<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 23, 1996
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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CHEVY CHASE BANK, F.S.B. CCB HOLDING CORPORATION
(Originator of the Trusts (Originator of the Chevy Chase
Described Herein) Master Credit Card Trust II
Described Herein)
(Exact Name of Registrants as Specified in Their Charters)
UNITED STATES 52-0897004 DELAWARE 52-0361930
(State or Other (I.R.S. Employer (State or Other (I.R.S. Employer
Jurisdiction of Identification Jurisdiction of Identification
Incorporation Number) Incorporation or Number)
or Organization) Organization)
8401 CONNECTICUT AVENUE 913 NORTH MARKET STREET
CHEVY CHASE, MARYLAND 20815 SUITE 405
(301) 986-7000 WILMINGTON, DELAWARE 19801
(302) 576-2748
(Address, Including Zip Code, and Telephone Number, Including Area
Code, of Each Registrant's Principal Executive Offices)
STEPHEN R. HALPIN, JR. JESSICA L. PARKER
EXECUTIVE VICE PRESIDENT AND PRESIDENT
CHIEF FINANCIAL OFFICER CCB HOLDING CORPORATION
CHEVY CHASE BANK, F.S.B. 913 NORTH MARKET STREET
8401 CONNECTICUT AVENUE SUITE 405
CHEVY CHASE, MARYLAND 20815 WILMINGTON, DELAWARE 19801
(301) 986-7000 (302) 576-2748
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent for Service)
COPIES TO:
LYNN A. SOUKUP, ESQ. JOSHUA E. RAFF, ESQ.
SHAW, PITTMAN, POTTS & TROWBRIDGE ORRICK, HERRINGTON & SUTCLIFFE LLP
2300 N STREET, N.W. 666 FIFTH AVENUE
WASHINGTON, D.C. 20037 NEW YORK, NEW YORK 10103
(202) 663-8000 (212) 506-5000
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. / /
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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. / /
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If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. / /
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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Proposed maximum Proposed maximum
Title of securities to be offering price per aggregate offering Amount of registration
registered Amount to be registered unit(1) price(1) fee
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<S> <C> <C> <C> <C>
Asset Backed Certificates $1,000,000 100% $1,000,000 $303.03
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</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
The registrants hereby amend this Registration Statement on such date or
dates as may be necessary to delay its effective date until the registrants
shall file a further amendment that 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.
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EXPLANATORY NOTE
This Registration Statement includes two different basic prospectuses
each with two corresponding forms of prospectus supplement for offering
series of Certificates (or one or more classes thereof) representing
beneficial interests in two different master credit card trusts, Chevy Chase
Master Credit Card Trust II and Chevy Chase Master Credit Card Trust,
respectively. Following this Explanatory Note in sequential order are the
basic prospectus and forms of prospectus supplement for Chevy Chase Master
Credit Card Trust II and then the basic prospectus and forms of prospectus
supplement for Chevy Chase Master Credit Card Trust.
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION, DATED OCTOBER 23, 1996
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P R O S P E C T U S
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CHEVY CHASE MASTER CREDIT CARD TRUST II
ASSET BACKED CERTIFICATES
CHEVY CHASE BANK, F.S.B.
TRANSFEROR AND SERVICER
CCB HOLDING CORPORATION
TRANSFEROR
Chevy Chase Bank, F.S.B. (the "Bank") and CCB Holding Corporation ("CCB
Holding" and, together with the Bank, the "Transferors"), may sell from time to
time one or more series (each, a "Series") of asset backed securities (the
"Certificates") evidencing undivided interests in certain assets of the Chevy
Chase Master Credit Card Trust II (the "Trust"). The Trust has been formed
pursuant to a pooling and servicing agreement (the "Pooling and Servicing
Agreement") among the Bank, as transferor and as servicer (in such capacity, the
"Servicer"), CCB Holding, as transferor, and Bankers Trust Company, as trustee.
The property of the Trust will include receivables (the "Receivables") generated
by the Bank from time to time in a portfolio of consumer revolving credit card
accounts (the "Accounts"), collections thereon and certain other property, as
more fully described herein and, with respect to any Series offered hereby, in
an accompanying prospectus supplement (a "Prospectus Supplement") relating to
such Series.
Certificates will be sold from time to time under this Prospectus on terms
determined for each Series (or any Class thereof) offered hereby at the time of
the sale and described in the related Prospectus Supplement. Each Series will
consist of one or more classes of Certificates (each, a "Class"). Each
Certificate will represent an undivided interest in the Trust and the interest
of the holders of Certificates of each Class or Series will include the right to
receive a varying percentage of each month's collections with respect to the
Receivables at the times, in the manner and to the extent described herein and,
with respect to any Series or Class thereof offered hereby, in the related
Prospectus Supplement. Interest and principal payments with respect to each
Series or Class thereof offered hereby will be made as specified in the related
Prospectus Supplement. A Series offered hereby (or any Class within such Series)
may be entitled to the benefits of a cash collateral account, collateral
interest, letter of credit, surety bond, insurance policy or other form of
enhancement as specified in the related Prospectus Supplement. In addition, any
Series offered hereby may include one or more Classes that are subordinated in
right and priority to payment of principal of, or interest on, one or more other
Classes of such Series or another Series, in each case to the extent described
in the related Prospectus Supplement. Each Series of Certificates or Class
offered hereby will be rated in one of the four highest categories by at least
one nationally recognized statistical rating organization.
While the specific terms of any Series or Class thereof in respect of which
this Prospectus is being delivered will be described in the related Prospectus
Supplement, the terms of any other Series will not be subject to prior review
by, or consent of, the holders of the Certificates of any previously issued
Series.
POTENTIAL INVESTORS SHOULD CONSIDER, AMONG OTHER THINGS, THE INFORMATION SET
FORTH IN "RISK FACTORS" COMMENCING ON PAGE 17 HEREIN AND IN THE PROSPECTUS
SUPPLEMENT.
--------------------------
THE CERTIFICATES WILL REPRESENT INTERESTS IN THE TRUST ONLY AND WILL NOT
REPRESENT INTERESTS IN OR OBLIGATIONS OF THE BANK OR CCB HOLDING OR ANY
AFFILIATE OF EITHER. A CERTIFICATE IS NOT A DEPOSIT AND NEITHER THE CERTIFICATES
NOR THE UNDERLYING ACCOUNTS OR RECEIVABLES OR ANY COLLECTIONS THEREON ARE
INSURED OR GUARANTEED BY THE SAVINGS ASSOCIATION INSURANCE FUND, THE FEDERAL
DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY OR
INSTRUMENTALITY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
--------------------------
Certificates may be sold by the Transferors directly to purchasers, through
agents designated from time to time, through underwriting syndicates led by one
or more managing underwriters or through one or more underwriters acting alone.
If underwriters or agents are involved in the offering of the Certificates of
any Series or Class thereof offered hereby, the name of the managing underwriter
or underwriters or agents will be set forth in the related Prospectus
Supplement. If an underwriter, agent or dealer is involved in the offering of
the Certificates of any Series or Class thereof offered hereby, the
underwriter's discount, agent's commission or dealer's purchase price will be
set forth in, or may be calculated from, the related Prospectus Supplement, and
the net proceeds to the Transferors from such offering will be the public
offering price of such Certificates less such discount in the case of an
underwriter, the purchase price of such Certificates less such commission in the
case of an agent or the purchase price of such Certificates in the case of a
dealer, and less, in each case, the other expenses of the Transferors associated
with the issuance and distribution of such Certificates. See "Plan of
Distribution."
THIS PROSPECTUS MAY NOT BE USED TO CONSUMMATE SALES OF CERTIFICATES OF ANY
SERIES OR ANY CLASS THEREOF UNLESS ACCOMPANIED BY THE RELATED PROSPECTUS
SUPPLEMENT.
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THE DATE OF THIS PROSPECTUS IS , 199
<PAGE>
AVAILABLE INFORMATION
The Transferors, as originators of the Trust, have filed a Registration
Statement under the Securities Act of 1933, as amended (the "Securities Act"),
with the Securities and Exchange Commission (the "Commission") on behalf of the
Trust with respect to the Certificates offered hereby. This Prospectus, which
forms a part of the Registration Statement, omits certain information contained
in such Registration Statement pursuant to the rules and regulations of the
Commission. For further information, reference is made to the Registration
Statement (including any amendments thereof and exhibits thereto) and any
reports and other documents incorporated herein or therein by reference as
described below under "Incorporation of Certain Documents by Reference," which
are available for inspection without charge at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549;
7 World Trade Center, New York, New York 10048; and Northwestern Atrium Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of
such material may be obtained from the Public Reference Section of the
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates.
In addition, the Commission maintains a Web site at "http://www.sec.gov" that
contains information regarding registrants that file electronically with the
Commission.
REPORTS TO CERTIFICATEHOLDERS
Unless and until Definitive Certificates are issued with respect to any
Series or Class thereof offered hereby, Monthly Reports, which contain unaudited
information concerning the Trust and are prepared by the Servicer, will be sent
on behalf of the Trust to Cede & Co. ("Cede"), as nominee of The Depository
Trust Company ("DTC") and registered holder of the Certificates offered hereby,
pursuant to the Pooling and Servicing Agreement. See "Description of the
Certificates -- Reports" and "The Pooling and Servicing Agreement -- Book-Entry
Registration" and "-- Evidence as to Compliance." Such reports will not
constitute financial statements prepared in accordance with generally accepted
accounting principles. The Pooling and Servicing Agreement will not require the
sending of, and neither the Bank nor CCB Holding intends to send, any of their
financial reports to registered holders of Certificates (the
"Certificateholders") offered hereby or to owners of beneficial interests in the
Certificates ("Certificate Owners"). The Servicer will file with the Commission
such periodic reports with respect to the Trust as are required under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules
and regulations of the Commission thereunder.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All reports and other documents filed by the Servicer, on behalf of the
Trust, pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act
subsequent to the date of this Prospectus and prior to the termination of the
offering of the Certificates offered hereby shall be deemed to be incorporated
by reference into this Prospectus and to be part hereof. Any statement contained
herein or in a document deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained in any other subsequently filed document,
which also is deemed to be incorporated by reference herein, modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as modified or superseded, to constitute a part of this
Prospectus.
The Servicer will provide without charge to each person to whom a copy of
this Prospectus is delivered, on the written or oral request of any such person,
a copy of any or all of the documents incorporated herein by reference, except
the exhibits to such documents (unless such exhibits are specifically
incorporated by reference in such documents). Written requests for such copies
should be directed to Chevy Chase Bank, F.S.B., 8401 Connecticut Avenue, Chevy
Chase, Maryland, 20815, Attention: Chief Financial Officer. Telephone requests
for such copies should be directed to Chevy Chase Bank, F.S.B. at (301)
986-7000.
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus and in any
accompanying Prospectus Supplement. Reference is made to the "Index of Defined
Terms" for the location herein of the definitions of certain capitalized terms
used herein. Unless the context requires otherwise, capitalized terms used in
this Prospectus and in any accompanying Prospectus Supplement refer only to the
particular Series or Class thereof being offered by such Prospectus Supplement.
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The Trust......................... Chevy Chase Master Credit Card Trust II (the "Trust").
The Trust, as a master trust, is expected to issue
Series from time to time. The assets of the Trust (the
"Trust Assets") will include a portfolio of receivables
(the "Receivables") arising under the Accounts
designated from time to time, monies collected or to be
collected from cardholders in respect of the
Receivables, the proceeds of the Receivables, monies and
other property on deposit in certain accounts of the
Trust, any Participation included in the Trust, monies
and other property collected or to be collected with
respect to such Participations and any Series
Enhancement with respect to a particular Series or
Class. The term "Series Enhancement" means, with respect
to any Series or Class of Certificates, any Credit
Enhancement, guaranteed rate agreement, maturity
liquidity facility, tax protection agreement, interest
rate cap agreement, interest rate swap agreement or
other similar arrangement for the benefit of
Certificateholders of such Series or Class. The Trust
Assets are expected to change over the life of the Trust
as receivables in revolving credit card accounts and
other revolving credit accounts and related assets are
included in the Trust and as Receivables in Accounts
included in the Trust are charged-off or removed. See
"The Trust" and "Description of the Certificates --
Addition of Trust Assets," "-- Removal of Accounts" and
"-- New Issuances."
The Transferors................... Chevy Chase Bank, F.S.B. (the "Bank"), a federally
chartered stock savings bank, and CCB Holding
Corporation ("CCB Holding"), a corporation organized
under the laws of the State of Delaware and a
wholly-owned subsidiary of the Bank, are the transferors
(in such capacity, the "Transferors") of the Receivables
and originators of the Trust. Subject to certain
conditions described herein under "The Pooling and Ser-
vicing Agreement -- The Transferor Certificates;
Additional Transferors," the Bank may designate one or
more affiliates to transfer all right, title and
interest in Receivables or Participations to the Trust
from time to time. Any such additional transferors will
generally have the same rights and obligations as those
of the Transferors described herein. Under certain
circumstances a Transferor may transfer its respective
interests and obligations as a Transferor and, with re-
spect to the Bank, as Servicer of the Trust to another
entity that will assume all of such Transferor's
obligations under the Pooling and Servicing Agreement
and related agreements. See "Assumption of a
Transferor's Obligations."
</TABLE>
3
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<TABLE>
<S> <C>
The Trustee....................... Bankers Trust Company, in its capacity as trustee under
the Pooling and Servicing Agreement (the "Trustee").
The Accounts...................... The Accounts will consist of the Initial Accounts and
any Additional Accounts but will not include any Removed
Accounts. The Accounts are not being sold or transferred
to the Trust or CCB Holding and will continue to be
controlled and held by the Bank (or an affiliate
thereof).
Pursuant to a Receivables Purchase Agreement (together
with any amendments or supplements thereto, the "Receiv-
ables Purchase Agreement") between the Bank and CCB
Holding, the Bank from time to time will sell to CCB
Holding all of its right, title and interest in and to
the Receivables arising in certain Accounts, whether
such Receivables are then existing or thereafter
created. See "Description of the Receivables Purchase
Agreement."
Either or both of the Transferors has conveyed to the
Trust all Receivables existing on the first Series
Closing Date in certain consumer revolving credit card
accounts and other consumer revolving credit accounts
("Accounts") designated on a date prior to the issuance
of the first series (the "Trust Cut-Off Date") and all
Receivables arising in the Accounts from time to time
thereafter until the termination of the Trust. The
Accounts designated on the Trust Cut-Off Date are
referred to herein as the "Initial Accounts." Pursuant
to the Pooling and Servicing Agreement, the Transferors
have designated, and expect (subject to certain
limitations and conditions), and in some circumstances
will be obligated, to designate, additional Accounts
(the "Additional Accounts"), the Receivables of which
are or will be included in the Trust or, in lieu thereof
or in addition thereto, to include Participations in the
Trust. Either or both of the Transferors, as applicable,
will convey to the Trust all Receivables in Additional
Accounts, whether such Receivables are then existing or
thereafter created. The addition to the Trust of
Receivables in Additional Accounts (other than Automatic
Additional Accounts) or Participations will be subject
to certain conditions, among others, that (a) such
addition will not result in a Ratings Effect and (b) the
applicable Transferor or the Transferors shall have
delivered to the Trustee and certain providers of Series
Enhancement a certificate of an authorized repre-
sentative to the effect that, in the reasonable belief
of such Transferor or the Transferors, such addition
will not, based on the facts known to such
representative at the time of such certification, cause
a Pay Out Event to occur with respect to any Series. See
"Description of the Certificates -- Addition of Trust
Assets."
Pursuant to the Pooling and Servicing Agreement, each of
the Transferors will have the right (subject to certain
limitations and conditions) to remove the Receivables of
certain designated Accounts from the Trust (such
accounts, the "Removed Accounts"). See "Description of
the Certificates -- Removal of Accounts."
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4
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The Receivables................... The Receivables consist of all amounts charged by
cardholders for merchandise and services and cash
advances ("Principal Receivables") and all related
periodic finance charges, cash advance fees, late
charges and any other fees and charges billed on the
Accounts ("Finance Charge Receivables"). The amount of
Receivables will fluctuate from day to day as new
Receivables are generated or added to the Trust and as
existing Receivables are collected, charged-off as
uncollectible or otherwise adjusted or removed from the
Trust.
The Certificates.................. The Certificates will be issued in Series, each of which
will consist of one or more Classes. The specific terms
of a Series or Class will be established as described
herein under "Description of the Certificates -- New
Issuances." However, while the specific terms of any
Series or Class offered hereby will be described in the
related Prospectus Supplement, the terms of such Series
or Class will not be subject to prior review by, or
consent of, the holders of the Certificates of any
previously issued Series.
Unless otherwise specified in the related Prospectus
Supplement, the Certificates of a Series offered hereby
will be available for purchase in minimum denominations
of $1,000 and in integral multiples thereof, and will
only be available in book-entry form except in certain
limited circumstances as described herein under "The
Pooling and Servicing Agreement -- Definitive
Certificates." A portion of the Trust Assets will be
allocated among the Certificateholders (including any
Credit Enhancers holding uncertificated subordinated
interests) of a particular Series (the
"Certificateholders' Interest"), the Certificateholders
(including any Credit Enhancers holding uncertificated
subordinated interests) of other Series and the
interests of the Transferors and their permitted
transferees (the "Transferors' Interest"), as described
below. The aggregate principal amount of the
Certificateholders' Interest of a Series offered hereby
will, except as otherwise provided herein and in the
related Prospectus Supplement, remain fixed at the
aggregate initial principal amount of the Certificates
of such Series. The Certificateholders' Interest of a
Series will include the right to receive (but only to
the extent needed to make required payments under the
Pooling and Servicing Agreement and the related Series
Supplement and subject to any reallocation of such
amounts if the related Series Supplement so provides)
varying percentages of collections of Finance Charge
Receivables and Principal Receivables and will be
allocated a varying percentage of the Defaulted Amount
with respect to each Monthly Period. See "Description of
the Certificates -- Interest" and "-- Principal." If the
Certificates of a Series offered hereby include more
than one Class of Certificates, the Trust Assets
allocable to the Certificateholders' Interest of such
Series may be further allocated among each Class in such
Series as described in the related Prospectus
Supplement.
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<TABLE>
<S> <C>
The Certificates of a Series will evidence undivided
interests in the Trust Assets allocated to the
Certificateholders' Interest of such Series. The
Certificates represent interests in the Trust only and
do not represent interests in or obligations of the
Bank, CCB Holding or any affiliate of either. None of
the Certificates, the Accounts, the Receivables or any
collections thereon are insured or guaranteed by the
Bank, CCB Holding or any affiliate of either or by the
Savings Association Insurance Fund, the Federal Deposit
Insurance Corporation (the "FDIC") or any other
governmental agency or instrumentality.
