<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 21, 1998
REGISTRATION NO. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
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)
MBNA MASTER CREDIT CARD TRUST II
(ISSUER OF THE CERTIFICATES)
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)
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
SENIOR VICE CHAIRMAN
MBNA AMERICA BANK, NATIONAL ASSOCIATION
WILMINGTON, DELAWARE 19884-0144
(800) 362-6255
(NAME, ADDRESS INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
COPIES TO:
CAMERON L. COWAN, ESQ. RICHARD F. KADLICK, ESQ.
ORRICK, HERRINGTON & SUTCLIFFE SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
LLP 919 THIRD AVENUE
WASHINGTON HARBOUR NEW YORK, NEW YORK 10022
3050 K STREET, N.W. (212) 735-3000
WASHINGTON, D.C. 20007
(202) 339-8400
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
MAXIMUM PROPOSED
TITLE OF EACH CLASS OF AMOUNT OFFERING PRICE MAXIMUM AMOUNT OF
SECURITIES TO BE TO BE PER AGGREGATE REGISTRATION
REGISTERED REGISTERED CERTIFICATE* OFFERING PRICE* FEE
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Asset Backed
Certificates.......... $10,000,000,000 100% $10,000,000,000 $2,950,000
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
</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 $2,129,400,000 of unissued Asset
Backed Certificates registered under Registration Statement No. 333-17253. A
filing fee of $645,272.93 was paid with Registration Statement No. 333-17253
in connection with such unissued Asset Backed Certificates.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT IS NOT COMPLETE AND MAY BE +
+AMENDED. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED +
+WITH THE SEC. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION +
+STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SUPPLEMENT IS NOT AN OFFER TO +
+SELL NOR IS IT SEEKING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE +
+THE OFFER OR SALE IS NOT PERMITTED. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED AUGUST , 1998
Prospectus Supplement to Prospectus Dated , 199
MBNA MASTER CREDIT CARD TRUST II
Issuer
MBNA AMERICA BANK, NATIONAL ASSOCIATION
Seller and Servicer
SERIES 199 -
$ FLOATING RATE ASSET BACKED CERTIFICATES
THE TRUST WILL ISSUE--
CONSIDER
CAREFULLY
THE RISK
FACTORS Class A Certificates Class B Certificates
BEGINNING ON -------------------- --------------------
PAGE 10 IN
THE Principal amount $[ ] $[ ]
PROSPECTUS. Certificate rate [Three]-Month LIBOR [Three]-Month LIBOR
plus [ ]% annually plus [ ]% annually
A Interest paid [Quarterly] [Quarterly]
certificate First interest
is not a payment date [ , ] [ , ]
deposit and Scheduled
neither the principal
certificates payment date [ , ] [ , ]
nor the Legal final [ , ] [ , ]
underlying maturity
accounts or
receivables CREDIT ENHANCEMENT--
are insured
or The Class B Certificates are subordinated to the Class A
guaranteed Certificates. Subordination of the Class B Certificates
by the provides credit enhancement for the Class A Certificates.
Federal
Deposit The Trust is also issuing a Collateral Interest in the amount
Insurance of $ that is subordinated to the Class A
Corporation Certificates and the Class B Certificates. Subordination of
or any other the Collateral Interest provides credit enhancement for both
governmental the Class A and the Class B Certificates.
agency.
The This prospectus supplement and the accompanying prospectus
certificates relate to the offering of the Certificates only.
will
represent
interests in
the trust
only and
will not
represent
interests in
or
obligations
of MBNA or
any MBNA
affiliate.
This
prospectus
supplement
may be
used to
offer and
sell
the certificates
only if
accompanied
by the
prospectus.
NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED THE
CERTIFICATES OR DETERMINED THAT THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS IS
ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Underwriter of the Class A and the Class B Certificates
[NAME OF UNDERWRITER]
, 199
<PAGE>
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
We provide information to you about the certificates in two separate
documents that progressively provide more detail: (a) the accompanying
Prospectus, which provides general information, some of which may not apply to
your Series of certificates and (b) this Prospectus Supplement, which describes
the specific terms of your Series of certificates.
IF THE TERMS OF YOUR SERIES OF CERTIFICATES VARY BETWEEN THIS PROSPECTUS
SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS, YOU SHOULD RELY ON THE INFORMATION
IN THIS PROSPECTUS SUPPLEMENT.
We include cross-references in this Prospectus Supplement and the
accompanying Prospectus to captions in these materials where you can find
further related discussions. The following Table of Contents and the Table of
Contents included in the accompanying Prospectus provide the pages on which
these captions are located.
You can find a listing of the pages where capitalized terms used in this
Prospectus Supplement and the accompanying Prospectus are defined under the
caption "Index of Terms for Prospectus Supplement" beginning on page S-47 in
this document and under the caption "Index of Terms for Prospectus" beginning
on page 58 in the accompanying Prospectus.
----------------
S-2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
SUMMARY OF TERMS........................................................... S-5
Offered Securities........................................................ S-5
Interest Payments........................................................ S-5
Principal Payments....................................................... S-6
The Collateral Interest................................................... S-6
Credit Enhancement........................................................ S-6
Other Interests in the Trust.............................................. S-6
Other Series of Certificates............................................. S-6
The Seller Interest...................................................... S-7
Information About the Receivables......................................... S-7
Collections by the Servicer............................................... S-7
Allocations and Payments to You and Your Series........................... S-7
Allocations of Collections of Finance Charge Receivables................. S-8
Allocations of Collections of Principal Receivables...................... S-9
Revolving Period........................................................ S-11
Controlled Accumulation Period.......................................... S-11
Rapid Amortization Period............................................... S-11
Pay Out Events.......................................................... S-11
Shared Principal Collections.............................................. S-12
Denominations............................................................. S-12
Registration, Clearance and Settlement.................................... S-12
Tax Status................................................................ S-13
ERISA Considerations...................................................... S-13
Certificate Ratings....................................................... S-13
Exchange Listing.......................................................... S-13
MBNA'S CREDIT CARD PORTFOLIO............................................... S-14
General................................................................... S-14
Billing and Payments...................................................... S-14
Delinquency and Gross Charge-Off Experience............................... S-14
Interchange............................................................... S-16
THE RECEIVABLES............................................................ S-16
MATURITY ASSUMPTIONS....................................................... S-19
Controlled Accumulation Period............................................ S-19
Rapid Amortization Period................................................. S-20
Pay Out Events............................................................ S-20
Payment Rates............................................................. S-21
</TABLE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
RECEIVABLE YIELD CONSIDERATIONS............................................ S-21
MBNA AND MBNA CORPORATION.................................................. S-22
Year 2000................................................................. S-23
DESCRIPTION OF SERIES PROVISIONS........................................... S-23
General................................................................... S-23
New Issuances............................................................. S-25
Interest Payments......................................................... S-25
Principal Payments........................................................ S-27
Postponement of Controlled Accumulation Period............................ S-28
Subordination............................................................. S-28
Allocation Percentages.................................................... S-28
Reallocation of Cash Flows................................................ S-31
Application of Collections................................................ S-32
Allocations.............................................................. S-32
Payment of Interest, Fees and Other Items................................ S-33
Excess Spread............................................................ S-34
Payments of Principal.................................................... S-35
Shared Principal Collections.............................................. S-37
Defaulted Receivables; Investor Charge-Offs............................... S-37
Principal Funding Account................................................. S-39
Interest Funding Account.................................................. S-39
Reserve Account........................................................... S-39
Pay Out Events............................................................ S-41
Servicing Compensation and Payment of Expenses............................ S-42
Reports to Certificateholders............................................. S-43
Amendments................................................................ S-43
ERISA CONSIDERATIONS....................................................... S-43
General................................................................... S-43
PTE 98-13................................................................. S-43
UNDERWRITING............................................................... S-45
INDEX OF TERMS FOR PROSPECTUS SUPPLEMENT................................... S-47
ANNEX I: OTHER SERIES ISSUED AND OUTSTANDING............................... A-1
</TABLE>
S-3
<PAGE>
[THIS PAGE IS INTENTIONALLY LEFT BLANK]
S-4
<PAGE>
SUMMARY OF TERMS
. THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS DOCUMENT AND DOES NOT
CONTAIN ALL OF THE INFORMATION THAT YOU NEED TO CONSIDER IN MAKING YOUR
INVESTMENT DECISION. TO UNDERSTAND ALL OF THE TERMS OF THE OFFERING OF THE
CERTIFICATES, READ CAREFULLY THIS ENTIRE DOCUMENT AND THE ACCOMPANYING
PROSPECTUS.
. THIS SUMMARY PROVIDES AN OVERVIEW OF CERTAIN CALCULATIONS, CASH FLOWS AND
OTHER INFORMATION TO AID YOUR UNDERSTANDING AND IS QUALIFIED BY THE FULL
DESCRIPTION OF THESE CALCULATIONS, CASH FLOWS AND OTHER INFORMATION IN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS.
OFFERED SECURITIES
MBNA Master Credit Card Trust II (the "Trust") is offering the Class A Floating
Rate Asset Backed Certificates (the "Class A Certificates") and the Class B
Floating Rate Asset Backed Certificates (the "Class B Certificates") as part of
Series 199 - . The Class A Certificates and the Class B Certificates (together,
the "Certificates") represent an interest in the assets of the Trust.
The Class B Certificates are subordinated to the Class A Certificates.
INTEREST PAYMENTS
The Class A Certificates will accrue interest for each Interest Period at the
Class A Certificate Rate set on the related LIBOR Determination Date. The
"Class A Certificate Rate" is an annual rate equal to LIBOR plus %.
The Class B Certificates will accrue interest for each Interest Period at the
Class B Certificate Rate set on the related LIBOR Determination Date. The
"Class B Certificate Rate" is an annual rate equal to LIBOR plus %.
Interest accrued during each Interest Period will be due on each Interest
Payment Date. Any interest due but not paid on a Interest Payment Date will be
payable on the next Interest Payment Date together with additional interest at
the applicable Certificate Rate plus 2% per annum.
. An "Interest Payment Date" is the 15th day of each , , and ,
or if that day is not a business day, the next business day (however, during
the Rapid Amortization Period, each Distribution Date is an Interest Payment
Date). The first Interest Payment Date is , .
. A "Distribution Date" is the 15th day of each month, or if that day is not a
business day, the next business day. The first Distribution Date is ,
.
. Each "Interest Period" begins on and includes a Distribution Date and ends on
and excludes the next Distribution Date. However, the first Interest Period
will begin on and include , (the "Closing Date") and end on but exclude
, , the first Distribution Date.
. LIBOR is the rate for deposits in U.S. dollars for a three-month period (or,
during the Rapid Amortization Period, the rate for deposits in U.S. dollars
for a one-month period) which appears on the Dow Jones Telerate Page 3750 (or
similar replacement page) as of 11:00 a.m., London time, on the related LIBOR
Determination Date. In addition, see "Description of Series Provisions--
Interest Payments" in this Prospectus Supplement for a discussion of the
determination of LIBOR if that rate does not appear on Dow Jones Telerate
Page 3750 (or similar replacement page).
. ""LIBOR Determination Dates" are:
. , , for the period beginning on and including the Closing Date and
ending on and excluding , .
. For each Interest Period beginning on or after , , the related LIBOR
Determination Date is the second London business day prior to the later of
(i) the most recent Interest Payment Date preceding the first day of each
Interest Period and (ii) the Interest Payment Date occurring on the first
day of such Interest Period.
S-5
<PAGE>
The following time line shows the relevant dates for the first two Interest
Payment Dates.
First Two Interest Payment Dates
[TIMELINE APPEARS HERE]
Other Interest Payment Dates and LIBOR Determination Dates will follow
sequentially after the second Interest Payment Date in the same manner as is
shown in the time line.
See "Description of Series Provisions--Interest Payments" in this Prospectus
Supplement for a discussion of the determination of amounts available to pay
interest and for the definition of business day and London business day.
You may obtain certificate rates for the current and immediately preceding
Interest Periods by telephoning The Bank of New York, the Trustee, at its
Corporate Trust Office at (212) 815-5738.
PRINCIPAL PAYMENTS
You are expected to receive payment of principal in full on the "Scheduled
Payment Date" which is , , or, if that date is not a business day, the
next business day. However, certain circumstances could cause principal to be
paid earlier or later, or in reduced amounts. No principal will be paid to the
Class B Certificateholders until the Class A Certificateholders are paid in
full. See "Maturity Assumptions" in this Prospectus Supplement and in the
Prospectus and "Description of Series Provisions--Allocation Percentages" in
this Prospectus Supplement.
The final payment of principal and interest on the Certificates will be made no
later than , , or, if that date is not a business day, the next business
day, called the "Legal Final Maturity" or the "Series 199 - Termination Date."
See "Description of Series Provisions--Principal Payments" in this Prospectus
Supplement for a discussion of the determination of amounts available to pay
principal.
THE COLLATERAL INTEREST
The Trust is also issuing an interest in the assets of the Trust that is
subordinated to the Certificates called the "Collateral Interest." The initial
Collateral Interest Amount is $ , representing 7.5% of the initial
aggregate principal amount of the Certificates plus the Collateral Interest
Amount. As a subordinated interest, the Collateral Interest is a form of Credit
Enhancement for the Certificates. The Collateral Interest Holder will have
voting and certain other rights as if the Collateral Interest were a
subordinated class of certificates.
THE COLLATERAL INTEREST IS NOT BEING OFFERED THROUGH THIS PROSPECTUS SUPPLEMENT
AND THE ACCOMPANYING PROSPECTUS.
CREDIT ENHANCEMENT
Credit Enhancement for your Series is for your Series's benefit only, and you
are not entitled to the benefits of any credit enhancement available to other
Series.
Subordination of the Class B Certificates provides Credit Enhancement for the
Class A Certificates. Subordination of the Collateral Interest provides Credit
Enhancement for both the Class A Certificates and the Class B Certificates. The
Collateral Interest and the Class B Investor Interest must be reduced to zero
before the Class A Investor Interest will suffer any loss of principal. The
Collateral Interest must be reduced to zero before the Class B Investor
Interest will suffer any loss of principal. For a description of the events
which may lead to a reduction of the Class A Investor Interest, the Class B
Investor Interest and the Collateral Interest, see "Description of Series
Provisions--Reallocation of Cash Flows," "-- Application of Collections" and
"--Defaulted Receivables; Investor Charge-Offs" in this Prospectus Supplement.
OTHER INTERESTS IN THE TRUST
OTHER SERIES OF CERTIFICATES
The Trust has issued other Series of certificates and expects to issue
additional Series of certificates. When issued by the Trust, the certificates
of each of
S-6
<PAGE>
those Series also represent an interest in the assets of the Trust. You can
review a summary of each Series previously issued and currently outstanding
under the caption "Annex I: Other Series Issued and Outstanding" included at
the end of this Prospectus Supplement. The Trust may issue additional Series
with terms that may be different from any other Series without prior review or
consent by any Certificateholders.
THE SELLER INTEREST
MBNA will own the "Seller Interest," which represents the remaining interest in
the assets of the Trust not represented by the Certificates, the Collateral
Interest and the other interests issued by the Trust. The Seller Interest does
not provide credit enhancement for your Series or any other Series.
INFORMATION ABOUT THE RECEIVABLES
The Trust assets include Receivables from certain MasterCard(R) and VISA(R)*
revolving credit card accounts selected from MBNA's credit card account
portfolio.
The Receivables consist of both Principal Receivables and Finance Charge
Receivables.
"Principal Receivables" are, generally, (a) amounts charged by cardholders for
goods and services and (b) cash advances.
"Finance Charge Receivables" are (a) the related finance charges and credit
card fees and (b) for your Series, certain amounts of fees, called Interchange,
collected through MasterCard and VISA and annual membership fees collected from
cardholders.
See "MBNA's Credit Card Portfolio--Interchange" in this Prospectus Supplement
and "MBNA's Credit Card Activities--Interchange" and "Description of the
Certificates--Transfer of Annual Membership Fees" in the accompanying
Prospectus.
COLLECTIONS BY THE SERVICER
The Servicer will collect payments on the Receivables and will deposit those
collections in an account. The Servicer will keep track of those collections
that are Finance Charge Receivables and those collections that are Principal
Receivables.
ALLOCATIONS AND PAYMENTS TO YOU AND YOUR SERIES
Each month, the Servicer will allocate collections and the amount of
Receivables that are not collected and are written off as uncollectible, called
the Default Amount, among:
. your Series, based on the size of the Investor Interest (initially $ );
. other outstanding Series, based on the size of their respective interests in
the Trust; and
. MBNA, based on the size of the Seller Interest.
The Trust assets allocated to your Series will be allocated to the following,
based on varying percentages:
. holders of the Class A Certificates, based on the Class A Investor Interest
(initially $ );
. holders of the Class B Certificates, based on the Class B Investor Interest
(initially $ ); and
. the holder of the Collateral Interest, based on the Collateral Interest
Amount (initially $ ).
See the following chart and "Description of Series Provisions--Allocation
Percentages" in this Prospectus Supplement.
The following chart illustrates the Trust's general allocation structure only
and does not reflect the relative percentages of collections or other amounts
allocated to the Seller Interest, to any Series,
- --------
* MasterCard(R) and VISA(R) are federally registered servicemarks of MasterCard
International Inc. and Visa U.S.A., Inc., respectively.
S-7
<PAGE>
including your Series, or to holders of the Class A Certificates, the Class B
Certificates or the Collateral Interest.
[FLOW CHART APPEARS HERE]
You are entitled to receive payments of interest and principal based upon
allocations to your Series. The Investor Interest, which is the basis for
allocations to your Series, is the sum of (a) the Class A Investor Interest,
(b) the Class B Investor Interest and (c) the Collateral Interest Amount. The
Class A Investor Interest, the Class B Investor Interest and the Collateral
Interest Amount will initially equal the outstanding principal amount of the
Class A Certificates, the Class B Certificates and the Collateral Interest. The
Investor Interest will decline as a result of principal payments and may
decline due to the writing off of Receivables or other reasons. If your
investor interest declines, amounts allocated and available for payment to your
Series and to you will be reduced. For a description of the events which may
lead to these reductions, see "Description of Series Provisions--Reallocation
of Cash Flows" in this Prospectus Supplement.
ALLOCATIONS OF COLLECTIONS OF FINANCE CHARGE RECEIVABLES
The following chart demonstrates the manner in which collections of Finance
Charge Receivables are allocated and applied to your Series. THE CHART IS A
SIMPLIFIED DEMONSTRATION OF CERTAIN ALLOCATION AND PAYMENT PROVISIONS AND IS
QUALIFIED BY THE FULL DESCRIPTIONS OF THESE PROVISIONS IN THIS PROSPECTUS
SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS.
Step 1: Collections of Finance Charge Receivables for your Series are
allocated, based on varying percentages, among the Class A Investor Interest,
the Class B Investor Interest and the Collateral Interest Amount.
Step 2: Collections of Finance Charge Receivables allocated to the Class A
Investor Interest are applied to cover, in the following priority: the
interest payment due to Class A, Class A's portion of the servicing fee due to
the Servicer and Class A's portion of the Default Amount.
Collections of Finance Charge Receivables allocated to the Class B Investor
Interest are applied to cover, in the following priority: the interest
payment due to Class B and Class B's portion of the servicing fee due to the
Servicer.
Collections of Finance Charge Receivables allocated to the Collateral
Interest Amount are applied, under certain circumstances, to cover the
Collateral Interest's portion of the servicing fee due to the Servicer.
Remaining collections of Finance Charge Receivables allocated to the Class B
Investor Interest and the Collateral Interest Amount are applied in Step 3
because of their subordinated status.
Step 3: Collections of Finance Charge Receivables allocated to your Series and
not used in Step 2 are treated as Excess Spread and applied, in the following
priority, to cover:
. the interest payment due to Class A, Class A's portion of the servicing fee
due to the Servicer and Class A's portion of the Default Amount, each to the
extent not covered in Step 2.
. reimbursement of certain reductions of the Class A Investor Interest.
. the interest payment due to Class B and Class B's portion of the servicing
fee due to the Servicer, each to the extent not covered in Step 2.
. Class B's portion of the Default Amount.
. reimbursement of certain reductions of the Class B Investor Interest.
S-8
<PAGE>
. the interest payment due to the Collateral Interest;
. the Collateral Interest's portion of the servicing fee due to the Servicer,
to the extent not covered in Step 2;
. the Collateral Interest's portion of the Default Amount;
. reimbursement of certain reductions of the Collateral Interest Amount; and
. funding, if necessary, of a reserve account maintained to cover certain
interest payment shortfalls, if any.
Remaining Excess Spread is then paid to the holder of the Collateral Interest.
See "Description of Series Provisions--Application of Collections" in this
Prospectus Supplement.
ALLOCATIONS OF COLLECTIONS OF FINANCE CHARGE RECEIVABLES
[FLOW CHART APPEARS HERE]
ALLOCATIONS OF COLLECTIONS OF PRINCIPAL RECEIVABLES
The following chart demonstrates the manner in which collections of Principal
Receivables are allocated and applied to your Series. THE CHART IS A SIMPLIFIED
DEMONSTRATION OF CERTAIN ALLOCATION AND PAYMENT PROVISIONS AND IS QUALIFIED BY
THE FULL DESCRIPTIONS OF THESE PROVISIONS IN THIS PROSPECTUS SUPPLEMENT AND THE
ACCOMPANYING PROSPECTUS.
Step 1: Collections of Principal Receivables for your Series are allocated,
based on varying percentages, among the Class A Investor Interest, the Class B
Investor Interest and the Collateral Interest Amount.
S-9
<PAGE>
Step 2: Collections of Principal Receivables allocated to the Collateral
Interest Amount and the Class B Investor Interest may be reallocated and made
available to pay amounts due to the Class A Investor Interest that have not
been paid by either the Class A's share of collections of Finance Charge
Receivables or Excess Spread. If required Class A amounts are satisfied, the
Collateral Interest also provides the same type of protection to the Class B
Investor Interest. Certain collections which are reallocated for Class A or
Class B will not be made part of Available Investor Principal Collections.
Step 3: Collections of Principal Receivables allocated to your Series and not
used in Step 2 above are combined with shared principal collections from other
Series, to the extent necessary and available, and treated as Available
Investor Principal Collections.
Available Investor Principal Collections may be paid, or accumulated and then
paid, to you as payments of principal. The amount, priority and timing of
your principal payments, if any, depend on whether your Series is in the
Revolving Period, the Controlled Accumulation Period or the Rapid
Amortization Period, as described below.
The Class A Certificates will be paid in full before the Class B Certificates
and the Collateral Interest receive any payments of principal. The Class B
Certificates will be paid in full before the Collateral Interest receives any
payments of principal.
See "Maturity Assumptions" and "Description of Series Provisions--Application
of Collections" in this Prospectus Supplement.
Step 4: Collections of Principal Receivables allocated to your Series and not
used in Steps 2 and 3 above may be paid to other Series, to the extent
necessary, or to the Seller.
ALLOCATIONS OF COLLECTIONS OF PRINCIPAL RECEIVABLES
[FLOW CHART APPEARS HERE]
S-10
<PAGE>
REVOLVING PERIOD: Series 199 - will have a period of time, called the
"Revolving Period," when the Trust will not pay, or accumulate, principal for
Certificateholders or the holder of the Collateral Interest. In general, during
the Revolving Period the Trust will pay available principal to other Series or
the holder of the Seller Interest. See "Description of Series Provisions--
Principal Payments" and "--Application of Collections" in this Prospectus
Supplement.
The Revolving Period starts on the Closing Date and ends on the earlier to
begin of:
. the Controlled Accumulation Period; or
. the Rapid Amortization Period.
CONTROLLED ACCUMULATION PERIOD: During the period called the "Controlled
Accumulation Period," each month the Servicer will deposit a specified amount
in the Principal Funding Account in order to pay the Certificates and the
Collateral Interest in full on the Scheduled Payment Date.
Each month, the Trust will pay principal not required to be deposited in the
Principal Funding Account to other Series or the holder of the Seller Interest.
Each month, if the amount actually deposited in the Principal Funding Account
is less than the required deposit, the amount of this deficiency will be
carried forward as a shortfall and included in the next month's required
deposit.
See "Description of Series Provisions--Principal Payments" and "--Application
of Collections" in this Prospectus Supplement. For information about the
application of money on deposit in the Principal Funding Account, including any
net investment earnings, see "Description of Series Provisions--Principal
Funding Account" in this Prospectus Supplement.
On the Scheduled Payment Date, the Trust will use the money on deposit in the
Principal Funding Account to pay (a) the Class A Investor Interest, (b) if the
Class A Investor Interest is paid in full, the Class B Investor Interest and
(c) if the Class B Investor Interest is paid in full, the Collateral Interest
Amount.
You should be aware that there may not be sufficient amounts available to pay
principal in full for the Class A Investor Interest, the Class B Investor
Interest and the Collateral Interest Amount on the Scheduled Payment Date. In
addition, if the money on deposit in the Principal Funding Account is
insufficient to pay these amounts on the Scheduled Payment Date or if a Pay Out
Event occurs, the Rapid Amortization Period will begin and the timing of your
principal payments could change. See "Maturity Assumptions" in this Prospectus
Supplement and in the accompanying Prospectus.
The Controlled Accumulation Period is scheduled to begin at the close of
business on , , but in some cases may be delayed to no later than the
close of business on , . See "Description of Series Provisions--
Postponement of Controlled Accumulation Period" in this Prospectus Supplement.
The Controlled Accumulation Period will end when any one of the following
occurs:
. the Investor Interest is paid in full;
. the Rapid Amortization Period begins; or
. the Series 199 - Termination Date.
RAPID AMORTIZATION PERIOD: If a period called the "Rapid Amortization Period"
begins, the Trust will use any available principal collections allocated to
your Series to pay (a) the Class A Investor Interest, (b) if the Class A
Investor Interest is paid in full, the Class B Investor Interest and (c) if the
Class B Investor Interest is paid in full, the Collateral Interest Amount.
These payments will begin on the Distribution Date in the month after the Rapid
Amortization Period begins.
The Rapid Amortization Period will begin if a Pay Out Event occurs and will end
when any one of the following occurs:
. the Investor Interest is paid in full;
. the Series 199 - Termination Date; or
. the Trust Termination Date.
PAY OUT EVENTS: Certain adverse events called Pay Out Events might lead to the
start of a Rapid Amortization Period and the end of either the Revolving Period
or the Controlled Accumulation Period.
S-11
<PAGE>
A Pay Out Event for your Series will include the following events:
. the Seller does not make any required payment or deposit (within the
applicable grace period);
. the Seller materially violates any other obligation or agreement causing you
to be adversely affected, if (a) the Seller does not remedy the violation
within 60 days after it has received written notice and (b) you continue to
be materially and adversely affected for the 60-day period;
. the Seller provides certain representations, warranties or other information
which were materially incorrect at the time they were provided causing you to
be adversely affected, if (a) they continue to be materially incorrect 60
days after the Seller has received written notice and (b) you continue to be
materially and adversely affected for the 60-day period;
. the three month average net yield on the Receivables is below the three month
average of a minimum level called the Base Rate;
. the Seller fails to transfer additional assets to the Trust when required;
. certain defaults by the Servicer that have a material adverse effect on you;
. you are not paid in full on the Scheduled Payment Date;
. certain events of insolvency or receivership relating to the Seller;
. the Seller is unable to transfer Receivables to the Trust as required under
the Agreement; or
. the Trust becomes an "investment company" under the Investment Company Act of
1940.
For a more detailed discussion of these Pay Out Events, see "Description of
Series Provisions--Pay Out Events" in this Prospectus Supplement. In addition,
see "Description of the Certificates--Pay Out Events" in the accompanying
Prospectus for a discussion of the consequences of an insolvency or
receivership of the Seller.
SHARED PRINCIPAL COLLECTIONS
This Series is included in a group of Series designated as "Group One." Each
Series identified under the caption "Annex I: Other Series Issued and
Outstanding" included at the end of this Prospectus Supplement is, or is
expected to be, and other Series in the future may be, included in Group One.
To the extent that collections of Principal Receivables allocated to your
Series are not needed to make payments or deposits to the Principal Funding
Account for your Series, these collections, called Shared Principal
Collections, will be applied to cover principal payments for other Series
within Group One. Any reallocation for this purpose will not reduce your
Series's Investor Interest. In addition, you may receive the benefits of
collections of Principal Receivables and certain other amounts allocated to
other Series in Group One, to the extent those collections are not needed for
those other Series. See "Description of Series Provisions--Shared Principal
Collections" in this Prospectus Supplement and "Description of the
Certificates--Shared Principal Collections" in the accompanying Prospectus.
DENOMINATIONS
Beneficial interests in the Certificates will be offered in minimum
denominations of $1,000 and integral multiples of that amount.
REGISTRATION, CLEARANCE AND SETTLEMENT
Your Certificates will be registered in the name of Cede & Co., as the nominee
of the Depository Trust Company ("DTC"). You will not receive a definitive
certificate representing your interest, except in limited circumstances
described in the accompanying Prospectus when Certificates in fully registered,
certificated form are issued. See "Description of the Certificates--Definitive
Certificates" in the accompanying Prospectus.
You may elect to hold your Certificates through DTC, in the United States, or
Cedel Bank, societe anonyme ("Cedel") or the Euroclear System ("Euroclear"), in
Europe. Transfers within DTC, Cedel or Euroclear, as the case may be, will be
made in accordance with the usual rules and
S-12
<PAGE>
operating procedures of those systems. Cross-market transfers between persons
holding directly or indirectly through DTC and counterparties holding directly
or indirectly through Cedel or Euroclear will be made in DTC through the
relevant depositaries of Cedel or Euroclear. See "Description of the
Certificates--Book-Entry Registration" in the accompanying Prospectus.
We expect that the Certificates will be delivered in book-entry form through
the facilities of DTC, Cedel and Euroclear on or about , .
TAX STATUS
Special Counsel to the Seller is of the opinion that under existing law your
Certificates will be characterized as debt for federal income tax purposes.
Under the Agreement, you and the Seller will agree to treat your Certificates
as debt for federal, state and local income tax purposes and franchise tax
purposes. See "Federal Income Tax Consequences" in the accompanying Prospectus
for additional information concerning the application of federal income tax
laws.
ERISA CONSIDERATIONS
Subject to important considerations described under "ERISA Considerations" in
this Prospectus Supplement and in the accompanying Prospectus, the Class A
Certificates are eligible for purchase by persons investing assets of employee
benefit plans or individual retirement accounts.
For the reasons discussed under "ERISA Considerations" in this Prospectus
Supplement and the accompanying Prospectus, the Class B Certificates are not
eligible for purchase by persons investing assets of employee benefit plans or
individual retirement accounts other than an insurance company investing assets
of its general account.
CERTIFICATE RATINGS
The Class A Certificates are required to be rated in the highest rating
category by at least one nationally recognized rating organization.
The Class B Certificates are required to be rated in one of the three highest
rating categories by at least one nationally recognized rating organization.
See "Certificate Ratings" in the accompanying Prospectus for a discussion of
the primary factors upon which the ratings are based.
EXCHANGE LISTING
We will apply to list the Certificates on the Luxembourg Stock Exchange. We
cannot guaranty that the application for the listing will be accepted. You
should consult with Bankers Trust Luxembourg S.A., the Luxembourg listing agent
for the Certificates, 14 Boulevard F.D. Roosevelt, L-2450 Luxembourg, phone
number (352) 46 02 41, to determine whether or not the Certificates are listed
on the Luxembourg Stock Exchange.
S-13
<PAGE>
MBNA'S CREDIT CARD PORTFOLIO
GENERAL
The receivables (the "Receivables") conveyed or to be conveyed to the Trust
by MBNA America Bank, National Association ("MBNA") pursuant to a pooling and
servicing agreement dated as of August 4, 1994 (as amended from time to time,
the "Agreement") between MBNA, as seller (the "Seller") and as servicer of the
Receivables, and The Bank of New York, as trustee (the "Trustee"), have been or
will be generated from transactions made by holders of selected MasterCard and
VISA credit card accounts (the "Accounts"), including premium accounts and
standard accounts, from the portfolio of MasterCard and VISA accounts owned by
the Seller (the "Bank Portfolio").
BILLING AND PAYMENTS
MBNA, using MBNA Hallmark Information Services, Inc. as its service bureau,
generates and mails to cardholders monthly statements summarizing account
activity and processes cardholder monthly payments. Currently, cardholders must
make a monthly minimum payment at least equal to the greater of (i) 2% of the
statement balance plus past due amounts and (ii) a stated minimum payment
(generally $15) plus past due amounts. Certain eligible cardholders are given
the option periodically to take a payment deferral.
The finance charges on purchases which are assessed monthly are calculated by
multiplying the account's average daily purchase balance by the applicable
daily periodic rate, and multiplying the result by the number of days in the
billing cycle. Finance charges are calculated on purchases from the date of the
purchase or the first day of the billing cycle in which the purchase is posted
to the account, whichever is later. Monthly periodic finance charges are not
assessed in most circumstances on new purchases if all balances shown on the
previous billing statement are paid by the due date, which is generally 25 days
after the billing date. Monthly periodic finance charges are not assessed in
most circumstances on previous purchases if all balances shown on the two
previous billing statements are paid by their respective due dates. The finance
charges which are assessed monthly on cash advances (including balance
transfers) are calculated by multiplying the account's average cash advance
balance by the applicable daily periodic rate, and multiplying the result by
the number of days in the billing cycle. Finance charges are calculated on cash
advances (including balance transfers) from the date of the transaction.
Currently, MBNA generally treats the day on which a cash advance check is
deposited or cashed as the transaction date for such check.
MBNA offers fixed rate and variable rate credit card accounts. MBNA also
offers temporary promotional rates.
MBNA assesses annual membership fees on certain accounts although under
various marketing programs these fees may be waived or rebated. For most credit
card accounts, MBNA also assesses late, overlimit and returned check charges.
MBNA generally assesses a fee on cash advances and certain purchase
transactions. Generally, a cash advance fee is not assessed on balance
transfers.
DELINQUENCY AND GROSS CHARGE-OFF EXPERIENCE
An account is contractually delinquent if the minimum payment is not received
by the due date indicated on the customer's statement. Efforts to collect
contractually delinquent credit card receivables currently are made by MBNA's
Customer Assistance personnel. Collection activities include statement
messages, telephone calls and formal collection letters. MBNA employs two
principal computerized systems for collecting past due accounts. The Predictive
Management System analyzes each cardholder's purchase and repayment habits and
selects accounts for initial contact with the objective of contacting the
highest risk accounts first. The accounts selected are queued to MBNA's
proprietary Outbound Call Management System ("OCMS"). OCMS sorts accounts by a
number of factors, including time zone, degree of delinquency and dollar amount
due. OCMS automatically dials delinquent accounts in order of priority.
Representatives are automatically linked to the cardholder's account
information and voice line when a contact is established.
S-14
<PAGE>
Accounts are worked continually at each stage of delinquency through the 180
day past due level. As an account enters the 180 day delinquency level, it is
classified as a potential charge-off. Accounts failing to make a payment during
the 180 day cycle are written off. Managers may defer a charge-off of an
account for another month, pending continued payment activity or other special
circumstances. Senior manager approval is required on all exceptions to charge-
off. Accounts of cardholders in bankruptcy are currently charged-off no later
than is consistent with this policy.
The Federal Financial Institutions Examination Council, on June 30, 1998,
proposed a revised policy statement on the classification of retail credit. If
adopted, the revised policy statement could establish, effective January 1,
2001, a uniform charge-off period of 150 days delinquency for open-end and
closed-end credit. Alternatively, the proposal also contains guidance that
would, effective January 1, 1999, standardize the methodology for implementing
the existing 180 day charge-off policy requirement for open-end credit. The
revised policy statement could also, effective January 1, 1999, provide
guidance for loans affected by bankruptcy, fraudulent activity and death;
establish standards for re-aging, extending, deferring or rewriting of past due
accounts; and broaden the circumstances under which partial payments are
recognized as full payments for purposes of determining that a loan is no
longer delinquent.
The following tables set forth the delinquency and gross charge-off
experience for each of the periods shown for the Bank Portfolio of credit card
accounts. The Bank Portfolio's delinquency and gross charge-off experience is
comprised of segments which may, when taken individually, have delinquency and
gross charge-off characteristics different from those of the overall Bank
Portfolio of credit card accounts. As of the beginning of the day on ,
, the Receivables in the Trust Portfolio represented approximately % of the
Bank Portfolio. Because the Trust Portfolio is only a portion of the Bank
Portfolio, actual delinquency and gross charge-off experience with respect to
the Receivables may be different from that set forth below for the Bank
Portfolio. There can be no assurance that the delinquency and gross charge-off
experience for the Receivables in the future will be similar to the historical
experience of the Bank Portfolio set forth below.
DELINQUENCY EXPERIENCE
BANK PORTFOLIO
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
, ,
----------------------- -------------------------------------------------------------------------
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 Outstand-
ing(1) $ $ $ $
Receivables Delin-
quent:
35 - 64 Days $ % $ % $ % $ %
65 - 94 Days
95 or more
----------- ----- ------------ ----- ----------- ----- ------------ -----
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-15
<PAGE>
GROSS CHARGE-OFF EXPERIENCE
BANK PORTFOLIO
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
MONTHS
ENDED YEAR ENDED ,
, -------------------
199 199 199 199
--------- ----- ----- -----
<S> <C> <C> <C> <C>
Average Receivables Outstanding(1)............. $ $ $ $
Total Gross Charge-Offs(2).....................
Total Gross 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 , 199 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 and the Collateral Interest on
the basis of the percentage equivalent of the ratio which the amount of the
Investor Percentage, with regard to Finance Charge Receivables, of cardholder
charges for goods and services in the Accounts bears to the total amount of
cardholder charges for goods and services in the MasterCard and VISA credit
card accounts owned by MBNA, as reasonably estimated by the Seller. MasterCard
and VISA may from time to time change the amount of Interchange reimbursed to
banks issuing their credit cards. Interchange will be treated as collections of
Finance Charge Receivables for the purposes of determining the amount of
Finance Charge Receivables, allocating collections of Finance Charge
Receivables, making required monthly payments, and calculating the Portfolio
Yield. Under the circumstances described herein, Interchange will be used to
pay a portion of the Investor Servicing Fee required to be paid on each
Transfer Date. See "Description of Series Provisions--Servicing Compensation
and Payment of Expenses" in this Prospectus Supplement and "MBNA's Credit Card
Activities--Interchange" in the accompanying Prospectus.
