<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED WITHOUT THE DELIVERY OF A FINAL PROSPECTUS +
+SUPPLEMENT AND ACCOMPANYING PROSPECTUS. THIS PROSPECTUS SHALL NOT CONSTITUTE +
+AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY OR NOR SHALL THERE BE +
+ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR+
+SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE +
+SECURITIES LAWS OF ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED MARCH 18, 1997
PROSPECTUS SUPPLEMENT
- - ---------------------
(TO PROSPECTUS DATED FEBRUARY 19, 1997)
$693,750,000
MBNA MASTER CREDIT CARD TRUST II
$637,500,000 CLASS A FLOATING RATE ASSET
BACKED CERTIFICATES, SERIES 1997-C
$56,250,000 CLASS B FLOATING RATE ASSET
BACKED CERTIFICATES, SERIES 1997-C
MBNA AMERICA BANK, NATIONAL ASSOCIATION
SELLER AND SERVICER
Each Class A Floating Rate Asset Backed Certificate, Series 1997-C
(collectively, the "Class A Certificates") and each Class B Floating Rate
Asset Backed Certificate, Series 1997-C (collectively, the "Class B
Certificates" and, together with the Class A Certificates, the "Certificates")
will represent the right to receive certain payments from the MBNA Master
Credit Card Trust II (the "Trust"), created pursuant to a Pooling and
Servicing Agreement between MBNA America Bank, National Association ("MBNA"),
as seller and servicer, and The Bank of New York, as trustee. The property of
the Trust includes receivables (the "Receivables") generated from time to time
in a portfolio of MasterCard(R) and VISA(R) revolving
(continued on next page)
THERE CURRENTLY IS NO SECONDARY MARKET FOR THE CERTIFICATES, AND THERE IS NO
ASSURANCE THAT ONE WILL DEVELOP. POTENTIAL INVESTORS SHOULD CONSIDER, AMONG
OTHER THINGS, THE INFORMATION SET FORTH IN "RISK FACTORS" BEGINNING ON PAGE 19
IN THE PROSPECTUS.
---------------
THE CERTIFICATES REPRESENT INTERESTS IN THE TRUST ONLY AND DO NOT REPRESENT
INTERESTS IN OR OBLIGATIONS OF MBNA AMERICA BANK, NATIONAL ASSOCIATION OR ANY
AFFILIATE THEREOF. A CERTIFICATE IS NOT A DEPOSIT AND NEITHER THE CERTIFICATES
NOR THE UNDERLYING ACCOUNTS OR RECEIVABLES ARE INSURED OR GUARANTEED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC(1) DISCOUNT SELLER(1)(2)
- - --------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Class A Certificate.............. % % %
- - --------------------------------------------------------------------------------
Per Class B Certificate.............. % % %
- - --------------------------------------------------------------------------------
Total................................ $ $ $
</TABLE>
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
(1) Plus accrued interest, if any, at the Class A Certificate Rate or the
Class B Certificate Rate, as applicable, from March , 1997.
(2) Before deduction of expenses estimated to be $800,000.
---------------
The Certificates are offered by the Underwriters when, as and if issued by
the Trust and accepted by the Underwriters and subject to the Underwriters'
right to reject orders in whole or in part. It is expected that the
Certificates will be delivered in book-entry form on or about March , 1997,
through the facilities of The Depository Trust Company, Cedel Bank, societe
anonyme, and the Euroclear System.
---------------
UNDERWRITERS OF THE CLASS A CERTIFICATES
MERRILL LYNCH & CO.
BEAR, STEARNS & CO. INC.
GOLDMAN, SACHS & CO.
J.P. MORGAN & CO.
SALOMON BROTHERS INC
UNDERWRITERS OF THE CLASS B CERTIFICATES
MERRILL LYNCH & CO. GOLDMAN, SACHS & CO.
---------------
The date of this Prospectus Supplement is March , 1997.
<PAGE>
(continued from previous page)
credit card accounts (the "Accounts"), all monies due or to become due in
payment of the Receivables and the right to receive Interchange allocable to
the Certificates, as described herein. In addition, the Collateral Interest
(as defined herein) will be issued in the initial amount of $56,250,000 and
will be subordinated to the Certificates as described herein. MBNA initially
will own the remaining undivided interest in the Trust not represented by the
Certificates, the Collateral Interest and the other interests issued by the
Trust and will service the Receivables. MBNA has offered and may from time to
time offer other Series of certificates that evidence undivided interests in
certain assets of the Trust, which may have terms significantly different from
the Certificates.
Interest will accrue on the Class A Certificates from March , 1997 (the
"Closing Date") through April 14, 1997, from April 15, 1997 through May 14,
1997 and from May 15, 1997 through June 15, 1997, and with respect to each
Interest Period (as defined herein) thereafter, at the rate of % per annum
above the London interbank offered rate for one-month United States dollar
deposits ("LIBOR"), determined as described herein, prevailing on the related
LIBOR Determination Date (as defined herein) with respect to such period (the
"Class A Certificate Rate"). Interest will accrue on the Class B Certificates
from the Closing Date through April 14, 1997, from April 15, 1997 through
May 14, 1997, and from May 15, 1997 through June 15, 1997 and with respect to
each Interest Period thereafter, at the rate of % per annum above LIBOR
prevailing on the related LIBOR Determination Date with respect to each such
period (the "Class B Certificate Rate"). The initial LIBOR Determination Date
with respect to the Certificates, on which LIBOR for the period from the
Closing Date through April 14, 1997 will be determined, is March , 1997.
Interest with respect to the Certificates will be distributed on June 16, 1997
and on the 15th day of each month thereafter (or, if such 15th day is not a
business day, the next succeeding business day) (each, a "Distribution Date").
For purposes of this Prospectus Supplement and the Prospectus, a "business
day" shall mean, unless otherwise indicated, any day other than a Saturday, a
Sunday or a day on which banking institutions in New York, New York or Newark,
Delaware are authorized or obligated by law or executive order to be closed.
Principal on the Certificates is scheduled to be distributed on the March 2004
Distribution Date (the "Scheduled Payment Date"), but may be paid earlier or
later under certain limited circumstances described herein. Principal payments
will not be made to Class B Certificateholders until the final principal
payment has been made with respect to the Class A Certificates. See "Maturity
Assumptions."
The Class B Certificates will be subordinated to the Class A Certificates as
described herein. The Collateral Interest will be subordinated to the Class A
Certificates and the Class B Certificates as described herein.
Application will be made to list the Certificates on the Luxembourg Stock
Exchange.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE SECURITIES
OFFERED HEREBY, INCLUDING OVER-ALLOTMENT TRANSACTIONS, STABILIZING
TRANSACTIONS, SYNDICATE COVERING TRANSACTIONS AND PENALTY BIDS. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
The Certificates offered hereby constitute a separate Series of certificates
being offered by the Seller from time to time pursuant to its Prospectus dated
February 19, 1997. This Prospectus Supplement does not contain complete
information about the offering of the Certificates. Additional information is
contained in the Prospectus and purchasers are urged to read both this
Prospectus Supplement and the Prospectus in full. Sales of the Certificates
may not be consummated unless the purchaser has received both this Prospectus
Supplement and the Prospectus.
S-2
<PAGE>
SUMMARY OF TERMS
The following is qualified in its entirety by reference to the detailed
information appearing elsewhere in this Prospectus Supplement and the
accompanying Prospectus. Certain capitalized terms used in this summary are
defined elsewhere in this Prospectus Supplement and the accompanying
Prospectus. A listing of the pages on which some of such terms are defined is
found in the "Index of Terms for Prospectus Supplement" beginning on page S-47
herein and the "Index of Terms for Prospectus" beginning on page 62 in the
Prospectus.
TYPE OF SECURITIES...... Class A Floating Rate Asset Backed Certificates,
Series 1997-C (the "Class A Certificates") and
Class B Floating Rate Asset Backed Certificates,
Series 1997-C (the "Class B Certificates," and
together with the Class A Certificates, the
"Certificates").
THE TRUST............... The MBNA Master Credit Card Trust II (the
"Trust") was formed pursuant to a pooling and
servicing agreement (as amended from time to
time, the "Agreement"), between MBNA America
Bank, National Association, as seller (the
"Seller") and as servicer of the Receivables,
and The Bank of New York, as trustee (the
"Trustee"), as supplemented by the supplement
relating to the Certificates (the "Series 1997-C
Supplement") (the term "Agreement," unless the
context requires otherwise, refers to the
Agreement as supplemented by the Series 1997-C
Supplement). As used in this Prospectus
Supplement, the term "Certificateholders" refers
to holders of the Certificates, the term "Class
A Certificateholders" refers to holders of the
Class A Certificates and the term "Class B
Certificateholders" refers to holders of the
Class B Certificates.
The Trust previously has issued thirty other
Series, each of which is in Group One. See
"Annex I: Other Series Issued" for a summary of
such other Series.
TRUST ASSETS............ The property of the Trust includes receivables
(the "Receivables") arising under certain
MasterCard(R) and VISA(R)* revolving credit card
accounts (the "Accounts") selected from the
portfolio of MasterCard and VISA accounts owned
by the Seller (the "Bank Portfolio"), all monies
due or to become due in payment of the
Receivables (other than recoveries on charged-
off Receivables), all proceeds of the
Receivables and proceeds of credit insurance
policies relating to the Receivables, the right
to receive Interchange allocable to the
Certificates (which right may not be afforded to
other Series issued by the Trust) and all monies
on deposit in certain bank accounts of the Trust
(other than investment earnings on such
amounts), and any Enhancement issued with
respect to any Series. The Certificateholders
will not be entitled to the benefits of any
Enhancement issued with respect to any Series
other than Series 1997-C, and the holders of
certificates of other Series will not be
entitled to the benefits of any Enhancement
issued with respect to Series 1997-C. "Series
1997-C" shall mean the Series of the Trust
represented by the Certificates and the
Collateral Interest.
- - --------
* MasterCard(R) and VISA(R) are federally registered servicemarks of MasterCard
International Inc. and Visa U.S.A., Inc., respectively.
S-3
<PAGE>
The Seller has conveyed to the Trustee for the
benefit of the Trust all Receivables existing
under certain Accounts that were selected from
the Bank Portfolio based on criteria provided in
the Agreement as applied on June 22, 1994 (the
"Cut-Off Date") and, with respect to certain
Additional Accounts, as applied on September 19,
1994, November 15, 1994, March 30, 1995, July 6,
1995, October 3, 1995, March 8, 1996, May 30,
1996, September 4, 1996, October 3, 1996,
November 5, 1996 and February 4, 1997 and has
conveyed and will convey all Receivables arising
under the Accounts from time to time thereafter
until the termination of the Trust. In addition,
pursuant to the Agreement, the Seller may
(subject to certain limitations and conditions)
designate other Additional Accounts for
inclusion in the Trust. Also, the Agreement
provides that in lieu of Additional Accounts or
in addition thereto, the Seller may, subject to
certain conditions, include Participations in
the Trust. See "The Receivables" herein and
"Description of the Certificates--Addition of
Trust Assets" in the Prospectus.
CERTIFICATE INTEREST
AND PRINCIPAL.......... Each of the Certificates offered hereby
represents the right to receive certain payments
from the assets of the Trust, which 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," and
together with the Class A Investor Interest and
the Class B Investor Interest, the "Investor
Interest"), the interest of the holders of other
undivided interests in the Trust issued pursuant
to the Agreement and applicable Series
Supplements and the Seller (the "Seller
Interest"), as described below. The Collateral
Interest in the initial amount of $56,250,000
(which amount represents 7.5% of the sum of the
initial Class A Investor Interest, the initial
Class B Investor Interest and the initial
Collateral Interest) constitutes Credit
Enhancement for the Certificates. The provider
of such Credit Enhancement is referred to herein
as the "Collateral Interest Holder." 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 Seller Interest will represent
the right to the assets of the Trust not
allocated to the Class A Investor Interest, the
Class B Investor Interest, the Collateral
Interest or the holders of other undivided
interests in the Trust. The principal amount of
the Seller Interest will fluctuate as the amount
of Receivables in the Trust changes from time to
time.
The Class A Certificates will represent the right
to receive, from the assets of the Trust
allocated to the Class A Certificates, funds up
to (but not in excess of) the amounts required
to make (a) payments of interest accruing from
March , 1997 (the "Closing Date") through
April 14, 1997, from April 15, 1997 through May
14, 1997 and from May 15, 1997 through June 15,
1997, and with respect to each Interest Period
thereafter, at the rate of % per annum above
the London interbank offered rate for one-month
United States dollar deposits ("LIBOR"),
S-4
<PAGE>
determined as described herein, prevailing on
the related LIBOR Determination Date (such rate,
the "Class A Certificate Rate"), and (b)
payments of principal on the Scheduled Payment
Date or, under certain limited circumstances,
during the Rapid Amortization Period, to the
extent of the Class A Investor Interest, which
may be less than the unpaid principal balance of
the Class A Certificates in certain
circumstances described herein. See "Description
of the Certificates--Principal Payments."
The Class B Certificates will represent the right
to receive, from the assets of the Trust
allocated to the Class B Certificates, funds up
to (but not in excess of) the amounts required
to make (a) payments of interest accruing from
the Closing Date through April 14, 1997, from
April 15, 1997 through May 14, 1997 and from May
15, 1997 through June 15, 1997, and with respect
to each Interest Period thereafter, at the rate
of % per annum above LIBOR, determined as
described herein, prevailing on the related
LIBOR Determination Date (such rate, the "Class
B Certificate Rate") and (b) payments of
principal on the Scheduled Payment Date or,
under certain limited circumstances, during the
Rapid Amortization Period, to the extent of the
Class B Investor Interest, which may be less
than the unpaid principal balance of the Class B
Certificates in certain circumstances described
herein. No principal will be paid to the Class B
Certificateholders until the Class A Investor
Interest is paid in full.
The aggregate principal amount of the Class A
Investor Interest and the Class B Investor
Interest will, except as otherwise provided
herein, remain fixed at $637,500,000 and
$56,250,000, respectively. The Class A Investor
Interest will decline in certain circumstances
if the Default Amounts allocated to the Class A
Certificates exceed funds allocable thereto as
described herein and the Class B Investor
Interest and the Collateral Interest are zero.
The Class B Investor Interest will decline in
certain circumstances as a result of (a) the
reallocation of collections of Principal
Receivables otherwise allocable to the Class B
Investor Interest to fund certain payments in
respect of the Class A Certificates and (b) the
allocation to the Class B Investor Interest of
certain Default Amounts, including such amounts
otherwise allocable to the Class A Investor
Interest when the Collateral Interest is zero.
During the Controlled Accumulation Period, for
the sole purpose of allocating collections of
Finance Charge Receivables and Default Amounts
with respect to each Monthly Period, the "Class
A Investor Interest" will be further reduced (in
an amount not to exceed the Class A Investor
Interest) by the Principal Funding Account
Balance from time to time (as so reduced, the
"Class A Adjusted Investor Interest") and the
"Class B Investor Interest" will be further
reduced (in an amount not to exceed the Class B
Investor Interest) by the amount by which the
Principal Funding Account Balance exceeds the
Class A Investor Interest (as so reduced, the
"Class B Adjusted Investor Interest" and
together with the Class A Adjusted Investor
Interest and the Collateral Interest, the
"Adjusted Investor Interest").
The Class A Certificates, the Class B
Certificates and the Collateral Interest will
each include the right to receive (but only to
the extent needed to make required payments
under the Agreement) varying
S-5
<PAGE>
percentages of collections of Finance Charge
Receivables and Principal Receivables and will
be allocated varying percentages of Default
Amounts, during each Monthly Period. The
"Monthly Period," with respect to any
Distribution Date, will be the period from and
including the first day of the preceding
calendar month to and including the last day of
such calendar month (other than the initial
Monthly Period, which will commence on the
Closing Date and end on May 31, 1997).
Collections of Finance Charge Receivables and
Default Amounts at all times, and collections of
Principal Receivables during the Revolving
Period, will be allocated to the Investor
Interest based on the Floating Investor
Percentage and will be further allocated among
the Class A Investor Interest, the Class B
Investor Interest and the Collateral Interest
based on the Class A Floating Allocation, the
Class B Floating Allocation and the Collateral
Floating Allocation, respectively, applicable
during the related Monthly Period. Collections
of Principal Receivables during the Controlled
Accumulation Period and the Rapid Amortization
Period will be allocated to the Investor
Interest based on the Fixed Investor Percentage
and will be further allocated among the Class A
Investor Interest, the Class B Investor Interest
and the Collateral Interest based on the Class A
Fixed Allocation, the Class B Fixed Allocation
and the Collateral Fixed Allocation,
respectively. See "Description of the
Certificates--Allocation Percentages" and "--Pay
Out Events" herein and "Description of the
Certificates--Pay Out Events" in the Prospectus.
The Seller initially will own the Seller
Interest. The Seller may tender the certificate
that represents the Seller Interest (the "Seller
Certificate") or, if provided in the relevant
Series Supplement, certificates of any Series
and the Seller Certificate, to the Trustee and,
upon satisfying certain conditions, cause the
Trustee to issue one or more new Series, as
described in "Description of the Certificates--
Exchanges" in the Prospectus. The certificates
of any new Series will be issued pursuant to the
Agreement and a related Series Supplement. See
"Description of the Certificates" herein and in
the Prospectus.
The final distribution of principal and interest
on the Certificates will be made no later than
the August 2006 Distribution Date in the manner
provided in "Description of the Certificates--
Final Payment of Principal; Termination" in the
Prospectus. Series 1997-C will terminate on the
earliest to occur of (a) the Distribution Date
on which the Investor Interest is paid in full,
(b) the August 2006 Distribution Date or (c) the
Trust Termination Date (such earliest to occur,
the "Series 1997-C Termination Date"). After the
Series 1997-C Termination Date, the Trust will
have no further obligation to pay principal or
interest on the Certificates.
RECEIVABLES............. The Receivables arise in Accounts that have been
selected from the Bank Portfolio based on
criteria provided in the Agreement as applied on
the Cut-Off Date and, with respect to certain
Additional Accounts, as applied on September 19,
1994, November 15, 1994, March 30, 1995, July 6,
1995, October 3, 1995, March 8, 1996, May 30,
1996,
S-6
<PAGE>
September 4, 1996, October 3, 1996, November 5,
1996 and February 4, 1997. The Receivables
consist of Principal Receivables and Finance
Charge Receivables. In addition, certain amounts
of Interchange attributed to cardholder charges
for goods and services in the Accounts will be
allocated to the Certificates and treated as
Finance Charge Receivables. See "MBNA's Credit
Card Portfolio--Interchange" herein and "MBNA's
Credit Card Activities--Interchange" in the
Prospectus. With respect to the characterization
of annual credit card membership fees as Finance
Charge Receivables, see "Description of the
Certificates--Transfer of Annual Membership
Fees" in the Prospectus.
The aggregate amount of Receivables in the
Accounts as of the beginning of the day on
February 4, 1997 was $25,224,329,427 comprised
of $24,829,060,180 of Principal Receivables and
$395,269,247 of Finance Charge Receivables. The
amount of Finance Charge Receivables will not
affect the amount of the Investor Interest
represented by the Certificates and the
Collateral Interest or the amount of the Seller
Interest, all of which are determined on the
basis of the amount of Principal Receivables in
the Trust. The aggregate interest in the
Principal Receivables in the Trust evidenced by
the Certificates and the Collateral Interest
will never exceed the amount of the Investor
Interest regardless of the total amount of
Principal Receivables in the Trust at any time.
DENOMINATIONS........... Beneficial interests in the Certificates will be
offered for purchase in minimum denominations of
$1,000 and integral multiples thereof.
REGISTRATION OF
CERTIFICATES........... The Certificates initially will be represented by
Certificates registered in the name of Cede, as
the nominee of DTC. No purchaser of a
Certificate will be entitled to receive a
Definitive Certificate, except under the limited
circumstances described herein.
Certificateholders may elect to hold their
Certificates through DTC (in the United States)
or CEDEL or Euroclear (in Europe). Transfers
will be made in accordance with the rules and
operating procedures described herein. See
"Description of the Certificates--Definitive
Certificates" in the Prospectus.
SERVICING FEE........... The Servicer will receive a monthly fee as
servicing compensation from the Trust on each
Transfer Date. On each Transfer Date, 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
respect of the Investor Servicing Fee. In
addition, the Class A Servicing Fee, the Class B
Servicing Fee and the Collateral Interest
Servicing Fee will be paid on each Transfer Date
as described under "Description of the
Certificates--Servicing Compensation and Payment
of Expenses." See also "Description of the
Certificates--Servicing Compensation and Payment
of Expenses" in the Prospectus.
INTEREST................ Interest on the Certificates for each Interest
Period will be distributed on June 16, 1997, and
on the 15th day of each month thereafter, or if
such day is not a business day, on the next
succeeding business day
S-7
<PAGE>
(each, a "Distribution Date"), in an amount
equal to (a) with respect to the Class A
Certificates, the product of (i) the actual
number of days in the related Interest Period
divided by 360 and (ii) the Class A Certificate
Rate and (iii) the outstanding principal balance
of the Class A Certificates as of the preceding
Record Date (or in the case of the first
Distribution Date, as of the Closing Date) and
(b) with respect to the Class B Certificates,
the product of (i) the actual number of days in
the related Interest Period divided by 360 and
(ii) the Class B Certificate Rate and (iii) the
outstanding principal balance of the Class B
Certificates as of the preceding Record Date (or
in the case of the first Distribution Date, as
of the Closing Date). Interest for any
Distribution Date due but not paid on such
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, as applicable, "Additional
Interest").
The "Interest Period," with respect to any
Distribution Date, will be (a) with respect to
the Certificates, the period from and including
the previous Distribution Date (or in the case
of the first Distribution Date, from and
including the Closing Date) through the day
preceding such Distribution Date and (b) with
respect to the Collateral Interest, the period
from and including the Transfer Date related to
the immediately preceding Distribution Date (or
in the case of the first Distribution Date, from
and including the Closing Date) to but excluding
the Transfer Date related to such Distribution
Date. Interest payments on each Distribution
Date will be funded from the portion of Finance
Charge Receivables collected during the
preceding Monthly Period and certain other
available amounts (a) with respect to the Class
A Certificates, allocated to the Class A
Investor Interest, and, if necessary, from
Excess Spread and Reallocated Principal
Collections (to the extent available), (b) with
respect to the Class B Certificates, allocated
to the Class B Investor Interest and, if
necessary, from Excess Spread and Reallocated
Collateral Principal Collections (to the extent
available) and (c) with respect to the
Collateral Interest, from Excess Spread. See
"Description of the Certificates--Reallocation
of Cash Flows" and "Application of Collections--
Payment of Interest, Fees and Other Items"
herein and "Risk Factors--Credit Enhancement" in
the Prospectus.
REVOLVING PERIOD........ The "Revolving Period" with respect to the
Certificates means the period from and including
the Closing Date to, but not including, the
earlier of (a) the commencement of the
Controlled Accumulation Period and (b) the
commencement of the Rapid Amortization Period.
The controlled accumulation period with respect
to the Certificates (the "Controlled
Accumulation Period") is scheduled to begin at
the close of business on February 28, 2003.
Subject to the conditions set forth under
"Description of the Certificates--Postponement
of Controlled Accumulation Period," the day on
which the Revolving Period ends and the
Controlled Accumulation Period begins may be
delayed to no later than the close of business
on January 31, 2004. During the
S-8
<PAGE>
Revolving Period, Available Investor Principal
Collections otherwise allocable to the Investor
Interest will, subject to certain limitations
and unless a reduction in the Required
Collateral Interest has occurred, be treated as
Shared Principal Collections and allocated to
the holders of other Series of certificates
within Group One issued and outstanding or,
subject to certain limitations, paid to the
holder of the Seller Certificate. See
"Description of the Certificates--Principal
Payments." See "Description of the
Certificates--Pay Out Events" herein and in the
Prospectus for a discussion of the events which
might lead to the termination of the Revolving
Period prior to the commencement of the
Controlled Accumulation Period.
CONTROLLED ACCUMULATION
PERIOD................. Unless a Pay Out Event has occurred, the
Controlled Accumulation Period will begin at the
close of business on the last day of the
Revolving Period and will end on the earliest of
(i) the commencement of the Rapid Amortization
Period, (ii) the payment of the Investor
Interest in full and (iii) the Series 1997-C
Termination Date. During the Controlled
Accumulation Period, amounts equal to the least
of (a) Available Investor Principal Collections
for the related Monthly Period, (b) the sum of
the applicable Controlled Accumulation Amount
for such Monthly Period and the applicable
Accumulation Shortfall, if any (such applicable
sum, the "Controlled Deposit Amount") and (c)
the sum of the Class A Adjusted Investor
Interest and the Class B Adjusted Investor
Interest on such Transfer Date will be deposited
monthly in a trust account established by the
Trustee (the "Principal Funding Account") on
each Transfer Date beginning with the Transfer
Date in the month following the commencement of
the Controlled Accumulation Period until the
Principal Funding Account Balance is equal to
the sum of the Class A Investor Interest and the
Class B Investor Interest. If, for any Monthly
Period, the Available Investor Principal
Collections for such Monthly Period exceed the
applicable Controlled Deposit Amount, any such
excess will be first paid to the Collateral
Interest Holder to the extent that the
Collateral Interest exceeds the Required
Collateral Interest and then treated as Shared
Principal Collections and allocated to the
holders of other Series of certificates within
Group One issued and outstanding or, subject to
certain limitations, paid to the holder of the
Seller Certificate. If, for any Monthly Period,
the Available Investor Principal Collections for
such Monthly Period are less than the applicable
Controlled Deposit Amount, the amount of such
deficiency will be the applicable "Accumulation
Shortfall" for the succeeding Monthly Period.
See "Description of the Certificates--
Application of Collections."
Unless a Pay Out Event shall have occurred, all
funds on deposit in the Principal Funding
Account will be invested at the direction of the
Servicer by the Trustee in certain Permitted
Investments. Investment earnings (net of
investment losses and expenses) on funds on
deposit in the Principal Funding Account (the
"Principal Funding Investment Proceeds") during
the Controlled Accumulation Period will be used
to pay interest on the Certificates in an amount
up to, for each Transfer
S-9
<PAGE>
Date, the sum of (a) with respect to the Class A
Certificates, the product of (i) a fraction, the
numerator of which is the actual number of days
in the related Interest Period and the
denominator of which is 360, (ii) the Class A
Certificate Rate in effect with respect to such
Interest Period and (iii) the aggregate amount
on deposit in the Principal Funding Account with
respect to Class A Monthly Principal as of the
Record Date preceding such Transfer Date and (b)
with respect to the Class B Certificates, the
product of (i) a fraction, the numerator of
which is the actual number of days in such
Interest Period and the denominator of which is
360, (ii) the Class B Certificate Rate in effect
with respect to such Interest Period and (iii)
the aggregate amount on deposit in the Principal
Funding Account with respect to Class B Monthly
Principal as of the Record Date preceding such
Transfer Date (such sum, the "Covered Amount").
If, for any Transfer Date, the Principal Funding
Investment Proceeds are less than the Covered
Amount, the amount of such deficiency (the
"Principal Funding Investment Shortfall") shall
be paid, to the extent required and available,
from the Reserve Account.
Funds on deposit in the Principal Funding Account
(in an amount not to exceed the Class A Investor
Interest) will be available to pay the Class A
Certificateholders in respect of the Class A
Investor Interest on the Scheduled Payment Date.
Funds on deposit in the Principal Funding
Account (to the extent such funds exceed the
Class A Investor Interest) will be used to pay
the Class B Certificateholders in respect of the
Class B Investor Interest on the Scheduled
Payment Date. If the aggregate amount of
deposits made to the Principal Funding Account
is insufficient to pay the Class A Investor
Interest and then the Class B Investor Interest
in full on the Scheduled Payment Date, the Rapid
Amortization Period will commence as described
below. Although it is anticipated that during
the Controlled Accumulation Period, funds will
be deposited in the Principal Funding Account in
an amount equal to the applicable Controlled
Deposit Amount on each Transfer Date and that
scheduled principal will be available for
distribution to the Class A Certificateholders
and then the Class B Certificateholders on the
Scheduled Payment Date, no assurance can be
given in that regard. See "Maturity Assumptions"
herein and in the Prospectus.
If a Pay Out Event occurs during the Controlled
Accumulation Period, the Rapid Amortization
Period will commence and any amounts on deposit
in the Principal Funding Account will be paid to
the Class A Certificateholders and, after the
Class A Investor Interest has been paid in full,
to the Class B Certificateholders on the
Distribution Date in the month following the
commencement of the Rapid Amortization Period.
Other Series offered by the Trust may or may not
have amortization or accumulation periods like
the Controlled Accumulation Period for the
Certificates, and such periods may have
different lengths and begin on different dates
than such Controlled Accumulation Period. Thus,
certain Series may be in their revolving periods
while others are in periods during which
collections of Principal Receivables are
distributed to or
S-10
<PAGE>
held for the benefit of certificateholders of
such other Series. In addition, other Series may
allocate Principal Receivables based upon
different investor percentages. See "Description
of the Certificates--Exchanges" in the
Prospectus for a discussion of the potential
terms of any other Series.
RAPID AMORTIZATION
PERIOD................. During the period from the day on which a Pay Out
Event has occurred and ending on the earlier of
(a) the payment of the Investor Interest in full
and (b) the Series 1997-C Termination Date (the
"Rapid Amortization Period"), Available Investor
Principal Collections will be distributed
monthly on each Distribution Date to the Class A
Certificateholders and, following payment of the
Class A Investor Interest in full, to the Class
B Certificateholders and, following payment of
the Class B Investor Interest in full, to the
Collateral Interest Holder beginning with the
Distribution Date in the month following the
commencement of the Rapid Amortization Period.
See "Description of the Certificates--Pay Out
Events" herein and in the Prospectus for a
discussion of the events which might lead to the
commencement of the Rapid Amortization Period.
SUBORDINATION OF THE
CLASS B CERTIFICATES
AND THE COLLATERAL
INTEREST............... The Class B Certificates and the Collateral
Interest will be subordinated, as described
herein, to the extent necessary to fund payments
with respect to the Class A Certificates as
described herein. In addition, the Collateral
Interest will be subordinated to the extent
necessary to fund certain payments with respect
to the Class A Certificates and the Class B
Certificates. If the Collateral Interest is
reduced to zero, the Class B Certificateholders
will bear directly the credit and other risks
associated with their interest in the Trust. To
the extent the Class B Investor Interest is
reduced, the percentage of collections of
Finance Charge Receivables allocable 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 and interest distributable to the
Class B Certificateholders will be reduced. Such
reductions of the Class B Investor Interest will
thereafter be reimbursed and the Class B
Investor Interest increased on each Transfer
Date by the amount, if any, of Excess Spread for
such Transfer Date available for that purpose.
See "Description of the Certificates--
Subordination."
ADDITIONAL AMOUNTS
AVAILABLE TO
CERTIFICATEHOLDERS..... With respect to any Transfer Date, Excess Spread
will be applied to fund the Class A Required
Amount and the Class B Required Amount, if any.
The "Class A Required Amount" means the amount,
if any, by which the sum of (a) the Class A
Monthly Interest due on the related Distribution
Date and any overdue Class A Monthly Interest
and Class A Additional Interest, if any, and (b)
the Class A Servicing Fee for the related
Monthly Period and any overdue Class A Servicing
Fee and (c) the Class A Investor Default Amount,
if any, for the related Monthly
S-11
<PAGE>
Period exceeds the Class A Available Funds for
the related Monthly Period. The "Class B
Required Amount" means the amount, if any, 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 any overdue
Class B Monthly Interest and Class B Additional
Interest, if any, and (ii) the Class B Servicing
Fee for the related Monthly Period and any
overdue Class B Servicing Fee, 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. The
"Required Amount" for any Monthly Period shall
mean the sum of (a) the Class A Required Amount
and (b) the Class B Required Amount, each for
such Monthly Period. "Excess Spread" for any
Transfer Date will equal the sum of (a) the
excess of (i) Class A Available Funds for the
related Monthly Period over (ii) the sum of the
amounts referred to in clauses (a), (b) and (c)
in the definition of "Class A Required Amount"
above, (b) the excess of (i) Class B Available
Funds for the related Monthly Period over (ii)
the sum of the amounts referred to in clauses
(a)(i) and (a)(ii) in the definition of "Class B
Required Amount" above and (c) Collateral
Available Funds for the related Monthly Period
not used under certain circumstances to pay the
Collateral Interest Servicing Fee, as described
herein.
If, on any Transfer Date, Excess Spread is less
than the Class A Required Amount, Reallocated
Principal Collections allocable first to the
Collateral Interest and then to the Class B
Investor Interest with respect to the related
Monthly Period will be used to fund the
remaining Class A Required Amount. If
Reallocated Principal Collections with respect
to such Monthly Period are insufficient to fund
the remaining Class A Required Amount for the
related Transfer Date, 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 deficiency
(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 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 such reductions in the
Collateral Interest and the Class B Investor
Interest with respect to such Monthly Period)
(such reduction, a "Class A Investor Charge-
Off"). If
S-12
<PAGE>
the Collateral Interest and the Class B Investor
Interest are reduced to zero, the Class A
Certificateholders will bear directly the credit
and other risks associated with their undivided
interest in the Trust. See "Description of the
Certificates--Reallocation of Cash Flows" and
"--Defaulted Receivables; Investor Charge-Offs."
If, on any Transfer Date, Excess Spread not
required to pay the Class A Required Amount and
to reimburse Class A Investor Charge-Offs is
less than the Class B Required Amount,
Reallocated Principal Collections allocable to
the Collateral Interest for the related Monthly
Period not required to pay the Class A Required
Amount will be used to fund the remaining Class
B Required Amount. If such remaining Reallocated
Principal Collections allocable to the
Collateral Interest with respect to such Monthly
Period are insufficient to fund the remaining
Class B Required Amount for the related Transfer
Date, then the Collateral Interest (after giving
effect to reductions for any Collateral Charge-
Offs, Reallocated Principal Collections and 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
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, if any, of the Class B Investor Default
Amount for such Monthly Period over such
reduction in the Collateral Interest with
respect to such Monthly Period) (such reduction,
a "Class B Investor Charge-Off"). In the event
of a reduction of the Class A Investor Interest,
the Class B Investor Interest or the Collateral
Interest, the amount of principal and interest
available to fund payments with respect to the
Class A Certificates and the Class B
Certificates will be decreased. See "Description
of the Certificates--Reallocation of Cash Flows"
and "--Defaulted Receivables; Investor Charge-
Offs."
REQUIRED COLLATERAL
INTEREST............... The "Required Collateral Interest" means (a)
initially, $56,250,000 (the "Initial Collateral
Interest") and (b) with respect to any Transfer
Date thereafter, an amount equal to 7.5% of the
sum of the Class A Adjusted Investor Interest
and the Class B Adjusted 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 the
Collateral Interest on the prior Transfer Date
after any adjustments made on such Transfer
Date, but not less than $22,500,000; provided,
however, that (i) if certain reductions in the
Collateral Interest occur 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; (ii) in no event
shall the Required Collateral Interest exceed
the unpaid principal amount of the Certificates
as of the last day of the Monthly Period
preceding such Transfer Date after taking into
account payments to be
S-13
<PAGE>
made on the related Distribution Date; and (iii)
the Required Collateral Interest may be reduced
at any time to a lesser amount if the Rating
Agency Condition is satisfied. See "Description
of the Certificates--Required Collateral
Interest."
