates. Accordingly, among other factors, Plan
fiduciaries and other Plan investors should consider whether the investment (i)
satisfies the diversification requirements of ERISA or other applicable law,
(ii) is in accordance with the Plan's governing instruments, and (iii) is
prudent in light of the "Risk Factors" and other factors discussed herein and in
the related Prospectus Supplement.
PLAN OF DISTRIBUTION
The Certificates of any Series offered hereby and by the related Prospectus
Supplement may be offered by the underwriter or underwriters named in the
related Prospectus Supplement as agent or underwriter, or through underwriting
syndicates represented by such underwriter or underwriters (collectively, the
"Underwriters").
The Prospectus Supplement relating to a Series will set forth the terms of
the offering of such Series and each Class within such Series, including the
name or names of the Underwriters, the proceeds to and their intended use by the
Transferor, and either the initial public offering price, the discounts and
commissions to the Underwriters and any discounts or concessions allowed or
reallowed to certain dealers, or the method by which the price at which the
Underwriters will sell the Certificates of such Series will be determined.
The Underwriters will be obligated, subject to certain conditions, to
purchase all of the Certificates described in the Prospectus Supplement relating
to a Series if any such Certificates are purchased. The Certificates may 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 determined at the time of sale.
The Transferor may also sell the Certificates offered hereby and by means of
the related Prospectus Supplements from time to time in negotiated transactions
or otherwise, at prices determined at the time of sale. Such transactions may be
effected by selling Certificates to or through dealers and such dealers may
receive compensation in the form of underwriting discounts, concessions or
commissions from the Transferor and any purchasers of Certificates for whom they
may act as agents.
The place and time of delivery for the Series in respect of which this
Prospectus is delivered will be set forth in the related Prospectus Supplement.
This Prospectus, together with an appropriate Prospectus Supplement, may be
used by any of Salomon Brothers Inc, Smith Barney Inc., or any successor thereto
(the "Salomon Smith Barney Subsidiaries"), each an indirect wholly owned
subsidiary of Travelers Group Inc., the ultimate parent of the Transferor, in
connection with offers and sales of an indeterminate amount of the Certificates
in market-making transactions at negotiated prices related to prevailing market
prices at the time of any sale. Any Salomon Smith Barney Subsidiary may act as a
principal or agent in such transactions. No Salomon Smith Barney Subsidiary has
any obligation to make a market in any of the Certificates and any such Salomon
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Smith Barney Subsidiary may discontinue any market-making activities at any time
without notice, at its sole discretion.
LEGAL MATTERS
It is anticipated that certain legal matters relating to the issuance of the
Certificates of any Series will be passed upon for the Banks and for the
Transferor by A. Keith McClung, Esq., General Counsel of Commercial Credit
Company. Certain legal matters relating to the issuance of the Certificates
under the laws of the State of Delaware will be passed upon for the Transferor
by Richards, Layton & Finger, P.A. and, with respect to the federal tax
consequences of such issuance, by Orrick, Herrington & Sutcliffe LLP as Special
Tax Counsel. Certain legal matters will be passed upon for the Underwriters by
the counsel named in the Prospectus Supplement.
