As filed with the Securities and Exchange Commission on May 27, 1999
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
FORM S-3
REGISTRATION STATEMENT
under
THE SECURITIES ACT OF 1933
--------------------
THE FIRST NATIONAL BANK OF ATLANTA
(Originator of the Trust described herein)
(Exact name as specified in registrant's charter)
WACHOVIA CREDIT CARD MASTER TRUST
(Issuer of Certificates)
United States 6025 22-2716130
(State or other jurisdiction (Primary Standard Industrial (IRS Employer
of incorporation or Classification Code Number) dentification Number)
organization)
77 Read's Way
New Castle Corporate Commons
New Castle, Delaware 19720
(302) 323-2395
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
Joan S. Suttin, Esq.
Wachovia Bank Card Services
Four Piedmont Center
3565 Piedmont Road
Atlanta, Georgia 30305
(404) 842-3883
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
John H. Loughridge, Jr., Esq. Andrew M. Faulkner, Esq.
WACHOVIA LEGAL DEPARTMENT SKADDEN, ARPS, SLATE,
100 N. Main Street MEAGHER & FLOM LLP
Winston-Salem, North Carolina 27150 919 Third Avenue
(336) 732-6375 New York, NY 10022
(212) 735-3000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
From time to time after this registration statement becomes effective as
determined by market conditions.
If the only securities being registered on this form are to be offered
pursuant to dividend or interest reinvestment plans, please check the
following box. | |
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. |X|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, please check the
following box and list the Securities Act registration statement number of
the earlier effective registration statement for the same offering. | |
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. | |
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. | |
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
===============================================================================================================
Amount to be Proposed maximum Proposed maximum Amount of
Title of securities to registered offering price per aggregate offering registration fee
be registered certificate* price*
- ---------------------------------------------------------------------------------------------------------------
Asset Backed
<S> <C> <C> <C> <C>
Certificates $1,000,000 100% $1,000,000 $278.00
===============================================================================================================
</TABLE>
* Estimated solely for the purpose of calculating the registration fee.
The registrant hereby amends this Registration Statement on such
date or dates as may be necessary to delay its effective date until the
registrant shall file a further amendment which specifically states that
this Registration Statement shall thereafter become effective in accordance
with Section 8(a) of the Securities Act of 1933 or until the Registration
Statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
==============================================================================
[FLAG]
The information in this prospectus is not complete and may be changed.
We can not sell these securities until the registration statement filed
with the Securities and Exchange Commission is effective. This prospectus
is not an offer to sell these securities and it is not soliciting an offer
to buy these securities in any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED MAY 27, 1999
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED , 1999
$[ ]
Wachovia Credit Card Master Trust
$_____ Class A Floating Rate Asset Backed Certificates,
Series 1999-_
$_____ Class B Floating Rate Asset Backed Certificates,
Series 1999-_
The First National Bank of Atlanta d/b/a Wachovia Bank Card Services
Transferor and Servicer
<TABLE>
<CAPTION>
Class A Certificates Class B Certificates
<S> <C> <C>
Principal Amount $[________] $_________
Price $[________] (___%) $_________ (___%)
Underwriting Discount $[________] (___%) $_________ (___%)
Proceeds to the Transferor $[________] (___%) $_________ (___%)
Certificate Rate one-month LIBOR + ___% p.a. one-month LIBOR + ___%
p.a.
Interest Payment Dates monthly on the [ ]th monthly on the [ ]th
First Interest Payment Date [___________] __________
Scheduled Principal Payment Date [___________] __________
</TABLE>
These securities are interests in Wachovia Credit Card Master Trust and are
backed only by the assets of the Trust. Neither these securities nor the
assets of the Trust are obligations of The First National Bank of
Atlanta d/b/a Wachovia Bank Card Services or any of its
affiliates, or obligations insured by the FDIC.
These securities are highly structured. Before you purchase these securities,
be sure you understand the structure and the risks. See "Risk Factors"
beginning on page S-8 in this prospectus supplement.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed on the
adequacy or accuracy of the disclosures in this supplement and the attached
prospectus. Any representation to the contrary is a criminal
offense.
These securities are offered subject to availability.
[Names of Underwriters]
The date of this Prospectus Supplement is , 1999
Table of Contents
Prospectus Supplement
Where to Find Information in These
Documents.............................................................S-3
Summary of Terms........................................................S-4
Structural Summary......................................................S-5
Risk Factors............................................................S-8
Potential Early Repayment or Delayed Payment
due to Reduced Portfolio Yield....................................S-8
Allocations of Charged-Off Receivables Could
Reduce Payments to Certificateholders.............................S-11
Limited Ability to Resell Certificates................................S-11
Certain Liens Could Be Given Priority Over
Your Securities.......................................................S-12
Insolvency or Bankruptcy of Wachovia Could
Result in Accelerated, Delayed or Reduced
Payments to Certificateholders....................................S-12
Issuance of Additional Series by the Trust
May Affect the Timing of Payments.................................S-13
Individual Certificateholders Will Have
Limited Control of Trust Actions..................................S-14
Wachovia's Credit Card Portfolio........................................S-15
General...............................................................S-15
Billing and Payments..................................................S-15
Portfolio Acquisitions................................................S-16
Delinquency and Loss Experience.......................................S-16
Interchange...........................................................S-18
The Receivables.........................................................S-19
Maturity Considerations.................................................S-23
Controlled Accumulation Period........................................S-23
Rapid Amortization Period.............................................S-23
Pay Out Events........................................................S-24
Payment Rates.........................................................S-24
Receivable Yield Considerations.........................................S-25
Wachovia and Wachovia Corporation.......................................S-26
Description of the Certificates.........................................S-26
General...............................................................S-26
Exchanges.............................................................S-27
Interest Payments.....................................................S-27
Principal Payments....................................................S-29
Postponement of Controlled Accumulation
Period..............................................................S-30
Subordination of the Class B Certificates.............................S-31
Allocation Percentages................................................S-31
Reallocation of Cash Flows............................................S-33
Application of Collections............................................S-34
Shared Excess Finance Charge Collections..............................S-39
Shared Principal Collections..........................................S-39
Required Collateral Interest..........................................S-40
Defaulted Receivables; Investor Charge-Offs...........................S-40
Principal Funding Account.............................................S-42
Reserve Account.......................................................S-42
Pay Out Events........................................................S-43
Defeasance............................................................S-44
Servicing Compensation and Payment of
Expenses............................................................S-45
Reports to Class A Certificateholders.................................S-46
ERISA Considerations....................................................S-46
Class A Certificates..................................................S-46
Class B Certificates..................................................S-47
Consultation with Counsel.............................................S-47
Underwriting............................................................S-48
Index of Terms for Prospectus Supplement................................S-50
Where to Find Information in These Documents
The attached prospectus provides general information about Wachovia
Credit Card Master Trust, including terms and conditions that are generally
applicable to the securities issued by the trust. The specific terms of
Series 1999-_ are described in this supplement.
This supplement begins with several introductory sections
describing your series and Wachovia Credit Card Master Trust in abbreviated
form:
o Summary of Terms provides important amounts, dates and other
terms of your series;
o Structural Summary gives a brief introduction of the key
structural features of your series and directions for locating
further information; and
o Risk Factors describes risks that apply to your series.
As you read through these sections, cross-references will direct
you to more detailed descriptions in the attached prospectus and elsewhere
in this supplement. You can also directly reference key topics by looking
at the table of contents pages in this supplement and the attached
prospectus.
This supplement and the attached prospectus may be used by Wachovia
Securities, Inc. and its successors in connection with offers and sales
related to market-making transactions in the certificates offered by this
supplement and the attached prospectus. Wachovia Securities, Inc. may act
as principal or agent in those transactions. The sales will be made at
varying prices related to prevailing market prices at the time of sale.
To understand the structure of these securities, you must read carefully
the attached prospectus and this supplement in their entirety.
Summary of Terms
- --------------------------------------------------------------------------
Transferor: The First National Bank of Atlanta d/b/a
Wachovia Bank Card Services--"Wachovia"
or the "Bank"
Servicer: Wachovia
Trustee: The Bank of New York (Delaware)
Pricing Date: [ ]
Closing Date: [ ]
Clearance and Settlement: DTC/Cedelbank/Euroclear
Trust Assets: receivables originated in VISA(R) and
MasterCard(R) accounts, including
recoveries on charged-off accounts
- --------------------------------------------------------------------------
<TABLE>
<CAPTION>
Series Structure: Amount % of Total Series
<S> <C> <C>
Class A $[ ] [ ]%
Class B $[ ] [ ]%
Collateral interest $[ ] [ ]%
Annual Servicing Fee: [ ]%
Class A Class B
------------------ -------------------
Anticipated Ratings:*
(Moody's/S&P/Fitch IBCA) [ ] [ ]
Credit Enhancement: [ ] [ ]
one-month LIBOR + one-month LIBOR +
Interest Rate: [ ]% p.a. [ ]% p.a.
Interest Accrual Method: actual/360 actual/360
Interest Payment Dates: monthly [( th)] monthly [( th)]
First Interest Payment Date: [ ] [ ]
Scheduled Payment Date: [ ] [ ]
Commencement of Accumulation Period
(subject to adjustment): [ ] [ ]
Stated Series Termination Date: [ ] [ ]
CUSIP: [ ] [ ]
- -----------
* It is a condition to issuance that one of these ratings be obtained.
</TABLE>
Structural Summary
This summary briefly describes certain major structural components
of Series 1999-_. To fully understand the terms of Series 1999-_, you will
need to read both this supplement and the attached prospectus in their
entirety.
The Series 1999-_ Certificates
Your certificates represent the right to a portion of collections
on the underlying Trust assets. Your certificates will also be allocated a
portion of losses on receivables, if any. Any collections of finance
charges allocated to your series will be used to make interest payments, to
pay a portion of the fees of Wachovia as servicer and to cover losses
allocated to your series. Remaining collections of finance charges
allocated to your series will be applied for the benefit of the holder of
the collateral interest. Any principal collections allocated to your series
in excess of the amount owed to certificates of your series on any
distribution date will be shared with other series of certificates issued
by Wachovia Credit Card Master Trust, retained in a trust account, or
returned to Wachovia. In no case will you receive more than the principal
and interest owed to you under the terms described in this supplement and
the attached prospectus.
For further information on allocations and payments, see
"Description of the Certificates-- Allocation Percentages " and
"--Application of Collections" in this supplement and "Description of the
Certificates--Investor Percentage and Transferor Percentage" and
"--Application of Collections" in the attached prospectus.
Your certificates feature credit enhancement by means of the
subordination of other interests, which is intended to protect you from
losses and shortfalls in cash flow. Credit enhancement for your series is
for your series' benefit only. Credit enhancement is provided to Class A by
the following:
o subordination of Class B; and
o subordination of the collateral interest.
Credit enhancement is provided to Class B by the following:
o subordination of the collateral interest.
The more subordinated interests will absorb any losses allocated to
Series 1999-_ and make up any shortfalls in cash flow, before the more
senior interests are affected. On the closing date, there will be $[ ] of
Class B certificates and a $[ ] collateral interest, or together [ ]% of
the sum of the initial Class A invested amount, the initial Class B
invested amount and the initial collateral interest amount. If the cash
flow and any subordinated interest do not cover all losses allocated to
Series 1999-_, your payments of interest and principal will be reduced and
you may suffer a loss of principal.
For a more detailed description of the subordination provisions of
Series 1999-_, see "Description of the Certificates--Subordination of Class
B Certificates," --"Reallocation of Cash Flows," "--Required Collateral
Interest" and "--Defaulted Receivables; Investor Charge-Offs" in this
supplement. For a discussion of losses, see "Description of the
Certificates--Defaulted Receivables; Investor Charge-Offs" in this
supplement. See "Risk Factors" in this supplement for more detailed
discussions of the risks of investing in Series 1999-_.
Wachovia Credit Card Master Trust
Your series is one of two series issued by Wachovia Credit Card
Master Trust which are expected to be outstanding as of the closing date.
Wachovia Credit Card Master Trust is maintained by the trustee, for the
benefit of:
o certificateholders of Series 1999-_;
o certificateholders of other series issued
by Wachovia Credit Card Master Trust;
o providers of credit enhancements for
Series 1999-_ and other series issued by
Wachovia Credit Card Master Trust; and
o Wachovia.
For a summary of the terms of the previously issued series, see
"Annex I: Other Series."
Each series has a claim to a fixed dollar amount of Wachovia Credit
Card Master Trust's assets, regardless of the total amount of receivables
in the Trust at any time. Wachovia holds the remaining claim to Wachovia
Credit Card Master Trust's assets, which fluctuates with the total amount
of receivables in the Trust. Wachovia, as the holder of that amount, has
the right to purchase the outstanding Series 1999-_ certificates at any
time when the outstanding amount of the Series 1999-_ certificateholders'
interest in the Wachovia Credit Card Master Trust is less than or equal to
5% of the original amount of that interest. The purchase price for these
outstanding Series 1999-_ certificates will be equal to the outstanding
amount plus accrued and unpaid interest on the certificates through the
last day of the period on which the repurchase occurs.
For more information on Wachovia Credit Card Master Trust's assets,
see "Wachovia's Credit Card Portfolio" and "The Receivables" in this
supplement and "Wachovia's Credit Card Activities" and "The Receivables" in
the attached prospectus.
Scheduled Principal Payments and Potential Later Payments
Wachovia Credit Card Master Trust expects to pay the entire
principal amount of Class A in one payment on [ ] and the entire principal
amount of Class B in one payment on [ ]. In order to accumulate the funds
to pay Class A on its scheduled payment date, the Trust will accumulate
principal collections in a principal funding account. The Trust will
deposit funds into the principal funding account on each "transfer date."
The Trust will deposit funds into the principal funding account during a
"controlled accumulation period." The length of the controlled accumulation
period may be as long as twelve months, but will be shortened if Wachovia
expects that a shorter period will suffice for the accumulation of the
Class A amount.
If Class A is not fully repaid on the scheduled payment date, Class
A will begin to amortize by means of monthly payments of all principal
collections allocated to Series 1999-_ until it is fully repaid.
After Class A is fully repaid, the Trust will use principal
collections allocated to Series 1999-_ to repay Class B. If Class B is not
fully repaid on its scheduled payment date, Class B will begin to amortize
by means of monthly payments of all monthly principal collections allocated
to Series 1999-_ after Class A is fully repaid.
For more information on scheduled principal payments and the
controlled accumulation period, see "Maturity Considerations" and
"Description of the Certificates--Principal Payments," "--Postponement of
Controlled Accumulation Period" and "--Application of Collections" in this
supplement and "Maturity Considerations" and "Description of the
Certificates--Principal Payments" in the attached prospectus.
Prior to the commencement of an accumulation or amortization period
for Series 1999- _, principal collections will be paid to Wachovia,
retained in a trust account or shared with other series that are amortizing
or in an accumulation period.
Minimum Yield on the Receivables; Possible Early Principal Repayment
of Series 1999-_
Class A or Class B may be repaid earlier than its scheduled
principal payment date if collections on the underlying receivables,
together with other amounts available for payment to certificateholders,
are too low. The minimum amount that must be available for payment to
Series 1999-_ in any month, referred to as the "base rate," is the sum of
the Class A interest rate, the Class B interest rate, the collateral
interest rate, and the investor servicing fee, divided by the investor
interest. If the average Trust portfolio yield, net of losses allocated to
your series, for any three consecutive months is less than the average base
rate for the same three consecutive months, a "pay out event" will occur
with respect to Series 1999-_, the Trust will commence a rapid amortization
of Series 1999-_, and holders of Series 1999-_ certificates will receive
principal payments earlier than their scheduled principal payment date.
Series 1999-_ is also subject to several other pay out events,
which could cause Series 1999-_ to amortize, and which are summarized under
the headings "Maturity Considerations" and "Description of the
Certificates--Pay Out Events" in this supplement. If Series 1999-_ begins
to amortize, Class A will receive monthly payments of principal until it is
fully repaid; Class B will then receive monthly payments of principal until
it is fully repaid.
In that event, your certificates may be repaid prior to the scheduled
payment date.
The final payment of principal and interest will be made no later
than [ ], which is the Series 1999-_ Termination Date.
For more information on pay out events, the portfolio yield and
base rate, early principal payment and rapid amortization, see "Maturity
Considerations," "Description of the Certificates--Principal Payments" and
"--Pay Out Events" in this supplement and "Description of the
Certificates-- Principal Payments" and "--Final Payment of Principal;
Termination" in the attached prospectus.
Tax Status of Class A and Class B
Skadden, Arps, Slate, Meagher & Flom LLP, special tax counsel to
Wachovia, is of the opinion that under existing law the Class A and Class B
certificates will be characterized as debt for U.S. federal income tax
purposes.
The Transferor, the Servicer, the holders of the Class A
certificates and the Class B certificates and the owners of such
certificates will agree to treat the Class A certificates as debt for
federal, state, local and foreign income and franchise tax purposes.
For further information regarding the application of U.S. federal
income tax laws, see "Certain U.S. Federal Income Tax Consequences" in the
attached prospectus.
ERISA Considerations
Class A Certificates: The underwriters anticipate that the Class A
certificates will be held by at least 100 independent persons. Wachovia
expects the other requirements will be met so that the Class A certificates
will be considered "publicly-offered securities." If so, subject to
important considerations described under "ERISA Considerations" in this
supplement and "Employee Benefit Plan Considerations" in the attached
prospectus, the Class A certificates will be eligible for purchase by
persons investing assets of employee benefit plans or individual retirement
accounts.
Class B Certificates: It is not anticipated that the Class B certificates
will meet the criteria for treatment as "publicly-offered securities." As a
result, pension plans and other investors subject to ERISA may not acquire
Class B certificates.
Prohibited investors include:
o "employee benefit plans" as defined in section 3(3) of ERISA.
o any "plan" as defined in section 4975 of the U.S.
Internal Revenue Code; and
o any entity whose underlying assets may be deemed to include
"plan assets" under ERISA by reason of any such plan's
investment in the entity, including insurance company
general accounts.
By purchasing any Class B certificates, you certify that you are not within
any of those categories.
For further information regarding the application of ERISA, see
"ERISA Considerations" in this supplement and "Employee Benefit Plan
Considerations" in the attached prospectus.
Mailing Address and Telephone Number of Principal Executive Offices
The mailing address of The First National Bank of Atlanta is 77
Read's Way, New Castle Corporate Commons, New Castle, Delaware 19720 and
the telephone number is (302) 323-2395.
Risk Factors
You should consider the following risk factors in deciding whether
to purchase the asset backed certificates described herein.
Potential Early Repayment or
Delayed Payment due to
Reduced Portfolio Yield If the average trust portfolio yield,
net of losses allocated to your series,
for any three consecutive months is
less than the average base rate for the
same three consecutive months, a "pay
out event" will occur with respect to
Series 1999-_ and the Trust will
commence a rapid amortization of Series
1999-_, and holders of Series 1999-_
certificates will receive principal
payments earlier than the scheduled
principal payment date. Moreover, if
principal collections on receivables
allocated to other series are available
for application to a rapid amortization
of any outstanding securities, the
period during which that rapid
amortization occurs may be
substantially shortened. Because of the
potential for early repayment if
collections on the receivables fall
below the minimum amount, any
circumstances that tend to reduce
collections may increase the risk of
early repayment of Series 1999-_.
Conversely, any reduction in
collections may cause the period during
which collections are accumulated in
the principal funding account for
payment of Class A to be longer than
otherwise would have been the case.
The following factors could result in
circumstances that tend to reduce
collections:
Wachovia May Change the Terms and
Conditions of the Accounts
Wachovia will transfer receivables to
the Wachovia Credit Card Master Trust
arising under specified credit card
accounts, but Wachovia will continue to
own those accounts. As the owner of
those accounts, Wachovia retains the
right to change various terms and
conditions of those accounts, including
finance charges and other fees it
charges and the required minimum
monthly payment. Wachovia may change
the terms of the accounts to maintain
its competitive position in the credit
card industry. Changes in the terms of
the accounts may reduce the amount of
receivables arising under the accounts,
reduce the amount of collections on
those receivables, or otherwise alter
payment patterns.
Wachovia has agreed that it will not
change the terms of the accounts or its
policies relating to the operation of
its credit card business, including the
reduction of the required minimum
monthly payment and the calculation of
the amount or the timing of finance
charges, other fees and charge-offs,
unless it reasonably believes such a
change would not result in a pay out
event for any series and takes the same
action on its other substantially
similar accounts, to the extent
permitted by those accounts.
As Servicer, Wachovia is also required
to exercise the same care and apply the
same policies that it exercises in
handling similar matters for its own
comparable accounts.
Wachovia May Add Accounts to the
Trust Portfolio
In addition to the accounts already
designated for Wachovia Credit Card
Master Trust, Wachovia is permitted to
designate additional accounts for the
Trust portfolio and to transfer the
receivables in those accounts to the
Trust. Wachovia may designate certain
accounts and add to the Trust the
receivables in those accounts or may
designate that receivables in certain
eligible accounts will automatically be
added to the Trust, subject to certain
limitations. Any new accounts and
receivables may have different terms
and conditions than the accounts and
receivables already in the Trust--such
as higher or lower fees or interest
rates, or longer or shorter principal
payment terms. Credit card accounts
purchased by Wachovia may be included
as additional accounts if certain
conditions are satisfied. Credit card
accounts purchased by Wachovia will
have been originated using the account
originator's underwriting criteria, not
those of Wachovia. The account
originator's underwriting criteria may
be more or less stringent than those of
Wachovia. Additionally, additional
credit card accounts may have been
originated by Wachovia using credit
criteria which is different from those
which were applied by Wachovia to the
current credit card accounts. The new
accounts and receivables may produce
higher or lower collections or
charge-offs over time than the accounts
and receivables already in the Trust
and could tend to reduce the amount of
collections allocated to Series 1999-_.
Also, if Wachovia's percentage interest
in the accounts of the Trust falls to
5% or less, Wachovia will be required
to maintain that level by designating
additional accounts for the Trust
portfolio and transferring the
receivables in those accounts to the
Trust. If Wachovia is required to add
accounts to the Trust, it may not have
any accounts available to be added to
the Trust. If Wachovia fails to add
accounts when required, a "pay out
event" will occur and you could receive
payment of principal sooner than
expected. See "Description of the
Certificates--Addition of Trust Assets"
in the attached prospectus.
Certificate and Receivables Interest
Rate Reset Terms May Differ
Finance charges on the accounts in the
Wachovia Credit Card Master Trust may
accrue at a fixed rate or a variable
rate above a designated prime rate or
other designated index. The certificate
rate of your certificate is based on
LIBOR. Changes in LIBOR might not be
reflected in the prime rate or the
designated index, resulting in a higher
or lower spread, or difference, between
the amount of collections of finance
charge receivables on the accounts and
the amounts of interest payable on
Series 1999-_ and other amounts
required to be funded out of
collections of finance charge
receivables. With respect to accounts
in the Trust that accrue finance
charges at a fixed rate, if LIBOR
increases, the amount of interest on
your certificate and other amounts
required to be funded out of
collections of finance charge
receivables will increase, while the
amount of collections of finance charge
receivables on those accounts will
remain the same until the rates on the
accounts are reset.
A decrease in the spread between
collections of finance charge
receivables and interest payments on
your certificate could increase the
risk of early repayment.
Changes to Consumer Protection Laws May
Impede Wachovia's Collection Efforts
Federal and state consumer protection
laws regulate the creation and
enforcement of consumer loans,
including credit card accounts and
receivables. Changes or additions to
those regulations could make it more
difficult for the servicer of the
receivables to collect payments on the
receivables. The U.S. Congress or state
or local legislatures could pass
legislation limiting the finance
charges and fees that may be charged on
credit card accounts. The impact could
be a reduction of the portfolio yield
which could result in a pay out event.
See "Description of the
Certificates--Pay Out Events" in this
supplement and "Certain Legal Aspects
of the Receivables--Consumer Protection
Laws" in the attached prospectus.
Receivables that do not comply with
consumer protection laws may not be
valid or enforceable in accordance with
their terms against the obligors on
those receivables. Wachovia makes
representations and warranties relating
to the validity and enforceability of
the receivables arising under the
accounts in the Trust portfolio.
Subject to certain conditions described
under "Description of the
Certificates--Representations and
Warranties" in the attached prospectus,
Wachovia must accept reassignment of
each receivable that does not comply in
all material respects with all
requirements of applicable law.
However, we do not anticipate that the
trustee under the pooling and servicing
agreement will make any examination of
the receivables or the related records
for the purpose of determining the
presence or absence of defects,
compliance with representations and
warranties, or for any other purpose.
The only remedy if any representation
or warranty is violated, and the
violation continues beyond the period
of time Wachovia has to correct the
violation, is that Wachovia must accept
reassignment of the receivables
affected by the violation, subject to
certain conditions described under
"Description of the
Certificates--Representations and
Warranties" in the attached prospectus.
See also "Certain Legal Aspects of the
Receivables--Consumer Protection Laws"
in the attached prospectus.
If a cardholder sought protection under
federal or state bankruptcy or debtor
relief laws, a court could reduce or
discharge completely the cardholder's
obligations to repay amounts due on its
account and, as a result, the related
receivables would be written off as
uncollectible. See "Description of the
Certificates-- Defaulted Receivables;
Investor Charge-Offs" in this
supplement and "Description of the
Certificates--Defaulted Receivables;
Rebates and Fraudulent Charges;
Investor Charge-Offs" in the attached
prospectus.
Slower Generation of Receivables Could
Reduce Collections
The receivables transferred to the
Wachovia Credit Card Master Trust may
be paid at any time. We cannot assure
the creation of additional receivables
in those accounts or that any
particular pattern of cardholder
payments will occur. A significant
decline in the amount of new
receivables generated by the accounts
in the Trust could result in reduced
collections. See "Maturity
Considerations" in this supplement and
in the attached prospectus.
Allocations of Charged-Off
Receivables Could Reduce
Payments to Certificateholders Wachovia anticipates that it will write
off as uncollectible some portion of
the receivables arising in accounts in
the trust portfolio. Each class of
Series 1999-_ will be allocated a
portion of those charged-off
receivables. See "Description of the
Certificates--Allocation Percentages"
and "Wachovia's Credit Card
Portfolio--Delinquency and Loss
Experience" in this supplement. If the
amount of charged-off receivables
allocated to any class of certificates
exceeds the amount of other funds
available for reimbursement of those
charge-offs (which could occur if the
limited amount of credit enhancement
for those certificates is reduced to
zero), the holders of those
certificates may not receive the full
amount of principal and interest due to
them. See "Description of the
Certificates--Reallocation of Cash
Flows," "--Application of Collections"
and "--Defaulted Receivables; Investor
Charge-Offs" in this supplement.
Limited Ability to Resell
Certificates The underwriters may assist in resales
of Class A certificates but they are
not required to do so. A secondary
market for any such securities may not
develop. If a secondary market does
develop, it might not continue or it
might not be sufficiently liquid to
allow you to resell any of your
securities.
Certain Liens Could Be Given
Priority Over Your Securities Wachovia accounts for the transfer of
the receivables to the Trust as a sale.
However, a court could conclude that
Wachovia still owns the receivables and
that the Trust holds only a security
interest. Wachovia will take steps to
give the trustee a "first priority
perfected security interest" in the
receivables. If Wachovia became
insolvent and the Federal Deposit
Insurance Corporation were appointed
conservator or receiver of Wachovia,
the FDIC's administrative expenses
might be paid from the receivables
before the Trust received any payments
on the receivables. If a court
concludes that the transfer to the
Trust is only a grant of a security
interest in the receivables, certain
liens on Wachovia's property arising
before new receivables come into
existence may get paid before the
Trust's interest in those receivables.
Those liens include a tax or government
lien or other liens permitted under the
law without the consent of Wachovia.
See "Certain Legal Aspects of the
Receivables--Transfer of Receivables"
and "Description of the
Certificates--Representations and
Warranties" in the attached prospectus.
Insolvency or Bankruptcy of
Wachovia Could Result in
Accelerated, Delayed or Reduced
Payments to Certificateholders Under the Federal Deposit Insurance
Act, as amended by the Financial
Institutions Reform, Recovery and
Enforcement Act of 1989, if Wachovia
becomes insolvent and the FDIC is
appointed conservator or receiver of
Wachovia, the FDIC could--
o require The Bank of New York
(Delaware), as trustee for the
Trust, to go through an
administrative claims procedure
under which the FDIC could have up
to 180 days to determine the
Trustee's right to payments
collected on the receivables in
the Trust;
o request a stay of up to 90 days of
any judicial action or proceeding
involving Wachovia; or
o repudiate the pooling and
servicing agreement establishing
the Trust up to 180 days following
the date of receivership and limit
the Trust's resulting claim to
"actual direct compensatory
damages" measured as of the date
of receivership.
If the FDIC were to take any of these
actions, your payments of outstanding
principal and interest could be
delayed and possibly reduced. In this
regard, among other possibilities, it
is likely that the FDIC would not pay
you the interest accrued from the date
of receivership to the date of
repudiation or payment. See "Certain
Legal Aspects of the
Receivables--Certain Matters Relating
to Receivership" in the attached
prospectus.
If a conservator or receiver were
appointed for Wachovia, then a "pay
out event" could occur for all
outstanding series. Under the terms of
the pooling and servicing agreement,
new principal receivables would not be
transferred to the Trust and, if
Series 1999- _ remains outstanding,
the trustee would sell the receivables
allocated to a series unless holders
of more than 50% of the invested
amount of the series or, if the series
has more than one class, each class of
the series gave the trustee other
instructions. The Trust would
terminate earlier than was planned if
each series did not vote to continue
the Trust. You could have a loss if
the sale of the receivables produced
insufficient net proceeds to pay you
in full. The conservator or receiver
may nonetheless have the power--
o regardless of the terms of the
pooling and servicing agreement,
(a) to prevent the beginning of a
rapid amortization period, (b) to
prevent the early sale of the
receivables and termination of the
Trust or (c) to require new
principal receivables to continue
being transferred to the Trust; or
o regardless of the instructions of
the certificateholders, (a) to
require the early sale of the
Trust's receivables, (b) to
require termination of the Trust
and retirement of the Trust's
certificates (including Series
1999-_) or (c) to prohibit the
continued transfer of principal
receivables to the Trust.
The FDIC as conservator or receiver
would also have the power to repudiate
or refuse to perform any obligations
of Wachovia, including any obligations
of Wachovia as servicer, and to
request a stay of up to 90 days of any
judicial action or proceeding
involving Wachovia. In addition, if
Wachovia, as servicer, defaults on its
obligations under the pooling and
servicing agreement solely because the
FDIC is appointed conservator or
receiver for Wachovia, the FDIC might
have the power to prevent the trustee
or the certificateholders from
appointing a new servicer under the
pooling and servicing agreement. See
"Certain Legal Aspects of the
Receivables--Certain Matters Relating
to Receivership" in the attached
prospectus.
Issuance of Additional Series by
the Trust May Affect the Timing
of Payments Wachovia Credit Card Master Trust, as
a master trust, may issue series of
certificates from time to time. The
Trust may issue additional series with
terms that are different from your
series without the prior review or
consent of any certificateholders. It
is a condition to the issuance of each
new series that each rating agency
that has rated an outstanding series
confirm in writing that the issuance
of the new series will not result in a
reduction or withdrawal of its rating
of any class of any outstanding
series.
However, the terms of a new series
could affect the timing and amounts of
payments on any other outstanding
series. See "Description of the
Certificates--Exchanges" in the
attached prospectus.
Individual Certificateholders
Will Have Limited Control of
Trust Actions Certificateholders of any series or
any class within a series may need the
consent or approval of a specified
percentage of the invested amount of
other series or a class of such other
series to take or direct certain
actions, including to require the
appointment of a successor servicer
after Wachovia, as servicer, defaults
on its obligations under the pooling
and servicing agreement, to amend the
pooling and servicing agreement in
some cases, and to direct a repurchase
of all outstanding series after
certain violations of Wachovia's
representations and warranties. The
interests of the certificateholders of
any such series may not coincide with
yours, making it more difficult for
any particular certificateholder to
achieve the desired results from such
vote.
Class B Bears
Additional Credit Risk Because Class B is subordinated to
Class A, principal payments to Class B
will not begin until Class A is repaid
in full. Also, if collections of
finance charge receivables allocated
to Series 1999-__ are insufficient to
cover amounts due to Class A, the
invested amount for Class B may be
reduced. This would reduce the amount
of the collections of finance charge
receivables available to Class B in
future periods and could cause a
possible delay or reduction in
principal and interest payments on
Class B. If the receivables are sold,
the net proceeds of that sale
available to pay principal would be
paid first to Class A and any
remaining net proceeds would be paid
to Class B. See "Description of the
Certificates--Subordination of the
Class B Certificates" in this
supplement.
Wachovia's Credit Card Portfolio
Capitalized terms are defined in the attached prospectus or in this
supplement. Definitions are indicated by boldface type. Both the attached
prospectus and this supplement contain an index of terms listing the page
numbers where definitions can be found.
General
The receivables (the "Receivables") conveyed to Wachovia Credit Card
Master Trust ("Trust I") by Wachovia pursuant to the pooling and servicing
agreement (as the same may be amended from time to time, the "Pooling and
Servicing Agreement"), between The First National Bank of Atlanta d/b/a
Wachovia Bank Card Services ("Wachovia" or the "Bank") as transferor (in
such capacity, the "Transferor") and as servicer of the Receivables (in
such capacity, the "Servicer"), and The Bank of New York (Delaware), as
trustee (the "Trustee"), as supplemented by the supplement relating to the
Certificates (the "Series 1999-_ Supplement") (the term "Agreement," unless
the context requires otherwise, refers to the Pooling and Servicing
Agreement as supplemented by the Series 1999-_ Supplement) have been or
will be generated from transactions made by holders of selected
MasterCard(R) and VISA(R) credit card accounts, including premium accounts
and standard accounts, from the Bank Portfolio. Each Class A Floating Rate
Asset Backed Certificate, Series 1999-_ (collectively, the "Class A
Certificates"), each Class B Floating Rate Asset Backed Certificate, Series
1999-_ (collectively, the "Class B Certificates" and, together with the
Class A Certificates, the "Offered Certificates") and the interest in the
collateral (the "Collateral Interest" and, together with the Offered
Certificates, the "Investor Certificates") will represent the right to
receive certain payments from the Trust. As used in this prospectus
supplement, the term "Class A Certificateholders" refers to holders of the
Class A Certificates, the term "Class B Certificateholders" refers to
holders of the Class B Certificates, the term "Collateral Interest Holders"
refers to the holders of the Collateral Interest and the "Investor
Certificateholders" refers to the Class A Certificateholders, Class B
Certificateholders and Collateral Interest Holders.
Certain MasterCard and VISA credit card accounts (the "Accounts")
represent only a portion of the entire portfolio of consumer revolving
credit loans arising in the VISA and MasterCard accounts currently owned by
Wachovia (such portfolio, excluding the Wells Portfolio (as defined below),
the "Bank Portfolio"). Additional Accounts may include Accounts originated
after the date of this offering and which are selected using eligibility
criteria different from those used in selecting the Accounts presently
included in the Trust.
Wachovia is a member of VISA and MasterCard International. VISA and
MasterCard credit cards are issued as part of the worldwide VISA and
MasterCard International systems, and transactions creating the receivables
through the use of those credit cards are processed through the VISA and
MasterCard International authorization and settlement systems. If either
system were to materially curtail its activities, or if Wachovia were to
cease being a member of VISA or MasterCard International, for any reason,
an Early Amortization Event, as such term is defined in the related Series
1999-_ Supplement, could occur, and delays in payments on the Receivables
and possible reductions in the amounts thereof could also occur. The VISA
and MasterCard accounts, the receivables in which have been conveyed to the
Trust, include both standard and premium VISA and MasterCard accounts.
The VISA and MasterCard credit cards may be used to purchase
merchandise and services and to obtain cash advances. A cash advance is
made when a credit card account is used to obtain cash from a financial
institution or automated teller machine, which may be located at a
financial institution, supermarket or other business establishment. Amounts
due with respect to both purchases and cash advances will be included in
the Receivables.
Billing and Payments
Wachovia, using Wachovia Operational Services Corporation ("WOSC") as
its service bureau, generates and mails to cardholders monthly statements
summarizing account activity and processes cardholder monthly payments.
Customers generally receive a 20-day grace period on purchases. Currently,
cardholders must make a minimum monthly payment at least equal to the
greater of (i)1/48th of the statement balance plus past due amounts and
(ii) a stated minimum payment (generally $10) plus past due amounts.
Certain eligible cardholders are given the option periodically to take a
payment deferral. The finance charges on purchases assessed monthly are
calculated by multiplying the account's average daily purchase balance by
the applicable monthly periodic rate. Finance charges are calculated on
purchases from the date of the purchase or the first day of the billing
cycle in which the purchase is posted to the account, whichever is later.
Monthly periodic finance charges are not assessed in most circumstances on
purchases if all balances shown in the billing statement are paid by the
due date, which is generally 20 days after the billing date. Finance
charges are calculated on cash advances (including balance transfers) from
the date of the transaction. Currently, Wachovia generally treats the date
of the cash advance check as the transaction date for the check. Wachovia
offers fixed rate and variable rate credit card accounts. Generally, fixed
annual percentage rates range from 14.98% to 17.98%, and variable rates
range from prime to prime plus 9.9% per annum. Wachovia also offers
temporary promotional rates and, under certain circumstances, the periodic
finance charges on a limited number of accounts may be less than those
assessed by Wachovia generally. In addition, certain delinquent accounts
may be priced at higher rates up to the greater of 22.99% per annum or
prime plus 14.99% per annum.
Wachovia assesses annual membership fees (generally ranging from $15 to
$98) on certain accounts, although under various marketing programs these
fees may be waived or rebated. For most credit card accounts, Wachovia also
assesses late and over limit charges (generally $29) and returned check
charges (generally $29). Wachovia generally assesses a cash advance fee,
typically 4% of the cash advance amount with a $5 minimum.
Portfolio Acquisitions
The Bank merged with Jefferson Bankshares, Inc., headquartered in
Charlottesville, Virginia, and Central Fidelity Banks, Inc., headquartered
in Richmond, Virginia (the "Virginia Banks") on October 31, 1997 and
December 15, 1997, respectively. In connection with these mergers, Wachovia
purchased from Jefferson Bankshares, Inc. approximately $16 million of
credit card receivables and from Central Fidelity Banks, Inc. approximately
$749 million of credit card receivables (collectively, the "Virginia
Portfolios"). On September 4, 1998, Wachovia purchased $269 million of
credit card receivables from Wells Fargo & Co. (the "Wells Portfolio").
None of the accounts in the Virginia Portfolios or the Wells Portfolio has
been designated to have its receivables included in the Trust I Portfolio.
Such accounts were originated using criteria different from those which
were applied in originating the Accounts designated on the initial Cut Off
Date. Consequently, there can be no assurance that Additional Accounts
designated in the future from such accounts, if any, will be of the same
credit quality as previously designated Accounts. Additionally, it is
possible that if receivables arising in accounts in the Virginia Portfolios
and/or the Wells Portfolio were added to the Trust I Portfolio, subject to
satisfaction of the Rating Agency Condition (as defined herein), the
quality of the Trust I Portfolio may change.
Delinquency and Loss Experience
An account is contractually delinquent if the minimum payment is not
received by the due date indicated on the customer's statement. Efforts to
collect contractually delinquent credit card receivables are currently made
by Wachovia's Account Management Department. Collection activities include
statement messages, telephone calls and formal collection letters. Wachovia
utilizes an automated collection system in conjunction with a power dialing
system to gain efficiencies and productivity in the collection effort of
the past due accounts. The automated collection system appends a behavioral
scoring model on accounts five days or more past due and prioritizes the
accounts for initial contact with the objective of contacting the highest
risk and balance accounts first. This information is then downloaded into
the power dialing system which sorts the accounts into the appropriate time
zone and dials the delinquent accounts in order of priority.
Representatives are automatically linked to the cardholder's account
information and voice line when contact is established.
Accounts are worked continually at each stage of delinquency through
the 120 day past due level. As an account enters the 120 day delinquency
level, it is classified as a potential charge-off. Accounts failing to make
a payment during the 120 day cycle are written off on or prior to becoming
150 days past due. Managers may defer a charge-off of an account for
another month, pending continued payment activity or other special
circumstances. Departmental manager approval is required on all exceptions
to charge-off. Accounts of cardholders in bankruptcy are generally
charged-off in the month following the receipt of notification of the
bankruptcy. On February 10, 1999, the Federal Financial Institutions
Examination Council ("FFIEC") adopted a revised Uniform Retail Credit
Classification and Account Management Policy (the "FFIEC Uniform Policy")
that provides that open end retail loans, such as credit card receivables,
that become past due 180 days should be charged off by the end of the month
in which the loan becomes 180 days past due. The Bank is currently
reviewing plans to implement a change in its charge-off policy to conform
it to the FFIEC Uniform Policy.
The following tables set forth the delinquency and loss experience for
each of the periods shown for the Accounts selected from the Bank
Portfolio. The Bank Portfolio's delinquency and loss experience is
comprised of segments which may, when taken individually, have delinquency
and loss characteristics different from those of the overall Bank Portfolio
of credit card accounts. As of _______, 1999 the Receivables in the Trust I
Portfolio represented approximately [ %] of the Bank Portfolio. Because the
Trust I Portfolio is only a portion of the Bank Portfolio, actual
delinquency and loss experience with respect to the Receivables may be
different from that set forth below for the Bank Portfolio. There can be no
assurance that the delinquency and loss experience for the Receivables in
the future will be similar to the historical experience of the Bank
Portfolio set forth below.
<TABLE>
<CAPTION>
Delinquency Experience
Bank Portfolio
As of December 31,
-------------------------------------------------------------------
As of _______1999(1) 1998(1) 1997(1) 1996(1)
------------------------ ------------------------ ------------------------ -------------------------
Percentage Percentage Percentage Percentage
of Total of Total of Total of Total
Receivables Receivables Receivables Receivables Receivables Receivables Receivables Receivables
------------------------ ------------- ----------- -------------- ----------- -------------- -----------
Receivables
<S> <C> <C> <C> <C> <C> <C> <C>
Outstanding(2). $6,189,588,274 100.00% $5,591,770,800 100.00% $5,407,813,397 100.00%
======================== ============= =========== ============== =========== ============== ===========
Receivables
Delinquent:
30-59 Days.... $ 82,356,495 1.33% $ 66,278,826 1.18% $ 53,823,867 1.00%
60-89 Days.... 44,694,277 0.72 35,537,859 0.64 27,222,566 0.50
90 or More
Days.......... 56,883,834 0.92 47,315,115 0.85 35,415,459 0.65
------------------------ ------------- ----------- -------------- ----------- -------------- -----------
TOTAL........ $ 183,934,606 2.97% $ 149,131,800 2.67% $ 116,461,892 2.15%
======================== ============= =========== ============== =========== ============== ===========
- ------------
(1) Figures shown include the Virginia Portfolios for the 1998 year end and do not include the Wells Portfolio.
(2) The Receivables Outstanding on the accounts consist of all amounts due from cardholders as posted to the accounts
as of the end of the period shown.
</TABLE>
<TABLE>
<CAPTION>
Loss Experience
Bank Portfolio
Year Ended December 31,
--------------------------------------
___ Months
Ended __ __,
1999(1) 1998(1) 1997(1) 1996(1)
------------ ---------------- ----------------- --------------
<S> <C> <C> <C> <C>
Average Receivables Outstanding(2).........$ [ ] $ 5,885,303,622 $ 5,398,461,407 $4,818,808,813
Total Gross Charge-Offs(3).................$ [ ] $ 292,516,163 $ 224,571,000 $ 171,897,000
Recoveries.................................$ [ ] $ 28,103,721 $ 23,184,000 $ 18,273,000
Total Net Charge-Offs as a Percentage of
Average Receivables Outstanding............$ [ ]% 4.49% 3.73% 3.19%
</TABLE>
- -----------
(1) Figures shown include the Virginia Portfolios from March 20, 1998 and
do not include the Wells Portfolio.
(2) Average Receivables Outstanding is the average of the daily
receivable balance during the period indicated.
(3) Total Gross Charge-Offs are total principal and interest
charge-offs before recoveries and do not include the amount of any
reductions in Average Receivables Outstanding due to fraud,
returned goods and customer disputes.
Interchange
The Transferor will be required, pursuant to the terms of the
Agreement, to transfer to Trust I a percentage of the Interchange (as
defined in the attached prospectus) attributed to cardholder charges for
goods and services in the Accounts. Interchange arising under the Accounts
will be allocated to Series 1999-_ on the basis of the percentage
equivalent of the ratio which the amount of the Floating Investor
Percentage of cardholder charges for goods and services in the Accounts
bears to the total amount of cardholder charges for goods and services in
the MasterCard and VISA credit card accounts owned by Wachovia, as
reasonably estimated by the Transferor. MasterCard and VISA may from time
to time change the amount of Interchange reimbursed to banks issuing their
credit cards. Interchange will be treated as collections of Finance Charge
Receivables for the purposes of determining the amount of Finance Charge
Receivables, allocating collections of Finance Charge Receivables, making
required monthly payments, and calculating the Portfolio Yield. Under the
circumstances described herein, Interchange will be used to pay a portion
of the Investor Servicing Fee required to be paid on each Transfer Date.
See "Description of the Certificates--Servicing Compensation and Payment of
Expenses" in this supplement and "Wachovia's Credit Card
Activities--Interchange" in the attached prospectus.