The Transferors' Interest......... The Transferors' Interest at any time represents the
right to the Trust Assets in excess of the
Certificateholders' Interest of all Series then
outstanding. The principal amount of the Transferors'
Interest (the "Transferor Amount") will fluctuate as the
amount of the Principal Receivables held by the Trust
changes from time to time. In addition, the Transferors
intend to cause the issuance of additional Series from
time to time and any such issuance will have the effect
of decreasing the Transferor Amount to the extent of the
initial Invested Amount of such Series (and to the
extent of any increases in the Invested Amount of such
Series in accordance with the terms thereof). See
"Description of the Certificates -- New Issuances." All
or a portion of the Transferors' Interest may be
transferred separately in one or more public or private
transactions. See "The Pooling and Servicing Agreement
-- The Transferor Certificates; Additional Transferors."
The Pooling and Servicing Agreement provides that the
Transferors will be required to make an Addition to the
Trust if, on the last business day of any Monthly
Period, the Transferor Amount is less than the Required
Transferor Amount. See "Description of the Certificates
-- Addition of Trust Assets." The level of the Required
Transferor Amount, which may be reduced subject to
certain conditions described under "Description of the
Certificates -- Addition of Trust Assets," is intended
to enable the Transferors' Interest to absorb fluc-
tuations in the amount of Principal Receivables held by
the Trust from time to time (due to, among other things,
seasonal purchase and payment habits of cardholders or
adjustments in the amount of Principal Receivables
because of rebates, refunds, fraudulent charges or
otherwise). See "Risk Factors -- Payment and Maturity
Considerations; Dependence on Cardholder Repayments" and
"Description of the Certificates -- Defaulted
Receivables; Rebates and Fraudulent Charges."
Issuance of Additional Series..... The Pooling and Servicing Agreement authorizes the
Trustee to issue three types of securities: (a) one or
more Series of Certificates, (b) a certificate
evidencing the portion of the Transferors' Interest in
the Trust retained by the Transferors (the "Bank
Certificate"), which Bank Certificate will be held by
either or both of the Transferors initially, and (c)
certificates ("Supplemental Certificates") evidencing
the
</TABLE>
6
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<TABLE>
<S> <C>
portion of the Transferors' Interest in the Trust held
by transferees of the Transferors, entitling the holders
to amounts in respect of a portion of the Transferors'
Interest previously evidenced by the Bank Certificate.
The Bank Certificate and any Supplemental Certificates
are collectively referred to as the "Transferor
Certificates." The Pooling and Servicing Agreement
provides that, pursuant to any one or more supplements
to the Pooling and Servicing Agreement (each, a "Series
Supplement"), the Transferors may cause the Trustee
without the consent of the Certificateholders to issue
one or more new Series and accordingly cause a reduc-
tion in the Transferors' Interest represented by the
Transferor Certificates. There can be no assurance that
the terms of any Series might not have an impact on the
timing or amount of payments received by a
Certificateholder of another Series. Under the Pooling
and Servicing Agreement, the Transferors may define,
with respect to any Series, the Principal Terms of such
Series. See "Description of the Certificates -- New
Issuances." The Transferors may offer any Series or
Class thereof to the public or other investors and in
connection therewith may utilize a disclosure document
(a "Disclosure Document"), which will consist of a
Prospectus Supplement in the case of a Series or Class
thereof offered hereby, in transactions either
registered under the Securities Act or exempt from
registration thereunder, directly or through one or more
underwriters or placement agents, in fixed-price
offerings or in negotiated transactions or otherwise.
See "Plan of Distribution."
A new Series may be issued only upon satisfaction of the
conditions described herein under "Description of the
Certificates -- New Issuances" including, among others,
that (a) such issuance will not result in a Ratings
Effect and (b) each Transferor shall have delivered to
the Trustee and certain providers of Series Enhancement
a certificate of an authorized representative to the
effect that, in the reasonable belief of such
Transferor, such issuance will not, based on the facts
known to such representative at the time of such
certification, cause a Pay Out Event to occur with
respect to any Series.
Collections....................... All collections of Receivables will be allocated by the
Servicer between amounts collected on Principal
Receivables and on Finance Charge Receivables. The
Servicer will allocate between the Certificateholders'
Interest of each Series and the Transferors' Interest
all amounts collected with respect to Finance Charge
Receivables and Principal Receivables and the Defaulted
Amount with respect to each day during each Monthly
Period. Collections of Finance Charge Receivables and
the Defaulted Amount will be allocated to each Series at
all times based upon its Floating Allocation Percentage.
Collections of Principal Receivables will be allocated
to each Series at all times based upon its Principal
Allocation Percentage. The Floating Allocation
Percentage and the Principal
</TABLE>
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<TABLE>
<S> <C>
Allocation Percentage with respect to each Series will
be determined as set forth in the related Series
Supplement and, with respect to each Series offered
hereby, in the related Prospectus Supplement.
Interest.......................... Interest will accrue on the Invested Amount or the
unpaid principal amount of the Certificates of a Series
or Class offered hereby at the per annum rate either
specified in or determined in the manner specified in
the related Prospectus Supplement. Except as otherwise
provided herein or in the related Prospectus Supplement,
collections of Finance Charge Receivables and certain
other amounts allocable to the Certificateholders'
Interest of a Series or Class thereof offered hereby
will be used to make interest payments to
Certificateholders of such Series or Class on each
Interest Payment Date with respect thereto; PROVIDED
that if an Early Amortization Period commences with
respect to such Series, thereafter interest will be
distributed to such Certificateholders monthly on each
Special Payment Date. If the Interest Payment Dates for
a Series or Class occur less frequently than monthly,
such collections or other amounts (or the portion
thereof allocable to such Class) will be deposited in
one or more trust accounts (each, an "Interest Funding
Account") and used to make interest payments to
Certificateholders of such Series or Class on the
following Interest Payment Date with respect thereto. If
a Series has more than one Class of Certificates, each
such Class may have a separate Interest Funding Account.
See "Description of the Certificates -- Interest."
Principal......................... The principal of the Certificates of each Series offered
hereby will be scheduled to be paid either (a) in full
on an expected date specified in the related Prospectus
Supplement (the "Expected Final Payment Date"), in which
case such Series will have a Scheduled Accumulation
Period as described below under "-- Scheduled
Accumulation Period," or (b) in installments commencing
on a date specified in the related Prospectus Supplement
(the "Principal Commencement Date"), in which case such
Series will have a Scheduled Amortization Period as
described below under "-- Scheduled Amortization
Period." If a Series has more than one Class of
Certificates, a different method of paying principal,
Expected Final Payment Date or Principal Commencement
Date may be assigned to each Class. The payment of
principal with respect to the Certificates of a Series
or Class may commence earlier than the applicable
Expected Final Payment Date or Principal Commencement
Date, and the final principal payment with respect to
the Certificates of a Series or Class may be made later
than the applicable Expected Final Payment Date or other
expected date, if a Pay Out Event occurs with respect to
such Series or Class or under certain other
circumstances described herein. See "Risk Factors --
Payment and Maturity Considerations; Dependence on
Cardholder Repayments" for
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a description of factors that may affect the timing of
principal payments on Certificates. See "Description of
the Certificates -- Principal."
Revolving Period.................. The Certificates of each Series offered hereby will have
a revolving period (the "Revolving Period") that will
commence on the date of issuance of the Series (the
"Series Closing Date") and continue until the earlier of
(a) the commencement of the Early Amortization Period or
Early Accumulation Period with respect to such Series
and (b) the date specified in the related Prospectus
Supplement as the end of the Revolving Period with
respect to such Series. During the Revolving Period with
respect to any Series offered hereby, collections of
Principal Receivables and certain other amounts
otherwise allocable to the Certificateholders' Interest
of such Series (other than amounts reallocated pursuant
to the Series Supplement for such Series) will be
treated as Shared Principal Collections and will be
distributed to, or for the benefit of, the
Certificateholders of other Series or the holders of the
Transferor Certificates. See "Description of the
Certificates -- Principal," "-- Shared Principal
Collections" and "-- Pay Out Events" for a discussion of
the events that might lead to the termination of the
Revolving Period with respect to a Series prior to its
scheduled date.
Scheduled Accumulation Period..... If the related Prospectus Supplement so specifies,
unless an Early Amortization Period or, if so specified
in the related Prospectus Supplement, an Early
Accumulation Period commences with respect to a Series
offered hereby, the Certificates of such Series will
have an accumulation period (the "Scheduled Accumulation
Period"), which will commence at the close of business
on the date or dates specified in such Prospectus
Supplement and continue until the earliest of (a) the
commencement of the Early Amortization Period or, if so
specified in the related Prospectus Supplement, the
Early Accumulation Period with respect to such Series,
(b) payment in full of the Invested Amount of the
Certificates of such Series and the Enhancement Invested
Amount or Collateral Interest, if any, with respect to
such Series or any Class thereof and (c) the Series
Termination Date with respect to such Series. During the
Scheduled Accumulation Period with respect to a Series
offered hereby, collections of Principal Receivables and
certain other amounts allocable to the Certifi-
cateholders' Interest of such Series (other than amounts
reallocated pursuant to the Series Supplement for such
Series), including Shared Principal Collections, if any,
allocable to such Series, if so specified in the related
Prospectus Supplement, will be deposited on each
Distribution Date in a trust account established for the
benefit of the Certificateholders of such Series (each,
a "Principal Funding Account") and used to make
principal distributions to the Certificateholders of
such Series or any Class thereof when due. The amount to
be deposited in the Principal Funding Account for any
Series offered hereby on any Distribution Date may, but
will not
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necessarily, be limited to an amount (the "Controlled
Deposit Amount") equal to an amount specified in the
related Prospectus Supplement (the "Controlled
Accumulation Amount") plus any existing deficit
controlled accumulation amount arising from prior
Distribution Dates. If the Prospectus Supplement for a
Series offered hereby so specifies, the amount to be
deposited in the Principal Funding Account on a
Distribution Date may be a variable amount. If a Series
has more than one Class of Certificates, each Class may
have a separate Principal Funding Account and Controlled
Accumulation Amount and the Scheduled Accumulation
Period with respect to each Class may commence on
different dates. In addition, the related Prospectus
Supplement may describe certain priorities among such
Classes with respect to deposits of principal into or
payments of amounts from such Principal Funding
Accounts.
Early Accumulation Period......... If so specified and under the conditions set forth in
the Prospectus Supplement relating to a Series having a
Scheduled Accumulation Period, during the period from
the day on which a Pay Out Event has occurred, until the
earliest of (a) the commencement of the Early
Amortization Period, (b) payment in full of the Invested
Amount of the Certificates of such Series or Class and
the Enhancement Invested Amount or Collateral Interest,
if any, with respect to such Series and (c) the Series
Termination Date with respect to such Series (the "Early
Accumulation Period"), collections of Principal
Receivables allocable to the Invested Amount of such
Series (and certain other amounts if so specified in the
related Prospectus Supplement but excluding amounts
reallocated pursuant to the Series Supplement for such
Series) will be deposited on each Distribution Date in
the Principal Funding Account and used to make
distributions of principal to the Certificateholders of
such Series or Class on the Expected Final Payment Date.
The amount to be deposited in the Principal Funding
Account during the Early Accumulation Period will not be
limited to any Controlled Deposit Amount or Controlled
Accumulation Amount. See "Description of the
Certificates -- Pay Out Events" herein and "Series
Provisions -- Pay Out Events" in the related Prospectus
Supplement for a discussion of the events which might
lead to commencement of an Early Accumulation Period.
Scheduled Amortization Period..... If the related Prospectus Supplement so specifies,
unless an Early Amortization Period commences with
respect to a Series offered hereby, the Certificates of
such Series will have an amortization period (the
"Scheduled Amortization Period"), which will commence at
the close of business on the date specified in such
Prospectus Supplement and continue until the earliest of
(a) the commencement of the Early Amortization Period
with respect to such Series, (b) payment in full of the
Invested Amount of the Certificates of such Series and
(c) the Series Termination Date with respect to such
Series. During the Scheduled Amortization Period with
respect to a
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Series, collections of Principal Receivables allocable
to the Invested Amount of such Series (and certain other
amounts if so specified in the related Prospectus
Supplement but excluding amounts reallocated pursuant to
the Series Supplement for such Series) will be used on
each Distribution Date to make principal distributions
to Certificateholders of such Series or any Class
thereof then scheduled to receive such distributions.
The amount to be distributed to Certificateholders of
any Series offered hereby on any Distribution Date may,
but will not necessarily, be limited to an amount (the
"Controlled Distribution Amount") equal to an amount
(the "Controlled Amortization Amount") specified in the
related Prospectus Supplement plus any existing deficit
controlled amortization amount arising from prior
Distribution Dates. If a Series has more than one Class
of Certificates, each Class may have a separate
Controlled Amortization Amount. In addition, the related
Prospectus Supplement may describe certain priorities
among such Classes with respect to such distributions.
Early Amortization Period......... During the period from the day on which a Pay Out Event
has occurred with respect to a Series or, if so
specified in the Prospectus Supplement relating to a
Series offered hereby with a Scheduled Accumulation
Period, from such time specified in the related
Prospectus Supplement after a Pay Out Event has occurred
and the Early Accumulation Period has commenced to the
date on which the Invested Amount of the Certificates of
such Series and the Enhancement Invested Amount or the
Collateral Interest, if any, with respect to such Series
have been paid in full or the related Series Termination
Date has occurred (the "Early Amortization Period"),
collections of Principal Receivables allocable to the
Invested Amount of such Series (and certain other
amounts if specified in the related Prospectus
Supplement but excluding amounts reallocated pursuant to
the Series Supplement for such Series) will be
distributed as principal payments to the
Certificateholders of such Series monthly on each
Distribution Date beginning with the first Special
Payment Date with respect to such Series. During the
Early Amortization Period with respect to a Series,
distributions of principal to Certificateholders will
not be subject to any Controlled Deposit Amount or
Controlled Distribution Amount. In addition, upon the
commencement of the Early Amortization Period with
respect to a Series, any funds on deposit in a Principal
Funding Account with respect to such Series will be paid
to the Certificateholders of the relevant Class or
Series on the first Special Payment Date with respect to
such Series. If a Series has more than one Class of
Certificates, the related Prospectus Supplement may
describe certain priorities among such Classes with
respect to such payments. See "Description of the
Certificates -- Pay Out Events" herein and "Series
Provisions -- Pay Out Events" in the related Prospectus
Supplement for a discussion of the events that might
lead to the commencement of the Early Amortization
Period with respect to a Series.
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Shared Principal Collections...... To the extent that collections of Principal Receivables
and certain other amounts that are allocated to the
Certificateholders' Interest of any Series are not
needed to make payments to the Certificateholders of
such Series or required to be deposited in a Principal
Funding Account for such Series, such collections may be
applied to cover principal payments due to or for the
benefit of Certificateholders of other Series. Any such
reallocation will not result in a reduction in the
Invested Amount of the Series to which such collections
were initially allocated. See "Description of the
Certificates -- Shared Principal Collections."
Special Funding Account........... If on any date the Transferor Amount is less than or
equal to the Required Transferor Amount or the amount of
Principal Receivables in the Trust is less than or equal
to the Required Principal Balance, the Servicer shall
not distribute to the holders of the Transferor
Certificates any Shared Principal Collections, which
otherwise would be distributed to the holders of the
Transferor Certificates, but shall deposit such funds in
the Special Funding Account.
Funds on deposit in the Special Funding Account will be
withdrawn and paid to the holders of the Transferor
Certificates on any Distribution Date to the extent
that, after giving effect to such payment, the
Transferor Amount exceeds the Required Transferor Amount
and the amount of Principal Receivables in the Trust
exceeds the Required Principal Balance on such date;
PROVIDED, HOWEVER, that if a Scheduled Accumulation
Period, Early Accumulation Period, Scheduled
Amortization Period or Early Amortization Period com-
mences with respect to any Series, any funds on deposit
in the Special Funding Account will be released and
treated as Shared Principal Collections to the extent
needed to cover principal payments due to or for the
benefit of such Series.
Sharing of Excess Finance Charge
Collections...................... Subject to certain limitations described under
"Description of the Certificates -- Sharing of Excess
Finance Charge Collections," if the Prospectus
Supplement for a Series offered hereby so provides,
collections of Finance Charge Receivables and certain
other amounts allocable to the Certificateholders'
Interest of any Series that is included in a group of
series (each, a "Group") in excess of the amounts
necessary to make required payments with respect to such
Series (including payments to the provider of any
related Series Enhancement) may be applied to cover any
shortfalls with respect to amounts payable from
collections of Finance Charge Receivables allocable to
any other Series included in such Group, in each case
PRO RATA based upon the amount of the shortfall, if any,
with respect to such other Series. See "Description of
the Certificates -- Sharing of Excess Finance Charge
Collections."
Funding Period.................... The Prospectus Supplement relating to a Series of
Certificates offered hereby may specify that for a
period beginning on the Series Closing Date and ending
on a specified date
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before the commencement of a Scheduled Amortization
Period or Scheduled 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 an amount equal
to the amount of such deficiency (the "Pre-Funding
Amount") will be held in a trust account established
with the Trustee for the benefit of Certificateholders
of such Series (the "Pre-Funding Account") pending the
transfer of additional Principal Receivables to the
Trust or pending the reduction of the Invested Amounts
of other Series issued by the Trust. The related
Prospectus Supplement will specify the initial Invested
Amount on the Series Closing Date with respect to such
Series, the aggregate principal amount of the
Certificates of such Series (the "Full Invested Amount")
and the date by which the Invested Amount is expected to
equal the Full Invested Amount. The Invested Amount will
increase as Principal Receivables are transferred to the
Trust or as the Invested Amounts of other Series of the
Trust are reduced. The Invested Amount may also decrease
due to the occurrence of a Pay Out Event as specified in
the related Prospectus Supplement.
During the Funding Period, funds on deposit in the Pre-
Funding Account for a Series of Certificates will be
withdrawn and paid to the Transferors to the extent of
any increases in the Invested Amount. In the event that
the Invested Amount of such Series does not for any
reason equal the Full Invested Amount by the end of the
Funding Period, any amount remaining in the Pre-Funding
Account and any additional amounts specified in the
related Prospectus Supplement will be payable to the
Certificateholders of such Series in a manner and at
such time as set forth in the related Prospectus
Supplement.
If so specified in the related Prospectus Supplement,
monies in the Pre-Funding Account with respect to any
Series will be invested by the Trustee in Eligible
Investments or will be subject to a guaranteed rate or
investment agreement or other similar arrangement, and
investment earnings and any applicable payment under any
such investment arrangement will be applied to pay
interest on the Certificates of such Series.
Paired Series..................... If so specified in the related Prospectus Supplement, a
Series of Certificates offered hereby may be paired with
one or more other Series or a portion of one or more
other Series issued by the Trust (each, a "Paired
Series") at or after the commencement of a Scheduled
Accumulation Period or Scheduled Amortization Period for
such Series. As the Invested Amount of the Series having
a Paired Series is reduced, the Invested Amount of the
Paired Series will increase by an equal amount. Upon
payment in full of such Series, the Invested Amount of
the Paired Series will be equal to the amount of the
Invested Amount paid to Certificateholders of such
Series. If
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a Pay Out Event occurs with respect to the Series having
a Paired Series or with respect to the Paired Series
when such Series is in a Scheduled Amortization Period
or a Scheduled Accumulation Period, the Principal
Allocation Percentage for the Series and the Principal
Allocation Percentage for the Paired Series will be
reset as specified in the related Prospectus Supplement.