If on any Transfer Date, the Collateral Interest
is less than the Required Collateral Interest,
certain Excess Spread amounts, if available,
will be used to increase the Collateral Interest
to the extent of such shortfall. If on any
Transfer Date the Collateral Interest equals or
exceeds the Required Collateral Interest, any
such Excess Spread amounts will first, be
deposited into the Reserve Account as described
herein and second, to the extent available, be
applied in accordance with the Loan Agreement
among the Seller, the Trustee, the Servicer and
the Collateral Interest Holder (the "Loan
Agreement") and will not be available to the
Certificateholders.
SHARED PRINCIPAL
COLLECTIONS............ The Series 1997-C Certificates are included in a
group of Series ("Group One"). Series 1994-A,
1994-B, 1994-C, 1994-D, 1994-E, 1995-A, 1995-B,
1995-C, 1995-D, 1995-E, 1995-F, 1995-G, 1995-H,
1995-I, 1995-J, 1996-A, 1996-B, 1996-C, 1996-D,
1996-E, 1996-F, 1996-G, 1996-H, 1996-I, 1996-J,
1996-K, 1996-L, 1996-M, 1997-A and 1997-B are,
and other Series in the future may be, included
in Group One. To the extent that collections of
Principal Receivables allocated to the Investor
Interest with respect to the Certificates are
not needed to make payments with respect to the
Investor Interest or to be deposited in the
Principal Funding Account, such collections
("Shared Principal Collections") will be
allocated to cover principal payments due to or
for the benefit of certificateholders of other
Series within Group One. Any such reallocation
will not result in a reduction in the Investor
Interest with respect to Series 1997-C. In
addition, collections of Principal Receivables
and certain other amounts otherwise allocable to
other Series in Group One, to the extent such
collections are not needed to make payments to
or deposits for the benefit of the
certificateholders of such other Series, may be
applied to cover principal payments due to or
for the benefit of the holders of the Class A
Certificates and the Class B Certificates or the
Collateral Interest Holder. See "Description of
the Certificates--Shared Principal Collections."
APPLICATION OF
COLLECTIONS OF FINANCE
CHARGE RECEIVABLES..... With respect to each Monthly Period during the
Revolving Period, the Servicer is required to
withdraw from the Collection Account and deposit
in the Finance Charge Account collections of
Finance Charge Receivables allocable to the
Certificates and the Collateral Interest in an
amount equal to the amount of current interest,
past due interest, if any, and additional
interest, if any, distributable to the
Certificateholders and the holder of the
Collateral Interest on the related Transfer Date
or Distribution Date, as applicable (plus, if
the Seller is not the Servicer, the
Certificateholder Servicing Fee for the related
Transfer Date plus the amount of any
Certificateholder Servicing Fee due but not paid
to the Servicer on any prior Transfer Date). On
each Transfer Date with
S-14
<PAGE>
respect to the Revolving Period, the Servicer is
required to withdraw from the Collection Account
and deposit in the Finance Charge Account all of
the collections of Finance Charge Receivables
allocated to the Certificates and the Collateral
Interest but not previously deposited in the
Finance Charge Account during the related
Monthly Period. With respect to each Monthly
Period during either the Controlled Accumulation
Period or the Rapid Amortization Period, the
Servicer is required to withdraw from the
Collection Account and deposit in the Finance
Charge Account collections of Finance Charge
Receivables allocable to the Certificates and
the Collateral Interest as described in the
Prospectus under "Description of the
Certificates--Application of Collections."
OPTIONAL REPURCHASE..... The Investor Interest will be subject to optional
repurchase by the Seller on any Distribution
Date on or after the Distribution Date on which
the Investor Interest is reduced to an amount
less than or equal to $37,500,000 (5% of the
initial Investor Interest), if certain
conditions set forth in the Agreement are met.
The repurchase price will be equal to the sum of
the Investor Interest and all accrued and unpaid
interest on the Certificates and the Collateral
Interest through the day preceding the
Distribution Date on which the repurchase
occurs. See "Description of the Certificates--
Final Payment of Principal; Termination" in the
Prospectus.
TRUSTEE................. The Bank of New York.
TAX STATUS.............. Special Counsel to the Seller is of the opinion
that under existing law the Certificates will be
characterized as debt for federal income tax
purposes. Under the Agreement, the Seller and
the Certificate Owners will agree to treat the
Certificates as debt for federal income tax
purposes. See "Federal Income Tax Consequences"
in the Prospectus for additional information
concerning the application of federal income tax
laws.
ERISA CONSIDERATIONS.... Subject to the considerations described below,
the Class A Certificates are eligible for
purchase by employee benefit plan investors.
Under a regulation issued by the Department of
Labor, the Trust's assets would not be deemed
"plan assets" of an employee benefit plan
holding the Class A Certificates if certain
conditions are met, including that the Class A
Certificates must be held, upon completion of
the public offering made hereby, by at least 100
investors who are independent of the Seller and
of one another. The Underwriters expect that the
Class A Certificates will be held by at least
100 independent investors at the conclusion of
the offering; however, no assurance can be given
and no monitoring or other measures will be
taken to ensure that such condition will be met.
The Seller anticipates that the other conditions
of the regulation will be met. If the Trust's
assets were deemed to be "plan assets" of an
employee benefit plan investor (e.g., if the 100
S-15
<PAGE>
independent investor criterion is not
satisfied), violations of the "prohibited
transaction" rules of the Employee Retirement
Income Security Act of 1974, as amended
("ERISA"), could result and generate excise tax
and other liabilities under ERISA and section
4975 of the Internal Revenue Code of 1986, as
amended (the "Code"), unless a statutory,
regulatory or administrative exemption is
available. It is uncertain whether existing
exemptions from the "prohibited transaction"
rules of ERISA would apply to all transactions
involving the Trust's assets if such assets were
treated for ERISA purposes as "plan assets" of
employee benefit plan investors. Accordingly,
fiduciaries or other persons contemplating
purchasing the Certificates on behalf or with
"plan assets" of any employee benefit plan
should consult their counsel before making a
purchase. See "ERISA Considerations" in the
Prospectus.
The Underwriters currently do not expect that the
Class B Certificates will be held by at least
100 such persons and, therefore, do 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.
CLASS A CERTIFICATE
RATING................. It is a condition to the issuance of the Class A
Certificates that they be rated in the highest
rating category by at least one nationally
recognized Rating Agency. The rating of the
Class A Certificates is based primarily on the
value of the Receivables and the terms of the
Class B Certificates and the Collateral
Interest.
CLASS B CERTIFICATE
RATING................. It is a condition to the issuance of the Class B
Certificates that they be rated in one of the
three highest rating categories by at least one
nationally recognized Rating Agency. The rating
of the Class B Certificates is based primarily
on the value of the Receivables and the terms of
the Collateral Interest.
LISTING................. Application will be made to list the Certificates
on the Luxembourg Stock Exchange.
S-16
<PAGE>
MBNA'S CREDIT CARD PORTFOLIO
GENERAL
The Receivables conveyed or to be conveyed to the Trust by MBNA pursuant to
the Agreement have been or will be generated from transactions made by holders
of selected MasterCard and VISA credit card accounts, including premium
accounts and standard accounts, from the Bank Portfolio.
BILLING AND PAYMENTS
MBNA, using MBNA Hallmark Information Services, Inc. as its service bureau,
generates and mails to cardholders monthly statements summarizing account
activity and processes cardholder monthly payments. Currently, cardholders
must make a monthly minimum payment at least equal to the greater of (i) 2% of
the statement balance plus past due amounts and (ii) a stated minimum payment
(generally $15) 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
daily periodic rate, and multiplying the result by the number of days in the
billing cycle. 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 on
the previous billing statement are paid by the due date, which is generally 25
days after the billing date. The finance charges assessed monthly on cash
advances are calculated by multiplying the account's average cash advance
balance by the applicable daily periodic rate, and multiplying the result by
the number of days in the billing cycle. Finance charges are calculated on
cash advances (including balance transfers) from the date of the transaction.
Currently, MBNA generally treats the day on which a cash advance check is
deposited or cashed as the transaction date for such check.
MBNA offers fixed rate and variable rate credit card accounts. Generally,
fixed annual percentage rates range from 14.9% to 19.9%, and variable rates
range from 6.65% to 10.9% above the prime rate. MBNA also offers temporary
promotional rates and, under certain circumstances, the periodic finance
charges on a limited number of accounts may be either greater than or less
than those assessed by MBNA generally.
MBNA assesses annual membership fees (generally ranging from $18 to $40) on
certain accounts although under various marketing programs these fees may be
waived or rebated. For most credit card accounts, MBNA also assesses late,
overlimit and returned check charges (generally $20 for late and overlimit
charges and generally $18 for returned check charges). MBNA generally assesses
a fee on cash advances and certain purchase transactions typically ranging
from 1% to 2% of the cash advance or purchase amount with a $2 minimum fee. In
some cases, the fee is capped at $10 or $25. Generally, a cash advance fee is
not assessed on balance transfers.
DELINQUENCY AND GROSS CHARGE-OFF 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 currently are made by
MBNA's Customer Assistance personnel. Collection activities include statement
messages, telephone calls and formal collection letters. MBNA employs two
principal computerized systems for collecting past due accounts. The
Predictive Management System analyzes each cardholder's purchase and repayment
habits and selects accounts for initial contact with the objective of
contacting the highest risk accounts first. The accounts selected are queued
to MBNA's proprietary Outbound Call Management System ("OCMS"). OCMS sorts
accounts by a number of factors, including time zone, degree of delinquency
and dollar amount due. OCMS automatically dials delinquent accounts in order
of priority. Representatives are automatically linked to the cardholder's
account information and voice line when a contact is established.
S-17
<PAGE>
Accounts are worked continually at each stage of delinquency through the 180
day past due level. As an account enters the 180 day delinquency level, it is
classified as a potential charge-off. Accounts failing to make a payment
during the 180 day cycle are written off. Managers may defer a charge-off of
an account for another month, pending continued payment activity or other
special circumstances. Senior manager approval is required on all exceptions
to charge-off. Accounts of cardholders in bankruptcy are currently charged-off
no later than is consistent with this policy.
The following tables set forth the delinquency and gross charge-off
experience for each of the periods shown for the Bank Portfolio of credit card
accounts. The Bank Portfolio's delinquency and gross charge-off experience is
comprised of segments which may, when taken individually, have delinquency and
gross charge-off characteristics different from those of the overall Bank
Portfolio of credit card accounts. As of the beginning of the day on February
4, 1997, the Receivables in the Trust Portfolio represented approximately 76%
of the Bank Portfolio. Because the Trust Portfolio is only a portion of the
Bank Portfolio, actual delinquency and gross charge-off 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 gross
charge-off experience for the Receivables in the future will be similar to the
historical experience of the Bank Portfolio set forth below.
DELINQUENCY EXPERIENCE
BANK PORTFOLIO
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------------------------------------
1996 1995 1994
----------------------- ----------------------- -----------------------
PERCENTAGE PERCENTAGE PERCENTAGE
OF TOTAL OF TOTAL OF TOTAL
RECEIVABLES RECEIVABLES RECEIVABLES RECEIVABLES RECEIVABLES RECEIVABLES
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Receivables
Outstanding(1)......... $33,070,523 $24,269,670 $17,162,700
Receivables Delinquent:
35-64 Days............. $ 619,940 1.87% $ 393,142 1.62% $ 234,686 1.37%
65-94 Days............. 282,815 0.86 178,038 0.73 106,309 0.62
95 or More Days........ 606,650 1.83 352,813 1.46 187,764 1.09
----------- ---- ----------- ---- ----------- ----
Total.................. $ 1,509,405 4.56% $ 923,993 3.81% $ 528,759 3.08%
=========== ==== =========== ==== =========== ====
</TABLE>
- - --------
(1) The Receivables Outstanding on the accounts consist of all amounts due
from cardholders as posted to the accounts as of the date shown.
GROSS CHARGE-OFF EXPERIENCE
BANK PORTFOLIO
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Average Receivables Outstanding(1)..... $27,781,061 $20,562,315 $13,594,814
Total Gross Charge-Offs(2)............. 1,193,375 686,687 423,551
Total Gross Charge-Offs as a percentage
of Average Receivables Outstanding.... 4.30% 3.34% 3.12%
</TABLE>
- - --------
(1) Average Receivables Outstanding is the average of the daily receivable
balance during the period indicated.
(2) Total Gross Charge-Offs as a percentage of Average Receivables Outstanding
for the months ended January 31, 1997 and February 28, 1997 was 5.27% and
4.80%, respectively, calculated as an annualized figure. 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, customer disputes or other
miscellaneous credit adjustments.
S-18
<PAGE>
INTERCHANGE
The Seller will be required, pursuant to the terms of the Agreement, to
transfer to the Trust a percentage of the Interchange attributed to cardholder
charges for goods and services in the Accounts. Interchange arising under the
Accounts will be allocated to the Certificates and the Collateral Interest on
the basis of the percentage equivalent of the ratio which the amount of the
Investor Percentage, with regard to Finance Charge Receivables, 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 MBNA, as reasonably estimated by the Seller. 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" herein and "MBNA's Credit Card Activities--
Interchange" in the Prospectus.
THE RECEIVABLES
The Receivables conveyed to the Trust arise in Accounts selected from the
Bank Portfolio on the basis of criteria set forth in the Agreement as applied
on the Cut-Off Date and, with respect to Additional Accounts, as of the
related date of their designation (the "Trust Portfolio"). Pursuant to the
Agreement, the Seller has the right, subject to certain limitations and
conditions set forth therein, to designate from time to time Additional
Accounts and to transfer to the Trust all Receivables of such 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 Seller designates such accounts as Additional
Accounts. On September 19, 1994, November 15, 1994, March 30, 1995, July 6,
1995, October 3, 1995, March 8, 1996, May 30, 1996, September 4, 1996, October
3, 1996, November 5, 1996 and February 4, 1997, the Seller designated
Additional Accounts and conveyed the Receivables arising therein to the Trust,
which included approximately $1.487 billion, $1.087 billion, $1.288 billion,
$1.094 billion, $1.193 billion, $1.981 billion, $1.685 billion, $1.986
billion, $1.087 billion, $690.6 million and $1.681 billion of Principal
Receivables, respectively. In addition, the Seller will be required to
designate Additional Accounts, to the extent available, (a) to maintain the
Seller Interest so that, during any period of 30 consecutive days, the Seller
Interest averaged over that period equals or exceeds the Minimum Seller
Interest for the same period and (b) to maintain, for so long as certificates
of any Series (including the Certificates) remain outstanding, an aggregate
amount of Principal Receivables equal to or greater than the Minimum Aggregate
Principal Receivables. "Minimum Seller Interest" for any period means 7% of
the average Principal Receivables for such period; provided, however, that the
Seller may reduce the Minimum Seller Interest to not less than 2% of the
average Principal Receivables 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, with respect to
all Series then outstanding, unless otherwise provided in the related Series
Supplement, an amount equal to the sum of the numerators used in the
calculation of the Investor Percentages with respect to Principal Receivables
for all outstanding Series on such date; provided, however, that with respect
to any Series in its Rapid Accumulation Period, or such other period as
designated in the related Series Supplement, with an investor interest as of
such date of determination equal to the principal funding account balance
relating to such Series, taking into account any deposit to be made to the
principal funding account relating to such Series on the Transfer Date
following such date of determination, the numerator used in the calculation of
the Investor Percentage with respect to Principal Receivables relating to such
Series shall, solely for the purpose of the definition of Minimum Aggregate
Principal Receivables, be deemed to equal zero; provided further, however,
that the Minimum Aggregate Principal Receivables may be reduced to a lesser
amount at any time if the Rating Agency Condition is satisfied. The Seller
will convey the Receivables then existing or thereafter created under such
Additional Accounts to the Trust. Further, pursuant to the Agreement, the
Seller 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 Seller, whether such Receivables
are then existing or thereafter created. Throughout the term of the Trust, the
Accounts
S-19
<PAGE>
from which the Receivables arise will be the Accounts designated by the Seller
on the Cut-Off Date plus any Additional Accounts minus any Removed Accounts.
As of the Cut-Off Date and, with respect to Receivables in Additional
Accounts, as of the related date of their conveyance to the Trust, and on the
date any new Receivables are created, the Seller will represent and warrant to
the Trust that the Receivables meet the eligibility requirements specified in
the Agreement. See "Description of the Certificates--Representations and
Warranties" in the Prospectus.
The Receivables in the Trust Portfolio, as of the beginning of the day on
February 4, 1997, included $24,829,060,180 of Principal Receivables and
$395,269,247 of Finance Charge Receivables. The Accounts had an average
Principal Receivable balance of $1,303 and an average credit limit of $8,062.
The percentage of the aggregate total Receivable balance to the aggregate
total credit limit was 16.4%. The average age of the Accounts was
approximately 30 months. As of the beginning of the day on February 4, 1997,
cardholders whose Accounts are included in the Trust Portfolio had billing
addresses in all 50 States and the District of Columbia. As of the beginning
of the day on February 4, 1997, 54.3% of the Accounts were standard accounts
and 45.7% were premium accounts, and the aggregate Principal Receivable
balances of standard accounts and premium accounts, as a percentage of the
total aggregate Principal Receivables, were 41.1% and 58.9%, respectively.
The following tables summarize the Trust Portfolio by various criteria as of
the beginning of the day on February 4, 1997. Because the future composition
of the Trust Portfolio may change over time, these tables are not necessarily
indicative of the composition of the Trust Portfolio at any subsequent time.
COMPOSITION BY ACCOUNT BALANCE
TRUST PORTFOLIO
<TABLE>
<CAPTION>
PERCENTAGE
OF TOTAL PERCENTAGE
NUMBER OF NUMBER OF OF TOTAL
ACCOUNT BALANCE RANGE ACCOUNTS ACCOUNTS RECEIVABLES RECEIVABLES
- - --------------------- ---------- ---------- --------------- -----------
<S> <C> <C> <C> <C>
Credit Balance............... 232,551 1.2% $ (23,199,681) (0.1)%
No Balance................... 10,900,289 57.2 0 0.0
$.01-- $5,000.00............. 6,027,279 31.6 9,010,812,292 35.7
$5,000.01--$10,000.00........ 1,485,945 7.8 10,204,551,560 40.5
$10,000.01--$15,000.00....... 290,937 1.5 3,478,370,361 13.8
$15,000.01--$20,000.00....... 75,762 0.4 1,289,801,180 5.1
$20,000.01--$25,000.00....... 26,558 0.2 590,374,124 2.3
$25,000.01 or More........... 20,649 0.1 673,619,591 2.7
---------- ----- --------------- -----
Total.................... 19,059,970 100.0% $25,224,329,427 100.0%
========== ===== =============== =====
</TABLE>
COMPOSITION BY CREDIT LIMIT
TRUST PORTFOLIO
<TABLE>
<CAPTION>
PERCENTAGE
OF TOTAL PERCENTAGE
NUMBER OF NUMBER OF OF TOTAL
CREDIT LIMIT RANGE ACCOUNTS ACCOUNTS RECEIVABLES RECEIVABLES
- - ------------------ ---------- ---------- --------------- -----------
<S> <C> <C> <C> <C>
Less than or equal to
$5,000.00.................. 5,977,779 31.4% $ 3,659,028,642 14.5%
$5,000.01--$10,000.00....... 8,087,239 42.4 10,925,911,142 43.3
$10,000.01--$15,000.00...... 3,125,559 16.4 5,446,868,075 21.6
$15,000.01--$20,000.00...... 1,036,830 5.4 2,339,321,273 9.3
$20,000.01--$25,000.00...... 458,243 2.4 1,289,951,800 5.1
$25,000.01 or More.......... 374,320 2.0 1,563,248,495 6.2
---------- ----- --------------- -----
Total................... 19,059,970 100.0% $25,224,329,427 100.0%
========== ===== =============== =====
</TABLE>
S-20
<PAGE>
COMPOSITION BY PERIOD OF DELINQUENCY
TRUST PORTFOLIO
<TABLE>
<CAPTION>
PERCENTAGE
OF TOTAL PERCENTAGE
PERIOD OF DELINQUENCY NUMBER OF NUMBER OF OF TOTAL
(DAY CONTRACTUALLY DELINQUENT)S ACCOUNTS ACCOUNTS RECEIVABLES RECEIVABLES
- - ------------------------------- ---------- ---------- --------------- -----------
<S> <C> <C> <C> <C>
Not Delinquent................... 18,387,636 96.5% $22,439,954,458 89.0%
Up to 34 Days.................... 400,977 2.1 1,664,405,360 6.6
35 to 64 Days.................... 110,267 0.6 446,536,141 1.8
65 to 94 Days.................... 53,735 0.3 212,408,612 0.8
95 or More Days.................. 107,355 0.5 461,024,856 1.8
---------- ----- --------------- -----
Total........................ 19,059,970 100.0% $25,224,329,427 100.0%
========== ===== =============== =====
</TABLE>
COMPOSITION BY ACCOUNT AGE
TRUST PORTFOLIO
<TABLE>
<CAPTION>
PERCENTAGE
OF TOTAL PERCENTAGE
NUMBER OF NUMBER OF OF TOTAL
ACCOUNT AGE ACCOUNTS ACCOUNTS RECEIVABLES RECEIVABLES
- - ----------- ---------- ---------- --------------- -----------
<S> <C> <C> <C> <C>
Not More than 6 Months...... 2,219,860 11.6% $ 2,102,542,102 8.3%
Over 6 Months to 12 Months.. 3,597,785 18.9 3,772,673,638 15.0
Over 12 Months to 24
Months..................... 5,613,349 29.4 5,822,784,202 23.1
Over 24 Months to 36
Months..................... 4,209,534 22.1 6,493,937,745 25.7
Over 36 Months to 48
Months..................... 945,246 5.0 1,401,704,268 5.6
Over 48 Months to 60
Months..................... 295,070 1.5 457,917,173 1.8
Over 60 Months to 72
Months..................... 183,438 1.0 379,851,343 1.5
Over 72 Months.............. 1,995,688 10.5 4,792,918,956 19.0
---------- ----- --------------- -----
Total................... 19,059,970 100.0% $25,224,329,427 100.0%
========== ===== =============== =====
</TABLE>
S-21
<PAGE>
GEOGRAPHIC DISTRIBUTION OF ACCOUNTS
TRUST PORTFOLIO
<TABLE>
<CAPTION>
PERCENTAGE
OF TOTAL PERCENTAGE
NUMBER OF NUMBER OF OF TOTAL
STATE ACCOUNTS ACCOUNTS RECEIVABLES RECEIVABLES
- - ----- ---------- ---------- --------------- -----------
<S> <C> <C> <C> <C>
Alabama....................... 178,565 0.9% $ 258,743,167 1.0%
Alaska........................ 35,105 0.2 65,487,290 0.3
Arizona....................... 303,103 1.6 442,917,909 1.8
Arkansas...................... 139,505 0.7 192,184,782 0.8
California.................... 2,058,761 10.8 3,539,854,454 14.0
Colorado...................... 327,713 1.7 434,722,901 1.7
Connecticut................... 329,237 1.7 411,170,912 1.6
Delaware...................... 79,340 0.4 105,253,298 0.4
Florida....................... 964,701 5.1 1,353,787,279 5.4
Georgia....................... 430,305 2.3 639,354,311 2.5
Hawaii........................ 71,964 0.4 117,855,018 0.5
Idaho......................... 83,181 0.4 104,257,588 0.4
Illinois...................... 728,620 3.8 909,842,926 3.6
Indiana....................... 416,469 2.2 452,622,659 1.8
Iowa.......................... 211,531 1.1 188,407,245 0.7
Kansas........................ 172,612 0.9 207,616,763 0.8
Kentucky...................... 212,642 1.1 243,847,232 1.0
Louisiana..................... 247,721 1.3 322,167,002 1.3
Maine......................... 138,788 0.7 153,597,913 0.6
Maryland...................... 632,269 3.3 938,652,168 3.7
Massachusetts................. 634,062 3.3 725,756,363 2.9
Michigan...................... 658,892 3.5 733,565,783 2.9
Minnesota..................... 382,874 2.0 390,465,338 1.6
Mississippi................... 105,201 0.6 143,797,299 0.6
Missouri...................... 333,797 1.8 402,124,517 1.6
Montana....................... 65,009 0.3 67,911,523 0.3
Nebraska...................... 150,898 0.8 158,912,298 0.6
Nevada........................ 119,072 0.6 213,412,422 0.8
New Hampshire................. 120,418 0.6 144,944,558 0.6
New Jersey.................... 766,274 4.0 1,061,467,705 4.2
New Mexico.................... 112,137 0.6 161,724,403 0.6
New York...................... 1,428,243 7.5 1,860,021,400 7.4
North Carolina................ 450,987 2.4 588,497,005 2.3
North Dakota.................. 44,761 0.2 42,684,884 0.2
Ohio.......................... 757,361 4.0 829,832,024 3.3
Oklahoma...................... 197,941 1.0 289,197,611 1.1
Oregon........................ 150,739 0.8 218,524,878 0.9
Pennsylvania.................. 1,070,257 5.6 1,064,697,011 4.2
Rhode Island.................. 92,554 0.5 105,954,269 0.4
South Carolina................ 219,200 1.2 281,867,289 1.1
South Dakota.................. 53,959 0.3 55,606,279 0.2
Tennessee..................... 371,669 2.0 530,990,561 2.1
Texas......................... 1,262,987 6.6 1,858,970,321 7.4
Utah.......................... 132,330 0.7 149,050,932 0.6
Vermont....................... 55,399 0.3 65,638,095 0.3
Virginia...................... 528,709 2.8 750,145,003 3.0
Washington.................... 370,665 2.0 539,623,551 2.1
West Virginia................. 102,373 0.5 122,611,679 0.5
Wisconsin..................... 441,994 2.3 402,729,275 1.6
Wyoming....................... 41,991 0.2 50,053,882 0.2
District of Columbia.......... 49,335 0.3 85,364,520 0.3
Other......................... 25,750 0.1 45,843,932 0.2
---------- ----- --------------- ----
Total..................... 19,059,970 100.0% $25,224,329,427 100%
========== ===== =============== ====
</TABLE>
S-22
<PAGE>
MATURITY ASSUMPTIONS
The Agreement provides that Class A Certificateholders will not receive
payments of principal until the Scheduled Payment Date, or earlier in the
event of a Pay Out Event which results in the commencement of the Rapid
Amortization Period. The Class B Certificateholders will not begin to receive
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, an amount equal to, for each Monthly Period, the least of
(a) the Available Investor Principal Collections, (b) the applicable
"Controlled Deposit Amount," which is equal to the sum of the applicable
Controlled Accumulation Amount for such Monthly Period and the applicable
Accumulation Shortfall, if any, and (c) the sum of the Class A Adjusted
Investor Interest and the Class B Adjusted Investor Interest prior to any
deposits on such day, will be deposited in the Principal Funding Account
established by the Trustee until the amount on deposit in the Principal
Funding Account (the "Principal Funding Account Balance") equals the sum of
the Class A Investor Interest and the Class B Investor Interest. 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
related Transfer Date until the earlier of the date the Collateral Interest
has been paid in full and the Series 1997-C Termination Date. Amounts in the
Principal Funding Account are expected to be available to pay in full, on the
Scheduled Payment Date, the Class A Investor Interest and, after the payment
of the Class A Investor Interest in full, the Class B Investor Interest.
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 and the
Class B Investor Interest will be paid to the Class B Certificateholders on
the Scheduled Payment Date, no assurance can be given in this regard. If the
amount required to pay the Class A Investor Interest and the Class B Investor
Interest in full is not available on the Scheduled Payment Date, a Pay Out
Event will occur and the Rapid Amortization Period will commence.
Rapid Amortization Period. If a Pay Out Event occurs during the Controlled
Accumulation Period, the Rapid Amortization Period will commence and any
amount on deposit in the Principal Funding Account will be paid to the Class A
Certificateholders and, after the Class A Investor Interest has been paid in
full, the Class B 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
1997-C Termination Date. After the Class A Certificates have been paid in full
and if the Series 1997-C Termination Date has not occurred, Available Investor
Principal Collections will be paid to the Class B Certificateholders on each
Distribution Date until the earlier of the date on which the Class B
Certificates have been paid in full and the Series 1997-C Termination Date.
Pay Out Events. A Pay Out Event occurs, either automatically or after
specified notice, upon (a) the failure of the Seller to make certain payments
or transfers of funds for the benefit of the Certificateholders within the
time periods stated in the Agreement, (b) certain material breaches of certain
representations, warranties or covenants of the Seller, (c) certain insolvency
events involving the Seller, (d) the average of the Portfolio Yields for any
three consecutive Monthly Periods being less than the average of the Base
Rates for such period, (e) the Trust becoming an "investment company" within
the meaning of the Investment Company Act of 1940, as amended, (f) the failure
of the Seller to convey Receivables arising under Additional Accounts or
Participations to the Trust when required by the Agreement, (g) the occurrence
of a Servicer Default which would have a material adverse effect on the
Certificateholders, (h) insufficient monies in the Distribution Account to pay
the Class A Investor Interest and the Class B Investor Interest in full on the
Scheduled Payment Date, or (i) the Seller becomes unable for any reason to
transfer Receivables to the Trust in accordance with the provisions of the
Agreement. See "Description of the Certificates--Pay Out Events." The term
"Base Rate" means, with respect to any Monthly Period, the annualized
percentage equivalent of a fraction, the numerator of which is the
S-23
<PAGE>
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
Certificateholder Servicing Fee and the Servicer Interchange, each 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, annual membership fees, Principal
Funding Investment Proceeds and amounts withdrawn from the Reserve Account
deposited into the Finance Charge Account and allocable to the Certificates
and the Collateral Interest for such Monthly Period, calculated on a cash
basis after subtracting the Investor Default Amount for such Monthly Period,
and the denominator of which is the Investor Interest as of the close of
business on the last day of such Monthly Period.
Payment Rates. The following table sets forth the highest and lowest
cardholder monthly payment rates for the Bank Portfolio during any month in
the period shown and the average cardholder monthly payment rates for all
months during the periods shown, in each case calculated as a percentage of
total opening monthly account balances during the periods shown. Payment rates
shown in the table are based on amounts which would be deemed payments of
Principal Receivables and Finance Charge Receivables with respect to the
Accounts.
CARDHOLDER MONTHLY PAYMENT RATES
BANK PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Lowest Month......................................... 10.69% 10.22% 10.46%
Highest Month........................................ 11.56% 11.34% 12.93%
Monthly Average...................................... 11.19% 10.79% 11.79%
</TABLE>
Prior to May 1, 1991, the Seller required each cardholder to make monthly
minimum payments of 3.0% of the statement balance plus past due amounts,
insurance payments and other fees. Between May 1, 1991 and September 20, 1993,
the Seller required each cardholder to make monthly minimum payments of 2.5%
of the statement balance plus past due amounts. Currently, cardholders must
make a monthly minimum payment equal to 2.0% of the statement balance plus
past due amounts. However, the cardholder was and is generally required to
make a monthly minimum payment (generally $15) plus past due amounts. There
can be no assurance that the cardholder monthly payment rates in the future
will be similar to the historical experience set forth above. In addition, the
amount of collections of Receivables may vary from month to month due to
seasonal variations, general economic conditions and payment habits of
individual cardholders. There can be no assurance that collections of
Principal Receivables with respect to the Trust Portfolio will be similar to
the historical experience set forth above or that deposits into the Principal
Funding Account or the Distribution Account, as applicable, will be made in
accordance with the applicable Controlled Accumulation Amount. If a Pay Out
Event occurs, the average life of the Certificates could be significantly
reduced.
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 final
Distribution Date will equal the expected number of months. As described 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 Scheduled Payment Date. See "Maturity
Assumptions" and "Risk Factors--Payments and Maturity" in the Prospectus.
S-24
<PAGE>
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, 1996 are set forth in the following table.
The historical yield figures in the following table are calculated on an
accrual basis. Collections of Receivables included in the Trust will be on a
cash basis and may not reflect the historical yield experience in the table.
During periods of increasing delinquencies or periodic payment deferral
programs, accrual yields may exceed cash amounts accrued and billed to
cardholders. Conversely, cash yields may exceed accrual yields as amounts
collected in a current period may include amounts accrued during prior
periods. However, the Seller believes that during the three calendar years
contained in the period ended December 31, 1996, 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. See "Risk
Factors" in the Prospectus.
BANK PORTFOLIO YIELD
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Average Account Monthly Accrued Finance
Charges and Fees(1)(2)...................... $ 24.27 $ 23.70 $ 22.27
Average Account Balance(3)................... $1,738.50 $1,718.08 $1,624.11
Yield from Finance Charges and Fees(4)....... 16.75% 16.55% 16.45%
Yield from Interchange(5).................... 1.17% 1.20% 1.58%
Yield from Finance Charges, Fees and
Interchange................................. 17.92% 17.75% 18.03%
</TABLE>
- - --------
(1) Finance Charges and Fees are comprised of monthly periodic finance charges
and other credit card fees.
(2) Average Account Monthly Accrued Finance Charges and Fees are presented net
of adjustments made pursuant to MBNA's normal servicing procedures,
including removal of incorrect or disputed monthly periodic finance
charges.
(3) Average Account Balances include purchases, cash advances and accrued and
unpaid monthly periodic finance and other charges and are calculated based
on the average of the account balances during the periods shown for
accounts with charging privileges.
(4) Yield from Finance Charges and Fees is the result of dividing the
annualized Average Account Monthly Accrued Finance Charges and Fees by the
Average Account Balance for the period.
(5) Yield from Interchange is the result of dividing annualized revenue
attributable to Interchange received during the period by the Average
Account Balance for the period. The amount of Interchange for each of the
periods indicated above has been estimated.
These revenues vary for each account based on the type and volume of
activity for each account. Because the Trust Portfolio is only a portion of
the Bank Portfolio, actual yield with respect to Receivables may be different
from that set forth above for the Bank Portfolio. See "MBNA's Credit Card
Portfolio" herein and "MBNA Credit Card Activities" in the Prospectus.
S-25
<PAGE>
MBNA AND MBNA CORPORATION
MBNA America Bank, National Association, a national banking association
located in Wilmington, Delaware, conducts nationwide consumer lending programs
principally comprised of credit card related activities. MBNA International
Bank Limited, a private limited company incorporated under the laws of England
and Wales, is a wholly-owned subsidiary of MBNA. On a managed basis, including
loans originated by MBNA International Bank Limited, MBNA maintained loan
accounts with aggregate outstanding balances of $38.2 billion as of December
31, 1996. Of this amount, $33.6 billion were MasterCard and VISA credit card
loans originated in the United States. As of December 31, 1996, the premium
credit card portfolio in the United States accounted for 49% of MBNA's
domestic MasterCard and VISA credit card accounts with outstanding balances
and 62% of MBNA's outstanding domestic MasterCard and VISA credit card loans.
MBNA conducts all direct customer contact processes with respect to the
cardholder. This involves a 24 hour, 365 day per year Customer Service
telephone staff, Credit Decisions, Correspondence Resolution, Security and
Collection Operations. As of December 31, 1996, MBNA had assets of $15.8
billion, deposits of $10.3 billion and capital and surplus accounts of $1.6
billion.
MBNA is a wholly-owned subsidiary of the Corporation. MBNA was established
in January 1991 in connection with a restructuring of the former MBNA America
Bank, N.A., a wholly-owned subsidiary of MNC Financial, Inc. The Corporation
is a bank holding company organized under the laws of Maryland in 1990 and
registered under the Bank Holding Company Act of 1956, as amended. As of
December 31, 1996, the Corporation had consolidated assets of $17.0 billion,
consolidated deposits of $10.2 billion and capital and surplus accounts of
$1.7 billion. The principal asset of the Corporation is the capital stock of
MBNA.