The Receivables
The Receivables conveyed to Trust I arise in Accounts selected from
the Bank Portfolio (the "Trust I Portfolio") on the basis of criteria set
forth in the Agreement as applied on the Cut Off Date with respect to the
original Accounts and, with respect to Additional Accounts, as of the date
the Account is selected to have its receivables added to the Trust (the
"Addition Cut Off Date"). Pursuant to the Agreement, the Transferor has the
right, subject to certain limitations and conditions set forth therein, to
designate from time to time Additional Accounts and Automatic Additional
Accounts and to transfer to Trust I all Receivables of such Additional
Accounts and Automatic Additional Accounts, whether such Receivables are
then existing or thereafter created. Any Additional Accounts designated
pursuant to the Agreement must be Eligible Accounts as of the date the
Transferor designates such accounts as Additional Accounts. Any Automatic
Additional Accounts designated pursuant to the Agreement must be Eligible
Accounts as of the date of their creation. The Transferor will be required
to designate Additional Accounts, to the extent available, (a) to maintain
the Transferor Amount (including the principal amount on deposit in the
Excess Funding Account) so that the Transferor Amount at the end of each
calendar month (the "Monthly Period") equals or exceeds the Minimum
Transferor Amount and (b) to maintain, for so long as certificates of any
Series (including Series 1999-_) remain outstanding, the sum of (i) the
aggregate amount of Principal Receivables and (ii) the principal amount on
deposit in the Excess Funding Account equal to or greater than the Minimum
Aggregate Principal Receivables. "Minimum Transferor Amount" means 5% of
the sum of (i) the average Principal Receivables for the preceding Monthly
Period and (ii) the average principal amount on deposit in the Excess
Funding Account for such period; provided, however, that the Transferor may
reduce the Minimum Transferor Amount to not less than 2% of the sum of (i)
the average Principal Receivables for such period and (ii) the average
principal amount on deposit in the Excess Funding Account and any other
account specified from time to time pursuant to the Agreement or any Series
Supplement for such period upon satisfaction of the Rating Agency Condition
and certain other conditions to be set forth in the Agreement. "Minimum
Aggregate Principal Receivables" means an amount equal to the sum of the
numerators used to calculate the Investor Percentages with respect to the
allocation of collections of Principal Receivables for each Series then
outstanding; provided, however, that the Minimum Aggregate Principal
Receivables may be reduced to a lesser amount at any time if the Rating
Agency Condition is satisfied. Further, pursuant to the Agreement, the
Transferor will have the right (subject to certain limitations and
conditions) to designate certain Removed Accounts and to require the
Trustee to reconvey all Receivables in such Removed Accounts to the
Transferor, whether such Receivables are then existing or thereafter
created. Throughout the term of Trust I, the Accounts from which the
Receivables arise will be the Accounts designated by the Transferor on the
Cut Off Date plus any Additional Accounts designated by the Transferor on
any Addition Cut Off Date and Automatic Additional Accounts minus any
Removed Accounts. As of the Cut Off Date, with respect to the original
Accounts, as of the Addition Cut Off Date with respect to Receivables in
Additional Accounts and, as of the related date of their conveyance to
Trust I with respect to Automatic Additional Accounts , and on the date any
new Receivables are created, the Transferor will represent and warrant to
Trust I that the Receivables meet the eligibility requirements specified in
the Agreement. See "Description of the Certificates--Representations and
Warranties" in the prospectus.
The Receivables in the Trust I Portfolio, as of the _______, 1999
included $[ ] of Principal Receivables and
$[ ] of Finance Charge Receivables. The Accounts had an average Principal
Receivable balance of $[ ] and an average credit limit of $[ ]. The
percentage of the aggregate total Receivable balance to the aggregate total
credit limit was [ ]%. The average age of the Accounts was approximately [
] months. As of the _______, 1999 cardholders whose Accounts are included
in the Trust I Portfolio had billing addresses in all [50] states, the
District of Columbia and other United States territories and possessions.
As of _______, 1999 [ ]% of the Accounts were standard accounts and [ ]%
were premium accounts, and the aggregate total Receivable balances of
standard accounts and premium accounts, as a percentage of the aggregate
total Receivables, were [ ]% and [ ]%, respectively.
The following tables summarize the Trust I Portfolio by various
criteria as of _______, 1999. Because the future composition of the Trust I
Portfolio may change over time, these tables are not necessarily indicative
of the composition of the Trust I Portfolio at any subsequent time.
<TABLE>
<CAPTION>
Composition by Account Balance
Trust I Portfolio
Percentage of
Number of Total Number of Percentage of
Account Balance Range Accounts Accounts Receivables Total Receivables
- --------------------- ---------- --------------- ------------- -----------------
<S> <C> <C> <C> <C>
Credit Balance............................ % $ %
No Balance................................
$.01-$1,499.99............................
$1,500.00-$2,999.99.......................
$3,000.00-$4,499.99.......................
$4,500.00-$9,999.99.......................
$10,000.00 or More........................
---------- --------------- ------------- -----------------
TOTAL................................... % $ %
========== =============== ============= =================
</TABLE>
<TABLE>
<CAPTION>
Composition by Credit Limit
Trust I Portfolio
Percentage of
Number of Total Number of Percentage of
Credit Limit Range Accounts Accounts Receivables Total Receivables
------------------ ---------- --------------- ------------- -----------------
<S> <C> <C> <C> <C>
Less than or equal to $1,500.............. % $ %
$1,501-$3,000.............................
$3,001-$4,500.............................
$4,501-$10,000............................
$10,001 or More...........................
---------- --------------- ------------- -----------------
TOTAL................................... % $ %
========== =============== ============= =================
</TABLE>
<TABLE>
<CAPTION>
Composition by Period of Delinquency
Trust I Portfolio
Percentage of
Period of Delinquency Number of Total Number of Percentage of
(Days Contractually Delinquent) Accounts Accounts Receivables Total Receivables
- ------------------------------- ---------- --------------- ------------- -----------------
<S> <C> <C> <C> <C>
Not Delinquent............................ % $ %
6 to 30 Days..............................
31 to 60 Days.............................
61 to 90 Days.............................
91 to 120 Days............................
121 to 150 Days...........................
Over 150 Days.............................
---------- --------------- ------------- -----------------
TOTAL................................... % $ %
========== =============== ============= =================
</TABLE>
<TABLE>
<CAPTION>
Composition by Account Age
Trust I Portfolio
Percentage of
Number of Total Number of Percentage of
Account Age Accounts Accounts Receivables Total Receivables
- ----------- ---------- --------------- ------------- -----------------
<S> <C> <C> <C> <C>
Not More than 24 Months....... % $ %
Over 24 Months to 48 Months...
Over 48 Months to 60 Months...
Over 60 Months................
---------- --------------- ------------- -----------------
TOTAL................................... % $ %
========== =============== ============= =================
</TABLE>
<TABLE>
<CAPTION>
Geographic Distribution of Accounts in the
Trust I Portfolio
Percentage of
Number of Total Number of Percentage of
State Accounts Accounts Receivables Total Receivables
- ----- ---------- --------------- ------------- -----------------
<S> <C> <C> <C> <C>
Alabama.............................. % $ %
Alaska...............................
Arizona..............................
Arkansas.............................
California...........................
Colorado.............................
Connecticut..........................
Delaware.............................
Florida..............................
Georgia..............................
Hawaii...............................
Idaho................................
Illinois.............................
Indiana..............................
Iowa.................................
Kansas...............................
Kentucky.............................
Louisiana............................
Maine................................
Maryland.............................
Massachusetts........................
Michigan.............................
Minnesota............................
Mississippi..........................
Missouri.............................
Montana..............................
Nebraska.............................
Nevada...............................
New Hampshire........................
New Jersey...........................
New Mexico...........................
New York.............................
North Carolina.......................
North Dakota.........................
Ohio.................................
Oklahoma.............................
Oregon...............................
Pennsylvania.........................
Rhode Island.........................
South Carolina.......................
South Dakota.........................
Tennessee............................
Texas................................
Utah.................................
Vermont..............................
Virginia.............................
Washington...........................
West Virginia........................
Wisconsin............................
Wyoming..............................
District of Columbia.................
Other................................
---------- --------------- ------------- -----------------
TOTAL................................... % $ %
========== =============== ============= =================
</TABLE>
Maturity Considerations
The Agreement provides that Class A Certificateholders will not receive
payments of principal until the[ ] Distribution Date (the "Class A
Scheduled Payment Date"), or earlier in the event of a Pay Out Event, which
results in the commencement of the Rapid Amortization Period. The Agreement
also provides that Class B Certificateholders will not receive payments of
principal until the [ ] Distribution Date (the "Class B Scheduled Payment
Date"), or earlier in the event of a Pay Out Event (as defined below),
which results in the commencement of the Rapid Amortization Period (in the
latter case, only after the Class A Investor Interest (as defined herein)
has been paid in full). The Class B Certificateholders will not begin to
receive payments of principal until the final principal payment on the
Class A Certificates has been made.
Controlled Accumulation Period
On each Transfer Date during the Controlled Accumulation Period prior
to the payment of the Class A Investor Interest in full, an amount equal
to, for each Monthly Period, the least of (a) the Available Investor
Principal Collections, (b) the applicable "Controlled Deposit Amount" for
such Monthly Period, which is equal to the sum of the Controlled
Accumulation Amount for such Monthly Period and the Accumulation Shortfall,
if any, for such Monthly Period and (c) the Class A Adjusted Investor
Interest prior to any deposits on such day, will be deposited in the
Principal Funding Account (the "Principal Funding Account") established by
the Servicer until the principal amount on deposit in the Principal Funding
Account (the "Principal Funding Account Balance") equals the Class A
Investor Interest. After the Class A Investor Interest has been paid in
full, or following the first Transfer Date upon which the Principal Funding
Account Balance has increased to the amount of the Class A Investor
Interest, Available Investor Principal Collections, to the extent required,
will be distributed to the Class B Certificateholders on each Distribution
Date beginning, during the Controlled Accumulation Period, on the Class B
Scheduled Payment Date, until the earlier of the date the Class B Investor
Interest (as defined herein) has been paid in full and the Series 1999-_
Termination Date. After the Class A Investor Interest and the Class B
Investor Interest have each been paid in full, Available Investor Principal
Collections, to the extent required, will be distributed to the Collateral
Interest Holder on each Transfer Date until the earlier of the date the
Collateral Interest has been paid in full and the Series 1999-_ Termination
Date. Amounts in the Principal Funding Account are expected to be available
to pay the Class A Investor Interest on the Class A Scheduled Payment Date.
After the payment of the Class A Investor Interest in full, Available
Investor Principal Collections are expected to be available to pay the
Class B Investor Interest on the Class B Scheduled Payment Date. Although
it is anticipated that collections of Principal Receivables will be
available on each Transfer Date during the Controlled Accumulation Period
to make a deposit of the applicable Controlled Deposit Amount and that the
Class A Investor Interest will be paid to the Class A Certificateholders on
the Class A Scheduled Payment Date and the Class B Investor Interest will
be paid to the Class B Certificateholders on the Class B Scheduled Payment
Date, respectively, no assurance can be given in this regard. If the amount
required to pay the Class A Investor Interest or the Class B Investor
Interest in full is not available on the Class A Scheduled Payment Date or
the Class B Scheduled Payment Date, respectively, a Pay Out Event will
occur and the Rapid Amortization Period will commence.
Rapid Amortization Period
If a Pay Out Event occurs, the "Rapid Amortization Period" will
commence and any amount on deposit in the Principal Funding Account will be
paid to the Class A Certificateholders on the Distribution Date in the
month following the commencement of the Rapid Amortization Period. In
addition, to the extent that the Class A Investor Interest has not been
paid in full, the Class A Certificateholders will be entitled to monthly
payments of principal equal to the Available Investor Principal Collections
until the earlier of the date on which the Class A Certificates have been
paid in full and the Series 1999-_ Termination Date. After the Class A
Certificates have been paid in full and if the Series 1999-_ Termination
Date has not occurred, Available Investor Principal Collections will be
paid to the Class B Certificates on each Distribution Date until the
earlier of the date on which the Class B Certificates have been paid in
full and the Series 1999-_ Termination Date.
Pay Out Events
A "Pay Out Event" occurs, either automatically or after specified
notice, upon (a) the failure of the Transferor to make certain payments or
transfers of funds for the benefit of the Class A Certificateholders within
the time periods stated in the Agreement, (b) material breaches of certain
representations, warranties or covenants of the Transferor, (c) certain
insolvency or bankruptcy events involving the Transferor or any holder of
an interest in the Transferor Certificate (including the Transferor
Participation), (d) a reduction in the average of the Portfolio Yields for
any three consecutive Monthly Periods to a rate that is less than the
average of the Base Rates for such period, (e) Trust I becoming subject to
regulation as an "investment company" within the meaning of the Investment
Company Act of 1940, as amended, (f) the failure of the Transferor to
convey Receivables arising under Additional Accounts or Participations to
Trust I when required by the Agreement, (g) the occurrence of a Servicer
Default which would have a material adverse effect on the Class A
Certificateholders, (h) insufficient monies in the Distribution Account to
pay the Class A Investor Interest or the Class B Investor Interest in full
on the Class A Scheduled Payment Date or the Class B Scheduled Payment
Date, respectively, or (i) the Transferor becomes unable for any reason to
transfer Receivables to Trust I in accordance with the provisions of the
Agreement. See "Description of the Certificates--Pay Out Events" in this
supplement. The term "Base Rate" means, with respect to any Monthly Period,
the annualized percentage equivalent of a fraction, the numerator of which
is the sum of the Class A Monthly Interest, the Class B Monthly Interest
and the Collateral Monthly Interest, each for the related Interest Period,
and the Investor Servicing Fee for such Monthly Period, and the denominator
of which is the Investor Interest as of the close of business on the last
day of such Monthly Period. The term "Portfolio Yield" means, with respect
to any Monthly Period, the annualized percentage equivalent of a fraction,
the numerator of which is the sum of collections of Finance Charge
Receivables (including recoveries on charged-off Receivables), Principal
Funding Investment Proceeds and certain other investment earnings and
amounts withdrawn from the Reserve Account deposited into the Finance
Charge Account and allocable to Series 1999-_ for such Monthly Period,
calculated on a cash basis after subtracting the Investor Default Amount
for such Monthly Period, and the denominator of which is the Investor
Interest as of the close of business on the last day of such Monthly
Period.
Payment Rates
The following table sets forth the highest and lowest cardholder
monthly payment rates for the Bank Portfolio during any month in the period
shown and the average cardholder monthly payment rates for all months
during the periods shown, in each case calculated as a percentage of total
opening monthly account balances during the periods shown. Payment rates
shown in the table are based on amounts which would be deemed payments of
Principal Receivables and Finance Charge Receivables with respect to the
Accounts.
<TABLE>
<CAPTION>
Cardholder Monthly Payment Rates
Bank Portfolio
Year Ended December 31,
-----------------------
__ Months
Ended ___,
1999(1) 1998(1) 1997(1) 1996(1)
---------- -------- -------- --------
<S> <C> <C> <C> <C>
Lowest Month.............................................[ ]% 10.62% 10.01% 9.78%
Highest Month............................................[ ]% 12.55% 11.72% 11.53%
Monthly Average..........................................[ ]% 11.22% 11.07% 10.67%
</TABLE>
- -----------
(1) Figures shown include the Virginia Portfolios from March 20, 1998 and
do not include the Wells Portfolio.
Currently, cardholders must make a monthly minimum payment equal to the
greater of (i) 1/48th of the statement balance plus past due amounts and
(ii) a stated minimum payment (generally $10) plus past due amounts. There
can be no assurance that the cardholder monthly payment rates in the future
will be similar to the historical experience set forth above. In addition,
the amount of collections of Receivables may vary from month to month due
to seasonal variations, general economic conditions and payment habits of
individual cardholders. There can be no assurance that collections of
Principal Receivables with respect to the Trust I Portfolio will be similar
to the historical experience set forth above or that deposits into the
Principal Funding Account or the Distribution Account, as applicable, will
be made in accordance with the applicable Controlled Accumulation Amount.
If a Pay Out Event occurs, the average life of the Class A Certificates
could be significantly reduced or increased. Because there may be a
slowdown in the payment rate below the payment rates used to determine the
Controlled Accumulation Amounts, or a Pay Out Event may occur which would
initiate the Rapid Amortization Period, there can be no assurance that the
actual number of months elapsed from the date of issuance of the Class A
Certificates and the Class B Certificates to their respective final
Distribution Dates will equal the expected number of months. As described
in this supplement under "Description of the Certificates--Postponement of
Controlled Accumulation Period," the Servicer may shorten the Controlled
Accumulation Period and, in such event, there can be no assurance that
there will be sufficient time to accumulate all amounts necessary to pay
the Class A Investor Interest and the Class B Investor Interest on the
Class A Scheduled Payment Date and the Class B Scheduled Payment Date,
respectively. See "Maturity Considerations" in this supplement
Receivable Yield Considerations
The gross revenues from finance charges and fees billed to accounts in
the Bank Portfolio for each of the three calendar years contained in the
period ended December 31, [ ] as well as the[ ] months in the period ended
_______, 1999 year are set forth in the following table. The historical
yield figures in the following table are calculated on an accrual basis.
Collections of Receivables included in Trust I will be on a cash basis and
may not reflect the historical yield experience in the table. During
periods of increasing delinquencies or periodic payment deferral programs,
accrual yields may exceed cash amounts accrued and billed to cardholders.
Conversely, cash yields may exceed accrual yields as amounts collected in a
current period may include amounts accrued during prior periods. However,
the Transferor believes that during the three calendar years contained in
the period ended December 31, [ ] and the [ ] months in the period ended
_______, 1999, the yield on an accrual basis closely approximated the yield
on a cash basis. The yield on both an accrual and a cash basis will be
affected by numerous factors, including the monthly periodic finance
charges on the Receivables, the amount of the annual membership fees and
other fees, changes in the delinquency rate on the Receivables and the
percentage of cardholders who pay their balances in full each month and do
not incur monthly periodic finance charges.
<TABLE>
<CAPTION>
Bank Portfolio Yield
___ Months
Ended _____ Year Ended December 31,
-----------------------
1999(1) 1998(1) 1997(1) 1996(1)
------------ -------------- -------------- --------------
<S> <C> <C> <C> <C>
Average Receivables Outstanding(2).......$[ ] $5,885,303,622 $5,398,461,407 $4,818,808,813
Total Finance Charges....................$[ ] 971,637,089 $ 855,676,589 $ 718,469,769
Total Finance Charges as a Percentage of
Average Receivables Outstanding..........$[ ]% 16.51% 15.85% 14.91%
</TABLE>
- -----------
(1) Figures shown include the Virginia Portfolios from March 20, 1998 and
do not include the Wells Portfolio.
(2) Average Receivables Outstanding is the average of the monthly
receivable balance during the period indicated.
The revenue for the Bank Portfolio of credit card accounts shown in the
above table is comprised of monthly periodic finance charges, credit card
fees and Interchange. These revenues vary for each account based on the
type and volume of activity for each account. Because the Trust I Portfolio
is only a portion of the Bank Portfolio, actual yield with respect to
Receivables may be different from that set forth above for the Bank
Portfolio. See "Wachovia's Credit Card Portfolio" in this supplement and
"Wachovia's Credit Card Activities" in the attached prospectus.
Wachovia and Wachovia Corporation
Wachovia, a wholly-owned subsidiary of the Corporation, is a national
banking association located in New Castle, Delaware, which conducts
nationwide consumer lending programs principally comprised of credit card
related activities. WBNA, a wholly-owned subsidiary of the Corporation, is
a national banking association located in Winston-Salem, North Carolina.
The Corporation is a bank holding company registered under the Bank Holding
Company Act of 1956, as amended, maintaining dual headquarters in Atlanta,
Georgia and Winston-Salem, North Carolina. As of [ ], Wachovia had assets
of $[ ] and shareholder's equity of $[ ]. As of [ ], WBNA had assets of $[
] and shareholder's equity of $[ ]. As of [ ], the Corporation had assets
of $[ ] and shareholders' equity of $[ ].
Description of the Certificates
The Offered Certificates will be issued pursuant to the Agreement and
the Series 1999-_ Supplement. Pursuant to the Agreement, the Transferor and
the Trustee may execute further series supplements in order to issue
additional Series. The following summary of the Offered Certificates does
not purport to be complete and is subject to, and is qualified in its
entirety by reference to, all of the provisions of the Agreement and the
Series 1999-_ Supplement. See "Description of the Certificates" in the
attached prospectus for additional information concerning the Offered
Certificates and the Agreement.
General
The Class A Certificates will represent the right to receive certain
payments from the assets of Trust I, including the right to the applicable
allocation percentage of all cardholder payments on the Receivables in
Trust I to the extent necessary to pay principal and interest on the Class
A Certificates. Trust I's assets will be allocated among the Class A
Certificateholders (the "Class A Investor Interest"), the Class B
Certificateholders (the "Class B Investor Interest"), the Collateral
Interest Holder (the Collateral Interest together with the Class A Investor
Interest and the Class B Investor Interest, the "Investor Interest"), the
interest of the holders of other undivided interests in Trust I issued
pursuant to the Agreement and applicable Series Supplements and the
interest of the Transferor (the "Transferor Interest"), as described below.
The Class B Certificates and the Collateral Interest in the initial amount
of $[ ] (which amount represents [ ]% of the amount of the initial Investor
Interest) constitute Credit Enhancement for the Class A Certificates.
Allocations will be made to the Collateral Interest, and the Collateral
Interest Holder will have voting and certain other rights, as if the
Collateral Interest were a subordinated class of certificates. The
Transferor Interest will represent the right to the assets of Trust I not
allocated to the Class A Investor Interest, the Class B Investor Interest,
the Collateral Interest or the holders of other undivided interests in
Trust I. The principal amount of the Transferor Interest (the "Transferor
Amount") will fluctuate as the amount of Receivables in Trust I changes
from time to time.
Each Class A Certificate represents the right to receive interest at
the Class A Certificate Rate on the principal amount of the Class A
Certificates for the related Interest Period and payments of principal on
the Class A Scheduled Payment Date or, to the extent of the Class A
Investor Interest, on each Distribution Date during the Rapid Amortization
Period, funded from collections of Finance Charge Receivables and Principal
Receivables, respectively, allocated to the Class A Investor Interest and
certain other available amounts. Each Class B Certificate represents the
right to receive payments of interest at the applicable Class B Certificate
Rate on the principal amount of the Class B Certificates for the related
Interest Period, and payments of principal on the Class B Scheduled Payment
Date or, to the extent of the Class B Investor Interest, on each
Distribution Date during the Rapid Amortization Period after the Class A
Certificates have been paid in full, funded from collections of Finance
Charge Receivables and Principal Receivables, respectively, allocated to
the Class B Investor Interest and certain other available amounts. Amounts
payable to the Class A Certificateholders may be paid from collections of
Finance Charge Receivables and Principal Receivables, Excess Spread, funds
on deposit in the Principal Funding Account and the Reserve Account and
certain investment earnings thereon, Reallocated Principal Collections (as
defined herein) and Shared Principal Collections (as defined herein) and
certain other available amounts (including, under certain circumstances,
amounts on deposit in the Excess Funding Account). Amounts payable to the
Class B Certificateholders may be paid from collections of Finance Charge
Receivables and Principal Receivables, Excess Spread, Reallocated
Collateral Principal Collections and Shared Principal Collections and
certain other available amounts (including, under certain circumstances,
amounts on deposit in the Excess Funding Account). Payments of interest and
principal will be made, to the extent of funds available therefor, on each
Distribution Date on which such amounts are due to Class A
Certificateholders in whose names the Class A Certificates were registered
on the last business day of the calendar month preceding such Distribution
Date (each, a "Record Date").
The Transferor initially will own the Transferor Certificate. WBNA will
own a participation interest (initially 95%, but subject to change) in the
Transferor Certificate (the "Transferor Participation"). The Transferor
Certificate will represent the right to receive certain payments from the
assets of Trust I, including the right to a percentage (the "Transferor
Percentage") of all cardholder payments on the Receivables in Trust I equal
to 100% minus the sum of the applicable Investor Percentages for all Series
of certificates then outstanding. The Transferor Certificate may be
transferred in whole or in part subject to certain limitations and
conditions set forth in the Agreement. See "Description of the
Certificates--Certain Matters Regarding the Transferor and the Servicer" in
the attached prospectus.
The Class A Certificates initially will be represented by certificates
registered in the name of Cede, as nominee of DTC. Unless and until
Definitive Class A Certificates are issued, all references herein to
actions by Class A Certificateholders shall refer to actions taken by DTC
upon instructions from DTC Participants and all references herein to
distributions, notices, reports and statements to Class A
Certificateholders shall refer to distributions, notices, reports and
statements to DTC or Cede, as the registered holder of the Class A
Certificates for distribution to Certificate Owners in accordance with DTC
procedures. Class A Certificateholders may hold their Class A Certificates
through DTC (in the United States) or Cedelbank or Euroclear (in Europe) if
they are participants of such systems, or indirectly through organizations
that are participants in such systems. Cede, as nominee for DTC, will hold
the global Class A Certificates. Cedelbank and Euroclear will hold omnibus
positions on behalf of the Cedelbank Customers and the Euroclear
Participants, respectively, through customers' securities accounts in
Cedelbank's and Euroclear's names on the books of their respective
Depositories which in turn will hold such positions in customers'
securities accounts in the Depositories' names on the books of DTC. See
"Description of the Certificates--General," "--Book-Entry Registration" and
"--Definitive Certificates" in the attached prospectus.
Exchanges
The Transferor Certificate is transferable only as provided in the
Agreement. The Agreement also provides that the holder of the Transferor
Certificate may tender the Transferor Certificate to the Trustee in
exchange for one or more new Series and a reissued Transferor Certificate
as described under "Description of the Certificates--Exchanges" in the
attached prospectus.
Interest Payments
Interest will accrue on the Class A Certificates at the Class A
Certificate Rate and on the Class B Certificates at the Class B Certificate
Rate from [ ] (the "Closing Date"). Interest will be distributed to Class A
Certificateholders on [ ] and on the [ ]th day of each month thereafter or,
if such [ ]th day is not a business day, the next succeeding business day
(each, a "Distribution Date") in an amount equal to (i) with respect to the
Class A Certificates, the product of (a) the actual number of days in the
related Interest Period divided by 360 and (b) the Class A Certificate Rate
and (c) the outstanding principal balance of the Class A Certificates as of
the preceding Record Date (or in the case of the first Distribution Date,
an amount equal to the sum of (i) the product of (a) the outstanding
principal amount of the Class A Certificates and (b) [ ] divided by 360 and
(c) the Class A Certificate Rate determined on [ ] and (ii) the product of
(a) the outstanding principal amount of the Class A Certificates and (b) [
] divided by 360 and (c) the Class A Certificate Rate determined on [ ])
and (ii) with respect to the Class B Certificates, the product of (a) the
actual number of days in the related Interest Period divided by 360 and (b)
the Class B Certificate Rate and (c) the outstanding principal balance of
the Class B certificates as of the preceding Record Date (or in the case of
the first Distribution Date, an amount equal to the sum of (i) the product
of (a) the outstanding principal amount of the Class B Certificates and (b)
[ ] divided by 360 and (c) the Class B Certificate Rate determined on [ ]
and (ii) the product of (a) the outstanding principal amount of the Class B
Certificates and (b) [ ] divided by 360 and (c) the Class B Certificate
Rate determined on [ ]). Interest due on the Class A Certificates and the
Class B Certificates but not paid on any Distribution Date will be payable
on the next succeeding Distribution Date together with additional interest
on such amount at the applicable Certificate Rate plus 2% per annum (such
amount with respect to the Class A Certificates, the "Class A Additional
Interest," and such amount with respect to the Class B Certificates, the
"Class B Additional Interest"). Additional Interest shall accrue on the
same basis as interest on the Class A Certificates, and shall accrue from
the Distribution Date on which such overdue interest first became due, to
but excluding the Distribution Date on which such Additional Interest is
paid. Interest payments on the Class A Certificates on any Distribution
Date will be paid from Class A Available Funds for the related Monthly
Period, and to the extent such Class A Available Funds are insufficient to
pay such interest, from Excess Spread, Excess Finance Charge Collections
from other Series and Reallocated Principal Collections (to the extent
available) for such Monthly Period. Interest payments on the Class B
Certificates on any Distribution Date will be paid from Class B Available
Funds for the related Monthly Period, and to the extent such Class B
Available Funds are insufficient to pay such interest, from Excess Spread,
Excess Finance Charge Collections from other Series and Reallocated
Collateral Principal Collections (to the extent available) remaining after
certain other payments have been made with respect to the Class A
Certificates. The "Interest Period" with respect to any Distribution Date
will be the period from the previous Distribution Date through the day
preceding such Distribution Date, except that the initial Interest Period
will be the period from the Closing Date through the day preceding the
initial Distribution Date.
"Class A Available Funds" means, with respect to any Monthly Period, an
amount equal to the sum of (a) the Class A Floating Allocation of
collections of Finance Charge Receivables allocated to the Investor
Interest with respect to such Monthly Period (excluding the portion of
collections of Finance Charge Receivables attributable to Interchange that
is allocable to Servicer Interchange), (b) Principal Funding Investment
Proceeds, if any, with respect to the related Transfer Date and (c)
amounts, if any, to be withdrawn from the Reserve Account which are
required to be included in Class A Available Funds pursuant to the Series
1999-_ Supplement with respect to such Transfer Date. "Class B Available
Funds" means, with respect to any Monthly Period, an amount equal to the
Class B Floating Allocation of collections of Finance Charge Receivables
allocated to the Investor Interest with respect to such Monthly Period
(excluding the portion of collections of Finance Charge Receivables
attributable to Interchange that is allocable to Servicer Interchange). If,
for any Transfer Date, the Principal Funding Investment Proceeds are less
than the product of (a) a fraction, the numerator of which is the actual
number of days in the related Interest Period and the denominator of which
is 360, (b) the Class A Certificate Rate in effect with respect to the
related Interest Period and (c) the Principal Funding Account Balance as of
the Record Date preceding such Transfer Date, a draw shall be made in the
amount of such difference (the "Reserve Account Draw") from the Reserve
Account, to the extent of funds on deposit therein.
The Class A Certificates will bear interest at the rate of [ ]% above
LIBOR determined as set forth below from the Closing Date through [ ], from
[ ] through [ ], and with respect to each Interest Period thereafter (the
"Class A Certificate Rate"). The Class B Certificates will bear interest at
the rate of [ ]% above LIBOR determined as set forth below from the Closing
Date through [ ], from [ ] through [ ] and with respect to each Interest
Period thereafter (the "Class B Certificate Rate").
The Trustee will determine two business days prior to the Closing Date
for the period from the Closing Date through [ ], on [ ] for the period
from [ ] through [ ], and for each Interest Period thereafter, on the
second business day prior to the Distribution Date on which such Interest
Period commences (each, a "LIBOR Determination Date"). For purposes of
calculating LIBOR, a business day is any business day on which dealings in
deposits in United States dollars are transacted in the London interbank
market. "LIBOR" means, as of any LIBOR Determination Date, the rate for
deposits in United States dollars for a period equal to the relevant
Interest Period which appears on Telerate Page 3750 as of 11:00 a.m.,
London time, on such date. If such rate does not appear on Telerate Page
3750, the rate for that LIBOR Determination Date will be determined on the
basis of the rates at which deposits in United States dollars are offered
by the Reference Banks at approximately 11:00 a.m., London time, on that
day to prime banks in the London interbank market for a period equal to the
relevant Interest Period. The Trustee will request the principal London
office of each of the Reference Banks to provide a quotation of its rate.
If at least two such quotations are provided, the rate for that LIBOR
Determination Date will be the arithmetic mean of the quotations. If fewer
than two quotations are provided as requested, the rate for that LIBOR
Determination Date will be the arithmetic mean of the rates quoted by major
banks in New York City, selected by the Servicer, at approximately 11:00
a.m., New York City time, on that day for loans in United States dollars to
leading European banks for a period equal to the relevant Interest Period.
"Telerate Page 3750" means the display page currently so designated on the
Dow Jones Telerate Service (or such other page as may replace that page on
that service for the purpose of displaying comparable rates or prices).
"Reference Banks" means four major banks in the London interbank market
selected by the Servicer.
The Class A Certificate Rate applicable to the current and immediately
preceding Interest Period may be obtained by telephoning the Trustee at
(212) 815-5368. Interest on the Class A Certificates will be calculated on
the basis of the actual number of days in the Interest Period and a 360-day
year.
Principal Payments
The aggregate principal amount of the Class A Investor Interest and the
Class B Investor Interest will, except as otherwise provided herein, remain
fixed at $[ ] and $[ ], respectively. The Class A Investor Interest will
decline in certain circumstances if the Default Amounts allocated to the
Class A Certificates exceed funds allocable thereto as described herein and
the Class B Investor Interest and the Collateral Interest are zero. The
Class B Investor Interest will decline in certain circumstances as a result
of (a) the reallocation of collections of Principal Receivables otherwise
allocable to the Class B Investor Interest to fund certain payments in
respect of the Class A Certificates and (b) the allocation to the Class B
Investor Interest of certain Default Amounts, including such amounts
otherwise allocable to the Class A Investor Interest when the Collateral
Interest is zero. During the Controlled Accumulation Period, for the sole
purpose of allocating collections of Finance Charge Receivables and Default
Amounts with respect to each Monthly Period, an amount equal to the amount
on deposit in the Principal Funding Account from time to time will be
subtracted from the Class A Investor Interest (as so reduced, the "Class A
Adjusted Investor Interest" and together with the Class B Investor Interest
and the Collateral Interest, the "Adjusted Investor Interest").
On each Transfer Date relating to the period from and including the
Closing Date and ending at the commencement of the Controlled Accumulation
Period or, if earlier, the Rapid Amortization Period (the "Revolving
Period"), collections of Principal Receivables allocable to the Investor
Interest will, subject to certain limitations, including the allocation of
any Reallocated Principal Collections with respect to the related Monthly
Period to pay the Class A Required Amount and the Class B Required Amount,
be treated as Shared Principal Collections, paid to the holder of the
Transferor Certificate, deposited into the Excess Funding Account or paid
to the Collateral Interest Holder, and will not be available to Class A
Certificateholders.
On each Transfer Date relating to the Controlled Accumulation Period,
the Trustee will deposit in the Principal Funding Account an amount equal
to the least of (a) Available Investor Principal Collections with respect
to such Transfer Date, (b) the applicable Controlled Deposit Amount and (c)
the Class A Adjusted Investor Interest prior to any deposits on such date.
Amounts in the Principal Funding Account will be paid to the Class A
Certificateholders on the Class A Scheduled Payment Date. After the Class A
Investor Interest has been paid in full, on each Transfer Date during the
Controlled Accumulation Period, amounts equal to the lesser of (a)
Available Investor Principal Collections with respect to such Transfer Date
and (b) the Class B Investor Interest will be deposited in the Distribution
Account for distribution to the Class B Certificateholders until the Class
B Investor Interest has been paid in full. Such amounts in the Distribution
Account will be paid to the Class B Certificateholders on the Class B
Scheduled Payment Date. During the Controlled Accumulation Period until the
final principal payment to the Class B Certificateholders, the portion of
Available Investor Principal Collections not applied to Class A Monthly
Principal, Class B Monthly Principal or Collateral Monthly Principal on a
Transfer Date will be treated as Shared Principal Collections, paid to the
holder of the Transferor Certificate, deposited into the Excess Funding
Account or paid to the Collateral Interest Holder, and will not be
available to Class A Certificateholders. "Available Investor Principal
Collections" means, with respect to any Monthly Period, an amount equal to
the sum of (a) (i) collections of Principal Receivables received during
such Monthly Period and certain other amounts allocable to the Investor
Interest, minus (ii) the amount of Reallocated Principal Collections with
respect to such Monthly Period used to fund the Required Amounts (as
defined herein), plus (b) any Shared Principal Collections with respect to
other Series that are allocated to Series 1999-_. On each Distribution Date
during the Rapid Amortization Period, the Class A Certificateholders will
be entitled to receive Available Investor Principal Collections for the
related Monthly Period in an amount up to the Class A Investor Interest
until the earlier of the date the Class A Certificates are paid in full and
the Series 1999-_ Termination Date. The "Series 1999-_ Termination Date" is
the earliest to occur of (a) the Distribution Date on which Investor
Interest is paid in full, (b) the [ ] Distribution Date and (c) the Trust
Termination Date. After payment in full of the Class A Investor Interest,
the Class B Certificateholders will be entitled to receive on each
Distribution Date during the Rapid Amortization Period Available Investor
Principal Collections until the earlier of the date the Class B
Certificates are paid in full and the Series 1999-_ Termination Date. After
payment in full of the Class B Investor Interest, the Collateral Interest
Holder will be entitled to receive on each Transfer Date (other than the
Transfer Date prior to the Series 1999-_ Termination Date) and on the
Series 1999-_ Termination Date, Available Investor Principal Collections
until the earlier of the date the Collateral Interest is paid in full and
the Series 1999-_ Termination Date. See "--Pay Out Events" below for a
discussion of events which might lead to the commencement of the Rapid
Amortization Period.
Postponement of Controlled Accumulation Period
Upon written notice to the Trustee, the Transferor may elect to
postpone the commencement of the Controlled Accumulation Period, and extend
the length of the Revolving Period, subject to certain conditions including
those set forth below. The Transferor may make such election only if the
Accumulation Period Length (determined as described below) is less than
twelve months. On the [ ] Determination Date and on each Determination Date
thereafter, until the Controlled Accumulation Period begins, the Servicer
will determine the "Accumulation Period Length," which is the number of
whole months expected to be required to fund the Principal Funding Account
up to the initial outstanding principal amount of the Class A Certificates
no later than the Class A Scheduled Payment Date, based on (a) the expected
monthly collections of Principal Receivables expected to be distributable
to the certificateholders of all Series (excluding certain other Series),
assuming a principal payment rate no greater than the lowest monthly
principal payment rate on the Receivables for the preceding twelve months
and (b) the amount of principal expected to be distributable to
certificateholders of all Series (excluding certain other Series) which are
not expected to be in their revolving periods during the Controlled
Accumulation Period. If the Accumulation Period Length is less than twelve
months, the Servicer may, at its option, postpone the commencement of the
Controlled Accumulation Period such that the number of months included in
the Controlled Accumulation Period will be equal to or exceed the
Accumulation Period Length. The effect of the foregoing calculation is to
permit the reduction of the length of the Controlled Accumulation Period
based on the investor interest of certain other Series which are scheduled
to be in their revolving periods during the Controlled Accumulation Period
and on increases in the principal payment rate occurring after the Closing
Date. The length of the Controlled Accumulation Period will not be
determined to be less than one month.
Subordination of the Class B Certificates
The Class B Investor Interest will be subordinated to the extent
necessary to fund payments with respect to the Class A Certificates. To the
extent the Class B Investor Interest 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 Investor Interest
is not reimbursed, the amount of principal distributable to the Class B
Certificateholders will be reduced. No principal will be paid to the Class
B Certificateholders until the Class A Investor Interest is paid in full.
If collections of Finance Charge Receivables allocable to the Class A
Investor Interest for any Monthly Period are insufficient to pay Class A
Monthly Interest, any overdue Class A Monthly Interest (with default
interest thereon), the Class A Investor Default Amount for such Monthly
Period, and the Class A Servicing Fee and any overdue Class A Servicing Fee
for such Monthly Period, then Excess Spread will be applied to fund the
amount of such deficiency. If Excess Spread available with respect to such
Monthly Period is less than the Class A Required Amount, Reallocated
Principal Collections will be applied to fund the remaining Class A
Required Amount and the Collateral Interest will be reduced until the
Collateral Interest is equal to zero and then the Class B Investor Interest
will be reduced by the amount of Reallocated Class B Principal Collections
so used.
If Reallocated Principal Collections available with respect to such
Monthly Period are insufficient to fund the remaining Class A Required
Amount and the Collateral Interest is reduced to zero, then a portion of
the Class B Investor Interest equal to such insufficiency (but not in
excess of the lesser of the Class A Investor Default Amount for such
Monthly Period and the Class B Investor Interest) will be allocated to the
Class A Certificates to avoid a reduction in the Class A Investor Interest,
and the Class B Investor Interest will be reduced by the amount so
allocated. Such reductions of the Class B Investor Interest will thereafter
be reimbursed and the Class B Investor Interest increased on each
Distribution Date by the amount, if any, of Excess Spread for such
Distribution Date allocated and available for such purpose. See
"--Application of Collections--Excess Spread" and "--Reallocated Principal
Collections" herein.
Allocation Percentages
Pursuant to the Agreement, with respect to each Monthly Period the
Servicer will allocate among the Investor Interest, the investor interest
for all other Series issued and outstanding and the Transferor Interest,
all amounts collected on Finance Charge Receivables, all amounts collected
on Principal Receivables and all Default Amounts with respect to such
Monthly Period.
Collections of Finance Charge Receivables and Default Amounts at any
time and collections of Principal Receivables during the Revolving Period
will be allocated to the Investor Interest based on the Floating Investor
Percentage. The "Floating Investor Percentage" means, with respect to any
Monthly Period, the percentage equivalent of a fraction, the numerator of
which is the Adjusted Investor Interest as of the close of business on the
last day of the preceding Monthly Period (or with respect to the first
Monthly Period, the initial Investor Interest) and the denominator of which
is the greater of (x) the sum of (A) the aggregate amount of Principal
Receivables as of the close of business on the last day of the preceding
Monthly Period (or with respect to the first Monthly Period, the aggregate
amount of Principal Receivables as of the opening of business on the
Closing Date) and (B) the principal amount on deposit in the Excess Funding
Account as of the close of business on such day and (y) the sum of the
numerators used to calculate the Investor Percentages for allocations with
respect to Finance Charge Receivables, Default Amounts or Principal
Receivables, as applicable, for all outstanding Series on such date of
determination; provided, however, that with respect to any Monthly Period
in which Additional Accounts are added on a specified date (an "Addition
Date") or in which Accounts are removed on a specified date (a "Removal
Date"), the amount in clause (x)(A) above shall be (i) the aggregate amount
of Principal Receivables in Trust I as of the close of business on the last
day of the prior Monthly Period for the period from and including the first
day of such Monthly Period to but excluding the related Addition Date or
Removal Date and (ii) the aggregate amount of Principal Receivables in
Trust I as of the beginning of the day on the related Addition Date or
Removal Date after adjusting for the aggregate amount of Principal
Receivables added to or removed from Trust I on the related Addition Date
or Removal Date, as the case may be, for the period from and including the
related Addition Date or Removal Date to and including the last day of such
Monthly Period. The amounts so allocated will be further allocated between
the Class A Certificateholders, Class B Certificateholders and the
Collateral Interest Holder based on the Class A Floating Allocation, the
Class B Floating Allocation and the Collateral Floating Allocation,
respectively. The "Class A Floating Allocation" means, with respect to any
Monthly Period, the percentage equivalent (which percentage shall never
exceed 100%) of a fraction, the numerator of which is equal to the Class A
Adjusted Investor Interest as of the close of business on the last day of
the preceding Monthly Period (or with respect to the first Monthly Period,
as of the Closing Date) and the denominator of which is equal to the
Adjusted Investor Interest as of the close of business on such day. The
"Class B Floating Allocation" means, with respect to any Monthly Period,
the percentage equivalent (which percentage shall never exceed 100%) of a
fraction, the numerator of which is equal to the Class B Investor Interest
as of the close of business on the last day of the preceding Monthly Period
(or with respect to the first Monthly Period, as of the Closing Date) and
the denominator of which is equal to the Adjusted Investor Interest as of
the close of business on such day. The "Collateral Floating Allocation"
means, with respect to any Monthly Period, the percentage equivalent (which
percentage shall never exceed 100%) of a fraction, the numerator of which
is equal to the Collateral Interest as of the close of business on the last
day of the preceding Monthly Period (or with respect to the first Monthly
Period, as of the Closing Date) and the denominator of which is equal to
the Adjusted Investor Interest as of the close of business on such day.
Collections of Principal Receivables during the Controlled Accumulation
Period and Rapid Amortization Period will be allocated to the Investor
Interest based on the Fixed Investor Percentage. The "Fixed Investor
Percentage" means, with respect to any Monthly Period, the percentage
equivalent of a fraction, the numerator of which is the Investor Interest
as of the close of business on the last day of the Revolving Period and the
denominator of which is the greater of (x) the sum of (A) the aggregate
amount of Principal Receivables as of the close of business on the last day
of the prior Monthly Period and (B) the principal amount on deposit in the
Excess Funding Account as of the close of business on such day and (y) the
sum of the numerators used to calculate the Investor Percentages for
allocations with respect to Principal Receivables for all outstanding
Series for such Monthly Period; provided, however, that with respect to any
Monthly Period in which an Addition Date occurs or in which a Removal Date
occurs, the amount in clause (x)(A) above shall be (i) the aggregate amount
of Principal Receivables in Trust I as of the close of business on the last
day of the prior Monthly Period for the period from and including the first
day of such Monthly Period to but excluding the related Addition Date or
Removal Date and (ii) the aggregate amount of Principal Receivables in
Trust I at the beginning of the day on the related Addition Date or Removal
Date after adjusting for the aggregate amount of Principal Receivables
added to or removed from Trust I on the related Addition Date or Removal
Date, as the case may be, for the period from and including the related
Addition Date or Removal Date to and including the last day of such Monthly
Period. The amounts so allocated will be further allocated between the
Class A Certificateholders, the Class B Certificateholders and the
Collateral Interest Holder based on the Class A Fixed Allocation, the Class
B Fixed Allocation and the Collateral Fixed Allocation, respectively. The
"Class A Fixed Allocation" means, with respect to any Monthly Period, the
percentage equivalent (which percentage shall never exceed 100%) of a
fraction, the numerator of which is equal to the Class A Investor Interest
as of the close of business on the last day of the Revolving Period, and
the denominator of which is equal to the Investor Interest as of the close
of business on the last day of the Revolving Period. The "Class B Fixed
Allocation" means, with respect to any Monthly Period, the percentage
equivalent (which percentage shall never exceed 100%) of a fraction, the
numerator of which is equal to the Class B Investor Interest as of the
close of business on the last day of the Revolving Period, and the
denominator of which is equal to the Investor Interest as of the close of
business on the last day of the Revolving Period. The "Collateral Fixed
Allocation" means, with respect to any Monthly Period, the percentage
equivalent (which percentage shall never exceed 100%) of a fraction, the
numerator of which is equal to the Collateral Interest as of the close of
business on the last day of the Revolving Period, and the denominator of
which is equal to the Investor Interest as of the close of business on the
last day of the Revolving Period.
"Class A Investor Interest" for any date means an amount equal to (a)
the aggregate initial principal amount of the Class A Certificates, minus
(b) the aggregate amount of principal payments made to Class A
Certificateholders prior to such date, minus (c) the excess, if any, of the
aggregate amount of Class A Investor Charge-Offs for all Transfer Dates
preceding such date over the aggregate amount of any reimbursements of
Class A Investor Charge-Offs for all Transfer Dates preceding such date;
provided, however, that the Class A Investor Interest may not be reduced
below zero.
"Class B Investor Interest" for any date means an amount equal to (a)
the aggregate initial principal amount of the Class B Certificates, minus
(b) the aggregate amount of principal payments made to Class B
Certificateholders prior to such date, minus (c) the aggregate amount of
Class B Investor Charge-Offs for all prior Transfer Dates, minus (d) the
aggregate amount of Reallocated Class B Principal Collections for all prior
Transfer Dates for which the Collateral Interest has not been reduced,
minus (e) an amount equal to the aggregate amount by which the Class B
Investor Interest has been reduced to fund the Class A Investor Default
Amount on all prior Transfer Dates as described under "--Defaulted
Receivables; Investor Charge Offs," plus (f) the aggregate amount of Excess
Spread allocated and available on all prior Transfer Dates for the purpose
of reimbursing amounts deducted pursuant to the foregoing clauses (c), (d)
and (e); provided, however, that the Class B Investor Interest may not be
reduced below zero.