THE RECEIVABLES
The Receivables conveyed to the Trust arise in Accounts selected from the
Bank Portfolio on the basis of criteria set forth in the Agreement as applied
on June 22, 1994 (the "Cut-Off Date") and, with respect to Additional Accounts,
as of the related date of their designation (the "Trust Portfolio"). Pursuant
to the Agreement, the Seller has the right, subject to certain limitations and
conditions set forth therein, to designate from time to time Additional
Accounts and to transfer to the Trust all Receivables of such Additional
Accounts, whether such Receivables are then existing or thereafter created. Any
Additional Accounts designated pursuant to the Agreement must be Eligible
Accounts as of the date the Seller designates such accounts as Additional
Accounts. On September 19, 1994, November 15, 1994, March 30, 1995, July 6,
1995, October 3, 1995, March 8, 1996, May 30, 1996, September 4, 1996, October
3, 1996, November 5, 1996, February 4, 1997, April 4, 1997, July 2, 1997,
October 2, 1997, December 17, 1997, April 10, 1998 and July 2, 1998, the Seller
designated Additional Accounts and conveyed the Receivables arising therein to
the Trust, which included approximately $1.487 billion, $1.087 billion, $1.288
billion, $1.094 billion, $1.193 billion, $1.981 billion, $1.685 billion, $1.986
billion, $1.087 billion, $690.6 million, $1.681 billion, $1.392 billion, $2.472
billion, $1.23 billion, $1.862 billion, $2.135 billion and $1.316 billion of
Principal Receivables,
S-16
<PAGE>
respectively. In addition, the Seller will be required to designate Additional
Accounts, to the extent available, (a) to maintain the Seller Interest so that,
during any period of 30 consecutive days, the Seller Interest averaged over
that period equals or exceeds the Minimum Seller Interest for the same period
and (b) to maintain, for so long as certificates of any Series (including the
Certificates) remain outstanding, an aggregate amount of Principal Receivables
equal to or greater than the Minimum Aggregate Principal Receivables. "Minimum
Seller Interest" for any period means 7% of the average Principal Receivables
for such period; provided, however, that the Seller may reduce the Minimum
Seller Interest to not less than 2% of the average Principal Receivables for
such period upon satisfaction of the Rating Agency Condition and certain other
conditions to be set forth in the Agreement. "Minimum Aggregate Principal
Receivables" means, with respect to all Series then outstanding, unless
otherwise provided in the related Series Supplement, an amount equal to the sum
of the numerators used in the calculation of the Investor Percentages with
respect to Principal Receivables for all outstanding Series on such date;
provided, however, that with respect to any Series in its Rapid Accumulation
Period, or such other period as designated in the related Series Supplement,
with an investor interest as of such date of determination equal to the
principal funding account balance relating to such Series, taking into account
any deposit to be made to the principal funding account relating to such Series
on the Transfer Date following such date of determination, the numerator used
in the calculation of the Investor Percentage with respect to Principal
Receivables relating to such Series shall, solely for the purpose of the
definition of Minimum Aggregate Principal Receivables, be deemed to equal zero;
provided further, however, that the Minimum Aggregate Principal Receivables may
be reduced to a lesser amount at any time if the Rating Agency Condition is
satisfied. The Seller will convey the Receivables then existing or thereafter
created under such Additional Accounts to the Trust. Further, pursuant to the
Agreement, the Seller will have the right (subject to certain limitations and
conditions) to designate certain Removed Accounts and to require the Trustee to
reconvey all Receivables in such Removed Accounts to the Seller, whether such
Receivables are then existing or thereafter created. Throughout the term of the
Trust, the Accounts from which the Receivables arise will be the Accounts
designated by the Seller on the Cut-Off Date plus any Additional Accounts minus
any Removed Accounts. As of the Cut-Off Date and, with respect to Receivables
in Additional Accounts, as of the related date of their conveyance to the
Trust, and on the date any new Receivables are created, the Seller will
represent and warrant to the Trust that the Receivables meet the eligibility
requirements specified in the Agreement. See "Description of Series
Provisions--Representations and Warranties" in the accompanying Prospectus.
The Receivables in the Trust Portfolio, as of the beginning of the day on
, , 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 all 50 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.
S-17
<PAGE>
The following tables summarize the Trust Portfolio by various criteria as of
the beginning of the day on , . Because the future composition of
the Trust Portfolio may change over time, these tables are not necessarily
indicative of the composition of the Trust Portfolio at any subsequent time.
COMPOSITION BY ACCOUNT BALANCE
TRUST PORTFOLIO
<TABLE>
<CAPTION>
NUMBER PERCENTAGE OF PERCENTAGE
OF TOTAL NUMBER OF TOTAL
ACCOUNT BALANCE RANGE ACCOUNTS OF 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>
COMPOSITION BY CREDIT LIMIT
TRUST PORTFOLIO
<TABLE>
<CAPTION>
PERCENTAGE OF PERCENTAGE
NUMBER TOTAL NUMBER OF TOTAL
CREDIT LIMIT RANGE OF ACCOUNTS OF ACCOUNTS RECEIVABLES RECEIVABLES
- ------------------ ----------- ------------- --------------- -----------
<S> <C> <C> <C> <C>
Less than or equal to
$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>
COMPOSITION BY PERIOD OF DELINQUENCY
TRUST PORTFOLIO
<TABLE>
<CAPTION>
PERIOD OF DELINQUENCY PERCENTAGE OF PERCENTAGE
(DAYS CONTRACTUALLY NUMBER TOTAL NUMBER OF TOTAL
DELINQUENT) OF ACCOUNTS OF 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>
S-18
<PAGE>
COMPOSITION BY ACCOUNT AGE
TRUST PORTFOLIO
<TABLE>
<CAPTION>
PERCENTAGE OF PERCENTAGE
NUMBER TOTAL NUMBER OF TOTAL
ACCOUNT AGE OF ACCOUNTS OF 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>
GEOGRAPHIC DISTRIBUTION OF ACCOUNTS
TRUST PORTFOLIO
<TABLE>
<CAPTION>
PERCENTAGE OF PERCENTAGE
NUMBER TOTAL NUMBER OF TOTAL
STATE OF ACCOUNTS OF ACCOUNTS RECEIVABLES RECEIVABLES
- ----- ----------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
[California................... % $ %
Texas.........................
New York......................
Florida.......................
Pennsylvania..................
New Jersey....................
Illinois......................
Ohio..........................
Maryland......................
Michigan......................
Other] .......................
---- ---- ----- ----
Total....................... % $ %
==== ==== ===== ====
</TABLE>
MATURITY ASSUMPTIONS
The Agreement provides that the holders of the Class A Certificates (the
"Class A Certificateholders") will not receive payments of principal until the
Scheduled Payment Date, or earlier in the event of a Pay Out Event which
results in the commencement of the Rapid Amortization Period. The holders of
the Class B Certificates (the "Class B Certificateholders" and, together with
the Class A Certificateholders, the "Certificateholders") will not begin to
receive principal until the final principal payment on the Class A Certificates
has been made.
CONTROLLED ACCUMULATION PERIOD
On each Transfer Date during the Controlled Accumulation Period, an amount
equal to, for each Monthly Period, the least of (a) the Available Investor
Principal Collections, (b) the applicable "Controlled Deposit Amount," which is
equal to the sum of the applicable Controlled Accumulation Amount for such
Monthly Period and the applicable Accumulation Shortfall, if any, and (c) the
Adjusted Investor Interest prior to any
S-19
<PAGE>
deposits on such day, will be deposited in the Principal Funding Account
established by the Trustee until the amount on deposit in the Principal Funding
Account (the "Principal Funding Account Balance") equals the Investor Interest.
Amounts in the Principal Funding Account are expected to be available to pay in
full, the Class A Investor Interest and, after the payment of the Class A
Investor Interest in full, the Class B Investor Interest on the Scheduled
Payment Date, and, after the deposit of the Class A Investor Interest and the
Class B Investor Interest in full in the Distribution Account, the Collateral
Interest Amount on the Transfer Date relating to the Scheduled Payment Date.
Although it is anticipated that collections of Principal Receivables will be
available on each Transfer Date during the Controlled Accumulation Period to
make a deposit of the applicable Controlled Deposit Amount and that the Class A
Investor Interest will be paid to the Class A Certificateholders and the Class
B Investor Interest will be paid to the Class B Certificateholders on the
Scheduled Payment Date and the Collateral Interest Amount will be paid to the
holder of the Collateral Interest (the "Collateral Interest Holder") on the
Transfer Date relating to the Scheduled Payment Date, no assurance can be given
in this regard. If the amount required to pay the Class A Investor Interest,
the Class B Investor Interest and the Collateral Interest Amount in full is not
available on the Scheduled Payment Date, a Pay Out Event will occur and the
Rapid Amortization Period will commence.
RAPID AMORTIZATION PERIOD
If a Pay Out Event occurs during either the Revolving Period or the
Controlled Accumulation Period, the Rapid Amortization Period will commence. If
a Pay Out Event occurs during the Controlled Accumulation Period, any amount on
deposit in the Principal Funding Account will be paid to the Class A
Certificateholders and, after the Class A Investor Interest has been paid in
full, the Class B Certificateholders on the first Distribution Date with
respect to the Rapid Amortization Period. In addition, to the extent that the
Class A Investor Interest has not been paid in full, the Class A
Certificateholders will be entitled to monthly payments of principal equal to
the Available Investor Principal Collections until the earlier of (a) the date
on which the Class A Certificates have been paid in full, (b) the Series 199 -
Termination Date and (c) the Trust Termination Date. After the Class A
Certificates have been paid in full and if the Series 1998 - Termination Date
or the Trust Termination Date has not occurred, Available Investor Principal
Collections will be paid to the Class B Certificateholders on each Distribution
Date until the earliest of (a) the date on which the Class B Certificates have
been paid in full, (b) the Series 199 - Termination Date and (c) the Trust
Termination Date.
PAY OUT EVENTS
A Pay Out Event occurs, either automatically or after specified notice, upon
(a) the failure of the Seller to make certain payments or transfers of funds
for the benefit of the Certificateholders within the time periods stated in the
Agreement, (b) certain material breaches of certain representations, warranties
or covenants of the Seller, (c) certain insolvency events involving the Seller,
(d) the average of the Portfolio Yields for any three consecutive Monthly
Periods being less than the average of the Base Rates for such period, (e) the
Trust becoming an "investment company" within the meaning of the Investment
Company Act of 1940, as amended, (f) the failure of the Seller to convey
Receivables arising under Additional Accounts or Participations to the Trust
when required by the Agreement, (g) the occurrence of a Servicer Default which
would have a material adverse effect on the Certificateholders, (h)
insufficient monies available to pay the Investor Interest in full on the
Scheduled Payment Date, or (i) the Seller becomes unable for any reason to
transfer Receivables to the Trust in accordance with the provisions of the
Agreement. See "Description of Series Provisions--Pay Out Events" in this
Prospectus Supplement and in the accompanying Prospectus. The term "Base Rate"
means, with respect to any Monthly Period, the annualized percentage equivalent
of a fraction, the numerator of which is the sum of the Class A Monthly
Interest, the Class B Monthly Interest and the Collateral Minimum Monthly
Interest, each for the related Interest Period and the Certificateholder
Servicing Fee and Servicer Interchange, each for such Monthly Period, and the
denominator of which is the Investor Interest as of the close of business on
the last day of such Monthly Period. The term "Portfolio Yield" means, with
respect to any Monthly Period, the annualized percentage equivalent of a
fraction, the numerator of which is an amount equal to the sum of collections
of Finance Charge Receivables, annual membership fees, Principal Funding
Investment
S-20
<PAGE>
Proceeds, the amount of any investment earnings (net of investment losses and
expenses), if any, on funds on deposit in the Interest Funding Account for the
related Transfer Date ("Interest Funding Investment Proceeds") and amounts
withdrawn from the Reserve Account, if any, deposited into the Finance Charge
Account and allocable to the Certificates and the Collateral Interest for such
Monthly Period, calculated on a cash basis after subtracting the Aggregate
Investor Default Amount for such Monthly Period, and the denominator of which
is the Investor Interest as of the close of business on the last day of such
Monthly Period.
PAYMENT RATES
The following table sets forth the highest and lowest cardholder monthly
payment rates for the Bank Portfolio during any month in the period shown and
the average cardholder monthly payment rates for all months during the periods
shown, in each case calculated as a percentage of total opening monthly account
balances during the periods shown. Payment rates shown in the table are based
on amounts which would be deemed payments of Principal Receivables and Finance
Charge Receivables with respect to the Accounts.
CARDHOLDER MONTHLY PAYMENT RATES
BANK PORTFOLIO
<TABLE>
<CAPTION>
MONTHS
ENDED YEAR ENDED ,
, -----------------
199 199 199 199
-------- ----- ----- -----
<S> <C> <C> <C> <C>
Lowest Month................................. % % % %
Highest Month................................ % % % %
Monthly Average.............................. % % % %
</TABLE>
Generally, cardholders must make a monthly minimum payment equal to 2.0% of
the statement balance plus past due amounts. However, the cardholder was and is
generally required to make a monthly minimum payment (generally $15) plus past
due amounts. There can be no assurance that the cardholder monthly payment
rates in the future will be similar to the historical experience set forth
above. In addition, the amount of collections of Receivables may vary from
month to month due to seasonal variations, general economic conditions and
payment habits of individual cardholders. There can be no assurance that
collections of Principal Receivables with respect to the Trust Portfolio will
be similar to the historical experience set forth above or that deposits into
the Principal Funding Account or the Distribution Account, as applicable, will
be made in accordance with the applicable Controlled Accumulation Amount. If a
Pay Out Event occurs, the average life of the Certificates and the Collateral
Interest could be significantly reduced.
Because there may be a slowdown in the payment rate below the payment rates
used to determine the Controlled Accumulation Amounts, or a Pay Out Event may
occur which would initiate the Rapid Amortization Period, there can be no
assurance that the actual number of months elapsed from the date of issuance of
Series 199 - to its final Distribution Date will equal the expected number of
months. As described under "Description of Series Provisions--Postponement of
Controlled Accumulation Period" in this Prospectus Supplement, the Servicer may
shorten the Controlled Accumulation Period and, in such event, there can be no
assurance that there will be sufficient time to accumulate all amounts
necessary to pay the Investor Interest on the Scheduled Payment Date. See
"Maturity Assumptions" and "Risk Factors--Timing of Principal Payments" in the
accompanying 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 , 199 and the calendar months contained in the period ended
, 199 are set forth in the following table.
S-21
<PAGE>
The historical yield figures in the following table are calculated on an
accrual basis. Collections of Receivables included in the Trust will be on a
cash basis and may not reflect the historical yield experience in the table.
During periods of increasing delinquencies or periodic payment deferral
programs, accrual yields may exceed cash amounts accrued and billed to
cardholders. Conversely, cash yields may exceed accrual yields as amounts
collected in a current period may include amounts accrued during prior periods.
However, the Seller believes that during the three calendar years contained in
the period ended , 199 and the calendar months contained in the
period ended , 199 , the yield on an accrual basis closely approximated
the yield on a cash basis. The yield on both an accrual and a cash basis will
be affected by numerous factors, including the monthly periodic finance charges
on the Receivables, the amount of the annual membership fees and other fees,
changes in the delinquency rate on the Receivables and the percentage of
cardholders who pay their balances in full each month and do not incur monthly
periodic finance charges. See "Risk Factors" in the accompanying Prospectus.
BANK PORTFOLIO YIELD
<TABLE>
<CAPTION>
MONTHS
ENDED YEAR 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(6).............................. % % % %
</TABLE>
- --------
(1) Finance Charges and Fees are comprised of monthly periodic finance charges
and other credit card fees.
(2) Average Account Monthly Accrued Finance Charges and Fees are presented net
of adjustments made pursuant to MBNA's normal servicing procedures,
including removal of incorrect or disputed monthly periodic finance
charges.
(3) Average Account Balance includes purchases, cash advances and accrued and
unpaid monthly periodic finance charges and other charges and is 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.
(6) The percentage reflected for the months ended , 199 is an
annualized figure.
The revenue for the Bank Portfolio of credit card accounts shown in the above
table is comprised of monthly periodic finance charges, credit card fees and
Interchange. These revenues vary for each account based on the type and volume
of activity for each account. Because the Trust Portfolio is only a portion of
the Bank Portfolio, actual yield with respect to Receivables may be different
from that set forth above for the Bank Portfolio. See "MBNA's Credit Card
Portfolio" in this Prospectus Supplement and "MBNA's Credit Card Activities" in
the accompanying Prospectus.
MBNA AND MBNA CORPORATION
MBNA America Bank, National Association, a national banking association
located in Wilmington, Delaware, conducts nationwide consumer lending programs
principally comprised of credit card related activities. MBNA International
Bank Limited, a private limited company incorporated under the laws of
S-22
<PAGE>
England and Wales, is a wholly-owned subsidiary of MBNA. On a managed basis,
including loans originated by MBNA International Bank Limited, MBNA maintained
loan accounts with aggregate outstanding balances of $ billion as of ,
. Of this amount, $ billion were MasterCard and VISA credit card loans
originated in the United States. As of , , the premium credit card
portfolio in the United States accounted for % of MBNA's domestic MasterCard
and VISA credit card accounts with outstanding balances and % of MBNA's
outstanding domestic MasterCard and VISA credit card loans.
MBNA conducts all direct customer contact processes with respect to the
cardholder. This involves a 24 hour, 365 day per year Customer Service
telephone staff, Credit Decisions, Correspondence Resolution, Security and
Collection Operations. As of , , MBNA had assets of $ billion,
deposits of $ billion and capital and surplus accounts of $ billion.
MBNA is a wholly-owned subsidiary of the Corporation. MBNA was established in
January 1991 in connection with a restructuring of the former MBNA America
Bank, N.A., a wholly-owned subsidiary of MNC Financial, Inc. The Corporation is
a bank holding company organized under the laws of Maryland in 1990 and
registered under the Bank Holding Company Act of 1956, as amended. As of ,
, the Corporation had consolidated assets of $ billion, consolidated
deposits of $ billion and capital and surplus accounts of $ billion. The
principal asset of the Corporation is the capital stock of MBNA.
YEAR 2000
Many computer applications have been written using two digits rather than
four to define the applicable year, and therefore may not recognize a date
using "00" as the Year 2000. This could result in the inability of the
application to properly process transactions with dates in the Year 2000 or
thereafter. The Corporation has substantially completed an assessment of the
impact of this problem on its computer systems and applications, including the
systems that service the Corporation's loans, and is executing a plan to make
the necessary programming changes, and has begun to test and implement them.
The Corporation expects to complete implementation of the necessary changes to
its mainframe, distributed, and desktop systems by the end of 1998, and its
other systems by mid-1999.
The Corporation is actively monitoring the progress of third parties, whose
systems provide information to the Corporation's system, in achieving Year 2000
compliance and is developing contingency plans to address any failure of a
critical vendor to do so. Based on its efforts and the information available to
date, and assuming the continued availability of staff and other technical
resources, and no unexpected difficulty in implementing system enhancements,
the Corporation believes that it will not incur significant operational
disruptions or material costs as a result of the Year 2000 problem. However,
there can be no assurance that the systems of third parties with which the
Corporation deals will be timely converted and will not adversely affect the
Corporation's business.
DESCRIPTION OF SERIES PROVISIONS
The Certificates and the Collateral Interest will be issued pursuant to the
Agreement, as supplemented by the supplement relating to the Certificates (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 Series 199 - 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 accompanying Prospectus for additional
information concerning the Certificates, the Collateral Interest, the Series
199 - Supplement and the Agreement.
GENERAL
The Class A Certificates, the Class B Certificates and the Collateral
Interest will represent the right to receive certain payments from the assets
of the Trust, including the right to the applicable allocation percentage of
all cardholder payments on the Receivables in the Trust. Each Class A
Certificate represents the right to
S-23
<PAGE>
receive quarterly (or, in certain limited circumstances, monthly) payments of
interest at the Class A Certificate Rate for the related Interest Period and
payments of principal on the Scheduled Payment Date or, on each Distribution
Date with respect to the Rapid Amortization Period, to the extent of the Class
A Investor Interest, funded from collections of Finance Charge Receivables and
annual membership fees and Principal Receivables, respectively, allocated to
the Class A Investor Interest and certain other available amounts. Each Class B
Certificate represents the right to receive quarterly (or, in certain limited
circumstances, monthly) payments of interest at the applicable Class B
Certificate Rate for the related Interest Period, and payments of principal on
the Scheduled Payment Date or, on each Distribution Date with respect to the
Rapid Amortization Period after the Class A Certificates have been paid in
full, to the extent of the Class B Investor Interest, funded from collections
of Finance Charge Receivables and annual membership fees and Principal
Receivables, respectively, allocated to the Class B Investor Interest and
certain other available amounts. In addition to representing the right to
payment from collections of Finance Charge Receivables, annual membership fees
and Principal Receivables, each Class A Certificate also represents the right
to receive payments from Excess Spread, funds on deposit in the Principal
Funding Account (in an amount not to exceed the Class A Investor Interest), the
Interest Funding Account and the Reserve Account and certain investment
earnings thereon, Reallocated Principal Collections and Shared Principal
Collections and certain other available amounts. In addition to representing
the right to payment from collections of Finance Charge Receivables, annual
membership fees and Principal Receivables, each Class B Certificate also
represents the right to receive payments from Excess Spread, funds on deposit
in the Principal Funding Account (to the extent such funds exceed the Class A
Investor Interest and in an amount not to exceed the Class B Investor
Interest), the Interest Funding Account and the Reserve Account and certain
investment earnings thereon, Reallocated Collateral Principal Collections and
Shared Principal Collections and certain other available amounts. Payments of
interest and principal will be made on each Interest Payment Date and
Distribution Date, respectively, 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 Interest Payment Date or
Distribution Date (each, a "Record Date").
The Seller will own the Seller Interest. The holder of the Seller Interest
will receive certain payments from the assets of the Trust, including a
percentage (the "Seller Percentage") of all cardholder payments on the
Receivables in the Trust equal to 100% minus the sum of the applicable Investor
Percentages for all Series of certificates then outstanding. The Seller
Interest may be transferred in whole or in part subject to certain limitations
and conditions set forth in the Agreement, and, at the discretion of the
Seller, the Seller Interest may be held either in an uncertificated form or in
the form of a Seller Certificate. See "Description of the Certificates--Certain
Matters Regarding the Seller and the Servicer" in the accompanying Prospectus.
Application will be made to list the Certificates on the Luxembourg Stock
Exchange; however, no assurance can be given that such listing will be
obtained. Certificateholders should consult with Bankers Trust Luxembourg S.A.,
the Luxembourg listing agent for the Certificates, 14 Boulevard F.D. Roosevelt,
L-2450 Luxembourg, phone number (352) 46 02 41, for the status of such listing.
The Class A Certificates and the Class B Certificates initially will be
represented by certificates registered in the name of Cede, as nominee of DTC.
Unless and until Definitive Certificates are issued, all references in this
Prospectus Supplement to actions by Class A Certificateholders and/or Class B
Certificateholders shall refer to actions taken by DTC upon instructions from
its Participants and all references in this Prospectus Supplement to
distributions, notices, reports and statements to Class A Certificateholders
and/or Class B Certificateholders shall refer to distributions, notices,
reports and statements to DTC or Cede, as the registered holder of the Class A
Certificates and the Class B Certificates, as the case may be, for distribution
to Certificate Owners in accordance with DTC procedures. Certificateholders may
hold their Certificates through DTC (in the United States) or Cedel or
Euroclear (in Europe) if they are participants of such systems, or indirectly
through organizations that are participants in such systems. Cede, as nominee
for DTC, will hold the global Certificates. Cedel and Euroclear will hold
omnibus positions on behalf of the Cedel Participants and the Euroclear
Participants, respectively, through customers' securities accounts in Cedel's
and Euroclear's names on the books of their respective Depositaries which in
turn will hold such positions in customers' securities accounts
S-24
<PAGE>
in the Depositaries' names on the books of DTC. See "Description of the
Certificates--General," "--Book-Entry Registration" and "--Definitive
Certificates" in the accompanying Prospectus.
NEW ISSUANCES
The Agreement provides that the holder of the Seller Interest may have one or
more new Series issued by notifying the Trustee as described under "Description
of the Certificates--New Issuances" in the accompanying Prospectus.
INTEREST PAYMENTS
Interest will accrue on the Class A Certificates at the Class A Certificate
Rate and on the Class B Certificates at the Class B Certificate Rate from the
Closing Date. Interest with respect to the Certificates will be distributed
quarterly on the 15th day of each , , and (or, if such 15th day
is not a business day, the next succeeding business day) (each, an "Interest
Payment Date"), commencing on , ; provided, however, that commencing on
the first Distribution Date with respect to the Rapid Amortization Period, each
Distribution Date will be an "Interest Payment Date." For purposes of this
Prospectus Supplement and the accompanying Prospectus, a "business day" is,
unless otherwise indicated, any day other than a Saturday, a Sunday or a day on
which banking institutions in New York, New York or Newark, Delaware are
authorized or obligated by law or executive order to be closed.
Interest payments on the Class A Certificates and the Class B Certificates on
any Interest Payment Date will be calculated for each of the related Interest
Periods on the outstanding principal balance of the Class A Certificates and
the outstanding principal balance of the Class B Certificates, as applicable,
as of the preceding Record Date, except that interest with respect to the first
Interest Period for the first Interest Payment Date will accrue at the
applicable Certificate Rate on the initial outstanding principal balance of the
Class A Certificates and the initial outstanding principal balance of the Class
B Certificates, as applicable, from the Closing Date. On each Transfer Date,
interest with respect to the Certificates will be deposited into the Interest
Funding Account for payment to Class A Certificateholders and Class B
Certificateholders on each Interest Payment Date. Interest due on the
Certificates but not paid on any Interest Payment Date will be payable on the
next succeeding Interest Payment Date together with additional interest (the
"Additional Interest") on such amount at the applicable Certificate Rate plus
2% per annum (such amount with respect to the Class A Certificates, the "Class
A Additional Interest," and such amount with respect to the Class B
Certificates, the "Class B Additional Interest"). Such Additional Interest
shall accrue on the same basis as interest on the Certificates, and shall
accrue from the Interest Payment Date such overdue interest became due, to but
excluding the Interest Payment Date on which such Additional Interest is paid.
Interest to be deposited in the Interest Funding Account with respect to the
Class A Certificates on any Transfer Date will be paid from Class A Available
Funds for the related Monthly Period and, to the extent such Class A Available
Funds are insufficient to pay such interest, from Excess Spread and Reallocated
Principal Collections (to the extent available) for such Monthly Period.
Interest to be deposited in the Interest Funding Account with respect to the
Class B Certificates on any Transfer Date will be paid from Class B Available
Funds for the related Monthly Period and, to the extent such Class B Available
Funds are insufficient to pay such interest, from Excess Spread and Reallocated
Collateral Principal Collections (to the extent available) for such Monthly
Period remaining after certain other payments have been made with respect to
the Class A Certificates.
"Class A Available Funds" means, with respect to any Monthly Period, an
amount equal to the sum of (a) the Class A Floating Allocation of collections
of Finance Charge Receivables and annual membership fees allocated to the
Investor Interest and deposited in the Finance Charge Account with respect to
such Monthly Period (excluding the portion of collections of Finance Charge
Receivables attributable to Interchange that is allocable to Servicer
Interchange), (b) an amount equal to the product of (i) the Class A Account
Percentage and (ii) the Principal Funding Investment Proceeds, if any, with
respect to the related Transfer Date, (c) Interest Funding Investment Proceeds,
if any, with respect to the related Transfer Date and (d) amounts, if any, to
be withdrawn from the Reserve Account which are required to be included in
Class A Available Funds pursuant to
S-25
<PAGE>
the Series 199 - Supplement with respect to such Transfer Date. "Class A
Account Percentage" means, with respect to any date of determination, the
percentage equivalent of a fraction, the numerator of which is the aggregate
amount on deposit in the Principal Funding Account with respect to Class A
Certificates and the denominator of which is the aggregate amount on deposit in
the Principal Funding Account with respect to Class A Certificates and the
Class B Certificates, in each case as of the last day of the preceding Monthly
Period. "Class B Available Funds" means, with respect to any Monthly Period, an
amount equal to the sum of (a) the Class B Floating Allocation of collections
of Finance Charge Receivables and annual membership fees allocated to the
Investor Interest and deposited in the Finance Charge Account with respect to
such Monthly Period (excluding the portion of collections of Finance Charge
Receivables attributable to Interchange that is allocable to Servicer
Interchange), (b) an amount equal to the product of (i) the Class B Account
Percentage and (ii) the Principal Funding Investment Proceeds, if any, with
respect to the related Transfer Date and (c) amounts, if any, to be withdrawn
from the Reserve Account which are required to be included in Class B Available
Funds pursuant to the Series 199 - Supplement with respect to such Transfer
Date. "Class B Account Percentage" means, with respect to any date of
determination, the percentage equivalent of a fraction, the numerator of which
is the aggregate amount on deposit in the Principal Funding Account with
respect to Class B Certificates and the denominator of which is the aggregate
amount on deposit in the Principal Funding Account with respect to Class A
Certificates and the Class B Certificates, in each case as of the last day of
the preceding Monthly Period.
The Class A Certificates will accrue interest from and including the Closing
Date through but excluding , and with respect to each Interest Period
thereafter, at a rate of % per annum above LIBOR prevailing on the related
LIBOR Determination Date with respect to each such period. The Class B
Certificates will accrue interest from and including the Closing Date through
but excluding , and with respect to each Interest Period thereafter,
at a rate of % per annum above LIBOR prevailing on the related LIBOR
Determination Date with respect to each such period.
The Trustee will determine LIBOR on , for the period from and
including the Closing Date through but excluding , and for each
Interest Period thereafter, on the second London business day prior to each
Interest Payment Date, commencing , (each, a "LIBOR Determination
Date"). For purposes of calculating LIBOR, a "London business day" is any
business day on which dealings in deposits in United States dollars are
transacted in the London interbank market.
For each Interest Period commencing on or after , , the related LIBOR
Determination Date shall be the LIBOR Determination Date prior to the later of
(i) the most recent Interest Payment Date preceding the first day of such
Interest Period and (ii) the Interest Payment Date occurring on the first day
of such Interest Period.
"LIBOR" means, as of any LIBOR Determination Date, the rate for deposits in
United States dollars for a three-month period (or, commencing on the first
Distribution Date with respect to the Rapid Amortization Period, a one-month
period) which appears on Telerate Page 3750 as of 11:00 a.m., London time, on
such date. If such rate does not appear on Telerate Page 3750, the rate for
that LIBOR Determination Date will be determined on the basis of the rates at
which deposits in United States dollars are offered by the Reference Banks at
approximately 11:00 a.m., London time, on that day to prime banks in the London
interbank market for a three-month period (or, commencing on the first
Distribution Date with respect to the Rapid Amortization Period, a one-month
period). The Trustee will request the principal London office of each of the
Reference Banks to provide a quotation of its rate. If at least two such
quotations are provided, the rate for that LIBOR Determination Date will be the
arithmetic mean of such quotations. If fewer than two quotations are provided,
the rate for that LIBOR Determination Date will be the arithmetic mean of the
rates quoted by major banks in New York City, selected by the Servicer, at
approximately 11:00 a.m., New York City time, on that day for loans in United
States dollars to leading European banks for a three-month period (or,
commencing on the first Distribution Date with respect to the Rapid
Amortization Period, a one-month period).
S-26
<PAGE>
"Telerate Page 3750" means the display page currently so designated on the
Dow Jones Telerate Service (or such other page as may replace that page on that
service for the purpose of displaying comparable rates or prices).
"Reference Banks" means four major banks in the London interbank market
selected by the Servicer.
The Class A Certificate Rate and the Class B Certificate Rate applicable to
the then current and immediately preceding Interest Period may be obtained by
telephoning the Trustee at its Corporate Trust Office at (212) 815-5738.
Interest to be deposited into the Interest Funding Account with respect to
the Certificates will be calculated on the basis of the actual number of days
in the related Interest Period and a 360-day year.
PRINCIPAL PAYMENTS
On each Transfer Date relating to the Revolving Period (which begins on the
Closing Date and ends at the commencement of the Controlled Accumulation Period
or, if earlier, the Rapid Amortization Period), collections of Principal
Receivables allocable to the Investor Interest will, subject to certain
limitations, including the allocation of any Reallocated Principal Collections
with respect to the related Monthly Period to pay the Class A Required Amount
and the Class B Required Amount, be treated as Shared Principal Collections.
On each Transfer Date relating to the Controlled Accumulation Period, the
Trustee will deposit in the Principal Funding Account an amount equal to the
least of (a) Available Investor Principal Collections with respect to such
Transfer Date, (b) the applicable Controlled Deposit Amount and (c) the
Adjusted Investor Interest prior to any deposits on such date. Amounts in the
Principal Funding Account will be paid first to Class A Certificateholders (in
an amount not to exceed the Class A Investor Interest) and then to Class B
Certificateholders (to the extent such funds exceed the Class A Investor
Interest and in an amount not to exceed the Class B Investor Interest), in each
case, on the Scheduled Payment Date, and lastly to the Collateral Interest
Holder (to the extent such funds exceed the sum of the Class A Investor
Interest and the Class B Investor Interest and in an amount not to exceed the
Collateral Interest Amount) on the Transfer Date preceding the Scheduled
Payment Date (in each case, unless paid earlier due to the commencement of the
Rapid Amortization Period). During the Controlled Accumulation Period, the
portion of Available Investor Principal Collections not applied to Class A
Monthly Principal, Class B Monthly Principal or Collateral Monthly Principal on
a Transfer Date will generally be treated as Shared Principal Collections.
"Available Investor Principal Collections" means, with respect to any Monthly
Period, an amount equal to the sum of (a) (i) collections of Principal
Receivables received during such Monthly Period and certain other amounts
allocable to the Investor Interest, minus (ii) the amount of Reallocated
Principal Collections with respect to such Monthly Period used to fund the
Required Amount, plus (b) any Shared Principal Collections with respect to
other Series in Group One that are allocated to the Series of the Trust
represented by the Certificates and the Collateral Interest ("Series 199 - ").
On each Distribution Date with respect to the Rapid Amortization Period, the
Class A Certificateholders will be entitled to receive Available Investor
Principal Collections for the related Monthly Period in an amount up to the
Class A Investor Interest until the earliest of the date the Class A
Certificates are paid in full, the Series 199 - Termination Date and the Trust
Termination Date. After payment in full of the Class A Investor Interest, the
Class B Certificateholders will be entitled to receive, on each Distribution
Date with respect to the Rapid Amortization Period, Available Investor
Principal Collections for the related Monthly Period in an amount up to the
Class B Investor Interest until the earliest of the date the Class B
Certificates are paid in full, the Series 199 - Termination Date and the Trust
Termination Date. After payment in full of the Class B Investor Interest, the
Collateral Interest Holder will be entitled to receive on each Transfer Date,
Available Investor Principal Collections until the earliest of the date the
Collateral Interest is paid in full, the
S-27
<PAGE>
Series 199 - Termination Date and the Trust Termination Date. See "--Pay Out
Events" below for a discussion of events which might lead to the commencement
of the Rapid Amortization Period.
POSTPONEMENT OF CONTROLLED ACCUMULATION PERIOD
Upon written notice to the Trustee, the Servicer may elect to postpone the
commencement of the Controlled Accumulation Period, and extend the length of
the Revolving Period, subject to certain conditions including those set forth
below. The Servicer may make such election only if the Accumulation Period
Length (determined as described below) is less than twelve months. On the
Determination Date immediately preceding the Distribution Date, and each
Determination Date thereafter, until the Controlled Accumulation Period begins,
the Servicer will determine the "Accumulation Period Length," which is the
number of whole months expected to be required to fully fund the Principal
Funding Account no later than the Scheduled Payment Date, based on (a) the
expected monthly collections of Principal Receivables expected to be
distributable to the certificateholders of all Series (excluding certain other
Series), assuming a principal payment rate no greater than the lowest monthly
principal payment rate on the Receivables for the preceding twelve months and
(b) the amount of principal expected to be distributable to certificateholders
of all Series (excluding certain other Series) which are not expected to be in
their revolving periods during the Controlled Accumulation Period; provided,
however, that the calculation of Accumulation Period Length may be changed at
any time if the Rating Agency Condition is satisfied. If the Accumulation
Period Length is less than twelve months, the Servicer may, at its option,
postpone the commencement of the Controlled Accumulation Period such that the
number of months included in the Controlled Accumulation Period will be equal
to or exceed the Accumulation Period Length. The effect of the foregoing
calculation is to permit the reduction of the length of the Controlled
Accumulation Period based on the investor interest of certain other Series
which are scheduled to be in their revolving periods during the Controlled
Accumulation Period and on increases in the principal payment rate occurring
after the Closing Date. The length of the Controlled Accumulation Period will
not be determined to be less than one month.
"Rating Agency Condition" means the notification in writing by each Rating
Agency to the Seller, the Servicer and the Trustee that a proposed action will
not result in any Rating Agency reducing or withdrawing its then existing
rating of the investor certificates of any outstanding Series or Class of a
Series with respect to which it is a Rating Agency.
SUBORDINATION
The Class B Certificates and the Collateral Interest will be subordinated to
the extent necessary to fund certain payments with respect to the Class A
Certificates. In addition, the Collateral Interest will be subordinated to the
extent necessary to fund certain payments with respect to the Class B
Certificates. Certain principal payments otherwise allocable to the Class B
Certificateholders may be reallocated to cover amounts in respect of the Class
A Certificates and the Class B Investor Interest may be reduced if the
Collateral Interest Amount is equal to zero. Similarly, certain principal
payments allocable to the Collateral Interest may be reallocated to cover
amounts in respect of the Class A Certificates and the Class B Certificates and
the Collateral Interest Amount may be reduced. To the extent the Class B
Investor Interest is reduced, the percentage of collections of Finance Charge
Receivables allocated to the Class B Certificates in subsequent Monthly Periods
will be reduced. Moreover, to the extent the amount of such reduction in the
Class B Investor Interest is not reimbursed, the amount of principal
distributable to, and the amounts available to be distributed with respect to
interest on, the Class B Certificateholders will be reduced. See "--Allocation
Percentages," "--Reallocation of Cash Flows" and "--Application of
Collections--Excess Spread" in this Prospectus Supplement.
ALLOCATION PERCENTAGES
Pursuant to the Agreement, with respect to each Monthly Period the Servicer
will allocate among the Investor Interest, the investor interest for all other
Series issued and outstanding and the Seller Interest, all amounts
S-28
<PAGE>
collected on Finance Charge Receivables, all amounts collected on Principal
Receivables and all Default Amounts with respect to such Monthly Period. Each
"Monthly Period" will be the period from and including the first day of a
calendar month to and including the last day of such calendar month (other than
the initial Monthly Period, which will commence on and include the Closing Date
and end on and include , ).