DESCRIPTION OF THE CERTIFICATES
The Certificates will be issued pursuant to the Agreement and the Series
1997-C Supplement. Pursuant to the Agreement, the Seller and the Trustee may
execute further series supplements in order to issue additional Series. The
following summary of the 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 1997-C Supplement. See "Description
of the Certificates" in the Prospectus for additional information concerning
the Certificates and the Agreement.
GENERAL
The Certificates will represent the right to receive certain payments from
the assets of the Trust, including the right to the applicable allocation
percentage of all cardholder payments on the Receivables in the Trust. Each
Class A Certificate represents the right to receive payments of interest at
the Class A Certificate Rate for the related Interest Period and payments of
principal on the Scheduled Payment Date or, to the extent of the Class A
Investor Interest, on each Distribution Date with respect to the Rapid
Amortization Period, funded from collections of Finance Charge Receivables and
annual membership fees 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 for the related Interest Period, and
payments of principal on the Scheduled Payment Date or, to the extent of the
Class B Investor Interest, on each Distribution Date with respect to the Rapid
Amortization Period after the Class A Certificates have been paid in full,
funded from collections of Finance Charge Receivables and annual membership
fees and Principal Receivables, respectively, allocated to the Class B
Investor Interest and certain other available amounts. In addition to
representing the right to payment from collections of Finance Charge
Receivables, annual membership fees and Principal Receivables, each Class A
Certificate also represents the right to receive payments from Excess Spread,
funds on deposit in the Principal Funding Account (in an amount not to exceed
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the Class A Investor Interest) and the Reserve Account and certain investment
earnings thereon, Reallocated Principal Collections and Shared Principal
Collections and certain other available amounts. In addition to representing
the right to payment from collections of Finance Charge Receivables, annual
membership fees and Principal Receivables, each Class B Certificate also
represents the right to receive payments from Excess Spread, funds on deposit
in the Principal Funding Account (to the extent such funds exceed the Class A
Investor Interest and in an amount not to exceed the Class B Investor
Interest) and the Reserve Account and certain investment earnings thereon,
Reallocated Collateral Principal Collections and Shared Principal Collections
and certain other available amounts. Payments of interest and principal will
be made on each Distribution Date on which such amounts are due to
Certificateholders in whose names the Certificates were registered on the last
business day of the calendar month preceding such Distribution Date (each, a
"Record Date").
The Seller initially will own the Seller Certificate. The Seller Certificate
will represent the right to receive certain payments from the assets of the
Trust, including the right to a percentage (the "Seller Percentage") of all
cardholder payments on the Receivables in the Trust equal to 100% minus the
sum of the applicable Investor Percentages for all Series of certificates then
outstanding. The Seller 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 Seller and the
Servicer" in the Prospectus.
Application will be made to list the Certificates on the Luxembourg Stock
Exchange.
The Class A Certificates and the Class B Certificates initially will be
represented by certificates registered in the name of Cede, as nominee of DTC.
Unless and until Definitive Certificates are issued, all references herein to
actions by Class A Certificateholders and/or Class B Certificateholders shall
refer to actions taken by DTC upon instructions from its Participants and all
references herein to distributions, notices, reports and statements to Class A
Certificateholders and/or Class B Certificateholders shall refer to
distributions, notices, reports and statements to DTC or Cede, as the
registered holder of the Class A Certificates and the Class B Certificates, as
the case may be, for distribution to Certificate Owners in accordance with DTC
procedures. Certificateholders may hold their Certificates through DTC (in the
United States) or CEDEL or Euroclear (in Europe) if they are participants of
such systems, or indirectly through organizations that are participants in
such systems. Cede, as nominee for DTC, will hold the global Certificates.
CEDEL and Euroclear will hold omnibus positions on behalf of the CEDEL
Participants and the Euroclear Participants, respectively, through customers'
securities accounts in CEDEL's and Euroclear's names on the books of their
respective Depositaries which in turn will hold such positions in customers'
securities accounts in the Depositaries' names on the books of DTC. See
"Description of the Certificates--General," "--Book-Entry Registration" and
"--Definitive Certificates" in the Prospectus.
EXCHANGES
The Seller Certificate is transferable only as provided in the Agreement.
The Agreement also provides that the holder of the Seller Certificate may
tender the Seller Certificate to the Trustee in exchange for one or more new
Series and a reissued Seller Certificate as described under "Description of
the Certificates--Exchanges" in the 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 on June 16, 1997 and on each
Distribution Date thereafter to Certificateholders. Interest payments on the
Class A Certificates and the Class B Certificates on any Distribution Date
will be calculated on the outstanding principal balance of the Class A
Certificates and the outstanding principal balance of the Class B
Certificates, as applicable, as of the preceding Record Date, except that
interest for the first Distribution Date will accrue at the applicable
Certificate Rate on the initial outstanding principal balance of the Class A
Certificates and the initial outstanding principal balance of the Class B
Certificates, as applicable, from the Closing Date. Interest due on the
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
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Certificates, the "Class A Additional Interest," and such amount with respect
to the Class B Certificates, the "Class B Additional Interest"). Such
Additional Interest shall accrue on the same basis as interest on the
Certificates, and shall accrue from the Distribution Date such overdue
interest 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 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 and Reallocated Collateral Principal Collections (to the
extent available) remaining after certain other payments have been made with
respect to the Class A Certificates.
"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 and annual membership fees allocated to the
Investor Interest and deposited in the Finance Charge Account 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, which are
required to be treated as Class A Available Funds pursuant to the Series 1997-
C Supplement, in an amount not to exceed that portion of the Covered Amount
with respect to the Class A Certificates 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
1997-C Supplement with respect to such Transfer Date. "Class B Available
Funds" means, with respect to any Monthly Period, an amount equal to the sum
of (a) the Class B Floating Allocation of collections of Finance Charge
Receivables and annual membership fees allocated to the Investor Interest and
deposited in the Finance Charge Account 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, which are required to be
treated as Class B Available Funds pursuant to the Series 1997-C Supplement,
in an amount not to exceed that portion of the Covered Amount with respect to
the Class B Certificates 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 B Available Funds pursuant to the Series 1997-C
Supplement with respect to such Transfer Date.
The Class A Certificates will accrue interest from the Closing Date through
April 14, 1997, from April 15, 1997 through May 14, 1997 and from May 15, 1997
through June 15, 1997, and with respect to each Interest Period thereafter, at
a rate of % per annum above LIBOR prevailing on the related LIBOR
Determination Date with respect to each such period (the "Class A Certificate
Rate"). The Class B Certificates will accrue interest from the Closing Date
through April 14, 1997, from April 15, 1997 through May 14, 1997 and from May
15, 1997 through June 15, 1997, and with respect to each Interest Period
thereafter, at a rate of % per annum above LIBOR prevailing on the related
LIBOR Determination Date with respect to each such period (the "Class B
Certificate Rate").
The Trustee will determine LIBOR with respect to the Certificates on March
, 1997 for the period from the Closing Date through April 14, 1997, on April
11, 1997 for the period from April 15, 1997 through May 14, 1997, on May 13,
1997 for the period from May 15, 1997 through June 15, 1997, 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 one-month 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 one-
month period. The Trustee will request the principal London office of each of
the Reference Banks to provide a
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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 such
quotations. If fewer than two quotations are provided, 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 one-month 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 and the Class B Certificate Rate applicable to
the then current and immediately preceding Interest Period may be obtained by
telephoning the Trustee at its Corporate Trust Office at (212) 815-5738.
Interest on the Certificates will be calculated on the basis of the actual
number of days in the related Interest Period and a 360-day year.
PRINCIPAL PAYMENTS
On each Transfer Date relating to the Revolving Period (which begins on the
Closing Date and ends at the commencement of the Controlled Accumulation
Period or, if earlier, the Rapid Amortization Period), unless a reduction in
the Required Collateral Interest has occurred, 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.
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 sum of
the Class A Adjusted Investor Interest and the Class B Adjusted Investor
Interest prior to any deposits on such date. Amounts in the Principal Funding
Account will be paid first to the Class A Certificateholders (in an amount not
to exceed the Class A Investor Interest) and then to the Class B
Certificateholders (to the extent such funds exceed the Class A Investor
Interest and in an amount not to exceed the Class B Investor Interest), in
each case, on the Scheduled Payment Date (unless paid earlier due to the
commencement of the Rapid Amortization Period). On each Transfer Date, if a
reduction in the Required Collateral Interest has occurred, a portion of
collections of Principal Receivables allocable to the Investor Interest will
be applied in accordance with the Loan Agreement to reduce the Collateral
Interest to the Required Collateral Interest. During the Controlled
Accumulation Period, 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 generally be treated as
Shared Principal Collections.
"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 Amount, plus (b) any Shared Principal Collections with respect to
other Series in Group One that are allocated to Series 1997-C.
On each Distribution Date with respect to 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 1997-C 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 with
respect to the Rapid Amortization Period, Available Investor Principal
Collections for the related Monthly Period in an amount up to the Class B
Investor Interest until the earlier of the date the Class B Certificates are
paid in full and the Series 1997-C
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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 1997-C Termination Date) and
on the Series 1997-C Termination Date, Available Investor Principal
Collections until the earlier of the date the Collateral Interest is paid in
full and the Series 1997-C 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 Servicer 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 Servicer may make such election only if the Accumulation Period
Length (determined as described below) is less than twelve months. On the
Determination Date immediately preceding the February 2003 Distribution Date,
and 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 fully fund the
Principal Funding Account no later than the 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; provided,
however, that the calculation of Accumulation Period Length may be changed at
any time if the Rating Agency Condition is satisfied. 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
The Class B Certificates and the Collateral Interest will be subordinated to
the extent necessary to fund certain payments with respect to the Class A
Certificates. In addition, the Collateral Interest will be subordinated to the
extent necessary to fund certain payments with respect to the Class B
Certificates. Certain principal payments otherwise allocable to the Class B
Certificateholders may be reallocated to cover amounts in respect of the Class
A Certificates and the Class B Investor Interest may be reduced if the
Collateral Interest is equal to zero. Similarly, certain principal payments
allocable to the Collateral Interest may be reallocated to cover amounts in
respect of the Class A Certificates and the Class B Certificates and the
Collateral Interest may be reduced. To the extent the Class B Investor
Interest is reduced, the percentage of collections of Finance Charge
Receivables allocated to the Class B Certificates 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, and the amounts available to be distributed with respect to
interest on, the Class B Certificateholders will be reduced. See "--Allocation
Percentages," "--Reallocation of Cash Flows" and "--Application of
Collections--Excess Spread."
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 Seller 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
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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 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 calendar month in the first Monthly Period, the aggregate amount
of Principal Receivables as of the close of business on the day immediately
preceding the Closing Date, with respect to the second calendar month in the
first Monthly Period, the aggregate amount of Principal Receivables as of the
close of business on the last day of the first calendar month in the first
Monthly Period and with respect to the third calendar month in the first
Monthly Period, the aggregate amount of Principal Receivables as of the close
of business on the last day of the second calendar month in the first Monthly
Period) 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 an Addition Date occurs or in which a Removal Date
occurs on which, if any Series has been paid in full, Principal Receivables in
an aggregate amount approximately equal to the initial investor interest of
such Series are removed from the Trust, the amount in clause (x) above shall
be (i) the aggregate amount of Principal Receivables in the Trust as of the
close of business on the last day of the prior Monthly Period for the period
from and including the first day of such Monthly Period to but excluding the
related Addition Date or Removal Date and (ii) the aggregate amount of
Principal Receivables in the Trust as of the beginning of the day on the
related Addition Date or Removal Date after adjusting for the aggregate amount
of Principal Receivables added to or removed from the Trust on the related
Addition Date or Removal Date, as the case may be, for the period from and
including the related Addition Date or Removal Date to and including the last
day of such Monthly Period. Such 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 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
"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 aggregate amount of Principal
Receivables as of the close of business on the last day of the prior Monthly
Period 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 on which, if any Series has been paid in full, Principal
Receivables in an aggregate amount approximately equal to the initial investor
interest of such Series are removed from the Trust, the amount in clause (x)
above shall be (i) the aggregate amount of Principal Receivables in the Trust
as of the close of business on the last day of the prior Monthly Period for
the period from and including the first day of
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such Monthly Period to but excluding the related Addition Date or Removal Date
and (ii) the aggregate amount of Principal Receivables in the Trust at the
beginning of the day on the related Addition Date or Removal Date after
adjusting for the aggregate amount of Principal Receivables added to or
removed from the Trust on the related Addition Date or Removal Date, as the
case may be, for the period from and including the related Addition Date or
Removal Date to and including the last day of such Monthly Period. Such
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," and
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," and 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.
"Class A Adjusted Investor Interest," for any date of determination, means
an amount equal to the Class A Investor Interest, minus the funds on deposit
in the Principal Funding Account on such date (up to the Class A Investor
Interest).
"Class B Adjusted Investor Interest," for any date of determination, means
an amount equal to the Class B Investor Interest, minus the funds on deposit
in the Principal Funding Account in excess of the Class A Investor Interest on
such date (up to the Class B Investor Interest).
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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, 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 1997-C and available for such purpose
will be used to fund the Class A Required Amount with respect to such Transfer
Date. If such Excess Spread is insufficient to fund the Class A Required
Amount, first, Reallocated Collateral Principal Collections and, then,
Reallocated Class B Principal Collections will be used to fund the remaining
Class A Required Amount. If Reallocated Principal Collections with respect to
the related Monthly Period, together with Excess Spread, are insufficient to
fund the remaining Class A Required Amount for such related Monthly Period,
then the Collateral Interest (after giving effect to reductions for any
Collateral Charge-Offs and Reallocated Principal Collections on such Transfer
Date) will be reduced by the amount of such excess (but not by more than the
Class A Investor Default Amount for such Monthly Period). In the event that
such reduction would cause the Collateral Interest to be a negative number,
the Collateral Interest will be reduced to zero, and the Class B Investor
Interest (after giving effect to reductions for any Class B Investor Charge-
Offs and any Reallocated Class B Principal Collections for which the
Collateral Interest was not reduced on such Transfer Date) will be reduced by
the amount by which the Collateral Interest would have been reduced below zero
(but not by more than the excess of the Class A Investor Default Amount, if
any, for such Monthly Period over the amount of such reduction, if any, of the
Collateral Interest with respect to such Monthly Period). In the event that
such reduction would cause the Class B Investor Interest to be a negative
number, the Class B Investor Interest will be reduced to zero and the Class A
Investor Interest will be reduced by the amount by which the Class B Investor
Interest would have been reduced below zero (but not by more than the excess,
if any, of the Class A Investor Default Amount for such Monthly Period over
the amount of the reductions, if any, of the Collateral Interest and the Class
B Investor Interest with respect to such Monthly Period). Any such reduction
in the Class A Investor Interest will have the effect of slowing or reducing
the return of principal and interest to the Class A Certificateholders. In
such case, the Class A Certificateholders will bear directly the credit and
other risks associated with their interests in the Trust. See "--Defaulted
Receivables; Investor Charge-Offs."
With respect to each Transfer Date, the Servicer will determine the amount
(the "Class B Required Amount"), 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, 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
1997-C 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 the Trust. See "--Defaulted Receivables; Investor
Charge-Offs."
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Reductions of the Class A Investor Interest or Class B Investor Interest
described above shall be reimbursed by, and the Class A Investor Interest or
Class B Investor Interest increased to the extent of, Excess Spread available
for such purposes on each Transfer Date. See "--Application of Collections--
Excess Spread." When such reductions of the Class A Investor Interest and
Class B Investor Interest have been fully reimbursed, reductions of the
Collateral Interest shall be reimbursed until reimbursed in full in a similar
manner.
"Reallocated Class B Principal Collections" for any Monthly Period means
collections of Principal Receivables allocable to the Class B Investor
Interest for the related Monthly Period in an amount not to exceed the amount
applied to fund the Class A Required Amount, if any; provided, however, that
such amount will not exceed the Class B Investor Interest after giving effect
to any Class B Investor Charge-Offs for the related Transfer Date.
"Reallocated Collateral Principal Collections" for any Monthly Period means
collections of Principal Receivables allocable to the Collateral Interest for
the related Monthly Period in an amount not to exceed the amount applied to
fund the Class A Required Amount and the Class B Required Amount, if any;
provided, however, that such amount will not exceed the Collateral Interest
after giving effect to any Collateral Charge-Offs for the related Transfer
Date.
"Reallocated Principal Collections" for any Monthly Period means the sum of
(a) the Reallocated Class B Principal Collections for such Monthly Period, if
any, and (b) the Reallocated Collateral Principal Collections for such Monthly
Period, if any.
APPLICATION OF COLLECTIONS
Allocations. Except as otherwise provided below, the Servicer will deposit
into the Collection Account, no later than the second business day following
the date of processing, any payment collected by the Servicer on the
Receivables. On the same day as any such deposit is made, the Servicer will
make the deposits and payments to the accounts and parties as indicated below;
provided, however, that for as long as MBNA remains the Servicer under the
Agreement and (a)(i) the Servicer provides to the Trustee a letter of credit
covering the risk of collection of the Servicer and (ii) the Seller shall not
have received a notice from the Rating Agency that such letter of credit would
result in the lowering of such Rating Agency's then-existing rating of any
Series then outstanding or (b) the Servicer has and maintains a certificate of
deposit rating of P-1 by Moody's and of A-1 by Standard & Poor's and deposit
insurance provided by either BIF or SAIF, 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 Certificates, 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, 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 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 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 priority:
(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
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deposited into the Distribution Account for distribution to Class A
Certificateholders on such Distribution Date;
(ii) an amount equal to the Class A Servicing Fee for the related
Monthly Period, plus the amount of any overdue Class A Servicing Fee,
will be paid to the Servicer;
(iii) an amount equal to the Class A Investor Default Amount, if any,
for the related Monthly Period will be treated as a portion of
Available Investor Principal Collections and deposited into the
Principal Account for such Transfer Date; and
(iv) the balance, if any, will constitute a portion of Excess Spread
and will be allocated and distributed as described under "--Excess
Spread."
(b) On each Transfer Date, an amount equal to the Class B Available Funds
will be distributed in the following priority:
(i) an amount equal to Class B Monthly Interest for the related
Distribution Date, plus the amount of any overdue Class B Monthly
Interest and Class B Additional Interest thereon, if any, will be
deposited into the Distribution Account for distribution to Class B
Certificateholders on such Distribution Date;
(ii) an amount equal to the Class B Servicing Fee for the related
Monthly Period, plus the amount of any overdue Class B Servicing Fee,
will be paid to the Servicer; and
(iii) the balance, if any, will constitute a portion of Excess Spread
and will be allocated and distributed as described under "--Excess
Spread."
(c) On each Transfer Date, an amount equal to the Collateral Available
Funds will be distributed in the following priority:
(i) if MBNA or The Bank of New York is no longer the Servicer, an
amount equal to the Collateral Interest Servicing Fee, plus the amount
of any overdue Collateral Interest Servicing Fee, for the related
Monthly Period 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 June 15, 1997.
"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 June 15, 1997.
"Collateral Available Funds" means, with respect to any Monthly Period, an
amount equal to the Collateral Floating Allocation of collections of Finance
Charge Receivables and annual membership fees 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.
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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;
(f) if MBNA or The Bank of New York is the Servicer, an amount equal to
the Collateral Interest Servicing Fee, plus the amount of any overdue
Collateral Interest Servicing Fee, for the related Monthly Period 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 shall be deposited into the Reserve Account; and
(j) the balance, if any, after giving effect to the payments made
pursuant to subparagraphs (a) through (i) above shall be applied in
accordance with the provisions of the Loan Agreement.
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<PAGE>
"Collateral Monthly Interest" with respect to any Transfer Date will equal
the product of (a) an amount equal to LIBOR plus 1.0% per annum, or such
lesser amount as may be designated in the Loan Agreement (the "Collateral
Rate"), (b) the actual number of days in the related Interest Period divided
by 360 and (c) the Collateral Interest as of the related Record Date or, with
respect to the first Transfer Date, the initial Collateral Interest. The
Trustee will determine LIBOR with respect to the Collateral Interest for each
Interest Period on the second business day prior to the Transfer Date on which
such Interest Period commences.
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 priority:
(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 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 (on the related Distribution Date) to the Class
A Certificateholders (during the Rapid Amortization Period); and
(ii) an amount equal to Class B Monthly Principal will be, after an
amount equal to the Class A Investor Interest has been deposited in the
Principal Funding Account, deposited in the Principal Funding Account
(during the Controlled Accumulation Period) or, after the Class A
Investor Interest has been paid in full (taking into account
distributions to be made on the related Distribution Date), distributed
(on the related Distribution Date) to the Class B Certificateholders
(during the Rapid Amortization Period);
(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 to 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 Prospectus.
"Class A Monthly Principal" with respect to any Transfer Date relating to
the Controlled Accumulation Period, prior to the deposit in full of an amount
equal to the Class A Investor Interest in the Principal Funding Account, or
with respect to any Transfer Date relating to 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, the 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, beginning with the Transfer Date on which
an amount equal to the Class A Investor Interest has been deposited in the
Principal Funding Account (after taking into account deposits to be made on
such Transfer Date), or with respect to any Transfer Date relating to the
Rapid Amortization Period, beginning with the Transfer Date immediately
preceding the Distribution Date on which the Class A Certificates will be paid
in full (after taking into account payments to be made on the related
Distribution Date), will equal the least of (i) the
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<PAGE>
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), (ii) for each Transfer Date with respect to the Controlled
Accumulation Period, prior to the Scheduled Payment Date, the Controlled
Deposit Amount for such Transfer Date (minus the Class A Monthly Principal
with respect to such Transfer Date) and (iii) the Class B Adjusted Investor
Interest prior to any deposits on such Transfer Date.
"Collateral Monthly Principal" means (a) with respect to any Transfer Date
relating to the Revolving Period following any reduction of the Required
Collateral Interest pursuant to clause (3) of the proviso in the definition
thereof an amount equal to the lesser of (i) the excess, if any, 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 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 for any Transfer Date with respect to
the Controlled Accumulation Period, $57,812,500; 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 interests 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.
"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 deposited in the
Principal Funding Account on 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 deposited in the Principal Funding Account on such subsequent
Transfer Date.
SHARED PRINCIPAL COLLECTIONS
Collections of Principal Receivables for any Monthly Period allocated to the
Investor Interest will first be used to cover, with respect to any Monthly
Period during the Controlled Accumulation Period, deposits of the applicable
Controlled Deposit Amount to the Principal Funding Account or the Distribution
Account, and during the Rapid Amortization Period, payments to the
Certificateholders and then under certain circumstances payments to the
Collateral Interest 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
Certificateholders and any similar amount remaining for any other Series in
Group One ("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 in Group One 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 in Group
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<PAGE>
One based on the relative amounts of Principal Shortfalls. To the extent that
Shared Principal Collections exceed Principal Shortfalls, the balance will,
subject to certain limitations, be paid to the holder of the Seller
Certificate.
REQUIRED COLLATERAL INTEREST
The "Required Collateral Interest" with respect to any Transfer Date means
(i) initially $56,250,000 and (ii) thereafter on each Transfer Date an amount
equal to 7.5% of the sum of the Class A Adjusted Investor Interest and the
Class B Adjusted 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 the Collateral
Interest on the prior Transfer Date after any adjustments made on such
Transfer Date, but not less than $22,500,000; provided, however, that (1) 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 unpaid principal amount of the
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 to the Seller, the Servicer and the Trustee that a proposed action will
not result in any Rating Agency reducing or withdrawing its then existing
rating of the investor certificates of any outstanding Series or Class of a
Series 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 such shortfall.
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 on the day the applicable Account became a Defaulted
Account 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 as described under "--Application of
Collections-- Excess Spread," 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,
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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
for which the Collateral Interest is not reduced) 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 as described
under "--Application of Collections--Excess Spread," 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 1997-C Supplement, the Trustee will establish and
maintain with a Qualified Institution the principal funding account as a
segregated trust account held for the benefit of the Certificateholders (the
"Principal Funding Account"). During the Controlled Accumulation Period, the
Trustee at the direction of the Servicer shall transfer collections in respect
of Principal Receivables (other than Reallocated Principal Collections) and
Shared Principal Collections from other Series, if any, allocated to the
Series 1997-C Certificates from the Principal Account to the Principal Funding
Account as described under "--Application of Collections."
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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 used to pay interest in an amount up to,
for each Transfer Date, the sum of (a) with respect to the Class A
Certificates, the product of (i) a fraction, the numerator of which is the
actual number of days in such Interest Period and the denominator of which is
360, (ii) the Class A Certificate Rate in effect with respect to such Interest
Period and (iii) the aggregate amount on deposit in the Principal Funding
Account with respect to Class A Monthly Principal as of the Record Date
preceding such Transfer Date, and (b) with respect to the Class B
Certificates, the product of (i) a fraction, the numerator of which is the
actual number of days in such Interest Period and the denominator of which is
360, (ii) the Class B Certificate Rate in effect with respect to such Interest
Period and (iii) the aggregate amount on deposit in the Principal Funding
Account with respect to Class B Monthly Principal as of the Record Date
preceding such Transfer Date (such sum, the "Covered Amount"). If, for any
Transfer Date, the Principal Funding Investment Proceeds are less than the
Covered Amount, the amount of such deficiency (the "Principal Funding
Investment Shortfall") shall be withdrawn, to the extent required and
available, from the Reserve Account and deposited in the Finance Charge
Account and included as Class A Available Funds or Class B Available Funds, as
applicable, for such Transfer Date.
RESERVE ACCOUNT
Pursuant to the Series 1997-C Supplement, the Trustee will establish and
maintain with a Qualified Institution the reserve account as a segregated
trust account held for the benefit of the Certificateholders (the "Reserve
Account"). The Reserve Account is established to assist with the subsequent
distribution of interest on the 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 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) 0.5% of the outstanding principal balance of the
Class A Certificates or (b) any other amount designated by the Seller;
provided, however, that if such designation is of a lesser amount, the Seller
shall have provided the Servicer, the Collateral Interest Holder and the
Trustee with evidence that the Rating Agency Condition has been satisfied and
the Seller shall have delivered to the Trustee a certificate of an authorized
officer of the Seller to the effect that, based on the facts known to such
officer at such time, in the reasonable belief of the Seller, 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
1997-C. 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 shall 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
S-41
<PAGE>
Account, and the amount of such withdrawal will be deposited in the Finance
Charge Account and included as Class A Available Funds or Class B Available
Funds, as provided in the Series 1997-C Supplement, for such Transfer Date in
an aggregate amount equal to the lesser of (a) the Available Reserve Account
Amount with respect to such Transfer Date and (b) the Principal Funding
Investment Shortfall with respect to such Transfer Date; provided, however,
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 the Trust pursuant to the 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 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 Certificateholders.
PAY OUT EVENTS
As described above, the Revolving Period will continue through February 28,
2003 (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 Seller (i) to make any payment or deposit
on the date required under the Agreement or the Series 1997-C Supplement
(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 Seller set forth in the Agreement or the Series 1997-C
Supplement, which failure has a material adverse effect on the
Certificateholders (which determination shall be made without reference to
whether any funds are available under the Collateral Interest) and which
continues unremedied for a period of 60 days after written notice of such
failure, requiring the same to be remedied, and continues to materially and
adversely affect the interests of the Certificateholders (which
determination shall be made without reference to whether any funds are
available under the Collateral Interest) for such period;
(b) any representation or warranty made by the Seller in the Agreement or
the Series 1997-C Supplement, or any information required to be given by
the Seller to the Trustee to identify the Accounts proves to have been
incorrect in any material respect when made or delivered and which
continues to be incorrect in any material respect for a period of 60 days
after written notice of such failure, requiring the same to be remedied,
and as a result of which the interests of the Certificateholders are
materially and adversely affected (which determination shall be made
without reference to whether any funds are available under the Collateral
Interest) and continue to be materially and adversely affected for such
period; provided, however, that a Pay Out Event pursuant to this
subparagraph (b) shall not be deemed to occur thereunder if the Seller 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) the average of the Portfolio Yields for any three consecutive Monthly
Periods is less than the average of the Base Rates for such period;
(d) a failure by the Seller to convey Receivables arising under
Additional Accounts, or Participations, to the Trust when required by the
Agreement;
S-42
<PAGE>
(e) any Servicer Default occurs which would have a material adverse
effect on the Certificateholders;
(f) insufficient moneys in the Distribution Account to pay the Class A
Investor Interest and the Class B Investor Interest on the Scheduled
Payment Date;
(g) certain events of insolvency, conservatorship or receivership
relating to the Seller;
(h) the Seller becomes unable for any reason to transfer Receivables to
the Trust in accordance with the provisions of the Agreement; or
(i) the Trust becomes 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 Certificates
only if, after any applicable grace period, either the Trustee or
Certificateholders and the Collateral Interest Holder evidencing undivided
interests aggregating not less than 50% of the Investor Interest, by written
notice to the Seller and the Servicer (and to the Trustee if given by the
Certificateholders) declare that a Pay Out Event has occurred with respect to
the 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 Certificates, will be
deemed to have occurred without any notice or other action on the part of the
Trustee or the 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 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 on or prior to January 31, 2004, Certificateholders
may begin receiving distributions of principal earlier than they otherwise
would have, which may shorten the average life of the Certificates.
See "Description of the Certificates--Pay Out Events" in the Prospectus for
an additional discussion of the consequences of an insolvency, conservatorship
or receivership of the Seller.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
The share of the Servicing Fee allocable to the Investor Interest with
respect to any Transfer Date (the "Investor Servicing Fee") shall be equal to
one-twelfth of the product of (a) 2.0% and (b) the Adjusted Investor Interest
as of the last day of the Monthly Period preceding such Transfer Date;
provided, however, with respect to the first Transfer Date, the Investor
Servicing Fee shall be equal to $ . On each Transfer Date, but only
if MBNA or The Bank of New York is the Servicer, Servicer Interchange with
respect to the related Monthly Period that is on deposit in the Finance Charge
Account shall 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 MBNA or The Bank of New York 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) 0.75%; provided
further, however, that with respect to the first Transfer Date, the Servicer
Interchange may equal but shall not exceed $ . In the case of any
insufficiency of Servicer Interchange on deposit in the Finance Charge
Account, a portion of the Investor Servicing Fee with respect to such Monthly
Period will not be paid to the extent of such insufficiency and in no event
shall the Trust, the Trustee, the Certificateholders or the Collateral
Interest Holder be liable for the share of the Servicing Fee to be paid out of
Servicer Interchange.
The share of the Investor Servicing Fee allocable to the Class A
Certificateholders with respect to any Transfer Date (the "Class A Servicing
Fee") shall be equal to one-twelfth of the product of (a) the Class A Floating
Allocation, (b) 1.25%, or if MBNA or The Bank of New York is not the Servicer,
2.0% (the "Net
S-43
<PAGE>
Servicing Fee Rate") and (c) the Adjusted Investor Interest as of the last day
of the Monthly Period preceding such Transfer Date; provided, however, that
with respect to the first Transfer Date, the Class A Servicing Fee shall be
equal to $ . 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; provided, however, that with respect to the first Transfer
Date, the Class B Servicing Fee shall be equal to $ . 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 the Class B Servicing Fee, the
"Certificateholder 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; provided, however, that with respect to
the first Transfer Date, the Collateral Interest Servicing Fee shall be equal
to $ . The remainder of the Servicing Fee shall be paid by the holder
of the Seller Certificate or other Series (as provided in the related Series
Supplements) or, to the extent of any insufficiency of Servicer Interchange as
described above, not be paid. In no event shall the Trust, the Trustee, the
Certificateholders or the Collateral Interest Holder 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--Payment of Interest, Fees
and Other Items."
The Servicer will pay from its servicing compensation certain expenses
incurred in connection with servicing the Receivables including, without
limitation, payment of the fees and disbursements of the Trustee and
independent certified public accountants and other fees which are not
expressly stated in the Agreement to be payable by the Trust or the
Certificateholders other than federal, state and local income and franchise
taxes, if any, of the Trust.
REPORTS TO CERTIFICATEHOLDERS
On each Transfer Date, the Trustee will forward to each Certificateholder of
record, a statement prepared by the Servicer setting forth the items described
in "Description of the Certificates--Reports to Certificateholders" in the
Prospectus. In addition, such statement will include certain information
regarding the Principal Funding Account and the Collateral Interest, if any,
for such Transfer Date.
AMENDMENTS
In addition to being subject to amendment pursuant to any other provisions
relating to amendments in either the Agreement or the Series 1997-C
Supplement, the Series 1997-C Supplement may be amended by the Seller without
the consent of the Servicer, the Trustee or any Certificateholder if the
Seller provides the Trustee with (a) an opinion of counsel to the effect that
such amendment or modification would reduce the risk that the Trust would be
treated as taxable as a publicly traded partnership pursuant to Code section
7704 and (b) a certificate that such amendment or modification would not
materially and adversely affect any Certificateholder, provided, however, that
no such amendment shall be deemed effective without the Trustee's consent, if
the Trustee's rights, duties and obligations under the Series 1997-C
Supplement are thereby modified. Promptly after the effectiveness of any such
amendment, the Seller shall deliver a copy of such amendment to each of the
Servicer, the Trustee and each Rating Agency described in the Series 1997-C
Supplement.
S-44
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement
as supplemented by a terms agreement relating to the Class A Certificates
(together, the "Class A Underwriting Agreement") between the Seller and the
Class A Underwriters named below (the "Class A Underwriters"), and the terms
and conditions set forth in an underwriting agreement as supplemented by a
terms agreement relating to the Class B Certificates (together, the "Class B
Underwriting Agreement," and together with the Class A Underwriting Agreement,
the "Underwriting Agreement") between the Seller and the Class B Underwriters
named below (the "Class B Underwriters," and together with the Class A
Underwriters, the "Underwriters"), the Seller has agreed to sell to the
Underwriters, and each of the Underwriters has severally agreed to purchase,
the principal amount of the Certificates set forth opposite its name:
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT OF
CLASS A UNDERWRITERS CLASS A CERTIFICATES
-------------------- --------------------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated................................... $127,500,000
Bear, Stearns & Co. Inc. ............................... 127,500,000
Goldman, Sachs & Co. ................................... 127,500,000
J.P. Morgan Securities Inc. ............................ 127,500,000
Salomon Brothers Inc ................................... 127,500,000
------------
Total................................................. $637,500,000
============
<CAPTION>
PRINCIPAL AMOUNT OF
CLASS B UNDERWRITERS CLASS B CERTIFICATES
-------------------- --------------------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated................................... $ 28,125,000
Goldman, Sachs & Co. ................................... 28,125,000
------------
Total................................................. $ 56,250,000
============
</TABLE>
In the Class A Underwriting Agreement, the Class A Underwriters have agreed,
subject to the terms and conditions set forth therein, to purchase all of the
Class A Certificates offered hereby if any of the Class A Certificates are
purchased. In the Class B Underwriting Agreement, the Class B Underwriters
have agreed, subject to the terms and conditions set forth therein, to
purchase all of the Class B Certificates offered hereby if any of the Class B
Certificates are purchased. The Underwriters have agreed to reimburse the
Seller for certain expenses of the issuance and distribution of the
Certificates.
The Class A Underwriters propose 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. The Class A Underwriters 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. After the initial public offering, the public offering price and
other selling terms may be changed by the Class A Underwriters.
The Class B Underwriters propose 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. The Class B Underwriters 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. After the
initial public offering, the public offering price and other selling terms may
be changed by the Class B Underwriters.