"Collateral Interest" for any date means an amount equal to (a) the
Initial Collateral Interest, minus (b) the aggregate amount of principal
payments made to the Collateral Interest Holder prior to such date, minus
(c) the aggregate amount of Collateral Charge-Offs for all prior Transfer
Dates, minus (d) the aggregate amount of Reallocated Principal Collections
for all prior Transfer Dates, minus (e) an amount equal to the aggregate
amount by which the Collateral Interest has been reduced to fund the Class
A Investor Default Amount and the Class B Investor Default Amount on all
prior Transfer Dates as described under "--Defaulted Receivables; Investor
Charge-Offs," plus (f) the aggregate amount of Excess Spread allocated and
available on all prior Transfer Dates for the purpose of reimbursing
amounts deducted pursuant to the foregoing clauses (c), (d) and (e);
provided, however, that the Collateral Interest may not be reduced below
zero.
Reallocation of Cash Flows
With respect to each Transfer Date, the Servicer will determine the
amount (the "Class A Required Amount"), which will be equal to the amount,
if any, by which the sum of (a) Class A Monthly Interest due on the related
Distribution Date and overdue Class A Monthly Interest and Class A
Additional Interest thereon, if any, (b) the Class A Servicing Fee for the
related Monthly Period and overdue Class A Servicing Fee, if any, and (c)
the Class A Investor Default Amount, if any, for the related Monthly Period
exceeds the Class A Available Funds for the related Monthly Period. If the
Class A Required Amount is greater than zero, Excess Spread allocated to
Series 1999-_ and available for such purpose will be used to fund the Class
A Required Amount with respect to such Transfer Date. If such Excess Spread
is insufficient to fund the Class A Required Amount first, Reallocated
Collateral Principal Collections and, then, Reallocated Class B Principal
Collections will be used to fund the remaining Class A Required Amount. If
Reallocated Principal Collections with respect to the related Monthly
Period, together with Excess Spread, are insufficient to fund the remaining
Class A Required Amount for such related Monthly Period, then the
Collateral Interest (after giving effect to reductions for any Collateral
Charge-Offs and Reallocated Principal Collections on such Transfer Date)
will be reduced by the amount of such excess (but not by more than the
Class A Investor Default Amount for such Monthly Period). In the event that
such reduction would cause the Collateral Interest to be a negative number,
the Collateral Interest will be reduced to zero, and the Class B Investor
Interest (after giving effect to reductions for any Class B Investor
Charge-Offs and any Reallocated Class B Principal Collections for which the
Collateral Interest was not reduced on such Transfer Date) will be reduced
by the amount by which the Collateral Interest would have been reduced
below zero (but not by more than the excess of the Class A Investor Default
Amount, if any, for such Monthly Period over the amount of such reduction,
if any, of the Collateral Interest with respect to such Monthly Period). In
the event that such reduction would cause the Class B Investor Interest to
be a negative number, the Class B Investor Interest will be reduced to zero
and the Class A Investor Interest will be reduced by the amount by which
the Class B Investor Interest would have been reduced below zero (but not
by more than the excess, if any, of the Class A Investor Default Amount for
such Monthly Period over the amount of the reductions, if any, of the
Collateral Interest and the Class B Investor Interest with respect to such
Monthly Period). Any such reduction in the Class A Investor Interest will
have the effect of slowing or reducing the return of principal and interest
to the Class A Certificateholders. In such case, the Class A
Certificateholders will bear directly the credit and other risks associated
with their interests in Trust I. See "--Defaulted Receivables; Investor
Charge-Offs."
With respect to each Transfer Date, the Servicer will determine the
amount (the "Class B Required Amount"; together with the Class A Required
Amount, the "Required Amounts"), which will be equal to the sum of (a) the
amount, if any, by which the sum of (i) Class B Monthly Interest due on the
related Distribution Date and overdue Class B Monthly Interest and Class B
Additional Interest thereon, if any, and (ii) the Class B Servicing Fee for
the related Monthly Period and overdue Class B Servicing Fee, if any,
exceeds the Class B Available Funds for the related Monthly Period and (b)
the Class B Investor Default Amount, if any, for the related Monthly
Period. If the Class B Required Amount is greater than zero, Excess Spread
allocated to Series 1999-_ not required to pay the Class A Required Amount
or reimburse Class A Investor Charge-Offs will be used to fund the Class B
Required Amount with respect to such Transfer Date. If such Excess Spread
is insufficient to fund the Class B Required Amount, Reallocated Collateral
Principal Collections not required to fund the Class A Required Amount for
the related Monthly Period will be used to fund the remaining Class B
Required Amount. If such Reallocated Collateral Principal Collections with
respect to the related Monthly Period are insufficient to fund the
remaining Class B Required Amount, then the Collateral Interest (after
giving effect to reductions for any Collateral Charge-Offs and Reallocated
Principal Collections on such Transfer Date and after any adjustments made
thereto for the benefit of the Class A Certificateholders) will be reduced
by the amount of such deficiency (but not by more than the Class B Investor
Default Amount for such Monthly Period). In the event that such a reduction
would cause the Collateral Interest to be a negative number, the Collateral
Interest will be reduced to zero, and the Class B Investor Interest will be
reduced by the amount by which the Collateral Interest would have been
reduced below zero (but not by more than the excess of the Class B Investor
Default Amount for such Monthly Period over the amount of such reduction of
the Collateral Interest), and the Class B Certificateholders will bear
directly the credit and other risks associated with their interests in
Trust I. See "--Defaulted Receivables; Investor Charge-Offs." Reductions of
the Class A Investor Interest or Class B Investor Interest described above
shall be reimbursed by, and the Class A Investor Interest or Class B
Investor Interest increased to the extent of, Excess Spread available for
such purposes on each Transfer Date. See "--Application of
Collections--Excess Spread." When such reductions of the Class A Investor
Interest and Class B Investor Interest have been fully reimbursed,
reductions of the Collateral Interest shall be reimbursed until reimbursed
in full in a similar manner.
"Reallocated Class B Principal Collections" for any Monthly Period
means collections of Principal Receivables allocable to the Class B
Investor Interest for the related Monthly Period in an amount not to exceed
the amount applied to fund the Class A Required Amount, if any; provided,
however, that such amount will not exceed the Class B Investor Interest
after giving effect to any Class B Investor Charge-Offs for the related
Transfer Date. "Reallocated Collateral Principal Collections" for any
Monthly Period means collections of Principal Receivables allocable to the
Collateral Interest for the related Monthly Period in an amount not to
exceed the amount applied to fund the Class A Required Amount and the Class
B Required Amount, if any; provided, however, that such amount will not
exceed the Collateral Interest after giving effect to any Collateral
Charge-Offs for the related Transfer Date. "Reallocated Principal
Collections" for any Monthly Period means the sum of (a) the Reallocated
Class B Principal Collections for such Monthly Period, if any, and (b) the
Reallocated Collateral Principal Collections for such Monthly Period, if
any.
Application of Collections
AllocationsExcept as otherwise provided below, the Servicer will
deposit into the Collection Account, no later than the second business day
following the date of processing, any payment collected by the Servicer on
the Receivables. On the same day as any such deposit is made, the Servicer
will make the deposits and payments to the accounts and parties as
indicated below; provided, however, that for as long as Wachovia remains
the Servicer under the Agreement and (a) (i) the Servicer provides to the
Trustee a letter of credit or other credit enhancement covering the risk of
collection of the Servicer acceptable to each Rating Agency and (ii) the
Transferor shall not have received a notice from any Rating Agency that
reliance on such letter of credit or other credit enhancement would result
in the lowering of such Rating Agency's then-existing rating of any Series
then outstanding or (b) the Servicer or the Corporation has and maintains a
certificate of deposit or commercial paper rating of P-1 by Moody's and of
A-1 by Standard & Poor's or makes other arrangements satisfactory to each
Rating Agency rating any Series then outstanding, then the Servicer may
make such deposits and payments on the business day immediately prior to
the Distribution Date (the "Transfer Date") in an amount equal to the net
amount of such deposits and payments which would have been made had the
conditions of this proviso not applied.
With respect to the Class A Certificates and Class B Certificates and
any Monthly Period, and notwithstanding anything in the Agreement to the
contrary, whether the Servicer is required to make monthly or daily
deposits from the Collection Account into the Finance Charge Account or the
Principal Account, (i) the Servicer will only be required to deposit
Collections from the Collection Account into the Finance Charge Account or
the Principal Account up to the required amount to be deposited into any
such deposit account or, without duplication, distributed on or prior to
the related Distribution Date to Class A Certificateholders, Class B
Certificateholders or to the Collateral Interest Holder and (ii) if at any
time prior to such Distribution Date the amount of collections deposited in
the Collection Account exceeds the amount required to be deposited pursuant
to clause (i) above, the Servicer will be permitted to withdraw the excess
from the Collection Account.
Payment of Interest, Fees and Other Items. On each Transfer Date, the
Trustee, acting pursuant to the Servicer's instructions, will apply the
Class A Available Funds, Class B Available Funds and Collateral Available
Funds in the Finance Charge Account in the following manner:
(a)On each Transfer Date, an amount equal to the Class A Available
Funds will be distributed in the following priority:
(i) an amount equal to Class A Monthly Interest for the related
Distribution Date, plus the amount of any overdue Class A Monthly
Interest and Class A Additional Interest thereon, if any, will be
deposited into the Distribution Account for distribution to Class A
Certificateholders on such Distribution Date;
(ii)an amount equal to the Class A Servicing Fee for the related
Monthly Period, plus the amount of any overdue Class A Servicing
Fee, will be paid to the Servicer;
(iiian amount equal to the Class A Investor Default Amount, if
any, for the related Monthly Period will be treated as a portion of
Available Investor Principal Collections and deposited into the
Principal Account for such Transfer Date; and
(iv)the balance, if any, will constitute a portion of Excess
Spread and will be allocated and distributed as described under
"--Excess Spread."
(b)On each Transfer Date, an amount equal to the Class B Available
Funds will be distributed in the following priority:
(i) an amount equal to Class B Monthly Interest for the related
Distribution Date, plus the amount of any overdue Class B Monthly
Interest and Class B Additional Interest thereon, if any, will be
deposited into the Distribution Account for distribution to Class B
Certificateholders on such Distribution Date;
(ii)an amount equal to the Class B Servicing Fee for the related
Monthly Period, plus the amount of any overdue Class B Servicing
Fee, will be paid to the Servicer; and
(iiithe balance, if any, will constitute a portion of Excess
Spread and will be allocated and distributed as described under
"--Excess Spread."
(c)On each Transfer Date, an amount equal to the Collateral
Available Funds will be distributed in the following priority:
(i) if Wachovia or The Bank of New York (Delaware) is no longer
the Servicer, an amount equal to the Collateral Interest Servicing
Fee for the related Monthly Period, plus the amount of any overdue
Collateral Interest Servicing Fee, will be paid to the Servicer;
and
(ii)the balance, if any, will constitute a portion of Excess
Spread and will be allocated and distributed as described under
"--Excess Spread."
"Class A Monthly Interest" with respect to any Distribution Date will
equal the product of (i) the Class A Certificate Rate for the related
Interest Period, (ii) the actual number of days in such Interest Period
divided by 360 and (iii) the outstanding principal balance of the Class A
Certificates as of the related Record Date; provided, however, with respect
to the first Distribution Date, Class A Monthly Interest will be equal to
the interest accrued on the initial outstanding principal balance of the
Class A Certificates at the applicable Class A Certificate Rate for the
period from the Closing Date through [ ].
"Class B Monthly Interest" with respect to any Distribution Date will
equal the product of (i) the Class B Certificate Rate for the related
Interest Period, (ii) the actual number of days in such Interest Period
divided by 360 and (iii) the outstanding principal balance of the Class B
Certificates as of the related Record Date; provided, however, with respect
to the first Distribution Date, Class B Monthly Interest will be equal to
the interest accrued on the initial outstanding principal balance of the
Class B Certificates at the applicable Class B Certificate Rate for the
period from the Closing Date through [ ].
"Collateral Available Funds" means, with respect to any Monthly Period,
an amount equal to the Collateral Floating Allocation of collections of
Finance Charge Receivables allocated to the Investor Interest with respect
to such Monthly Period (excluding the portion of collections of Finance
Charge Receivables attributable to Interchange that is allocable to
Servicer Interchange).
"Excess Spread" means, with respect to any Transfer Date, an amount
equal to the sum of the amounts described in clause (a) (iv), clause (b)
(iii) and clause (c) (ii) above. To the extent such amounts are
insufficient to make the distributions required by subparagraphs (a)
through (j) below under "--Excess Spread," Excess Spread shall also be
deemed to include any Excess Finance Charge Collections allocable to other
Series available to Series 1999-_ in accordance with the Agreement.
Excess Spread. On each Transfer Date, the Trustee, acting pursuant to
the Servicer's instructions, will apply Excess Spread with respect to the
related Monthly Period, to make the following distributions in the
following priority:
(a)an amount equal to the Class A Required Amount, if any, with
respect to such Transfer Date will be used to fund the Class A Required
Amount; provided, that in the event the Class A Required Amount for
such Transfer Date exceeds the amount of Excess Spread, such Excess Spread
shall be applied first to pay amounts due with respect to such Transfer
Date pursuant to clause (a) (i) above under "--Payment of Interest, Fees
and Other Items," second to pay amounts due with respect to such Transfer
Date pursuant to clause (a) (ii) above under "--Payment of Interest,
Fees and Other Items" and third to pay amounts due with respect to such
Transfer Date pursuant to clause (a) (iii) above under "--Payment of
Interest, Fees and Other Items";
(b)an amount equal to the aggregate amount of Class A Investor
Charge-Offs which have not been previously reimbursed (after giving
effect to the allocation on such Transfer Date of certain other amounts
applied for that purpose) will be deposited into the Principal Account
and treated as a portion of Available Investor Principal Collections
for such Transfer Date as described under "--Payments of Principal"
below;
(c)an amount equal to the Class B Required Amount, if any, with
respect to such Transfer Date will be used to fund the Class B Required
Amount and will be applied first to pay amounts due with respect to
such Transfer Date pursuant to clause (b) (i) above under "--Payment of
Interest, Fees and Other Items," second to pay amounts due with respect
to such Transfer Date pursuant to clause (b) (ii) above under
"--Payment of Interest, Fees and Other Items" and third, the amount
remaining, up to the Class B Investor Default Amount, will be deposited
into the Principal Account and treated as a portion of Available
Investor Principal Collections for such Transfer Date as described
under "--Payments of Principal" below;
(d)an amount equal to the aggregate amount by which the Class B
Investor Interest has been reduced below the initial Class B Investor
Interest for reasons other than the payment of principal to the Class B
Certificateholders (but not in excess of the aggregate amount of such
reductions which have not been previously reimbursed) will be deposited
into the Principal Account and treated as a portion of Available
Investor Principal Collections for such Transfer Date as described
under "--Payments of Principal" below;
(e)an amount equal to the Collateral Monthly Interest for such
Transfer Date, plus the amount of any Collateral Monthly Interest
previously due but not distributed to the Collateral Interest Holder on
a prior Transfer Date, will be distributed to the Collateral Interest
Holder for distribution in accordance with the loan agreement to be
dated the Closing Date, among the Trustee, the Transferor, the
Servicer, the Collateral Interest Holders and the agent acting on their
behalf (the "Loan Agreement");
(f)if Wachovia or The Bank of New York (Delaware) is the Servicer,
an amount equal to the Collateral Interest Servicing Fee for the
related Monthly Period, plus the amount of any overdue Collateral
Interest Servicing Fee, will be paid to the Servicer;
(g)an amount equal to the aggregate Collateral Default Amount, if
any, for such Transfer Date will be deposited into the Principal
Account and treated as a portion of Available Investor Principal
Collections for such Transfer Date as described under "--Payments of
Principal" below;
(h)an amount equal to the aggregate amount by which the Collateral
Interest has been reduced below the Required Collateral Interest for
reasons other than the payment of principal to the Collateral Interest
Holder (but not in excess of the aggregate amount of such reductions
which have not been previously reimbursed) will be deposited into the
Principal Account and treated as a portion of Available Investor
Principal Collections for such Transfer Date as described under
"--Payments of Principal" below;
(i)on each Transfer Date from and after the Reserve Account Funding
Date, but prior to the date on which the Reserve Account terminates as
described under "--Reserve Account," an amount up to the excess, if
any, of the Required Reserve Account Amount over the Available Reserve
Account Amount will be deposited into the Reserve Account;
(j)an amount equal to the aggregate of any other amounts then due
to the Collateral Interest Holder pursuant to the Loan Agreement or
otherwise required to be applied in accordance with the Loan Agreement
will be distributed for application in accordance with the Loan
Agreement; and
(k)the balance, if any, after giving effect to the payments made
pursuant to subparagraphs (a) through (j) above, first will be treated
as "Excess Finance Charge Collections" to be applied to cover
shortfalls, if any, with respect to amounts payable from collections of
Finance Charge Receivables with respect to other Series in accordance
with the Agreement, and then the balance, if any, remaining after such
sharing will be paid to the holder of the Transferor Certificate.
"Collateral Monthly Interest" with respect to any Transfer Date will
equal the product of (a) an amount equal to LIBOR plus [ ]% per annum, or
such lesser amount as may be designated in the Loan Agreement (the
"Collateral Rate"), (b) the actual number of days in the related Interest
Period divided by 360 and (c) the Collateral Interest as of the related
Record Date or, with respect to the first Transfer Date, the Initial
Collateral Interest.
Payments of Principal. On each Transfer Date, the Trustee, acting
pursuant to the Servicer's instructions, will distribute Available Investor
Principal Collections (see "--Principal Payments" above) on deposit in the
Principal Account in the following manner:
(a)on each Transfer Date with respect to the Revolving Period, all
such Available Investor Principal Collections will be distributed or
deposited in the following priority:
(i) an amount equal to the Collateral Monthly Principal will be
paid to the Collateral Interest Holder in accordance with the Loan
Agreement; and
(ii)the balance will be treated as Shared Principal Collections
and applied as described under "Description of the
Certificates--Shared Principal Collections" herein and in the
attached prospectus;
(b)on each Transfer Date with respect to the Controlled
Accumulation Period or the Rapid Amortization Period, all such
Available Investor Principal Collections will be distributed or
deposited in the following priority:
(i) an amount equal to Class A Monthly Principal will be
deposited in the Principal Funding Account (during the Controlled
Accumulation Period) or distributed to the Class A
Certificateholders (during the Rapid Amortization Period); and
(ii)for each Transfer Date after the Class A Investor Interest
has been paid in full (after taking into account payments to be
made on the related Distribution Date), an amount equal to the
Class B Monthly Principal for such Transfer Date will be
distributed to the Class B
Certificateholders;
(c)on each Transfer Date with respect to the Controlled
Accumulation Period and the Rapid Amortization Period in which a
reduction in the Required Collateral Interest has occurred, Available
Investor Principal Collections not applied to Class A Monthly Principal
or Class B Monthly Principal will be applied to reduce the Collateral
Interest until the sum of the Collateral Interest equals the Required
Collateral Interest; and
(d)on each Transfer Date with respect to the Controlled
Accumulation Period and the Rapid Amortization Period, the balance of
Available Investor Principal Collections not applied pursuant to
(b) and (c) above, if any, will be treated as Shared Principal Collections
and applied as described under "Description of the Certificates--Shared
Principal Collections" herein and in the attached prospectus.
"Class A Monthly Principal" with respect to any Transfer Date relating
to the Controlled Accumulation Period or the Rapid Amortization Period,
prior to the payment in full of the Class A Investor Interest, will equal
the least of (i) the Available Investor Principal Collections on deposit in
the Principal Account with respect to such Transfer Date, (ii) for each
Transfer Date with respect to the Controlled Accumulation Period, prior to
the payment in full of the Class A Investor Interest, and on or prior to
the Class A Scheduled Payment Date, the applicable Controlled Deposit
Amount for such Transfer Date and (iii) the Class A Adjusted Investor
Interest prior to any deposits on such Transfer Date.
"Class B Monthly Principal" with respect to any Transfer Date relating
to the Controlled Accumulation Period or the Rapid Amortization Period,
after the Class A Certificates have been paid in full (after taking into
account payments to be made on the related Distribution Date), will equal
the lesser of (i) the Available Investor Principal Collections on deposit
in the Principal Account with respect to such Transfer Date (minus the
portion of such Available Investor Principal Collections applied to Class A
Monthly Principal on such Transfer Date) and (ii) the Class B Investor
Interest for such Transfer Date.
"Collateral Monthly Principal" means (a) with respect to any Transfer
Date relating to the Revolving Period an amount equal to the lesser of (i)
the excess, if any, of the sum of the Collateral Interest (after giving
effect to reductions for any Collateral Charge-Offs and Reallocated
Principal Collections on such Transfer Date and after giving effect to any
adjustments thereto for the benefit of the Class A Certificateholders and
the Class B Certificateholders on such Transfer Date) over the Required
Collateral Interest on such Transfer Date, and (ii) the Available Investor
Principal Collections on such Transfer Date or (b) with respect to any
Transfer Date relating to the Controlled Accumulation Period or Rapid
Amortization Period an amount equal to the lesser of (i) the excess, if
any, of the sum of the Collateral Interest (after giving effect to
reductions for any Collateral Charge-Offs and Reallocated Principal
Collections on such Transfer Date and after giving effect to any
adjustments thereto for the benefit of the Class A Certificateholders and
the Class B Certificateholders on such Transfer Date) over the Required
Collateral Interest on such Transfer Date, and (ii) the excess, if any, of
(A) the Available Investor Principal Collections on such Transfer Date over
(B) the sum of the Class A Monthly Principal and the Class B Monthly
Principal for such Transfer Date.
"Controlled Accumulation Amount" means (a) for any Transfer Date with
respect to the Controlled Accumulation Period, prior to the payment in full
of the Class A Investor Interest, $[ ]; provided, however, that if the
commencement of the Controlled Accumulation Period is delayed as described
above under "--Postponement of Controlled Accumulation Period," the
Controlled Accumulation Amount may be higher than the amount stated above
for each Transfer Date with respect to the Controlled Accumulation Period
and will be determined by the Servicer in accordance with the Agreement
based on the principal payment rates for the Accounts and on the investor
interest of other Series (other than certain excluded Series) which are
scheduled to be in their revolving periods and then scheduled to create
Shared Principal Collections during the Controlled Accumulation Period, (b)
for any Transfer Date with respect to the Controlled Accumulation Period
after the payment in full of the Class A Investor Interest and prior to the
payment in full of the Class B Investor Interest, an amount equal to the
Class B Investor Interest on such Transfer Date and (c) for any Transfer
Date with respect to the Controlled Accumulation Period after the payment
in full of the Class B Investor Interest, an amount equal to the Collateral
Interest on such Transfer Date.
"Accumulation Shortfall" means (a) on the first Transfer Date with
respect to the Controlled Accumulation Period, the excess, if any, of the
Controlled Accumulation Amount for such Transfer Date over the amount
distributed from the Principal Account as Class A Monthly Principal for
such Transfer Date and (b) on each subsequent Transfer Date with respect to
the Controlled Accumulation Period, the excess, if any, of the applicable
Controlled Accumulation Amount for such subsequent Transfer Date plus any
Accumulation Shortfall for the prior Transfer Date over the amount
distributed from the Principal Account as Class A Monthly Principal for
such subsequent Transfer Date.
Shared Excess Finance Charge Collections
To the extent that collections of Finance Charge Receivables allocated
to the Investor Interest (and any other amounts that are to be treated as
collections of Finance Charge Receivables allocated to the Investor
Interest) are not needed to make payments in respect of the Investor
Interest as described above under "--Application of Collections--Payment of
Interest, Fees and Other Items" and "--Excess Spread," such Excess Finance
Charge Collections will be applied to make payments in respect of other
Series entitled to share therein in accordance with the Agreement. In
addition, Excess Finance Charge Collections with respect to certain other
Series, to the extent not required to make payments in respect of such
Series, may be applied to cover shortfalls in amounts payable from Excess
Spread as described above under "--Application of Collections--Excess
Spread" (as well as shortfalls experienced by other Series).
Shared Principal Collections
Collections of Principal Receivables for any Monthly Period allocated
to the Investor Interest will first be used to cover, with respect to any
Monthly Period during the Controlled Accumulation Period, deposits of the
applicable Controlled Deposit Amount to the Principal Funding Account or
the Distribution Account, and during the Rapid Amortization Period,
payments to the Class A Certificateholders and Class B Certificateholders
and then under certain circumstances payments to the Collateral Interest
Holder. The Servicer will determine the amount of collections of Principal
Receivables for any Monthly Period allocated to the Investor Interest
remaining after covering required payments to the Class A
Certificateholders and Class B Certificateholders and any similar amount
remaining for any other Series ("Shared Principal Collections"). The
Servicer will allocate the Shared Principal Collections to cover any
scheduled or permitted principal distributions to certificateholders and
deposits to principal funding accounts, if any, for any Series entitled
thereto which have not been covered out of the collections of Principal
Receivables allocable to such Series and certain other amounts for such
Series ("Principal Shortfalls"). Shared Principal Collections will not be
used to cover investor charge-offs for any Series. If Principal Shortfalls
exceed Shared Principal Collections for any Monthly Period, Shared
Principal Collections will be allocated pro rata among the applicable
Series based on the relative amounts of Principal Shortfalls. To the extent
that Shared Principal Collections exceed Principal Shortfalls, the balance
will be paid to the holder of the Transferor Certificate or, under certain
circumstances, deposited into the Excess Funding Account.
Required Collateral Interest
The "Required Collateral Interest" means (i) initially $[ ] (the
"Initial Collateral Interest") and (ii) thereafter on each Transfer Date,
an amount equal to [ ]% of the sum of (x) the Class A Adjusted Investor
Interest and the Class B Investor Interest on such Transfer Date, after
taking into account deposits into the Principal Funding Account on such
Transfer Date and payments to be made on the related Distribution Date, and
(y) the Collateral Interest on the prior Transfer Date after any
adjustments made on such Transfer Date, but not less than $[ ]; provided,
however, (1) that if certain reductions in the Collateral Interest are made
or if a Pay Out Event occurs, the Required Collateral Interest for such
Transfer Date shall equal the Required Collateral Interest for the Transfer
Date immediately preceding the occurrence of such reduction or Pay Out
Event, (2) in no event shall the Required Collateral Interest exceed the
sum of the unpaid principal amount of the Class A Certificates and the
Class B Certificates as of the last day of the Monthly Period preceding
such Transfer Date after taking into account payments to be made on the
related Distribution Date and (3) the Required Collateral Interest may be
reduced to a lesser amount at any time if the Rating Agency Condition is
satisfied.
"Rating Agency Condition" means the notification in writing by each
Rating Agency that a proposed action will not result in such Rating Agency
reducing or withdrawing its then existing rating of the investor
certificates of any outstanding Series or Class with respect to which it is
a Rating Agency.
With respect to any Transfer Date, if the Collateral Interest is less
than the Required Collateral Interest, certain Excess Spread, if available,
will be allocated to increase the Collateral Interest to the extent of
certain unreimbursed reductions thereof. Any of such Excess Spread not
required to be so allocated or deposited into the Reserve Account with
respect to any Transfer Date will be applied in accordance with the Loan
Agreement. See "--Application of Collections--Excess Spread."
Defaulted Receivables; Investor Charge-Offs
On or before each Transfer Date, the Servicer will calculate the
Investor Default Amount for the preceding Monthly Period. The term
"Investor Default Amount" means, for any Monthly Period, the product of (a)
the Floating Investor Percentage with respect to such Monthly Period and
(b) the aggregate amount of Receivables in Defaulted Accounts (the "Default
Amount") for such Monthly Period. A portion of the Investor Default Amount
will be allocated to the Class A Certificateholders (the "Class A Investor
Default Amount") on each Transfer Date in an amount equal to the product of
the Class A Floating Allocation applicable during the related Monthly
Period and the Investor Default Amount for such Monthly Period. A portion
of the Investor Default Amount will be allocated to the Class B
Certificateholders (the "Class B Investor Default Amount") on each Transfer
Date in an amount equal to the product of the Class B Floating Allocation
applicable during the related Monthly Period and the Investor Default
Amount for such Monthly Period. A portion of the Investor Default Amount
will be allocated to the Collateral Interest Holder (the "Collateral
Default Amount") on each Transfer Date in an amount equal to the product of
the Collateral Floating Allocation applicable during the related Monthly
Period and the Investor Default Amount for such Monthly Period.
On each Transfer Date, if the Class A Investor Default Amount for such
Transfer Date exceeds the amount of Excess Spread and Reallocated Principal
Collections available to fund such amount with respect to the Monthly
Period immediately preceding such Transfer Date, the Collateral Interest
(after giving effect to reductions for any Collateral Charge-Offs and any
Reallocated Principal Collections on such Transfer Date) will be reduced by
the amount of such excess, but not more than the lesser of the Class A
Investor Default Amount and the Collateral Interest (after giving effect to
reductions for any Collateral Charge-Offs and any Reallocated Principal
Collections on such Transfer Date) for such Transfer Date. In the event
that such reduction would cause the Collateral Interest to be a negative
number, the Collateral Interest will be reduced to zero, and the Class B
Investor Interest (after giving effect to reductions for any Class B
Investor Charge-Offs and any Reallocated Class B Principal Collections on
such Transfer Date) will be reduced by the amount by which the Collateral
Interest would have been reduced below zero. In the event that such
reduction would cause the Class B Investor Interest to be a negative
number, the Class B Investor Interest will be reduced to zero, and the
Class A Investor Interest will be reduced by the amount by which the Class
B Investor Interest would have been reduced below zero, but not more than
the Class A Investor Default Amount for such Transfer Date (a "Class A
Investor Charge-Off"), which will have the effect of slowing or reducing
the return of principal and interest to the Class A Certificateholders. If
the Class A Investor Interest has been reduced by the amount of any Class A
Investor Charge-Offs, it will be reimbursed on any Transfer Date (but not
by an amount in excess of the aggregate Class A Investor Charge-Offs) by
the amount of Excess Spread allocated and available for such purpose as
described under "--Application of Collections--Excess Spread."
On each Transfer Date, if the Class B Investor Default Amount for such
Transfer Date exceeds the amount of Excess Spread and Reallocated
Collateral Principal Collections which are allocated and available to fund
such amount with respect to the Monthly Period preceding such Transfer
Date, the Collateral Interest (after giving effect to reductions for any
Collateral Charge-Offs and any Reallocated Principal Collections on such
Transfer Date and after giving effect to any adjustments with respect
thereto as described in the preceding paragraph) will be reduced by the
amount of such excess, but not more than the lesser of the Class B Investor
Default Amount and the Collateral Interest (after giving effect to
reductions for any Collateral Charge-Offs and any Reallocated Principal
Collections on such Transfer Date and after giving effect to any
adjustments with respect thereto as described in the preceding paragraph)
for such Transfer Date. In the event that such reduction would cause the
Collateral Interest to be a negative number, the Collateral Interest will
be reduced to zero, and the Class B Investor Interest will be reduced by
the amount by which the Collateral Interest would have been reduced below
zero, but not more than the Class B Investor Default Amount for such
Transfer Date (a "Class B Investor Charge-Off"). The Class B Investor
Interest will also be reduced by the amount of Reallocated Class B
Principal Collections in excess of the Collateral Interest (after giving
effect to reductions for any Collateral Charge-Offs and any Reallocated
Collateral Principal Collections on such Transfer Date) and the amount of
any portion of the Class B Investor Interest allocated to the Class A
Certificates to avoid a reduction in the Class A Investor Interest. The
Class B Investor Interest will thereafter be reimbursed (but not in excess
of the unpaid principal balance of the Class B Certificates) on any
Transfer Date by the amount of Excess Spread allocated and available for
that purpose as described under "--Application of Collections--Excess
Spread."
On each Transfer Date, if the Collateral Default Amount for such
Transfer Date exceeds the amount of Excess Spread which is allocated and
available to fund such amount as described under "--Application of
Collections--Excess Spread," the Collateral Interest will be reduced by the
amount of such excess but not more than the lesser of the Collateral
Default Amount and the Collateral Interest for such Transfer Date (a
"Collateral Charge-Off"). The Collateral Interest will also be reduced by
the amount of Reallocated Principal Collections and the amount of any
portion of the Collateral Interest allocated to the Class A Certificates to
avoid a reduction in the Class A Investor Interest or to the Class B
Certificates to avoid a reduction in the Class B Investor Interest. The
Collateral Interest will thereafter be reimbursed on any Transfer Date by
the amount of Excess Spread allocated and available for that purpose as
described under "--Application of Collections--Excess Spread."
Principal Funding Account
Pursuant to the Series 1999-_ Supplement, the Trustee will establish
and maintain with a Qualified Institution a segregated trust account held
for the benefit of the Class A Certificateholders (the "Principal Funding
Account"). During the Controlled Accumulation Period, the Trustee, at the
direction of the Servicer, will transfer collections in respect of
Principal Receivables (other than Reallocated Principal Collections) and
Shared Principal Collections from other Series, if any, allocated to Series
1999-_ from the Principal Account to the Principal Funding Account as
described under "--Application of Collections." Such collections will be
retained in the Principal Funding Account and ultimately used to pay
principal of the Class A Certificates on the Class A Scheduled Payment Date
or the first Distribution Date with respect to the Rapid Amortization
Period, whichever occurs earlier.
Funds on deposit in the Principal Funding Account will be invested to
the following Transfer Date by the Trustee at the direction of the Servicer
in Permitted Investments. Investment earnings (net of investment losses and
expenses) on funds on deposit in the Principal Funding Account (the
"Principal Funding Investment Proceeds") will be applied on each Transfer
Date as Class A Available Funds.
Reserve Account
Pursuant to the Series 1999-_ Supplement, the Trustee will establish
and maintain with a Qualified Institution a segregated trust account held
for the benefit of the Class A Certificateholders (the "Reserve Account").
The Reserve Account is established to assist with the subsequent
distribution of interest on the Class A Certificates during the Controlled
Accumulation Period. On each Transfer Date from and after the Reserve
Account Funding Date, but prior to the termination of the Reserve Account,
the Trustee, acting pursuant to the Servicer's instructions, will apply
Excess Spread allocated to the Class A Certificates (to the extent
described above under "--Application of Collections--Excess Spread") to
increase the amount on deposit in the Reserve Account (to the extent such
amount is less than the Required Reserve Account Amount). The "Reserve
Account Funding Date" will be the Transfer Date with respect to the Monthly
Period which commences no later than three months prior to the commencement
of the Controlled Accumulation Period, or such earlier date as the Servicer
may determine. The "Required Reserve Account Amount" for any Transfer Date
on or after the Reserve Account Funding Date will be equal to (a) [ ]% of
the outstanding principal balance of the Class A Certificates or (b) any
other amount designated by the Transferor; provided, however, that if such
designation is of a lesser amount, the Transferor shall have provided the
Servicer, the Collateral Interest Holder and the Trustee with evidence that
the Rating Agency Condition has been satisfied and the Transferor shall
have delivered to the Trustee a certificate of an authorized officer to the
effect that, based on the facts known to such officer at such time, in the
reasonable belief of the Transferor, such designation will not cause a Pay
Out Event or an event that, after the giving of notice or the lapse of
time, would cause a Pay Out Event to occur with respect to Series 1999-_.
On each Transfer Date, after giving effect to any deposit to be made to,
and any withdrawal to be made from, the Reserve Account on such Transfer
Date, the Trustee will withdraw from the Reserve Account an amount equal to
the excess, if any, of the amount on deposit in the Reserve Account over
the Required Reserve Account Amount and distribute such excess to the
Collateral Interest Holder for application in accordance with the terms of
the Loan Agreement.
Provided that the Reserve Account has not terminated as described
below, all amounts on deposit in the Reserve Account on any Transfer Date
(after giving effect to any deposits to, or withdrawals from, the Reserve
Account to be made on such Transfer Date) will be invested to the following
Transfer Date by the Trustee at the direction of the Servicer in Permitted
Investments. The interest and other investment income (net of investment
expenses and losses) earned on such investments will be retained in the
Reserve Account (to the extent the amount on deposit is less than the
Required Reserve Account Amount) or deposited in the Finance Charge Account
and treated as Class A Available Funds.
On or before each Transfer Date with respect to the Controlled
Accumulation Period and on the first Transfer Date with respect to the
Rapid Amortization Period, a withdrawal will be made from the Reserve
Account, and the amount of such withdrawal will be deposited in the Finance
Charge Account and included in collections of Finance Charge Receivables to
be applied to the payment of the Class A Monthly Interest for such Transfer
Date in an amount equal to the lesser of (a) the Available Reserve Account
Amount with respect to such Transfer Date and (b) the Reserve Account Draw
with respect to such Transfer Date; provided, that the amount of such
withdrawal shall be reduced to the extent that funds otherwise would be
available to be deposited in the Reserve Account on such Transfer Date. On
each Transfer Date, the amount available to be withdrawn from the Reserve
Account (the "Available Reserve Account Amount") will be equal to the
lesser of the amount on deposit in the Reserve Account (before giving
effect to any deposit to be made to the Reserve Account on such Transfer
Date) and the Required Reserve Account Amount for such Transfer Date.
The Reserve Account will be terminated upon the earlier to occur of (a)
the termination of Trust I pursuant to the Pooling and Servicing Agreement
and (b) if the Controlled Accumulation Period has not commenced, the first
Transfer Date with respect to the Rapid Amortization Period or, if the
Controlled Accumulation Period has commenced, the earlier to occur of (i)
the first Transfer Date with respect to the Rapid Amortization Period and
(ii) the Transfer Date immediately preceding the Class A Scheduled Payment
Date. Upon the termination of the Reserve Account, all amounts on deposit
therein (after giving effect to any withdrawal from the Reserve Account on
such date as described above) will be distributed to the Collateral
Interest Holder for application in accordance with the terms of the Loan
Agreement. Any amounts withdrawn from the Reserve Account and distributed
to the Collateral Interest Holder as described above will not be available
for distribution to the Class A Certificateholders.
Pay Out Events
As described above, the Revolving Period will continue through [ ]
(unless such date is postponed as described under "--Postponement of
Controlled Accumulation Period"), unless a Pay Out Event occurs prior to
such date. A "Pay Out Event" refers to any of the following events:
(a)failure on the part of the Transferor (i) to make any payment or
deposit on the date required under the Agreement (or within the
applicable grace period which shall not exceed five days) or (ii) to
observe or perform in any material respect any other covenants or
agreements of the Transferor set forth in the Agreement or the Series
1999-_ Supplement, which failure has a material adverse effect on the
Investor Certificateholders (which determination shall be made without
regard to the existence of the Collateral Interest) and which continues
unremedied for a period of 60 days after written notice and continues
to materially and adversely affect the interests of the Investor
Certificateholders (which determination shall be made without regard to
the existence of the Collateral Interest) for such period;
(b)any representation or warranty made by the Transferor in the
Agreement or the Series 1999-_ Supplement, or any information required
to be given by the Transferor to the Trustee to identify the Accounts
proves to have been incorrect in any material respect when made and
which continues to be incorrect in any material respect for a period of
60 days after written notice and as a result of which the interests of
the Investor Certificateholders are materially and adversely affected
(which determination shall be made without regard to the existence of
the Collateral Interest) and continue to be materially and adversely
affected for such period; provided, however, that a Pay Out Event
pursuant to this clause (b) shall not be deemed to occur thereunder if
the Transferor has accepted reassignment of the related Receivable or
all such Receivables, if applicable, during such period (or such longer
period as the Trustee may specify) in accordance with the provisions of
the Agreement;
(c)any reduction of the average of the Portfolio Yields for any
three consecutive Monthly Periods to a rate which is less than the
average of the Base Rates for such period;
(d)a failure by the Transferor to convey Receivables arising under
Additional Accounts, or Participations, to Trust I when required by the
Agreement;
(e)any Servicer Default occurs which would have a material adverse
effect on the Investor Certificateholders;
(f)insufficient moneys in the Distribution Account to pay the Class
A Investor Interest on the Class A Scheduled Payment Date or the Class
B Investor Interest on the Class B Scheduled Payment
Date;
(g)certain events of insolvency, conservatorship, receivership or
bankruptcy relating to the Transferor or any holder of an interest in
the Transferor Certificate (including the Transferor Participation);
(h)the Transferor becomes unable for any reason to transfer Receivables
to Trust I in accordance with the provisions of the Agreement; or
(i)Trust I becomes subject to regulation as an "investment company"
within the meaning of the Investment Company Act of 1940, as amended.
In the case of any event described in clause (a), (b) or (e) above, a
Pay Out Event will be deemed to have occurred with respect to the Investor
Certificates only if, after any applicable grace period, either the Trustee
or Investor Certificateholders evidencing undivided interests aggregating
more than 50% of the Investor Interest, by written notice to the Transferor
and the Servicer (and to the Trustee if given by the Investor
Certificateholders) declare that a Pay Out Event has occurred with respect
to the Investor Certificates as of the date of such notice. In the case of
any event described in clause (g), (h) or (i), a Pay Out Event with respect
to all Series then outstanding, and in the case of any event described in
clause (c), (d) or (f), a Pay Out Event with respect to only the Investor
Certificates, will be deemed to have occurred without any notice or other
action on the part of the Trustee or the Investor Certificateholders or all
certificateholders, as appropriate, immediately upon the occurrence of such
event. On the date on which a Pay Out Event is deemed to have occurred, the
Rapid Amortization Period will commence. In such event, distributions of
principal to the Class A Certificateholders will begin on the first
Distribution Date following the month in which such Pay Out Event occurred.
If, because of the occurrence of a Pay Out Event, the Rapid Amortization
Period begins earlier than the Monthly Period preceding the month in which
the Class A Scheduled Payment Date occurs, Class A Certificateholders will
begin receiving distributions of principal earlier than they otherwise
would have, which may shorten the average life of the Class A Certificates.
See "Description of the Certificates--Pay Out Events" in the attached
prospectus for an additional discussion of the consequences of an
insolvency, conservatorship or receivership of the Transferor.
Defeasance
On the date that the following conditions shall have been satisfied:
(i) the Transferor shall have deposited (x) in the Principal Funding
Account an amount equal to the sum of the outstanding principal balance of
the Class A Certificates, the Class B Certificates and the Collateral
Interest which amount shall be invested in Permitted Investments and (y) in
the Reserve Account an amount equal to or greater than the amount of
interest to accrue on the Class A Certificates, the Class B Certificates
and the Collateral Interest, as estimated by the Transferor, for the period
from the date of the deposit to the Principal Funding Account through the
expected final payment date for the Collateral Interest; (ii) the
Transferor shall have delivered to the Trustee an opinion of counsel to the
effect that such deposit and termination of obligations will not result in
the Trust being required to register as an "investment company" within the
meaning of the Investment Company Act of 1940, as amended and an opinion of
counsel to the effect that following such deposit none of Trust I, the
Reserve Account or the Principal Funding Account will be deemed to be an
association (or publicly traded partnership) taxable as a corporation;
(iii) the Transferor shall have delivered to the Trustee a certificate of
an officer of the Transferor stating that the Transferor reasonably
believes that such deposit and termination of its obligations will not
constitute a Pay Out Event or any event that, with the giving of notice or
the lapse of time, would cause a Pay Out Event to occur; and (iv) the
Rating Agency Condition will be satisfied with respect to such event; then,
the Class A Certificates will no longer be entitled to the security
interest of Trust I in the Receivables and, except those set forth in
clause (i) above, other Trust assets, and the percentages applicable to the
allocation to the Investor Certificates of collections on Principal
Receivables and Finance Charge Receivables and Defaulted Accounts will be
reduced to zero.
Servicing Compensation and Payment of Expenses
The share of the Servicing Fee (as defined herein) allocable to the
Investor Interest with respect to any Transfer Date (the "Investor
Servicing Fee") shall be equal to one-twelfth of the product of (a) [ ]%
and (b) the Adjusted Investor Interest as of the last day of the Monthly
Period preceding such Transfer Date. On each Transfer Date, but only
if Wachovia or The Bank of New York (Delaware) is the Servicer, Servicer
Interchange with respect to the related Monthly Period that is on deposit
in the Finance Charge Account will be withdrawn from the Finance Charge
Account and paid to the Servicer in payment of a portion of the Investor
Servicing Fee with respect to such Monthly Period. The "Servicer
Interchange" for any Monthly Period for which Wachovia or The Bank of New
York (Delaware) is the Servicer will be an amount equal to the portion of
collections of Finance Charge Receivables allocated to the Investor
Interest with respect to such Monthly Period that is attributable to
Interchange; provided, however, that Servicer Interchange for a Monthly
Period shall not exceed one-twelfth of the product of (i) the Adjusted
Investor Interest, as of the last day of such Monthly Period and (ii) [ ]%.
In the case of any insufficiency of Servicer Interchange on deposit in the
Finance Charge Account, a portion of the Investor Servicing Fee with
respect to such Monthly Period will not be paid to the extent of such
insufficiency and in no event shall Trust I, the Trustee or the Investor
Certificateholders be liable for the share of the Servicing Fee to be paid
out of Servicer Interchange.
The share of the Investor Servicing Fee allocable to the Class A
Certificateholders with respect to any Transfer Date (the "Class A
Servicing Fee") shall be equal to one-twelfth of the product of (a) the
Class A Floating Allocation, (b) [ ]%, or if Wachovia or The Bank of New
York (Delaware) is not the Servicer, [ ]% (the "Net Servicing Fee Rate")
and (c) the Adjusted Investor Interest as of the last day of the Monthly
Period preceding such Transfer Date. The share of the Investor Servicing
Fee allocable to the Class B Certificateholders with respect to any
Transfer Date (the "Class B Servicing Fee") shall be equal to one-twelfth
of the product of (a) the Class B Floating Allocation, (b) the Net
Servicing Fee Rate and (c) the Adjusted Investor Interest as of the last
day of the Monthly Period preceding such Transfer Date. The share of the
Investor Servicing Fee allocable to the Collateral Interest Holder with
respect to any Transfer Date (the "Collateral Interest Servicing Fee";
together with the Class A Servicing Fee and Class B Servicing Fee, the
"Servicing Fee") shall be equal to one-twelfth of the product of (a) the
Collateral Floating Allocation, (b) the Net Servicing Fee Rate and (c) the
Adjusted Investor Interest as of the last day of the Monthly Period
preceding such Transfer Date. The remainder of the Servicing Fee shall be
paid by the holder of the Transferor Certificate or other Series (as
provided in the related Series Supplements) or, to the extent of any
insufficiency of Servicer Interchange as described above, not be paid. In
no event shall Trust I, the Trustee or the Investor Certificateholders be
liable for the share of the Servicing Fee to be paid out of Servicer
Interchange. The Class A Servicing Fee and the Class B Servicing Fee shall
be payable to the Servicer solely to the extent amounts are available for
distribution in respect thereof as described under "--Application of
Collections."
