<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 10, 1997
REGISTRATION NO. 333-17253
POST-EFFECTIVE AMENDMENT NO. 1 TO
REGISTRATION STATEMENT NO. 33-99324
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------
MBNA AMERICA BANK, NATIONAL ASSOCIATION
(ORIGINATOR OF THE TRUST DESCRIBED HEREIN)
(EXACT NAME AS SPECIFIED IN REGISTRANT'S CHARTER)
<TABLE>
<S> <C> <C>
UNITED STATES 6025 51-0331454
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL IDENTIFICATION NUMBER)
INCORPORATION OR CLASSIFICATION CODE
ORGANIZATION) NUMBER)
</TABLE>
WILMINGTON, DELAWARE 19884
(800) 362-6255
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
M. SCOT KAUFMAN
VICE CHAIRMAN
MBNA AMERICA BANK, NATIONAL ASSOCIATION
WILMINGTON, DELAWARE 19884-0864
(800) 362-6255
(NAME, ADDRESS INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------
Copies to:
<TABLE>
<S> <C>
CAMERON L. COWAN, ESQ. RICHARD F. KADLICK, ESQ.
ORRICK, HERRINGTON & SUTCLIFFE LLP SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
3050 K STREET, N.W. 919 THIRD AVENUE
WASHINGTON, D.C. 20007 NEW YORK, NEW YORK 10022
(202) 339-8400 (212) 735-3000
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
From time to time after this registration statement becomes effective as
determined by market conditions.
If the only securities registered on this form are to be offered pursuant to
dividend or interest reinvestment plans, please check the following box. [ ]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
------------
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
------------
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
=================================================================================================================
PROPOSED PROPOSED
MAXIMUM MAXIMUM
AMOUNT OFFERING AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF TO BE PRICE PER OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED CERTIFICATE* PRICE* FEE
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<S> <C> <C> <C> <C>
Asset Backed Certificates..................... $10,000,000,000 100% $10,000,000,000 $3,030,304
=================================================================================================================
</TABLE>
* Estimated solely for the purpose of calculating the registration fee.
------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
In accordance with Rule 429 of the General Rules and Regulations under the
Securities Act of 1933, as amended, the Prospectus included herein is a combined
prospectus which also relates to $1,366,850,000 of unissued Asset Backed
Certificates registered under Registration Statement No. 33-99324 and this
Registration Statement constitutes Post-Effective Amendment No. 1 to
Registration Statement No. 33-99324. A filing fee of $471,327.59 was paid with
Registration Statement No. 33-99324 in connection with such unissued Asset
Backed Certificates.
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<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED JANUARY 10, 1997
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 17 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 January 10, 1997.
<PAGE> 3
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 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.
2
<PAGE> 4
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 60 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 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
- ---------------
* MasterCard(R) and VISA(R) are federally registered servicemarks of MasterCard
International Inc. and Visa U.S.A., Inc., respectively.
3
<PAGE> 5
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. 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
4
<PAGE> 6
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 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
5
<PAGE> 7
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."
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
6
<PAGE> 8
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."
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
7
<PAGE> 9
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
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
8
<PAGE> 10
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 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
9
<PAGE> 11
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
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
10
<PAGE> 12
"Transfer Date") in a trust account established
for the benefit of the Certificateholders of such
Series or Class (a "Principal Funding Account")
and used to make distributions of principal to
the Certificateholders of such Series or Class on
the Scheduled Payment Date. The amount to be
deposited in the Principal Funding Account on any
Transfer Date will be limited to an amount (the
"Controlled Deposit Amount") equal to an amount
specified in the related Prospectus Supplement
(the "Controlled Accumulation Amount") plus any
deficit Controlled Accumulation Amount arising
from prior Distribution Dates. If a Series has
more than one Class of Certificates, each Class
may have a separate Principal Funding Account and
Controlled Accumulation Amount. In addition, the
related Prospectus Supplement may describe
certain priorities among such Classes with
respect to deposits of principal into such
Principal Funding Accounts. The Controlled
Accumulation Period will commence at the close of
business on a date specified in or determined in
the manner specified in the related Prospectus
Supplement and continue until the earliest of (a)
the commencement of the Rapid Amortization Period
or, if so specified in the related Prospectus
Supplement, the Rapid Accumulation Period, (b)
payment in full of the Investor Interest of the
Certificates of such Series or Class and, if so
specified in the related Prospectus Supplement,
of the Collateral Interest, if any, with respect
to such Series and (c) the Series Termination
Date with respect to such Series.
Funds on deposit in any Principal Funding Account
may be invested in permitted investments or
subject to a guaranteed rate or investment
contract or other arrangement intended to assure
a minimum 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
11
<PAGE> 13
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 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
12
<PAGE> 14
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 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
13
<PAGE> 15
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.
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
14
<PAGE> 16
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 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 will deliver its 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 satis-
15
<PAGE> 17
fied), 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 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.
16
<PAGE> 18
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 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
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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. 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. 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, if so specified in the
related Prospectus Supplement, the Rapid Accumulation Period would commence. See
"Description of the Certificates -- Pay Out Events."
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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 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
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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.
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.
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 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
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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."
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.
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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 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.
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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."
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
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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.
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.
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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
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
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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.
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
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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.
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
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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, 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.
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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.
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
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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 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
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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 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.
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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 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
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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 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.
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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 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
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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
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.
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DISCOUNT OPTION
The Seller may 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. 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. 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 ("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
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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 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
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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 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
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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.
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.
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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.
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
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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:
(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
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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 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
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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.
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.
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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 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
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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 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
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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 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.
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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 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.
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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 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.
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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 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.
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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 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
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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."
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.
OPINIONS OF COUNSEL
In connection with the issuance of each particular Series of Certificates,
Orrick, Herrington & Sutcliffe LLP, counsel to the Seller ("Special Counsel"),
will deliver certain tax opinions further discussed below generally to the
effect that, for federal income tax purposes, (i) the Trust will not be
classified as an association (or publicly traded partnership) taxable as a
corporation and (ii) the Certificates offered hereunder will be characterized as
debt. See also "Description of the Certificates -- Exchanges." However, such
opinions of Special Counsel with respect to the classification of the Trust and
the Certificates are not binding upon the Internal Revenue Service (the "IRS")
or the courts, and no ruling will be sought from the IRS with respect to the
classification of either the Trust or the Certificates.
Additionally, Special Counsel has prepared the statements under the
headings "Summary of Terms -- Tax Status" and "Federal Income Tax Consequences"
in this Prospectus, and has filed a separate tax opinion as an exhibit to the
Registration Statement to the effect that such statements, to the extent that
they constitute matters of law or legal conclusions with respect thereto, are
correct in all material respects. Such statements are intended as an explanatory
discussion of the possible effects of the classification of the Trust and the
Certificates on investors in offered Certificates generally and of related tax
matters affecting investors generally. Such statements, however, do not purport
to furnish information in the level of detail or with the attention to the
investors specific tax circumstances that would be provided by an investor's own
tax
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advisers with regard to the such tax consequences. Accordingly, each investor is
advised to consult its own tax advisers with regard to the tax consequences to
it of investing in Certificates.
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 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, in connection with the issuance of each Series of
Certificates offered hereunder, Special Counsel will deliver its opinion
generally to the effect 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.
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, in connection with the issuance of each Series of
Certificates, Special Counsel will deliver its opinion generally to the effect
that, under current law as in effect on the
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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
will deliver its 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 will not bind the IRS and thus no assurance can be given that such
treatment will prevail. Further, such opinion will be 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 will deliver its 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, 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
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(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 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
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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.
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
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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 "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
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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.
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
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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.
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.
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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.
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INDEX OF TERMS FOR PROSPECTUS
<TABLE>
<CAPTION>
TERM PAGE
- ------------------------------------------------------------------------------------ ------
<S> <C>
Accounts............................................................................ 1, 3
Accumulation Period................................................................. 4
Additional Accounts................................................................. 4
Additional Interest................................................................. 13
Agreement........................................................................... 3
Amortization Period................................................................. 4
Assignment.......................................................................... 34
Bank Portfolio...................................................................... 3
Base Rate........................................................................... 18
BIF................................................................................. 36
Cash Collateral Account............................................................. 48
Cash Collateral Guaranty............................................................ 48
Cede................................................................................ 2
CEDEL............................................................................... 27
CEDEL Participants.................................................................. 27
Certificate Owners.................................................................. 2
Certificate Rate.................................................................... 4
Certificateholder................................................................... 27
Certificateholders.................................................................. 2
Certificates........................................................................ 1, 3
Class............................................................................... 1, 3
Closing Date........................................................................ 9
Code................................................................................ 16, 54
Collateral Interest................................................................. 48
Collection Account.................................................................. 8
Commission.......................................................................... 2
Controlled Accumulation Amount...................................................... 11
Controlled Accumulation Period...................................................... 10
Controlled Amortization Amount...................................................... 10
Controlled Amortization Period...................................................... 9
Controlled Deposit Amount........................................................... 11
Controlled Distribution Amount...................................................... 10
Cooperative......................................................................... 28
Corporation......................................................................... 8
Credit Enhancement.................................................................. 3
Credit Enhancement Percentage....................................................... 37
Credit Enhancement Provider......................................................... 44
Cut-Off Date........................................................................ 5
Defaulted Accounts.................................................................. 5
Definitive Certificates............................................................. 7
Depositaries........................................................................ 26
Depository.......................................................................... 26
Determination Date.................................................................. 40
Disclosure Document................................................................. 7
Discount Percentage................................................................. 36
Distribution Account................................................................ 36
Distribution Date................................................................... 8
DoL................................................................................. 56
DTC................................................................................. 2
Eligible Account.................................................................... 33
Eligible Receivable................................................................. 33
Enhancement......................................................................... 3
Enhancement Invested Amount......................................................... 47
ERISA............................................................................... 16
</TABLE>
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<TABLE>
<CAPTION>
TERM PAGE
- ------------------------------------------------------------------------------------ ------
<S> <C>
Euroclear........................................................................... 28
Euroclear Operator.................................................................. 28
Euroclear Participants.............................................................. 28
Excess Finance Charge Collections................................................... 13
Exchange............................................................................ 6
Exchange Act........................................................................ 2
FDIA................................................................................ 17
FDIC................................................................................ 5
Finance Charge Account.............................................................. 36
Finance Charge Receivables.......................................................... 5
FIRREA.............................................................................. 17
Full Investor Interest.............................................................. 14
Funding Period...................................................................... 13
Group............................................................................... 12
Holders............................................................................. 29
Independent Investors............................................................... 15
Indirect Participants............................................................... 26
Ineligible Receivable............................................................... 32
Interchange......................................................................... 3
Interest Funding Account............................................................ 29
Interest Period..................................................................... 8
Investor Charge-Off................................................................. 13
Investor Default Amount............................................................. 13
Investor Interest................................................................... 5
Investor Percentage................................................................. 5
Investor Servicing Fee.............................................................. 13
IRS................................................................................. 51
L/C Bank............................................................................ 48
MBNA................................................................................ 1
MBNA Hallmark....................................................................... 22
Minimum Seller Interest............................................................. 6
Monthly Interest.................................................................... 13
Monthly Period...................................................................... 8
Moody's............................................................................. 36
OID................................................................................. 54
Participants........................................................................ 26
Participation Agreement............................................................. 34
Participations...................................................................... 4, 34
Pay Out Event....................................................................... 11
Permitted Investments............................................................... 36
Plan Asset Regulation............................................................... 56
Plans............................................................................... 56
Portfolio Yield..................................................................... 18
Pre-Funding Account................................................................. 14
Pre-Funding Amount.................................................................. 14
Principal Account................................................................... 36
Principal Amortization Period....................................................... 10
Principal Commencement Date......................................................... 9
Principal Funding Account........................................................... 11
Principal Receivables............................................................... 5
Principal Terms..................................................................... 7
Prospectus Supplement............................................................... 1
Qualified Institution............................................................... 36
Rapid Accumulation Period........................................................... 11
Rapid Amortization Period........................................................... 12
Rating Agency....................................................................... 16
</TABLE>
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<TABLE>
<CAPTION>
TERM PAGE
- ------------------------------------------------------------------------------------ ------
<S> <C>
Receivables......................................................................... 1, 3
Regulations......................................................................... 53
Removed Accounts.................................................................... 6
Reserve Account..................................................................... 49
Revolving Period.................................................................... 9
SAIF................................................................................ 36
Scheduled Payment Date.............................................................. 9
Securities Act...................................................................... 7
Seller.............................................................................. 4
Seller Certificate.................................................................. 6
Seller Interest..................................................................... 5
Seller Percentage................................................................... 25
Senior Certificates................................................................. 4
Series.............................................................................. 1, 3
Series Supplement................................................................... 3
Series Termination Date............................................................. 41
Service Transfer.................................................................... 43
Servicer............................................................................ 8
Servicer Default.................................................................... 44
Servicing Fee....................................................................... 8
Shared Principal Collections........................................................ 13
Special Counsel..................................................................... 51
Spread Account...................................................................... 49
Standard & Poor's................................................................... 36
Subordinated Certificates........................................................... 4
Tax Opinion......................................................................... 7
Terms and Conditions................................................................ 28
Transfer Date....................................................................... 11
Trust............................................................................... 1, 3
Trust Portfolio..................................................................... 23
Trust Termination Date.............................................................. 41
Trustee............................................................................. 3
U.S. Certificate Owner.............................................................. 52
U.S. Person......................................................................... 52
UCC................................................................................. 49
Unallocated Principal Collections................................................... 39
Underwriting Agreement.............................................................. 58
Withholding Agent................................................................... 55
</TABLE>
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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.
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
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<PAGE> 65
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 from DTC Participants for delivery
to CEDEL Participants or
A-2
<PAGE> 66
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 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
A-3
<PAGE> 67
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> 68
PART II
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following is an itemized list of the estimated expenses to be incurred
in connection with the offering of the securities being offered hereunder other
than underwriting discounts and commissions.
<TABLE>
<S> <C>
Registration Fee................................................ $3,030,304
Printing and Engraving.......................................... 420,000
Trustee's Fees.................................................. 45,000
Legal Fees and Expenses......................................... 1,200,000
Blue Sky Fees and Expenses...................................... 20,000
Accountants' Fees and Expenses.................................. 180,000
Rating Agency Fees.............................................. 3,600,000
Miscellaneous Fees.............................................. 60,000
----------
Total...................................................... $8,555,304
==========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article TENTH of the Articles of Association of MBNA America Bank, National
Association (the "Bank"), provides that the Bank shall indemnify and advance
expenses to (a) its currently acting and its former directors to the fullest
extent permitted by the Maryland General Corporation Law, and (b) to its
officers to the same extent as its directors (and may do so to such further
extent as is consistent with law). In addition, such Article provides that the
Board of Directors may by by-law, resolution or agreement make further provision
for indemnification of directors, officers, employees and agents to the fullest
extent permitted by the Maryland General Corporation Law. Further, such Article
provides that the Bank may purchase insurance for the purpose of indemnifying
its directors and officers to the extent that such indemnification is permitted
by the foregoing provisions and not prohibited by federal banking laws and
regulations.
Section 17 of the By-laws of the Bank provides that the Bank shall
indemnify (a) its directors to the fullest extent that indemnification of
directors is permitted by the Maryland General Corporation Law and (b) its
officers to the same extent as its directors (and to such further extent as is
consistent with law). In addition, such Section provides that the Bank shall
indemnify its directors and officers who, while serving as directors or officers
of the Bank, also serve at the request of the Bank as a director, officer,
partner, trustee, employee, agent or fiduciary of another corporation,
partnership, joint venture, trust, other enterprise or employee benefit plan to
the fullest extent consistent with law.
Section 17 of the Bank's By-laws also provides that any director or officer
seeking indemnification within the foregoing rights of indemnification shall be
entitled to advances from the Bank for payment of the reasonable expenses
incurred by him in connection with the matter as to which he is seeking
indemnification in the manner and to the fullest extent permissible under the
Maryland General Corporation Law and that the Board of Directors may make
further provision consistent with law for indemnification and advance of
expenses to directors, officers, employees and agents by resolution, agreement
or otherwise. Further, such Section provides that the foregoing rights of
indemnification shall not be deemed exclusive of any other right, with respect
to indemnification or otherwise, to which those seeking indemnification may be
entitled under any insurance or other agreement or resolution of stockholders or
disinterested directors or otherwise.
The Maryland General Corporation Law provides that a corporation may
indemnify any director made a party to a proceeding by reason of service in that
capacity unless it is established that: (1) the act or omission of the director
was material to the matter giving rise to the proceeding and (a) was committed
in bad faith or (b) was the result of active and deliberate dishonesty, or (2)
the director actually received an improper personal benefit in money, property
or services, or (3) in the case of any criminal proceeding, the director had
reasonable cause to believe that the act or omission was unlawful. To the extent
that a director had been successful in defense of any proceeding, the Maryland
General Corporation Law provides that he shall be
II-1
<PAGE> 69
indemnified against reasonable expenses incurred in connection therewith. A
Maryland corporation may indemnify its officers to the same extent as its
directors and to such further extent as is consistent with law.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENTS
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ---------- -------------------------------------------------------------------------------------
<C> <C> <S>
1.1 -- Form of Underwriting Agreement (incorporated by reference to Exhibit 1 to the
registrant's Registration Statement on Form S-3, No. 33-64244)
4.1 -- Pooling and Servicing Agreement dated as of August 4, 1994, and certain other related
agreements as Exhibits thereto (incorporated by reference to Form 8-K filed with the
Securities and Exchange Commission on October 14, 1994)
4.2 -- First Amendment to Pooling and Servicing Agreement dated as of March 11, 1996
(incorporated by reference to Form 8-K filed with the Securities and Exchange
Commission on May 14, 1996)
4.3 -- Form of Series Supplement, Version #1 (including form of Certificate) (incorporated
by reference to Exhibit 4.3 to the registrant's Registration Statement on Form S-3,
No. 33-84890)
4.4 -- Form of Series Supplement, Version #2 (including forms of Certificates) (incorporated
by reference to Exhibit 4.4 to the registrant's Registration Statement on Form S-3,
No. 33-84890)
4.5 -- Form of Prospectus Supplement, Version #1
4.6 -- Form of Prospectus Supplement, Version #2
5.1 -- Opinion of Richards, Layton & Finger with respect to legality, including an opinion
of John W. Scheflen, Esq. with respect to certain corporate matters as an Exhibit
thereto
8.1 -- Opinion of Orrick, Herrington & Sutcliffe LLP with respect to tax matters
23.1 -- Consent of John W. Scheflen, Esq. (included in his opinion filed as an Exhibit to
Exhibit 5.1)
23.2 -- Consent of Orrick, Herrington & Sutcliffe LLP (included in its opinion filed as
Exhibit 8.1)
23.3 -- Consent of Richards, Layton & Finger (included in its opinion filed as Exhibit 5.1)
24.1 -- Powers of Attorney (included on page II-5)
</TABLE>
(b) Financial Statements
All financial statements, schedules and historical financial information
have been omitted as they are not applicable.
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(a) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement; (i) to
include any prospectus required by Section 10(a)(3) of the Securities Act
of 1933; (ii) to reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement; notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high and of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table in
the effective registration statement; (iii) to include any material
information with respect to the plan of distribution not previously
disclosed in the registration statement or any
II-2
<PAGE> 70
material change in such information in the registration statement;
provided, however, that (a)(i) and (a)(ii) will not apply if the
information required to be included in a post-effective amendment thereby
is contained in periodic reports filed with or furnished to the Commission
by the registrant pursuant to Section 13 or Section 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in this
registration statement.
(b) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering hereof.
(c) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(d) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the registrant's annual report
pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934
(and, where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Securities Exchange Act of 1934)
that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(e) To provide to the underwriters at the closing specified in the
underwriting agreements certificates in such denominations and registered
in such names as required by the underwriters to permit prompt delivery to
each purchaser.
(f) That insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the provisions described
under Item 15 above, or otherwise, the registrant has been advised that in
the opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in
the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to
a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
(g) That, for purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of prospectus
filed as part of this Registration Statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act of 1933 shall be deemed
to be part of this Registration Statement as of the time it was declared
effective.
(h) That, for the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form
of prospectus shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE> 71
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL
OF THE REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS AMENDMENT
NO. 1 TO THE REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF WILMINGTON, STATE OF
DELAWARE, ON JANUARY 10, 1997.
MBNA AMERICA BANK, NATIONAL ASSOCIATION
as originator of the Trust and Registrant
By: /s/ THOMAS DUNN
-------------------------------------------
THOMAS DUNN
SENIOR VICE PRESIDENT
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS AMENDMENT NO. 1 TO THE REGISTRATION STATEMENT HAS BEEN SIGNED ON JANUARY
10, 1997 BY THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- --------------------------------------------- ----------------------------------------------
<S> <C>
/s/ JAMES H. BERICK, ESQ.* Director
- ---------------------------------------------
JAMES H. BERICK, ESQ.
/s/ CHARLES M. CAWLEY* Chief Executive Officer, Director
- ---------------------------------------------
CHARLES M. CAWLEY
/s/ BENJAMIN R. CIVILETTI, ESQ.* Director
- ---------------------------------------------
BENJAMIN R. CIVILETTI, ESQ.
/s/ JOHN R. COCHRAN* Director
- ---------------------------------------------
JOHN R. COCHRAN
/s/ RONALD W. DAVIES* Director
- ---------------------------------------------
RONALD W. DAVIES
/s/ BRUCE L. HAMMONDS* Director
- ---------------------------------------------
BRUCE L. HAMMONDS
/s/ M. SCOT KAUFMAN* Chief Financial Officer, Director
- ---------------------------------------------
M. SCOT KAUFMAN
/s/ ALFRED LERNER* Director
- ---------------------------------------------
ALFRED LERNER
/s/ RANDOLPH D. LERNER* Director
- ---------------------------------------------
RANDOLPH D. LERNER
/s/ VICTOR P. MANNING* Chief Accounting Officer
- ---------------------------------------------
VICTOR P. MANNING
/s/ STUART L. MARKOWITZ, M.D.* Director
- ---------------------------------------------
STUART L. MARKOWITZ, M.D.
</TABLE>
II-4
<PAGE> 72
<TABLE>
<CAPTION>
SIGNATURE TITLE
- --------------------------------------------- ----------------------------------------------
<S> <C>
/s/ MICHAEL ROSENTHAL, PH.D.* Director
- ---------------------------------------------
MICHAEL ROSENTHAL, PH.D.
/s/ LANCE L. WEAVER* Director
- ---------------------------------------------
LANCE L. WEAVER
/s/ VERNON H.C. WRIGHT* Chief Corporate Finance Officer, Director
- ---------------------------------------------
VERNON H.C. WRIGHT
</TABLE>
*By: /s/ THOMAS DUNN
-------------------------------
THOMAS DUNN
ATTORNEY-IN-FACT
- ---------------
* Note: Powers of Attorney appointing Vernon H.C. Wright, Thomas Wren, Mary Lou
Beigel and Thomas Dunn, or any of them acting singly, to execute the
Registration Statement and any amendments thereto on behalf of the above-named
individuals, were previously filed with the Securities and Exchange
Commission.
II-5
<PAGE> 73
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ---------- ------------------------------------------------------------------------------
<C> <C> <S> <C>
1.1 -- Form of Underwriting Agreement (incorporated by reference to Exhibit 1 to the
registrant's Registration Statement on Form S-3, No. 33-64244)
4.1 -- Pooling and Servicing Agreement dated as of August 4, 1994, and certain other
related agreements as Exhibits thereto (incorporated by reference to Form 8-K
filed with the Securities and Exchange Commission on October 14, 1994)
4.2 -- First Amendment to Pooling and Servicing Agreement dated as of March 11, 1996
(incorporated by reference to Form 8-K filed with the Securities and Exchange
Commission on May 14, 1996)
4.3 -- Form of Series Supplement, Version #1 (including form of Certificate)
(incorporated by reference to Exhibit 4.3 to the registrant's Registration
Statement on Form S-3, No. 33-84890)
4.4 -- Form of Series Supplement, Version #2 (including forms of Certificates)
(incorporated by reference to Exhibit 4.4 to the registrant's Registration
Statement on Form S-3, No. 33-84890)
4.5 -- Form of Prospectus Supplement, Version #1
4.6 -- Form of Prospectus Supplement, Version #2
5.1 -- Opinion of Richards, Layton & Finger with respect to legality, including an
opinion of John W. Scheflen, Esq. with respect to certain corporate matters as
an Exhibit thereto
8.1 -- Opinion of Orrick, Herrington & Sutcliffe LLP with respect to tax matters
23.1 -- Consent of John W. Scheflen, Esq. (included in his opinion filed as an Exhibit
to Exhibit 5.1)
23.2 -- Consent of Orrick, Herrington & Sutcliffe LLP (included in its opinion filed
as Exhibit 8.1)
23.3 -- Consent of Richards, Layton & Finger (included in its opinion filed as Exhibit
5.1)
24.1 -- Powers of Attorney (included on page II-5)
</TABLE>
<PAGE> 1
Version #1
Prospectus Supplement
(To Prospectus dated __________, 199__)
$__________
MBNA MASTER CREDIT CARD TRUST II
SERIES [199__-__] [FLOATING RATE] [____%] ASSET BACKED CERTIFICATES
MBNA AMERICA BANK, NATIONAL ASSOCIATION
SELLER AND SERVICER
Each Series [199__-__] [Floating Rate] [____%] Asset Backed
Certificate (collectively, the "Certificates") will represent an undivided
interest in 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 credit card accounts (the "Accounts"), all monies due or to become
due in payment of the Receivables, [the right to receive Interchange allocable
to the Certificates] [moneys on deposit in bank accounts of the Trust and
certain investment earnings thereon] and [the benefits of the credit
enhancement, as described herein]. [In addition, the Collateral Interest (as
defined herein) will be issued in the initial amount of $______ 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 investor certificates
issued by the Trust and will service the Receivables. MBNA has offered and may
offer from time to time other series of certificates that evidence undivided
interests in certain assets of the Trust, which may have terms significantly
different from the Certificates.
(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" IN THIS
PROSPECTUS SUPPLEMENT BEGINNING ON PAGE S-22 AND IN] THE PROSPECTUS BEGINNING
ON PAGE __.
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 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 CERTIFICATE % % %
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL $ $ $
====================================================================================================================================
</TABLE>
(1) Plus accrued interest, if any, [at the initial Certificate Rate,] from
__________, 199__.
(2) Before deduction of expenses estimated to be $__________.
<PAGE> 2
(continued from previous page)
The Certificates are offered by the Underwriter[s] when, as and if
issued by the Trust and accepted by the Underwriter[s] and subject to the
Underwriter[s]' 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
__________, ____, through the facilities of The Depository Trust Company, CEDEL
S.A. and the Euroclear System.
[Underwriter[s]]
The date of this Prospectus Supplement is __________, 199__
[Interest will accrue on the Certificates at the rate of ____% per
annum. Interest with respect to the Certificates will be distributed on
___________ and on the ____ day of each [month] thereafter (or, if such ____
day is not a business day, the next succeeding business day) (the "Distribution
Date").] [Interest will accrue on the Certificates at the rate of ____% per
annum with respect to the initial Interest Period and with respect to each
subsequent Interest Period at the rate of ____% per annum [above] [below]
[times] ____ prevailing on the related Rate Determination Date (as defined
herein), [but in no event in excess of ____% per annum]. Interest with respect
to the Certificates will be distributed on ____________ and on the ____ day of
each [month] thereafter (or, if such ____ day is not a business day, the next
succeeding business day) (the "Distribution Date").] Principal [will be paid
on __________, 199__] [is scheduled to be distributed on each Distribution Date
commencing on the Distribution Date in __________ [and ending on the
Distribution Date in _________], but may be paid earlier or later under certain
limited circumstances described herein. See "Maturity Assumptions."
[The fractional undivided interest in the Trust represented by the
Collateral Interest will be subordinated to the extent necessary to fund
payments with respect to the Certificates, to the extent described herein.]
[Application will be made to list the Certificates on the Luxembourg
Stock Exchange [other Exchange]].
----------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER[S] MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE
CERTIFICATES AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
----------------
THE CERTIFICATES OFFERED HEREBY CONSTITUTE A SEPARATE SERIES OF
CERTIFICATES BEING OFFERED BY THE SELLER FROM TIME TO TIME PURSUANT TO ITS
PROSPECTUS DATED __________ ____, 199__. 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> 3
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" on page S-__ and in the
"Index of Terms for Prospectus" on page __.
<TABLE>
<S> <C>
Type of Securities . . . . . . . . . . . Series [199__-__] [Floating Rate] [____%] Asset Backed Certificates.
Trust . . . . . . . . . . . . . . . . . . The MBNA Master Credit Card Trust II (the "Trust") was formed as a master trust pursuant
to a pooling and servicing agreement (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 [199__-__] Supplement") (the term
"Agreement," unless the context requires otherwise, refers to the Agreement as
supplemented by the Series [199__-__] Supplement). As used herein, the term
"Certificates" refers to the Series [199__-__] [Floating Rate] [____%] Asset Backed
Certificates, the term "Certificateholders" refers to holders of the Certificates and
the term "Series" refers to any series of certificates issued by the Trust, including
the Certificates.
The Trust has previously issued ____ other Series. See "Description of the Certificates
-- Prior Issuances of Certificates" for a summary of each previously issued 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, 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
</TABLE>
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* MasterCard and VISA are registered trademarks of MasterCard International
Incorporated and VISA USA, Inc., respectively.
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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)],
[including the benefits of the Credit Enhancement described herein] [and any Credit
Enhancement issued with respect to any other Series issued by the Trust (the benefits
of such Credit Enhancement issued with respect to any other Series issued by the Trust
will not be available for the benefit of the Certificateholders)]. [The holders of the
certificates of other Series will not be entitled to the benefit of the Credit
Enhancement provided for the Certificates.] The term "Credit Enhancement" means, with
respect to any Series, any subordination, letter of credit, cash collateral guaranty or
account, surety bond, insurance policy, spread account, collateral interest, reserve
account or other contract, agreement, or cross-support feature for the benefit of the
Certificateholder of such Series.
The Seller has conveyed to the Trustee 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 [__________, ____ and __________, ____,] and has
conveyed and will convey all Receivables arising under the Accounts from time to time
thereafter until termination of the Trust. In addition, pursuant to the Agreement,
MBNA may (subject to certain limitations and conditions) designate Additional Accounts
for inclusion in the Trust [or, in lieu thereof or in addition thereto, include
Participations in the Trust]. See "The Receivables" and "Description of the
Certificates -- Addition of Trust Assets" in the Prospectus.
Certificate Interest
and Principal . . . . . . . . . . . . . . [Each of the Certificates offered hereby represents an undivided interest in the Trust.
Each Certificate represents the right to receive payments of (i) interest at the rate
of ____% per annum (the "Certificate Rate"), accruing from __________, ____ (the
"Closing Date") and (ii) payments of principal [during] [the Controlled Amortization
Period] [the Principal Amortization Period] [on the Scheduled Payment Date] or, under
certain limited circumstances, the Rapid Amortization Period, funded from a percentage
of the payments received with respect to the Receivables and certain
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other available funds allocable to the Certificateholders as described herein.]
[Each of the Certificates offered hereby represents an undivided interest in the Trust.
Each Certificate represents the right to receive payments of (i) interest at the rate
of ____% per annum with respect to the initial Interest Period and, with respect to
each subsequent Interest Period, ____% per annum [above] [below] [times] ____________
(the "Index") prevailing on the [____ day] [____ business day] immediately preceding
the commencement of such Interest Period (the "Rate Determination Date"), [but in no
event in excess of ____% per annum] (such rate, the "Certificate Rate"), accruing from
the Closing Date and (ii) payments of principal [during] [the Controlled Amortization
Period] [the Principal Amortization Period] [on the Scheduled Payment Date] or, under
certain limited circumstances, the Rapid Amortization Period, funded from a percentage
of the payments received with respect to the Receivables and certain other available
funds allocable to the Certificateholders as described herein.]
[The "Collateral Interest" in the initial amount of $__________ (which amount represents
____% of the sum of the initial Investor Interest and the initial Collateral Interest)
constitutes enhancement for the Certificates. The holders of the Collateral Interest
are referred to herein as the "CA Investors" and their interest in the Trust Assets is
referred to as the "Collateral Interest." Allocations will be made to the Collateral
Interest and the holders of the Collateral Interest will have voting and certain other
rights as if it were a subordinated class of Certificates.]
The assets of the Trust will be allocated among the Certificateholders, the holders of
certificates of any other Series that have been or may be issued[, the Collateral
Interest (and any similar amount issued in connection with any other series)] and the
holder of the Seller Certificate. The aggregate undivided interest in the Principal
Receivables represented by the Certificates (the "Investor Interest") [initially will
equal $__________ (the "Initial Investor Interest") [and will, unless (a) insufficient
Principal Receivables [or Participations] are added to the Trust or an insufficient
amount of principal payments are made to other amortizing Series, (b) there are
unreimbursed Investor Charge Offs or (c) a Pay Out Event occurs, increase to
$__________ (the "Full Investor Interest") during the
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Funding Period, remain fixed at the Full Investor Interest during the Revolving Period]
and will decline as principal is paid to the Certificateholders during an Amortization
Period [(including payments of the Economic Pay Out Amount on the Economic Pay Out
Distribution Date)]] [will remain fixed at the aggregate initial principal amount of
Certificates except as otherwise provided herein]. [During the Amortization Period,
for the sole purpose of allocating collections of Finance Charge Receivables and the
amount of Receivables in Defaulted Accounts for each Monthly Period, the Investor
Interest will be reduced (in such case, the "Adjusted Investor Interest") by the amount
on deposit in the Principal Funding Account.]
The Seller initially will hold the remaining undivided interest in the Principal
Receivables in the Trust not represented by the Certificates[, the Collateral Interest]
or any other Series of certificates that have been or may be issued (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 representing any Series of certificates 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. Any Exchange involving the Seller Certificate will have the effect of
decreasing the Seller Interest. The Certificates will be issued pursuant to the
Agreement. See "Description of the Certificates" in the Prospectus.
The final distribution of principal and interest on the Certificates will be made no
later than __________, ____ (the "Series [199__-__] Termination Date") in the manner
provided in "Description of the Certificates -- Final Payment of Principal;
Termination" in the Prospectus. After the Series [199__-__] Termination Date, the
Trust will have no further obligation to pay principal or interest on the Certificates.
The Certificates will include the right to receive (but only to the extent needed to make
required payments under the Agreement) a varying percentage (each, the "Investor
Percentage") of the collections of Finance Charge Receivables and Principal Receivables
processed during each calendar month (a "Monthly Period"). The Investor Percentage
with respect to the allocation of Finance Charge Receivables and Receivables in
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Defaulted Accounts at all times will be based on a fraction, the numerator of which is
the Investor Interest [(Adjusted Investor Interest with respect to the allocation of
Finance Charge Receivables and Receivables in Defaulted Accounts during the [Controlled
Accumulation Period] [Rapid Accumulation Period])] [plus the Collateral Interest,] [plus
any Enhancement Invested Amount] as of the close of business on the last day of the prior
Monthly Period and the denominator of which is the greater of (a) the aggregate amount of
Principal Receivables in the Trust as of the close of business on such day (adjusted in
certain Monthly Periods due to the Addition or removal of Accounts [or Participations])
and (b) the sum of the numerators used to calculate the investor percentages with respect
to such Receivables for all Series outstanding. The Investor Percentage with respect to
the allocation of Principal Receivables during the Revolving Period will be [based on a
fraction, the numerator of which is the Investor Interest, [plus the Collateral Interest]
as of the close of business on the last day of the prior Monthly Period, and the
denominator of which is the greater of (a) the aggregate amount of Principal Receivables
in the Trust as of the close of business on such day (adjusted in certain Monthly Periods
due to the addition or removal of Accounts or [Participations]) and (b) the sum of the
numerators used to calculate the investor percentages with respect to Principal
Receivables for all Series outstanding]. The Investor Percentage with respect to the
allocation of Principal Receivables [during either] [Amortization Period] [Accumulation
Period] [will be based on a fraction, the numerator of which is the Investor Interest at
the close of business on the last day of the Revolving Period, and the denominator of
which is the greater of (a) the aggregate amount of Principal Receivables in the Trust as
of the close of business on the last day of the prior Monthly Period (adjusted in certain
Monthly Periods due to the addition of Accounts [or Participations]) and (b) the sum of
the numerators used to calculate the investor percentages with respect to Principal
Receivables for all series outstanding. See "Description of the Certificates -- Investor
Percentage and Seller Percentage."] [(A) with respect to any day during a Monthly Period
occurring prior to the Fixed Principal Allocation Date, the Floating Allocation
Percentage for such Monthly Period, and (B) with respect to any day during a Monthly
Period occurring on or after the Fixed Principal Allocation Date, the percentage
equivalent (which percentage shall never exceed 100%) of a fraction, the numerator of
which is
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the [Adjusted] Investor Interest [plus the Collateral Interest] as of the last day of
the Monthly Period occurring immediately prior to the Fixed Principal Allocation Date
and the denominator of which is the greater of (x) the aggregate amount of Principal
Receivables at the end of the day on the last day of the preceding Monthly Period and
(y) the sum of the numerators used to calculate the investor percentages with respect
to Principal Receivables for all Series of certificates outstanding] [; provided,
however, that, because Series [199__-__] is subject to being paired with a Companion
Series, if a Pay Out Event occurs with respect to Series [199__-__] during its
[Controlled Amortization Period] [Principal Amortization Period] [Accumulation Period],
and if at such time Series [199__-__] is paired with a Companion Series, the numerator
will be reset to equal the Investor Interest at the end of the last day prior to the
occurrence of such Pay Out Event]. See "Description of the Certificates -- Companion
Series" in the Prospectus.
The Certificates represent interests in the Trust only and do 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.
[Subordination to
Other Series . . . . . . . . . . . . . . The Certificates will be subordinated in right of payment of [interest] [and] [principal]
to the certificates of Series [199__-__].]
[Issuance of Additional
Certificates . . . . . . . . . . . . . . After the completion of the offering made hereby, the Seller may cause the Trustee to
issue additional Certificates ("Additional Certificates") from time to time during the
Revolving Period, provided that certain conditions included in the Series [199__-__]
Supplement are met. In connection with each Additional Issuance, the outstanding
principal amount of the Certificates and the aggregate amount of Credit Enhancement
will be increased pro rata. When issued, the Additional Certificates will be identical
in all respects to the other outstanding Certificates. See "Description of the
Certificates -- Issuance of Additional 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,
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with respect to certain Additional Accounts, as applied on __________]. 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 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 __________, ____, was
$__________ comprised of $__________ of Principal Receivables and $__________ of
Finance Charge Receivables. The Finance Charge Receivables will not affect the amount
of the Investor Interest represented by the Certificates or the amount of the Seller
Interest, which are determined on the basis of the amount of Principal Receivables in
the Trust. The aggregate undivided interest in the Principal Receivables in the Trust
evidenced by the Certificates will never exceed the amount of the Investor Interest
regardless of the total amount of Principal Receivables in the Trust at any time.
[On __________, ____ and on __________, ____, the Seller conveyed to the Trust the
Receivables in certain Additional Accounts. See "The Receivables" and "Description of
the Certificates -- Addition of Accounts" in the Prospectus.]
[Funding Period . . . . . . . . . . . . . During the period from and including the Closing Date to but excluding the earliest of
(i) the day on which the Investor Interest equals the Full Investor Interest, (ii) the
day on which a Pay Out Event occurs and (iii) the __________ 199__ Distribution Date
(the "Funding Period"), the Pre-Funding Amount will be held in a trust account
established with the Trustee for the benefit of the Certificateholders (the
"Pre-Funding Account"). The "Pre-Funding Amount" will equal $__________, less the
amounts of any increases in the Investor Interest pursuant to the Series [199__-__]
Supplement in connection with the addition of Principal Receivables to the Trust or
principal payments made to other amortizing Series.
[Funds on deposit in the Pre-Funding Account will be invested by the Trustee in certain
Permitted Investments
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[pursuant to a guaranteed rate agreement] [guaranteed investment contract]. Interest
earnings on the Pre-Funding Amount (net of investment losses and expenses) will be used
to pay interest on the Certificates during the Funding Period.]
During the Funding Period, funds on deposit in the Pre-Funding Account will be withdrawn
and paid to the Seller to the extent of any increases in the Investor Interest. The
Seller expects that the Investor Interest will equal the Full Investor Interest by the
__________ 199__ Monthly Period. In the event that the Investor Interest does not for
any reason equal the Full Investor Interest by the end of the Funding Period, any
amount remaining in the Pre-Funding Account will be payable to the Certificateholders
on the Distribution Date which is the last day of the Funding Period.]
[Early Termination
Amount . . . . . . . . . . . . . . . . . An early termination amount (the "Early Termination Amount") will be payable by the
Seller on the first Distribution Date following the end of the Funding Period if any
Pre-Funding Amount exists at the end of the Funding Period. The Early Termination
Amount will equal the excess, if any, discounted as described below, of (i) the amount
of interest that would have accrued on such Pre-Funding Amount at the Certificate Rate
during the period commencing on and including such Distribution Date to, but excluding,
__________, over (ii) the amount of interest that would have accrued on such
Pre-Funding Amount over the same period at a per annum rate of interest equal to the
bond equivalent yield to maturity on the Determination Date preceding such Distribution
Date on [__________]. Such excess shall be discounted to present value to such
Distribution Date at the applicable yield described in clause (ii).]
[Denominations . . . . . . . . . . . . . Beneficial interests in the Certificates will be offered for purchase in denominations of
[$___________] and integral multiples thereof. Each [$__________] denomination
represents ____th of the Certificate Owners' undivided interest in Series [199__-__].]
Registration of Certificates . . . . . . The Certificates 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 except under the limited circumstances described herein.
Certificateholders may elect to hold their Investor Certificates through DTC (in the
United States) or
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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 [from Servicer Interchange on deposit in the Collection
Account] a [monthly] fee as servicing compensation from the Trust [on each Transfer
Date] [on the ____ day of each month (or if such day is not a business day, the next
succeeding business day)] equal to [one-____ of the product of (i) ____% per annum and
(ii) the [sum of the] [Adjusted] Investor Interest [and Collateral Interest] as of the
[preceding Record Date] [last day of the prior Monthly Period] [and, following the
occurrence of an Economic Pay Out Event, the Enhancement Invested Amount, if any, as of
the preceding Record Date (the "Investor Servicing Fee"). See "Description of the
Certificates -- Servicing Compensation and Payment of Expenses" herein and in the
Prospectus.
Interest Payments . . . . . . . . . . . . Interest on the Certificates for each Interest Period will be distributed on __________,
____, and on the ____th day of each [month] [__________] thereafter, or if such day is
not a business day, on the next succeeding business day (each, a "Distribution Date"),
in an amount equal to [one-____ of the] product of the [applicable] Certificate Rate
and the [sum of the] Investor Interest [and the Pre-Funding Amount, if any], as of the
[preceding Record Date] [[____] [last] day of the prior Monthly Period] (or in the case
of the first Distribution Date, as of the Closing Date. [Interest will be calculated
on the basis of twelve 30-day months and a 360-day year.] [Interest will be calculated
on the basis of the actual number of days in the Interest Period and a 360-day year.]
[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 2.0% per annum.]
The "Interest Period," with respect to any Distribution Date, will be [the period from
[the ____ business day preceding] the previous Distribution Date through the [____] day
preceding such Distribution Date, except the initial Interest Period will be the period
from the Closing Date through the [____] day preceding the initial Distribution Date].
Interest payments on each Distribution Date will be funded from the portion of Finance
Charge Receivables collected during the
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preceding Monthly Period allocated to the Investor Interest, or with respect to the
first Distribution Date, from and including the Closing Date to and including
__________, ____, [from investment income on or in respect of the Principal Funding
Account,] [from withdrawals of investment income from the Pre-Funding Account and from
payments pursuant to the guaranteed rate agreement with respect thereto,] and, if
necessary, from [Shared Excess Finance Charge Collections] [and] amounts received from
the Credit Enhancement described herein [and with respect to the Collateral Interest,
from Excess Finance Charge Collections]. See "Description of the Certificates --
Payment of Fees, Interest and Other Items", ["-- Shared Excess Finance Charge
Collections"] ["-- Credit Enhancement"] herein and "Special Considerations -- Credit
Enhancement" in the Prospectus.
Revolving Period . . . . . . . . . . . . No principal will be payable to Certificateholders until [__________, 199__ (the first
Distribution Date with respect to the Controlled Amortization Period)] [__________,
199__ (the first Distribution Date with respect to the Principal Amortization Period]
[__________, 199__ (the "Scheduled Payment Date")], or upon the occurrence of a Pay Out
Event [or after such time after a Pay Out Event has occurred and the Rapid Accumulation
Period has commenced] as described herein, the first Distribution Date with respect to
the Rapid Amortization Period. For the period beginning on the Closing Date and ending
with the commencement of the [Controlled Amortization Period] [Principal Amortization
Period] [Controlled Accumulation Period] [Rapid Accumulation Period] or the Rapid
Amortization Period (the "Revolving Period"), collections of Principal Receivables
otherwise allocable to the Investor Interest [and the Collateral Interest] [other than
certain Principal Receivables otherwise allocable to the Collateral Interest (the
"Reallocated Collateral Principal Collections")] will, subject to certain limitations,
be [paid from the Trust to the holder of the Seller Certificate to maintain the
Investor Interest at the Initial Investor Interest] [treated as Shared Principal
Collections and [paid] [allocated] to the holders of other Series of certificates
issued and outstanding]. See "Description of the Certificates -- Pay Out Events" for a
discussion of the events which might lead to the termination of the Revolving Period
prior to the commencement of the [Controlled Amortization Period] [Principal
Amortization Period] [Controlled Accumulation Period].
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Principal Payments . . . . . . . . . . . Collections of Principal Receivables with respect to any Monthly Period will be allocated
on the basis of the applicable Investor Percentage with respect to Principal
Receivables. Under the Agreement, such collections [other than Reallocated Collateral
Principal Collections] will be paid either to the Seller [(subject to certain
limitations)], as described above during the Revolving Period, or to the
Certificateholders in respect of the Investor Interest [and to the CA Investors in
payment of the Collateral Interest], or to both [, or, under certain circumstances will
be treated as Shared Principal Collections and paid or allocated to the holders of
certificates of other Series issued and outstanding]. Such allocations will be
performed during the Revolving Period [and] [the] [each] Amortization Period [and] [the
Accumulation Period]. In addition, certain other amounts with respect to any Monthly
Period will be allocable to Certificateholders as described herein.
Other Series offered by the Trust may or may not have amortization [or accumulation]
periods like the [Controlled Amortization Period] [the Principal Amortization Period]
[Controlled Accumulation Period] [Rapid Accumulation Period] or the Rapid Amortization
Period for the Certificates, and such periods may have different lengths and begin on
different dates than such [Controlled Amortization Period] [the Principal Amortization
Period] [Controlled Accumulation Period] [Rapid Accumulation Period] or the Rapid
Amortization Period. Thus, certain Series may be in their revolving periods, while
others are in periods during which collections of Principal Receivables are distributed
or allocated to 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 other Series.