Each Underwriter has represented and agreed that:
(a) it has complied and will comply with all applicable provisions of the
Financial Services Act 1986 with respect to anything done by it in relation
to the Certificates in, from or otherwise involving the United Kingdom;
S-45
<PAGE>
(b) 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 or
sale of the 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 or is a person to whom such document may otherwise
lawfully be issued or passed on;
(c) if it is an authorized person under Chapter III of part I of the
Financial Services Act 1986, it has only promoted and will only promote (as
that term is defined in Regulation 1.02(2) of the Financial Services
(Promotion of Unregulated Schemes) Regulations 1991) to any person in the
United Kingdom the scheme described in this Prospectus Supplement and the
Prospectus 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; and
(d) it is a person of a kind described in Article 11(3) of the Financial
Services Act 1986 (Investment Advertisements) (Exemptions) Order 1996.
The Seller will indemnify the Underwriters against certain liabilities,
including liabilities under the Securities Act, or contribute to payments the
Underwriters may be required to make in respect thereof.
The Underwriters may engage in over-allotment transactions, stabilizing
transactions, syndicate covering transactions and penalty bids with respect to
the Certificates in accordance with Regulation M under the Exchange Act. Over-
allotment transactions involve syndicate sales in excess of the offering size,
which creates a syndicate short position. Stabilizing transactions permit bids
to purchase the Certificates so long as the stabilizing bids do not exceed a
specified maximum. Syndicate covering transactions involve purchases of the
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 Certificates
originally sold by such syndicate member are purchased in a syndicate covering
transaction. Such over-allotment transactions, stabilizing transactions,
syndicate covering transactions and penalty bids may cause the prices of the
Certificates to be higher than they would otherwise be in the absence of such
transactions. Neither the Seller nor any of the Underwriters represent that
the Underwriters will engage in any such transactions or that such
transactions, once commenced, will not be discontinued without notice at any
time.
S-46
<PAGE>
INDEX OF TERMS FOR PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
TERM PAGE
- - ---- ----
<S> <C>
Accounts......................................................... S-2, S-3
Accumulation Period Length....................................... S-30
Accumulation Shortfall........................................... S-9, S-38
Additional Interest.............................................. S-8
Adjusted Investor Interest....................................... S-5
Agreement........................................................ S-3
Available Investor Principal Collections......................... S-29
Available Reserve Account Amount................................. S-42
Bank Portfolio................................................... S-3
Base Rate........................................................ S-23
Certificateholder Servicing Fee.................................. S-44
Certificateholders............................................... S-3
Certificates..................................................... S-1, S-3
Class A Additional Interest...................................... S-28
Class A Adjusted Investor Interest............................... S-5, S-32
Class A Available Funds.......................................... S-28
Class A Certificate Rate......................................... S-2, S-5, S-28
Class A Certificateholders....................................... S-3
Class A Certificates............................................. S-1, S-3
Class A Fixed Allocation......................................... S-32
Class A Floating Allocation...................................... S-31
Class A Investor Charge-Off...................................... S-12, S-40
Class A Investor Default Amount.................................. S-39
Class A Investor Interest........................................ S-4, S-5, S-32
Class A Monthly Interest......................................... S-35
Class A Monthly Principal........................................ S-37
Class A Required Amount.......................................... S-11, S-33
Class A Servicing Fee............................................ S-43
Class A Underwriters............................................. S-45
Class A Underwriting Agreement................................... S-45
Class B Additional Interest...................................... S-28
Class B Adjusted Investor Interest............................... S-5, S-32
Class B Available Funds.......................................... S-28
Class B Certificate Rate......................................... S-2, S-5, S-28
Class B Certificateholders....................................... S-3
Class B Certificates............................................. S-1, S-3
Class B Fixed Allocation......................................... S-32
Class B Floating Allocation...................................... S-31
Class B Investor Charge-Off...................................... S-13, S-40
Class B Investor Default Amount.................................. S-39
Class B Investor Interest........................................ S-4, S-5, S-32
Class B Monthly Interest......................................... S-35
Class B Monthly Principal........................................ S-37
Class B Required Amount.......................................... S-12, S-33
Class B Servicing Fee............................................ S-44
Class B Underwriters............................................. S-45
Class B Underwriting Agreement................................... S-45
Closing Date..................................................... S-2, S-4
</TABLE>
S-47
<PAGE>
<TABLE>
<CAPTION>
TERM PAGE
- - ---- ----
<S> <C>
Code............................................................. S-16
Collateral Available Funds....................................... S-35
Collateral Charge-Off............................................ S-40
Collateral Default Amount........................................ S-39
Collateral Fixed Allocation...................................... S-32
Collateral Floating Allocation................................... S-31
Collateral Interest.............................................. S-4, S-32
Collateral Interest Holder....................................... S-4
Collateral Interest Servicing Fee................................ S-44
Collateral Monthly Interest...................................... S-37
Collateral Monthly Principal..................................... S-38
Collateral Rate.................................................. S-37
Controlled Accumulation Amount................................... S-38
Controlled Accumulation Period................................... S-8
Controlled Deposit Amount........................................ S-9, S-23
Covered Amount................................................... S-10, S-41
Cut-Off Date..................................................... S-4
Default Amount................................................... S-39
Distribution Date................................................ S-2, S-8
ERISA............................................................ S-16
Excess Spread.................................................... S-12, S-35
Fixed Investor Percentage........................................ S-31
Floating Investor Percentage..................................... S-31
Group One........................................................ S-14
Initial Collateral Interest...................................... S-13
Interest Period.................................................. S-8
Investor Default Amount.......................................... S-39
Investor Interest................................................ S-4
Investor Servicing Fee........................................... S-43
LIBOR............................................................ S-2, S-4, S-28
LIBOR Determination Date......................................... S-28
Loan Agreement................................................... S-14
MBNA............................................................. S-1
Minimum Aggregate Principal Receivables.......................... S-19
Minimum Seller Interest.......................................... S-19
Monthly Period................................................... S-6
Net Servicing Fee Rate........................................... S-43
OCMS............................................................. S-17
Pay Out Event.................................................... S-42
Portfolio Yield.................................................. S-24
Principal Funding Account........................................ S-9, S-40
Principal Funding Account Balance................................ S-23
Principal Funding Investment Proceeds............................ S-9, S-41
Principal Funding Investment Shortfall........................... S-10, S-41
Principal Shortfalls............................................. S-38
Rapid Amortization Period........................................ S-11
Rating Agency Condition.......................................... S-39
Reallocated Class B Principal Collections........................ S-34
Reallocated Collateral Principal Collections..................... S-34
Reallocated Principal Collections................................ S-34
Receivables...................................................... S-1, S-3
</TABLE>
S-48
<PAGE>
<TABLE>
<CAPTION>
TERM PAGE
- - ---- ----
<S> <C>
Record Date.......................................................... S-27
Reference Banks...................................................... S-29
Required Amount...................................................... S-12
Required Collateral Interest......................................... S-13, S-39
Required Reserve Account Amount...................................... S-41
Reserve Account...................................................... S-41
Reserve Account Funding Date......................................... S-41
Revolving Period..................................................... S-8
Scheduled Payment Date............................................... S-2
Seller............................................................... S-3
Seller Certificate................................................... S-6
Seller Interest...................................................... S-4
Seller Percentage.................................................... S-27
Series 1997-C........................................................ S-3
Series 1997-C Supplement............................................. S-3
Series 1997-C Termination Date....................................... S-6
Servicer Interchange................................................. S-43
Shared Principal Collections......................................... S-14, S-38
Telerate Page 3750................................................... S-29
Transfer Date........................................................ S-34
Trust................................................................ S-1, S-3
Trust Portfolio...................................................... S-19
Trustee.............................................................. S-3
Underwriters......................................................... S-45
Underwriting Agreement............................................... S-45
</TABLE>
S-49
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
ANNEX I
OTHER SERIES ISSUED
The table below sets forth the principal characteristics of the thirty other
Series previously issued by the Trust, all of which are in Group One. For more
specific information with respect to any Series, any prospective investor
should contact MBNA at (800) 362-6255 or (302) 456-8588. MBNA will provide,
without charge, to any prospective purchaser of the Certificates, a copy of
the Disclosure Documents for any previous publicly-issued Series.
1.Series 1994-A
<TABLE>
<S> <C>
Initial Class A Investor Interest...............................$661,200,000
Class A Certificate Rate................One-Month LIBOR plus 0.17% per annum
Initial Class B Investor Interest................................$34,200,000
Class B Certificate Rate................One-Month LIBOR plus 0.37% per annum
Class A Controlled Accumulation Amount..........................$55,100,000*
Class A Scheduled Payment Date.................August 1999 Distribution Date
Class B Scheduled Payment Date..............September 1999 Distribution Date
Annual Servicing Fee Percentage...............................2.0% per annum
Initial Collateral Interest......................................$64,600,000
Other Enhancement for the Class A Certificates......Subordination of Class B
Certificates
Series 1994-A Termination Date................January 2002 Distribution Date
Series Issuance Date..........................................August 4, 1994
</TABLE>
2.Series 1994-B
<TABLE>
<S> <C>
Initial Class A Investor Interest...............................$870,000,000
Class A Certificate Rate....Thirteen-week Treasury Bill plus 0.45% per annum
Initial Class B Investor Interest................................$45,000,000
Class B Certificate Rate................One-Month LIBOR plus 0.35% per annum
Class A Controlled Accumulation Amount..........................$72,500,000*
Class A Scheduled Payment Date.................August 1999 Distribution Date
Class B Scheduled Payment Date..............September 1999 Distribution Date
Annual Servicing Fee Percentage...............................2.0% per annum
Initial Collateral Interest......................................$85,000,000
Other Enhancement for the Class A Certificates......Subordination of Class B
Certificates
Series 1994-B Termination Date................January 2002 Distribution Date
Series Issuance Date.........................................August 18, 1994
</TABLE>
3.Series 1994-C
<TABLE>
<S> <C>
Initial Class A Investor Interest...............................$870,000,000
Class A Certificate Rate.................One-Month LIBOR plus .25% per annum
Initial Class B Investor Interest................................$45,000,000
Class B Certificate Rate.................One-Month LIBOR plus .45% per annum
Class A Controlled Accumulation Amount..........................$72,500,000*
Class A Scheduled Payment Date................October 2001 Distribution Date
Class B Scheduled Payment Date...............November 2001 Distribution Date
Annual Servicing Fee Percentage...............................2.0% per annum
Initial Collateral Interest......................................$85,000,000
Other Enhancement for the Class A Certificates......Subordination of Class B
Certificates
Series 1994-C Termination Date..................March 2004 Distribution Date
Series Issuance Date........................................October 26, 1994
</TABLE>
A-1
<PAGE>
4.Series 1994-D
<TABLE>
<S> <C>
Initial Class A Investor Interest...............................$870,000,000
Class A Certificate Rate........Daily Federal Funds Rate plus .33% per annum
Initial Class B Investor Interest................................$45,000,000
Class B Certificate Rate.................One-Month LIBOR plus .35% per annum
Class A Controlled Accumulation Amount..........................$72,500,000*
Class A Scheduled Payment Date................October 1997 Distribution Date
Class B Scheduled Payment Date...............November 1997 Distribution Date
Annual Servicing Fee Percentage...............................2.0% per annum
Initial Collateral Interest......................................$85,000,000
Other Enhancement for the Class A Certificates......Subordination of Class B
Certificates
Series 1994-D Termination Date..................March 2000 Distribution Date
Series Issuance Date........................................October 26, 1994
</TABLE>
5.Series 1994-E
<TABLE>
<S> <C>
Initial Investor Interest.......................................$500,000,000
Current Investor Interest as of February 28, 1997...............$700,000,000
Maximum Investor Interest.......................................$700,000,000
Certificate Rate......................................Commercial Paper Index
Annual Servicing Fee Percentage...............................2.0% per annum
Initial Cash Collateral Amount...................................$20,000,000
Series Issuance Date.......................................December 15, 1994
</TABLE>
6.Series 1995-A
<TABLE>
<S> <C>
Initial Class A Investor Interest...............................$500,250,000
Class A Certificate Rate.................One-Month LIBOR plus .27% per annum
Initial Class B Investor Interest................................$25,875,000
Class B Certificate Rate.................One-Month LIBOR plus .45% per annum
Class A Controlled Accumulation Amount..........................$41,687,500*
Class A Scheduled Payment Date.................August 2004 Distribution Date
Class B Scheduled Payment Date..............September 2004 Distribution Date
Annual Servicing Fee Percentage...............................2.0% per annum
Initial Collateral Interest......................................$48,875,000
Other Enhancement for the Class A Certificates......Subordination of Class B
Certificates
Series 1995-A Termination Date................January 2007 Distribution Date
Series Issuance Date..........................................March 22, 1995
</TABLE>
7.Series 1995-B
<TABLE>
<S> <C>
Initial Class A Investor Interest...............................$652,500,000
Class A Certificate Rate.................One-Month LIBOR plus .16% per annum
Initial Class B Investor Interest................................$33,750,000
Class B Certificate Rate.................One-Month LIBOR plus .32% per annum
Class A Controlled Accumulation Amount..........................$54,375,000*
Class A Scheduled Payment Date....................May 2000 Distribution Date
Class B Scheduled Payment Date...................June 2000 Distribution Date
Annual Servicing Fee Percentage...............................2.0% per annum
Initial Collateral Interest......................................$63,750,000
Other Enhancement for the Class A Certificates......Subordination of Class B
Certificates
Series 1995-B Termination Date................October 2002 Distribution Date
Series Issuance Date............................................May 23, 1995
</TABLE>
A-2
<PAGE>
8.Series 1995-C
<TABLE>
<S> <C>
Initial Class A Investor Interest....................................................$500,250,000
Class A Certificate Rate..........................................................6.45% per annum
Initial Class B Investor Interest.....................................................$25,875,000
Class B Certificate Rate......................................One-Month LIBOR plus .42% per annum
Class A Controlled Accumulation Amount...............................................$41,687,500*
Class A Scheduled Payment Date........................................June 2005 Distribution Date
Class B Scheduled Payment Date........................................July 2005 Distribution Date
Annual Servicing Fee Percentage....................................................2.0% per annum
Initial Collateral Interest...........................................................$48,875,000
Other Enhancement for the Class A Certificates..............Subordination of Class B Certificates
Series 1995-C Termination Date....................................February 2008 Distribution Date
Series Issuance Date................................................................June 29, 1995
</TABLE>
9.Series 1995-D
<TABLE>
<S> <C>
Initial Class A Investor Interest....................................................$435,000,000
Class A Certificate Rate..........................................................6.05% per annum
Initial Class B Investor Interest.....................................................$22,500,000
Class B Certificate Rate......................................One-Month LIBOR plus .29% per annum
Class A Controlled Accumulation Amount...............................................$36,250,000*
Class A Scheduled Payment Date........................................June 2000 Distribution Date
Class B Scheduled Payment Date........................................July 2000 Distribution Date
Annual Servicing Fee Percentage....................................................2.0% per annum
Initial Collateral Interest...........................................................$42,500,000
Other Enhancement for the Class A Certificates..............Subordination of Class B Certificates
Series 1995-D Termination Date....................................November 2002 Distribution Date
Series Issuance Date................................................................June 29, 1995
</TABLE>
10.Series 1995-E
<TABLE>
<S> <C>
Initial Class A Investor Interest....................................................$435,000,000
Class A Certificate Rate.....................................One-Month LIBOR plus 0.22% per annum
Initial Class B Investor Interest.....................................................$22,500,000
Class B Certificate Rate.....................................One-Month LIBOR plus 0.32% per annum
Class A Controlled Accumulation Amount...............................................$36,250,000*
Class A Scheduled Payment Date......................................August 2002 Distribution Date
Class B Scheduled Payment Date...................................September 2002 Distribution Date
Annual Servicing Fee Percentage....................................................2.0% per annum
Initial Collateral Interest...........................................................$42,500,000
Other Enhancement for the Class A Certificates..............Subordination of Class B Certificates
Series 1995-E Termination Date.....................................January 2005 Distribution Date
Series Issuance Date...............................................................August 2, 1995
</TABLE>
A-3
<PAGE>
11.Series 1995-F
<TABLE>
<S> <C>
Initial Class A Investor Interest....................................................$455,000,000
Class A Certificate Rate..........................................................6.60% per annum
Initial Class B Investor Interest.....................................................$18,750,000
Class B Certificate Rate..........................................................6.75% per annum
Class A Controlled Accumulation Amount............................................$37,916,666.67*
Class A Scheduled Payment Date......................................August 2000 Distribution Date
Class B Scheduled Payment Date...................................September 2000 Distribution Date
Annual Servicing Fee Percentage....................................................2.0% per annum
Initial Collateral Interest...........................................................$26,250,000
Other Enhancement for the Class A Certificates..............Subordination of Class B Certificates
Series 1995-F Termination Date.....................................January 2003 Distribution Date
Series Issuance Date..............................................................August 30, 1995
</TABLE>
12.Series 1995-G
<TABLE>
<S> <C>
Initial Class A Investor Interest....................................................$435,000,000
Class A Certificate Rate.....................................One-Month LIBOR plus 0.21% per annum
Initial Class B Investor Interest.....................................................$22,500,000
Class B Certificate Rate.....................................One-Month LIBOR plus 0.33% per annum
Class A Controlled Accumulation Amount...............................................$36,250,000*
Class A Scheduled Payment Date.....................................October 2002 Distribution Date
Class B Scheduled Payment Date....................................November 2002 Distribution Date
Annual Servicing Fee Percentage....................................................2.0% per annum
Initial Collateral Interest...........................................................$42,500,000
Other Enhancement for the Class A Certificates..............Subordination of Class B Certificates
Series 1995-G Termination Date.......................................March 2005 Distribution Date
Series Issuance Date...........................................................September 27, 1995
</TABLE>
13.Series 1995-H
<TABLE>
<S> <C>
Initial Class A Investor Interest....................................................$285,245,000
Class A Certificate Rate.....................................One-Month LIBOR plus 0.07% per annum
Initial Class B Investor Interest.....................................................$14,755,000
Class B Certificate Rate.....................................One-Month LIBOR plus 0.19% per annum
Class A Controlled Accumulation Amount............................................$23,770,416.67*
Class A Scheduled Payment Date.....................................October 1998 Distribution Date
Class B Scheduled Payment Date....................................November 1998 Distribution Date
Annual Servicing Fee Percentage....................................................2.0% per annum
Initial Collateral Interest...........................................................$27,875,000
Other Enhancement for the Class A Certificates..............Subordination of Class B Certificates
Series 1995-H Termination Date.......................................March 2001 Distribution Date
Series Issuance Date...........................................................September 28, 1995
</TABLE>
A-4
<PAGE>
14.Series 1995-I
<TABLE>
<S> <C>
Initial Class A Investor Interest....................................................$652,500,000
Class A Certificate Rate.....................................One-Month LIBOR plus 0.17% per annum
Initial Class B Investor Interest.....................................................$33,750,000
Class B Certificate Rate.....................................One-Month LIBOR plus 0.27% per annum
Class A Controlled Accumulation Amount...............................................$54,375,000*
Class A Scheduled Payment Date.....................................October 2000 Distribution Date
Class B Scheduled Payment Date....................................November 2000 Distribution Date
Annual Servicing Fee Percentage....................................................2.0% per annum
Initial Collateral Interest...........................................................$63,750,000
Other Enhancement for the Class A Certificates..............Subordination of Class B Certificates
Series 1995-I Termination Date.......................................March 2003 Distribution Date
Series Issuance Date.............................................................October 26, 1995
</TABLE>
15.Series 1995-J
<TABLE>
<S> <C>
Initial Class A Investor Interest....................................................$435,000,000
Class A Certificate Rate.....................................One-Month LIBOR plus 0.23% per annum
Initial Class B Investor Interest.....................................................$22,500,000
Class B Certificate Rate.....................................One-Month LIBOR plus 0.35% per annum
Class A Controlled Accumulation Amount...............................................$36,250,000*
Class A Scheduled Payment Date....................................November 2002 Distribution Date
Class B Scheduled Payment Date....................................December 2002 Distribution Date
Annual Servicing Fee Percentage....................................................2.0% per annum
Initial Collateral Interest...........................................................$42,500,000
Other Enhancement for the Class A Certificates..............Subordination of Class B Certificates
Series 1995-J Termination Date.......................................April 2005 Distribution Date
Series Issuance Date............................................................November 21, 1995
</TABLE>
16.Series 1996-A
<TABLE>
<S> <C>
Initial Class A Investor Interest....................................................$609,000,000
Class A Certificate Rate.....................................One-Month LIBOR plus 0.21% per annum
Initial Class B Investor Interest.....................................................$31,500,000
Class B Certificate Rate.....................................One-Month LIBOR plus 0.34% per annum
Class A Controlled Accumulation Amount...............................................$50,750,000*
Class A Scheduled Payment Date....................................February 2003 Distribution Date
Class B Scheduled Payment Date.......................................March 2003 Distribution Date
Annual Servicing Fee Percentage....................................................2.0% per annum
Initial Collateral Interest...........................................................$59,500,000
Other Enhancement for the Class A Certificates..............Subordination of Class B Certificates
Series 1996-A Termination Date........................................July 2005 Distribution Date
Series Issuance Date............................................................February 28, 1996
</TABLE>
A-5
<PAGE>
17.Series 1996-B
<TABLE>
<S> <C>
Initial Class A Investor Interest....................................................$435,000,000
Class A Certificate Rate.....................................One-Month LIBOR plus 0.26% per annum
Initial Class B Investor Interest.....................................................$22,500,000
Class B Certificate Rate.....................................One-Month LIBOR plus 0.37% per annum
Class A Controlled Accumulation Amount...............................................$36,250,000*
Class A Scheduled Payment Date.......................................March 2006 Distribution Date
Class B Scheduled Payment Date.......................................April 2006 Distribution Date
Annual Servicing Fee Percentage....................................................2.0% per annum
Initial Collateral Interest...........................................................$42,500,000
Other Enhancement for the Class A Certificates..............Subordination of Class B Certificates
Series 1996-B Termination Date......................................August 2008 Distribution Date
Series Issuance Date...............................................................March 26, 1996
</TABLE>
18.Series 1996-C
<TABLE>
<S> <C>
Initial Class A Investor Interest....................................................$435,000,000
Class A Certificate Rate.....................................One-Month LIBOR plus 0.14% per annum
Initial Class B Investor Interest.....................................................$22,500,000
Class B Certificate Rate.....................................One-Month LIBOR plus 0.28% per annum
Class A Controlled Accumulation Amount...............................................$36,250,000*
Class A Scheduled Payment Date.......................................March 2001 Distribution Date
Class B Scheduled Payment Date.......................................April 2001 Distribution Date
Annual Servicing Fee Percentage....................................................2.0% per annum
Initial Collateral Interest...........................................................$42,500,000
Other Enhancement for the Class A Certificates..............Subordination of Class B Certificates
Series 1996-C Termination Date......................................August 2003 Distribution Date
Series Issuance Date...............................................................March 27, 1996
</TABLE>
19.Series 1996-D
<TABLE>
<S> <C>
Initial Class A Investor Interest....................................................$850,000,000
Class A Certificate Rate.....................................One-Month LIBOR plus 0.15% per annum
Initial Class B Investor Interest.....................................................$75,000,000
Class B Certificate Rate.....................................One-Month LIBOR plus 0.29% per annum
Class A Controlled Accumulation Amount............................................$70,833,333.33*
Class A Scheduled Payment Date.......................................April 2001 Distribution Date
Class B Scheduled Payment Date.........................................May 2001 Distribution Date
Annual Servicing Fee Percentage....................................................2.0% per annum
Initial Collateral Interest...........................................................$75,000,000
Other Enhancement for the Class A Certificates..............Subordination of Class B Certificates
Series 1996-D Termination Date...................................September 2003 Distribution Date
Series Issuance Date..................................................................May 1, 1996
</TABLE>
A-6
<PAGE>
20.Series 1996-E
<TABLE>
<S> <C>
Initial Class A Investor Interest...............................$637,500,000
Class A Certificate Rate................One-Month LIBOR plus 0.17% per annum
Initial Class B Investor Interest................................$56,250,000
Class B Certificate Rate................One-Month LIBOR plus 0.31% per annum
Class A Controlled Accumulation Amount..........................$53,125,000*
Class A Scheduled Payment Date....................May 2003 Distribution Date
Class B Scheduled Payment Date...................June 2003 Distribution Date
Annual Servicing Fee Percentage...............................2.0% per annum
Initial Collateral Interest......................................$56,250,000
Other Enhancement for the Class A Certificates......Subordination of Class B
Certificates
Series 1996-E Termination Date................October 2005 Distribution Date
Series Issuance Date............................................May 21, 1996
</TABLE>
21.Series 1996-F
<TABLE>
<S> <C>
Initial Class A Investor Interest...............................$470,000,000
Initial Collateral Interest......................................$30,000,000
Current Investor Interest as of February 28, 1997...............$500,000,000
Maximum Investor Interest.......................................$500,000,000
Certificate Rate......................................Commercial Paper Index
Annual Servicing Fee Percentage...............................2.0% per annum
Series Issuance Date...........................................June 25, 1996
</TABLE>
22.Series 1996-G
<TABLE>
<S> <C>
Initial Class A Investor Interest...............................$425,000,000
Class A Certificate Rate................One-Month LIBOR plus 0.18% per annum
Initial Class B Investor Interest................................$37,500,000
Class B Certificate Rate................One-Month LIBOR plus 0.35% per annum
Class A Controlled Accumulation Amount.......................$35,416,666.67*
Class A Scheduled Payment Date...................July 2006 Distribution Date
Class B Scheduled Payment Date.................August 2006 Distribution Date
Annual Servicing Fee Percentage...............................2.0% per annum
Initial Collateral Interest......................................$37,500,000
Other Enhancement for the Class A Certificates......Subordination of Class B
Certificates
Series 1996-G Termination Date...............December 2008 Distribution Date
Series Issuance Date...........................................July 17, 1996
</TABLE>
23.Series 1996-H
<TABLE>
<S> <C>
Initial Class A Investor Interest.............................$1,020,000,000
Class A Certificate Rate..............Three-Month LIBOR plus 0.10% per annum
Initial Class B Investor Interest................................$90,000,000
Class B Certificate Rate..............Three-Month LIBOR plus 0.27% per annum
Class A Controlled Accumulation Amount..........................$85,000,000*
Class A Scheduled Payment Date.................August 2001 Distribution Date
Class B Scheduled Payment Date..............September 2001 Distribution Date
Annual Servicing Fee Percentage...............................2.0% per annum
Initial Collateral Interest......................................$90,000,000
Other Enhancement for the Class A Certificates......Subordination of Class B
Certificates
Series 1996-H Termination Date................January 2004 Distribution Date
Series Issuance Date.........................................August 14, 1996
</TABLE>
A-7
<PAGE>
24.Series 1996-I
<TABLE>
<S> <C>
Initial Class A Deutsche Mark ("DM") Investor Interest........................................DM 1,000,000,000
Initial Class A Investor Interest..............................................................$666,444,518.49
Class A Certificate Rate.............................................Three-Month DM LIBOR plus 0.09% per annum
Class A Floating Dollar Rate...........................................Three-Month LIBOR plus 0.115% per annum
Initial Class B Investor Interest..................................................................$58,804,000
Class B Certificate Rate..................................Not to Exceed Three-Month LIBOR plus 0.50% per annum
Class A Controlled Accumulation Amount.........................................................$55,537,043.21*
Class A Scheduled Payment Date..............................................................September 19, 2001
Class B Scheduled Payment Date..................................................October 2001 Distribution Date
Annual Servicing Fee Percentage.................................................................2.0% per annum
Initial Collateral Interest........................................................................$58,804,000
Other Enhancement for the Class A Certificates...........................Subordination of Class B Certificates
Series 1996-I Termination Date...............................................................February 18, 2004
Series Issuance Date........................................................................September 25, 1996
</TABLE>
25.Series 1996-J
<TABLE>
<S> <C>
Initial Class A Investor Interest.................................................................$850,000,000
Class A Certificate Rate..................................................One-Month LIBOR plus 0.15% per annum
Initial Class B Investor Interest..................................................................$75,000,000
Class B Certificate Rate..................................................One-Month LIBOR plus 0.36% per annum
Class A Controlled Accumulation Amount.........................................................$70,833,333.33*
Class A Scheduled Payment Date................................................September 2003 Distribution Date
Class B Scheduled Payment Date..................................................October 2003 Distribution Date
Annual Servicing Fee Percentage.................................................................2.0% per annum
Initial Collateral Interest........................................................................$75,000,000
Other Enhancement for the Class A Certificates...........................Subordination of Class B Certificates
Series 1996-J Termination Date.................................................February 2006 Distribution Date
Series Issuance Date........................................................................September 19, 1996
</TABLE>
26.Series 1996-K
<TABLE>
<S> <C>
Initial Class A Investor Interest....................................................$850,000,000
Class A Certificate Rate.....................................One-Month LIBOR plus 0.13% per annum
Initial Class B Investor Interest.....................................................$75,000,000
Class B Certificate Rate.....................................One-Month LIBOR plus 0.35% per annum
Class A Controlled Accumulation Amount............................................$70,833,333.34*
Class A Scheduled Payment Date.....................................October 2003 Distribution Date
Class B Scheduled Payment Date....................................November 2003 Distribution Date
Annual Servicing Fee Percentage....................................................2.0% per annum
Initial Collateral Interest...........................................................$75,000,000
Other Enhancement for the Class A Certificates..............Subordination of Class B Certificates
Series 1996-K Termination Date.......................................March 2006 Distribution Date
Series Issuance Date.............................................................October 24, 1996
</TABLE>
A-8
<PAGE>
27.Series 1996-L
<TABLE>
<S> <C>
Initial Class A Investor Interest...............................$425,000,000
Class A Certificate Rate..............Three-Month LIBOR plus 0.03% per annum
Initial Class B Investor Interest................................$37,500,000
Class B Certificate Rate..............Three-Month LIBOR plus 0.24% per annum
Class A Controlled Accumulation Amount.......................$35,416,666.67*
Class A Scheduled Payment Date...............November 1999 Distribution Date
Class B Scheduled Payment Date...............December 1999 Distribution Date
Annual Servicing Fee Percentage...............................2.0% per annum
Initial Collateral Interest......................................$37,500,000
Other Enhancement for the Class A Certificates......Subordination of Class B
Certificates
Series 1996-L Termination Date...............November 2001 Distribution Date
Series Issuance Date........................................December 3, 1996
</TABLE>
28.Series 1996-M
<TABLE>
<S> <C>
Initial Class A Investor Interest...............................$425,000,000
Class A Certificate Rate..............Three-Month LIBOR plus 0.13% per annum
Initial Class B Investor Interest................................$37,500,000
Class B Certificate Rate..............Three-Month LIBOR plus 0.35% per annum
Class A Controlled Accumulation Amount.......................$35,416,666.67*
Class A Scheduled Payment Date...............November 2006 Distribution Date
Class B Scheduled Payment Date...............December 2006 Distribution Date
Annual Servicing Fee Percentage...............................2.0% per annum
Initial Collateral Interest......................................$37,500,000
Other Enhancement for the Class A Certificates......Subordination of Class B
Certificates
Series 1996-M Termination Date..................April 2009 Distribution Date
Series Issuance Date.......................................November 26, 1996
</TABLE>
29.Series 1997-A
<TABLE>
<S> <C>
Initial Class A Investor Interest...............................$525,000,000
Class A Certificate Rate............Three-Month LIBOR minus 0.075% per annum
Initial Class B Investor Interest................................$46,350,000
Class B Certificate Rate..............Three-Month LIBOR plus 0.27% per annum
Controlled Accumulation Amount..................................$47,612,500*
Scheduled Payment Date.......................February 2000 Distribution Date
Annual Servicing Fee Percentage...............................2.0% per annum
Initial Collateral Interest......................................$46,350,000
Other Enhancement for the Class A Certificates......Subordination of Class B
Certificates
Series 1997-A Termination Date...................July 2002 Distribution Date
Series Issuance Date........................................January 30, 1997
</TABLE>
30.Series 1997-B
<TABLE>
<S> <C>
Initial Class A Investor Interest...............................$850,000,000
Class A Certificate Rate................One-Month LIBOR plus 0.16% per annum
Initial Class B Investor Interest................................$75,000,000
Class B Certificate Rate................One-Month LIBOR plus 0.35% per annum
Controlled Accumulation Amount...............................$83,333,333.34*
Scheduled Payment Date..........................March 2012 Distribution Date
Annual Servicing Fee Percentage...............................2.0% per annum
Initial Class C Investor Interest................................$75,000,000
Other Enhancement for the Class A Certificates......Subordination of Class B
Certificates
Series 1997-B Termination Date.................August 2014 Distribution Date
Series Issuance Date.......................................February 27, 1997
</TABLE>
- - --------
* Subject to change if the commencement of the Accumulation Period or
Controlled Accumulation Period, as applicable, is delayed.
A-9
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
PROSPECTUS
MBNA MASTER CREDIT CARD TRUST II
Asset Backed Certificates
MBNA AMERICA BANK, NATIONAL ASSOCIATION
SELLER AND SERVICER
---------------
The Asset Backed Certificates (collectively, the "Certificates") described
herein may be sold from time to time in one or more series (each, a "Series"),
in amounts, at prices and on terms to be determined at the time of sale and to
be set forth in a supplement to this Prospectus (a "Prospectus Supplement").
The Certificates of each Series will represent an undivided interest in MBNA
Master Credit Card Trust II (the "Trust"). The Trust has been formed pursuant
to a pooling and servicing agreement between MBNA America Bank, National
Association ("MBNA"), as seller and servicer, and The Bank of New York, as
trustee. The property of the Trust will include receivables (the
"Receivables") generated from time to time in a portfolio of consumer
revolving credit card accounts (the "Accounts"), all monies due in payment of
the Receivables and certain other property, as more fully described herein
and, with respect to any Series, in the related Prospectus Supplement. MBNA
initially will own the remaining undivided interest in the Trust not
represented by the Certificates issued by the Trust and will service the
Receivables.
Each Series will consist of one or more classes of Certificates (each, a
"Class"), one or more of which may be fixed rate Certificates, floating rate
Certificates or other type of Certificates, as specified in the related
Prospectus Supplement. Each Certificate will represent an undivided interest
in the Trust and the interest of the Certificateholders of each Class or
Series will include the right to receive a varying percentage of each month's
collections with respect to the Receivables of the Trust at the times, in the
manner and to the extent described herein and, with respect to any Series
offered hereby, in the related Prospectus Supplement. Interest and principal
payments with respect to each Series offered hereby will be made as specified
in the related Prospectus Supplement. One or more Classes of a Series offered
hereby may be entitled to the benefits of a cash collateral account or
guaranty, a collateral interest, a letter of credit, a surety bond, an
insurance policy or other form of enhancement as specified in the Prospectus
Supplement relating to such Series. In addition, any Series offered hereby may
include one or more Classes which are subordinated in right and priority to
payment of principal of, and/or interest on, one or more other Classes of such
Series or another Series, in each case to the extent described in the related
Prospectus Supplement. Each Series of Certificates or Class thereof offered
hereby will be rated in one of the four highest rating categories by at least
one nationally recognized rating organization.
While the specific terms of any Series in respect of which this Prospectus
is being delivered will be described in the related Prospectus Supplement, the
terms of such Series will not be subject to prior review by, or consent of,
the Certificateholders of any previously issued Series.