Collections of Finance Charge Receivables and Default Amounts at any time and
collections of Principal Receivables during the Revolving Period will be
allocated to the Investor Interest based on the Floating Investor Percentage.
The "Floating Investor Percentage" means, with respect to any Monthly Period,
the percentage equivalent of a fraction, the numerator of which is the Adjusted
Investor Interest as of the close of business on the last day of the preceding
Monthly Period (or with respect to the first Monthly Period, the initial
Investor Interest) and the denominator of which is the greater of (x) the
aggregate amount of Principal Receivables as of the close of business on the
last day of the preceding Monthly Period (or with respect to the first calendar
month in the first Monthly Period, the aggregate amount of Principal
Receivables as of the close of business on the day immediately preceding the
Closing Date and with respect to the second calendar month in the first Monthly
Period, the aggregate amount of Principal Receivables as of the close of
business on the last day of the first calendar month in the first Monthly
Period) and (y) the sum of the numerators used to calculate the Investor
Percentages for allocations with respect to Finance Charge Receivables, Default
Amounts or Principal Receivables, as applicable, for all outstanding Series on
such date of determination; provided, however, that with respect to any Monthly
Period in which an Addition Date occurs or in which a Removal Date occurs on
which, if any Series has been paid in full, Principal Receivables in an
aggregate amount approximately equal to the initial investor interest of such
Series are removed from the Trust, the amount in clause (x) above shall be (i)
the aggregate amount of Principal Receivables in the Trust as of the close of
business on the last day of the prior Monthly Period for the period from and
including the first day of such Monthly Period to but excluding the related
Addition Date or Removal Date and (ii) the aggregate amount of Principal
Receivables in the Trust as of the beginning of the day on the related Addition
Date or Removal Date after adjusting for the aggregate amount of Principal
Receivables added to or removed from the Trust on the related Addition Date or
Removal Date, as the case may be, for the period from and including the related
Addition Date or Removal Date to and including the last day of such Monthly
Period. Such amounts so allocated will be further allocated between the Class A
Certificateholders, Class B Certificateholders and the Collateral Interest
Holder based on the Class A Floating Allocation, the Class B Floating
Allocation and the Collateral Floating Allocation, respectively. The "Class A
Floating Allocation" means, with respect to any Monthly Period, the percentage
equivalent (which percentage shall never exceed 100%) of a fraction, the
numerator of which is equal to the Class A Adjusted Investor Interest as of the
close of business on the last day of the preceding Monthly Period (or with
respect to the first Monthly Period, as of the Closing Date) and the
denominator of which is equal to the Adjusted Investor Interest as of the close
of business on such day. The "Class B Floating Allocation" means, with respect
to any Monthly Period, the percentage equivalent (which percentage shall never
exceed 100%) of a fraction, the numerator of which is equal to the Class B
Adjusted Investor Interest as of the close of business on the last day of the
preceding Monthly Period (or with respect to the first Monthly Period, as of
the Closing Date) and the denominator of which is equal to the Adjusted
Investor Interest as of the close of business on such day. The "Collateral
Floating Allocation" means, with respect to any Monthly Period, the percentage
equivalent (which percentage shall never exceed 100%) of a fraction, the
numerator of which is equal to the Collateral Interest Adjusted Amount as of
the close of business on the last day of the preceding Monthly Period (or with
respect to the first Monthly Period, as of the Closing Date) and the
denominator of which is equal to the Adjusted Investor Interest as of the close
of business on such day.
Collections of Principal Receivables during the Controlled Accumulation
Period and Rapid Amortization Period will be allocated to the Investor Interest
based on the Fixed Investor Percentage. The "Fixed Investor Percentage" means,
with respect to any Monthly Period, the percentage equivalent of a fraction,
the numerator of which is the Investor Interest as of the close of business on
the last day of the Revolving Period and the denominator of which is the
greater of (x) the aggregate amount of Principal Receivables as of the close of
business on the last day of the prior Monthly Period and (y) the sum of the
numerators used to calculate the Investor Percentages for allocations with
respect to Principal Receivables for all outstanding Series for such
S-29
<PAGE>
Monthly Period; provided, however, that with respect to any Monthly Period in
which an Addition Date occurs or in which a Removal Date occurs on which, if
any Series has been paid in full, Principal Receivables in an aggregate amount
approximately equal to the initial investor interest of such Series are removed
from the Trust, the amount in clause (x) above shall be (i) the aggregate
amount of Principal Receivables in the Trust as of the close of business on the
last day of the prior Monthly Period for the period from and including the
first day of such Monthly Period to but excluding the related Addition Date or
Removal Date and (ii) the aggregate amount of Principal Receivables in the
Trust at the beginning of the day on the related Addition Date or Removal Date
after adjusting for the aggregate amount of Principal Receivables added to or
removed from the Trust on the related Addition Date or Removal Date, as the
case may be, for the period from and including the related Addition Date or
Removal Date to and including the last day of such Monthly Period. Such amounts
so allocated will be further allocated between the Class A Certificateholders,
the Class B Certificateholders and the Collateral Interest Holder based on the
Class A Fixed Allocation, the Class B Fixed Allocation and the Collateral Fixed
Allocation, respectively. The "Class A Fixed Allocation" means, with respect to
any Monthly Period, the percentage equivalent (which percentage shall never
exceed 100%) of a fraction, the numerator of which is equal to the Class A
Investor Interest as of the close of business on the last day of the Revolving
Period, and the denominator of which is equal to the Investor Interest as of
the close of business on the last day of the Revolving Period. The "Class B
Fixed Allocation" means, with respect to any Monthly Period, the percentage
equivalent (which percentage shall never exceed 100%) of a fraction, the
numerator of which is equal to the Class B Investor Interest as of the close of
business on the last day of the Revolving Period, and the denominator of which
is equal to the Investor Interest as of the close of business on the last day
of the Revolving Period. The "Collateral Fixed Allocation" means, with respect
to any Monthly Period, the percentage equivalent (which percentage shall never
exceed 100%) of a fraction, the numerator of which is equal to the Collateral
Interest Amount as of the close of business on the last day of the Revolving
Period, and the denominator of which is equal to the Investor Interest as of
the close of business on the last day of the Revolving Period.
"Class A Investor Interest" for any date means an amount equal to (a) the
aggregate initial principal amount of the Class A Certificates, minus (b) the
aggregate amount of principal payments made to Class A Certificateholders prior
to such date, minus (c) the excess, if any, of the aggregate amount of Class A
Investor Charge-Offs for all Transfer Dates preceding such date over the
aggregate amount of any reimbursements of Class A Investor Charge-Offs for all
Transfer Dates preceding such date; provided, however, that the Class A
Investor Interest may not be reduced below zero.
"Class B Investor Interest" for any date means an amount equal to (a) the
aggregate initial principal amount of the Class B Certificates, minus (b) the
aggregate amount of principal payments made to Class B Certificateholders prior
to such date, minus (c) the aggregate amount of Class B Investor Charge-Offs
for all prior Transfer Dates, minus (d) the aggregate amount of Reallocated
Class B Principal Collections for all prior Transfer Dates for which the
Collateral Interest Amount has not been reduced, minus (e) an amount equal to
the aggregate amount by which the Class B Investor Interest has been reduced to
fund the Class A Investor Default Amount on all prior Transfer Dates as
described under "--Defaulted Receivables; Investor Charge-Offs" in this
Prospectus Supplement, and plus (f) the aggregate amount of Excess Spread
allocated and available on all prior Transfer Dates for the purpose of
reimbursing amounts deducted pursuant to the foregoing clauses (c), (d) and
(e); provided, however, that the Class B Investor Interest may not be reduced
below zero.
"Collateral Interest Amount" for any date means an amount equal to (a) $
(the "Initial Collateral Interest Amount"), minus (b) the aggregate amount of
principal payments made to the Collateral Interest Holder prior to such date,
minus (c) the aggregate amount of Collateral Charge-Offs for all prior Transfer
Dates, minus (d) the aggregate amount of Reallocated Principal Collections for
all prior Transfer Dates, minus (e) an amount equal to the aggregate amount by
which the Collateral Interest Amount has been reduced to fund the Class A
Investor Default Amount and the Class B Investor Default Amount on all prior
Transfer Dates as described under "--Defaulted Receivables; Investor Charge-
Offs" in this Prospectus Supplement, and plus (f) the aggregate amount of
Excess Spread allocated and available on all prior Transfer
S-30
<PAGE>
Dates for the purpose of reimbursing amounts deducted pursuant to the foregoing
clauses (c), (d) and (e); provided, however, that the Collateral Interest
Amount may not be reduced below zero.
"Investor Interest," for any date of determination, means an amount equal to
the sum of (a) the Class A Investor Interest, (b) the Class B Investor Interest
and (c) the Collateral Interest Amount.
"Class A Adjusted Investor Interest," for any date of determination, means an
amount equal to the Class A Investor Interest, minus the funds on deposit in
the Principal Funding Account on such date (up to the Class A Investor
Interest).
"Class B Adjusted Investor Interest," for any date of determination, means an
amount equal to the Class B Investor Interest, minus the funds on deposit in
the Principal Funding Account in excess of the Class A Investor Interest on
such date (up to the Class B Investor Interest).
"Collateral Interest Adjusted Amount," for any date of determination, means
an amount equal to the Collateral Interest Amount, minus the funds on deposit
in the Principal Funding Account in excess of the sum of the Class A Investor
Interest and the Class B Investor Interest on such date (up to the Collateral
Interest Amount).
"Adjusted Investor Interest," for any date of determination, means the sum of
(a) the Class A Adjusted Investor Interest, (b) the Class B Adjusted Investor
Interest and (c) the Collateral Interest Adjusted Amount.
REALLOCATION OF CASH FLOWS
With respect to each Transfer Date, the Servicer will determine the amount
(the "Class A Required Amount"), which will be equal to the amount, if any, by
which the sum of (a) Class A Monthly Interest due on the related Distribution
Date and overdue Class A Monthly Interest and Class A Additional Interest, if
any, (b) the Class A Servicing Fee for the related Monthly Period and overdue
Class A Servicing Fee, if any, and (c) the Class A Investor Default Amount, if
any, for the related Monthly Period exceeds the Class A Available Funds for the
related Monthly Period. If the Class A Required Amount is greater than zero,
Excess Spread allocated to Series 199 - and available for such purpose will be
used to fund the Class A Required Amount with respect to such Transfer Date. If
such Excess Spread is insufficient to fund the Class A Required Amount, first,
Reallocated Collateral Principal Collections and, then, Reallocated Class B
Principal Collections will be used to fund the remaining Class A Required
Amount. If Reallocated Principal Collections with respect to the related
Monthly Period, together with Excess Spread, are insufficient to fund the
remaining Class A Required Amount for such related Monthly Period, then the
Collateral Interest (after giving effect to reductions for any Collateral
Charge-Offs and Reallocated Principal Collections on such Transfer Date) will
be reduced by the amount of such excess (but not by more than the Class A
Investor Default Amount for such Monthly Period). In the event that such
reduction would cause the Collateral Interest Amount to be a negative number,
the Collateral Interest Amount will be reduced to zero, and the Class B
Investor Interest (after giving effect to reductions for any Class B Investor
Charge-Offs and any Reallocated Class B Principal Collections for which the
Collateral Interest Amount was not reduced on such Transfer Date) will be
reduced by the amount by which the Collateral Interest Amount would have been
reduced below zero (but not by more than the excess of the Class A Investor
Default Amount, if any, for such Monthly Period over the amount of such
reduction, if any, of the Collateral Interest Amount with respect to such
Monthly Period). In the event that such reduction would cause the Class B
Investor Interest to be a negative number, the Class B Investor Interest will
be reduced to zero and the Class A Investor Interest will be reduced by the
amount by which the Class B Investor Interest would have been reduced below
zero (but not by more than the excess, if any, of the Class A Investor Default
Amount for such Monthly Period over the amount of the reductions, if any, of
the Collateral Interest Amount and the Class B Investor Interest with respect
to such Monthly Period). Any such reduction in the Class A Investor Interest
will have the effect of slowing or reducing the return of principal and
interest to the Class A Certificateholders. In such case, the Class A
Certificateholders will bear directly the credit and other risks associated
with their interests in the Trust. See "--Defaulted Receivables; Investor
Charge-Offs" in this Prospectus Supplement.
S-31
<PAGE>
With respect to each Transfer Date, the Servicer will determine the amount
(the "Class B Required Amount"), which will be equal to the sum of (a) the
amount, if any, by which the sum of (i) Class B Monthly Interest due on the
related Distribution Date and overdue Class B Monthly Interest and Class B
Additional Interest, if any, and (ii) the Class B Servicing Fee for the related
Monthly Period and overdue Class B Servicing Fee, if any, exceeds the Class B
Available Funds for the related Monthly Period and (b) the Class B Investor
Default Amount, if any, for the related Monthly Period. If the Class B Required
Amount is greater than zero, Excess Spread allocated to Series 199 - not
required to pay the Class A Required Amount or reimburse Class A Investor
Charge-Offs will be used to fund the Class B Required Amount with respect to
such Transfer Date. If such Excess Spread is insufficient to fund the Class B
Required Amount, Reallocated Collateral Principal Collections not required to
fund the Class A Required Amount for the related Monthly Period will be used to
fund the remaining Class B Required Amount. If such Reallocated Collateral
Principal Collections with respect to the related Monthly Period are
insufficient to fund the remaining Class B Required Amount, then the Collateral
Interest Amount (after giving effect to reductions for any Collateral Charge-
Offs and Reallocated Principal Collections on such Transfer Date and after any
adjustments made thereto for the benefit of the Class A Certificateholders)
will be reduced by the amount of such deficiency (but not by more than the
Class B Investor Default Amount for such Monthly Period). In the event that
such a reduction would cause the Collateral Interest Amount to be a negative
number, the Collateral Interest Amount will be reduced to zero, and the Class B
Investor Interest will be reduced by the amount by which the Collateral
Interest Amount would have been reduced below zero (but not by more than the
excess of the Class B Investor Default Amount for such Monthly Period over the
amount of such reduction of the Collateral Interest Amount), and the Class B
Certificateholders will bear directly the credit and other risks associated
with their interests in the Trust. See "--Defaulted Receivables; Investor
Charge-Offs" in this Prospectus Supplement.
Reductions of the Class A Investor Interest or Class B Investor Interest
described above shall be reimbursed by, and the Class A Investor Interest or
Class B Investor Interest increased to the extent of, Excess Spread available
for such purposes on each Transfer Date. See "--Application of Collections--
Excess Spread" in this Prospectus Supplement. When such reductions of the Class
A Investor Interest and Class B Investor Interest have been fully reimbursed,
reductions of the Collateral Interest Amount shall be reimbursed until
reimbursed in full in a similar manner.
"Required Amount" for any Monthly Period means the sum of (a) the Class A
Required Amount and (b) the Class B Required Amount, each for such Monthly
Period.
"Reallocated Class B Principal Collections" for any Monthly Period means
collections of Principal Receivables allocable to the Class B Investor Interest
for such Monthly Period in an amount not to exceed the amount applied to fund
the Class A Required Amount, if any; provided, however, that such amount will
not exceed the Class B Investor Interest after giving effect to any Class B
Investor Charge-Offs for the related Transfer Date.
"Reallocated Collateral Principal Collections" for any Monthly Period means
collections of Principal Receivables allocable to the Collateral Interest
Amount for such Monthly Period in an amount not to exceed the amount applied to
fund the Class A Required Amount and the Class B Required Amount, if any;
provided, however, that such amount will not exceed the Collateral Interest
Amount after giving effect to any Collateral Charge-Offs for the related
Transfer Date.
"Reallocated Principal Collections" for any Monthly Period means the sum of
(a) the Reallocated Class B Principal Collections for such Monthly Period, if
any, and (b) the Reallocated Collateral Principal Collections for such Monthly
Period, if any.
APPLICATION OF COLLECTIONS
Allocations. Except as otherwise provided below, the Servicer will deposit
into the Collection Account, no later than the second business day following
the date of processing, any payment collected by the Servicer
S-32
<PAGE>
on the Receivables. On the same day as any such deposit is made, the Servicer
will make the deposits and payments to the accounts and parties as indicated
below; provided, however, that for as long as MBNA remains the Servicer under
the Agreement and (a)(i) the Servicer provides to the Trustee a letter of
credit covering the risk of collection of the Servicer and (ii) the Seller
shall not have received a notice from the Rating Agency that such letter of
credit would result in the lowering of such Rating Agency's then-existing
rating of any Series then outstanding or (b) the Servicer has and maintains a
certificate of deposit rating of P-1 by Moody's and of A-1 by Standard & Poor's
and deposit insurance provided by either BIF or SAIF, then the Servicer may
make such deposits and payments on the business day immediately prior to the
Distribution Date (the "Transfer Date") in an amount equal to the net amount of
such deposits and payments which would have been made had the conditions of
this proviso not applied.
With respect to Series 199 - , 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 the Certificateholders or to the
Collateral Interest Holder and (ii) if at any time prior to such Distribution
Date the amount of Collections deposited in the Collection Account exceeds the
amount required to be deposited pursuant to clause (i) above, the Servicer will
be permitted to withdraw the excess from the Collection Account.
Payment of Interest, Fees and Other Items. On each Transfer Date, the
Trustee, acting pursuant to the Servicer's instructions, will apply the Class A
Available Funds, Class B Available Funds and Collateral Available Funds in the
Finance Charge Account in the following priority:
(a) On each Transfer Date, an amount equal to the Class A Available Funds
will be distributed in the following priority:
(i) an amount equal to Class A Monthly Interest for the related
Distribution Date, plus the amount of any overdue Class A Monthly
Interest and Class A Additional Interest thereon, if any, will be
deposited into the Interest Funding Account for distribution to Class A
Certificateholders on the related Interest Payment Date;
(ii) an amount equal to the Class A Servicing Fee for the related
Monthly Period, plus the amount of any overdue Class A Servicing Fee,
will be paid to the Servicer;
(iii) an amount equal to the Class A Investor Default Amount, if any,
for the related Monthly Period will be treated as a portion of
Available Investor Principal Collections and deposited into the
Principal Account for such Transfer Date; and
(iv) the balance, if any, will constitute a portion of Excess Spread
and will be allocated and distributed as described under "--Excess
Spread" in this Prospectus Supplement.
(b) On each Transfer Date, an amount equal to the Class B Available Funds
will be distributed in the following priority:
(i) an amount equal to Class B Monthly Interest for the related
Distribution Date, plus the amount of any overdue Class B Monthly
Interest and Class B Additional Interest thereon, if any, will be
deposited into the Interest Funding Account for distribution to Class B
Certificateholders on the related Interest Payment Date;
(ii) an amount equal to the Class B Servicing Fee for the related
Monthly Period, plus the amount of any overdue Class B Servicing Fee,
will be paid to the Servicer; and
(iii) the balance, if any, will constitute a portion of Excess Spread
and will be allocated and distributed as described under "--Excess
Spread" in this Prospectus Supplement.
(c) On each Transfer Date, an amount equal to the Collateral Available
Funds will be distributed in the following priority:
S-33
<PAGE>
(i) if MBNA or The Bank of New York is no longer the Servicer, an
amount equal to the Collateral Interest Servicing Fee, plus the amount
of any overdue Collateral Interest Servicing Fee, for the related
Monthly Period will be paid to the Servicer; and
(ii) the balance, if any, will constitute a portion of Excess Spread
and will be allocated and distributed as described under "--Excess
Spread" in this Prospectus Supplement.
"Class A Monthly Interest" with respect to any Distribution Date will equal
the product of (a) the Class A Certificate Rate for the related Interest
Period, (b) the actual number of days in such Interest Period divided by 360
and (c) the outstanding principal balance of the Class A Certificates as of the
related Record Date; provided, however, with respect to the first Distribution
Date, Class A Monthly Interest will be equal to the interest accrued on the
initial outstanding principal balance of the Class A Certificates at the
applicable Class A Certificate Rate for the period from and including the
Closing Date through but excluding , .
"Class B Monthly Interest" with respect to any Distribution Date will equal
the product of (a) the Class B Certificate Rate for the related Interest
Period, (b) the actual number of days in such Interest Period divided by 360
and (c) the outstanding principal balance of the Class B Certificates as of the
related Record Date; provided, however, with respect to the first Distribution
Date, Class B Monthly Interest will be equal to the interest accrued on the
initial outstanding principal balance of the Class B Certificates at the
applicable Class B Certificate Rate for the period from and including the
Closing Date through but excluding , .
"Collateral Available Funds" means, with respect to any Monthly Period, an
amount equal to the Collateral Floating Allocation of collections of Finance
Charge Receivables and annual membership fees allocated to the Investor
Interest with respect to such Monthly Period (excluding the portion of
collections of Finance Charge Receivables attributable to Interchange that is
allocable to Servicer Interchange).
"Excess Spread" means, with respect to any Transfer Date, an amount equal to
the sum of the amounts described in clause (a)(iv), clause (b)(iii) and clause
(c)(ii) above.
Excess Spread. On each Transfer Date, the Trustee, acting pursuant to the
Servicer's instructions, will apply Excess Spread with respect to the related
Monthly Period, to make the following distributions in the following priority:
(a) an amount equal to the Class A Required Amount, if any, with respect
to such Transfer Date will be used to fund the Class A Required Amount;
provided, however, that in the event the Class A Required Amount for such
Transfer Date exceeds the amount of Excess Spread, such Excess Spread shall
be applied first to pay amounts due with respect to such Transfer Date
pursuant to clause (a)(i) above under "--Payment of Interest, Fees and
Other Items," second to pay amounts due with respect to such Transfer Date
pursuant to clause (a)(ii) above under "--Payment of Interest, Fees and
Other Items" and third to pay amounts due with respect to such Transfer
Date pursuant to clause (a)(iii) above under "--Payment of Interest, Fees
and Other Items";
(b) an amount equal to the aggregate amount of Class A Investor Charge-
Offs which have not been previously reimbursed (after giving effect to the
allocation on such Transfer Date of certain other amounts applied for that
purpose) will be deposited into the Principal Account and treated as a
portion of Available Investor Principal Collections for such Transfer Date
as described under "--Payments of Principal" below;
(c) an amount equal to the Class B Required Amount, if any, with respect
to such Transfer Date will be used to fund the Class B Required Amount and
will be applied first to pay amounts due with respect to such Transfer Date
pursuant to clause (b)(i) above under "--Payment of Interest, Fees and
Other Items," second to pay amounts due with respect to such Transfer Date
pursuant to clause (b)(ii) above under "--Payment of Interest, Fees and
Other Items" and third, the amount remaining, up to the Class B Investor
Default Amount, will be deposited into the Principal Account and treated as
a portion of Available Investor Principal Collections for such Transfer
Date as described under "--Payments of Principal" below;
S-34
<PAGE>
(d) an amount equal to the aggregate amount by which the Class B Investor
Interest has been reduced below the initial Class B Investor Interest for
reasons other than the payment of principal to the Class B
Certificateholders (but not in excess of the aggregate amount of such
reductions which have not been previously reimbursed) will be deposited
into the Principal Account and treated as a portion of Available Investor
Principal Collections for such Transfer Date as described under "--Payments
of Principal" below;
(e) an amount equal to the Collateral Minimum Monthly Interest for such
Transfer Date, plus the amount of any Collateral Minimum Monthly Interest
previously due but not distributed to the Collateral Interest Holder on a
prior Transfer Date, will be distributed to the Collateral Interest Holder
for distribution in accordance with the agreement among MBNA and the
Collateral Interest Holder relating to the transfer of the Collateral
Interest to the Collateral Interest Holder (the "Transfer Agreement");
(f) if MBNA or The Bank of New York is the Servicer, an amount equal to
the Collateral Interest Servicing Fee, plus the amount of any overdue
Collateral Interest Servicing Fee, for the related Monthly Period will be
paid to the Servicer;
(g) an amount equal to the aggregate Collateral Default Amount, if any,
for such Transfer Date will be deposited into the Principal Account and
treated as a portion of Available Investor Principal Collections for such
Transfer Date as described under "--Payments of Principal" below;
(h) an amount equal to the aggregate amount by which the Collateral
Interest Amount has been reduced for reasons other than the payment of
principal to the Collateral Interest Holder (but not in excess of the
aggregate amount of such reductions which have not been previously
reimbursed) will be deposited into the Principal Account and treated as a
portion of Available Investor Principal Collections for such Transfer Date
as described under "--Payments of Principal" below;
(i) on each Transfer Date from and after the Reserve Account Funding
Date, but prior to the date on which the Reserve Account terminates as
described under "--Reserve Account" in this Prospectus Supplement, an
amount up to the excess, if any, of the Required Reserve Account Amount
over the Available Reserve Account Amount shall be deposited into the
Reserve Account; and
(j) the balance, if any, after giving effect to the payments made
pursuant to subparagraphs (a) through (i) above shall be distributed to the
Collateral Interest Holder.
"Collateral Minimum Monthly Interest" with respect to any Transfer Date will
equal one-twelfth of the product of (a) % per annum or such lesser amount as
may be designated in the Transfer Agreement (the "Collateral Minimum Rate") and
(b) the Collateral Interest Amount as of the related Record Date or, with
respect to the first Transfer Date, the Initial Collateral Interest Amount;
provided, however, that with respect to the first Transfer Date, Collateral
Minimum Monthly Interest will be equal to the interest accrued on the Initial
Collateral Interest Amount at the Collateral Minimum Rate for the period from
and including the Closing Date through but excluding , . Interest on
the Collateral Interest will be calculated on the basis of a 360-day year and
twelve 30-day months.
Payments of Principal. On each Transfer Date, the Trustee, acting pursuant to
the Servicer's instructions, will distribute Available Investor Principal
Collections (see "--Principal Payments" above) on deposit in the Principal
Account in the following priority:
(a) on each Transfer Date with respect to the Revolving Period, all such
Available Investor Principal Collections will be treated as Shared
Principal Collections and applied as described under "Description of the
Certificates--Shared Principal Collections" in this Prospectus Supplement
and in the accompanying Prospectus;
(b) on each Transfer Date with respect to the Controlled Accumulation
Period or the Rapid Amortization Period, all such Available Investor
Principal Collections will be distributed or deposited in the following
priority:
(i) an amount equal to Class A Monthly Principal will be deposited in
the Principal Funding Account (during the Controlled Accumulation
Period) or distributed (on the related Distribution Date) to the Class
A Certificateholders (during the Rapid Amortization Period);
S-35
<PAGE>
(ii) an amount equal to Class B Monthly Principal will be, after an
amount equal to the Class A Investor Interest has been deposited in the
Principal Funding Account (taking into account deposits to be made on
such Transfer Date), deposited in the Principal Funding Account (during
the Controlled Accumulation Period) or, after the Class A Investor
Interest has been paid in full (taking into account payments to be made
on the related Distribution Date), distributed (on the related
Distribution Date) to the Class B Certificateholders (during the Rapid
Amortization Period); and
(iii) an amount equal to Collateral Monthly Principal will be, after
an amount equal to the sum of the Class A Investor Interest and the
Class B Investor Interest has been deposited in the Principal Funding
Account, deposited in the Principal Funding Account (during the
Controlled Accumulation Period) or, after the Class A Investor Interest
and the Class B Investor Interest has been paid in full (taking into
account distributions to be made on the related Distribution Date),
distributed (on such Transfer Date) to the Collateral Interest Holder
(during the Rapid Amortization Period);
(c) on each Transfer Date with respect to the Controlled Accumulation
Period and the Rapid Amortization Period, the balance of Available Investor
Principal Collections not applied pursuant to (b) above, if any, will be
treated as Shared Principal Collections and applied as described under
"Description of Series Provisions--Shared Principal Collections" in this
Prospectus Supplement and "Description of the Certificates--Shared
Principal Collections" in the accompanying Prospectus.
"Class A Monthly Principal" with respect to any Transfer Date relating to (a)
the Controlled Accumulation Period, prior to the deposit in full of an amount
equal to the Class A Investor Interest in the Principal Funding Account, or (b)
the Rapid Amortization Period, prior to the payment in full of the Class A
Investor Interest, will equal the least of (i) the Available Investor Principal
Collections on deposit in the Principal Account with respect to such Transfer
Date, (ii) for each Transfer Date with respect to the Controlled Accumulation
Period, the Controlled Deposit Amount for such Transfer Date and (iii) the
Class A Adjusted Investor Interest prior to any deposits on such Transfer Date.
"Class B Monthly Principal" with respect to any Transfer Date relating to (a)
the Controlled Accumulation Period, beginning with the Transfer Date on which
an amount equal to the Class A Investor Interest has been deposited in the
Principal Funding Account (after taking into account deposits to be made on
such Transfer Date), or (b) the Rapid Amortization Period, beginning with the
Transfer Date immediately preceding the Distribution Date on which the Class A
Certificates will be paid in full (after taking into account payments to be
made on the related Distribution Date), will equal the least of (i) the
Available Investor Principal Collections on deposit in the Principal Account
with respect to such Transfer Date (minus the portion of such Available
Investor Principal Collections applied to Class A Monthly Principal on such
Transfer Date), (ii) for each Transfer Date with respect to the Controlled
Accumulation Period, prior to the Scheduled Payment Date, the Controlled
Deposit Amount for such Transfer Date (minus the Class A Monthly Principal with
respect to such Transfer Date) and (iii) the Class B Adjusted Investor Interest
prior to any deposits on such Transfer Date.
"Collateral Monthly Principal" with respect to any Transfer Date relating to
the Controlled Accumulation Period, beginning with the Transfer Date on which
an amount equal to the sum of (i) the Class A Investor Interest and (ii) the
Class B Investor Interest has been deposited in the Principal Funding Account
(after taking into account deposits to be made on such Transfer Date), or with
respect to any Transfer Date relating to the Rapid Amortization Period,
beginning with the Transfer Date immediately preceding the Distribution Date on
which the Class B Certificates will be paid in full (after taking into account
payments to be made on the related Distribution Date), will equal the least of
(i) the Available Investor Principal Collections on deposit in the Principal
Account with respect to such Transfer Date (minus the portion of such Available
Investor Principal Collections applied to Class A Monthly Principal and Class B
Monthly Principal on such Transfer Date), (ii) for each Transfer Date with
respect to the Controlled Accumulation Period, the Controlled Deposit Amount
for such Transfer Date (minus the sum of the Class A Monthly Principal and the
Class B Monthly Principal with respect to such Transfer Date) and (iii) the
Collateral Interest Adjusted Amount prior to any deposits on such Transfer
Date.
S-36
<PAGE>
"Controlled Accumulation Amount" means for any Transfer Date with respect to
the Controlled Accumulation Period, $ ; provided, however, that if the
commencement of the Controlled Accumulation Period is delayed as described
above under "--Postponement of Controlled Accumulation Period," the Controlled
Accumulation Amount may be higher than the amount stated above for each
Transfer Date with respect to the Controlled Accumulation Period and will be
determined by the Servicer in accordance with the Agreement based on the
principal payment rates for the Accounts and on the investor interests of other
Series (other than certain excluded Series) which are scheduled to be in their
revolving periods and then scheduled to create Shared Principal Collections
during the Controlled Accumulation Period.
"Accumulation Shortfall" means (a) on the first Transfer Date with respect to
the Controlled Accumulation Period, the excess, if any, of the Controlled
Accumulation Amount for such Transfer Date over the amount deposited in the
Principal Funding Account on such Transfer Date and (b) on each subsequent
Transfer Date with respect to the Controlled Accumulation Period, the excess,
if any, of the applicable Controlled Accumulation Amount for such subsequent
Transfer Date plus any Accumulation Shortfall for the prior Transfer Date over
the amount deposited in the Principal Funding Account on such subsequent
Transfer Date.
SHARED PRINCIPAL COLLECTIONS
Collections of Principal Receivables for any Monthly Period allocated to the
Investor Interest will first be used to cover, with respect to any Monthly
Period during the Controlled Accumulation Period, deposits of the applicable
Controlled Deposit Amount to the Principal Funding Account or the Distribution
Account, and during the Rapid Amortization Period, payments to the
Certificateholders and the Collateral Interest Holder. The Servicer will
determine the amount of collections of Principal Receivables for any Monthly
Period allocated to the Investor Interest remaining after covering required
payments to the Certificateholders and the Collateral Interest Holder and any
similar amount remaining for any other Series in Group One ("Shared Principal
Collections"). The Servicer will allocate the Shared Principal Collections to
cover any scheduled or permitted principal distributions to certificateholders
and deposits to principal funding accounts, if any, for any Series in Group One
which have not been covered out of the collections of Principal Receivables
allocable to such Series and certain other amounts for such Series ("Principal
Shortfalls"). Shared Principal Collections will not be used to cover investor
charge-offs for any Series. If Principal Shortfalls exceed Shared Principal
Collections for any Monthly Period, Shared Principal Collections will be
allocated pro rata among the applicable Series in Group One based on the
relative amounts of Principal Shortfalls. To the extent that Shared Principal
Collections exceed Principal Shortfalls, the balance will, subject to certain
limitations, be paid to the holder of the Seller Interest.
DEFAULTED RECEIVABLES; INVESTOR CHARGE-OFFS
On or before each Transfer Date, the Servicer will calculate the Aggregate
Investor Default Amount for the preceding Monthly Period. The term "Aggregate
Investor Default Amount" means, for any Monthly Period, the sum of the Investor
Default Amounts for such Monthly Period. The term "Investor Default Amount"
means, for any Receivable, the product of (a) the Floating Investor Percentage
on the day the applicable Account became a Defaulted Account and (b) the
aggregate amount of Principal Receivables (other than Ineligible Receivables)
in such account on the day such Account became a Defaulted Account (the
"Default Amount"). A portion of the Aggregate Investor Default Amount will be
allocated to the Class A Certificateholders (the "Class A Investor Default
Amount") on each Transfer Date in an amount equal to the product of the Class A
Floating Allocation applicable during the related Monthly Period and the
Aggregate Investor Default Amount for such Monthly Period. A portion of the
Aggregate Investor Default Amount will be allocated to the Class B
Certificateholders (the "Class B Investor Default Amount") on each Transfer
Date in an amount equal to the product of the Class B Floating Allocation
applicable during the related Monthly Period and the Aggregate Investor Default
Amount for such Monthly Period. A portion of the Aggregate Investor Default
Amount will be allocated to the Collateral Interest Holder (the "Collateral
Default Amount") on each Transfer Date in an amount equal to the product of the
Collateral Floating Allocation applicable during the related Monthly Period and
the Aggregate Investor Default Amount for such Monthly Period.
S-37
<PAGE>
On each Transfer Date, if the Class A Investor Default Amount for such
Transfer Date exceeds the amount of Class A Available Funds, Excess Spread and
Reallocated Principal Collections available to fund such amount with respect to
the Monthly Period immediately preceding such Transfer Date as described under
"--Application of Collections--Excess Spread" in this Prospectus Supplement,
the Collateral Interest Amount (after giving effect to reductions for any
Collateral Charge-Offs and any Reallocated Principal Collections on such
Transfer Date) will be reduced by the amount of such excess, but not more than
the lesser of the Class A Investor Default Amount and the Collateral Interest
Amount (after giving effect to reductions for any Collateral Charge-Offs and
any Reallocated Principal Collections on such Transfer Date) for such Transfer
Date. In the event that such reduction would cause the Collateral Interest
Amount to be a negative number, the Collateral Interest Amount will be reduced
to zero, and the Class B Investor Interest (after giving effect to reductions
for any Class B Investor Charge-Offs and any Reallocated Class B Principal
Collections on such Transfer Date for which the Collateral Interest Amount is
not reduced) will be reduced by the amount by which the Collateral Interest
Amount would have been reduced below zero. In the event that such reduction
would cause the Class B Investor Interest to be a negative number, the Class B
Investor Interest will be reduced to zero, and the Class A Investor Interest
will be reduced by the amount by which the Class B Investor Interest would have
been reduced below zero, but not more than the Class A Investor Default Amount
for such Transfer Date (a "Class A Investor Charge-Off"), which will have the
effect of slowing or reducing the return of principal and interest to the Class
A Certificateholders. If the Class A Investor Interest has been reduced by the
amount of any Class A Investor Charge-Offs, it will be reimbursed on any
Transfer Date (but not by an amount in excess of the aggregate Class A Investor
Charge-Offs) by the amount of Excess Spread allocated and available for such
purpose as described under "--Application of Collections--Excess Spread" in
this Prospectus Supplement.
On each Transfer Date, if the Class B Investor Default Amount for such
Transfer Date exceeds the amount of Excess Spread and Reallocated Collateral
Principal Collections which are allocated and available to fund such amount
with respect to the Monthly Period preceding such Transfer Date as described
under "--Application of Collections--Excess Spread" in this Prospectus
Supplement, the Collateral Interest Amount (after giving effect to reductions
for any Collateral Charge-Offs and any Reallocated Principal Collections on
such Transfer Date and after giving effect to any adjustments with respect
thereto as described in the preceding paragraph) will be reduced by the amount
of such excess but not more than the lesser of the Class B Investor Default
Amount and the Collateral Interest Amount (after giving effect to reductions
for any Collateral Charge-Offs and any Reallocated Principal Collections on
such Transfer Date and after giving effect to any adjustments with respect
thereto as described in the preceding paragraph) for such Transfer Date. In the
event that such reduction would cause the Collateral Interest Amount to be a
negative number, the Collateral Interest Amount will be reduced to zero and the
Class B Investor Interest will be reduced by the amount by which the Collateral
Interest Amount would have been reduced below zero, but not more than the Class
B Investor Default Amount for such Transfer Date (a "Class B Investor Charge-
Off"). The Class B Investor Interest will also be reduced by the amount of
Reallocated Class B Principal Collections in excess of the Collateral Interest
Amount (after giving effect to reductions for any Collateral Charge-Offs and
any Reallocated Collateral Principal Collections on such Transfer Date) and the
amount of any portion of the Class B Investor Interest allocated to the Class A
Certificates to avoid a reduction in the Class A Investor Interest. The Class B
Investor Interest will thereafter be reimbursed (but not in excess of the
unpaid principal balance of the Class B Certificates) on any Transfer Date by
the amount of Excess Spread allocated and available for that purpose as
described under "--Application of Collections--Excess Spread" in this
Prospectus Supplement.