[Controlled Amortization
Period . . . . . . . . . . . . . . . . . Unless or until a Pay Out Event has occurred, during the period beginning on __________,
____, and ending on the earliest of [(a) the commencement of the Rapid Amortization
Period, (b) payment in full of the Investor Interest [and the Collateral Interest] or
(c) the Series [199__-__] Termination Date (the "Controlled Amortization Period"),]
collections of Principal Receivables allocated to the Investor Interest [and the
Collateral Interest] [other than Reallocated Collateral Principal Collections] will no
longer be paid to the
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holder of the Seller Certificate [(subject to certain limitations)] [or treated as
Shared Principal Collections and paid or allocated to other Series], as described
above, but instead, such collections [plus [Shared Principal Collections, if any, from
other Series allocated to Series [199__-__] [other amounts]] will be distributed
[monthly] as provided herein on each Distribution Date beginning with the Distribution
Date [in the month] following the commencement of the Controlled Amortization Period.
During the Controlled Amortization Period or the Rapid Amortization Period, the amount
of collections of Principal Receivables allocated to the Investor Interest [and the
Collateral Interest] [for each related Monthly Period] (the "Percentage Allocation")
will be equal to the product of (a) the applicable Investor Percentage and (b) such
amount of collections of Principal Receivables. [Such amount will be further allocated
between the Certificates and the Collateral Interest as described herein.]
If the Percentage Allocation for any Monthly Period during the Controlled Amortization
Period is equal to or greater than the sum of the Controlled Amortization Amount and
the existing Deficit Controlled Amortization Amount (such sum, the "Controlled
Distribution Amount"), the amount of the Controlled Distribution Amount will be paid
from the Trust to the Certificateholders in respect of the Investor Interest, and any
excess of such Percentage Allocation over the Controlled Distribution Amount will be
[paid from the Trust to the holder of the Seller Certificate on the following
Distribution Date] [treated as Shared Principal Collections and paid or allocated to
the certificateholders of other Series] [will be paid to the CA Investors to the extent
that the Collateral Interest exceeds the Required Collateral Interest] subject to
certain conditions set forth in the Agreement. The term "Controlled Amortization
Amount" means $__________. Although it is anticipated, based on the Payment Rate
Assumptions, that principal payments will be made to Certificateholders in an amount
equal to the Controlled Amortization Amount [for each related Monthly Period] on each
Distribution Date beginning on the __________ Distribution Date and ending on the
__________ Distribution Date, no assurance can be given in that regard. See "Maturity
Assumptions" in the Prospectus and "Maturity Assumptions" herein.
If the Percentage Allocation for any Monthly Period during the Controlled Amortization
Period is less than
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the Controlled Distribution Amount, such Percentage Allocation will be paid from the
Trust to Certificateholders in respect of the Investor Interest [, and, to the extent
available, [Shared Principal Collections allocated to the Series 199__-__] [other
amounts] will be paid to the Certificateholders to make up such deficiency]. The
amount of the excess of the Controlled Distribution Amount over such Percentage
Allocation [and such other available amounts] will be the "Deficit Controlled
Amortization Amount" for the succeeding Monthly Period. See "Description of the
Certificates -- Application of Collections" in the Prospectus.]
[Principal Amortization
Period . . . . . . . . . . . . . . . . . During the period beginning on __________, ____, and ending on the earliest of (a) the
commencement of the Rapid Amortization Period, (b) the date on which the Investor
Interest [has] [and the Collateral Interest have] been paid in full or (c) the
Series [199__-__] Termination Date, (the "Principal Amortization Period"), collections
of Principal Receivables allocated to the Investor Interest [and the Collateral
Interest] [other than Reallocated Collateral Principal Collections] will no longer be
paid to the holder of the Seller Certificate [(subject to certain limitations)] [or
treated as Shared Principal Collections and paid or allocated to other Series], as
described above, but instead, such collections [plus [Shared Principal Collections, if
any, from other Series allocated to Series [199__-__]] [other amounts]] will be
distributed [monthly] as provided herein on each Distribution Date beginning with the
Distribution Date [in the month] following the commencement of the Principal
Amortization Period. During the Principal Amortization Period or the Rapid
Amortization Period, the amount of collections of Principal Receivables allocated to
the Investor Interest [and the Collateral Interest] [other than Reallocated Collateral
Principal Collections] [for each related Monthly Period] (the "Percentage Allocation")
will be equal to the product of (a) the applicable Investor Percentage and (b) such
amount of collections of Principal Receivables.] [During the Principal Amortization
Period, the Percentage Allocation (less any Reallocated Collateral Principal
Collections that are used to pay any deficiency in the Required Amount) for the related
Monthly Period will be paid on each Distribution Date first to the Certificateholders
in respect of the Investor Interest and thereafter, when the Certificates
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have been paid in full, to the CA Investors in respect of the Collateral Interest.]
[Controlled Accumulation Period . . . . . During the period beginning on __________ ____, and ending on the earliest of (a) the
commencement of the Rapid Amortization Period [or the Rapid Accumulation Period], (b)
the date on which the Investor Interest [has] [and the Collateral Interest] been paid
in full or (c) the Series [199__-__] Termination Date (the "Controlled Accumulation
Period"), the lesser of (a) collections of Principal Receivables allocated to the
Investor Interest [and the Collateral Interest] [less any Reallocated Collateral
Principal Collections] for each Monthly Period and (b) the sum of the Controlled
Accumulation Amount for such Monthly Period and any Accumulation Shortfall (such sum,
the "Controlled Deposit Amount") will no longer be paid to the holder of the Seller
Certificate [(subject to certain limitations)] [or treated as Shared Principal
Collections and paid or allocated to other Series], as described above, but instead,
such collections [plus [Shared Principal Collections, if any, from other Series
allocated to Series [199__-__] [other amounts]] will be deposited [monthly] in a trust
account established with the Trustee (the "Principal Funding Account") on each
[Distribution Date beginning with the Distribution Date [in the month]] [Transfer Date
beginning with the Transfer Date [in the month] [on the ____ business day of each
[month]] following the commencement of the Accumulation Period[; provided, however, the
Servicer may, based on the principal payment rate on the Receivables and the amount of
principal distributable to Certificateholders, postpone the commencement of the
Controlled Accumulation Period and extend the length of the Revolving Period. See
"Description of the Certificates -- Postponement of the Controlled Accumulation
Period"]. The term "Controlled Accumulation Amount" means $__________. [If, for any
Monthly Period, the collections of Principal Receivables so allocated [less any
Reallocated Collateral Principal Collections] exceed the Controlled Deposit Amount, any
such excess will be paid from the Trust to the holder of the Seller Certificate on the
following Distribution Date] [treated as Shared Principal Collections and paid or
allocated to certificateholders of other Series] [paid to the CA Investors to the
extent that the Collateral Interest exceeds the Required Collateral Interest], subject
to certain conditions set forth in the Agreement. If, for any Monthly Period, the
collections of Principal Receivables [less any Reallocated Collateral Principal
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Collections] [and, to the extent available, Shared Principal Collections allocated to
the Series 199__-__ Certificates] [other available amounts] are less than the
Controlled Deposit Amount, the amount of such deficiency will be the Accumulation
Shortfall for the succeeding Monthly Period.
Unless the Rapid Amortization Period shall have commenced, all amounts in the Principal
Funding Account will be invested by the Trustee in certain Permitted Investments
[pursuant to a [guaranteed rate agreement] [guaranteed investment contract], which
provides for the guarantee of a rate of return on such amounts equal to the Certificate
Rate].] Investment earnings (net of investment losses and expenses) on funds on
deposit in the Principal Funding Account for each [Interest] [Monthly] Period during
the Controlled Accumulation Period (the "Principal Funding Investment Proceeds") will
be used to pay interest on the Certificates in an amount equal to, for each [Interest]
[Monthly] Period, [one-twelfth of the product of the Certificate Rate and the balance
in the Principal Funding Account on the last day of [such] [the related] Monthly
Period] [the product of (i)(A) a fraction, the numerator of which is the actual number
of days in the [the related] Interest Period and the denominator of which is 360, times
(B) the Certificate Rate in effect with respect to the related Interest Period times
(ii) the balance in the Principal Funding Account as of the last day of [such] [the
related] Monthly Period] (the "Covered Amount"). [If, for any [Monthly] [Interest]
Period, the Principal Funding Investment Proceeds are less than the Covered Amount, the
amount of such deficiency shall be paid from ____.]
During the Controlled Accumulation Period, funds on deposit in the Principal Funding
Account will be available to pay the Investor Interest on the Scheduled Payment Date].
If the aggregate principal amount of deposits made to the Principal Funding Account on
or prior to the Scheduled Payment Date is insufficient to pay in full the Investor
Interest on the Scheduled Payment Date [the Rapid Amortization Period will commence as
described below] [the Trustee will draw on the principal guaranty of __________].
Although it is anticipated, based on the Payment Rate Assumptions, that principal will
be deposited in the Principal Funding Account in an amount equal to the Controlled
Accumulation Amount on each [Distribution] [Transfer] Date [on the ____ business day of
each [month]] and
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that principal in an amount equal to the Investor Interest will be available for
distribution on the Scheduled Payment Date, no assurance can be given in that regard.
See "Maturity Assumptions" in the Prospectus and "Maturity Assumptions" herein.]
[Rapid Accumulation Period . . . . . . . [Except as otherwise provided herein,] the Rapid Accumulation Period will begin on the
day on which a Pay Out Event has occurred and end on the earliest of (a) the
commencement of the Rapid Amortization Period, (b) the date on which the Investor
Interest [and the Collateral Interest] has been paid in full or (c) the Series
[199_-__] Termination Date (the "Rapid Accumulation Period"). During the Rapid
Accumulation Period, collections of Principal Receivable allocated to the Investor
Interest for each Monthly Period will be deposited monthly in the Principal Funding
Account on each Transfer Date during the Rapid Accumulation Period until the balance on
deposit in the Principal Funding Account equals the Investor Interest [and the
Collateral Interest]. Deposits of Principal Receivables into the Principal Funding
Account during the Rapid Accumulation Period will not be subject to the Controlled
Deposit Amount.
During the Rapid Accumulation Period all funds on deposit in the Principal Funding
Account will be invested by the Trustee in certain Permitted Investments. Principal
Funding Investment Proceeds during the Rapid Accumulation Period will be used to pay
interest on the [Class A] [Class B] Certificates [and such other amounts].
[Except as otherwise provided herein,] funds on deposit in the Principal Funding Account
during the Rapid Accumulation Period will be available to pay the Certificateholders on
the Scheduled Payment Date [and the Collateral Interest]. If the aggregate principal
amount of deposits made to the Principal Funding Account during the Rapid Accumulation
Period are insufficient to pay in full the Investor Interest on the Scheduled Payment
Date [or upon such other event], the Rapid Amortization Period will commence as
described herein.]
Rapid Amortization
Period . . . . . . . . . . . . . . . . . During the period beginning on the day on which a Pay Out Event has occurred [or after
such time after a Pay Out Event has occurred and the Rapid Accumulation Period has
commenced as described herein] and ending no earlier than the payment in full of the
Investor
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Interest [and the Collateral Interest] [and the Enhancement Invested Amount] and no
later than the Series [199__-__] Termination Date (the "Rapid Amortization Period"),
collections of Principal Receivables allocated to the Investor Interest [and the
Collateral Interest] [and the Enhancement Invested Amount] will no longer be paid [or
accumulated for payment] to the Certificateholders or to the holder of the Seller
Certificate [or treated as Shared Principal Collections and paid or allocated to the
certificateholders of other Series], as described above, but instead, such Collections
[plus [Shared Principal Collections, if any, from other Series allocated to Series
[199__-__] [other amounts]] [less any Reallocated Collateral Principal Collections]
will be distributed [monthly] on each Distribution Date to Certificateholders [and,
after payment in full of the Certificates, to the CA Investors up to the Collateral
Interest] [and, after payment in full of the Certificates, to the Cash Collateral
Depositor up to the Enhancement Invested Amount] beginning with the Distribution Date
[in the month] following the commencement of the Rapid Amortization Period. [In
addition, upon the occurrence of an Economic Pay Out Event, the Economic Pay Out Amount
will be withdrawn from the Cash Collateral Account and distributed as a payment to the
Certificateholders on the Economic Pay Out Distribution Date.] See "Description of the
Certificates -- Pay Out Events" herein for a discussion of the events which might lead
to commencement of the Rapid Amortization Period.
[Shared Excess Finance
Charge Collections . . . . . . . . . . . Excess Finance Charge Collections with respect to any Series in Group ____ during any
Monthly Period will be combined and applied to cover any shortfalls with respect to
amounts payable from collections of Finance Charge Receivables [and other amounts]
allocable to Series 199__-__ [, the Collateral Interest] [and other Series then
outstanding, pro rata] based upon the amount of the shortfall, if any, with respect to
the Series 199__-__ [and such other Series (as combined, "Shared Excess Finance Charge
Collections")]. Any Shared Excess Finance Charge Collections remaining after covering
shortfalls with respect to the Series 199__-__ [and other outstanding Series] will be
paid to the [Seller].
[With respect to any Transfer Date, prior to an Economic Pay Out Distribution Date, if
the amount on deposit in the Cash Collateral Account is less than the Required
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Cash Collateral Amount, Excess Finance Charge Collections, if any, will be deposited
into the Cash Collateral Account to the extent of such shortfall.] "Excess Finance
Charge Collections" with respect to a Series for any Monthly Period will equal the
excess of collections of Finance Charge Receivables and annual membership fees [and
other amounts] allocated to the Investor Interest over the sum of (i) current Monthly
Interest, any overdue Monthly Interest and any Additional Interest on the Certificates,
(ii) the Investor Servicing Fee and any accrued and unpaid Investor Servicing Fees,
(iii) the Investor Default Amount, [and] (iv) unreimbursed Investor Charge-Offs [and
(v) certain unreimbursed reductions in the Enhancement Invested Amount, if any].
[Excess Finance Charge Collections with respect to the Series 199__-__ Certificates
will become Shared Excess Finance Charge Collections and applied as described herein.]
[In addition, if on any Transfer Date the amount on deposit in the Cash Collateral
Account exceeds the Required Cash Collateral Amount, such excess will be withdrawn from
the Cash Collateral Account and applied in accordance with the Loan Agreement. See
"Description of the Certificates -- The Cash Collateral Account."]
[Shared Principal
Collections . . . . . . . . . . . . . . . To the extent that collections of Principal Receivables [and other available amounts]
allocated to the Investor Interest with respect to the Certificates are not needed to
make payments to the Certificates [or the Collateral Interest] [or required to be
deposited in the Principal Funding Account], such collections ("Shared Principal
Collections") will be applied to cover principal payments due to or for the benefit of
certificateholders of another Series. Any such reallocation will not result in a
reduction in the Investor Interest with respect to the Certificates. In addition,
collections of Principal Receivables and certain other amounts otherwise allocable to
other Series, 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
Certificates.]
[Required Collateral
Interest . . . . . . . . . . . . . . . . The "Required Collateral Interest" with respect to any [Transfer] [Distribution] Date for
the Certificates means (i) $__________ initially and (ii) thereafter an amount
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equal to the greater of (a) ____% of the sum of the Investor Interest plus the
Collateral Interest and (b) ____% of the Investor Interest, in each case as of such
[Transfer] [Distribution] Date after taking into account distributions made on such
date; provided, however, (1) that if certain reductions in the Collateral
Interest occur or if a Pay Out Event occurs, the Required Collateral Interest
for such [Transfer] [Distribution] Date shall equal to the Required Collateral Interest
for the [Transfer] [Distribution] 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] [Distribution] Date; and (3) 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
Amount" herein.
With respect to any [Transfer] [Distribution] Date, if the Collateral Interest is less
than the Required Collateral Interest, certain Excess Finance Charge Collections, if
available, will be reallocated to increase the Collateral Interest to the extent of
such shortfall. Any of such Excess Finance Charge Collections not required to be so
reallocated with respect to any [Transfer] [Distribution] Date will be applied in
accordance with the Loan Agreement among the Seller, the Trustee, the Servicer and the
CA Investors (the "Loan Agreement").
[With respect to any [Transfer] [Distribution] Date during the Controlled Amortization
Period, an amount equal to the excess of the Collateral Interest over the Required
Collateral Interest will be paid to the CA Investors to the extent of the excess of the
Percentage Allocation [plus certain other amounts over the Controlled Distribution
Amount for such [Transfer] [Distribution] Date.]
[Cash Collateral Account . . . . . . . . The Trust will have the benefit of the Cash Collateral Account, which will be held in the
name of the Trustee for the benefit of the Certificateholders [and the Cash Collateral
Depositor, as their interests appear in the Series [199__-__] Supplement and with
respect to the Cash Collateral Depositor, the Loan Agreement]. See "Description of the
Certificates -- The Cash Collateral Account." The Cash Collateral Account will be
funded on the Closing Date in the amount of $__________ (the "Initial Cash Collateral
Amount") from the proceeds of
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a loan to be made to the Trust by the Cash Collateral Depositor pursuant to a loan
agreement among the Seller, the Trustee and the Cash Collateral Depositor (the "Loan
Agreement"). With respect to any Transfer Date, the amount available in the Cash
Collateral Account (the "Available Cash Collateral Amount") will equal the lesser of
the amount on deposit in the Cash Collateral Account (exclusive of interest and
earnings thereon and net of any investment losses and expenses), [which shall be zero
upon the termination of the Cash Collateral Account after any withdrawals on the
Transfer Date preceding the Economic Pay Out Distribution Date,] and the Required Cash
Collateral Amount. The "Required Cash Collateral Amount" with respect to any Transfer
Date means the product of (i) the [Adjusted] Investor Interest as of the last day of
the Monthly Period preceding such date and (ii) ____%, but not less than $__________;
provided, however, that if certain withdrawals are made from the Cash Collateral
Account during the [Controlled Amortization Period] [Controlled Accumulation Period]
[Principal Amortization Period] or if a Pay Out Event occurs, the Required Cash
Collateral Amount for each Transfer Date thereafter shall equal the Required Cash
Collateral Amount for the Transfer Date immediately preceding the occurrence of such
withdrawal or such Pay Out Event.
If, in any Monthly Period, collections of Finance Charge Receivables and annual
membership fees allocated to the Investor Interest are insufficient to pay (i) current
Monthly Interest on the Certificates, (ii) the Investor Servicing Fee and (iii) the
Investor Default Amount, the Trustee will make a withdrawal from the Cash Collateral
Account in an amount equal to the deficiency, up to the Available Cash Collateral
Amount. In the event the Available Cash Collateral Amount is reduced to less than
____% of the [Adjusted] Investor Interest, a Pay Out Event will occur and the [Rapid
Amortization Period] [Rapid Accumulation Period] will commence.
[In addition, upon the occurrence of an Economic Pay Out Event, after giving effect to
any payment of principal to be made [or deposited] on the related Distribution Date as
described under "Description of the Certificates -- Application of Collections --
Payments of Principal," an amount equal to the lesser of (i) the Available Cash
Collateral Amount (after giving effect to other withdrawals from the Cash Collateral
Account on the Transfer Date prior to the Economic Pay Out
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Distribution Date) and (ii) the unpaid principal amount of the Certificates (the
"Economic Pay Out Amount") will be withdrawn from the Cash Collateral Account and
distributed to Certificateholders as principal on the first Distribution Date following
the Monthly Period in which such Economic Pay Out Event occurred (the "Economic Pay Out
Distribution Date"). Following such withdrawal from the Cash Collateral Account on the
Transfer Date prior to such Economic Pay Out Distribution Date, the Cash Collateral
Account will be terminated and no further deposits to, or withdrawals from, the Cash
Collateral Account will be made for the benefit of the Certificateholders. See
"Description of the Certificates -- The Cash Collateral Account."
In the event the Available Cash Collateral Amount is reduced to zero, [including as a
result of the payment of the Economic Pay Out Amount, or, following the occurrence of
an Economic Pay Out Event, the Enhancement Invested Amount is also reduced to zero,]
Certificateholders will bear directly the credit and other risks associated with their
undivided interest in the Trust. See "Description of the Certificates -- The Cash
Collateral Account" herein and "Special Considerations -- Credit Enhancement" in the
Prospectus.
With respect to any Transfer Date, [prior to an Economic Pay Out Distribution Date,] if
the amount on deposit in the Cash Collateral Account is less than the Required Cash
Collateral Amount, Excess Finance Charge Collections, if any, will be deposited into
the Cash Collateral Account to the extent of such shortfall. "Excess Finance Charge
Collections" for any Transfer Date will equal the excess of any collections of Finance
Charge Receivables and annual membership fees allocated to the Investor Interest over
the sum of (i) current Monthly Interest, any overdue Monthly Interest and any
Additional Interest on the Certificates, (ii) the Investor Servicing Fee and any
accrued and unpaid Investor Servicing Fees, (iii) the Investor Default Amount,
(iv) unreimbursed Investor Charge Offs [and (v) certain unreimbursed reductions in the
Enhancement Invested Amount, if any]. Any Excess Finance Charge Collections not
deposited to the Cash Collateral Account with respect to any Transfer Date will be
applied in accordance with the Loan Agreement. See "Description of the Certificates --
Application of Collections -- Payment of Fees, Interest and Other Items."
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In addition, if on any Transfer Date the amount on deposit in the Cash Collateral Account
exceeds the Required Cash Collateral Amount, such excess will be withdrawn from the
Cash Collateral Account and applied in accordance with the Loan Agreement. See
"Description of the Certificates -- The Cash Collateral Account."
The Initial Cash Collateral Amount may be reduced without the consent of the
Certificateholders, if the Seller receives written notice from each Rating Agency that
such reduction will not result in a reduction or withdrawal of its then-current rating
of the Certificates and the Seller shall have delivered to the Trustee a certificate of
an authorized officer to the effect that, based on the facts known to such officer at
such time, in the reasonable belief of the Seller, such reduction will not cause a Pay
Out Event or an event that, after the giving of notice or the lapse of time, would
constitute a Pay Out Event, to occur with respect to the Series.]
[Credit Enhancement . . . . . . . . . . . The Trust will have the benefit of a [letter of credit] [cash collateral guaranty or
account] [collateral interest] [surety bond] [insurance policy] [spread account]
[reserve account] [other credit enhancement] [issued by __________ for the benefit of
the Certificateholders as described herein]. See "Description of the Certificates --
Credit Enhancement."]
Optional Repurchase . . . . . . . . . . . The Investor Interest will be subject to optional repurchase by the Seller on any
Distribution Date after the [sum of the] Investor Interest [and the Enhancement
Invested Amount, if any,] [and the Collateral Interest] is reduced to an amount less
than or equal to $__________ (____% of the Initial Investor Interest [and the initial
Collateral Interest]), if certain conditions set forth in the Agreement are met. The
repurchase price will be equal to the [sum of the] Investor Interest [(less the amount,
if any, on deposit in the Principal Funding Account)] [and the Enhancement Invested
Amount, if any,] [and the Collateral Interest] plus accrued and unpaid interest on the
Certificates [and interest or other amounts payable on the [Enhancement Invested
Amount] [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" in the Prospectus.
Trustee . . . . . . . . . . . . . . . . . [____________________].
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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 "Certain 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 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 Certificates if certain conditions are met, including that the 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 Underwriter[s]
expect that the Certificates will be held by at least 100 independent investors at the
conclusion of the offering, although no assurance can be given, and no monitoring or
other measures will be taken to ensure that such condition will be met. The 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 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
satisfactory, 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. Accordingly, employee benefit
plan 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.
Certificate Rating. . . . . . . . . . . . It is a condition to the issuance of the Certificates that they be rated in [the highest
rating category] [one of the four highest rating categories] by at least one nationally
recognized rating agency. [The rating of the Certificates is based primarily on the
value of the Receivables, the
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size of the Credit Enhancement and the circumstances in which the Credit Enhancement
may become available to Certificateholders.
[Listing . . . . . . . . . . . . . . . . Application will be made to list the Certificates on the [Luxembourg Stock Exchange]
[other exchange].]
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RISK FACTORS
LIMITED LIQUIDITY. There is currently no market for the Certificates.
The Underwriter[s] intend[s] to make a market in the Certificates, but [is]
[are] not obligated to do so. There is no assurance that a secondary market
will develop, or if it does develop, that it will provide Certificateholders
with liquidity of investment or that it will continue for the life of the
Certificates.
[SUBORDINATION. The Certificates will be subordinated in right of
payment [of [interest] [principal] to the certificates of Series ____.]
CREDIT ENHANCEMENT. Although Credit Enhancement with respect to the
Certificates will be provided by the [Letter of Credit] [Cash Collateral
Guaranty] [Cash Collateral Account] [Collateral Interest] [Surety Bond]
[Insurance Policy] [Spread Account] [Reserve Account], the amount [available
thereunder] [pursuant thereto] is limited, [is expected to] [may] decline
during an Amortization Period [and Accumulation Period] [or under certain
circumstances may be reduced] and will be reduced by payments made pursuant
thereto. If the amount available under such Credit Enhancement has been
reduced to zero, Certificateholders will bear directly the credit and other
risks associated with their respective undivided interests in the Trust.
CERTIFICATE RATING. It is a condition to issuance of the Certificates
that they be rated in the [highest rating category] [one of the four highest
rating categories] by at least one nationally recognized rating agency. [As
used herein, the term "Rating Agency" with respect to the Certificates, [and
with respect to any other Series,] means [Standard & Poor's Corporation]
[Moody's Investors Service Inc.] [other rating agency]. [The rating addresses
the likelihood of full payment of principal and interest by the Series
[199__-__] Termination Date.] The rating is based primarily on the quality of
the Receivables [and the [credit rating] [initial amount] of Credit
Enhancement]. The rating is not a recommendation to purchase, hold or sell
Certificates, inasmuch as such rating does not comment as to the market price
or suitability for a particular investor. There is no assurance that the
rating will remain for any given period of time or that the rating will not be
lowered or withdrawn by a Rating Agency if in its judgment circumstances so
warrant.
[DISCOUNT OPTION. Pursuant to the Agreement, the Seller has the
option to designate a fixed percentage of Receivables that otherwise would be
treated as Principal Receivables to be treated as Finance Charge Receivables.
Any such designation would result in an increase in the amount of Finance
Charge Receivables and a slower payment rate of collections in respect of
Principal Receivables than otherwise would occur. Pursuant to the Agreement,
the Seller can make such a designation without notice to or the consent of
certificateholders. [The Seller must provide [30] days' prior written notice
to the Servicer, the Trustee, any provider of Enhancement and each Rating
Agency of any such designation, and such designation will become effective only
if (i) in the reasonable belief of the Seller such designation would not cause
a Pay Out Event to occur or an event which with notice or the lapse of time or
both would constitute a Pay Out Event and (ii) each Rating Agency confirms in
writing its then current rating on any outstanding Series. See "Description of
the Certificates -- Discount Option" in the Prospectus.]]
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. In addition,
the Seller may purchase portfolios of credit card accounts from other credit
card issuers which may be included in the Trust as Additional Accounts. Such
accounts may not be originated, used or
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collected in the same manner as the VISA and MasterCard International accounts
described below and may differ with respect to loss and delinquency and revenue
experience and historical payment rates. Such accounts may also have different
terms than the accounts described below, including lower periodic finance
charges. Consequently, the addition of the receivables arising in such
accounts to the Trust could have the effect of reducing the Portfolio Yield.
Additional Accounts may consist of Eligible Accounts which are not currently in
existence and which are selected using different eligibility criteria from
those used in selecting the Accounts already included in the Trust.
BILLING AND PAYMENTS
MBNA, using MBNA Information Services, Inc. ("MBNA I.S.") as its
service bureau, generates and mails to cardholders monthly statements
summarizing account activity and processes cardholder monthly payments.
Customers generally receive a 25-day grace period on purchases. Currently,
cardholders must make a monthly minimum payment at least equal to the greater
of (i) [2.0]% 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 assessed monthly are calculated by multiplying the
account's average daily balance(s) 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 in the billing statement are
paid by the due date, which is generally 25 days after the billing date.
Finance charges are calculated on cash advances from the date of the
transaction. Currently, MBNA generally treats the day (excluding Sundays and
bank holidays) before the day on which a cash advance check is presented to
MBNA for payment as the transaction date for such check.
MBNA offers fixed rate and variable rate credit card accounts.
Generally, fixed annual percentage rates range from [11.9%] to [19.8%] and
variable rates range from [7.6%] 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 charges annual membership fees (generally ranging from [$18] to
[$40]) on most accounts although under various marketing programs these fees
may not be assessed or may be waived or rebated. For most credit card
accounts, MBNA also assesses late and overlimit charges (generally [$15]) and
returned check charges (generally [$15]). For most accounts, MBNA assesses a
cash advance fee generally ranging from [1%] to [2%] of the cash advance amount
with a [$2] minimum and maximum fee of either [$10] or [$25].
DELINQUENCY AND LOSS EXPERIENCE
An account is contractually delinquent if the minimum payment is not
received by the due date indicated on the customer's statement. Efforts to
collect contractually delinquent credit card receivables 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.
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Accounts are worked continually at each stage of delinquency through
the 150 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
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
charged-off in a manner consistent with this policy.
The following tables set forth the delinquency and loss experience for
each of the periods shown for the Bank Portfolio of credit card accounts. The
Bank Portfolio's delinquency and loss experience is comprised of segments which
may, when taken individually, have delinquency and loss characteristics
different from those of the overall Bank Portfolio of credit card accounts. As
of the beginning of the day on, _________, _____, the Receivables in the Trust
Portfolio represent approximately ____% of the Bank Portfolio. Because the
Trust Portfolio is only a portion of the Bank Portfolio, actual delinquency and
loss experience with respect to the Receivables may be different from that set
forth below for the Bank Portfolio. There can be no assurance that the
delinquency and loss experience for the Receivables in the future will be
similar to the historical experience of the Bank Portfolio set forth below.
<TABLE>
<CAPTION>
DELINQUENCY EXPERIENCE
BANK PORTFOLIO
(DOLLARS IN THOUSANDS)
DECEMBER 31,
------------------------------------------------------------------------------
__________, 199__ 199__ 199__ 199__
----------------------- ------------------------- ------------------------ ------------------------
PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
OF TOTAL OF TOTAL OF TOTAL OF TOTAL
RECEIVABLES RECEIVABLES RECEIVABLES RECEIVABLES RECEIVABLES RECEIVABLES RECEIVABLES RECEIVABLES
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Receivables Outstanding(1) $ $ $ $
Receivables Delinquent:
35 - 64 Days $ % $ % $ % $ %
65 - 94 Days
95 or More Days
------- ------ -----
Total $ % $ % $ % $ %
======= ====== ===== =====
</TABLE>
- ----------------------------
(1) The Receivables Outstanding on the accounts consist of all amounts due
from cardholders as posted to the accounts as of the
end of the period shown.
S-29
<PAGE> 30
<TABLE>
<CAPTION>
GROSS CHARGE-OFF EXPERIENCE
BANK PORTFOLIO
(DOLLARS IN THOUSANDS)
____ MONTHS ENDED YEAR ENDED DECEMBER 31,
-----------------------------
__________, 199__ 199__ 199__ 199__
----------------------- ------ ----- --------
<S> <C> <C> <C> <C>
Average Receivables Outstanding(1) . . . . . . . $ $ $ $
Total Gross Charge-Offs(2) . . . . . . . . . . .
Total Charge Offs as a percentage
of Average Receivables Outstanding(3) . . . . . % % % %
</TABLE>
- ----------------------------
(1) Average Receivables Outstanding is the average of the daily receivable
balance during the period indicated.
(2) 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.
(3) The percentage reflected for the ____ months ended __________, ____ is an
annualized figure.
[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 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.] VISA and MasterCard 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 to
Certificateholders, making required monthly payments including interest
payments on the Certificates [and making payment of the Investor Servicing Fee]
and calculating the Portfolio Yield. See "MBNA's Credit Card Activities --
Interchange" in the Prospectus.]
THE RECEIVABLES
The Receivables to be 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 __________, the Seller designated Additional Accounts and
conveyed the Receivables arising therein to the Trust, which included
approximately $____ million of Principal Receivables.] [In addition, the
Seller is required to designate Additional Accounts, to the extent available,
(x) to maintain the Seller Interest so that, during any period of [30]
consecutive days, the Seller Interest averaged over that period equals or
exceeds ____% or such higher percentage as may be specified in any series
supplement (such percentage, the "Minimum Seller Interest") of the average
Principal Receivables for the same period, and (y) to maintain, for so long as
certificates of any Series (including the Certificates) remain outstanding, an
aggregate amount of Principal Receivables in an amount equal to or greater than
the Minimum Aggregate Principal Receivables.] [The Seller may,
S-30
<PAGE> 31
upon 30 days prior notice to the Trustee, reduce the Minimum Seller Interest,
provided that such reduction will not result in a reduction or withdrawal of
the then-current ratings of the Certificates, and provided further, the Minimum
Seller Interest shall never be less than 2%.] "Minimum Aggregate Principal
Receivables" shall mean an amount equal to the sum of the initial investor
interests for all Series then outstanding. 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 has the right
(subject to certain limitations and conditions) to designate certain 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.] As of the [Cut
Off Date] [Initial Closing 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 represents and warrants 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 __________, ____ [the Cut Off Date], included $___________ of Principal
Receivables and $__________ of Finance Charge Receivables. The Accounts had an
average Principal Receivable balance of $__________ and an average credit limit
of $__________. The percentage of the aggregate total Receivable balance to
the aggregate total credit limit was ____%. The average age of the Accounts
was approximately ____ months. As of the beginning of the day on __________,
____, cardholders whose Accounts are included in the Trust Portfolio had
billing addresses in ____ States and the District of Columbia. As of the
beginning of the day on __________, ____, ____% of the Accounts were standard
accounts and ____% 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 ____% and ____%,
respectively.
The following tables summarize the Trust Portfolio by various criteria
as of the beginning of the day on __________, ____ [the Cut Off Date]. 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.
<TABLE>
<CAPTION>
COMPOSITION BY ACCOUNT BALANCE
TRUST PORTFOLIO
PERCENTAGE
OF TOTAL PERCENTAGE
NUMBER OF NUMBER OF OF TOTAL
ACCOUNT BALANCE RANGE ACCOUNTS ACCOUNTS RECEIVABLES RECEIVABLES
--------------------- ---------- ----------------- -------------------- ---------------
<S> <C> <C> <C> <C>
Credit Balance . . . . . . . . . . . . . % $ %
No Balance . . . . . . . . . . . . . . .
$ .01 - $ 5,000.00 . . . . . . . . .
$ 5,000.01 - $10,000.00 . . . . . . . . .
$10,000.01 - $15,000.00 . . . . . . . . .
$15,000.01 - $20,000.00 . . . . . . . . .
$20,000.01 - $25,000.00 . . . . . . . . .
$25,000.01 or More
-------- --- ------------ ---
TOTAL . . . . . . . . . . . . . % $ 00 0.0 %
======= ============= ===
</TABLE>
S-31
<PAGE> 32
<TABLE>
<CAPTION>
COMPOSITION BY CREDIT LIMIT
TRUST PORTFOLIO
PERCENTAGE
OF TOTAL PERCENTAGE
NUMBER OF NUMBER OF OF TOTAL
CREDIT LIMIT RANGE ACCOUNTS ACCOUNTS RECEIVABLES RECEIVABLES
------------------ ---------- ----------------- -------------------- ---------------
<S> <C> <C> <C> <C>
Less than $ 5,000.00 . . . . . . . . . . % $ %
$ 5,000.01 - $10,000.00 . . . . . . . . .
$10,000.01 - $15,000.00 . . . . . . . . .
$15,000.01 - $20,000.00 . . . . . . . . .
$20,000.01 - $25,000.00 . . . . . . . . .
$25,000.01 or More
-------- --- ---
TOTAL . . . . . . . . . . . . . % $ %
======== ==
</TABLE>
<TABLE>
<CAPTION>
COMPOSITION BY PERIOD OF DELINQUENCY
TRUST PORTFOLIO
PERCENTAGE
OF TOTAL PERCENTAGE
PERIOD OF DELINQUENCY NUMBER OF NUMBER OF OF TOTAL
(DAYS CONTRACTUALLY DELINQUENT) ACCOUNTS ACCOUNTS RECEIVABLES RECEIVABLES
------------------------------- ---------- ----------------- -------------------- ---------------
<S> <C> <C> <C> <C>
Not Delinquent . . . . . . . . . . . . . % $ %
Up to 34 Days . . . . . . . . . . . . . .
35 to 64 Days . . . . . . . . . . . . . .
65 to 94 Days . . . . . . . . . . . . . .
95 or More Days . . . . . . . . . . . . .
-------- ---- ----------- ---
TOTAL . . . . . . . . . . . . . % $ %
======= == =========== ==
</TABLE>
<TABLE>
<CAPTION>
COMPOSITION BY ACCOUNT AGE
TRUST PORTFOLIO
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 % $ %
Over 6 Months to 12 Months
Over 12 Months to 24 Months
Over 24 Months to 36 Months
Over 36 Months to 48 Months
Over 48 Months to 60 Months
Over 60 Months to 72 Months
Over 72 Months
-------- ---- ----------- ---
TOTAL . . . . . . . . . . . . . % $ %
======= == =========== == =
</TABLE>
S-32
<PAGE> 33
<TABLE>
<CAPTION>
GEOGRAPHIC DISTRIBUTION OF ACCOUNTS
TRUST PORTFOLIO
PERCENTAGE
NUMBER OF TOTAL PERCENTAGE
OF NUMBER OF OF TOTAL
STATE ACCOUNTS ACCOUNTS RECEIVABLES RECEIVABLES
----- ---------- ---------- --------------------- -----------
<S> <C> <C> <C> <C>
Alabama . . . . . . . . . . . . . . . . . . . . % $ %
Alaska . . . . . . . . . . . . . . . . . . . .
Arizona . . . . . . . . . . . . . . . . . . . .
Arkansas . . . . . . . . . . . . . . . . . . .
California . . . . . . . . . . . . . . . . . .
Colorado . . . . . . . . . . . . . . . . . . .
Connecticut . . . . . . . . . . . . . . . . . .
Delaware . . . . . . . . . . . . . . . . . . .
Florida . . . . . . . . . . . . . . . . . . . .
Georgia . . . . . . . . . . . . . . . . . . . .
Hawaii . . . . . . . . . . . . . . . . . . . .
Idaho . . . . . . . . . . . . . . . . . . . . .
Illinois . . . . . . . . . . . . . . . . . . .
Indiana . . . . . . . . . . . . . . . . . . . .
Iowa . . . . . . . . . . . . . . . . . . . . .
Kansas . . . . . . . . . . . . . . . . . . . .
Kentucky . . . . . . . . . . . . . . . . . . .
Louisiana . . . . . . . . . . . . . . . . . . .
Maine . . . . . . . . . . . . . . . . . . . . .
Maryland . . . . . . . . . . . . . . . . . . .
Massachusetts . . . . . . . . . . . . . . . . .
Michigan . . . . . . . . . . . . . . . . . . .
Minnesota . . . . . . . . . . . . . . . . . . .
Mississippi . . . . . . . . . . . . . . . . . .
Missouri . . . . . . . . . . . . . . . . . . .
Montana . . . . . . . . . . . . . . . . . . . .
Nebraska . . . . . . . . . . . . . . . . . . .
Nevada . . . . . . . . . . . . . . . . . . . .
New Hampshire . . . . . . . . . . . . . . . . .
New Jersey . . . . . . . . . . . . . . . . . .
New Mexico . . . . . . . . . . . . . . . . . .
New York . . . . . . . . . . . . . . . . . . .
North Carolina . . . . . . . . . . . . . . . .
North Dakota . . . . . . . . . . . . . . . . .
Ohio . . . . . . . . . . . . . . . . . . . . .
Oklahoma . . . . . . . . . . . . . . . . . . .
Oregon . . . . . . . . . . . . . . . . . . . .
Pennsylvania . . . . . . . . . . . . . . . . .
Rhode Island . . . . . . . . . . . . . . . . .
South Carolina . . . . . . . . . . . . . . . .
South Dakota . . . . . . . . . . . . . . . . .
Tennessee . . . . . . . . . . . . . . . . . . .
Texas . . . . . . . . . . . . . . . . . . . . .
Utah . . . . . . . . . . . . . . . . . . . . .
Vermont . . . . . . . . . . . . . . . . . . . .
Virginia . . . . . . . . . . . . . . . . . . .
Washington . . . . . . . . . . . . . . . . . .
West Virginia . . . . . . . . . . . . . . . . .
Wisconsin . . . . . . . . . . . . . . . . . . .
Wyoming . . . . . . . . . . . . . . . . . . . .
District of Columbia . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . .
--------- -- ------ ---
TOTAL . . . . . . . . . . . . . . . . . . . . % $ %
======= == ======= ==
</TABLE>
S-33
<PAGE> 34
MATURITY ASSUMPTIONS
The Agreement provides that Certificateholders will not receive
payments of principal until [the first Distribution Date with respect to the
[Controlled Amortization Period] [Principal Amortization Period], which is the
Distribution Date on __________, 199__] [__________, 199__ (the "Scheduled
Payment Date")], or earlier in the event of a Pay Out Event which results in
the commencement of the Rapid Amortization Period.
[Controlled Accumulation Period. During the Controlled Amortization
Period, the Certificateholders will be entitled to receive [monthly] payments
of principal equal to, [for each Monthly Period,] the lesser of (a) [the sum of
(i)] the Percentage Allocation, which is equal to the product of the applicable
Investor Percentage and the aggregate amount of the collections processed in
respect of Principal Receivables received during [such] [the related] Monthly
Period [other than Reallocated Collateral Principal Collections] [(ii) [Shared
Principal Collections for such Monthly Period from other Series, if any,
allocated to the Series [199__-__] Certificates,] [and (iii)] [other amounts]]
and (b) the Controlled Distribution Amount, which is equal to the sum of the
Controlled Amortization Amount and any existing Deficit Controlled Amortization
Amount (both as defined below). On each Distribution Date, the
Certificateholders will be paid the [aggregate] amount so allocated for the
Monthly Period[s] related to such Distribution Date. The Controlled
Amortization Amount is $___________. The term "Deficit Controlled Amortization
Amount" means zero on the Closing Date and, on any [Distribution Date]
[Transfer Date] [subsequent date], the excess, if any, of the amount determined
under clause (b) above over the amount determined under clause (a) above as of
the end of the related Monthly Period[s]. Although it is anticipated that
principal payments will be made to Certificateholders in an amount equal to the
Controlled Amortization Amount [for each related Monthly Period] on each
Distribution Date beginning on the __________, 199__ Distribution Date and
ending on the __________, 199__ Distribution Date, no assurance can be given in
that regard. The Seller expects that there will be sufficient funds on each
Distribution Date of the Controlled Amortization Period to pay on such
Distribution Date the Controlled Amortization Amount [for each related Monthly
Period] based on the following assumptions (the "Payment Rate Assumptions"):
[(a) cardholder monthly payment rates for the Accounts are not less than ____%
(which rate is below the lowest monthly payment rate shown in the "Cardholder
Monthly Payment Rates for the Bank's Portfolio" table below), (b) the amount of
Principal Receivables outstanding remains constant at the level of [the sum of]
the amount of such Principal Receivables as of the Closing Date [and the amount
of Principal Receivables delivered to the Trust by the end of the Funding
Period], (c) Total Charge-Offs as a Percentage of Average Receivables
Outstanding and Yield from Finance Charges, Fees [and Interchange] remain
constant at the levels indicated in the related tables for the calendar year
ended _________ __, ____ and [[____] months ended __________, 199__] and (d) no
Pay Out Event occurs during the Controlled Amortization Period.] The Seller
cannot predict, and no assurance can be given, as to the cardholder monthly
payment rates which will actually occur in any future period, as to whether any
of the above assumptions will prove to have been correct or as to whether the
actual rate of payment of principal of the Certificates will be as
anticipated.]
[During the Controlled Accumulation Period, collections of Principal
Receivables equal to [, for each Monthly Period,] the lesser of (a) [the sum of
(i)] the Percentage Allocation, which is equal to the product of the applicable
Investor Percentage and the aggregate amount of collections of Principal
Receivables during [such] [the related] Monthly Period [other than Reallocated
Collateral Principal Collections] [(ii) [Shared Principal Collections for such
Monthly Period from other Series, if any, allocated to the Series 199__-__
Certificates,] [and (iii)] [other amounts]] and (b) the Controlled Deposit
Amount, which is equal to the sum of the Controlled Accumulation Amount for
such Monthly Period and any Accumulation Shortfall (both as defined below) will
be deposited in the Principal Funding Account held by the Trustee (the
"Principal Funding Account") on each [Distribution Date] [on the ____ business
day in each month]. The Controlled Accumulation Amount is $__________ [or such
other amount to be determined as described herein]. The term "Accumulation
Shortfall" means zero on the Closing Date, and on any [Distribution] Date
[Transfer Date] [subsequent date], the excess, if any, of the amount
S-34
<PAGE> 35
determined under clause (b) above over the amount determined under clause (a)
above as of the end of the related Monthly Period[s]. Amounts in the Principal
Funding Account are expected to be available to pay principal in an amount
equal to the Investor Interest on the Scheduled Payment Date. Although it is
anticipated that collections of Principal Receivables will be available [for
each Monthly Period] [on each Distribution Date] during the Controlled
Accumulation Period to make a deposit of the Controlled Accumulation Amount and
that scheduled principal payments will be made to the Certificateholders on the
Scheduled Payment Date, no assurance can be given in this regard. [If the
scheduled principal amount is not available in the Principal Funding Account on
any Scheduled Payment Date, a Pay Out Event will occur and a Rapid Amortization
Period will occur.] The Seller expects that there will be sufficient funds on
each [Distribution Date] [Transfer Date] [____ last business day of each
[month]] of the Controlled Accumulation Period to accumulate [for each related
Monthly Period] the Controlled Accumulation Amount and to pay on the Scheduled
Payment Date the Investor Interest in full, on the following assumptions (the
"Payment Rate Assumptions"): [(a) cardholder monthly payment rates for the
Accounts are not less than ____% (which rate is below the lowest monthly
payment rate shown in the "Cardholder Monthly Payment Rates for the Bank's
Portfolio" table below), (b) the amount of Principal Receivables outstanding
remains constant at the level of [the sum of] the amount of such Principal
Receivables as of the Closing Date [and the amount of Principal Receivables
delivered to the Trust by the end of the Funding Period], (c) Total Charge-Offs
as a Percentage of Average Receivables Outstanding and Yield from Finance
Charges, Fees [and Interchange] remain constant at the levels indicated in the
related tables for the [ ] months ended __________, 199__ and (d) no
Pay Out Event occurs during the Controlled Accumulation Period.] The Seller
cannot predict, and no assurance can be given, as to the cardholder monthly
payment rates which will actually occur in any future period, as to whether any
of the above assumptions will prove to have been correct or as to whether the
actual rate of payment of principal of the Certificates will be as
anticipated.] [Funds on deposit in the Principal Funding Account applicable to
the Series [199__] will be invested in certain Permitted Investments [pursuant
to a [guaranteed rate agreement] [guaranteed investment contract] [with
__________] intended to assure a minimum rate of return on the investment of
such funds.]