The Servicer will pay from its servicing compensation certain expenses
incurred in connection with servicing the Receivables including, without
limitation, payment of the fees and disbursements of the Trustee and
independent certified public accountants and other fees which are not
expressly stated in the Agreement to be payable by Trust I or the Investor
Certificateholders other than Federal, state and local income and franchise
taxes, if any, of Trust I.
Reports to Class A Certificateholders
On each Transfer Date, the Trustee will forward to each Class A
Certificateholder of record, a statement prepared by the Servicer setting
forth the items described in "Description of the Certificates--Reports to
Certificateholders" in the attached prospectus. In addition, such statement
will include (a) the amount, if any, withdrawn from the Principal Funding
Account for such Transfer Date, and (b) the Collateral Interest, if any,
for such Transfer Date.
ERISA Considerations
Section 406 of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") and Section 4975 of the Code prohibit certain pension,
profit sharing or other employee benefit plans, individual retirement
accounts or annuities and employee annuity plans and Keogh plans
(collectively, "Plans") from engaging in certain transactions involving
"plan assets" with persons that are "parties in interest" under ERISA or
"disqualified persons" under the Code (collectively, "Parties in Interest")
with respect to the Plan. A violation of these "prohibited transaction"
rules may generate excise tax and other liabilities under ERISA and Section
4975 of the Code for such persons, unless a statutory, regulatory or
administrative exemption is available. Plans that are governmental plans
(as defined in section 3(32) of ERISA) and certain church plans (as defined
in section 3(33) of ERISA) are not subject to ERISA requirements.
Class A Certificates
A violation of the prohibited transaction rules could occur if the
Class A Certificates were to be purchased with assets of any Plan if the
Transferor, the Trustee, any underwriters of such Series or any of their
affiliates were a Party in Interest with respect to such Plan, unless a
statutory, regulatory or administrative exemption is available or an
exception applies under a regulation (the "Plan Asset Regulation") issued
by the Department of Labor ("DOL"). The Transferor, the Trustee, any
underwriters of a Series and their affiliates are likely to be Parties in
Interest with respect to many Plans. Before purchasing the Class A
Certificates, a Plan fiduciary or other Plan investor should consider
whether a prohibited transaction might arise by reason of the relationship
between the Plan and the Transferor, the Trustee, any underwriters of such
Series or any of their affiliates and consult their counsel regarding the
purchase in light of the considerations described below and in the attached
prospectus.
Under certain circumstances, the Plan Asset Regulation treats the
assets of an entity in which a Plan holds an equity interest as "plan
assets" of such Plan. Because the Class A Certificates will represent
beneficial interests in Trust I, and despite the agreement of the
Transferor and the Certificate Owners to treat the Class A Certificates as
debt instruments, the Class A Certificates are likely to be considered
equity interests in the Trust for purposes of the Plan Asset Regulation,
with the result that the assets of Trust I are likely to be treated as
"plan assets" of the investing Plans for purposes of ERISA and Section 4975
of the Code, unless the exception for "publicly-offered securities" is
applicable as described in the attached prospectus. The Underwriters
anticipate that the Class A Certificates will be held by at least 100
independent persons. Wachovia expects the other requirements will be met so
that the Class A certificates will be considered, "publicly-offered
securities" as described in the attached prospectus. No restrictions will
be imposed on the transfer of the Class A Certificates. It is expected that
the Class A Certificates will be held by at least 100 or more investors who
were independent of the issuer and of one another ("Independent Investors")
at the conclusion of the initial public offering although no assurance can
be given, and no monitoring or other measures will be taken to ensure, that
such condition is met. The Class A Certificates will be sold as part of an
offering pursuant to an effective registration statement under the
Securities Act and then will be timely registered under the Exchange Act.
If the foregoing exception under the Plan Asset Regulation were not
satisfied, transactions involving Trust I and Parties in Interest with
respect to a Plan that purchases or holds Class A Certificates might be
prohibited under Section 406 of ERISA and/or Section 4975 of the Code and
result in excise tax and other liabilities under ERISA and Section 4975 of
the Code unless an exemption were available. The five DOL class exemptions
described in the attached prospectus may not provide relief for all
transactions involving the assets of the Trust even if they would otherwise
apply to the purchase of a Class A Certificate by a Plan.
Class B Certificates
The Underwriter currently does not expect that the Class B Certificates
will be held by at least 100 Independent Investors and, therefore, does not
expect that such Class B Certificates will qualify as "publicly-offered
securities" under the regulation referred to in the preceding paragraph.
Accordingly, the Class B Certificates may not be acquired or held by (a)
any employee benefit plan that is subject to ERISA, (b) any plan or other
arrangement (including an individual retirement account or Keogh plan) that
is subject to Section 4975 of the Code, or (c) any entity whose underlying
assets include "plan assets" under the regulation by reason of any such
plan's investment in the entity. By its acceptance of a Class B
Certificate, each Class B Certificateholder will be deemed to have
represented and warranted that it is not and will not be subject to the
foregoing limitation.
Consultation with Counsel
In light of the foregoing, fiduciaries or other persons contemplating
purchasing the Class A Certificates on behalf or with "plan assets" of any
Plan should consult their own counsel regarding whether the Trust assets
represented by the Class A Certificates would be considered "plan assets,"
the consequences that would apply if the Trust's assets were considered
"plan assets," and the possibility of exemptive relief from the prohibited
transaction rules.
Finally, Plan fiduciaries and other Plan investors should consider the
fiduciary standards under ERISA or other applicable law in the context of
the Plan's particular circumstances before authorizing an investment of a
portion of the Plan's assets in the Class A Certificates. Accordingly,
among other factors, Plan fiduciaries and other Plan investors should
consider whether the investment (i) satisfies the diversification
requirement of ERISA or other applicable law, (ii) is in accordance with
the Plan's governing instruments, and (iii) is prudent in light of the
"Risk Factors" and other factors discussed in this prospectus supplement.
Underwriting
Subject to the terms and conditions set forth in the Underwriting
Agreement dated [ ] (the "Underwriting Agreement") between Wachovia and the
underwriters named below (the "Underwriters"), Wachovia has agreed to sell
to the Underwriters and the Underwriters have agreed to purchase, the
principal amount of the Offered Certificates offered hereby if any of the
Offered Certificates are purchased.
<TABLE>
<CAPTION>
Principal Principal
Amount of Amount of
Class A Class B
Underwriters Certificates Certificates
------------- ---------------
<S> <C> <C>
[ ].....................................$ $
[ ]...................................
[ ].....................................
[ ].....................................
[ ]..................................... ------------- ---------------
Total.........................................................$ $
============= ===============
</TABLE>
The price to public, Underwriters' discounts and commissions, the
concessions that the Underwriters may allow to certain dealers, and the
discounts that such dealers may reallow to certain other dealers, each
expressed as a percentage of the principal amount of the Class A
Certificates and the Class B Certificates,
shall be as follows:
<TABLE>
<CAPTION>
Underwriting
Price to discount and
public commissions
----------- -------------
<S> <C> <C>
Class A Certificates.............................................. % %
Class B Certificates.............................................. % %
</TABLE>
After the offering is completed, Wachovia will receive the proceeds,
after deduction of the underwriting and other expenses, listed below:
<TABLE>
<CAPTION>
Proceeds to Transferor
(as % of the principal Underwriting
Proceeds to amount of the Class A discounts and
Transferor Certificates) commissions
------------ ----------------------- -------------
<S> <C> <C>
Class A Certificates.......................... $ % $
Class B Certificates.......................... $ % $
</TABLE>
After the public offering, the public offering price and other selling
terms may be changed by the Underwriters. Additional offering expenses are
estimated to be $________.
The Underwriters may engage in over-allotment transactions, stabilizing
transactions, syndicate covering transactions and penalty bids with respect
to the Offered Certificates in accordance with Regulation M under the
Exchange Act. Over-allotment transactions involve syndicate sales in excess
of the offering size, which create a syndicate short position. Stabilizing
transactions permit bids to purchase the Offered Certificates so long as
the stabilizing bids do not exceed a specified maximum. Syndicate covering
transactions involve purchases of the Offered Certificates in the open
market after the distribution has been completed in order to cover
syndicate short positions. Penalty bids permit the Underwriters to reclaim
a selling concession from a syndicate member when the Offered Certificates
originally sold by such syndicate member are purchased in a syndicate
covering transaction to cover syndicate short positions. Such
over-allotment transactions, stabilizing transactions, syndicate covering
transactions and penalty bids may cause the price of the Offered
Certificates to be higher than it would otherwise be in the absence of such
transactions. Neither the Transferor nor the Underwriters represent that
the Underwriters will engage in any such transactions or that such
transactions, once commenced, will not be discontinued without notice at
any time.
The Transferor has been advised by each Underwriter that it proposes
initially to offer the Class A Certificates to the public at the price set
forth on the cover page hereof and to certain dealers at such price less
concessions not in excess of [ ]% of the principal amount of the Class A
Certificates. Each Underwriter may allow, and such dealers may reallow,
concessions not in excess of [ ]% of the principal amount of the Class A
Certificates to certain brokers and dealers. The Transferor has been
advised by each Underwriter that it proposes initially to offer the Class B
Certificates to the public at the price set forth on the cover page hereof
and to certain dealers at such price less concessions not in excess of [ ]%
of the principal amount of the Class B Certificates. Each Underwriter may
allow, and such dealers may reallow, concessions not in excess of [ ]% of
the principal amount of the Class B Certificates to certain brokers and
dealers.
Each Underwriter has represented and agreed that (a) it has only issued
or passed on and will only issue or pass on in the United Kingdom any
document received by it in connection with the issue of the Class A
Certificates to a person who is of a kind described in Article 11(3) of the
Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order
1996 (as amended) or who is a person to whom the document may otherwise
lawfully be issued or passed on, (b) it has complied and will comply with
all applicable provisions of the Financial Services Act 1986 and other
applicable laws and regulations with respect to anything done by it in
relation to the Class A Certificates in, from or otherwise involving the
United Kingdom and (c) if the Underwriter is an authorized person under the
Financial Services Act 1986, it has only promoted and will only promote (as
that term is defined in Regulation 1.02 of the Financial Services
(Promotion of Unregulated Schemes) Regulations 1991) to any person in the
United Kingdom the scheme described herein if that person is of a kind
described either in Section 76(2) of the Financial Services Act 1986 or in
Regulation 1.04 of the Financial Services (Promotion of Unregulated
Schemes) Regulations 1991.
The Transferor will indemnify each Underwriter against certain
liabilities, including liabilities under the Securities Act or contribute
to payments the Underwriter may be required to make in respect thereof.
Each Underwriter has agreed to reimburse the Transferor for certain
expenses incurred in connection with the issuance and distribution of the
Offered Certificates.
In the ordinary course of business, each Underwriter and its affiliates
have engaged and may engage in investment banking and/or commercial banking
transactions with the Transferor, its affiliates and the Trust. In
addition, each Underwriter may from time to time take positions in the
Offered Certificates and other
certificates issued by the Trust.
Wachovia Securities, Inc. ("WSI") is an affiliate of the Transferor.
Any obligations of WSI are the sole obligations of WSI and do not create
any obligations on the part of any of its affiliates.
WSI may from time to time purchase or acquire a position in the Offered
Certificates and may, at its option, hold or resell such Offered
Certificates. WSI expects to offer and sell previously issued Offered
Certificates in the course of its business as a broker-dealer. WSI may act
as a principal or agent in such transactions. This supplement and the
attached prospectus may be used by WSI and its successors in connection
with such transactions. Such sales, if any, will be made at varying prices
related to prevailing market prices at the time of sale.
Index of Terms for Prospectus Supplement
Accounts..............................................................S-15
Accumulation Period Length............................................S-30
Accumulation Shortfall................................................S-39
Addition Cut-Off Date.................................................S-19
Addition Date.........................................................S-31
Adjusted Investor Interest............................................S-29
Agreement.............................................................S-15
Available Investor Principal Collections..............................S-30
Available Reserve Account Amount......................................S-43
Bank..................................................................S-15
Bank Portfolio........................................................S-15
Base Rate.............................................................S-24
Class A Additional Interest...........................................S-28
Class A Adjusted Investor Interest....................................S-29
Class A Available Funds...............................................S-28
Class A Certificate Rate..............................................S-28
Class A Certificateholders............................................S-15
Class A Certificates..................................................S-15
Class A Fixed Allocation..............................................S-32
Class A Floating Allocation...........................................S-32
Class A Investor Charge-Off...........................................S-41
Class A Investor Default Amount.......................................S-40
Class A Investor Interest.......................................S-26, S-32
Class A Monthly Interest..............................................S-36
Class A Monthly Principal.............................................S-38
Class A Required Amount...............................................S-33
Class A Scheduled Payment Date........................................S-23
Class A Servicing Fee.................................................S-45
Class B Additional Interest...........................................S-28
Class B Available Funds...............................................S-28
Class B Certificate Rate..............................................S-28
Class B Certificateholders............................................S-15
Class B Certificates..................................................S-15
Class B Fixed Allocation..............................................S-32
Class B Floating Allocation...........................................S-32
Class B Investor Charge-Off...........................................S-41
Class B Investor Default Amount.......................................S-41
Class B Investor Interest.......................................S-26, S-33
Class B Monthly Interest..............................................S-36
Class B Monthly Principal.............................................S-38
Class B Required Amount...............................................S-34
Class B Scheduled Payment Date........................................S-23
Class B Servicing Fee.................................................S-45
Closing Date..........................................................S-27
Collateral Available Funds............................................S-36
Collateral Default Amount.............................................S-41
Collateral Fixed Allocation...........................................S-32
Collateral Floating Allocation........................................S-32
Collateral Interest.............................................S-15, S-33
Collateral Interest Holders...........................................S-15
Collateral Interest Servicing Fee.....................................S-45
Collateral Monthly Interest...........................................S-37
Collateral Monthly Principal..........................................S-39
Collateral Rate.......................................................S-37
Controlled Accumulation Amount........................................S-39
Controlled Deposit Amount.............................................S-23
Default Amount........................................................S-40
Distribution Date.....................................................S-28
DOL...................................................................S-46
ERISA.................................................................S-46
Excess Finance Charge Collections.....................................S-37
Excess Spread.........................................................S-36
FFIEC.................................................................S-17
FFIEC Uniform Policy..................................................S-17
Floating Investor Percentage..........................................S-31
Independent Investors.................................................S-46
Initial Collateral Interest...........................................S-40
Interest Period.......................................................S-28
Investor Certificateholders...........................................S-15
Investor Certificates.................................................S-15
Investor Default Amount...............................................S-40
Investor Interest.....................................................S-26
Investor Servicing Fee................................................S-45
LIBOR.................................................................S-29
LIBOR Determination Date..............................................S-29
Loan Agreement........................................................S-37
Minimum Aggregate Principal Receivables...............................S-19
Minimum Transferor Amount.............................................S-19
Monthly Period........................................................S-19
Net Servicing Fee Rate................................................S-45
Offered Certificates..................................................S-15
Parties in Interest...................................................S-46
Pay Out Event...................................................S-24, S-43
Plan Asset Regulation.................................................S-46
Plans.................................................................S-46
Pooling and Servicing Agreement.......................................S-15
Portfolio Yield.......................................................S-24
Principal Funding Account.............................................S-42
Principal Funding Account Balance.....................................S-23
Principal Funding Investment Proceeds.................................S-42
Principal Shortfalls..................................................S-40
Rapid Amortization Period.............................................S-23
Rating Agency Condition...............................................S-40
Reallocated Class B Principal Collections.............................S-34
Reallocated Collateral Principal Collections..........................S-34
Reallocated Principal Collections.....................................S-34
Receivables...........................................................S-15
Record Date...........................................................S-27
Reference Banks.......................................................S-29
Removal Date..........................................................S-31
Required Collateral Interest..........................................S-40
Required Reserve Account Amount.......................................S-42
Reserve Account.......................................................S-42
Reserve Account Draw..................................................S-28
Reserve Account Funding Date..........................................S-42
Revolving Period......................................................S-29
Series 1999-1 Supplement..............................................S-15
Series 1999-1 Termination Date........................................S-30
Servicer..............................................................S-15
Servicer Interchange..................................................S-45
Servicing Fee.........................................................S-45
Shared Principal Collections..........................................S-40
Telerate Page 3750....................................................S-29
Transfer Date.........................................................S-35
Transferor............................................................S-15
Transferor Interest...................................................S-26
Transferor Participation..............................................S-27
Transferor Percentage.................................................S-27
Trust I...............................................................S-15
Trust I Portfolio.....................................................S-19
Trustee...............................................................S-15
Underwriters..........................................................S-48
Underwriting Agreement................................................S-48
Virginia Banks........................................................S-16
Virginia Portfolios...................................................S-16
Wachovia..............................................................S-15
WCM...................................................................S-49
Wells Portfolio.......................................................S-16
WOSC..................................................................S-15
ANNEX I
Other Series
The Trust has previously issued two other Series that the Transferor
anticipates will remain outstanding on the Closing Date. The table below
sets forth the principal characteristics of such Series: Series 1995-1 and
Series 1999-1. For more specific information with respect to any Series,
any prospective investor should contact the Servicer at (336) 732-7729. The
Servicer will provide, without charge, to any prospective purchaser of the
Offered Certificates, a copy of the Disclosure Documents for any previous
publicly issued Series.
Series 1995-1
1. Class A Certificates
Initial Invested Amount.......................... $446,250,000
Certificate Rate................................. One Month LIBOR + 0.170%
Controlled Accumulation Amount
(subject to adjustment)........................ $37,187,500
Commencement of Controlled Accumulation Period
(subject to adjustment)........................ September 30, 1999
Annual Servicing Fee Percentage.................. 2.0%
Initial Collateral Invested Amount............... $10,000,000
Other Enhancement................................ cash collateral account
and subordination of
Class B Certificates
and collateral interest
Expected Final Payment Date...................... October 2000
Scheduled Series Termination Date................ March 2003
Series Issuance Date............................. October 17, 1995
2. Class B Certificates
Initial Invested Amount.......................... $26,250,000
Certificate Rate................................. One Month LIBOR + 0.275%
Annual Servicing Fee Percentage.................. Same as above for
Class A Certificates
Initial Collateral Invested Amount............... Same as above for
Class A Certificates
Other Enhancement................................ cash collateral account
and subordination of the
collateral interest
Expected Final Payment Date...................... November 2000
Scheduled Series Termination Date................ Same as above for
Class A Certificates
Series Issuance Date............................. Same as above for Class
A Certificates
Series 1999-1
1. Class A Certificates
Initial Invested Amount.......................... $775,000,000
Certificate Rate................................. One Month LIBOR + 0.15%
Controlled Accumulation Amount
(subject to adjustment)........................ $64,583,333.33
Commencement of Controlled Accumulation Period
(subject to adjustment)........................ February 28, 2003
Annual Servicing Fee Percentage.................. 2.0%
Initial Collateral Interest...................... $67,169,550
Other Enhancement................................ subordination
of Class B Certificates
and collateral interest
Scheduled Payment Date........................... March 2004
Stated Series Termination Date................... August 2006
Series Issuance Date............................. March 24, 1999
2. Class B Certificates
Initial Invested Amount........................... $53,757,250
Certificate Rate.................................. One Month LIBOR + 0.40%
Annual Servicing Fee Percentage................... Same as above for Class
A Certificates
Initial Collateral Interest....................... Same as above for Class
A Certificates
Other Enhancement................................. subordination of the
collateral interest
Scheduled Payment Date............................ April 2004
Stated Series Termination Date.................... August 2006
Series Issuance Date.............................. March 24, 1999
A certificate is not a deposit and neither the certificates nor the
underlying accounts or receiv ables are insured or guaranteed by the
Federal Deposit Insurance Corporation or any other govern mental agency.
The certificates will represent interests in the trust only and will not
represent interests in or obligations of The First National Bank of Atlanta
d/b/a Wachovia Bank Card Services, the servicer or any of its affiliates.
This prospectus may be used to offer and sell any series of certif icates
only if accompanied by the prospectus supplement for that series.
[Flag]
The information in this prospectus is not complete and may be changed. We
cannot sell these securities until the registration statement filed with
the Securities and Exchange Commission is effective. This prospectus is not
an offer to sell these securities and it is not soliciting an offer to buy
these securities in any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED MAY 27, 1999
Prospectus
WACHOVIA CREDIT CARD MASTER TRUST
Issuer
The First National Bank of Atlanta d/b/a Wachovia Bank Card
Services
Transferor and Servicer
Asset Backed Certificates
The trust--
o may periodically issue asset backed certificates in one or more series
with one or more classes; and
o will own--
o receivables in a portfolio of consumer revolving credit card
accounts; o payments due on those receivables; and o other property
described in this prospectus and in the prospectus supplement.
The certificates--
o will represent interests in a trust and will be paid only from the
assets of the trust;
o offered by this prospectus will be rated in one of the four highest
rating categories by at least one nationally recognized rating
organization;
o may have one or more forms of enhancement; and
o will be issued as part of a designated series which may include one or
more classes of certificates and enhancement.
The certificateholders--
o will receive interest and principal payments from a varying percentage
of credit card account collections.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or determined
whether this prospectus is truthful or complete. Any representation to the
contrary is a criminal offense.
The date of this Prospectus is , 1999
Table of Contents
Prospectus
Important Notice About Information Presented in This
Prospectus and the Prospectus Supplement...........................3
The Trusts.............................................................4
Wachovia's Credit Card Activities......................................4
General..............................................................4
Acquisition and Use of Credit Card Accounts..........................4
Description of Wachovia Operational Services Corporation ............5
Interchange..........................................................5
Recoveries...........................................................5
The Receivables........................................................6
Maturity Considerations................................................6
Use of Proceeds........................................................7
Wachovia and Wachovia Corporation......................................7
General..............................................................7
Year 2000 Compliance.................................................7
Description of the Certificates........................................8
General..............................................................9
Book-Entry Registration.............................................10
Definitive Certificates.............................................13
Interest Payments...................................................13
Principal Payments..................................................14
Controlled Amortization Period......................................14
Principal Amortization Period.......................................14
Controlled Accumulation Period......................................15
Rapid Accumulation Period...........................................15
Rapid Amortization Period...........................................15
Transfer and Assignment of Receivables..............................16
Exchanges...........................................................16
Representations and Warranties......................................17
Addition of Trust Assets............................................19
Removal of Accounts.................................................20
Collection and Other Servicing Procedures...........................20
Discount Option.....................................................21
Trust Accounts......................................................21
Funding Period......................................................21
Investor Percentage and Transferor Percentage.......................22
Application of Collections..........................................22
Shared Excess Finance Charge Collections............................23
Excess Funding Account..............................................24
Shared Principal Collections........................................24
Paired Series ......................................................24
Defaulted Receivables; Rebates and Fraudulent Charges; Investor
Charge-Offs....................................................24
Defeasance..........................................................25
Final Payment of Principal; Termination.............................25
Pay Out Events......................................................26
Servicing Compensation and Payment of Expenses......................26
Certain Matters Regarding the Transferor and the Servicer...........27
Servicer Default....................................................28
Reports to Certificateholders.......................................28
Evidence as to Compliance...........................................29
Amendments..........................................................29
List of Certificateholders..........................................30
The Trustee.........................................................30
Credit Enhancement....................................................30
General.............................................................30
Subordination.......................................................31
Cash Collateral Guaranty or Account.................................31
Collateral Interest.................................................31
Letter of Credit....................................................32
Surety Bond or Insurance Policy.....................................32
Spread Account......................................................32
Reserve Account.....................................................32
Certificate Ratings...................................................32
Certain Legal Aspects of the Receivables..............................33
Transfer of Receivables.............................................33
Certain Matters Relating to Receivership............................33
Consumer Protection Laws............................................34
Industry Litigation.................................................35
Certain U.S. Federal Income Tax Consequences..........................35
General.............................................................35
Characterization of the Certificates as Indebtedness................36
Taxation of Interest Income of Certificateholders...................36
Sale or Other Disposition of a Certificate..........................37
Tax Characterization of the Trust...................................37
FASIT Legislation...................................................38
Foreign Investors...................................................39
State and Local Taxation..............................................40
Employee Benefit Plan Considerations..................................40
Plan of Distribution..................................................42
Legal Matters.........................................................42
Reports to Certificateholders.........................................43
Where You Can Find More Information...................................43
Index of Terms for Prospectus.........................................44
ANNEX I: GLOBAL CLEARANCE, SETTLEMENT AND TAX
DOCUMENTATION PROCEDURES.........................................A-1
Initial Settlement...............................................A-1
Secondary Market Trading.........................................A-1
Certain U.S. Federal Income Tax Documentation Requirements.......A-2
Important Notice About Information Presented in This
Prospectus and the Prospectus Supplement
We provide information to you about the certificates in two separate
documents that progressively provide more detail: (a) this prospectus,
which provides general information, some of which may not apply to a
particular series of certificates, including your series, and (b) the
prospectus supplement, which will describe the specific terms of your
series of certificates, including:
o the timing and amount of interest and principal payments;
o information about the receivables;
o information about credit enhancement for each offered class;
o credit ratings; and
o the method for selling the certificates.
Whenever information in the prospectus supplement is more specific than
the information in this prospectus, you should rely on the information in
the prospectus supplement.
You should rely only on the information provided in this prospectus and
the prospectus supplement, including the information incorporated by
reference. We have not authorized anyone to provide you with different
information.
We include cross-references in this prospectus and in the prospectus
supplement to captions in these materials where you can find further
related discussions. The preceding table of contents and the table of
contents included in the prospectus supplement provide the pages on which
these captions are located.
You can find a listing of the pages where capitalized terms are defined
under the caption "Index of Terms for Prospectus" beginning on page 44 in
this prospectus.
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The Trusts
The Wachovia Credit Card Master Trust ("Trust I") has been formed in
accordance with the laws of the State of Delaware pursuant to a pooling and
servicing agreement (the "Pooling and Servicing Agreement") between The
First National Bank of Atlanta d/b/a Wachovia Bank Card Services
("Wachovia" or the "Bank"), as transferor (in such capacity, the
"Transferor") and servicer (in such capacity, the "Servicer"), and The Bank
of New York (Delaware), as trustee. Additional Trusts (each such Trust, a
"New Trust") may be formed from time to time, each pursuant to a pooling
and servicing agreement (each such agreement, a "New Agreement," and each
New Agreement and the Pooling and Servicing Agreement, an "Agreement") to
be entered into between the Bank, as transferor and servicer, and a trustee
to be identified in the Prospectus Supplement relating to the Series of
Certificates representing interests in such Trust (each trustee under an
Agreement, a "Trustee"). Trust I and each New Trust will be created as a
master trust under which one or more Series will be issued pursuant to a
series supplement to the related Agreement (a "Series Supplement"). A
Series issued by a Trust may be offered pursuant to this Prospectus, or may
be offered pursuant to another disclosure document in a transaction exempt
from the registration requirements of the Securities Act of 1933, as
amended (the "Securities Act"). Each Prospectus Supplement identifies the
related Trust and all Series previously issued by such Trust.
No Trust will engage in any business activity other than as described
herein and in the related supplement to this Prospectus (the "Prospectus
Supplement"). Each Trust will hold the Receivables, issue asset backed
certificates (the "Certificates") evidencing an undivided interest in the
assets of a Wachovia Credit Card Master Trust (each, a "Trust") which may
be issued from time to time in one or more series (each, a "Series") which
will consist of one or more classes of Certificates (each, a "Class") and
the related Transferor Certificate, make payments thereon and engage in
related activities (including, with respect to any Series, obtaining any
Enhancement (as defined herein) and entering into an Enhancement agreement
relating thereto). As a consequence, no Trust is expected to have any need
for additional capital resources other than the assets of such Trust and
there is no reasonable potential for such need to develop. Furthermore, no
such additional capital resources will be available.
Wachovia's Credit Card Activities
General
With respect to each Series of Certificates, the Receivables conveyed
or to be conveyed to a Trust by the Bank pursuant to the related Agreement
have been or will be generated from transactions made by holders of
selected MasterCard(R) and VISA(R)1 credit card accounts (the "Accounts"),
including premium accounts and standard accounts, from the portfolio of
accounts owned by the Bank (the "Bank Portfolio"). Generally, both premium
and standard accounts undergo the same credit analysis, but premium
accounts generally carry higher credit limits and offer a wider variety of
services to the cardholders. The Bank currently services the Bank Portfolio
in the manner described in the related Prospectus Supplement. Certain data
processing and administrative functions associated with the servicing of
the Bank Portfolio are performed on behalf of the Bank by Wachovia
Operational Services Corporation. See "--Description of Wachovia
Operational Services Corporation."
Acquisition and Use of Credit Card Accounts
Wachovia primarily relies on nationally targeted direct marketing in
the acquisition of new credit card accounts. Normally marketing campaigns
are based on product pricing and targeted individuals that are more likely
to be revolvers as opposed to convenience users. Wachovia also targets
existing customer base of the Wachovia Bank, N.A. ("WBNA") in the states in
which WBNA operates through branch promotions and cross-selling campaigns.
Credit applications are processed by an automated application
processing system that utilizes credit scorecards and specific credit
policy rules and fraud detection criteria. Those applications that are not
decisioned by the automated application processing system are reviewed by a
Wachovia credit analyst who makes a credit and limit assignment decision
based on a review of (i) the information contained in the application, (ii)
a credit report obtained through an independent credit reporting agency,
and (iii) an analysis of the applicant's capacity to repay. For some
programs, Wachovia uses a pre-screening method to acquire new accounts.
These applications are also processed by an automated application
processing system that utilizes a credit report obtained through an
independent credit reporting agency and specific credit policy rules and
fraud detection criteria. Those pre-screened applications that are not
decisioned by the automated application processing system are reviewed by a
Wachovia credit analyst who makes a credit and limit assignment decision
based on a review of (i) the information contained in the application, (ii)
the credit report obtained through an independent credit reporting agency,
and (iii) an analysis of the applicant's capacity to repay. Certain
applications, selected on the basis of management reports, are
independently reviewed by loan administration officials to ensure quality
and consistency.
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1 MasterCard(R) and VISA(R) are registered trademarks of MasterCard
International Incorporated and VISA USA Incorporated, respectively.
Credit card accounts that have been purchased by the Transferor were
originally opened using criteria established by institutions other than
Wachovia and may not have been subject to the same level of credit review
as accounts originally established by Wachovia. From time to time the
Transferor may add to the Trust receivables from portfolios of credit card
accounts purchased by the Transferor from other credit card issuers.
Each cardholder is subject to an agreement with Wachovia governing the
terms and conditions of the related MasterCard or VISA account. Pursuant to
each such agreement, Wachovia reserves the right, upon advance notice to
the cardholders, to add or to change any terms, conditions, services or
features of its MasterCard or VISA accounts at any time, including
increasing or decreasing periodic finance charges, other charges or minimum
payment terms. The agreement with each cardholder provides that Wachovia
may apply such changes, when applicable, to current outstanding balances as
well as to future transactions. The cardholder can avoid certain changes in
terms by giving timely written notification to Wachovia and by not using
the account.
A cardholder may use the credit card for two types of transactions:
purchases and cash advances. Cardholders make purchases when using the
credit card to buy goods or services. A cash advance is made when a credit
card is used to obtain cash from a financial institution or an automated
teller machine ("ATM"). Cardholders may use special cash advance checks
issued by Wachovia to draw against their MasterCard or VISA credit lines.
Cardholders may also draw against their credit lines issued by Wachovia by
transferring balances owed to other creditors to such accounts.
The Bank has made portfolio acquisitions in the past and such
acquisitions are possible in the future. See "Wachovia and Wachovia
Corporation--General." Prior to acquiring a portfolio, the Bank reviews the
historical performance and seasoning of the portfolio and the policies and
practices of the selling institution, but individual accounts are not
requalified by the Bank. There can be no assurance that accounts so
acquired were originated in a manner consistent with the Bank's policies or
that the underwriting and qualification of such accounts conformed to any
given standards. Such accounts and any accounts acquired in the future may
become Additional Accounts provided that, at such time, they constitute
Eligible Accounts (as defined herein). See "The Receivables," "Description
of the Certificates--Transfer and Assignment of Receivables" and
"--Representations and Warranties."
Description of Wachovia Operational Services Corporation
Credit card processing services performed by Wachovia Operational
Services Corporation ("WOSC"), a wholly-owned subsidiary of the
Corporation, include data processing and network services. WOSC's data
network provides an interface to MasterCard International Incorporated and
VISA USA, Inc. for performing authorizations and funds transfers.
Interchange
Creditors participating in the VISA and MasterCard associations receive
Interchange as partial compensation for taking credit risk, absorbing fraud
losses and funding receivables for a limited period prior to initial
billing. "Interchange" consists of certain fees received by the Bank from
VISA and MasterCard as partial compensation for taking credit risk,
absorbing fraud losses and funding receivables for a limited period prior
to initial billing. Under the VISA and MasterCard systems, a portion of
this Interchange in connection with cardholder charges for goods and
services is passed from banks which clear the transactions for merchants to
credit card issuing banks. Interchange fees are set annually by MasterCard
and VISA and are based on the number of credit card transactions and the
amount charged per transaction. The Transferor may be required, as
described in the related Prospectus Supplement, to transfer to a Trust a
percentage of the Interchange attributed to cardholder charges for goods
and services in the related Accounts. If so required to be transferred,
Interchange arising under the Accounts will be allocated to the related
Certificates of any Series in the manner provided in the related Prospectus
Supplement, and, unless otherwise provided in the related Prospectus
Supplement, will be treated as collections of Finance Charge Receivables
(as defined herein) and will be used to pay required monthly payments
including interest on the related Series of Certificates, and, in some
cases, to pay all or a portion of the Servicing Fee (as defined herein) to
the Servicer.
Recoveries
The Transferor and the Servicer will be required, pursuant to the terms
of the Pooling and Servicing Agreement, to transfer to the Trust all
amounts received by the Transferor or the Servicer with respect to
Receivables in Defaulted Accounts, including amounts received by the
Transferor or the Servicer from the purchaser or transferee with respect to
the sale or other disposition of Receivables in Defaulted Accounts
("Recoveries"). In the event of any such sale or other disposition of
Receivables, Recoveries will not include amounts received by the purchaser
or transferee of such Receivables but will be limited to amounts received
by the Transferor or the Servicer from the purchaser or transferee.
The Receivables
The assets of Trust I and each New Trust will include receivables (the
"Receivables") conveyed to each such Trust arising in Accounts selected
from the Bank Portfolio (the "Trust Portfolio") on the basis of criteria
set forth in the related Agreement as applied on the relevant date (the
"Cut Off Date") specified in the related Prospectus Supplement and, with
respect to Additional Accounts (as defined herein), as of the related date
of their selection to be added to the Trust (the "Addition Cut Off Date").
The Receivables will consist of amounts charged by cardholders for goods
and services and cash advances (the "Principal Receivables"), plus the
related periodic finance charges and amounts charged to the Accounts in
respect of certain credit card fees (the "Finance Charge Receivables");
provided, however, that if the Transferor exercises the Discount Option (as
defined herein) with respect to a Trust, an amount equal to the product of
the Discount Percentage (as defined herein) and the amount of Receivables
arising in the related Accounts on and after the date such option is
exercised that otherwise would be Principal Receivables will be treated as
Finance Charge Receivables. See "Description of the Certificates--Discount
Option." In addition, if so specified in the related Prospectus Supplement,
certain amounts of Interchange attributed to cardholder charges for goods
and services in the Accounts may be allocated to the Certificates of a
Series or any Class thereof and treated as collections of Finance Charge
Receivables for purposes of such Series or Class thereof or may be applied
in some other manner as described in the related Prospectus Supplement. See
"Wachovia's Credit Card Activities--Interchange."
During the term of each Trust, all new Receivables arising in the
Accounts relating to such Trust will be transferred automatically to such
Trust by the Transferor. The total amount of Receivables in any Trust will
fluctuate from day to day, because the amount of new Receivables arising in
the Accounts and the amount of payments collected on existing Receivables
usually differ each day. It will not be required or anticipated that the
Trustee will make any initial or periodic general examination of the
Receivables or any records relating to the Receivables for the presence or
absence of defects, compliance with the Transferor's representations and
warranties or for any other purpose.
The Transferor will have the right (subject to certain limitations and
conditions set forth in the related Agreement), and in some circumstances,
such as the maintenance of the Transferor Amount at a specified minimum
level (the "Minimum Transferor Amount"), will be obligated, to designate
from time to time "Additional Accounts" and to transfer to the related
Trust all Receivables of such Additional Accounts, whether such Receivables
are then existing or thereafter created, or to transfer Participations in
lieu of such Receivables or in addition thereto. Any Additional Accounts
designated pursuant to an Agreement must be Eligible Accounts as of the
date the Transferor designates such accounts to be included as Additional
Accounts. The Transferor will also have the right to designate Eligible
Accounts to be included automatically as Accounts upon their creation
("Automatic Additional Accounts"), subject to certain limitations set forth
in the Agreement. The Transferor may discontinue the inclusion of Automatic
Additional Accounts at any time, at its sole discretion. Furthermore,
pursuant to each Agreement, the Transferor has the right (subject to
certain limitations and conditions) to designate certain Accounts as
Removed Accounts and to require the Trustee to reconvey all receivables in
such Accounts (the "Removed Accounts") to the Transferor, whether such
Receivables are then existing or thereafter created. Throughout the term of
each Trust, the related Accounts from which the Receivables arise will be
the Accounts designated by the Transferor on the relevant Cut Off Date,
plus any Additional Accounts and Automatic Additional Accounts minus any
Removed Accounts. With respect to each Series of Certificates, the
Transferor will represent and warrant to the related Trust that, as of the
date the Receivables are selected to be added to the Trust or as of the
date of creation of new Receivables, such Receivables meet certain
eligibility requirements. See "Description of the
Certificates--Representations and Warranties," "--Addition of Trust Assets"
and "--Removal of Accounts."
The Prospectus Supplement relating to each Series of Certificates will
provide certain information about the related Trust Portfolio as of the
date specified. Such information will include, but not be limited to, the
amount of Principal Receivables, the amount of Finance Charge Receivables,
the range of principal balances of the Accounts and the average thereof,
the range of credit limits of the Accounts and the average thereof, the
range of ages of the Accounts and the average thereof, the geographic
distribution of the Accounts, the types of Accounts and delinquency
statistics relating to the Accounts.
Maturity Considerations
For each Series, following the Revolving Period (as defined herein),
collections of Principal Receivables are expected to be distributed to the
Certificateholders of such Series or any specified Class thereof on each
specified Distribution Date (as defined herein) during the amortization
period (the "Controlled Amortization Period") or the Principal Amortization
Period (as defined herein), or are expected to be accumulated for payment
to Certificateholders of such Series or any specified Class thereof during
an Accumulation Period and distributed on a Scheduled Payment Date;
provided, however, that, if the Rapid Amortization Period commences,
collections of Principal Receivables will be paid to Certificateholders in
the manner described herein and in the related Prospectus Supplement. The
related Prospectus Supplement specifies when the Controlled Amortization
Period, the Principal Amortization Period or an Accumulation Period, as
applicable, will commence, the principal payments expected or available to
be received or accumulated during such Controlled Amortization Period,
Principal Amortization Period or Accumulation Period, or on the Scheduled
Payment Date, as applicable, the manner and priority of principal
accumulations and payments among the Classes of a Series of Certificates,
the payment rate assumptions on which such expected principal accumulations
and payments are based and the Pay Out Events which, if any were to occur,
would lead to the commencement of a Rapid Amortization Period or, if so
specified in the related Prospectus Supplement, a Rapid Accumulation
Period.
Use of Proceeds
Unless otherwise specified in the related Prospectus Supplement, the
net proceeds from the sale of each Series of Certificates offered hereby
will be paid to the Transferor. The Transferor will use such proceeds for
its general corporate purposes or for such other purpose specified in the
Prospectus Supplement.
Wachovia and Wachovia Corporation
General
Wachovia, a wholly-owned subsidiary of Wachovia Corporation (the
"Corporation"), is a national banking association located in New Castle,
Delaware which conducts nationwide consumer lending programs principally
comprised of credit card related activities. WBNA, a wholly-owned
subsidiary of the Corporation, is a national banking association located in
Winston-Salem, North Carolina. The principal executive offices of the Bank
are located at New Castle, Delaware, telephone number (302) 323-2395. The
Corporation is a bank holding company registered under the Bank Holding
Company Act of 1956, as amended, maintaining dual headquarters in Atlanta,
Georgia and Winston-Salem, North Carolina. The Prospectus Supplement for
each Series of Certificates contains additional information, including
financial information, relating to Wachovia, Wachovia's credit card
activities, WBNA and the Corporation.
Year 2000 Compliance
The change in date to the year 2000 from 1999 will cause data
recognition problems in computers, software and facility operations
dependent on computer chip devices due to programming standards that
historically limited data date fields to two digits. In late 1995, the
Corporation initiated a formal evaluation of Year 2000 issues, establishing
in the early months of 1996 a full-time project team to assess and address
both internal and external risks associated with the change in date event.
The project team is in the latter stages of completing a Year 2000
readiness plan consisting of five phases: problem awareness; identification
of affected systems, functions and facilities; conversion or replacement of
identified areas to Year 2000 compliant standards; testing; and
implementation.
The Corporation's readiness plan encompasses both information
technology systems and computer chip embedded functions, such as those
operating facilities including elevators, security systems and building
heating and cooling. In 1996, the Corporation completed its awareness and
identification phases, extending and completing the processes in 1997 and
1998 for recent merger partners. As of March 31, 1999, virtually all of the
Corporation's information technology systems, including all of those
designated as mission critical, had been converted, tested and implemented.
While regulatory guidelines require conversion only of mission critical
systems, the Corporation's approach has been to address all of its
information technology systems. For computer chip embedded functions, the
Corporation has replaced and tested noncompliant functions essential to
business operations.
In-house testing of internal and external mission critical systems was
100 percent complete as of March 31, 1999. Testing of the Corporation's
entire application portfolio was 96 percent complete as of the same date.
Management expects to finish testing of its remaining systems by April 30,
1999. Testing is done in both a 21st century and 20th century date
environment before systems are returned to production to ensure data
accuracy and consistency. All exceptions to testing results are resolved
before further testing is permitted. Management has chosen to implement
converted systems back into production as systems are tested to permit
greater flexibility in the event of future system flaws or failures. The
percentage of systems implemented, therefore, closely approximates the
percentage tested.
The Corporation also is working to address Year 2000 readiness on the
part of external entities, particularly critical vendors and significant
credit customers. Identification and monitoring of external entities began
in 1996 and includes surveys with follow-up reviews and contacts.
Substantially all of the Corporation's vendors have responded to
management's surveys regarding Year 2000 readiness, with approximately 81
percent indicating that they are compliant as of March 31, 1999. The
project team is continuing to monitor the progress of remaining
noncompliant vendors as well as the status of large corporate borrowers
identified as potentially at risk. The Corporation began external entity
testing in 1998 and has continued this testing in 1999. All external entity
testing is on schedule to be completed on June 30, 1999.
Management estimates that total Year 2000 project costs will be
approximately $80 million, with $72 million having been spent through March
31, 1999 including $6 million in the first quarter of 1999. The
Corporation's remaining Year 2000 project costs are not expected to have a
material impact on the Corporation's results of operations, liquidity or
capital resources.
The Corporation faces a number of risks related to the year 2000 date
change event including project management risks, legal risks and financial
risks. Project management risks refer primarily to the failure to
adequately assess Year 2000 planning and resource needs, resulting in
under- or over-allotment of resources assigned to complete the project
work, missed deadlines and estimation errors. Legal risks include the
failure to meet contractual service agreements, leading to possible
punitive actions including those of a regulatory nature. Financial risks
concern the possibility of lost revenues, asset quality deterioration or
even business failure. The Corporation conducted a project management risk
assessment in early 1997 and is in the process of addressing its legal and
financial risks.
Management of the date change event entails additional risks separate
from those of project management. Major risks associated with the date
change event include a shutdown of voice and data communication systems due
to failure by switching systems, satellites or telephone companies;
excessive cash withdrawal activity; cash couriers delayed or not available;
ATM failures; problems with international accounts or offices, including
inaccurate or delayed information or inaccessibility to account data; and
government offices or facilities not opening or operating.
The Corporation has identified 60 risks associated with the date change
event and has completed development of formal contingency plans for each
major risk. Management views contingency planning as part of an overall
strategy for managing the date change event and post-event risks and
considers pre-implementation mitigating actions as critical components to
successful contingency planning. In the event of a voice and data
communication system shutdown, contingency plans include deploying cellular
and field phones to communicate between established command posts. To
reduce expected cash withdrawal demands while simultaneously preparing for
higher fund withdrawal activity, the Corporation is sponsoring public
awareness programs on appropriate cash reserve levels, applying for
increased borrowing limits from the Federal Reserve, and broadening its
regular liquidity management reviews. Standing agreements with cash courier
services are being reviewed to identify and resolve potential courier
service problems prior to the date change event.
To minimize ATM failures, the Corporation has upgraded its entire
network of ATMs, including their primary and backup computer processors.
Alternate cash access plans include using existing communication channels
to direct customers to working ATMs in the event of localized ATM failures
and extending branch office hours where needed. To reduce potential
problems in international offices, the Corporation has converted and tested
the information systems of its Sao Paulo, Brazil office, and will complete
testing for its London, England office by April 30. Separate contingency
plans have been developed by each foreign office to assist independent
operations. In addition to its contingency planning, management has mapped
all information systems to its core business processes as part of its
pre-implementation mitigating action plan. This will enable the Corporation
to identify affected business processes should data information problems
occur during the changeover to calendar year 2000 and in the time period
immediately following.
The Corporation believes the actions it is taking should reduce the
risks posed by Year 2000 challenges to its own systems. Management
recognizes, however, that unforeseen circumstances could arise both within
its own systems and with the systems of external entities and can give no
assurances that, if such circumstances arose, they would not adversely
affect the Corporation's Year 2000 compliance efforts. Further, management
cannot determine the impact that any adverse effect might have on the
Corporation's operations, financial position or cash flows.