Credit Enhancement................ The credit enhancement (the "Credit Enhancement") with
respect to a Series or Class thereof offered hereby may
include a letter of credit, a cash collateral account,
an uncertificated subordinated invested amount or
collateral interest, a surety bond, an insurance policy
or any other form of credit enhancement described in the
related Prospectus Supplement. Credit Enhancement may
also be provided to a Class or Classes of a Series by
subordination provisions that require that distribu-
tions of principal or interest be made with respect to
the Certificates of such Class or Classes before
distributions are made to one or more other Classes of
such Series. If so specified in the Prospectus
Supplement for a Series or Class offered hereby, the
level of Credit Enhancement for such Series may be
reduced if such reduction will not have a Ratings
Effect.
The type, characteristics and amount of the Credit
Enhancement with respect to any Series or Class thereof
will be determined based on several factors, including
the characteristics of the Receivables and Accounts
underlying or comprising the Trust Assets as of the
Series Closing Date with respect thereto, and will be
established on the basis of requirements of each
applicable Rating Agency. The terms of the Credit En-
hancement with respect to any Series or Class thereof
offered hereby will be described in the related
Prospectus Supplement. See "Description of the
Certificates -- Credit Enhancement" and "Risk Factors --
Limited Nature of Rating."
Servicing......................... The Bank, in its capacity as servicer under the Pooling
and Servicing Agreement (in such capacity, together with
any successor Servicer referred to herein, the
"Servicer"), will be the initial Servicer for the Trust.
The Servicer will be responsible for servicing, managing
and making collections on the Receivables. Subject to
certain exceptions described under "Description of the
Certificates -- Deposits in Collection Account," the
Servicer will deposit any collections on the Receivables
in a Monthly Period into the Collection Account within
two business days of the Date of Processing to the
extent such collections are allocable to the
Certificateholders' Interest of any Series and are
required to be deposited into an account for the benefit
of, or distributed to, the Certificateholders of any Se-
ries or the issuer of any Series Enhancement. Unless
otherwise specified in a Prospectus Supplement for a
particular Series, the "Distribution Date" for a Series
will be the 15th day of each month (or, if such day is
not a business day, the next business day). On the
earlier of (a) the second business day following the
Date of Processing and (b) the day on which
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the Servicer deposits any collections into the
Collection Account, subject to certain exceptions
described herein, the Servicer will pay to the holders
of the Transferor Certificates their allocable portion
of any collections then held by the Servicer. The "Date
of Processing" is the business day on which a record of
any transaction is first recorded pursuant to the
Servicer's data processing procedures. On or about the
third business day preceding each Distribution Date
(each, a "Determination Date"), the Servicer will
calculate the amounts to be allocated to the
Certificateholders of each Class or Series and to the
holders of the Transferor Certificates as described
herein in respect of collections of Receivables received
with respect to the preceding Monthly Period.
In certain limited circumstances, the Bank may resign or
be removed as Servicer, in which event either the
Trustee or, so long as it meets certain eligibility
standards set forth in the Pooling and Servicing
Agreement, a third-party servicer may be appointed as
successor servicer. The Servicer is permitted to
delegate any of its duties as Servicer to any of its
affiliates and to certain third party service providers,
but any such delegation will not relieve the Servicer of
its liability and responsibility with respect to such
duties under the Pooling and Servicing Agreement or any
Series Supplement. The Servicer will receive servicing
fees payable with respect to each Series offered hereby
as servicing compensation from the Trust. See
"Description of the Certificates -- Servicing Com-
pensation and Payment of Expenses."
Mandatory Reassignment and
Transfer of Certain
Receivables...................... Pursuant to the Pooling and Servicing Agreement, each
Transferor severally will make certain representations
and warranties with respect to the Receivables conveyed
by such Transferor to the Trust and the Bank will make
certain representations and warranties with respect to
the Accounts. If a Transferor breaches any such
representation and warranty, under certain circumstances
and subject to certain conditions described under "The
Pooling and Servicing Agreement -- Representations and
Warranties," all Receivables with respect to the
affected Account will be reassigned to such Transferor.
In addition, if either Transferor breaches certain other
representations and warranties described under "The
Pooling and Servicing Agreement -- Representations and
Warranties," all the Receivables conveyed by such
Transferor may be reassigned to such Transferor. See
"The Pooling and Servicing Agreement -- Representations
and Warranties."
The Bank, in its capacity as a Servicer, will make
certain covenants in the Pooling and Servicing
Agreement. If the Servicer breaches any such covenant
with respect to any Receivable, subject to certain
conditions described under "The Pooling and Servicing
Agreement -- Servicer Covenants," all Receivables with
respect to the affected Account will be assigned to the
Servicer. In the event of a transfer of servicing
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obligations to a successor Servicer, such successor
Servicer, rather than the Bank, would be responsible for
any subsequent failure to comply with the Servicer's
covenants.
Tax Status........................ Except to the extent otherwise provided in the related
Prospectus Supplement, Tax Counsel (defined herein) will
deliver its opinion generally to the effect that the
Certificates of each Series or Class thereof offered
hereby will properly be characterized as debt for
federal income tax purposes. Each investor in an
interest in Certificates, by acceptance of its interest
therein, will agree to treat the Certificates of such
Series as debt for federal, state and local income and
franchise tax purposes. See "Certain Federal Income Tax
Consequences" for additional information concerning the
application of federal income tax laws.
ERISA Considerations.............. Certificates of any Series or Class offered hereby may
be eligible for purchase by Plans and Plan Investors (as
defined herein). See "ERISA Considerations."
Certificate Rating................ It will be a condition to the issuance of each Series of
Certificates or Class thereof offered pursuant to this
Prospectus and the related Prospectus Supplement that
they be rated in one of the four highest applicable
rating categories by at least one nationally recognized
statistical rating organization selected by the
Transferors (each rating agency rating any Series, a
"Rating Agency"). The rating or ratings applicable to
the Certificates of each such Series or Class thereof
will be set forth in the related Prospectus Supplement.
A security rating should be evaluated independently of
similar ratings of different types of securities. A
rating is not a recommendation to buy, sell or hold
securities and may be subject to revision or withdrawal
at any time by the assigning Rating Agency. Each rating
should be evaluated independently of any other rating.
See "Risk Factors -- Limited Nature of Rating."
Listing........................... If so specified in the Prospectus Supplement relating to
a Series or Class offered hereby, application will be
made to list the Certificates of such Series, or all or
a portion of any Class thereof, on the Luxembourg Stock
Exchange or any other specified exchange.
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RISK FACTORS
Investors should consider, among other things, the following risk factors in
connection with the purchase of Certificates.
LIMITED LIQUIDITY. It is anticipated that, to the extent permitted, the
underwriters of any Series of Certificates offered hereby will make a market in
such Certificates, but in no event will any such underwriter be under an
obligation to do so. There can be no assurance that a secondary market will
develop with respect to the Certificates of any Series offered hereby, or if
such secondary market does develop, that it will provide Certificateholders with
liquidity of investment or that it will continue for the life of such
Certificates.
ISSUANCE OF ADDITIONAL SERIES; EFFECT ON PAYMENTS TO
CERTIFICATEHOLDERS. The Trust, as a master trust, is expected to issue Series
from time to time. While the terms of any Series will be specified in a Series
Supplement, the provisions of a Series Supplement and, therefore, the terms of
any additional Series, will not be subject to the prior review by, or consent
of, holders of the Certificates of any previously issued Series. Such terms may
be different than the terms described herein, and may include methods for
determining applicable investor percentages and allocating collections,
provisions creating different or additional security or other Series
Enhancements and any other amendment or supplement to the Pooling and Servicing
Agreement that is made applicable only to such Series. The obligation of the
Trustee to issue any new Series is subject to the conditions, among others,
that: (a) such issuance will not result in any Rating Agency reducing or
withdrawing its rating of the Certificates of any outstanding Series (any such
reduction or withdrawal is referred to herein as a "Ratings Effect") and (b)
each Transferor shall have delivered to the Trustee and certain providers of
Series Enhancement a certificate of an authorized representative to the effect
that, in the reasonable belief of such Transferor, such issuance will not, based
on the facts known to such representative at the time of such certification,
cause a Pay Out Event to occur with respect to any Series. There can be no
assurance that the terms of any Series, including any Series issued from time to
time hereafter, might not have an impact on the timing or amount of payments
received by a Certificateholder of another Series. See "Description of the
Certificates -- New Issuances."
IMPACT OF ADDITION OF TRUST ASSETS; DIFFERENT CHARACTERISTICS. The
Transferors expect, and in some cases will be obligated, to designate or cause
to be designated Additional Accounts, the Receivables of which will be conveyed
to the Trust. Additional Accounts may include accounts originated using criteria
different from those which were used to originate the Initial Accounts because
such Additional Accounts were originated at a later date, were part of a
portfolio of accounts that were not part of the Bank Portfolio as of the Trust
Cut-Off Date or were acquired from another institution. Moreover, Additional
Accounts designated at any time may not be accounts having the same
characteristics as those previously included in the Trust. See "The Pooling and
Servicing Agreement -- Representations and Warranties." Consequently, there can
be no assurance that Additional Accounts will be of the same credit quality or
have the same payment characteristics as the Initial Accounts or the Additional
Accounts previously included in the Trust. In addition, Additional Accounts may
consist of revolving credit card accounts or other revolving credit accounts
that have different terms than the Initial Accounts or the Additional Accounts
previously included in the Trust, including lower periodic finance charges and
other fees and charges, which may have the effect of reducing the average yield
on the Trust Portfolio. The designation of Additional Accounts will be subject
to the satisfaction of certain conditions described herein under "Description of
the Certificates -- Addition of Trust Assets," including that (a) such addition
will not result in a Ratings Effect and (b) the Transferor designating
Additional Accounts shall have delivered to the Trustee and certain providers of
Series Enhancement a certificate of an authorized representative to the effect
that, in the reasonable belief of such Transferor, such addition will not, based
on the facts known to such representative at the time of such certification,
cause a Pay Out Event to occur with respect to any Series. The only limitations
on each Transferor's right to designate Additional Accounts, including Automatic
Additional Accounts, are those described herein and in the Prospectus
Supplement. See "Description of the Certificates -- Addition of Trust Assets."
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TRANSFER OF ASSETS. While the Transferors will transfer all of their right,
title and interest in Receivables to the Trust, a court could treat such
transaction as an assignment of collateral as security for the benefit of the
Certificateholders of the outstanding Series. Each Transferor represents and
warrants in the Pooling and Servicing Agreement that the transfer of Receivables
by it to the Trust is either a valid sale and assignment of the Receivables to
the Trust or the grant to the Trust of a security interest in the Receivables.
Additionally, the Bank represents and warrants in the Receivables Purchase
Agreement that the transfer of Receivables by it to CCB Holding is a valid sale
and assignment of the Receivables to CCB Holding. Each Transferor will take
certain actions under applicable state law to perfect the Trust's interest in
the Receivables transferred to the Trust by such Transferor and, in the Pooling
and Servicing Agreement, each Transferor represents and warrants that, if the
transfer by such Transferor to the Trust is a grant to the Trust of a security
interest in the Receivables sold by such Transferor, the Trust will have a first
priority perfected security interest therein and, with certain exceptions and
for certain limited periods of time, in the proceeds thereof (subject, in each
case, to certain potential tax and other governmental liens referred to under
"The Pooling and Servicing Agreement -- Representations and Warranties").
Nevertheless, if the transfer of Receivables by a Transferor to the Trust is
deemed to create a security interest therein under the New York Uniform
Commercial Code (the "UCC"), (i) a tax or government lien or other nonconsensual
lien on property of such Transferor arising before Receivables come into
existence may have priority over the Trust's interest in such Receivables, (ii)
if the Federal Deposit Insurance Corporation ("FDIC") were appointed receiver or
conservator of the Bank, the receiver's or conservator's administrative expenses
may also have priority over the Trust's security interest in the Receivables
transferred to the Trust by the Bank and (iii) in the event of the insolvency of
CCB Holding, delays in payments on the Certificates and possible reductions in
the amount of those payments could occur. In addition, while the Bank is the
Servicer, cash collections held by the Bank may, subject to certain conditions,
be commingled and used for the benefit of the Bank prior to the date on which
such collections are required to be deposited in the Collection Account, as
described under "Description of the Certificates -- Deposits in Collection
Account" and, in the event of the insolvency, receivership or conservatorship of
the Bank or the bankruptcy, liquidation or insolvency of CCB Holding or, in
certain circumstances, the lapse of certain time periods, the Trust may not have
a perfected interest in such collections.
CERTAIN MATTERS RELATING TO INSOLVENCY OR RECEIVERSHIP. The Pooling and
Servicing Agreement provides that, upon the commencement of an Insolvency Event
(defined below), a Pay Out Event would occur with respect to each Series and,
pursuant to the terms of the Pooling and Servicing Agreement, new Principal
Receivables would not be transferred to the Trust and the Trustee would sell the
Receivables (unless Certificateholders holding Certificates of each Series or,
if a Series includes more than one Class, each Class of such Series evidencing
more than 50% of the aggregate unpaid principal amount of each such Series or
Class, as well as each holder of an interest in the Transferors' Interest not
subject to the Insolvency Event and each person designated by the Transferors to
the Trustee prior to the occurrence of the Insolvency Event, instruct
otherwise), thereby causing early termination of the Trust. An "Insolvency
Event" shall occur if any Transferor (including any Additional Transferor) or
any other holder of the Bank Certificate shall consent to the appointment of a
conservator or receiver or liquidator or trustee in any insolvency, bankruptcy,
receivership, conservatorship, readjustment of debt, marshaling of assets and
liabilities or similar proceedings of or relating to any such Transferor or
holder or of or relating to all or substantially all of its property, or a court
or agency or supervisory authority having jurisdiction in the premises shall
issue, or enter against any such Transferor or holder, a decree or order for the
appointment of a conservator or receiver or liquidator or trustee in any
insolvency, bankruptcy, receivership, conservatorship, readjustment of debt,
marshaling of assets and liabilities or similar proceedings or for the
winding-up or liquidation of its affairs; or any such Transferor or holder shall
admit in writing its inability to pay its debts generally as they become due,
file a petition to take advantage of any applicable insolvency, reorganization,
liquidation, receivership, or conservatorship statute, make any assignment for
the benefit of its creditors or voluntarily suspend payment of its obligations;
or a proceeding shall have been instituted by a court having jurisdiction in the
premises seeking a decree or order for relief in respect of any such Transferor
or such holder in an involuntary case under any
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debtor relief law, or for the appointment of a receiver, liquidator, assignee,
trustee, custodian, sequestrator, conservator or other similar official, of any
such Transferor or holder or for any substantial part of its property, or for
the liquidation and winding up of its affairs and, if instituted against any
such Transferor or holder, any such proceeding shall continue undismissed or
unstayed and in effect for a period of 60 consecutive days, or any of the
actions sought in such proceeding shall occur. In such event, the portion of the
proceeds of such sale allocable to such Certificateholders of a related Series
and the proceeds of any collections on the Receivables in the Collection Account
allocated to the Certificateholders' Interest of such Series may be insufficient
to pay such Certificateholders in full.
To the extent the Bank grants a security interest in the Receivables
transferred by it to the Trust, and such security interest is validly perfected
before the occurrence of an Insolvency Event and is not taken or granted in
contemplation of insolvency or with the intent to hinder, delay or defraud the
Bank or its creditors, the Federal Deposit Insurance Act, as amended ("FDIA"),
including as amended by the Financial Institutions Reform, Recovery, and
Enforcement Act of 1989, as amended ("FIRREA"), provides that such security
interest should not be subject to avoidance by the FDIC, as receiver or
conservator for the Bank. Subject to clarification by regulations or
interpretations, positions taken by the FDIC staff prior to the passage of
FIRREA do not suggest that the FDIC, as receiver or conservator for the Bank,
would interfere with the timely transfer to the Trust of payments collected on
the related Receivables. If, however, the FDIC were to assert a contrary
position, such as requiring the Trustee to establish its right to those payments
by submitting to and completing the administrative claims procedure under the
FDIA, or the conservator or receiver were to request a stay of proceedings with
respect to the Bank as provided under the FDIA, delays in payments on the
Certificates and possible reductions in the amount of those payments could
occur. In addition, the FDIC, if appointed as conservator or receiver for the
Bank, has the power under the FDIA to repudiate contracts, including secured
contracts of the Bank. The FDIA provides that a claim for damages arising from
the repudiation of a contract is limited to "actual direct compensatory
damages." In the event the FDIC were to be appointed as conservator or receiver
of the Bank and were to repudiate the Pooling and Servicing Agreement, then the
amount payable out of available collections on the Receivables to the
Certificateholders could be lower than the outstanding principal and accrued
interest on the Certificates. Upon the occurrence of an Insolvency Event with
respect to the Bank, if no Pay Out Event other than such Insolvency Event
exists, the FDIC may have the power to continue to require the Bank to transfer
new Principal Receivables to the Trust (and new Receivables to CCB Holding
pursuant to the terms of the Receivables Purchase Agreement) and to prevent the
early sale, liquidation, foreclosure or disposition of the Receivables and the
commencement of an Early Amortization Period or Early Accumulation Period. A
conservator or receiver of the Bank may also have the power to cause the early
sale of the Receivables and the early retirement of the Certificates of each
Series. In addition, 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, receivership or insolvency of the Servicer exists, the
conservator or receiver may have the power to prevent either the Trustee or the
Certificateholders from appointing a successor Servicer. See "Certain Legal
Aspects of the Receivables -- Transfer of Receivables" and "-- Certain Matters
Relating to Insolvency and Receivership."
CCB Holding has been structured such that the voluntary or involuntary
application with respect to CCB Holding for relief under Title 11 of the United
States Code (the "Bankruptcy Code") or similar state laws is unlikely. CCB
Holding is a separate, limited purpose subsidiary, the certificate of
incorporation of which contains limitations on the nature of CCB Holding's
business and restrictions on the ability of CCB Holding to commence a voluntary
case or proceeding under such laws without the prior unanimous consent of all of
its directors. See "CCB Holding Corporation." CCB Holding currently does not
intend to file, and the Bank has agreed that it will not file, a voluntary
petition for relief under the Bankruptcy Code with respect to CCB Holding.
If CCB Holding were to become a debtor in a bankruptcy case and a creditor
or bankruptcy trustee of such debtor or such debtor itself were to take the
position that the transfer of Receivables by
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CCB Holding to the Trust should be recharacterized as a grant of a security
interest in such Receivables to secure a borrowing of such debtor, then delays
in payments of collections of such Receivables to the Trust (and therefore to
the Certificateholders) could occur or (should the court rule in favor of any
such trustee, debtor or creditor) reductions in the amount of such payments
could result.