[Principal Accumulation Period. During the Principal Amortization
Period, the Certificateholders will be entitled to [monthly] payments of
principal equal to [, for each related Monthly Period,] the product of the
applicable Investor Percentage and the aggregate amount of collections of
Principal Receivables received by the Trust during the related monthly
Period[s] [other than Reallocated Collateral Principal Collections] [Shared
Principal Collections, if any, allocated to the Series 199__-__ Certificates]
[and other amounts] until the Investor Interest is paid in full. Principal so
allocated on a monthly basis will be paid to Certificateholders on each
Distribution Date during the Principal Amortization Period.]
[Rapid Accumulation Period. If a Pay Out Event occurs during the
Revolving Period or the Controlled Accumulation Period, the Rapid Accumulation
Period will commence and any amount on deposit in the Principal Funding Account
will be held for the benefit of Certificateholders, and [collections of
Principal Receivables allocated to the Investor Interest for each Monthly
Period] [such other amounts] will be deposited monthly in the Principal Funding
Account on each [Distribution Date] [Transfer Date] [other date] during the
Rapid Accumulation Period until the balance on deposit in the Principal Funding
Account equals the Investor Interest. The [collections of Principal
Receivables allocated to the Investor Interest for each Monthly Period] [such
other amounts] will not be subject to the Controlled Deposit Amount. Unless as
so provided herein, funds on deposit in the Principal Funding Account will be
available to pay the Certificateholders in respect of the Investor Interest on
the Scheduled Payment Date. If the aggregate principal amount of deposits made
to the Principal Funding Account during the Rapid Accumulation Period are
insufficient to pay in full the Investor Interest on the Scheduled Payment
Date, the Rapid Amortization Period will commence. Unless as otherwise
provided herein, funds on deposit in the Principal Funding Account will be
distributed to the Certificateholders on the next succeeding [Distribution
Date] [Transfer Date] [other date].]
Pay Out Events. Should a Pay Out Event occur and the Rapid
Amortization Period commence, the Certificateholders will be entitled to
receive [monthly] payments of principal equal to [, for each
S-35
<PAGE> 36
related Monthly Period,] the product of the applicable Investor Percentage and
collections in respect of Principal Receivables received during the related
Monthly Period[s] [other than Reallocated Collateral Principal Collections]
[Shared Principal Collections, if any, allocated to the Series 199__-__
Certificates] [and other amounts]. [Should a Pay Out Event occur and the Rapid
Amortization Period commence, the Certificateholders will be entitled to
receive monthly payments of principal equal to the product of the applicable
Investor Percentage and collections in respect of Principal Receivables
received during the related Monthly Period.] [In addition, upon the occurrence
of an Economic Pay Out Event, after giving effect to any payment of principal
to be made on the related Distribution Date as described under "Description of
the Certificates -- Application of Collections -- Payments of Principal," an
amount equal to the lesser of (i) the Available Cash Collateral Amount (after
giving effect to other withdrawals from the Cash Collateral Account on the
Transfer Date prior to the Economic Pay Out Distribution Date) and (ii) the
unpaid principal amount of the Certificates (the "Economic Pay Out Amount"),
will be withdrawn from the Cash Collateral Account and distributed as a payment
of principal of the Certificates to Certificateholders on the first
Distribution Date following the Monthly Period in which such Economic Pay Out
Event occurs (the "Economic Pay Out Distribution Date").] 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)
material breaches of certain representations, warranties or covenants of the
Seller, (c) certain insolvency events involving the Seller, [(d) a reduction in
the average of the Portfolio Yields for any [____] consecutive Monthly Periods
to a rate that is less than the average of the Base Rates for such period [(an
"Economic Pay Out Event")], (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) reduction of the [amount available under the Credit
Enhancement] to less than ____ percent of the Investor Interest, [(i)
insufficient money in the Principal Funding Account to pay principal equal to
the Investor Interest on the Scheduled Payment Date] [or (j) other events].
See "Description of the Certificates -- Pay Out Events herein." The term "Base
Rate" means, with respect to any Monthly Period, [the annualized percentage
equivalent of a fraction, the numerator of which is [____%] [the sum of the
Certificate Rate for the related Interest Period and the Investor Servicing Fee
percentage for such Monthly Period and the denominator of which is the Investor
Interest as of the end of the day on the last day of such Monthly Period]].
The term "Portfolio Yield" means, with respect to any Monthly Period [and
calculated with respect to any Transfer Dates related thereto], [the annualized
percentage equivalent of a fraction, the numerator of which is [the sum of
collections of Finance Charge Receivables and annual membership fees deposited
in the Finance Charge Account and allocable to the Certificates 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
[Adjusted] Investor Interest as of the end of the day on the last day of the
such Monthly Period.]] See "Description of the Certificates -- Pay Out
Events."
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.
S-36
<PAGE> 37
<TABLE>
<CAPTION>
CARDHOLDER MONTHLY PAYMENT RATES
BANK PORTFOLIO
____ MONTHS ENDED YEAR ENDED DECEMBER 31,
__________, 199__ ----------------------------------
--------------------- 199__ 199__ 199__
---------- ------- -------
<S> <C> <C> <C> <C>
Lowest Month . . . . . . . . . . . . __% % % %
Highest Month . . . . . . . . . . . . __% % % %
Monthly Average . . . . . . . . . . . __% % % %
</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, in all instances, the cardholder was and is 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.
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 Certificateholders could expect to receive payments [allocations] of
principal on their Certificates during an Amortization Period [Accumulation
Period], will be similar to the historical experience set forth above. If a
Pay Out Event occurs ([including an Economic Pay Out Event)], the average life
and maturity of the Certificates could be significantly reduced.
Because there may be a slowdown in the payment rate below the payment
rate used to determine the [Controlled Amortization Amount] [the Controlled
Accumulation Amount], 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 Certificates to the final
Distribution Date with respect to the Certificates will equal the expected
number of months. See "Maturity Assumptions" herein and "Special
Considerations -- Payments and Maturity" in the Prospectus.
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 __________, ____ and the ____ months ended __________, ____ 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 yields as amounts collected on credit
card receivables lag behind amounts accrued and billed to cardholders.
Conversely, as delinquencies decrease, cash yields may exceed accrual yields as
amounts collected in a current period may include amounts accrued during prior
periods. [However, the Seller believes that during the three calendar years
ending __________, ____ and the ____ months ended __________, ____, 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 credit card 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 "Special
Considerations" in the Prospectus.
S-37
<PAGE> 38
<TABLE>
<CAPTION>
BANK PORTFOLIO YIELD
Year Ended December 31,
____ Months Ended -------------------------------------------------
______, 199__ 199__ 199__ 199__
------------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Average Account Monthly Accrued
Finance Charges and Fees (1)(2) . . . . . . $ $ $ $
Average Account Balance(3) . . . . . . . . $ $ $ $
Yield from Finance Charges
and Fees(4) . . . . . . . . . . . . . . . % % %
%
[Yield from Interchange(5)] . . . . . . . . % % % %
Yield from Finance Charges, Fees [and
Interchange] . . . . . . . . . . . . . . % % % %
</TABLE>
- ----------------------------
(1) Finance Charges and Fees are comprised of monthly periodic finance charges
and other credit card fees [,but do not include revenue attributable to
Interchange].
(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
years indicated above has been estimated.]
The revenue for the Bank Portfolio of credit card accounts shown in the
above table is comprised of monthly periodic finance charges and [,] credit
card fees [and Interchange]. These revenues vary for each account based on the
type and volume of activity for each account. See "MBNA's Credit Card
Portfolio" herein and "MBNA's Credit Card Activities" in the Prospectus.
MBNA AND MBNA CORPORATION
MBNA America Bank, National Association, a national banking
association located in Newark, Delaware, conducts nationwide consumer lending
programs principally comprised of credit card related activities. Based on
statistics compiled by MasterCard and VISA from member institutions as of
__________, 199__, MBNA was the nation's [leading] issuer of premium MasterCard
credit cards and the __________ largest issuer of premium VISA credit cards
based on managed loans. As of __________ ____, 199__, MBNA was the __________
largest lender of MasterCard and Visa accounts based on managed loans according
to the __________, 199__ issue of The Nilson Report, a bi-weekly industry
publication. On a managed basis, MBNA maintained loan accounts with over [11]
million customers with aggregate outstanding balances of $____ billion as of
__________ ____, 199__. Of this amount, $____ billion were MasterCard and VISA
credit card loans outstanding. As of __________, 199__, the premium credit
card portfolio accounted for ____% of MBNA's MasterCard and Visa credit card
accounts with outstanding balances and ____% of MBNA's MasterCard and VISA
credit card loans outstanding.
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 __________, 199__, MBNA had assets of $____
billion, deposits of $____ billion and capital and surplus accounts of $____
million.
S-38
<PAGE> 39
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 __________, 199__, the Corporation had consolidated assets of $____ billion,
consolidated deposits of $____ billion and capital and surplus accounts of
$____ million. 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 [199__-__] 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 [199__-__] Supplement.
See "Description of the Certificates" in the Prospectus for additional
information concerning the Certificates and the Agreement.
GENERAL
The Certificates 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. The Investor Interest on
any date will be equal to the Initial Investor Interest [(increased by the
principal balance of any Additional Certificates)] [, plus the amount of any
withdrawals from the Pre-Funding Account in connection with the addition of
Principal Receivables during the Funding Period] minus the amount of principal
paid to Certificateholders prior to such date [(other than any payments of
principal to Certificateholders from the Pre-Funding Account)] and minus the
amount of unreimbursed Investor Charge-Offs prior to such date. See
"Description of the Certificates -- Defaulted Receivables; Rebates and
Fraudulent Charges; Investor Charge-Offs" in the Prospectus and "-- Defaulted
Receivables; Rebates and Fraudulent Charges; Investor Charge-Offs" herein.
[The Adjusted Investor Interest on any date during the [Controlled Accumulation
Period] [Rapid Accumulation Period] will be equal to the Investor Interest
minus the funds on deposit in the Principal Funding Account on such date.]
Each Certificate represents the right to receive payments of interest at the
[applicable] Certificate Rate [or Rates] for the related [Interest] [Monthly]
Period and payments of principal [during an Amortization Period] [on the
Scheduled Payment Date] funded from collections in respect of Finance Charge
Receivables and Principal Receivables, [funds on deposit in the Pre-Funding
Account and certain investment earnings thereon] [funds on deposit in the
Principal Funding Account and certain investment earnings thereon], [Shared
Excess Finance Charge Collections] [Shared Principal Collections if any,
allocated to the Series 199__-__ Certificates] [Credit Enhancement] [Collateral
Interest] allocated to the Investor Interest [and, under certain circumstances,
from withdrawals from the Cash Collateral Account]. Payments of interest and
principal will be made on each related Distribution Date 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").
Interest payments will be derived from collections in respect of
Finance Charge Receivables, annual membership fees [and certain investment
earnings on funds on deposit in the [Pre-Funding Account] [Principal Funding
Account] [and, if necessary, [Shared Excess Finance Charge Collections] [Credit
Enhancement]. Allocations of collections of Finance Charge Receivables and
annual membership fees with respect to any [Distribution Date] [Monthly Period]
will not exceed the product of the applicable Investor Percentage with respect
to Finance Charge Receivables and such collections. The Certificates will
represent undivided interests in the Trust, including the right to a floating
percentage (in the case of Principal Receivables during the Revolving Period,
which will be allocated to the Certificates and [paid to the holder of the
Seller's Certificate [(subject to certain limitations)] [or treated as Shared
Principal Collections and paid to the holders of certificates of certain other
Series], and Finance Charge Receivables and Receivables in Defaulted Accounts
at all times) or a [fixed] percentage (in the case of Principal
S-39
<PAGE> 40
Receivables during any Amortization Period [Accumulation Period] of all
cardholder payments on the Receivables; [provided, however, that on any
Distribution Date during a Controlled Amortization Period, the Certificates
shall be entitled to be paid, in respect of collections of Principal
Receivables, not more than the Controlled Distribution Amount [for each related
Monthly Period] [provided, however, that on any [Distribution Date] [Transfer
Date] [[____] [last] business day of each month] during an Accumulation
Period], the Certificates shall be entitled to have deposited in the Principal
Funding Account in respect of collections of Principal Receivables only the
Controlled Deposit Amount and on a Distribution Date that is a Scheduled
Payment Date, the Certificates shall be entitled to be paid principal equal to
the Investor Interest.]
The Seller initially will own the Seller Certificate. The Seller
Certificate will represent an undivided interest in 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 Percentage and 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.
During the Revolving Period, the amount of the Investor Interest will
[remain constant] [increase in the case of an Additional Issuance] [increase to
the Full Investor Interest, unless by the end of the Funding Period (a)
insufficient Principal Receivables [or Participations] have been added to the
Trust, (b) insufficient reduction of the investor interests of other amortizing
Series has occurred, (c) there are unreimbursed Investor Charge-Offs or (d) a
Pay Out Event has occurred]. See "Description of the Certificates -- Defaulted
Receivables; Rebates and Fraudulent Charges; Investor Charge-Offs" in the
Prospectus. 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.
During an Amortization Period, the Investor Interest in the Trust will decline
as cardholder payments of Principal Receivables are collected and held for
[monthly] distribution to the Certificateholders. As a result, the Seller
Interest during an Amortization Period will generally increase each month to
reflect the reductions in the Investor Interest and will also change to reflect
the variations in the amount of Principal Receivables in the Trust. The Seller
Interest may be reduced as the result of an Exchange. See "Description of the
Certificates -- Exchanges" in the Prospectus.
The Certificates initially will be represented by certificates
registered in the name of the nominee of DTC except as set forth below and in
the Prospectus. Beneficial interests in the Certificates will be available for
purchase in minimum denominations of $[1,000] (representing a ____th of the
undivided interest of the Certificate Owners in the Series) 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 the 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 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, 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 "Description of the Certificates -- General", "-- Book-Entry
Registration" and "-- Definitive Certificates" in the Prospectus.
[Application will be made to list the Certificates on the [Luxembourg
Stock Exchange] [other exchange].]
S-40
<PAGE> 41
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.
The Certificates will be issued as Definitive Certificates to
Certificate Owners or their nominees, rather than DTC or its nominee, only as
provided under "Description of the Certificates -- Definitive Certificates" in
the Prospectus.
[ISSUANCE OF ADDITIONAL CERTIFICATES
The Series [199__-__] Supplement provides that, from time to time
during the Revolving Period, the Seller may, subject to certain conditions
described below, cause the Trustee to issue Additional Certificates (each such
issuance, an "Additional Issuance"). When issued, the Additional Certificates
will be identical in all respects to the other outstanding Certificates and
will be equally and ratably entitled to the benefits of the Agreement and the
Series Supplement without preference, priority or distinction.
In connection with each Additional Issuance, the outstanding principal
amounts of the Certificates and the aggregate amount of Credit Enhancement will
all be increased pro rata. The additional Credit Enhancement provided in
connection with an Additional Issuance may take the form of [an additional
deposit to the Cash Collateral Account] or another form of Credit Enhancement,
provided that the form and amount of additional Credit Enhancement will not
cause a reduction or withdrawal of the then-current ratings of the
Certificates.
Additional Certificates may be issued only upon the satisfaction of
certain conditions provided in the Series Supplement, including the following:
(a) on or before the fifth Business Day immediately preceding the date on which
the Additional Investor Certificates are to be issued, the Seller shall have
given the Trustee, the Servicer and any provider of Credit Enhancement written
notice of such issuance and the date upon which it is to occur; (b) after
giving effect to the Additional Issuance, the total amount of Principal
Receivables shall be at least equal to the Minimum Aggregate Principal
Receivables; (c) the Seller shall have delivered to the Trustee any additional
Credit Enhancement agreement related to the Additional Issuance, executed by
each of the parties to such agreement; (d) the Trustee shall have received
confirmation from each Rating Agency that such Additional Issuance will not
result in a reduction or withdrawal of its then-current rating of the
Certificates; (e) [other conditions].
There are no restrictions on the timing or amount of any Additional
Issuance, provided that the conditions described above are met. As of the date
of any Additional Issuance, the Investor Interest will be increased to reflect
the initial principal balance of the Additional Certificates of the respective
classes.]
[SUBORDINATION
The Certificates will be subordinated in right of payment of
[interest] [principal] to the certificates of Series [199__-__].]
INTEREST PAYMENTS
Interest will accrue on the Investor Interest [and the Pre-Funding
Amount, if any] at the applicable Certificate Rate from the Closing Date.
Interest [accrued during each Interest Period] will be distributed on
__________, ____, and on each Distribution Date thereafter to
Certificateholders. Interest
S-41
<PAGE> 42
payments on the Certificates for each [Interest] [Monthly] Period and related
Distribution Date will be calculated on the Investor Interest as of [the
preceding Record Date] [the [_____] [last] day of the prior Monthly Period] (or
in the case of the initial [Interest] [Monthly] Period on the Initial Investor
Interest) [and the Pre-Funding Amount, if any] based upon the Certificate Rate
for the related [Interest] [Monthly] Period. [Interest due but not paid on any
Distribution Date will be payable on the next succeeding Distribution Date
together with additional interest on such amount at the [applicable]
Certificate Rate plus 2.00% per annum ("Additional Interest").] [The "Interest
Period" with respect to any Distribution Date, will be the period from [the
____ business day preceding] the previous Distribution Date through the [____]
day preceding such Distribution Date, except the initial Interest Period will
be the period from the Closing Date through the [____] day preceding the
initial Distribution Date.] Interest payments on any Distribution Date will be
funded from collections of Finance Charge Receivables and annual membership
fees allocated to the Investor Interest during the preceding Monthly Period[s].
To the extent [the sum of (i)] the Investor Percentage of collections of
Finance Charge Receivables during the preceding Monthly Period[s] [and (ii)
other Available Funds for the related Monthly Period] is insufficient to pay
such interest, [amounts available under the Credit Enhancement, up to the
[Available Credit Enhancement Amount] [Reallocated Collateral Principal
Collections], will be used to make such payments. ["Available Funds" will, on
any Transfer Date, consist of (i) collections of Finance Charge Receivables
allocated to the Certificates with respect to the preceding Monthly Period and
deposited in the Finance Charge Account on such Transfer Date, (ii) annual
membership fees allocated to the Certificates with respect to the preceding
Monthly Period and deposited in the Finance Charge Account on such Transfer
Date, [(iii) during the [Controlled Accumulation Period] [Rapid Accumulation
Period], Principal Funding Investment Proceeds and shortfall amounts in respect
thereof transferred to the Finance Charge Account on such Transfer Date,] [(iv)
during the Funding Period, certain investment earnings (net of investment
losses and expenses) on funds on deposit in the Pre-Funding Account on such
Transfer Date] [(v) Shared Excess Finance Charge Collections allocated to
Series [199__-__]].]
[The Certificates will bear interest at the rate of ____% per annum.
Interest on the Certificates will be calculated on the basis of twelve 30-day
months and a 360-day year. Interest due but not paid on any Payment Date will
be payable on the next succeeding Payment Date together with additional
interest on such amount at the Certificate Rate plus 2.00% ("Additional
Interest")].
[The Certificates will bear interest at the rate of ____% per annum
with respect to the initial Interest Period and, with respect to each
subsequent Interest Period, at the rate of ____% per annum [above] [below]
[times] ____ (the "Index") prevailing on the ____ business day immediately
preceding the commencement of such Interest Period (the "Rate Determination
Date"), [provided, however, that the rate at which interest will accrue on the
Certificates will in no event exceed ____% per annum].] Interest on the
Certificates will be calculated on the basis of the [actual number of days in
the [Interest Period] and a 360-day year. Interest due but not paid on any
Payment Date will be payable on the next succeeding Payment Date together with
additional interest on such amount at the Certificate Rate plus 2.00%
("Additional Interest")].
[The 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 __________.]
PRINCIPAL PAYMENTS
During the Revolving Period (which begins on the Closing Date and ends
on the day before an Amortization Period [or Accumulation Period] begins), no
principal payments will be made to Certificateholders [or the CA Investors]
[except at the end of the Funding Period if the Investor Interest has not
increased to the Full Investor Interest. [At the end of the Funding Period,
which is the ____ Distribution Date, the Certificateholders will be paid all
funds (except investment earnings thereon) remaining in the Pre-Funding Account
[and a certain Early Termination Amount]. See "-- Funding Period" herein.]
S-42
<PAGE> 43
[During the Controlled Amortization Period, which is scheduled to
begin on __________, ____, and during the Rapid Amortization Period, which will
begin upon the occurrence of a Pay Out Event, principal will be paid to the
Certificateholders. The first principal payment will be made to
Certificateholders beginning on the Distribution Date following the month in
which the Controlled Amortization Period or the Rapid Amortization Period
commences.] [On each Distribution Date during the Controlled Amortization
Period unless a Rapid Amortization Period commences, the Certificateholders
will be entitled to receive [for each related Monthly Period since the previous
Distribution Date] the lesser of (a) [the sum of (i)] the applicable Investor
Percentage of all collections of Principal Receivables received during [each
such] [the related] Monthly Period, [less Reallocated Collateral Principal
Collections] [(ii) [Shared Principal Collections for such Monthly Period from
other Series, if any, allocated to the Series 199__-__ Certificates,] [and
(iii)] [other amounts]] or (b) the Controlled Distribution Amount] until the
[Series 199__-__] is terminated.]
[During the Principal Amortization Period, which is scheduled to begin
on __________, ____, and during the Rapid Amortization Period, which will begin
upon the occurrence of a Pay Out Event, the Certificateholders will be entitled
to receive principal payments beginning on the Distribution Date following the
month in which the Principal Amortization Period or the Rapid Amortization
Period commences.] [On each Distribution Date during the Principal
Amortization Period, the Certificateholders will be entitled to receive [for
each related Monthly Period since the previous Distribution Date] the
applicable Investor Percentage of all collections of Principal Receivables
[Shared Principal Collections for such Monthly Period from other Series, if
any, allocated to the Series 199__-__ Certificates [and other available
amounts] received during [each such] [the related] Monthly Period until Series
[199__-__] is terminated.]
[On each [Distribution Date] [Transfer Date] [on the ____ business day
in each calendar month] following the commencement of the [Controlled
Accumulation Period] [Rapid Accumulation Period], the Trustee will deposit in
the Principal Funding Account an amount equal to [for each related Monthly
Period since the previous Distribution Date] the lesser of (a) [the sum of (i)]
the applicable Investor Percentage of all collections of Principal Receivables
received during [each such] [the related] Monthly Period [other than
Reallocated Collateral Principal Collections] [(ii) [Shared Principal
Collections for such Monthly Period from other Series, if any, allocated to the
Series [199__-__] Certificates,] [and (iii) [other amounts]], [and (b) the
Controlled Deposit Amount]. Amounts in the Principal Funding Account not to
exceed the applicable scheduled principal amount will be paid to the
Certificateholders on the Scheduled Payment Date. [If, on a Scheduled Payment
Date, moneys on deposit in the Principal Funding Account are insufficient to
pay principal equal to the Investor Interest, a Pay Out Event will occur and a
Rapid Amortization Period will commence.]]
[[With respect to any Distribution Date during the [Controlled
Amortization Period] [Controlled Accumulation Period], an amount equal to the
excess of the Collateral Interest over the Required Collateral Interest will be
paid to the CA Investors to the extent of the excess of the Percentage
Allocation plus certain other amounts over the [Controlled Distribution Amount]
[Controlled Deposit Amount] for such Distribution Date.] On each Distribution
Date on and following the Distribution Date on which the Investor Interest is
paid in full, the Percentage Allocation of all collections of Principal
Receivables for the related Monthly Period plus certain other amounts will be
paid to the CA Investors until the Collateral Interest is paid in full.]
[The Certificateholders will be entitled to receive the Investor
Interest on the Scheduled Payment Date. If funds on deposit in the Principal
Funding Account during the Rapid Accumulation Period are insufficient to pay in
full the Investor Interest on the Scheduled Payment Date, the Rapid
Amortization Period will commence.]
On each Distribution Date during the Rapid Amortization Period until
the Certificateholders have been paid in full, the Certificateholders will be
entitled to receive [for each related Monthly Period since the previous
Distribution Date] the applicable Investor Percentage of all collections of
Principal
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<PAGE> 44
Receivables [Shared Principal Collections for such Monthly Period from other
Series, if any, allocated to the Series 199__-__ Certificates [and other
available amounts] received during [each such] [the related] Monthly Period
until the Series [199__-__] is terminated. [In addition, upon the occurrence
of an Economic Pay Out Event, the Economic Pay Out Amount will be withdrawn
from the Cash Collateral Account on the following Transfer Date and distributed
as a payment of principal of the Certificates to Certificateholders on the
Economic Pay Out Distribution Date.]
See "-- Application of Collections" below for a discussion of the
method by which collections of Principal Receivables [and other amounts] are
allocated during an Amortization Period [or Accumulation 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 __________ Distribution Date
and thereafter on each Determination Date until the date the Controlled
Accumulation Period begins, the Servicer will determine the "Accumulation
Period Length" based on the lowest monthly principal payment rate on the
Receivables for the prior 12 months and the amount of principal distributable
to the Certificateholders of all outstanding series (excluding certain
specified series) which are not in their revolving period. If the Accumulation
Period Length is less than twelve months, the Servicer may, at its option,
postpone the commencement of the Controlled Accumulation Period such that the
number of months included in the Controlled Accumulation Period will be equal
to or exceed the Accumulation Period Length. The effect of the foregoing
calculation is to permit the reduction of the length of the Controlled
Accumulation Period based on the invested amounts 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, which, if
continued, would result in a shorter Controlled Accumulation Period and an
increase to the Controlled Accumulation Amount. The length of the Controlled
Accumulation Period will not be less than one month and will not be shorter
than the period determined as of the first date of determination unless the
Trust has issued another Series of Certificates subsequent to that date and
such Series is in its revolving period. If the commencement of the Controlled
Accumulation Period is delayed in accordance with the foregoing, and if an
Amortization Event occurs after the date originally scheduled as the
commencement of the Controlled Accumulation Period, then it is probable that
holders of Certificates would receive some of their principal later than if the
Controlled Accumulation Period had not been delayed.]
TRANSFER AND ASSIGNMENT OF RECEIVABLES
On the date of issuance of the Series ____ Certificates of the Trust
(the "Initial Closing Date") [and, with respect to certain Additional Accounts,
on __________, the Seller [will transfer and assign] [transferred and assigned]
to the Trust 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 the transfer of the Receivables to the Trust, the
Seller [indicated] [will indicate] in its computer files that the Receivables
had [have] been conveyed to the Trust and [provided] [will provide] the Trustee
with certain information relating to such Accounts. In addition, the Seller
[has filed] [will file] UCC financing statements with respect to the
Receivables meeting the requirements of Delaware state law. See "Description
of the Certificates -- Transfer and Assignment of Receivables," "Special
Considerations -- Certain Legal Aspects" and "Certain Legal Aspects of the
Receivables" in the Prospectus.
S-44
<PAGE> 45
EXCHANGES
The Agreement provides 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 is held by the
Seller and is transferable only as provided in the Agreement. The Agreement
also provides that, pursuant to any one or more series supplements, the holder
of the Seller Certificate may tender such certificate, or the Seller
Certificate and the certificates evidencing any Series of certificates, 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.
[PRIOR ISSUANCES OF CERTIFICATES
The table below sets forth the principal characteristics of the ____
Series heretofore issued by the Trust: the __________ Certificates, the
__________ Certificates and the __________ Certificates. For more specific
information with respect to any Series, any prospective investor should contact
MBNA at (800) 362-6225 or (302) 456-8588. MBNA will provide, without charge,
to any prospective purchaser of the Investor Certificates, a copy of the
Disclosure Documents for any previous publicly-issued Series.
Series ___________
<TABLE>
<S> <C>
Initial Investor Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Certificate Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current Investor Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
[Full Investor Interest] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
[Scheduled Termination of Funding Period] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
[Controlled [Amortization] [Accumulation] Amount] . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
[Commencement of [Controlled] [Principal] Amortization Period] . . . . . . . . . . . . . . . . . . . . . .
[Commencement of Controlled Accumulation Period] . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
[Scheduled Payment Date] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Monthly Servicing Fee Percentage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
[Initial Credit Enhancement Amount] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected Series Termination Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Scheduled Series Termination Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Series Issuance Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ]
</TABLE>
[FUNDING PERIOD
During the Funding Period, the Pre-Funding Amount will be held in the
Pre-Funding Account. [Funds on deposit in the Pre-Funding Account will be
invested by the Trustee in certain Permitted Investments [pursuant to a
guaranteed rate agreement] [guaranteed investment contract] which provides a
rate of return on such funds equal to the Certificate Rate. Interest earnings
on the Pre-Funding Amount (net of investment losses and expenses) will be used
to pay interest on the Certificates during the Funding Period.]
During the Funding Period, funds on deposit in the Pre-Funding Account
will be withdrawn and paid to the Seller to the extent of any increases in the
Investor Interest. The Seller expects that the Investor Interest will equal
the Full Investor Interest in the ______ 199__ Monthly Period. In the event
that the Investor Interest does not for any reason equal the Full Investor
Interest by the end of the Funding Period, any amount remaining in the
Pre-Funding Account will be payable to the Certificateholders of such Series on
such Distribution Date.] [The Early Termination Amount will be payable by the
Seller on the Distribution Date which is the last day of the Funding Period if
any Pre-Funding Amount exists at the end of the Funding Period. The Early
Termination Amount will equal the excess, if any, discounted as described
below, of (i) the amount of interest that would have accrued on such
Pre-Funding Amount at the Certificate Rate during the period commencing on and
including such
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<PAGE> 46
Distribution Date to, but excluding, __________, over (ii) the amount of
interest that would have accrued on such Pre-Funding Amount over the same
period at a per annum rate of interest equal to the bond equivalent yield to
maturity on the Determination Date preceding such Distribution Date on
[__________]. Such excess shall be discounted to present value to such
Distribution Date at the applicable yield described in clause (ii).]
INVESTOR PERCENTAGE AND SELLER PERCENTAGE
Pursuant to the Agreement, the Servicer will allocate between 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 Receivables
in Defaulted Accounts. The Servicer will make each allocation by reference to
the applicable Investor Percentage and the Seller Percentage in each case.
The Investor Percentage with respect to the Certificates for any
Monthly Period will be calculated as follows:
FINANCE CHARGE RECEIVABLES AND RECEIVABLES IN DEFAULTED ACCOUNTS.
When used at any time with respect to Finance Charge Receivables or
Receivables in Defaulted Accounts, "Investor Percentage" means the
[percentage equivalent of a fraction the numerator of which is the
[Adjusted] Investor Interest [plus the Collateral Interest] at the end
of the last day of the prior Monthly Period (or with respect to the
first Monthly Period, the Initial Investor Interest [plus the initial
Collateral Interest])[, plus the Enhancement Invested Amount, if any,
at the end of the last day of the prior Monthly Period] and the
denominator of which is the greater of (a) the aggregate amount of
Principal Receivables in the Trust at the end of such day, (or with
respect to the first Monthly Period, the aggregate amount of Principal
Receivables in the Trust at the end of the day preceding the Closing
Date) and (b) the sum of the numerators used to calculate the investor
percentages with respect to Finance Charge Receivables and Receivables
in Defaulted Accounts for all Series of certificates outstanding.]
PRINCIPAL RECEIVABLES DURING REVOLVING PERIOD. When used with
respect to Principal Receivables during the Revolving Period,
"Investor Percentage" means the percentage equivalent of a fraction
the numerator of which is the Investor Interest [plus the Collateral
Interest] at the end of the last day of the prior Monthly Period (or
with respect to the first Monthly Period, the Initial Investor
Interest [plus the initial Collateral Interest]) and the denominator
of which is the greater of (a) the aggregate amount of Principal
Receivables in the Trust at the end of such day (or with respect to
the first Monthly Period, the aggregate amount of Principal
Receivables in the Trust at the end of the day preceding the Closing
Date), and (b) the sum of the numerators used to calculate the
investor percentages with respect to Principal Receivables during the
revolving periods for all Series of certificates outstanding [(the
"Floating Allocation Percentage")].
PRINCIPAL RECEIVABLES DURING [CONTROLLED AMORTIZATION PERIOD]
[PRINCIPAL AMORTIZATION PERIOD] [CONTROLLED ACCUMULATION PERIOD]
[RAPID ACCUMULATION PERIOD] AND RAPID AMORTIZATION PERIOD. When used
with respect to Principal Receivables during the [Controlled
Amortization Period] [Principal Amortization Period] [Controlled
Accumulation Period] [Rapid Accumulation Period] and the Rapid
Amortization Period, "Investor Percentage" means [the percentage
equivalent of a fraction the numerator of which is the Investor
Interest [plus the Collateral Interest] at the end of the last day of
the Revolving Period and the denominator of which is the greater of
(a) the aggregate amount of Principal Receivables in the Trust as of
the close of business on the last day of the prior Monthly Period, and
(b) the sum of the numerators used to calculate the investor
percentages with respect to Principal Receivables for all Series
outstanding] [(A) with respect to any day during a Monthly Period
occurring prior to the Fixed Principal Allocation Date, the Floating
Allocation Percentage for such Monthly Period, and (B) with respect to
any day during a Monthly Period occurring on or after the Fixed
Principal
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<PAGE> 47
Allocation Date, the percentage equivalent (which percentage shall
never exceed 100%) of a fraction, the numerator of which is the
[Adjusted] Investor Interest [plus the Collateral Interest] as of the
last day of the Monthly Period occurring immediately prior to the
Fixed Principal Allocation Date and the denominator of which is the
greater of (x) the aggregate amount of Principal Receivables at the
end of the day on the last day of the preceding Monthly Period and (y)
the sum of the numerators used to calculate the investor percentages
with respect to Principal Receivables for all Series of certificates
outstanding].
["Fixed Principal Allocation Date" means the earlier of (a) the date
on which a Pay Out Event with respect to Certificates occurs, and (b) a date
selected by the Servicer, if any.]
[The term "Collateral Interest" means an amount equal to (a) the
initial Collateral Interest, minus (b) the amount of principal payments made to
the CA Investors prior to such date, minus (c) the aggregate amount of
Collateral Charge-Offs for all prior Distribution Dates, minus (d) an amount
equal to the aggregate amount of Reallocated Collateral Principal Collections
for all prior [Transfer] [Distribution] Dates which have been used to fund the
Required Amount, and plus (e) the aggregate amount of Excess Finance Charge
Collections and certain other amounts allocated and available for purposes of
reimbursing amounts deducted pursuant to the foregoing clauses (c) and (d);
provided, however, that the Collateral Interest may not be reduced below zero.]
The Seller Percentage will, in all cases, be equal to 100% minus the
applicable Investor Percentage and the applicable investor percentages with
respect to all other Series outstanding.
[Notwithstanding the foregoing, in any Monthly Period in which there
occurs (a) an Addition Date or (b) a Removal Date on which Principal
Receivables in an aggregate amount approximately equal to the initial investor
interest of a Series are removed from the Trust in connection with the payment
in full of such Series, the amount of Principal Receivables making up the
denominator in each calculation of the Investor Percentage described above
shall be (i) the aggregate amount of Principal Receivables in the Trust at the
end of the day on the last day of the prior Monthly Period (or with respect to
the first Monthly Period, the aggregate amount of Principal Receivables as of
the close of business on the day immediately preceding the Closing Date) 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 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] [; provided further, however, that with respect to
any Monthly Period during the Funding Period in which the Investor Interest is
increased pursuant to the Series [199__-__] Supplement, the numerator in each
calculation of the Investor Percentage described will be (1) the Investor
Interest at 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 day the
Investor Interest is increased and (2) the Investor Interest at the end of the
day on which the Investor Interest is increased for the period from and
including such day to and including the last day of such Monthly Period].
[As a result of the calculations described above, collections of
Finance Charge Receivables in each month will be allocated to the
Certificateholders based on the relationship of the amount of the Investor
Interest to the amount of Principal Receivables in the Trust (which may
fluctuate from month to month). As described above, during the Revolving
Period the Investor Percentage applied when allocating collections of Principal
Receivables is expected to vary from month to month because the Investor
Interest as a percentage of the total amount of Principal Receivables in the
Trust will fluctuate from day to day.]
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<PAGE> 48
PRINCIPAL FUNDING ACCOUNT
Pursuant to the Series [199__-__] Supplement, the Trustee will
establish and maintain the Principal Funding Account as a segregated trust
account held for the benefit of the Certificateholders. During the [Controlled
Accumulation Period] [Rapid Accumulation Period], the Servicer shall transfer
collections in respect of Principal Receivables from the [Collection]
[Principal] Account [Shared Principal Collections from other Series, if any,
allocated to the Series 199__-__ Certificates [other amounts]] to the Principal
Funding Account as described under "Application of Collections."
Funds on deposit in the Principal Funding Account will be invested in
Permitted Investments [pursuant to a [guaranteed rate agreement] [guaranteed
investment contract] [with ___________], which provides for the guarantee of a
rate of return on such amounts equal to the Certificate Rate].] Investment
earnings (net of investment losses and expenses) on funds on deposit in the
Principal Funding Account for each [Interest] [Monthly] Period during the
[Controlled Accumulation Period] [Rapid Accumulation Period] (the "Principal
Funding Investment Proceeds") will be used to pay interest on the Certificates
in an amount equal to, for each [Interest] [Monthly] Period, [one-twelfth of
the product of the Certificate Rate and the balance in the Principal Funding
Account on the last day of [such] [the related] Monthly Period] [the product of
(i)(A) a fraction, the numerator of which is the actual number of days in the
[the related] Interest Period and the denominator of which is 360, times (B)
the Certificate Rate in effect with respect to the related Interest Period
times (ii) the balance in the Principal Funding Account as of the last day of
[such] [the related] Monthly Period] (the "Covered Amount"). [If, for any
[Monthly] [Interest] Period, the Principal Funding Investment Proceeds are less
than the Covered Amount, the amount of such deficiency shall be paid from
__________.]
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 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 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] [____ business day of each [month]]
(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 Credit Enhancement Provider] and (ii) if at any time prior to such
Distribution Date the amount of Collections deposited in the Collection Account
exceeds the amount required to be deposited pursuant to clause (i) above, the
Servicer will be permitted to withdraw the excess from the Collection Account.
The Servicer will withdraw the following amounts from the Collection
Account for application as indicated:
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<PAGE> 49
[(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 to the
holder of the Seller Certificate;
(b) an amount equal to the Investor Percentage of the
aggregate amount of such deposits in respect of Finance Charge
Receivables will be deposited into the Finance Charge Account;
(c) during the Revolving Period, an amount equal to the
Investor Percentage of the aggregate amount of such deposits in
respect of Principal Receivables [other than Reallocated Collateral
Principal Collections] will be paid to the holder of the Seller
Certificate [or will be held by the Seller for application, to the
extent necessary, as Shared Principal Collections on the related
Transfer Date] 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];
(d) during the [Controlled Amortization Period]
[Controlled Accumulation Period], an amount equal to the Percentage
Allocation of such deposits in respect of Principal Receivables [up
to, during any Monthly Period, an amount equal to the sum of the
Controlled Amortization Amount and any existing Deficit Controlled
Amortization Amount (such sum, the "Controlled Distribution Amount"),
will be deposited in the Principal Account] [up to, during any Monthly
Period, the sum of the Controlled Accumulation Amount and the
Accumulation Shortfall (such sum, the "Controlled Deposit Amount")
will be deposited in the Principal Account for transfer to the
Principal Funding Account and distribution to Certificateholders on
the Scheduled Payment Date] [provided, however, that after the date on
which the amount of such collections on deposit in the Principal
Account equals the [Adjusted] Investor Interest [plus the Collateral
Interest], any such collections of Principal Receivables in excess of
such amount will be paid to the holder of the Seller Certificate,
subject to the limitations discussed below]. Any excess of the
Percentage Allocation over the [Controlled Distribution Amount]
[Controlled Deposit Amount] will be paid to the holder of the Seller
Certificate [or will be held by the Seller for application, to the
extent necessary, as Shared Principal Collections on the related
Transfer Date] [or applied to reduce the Collateral Interest to the
Required Collateral Interest], provided that if on such day 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.] [If [the
sum of] the Percentage Allocation [Shared Principal Collections for
such Monthly Period, if any, allocated to the Series 199__-__
Certificates] [other amounts] is less than the Controlled Distribution
Amount, then the excess of the Controlled Distribution Amount over the
Percentage Allocation will be the Deficit Controlled Amortization
Amount for the next Monthly Period] [If [the sum of] the Percentage
Allocation [Shared Principal Collections for such Monthly Period, if
any, allocated to the Series 199__-__ Certificates] [other amounts] is
less than the Controlled Deposit Amount, then such deficiency will be
the Accumulation Shortfall for the next Monthly Period];
(e) during the [Principal Amortization Period] Rapid
Amortization Period, an amount equal to the Percentage Allocation up
to the amount of the Investor Interest [Collateral Interest] will be
deposited into the Principal Account or will be held by the Seller of
application, to the extent necessary, as Shared Principal Collections
on the related Transfer Date];
[(f) Shared Principal Collections will be allocated to
other outstanding Series pro rata based on the Principal Shortfall
with respect to such Series [, and any remaining Shared Principal
Collections will be paid to the holder of the Seller Certificate until
the Seller Interest is reduced to zero, and the excess will be
deposited in the Principal Account]. "Principal Shortfall" means (a)
with respect to any Series in a controlled amortization period or
controlled accumulation
S-49
<PAGE> 50
period, any shortfall in collections of Principal Receivables during a
Monthly Period allocable to such Series, based on the investor
percentage for collections of Principal Receivables applicable to such
Series, with respect to the controlled distribution amount or
controlled deposit amount for such Series, and (b) with respect to any
Series which is in its amortization period but not subject to any
controlled distribution amount any shortfall in collection of
Principal Receivables during a Monthly Period allocable to such Series
with respect to the investor interest on such Series.]
[Any amounts collected in respect of Principal Receivables [and any
Shared Principal Collections] not paid to the Seller because of the limitations
described above ("Unallocated Principal Collections"), together with any
adjustment payments, as described below, will, during the Revolving Period, be
paid to, or held in the Principal Account for payment 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 related Distribution Date] [deposited in the Principal Funding Account
on the related Transfer Date] [paid to the certificateholders of other Series.]
PAYMENT OF FEES, INTEREST AND OTHER ITEMS. On each [Transfer Date]
[preceding a Distribution Date on which interest is to be paid on the
Certificates], the Trustee, acting pursuant to the Servicer's instructions,
will withdraw all amounts on deposit in the Finance Charge Account and make the
following payments and deposits in the following order. [Each such withdrawal
will be the aggregate of the following payments and deposits for each related
Monthly Period.]:
[(a) an amount equal to [one-____ of the product of the
Certificate Rate and the Investor Interest [and the Pre-Funding
Amount, if any] as of the [preceding Record Date] [____] [last] day of
the prior Monthly Period]] [the product of (i) (A) the actual number
of days in the related Interest Period divided by 360, times (B) the
Certificate Rate for the related Interest Period and (ii) the Investor
Interest [and the Pre-Funding Amount, if any] as of the [preceding
Record Date] [____] [last] day of the prior Monthly Period] (or, in
the case of the first [Distribution Date] the Initial Investor
Interest] ("Monthly Interest"), plus any Monthly Interest previously
due but not paid on the Distribution Date, [plus interest on any
overdue interest at the Certificate Rate plus 2.00% per annum] will be
deposited in the Distribution Account for distribution to
Certificateholders on the next succeeding Distribution Date;
(b) an amount equal to the Investor Servicing Fee [for
[each] [the] preceding Monthly Period] and any accrued and unpaid
Investor Servicing Fees will be paid to the Servicer;
(c) an amount equal to the Investor Default Amount, if
any, for [each] [the] preceding Monthly Period will be treated as a
collection of Principal Receivables and (A) during the Revolving
Period, will be [paid] [held for payment on the next Distribution
Date] to the holder of the Seller Certificate up to the amount of the
Seller Interest, during the Revolving Period] [treated as Shared
Principal Collections] (B) will be [available for payment to]
[accumulated for the benefit of] the Certificateholders during an
Amortization Period [or Accumulation Period];
(d) an amount equal to unreimbursed Investor Charge-Offs,
if any, will be treated as a collection of Principal Receivables and
will be [paid to] [accumulated for the benefit of] the
Certificateholders during the Rapid Amortization Period;
[(e) an amount equal to the monthly fee payable to the
Credit Enhancement Provider (the "Credit Enhancement Fee") and any
accrued and unpaid Credit Enhancement fees will be paid [held for
payment on the next Distribution Date] to the Credit Enhancement
Provider];]
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<PAGE> 51
[(f) an amount equal to the aggregate amount by which the
Enhancement Invested Amount has been reduced pursuant to clause (c) of
the definition of "Enhancement Invested Amount" (but not in excess of
the aggregate amount of such reductions which have not been previously
reimbursed) will be treated as a collection of Principal Receivables
and will be paid to Certificateholders during the Rapid Amortization
Period;]
[(g)] the balance, if any, on deposit in the Finance Charge
Account, after giving effect to the above payments, will be [paid] [to
the Credit Enhancement Provider] [other fees] [treated as Shared
Excess Finance Charge Collections and paid to other Series of
certificates issued and outstanding] [in accordance with the
provisions of the [Agreement] [Series [199__] Supplement].]
"Required Amount" means, with respect to any Distribution Date, the
excess, if any, of the full amount required to be paid pursuant to paragraphs
(a) through (c) above over the amount of Available Funds [and Shared Excess
Finance Charge Collections allocated to Series 199__-__] for such Distribution
Date.
If the amount allocable to the Series offered hereby on deposit in the
Finance Charge Account during the preceding Monthly Period[s] [and other
Available Funds transferred to the Finance Charge Account on the related
Transfer Date] insufficient to pay [Monthly Interest for the related Monthly
Period] [the aggregate of the Monthly Interest for each related Interest
Period] [Additional Interest] preceding the Distribution Date, [the Investor
Servicing Fee] and the Investor Default Amount for the preceding Monthly
Period[s], the Trustee will obtain moneys from [Credit Enhancement, up to the
Available Credit Enhancement Amount] [Reallocated Collateral Principal
Collections], and deposit such amount into the Finance Charge Account on the
Transfer Date to make such payments in the order and manner set forth above.
[In addition, if an Economic Pay Out Event occurs, the Economic Pay Out Amount
will be distributed to Certificateholders as principal on the Economic Pay Out
Distribution Date. See "-- The Cash Collateral Account."]
[If, on the Distribution Date which is the last day of the Funding
Period, the remaining Pre-Funding Amount is scheduled to be paid as principal
on the Certificates, the Trustee shall [withdraw] [obtain] moneys from
[__________] to pay the Early Termination Amount. See "-- Funding Period."]
[Moneys in the Distribution Account will be paid to the
Certificateholders on each Distribution Date in the aggregate amount of the
deposit therein for each Monthly Period related to such Distribution Date.]