Description of the Certificates
The Certificates will be issued in Series. Each Series will represent
an interest in the specified Trust other than the interests represented by
any other Series of Certificates issued by such Trust (which may include
Series offered pursuant to this Prospectus) and the Transferor Certificate.
Each Series will be issued pursuant to an Agreement entered into by the
Bank and the Trustee named in the related Prospectus Supplement, a copy of
the form of which is filed as an exhibit to the Registration Statement of
which this Prospectus is a part, and a Series Supplement to the Agreement.
The Prospectus Supplement for each Series describes any provisions of the
particular Agreement relating to such Series which may differ materially
from the Agreement filed as an exhibit to the Registration Statement. The
following summaries describe certain provisions common to each Series of
Certificates. The summaries do not purport to be complete and are subject
to, and are qualified in their entirety by reference to, all of the
provisions of the related Agreement and Series Supplement.
General
Each Series of Certificates will represent an undivided interest in the
assets of the related Trust, including the right to the applicable Investor
Percentage of all cardholder payments on the Receivables in such Trust.
Each Certificate of a Series will represent the right to receive payments
of (i) interest at the specified rate or rates per annum (each, a
"Certificate Rate"), which may be a fixed, floating or other type of rate
and (ii) principal during the Controlled Amortization Period, the Principal
Amortization Period, or, under certain limited circumstances, the Rapid
Amortization Period (each, as defined herein, an "Amortization Period"), or
on Scheduled Payment Dates (as defined herein), in which case such Series
will have a Controlled Accumulation Period and, under certain limited
circumstances if so specified in the related Prospectus Supplement, a Rapid
Accumulation Period (each, an "Accumulation Period"), as well as, under
certain limited circumstances, a Rapid Amortization Period, all as
specified in the related Prospectus Supplement.
The Investor Interest for each Series of Certificates on any date will
be equal to the initial Investor Interest as of the related Closing Date
for such Series (increased by the principal balance of any Certificates of
such Series issued after the Closing Date for such Series) minus the amount
of principal paid to the related Certificateholders prior to such date and
minus the amount of unreimbursed Investor Charge-Offs with respect to such
Certificates prior to such date. If so specified in the Prospectus
Supplement relating to any Series of Certificates, under certain
circumstances the Investor Interest may be further adjusted by the amount
of principal allocated to Certificateholders, the funds on deposit in any
specified account, and any other amount specified in the related Prospectus
Supplement.
Each Series of Certificates will consist of one or more Classes, one or
more of which may be senior Certificates ("Senior Certificates") and one or
more of which may be subordinated Certificates ("Subordinated
Certificates"). Each Class of a Series may evidence the right to receive a
specified portion of each distribution of principal or interest or both.
The Certificates of a Class may also differ from Certificates of other
Classes of the same Series in, among other things, the amounts allocated to
principal payments, priority of payments, payment dates, maturity, interest
rates, interest rate computation and availability and form of Enhancement
(as defined herein).
The Certificateholders of each Series will have the right to receive
(but only to the extent needed to make required payments under the related
Agreement and the related Series Supplement and subject to any reallocation
of collections if the related Series Supplement so provides) varying
percentages of the collections of Finance Charge Receivables and Principal
Receivables for each month and will be allocated a varying percentage of
the amount of Receivables in Accounts which were written off as
uncollectible by the Servicer ("Defaulted Accounts") for such month (each
such percentage, an "Investor Percentage"). The related Prospectus
Supplement specifies the Investor Percentages that apply with respect to
the allocation of collections of Principal Receivables, Finance Charge
Receivables and Receivables in Defaulted Accounts during the Revolving
Period (as defined herein), any Amortization Period and any Accumulation
Period, as applicable. If the Certificates of a Series offered hereby
include more than one Class of Certificates, the assets of the related
Trust allocable to the Certificates of such Series may be further allocated
among each Class in such Series as described in the related Prospectus
Supplement. See "--Investor Percentage and Transferor Percentage."
For each Series of Certificates, payments of interest and principal
will be made on Distribution Dates specified in the related Prospectus
Supplement to holders of Certificates in whose names the Certificates were
registered ("Certificateholders") on the record dates (each, a "Record
Date") specified in the related Prospectus Supplement. Interest will be
distributed to Certificateholders in the amounts, for the periods and on
the dates specified in the related Prospectus Supplement.
For each Series of Certificates, the Transferor initially will own the
Transferor Certificate. The Transferor Certificate will represent the
undivided interest in each Trust not represented by the Certificates issued
and outstanding under such Trust or the rights, if any, of any Credit
Enhancement Providers to receive payments from each Trust. The holder of
the Transferor Certificate will have the right to a percentage (the
"Transferor Percentage") of all cardholder payments from the Receivables in
the Trust. If provided in the related Agreement, the Transferor Certificate
may be transferred in whole or in part subject to the limitations and
conditions set forth therein. The ability to transfer the Transferor
Certificate or an interest therein is intended to allow the Transferor to
assign a portion of its interest in a Trust and property of such Trust
(including the Receivables) to another entity. The Transferor intends to
transfer an interest in the Transferor Certificate only to its affiliates
in privately negotiated transactions pursuant to a contract between the
Transferor and any such affiliate. Certificateholders will not incur any
costs, direct or indirect, associated with any such transfer. On the
initial Closing Date for Trust I, the Transferor sold a participation
interest in the Trust I Transferor Certificate (the "Transferor
Participation") to its affiliate, WBNA, a wholly-owned subsidiary of the
Corporation. Such interest represents the right to receive 95% of the
amounts payable to the Transferor as holder of the Transferor Certificate.
See "--Certain Matters Regarding the Transferor and the Servicer."
The assets of each Trust will be allocated among the Certificateholders
of each Series of such Trust and the holder of the Transferor Certificate
of such Trust and, in certain circumstances, the related Credit Enhancement
Provider. With respect to a Trust, the aggregate principal amount of the
interest of the Certificateholders of a Series in such Trust is referred to
herein as the "Investor Interest" and is based on the aggregate amount of
the Principal Receivables in such Trust allocated to such Series. If
specified in any Prospectus Supplement, the term Investor Interest with
respect to the related Series includes the Collateral Interest with respect
to such Series. The aggregate principal amount of the interest represented
by the Transferor Certificate in a Trust is referred to herein as the
"Transferor Amount" and is based on the sum of the aggregate amount of
Principal Receivables in such Trust not allocated to the Certificateholders
or any Credit Enhancement Provider with respect to such Trust and the
principal amount, if any, on deposit in the Excess Funding Account for such
Trust.
Unless otherwise specified in the related Prospectus Supplement, during
the Revolving Period, the amount of the Investor Interest with respect to
each Series of Certificates will remain constant except under certain
limited circumstances. See "--Defaulted Receivables; Rebates and Fraudulent
Charges; Investor Charge-Offs." The amount of Principal Receivables in each
Trust, however, will vary each day as new Principal Receivables are created
and others are paid. The amount of the Transferor Amount will fluctuate
each day, to reflect the changes in the amount of the Principal Receivables
in the Trust (and amounts, if any, on deposit in the Excess Funding
Account). When a Series is amortizing, the Investor Interest of such Series
will decline as customer payments of Principal Receivables are collected
and distributed to or accumulated for distribution to the
Certificateholders. As a result, the Transferor Amount will generally
increase to reflect reductions in the Investor Interest for such Series and
will also change to reflect the variations in the amount of Principal
Receivables in the related Trust. The Transferor Amount in each Trust may
also be reduced as the result of an Exchange. See "--Exchanges."
Unless otherwise specified in the related Prospectus Supplement,
Certificates of each Series initially will be represented by certificates
registered in the name of the nominee of DTC (together with any successor
depository selected by the Transferor, the "Depository"), except as set
forth below. Unless otherwise specified in the related Prospectus
Supplement, with respect to each Series of Certificates, beneficial
interests in the Certificates will be available for purchase in minimum
denominations of $1,000 and integral multiples thereof in book-entry form
only. The Transferor has been informed by DTC that DTC's nominee will be
Cede. Accordingly, Cede is expected to be the holder of record of each
Series of Certificates. No Certificate Owner acquiring an interest in the
Certificates will be entitled to receive a certificate representing such
person's interest in the Certificates. Unless and until Definitive
Certificates are issued for any Series under the limited circumstances
described herein, all references herein to actions by Certificateholders
shall refer to actions taken by DTC upon instructions from DTC Participants
(as defined below), and all references herein to distributions, notices,
reports and statements to Certificateholders shall refer to distributions,
notices, reports and statements to DTC or Cede, as the registered holder of
the Certificates, as the case may be, for distribution to Certificate
Owners in accordance with DTC procedures. See "--Book-Entry Registration"
and "--Definitive Certificates."
If so specified in the Prospectus Supplement relating to a Series,
application will be made to list the Certificates of such Series, or all or
a portion of any Class thereof, on the Luxembourg Stock Exchange or any
other specified exchange.
Book-Entry Registration
Unless otherwise specified in the related Prospectus Supplement, with
respect to each Series of Certificates in book-entry form,
Certificateholders may hold their Certificates through DTC (in the United
States) or Cedelbank or Euroclear (in Europe) which in turn hold through
DTC, if they are participants of such systems, or indirectly through
organizations that are participants in such systems.
Cede, as nominee for DTC, will hold the global Certificates. Cedelbank
and Euroclear will hold omnibus positions on behalf of the Cedelbank
Customers and the Euroclear Participants, respectively, through customers'
securities accounts in Cedelbank's and Euroclear's names on the books of
their respective depositories (collectively, the "Depositories") which in
turn will hold such positions in customers' securities accounts in the
Depositories' names on the books of DTC.
DTC is a limited-purpose trust company organized under the New York
Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code and
a "clearing agency" registered pursuant to the provisions of Section 17A of
the Securities Exchange Act of 1934, as amended (the "Exchange Act "). DTC
holds securities that its participating organizations ("DTC Participants")
deposit with DTC. DTC also facilitates the clearance and settlement among
DTC Participants of securities transactions, such as transfers and pledges,
in deposited securities through electronic book-entry changes in DTC
Participants' accounts, thereby eliminating the need for physical movement
of securities certificates. DTC Participants include securities brokers and
dealers, banks, trust companies and clearing corporations and may include
certain other organizations. DTC is owned by a number of its DTC
Participants and the New York Stock Exchange, Inc., the American Stock
Exchange, Inc. and the National Association of Securities Dealers, Inc.
Indirect access to the DTC system is also available to others such as
securities brokers and dealers, banks, and trust companies that clear
through or maintain a custodial relationship with a DTC Participant, either
directly or indirectly ("Indirect Participants"). The rules applicable to
DTC and DTC Participants are on file with the Securities and Exchange
Commission (the "SEC").
DTC management is aware that some computer applications and systems
used for processing data were written using two digits rather than four to
define the applicable year, and therefore may not recognize a date using
"00" as the year 2000. This could result in the inability of these systems
to properly process transactions with dates in the year 2000 and
thereafter. DTC has developed and is implementing a program to address this
problem so that its applications and systems as the same relate to the
timely payment of distributions (including principal and interest payments)
to security holders, book-entry deliveries and settlement of trades within
DTC continue to function properly. This program includes a technical
assessment and a remediation plan, each of which is complete. Additionally,
DTC plans to implement a testing phase of this program which is expected to
be completed within appropriate time frames.
In addition, DTC is contacting (and will continue to contact) third
party vendors that provide services to DTC to determine the extent of their
year 2000 compliance, and DTC will develop contingency plans as it deems
appropriate to address failures in year 2000 compliance on the part of
third party vendors. However, there can be no assurance that the systems of
third party vendors will be timely converted and will not adversely affect
the proper functioning of DTC's services.
The information set forth in the preceding two paragraphs has been
provided by DTC for informational purposes only and is not intended to
serve as a representation, warranty or contract modification of any kind.
The Transferor makes no representations as to the accuracy or completeness
of such information.
Transfers between DTC Participants will occur in accordance with DTC
rules. Transfers between Cedelbank Customers and Euroclear Participants
will occur in the ordinary way in accordance with their applicable
rules and operating procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC in the United States, on the one hand, and directly or
indirectly through Cedelbank Customers or Euroclear Participants, on the
other, will be effected in DTC in accordance with DTC rules on behalf of
the relevant European international clearing system by its Depository;
however, such cross-market transactions will require delivery of
instructions to the relevant European international clearing system by the
counterparty in such system in accordance with its rules and procedures and
within its established deadlines (European time). The relevant European
international clearing system will, if the transaction meets its settlement
requirements, deliver instructions to its Depository to take action to
effect final settlement on its behalf by delivering or receiving securities
in DTC, and making or receiving payment in accordance with normal
procedures for same-day funds settlement applicable to DTC. Cedelbank
Customers and Euroclear Participants may not deliver instructions directly
to the Depositories.
Because of time-zone differences, credits of securities in Cedelbank or
Euroclear as a result of a transaction with a DTC Participant will be made
during the subsequent securities settlement processing, dated the business
day following the DTC settlement date, and such credits or any transactions
in such securities settled during such processing will be reported to the
relevant Cedelbank Customer or Euroclear Participant on such business day.
Cash received in Cedelbank or Euroclear as a result of sales of securities
by or through a Cedelbank Customer or a Euroclear Participant will be
received with value on the DTC settlement date but will be available in the
relevant Cedelbank or Euroclear cash account only as of the business day
following settlement in DTC.
Certificate Owners that are not DTC Participants or Indirect
Participants but desire to purchase, sell or otherwise transfer ownership
of, or other interests in, Certificates may do so only through DTC
Participants and Indirect Participants. In addition, Certificate Owners
will receive all distributions of principal and interest on the
Certificates from the Trustee through DTC Participants who in turn will
receive them from DTC. Under a book-entry format, Certificate Owners may
experience some delay in their receipt of payments, since such payments
will be forwarded by the Trustee to Cede, as nominee for DTC. DTC will
forward such payments to DTC Participants which thereafter will forward
them to Indirect Participants or Certificate Owners. It is anticipated that
the only Certificateholders of Certificates in book-entry form will be
Cede, as nominee of DTC. Certificate Owners will not be recognized by the
Trustee as Certificateholders, as such term is used in the Agreement, and
Certificate Owners will only be permitted to exercise the rights of
Certificateholders indirectly through DTC Participants who in turn will
exercise the rights of Certificateholders through DTC.
Under the rules, regulations and procedures creating and affecting DTC
and its operations, DTC is required to make book-entry transfers among DTC
Participants on whose behalf it acts with respect to the Certificates and
is required to receive and transmit distributions of principal of and
interest on the Certificates. DTC Participants and Indirect Participants
with which Certificate Owners have accounts with respect to the
Certificates similarly are required to make book-entry transfers and
receive and transmit such payments on behalf of their respective
Certificate Owners. Accordingly, although Certificate Owners will not
possess Certificates, Certificate Owners will receive payments and will be
able to transfer their interests.
Because DTC can only act on behalf of DTC Participants, who in turn act
on behalf of Indirect Participants and certain banks, the ability of a
Certificate Owner to pledge Certificates to persons or entities that do not
participate in the DTC system, or otherwise take actions in respect of such
Certificates, may be limited due to the lack of a physical certificate for
such Certificates.
DTC has advised the Transferor that it will take any action permitted
to be taken by a Certificateholder under the Agreement only at the
direction of one or more DTC Participants to whose account with DTC the
Certificates are credited. Additionally, DTC has advised the Transferor
that it will take such actions with respect to specified percentages of the
Investor Interest only at the direction of and on behalf of DTC
Participants whose holdings include undivided interests that satisfy such
specified percentages. DTC may take conflicting actions with respect to
other undivided interests to the extent that such actions are taken on
behalf of DTC Participants whose holdings include such undivided interests.
Cedelbank, societe anonyme ("Cedelbank") is incorporated under the laws
of Luxembourg as a professional depository. Cedelbank holds securities for
its participating organizations ("Cedelbank Customers") and facilitates the
clearance and settlement of securities transactions between Cedelbank
Customers through electronic book-entry changes in accounts of Cedelbank
Customers, thereby eliminating the need for physical movement of
securities. Transactions may be settled in Cedelbank in any of 36
currencies, including United States dollars. Cedelbank provides to its
Cedelbank Customers, among other things, services for safekeeping,
administration, clearance and settlement of internationally traded
securities and securities lending and borrowing. Cedelbank deals with
domestic securities markets in over 30 countries through established
depository and custodial relationships. Cedelbank has established an
electronic bridge with Morgan Guaranty Trust as the Operator of the
Euroclear System ("MGT/EOC") in Brussels to facilitate settlement of trades
between Cedelbank and MGT/EOC. Cedelbank currently accepts over 110,000
securities issues on its books. As a professional depository, Cedelbank is
subject to regulation by the Luxembourg Commission for the Supervision of
the Financial Sector, which supervises Luxembourg banks. Cedelbank
Customers are recognized financial institutions around the world, including
underwriters, securities brokers and dealers, banks, trust companies,
clearing corporations and certain other organizations and may include the
underwriters of any Series of Certificates. Cedelbank Customers in the
United States are limited to securities brokers and dealers and banks.
Currently, Cedelbank has approximately 2,000 customers located in over 80
countries, including all major European countries, Canada and the United
States. Indirect access to Cedelbank is also available to others, such as
banks, brokers, dealers and trust companies that clear through or maintain
a custodial relationship with a Cedelbank Customer, either directly or
indirectly.
The Euroclear System (the "Euroclear System") was created in 1968 to
hold securities for participants of the Euroclear System ("Euroclear
Participants") and to clear and settle transactions between Euroclear
Participants through simultaneous electronic book-entry delivery against
payment, thereby eliminating the need for physical movement of securities
and any risk from lack of simultaneous transfers of securities and cash.
Transactions may now be settled in any of 34 currencies, including United
States dollars. The Euroclear System includes various other services,
including securities lending and borrowing and interfaces with domestic
markets in several countries generally similar to the arrangements for
cross-market transfers with DTC described above. The Euroclear System is
operated by Morgan Guaranty Trust Company of New York's Brussels, Belgium
office (the "Euroclear Operator" or "Euroclear"), under contract with
Euroclear Clearance System, S.C., a Belgian cooperative corporation (the
"Cooperative"). All operations are conducted by the Euroclear Operator, and
all Euroclear securities clearance accounts and Euroclear cash accounts are
accounts with the Euroclear Operator, not the Cooperative. The Cooperative
establishes policy for the Euroclear System on behalf of Euroclear
Participants. Euroclear Participants include banks (including central
banks), securities brokers and dealers and other professional financial
intermediaries and may include the underwriters of any Series of
Certificates. Indirect access to the Euroclear System is also available to
other firms that clear through or maintain a custodial relationship with a
Euroclear Participant, either directly or indirectly.
The Euroclear Operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such,
it is regulated and examined by the Board of Governors of the Federal
Reserve System and the New York State Banking Department, as well as the
Belgian Banking Commission.
Securities clearance accounts and cash accounts with the Euroclear
Operator are governed by the Terms and Conditions Governing Use of
Euroclear and the related Operating Procedures of the Euroclear System and
applicable Belgian law (collectively, the "Terms and Conditions"). The
Terms and Conditions govern transfers of securities and cash within the
Euroclear System, withdrawal of securities and cash from the Euroclear
System, and receipts of payments with respect to securities in the
Euroclear System. All securities in the Euroclear System are held on a
fungible basis without attribution of specific certificates to specific
securities clearance accounts. The Euroclear Operator acts under the Terms
and Conditions only on behalf of Euroclear Participants and has no record
of or relationship with persons holding through Euroclear Participants.
Distributions with respect to Certificates held through Cedelbank or
Euroclear will be credited to the cash accounts of Cedelbank Customers or
Euroclear Participants in accordance with the relevant system's rules and
procedures, to the extent received by its Depository. Such distributions
will be subject to tax reporting in accordance with relevant United States
tax laws and regulations. See "Certain U.S. Federal Income Tax
Consequences." Cedelbank or the Euroclear Operator, as the case may be,
will take any other action permitted to be taken by a Certificateholder
under the Agreement on behalf of a Cedelbank Customer or Euroclear
Participant only in accordance with its relevant rules and procedures and
subject to its Depository's ability to effect such actions on its behalf
through DTC.
Although DTC, Cedelbank and Euroclear have agreed to the foregoing
procedures in order to facilitate transfers of Certificates among
participants of DTC and Euroclear and Cedelbank Customers, they are under
no obligation to perform or continue to perform such procedures and such
procedures may be discontinued at any time.
Definitive Certificates
Unless otherwise specified in the related Prospectus Supplement, the
Certificates of each Series will be issued as definitive certificates in
fully registered, certificated form ("Definitive Certificates") to
Certificate Owners or their nominees rather than to DTC or its nominee,
only if (i) the Transferor advises the Trustee for such Series in writing
that DTC is no longer willing or able to discharge properly its
responsibilities as Depository with respect to such Series of Certificates,
and the Trustee or the Transferor is unable to locate a qualified
successor, (ii) the Transferor, at its option, advises the Trustee in
writing that it elects to terminate the book-entry system through DTC or
(iii) after the occurrence of a Servicer Default, Certificate Owners
representing not less than 50% (or such other percentage specified in the
related Prospectus Supplement) of the Investor Interest advise the Trustee
and DTC through DTC Participants in writing that the continuation of a
book-entry system through DTC (or a successor thereto) is no longer in the
best interest of the Certificate Owners.
Upon the occurrence of any of the events described in the immediately
preceding paragraph, DTC is required to notify all DTC Participants of the
availability through DTC of Definitive Certificates. Upon surrender by DTC
of the definitive certificate representing the Certificates and
instructions for reregistration, the Trustee will issue the Certificates as
Definitive Certificates, and thereafter the Trustee will recognize the
holders of such Definitive Certificates as holders under the Agreement
("Holders").
Distribution of principal and interest on the Certificates will be made
by the Trustee directly to Holders of Definitive Certificates in accordance
with the procedures set forth herein and in the Agreement. Interest
payments and any principal payments on each Distribution Date will be made
to Holders in whose names the Definitive Certificates were registered at
the close of business on the related Record Date. Distributions will be
made by check mailed to the address of such Holder as it appears on the
register maintained by the Trustee or, if such Holder holds more than an
aggregate principal amount of such Definitive Certificates specified in the
related Series Supplement, by wire transfer to such Holder's account. The
final payment on any Certificate (whether Definitive Certificates or the
Certificates registered in the name of Cede representing the Certificates),
will be made only upon presentation and surrender of such Certificate at
the office or agency specified in the notice of final distribution to
Certificateholders. The Trustee will provide such notice to registered
Certificateholders not later than the fifth day of the month of such final
distribution.
Definitive Certificates will be transferable and exchangeable at the
offices of the Transfer Agent and Registrar, which shall initially be the
Trustee. No service charge will be imposed for any registration of transfer
or exchange, but the Transfer Agent and Registrar may require payment of a
sum sufficient to cover any tax or other governmental charge imposed in
connection therewith. The Transfer Agent and Registrar shall not be
required to register the transfer or exchange of Definitive Certificates
for a period of fifteen days preceding the due date for any payment with
respect to such Definitive Certificates.
Interest Payments
Interest on each Series of Certificates or Class thereof for each
accrual period (each, an "Interest Period") specified in the related
Prospectus Supplement will be distributed in the amounts and on the dates
(which may be monthly, quarterly, semi-annually or otherwise as specified
in the related Prospectus Supplement) (each, a "Distribution Date")
specified in the related Prospectus Supplement. Interest will accrue on the
applicable Investor Interest at the applicable Certificate Rate, which may
be a fixed, floating or other type of rate as specified in the related
Prospectus Supplement. Interest will be distributed to Certificateholders
on the Distribution Dates specified in the related Prospectus Supplement.
Interest payments on each Distribution Date will be funded from collections
of Finance Charge Receivables allocated to the Investor Interest during the
preceding monthly period or periods (each, a "Monthly Period"), as
described in the related Prospectus Supplement, and may be funded from
certain investment earnings on funds in certain accounts of the related
Trust and from any applicable Enhancement, if necessary, or certain other
amounts as specified in the related Prospectus Supplement. If the
Distribution Dates for payment of interest for a Series or Class occur less
frequently than monthly, such collections or other amounts (or the portion
thereof allocable to such Class) may be deposited in one or more trust
accounts (each, an "Interest Funding Account") pending distribution to the
Certificateholders of such Series or Class, as described in the related
Prospectus Supplement. If a Series has more than one Class of Certificates,
each such Class may have a separate Interest Funding Account. The
Prospectus Supplement relating to each Series of Certificates describes the
amounts and sources of interest payments to be made; the Certificate Rate
for each Class thereof; for a Series or Class thereof bearing interest at a
floating Certificate Rate, the initial Certificate Rate, the dates and the
manner for determining subsequent Certificate Rates, and the formula, index
or other method by which such Certificate Rates are determined and any
limitations on any such Certificate Rate.
Principal Payments
Except in the circumstances specified in the related Prospectus
Supplement, during the Revolving Period for each Series of Certificates
(which begins on the related Closing Date and ends on the day before an
Amortization Period or Accumulation Period begins), no principal payments
will be made to the Certificateholders of such Series. During the
Controlled Amortization Period or Principal Amortization Period, as
applicable, which will be scheduled to begin on the date specified in, or
determined in the manner specified in, the related Prospectus Supplement
(the "Principal Commencement Date"), and during the Rapid Amortization
Period, which will begin upon the occurrence of a Pay Out Event or, if so
specified in the Prospectus Supplement, following the Rapid Accumulation
Period, principal will be paid to the Certificateholders in the amounts and
on Distribution Dates specified in the related Prospectus Supplement.
During an Accumulation Period, principal will be accumulated in a Principal
Funding Account for later distribution to Certificateholders on the
expected date specified in, or determined in the manner specified in, the
related Prospectus Supplement (the "Scheduled Payment Date") in the amounts
specified in the related Prospectus Supplement. Principal payments for any
Series or Class thereof will be funded from collections of Principal
Receivables received during the related Monthly Period or Periods as
specified in the related Prospectus Supplement and allocated to such Series
or Class, in certain circumstances from amounts on deposit in the Excess
Funding Account and from certain other sources specified in the related
Prospectus Supplement. In the case of a Series with more than one Class of
Certificates, the Certificateholders of one or more Classes may receive
payments of principal at different times. The related Prospectus Supplement
describes the manner, timing and priority of payments of principal to
Certificateholders of each Class.
Funds on deposit in any Principal Funding Account applicable to a
Series may be subject to a guaranteed rate agreement or investment contract
or other arrangement specified in the related Prospectus Supplement
intended to assure a minimum rate of return on the investment of such
funds. In order to enhance the likelihood of the payment in full of the
principal amount of a Series of Certificates or Class thereof at the end of
an Accumulation Period, such Series of Certificates or Class thereof may be
subject to a principal payment guaranty or other similar arrangement
specified in the related Prospectus Supplement.
Controlled Amortization Period
If the Prospectus Supplement relating to a Series so specifies, unless
a Rapid Amortization Period with respect to such Series commences, the
Certificates of such Series or any Class thereof will have an amortization
period (the "Controlled Amortization Period") during which collections of
Principal Receivables allocable to the Investor Interest of such Series
(and certain other amounts if so specified in the related Prospectus
Supplement) will be used on each Distribution Date to make principal
distributions in scheduled amounts to the Certificateholders of such Series
or any Class of such Series then scheduled to receive such distributions.
The amount to be distributed on any Distribution Date during the Controlled
Amortization Period will be limited to an amount (the "Controlled
Distribution Amount") equal to an amount specified in the related
Prospectus Supplement (the "Controlled Amortization Amount") plus any
existing deficit Controlled Amortization Amount arising from prior
Distribution Dates. If a Series has more than one Class of Certificates,
each Class may have a separate Controlled Amortization Amount. In addition,
the related Prospectus Supplement may describe certain priorities among
such Classes with respect to such distributions. The Controlled
Amortization Period will commence at the close of business on a date
specified in the related Prospectus Supplement and continue until the
earliest of (a) the commencement of the Rapid Amortization Period, (b)
payment in full of the Investor Interest of the Certificates of such Series
or Class and, if so specified in the related Prospectus Supplement, of the
Collateral Interest (as defined herein), if any, with respect to such
Series and (c) the Series Termination Date (as defined herein) with respect
to such Series.
Principal Amortization Period
If the Prospectus Supplement relating to a Series so specifies, unless
a Rapid Amortization Period with respect to such Series commences, the
Certificates of such Series or any Class thereof will have an amortization
period (the "Principal Amortization Period") during which collections of
Principal Receivables allocable to the Investor Interest of such Series
(and certain other amounts if so specified in the related Prospectus
Supplement) will be used on each Distribution Date to make principal
distributions to the Certificateholders of such Series or any Class of such
Series then scheduled to receive such distributions. If a Series has more
than one Class of Certificates, the related Prospectus Supplement may
describe certain priorities among such Classes with respect to such
distributions. The Principal Amortization Period will commence at the close
of business on a date specified in the related Prospectus Supplement and
continue until the earliest of (a) the commencement of the Rapid
Amortization Period, (b) payment in full of the Investor Interest of the
Certificates of such Series or Class and, if so specified in the related
Prospectus Supplement, of the Collateral Interest, if any, with respect to
such Series and (c) the Series Termination Date with respect to such
Series.
Controlled Accumulation Period
If the Prospectus Supplement relating to a Series so specifies, unless
a Rapid Amortization Period or, if so specified in the related Prospectus
Supplement, a Rapid Accumulation Period with respect to such Series
commences, the Certificates of such Series or any Class thereof will have
an accumulation period (the "Controlled Accumulation Period") during which
collections of Principal Receivables allocable to the Investor Interest of
such Series (and certain other amounts if so specified in the related
Prospectus Supplement) will be deposited on the business day immediately
prior to each Distribution Date or other business day specified in the
related Prospectus Supplement (each, a "Transfer Date") in a trust account
established for the benefit of the Certificateholders of such Series or
Class (a "Principal Funding Account") and used to make distributions of
principal to the Certificateholders of such Series or Class on the
Scheduled Payment Date. The amount to be deposited in the Principal Funding
Account on any Transfer Date will be limited to an amount (the "Controlled
Deposit Amount") equal to an amount specified in the related Prospectus
Supplement (the "Controlled Accumulation Amount") plus any deficit
Controlled Accumulation Amount arising from prior Distribution Dates. If a
Series has more than one Class of Certificates, each Class may have a
separate Principal Funding Account and Controlled Accumulation Amount. In
addition, the related Prospectus Supplement may describe certain priorities
among such Classes with respect to deposits of principal into such
Principal Funding Accounts. The Controlled Accumulation Period will
commence at the close of business on a date specified in or determined in
the manner specified in the related Prospectus Supplement and continue
until the earliest of (a) the commencement of the Rapid Amortization Period
or, if so specified in the related Prospectus Supplement, the Rapid
Accumulation Period, (b) payment in full of the Investor Interest of the
Certificates of such Series or Class and, if so specified in the related
Prospectus Supplement, of the Collateral Interest, if any, with respect to
such Series and (c) the Series Termination Date with respect to such
Series.
Funds on deposit in any Principal Funding Account may be invested in
Permitted Investments or subject to a guaranteed rate or investment
contract or other arrangement intended to assure a minimum rate of return
on the investment of such funds. Investment earnings on such funds may be
applied to pay interest on the related Series of Certificates. In order to
enhance the likelihood of payment in full of principal at the end of an
Accumulation Period with respect to a Series of Certificates, such Series
or any Class thereof may be subject to a principal payment guaranty or
other similar arrangement.
Rapid Accumulation Period
If so specified and under the conditions set forth in the Prospectus
Supplement relating to a Series having a Controlled Accumulation Period,
during the period from the day on which a Pay Out Event has occurred until
the earliest of (a) the commencement of the Rapid Amortization Period, (b)
payment in full of the Investor Interest of the Certificates of such Series
and, if so specified in the related Prospectus Supplement, of the
Collateral Interest, if any, with respect to such Series and (c) the Series
Termination Date (the "Rapid Accumulation Period"), collections of
Principal Receivables allocable to the Investor Interest of such Series
(and certain other amounts if so specified in the related Prospectus
Supplement) will be deposited on each Transfer Date in the Principal
Funding Account and used to make distributions of principal to the
Certificateholders of such Series or Class on the Scheduled Payment Date.
The amount to be deposited in the Principal Funding Account during the
Rapid Accumulation Period will not be limited to the Controlled Deposit
Amount. The Rapid Accumulation Period is intended to result in the fastest
possible accumulation of funds available to make principal distributions to
Certificateholders of a Series following a Pay Out Event with respect to
such Series in order to better assure the repayment of principal to such
Certificateholders. The term "Pay Out Event" with respect to a Series of
Certificates issued by a Trust means any of the events identified as such
in the related Prospectus Supplement and any of the following: (a) certain
events of insolvency, receivership or bankruptcy relating to the Transferor
and any other holder of an interest in the Transferor Certificate
(including any Transferor Participation), (b) the Transferor being unable
for any reason to transfer Receivables to such Trust in accordance with the
provisions of the related Agreement or (c) such Trust becoming subject to
regulation as an "investment company" within the meaning of the Investment
Company Act of 1940, as amended. See "--Pay Out Events" for a discussion of
the events which might lead to commencement of a Rapid Accumulation Period.
During the Rapid Accumulation Period, funds on deposit in any Principal
Funding Account may be invested in Permitted Investments or subject to a
guaranteed rate or investment contract or other arrangement intended to
assure a minimum return on the investment of such funds. Investment
earnings on such funds may be applied to pay interest on the related Series
of Certificates or make other payments as specified in the related
Prospectus Supplement. In order to enhance the likelihood of payment in
full of principal at the end of the Rapid Accumulation Period with respect
to a Series of Certificates, such Series or any Class thereof may be
subject to a principal payment guaranty or other similar arrangement.
Rapid Amortization Period
During the period from the day on which a Pay Out Event has occurred
with respect to a Series or, if so specified in the Prospectus Supplement
relating to a Series with a Controlled Accumulation Period, from such time
specified in the related Prospectus Supplement after a Pay Out Event has
occurred and the Rapid Accumulation Period has commenced, to the earlier of
(a) the date on which the Investor Interest of the Certificates of such
Series and the Collateral Interest or the Enhancement Invested Amount (as
defined herein), if any, with respect to such Series have been paid in full
and (b) the Series Termination Date (the "Rapid Amortization Period"),
collections of Principal Receivables allocable to the Investor Interest of
such Series (and certain other amounts if so specified in the related
Prospectus Supplement) will be distributed as principal payments to the
Certificateholders of such Series and, in certain circumstances, to the
Credit Enhancement Provider (as defined herein), monthly on each
Distribution Date with respect to such Series in the manner and order of
priority set forth in the related Prospectus Supplement. During the Rapid
Amortization Period with respect to a Series, distributions of principal
will not be limited by any Controlled Deposit Amount or Controlled
Distribution Amount. In addition, upon the commencement of the Rapid
Amortization Period with respect to a Series, any funds on deposit in a
Principal Funding Account with respect to such Series or any Class thereof
will be paid to the Certificateholders of such Series or Class on the first
Distribution Date in the Rapid Amortization Period. The Rapid Amortization
Period is intended to result in the fastest possible distribution of
principal to Certificateholders of a Series following a Pay Out Event with
respect to such Series in order to better assure the repayment of principal
to such Certificateholders. See "--Pay Out Events" for a discussion of the
events which might lead to commencement of a Rapid Amortization Period.
Transfer and Assignment of Receivables
With respect to Trust I and with respect to any New Trust, the
Transferor will transfer and assign at the time of formation of each such
Trust all of its right, title and interest in and to the Receivables in the
related Accounts and all Receivables thereafter created in such Accounts,
except for the interest of the Transferor as holder of the Transferor
Certificate.
In connection with each transfer of Receivables to a Trust, the
Transferor will indicate in its computer files that the related Receivables
have been conveyed to such Trust. In addition, the Transferor will provide
to the Trustee, with respect to Trust I and each New Trust, computer files
or microfiche lists, containing a true and complete list showing each
related Account, identified by account number and by total outstanding
balance on the date of transfer. The Transferor will not deliver to the
related Trustee any other records or agreements relating to the Accounts or
the Receivables, except in connection with additions or removals of
Accounts. Except as stated above, the records and agreements relating to
the Accounts and the Receivables maintained by the Transferor or the
Servicer are not and will not be segregated by the Transferor or the
Servicer from other documents and agreements relating to other credit card
accounts and receivables and are not and will not be stamped or marked to
reflect the transfer of the Receivables to a Trust, but the computer
records of the Transferor are and will be required to be marked to evidence
such transfer. The Transferor will file with respect to Trust I and each
New Trust Uniform Commercial Code financing statements with respect to the
Receivables meeting the requirements of Delaware state law. See "Certain
Legal Aspects of the Receivables--Transferor of Receivables."
Exchanges
For each Series of Certificates, the related Agreement will provide for
the related Trustee to issue two types of certificates: (i) one or more
Series of Certificates that are transferable and have the characteristics
described below and (ii) a certificate (the "Transferor Certificate") that
evidences the Transferor's interest in the related Trust (the "Transferor
Interest"), which initially will be held by the Transferor and will be
transferable only as provided in the related Agreement. The related
Agreement will also provide that, pursuant to any one or more Series
Supplements, the holder of the Transferor Certificate may tender such
Transferor Certificate, or the Transferor Certificate and the Certificates
evidencing any Series of Certificates issued by such Trust, to the related
Trustee in exchange for one or more new Series (which may include Series
offered pursuant to this Prospectus) and a reissued Transferor Certificate
(any such tender, an "Exchange"). This exchange feature permits the
creation of new Series to be issued from an already existing trust.
Pursuant to each Agreement, the holder of the Transferor Certificate may
define, with respect to any newly issued Series, all Principal Terms of
such new Series. Upon the issuance of an additional Series of Certificates,
none of the Transferor, the Servicer, the Trustee or the related Trust will
be required or will intend to obtain the consent of any Certificateholder
of any other Series previously issued by such Trust. However, as a
condition of an Exchange, the holder of the Transferor Certificate will
deliver to the Trustee written confirmation that the Exchange will not
result in the reduction or withdrawal by any Rating Agency of its rating of
any outstanding Series. The Transferor may offer any Series under a
prospectus or other disclosure document (a "Disclosure Document") in
offerings pursuant to this Prospectus or in transactions either registered
under the Securities Act or exempt from registration thereunder directly,
through one or more other underwriters or placement agents, in fixed-price
offerings or in negotiated transactions or otherwise.
The holder of the Transferor Certificate may perform Exchanges and
define Principal Terms such that each Series issued under a Trust has a
period during which amortization or accumulation of the principal amount
thereof is intended to occur which may have a different length and begin on
a different date than such period for any other Series. Further, one or
more Series may be in their amortization or accumulation periods while
other Series are not. Moreover, each Series may have the benefit of a
Credit Enhancement which is available only to such Series. Under the
related Agreement, the Trustee shall hold any such form of Credit
Enhancement only on behalf of the Series to which it relates. The holder of
the Transferor Certificate may deliver a different form of Credit
Enhancement agreement with respect to any Series. The holder of the
Transferor Certificate may specify different certificate rates and monthly
servicing fees with respect to each Series (or a particular Class within
such Series). The holder of the Transferor Certificate will also have the
option under the related Agreement to vary between Series the terms upon
which a Series (or a particular Class within such Series) may be
repurchased by the Transferor or remarketed to other investors. There will
be no limit to the number of Exchanges that may be performed under a
related Agreement.
An Exchange may only occur upon the satisfaction of certain conditions
provided in the related Agreement. Under each Agreement, the holder of the
Transferor Certificate may perform an Exchange by notifying the Trustee at
least five days in advance of the date upon which the Exchange is to occur
stating the Series to be issued on the date of the Exchange and, with
respect to each such Series (and, if applicable, each Class thereof): (i)
its initial principal amount (or method for calculating such amount), (ii)
its certificate rate (or method of calculating such rate) and (iii) the
"Credit Enhancement Provider," if any, which is expected to provide support
with respect to it. Each Agreement will provide that on the date of the
Exchange the Trustee will authenticate any such Series only upon delivery
to it of the following, among others, (i) a Series Supplement specifying
the principal terms of such Series (the "Principal Terms"), (ii) (a) an
opinion of counsel to the effect that, unless otherwise stated in the
related Series Supplement, the certificates of such Series will be
characterized as indebtedness for Federal income tax purposes and (b) an
opinion of counsel to the effect that, for federal income tax purposes, (1)
such issuance will not adversely affect the Federal income tax
characterization as debt of Certificates of any outstanding Series or Class
that were characterized as debt at the time of their issuance, (2)
following such issuance the Trust will not be deemed to be an association
(or publicly traded partnership) taxable as a corporation for Federal
income tax purposes and (3) such issuance will not cause or constitute an
event in which gain or loss would be recognized by any Certificateholder
(an opinion of counsel with respect to any matter to the effect referred to
in clause (b) with respect to any action is referred to herein as a "Tax
Opinion"), (iii) if required by the related Series Supplement, the form of
Credit Enhancement, (iv) if Credit Enhancement is required by the Series
Supplement, an appropriate Credit Enhancement agreement executed by the
Transferor and the issuer of the Credit Enhancement, (v) written
confirmation from each Rating Agency that the Exchange will not result in
such Rating Agency's reducing or withdrawing its rating on any then
outstanding Series rated by it, (vi) an officer's certificate of the
Transferor to the effect that after giving effect to the Exchange the
Transferor would not be required to add Additional Accounts pursuant to the
related Agreement and the Transferor Amount would be at least equal to the
Minimum Transferor Amount and (vii) the existing Transferor Certificate
and, if applicable, the certificates representing the Series to be
exchanged. Upon satisfaction of such conditions, the Trustee will cancel
the existing Transferor Certificate and the certificates of the exchanged
Series, if applicable, and authenticate the new Series and a new Transferor
Certificate.
Representations and Warranties
The Transferor will make in the Agreement and each New Agreement
certain representations and warranties to the Trust to the effect that,
among other things, (a) as of the Closing Date, the Transferor was duly
incorporated and in good standing and that it has the authority to
consummate the transactions contemplated by the related Agreement and (b)
as of the relevant Cut Off Date (or as of the date of the designation of
Additional Accounts or the creation of Automatic Additional Accounts), each
Account was an Eligible Account (as defined below). If so provided in the
related Prospectus Supplement, if (i) any of these representations and
warranties proves to have been incorrect in any material respect when made,
and continues to be incorrect for 60 days after notice to the Transferor by
the related Trustee or to the Transferor and the related Trustee by the
Certificateholders holding more than 50% of the Investor Interest of the
related Series, and (ii) as a result the interests of the
Certificateholders are materially and adversely affected, and continue to
be materially and adversely affected during such period, then the Trustee
or Certificateholders holding more than 50% of the Investor Interest may
give notice to the Transferor (and to the related Trustee in the latter
instance) declaring that a Pay Out Event has occurred, thereby commencing
the Rapid Amortization Period or, if so specified in the related Prospectus
Supplement, the Rapid Accumulation Period.
The Transferor will make in the Agreement and each New Agreement
representations and warranties to the related Trust relating to the
Receivables in such Trust to the effect, among other things, that (a) as of
the Closing Date of the initial Series of Certificates issued by such
Trust, each of the Receivables then existing is an Eligible Receivable (as
defined below) and (b) as of the date of creation of any new Receivable,
such Receivable is an Eligible Receivable and the representation and
warranty set forth in clause (b) in the immediately following paragraph is
true and correct with respect to such Receivable. In the event (i) of a
breach of any representation and warranty set forth in this paragraph,
within 60 days, or such longer period as may be agreed to by the Trustee,
of the earlier to occur of the discovery of such breach by the Transferor
or Servicer or receipt by the Transferor of written notice of such breach
given by the Trustee, or, with respect to certain breaches relating to
prior liens, immediately upon the earlier to occur of such discovery or
notice and (ii) that as a result of such breach, the Receivables in the
related Accounts are charged off as uncollectible, the Trust's rights in,
to or under the Receivables or its proceeds are impaired or the proceeds of
such Receivables are not available for any reason to the Trust free and
clear of any lien, the Transferor shall accept reassignment of each
Principal Receivable as to which such breach relates (an "Ineligible
Receivable") on the terms and conditions set forth below; provided,
however, that no such reassignment shall be required to be made with
respect to such Ineligible Receivable if, on any day within the applicable
period (or such longer period as may be agreed to by the Trustee), the
representations and warranties with respect to such Ineligible Receivable
shall then be true and correct in all material respects. The Transferor
shall accept reassignment of each such Ineligible Receivable by directing
the Servicer to deduct the amount of each such Ineligible Receivable from
the aggregate amount of Principal Receivables used to calculate the
Transferor Amount. In the event that the exclusion of an Ineligible
Receivable from the calculation of the Transferor Amount would cause the
Transferor Amount to be a negative number, on the date of reassignment of
such Ineligible Receivable the Transferor shall make a deposit in the
Excess Funding Account in immediately available funds in an amount equal to
the amount by which the Transferor Amount would be reduced below zero. Any
such deduction or deposit shall be considered a repayment in full of the
Ineligible Receivable. The obligation of the Transferor to accept
reassignment of any Ineligible Receivable is the sole remedy respecting any
breach of the representations and warranties set forth in this paragraph
with respect to such Receivable available to the Certificateholders or the
Trustee on behalf of Certificateholders. Certificateholders will not incur
any costs, direct or indirect, related to any such reassignment to the
Transferor.
The Transferor will make in the Agreement and each New Agreement
representations and warranties to the related Trust to the effect, among
other things, that as of the Closing Date of the initial Series of
Certificates issued by such Trust (a) the related Agreement will constitute
a legal, valid and binding obligation of the Transferor and (b) the
transfer of Receivables by it to the Trust under the Agreement will
constitute either a valid transfer and assignment to the Trust of all
right, title and interest of the Transferor in and to the Receivables
(other than Receivables in Additional Accounts), whether then existing or
thereafter created and the proceeds thereof (including amounts in any of
the accounts established for the benefit of Certificateholders) or the
grant of a first priority perfected security interest in such Receivables
(except for certain tax liens) and the proceeds thereof (including amounts
in any of the accounts established for the benefit of Certificateholders),
which is effective as to each such Receivable upon the creation thereof. In
the event of a breach of any of the representations and warranties
described in this paragraph, either the Trustee or the Holders of
Certificates evidencing undivided interests in the Trust aggregating more
than 50% of the aggregate Investor Interest of all Series outstanding under
such Trust may direct the Transferor to accept reassignment of the Trust
Portfolio within 60 days of such notice, or within such longer period
specified in such notice. The Transferor will be obligated to accept
reassignment of such Receivables on a Distribution Date occurring within
such applicable period. Such reassignment will not be required to be made,
however, if at any time during such applicable period, or such longer
period, the representations and warranties shall then be true and correct
in all material respects. The deposit amount for such reassignment will be
equal to the Investor Interest and Enhancement Invested Amount, if any, for
each Series outstanding under such Trust on the last day of the Monthly
Period preceding the Distribution Date on which the reassignment is
scheduled to be made less the amount, if any, previously allocated for
payment of principal to such Certificateholders or such holders of the
Enhancement Invested Amount or the Collateral Interest, if any, on such
Distribution Date, plus an amount equal to all accrued and the unpaid
interest less the amount, if any, previously allocated for payment of such
interest on such Distribution Date. The payment of the reassignment deposit
amount and the transfer of all other amounts deposited for the preceding
month in the Distribution Account will be considered a payment in full of
the Investor Interest and the Enhancement Invested Amount, if any, for each
such Series required to be repurchased and will be distributed upon
presentation and surrender of the Certificates for each such Series. The
obligation of the Transferor to make any such deposit will constitute the
sole remedy respecting a breach of the representations and warranties
available to the Trustee or Certificateholders. The Certificateholders will
not incur any costs, direct or indirect, related to the reassignment of the
Trust Portfolio to the Transferor.