POTENTIAL INVESTORS SHOULD CONSIDER, AMONG OTHER THINGS, THE INFORMATION SET
FORTH IN "RISK FACTORS" BEGINNING ON PAGE 19 HEREIN.
---------------
THE CERTIFICATES WILL REPRESENT INTERESTS IN THE TRUST ONLY AND WILL NOT
REPRESENT INTERESTS IN OR OBLIGATIONS OF MBNA AMERICA BANK, NATIONAL ASSOCIATION
OR ANY AFFILIATE THEREOF. A CERTIFICATE IS NOT A DEPOSIT AND NEITHER THE
CERTIFICATES NOR THE UNDERLYING ACCOUNTS OR RECEIVABLES ARE INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENTAL AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------
Certificates may be sold by MBNA directly to purchasers, through agents
designated from time to time, through underwriting syndicates led by one or
more managing underwriters or through one or more underwriters acting alone.
If underwriters or agents are involved in the offering of the Certificates of
any Series offered hereby, the name of the managing underwriter or
underwriters or agents will be set forth in the related Prospectus Supplement.
If an underwriter, agent or dealer is involved in the offering of the
Certificates of any Series offered hereby, the underwriter's discount, agent's
commission or dealer's purchase price will be set forth in, or may be
calculated from, the related Prospectus Supplement, and the net proceeds to
MBNA from such offering will be the public offering price of such Certificates
less such discount in the case of an underwriter, the purchase price of such
Certificates less such commission in the case of an agent or the purchase
price of such Certificates in the case of a dealer, and less, in each case,
the other expenses of MBNA associated with the issuance and distribution of
such Certificates. See "Plan of Distribution."
This Prospectus may not be used to consummate sales of any Series of
Certificates unless accompanied by the related Prospectus Supplement.
---------------
The date of this Prospectus is February 19, 1997.
<PAGE>
PROSPECTUS SUPPLEMENT
The Prospectus Supplement relating to a Series to be offered thereby and
hereby will, among other things, set forth with respect to such Series: (a)
the initial aggregate principal amount of each Class of such Series; (b) the
certificate interest rate (or method for determining it) of each Class of such
Series; (c) certain information concerning the Receivables allocated to such
Series; (d) the expected date or dates on which the principal amount of the
Certificates will be paid to holders of each Class of Certificates (the
"Certificateholders"); (e) the extent to which any Class within a Series is
subordinated to any other Class of such Series or any other Series; (f) the
identity of each Class of floating rate Certificates and fixed rate
Certificates included in such Series, if any, or such other type of Class of
Certificates; (g) the Distribution Dates for the respective Classes; (h)
relevant financial information with respect to the Receivables; (i) additional
information with respect to any Enhancement relating to such Series; and (j)
the plan of distribution of such Series.
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 Seller does not intend to send any of its financial reports to
Certificateholders or to the owners of beneficial interests in the
Certificates ("Certificate Owners"). The Servicer will file with the
Securities and Exchange Commission (the "Commission") such periodic reports
with respect to the Trust as are required under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and the rules and regulations of the
Commission thereunder.
AVAILABLE INFORMATION
This Prospectus, which forms a part of the Registration Statement, omits
certain information contained in such Registration Statement pursuant to the
rules and regulations of the Commission. For further information, reference is
made to the Registration Statement (including any amendments thereof and
exhibits thereto) and any reports and other documents incorporated herein by
reference as described below under "Incorporation of Certain Documents by
Reference," which are available for inspection without charge at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549; 7 World Trade Center, New York, New York 10048; and
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511. Copies of such material may be obtained from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549, at prescribed rates. In addition, the Commission maintains a
public access site on the Internet through the World Wide Web at which site
reports, information statements and other information, including all
electronic filings, may be reviewed. The Internet address of the Commission's
World Wide Web site is http://www.sec.gov.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All reports and other documents filed by the Servicer, on behalf of the
Trust, pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act
subsequent to the date of this Prospectus and prior to the termination of the
offering of the Certificates shall be deemed to be incorporated by reference
into this Prospectus and to be part hereof. Any statement contained herein or
in a document incorporated or deemed to be incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Prospectus
to the extent that a statement contained herein or in any subsequently filed
document which also is or is deemed to be incorporated
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by reference herein modifies or supersedes such statement. Any such statement
so modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Prospectus.
The Servicer will provide without charge to each person to whom a copy of
this Prospectus is delivered, on the written or oral request of any such
person, a copy of any or all of the documents incorporated herein by
reference, except the exhibits to such documents (unless such exhibits are
specifically incorporated by reference in such documents). Written requests
for such copies should be directed to Investor Relations, MBNA America Bank,
National Association, Wilmington, Delaware 19884-0786. Telephone requests for
such copies should be directed to MBNA America Bank, National Association at
(800) 362-6255.
3
<PAGE>
PROSPECTUS SUMMARY
The following is qualified in its entirety by reference to the detailed
information appearing elsewhere in this Prospectus and in any accompanying
Prospectus Supplement. Certain capitalized terms used in this summary are
defined elsewhere in this Prospectus and in the accompanying Prospectus
Supplement. A listing of the pages on which some of such terms are defined is
found in the "Index of Terms for Prospectus" beginning on page 62 herein.
Unless the context requires otherwise, capitalized terms used in this
Prospectus and in any accompanying Prospectus Supplement refer only to the
particular Series being offered by such Prospectus Supplement.
TYPE OF SECURITIES...... Asset Backed Certificates (the "Certificates")
evidencing an undivided ownership interest in the
assets of MBNA Master Credit Card Trust II (the
"Trust") 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").
THE TRUST............... The Trust was formed pursuant to a pooling and
servicing agreement dated as of August 4, 1994,
between MBNA, as seller and servicer, and The Bank
of New York, as trustee (the "Trustee") (the
"Agreement"). The Trust was created as a master
trust under which one or more Series will be issued
pursuant to a series supplement to the Agreement (a
"Series Supplement"). Any Series issued by the Trust
may or may not be a Series offered pursuant to this
Prospectus. Each Prospectus Supplement will identify
the Trust and all Series previously issued by the
Trust.
TRUST ASSETS............ The assets of the Trust include receivables (the
"Receivables") arising under certain MasterCard(R)
and VISA(R)* revolving credit card accounts (the
"Accounts") selected from the portfolio of
MasterCard and VISA accounts owned by MBNA (the
"Bank Portfolio") and all monies due or to become
due in payment of the Receivables (other than
recoveries on charged-off Receivables), all proceeds
of the Receivables and proceeds of credit insurance
policies relating to the Receivables, and may
include the right to receive Interchange, if any,
allocable to the Certificates and all monies on
deposit in certain bank accounts of the Trust
(including any permitted investments in which any
such monies are invested, but excluding investment
earnings on such amounts unless otherwise specified
in the related Prospectus Supplement), and any
Enhancement with respect to any particular Series or
Class, as described in the related Prospectus
Supplement. "Interchange" consists of certain fees
received by MBNA 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. 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, currency
swap agreement or other similar arrangement for the
benefit
- - --------
* MasterCard(R) and VISA(R) are federally registered servicemarks of MasterCard
International Inc. and Visa U.S.A., Inc., respectively.
4
<PAGE>
of the Certificateholders of such Series or Class.
The term "Credit Enhancement" means, with respect to
any Series or Class thereof, any letter of credit,
cash collateral guaranty or account, collateral
interest, 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.
At the time of formation of the Trust and at certain
other times subsequent thereto, MBNA, as seller (in
such capacity, the "Seller"), conveyed to the
Trustee all Receivables existing under certain
Accounts selected from the Bank Portfolio based on
criteria provided in the Agreement and all
Receivables arising under such Accounts from time to
time thereafter until termination of the Trust. In
addition, the Agreement provides that MBNA may from
time to time (subject to certain limitations and
conditions), and in some circumstances will be
obligated to, designate additional eligible
revolving credit card accounts to be included as
Accounts (the "Additional Accounts"), the
Receivables of which will be included in the Trust.
The Agreement provides that in lieu of Additional
Accounts or in addition thereto, MBNA may include in
the Trust, participations representing undivided
interests in a pool of assets primarily consisting
of receivables arising under consumer revolving
credit card accounts owned by the Seller and
collections thereon ("Participations"). See "The
Receivables" and "Description of the Certificates--
Addition of Trust Assets."
CERTIFICATE INTEREST
AND PRINCIPAL.......... Each Series of Certificates will represent an
undivided interest in the assets of the 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 fixed, floating or other type
of rate and (ii) unless otherwise provided in the
related Prospectus Supplement, payments of principal
during the Controlled Amortization Period, the
Principal Amortization Period, or, under certain
limited circumstances, the Rapid Amortization Period
(each, an "Amortization Period"), or on Scheduled
Payment Dates, 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.
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.
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<PAGE>
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 and
currency computation, and availability and form of
Enhancement.
The assets of the Trust will be allocated among the
Certificateholders of each Series and the holder of
the Seller Certificate and, in certain
circumstances, the related Credit Enhancement
Provider. The aggregate principal amount of the
interest of the Certificateholders of a Series is
referred to herein as the "Investor Interest" and is
based on the aggregate amount of the Principal
Receivables in the Trust allocated to such Series.
If specified in any Prospectus Supplement, the term
"Investor Interest" with respect to the related
Series will include the Collateral Interest with
respect to such Series. The aggregate principal
amount of the interest of the holder of the Seller
Certificate is referred to herein as the "Seller
Interest," and is based on the aggregate amount of
Principal Receivables in the Trust not allocated to
the Certificateholders or any Credit Enhancement
Provider. See "Description of the Certificates--
General."
The Certificateholders of each Series will have the
right to receive (but only to the extent needed to
make required payments under the Agreement and the
related Series Supplement and subject to any
reallocation of such amounts 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 will
specify the Investor Percentages with respect to the
allocation 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. If the Certificates of a Series offered
hereby include more than one Class of Certificates,
the assets of the 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 "Description of
the Certificates--Investor Percentage and Seller
Percentage."
The Certificates of each Series will represent
interests in the Trust only and will not represent
interests in or obligations of the Seller or any
affiliate thereof. A Certificate is not a deposit
and neither the Certificates nor the underlying
Accounts or Receivables are insured or guaranteed by
the Federal Deposit Insurance Corporation (the
"FDIC") or any other governmental agency.
RECEIVABLES............. The Receivables held in the Trust will arise in
Accounts that have been selected from the Bank
Portfolio based on criteria provided in the
Agreement and described in the related Prospectus
Supplement as
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<PAGE>
applied initially on the date (the "Cut-Off Date")
specified in the related Prospectus Supplement and,
with respect to certain Additional Accounts, if any,
on the subsequent dates specified in the related
Prospectus Supplement.
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 Seller exercises the Discount Option
with respect to the Trust, an amount equal to the
product of the Discount Percentage 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."
With respect to the characterization of annual
credit card membership fees as Finance Charge
Receivables, see "Description of the Certificates--
Transfer of Annual Membership Fees." 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 "MBNA's Credit
Card Activities--Interchange."
During the term of the Trust, all new Receivables
arising in the Accounts will be transferred
automatically to the Trust by the Seller. The total
amount of Receivables in the 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.
Pursuant to the Agreement, the Seller will have the
right (subject to certain limitations and
conditions), and in some circumstances, such as the
maintenance of the Seller Interest at a specified
minimum level (the "Minimum Seller Interest"), will
be obligated, to designate additional eligible
revolving credit card accounts to be included as
Additional Accounts and to convey to the Trust all
of the Receivables in the Additional Accounts,
whether such Receivables are then existing or
thereafter created or, if so specified in the
Prospectus Supplement relating to a Series,
designate Participations to be included in the Trust
in lieu thereof or in addition thereto. See
"Description of the Certificates--Addition of Trust
Assets."
Pursuant to the Agreement, the Seller will have the
right (subject to certain limitations and
conditions) to designate certain Accounts and to
accept the reconveyance of all the Receivables in
such Accounts (the "Removed Accounts"), whether such
Receivables are then existing or thereafter created.
See "Description of the Certificates--Removal of
Accounts."
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<PAGE>
EXCHANGES............... The Agreement authorizes the Trustee to issue two
types of certificates: (i) one or more Series of
Certificates that will be transferable and have the
characteristics described below and (ii) a
certificate that evidences the Seller Interest (the
"Seller Certificate"), which initially will be held
by the Seller and which will be transferable only as
provided in the Agreement. Pursuant to any one or
more Series Supplements to the Agreement, the holder
of the Seller Certificate may tender the Seller
Certificate or, if provided in the relevant Series
Supplement, Certificates representing any Series
(which may include Series offered pursuant to this
Prospectus) issued by the Trust and the Seller
Certificate, to the Trustee in exchange for one or
more new Series (which may include Series offered
pursuant to this Prospectus) and a reissued Seller
Certificate (any such tender, an "Exchange"). Any
such Series may be offered to the public or other
investors 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 of 1933,
as amended (the "Securities Act"), or exempt from
registration thereunder, directly or through one or
more other underwriters or placement agents, in
fixed-price offerings or in negotiated transactions
or otherwise.
An Exchange may occur only upon delivery to the
Trustee of the following: (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 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 and (3)
such issuance will not cause or constitute an event
in which gain or loss would be recognized by any
Certificateholder or the Trust (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 with respect thereto,
(v) written confirmation from each Rating Agency
that the Exchange will not result in such Rating
Agency reducing or withdrawing its rating on any
then outstanding Series rated by it, (vi) an
officer's certificate of the Seller to the effect
that after giving effect to the Exchange the Seller
would not be required to add the Receivables of any
Additional Accounts pursuant to the Agreement and
the Seller Interest would be at least equal to the
Minimum Seller Interest and (vii) the existing
Seller Certificate and, if applicable, the
Certificates representing the Series to be
exchanged. See "Description of the Certificates--
Exchanges."
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<PAGE>
DENOMINATIONS........... Unless otherwise specified in the related Prospectus
Supplement, beneficial interests in the Certificates
will be offered for purchase in denominations of
$1,000 and integral multiples thereof.
REGISTRATION OF
CERTIFICATES........... Unless otherwise specified in the related Prospectus
Supplement, the Certificates of each Series
initially will be represented by Certificates
registered in the name of Cede, as the nominee of
DTC. No Certificate Owner will be entitled to
receive a definitive certificate representing such
person's interest, except in the event that
Certificates in fully registered, certificated form
("Definitive Certificates") are issued under the
limited circumstances described herein. See
"Description of the Certificates--Definitive
Certificates."
CLEARANCE AND
SETTLEMENT............. Unless otherwise provided in the related Prospectus
Supplement, Certificate Owners of each Series
offered hereby may elect to hold their Certificates
through any of DTC (in the United States) or CEDEL
or Euroclear (in Europe). Transfers within DTC,
CEDEL or Euroclear, as the case may be, will be made
in accordance with the usual rules and operating
procedures of the relevant system. Cross-market
transfers between persons holding directly or
indirectly through DTC, on the one hand, and
counterparties holding directly or indirectly
through CEDEL or Euroclear, on the other, will be
effected in DTC through the relevant Depositaries of
CEDEL or Euroclear. See "Description of the
Certificates--Book-Entry Registration."
SELLER AND SERVICER..... MBNA America Bank, National Association. The
principal executive offices of MBNA are located in
Wilmington, Delaware 19884, telephone number 1-800-
362-6255. The Servicer will receive a fee as
servicing compensation from the Trust in respect of
each Series in the amounts and at the times
specified in the related Prospectus Supplement (the
"Servicing Fee"). The Servicing Fee may be payable
from Finance Charge Receivables, Interchange or
other amounts as specified in the related Prospectus
Supplement. In certain limited circumstances, MBNA
may resign or be removed, in which event the Trustee
or a third party servicer may be appointed as
successor servicer (MBNA, or any such successor
servicer, is referred to herein as the "Servicer").
MBNA is a wholly-owned subsidiary of MBNA
Corporation (the "Corporation"). See "MBNA and MBNA
Corporation."
COLLECTIONS............. Unless otherwise 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 Agreement
(the "Collection Account"). All amounts deposited in
the Collection Account will be allocated by the
Servicer between amounts collected on Principal
Receivables and amounts collected on Finance Charge
Receivables. If so specified in the related
Prospectus Supplement, Principal Receivables and/or
Finance Charge Receivables may be otherwise
characterized. See "Description of the
Certificates--Discount Option." All such amounts
will then be allocated in accordance with the
respective interests of the Certificateholders of
each Series of
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<PAGE>
Certificates or Class thereof and the holder of the
Seller Certificate and, in certain circumstances,
certain Credit Enhancement Providers. See
"Description of the Certificates--Investor
Percentage and Seller Percentage."
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 or deposited into an
escrow account or other account for the benefit of
such Series of Certificates or Class thereof in the
amounts and on the dates (which may be monthly,
quarterly, semiannually or otherwise as specified in
the related Prospectus Supplement) (each, a
"Distribution Date") specified in the related
Prospectus Supplement. Interest payments or deposits
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 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 or deposit of
interest for a Series or Class occur less frequently
than monthly, such collections or other amounts
allocable to such Series or Class may be deposited
in one or more trust accounts pending distribution
to the Certificateholders of such Series or Class,
all as described in the related Prospectus
Supplement. See "Description of the Certificates--
Application of Collections," "--Shared Excess
Finance Charge Collections," "Credit Enhancement"
and "Risk Factors--Credit Enhancement."
REVOLVING PERIOD........ 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, as described below. For the
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 (the "Revolving Period"),
collections of Principal Receivables otherwise
allocable to the Investor Interest will, subject to
certain limitations, be paid from the Trust to the
holder of the Seller Certificate or, under certain
circumstances and if so specified in the related
Prospectus Supplement, will be treated as Shared
Principal Collections and paid to the holders of
other Series of Certificates issued by the Trust, as
described herein and in the related Prospectus
Supplement. See "Description of the Certificates--
Pay Out Events" for a discussion of the events which
might lead to early termination of the Revolving
Period.
PRINCIPAL PAYMENTS...... The principal of the Certificates of each Series
offered hereby will be scheduled to be paid either
in installments commencing on a date specified in
the related Prospectus Supplement (the "Principal
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<PAGE>
Commencement Date"), in which case such Series will
have either a Controlled Amortization Period or a
Principal Amortization Period, as described below,
or on an expected date specified in, or determined
in the manner specified in, the related Prospectus
Supplement (the "Scheduled Payment Date"), in which
case such Series will have an Accumulation Period,
as described below. If a Series has more than one
Class of Certificates, a different method of paying
principal, Principal Commencement Date or Scheduled
Payment Date may be assigned to each Class. The
payment of principal with respect to the
Certificates of a Series or Class may commence
earlier than the applicable Principal Commencement
Date or Scheduled Payment Date, and the final
principal payment with respect to the Certificates
of a Series or Class may be made later than the
applicable expected payment date, Scheduled Payment
Date or other expected date, if a Pay Out Event
occurs and the Rapid Amortization Period commences
with respect to such Series or Class or under
certain other circumstances described herein. See
"Description of the Certificates--Principal
Payments."
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 or
deposited on or before 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, if any, with respect to such Series, and
(c) the Series Termination Date 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
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<PAGE>
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 or deposits with
respect 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 earlier
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.
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<PAGE>
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. 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 may be subject
to a principal 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
related 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 term
"Pay Out Event" with respect to a Series of
Certificates means any of the events identified as
such in the related Prospectus Supplement and any of
the following: (a) certain events of insolvency or
receivership relating to the Seller, (b) the Seller
is unable for any reason to transfer Receivables to
the Trust in accordance with the provisions of the
Agreement or (c) the Trust becomes an "investment
company" within the meaning of the Investment
Company Act of 1940, as amended. See "Description of
the Certificates--Pay Out Events" for a discussion
of the events which might lead to the 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 may be subject to a
principal 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
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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 Enhancement
Invested Amount or the Collateral Interest, if any,
with respect to such Series have been paid in full
and (b) the related 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, 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 subject to 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 or deposited with respect to the
Certificateholders of such Series or Class on or
before the Distribution Date in the month following
the commencement of the Rapid Amortization Period.
See "Description of the Certificates--Pay Out
Events" for a discussion of the events which might
lead to the commencement of a Rapid Amortization
Period.
SHARED EXCESS FINANCE
CHARGE COLLECTIONS..... Any Series offered hereby may be included in a group
of Series (a "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 within such Group or Class
thereof to cover any shortfalls with respect to
amounts payable from collections of Finance Charge
Receivables allocable to such Series or Class.
Unless otherwise provided in the related Prospectus
Supplement, with respect to any Series, "Excess
Finance Charge Collections" for any Monthly Period
will equal the excess of collections of Finance
Charge Receivables, annual membership fees 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
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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 Investor Percentage of
Principal 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), the accrued and
unpaid Investor Servicing Fees payable from
collections of Finance Charge Receivables, the
Investor Default Amount and any other 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. See "Description of the Certificates--
Application of Collections," "--Shared Excess
Finance Charge Collections," "--Defaulted
Receivables; Rebates and Fraudulent Charges;
Investor Charge-Offs" and "Credit Enhancement."
SHARED PRINCIPAL
COLLECTIONS............ If so specified in the related Prospectus Supplement,
to the extent that collections of Principal
Receivables 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 ("Shared Principal Collections")
will be applied to cover principal payments due to
or for the benefit of Certificateholders of another
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.
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"), the aggregate amount of Principal
Receivables in the Trust allocable to such Series
may be less than the aggregate principal amount of
the Certificates of such Series and that the amount
of such deficiency (the "Pre-Funding Amount") will
be held in a trust account established with the
Trustee for the benefit of Certificateholders of
such Series (the "Pre-Funding Account") pending the
transfer of additional Principal Receivables to the
Trust or pending the reduction of the Investor
Interests of other Series issued by the Trust. The
related Prospectus Supplement will specify the
initial Investor Interest on the Closing Date with
respect to such 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 delivered to
the Trust or as the Investor Interests of other
Series of the Trust are reduced. The Investor
Interest may also decrease due to Investor Charge-
Offs or the occurrence of a Pay Out Event and the
commencement of the Rapid Amortization Period, as
specified in the related Prospectus Supplement.
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During the Funding Period, funds on deposit in the
Pre-Funding Account for a Series of Certificates
will be withdrawn and paid to the Seller 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 and any additional amounts
specified in the related Prospectus Supplement will
be payable to the Certificateholders of such Series
in a manner and at such time as set forth in the
related Prospectus Supplement.
If so specified in the related Prospectus Supplement,
monies in the Pre-Funding Account with respect to
any Series will be invested by the Trustee in
Permitted Investments or will be subject to a
guaranteed rate or investment agreement or other
similar arrangement, and investment earnings and any
applicable payment under any such investment
arrangement will be applied to pay interest on the
Certificates of such Series.
CREDIT ENHANCEMENT...... Credit Enhancement with respect to a Series or any
Class thereof may be provided in the form or forms
of subordination, a letter of credit, a cash
collateral guaranty or account, a collateral
interest, a surety bond, an insurance policy, a
spread account, a reserve account or other form of
support as specified in the related Prospectus
Supplement. Credit Enhancement may also be provided
to a Class or Classes of different Series by a
cross-support feature which requires that
distributions of principal and/or interest be made
with respect to Certificates of one or more Classes
of a particular Series before distributions are made
to one or more Classes of another Series.
The type, characteristics and amount of the Credit
Enhancement will be determined based on several
factors, including the characteristics of the
Receivables and Accounts included in the Trust
Portfolio as of the Closing Date with respect to any
Series, and will be established on the basis of
requirements of each Rating Agency rating the
Certificates of such Series. If so specified in the
related Prospectus Supplement, any such Credit
Enhancement will apply only in the event of certain
types of losses and the protection against losses
provided by such Credit Enhancement will be limited.
The terms of the Credit Enhancement with respect to
a Series, and the conditions under which the Credit
Enhancement may be increased, reduced or replaced,
will be described in the related Prospectus
Supplement. See "Credit Enhancement" and "Risk
Factors--Certificate Rating."
OPTIONAL REPURCHASE..... With respect to each Series of Certificates, the
Investor Interest will be subject to optional
repurchase by the Seller on any Distribution Date
after the Investor Interest 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
Agreement are met. Unless otherwise specified in the
related
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Prospectus Supplement, the repurchase price will be
equal to the Investor Interest (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.
See "Description of the Certificates--Final Payment
of Principal; Termination."
TAX STATUS.............. Except to the extent otherwise specified in the
related Prospectus Supplement, Special Counsel to
the Seller is of the opinion that under existing law
the Certificates of each Series will be
characterized as debt for federal income tax
purposes. Except to the extent otherwise specified
in the related Prospectus Supplement, the
Certificate Owners will agree to treat the
Certificates as debt for federal, state and local
income and franchise tax purposes. See "Federal
Income Tax Consequences" for additional information
concerning the application of federal income tax
laws.
ERISA CONSIDERATIONS.... Subject to the considerations described below and
except to the extent otherwise specified in the
related Prospectus Supplement, the Seller
anticipates that each Class of Certificates will be
eligible for purchase by employee benefit plan
investors. Under a regulation issued by the
Department of Labor, the assets of the Trust would
not be deemed "plan assets" of an employee benefit
plan holding the Certificates of any Class if
certain conditions are met, including that the
Certificates of such Class must be held, upon
completion of the public offering being made hereby
and by the related Prospectus Supplement, by at
least 100 investors who are independent of the
Seller and of one another ("Independent Investors").
Except to the extent otherwise disclosed in the
related Prospectus Supplement, the Seller expects
that each Class of Certificates will be held by at
least 100 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 will be
met. The Seller anticipates that the other
conditions of the regulation will be met. If the
assets of the Trust were deemed to be "plan assets"
of an employee benefit plan investor (e.g., if the
100 Independent Investor criterion is not
satisfied), violation of the "prohibited
transaction" rules of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), could
result and generate excise tax and other liabilities
under ERISA and section 4975 of the Internal Revenue
Code of 1986, as amended (the "Code"), unless a
statutory, regulatory or administrative exemption is
available. It is uncertain whether existing
exemptions from the "prohibited transaction" rules
of ERISA would apply to all transactions involving
the Trust's assets if such assets were treated for
ERISA purposes as "plan assets" of employee benefit
plan investors. Accordingly, fiduciaries or other
persons contemplating purchasing Certificates or any
Class on behalf or with "plan assets" of any
employee benefit plan
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<PAGE>
should consult their counsel before making a
purchase. See "ERISA Considerations."
CERTIFICATE RATING...... It will be a condition to the issuance of the
certificates of each Series or Class thereof offered
pursuant to this Prospectus and the related
Prospectus Supplement that they be rated in one of
the four highest rating categories by at least one
nationally recognized rating organization (the
rating agency or agencies selected by the Seller to
rate any Series, the "Rating Agency"). The rating or
ratings applicable to the Certificates of each
Series or Class thereof offered hereby will be set
forth in the related Prospectus Supplement.
A rating is not a recommendation to buy, sell or hold
securities and may be subject to revision or
withdrawal at any time by the assigning Rating
Agency. Each rating should be evaluated
independently of any other rating. See "Risk
Factors--Certificate Rating."
LISTING................. If so specified in the Prospectus Supplement relating
to a Series, application will be made to list the
Certificates of such Series, or all or a portion of
any Class thereof, on the Luxembourg Stock Exchange
or any other specified exchange.
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RISK FACTORS
Potential investors should consider, among other things, the following risk
factors in connection with the purchase of the Certificates.
Limited Liquidity. It is anticipated that, to the extent permitted, the
underwriters of any Series of Certificates offered hereby will make a market
in such Certificates, but in no event will any such underwriter be under an
obligation to do so. There is no assurance that a secondary market will
develop with respect to the Certificates of any Series offered hereby, or if
it does develop, that it will provide Certificateholders with liquidity of
investment or that it will continue for the life of such Certificates.
Potential Priority of Certain Liens. While the Seller has transferred
interests in Receivables to the Trust, a court could treat any such
transaction as an assignment of collateral as security for the benefit of
holders of Certificates issued by the Trust. The Seller has represented and
warranted in the Agreement that the transfer of the Receivables to the Trust
is either a valid transfer and assignment of the Receivables to the Trust or
the grant to the Trust of a security interest in the Receivables. The Seller
has taken certain actions as are required to perfect the Trust's security
interest in the Receivables and will warrant that if the transfer to the Trust
is deemed to be a grant to the Trust of a security interest in the
Receivables, the Trustee will have a first priority perfected security
interest therein, and, with certain exceptions and for certain limited periods
of time provided for in the Uniform Commercial Code, in the proceeds thereof
(subject, in each case, to certain potential tax liens referred to under
"Description of the Certificates--Representations and Warranties").
Nevertheless, if the transfer of Receivables to the Trust is deemed to create
a security interest therein, a tax or government lien or other nonconsensual
lien on property of the Seller arising before Receivables come into existence
may have priority over the Trust's interest in such Receivables, and if the
FDIC were appointed conservator or receiver of the Seller, the conservator's
or receiver's administrative expenses may also have priority over the Trust's
interest in such Receivables. See "Certain Legal Aspects of the Receivables--
Transfer of Receivables."
Potential Effect of Insolvency or Bankruptcy of Seller or Other Holder of
Seller Certificate. To the extent that the Seller has granted or will grant a
security interest in Receivables to the Trust and that security interest is
validly perfected before the Seller's insolvency and was not or will not be
taken in contemplation of insolvency of the Seller, or with the intent to
hinder, delay or defraud the Seller or the creditors of the Seller, the
Federal Deposit Insurance Act ("FDIA"), as amended by the Financial
Institutions Reform, Recovery and Enforcement Act of 1989, as amended
("FIRREA"), provides that such security interest should not be subject to
avoidance by the FDIC, as conservator or receiver for the Seller. Positions
taken by the FDIC staff prior to the passage of FIRREA do not suggest that the
FDIC, as receiver or conservator for the Seller, would interfere with the
timely transfer to the Trust of payments collected on the Receivables. If,
however, the FDIC were to assert a contrary position, such as requiring the
Trustee to establish its right to those payments by submitting to and
completing the administrative claims procedure under the FDIA, or the
conservator or receiver were to request a stay of proceedings with respect to
the Seller as provided under the FDIA, delays in payments on the related
Series of Certificates and possible reductions in the amount of those payments
could occur. In addition, the FDIC, if appointed as conservator or receiver
for the Seller, has the power under the FDIA to repudiate contracts, including
secured contracts of the Seller. The FDIA provides that a claim for damages
arising from the repudiation of a contract is limited to "actual direct
compensatory damages". In the event the FDIC were to be appointed as
conservator or receiver of the Seller and were to repudiate the Agreement,
then the amount payable out of available collateral to the Certificateholders
could be lower than the outstanding principal and accrued interest on the
Certificates.
If a conservator or receiver were appointed for the Seller, then a Pay Out
Event could occur with respect to all Series then outstanding and, pursuant to
the Agreement, new Principal Receivables would not be transferred to the Trust
and the Trustee would sell the Receivables (unless otherwise instructed by
holders of more than 50% of the Investor Interest of each Series of
Certificates, or with respect to any Series with more than one Class, of each
Class, and any other Person specified in the Agreement or a Series
Supplement), thereby causing
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<PAGE>
early termination of the Trust and a loss to Certificateholders of a Series if
the net proceeds of such sale allocable to such Series were insufficient to
pay the Certificateholders of such Series in full. If a Pay Out Event occurs
involving either the insolvency of the Seller or the appointment of a
conservator or receiver for the Seller, the 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 or, if
applicable with respect to a Series as specified in the related Prospectus
Supplement, the Rapid Accumulation Period and may be able to require that new
Principal Receivables be transferred to the Trust. A conservator or receiver
may also have the power to cause the early sale of the Receivables and the
early retirement of the Certificates of each Series or to prohibit the
continued transfer of Principal Receivables to the Trust. In addition, in the
event of a Servicer Default relating to the conservatorship or receivership of
the Servicer, if no Servicer Default other than such conservatorship or
receivership exists, the conservator or receiver for the Servicer may have the
power to prevent either the Trustee or the Certificateholders from appointing
a successor Servicer under the Agreement. See "Certain Legal Aspects of the
Receivables--Certain Matters Relating to Receivership."
Seller's Ability to Change Terms of the Receivables and Possible Effects on
Certificateholders. Pursuant to the Agreement, the Seller does not transfer to
the Trust the Accounts but only the Receivables arising in the Accounts. As
owner of the Accounts, the Seller retains the right to determine the monthly
periodic finance charges and other fees which will be applicable from time to
time to the Accounts, to alter the minimum monthly payment required on the
Accounts and to change various other terms with respect to the Accounts,
including changing the annual percentage rate from a fixed rate to a variable
rate. A decrease in the monthly periodic finance charge and a reduction in
credit card or other fees would decrease the effective yield on the Accounts
and could result in the occurrence of a Pay Out Event with respect to each
Series and the commencement of the Rapid Amortization Period or, if so
specified in the related Prospectus Supplement, the Rapid Accumulation Period
with respect to each Series. Under the Agreement the Seller has agreed that,
except as otherwise required by law or as is deemed by the Seller to be
necessary in order to maintain its credit card business, based upon a good
faith assessment by it, in its sole discretion, of the nature of the
competition in that business, the Seller will not reduce the annual percentage
rate of the monthly periodic finance charges assessed on the Receivables or
other fees on the Accounts if, as a result of such reduction, the Portfolio
Yield for any Series as of such date would be less than the Base Rate for such
Series. The terms "Portfolio Yield" and "Base Rate" for each Series will have
the meanings set forth in the Prospectus Supplement relating to each Series.
In addition, the Agreement provides that the Seller may change the terms of
the contracts relating to the Accounts or its policies and procedures with
respect to the servicing thereof (including without limitation the reduction
of the required minimum monthly payment and the calculation of the amount or
the timing of finance charges, credit card fees, and charge offs), if such
change (i) would not, in the reasonable belief of the Seller, cause a Pay Out
Event for any related Series to occur, and (ii) is made applicable to the
comparable segment of revolving credit card accounts owned and serviced by the
Seller which have characteristics the same as or substantially similar to the
Accounts which are subject to such change. In servicing the Accounts, the
Servicer will be required to exercise the same care and apply the same
policies that it exercises in handling similar matters for its own comparable
accounts. Except as specified above or in any Prospectus Supplement, there
will be no restrictions on the Seller's ability to change the terms of the
Accounts. There can be no assurance that changes in applicable law, changes in
the marketplace or prudent business practice might not result in a
determination by the Seller to take actions which would change this or other
Account terms.
Effects of Consumer Protection Laws on Certificateholders. Federal and state
consumer protection laws impose requirements on the making and enforcement of
consumer loans. Congress and the states may enact new laws and amendments to
existing laws to regulate further the credit card and consumer credit industry
or to reduce finance charges or other fees or charges applicable to credit
card accounts. Such laws, as well as any new laws or rulings which may be
adopted, may adversely affect the Servicer's ability to collect on the
Receivables or maintain previous levels of monthly periodic finance charges
and other credit card fees. One effect of any legislation which regulates the
amount of interest and other charges that may be assessed on credit card
account balances would be to reduce the Portfolio Yield on the Accounts. If
such legislation were to result in a significant reduction in the Portfolio
Yield, a Pay Out Event could occur, in which case the Rapid Amortization
Period or,
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if so specified in the related Prospectus Supplement, the Rapid Accumulation
Period would commence. See "Description of the Certificates--Pay Out Events."
Pursuant to the Agreement, the Seller will covenant to accept reassignment,
subject to certain conditions described under "Description of the
Certificates--Representations and Warranties," of each Receivable that does
not comply in all material respects with all requirements of applicable law.