PAYMENTS OF PRINCIPAL. [On the Transfer Date occurring in the month
following the month in which an Amortization Period begins, and thereafter on
each Transfer Date [preceding a Distribution Date on which principal is to be
paid], the Trustee, acting in accordance with instructions from the Servicer,
will withdraw all amounts on deposit in the Principal Account and deposit such
amounts in the Distribution Account for distribution to the Certificateholders
on the next succeeding Distribution Date. On each such Distribution Date, the
Certificateholders will be entitled to receive principal payments [for each
related Monthly Period since the previous Distribution Date] and any principal
previously due but not distributed on a prior Distribution Date until the
Investor Interest is paid in full.] [On the Transfer Date before each
Scheduled Payment Date, the Trustee, acting in accordance with instructions
from the Servicer, will withdraw all amounts on deposit in the Principal
Funding Account (following any required transfers on such date from the
Principal Account to the Principal Funding Account of the Controlled Deposit
Amount) and deposit such amounts in the Distribution Account for distribution
[to Certificateholders on the next succeeding Distribution Date] [as follows:
(i) an amount equal to the Monthly Principal for the related Distribution Date
will be distributed to the Certificateholders and (ii) an amount equal to the
[Enhancement Invested Amount, if any,] [Collateral Interest] will be
distributed to the [Cash Collateral Depositor] [CA Investors] for application
in accordance with the [Loan Agreement]; [provided, however, that principal
will not be payable to the [Cash Collateral Depositor] [CA Investors] with
respect to the [Enhancement Invested Amount] [Collateral Interest], if any,
until the Certificates have been paid in
S-51
<PAGE> 52
full]]. On the Scheduled Payment Date, the Certificateholders will be entitled
to receive scheduled principal payments.] [On the Transfer Date immediately
preceding the last day of the end of the Funding Period, the Trustee, acting in
accordance with instructions from the Servicer, will withdraw any remaining
Pre-Funding Amount and deposit such Amount into the Distribution Account for
distribution as payment of principal on the Certificates on the related
Distribution Date.]
["Monthly Principal" with respect to any Distribution Date relating
to an Amortization Period will equal the least of (i) the sum of the Percentage
Allocation and the Economic Pay Out Amount, if any, on deposit in the Principal
Account, (ii) for each Distribution Date with respect to the Controlled
Amortization Period (on or after the _______ ____ Distribution Date), the
Controlled Distribution Amount for such Distribution Date and (iii) the
Investor Interest.]
[If amounts on deposit in the Principal Account [Principal Funding
Account] in respect of collections of Principal Receivables during the
preceding Monthly Period are insufficient on any Transfer Date to [pay]
[accumulate for distribution on the next Distribution Date] required principal
payments for the related Monthly Period[s], the Trustee shall obtain the amount
of such deficiency from [Shared Principal Collections] [Credit Enhancement up
to the Available Credit Enhancement Amount] [other amounts] and deposit such
amount into the [Principal Funding] [Distribution] Account on the Transfer Date
to [make] [accumulate] such payments as set forth above.]
[The [CA Investors] [holder of the Enhancement Invested Amount] will
receive principal payments after the Investor Interest has been paid in full
[and, to the extent that the Collateral Interest exceeds the Required
Collateral Interest on any Distribution Date, the CA Investors will receive
principal payments prior to the payment in full of the Investor Interest.]]
[SHARED EXCESS FINANCE CHARGE COLLECTIONS
Excess Finance Charge Collections with respect to any Series in Group
____ during any Monthly Period will be combined and applied to cover any
shortfalls with respect to amounts payable from collections of Finance Charge
Receivables allocable to the Series 199__-__ Certificates [and [specified]
other Series then outstanding, pro rata] based upon the amount of the
shortfall, if any, with respect to [each] such Series (as combined, "Shared
Excess Finance Charge Collections"). [Any Shared Excess Finance Charge
Collections remaining after covering shortfalls with respect to the Series
199__-__ Certificates [and [specified] outstanding Series will be paid to the
[Seller].
["Excess Finance Charge Collections" with respect to a Series for any
Monthly Period will equal the excess of collections of Finance Charge
Receivables and annual membership fees allocated to the Investor Interest [and
other amounts] over the sum of (i) current Monthly Interest, any overdue
Monthly Interest and any Additional Interest on the Certificates, (ii) the
Investor Servicing Fee and any accrued and unpaid Investor Servicing Fees,
(iii) the Investor Default Amount, [and] (iv) unreimbursed Investor Charge-Offs
[and (v) certain unreimbursed reductions in the Enhancement Invested Amount, if
any]. Excess Finance Charge Collections with respect to the Series 199__-__
Certificates will become Shared Excess Finance Charge Collections and applied
as described herein.]
[SHARED PRINCIPAL COLLECTIONS
To the extent that collections of Principal Receivables [and other
available amounts] allocated to the Investor Interest with respect to the
Certificates are not needed to make payments to the Certificates [the
Collateral Interest] [the Enhancement Invested Amount] [or required to be
deposited in the Principal Funding Account], they will be applied to cover
principal payments due to or for the benefit of certificateholders of another
Series. Any such reallocation will not result in a reduction in the Investor
Interest with respect to the Certificates. In addition, collections of
Principal Receivables and certain other amounts otherwise allocable to other
Series, to the extent such collections are not needed to make
S-52
<PAGE> 53
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 Certificates.]
[REQUIRED COLLATERAL AMOUNT
The "Required Collateral Interest" with respect to any [Transfer]
[Distribution] Date for the Certificates means (i) $__________ initially and
(ii) thereafter an amount equal to the greater of (a) ____% of the sum of the
Investor Interest plus the Collateral Interest and (b) ____% of the Investor
Interest, in each case as of such [Transfer] [Distribution] Date after taking
into account distributions made on such date; provided, however, (1) that if
certain reductions in the Collateral Interest are made or if a Pay Out Event
occurs, the Required Collateral Interest for such [Transfer] [Distribution]
Date shall equal the Required Collateral Interest for the [Transfer]
[Distribution] 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] [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 any 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 with
respect to which it is a Rating Agency.
[With respect to any [Transfer] [Distribution] Date, if the Collateral
Interest is less than the Required Collateral Interest, certain Excess Finance
Charge Collections, if available, will be allocated to increase the Collateral
Interest to the extent of such shortfall. Any of such Excess Finance Charge
Collections not required to be so allocated with respect to any [Transfer]
[Distribution] Date will be applied in accordance with the Loan Agreement.]]
[THE CASH COLLATERAL ACCOUNT
The Certificates will have the benefit of the Cash Collateral Account,
which will be held with the Trustee in the name of the Trust for the benefit of
the Certificateholders. Funds on deposit in the Cash Collateral Account will
be invested in certain short-term investments having a rating of at least A-1+
or P-1 (or AAAm or Aaa, as the case may be) from the applicable Rating Agency
and further described in the related Series Supplement.
The Cash Collateral Account will have an initial Available Cash
Collateral Amount of $__________, to be funded from the proceeds of a loan to
be made to the Trust pursuant to the Loan Agreement by one or more financial
institutions to be selected by MBNA (such financial institution or
institutions, the "Cash Collateral Depositor"). The loan will be repaid
pursuant to the Loan Agreement.
On each Determination Date, the Servicer will determine the amounts,
if any, required to be withdrawn from the Cash Collateral Account and deposited
into the Finance Charge Account, up to the Available Cash Collateral Amount, as
described above in "-- Application of Collections -- Payment of Fees, Interest
and Other Items" on the related Transfer Date.
On each Transfer Date, prior to an Economic Pay Out Distribution Date,
the Trustee, acting pursuant to the Servicer's instructions, will deposit into
the Cash Collateral Account the portion of the Excess Finance Charge
Collections, if any, necessary to increase the amount of funds on deposit in
the Cash Collateral Account to the Required Cash Collateral Amount. The
remaining Excess Finance Charge Collections, if any, will be applied in
accordance with the terms of the Loan Agreement. On each Transfer Date, the
Trustee, acting pursuant to the Servicer's instructions, will withdraw from the
Cash Collateral Account an amount equal to the amount by which the amount on
deposit in the Cash Collateral
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<PAGE> 54
Account exceeds the Required Cash Collateral Amount and apply such amounts in
accordance with the terms of the Loan Agreement.
The Required Cash Collateral Amount with respect to any Transfer Date
will equal the product of (i) the [Adjusted] Investor Interest as of the last
day of the Monthly Period preceding such date and (ii) ____%, but not less than
$__________, provided, however, that if certain withdrawals are made from the
Cash Collateral Account during the [Controlled Amortization Period] [Controlled
Accumulation Period] [Principal Amortization Period] or if a Pay Out Event
occurs, the Required Cash Collateral Amount for each Transfer Date thereafter
will equal the Required Cash Collateral Amount with respect to the Transfer
Date immediately preceding such withdrawal or such Pay Out Event.
On the Transfer Date preceding the Economic Pay Out Distribution Date,
an amount equal to the Economic Pay Out Amount will be withdrawn from the Cash
Collateral Account and deposited into the Principal Account for distribution to
the Certificateholders as a payment of principal on such Economic Pay Out
Distribution Date. The "Economic Pay Out Amount" will equal the lesser of (i)
the Available Cash Collateral Amount (after giving effect to any other
withdrawals from the Cash Collateral Account on the Transfer Date prior to such
Economic Pay Out Distribution Date) and (ii) the unpaid principal amount of the
Certificates after giving effect to any payment of principal to be made on the
related Distribution Date.
Following the withdrawal of the Economic Pay Out Amount from the Cash
Collateral Account, the Cash Collateral Account with be terminated. No further
deposits will be made into the Cash Collateral Account and, on subsequent
Distribution Dates, any amounts that otherwise would have been deposited into
the Cash Collateral Account will instead be applied in accordance with the
terms of the Loan Agreement. Upon the termination of the Cash Collateral
Account and the payment of the Economic Pay Out Amount to the
Certificateholders, the Investor Interest will be reduced by such amount. For
subsequent Distribution Dates, the Investor Percentage with respect to Finance
Charge Receivables will be determined using a numerator equal to the Investor
Interest plus the Enhancement Invested Amount. See "-- Investor Percentage and
Seller Percentage." The term "Enhancement Invested Amount" for any date means
an amount equal to (a) the Economic Pay Out Amount minus (b) an amount equal to
the aggregate amount of principal payments made with respect to such
Enhancement Invested Amount, minus (c) the aggregate amount by which the
Enhancement Invested Amount has been reduced to fund the Investor Default
Amount on all prior Distribution Dates (as described under "-- Defaulted
Accounts; Rebates and Fraudulent Charges; Investor Charge Offs"), and plus (d)
the amount of collections of Finance Charge Receivables applied on all prior
Distribution Dates for the purpose of reimbursing all amounts deducted from the
Enhancement Invested Amount pursuant to the foregoing clause (c). In the
absence of an Economic Pay Out Event and a related withdrawal from the Cash
Collateral Account of the Economic Pay Out Amount, the Enhancement Invested
Amount will be zero.
The amount available in the Cash Collateral Account is limited and
will be reduced by withdrawals made therefrom that are not reimbursed by
deposits made to the Cash Collateral Account from Excess Finance Charge
Collections. If the Available Cash Collateral Amount is reduced to zero,
[including as a result of the payment of an Economic Pay Out Amount, or,
following the occurrence of an Economic Pay Out Event, if the Enhancement
Invested Amount is also reduced to zero,] Certificateholders will bear directly
the credit and other risks associated with their respective undivided interests
in the Trust. See "-- Defaulted Receivables; Rebates and Fraudulent Charges;
Investor Charge-Offs."]
[CREDIT ENHANCEMENT
The Certificates will have the benefit of the [Letter of Credit] [Cash
Collateral Guaranty] [Collateral Interest] [Surety Bond] [Insurance Policy]
[Spread Account] [Reserve Account] [issued by __________ (the "Credit
Enhancement Provider")] in the initial amount of $__________.
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<PAGE> 55
With respect to any Distribution Date, the amount available to be
drawn under the [Letter of Credit] [Cash Collateral Account Guaranty]
[Collateral Interest] [Surety Bond] [Insurance Policy] [Spread Account]
[Reserve Account] (the "Available Credit Enhancement Amount") will equal
[__________].
On each [Determination Date], the Servicer will determine the amount
of the excess, if any, of amounts which are required to be paid from the
Collection Account with respect to collections of Finance Charge Receivables
[and other Available Funds transferred to the Finance Charge Account on the
related Transfer Date] on the next succeeding [Distribution Date] [Transfer
Date], as provided above [in clauses (a) through (d) of "-- Allocations --
Application of Collections; -- Payment of Fees, Interest and Other Items,"]]
[with respect to collections of Principal Receivables and other amounts on the
next succeeding [Distribution] [Transfer] Date, as provided above in "--
Allocations -- Application of Collections -- Payments of Principal,"]] over
amounts available in the Collection Account [with respect to (i) collections of
Finance Charge Receivables processed during the prior Monthly Period or
otherwise [and (ii) other Available Funds] (the "Finance Charge Deficiency
Amount")] [[with respect to (i) collections of Principal Receivables, [(ii)
Shared Principal Collections,] [(iv) other amounts] (the "Principal Deficiency
Amount")]. On the business day preceding the related [Distribution Date], the
Trustee, acting in accordance with instructions from the Servicer or as
otherwise provided in the Agreement, will draw on the Credit Enhancement, to
the extent of the Available Credit Enhancement Amount, an amount equal to the
[Finance Charge Deficiency Amount] [the Principal Deficiency Amount], if any.]
[CREDIT ENHANCEMENT PROVIDER]
[Description of and financial information with respect to the Credit
Enhancement Provider to be provided by the Credit Enhancement Provider]
DEFAULTED RECEIVABLES; REBATES AND FRAUDULENT CHARGES; INVESTOR CHARGE OFFS
On the [__________] business day preceding each Transfer Date (the
"Determination Date"), the Servicer will calculate the Investor Default Amount
for the preceding Monthly Period. The term "Investor Default Amount" means,
for any Monthly Period, the 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. [On each Distribution Date] [For each Monthly
Period], an amount equal to the Investor Default Amount for such related
Monthly Period[s] will be paid from amounts on deposit in the Finance Charge
Account or [amounts available under Credit Enhancement] [Shared Excess Finance
Charge Collections] and applied as described above in "-- Application of
Collections -- Payment of Fees, Interest and Other Items."
If the amount payable on a [Distribution Date] [Transfer Date] in
respect of interest on the Certificates, [Investor Servicing Fees] and the
[Aggregate Investor Default Amount], as described above in "-- Application of
Collections -- Payment of Fees, Interest and Other Items," exceeds the funds
allocable to the Series offered hereby on deposit in the Finance Charge Account
and the [Available Credit Enhancement Amount] [Shared Excess Finance Charge
Collections] [Reallocated Collateral Principal Collections], then [the
[Enhancement Invested Amount, if any,] [Collateral Interest] will be reduced by
the amount of such excess, but not more than the Investor Default Amount for
such Distribution Date. In the event that such reduction would cause the
[Enhancement Invested Amount] [Collateral Interest] to be a negative number,
the [Enhancement Invested Amount] [Collateral Interest] will be reduced to
zero, and] the Investor Interest will be reduced by the amount [by which the
[Enhancement Invested Amount] [Collateral Interest] would have been reduced
below zero] of such excess, but not more than such Investor Default Amount (an
"Investor Charge-Off"). Such Investor Charge-Offs, if, any, will have the
effect of reducing, pro rata, the principal balance of each Certificate.
Investor Charge-Offs will be reimbursed on any Distribution Date to the extent
amounts on deposit in the Finance Charge Account [Available Credit Enhancement
Amount] [Shared Excess Finance Charge Collections] exceed such interest, fees
and any Investor Default Amount payable on such date, as described above in "--
Application of Collections --
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<PAGE> 56
Payment of Fees, Interest and Other Items." Such reimbursement of Investor
Charge-Offs will result in an increase in the Investor Interest, which will
have the effect of increasing, pro rata, the principal balance of each
Certificate.
[Any such reductions of the Enhancement Invested Amount shall
thereafter be reimbursed and the Enhancement Invested Amount increased (but not
by an amount in excess of the aggregate reductions of the Enhancement Invested
Amount) on any Distribution Date by the amount on deposit in the Finance Charge
Account allocated and available for such purpose as described under "--
Application of Collections -- Payments of Fees, Interest and Other Items."]
PAY OUT EVENTS
As described above, the Revolving Period will continue through
__________, ____, 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 within the
applicable grace period which will 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
[199__-__] Supplement, which failure has a material adverse effect on the
Certificateholders and which continues unremedied for a period of [60] days
after written notice and continues to materially and adversely affect the
interests of the Certificateholders for such period;
(b) any representation or warranty made by the Seller in the
Agreement 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 and which continues to be incorrect in any
material respect for a period of [60] days after written notice and as a
result of which the interests of the Certificateholders are materially and
adversely affected 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) certain events of insolvency, conservatorship or
receivership relating to the Seller;
[(d) any reduction of the [average of the] Portfolio Yields
for any [three] [consecutive] Monthly Periods to a rate which is less than
the [average of the] Base Rate[s] for such period [(an "Economic Pay Out
Event")];]
(e) the Trust becomes an "investment company" within the
meaning of the Investment Company Act of 1940, as amended;
(f) a failure by the Seller to convey Receivables arising
under Additional Accounts to the Trust when required by the Agreement;
(g) any Servicer Default occurs which would have a material
adverse effect on the Certificateholders;
[(h) the Available Credit Enhancement Amount is less than
____% of the Investor Interest;]
[(i) the amount on deposit in the Principal Funding Account on
any Scheduled Payment Date is insufficient to pay the scheduled principal
amount equal to the Investor Interest in full; or]
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<PAGE> 57
[(j) other events.]
In the case of any event described in clause (a), (b) or (g) 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 evidencing undivided interests aggregating more 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 (c) or (e), a Pay Out Event with
respect to all Series then outstanding, and in the case of any event described
in clause (d), (f), (h) or (i), 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 Certificateholder will begin on the first Distribution Date
following the month in which such Pay Out Event occurred unless the [Controlled
Amortization Period] [Principal Amortization Period] previously commenced.
[Notwithstanding the prior occurrence of any Pay Out Event other than an
Economic Pay Out Event, in the event that an Economic Pay Out Event occurs, the
Economic Pay Out Amount will be distributed as a payment of principal to
Certificateholders on the Economic Pay Out Distribution Date.] 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
unless the [Controlled Amortization Period] [Principal Amortization Period]
previously commenced. If, because of the occurrence of a Pay Out Event, the
Rapid Amortization Period begins earlier than __________, ____, the scheduled
commencement of the [Controlled Amortization Period] [Principal Amortization
Period], Certificateholders will 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 Servicer's compensation for its servicing activities and
reimbursement for its expenses will take the form of the payment to it of a
[monthly] servicing fee in an amount equal to the sum of one-____ of the
product of [____% per annum] and the average amount of the Principal
Receivables during each month[s]. The [monthly] servicing fee will be
allocated between the Seller Interest[, the Collateral Interest] [the
Enhancement Invested Amount] and the Investor Interest and the investor
interest for all other Series. [On each Payment Date, Servicer Interchange
with respect to the related Monthly Period will be 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 will be equal to
one-twelfth of [1.00%] of the Principal Receivables allocable to the Investor
Interest [plus the Collateral Interest] [plus Enhancement Invested Amount, if
any,] as of the last day of such Monthly Period. In the case of any
insufficiency of Servicer Interchange, so long as MBNA is the Servicer, a
portion of the Investor Servicing Fee with respect to such Monthly Period will
not be paid to the extent of such insufficiency, provided, however, that if
MBNA is no longer the Servicer, any insufficiency in the Investor Servicing Fee
due to a shortfall in Servicer Interchange will be paid out of Collections of
Finance Receivables [and other amounts] allocated to the Investor Interest
[plus the Collateral Interest] [and the Enhancement Invested Amount].] The
portion of the [monthly] servicing fee allocable to the Investor Interest [and
the Collateral Interest] [and, following the occurrence of an Economic Pay Out
Event, the Enhancement Invested Amount, if any] for each month[s] to be paid to
the Servicer on each [Transfer] [Distribution] Date will be equal to one-____
of the product of ____% per annum (the "Series Servicing Fee Percentage") and
the [Adjusted] Investor Interest [and the Collateral Interest] [and, following
the occurrence of an Economic Pay Out Event, the Enhancement Invested Amount,
if any] as of the [preceding Record Date] [the [____] [last] business day of
the preceding Monthly Period] (the "Investor Servicing Fee"). [The Investor
Servicing Fee will be funded from collections of Finance Charge
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<PAGE> 58
Receivables allocated to the Investor Interest [and the Collateral Interest]
[and, following the occurrence of an Economic Pay Out Event, the Enhancement
Invested Amount, if any], and will be paid each [month] from the amount so
allocated and on deposit in the Finance Charge Account or, in certain limited
circumstances, from [Available Credit Enhancement Amount].] See "--
Application of Collections -- Payment of Fees, Interest and Other Items" above.
The remainder of the servicing fee will be allocable to the Seller Interest and
the investor interests of other Series. Neither the Trust nor the
Certificateholders will have any obligation to pay the portion of the monthly
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 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 Distribution Date, the Paying Agent 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 (a) the Economic Pay Out Amount, if any, withdrawn from the Cash
Collateral Account for such Distribution Date, and (b) the Enhancement Invested
Amount, if any, for such Distribution Date.]
UNDERWRITING
Subject to the terms and conditions set forth in the underwriting
agreement (the "Underwriting Agreement") between the Seller and the
underwriter[s] named below (the "Underwriter[s]"), the Seller has agreed to
sell to the Underwriter[s], and each of the Underwriter[s] has severally agreed
to purchase, the principal amount of the Certificates set forth opposite its
name:
<TABLE>
<CAPTION>
PRINCIPAL
UNDERWRITER[S] AMOUNT
-------------- ------
<S> <C>
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
--------------
Total . . . . . . . . . . . . . . . . . . . . . . . . . $
==============
</TABLE>
In the Underwriting Agreement, the Underwriter[s] have agreed, subject
to the terms and conditions set forth therein, to purchase all the Certificates
offered hereby if any of the Certificates are purchased.
The Underwriter[s] propose initially to offer the 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 Certificates. The Underwriter[s] may allow, and such dealers may
reallow, concessions not in excess of ____% of the principal amount of the
Certificates to certain brokers and dealers. After the initial public
offering, the public offering price and other selling terms may be changed by
the Underwriter[s].
[Each Underwriter has represented and agreed that (a) it has complied
and will comply with all applicable provisions of the Financial Services Act of
1986 with respect to anything done by it in relation to the Certificates in,
from or otherwise involving the United Kingdom; (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
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<PAGE> 59
the issue of the Certificates to a person who is of a kind described in Article
9(3) of the Financial Services Act of 1986 (Investment Advertisements)
(Exemptions) Order 1988 or who is a person to whom the document may otherwise
lawfully be issued or passed on; (c) if that Underwriter is an authorized
person under Chapter III of the Financial Services Act of 1986, it has only
promoted and will only promote (as that term is defined in Regulation 1.02 of
the Financial Services (Promotion of Unregulated Schemes) Regulations 1991) to
any person in the United Kingdom the scheme described in this Prospectus
Supplement 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) Regulation 1991; and (d) it is a person of a
kind described in Article 9(3) of the Financial Services Act 1986 (Investment
Advertisements) (Exemptions) Order 1988.]
The Seller will indemnify the Underwriter[s] against certain
liabilities, including liabilities under the Securities Act, or contribute to
payments the Underwriter[s] may be required to make in respect thereof.
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<PAGE> 60
INDEX OF TERMS
FOR PROSPECTUS SUPPLEMENT
<TABLE>
<S> <C>
Accounts . . . . . . . . . . . . . . . . . . . . . . . . 3
Accumulation Period Length . . . . . . . . . . . . . . . 44
Accumulation Shortfall . . . . . . . . . . . . . . . . . 34
Additional Certificates . . . . . . . . . . . . . . . . . 8
Additional Interest . . . . . . . . . . . . . . . . . . . 42
Additional Issuance . . . . . . . . . . . . . . . . . . . 41
Adjusted Investor Interest . . . . . . . . . . . . . . . 6
Agreement . . . . . . . . . . . . . . . . . . . . . . . . 3
Available Cash Collateral Amount . . . . . . . . . . . . 22
Available Credit Enhancement Amount . . . . . . . . . . . 55
Available Funds . . . . . . . . . . . . . . . . . . . . . 42
Base Rate . . . . . . . . . . . . . . . . . . . . . . . . 36
CA Investors . . . . . . . . . . . . . . . . . . . . . . 5
Cash Collateral Depositor . . . . . . . . . . . . . . . . 53
Certificate Rate . . . . . . . . . . . . . . . . . . . . 4
Certificateholders . . . . . . . . . . . . . . . . . . . 3
Certificates . . . . . . . . . . . . . . . . . . . . . . 3
Closing Date . . . . . . . . . . . . . . . . . . . . . . 4
Code . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Collateral Interest . . . . . . . . . . . . . . . . . . . 5
Controlled Accumulation Amount . . . . . . . . . . . . . 16
Controlled Accumulation Period . . . . . . . . . . . . . 16
Controlled Amortization Amount . . . . . . . . . . . . . 14
Controlled Amortization Period . . . . . . . . . . . . . 13
Controlled Deposit Amount . . . . . . . . . . . . . . . . 16
Controlled Distribution Amount . . . . . . . . . . . . . 14
Covered Amount . . . . . . . . . . . . . . . . . . . . . 17
Credit Enhancement . . . . . . . . . . . . . . . . . . . 4
Credit Enhancement Fee . . . . . . . . . . . . . . . . . 50
Credit Enhancement Provider . . . . . . . . . . . . . . . 54
Cut Off Date . . . . . . . . . . . . . . . . . . . . . . 4
Deficit Controlled Amortization Amount . . . . . . . . . 15
Determination Date . . . . . . . . . . . . . . . . . . . 55
Distribution Date . . . . . . . . . . . . . . . . . . . . 11
Early Termination Amount . . . . . . . . . . . . . . . . 10
Economic Pay Out Amount . . . . . . . . . . . . . . . . . 22
Economic Pay Out Distribution Date . . . . . . . . . . . 23
Economic Pay Out Event . . . . . . . . . . . . . . . . . 36
Enhancement Invested Amount . . . . . . . . . . . . . . . 51
ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Excess Finance Charge Collections . . . . . . . . . . . . 20
FDIC . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Finance Charge Deficiency Amount . . . . . . . . . . . . 55
Fixed Principal Allocation Date . . . . . . . . . . . . . 47
Floating Allocation Percentage . . . . . . . . . . . . . 46
Full Investor Interest . . . . . . . . . . . . . . . . . 5
</TABLE>
S-60
<PAGE> 61
<TABLE>
<S> <C>
Funding Period . . . . . . . . . . . . . . . . . . . . . 9
Index . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Initial Cash Collateral Amount . . . . . . . . . . . . . 21
Initial Closing Date . . . . . . . . . . . . . . . . . . 44
Initial Investor Interest . . . . . . . . . . . . . . . . 5
Interest Period . . . . . . . . . . . . . . . . . . . . . 11
Investor Charge-Off . . . . . . . . . . . . . . . . . . . 55
Investor Default Amount . . . . . . . . . . . . . . . . . 55
Investor Interest . . . . . . . . . . . . . . . . . . . . 5
Investor Percentage . . . . . . . . . . . . . . . . . . . 6
Investor Servicing Fee . . . . . . . . . . . . . . . . . 11
Loan Agreement . . . . . . . . . . . . . . . . . . . . . 21
MBNA . . . . . . . . . . . . . . . . . . . . . . . . . . 1
MBNA I.S. . . . . . . . . . . . . . . . . . . . . . . . . 28
Minimum Aggregate Principal Receivables . . . . . . . . . 31
Minimum Seller Interest . . . . . . . . . . . . . . . . . 30
Monthly Interest . . . . . . . . . . . . . . . . . . . . 50
Monthly Period . . . . . . . . . . . . . . . . . . . . . 6
Monthly Principal . . . . . . . . . . . . . . . . . . . . 52
OCMS . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Pay Out Event . . . . . . . . . . . . . . . . . . . . . . 56
Payment Rate Assumptions . . . . . . . . . . . . . . . . 34
Percentage Allocation . . . . . . . . . . . . . . . . . . 14
Portfolio Yield . . . . . . . . . . . . . . . . . . . . . 36
Pre-Funding Account . . . . . . . . . . . . . . . . . . . 9
Pre-Funding Amount . . . . . . . . . . . . . . . . . . . 9
Principal Amortization Period . . . . . . . . . . . . . . 15
Principal Deficiency Amount . . . . . . . . . . . . . . . 55
Principal Funding Account . . . . . . . . . . . . . . . . 16
Principal Funding Investment Proceeds . . . . . . . . . . 17
Principal Shortfall . . . . . . . . . . . . . . . . . . . 49
Rapid Accumulation Period . . . . . . . . . . . . . . . . 18
Rapid Amortization Period . . . . . . . . . . . . . . . . 18
Rate Determination Date . . . . . . . . . . . . . . . . . 5
Rating Agency . . . . . . . . . . . . . . . . . . . . . . 27
Rating Agency Condition . . . . . . . . . . . . . . . . . 53
Reallocated Collateral Principal Collections . . . . . . 12
Receivables . . . . . . . . . . . . . . . . . . . . . . . 3
Record Date . . . . . . . . . . . . . . . . . . . . . . . 39
Required Amount . . . . . . . . . . . . . . . . . . . . . 51
Required Cash Collateral Amount . . . . . . . . . . . . . 22
Required Collateral Interest . . . . . . . . . . . . . . 20
Revolving Period . . . . . . . . . . . . . . . . . . . . 12
Scheduled Payment Date . . . . . . . . . . . . . . . . . 12
Seller . . . . . . . . . . . . . . . . . . . . . . . . . 3
Seller Certificate . . . . . . . . . . . . . . . . . . . 6
Seller Interest . . . . . . . . . . . . . . . . . . . . . 6
Seller Percentage . . . . . . . . . . . . . . . . . . . . 40
Series . . . . . . . . . . . . . . . . . . . . . . . . . 3
Series Servicing Fee Percentage . . . . . . . . . . . . . 57
</TABLE>
S-61
<PAGE> 62
<TABLE>
<S> <C>
Series [199__-__] Supplement . . . . . . . . . . . . . . 3
Series [199__-__] Termination Date . . . . . . . . . . . 6
Servicer Interchange . . . . . . . . . . . . . . . . . . 57
Shared Excess Finance Charge Collections . . . . . . . . 19
Shared Principal Collections . . . . . . . . . . . . . . 20
Transfer Date . . . . . . . . . . . . . . . . . . . . . . 48
Trust . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Trust Portfolio . . . . . . . . . . . . . . . . . . . . . 30
Trustee . . . . . . . . . . . . . . . . . . . . . . . . . 3
Unallocated Principal Collections . . . . . . . . . . . . 50
Underwriter[s] . . . . . . . . . . . . . . . . . . . . . 58
Underwriting Agreement . . . . . . . . . . . . . . . . . 58
</TABLE>
S-62
<PAGE> 63
<TABLE>
<S> <C>
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN
AUTHORIZED TO GIVE ANY INFORMATION 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 PROSPECTUS SUPPLEMENT NOR THE ACCOMPANYING
PROSPECTUS CONSTITUTES AN OFFER OR SOLICITATION BY ANYONE
IN ANY STATE IN WHICH SUCH OFFER OR SOLICITATION IS NOT MBNA MASTER
AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR CREDIT CARD TRUST II
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
ACCOMPANYING PROSPECTUS, NOR ANY SALE MADE HEREUNDER OR SERIES [199__-__]
THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY [FLOATING RATE]
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF [__%] ASSET BACKED CERTIFICATES
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.
----------------------
[LOGO]
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
Page
---- MBNA AMERICA BANK,
NATIONAL ASSOCIATION
Summary of Terms . . . . . . . . . . . . . . . . . . . . .
Special Considerations . . . . . . . . . . . . . . . . . . Seller and Servicer
MBNA's Credit Card Portfolio . . . . . . . . . . . . . . .
The Receivables . . . . . . . . . . . . . . . . . . . . . .
Maturity Assumptions . . . . . . . . . . . . . . . . . . .
Receivable Yield Considerations . . . . . . . . . . . . . .
MBNA and MBNA Corporation . . . . . . . . . . . . . . . . . -----------------------
Description of the Certificates . . . . . . . . . . . . . .
Underwriting . . . . . . . . . . . . . . . . . . . . . . . PROSPECTUS SUPPLEMENT
Index of Terms for Prospectus Supplement . . . . . . . . .
-----------------------
PROSPECTUS
[UNDERWRITERS]
Prospectus Supplement . . . . . . . . . . . . . . . . . . .
Reports to Holders . . . . . . . . . . . . . . . . . . . . __________ ____, 199__
Available Information . . . . . . . . . . . . . . . . . . .
Incorporation of Certain Documents by Reference . . . . . .
Prospectus Summary . . . . . . . . . . . . . . . . . . . .
Special Considerations . . . . . . . . . . . . . . . . . .
The Trusts . . . . . . . . . . . . . . . . . . . . . . . .
MBNA's Credit Card Activities . . . . . . . . . . . . . . .
The Receivables . . . . . . . . . . . . . . . . . . . . . .
Maturity Assumptions . . . . . . . . . . . . . . . . . . .
Use of Proceeds . . . . . . . . . . . . . . . . . . . . . .
MBNA and MBNA Corporation . . . . . . . . . . . . . . . . .
Description of the Certificates . . . . . . . . . . . . . .
Plan of Distribution . . . . . . . . . . . . . . . . . . .
Certain Legal Aspects of the Receivables . . . . . . . . .
Certain Federal Income Tax Consequences . . . . . . . . . .
ERISA Considerations . . . . . . . . . . . . . . . . . . .
Underwriting . . . . . . . . . . . . . . . . . . . . . . .
Legal Matters . . . . . . . . . . . . . . . . . . . . . . .
Index of Terms for Prospectus . . . . . . . . . . . . . . .
Annex I: Global Clearance, Settlement
and Tax Documentation Procedures . . . . . . . . . . . .
----------------------
UNTIL __________, 199__, 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 ADDITION TO THE OBLIGATION OF
DEALERS TO DELIVER A PROSPECTUS SUPPLEMENT AND A PROSPECTUS
WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
</TABLE>
S-63
<PAGE> 1
Version #2
Prospectus Supplement
(To Prospectus dated ___________, 199_)
$___________
MBNA MASTER CREDIT CARD TRUST II
$_____ CLASS A SERIES [199__-__] [FLOATING RATE] [____%] ASSET BACKED
CERTIFICATES
$_____ CLASS B SERIES [199__-__] [FLOATING RATE] [____%] ASSET BACKED
CERTIFICATES
MBNA AMERICA BANK, NATIONAL ASSOCIATION
SELLER AND SERVICER
Each Class A Series [199__-__] [Floating Rate] [____%] Asset
Backed Certificate (collectively, the "Class A Certificates") and each Class B
Series [199__-__] [Floating Rate] [____%] Asset Backed Certificates
(collectively, the "Class B Certificates" and together with the Class A
Certificates, the "Certificates") will represent an undivided interest in the
MBNA Master Credit Card Trust II (the "Trust") [to be] 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 and VISA revolving credit card
accounts (the "Accounts"), all monies due or to become due in payment of the
Receivables, [the right to receive Interchange allocable to the Certificates]
[moneys on deposit in bank accounts of the Trust and certain investment
earnings thereon] and the benefits of the credit enhancement, as described
herein, with respect to the [Class A] [Class B] Certificates. [In addition,
the Collateral Interest (as defined herein) will be issued in the initial
amount of $__________ 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
investor certificates issued by the Trust and will service the Receivables.
MBNA has offered and may offer from time to time other series of certificates
that evidence undivided interests in certain assets of the Trust, which may
have terms significantly different from the Certificates.
(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" IN THIS
PROSPECTUS SUPPLEMENT BEGINNING ON PAGE S-___ AND IN] THE PROSPECTUS BEGINNING
ON PAGE __.
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 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 initial Class A
Certificate Rate or initial Class B Certificate Rate, as
applicable] from __________, 199__.]
[(1)][(2)] Before deduction of expenses estimated to be $__________.
The Certificates are offered by the Underwriter[s] when, as and if
issued by the Trust and accepted by the Underwriter[s] and subject to the
Underwriter[s]' 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
__________, 199__, through the facilities of The Depository Trust Company,
CEDEL S.A. and the Euroclear System.
[Underwriter[s]]
The date of this Prospectus Supplement is __________, 199__
<PAGE> 2
(continued from previous page)
[Interest will accrue on the Class A Certificates at the rate
of ____% per annum. Interest will accrue on the Class B Certificates at the
rate of ____% per annum.] [Interest will accrue on the Class A Certificates
with respect to the initial Interest Period at the rate of ____% per annum and
with respect to each subsequent Interest Period, at the rate of ____% per annum
[above] [below] [times] ______ prevailing on the related Rate Determination
Date, as defined herein, [but in no event in excess of ____% per annum].
Interest will accrue on the Class B Certificates with respect to the initial
Interest Period at the rate of ____% per annum and with respect to each
subsequent Interest Period, at the rate of ____% per annum [above] [below]
[times] _______ prevailing on the related Rate Determination Date, [but in no
event in excess of ____% per annum].] Interest with respect to the
Certificates will be distributed on __________ and on the ____ day of each
[month] thereafter (or, if such ____ day is not a business day, the next
succeeding business day) (the "Distribution Date").
Principal with respect to the Class A Certificates [is
scheduled to be paid on __________, 199__] [is scheduled to be distributed on
each Distribution Date commencing on the Distribution Date in __________ and
ending on the Distribution Date in _________] but may be paid earlier or later
under certain limited circumstances described herein. Principal with respect
to the Class B Certificates [is scheduled to be paid on __________, 199__] [is
scheduled to be distributed on each Distribution Date,] [commencing on the
Distribution Date in __________, 199__] [commencing with the Distribution Date
following the Distribution Date on which the Class A Certificates have been
paid in full,] [and ending on the ___________ ____, 199__ Distribution Date],
but may be paid earlier or later under certain limited circumstances described
herein. See "Maturity Assumptions."
THE FRACTIONAL UNDIVIDED INTEREST IN THE TRUST REPRESENTED BY
THE CLASS B CERTIFICATES WILL BE SUBORDINATED TO THE EXTENT NECESSARY TO FUND
PAYMENTS WITH RESPECT TO THE CLASS A CERTIFICATES TO THE EXTENT DESCRIBED
HEREIN. [The Collateral Interest will be subordinated to the Class A
Certificates and Class B Certificates as described herein.] The Trust will
have the benefit of a [credit enhancement] [provided by __________] for the
benefit of the [Class A] [Class B] Certificates.
[Application will be made to list the Certificates on the
Luxembourg Stock Exchange [other Exchange].]
---------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER[S] MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE
CERTIFICATES AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
---------------
THE CERTIFICATES OFFERED HEREBY CONSTITUTE A SEPARATE SERIES OF
CERTIFICATES BEING OFFERED BY THE SELLER FROM TIME TO TIME PURSUANT TO ITS
PROSPECTUS DATED __________ ____, 199__. 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> 3
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" on page S-___ and in
the "Index of Terms for Prospectus" on page __.
<TABLE>
<S> <C>
Type of Securities . . . . . . . . . . . Class A Series [199__-__] [Floating Rate] [____%] Asset Backed Certificates (the "Class A
Certificates") and Class B Series [199__-__] [Floating Rate] [____%] Asset Backed
Certificates (the "Class B Certificates").
Trust . . . . . . . . . . . . . . . . . . The MBNA Master Credit Card Trust II (the "Trust") was formed as a master trust pursuant
to a pooling and servicing agreement (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 [199__-__] Supplement") (the term
"Agreement," unless the context requires otherwise, refers to the Agreement as
supplemented by the Series [199__-__] Supplement). As used herein, the term
"Certificates" refers to the Class A Certificates and the Class B Certificates, the
term "Certificateholders" refers to holders of the Certificates, the term "Class A
Certificateholders" refers to the holders of the Class A Certificates, the term "Class
B Certificateholders" refers to the holders of the Class B Certificates and the term
"Series" refers to any series of certificates issued by the Trust, including the
Certificates.
The Trust has previously issued ____ other Series. See "Description of the
Certificates -- Prior Issuances of Certificates" for a summary of each previously
issued 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
</TABLE>
- ----------------------------------
*/ MasterCard(R) and VISA(R) are registered trademarks of MasterCard
International Incorporated and VISA USA, Inc., respectively.
S-3
<PAGE> 4
<TABLE>
<S> <C>
and VISA accounts owned by the Seller, 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)],
[including the benefits of the Credit Enhancement described herein] [and any Credit
Enhancement issued with respect to any other Series issued by the Trust (the benefits
of such Credit Enhancement issued with respect to any other Series issued by the Trust
will not be available for the benefit of the Certificateholders)]. [The holders of the
[Class A Certificates] [Class B Certificates] [and the] certificates of other Series
will not be entitled to the benefit of the Credit Enhancement provided for the [Class
A] [Class B] Certificates.] The term "Credit Enhancement" means, with respect to any
Series, any subordination, letter of credit, cash collateral or guaranty account,
surety bond, insurance policy, spread account, collateral interest, reserve account or
other contract, agreement, or cross-support feature for the benefit of
certificateholders of such Series.
The Seller has conveyed to the Trustee 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 [__________, 199__ and __________,] 199__,] and has
conveyed and will convey all Receivables arising under the Accounts from time to time
thereafter until termination of the Trust. In addition, pursuant to the Agreement,
MBNA may (subject to certain limitations and conditions) designate Additional Accounts,
for inclusion in the Trust [or, in lieu thereof or in addition thereto, include
Participations in the Trust]. See "The Receivables" and "Description of the
Certificates -- Addition of Trust Assets" in the Prospectus.
Certificate Interest
and Principal . . . . . . . . . . . . . Each of the Certificates offered hereby represents an undivided interest in the Trust.
The assets of the Trust will be allocated among the Class A Certificateholders, the
Class B Certificateholders, [the Collateral Interest (and any similar amount issued in
connection with any
</TABLE>
S-4
<PAGE> 5
<TABLE>
<S> <C>
other series),] the holders of certificates of any other Series that [have been or] may
be issued and the holder of the Seller Certificate. The aggregate undivided interest
in the Principal Receivables represented by the Class A Certificates (the "Class A
Investor Interest") [initially] will equal $__________ [(the "Class A Initial Investor
Interest")] and the aggregate undivided interest in the Principal Receivables
represented by the Class B Certificates (the "Class B Investor Interest") [initially]
will equal $__________ [(the "Class B Initial Investor Interest")]. [The [Class A
Initial Investor Interest] [and] [Class B Initial Investor Interest] will, unless (a)
insufficient Principal Receivables [or Participations] are added to the Trust or an
insufficient amount of principal payments are made to other amortizing Series, (b)
there are unreimbursed Investor Charge-Offs or (c) a Pay Out Event occurs, increase to
[$__________ (the "Full Class A Investor Interest")] [and] [$__________ (the "Full
Class B Investor Interest")] [, respectively] during the Funding Period and remain
fixed at the [Full Class A Investor Interest] [and] [Full Class B Investor Interest]
during the Revolving Period.] The Class A Investor Interest and the Class B Investor
Interest are sometimes collectively referred to herein as the "Investor Interest"; [the
Class A Initial Investor Interest and the Class B Initial Investor Interest are
sometimes collectively referred to herein as the "Initial Investor Interest"]. The
[Class A Investor Interest] and [Class B Investor Interest] [will decline as principal
is paid to the [Class A Certificateholders] [and] [Class B Certificateholders],
[respectively,] during an Amortization Period [will remain fixed at the aggregate
initial principal amount of the [Class A Certificates] [and] [Class B Certificates]
[,respectively] except as otherwise provided herein]. The Class B Investor Interest
will also decline in certain circumstances as a result of [(a) the allocation to the
Class B Investor Interest of Investor Default Amounts otherwise allocable to the Class
A Investor Interest, and (b)] the reallocation of collections of Principal Receivables
otherwise allocable to the Class B Investor Interest to fund payments to the Class A
Certificateholders (the "Reallocated Principal Collections"). [Reductions in the Class
B Investor Interest below the unpaid balance of the Class B Certificates may be
reimbursed out of Excess Spread, if any, [Shared Excess Finance Charge Collections] and
certain amounts [received from Credit Enhancement].] [During the Controlled
Accumulation Period [or the Rapid Accumulation Period], for the sole purpose of
allocating collections of Finance Charge Receivables and
</TABLE>
S-5
<PAGE> 6
<TABLE>
<S> <C>
the amount of Receivables in Defaulted Accounts for each Monthly Period, the [Class A]
[Class B] Investor Interest will be further reduced (in each such case, the "[Class A]
[Class B] Adjusted Investor Interest") by the amount on deposit in the Principal
Funding Account.]
The Class A Certificates will evidence undivided interests in the assets of the Trust
allocated to the Class A Certificates and will represent the right to receive from such
assets funds up to (but not in excess of) the amounts required to make [(i) payments of
interest at the rate of ____% per annum (the "Class A Certificate Rate")] [(i) payment
of interest at the rate of ____% per annum with respect to the initial Interest Period
and, with respect to each subsequent Interest Period, ____% per annum [above][below]
[times] ______ (the "Index") prevailing on the [____ day] [____ business day]
immediately preceding the commencement of such Interest Period (the "Rate Determination
Date"), [but in no event in excess of ____% per annum] (such rate, the "Class A
Certificate Rate")] and (ii) payments of principal [during the] [Controlled
Amortization Period] [Principal Amortization Period] [on the Scheduled Payment Date]
or, under certain limited circumstances, the Rapid Amortization Period, to the extent
of the Class A Investor Interest (which may be less than the aggregate unpaid principal
amount of the Class A Certificates, in certain circumstances, if the amount of
Receivables in Defaulted Accounts allocated to the Class A Certificates exceeds funds
allocable thereto as described herein and the Class B Investor Interest [and the
Collateral Interest are] [is] zero).
The Class B Certificates will evidence undivided interests in the assets of the Trust
allocated to the Class B Certificates and will represent the right to receive from such
assets funds up to (but not in excess of) the amounts required to make [(i) payments of
interest at the rate of ____% per annum (the "Class B Certificate Rate")] [(i) payments
of interest at the rate of ____% per annum with respect to the initial Interest Period
and, with respect to each subsequent Interest Period, ____% per annum [above][below]
[times] ____ (the "Index") prevailing on the [____ day] [____ business day] immediately
preceding the commencement of such Interest Period (the "Rate Determination Date"),
[but in no event in excess of ____% per annum] (such rate, the "Class B Certificate
Rate")] and (ii) payments of principal [following the final payment of principal to the
Class A Certificates], generally to the extent of the
</TABLE>
S-6
<PAGE> 7
<TABLE>
<S> <C>
Class B Investor Interest, which may be less than the unpaid principal balance of the
Class B Certificates [in certain circumstances described herein] [if the Collateral
Interest is zero].