An "Eligible Account" means, as of the relevant Cut Off Date (or, with
respect to Additional Accounts, as of the relevant Addition Cut Off Date,
or with respect to Automatic Additional Accounts, as of their date of
creation), each Account owned by the Transferor (a) which was in existence
and maintained with the Transferor, (b) which is payable in United States
dollars, (c) the customer of which has provided, as his most recent billing
address, an address located in the United States or its territories or
possessions, (d) which has not been classified by the Transferor as
cancelled, counterfeit, deleted, fraudulent, stolen or lost and (e) which
has either been originated by the Transferor or acquired by the Transferor
from other institutions. Under the Agreement and each New Agreement, the
definition of Eligible Account may be changed by amendment to such
Agreement without the consent of the related Certificateholders if (i) the
Transferor delivers to the Trustee a certificate of an authorized officer
to the effect that, in the reasonable belief of the Transferor, such
amendment will not as of the date of such amendment adversely affect in any
material respect the interest of such Certificateholders, and (ii) such
amendment will not result in a withdrawal or reduction of the rating of any
outstanding Series under the related Trust.
An "Eligible Receivable" means each Receivable (a) which has arisen
under an Eligible Account, (b) which was created in compliance, in all
material respects, with all requirements of law applicable to the
Transferor, and pursuant to a credit card agreement which complies in all
material respects with all requirements of law applicable to the
Transferor, (c) with respect to which all consents, licenses or
authorizations of, or registrations with, any governmental authority
required to be obtained or given by the Transferor in connection with the
creation of such Receivable or the execution, delivery, creation and
performance by the Transferor of the related credit card agreement have
been duly obtained or given and are in full force and effect as of the date
of the creation of such Receivable, (d) as to which, at the time of its
creation, the Transferor or the related Trust had good and marketable title
free and clear of all liens and security interests arising under or through
the Transferor (other than certain tax liens for taxes not then due or
which the Transferor is contesting), (e) which is the legal, valid and
binding payment obligation of the obligor thereon, legally enforceable
against such obligor in accordance with its terms (with certain
bankruptcy-related exceptions) and (f) which constitutes an "account" under
Article 9 of the Uniform Commercial Code as then in effect in the State of
Delaware.
Unless otherwise specified in the Prospectus Supplement relating to a
Series of Certificates, the Trustee will not make any initial or periodic
general examination of the Receivables or any records relating to the
Receivables for the purpose of establishing the presence or absence of
defects, compliance with the Transferor's representations and warranties or
for any other purpose. The Servicer, however, will deliver to the Trustee
on or before October 31 of each year (or such other date specified in the
related Prospectus Supplement) an opinion of counsel with respect to the
validity of the security interest of the Trust in and to the Receivables
and certain other components of the Trust.
Addition of Trust Assets
As described above under "The Receivables," the Transferor will have
the right to designate for each Trust, from time to time, additional
eligible revolving credit card accounts to be included as Accounts (the
"Additional Accounts") with respect to such Trust. In addition, the
Transferor will be required to designate Additional Accounts under the
circumstances and in the amounts specified in the related Prospectus
Supplement. The Transferor will convey to the related Trust its interest in
all Receivables of such Additional Accounts, whether such Receivables are
then existing or thereafter created. This feature permits the Transferor to
increase the amount of Principal Receivables in a Trust over the amount
that would otherwise be included, thereby permitting the issuance of
additional Series or avoiding the occurrence of certain Pay Out Events with
respect to existing Series. Certificateholders will not incur any costs,
direct or indirect, as a result of the exercise of this feature.
Each Additional Account must be an Eligible Account at the time of its
designation. However, Additional Accounts may not be of the same credit
quality as the initial Accounts. Additional Accounts may have been
originated by the Transferor using credit criteria different from those
which were applied by the Transferor to the initial Accounts or may have
been acquired by the Transferor from an institution which may have had
different credit criteria.
In addition to or in lieu of Additional Accounts, the Transferor under
the Agreement and each New Agreement will be permitted to add to the
related Trust participations representing undivided interests in a pool of
assets primarily consisting of receivables arising under consumer revolving
credit card accounts and collections thereon ("Participations"). Each
Participation must (a) have been (i) previously registered under the
Securities Act or (ii) held for the holding period required under Rule
144(k) under the Securities Act and (b) be acquired in a bona fide
secondary market transaction and not from the Transferor or an affiliate
thereof, in each case to the extent required by the Securities Act.
Participations may be evidenced by one or more certificates of ownership
issued under a separate pooling and servicing agreement or similar
agreement (a "Participation Agreement") which entitles the
Certificateholder to receive percentages of collections generated by the
pool of assets subject to such Participation Agreement from time to time
and to certain other rights and remedies specified therein. Participations
may have their own credit enhancement, pay out events, servicing
obligations and servicer defaults, all of which are likely to be
enforceable by a separate trustee under the Participation Agreement and may
be different from those specified herein. The rights and remedies of the
related Trust as the holder of a Participation (and therefore the
Certificateholders) will be subject to all the terms and provisions of the
related Participation Agreement. The Agreement and each New Agreement may
be amended to permit the addition of a Participation in a Trust without the
consent of the related Certificateholders if (i) the Transferor delivers to
the Trustee a certificate of an authorized officer to the effect that, in
the reasonable belief of the Transferor, such amendment will not as of the
date of such amendment adversely affect in any material respect the
interest of such Certificateholders, and (ii) such amendment will not
result in a withdrawal or reduction of the rating of any outstanding Series
under the related Trust.
A conveyance by the Transferor to a Trust of Receivables in Additional
Accounts or Participations is subject to the following conditions, among
others: (i) the Transferor shall give the Trustee, each Rating Agency and
the Servicer written notice that such Additional Accounts or Participations
will be included, which notice shall specify the approximate aggregate
amount of the Receivables or interests therein to be transferred; (ii) the
Transferor shall have delivered to the Trustee a written assignment
(including an acceptance by the Trustee on behalf of the Trust for the
benefit of the Certificateholders) as provided in the Agreement relating to
such Additional Accounts or Participations (the "Assignment") and, the
Transferor shall have delivered to the Trustee a computer file or
microfiche list, dated the date of such Assignment, containing a true and
complete list of such Additional Accounts or Participations; (iii) the
Transferor shall represent and warrant that (x) each Additional Account is,
as of the Addition Cut Off Date", an Eligible Account, and each Receivable
in such Additional Account is, as of the Addition Cut Off Date, an Eligible
Receivable, (y) no selection procedures believed by the Transferor to be
materially adverse to the interests of the Certificateholders were utilized
in selecting the Additional Accounts from the available Eligible Accounts
from the Bank Portfolio, and (z) as of the Addition Date, the Transferor is
not insolvent; (iv) the Transferor shall deliver certain opinions of
counsel with respect to the transfer of the Receivables in the Additional
Accounts or the Participations to the Trust; and (v) under certain
circumstances with respect to Additional Accounts, and in all cases with
respect to Participations, each Rating Agency then rating any Series of
Certificates outstanding under such Trust shall have consented to the
addition of such Additional Accounts or Participations.
The Transferor may from time to time, at its sole discretion, designate
Eligible Accounts to be included as Accounts ("Automatic Additional
Accounts"), subject to the limitations specified in this paragraph and in
the applicable Agreement. Unless each Rating Agency otherwise consents, the
number of Automatic Additional Accounts shall not either (i) with respect
to any three consecutive Monthly Periods, exceed 15% of the number of
Accounts as of the end of the ninth Monthly Period preceding the
commencement of such three Monthly Periods (or, the Cut Off Date, whichever
is later) and (ii) with respect to any twelve Monthly Periods, exceed 20%
of the number of Accounts as of the first day of such twelve Monthly
Periods (or, the Cut Off Date, whichever is later) (the "Aggregate Addition
Limit"). On a semi-annual basis, or more frequently if required by any
Rating Agency, the Transferor shall have delivered to the Trustee, each
Rating Agency and certain providers of Credit Enhancement an opinion of
counsel with respect to the Automatic Additional Accounts included as
Accounts during the preceding three-month period confirming the validity
and perfection of the transfer of the Receivables of such Automatic
Additional Accounts. Such opinion of counsel shall be provided by outside
counsel. If such opinion of counsel with respect to any Automatic
Additional Accounts is not so received, the ability of the Bank to
designate Automatic Additional Accounts will be suspended until such time
as each Rating Agency otherwise consents in writing or affected Accounts
are removed from the Trust. The Transferor may discontinue the inclusion of
Automatic Additional Accounts at any time, at its sole discretion.
In addition to the periodic reports otherwise required to be filed by
the Servicer with the SEC pursuant to the Exchange Act, the Servicer
intends to file, on behalf of each Trust, a Report on Form 8-K with respect
to any addition to a Trust of Receivables in Additional Accounts or
Participations that would have a material effect on the composition of the
assets of such Trust.
Removal of Accounts
Subject to the conditions set forth in the next succeeding sentence,
the Transferor may, but shall not be obligated to, designate from time to
time certain Accounts to be Removed Accounts, all Receivables in which
shall be subject to deletion and removal from the related Trust. This
feature is intended to permit the Transferor to obtain unencumbered
ownership of Receivables not needed to support any Series of Certificates.
Certificateholders will not incur any cost, direct or indirect, as a result
of the exercise of this feature. The Transferor will be permitted to
designate and require reassignment to it of the Receivables from Removed
Accounts only upon satisfaction of the following conditions: (i) the
removal of any Receivables of any Removed Accounts shall not, in the
reasonable belief of the Transferor, cause a Pay Out Event to occur; (ii)
the Transferor shall have delivered to the related Trustee for execution a
written assignment and a computer file or microfiche list containing a true
and complete list of all Removed Accounts identified by account number and
the aggregate amount of the Receivables in such Removed Accounts; (iii) the
Transferor shall represent and warrant that no selection procedures
believed by the Transferor to be materially adverse to the interests of the
holders of any Series of Certificates outstanding under such Trust were
utilized in selecting the Removed Accounts to be removed from such Trust;
(iv) the Transferor shall have received notice from each such Rating Agency
that such proposed removal will not result in a downgrade of its then
current rating for any such Series; (v) the Principal Receivables of the
Removed Accounts shall not equal or exceed the percentage specified in the
related Prospectus Supplement of the aggregate amount of the Principal
Receivables in such Trust at such time; provided, that if any Series has
been paid in full, the Principal Receivables in such Removed Accounts may
equal or approximately equal the initial Investor Interest or Full Investor
Interest, as applicable, of such Series; (vi) such other conditions as are
specified in the related Prospectus Supplement; and (vii) the Transferor
shall have delivered to the Trustee an officer's certificate confirming the
items set forth in clauses (i) through (vi) above. Notwithstanding the
above, the Transferor will be permitted to designate as a Removed Account
without the consent of the related Trustee, Certificateholders or Rating
Agencies any Account that has a zero balance and which the Transferor will
remove from its computer file.
Collection and Other Servicing Procedures
For each Series of Certificates, the Servicer will be responsible for
servicing and administering the Receivables in accordance with the
Servicer's policies and procedures for servicing credit card receivables
comparable to the Receivables. The Servicer will be required to maintain or
cause to be maintained fidelity bond coverage insuring against losses
through wrongdoing of its officers and employees who are involved in the
servicing of credit card receivables covering such actions and in such
amounts as the Servicer believes to be reasonable from time to time. Except
in circumstances specified in the related Prospectus Supplement, the
Servicer will deposit all collections of Receivables in an account required
to be established for such purpose by the related Agreement (the
"Collection Account"). All amounts deposited in the Collection Account with
respect to a Trust will be allocated by the Servicer between amounts
collected on Principal Receivables and amounts collected on Finance Charge
Receivables.
Discount Option
The Transferor may at any time designate a specified fixed or variable
percentage as specified in the related Prospectus Supplement (the "Discount
Percentage") of the amount of Receivables arising in the Accounts with
respect to the related Trust on and after the date such option is exercised
(the "Discount Option") that otherwise would have been treated as Principal
Receivables to be treated as Finance Charge Receivables. Such designation
will become effective upon satisfaction of the requirements set forth in
the related Agreement, including written confirmation by each Rating Agency
in writing of its then current rating on each outstanding Series of the
related Trust. On the date of processing of any collections, the product of
the Discount Percentage and collections of Receivables that arise in the
Accounts on such day on or after the date such option is exercised that
otherwise would be Principal Receivables will be deemed collections of
Finance Charge Receivables and will be applied accordingly, unless
otherwise provided in the related Prospectus Supplement. Such feature is
intended to permit the Transferor to increase the portfolio yield and
thereby decrease the risk of the occurrence of a Pay Out Event.
Certificateholders will not incur any cost, direct or indirect, as a result
of the exercise of this feature.
Trust Accounts
The related Trustee will establish and maintain in the name of the
Trust two separate accounts in a segregated trust account, a "Finance
Charge Account" and a "Principal Account," for the benefit of the
Certificateholders of all related Series, including any Series offered
pursuant to this Prospectus. Each Agreement will provide that the Trustee
shall have the power to establish series accounts in Series Supplements,
including an Interest Funding Account, a Principal Funding Account, a
Pre-Funding Account or such other account specified in the related Series
Supplement, each of which series accounts shall be held for the benefit of
the Certificateholders of the related Series and for the purposes set forth
in the related Prospectus Supplement. The Trustee will also establish a
"Distribution Account," which shall be a non-interest bearing segregated
demand deposit account established with a Qualified Institution other than
the Transferor. The Servicer will establish and maintain, in the name of
the Trust, for the benefit of Certificateholders of all Series issued
thereby including any Series offered pursuant to this Prospectus, a
Collection Account, which will be a non-interest bearing segregated account
established and maintained with the Servicer or with a "Qualified
Institution," defined as a depository institution or trust company, which
may include the related Trustee, organized under the laws of the United
States or any one of the states thereof, which at all times has a
short-term unsecured debt rating of P-1 by Moody's Investors Service, Inc.
("Moody's") and of A-l+ by Standard & Poor's Ratings Services ("Standard &
Poor's"), or a depository institution, which may include the Trustee, which
is acceptable to the Rating Agency. The Servicer will also establish and
maintain, with respect to each Trust, the Excess Funding Account, as more
fully described herein. Funds in the Principal Account and the Finance
Charge Account for each Trust will be invested, at the direction of the
Servicer, in (i) obligations fully guaranteed by the United States of
America, (ii) demand deposits, time deposits or certificates of deposit of
depository institutions or trust companies, the certificates of deposit of
which have the highest rating from Moody's and Standard & Poor's, (iii)
commercial paper having, at the time of the Trust's investment, a rating in
the highest rating category from Moody's and Standard & Poor's, (iv)
bankers' acceptances issued by any depository institution or trust company
described in clause (ii) above, (v) certain repurchase agreements
transacted with either (a) an entity subject to the United States federal
bankruptcy code or (b) a financial institution insured by the FDIC or any
broker-dealer with "retail customers" that is under the jurisdiction of the
Securities Investors Protection Corp. and (vi) any other investment if the
Rating Agency confirms in writing that such investment will not adversely
affect its then current rating or ratings of the Certificates, provided
that such investment will not cause the Trust to be treated as an
investment company within the meaning of the Investment Company Act of
1940, as amended (such investments, "Permitted Investments"). Any earnings
(net of losses and investment expenses) on funds in the Finance Charge
Account or the Principal Account will be paid to the Transferor, or used
for another purpose if specified in the related Prospectus Supplement.
Funds in any other series account established by a Series Supplement may be
invested in Permitted Investments or otherwise as provided in the related
Prospectus Supplement. The Servicer will have the revocable power to
withdraw funds from the Collection Account and to instruct the Trustee to
make withdrawals and payments from the Finance Charge Account and the
Principal Account for the purpose of carrying out the Servicer's duties
under the Agreement. The Trustee will be the paying agent and will have the
revocable power to withdraw funds from the Distribution Account for the
purpose of making distributions to the Certificateholders.
Funding Period
The Prospectus Supplement relating to a Series of Certificates may
specify that for a period beginning on the Closing Date and ending on a
specified date before the commencement of an Amortization Period or
Accumulation Period with respect to such Series (the "Funding Period"),
which period is expected to be less than a year, the aggregate amount of
Principal Receivables in the related Trust allocable to such Series may be
less than the aggregate principal amount of the Certificates of such Series
and that the amount of such deficiency (the "Pre-Funding Amount") will be
held in a trust account established with the related Trustee for the
benefit of Certificateholders of such Series (the "Pre-Funding Account")
pending the transfer of additional Principal Receivables to the Trust or
pending the reduction of the Investor Interests of other Series issued by
the related Trust. The Pre-Funded Amount may be up to 100% of the principal
amount of the Certificates of a Series. The related Prospectus Supplement
specifies the initial Investor Interest on the Closing Date with respect to
such a Series, the aggregate principal amount of the Certificates of such
Series (the "Full Investor Interest") and the date by which the Investor
Interest is expected to equal the Full Investor Interest. The Investor
Interest will increase as Principal Receivables are added to the related
Trust or as the Investor Interests of other Series of the related Trust are
reduced. See "--Addition of Trust Assets." This feature is intended to
permit the Transferor to issue a new Series of Certificates at an opportune
time, if the Investor Interest of existing Series are expected to be
reduced or additional Principal Receivables are expected to be included in
a Trust at a subsequent time. Certificateholders will not incur any costs,
direct or indirect, as a result of the exercise of this feature. If the
Investor Interest does not equal the Full Investor Interest by the end of
the Funding Period, Certificateholders of the affected Series will receive
principal repayments prior to the expected date of receipt. Any designation
of Additional Accounts (or Participations) or Automatic Additional Accounts
during the Funding Period will be subject to the same conditions and
protections applicable at any other time.
During the Funding Period, funds on deposit in the Pre-Funding Account
for a Series of Certificates will be withdrawn and paid to the holder of
the Transferor Certificate to the extent of any increases in the Investor
Interest. In the event that the Investor Interest does not for any reason
equal the Full Investor Interest by the end of the Funding Period, any
amount remaining in the Pre-Funding Account will be payable to the
Certificateholders of such Series in the manner and at such time as set
forth in the related Prospectus Supplement. Such payment will reduce the
aggregate principal amount of such Certificates. In addition, if so
specified in the related Prospectus Supplement, a prepayment premium or
penalty or similar amount may be payable to the Certificateholders of such
Series.
Monies in the Pre-Funding Account will be invested by the Trustee in
Permitted Investments and, if so specified in the related Prospectus
Supplement, will be subject to a guaranteed rate or investment agreement or
other similar arrangement, and, in connection with each Distribution Date
during the Funding Period, investment earnings on funds in the Pre-Funding
Account during the related Monthly Period will be withdrawn from the
Pre-Funding Account and deposited, together with any applicable payment
under a guaranteed rate or investment agreement or other similar
arrangement, into the Finance Charge Account for distribution in respect of
interest on the Certificates of the related Series in the manner specified
in the related Prospectus Supplement.
Investor Percentage and Transferor Percentage
For each Trust, the Servicer will allocate between the Investor
Interest of each Series issued by such Trust (and between each Class of
each Series) and the Transferor Interest, and, in certain circumstances,
the interest of certain Credit Enhancement Providers, all amounts collected
on Finance Charge Receivables, all amounts collected on Principal
Receivables and all Receivables in Defaulted Accounts. The Servicer will
make each allocation by reference to the applicable Investor Percentage of
each Series and the Transferor Percentage, and, in certain circumstances,
the percentage interest of certain providers of Enhancement (the "Credit
Enhancement Percentage") with respect to such Series. The Prospectus
Supplement relating to a Series specifies the Investor Percentage and, if
applicable, the Credit Enhancement Percentage (or the method of calculating
such percentages) with respect to the allocations of collections of
Principal Receivables, Finance Charge Receivables and Receivables in
Defaulted Accounts during the Revolving Period, any Amortization Period and
any Accumulation Period, as applicable. In addition, for each Series of
Certificates having more than one Class, the related Prospectus Supplement
specifies the method of allocation between each Class.
The Transferor Percentage will, in all cases, be equal to 100% minus
the aggregate Investor Percentages and, if applicable, the Credit
Enhancement Percentages, for all Series then outstanding.
Application of Collections
Except as otherwise provided below, the Servicer will deposit into the
Collection Account for the related Trust no later than the second business
day (or such other day specified in the related Prospectus Supplement)
following the date of processing, any payment collected by the Servicer on
the Receivables. On the same day as any such deposit is made, the Servicer
will make the deposits and payments to the accounts and parties as
indicated below; provided, however, that for as long as the Bank or an
affiliate thereof remains the Servicer under the related Agreement, and (a)
the Servicer provides to the Trustee a letter of credit or other credit
support acceptable to each Rating Agency or (b) the Servicer or the
Corporation has and maintains a certificate of deposit or commercial paper
rating of P-1 by Moody's and of A-1 by Standard & Poor's, then the Servicer
may make such deposits and payments on a monthly or other periodic basis on
the Transfer Date in an amount equal to the net amount of such deposits and
payments which would have been made.
Notwithstanding anything in the related Agreement to the contrary,
whether the Servicer is required to make monthly or daily deposits from the
Collection Account into the Finance Charge Account or the Principal
Account, with respect to any Monthly Period, (i) the Servicer will only be
required to deposit collections from the Collection Account into the
Finance Charge Account, the Principal Account or any series account
established by a related Series Supplement up to the required amount to be
deposited into any such account or, without duplication, distributed on or
prior to the related Distribution Date to Certificateholders or to the
provider of Enhancement and (ii) if at any time prior to such Distribution
Date the amount of collections deposited in the Collection Account exceeds
the amount required to be deposited pursuant to clause (i) above, the
Servicer will be permitted to withdraw the excess from the Collection
Account.
The Servicer will withdraw the following amounts from the
Collection Account for application as indicated:
(a) an amount equal to the Transferor Percentage of the
aggregate amount of such deposits in respect of Principal Receivables
and Finance Charge Receivables, respectively, will be paid or held for
payment to the holder of the Transferor Certificate (or, in certain
limited circumstances, deposited in the Excess Funding Account);
(b) an amount equal to the applicable Investor Percentage of the
aggregate amount of such deposits in respect of Finance Charge
Receivables will be deposited into the Finance Charge Account for
allocation and distribution as described in the related Prospectus
Supplement;
(c) during the Revolving Period, an amount equal to the
applicable Investor Percentage of the aggregate amount of such deposits
in respect of Principal Receivables will be paid or held for payment to
the holder of the Transferor Certificate, provided that if after giving
effect to the inclusion in the related Trust of all Receivables on or
prior to such date of processing and the application of payments
referred to in paragraph (a) above the Transferor Amount is less than
the Minimum Transferor Amount, the excess will be deposited in the
Excess Funding Account or other specified account and will be used as
described in the related Prospectus Supplement, including for payment
to other Series of Certificates issued by the related Trust;
(d) during the Controlled Amortization Period, Controlled
Accumulation Period or Rapid Accumulation Period, as applicable, an
amount equal to the applicable Investor Percentage of such deposits in
respect of Principal Receivables up to the amount, if any, as specified
in the related Prospectus Supplement will be deposited in the Principal
Account or Principal Funding Account, as applicable, for allocation and
distribution to Certificateholders as described in the related
Prospectus Supplement, provided that if collections of Principal
Receivables exceed the principal payments that may be allocated or
distributed to Certificateholders, the amount of such excess will be
paid to the holder of the Transferor Certificate until the Transferor
Amount is reduced to the Minimum Transferor Amount, and thereafter will
be deposited in the Excess Funding Account or other specified account
and will be used as described in the related Prospectus Supplement,
including for payment to other Series of Certificates issued by the
related Trust; and
(e) during the Principal Amortization Period, if applicable, and
the Rapid Amortization Period, an amount equal to the applicable
Investor Percentage of such deposits in respect of Principal
Receivables will be deposited into the Principal Account for
application and distribution as provided in the related Prospectus
Supplement.
In the case of a Series of Certificates having more than one Class,
the amounts in the Collection Account will be allocated and applied to each
Class in the manner and order of priority described in the related
Prospectus Supplement.
Shared Excess Finance Charge Collections
Any Series offered hereby may be included in a group of Series (a
"Group"). The Prospectus Supplement relating to a Series specifies whether
such Series will be included in a Group and identifies any previously
issued Series included in such Group. If so specified in the related
Prospectus Supplement, the Certificateholders of a Series within a Group or
any Class thereof may be entitled to receive all or a portion of Excess
Finance Charge Collections with respect to another Series or Class thereof
within such Group to cover any shortfalls with respect to amounts payable
from collections of Finance Charge Receivables allocable to such Series or
Class. With respect to any Series, "Excess Finance Charge Collections" for
any Monthly Period will equal the excess of collections of Finance Charge
Receivables, and certain other amounts allocated to the Investor Interest
of such Series or Class over the sum of (i) interest accrued for the
current month ("Monthly Interest") and overdue Monthly Interest on the
Certificates of such Series or Class (together with, if applicable,
interest on overdue Monthly Interest at the rate specified in the related
Prospectus Supplement, ("Additional Interest")), (ii) accrued and unpaid
Investor Servicing Fees with respect to such Series or Class payable from
collections of Finance Charge Receivables, (iii) the Investor Default
Amount with respect to such Series or Class, (iv) unreimbursed Investor
Charge-Offs with respect to such Series or Class and (v) other amounts
specified in the related Prospectus Supplement. The term "Investor
Servicing Fee" for any Series of Certificates or Class thereof means the
Servicing Fee allocable to the Investor Interest with respect to such
Series or Class, as specified in the related Prospectus Supplement. The
term "Investor Default Amount" means, for any Monthly Period and for any
Series or Class thereof, the aggregate amount of the applicable Investor
Percentage of Receivables in Defaulted Accounts. The term "Investor
Charge-Off" means, for any Monthly Period and for any Series or Class
thereof, the amount by which (a) the related Monthly Interest and overdue
Monthly Interest (together with, if applicable, Additional Interest),
accrued and unpaid Investor Servicing Fees payable from collections of
Finance Charge Receivables, the Investor Default Amount and any required
fees exceeds (b) amounts available to pay such amounts out of collections
of Finance Charge Receivables, available Credit Enhancement amounts, if
any, and other sources specified in the related Prospectus Supplement, but
not more than such Investor Default Amount. This feature permits amounts
that would otherwise be payable to the holder of the Transferor Certificate
to be used for the benefit of Series of Certificates that would otherwise
experience shortfalls in amounts payable from collections of Finance Charge
Receivables or from Credit Enhancement. See "--Application of Collections"
and "--Defaulted Receivables; Rebates and Fraudulent Charges; Investor
Charge-Offs."
Excess Funding Account
If on any date the Transferor Amount would be less than the Minimum
Transferor Amount (after giving effect to any addition of Principal
Receivables to the applicable Trust) if the Servicer were to distribute to
the holder of the Transferor Certificate any collections of Principal
Receivables that otherwise would be distributed to the holder of the
Transferor Certificate, the Servicer will not distribute such amounts, but
shall instead deposit such funds in a segregated account established and
maintained by the Servicer, in the name of the Trust, for the benefit of
Certificateholders of all Series issued by such Trust, with the Servicer or
with a Qualified Institution (the "Excess Funding Account"). Funds on
deposit in the Excess Funding Account will be withdrawn and paid to the
holder of the Transferor Certificate on any date to the extent that the
Transferor Amount exceeds the Minimum Transferor Amount on such date;
provided, however, that if a Controlled Accumulation Period, Controlled
Amortization Period, Principal Amortization Period, Rapid Amortization
Period or Rapid Accumulation Period commences with respect to any Series in
a Group entitled to the benefits of Shared Principal Collections, any funds
on deposit in the Excess Funding Account not released to the holder of the
Transferor Certificate will be treated as Shared Principal Collections to
the extent needed to cover principal payments due to or for the benefit of
such Series, if the Series Supplement with respect to such Series so
provides. This feature is intended to avoid or forestall the occurrence of
a Pay Out Event (and thus certain unexpected prepayments of the
Certificates) at a time when adequate Principal Receivables are not being
generated in the Accounts in a Trust by retaining collections of Principal
Receivables in the Trust for the benefit of Certificateholders.
Certificateholders will not incur any costs, direct or indirect, as a
result of the inclusion of this feature.
Funds on deposit in the Excess Funding Account will be invested by the
Trustee, at the direction of the Servicer, in Permitted Investments. Any
earnings (net of losses and investment expenses) earned on amounts on
deposit in the Excess Funding Account during any Monthly Period will be
withdrawn from the Excess Funding Account and treated as collections of
Finance Charge Receivables with respect to such Monthly Period for the
applicable Trust.
Shared Principal Collections
If so specified in the related Prospectus Supplement, to the extent
that collections of Principal Receivables and certain other amounts that
are allocated to the Investor Interest of any Series are not needed to make
payments or deposits with respect to such Series, such collections will
constitute "Shared Principal Collections" and will be applied to cover
principal payments due to or for the benefit of Certificateholders of other
Series. If so specified in the related Prospectus Supplement, the
allocation of Shared Principal Collections may be among Series within a
Group. Any such reallocation will not result in a reduction in the Investor
Interest of the Series to which such collections were initially allocated.
This feature permits amounts that would otherwise be payable to the holder
of the Transferor Certificate to be used for the benefit of Series of
Certificates that would otherwise experience a shortfall or delay in the
payment of principal thereon.
Paired Series
If specified in the Prospectus Supplement relating to a Series, such
Series may be paired with another Series (each, a "Paired Series") , such
that a reduction in the Investor Interest of one such Series results in an
increase in the Investor Interest of the other such Series. The effects of
this feature are discussed in the related Prospectus Supplements of the
Paired Series.
Defaulted Receivables; Rebates and Fraudulent Charges; Investor Charge-Offs
For each Series of Certificates, on the business day preceding each
Transfer Date (the "Determination Date"), the Servicer will calculate the
aggregate Investor Default Amount for the preceding Monthly Period, which
will be equal to the aggregate amount of the Investor Percentage of
Receivables in Defaulted Accounts; that is, Accounts which in such Monthly
Period were written off as uncollectible in accordance with the Servicer's
policies and procedures for servicing credit card receivables comparable to
the Receivables. In the case of a Series of Certificates having more than
one Class, the Investor Default Amount will be allocated among the Classes
in the manner described in the related Prospectus Supplement. If so
provided in the related Prospectus Supplement, an amount equal to the
Investor Default Amount for any Monthly Period may be paid from other
amounts, including collections in the Finance Charge Account or from Credit
Enhancement, and applied to pay principal to Certificateholders or the
holder of the Transferor Certificate, as appropriate. In the case of a
Series of Certificates having one or more Classes of Subordinated
Certificates, the related Prospectus Supplement may provide that all or a
portion of amounts otherwise allocable to such Subordinated Certificates
may be paid to the holders of Senior Certificates to make up any Investor
Default Amount allocable to such holders of Senior Certificates.
With respect to each Series of Certificates, the Investor Interest with
respect to such Series will be reduced by the amount of Investor
Charge-Offs for any Monthly Period. Investor Charge-Offs will be reimbursed
on any Distribution Date to the extent amounts on deposit in the Finance
Charge Account and otherwise available therefor exceed such interest, fees
and any aggregate Investor Default Amount payable on such date. Such
reimbursement of Investor Charge-Offs will result in an increase in the
Investor Interest with respect to such Series. In the case of a Series of
Certificates having more than one Class, the related Prospectus Supplement
describes the manner and priority of allocating Investor Charge-Offs and
reimbursements thereof among the Investor Interests of the several Classes.
If the Servicer adjusts the amount of any Principal Receivable because
of transactions occurring in respect of a rebate or refund to a cardholder,
or because such Principal Receivable was created in respect of merchandise
which was refused or returned by a cardholder, then the amount of the
Transferor Amount in the related Trust will be reduced, on a net basis, by
the amount of the adjustment. In addition, the Transferor Amount in such
Trust will be reduced, on a net basis, as a result of transactions in
respect of any Principal Receivable which was discovered as having been
created through a fraudulent or counterfeit charge. Furthermore, in the
event that the exclusion of such Receivables from the calculation of the
Transferor Amount at such time would cause the Transferor Amount to be less
than the Minimum Transferor Amount, the Transferor shall be required to pay
an amount equal to such deficiency into the Excess Funding Account.
Defeasance
If so specified in the Prospectus Supplement relating to a Series, the
Transferor may terminate its substantive obligations in respect of such
Series or the related Trust by depositing with the Trustee, from amounts
representing, or acquired with, collections of Receivables, money or
Permitted Investments sufficient to make all remaining scheduled interest
and principal payments on such Series or all outstanding Series of
Certificates of such Trust, as the case may be, on the dates scheduled for
such payments and to pay all amounts owing to any Credit Enhancement
Provider with respect to such Series or all outstanding Series, as the case
may be, if such action would not result in a Pay Out Event for any Series.
Prior to its first exercise of its right to substitute money or Permitted
Investments for Receivables, the Transferor will deliver to the Trustee (i)
an opinion of counsel to the effect that such deposit and termination of
obligations will not result in the related Trust being required to register
as an "investment company" within the meaning of the Investment Company Act
of 1940, as amended, and (ii) a Tax Opinion.
Final Payment of Principal; Termination
With respect to each Series, the Certificates will be subject to
optional repurchase by the Transferor on any Distribution Date after the
total Investor Interest of such Series and the Enhancement Invested Amount,
if any, with respect to such Series, is reduced to an amount less than or
equal to 5% of the initial Investor Interest (or such other amount
specified in the related Prospectus Supplement), if certain conditions set
forth in the related Agreement are met. The repurchase price will be equal
to the total Investor Interest of such Series (less the amount, if any, on
deposit in any Principal Funding Account with respect to such Series), plus
the Enhancement Invested Amount, if any, with respect to such Series, plus
accrued and unpaid interest on the Certificates and interest or other
amounts payable on the Enhancement Invested Amount or the Collateral
Interest, if any, through the day preceding the Distribution Date on which
the repurchase occurs.
The Certificates of each Series will be retired on the day following
the Distribution Date on which the final payment of principal is scheduled
to be made to the Certificateholders, whether as a result of optional
reassignment to the Transferor or otherwise. Each Prospectus Supplement
specifies the final date on which principal and interest with respect to
the related Series of Certificates will be scheduled to be distributed (the
"Series Termination Date"); provided, however, that the Certificates may be
subject to prior termination as provided above. If the Investor Interest is
greater than zero on the Series Termination Date, the Trustee or Servicer
may be required to sell or cause to be sold certain Receivables in the
manner provided in the related Agreement and Series Supplement and to pay
the net proceeds of such sale and any collections on the Receivables, in an
amount at least equal to the sum of the Investor Interest and the
Enhancement Invested Amount, if any, with respect to such Series plus
accrued interest due thereon.
Unless the Servicer and the holder of the Transferor Certificate
instruct the Trustee otherwise, each Trust will terminate on the earlier of
(a) the day after the Distribution Date on which the aggregate Investor
Interest and Enhancement Invested Amount or Collateral Interest, if any,
with respect to each Series outstanding is zero, (b) October 26, 2045, or
(c) if the Receivables are sold, disposed of or liquidated following the
occurrence of an Insolvency Event, immediately following such sale,
disposition or liquidation (such date, the "Trust Termination Date"). Upon
the termination of each Trust and the surrender of the Transferor
Certificate, the Trustee shall convey to the holder of the Transferor
Certificate all right, title and interest of the Trust in and to the
Receivables and other funds of the Trust.
Pay Out Events
Unless otherwise specified in the related Prospectus Supplement, with
respect to each Series and any Class thereof, no principal will be payable
to Certificateholders until the Principal Commencement Date or the
Scheduled Payment Date with respect to such Series or Class. The "Revolving
Period," beginning on the date of issuance of the related Series (the
"Closing Date") and ending with the commencement of an Amortization Period
or an Accumulation Period, will continue through the date specified in the
related Prospectus Supplement unless a Pay Out Event occurs prior to such
date. A Pay Out Event occurs with respect to all Series issued by a Trust
upon the occurrence of any of the following events:
(a) certain events of insolvency, receivership or bankruptcy
relating to the Transferor or any holder of an interest in the
Transferor Certificate, as defined in the Agreement (an "Insolvency
Event") (including the Transferor Participation);
(b) the Transferor is unable for any reason to transfer
Receivables to such Trust in accordance with the provisions of the
related Agreement; or
(c) such Trust becomes subject to regulation as an "investment
company" within the meaning of the Investment Company Act of 1940, as
amended.
In addition, a Pay Out Event may occur with respect to any Series upon
the occurrence of any other event specified in the related Prospectus
Supplement. On the date on which a Pay Out Event is deemed to have
occurred, the Rapid Amortization Period or, if so specified in the related
Prospectus Supplement, the Rapid Accumulation Period will commence. If,
because of the occurrence of a Pay Out Event, the Rapid Amortization Period
begins earlier than the scheduled commencement of a Controlled Amortization
Period or prior to a Scheduled Payment Date, Certificateholders will begin
receiving distributions of principal earlier than they otherwise would
have, which may shorten the average life of the Certificates.
In addition to the consequences of a Pay Out Event discussed above,
unless otherwise specified in the related Prospectus Supplement, if an
Insolvency Event occurs with respect to the Transferor or any holder of an
interest in the Transferor Certificate (including the Transferor
Participation), on the day of such event (the "Appointment Date") the
Transferor will immediately cease to transfer Principal Receivables to the
Trust and promptly give notice to the Trustee of such event. If such event
occurs while any of the Series 1995-1 Certificates remain outstanding,
within 15 days, the Trustee will publish a notice of the liquidation or the
appointment stating that the Trustee intends to sell, dispose of, or
otherwise liquidate the Receivables in a commercially reasonable manner.
Unless otherwise instructed within a specified period by Certificateholders
representing undivided interests aggregating more than 50% of the Investor
Interest of each Series (or if any Series has more than one Class, of each
Class, and any holder of the Transferor Certificate (including any
Transferor Participation) with respect to which the Insolvency Event has
not occurred, each provider of Enhancement, if any, and any other person
entitled to give such instructions pursuant to any Series Supplement)
issued and outstanding, the Trustee will sell, dispose of, or otherwise
liquidate the Receivables in a commercially reasonable manner and on
commercially reasonable terms. If the Trustee is instructed not to
liquidate the Receivables as described in the preceding sentence, the
Trustee will retain the Receivables and apply collections thereon in
accordance with the Agreement; provided, however, that the Trustee shall
nevertheless liquidate any remaining Receivables no later than three years
after the Appointment Date. The proceeds from the sale, disposition or
liquidation of the Receivables will be treated as collections of the
Receivables and applied as specified above in "--Application of
Collections" and in the related Prospectus Supplement.
If the only Pay Out Event to occur is either the insolvency of the
Transferor or the appointment of a conservator or receiver for the
Transferor, the conservator or receiver may have the power to prevent the
early sale, liquidation or disposition of the Receivables and the
commencement of a Rapid Amortization Period or, if applicable with respect
to a Series as specified in the related Prospectus Supplement, a Rapid
Accumulation Period. In addition, a conservator or receiver may have the
power to cause the early sale of the Receivables and the early retirement
of the Certificates. See "Certain Legal Aspects of the Receivables--Certain
Matters Relating to Receivership."
Servicing Compensation and Payment of Expenses
For each Series of Certificates, the Servicer's compensation for its
servicing activities and reimbursement for its expenses will take the form
of the payment to it of the fee payable at the times and in the amounts
specified in the related Prospectus Supplement (the "Servicing Fee"). The
Investor Servicing Fee will be funded from collections of Finance Charge
Receivables allocated to the Investor Interest and will be paid each month,
or on such other specified periodic basis, from amounts so allocated and on
deposit in the Finance Charge Account (which, if so specified in the
related Prospectus Supplement, may include all or a portion of the
Interchange arising from the Accounts) or, in certain limited
circumstances, from amounts available from Enhancement and other sources,
if any. The remainder of the Servicing Fee for each Trust will be allocable
to the Transferor Interest, the Investor Interests of any other Series
issued by such Trust and the interest represented by the Collateral
Interest or the Enhancement Invested Amount, if any, with respect to such
Series, as described in the related Prospectus Supplement. Neither the
Trust nor the Certificateholders will have any obligation to pay the
portion of the Servicing Fee allocable to the Transferor Interest.
The Servicer will pay from its servicing compensation certain expenses
incurred in connection with servicing the Receivables including, without
limitation, payment of the fees and disbursements of the Trustee and
independent certified public accountants and other fees which are not
expressly stated in the Agreement to be payable by the related Trust or the
Certificateholders other than federal, state and local income and franchise
taxes, if any, of the Trust.
Certain Matters Regarding the Transferor and the Servicer
With respect to each Series of Certificates, the Servicer may not
resign from its obligations and duties under the related Agreement, except
upon determination that performance of its duties is no longer permissible
under applicable law. No such resignation will become effective until the
Trustee or a successor to the Servicer has assumed the Servicer's
responsibilities and obligations under the related Agreement (the Bank, or
any such successor servicer, is referred to herein as the "Servicer"). The
Bank, as initial Servicer, intends to delegate some of its servicing duties
to WOSC; however, such delegation will not relieve it of its obligation to
perform such duties in accordance with the related Agreement.
The Agreement and each New Agreement will provide that the Servicer
will indemnify the related Trust and Trustee from and against any
reasonable loss, liability, expense, damage or injury suffered or sustained
by reason of any acts or omissions or alleged acts or omissions of the
Servicer with respect to the activities of the Trust or the Trustee;
provided, however, that the Servicer shall not indemnify (a) the Trustee
for liabilities imposed by reason of fraud, negligence, or willful
misconduct by the Trustee in the performance of its duties under the
Agreement, (b) the Trust, the Certificateholders or the Certificate Owners
for liabilities arising from actions taken by the Trustee at the request of
Certificateholders, (c) the Trust, the Certificateholders or the
Certificate Owners for any losses, claims, damages or liabilities incurred
by any of them in their capacities as investors, including without
limitation, losses incurred as a result of defaulted Receivables or
Receivables which are written off as uncollectible, or (d) the Trust, the
Certificateholders or the Certificate Owners for any liabilities, costs or
expenses of the Trust, the Certificateholders or the Certificate Owners
arising under any tax law, including without limitation, any federal, state
or local income or franchise tax or any other tax imposed on or measured by
income (or any interest or penalties with respect thereto or arising from a
failure to comply therewith) required to be paid by the Trust, the
Certificateholders or the Certificate Owners in connection with the
Agreement to any taxing authority.
In addition, the Agreement and each New Agreement will provide that,
subject to certain exceptions, the Transferor and any holder of an interest
in the Transferor Certificate (including any Transferor Participation) will
indemnify an injured party for any losses, claims, damages or liabilities
(other than those incurred by a Certificateholder as an investor in the
Certificates) arising out of or based upon the arrangement created by the
Agreement as though the Agreement created a partnership under the Delaware
Uniform Partnership Law in which the Transferor and any such holder of an
interest in the Transferor Certificate (including any Transferor
Participation) are general partners.
The Agreement and each New Agreement will provide that neither the
Transferor nor the Servicer nor any of their respective directors,
officers, employees or agents will be under any other liability to the
related Trust, Trustee, Certificateholders or any other person for any
action taken, or for refraining from taking any action, in good faith
pursuant to the Agreement. Neither the Transferor, the Servicer, nor any of
their respective directors, officers, employees or agents will be protected
against any liability which would otherwise be imposed by reason of willful
misfeasance, bad faith or gross negligence of the Transferor, the Servicer
or any such person in the performance of its duties or by reason of
reckless disregard of obligations and duties thereunder. In addition, the
Agreement and each New Agreement will provide that the Servicer is not
under any obligation to appear in, prosecute or defend any legal action
which is not incidental to its servicing responsibilities under the
Agreement and which in its opinion may expose it to any expense or
liability.
The Agreement and each New Agreement will provide that, in addition to
Exchanges, if applicable, the Transferor may transfer its interest in all
or a portion of the Transferor Certificate, provided that prior to any such
transfer (a) the Trustee receives written notification from each Rating
Agency that such transfer will not result in a lowering of its
then-existing rating of the Certificates of each outstanding Series rated
by it and (b) the Trustee receives a Tax Opinion.
Any person into which, in accordance with each Agreement, the
Transferor or the Servicer may be merged or consolidated or any person
resulting from any merger or consolidation to which the Transferor or the
Servicer is a party, or any person succeeding to the business of the
Transferor or the Servicer will, upon compliance with the applicable
provisions of the Agreement, be the successor to the Transferor or the
Servicer, as the case may be, under the Agreement.
Servicer Default
In the event of any Servicer Default (as defined below), either the
Trustee or Certificateholders representing undivided interests aggregating
more than 50% of the Investor Interests for all Series of Certificates of
the related Trust, by written notice to the Servicer (and to the Trustee if
given by the Certificateholders), may terminate all of the rights and
obligations of the Servicer as servicer under the Agreement and in and to
the Receivables and the proceeds thereof and the Trustee may appoint a new
Servicer (a "Service Transfer"). The rights and interest of the Transferor
under the related Agreement and in the Transferor Interest will not be
affected by such termination. The related Trustee shall as promptly as
possible appoint a successor Servicer. If no such Servicer has been
appointed and has accepted such appointment by the time the Servicer ceases
to act as Servicer, all authority, power and obligations of the Servicer
under the Agreement shall pass to and be vested in the Trustee. If the
Trustee is unable to obtain any bids from eligible servicers and the
Servicer delivers an officer's certificate to the effect that it cannot in
good faith cure the Servicer Default which gave rise to a transfer of
servicing, and if the Trustee is legally unable to act as successor
Servicer, then the Trustee shall give the Transferor the right of first
refusal to purchase the Receivables on terms equivalent to the best
purchase offer as determined by the Trustee.