If an Insolvency Event relating to CCB Holding were to occur, then a Pay Out
Event will occur with respect to each Series and, pursuant to the terms of the
Pooling and Servicing Agreement, new Principal Receivables would not be
transferred to the Trust and the Trustee would sell the Receivables (unless
Certificateholders holding Certificates of each Series or, if a Series includes
more than one Class, each Class of such Series evidencing more than 50% of the
aggregate unpaid principal amount of each such Series or Class, as well as each
holder of an interest in the Transferors' Interest (other than CCB Holding) and
each person designated by the Transferors to the Trustee prior to the occurrence
of the Insolvency Event, instruct otherwise), thereby causing early termination
of the Trust. In such event, the portion of the proceeds of such sale allocable
to such Certificateholders of a related Series and the proceeds of any
collections on the Receivables in the Collection Account allocated to the
Certificateholders' Interest of such Series may be insufficient to pay such
Certificateholders in full. However, in a bankruptcy proceeding of CCB Holding,
the Trustee may not be permitted to suspend transfers of Receivables to the
Trust, and the instructions to sell the Receivables may not be given effect.
CONSUMER PROTECTION LAWS. The Accounts and Receivables are subject to
numerous federal and state consumer protection laws that impose requirements on
the making, enforcement and collection of consumer loans. The United States
Congress and the states may enact laws and amendments to existing laws to
regulate further the credit card and consumer revolving loan industry or to
reduce finance charges or other fees or charges applicable to credit card and
other consumer revolving loan accounts. Such laws, as well as any new laws or
rulings that may be adopted, may adversely affect the Servicer's ability to
collect on the Receivables or maintain the current level of periodic finance
charges and other fees and charges with respect to the Accounts. In addition,
failure by the Servicer to comply with such requirements could adversely affect
the Servicer's ability to enforce the Receivables. In October 1987 and November
1991, members of Congress attempted unsuccessfully to limit the maximum annual
percentage rate that may be assessed on credit card accounts. If federal
legislation were enacted that contained an interest rate cap substantially lower
than the annual percentage rates currently assessed on the Accounts, it is
possible that the Portfolio Yield for a Series would be reduced and therefore a
Pay Out Event could occur with respect to the Certificates of a Series. See
"Description of the Certificates -- Pay Out Events." In addition, during recent
years, there has been increased consumer awareness with respect to the level of
finance charges and fees and other practices of credit card issuers and other
consumer revolving loan providers. As a result of these developments and other
factors, there can be no assurance as to whether any federal or state
legislation will be promulgated that would impose additional limitations on the
monthly periodic finance charges or other fees or charges relating to the
Accounts.
Pursuant to the Pooling and Servicing Agreement, if a Receivable fails to
comply in all material respects with applicable requirements of law, subject to
certain conditions described under "The Pooling and Servicing Agreement --
Representations and Warranties," all Receivables in the affected Account will be
reassigned to the Transferor that transferred all right, title and interest in
such Receivables or, in some circumstances, to the Servicer. On the Series
Closing Date with respect to a Series, each Transferor will make certain
representations and warranties with regard to the validity and enforceability of
the Accounts and with regard to Receivables. The sole remedy available to the
Certificateholders for the breach of any such representation or warranty is
that, subject to certain conditions described herein under "The Pooling and
Servicing Agreement -- Representations and Warranties," the interest of
Certificateholders of all Series in the Receivables affected thereby will be
reassigned to the relevant Transferor or assigned to the Servicer, as the case
may be. In addition, in the event of the breach of certain representations and
warranties, either Transferor may be obligated to accept the reassignment of all
the Receivables transferred by it to the Trust, which reassignment
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will constitute the sole remedy available to Certificateholders with respect to
any such breach. See "The Pooling and Servicing Agreement -- Representations and
Warranties" and "-- Servicer Covenants" and "Certain Legal Aspects of the
Receivables -- Consumer Protection Laws."
Application of federal and state bankruptcy and debtor relief laws would
affect the interests of the Certificateholders in the Receivables if the
protection provided to debtors under such laws result in any Receivables being
written off as uncollectible when there are no funds available from any Credit
Enhancement or other sources. See "Description of the Certificates -- Defaulted
Receivables; Rebates and Fraudulent Charges."
PAYMENT AND MATURITY CONSIDERATIONS; DEPENDENCE ON CARDHOLDER
REPAYMENTS. The Receivables may be paid at any time and there is no assurance
that there will be new Receivables created in the Accounts, that Receivables
will be added to the Trust or that any particular pattern of cardholder
repayments will occur. The actual rate of accumulation of principal with respect
to a Series in a Principal Funding Account during a Scheduled Accumulation
Period or Early Accumulation Period and the rate of distribution of principal
with respect to a Series during a Scheduled Amortization Period or Early
Amortization Period will depend upon, among other factors, the rate of
cardholder repayments, the timing of the receipt of repayments and the rate of
default by cardholders. As a result, no assurance can be given that the Invested
Amount of a Series will be paid on the Expected Final Payment Date, if any, with
respect to a Series or that payments of principal during the Scheduled
Amortization Period with respect to a Series will equal the Controlled
Amortization Amount, if any, with respect to such Series or will follow any
particular pattern. Cardholder monthly payment rates with respect to the
Accounts are dependent upon a variety of factors, including seasonal purchasing
and payment habits of cardholders, the availability of other sources of credit,
general economic conditions, tax laws and the terms of the Accounts (which terms
are subject to change by the Bank). Increased convenience use (where cardholders
pay their Account balances in full on or prior to the due date and thus avoid
all finance charges) would decrease the effective yield on the Accounts and
could result in a Pay Out Event with respect to one or more Series and the
commencement of an Early Amortization Period or Early Accumulation Period with
respect to one or more Series, as well as a decrease in protection to
Certificateholders against defaults under the Accounts. No assurance can be
given as to the cardholder payment rates that will actually occur in any future
period.
A decline in the amount of Receivables in the Accounts for any reason
(including, the decision by cardholders to use competing sources of credit, an
economic downturn or other factors) could result in the occurrence of a Pay Out
Event with respect to a Series and the commencement of an Early Amortization
Period or Early Accumulation Period with respect to such Series. The Pooling and
Servicing Agreement provides that the Transferors will be required to make an
Addition to the Trust in the event that either (a) the Transferor Amount is not
maintained at a minimum level equal to the Required Transferor Percentage of the
sum of (i) the aggregate amount of Principal Receivables and (ii) the aggregate
principal amount on deposit in the Special Funding Account (the "Required
Transferor Amount") or (b) the amount of Principal Receivables in the Trust is
not maintained at a minimum level equal to (i) the sum of the Series Invested
Amount of each Series then outstanding (provided that certain Series may be
designated in the applicable Series Supplement as being excluded from such
calculation) less (ii) the aggregate principal amount on deposit in the Special
Funding Account (the "Required Principal Balance"). The "Required Transferor
Percentage" is equal to five percent, but may be reduced under certain
circumstances described under "Description of the Certificates -- Addition of
Trust Assets." The "Series Invested Amount" for any Series will be specified in
the Series Supplement and, for each Series offered hereby, in the related
Prospectus Supplement for such Series, but will generally equal the initial
Invested Amount for a Series. In the event that the Transferors fail to make
such Addition within five business days (or any other time period specified in a
Series Supplement with respect to a Series) of the day on which it is required
to make such Addition pursuant to the Pooling and Servicing Agreement, as
described under "Description of the Certificates -- Addition of Trust Assets," a
Pay Out Event could occur with respect to one or more Series. Further, the Bank
may under similar circumstances be required to transfer credit card receivables
to one or more of its other credit card trusts, which may limit the amount of
receivables available to be transferred to the Trust.
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LIMITED NATURE OF RATING. Any rating assigned to the Certificates of a
Series or a Class by a Rating Agency will reflect such Rating Agency's
assessment of the likelihood that Certificateholders of such Series or Class
will receive the payments of interest and principal required to be made under
the Pooling and Servicing Agreement and the related Series Supplement. Such
rating will be based primarily on the value of the Receivables in the Trust and
the availability of any Series Enhancement with respect to such Series or Class;
therefore, any such rating will generally address credit risk and will not,
unless otherwise specified in the related Prospectus Supplement with respect to
any Class or Series offered hereby, address the likelihood that the principal
of, or interest on, any Certificates of such Class or Series will be prepaid,
paid on a scheduled date or paid on any particular date before the applicable
Series Termination Date. In addition, any such rating will not address the
possibility of the occurrence of a Pay Out Event with respect to such Class or
Series or the possibility of the imposition of United States withholding tax
with respect to non-U.S. Certificateholders. Further, the available amount of
any Credit Enhancement or other Series Enhancement with respect to any such
Series or Class offered hereby will be limited and will be subject to reduction
from time to time as described in the related Prospectus Supplement. The rating
of the Certificates of a Class or Series will not be a recommendation to
purchase, hold or sell such Certificates, and such rating will not comment as to
the marketability of such Certificates, any market price or suitability for a
particular investor. There is no assurance that any rating will remain for any
given period of time or that any rating will not be lowered or withdrawn
entirely by a Rating Agency if in such Rating Agency's judgment circumstances so
warrant.
BOOK-ENTRY REGISTRATION. Unless otherwise stated in the related Prospectus
Supplement, the Certificates of each Series offered hereby initially will be
represented by one or more certificates registered in the name of Cede, the
nominee for DTC, and will not be registered in the names of the Certificate
Owners or their nominees. Consequently, unless and until Definitive Certificates
are issued, Certificate Owners will not be recognized by the Trustee as
"Certificateholders" (as such term is used in the Pooling and Servicing
Agreement and any Series Supplement). Hence, until such time, Certificate Owners
will only be able to exercise the rights of Certificateholders indirectly
through DTC, Cedel (defined herein) or Euroclear and their respective
participating organizations. See "The Pooling and Servicing Agreement --
Book-Entry Registration" and "-- Definitive Certificates."
SOCIAL, LEGAL, ECONOMIC AND OTHER FACTORS. Changes in credit use and
payment patterns by cardholders result from a variety of economic, legal and
social factors. Economic factors include the rate of inflation, unemployment
levels and relative interest rates. The use of incentive programs (E.G., gift
awards for credit usage) may affect credit use. The Transferors are unable to
determine whether or to what extent changes in applicable laws or other economic
or social factors will affect credit use or repayment patterns.
COMPETITION IN THE CREDIT CARD AND CONSUMER REVOLVING LOAN INDUSTRY. The
credit card and consumer revolving loan industry is highly competitive and
operates in a legal and regulatory environment increasingly focused on the cost
of services charged to consumers. There is increased use of advertising, target
marketing, pricing competition and incentive programs. Other consumer credit
providers seek to enter, or expand their share of, the market. In addition,
certain credit card issuers and other revolving credit providers assess periodic
finance charges or other fees or charges at rates lower than the rate currently
being assessed on most of the Accounts. The Bank may also solicit existing
cardholders to open other revolving credit card accounts or revolving credit
accounts that offer certain benefits not available under the Accounts, including
lower periodic finance charges or reduced late charges and other fees or
charges. If cardholders choose to utilize competing sources of credit, the rate
at which new Receivables are generated in the Accounts may be reduced and
certain purchase and payment patterns with respect to the Receivables may be
affected. The Trust will be dependent upon the Bank's continued ability to
generate new Receivables. If the rate at which new Receivables are generated
declines significantly and the Bank does not add Receivables in Additional
Accounts to the Trust, a Pay Out Event could occur with respect to a Series.
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Other credit card issuers have announced changes in the terms of certain of
their VISA-Registered Trademark- and MasterCard-Registered Trademark-1 credit
cards, including lowering the fixed annual percentage rate charged on balances
or converting the annual percentage rate charged on balances from a fixed per
annum rate to a variable rate. In addition, other credit card issuers have
recently announced "tiered" or "risk adjusted" rates under which the annual
percentage rate for the issuer's most creditworthy customers would be lowered.
THE ABILITY OF THE BANK TO CHANGE TERMS OF THE ACCOUNTS. Pursuant to the
Pooling and Servicing Agreement, no Transferor transfers Accounts to the Trust,
but instead transfers only the Receivables arising in the Accounts and pursuant
to the Receivables Purchase Agreement the Bank does not transfer Accounts to CCB
Holding, but instead transfers only the Receivables arising in the Accounts. As
the owner and holder of the Accounts, the Bank will have the right (subject to
applicable laws) to determine the periodic finance charges, the fees and the
other charges that will be applicable from time to time to the Accounts, to
alter the minimum monthly payment required under the Accounts and to change
various other terms with respect to the Accounts. A decrease in the periodic
finance charges or other fees or charges applicable to the Accounts would
decrease the effective yield on the Accounts and could result in the occurrence
of a Pay Out Event with respect to a Series and the commencement of an Early
Amortization Period or Early Accumulation Period with respect to such Series, as
well as decreased protection to Certificateholders against charged-off Accounts.
Under the Pooling and Servicing Agreement, the Bank has agreed that, unless
required by law or unless, in its sole discretion, the Bank deems it necessary
to maintain its lending business on a competitive basis, it will not reduce the
annual percentage rate of the monthly periodic finance charge assessed on the
Receivables or reduce other fees on the Accounts, if as a result of such
reduction, either (a) its reasonable expectation is that such reduction will
(based on facts known at such time) cause a Pay Out Event to occur with respect
to a Series or (b) such reduction is not applied to any comparable segment of
consumer revolving credit accounts owned by the Bank that have characteristics
the same as or substantially similar to the Accounts. In addition, the Bank,
subject to compliance with applicable laws, may in its sole discretion change
the other terms of its Accounts, if such change is made applicable to any
comparable segment of consumer revolving credit accounts owned by the Bank that
have characteristics the same as, or substantially similar to, such Accounts.
Except as specified above, there are no restrictions on the Bank's ability to
change the terms of the Accounts. There can be no assurance that changes in
applicable law, changes in the marketplace, including announcements by other
credit card issuers that they are lowering annual percentage rates or adopting
"tiered" or "risk-adjusted" rates, or prudent business practice might not result
in a determination by the Bank to decrease customer finance charges or otherwise
take actions that would change any Account terms. See "-- Competition in the
Credit Card and Consumer Revolving Loan Industry" above. In servicing the
Accounts, the Servicer is required to apply its usual and customary servicing
procedures for servicing receivables comparable to the Receivables and to act in
accordance with the Bank's written policies and procedures relating to the
operation of their consumer revolving lending business (the "Credit Card
Guidelines").
CONTROL. Subject to certain exceptions, the Certificateholders of each
Series may take certain actions, or direct certain actions to be taken, under
the Pooling and Servicing Agreement or the related Series Supplement. However,
under certain circumstances, the consent or approval of a specified percentage
of the aggregate unpaid principal amount of the Certificates of all outstanding
Series will be required to direct certain actions, including requiring
appointment of a successor Servicer following a Servicer Default, amending the
Pooling and Servicing Agreement under certain circumstances and directing a
reassignment of the Receivables in the entire portfolio of Accounts. In
addition, following the occurrence of an Insolvency Event with respect to a
Transferor, the Trust Assets will be liquidated unless the holders of
Certificates evidencing more than 50% of the aggregate unpaid principal amount
of each Series or, if a Series included more than one Class, each Class of such
Series, as well as each holder of an interest in the Transferors' Interest not
subject to the Insolvency
- ------------------------
(1) VISA-Registered Trademark- and MasterCard-Registered Trademark- are
registered trademarks of VISA U.S.A., Inc. and MasterCard International
Inc., respectively.
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Event and each person designated by the Transferors to the Trustee prior to the
occurrence of the Insolvency Event direct the Trustee not to sell or otherwise
liquidate the Receivables. Further, in certain cases (including with respect to
certain amendments described under "The Pooling and Servicing Agreement --
Amendments"), when determining whether the required percentage of
Certificateholders of a Series have given their approval or consent, all the
Certificateholders of such Series will be treated as a single class (whether or
not such Series includes more than one Class). Accordingly, one or more Classes
of Certificateholders may have the power to determine whether any such action is
taken without regard to the position or interests of other Classes of
Certificateholders relating to such action.
NONRECOURSE OBLIGATIONS. The Certificates represent interests in the Trust
only and do not represent interests in or recourse obligations of the
Transferors, the Servicer or any of their affiliates. Certificateholders must
rely solely upon the Receivables and the Series Enhancement, if any, for the
payment of principal of and interest on the Certificates. The only obligations
of a Transferor or the Servicer with respect to the Trust are generally limited
to the obligation to accept reassignment of all or a portion of the Receivables
under certain circumstances upon breach of certain representations and
warranties, the obligations to make Additions to the Trust under certain
circumstances and certain other limited obligations, all as more fully described
herein. The ability of a Transferor or the Servicer to perform such obligations
will be dependent in part on the financial condition of the applicable
Transferor or the Servicer at the time such obligation arises.
ASSUMPTION OF A TRANSFEROR'S OBLIGATIONS BY AN ASSUMING ENTITY. A
Transferor may, subject to certain conditions, transfer its respective assets
and obligations with respect to the Trust and under the Pooling and Servicing
Agreement to an Assuming Entity that is not affiliated with either Transferor
without obtaining Certificateholder consent to such transfer. See "Assumption of
the Transferor's Obligations."
THE BANK'S CREDIT CARD ACTIVITIES
GENERAL
The Receivables that the Bank or CCB Holding have conveyed and will convey
to the Trust pursuant to the Pooling and Servicing Agreement will be generated
from transactions made by holders of selected VISA USA, Inc. ("VISA") and
MasterCard International Incorporated ("MasterCard") credit card accounts,
including premium and standard accounts from the Bank's portfolio of such
accounts (the "Bank Portfolio"). Generally, both premium and standard accounts
undergo the same credit analysis, but premium accounts have higher credit
limits.
The Bank presently conducts all of its credit card origination and servicing
related activities in Maryland and Virginia. Certain data processing and
ministerial functions associated with the servicing of the Bank's credit card
accounts are performed on behalf of the Bank by First Data Corporation ("FDC").
If FDC were to fail to perform such functions or become insolvent, delays in
processing and recovery of information with respect to charges incurred by
cardholders could occur and the replacement of the services FDC currently
provides to the Bank could be time consuming. As a result, delays in payments to
Certificateholders could occur.
The Bank utilizes a variety of the services provided by FDC in originating
and servicing the Bank's VISA and MasterCard accounts, including provision of
network interface to other card processors through VISA and MasterCard. This
network provides cardholder authorizations in addition to a conduit for funds
transfer and settlement.
NEW ACCOUNTS AND UNDERWRITING
The Bank generated substantially all of its credit card accounts through
direct mailings and telemarketing. The Bank's credit card program commenced in
June 1985. From November 1990 through January 1993, the Bank did not actively
solicit new accounts, although it continued to acquire new accounts through
applications available at the Bank's branches. The Bank resumed active
solicitation of new accounts in February 1993. Prior to February 1993, the Bank
generally did not preapprove accounts for its credit cards; however, with the
resumption of its solicitation of new
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accounts the Bank currently generates new accounts through direct mailing and
telemarketing solicitation campaigns directed at individuals who have been
preapproved. The Bank identifies potential cardholders for preapproved
solicitations by supplying a list of credit criteria to a credit bureau, which
generates a list of individuals who meet such criteria. When the Bank receives
an acceptance certificate from an individual that received a preapproved
solicitation, the Bank obtains a credit report on such individual issued by an
independent credit reporting agency, and the issuance of a credit card to such
individual and the credit limit and terms of the account are subject to certain
postscreening underwriting reviews by the Bank.