On each Transfer Date, if the Collateral Default Amount for such Transfer
Date exceeds the amount of Excess Spread which is allocated and available to
fund such amount as described under "--Application of Collections--Excess
Spread" in this Prospectus Supplement, the Collateral Interest Amount will be
reduced by the amount of such excess but not more than the lesser of the
Collateral Default Amount and the Collateral Interest Amount for such Transfer
Date (a "Collateral Charge-Off"). The Collateral Interest Amount will also be
reduced by the amount of Reallocated Principal Collections and the amount of
any portion of the Collateral Interest Amount allocated to the Class A
Certificates to avoid a reduction in the Class A Investor Interest or to the
Class B Certificates to avoid a reduction in the Class B Investor Interest. The
Collateral Interest Amount
S-38
<PAGE>
will thereafter be reimbursed on any Transfer Date by the amount of Excess
Spread allocated and available for that purpose as described under "--
Application of Collections--Excess Spread" in this Prospectus Supplement.
PRINCIPAL FUNDING ACCOUNT
Pursuant to the Series 199 - Supplement, the Trustee will establish and
maintain with a Qualified Institution the principal funding account as a
segregated trust account held for the benefit of the Certificateholders and the
Collateral Interest Holder (the "Principal Funding Account"). During the
Controlled Accumulation Period, the Trustee at the direction of the Servicer
shall transfer collections in respect of Principal Receivables (other than
Reallocated Principal Collections) and Shared Principal Collections from other
Series, if any, allocated to the Series 199 - Certificates from the Principal
Account to the Principal Funding Account as described under "--Application of
Collections" in this Prospectus Supplement.
Funds on deposit in the Principal Funding Account will be invested to the
following Transfer Date by the Trustee at the direction of the Servicer in
Permitted Investments. Investment earnings (net of investment losses and
expenses) on funds on deposit in the Principal Funding Account (the "Principal
Funding Investment Proceeds") will be deposited in the Finance Charge Account
and included in Class A Available Funds and Class B Available Funds for such
Interest Period. If, for any Transfer Date, the Principal Funding Investment
Proceeds are less than the Covered Amount, the amount of such deficiency (the
"Reserve Draw Amount") shall be withdrawn, to the extent required and
available, from the Reserve Account and deposited in the Finance Charge Account
and included as Class A Available Funds or Class B Available Funds, as
applicable, for such Transfer Date.
"Covered Amount" means, with respect to any Transfer Date, the sum of (a)
with respect to the Class A Certificates, the product of (i) a fraction, the
numerator of which is the actual number of days in such Interest Period and the
denominator of which is 360, (ii) the Class A Certificate Rate in effect with
respect to such Interest Period and (iii) the aggregate amount on deposit in
the Principal Funding Account with respect to Class A Monthly Principal as of
the Record Date immediately preceding such Transfer Date, and (b) with respect
to the Class B Certificates, the product of (i) a fraction, the numerator of
which is the actual number of days in such Interest Period and the denominator
of which is 360, (ii) the Class B Certificate Rate in effect with respect to
such Interest Period and (iii) the aggregate amount on deposit in the Principal
Funding Account with respect to Class B Monthly Principal as of the Record Date
immediately preceding such Transfer Date.
INTEREST FUNDING ACCOUNT
Pursuant to the Series 199 - Supplement, the Trustee will establish and
maintain with a Qualified Institution the interest funding account as a
segregated trust account held for the benefit of the Certificateholders (the
"Interest Funding Account"). On each Transfer Date, the Trustee, acting
pursuant to the Servicer's instructions, will transfer collections in respect
of Finance Charge Receivables from the Finance Charge Account to the Interest
Funding Account as described under "--Application of Collections" in this
Prospectus Supplement. All amounts on deposit in the Interest Funding Account
on any Transfer Date (after giving effect to any deposits to, or withdrawals
from, the Interest Funding Account to be made on such Transfer Date) will be
invested to the following Transfer Date by the Trustee at the direction of the
Servicer in Permitted Investments. The interest and other investment income
(net of investment expenses and losses) earned on such investments will be
deposited in the Finance Charge Account and treated as Class A Available Funds.
RESERVE ACCOUNT
Pursuant to the Series 199 - Supplement, the Trustee will establish and
maintain with a Qualified Institution the reserve account as a segregated trust
account held for the benefit of the Certificateholders and the Collateral
Interest Holder (the "Reserve Account"). The Reserve Account is established to
assist with the subsequent distribution of interest on the Certificates during
the Controlled Accumulation Period and on the
S-39
<PAGE>
first Transfer Date with respect to the Rapid Amortization Period. On each
Transfer Date from and after the Reserve Account Funding Date, but prior to the
termination of the Reserve Account, the Trustee, acting pursuant to the
Servicer's instructions, will apply Excess Spread allocated to the Certificates
(to the extent described above under "--Application of Collections--Excess
Spread" in this Prospectus Supplement) to increase the amount on deposit in the
Reserve Account (to the extent such amount is less than the Required Reserve
Account Amount). The "Reserve Account Funding Date" will be the Transfer Date
with respect to the Monthly Period which commences no later than three months
prior to the commencement of the Controlled Accumulation Period, or such
earlier date as the Servicer may determine. The "Required Reserve Account
Amount" for any Transfer Date on or after the Reserve Account Funding Date will
be equal to (a) 0.5% of the outstanding principal balance of the Class A
Certificates or (b) any other amount designated by the Seller; provided,
however, that if such designation is of a lesser amount, the Seller shall have
provided the Servicer, the Collateral Interest Holder and the Trustee with
evidence that the Rating Agency Condition has been satisfied and the Seller
shall have delivered to the Trustee a certificate of an authorized officer of
the Seller to the effect that, based on the facts known to such officer at such
time, in the reasonable belief of the Seller, such designation will not cause a
Pay Out Event or an event that, after the giving of notice or the lapse of
time, would cause a Pay Out Event to occur with respect to Series 199 - . On
each Transfer Date, after giving effect to any deposit to be made to, and any
withdrawal to be made from, the Reserve Account on such Transfer Date, the
Trustee will withdraw from the Reserve Account an amount equal to the excess,
if any, of the amount on deposit in the Reserve Account over the Required
Reserve Account Amount and shall distribute such excess to the Collateral
Interest Holder. Any amounts withdrawn from the Reserve Account and distributed
to the Collateral Interest Holder as described above will not be available for
distribution to the Certificateholders.
Provided that the Reserve Account has not terminated as described below, all
amounts on deposit in the Reserve Account on any Transfer Date (after giving
effect to any deposits to, or withdrawals from, the Reserve Account to be made
on such Transfer Date) will be invested to the following Transfer Date by the
Trustee at the direction of the Servicer in Permitted Investments. The interest
and other investment income (net of investment expenses and losses) earned on
such investments will be retained in the Reserve Account (to the extent the
amount on deposit is less than the Required Reserve Account Amount) or
deposited in the Finance Charge Account and treated as Class A Available Funds.
On or before each Transfer Date with respect to the Controlled Accumulation
Period and on the first Transfer Date with respect to the Rapid Amortization
Period, a withdrawal will be made from the Reserve Account, and the amount of
such withdrawal will be deposited in the Finance Charge Account and included as
Class A Available Funds or Class B Available Funds, as provided in the Series
199 - Supplement, for such Transfer Date in an aggregate amount equal to the
lesser of (a) the Available Reserve Account Amount with respect to such
Transfer Date and (b) the Reserve Draw Amount with respect to such Transfer
Date; provided, however, that the amount of such withdrawal shall be reduced to
the extent that funds otherwise would be available to be deposited in the
Reserve Account on such Transfer Date. On each Transfer Date, the amount
available to be withdrawn from the Reserve Account (the "Available Reserve
Account Amount") will be equal to the lesser of the amount on deposit in the
Reserve Account (before giving effect to any deposit to be made to the Reserve
Account on such Transfer Date) and the Required Reserve Account Amount for such
Transfer Date.
The Reserve Account will be terminated upon the earliest to occur of (a) the
termination of the Trust pursuant to the Agreement, (b) the first Transfer Date
with respect to the Rapid Amortization Period and (c) the Transfer Date
immediately preceding the Scheduled Payment Date. Upon the termination of the
Reserve Account, all amounts on deposit therein (after giving effect to any
withdrawal from the Reserve Account on such date as described above) will be
distributed to the Collateral Interest Holder. Any amounts withdrawn from the
Reserve Account and distributed to the Collateral Interest Holder as described
above will not be available for distribution to the Certificateholders.
S-40
<PAGE>
PAY OUT EVENTS
As described above, the Revolving Period will continue through ,
(unless such date is postponed as described under "--Postponement of Controlled
Accumulation Period" in this Prospectus Supplement), unless a Pay Out Event
occurs prior to such date. A "Pay Out Event" refers to any of the following
events:
(a) failure on the part of the Seller (i) to make any payment or deposit
on the date required under the Agreement or the Series 199 - Supplement
(or within the applicable grace period which shall not exceed five days) or
(ii) to observe or perform in any material respect any other covenants or
agreements of the Seller set forth in the Agreement or the Series 199 -
Supplement, which failure has a material adverse effect on the
Certificateholders (which determination shall be made without reference to
whether any funds are available under the Collateral Interest) and which
continues unremedied for a period of 60 days after written notice of such
failure, requiring the same to be remedied, and continues to materially and
adversely affect the interests of the Certificateholders (which
determination shall be made without reference to whether any funds are
available under the Collateral Interest) for such period;
(b) any representation or warranty made by the Seller in the Agreement or
the Series 199 - Supplement, or any information required to be given by
the Seller to the Trustee to identify the Accounts proves to have been
incorrect in any material respect when made or delivered and which
continues to be incorrect in any material respect for a period of 60 days
after written notice of such failure, requiring the same to be remedied,
and as a result of which the interests of the Certificateholders are
materially and adversely affected (which determination shall be made
without reference to whether any funds are available under the Collateral
Interest) and continue to be materially and adversely affected for such
period; provided, however, that a Pay Out Event pursuant to this
subparagraph (b) shall not be deemed to occur thereunder if the Seller has
accepted reassignment of the related Receivable or all such Receivables, if
applicable, during such period (or such longer period as the Trustee may
specify) in accordance with the provisions of the Agreement;
(c) the average of the Portfolio Yields for any three consecutive Monthly
Periods is less than the average of the Base Rates for such period;
(d) a failure by the Seller to convey Receivables arising under
Additional Accounts, or Participations, to the Trust when required by the
Agreement;
(e) any Servicer Default occurs which would have a material adverse
effect on the Certificateholders;
(f) insufficient moneys available to pay the Investor Interest on the
Scheduled Payment Date;
(g) certain events of insolvency, conservatorship or receivership
relating to the Seller;
(h) the Seller becomes unable for any reason to transfer Receivables to
the Trust in accordance with the provisions of the Agreement; or
(i) the Trust becomes an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
In the case of any event described in clause (a), (b) or (e) above, a Pay Out
Event will be deemed to have occurred with respect to the Certificates only if,
after any applicable grace period, either the Trustee or the Certificateholders
and the Collateral Interest Holder evidencing interests aggregating not less
than 50% of the Investor Interest, by written notice to the Seller and the
Servicer (and to the Trustee if given by the Certificateholders) declare that a
Pay Out Event has occurred with respect to the Certificates as of the date of
such notice. In the case of any event described in clause (g), (h) or (i), a
Pay Out Event with respect to all Series then outstanding, and in the case of
any event described in clause (c), (d) or (f), a Pay Out Event with respect to
only the Certificates, will be deemed to have occurred without any notice or
other action on the part of the Trustee or the Certificateholders or all
certificateholders, as appropriate, immediately upon the occurrence of such
event. On the date on which a Pay Out Event is deemed to have occurred, the
Rapid Amortization Period will commence. In such event, distributions of
principal to the Certificateholders will
S-41
<PAGE>
begin on the first Distribution Date following the month in which such Pay Out
Event occurred. If, because of the occurrence of a Pay Out Event, the Rapid
Amortization Period begins on or prior to , , Certificateholders may
begin receiving distributions of principal earlier than they otherwise would
have, which may shorten the average life of the Certificates and the Collateral
Interest.
See "Description of the Certificates--Pay Out Events" in the accompanying
Prospectus for an additional discussion of the consequences of an insolvency,
conservatorship or receivership of the Seller.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
The share of the Servicing Fee allocable to the Investor Interest with
respect to any Transfer Date (the "Investor Servicing Fee") shall be equal to
one-twelfth of the product of (a) 2.0% and (b) the Adjusted Investor Interest
as of the last day of the Monthly Period preceding such Transfer Date;
provided, however, with respect to the first Transfer Date, the Investor
Servicing Fee shall be equal to $ . On each Transfer Date, but only if MBNA
or The Bank of New York is the Servicer, Servicer Interchange with respect to
the related Monthly Period that is on deposit in the Finance Charge Account
shall be withdrawn from the Finance Charge Account and paid to the Servicer in
payment of a portion of the Investor Servicing Fee with respect to such Monthly
Period. The "Servicer Interchange" for any Monthly Period for which MBNA or The
Bank of New York is the Servicer will be an amount equal to the portion of
collections of Finance Charge Receivables allocated to the Investor Interest
with respect to such Monthly Period that is attributable to Interchange;
provided, however, that Servicer Interchange for a Monthly Period shall not
exceed one-twelfth of the product of (i) the Adjusted Investor Interest, as of
the last day of such Monthly Period and (ii) 0.75%; provided further, however,
that with respect to the first Transfer Date, the Servicer Interchange may
equal but shall not exceed $ . In the case of any insufficiency of Servicer
Interchange on deposit in the Finance Charge Account, a portion of the Investor
Servicing Fee with respect to such Monthly Period will not be paid to the
extent of such insufficiency and in no event shall the Trust, the Trustee, the
Certificateholders or the Collateral Interest Holder be liable for the share of
the Servicing Fee to be paid out of Servicer Interchange.
The share of the Investor Servicing Fee allocable to the Class A
Certificateholders with respect to any Transfer Date (the "Class A Servicing
Fee") shall be equal to one-twelfth of the product of (a) the Class A Floating
Allocation, (b) 1.25%, or if MBNA or The Bank of New York is not the Servicer,
2.0% (the "Net Servicing Fee Rate") and (c) the Adjusted Investor Interest as
of the last day of the Monthly Period preceding such Transfer Date; provided,
however, that with respect to the first Transfer Date, the Class A Servicing
Fee shall be equal to $ . The share of the Investor Servicing Fee allocable
to the Class B Certificateholders with respect to any Transfer Date (the "Class
B Servicing Fee") shall be equal to one-twelfth of the product of (a) the Class
B Floating Allocation, (b) the Net Servicing Fee Rate and (c) the Adjusted
Investor Interest as of the last day of the Monthly Period preceding such
Transfer Date; provided, however, that with respect to the first Transfer Date,
the Class B Servicing Fee shall be equal to $ . The share of the Investor
Servicing Fee allocable to the Collateral Interest Holder with respect to any
Transfer Date (the "Collateral Interest Servicing Fee", together with the Class
A Servicing Fee and the Class B Servicing Fee, the "Certificateholder Servicing
Fee") shall be equal to one-twelfth of the product of (a) the Collateral
Floating Allocation, (b) the Net Servicing Fee Rate and (c) the Adjusted
Investor Interest as of the last day of the Monthly Period preceding such
Transfer Date; provided, however, that with respect to the first Transfer Date,
the Collateral Interest Servicing Fee shall be equal to $ . The remainder
of the Servicing Fee shall be paid by the holder of the Seller Interest or
other Series (as provided in the related Series Supplements) or, to the extent
of any insufficiency of Servicer Interchange as described above, not be paid.
In no event shall the Trust, the Trustee, the Certificateholders or the
Collateral Interest Holder be liable for the share of the Servicing Fee to be
paid out of Servicer Interchange. The Class A Servicing Fee and the Class B
Servicing Fee shall be payable to the Servicer solely to the extent amounts are
available for distribution in respect thereof as described under "--Application
of Collections--Payment of Interest, Fees and Other Items" in this Prospectus
Supplement.
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
S-42
<PAGE>
and independent certified public accountants and other fees which are not
expressly stated in the Agreement to be payable by the Trust, the
Certificateholders or the Collateral Interest Holder other than federal, state
and local income and franchise taxes, if any, of the Trust.
REPORTS TO CERTIFICATEHOLDERS
On each Transfer Date, the Trustee will forward to each Certificateholder of
record, a statement prepared by the Servicer setting forth the items described
in "Description of the Certificates--Reports to Certificateholders" in the
accompanying Prospectus. In addition, such statement will include certain
information regarding the Principal Funding Account and the Collateral
Interest, if any, for such Transfer Date.
AMENDMENTS
In addition to being subject to amendment pursuant to any other provisions
relating to amendments in either the Agreement or the Series 199 - Supplement,
the Series 199 - Supplement may be amended by the Seller without the consent
of the Servicer, the Trustee or any Certificateholder if the Seller provides
the Trustee with (a) an opinion of counsel to the effect that such amendment or
modification would reduce the risk that the Trust would be treated as taxable
as a publicly traded partnership pursuant to section 7704 of the Internal
Revenue Code of 1986, as amended (the "Code") and (b) a certificate that such
amendment or modification would not materially and adversely affect any
Certificateholder, provided, however, that no such amendment shall be deemed
effective without the Trustee's consent, if the Trustee's rights, duties and
obligations under the Series 199 - Supplement are thereby modified. Promptly
after the effectiveness of any such amendment, the Seller shall deliver a copy
of such amendment to each of the Servicer, the Trustee and each Rating Agency
described in the Series 199 - Supplement.
ERISA CONSIDERATIONS
GENERAL
Subject to the considerations described below and in the Prospectus, the
Class A Certificates may be purchased by, on behalf of, or with "plan assets"
of any employee benefit or other plan that is subject to the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), or Section 4975
of the Internal Revenue Code of 1986, as amended (each, a "Plan"). Any Plan
fiduciary that proposes to cause a Plan to acquire any of the Class A
Certificates should consult with its counsel with respect to the potential
consequences under ERISA and the Code of the Plan's acquisition and ownership
of such Class A Certificates. See "ERISA Considerations" in the Prospectus.
The Class B Certificates may not be acquired or held by any Plan, other than
an insurance company investing assets of its general account. By its acceptance
of a Class B Certificate, each Class B Certificateholder will be deemed to have
represented and warranted that either (i) it is not and will not be a Plan or
(ii) it is an insurance company, it acquired and will hold the Class B
Certificates solely with assets of its general account, and such acquisition
and holding satisfies the conditions applicable under Sections I and III of
U.S. Department of Labor ("DOL") Prohibited Transaction Class Exemption 95-60.
PTE 98-13
The DOL has issued an individual exemption, Prohibited Transaction Exemption
98-13 (Exemption Application No. D-10304), 63 Fed. Reg. 17,020 (April 7, 1998),
to MBNA (the "Exemption") relating to (1) the initial purchase, the holding and
the subsequent resale by Plans of senior certificates representing an undivided
interest in a credit card trust with respect to which MBNA is the sponsor; and
(2) the servicing, operation and management of such trust, provided that the
general conditions and certain other conditions set forth in the Exemption are
satisfied. The Exemption will apply to the acquisition, holding and resale of
the Class A Certificates by, on behalf of, or with "plan assets" of a Plan,
provided that certain conditions (certain of which are described below) are
met.
S-43
<PAGE>
Among the conditions which must be satisfied for the Exemption to apply are
the following:
(1) The acquisition of the Class A Certificates by a Plan is on terms
(including the price for such Class A Certificates) that are at least as
favorable to the investing Plan as they would be in an arm's-length
transaction with an unrelated party;
(2) The rights and interests evidenced by the Class A Certificates
acquired by the Plan are not subordinated to the rights and interests
evidenced by other certificates of the Trust;
(3) The Class A Certificates acquired by the Plan have received a rating
at the time of such acquisition in one of the two highest generic rating
categories from a Rating Agency, provided that, notwithstanding such
rating, credit support is provided to the Class A Certificates through a
senior-subordinated structure or other form of third-party credit support
which, at a minimum, represents 5% of the outstanding principal balance of
the Class A Certificates at the time of such acquisition;
(4) The Trustee is not an affiliate of the Underwriters, the Seller, the
Servicer, any obligor whose receivables constitute more than 0.5% of the
fair market value of the aggregate undivided interest in the Trust
allocated to Series 199 - , or any of their respective affiliates (the
"Restricted Group");
(5) The sum of all payments made to and retained by the Underwriters in
connection with the distribution of the Class A Certificates represents not
more than reasonable compensation for underwriting such Class A
Certificates; the consideration received by the Seller as a consequence of
the assignment of Receivables to the Trust, to the extent allocable to the
Class A Certificates, represents not more than the fair market value of
such Receivables; and the sum of all payments made to and retained by the
Servicer, to the extent allocable to the Class A Certificates, represents
not more than reasonable compensation for the Servicer's services under the
Agreement and reimbursement of the Servicer's reasonable expenses in
connection therewith;
(6) The Plan investing in the Class A Certificates is an "accredited
investor" as defined in Rule 501(a)(1) of Regulation D of the Securities
and Exchange Commission under the Securities Act of 1933, as amended;
(7) The Trustee is a substantial financial institution or trust company
experienced in trust activities, is familiar with its duties,
responsibilities and liabilities as a fiduciary under ERISA and, as the
legal owner of (or holder of a perfected security interest in) the
Receivables, enforces all the rights created in favor of the
Certificateholders, including Plans;
(8) Prior to the issuance of any new Series, confirmation is received
from the Rating Agencies that such issuance will not result in the
reduction or withdrawal of the then current rating of the Class A
Certificates held by any Plan pursuant to the Exemption;
(9) To protect against fraud, chargebacks or other dilution of the
Receivables, the Agreement and the Rating Agencies require the Seller to
maintain a Seller Interest of not less than 2% of the principal balance of
the receivables contained in the Trust;
(10) Each Receivable is an Eligible Receivable, based on criteria of the
Rating Agencies and as specified in the Agreement, and the Agreement
requires that any change in the terms of the cardholder agreements must be
made applicable to the comparable segment of accounts owned or serviced by
MBNA which are part of the same program or have the same or substantially
similar characteristics;
(11) The Agreement limits the number of newly originated Accounts to be
designated to the Trust, unless the Rating Agencies otherwise consent in
writing, to the following: (a) with respect to any three-month period, 15%
of the number of existing Accounts designated to the Trust as of the first
day of such period, and (b) with respect to any twelve-month period, 20% of
the number of existing Accounts designated to the Trust as of the first day
of such twelve-month period;
(12) The Agreement requires the Seller to deliver an opinion of counsel
semi-annually confirming the validity and perfection of the transfer of
Receivables in newly originated Accounts to the Trust if such an opinion is
not delivered with respect to each interim addition; and
S-44
<PAGE>
(13) The Agreement requires the Seller and the Trustee to receive
confirmation from each Rating Agency that such Rating Agency will not
reduce or withdraw its then current rating of the Class A Certificates as a
result of (a) a proposed transfer of Receivables in newly originated
Accounts to the Trust, or (b) the transfer of Receivables in all newly
originated Accounts added to the Trust during the preceding three-month
period (beginning at quarterly intervals specified in the Agreement and
ending in the calendar month prior to the date such confirmation is
issued), provided that a Rating Agency confirmation shall not be required
under clause (b) for any three-month period in which any additions of
Receivables in newly originated Accounts occurred only after receipt of
prior Rating Agency confirmation pursuant to clause (a).
The Seller believes that the Exemption will apply to the acquisition and
holding of the Class A Certificates by Plans and that all conditions of the
Exemption, other than those within the control of the investors, will be met.
Any Plan fiduciary considering whether to purchase any Class A Certificates
on behalf of, or with "plan assets" of, a Plan should consult with its counsel
regarding the applicability of the fiduciary responsibility and prohibited
transaction provisions of ERISA and Section 4975 of the Code to such
investment. Among other things, before purchasing any Class A Certificates, a
Plan fiduciary should make its own determination as to the availability of the
relief provided in the Exemption and also consider the availability of any
other prohibited transaction exemptions.
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement as
supplemented by a terms agreement relating to the Class A Certificates and the
Class B Certificates (together, the "Underwriting Agreement") between the
Seller and [ ] (the "Underwriter"), the Seller has agreed to sell to
the Underwriter, and the Underwriter has agreed to purchase, the Class A
Certificates and the Class B Certificates.
In the Underwriting Agreement, the Underwriter has agreed, subject to the
terms and conditions set forth therein, to purchase all of the Certificates
offered hereby if any of the Certificates are purchased. The Underwriter has
agreed to reimburse the Seller for certain expenses of the issuance and
distribution of the Certificates.
The Underwriter proposes initially to offer the Class A Certificates to the
public at % of their principal amount and to certain dealers at such price
less concessions not in excess of % of the principal amount of the Class A
Certificates. The Underwriter may allow, and such dealers may reallow,
concessions not in excess of % of the principal amount of the Class A
Certificates to certain brokers and dealers. The Underwriter proposes initially
to offer the Class B Certificates to the public at % of their principal
amount and to certain dealers at such price less concessions not in excess of
% of the principal amount of the Class B Certificates. The Underwriter may
allow, and such dealers may reallow, concessions not in excess of % of the
principal amount of the Class B Certificates to certain brokers and dealers.
After the initial public offering, the public offering price and other selling
terms may be changed by the Underwriter.
We will receive proceeds of approximately $ from the sale of the
Certificates (representing % of the principal amount of each Class A
Certificate and % of the principal amount of each Class B Certificate) after
paying the underwriting discount of $ (representing % of the principal
amount of each Class A Certificate and % of the principal amount of each
Class B Certificate). Additional offering expenses are estimated to be $ .
S-45
<PAGE>
The Underwriter has represented and agreed that:
(a) it has complied and will comply with all applicable provisions of the
Financial Services Act 1986 with respect to anything done by it in relation
to the Certificates in, from or otherwise involving the United Kingdom;
(b) it has only issued or passed on and will only issue or pass on in the
United Kingdom any document received by it in connection with the issue or
sale of the Certificates to a person who is of a kind described in Article
11(3) of the Financial Services Act 1986 (Investment Advertisements)
(Exemptions) Order 1996 or is a person to whom such document may otherwise
lawfully be issued or passed on;
(c) if it is an authorized person under Chapter III of part I of the
Financial Services Act 1986, it has only promoted and will only promote (as
that term is defined in Regulation 1.02(2) of the Financial Services
(Promotion of Unregulated Schemes) Regulations 1991) to any person in the
United Kingdom the scheme described in this Prospectus Supplement and the
Prospectus if that person is of a kind described either in Section 76(2) of
the Financial Services Act 1986 or in Regulation 1.04 of the Financial
Services (Promotion of Unregulated Schemes) Regulations 1991; and
(d) it is a person of a kind described in Article 11(3) of the Financial
Services Act 1986 (Investment Advertisements) (Exemptions) Order 1996.
The Seller will indemnify the Underwriter against certain liabilities,
including liabilities under the Securities Act, or contribute to payments the
Underwriter may be required to make in respect thereof.
The Underwriter may engage in over-allotment transactions, stabilizing
transactions, syndicate covering transactions and penalty bids with respect to
the Certificates in accordance with Regulation M under the Exchange Act. Over-
allotment transactions involve syndicate sales in excess of the offering size,
which creates a syndicate short position. Stabilizing transactions permit bids
to purchase the Certificates so long as the stabilizing bids do not exceed a
specified maximum. Syndicate covering transactions involve purchases of the
Certificates in the open market after the distribution has been completed in
order to cover syndicate short positions. Penalty bids permit the Underwriter
to reclaim a selling concession from a syndicate member when the Certificates
originally sold by such syndicate member are purchased in a syndicate covering
transaction. Such over-allotment transactions, stabilizing transactions,
syndicate covering transactions and penalty bids may cause the prices of the
Certificates to be higher than they would otherwise be in the absence of such
transactions. Neither the Seller nor any of the Underwriter represent that the
Underwriter will engage in any such transactions or that such transactions,
once commenced, will not be discontinued without notice at any time.
S-46
<PAGE>
INDEX OF TERMS FOR PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
Term Page
- ---- ----
<S> <C>
Accounts................................................................... S-14
Accumulation Period Length................................................. S-28
Accumulation Shortfall..................................................... S-37
Additional Interest........................................................ S-25
Adjusted Investor Interest................................................. S-31
Aggregate Investor Default Amount.......................................... S-37
Agreement.................................................................. S-14
Available Investor Principal Collections................................... S-27
Available Reserve Account Amount........................................... S-40
Bank Portfolio............................................................. S-14
Base Rate.................................................................. S-20
business day............................................................... S-25
Cedel...................................................................... S-12
Certificateholder Servicing Fee............................................ S-42
Certificateholders......................................................... S-19
Certificates............................................................... S-5
Class A Account Percentage................................................. S-26
Class A Additional Interest................................................ S-25
Class A Adjusted Investor Interest......................................... S-31
Class A Available Funds.................................................... S-25
Class A Certificate Rate................................................... S-5
Class A Certificateholders................................................. S-19
Class A Certificates....................................................... S-5
Class A Fixed Allocation................................................... S-30
Class A Floating Allocation................................................ S-29
Class A Investor Charge-Off................................................ S-38
Class A Investor Default Amount............................................ S-37
Class A Investor Interest.................................................. S-30
Class A Monthly Interest................................................... S-34
Class A Monthly Principal.................................................. S-36
Class A Required Amount.................................................... S-31
Class A Servicing Fee...................................................... S-42
Class B Account Percentage................................................. S-26
Class B Additional Interest................................................ S-25
Class B Adjusted Investor Interest......................................... S-31
Class B Available Funds.................................................... S-26
Class B Certificate Rate................................................... S-5
Class B Certificateholders................................................. S-19
Class B Certificates....................................................... S-5
Class B Fixed Allocation................................................... S-30
Class B Floating Allocation................................................ S-29
Class B Investor Charge-Off................................................ S-38
Class B Investor Default Amount............................................ S-37
Class B Investor Interest.................................................. S-30
Class B Monthly Interest................................................... S-34
Class B Monthly Principal.................................................. S-36
Class B Required Amount.................................................... S-32
Class B Servicing Fee...................................................... S-42
</TABLE>
<TABLE>
<CAPTION>
Term Page
- ---- ----
<S> <C>
Closing Date.......................................................... S-5
Code.................................................................. S-43
Collateral Available Funds............................................ S-34
Collateral Charge-Off................................................. S-38
Collateral Default Amount............................................. S-37
Collateral Fixed Allocation........................................... S-30
Collateral Floating Allocation........................................ S-29
Collateral Interest................................................... S-6
Collateral Interest Adjusted Amount................................... S-31
Collateral Interest Amount............................................ S-30
Collateral Interest Holder............................................ S-20
Collateral Interest Servicing Fee..................................... S-42
Collateral Minimum Monthly Interest................................... S-35
Collateral Minimum Rate............................................... S-35
Collateral Monthly Principal.......................................... S-36
Controlled Accumulation Amount........................................ S-37
Controlled Accumulation Period........................................ S-11
Controlled Deposit Amount............................................. S-19
Covered Amount........................................................ S-39
Cut-Off Date.......................................................... S-16
Default Amount........................................................ S-37
Distribution Date..................................................... S-5
DOL................................................................... S-43
DTC................................................................... S-12
ERISA................................................................. S-43
Euroclear............................................................. S-12
Excess Spread......................................................... S-34
Exemption............................................................. S-43
Finance Charge Receivables............................................ S-7
Fixed Investor Percentage............................................. S-29
Floating Investor Percentage.......................................... S-29
Group One............................................................. S-12
Initial Collateral Interest Amount.................................... S-30
Interest Funding Account.............................................. S-39
Interest Funding Investment Proceeds.................................. S-21
Interest Payment Date................................................. S-5, S-25
Interest Period....................................................... S-5
Investor Default Amount............................................... S-37
Investor Interest..................................................... S-31
Investor Servicing Fee................................................ S-42
Legal Final Maturity.................................................. S-6
LIBOR................................................................. S-26
LIBOR Determination Date.............................................. S-5, S-26
London business day................................................... S-26
MBNA.................................................................. S-14
Minimum Aggregate Principal Receivables............................... S-17
Minimum Seller Interest............................................... S-17
<CAPTION>
Monthly Period........................................................ S-29
</TABLE>
S-47
<PAGE>
<TABLE>
<CAPTION>
Term Page
- ---- ----
<S> <C>
Net Servicing Fee Rate..................................................... S-42
OCMS....................................................................... S-14
Pay Out Event.............................................................. S-41
Plan....................................................................... S-43
Portfolio Yield............................................................ S-20
Principal Funding Account.................................................. S-39
Principal Funding Account Balance.......................................... S-20
Principal Funding Investment Proceeds...................................... S-39
Principal Receivables...................................................... S-7
Principal Shortfalls....................................................... S-37
Rapid Amortization Period.................................................. S-11
Rating Agency Condition.................................................... S-28
Reallocated Class B Principal Collections.................................. S-32
Reallocated Collateral Principal Collections............................... S-32
Reallocated Principal Collections.......................................... S-32
Receivables................................................................ S-14
Record Date................................................................ S-24
Reference Banks............................................................ S-27
Required Amount............................................................ S-32
Required Reserve Account Amount............................................ S-40
</TABLE>
<TABLE>
<CAPTION>
Term Page
- ---- ----
<S> <C>
Reserve Account............................................................ S-39
Reserve Account Funding Date............................................... S-40
Reserve Draw Amount........................................................ S-39
Restricted Group........................................................... S-44
Revolving Period........................................................... S-11
Scheduled Payment Date..................................................... S-6
Seller..................................................................... S-14
Seller Interest............................................................ S-7
Seller Percentage.......................................................... S-24
Series 199 - .............................................................. S-27
Series 199 - Supplement................................................... S-23
Series 199 - Termination Date............................................. S-6
Servicer Interchange....................................................... S-42
Shared Principal Collections............................................... S-37
Telerate Page 3750......................................................... S-27
Transfer Agreement......................................................... S-35
Transfer Date.............................................................. S-33
Trust...................................................................... S-5
Trust Portfolio............................................................ S-16
Trustee.................................................................... S-14
Underwriter................................................................ S-45
Underwriting Agreement..................................................... S-45
</TABLE>
S-48
<PAGE>
ANNEX I
OTHER SERIES ISSUED AND OUTSTANDING
The table below sets forth the principal characteristics of the forty-five
other Series previously issued by the Trust that are currently outstanding, all
of which are in Group One as well as another Series that is expected to be
issued by the Trust, and included in Group One, on or about , 199 . For
more specific information with respect to any Series, any prospective investor
should contact MBNA at (800) 362-6255 or (302) 456-8588. MBNA will provide,
without charge, to any prospective purchaser of the Certificates, a copy of the
Disclosure Documents for any previous publicly-issued Series.