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INDEX OF DEFINED TERMS
<TABLE>
<S> <C>
Account Owner..................................................................... 5, 8
Accounts.......................................................................... 1, 4
Act............................................................................... 2
Addition Cut-Off Date............................................................. 46
Addition Date..................................................................... 46
Additional Accounts............................................................... 24, 46
Additional Transferors............................................................ 35, 41
Adverse Effect.................................................................... 13
Amortization Period............................................................... 11
Automatic Additional Accounts..................................................... 48
Bank.............................................................................. 1
Banks............................................................................. 1
Cash Collateral Account........................................................... 15
Cash Collateral Guaranty.......................................................... 15
Cede.............................................................................. 9, 30
Cedel............................................................................. 33
Cedel Participants................................................................ 33
Certificate Owner................................................................. 9
Certificateholders................................................................ 6
Certificateholders' Interest...................................................... 6
Certificates...................................................................... 1, 5
Class............................................................................. 1, 6
Code.............................................................................. 69
Collateral Interest............................................................... 15, 61
Collection Account................................................................ 10, 50
Commercial Credit................................................................. 28
Commission........................................................................ 2
Companion Series.................................................................. 12, 37
Controlled Accumulation Period.................................................... 11
Controlled Amortization Period.................................................... 11
Cooperative....................................................................... 33
Counterparties.................................................................... 59
Defaulted Amount.................................................................. 52
Defaulted Receivables............................................................. 52
Defeased Series................................................................... 59
Definitive Certificate............................................................ 9
Definitive Certificates........................................................... 34
Depositaries...................................................................... 31
Depository........................................................................ 30
Disclosure Document............................................................... 8
Discount Option................................................................... 10
Discount Option Collections....................................................... 50
Discount Option Date.............................................................. 50
Discount Percentage............................................................... 50
Distribution Date................................................................. 10
DOL............................................................................... 72
DTC............................................................................... 9
Eligible Account.................................................................. 44
</TABLE>
76
<PAGE>
<TABLE>
<S> <C>
Eligible Institution.............................................................. 50
Eligible Investments.............................................................. 51
Eligible Receivable............................................................... 45
Eligible Servicer................................................................. 55
ERISA............................................................................. 17
Euroclear......................................................................... 33
Euroclear Operator................................................................ 33
Euroclear Participants............................................................ 33
Excess Funding Account............................................................ 50
Excess Transferor Finance Charge Collections...................................... 37
Exchange Act...................................................................... 2
FASIT............................................................................. 68
FDIA.............................................................................. 18
FDIC.............................................................................. 1, 7, 18
FDR............................................................................... 25
Finance Charge Receivables........................................................ 9
FIRREA............................................................................ 18
Full Invested Amount.............................................................. 13
Funding Period.................................................................... 13
General Account Regulations....................................................... 73
Group............................................................................. 13, 38
Holders........................................................................... 34
Indirect Participants............................................................. 31
Ineligible Receivables............................................................ 42
Initial Accounts.................................................................. 24
Initial Cut-Off Date.............................................................. 24
Insolvency Event.................................................................. 54
Interchange....................................................................... 27
Interest Period................................................................... 10
Invested Amount................................................................... 7
Investor Amount................................................................... 7
IRS............................................................................... 66
L/C Bank.......................................................................... 15, 61
LIBOR............................................................................. 59
Limited Amortization Period....................................................... 11
Monthly Period.................................................................... 10
Monthly Servicing Fee............................................................. 54
Moody's........................................................................... 50
NASD.............................................................................. 74
New Issuance...................................................................... 7
OID............................................................................... 69
Optional Amortization Period...................................................... 11
Participants...................................................................... 31
Participation Interests........................................................... 4, 46
Parties in Interest............................................................... 72
Pay Out Event..................................................................... 53
Paying Agent...................................................................... 51
Plan.............................................................................. 72