The Seller will make certain other representations and warranties relating to
the validity and enforceability of the Receivables. However, it is not
anticipated that the Trustee will make any examination of the Receivables or
the records relating thereto for the purpose of establishing the presence or
absence of defects, compliance with such representations and warranties, or
for any other purpose. The sole remedy if any such representation or warranty
is breached and such breach continues beyond the applicable cure period is
that the Seller will be obligated to accept reassignment, subject to certain
conditions described under "Description of the Certificates--Representations
and Warranties," of the Receivables affected thereby. See "Description of the
Certificates--Representations and Warranties" and "Certain Legal Aspects of
the Receivables--Consumer Protection Laws."
Application of federal and state bankruptcy and debtor relief laws would
affect the interests of the Certificateholders in the Receivables if such laws
result in any Receivables being written off as uncollectible when there are no
funds available from any Credit Enhancement or other sources. See "Description
of the Certificates--Defaulted Receivables; Rebates and Fraudulent Charges;
Investor Charge-Offs."
Effects of Competition in the Credit Card Industry. The credit card industry
is highly competitive. As new credit card issuers enter the market and all
issuers seek to expand their share of the market, there is increased use of
advertising, target marketing and pricing competition. The Trust will be
dependent upon the Seller's continued ability to generate new Receivables. If
the rate at which new Receivables are generated declines significantly and the
Seller is unable to designate Additional Accounts to the Trust, a Pay Out
Event could occur with respect to each Series, in which case the Rapid
Amortization Period or, if so specified in the related Prospectus Supplement,
the Rapid Accumulation Period with respect to each Series would commence.
Timing of Principal Payments Other Than at Expected Maturity. The
Receivables may be paid at any time and there is no assurance that there will
be additional Receivables created in the Accounts or that any particular
pattern of cardholder repayments will occur. The commencement and continuation
of a Controlled Amortization Period, a Principal Amortization Period or a
Controlled Accumulation Period for a Series or Class thereof will be dependent
upon the continued generation of new Receivables to be conveyed to the Trust.
A significant decline in the amount of Receivables generated could result in
the occurrence of a Pay Out Event for one or more Series and the commencement
of the Rapid Amortization Period or, if so specified in the related Prospectus
Supplement, the Rapid Accumulation Period for each such Series.
Certificateholders should be aware that the Seller's ability to continue to
compete in the current industry environment will affect the Seller's ability
to generate new Receivables to be conveyed to the Trust and may also affect
payment patterns. In addition, changes in periodic finance charges can alter
the monthly payment rates of cardholders. A significant decrease in such
monthly payment rate could slow the return or accumulation of principal during
an Amortization Period or Accumulation Period. See "Maturity Assumptions."
In addition, if a Series utilizes a Pre-Funding Account, the
Certificateholders of such Series may receive principal payments on their
Certificates sooner than anticipated, potentially reducing the anticipated
yield on such Certificates, if amounts on deposit in the Pre-Funding Account
are not fully invested (to the extent of the Full Investor Interest for such
Series) in Receivables prior to the termination of the Funding Period. See
"Description of the Certificates--Funding Period."
Effect of Subordination on Subordinated Certificateholders. With respect to
Certificates of a Series having a Class or Classes of Subordinated
Certificates, unless otherwise specified in the related Prospectus Supplement,
payments of principal in respect of the Subordinated Certificates of a Series
will not commence until after the final principal payment with respect to the
Senior Certificates of such Series. In addition, if so specified in the
related Prospectus Supplement, if collections of Finance Charge Receivables
allocable to the Certificates of a
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Series are insufficient to cover required amounts due with respect to the
Senior Certificates of such Series, the Investor Interest with respect to the
Subordinated Certificates will be reduced, resulting in a reduction of the
portion of collections of Finance Charge Receivables allocable to the
Subordinated Certificates in future periods and a possible delay or reduction
in principal and interest payments on the Subordinated Certificates. Moreover,
if so specified in the related Prospectus Supplement, in the event of a sale
of Receivables in the Trust due to the insolvency of the Seller or the
appointment of a conservator or receiver for the Seller, or due to the
inability of the Trustee to act as or find a successor Servicer after a
Servicer Default, the portion of the net proceeds of such sale allocable to
pay principal to the Certificates of a Series will be used first to pay
amounts due to the Senior Certificateholders and any remainder will be used to
pay amounts due to the Subordinated Certificateholders.
Limited Scope of Certificate Rating. Any rating assigned to the Certificates
of a Series or a Class by a Rating Agency will reflect such Rating Agency's
assessment of the likelihood that Certificateholders of such Series or Class
will receive the payments of interest and principal required to be made under
the Agreement and will be based primarily on the value of the Receivables in
the Trust and the availability of any Enhancement with respect to such Series
or Class. However, any such rating will not, unless otherwise specified in the
related Prospectus Supplement with respect to any Class or Series offered
hereby, address the likelihood that the principal of, or interest on, any
Certificates of such Class or Series will be paid on a scheduled date. In
addition, any such rating will not address the possibility of the occurrence
of a Pay Out Event with respect to such Class or Series or the possibility of
the imposition of United States withholding tax with respect to non-U.S.
Certificateholders. The rating will not be a recommendation to purchase, hold
or sell Certificates of such Series or Class, and such rating will not comment
as to the marketability of such Certificates, any market price or suitability
for a particular investor. There is no assurance that any rating will remain
for any given period of time or that any rating will not be lowered or
withdrawn entirely by a Rating Agency if in such Rating Agency's judgment
circumstances so warrant.
The Seller will request a rating of the Certificates offered hereby of each
Series by at least one Rating Agency. There can be no assurance as to whether
any rating agency not requested to rate the Certificates will nonetheless
issue a rating with respect to any Series of Certificates or Class thereof,
and, if so, what such rating would be. A rating assigned to any Series of
Certificates or Class thereof by a rating agency that has not been requested
by the Seller to do so may be lower than the rating assigned by a Rating
Agency pursuant to the Seller's request.
Limited Credit Enhancement. Although Credit Enhancement may be provided with
respect to a Series of Certificates or any Class thereof, the amount available
will be limited and will be subject to certain reductions as described in the
related Prospectus Supplement. If the amount available under any Credit
Enhancement is reduced to zero, Certificateholders of the Series or Class
thereof covered by such Credit Enhancement will bear directly the credit and
other risks associated with their undivided interest in the Trust. See "Credit
Enhancement."
Basis Risk. If so specified in the related Prospectus Supplement, a portion
of the Accounts will have finance charges set at a variable rate above a
designated prime rate or other designated index. A Series of Certificates may
bear interest at a fixed rate or at a floating rate based on an index other
than such prime rate or other designated index. If there is a decline in such
prime rate or other designated index, the amount of collections of Finance
Charge Receivables on such Accounts may be reduced, whereas the amounts
payable as Monthly Interest on such Series of Certificates and other amounts
required to be funded out of collections of Finance Charge Receivables with
respect to such Series may not be similarly reduced.
Effects to Certificateholders of Master Trust Considerations. The Trust, as
a master trust, has issued Series of Certificates prior to the date of this
Prospectus and is expected to issue additional Series from time to time. While
the Principal Terms of any Series will be specified in a Series Supplement,
the provisions of a Series Supplement and, therefore, the terms of any
additional Series, will not be subject to the prior review by or consent of,
holders of the Certificates of any previously issued Series. Such Principal
Terms may include methods for determining applicable investor percentages and
allocating collections, provisions creating different
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or additional security or other Credit Enhancement, provisions subordinating
such Series to another Series or other Series (if the Series Supplement
relating to such Series so permits) to such Series, and any other amendment or
supplement to the Agreement which is made applicable only to such Series. It
is a condition precedent to the issuance of any additional Series by the Trust
that each Rating Agency that has rated any outstanding Series deliver written
confirmation to the Trustee that the Exchange will not result in such Rating
Agency reducing or withdrawing its rating on any outstanding Series. There can
be no assurance, however, that the Principal Terms of any other Series,
including any Series issued from time to time hereafter, might not have an
impact on the timing and amount of payments received by a Certificateholder of
any other Series. See "Description of the Certificates--Exchanges."
Effect of Addition of Trust Assets on Credit Quality. The Seller expects,
and in some cases will be obligated, to designate Additional Accounts, the
Receivables in which will be conveyed to the Trust. Such Additional Accounts
may include accounts originated using criteria different from those which were
applied to the Accounts designated on the Cut-Off Date or to previously-
designated Additional Accounts, because such accounts were originated at a
different date or were acquired from another institution. Consequently, there
can be no assurance that Additional Accounts designated in the future will be
of the same credit quality as previously-designated Accounts. In addition, the
Agreement provides that the Seller may add Participations to the Trust. The
designation of Additional Accounts and Participations will be subject to the
satisfaction of certain conditions described herein under "Description of the
Certificates--Addition of Trust Assets."
Certificateholders Have Limited Control of Actions Under Agreement. Subject
to certain exceptions, the Certificateholders of each Series may take certain
actions, or direct certain actions to be taken, under the Agreement or the
related Series Supplement. However, the Agreement or related Series Supplement
may provide that under certain circumstances the consent or approval of a
specified percentage of the aggregate Investor Interest of other Series or of
the Investor Interest of a specified Class of such other Series will be
required to direct certain actions, including requiring the appointment of a
successor Servicer following a Servicer Default, amending the related
Agreement in certain circumstances and directing a repurchase of all
outstanding Series upon the breach of certain representations and warranties
by the Seller. Certificateholders of such other Series may have interests
which do not coincide in any way with the interests of Certificateholders of
the subject Series. In such instances, it may be difficult for the
Certificateholders of such Series to achieve the results from the vote that
they desire.
Risks Presented by Social, Technological, Legal and Economic
Factors. Changes in use of credit and payment patterns by customers may result
from a variety of social, technological, legal and economic factors. Economic
factors include the rate of inflation, unemployment levels and relative
interest rates. Cardholders whose accounts are included in the Bank Portfolio
have addresses in all 50 states and the District of Columbia or other United
States territories and possessions. The Seller, however, is unable to
determine and has no basis to predict whether, or to what extent, social,
technological, legal or economic factors will affect future use of credit or
repayment patterns.
Effects of Book-Entry Registration. Unless otherwise specified in the
related Prospectus Supplement, the Certificates of each Series initially will
be represented by one or more Certificates registered in the name of Cede, the
nominee for DTC, and will not be registered in the names of the Certificate
Owners or their nominees. Unless and until Definitive Certificates are issued
for a Series, Certificate Owners relating to such Series will not be
recognized by the Trustee as Certificateholders, as that term will be used in
the Agreement. Hence, until such time, Certificate Owners will only be able to
exercise the rights of Certificateholders indirectly through DTC, CEDEL or
Euroclear and their participating organizations. See "Description of the
Certificates--Book-Entry Registration" and "--Definitive Certificates."
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THE TRUST
The Trust has been formed in accordance with the laws of the State of
Delaware pursuant to the Agreement. The Trust will not engage in any business
activity other than acquiring and holding Receivables, issuing Series of
Certificates and the related Seller Certificate, making payments thereon and
engaging in related activities (including, with respect to any Series,
obtaining any Enhancement and entering into an Enhancement agreement relating
thereto). As a consequence, the Trust is not expected to have any need for
additional capital resources other than the assets of the Trust.
MBNA'S CREDIT CARD ACTIVITIES
GENERAL
With respect to each Series of Certificates, the Receivables conveyed or to
be conveyed to the Trust by MBNA pursuant to the Agreement have been or will
be generated from transactions made by holders of selected MasterCard and VISA
credit card accounts, including premium accounts and standard accounts, from
the Bank Portfolio. Generally, both premium and standard accounts undergo the
same credit analysis, but premium accounts carry higher credit limits and
offer a wider variety of services to the cardholders. MBNA 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 MBNA by
MBNA Hallmark Information Services, Inc. ("MBNA Hallmark"). See "--Description
of MBNA Hallmark." MBNA Hallmark is a wholly-owned subsidiary of MBNA.
ACQUISITION AND USE OF CREDIT CARD ACCOUNTS
MBNA primarily relies on affinity marketing in the acquisition of new credit
card accounts. Affinity marketing involves the solicitation of prospective
cardholders from identifiable groups with a common interest or a common cause.
Affinity marketing is conducted through two approaches: the first relies on
the solicitation of members of organized membership groups with the
endorsement of such group's leadership, and the second utilizes direct
solicitation of purchased list prospects. MBNA also relies on targeted direct
response marketing in the acquisition of new accounts.
Credit applications that are approved are reviewed individually by a credit
analyst, who approves the application and assigns a credit line based on a
review of the potential customer's financial history and capacity to repay.
Credit analysts review credit reports obtained through an independent credit
reporting agency, and use a delinquency probability model to assist them in
reaching a credit decision for each applicant. Credit analysts also review and
verify other information, such as employment and income, when necessary to
make a credit decision. Further levels of review are automatically triggered,
depending upon the levels of risk indicated by the delinquency probability
model. Credit analysts review applications obtained through pre-approved
offers to ensure adherence to credit standards and that the appropriate credit
limit is assigned. MBNA's Loan Review Department independently reviews
selected applications to ensure quality and consistency. Less than half of all
credit applications are approved.
Credit card accounts that have been purchased by the Seller were originally
opened using criteria established by institutions other than MBNA and may not
have been subject to the same level of credit review as accounts established
by MBNA. It is expected that portfolios of credit card accounts purchased by
the Seller from other credit card issuers will be added to the Trust from time
to time.
Each cardholder is subject to an agreement with MBNA governing the terms and
conditions of the related MasterCard or VISA account. Pursuant to each such
agreement, MBNA reserves the right, upon advance notice to the cardholder, 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 MBNA may apply such changes, when
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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 MBNA 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. Cardholders may use special cash advance checks issued by MBNA to
draw against their MasterCard or VISA credit lines. Cardholders may draw
against their MBNA credit lines by transferring balances owed to other
creditors to their MBNA accounts.
DESCRIPTION OF MBNA HALLMARK
Credit card processing services performed by MBNA Hallmark include data
processing, payment processing, statement rendering, card production and
network services. MBNA Hallmark's data network provides an interface to
MasterCard International Inc. and VISA U.S.A., Inc. for performing
authorizations and funds transfers. Most data processing and network functions
are performed at MBNA Hallmark's facility in Addison, Texas.
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.
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
Seller may be required, as described in the related Prospectus Supplement, to
transfer to the 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 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 to the Servicer.
THE RECEIVABLES
The Receivables conveyed to the Trust will arise in Accounts selected from
the Bank Portfolio on the basis of criteria set forth in the Agreement as
applied on the Cut-Off Date and, with respect to Additional Accounts, as of
the date of their designation (the "Trust Portfolio"). The Seller will have
the right (subject to certain limitations and conditions set forth therein),
and in some circumstances will be obligated, to designate from time to time
Additional Accounts and to transfer to the Trust all Receivables of such
Additional Accounts, whether such Receivables are then existing or thereafter
created, or to transfer to such Trust Participations in lieu of such
Receivables or in addition thereto. Any Additional Accounts designated
pursuant to the Agreement must be Eligible Accounts as of the date the Seller
designates such accounts as Additional Accounts. Furthermore, pursuant to the
Agreement, the Seller 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 Removed Accounts to the
Seller, whether such Receivables are then existing or thereafter created.
Throughout the term of the Trust, the Accounts from which the Receivables
arise will be the Accounts designated by the Seller on the Cut-Off Date plus
any Additional Accounts minus any Removed Accounts. With respect to each
Series of Certificates, the Seller will represent and warrant to the Trust
that, as of the Closing Date and the date Receivables are conveyed to the
Trust, such Receivables meet certain eligibility requirements. See
"Description of the Certificates--Representations and Warranties."
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The Prospectus Supplement relating to each Series of Certificates will
provide certain information about the 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 ASSUMPTIONS
Unless otherwise specified in the related Prospectus Supplement, for each
Series, following the Revolving Period, 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 during the
Controlled Amortization Period or the Principal Amortization Period, 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 will specify 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.
No assurance can be given, however, that the Principal Receivables allocated
to be paid to Certificateholders or the holders of any specified Class thereof
will be available for distribution or accumulation for payment to
Certificateholders on each Distribution Date during the Controlled
Amortization Period, the Principal Amortization Period or an Accumulation
Period, or on the Scheduled Payment Date, as applicable. In addition, the
Seller can give no assurance that the payment rate assumptions for any Series
will prove to be correct. The related Prospectus Supplement will provide
certain historical data relating to payments by cardholders, total charge-offs
and other related information relating to the Bank Portfolio. There can be no
assurance that future events will be consistent with such historical data.
The amount of collections of Receivables may vary from month to month due to
seasonal variations, general economic conditions and payment habits of
individual cardholders. There can be no assurance that collections of
Principal Receivables with respect to the Trust Portfolio, and thus the rate
at which the related Certificateholders could expect to receive or accumulate
payments of principal on their Certificates during an Amortization Period or
Accumulation Period, or on any Scheduled Payment Date, as applicable, will be
similar to any historical experience set forth in a related Prospectus
Supplement. If a Pay Out Event occurs and the Rapid Amortization Period
commences, the average life and maturity of such Series of Certificates could
be significantly reduced.
Because, for any Series of Certificates, there may be a slowdown in the
payment rate below the payment rate used to determine the amount of
collections of Principal Receivables scheduled or available to be distributed
or accumulated for later payment to Certificateholders or any specified Class
thereof during an Amortization Period or an Accumulation Period or on any
Scheduled Payment Date, as applicable, or a Pay Out Event may occur which
could initiate the Rapid Amortization Period, there can be no assurance that
the actual number of months elapsed from the date of issuance of such Series
of Certificates to the final Distribution Date with respect to the
Certificates will equal the expected number of months.
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USE OF PROCEEDS
The net proceeds from the sale of each Series of Certificates offered hereby
will be paid to the Seller. The Seller will use such proceeds for its general
corporate purposes.
MBNA AND MBNA CORPORATION
MBNA America Bank, National Association, a national banking association
located in Wilmington, Delaware, conducts nationwide consumer lending programs
principally comprised of credit card related activities. MBNA is a wholly-
owned subsidiary of the Corporation. MBNA was organized in January 1991 as the
successor of a national bank formed in 1982. The Corporation is a bank holding
company organized under the laws of Maryland on December 6, 1990 and
registered under the Bank Holding Company Act of 1956, as amended. The
Prospectus Supplement for each Series of Certificates will provide additional
information, including financial information, relating to MBNA, MBNA's credit
card activities and the Corporation.
DESCRIPTION OF THE CERTIFICATES
The Certificates will be issued in Series. Each Series will represent an
interest in the Trust other than the interests represented by any other Series
of Certificates issued by the Trust (which may include Series offered pursuant
to this Prospectus) and the Seller Certificate. Each Series will be issued
pursuant to the Agreement entered into by MBNA and the Trustee named in the
related Prospectus Supplement and a Series Supplement to the Agreement, a copy
of the form of which is filed as an exhibit to the Registration Statement of
which this Prospectus is a part. The Prospectus Supplement for each Series
will describe any provisions of the 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 Agreement and the related Series Supplement.
GENERAL
The Certificates of each Series will represent undivided interests in
certain assets of the Trust, including the right to the applicable Investor
Percentage of all cardholder payments on the Receivables in the Trust. For
each Series of Certificates, unless otherwise specified in the related
Prospectus Supplement, the Investor Interest 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 may consist of one or more Classes, one or more
of which may be Senior Certificates and one or more of which may be
Subordinated Certificates. Each Class of a Series will evidence the right to
receive a specified portion of each distribution of principal or interest or
both. The Investor Interest with respect to a Series with more than one Class
will be allocated among the Classes as described in the related Prospectus
Supplement. The Certificates of a Class may differ from Certificates of other
Classes of the same Series in, among other things, the amounts allocated to
principal payments, maturity date, Certificate Rate and the availability of
Enhancement.
For each Series of Certificates, payments and deposits of interest and
principal will be made on Distribution Dates to Certificateholders in whose
names the Certificates were registered on the record dates specified in the
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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 Seller initially will own the Seller
Certificate. The Seller Certificate will represent the undivided interest in
the Trust not represented by the Certificates issued and outstanding under the
Trust or the rights, if any, of any Credit Enhancement Providers to receive
payments from the Trust. The holder of the Seller Certificate will have the
right to a percentage (the "Seller Percentage") of all cardholder payments
from the Receivables in the Trust. If provided in the Agreement and the
related Prospectus Supplement, the Seller Certificate may be transferred in
whole or in part subject to certain limitations and conditions set forth
therein. See "--Certain Matters Regarding the Seller and the Servicer."
Unless otherwise specified in the related Prospectus Supplement, with
respect to each Series of Certificates, during the Revolving Period, the
amount of the Investor Interest in the Trust will remain constant except under
certain limited circumstances. See "--Defaulted Receivables; Rebates and
Fraudulent Charges; Investor Charge-Offs." The amount of Principal Receivables
in the Trust, however, will vary each day as new Principal Receivables are
created and others are paid. The amount of the Seller Interest will fluctuate
each day, therefore, to reflect the changes in the amount of the Principal
Receivables in the Trust. 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 Seller Interest 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
Trust. The Seller Interest 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 Seller, 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 Seller 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
its Participants (as defined below), and all references herein to
distributions, notices, reports and statements to Certificateholders shall
refer to distributions, notices, reports and statements to DTC or Cede, as the
registered holder of the Certificates, as the case may be, for distribution to
Certificate Owners in accordance with DTC procedures. See "--Book-Entry
Registration" and "--Definitive Certificates."
If so specified in the Prospectus Supplement relating to a Series,
application will be made to list the Certificates of such Series, or all or a
portion of any Class thereof, on the Luxembourg Stock Exchange or any other
specified exchange.
BOOK-ENTRY REGISTRATION
Unless otherwise specified in the related Prospectus Supplement, with
respect to each Series of Certificates, Certificateholders may hold their
Certificates through DTC (in the United States) or CEDEL or Euroclear (in
Europe) if they are participants of such systems, or indirectly through
organizations that are participants in such systems.
Cede, as nominee for DTC, will hold the global Certificates. CEDEL and
Euroclear will hold omnibus positions on behalf of the CEDEL Participants and
the Euroclear Participants, respectively, through customers' securities
accounts in CEDEL's and Euroclear's names on the books of their respective
depositaries (collectively, the "Depositaries") which in turn will hold such
positions in customers' securities accounts in the Depositaries' names on the
books of DTC.
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DTC is a limited-purpose trust company organized under the laws of the State
of New York, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commercial Code, and a "clearing
agency" registered pursuant to the provisions of Section 17A of the Exchange
Act. DTC was created to hold securities for its participating organizations
("Participants") and facilitate the clearance and settlement of securities
transactions between Participants through electronic book-entry changes in
accounts of Participants, thereby eliminating the need for physical movement
of certificates. Participants include securities brokers and dealers (who may
include the underwriters of any Series), banks, trust companies and clearing
corporations and may include certain other organizations. Indirect access to
the DTC system also is available to others such as banks, brokers, dealers and
trust companies that clear through or maintain a custodial relationship with a
Participant, either directly or indirectly (the "Indirect Participants").
Transfers between Participants will occur in accordance with DTC rules.
Transfers between CEDEL Participants and Euroclear Participants will occur in
the ordinary way in accordance with their applicable rules and operating
procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly or indirectly through CEDEL
Participants or Euroclear Participants, on the other, will be effected in DTC
in accordance with DTC rules on behalf of the relevant European international
clearing system by its Depositary; however, such cross-market transactions
will require delivery of instructions to the relevant European international
clearing system by the counterparty in such system in accordance with its
rules and procedures and within its established deadlines (European time). The
relevant European international clearing system will, if the transaction meets
its settlement requirements, deliver instructions to its Depositary to take
action to effect final settlement on its behalf by delivering or receiving
securities in DTC, and making or receiving payment in accordance with normal
procedures for same-day funds settlement applicable to DTC. CEDEL Participants
and Euroclear Participants may not deliver instructions directly to the
Depositaries.
Because of time-zone differences, credits of securities in CEDEL or
Euroclear as a result of a transaction with a Participant will be made during
the subsequent securities settlement processing, dated the business day
following the DTC settlement date, and such credits or any transactions in
such securities settled during such processing will be reported to the
relevant CEDEL Participant or Euroclear Participant on such business day. Cash
received in CEDEL or Euroclear as a result of sales of securities by or
through a CEDEL Participant or a Euroclear Participant to a DTC Participant
will be received with value on the DTC settlement date but will be available
in the relevant CEDEL or Euroclear cash account only as of the business day
following settlement in DTC.
Certificate Owners that are not Participants or Indirect Participants but
desire to purchase, sell or otherwise transfer ownership of, or other interest
in, Certificates may do so only through Participants and Indirect
Participants. In addition, Certificate Owners will receive all distributions
of principal of and interest on the Certificates from the Trustee through the
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 its Participants which
thereafter will forward them to Indirect Participants or Certificate Owners.
It is anticipated that the only "Certificateholder" 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 the 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
Participants on whose behalf it acts with respect to the Certificates and is
required to receive and transmit distributions of principal and interest on
the Certificates. 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.
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Because DTC can only act on behalf of 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 Seller that it will take any action permitted to be
taken by a Certificateholder under the Agreement only at the direction of one
or more Participants to whose account with DTC the Certificates are credited.
Additionally, DTC has advised the Seller that it will take such actions with
respect to specified percentages of the Investor Interest only at the
direction of and on behalf of 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 Participants whose holdings include such
undivided interests.
Cedel Bank, societe anonyme ("CEDEL") is incorporated under the laws of
Luxembourg as a professional depository. CEDEL holds securities for its
participating organizations ("CEDEL Participants") and facilitates the
clearance and settlement of securities transactions between CEDEL Participants
through electronic book-entry changes in accounts of CEDEL Participants,
thereby eliminating the need for physical movement of certificates.
Transactions may be settled in CEDEL in any of 28 currencies, including United
States dollars. CEDEL provides to its CEDEL Participants, among other things,
services for safekeeping, administration, clearance and settlement of
internationally traded securities and securities lending and borrowing. CEDEL
interfaces with domestic markets in several countries. As a professional
depository, CEDEL is subject to regulation by the Luxembourg Monetary
Institute. CEDEL Participants are recognized financial institutions around the
world, including underwriters, securities brokers and dealers, banks, trust
companies, clearing corporations and certain other organizations and may
include the underwriters of any Series of Certificates. Indirect access to
CEDEL is also available to others, such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a CEDEL
Participant, either directly or indirectly.
The Euroclear System was created in 1968 to hold securities for participants
of the Euroclear System ("Euroclear Participants") and to clear and settle
transactions between Euroclear Participants through simultaneous electronic
book-entry delivery against payment, thereby eliminating the need for physical
movement of certificates and any risk from lack of simultaneous transfers of
securities and cash. Transactions may now be settled in any of 27 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, Brussels, Belgium
office (the "Euroclear Operator" or "Euroclear"), under contract with Euro-
clear 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,
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and receipts of payments with respect to securities in the Euroclear System.
All securities in the Euroclear System are held on a fungible basis without
attribution of specific certificates to specific securities clearance
accounts. The Euroclear Operator acts under the Terms and Conditions only on
behalf of Euroclear Participants and has no record of or relationship with
persons holding through Euroclear Participants.
Distributions with respect to Certificates held through CEDEL or Euroclear
will be credited to the cash accounts of CEDEL Participants or Euroclear
Participants in accordance with the relevant system's rules and procedures, to
the extent received by its Depositary. Such distributions will be subject to
tax reporting in accordance with relevant United States tax laws and
regulations. See "Federal Income Tax Consequences." CEDEL 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 CEDEL Participant or
Euroclear Participant only in accordance with its relevant rules and
procedures and subject to its Depositary's ability to effect such actions on
its behalf through DTC.
Although DTC, CEDEL and Euroclear have agreed to the foregoing procedures in
order to facilitate transfers of Certificates among participants of DTC, CEDEL
and Euroclear, they are under no obligation to perform or continue to perform
such procedures and such procedures may be discontinued at any time.
DEFINITIVE CERTIFICATES
Unless otherwise specified in the related Prospectus Supplement, the
Certificates of each Series will be issued as Definitive Certificates in fully
registered, certificated form to Certificate Owners or their nominees rather
than to DTC or its nominee, only if (i) the Seller 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 Seller is unable to locate a qualified
successor, (ii) the Seller, 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
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 Participants of the
availability through DTC of Definitive Certificates. Upon surrender by DTC of
the definitive certificate representing the Certificates and instructions for
re-registration, 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. The final payment on any Certificate (whether Definitive
Certificates or the Certificates registered in the name of Cede representing
the Certificates), however, will be made only upon presentation and surrender
of such Certificate at the office or agency specified in the notice of final
distribution to Certificateholders. The Trustee will provide such notice to
registered Certificateholders not later than the fifth day of the month of
such final distributions.
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.
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INTEREST PAYMENTS
For each Series of Certificates and Class thereof, interest will accrue from
the relevant Closing Date 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 or deposited with respect to Certificateholders on the
Distribution Dates. Interest payments or deposits on any Distribution Date
will be funded from collections of Finance Charge Receivables allocated to the
Investor Interest during the preceding Monthly Period or Periods and may be
funded from certain investment earnings on funds held in accounts of the Trust
and, from any applicable Credit Enhancement, if necessary, or certain other
amounts as specified in the related Prospectus Supplement. If the Distribution
Dates for payment or deposit 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 and each Class thereof will
describe the amounts and sources of interest payments to be made, the
Certificate Rate, and, 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.
PRINCIPAL PAYMENTS
Unless otherwise specified in the related Prospectus Supplement, during the
Revolving Period for each Series of Certificates (which begins on the Closing
Date relating to such Series 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, and during the Rapid Amortization Period, which
will begin upon the occurrence of a Pay Out Event or, if so specified in the
related Prospectus Supplement, the Rapid Accumulation Period, principal will
be paid to the Certificateholders in the amounts and on the 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 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 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 will describe 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 guaranteed 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
guaranty or other similar arrangement specified in the related Prospectus
Supplement.
TRANSFER AND ASSIGNMENT OF RECEIVABLES
The Seller has transferred and assigned all of its right, title and interest
in and to the Receivables in the Accounts and all Receivables thereafter
created in the Accounts.
In connection with each previous transfer of the Receivables to the Trust,
the Seller indicated, and in connection with each subsequent transfer of
Receivables to the Trust, the Seller will indicate, in its computer
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files that the Receivables have been conveyed to the Trust. In addition, the
Seller has provided to the Trustee computer files or microfiche lists,
containing a true and complete list showing each Account, identified by
account number and by total outstanding balance on the date of transfer. The
Seller will not deliver to the 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
Seller or the Servicer are not and will not be segregated by the Seller 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 the Trust, but the computer records
of the Seller are and will be required to be marked to evidence such transfer.
The Seller has filed Uniform Commercial Code financing statements with respect
to the Receivables meeting the requirements of Delaware state law. See "Risk
Factors--Transfer of Receivables" and "Certain Legal Aspects of the
Receivables."
EXCHANGES
For each Series of Certificates, the Agreement will provide for the Trustee
to issue two types of certificates: (i) one or more Series of Certificates
which are transferable and have the characteristics described below and (ii)
the Seller Certificate, a certificate which evidences the Seller Interest,
which initially will be held by the Seller and will be transferable only as
provided in the Agreement. The related Prospectus Supplement may also provide
that, pursuant to any one or more Series Supplements, the holder of the Seller
Certificate may tender such Seller Certificate, or the Seller Certificate and
the Certificates evidencing any Series of Certificates issued by the Trust, to
the Trustee in exchange for one or more new Series (which may include Series
offered pursuant to this Prospectus) and a reissued Seller Certificate.
Pursuant to the Agreement, the holder of the Seller 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
Seller, the Servicer, the Trustee or the Trust will be required or will intend
to obtain the consent of any Certificateholder of any other Series previously
issued by the Trust. However, as a condition of an Exchange, the holder of the
Seller 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 Seller may offer any Series under
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.
Unless otherwise specified in the related Prospectus Supplement, the holder
of the Seller Certificate may perform Exchanges and define Principal Terms
such that each Series issued under the 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 Agreement, the Trustee shall hold any such form
of Credit Enhancement only on behalf of the Series with respect to which it
relates. Likewise, with respect to each such form of Credit Enhancement, the
holder of the Seller Certificate may deliver a different form of Credit
Enhancement agreement. The holder of the Seller 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 Seller
Certificate will also have the option under the Agreement to vary between
Series the terms upon which a Series (or a particular Class within such
Series) may be repurchased by the Seller or remarketed to other investors.
Additionally, certain Series may be subordinated to other Series, or Classes
within a Series may have different priorities. There will be no limit to the
number of Exchanges that may be performed under the Agreement.
Unless otherwise specified in the related Prospectus Supplement, an Exchange
may only occur upon the satisfaction of certain conditions provided in the
Agreement. Under the Agreement, the holder of the Seller Certificate may
perform an Exchange by notifying the Trustee at least three days in advance of
the date upon which the Exchange is to occur. Under the Agreement, the notice
will state the designation of any Series to be
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issued on the date of the Exchange and, with respect to each such Series: (i)
its initial principal amount (or method for calculating such amount) which
amount may not be greater than the current principal amount of the Seller
Certificate, (ii) its certificate rate (or method of calculating such rate)
and (iii) the provider of Credit Enhancement, if any, which is expected to
provide support with respect to it. The 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, (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) 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 with respect thereto executed by the Seller 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 Seller to the effect that after giving effect to
the Exchange the Seller would not be required to add Additional Accounts
pursuant to the Agreement and the Seller Interest would be at least equal to
the Minimum Seller Interest and (vii) the existing Seller Certificate and, if
applicable, the certificates representing the Series to be exchanged. Upon
satisfaction of such conditions, the Trustee will cancel the existing Seller
Certificate and the Certificates of the exchanged Series, if applicable, and
authenticate the new Series and a new Seller Certificate.
REPRESENTATIONS AND WARRANTIES
Unless otherwise specified in the Prospectus Supplement relating to a Series
of Certificates, the Seller has made in the Agreement certain representations
and warranties to the Trust to the effect that, among other things, (a) as of
the Closing Date, the Seller was duly incorporated and in good standing and
that it has the authority to consummate the transactions contemplated by the
Agreement and (b) as of the Cut-Off Date (or as of the date of the designation
of 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 Seller by the Trustee or to the Seller and the 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 Seller
(and to the 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.
Unless otherwise specified in the Prospectus Supplement relating to a Series
of Certificates, the Seller has made in the Agreement representations and
warranties to the Trust relating to the Receivables to the effect, among other
things, that (a) as of the Closing Date of the initial Series of Certificates
issued by the 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 Seller or Servicer or receipt
by the Seller 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 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 Seller 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
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material respects. The Seller 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 Seller Interest. In the event that the exclusion of an
Ineligible Receivable from the calculation of the Seller Interest would cause
the Seller Interest to be a negative number, on the date of reassignment of
such Ineligible Receivable the Seller shall make a deposit in the Principal
Account in immediately available funds in an amount equal to the amount by
which the Seller Interest 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 Seller 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.
Unless otherwise specified in the Prospectus Supplement relating to a Series
of Certificates, the Seller has made in the Agreement representations and
warranties to the Trust to the effect, among other things, that as of the
Closing Date of the initial Series of Certificates issued by the Trust (a) the
Agreement will constitute a legal, valid and binding obligation of the Seller
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 Seller 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 the Trust may direct the Seller to accept
reassignment of the Trust Portfolio within 60 days of such notice, or within
such longer period specified in such notice. The Seller 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 the 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. If the Trustee or Certificateholders give a notice as
provided above, the obligation of the Seller to make any such deposit will
constitute the sole remedy respecting a breach of the representations and
warranties available to the Trustee or such Certificateholders.