[The "Collateral Interest" in the initial amount of $__________ (which amount represents
____% of the sum of the initial Investor Interest and the initial Collateral Interest)
constitutes enhancement for the Certificates. The holders of the Collateral Interest
are referred to herein as the "CA Investors" and their interest in the Trust Assets is
referred to as the "Collateral Interest." Allocations will be made to the Collateral
Interest and the holders of the Collateral Interest will have voting and certain other
rights as if it were a subordinated class of Certificates.]
The Seller initially will hold the remaining undivided interest in the Principal
Receivables in the Trust not represented by the Certificates[, the Collateral
Interest,] or any other Series of certificates that [have been or] may be issued (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 representing any Series of certificates 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. Any Exchange involving the Seller Certificate will have the effect of
decreasing the Seller Interest. The Certificates will be issued pursuant to the
Agreement. See "Description of the Certificates" in the Prospectus.
The final distribution of principal and interest on the Certificates will be made no
later than __________, ____ (the "Series [199__-__] Termination Date") in the manner
provided in "Description of the Certificates -- Final Payment of Principal;
Termination" in the Prospectus. [After the Series [199__-__] Termination Date, the
Trust will have no further obligation to pay principal or interest on the Certificates.
The Certificates will be allocated varying percentages (each, the "Investor Percentage")
of the collections of Finance Charge Receivables and Principal Receivables and
Receivables in Defaulted Accounts each calendar month. Collections of Finance Charge
Receivables and Receivables in Defaulted Accounts at all times will be
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allocated to the Certificateholders [and the CA Investors] based on the Floating
Investor Percentage during the related calendar month (each, a "Monthly Period"). Such
amounts will be further allocated to the Class A Certificateholders [and] the Class B
Certificateholders [and the CA Investors] based on the Class A Floating Percentage
[and] [,] the Class B Floating Percentage [and the Collateral Interest Floating
Percentage], respectively. Collections of Principal Receivables allocable to the
Certificates in each Monthly Period during the Revolving Period will be paid, [subject
to certain limitations described herein,] to the Seller [or treated as Shared Principal
Collections]. Collections of Principal Receivables during an Amortization Period
[Accumulation Period] will be allocated to the Certificateholders [and the CA Investor]
based on the Fixed Investor Percentage. Such amounts will be further allocated to the
Class A Certificateholders and the Class B Certificateholders [and the CA Investors]
based on the Class A Fixed Percentage and the Class B Fixed Percentage [and the
Collateral Interest Fixed Percentage], respectively.
The Certificates represent interests in the Trust only and do 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.
[Subordination to
Other Series . . . . . . . . . . . . . The Certificates will be subordinated in right of payment of [interest] [and] [principal]
to the certificates of Series [199__-__].]
[Issuance of Additional
Certificates . . . . . . . . . . . . . After the completion of the offering made hereby, the Seller may cause the Trustee to
issue additional Certificates ("Additional Certificates") from time to time during the
Revolving Period, provided that certain conditions included in the Series [199__-__]
Supplement are met. In connection with each Additional Issuance, the outstanding
principal amount of the Certificates and the aggregate amount of Credit Enhancement
will be increased pro rata. When issued, the Additional Certificates will be identical
in all respects to the other outstanding Certificates. See "Description of the
Certificates -- Issuance of Additional Certificates."]
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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 __________]. The Receivables consist of
Principal Receivables and Finance Charge Receivables. 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. [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 Activities --
Interchange" in the Prospectus.] The aggregate amount of Receivables in the Accounts
as of __________, ____, was $__________ comprised of $__________ of Principal
Receivables and $__________ of Finance Charge Receivables. The Finance Charge
Receivables will not affect the amount of the Investor Interest represented by the
Certificates or the amount of the Seller Interest, which are determined on the basis of
the amount of Principal Receivables in the Trust. The aggregate undivided 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 [and the
Collateral Interest] regardless of the total amount of Principal Receivables in the
Trust at any time.
[On __________, 199__ and on __________, 199__, the Seller conveyed to the Trust the
Receivables in certain Additional Accounts. See "The Receivables" and "Description of
the Certificates -- Addition of Accounts" in the Prospectus.]
[Funding Period . . . . . . . . . . . . . During the period from and including the Closing Date to but excluding the earliest of
(i) the day on which the Investor Interest equals the Full Investor Interest, (ii) the
day on which a Pay Out Event occurs and (iii) the __________, 199__ Distribution Date
(the "Funding Period"), the Pre-Funding Amount will be held in a trust account
established with the Trustee for the benefit of the Certificateholders (the
"Pre-Funding Account"). The Pre-Funding Amount will equal $__________, less the
amounts of any increases in the Investor Interest pursuant to the Series [199__-__]
Supplement in connection with the addition of Principal Receivables to the Trust or
principal payments made to the
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Certificateholders from amounts on deposit in the Pre-Funding Account.
[Funds on deposit in the Pre-Funding Account will be invested by the Trustee in certain
Permitted Investments [pursuant to a guaranteed rate agreement] [guaranteed investment
contract]. Interest earnings on the Pre-Funding Amount (net of investment losses and
expenses) will be used to pay interest on the Certificates during the Funding Period.]
During the Funding Period, funds on deposit in the Pre-Funding Account will be withdrawn
and paid to the Seller to the extent of any increases in the Investor Interest. The
Seller expects that the Investor Interest will equal the Full Investor Interest by the
__________, 199__ Distribution Date. In the event that the Investor Interest does not
for any reason equal the Full Investor Interest by the end of the Funding Period, any
amount remaining in the Pre-Funding Account will be payable to the [Class A] [Class B]
Certificateholders [pro rata, on the basis of the ratio of the Class A Investor
Interest and the Class B Investor Interest, respectively, to the Investor Interest as
of the last day of the related Monthly Period] on the Distribution Date on which the
Funding Period ends.]
[Early Termination
Amount . . . . . . . . . . . . . . . . An early termination amount (the "Early Termination Amount") will be payable for the
benefit of the Certificateholders on the first Distribution Date following the end of
the Funding Period if any Pre-Funding Amount exists at the end of the Funding Period.
The Early Termination Amount will equal the excess, if any, discounted as described
below, of (i) the amount of interest that would have accrued on such Pre-Funding Amount
at the [Class A] Certificate Rate [and Class B Certificate Rate] during the period
commencing on and including such Distribution Date to, but excluding, ___________, over
(ii) the amount of interest that would have accrued on such Pre-Funding Amount over the
same period at a per annum rate of interest equal to the bond equivalent yield to
maturity on the Determination Date preceding such Distribution Date on [____]. Such
excess shall be discounted to present value to such Distribution Date at the applicable
yield described in clause (ii).]
[Denominations . . . . . . . . . . . . . Beneficial interests in the Certificates will be offered for purchase in denominations of
[$____] and integral
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multiples thereof. Each [$____] denomination represents __________ of the Certificate
Owners' undivided interest in the Series [199__-__].]
Registration of
Certificates . . . . . . . . . . . . . The Certificates 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 except under the limited circumstances described herein.
Certificateholders may elect to hold their Investor 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 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 the ____ day of each month (or if such day is not a business
day, the next succeeding business day)] equal to [one-____ of the product of (i) ____%
per annum (the "Series Servicing Fee Percentage") and (ii) the [sum of the] [Adjusted]
Investor Interest [and Collateral Interest] as of the [preceding Record Date] [last day
of the prior Monthly Period] [and, following the occurrence of an Economic Pay Out
Event, the Enhancement Invested Amount, if any, as of the preceding Record Date] (the
"Investor Servicing Fee"). See "Description of the Certificates -- Servicing
Compensation and Payment of Expenses" herein and in the Prospectus.
Interest . . . . . . . . . . . . . . . . Interest on the Certificates for each Interest Period will be distributed on __________,
____, and on the __the day of each [month] [__________] thereafter, or if such day is
not a business day, on the next succeeding business day (each, a "Distribution Date"),
in an amount equal to (a) with respect to the Class A Certificates [one-_____ of] the
product of (i) [(a) the actual number of days in the related Interest Period divided by
360, times (b)] the Class A Certificate Rate and (ii) the [sum of the] Class A Investor
Interest [and the Pre-Funding Amount allocable to Class A, if any,] as of the
[preceding Record Date] [____] [last day of the prior Monthly Period] (or in the case
of the first Distribution Date as of the Closing Date) and (b) with respect to the
Class B Certificates [one-_______ of] the product of (i) [(a) the actual number of days
in the related Interest Period divided by 360, times (b)] the Class B Certificate Rate
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and (ii) the [sum of the] Class B Investor Interest [and the Pre-Funding Amount
allocable to Class B, if any] as of the [preceding Record Date] [____] [last day of the
prior Monthly Period] (or in the case of the first Distribution Date as of the Closing
Date). [Interest will be calculated on the basis of twelve 30-day months and a 360-day
year.] [Interest will be calculated on the basis of the actual number of days in the
Interest Period and a 360 - day year.] [The payment of interest on the Class B
Certificates will be subordinated to the payment of interest on the Class A
Certificates on each Distribution 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 2.0% per annum.]
The "Interest Period," with respect to any Distribution Date, will be [the period from
[the ____ business day preceding] the previous Distribution Date through the ____ day
preceding such Distribution Date, except the initial Interest Period will be the period
from _____________, ____ (the "Closing Date") through the [____] day preceding the
initial Distribution Date].] Interest payments on each Distribution Date will be
funded (i) with respect to the Class A Certificates, from the portion of Finance Charge
Receivables collected during the preceding [____] Monthly Period[s] or with respect to
the first Distribution Date from and including the Closing Date to and including
__________, ____, [from investment income from the Pre-Funding Account] [and from
payments pursuant to the guaranteed rate agreement with respect thereto,] [from
investment income on or in respect of the Principal Funding Account,] allocated to the
Class A Investor Interest, and, if necessary, from Excess Spread [Shared Excess Finance
Charge Collections] Reallocated Principal Collections [and] [amounts received from
Credit Enhancement][,] [and] (ii) with respect to the Class B Certificates, from the
portion of Finance Charge Receivables collected during the preceding [____] Monthly
Period[s] (or with respect to the first [Distribution Date] [Monthly Period] from and
including the Closing Date to and including __________, __) [from investment income
from the Pre-Funding Account] [and from payments pursuant to the guaranteed rate
agreement with respect thereto,] [from investment income on or in respect of the
Principal Funding Account,] allocated to the Class B Investor Interest, and, if
necessary, from Excess Spread [Shared Excess
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Finance Charge Collections] [and] [Reallocated Collateral Principal Collections (to the
extent available)] [amounts received from Credit Enhancement] [and (iii) with respect
to the Collateral Interest, from Excess Finance Charge Collections]. See "Description
of the Certificates -- Payment of Fees, Interest and Other Items," ["-- Shared Excess
Finance Charge Collections"] ["-- Reallocation of Cash Flows; Class B Investor
Interest"] ["-- Credit Enhancement"] herein and "Special Considerations -- Credit
Enhancement" in the Prospectus.
Revolving Period . . . . . . . . . . . . No principal will be payable to Class A Certificateholders until [__________, 199__ (the
first Distribution Date with respect to the Controlled Amortization Period)]
[__________, 199__ (the first Distribution Date with respect to the Principal
Amortization Period] [__________, 199__ (the "Scheduled Payment Date")], or upon the
occurrence of a Pay Out Event [or after such time after a Pay Out Event has occurred
and the Rapid Accumulation Period has commenced] as described herein, the first
Distribution Date with respect to the Rapid Amortization Period. [No principal will be
payable to Class B Certificateholders until the Class A Certificateholders have
received their final payment of principal.] For the period beginning on the Closing
Date and ending with the commencement of the [Controlled Amortization Period]
[Principal Amortization Period] [Controlled Accumulation Period] [Rapid Accumulation
Period] or the Rapid Amortization Period (the "Revolving Period"), collections of
Principal Receivables otherwise allocable to the Investor Interest [and the Collateral
Interest] (other than Reallocated Principal Collections that are used to pay any
deficiency in the Required Amount) will, subject to certain limitations, be [paid from
the Trust to the holder of the Seller Certificate to maintain the Investor Interest at
the Initial Investor Interest] [treated as Shared Principal Collections and [paid]
[allocated] to the holders of other Series of certificates issued and outstanding].
See "Description of the Certificates -- Pay Out Events" for a discussion of the events
which might lead to the termination of the Revolving Period prior to the commencement
of the [Controlled Amortization Period] [Principal Amortization Period] [Controlled
Accumulation Period].
Principal Payments . . . . . . . . . . . Collections of Principal Receivables with respect to any Monthly Period will be allocated
on the basis of the applicable Investor Percentage with respect to Principal
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Receivables. Under the Agreement, such collections [(other than Reallocated Principal
Collections)] will be paid either to the Seller [(subject to certain limitations)], as
described above during the Revolving Period, or to the holders of the Class A
Certificates in respect of the Class A Investor Interest until the Class A Investor
Interest has been paid in full, and then to the holders of the Class B Certificates in
respect of the Class B Investor Interest, [and then to the CA Investors in respect of
the Collateral Interest] and the Seller [or, under certain circumstances, will be
treated as Shared Principal Collections and paid to the holders of certificates of
other Series issued and outstanding]. Such allocations will be performed during the
Revolving Period, [and] [the] [each] Amortization Period [and] [the Accumulation
Period]. In addition, certain other amounts with respect to any Monthly Period will be
allocable to [Class A] [Class B] Certificateholders as described herein.
Other Series offered by the Trust may or may not have amortization [or accumulation]
periods like the [Controlled Amortization Period] [Principal Amortization Period]
[Controlled Accumulation Period] [Rapid Accumulation Period] or the Rapid Amortization
Period for the Certificates, and such periods may have different lengths and begin on
different dates than such [Controlled Amortization Period] [Principal Amortization
Period] [Controlled Accumulation Period] [Rapid Accumulation Period] or the Rapid
Amortization Period. Thus, certain Series may be in their revolving periods while
others are in periods during which collections of Principal Receivables are distributed
to 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 other Series.
[Controlled Amortization
Period . . . . . . . . . . . . . . . . Unless or until a Pay Out Event has occurred, during the period beginning on __________,
____, and ending on the earliest of [(a) the commencement of the Rapid Amortization
Period, (b) payment in full of the Investor Interest [and the Collateral Interest] or
(c) the Series [199__-__] Termination Date (the "Controlled Amortization Period"),]
collections of Principal Receivables allocated to the Investor Interest [and the
Collateral Interest] (other than Reallocated Principal Collections that are used to pay
any deficiency in the
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Required Amount) will no longer [be paid to the holder of the Seller Certificate]
[(subject to certain limitations)] [or treated as Shared Principal Collections and paid
or allocated to the holders of other Series], as described above, but instead, such
collections [plus [Shared Principal Collections, if any, from other Series allocated to
the [Class A] [Class B] Certificates] [other amounts]] will be distributed [monthly] as
provided herein on each Distribution Date beginning with the Distribution Date [in the
month] following the commencement of the Controlled Amortization Period. During the
Controlled Amortization Period or the Rapid Amortization Period, the amount of
collections of Principal Receivables allocated to the Certificates [for each related
Monthly Period] [and the Collateral Interest] will be equal to the product of (a) the
Fixed Investor Percentage and (b) such amount of collections of Principal Receivables.
Such amount will be further allocated between the Class A Certificates and the Class B
Certificates [and the Collateral Interest] based on the Class A Fixed Percentage and
the Class B Fixed Percentage [and the Collateral Interest Fixed Percentage],
respectively.
If the collections of Principal Receivables allocated to the Class A Certificates for any
Monthly Period during the Controlled Amortization Period are equal to or greater than
the sum of the Controlled Amortization Amount and the existing Deficit Controlled
Amortization Amount (such sum, the "Controlled Distribution Amount"), the amount of the
Controlled Distribution Amount will be paid from the Trust to the Class A
Certificateholders in respect of the Class A Investor Interest and any excess of such
allocation of collections over the Controlled Distribution Amount will be [paid from
the Trust to the holder of the Seller Certificate] [treated as Shared Principal
Collections and paid or allocated to the certificateholders of other Series] [paid to
the CA Investors to the extent that the Collateral Interest exceeds the Required
Collateral Interest], subject to certain conditions set forth in the Agreement.
If the collections of Principal Receivables allocated to the Class A Certificates, plus
collections of Principal Receivables allocated to the Class B Certificates (less any
Reallocated Principal Collections that are used to pay any deficiency in the Required
Amount), on deposit in the Principal Account for any Monthly Period during the
Controlled Amortization Period are less than the Controlled Distribution Amount for the
Class A Certificates, such amount will be paid from the Trust to
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the Class A Certificateholders in respect of the Class A Investor Interest. [In
addition, if the collections of Principal Receivables allocated to the Class A
Certificateholders, plus collections of Principal Receivables allocated to the Class B
Certificateholders (less any Reallocated Principal Collections that are used to pay any
deficiency in the Required Amount), [plus collections of Principal Receivables
allocated to the Collateral Interest, less any Reallocated Collateral Principal
Collections] is less than the Controlled Distribution Amount for the Class A
Certificates for any Monthly Period, such deficiency will be made up, to the extent
available, from Shared Principal Collections allocated to the Class A
Certificateholders [other amounts]]. The amount of the excess of the Controlled
Distribution Amount for the Class A Certificates over the allocations of collections of
Principal Receivables to the Class A Certificates [Shared Principal Collections
allocated to the Class A Certificates] [and such other amounts] will be the "Deficit
Controlled Amortization Amount" for the succeeding Monthly Period. See "Description of
the Certificates -- Application of Collections" in the Prospectus. After the Class A
Investor Interest has been paid in full, the Fixed Investor Percentage of the
collections of Principal Receivables for any Monthly Period will be distributed to the
Class B Certificateholders on each Distribution Date [up to the sum of the Controlled
Amortization Amount for the Class B Certificates and the existing Deficit Controlled
Amortization Amount for the Class B Certificates (such sum, the "Controlled
Distribution Amount" for the Class B Certificates), and any excess will be [first, to
the extent necessary, treated as Shared Principal Collections, and then] paid from the
Trust to the holder of the Seller Certificate]. [If such allocation of collections of
Principal Receivables is less than the Controlled Distribution Amount for the Class B
Certificates, such amount [plus Shared Principal Collections allocated to the Class B
Certificateholders, [other amounts] up to the Controlled Distribution Amount] will be
paid from the Trust to the Class B Certificateholders in respect of the Class B
Investor Interest and the amount of the excess of the Controlled Distribution Amount
for the Class B Certificates over such allocation of collections of Principal
Receivables [Shared Principal Collections allocated to the Class B Certificates] [and
such other available amounts] will be the "Deficit Controlled Amortization Amount" for
the Class B Certificates.]
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The "Controlled Amortization Amount" for the [Class A] Certificates is $__________ [and
for the Class B Certificates is $__________]. Although it is anticipated, based on the
Payment Rate Assumptions, that principal payments will be made to Certificateholders in
an amount equal to the Controlled Amortization Amount [for each related monthly Period]
on each Distribution Date beginning on the __________ Distribution Date and ending on
the __________ Distribution Date with respect to the Class A Certificates, and
thereafter with respect to the Class B Certificates, no assurance can be given in that
regard. See "Maturity Assumptions" in the Prospectus and "Maturity Assumptions"
herein.
[Principal Amortization
Period . . . . . . . . . . . . . . . . During the period beginning on __________, ____, and ending on the earliest of (a) the
commencement of the Rapid Amortization Period, (b) the date on which the Investor
Interest [has] [and the Collateral Interest have] been paid in full or (c) the Series
[199__-__] Termination Date (the "Principal Amortization Period"), collections of
Principal Receivables allocated to the Investor Interest [and the Collateral Interest]
(other than Reallocated Principal Collections that are used to pay any deficiency in
the Required Amount)] will no longer be paid to the holder of the Seller Certificate
[(subject to certain limitations) [or treated as Shared Principal Collections and paid
or allocated to other Series], as described above, but instead, such collections [plus
[Shared Principal Collections, if any, from other Series allocated to Series
[199__-__]] [other amounts]] will be distributed [monthly] as provided herein on each
Distribution Date beginning with the Distribution Date [in the month] following the
commencement of the Principal Amortization Period. During the Principal Amortization
Period or the Rapid Amortization Period, the amount of collections of Principal
Receivables allocated to the Investor Interest [and the Collateral Interest] [for each
related monthly Period] (the "Percentage Allocation") will be equal to the product of
(a) the Fixed Investor Percentage and (b) such amount of collections of Principal
Receivables. [During the Principal Amortization Period, the Percentage Allocation
(less any Reallocated Principal Collections that are used to pay any deficiency in the
Required Amount) for the related Monthly Period[s] will be paid on each Distribution
Date, [first] to the Class A Certificateholders in respect of the Class A Investor
Interest and [thereafter, when the Class A Certificates have been paid in full, to the
Class B Certificateholders
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in respect of the Class B Investor Interest, subject to certain conditions set forth
in the Agreement] [and thereafter, when the Class B Certificates have been paid in
full, to the CA Investors in respect of the Collateral Interest].]
[Controlled Accumulation Period . . . . . During the period beginning on __________ ____, 199__ and ending on the earliest of (a)
the commencement of the Rapid Amortization Period [or the Rapid Accumulation Period],
(b) the date on which the Investor Interest [has] [and the Collateral Interest have]
been paid in full or (c) the Series [199__-__] Termination Date (the "Controlled
Accumulation Period"), the lesser of (a) collections of Principal Receivables allocated
to the Investor Interest [and the Collateral Interest] for each Monthly Period (less
any Reallocated Principal Collections that are used to pay any deficiency in the
Required Amount) (the "Available Investor Principal Collections") and (b) the sum of
the Controlled Accumulation Amount for such Monthly Period and any Accumulation
Shortfall (such sum, the "Controlled Deposit Amount") will no longer be paid to the
holder of the Seller Certificate [(subject to certain limitations)] [or treated as
Shared Principal Collections and paid or allocated to other Series], as described
above, but instead, such collections [plus [Shared Principal Collections, if any, from
other Series allocated to the [Class A][Class B] Certificates] [other amounts]] will be
deposited [monthly] in a trust account established with the Trustee (the "Principal
Funding Account") on each [Distribution Date beginning with the Distribution Date]
[Transfer Date beginning with the Transfer Date] [later date] in the month following
the commencement of the Controlled Accumulation Period; provided, however, the Servicer
may, based on the principal payment rate on the Receivables and the amount of principal
distributable to Certificateholders, postpone the commencement of the Controlled
Accumulation Period and extend the length of the Revolving Period.] During the
Controlled Accumulation Period[, Rapid Accumulation Period] or the Rapid Amortization
Period, the amount of collections of Principal Receivables allocated to the
Certificates [for each related Monthly Period] will be equal to the product of (a) the
Fixed Investor Percentage and (b) such amount of collections of Principal Receivables.
Such amount will be further allocated between the Class A Certificates [and] [,] the
Class B Certificates [and the Collateral Interest] based on the Class A Fixed
Percentage [and] [,] the Class B Fixed
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Percentage [and the Collateral Interest Fixed Percentage], respectively. [If, for
any Monthly Period, the collections of Principal Receivables so allocated (less any
Reallocated Principal Collections that are used to pay any deficiency in the Required
Amount) exceed the Controlled Deposit Amount, any such excess will be [first, to the
extent necessary, treated as Shared Principal Collections,and then] paid from the Trust
to the holder of the Seller Certificate on the following Distribution Date] [treated as
Shared Principal Collections and used to pay the certificateholders of other Series]
[paid to the CA Investors to the extent that the Collateral Interest exceeds the
Required Collateral Interest], subject to certain conditions set forth in the
Agreement. If, for any Monthly Period, the collections of Principal Receivables so
allocated (less any Reallocated Principal Collections that are used to pay any
deficiency in the Required Amount) [and, to the extent available, [Shared Principal
Collections allocated to the Certificates] other available amounts] are less than the
Controlled Deposit Amount, the amount of such deficiency will be the Accumulation
Shortfall for the succeeding Monthly Period. The term "Controlled Accumulation Amount"
means $__________.
Unless the Rapid Amortization Period shall have commenced, all amounts in the Principal
Funding Account will be invested by the Trustee in certain Permitted Investments
[pursuant to a [guaranteed rate agreement] [guaranteed investment contract]].
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 on the Class A Certificates in an amount equal to, for each [Monthly]
[Interest] Period, [one-twelfth of the product of (a) the Class A Certificate Rate and
(b) the balance in the Principal Funding Account on the last day of the Monthly Period
preceding [such] [the related] Monthly Period] [the product of (a) a fraction, the
numerator of which is the actual number of days in the related Interest Period and the
denominator of which is 360, (b) the Class A Certificate Rate in effect with respect to
the related Interest Period and (c) the balance in the Principal Funding Account as of
the last day of the Monthly Period preceding [such] [the related] Monthly Period] (the
"Class A Covered Amount"). [If, for any [Monthly] [Interest] Period, the Principal
Funding Investment Proceeds are less than the Class A Covered Amount, the amount of
such deficiency (the "Class A
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Principal Funding Investment Shortfall") shall be paid from __________.]
[Principal Funding Investment Proceeds will also be used to pay interest on the Class B
Certificates in an amount equal to, for each [Monthly] [Interest] Period, [the sum of
(1)] [one-twelfth of the product of (a) the Class B Certificate Rate and (b) the
balance in the Principal Funding Account on the last day of the Monthly Period
preceding [such] [the related] Monthly Period [the product of (a) a fraction, the
numerator of which is the actual number of days in the related Interest Period and the
denominator of which is 360, (b) the Class B Certificate Rate in effect with respect to
the related Interest Period and (c) the balance in the Principal Funding Account as of
the last day of the Monthly Period preceding [such] [the related] Monthly Period] (the
"Class B Covered Amount"). [If, for any [Monthly] [Interest] Period, the Principal
Funding Investment Proceeds are less than the Class B Covered Amount, the amount of
such deficiency (the "Class B Principal Funding Investment Shortfall") shall be paid
from __________.]]
During the Controlled Accumulation Period, funds on deposit in the Principal Funding
Account will be available to pay the Class A Certificateholders in respect of the Class
A Investor Interest on the [Class A] Scheduled Payment Date [and then, after the Class
A Certificateholders have been paid in full, to pay the Class B Certificateholders in
respect of the Class B Investor Interest on the [Class B] Scheduled Payment Date]. If
the aggregate principal amount of deposits made to the Principal Funding Account on or
prior to the Scheduled Payment Date[s] is insufficient to pay in full the [Class A]
Investor Interest on the Scheduled Payment Date[s] [the Rapid Amortization Period will
commence as described below] [the Trustee will draw on the principal guaranty of
__________]. [After the Class A Investor Interest has been paid in full, the Fixed
Investor Percentage of the collections of Principal Receivables for any Monthly Period
will be distributed to the Class B Certificateholders on each Distribution Date until
the earlier of the date the Class B Investor Interest has been paid in full and the
Series [199__-__] Termination Date [and then to the CA Investors on each Distribution
Date until the earlier of the date the Collateral Interest is paid in full and the
Series [199__-__] Termination Date].] Although it is anticipated, based on the Payment
Rate Assumptions,
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that principal will be deposited in the Principal Funding Account in an amount equal to
the Controlled Accumulation Amount on each [Distribution] [Transfer] Date [on the ____
business day of each [month]] and that scheduled principal will be available for
distribution on [each] Scheduled Payment Date, no assurance can be given in that
regard. See "Maturity Assumptions" in the Prospectus and "Maturity Assumptions"
herein.]
[Rapid Accumulation Period . . . . . . . [Except as otherwise provided herein,] the Rapid Accumulation Period will begin on the
day on which a Pay Out Event has occurred and end on the earliest of (a) the
commencement of the Rapid Amortization Period, (b) the date on which the Investor
Interest [and the Collateral Interest] has been paid in full or (c) the Series
[199_-__] Termination Date (the "Rapid Accumulation Period"). During the Rapid
Accumulation Period, Available Investor Principal Collections will be deposited monthly
in the Principal Funding Account on each Transfer Date during the Rapid Accumulation
Period until the balance on deposit in the Principal Funding Account equals the
Investor Interest [and the Collateral Interest]. The Available Investor Principal
Collections will not be subject to the Controlled Deposit Amount.
During the Rapid Accumulation Period all funds on deposit in the Principal Funding
Account will be invested by the Trustee in certain Permitted Investments. Principal
Funding Investment Proceeds during the Rapid Accumulation Period will be used to pay
interest on the [Class A] [Class B] Certificates [and such other amounts].
[Except as otherwise provided herein,] funds on deposit in the Principal Funding Account
during the Rapid Accumulation Period will be available to pay the Class A
Certificateholders in respect of the Class A Investor Interest on the Class A Scheduled
Payment Date and the Class B Certificateholders in respect of the Class B Investor
Interest on the Class B Scheduled Payment Date [and the Collateral Interest]. If the
aggregate principal amount of deposits made to the Principal Funding Account during the
Rapid Accumulation Period are insufficient to pay in full either the Class A Investor
Interest on the Class A Scheduled Payment Date or the Class B Investor on the Class B
Scheduled Payment Date [or upon such other event], the Rapid Amortization Period will
commence as described herein.]
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Rapid Amortization Period . . . . . . . . During the period beginning on the day on which a Pay Out Event has occurred [or after
such time after a Pay Out Event has occurred and the Rapid Accumulation Period has
commenced as described herein] and ending no earlier than payment in full of the Class
A Investor Interest and the Class B Investor Interest [and the Collateral Interest]
[and the Enhancement Invested Amount] and no later than the Series [199__-__]
Termination Date (the "Rapid Amortization Period"), collections of Principal
Receivables allocated to the Class A Investor Interest and the Class B Investor
Interest [and the Collateral Interest] [and the Enhancement Invested Amount] will no
longer [be paid or accumulated for payment to the Certificateholders or to the holder
of the Seller Certificate] [or treated as Shared Principal Collections], as described
above, but instead, such collections [plus [Shared Principal Collections, if any, from
other Series allocated to Series [199__-__]] [other amounts]] (less any Reallocated
Principal Collections that are used to pay any deficiency in the Required Amount) will
be distributed [monthly] on each Distribution Date to Class A Certificateholders until
they have been paid in full, and then to Class B Certificateholders, [and, after
payment in full of the Certificates, to the CA Investors up to the Collateral Interest]
[and the Enhancement Invested Amount] 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 for a discussion of the events which might lead
to commencement of the Rapid Amortization Period.
[Additional Amounts
Available to Class A
Certificateholders . . . . . . . . . . If collections of Finance Charge Receivables allocable to the Class A Certificates for
any related Monthly Period [and certain other amounts described herein] are less than
Class A Monthly Interest and any overdue Class A Monthly Interest [(with interest
thereon)] [accrued for the related Interest Period] [due on the related Distribution
Date], the Class A Servicing Fee for the related Monthly Period and any overdue Class A
Servicing Fee and the Class A Investor Default Amount for the related Monthly Period
(such insufficiency being the "Required Amount"), Excess Spread will be applied to fund
the Required Amount. "Excess Spread" for any Monthly Period will equal the excess of
collections of [(a)] Finance Charge Receivables and annual membership fees allocated to
the Class A Certificates
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and the Class B Certificates [and the Collateral Interest] [and (b) other available
funds described herein] over the sum of (i) current Monthly Interest and overdue
Monthly Interest on the Class A and Class B Certificates, (ii) accrued and unpaid Class
A and Class B Servicing Fees, (iii) the Class A Investor Default Amount [and (iv)
unreimbursed Class A Charge-Offs] [and (v) certain unreimbursed reductions in the
Enhancement Invested Amount, if any]. [If Excess Spread available with respect to such
related Monthly Period is less than the Required Amount, certain other available
amounts, [including amounts available from the Credit Enhancement] [Reallocated
Collateral Principal Collections] [and Shared Excess Finance Charge Collections for
such Monthly Period, if any, allocated to the Class A Certificates], will then be used
to fund the remaining Required Amount.] If [the sum of] Excess Spread [Shared Excess
Finance Charge Collections] [Reallocated Collateral Principal Collections] [other
available funds] with respect to such related Monthly Period is less than the Required
Amount, collections of Principal Receivables for such related Monthly Period in an
amount equal to (a) with respect to any related Monthly Period during the Revolving
Period, the applicable Class B Floating Percentage of the Floating Investor Percentage
of collections in respect of Principal Receivables for such related Monthly Period and
(b) with respect to any related Monthly Period during an Amortization Period
[Accumulation Period], the applicable Class B Fixed Percentage of the Fixed Investor
Percentage of collections in respect of Principal Receivables for such related Monthly
Period, will then be used to fund the remaining Required Amount (such amount
"Reallocated Principal Collections"). If Reallocated Principal Collections with
respect to any related Monthly Period are insufficient to fund the remaining Required
Amount for such related Monthly Period, then a portion of the Class B Investor Interest
equal to such insufficiency (but not in excess of the Class A Investor Default Amount
for such related Monthly Period) will be allocated to the Class A Certificates to avoid
a charge-off with respect to the Class A Certificates. If the [Collateral Interest and
the] Class B Investor Interest is reduced to zero, the Class A Investor Interest will
be reduced if the Required Amount for any related Monthly Period exceeds the sum of
Excess Spread and Reallocated Principal Collections [and certain other amounts
[including Shared Excess Finance Charge Collections allocated to the Class A
Certificates] described herein] for such related Monthly
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Period, but not by more than the Class A Investor Default Amount for such related
Monthly Period, and the Class A Certificateholders will bear directly the credit and
other risks associated with their undivided interest in the Trust. See "Description of
the Investor Certificates -- Reallocation of Cash Flows; Class B Investor Interest"
herein.]
Subordination of the
Class B Certificates . . . . . . . . . The Class B Certificates will be subordinated as described herein to the extent necessary
to fund payments with respect to the Class A Certificates as described herein. 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 available
for distribution to the Class B Certificateholders will be reduced. See "Description
of the Certificates -- Allocation Percentages" and "-- Subordination of the Class B
Certificates" herein.
[Shared Excess Finance Charge
Collections . . . . . . . . . . . . . . Excess Finance Charge Collections with respect to any Series in Group ____ during any
Monthly Period will be combined and applied to cover any shortfalls with respect to
amounts payable from collections of Finance Charge Receivables [and other amounts]
allocable to the [Class A] [Class B] Certificates [Collateral Interest] [and other
Series then outstanding, pro rata] based upon the amount of the shortfall, if any, with
respect to the [Class A] [Class B] Certificates [and such other Series (as combined,
"Shared Excess Finance Charge Collections")]. Any Shared Excess Finance Charge
Collections remaining after covering shortfalls with respect to the [Class A] [Class B]
Certificates [and other outstanding Series] will be paid to the [Seller].]
[With respect to any Transfer Date, prior to an Economic Pay Out Distribution Date, if
the amount on deposit in the Cash Collateral Account is less than the Required Cash
Collateral Amount, Excess Finance Charge Collections, if any, will be deposited into
the Cash Collateral Account to the extent of such shortfall.] "Excess Finance Charge
Collections" with respect to a Series for any Monthly Period will equal the excess of
collections of Finance Charge Receivables and annual membership fees [and other
amounts] allocated to the
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Investor Interest over the sum of (i) current Monthly Interest, any overdue Monthly
Interest and any Additional Interest on the Certificates, (ii) the Investor Servicing
Fee and any accrued and unpaid Investor Servicing Fees, (iii) the Investor Default
Amount, [and] (iv) unreimbursed Investor Charge-Offs [and (v) certain unreimbursed
reductions in the Enhancement Invested Amount, if any]. Excess Finance Charge
Collections with respect to the Series 199__-__ Certificates will become Shared Excess
Finance Charge Collections and applied as described herein.
[In addition, if on any Transfer Date the amount on deposit in the Cash Collateral
Account exceeds the Required Cash Collateral Amount, such excess will be withdrawn from
the Cash Collateral Account and applied in accordance with the Loan Agreement. See
"Description of the Certificates -- The Cash Collateral Account."]
[Shared Principal
Collections . . . . . . . . . . . . . . To the extent that collections of Principal Receivables allocated to the Investor
Interest with respect to the Certificates are not needed to make payments to the
Certificates [or the Collateral Interest] [or required to be deposited in the Principal
Funding Account], such collections ("Shared Principal Collections") will be applied to
cover principal payments due to or for the benefit of certificateholders of other
Series. Any such reallocation will not result in a reduction in the Investor Interest
with respect to the Certificates. In addition, collections of Principal Receivables
and certain other amounts otherwise allocable to other Series, 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] [Class B] Certificates.]
[Required Collateral
Invested Amount . . . . . . . . . . . . The "Required Collateral Interest" with respect to any [Transfer] [Distribution] Date for
the Certificates means (i) $__________ initially (the "Initial Collateral Interest")]
and (ii) thereafter an amount equal to the greater of (a) ____% of the sum of the
Investor Interest plus the Collateral Interest and (b) ____% of the Investor Interest,
in each case as of such [Transfer] [Distribution] Date after taking into account
distributions made on such date; provided, however, (1) that if certain reductions in
the Collateral Interest occur or if
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a Pay Out Event occurs, the Required Collateral Interest for such [Transfer]
[Distribution] Date shall equal to the Required Collateral Interest for the [Transfer]
[Distribution] 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] [Distribution] Date; and (3) 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 Amount" herein.
With respect to any [Transfer] [Distribution] Date, if the Collateral Interest is less
than the Required Collateral Interest, certain Excess Finance Charge Collections, if
available, will be reallocated to increase the Collateral Interest to the extent of
such shortfall. Any of such Excess Finance Charge Collections not required to be so
reallocated with respect to any [Transfer] [Distribution] Date will be applied in
accordance with the Loan Agreement among the Seller, the Trustee, the Servicer and the
CA Investors (the "Loan Agreement").
[With respect to any [Transfer] [Distribution] Date during the Controlled Amortization
Period, an amount equal to the excess of the Collateral Interest over the Required
Collateral Interest will be paid to the CA Investors to the extent of the excess of the
Percentage Allocation [plus certain other amounts over the Controlled Distribution
Amount for such [Transfer] [Distribution] Date.]]
[Cash Collateral Account . . . . . . . . The Trust will have the benefit of the Cash Collateral Account, which will be held in the
name of the Trustee for the benefit of the Certificateholders [and the Cash Collateral
Depositor, as their interests appear in the Series [199__-__] Supplement and with
respect to the Cash Collateral Depositor, the Loan Agreement]. See "Description of the
Certificates -- The Cash Collateral Account." The Cash Collateral Account will be
funded on the Closing Date in the amount of $__________ (the "Initial Cash Collateral
Amount") from the proceeds of a loan to be made to the Trust by the Cash Collateral
Depositor pursuant to a loan agreement among the Seller, the Trustee and the Cash
Collateral Depositor (the "Loan Agreement"). With respect to any Transfer Date, the
amount available in the Cash Collateral Account (the "Available Cash Collateral
Amount") will
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equal the lesser of the amount on deposit in the Cash Collateral Account (exclusive
of interest and earnings thereon and net of any investment losses and expenses), [which
shall be zero upon the termination of the Cash Collateral Account after any withdrawals
on the Transfer Date preceding the Economic Pay Out Distribution Date,] and the
Required Cash Collateral Amount. The "Required Cash Collateral Amount" with respect to
any Transfer Date means the product of (i) the [Adjusted] Investor Interest as of the
last day of the Monthly Period preceding such date and (ii) ____%, but not less than
$__________; provided, however, that if certain withdrawals are made from the Cash
Collateral Account during the [Controlled Amortization Period] [Controlled Accumulation
Period] [Principal Amortization Period] or if a Pay Out Event occurs, the Required Cash
Collateral Amount for each Transfer Date thereafter shall equal the Required Cash
Collateral Amount for the Transfer Date immediately preceding the occurrence of such
withdrawal or such Pay Out Event.
If, in any Monthly Period, collections of Finance Charge Receivables and annual
membership fees allocated to the Investor Interest are insufficient to pay (i) current
Monthly Interest on the Certificates, (ii) the Investor Servicing Fee and (iii) the
Investor Default Amount, the Trustee will make a withdrawal from the Cash Collateral
Account in an amount equal to the deficiency, up to the Available Cash Collateral
Amount. In the event the Available Cash Collateral Amount is reduced to less than
____% of the [Adjusted] Investor Interest, a Pay Out Event will occur and the [Rapid
Amortization Period] [Rapid Accumulation Period] will commence.
[In addition, upon the occurrence of an Economic Pay Out Event, after giving effect to
any payment of principal to be made [or deposited] on the related Distribution Date as
described under "Description of the Certificates -- Application of Collections --
Payments of Principal," an amount equal to the lesser of (i) the Available Cash
Collateral Amount (after giving effect to other withdrawals from the Cash Collateral
Account on the Transfer Date prior to the Economic Pay Out Distribution Date) and
(ii) the unpaid principal amount of the Certificates (the "Economic Pay Out Amount")
will be withdrawn from the Cash Collateral Account and distributed to
Certificateholders as principal on the first Distribution Date following the Monthly
Period in which such Economic Pay Out Event occurred (the
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"Economic Pay Out Distribution Date"). Following such withdrawal from the Cash
Collateral Account on the Transfer Date prior to such Economic Pay Out Distribution
Date, the Cash Collateral Account will be terminated and no further deposits to, or
withdrawals from, the Cash Collateral Account will be made for the benefit of the
Certificateholders. See "Description of the Certificates -- The Cash Collateral
Account."
In the event the Available Cash Collateral Amount is reduced to zero, [including as a
result of the Economic Pay Out Amount, or, following the occurrence of an Economic Pay
Out Event, the Enhancement Invested Amount is also reduced to zero,] Certificateholders
will bear directly the credit and other risks associated with their undivided interest
in the Trust. See "Description of the Certificates -- The Cash Collateral Account"
herein and "Special Considerations -- Credit Enhancement" in the Prospectus.
With respect to any Transfer Date, [prior to an Economic Pay Out Distribution Date,] if
the amount on deposit in the Cash Collateral Account is less than the Required Cash
Collateral Amount, Excess Finance Charge Collections, if any, will be deposited into
the Cash Collateral Account to the extent of such shortfall. "Excess Finance Charge
Collections" for any Transfer Date will equal the excess of any collections of Finance
Charge Receivables and annual membership fees allocated to the Investor Interest over
the sum of (i) current Monthly Interest, any overdue Monthly Interest and any
Additional Interest on the Certificates, (ii) the Investor Servicing Fee and any
accrued and unpaid Investor Servicing Fees, (iii) the Investor Default Amount,
(iv) unreimbursed Investor Charge Offs [and (v) certain unreimbursed reductions in the
Enhancement Invested Amount, if any]. Any Excess Finance Charge Collections not
deposited to the Cash Collateral Account with respect to any Transfer Date will be
applied in accordance with the Loan Agreement. See "Description of the Certificates --
Application of Collections -- Payment of Fees, Interest and Other Items."
In addition, if on any Transfer Date the amount on deposit in the Cash Collateral Account
exceeds the Required Cash Collateral Amount, such excess will be withdrawn from the
Cash Collateral Account and applied in accordance with the Loan Agreement. See
"Description of the Certificates -- The Cash Collateral Account."
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The Initial Cash Collateral Amount may be reduced without the consent of the
Certificateholders, if the Seller receives written notice from each Rating Agency that
such reduction will not result in a reduction or withdrawal of its then-current rating
of the Certificates and the Seller shall have delivered to the Trustee a certificate of
an authorized officer to the effect that, based on the facts known to such officer at
such time, in the reasonable belief of the Seller, such reduction will not cause a Pay
Out Event or an event that, after the giving of notice or the lapse of time, would
constitute a Pay Out Event, to occur with respect to the Series.]
[Credit Enhancement . . . . . . . . . . . The Trust will have the benefit of a [letter of credit] [cash collateral guaranty]
[collateral interest] [surety bond] [insurance policy] [spread account] [reserve
account] [other credit enhancement] [issued by ___________] for the benefit of the
[Class A] [and] [Class B] Certificateholders as described herein]. See "Description of
the Certificates -- Credit Enhancement" herein.]
Optional Repurchase . . . . . . . . . . . The Investor Interest will be subject to optional repurchase by the Seller on any
Distribution Date after [the sum of] the Investor Interest [and the Enhancement
Invested Amount, if any,] [and the Collateral Interest] is reduced to an amount less
than or equal to $__________ (____% of the Initial Investor Interest [and the Initial
Collateral Interest]), if certain conditions set forth in the Agreement are met. The
repurchase price will be equal to [the sum of] the Investor Interest [less the amount,
if any, on deposit in the Principal Funding Account)] [and the Enhancement Invested
Amount, if any,] [and the Collateral Interest] plus accrued and unpaid interest on the
Class A Certificates and the Class B Certificates [and interest or other amounts
payable on the [Enhancement Invested Amount] [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" in the
Prospectus.
Trustee . . . . . . . . . . . . . . . . . [__________].
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 "Certain Federal Income Tax
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Consequences" in the Prospectus for additional information concerning the application
of federal income tax laws.
ERISA Considerations . . . . . . . . . . Subject to the considerations described below, the 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 Certificates if certain conditions are met, including that the 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 Underwriter[s]
expect that the Certificates will be held by at least 100 independent investors at the
conclusion of the offering, although no assurance can be given, and no monitoring or
other measures will be taken to ensure that such condition will be met. The 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 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
satisfactory, 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. Accordingly, employee benefit
plan 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.
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] [one of the four highest rating categories] by at least one
nationally recognized rating agency.
Class B Certificate
[Rating] . . . . . . . . . . . . . . . [It is a condition to the issuance of the Class B Certificates that they be rated [in one
of the four highest rating categories] by at least one nationally recognized
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rating agency.] [The Class B Certificates are not offered hereby.]
[Listing . . . . . . . . . . . . . . . . Application will be made to list the Certificates on the Luxembourg Stock Exchange]
[other exchange].]
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[RISK FACTORS]
LIMITED LIQUIDITY. There is currently no market for the Class A
Certificates and Class B Certificates. The Underwriter[s] intend[s] to make a
market in the Certificates, but [is] [are] not obligated to do so. There is no
assurance that a secondary market will develop, or if it does develop, that it
will provide Certificateholders with liquidity of investment or that it will
continue for the life of the Certificates.
[DISCOUNT OPTION. Pursuant to the Agreement, the Seller has the
option to designate a fixed percentage of Receivables that otherwise would be
treated as Principal Receivables to be treated as Finance Charge Receivables.
Any such designation would result in an increase in the amount of Finance
Charge Receivables and a slower payment rate of collections in respect of
Principal Receivables than otherwise would occur. Pursuant to the Agreement,
the Seller can make such a designation without notice to or the consent of
certificateholders. The Seller must provide [30] days' prior written notice to
the Servicer, the Trustee, any provider of Enhancement and each Rating Agency
of any such designation, and such designation will become effective only if (i)
in the reasonable belief of the Seller such designation would not cause a Pay
Out Event to occur or an event which with notice or the lapse of time or both
would constitute a Pay Out Event and (ii) each Rating Agency confirms in
writing its then current rating on any outstanding Series. See "Description of
the Certificates -- Discount Option" in the Prospectus.]