Pooling and Servicing Agreement................................................... 4, 5
Pre-Funding Account............................................................... 13
Pre-Funding Amount................................................................ 13
</TABLE>
77
<PAGE>
<TABLE>
<S> <C>
Principal Amortization Period..................................................... 11
Principal Receivables............................................................. 9
Principal Sharing Series.......................................................... 11
Principal Shortfalls.............................................................. 12
Principal Terms................................................................... 38
Prior Series...................................................................... 12
Prospectus Supplement............................................................. 1
PTCE.............................................................................. 73
Qualified Account................................................................. 50
Rapid Accumulation Period......................................................... 11
Rapid Amortization Period......................................................... 11
Rating Agency..................................................................... 17
Rating Agency Condition........................................................... 8, 39
Receivables....................................................................... 1, 4
Receivables Transfer Agreement.................................................... 8
Recoveries........................................................................ 25
Regulation........................................................................ 72
Regulations....................................................................... 67
Reinvestment Event................................................................ 53
Relevant Closing Date............................................................. 10
Removal Cut-Off Date.............................................................. 49
Removal Date...................................................................... 49
Removal Notice Date............................................................... 49
Removed Accounts.................................................................. 49
Required Principal Balance........................................................ 47
Required Transferor Amount........................................................ 46
Required Transferor Percentage.................................................... 47
Revolving Period.................................................................. 10
Salomon Smith Barney Subsidiaries................................................. 74
Scheduled Amortization Date....................................................... 11
Securities Intermediary........................................................... 50
Series............................................................................ 1, 6
Series Account.................................................................... 6
Series Enhancement................................................................ 4, 14
Series Investor Amount............................................................ 47
Series Percentage................................................................. 30
Series Supplement................................................................. 5
Servicer.......................................................................... 1, 4, 5
Servicer Default.................................................................. 56
Servicing Fee..................................................................... 54
Shared Principal Collections...................................................... 12
Shared Transferor Principal Collections........................................... 36
Special Tax Counsel............................................................... 66
Spread Account.................................................................... 16, 53
Standard & Poor's................................................................. 50
Stated Series Termination Date.................................................... 16, 52
Supplemental Certificate.......................................................... 7, 34, 38
Swaps............................................................................. 59
Tax Opinion....................................................................... 8
Termination Notice................................................................ 56
Terms and Conditions.............................................................. 33
</TABLE>
78
<PAGE>
<TABLE>
<S> <C>
Transferor........................................................................ 2, 5
Transferor Amount................................................................. 6
Transferor Certificate............................................................ 7
Transferor Certificates........................................................... 7, 38
Transferor Percentage............................................................. 30
Transferor's Interest............................................................. 6, 30, 38
Travelers......................................................................... 28
Travelers Consumer Credit Card Portfolio.......................................... 29
Trust............................................................................. 1, 4
Trust Assets...................................................................... 1, 4
Trust Portfolio................................................................... 29
Trust Termination Date............................................................ 16, 53
Trustee........................................................................... 1, 4
U.S. Certificate Owner............................................................ 66
U.S. Person....................................................................... 66
UCC............................................................................... 18, 62
Underwriters...................................................................... 74
Withholding Agent................................................................. 70
</TABLE>
79
<PAGE>
ANNEX I
GLOBAL CLEARANCE, SETTLEMENT AND
TAX DOCUMENTATION PROCEDURES
Except in certain circumstances, the globally offered Travelers Bank Credit
Card Master Trust I Asset Backed Securities (the "Global Securities") to be
issued in Series from time to time (each, a "Series") will be available only in
book-entry form. Investors in the Global Securities may hold such Global
Securities through any of The Depository Trust Company ("DTC"), Cedel or
Euroclear. The Global Securities will be tradable as home market instruments in
both the European and U.S. domestic markets. Initial settlement and all
secondary trades will settle in same-day funds.
Secondary market trading between investors holding Global Securities through
Cedel and Euroclear will be conducted in the ordinary way in accordance with
their normal rules and operating procedures and in accordance with conventional
eurobond practice (i.e., seven calendar day settlement).
Secondary market trading between investors holding Global Securities through
DTC will be conducted according to the rules and procedures applicable to U.S.
corporate debt obligations.
Secondary cross-market trading between Cedel or Euroclear and DTC
Participants holding Certificates will be effected on a delivery-against-payment
basis through the respective Depositaries of Cedel and Euroclear (in such
capacity) and as DTC Participants.
Non-U.S. holders (as described below) of Global Securities will be subject
to U.S. withholding taxes unless such holders meet certain requirements and
deliver appropriate U.S. tax documents to the securities clearing organizations
or their participants.
INITIAL SETTLEMENT
All Global Securities will be held in book-entry form by DTC in the name of
Cede & Co. as nominee of DTC. Investors' interests in the Global Securities will
be represented through financial institutions acting on their behalf as direct
and indirect Participants in DTC. As a result, Cedel and Euroclear will hold
positions on behalf of their participants through their respective Depositaries,
which in turn will hold such positions in accounts as DTC Participants.