1.Series 1994-A
<TABLE>
<S> <C>
Initial Class A Investor Interest...............................$661,200,000
Class A Certificate Rate................One-Month LIBOR plus 0.17% per annum
Initial Class B Investor Interest................................$34,200,000
Class B Certificate Rate................One-Month LIBOR plus 0.37% per annum
Class A Controlled Accumulation Amount..........................$55,100,000*
Class A Scheduled Payment Date.................August 1999 Distribution Date
Class B Scheduled Payment Date..............September 1999 Distribution Date
Annual Servicing Fee Percentage...............................2.0% per annum
Initial Collateral Interest......................................$64,600,000
Other Enhancement for the Class A Certificates......Subordination of Class B
Certificates
Series 1994-A Termination Date................January 2002 Distribution Date
Series Issuance Date..........................................August 4, 1994
</TABLE>
2.Series 1994-B
<TABLE>
<S> <C>
Initial Class A Investor Interest...............................$870,000,000
Class A Certificate Rate....Thirteen-week Treasury Bill plus 0.45% per annum
Initial Class B Investor Interest................................$45,000,000
Class B Certificate Rate................One-Month LIBOR plus 0.35% per annum
Class A Controlled Accumulation Amount..........................$72,500,000*
Class A Scheduled Payment Date.................August 1999 Distribution Date
Class B Scheduled Payment Date..............September 1999 Distribution Date
Annual Servicing Fee Percentage...............................2.0% per annum
Initial Collateral Interest......................................$85,000,000
Other Enhancement for the Class A Certificates......Subordination of Class B
Certificates
Series 1994-B Termination Date................January 2002 Distribution Date
Series Issuance Date.........................................August 18, 1994
</TABLE>
3.Series 1994-C
<TABLE>
<S> <C>
Initial Class A Investor Interest...............................$870,000,000
Class A Certificate Rate................One-Month LIBOR plus 0.25% per annum
Initial Class B Investor Interest................................$45,000,000
Class B Certificate Rate................One-Month LIBOR plus 0.45% per annum
Class A Controlled Accumulation Amount..........................$72,500,000*
Class A Scheduled Payment Date................October 2001 Distribution Date
Class B Scheduled Payment Date...............November 2001 Distribution Date
Annual Servicing Fee Percentage...............................2.0% per annum
Initial Collateral Interest......................................$85,000,000
Other Enhancement for the Class A Certificates......Subordination of Class B
Certificates
Series 1994-C Termination Date..................March 2004 Distribution Date
Series Issuance Date........................................October 26, 1994
</TABLE>
A-1
<PAGE>
4.Series 1994-E
<TABLE>
<S> <C>
Initial Investor Interest.......................................$500,000,000
Current Investor Interest as of June 30, 1998...................$700,000,000
Maximum Investor Interest.......................................$700,000,000
Certificate Rate......................................Commercial Paper Index
Annual Servicing Fee Percentage...............................2.0% per annum
Initial Cash Collateral Amount...................................$20,000,000
Series Issuance Date.......................................December 15, 1994
</TABLE>
5.Series 1995-A
<TABLE>
<S> <C>
Initial Class A Investor Interest...............................$500,250,000
Class A Certificate Rate................One-Month LIBOR plus 0.27% per annum
Initial Class B Investor Interest................................$25,875,000
Class B Certificate Rate................One-Month LIBOR plus 0.45% per annum
Class A Controlled Accumulation Amount..........................$41,687,500*
Class A Scheduled Payment Date.................August 2004 Distribution Date
Class B Scheduled Payment Date..............September 2004 Distribution Date
Annual Servicing Fee Percentage...............................2.0% per annum
Initial Collateral Interest......................................$48,875,000
Other Enhancement for the Class A Certificates......Subordination of Class B
Certificates
Series 1995-A Termination Date................January 2007 Distribution Date
Series Issuance Date..........................................March 22, 1995
</TABLE>
6.Series 1995-B
<TABLE>
<S> <C>
Initial Class A Investor Interest...............................$652,500,000
Class A Certificate Rate................One-Month LIBOR plus 0.16% per annum
Initial Class B Investor Interest................................$33,750,000
Class B Certificate Rate................One-Month LIBOR plus 0.32% per annum
Class A Controlled Accumulation Amount..........................$54,375,000*
Class A Scheduled Payment Date....................May 2000 Distribution Date
Class B Scheduled Payment Date...................June 2000 Distribution Date
Annual Servicing Fee Percentage...............................2.0% per annum
Initial Collateral Interest......................................$63,750,000
Other Enhancement for the Class A Certificates......Subordination of Class B
Certificates
Series 1995-B Termination Date................October 2002 Distribution Date
Series Issuance Date............................................May 23, 1995
</TABLE>
7.Series 1995-C
<TABLE>
<S> <C>
Initial Class A Investor Interest...............................$500,250,000
Class A Certificate Rate.....................................6.45% per annum
Initial Class B Investor Interest................................$25,875,000
Class B Certificate Rate................One-Month LIBOR plus 0.42% per annum
Class A Controlled Accumulation Amount..........................$41,687,500*
Class A Scheduled Payment Date...................June 2005 Distribution Date
Class B Scheduled Payment Date...................July 2005 Distribution Date
Annual Servicing Fee Percentage...............................2.0% per annum
Initial Collateral Interest......................................$48,875,000
Other Enhancement for the Class A Certificates......Subordination of Class B
Certificates
Series 1995-C Termination Date...............February 2008 Distribution Date
Series Issuance Date...........................................June 29, 1995
</TABLE>
A-2
<PAGE>
8.Series 1995-D
<TABLE>
<S> <C>
Initial Class A Investor Interest...............................$435,000,000
Class A Certificate Rate.....................................6.05% per annum
Initial Class B Investor Interest................................$22,500,000
Class B Certificate Rate................One-Month LIBOR plus 0.29% per annum
Class A Controlled Accumulation Amount..........................$36,250,000*
Class A Scheduled Payment Date...................June 2000 Distribution Date
Class B Scheduled Payment Date...................July 2000 Distribution Date
Annual Servicing Fee Percentage...............................2.0% per annum
Initial Collateral Interest......................................$42,500,000
Other Enhancement for the Class A Certificates......Subordination of Class B
Certificates
Series 1995-D Termination Date...............November 2002 Distribution Date
Series Issuance Date...........................................June 29, 1995
</TABLE>
9.Series 1995-E
<TABLE>
<S> <C>
Initial Class A Investor Interest...............................$435,000,000
Class A Certificate Rate................One-Month LIBOR plus 0.22% per annum
Initial Class B Investor Interest................................$22,500,000
Class B Certificate Rate................One-Month LIBOR plus 0.32% per annum
Class A Controlled Accumulation Amount..........................$36,250,000*
Class A Scheduled Payment Date.................August 2002 Distribution Date
Class B Scheduled Payment Date..............September 2002 Distribution Date
Annual Servicing Fee Percentage...............................2.0% per annum
Initial Collateral Interest......................................$42,500,000
Other Enhancement for the Class A Certificates......Subordination of Class B
Certificates
Series 1995-E Termination Date................January 2005 Distribution Date
Series Issuance Date..........................................August 2, 1995
</TABLE>
10.Series 1995-F
<TABLE>
<S> <C>
Initial Class A Investor Interest...............................$455,000,000
Class A Certificate Rate.....................................6.60% per annum
Initial Class B Investor Interest................................$18,750,000
Class B Certificate Rate.....................................6.75% per annum
Class A Controlled Accumulation Amount.......................$37,916,666.67*
Class A Scheduled Payment Date.................August 2000 Distribution Date
Class B Scheduled Payment Date..............September 2000 Distribution Date
Annual Servicing Fee Percentage...............................2.0% per annum
Initial Collateral Interest......................................$26,250,000
Other Enhancement for the Class A Certificates......Subordination of Class B
Certificates
Series 1995-F Termination Date................January 2003 Distribution Date
Series Issuance Date.........................................August 30, 1995
</TABLE>
A-3
<PAGE>
11.Series 1995-G
<TABLE>
<S> <C>
Initial Class A Investor Interest...............................$435,000,000
Class A Certificate Rate................One-Month LIBOR plus 0.21% per annum
Initial Class B Investor Interest................................$22,500,000
Class B Certificate Rate................One-Month LIBOR plus 0.33% per annum
Class A Controlled Accumulation Amount..........................$36,250,000*
Class A Scheduled Payment Date................October 2002 Distribution Date
Class B Scheduled Payment Date...............November 2002 Distribution Date
Annual Servicing Fee Percentage...............................2.0% per annum
Initial Collateral Interest......................................$42,500,000
Other Enhancement for the Class A Certificates......Subordination of Class B
Certificates
Series 1995-G Termination Date..................March 2005 Distribution Date
Series Issuance Date......................................September 27, 1995
</TABLE>
12.Series 1995-H
<TABLE>
<S> <C>
Initial Class A Investor Interest...............................$285,245,000
Class A Certificate Rate................One-Month LIBOR plus 0.07% per annum
Initial Class B Investor Interest................................$14,755,000
Class B Certificate Rate................One-Month LIBOR plus 0.19% per annum
Class A Controlled Accumulation Amount.......................$23,770,416.67*
Class A Scheduled Payment Date................October 1998 Distribution Date
Class B Scheduled Payment Date...............November 1998 Distribution Date
Annual Servicing Fee Percentage...............................2.0% per annum
Initial Collateral Interest......................................$27,875,000
Other Enhancement for the Class A Certificates......Subordination of Class B
Certificates
Series 1995-H Termination Date..................March 2001 Distribution Date
Series Issuance Date......................................September 28, 1995
</TABLE>
13.Series 1995-I
<TABLE>
<S> <C>
Initial Class A Investor Interest...............................$652,500,000
Class A Certificate Rate................One-Month LIBOR plus 0.17% per annum
Initial Class B Investor Interest................................$33,750,000
Class B Certificate Rate................One-Month LIBOR plus 0.27% per annum
Class A Controlled Accumulation Amount..........................$54,375,000*
Class A Scheduled Payment Date................October 2000 Distribution Date
Class B Scheduled Payment Date...............November 2000 Distribution Date
Annual Servicing Fee Percentage...............................2.0% per annum
Initial Collateral Interest......................................$63,750,000
Other Enhancement for the Class A Certificates......Subordination of Class B
Certificates
Series 1995-I Termination Date..................March 2003 Distribution Date
Series Issuance Date........................................October 26, 1995
</TABLE>
A-4
<PAGE>
14.Series 1995-J
<TABLE>
<S> <C>
Initial Class A Investor Interest...............................$435,000,000
Class A Certificate Rate................One-Month LIBOR plus 0.23% per annum
Initial Class B Investor Interest................................$22,500,000
Class B Certificate Rate................One-Month LIBOR plus 0.35% per annum
Class A Controlled Accumulation Amount..........................$36,250,000*
Class A Scheduled Payment Date...............November 2002 Distribution Date
Class B Scheduled Payment Date...............December 2002 Distribution Date
Annual Servicing Fee Percentage...............................2.0% per annum
Initial Collateral Interest......................................$42,500,000
Other Enhancement for the Class A Certificates......Subordination of Class B
Certificates
Series 1995-J Termination Date..................April 2005 Distribution Date
Series Issuance Date.......................................November 21, 1995
</TABLE>
15.Series 1996-A
<TABLE>
<S> <C>
Initial Class A Investor Interest...............................$609,000,000
Class A Certificate Rate................One-Month LIBOR plus 0.21% per annum
Initial Class B Investor Interest................................$31,500,000
Class B Certificate Rate................One-Month LIBOR plus 0.34% per annum
Class A Controlled Accumulation Amount..........................$50,750,000*
Class A Scheduled Payment Date...............February 2003 Distribution Date
Class B Scheduled Payment Date..................March 2003 Distribution Date
Annual Servicing Fee Percentage...............................2.0% per annum
Initial Collateral Interest......................................$59,500,000
Other Enhancement for the Class A Certificates......Subordination of Class B
Certificates
Series 1996-A Termination Date...................July 2005 Distribution Date
Series Issuance Date.......................................February 28, 1996
</TABLE>
16.Series 1996-B
<TABLE>
<S> <C>
Initial Class A Investor Interest...............................$435,000,000
Class A Certificate Rate................One-Month LIBOR plus 0.26% per annum
Initial Class B Investor Interest................................$22,500,000
Class B Certificate Rate................One-Month LIBOR plus 0.37% per annum
Class A Controlled Accumulation Amount..........................$36,250,000*
Class A Scheduled Payment Date..................March 2006 Distribution Date
Class B Scheduled Payment Date..................April 2006 Distribution Date
Annual Servicing Fee Percentage...............................2.0% per annum
Initial Collateral Interest......................................$42,500,000
Other Enhancement for the Class A Certificates......Subordination of Class B
Certificates
Series 1996-B Termination Date.................August 2008 Distribution Date
Series Issuance Date..........................................March 26, 1996
</TABLE>
A-5
<PAGE>
17.Series 1996-C
<TABLE>
<S> <C>
Initial Class A Investor Interest...............................$435,000,000
Class A Certificate Rate................One-Month LIBOR plus 0.14% per annum
Initial Class B Investor Interest................................$22,500,000
Class B Certificate Rate................One-Month LIBOR plus 0.28% per annum
Class A Controlled Accumulation Amount..........................$36,250,000*
Class A Scheduled Payment Date..................March 2001 Distribution Date
Class B Scheduled Payment Date..................April 2001 Distribution Date
Annual Servicing Fee Percentage...............................2.0% per annum
Initial Collateral Interest......................................$42,500,000
Other Enhancement for the Class A Certificates......Subordination of Class B
Certificates
Series 1996-C Termination Date.................August 2003 Distribution Date
Series Issuance Date..........................................March 27, 1996
</TABLE>
18.Series 1996-D
<TABLE>
<S> <C>
Initial Class A Investor Interest...............................$850,000,000
Class A Certificate Rate................One-Month LIBOR plus 0.15% per annum
Initial Class B Investor Interest................................$75,000,000
Class B Certificate Rate................One-Month LIBOR plus 0.29% per annum
Class A Controlled Accumulation Amount.......................$70,833,333.33*
Class A Scheduled Payment Date..................April 2001 Distribution Date
Class B Scheduled Payment Date....................May 2001 Distribution Date
Annual Servicing Fee Percentage...............................2.0% per annum
Initial Collateral Interest......................................$75,000,000
Other Enhancement for the Class A Certificates......Subordination of Class B
Certificates
Series 1996-D Termination Date..............September 2003 Distribution Date
Series Issuance Date.............................................May 1, 1996
</TABLE>
19.Series 1996-E
<TABLE>
<S> <C>
Initial Class A Investor Interest...............................$637,500,000
Class A Certificate Rate................One-Month LIBOR plus 0.17% per annum
Initial Class B Investor Interest................................$56,250,000
Class B Certificate Rate................One-Month LIBOR plus 0.31% per annum
Class A Controlled Accumulation Amount..........................$53,125,000*
Class A Scheduled Payment Date....................May 2003 Distribution Date
Class B Scheduled Payment Date...................June 2003 Distribution Date
Annual Servicing Fee Percentage...............................2.0% per annum
Initial Collateral Interest......................................$56,250,000
Other Enhancement for the Class A Certificates......Subordination of Class B
Certificates
Series 1996-E Termination Date................October 2005 Distribution Date
Series Issuance Date............................................May 21, 1996
</TABLE>
20.Series 1996-F
<TABLE>
<S> <C>
Initial Class A Investor Interest...............................$705,000,000
Initial Collateral Interest......................................$45,000,000
Current Investor Interest as of June 30, 1998.................$1,000,000,000
Maximum Investor Interest.....................................$1,000,000,000
Certificate Rate......................................Commercial Paper Index
Annual Servicing Fee Percentage...............................2.0% per annum
Series Issuance Date...........................................June 25, 1996
</TABLE>
A-6
<PAGE>
21.Series 1996-G
<TABLE>
<S> <C>
Initial Class A Investor Interest...............................$425,000,000
Class A Certificate Rate................One-Month LIBOR plus 0.18% per annum
Initial Class B Investor Interest................................$37,500,000
Class B Certificate Rate................One-Month LIBOR plus 0.35% per annum
Class A Controlled Accumulation Amount.......................$35,416,666.67*
Class A Scheduled Payment Date...................July 2006 Distribution Date
Class B Scheduled Payment Date.................August 2006 Distribution Date
Annual Servicing Fee Percentage...............................2.0% per annum
Initial Collateral Interest......................................$37,500,000
Other Enhancement for the Class A Certificates......Subordination of Class B
Certificates
Series 1996-G Termination Date...............December 2008 Distribution Date
Series Issuance Date...........................................July 17, 1996
</TABLE>
22.Series 1996-H
<TABLE>
<S> <C>
Initial Class A Investor Interest.............................$1,020,000,000
Class A Certificate Rate..............Three-Month LIBOR plus 0.10% per annum
Initial Class B Investor Interest................................$90,000,000
Class B Certificate Rate..............Three-Month LIBOR plus 0.27% per annum
Class A Controlled Accumulation Amount..........................$85,000,000*
Class A Scheduled Payment Date.................August 2001 Distribution Date
Class B Scheduled Payment Date..............September 2001 Distribution Date
Annual Servicing Fee Percentage...............................2.0% per annum
Initial Collateral Interest......................................$90,000,000
Other Enhancement for the Class A Certificates......Subordination of Class B
Certificates
Series 1996-H Termination Date................January 2004 Distribution Date
Series Issuance Date.........................................August 14, 1996
</TABLE>
23.Series 1996-I
<TABLE>
<S> <C>
Initial Class A Deutsche Mark ("DM") Investor Interest......DM 1,000,000,000
Initial Class A Investor Interest............................$666,444,518.49
Class A Certificate Rate...........Three-Month DM LIBOR plus 0.09% per annum
Class A Floating Dollar Rate.........Three-Month LIBOR plus 0.115% per annum
Initial Class B Investor Interest................................$58,804,000
Class B Certificate Rate..Not to Exceed Three-Month LIBOR plus 0.50% per
annum
Class A Controlled Accumulation Amount.......................$55,537,043.21*
Class A Scheduled Payment Date............................September 19, 2001
Class B Scheduled Payment Date................October 2001 Distribution Date
Annual Servicing Fee Percentage...............................2.0% per annum
Initial Collateral Interest......................................$58,804,000
Other Enhancement for the Class A Certificates......Subordination of Class B
Certificates
Series 1996-I Termination Date.............................February 18, 2004
Series Issuance Date......................................September 25, 1996
</TABLE>
A-7
<PAGE>
24.Series 1996-J
<TABLE>
<S> <C>
Initial Class A Investor Interest...............................$850,000,000
Class A Certificate Rate................One-Month LIBOR plus 0.15% per annum
Initial Class B Investor Interest................................$75,000,000
Class B Certificate Rate................One-Month LIBOR plus 0.36% per annum
Class A Controlled Accumulation Amount.......................$70,833,333.33*
Class A Scheduled Payment Date..............September 2003 Distribution Date
Class B Scheduled Payment Date................October 2003 Distribution Date
Annual Servicing Fee Percentage...............................2.0% per annum
Initial Collateral Interest......................................$75,000,000
Other Enhancement for the Class A Certificates......Subordination of Class B
Certificates
Series 1996-J Termination Date...............February 2006 Distribution Date
Series Issuance Date......................................September 19, 1996
</TABLE>
25.Series 1996-K
<TABLE>
<S> <C>
Initial Class A Investor Interest...............................$850,000,000
Class A Certificate Rate................One-Month LIBOR plus 0.13% per annum
Initial Class B Investor Interest................................$75,000,000
Class B Certificate Rate................One-Month LIBOR plus 0.35% per annum
Class A Controlled Accumulation Amount.......................$70,833,333.34*
Class A Scheduled Payment Date................October 2003 Distribution Date
Class B Scheduled Payment Date...............November 2003 Distribution Date
Annual Servicing Fee Percentage...............................2.0% per annum
Initial Collateral Interest......................................$75,000,000
Other Enhancement for the Class A Certificates......Subordination of Class B
Certificates
Series 1996-K Termination Date..................March 2006 Distribution Date
Series Issuance Date........................................October 24, 1996
</TABLE>
26.Series 1996-L
<TABLE>
<S> <C>
Initial Class A Investor Interest...............................$425,000,000
Class A Certificate Rate..............Three-Month LIBOR plus 0.03% per annum
Initial Class B Investor Interest................................$37,500,000
Class B Certificate Rate..............Three-Month LIBOR plus 0.24% per annum
Class A Controlled Accumulation Amount.......................$35,416,666.67*
Class A Scheduled Payment Date...............November 1999 Distribution Date
Class B Scheduled Payment Date...............December 1999 Distribution Date
Annual Servicing Fee Percentage...............................2.0% per annum
Initial Collateral Interest......................................$37,500,000
Other Enhancement for the Class A Certificates......Subordination of Class B
Certificates
Series 1996-L Termination Date...............November 2001 Distribution Date
Series Issuance Date........................................December 3, 1996
</TABLE>
A-8
<PAGE>
27.Series 1996-M
<TABLE>
<S> <C>
Initial Class A Investor Interest...............................$425,000,000
Class A Certificate Rate..............Three-Month LIBOR plus 0.13% per annum
Initial Class B Investor Interest................................$37,500,000
Class B Certificate Rate..............Three-Month LIBOR plus 0.35% per annum
Class A Controlled Accumulation Amount.......................$35,416,666.67*
Class A Scheduled Payment Date...............November 2006 Distribution Date
Class B Scheduled Payment Date...............December 2006 Distribution Date
Annual Servicing Fee Percentage...............................2.0% per annum
Initial Collateral Interest......................................$37,500,000
Other Enhancement for the Class A Certificates......Subordination of Class B
Certificates
Series 1996-M Termination Date..................April 2009 Distribution Date
Series Issuance Date.......................................November 26, 1996
</TABLE>
28.Series 1997-A
<TABLE>
<S> <C>
Initial Class A Investor Interest...............................$525,000,000
Class A Certificate Rate............Three-Month LIBOR minus 0.075% per annum
Initial Class B Investor Interest................................$46,350,000
Class B Certificate Rate..............Three-Month LIBOR plus 0.27% per annum
Controlled Accumulation Amount..................................$47,612,500*
Scheduled Payment Date.......................February 2000 Distribution Date
Annual Servicing Fee Percentage...............................2.0% per annum
Initial Collateral Interest......................................$46,350,000
Other Enhancement for the Class A Certificates......Subordination of Class B
Certificates
Series 1997-A Termination Date...................July 2002 Distribution Date
Series Issuance Date........................................January 30, 1997
</TABLE>
29.Series 1997-B
<TABLE>
<S> <C>
Initial Class A Investor Interest...............................$850,000,000
Class A Certificate Rate................One-Month LIBOR plus 0.16% per annum
Initial Class B Investor Interest................................$75,000,000
Class B Certificate Rate................One-Month LIBOR plus 0.35% per annum
Controlled Accumulation Amount...............................$83,333,333.34*
Scheduled Payment Date..........................March 2012 Distribution Date
Annual Servicing Fee Percentage...............................2.0% per annum
Initial Class C Investor Interest................................$75,000,000
Other Enhancement for the Class A Certificates......Subordination of Class B
Certificates
Series 1997-B Termination Date.................August 2014 Distribution Date
Series Issuance Date.......................................February 27, 1997
</TABLE>
30.Series 1997-C
<TABLE>
<S> <C>
Initial Class A Investor Interest...............................$637,500,000
Class A Certificate Rate................One-Month LIBOR plus 0.11% per annum
Initial Class B Investor Interest................................$56,250,000
Class B Certificate Rate................One-Month LIBOR plus 0.30% per annum
Controlled Accumulation Amount..................................$57,812,500*
Scheduled Payment Date..........................March 2004 Distribution Date
Annual Servicing Fee Percentage...............................2.0% per annum
Initial Collateral Interest......................................$56,250,000
Other Enhancement for the Class A Certificates......Subordination of Class B
Certificates
Series 1997-C Termination Date.................August 2006 Distribution Date
Series Issuance Date..........................................March 26, 1997
</TABLE>
A-9
<PAGE>
31.Series 1997-D
<TABLE>
<S> <C>
Initial Class A Investor Interest...............................$387,948,000
Class A Certificate Rate..............Three-Month LIBOR plus 0.05% per annum
Initial Class B Investor Interest................................$34,231,000
Class B Certificate Rate..Not to Exceed Three-Month LIBOR plus 0.50% per
annum
Controlled Accumulation Amount...............................$38,034,166.67*
Scheduled Payment Date............................May 2007 Distribution Date
Annual Servicing Fee Percentage...............................2.0% per annum
Initial Class C Investor Interest................................$34,231,000
Other Enhancement for the Class A Certificates......Subordination of Class B
Certificates
Series 1997-D Termination Date................October 2009 Distribution Date
Series Issuance Date............................................May 22, 1997
</TABLE>
32.Series 1997-E
<TABLE>
<S> <C>
Initial Class A Investor Interest...............................$637,500,000
Class A Certificate Rate..............Three-Month LIBOR plus 0.08% per annum
Initial Class B Investor Interest................................$56,250,000
Class B Certificate Rate..............Three-Month LIBOR plus 0.28% per annum
Controlled Accumulation Amount..................................$57,812,500*
Scheduled Payment Date..........................April 2002 Distribution Date
Annual Servicing Fee Percentage...............................2.0% per annum
Initial Collateral Interest......................................$56,250,000
Other Enhancement for the Class A Certificates......Subordination of Class B
Certificates
Series 1997-E Termination Date..............September 2004 Distribution Date
Series Issuance Date.............................................May 8, 1997
</TABLE>
33.Series 1997-F
<TABLE>
<S> <C>
Initial Class A Investor Interest...............................$600,000,000
Class A Certificate Rate.....................................6.60% per annum
Initial Class B Investor Interest................................$53,000,000
Class B Certificate Rate................One-Month LIBOR plus 0.29% per annum
Controlled Accumulation Amount...............................$54,416,666.67*
Scheduled Payment Date...........................June 2002 Distribution Date
Annual Servicing Fee Percentage...............................2.0% per annum
Initial Collateral Interest......................................$53,000,000
Other Enhancement for the Class A Certificates......Subordination of Class B
Certificates
Series 1997-F Termination Date...............November 2004 Distribution Date
Series Issuance Date...........................................June 18, 1997
</TABLE>
34.Series 1997-G
<TABLE>
<S> <C>
Initial Class A Investor Interest...............................$460,000,000
Class A Certificate Rate................One-Month LIBOR plus 0.15% per annum
Initial Class B Investor Interest................................$40,600,000
Class B Certificate Rate................One-Month LIBOR plus 0.36% per annum
Controlled Accumulation Amount...............................$41,716,666.67*
Scheduled Payment Date...........................June 2004 Distribution Date
Annual Servicing Fee Percentage...............................2.0% per annum
Initial Collateral Interest......................................$40,600,000
Other Enhancement for the Class A Certificates......Subordination of Class B
Certificates
Series 1997-G Termination Date...............November 2006 Distribution Date
Series Issuance Date...........................................June 18, 1997
</TABLE>
A-10
<PAGE>
35.Series 1997-H
<TABLE>
<S> <C>
Initial Class A Investor Interest...............................$507,357,000
Class A Certificate Rate..............Three-Month LIBOR plus 0.07% per annum
Initial Class B Investor Interest................................$44,770,000
Class B Certificate Rate..Not to Exceed Three-Month LIBOR plus 0.50% per
annum
Controlled Accumulation Amount...............................$49,741,416.67*
Scheduled Payment Date......................September 2007 Distribution Date
Annual Servicing Fee Percentage...............................2.0% per annum
Initial Class C Investor Interest................................$44,770,000
Other Enhancement for the Class A Certificates......Subordination of Class B
Certificates
Series 1997-H Termination Date...............February 2010 Distribution Date
Series Issuance Date..........................................August 6, 1997
</TABLE>
36.Series 1997-I
<TABLE>
<S> <C>
Initial Class A Investor Interest...............................$637,500,000
Class A Certificate Rate.....................................6.55% per annum
Initial Class B Investor Interest................................$56,250,000
Class B Certificate Rate................One-Month LIBOR plus 0.31% per annum
Controlled Accumulation Amount..................................$57,812,500*
Scheduled Payment Date.........................August 2004 Distribution Date
Annual Servicing Fee Percentage...............................2.0% per annum
Initial Collateral Interest......................................$56,250,000
Other Enhancement for the Class A Certificates......Subordination of Class B
Certificates
Series 1997-I Termination Date................January 2007 Distribution Date
Series Issuance Date.........................................August 26, 1997
</TABLE>
37.Series 1997-J
<TABLE>
<S> <C>
Initial Class A Investor Interest...............................$637,500,000
Class A Certificate Rate................One-Month LIBOR plus 0.12% per annum
Initial Class B Investor Interest................................$56,250,000
Class B Certificate Rate................One-Month LIBOR plus 0.30% per annum
Controlled Accumulation Amount..................................$57,812,500*
Scheduled Payment Date......................September 2004 Distribution Date
Annual Servicing Fee Percentage...............................2.0% per annum
Initial Collateral Interest......................................$56,250,000
Other Enhancement for the Class A Certificates......Subordination of Class B
Certificates
Series 1997-J Termination Date...............February 2007 Distribution Date
Series Issuance Date......................................September 10, 1997
</TABLE>
38.Series 1997-K
<TABLE>
<S> <C>
Initial Class A Investor Interest...............................$637,500,000
Class A Certificate Rate................One-Month LIBOR plus 0.12% per annum
Initial Class B Investor Interest................................$56,250,000
Class B Certificate Rate................One-Month LIBOR plus 0.32% per annum
Controlled Accumulation Amount..................................$57,812,500*
Scheduled Payment Date.......................November 2005 Distribution Date
Annual Servicing Fee Percentage...............................2.0% per annum
Initial Collateral Interest......................................$56,250,000
Other Enhancement for the Class A Certificates......Subordination of Class B
Certificates
Series 1997-K Termination Date..................April 2008 Distribution Date
Series Issuance Date........................................October 22, 1997
</TABLE>
A-11
<PAGE>
39.Series 1997-L
<TABLE>
<S> <C>
Initial Class A Investor Interest...............................$511,000,000
Class A Certificate Rate.............Three-Month LIBOR minus 0.01% per annum
Initial Class B Investor Interest................................$45,100,000
Class B Certificate Rate..Not to Exceed Three-Month LIBOR plus 0.50% per
annum
Controlled Accumulation Amount...............................$46,341,666.67*
Scheduled Payment Date.......................November 2002 Distribution Date
Annual Servicing Fee Percentage...............................2.0% per annum
Initial Collateral Interest......................................$45,100,000
Other Enhancement for the Class A Certificates......Subordination of Class B
Certificates
Series 1997-L Termination Date..................April 2005 Distribution Date
Series Issuance Date.......................................November 13, 1997
</TABLE>
40.Series 1997-M
<TABLE>
<S> <C>
Initial Class A Investor Interest...............................$637,500,000
Class A Certificate Rate..............Three-Month LIBOR plus 0.11% per annum
Initial Class B Investor Interest................................$56,250,000
Class B Certificate Rate..............Three-Month LIBOR plus 0.27% per annum
Controlled Accumulation Amount..................................$57,812,500*
Scheduled Payment Date........................October 2002 Distribution Date
Annual Servicing Fee Percentage...............................2.0% per annum
Initial Collateral Interest......................................$56,250,000
Other Enhancement for the Class A Certificates......Subordination of Class B
Certificates
Series 1997-M Termination Date..................March 2005 Distribution Date
Series Issuance Date........................................November 6, 1997
</TABLE>
41.Series 1997-N
<TABLE>
<S> <C>
Initial Class A Investor Interest...............................$765,000,000
Class A Certificate Rate..............Three-Month LIBOR plus 0.07% per annum
Initial Class B Investor Interest................................$67,500,000
Class B Certificate Rate..............Three-Month LIBOR plus 0.23% per annum
Controlled Accumulation Amount..................................$69,375,000*
Scheduled Payment Date.......................November 2000 Distribution Date
Annual Servicing Fee Percentage...............................2.0% per annum
Initial Collateral Interest......................................$67,500,000
Other Enhancement for the Class A Certificates......Subordination of Class B
Certificates
Series 1997-N Termination Date...............November 2002 Distribution Date
Series Issuance Date........................................December 9, 1997
</TABLE>
A-12
<PAGE>
42.Series 1997-O
<TABLE>
<S> <C>
Initial Class A Investor Interest...............................$425,000,000
Class A Certificate Rate................One-Month LIBOR plus 0.17% per annum
Initial Class B Investor Interest................................$37,500,000
Class B Certificate Rate................One-Month LIBOR plus 0.35% per annum
Controlled Accumulation Amount...............................$38,541,666.67*
Scheduled Payment Date.......................December 2007 Distribution Date
Annual Servicing Fee Percentage...............................2.0% per annum
Initial Collateral Interest......................................$37,500,000
Other Enhancement for the Class A Certificates......Subordination of Class B
Certificates
Series 1997-O Termination Date....................May 2010 Distribution Date
Series Issuance Date.......................................December 23, 1997
</TABLE>
43.Series 1998-A
<TABLE>
<S> <C>
Initial Class A Investor Interest...............................$637,500,000
Class A Certificate Rate................One-Month LIBOR plus 0.11% per annum
Initial Class B Investor Interest................................$56,250,000
Class B Certificate Rate..Not to Exceed One-Month LIBOR plus 0.50% per annum
Controlled Accumulation Amount..................................$57,812,500*
Scheduled Payment Date..........................March 2003 Distribution Date
Annual Servicing Fee Percentage...............................2.0% per annum
Initial Collateral Interest......................................$56,250,000
Other Enhancement for the Class A Certificates......Subordination of Class B
Certificates
Series 1998-A Termination Date.................August 2005 Distribution Date
Series Issuance Date..........................................March 18, 1998
</TABLE>
44.Series 1998-B
<TABLE>
<S> <C>
Initial Class A Investor Interest...............................$550,000,000
Class A Certificate Rate..............Three-Month LIBOR plus 0.09% per annum
Initial Class B Investor Interest................................$48,530,000
Class B Certificate Rate..Not to Exceed Three-Month LIBOR plus 0.50% per
annum
Controlled Accumulation Amount..................................$49,877,500*
Scheduled Payment Date..........................April 2008 Distribution Date
Annual Servicing Fee Percentage...............................2.0% per annum
Initial Collateral Interest......................................$48,530,000
Other Enhancement for the Class A Certificates......Subordination of Class B
Certificates
Series 1998-B Termination Date..............September 2010 Distribution Date
Series Issuance Date..........................................April 14, 1998
</TABLE>
45.Series 1998-C
<TABLE>
<S> <C>
Initial Class A Investor Interest...............................$637,500,000
Class A Certificate Rate ...............One-Month LIBOR plus 0.08% per annum
Initial Class B Investor Interest................................$56,250,000
Class B Certificate Rate ...............One-Month LIBOR plus 0.25% per annum
Controlled Accumulation Amount..................................$62,500,000*
Scheduled Payment Date ..........................June 2003 Distribution Date
Annual Servicing Fee Percentage ..............................2.0% per annum
Initial Collateral Interest......................................$56,250,000
Other Enhancement For the Class A Certificates .....Subordination of Class B
Certificates
Series 1998-C Termination Date ..............November 2005 Distribution Date
Series Issuance Date ..........................................June 24, 1998
</TABLE>
A-13
<PAGE>
46.Series 1998-D
<TABLE>
<S> <C>
Initial Class A Investor Interest...............................$475,000,000
Class A Certificate Rate.....................................5.80% per annum
Initial Class B Investor Interest................................$42,000,000
Class B Certificate Rate................One-Month LIBOR plus 0.25% per annum
Controlled Accumulation Amount...............................$46,583,333.33*
Scheduled Payment Date...........................July 2003 Distribution Date
Annual Servicing Fee Percentage...............................2.0% per annum
Initial Collateral Interest......................................$42,000,000
Other Enhancement for the Class A Certificates......Subordination of Class B
Certificates
Series 1998-D Termination Date...............December 2005 Distribution Date
Expected Series Issuance Date..................................July 30, 1998
</TABLE>
- --------
* Subject to change if the commencement of the Accumulation Period or
Controlled Accumulation Period, as applicable, is delayed.
A-14
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE AMENDED. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SEC. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL NOR IS IT SEEKING +
+AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT +
+PERMITTED. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED AUGUST , 1998
Prospectus
MBNA MASTER CREDIT CARD TRUST II
Issuer
MBNA AMERICA BANK, NATIONAL ASSOCIATION
Seller and Servicer
ASSET BACKED CERTIFICATES
THE TRUST--
CONSIDER
CAREFULLY . may periodically issue asset backed certificates in one or
THE RISK more series with one or more classes; and
FACTORS
BEGINNING ON . will own--
PAGE 10 IN
THIS . receivables in a portfolio of consumer revolving credit
PROSPECTUS. card accounts;
A . payments due on those receivables; and
certificate
is not a . other property described in this prospectus and in the
deposit and accompanying prospectus supplement.
neither the
certificates THE CERTIFICATES--
nor the
underlying . will represent interests in the trust and will be paid
accounts or only from the trust assets;
receivables
are insured . offered with this prospectus will be rated in one of the
or four highest rating categories by at least one nationally
guaranteed recognized rating organization;
by the
Federal . may have one or more forms of enhancement; and
Deposit
Insurance . will be issued as part of a designated series which may
Corporation include one or more classes of certificates and
or any other enhancement.
governmental
agency. THE CERTIFICATEHOLDERS--
The
certificates . will receive interest and principal payments from a
will varying percentage of credit card account collections.
represent
interests in
the trust
only and
will not
represent
interests in
or
obligations
of MBNA or
any MBNA
affiliate.
This
prospectus
may be used
to offer and
sell any
series of
certificates
only if
accompanied
by the
prospectus
supplement
for that
series.
NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED THESE
CERTIFICATES OR DETERMINED THAT THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
, 199
<PAGE>
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS AND THE ACCOMPANYING PROSPECTUS SUPPLEMENT
We provide information to you about the Certificates in two separate
documents that progressively provide more detail: (a) this Prospectus, which
provides general information, some of which may not apply to a particular
Series of Certificates, including your Series, and (b) the accompanying
Prospectus Supplement, which will describe the specific terms of your Series of
Certificates, including:
. the timing of interest and principal payments;
. financial and other information about the Receivables;
. information about enhancement for each Class;
. the ratings for each Class; and
. the method for selling the Certificates.
IF THE TERMS OF A PARTICULAR SERIES OF CERTIFICATES VARY BETWEEN THIS
PROSPECTUS AND THE PROSPECTUS SUPPLEMENT, YOU SHOULD RELY ON THE INFORMATION IN
THE PROSPECTUS SUPPLEMENT.
You should rely only on the information provided in this Prospectus and the
accompanying Prospectus Supplement including the information incorporated by
reference. We have not authorized anyone to provide you with different
information. We are not offering the Certificates in any state where the offer
is not permitted. We do not claim the accuracy of the information in this
Prospectus or the accompanying Prospectus Supplement as of any date other than
the dates stated on their respective covers.
We include cross-references in this Prospectus and in the accompanying
Prospectus Supplement to captions in these materials where you can find further
related discussions. The following Table of Contents and the Table of Contents
included in the accompanying Prospectus Supplement provide the pages on which
these captions are located.
You can find a listing of the pages where capitalized terms used in this
Prospectus are defined under the caption "Index of Terms for Prospectus"
beginning on page 58 in this Prospectus.
----------------
2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
PROSPECTUS SUMMARY........................................................ 5
The Trust and the Trustee................................................ 5
Trust Assets............................................................. 5
Information about the Receivables........................................ 5
Collections by the Servicer.............................................. 6
Allocation of Trust Assets............................................... 6
Interest Payments on the Certificates.................................... 6
Principal Payments on the Certificates................................... 6
Revolving Period........................................................ 7
Controlled Accumulation Period.......................................... 7
Controlled Amortization Period.......................................... 7
Principal Amortization Period........................................... 7
Rapid Accumulation Period............................................... 7
Rapid Amortization Period............................................... 8
Pay Out Events.......................................................... 8
Shared Excess Finance Charge Collections................................. 8
Shared Principal Collections............................................. 8
Credit Enhancement....................................................... 8
Optional Repurchase...................................................... 9
Tax Status............................................................... 9
Certificate Ratings...................................................... 9
RISK FACTORS.............................................................. 10
Limited Ability to Resell Certificates................................... 10
Potential Priority of Certain Liens...................................... 10
Possible Effects of Insolvency or Bankruptcy of the Seller or Other
Holder of Seller Interest............................................... 10
Seller's Ability to Change Terms of the Receivables and Possible Effect
on Certificateholders................................................... 11
Effects of Certain Legal Matters and Litigation.......................... 12
Effects of Consumer Protection Laws on Certificateholders................ 12
Timing of Principal Payments............................................. 13
Effect of Subordination on Subordinated Certificateholders............... 13
Risks Relating to Receivables in Defaulted Accounts...................... 14
Basis Risk............................................................... 14
Effects on Certificateholders of Issuance of Additional Series by the
Trust................................................................... 14
THE TRUST................................................................. 15
MBNA'S CREDIT CARD ACTIVITIES............................................. 15
General.................................................................. 15
Acquisition and Use of Credit Card Accounts.............................. 15
</TABLE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Description of MBNA Hallmark............................................. 16
Interchange.............................................................. 16
Competition in the Credit Card Industry.................................. 16
THE RECEIVABLES........................................................... 17
MATURITY ASSUMPTIONS...................................................... 17
USE OF PROCEEDS........................................................... 18
MBNA AND MBNA CORPORATION................................................. 18
DESCRIPTION OF THE CERTIFICATES........................................... 19
General.................................................................. 19
Book-Entry Registration.................................................. 20
Definitive Certificates.................................................. 23
Interest Payments........................................................ 23
Principal Payments....................................................... 24
Transfer and Assignment of Receivables................................... 24
New Issuances............................................................ 25
Representations and Warranties........................................... 26
Addition of Trust Assets................................................. 28
Removal of Accounts...................................................... 29
Collection and Other Servicing Procedures................................ 30
Discount Option.......................................................... 30
Trust Accounts........................................................... 30
Funding Period........................................................... 31
Investor Percentage and Seller Percentage................................ 32
Transfer of Annual Membership Fees....................................... 32
Application of Collections............................................... 33
Shared Excess Finance Charge Collections................................. 34
Shared Principal Collections............................................. 35
Defaulted Receivables; Rebates and Fraudulent Charges; Investor
Charge-Offs............................................................. 35
Defeasance............................................................... 35
Final Payment of Principal; Termination.................................. 36
Pay Out Events........................................................... 36
Servicing Compensation and Payment of Expenses........................... 37
Certain Matters Regarding the Seller and the Servicer.................... 37
Servicer Default......................................................... 39
Reports to Certificateholders............................................ 40
Evidence as to Compliance................................................ 40
Amendments............................................................... 41
List of Certificateholders............................................... 41
The Trustee.............................................................. 42
Certificateholders Have Limited Control of Actions....................... 42
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
CREDIT ENHANCEMENT........................................................ 42
General.................................................................. 42
Subordination............................................................ 43
Letter of Credit......................................................... 43
Cash Collateral Guaranty or Account...................................... 43
Collateral Interest...................................................... 44
Surety Bond or Insurance Policy.......................................... 44
Spread Account........................................................... 44
Reserve Account.......................................................... 44
CERTIFICATE RATINGS....................................................... 45
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES.................................. 45
Transfer of Receivables.................................................. 45
Certain Matters Relating to Receivership................................. 46
Consumer Protection Laws................................................. 47
FEDERAL INCOME TAX CONSEQUENCES........................................... 47
General.................................................................. 47
Treatment of the Certificates as Debt.................................... 48
Treatment of the Trust................................................... 48
General................................................................. 48
Possible Treatment of the Trust as a Partnership or a Publicly Traded
Partnership............................................................ 48
</TABLE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Taxation of Interest Income of U.S. Certificate Owners................... 50
General................................................................. 50
Original Issue Discount................................................. 50
Market Discount......................................................... 50
Market Premium.......................................................... 50
Sale or Exchange of Certificates......................................... 50
Non-U.S. Certificate Owners.............................................. 51
Information Reporting and Backup Withholding............................. 51
State and Local Taxation................................................. 52
ERISA CONSIDERATIONS...................................................... 52
PLAN OF DISTRIBUTION...................................................... 56
LEGAL MATTERS............................................................. 56
REPORTS TO CERTIFICATEHOLDERS............................................. 57
WHERE YOU CAN FIND MORE INFORMATION....................................... 57
INDEX OF TERMS FOR PROSPECTUS............................................. 58
ANNEX I: GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES.... A-1
</TABLE>
4
<PAGE>
PROSPECTUS SUMMARY
. THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS DOCUMENT AND DOES NOT
CONTAIN ALL OF THE INFORMATION THAT YOU NEED TO CONSIDER IN MAKING YOUR
INVESTMENT DECISION. TO UNDERSTAND ALL OF THE TERMS OF AN OFFERING OF THE
CERTIFICATES, READ CAREFULLY THIS ENTIRE DOCUMENT AND THE ACCOMPANYING
PROSPECTUS SUPPLEMENT.