CREDIT ENHANCEMENT. Although Credit Enhancement with respect to the
Certificates will be provided by the [subordination of the Class B Certificates
to the Class A Certificates] [Letter of Credit] [Cash Collateral Guaranty]
[Cash Collateral Account] [Collateral Interest] [Surety Bond] [Insurance
Policy] [Spread Account] [Reserve Account], the amount [available thereunder]
[pursuant thereto] is limited, [is expected to] [may] decline during an
Amortization Period [Accumulation Period] [or under certain circumstances may
be reduced] and will be reduced by payments made pursuant thereto. If the
amount available under such Credit Enhancement has been reduced to zero, [Class
A] Certificateholders [and Class B Certificateholders] will [each] bear
directly the credit and other risks associated with their respective undivided
interests in the Trust.
EFFECT OF SUBORDINATION OF CLASS B CERTIFICATES; PRINCIPAL PAYMENTS.
The Class B Certificates are subordinated in right of payment of principal to
the Class A Certificates. [Payments of principal in respect of the Class B
Certificates will not commence until after the final principal payment with
respect to the Class A Certificates has been made as described herein.]
Moreover, the Class B Investor Interest is subject to reduction if the Required
Amount for any Monthly Period is greater than zero and is not funded from
Excess Spread [and certain other amounts described herein]. To the extent the
Class B Investor Interest is reduced, the percentage of collections of Finance
Charge Receivables allocable to the Class B Investor Interest in future 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
available for distribution to the Class B Certificateholders will be reduced.
See "Description of the Investor Certificates -- Investor Percentage and Seller
Percentage", "-- Subordination of the Class B Certificates" and "--
Reallocation of Cash Flows; Class B Investor Interest" herein. [Although
credit enhancement with respect to the Class B Certificates will be provided by
the Credit Enhancement, the amount thereunder is limited and will be reduced by
unreimbursed draws made thereunder.]
RATING OF THE CLASS A [AND CLASS B] CERTIFICATES. It is a condition
to issuance of the Class A Certificates that they be rated in [the highest
rating category] [one of the four highest rating categories] by at least one
nationally recognized rating agency (the "Rating Agency"). [As used herein,
the term "Rating Agency" means Standard & Poor's Corporation, Moody's Investors
Service Inc. [or other rating agency].] The rating of the Class A Certificates
is based primarily on the quality of the Receivables and the terms of the Class
B Certificates [and the [credit rating] [initial amount] of the Credit
Enhancement]. [It is a condition to the issuance of the Class B Certificates
that they be rated in [one of the four highest rating categories] or its
equivalent by at least one nationally recognized Rating Agency. The rating of
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<PAGE> 33
the Class B Certificates is based primarily on the value of the Receivables
[and the [credit rating] [initial amount] of Credit Enhancement].] The ratings
are not a recommendation to purchase, hold or sell Certificates, and such
rating does not comment as to the marketability of the 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 the Rating Agency if in its judgment
circumstances so warrant.]
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. In addition,
the Seller may purchase portfolios of credit card accounts from other credit
card issuers which may be included in the Trust as Additional Accounts. Such
accounts may not be originated, used or collected in the same manner as the
VISA and MasterCard International accounts described below and may differ with
respect to loss and delinquency and revenue experience and historical payment
rates. Such accounts may also have different terms than the accounts described
below, including lower periodic finance charges. Consequently, the addition of
the receivables arising in such accounts to the Trust could have the effect of
reducing the Portfolio Yield. Additional Accounts may consist of Eligible
Accounts which are not currently in existence and which are selected using
different eligibility criteria from those used in selecting the Accounts
already included in the Trust.
BILLING AND PAYMENTS
MBNA, using MBNA Information Services, Inc. ("MBNA I.S.") as its
service bureau, generates and mails to cardholders monthly statements
summarizing account activity and processes cardholder monthly payments.
Customers generally receive a 25-day grace period on purchases. Currently,
cardholders must make a monthly minimum payment at least equal to the greater
of (i) [2.0]% of the statement balance plus past due amounts and (ii) a stated
minimum monthly payment (generally $15) plus past due amounts. Certain
eligible cardholders are given the option periodically to take a payment
deferral.
The finance charges assessed monthly are calculated by multiplying the
account's average daily balance(s) 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 in the billing statement are
paid by the due date, which is generally 25 days after the billing date.
Finance charges are calculated on cash advances from the date of the
transaction. Currently, MBNA generally treats the day (excluding Sundays and
bank holidays) before the day on which a cash advance check is presented to
MBNA for payment as the transaction date for such check.
MBNA offers fixed rate and variable rate credit card accounts.
Generally, fixed annual percentage rates range from [11.9]% to [19.8]% and
variable rates range from [7.6%] to [10.9%] above the prime rate. MBNA also
offers temporary promotional rates and, under certain circumstances, the period
charges on a limited number of accounts may be either greater than or less than
those assessed by MBNA generally.
MBNA charges annual membership fees (generally ranging from $[18] to
$[40]) on most accounts although under various marketing programs these fees
may not be assessed or may be waived or rebated. For most credit card
accounts, MBNA also assesses late and overlimit charges (generally $[15]) and
S-33
<PAGE> 34
returned check charges (generally $[15]). For most accounts, MBNA assesses a
cash advance fee generally ranging from [1%] to [2%] of the cash advance amount
with a $[2] minimum fee and a maximum fee of either $[10] or $[25].
DELINQUENCY AND LOSS EXPERIENCE
An account is contractually delinquent if the minimum payment is not
received by the due date indicated on the customer's statement. Efforts to
collect contractually delinquent credit card receivables 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.
Accounts are worked continually at each stage of delinquency through
the 150 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
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 customers in bankruptcy are charged-off
in a manner consistent with this policy.
The following tables set forth the delinquency and loss experience for
each of the periods shown for the Bank Portfolio. The Bank Portfolio's
delinquency and loss experience is comprised of segments which may, when taken
individually, have delinquency and loss characteristics different from those of
the overall Bank Portfolio of credit card accounts. As of the beginning of the
day on _________, ____, the Receivables in the Trust Portfolio represent
approximately ____% of the Bank Portfolio. Because the Trust Portfolio is only
a portion of the Bank Portfolio, actual delinquency and loss experience with
respect to the Receivables may be different from that set forth below for the
Bank Portfolio. There can be no assurance that the delinquency and loss
experience for the Receivables in the future will be similar to the historical
experience of the Bank Portfolio set forth below.
S-34
<PAGE> 35
<TABLE>
<CAPTION>
DELINQUENCY EXPERIENCE
BANK PORTFOLIO
(DOLLARS IN THOUSANDS)
DECEMBER 31,
-----------------------------------------------------------------------------------------------------
______, 199__ 199__ 199__ 199__
----------------- ----------------------- ----------------------- ------------------------
PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
OF TOTAL OF TOTAL OF TOTAL OF TOTAL
RECEIVABLES RECEIVABLES RECEIVABLES RECEIVABLES RECEIVABLES RECEIVABLES RECEIVABLES RECEIVABLES
----------- ---------- ----------- ---------- ----------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Receivables Outstanding(1) $ $ $ $
Receivables Delinquent:
35 - 64 Days $ % $ % $ % $ %
65 - 94 Days
95 or More Days
--------- ---- -------- ---- ------- ---- ------- ----
Total $ % $ % $ % $ %
========= ==== ======== ==== ======= ==== ======= ====
</TABLE>
- ----------------------------
(1) The Receivables Outstanding on the accounts consist of all amounts due
from cardholders as posted to the accounts as of the end of the period
shown.
<TABLE>
<CAPTION>
GROSS CHARGE-OFF EXPERIENCE
BANK PORTFOLIO
(DOLLARS IN THOUSANDS)
YEAR ENDED DECEMBER 31,
____ MONTHS ENDED ------------------------------------------------
________, 199__ 199__ 199__ 199__
------------------- --------------- ---------- --------------
<S> <C> <C> <C> <C>
Average Receivables Outstanding(1) . . . . . . . $ $ $ $
Total Gross Charge-Offs(2) . . . . . . . . . . .
Total Charge Offs as a percentage
of Average Receivables Outstanding(3) . . . . . % % % %
</TABLE>
- ----------------------------
(1) Average Receivables Outstanding is the average of the daily receivable
balance during the period indicated.
(2) Total 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.
(3) The percentage reflected for the ____ months ended __________, ____ is an
annualized figure.
[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 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]. VISA and MasterCard 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
S-35
<PAGE> 36
Receivables, allocating collections of Finance Charge Receivables to
Certificateholders, making required monthly payments, including interest
payments on the Certificates [and making payment of the Investor Servicing
Fee], and calculating the Portfolio Yield. See "MBNA's Credit Card Activities
- -- Interchange" in the Prospectus.]
THE RECEIVABLES
The Receivables to be conveyed to the Trust arise in Accounts selected
from the [Bank Portfolio] [and/or] [Purchased Accounts] 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 __________, the Seller designated
Additional Accounts and conveyed the Receivables arising therein to the Trust,
which included approximately $____ million of Principal Receivables.] [In
addition, the Seller is required to designate Additional Accounts, to the
extent available, (x) to maintain the Seller Interest so that, during any
period of [30] consecutive days, the Seller Interest averaged over that period
equals or exceeds ____% or such higher percentage as may be specified in any
series supplement (such percentage, the "Minimum Seller Interest") of the
average Principal Receivables for the same period, and (y) to maintain, for so
long as certificates of any Series (including the Certificates) remain
outstanding, an aggregate amount of Principal Receivables in an amount equal to
or greater than the Minimum Aggregate Principal Receivables. [The Seller may,
upon 30 days prior notice to the Trustee, reduce the Minimum Seller Interest,
provided that such reduction will not result in a reduction or withdrawal of
the then-current ratings of the Certificates, and provided further, the Minimum
Seller Interest shall never be less than 2%.] "Minimum Aggregate Principal
Receivables" shall mean an amount equal to the sum of the initial investor
interests for all Series then outstanding.] 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 has the right
(subject to certain limitations and conditions) to designate certain 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.] As of the [Cut
Off Date] [Initial Closing 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 represents and warrants 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 __________, _____ [the Cut Off Date], included $__________ of Principal
Receivables and $__________ of Finance Charge Receivables. The Accounts had an
average Principal Receivable balance of $__________ and an average credit limit
of $__________. The percentage of the aggregate total Receivable balance to
the aggregate total credit limit was ____%. The average age of the Accounts was
approximately ____ months. As of the beginning of the day on __________, _____,
cardholders whose Accounts are included in the Trust Portfolio had billing
addresses in ____ States and the District of Columbia. As of the beginning of
the day on __________, ____, ____% of the Accounts were standard accounts and
____% 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 ____% and ____%, respectively.
The following tables summarize the Trust Portfolio by various criteria
as of the beginning of the day on __________, ____ [the Cut Off Date]. Because
the future composition of the Trust Portfolio may
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<PAGE> 37
change over time, these tables are not necessarily indicative of the
composition of the Trust Portfolio at any subsequent time.
<TABLE>
<CAPTION>
COMPOSITION BY ACCOUNT BALANCE
TRUST PORTFOLIO
PERCENTAGE
OF TOTAL PERCENTAGE
NUMBER OF NUMBER OF OF TOTAL
ACCOUNT BALANCE RANGE ACCOUNTS ACCOUNTS RECEIVABLES RECEIVABLES
- --------------------- ---------- ----------------- -------------------- ---------------
<S> <C> <C> <C> <C>
Credit Balance . . . . . . . . . . . . . % $ %
No Balance . . . . . . . . . . . . . . .
$ .01 - $ 5,000.00 . . . . . . . . .
$ 5,000.01 - $10,000.00 . . . . . . . . .
$10,000.01 - $15,000.00 . . . . . . . . .
$15,000.01 - $20,000.00 . . . . . . . . .
$20,000.01 - $25,000.00 . . . . . . . . .
$25,000.01 or More
---------- -------- --------------------- ----------
TOTAL . . . . . . . . . . . . . % $ %
========== ======== ===================== ==========
</TABLE>
<TABLE>
<CAPTION>
COMPOSITION BY CREDIT LIMIT
TRUST PORTFOLIO
PERCENTAGE
OF TOTAL PERCENTAGE
NUMBER OF NUMBER OF OF TOTAL
CREDIT LIMIT RANGE ACCOUNTS ACCOUNTS RECEIVABLES RECEIVABLES
- ------------------ ---------- ----------------- -------------------- ---------------
<S> <C> <C> <C> <C>
Less than $ 5,000.00 . . . . . . . . . . % $ %
$ 5,000.01 - $10,000.00 . . . . . . . . .
$10,000.01 - $15,000.00 . . . . . . . . .
$15,000.01 - $20,000.00 . . . . . . . . .
$20,000.01 - $25,000.00 . . . . . . . . .
---------- --------
$25,000.01 or More
------------------- -----------
TOTAL . . . . . . . . . . . . . % $ %
========== ======== =================== ===========
</TABLE>
S-37
<PAGE> 38
<TABLE>
<CAPTION>
COMPOSITION BY PERIOD OF DELINQUENCY
TRUST PORTFOLIO
PERCENTAGE
OF TOTAL PERCENTAGE
PERIOD OF DELINQUENCY NUMBER OF NUMBER OF OF TOTAL
(DAYS CONTRACTUALLY DELINQUENT) ACCOUNTS ACCOUNTS RECEIVABLES RECEIVABLES
------------------------------- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Not Delinquent . . . . . . . . . . . . . % $ %
Up to 34 Days . . . . . . . . . . . . . .
35 to 64 Days . . . . . . . . . . . . . .
65 to 94 Days . . . . . . . . . . . . . .
95 or More Days . . . . . . . . . . . . .
------- ----- ---------- -----
TOTAL . . . . . . . . . . . . . % $ %
======= ===== ========== =====
</TABLE>
<TABLE>
<CAPTION>
COMPOSITION BY ACCOUNT AGE
TRUST PORTFOLIO
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 % $ ( ) %
Over 6 Months to 12 Months
Over 12 Months to 24 Months
Over 24 Months to 36 Months
Over 36 Months to 48 Months
Over 48 Months to 60 Months
Over 60 Months to 72 Months
Over 72 Months
------- ----- ---------- ----------
TOTAL . . . . . . . . . . . . . % $ %
======= ===== ========== ==========
</TABLE>
S-38
<PAGE> 39
<TABLE>
<CAPTION>
GEOGRAPHIC DISTRIBUTION OF ACCOUNTS
TRUST PORTFOLIO
PERCENTAGE
NUMBER OF TOTAL PERCENTAGE
OF NUMBER OF OF TOTAL
STATE ACCOUNTS ACCOUNTS RECEIVABLES RECEIVABLES
----- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Alabama . . . . . . . . . . . . . . . . . . . . % $ %
Alaska . . . . . . . . . . . . . . . . . . . .
Arizona . . . . . . . . . . . . . . . . . . . .
Arkansas . . . . . . . . . . . . . . . . . . .
California . . . . . . . . . . . . . . . . . .
Colorado . . . . . . . . . . . . . . . . . . .
Connecticut . . . . . . . . . . . . . . . . . .
Delaware . . . . . . . . . . . . . . . . . . .
Florida . . . . . . . . . . . . . . . . . . . .
Georgia . . . . . . . . . . . . . . . . . . . .
Hawaii . . . . . . . . . . . . . . . . . . . .
Idaho . . . . . . . . . . . . . . . . . . . . .
Illinois . . . . . . . . . . . . . . . . . . .
Indiana . . . . . . . . . . . . . . . . . . . .
Iowa . . . . . . . . . . . . . . . . . . . . .
Kansas . . . . . . . . . . . . . . . . . . . .
Kentucky . . . . . . . . . . . . . . . . . . .
Louisiana . . . . . . . . . . . . . . . . . . .
Maine . . . . . . . . . . . . . . . . . . . . .
Maryland . . . . . . . . . . . . . . . . . . .
Massachusetts . . . . . . . . . . . . . . . . .
Michigan . . . . . . . . . . . . . . . . . . .
Minnesota . . . . . . . . . . . . . . . . . . .
Mississippi . . . . . . . . . . . . . . . . . .
Missouri . . . . . . . . . . . . . . . . . . .
Montana . . . . . . . . . . . . . . . . . . . .
Nebraska . . . . . . . . . . . . . . . . . . .
Nevada . . . . . . . . . . . . . . . . . . . .
New Hampshire . . . . . . . . . . . . . . . . .
New Jersey . . . . . . . . . . . . . . . . . .
New Mexico . . . . . . . . . . . . . . . . . .
New York . . . . . . . . . . . . . . . . . . .
North Carolina . . . . . . . . . . . . . . . .
North Dakota . . . . . . . . . . . . . . . . .
Ohio . . . . . . . . . . . . . . . . . . . . .
Oklahoma . . . . . . . . . . . . . . . . . . .
Oregon . . . . . . . . . . . . . . . . . . . .
Pennsylvania . . . . . . . . . . . . . . . . .
Rhode Island . . . . . . . . . . . . . . . . .
South Carolina . . . . . . . . . . . . . . . .
South Dakota . . . . . . . . . . . . . . . . .
Tennessee . . . . . . . . . . . . . . . . . . .
Texas . . . . . . . . . . . . . . . . . . . . .
Utah . . . . . . . . . . . . . . . . . . . . .
Vermont . . . . . . . . . . . . . . . . . . . .
Virginia . . . . . . . . . . . . . . . . . . .
Washington . . . . . . . . . . . . . . . . . .
West Virginia . . . . . . . . . . . . . . . . .
Wisconsin . . . . . . . . . . . . . . . . . . .
Wyoming . . . . . . . . . . . . . . . . . . . .
District of Columbia . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . .
------- ----- ---------- -----
TOTAL . . . . . . . . . . . . . . . . . . . . % $ %
======= ===== ========== =====
</TABLE>
S-39
<PAGE> 40
MATURITY ASSUMPTIONS
The Agreement provides that Certificateholders will not receive
payments of principal until [the first Distribution Date with respect to the
[Controlled Amortization Period] [Principal Amortization Period], which is the
__________, 199__ Distribution Date,] [__________, 199__ (the "[Class A]
Scheduled Payment Date")], or earlier in the event of a Pay Out Event which
results in the commencement of the Rapid Amortization Period. [The Class B
Certificateholders will not begin to receive payments of principal until the
final principal payment on the Class A Certificates has been made.]
[Controlled Accumulation Period. During the Controlled Amortization
Period, the Class A Certificateholders will be entitled to receive [monthly]
payments of principal until the Class A Certificates have been paid in full
[and then the Class B Certificateholders will be entitled to receive [monthly]
payments of principal] equal to the lesser of (a) [the sum of (i)] the product
of (A) the [Class A Fixed Percentage of the] Fixed Investor Percentage and (B)
the amount of the collections of Principal Receivables received during the
related Monthly Period [(other than Reallocated Principal Collections that are
used to pay any deficiency in the Required Amount)], [(ii) Shared Principal
Collections for such Monthly Period, if any, allocated to the [Class A] [Class
B] Certificates,] [(iii) [other amounts]] and (b) the [applicable] Controlled
Distribution Amount, which is equal to the sum of the [applicable] Controlled
Amortization Amount and any existing [applicable] Deficit Controlled
Amortization Amount (both as defined below).] [After the Class A Investor
Interest has been paid in full, the Fixed Investor Percentage of the
collections of Principal Receivables for any Monthly Period [(without regard to
the Controlled Distribution Amount)] will be distributed to the Class B
Certificateholders on each Distribution Date until the earlier of the date the
Class B Investor Interest has been paid in full and the Series [199__-__]
Termination Date.] The Controlled Amortization Amount is for the Class A
Certificates $__________ [and for the Class B Certificates $__________]. The
term "Deficit Controlled Amortization Amount" means zero on the Closing Date
and, on any [Distribution Date] [Transfer Date] [subsequent date], the excess,
if any, of the amount determined under clause (b) above over the amount
determined under clause (a) above as of the end of the related Monthly Period.
Although it is anticipated that principal payments will be made to Class A
Certificateholders in an amount equal to the Controlled Amortization Amount
[for each related Monthly Period] on each Distribution Date beginning on the
__________, 199__ Distribution Date and ending on the __________, 199__
Distribution Date, [and to the Class B Certificateholders in an amount equal to
the applicable Controlled Amortization Amount [for each related Monthly Period]
on Distribution Dates [beginning on __________, 199__ and ending on __________,
199__] [after the Class A Certificates have been paid in full]], no assurance
can be given in that regard. The Seller expects that there will be sufficient
funds on each Distribution Date of the Controlled Amortization Period to [pay
on such date the Controlled Amortization Amount] [for each related Monthly
Period] based on the following assumptions (the "Payment Rate Assumptions"):
[(a) cardholder monthly payment rates for the Accounts are not less than ____%
(which rate is below the lowest monthly payment rate shown in the "Cardholder
Monthly Payment Rates for the Bank's Portfolio" table below), (b) the amount of
Principal Receivables outstanding remains constant at the level of [the sum of]
the amount of such Principal Receivables as of the Closing Date [and the amount
of Principal Receivables delivered to the Trust by the end of the Funding
Period], (c) Total Charge-Offs as a Percentage of Average Receivables
Outstanding and Yield from Finance Charges, Fees [and Interchange] remain
constant at the levels indicated in the related tables for the calendar year
ended __________, ____ and [[____] months ended ____________, 199__] and (d) no
Pay Out Event occurs during the Controlled Amortization Period]. The Seller
cannot predict, and no assurance can be given, as to the cardholder monthly
payment rates which will actually occur in any future period, as to whether any
of the above assumptions will prove to have been correct, or as to whether the
actual rate of payment of principal of the Certificates will be as
anticipated.]
[During the Controlled Accumulation Period, amounts equal to [,for
each Monthly Period,] the lesser of (a) [the sum of (i)] the product of (A) the
[Class A Fixed Percentage of the] Fixed Investor Percentage and (B) the amount
of collections of Principal Receivables during the related Monthly Period
S-40
<PAGE> 41
(other than Reallocated Principal Collections that are used to pay any
deficiency in the Required Amount), [(ii) Shared Principal Collections for such
Monthly Period, if any, allocated to the [Class A] [Class B] Certificates,]
[(iii) [other amounts] and (b) the [applicable] Controlled Deposit Amount,
which is equal to the sum of the [applicable] Controlled Accumulation Amount
for such Monthly Period and any [applicable] Accumulation Shortfall (both as
defined below) will be deposited in the Principal Funding Account held by the
Trustee (the "Principal Funding Account") on each [Distribution Date] [Transfer
Date] [on the ____ business day in each calendar month].] The Controlled
Accumulation Amount is $__________ [for the Class A Certificates [or such other
amount determined as described herein]] [and $__________ for the Class B
Certificates [or such other amount determined as described herein]]. [After
the Class A Investor Interest has been paid in full, the Fixed Investor
Percentage of the collections of Principal Receivables for any Monthly Period
[(without regard to the Controlled Distribution Amount)] will be distributed to
the Class B Certificateholders on each Distribution Date until the earlier of
the date the Class B Investor Interest has been paid in full and the Series
[199__-__] Termination Date.] The term "Accumulation Shortfall" means zero on
the Closing Date, and on any [Distribution Date] [Transfer Date] [subsequent
date], the excess, if any, of the amount determined under clause (b) above over
the amount determined under clause (a) above as of the end of the related
Monthly Period[s]. Amounts in the Principal Funding Account are expected to be
available to pay scheduled payments of principal on the Scheduled Payment
Date[s]. Although it is anticipated that collections of Principal Receivables
will be available on [each Distribution Date] [for each Monthly Period] during
the Controlled Accumulation Period to make a deposit of the Controlled
Accumulation Amount and that scheduled principal payments will be paid to the
[Class A] [Class B] Certificateholders on the Scheduled Payment Date[s], no
assurance can be given in this regard. [If the scheduled principal amount is
not available in the Principal Funding Account on any Scheduled Payment Date, a
Pay Out Event will occur and a Rapid Amortization Period will commence. The
Seller expects that there will be sufficient funds on each [Distribution Date]
[Transfer Date] [subsequent date] of the [Controlled Accumulation Period and on
the Scheduled Payment Date[s]] to accumulate [for each related Monthly Period]
the Controlled Accumulation Amount and to pay on the Scheduled Payment Date[s]
the Scheduled Principal Amounts, respectively, based on the following
assumptions (the "Payment Rate Assumptions"): [(a) cardholder monthly payment
rates for the Accounts are not less than ____% (which rate is below the lowest
monthly payment rate shown in the "Cardholder Monthly Payment Rates for the
Bank's Portfolio" table below), (b) the amount of Principal Receivables
outstanding remains constant at the level of [the sum of] the amount of such
Principal Receivables as of the Closing Date [and the amount of Principal
Receivables delivered to the Trust by the end of the Funding Period], (c) Total
Charge-Offs as a Percentage of Average Receivables Outstanding and Yield from
Finance Charges, Fees [and Interchange] remain constant at the levels indicated
in the related tables for the [____] months ended __________, 199__ and (d) no
Pay Out Event occurs during the Controlled Accumulation Period]. The Seller
cannot predict, and no assurance can be given, as to the cardholder monthly
payment rates which will actually occur in any future period, as to whether any
of the above assumptions will prove to have been correct or as to whether the
actual rate of payment of principal of the Certificates will be as anticipated.
[Funds on deposit in the Principal Funding Account applicable to the Series
will be invested [in certain permitted investments] [pursuant to a [guaranteed
rate agreement] [guaranteed investment contract] [with ___________] intended to
assure a minimum rate of return on the investment of such funds.]
[Principal Accumulation Period. During the Principal Amortization
Period, the Class A Certificateholders will be entitled to [monthly] payments
of principal equal to the product of (a) the Fixed Investor Percentage and (b)
the amount of collections of Principal Receivables received by the Trust during
the related Monthly Period[s] (other than Reallocated Principal Collections
that are used to pay any deficiency in the Required Amount) [Shared Principal
Collections, if any, allocated to the [Class A] Certificates] [and other
amounts] [until the Class A Investor Interest is paid in full]. [After the
Class A Certificates have been paid in full], amounts equal to the product of
(a) the Fixed Investor Percentage and (b) the amount of collections of
Principal Receivables [Shared Principal Collections, if any, allocated to the
[Class B] Certificates] [and other amounts] will be allocated to the Class B
Certificates on a monthly basis until the earlier of and the date on which the
Class B Certificates have been paid in full and the Series [199__-__
Termination Date. Principal so allocated on a monthly basis will be paid to
Class A
S-41
<PAGE> 42
or Class B Certificateholders, as appropriate, on each Distribution Date during
the Principal Amortization Period.]
[Rapid Accumulation Period. If a Pay Out Event occurs during the
Revolving Period or the Controlled Accumulation Period, the Rapid Accumulation
Period will commence and any amount on deposit in the Principal Funding Account
will be held for the benefit of Certificateholders, and [Available Investor
Principal Collections] [such other amounts] will be deposited monthly in the
Principal Funding Account on each [Distribution Date] [Transfer Date] [other
date] during the Rapid Accumulation Period until the balance on deposit in the
Principal Funding Account equals the Investor Interest. The [Available
Investor Principal Collections] [such other amounts] will not be subject to the
Controlled Deposit Amount. Unless as so provided herein, funds on deposit in
the Principal Funding Account will be available to pay the [Class A] [Class B]
Certificateholders in respect of the [Class A] [Class B] Investor Interest on
the [Class A] [Class B] Scheduled Payment Date. If the aggregate principal
amount of deposits made to the Principal Funding Account during the Rapid
Accumulation Period are insufficient to pay in full the [Class A] [Class B]
Investor Interest on the [Class A] [Class B] Scheduled Payment Date, the Rapid
Amortization Period will commence. Unless as otherwise provided herein, funds
on deposit in the Principal Funding Account will be distributed to the [Class
A] [Class B] Certificateholders on the next succeeding [Distribution Date]
[Transfer Date] [other date].]
Pay Out Events. Should a Pay Out Event occur and the Rapid
Amortization Period commence, the Class A Certificateholders will be entitled
to monthly payments of principal equal to the product of (a) the Fixed Investor
Percentage and (b) the amount of collections in respect of Principal
Receivables received during the related Monthly Period (other than Reallocated
Principal Collections that are used to pay any deficiency in the Required
Amount) [Shared Principal Collections, if any, allocated to the Class A
Certificates] [other amounts]. On each Distribution Date during the Rapid
Amortization Period, the Class A Certificateholders shall receive the amount so
allocated for the related Monthly Period [until the Class A Certificates have
been paid in full]. [On each Distribution Date after the Class A Certificates
have been paid in full, amounts equal to the product of (a) the Fixed Investor
Percentage and (b) the amount of collections of Principal Receivables [Shared
Principal Collections, if any, allocated to the Class B Certificates] [other
amounts] will be paid to the Class B Certificates on each Distribution Date
until the earlier of the date on which the Class B Certificates have been paid
in full and the Series [199__-__] Termination Date.] 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)
material breaches of certain representations, warranties or covenants of the
Seller, (c) certain insolvency events involving the Seller, [(d) a reduction in
the [average] of the Portfolio Yields for any [____] consecutive Monthly
Periods to a rate that is less than the [average] Base Rate [for such period]
[(an "Economic Pay Out Event")],] (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 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) reduction of the [amount available under the Credit
Enhancement] to less than ____ percent of the [Class A] [Class B] Investor
Interest, [(i) insufficient moneys in the Principal Funding Account to pay the
scheduled principal amount on the Scheduled Payment Date[s],] [or (j) other
events]. See "Description of the Certificates -- Pay Out Events" herein. The
term "Base Rate" means, [__________]. The term "Portfolio Yield" means
[________].
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.
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<PAGE> 43
<TABLE>
<CAPTION>
CARDHOLDER MONTHLY PAYMENT RATES
BANK PORTFOLIO
____ MONTHS ENDED YEAR ENDED DECEMBER 31,
---------------------------------
________, 199__ 199__ 199__ 199__
-------------------- ------ ------- -------
<S> <C> <C> <C> <C>
Lowest Month . . . . . . . . . . . . __% % % %
Highest Month . . . . . . . . . . . . __% % % %
Monthly Average . . . . . . . . . . . __% % % %
</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, in all instances, the cardholder was and is
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.
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 Certificateholders could expect to receive payments [allocations] of
principal on their Certificates during an Amortization Period [Accumulation
Period], will be similar to the historical experience set forth above. If a
Pay Out Event occurs [(including an Economic Pay Out Event)], the average life
and maturity of the Certificates could be significantly reduced.
Because there may be a slowdown in the payment rate below the payment
rate used to determine the [Controlled Amortization Amount] [Controlled
Accumulation Amount], or a Pay Out Event may occur which would initiate the
Rapid Amortization Period [or Rapid Accumulation Period], there can be no
assurance that the actual number of months elapsed from the date of issuance of
the Certificates to the final Distribution Date with respect to the
Certificates will equal the expected number of months. See "Maturity
Assumptions" herein and "Special Considerations -- Payments and Maturity" in
the Prospectus.
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 __________, ____ and the _______ months ended __________, ____ 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 yields as amounts collected on credit
card receivables lag behind amounts accrued and billed to cardholders.
Conversely, as delinquencies decrease, cash yields may exceed accrual yields as
amounts collected in a current period may include amounts accrued during prior
periods. [However, the Seller believes that during the three calendar years
ending __________, ____ and the _______ months ended __________, ____, 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 credit card 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 "Special
Considerations" in the Prospectus.
S-43
<PAGE> 44
<TABLE>
<CAPTION>
BANK PORTFOLIO YIELD
YEAR ENDED DECEMBER 31,
____ MONTHS ENDED -------------------------------------------------
_______, 199__ 199__ 199__ 199__
------------------ ------------- --------------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Average Account Monthly Accrued
Finance Charges and Fees (1)(2) . . . . . . $ $ $ $
Average Account Balance(3) . . . . . . . . $ $ $ $
Yield from Finance Charges
and Fees(4) . . . . . . . . . . . . . . . % % % %
[Yield from Interchange(5)] . . . . . . . . % % % %
[Yield from Finance Charges, Fees and
Interchange] . . . . . . . . . . . . . . % % % %
</TABLE>
(1) Finance Charges and Fees are comprised of monthly periodic finance charges
and other credit card fees but do not include revenue attributable to
Interchange].
(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 years indicated above has been estimated.]
The revenue for the Bank Portfolio of credit card accounts shown in
the above table is comprised of monthly periodic finance charges and [,] credit
card fees [and Interchange]. These revenues vary for each Account based on the
type and volume of activity for each account. See "MBNA's Credit Card
Portfolio" herein and "MBNA's Credit Card Activities" in the Prospectus.
USE OF PROCEEDS
The net proceeds from the sale of the Certificates 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 Newark, Delaware, conducts nationwide consumer lending
programs principally comprised of credit card related activities. Based on
statistics compiled by MasterCard and VISA from member institutions as of
__________ ____, 199__, MBNA was the nation's [leading] issuer of premium
MasterCard credit cards and the ____ largest issuer of premium VISA credit
cards based on managed loans. As of __________ ____, 199__, MBNA was the ____
largest lender of MasterCard and Visa accounts based on managed loans according
to the 199__ issue of The Nilson Report, a bi-weekly industry publication. On
a managed basis, MBNA maintained loan accounts with over [11] million customers
with aggregate outstanding balances of $____ billion as of __________ ___,
199__. Of this amount, $___ billion were MasterCard and VISA credit card loans
outstanding. As of __________, 199__, the premium credit card portfolio
accounted for ____% of MBNA's MasterCard and Visa credit card account with
outstanding balances and ____% of MBNA's MasterCard and VISA credit card loans
outstanding.
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,
S-44
<PAGE> 45
Security and Collections Operations. As of __________ ____, 199__, MBNA had
assets of $____ billion, deposits of $____ billion and capital and surplus
accounts of $____ million.
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 _________ ____, 199__, the Corporation had consolidated assets of $____
billion, consolidated deposits of $____ billion and capital and surplus
accounts of $____ million. 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 [199__-__] 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 [199__-__] Supplement.
See "Description of the Certificates" in the Prospectus for additional
information concerning the Certificates and the Agreement.
GENERAL
The Certificates will represent undivided interests in certain assets
of the Trust, including the right to applicable investor percentages 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] [Monthly] Period and payments of principal
[during an Amortization Period] [on each Scheduled Payment Date] funded from
collections of Finance Charge Receivables and annual membership fees and
Principal Receivables, respectively, allocated to the Class A Investor
Interest. Each Class B Certificate represents the right to receive payments of
interest at the applicable Class B Certificate Rate for the related [Interest]
[Monthly] Period, and [after the Class A Certificates have been paid in full],
payments of principal funded from collections of Finance Charge Receivables and
annual membership fees and Principal Receivables, respectively, allocated to
the Class B Investor Interest. 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 [and] [funds on deposit in the
Pre-Funding Account and certain investment earnings thereon] [funds on deposit
in the Principal Funding Account and certain investment earnings thereon]
[Shared Excess Finance Charge Collections] Reallocated Principal Collections
relating to the Class B Certificates, [Shared Principal Collections], [Credit
Enhancement] [Collateral Interest]. 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 [and] [funds on deposit in the
Pre-Funding Account and certain investment earnings thereon] [funds on deposit
in the Principal Funding Account and certain investment earnings thereon]
[Shared Excess Finance Charge Collections] [Shared Principal Collections],
[Credit Enhancement] [Collateral Interest]. 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 an undivided interest in 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 Percentage and 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.
S-45
<PAGE> 46
During the Revolving Period, the amount of the sum of the Class A
Investor Interest and the Class B Investor Interest in the Trust will [remain
constant] [increase in the case of an Additional Issuance] [increase to the
Full Investor Interest, unless by the end of the Funding Period insufficient
Receivables [or Participations] have been added to the Trust or the investor
interests of other Series have not been reduced sufficiently and] except under
certain [other] limited circumstances. See "Description of the Certificates --
Defaulted Receivables; Rebates and Fraudulent Charges; Investor Charge-Offs" in
the Prospectus. 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 generally the changes in the amount of the Principal Receivables in the
Trust. During an [Amortization Period] [Accumulation Period], the sum of the
Class A [Adjusted] Investor Interest and the Class B Investor Interest in the
Trust will decline as cardholder payments of Principal Receivables are
collected and paid to the Class A Certificateholders and Class B
Certificateholders, respectively. As a result, the Seller Interest during any
Amortization Period will generally increase each month to reflect the
reductions in the [Adjusted] Investor Interest and will also change to reflect
the variations in the amount of Principal Receivables in the Trust. The Seller
Interest may be reduced as the result of an Exchange. See "Description of the
Certificates -- Exchanges" in the Prospectus.
The Class A Certificates and the Class B Certificates initially will
be represented by certificates registered in the name of the nominee of DTC
except as set forth below and in the Prospectus. Beneficial interests in the
Certificates will be available for purchase in minimum denominations of
$[1,000] [(representing a _________th of the undivided interest of the
Certificate Owners in the Series)] 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 the
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 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, 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 "Description of the Certificates --
General", "-- Book-Entry Registration" and "-- Definitive Certificates" in the
Prospectus.
[Application will be made to list the Certificates on the [Luxembourg
Stock Exchange] [other exchange].]
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.
The Certificates will be issued as Definitive Certificates to
Certificate Owners or their nominees, rather than DTC or its nominee, only as
provided under "Description of the Certificates -- Definitive Certificates" in
the Prospectus.
[ISSUANCE OF ADDITIONAL CERTIFICATES
The Series [199__-__] Supplement provides that, from time to time
during the Revolving Period, the Seller may, subject to certain conditions
described below, cause the Trustee to issue Additional Certificates (each such
issuance, an "Additional Issuance"). When issued, the Additional Certificates
will be identical in all respects to the other outstanding Certificates of that
class and will be equally and ratably entitled to the benefits of the Agreement
and the Series Supplement without preference, priority or distinction.
S-46
<PAGE> 47
In connection with each Additional Issuance, the outstanding principal
amounts of the Certificates and the aggregate amount of Credit Enhancement will
all be increased pro rata. The additional Credit Enhancement provided in
connection with an Additional Issuance may take the form of [an additional
deposit to the Cash Collateral Account] or another form of Credit Enhancement,
provided that the form and amount of additional Credit Enhancement will not
cause a reduction or withdrawal of the then-current ratings of the
Certificates.
Additional Certificates may be issued only upon the satisfaction of
certain conditions provided in the Series Supplement, including the following:
(a) on or before the fifth Business Day immediately preceding the date on which
the Additional Investor Certificates are to be issued, the Seller shall have
given the Trustee, the Servicer and any provider of Credit Enhancement written
notice of such issuance and the date upon which it is to occur; (b) after
giving effect to the Additional Issuance, the total amount of Principal
Receivables shall be at least equal to the Minimum Aggregate Principal
Receivables; (c) the Seller shall have delivered to the Trustee any additional
Credit Enhancement agreement related to the Additional Issuance, executed by
each of the parties to such agreement; (d) the Trustee shall have received
confirmation from each Rating Agency that such Additional Issuance will not
result in a reduction or withdrawal of its then-current rating of the
Certificates; (e) [other conditions].
There are no restrictions on the timing or amount of any Additional
Issuance, provided that the conditions described above are met. As of the date
of any Additional Issuance, the Investor Interest will be increased to reflect
the initial principal balance of the Additional Certificates of the respective
classes.]
[SUBORDINATION
The Certificates will be subordinated in right of payment of
[interest] [and] [principal] to the certificates of Series [199__-__].]
INTEREST PAYMENTS
Interest on the Class A Certificates and the Class B Certificates will
accrue from the Closing Date on the Class A Investor Interest [and the
Pre-Funding Amount allocable to the Class A Certificates] and Class B Investor
Interest [and the Pre-Funding Amount allocable to the Class B Certificates] at
the Class A Certificate Rate and Class B Certificate Rate, respectively.
Interest [accrued during each Interest Period] will be distributed on
__________, 199__, and on each Distribution Date thereafter to
Certificateholders. Interest payments on the Class A Certificates for each
[Interest] [Monthly] Period and related Distribution Date will be calculated on
the Class A Investor Interest [and the Pre-Funding Amount allocable to the
Class A Certificates] as of [the preceding Record Date] [the [____] [last] day
of the prior Monthly Period] (or in the case of the initial [Interest]
[Monthly] Period, on the Class A Initial Investor Interest [and the Pre-Funding
Amount allocable to the Class A Certificates]) based upon the Class A
Certificate Rate for the related [Interest] [Monthly] Period. [Interest due
but not paid on any Distribution Date will be payable on the next succeeding
Distribution Date together with additional interest on such amount at the
[applicable] Certificate Rate plus 2.00% per annum ("Additional Interest").]
Interest payments on any Distribution Date will be funded from collections of
Finance Charge Receivables and annual membership fees allocated to the Class A
Investor Interest during the preceding Monthly Period and other Available Funds
allocated to the Class A Investor Interest for the related Monthly Period. To
the extent [the sum of (i)] the product of the Class A Floating Percentage of
the Floating Investor Percentage of collections of Finance Charge Receivables
during the preceding Monthly Period [and (ii) other Available Funds allocated
to the Class A Investor Interest for the related Monthly Period] is
insufficient to pay such interest, Excess Spread [and] Reallocated Principal
Collections [Shared Excess Finance Charge Collections] [Credit Enhancement up
to the Available Credit Enhancement Amount], will be used to make such
payments. "Class A Available Funds" and "Class B Available Funds" will, on any
Transfer Date, consist of (i) collections of Finance Charge Receivables
allocated to the Class A Certificates and Class B Certificates, as applicable,
with respect to the preceding Monthly Period and deposited in the Finance
Charge Account on such Transfer Date, (ii) annual membership fees allocated to
the Class A Certificates and Class B Certificates, as applicable, with respect
to the preceding Monthly Period and deposited in the Finance Charge Account on
such Transfer Date, [(iii during the Accumulation Period, Principal Funding
Investment Proceeds and shortfall amounts in respect
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<PAGE> 48
thereof transferred to the Finance Charge Account on such Transfer Date
allocated to the Class A Certificates and Class B Certificates, as applicable,]
[(iv) during the Funding Period, certain investment earnings (net of investment
losses and expenses) on funds on deposit in the Pre-Funding Account transferred
to the Finance Charge Account on such Transfer Date allocated to the Class A
Certificates and Class B Certificates, as applicable].
Interest Payments on the Class B Certificates for each [Interest]
[Monthly] Period and related Distribution Date will be calculated on the Class
B Investor Interest [and the Pre-Funding Amount allocable to the Class B
Certificates] as of [the preceding Record Date] [the [____] [last] day of the
prior Monthly Period] (or in the case of the initial Interest Period, on the
Class B Initial Investor Interest [and the Pre-Funding Amount allocated to the
Class B Certificates]) based upon the Class B Certificate Rate for the related
[Interest] [Monthly] Period. [Interest due but not paid on any Distribution
Date will be payable on the next succeeding Distribution Date together with
Additional Interest. Interest Payments on any Distribution Date will be funded
from the collections of Finance Charge Receivables and annual membership fees
allocated to the Class B Investor Interest during the related Monthly Period
and other Available Funds allocated to the Class B Investor Interest for the
related Monthly Period, and, if necessary, from Excess Spread [and] [Shared
Excess Finance Charge Collections] [Credit Enhancement, up to the Available
Credit Enhancement Amount,] [and Reallocated Collateral Principal Collections]
will be used to make such payments. [If the unpaid principal balance of the
Class B Certificates [for the related Monthly Period] [on any Distribution
Date] (after giving effect to any payment of principal made during [such] [the
related] Monthly Period [Periods]) exceeds the Class B Investor Interest [for
the related Monthly Period] [on such Distribution Date], the amount of Monthly
Interest [accruing] will be less than the amount of accrued interest on the
unpaid principal balance of the Class B Certificates.]
[The "Interest Period" with respect to any Distribution Date, will be
the period from [the ____ business day preceding] the previous Distribution
Date through the [____] day preceding such Distribution Date, except the
initial Interest Period will be the period from the Closing Date through the
[____] day preceding the initial Distribution Date.]
[The Class A Certificates will bear interest at the rate of ____% per
annum. Interest on the Class A Certificates will be calculated on the basis of
twelve 30-day months and a 360-day year.]
[The Class A Certificates will bear interest at the rate of ____% per
annum with respect to the initial [Interest Period] and, with respect to each
subsequent [Interest Period], at the rate of ____% per annum [above] [below]
[times] ____ (the "Index") prevailing on the _____ business day immediately
preceding the commencement of such [Interest Period] (the "Rate Determination
Date"), [provided, however, that the rate at which interest will accrue on
the Certificates will in no event exceed ____% per annum]. Interest on the
Certificates will be calculated on the basis of [the actual number of days in
the Interest Period and a 360-day year].]
[The Class B Certificates will bear interest at the rate of ____% per
annum. Interest on the Class B Certificates will be calculated on the basis of
twelve 30-day months and a 360-day year.]
[The Class B Certificates will bear interest at the rate of ____% per
annum with respect to the initial [Interest Period] and, with respect to each
subsequent Interest Period, at the rate of ____% per annum [above] [below]
[times] the Index prevailing on the Rate Determination Date, [provided,
however, that the rate at which interest will accrue on the Class B
Certificates will in no event exceed ____% per annum]. Interest on the Class B
Certificates will be calculated on the basis of the [actual number of days in
the Interest Period and a 360-day year].]
[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 (___)
___-____.]
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<PAGE> 49
PRINCIPAL PAYMENTS
During the Revolving Period (which begins on the Closing Date and ends
on the day before an Amortization Period [Accumulation Period] begins), no
principal payments will be made to Certificateholders [or the CA Investors]
[except at the end of the Funding Period if the Investor Interest has not
increased to the Full Investor Interest. [At the end of the Funding Period,
which is the ____ Distribution Date, the Class A Certificateholders and the
Class B Certificateholders will be paid all funds [(except investment earnings
thereon)] remaining in the Pre-Funding Account [pro rata, on the basis of the
ratio of the Class A Investor Interest and the Class B Investor Interest,
respectively, to the Investor Interest] [and a certain Early Termination
Amount]. See "-- Funding Period" herein.]
[During the Controlled Amortization Period, which is scheduled to
begin on __________, ____, and during the Rapid Amortization Period, which will
begin upon the occurrence of a Pay Out Event, principal will be paid first to
the Class A Certificateholders [until the Class A Certificates have been paid
in full], and [then] to the Class B Certificateholders. The first principal
payment will be made to Class A Certificateholders beginning on the
Distribution Date following the month in which the Controlled Amortization
Period or the Rapid Amortization Period commences.] [On each Distribution Date
during the Controlled Amortization Period unless [the Class A Certificates have
been paid in full or] a Rapid Amortization Period commences, the Class A
Certificateholders will be entitled to receive [for each related Monthly Period
since the previous Distribution Date] the lesser of (a) [the sum of (i)]
collections of Principal Receivables received during [each such] [the related]
Monthly Period allocated to the Certificates (other than Reallocated Principal
Collections) [(ii) Shared Principal Collections for such Monthly Period, if
any, allocated to the [Series 199__-__ Certificates] [and] [(iii) other
amounts], and (b) the Controlled Distribution Amount. [After payment in full
of the Class A Investor Interest,] the Class B Certificateholders will be
entitled to receive on each Distribution Date [during the Controlled
Amortization Period] the amount specified in the preceding sentence allocable
to the Class B Certificates [without regard to the Controlled Distribution
Amount] until [the earlier of] the date the Class B Investor Interest is paid
in full [and the CA Investors will be entitled to receive the amount specified
in the preceding sentence allocable to the Collateral Interest] [and the Series
[199__-__] Termination Date].