Unless otherwise specified in the related Prospectus Supplement, with
respect to each Series of Certificates, an "Eligible Account" will be defined
to mean, as of the Cut-Off Date (or, with respect to Additional Accounts, as
of their date of designation for inclusion in the Trust), each Account owned
by the Seller (a) which was in existence and maintained with the Seller, (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 Seller as cancelled, counterfeit, deleted, fraudulent, stolen or lost, (e)
which has either been originated by the Seller or acquired by the Seller from
other institutions, and (f) which has not been charged off by the Seller in
its customary and usual manner for charging off such Account as of the Cut-Off
Date and, with respect to Additional Accounts, as of their date of designation
for inclusion in the Trust. Under the Agreement, the definition of Eligible
Account may be changed by amendment to the Agreement without the consent of
the related Certificateholders if (i) the Seller delivers to the Trustee a
certificate
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of an authorized officer to the effect that, in the reasonable belief of the
Seller, 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 Trust.
Unless otherwise specified in the related Prospectus Supplement, with
respect to each Series of Certificates, an "Eligible Receivable" will be
defined to mean 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 Seller, and pursuant to a credit
card agreement which complies in all material respects with all requirements
of law applicable to the Seller, (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 Seller in connection with
the creation of such Receivable or the execution, delivery, creation and
performance by the Seller 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
Seller or the Trust had good and marketable title free and clear of all liens
and security interests arising under or through the Seller (other than certain
tax liens for taxes not then due or which the Seller 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 UCC.
Unless otherwise specified in the Prospectus Supplement relating to a Series
of Certificates, 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 purpose of establishing the
presence or absence of defects, compliance with the Seller's representations
and warranties or for any other purpose. The Servicer, however, will deliver
to the Trustee on or before March 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 Seller will have the right
to designate for the Trust, from time to time, Additional Accounts to be
included as Accounts. In addition, the Seller will be required to designate
Additional Accounts under the circumstances and in the amounts specified in
the related Prospectus Supplement. The Seller will convey to the Trust its
interest in all Receivables of such Additional Accounts, whether such
Receivables are then existing or thereafter created.
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 Seller using credit criteria different from those which were applied by
the Seller to the initial Accounts or may have been acquired by the Seller
from an institution which may have had different credit criteria.
If so specified in the Prospectus Supplement relating to a Series, in
addition to or in lieu of Additional Accounts, the Seller under the Agreement
is permitted to add to the Trust participations representing undivided
interests in a pool of assets primarily consisting of receivables arising
under consumer revolving credit card accounts owned by the Seller and
collections thereon ("Participations"). 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") entered
into by the Seller 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 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 may be amended
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to permit the addition of a Participation in the Trust without the consent of
the related Certificateholders if (i) the Seller delivers to the Trustee a
certificate of an authorized officer to the effect that, in the reasonable
belief of the Seller, 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 Trust.
A conveyance by the Seller to the Trust of Receivables in Additional
Accounts or Participations is subject to the following conditions, among
others: (i) the Seller 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 Seller 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 Seller 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 Seller shall represent and warrant that (x) each
Additional Account is, as of the Addition Date, an Eligible Account, and each
Receivable in such Additional Account is, as of the Addition Date, an Eligible
Receivable, (y) no selection procedures believed by the Seller 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 Seller is not
insolvent; (iv) the Seller 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 the
Trust shall have consented to the addition of such Additional Accounts or
Participations.
In addition to the periodic reports otherwise required to be filed by the
Servicer with the Commission pursuant to the Exchange Act, the Servicer
intends to file, on behalf of the Trust, a Report on Form 8-K with respect to
any addition to the Trust of Receivables in Additional Accounts or
Participations that would have a material effect on the composition of the
assets of the Trust.
REMOVAL OF ACCOUNTS
Unless otherwise specified in the Prospectus Supplement relating to a Series
of Certificates, subject to the conditions set forth in the next succeeding
sentence, the Seller may, but shall not be obligated to, designate from time
to time (which may be restricted to certain periods if so specified in the
related Prospectus Supplement) certain Accounts to be Removed Accounts, all
Receivables in which shall be subject to deletion and removal from the Trust;
provided, however, that the Seller shall not make more than one such
designation in any Monthly Period. The Seller 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
Seller, cause a Pay Out Event to occur; (ii) the Seller shall have delivered
to the 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) either (a) the Trust Portfolio is not more than
15% delinquent and the weighted average delinquency rate of the Trust
Portfolio does not exceed 60 days or (b) the Trust Portfolio is not more than
7% delinquent and the weighted average delinquency rate of the Trust Portfolio
does not exceed 90 days or (c) the Trust Portfolio is not more than the
specified percentage delinquent and the weighted average delinquency rate of
the Trust Portfolio does not exceed the number of days specified in the
related Prospectus Supplement; (iv) the Seller shall represent and warrant
that no selection procedures believed by the Seller to be materially adverse
to the interests of the holders of any Series of Certificates outstanding
under the Trust were utilized in selecting the Removed Accounts to be removed
from the Trust; (v) each Rating Agency then rating each Series of Certificates
outstanding under the Trust shall have received notice of such proposed
removal of Accounts and the Seller 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; (vi) the aggregate amount of
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Principal Receivables of the Accounts then existing less the aggregate amount
of Principal Receivables of the Removed Accounts shall not be less than the
amount, if any, specified for any period specified; (vii) the Principal
Receivables of the Removed Accounts shall not equal or exceed 5% (or such
other percentage specified in the related Prospectus Supplement) of the
aggregate amount of the Principal Receivables in the 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; (viii) such
other conditions as are specified in the related Prospectus Supplement; and
(ix) the Seller shall have delivered to the Trustee an officer's certificate
confirming the items set forth in clauses (i) through (viii) above.
Notwithstanding the above, the Seller will be permitted to designate as a
Removed Account without the consent of the Trustee, Certificateholders or
Rating Agencies any Account that has a zero balance and which the Seller 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 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.
DISCOUNT OPTION
The Agreement provides that the Seller may, at its sole discretion, at any
time designate a specified fixed or variable percentage (the "Discount
Percentage") of the amount of Receivables arising in the Accounts with respect
to the Trust on and after the date such option is exercised that otherwise
would have been treated as Principal Receivables to be treated as Finance
Charge Receivables. In effect, if such option is exercised by the Seller, the
Principal Receivables are treated as having been transferred to the Trust at a
discount. The result of such discounting treatment is to increase the yield to
the Trust beyond the actual income performance of the Accounts. Such
designation will become effective upon satisfaction of the requirements set
forth in the Agreement, including written confirmation by each Rating Agency
in writing of its then current rating on each outstanding Series of the Trust.
After such designation is effective, 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.
TRUST ACCOUNTS
Unless otherwise specified in a Prospectus Supplement, the Trustee will
establish and maintain in the name of the Trust two separate accounts in a
segregated trust account (which need not be a deposit 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. The 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" (a non-interest bearing segregated demand deposit account established
with a Qualified Institution other than the Seller). 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 Trustee, organized under
the laws of the United States or any one of the states thereof, which at all
times has a certificate of deposit rating of P-1 by Moody's Investors Service,
Inc. ("Moody's") and of A-1+ by Standard & Poor's Corporation ("Standard &
Poor's") or long-term unsecured debt obligation (other than such obligation
the rating of which is based on collateral or on the credit of a person other
than such institution or trust company) rating of Aa3 by Moody's and deposit
insurance provided by either the Bank Insurance Fund
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("BIF") or the Savings Association Insurance Fund ("SAIF"), each administered
by the FDIC, or a depository institution, which may include the Trustee, which
is acceptable to the Rating Agency. Unless otherwise specified in the related
Prospectus Supplement, funds in the Principal Account and the Finance Charge
Account for the 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)
money market funds which have the highest rating from, or have otherwise been
approved in writing by, Moody's and Standard & Poor's, (vi) certain open end
diversified investment companies, and (vii) 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 Investor Certificates (such investments,
"Permitted Investments"). Unless otherwise specified in the related Prospectus
Supplement, any earnings (net of losses and investment expenses) on funds in
the Finance Charge Account or the Principal Account will be paid to the
Seller. 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. Unless otherwise specified in the related Prospectus Supplement,
the Trustee will initially 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
For any Series of Certificates, the related Prospectus Supplement may
specify that during a Funding Period, the Pre-Funding Amount will be held in a
Pre-Funding Account pending the transfer of additional Receivables to the
Trust or pending the reduction of the Investor Interests of other Series
issued by the Trust. The related Prospectus Supplement will specify the
initial Investor Interest with respect to 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 Receivables are
delivered to the Trust or as the Investor Interests of other Series of the
Trust are reduced. The Investor Interest may also decrease due to Investor
Charge-Offs or the occurrence of a Pay Out Event with respect to such Series
as provided in the related Prospectus Supplement.
During the Funding Period, funds on deposit in the Pre-Funding Account for a
Series of Certificates will be withdrawn and paid to the Seller 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 and any
additional amounts specified in the related Prospectus Supplement will be
payable to the Certificateholders of such Series in the manner and at such
time as set forth in the related Prospectus Supplement.
If so specified in the related Prospectus Supplement, monies in the Pre-
Funding Account will be invested by the Trustee in Permitted Investments or
will be subject to a guaranteed rate or investment agreement or other similar
arrangement, and, in connection with each Distribution Date during the Funding
Period, investment earnings on funds in the Pre-Funding Account during the
related Monthly Period will be withdrawn from the Pre-Funding Account and
deposited, together with any applicable payment under a guaranteed rate or
investment agreement or other similar arrangement, into the 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 SELLER PERCENTAGE
The Servicer will allocate between the Investor Interest of each Series
issued and outstanding (and between each Class of each Series) and the Seller
Interest, and, in certain circumstances, the interest of certain Credit
Enhancement Providers, all amounts collected on Finance Charge Receivables,
all amounts collected on Principal
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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 Seller Percentage, and, in certain circumstances, the
percentage interest of certain Credit Enhancement Providers (the "Credit
Enhancement Percentage") with respect to such Series. The Prospectus
Supplement relating to a Series will specify the Investor Percentage and, if
applicable, the Credit Enhancement Percentage 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 will specify the method of allocation between each
Class.
The Seller 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.
TRANSFER OF ANNUAL MEMBERSHIP FEES
Unless otherwise specified in the related Prospectus Supplement, on or
before the Transfer Date following each annual membership fee processing date,
the Seller will accept reassignment of the Receivables representing such
annual membership fee from the Trust. The Seller will pay to the Trust for
such Receivable the amount of such annual membership fee. An amount equal to
the product of (a) the Investor Percentages with respect to all Series issued
by the Trust with respect to Finance Charge Receivables and (b) the amount of
such annual membership fee will be deposited by the Seller into the Finance
Charge Account and an amount equal to the product of (a) the Seller Percentage
and (b) the amount of such annual membership fee will be paid to the holder of
the Seller Certificate. Simultaneously with such reassignment, the Seller will
retransfer the Receivable representing such annual membership fee to the
Trust. Upon such retransfer, the Seller will make certain representations and
warranties with respect to such Receivables, as provided above under "--
Representations and Warranties," as if such Receivable were a new Receivable
created in an existing Account. Further, the amount of the Seller Interest
will be increased to reflect the addition of such annual membership fee
Receivable to the Trust. Unless otherwise provided in the related Prospectus
Supplement, collections with respect to such annual membership fees will be
treated as collections of Principal Receivables.
APPLICATION OF COLLECTIONS
Unless otherwise specified in the related Prospectus Supplement, except as
otherwise provided below, the Servicer will deposit into the Collection
Account for the 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 MBNA remains the Servicer under the Agreement, and (a)(i)
the Servicer provides to the Trustee a letter of credit covering risk
collection of the Servicer acceptable to the Rating Agency and (ii) the Seller
shall not have received a notice from the Rating Agency that such letter of
credit would result in the lowering of such Rating Agency's then-existing
rating of the related Series or any Series of certificates previously-issued
and then-outstanding, or (b) the Servicer has and maintains a certificate of
deposit rating of P-1 by Moody's and of A-1 by Standard & Poor's and deposit
insurance provided by either BIF or SAIF, 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 had the conditions of this proviso not applied.
Unless otherwise specified in the related Prospectus Supplement,
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, 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 deposit
account or, without duplication, distributed or
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deposited 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.
Unless otherwise specified in the related Prospectus Supplement, the
Servicer will withdraw the following amounts from the Collection Account for
application as indicated:
(a) an amount equal to the Seller 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 Seller Certificate;
(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
Seller Certificate, provided that if after giving effect to the inclusion
in the Trust of all Receivables on or prior to such date of processing and
the application of payments referred to in paragraph (a) above the Seller
Interest is reduced to zero, the excess will be deposited in the Principal
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 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 which may be allocated or distributed to Certificateholders, the
amount of such excess will be paid to the holder of the Seller Certificate
until the Seller Interest is reduced to zero, and thereafter will be
deposited in the Principal 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 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.
Any amounts collected in respect of Principal Receivables and not paid to
the Seller because the Seller Interest is zero as described above (with
respect to each Series, "Unallocated Principal Collections"), together with
any adjustment payments as described below, will be paid to and held in the
Principal Account and paid to the Seller if and to the extent that the Seller
Interest is equal to or greater than zero. If an Amortization Period or
Accumulation Period has commenced, Unallocated Principal Collections will be
held for distribution to the Certificateholders on the dates specified in the
related Prospectus Supplement or accumulated for distribution on the Scheduled
Payment Date, as applicable, and distributed to the Certificateholders of each
Class or held for and distributed to the Certificateholders of other Series of
Certificates issued by the Trust in the manner and order of priority specified
in the related Prospectus Supplement.
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SHARED EXCESS FINANCE CHARGE COLLECTIONS
Any Series offered hereby may be included in a Group. The Prospectus
Supplement relating to a Series will specify whether such Series will be
included in a Group and will identify any previously issued Series included in
such Group. If 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 within such Group to cover any shortfalls with
respect to amounts payable from collections of Finance Charge Receivables
allocable to such Series or Class. See "Description of the Certificates--
Application of Collections" and "--Defaulted Receivables; Rebates and
Fraudulent Charges; Investor Charge-Offs."
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.
DEFAULTED RECEIVABLES; REBATES AND FRAUDULENT CHARGES; INVESTOR CHARGE-OFFS
Unless otherwise specified in the related Prospectus Supplement, for each
Series of Certificates, on the fourth 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 Principal 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 Seller 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 the 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 will describe 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 Seller
Interest in the Trust will be reduced, on a net basis, by the amount of the
adjustment. In addition, the Seller Interest in the 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.
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DEFEASANCE
If so specified in the Prospectus Supplement relating to a Series, the
Seller may terminate its substantive obligations in respect of such Series or
the 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 the 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 Seller 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 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 Seller 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, if any (or such other amount specified in the
related Prospectus Supplement), if certain conditions set forth in the
Agreement are met. Unless otherwise specified in the related Prospectus
Supplement, 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
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 Seller
or otherwise. Each Prospectus Supplement will specify 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 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 Seller Certificate instruct the
Trustee otherwise, the 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) December 31, 2024, 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 the Trust
and the surrender of the Seller Certificate, the Trustee shall convey to the
holder of the Seller 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, as
described above, the Revolving 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 the
Trust upon the occurrence of either of the following events:
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(a) certain events of insolvency or receivership relating to the Seller;
(b) the Seller is unable for any reason to transfer Receivables to the
Trust in accordance with the provisions of the Agreement; or
(c) the Trust becomes 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 an 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 pursuant to
certain provisions of federal law, the Seller voluntarily enters liquidation
or a receiver is appointed for the Seller, on the day of such event the Seller
will immediately cease to transfer Principal Receivables to the Trust and
promptly give notice to the Trustee of such event. 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 other Person specified
in the Agreement or a 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. 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 Seller or
the appointment of a conservator or receiver for the Seller, 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 "Risk Factors--Certain Matters
Relating to Receivership" and "Certain Legal Aspects of the Receivables--
Certain Matters Relating to Receivership."
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
Unless otherwise specified in the related Prospectus Supplement, 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 Servicing Fee payable at the times and in the amounts
specified in the related Prospectus Supplement. 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 the Trust will
be allocable to the Seller Interest, the Investor Interests of any other
Series issued by the Trust and the interest represented by the Enhancement
Invested Amount or the Collateral Interest, 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 Seller 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
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and independent certified public accountants and other fees which are not
expressly stated in the Agreement to be payable by the Trust or the
Certificateholders other than any tax imposed on or measured by income,
including any federal, state and local income and franchise taxes, if any, of
the Trust or the Certificateholders.
CERTAIN MATTERS REGARDING THE SELLER AND THE SERVICER
With respect to each Series of Certificates, the Servicer may not resign
from its obligations and duties under the 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 Agreement. MBNA, as initial Servicer, intends to delegate some of its
servicing duties to MBNA Hallmark; however, such delegation will not relieve
it of its obligation to perform such duties in accordance with the Agreement.
The Agreement provides that the Servicer will indemnify the Trust and
Trustee from and against any 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 provides that, subject to certain exceptions, the
Seller 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 or those which arise from any action of a
Certificateholder) 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 Seller is a general partner.
The Agreement provides that neither the Seller nor the Servicer nor any of
their respective directors, officers, employees or agents will be under any
other liability to the 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 Seller, 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 Seller, 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
provides that the Servicer is not under any obligation to appear in, prosecute
or defend any legal action which is not incidental to its servicing
responsibilities under the Agreement and which in its opinion may expose it to
any expense or liability.
The Agreement provides that, in addition to Exchanges, if applicable, the
Seller may transfer its interest in all or a portion of the Seller
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 written opinion
of counsel confirming that such transfer would not adversely affect the
treatment of the Certificates of each outstanding Series as debt for federal
income tax purposes.
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Any person into which, in accordance with the Agreement, the Seller or the
Servicer may be merged or consolidated or any person resulting from any merger
or consolidation to which the Seller or the Servicer is a party, or any person
succeeding to the business of the Seller or the Servicer, upon execution of a
supplement to the Agreement, delivery of an opinion of counsel with respect to
the compliance of the transaction with the applicable provisions of the
Agreement, will be the successor to the Seller or the Servicer, as the case
may be, under the Agreement.
SERVICER DEFAULT
Unless otherwise specified in the related Prospectus Supplement, 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 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 Seller under the Agreement and in
the Seller Interest will not be affected by such termination. The 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 Seller the right of first refusal to purchase
the Receivables on terms equivalent to the best purchase offer as determined
by the Trustee.
Unless otherwise specified in the related Prospectus Supplement, "Servicer
Default" under the 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 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 the 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 the
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 and/or any issuer of any third-party Credit Enhancement (a "Credit
Enhancement Provider"), the Seller and the holders of
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Certificates of each Series issued and outstanding under the 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 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 35 or more days delinquent
by class 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 close of business on the last day of the
preceding Monthly Period (consisting of a seven-digit decimal expressing the
ratio of the Investor Interest to the initial Investor Interest), (l) 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 provides that on or before August 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
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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 Agreement during the period covered by
such report (which shall be the period from July 1 (or for the initial period,
the relevant Closing Date) of the preceding calendar year to and including
June 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 provides for delivery to the Trustee on or before August 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
Unless otherwise specified in the related Prospectus Supplement, the
Agreement and any Series Supplement may be amended by the Seller, the Servicer
and the Trustee, without the consent of Certificateholders of any Series then
outstanding, for any purpose, provided that (i) the Seller delivers an opinion
of counsel acceptable to the Trustee to the effect that such amendment will
not 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 Trust.
The Agreement and any related Series Supplement may be amended by the
Seller, the Servicer and the Trustee, without the consent of the
Certificateholders of any Series then outstanding, to provide for additional
Enhancement or substitute Enhancement with respect to a Series, to change the
definition of Eligible Account or to provide for the addition to the Trust of
a Participation, provided, that (i) the Seller delivers to the Trustee a
certificate of an authorized officer to the effect that, in the reasonable
belief of the Seller, 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 Trust.
The Agreement and the related Series Supplement may be amended by the
Seller, the Servicer and the Trustee with the consent of the holders of
Certificates evidencing undivided interests aggregating not less than 66 2/3%
(or such other percentage specified in the related Prospectus Supplement) of
the Investor Interests for all Series of the 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 from the Trust will not be
considered an amendment requiring Certificateholder consent under the
provisions of the 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
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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 will specify the Trustee under the
Agreement. The Seller, 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 Seller, 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 Seller will be
obligated to appoint a successor Trustee. The Seller 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
Seller 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, a
letter of credit, the establishment of a cash collateral guaranty or account,
a collateral interest, 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 Supplements, 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.
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 will include a description of (a) the amount payable
under such Credit Enhancement, (b) any conditions to payment thereunder not
otherwise described herein, (c) the conditions (if any) under which the amount
payable under such Credit Enhancement may be reduced and under which such
Credit Enhancement may be terminated or replaced and (d) any material
provision of any agreement relating to such Credit Enhancement. Additionally,
the related Prospectus Supplement may set forth certain information with
respect to any 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
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such Series following the occurrence of certain Pay Out Events with respect to
such Series. In such event, the Credit Enhancement Provider will 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 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 will also set forth information concerning the amount of
subordination of a Class or Classes of Subordinated Certificates in a Series,
the circumstances in which such subordination will be applicable, the manner,
if any, in which the amount of subordination will decrease over time, and the
conditions under which amounts available from payments that would otherwise be
made to holders of such Subordinated Certificates will be distributed to
holders of 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 will
specify the manner and conditions for applying such a cross-support feature.
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 (the "L/C Bank") will be obligated to honor demands with
respect to such letter of credit, to the extent of the amount available
thereunder, to provide funds under the circumstances and subject to such
conditions as are specified in the related Prospectus Supplement.
The maximum liability of an L/C Bank under its letter of credit will
generally be an amount equal to a percentage specified in the related
Prospectus Supplement of the initial Investor 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.
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 will set forth the circumstances
under which payments are made to beneficiaries of the Cash Collateral Guaranty
from the Cash Collateral Account or from the Cash Collateral Account directly.
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 Prospectus Supplement which will
be increased (i) to the extent the
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Seller elects, subject to certain conditions specified in the related
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 the related 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 the related 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 will set 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.
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 or 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, guarantee, 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.
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES
TRANSFER OF RECEIVABLES
The Seller has represented and warranted in the Agreement that the transfer
of Receivables by it to the Trust is either a valid transfer and assignment to
the Trust of all right, title and interest of the Seller in and to the related
Receivables, except for the interest of the Seller as holder of the Seller
Certificate, or the grant to the Trust of a security interest in such
Receivables. The Seller also has represented and warranted in the Agreement
that, in the event the transfer of Receivables by the Seller to the 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 the
Receivables created thereafter in favor
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of the Trust on and after their creation, except for certain tax and other
governmental liens and other nonconsensual 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 Seller has represented as to previously conveyed Receivables, and 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 Trust. Financing
statements covering the Receivables have been and will be filed with the
appropriate state and local governmental authority to protect the interests of
the 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 the Closing
Date could have an interest in such Receivables with priority over the Trust's
interest. Under the Agreement, however, the Seller has represented and
warranted that it transferred the Receivables to the Trust free and clear of
the lien of any third party. In addition, the Seller has covenanted and 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 Seller 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 conservator or receiver of the Seller, certain
administrative expenses of the conservator or receiver may also have priority
over the interest of the Trust in such Receivable.
CERTAIN MATTERS RELATING TO RECEIVERSHIP
The Seller is chartered as a national banking association and is subject to
regulation and supervision by the Office of the Comptroller of the Currency,
which is authorized to appoint the FDIC as conservator or receiver of the
Seller upon the occurrence of certain events relating to the Seller's
financial condition.
The FDIA, as amended by FIRREA, sets forth certain powers that the FDIC in
its capacity as conservator or receiver for the Seller could exercise.
Positions taken by the FDIC prior to the passage of FIRREA do not suggest that
the FDIC, if appointed as conservator or receiver for the Seller, would
interfere with the timely transfer to the Trust of payments collected on the
Receivables or interfere with the timely liquidation of the Receivables, as
described below. To the extent that the Seller has granted a security interest
in the Receivables to the Trust, and that interest was validly perfected
before the Seller's insolvency and was not taken in contemplation of the
insolvency of the Seller, or with the intent to hinder, delay or defraud the
Seller or the creditors of the Seller, the FDIA provides that such security
interest should not be subject to avoidance. As a result, payments to the
Trust with respect to the Receivables should not be subject to recovery by the
FDIC as conservator or receiver of the Seller. If, however, the FDIC, as
conservator or receiver for the Seller, were to assert a contrary position, or
were to require the Trustee to establish its right to those payments by
submitting to and completing the administrative claims procedure established
under the FDIA, or the conservator or receiver were to request a stay of
proceedings with respect to the Seller as provided under the FDIA, delays in
payments on the related Series of Certificates and possible reductions in the
amount of those payments could occur. In addition, the FDIC, if appointed as
conservator or receiver for the Seller, has the power under the FDIA to
repudiate contracts, including secured contracts of the Seller. The FDIA
provides that a claim for damages arising from the repudiation of a contract
is limited to "actual direct compensatory damages". In the event the FDIC were
to be appointed as conservator or receiver of the Seller and were to repudiate
the Agreement, then the amount payable out of available collateral to the
Certificateholders could be lower than the outstanding principal and accrued
interest on the Certificates.
Upon the appointment of a conservator or receiver or upon a voluntary
liquidation with respect to the Seller, the Seller will promptly give notice
thereof to the Trustee and a Pay Out Event will occur with respect to all
Series then outstanding under the Trust. Pursuant to the Agreement, newly
created Principal Receivables will
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not be transferred to the Trust on and after any such appointment or voluntary
liquidation, and the Trustee will 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 Series (or if any Series has
more than one Class, of each Class, and any other Person specified in the
Agreement or a Series Supplement), or unless otherwise required by the FDIC as
receiver or conservator of the Seller. Under the Agreement, the proceeds from
the sale of the Receivables would be treated as collections of the Receivables
and the Investor Percentage of such proceeds would be distributed to the
Certificateholders or, if so specified in the related Prospectus Supplement,
collected and held for the benefit of Certificateholders. This procedure could
be delayed, as described above. If the only Pay Out Event to occur is either
the insolvency of the Seller or the appointment of a conservator or receiver
for the Seller, 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 or to
prohibit the continued transfer of Principal Receivables to the Trust. See
"Description of the Certificates--Pay Out Events."
CONSUMER PROTECTION LAWS
The relationships of the cardholder and credit card issuer and the lender
are extensively regulated by federal and state consumer protection laws. With
respect to credit cards issued by the Seller, the most significant laws
include the federal Truth-in-Lending, Equal Credit Opportunity, Fair Credit
Reporting, Fair Debt Collection Practice and Electronic Funds Transfer Acts.
These statutes impose disclosure requirements when a credit card account is
advertised, when it is opened, at the end of monthly billing cycles, and at
year end. In addition, these statutes limit customer 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. Cardholders are entitled under these laws to have
payments and credits applied to the credit card accounts promptly, to receive
prescribed notices and to require billing errors to be resolved promptly. The
Trust may be liable for certain violations of consumer protection laws that
apply to the Receivables, either as assignee from the Seller 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
Seller has warranted in the Agreement that all of the Receivables have been
and will be created in compliance with the requirements of such laws. The
Servicer also agrees in the Agreement to indemnify the Trust, among other
things, for any liability arising from such violations caused by the Servicer.
For a discussion of the Trust's rights arising from the breach of these
warranties, see "Description of the Certificates--Representations and
Warranties."
Certain jurisdictions may attempt to require out-of-state credit card
issuers to comply with such jurisdiction's consumer protection laws (including
laws limiting the charges imposed by such credit card issuers) in connection
with their operations in such jurisdictions. A successful challenge by such a
jurisdiction could have an adverse impact on the Seller's credit card
operations or the yield on the Receivables in the Trust.
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 amount available under
any Credit Enhancement is equal to zero. See "Description of the
Certificates--Defaulted Receivables; Rebates and Fraudulent Charges; Investor
Charge-Offs."
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FEDERAL INCOME TAX CONSEQUENCES
GENERAL
The following is a discussion of material federal income tax consequences
relating to the investment in a Certificate offered hereunder. Additional
federal income tax considerations relevant to a particular Series may be set
forth in the related Prospectus Supplement. This discussion is based on
current law, which is subject to changes that could prospectively or
retroactively modify or adversely affect the tax consequences summarized
below. The discussion does not address all of the tax consequences relevant to
a particular Certificate Owner in light of that Certificate Owner's
circumstances, and some Certificate Owners may be subject to special tax rules
and limitations not discussed below. Each prospective Certificate Owner is
urged to consult its own tax adviser in determining the federal, state, local
and foreign income and any other tax consequences of the purchase, ownership
and disposition of a Certificate.
For purposes of this discussion, "U.S. Person" means a citizen or resident
of the United States, a corporation or partnership organized in or under the
laws of the United States, any state thereof, or any political subdivision of
either (including the District of Columbia), or an estate or trust the income
of which is includible in gross income for U.S. federal income tax purposes
regardless of its source. The term "U.S. Certificate Owner" means any U.S.
Person and any other person to the extent that the income attributable to its
interest in a Certificate is effectively connected with that person's conduct
of a U.S. trade or business.
TREATMENT OF THE CERTIFICATES AS DEBT
The Seller expresses in the Agreement the intent that for federal, state and
local income and franchise tax purposes, the Certificates will be debt secured
by the Receivables. The Seller, by entering into the Agreement, and each
investor, by the acceptance of a beneficial interest in a Certificate, will
agree to treat the Certificates as debt for federal, state and local income
and franchise tax purposes. However, the Agreement generally refers to the
transfer of Receivables as a "sale," and because different criteria are used
in determining the non-tax accounting treatment of the transaction, the Seller
will treat the Agreement for certain non-tax accounting purposes as causing a
transfer of an ownership interest in the Receivables and not as creating a
debt obligation.
A basic premise of federal income tax law is that the economic substance of
a transaction generally determines its tax consequences. The form of a
transaction, while a relevant factor, is not conclusive evidence of its
economic substance. In appropriate circumstances, the courts have allowed
taxpayers as well as the Internal Revenue Service (the "IRS") to treat a
transaction in accordance with its economic substance, as determined under
federal income tax law, even though the participants in the transaction have
characterized it differently for non-tax purposes.
The determination of whether the economic substance of a purchase of an
interest in property is instead a loan secured by the transferred property has
been made by the IRS and the courts on the basis of numerous factors designed
to determine whether the seller has relinquished (and the purchaser has
obtained) substantial incidents of ownership in the property. Among those
factors, the primary ones examined are whether the purchaser has the
opportunity to gain if the property increases in value, and has the risk of
loss if the property decreases in value. Except to the extent otherwise
specified in the related Prospectus Supplement, Orrick, Herrington & Sutcliffe
LLP, special counsel to the Seller ("Special Counsel"), is of the opinion
that, under current law as in effect on the Closing Date, although no
transaction closely comparable to that contemplated herein has been the
subject of any Treasury regulation, revenue ruling or judicial decision, for
federal income tax purposes the Certificates offered hereunder will not
constitute an ownership interest in the Receivables but will properly be
characterized as debt. Except where indicated to the contrary, the following
discussion assumes that the Certificates offered hereunder are debt for
federal income tax purposes.
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TREATMENT OF THE TRUST
General. The Agreement permits the issuance of Certificates and certain
other interests (including any Collateral Interest) in the Trust, each of
which may be treated for federal income tax purposes either as debt or as
equity interests in the Trust. If all of the Certificates and other interests
(other than the Seller Certificate) in the Trust were characterized as debt,
the Trust might be characterized as a security arrangement for debt
collateralized by the Receivables and issued directly by the Seller (or other
holder of the Seller Certificate). Under such a view, the Trust would be
disregarded for federal income tax purposes. Alternatively, if some of the
Certificates or other interests (other than the Seller Certificate) in the
Trust were characterized as equity, the Trust might be characterized as a
separate entity owning the Receivables, issuing its own debt, and jointly
owned by the Seller (or other holder of the Seller Certificate) and the other
holders of equity interests in the Trust. However, Special Counsel is of the
opinion that, under current law as in effect on the Closing Date, any such
entity constituted by the Trust will not be an association or publicly traded
partnership taxable as a corporation.
Possible Treatment of the Trust as a Partnership, a Publicly Traded
Partnership or an Association. Although, as described above, Special Counsel
is of the opinion that the Certificates will properly be treated as debt for
federal income tax purposes and that the Trust will not be treated as an
association or publicly traded partnership taxable as a corporation, such
opinion does not bind the IRS and thus no assurance can be given that such
treatment will prevail. Further, such opinion is made with respect to current
law, which is subject to change. If the IRS were to contend successfully that
some or all of the Certificates or any other interest in the Trust (other than
a Seller Certificate), including any Collateral Interest, were not debt
obligations for federal income tax purposes, all or a portion of the Trust
could be classified as a partnership or an association taxable as a
corporation for such purposes. Because Special Counsel is of the opinion that
the Certificates will be characterized as debt for federal income tax purposes
and because any holder of an interest in a Collateral Interest will agree to
treat that interest as debt for such purposes, no attempt will be made to
comply with any tax reporting requirements that would apply as a result of
such alternative characterizations.
If the Trust were treated in whole or in part as a partnership in which some
or all holders of interests in the publicly offered Certificates were
partners, that partnership could be classified as a publicly traded
partnership, and so could be taxable as a corporation. Further, regulations
published by the Treasury Department on December 4, 1995 (the "Regulations")
could cause the Trust to constitute a publicly traded partnership even if all
holders of interests in publicly offered Certificates are treated as holding
debt. The Regulations generally apply to taxable years beginning after
December 31, 1995, and thus could affect the classification of presently
existing entities and the ongoing tax treatment of already completed
transactions. Although the Regulations provide for a 10-year grandfather
period for a partnership actively engaged in an activity before December 4,
1995, it is not clear whether the Trust would qualify for this grandfather
period. If the Trust were classified as a publicly traded partnership, whether
by reason of the treatment of publicly offered Certificates as equity or by
reason of the Regulations, it would avoid taxation as a corporation if its
income was not derived in the conduct of a "financial business"; however,
whether the income of the Trust would be so classified is unclear.
Under the Code and the Regulations, a partnership will be classified as a
publicly traded partnership if equity interests therein are traded on an
"established securities market," or are "readily tradable" on a "secondary
market" or its "substantial equivalent." The Seller intends to take measures
designed to reduce the risk that the Trust could be classified as a publicly
traded partnership by reason of interests in the Trust other than the publicly
traded Certificates. Although the Seller expects such measures will ultimately
be successful, certain of the actions that may be necessary for avoiding the
treatment of such interests as "readily tradable" on a "secondary market" or
its "substantial equivalent" are not fully within the control of the Seller.
As a result, there can be no assurance that the measures the Seller intends to
take will in all circumstances be sufficient to prevent the Trust from being
classified as a publicly traded partnership under the Regulations.