. THIS SUMMARY PROVIDES AN OVERVIEW OF CERTAIN CALCULATIONS, CASH FLOWS AND
OTHER INFORMATION TO AID YOUR UNDERSTANDING AND IS QUALIFIED BY THE FULL
DESCRIPTION OF THESE CALCULATIONS, CASH FLOWS AND OTHER INFORMATION IN THIS
PROSPECTUS AND THE ACCOMPANYING PROSPECTUS SUPPLEMENT.
THE TRUST AND THE TRUSTEE
MBNA Master Credit Card Trust II (the "Trust") was formed on August 4, 1994
under an Agreement between MBNA America Bank, National Association ("MBNA"), as
Seller and as Servicer, and The Bank of New York, as "Trustee." The Trust is a
master trust under which one or more Series will be issued through a Series
Supplement to the Agreement. Any Class or Series may not be offered by this
Prospectus; for example, they may be offered in a private placement. The Trust
may engage only in the following activities:
. acquiring and holding specified assets;
. issuing and making payments on the Asset Backed Certificates (the
"Certificates") and other interests in the Trust; and
. engaging in related activities.
TRUST ASSETS
MBNA has transferred to the Trust the Receivables from certain MasterCard(R)
and VISA(R)* revolving credit card Accounts. All new Receivables generated in
the Accounts will be transferred automatically to the Trust. The total amount
of Receivables in the Trust will fluctuate daily as new Receivables are
generated and payments are received on existing Accounts. Additional similar
assets may be transferred to the Trust. See "The Receivables" and "Description
of the Certificates--Addition of Trust Assets" in this Prospectus.
The Trust assets also include payments due on the Receivables and other proceeds
of the Receivables and of related credit insurance policies. However, the Trust
assets will exclude payments on receivables written off as uncollectible.
Additional Trust assets may include:
. rights to certain fees MBNA receives through VISA and MasterCard called
Interchange;
. monies deposited in certain of the Trust's bank accounts and investments of
those monies; and
. ""Enhancements," including any Credit Enhancement, guaranteed rate agreement,
maturity liquidity facility, interest rate cap agreement, interest rate swap
agreement, currency swap agreement, or other similar arrangement.
MBNA may remove, subject to certain limitations and conditions, Receivables
that it transferred to the Trust. See "Description of the Certificates--Removal
of Accounts" in this Prospectus.
INFORMATION ABOUT THE RECEIVABLES
The Receivables arise in Accounts selected from MBNA's credit card portfolio
based on criteria established in the Agreement and applied on the date of their
selection.
The Receivables consist of both Principal Receivables and Finance Charge
Receivables.
"Principal Receivables" are, generally, (a) amounts charged by cardholders for
goods and services and (b) cash advances.
"Finance Charge Receivables" are the related finance charges and credit card
fees.
Interchange fees collected through MasterCard and VISA and annual membership
fees collected from
- --------
* MasterCard(R) and VISA(R) are federally registered servicemarks of MasterCard
International Inc. and Visa U.S.A., Inc., respectively.
5
<PAGE>
cardholders generally are treated as collections of Finance Charge Receivables.
See "MBNA's Credit Card Activities--Interchange" and "Description of the
Certificates--Transfer of Annual Membership Fees" in this Prospectus.
COLLECTIONS BY THE SERVICER
MBNA services the Receivables under the Agreement. In limited cases, MBNA may
resign or be removed and either the Trustee or a third party may be appointed
as the new servicer. MBNA, or any new servicer, is called the "Servicer." The
Servicer receives a servicing fee from the Trust for each Series. See "MBNA and
MBNA Corporation" in this Prospectus.
The Servicer receives collections on the Receivables, deposits those
collections in an account and keeps track of those collections for Finance
Charge Receivables and Principal Receivables. The Servicer then allocates those
collections as summarized below.
ALLOCATION OF TRUST ASSETS
The Trust assets will be allocated to the holders of Certificates and other
interests of each Series and to the holder of the Seller Interst. The "Seller
Interest" represents the remaining interest in the assets of the Trust not
represented by the Certificates and other interests issued by the Trust and, on
any date, is equal to the aggregate amount of Principal Receivables in the
Trust not allocated to each Series. If there is more than one Class in a
Series, there may be a further allocation of Trust assets among each Class.
The Servicer will allocate (a) collections of Finance Charge Receivables and
Principal Receivables and (b) Receivables in Accounts written off as
uncollectible, to each Series based on a varying percentage, called the
"Investor Percentage," as described in the accompanying Prospectus Supplement.
The aggregate amount of Principal Receivables allocated to a Series establishes
that Series's "Investor Interest."
Certificateholders are only entitled to amounts allocated to their Series equal
to the interest and principal payments on their Certificates. See "Description
of the Certificates--General" and "--Investor Percentage and Seller Percentage"
in this Prospectus.
INTEREST PAYMENTS ON THE CERTIFICATES
Each Certificate of a Series will represent the right to receive payments of
interest as described in the accompanying Prospectus Supplement. If a Series of
Certificates consists of one or more Classes, each Class may differ in, among
other things, priority of payments, payment dates, interest rates, method for
computing interest, and rights to Enhancement.
Each Class of Certificates may have fixed, floating or any other type of
interest rate. Generally, interest will be paid monthly, quarterly, semi-
annually or on other scheduled dates over the life of the Certificates, each
called a "Distribution Date."
If interest is paid less frequently than monthly, collections of Finance Charge
Receivables may be deposited monthly in one or more trust accounts and invested
under guidelines established by the Rating Agencies until paid to
Certificateholders. Interest payments for any Series of Certificates will be
funded from collections of Finance Charge Receivables allocated to the Series,
any applicable Enhancement and, if and to the extent specified in the
accompanying Prospectus Supplement, monies earned while collections were
invested pending payment to Certificateholders. See "Description of the
Certificates--Application of Collections," "--Shared Excess Finance Charge
Collections" and "Credit Enhancement" in this Prospectus.
PRINCIPAL PAYMENTS ON THE CERTIFICATES
Each Certificate of a Series will represent the right to receive payments of
principal as described in the accompanying Prospectus Supplement. If a Series
of Certificates consists of one or more Classes, each Class may differ in,
among other things, the amounts allocated for principal payments, priority of
payments, payment dates, maturity, and rights to Enhancement.
6
<PAGE>
REVOLVING PERIOD
Each Class of Certificates will begin with a period called a "Revolving Period"
during which the Trust will not pay, or accumulate, principal for the related
Certificateholders. The Trust will usually pay available principal to the
holder of the Seller Interest but may pay amounts due to holders of
Certificates of other Series. The Revolving Period for a Class starts on the
date that Class is issued and ends at the start of an amortization period or an
accumulation period.
Following the Revolving Period, each Class of Certificates will have one or a
combination of the following periods in which:
. principal is accumulated in specified amounts and paid on a scheduled date (a
"Controlled Accumulation Period");
. principal is paid in fixed amounts at scheduled intervals (a "Controlled
Amortization Period");
. principal is paid in varying amounts at scheduled intervals (a "Principal
Amortization Period");
. principal is accumulated in varying amounts following certain adverse events
and paid on a scheduled date (a "Rapid Accumulation Period");
. principal is paid in varying amounts each month following certain adverse
events (a "Rapid Amortization Period").
CONTROLLED ACCUMULATION PERIOD
If a Class of Certificates has a Controlled Accumulation Period, the Trust is
expected to pay available principal to those Certificateholders on a specific
date specified in the accompanying Prospectus Supplement called the "Scheduled
Payment Date." If the Series has more than one Class, each Class may have a
different priority for payment. For a period of time prior to the Scheduled
Payment Date, the Trust is scheduled to deposit available principal in a trust
account in specified amounts plus any specified amounts not previously
deposited. If amounts sufficient to pay the Investor Interest for a Class have
not been accumulated by the Scheduled Payment Date for that Class, a Pay Out
Event will occur and the Rapid Amortization Period will begin. The Controlled
Accumulation Period for a Class starts on a date specified in the accompanying
Prospectus Supplement and ends when any one of the following occurs:
. the Investor Interest for the Class is paid in full;
. a Rapid Amortization Period or, if it applies, a Rapid Accumulation Period
starts; or
. the latest date by which principal and interest for the Series of
Certificates can be paid, called the "Series Termination Date."
CONTROLLED AMORTIZATION PERIOD
If a Class of Certificates has a Controlled Amortization Period, the Trust will
pay available principal to those Certificateholders on each Distribution Date
during the Controlled Amortization Period in a fixed amount plus any amounts
not previously paid. If the Series has more than one Class, each Class may have
a different priority for payment. The Controlled Amortization Period for a
Class starts on the date specified in the accompanying Prospectus Supplement
and ends when any one of the following occurs:
. the Investor Interest for the Class is paid in full;
. a Rapid Amortization Period starts; or
. the Series Termination Date.
PRINCIPAL AMORTIZATION PERIOD
If a Class of Certificates has a Principal Amortization Period, the Trust will
pay available principal to those Certificateholders on each Distribution Date
during the Principal Amortization Period. If a Series has more than one Class,
each Class may have a different priority for payment. The Principal
Amortization Period for a Class starts on the date specified in the
accompanying Prospectus Supplement and ends when any one of the following
occurs:
. the Investor Interest for the Class is paid in full;
. a Rapid Amortization Period starts; or
. the Series Termination Date.
RAPID ACCUMULATION PERIOD
If a Class of Certificates has a Controlled Accumulation Period, it may also
have a Rapid Accumulation Period. During a Rapid Accumulation Period, the Trust
will periodically deposit available
7
<PAGE>
principal in a trust account prior to the Scheduled Payment Date. The Rapid
Accumulation Period for a Class starts as specified in the accompanying
Prospectus Supplement on a day on or after a designated Pay Out Event has
occurred, but in no event later than the Scheduled Payment Date, and ends when
any one of the following occurs:
. the Investor Interest for the Class is paid in full;
. a Rapid Amortization Period starts; or
. the Scheduled Payment Date.
RAPID AMORTIZATION PERIOD
If a Class of Certificates is in a Rapid Amortization Period, the Trust will
pay available principal to those Certificateholders on each Distribution Date.
If the Series has more than one Class, each Class may have a different priority
for payment. For a Class without a Rapid Accumulation Period, the Rapid
Amortization Period starts on the day a Pay Out Event occurs. For a Class with
a Rapid Accumulation Period, the Rapid Amortization Period starts as specified
in the accompanying Prospectus Supplement on a day on or after a Pay Out Event
occurs, but in no event later than the Scheduled Payment Date for that Class.
The Rapid Amortization Period ends when any of the following occurs:
. the Investor Interest for the Class is paid in full;
. the Series Termination Date; or
. the Trust Termination Date.
PAY OUT EVENTS
A "Pay Out Event" for any Series of Certificates will include certain adverse
events described in the accompanying Prospectus Supplement, including the
following:
. Certain events of insolvency or receivership relating to the Seller;
. The Seller is unable to transfer Receivables to the Trust as required under
the Agreement; or
. The Trust becomes an "investment company" under the Investment Company Act of
1940.
See "Description of the Certificates--Pay Out Events" in this Prospectus.
SHARED EXCESS FINANCE CHARGE COLLECTIONS
Any Series may be included in a Group of Series. If specified in the
accompanying Prospectus Supplement, to the extent that collections of Finance
Charge Receivables allocated to any Series are not needed for that Series,
those collections may be applied to certain shortfalls of another Series in the
same Group. See "Description of the Certificates--Shared Excess Finance Charge
Collections," "--Applications of Collections" and "--Defaulted Receivables;
Rebates and Fraudulent Charges; Investor Charge-Offs" in this Prospectus.
SHARED PRINCIPAL COLLECTIONS
If specified in the accompanying Prospectus Supplement, to the extent that
collections of Principal Receivables and certain other amounts that are
allocated to the Investor Interest for any Series are not needed for that
Series, those collections may be applied to cover principal payments for
another Series in the same Group. Any reallocation for this purpose will not
reduce the Investor Interest for the Series to which those collections were
initially allocated. See "Description of the Certificates--Shared
Principal Collections" in this Prospectus.
CREDIT ENHANCEMENT
Each Class of a Series may be entitled to Credit Enhancement. Credit
Enhancement provides additional payment protection to investors in each Class
of Certificates that has Credit Enhancement.
"Credit Enhancement" for the Certificates of any Class may take the form of one
or more of the following:
. subordination . letter of credit
. collateral interest . surety bond
. insurance policy . spread account
. cash collateral . reserve account
guaranty or account
8
<PAGE>
The type, characteristics and amount of any Credit Enhancement will be:
. based on several factors, including the characteristics of the Receivables
and Accounts at the time a Series of Certificates is issued and
. established based on the requirements of each Rating Agency rating one or
more Classes of the Certificates of that Series.
See "Credit Enhancement" and "Certificate Ratings" in this Prospectus.
OPTIONAL REPURCHASE
MBNA has the option to repurchase any Series of Certificates once the Investor
Interest for the Series is reduced to 5% or less of the initial Investor
Interest. See "Description of the Certificates--Final Payment of Principal;
Termination" in this Prospectus.
TAX STATUS
For information concerning the application of the federal income tax laws,
including whether the Certificates will be characterized as debt for federal
income tax purposes, see "Federal Income Tax Consequences" in this Prospectus
and "Summary of Terms--Tax Status" in the accompanying Prospectus Supplement.
CERTIFICATE RATINGS
Any Certificate offered by this Prospectus and the accompanying Prospectus
Supplement will be rated in one of the four highest rating categories by at
least one nationally recognized rating organization. Any nationally recognized
rating organization selected by the Seller to rate any Series is a
"Rating Agency."
A rating is not a recommendation to buy, sell or hold securities and may be
revised or withdrawn at any time by the assigning Rating Agency. Each rating
should be evaluated independently of any other rating. See "Certificate
Ratings" in this Prospectus.
9
<PAGE>
RISK FACTORS
You should consider the following risk factors in deciding whether to
purchase the Certificates.
LIMITED ABILITY TO
RESELL CERTIFICATES The underwriters may assist in resales of the
Certificates but they are not required to do so. A
secondary market for any Certificates may not
develop. If a secondary market does develop, it
might not continue or it might not be sufficiently
liquid to allow you to resell any of your
Certificates.
POTENTIAL PRIORITY OF
CERTAIN LIENS The Seller has transferred the Receivables to the
Trust. However, a court could conclude that the
Seller still owns the Receivables subject to a
security interest in favor of the Trust in the
Receivables. The Seller has taken steps to give
the Trustee a "first priority perfected security
interest" in the Receivables in the event a court
concludes the Seller still owns the Receivables.
If a court concludes that the transfer to the
Trust is only a grant by the Seller of a security
interest in the Receivables, a tax or government
lien (or other lien imposed under applicable state
or federal law without the consent of the Seller)
on the Seller's property arising before new
Receivables come into existence may be senior to
the Trust's interest in the Receivables. Also, if
the Seller became insolvent or the FDIC was
appointed conservator or receiver of the Seller,
the FDIC's administrative expenses might be paid
from the Receivables before the Trust received any
payments on the Receivables. See "Certain Legal
Aspects of the Receivables--Transfer of
Receivables" and "Description of the
Certificates--Representations and Warranties" in
this Prospectus.
POSSIBLE EFFECTS OF
INSOLVENCY OR BANKRUPTCY
OF THE SELLER OR OTHER
HOLDER OF SELLER
INTEREST
The Federal Deposit Insurance Act ("FDIA"), as
amended by the Financial Institutions Reform,
Recovery and Enforcement Act of 1989 ("FIRREA"),
provides that a security interest should be
respected by the Federal Deposit Insurance
Corporation ("FDIC") where--
. the Seller's transfer of the Receivables is the
grant of a valid security interest in the
Receivables to the Trust;
. the FDIC is appointed conservator or receiver
of MBNA; and
. the security interest (a) is validly perfected
before the Seller's insolvency and (b) was not
taken in contemplation of the Seller's
insolvency or with the intent to hinder, delay
or defraud the Seller or its creditors.
FDIC staff positions taken prior to the passage of
FIRREA do not suggest that the FDIC would
interrupt the timely transfer to the Trust of
payments collected on the Receivables. If the FDIC
were to assert a different position, your payments
of outstanding principal and interest
10
<PAGE>
could be delayed and possibly reduced. For
example, under the FDIA, the FDIC could--
. require the Trustee to go through an
administrative claims procedure to establish its
right to those payments;
. request a stay of proceedings with respect to
the Seller; or
. reject the Seller's sales contract and limit the
Trust's resulting claim to "actual direct
compensatory damages."
If a conservator or receiver were appointed for the
Seller, then a Pay Out Event could occur on all
outstanding Series. Under the terms of the
Agreement, new Principal Receivables would not be
transferred to the Trust and the Trustee would
sell the Receivables (unless holders of more than
50% of the Investor Interest of each Class of
outstanding Certificates, and anyone else
authorized to vote on those matters in a Series
Supplement, gave the Trustee other instructions).
The Trust would then terminate earlier than was
planned and you could have a loss if the sale of
the Receivables produced insufficient net proceeds
to pay you in full. However, the conservator or
receiver may have the power--
. regardless of the terms of the Agreement, (a) to
prevent the beginning of a Rapid Amortization
Period (or, if applicable, Rapid Accumulation
Period), (b) to prevent the early sale of the
Receivables and termination of the Trust or (c)
to require new Principal Receivables to continue
being transferred to the Trust; or
. regardless of the instructions of those
authorized to direct the Trustee's actions under
the Agreement, (a) to require the early sale of
the Receivables, (b) to require termination of
the Trust and retirement of the Certificates or
(c) to prohibit the continued transfer of
Principal Receivables to the Trust.
In addition, if a Servicer Default occurs solely
because the Servicer is insolvent or a conservator
or receiver is appointed for the Servicer, the
conservator or receiver might have the power to
prevent either the Trustee or the
Certificateholders from appointing a new Servicer
under the Agreement. See "Certain Legal Aspects of
the Receivables--Certain Matters Relating to
Receivership" in this Prospectus.
SELLER'S ABILITY TO
CHANGE TERMS OF THE
RECEIVABLES AND
POSSIBLE EFFECT ON The Seller transfers the Receivables to the Trust
CERTIFICATEHOLDERS but continues to own the Accounts. As owner of the
Accounts, the Seller retains the right to change
various Account terms (including finance charges
and other fees it charges and the required monthly
minimum payment). A Pay Out Event could occur if
the Seller reduced the finance charges and other
fees it charges and a corresponding decrease in
the collection of finance charges and fees
resulted. In addition, changes in the Account
terms may alter payment patterns. If payment rates
decrease significantly at a time when you are
scheduled to receive principal, you might receive
principal more slowly than planned.
The Seller will not reduce the interest rate it
charges on the Receivables or other fees if that
action would result in a Pay Out Event unless the
11
<PAGE>
Seller is required by law or determines it is
necessary to maintain its credit card business,
based on its good faith assessment of its business
competition.
The Seller will not change the terms of the
Accounts or its servicing practices (including the
reduction of the required minimum monthly payment
and the calculation of the amount or the timing of
finance charges, other fees and charge offs)
unless the Seller reasonably believes a Pay Out
Event would not occur for any Series and takes the
same action on its other substantially similar
accounts, to the extent permitted by those
accounts.
The Seller has no restrictions on its ability to
change the terms of the Accounts except as
described above or in the accompanying Prospectus
Supplement. Changes in relevant law, changes in
the marketplace or prudent business practices
could cause the Seller to change Account terms.
EFFECTS OF CERTAIN LEGAL
MATTERS AND LITIGATION In May 1996, Andrew B. Spark filed a lawsuit
against MBNA Corporation, MBNA and certain of its
officers and its subsidiary, MBNA Marketing
Systems, Inc. The case is pending in the United
States District Court for the District of
Delaware. This suit is a purported class action.
The plaintiff alleges that MBNA's advertising of
its cash promotional annual percentage rate
program was fraudulent and deceptive. The
plaintiff seeks unspecified damages including
actual, treble and punitive damages and attorney's
fees for an alleged breach of contract, violation
of the Delaware Deceptive Trade Practices Act and
the federal Racketeer Influenced and Corrupt
Organizations Act. In February 1998, a class was
certified. MBNA has filed a motion for summary
judgment and reconsideration of the class
certification order, or alternatively for
certification of the summary judgment and class
certification issues for an interlocutory appeal.
This motion is pending. MBNA Corporation believes
that its advertising practices are proper under
applicable federal and state law and intends to
defend the action vigorously. It is not clear at
this point in time what effect, if any, this case
will have with respect to the Certificateholders'
interests. See "Description of the Certificates--
Representations and Warranties" in this
Prospectus.
EFFECTS OF CONSUMER
PROTECTION LAWS ON Federal and state consumer protection laws regulate
CERTIFICATEHOLDERS the creation and enforcement of consumer loans.
Congress and the states could further regulate the
credit card and consumer credit industry in ways
that make it more difficult for the Servicer to
collect payments on the Receivables or that reduce
the finance charges and other fees that the Seller
can charge on credit card account balances. For
example, if the Seller were required to reduce its
finance charges and other fees, resulting in a
corresponding decrease in the Accounts' effective
yield, this could lead to a Pay Out Event,
resulting in the payment of principal sooner than
expected. See "Description of the Certificates--
Pay Out Events" in this Prospectus.
12
<PAGE>
The Seller makes representations and warranties
relating to the validity and enforceability of the
Receivables. Subject to certain conditions
described under "Description of the Certificates--
Representations and Warranties," the Seller must
accept reassignment of each Receivable that does
not comply in all material respects with all
requirements of applicable law. However, we do not
anticipate that the Trustee will make any
examination of the Receivables or the related
records for the purpose of determining the
presence or absence of defects, compliance with
representations and warranties, or for any other
purpose. The only remedy if any representation or
warranty is violated, and the violation continues
beyond the period of time the Seller has to
correct the violation, is that the Seller must
accept reassignment of the Receivables affected by
the violation (subject to certain conditions
described under "Description of the Certificates--
Representations and Warranties" in this
Prospectus). See also "Certain Legal Aspects of
the Receivables--Consumer Protection Laws" in this
Prospectus.
If a cardholder sought protection under federal or
state bankruptcy or debtor relief laws, a court
could reduce or discharge completely the
cardholder's obligations to repay amounts due on
its Account and, as a result, the related
Receivables would be written off as uncollectible.
The Certificateholders could suffer a loss if no
funds are available from Credit Enhancement or
other sources. See "Description of the
Certificates--Defaulted Receivables; Rebates and
Fraudulent Charges; Investor Charge-Offs" in this
Prospectus.
TIMING OF PRINCIPAL The Receivables may be paid at any time. We cannot
PAYMENTS assure the creation of additional Receivables in
the Accounts or that any particular pattern of
cardholder payments will occur. The commencement
and continuation of a Revolving Period, a
Controlled Amortization Period, a Principal
Amortization Period or a Controlled Accumulation
Period for a Series or Class of that Series depend
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 applicable, the
Rapid Accumulation Period for each of those
Series. If a Pay Out Event occurs, you could
receive payment of principal sooner than expected.
The Seller's ability to compete in the current
industry environment will affect its ability to
generate new Receivables and might also affect
payment patterns on the Receivables. In addition,
changes in finance charges can alter the monthly
payment rates of cardholders. A significant
decrease in monthly payment rates could slow the
return or accumulation of principal during an
Amortization Period or Accumulation Period. See
"Maturity Assumptions" in this Prospectus.
EFFECT OF SUBORDINATION
ON SUBORDINATED Where one or more Classes in a Series are
CERTIFICATEHOLDERS subordinated, principal payments on the
subordinated Class or Classes generally will not
begin until the senior Class or Classes are
repaid. Additionally, if collections
13
<PAGE>
of Finance Charge Receivables allocated to a
Series are insufficient to cover amounts due for
that Series's senior Certificates, the Investor
Interest for the subordinated Certificates might
be reduced. This would reduce the amount of the
collections of Finance Charge Receivables
available to the subordinated Certificates in
future periods and could cause a possible delay or
reduction in principal and interest payments on
the subordinated Certificates. If Receivables had
to be sold, the net proceeds of that sale
available to pay principal would be paid first to
senior Certificateholders and any remaining net
proceeds would be paid to the subordinated
Certificateholders.
RISKS RELATING TO
RECEIVABLES IN DEFAULTED Each Class of Certificates will be allocated a
ACCOUNTS portion of the Receivables written off as
uncollectible. See "Description of the
Certificates--Allocation Percentages" and "MBNA's
Credit Card Portfolio--Delinquency and Gross
Charge-Off Experience" in the accompanying
Prospectus Supplement. If the written off amounts
allocated to any Certificates exceed the amounts
available to cover them, which could occur if the
limited amount of Credit Enhancement is reduced to
zero, those Certificateholders may not receive the
full amount of principal and interest due to them.
See "Description of the Certificates--Reallocation
of Cash Flows," "--Application of Collections" and
"--Defaulted Receivables; Investor Charge-Offs" in
the accompanying Prospectus Supplement.
BASIS RISK Some Accounts may have finance charges set at a
variable rate based on a designated index (for
example, the prime rate). A Series of Certificates
may bear interest either at a fixed rate or at a
floating rate based on a different index. If the
rate charged on the Accounts declines, collections
of Finance Charge Receivables may be reduced
without a corresponding reduction in the amounts
payable as interest on the Certificates and other
amounts paid from collections of Finance Charge
Receivables.
EFFECTS ON
CERTIFICATEHOLDERS
OF ISSUANCE OF
ADDITIONAL SERIES BY THE The Trust has issued other Series of Certificates
TRUST and is expected to issue additional Series from
time to time. The Trust may issue additional
Series with terms that are different from your
Series without the prior review or consent of any
Certificateholders. It is a condition to the
issuance of each new Series that each Rating
Agency that has rated an outstanding Series
confirm in writing that the issuance of the new
Series will not result in a reduction or
withdrawal of its rating. However, the terms of a
new Series could affect the timing and amounts of
payments on any other outstanding Series.
14
<PAGE>
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 (each, a
"Series") of Certificates and, if applicable, the Seller Certificate, making
payments thereon and engaging in related activities (including, with respect to
any Series, obtaining any Enhancement and entering into an Enhancement
agreement relating thereto). As a consequence, the Trust is not expected to
have any need for additional capital resources other than the assets of the
Trust.
MBNA'S CREDIT CARD ACTIVITIES
GENERAL
With respect to each Series of Certificates, the receivables (the
"Receivables") conveyed or to be conveyed to the Trust by MBNA pursuant to the
pooling and servicing agreement (as amended from time to time, the "Agreement")
between MBNA, as seller (the "Seller") and as Servicer, and The Bank of New
York, as Trustee, have been or will be generated from transactions made by
holders of selected MasterCard and VISA credit card accounts (the "Accounts"),
including premium accounts and standard accounts, from the portfolio of
MasterCard and VISA accounts owned by MBNA (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 accompanying 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" in this
Prospectus. 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
15
<PAGE>
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 pay
for 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 as a cash advance by transferring balances owed to other creditors
to their MBNA accounts.
DESCRIPTION OF MBNA HALLMARK
Credit card processing services performed by MBNA Hallmark include data
processing, payment processing, statement rendering, card production and
network services. MBNA Hallmark's data network provides an interface to
MasterCard International Inc. and VISA U.S.A., Inc. for performing
authorizations and funds transfers. Most data processing and network functions
are performed at MBNA Hallmark's facility in Addison, Texas.
INTERCHANGE
Creditors participating in the VISA and MasterCard associations receive
certain fees from VISA and MasterCard ("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
accompanying 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 accompanying Prospectus Supplement, and, unless
otherwise provided in the accompanying 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 fee (the "Servicing Fee") paid to
the Servicer as servicing compensation.
COMPETITION IN THE CREDIT CARD INDUSTRY
The credit card industry is highly competitive. As new credit card companies
enter the market and all companies try to expand their market share, effective
advertising, target marketing and pricing strategies grow in importance. MBNA's
ability to compete in this industry environment will affect its ability to
generate new Receivables and might also affect payment patterns on the
Receivables. If the rate at which MBNA generates new Receivables declines
significantly, MBNA might be unable to designate additional Accounts to the
Trust and a Pay Out Event could occur, resulting in payment of principal sooner
than expected. If the rate at which MBNA generates new Receivables decreases
significantly at a time when Certificateholders are scheduled to receive
principal, Certificateholders might receive principal more slowly than planned.
16
<PAGE>
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 date (the "Cut-Off Date") specified in the accompanying
Prospectus Supplement 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
eligible revolving credit card accounts to be included as Accounts (the
"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 and to require the Trustee to reconvey all
receivables in such Accounts (the "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 date of issuance of the related Series (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" in this Prospectus.
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 accompanying Prospectus Supplement, for
each Series, following the Revolving Period, collections of Principal
Receivables are expected to be distributed to holders of each Class of
Certificates (the "Certificateholders") of such Series or any specified class
(each a "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 a Controlled Accumulation Period and, under
certain limited circumstances if so specified in the accompanying Prospectus
Supplement, a Rapid Accumulation Period (each, 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 in this Prospectus and in
the accompanying Prospectus Supplement. The accompanying 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 accompanying 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
17
<PAGE>
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 accompanying 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.
Cardholders' use of credit and payment patterns may change due to seasonal
variations and the payment habits of individual cardholders, as well as in
response to a variety of social, technological, legal and economic factors. As
a result, the amount of collections of Receivables may vary from month to
month. Economic factors include the rate of inflation, unemployment levels and
relative interest rates. While the addresses of the cardholders in the
portfolio suggest a wide geographic distribution, the Seller is unable to
determine the extent to which these factors may affect future credit use or
payment patterns. 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 the accompanying 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 a Controlled Amortization Period, a Principal Amortization
Period or a Rapid Amortization Period (each, 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 MBNA Corporation (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.
18
<PAGE>
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 Interest. Each Series will be issued
pursuant to the Agreement entered into by MBNA and the Trustee named in the
accompanying Prospectus Supplement and a series supplement to the Agreement (a
"Series Supplement"), 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 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 accompanying 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
accompanying Prospectus Supplement.
Each Series of Certificates may 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 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 accompanying 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, interest rate per annum (the "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
accompanying Prospectus Supplement. Interest will be distributed to
Certificateholders in the amounts, for the periods and on the dates specified
in the accompanying Prospectus Supplement.
The Seller initially will own the Seller Interest. The Seller Interest will
represent the 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 Interest 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 accompanying Prospectus Supplement, the Seller Interest
may be transferred in whole or in part subject to certain limitations and
conditions set forth therein, and, at the discretion of the Seller, the Seller
Interest may be held either in an uncertificated form or in the form of a
certificate representing the Seller Interest (a "Seller Certificate"). See "--
Certain Matters Regarding the Seller and the Servicer" in this Prospectus.
Unless otherwise specified in the accompanying 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" in this 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
19
<PAGE>
fluctuate each day, therefore, to reflect the changes in the amount of the
Principal Receivables in the Trust. When a Series is amortizing, the Investor
Interest of such Series will decline as customer payments of Principal
Receivables are collected and distributed to or accumulated for distribution to
the Certificateholders. As a result, the Seller Interest will generally
increase to reflect reductions in the Investor Interest for such Series and
will also change to reflect the variations in the amount of Principal
Receivables in the Trust. The Seller Interest may also be reduced as the result
of New Issuance. See "--New Issuances" in this Prospectus.
Unless otherwise specified in the accompanying 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 accompanying 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 & Co. ("Cede"). Accordingly,
Cede is expected to be the holder of record of each Series of Certificates. No
owner of beneficial interests in the Certificates (a "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 in this Prospectus, all references in this Prospectus
to actions by Certificateholders shall refer to actions taken by DTC upon
instructions from its Participants (as defined below). In addition, unless and
until Certificates in fully registered, certificated form ("Definitive
Certificates") are issued for any Series, the Trustee will not consider a
Certificate Owner to be a Certificateholder (as that term is used in the
Agreement) and all references in this Prospectus 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. Therefore, until such time, a Certificate Owner
will only be able to exercise its rights as Certificateholders indirectly
through DTC, Cedel Bank, societe anonyme ("Cedel") or the Euroclear System and
their participating organizations. See "--Book-Entry Registration" and "--
Definitive Certificates" in this Prospectus.
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 accompanying 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 Securities
Exchange Act of 1934, as amended (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
20
<PAGE>
include certain other organizations. Indirect access to the DTC system also is
available to others such as banks, brokers, dealers and trust companies that
clear through or maintain a custodial relationship with a Participant, either
directly or indirectly (the "Indirect Participants").
Transfers between Participants will occur in accordance with DTC rules.
Transfers between Cedel Participants and Euroclear Participants will occur in
the ordinary way in accordance with their applicable rules and operating
procedures.
Cross-market transfers between persons holding directly or indirectly through
DTC, on the one hand, and directly or indirectly through Cedel Participants or
Euroclear Participants, on the other, will be effected in DTC in accordance
with DTC rules on behalf of the relevant European international clearing system
by its Depositary; however, such cross-market transactions will require
delivery of instructions to the relevant European international clearing system
by the counterparty in such system in accordance with its rules and procedures
and within its established deadlines (European time). The relevant European
international clearing system will, if the transaction meets its settlement
requirements, deliver instructions to its Depositary to take action to effect
final settlement on its behalf by delivering or receiving securities in DTC,
and making or receiving payment in accordance with normal procedures for same-
day funds settlement applicable to DTC. Cedel Participants and Euroclear
Participants may not deliver instructions directly to the Depositaries.
Because of time-zone differences, credits of securities in Cedel or Euroclear
as a result of a transaction with a Participant will be made during the
subsequent securities settlement processing, dated the business day following
the DTC settlement date, and such credits or any transactions in such
securities settled during such processing will be reported to the relevant
Cedel Participant or Euroclear Participant on such business day. Cash received
in Cedel or Euroclear as a result of sales of securities by or through a Cedel
Participant or a Euroclear Participant to a DTC Participant will be received
with value on the DTC settlement date but will be available in the relevant
Cedel or Euroclear cash account only as of the business day following
settlement in DTC.
Certificate Owners that are not Participants or Indirect Participants but
desire to purchase, sell or otherwise transfer ownership of, or other interest
in, Certificates may do so only through Participants and Indirect Participants.
In addition, Certificate Owners will receive all distributions of principal of
and interest on the Certificates from the Trustee through the Participants who
in turn will receive them from DTC. Under a book-entry format, Certificate
Owners may experience some delay in their receipt of payments, since such
payments will be forwarded by the Trustee to Cede, as nominee for DTC. DTC will
forward such payments to its Participants which thereafter will forward them to
Indirect Participants or Certificate Owners. It is anticipated that the only
"Certificateholder" will be Cede, as nominee of DTC. Certificate Owners will
not be recognized by the Trustee as Certificateholders, as such term is used in
the Agreement, and Certificate Owners will only be permitted to exercise the
rights of Certificateholders indirectly through the Participants who in turn
will exercise the rights of Certificateholders through DTC.
Under the rules, regulations and procedures creating and affecting DTC and
its operations, DTC is required to make book-entry transfers among Participants
on whose behalf it acts with respect to the Certificates and is required to
receive and transmit distributions of principal and interest on the
Certificates. Participants and Indirect Participants with which Certificate
Owners have accounts with respect to the Certificates similarly are required to
make book-entry transfers and receive and transmit such payments on behalf of
their respective Certificate Owners. Accordingly, although Certificate Owners
will not possess Certificates, Certificate Owners will receive payments and
will be able to transfer their interests.
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.
21
<PAGE>
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 interests that satisfy
such specified percentages. DTC may take conflicting actions with respect to
other interests to the extent that such actions are taken on behalf of
Participants whose holdings include such interests.
Cedel is incorporated under the laws of Luxembourg as a professional
depository. Cedel holds securities for its participating organizations ("Cedel
Participants") and facilitates the clearance and settlement of securities
transactions between Cedel Participants through electronic book-entry changes
in accounts of Cedel Participants, thereby eliminating the need for physical
movement of certificates. Transactions may be settled in Cedel in any of 28
currencies, including United States dollars. Cedel provides to its Cedel
Participants, among other things, services for safekeeping, administration,
clearance and settlement of internationally traded securities and securities
lending and borrowing. Cedel interfaces with domestic markets in several
countries. As a professional depository, Cedel is subject to regulation by the
Luxembourg Monetary Institute. Cedel Participants are recognized financial
institutions around the world, including underwriters, securities brokers and
dealers, banks, trust companies, clearing corporations and certain other
organizations and may include the underwriters of any Series of Certificates.