The Bank's underwriting approach to account approval supplements a
computerized credit scoring system with an evaluation of each completed
application for creditworthiness. In the underwriting process, the Bank
considers the prospective cardholder's income, credit history, outstanding debt
as a percentage of gross income and other factors intended to provide a general
indication of the applicant's willingness and ability to repay his or her
obligations. The Bank also reviews a credit report on each applicant issued by
an independent credit reporting agency and, for certain applicants,
independently verifies employment, income or other information contained in the
credit application.
If an application is approved, the Bank establishes an initial credit limit
on the cardholder's account based on the Bank's evaluation of the cardholder's
creditworthiness. This credit limit is adjusted from time to time based on the
Bank's continuing evaluation of the cardholder's repayment ability as evidenced
by the cardholder's payment history and other factors. The Bank also may
increase the credit limit at the cardholder's request after completion of an
evaluation comparable to that performed during the initial underwriting.
The Bank reviews credit losses on a monthly basis. From time to time, based
on such review and other factors, the Bank adjusts its underwriting standards
appropriately. The Bank also performs an ongoing credit review for each account,
which may result in the Bank's (i) limiting the amount of credit available for
cash advances on an account to 30% of the credit limit for such account, (ii)
reducing the available credit limit for such account, or (iii) closing the
account.
USE OF CREDIT CARDS
Each cardholder is subject to an agreement with the Bank governing the terms
and conditions of the cardholder's account. Pursuant to each such agreement, the
Bank reserves the right to change or terminate any terms, conditions, services
or features of its accounts (including increasing or decreasing Monthly Periodic
Charges, Annual Fees, Other Charges or minimum payment terms) at any time. The
agreement with each cardholder provides that the Bank may apply such changes,
when applicable, to current outstanding balances as well as to future
transactions upon written notice to cardholders. However, applicable laws may
limit the ability of the Bank to make such changes. See "Certain Legal Aspects
of the Receivables -- Consumer Protection Laws."
A cardholder may use his or her credit card for purchases and for cash
advances. Cardholders make purchases when using their credit cards to buy goods
or services. A cash advance is made when a credit card is used to obtain cash
from a financial institution or an automated teller machine (ATM). Cardholders
may also use special "convenience" checks issued by the bank to draw against
their credit line.
BILLING AND PAYMENTS
The accounts in the Bank Portfolio currently have various billing and
payment characteristics, including varying periodic rate finance charges and
fees.
Cardholders receive monthly billing statements summarizing the activity in
their accounts. Currently, a cardholder must make minimum monthly payments equal
to the sum of (x) the greater of $15 or 2% of the lesser of (i) the outstanding
account balance or (ii) the applicable credit limit, plus (y) any amount past
due, plus (z) any amount by which the account balance exceeds the applicable
credit limit. Balances of $15 or less must be paid in full.
The Bank assesses certain cardholders a non-refundable annual fee (which it
has waived and may continue to waive in connection with other promotional
programs for a one-year period) that generally
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ranges from $10 to $40. Other charges currently assessed by the Bank include a
late charge (generally $20, assessed by the Bank if it does not receive the
required minimum payment on or before the payment due date), a cash advance fee
(which can be two percent of the cash advance subject to a $2 minimum, three
percent of the cash advance subject to a $4 minimum or two percent of the cash
advance subject to a $10 minimum, depending on the nature of the cash advance),
a return check charge (generally $15 for returned payments as well as for cash
advance checks) and an overlimit fee of $20 if, at the close of a billing cycle,
a cardholder's outstanding balance exceeds the cardholder's credit limit).
Cardholders may also purchase credit life, unemployment and disability insurance
covering their account. All fees, charges and insurance premiums assessed by the
Bank are automatically charged to the account and are included in the account
balance.
The Bank assesses interest based on the average daily account balance, which
includes accrued and unpaid interest. To calculate such balance, the Bank first
takes the beginning balance each day, adds any new purchases, cash advances and
applicable fees and charges and subtracts any payments or credits. Beginning in
October 1996, a purchase appearing on the monthly statement will be considered a
part of the outstanding balance from the later of the date of the transaction or
the first day of the billing cycle in which the purchase is posted until the
date payment is received, and the average daily purchase balance will include as
a purchase any accrued, unpaid finance charges applicable to purchases. This
computation yields the daily account balance. The Bank then adds all the daily
balances for the billing cycle and divides the total by the number of days in
the billing cycle. This produces the average daily account balance. The total
periodic charge for a billing cycle is calculated by multiplying the average
daily account balance by the applicable daily periodic rate or rates and
multiplying this product by the number of days in the billing cycle. Periodic
charges for new purchases are not assessed if all balances shown in the billing
statement are paid by the due date, which is normally 25 days after the
statement closing date. Cash advances accrue periodic charges on the outstanding
balance of the advance from the date of the advance until the date full payment
is received.
Currently, accounts in the Bank Portfolio incur periodic finance charges at
a variety of fixed and variable annual percentage rates. In the solicitation of
new accounts, the Bank has various marketing programs for which the annual
percentage rate and fees may vary. The Bank makes use of low introductory
periodic finance charge rates for an initial period, and at the conclusion of
this period rise to a higher, variable periodic finance charge rate, which
generally ranges from 8.9% to 10.9% over a selected prime rate for purchases and
13.8% over the selected prime rate for cash advances. A number of cardholders
are subject to higher rates based upon their risk profile as assessed by the
Bank. In addition, cardholders who fail to make two consecutive payments by
their respective due dates are subject to higher rates. Such rates may be
changed from time to time. In its solicitation of new accounts and to certain
existing customers, the Bank is offering various products which currently
include (1) a rebate program in which the customer will generally receive a
rebate of 1% of purchases charged to the account during a year if the purchases
exceed specified thresholds and (2) a no-annual fee product.
The Bank periodically offers promotional discounts to certain customers to
encourage increased usage of their credit card accounts with the Bank, including
(i) a reduced interest rate for purchases, cash advances and balance transfers
made from other credit card accounts during specified promotional periods, (ii)
reduction of the monthly minimum payment, and (iii) an increase in the rebate
amount for a specified period.
DELINQUENCIES
An account is contractually delinquent if the minimum payment indicated on
the cardholder's statement is not received by the statement cycle date, which is
generally three to five days after the due date. Efforts to collect
contractually delinquent credit card receivables are made by the Bank's service
center personnel or the Bank's designees. Collection activities include
statement messages, formal collection letters and telephone calls. Collection
personnel generally initiate telephone contact with cardholders whose accounts
have become five days or more delinquent. The intensity at which the collection
activity is pursued depends on the risk the account presents to the Bank. In the
event
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that initial telephone contact fails to resolve the delinquency, the Bank
continues to contact the cardholder by telephone and by mail. The Bank may enter
into arrangements with cardholders to extend or otherwise change payment
schedules and other account terms. Delinquency levels are monitored by
collections managers and information is reported regularly to senior management
of the Bank. Accounts are generally charged off when they become 190 days
contractually delinquent (or sooner in the event of receipt of notice of death
or bankruptcy of the credit card holder), at which time they are generally
referred to outside collection agencies.
The Bank's account origination, credit evaluation, servicing and charge-off
policies and collection practices may change from time to time in accordance
with the Bank's business judgment, industry practice, applicable laws and
regulations and other factors. Such changes may affect the performance of the
Trust Portfolio and the collectibility of the Receivables.
INTERCHANGE
Members participating in the VISA and MasterCard associations receive
certain fees ("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 purchases is collected by banks that
issue credit cards by applying a discount to the amount paid by such banks to
the banks that clear the related transactions for merchants. In respect of
Interchange attributed to the cardholder charges for merchandise and services in
the Accounts, collections of Finance Charge Receivables with respect to any
Monthly Period will be deemed to include Interchange as calculated pursuant to
the related Series Supplement for any Series.
THE BANK
The Bank is a federally chartered stock savings bank. The Bank's executive
offices are located at 8401 Connecticut Avenue, Chevy Chase, Maryland 20815, and
the Bank's telephone number is (301) 986-7000. The Bank is subject to
comprehensive regulation, examination and supervision by the Office of Thrift
Supervision ("OTS") within the Department of the Treasury and the FDIC. Deposits
at the Bank are fully insured up to $100,000 per insured depositor by the
Savings Association Insurance Fund, which is administered by the FDIC. The
Prospectus Supplement for each Series will provide additional information,
including financial information, relating to the Bank.
CCB HOLDING CORPORATION
CCB Holding was incorporated under the laws of the State of Delaware on
September 28, 1994, and is a special purpose wholly-owned subsidiary of the
Bank. CCB Holding's principal office is located at 913 North Market Street,
Suite 405, Wilmington, Delaware 19801. CCB Holding was organized for the limited
purposes of facilitating the type of transactions described herein and
purchasing, holding, owning and transferring all right, title and interest in
receivables and any activities incidental to and necessary or convenient for the
accomplishment of such purposes. Neither the Bank's nor CCB Holding's board of
directors intends to change the business purpose of CCB Holding.
ASSUMPTION OF A TRANSFEROR'S OBLIGATIONS
A Transferor may transfer all of its consumer revolving credit card accounts
(if any) and the receivables arising thereunder, which may include all, but not
less than all, of the Accounts and such Transferor's remaining respective
interests in (a) the Receivables arising thereunder, (b) Participations and (c)
the Trust (collectively, the "Assigned Assets"), together with all servicing
functions (with respect to the Bank) and other obligations under the Pooling and
Servicing Agreement or relating to the transactions contemplated thereby
(collectively, the "Assumed Obligations"), to another entity (the "Assuming
Entity") which may be an entity that is not affiliated with the Transferors.
Pursuant to the Pooling and Servicing Agreement, each Transferor is permitted to
transfer Assigned Assets and Assumed Obligations to the Assuming Entity without
the consent or approval of the holders of any Certificates if the following
conditions, among others, are satisfied:
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(i) the Assuming Entity, such Transferor and the Trustee shall have entered into
an assumption agreement providing for the Assuming Entity to assume the Assumed
Obligations, including the obligation under the Pooling and Servicing Agreement
to transfer the Receivables arising under the Accounts and the Receivables
arising under any Additional Accounts to the Trust, (ii) each provider of Series
Enhancement, if any, shall have consented to the transfer and assumption, (iii)
all filings required to perfect the interest of the Trustee in the Receivables
arising under such Accounts shall have been duly made and copies thereof shall
have been delivered by such Transferor to the Trustee, (iv) such Transferor
shall have received written notice from each Rating Agency that such transfer
and assumption will not have a Ratings Effect, (v) the Trustee shall have
received an opinion of counsel with respect to clause (iii) above and as to
certain other matters specified in the Pooling and Servicing Agreement, and (vi)
the Trustee shall have received a Tax Opinion. The Pooling and Servicing
Agreement provides that the Servicer, the Transferors, the Assuming Entity and
the Trustee may enter into amendments to the Pooling and Servicing Agreement to
permit the transfer and assumption described above without the consent of the
holders of any Certificates. After any permitted transfer and assumption, the
Assuming Entity will be considered to be a "Transferor" for all purposes hereof,
and such Transferor will have no further liability or obligation under the
Pooling and Servicing Agreement, other than those liabilities that arose prior
to such transfer.
THE RECEIVABLES
The Receivables arise in certain Eligible Accounts selected by the Bank from
the Bank Portfolio (the "Trust Portfolio"). Certain of the Accounts included in
the Trust Portfolio will include Receivables transferred to CCB Holding pursuant
to the Receivables Purchase Agreement. The Bank has identified a pool of
accounts, from which the Initial Accounts were selected, based on the
eligibility and other criteria specified in the Pooling and Servicing Agreement
and the Receivables Purchase Agreement.
Each Transferor, as applicable, will transfer to the Trust all Receivables
owned by it and existing in the Accounts on the date specified for transfer to
the Trust and all Receivables generated in such Accounts after such date. All
monthly calculations with respect to such Accounts are computed based on
activity occurring during a calendar month (each, a "Monthly Period"). Pursuant
to the Pooling and Servicing Agreement, the Transferors have the right, and in
certain cases the obligation (subject to certain limitations and conditions
described below), to designate or cause to be designated, from time to time,
additional qualifying VISA or MasterCard consumer revolving credit card accounts
or other consumer revolving credit accounts owned by the Bank or any Additional
Transferor to be included in the Trust Portfolio and to convey to the Trust all
Receivables in such Additional Accounts, whether such Receivables are then
existing or thereafter created. These accounts must be Eligible Accounts as of
the date the Transferors designate or cause to be designated such accounts as
Additional Accounts.
In addition, as of the Trust Cut-Off Date (or as of the date any Additional
Accounts are designated) and on the date any new Receivables are created in an
existing Account, the relevant Transferor will represent and warrant to the
Trust that each of the Receivables in any such Account or Additional Account
that is designated on such day meets the eligibility criteria specified in the
Pooling and Servicing Agreement. With respect to an Account, such eligibility
criteria include, but are not limited to, that such Account (a) has not been,
and does not have any receivables that have been, sold, pledged or assigned to
any person except pursuant to the Receivables Purchase Agreement and the Pooling
and Servicing Agreement, (b) does not have any receivables that are Defaulted
Receivables and (c) does not have any receivables identified as having been
incurred as a result of fraudulent use of any related credit card. With respect
to a Receivable, such eligibility criteria include, but are not limited to, that
such Receivable (i) has arisen under an Eligible Account, (ii) was created in
compliance with the Credit Card Guidelines and (iii) at the time of transfer to
the Trust is not subject to any right of rescission, setoff, counterclaim or
other defense other than certain bankruptcy and equity-related defenses and
adjustments permitted by the Pooling and Servicing Agreement. See "The Pooling
and
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Servicing Agreement -- Representations and Warranties." However, there can be no
assurance that all the Accounts will continue to meet the applicable eligibility
requirements throughout the life of the Trust.
Subject to certain limitations and restrictions, the Transferors may also
designate or cause to be designated certain Accounts, the Receivables of which
will be removed from the Trust. In such case, the Receivables in the Removed
Accounts will be reassigned to the respective Transferor. Throughout the term of
the Trust, the Trust Portfolio will consist of the Initial Accounts, plus any
Additional Accounts, minus any Removed Accounts and minus any Accounts
containing Ineligible Receivables that have been reassigned to a Transferor.
Additional Accounts may not be accounts of the same type previously included
in the Trust. Therefore there can be no assurance that such Additional Accounts
will be of the same credit quality as the Initial Accounts or the Additional
Accounts the Receivables of which have been previously conveyed to the Trust.
Moreover, Additional Accounts may contain Receivables that consist of fees,
charges and amounts that are different from the fees, charges and amounts
described herein. Such Additional Accounts may also be subject to different
credit limits, balances and ages. Consequently, there can be no assurance that
the Accounts will continue to have the characteristics described herein as
Additional Accounts are added. In addition, the inclusion in the Trust of
Additional Accounts with lower periodic finance charges may have the effect of
reducing the Portfolio Yield for a Series. The Transferors intend to file with
the Commission, on behalf of the Trust, a Current Report on Form 8-K with
respect to any addition of Accounts that would have a material effect on the
composition of the Trust Portfolio.
The Prospectus Supplement relating to a Series will provide certain
information about the Trust Portfolio as of the date specified therein. Such
information will include 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.
USE OF PROCEEDS
The net proceeds from the sale of the Certificates of any Series offered
hereby will be paid to the Transferors. Unless otherwise specified in the
related Prospectus Supplement, each of the Transferors will use such proceeds
for general corporate purposes.
THE TRUST
The Trust, as a master trust, is expected to issue Series from time to time.
The Trust has not engaged and will not engage in any business activity other
than acquiring and holding Trust Assets and proceeds therefrom, issuing Series
of Certificates and the Transferor Certificates and making payments thereon and
related activities. As a consequence, the Trust does not and is not expected to
have any source of capital resources other than the Trust Assets. The Trust will
be administered in accordance with the laws of the State of New York.
Each Transferor will convey to the Trust, without recourse, its interest in
all Receivables owned by it arising under the Accounts. The Trust Assets will
consist of the Receivables, all monies due or to become due thereunder, the
proceeds of the Receivables, all monies and other property on deposit in the
Collection Account and in certain accounts maintained for the benefit of the
Certificateholders, any Participations included in the Trust, monies collected
or to be collected with respect to such Participations and any Series
Enhancements. The Trust Assets are expected to change over the life of the Trust
as revolving credit card accounts or other consumer revolving credit accounts
and related assets become subject to the Trust and as Accounts are closed,
charged off or removed and are no longer subject to the Trust. Pursuant to the
Pooling and Servicing Agreement, the Transferors will have the right (subject to
certain limitations and conditions), and in some circumstances will be
obligated, to designate as Trust Assets, Receivables arising in Additional
Accounts or, in lieu thereof
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or in addition thereto, Participations. See "Description of the Certificates --
Addition of Trust Assets." In addition, the Transferors will have the right to
remove from the Trust Receivables arising in designated Accounts as described
herein under "Description of the Certificates -- Removal of Accounts."
DESCRIPTION OF THE CERTIFICATES
GENERAL
The Certificates of a Series will be issued pursuant to a pooling and
servicing agreement (together with any amendment or supplement thereto the
"Pooling and Servicing Agreement"), and a series supplement thereto (the "Series
Supplement") relating to such Series among the Transferors, as transferors of
their interests in the Receivables (in such capacity, the "Transferors"), the
Bank, as servicer of the Accounts, and the Trustee. The Pooling and Servicing
Agreement and each Series Supplement with respect to any Series offered hereby
will be substantially in the forms filed as exhibits to the Registration
Statement of which this Prospectus is a part. See "-- New Issuances." The
Trustee will provide a copy of the Pooling and Servicing Agreement (without
exhibits or schedules), including the applicable Series Supplements, to
Certificateholders upon written request. The following summary describes certain
terms generally applicable to the Certificates of each Series or Class offered
hereby and is qualified in its entirety by reference to the Pooling and
Servicing Agreement and the applicable Series Supplement.
This Prospectus refers to Series offered hereby; however, if only certain
Classes of a Series are offered hereby, such reference shall be limited to the
Classes offered hereby unless the context otherwise requires.
The Certificates of each Series offered hereby will initially be represented
by one or more certificates registered in the name of the nominee of DTC
(together with any successor depository selected by the Transferors, the
"Depository"), except as set forth below. Unless otherwise specified in the
related Prospectus Supplement, the Certificates of each Series offered hereby
will be available for purchase in minimum denominations of $1,000 and in
integral multiples thereof in book-entry form. The Transferors have been
informed by DTC that DTC's nominee will be Cede. Unless otherwise specified in
the related Prospectus Supplement, Certificateholders may hold Certificates of a
Series offered hereby 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. See "The Pooling and
Servicing Agreement -- Book-Entry Registration" and "-- Definitive
Certificates."
Any Series or Class that is not offered hereby may be issued in
uncertificated form; all references herein to the "Certificates" shall include
any such Series or Class issued in such form unless otherwise specified.