Investors electing to hold their Global Securities through DTC will follow
the settlement practices applicable to conventional United States credit card
securities. Investor securities custody accounts will be credited with their
holdings against payment in same-day funds on the settlement date.
Investors electing to hold their Global Securities through Cedel or
Euroclear accounts will follow the settlement procedures applicable to
conventional eurobonds, except that there will be no temporary global security
and no "lock-up" or restricted period. Global Securities will be credited to the
securities custody accounts on the settlement date against payment in same-day
funds.
SECONDARY MARKET TRADING
Since the purchaser determines the place of delivery, it is important to
establish at the time of the trade where both the purchaser's and Transferor's
accounts are located to ensure that settlement can be made on the desired value
date.
TRADING BETWEEN DTC PARTICIPANTS. Secondary market trading between DTC
Participants will be settled using the same-day funds.
TRADING BETWEEN CEDEL AND/OR EUROCLEAR PARTICIPANTS. Secondary market
trading between Cedel Participants or Euroclear Participants will be settled
using the procedures applicable to conventional eurobonds in same-day funds.
A-1
<PAGE>
TRADING BETWEEN DTC TRANSFEROR AND CEDEL OR EUROCLEAR PURCHASER. When
Global Securities are to be transferred from the account of a DTC Participant to
the account of a Cedel Participant or a Euroclear Participant, the purchaser
will send instructions to Cedel or Euroclear through a Cedel Participant or
Euroclear Participant at least one business day prior to settlement. Cedel or
Euroclear will instruct the respective Depositary, as the case may be, to
receive the Global Securities against payment. Payment will include interest
accrued on the Global Securities from and including the last coupon payment date
to and excluding the settlement date. Payment will then be made by the
respective Depositary to the DTC Participant's account against delivery of the
Global Securities. After settlement has been completed, the Global Securities
will be credited to the respective clearing system and by the clearing system,
in accordance with its usual procedures, to the Cedel Participant's or Euroclear
Participant's account. The Global Securities credit will appear the next day
(European time) and the cash debit will be back-valued to, and the interest on
the Global Securities will accrue from, the value date (which would be the
preceding day when settlement occurred in New York). If settlement is not
completed on the intended value date (i.e., the trade fails), the Cedel or
Euroclear cash debit will be valued instead as of the actual settlement date.
Cedel Participants and Euroclear Participants will need to make available to
the respective clearing systems the funds necessary to process same-day funds
settlement. The most direct means of doing so is to pre-position funds for
settlement, either from cash on hand or existing lines of credit, as they would
for any settlement occurring within Cedel or Euroclear. Under this approach,
they may take on credit exposure to Cedel or Euroclear until Global Securities
are credited to their accounts one day later.
As an alternative, if Cedel or Euroclear has extended a line of credit to
them, Cedel Participants or Euroclear Participants can elect not to pre-position
funds and allow that credit line to be drawn upon the finance settlement. Under
this procedure, Cedel Participants or Euroclear Participants purchasing Global
Securities would incur overdraft charges for one day, assuming they cleared the
overdraft when the Global Securities were credited to their accounts. However,
interest on the Global Securities would accrue from the value date. Therefore,
in many cases the investment income on the Global Securities earned during that
one-day period may substantially reduce or offset the amount of such overdraft
charges, although this result will depend on each Cedel Participant's or
Euroclear Participant's particular cost of funds.
Since the settlement is taking place during New York business hours, DTC
Participants can employ their usual procedures for sending Global Securities to
the respective Depositary for the benefit of Cedel Participants or Euroclear
Participants. The sale proceeds will be available to the DTC transferor on the
settlement date. Thus, to the DTC Participant a cross-market transaction will
settle no differently than a trade between two DTC Participants.