If the Trust treated as a partnership nevertheless were not treated as a
publicly traded partnership taxable as a corporation, that partnership would
not be subject to federal income tax. Rather, each item of income, gain,
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loss and deduction of the partnership generated through the ownership of the
related Receivables would be taken into account directly in computing taxable
income of the Seller (or the holder of the Seller Certificate) and any
Certificate Owners treated as partners in accordance with their respective
partnership interests therein. The amounts and timing of income reportable by
any Certificate Owners treated as partners would likely differ from that
reportable by such Certificate Owners had they been treated as owning debt. In
addition, if the Trust were treated in whole or in part as a partnership other
than a publicly traded partnership, income derived from the partnership by any
Certificate Owner that is a pension fund or other tax-exempt entity may be
treated as unrelated business taxable income. Partnership characterization
also may have adverse state and local income or franchise tax consequences for
a Certificate Owner. From time to time, legislation has been introduced in
Congress that would affect the treatment of any "large partnership," defined
as any partnership in which there are at least 250 partners in a taxable year.
Under such legislative proposals, among other things, the availability of
certain deductions to partners may be limited, and certain computations (such
as those relating to the level of allowable miscellaneous itemized deductions
and the netting of capital gains and losses) would be made at the partnership
rather than the partner level. No prediction can be made regarding whether any
such legislation will be enacted or, if so, what its ultimate effective date
will be.
If the arrangement created by the Agreement were treated in whole or in part
as a publicly traded partnership or an association taxable as a corporation,
that entity would be subject to federal income tax at corporate tax rates on
its taxable income generated by ownership of the Receivables. That tax could
result in reduced distributions to Certificate Owners. No distributions from
the Trust would be deductible in computing the taxable income of the
corporation, except to the extent that any Certificates were treated as debt
of the corporation and distributions to the related Certificate Owners were
treated as payments of interest thereon. In addition, distributions to
Certificate Owners not treated as holding debt would be dividend income to the
extent of the current and accumulated earnings and profits of the corporation
(and Certificate Owners may not be entitled to any dividends received
deduction in respect of such income).
TAXATION OF INTEREST INCOME OF U.S. CERTIFICATE OWNERS
General. Stated interest on a beneficial interest in a Certificate will be
includible in gross income in accordance with a U.S. Certificate Owner's
method of accounting.
Original Issue Discount. If the Certificates are issued with original issue
discount ("OID"), the provisions of sections 1271 through 1273 and 1275 of the
Internal Revenue Code of 1986 (the "Code") will apply to the Certificates.
Under those provisions, a U.S. Certificate Owner (including a cash basis
holder) generally would be required to accrue the OID on its interest in a
Certificate in income for federal income tax purposes on a constant yield
basis, resulting in the inclusion of OID in income somewhat in advance of the
receipt of cash attributable to that income. In general, a Certificate will be
treated as having OID to the extent that its "stated redemption price" exceeds
its "issue price," if such excess is more than 0.25 percent multiplied by the
weighted average life of the Certificate (determined by taking into account
only the number of complete years following issuance until payment is made for
any partial principal payments). Under section 1272(a)(6) of the Code, special
provisions apply to debt instruments on which payments may be accelerated due
to prepayments of other obligations securing those debt instruments. However,
no regulations have been issued interpreting those provisions, and the manner
in which those provisions would apply to the Certificates is unclear.
Additionally, the IRS could take the position based on Treasury regulations
that none of the interest payable on a Certificate is "unconditionally
payable" and hence that all of such interest should be included in the
Certificate's stated redemption price at maturity. If sustained, such
treatment should not significantly affect the tax liability of most
Certificate Owners, but prospective U.S. Certificate Owners should consult
their own tax advisers concerning the impact to them in their particular
circumstances.
Market Discount. A U.S. Certificate Owner who purchases an interest in a
Certificate at a discount that exceeds any unamortized OID may be subject to
the "market discount" rules of sections 1276 through 1278 of the Code. These
rules provide, in part, that gain on the sale or other disposition of a
Certificate and partial
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principal payments on a Certificate are treated as ordinary income to the
extent of accrued market discount. The market discount rules also provide for
deferral of interest deductions with respect to debt incurred to purchase or
carry a Certificate that has market discount.
Market Premium. A U.S. Certificate Owner who purchases an interest in a
Certificate at a premium may elect to offset the premium against interest
income over the remaining term of the Certificate in accordance with the
provisions of section 171 of the Code.
SALE OR EXCHANGE OF CERTIFICATES
Upon a disposition of an interest in a Certificate, a U.S. Certificate Owner
generally will recognize gain or loss equal to the difference between the
amount realized on the disposition and the U.S. Certificate Owner's adjusted
basis in its interest in the Certificate. The adjusted basis in the interest
in the Certificate will equal its cost, increased by any OID or market
discount includible in income with respect to the interest in the Certificate
prior to its sale and reduced by any principal payments previously received
with respect to the interest in the Certificate and any amortized premium.
Subject to the market discount rules, gain or loss will be capital gain or
loss if the interest in the Certificate was held as a capital asset. Capital
losses generally may be used only to offset capital gains.
NON-U.S. CERTIFICATE OWNERS
In general, a non-U.S. Certificate Owner will not be subject to U.S. federal
income tax on interest (including OID) on a beneficial interest in a
Certificate unless (i) the non-U.S. Certificate Owner actually or
constructively owns 10 percent or more of the total combined voting power of
all classes of stock of the Seller entitled to vote (or of a profits or
capital interest of the Trust characterized as a partnership), (ii) the non-
U.S. Certificate Owner is a controlled foreign corporation that is related to
the Seller (or the Trust treated as a partnership) through stock ownership,
(iii) the non-U.S. Certificate Owner is a bank receiving interest described in
Code Section 881(c)(3)(A), (iv) such interest is contingent interest described
in Code Section 871(h)(4), or (v) the non-U.S. Certificate Owner bears certain
relationships to any holder of either the Seller Certificate other than the
Seller or any other interest in the Trust not properly characterized as debt.
To qualify for the exemption from taxation, the last U.S. Person in the chain
of payment prior to payment to a non-U.S. Certificate Owner (the "Withholding
Agent") must have received (in the year in which a payment of interest or
principal occurs or in either of the two preceding years) a statement that (i)
is signed by the non-U.S. Certificate Owner under penalties of perjury, (ii)
certifies that the non-U.S. Certificate Owner is not a U.S. Person and (iii)
provides the name and address of the non-U.S. Certificate Owner. The statement
may be made on a Form W-8 or substantially similar substitute form, and the
non-U.S. Certificate Owner must inform the Withholding Agent of any change in
the information on the statement within 30 days of the change. If a
Certificate is held through a securities clearing organization or certain
other financial institutions, the organization or institution may provide a
signed statement to the Withholding Agent. However, in that case, the signed
statement must be accompanied by a Form W-8 or substitute form provided by the
non-U.S. Certificate Owner to the organization or institution holding the
Certificate on behalf of the non-U.S. Certificate Owner. The U.S. Treasury
Department is considering implementation of further certification requirements
aimed at determining whether the issuer of a debt obligation is related to
holders thereof.
Generally, any gain or income realized by a non-U.S. Certificate Owner upon
retirement or disposition of an interest in a Certificate will not be subject
to U.S. federal income tax, provided that (i) in the case of a Certificate
Owner that is an individual, such Certificate Owner is not present in the
United States for 183 days or more during the taxable year in which such
retirement or disposition occurs and (ii) in the case of gain representing
accrued interest, the conditions described in the preceding paragraph for
exemption from withholding are satisfied. Certain exceptions may be
applicable, and an individual non-U.S. Certificate Owner should consult a tax
adviser.
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If the Certificates were treated as an interest in a partnership, the
recharacterization could cause a non-U.S. Certificate Owner to be treated as
engaged in a trade or business in the United States. In that event, the non-
U.S. Certificate Owner would be required to file a federal income tax return
and, in general, would be subject to U.S. federal income tax (including the
branch profits tax) on its net income from the partnership. Further, certain
withholding obligations apply with respect to income allocable or
distributions made to a foreign partner. That withholding may be at a rate as
high as 39.6 percent. If some or all of the Certificates were treated as stock
in a corporation, any related dividend distributions to a non-U.S. Certificate
Owner generally would be subject to withholding of tax at the rate of 30
percent, unless that rate were reduced by an applicable tax treaty.
INFORMATION REPORTING AND BACKUP WITHHOLDING
Backup withholding of U.S. federal income tax at a rate of 31 percent may
apply to payments made in respect of a Certificate to a registered owner who
is not an "exempt recipient" and who fails to provide certain identifying
information (such as the registered owner's taxpayer identification number) in
the manner required. Generally, individuals are not exempt recipients whereas
corporations and certain other entities are exempt recipients. Payments made
in respect of a U.S. Certificate Owner must be reported to the IRS, unless the
U.S. Certificate Owner is an exempt recipient or otherwise establishes an
exemption. Compliance with the identification procedures (described in the
preceding section) would establish an exemption from backup withholding for a
non-U.S. Certificate Owner who is not an exempt recipient.
In addition, upon the sale of a Certificate to (or through) a "broker," the
broker must withhold 31 percent of the entire purchase price, unless either
(i) the broker determines that the seller is a corporation or other exempt
recipient or (ii) the seller provides certain identifying information in the
required manner, and in the case of a non-U.S. Certificate Owner certifies
that the seller is a non-U.S. Certificate Owner (and certain other conditions
are met). Such a sale must also be reported by the broker to the IRS, unless
either (i) the broker determines that the seller is an exempt recipient or
(ii) the seller certifies its non-U.S. status (and certain other conditions
are met). Certification of the registered owner's non-U.S. status normally
would be made on Form W-8 under penalties of perjury, although in certain
cases it may be possible to submit other documentary evidence. As defined by
Treasury regulations, the term "broker" includes all persons who stand ready
to effect sales made by others in the ordinary course of a trade or business,
as well as brokers and dealers registered as such under the laws of the United
States or a state. These requirements generally will apply to a U.S. office of
a broker, and the information reporting requirements generally will apply to a
foreign office of a U.S. broker as well as to a foreign office of a foreign
broker (i) that is a controlled foreign corporation within the meaning of
section 957(a) of the Code or (ii) 50 percent or more of whose gross income
from all sources for the three year period ending with the close of its
taxable year preceding the payment (or for such part of the period that the
foreign broker has been in existence) was effectively connected with the
conduct of a trade or business within the United States.
Any amounts withheld under the backup withholding rules from a payment to a
Certificate Owner would be allowed as a refund or a credit against such
Certificate Owner's U.S. federal income tax, provided that the required
information is furnished to the IRS.
STATE AND LOCAL TAXATION
The discussion above does not address the taxation of the Trust or the tax
consequences of the purchase, ownership or disposition of an interest in the
Certificates under any state or local tax law. Each investor should consult
its own tax adviser regarding state and local tax consequences.
ERISA CONSIDERATIONS
Section 406 of ERISA and section 4975 of the Code prohibit certain pension,
profit sharing or other employee benefit plans, individual retirement accounts
or annuities and employee annuity plans and Keogh plans (collectively,
"Plans") from engaging in certain transactions involving "plan assets" with
persons that are
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"parties in interest" under ERISA or "disqualified persons" under the Code
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.
A violation of the prohibited transaction rules could occur if any Series of
Certificates were to be purchased with assets of any Plan if the Seller, the
Trustee, any underwriters of such Series or any of their affiliates were a
"party in interest" or a "disqualified person," 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 (the "DoL"). The Seller, the Trustee, any underwriters
of a Series and their affiliates are likely to be "parties in interest" and
"disqualified persons" with respect to many Plans. Before purchasing
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 Seller, 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. The DoL has issued five class exemptions
that may apply to otherwise prohibited transactions arising from the purchase
or holding of the Certificates: DoL Prohibited Transaction Exemptions 96-23
(Class Exemption for Plan Asset Transactions Determined by In-house Asset
Managers), 95-60 (Class Exemption for Certain Transactions Involving Insurance
Company General Accounts), 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) and 84-14
(Class Exemption for Plan Asset Transactions Determined by Independent
Qualified Professional Asset Managers).
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 Certificates will represent beneficial interests in the
Trust, and despite the agreement of the Seller and the Certificate Owners to
treat each Series of Certificates as debt instruments, the Certificates are
likely to be considered equity interests in the Trust for purposes of the Plan
Asset Regulation, with the result that the assets of the Trust are likely to
be treated as "plan assets" of the investing Plans for purposes of ERISA and
section 4975 of the Code, unless either of the following exceptions applies.
The first exception applies to a "publicly-offered security." A publicly-
offered security is a security that is (a) freely transferable, (b) part of a
class of securities that is owned, immediately subsequent to the initial
offering, by 100 or more investors who were independent of the issuer and of
one another ("Independent Investors") and (c) either is (i) part of a class of
securities registered under section 12(b) or 12(g) of the Exchange Act, or
(ii) 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
Commission) after the end of the fiscal year of the issuer during which the
offering of such securities to the public occurred. For purposes of the 100
Independent Investor criterion, except to the extent otherwise disclosed in
the related Prospectus Supplement, each Class of Certificates should be deemed
to be a "class" of securities that would be tested separately from any other
securities that may be issued by the Trust. Except to the extent otherwise
disclosed in the related Prospectus Supplement, it is anticipated that the
most senior Class of Certificates will meet the foregoing criteria for
treatment as "public-offered securities." No restrictions will be imposed on
the transfer of such Certificates. Except to the extent otherwise disclosed in
the related Prospectus Supplement, it is expected that the most senior Class
of Certificates will be held by at least 100 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 most senior Class of Certificates will be sold as part
of an offering pursuant to an effective registration statement under the Act
and then will be timely registered under the Exchange Act.
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The second exception applies if equity participation in the entity by
"benefit plan investors" (i.e., Plans and other employee benefit plans not
subject to ERISA, such as governmental or foreign plans, as well as entities
holding assets deemed to be "plan assets") is not "significant." Benefit plan
investors' equity participation in the Trust is not significant on any date on
which any Series of Certificates is issued and outstanding if, immediately
after the most recent acquisition of any equity interest in the Trust, less
than 25% of the value of each class of equity interests in the Trust
(excluding interests held by the Seller, the Trustee or their affiliates) is
held by benefit plan investors. No assurance can be given by the Seller as to
whether the value of each class of equity interests in the Trust held by
benefit plan investors will be "significant" upon completion of the offering
of any Series of Certificates or thereafter, and no monitoring or other
measures will be taken with respect to the satisfaction of the conditions to
this exception.
If neither of the foregoing exceptions under the Plan Asset Regulation were
satisfied with respect to the Trust and the Trust were considered to hold
"plan assets," transactions involving the Trust and "parties in interest" or
"disqualified persons" with respect to a Plan that is a Certificate Owner
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
mentioned above may not provide relief for all transactions involving the
assets of the Trust even if they would otherwise apply to the purchase of a
Certificate by a Plan.
The Certificates of any Series may not be purchased with the assets of a
Plan if the Seller, the Servicer, the Trustee or any of their affiliates (a)
has investment or administrative discretion with respect to such Plan assets;
(b) has authority or responsibility to give, or regularly gives, investment
advice with respect to such Plan assets, for a fee and pursuant to an
agreement or understanding that such advice (i) will serve as a primary basis
for investment decisions with respect to such Plan assets, and (ii) will be
based on the particular investment needs of such Plan; or (c) is an employer
maintaining or contributing to such Plan.
In light of the foregoing, fiduciaries or other persons contemplating
purchasing the Certificates on behalf or with "plan assets" of any Plan should
consult their own counsel regarding whether the Trust assets represented by
the Certificates would be considered "plan assets," the consequences that
would apply if the Trust'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 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 herein and in the related Prospectus Supplement.
PLAN OF DISTRIBUTION
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 Seller 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 Seller, 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.
60
<PAGE>
Each Prospectus Supplement will set forth the price at which each Series of
Certificates or Class being offered thereby initially will be offered to the
public and any concessions that may be offered to certain dealers
participating in the offering of such Certificates. After the initial public
offering, the public offering price and such concessions may be changed.
Each Underwriting Agreement will provide that the Seller 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 will be 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 Seller by John W. Scheflen, Executive Vice President,
General Counsel and Secretary of the Corporation and Senior Executive Vice
President, Cashier and Secretary of MBNA, and by Orrick, Herrington &
Sutcliffe LLP, Washington, D.C., special counsel to the Seller. Certain legal
matters relating to the issuance of the Certificates under the laws of the
State of Delaware will be passed upon for the Seller by Richards, Layton &
Finger, Wilmington, Delaware. Certain legal matters relating to the federal
tax consequences of the issuance of the Certificates will be passed upon for
the Seller by Orrick, Herrington & Sutcliffe LLP. 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.
Mr. Scheflen owns beneficially in excess of 100,000 shares of common stock of
the Corporation, including options exercisable within sixty days under the
Corporation's 1991 Long Term Incentive Plan.
61
<PAGE>
INDEX OF TERMS FOR PROSPECTUS
<TABLE>
<CAPTION>
TERM PAGE
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<S> <C>
Accounts................................................................. 1, 4
Accumulation Period...................................................... 5
Additional Accounts...................................................... 5
Additional Interest...................................................... 14
Agreement................................................................ 4
Amortization Period...................................................... 5
Assignment............................................................... 37
Bank Portfolio........................................................... 4
Base Rate................................................................ 20
BIF...................................................................... 39
Cash Collateral Account.................................................. 50
Cash Collateral Guaranty................................................. 50
Cede..................................................................... 2
CEDEL.................................................................... 30
CEDEL Participants....................................................... 30
Certificate Owners....................................................... 2
Certificate Rate......................................................... 5
Certificateholder........................................................ 29
Certificateholders....................................................... 2
Certificates............................................................. 1, 4
Class.................................................................... 1, 4
Closing Date............................................................. 10
Code..................................................................... 17, 56
Collateral Interest...................................................... 50
Collection Account....................................................... 9
Commission............................................................... 2
Controlled Accumulation Amount........................................... 12
Controlled Accumulation Period........................................... 12
Controlled Amortization Amount........................................... 11
Controlled Amortization Period........................................... 11
Controlled Deposit Amount................................................ 12
Controlled Distribution Amount........................................... 11
Cooperative.............................................................. 30
Corporation.............................................................. 9
Credit Enhancement....................................................... 5
Credit Enhancement Percentage............................................ 40
Credit Enhancement Provider.............................................. 46
Cut-Off Date............................................................. 7
Defaulted Accounts....................................................... 6
Definitive Certificates.................................................. 9
Depositaries............................................................. 28
Depository............................................................... 28
Determination Date....................................................... 42
Disclosure Document...................................................... 8
Discount Percentage...................................................... 38
Distribution Account..................................................... 38
Distribution Date........................................................ 10
DoL...................................................................... 59
DTC...................................................................... 2
</TABLE>
62
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<TABLE>
<CAPTION>
TERM PAGE
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<S> <C>
Eligible Account......................................................... 35
Eligible Receivable...................................................... 36
Enhancement.............................................................. 4
Enhancement Invested Amount.............................................. 50
ERISA.................................................................... 17
Euroclear................................................................ 30
Euroclear Operator....................................................... 30
Euroclear Participants................................................... 30
Excess Finance Charge Collections........................................ 14
Exchange................................................................. 8
Exchange Act............................................................. 2
FDIA..................................................................... 19
FDIC..................................................................... 6
Finance Charge Account................................................... 38
Finance Charge Receivables............................................... 7
FIRREA................................................................... 19
Full Investor Interest................................................... 15
Funding Period........................................................... 15
Group.................................................................... 14
Holders.................................................................. 31
Independent Investors.................................................... 17, 59
Indirect Participants.................................................... 29
Ineligible Receivable.................................................... 34
Interchange.............................................................. 4
Interest Funding Account................................................. 32
Interest Period.......................................................... 10
Investor Charge-Off...................................................... 15
Investor Default Amount.................................................. 15
Investor Interest........................................................ 6
Investor Percentage...................................................... 6
Investor Servicing Fee................................................... 14
IRS...................................................................... 54
L/C Bank................................................................. 50
MBNA..................................................................... 1
MBNA Hallmark............................................................ 24
Minimum Seller Interest.................................................. 7
Monthly Interest......................................................... 14
Monthly Period........................................................... 10
Moody's.................................................................. 38
OID...................................................................... 56
Participants............................................................. 29
Participation Agreement.................................................. 36
Participations........................................................... 5, 36
Pay Out Event............................................................ 13
Permitted Investments.................................................... 39
Plan Asset Regulation.................................................... 59
Plans.................................................................... 58
Portfolio Yield.......................................................... 20
Pre-Funding Account...................................................... 15
Pre-Funding Amount....................................................... 15
Principal Account........................................................ 38
</TABLE>
63
<PAGE>
<TABLE>
<CAPTION>
TERM PAGE
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<S> <C>
Principal Amortization Period............................................ 11
Principal Commencement Date.............................................. 10
Principal Funding Account................................................ 12
Principal Receivables.................................................... 7
Principal Terms.......................................................... 8
Prospectus Supplement.................................................... 1
Qualified Institution.................................................... 38
Rapid Accumulation Period................................................ 13
Rapid Amortization Period................................................ 14
Rating Agency............................................................ 18
Receivables.............................................................. 1, 4
Regulations.............................................................. 55
Removed Accounts......................................................... 7
Reserve Account.......................................................... 51
Revolving Period......................................................... 10
SAIF..................................................................... 39
Scheduled Payment Date................................................... 11
Securities Act........................................................... 8
Seller................................................................... 5
Seller Certificate....................................................... 8
Seller Interest.......................................................... 6
Seller Percentage........................................................ 28
Senior Certificates...................................................... 5
Series................................................................... 1, 4
Series Supplement........................................................ 4
Series Termination Date.................................................. 43
Service Transfer......................................................... 46
Servicer................................................................. 9
Servicer Default......................................................... 46
Servicing Fee............................................................ 9
Shared Principal Collections............................................. 15
Special Counsel.......................................................... 54
Spread Account........................................................... 51
Standard & Poor's........................................................ 38
Subordinated Certificates................................................ 5
Tax Opinion.............................................................. 8
Terms and Conditions..................................................... 30
Transfer Date............................................................ 12
Trust.................................................................... 1, 4
Trust Portfolio.......................................................... 25
Trust Termination Date................................................... 43
Trustee.................................................................. 4
U.S. Certificate Owner................................................... 54
U.S. Person.............................................................. 54
UCC...................................................................... 51
Unallocated Principal Collections........................................ 41
Underwriting Agreement................................................... 60
Withholding Agent........................................................ 57
</TABLE>
64
<PAGE>
ANNEX I
GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the globally offered MBNA Master
Credit Card Trust II Asset Backed Certificates (the "Global Securities") to be
issued in Series from time to time (each, a "Series") will be available only
in book-entry form. Investors in the Global Securities may hold such Global
Securities through any of The Depository Trust Company ("DTC"), CEDEL 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
CEDEL and Euroclear will be conducted in the ordinary way in accordance with
their normal rules and operating procedures and in accordance with
conventional eurobond practice (i.e., seven calendar day settlement).
Secondary market trading between investors holding Global Securities through
DTC will be conducted according to the rules and procedures applicable to U.S.
corporate debt obligations.
Secondary cross-market trading between CEDEL or Euroclear and DTC
Participants holding Certificates will be effected on a delivery-against-
payment basis through the respective Depositaries of CEDEL and Euroclear (in
such capacity) and as DTC Participants.
Non-U.S. holders (as described below) of Global Securities will be subject
to U.S. withholding taxes unless such holders meet certain requirements and
deliver appropriate U.S. tax documents to the securities clearing
organizations or their participants.
INITIAL SETTLEMENT
All Global Securities will be held in book-entry form by DTC in the name of
Cede & Co. as nominee of DTC. Investors' interests in the Global Securities
will be represented through financial institutions acting on their behalf as
direct and indirect Participants in DTC. As a result, CEDEL and Euroclear will
hold positions on behalf of their participants through their respective
Depositaries, which in turn will hold such positions in accounts as DTC
Participants.
Investors electing to hold their Global Securities through DTC will follow
the settlement practices applicable to prior MBNA Master Credit Card Trust II
issues. Investor securities custody accounts will be credited with their
holdings against payment in same-day funds on the settlement date.
Investors electing to hold their Global Securities through CEDEL or
Euroclear accounts will follow the settlement procedures applicable to
conventional eurobonds, except that there will be no temporary global security
and no "lock-up" or restricted period. Global Securities will be credited to
the securities custody accounts on the settlement date against payment in
same-day funds.
SECONDARY MARKET TRADING
Since the purchaser determines the place of delivery, it is important to
establish at the time of the trade where both the purchaser's and 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 prior MBNA
Master Credit Card Trust II issues in same-day funds.
Trading between CEDEL and/or Euroclear Participants. Secondary market
trading between CEDEL Participants or Euroclear Participants will be settled
using the procedures applicable to conventional eurobonds in same-day funds.
A-1
<PAGE>
Trading between DTC seller and CEDEL or Euroclear purchaser. When Global
Securities are to be transferred from the account of a DTC Participant to the
account of a CEDEL Participant or a Euroclear Participant, the purchaser will
send instructions to CEDEL or Euroclear through a CEDEL Participant or
Euroclear Participant at least one business day prior to settlement. CEDEL or
Euroclear will instruct the respective Depositary, as the case may be, to
receive the Global Securities against payment. Payment will include interest
accrued on the Global Securities from and including the last coupon payment
date to and excluding the settlement date. Payment will then be made by the
respective Depositary to the DTC Participant's account against delivery of the
Global Securities. After settlement has been completed, the Global Securities
will be credited to the respective clearing system and by the clearing system,
in accordance with its usual procedures, to the CEDEL Participant's or
Euroclear Participant's account. The Global Securities credit will appear the
next day (European time) and the cash debit will be back-valued to, and the
interest on the Global Securities will accrue from, the value date (which
would be the preceding day when settlement occurred in New York). If
settlement is not completed on the intended value date (i.e., the trade
fails), the CEDEL or Euroclear cash debit will be valued instead as of the
actual settlement date.
CEDEL Participants and Euroclear Participants will need to make available to
the respective clearing systems the funds necessary to process same-day funds
settlement. The most direct means of doing so is to pre-position funds for
settlement, either from cash on hand or existing lines of credit, as they
would for any settlement occurring within CEDEL or Euroclear. Under this
approach, they may take on credit exposure to CEDEL or Euroclear until the
Global Securities are credited to their accounts one day later.
As an alternative, if CEDEL or Euroclear has extended a line of credit to
them, CEDEL Participants or Euroclear Participants can elect not to pre-
position funds and allow that credit line to be drawn upon the finance
settlement. Under this procedure, CEDEL Participants or Euroclear Participants
purchasing Global Securities would incur overdraft charges for one day,
assuming they cleared the overdraft when the Global Securities were credited
to their accounts. However, interest on the Global Securities would accrue
from the value date. Therefore, in many cases the investment income on the
Global Securities earned during that one-day period may substantially reduce
or offset the amount of such overdraft charges, although this result will
depend on each CEDEL Participant's or Euroclear Participant's particular cost
of funds.
Since the settlement is taking place during New York business hours, DTC
Participants can employ their usual procedures for sending Global Securities
to the respective Depositary for the benefit of CEDEL Participants or
Euroclear Participants. The sale proceeds will be available to the DTC 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 CEDEL or Euroclear seller and DTC purchaser. Due to time
zone differences in their favor, CEDEL Participants and Euroclear Participants
may employ their customary procedures for transactions in which Global
Securities are to be transferred by the respective clearing system, through
the respective Depositary, to a DTC Participant. The seller will send
instructions to CEDEL or Euroclear through a CEDEL Participant or Euroclear
Participant at least one business day prior to settlement. In these cases,
CEDEL or Euroclear will instruct the respective Depositary, as appropriate, to
deliver the bonds to the DTC Participant's account against payment. Payment
will include interest accrued on the Global Securities from and including the
last coupon payment date to and excluding the settlement date. The payment
will then be reflected in the account of the CEDEL Participant or Euroclear
Participant the following day, and receipt of the cash proceeds in the CEDEL
Participant's or Euroclear Participant's account would be back-valued to the
value date (which would be the preceding day, when settlement occurred in New
York). Should the CEDEL Participant or Euroclear Participant have a line of
credit with its respective clearing system and elect to be in debit in
anticipation of receipt of the sale proceeds in its account, the back-
valuation will extinguish any overdraft charges incurred over that one-day
period. If settlement is not completed on the intended value date (i.e., the
trade fails), receipt of the cash proceeds in the CEDEL Participant's or
Euroclear Participant's account would instead be valued as of the actual
settlement date. Finally, day traders that use CEDEL or Euroclear and that
purchase Global Securities
A-2
<PAGE>
from DTC Participants for delivery to CEDEL Participants or Euroclear
Participants should note that these trades would automatically fail on the
sale side unless affirmative action were taken. At least three techniques
should be readily available to eliminate this potential problem:
(a) borrowing through CEDEL or Euroclear for one day (until the purchase
side of the day trade is reflected in their CEDEL or Euroclear accounts) in
accordance with the clearing system's customary procedures;
(b) borrowing the Global Securities in the U.S. from a DTC Participant no
later than one day prior to settlement, which would give the Global
Securities sufficient time to be reflected in their CEDEL or Euroclear
account in order to settle the sale side of the trade; or
(c) staggering the value dates for the buy and sell sides of the trade so
that the value date for the purchase from the DTC Participant is at least
one day prior to the value date for the sale to the CEDEL Participant or
Euroclear Participant.
CERTAIN U.S. FEDERAL INCOME TAX DOCUMENTATION REQUIREMENTS
A beneficial owner of Global Securities holding securities through CEDEL or
Euroclear (or through DTC if the holder has an address outside the U.S.) will
be subject to the 30% U.S. withholding tax that generally applies to payments
of interest (including original issue discount) on registered debt issued by
U.S. Persons, unless (i) each clearing system, bank or other financial
institution that holds customers' securities in the ordinary course of its
trade or business in the chain of intermediaries between such beneficial owner
and the U.S. entity required to withhold tax complies with applicable
certification requirements and (ii) such beneficial owner takes one of the
following steps to obtain an exemption or reduced tax rate:
Exemption for non-U.S. Persons (Form W-8). Beneficial owners of
Certificates that are non-U.S. Persons generally can obtain a complete
exemption from the withholding tax by filing a signed Form W-8 (Certificate
of Foreign Status). If the information shown on Form W-8 changes, a new
Form W-8 must be filed within 30 days of such change.
Exemption for non-U.S. Persons with effectively connected income (Form
4224). A non-U.S. Person, including a non-U.S. corporation or bank with a
U.S. branch, for which the interest income is effectively connected with
its conduct of a trade or business in the United States, can obtain an
exemption from the withholding tax by filing Form 4224 (Exemption from
Withholding of Tax on Income Effectively Connected with the Conduct of a
Trade or Business in the United States).
Exemption or reduced rate for non-U.S. Persons resident in treaty
countries (Form 1001). Non-U.S. Persons that are Certificate Owners
residing in a country that has a tax treaty with the United States can
obtain an exemption or reduced tax rate (depending on the treaty terms) by
filing Form 1001 (Ownership, Exemption or Reduced Rate Certificate). If the
treaty provides only for a reduced rate, withholding tax will be imposed at
that rate unless the filer alternatively files Form W-8. Form 1001 may be
filed by the Certificate Owner or his agent.
Exemption for U.S. Persons (Form W-9). U.S. Persons can obtain a complete
exemption from the withholding tax by filing Form W-9 (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, any state thereof, or any political subdivision of either (including
the District of Columbia), or (iii) an estate or trust the income of which is
includible in gross income for United States tax purposes regardless of its
source. This summary does not deal with all aspects of U.S. Federal income tax
withholding that may be relevant to foreign holders of the Global Securities.
Investors are
A-3
<PAGE>
advised to consult their own tax advisors for specific tax advice concerning
their holding and disposing of the Global Securities. Further, the IRS has
recently proposed new regulations that would revise some aspects of the
current system for withholding on amounts paid to foreign persons. Under these
proposed regulations, interest or OID paid to a nonresident alien would
continue to be exempt from U.S. withholding taxes (including backup
withholding) provided that the holder complies with the new certification
procedures.
A-4
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
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NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMA-
TION OR TO MAKE ANY REPRESENTATION NOT CONTAINED OR INCORPORATED BY REFERENCE
IN THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE SELLER OR ANY AGENT OR UNDERWRITER. NEITHER THIS PRO-
SPECTUS SUPPLEMENT NOR THE ACCOMPANYING PROSPECTUS CONSTITUTES AN OFFER OR SO-
LICITATION BY ANYONE IN ANY STATE IN WHICH SUCH OFFER OR SOLICITATION IS NOT
AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR THE ACCOM-
PANYING PROSPECTUS, NOR ANY SALE MADE HEREUNDER OR THEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AF-
FAIRS OF THE SELLER OR THE RECEIVABLES OR THE ACCOUNTS SINCE THE DATE HEREOF
OR THEREOF OR THAT THE INFORMATION CONTAINED OR INCORPORATED BY REFERENCE
HEREIN OR THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
----------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary of Terms.......................................................... S-3
MBNA's Credit Card Portfolio.............................................. S-17
The Receivables........................................................... S-19
Maturity Assumptions...................................................... S-23
Receivable Yield Considerations........................................... S-25
MBNA and MBNA Corporation................................................. S-26
Description of the Certificates........................................... S-26
Underwriting.............................................................. S-45
Index of Terms for Prospectus Supplement ................................. S-47
Annex I: Other Series Issued.............................................. A-1
PROSPECTUS
Prospectus Supplement..................................................... 2
Reports to Certificateholders............................................. 2
Available Information..................................................... 2
Incorporation of Certain Documents by Reference........................... 2
Prospectus Summary........................................................ 4
Risk Factors.............................................................. 19
The Trust................................................................. 24
MBNA's Credit Card Activities............................................. 24
The Receivables........................................................... 25
Maturity Assumptions...................................................... 26
Use of Proceeds........................................................... 27
MBNA and MBNA Corporation................................................. 27
Description of the Certificates........................................... 27
Credit Enhancement........................................................ 49
Certain Legal Aspects of the Receivables.................................. 51
Federal Income Tax Consequences........................................... 54
ERISA Considerations...................................................... 58
Plan of Distribution...................................................... 60
Legal Matters............................................................. 61
Index of Terms for Prospectus............................................. 62
Annex I: Global Clearance, Settlement and Tax Documentation Procedures.... A-1
</TABLE>
----------------
UNTIL , 1997, ALL DEALERS EFFECTING TRANSACTIONS IN THE CERTIFICATES,
WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER
A PROSPECTUS SUPPLEMENT AND A PROSPECTUS. THIS DELIVERY REQUIREMENT IS IN AD-
DITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS SUPPLEMENT AND A
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOT-
MENTS OR SUBSCRIPTIONS.
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MBNA MASTER
CREDIT CARD TRUST II
$637,500,000 CLASS A
FLOATING RATE ASSET BACKED
CERTIFICATES, SERIES 1997-C
$56,250,000 CLASS B
FLOATING RATE ASSET BACKED
CERTIFICATES, SERIES 1997-C
[LOGO OF MBNA AMERICA(R) APPEARS HERE]
MBNA AMERICA BANK,
NATIONAL ASSOCIATION
SELLER AND SERVICER
- - -------------------------------------------------------------------------------
PROSPECTUS SUPPLEMENT
- - -------------------------------------------------------------------------------
UNDERWRITERS OF THE CLASS A CERTIFICATES
MERRILL LYNCH & CO.
BEAR, STEARNS & CO. INC.
GOLDMAN, SACHS & CO.
J.P. MORGAN & CO.
SALOMON BROTHERS INC
UNDERWRITERS OF THE CLASS B CERTIFICATES
MERRILL LYNCH & CO.
GOLDMAN, SACHS & CO.
[LOGO OF RECYCLED PAPER APPEARS HERE]
THIS DOCUMENT IS PRINTED ENTIRELY ON RECYCLED PAPER.
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