"Servicer Default" under any Agreement refers to any of the following
events:
(a) failure by the Servicer to make any payment, transfer or
deposit, or to give instructions to the Trustee to make certain
payments, transfers or deposits, on the date the Servicer is required
to do so under the related Agreement or any Series Supplement (or
within the applicable grace period, which shall not exceed 10 business
days);
(b) failure on the part of the Servicer duly to observe or perform
in any respect any other covenants or agreements of the Servicer which
has a material adverse effect on the Certificateholders of any Series
issued and outstanding under such Trust and which continues unremedied
for a period of 60 days after written notice and continues to have a
material adverse effect on such Certificateholders; or the delegation
by the Servicer of its duties under the Agreement, except as
specifically permitted thereunder;
(c) Any representation, warranty or certification made by the
Servicer in the Agreement, or in any certificate delivered pursuant to
the Agreement, proves to have been incorrect when made which has a
material adverse effect on the Certificateholders of any Series issued
and outstanding under such Trust, and which continues to be incorrect
in any material respect for a period of 60 days after written notice
and continues to have a material adverse effect on such
Certificateholders;
(d) the occurrence of certain events of bankruptcy, insolvency or
receivership of the Servicer; or
(e) such other event specified in the related Prospectus
Supplement.
Unless otherwise stated in the related Prospectus Supplement,
notwithstanding the foregoing, a delay in or failure of performance
referred to in clause (a) above for a period of 10 business days, or
referred to under clause (b) or (c) for a period of 60 business days, shall
not constitute a Servicer Default if such delay or failure could not be
prevented by the exercise of reasonable diligence by the Servicer and such
delay or failure was caused by an act of God or other similar occurrence.
Upon the occurrence of any such event, the Servicer shall not be relieved
from using its best efforts to perform its obligations in a timely manner
in accordance with the terms of the Agreement, and the Servicer shall
provide the Trustee, any provider of Enhancement, the Transferor and the
holders of Certificates of each Series issued and outstanding under the
related Trust prompt notice of such failure or delay by it, together with a
description of the cause of such failure or delay and its efforts to
perform its obligations.
In the event of a Servicer Default, if a conservator or receiver is
appointed for the Servicer and no Servicer Default other than such
conservatorship or receivership or the insolvency of the Servicer exists,
the conservator or receiver may have the power to prevent either the
Trustee or the majority of the Certificateholders from effecting a Service
Transfer.
Reports to Certificateholders
Unless otherwise specified in the related Prospectus Supplement, for
each Series of Certificates, on each Distribution Date, or as soon
thereafter as is practicable, as specified in the related Prospectus
Supplement, the Trustee as the paying agent (the "Paying Agent") will
forward to each Certificateholder of record a statement prepared by the
Servicer setting forth, among other things: (a) the total amount
distributed, (b) the amount of the distribution on such Distribution Date
allocable to principal on the Certificates, (c) the amount of such
distribution allocable to interest on the Certificates, (d) the amount of
collections of Principal Receivables processed during the preceding month
or months since the last Distribution Date and allocated in respect of the
Certificates, (e) the aggregate amount of Principal Receivables, the
Investor Interest and the Investor Interest as a percentage of the
aggregate amount of the Principal Receivables in the Trust as of the end of
the last day of the preceding Monthly Period or Periods since the last
Distribution Date, (f) the aggregate outstanding balance of Accounts which
are 30-59, 60-89 and 90 or more days delinquent (or a similar
classification of delinquency) as of the end of the last day of the
preceding Monthly Period or Periods since the last Distribution Date, (g)
the aggregate Investor Default Amount for the preceding Monthly Period or
Periods since the last Distribution Date, (h) the amount of Investor
Charge-Offs for the preceding Monthly Period or Periods since the last
Distribution Date and the amount of reimbursements of previous Investor
Charge-Offs for the preceding Monthly Period or Periods since the last
Distribution Date, (i) the amount of the Investor Servicing Fee for the
preceding Monthly Period or Periods since the last Distribution Date, (j)
the amount available under any Enhancement and Credit Enhancement, if any,
as of the close of business on such Distribution Date, (k) the "pool
factor" as of the end of the related Record Date (consisting of a
seven-digit decimal expressing the ratio of the Investor Interest to the
initial Investor Interest), (1) the aggregate amount of collections on
Finance Charge Receivables and annual membership fees processed during the
preceding Monthly Period or Periods since the last Distribution Date, (m)
the portfolio yield for the preceding Monthly Period or Periods since the
last Distribution Date, and (n) certain information relating to the
floating or variable Certificate Rates, if applicable, for the Monthly
Period or Periods ending on such Distribution Date. In the case of a Series
of Certificates having more than one Class, the statements forwarded to
Certificateholders will provide information as to each Class of
Certificates, as appropriate.
On or before January 31 of each calendar year or such other date as
specified in the related Prospectus Supplement, the Paying Agent will
furnish to each person who at any time during the preceding calendar year
was a Certificateholder of record, a statement prepared by the Servicer
containing the information required to be contained in the regular monthly
report to Certificateholders, as set forth in clauses (a), (b) and (c)
above aggregated for such calendar year or the applicable portion thereof
during which such person was a Certificateholder, together with such other
customary information (consistent with the treatment of the Certificates as
debt) as the Trustee or the Servicer deems necessary or desirable to enable
the Certificateholders to prepare their United States tax returns.
Evidence as to Compliance
The Agreement and each New Agreement will provide that on or before
October 31 of each calendar year or such other date as specified in the
related Prospectus Supplement, the Servicer will cause a firm of
independent certified public accountants to furnish a report to the effect
that such accounting firm has made a study and evaluation of the Servicer's
internal accounting controls relative to the servicing of the Accounts and
that, on the basis of such examination, such firm is of the opinion that,
assuming the accuracy of reports by the Servicer's third party agents, the
system of internal accounting controls in effect on the date of such
statement relating to servicing procedures performed by the Servicer, taken
as a whole, was sufficient for the prevention and detection of errors and
irregularities in amounts that would be material to the financial
statements of the Servicer and that such servicing was conducted in
compliance with the sections of the related Agreement during the period
covered by such report (which shall be the period from October 1 (or for
the initial period, the relevant Closing Date) of the preceding calendar
year to and including September 30 of such calendar year), except for such
exceptions or errors as such firm shall believe to be immaterial and such
other exceptions as shall be set forth in such statement.
The Agreement and each New Agreement will provide for delivery to the
Trustee on or before October 31 of each calendar year or such other date as
specified in the related Prospectus Supplement, of an annual statement
signed by an officer of the Servicer to the effect that the Servicer has
fully performed its obligations under the Agreement throughout the
preceding year, or, if there has been a default in the performance of any
such obligation, specifying the nature and status of the default.
Amendments
Each Agreement and any Series Supplement may be amended by the
Transferor, the Servicer and the related Trustee, without the consent of
Certificateholders of any Series then outstanding, for any purpose,
provided that (i) the Transferor delivers to the Trustee a certificate of
an authorized officer of the Transferor to the effect that such amendment
will not adversely affect in any material respect the interest of such
Certificateholders, (ii) the Transferor delivers a Tax Opinion to the
Trustee and (iii) such amendment will not result in a withdrawal or
reduction of the rating of any outstanding Series under the related Trust
by any Rating Agency. Such an amendment may be entered into in order to
comply with or obtain the benefits of certain recent and future tax
legislation (such as legislation creating FASITs), as described below under
"Certain U.S. Federal Income Tax Consequences--FASIT Legislation."
Each Agreement and the related Series Supplement may be amended by the
Transferor, the Servicer and the related Trustee with the consent of the
holders of Certificates evidencing undivided interests aggregating not less
than 662/3% (or such other percentage specified in the related Prospectus
Supplement) of the Investor Interests for all Series of the related Trust,
for the purpose of adding any provisions to, changing in any manner or
eliminating any of the provisions of the Agreement or the related Series
Supplement or of modifying in any manner the rights of Certificateholders
of any outstanding Series of the Trust. No such amendment, however, may (a)
reduce in any manner the amount of, or delay the timing of, distributions
required to be made on the related Series or any Series, (b) change the
definition of or the manner of calculating the interest of any
Certificateholder of such Series or any Certificateholder of any other
Series issued by the Trust or (c) reduce the aforesaid percentage of
undivided interests the holders of which are required to consent to any
such amendment, in each case without the consent of all Certificateholders
of the related Series and Certificateholders of all Series adversely
affected. Promptly following the execution of any amendment to the
Agreement, the Trustee will furnish written notice of the substance of such
amendment to each Certificateholder. Any Series Supplement and any
amendments regarding the addition or removal of Receivables or
Participations from the Trust will not be considered an amendment requiring
Certificateholder consent under the provisions of the related Agreement and
any Series Supplement.
List of Certificateholders
With respect to each Series of Certificates, upon written request of
Certificateholders of record representing undivided interests in the Trust
aggregating not less than 10% (or such other percentage specified in the
related Prospectus Supplement) of the Investor Interest, the Trustee after
having been adequately indemnified by such Certificateholders for its costs
and expenses, and having given the Servicer notice that such request has
been made, will afford such Certificateholders access during business hours
to the current list of Certificateholders of the Trust for purposes of
communicating with other Certificateholders with respect to their rights
under the Agreement. See "--Book-Entry Registration" and "--Definitive
Certificates" above.
The Trustee
The Prospectus Supplement for each Series specifies the Trustee under
the related Agreement. The Transferor, the Servicer and their respective
affiliates may, from time to time, enter into normal banking and trustee
relationships with the Trustee and its affiliates. The Trustee, the
Transferor, the Servicer and any of their respective affiliates may hold
Certificates in their own names. In addition, for purposes of meeting the
legal requirements of certain local jurisdictions, the Trustee shall have
the power to appoint a co-trustee or separate trustees of all or any part
of the Trust. In the event of such appointment, all rights, powers, duties
and obligations conferred or imposed upon the Trustee by the Agreement
shall be conferred or imposed upon the Trustee and such separate trustee or
co-trustee jointly, or, in any jurisdiction in which the Trustee shall be
incompetent or unqualified to perform certain acts, singly upon such
separate trustee or co-trustee who shall exercise and perform such rights,
powers, duties and obligations solely at the direction of the Trustee.
The Trustee may resign at any time, in which event the Transferor will
be obligated to appoint a successor Trustee. The Transferor may also remove
the Trustee if the Trustee ceases to be eligible to continue as such under
the Agreement or if the Trustee becomes insolvent. In such circumstances,
the Transferor will be obligated to appoint a successor Trustee. Any
resignation or removal of the Trustee and appointment of a successor
Trustee does not become effective until acceptance of the appointment by
the successor Trustee.
Credit Enhancement
General
For any Series, Credit Enhancement may be provided with respect to one
or more Classes thereof. Credit Enhancement may be in the form of the
subordination of one or more Classes of the Certificates of such Series,
the establishment of a cash collateral guaranty or account, a collateral
interest, a letter of credit, a surety bond, an insurance policy, a spread
account, a reserve account, the use of cross-support features or another
method of Credit Enhancement described in the related Prospectus
Supplement, or any combination of the foregoing. If so specified in the
related Prospectus Supplement, any form of Credit Enhancement may be
structured so as to be drawn upon by more than one Class to the extent
described therein. The term "Enhancement" means, with respect to any Series
or Class thereof, any Credit Enhancement, guaranteed rate agreement,
maturity liquidity facility, interest rate cap agreement, interest rate
swap agreement or other similar arrangement for the benefit of the
Certificateholders of such Series or Class. The term "Credit Enhancement"
means, with respect to any Series or Class thereof, any cash collateral
guaranty or account, collateral interest, letter of credit, surety bond,
insurance policy, spread account, reserve account or other similar
arrangement for the benefit of the Certificateholders of such Series or
Class. Credit Enhancement may also take the form of subordination of one or
more Classes of a Series to any other Class or Classes of a Series or a
cross-support feature which requires collections on Receivables of one
Series to be paid as principal and/or interest with respect to another
Series.
Unless otherwise specified in the related Prospectus Supplement for a
Series, the Credit Enhancement will not provide protection against all
risks of loss and will not guarantee repayment of the entire principal
balance of the Certificates and interest thereon. If losses occur which
exceed the amount covered by the Credit Enhancement or which are not
covered by the Credit Enhancement, Certificateholders will bear their
allocable share of deficiencies.
If Credit Enhancement is provided with respect to a Series, the related
Prospectus Supplement includes a description of (a) the amount payable
under such Credit Enhancement, (b) any conditions to payment thereunder not
otherwise described herein, (c) the conditions (if any) under which the
amount payable under such Credit Enhancement may be reduced and under which
such Credit Enhancement may be terminated or replaced and (d) any material
provision of any agreement relating to such Credit Enhancement.
Additionally, the related Prospectus Supplement may set forth certain
information with respect to any provider of Credit Enhancement (a "Credit
Enhancement Provider"), including (i) a brief description of its principal
business activities, (ii) its principal place of business, place of
incorporation and the jurisdiction under which it is chartered or licensed
to do business, (iii) if applicable, the identity of regulatory agencies
which exercise primary jurisdiction over the conduct of its business and
(iv) its total assets, and its stockholders' or policy holders' surplus, if
applicable, and other appropriate financial information as of the date
specified in the Prospectus Supplement. If so specified in the related
Prospectus Supplement, Credit Enhancement with respect to a Series may be
available to pay principal of the Certificates of such Series following the
occurrence of certain Pay Out Events with respect to such Series. In such
event, the Credit Enhancement Provider may have an interest in certain cash
flows in respect of the Receivables to the extent described in such
Prospectus Supplement (the "Enhancement Invested Amount").
Subordination
If so specified in the related Prospectus Supplement, one or more
Classes of any Series will be subordinated as described in the related
Prospectus Supplement to the extent necessary to fund payments with respect
to the Senior Certificates. The rights of the holders of any such
Subordinated Certificates to receive distributions of principal and/or
interest on any Distribution Date for such Series will be subordinate in
right and priority to the rights of the holders of Senior Certificates, but
only to the extent set forth in the related Prospectus Supplement. If so
specified in the related Prospectus Supplement, subordination may apply
only in the event of certain types of losses not covered by another Credit
Enhancement. The related Prospectus Supplement also sets forth any
applicable information concerning the amount of subordination of a Class or
Classes of Subordinated Certificates in a Series, the circumstances in
which such subordination will be applicable, the manner, if any, in which
the amount of subordination will decrease over time, and the conditions
under which amounts available from payments that would otherwise be made to
holders of such Subordinated Certificates will be distributed to holders of
Senior Certificates. If collections of Receivables otherwise distributable
to holders of a subordinated Class of a Series will be used as support for
a Class of another Series, the related Prospectus Supplement specifies the
manner and conditions for applying such a cross-support feature.
Cash Collateral Guaranty or Account
If so specified in the related Prospectus Supplement, support for a
Series or one or more Classes thereof will be provided by a guaranty (the
"Cash Collateral Guaranty") secured by the deposit of cash or certain
permitted investments in an account (the "Cash Collateral Account")
reserved for the beneficiaries of the Cash Collateral Guaranty or by a Cash
Collateral Account alone. The amount available pursuant to the Cash
Collateral Guaranty or the Cash Collateral Account will be the lesser of
amounts on deposit in the Cash Collateral Account and an amount specified
in the related Prospectus Supplement. The related Prospectus Supplement
sets forth the circumstances under which payments are made to beneficiaries
of the Cash Collateral Guaranty from the Cash Collateral Account or from
the Cash Collateral Account directly.
Collateral Interest
If so specified in the related Prospectus Supplement, support for a
Series or one or more Classes thereof will be provided initially by an
undivided interest in the Trust (the "Collateral Interest") in an amount
initially equal to a percentage of the Certificates of such Series as
specified in the Prospectus Supplement. Such Series may also have the
benefit of a Cash Collateral Guaranty or Cash Collateral Account with an
initial amount on deposit therein, if any, as specified in the related
Prospectus Supplement which will be increased (i) to the extent the
Transferor elects, subject to certain conditions specified in such
Prospectus Supplement, to apply collections of Principal Receivables
allocable to the Collateral Interest to decrease the Collateral Interest,
(ii) to the extent collections of Principal Receivables allocable to the
Collateral Interest are required to be deposited into the Cash Collateral
Account as specified in such Prospectus Supplement and (iii) to the extent
excess collections of Finance Charge Receivables are required to be
deposited into the Cash Collateral Account as specified in such Prospectus
Supplement. The total amount of the Credit Enhancement available pursuant
to the Collateral Interest and, if applicable, the Cash Collateral Guaranty
or Cash Collateral Account will be the lesser of the sum of the Collateral
Interest and the amount on deposit in the Cash Collateral Account and an
amount specified in the related Prospectus Supplement. The related
Prospectus Supplement sets forth the circumstances under which payments
which otherwise would be made to holders of the Collateral Interest will be
distributed to holders of Certificates and, if applicable, the
circumstances under which payment will be made under the Cash Collateral
Guaranty or under the Cash Collateral Account.
Letter of Credit
If so specified in the related Prospectus Supplement, support for a
Series or one or more Classes thereof will be provided by one or more
letters of credit. A letter of credit may provide limited protection
against certain losses in addition to or in lieu of other Credit
Enhancement. The issuer of the letter of credit will be obligated to honor
demands with respect to such letter of credit, to the extent of the amount
available thereunder, to provide funds under the circumstances and subject
to such conditions as are specified in the related Prospectus Supplement.
The maximum liability of the issuer of the letter of credit under such
letter of credit will generally be an amount equal to a percentage
specified in the related Prospectus Supplement of the initial Investor
Interest of a Series or a Class of such Series. The maximum amount
available at any time to be paid under a letter of credit will be
determined in the manner specified therein and in the related Prospectus
Supplement.
Surety Bond or Insurance Policy
If so specified in the related Prospectus Supplement, insurance with
respect to a Series or one or more Classes thereof will be provided by one
or more insurance companies. Such insurance will guarantee, with respect to
one or more Classes of the related Series, distributions of interest or
principal in the manner and amount specified in the related Prospectus
Supplement. If so specified in the related Prospectus Supplement, a surety
bond will be purchased for the benefit of the holders of any Series or
Class of such Series to assure distributions of interest or principal with
respect to such Series or Class of Certificates in the manner and amount
specified in the related Prospectus Supplement.
Spread Account
If so specified in the related Prospectus Supplement, support for a
Series or one or more Classes thereof will be provided by the periodic
deposit of certain available excess cash flow from the Trust assets into an
account (the "Spread Account") intended to assist with subsequent
distribution of interest and principal on the Certificates of such Class or
Series in the manner specified in the related Prospectus Supplement.
Reserve Account
If so specified in the related Prospectus Supplement, support for a
Series or one or more Classes thereof or any Enhancement related thereto
will be provided by the establishment of a reserve account (the "Reserve
Account"). The Reserve Account may be funded, to the extent provided in the
related Prospectus Supplement, by an initial cash deposit, the retention of
certain periodic distributions of principal or interest or both otherwise
payable to one or more Classes of Certificates, including the Subordinated
Certificates, or the provision of a letter of credit, guaranty, insurance
policy or other form of credit or any combination thereof. The Reserve
Account will be established to assist with the subsequent distribution of
principal or interest on the Certificates of such Series or Class thereof
or such other amount owing on any Enhancement thereto in the manner
provided in the related Prospectus Supplement.
Certificate Ratings
Any rating of the Certificates by a Rating Agency will indicate:
o its view on the likelihood that Certificateholders will
receive required interest and principal payments; and
o its evaluation of the Receivables and the availability
of any Enhancement for the Certificates.
Among the things a rating will not indicate are:
o the likelihood that principal payments will be made on a
scheduled payment date;
o the likelihood that a Pay Out Event will occur;
o the likelihood that a United States withholding tax will be
imposed on non-U.S. Certificateholders;
o the marketability of the Certificates;
o the market price of the Certificates; or
o whether the Certificates are an appropriate investment for
any purchaser.
A rating will not be a recommendation to buy, sell or hold the
Certificates. A rating may be lowered or withdrawn at any time by a Rating
Agency.
The Transferor will request a rating of the Certificates offered by
this Prospectus and the related Prospectus Supplement from at least one
Rating Agency. It will be a condition to the issuance of the Certificates
of each Series or Class offered pursuant to this Prospectus and the related
Prospectus Supplement (including each Series that includes a Pre-Funding
Account) that they be rated in one of the four highest rating categories by
at least one nationally recognized rating organization (each such rating
agency selected by the Transferor to rate any Series, a "Rating Agency").
The rating or ratings applicable to the Certificates of each Series or
Class offered hereby will be set forth in the related Prospectus
Supplement. Rating agencies other than those requested could assign a
rating to the Certificates and such a rating could be lower than any rating
assigned by a Rating Agency chosen by the Transferor.
Certain Legal Aspects of the Receivables
Transfer of Receivables
The Transferor will represent and warrant in the Agreement and each New
Agreement that the transfer of Receivables by it to the related Trust is
either a valid transfer and assignment to such Trust of all right, title
and interest of the Transferor in and to the related Receivables, except
for the interest of the Transferor as holder of the Transferor Certificate,
or the grant to the Trust of a security interest in such Receivables. The
Transferor also will represent and warrant in the Agreement and each New
Agreement that, in the event the transfer of Receivables by the Transferor
to the related Trust is deemed to create a security interest under the
Uniform Commercial Code, as in effect in the State of Delaware (the "UCC"),
there will exist a valid, subsisting and enforceable first priority
perfected security interest in such Receivables created thereafter in favor
of such Trust on and after their creation, except for certain tax and other
governmental liens. For a discussion of the Trust's rights arising from a
breach of these warranties, see "Description of the
Certificates--Representations and Warranties."
The Transferor will represent as to Receivables to be conveyed that the
Receivables are "accounts" for purposes of the UCC. Both the transfer and
assignment of accounts and the transfer of accounts as security for an
obligation are treated under Article 9 of the UCC as creating a security
interest therein and are subject to its provisions, and the filing of an
appropriate financing statement is required to perfect the security
interest of the related Trust. Financing statements covering the
Receivables have been and will be filed with the appropriate governmental
authority to protect the interests of the related Trust in the Receivables.
There are certain limited circumstances under the UCC in which a prior
or subsequent transferee of Receivables coming into existence after a
Closing Date could have an interest in such Receivables with priority over
such Trust's interest. Under the Agreement and each New Agreement, however,
the Transferor will represent and warrant that it transferred the
Receivables to the Trust free and clear of the lien of any third party. In
addition, the Transferor will covenant that it will not sell, pledge,
assign, transfer or grant any lien on any Receivable (or any interest
therein) other than to the Trust. A tax or government lien or other
nonconsensual lien on property of the Transferor arising prior to the time
a Receivable comes into existence may also have priority over the interest
of the Trust in such Receivable. In addition, if the FDIC were appointed as
receiver of the Transferor, certain administrative expenses of the receiver
may also have priority over the interest of the Trust in such Receivable.
Certain Matters Relating to Receivership
The Federal Deposit Insurance Act ("FDIA"), as amended by the Financial
Institutions Reform, Recovery and Enforcement Act of 1989 ("FIRREA"), sets
forth certain powers that the Federal Deposit Insurance Corporation
("FDIC") could exercise if it were appointed as conservator or receiver of
the Transferor or the Servicer. Among other things, the FDIA grants such a
conservator or receiver the power to repudiate contracts of, and to request
a stay of up to 90 days of any judicial action or proceeding involving, the
Transferor or the Servicer.
To the extent that (i) the Transferor granted a security interest in
the Receivables to the Trust, (ii) the interest was validly perfected
before the Transferor's insolvency, (iii) the interest was not taken or
granted in contemplation of the Transferor's insolvency or with the intent
to hinder, delay or defraud the Transferor or its creditors, (iv) the
Agreement is continuously a record of the Bank, and (v) the Agreement
represents a bona fide and arm's length transaction undertaken for adequate
consideration in the ordinary course of business and that the Trustee is
the secured party and is not an insider or affiliate of the Transferor,
such valid perfected security interest of the Trustee should be enforceable
(to the extent of the Trust's "actual direct compensatory damages")
notwithstanding the insolvency of, or the appointment of a receiver or
conservator for, the Transferor and payments to the Trust with respect to
the Receivables (up to the amount of such damages) should not be subject to
an automatic stay of payment or to recovery by the FDIC as conservator or
receiver of the Transferor. If, however, the FDIC were to assert that the
security interest was unperfected or unenforceable or were to require the
Trustee to establish its right to those payments by submitting to and
completing the statutory administrative claims procedure established under
FIRREA or the FDIC as conservator or receiver were to request a stay of
proceedings with respect to the Transferor as provided under FIRREA, delays
in payments on the Certificates and possible reductions in the amount of
those payments could occur. The FDIA does not define the term "actual
direct compensatory damages." The FDIC has stated that a claim for "actual
direct compensatory damages" is limited to such damages determined as of
the date of appointment of the FDIC as conservator or receiver. Since the
FDIC may delay repudiation or disaffirmation for up to 180 days following
such appointment, investors may not have a claim for interest accrued
during this 180 day period. On December 18, 1998, the FDIC proposed a
statement of policy regarding the treatment of asset-backed securitization
transactions in the event of conservatorship or receivership. In addition,
in one case involving the repudiation by the Resolution Trust Corporation
of certain secured zero-coupon bonds issued by a savings association, a
United States federal district court held that "actual direct compensatory
damages" in the case of a marketable security meant the market value of the
repudiated bonds as of the date of repudiation. If that court's view were
applied to determine the Trust's "actual direct compensatory damages" in
the event the FDIC repudiated the Transferor's obligations under the
Agreement, the amount paid to Certificateholders could, depending upon
circumstances existing on the date of the repudiation, be less than the
principal of the Certificates and the interest accrued thereon to the date
of payment.
The Agreement provides that, upon the appointment of a conservator or
receiver or upon a voluntary liquidation with respect to the Transferor,
the Transferor will promptly give notice thereof to the Trustee and a Pay
Out Event will occur with respect to all Series then outstanding. Pursuant
to the Agreement, newly created Principal Receivables would not be
transferred to the Trust on and after any such appointment or voluntary
liquidation, and the Trustee would proceed to sell, dispose of or otherwise
liquidate the Receivables in a commercially reasonable manner and on
commercially reasonable terms, unless otherwise instructed within a
specified period by holders of certificates representing undivided
interests aggregating more than 50% of the investor interest of each
outstanding Series (or with respect to each Series with two or more
Classes, 50% of each Class), or unless otherwise required by the FDIC as
receiver or conservator of the Transferor. Under the Agreement, the
proceeds from the sale of the Receivables allocable to the Certificates
would be treated as collections of the Receivables and would be distributed
to the Certificateholders. This procedure could be delayed, as described
above. If the only Pay Out Event to occur is either the insolvency of the
Transferor or the appointment of a conservator or receiver for the
Transferor, the FDIC as conservator or receiver may have the power to
prevent the early sale, liquidation or disposition of the Receivables and
the commencement of the Rapid Amortization Period. See "Description of the
Certificates--Pay Out Events."
If, upon the insolvency of the Servicer, the Servicer were to be placed
into conservatorship or receivership, the FDIC as conservator or receiver
would have the power to repudiate and refuse to perform any obligations,
including servicing obligations, of the Servicer under the Agreement or any
other contract, and to request a stay of up to 90 days of any judicial
action or proceeding involving the Servicer. In the event of a Servicer
Default, if the FDIC were appointed as conservator or receiver for the
Servicer, and no Servicer Default other than such conservatorship or
receivership or insolvency of the Servicer exists, the FDIC may have the
power to prevent a transfer of servicing to a successor Servicer or to
appoint a successor Servicer chosen by the FDIC.
In Octagon Gas Systems, Inc. v. Rimmer, 995 F.2d 948 (10th Cir. 1993),
cert. denied, 114 S. Ct. 554 (1993) ("Octagon"), the United States Court of
Appeals for the 10th Circuit suggested that even where a transfer of
accounts from a seller to a buyer constitutes a "true sale," the accounts
would nevertheless constitute property of the seller's bankruptcy estate in
a bankruptcy of the seller. If the Transferor were to be placed into
receivership and a court were to follow the Octagon court's reasoning,
Certificateholders might experience delays in payment or possibly losses in
their investment in the Certificates. Counsel has advised the Transferor
that the facts of the Octagon case are distinguishable from those in the
sale transactions between the Transferor and the Trust and that the
reasoning of the Octagon case appears to be inconsistent with established
precedent and the UCC. In addition, because the Transferor, the Trust and
the transactions governed by the Agreement do not have any particular link
to the 10th Circuit, it is unlikely that the Transferor would be subject to
a receivership proceeding in the 10th Circuit. Accordingly, the Octagon
case should not be binding precedent on a court in a receivership
proceeding.
Consumer Protection Laws
The relationship of the cardholder and credit card issuer is
extensively regulated by Federal and state consumer protection laws. With
respect to credit cards issued by the Bank, the most significant of these
laws include the Federal Truth in Lending Act, Equal Credit Opportunity
Act, Fair Debt Collection Practices Act, Fair Credit Reporting Act and
Electronic Funds Transfer Act. These statutes impose disclosure
requirements when a credit card account is advertised, when it is opened,
at the end of monthly billing cycles, upon account renewal for accounts on
which annual fees are assessed, and at year end and, in addition, limit
cardholder liability for unauthorized use, prohibit certain discriminatory
practices in extending credit, and impose certain limitations on the type
of account- related charges that may be assessed. Federal legislation
requires credit card issuers to disclose to consumers the interest rates,
annual cardholder fees, grace periods, balance calculation methods, and
other features associated with their credit card accounts. Cardholders are
entitled under current law to have payments and credits applied to the
credit card account promptly, to receive prescribed notices and to have
billing errors resolved promptly.
The Trust may be liable for certain violations of consumer protection
laws that apply to the Receivables, either as assignee of the Transferor
with respect to obligations arising before transfer of the Receivables to
the Trust or as a party directly responsible for obligations arising after
the transfer. In addition, a cardholder may be entitled to assert such
violations by way of set-off against his obligation to pay the amount of
Receivables owing. The Transferor covenants in the Agreement to accept the
transfer of all Receivables in an Account if any Receivable in such Account
has not been created in compliance with the requirements of such laws. The
Bank has also agreed in the Agreement to indemnify the Trust for, among
other things, any liability arising from such violations. See "Description
of the Certificates--Representations and Warranties."
Various proposed laws and amendments to existing laws have from time to
time been introduced in Congress and certain state and local legislatures
that, if enacted, would further regulate the credit card industry, certain
of which would, among other things, impose a ceiling on the rate at which a
financial institution may assess finance charges and fees on credit card
accounts that would be substantially below the rates of the finance charges
and fees the Bank currently assesses on its accounts. In particular, on May
5, 1999 an amendment to the Federal Truth-in-Lending Act was passed by the
House of Representatives as a part of the bankruptcy reform bill and
referred to the Senate. This amendment, among other things, requires (i)
disclosure as to the time it would take a consumer to repay a balance in
the consumer makes only the minimum payments, (ii) disclosure as to when
any introductory rate will expire, as well as the rate that will then apply
and (iii) disclose in internet based solicitations identical to that
contained in direct mail solicitations. In addition, on May 4, 1999,
President Clinton proposed similar legislation to require additional
disclosure in credit cards bills and solicitations.
The potential effect of any legislation which limits the amount of
finance charges and fees that may be charged on credit cards could be to
reduce the portfolio yield on the Accounts. If such portfolio yield is
reduced, a Pay Out Event may occur and the Rapid Amortization Period would
commence.
The Soldiers' and Sailors' Civil Relief Act of 1940 allows individuals
on active duty in the military to cap the interest rate on debts incurred
before the call to active duty to 6% per annum. In addition, subject to
judicial discretion, any action or court proceeding in which an individual
in military service is involved may be stayed if the individual's rights
would be prejudiced by denial of such stay.
Application of Federal and state bankruptcy and debtor relief laws
would affect the interests of the Certificateholders if such laws result in
any Receivables being written off as uncollectible when the applicable
Enhancement is equal to zero. See "Description of the
Certificates--Defaulted Receivables; Rebates and Fraudulent Charges;
Investor Charge-Offs."
Industry Litigation
In October 1998, the United States Department of Justice (the "DOJ")
filed an antitrust lawsuit in federal court in New York City against VISA
U.S.A., Inc., VISA International Inc. (together, "VISA") and MasterCard
International Incorporated ("MasterCard International") alleging that the
two credit card associations restrain competition and limit consumer
choice. The DOJ in such lawsuit challenges, among other things, the control
of both VISA and MasterCard International by the same set of banks, the
ability of banks to issue both MasterCard and VISA cards as well as the
rules adopted by the two associations prohibiting members from offering
credit cards of certain competitors. In public statements, both VISA and
MasterCard International have contested the DOJ's allegations. The Bank is
unable to predict the effect of such lawsuit on the Bank's credit card
business. A final adverse decision against VISA and MasterCard
International, or a similar settlement with the DOJ by the two
associations, could result in changes in the current associations and the
Bank's ability to issue both MasterCard and VISA cards as well as cards of
certain other competitors.
Certain U.S. Federal Income Tax Consequences
General
The following discussion, summarizing certain anticipated U.S. Federal
income tax aspects of the purchase, ownership and disposition of the
Certificates of a Series, is based upon the provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), proposed, temporary and
final Treasury regulations thereunder, and published rulings and court
decisions in effect as of the date hereof, all of which are subject to
change, possibly retroactively. This discussion does not address every
aspect of the Federal income tax laws that may be relevant to Certificate
Owners of a Series in light of their personal investment circumstances or
to certain types of Certificate Owners of a Series subject to special
treatment under the U.S. Federal income tax laws (for example, banks and
life insurance companies). Each prospective Certificate Owner is urged to
consult its own tax advisor in determining the Federal, state, local and
foreign income and any other tax consequence of the purchase, ownership and
disposition of a Certificate.
Characterization of the Certificates as Indebtedness
Unless otherwise specified in the related Prospectus Supplement,
special tax counsel to the Bank ("Special Tax Counsel") will, upon issuance
of a Series of Certificates, advise the Bank based on the assumptions and
qualifications set forth in the opinion that the Certificates of such
Series that are offered pursuant to a Prospectus Supplement (the "Offered
Certificates;" and for purposes of this section "Certain U.S. Federal
Income Tax Consequences," the term "Certificate Owner" refers to a holder
of a beneficial interest in an Offered Certificate) will be treated as
indebtedness for Federal income tax purposes. However, opinions of counsel
are not binding on the Internal Revenue Service (the "IRS") and there can
be no assurance that the IRS could not successfully challenge this
conclusion.
The Transferor expresses in the Agreement its intent that for Federal,
state and local income or franchise tax purposes, the Offered Certificates
of each Series will be indebtedness secured by the Receivables. The
Transferor agrees and each Certificateholder and Certificate Owner, by
acquiring an interest in an Offered Certificate, agrees or will be deemed
to agree to treat the Offered Certificates of such Series as indebtedness
for Federal, state and local income or franchise tax purposes. However,
because different criteria are used to determine the non-tax accounting
characterization of the transactions contemplated by the Agreement, the
Transferor expects to treat such transaction, for regulatory and financial
accounting purposes, as a sale of an ownership interest in the Receivables
and not as a secured loan.
In general, whether for Federal income tax purposes a transaction
constitutes a sale of property or a loan, the repayment of which is secured
by the property, is a question of fact, the resolution of which is based
upon the economic substance of the transaction rather than its form or the
manner in which it is labeled. While the IRS and the courts have set forth
several factors to be taken into account in determining whether the
substance of a transaction is a sale of property or a secured loan for
Federal income tax purposes, the primary factor in making this
determination is whether the transferee has assumed the risk of loss or
other economic burdens relating to the property and has obtained the
benefits of ownership thereof. Unless otherwise set forth in a Prospectus
Supplement, it is expected that, as set forth in its opinion, Special Tax
Counsel will analyze and rely on several factors in reaching its opinion
that the weight of the benefits and burdens of ownership of the Receivables
has not been transferred to the Certificate Owners.
In some instances, courts have held that a taxpayer is bound by a
particular form it has chosen for a transaction, even if the substance of
the transaction does not accord with its form. Unless otherwise specified
in a Prospectus Supplement, it is expected that Special Tax Counsel will
advise that the rationale of those cases will not apply to the transaction
evidenced by a Series of Certificates, because the form of the transaction,
as reflected in the operative provisions of the documents, either is not
inconsistent with the characterization of the Offered Certificates of such
Series as debt for Federal income tax purposes or otherwise makes the
rationale of those cases inapplicable to this situation.
President Clinton's Fiscal Year 2000 Budget Proposal includes a
provision that would preclude a corporate taxpayer (but not the IRS) from
taking any position that the Federal income tax treatment of a transaction
is different from that dictated by its "form" if a "tax indifferent person"
has a direct or indirect interest in such transaction, unless the taxpayer
discloses the inconsistent position on its tax return. The statutory
language of the provision has not been drafted, and accordingly it is
unclear to what extent, if any, the provision would apply to the
Certificates. As drafted, however, the provision would apply only to
transactions entered into after the date of first "committee" action in
Congress.
Taxation of Interest Income of Certificateholders
As set forth above, it is expected that, unless otherwise specified in
a Prospectus Supplement, Special Tax Counsel will advise the Bank that the
Offered Certificates will constitute indebtedness for Federal income tax
purposes, and accordingly, interest thereon will be includible in income by
Certificate Owners as ordinary income in accordance with their respective
methods of tax accounting. Interest received on the Offered Certificates
may also constitute "investment income" for purposes of certain limitations
of the Code concerning the deductibility of investment interest expense.
While it is not anticipated that the Offered Certificates will be
issued at a greater than de minimis discount, under applicable Treasury
regulations (the "Regulations") the Offered Certificates may nevertheless
be deemed to have been issued with original issue discount ("OID"). This
could be the case, for example, if interest payments for a Series are not
treated as "qualified stated interest" because the IRS determines that (i)
no reasonable legal remedies exist to compel timely payment and (ii) the
Offered Certificates do not have terms and conditions that make the
likelihood of late payment (other than a late payment that occurs within a
reasonable grace period) or nonpayment a remote contingency. Applicable
regulations provide that, for purposes of the foregoing test, the
possibility of nonpayment due to default, insolvency, or similar
circumstances, is ignored. Although this provision does not directly apply
to the Offered Certificates (because they have no actual default
provisions) the Transferor intends to take the position that, because
nonpayment can occur only as a result of events beyond its control
(principally, loss rates and payment delays on the Receivables
substantially in excess of those anticipated), nonpayment is a remote
contingency. Based on the foregoing, and on the fact that generally
interest will accrue on the Offered Certificates at a "qualified floating
rate," the Transferor intends to take the position that interest payments
on the Offered Certificates constitute qualified stated interest. If,
however, interest payments for a Series were not classified as "qualified
stated interest," all of the taxable income to be recognized with respect
to the Offered Certificates would be includible in income as OID but would
not be includible again when the interest is actually received.
If the Offered Certificates are in fact issued at a greater than de
minimis discount or are treated as having been issued with OID under the
Regulations, the following rules will apply. The excess of the "stated
redemption price at maturity" of an Offered Certificate over the original
issue price (in this case, the initial offering price at which a
substantial amount of the Offered Certificates are sold to the public) will
constitute OID. A Certificate Owner must include OID in income as interest
over the term of the Offered Certificate under a constant yield method. In
general, OID must be included in income in advance of the receipt of cash
representing that income. In the case of a debt instrument as to which the
repayment of principal may be accelerated as a result of the prepayment of
other obligations securing the debt instrument (a "Prepayable Instrument"),
the periodic accrual of OID is determined by taking into account both the
prepayment assumptions used in pricing the debt instrument and the
prepayment experience. If this provision applies to a Class of Certificates
(which is unlikely, but not entirely free from doubt), the amount of OID
which will accrue in any given "accrual period" may either increase or
decrease depending upon the actual prepayment rate. Accordingly, each
Certificate Owner should consult its own tax advisor regarding the impact
to it of the OID rules if the Offered Certificates are issued with OID.
Under the Regulations, a holder of a Certificate issued with de minimis OID
must include such OID in income proportionately as principal payments are
made on a Class of Certificates.
A Certificate Owner who purchases an Offered Certificate at a discount
from its adjusted issue price may be subject to the "market discount" rules
of the Code. These rules provide, in part, for the treatment of gain
attributable to accrued market discount as ordinary income upon the receipt
of partial principal payments or on the sale or other disposition of the
Offered Certificate, and for the deferral of interest deductions with
respect to debt incurred to acquire or carry the market discount Offered
Certificate.
A Certificate Owner who purchases an Offered Certificate for an amount
in excess of the sum of all amounts payable on such Certificate after the
purchase date other than payment of qualified stated interest (the
"Remaining Redemption Amount") shall be considered to have purchased the
Certificate at a premium. Such Certificate Owner may generally elect to
amortize such premium (as an offset to interest income), using a constant
yield method, over the remaining term of the Certificate.
A Certificate Owner who purchases an Offered Certificate that was
issued with OID for an amount less than or equal to the Remaining
Redemption Amount but in excess of the Certificate adjusted issue price
(any such excess being "acquisition premium") generally is permitted to
reduce the daily portion of OID otherwise includible in such Certificate
Owner's taxable income.
Sale or Other Disposition of a Certificate
In general, a Certificate Owner will recognize gain or loss upon the
sale, exchange, redemption, or other taxable disposition of an Offered
Certificate measured by the difference between (i) the amount of cash and
the fair market value of any property received (other than amounts
attributable to, and taxable as, accrued interest) and (ii) the Certificate
Owner's tax basis in the Offered Certificate (which is equal, in general,
to the purchase price of the Certificate increased by any OID or market
discount previously included in income by the holder and decreased by any
deductions previously allowed for amortizable bond premium and by any
payments reflecting principal or OID received with respect to such
Certificate). Subject to the market discount rules discussed above and to
the one-year holding requirement for long-term capital gain treatment, any
such gain or loss generally will be long-term capital gain, provided that
the Offered Certificate was held as a capital asset and provided, further,
that if the rules applicable to Prepayable Instruments apply, any OID not
previously accrued will be treated as ordinary income. The maximum ordinary
income rate for individuals, estates, and trusts exceeds the maximum
long-term capital gains rate for such taxpayers. In addition, capital
losses generally may be used only to offset capital gains.
Tax Characterization of the Trust
The Agreement permits the issuance of Classes of Certificates that are
treated for Federal income tax purposes either as indebtedness or as an
interest in a partnership. Accordingly, a Trust could be characterized
either as (i) a security device to hold Receivables securing the repayment
of the Certificates of all Series or (ii) a partnership in which the
Transferor and holders of certain Classes of Certificates are partners, and
which has issued debt represented by other Classes of Certificates
(including, unless otherwise specified in a Series Supplement, the Offered
Certificates). In connection with the issuance of Certificates of any
Series, Special Tax Counsel will render an opinion to the Bank, based on
the assumptions and qualifications set forth therein, that under then
current law, the issuance of the Certificates of such Series will not cause
the applicable Trust to be characterized for Federal income tax purposes as
an association (or publicly traded partnership) taxable as a corporation.
The assumptions and qualifications set forth in such opinion will include
the qualification that the opinion is limited to the issuance of the
Certificates of such Series by such Trust and an assumption that any
secondary transactions entered into with respect to any Class of
Certificates (such as the deposit of Certificates into a second trust and
the issuance of securities out of that trust) will not adversely affect the
Federal income tax status of such Trust.
The opinion of Special Tax Counsel with respect to Offered Certificates
and a Trust will not be binding on the courts or the IRS. It is possible
that the IRS could assert that, for purposes of the Code, the transaction
contemplated by this Prospectus and a Prospectus Supplement constitutes a
sale of the Receivables (or an interest therein) to the Certificate Owners
of one or more Series or Classes and that the proper classification of the
legal relationship between the Bank and some or all of the Certificate
Owners or Certificateholders of one or more Series resulting from the
transaction is that of a partnership or a publicly traded partnership
taxable as a corporation. The Transferor currently does not intend to
comply with the Federal income tax reporting requirements that would apply
if any Classes of Certificates were treated as interests in a partnership
(unless, as is permitted by the Agreement, an interest in the applicable
Trust which is issued or sold is intended to be classified as an interest
in a partnership).
If a Trust were treated in whole or in part as a partnership in which
some or all Certificate Owners of one or more Series were partners, that
partnership could be classified as a publicly traded partnership taxable as
a corporation. A partnership will be classified as a publicly traded
partnership taxable as a corporation if equity interests therein are traded
on an "established securities market," or are "readily tradeable" on a
"secondary market" or its "substantial equivalent" unless certain
exceptions apply. One such exception would apply if the Trust is not
engaged in a "financial business" and 90% or more of its income consists of
interest and certain other types of passive income. Because Treasury
regulations do not clarify the meaning of a "financial business" for this
purpose, it is unclear whether this exception applies. The Transferor has
taken and intends to take measures designed to reduce the risk that a Trust
could be classified as a publicly traded partnership taxable as a
corporation by reason of trading of interests in such Trust other than the
Offered Certificates and other certificates with respect to which an
opinion is rendered that such certificates constitute debt for Federal
income tax purposes. However, there can be no assurance that a Trust could
not become a publicly traded partnership, because certain of the actions
necessary to comply with such exceptions are not fully within the control
of the Transferor.
If a transaction were treated as creating a partnership between the
Transferor and the Certificate Owners of one or more Series, the
partnership itself would not be subject to Federal income tax (unless it
were to be characterized as a publicly traded partnership taxable as a
corporation); rather, the partners of such partnership, including the
Certificate Owners of such Series, would be taxed individually on their
respective distributive shares of the partnership's income, gain, loss,
deductions and credits. The amount and timing of items of income and
deductions of a Certificate Owner could differ if the Offered Certificates
were held to constitute partnership interests, rather than indebtedness.
Moreover, unless the partnership were treated as engaged in a trade or
business, an individual's share of expenses of the partnership would be
miscellaneous itemized deductions that, in the aggregate, are allowed as
deductions only to the extent they exceed two percent of the individual's
adjusted gross income, and would be subject to reduction under Section 68
of the Code if the individual's adjusted gross income exceeded certain
limits. As a result, the individual might be taxed on a greater amount of
income than the stated rate on the Offered Certificates. Finally, if the
partnership were a publicly traded partnership that qualifies for exemption
from taxation as a corporation, all or a portion of any taxable income
allocated to a Certificate Owner that is a pension, profit sharing or
employee benefit plan or other tax-exempt entity (including an individual
retirement account) may, under certain circumstances, constitute "unrelated
business taxable income" which generally would be taxable to the holder.