Indirect access to Cedel is also available to others, such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a Cedel Participant, either directly or indirectly.
Euroclear 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.
22
<PAGE>
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" in this Prospectus. Cedel or
the Euroclear Operator, as the case may be, will take any other action
permitted to be taken by a Certificateholder under the Agreement on behalf of a
Cedel Participant or Euroclear Participant only in accordance with its relevant
rules and procedures and subject to its Depositary's ability to effect such
actions on its behalf through DTC.
Although DTC, Cedel and Euroclear have agreed to the foregoing procedures in
order to facilitate transfers of Certificates among participants of DTC, Cedel
and Euroclear, they are under no obligation to perform or continue to perform
such procedures and such procedures may be discontinued at any time.
DEFINITIVE CERTIFICATES
Unless otherwise specified in the accompanying 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 accompanying 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 in this Prospectus 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
23
<PAGE>
rate as specified in the accompanying 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 (each, a "Monthly
Period") 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 accompanying 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 accompanying Prospectus Supplement. If a Series has more than one Class of
Certificates, each such Class may have a separate Interest Funding Account. The
Prospectus Supplement relating to each Series of Certificates and each Class
thereof will describe the amounts and sources of interest payments to be made,
the Certificate Rate, and, for a Series or Class thereof bearing interest at a
floating Certificate Rate, the initial Certificate Rate, the dates and the
manner for determining subsequent Certificate Rates, and the formula, index or
other method by which such Certificate Rates are determined.
PRINCIPAL PAYMENTS
Unless otherwise specified in the accompanying 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 accompanying 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 accompanying Prospectus Supplement, the Rapid Accumulation
Period, principal will be paid to the Certificateholders in the amounts and on
the dates specified in the accompanying Prospectus Supplement. During an
Accumulation Period, principal will be accumulated in a trust account
established for the benefit of such Certificateholders (a "Principal Funding
Account") for later distribution to Certificateholders on the Scheduled Payment
Date in the amounts specified in the accompanying 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 accompanying Prospectus Supplement and allocated
to such Series or Class and from certain other sources specified in the
accompanying 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 accompanying 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 accompanying 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 accompanying 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
24
<PAGE>
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--Potential Priority of Certain Liens" and "Certain Legal Aspects of the
Receivables" in this Prospectus.
NEW ISSUANCES
The Agreement provides for the Trustee to issue one or more Series of
Certificates which are transferable and have the characteristics described
below. The accompanying Prospectus Supplement may also provide that, pursuant
to any one or more Series Supplements, the holder of the Seller Interest may
have one or more new Series (which may include Series offered pursuant to this
Prospectus) issued by notifying the Trustee (each such issuance, a "New
Issuance"). Pursuant to the Agreement, the holder of the Seller Interest may
define, with respect to any newly issued Series, all principal terms of such
Series (the "Principal Terms"). 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 a
New Issuance, the holder of the Seller Interest will deliver to the Trustee
written confirmation that the New Issuance 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 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, through
one or more other underwriters or placement agents, in fixed-price offerings or
in negotiated transactions or otherwise.
Unless otherwise specified in the accompanying Prospectus Supplement, the
holder of the Seller Interest may perform New Issuances 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 Interest may deliver a different form of Credit
Enhancement agreement. The holder of the Seller Interest 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 Interest 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 New Issuances that may be
performed under the Agreement.
Unless otherwise specified in the accompanying Prospectus Supplement, a New
Issuance may only occur upon the satisfaction of certain conditions provided in
the Agreement. Under the Agreement, the holder of the Seller Interest may
perform a New Issuance by notifying the Trustee at least three days in advance
of the date upon which the New Issuance is to occur. Under the Agreement, the
notice will state the designation of any Series to be issued on the date of the
New Issuance and, with respect to each such Series: (i) its initial principal
25
<PAGE>
amount (or method for calculating such amount) which amount may not be greater
than the current principal amount of the Seller Interest, (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 provides 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) 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 in this Prospectus 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
executed by the Seller and the issuer of the Credit Enhancement, (v) written
confirmation from each Rating Agency that the New Issuance will not result in
such Rating Agency's reducing or withdrawing its rating on any then outstanding
Series rated by it and (vi) an officer's certificate of the Seller to the
effect that after giving effect to the New Issuance the Seller would not be
required to add Additional Accounts pursuant to the Agreement and the Seller
Interest would be at least equal to a specified minimum level (the "Minimum
Seller Interest"). Upon satisfaction of such conditions, the Trustee will
authenticate the new Series.
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 accompanying 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 accompanying 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
26
<PAGE>
(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
(except for certain tax, governmental and other nonconsensual liens), 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 Receivables (except for certain
tax, governmental and other nonconsensual 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 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 accompanying 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
27
<PAGE>
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 accompanying Prospectus Supplement, with
respect to each Series of Certificates, an "Eligible Receivable" will be
defined to mean each Receivable (a) which has arisen under an Eligible Account,
(b) which was created in compliance, in all material respects, with all
requirements of law applicable to the Seller, and pursuant to a credit card
agreement which complies in all material respects with all requirements of law
applicable to the Seller, (c) with respect to which all consents, licenses or
authorizations of, or registrations with, any governmental authority required
to be obtained or given by the Seller in connection with the creation of such
Receivable or the execution, delivery, creation and performance by the Seller
of the related credit card agreement have been duly obtained or given and are
in full force and effect as of the date of the creation of such Receivable, (d)
as to which, at the time of its creation, the Seller or the Trust had good and
marketable title free and clear of all liens and security interests arising
under or through the Seller (other than certain tax liens for taxes not then
due or which the Seller is contesting), (e) which is the legal, valid and
binding payment obligation of the obligor thereon, legally enforceable against
such obligor in accordance with its terms (with certain bankruptcy-related
exceptions) and (f) which constitutes an "account" under Article 9 of the UCC.
Unless otherwise specified in the Prospectus Supplement relating to a Series
of Certificates, it will not be required or anticipated that the Trustee will
make any initial or periodic general examination of the Receivables or any
records relating to the Receivables for the purpose of establishing the
presence or absence of defects, compliance with the Seller's representations
and warranties or for any other purpose. The Servicer, however, will deliver to
the Trustee on or before March 31 of each year (or such other date specified in
the accompanying 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
accompanying 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 interests
28
<PAGE>
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 in this Prospectus. 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 (the "Addition
Date"), 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) each Rating Agency then rating any Series of Certificates
outstanding under the Trust shall have previously, or, in certain limited
circumstances, within a three-month period, 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 Securities and Exchange Commission (the "SEC") 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
accompanying 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, dated the date of such removal (the "Removal Date") containing
a true and complete list of all Removed Accounts identified by account number
and the aggregate amount of the Receivables in such
29
<PAGE>
Removed Accounts; (iii) 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; (iv) 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; (v) 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; (vi) the Principal
Receivables of the Removed Accounts shall not equal or exceed 5% (or such other
percentage specified in the accompanying 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 not equal or exceed the sum of (a) the initial
Investor Interest or the aggregate principal amount of the Certificates of such
Series (the "Full Investor Interest"), as applicable, of such Series plus (b)
5% of the aggregate amount of the Principal Receivables in the Trust at such
time after giving effect to the removal of Accounts pursuant to clause (a)
above; (vii) such other conditions as are specified in the accompanying
Prospectus Supplement; and (viii) the Seller shall have delivered to the
Trustee an officer's certificate confirming the items set forth in clauses (i)
through (vii) above. Notwithstanding the above, the Seller will be permitted to
designate as a Removed Account without the consent of the Trustee,
Certificateholders or Rating Agencies any Account that has a zero balance and
which the Seller will remove from its computer file.
COLLECTION AND OTHER SERVICING PROCEDURES
For each Series of Certificates, the Servicer will be responsible for
servicing and administering the Receivables in accordance with the Servicer's
policies and procedures for servicing credit card receivables comparable to the
Receivables. The Servicer will be required to maintain fidelity bond coverage
insuring against losses through wrongdoing of its officers and employees who
are involved in the servicing of credit card receivables covering such actions
and in such amounts as the Servicer believes to be reasonable from time to
time.
DISCOUNT OPTION
The Agreement provides that the Seller may, at its sole discretion, at any
time designate a specified fixed or variable percentage (the "Discount
Percentage") of the amount of Receivables arising in the Accounts with respect
to the Trust on and after the date such option is exercised that otherwise
would have been treated as Principal Receivables to be treated as Finance
Charge Receivables. In effect, if such option is exercised by the Seller, the
Principal Receivables are treated as having been transferred to the Trust at a
discount. The result of such discounting treatment is to increase the yield to
the Trust beyond the actual income performance of the Accounts. Such
designation will become effective upon satisfaction of the requirements set
forth in the Agreement, including written confirmation by each Rating Agency of
its then-current rating on each outstanding Series of the Trust. After such
designation is effective, on the date of processing of any collections, the
product of the Discount Percentage and collections of Receivables that arise in
the Accounts on such day on or after the date such option is exercised that
otherwise would be Principal Receivables will be deemed collections of Finance
Charge Receivables and will be applied accordingly, unless otherwise provided
in the accompanying 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
30
<PAGE>
"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 accompanying 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, an
account established for the purpose of holding collections of Receivables (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
accompanying 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) time deposits or certificates of deposit of depositary 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 depositary
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 each 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 accompanying
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 accompanying 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 accompanying Prospectus
Supplement, the Trustee will initially be the paying agent and will have the
revocable power to withdraw funds from the Distribution Account for the purpose
of making distributions to the Certificateholders.
FUNDING PERIOD
For any Series of Certificates, the accompanying Prospectus Supplement may
specify that for a period beginning on the Closing Date and ending on a
specified date before the commencement of an Amortization Period or
Accumulation Period with respect to such Series (the "Funding Period"), the
aggregate amount of Principal Receivables in the Trust allocable to such Series
may be less than the aggregate principal amount of the Certificates of such
Series and that the amount of 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 Receivables to the Trust or pending the reduction of the
Investor Interests of other Series issued by the Trust. The accompanying
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
31
<PAGE>
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 accompanying 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 accompanying Prospectus Supplement will be
payable to the Certificateholders of such Series in the manner and at such time
as set forth in the accompanying Prospectus Supplement.
If so specified in the accompanying 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 accompanying 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 Accounts
which were written off as uncollectible by the Servicer ("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 accompanying
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 accompanying Prospectus Supplement, on or
before the Transfer Date following each annual membership fee processing date,
the Seller will accept reassignment of the Receivables representing such annual
membership fee from the Trust. The Seller will pay to the Trust for such
Receivable the amount of such annual membership fee. An amount equal to the
product of (a) the Investor Percentages with respect to all Series issued by
the Trust with respect to Finance Charge Receivables and (b) the amount of such
annual membership fee will be deposited by the Seller into the Finance Charge
Account and an amount equal to the product of (a) the Seller Percentage and (b)
the amount of such annual membership fee will be paid to the holder of the
Seller Interest. 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 accompanying Prospectus
Supplement, collections with respect to such annual membership fees will be
treated as collections of Principal Receivables.
32
<PAGE>
APPLICATION OF COLLECTIONS
Unless otherwise specified in the accompanying 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 accompanying 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 business day
immediately prior to each Distribution Date or other business day specified in
the accompanying Prospectus Supplement (each, a "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 accompanying 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 accompanying 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 Interest;
(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 accompanying 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 Interest, provided that if after giving effect to the inclusion in
the Trust of all Receivables on or prior to such date of processing and the
application of payments referred to in paragraph (a) above the Seller
Interest is reduced to zero, the excess will be deposited in the Principal
Account or other specified account and will be used as described in the
accompanying 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 accompanying
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 accompanying 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
33
<PAGE>
paid to the holder of the Seller Interest 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
accompanying 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 accompanying 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 accompanying 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 accompanying 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
accompanying Prospectus Supplement.
SHARED EXCESS FINANCE CHARGE COLLECTIONS
Any Series offered hereby may be included in a group of Series (a "Group").
If so specified in the accompanying Prospectus Supplement, the
Certificateholders of a Series within a Group or any Class thereof may be
entitled to receive all or a portion of Excess Finance Charge Collections with
respect to another Series within such Group or Class thereof to cover any
shortfalls with respect to amounts payable from collections of Finance Charge
Receivables allocable to such Series or Class. Unless otherwise provided in the
accompanying 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
accompanying 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 accompanying 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 accompanying 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 accompanying
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" in this Prospectus.
34
<PAGE>
SHARED PRINCIPAL COLLECTIONS
If so specified in the accompanying 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 ("Shared
Principal Collections") will be applied to cover principal payments due to or
for the benefit of Certificateholders of other Series. If so specified in the
accompanying Prospectus Supplement, the allocation of Shared Principal
Collections may be among Series within a Group. Any such reallocation will not
result in a reduction in the Investor Interest of the Series to which such
collections were initially allocated.
DEFAULTED RECEIVABLES; REBATES AND FRAUDULENT CHARGES; INVESTOR CHARGE-OFFS
Unless otherwise specified in the accompanying 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 accompanying Prospectus Supplement. If so provided in the accompanying
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 Interest, as appropriate. In
the case of a Series of Certificates having one or more Classes of Subordinated
Certificates, the accompanying 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 accompanying 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 Seller Interest will be
reduced, on a net basis, by the amount of the adjustment. In addition, the
Seller Interest 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
35
<PAGE>
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
accompanying Prospectus Supplement), if certain conditions set forth in the
Agreement are met. Unless otherwise specified in the accompanying Prospectus
Supplement, the repurchase price will be equal to the total Investor Interest
of such Series (less the amount, if any, on deposit in any Principal Funding
Account with respect to such Series), plus the Enhancement Invested Amount, if
any, with respect to such Series, plus accrued and unpaid interest on the
Certificates and interest or other amounts payable on the Enhancement Invested
Amount or the Collateral Interest, if any, through the day preceding the
Distribution Date on which the repurchase occurs.
The Certificates of each Series will be retired on the day following the date
on which the final payment of principal is scheduled to be made to the
Certificateholders, whether as a result of optional reassignment to the Seller
or otherwise. Each Prospectus Supplement will specify the Series Termination
Date with respect to the related Series of Certificates; 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 Interest 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 Interest, the Trustee shall convey to the holder of the Seller
Interest 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 accompanying Prospectus Supplement, as
described above, the Revolving Period will continue through the date specified
in the accompanying 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 accompanying 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 accompanying
Prospectus Supplement, the Rapid Accumulation Period will commence. If, because
of the occurrence of a Pay Out Event, the Rapid
36
<PAGE>
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 accompanying 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 interests aggregating more
than 50% of the Investor Interest of each Series (or if any Series has more
than one Class, of each Class, and any other Person specified in the Agreement
or a Series Supplement) issued and outstanding, the Trustee will sell, dispose
of, or otherwise liquidate the Receivables in a commercially reasonable manner
and on commercially reasonable terms. The proceeds from the sale, disposition
or liquidation of the Receivables will be treated as collections of the
Receivables and applied as specified above in "--Application of Collections"
and in the accompanying 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
accompanying 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--
Potential Effect of Insolvency or Bankruptcy of Seller or Other Holder of
Seller Interest" and "Certain Legal Aspects of the Receivables--Certain Matters
Relating to Receivership" in this Prospectus.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
Unless otherwise specified in the accompanying 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 accompanying 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 accompanying 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 accompanying 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
37
<PAGE>
applicable law. No such resignation will become effective until the Trustee or
a successor to the Servicer has assumed the Servicer's responsibilities and
obligations under the Agreement. MBNA, as initial Servicer, intends to delegate
some of its servicing duties to MBNA Hallmark; however, such delegation will
not relieve it of its obligation to perform such duties in accordance with the
Agreement.
The Agreement provides that the Servicer will indemnify the Trust and Trustee
from and against any loss, liability, expense, damage or injury suffered or
sustained by reason of any acts or omissions or alleged acts or omissions of
the Servicer with respect to the activities of the Trust or the Trustee;
provided, however, that the Servicer shall not indemnify (a) the Trustee for
liabilities imposed by reason of fraud, negligence, or willful misconduct by
the Trustee in the performance of its duties under the Agreement, (b) the
Trust, the Certificateholders or the Certificate Owners for liabilities arising
from actions taken by the Trustee at the request of Certificateholders, (c) the
Trust, the Certificateholders or the Certificate Owners for any losses, claims,
damages or liabilities incurred by any of them in their capacities as
investors, including without limitation, losses incurred as a result of
defaulted Receivables or Receivables which are written off as uncollectible, or
(d) the Trust, the Certificateholders or the Certificate Owners for any
liabilities, costs or expenses of the Trust, the Certificateholders or the
Certificate Owners arising under any tax law, including without limitation, any
federal, state or local income or franchise tax or any other tax imposed on or
measured by income (or any interest or penalties with respect thereto or
arising from a failure to comply therewith) required to be paid by the Trust,
the Certificateholders or the Certificate Owners in connection with the
Agreement to any taxing authority.
In addition, the Agreement provides that, subject to certain exceptions, the
Seller will indemnify an injured party for any losses, claims, damages or
liabilities (other than those incurred by a Certificateholder as an investor in
the Certificates or those which arise from any action of a Certificateholder)
arising out of or based upon the arrangement created by the Agreement as though
the Agreement created a partnership under the Delaware Uniform Partnership Law
in which the Seller is a general partner.
The Agreement provides that neither the Seller nor the Servicer nor any of
their respective directors, officers, employees or agents will be under any
other liability to the Trust, Trustee, Certificateholders or any other person
for any action taken, or for refraining from taking any action, in good faith
pursuant to the Agreement. Neither the Seller, the Servicer, nor any of their
respective directors, officers, employees or agents will be protected against
any liability which would otherwise be imposed by reason of willful
misfeasance, bad faith or gross negligence of the Seller, the Servicer or any
such person in the performance of its duties or by reason of reckless disregard
of obligations and duties thereunder. In addition, the Agreement provides that
the Servicer is not under any obligation to appear in, prosecute or defend any
legal action which is not incidental to its servicing responsibilities under
the Agreement and which in its opinion may expose it to any expense or
liability.
The Agreement provides that the Seller may transfer its interest in all or a
portion of the Seller Interest, 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.
38
<PAGE>
SERVICER DEFAULT
Unless otherwise specified in the accompanying Prospectus Supplement, in the
event of any Servicer Default (as defined below), either the Trustee or
Certificateholders representing interests aggregating more than 50% of the
Investor Interests for all Series of Certificates of the Trust, by written
notice to the Servicer (and to the Trustee if given by the Certificateholders),
may terminate all of the rights and obligations of the Servicer as servicer
under the Agreement and in and to the Receivables and the proceeds thereof and
the Trustee may appoint a new Servicer (a "Service Transfer"). The rights and
interest of the Seller under the Agreement and in the Seller Interest will not
be affected by such termination. The Trustee shall as promptly as possible
appoint a successor Servicer. If no such Servicer has been appointed and has
accepted such appointment by the time the Servicer ceases to act as Servicer,
all authority, power and obligations of the Servicer under the Agreement shall
pass to and be vested in the Trustee. If the Trustee is unable to obtain any
bids from eligible servicers and the Servicer delivers an officer's certificate
to the effect that it cannot in good faith cure the Servicer Default which gave
rise to a transfer of servicing, and if the Trustee is legally unable to act as
successor Servicer, then the Trustee shall give the Seller the right of first
refusal to purchase the Receivables on terms equivalent to the best purchase
offer as determined by the Trustee.
Unless otherwise specified in the accompanying 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,
conservatorship or receivership of the Servicer; or
(e) such other event specified in the accompanying Prospectus Supplement.
Unless otherwise stated in the accompanying 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
39
<PAGE>
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 accompanying Prospectus Supplement, for
each Series of Certificates, on each Distribution Date, or as soon thereafter
as is practicable, as specified in the accompanying Prospectus Supplement, the
Paying Agent will forward to each Certificateholder of record a statement
prepared by the Servicer setting forth, among other things: (a) the total
amount distributed, (b) the amount of the distribution on such Distribution
Date allocable to principal on the Certificates, (c) the amount of such
distribution allocable to interest on the Certificates, (d) the amount of
collections of Principal Receivables processed during the preceding month or
months since the last Distribution Date and allocated in respect of the
Certificates, (e) the aggregate amount of Principal Receivables, the Investor
Interest and the Investor Interest as a percentage of the aggregate amount of
the Principal Receivables in the Trust as of the end of the last day of the
preceding Monthly Period or Periods since the last Distribution Date, (f) the
aggregate outstanding balance of Accounts which are 35 or more days delinquent
by class of delinquency as of the end of the last day of the preceding Monthly
Period or Periods since the last Distribution Date, (g) the aggregate Investor
Default Amount for the preceding Monthly Period or Periods since the last
Distribution Date, (h) the amount of Investor Charge-Offs for the preceding
Monthly Period or Periods since the last Distribution Date and the amount of
reimbursements of previous Investor Charge-Offs for the preceding Monthly
Period or Periods since the last Distribution Date, (i) the amount of the
Investor Servicing Fee for the preceding Monthly Period or Periods since the
last Distribution Date, (j) the amount available under any Enhancement and
Credit Enhancement, if any, as of the close of business on such Distribution
Date, (k) the "pool factor" as of the close of business on the last day of the
preceding Monthly Period (consisting of a seven-digit decimal expressing the
ratio of the Investor Interest to the initial Investor Interest), (l) the
aggregate amount of collections on Finance Charge Receivables and annual
membership fees processed during the preceding Monthly Period or Periods since
the last Distribution Date, (m) the Portfolio Yield (defined in the
accompanying Prospectus Supplement) 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 accompanying 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 accompanying Prospectus Supplement, the
Servicer will cause a firm of independent certified public accountants to
furnish a report, based upon established criteria that meets the standards
applicable to accountants' reports intended for general distribution, attesting
to the fairness of the assertion of the Servicer's management that its internal
controls over the functions performed as Servicer of the Trust are effective,
in all material respects, in providing reasonable assurance that Trust assets
are safeguarded against loss from unauthorized use or disposition, on the date
of such report, 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
40
<PAGE>
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 accompanying
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 accompanying Prospectus Supplement, the
Agreement and any Series Supplement may be amended by the Seller, the Servicer
and the Trustee, without the consent of Certificateholders of any Series then
outstanding, for any purpose, provided that (i) the Seller delivers an opinion
of counsel acceptable to the Trustee to the effect that such amendment will not
adversely affect in any material respect the interest of such
Certificateholders, and (ii) such amendment will not result in a withdrawal or
reduction of the rating of any outstanding Series under the Trust.
The Agreement and any related Series Supplement may be amended by the Seller,
the Servicer and the Trustee, without the consent of the Certificateholders of
any Series then outstanding, to provide for additional Enhancement or
substitute Enhancement with respect to a Series, to change the definition of
Eligible Account or to provide for the addition to the Trust of a
Participation, provided, that (i) the Seller delivers to the Trustee a
certificate of an authorized officer to the effect that, in the reasonable
belief of the Seller, such amendment will not as of the date of such amendment
adversely affect in any material respect the interest of such
Certificateholders, and (ii) such amendment will not result in a withdrawal or
reduction of the rating of any outstanding Series under the Trust.
The Agreement and the related Series Supplement may be amended by the Seller,
the Servicer and the Trustee with the consent of the holders of Certificates
evidencing interests aggregating not less than 66 2/3% (or such other
percentage specified in the accompanying 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 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 interests in the Trust aggregating
not less than 10% (or such other percentage specified in the accompanying
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.
41
<PAGE>
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.
CERTIFICATEHOLDERS HAVE LIMITED CONTROL OF ACTIONS
Certificateholders of any Series or Class within a Series may need the
consent or approval of a specified percentage of the Investor Interest of other
Series or a Class of such other Series to take or direct certain actions,
including to require the appointment of a successor Servicer after a Servicer
Default, to amend the Agreement in some cases, and to direct a repurchase of
all outstanding Series after certain violations of the Seller's representations
and warranties. The interests of the Certificateholders of any such Series may
not coincide with yours, making it more difficult for any particular
Certificateholder to achieve the desired results from such vote.
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 accompanying Prospectus Supplement, or any
combination of the foregoing. If so specified in the accompanying 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 in that accompanying
Prospectus Supplement.
Unless otherwise specified in the accompanying 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 accompanying
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
42
<PAGE>
replaced and (d) any material provision of any agreement relating to such
Credit Enhancement. Additionally, the accompanying 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 accompanying 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 accompanying Prospectus Supplement, one or more of any
Series will be subordinated as described in the accompanying 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
accompanying Prospectus Supplement. If so specified in the accompanying
Prospectus Supplement, subordination may apply only in the event of certain
types of losses not covered by another Credit Enhancement. The accompanying
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 accompanying Prospectus Supplement
will specify the manner and conditions for applying such a cross-support
feature.
LETTER OF CREDIT
If so specified in the accompanying 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 accompanying 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 accompanying
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
accompanying Prospectus Supplement.
CASH COLLATERAL GUARANTY OR ACCOUNT
If so specified in the accompanying 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 accompanying Prospectus
Supplement. The accompanying
43
<PAGE>
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 accompanying Prospectus Supplement, support for a
Series or one or more Classes thereof will be provided initially by an interest
in the Trust (the "Collateral Interest") in an amount 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 accompanying 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 accompanying 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
accompanying 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 accompanying Prospectus Supplement. The
accompanying 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 accompanying 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 accompanying Prospectus Supplement.
If so specified in the accompanying 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
accompanying Prospectus Supplement.
SPREAD ACCOUNT
If so specified in the accompanying 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 accompanying Prospectus Supplement.
RESERVE ACCOUNT
If so specified in the accompanying 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 accompanying
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 accompanying
Prospectus Supplement.
44
<PAGE>
CERTIFICATE RATINGS
Any rating of the Certificates by a Rating Agency will indicate:
. its view on the likelihood that Certificateholders will receive required
interest and principal payments; and
. its evaluation of the Receivables and the availability of any Credit
Enhancement for the Certificates.
Among the things a rating will not indicate are:
. the likelihood that interest or principal payments will be paid on a
scheduled date;
. the likelihood that a Pay Out Event will occur;
. the likelihood that a United States withholding tax will be imposed on
non-U.S. Certificateholders;
. the marketability of the Certificates;
. the market price of the Certificates; or
. whether the Certificates are an appropriate investment for any purchaser.
A rating will not be a recommendation to buy, sell or hold the Certificates.
A rating may be lowered or withdrawn at any time by a Rating Agency.
The Seller will request a rating of the Certificates offered by this
Prospectus and the accompanying Prospectus Supplement from at least one Rating
Agency. Rating agencies other than those requested could assign a rating to the
Certificates and such a rating could be lower than any rating assigned by a
Rating Agency chosen by the Seller.
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 an absolute 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 Interest, 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 an enforceable
first priority perfected security interest in the Receivables in favor of the
Trust, 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" in this Prospectus.
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 governmental
authority to protect the interests of the Trust in the Receivables.
There are certain limited circumstances 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 Seller's interest in the Receivables to the Trust free and
clear of the lien of any third party. In addition, the Seller has
45
<PAGE>
covenanted and will covenant that it will not sell, pledge, assign, transfer or
grant any lien on any Receivable (or any interest therein) other than to the
Trust. A tax or government lien or other nonconsensual lien on property of the
Seller arising prior to the time a Receivable comes into existence may also
have priority over the interest of the Trust in such Receivable. In addition,
if the FDIC were appointed as conservator or receiver of the Seller, certain
administrative expenses of the conservator or receiver may also have priority
over the interest of the Trust in such Receivable.
CERTAIN MATTERS RELATING TO RECEIVERSHIP
The Seller is chartered as a national banking association and is subject to
regulation and supervision by the Office of the Comptroller of the Currency,
which is authorized to appoint the FDIC as conservator or receiver of the
Seller upon the occurrence of certain events relating to the Seller's financial
condition.
The FDIA, as amended by FIRREA, sets forth certain powers that the FDIC in
its capacity as conservator or receiver for the Seller could exercise.
Positions taken by the FDIC prior to the passage of FIRREA do not suggest that
the FDIC, if appointed as conservator or receiver for the Seller, would
interfere with the timely transfer to the Trust of payments collected on the
Receivables or interfere with the timely liquidation of the Receivables, as
described below. To the extent that the Seller has granted a security interest
in the Receivables to the Trust, and that security 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
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
accompanying 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
accompanying 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 or
46
<PAGE>
require the continued transfer of Principal Receivables to the Trust. See
"Description of the Certificates--Pay Out Events" in this Prospectus.
CONSUMER PROTECTION LAWS
The relationships of the cardholder and credit card issuer and the lender are
extensively regulated by federal and state consumer protection laws. With
respect to credit cards issued by the Seller, the most significant laws include
the federal Truth-in-Lending, Equal Credit Opportunity, Fair Credit Reporting,
Fair Debt Collection Practice and Electronic Funds Transfer Acts. These
statutes impose disclosure requirements when a credit card account is
advertised, when it is opened, at the end of monthly billing cycles, and at
year end. In addition, these statutes limit customer liability for unauthorized
use, prohibit certain discriminatory practices in extending credit, and impose
certain limitations on the type of account-related charges that may be
assessed. Cardholders are entitled under these laws to have payments and
credits applied to the credit card accounts promptly, to receive prescribed
notices and to require billing errors to be resolved promptly. The Trust may be
liable for certain violations of consumer protection laws that apply to the
Receivables, either as assignee from the Seller with respect to obligations
arising before transfer of the Receivables to the Trust or as a party directly
responsible for obligations arising after the transfer. In addition, a
cardholder may be entitled to assert such violations by way of set-off against
his obligation to pay the amount of Receivables owing. The Seller has warranted
in the Agreement that all of the Receivables have been and will be created in
compliance with the requirements of such laws. The Servicer also agrees in the
Agreement to indemnify the Trust, among other things, for any liability arising
from such violations caused by the Servicer. For a discussion of the Trust's
rights arising from the breach of these warranties, see "Description of the
Certificates--Representations and Warranties" in this Prospectus.
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.
If a cardholder sought protection under federal or state bankruptcy or debtor
relief laws, a court could reduce or discharge completely the cardholder's
obligations to repay amounts due on its Account and, as a result, the related
Receivables would be written off as uncollectible. The Certificateholders could
suffer a loss if no funds are available from Credit Enhancement or other
sources. See "Description of the Certificates--Defaulted Receivables; Rebates
and Fraudulent Charges; Investor Charge-Offs" in this Prospectus.
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 accompanying Prospectus Supplement. This discussion is based on
current law, which is subject to changes that could prospectively or
retroactively modify or adversely affect the tax consequences summarized below.
The discussion does not address all of the tax consequences relevant to a
particular Certificate Owner in light of that Certificate Owner's
circumstances, and some Certificate Owners may be subject to special tax rules
and limitations not discussed below. Each prospective Certificate Owner is
urged to consult its own tax adviser in determining the federal, state, local
and foreign income and any other tax consequences of the purchase, ownership
and disposition of a Certificate.
For purposes of this discussion, "U.S. Person" means a citizen or resident of
the United States, a corporation or partnership organized in or under the laws
of the United States, any state thereof, or any political subdivision of either
(including the District of Columbia), or an estate or trust the income of which
is includible
47
<PAGE>
in gross income for U.S. federal income tax purposes regardless of its source.
The term "U.S. Certificate Owner" means any U.S. Person and any other person to
the extent that the income attributable to its interest in a Certificate is
effectively connected with that person's conduct of a U.S. trade or business.
TREATMENT OF THE CERTIFICATES AS DEBT
The Seller expresses in the Agreement the intent that for federal, state and
local income and franchise tax purposes, the Certificates will be debt secured
by the Receivables. The Seller, by entering into the Agreement, and each
investor, by the acceptance of a beneficial interest in a Certificate, will
agree to treat the Certificates as debt for federal, state and local income and
franchise tax purposes. However, the Agreement generally refers to the transfer
of Receivables as a "sale," and because different criteria are used in
determining the non-tax accounting treatment of the transaction, the Seller
will treat the Agreement for certain non-tax accounting purposes as causing a
transfer of an ownership interest in the Receivables and not as creating a
debt obligation.
A basic premise of federal income tax law is that the economic substance of a
transaction generally determines its tax consequences. The form of a
transaction, while a relevant factor, is not conclusive evidence of its
economic substance. In appropriate circumstances, the courts have allowed
taxpayers as well as the Internal Revenue Service (the "IRS") to treat a
transaction in accordance with its economic substance, as determined under
federal income tax law, even though the participants in the transaction have
characterized it differently for non-tax purposes.
The determination of whether the economic substance of a purchase of an
interest in property is instead a loan secured by the transferred property has
been made by the IRS and the courts on the basis of numerous factors designed
to determine whether the seller has relinquished (and the purchaser has
obtained) substantial incidents of ownership in the property. Among those
factors, the primary ones examined are whether the purchaser has the
opportunity to gain if the property increases in value, and has the risk of
loss if the property decreases in value. Except to the extent otherwise
specified in the accompanying Prospectus Supplement, Orrick, Herrington &
Sutcliffe LLP, special counsel to the Seller ("Special Counsel"), is of the
opinion that, under current law as in effect on the Closing Date, although no
transaction closely comparable to that contemplated herein has been the subject
of any Treasury regulation, revenue ruling or judicial decision, for federal
income tax purposes the Certificates offered hereunder will not constitute an
ownership interest in the Receivables but will properly be characterized as
debt. Except where indicated to the contrary, the following discussion assumes
that the Certificates offered hereunder are debt for federal income tax
purposes.
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 Interest) 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
Interest). 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 Interest) 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 Interest) and the other holders of equity interests in the Trust.
However, Special Counsel is of the opinion that, under current law as in effect
on the Closing Date, any such entity constituted by the Trust will not be an
association or publicly traded partnership taxable as a corporation.
Possible Treatment of the Trust as a Partnership or a Publicly Traded
Partnership. Although, as described above, Special Counsel is of the opinion
that the Certificates will properly be treated as debt for federal income tax
purposes and that the Trust will not be treated as an association or publicly
traded
48
<PAGE>
partnership taxable as a corporation, such opinion does not bind the IRS and
thus no assurance can be given that such treatment will prevail. Further, such
opinion is made with respect to current law, which is subject to change. If the
IRS were to contend successfully that some or all of the Certificates or any
other interest in the Trust (other than the Seller Interest), 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 as a
publicly traded partnership taxable as a corporation for such purposes. Because
Special Counsel is of the opinion that the Certificates will be characterized
as debt for federal income tax purposes and because any holder of an interest
in a Collateral Interest will agree to treat that interest as debt for such
purposes, no attempt will be made to comply with any tax reporting requirements
that would apply as a result of such alternative characterizations.
If the Trust were treated in whole or in part as a partnership in which some
or all holders of interests in the publicly offered Certificates were partners,
that partnership could be classified as a publicly traded partnership, and so
could be taxable as a corporation. Further, regulations published by the
Treasury Department on December 4, 1995 (the "Regulations") could cause the
Trust to constitute a publicly traded partnership even if all holders of
interests in publicly offered Certificates are treated as holding debt. The
Regulations generally apply to taxable years beginning after December 31, 1995,
and thus could affect the classification of presently existing entities and the
ongoing tax treatment of already completed transactions. Although the
Regulations provide for a 10-year grandfather period for a partnership actively
engaged in an activity before December 4, 1995, it is not clear whether the
Trust would qualify for this grandfather period. If the Trust were classified
as a publicly traded partnership, whether by reason of the treatment of
publicly offered Certificates as equity or by reason of the Regulations, it
would avoid taxation as a corporation if its income was not derived in the
conduct of a "financial business"; however, whether the income of the Trust
would be so classified is unclear.
Under the Code and the Regulations, a partnership will be classified as a
publicly traded partnership if equity interests therein are traded on an
"established securities market," or are "readily tradable" on a "secondary
market" or its "substantial equivalent." The Seller intends to take measures
designed to reduce the risk that the Trust could be classified as a publicly
traded partnership by reason of interests in the Trust other than the publicly
traded Certificates. Although the Seller expects such measures will ultimately
be successful, certain of the actions that may be necessary for avoiding the
treatment of such interests as "readily tradable" on a "secondary market" or
its "substantial equivalent" are not fully within the control of the Seller. As
a result, there can be no assurance that the measures the Seller intends to
take will in all circumstances be sufficient to prevent the Trust from being
classified as a publicly traded partnership under the Regulations.
If the Trust treated as a partnership nevertheless were not treated as a
publicly traded partnership taxable as a corporation, that partnership would
not be subject to federal income tax. Rather, each item of income, gain, 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 Interest) 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. If the Trust were treated in whole or in part as a partnership and the
number of holders of interests in the publicly offered certificates and other
interests in the Trust treated as partners equaled or exceeded 100, the Seller
may cause the Trust to elect to be an "electing large partnership." The
consequence of such election to investors could include the determination of
certain tax items at the partnership level and the disallowance of otherwise
allowable deductions. No representation is made as to whether such election
will be made.
49
<PAGE>
If the arrangement created by the Agreement were treated in whole or in part
as a publicly traded partnership taxable as a corporation, that entity would be
subject to federal income tax at corporate tax rates on its taxable income
generated by ownership of the 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 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.
50
<PAGE>
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 Interest other than the Seller
or any other interest in the Trust not properly characterized as debt. To
qualify for the exemption from taxation, under currently applicable procedures
the last U.S. Person in the chain of payment prior to payment to a non-U.S.
Certificate Owner (the "Withholding Agent") must have received (in the year in
which a payment of interest or principal occurs or in either of the two
preceding years) a statement that (i) is signed by the non-U.S. Certificate
Owner under penalties of perjury, (ii) certifies that the non-U.S. Certificate
Owner is not a U.S. Person and (iii) provides the name and address of the non-
U.S. Certificate Owner. This 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 recently issued final Treasury
regulations which will revise some of the foregoing procedures whereby a non-
U.S. Certificate Owner may establish an exemption from withholding generally
beginning January 1, 2000; non-U.S. Certificate Owners should consult their tax
advisers concerning the impact to them, if any, of such revised procedures.
Generally, any gain or income realized by a non-U.S. Certificate Owner upon
retirement or disposition of an interest in a Certificate will not be subject
to U.S. federal income tax, provided that (i) in the case of a Certificate
Owner that is an individual, such Certificate Owner is not present in the
United States for 183 days or more during the taxable year in which such
retirement or disposition occurs and (ii) in the case of gain representing
accrued interest, the conditions described in the preceding paragraph for
exemption from withholding are satisfied. Certain exceptions may be applicable,
and an individual non-U.S. Certificate Owner should consult a tax adviser.