[During the Principal Amortization Period, which is scheduled to begin
on __________, ____, and during the Rapid Amortization Period, which will begin
upon the occurrence of a Pay Out Event, principal will be paid first to the
Class A Certificateholders [until the Class A Certificates have been paid in
full], and [then] to the Class B Certificateholders. The first principal
payment will be made to Class A Certificateholders beginning on the
Distribution Date following the month in which the Principal Amortization
Period or the Rapid Amortization Period commences. [On each Distribution Date
during the Principal Amortization Period unless [the Class A Certificates have
been paid in full or] a Rapid Amortization Period commences, the Class A
Certificateholders will be entitled to receive [for each related Monthly Period
since the previous Distribution Date] collections of Principal Receivables
allocated to the Certificates (other than Reallocated Principal Collections)
[Shared Principal Collections for such Monthly Period, if any, allocated to the
[Series 199__-__ Certificates] [and] [other amounts] received during [each
such] [the related] Monthly Period. [After payment in full of the Class A
Investor Interest, the Class B Certificateholders will be entitled to receive
on each Distribution Date during the Principal Amortization Period the amounts
specified in the preceding sentence until the earlier of the date the Class B
Investor Interest is paid in full and the Series [199__-__] Termination Date].]
[On each [Distribution Date] [Transfer Date] [on the ____ business day
in each calendar month] following the [month of the] commencement of the
[Controlled Accumulation Period] [Rapid Accumulation Period], the Trustee will
deposit in the Principal Funding Account an amount equal to [for each related
Monthly Period since the previous Distribution Date] [the lesser of] (a) [the
sum of (i)] collections of Principal Receivables received during [each such]
[the related] Monthly Period allocated to the Certificates (other than
Reallocated Principal Collections) [(ii) Shared Principal Collections for such
Monthly Period, if any, allocated to the [Series 199__-__ Certificates] [and]
[(iii) other amounts], [and (b) the Controlled Deposit Amount]. [Amounts in
the Principal Funding Account not to exceed the applicable scheduled principal
amount will be paid to the [Class A] [Class B] Certificateholders on the
Scheduled Payment Date[s].] [If, on a Scheduled Payment Date, moneys on
deposit in the Principal Funding Account are insufficient to pay the scheduled
principal amount, a Pay Out Event will
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<PAGE> 50
occur and a Rapid Amortization Period will commence.] [After payment in full
of the Class A Investor Interest, the Class B Certificateholders will be
entitled to receive [on the Scheduled Payment Date for the Class B Certificates
an amount equal to the Class B Investor Interest] [amounts specified in the
preceding sentence allocable to the Class B Certificates [without regard to the
Controlled Deposit Amount].]
[The Class A Certificateholders will be entitled to receive the Class
A Investor Interest on the Class A Scheduled Payment Date. After payment in
full of the Class A Investor Interest, the Class B Certificateholders will be
entitled to receive the Class B Investor Interest on the Class B Scheduled
Payment Date. If funds on deposit in the Principal Funding Account during the
Rapid Accumulation Period are insufficient to pay in full the [Class A][Class
B] Investor Interest on the [Class A][Class B] Scheduled Payment Date, the
Rapid Amortization Period will commence.]
On each Distribution Date during the Rapid Amortization Period [until
the Class A Certificateholders have been paid in full], the Class A
Certificateholders will be entitled to receive for [each] [the] related Monthly
Period since the previous Distribution Date] collections of Principal
Receivables received during [each such] [the related] Monthly Period allocated
to the Certificates (other than Reallocated Principal Collections) [Shared
Principal Collections for [each such] [the related] Monthly Period, if any,
allocated to the Certificates] [and] [other amounts]. [After payment in full
of the Class A Investor Interest the Class B Certificateholders will be
entitled to receive on each Distribution Date during the Rapid Amortization
Date the amount calculated pursuant to the preceding sentence allocable to the
Class B Certificates until the earlier of the date the Class B Certificates are
paid in full and the Series 199__-__ Termination Date.] See "-- Pay Out
Events" below for a discussion of events which might lead to the commencement
of the Rapid Amortization Period.
[In addition to collections of Principal Receivables allocated to the
Class A Investor Interest, Class A Certificateholders may receive payments of
principal from [Reallocated Principal Collections] during an Amortization
Period [Accumulation Period], [Shared Principal Collections] [Credit
Enhancement]. In addition to collections of Principal Receivables allocated to
the Class B Investor Interest, Class B Certificateholders may receive payment
of principal from [Shared Principal Collections] [Credit Enhancement]. See "--
Application of Collections" below for a discussion of the method by which
Principal Receivables [and other amounts] are allocated during an Amortization
Period [or Accumulation Period].
[[With respect to any Distribution Date during the [Controlled
Amortization Period] [Controlled Accumulation Period], an amount equal to the
excess of the Collateral Interest over the Required Collateral Interest will be
paid to the CA Investors to the extent of the excess of the Percentage
Allocation plus certain other amounts over the [Controlled Distribution Amount]
[Controlled Deposit Amount] for such Distribution Date.] On each Distribution
Date on and following the Distribution Date on which the Investor Interest is
paid in full, the Percentage Allocation of all collections of Principal
Receivables for the related Monthly Period plus certain other amounts will be
paid to the CA Investors until the Collateral Interest is paid in full.]
[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 __________ Distribution Date
and thereafter on each Determination Date until the date the Controlled
Accumulation Period begins, the Servicer will determine the "Accumulation
Period Length" based on the lowest monthly principal payment rate on the
Receivables for the prior 12 months and the amount of principal distributable
to the Certificateholders of all outstanding Series (excluding certain
specified Series) which are not in their revolving period. If the Accumulation
Period Length is less than twelve months, the Servicer may, at its option,
postpone the commencement of the Controlled Accumulation Period such that the
number of months included in the Controlled Accumulation Period will be equal
to or exceed the Accumulation Period Length. The effect of the foregoing
calculation is to permit the reduction of the length of the Controlled
Accumulation Period based on the invested amounts of certain other Series which
are scheduled to be in their revolving periods during
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<PAGE> 51
the Controlled Accumulation Period and on increases in the principal payment
rate, which, if continued, would result in a shorter Controlled Accumulation
Period [and an increase to the Controlled Accumulation Amount]. The length of
the Controlled Accumulation Period will not be less than one month and will not
be shorter than the period determined as of the first date of determination
unless the Trust has issued another Series of Certificates subsequent to that
date and such Series is in its revolving period. If the commencement of the
Controlled Accumulation Period is delayed in accordance with the foregoing, and
if an Amortization Event occurs after the date originally scheduled as the
commencement of the Controlled Accumulation Period, then it is probable that
holders of Certificates would receive some of their principal later than if the
Controlled Accumulation Period had not been delayed.]
SUBORDINATION OF THE CLASS B CERTIFICATES
The Class B Interest will be subordinated [(other than with respect to
the [Credit Enhancement])] to the extent necessary to fund payment with respect
to the Class A Certificates. To the extent the Class B Investor Interest is
reduced, the percentage of collections of Finance Charge Receivables allocated
to the Class B Certificateholders in subsequent Monthly Periods will be
reduced. Moreover, to the extent the amount of such reduction in the Class B
Investor Interest is not reimbursed, the amount of principal distributable to
the Class B Certificateholders will be reduced. See "-- Investor Percentage
and Seller Percentage," "-- Reallocation of Cash Flows; Class B Investor
Interest," "-- Excess Spread" and "-- Reallocated Principal Collections"
herein.
TRANSFER AND ASSIGNMENT OF RECEIVABLES
On the date of issuance of the Series ____ Certificates of the Trust
(the "Initial Closing Date") [and, with respect to certain Additional Accounts,
on __________, ____ and __________, ____,] the Seller [will transfer and
assign] [transferred and assigned] to the Trust 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 the transfer of the Receivables to the Trust, the
Seller [indicated] [will indicate] in its computer files that the Receivables
had [have] been conveyed to the Trust and [provided] [will provide] the Trustee
with certain information relating to such Accounts. In addition, the Seller
[has filed] [will file] UCC financing statements with respect to the
Receivables meeting the requirements of Delaware state law. See "Description
of the Certificates -- Transfer and Assignment of Receivables," "Special
Considerations -- Certain Legal Aspects" and "Certain Legal Aspects of the
Receivables" in the Prospectus.
EXCHANGES
The Agreement provides 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 is held by the
Seller and is transferable only as provided in the Agreement. The Agreement
also provides that, pursuant to any one or more series supplements, the holder
of the Seller Certificate may tender such certificate, or the Seller
Certificate and the certificates evidencing any Series of certificates, 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.
Although the holder of the Seller Certificate also has the option
under the Agreement to vary the terms of any Series (or a particular class
within such Series), certain Series, including the option to subordinate to
other Series. [The Series [199__-__] Supplement does not permit the
subordination of the Series [199__-__] to any other Series which may be issued
by the Trust.] There is no limit to the number of Exchanges that may be
performed under the Agreement. The Trust will terminate only as provided in
the Agreement.
[PRIOR ISSUANCES OF CERTIFICATES
The table below sets forth the principal characteristics of the ____
Series heretofore issued by the Trust: the __________ Certificates, the
__________ Certificates and the __________ Certificates. For more specific
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<PAGE> 52
information with respect to any Series, any prospective investor should contact
MBNA at (800) 362-6225 or (302) 456-8588. MBNA will provide, without charge,
to any prospective purchaser of the Investor Certificates, a copy of the
Disclosure Documents for any previous publicly-issued Series.
Series ___________
<TABLE>
<S> <C>
Initial Investor Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Certificate Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current Investor Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
[Full Investor Interest] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
[Scheduled Termination of Funding Period] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Controlled [Amortization] [Accumulation] Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commencement of [Controlled] [Principal] Amortization Period . . . . . . . . . . . . . . . . . . . . . . . . . . . .
[Commencement of Controlled Accumulation Period] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Monthly Servicing Fee Percentage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
[Initial Available Credit Enhancement Amount] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected Series Termination Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
[Scheduled Payment Date] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Scheduled Series Termination Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Series Issuance Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ]
</TABLE>
[FUNDING PERIOD
During the Funding Period, the Pre-Funding Amount will be held in the
Pre-Funding Account. [Funds on deposit in the Pre-Funding Account will be
invested by the Trustee in certain Permitted Investments [pursuant to a
guaranteed rate agreement] [guaranteed investment contract]. Interest earnings
on the Pre-Funding Amount (net of investment losses and expenses) will be used
to pay interest on the [Class A] [Class B] Certificates during the Funding
Period.
During the Funding Period, funds on deposit in the Pre-Funding Account
will be withdrawn and paid to the Seller to the extent of any increases in the
Investor Interest. The Seller expects that the Investor Interest will equal
the Full Investor Interest by the __________ 199__ Monthly Period. In the
event that the Investor Interest does not for any reason equal the [Class A]
[Class B] Full Investor Interest by the end of the Funding Period, any amount
remaining in the Pre-Funding Account will be payable to the [Class A] [Class B]
Certificateholders [pro rata, on the basis of the ratio of the Class A Investor
Interest and the Class B Investor Interest, respectively, to the Investor
Interest as of the last day of the related Monthly Period] on the Distribution
Date on which the Funding Period ends. [The Early Termination Amount will be
payable by the Seller on the Distribution Date which is the end of the Funding
Period if any Pre-Funding Amount exists at the end of the Funding Period. The
Early Termination Amount will equal the excess, if any, discounted as described
below, of (i) the amount of interest that would have accrued on such
Pre-Funding Amount at the Class A Certificate Rate [and Class B Certificate
Rate] during the period commencing on and including such Distribution Date to,
but excluding, __________, over (ii) the amount of interest that would have
accrued on such Pre-Funding Amount over the same period at a per annum rate of
interest equal to the bond equivalent yield to maturity on the Determination
Date preceding such Distribution Date on [__________]. Such excess shall be
discounted to present value to such Distribution Date at the applicable yield
described in clause (ii).]]
INVESTOR PERCENTAGE AND SELLER PERCENTAGE
Pursuant to the Agreement, 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 Receivables
in Defaulted Accounts. The Servicer will make each allocation by reference to
the applicable Floating Investor Percentage, Fixed Investor Percentage and
Seller Percentage in each case.
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<PAGE> 53
Allocations to Certificateholders of collections of Finance Charge
Receivables and Receivables in Defaulted Accounts at any time and of
collections of Principal Receivables during the Revolving Period will be made
in accordance with the Floating Investor Percentage of such Receivables. 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 [plus the Collateral Interest] [plus the Enhancement Invested
Amount, if any] as of the last day of the preceding Monthly Period (or with
respect to the first Monthly Period, the Initial Investor Interest [plus the
initial Collateral Interest] as of the Closing Date) and the denominator of
which is the greater of (x) the aggregate amount of Principal Receivables as of
the close of business of 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 of the
day immediately preceding the Closing Date [, and with respect to the second
calendar month in the first Monthly Period, the aggregate amount of Principal
Receivables at the end of the last day of the first 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, Receivables in Defaulted Accounts 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 (x) above shall be (1) the aggregate amount of Principal Receivables
in the Trust at the end of the day 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 (2) 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] [provided further, however, that with respect to
any Monthly Period during the Funding Period in which the Investor Interest is
increased pursuant to the Series [199__-__] Supplement, the numerator above
will be (1) the Investor Interest [plus the Collateral Interest] at 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 day the Investor Interest is
increased and (2) the Investor Interest [plus the Collateral Interest] at the
end of the day on which the Investor Interest is increased for the period from
and including such day to and including the last day of such Monthly Period].
Such amounts so allocated to the Certificateholders will be further allocated
between the Class A Certificateholders and Class B Certificateholders during
the Revolving Period in accordance with the Class A Floating Percentage and the
Class B Floating Percentage, respectively, of such Receivables. The "Class A
Floating Percentage" means, with respect to any Monthly Period, the percentage
equivalent 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 [plus the Collateral Interest] as of the close of business on
such day. The "Class B Floating Percentage" means, with respect to any Monthly
Period, the percentage equivalent 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 and the denominator of which is
equal to the [Adjusted] Investor Interest [plus the Collateral Interest] as of
the close of business on such day. The "Collateral Interest Floating
Percentage" means, with respect to any Monthly Period, the percentage
equivalent 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 and the denominator of which is equal to the [Adjusted] Investor
Interest [plus Collateral Interest] on the last day of the preceding Monthly
Period.
Allocations to Certificateholders of collections of Principal
Receivables during the [Controlled Amortization Period] [Principal Amortization
Period] [Controlled Accumulation Period] [Rapid Accumulation Period] and Rapid
Amortization Period will be made in accordance with the Fixed Investor
Percentage with respect to such Receivables. 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 [plus the Collateral
Interest] as of 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 of the last day of the preceding Monthly Period and (y)
the sum of the numerators used to calculate the Investor Percentages for
allocations with respect to Principal
S-53
<PAGE> 54
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 (x) above shall be (1) the aggregate amount of Principal Receivables
in the Trust at the end of the day 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 (2) the aggregate
amount of Principal Receivables in the Trust at the beginning of the day on the
related Addition Date or Removal Date 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 to the Certificateholders [and the
Collateral Interest] will be further allocated between the Class A
Certificateholders and the Class B Certificateholders based on the Class A
Fixed Percentage and the Class B Fixed Percentage, respectively, of such
Receivables. The "Class A Fixed Percentage" means, with respect to any Monthly
Period, the percentage equivalent of a fraction, the numerator of which is
equal to the Class A Investor Interest as of the end of the Revolving Period,
and the denominator of which is equal to the Investor Interest [plus the
Collateral Interest] as of the end of the Revolving Period. The "Class B Fixed
Percentage" means, with respect to any Monthly Period, the percentage
equivalent of a fraction, the numerator of which is equal to the Class B
Investor Interest as of the end of the Revolving Period, and the denominator of
which is equal to the Investor Interest [plus the Collateral Interest] as of
the end of the Revolving Period. (The "Collateral Fixed Percentage" means,
with respect to any Monthly Period, the percentage equivalent of a fraction,
the numerator of which is equal to the Collateral Interest as of the end of the
Revolving Period, and the denominator of which is equal to the Investor
Interest plus the Collateral Interest as of the end of the Revolving Period.]
As used herein, (a) the term "Class A Investor Interest" for any date
means an amount equal to (i) the Class A Initial Investor Interest [, plus the
amount of any withdrawals from the Pre-Funding Account in connection with the
addition of Principal Receivables during the Funding Period], minus (ii) the
amount of principal payments made to Class A Certificateholders prior to such
date [(other than payments of principal to the Class A Certificateholders from
the Pre-Funding Account)] minus (iii) the excess, if any, of the aggregate
amount of Class A Investor Charge-Offs for all [[Distribution][Transfer] Dates]
[Monthly Periods] preceding such date over the aggregate amount of any
reimbursements of Class A Investor Charge-Offs for all
[[Distribution][Transfer] Dates] [Monthly Periods] preceding such date, (b) the
term "Class B Investor Interest" for any date means an amount equal to (i) the
Class B Initial Investor Interest, minus (ii) the amount of principal payments
made to Class B Certificateholders prior to such date [(other than principal
payments made from the proceeds of amounts received from Credit Enhancement for
the purpose of reimbursing previous reductions in the Class B Investor
Interest)] [(other than payments of principal to the Class B Certificateholders
from the Pre-Funding Account)], minus (iii) the excess, if any, of the
aggregate amount of Class B Investor Charge-Offs for all prior
[[Distribution][Transfer] Dates] [Monthly Periods] over the aggregate amount of
any reimbursement of Class B Investor Charge-Offs for all [Distribution]
[Transfer] Dates preceding such date, minus (iv) the aggregate amount of
Reallocated Principal Collections for all prior [[Distribution][Transfer]
Dates] [Monthly Periods] which have been used to fund the Required Amount with
respect to [such][the related] [[Distribution][Transfer] Dates] [Monthly
Periods], minus (v) 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 [[Distribution][Transfer] Dates] [Monthly Periods] as
described under "Class A Investor Charge-Offs," and plus (vi) the aggregate
amount of Unallocated Principal Collections and Excess Spread and certain other
amounts applied on all prior [[Distribution][Transfer] Dates] [Monthly Periods]
for the purpose of reimbursing amounts deducted pursuant to the foregoing
clauses (iii), (iv) and (v), [(c) the term "Class A Adjusted Investor Interest"
means an amount equal to the then current Class A Investor Interest, minus [the
funds on deposit in the Principal Funding Account on such day], (d) the term
"Class B Adjusted Investor Interest" means an amount equal to the then current
Class B Investor Interest, [minus the funds on deposit in the Principal Funding
Account on such day],] [and] [(c)] the term "Seller Percentage" means, in all
cases, an amount equal to 100% minus the applicable Investor Percentage and the
applicable investor percentages with respect to all Series of investor
certificates issued and outstanding [and [(c)] the term "Collateral Interest"
means an amount equal to (i) the initial Collateral Interest, minus (ii) the
amount of principal payments made to the CA Investors prior to such date, minus
(iii) the aggregate amount of Collateral Charge-Offs for all prior Distribution
Dates, minus (iv) the aggregate amount of Reallocated Principal Collections for
all prior Distribution Dates which have been used to fund the Class A Required
Amount or the
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<PAGE> 55
Class B Required Amount, minus (v) 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
Distribution Dates as described under "-- Defaulted Receivables; Investor
Charge-Offs," and plus (vi) the aggregate amount of Excess Finance Charge
Collections and certain other amounts allocated and available for purposes of
reimbursing amounts deducted pursuant to the foregoing clauses (iii), (iv) and
(v); provided, however, that the Collateral Interest may not be reduced below
zero.]
[PRINCIPAL FUNDING ACCOUNT
Pursuant to the Series 199__-__ Supplement, the Trustee will establish
and maintain the Principal Funding Account as a segregated trust account held
for the benefit of the Certificateholders. During the Controlled Accumulation
Period [and the Rapid Accumulation Period], the Servicer shall transfer
collections in respect of Principal Receivables [and Shared Principal
Collections from other Series, if any, allocated to the Series 199__-__
Certificates] [and certain other amounts] from the [Collection] [Principal]
Account to the Principal Funding Account as described under "-- Application of
Collections."
Funds on deposit in the Principal Funding Account will be invested in
Permitted Investments [pursuant to a guaranteed rate agreement] [guaranteed
investment contract] [with __________________.]] 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 on the Class A Certificates in an amount equal to, for each [Monthly]
[Interest] Period, [one-twelfth of the product of (a) the Class A Certificate
Rate and (b) the balance in the Principal Funding Account on the last day of
the Monthly Period preceding [such] [the related] Monthly Period] [the product
of (a) a fraction, the numerator of which is the actual number of days in the
related Interest Period and the denominator of which is 360, (b) the Class A
Certificate Rate in effect with respect to the related Interest Period and (c)
the balance in the Principal Funding Account as of the last day of the Monthly
Period preceding [such] [the related] Monthly Period] (the "Class A Covered
Amount"). [If, for any [Monthly] [Interest] Period, the Principal Funding
Investment Proceeds are less than the Class A Covered Amount, the amount of
such deficiency (the "Class A Principal Funding Investment Shortfall") shall be
paid from __________.]
[Principal Funding Investment Proceeds will also be used to pay
interest on the Class B Certificates in an amount equal to, for each [Monthly]
[Interest] Period, [the sum of (1)] [one-twelfth of the product of (a) the
Class B Certificate Rate and (b) the balance in the Principal Funding Account
on the last day of the Monthly Period preceding [such] [the related] Monthly
Period [the product of (a) a fraction, the numerator of which is the actual
number of days in the related Interest Period and the denominator of which is
360, (b) the Class B Certificate Rate in effect with respect to the related
Interest Period and (c) the balance in the Principal Funding Account as of the
last day of the Monthly Period preceding [such] [the related] Monthly Period]
(the "Class B Covered Amount"). [If, for any [Monthly] [Interest] Period, the
Principal Funding Investment Proceeds are less than the Class B Covered Amount,
the amount of such deficiency (the "Class B Principal Funding Investment
Shortfall") shall be paid from __________.]]
REALLOCATION OF CASH FLOWS[; CLASS B INVESTOR INTEREST]
On each Determination Date, the Servicer will determine the Required
Amount, which will be equal to the amount, if any, by which (a) the sum of (i)
Class A Monthly Interest for the following Distribution Date, (ii) any Class A
Monthly Interest previously due but not paid to the Class A Certificateholders
on a prior Distribution Date, (iii) the Class A Servicing Fee for the related
Monthly Period and any unpaid Class A Servicing Fee and (iv) the Class A
Investor Default Amount [for such Distribution Date] [as of the last day of the
related Monthly Period] exceeds (b) [the sum of (i)] the product of (A) the
Class A Floating Percentage, (B) the Floating Investor Percentage and (C) the
aggregate amount of collections of Finance Charge Receivables and annual
membership fees for the related Monthly Period, [and (ii) during the Controlled
Accumulation Period [the Rapid Accumulation Period], the Principal Funding
Investment Proceeds and the Principal Funding Investment Shortfall allocable to
the Class A Certificates and transferred to the Finance Charge Account on the
related Transfer Date] [and (iii) during the Pre-Funding Period, the Class A
Floating Percentage of net investment earnings in the Pre-
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Funding Account]. If the Required Amount is greater than zero, Excess Spread
will be used to pay the Required Amount with respect to such Distribution Date.
[If Excess Spread available with respect to such related Monthly Period is less
than the Required Amount, certain other available amounts, including amounts
available from [the Credit Enhancement] [and Shared Excess Finance Charge
Collections from other Series, if any, allocated to the [Class A]
Certificates], will then be used to fund the remaining Required Amount.] If
such Excess Spread [and other amounts] is insufficient to pay the Required
Amount, collections of Principal Receivables allocable to the [Collateral
Interest for the related Monthly Period (the "Reallocated Collateral Principal
Receivables")] Class B Certificates for the related Monthly Period [(the
"Reallocated Class B Principal Receivables" [and, together with the Reallocated
Collateral Principal Receivables, the [(]"Reallocated Principal Collections")
will then be used to fund the remaining Required Amount. If Reallocated
Principal Collections with respect to the related Monthly Period, together with
[Shared Excess Finance Charge Collections] [Credit Enhancement] are
insufficient to fund the remaining Required Amount for such related Monthly
Period, then a portion of the [Collateral Interest] Class B Investor Interest
equal to such insufficiency (but not in excess of the Class A Investor Default
Amount for the related Monthly Period) will be allocated to the Class A
Certificates to avoid a charge-off with respect to the Class A Certificates.
If the Class B Investor Interest [plus the Collateral Interest] is reduced to
zero, the Class A Investor Interest will be reduced if the Required Amount for
the related Monthly Period exceeds the sum of Excess Spread [Shared Excess
Finance Charge Collections] and Reallocated Principal Collections [Credit
Enhancement] for the related Monthly Period, but not in excess of the Class A
Investor Default Amount for the related Monthly Period, and the Class A
Certificateholders will bear directly the credit and other risks associated
with their undivided interest in the Trust.
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 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 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] [on the ____ business day of each
month] (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.
The Servicer will withdraw the following amounts on each Transfer Date
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 to the
holder of the Seller Certificate;
(b) an amount equal to the Floating Investor Percentage
of the aggregate amount of such deposits in respect of Finance Charge
Receivables will be deposited into the Finance Charge Account;
(c) during the Revolving Period, (i) an amount equal to
the product of (A) the Class A Floating Percentage, (B) the Floating
Investor Percentage and (C) of the aggregate amount of such deposits
in respect of Principal Receivables [will be paid to the holder of the
Seller Certificate] [will be held by the Seller for application, to
the extent necessary, as Shared Principal Collections on the related
Transfer Date], 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; and (ii) an amount equal to the product of
(A) the Class B Floating Percentage, (B) the Floating Investor
Percentage
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<PAGE> 57
and (C) the aggregate amount of such deposits in respect of Principal
Receivables will be deposited in the Principal Account to be applied
to the extent necessary as Reallocated Principal Collections, as
described herein, and any remaining amount [will be paid to the holder
of the Seller Certificate] [will be held by the Seller for
application, to the extent necessary, as Shared Principal Collections
on the related Transfer Date, subject to the limitations set forth in
clause (i) above;
[(d) during the [Controlled Amortization Period]
[Controlled Accumulation Period] [Rapid Accumulation Period], an
amount equal to the product of the Fixed Investor Percentage and the
aggregate amount of such collections in respect of Principal
Receivables (other than Reallocated Principal Collections) [up to,
during any Monthly Period, an amount equal to the sum of the
Controlled Amortization Amount and any existing Deficit Controlled
Amortization Amount (such sum, the "Controlled Distribution Amount")]
will be deposited in the Principal Account] [up to, during any Monthly
Period, the sum of the Controlled Accumulation Amount and the
Accumulation Shortfall (such sum, the "Controlled Deposit Amount")]
will be deposited in the Principal Account for transfer to the
Principal Funding Account and distribution to Certificateholders on
the Scheduled Payment Date[s]] and will be applied to make payments to
the Class A Certificateholders until the Class A Investor Interest has
been paid in full [and then to the Class B Certificateholders,
[without regard to the [Controlled Distribution Amount] [Controlled
Deposit Amount],] as described herein] [provided, however, that after
the date on which the amount of such collections on deposit in the
Principal Account equals the [Adjusted] Investor Interest [plus the
Collateral Interest], any such collections of Principal Receivables in
excess of such amount will be paid to the holder of the Seller
Certificate, subject to the limitations discussed below.] Any excess
of such amount over the [applicable] [Controlled Distribution Amount]
[Controlled Deposit Amount] will be [paid to the holder of the Seller
Certificate] [held by the Seller for application, to the extent
necessary, as Shared Principal Collections on the related Transfer
Date] [or applied to reduce the Collateral Interest to the Required
Collateral Interest]; provided that if on such day 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. [With respect to
the Class A and Class B Certificates, as applicable, if] [If] such
amount [, together with [Shared Principal Collections, if any,
allocated to the [Class A] [Class B] Certificates] [other amounts,] is
less than the Controlled Distribution Amount, then the excess of the
Controlled Distribution Amount over the Percentage Allocation will be
the Deficit Controlled Amortization Amount for the next Monthly
Period.] [With respect to the Class A and Class B Certificates, as
applicable, if] [If such amount [, together with [Shared Principal
Collections, if any, allocated to the [Class A] [Class B]
Certificates] [other amounts] is less than the Controlled Deposit
Amount, then such deficiency will be the Accumulation Shortfall for
the next Monthly Period.] [After the Class A Investor Interest has
been paid in full, the Fixed Investor Percentage of the collections of
Principal Receivables for any Monthly Period will be deposited in the
Principal Account.];
[(e) during the [Principal Amortization Period] Rapid
Amortization Period, an amount equal to the product of the Fixed
Investor Percentage and the aggregate amount of such deposits in
respect of Principal Receivables up to the aggregate amount of the
Investor Interest will be deposited in the Principal Account];
[(f) Shared Principal Collections will be allocated to other
outstanding Series pro rata based on the Principal Shortfall with
respect to such Series, [and any remaining Shared Principal
Collections will be paid to the holder of the Seller Certificate until
the Seller Interest is reduced to zero, and the excess will be
deposited in the Principal Account]. "Principal Shortfall" means (a)
with respect to any Series in a controlled amortization period or
controlled accumulation period, any shortfall in collections of
Principal Receivables during a Monthly Period allocable to such
Series, based on the investor percentage for collections of Principal
Receivables applicable to such Series, with respect to the controlled
distribution amount or controlled deposit amount for such Series, and
(b) with respect to any Series which is in its amortization period but
not subject to any controlled distribution amount any shortfall in
collection of Principal Receivables during a Monthly Period allocable
to such Series with respect to the investor interest on such Series.]]
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<PAGE> 58
[Any amounts collected in respect of Principal Receivables [and any
Shared Principal Collections] not paid to the holder of the Seller Certificate
because of the limitations described above ("Unallocated Principal
Collections"), together with any adjustment payments, as described below, will,
during the Revolving Period, be paid to, or held in the Principal Account for
payment to the holder of the Seller Certificate 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 Class A Certificateholders on the next
Distribution Date until the Class A Certificates are paid in full, and then for
distribution to Class B Certificateholders [deposited in the Principal Funding
Account on the related Transfer Date] [or used to pay principal of other Series
of certificates].]
PAYMENT OF FEES, INTEREST AND OTHER ITEMS. On each [Transfer Date]
[preceding a Distribution Date on which interest is to be paid on the
Certificates], the Trustee, acting pursuant to the Servicer's instructions,
will withdraw all amounts on deposit in the Finance Charge Account and make the
following payments and deposits in the following order:
[(a) An amount equal to the Class A Floating Percentage of
such amounts [, together with other Available Funds allocable to the
Class A Certificates and transferred to the Finance Charge Account on
the related Transfer Date,] will be distributed in the following order
of priority:
[(i) an amount equal to one-_______ of the product
of the Class A Certificate Rate and the Class A Investor
Interest [plus the Pre-Funding Amount allocable to the Class A
Certificates] as of the [preceding Record Date] [[____] [last]
day of the prior Monthly Period] (or in the case of the first
Distribution Date, the Class A Initial Investor Interest [plus
the Pre-Funding Amount allocable to the Class A Certificates])
("Class A Monthly Interest"), plus any Class A Monthly
Interest previously due but not paid on the Distribution Date
[plus interest on any overdue interest at the Class A
Certificate Rate plus 2.00% per annum] will be deposited in
the Distribution Account for distribution to Class A
Certificateholders on the next succeeding Distribution Date;]
[(ii) an amount equal to [the product of (i)(A) the
actual number of days in the related Interest Period divided
by 360, times (B) the Class A Certificate Rate for the related
Interest Period and (ii) the Class A Investor Interest [plus
the Pre-Funding Amount allocable to the Class A Certificates]
as of the [preceding Record Date] [[____][last] day of the
prior Monthly Period] (or in the case of the first
Distribution Date, the Class A Initial Investor Interest [plus
the Pre-Funding Amount allocable to the Class A Certificates])
("Class A Monthly Interest"), plus any overdue Class A Monthly
Interest [plus interest on any overdue interest at the Class A
Certificate Rate plus 2% per annum] will be deposited in the
Distribution Account for distribution to Class A
Certificateholders on the next succeeding Distribution Date;]
(iii) an amount equal to the Class A Servicing Fee
for [each] [the] preceding Monthly Period and any accrued and
unpaid Class A Servicing Fees will be [paid] [held for payment
on the next Distribution Date] to the Servicer;
(iv) an amount equal to the Class A Investor
Default Amount, if any, for [each] [the] preceding Monthly
Period will be treated as a collection of Principal
Receivables and (A) during the Revolving Period, will be
[paid] [held for payment on the next Distribution Date] to the
holder of the Seller Certificate up to the amount of the
Seller Interest, during the Revolving Period] [treated as
Shared Principal Collections] and (B) during an Amortization
Period [Accumulation Period], will be [available for payment
to] [accumulated for the benefit of] the Class A
Certificateholders; and
(v) the balance, if any, on deposit in the
Finance Charge Account, after giving effect to the above
payments, will constitute a portion of Excess Spread and will
be allocated and distributed as described under "Excess
Spread."]
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<PAGE> 59
[(b) An amount equal to the Class B Floating Percentage of
such amounts[, together with other Available Funds allocable to the
Class B Certificates and transferred to the Finance Charge Account on
the related Transfer Date,] will be distributed in the following order
of priority:
[(i) an amount equal to one-_______ of the product
of the Class B Certificate Rate and the Class B Investor
Interest [plus the Pre-Funding Amount allocable to the Class B
Certificates] as of the [preceding Record Date] [[____][last]
day of the prior Monthly Period] (or in the case of the first
Distribution Date, the Class B Initial Investor Interest [plus
the Pre-Funding Amount allocable to the Class B Certificates])
(the "Class B Monthly Interest") for such Distribution Date,
plus the amount of any Class B Monthly Interest previously due
but not paid on the Distribution Date, plus any additional
interest with respect to interest amounts that were due but
not paid on a prior Distribution Date, will be deposited into
the Distribution Account for distribution to Class B
Certificateholders on the next succeeding Distribution Date;]
[(i) an amount equal to [the product of (i)(A) the
actual number of days in the related Interest Period divided
by 360, times (B) the Class B Certificate Rate for the related
Interest Period and (ii) the Class B Investor Interest [plus
the Pre-Funding Amount allocable to the Class B Certificates]
as of the preceding [Record Date] [[____] [last] of the prior
Monthly Period] (or in the case of the first Distribution
Date, the Class B Initial Investor Interest [plus the
Pre-Funding Amount allocable to the Class B Certificates])
(the "Class B Monthly Interest") for such Distribution Date,
plus the amount of any overdue Class B Monthly Interest, plus
any additional interest with respect to interest amounts that
were due but not paid on a prior Distribution Date, will be
deposited into the Distribution Account for distribution to
Class B Certificateholders on the next succeeding Distribution
Date;]
(ii) an amount equal to the Class B Servicing Fee
for [each][the] related Monthly Period and any accrued and
unpaid Class B Servicing Fees will be paid [held for payment
on the next Distribution Date] 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."
"Excess Spread" shall mean, with respect to any Distribution Date, an
amount equal to the sum of the amounts described in clause (a)(iv) above and
clause (b)(iii) above.
If the amount on deposit in the Finance Charge Account with respect to
the allocation of Finance Charge Receivables allocated to the Class A
Certificates during the preceding Monthly Period[s] and other Available Funds
allocated to the Class A Certificates transferred to the Finance Charge Account
on the related Transfer Date are insufficient to pay [Class A Monthly Interest
for the related Monthly Period] [the aggregate of the Class A Monthly Interest
for each related Interest Period] and accrued and unpaid Class A Monthly
Interest from prior [Interest] [Monthly] Periods preceding the Distribution
Date, [the Class A Investor Servicing Fee], accrued and unpaid Class A Investor
Servicing Fees from prior [Monthly] [Interest] Periods and the Class A Investor
Default Amount for the preceding Monthly Period[s], the Trustee will apply
[Excess Spread] [Shared Excess Finance Charge Collections allocated to the
Series 199__-__ Certificates] [Reallocated Principal Collections] [and, to the
extent necessary, obtain moneys from [Credit Enhancement, up to the Available
Credit Enhancement Amount], and deposit such amounts into the Finance Charge
Account on the Transfer Date to make such payments in the order and manner set
forth above.
[If the amount on deposit in the Finance Charge Account with respect
to the allocations of Finance Charge Receivables and annual membership fees
allocated to the Class B Certificates during the preceding Monthly Period and
other Available Funds allocated to the Class B Certificates transferred to the
Finance Charge Account on the related Transfer Date are insufficient to pay
[Class B Monthly Interest for the related Monthly Period] [the aggregate of the
Class B Monthly Interest for each related Interest Period] and accrued and
unpaid Class B Monthly Interest from prior [Monthly] [Interest] Periods
preceding the Distribution Date, [the Class B Investor
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<PAGE> 60
Servicing Fee], accrued and unpaid Class B Investor Servicing Fees from prior
[Monthly] [Interest] Periods and the Class B Investor Default Amount for the
preceding Monthly Period[s], the Trustee will apply [Excess Spread] [Shared
Excess Finance Charge Collections allocated to the Series 199__-__
Certificates] [and, to the extent necessary, obtain moneys from Credit
Enhancement, up to the Available Credit Enhancement Amount,] and deposit such
amounts into the Finance Charge Account on the Transfer Date to make such
payments in the order and manner set forth above.]
[If, on the Distribution Date which is the last day of the Funding
Period, remaining Pre-Funding Amount is scheduled to be paid as principal on
the Certificates, the Trustee shall [withdraw] [obtain] moneys from
[__________] to pay the Early Termination Amount. See "-- Funding Period."]
[Moneys in the Distribution Account will be paid to the
Certificateholders on each Distribution Date in the aggregate amount of the
deposit therein for each Monthly Period related to such Distribution Date.]
EXCESS SPREAD
On each [Transfer] [Distribution] Date, the Servicer will apply or
cause the Trustee to apply Excess Spread with respect to [the] [each] related
Monthly Period since the previous Distribution Date, to make the following
distributions in the following priority:
(a) an amount equal to the Required Amount, if any, with
respect to [the] [each] related Monthly Period will be used to fund
the Required Amount;
(b) an amount equal to the aggregate amount of Class A
Investor Charge-Offs for [the] [each] related Monthly Period, which
have not been previously reimbursed (after giving effect to the
allocation on such [Transfer] [Distribution] Date of certain other
amounts applied for that purpose) will, during the Rapid Amortization
Period, be included in the funds available to make principal payments
with respect to the Class A Certificateholders [until the Class A
Investor Interest is paid in full] and [then] to the Class B
Certificateholders;
(c) an amount equal to the amount of interest which has
accrued for [the] [each] related [Interest] [Monthly] Period with
respect to the outstanding aggregate principal amount of the Class B
Certificates at the [applicable] Class B Certificate Rate but has not
been paid to the Class B Certificateholders either on such
Distribution Date or on a prior Distribution Date [on which it was due
and payable] will be deposited into the Distribution Account for
payment to the Class B Certificateholders;
(d) an amount equal to the Class B Servicing Fee due but
not distributed to the Servicer for such [Distribution] [Transfer]
Date;
(e) an amount equal to the aggregate Class B Investor
Default Amount, if any, for such [[Distribution] [Transfer] Date for
[the] [each] related Monthly Period] will be (A) distributed to the
Seller on Distribution Dates with respect to the Revolving Period,
provided that if the Seller Interest (determined as of [such
Distribution Date] [Transfer Date] [the ____ day of the month
following such Monthly Period] after giving effect to any Principal
Receivables transferred to the Trust on such date) is reduced to zero,
the excess will be considered as Unallocated Principal Collections,
deposited in the Principal Account and treated as described above
under "-- Application of Collections," and (B) on Distribution Dates
during an Amortization Period [Accumulation Period] [interest and]
[principal] will be included in the funds available to [make]
[accumulate] principal payments with respect to the Class A
Certificateholders [until the Class A Investor Interest is paid in
full] and [then] to the Class B Certificateholders;
(f) an amount equal to the aggregate amount by which the
Class B Investor Interest has been reduced below the initial Class B
Investor Interest (due to Investor Charge-Offs and Reallocated
Principal
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Collections applied to the Class A Certificates and any insufficiency
of Excess Spread, Reallocated Principal Collections [and other
amounts] to cover the Class A Investor Default Amount) [for each
related Monthly Period] (but not in excess of the aggregate amount of
such reductions which have not been previously reimbursed) will be
distributed to the Seller on Distribution Dates with respect to the
Revolving Period, provided that if the Seller Interest (determined as
of [such Distribution Date] [Transfer Date] [the ____ day of the month
following such Monthly Period] after giving effect to any new
Receivables transferred to the Trust on such date) is reduced to zero,
the excess will be considered Unallocated Principal Collections,
deposited in the Principal Account and treated as described above
under "-- Application of Collections," and on Distribution Dates with
respect to an Amortization Period [Accumulation Period] will be
included in the funds available to [make] [accumulate] principal
payments with respect to the Class A Certificateholders [until the
Class A Investor Interest is paid in full] and [then] to the Class B
Certificateholders; and
[(g) the balance, if any, [will be applied as Shared
Excess Finance Charge Collections for payment to other Series as
described herein under "-- Shared Excess Finance Charge Collections"
and any remaining amount] will be paid to the [Credit Enhancement
Provider] in accordance with the provisions of the [Series 199__-__
Supplement] Agreement].]
PAYMENTS OF PRINCIPAL. [On the Transfer Date occurring in the month
following the month in which an Amortization Period begins and thereafter on
each Transfer Date [preceding Distribution Date on which principal is to be
paid], the Trustee, acting in accordance with instructions from the Servicer,
will withdraw all amounts deposited into the Principal Account in respect of
collections processed during the related Monthly Period and then on deposit in
the Principal Account and allocated to the Certificates and deposit such
amounts in the Distribution Account for distribution to the Certificateholders
on the next succeeding Distribution Date. On each such Distribution Date, the
Class A Certificateholders will be entitled to receive the principal payment
due the Class A Certificateholders [for each related Monthly Period since the
previous Distribution Date] and any principal payment previously due but not
distributed on a prior Distribution Date until the Class A Investor Interest is
paid in full. The Class B Certificateholders will be entitled to receive
principal payments, [but only after the Class A Investor Interest has been paid
in full,] in an amount equal to, on each Distribution Date, the principal
payment due the Class B Certificateholders [for each related Monthly Period
since the previous Distribution] and any principal payment previously due but
not distributed on a prior Distribution Date until the Class B Investor
Interest has been paid in full.]
[On the Transfer Date before each Scheduled Payment Date, the Trustee,
acting in accordance with instructions from the Servicer, will withdraw all
amounts on deposit in the Principal Funding Account (following any required
transfers on such date from the Principal Account to the Principal Funding
Account of the Controlled Deposit Amount) and deposit such amounts in the
Distribution Account for distribution to [Class A] [Class B] Certificateholders
on the next succeeding Distribution Date] [as follows: (i) an amount equal to
the monthly principal for the related Distribution Date will be distributed to
the Certificateholders and (ii) an amount equal to the [Enhancement Invested
Amount, if any,] [Collateral Interest] will be distributed to the [Cash
Collateral Depositor] [CA Investors] for application in accordance with the
Loan Agreement; provided, however, that principal will not be payable to the
[Cash Depositor] [CA Investors] with respect to the [Enhancement Invested
Amount, if any,] [Collateral Interest] until the Certificates have been paid in
full]. [On the Transfer Date before each Scheduled Payment Date, the Trustee,
acting in accordance with instructions from the Servicer, will withdraw all
amounts on deposit in the Principal Funding Account (following any required
transfers on such date from the Principal Account to the Principal Funding
Account of the Controlled Deposit Amount) and deposit such amounts in the
Distribution Account for distribution to the Class A Certificateholders [until
the Class A Investor Interest is paid in full] [, and then the Class B
Certificateholders until the Class B Investor Interest is paid in full] [but
only after the Class A Investor Interest has been paid in full.]
[If amounts in the Principal Account [Principal Funding Account] in
respect of collections of Principal Receivables during the preceding Monthly
Period are insufficient on any Transfer Date to [pay] [accumulate for
distribution on the next Distribution Date] required [Class A] [Class B]
principal payments for the related Monthly Period, the Trustee shall obtain the
amount of such deficiency from [Shared Principal Collections] [other amounts]
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[Credit Enhancement up to the available Credit Enhancement Amount] and deposit
such amount into the [Principal] [Principal Funding] [Distribution] Account on
the Transfer Date to [make] [accumulate] such payments as set forth above.]
[The [CA Investors] [holder of the Enhancement Invested Amount] will
receive principal payments after the Investor Interest has been paid in full
[and, to the extent that the Collateral Interest exceeds the Required
Collateral Interest on any Distribution Date, the CA Investors will receive
principal payments prior to the payment in full of the Investor Interest].]
[SHARED EXCESS FINANCE CHARGE COLLECTIONS
Excess Finance Charge Collections with respect to any Series in Group
____ during any Monthly Period will be combined and applied to cover any
shortfalls with respect to amounts payable from collections of Finance Charge
Receivables [and other amounts] allocable to the [Class A] [Class B]
Certificates [and [specified] other Series then outstanding, pro rata] based
upon the amount of the shortfall, if any, with respect to [each] such other
Series (as combined, "Shared Excess Finance Charge Collections"). Any Shared
Excess Finance Charge Collections remaining after covering shortfalls with
respect to the [Class A] [Class B] Certificates [and [specified] outstanding
Series will be paid to the [Seller].]
"Excess Finance Charge Collections" with respect to a Series for any
Monthly Period will equal the excess of collections of Finance Charge
Receivables and annual membership fees allocated to the Investor Interest [and
other amounts] over the sum of (i) current Monthly Interest, any overdue
Monthly Interest and any Additional Interest on the Certificates, (ii) the
Investor Servicing Fee and any accrued and unpaid Investor Servicing Fees,
(iii) the Investor Default Amount, [and] (iv) unreimbursed Investor Charge-Offs
[and (v) certain unreimbursed reductions in the Enhancement Invested Amount, if
any]. Excess Finance Charge Collection with respect to the Series 199__-__
Certificates will become Shared Excess Finance Charge Collections and applied
as described herein.]
[SHARED PRINCIPAL COLLECTIONS
To the extent that collections of Principal Receivables [and other
available amounts] allocated to the Investor Interest with respect to the
Certificates are not needed to make payments to the Certificates [or required
to be deposited in the Principal Funding Account], they will be applied to
cover principal payments due to or for the benefit of certificateholders of
another Series. Any such reallocation will not result in a reduction in the
Investor Interest with respect to the Certificates. In addition, collections
of Principal Receivables and certain other amounts otherwise allocable to other
Series, 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 Certificates.]