TRADING BETWEEN CEDEL OR EUROCLEAR TRANSFEROR AND DTC PURCHASER. Due to
time zone differences in their favor, Cedel Participants and Euroclear
Participants may employ their customary procedures for transactions in which
Global Securities are to be transferred by the respective clearing system,
through the respective Depositary, to a DTC Participant. The Transferor will
send instructions to Cedel or Euroclear through a Cedel Participant or Euroclear
Participant at least one business day prior to settlement. In these cases, Cedel
or Euroclear will instruct the respective Depositary, as appropriate, to deliver
the bonds to the DTC Participant's account against payment. Payment will include
interest accrued on the Global Securities from and including the last coupon
payment date to and excluding the settlement date. The payment will then be
reflected in the account of the Cedel Participant or Euroclear Participant the
following day, and receipt of the cash proceeds in the Cedel Participant's or
Euroclear Participant's account would be back-valued to the value date (which
would be the preceding day, when settlement occurred in New York). Should the
Cedel Participant or Euroclear Participant have a line of credit with its
respective clearing system and elect to be in debit in anticipation of receipt
of the sale proceeds in its account, the back-valuation will extinguish any
overdraft charges incurred over that one-day period. If settlement is not
completed on the intended value date (i.e., the trade fails), receipt of the
cash proceeds in the Cedel Participant's or Euroclear Participant's account
would instead be valued as of the actual settlement date.
A-2
<PAGE>
Finally, day traders that use Cedel or Euroclear and that purchase Global
Securities from DTC Participants for delivery to Cedel Participants or Euroclear
Participants should note that these trades would automatically fail on the sale
side unless affirmative action were taken. At least three techniques should be
readily available to eliminate this potential problem:
(a) borrowing through Cedel or Euroclear for one day (until the purchase
side of the day trade is reflected in their Cedel or Euroclear accounts) in
accordance with the clearing system's customary procedures;
(b) borrowing the Global Securities in the U.S. from a DTC Participant
no later than one day prior to settlement, which would give the Global
Securities sufficient time to be reflected in their Cedel or Euroclear
account in order to settle the sale side of the trade; or
(c) staggering the value dates for the buy and sell sides of the trade
so that the value date for the purchase from the DTC Participant is at least
one day prior to the value date for the sale to the Cedel Participant or
Euroclear Participant.
CERTAIN U.S. FEDERAL INCOME TAX DOCUMENTATION REQUIREMENTS
A beneficial owner of Global Securities holding securities through Cedel or
Euroclear (or through DTC if the holder has an address outside the U.S.) will be
subject to the 30% U.S. withholding tax that generally applies to payments of
interest (including original issue discount) on registered debt issued by U.S.
Persons, unless (i) each clearing system, bank or other financial institution
that holds customers' securities in the ordinary course of its trade or business
in the chain of intermediaries between such beneficial owner and the U.S. entity
required to withhold tax complies with applicable certification requirements and
(ii) such beneficial owner takes one of the following steps to obtain an
exemption or reduced tax rate:
EXEMPTION FOR NON-U.S. PERSONS (FORM W-8). Beneficial owners of
Certificates that are non-U.S. Persons generally can obtain a complete exemption
from the withholding tax by filing a signed Form W-8 (Certificate of Foreign
Status). If the information shown on Form W-8 changes, a new Form W-8 must be
filed within 30 days of such change.
EXEMPTION FOR NON-U.S. PERSONS WITH EFFECTIVELY CONNECTED INCOME (FORM
4224). A non-U.S. Person, including a non-U.S. corporation or bank with a U.S.
branch, for which the interest income is effectively connected with its conduct
of a trade or business in the United States, can obtain an exemption from the
withholding tax by filing Form 4224 (Exemption from Withholding of Tax on Income
Effectively Connected with the Conduct of a Trade or Business in the United
States).
EXEMPTION OR REDUCED RATE FOR NON-U.S. PERSONS RESIDENT IN TREATY COUNTRIES
(FORM 1001). Non-U.S. Persons that are Certificate Owners residing in a country
that has a tax treaty with the United States can obtain an exemption or reduced
tax rate (depending on the treaty terms) by filing Form 1001 (Ownership,
Exemption or Reduced Rate Certificate). If the treaty provides only for a
reduced rate, withholding tax will be imposed at that rate unless the filer
alternatively files Form W-8. Form 1001 may be filed by the Certificate Owner or
his agent.