Partnership characterization also may have adverse state and local income
or franchise tax consequences for a Certificate Owner.
If it were determined that a transaction created an entity classified
as an association or as a publicly traded partnership taxable as a
corporation, a Trust would be subject to Federal income tax at corporate
income tax rates on the income it derives from the Receivables, which would
reduce the amounts available for distribution to the Certificate Owners,
possibly including Certificate Owners of a Class that is treated as
indebtedness. Such classification may also have adverse state and local tax
consequences that would reduce amounts available for distribution to
Certificate Owners. Cash distributions to the Certificate Owners (except
any Class not recharacterized as an equity interest in an association)
generally would be treated as dividends for tax purposes to the extent of
such deemed corporation's earnings and profits.
FASIT Legislation
Certain provisions of the Code provide for the creation of a new type
of entity for Federal income tax purposes, the "financial asset
securitization investment trust" ("FASIT"). However, although these
provisions were effective September 1, 1997, many technical issues
concerning FASITs must be addressed by Treasury regulations which have not
yet been issued. Although transition rules permit an entity in existence on
August 31, 1997, to elect FASIT status, at the present time it is not clear
how outstanding interests of such an entity would be treated subsequent to
such an election. An Agreement may be amended in accordance with the
provisions thereof to provide that the Transferor may cause a FASIT
election to be made for the related Trust if the Transferor delivers to the
Trustee an opinion of counsel to the effect that, for Federal income tax
purposes, (i) the issuance of FASIT regular interests will not adversely
affect the tax characterization as debt of Certificates of any outstanding
Series or Class that were characterized as debt at the time of their
issuance, (ii) following such issuance the applicable Trust will not be
deemed to be a publicly traded partnership taxable as a corporation and
(iii) such issuance will not cause or constitute an event in which gain or
loss would be recognized by any Certificateholder or such Trust.
Foreign Investors
As set forth above, it is expected that Special Tax Counsel will render
an opinion, upon issuance, that the Offered Certificates will be treated as
debt for U.S. Federal income tax purposes. The following information
describes the U.S. Federal income tax treatment of investors that are not
U.S. persons ("Foreign Investors") if the Offered Certificates are treated
as debt. The term "Foreign Investor" means any person other than (i) a
citizen or resident of the United States, (ii) a corporation, partnership
or other entity organized in or under the laws of the United States or any
political subdivision thereof, (iii) an estate the income of which is
includible in gross income for U.S. Federal income tax purposes, regardless
of its source or (iv) a trust if a U.S. court is able to exercise primary
supervision over the administration of such trust and one or more U.S.
persons have the authority to control all substantial decisions of such
trust.
Interest, including OID, paid to a Foreign Investor will be subject to
U.S. withholding taxes at a rate of 30% unless (x) the income is
"effectively connected" with the conduct by such Foreign Investor of a
trade or business in the United States or (y) the Foreign Investor and each
securities clearing organization, bank, or other financial institution that
holds the Offered Certificates on behalf of the customer in the ordinary
course of its trade or business, in the chain between the Certificate Owner
and the U.S. person otherwise required to withhold the U.S. tax, complies
with applicable identification requirements and, in addition (i) the
non-U.S. Certificate Owner does not actually or constructively own 10% or
more of the total combined voting power of all classes of stock of the
Transferor entitled to vote (or of a profits or capital interest of a trust
characterized as a partnership), (ii) the non-U.S. Certificate Owner is not
a controlled foreign corporation that is related to the Transferor (or a
trust treated as a partnership) through stock ownership, (iii) the non-U.S.
Certificate Owner is not a bank receiving interest described in Code
Section 881(c)(3)(A), (iv) such interest is not contingent interest
described in Code Section 871(h)(4), and (v) the non-U.S. Certificate Owner
does not bear certain relationships to any holder of the Transferor
Certificate other than the Transferor or any holder of the Certificates of
any Series not properly characterized as debt. Applicable identification
requirements generally will be satisfied if there is delivered to a
securities clearing organization (i) IRS Form W-8 signed under penalties of
perjury by the Certificate Owner, stating that the Certificate Owner is not
a U.S. person and providing such Certificate Owner's name and address, (ii)
IRS Form 1001, signed by the Certificate Owner or such Certificate Owner's
agent, claiming exemption from withholding under an applicable tax treaty,
or (iii) IRS Form 4224 signed by the Certificate Owner or such owner's
agent, claiming exemption from withholding of tax on income effectively
connected with the conduct of a trade or business in the United States;
provided that in any such case (x) the applicable form is delivered
pursuant to applicable procedures and is properly transmitted to the United
States entity otherwise required to withhold tax and (y) none of the
entities receiving the form has actual knowledge that the Certificate Owner
is a U.S. person.
On October 6, 1997, the Department of the Treasury issued new
regulations (the "New Regulations") which make certain modifications to the
withholding, backup withholding and information reporting rules described
above. The New Regulations attempt to unify certification requirements and
modify reliance standards. The New Regulations will generally be effective
for payments made after December 31, 2000, subject to certain transition
rules. Prospective investors are urged to consult their own tax advisors
regarding the New Regulations.
A Certificate Owner that is a nonresident alien or foreign corporation
will not be subject to U.S. Federal income tax on gain realized upon the
sale, exchange, or redemption of an Offered Certificate, provided that (i)
such gain is not effectively connected with the conduct of a trade or
business in the United States, (ii) in the case of a Certificate Owner that
is an individual, such Certificate Owner is not present in the United
States for 183 days or more during the taxable year in which such sale,
exchange, or redemption occurs, and (iii) in the case of gain representing
accrued interest, the conditions described in the second preceding
paragraph are satisfied.
If the interests of the Certificate Owners of a Series were
reclassified as interests in a partnership (not taxable as a corporation),
such recharacterization could cause a Foreign Investor to be treated as
engaged in a trade or business in the United States. In such event the
Certificate Owner of such Series would be required to file a Federal income
tax return and, in general, would be subject to Federal income tax,
including branch profits tax in the case of a Certificateholder that is a
corporation, on its net income from the partnership. Further, the
partnership would be required, on a quarterly basis, to pay withholding tax
equal to the sum, for each foreign partner, of such foreign partner's
distributive share of "effectively connected" income of the partnership
multiplied by the highest rate of tax applicable to that foreign partner.
The tax withheld from each foreign partner would be credited against such
foreign partner's U.S. Federal income tax liability.
If a Trust were taxable as a corporation, distributions to foreign
persons, to the extent treated as dividends, would generally be subject to
withholding at the rate of 30%, unless such rate were reduced by an
applicable tax treaty.
State and Local Taxation
The Trustee is located in the State of Delaware and servicing of the
Receivables will take place in Delaware. Unless otherwise specified in the
Prospectus Supplement, Special Tax Counsel will render its opinion that the
Offered Certificates will be treated as indebtedness for Delaware income
tax purposes and Certificate Owners not otherwise subject to taxation in
Delaware will not become subject to taxation in Delaware solely because of
any such Certificate Owner's ownership of an Offered Certificate. Assuming
that the Trust is not subject to Federal income taxes at the entity level,
the Trust will not be subject to Delaware income tax at the entity level.
THE DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL INFORMATION ONLY
AND DOES NOT PURPORT TO ADDRESS THE APPLICABILITY OF STATE TAX LAWS OTHER
THAN THE TREATMENT OF THE OFFERED CERTIFICATES AND THE CERTIFICATE OWNERS
UNDER THE LAWS OF DELAWARE AND MAY NOT BE APPLICABLE DEPENDING UPON A
PARTICULAR CERTIFICATE OWNER'S TAX SITUATION. PROSPECTIVE INVESTORS ARE
URGED TO CONSULT THEIR TAX ADVISORS REGARDING STATE AND LOCAL TAX TREATMENT
OF THE TRUST AND THE CERTIFICATES OF ANY SERIES, AND THE CONSEQUENCES OF
PURCHASE, OWNERSHIP OR DISPOSITION OF THE CERTIFICATES OF ANY SERIES UNDER
ANY STATE OR LOCAL TAX LAW.
Employee Benefit Plan Considerations
Section 406 of ERISA and Section 4975 of the Code prohibit a pension,
profit sharing or other employee benefit plan from engaging in certain
transactions involving "plan assets" with persons that are "parties in
interest" under the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), or "disqualified persons" under the Code with respect to
the plan. ERISA also imposes certain duties on persons who are fiduciaries
of plans subject to ERISA and prohibits certain transactions between a plan
and parties in interest with respect to such plans. Under ERISA, any person
who exercises any authority or control respecting the management or
disposition of the assets of a plan is considered to be a fiduciary of such
plan (subject to certain exceptions not here relevant). A violation of
these "prohibited transaction" rules may generate excise tax and other
liabilities under ERISA and the Code for such persons.
Plan fiduciaries must determine whether the acquisition and holding of
the Certificates of a Series and the operations of the Trust would result
in direct or indirect prohibited transactions under ERISA and the Code. The
operations of the Trust could result in prohibited transactions if Benefit
Plans that purchase the Certificates of a Series are deemed to own an
interest in the underlying assets of the Trust. There may also be an
improper delegation of the responsibility to manage Benefit Plan assets if
Benefit Plans that purchase the Certificates are deemed to own an interest
in the underlying assets of the Trust.
Pursuant to a regulation (the "Plan Asset Regulation") issued by the
Department of Labor ("DOL") concerning the definition of what constitutes
the "plan assets" of an employee benefit plan subject to ERISA or the Code,
or an individual retirement account ("IRA") (collectively referred to as
"Benefit Plans"), the assets and properties of certain entities in which a
Benefit Plan makes an equity investment could be deemed to be assets of the
Benefit Plan in certain circumstances. Accordingly, if Benefit Plans
purchase Certificates of a Series, the Trust could be deemed to hold plan
assets unless one of the exceptions under the Plan Asset Regulation is
applicable to the Trust.
The Plan Asset Regulation only applies to the purchase by a Benefit
Plan of an "equity interest" in an entity. Assuming that interests in
Certificates of a Series are equity interests, the Plan Asset Regulation
contains an exception that provides that if a Benefit Plan acquires a
"publicly-offered security," the issuer of the security is not deemed to
hold plan assets. A publicly-offered security is a security that is (i)
freely transferable, (ii) part of a class of securities that is owned by
100 or more investors independent of the issuer and of one another and
(iii) either (A) part of a class of securities registered under Section
12(b) or 12(g) of the Exchange Act or (B) sold to the plan as part of an
offering of securities to the public pursuant to an effective registration
statement under the Securities Act and the class of securities of which
such security is a part is registered under the Exchange Act within 120
days (or such later time as may be allowed by the SEC) after the end of the
fiscal year of the issuer during which the offering of such securities to
the public occurred. In addition, the Plan Asset Regulation provides that
if a Benefit Plan invests in an "equity interest" of an entity that is
neither a "publicly-offered security" nor a security issued by an
investment company registered under the Investment Company Act of 1940, as
amended, the Benefit Plan's assets include both the equity interest and an
undivided interest in each of the entity's underlying assets, unless it is
established that equity participation by "benefit plan investors" is not
"significant" or that another exception applies.
Under the Plan Asset Regulation, equity participation in an entity by
"benefit plan investors" is "significant" on any date if, immediately after
the most recent acquisition of any equity interest in the entity (other
than a publicly-offered class of equity), 25% or more of the value of any
class of equity interests in the entity (other than a publicly-offered
class) is held by "benefit plan investors." For purposes of this
determination, the value of equity interests held by a person (other than a
benefit plan investor) that has discretionary authority or control with
respect to the assets of the entity or that provides investment advice for
a fee with respect to such assets (or any affiliate of such person) is
disregarded. The term "benefit plan investor" is defined in the Plan Asset
Regulation as (a) any employee benefit plan (as defined in Section 3(3) of
ERISA), whether or not it is subject to the provisions of Title I of ERISA,
(b) any plan described in Section 4975(e)(1) of the Code and (c) any entity
whose underlying assets include plan assets by reason of a plan's
investment in the entity.
Unless otherwise specified in the related Prospectus Supplement, it is
anticipated that interests in the Certificates of a Series will meet the
criteria of publicly-offered securities as set forth above. Unless
otherwise specified in the related Prospectus Supplement, the underwriters
expect (although no assurances can be given) that interests in each Class
of Certificates of each Series offered hereby will be held by at least 100
independent investors at the conclusion of the offering for such Series;
there are no restrictions imposed on the transfer of interests in the
Certificates of such Series; and interests in the Certificates of such
Series will be sold as part of an offering pursuant to an effective
registration statement under the Securities Act and then will be timely
registered under the Exchange Act.
If interests in the Certificates of a Series fail to meet the criteria
of publicly-offered securities or investment by benefit plan investors
becomes significant and the Trust's assets are deemed to include assets of
Benefit Plans that are Certificateholders, transactions involving the Trust
and "parties in interest" or "disqualified persons" with respect to such
plans might be prohibited under Section 406 of ERISA and Section 4975 of
the Code. In addition, the Transferor or any underwriter of such Series may
be considered to be a party in interest, disqualified person or fiduciary
with respect to an investing Benefit Plan. Accordingly, an investment by a
Benefit Plan in Certificates may be a prohibited transaction under ERISA
and the Code. Thus, for example, if a participant in any Benefit Plan is a
cardholder of one of the Accounts, under DOL interpretations the purchase
of interests in Certificates by such plan could constitute a prohibited
transaction. Such transferors may now be subject to certain statutory or
administrative exemptions from the penalties normally associated with
prohibited transactions. Five class exemptions issued by the DOL that could
apply in such event are DOL Prohibited Transaction Exemption ("PTE") 84-14
(Class Exemption for Plan Asset Transactions Determined by Independent
Qualified Professional Asset Managers), 91-38 (Class Exemption for Certain
Transactions Involving Bank Collective Investment Funds), 90-1 (Class
Exemption for Certain Transactions Involving Insurance Company Pooled
Separate Accounts), 95-60 (Class Exemption for Certain Transactions
Involving Insurance Company General Accounts) and 96-23 (Class Exemption
for Plan Asset Transactions Determined by In-House Asset Managers). There
is no assurance that these exemptions, even if all of the conditions
specified therein are satisfied, or any other exemption will apply to all
transactions involving the Trust's assets.
IN LIGHT OF THE FOREGOING, FIDUCIARIES OF A BENEFIT PLAN CONSIDERING
THE PURCHASE OF INTERESTS IN CERTIFICATES OF ANY SERIES SHOULD CONSULT
THEIR OWN COUNSEL AS TO WHETHER THE ASSETS OF THE TRUST WHICH ARE
REPRESENTED BY SUCH INTERESTS WOULD BE CONSIDERED PLAN ASSETS, AND WHETHER,
UNDER THE GENERAL FIDUCIARY STANDARDS OF INVESTMENT PRUDENCE AND
DIVERSIFICATION, AN INVESTMENT IN CERTIFICATES OF ANY SERIES IS APPROPRIATE
FOR THE BENEFIT PLAN TAKING INTO ACCOUNT THE OVERALL INVESTMENT POLICY OF
THE BENEFIT PLAN AND THE COMPOSITION OF THE BENEFIT PLAN'S INVESTMENT
PORTFOLIO. In addition, fiduciaries should consider the consequences that
would apply if the Trust's assets were considered plan assets, the
applicability of exemptive relief from the prohibited transaction rules and
whether all conditions for such exemptive relief would be satisfied.
In particular, insurance companies considering the purchase of
Certificates of any Series should consult their own employee benefits
counsel or other appropriate counsel with respect to the United States
Supreme Court's decision in John Hancock Mutual Life Insurance Co. v.
Harris Trust & Savings Bank, 114 S. Ct. 517 (1993) ("John Hancock") and the
applicability of PTE 95-60. In John Hancock, the Supreme Court held that
assets held in an insurance company's general account may be deemed to be
"plan assets" under certain circumstances; however, PTE 95-60 may exempt
some or all of the transactions that could occur as the result of the
acquisition and holding of the Certificates of a Series by an insurance
company general account from the penalties normally associated with
prohibited transactions. Accordingly, investors should analyze whether John
Hancock and PTE 95-60 or any other exemption may have an impact with
respect to their purchase of the Certificates of any Series.
In addition, insurance companies considering the purchase of
Certificates using assets of a general account should consult their own
employee benefits counsel or other appropriate counsel with respect to the
effect of the Small Business Job Protection Act of 1996, which added a new
Section 401(c) of ERISA relating to the status of the assets of insurance
company general accounts under ERISA and Section 4975 of the Code. Pursuant
to Section 401(c), the DOL is required to issue final regulations (the
"General Account Regulations") with respect to insurance policies issued on
or before December 31, 1998 that are supported by an insurer's general
account. The General Account Regulations are intended to provide guidance
on which assets held by the insurer constitute "plan assets" for purposes
of the fiduciary responsibility provisions of ERISA and Section 4975 of the
Code. Section 401(c) also provides that, except in the case of avoidance of
the General Account Regulations and actions brought by the Secretary of
Labor relating to certain breaches of fiduciary duties that also constitute
breaches of state or Federal criminal law, until the date that is 18 months
after the General Account Regulations become final, no liability under the
fiduciary responsibility and prohibited transaction provisions of ERISA and
Section 4975 of the Code may result on the basis of a claim that the assets
of the general account of an insurance company constitute the plan assets
of any Benefit Plan. The DOL has recently issued proposed regulations under
Section 401(c). It should be noted that if the General Account Regulations
are adopted substantially in the form in which proposed, the General
Account Regulations may not exempt the assets of insurance company general
accounts from treatment as "plan assets" after December 31, 1998. The plan
asset status of insurance company separate accounts is unaffected by new
Section 401(c) of ERISA, and separate account assets continue to be treated
as the plan assets of any Benefit Plan invested in a separate account. Plan
investors considering the purchase of Certificates of any Series on behalf
of an insurance company general account should consult their legal advisors
regarding the effect of the General Account Regulations on such purchase.
Plan of Distribution
The Transferor may sell Certificates (i) through underwriters or
dealers, (ii) directly to one or more purchasers or (iii) through agents.
The related Prospectus Supplement in respect of a Series offered hereby
sets forth the terms of the offering of such Certificates, including the
name or names of any underwriters, the purchase price of such Certificates
and the proceeds to the Transferor from such sale, any underwriting
discounts and other items constituting underwriters' compensation, any
initial offering price and any discounts or concessions allowed or
reallowed or paid to dealers. Only underwriters so named in such Prospectus
Supplement shall be deemed to be underwriters in connection with the
Certificates offered thereby.
Subject to the terms and conditions set forth in an underwriting
agreement (an "Underwriting Agreement") to be entered into with respect to
each series of Certificates, the Transferor will agree to sell to each of
the underwriters named therein and in the related Prospectus Supplement,
and each of such underwriters will severally agree to purchase from the
Transferor, the principal amount of Certificates set forth therein and in
the related Prospectus Supplement (subject to proportional adjustment on
the terms and conditions set forth in the related Underwriting Agreement in
the event of an increase or decrease in the aggregate amount of
Certificates offered hereby and by the related Prospectus Supplement).
In each Underwriting Agreement, the several underwriters will agree,
subject to the terms and conditions set forth therein, to purchase all the
Certificates offered hereby and by the related Prospectus Supplement if any
of such Certificates are purchased. In the event of a default by any
underwriter, each Underwriting Agreement will provide that, in certain
circumstances, purchase commitments of the nondefaulting underwriters may
be increased or the Underwriting Agreement may be terminated.
Each Underwriting Agreement will provide that the Transferor will
indemnify the related underwriters against certain liabilities, including
liabilities under the Securities Act of 1933, as amended.
The place and time of delivery for any Series of Certificates in
respect of which this Prospectus is delivered are set forth in the
accompanying Prospectus Supplement.
Legal Matters
Certain legal matters relating to the issuance of the Certificates will
be passed upon for the Transferor by Richards, Layton & Finger, Wilmington,
Delaware. Certain legal matters relating to the issuance of the
Certificates will be passed upon by Richards, Layton & Finger. Martin I.
Lubaroff, a member of Richards, Layton & Finger, is a member of the Board
of Directors of The First National Bank of Atlanta and owns 100 shares of
the Corporation's common stock. Certain other legal matters relating to the
issuance of the Certificates and certain legal matters relating to the
Federal tax consequences of the issuance of the Certificates will be passed
upon for the Transferor by Skadden, Arps, Slate, Meagher & Flom LLP, New
York, New York, special counsel to the Transferor. Certain legal matters
relating to the issuance of the Certificates will be passed upon for the
underwriters by Skadden, Arps, Slate, Meagher & Flom LLP, New York, New
York.
Reports to Certificateholders
Unless and until Definitive Certificates are issued, monthly and annual
reports, containing information concerning the Trust and prepared by the
Servicer, will be sent on behalf of the Trust to Cede & Co. ("Cede") as
nominee of The Depository Trust Company ("DTC") and registered holder of
the related Certificates, pursuant to the Agreement. See "Description of
the Certificates--Book-Entry Registration," "--Reports to
Certificateholders" and "--Evidence as to Compliance." Such reports will
not constitute financial statements prepared in accordance with generally
accepted accounting principles. The Transferor does not intend to send any
financial reports of the Bank to Certificateholders or to the owners of
beneficial interests in the Certificates (the "Certificate Owners"). The
Servicer will file with the SEC such periodic reports with respect to the
Trust as are required under the Exchange Act and the rules and regulations
of the SEC thereunder.
Where You Can Find More Information
We filed a registration statement relating to the Certificates with the
SEC. This Prospectus is part of the registration statement, but the
registration statement includes additional information.
The Servicer will file with the SEC all required annual, monthly and
special SEC reports and other information about the Trust.
You may read and copy any reports, statements or other information we
file at the SEC's public reference room at 450 Fifth Street, N.W.,
Washington, D.C. 20549. You may request copies of these documents, upon
payment of a duplicating fee, by writing to the SEC. Please call the SEC at
(800) SEC-0330 for further information on the operation of the public
reference rooms. Our SEC filings are also available to the public on the
SEC Internet site (http://www.sec.gov).
The SEC allows us to "incorporate by reference" information we file
with it, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference
is considered to be part of this Prospectus. Information that we file later
with the SEC will automatically update the information in this Prospectus.
In all cases, you should rely on the later information over different
information included in this Prospectus or the related Prospectus
Supplement. We incorporate by reference any future annual, monthly and
special SEC reports and proxy materials filed by or on behalf of the Trust
until we terminate our offering of the Certificates.
As a recipient of this Prospectus, you may request a copy of any
document we incorporate by reference, except exhibits to the documents
(unless the exhibits are specifically incorporated by reference), at no
cost, by writing or calling us at: Investor Relations, Wachovia
Corporation, 100 North Main Street, Winston-Salem, North Carolina
27150-3099, telephone number (336) 732-6520.
Index of Terms for Prospectus
Accounts...............................................................4
Accumulation Period....................................................9
acquisition premium...................................................37
Addition Cut-Off Date..................................................6
Addition Date.........................................................19
Additional Accounts................................................6, 19
Additional Interest...................................................23
Aggregate Addition Limit..............................................20
Agreement..............................................................4
Amortization Period....................................................9
Appointment Date......................................................26
Assignment............................................................19
ATM....................................................................5
Automatic Additional Accounts......................................6, 20
Bank...................................................................4
Bank Portfolio.........................................................4
Benefit Plans.........................................................40
Cash Collateral Account...............................................31
Cash Collateral Guaranty..............................................31
Cede..................................................................43
Cedelbank.............................................................12
Cedelbank Customers...................................................12
Certificate Owner.....................................................36
Certificate Owners....................................................43
Certificate Rate.......................................................9
Certificateholders.....................................................9
Certificates...........................................................4
Class..................................................................4
Closing Date..........................................................26
Code..................................................................35
Collateral Interest...................................................31
Collection Account....................................................20
Controlled Accumulation Amount........................................15
Controlled Accumulation Period........................................15
Controlled Amortization Amount........................................14
Controlled Amortization Period.....................................6, 14
Controlled Deposit Amount.............................................15
Controlled Distribution Amount........................................14
Cooperative...........................................................12
Corporation............................................................7
Credit Enhancement....................................................30
Credit Enhancement Percentage.........................................22
Credit Enhancement Provider...........................................31
Cut-Off Date...........................................................6
Defaulted Accounts.....................................................9
Definitive Certificates...............................................13
Depositories..........................................................10
Depository............................................................10
Determination Date....................................................24
Disclosure Document...................................................16
Discount Option.......................................................21
Discount Percentage...................................................21
Distribution Account..................................................21
Distribution Date.....................................................13
DOJ...................................................................35
DOL...................................................................40
DTC...................................................................43
DTC Participants......................................................10
Eligible Account......................................................18
Eligible Receivable...................................................18
Enhancement...........................................................30
Enhancement Invested Amount...........................................31
ERISA.................................................................40
Euroclear.............................................................12
Euroclear Operator....................................................12
Euroclear Participants................................................12
Euroclear System......................................................12
Excess Finance Charge Collections.....................................23
Excess Funding Account................................................24
Exchange..............................................................16
Exchange Act..........................................................10
FASIT.................................................................38
FDIA..................................................................33
FDIC..................................................................33
Finance Charge Account................................................21
Finance Charge Receivables.............................................6
FIRREA................................................................33
Foreign Investors.....................................................39
Full Investor Interest................................................22
Funding Period........................................................21
General Account Regulations...........................................42
Global Securities....................................................A-1
Group.................................................................23
Holders...............................................................13
Indirect Participants.................................................10
Ineligible Receivable.................................................17
Insolvency Event......................................................26
Interchange............................................................5
Interest Funding Account..............................................13
Interest Period.......................................................13
Investor Charge-Off...................................................23
Investor Default Amount...............................................23
Investor Interest......................................................9
Investor Percentage....................................................9
Investor Servicing Fee................................................23
IRA...................................................................40
IRS...................................................................36
John Hancock..........................................................41
MasterCard International..............................................35
MGT/EOC...............................................................12
Minimum Transferor Amount..............................................6
Monthly Interest......................................................23
Monthly Period........................................................13
Moody's...............................................................21
New Agreement..........................................................4
New Regulations.......................................................39
New Trust..............................................................4
Octagon...............................................................34
Offered Certificates..................................................36
OID...................................................................36
Paired Series.........................................................24
Participation Agreement...............................................19
Participations........................................................19
Pay Out Event.........................................................15
Paying Agent..........................................................28
Permitted Investments.................................................21
Plan Asset Regulation.................................................40
Pre-Funding Account...................................................21
Pre-Funding Amount....................................................21
Prepayable Instrument.................................................37
Principal Account.....................................................21
Principal Amortization Period.........................................14
Principal Commencement Date...........................................14
Principal Funding Account.............................................15
Principal Receivables..................................................6
Principal Terms.......................................................17
Prospectus Supplement..................................................4
PTE...................................................................41
Qualified Institution.................................................21
Rapid Accumulation Period.............................................15
Rapid Amortization Period.............................................16
Rating Agency.........................................................33
Receivables............................................................6
Record Date............................................................9
Recoveries.............................................................5
Regulations...........................................................36
Remaining Redemption Amount...........................................37
Removed Accounts.......................................................6
Reserve Account.......................................................32
Revolving Period......................................................26
Scheduled Payment Date................................................14
SEC...................................................................10
Securities Act.........................................................4
Senior Certificates....................................................9
Series............................................................4, A-1
Series Supplement......................................................4
Series Termination Date...............................................25
Service Transfer......................................................28
Servicer...........................................................4, 27
Servicer Default......................................................28
Servicing Fee.........................................................26
Shared Principal Collections..........................................24
Special Tax Counsel...................................................36
Spread Account........................................................32
Standard & Poor's.....................................................21
Subordinated Certificates..............................................9
Tax Opinion...........................................................17
Terms and Conditions..................................................12
Transfer Date.........................................................15
Transferor.............................................................4
Transferor Amount.....................................................10
Transferor Certificate................................................16
Transferor Interest...................................................16
Transferor Participation...............................................9
Transferor Percentage..................................................9
Trust..................................................................4
Trust I................................................................4
Trust Portfolio........................................................6
Trust Termination Date................................................25
Trustee................................................................4
U.S. Person..........................................................A-3
UCC...................................................................33
Underwriting Agreement................................................42
VISA..................................................................35
Wachovia...............................................................4
WBNA................................................................4, 9
WOSC...................................................................5
ANNEX I
GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the globally offered
Wachovia Credit Card Master Trust Asset Backed Certificates (the "Global
Securities") to be issued in series from time to time (each, a "Series")
will be available only in book-entry form. Investors in the Global
Securities may hold such Global Securities through any of DTC, Cedelbank or
Euroclear. The Global Securities will be tradeable as home market
instruments in both the European and U.S. domestic markets. Initial
settlement and all secondary trades will settle in same-day funds.
Secondary market trading between investors holding Global
Securities through Cedelbank and Euroclear will be conducted in the
ordinary way in accordance with their normal rules and operating procedures
and in accordance with conventional eurobond practice.
Secondary market trading between investors holding Global
Securities through DTC will be conducted according to the rules and
procedures applicable to U.S. corporate debt obligations.
Secondary cross-market trading between Cedelbank or Euroclear and
DTC Participants holding Certificates will be effected on a
delivery-against-payment basis through the respective Depositories of
Cedelbank and Euroclear (in such capacity) and as DTC Participants.
Non-U.S. holders (as described below) of Global Securities will be
subject to U.S. withholding taxes unless such holders meet certain
requirements and deliver appropriate U.S. tax documents to the securities
clearing organizations or their participants.
Initial Settlement
All Global Securities will be held in book-entry form by DTC in the
name of Cede & Co. as nominee of DTC. Investors' interests in the Global
Securities will be represented through financial institutions acting on
their behalf as direct and indirect participants in DTC. As a result,
Cedelbank and Euroclear will hold positions on behalf of their customers or
participants through their respective Depositories, which in turn will hold
such positions in accounts as DTC Participants.
Investors electing to hold their Global Securities through DTC will
follow the settlement practices applicable to U.S. corporate debt
obligations. Investor securities custody accounts will be credited with
their holdings against payment in same-day funds on the settlement date.
Investors electing to hold their Global Securities through
Cedelbank or Euroclear accounts will follow the settlement procedures
applicable to conventional eurobonds, except that there will be no
temporary global security and no "lock-up" or restricted period. Global
Securities will be credited to the securities custody accounts on the
settlement date against payment in same-day funds.
Secondary Market Trading
Since the purchaser determines the place of delivery, it is
important to establish at the time of the trade where both the purchaser's
and seller's accounts are located to ensure that settlement can be made on
the desired value date.
Trading Between DTC Participants. Secondary market trading between
DTC Participants will be settled using the procedures applicable to U.S.
corporate debt obligations in same-day funds.
Trading Between Cedelbank Customers and/or Euroclear Participants.
Secondary market trading between Cedelbank Customers or Euroclear
Participants will be settled using the procedures applicable to
conventional eurobonds in same-day funds.
Trading Between DTC Seller and Cedelbank or Euroclear Purchaser.
When Global Securities are to be transferred from the account of a DTC
Participant to the account of a Cedelbank Customer or a Euroclear
Participant, the purchaser will send instructions to Cedelbank or Euroclear
through a Cedelbank Customer or Euroclear Participant at least one business
day prior to settlement. Cedelbank or Euroclear will instruct the
respective Depository, as the case may be, to receive the Global Securities
against payment. Payment will include interest accrued on the Global
Securities from and including the last coupon payment date to and excluding
the settlement date. Payment will then be made by the respective Depository
to the DTC Participant's account against delivery of the Global Securities.
After settlement has been completed, the Global Securities will be credited
to the respective clearing system and by the clearing system, in accordance
with its usual procedures, to the Cedelbank Customer's or Euroclear
Participant's account. The Global Securities credit will appear the next
day (European time) and the cash debit will be back-valued to, and the
interest on the Global Securities will accrue from, the value date (which
would be the preceding day when settlement occurred in New York). If
settlement is not completed on the intended value date (i.e., the trade
fails), the Cedelbank or Euroclear cash debit will be valued instead as of
the actual settlement date.
Cedelbank Customers and Euroclear Participants will need to make
available to the respective clearing systems the funds necessary to process
same-day funds settlement. The most direct means of doing so is to
pre-position funds for settlement, either from cash on hand or existing
lines of credit, as they would for any settlement occurring within
Cedelbank or Euroclear. Under this approach, they may take on credit
exposure to Cedelbank or Euroclear until the Global Securities are credited
to their accounts one day later.
As an alternative, if Cedelbank or Euroclear has extended a line of
credit to them, Cedelbank Customers or Euroclear Participants can elect not
to pre-position funds and allow that credit line to be drawn upon the
finance settlement. Under this procedure, Cedelbank Customers or Euroclear
Participants purchasing Global Securities would incur overdraft charges for
one day, assuming they cleared the overdraft when the Global Securities
were credited to their accounts. However, interest on the Global Securities
would accrue from the value date. Therefore, in many cases the investment
income on the Global Securities earned during that one-day period may
substantially reduce or offset the amount of such overdraft charges,
although this result will depend on each Cedelbank Customer's or Euroclear
Participant's particular cost of funds.
Since the settlement is taking place during New York business
hours, DTC Participants can employ their usual procedures for sending
Global Securities to the respective Depository for the benefit of Cedelbank
Customers or Euroclear Participants. The sale proceeds will be available to
the DTC seller on the settlement date. Thus, to the DTC Participant a
cross-market transaction will settle no differently than a trade between
two DTC Participants.
Trading Between Cedelbank or Euroclear Seller and DTC Purchaser.
Due to time zone differences in their favor, Cedelbank Customers and
Euroclear Participants may employ their customary procedures for
transactions in which Global Securities are to be transferred by the
respective clearing system, through the respective Depository, to a DTC
Participant. The seller will send instructions to Cedelbank or Euroclear
through a Cedelbank Customer or Euroclear Participant at least one business
day prior to settlement. In these cases, Cedelbank or Euroclear will
instruct the respective Depository, as appropriate, to deliver the bonds to
the DTC Participant's account against payment. Payment will include
interest accrued on the Global Securities from and including the last
coupon payment date to and excluding the settlement date. The payment will
then be reflected in the account of the Cedelbank Customer or Euroclear
Participant the following day, and receipt of the cash proceeds in the
Cedelbank Customer's or Euroclear Participant's account would be
back-valued to the value date (which would be the preceding day, when
settlement occurred in New York). Should the Cedelbank Customer or
Euroclear Participant have a line of credit with its respective clearing
system and elect to be in debit in anticipation of receipt of the sale
proceeds in its account, the back-valuation will extinguish any overdraft
charges incurred over that one-day period. If settlement is not completed
on the intended value date (i.e., the trade fails), receipt of the cash
proceeds in the Cedelbank Customer's or Euroclear Participant's account
would instead be valued as of the actual settlement date. Finally, day
traders that use Cedelbank or Euroclear and that purchase Global Securities
from DTC Participants for delivery to Cedelbank Customers or Euroclear
Participants should note that these trades would automatically fail on the
sale side unless affirmative action were taken. At least three techniques
should be readily available to eliminate this potential problem:
(a) borrowing through Cedelbank or Euroclear for one day (until the
purchase side of the day trade is reflected in their Cedelbank or
Euroclear accounts) in accordance with the clearing system's customary
procedures;
(b) borrowing the Global Securities in the U.S. from a DTC
Participant no later than one day prior to settlement, which would give
the Global Securities sufficient time to be reflected in their
Cedelbank or Euroclear account in order to settle the sale side of the
trade; or
(c) staggering the value dates for the buy and sell sides of the
trade so that the value date for the purchase from the DTC Participant
is at least one day prior to the value date for the sale to the
Cedelbank Customer or Euroclear Participant.
Certain U.S. Federal Income Tax Documentation Requirements
A beneficial owner of Global Securities holding securities through
Cedelbank or Euroclear (or through DTC if the holder has an address outside
the U.S.) will be subject to the 30% U.S. withholding tax that generally
applies to payments of interest (including original issue discount) on
registered debt issued by U.S. Persons, unless (i) each clearing system,
bank or other financial institution that holds customers' securities in the
ordinary course of its trade or business in the chain of intermediaries
between such beneficial owner and the U.S. entity required to withhold tax
complies with applicable certification requirements and (ii) such
beneficial owner takes one of the following steps to obtain an exemption or
reduced tax rate:
Exemption for Non-U.S. Persons (Form W-8). Beneficial owners of
Certificates that are non-U.S. Persons can obtain a complete exemption from
the withholding tax by filing a signed Form W-8 (Certificate of Foreign
Status). If the information shown on Form W-8 changes, a new Form W-8 must
be filed within 30 days of such change.
Exemption for Non-U.S. Persons with Effectively Connected Income
(Form 4224). A non-U.S. Person, including a non-U.S. corporation or bank
with a U.S. branch, for which the interest income is effectively connected
with its conduct of a trade or business in the United States, can obtain an
exemption from the withholding tax by filing Form 4224 (Exemption from
Withholding of Tax on Income Effectively Connected with the Conduct of a
Trade or Business in the United States).
Exemption or Reduced Rate for Non-U.S. Persons Resident in Treaty
Countries (Form 1001). Non-U.S. Persons that are Certificate Owners
residing in a country that has a tax treaty with the United States can
obtain an exemption or reduced tax rate (depending on the treaty terms) by
filing Form 1001 (Ownership, Exemption or Reduced Rate Certificate). If the
treaty provides only for a reduced rate, withholding tax will be imposed at
that rate unless the filer alternatively files Form W-8. Form 1001 may be
filed by the Certificate Owner or his agent.
Exemption for U.S. Persons (Form W-9). U.S. Persons can obtain a
complete exemption from the withholding tax by filing Form W-9 (Payer's
Request for Taxpayer Identification Number and Certification).
U.S. Federal Income Tax Reporting Procedure. The Certificate Owner
of a Global Security or in the case of a Form 1001 or a Form 4224 filer,
his agent, files by submitting the appropriate form to the person through
whom it holds (the clearing agency, in the case of persons holding directly
on the books of the clearing agency). Form W-8 and Form 1001 are effective
for three calendar years and Form 4224 is effective for one calendar year.
The term "U.S. Person" means (i) a citizen or resident of the
United States, (ii) a corporation or partnership organized in or under the
laws of the United States or any political subdivision thereof, (iii) an
estate the income of which is includible in gross income for United States
tax purposes, regardless of its source or (iv) a trust if a U.S. court is
able to exercise primary supervision over the administration of such trust
and one or more U.S. persons have the authority to control all substantial
decisions of such trust. 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.
- -----------------------------------------------------------------------------
$[ ]
Wachovia Credit Card Master Trust
$______ Class A Floating Rate Asset Backed Certificates,
Series 1999 - __
$______ Class B Floating Rate Asset Backed Certificates,
Series 1999 - __
The First National Bank of Atlanta d/b/a Wachovia Bank Card Services
Transferor and Servicer
PROSPECTUS SUPPLEMENT
[ ], [ ]
[Names of Underwriters]
You should rely only on the information contained or incorporated by
reference in this prospectus supplement and the attached prospectus. We
have not authorized anyone to provide you with different information.
We are not offering the certificates in any state where the offer is not
permitted.
We do not claim the accuracy of the information in this prospectus
supplement and the prospectus as of any date other than the dates stated on
their respective covers.
Dealers will deliver a prospectus supplement and prospectus when acting as
underwriters of the Class A Certificates and the Class B Certificates with
respect to their unsold allotments or subscriptions. In addition, all
dealers selling the certificates will deliver a prospectus supplement and
prospectus until [ ].
- ----------------------------------------------------------------------------
PART II
Item 14. Other Expenses of Issuance and Distribution
The following is an itemized list of the estimated expenses to be
incurred in connection with the offering of the securities being offered
hereunder other than underwriting discounts and commissions.
Registration Fee...................................... $278.00
Printing and Engraving................................ *
Trustee's Fees........................................ *
Legal Fees and Expenses............................... *
Blue Sky Fees and Expenses............................ *
Accountants' Fees and Expenses........................ *
Rating Agency Fees.................................... *
Miscellaneous Fees.................................... *
-------
Total....................................... *
=======
- -----------------------
* To be supplied by amendment.
ITEM 15. Indemnification of Directors and Officers
Article Tenth of the Articles of Association of the registrant
provides as follows:
Any person, his heirs, executors, or administrators, may be
indemnified or reimbursed by the Association for reasonable expenses
actually incurred in connection with any action, suit or proceeding, civil
or criminal, to which he or they shall be made a party by reason of this
being or having been a director, officer of employee of the Association, or
of any firm, corporation or organization which he served in any such
capacity at the request of the Association: Provided, however, that no
person shall be so indemnified or reimbursed in relation to any matter in
such action, suit or proceeding as to which he shall finally be adjudged to
have been guilty of or liable for gross negligence, willful misconduct or
criminal acts in the performance of duties to the Association: And,
provided, further, that no person shall be so indemnified or reimbursed in
relation to any matter in such action, suit or proceeding which has been
made the subject of a compromise settlement except with the approval of a
court of competent jurisdiction, or the holders of record of a majority of
the outstanding shares of the Association, or the Board of Directors,
acting by vote of directors not parties to the same action, suit or
proceeding, constituting a majority of the whole number of directors. The
foregoing right of indemnification or reimbursement shall not be exclusive
of the rights to which such person, his heirs, executors of administrators,
may be entitled as a matter of law.
The Association may, upon the affirmative vote of a majority of its
Board of Directors, purchase insurance for the purpose of indemnifying its
directors, officers and other employees to the extent that such
indemnification is allowed in the preceding paragraph. Such insurance may,
but need not, be for the benefit of all directors, officers or employees.
ITEM 16. Exhibits and Financial Statements
(a) Exhibits
1.1 -- Form of Underwriting Agreement.*
3.1 -- Articles of Association.*
3.2 -- By-Laws.*
4.1 -- Form of Pooling and Servicing Agreement.*
4.2 -- Form of Series Supplement (including form of
Certificate).*
4.3 -- Form of Prospectus Supplement.*
5.1 -- Opinion of Richards, Layton & Finger with respect
to legality.**
8.1 -- Opinion of Skadden, Arps, Slate, Meagher & Flom LLP
with respect to tax matters.**
23.1 -- Consent of Richards, Layton & Finger (included in
opinion filed as Exhibit 5.1).**
23.2 -- Consent of Skadden, Arps, Slate, Meagher & Flom
(included in opinion filed as Exhibit 8.1).**
24.1 -- Power of Attorney (included on signature page).
* Incorporated herein by reference to Registration Statement on Form S-3
(File No. 33-95714) of The First National Bank of Atlanta.
** To be filed by amendment.
(b) Financial Statements
All financial statements, schedules and historical financial
information have been omitted as they are not applicable.
ITEM 17. Undertakings
The undersigned registrant hereby undertakes:
(b) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement; (i) to
include any prospectus required by Section 10(a)(3) of the Securities Act
of 1933; (ii) to reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement; (iii) to include any material information with
respect to the plan of distribution not previously disclosed in the
registration statement or any material change to such information in the
registration statement; provided, however, that (a)(i) and (a)(ii) will not
apply if the information required to be included in a post-effective
amendment thereby is contained in periodic reports filed pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in this registration statement.
(c) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(d) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(e) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the registrant's annual report
pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934
(and, where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Securities Exchange Act of 1934)
that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(f) To provide to the underwriters at the closing specified in the
underwriting agreements certificates in such denominations and registered
in such names as required by the underwriters to permit prompt delivery to
each purchaser.
(g) That insofar as indemnification for liabilities arising under
the Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the provisions described
under Item 15 above, or otherwise, the registrant has been advised that in
the opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in
the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to
a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
(h) That, for purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of prospectus
filed as part of this Registration Statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant to Rule
424(b)(i) or (4) or 497(h) under the Securities Act of 1933 shall be deemed
to be part of this Registration Statement as of the time it was declared
effective.
(i) That, for the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form
of prospectus shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering thereof.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the registrant certifies that it has reasonable grounds to believe
that it meets all of the requirements for filing on Form S-3 and has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Winston-Salem, State
of North Carolina, on May 27, 1999.
THE FIRST NATIONAL BANK OF ATLANTA
as originator of the Trusts and registrant
By: /S/ Charles M. Hegarty
----------------------------------------
Charles M. Hegarty
Principal Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose
signature appears below constitutes and appoints Kenneth W. McAllister,
Esq., Joan S. Suttin, Esq. and John H. Loughridge, Jr., Esq. and each of
them, his or her true and lawful attorney-in-fact and agent, with full
power of substitution and resubstitution, for him or her and in his or her
name, place and stead, in any and all capacities, to sign any or all
amendments (including post-effective amendments) to this Registration
Statement and any and all other documents in connection therewith, and to
file the same, with all exhibits thereto, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents or any of them
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to
all intents and purposes as might or could be done in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents or any
of them, or their substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933,
as amended, this Registration Statement has been signed on May 27, 1999 by
the following persons in the capacities indicated.
Signature Title
/S/ Charles M. Hegarty President and Director (Principal
-------------------------------- Executive Officer)
(Charles M. Hegarty)
/S/ Donald K. Truslow Controller (Principal Financial
-------------------------------- Officer and Principal Accounting
(Donald K. Truslow) Officer)
/S/ Beverly B. Wells Chairman and Director
---------------------------------
(Beverly B. Wells)
/S/ J. Peirce Anderson, Esq. Director
---------------------------------
(J. Peirce Anderson, Esq.)
/S/ John E.F. Corson Director
---------------------------------
(John E.F. Corson)
/S/ Martin I. Lubaroff, Esq. Director
---------------------------------
(Martin I. Lubaroff, Esq.)
/S/ Richard G. McCauley, Esq. Director
---------------------------------
(Richard G. McCauley, Esq.)
EXHIBITS INDEX
Sequential Page
Exhibit No. Description of Exhibit Number
1.1 Form of Underwriting Agreement.*
3.1 Articles of Association.*
3.2 By-Laws.*
4.1 Form of Pooling and Servicing Agreement.*
4.2 Form of Series Supplement
(including form of Certificate).*
4.3 Form of Prospectus Supplement.*
5.1 Opinion of Richards, Layton & Finger
with respect to legality.**
8.1 Opinion of Skadden, Arps, Slate, Meagher
& Flom LLP with respect to tax matters.**
23.1 Consent of Richards, Layton & Finger
(included in opinion filed as Exhibit 5.1).**
23.2 Consent of Skadden, Arps, Slate, Meagher
& Flom (included in opinion filed as Exhibit
8.1).**
24.1 Power of Attorney (included on signature page).
- ------------------------
* Incorporated herein by reference to Registration Statement on Form S-3
(File No. 33-95714) of The First National Bank of Atlanta.
** To be filed by amendment.