The Certificates of each Series offered hereby will evidence undivided
interests in the Trust Assets allocated to the Certificateholders' Interest of
such Series, representing the right to receive from such Trust Assets funds up
to (but not in excess of) the amounts required to make payments of interest and
principal with respect thereto as described in the related Prospectus
Supplement.
INTEREST
Interest will accrue on the Certificates of a Series or Class offered hereby
at the per annum rate either specified in or determined in the manner specified
in the related Prospectus Supplement. Except as otherwise provided herein or in
the related Prospectus Supplement, collections of Finance Charge Receivables and
certain other amounts allocable to the Certificateholders' Interest of a Series
offered hereby will be used to make interest payments to Certificateholders of
such Series on each Interest Payment Date specified in the related Prospectus
Supplement; PROVIDED that after the commencement of an Early Amortization Period
with respect to such Series, interest will be distributed to such
Certificateholders monthly on each Special Payment Date. If the Interest Payment
Dates for a Series or Class occur less frequently than monthly, such collections
or other amounts (or the portion thereof allocable to such Class) will be
deposited in one or more Interest Funding Accounts
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and used to make interest payments to Certificateholders of such Series or Class
on the following Interest Payment Date. If a Series has more than one Class of
Certificates, each such Class may have a separate Interest Funding Account.
Funds on deposit in an Interest Funding Account will be invested in Eligible
Investments. Any earnings (net of losses and investment expenses) on funds in an
Interest Funding Account will be paid to, or at the direction of, the
Transferors, except as otherwise specified in any Series Supplement. Interest
with respect to the Certificates of each Series offered hereby will accrue and
be calculated on the basis described in the related Prospectus Supplement.
PRINCIPAL
The Certificates of each Series or Class offered hereby will have a
Revolving Period during which collections of Principal Receivables and certain
other amounts otherwise allocable to the Certificateholders' Interest of such
Series (other than amounts reallocated pursuant to the Series Supplement for
such Series) will be treated as Shared Principal Collections and will be
distributed to, or for the benefit of, the Certificateholders of other Series or
the holders of the Transferor Certificates. Unless an Early Amortization Period
or Early Accumulation Period commences with respect to a Series, following the
Revolving Period with respect to such Series, such Series will have either a
Scheduled Accumulation Period or a Scheduled Amortization Period.
During the Scheduled Accumulation Period, if any, with respect to a Series,
collections of Principal Receivables and certain other amounts allocable to the
Certificateholders' Interest of such Series (other than amounts reallocated
pursuant to the Series Supplement for such Series), including Shared Principal
Collections, if any, allocable to such Series, if so specified in the related
Prospectus Supplement, will be deposited on each Distribution Date in a
Principal Funding Account and used to make principal distributions to the
Certificateholders of such Series or any Class thereof when due. If so specified
in the related Prospectus Supplement, the amount to be deposited in a Principal
Funding Account for any Series offered hereby on any Distribution Date will be
limited to an amount equal to a Controlled Accumulation Amount specified in such
Prospectus Supplement plus any existing deficit controlled accumulation amount
arising from prior Distribution Dates. If the Prospectus Supplement for a Series
so specifies, the amount to be deposited in the Principal Funding Account on a
Distribution Date may be a variable amount. If a Series has more than one Class
of Certificates, each Class may have a separate Principal Funding Account and
Controlled Accumulation Amount. In addition, the related Prospectus Supplement
may describe certain priorities among such Classes with respect to deposits of
principal into such Principal Funding Accounts.
During the Early Accumulation Period, if any, with respect to a Series,
collections of Principal Receivables and certain other amounts allocable to the
Certificateholders' Interest of such Series (other than amounts reallocated
pursuant to the Series Supplement for such Series), including Shared Principal
Collections, if any, allocable to such Series if so provided in the related
Prospectus Supplement, will be deposited on each Distribution Date in a
Principal Funding Account and used to make distributions of principal to the
Certificateholders of such Series or Class on the Expected Final Payment Date.
During the Early Accumulation Period, the amount to be deposited in the
Principal Funding Account will not be limited to any Controlled Deposit Amount
or Controlled Accumulation Amount. See "Series Provisions -- Pay Out Events" in
the related Prospectus Supplement for a discussion of the events that might lead
to the commencement of the Early Accumulation Period with respect to a Series.
During the Scheduled Amortization Period, if any, with respect to a Series,
collections of Principal Receivables and certain other amounts allocable to the
Certificateholders' Interest of such Series (other than amounts reallocated
pursuant to the Series Supplement for such Series), including Shared Principal
Collections, if any, allocable to such Series if so provided in the related
Prospectus Supplement, will be used on each Distribution Date to make principal
distributions to any Class of Certificateholders then scheduled to receive such
distributions. If so specified in the related Prospectus Supplement, the amount
to be distributed to Certificateholders of any Series offered hereby on any
Distribution Date may be limited to an amount equal to the Controlled
Amortization Amount specified in such Prospectus Supplement plus any existing
deficit controlled amortization amount arising
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from prior Distribution Dates. If a Series has more than one Class of
Certificates, each Class may have a separate Controlled Amortization Amount. In
addition, the related Prospectus Supplement may describe certain priorities
among such Classes with respect to such distributions.
During the Early Amortization Period, if any, with respect to a Series,
collections of Principal Receivables and certain other amounts allocable to the
Certificateholders' Interest of such Series (other than amounts reallocated
pursuant to the Series Supplement for such Series), including Shared Principal
Collections, if any, allocable to such Series if so provided in the related
Prospectus Supplement, will be distributed as principal payments to the
applicable Certificateholders monthly on each Distribution Date beginning with
the first Special Payment Date. During the Early Amortization Period with
respect to a Series, distributions of principal to Certificateholders of such
Series will not be subject to any Controlled Deposit Amount or Controlled
Distribution Amount. In addition, upon the commencement of the Early
Amortization Period, any funds on deposit in a Principal Funding Account with
respect to such Series will be paid to the Certificateholders of the relevant
Class or Series on the first Special Payment Date. See "Description of the
Certificates -- Pay Out Events" herein and "Series Provisions -- Pay Out Events"
in the related Prospectus Supplement for a discussion of the events that might
lead to the commencement of the Early Amortization Period with respect to a
Series.
Funds on deposit in any Principal Funding Account established with respect
to a Class or Series offered hereby will be invested in Eligible Investments and
may be subject to a guarantee or guaranteed investment contract or a deposit
account or other mechanism specified in the related Prospectus Supplement
intended to assure a minimum rate of return on the investment of such funds. In
order to enhance the likelihood of the payment in full of the principal amount
of a Class of Certificates offered hereby at the end of a Scheduled Accumulation
Period or Early Accumulation Period with respect thereto, such Class may be
subject to a maturity liquidity facility or a deposit account or other similar
mechanism specified in the relevant Prospectus Supplement.
ADDITION OF TRUST ASSETS
If, as of the close of business on the last business day of any Monthly
Period, either (a) the Transferor Amount is less than the Required Transferor
Amount or (b) the amount of Principal Receivables in the Trust is less than the
Required Principal Balance, the Transferors will be required, on or prior to the
close of business on the tenth business day following such day (unless the
Transferor Amount exceeds the Required Transferor Amount or the aggregate amount
of Principal Receivables in the Trust exceeds the Required Principal Balance, as
the case may be, in either case as of the close of business on any day after the
last business day of such Monthly Period and prior to such tenth business day)
to make an Addition to the Trust such that, after giving effect to such
Addition, the Transferor Amount will be at least equal to the Required
Transferor Amount and the aggregate amount of Principal Receivables in the Trust
will be at least equal to the Required Principal Balance. An "Addition" will
consist of (i) receivables arising in Eligible Accounts or (ii) participations
representing undivided interests in a pool of assets primarily consisting of
receivables arising in revolving credit card accounts and any interests in the
foregoing, including securities representing or backed by such receivables, and
other self-liquidating financial assets including without limitation, "eligible
assets" (as such term is defined in Rule 3a-7 under the Investment Company Act
of 1940, as amended) and collections thereon (each, a "Participation"). The
Addition of Participations to the Trust will be effected by an amendment to the
Pooling and Servicing Agreement that will not require the consent of
Certificateholders. The Transferors, upon 30 days prior notice to the Trustee,
each Rating Agency and certain providers of Series Enhancement, may reduce the
Required Transferor Percentage; PROVIDED that (A) such reduction will not result
in a Ratings Effect and (B) each Transferor shall have delivered to the Trustee
and certain providers of Series Enhancement a certificate of an authorized
representative to the effect that, in the reasonable belief of such Transferor,
such reduction will not, based on the facts known to such representative at the
time of such certification, cause a Pay Out Event to occur with respect to any
Series. In addition, the Transferors may from time to time, at their sole
discretion, subject to the conditions described below, voluntarily make an
Addition to the Trust.
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The Transferors may designate, from time to time, at their sole discretion,
Eligible Accounts to be included as Accounts ("Automatic Additional Accounts"),
subject to the limitations specified in the Pooling and Servicing Agreement and
the Series Supplements, including the limitations (the "Aggregate Additional
Limit") specified in each Prospectus Supplement. The Aggregate Additional Limit
is intended to limit the extent to which the Transferors, by designating
Automatic Additional Accounts, may alter the composition of the Accounts without
Rating Agency consent. If the aggregate number of Automatic Additional Accounts
designated to be included as Accounts plus the number of Accounts designated
pursuant to the preceding paragraph without prior review by each Rating Agency
with respect to any of the periods specified in the Prospectus Supplements would
exceed the Aggregate Additional Limit, then no Automatic Additional Accounts may
be added during such periods without the consent of each Rating Agency. On or
before each Distribution Date, the Transferors shall have delivered to the
Trustee, each Rating Agency and certain providers of Series Enhancement an
opinion of outside counsel with respect to the Automatic Additional Accounts
included as Accounts during the preceding Monthly Period confirming the validity
and perfection of each transfer of such Automatic Additional Accounts. If such
opinion of counsel with respect to any Automatic Additional Accounts is not so
received, the ability of the Transferors to designate Automatic Additional
Accounts will be suspended until such time as the Rating Agency otherwise
consents in writing. The addition to the Trust of Receivables in Automatic
Additional Accounts will be subject to the further condition that revolving
credit card accounts either (a) not originated after June 1, 1995 by a
Transferor or (b) of a type not included in the Accounts at the time of their
addition may only be designated as Automatic Additional Accounts upon the
compliance with all of the conditions described in the following paragraph with
respect to Additions. Automatic Additional Accounts and Accounts relating to any
Addition are collectively referred to herein as "Additional Accounts."
In connection with an Addition, each Transferor will convey to the Trust the
Receivables arising in Additional Accounts and Participations subject to the
following conditions, among others (provided that clauses (a), (c), (d) and (e)
below shall not apply to the transfer to the Trust of Receivables in Automatic
Additional Accounts except as specifically provided in the preceding paragraph):
(a) on or before the tenth business day immediately preceding any Addition, each
Transferor that owns such Additional Account or is transferring any such
Participation to the Trust shall have given the Trustee, the Servicer, the
Rating Agencies and certain providers of Series Enhancement written notice that
the Receivables arising in the Additional Accounts or Participations will be
included as Trust Assets; (b) on or before the date on which any such
Receivables are added to the Trust, such Transferor shall have delivered to the
Trustee a written assignment and a computer file or microfiche list containing a
true and complete list of the related Additional Accounts specifying for each
such Account its account number, the aggregate amount outstanding in such
Account and the aggregate amount of Principal Receivables outstanding in such
Account; (c) in the case of an Addition, other than a required Addition, such
Transferor shall have received confirmation from each Rating Agency that such
Addition will not result in a Ratings Effect; (d) in the case of a required
Addition that exceeds the Aggregate Additional Limit, such Transferor shall have
provided to Standard & Poor's with fifteen days prior written notice and
Standard & Poor's shall not have notified such Transferor that such Addition
would result in a Ratings Effect; and (e) prior to or on the date any such
Receivables or Participations are added to the Trust, such Transferor shall have
delivered to the Trustee and certain providers of Series Enhancement a
certificate of an authorized representative stating that any related Additional
Accounts are Eligible Accounts and that such Transferor reasonably believes that
(i) such Addition will not, based on the facts known to such representative at
the time of such certification, cause a Pay Out Event to occur with respect to
any Series and (ii) in the case of Additional Accounts, no selection procedure
was utilized by such Transferor that would result in a selection of Additional
Accounts (from the available Eligible Accounts) that would be materially adverse
to the interests of the Certificateholders of any Series as of the date of the
Addition. The only limitations on a Transferor's right to designate Additional
Accounts, including Automatic Additional Accounts, are those described herein
and in the related Prospectus Supplement.
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Additional Accounts or accounts included in Participations may include
accounts originated using criteria different from those that were applied to the
Accounts initially selected for the Trust Portfolio because such accounts were
originated at a later date, were part of a portfolio of revolving credit card
accounts that were not part of the Bank Portfolio as of the Trust Cut-Off Date
or were acquired from another institution. Moreover, Additional Accounts and
accounts included in Participations may not be accounts having the same
characteristics as those previously included in the Trust. See "The Pooling and
Servicing Agreement -- Representations and Warranties." Consequently, there can
be no assurance that such Additional Accounts or accounts included in
Participations will be of the same credit quality or have the same payment
characteristics as the Accounts initially selected for the Trust Portfolio or
the Additional Accounts previously included in the Trust.
Additional Accounts may have different terms than the Initial Accounts or
the Additional Accounts previously included in the Trust, including fees,
charges and amounts that are different from the fees, charges and amounts that
have been designated as Finance Charge Receivables and Principal Receivables
herein and Participations may be added to the Trust as Additions. In either
case, the Servicer will designate the portions of funds collected or to be
collected in respect of such Receivables or Participations to be treated for
purposes of the Pooling and Servicing Agreement as Principal Receivables and
Finance Charge Receivables.
REMOVAL OF ACCOUNTS
On any day of any Monthly Period, a Transferor may require the reassignment
to it or its designee of all the Trust's right, title and interest in, to and
under the Receivables then existing and thereafter created, all monies due or to
become due and all amounts received with respect thereto and all proceeds
thereof in or with respect to the Removed Accounts or Participations, upon
satisfaction of the following conditions: (a) on or before the tenth business
day (the "Removal Notice Date") immediately preceding the date upon which the
Receivables in such Accounts or Participations are to be removed from the Trust,
such Transferor shall have given the Trustee, the Servicer, each Rating Agency
and certain providers of Series Enhancement written notice of such removal
specifying the date for removal of the Removed Accounts (the "Removal Date");
(b) on or prior to the date that is ten business days after the Removal Date,
such Transferor shall have delivered to the Trustee a computer file or
microfiche list containing a true and complete list of the Removed Accounts
specifying for each such Account, as of the Removal Notice Date, its account
number, the aggregate amount outstanding in such account and the aggregate
amount of Principal Receivables outstanding in such Account; (c) such Transferor
shall have represented and warranted as of such Removal Date that the list of
Removed Accounts delivered pursuant to clause (b) above is true and complete in
all material respects; (d) such Transferor shall have received confirmation from
each Rating Agency that such removal will not result in a Ratings Effect; (e)
such Transferor shall have delivered to the Trustee and certain providers of
Series Enhancement a certificate of an authorized representative, dated the
Removal Date, to the effect that such Transferor reasonably believes that (i)
such removal will not, based on the facts known to such representative at the
time of such certification, cause a Pay Out Event to occur with respect to any
Series and (ii) no selection procedure was utilized by such Transferor that
would result in a selection of Removed Accounts that would be materially adverse
to the interests of the Certificateholders of any Series as of the Removal Date;
and (f) as of the Removal Notice Date either (i) the Receivables in the Accounts
are not more than 15% delinquent by estimated principal amount and the weighted
average delinquency of such Receivables is not more than 60 days or (ii) the
Receivables in the Accounts are not more than 7% delinquent by estimated
principal amount and the weighted average delinquency of such Receivables does
not exceed 90 days. Such removal could occur for a number of reasons including,
among others, a determination by the Transferors that the Trust contains more
Receivables than the Transferors are obligated to retain in the Trust under the
Pooling and Servicing Agreement and any applicable Series Supplements and a
determination that the Transferors do not desire to obtain additional financing
through the Trust at such time. The only limitation on a Transferor's right to
require the reassignment to it or its designee of the Receivables in designated
Removed Accounts are those described herein and in the related Prospectus
Supplement.
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Upon satisfaction of the above conditions, the Trustee shall execute and
deliver to the relevant Transferor a written reassignment and shall be deemed to
transfer, assign, set over and otherwise convey to such Transferor or its
designee, without recourse, representation or warranty, all the right, title and
interest of the Trust in and to the Receivables arising in the Removed Accounts
or Participations, all monies due and to become due and all amounts received
with respect thereto and all proceeds thereof.
DISCOUNT OPTION
The Pooling and Servicing Agreement provides that the Transferors may at any
time and from time to time, but without any obligation to do so, designate a
specified fixed or variable percentage based on a formula as specified in the
related Prospectus Supplement (the "Discount Percentage") of the amount of
Receivables arising in all or any specified portion of the Accounts on and after
the date such designation becomes effective that otherwise would have been
treated as Principal Receivables to be treated as Finance Charge Receivables
(the "Discount Option Receivables"). Although there can be no assurance that the
Transferors will do so, such designation may occur because the Transferors
determine that the exercise of the discount option is needed to provide a
sufficient yield on the Receivables to cover interest and other amounts due and
payable from collections of Finance Charge Receivables or to avoid the
occurrence of a Pay Out Event relating to the reduction of the average yield on
the portfolio of Accounts in the Trust, if the related Series Supplement
provides for such a Pay Out Event. After any such designation, pursuant to the
Pooling and Servicing Agreement, each Transferor may, without notice to or
consent of the Certificateholders, from time to time reduce or withdraw the
Discount Percentage. The relevant Transferor must provide 30 days prior written
notice to the Servicer, the Trustee, each Rating Agency and any provider of
Series Enhancement of any such designation or reduction or withdrawal, and such
designation or reduction or withdrawal will become effective on the date
specified therein only if (a) such Transferor has delivered to the Trustee and
certain providers of Series Enhancement a certificate of an authorized
representative of such Transferor, based on the facts known to such
representative at the time, stating that such Transferor reasonably believes
that such designation or reduction or withdrawal will not at the time of its
occurrence cause a Pay Out Event or an event that, with notice or the lapse of
time or both, would constitute a Pay Out Event, to occur with respect to any
Series, (b) such Transferor has received written notice from each Rating Agency
that such designation or reduction or withdrawal will not have a Ratings Effect
and (c) in the case of a reduction or withdrawal, such Transferor shall have
delivered to the Trustee a certificate of an authorized representative to the
effect that, in the reasonable belief of such Transferor, such reduction or
withdrawal shall not have material adverse regulatory or accounting implications
for such Transferor. On the Date of Processing of any collections on or after
the date the exercise of the discount option takes effect, the product of (i) a
fraction the numerator of which is the amount of Discount Option Receivables and
the denominator of which is the amount of all of the Principal Receivables
(including Discount Option Receivables) at the end of the prior Monthly Period
and (ii) collections of Receivables that arise in the Accounts on such day on or
after the date such option is exercised that otherwise would be Principal
Receivables will be deemed collections of Finance Charge Receivables and will be
applied accordingly, unless otherwise provided in the related Prospectus
Supplement. Any such designation would result in an increase in the amount of
Finance Charge Receivables and a lower payment rate of collections in respect of
Principal Receivables than would otherwise occur.