EXEMPTION FOR U.S. PERSONS (FORM W-9). U.S. Persons can obtain a complete
exemption from the withholding tax by filing Form W-9 (Request for Taxpayer
Identification Number and Certification).
U.S. FEDERAL INCOME TAX REPORTING PROCEDURE. The Certificate Owner of a
Global Security or, in the case of a Form 1001 or a Form 4224 filer, his agent,
files by submitting the appropriate form to the person through whom it holds
(the clearing agency, in the case of persons holding directly on the books of
the clearing agency). Form W-8 and Form 1001 are effective for three calendar
years and Form 4224 is effective for one calendar year.
A-3
<PAGE>
The term "U.S. Person" means (i) a citizen or resident of the United States,
(ii) a corporation or partnership organized in or under the laws of the United
States, any state thereof, or any political subdivision of either (including the
District of Columbia) or (iii) an estate or trust the income of which is
includible in gross income for United States tax purposes regardless of its
source. This summary does not deal with all aspects of U.S. Federal income tax
withholding that may be relevant to foreign holders of the Global Securities.
Investors are advised to consult their own tax advisors for specific tax advice
concerning their holding and disposing of the Global Securities. Further, the
U.S. Treasury Department has recently finalized new regulations that will revise
some aspects of the current system for withholding on amounts paid to foreign
persons. Under these regulations, interest or OID paid to a nonresident alien
would continue to be exempt from U.S. withholding taxes (including backup
withholding) provided that the holder complies with the new procedures.
A-4
<PAGE>
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NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS
SUPPLEMENT OR THE PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
TRANSFEROR OR THE UNDERWRITERS. NEITHER THIS PROSPECTUS SUPPLEMENT NOR THE
PROSPECTUS CONSTITUTES AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY
OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS, NOR ANY SALE HEREUNDER OR THEREUNDER,
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION
HEREIN OR THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THEIR RESPECTIVE DATES
OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE TRANSFEROR OR THE TRUST
SINCE SUCH DATES.
--------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PROSPECTUS SUPPLEMENT PAGE
-----
<S> <C>
Summary of Terms............................... S-4
Risk Factors................................... S-16
The Banks' Credit Card Activities.............. S-17
The Receivables................................ S-18
Maturity Assumptions........................... S-22
Receivable Yield Considerations................ S-23
Description of the Class A Certificates........ S-24
Federal Income Tax Consequences................ S-45
Underwriting................................... S-45
Legal Matters.................................. S-46
Index of Defined Terms......................... S-47
PROSPECTUS
Prospectus Supplement.......................... 2
Reports to Certificateholders.................. 2
Available Information.......................... 2
Incorporation of Certain Documents by 3
Reference....................................
Prospectus Summary............................. 4
Risk Factors................................... 18
Use of Proceeds................................ 24
The Trust...................................... 24
The Banks' Credit Card Activities.............. 25
The Banks...................................... 28
The Transferor................................. 29
The Accounts................................... 29
Description of the Certificates................ 29
The Receivables Transfer Agreements............ 39
The Pooling and Servicing Agreement 40
Generally....................................
Series Enhancement............................. 60
Certain Legal Aspects of the Receivables....... 62
Federal Income Tax Consequences................ 66
ERISA Considerations........................... 72
Plan of Distribution........................... 74
Legal Matters.................................. 75
Index of Defined Terms......................... 76
</TABLE>
--------------------------
UNTIL MAY 27, 1998, ALL DEALERS EFFECTING TRANSACTIONS IN THE CLASS A
CERTIFICATES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED
TO DELIVER A PROSPECTUS SUPPLEMENT AND A PROSPECTUS. THIS DELIVERY REQUIREMENT
IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS SUPPLEMENT
AND A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS.
Travelers Bank
Credit Card
Master Trust I
$227,500,000
Class A 6.00%
Asset-Backed Certificates,
Series 1998-1
CC Credit Card Corporation
Transferor
Travelers Bank & Trust, fsb
Servicer
------------
P R O S P E C T U S S U P P L E M E N T
---------
Salomon Smith Barney
Chase Securities Inc.
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