[REQUIRED COLLATERAL AMOUNT
The "Required Collateral Interest" with respect to any [Transfer]
[Distribution] Date for the Certificates means (i) $__________ initially and
(ii) thereafter an amount equal to the greater of (a) ____% of the sum of the
Investor Interest plus the Collateral Interest and (b) ____% of the Investor
Interest, in each case as of such [Transfer] [Distribution] Date after taking
into account distributions made on such date; provided, however, (1) that if
certain reductions in the Collateral Interest are made or if a Pay Out Event
occurs, the Required Collateral Interest for such [Transfer] [Distribution]
Date shall equal the Required Collateral Interest for the [Transfer]
[Distribution] Date immediately preceding the occurrence of such withdrawal,
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] [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 any action will
not result in any Rating Agency reducing or withdrawing its then
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existing rating of the investor certificates of any outstanding Series or class
with respect to which it is a Rating Agency.
[With respect to any [Transfer] [Distribution] Date, if the Collateral
Interest is less than the Required Collateral Interest, certain Excess Finance
Charge Collections, if available, will be allocated to increase the Collateral
Interest to the extent of such shortfall. Any of such Excess Finance Charge
Collections not required to be so allocated with respect to any [Transfer]
[Distribution] Date will be applied in accordance with the Loan Agreement.]]
[THE CASH COLLATERAL ACCOUNT
The Certificates will have the benefit of the Cash Collateral Account,
which will be held with the Trustee in the name of the Trust for the benefit of
the Certificateholders. Funds on deposit in the Cash Collateral Account will
be invested in certain short-term investments having a rating of at least A-1+
or P-1 (or AAAm or Aaa, as the case may be) from the applicable Rating Agency
and further described in the related Series Supplement.
The Cash Collateral Account will have an initial Available Cash
Collateral Amount of $__________, to be funded from the proceeds of a loan to
be made to the Trust pursuant to the Loan Agreement by one or more financial
institutions to be selected by MBNA (such financial institution or
institutions, the "Cash Collateral Depositor"). The loan will be repaid
pursuant to the Loan Agreement.
On each Determination Date, the Servicer will determine the amounts,
if any, required to be withdrawn from the Cash Collateral Account and deposited
into the Finance Charge Account, up to the Available Cash Collateral Amount, as
described above in "-- Application of Collections -- Payment of Fees, Interest
and Other Items" on the related Transfer Date.
On each Transfer Date, prior to an Economic Pay Out Distribution Date,
the Trustee, acting pursuant to the Servicer's instructions, will deposit into
the Cash Collateral Account the portion of the Excess Finance Charge
Collections, if any, necessary to increase the amount of funds on deposit in
the Cash Collateral Account to the Required Cash Collateral Amount. The
remaining Excess Finance Charge Collections, if any, will be applied in
accordance with the terms of the Loan Agreement. On each Transfer Date, the
Trustee, acting pursuant to the Servicer's instructions, will withdraw from the
Cash Collateral Account an amount equal to the amount by which the amount on
deposit in the Cash Collateral Account exceeds the Required Cash Collateral
Amount and apply such amounts in accordance with the terms of the Loan
Agreement.
The Required Cash Collateral Amount with respect to any Transfer Date
will equal the product of (i) the [Adjusted] Investor Interest as of the last
day of the Monthly Period preceding such date and (ii) ____%, but not less than
$__________, provided, however, that if certain withdrawals are made from the
Cash Collateral Account during the [Controlled Amortization Period] [Controlled
Accumulation Period] [Principal Amortization Period] or if a Pay Out Event
occurs, the Required Cash Collateral Amount for each Transfer Date thereafter
will equal the Required Cash Collateral Amount with respect to the Transfer
Date immediately preceding such withdrawal or such Pay Out Event.
On the Transfer Date preceding the Economic Pay Out Distribution Date,
an amount equal to the Economic Pay Out Amount will be withdrawn from the Cash
Collateral Account and deposited into the Principal Account for distribution to
the Certificateholders as a payment of principal on such Economic Pay Out
Distribution Date. The "Economic Pay Out Amount" will equal the lesser of (i)
the Available Cash Collateral Amount (after giving effect to any other
withdrawals from the Cash Collateral Account on the Transfer Date prior to such
Economic Pay Out Distribution Date) and (ii) the unpaid principal amount of the
Certificates after giving effect to any payment of principal to be made on the
related Distribution Date.
Following the withdrawal of the Economic Pay Out Amount from the Cash
Collateral Account, the Cash Collateral Account with be terminated. No further
deposits will be made into the Cash Collateral Account and,
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on subsequent Distribution Dates, any amounts that otherwise would have been
deposited into the Cash Collateral Account will instead be applied in
accordance with the terms of the Loan Agreement. Upon the termination of the
Cash Collateral Account and the payment of the Economic Pay Out Amount to the
Certificateholders, the Investor Interest will be reduced by such amount. For
subsequent Distribution Dates, the Investor Percentage with respect to Finance
Charge Receivables will be determined using a numerator equal to the Investor
Interest plus the Enhancement Invested Amount. See "-- Investor Percentage and
Seller Percentage." The term "Enhancement Invested Amount" for any date means
an amount equal to (a) the Economic Pay Out Amount minus (b) an amount equal to
the aggregate amount of principal payments made with respect to such
Enhancement Invested Amount, minus (c) the aggregate amount by which the
Enhancement Invested Amount has been reduced to fund the Investor Default
Amount on all prior Distribution Dates (as described under "-- Defaulted
Accounts; Rebates and Fraudulent Charges; Investor Charge Offs"), and plus (d)
the amount of collections of Finance Charge Receivables applied on all prior
Distribution Dates for the purpose of reimbursing all amounts deducted from the
Enhancement Invested Amount pursuant to the foregoing clause (c). In the
absence of an Economic Pay Out Event and a related withdrawal from the Cash
Collateral Account of the Economic Pay Out Amount, the Enhancement Invested
Amount will be zero.
The amount available in the Cash Collateral Account is limited and
will be reduced by withdrawals made therefrom that are not reimbursed by
deposits made to the Cash Collateral Account from Excess Finance Charge
Collections. If the Available Cash Collateral Amount is reduced to zero,
[including as a result of the payment of an Economic Pay Out Amount, or,
following the occurrence of an Economic Pay Out Event, if the Enhancement
Invested Amount is also reduced to zero,] Certificateholders will bear directly
the credit and other risks associated with their respective undivided interests
in the Trust. See "-- Defaulted Receivables; Rebates and Fraudulent Charges;
Investor Charge-Offs."]
[CREDIT ENHANCEMENT
The [Class ____] Certificates [and the Class __ Certificates] will
have the benefit of the [Letter of Credit] [Cash Collateral Guaranty]
[Collateral Interest] [Surety Bond] [Insurance Policy] [Spread Account]
[Reserve Account] [issued by _______________ (the "Credit Enhancement
Provider")] in the initial amount of $____________.
With respect to any Distribution Date, the amount available to be
drawn under the [Letter of Credit] [Cash Collateral Guaranty] [Collateral
Interest] [Surety Bond] [Insurance Policy] [Spread Account] [Reserve Account]
(the "Available Credit Enhancement Amount") will equal [_______________].
[If the amount that will be allocated and available for the payment of
interest on the [Class A] [and] [Class B] Certificates on any [Distribution
Date] is less than the [Class A] [and] [Class B] Monthly Interest, then a
withdrawal will be made on the [Credit Enhancement] with respect to such
[Distribution Date] to the extent of such deficiency (but not more than the
Available Credit Enhancement Amount) and the proceeds thereof will be
distributed to the [Class A] [and] [Class B] Certificateholders].
If [(i) the amount allocated and available to pay scheduled principal
of the [Class A] [and] [Class B] Certificates is less than principal scheduled
to be paid on the first day that principal is payable on the [Class A] [and]
[Class B] Certificates or on any subsequent [Distribution Date] or (ii)] the
unpaid principal amount of the Class B Certificate exceeds the Class B Investor
Interest on the first day that principal is payable on the Class B Certificates
or on any subsequent [Distribution] Date, then a withdrawal will be made under
the [Credit Enhancement] with respect to such date to pay principal with
respect to the [Class A] [and] [Class B] Certificates in an amount equal to the
lesser of (i) the Available Credit Enhancement Amount for such date (after
giving effect to any other drawings with respect to such date) and (ii) such
excess.
[In the event of a sale of the Receivables and an early termination of
the Trust due to an event of insolvency or the breach of certain
representations and warranties, a repurchase of the Receivables in connection
with a Servicer Default or a sale of the Receivables in connection with the
Series [199__-__] Termination Date, any Available Credit Enhancement Amount
(after giving effect to any other withdrawals on such date) will be
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withdrawn and distributed to the Class B Certificateholders to the extent that,
after giving effect to the prior payment in full of the Class A Certificates
and the distribution to the Class B Certificateholders of the remaining
proceeds from such sale or repurchase, the unpaid principal amount of the Class
B Certificates exceeds the Class B Investor Interest.]
[On each [Distribution Date], one or more withdrawals will be made
from the [Credit Enhancement] in an amount up to the Available Credit
Enhancement Amount on such [Distribution Date], to fund the following amounts
in the following priority:
[(a) the excess, if any, of the Required Amount with respect
to such Distribution Date over the amount of Excess Spread
[Reallocated Principal Collections] [and Shared Excess Finance Charge
Collections] [and other amounts] allocated and available to fund such
Required Amount will be [paid to the Class A Certificateholders], up
to the portion of the Required Amount attributable to Class A Monthly
Interest, [and the remainder will be allocated in the same manner as
collections of Principal Receivables allocable to the Class A
Certificates];]
[(b) the excess, if any, of the amount that will be allocated
and available for the payment of interest on the Class B Certificates
on such [Distribution Date] over the Class B Monthly Interest on such
[Distribution Date] will be paid to the Class B Certificateholders;
and]
[(c) the excess, if any, of the Class B Investor Default
Amount over the amount of Excess Spread [and Shared Excess Finance
Charge Collections] [and other amounts] allocated and available to
fund such Class B Investor Default Amount will be allocated in the
same manner as collections of Principal Receivables allocable to the
Class B Certificates on such [Distribution Date].]
[CREDIT ENHANCEMENT PROVIDER]
[Description of and financial information with respect to the Credit
Enhancement Provider to be provided by Credit Enhancement Provider]
DEFAULTED RECEIVABLES; REBATES AND FRAUDULENT CHARGES; INVESTOR CHARGE-OFFS
On the [_______] business day preceding each Transfer Date (the
"Determination Date"), the Servicer will calculate the Investor Default Amount
for the preceding Monthly Period. The term "Investor Default Amount" means,
for any Monthly Period, the aggregate amount of the Floating 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. A portion of the Investor Default
Amount will be allocated to the Class A Certificateholders (the "Class A
Investor Default Amount") [on each Distribution Date] [for each Monthly Period]
in an amount equal to the product of the Class A Floating Percentage,
applicable during [the related] [such] Monthly Period and the Investor Default
Amount for [the related] [such] Monthly Period. A portion of the Investor
Default Amount will be allocated to the Class B Certificateholders (the "Class
B Investor Default Amount") in an amount equal to the product of the Class B
Floating Percentage, applicable during [the related] [such] Monthly Period and
the Investor Default Amount for [the related] [such] Monthly Period. An amount
equal to the Investor Default Amount for each Monthly Period will be paid from
amounts on deposit in the Finance Charge Account allocable to the Class A
Certificates, [Excess Spread] [Reallocated Principal Collections] [Shared
Excess Finance Charge Collections] or [from amounts available under Credit
Enhancement] and applied as described above in "-- Application of Collections
- -- Payment of Fees, Interest and Other Items."
[On each [Distribution] [Transfer] Date, if the Required Amount for
[the related Monthly Period] [such [Distribution] [Transfer] Date] exceeds the
sum of Excess Spread [Shared Excess Finance Charge Collections] [Reallocated
Principal Collections] [Credit Enhancement] [and other amounts] allocated and
applied to the Class A Certificates], the Class B Investor Interest will be
reduced by the amount of such excess, but not more than
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the Class A Investor Default Amount for such [Distribution][Transfer] Date. 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 [Distribution] [Transfer] Date (a
"Class A Investor Charge-Off"), which will have the effect of slowing or
reducing the return of principal to the Class A Certificateholders. If the
Class A Investor Interest has been reduced by the amount of any Class A
Investor Charge-Offs, it will be reimbursed on any [Distribution] [Transfer]
Date (but not by an amount in excess of the aggregate Class A Investor
Charge-Offs) by [the sum of (i) the aggregate amount of any Unallocated
Principal Collections for such [Distribution] [Transfer] Date and (ii)] the
amount of Excess Spread [and Shared Excess Finance Charge Collections]
[Reallocated Principal Collections] [and other amounts] allocated and available
for such purpose as described under "Excess Spread."]
[If on any [Distribution] [Transfer] Date, the Class B Investor
Default Amount, for such [Distribution] [Transfer] Date exceeds the amount of
Excess Spread [and Shared Excess Finance Charge Collections] [and other
amounts] which are allocated and available to fund such amount, then the Class
B Investor Interest shall be reduced by the aggregate amount of such excess,
but not more than the Class B Investor Default Amount for such [Distribution]
[Transfer] Date (a "Class B Investor Charge-Off"). The Class B Investor
Interest will also be reduced by the amount of Reallocated Principal
Collections. 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 Distribution Date by the [the sum of (i) during an Amortization Period
[Accumulation Period], the aggregate amount of any Unallocated Principal
Collections for [each monthly Period relating to] such Distribution Date (but
only to the extent such amounts are not required to reimburse Class A Investor
Charge-Offs, as described above), and (ii) the amount of Excess Spread [and
Shared Excess Finance Charge Collections] [and other amounts] allocated and
available for the purpose as described under "Excess Spread."]
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.
PAY OUT EVENTS
As described above, the Revolving Period will continue through
____________, _____, 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 within
the applicable grace period which will 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
[199__-__] Supplement, which failure has a material adverse effect on
the Certificateholders and which continues unremedied for a period of
[60] days after written notice and continues to materially and
adversely affect the interests of the Certificateholders for such
period;
(b) any representation or warranty made by the Seller in
the Agreement 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 and which continues to be incorrect in
any material respect for a period of [60] days after written notice
and as a result of which the interests of the Certificateholders are
materially and adversely affected 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;
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(c) certain events of insolvency, conservatorship or
receivership relating to the Seller;
[(d) any reduction of the [average of the] Portfolio
Yields for any [three] [consecutive] Monthly Periods to a rate which
is less than the [average of the] Base Rate[s] [for such period] [(an
"Economic Pay Out Event")];]
(e) the Trust becomes an "investment company" within the
meaning of the Investment Company Act of 1940, as amended;
(f) a failure by the Seller to convey Receivables arising
under Additional Accounts to the Trust when required by the Agreement;
(g) any Servicer Default occurs which would have a
material adverse effect on the Certificateholders;
[(h) the Available Credit Enhancement Amount is less
than ____% of the Investor Interest;]
[(i) on any Determination Date, the Class B Investor
Interest on the related Distribution Date will be less than
$__________;]
[(j) the amount on deposit in the Principal Funding
Account on each Scheduled Payment Date is insufficient to pay the
scheduled principal amount; or]
[(k) other events.]
In the case of any event described in clause (a), (b) or (g) 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 evidencing undivided interests aggregating more 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 (c) or (e), a Pay Out Event with
respect to all Series then outstanding, and in the case of any event described
in clause [(d)], (f), (h) [(i)] [or (j)], 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][, if so specified herein, the Rapid Accumulation
Period] will commence. In the event the Rapid Amortization Period commences,
distributions of principal to the Certificateholders will begin on the first
Distribution Date following the month in which such Pay Out Event occurred.
[In the event the Rapid Accumulation Period commences, Principal Collections
will be accumulated and held for the Certificateholders] unless the [Controlled
Amortization Period] [Controlled Accumulation Period] [Principal Amortization
Period] previously commenced. [Notwithstanding the prior occurrence of any Pay
Out Event other than an Economic Pay Out Event, in the event that an Economic
Pay Out Event occurs, the Economic Pay Out Amount will be distributed as a
payment of principal to Certificateholders on the Economic Pay Out Distribution
Date.] If, because of the occurrence of a Pay Out Event, the Rapid
Amortization Period begins earlier than ____________, _____, the scheduled
commencement of the [Controlled Amortization Period] [Controlled Accumulation
Period] [Principal Amortization Period], Certificateholders will 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 consequence of an insolvency,
conservatorship or receivership of the Seller.
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SERVICING COMPENSATION AND PAYMENT OF EXPENSES
The Servicer's compensation for its servicing activities and
reimbursement for its expenses will take the form of the payment to it of a
[monthly] servicing fee in an amount equal to the sum of one-_______ of the
product of [____% per annum] and the average amount of the Principal
Receivables during each month. The [monthly] servicing fee will be allocated
among the Seller Interest, the Class A Investor Interest, the Class B Investor
Interest [the [Collateral Interest] [Enhancement Invested Amount] and the
investor interests for all other Series. The "Servicer Interchange" for any
Monthly Period will be equal to one-twelfth of 1.00% of the Principal
Receivables allocable to the Investor Interest [plus the Collateral Interest]
[plus Enhancement Invested Amount, if any,] as of the last day of such Monthly
Period. In the case of any insufficiency of Servicer Interchange, so long as
MBNA is the Servicer, a portion of the Investor Servicing Fee with respect to
such Monthly Period will not be paid to the extent of such insufficiency,
provided, however, that if MBNA is no longer the Servicer, any insufficiency in
the Investor Servicing Fee due to a shortfall in Servicer Interchange will be
paid out of Collections of Finance Receivables [and other amounts] allocated to
the Investor Interest [plus the Collateral Interest] [and the Enhancement
Invested Amount].] The portion of the [monthly] servicing fee allocable to the
Class A Investor Interest for each month to be paid to the Servicer on each
[Transfer] [Distribution] Date will be equal to the product of (a) one-twelfth
of the product of ____% per annum (the "Series Servicing Fee Percentage") and
the [Adjusted] Investor Interest as of the [preceding Record Date] [the [____]
[last] business day of the preceding Monthly Period] (the "Investor Servicing
Fee") and (b) the Class A Floating Percentage (the "Class A Servicing Fee").
The portion of the [monthly] servicing fee allocable to the Class B Investor
Interest for each [month] to be paid to the Servicer on each Transfer Date will
be equal to the product of (a) the Investor Servicing Fee and (b) the Class B
Floating Percentage (the "Class B Servicing Fee"). The Class A Servicing Fee
and the Class B Servicing Fee will be funded from collections of Finance Charge
Receivables [and other amounts] allocated to the Investor Interest as described
herein and will be paid each [month] from the amount so allocated and on
deposit in the Finance Charge Account or, in certain limited circumstances,
from [Available Credit Enhancement Amount]. See "-- Application of Collections
- -- Payment of Fees, Interest and Other Items" above. The remainder of the
servicing fee will be allocable to the Seller Interest and the investor
interests of other Series]. Neither the Trust nor the Certificateholders will
have any obligation to pay the portion of the monthly 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 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 Distribution Date, the Paying Agent 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 (a) the Economic Pay Out Amount, if any, withdrawn from the Cash
Collateral Account for such Distribution Date, and (b) the Enhancement Invested
Amount, if any, for such Distribution Date.]
UNDERWRITING
Subject to the terms and conditions set forth in the underwriting
agreement (the "Underwriting Agreement") between the Seller and the
underwriters[s] named below (the "Underwriter[s]"), the Seller has agreed to
sell to the Underwriters[s], and each of the Underwriter[s] has severally
agreed to purchase, the principal amount of the Class A Certificates and Class
B Certificates set forth opposite its name:
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<TABLE>
<CAPTION>
CLASS A CLASS B
PRINCIPAL PRINCIPAL
UNDERWRITER[S] AMOUNT AMOUNT
- -------------- ------ ------
<S> <C> <C>
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
--------- ------------
$ $
========= ============
Total . . . . . . . . . . . . . . . . . . . . . .
</TABLE>
In the Underwriting Agreement, the Underwriter[s] have agreed, subject
to the terms and conditions set forth therein, to purchase all the Certificates
offered hereby if any of the Certificates are purchased.
The Underwriter[s] propose initially to offer the 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 Underwriter[s] 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 Underwriter[s].
The Underwriter[s] propose initially to offer the 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 Underwriter[s] 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 Underwriter[s].
[Each Underwriter has represented and agreed that (a) it has complied
and will comply with all applicable provisions of the Financial Services Act of
1986 with respect to anything done by it in relation to the Certificates in,
from or otherwise involving the United Kingdom; (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 of the Certificates to a person who
is of a kind described in Article 9(3) of the Financial Services Act of 1986
(Investment Advertisements) (Exemptions) Order 1988 or who is a person to whom
the document may otherwise lawfully be issued or passed on; (c) if that
Underwriter is an authorized person under Chapter III of the Financial Services
Act of 1986, it has only promoted and will only promote (as that term is
defined in Regulation 1.02 of the Financial Services (Promotion of Unregulated
Schemes) Regulations 1991) to any person in the United Kingdom the scheme
described in this Prospectus Supplement 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) Regulation
1991; and (d) it is a person of a kind described in Article 9(3) of the
Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order
1988.]
The Seller will indemnify the Underwriter[s] against certain
liabilities, including liabilities under the Securities Act, or contribute to
payments the Underwriter[s] may be required to make in respect thereof.
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INDEX OF TERMS
FOR PROSPECTUS SUPPLEMENT
<TABLE>
<S> <C>
Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Accumulation Period Length . . . . . . . . . . . . . . . . . 50
Accumulation Shortfall . . . . . . . . . . . . . . . . . . . 41
Additional Certificates . . . . . . . . . . . . . . . . . . . 8
Additional Interest . . . . . . . . . . . . . . . . . . . . . 47
Additional Issuance . . . . . . . . . . . . . . . . . . . . . 46
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Available Cash Collateral Amount . . . . . . . . . . . . . . 26
Available Credit Enhancement Amount . . . . . . . . . . . . . 64
Available Investor Principal Collections . . . . . . . . . . 18
Base Rate . . . . . . . . . . . . . . . . . . . . . . . . . . 42
CA Investors . . . . . . . . . . . . . . . . . . . . . . . . 7
Cash Collateral Depositor . . . . . . . . . . . . . . . . . . 63
Certificateholders . . . . . . . . . . . . . . . . . . . . . 3
Certificates . . . . . . . . . . . . . . . . . . . . . . . . 3
Class A Adjusted Investor Interest . . . . . . . . . . . . . 54
Class A Available Funds . . . . . . . . . . . . . . . . . . . 47
Class A Certificate Rate . . . . . . . . . . . . . . . . . . 6
Class A Certificateholders . . . . . . . . . . . . . . . . . 3
Class A Certificates . . . . . . . . . . . . . . . . . . . . 3
Class A Covered Amount . . . . . . . . . . . . . . . . . . . 19
Class A Fixed Percentage . . . . . . . . . . . . . . . . . . 54
Class A Floating Percentage . . . . . . . . . . . . . . . . . 53
Class A Initial Investor Interest . . . . . . . . . . . . . . 5
Class A Investor Charge-Off . . . . . . . . . . . . . . . . . 66
Class A Investor Charge-Offs . . . . . . . . . . . . . . . . 54
Class A Investor Default Amount . . . . . . . . . . . . . . . 65
Class A Investor Interest . . . . . . . . . . . . . . . . . . 5
Class A Monthly Interest . . . . . . . . . . . . . . . . . . 58
Class A Principal Funding Investment Shortfall . . . . . . . 19
Class A Servicing Fee . . . . . . . . . . . . . . . . . . . . 68
Class B Adjusted Investor Interest . . . . . . . . . . . . . 54
Class B Available Funds . . . . . . . . . . . . . . . . . . . 47
Class B Certificate Rate . . . . . . . . . . . . . . . . . . 6
Class B Certificateholders . . . . . . . . . . . . . . . . . 3
Class B Certificates . . . . . . . . . . . . . . . . . . . . 3
Class B Covered Amount . . . . . . . . . . . . . . . . . . . 20
Class B Fixed Percentage . . . . . . . . . . . . . . . . . . 54
Class B Floating Percentage . . . . . . . . . . . . . . . . . 53
Class B Initial Investor Interest . . . . . . . . . . . . . . 5
Class B Investor Charge-Off . . . . . . . . . . . . . . . . . 66
Class B Investor Default Amount . . . . . . . . . . . . . . . 65
Class B Investor Interest . . . . . . . . . . . . . . . . . . 5
Class B Monthly Interest . . . . . . . . . . . . . . . . . . 59
Class B Principal Funding Investment Shortfall . . . . . . . 20
Class B Servicing Fee . . . . . . . . . . . . . . . . . . . . 68
Closing Date . . . . . . . . . . . . . . . . . . . . . . . . 12
</TABLE>
S-70
<PAGE> 71
<TABLE>
<S> <C>
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Collateral Fixed Percentage . . . . . . . . . . . . . . . . . 54
Collateral Interest . . . . . . . . . . . . . . . . . . . . . 7
Collateral Interest Floating Percentage . . . . . . . . . . . 53
Controlled Accumulation Amount . . . . . . . . . . . . . . . 19
Controlled Accumulation Period . . . . . . . . . . . . . . . 18
Controlled Amortization Amount . . . . . . . . . . . . . . . 17
Controlled Amortization Period . . . . . . . . . . . . . . . 14
Controlled Deposit Amount . . . . . . . . . . . . . . . . . . 18
Controlled Distribution Amount . . . . . . . . . . . . . . . 15
Credit Enhancement . . . . . . . . . . . . . . . . . . . . . 4
Credit Enhancement Provider . . . . . . . . . . . . . . . . . 64
Cut Off Date . . . . . . . . . . . . . . . . . . . . . . . . 4
Deficit Controlled Amortization Amount . . . . . . . . . . . 16
Determination Date . . . . . . . . . . . . . . . . . . . . . 65
Distribution Date . . . . . . . . . . . . . . . . . . . . . . 11
Early Termination Amount . . . . . . . . . . . . . . . . . . 10
Economic Pay Out Amount . . . . . . . . . . . . . . . . . . . 27
Economic Pay Out Distribution Date . . . . . . . . . . . . . 27
Economic Pay Out Event . . . . . . . . . . . . . . . . . . . 42
Enhancement Invested Amount . . . . . . . . . . . . . . . . . 64
ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Excess Finance Charge Collections . . . . . . . . . . . . . . 24
Excess Spread . . . . . . . . . . . . . . . . . . . . . . . . 22
FDIC . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Fixed Investor Percentage . . . . . . . . . . . . . . . . . . 53
Floating Investor Percentage . . . . . . . . . . . . . . . . 53
Full Class A Investor Interest . . . . . . . . . . . . . . . 5
Full Class B Investor Interest . . . . . . . . . . . . . . . 5
Funding Period . . . . . . . . . . . . . . . . . . . . . . . 9
Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Initial Cash Collateral Amount . . . . . . . . . . . . . . . 26
Initial Closing Date . . . . . . . . . . . . . . . . . . . . 51
Initial Collateral Interest . . . . . . . . . . . . . . . . . 25
Initial Investor Interest . . . . . . . . . . . . . . . . . . 5
Interest Period . . . . . . . . . . . . . . . . . . . . . . . 12
Investor Default Amount . . . . . . . . . . . . . . . . . . . 65
Investor Interest . . . . . . . . . . . . . . . . . . . . . . 5
Investor Percentage . . . . . . . . . . . . . . . . . . . . . 7
Investor Servicing Fee . . . . . . . . . . . . . . . . . . . 11
Loan Agreement . . . . . . . . . . . . . . . . . . . . . . . 26
MBNA . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
MBNA I.S. . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Minimum Aggregate Principal Receivables . . . . . . . . . . . 36
Minimum Seller Interest . . . . . . . . . . . . . . . . . . . 36
Monthly Period . . . . . . . . . . . . . . . . . . . . . . . 8
OCMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Pay Out Event . . . . . . . . . . . . . . . . . . . . . . . . 66
Payment Rate Assumptions . . . . . . . . . . . . . . . . . . 40
Percentage Allocation . . . . . . . . . . . . . . . . . . . . 17
</TABLE>
S-71
<PAGE> 72
<TABLE>
<S> <C>
Portfolio Yield . . . . . . . . . . . . . . . . . . . . . . . 42
Pre-Funding Account . . . . . . . . . . . . . . . . . . . . . 9
Pre-Funding Amount . . . . . . . . . . . . . . . . . . . . . 9
Principal Amortization Period . . . . . . . . . . . . . . . . 17
Principal Funding Account . . . . . . . . . . . . . . . . . . 18
Principal Funding Investment Proceeds . . . . . . . . . . . . 19
Principal Shortfall . . . . . . . . . . . . . . . . . . . . . 57
Rapid Accumulation Period . . . . . . . . . . . . . . . . . . 21
Rapid Amortization Period . . . . . . . . . . . . . . . . . . 22
Rate Determination Date . . . . . . . . . . . . . . . . . . . 6
Rating Agency . . . . . . . . . . . . . . . . . . . . . . . . 32
Rating Agency Condition . . . . . . . . . . . . . . . . . . . 62
Reallocated Class B Principal Receivables . . . . . . . . . . 56
Reallocated Collateral Principal Receivables . . . . . . . . 56
Reallocated Principal Collections . . . . . . . . . . . . . . 5
Receivables . . . . . . . . . . . . . . . . . . . . . . . . . 3
Record Date . . . . . . . . . . . . . . . . . . . . . . . . . 45
Required Amount . . . . . . . . . . . . . . . . . . . . . . . 22
Required Cash Collateral Amount . . . . . . . . . . . . . . . 27
Required Collateral Interest . . . . . . . . . . . . . . . . 25
Revolving Period . . . . . . . . . . . . . . . . . . . . . . 13
Scheduled Payment Date . . . . . . . . . . . . . . . . . . . 13
Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Seller Certificate . . . . . . . . . . . . . . . . . . . . . 7
Seller Interest . . . . . . . . . . . . . . . . . . . . . . . 7
Seller Percentage . . . . . . . . . . . . . . . . . . . . . . 45
Series . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Series Servicing Fee Percentage . . . . . . . . . . . . . . . 11
Series [199__-__] Supplement . . . . . . . . . . . . . . . . 3
Series [199__-__] Termination Date . . . . . . . . . . . . . 7
Servicer Interchange . . . . . . . . . . . . . . . . . . . . 68
Shared Excess Finance Charge Collections . . . . . . . . . . 24
Shared Principal Collections . . . . . . . . . . . . . . . . 25
Transfer Date . . . . . . . . . . . . . . . . . . . . . . . . 56
Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Trust Portfolio . . . . . . . . . . . . . . . . . . . . . . . 36
Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Unallocated Principal Collections . . . . . . . . . . . . . . 58
Underwriter[s] . . . . . . . . . . . . . . . . . . . . . . . 68
Underwriting Agreement . . . . . . . . . . . . . . . . . . . 68
[Class A] Scheduled Payment Date . . . . . . . . . . . . . . 40
[Class A] [Class B] Adjusted Investor Interest . . . . . . . 6
</TABLE>
S-72
<PAGE> 73
<TABLE>
<S> <C>
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN
AUTHORIZED TO GIVE ANY INFORMATION 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 PROSPECTUS SUPPLEMENT NOR THE ACCOMPANYING
PROSPECTUS CONSTITUTES AN OFFER OR SOLICITATION BY ANYONE
IN ANY STATE IN WHICH SUCH OFFER OR SOLICITATION IS NOT MBNA MASTER
AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR CREDIT CARD TRUST II
SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM
IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER $_______ CLASS A SERIES [199__-__]
THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR THE [FLOATING RATE]
ACCOMPANYING PROSPECTUS, NOR ANY SALE MADE HEREUNDER OR [____%] ASSET BACKED CERTIFICATES
THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF $_______ CLASS B SERIES [199__-__]
THE SELLER OR THE RECEIVABLES OR THE ACCOUNTS SINCE THE [FLOATING RATE]
DATE HEREOF OR THEREOF OR THAT THE INFORMATION CONTAINED OR [____%] ASSET BACKED CERTIFICATES
INCORPORATED BY REFERENCE HEREIN OR THEREIN IS CORRECT AS
OF ANY TIME SUBSEQUENT TO ITS DATE.
---------------------
TABLE OF CONTENTS [LOGO]
PROSPECTUS SUPPLEMENT
Page
----
Terms of Certificates . . . . . . . . . . . . . . . . . . .
Special Considerations . . . . . . . . . . . . . . . . . . MBNA AMERICA BANK,
MBNA's Credit Card Portfolio . . . . . . . . . . . . . . . NATIONAL ASSOCIATION
The Receivables . . . . . . . . . . . . . . . . . . . . . .
Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . Seller and Servicer
Maturity Assumptions . . . . . . . . . . . . . . . . . . .
Receivable Yield Considerations . . . . . . . . . . . . . .
MBNA and MBNA Corporation . . . . . . . . . . . . . . . . .
Description of the Certificates . . . . . . . . . . . . . .
Underwriting . . . . . . . . . . . . . . . . . . . . . . .
Index of Terms for Prospectus Supplement . . . . . . . . . -----------------------
PROSPECTUS PROSPECTUS SUPPLEMENT
Prospectus Supplement . . . . . . . . . . . . . . . . . . . -----------------------
Reports to Holders . . . . . . . . . . . . . . . . . . . .
Available Information . . . . . . . . . . . . . . . . . . . [UNDERWRITERS]
Incorporation of Certain Documents by Reference . . . . . .
Prospectus Summary . . . . . . . . . . . . . . . . . . . . __________ ____, 199_
Special Considerations . . . . . . . . . . . . . . . . . .
The Trusts . . . . . . . . . . . . . . . . . . . . . . . .
MBNA's Credit Card Activities . . . . . . . . . . . . . . .
The Receivables . . . . . . . . . . . . . . . . . . . . . .
Maturity Assumptions . . . . . . . . . . . . . . . . . . .
Use of Proceeds . . . . . . . . . . . . . . . . . . . . . .
MBNA and MBNA Corporation . . . . . . . . . . . . . . . . .
Description of the Certificates . . . . . . . . . . . . . .
Plan of Distribution . . . . . . . . . . . . . . . . . . .
Certain Legal Aspects of the Receivables . . . . . . . . .
Certain Federal Income Tax Consequences . . . . . . . . . .
ERISA Considerations . . . . . . . . . . . . . . . . . . .
Underwriting . . . . . . . . . . . . . . . . . . . . . . .
Legal Matters . . . . . . . . . . . . . . . . . . . . . . .
Index of Terms for Prospectus . . . . . . . . . . . . . . .
Annex I: Global Clearance, Settlement
and Tax Documentation Procedures . . . . . . . . . . . .
---------------------
UNTIL ________, 199_, 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 ADDITION TO THE OBLIGATION OF
DEALERS TO DELIVER A PROSPECTUS SUPPLEMENT AND A PROSPECTUS
WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
</TABLE>
<PAGE> 1
[RICHARDS, LAYTON & FINGER LETTERHEAD]
January 10, 1997
MBNA America Bank, National Association
400 Christiana Road
Newark, Delaware 19713
Re: MBNA Master Credit Card Trust II
Ladies and Gentlemen:
We have acted as special Delaware counsel for MBNA America
Bank, National Association, a national banking association (the "Bank"), in
connection with the proposed issuance and sale of series certificates (the
"Certificates") by the MBNA Master Credit Card Trust II pursuant to a Pooling
and Servicing Agreement, dated as of August 4, 1994, as amended by the First
Amendment to the MBNA Master Credit Card Trust II Pooling and Servicing
Agreement, dated as of March 11, 1996 (the "Original Pooling and Servicing
Agreement"), by and between the Bank, as Seller and Servicer, and The Bank of
New York, a banking corporation organized and existing under the laws of the
State of New York, as trustee (the "Trustee"), as amended by Assignment No. 1
of Receivables in Additional Accounts, dated as of September 19, 1994
("Assignment No. 1"), by and between the Bank, as Seller and Servicer, and the
Trustee, by Assignment No. 2 of Receivables in Additional Accounts, dated as of
November 15, 1994 ("Assignment No. 2"), by and between the Bank, as Seller and
Servicer, and the Trustee, by Assignment No. 3 of Receivables in Additional
Accounts, dated as of March 30, 1995 ("Assignment No. 3"), by and between the
Bank, as Seller and Servicer, and the Trustee, by Assignment No. 4 of
Receivables in Additional Accounts, dated as of July 6, 1995 ("Assignment No.
4"), by and between the Bank, as Seller and Servicer, and the Trustee, by
Assignment No. 5 of Receivables in Additional Accounts, dated as of October 3,
1995 ("Assignment No. 5"), by and between the Bank,
<PAGE> 2
MBNA America Bank, National Association
January 10, 1997
Page 2
as Seller and Servicer, and the Trustee, by Assignment No. 6 of Receivables in
Additional Accounts, dated as of March 8, 1996 ("Assignment No. 6"), by and
between the Bank, as Seller and Servicer, and the Trustee, by Assignment No. 7
of Receivables in Additional Accounts, dated as of May 30, 1996 ("Assignment
No. 7"), by and between the Bank, as Seller and Servicer, and the Trustee, by
Assignment No. 8 of Receivables in Additional Accounts, dated as of September
4, 1996 ("Assignment No. 8"), by and between the Bank, as Seller and Servicer,
and the Trustee, by Assignment No. 9 of Receivables in Additional Accounts,
dated as of October 3, 1996 ("Assignment No. 9"), by and between the Bank, as
Seller and Servicer, and the Trustee, and by Assignment No. 10 of Receivables
in Additional Accounts, dated as of November 5, 1996 ("Assignment No. 10"), by
and between the Bank, as Seller and Servicer, and the Trustee, and as to be
supplemented from time to time by Supplements in the form of the supplements
which are attached as Exhibits 4.3 and 4.4 to the Registration Statement (as
defined below) (each, a "Supplement") (the Original Pooling and Servicing
Agreement as amended by Assignment No. 1, Assignment No. 2, Assignment No. 3,
Assignment No. 4, Assignment No. 5, Assignment No. 6, Assignment No. 7,
Assignment No. 8, Assignment No. 9 and Assignment No. 10, and as to be
supplemented by a Supplement is hereinafter referred to as the "Pooling and
Servicing Agreement"). At your request, this opinion is being furnished to
you.
For purposes of giving the opinions hereinafter set forth, our
examination of documents has been limited to the examination of executed or
conformed counterparts, or copies otherwise proved to our satisfaction, of the
following:
(a) The Pooling and Servicing Agreement;
(b) Post Effective Amendment No. 1 to Registration
Statement No. 33-99324 on Form S-3 (the "Registration
Statement"), filed by the Bank with the Securities
and Exchange Commission on or about January 10, 1997,
including a related preliminary prospectus (the
"Prospectus"); and
(c) A certificate of an officer of the Bank, dated
January 10, 1997.
For purposes of this opinion, we have not reviewed any
documents other than the documents listed above, and we have assumed that there
exists no provision in any document not listed above that bears upon or is
inconsistent with the opinions stated herein. We have conducted no factual
investigation of our own but rather have relied solely upon the foregoing
documents, the statements and information set forth therein and the additional
matters recited or assumed herein, all of which we have assumed to be true,
complete and accurate in all material respects. In connection with the
formation
<PAGE> 3
MBNA America Bank, National Association
January 10, 1997
Page 3
and authorization to transact business of the Bank, in rendering this opinion,
we have relied upon an opinion, dated January 10, 1997, of John W. Scheflen,
Esquire, a copy of which is attached hereto as Exhibit "A."
With respect to all documents examined by us, we have assumed
that (i) all signatures on documents examined by us are genuine, (ii) all
documents submitted to us as originals are authentic, and (iii) all documents
submitted to us as copies conform with the original copies of those documents.
For purposes of this opinion, we have assumed that, at the
time of issuance and sale of the Certificates, (i) the due authorization,
execution and delivery by all parties thereto of all documents examined by us,
(ii) the Bank will be a national banking association duly formed and validly
existing under the laws of the United States of America, (iii) the Bank will
have all necessary corporate power and authority to cause the issuance and sale
of the Certificates, (iv) the Bank will have taken all necessary corporate
action to cause the issuance and sale of the Certificates, (v) the issuance and
sale of the Certificates will not be contrary to any applicable law, rule,
regulation or order, and (vi) in connection with the documents of which we have
reviewed a form, all blanks contained in such documents will be properly and
appropriately completed, and optional provisions included in such documents
will be properly and appropriately selected, and as executed, such documents
will conform with the forms of the documents reviewed by us.
This opinion is limited to the laws of the State of Delaware
and United States of America federal law, and we have not considered and
express no opinion on the laws of any other jurisdiction. Our opinions are
rendered only with respect to Delaware and United States of America federal
laws and rules, regulations and orders thereunder which are currently in
effect.
Based upon the foregoing, and upon our examination of such
questions of law and statutes as we have considered necessary or appropriate,
and subject to the assumptions, qualifications, limitations and exceptions set
forth herein, we are of the opinion that, when issued and sold in accordance
with the terms of the Pooling and Servicing Agreement, including when duly
executed and authenticated by the Trustee in accordance with the terms of the
Pooling and Servicing Agreement and issued and delivered against payment
therefor, the Certificates will be legally issued, fully paid and nonassessable
and entitled to the benefits of the Pooling and Servicing Agreement.
We understand that you will file this opinion with the
Securities and Exchange Commission as an exhibit to the Registration Statement
in connection with the filing by the Bank of the Registration Statement under
the Securities Act of 1933, as amended. We hereby consent to the filing of
this opinion with the Securities and
<PAGE> 4
MBNA America Bank, National Association
January 10, 1997
Page 4
Exchange Commission. This opinion is rendered solely for your benefit in
connection with the foregoing. We hereby consent to the use of our name under
the heading "Legal Matters" in the Prospectus. In giving the foregoing
consent, we do not thereby admit that we come within the category of persons
whose consent is required under Section 7 of the Securities Act of 1933, as
amended, or the rules and regulations of the Securities and Exchange Commission
thereunder. Except as stated above, without our prior consent, this opinion
may not be furnished or quoted to, or relied upon by, any other person or
entity for any purpose.
Very truly yours,
/s/ RICHARDS, LAYTON & FINGER
MIL/WAY/MM/kth
<PAGE> 5
EXHIBIT A
[LETTERHEAD OF MBNA AMERICA BANK, NATIONAL ASSOCIATION]
January 10, 1997
Richards, Layton & Finger
One Rodney Square
P.O. Box 551
Wilmington, Delaware 19899
Re: MBNA Master Credit Card Trust II, Asset Backed Certificates
MBNA America Bank, National Association (Seller)
Registration Statement on Form S-3, Amendment No. 1
Gentlemen:
I am familiar with the registration statement on Form S-3 filed on
December 4, 1996 and Amendment No. 1 to the Registration Statement to be filed
on or about January 10, 1997 (as amended, the "Registration Statement") by MBNA
America Bank, National Association, a national banking association (the
"Bank"), on behalf of MBNA Master Credit Card Trust II (the "Trust") with the
Securities and Exchange Commission under the Securities Act of 1933, as amended
(the "Act"), with respect to the issuance from time to time by the Trust of a
series (each, a "Series") of its Asset Backed Certificates representing
undivided interests in the Trust. The Series of Asset Backed Certificates to
be issued by the Trust in offerings pursuant to the Registration Statement are
collectively referred to herein as the "Certificates."
I have examined originals or copies, certified or otherwise identified
to my satisfaction, of such documents, corporate records and other instruments
as I have deemed necessary or appropriate for the purposes of this opinion.
Based upon the forgoing, I am of the opinion that the Bank is a
national banking association formed under the laws of the United States of
America and is authorized thereunder to transact the business of banking.
I am admitted to the Bar of the State of Maryland, and express no
opinion as to the law of any jurisdiction other than the laws of the United
States of America.
You may rely on this opinion in connection with an opinion to be
submitted by you to the Bank and filed by the Bank with the Securities and
Exchange Commission as an exhibit to the Registration Statement. I hereby
consent of the filing of this opinion as an exhibit to the Registration
Statement and to the use of my name under the heading "Legal Matters" in the
prospectus relating to the Certificates. In giving such consent, I do not
thereby admit that I am in the category of persons whose consent is required
under Section 7 of the Act.
Very truly yours,
/s/ John W. Scheflen, Esq.
<PAGE> 1
EXHIBIT 8.1
[Letterhead of Orrick, Herrington & Sutcliffe LLP]
January 10, 1997
MBNA America Bank,
National Association
1100 North King Street
Wilmington, Delaware 19884
Re: MBNA MASTER CREDIT CARD TRUST II
ASSET BACKED CERTIFICATES
MBNA AMERICA BANK, NATIONAL ASSOCIATION (SELLER)
AMENDMENT NO. 1 TO REGISTRATION STATEMENT ON FORM S-3
Ladies and Gentlemen:
We have acted as counsel for MBNA America Bank, National Association,
a national banking association (the "Seller"), in connection with the
preparation of Amendment No. 1 to Registration Statement on Form S-3 (the
"Registration Statement"), which has been filed with the Securities and
Exchange Commission under the Securities Act of 1933, as amended (the "Act"),
for the registration under the Act of series (each, a "Series") of Asset Backed
Certificates (collectively, the "Certificates"), each such series representing
an undivided interest in MBNA Master Credit Card Trust II (the "Trust"). Each
Series of Certificates will be issued pursuant to the Pooling and Servicing
Agreement dated as of August 4, 1994, formed by the Seller on such date, as
amendeded by the First Amendment thereto dated as of March 11, 1996 (the
"Pooling and Servicing Agreement"). The Pooling and Servicing Agreement and
the Series Supplements relating to Series of Certificates issued by the Trust
have been incorporated by reference in the Registration Statement. The forms
of Series Supplements relating to Series of Certificates to be issued by the
Trust have been filed as Exhibits 4.3 and 4.4 to the Registration Statement.
We hereby confirm that the statements set forth in the prospectus
relating to the Certificates (the "Prospectus") forming a part of the
Registration Statement under the heading "Federal Income Tax Consequences" and
the statements set forth in each of the forms of prospectus supplements, filed
as Exhibits 4.5 and 4.6 to the Registration Statement, relating to the
Certificates (collectively, the "Prospectus Supplement") forming a part of the
Registration Statement under the heading "Summary of Terms - Tax Status", which
statements have been prepared by
<PAGE> 2
MBNA America Bank,
National Association
January 10, 1997
Page 2
us, to the extent that they constitute matters of law or legal conclusions with
respect thereto, are correct in all material respects.
We note that the forms of Prospectus and Prospectus Supplement do not
relate to a specific transaction. Accordingly, the above-referenced
description of federal income tax consequences may, under certain
circumstances, require modification in the context of an actual transaction.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. We also consent to the reference to Orrick, Herrington
& Sutcliffe LLP under the captions "Legal Matters" and "Federal Income Tax
Consequences" in the Prospectus. In giving such consent, we do not admit that
we are "experts," within the meaning of the term used in the Act or the rules
and regulations of the Securities and Exchange Commission issued thereunder,
with respect to any part of the Registration Statement, including this opinion
as an exhibit or otherwise.
Very truly yours,
ORRICK, HERRINGTON & SUTCLIFFE LLP