NEW ISSUANCES
The Pooling and Servicing Agreement provides that, pursuant to any one or
more Series Supplements, the Transferors may direct the Trustee to authenticate
from time to time new Series subject to the conditions described below (each
such issuance, a "New Issuance"). Each New Issuance will have the effect of
decreasing the Transferor Amount to the extent of the initial Invested Amount of
such new Series. Under the Pooling and Servicing Agreement, the Transferors may
designate, with respect to any newly issued Series: (a) its name or designation;
(b) its initial principal amount (or method for calculating such amount) and its
invested amount in the Trust (the "Invested Amount"), which is
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generally based on the aggregate amount of Principal Receivables in the Trust
allocated to such Series and its Series Invested Amount; (c) its certificate
rate (or method for the determination thereof); (d) the interest payment date or
dates (each, an "Interest Payment Date") and the date or dates from which
interest shall accrue; (e) the method for allocating collections to
Certificateholders of such Series; (f) any bank accounts to be used by such
Series and the terms governing the operation of any such bank accounts; (g) the
percentage used to calculate monthly servicing fees; (h) the provider and terms
of any form of Series Enhancement with respect thereto; (i) the terms on which
the Certificates of such Series may be exchanged for another Series or
repurchased or remarketed to other investors; (j) the Series Termination Date;
(k) the number of Classes of Certificates of such Series, and if such Series
consists of more than one Class, the rights and priorities of each such Class;
(l) the extent to which the Certificates of such Series will be issuable in
temporary or permanent global form (and, in such case, the depositary for such
global certificate or certificates, the terms and conditions, if any, upon which
such global certificate may be exchanged, in whole or in part, for definitive
certificates, and the manner in which any interest payable on a global
certificate will be paid); (m) whether the Certificates of such Series may be
issued in bearer form and any limitations imposed thereon; (n) the priority of
such Series with respect to any other Series; (o) whether such Series is
entitled to receive Shared Principal Collections; (p) the Group, if any, in
which such Series will be included; and (q) any other relevant terms (all such
terms, the "Principal Terms" of such Series). None of the Transferors, the
Servicer, the Trustee or the Trust is required or intends to obtain the consent
of any Certificateholder of any outstanding Series to issue any additional
Series. The Transferors may offer any Series or any Class thereof to the public
and in connection therewith may utilize a Prospectus Supplement or other
Disclosure Document in transactions either registered under the Securities Act
or exempt from registration thereunder directly, through one or more
underwriters or placement agents, in fixed-price offerings or in negotiated
transactions or otherwise. See "Plan of Distribution." Any such Series may be
issued in fully registered, book-entry, uncertificated or bearer form in minimum
denominations determined by the Transferors. The Transferors intend to offer,
from time to time, additional Series.
The Pooling and Servicing Agreement provides that the Transferors may
designate Principal Terms such that each Series has a Scheduled Accumulation
Period or a Scheduled Amortization Period that may have a different length and
begin on a different date than such periods for any other Series. Further, one
or more Series may be in their Scheduled Accumulation Period or Scheduled
Amortization Period while other Series are not. Collections of Principal
Receivables otherwise allocable to a Series (other than amounts reallocated
pursuant to the Series Supplement for such Series) that is not amortizing or
accumulating principal will be treated as Shared Principal Collections and
reallocated to a Series that is amortizing or accumulating principal and is
entitled to receive Shared Principal Collections. Moreover, each Series may have
the benefits of Series Enhancements issued by enhancement providers different
from the providers of Series Enhancement with respect to any other Series. Under
the Pooling and Servicing Agreement, the Trustee shall hold any such Series
Enhancement only on behalf of the Certificateholders of the Series to which such
Series Enhancement relates. With respect to each such Series Enhancement, the
Transferors may deliver a different form of Series Enhancement agreement. The
Transferors also have the option under the Pooling and Servicing Agreement to
vary among Series the terms upon which a Series may be repurchased by the
Transferors or remarketed to other investors. There is no limit to the number of
New Issuances the Transferors may cause under the Pooling and Servicing
Agreement. The Trust will terminate only as provided in the Pooling and
Servicing Agreement. There can be no assurance that the terms of any Series
might not have an impact on the timing and amount of payments received by a
Certificateholder of another Series.
Under the Pooling and Servicing Agreement and pursuant to a Series
Supplement, a New Issuance may only occur upon the satisfaction of certain
conditions provided in the Pooling and Servicing Agreement. The obligation of
the Trustee to authenticate the Certificates of such new Series and to execute
and deliver the related Series Supplement is subject to the satisfaction of the
following conditions: (a) on or before the fifth business day immediately
preceding the date upon which the New
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Issuance is to occur, the Transferors shall have given the Trustee, the
Servicer, each Rating Agency and certain providers of Series Enhancement written
notice of such New Issuance and the date upon which the New Issuance is to
occur; (b) the Transferors shall have delivered to the Trustee the related
Series Supplement, in form satisfactory to the Trustee, executed by each party
to the Pooling and Servicing Agreement other than the Trustee; (c) the
Transferors shall have delivered to the Trustee any related Series Enhancement
agreement executed by each of the parties to such agreement other than the
Trustee; (d) the Trustee shall have received confirmation from each Rating
Agency that such New Issuance will not result in a Ratings Effect; (e) each of
the Transferors shall have delivered to the Trustee and certain providers of
Series Enhancement a certificate of an authorized representative, dated the date
upon which the New Issuance is to occur, to the effect that such Transferor
reasonably believes that such issuance will not, based on the facts known to
such representative at the time of such certification, cause a Pay Out Event to
occur with respect to any Series; (f) the Transferors shall have delivered to
the Trustee and each Rating Agency an opinion of counsel acceptable to the
Trustee that for federal income tax purposes and for Maryland State income and
franchise tax purposes: (i) following such New Issuance the Trust will not be
deemed to be an association (or publicly traded partnership) taxable as a
corporation; (ii) such New 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; and (iii) such New
Issuance will not cause or constitute an event in which gain or loss would be
recognized by any Certificateholders (an opinion of counsel to the effect
referred to in clauses (i), (ii) and (iii) with respect to any action is
referred to herein as a "Tax Opinion"); (g) the Transferor Amount shall not be
less than two percent of the total amount of Principal Receivables, in each case
as of the date upon which the New Issuance is to occur after giving effect to
such issuance; and any other conditions specified in any Series Supplement. Upon
satisfaction of the above conditions, the Trustee shall execute the Series
Supplement and issue to the Transferors the Certificates of such new Series for
execution and redelivery to the Trustee for authentication.
COLLECTION ACCOUNT
The Servicer will establish and maintain for the benefit of the
Certificateholders of each Series, in the name of the Trustee, on behalf of the
Trust, an Eligible Deposit Account bearing a designation clearly indicating that
the funds deposited therein are held for the benefit of the Certificateholders
of each Series (the "Collection Account"). "Eligible Deposit Account" means
either (a) a segregated account with an Eligible Institution or (b) a segregated
trust account with the corporate trust department of a depository institution
organized under the laws of the United States or any one of the states thereof,
including the District of Columbia (or any domestic branch of a foreign bank),
and acting as a trustee for funds deposited in such account, so long as any of
the securities of such depository institution shall have a credit rating from
each Rating Agency in one of its generic credit rating categories that signifies
investment grade. "Eligible Institution" means (i) a depository institution
(which may be the Trustee) organized under the laws of the United States or any
one of the states thereof that, at all times, (A) has either (1) a long-term
unsecured debt rating of "A2" or better by Moody's Investors Service, Inc.
("Moody's") or (2) a certificate of deposit rating of "P-1" by Moody's, (B) has
either (1) a long-term unsecured debt rating of "AAA" by Standard & Poor's
Ratings Group ("Standard & Poor's") or (2) a certificate of deposit rating of
"A-1+" by Standard & Poor's and (C) is a member of the FDIC or (ii) any other
institution that is acceptable to each Rating Agency. The Collection Account
will initially be maintained with the Trustee. If at any time the Collection
Account ceases to be an Eligible Deposit Account, the Collection Account shall
be moved so that it will again be qualified as an Eligible Deposit Account.
Funds in the Collection Account generally will be invested in (i) obligations
fully guaranteed by the United States of America, (ii) demand deposits, time
deposits or certificates of deposit of depository institutions or trust
companies, the commercial paper, if any, of which has the highest rating from
Moody's and Standard & Poor's, (iii) commercial paper (or other short term
obligations) having, at the time of the Trust's investment therein, a rating in
the highest rating category from Moody's and Standard & Poor's, (iv) demand
deposits, time deposits and certificates of deposit that are fully insured by
the FDIC, (v) notes or bankers' acceptances issued by any depository institution
or trust company described in (ii) above, (vi) money market funds that have the
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highest rating from Moody's and Standard & Poor's, or have otherwise been
approved in writing by each Rating Agency, (vii) time deposits with an entity,
the commercial paper of which has the highest rating from Moody's and Standard &
Poor's, and (viii) any other investments approved in writing by each Rating
Agency (collectively, "Eligible Investments"). Such funds may be invested in
debt obligations of the Bank or its affiliates, so long as such obligations
qualify as Eligible Investments. Any earnings (net of losses and investment
expenses) on funds in the Collection Account will be treated as collections of
Finance Charge Receivables with respect to the last day of the related Monthly
Period except as otherwise specified in any Series 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 Collection
Account for the purpose of carrying out its duties under the Pooling and
Servicing Agreement and any Series Supplement. The Paying Agent shall have the
revocable power to withdraw funds from the Collection Account for the purpose of
making distributions to the Certificateholders. The Paying Agent shall initially
be the Trustee.
ALLOCATION PERCENTAGES
Pursuant to the Pooling and Servicing Agreement, the Servicer will allocate
among the Certificateholders' Interest of each Series and the Transferors'
Interest all amounts collected with respect to Finance Charge Receivables and
Principal Receivables and the Defaulted Amount with respect to each business day
during any Monthly Period as follows:
(a) collections of Finance Charge Receivables and the Defaulted Amount
will at all times be allocated to the Certificateholders' Interest of a
Series based on the Floating Allocation Percentage of such Series; and
(b) collections of Principal Receivables will at all times be allocated
to the Certificateholders' Interest of such Series based on the Principal
Allocation Percentage of such Series.
The "Floating Allocation Percentage" and the "Principal Allocation
Percentage" with respect to any Series will be determined as set forth in the
related Series Supplement and, with respect to each Series offered hereby, in
the related Prospectus Supplement. Amounts not allocated to the
Certificateholders' Interest of any Series as described above will be allocated
to the Transferors' Interest.
DEPOSITS IN COLLECTION ACCOUNT
For as long as (a) the Bank is the Servicer under the Pooling and Servicing
Agreement and (b) either (i) the Bank, as the Servicer, provides to the Trustee
a letter of credit covering collection risk of the Servicer acceptable to each
Rating Agency (as evidenced by a letter from each Rating Agency to the effect
that no Ratings Effect would occur) or (ii) the Bank has and maintains a
certificate of deposit rating of at least "A-1" and "P-1" (or their equivalent)
by Standard & Poor's and Moody's, respectively, the Bank may use for its own
benefit all collections received with respect to the Receivables in each Monthly
Period until the business day preceding the related Distribution Date, at which
time, the Bank will deposit all such collections, to the extent described below,
into the Collection Account, and the Servicer will make the deposits and
payments to the accounts and parties described herein and in the related
Prospectus Supplement on the date of such deposit. In the event of the
insolvency or receivership of the Bank or, in certain circumstances, the lapse
of certain time periods, the Trust may not have a perfected security interest in
such collections prior to their deposit in the Collection Account. If the Bank
is no longer the Servicer or fails to maintain the required letter of credit
covering collection risk or the required certificate of deposit rating, the
Servicer will make such deposits, as described below, not later than two
business days after the Date of Processing. Whether the Servicer is required to
make deposits of collections pursuant to the first or the second preceding
sentence, (A) the Servicer will only be required to deposit collections into the
Collection Account up to the aggregate amount of collections required to be
deposited into an account established for any Series or, without duplication,
distributed on the related Distribution Date or Payment Date to
Certificateholders of any Series or to the issuer of any Series Enhancement
pursuant to the terms of any Series Supplement or Series Enhancement agreement
and (B) if at any time prior to such
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Distribution Date or Payment Date the amount of collections deposited in the
Collection Account exceeds the amount required to be deposited pursuant to
clause (A) above, the Servicer will be permitted to withdraw such excess from
the Collection Account.
On the earlier of (a) the second business day after the Date of Processing
and (b) the day on which the Servicer deposits any collections into the
Collection Account, the Servicer will pay to the holders of the Transferor
Certificates (i) such holders' allocable portion of collections of Principal
Receivable and (ii) such holders' allocable portion of collections of Finance
Charge Receivables.
SHARED PRINCIPAL COLLECTIONS
Collections of Principal Receivables for any Monthly Period allocated to the
Certificateholders' Interest of any Series offered hereby will first be used to
cover certain amounts described in the related Prospectus Supplement (including
any required deposits into a Principal Funding Account or required distributions
to Certificateholders of such Series). The Servicer will determine the amount of
collections of Principal Receivables for any Monthly Period (plus certain other
amounts described in the related Prospectus Supplement) allocated to such Series
remaining after covering such required deposits and distributions and any
similar amount remaining for any other Series (collectively, "Shared Principal
Collections"). With respect to any Series that is entitled to Shared Principal
Collections, the Servicer will allocate the Shared Principal Collections to
cover any principal distributions to Certificateholders and deposits to
Principal Funding Accounts for any Series that are either scheduled or permitted
and that have not been covered out of the investor principal collections and
certain other amounts for such Series (collectively, "Principal Shortfalls"). If
Principal Shortfalls exceed Shared Principal Collections for any Monthly Period,
Shared Principal Collections will be allocated PRO RATA among the applicable
Series based on the respective Principal Shortfalls of such Series. To the
extent that Shared Principal Collections exceed Principal Shortfalls, the
balance will be allocated to the holders of the Transferor Certificates,
PROVIDED that (a) such Shared Principal Collections will be distributed to the
holders of the Transferor Certificates only to the extent that the Transferor
Amount is greater than the Required Transferor Amount (see "-- Deposits in
Collection Account") and (b) in certain circumstances described below under "--
Special Funding Account," such Shared Principal Collections will be deposited in
the Special Funding Account. Any such reallocation of collections of Principal
Receivables will not result in a reduction in the Invested Amount of the Series
to which such collections were initially allocated. There can be no assurance
that there will be any Shared Principal Collections with respect to any Monthly
Period.
SPECIAL FUNDING ACCOUNT
If, on any date, the Transferor Amount is less than or equal to the Required
Transferor Amount or the amount of Principal Receivables in the Trust is less
than or equal to the Required Principal Balance, the Servicer shall not
distribute to the holders of the Transferor Certificates any Shared Principal
Collections that otherwise would be distributed to such holders, but shall
deposit such funds in an Eligible Deposit Account established and maintained by
the Servicer for the benefit of the Certificateholders of each Series, in the
name of the Trustee, on behalf of the Trust, and bearing a designation clearly
indicating that the funds deposited therein are held for the benefit of the
Certificateholders of each Series (the "Special Funding Account"). Funds on
deposit in the Special Funding Account will be withdrawn and paid to the holders
of the Transferor Certificates on any Distribution Date to the extent that,
after giving effect to such payment, the Transferor Amount exceeds the Required
Transferor Amount and the amount of Principal Receivables in the Trust exceeds
the Required Principal Balance on such date; PROVIDED, HOWEVER, that if a
Scheduled Accumulation Period, Early Accumulation Period, Scheduled Amortization
Period or Early Amortization Period commences with respect to any Series, any
funds on deposit in the Special Funding Account will be released from the
Special Funding Account, deposited in the Collection Account and treated as
Shared Principal Collections to the extent needed to make principal payments due
to or for the benefit of the Certificateholders of such Series.
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Funds on deposit in the Special Funding Account will be invested by the
Trustee, at the direction of the Servicer, in Eligible Investments. Any earnings
(net of losses and investment expenses) earned on amounts on deposit in the
Special Funding Account during any Monthly Period will be withdrawn from the
Special Funding Account and treated as collections of Finance Charge Receivables
with respect to such Monthly Period.
SHARING OF EXCESS FINANCE CHARGE COLLECTIONS
Any Series may be included in a Group. If the related Prospectus Supplement
for a Series so provides, such Series may at a later date be removed from such
Group. If the related Prospectus Supplements for the Series in a specific Group
so provide, each Series in such Group may be entitled to share Excess Finance
Charge Collections in the manner, and to the extent, described below with each
other Series, if any, in such Group. The Prospectus Supplement with respect to a
Series offered hereby will specify whether such Series will be included in a
Group, whether any previously issued Series have been included in such Group and
whether any such Series or any previously issued Series may be removed from such
Group. Subsequently issued Series may also be included in such Group. If the
related Prospectus Supplements for a Series in a specific Group so provide,
collections of Finance Charge Receivables and certain other amounts allocable to
the Certificateholders' Interest of any Series that is included in such Group in
excess of the amounts necessary to make required payments with respect to such
Series (including payments to the provider of any related Series Enhancement)
that are payable out of collections of Finance Charge Receivables (any such
excess, the "Excess Finance Charge Collections") may be applied to cover any
shortfalls with respect to amounts payable from collections of Finance Charge
Receivables allocable to any other Series included in such Group, PRO RATA based
upon the amount of the shortfall, if any, with respect to each other Series in
such Group; PROVIDED, HOWEVER, that the sharing of Excess Finance Charge
Collections among Series in any such Group will cease if a Transferor shall
deliver to the Trustee a certificate of an authorized representative to the
effect that, in the reasonable belief of such Transferor, the continued sharing
of Excess Finance Charge Collections among Series in any Group would have
adverse regulatory implications with respect to such Transferor. Following the
delivery by a Transferor of any such certificate to the Trustee there will not
be any further sharing of Excess Finance Charge Collections among the Series in
any such Group. In all cases, any Excess Finance Charge Collections remaining
after covering shortfalls with respect to all outstanding Series in such Group
will be paid to the holders of the Transferor Certificates. While any Series
offered hereby may be included in a Group, there can be no assurance that (a)
any other Series will be included in such Group, (b) there will be any Excess
Finance Charge Collections with respect to such Group for any Monthly Period,
(c) any agreement relating to any Series Enhancement will not be amended in such
a manner as to increase payments to the providers of Series Enhancement and
thereby decrease the amount of Excess Finance Charge Collections available from
such Series or (d) a Transferor will not at any time deliver a certificate as
described above. While the Transferors believe that, based upon applicable rules
and regulations as currently in effect, the sharing of Excess Finance Charge
Collections among Series in a Group will not have adverse regulatory
implications for them, there can be no assurance that this will continue to be
true in the future.