If the Certificates were treated as an interest in a partnership, the
recharacterization could cause a non-U.S. Certificate Owner to be treated as
engaged in a trade or business in the United States. In that event, the non-
U.S. Certificate Owner would be required to file a federal income tax return
and, in general, would be subject to U.S. federal income tax (including the
branch profits tax) on its net income from the partnership. Further, certain
withholding obligations apply with respect to income allocable or distributions
made to a foreign partner. That withholding may be at a rate as high as 39.6
percent. If some or all of the Certificates were treated as stock in a
corporation, any related dividend distributions to a non-U.S. Certificate Owner
generally would be subject to withholding of tax at the rate of 30 percent,
unless that rate were reduced by an applicable tax treaty.
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
51
<PAGE>
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.
Recently issued final Treasury regulations will revise some of the foregoing
information reporting and backup withholding procedures generally beginning
January 1, 2000; Certificate Owners should consult their tax advisers
concerning the impact to them, if any, of such revised procedures.
STATE AND LOCAL TAXATION
The discussion above does not address the taxation of the Trust or the tax
consequences of the purchase, ownership or disposition of an interest in the
Certificates under any state or local tax law. Each investor should consult its
own tax adviser regarding state and local tax consequences.
ERISA CONSIDERATIONS
Section 406 of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), and Section 4975 of the Code prohibit certain pension,
profit sharing or other employee benefit plans, individual retirement accounts
or annuities and employee annuity plans and Keogh plans (collectively, "Plans")
from engaging in certain transactions involving "plan assets" with persons that
are "parties in interest" under ERISA or "disqualified persons" under the Code
(collectively, "Parties in Interest") with respect to the Plan. A violation of
these "prohibited transaction" rules may generate excise tax and other
liabilities under ERISA and Section 4975 of the Code for such persons, unless a
statutory, regulatory or administrative exemption is available. Plans that are
governmental plans (as defined in Section 3(32) of ERISA) and certain church
plans (as defined in Section 3(33) of ERISA) are not subject to ERISA
requirements.
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 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
52
<PAGE>
likely to be Parties in Interest 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 Class Exemptions
("PTCE") 96-23 (Class Exemption for Plan Asset Transactions Determined by In-
House Asset Managers), 95-60 (Class Exemption for Certain Transactions
Involving Insurance Company General Accounts), 91-38 (Class Exemption for
Certain Transactions Involving Bank Collective Investment Funds), 90-1 (Class
Exemption for Certain Transactions Involving Insurance Company Pooled Separate
Accounts) and 84-14 (Class Exemption for Plan Asset Transactions Determined by
Independent Qualified Professional Asset Managers).
Under certain circumstances, the Plan Asset Regulation treats the assets of
an entity in which a Plan holds an equity interest as "plan assets" of such
Plan. Because the Certificates will represent beneficial interests in the
Trust, and despite the agreement of the Seller and the Certificate Owners to
treat each Series of Certificates as debt instruments, the Certificates are
likely to be considered equity interests in the Trust for purposes of the Plan
Asset Regulation, with the result that the assets of the Trust are likely to be
treated as "plan assets" of the investing Plans for purposes of ERISA and
Section 4975 of the Code and result in non-exempt prohibited transactions,
unless one 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 SEC) 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 accompanying
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.
A 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.
A third exception may also be available. On April 7, 1998, the DOL granted to
MBNA an administrative exemption, Prohibited Transaction Exemption 98-13
(Exemption Application No. D-10304, 63 Fed. Reg. 17,020) (the "Exemption"),
from certain of the prohibited transaction rules of ERISA and Section 4975 of
the Code with respect to the initial purchase, the holding and the subsequent
resale by Plans of securities representing interests in MBNA credit card trusts
that meet the conditions and requirements of the Exemption. The Exemption will
apply to the acquisition, holding and resale of the Senior Certificates by a
Plan, provided that certain conditions (certain of which are described below)
are met.
53
<PAGE>
Among the conditions which must be satisfied for the Exemption to apply are
the following:
(1) The acquisition of the Senior Certificates by a Plan is on terms
(including the price for such Senior Certificates) that are at least as
favorable to the investing Plan as they would be in an arm's-length
transaction with an unrelated party;
(2) The rights and interests evidenced by the Senior Certificates
acquired by the Plan are not subordinated to the rights and interests
evidenced by other certificates of the Trust;
(3) The Senior Certificates acquired by the Plan have received a rating
at the time of such acquisition in one of the two highest generic rating
categories from a Rating Agency; provided that, notwithstanding such
rating, credit support is provided to the Senior Certificates through a
senior-subordinated structure or other form of third-party credit support
which, at a minimum, represents 5% of the outstanding principal balance of
the Senior Certificates at the time of such acquisition;
(4) the Trustee is not an affiliate of the Restricted Group (as defined
below);
(5) the sum of all payments made to and retained by the underwriters in
connection with the distribution of the Senior Certificates represents not
more than reasonable compensation for underwriting such Senior
Certificates; the consideration received by the Seller as a consequence of
the assignment of Receivables to the Trust, to the extent allocable to the
Senior Certificates, represents not more than the fair market value of such
Receivables; and the sum of all payments made to and retained by the
Servicer, to the extent allocable to the Senior Certificates, represents
not more than reasonable compensation for the Servicer's services under the
Agreement and reimbursement of the Servicer's reasonable expenses in
connection therewith;
(6) The Plan investing in the Senior Certificates is an "accredited
investor" as defined in Rule 501(a)(1) of Regulation D of the Securities
and Exchange Commission under the Securities Act of 1933, as amended;
(7) The Trustee is a substantial financial institution or trust company
experienced in trust activities and is familiar with its duties,
responsibilities and liabilities as a fiduciary under ERISA and, as the
legal owner of (or holder of a perfected security interest in) the
Receivables, enforces all the rights created in favor of the
Certificateholders, including Plans;
(8) Prior to the issuance of any new Series, confirmation is received
from the Rating Agencies that such issuance will not result in the
reduction or withdrawal of the then current rating of the Senior
Certificates held by any Plan pursuant to the Exemption;
(9) To protect against fraud, chargebacks or other dilution of the
Receivables, the Agreement and the Rating Agencies require the Seller to
maintain a Seller Interest of not less than 2% of the principal balance of
the receivables contained in the Trust;
(10) Each Receivable is an Eligible Receivable, based on criteria of the
Rating Agencies and as specified in the Agreement, and the Agreement
requires that any change in the terms of the cardholder agreements must be
made applicable to the comparable segment of accounts owned or serviced by
MBNA which are part of the same program or have the same or substantially
similar characteristics;
(11) The Agreement limits the number of newly originated Accounts to be
designated to the Trust, unless the Rating Agencies otherwise consent in
writing, to the following: (a) with respect to any three-month period, 15%
of the number of existing Accounts designated to the Trust as of the first
day of such period, and (b) with respect to any twelve-month period, 20% of
the number of existing Accounts designated to the Trust as of the first day
of such twelve-month period;
(12) The Agreement requires the Seller to deliver an opinion of counsel
semi-annually confirming the validity and perfection of the transfer of
Receivables in newly originated Accounts to the Trust if such an opinion is
not delivered with respect to each interim addition; and
54
<PAGE>
(13) The Agreement requires the Seller and the Trustee to receive
confirmation from each Rating Agency that such Rating Agency will not
reduce or withdraw its then current rating of the Class A Certificates as a
result of (a) a proposed transfer of Receivables in newly originated
Accounts to the Trust, or (b) the transfer of Receivables in all newly
originated Accounts added to the Trust during the preceding three-month
period (beginning at quarterly intervals specified in the Agreement and
ending in the calendar month prior to the date such confirmation is
issued), provided that a Rating Agency confirmation shall not be required
under clause (b) for any three-month period in which any additions of
Receivables in newly originated Accounts occurred only after receipt of
prior Rating Agency confirmation pursuant to clause (a).
The Trust also must meet the following requirements:
(a) The corpus of the Trust must consist only of Receivables of the
type which have been included in other investment pools;
(b) Certificates evidencing interests in such other investment pools
have been rated in one of the two highest generic rating categories by
at least one of the Rating Agencies for at least one year prior to the
Plan's acquisition of Certificates; and
(c) Certificates evidencing an interest in such other investment
pools have been purchased by investors other than Plans for at least
one year prior to any Plan's acquisition of Senior Certificates.
Moreover, the Exemption provides relief from certain self-dealing/conflict of
interest prohibited transactions that may occur when a Plan fiduciary causes a
Plan to acquire Senior Certificates if the fiduciary (or its affiliate) is an
obligor on the Receivables held in the Trust, provided that, among other
requirements: (a) in the case of an acquisition in connection with the initial
issuance of Senior Certificates, at least 50% of each Class of Certificates in
which Plans have invested is acquired by persons independent of the Restricted
Group and at least 50% of the aggregate interest in the Trust is acquired by
persons independent of the Restricted Group; (b) such fiduciary (or its
affiliate) is an obligor with respect to 0.5% or less of the fair market value
of the obligations contained in the Trust; (c) the Plan's investment in Senior
Certificates does not exceed 25% of all of the Senior Certificates outstanding
after the acquisition; and (d) no more than 25% of the assets of the Plan are
invested in securities representing an interest in one or more trusts
containing assets sold or serviced by the same entity. The Exemption does not
apply to Plans sponsored by the Seller, the underwriters of the Senior
Certificates, the Trustee, the Servicer, any obligor with respect to
obligations included in the Trust constituting more than 0.5% of the fair
market value of the aggregate undivided interest in the Trust allocated to the
Senior Certificates of a Series, determined on the date of the initial issuance
of such Series, or any affiliate of any such party (the "Restricted Group").
The DOL has designated the Exemption as an "underwriter exemption." As a
result, an insurance company investing solely assets of its general account may
be able to acquire and hold Subordinate Certificates of a Series, provided that
(i) the Senior Certificates of that Series are eligible for relief under the
Exemption and (ii) such acquisition and holding satisfies the conditions
applicable under Sections I and III of PTCE 95-60.
If none 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 with respect
to a Plan that is a Certificate Owner might be prohibited under Section 406 of
ERISA and/or Section 4975 of the Code and result in excise tax and other
liabilities under ERISA and Section 4975 of the Code unless an exemption were
available. The five DOL class exemptions mentioned above may not provide relief
for all transactions involving the assets of the Trust even if they would
otherwise apply to the purchase of a Certificate by a Plan.
The Certificates of any Series may not be purchased with the assets of a Plan
if the Seller, the Servicer, the Trustee or any of their affiliates (a) has
investment or administrative discretion with respect to such Plan assets; (b)
has authority or responsibility to give, or regularly gives, investment advice
with respect to such Plan assets, for a fee and pursuant to an agreement or
understanding that such advice (i) will serve as a primary basis for investment
decisions with respect to such Plan assets, and (ii) will be based on the
particular
55
<PAGE>
investment needs of such Plan; or (c) unless PTCE 95-60, 91-38 or 90-1 applies,
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 availability
of exemptive relief from the prohibited transaction rules under the Exemption
or otherwise.
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
in this Prospectus and in the accompanying 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 accompanying 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 accompanying 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
accompanying 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 accompanying 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.
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
56
<PAGE>
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.
REPORTS TO CERTIFICATEHOLDERS
The Servicer will prepare monthly and annual reports that will contain
information about the Trust. The financial information contained in the reports
will not be prepared in accordance with generally accepted accounting
principles. Unless and until Definitive Certificates are issued, the reports
will be sent to Cede & Co. which is the nominee of The Depository Trust Company
and the registered holder of the Certificates. No financial reports will be
sent to you. See "Description of the Certificates--Book-Entry Registration,"
"--Reports to Certificateholders" and "--Evidence as to Compliance" in this
Prospectus.
WHERE YOU CAN FIND MORE INFORMATION
We filed a registration statement relating to the Certificates with the SEC.
This Prospectus is part of the registration statement, but the registration
statement includes additional information.
The Servicer will file with the SEC all required annual, monthly and special
SEC reports and other information about the Trust.
You may read and copy any reports, statements or other information we file at
the SEC's public reference room in Washington, D.C. You can request copies of
these documents, upon payment of a duplicating fee, by writing to the SEC.
Please call the SEC at (800) SEC-0330 for further information on the operation
of the public reference rooms. Our SEC filings are also available to the public
on the SEC Internet site (http://www.sec.gov.).
The SEC allows us to "incorporate by reference" information we file with it,
which means that we can disclose important information to you by referring you
to those documents. The information incorporated by reference is considered to
be part of this Prospectus. Information that we file later with the SEC will
automatically update the information in this Prospectus. In all cases, you
should rely on the later information over different information included in
this Prospectus or the accompanying Prospectus Supplement. We incorporate by
reference any future annual, monthly and special SEC reports and proxy
materials filed by or on behalf of the Trust until we terminate our offering of
the Certificates.
As a recipient of this Prospectus, you may request a copy of any document we
incorporate by reference, except exhibits to the documents (unless the exhibits
are specifically incorporated by reference), at no cost, by writing or calling
us at: Investor Relations; MBNA America Bank, National Association; Wilmington,
Delaware 19884-0131; (800) 362-6255.
57
<PAGE>
INDEX OF TERMS FOR PROSPECTUS
<TABLE>
<CAPTION>
Term Page
- ---- ----
<S> <C>
Accounts................................................................... 15
Accumulation Period........................................................ 17
Addition Date.............................................................. 29
Additional Accounts........................................................ 17
Additional Interest........................................................ 34
Agreement.................................................................. 15
Amortization Period........................................................ 18
Assignment................................................................. 29
Bank Portfolio............................................................. 15
BIF........................................................................ 31
Cash Collateral Account.................................................... 43
Cash Collateral Guaranty................................................... 43
Cede....................................................................... 20
Cedel...................................................................... 20
Cedel Participants......................................................... 22
Certificate Owner.......................................................... 20
Certificate Rate........................................................... 19
Certificateholder.......................................................... 21
Certificateholders......................................................... 17
Certificates............................................................... 5
Class...................................................................... 17
Closing Date............................................................... 17
Code....................................................................... 50
Collateral Interest........................................................ 44
Collection Account......................................................... 31
Controlled Accumulation Period............................................. 7
Controlled Amortization Period............................................. 7
Cooperative................................................................ 22
Corporation................................................................ 18
Credit Enhancement......................................................... 8
Credit Enhancement Percentage.............................................. 32
Credit Enhancement Provider................................................ 39
Cut-Off Date............................................................... 17
Defaulted Accounts......................................................... 32
Definitive Certificates.................................................... 20
Depositaries............................................................... 20
Depository................................................................. 20
Determination Date......................................................... 35
Disclosure Document........................................................ 25
Discount Percentage........................................................ 30
Distribution Account....................................................... 31
Distribution Date.......................................................... 6
DOL........................................................................ 52
Eligible Account........................................................... 27
Eligible Receivable........................................................ 28
Enhancements............................................................... 5
Enhancement Invested Amount................................................ 43
ERISA...................................................................... 52
Euroclear.................................................................. 22
</TABLE>
<TABLE>
<CAPTION>
Term Page
- ---- ----
<S> <C>
Euroclear Operator......................................................... 22
Euroclear Participants..................................................... 22
Excess Finance Charge Collections.......................................... 34
Exchange Act............................................................... 20
Exemption.................................................................. 53
FDIA....................................................................... 10
FDIC....................................................................... 10
Finance Charge Account..................................................... 31
Finance Charge Receivables................................................. 5
FIRREA..................................................................... 10
Full Investor Interest..................................................... 30
Funding Period............................................................. 31
Group...................................................................... 34
Holders.................................................................... 23
Independent Investors...................................................... 53
Indirect Participants...................................................... 21
Ineligible Receivable...................................................... 27
Interchange................................................................ 16
Interest Funding Account................................................... 24
Investor Charge-Off........................................................ 34
Investor Default Amount.................................................... 34
Investor Interest.......................................................... 6
Investor Percentage........................................................ 6
Investor Servicing Fee..................................................... 34
IRS........................................................................ 48
L/C Bank................................................................... 43
MBNA....................................................................... 5
MBNA Hallmark.............................................................. 15
Minimum Seller Interest.................................................... 26
Monthly Interest........................................................... 34
Monthly Period............................................................. 24
Moody's.................................................................... 31
New Issuance............................................................... 25
OID........................................................................ 50
Participants............................................................... 20
Participation Agreement.................................................... 29
Participations............................................................. 29
Parties in Interest........................................................ 52
Pay Out Event.............................................................. 8
Permitted Investments...................................................... 31
Plan Asset Regulation...................................................... 52
Plans...................................................................... 52
Pre-Funding Account........................................................ 31
Pre-Funding Amount......................................................... 31
Principal Account.......................................................... 31
Principal Amortization Period.............................................. 7
Principal Funding Account.................................................. 24
Principal Receivables...................................................... 5
Principal Terms............................................................ 25
</TABLE>
58
<PAGE>
<TABLE>
<CAPTION>
Term Page
- ---- ----
<S> <C>
PTCE....................................................................... 53
Qualified Institution...................................................... 31
Rapid Accumulation Period.................................................. 7
Rapid Amortization Period.................................................. 7
Rating Agency.............................................................. 9
Receivables................................................................ 15
Regulations................................................................ 49
Removal Date............................................................... 29
Removed Accounts........................................................... 17
Reserve Account............................................................ 44
Restricted Group........................................................... 55
Revolving Period........................................................... 7
SAIF....................................................................... 31
Scheduled Payment Date..................................................... 7
SEC........................................................................ 29
Securities Act............................................................. 25
Seller..................................................................... 15
Seller Certificate......................................................... 19
Seller Interest............................................................ 6
Seller Percentage.......................................................... 19
Senior Certificates........................................................ 19
Series..................................................................... 15
Series Supplement.......................................................... 19
</TABLE>
<TABLE>
<CAPTION>
Term Page
- ---- ----
<S> <C>
Series Termination Date.................................................... 7
Service Transfer........................................................... 39
Servicer................................................................... 6
Servicer Default........................................................... 39
Servicing Fee.............................................................. 16
Shared Principal Collections............................................... 35
Special Counsel............................................................ 48
Spread Account............................................................. 44
Standard & Poor's.......................................................... 31
Subordinated Certificates.................................................. 19
Tax Opinion................................................................ 26
Terms and Conditions....................................................... 22
Transfer Date.............................................................. 33
Trust...................................................................... 5
Trust Portfolio............................................................ 17
Trust Termination Date..................................................... 36
Trustee.................................................................... 5
U.S. Certificate Owner..................................................... 48
U.S. Person................................................................ 47
UCC........................................................................ 45
Unallocated Principal Collections.......................................... 34
Underwriting Agreement..................................................... 56
Withholding Agent.......................................................... 51
</TABLE>
59
<PAGE>
ANNEX I
GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the globally offered MBNA Master
Credit Card Trust II Asset Backed Certificates (the "Global Securities") to be
issued in Series from time to time (each, a "Series") will be available only in
book-entry form. Investors in the Global Securities may hold such Global
Securities through any of The Depository Trust Company ("DTC"), Cedel or
Euroclear. The Global Securities will be tradeable as home market instruments
in both the European and U.S. domestic markets. Initial settlement and all
secondary trades will settle in same-day funds.
Secondary market trading between investors holding Global Securities through
Cedel and Euroclear will be conducted in the ordinary way in accordance with
their normal rules and operating procedures and in accordance with conventional
eurobond practice (i.e., seven calendar day settlement).
Secondary market trading between investors holding Global Securities through
DTC will be conducted according to the rules and procedures applicable to U.S.
corporate debt obligations.
Secondary cross-market trading between Cedel or Euroclear and DTC
Participants holding Certificates will be effected on a delivery-against-
payment basis through the respective Depositaries of Cedel and Euroclear (in
such capacity) and as DTC Participants.
Non-U.S. holders (as described below) of Global Securities will be subject to
U.S. withholding taxes unless such holders meet certain requirements and
deliver appropriate U.S. tax documents to the securities clearing organizations
or their participants.
INITIAL SETTLEMENT
All Global Securities will be held in book-entry form by DTC in the name of
Cede & Co. as nominee of DTC. Investors' interests in the Global Securities
will be represented through financial institutions acting on their behalf as
direct and indirect Participants in DTC. As a result, Cedel and Euroclear will
hold positions on behalf of their participants through their respective
Depositaries, which in turn will hold such positions in accounts as DTC
Participants.
Investors electing to hold their Global Securities through DTC will follow
the settlement practices applicable to prior MBNA Master Credit Card Trust II
issues. Investor securities custody accounts will be credited with their
holdings against payment in same-day funds on the settlement date.
Investors electing to hold their Global Securities through Cedel or Euroclear
accounts will follow the settlement procedures applicable to conventional
eurobonds, except that there will be no temporary global security and no "lock-
up" or restricted period. Global Securities will be credited to the securities
custody accounts on the settlement date against payment in same-day funds.
SECONDARY MARKET TRADING
Since the purchaser determines the place of delivery, it is important to
establish at the time of the trade where both the purchaser's and seller's
accounts are located to ensure that settlement can be made on the desired value
date.
Trading between DTC Participants. Secondary market trading between DTC
Participants will be settled using the procedures applicable to prior MBNA
Master Credit Card Trust II issues in same-day funds.
Trading between Cedel and/or Euroclear Participants. Secondary market trading
between Cedel Participants or Euroclear Participants will be settled using the
procedures applicable to conventional eurobonds in same-day funds.
A-1
<PAGE>
Trading between DTC seller and Cedel or Euroclear purchaser. When Global
Securities are to be transferred from the account of a DTC Participant to the
account of a Cedel Participant or a Euroclear Participant, the purchaser will
send instructions to Cedel or Euroclear through a Cedel Participant or
Euroclear Participant at least one business day prior to settlement. Cedel or
Euroclear will instruct the respective Depositary, as the case may be, to
receive the Global Securities against payment. Payment will include interest
accrued on the Global Securities from and including the last coupon payment
date to and excluding the settlement date. Payment will then be made by the
respective Depositary to the DTC Participant's account against delivery of the
Global Securities. After settlement has been completed, the Global Securities
will be credited to the respective clearing system and by the clearing system,
in accordance with its usual procedures, to the Cedel Participant's or
Euroclear Participant's account. The Global Securities credit will appear the
next day (European time) and the cash debit will be back-valued to, and the
interest on the Global Securities will accrue from, the value date (which would
be the preceding day when settlement occurred in New York). If settlement is
not completed on the intended value date (i.e., the trade fails), the Cedel or
Euroclear cash debit will be valued instead as of the actual settlement date.
Cedel Participants and Euroclear Participants will need to make available to
the respective clearing systems the funds necessary to process same-day funds
settlement. The most direct means of doing so is to pre-position funds for
settlement, either from cash on hand or existing lines of credit, as they would
for any settlement occurring within Cedel or Euroclear. Under this approach,
they may take on credit exposure to Cedel or Euroclear until the Global
Securities are credited to their accounts one day later.
As an alternative, if Cedel or Euroclear has extended a line of credit to
them, Cedel Participants or Euroclear Participants can elect not to pre-
position funds and allow that credit line to be drawn upon the finance
settlement. Under this procedure, Cedel Participants or Euroclear Participants
purchasing Global Securities would incur overdraft charges for one day,
assuming they cleared the overdraft when the Global Securities were credited to
their accounts. However, interest on the Global Securities would accrue from
the value date. Therefore, in many cases the investment income on the Global
Securities earned during that one-day period may substantially reduce or offset
the amount of such overdraft charges, although this result will depend on each
Cedel Participant's or Euroclear Participant's particular cost of funds.
Since the settlement is taking place during New York business hours, DTC
Participants can employ their usual procedures for sending Global Securities to
the respective Depositary for the benefit of Cedel Participants or Euroclear
Participants. The sale proceeds will be available to the DTC seller on the
settlement date. Thus, to the DTC Participant a cross-market transaction will
settle no differently than a trade between two DTC Participants.
Trading between Cedel or Euroclear seller and DTC purchaser. Due to time zone
differences in their favor, Cedel Participants and Euroclear Participants may
employ their customary procedures for transactions in which Global Securities
are to be transferred by the respective clearing system, through the respective
Depositary, to a DTC Participant. The seller will send instructions to Cedel or
Euroclear through a Cedel Participant or Euroclear Participant at least one
business day prior to settlement. In these cases, Cedel or Euroclear will
instruct the respective Depositary, as appropriate, to deliver the bonds to the
DTC Participant's account against payment. Payment will include interest
accrued on the Global Securities from and including the last coupon payment
date to and excluding the settlement date. The payment will then be reflected
in the account of the Cedel Participant or Euroclear Participant the following
day, and receipt of the cash proceeds in the Cedel Participant's or Euroclear
Participant's account would be back-valued to the value date (which would be
the preceding day, when settlement occurred in New York). Should the Cedel
Participant or Euroclear Participant have a line of credit with its respective
clearing system and elect to be in debit in anticipation of receipt of the sale
proceeds in its account, the back-valuation will extinguish any overdraft
charges incurred over that one-day period. If settlement is not completed on
the intended value date (i.e., the trade fails), receipt of the cash proceeds
in the Cedel Participant's or Euroclear Participant's account would instead be
valued as of the actual settlement date. Finally, day traders that use Cedel or
Euroclear and that purchase Global Securities
A-2
<PAGE>
from DTC Participants for delivery to Cedel Participants or Euroclear
Participants should note that these trades would automatically fail on the sale
side unless affirmative action were taken. At least three techniques should be
readily available to eliminate this potential problem:
(a) borrowing through Cedel or Euroclear for one day (until the purchase
side of the day trade is reflected in their Cedel or Euroclear accounts) in
accordance with the clearing system's customary procedures;
(b) borrowing the Global Securities in the U.S. from a DTC Participant no
later than one day prior to settlement, which would give the Global
Securities sufficient time to be reflected in their Cedel or Euroclear
account in order to settle the sale side of the trade; or
(c) staggering the value dates for the buy and sell sides of the trade so
that the value date for the purchase from the DTC Participant is at least
one day prior to the value date for the sale to the Cedel Participant or
Euroclear Participant.
CERTAIN U.S. FEDERAL INCOME TAX DOCUMENTATION REQUIREMENTS
A beneficial owner of Global Securities holding securities through Cedel or
Euroclear (or through DTC if the holder has an address outside the U.S.) will
be subject to the 30% U.S. withholding tax that generally applies to payments
of interest (including original issue discount) on registered debt issued by
U.S. Persons, unless, under currently applicable law, (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
A-3
<PAGE>
either (including the District of Columbia), or (iii) an estate or trust the
income of which is includible in gross income for United States tax purposes
regardless of its source. This summary does not deal with all aspects of U.S.
Federal income tax withholding that may be relevant to foreign holders of the
Global Securities. Investors are advised to consult their own tax advisors for
specific tax advice concerning their holding and disposing of the Global
Securities. Further, the U.S. Treasury Department has recently finalized new
regulations that will revise some aspects of the current system for withholding
on amounts paid to foreign persons. Under these regulations, interest or OID
paid to a nonresident alien would continue to be exempt from U.S. withholding
taxes (including backup withholding) provided that the holder complies with the
new certification procedures.
A-4
<PAGE>
MBNA MASTER CREDIT CARD TRUST II
Issuer
[LOGO OF MBNA AMERICA APPEARS HERE]
MBNA AMERICA BANK, NATIONAL ASSOCIATION
Seller and Servicer
SERIES 199 -
$[ ]
CLASS A FLOATING RATE ASSET BACKED CERTIFICATES
$[ ]
CLASS B FLOATING RATE ASSET BACKED CERTIFICATES
----------------
PROSPECTUS SUPPLEMENT
----------------
UNDERWRITER OF THE CERTIFICATES
[NAME OF UNDERWRITER]
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT AND
THE ACCOMPANYING PROSPECTUS. WE HAVE NOT AUTHORIZED ANYONE TO
PROVIDE YOU WITH DIFFERENT INFORMATION.
WE ARE NOT OFFERING THE CERTIFICATES IN ANY STATE WHERE THE
OFFER IS NOT PERMITTED.
WE DO NOT CLAIM THE ACCURACY OF THE INFORMATION IN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS AS OF
ANY DATE OTHER THAN THE DATES STATED ON THEIR RESPECTIVE
COVERS.
DEALERS WILL DELIVER A PROSPECTUS SUPPLEMENT AND PROSPECTUS
WHEN ACTING AS UNDERWRITERS OF THE CERTIFICATES AND WITH
RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS. IN
ADDITION, ALL DEALERS SELLING THE CERTIFICATES WILL DELIVER A
PROSPECTUS SUPPLEMENT AND PROSPECTUS UNTIL , 199 .
[RECYCLED PAPER LOGO THIS DOCUMENT IS PRINTED ENTIRELY ON RECYCLED PAPER.
APPEARS HERE]
<PAGE>
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.............................................. $ 2,950,000**
Printing and Engraving........................................ 600,000*
Trustee's Fees................................................ 150,000*
Legal Fees and Expenses....................................... 1,500,000*
Blue Sky Fees and Expenses.................................... 20,000*
Accountants' Fees and Expenses................................ 225,000*
Rating Agency Fees............................................ 4,500,000*
Miscellaneous Fees............................................ 75,000*
-----------
Total..................................................... $10,020,000*
===========
</TABLE>
- --------
* Estimate
** Actual
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
II-1
<PAGE>
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 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> <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 --Second Amendment to Pooling and Servicing Agreement and Amendment to
the Series Supplements dated as of June 2, 1998 (incorporated by
reference to Form 8-K filed with the Securities and Exchange
Commission on July 14, 1998)
4.4 --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)
4.5 --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)
4.6 --Form of Prospectus Supplement, Version #1 (incorporated by reference
to Exhibit 4.5 to the registrant's Registration Statement on Form
S-3, No. 333-17253)
4.7 --Form of Prospectus Supplement, Version #2 (incorporated by reference
to Exhibit 4.6 to the registrant's Registration Statement on Form
S-3, No. 333-17253)
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-4)
</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
II-2
<PAGE>
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 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 thereof.
(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>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, EACH
CO-REGISTRANT CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS
ALL OF THE REQUIREMENTS FOR FILING ON FORM S-3, REASONABLY BELIEVES THAT THE
SECURITY RATING REQUIREMENT CONTAINED IN TRANSACTION REQUIREMENT B.5. OF FORM
S-3 WILL BE MET BY THE TIME OF THE SALE OF THE SECURITIES REGISTERED HEREUNDER
AND HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY
THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF WILMINGTON, STATE OF
DELAWARE, ON AUGUST 21, 1998.
MBNA AMERICA BANK, NATIONAL ASSOCIATION
as originator of the Trust and Co-Registrant
and
as Servicer on behalf of the Trust as Co-
Registrant
/s/ Thomas Dunn
By: __________________________________________
THOMAS DUNN SENIOR VICE PRESIDENT
Know All Men By These Presents, that each person whose signature appears
below constitutes and appoints Vernon H. C. Wright, Thomas Wren and Thomas
Dunn, and each of them, his true and lawful attorneys-in-fact and agents, with
full power of substitution and resubstitution, for and in his name, place and
stead, in any and all capacities to sign any or all amendments (including post-
effective amendments) to this Registration Statement and any or all other
documents in connection therewith, and to file the same, with all exhibits
thereto, with the Securities and Exchange Commission, granting unto said
authority and to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as might or could be done in person, hereby ratifying and confirming
all said attorneys-in-fact and agents or any of them, or their substitute or
substitutes, or may lawfully do or cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED ON AUGUST 21, 1998 BY THE FOLLOWING
PERSONS IN THE CAPACITIES INDICATED.
SIGNATURE TITLE
--------- ------
- ------------------------------------- Director
GREGG BACCHIERI
/s/ James H. Berick, Esq. Director
- -------------------------------------
JAMES H. BERICK, ESQ.
Director
- -------------------------------------
KENNETH F. BOEHL
Director
- -------------------------------------
JULES J. BONAVOLONTA
/s/ Charles M. Cawley Chief Executive Officer,
- ------------------------------------- Director
CHARLES M. CAWLEY
/s/ Benjamin R. Civiletti, Esq. Director
- -------------------------------------
BENJAMIN R. CIVILETTI, ESQ.
Director
- -------------------------------------
JOHN R. COCHRAN
II-4
<PAGE>
SIGNATURE TITLE
/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.
Director
- ------------------------------------
DAVID W. NELMS
/s/ Michael Rosenthal, Ph.D. Director
- ------------------------------------
MICHAEL ROSENTHAL, PH.D.
/s/ David W. Spartin Director
- ------------------------------------
DAVID W. SPARTIN
Director
- ------------------------------------
RICHARD K. STRUTHERS
/s/ Lance L. Weaver Director
- ------------------------------------
LANCE L. WEAVER
/s/ Vernon H.C. Wright Chief Corporate Finance
- ------------------------------------ Officer, Director
VERNON H.C. WRIGHT
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<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 --Second Amendment to Pooling and Servicing Agreement and Amendment to
the Series Supplements dated as of June 2, 1998 (incorporated by
reference to Form 8-K filed with the Securities and Exchange
Commission on July 14, 1998)
4.4 --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)
4.5 --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)
4.6 --Form of Prospectus Supplement, Version #1 (incorporated by reference
to Exhibit 4.5 to the registrant's Registration Statement on Form
S-3, No. 333-17253)
4.7 --Form of Prospectus Supplement, Version #2 (incorporated by reference
to Exhibit 4.6 to the registrant's Registration Statement on Form
S-3, No. 333-17253)
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-4)
</TABLE>
<PAGE>
Exhibit 5.1
[LETTERHEAD OF RICHARDS, LAYTON & FINGER, P.A.]
August 21, 1998
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, as amended by the Second Amendment to the MBNA Master Credit Card Trust II
Pooling and Servicing Agreement, dated as of June 2, 1998 (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 (the "First Assignment"), 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 (the "Second Assignment"), 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 (the "Third
Assignment"), 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 (the "Fourth Assignment"), 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 (the "Fifth Assignment"), by and between the Bank,
as Seller and Servicer, and the Trustee, by Assignment No. 6 of Receivables in
Additional Accounts, dated as of March 8, 1996 (the "Sixth Assignment"), 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 (the "Seventh
Assignment"), 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 (the "Eighth Assignment"), 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 (the "Ninth Assignment"), by and between
the Bank, as Seller and Servicer, and the Trustee, by Assignment No. 10 of
Receivables in Additional
<PAGE>
MBNA America Bank, National Association
August 21, 1998
Page 2
Accounts, dated as of November 5, 1996 (the "Tenth Assignment"), by and between
the Bank, as Seller and Servicer, and the Trustee, by Assignment No. 11 of
Receivables in Additional Accounts, dated as of February 4, 1997 (the "Eleventh
Assignment"), by and between the Bank, as Seller and Servicer, and the Trustee,
by Assignment No. 12 of Receivables in Additional Accounts, dated as of April 4,
1997 (the "Twelfth Assignment"), by and between the Bank, as Seller and
Servicer, and the Trustee, by Assignment No. 13 of Receivables in Additional
Accounts, dated as of July 2, 1997 (the "Thirteenth Assignment"), by and between
the Bank, as Seller and Servicer, and the Trustee, by Assignment No. 14 of
Receivables in Additional Accounts, dated as of October 2, 1997 (the "Fourteenth
Assignment"), by and between the Bank, as Seller and Servicer, and the Trustee,
by Assignment No. 15 of Receivables in Additional Accounts, dated as of December
17, 1997 (the "Fifteenth Assignment"), by and between the Bank, as Seller and
Servicer, and the Trustee, by Assignment No. 16 of Receivables in Additional
Accounts, dated as of April 10, 1998 (the "Sixteenth Assignment"), by and
between the Bank, as Seller and Servicer, and the Trustee, and by Assignment No.
17 of Receivables in Additional Accounts, dated as of July 2, 1998 (the
"Seventeenth Assignment"), 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 4.4 and 4.5 to the
Registration Statement (as defined below) (each, a "Supplement") (the Original
Pooling and Servicing Agreement as amended by the First Assignment, the Second
Assignment, the Third Assignment, the Fourth Assignment, the Fifth Assignment,
the Sixth Assignment, the Seventh Assignment, the Eighth Assignment, the Ninth
Assignment, the Tenth Assignment, the Eleventh Assignment, the Twelfth
Assignment, the Thirteenth Assignment, the Fourteenth Assignment, the Fifteenth
Assignment, the Sixteenth Assignment and the Seventeenth Assignment, 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) The Registration Statement on Form S-3 (the "Registration Statement"),
to be filed by the Bank with the Securities and Exchange Commission on
or about August 21, 1998, including a related preliminary prospectus
(the "Prospectus"); and
(c) A certificate of an officer of the Bank, dated August 21, 1998.
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
<PAGE>
MBNA America Bank, National Association
August 21, 1998
Page 3
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 and authorization to transact business of the Bank, in rendering
this opinion, we have relied upon an opinion, dated August 21, 1998, 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
<PAGE>
MBNA America Bank, National Association
August 21, 1998
Page 4
to the filing of this opinion with the Securities and 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, P.A.
MIL/DJM/dts
<PAGE>
EXHIBIT A
[LETTERHEAD OF MBNA AMERICA BANK, N.A.]
August 21, 1998
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
Gentlemen:
I am familiar with the registration statement on Form S-3 to be filed on or
about August 21, 1998 ("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 to the
filing of this opinion as an exhibit to the
<PAGE>
Richards, Layton & Finger
August 21, 1998
Page 2
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.
John W. Scheflen, Esq.
<PAGE>
[LETTERHEAD OF ORRICK, HERRINGTON & SUTCLIFFE LLP]
Exhibit 8.1
August 21, 1998
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)
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 the Registration Statement on Form S-3 (the "Registration Statement"), which
has been filed on August 21, 1998 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, as amended by the First Amendment thereto dated as
of March 11, 1996 and the Second Amendment thereto dated as of June 2, 1998
(collectively, 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 4.4 and 4.5
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 the representative form of prospectus supplement relating to the
Certificates (the "Prospectus Supplement") forming a part of the Registration
Statement under the heading "Summary of Terms - Tax Status", which statements
have been prepared by us, to the extent that they constitute matters of law or
legal conclusions with respect thereto, are correct in all material respects,
and we hereby confirm our opinions set forth under such headings.
We note that the Prospectus and representative form of Prospectus
Supplement do not relate to a specific transaction. Accordingly, the above-
referenced description of federal income
<PAGE>
MBNA America Bank,
National Association
Agusut 21, 1998
Page 2
tax consequences and opinions 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,
/s/ Orrick, Herrington & Sutcliffe LLP
ORRICK, HERRINGTON & SUTCLIFFE LLP