FUNDING PERIOD
For any Series of Certificates offered hereby, the related Prospectus
Supplement may specify that during a Funding Period, the Pre-Funding Amount will
be held in a Pre-Funding Account pending the transfer of additional Receivables
to the Trust or pending the reduction of the Invested Amounts of other Series
issued by the Trust. The related Prospectus Supplement will specify the initial
Invested Amount with respect to such Series, the Full Invested Amount and the
date by which the Invested Amount is expected to equal the Full Invested Amount.
The Invested Amount will increase as Receivables are delivered to the Trust or
as the Invested Amounts of other Series of the Trust are reduced. The Invested
Amount may also decrease due to the occurrence of a Pay Out Event with respect
to such Series as provided in the related Prospectus Supplement.
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During the Funding Period, funds on deposit in the Pre-Funding Account for a
Series of Certificates will be withdrawn and paid to the Transferors to the
extent of any increases in the Invested Amount. If the Invested Amount does not
for any reason equal the Full Invested Amount by the end of the Funding Period,
any amount remaining in the Pre-Funding Account and any additional amounts
specified in the related Prospectus Supplement will be payable to the
Certificateholders of such Series in the manner and at such time as set forth in
the related Prospectus Supplement.
If so specified in the related Prospectus Supplement, moneys in the
Pre-Funding Account will be invested by the Trustee in Eligible Investments or
will be subject to a guaranteed rate or investment agreement or other similar
arrangement, and, 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 Collection Account
for distribution in respect of interest on the Certificates of the related
Series in the manner specified in the related Prospectus Supplement.
PAIRED SERIES
If so provided in the related Prospectus Supplement, a Series offered hereby
may be paired with a Paired Series issued by the Trust at or after the
commencement of the Scheduled Amortization Period or Scheduled Accumulation
Period for such Series. As the Invested Amount of the Series having a Paired
Series is reduced, the Invested Amount in the Trust of the Paired Series will
increase by an equal amount. Upon payment in full of the Series having a Paired
Series, the Invested Amount of such Paired Series will be equal to the Invested
Amount paid to Certificateholders of such Series. If a Pay Out Event occurs with
respect to the Series having a Paired Series or with respect to the Paired
Series when the Series is in a Scheduled Amortization Period or Scheduled
Accumulation Period, the Principal Allocation Percentage for the Series and the
Principal Allocation Percentage for the Paired Series will be reset as provided
in the related Prospectus Supplement.
DEFAULTED RECEIVABLES; REBATES AND FRAUDULENT CHARGES
"Defaulted Receivables" for any Monthly Period are Principal Receivables
that were charged-off as uncollectible in such Monthly Period. The "Defaulted
Amount" for any Monthly Period will be an amount (not less than zero) equal to
(a) the amount of Principal Receivables that became Defaulted Receivables for
such Monthly Period minus (b) the amount of any Defaulted Receivables that a
Transferor or the Servicer becomes obligated to accept reassignment or
assignment of during such Monthly Period (unless an Insolvency Event has
occurred with respect to such Transferor or the Servicer, in which event the
amount of such Defaulted Receivables will not be added to the amount so
subtracted). Receivables in any Account will be charged-off as uncollectible in
accordance with the Credit Card Guidelines and the Servicer's customary and
usual policies and procedures for servicing revolving credit card and other
revolving credit account receivables comparable to the Receivables. The current
policy of the Bank is to charge-off the receivables in an account when the
credit card holder has failed to make seven consecutive payments on the account
(or within 30 days of receipt of notice of death or bankruptcy of the credit
card holder).
If the Servicer adjusts downward the amount of any Principal Receivable
(other than Ineligible Receivables that have been, or are to be, reassigned to
the Transferors) because of a rebate, refund, counterclaim, defense, error,
fraudulent charge or counterfeit charge to a cardholder, or such Principal
Receivable was created in respect of merchandise that was refused or returned by
a cardholder or if the Servicer otherwise adjusts downward the amount of any
Principal Receivable without receiving collections therefor or charging off such
amount as uncollectible, the amount of the Principal Receivables in the Trust
with respect to the Monthly Period in which such adjustment takes place will be
reduced by the amount of the adjustment. Furthermore, in the event that the
exclusion of any such Receivables would cause the Transferor Amount at such time
to be less than the Required Transferor Amount, the Transferor that transferred
such Principal Receivables to the Trust shall be required to pay an amount equal
to such deficiency into the Special Funding Account.
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CREDIT ENHANCEMENT
GENERAL. For any Series, Credit Enhancement may be provided with respect to
one or more Classes thereof. Credit Enhancement with respect to one or more
Classes of a Series offered hereby may include a letter of credit, a cash
collateral account, an uncertificated subordinated invested amount or collateral
interest, a surety bond, an insurance policy or any other form of credit
enhancement described in the related Prospectus Supplement, or any combination
of the foregoing. Credit Enhancement may also be provided to a Class or Classes
of a Series by subordination provisions that require that distributions of
principal or interest be made with respect to the Certificates of such Class or
Classes before distributions are made to one or more Classes of such Series. If
so specified in the related Prospectus Supplement, any form of Credit
Enhancement may be available to more than one Class or Series to the extent
described therein. If so specified in the Prospectus Supplement for a Series or
Class offered hereby, the level of Credit Enhancement for such Series or Class
may be reduced by the Transferors if such reduction will not have a Ratings
Effect.
The presence of Credit Enhancement with respect to a Class is intended to
enhance the likelihood of receipt by Certificateholders of such Class of the
full amount of principal and interest with respect thereto and to decrease the
likelihood that such Certificateholders will experience losses. However, unless
otherwise specified in the related Prospectus Supplement, the Credit
Enhancement, if any, with respect thereto 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 that exceed
the amount covered by the Credit Enhancement or that are not covered by the
Credit Enhancement, Certificateholders will bear their allocable share of such
losses. In addition, if specific Credit Enhancement is provided for the benefit
of more than one Class or Series, Certificateholders of any such Class or Series
will be subject to the risk that such Credit Enhancement will be exhausted by
the claims of Certificateholders of other Classes or Series.
If Credit Enhancement is provided with respect to a Series offered hereby,
the related Prospectus Supplement will include a description of (a) the amount
payable under such Credit Enhancement, (b) any conditions to payment thereunder
not otherwise described herein, (c) the conditions (if any) under which the
amount payable under such Credit Enhancement may be reduced and under which such
Credit Enhancement may be terminated or replaced and (d) any provisions of any
agreement relating to such Credit Enhancement material to the Certificateholders
of such Series. Additionally, in certain cases, the related Prospectus
Supplement may set forth certain information with respect to the provider of any
third-party Credit Enhancement (the "Credit Enhancer"), including (i) a brief
description of its principal business activities, (ii) its principal place of
business, place of incorporation or the jurisdiction under which it is chartered
or licensed to do business, (iii) if applicable, the identity of regulatory
agencies that exercise primary jurisdiction over the conduct of its business and
(iv) its total assets, and its stockholders' or policyholders' surplus, if
applicable, as of a date specified in the Prospectus Supplement. If so described
in the related Prospectus Supplement, Credit Enhancement with respect to a
Series offered hereby 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 Enhancer 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") and may be entitled to
the benefit of the Trustee's security interest in the Receivables, in each case
subordinated to the interest of the Certificateholders of such Series.
SUBORDINATION. If so specified in the related Prospectus Supplement, one or
more Classes of a Series offered hereby may be subordinated to one or more other
Classes of such Series. If so specified in the related Prospectus Supplement,
the rights of the holders of the subordinated Certificates to receive
distributions of principal or interest on any Payment Date will be subordinated
to such rights of the holders of the Certificates that are senior to such
subordinated Certificates to the extent set forth in the related Prospectus
Supplement. The related Prospectus Supplement will also set forth information
concerning the amount of subordination of a Class or Classes of subordinated
Certificates in a Series, the circumstances in which such subordination will be
applicable, the manner, if any, in
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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
Certificates that are senior to such subordinated Certificates. The amount of
subordination will decrease whenever amounts otherwise payable to the holders of
subordinated Certificates are paid to the holders of the Certificates that are
senior to such subordinated Certificates.
LETTER OF CREDIT. If so specified in the related Prospectus Supplement, a
letter of credit with respect to a Series or Class of Certificates offered
hereby may be issued by a bank or financial institution specified in the related
Prospectus Supplement (the "L/C Issuer"). Subject to the terms and conditions
specified in the related Prospectus Supplement, the L/C Issuer will be obligated
to honor drawings under a letter of credit in an aggregate dollar amount (which
may be fixed or may be reduced as described in the related Prospectus
Supplement), net of unreimbursed payments thereunder, equal to the amount
described in the related Prospectus Supplement. The amount available under a
letter of credit will be reduced to the extent of the unreimbursed payments
thereunder.
CASH COLLATERAL ACCOUNT. If specified in the related Prospectus Supplement,
the Certificates of any Class or Series offered hereby may have the benefit of a
cash collateral account. A cash collateral account with respect to a Class or
Series may be fully or partially funded on the Series Closing Date with respect
thereto and the funds on deposit therein will be invested in Eligible
Investments. The amount available to be withdrawn from a cash collateral account
will be the lesser of the amount on deposit in the cash collateral account and
an amount specified in the related Prospectus Supplement. The related Prospectus
Supplement will set forth the circumstances under which such withdrawals will be
made from the cash collateral account.
COLLATERAL INTEREST. If so specified in the related Prospectus Supplement,
support for a Series of Certificates or one or more Classes thereof offered
hereby may be provided initially by an uncertificated, subordinated interest in
the Trust (the "Collateral Interest") in an amount initially equal to a
percentage of the Certificates of such Series specified in the Prospectus
Supplement.
SURETY BOND OR INSURANCE POLICY. If so specified in the related Prospectus
Supplement, insurance with respect to a Series or Class of Certificates offered
hereby may be provided by one or more insurance companies. Such insurance will
guarantee, with respect to one or more Classes of the related Series,
distributions of interest or principal in the manner and amount specified in the
related Prospectus Supplement.
If so specified in the related Prospectus Supplement, a surety bond may be
purchased for the benefit of the holders of any Series or Class of Certificates
offered hereby to assure distributions of interest or principal with respect to
such Series or Class of Certificates in the manner and amount specified in the
related Prospectus Supplement.
SPREAD ACCOUNT. If so specified in the related Prospectus Supplement,
support for a Series or one or more Classes of a Series offered hereby may be
provided by the periodic deposit of certain available excess cash flow from the
Trust Assets into a spread account intended to assure the subsequent
distributions of interest and principal on the Certificates of such Class or
Series in the manner and subject to the limitations specified in the related
Prospectus Supplement.
PAY OUT EVENTS
As described above, the Revolving Period with respect to a Series will
continue until the commencement of the Scheduled Accumulation Period or the
Scheduled Amortization Period with respect thereto, which will continue until
the Invested Amount of such Series shall have been paid in full or the Series
Termination Date with respect to such Series occurs, unless a Pay Out Event
occurs with respect to such Series prior to any such dates. A "Pay Out Event"
will occur with respect to all Series upon the occurrence of any of the
following events:
(a) the occurrence of an Insolvency Event;
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(b) the Trust becomes an "investment company" within the meaning of the
Investment Company Act of 1940, as amended; or
(c) either Transferor becomes unable for any reason to transfer
Receivables to the Trust in accordance with the Pooling and Servicing
Agreement.
In addition, a Pay Out Event may occur with respect to a specific Series
offered hereby upon the occurrence of any other event specified in the related
Prospectus Supplement. Such events may include, but are not required to include
nor are they limited to, (i) the failure by either Transferor to make any
payment or deposit required under the Pooling and Servicing Agreement or the
related Series Supplement within a specified period of the date such payment or
deposit is required to be made, (ii) the breach of certain other covenants,
representations or warranties contained in the Pooling and Servicing Agreement
or related Series Supplement, after any applicable notice and cure period (and,
if so specified in the related Prospectus Supplement, only to the extent such
breach has a material adverse effect on the related Certificateholders), (iii)
the failure by the Transferors to make a required Addition to the Trust within a
specified time after the date such Addition is required to be made, (iv) a
reduction in the Portfolio Yield below the rates, and for the period, specified
in the related Prospectus Supplement and (v) the occurrence of a Servicer
Default. The Early Amortization Period or, if so specified in the related
Prospectus Supplement, the Early Accumulation Period with respect to a Series
will commence on the day on which a Pay Out Event occurs with respect thereto.
Monthly distributions of principal to the Certificateholders of such Series will
begin on the Distribution Date in the Monthly Period following the Monthly
Period in which such Pay Out Event occurs and the Early Amortization Period
commences (such Distribution Date and each following Distribution Date with
respect to such Series, a "Special Payment Date"). Any amounts on deposit in a
Principal Funding Account or an Interest Funding Account with respect to such
Series at such time will be distributed to the Certificateholders of such Series
on such first Special Payment Date. If, because of the occurrence of a Pay Out
Event, the Early Amortization Period begins earlier than the scheduled
commencement of a Scheduled Amortization Period or prior to an Expected Final
Payment Date, Certificateholders will begin receiving distributions of principal
earlier than they otherwise would have and such distributions will not be
subject to the Controlled Deposit Amount or the Controlled Distribution Amount.
As a result, the average life of the Certificates may be reduced. If a Series
has more than one Class of Certificates, each Class may have different Pay Out
Events that, in the case of any Series of Certificates offered hereby, will be
described in the related Prospectus Supplement.
In addition to the consequences of a Pay Out Event discussed above, if an
Insolvency Event occurs, pursuant to the Pooling and Servicing Agreement, on the
day of such Insolvency Event, the Transferors will immediately cease to transfer
Principal Receivables to the Trust and promptly give notice to the Trustee of
such Insolvency Event. Under the terms of the Pooling and Servicing Agreement,
within fifteen days the Trustee will publish a notice of the occurrence of the
Insolvency Event stating that the Trustee intends to sell, dispose of or
otherwise liquidate the Receivables in a commercially reasonable manner and on
commercially reasonable terms unless within ninety days from the date such
notice is published, the holders of Certificates of each Series or, if a Series
includes more than one Class, each Class of such Series, evidencing more than
50% of the aggregate unpaid principal amount of each such Series or Class, as
well as each holder of an interest in the Transferors' Interest not subject to
the Insolvency Event and each person designated by the Transferors to the
Trustee prior to the occurrence of the Insolvency Event instruct the Trustee not
to dispose of or liquidate the Receivables and that the transfer of Principal
Receivables as before such Insolvency Event should be continued. The proceeds
from any such sale, disposition or liquidation of the Receivables will be
deposited in the Collection Account and allocated as described in the Pooling
and Servicing Agreement and each Series Supplement. If the sum of (a) the
portion of such proceeds allocated to the Certificateholders' Interest of any
Series and (b) the proceeds of any collections of the Receivables in the
Collection Account allocated to the Certificateholders' Interest of such Series
is not sufficient to pay the Invested Amount of the Certificates of such Series
in full, such Certificateholders may incur a loss.
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SERVICING COMPENSATION AND PAYMENT OF EXPENSES
The Servicer's compensation for its servicing activities and reimbursement
for its expenses for any Monthly Period will be a servicing fee (the "Servicing
Fee") payable monthly on each Distribution Date in an amount equal to
one-twelfth of the product of (a) the weighted average of the applicable
servicing fee percentages with respect to each Series outstanding (based upon
the applicable servicing fee percentage for each Series and the Investor Amount
(or other amount specified in the related Series Supplement) of each Series) and
(b) the amount of Principal Receivables in the Trust on the last day of the
prior Monthly Period. The Servicing Fee will be allocated among the Transferors'
Interest, the Certificateholders' Interests of each Series and, after the
Certificates of a Series have been paid in full, the interest represented by the
Enhancement Investment Amount or Collateral Interest, if any, with respect to
such Series. The share of the Servicing Fee allocable to the Certificateholders'
Interest, which includes the Enhancement Invested Amount or Collateral Interest,
if any, of a Series offered hereby with respect to any Distribution Date shall
be equal to one-twelfth of the product of (i) the servicing fee percentage
specified in the related Prospectus Supplement with respect to such Series (the
"Series Servicing Fee Percentage") and (ii) the sum of the Invested Amount with
respect to such Series (less the amount, if any, on deposit in any Principal
Funding Account with respect to such Series) and the Enhancement Invested Amount
or Collateral Interest, if any, with respect to such Series as of the last day
of the preceding Monthly Period, subject to certain adjustments as provided in
the related Prospectus Supplement (the "Monthly Investor Servicing Fee"). The
portion of the Servicing Fee not so allocated to the Certificateholders'
Interest of a Series shall be paid by the holders of the Transferor Certificates
and in no event shall the Trust, the Trustee, the Certificateholders of any
Series or any provider of Series Enhancement be liable for the share of the
Servicing Fee to be paid by such holders. Unless otherwise provided in any
Series Supplement, in the case of the first Distribution Date with respect to
any Series, the Monthly Investor Servicing Fee shall accrue from the Series
Closing Date with respect to such Series. The Monthly Investor Servicing Fee
with respect to a Series will be funded from collections of Finance Charge
Receivables allocated to such Series (which, if so specified in the related
Prospectus Supplement, may include all or a portion of the Interchange arising
in the Accounts) or, in certain limited circumstances, from amounts available
from Series Enhancement and other sources, if any, and will be paid on the
Distribution Date with respect to each Monthly Period from the Collection
Account (unless such amount has been netted against deposits by the Servicer to
the Collection Account).
The Servicer will pay from its servicing compensation certain expenses
incurred in connection with servicing the Receivables including, without
limitation, expenses related to the enforcement of the Receivables, payment of
the fees and disbursements of the Trustee and independent accountants and all
other fees and expenses that are not expressly stated in the Pooling and
Servicing Agreement to be payable by the Trust, the Certificateholders of a
Series or the Transferors (other than federal, state, local and foreign income,
franchise or other taxes, if any, or any interest or penalties with respect
thereto, assessed on the Trust). If the Bank is acting as Servicer and fails to
pay the fees and disbursements of the Trustee, the Trustee will be entitled to
receive the portion of the Servicing Fee that is equal to such unpaid amounts.
In no event will the Certificateholders of a Series be liable to the Trustee for
the Servicer's failure to pay such amounts, and any such amounts so paid to the
Trustee will be treated as paid to the Servicer for all other purposes of the
Pooling and Servicing Agreement.
RECORD DATE
Payments on the Certificates of a Series offered hereby will be made as
described herein and in the related Prospectus Supplement to the
Certificateholders in whose names the Certificates were registered (expected to
be Cede, as nominee of DTC) at the close of business on the last day of the
calendar month preceding the date of such payment (each, a "Record Date").
However, the final payment on the Certificates of a Series offered hereby will
be made only upon presentation and surrender of such Certificates. Distributions
will be made to DTC in immediately available funds. See "The Pooling and
Servicing Agreement -- Book-Entry Registration."
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DEFEASANCE
Pursuant to the Pooling and Servicing Agreement, the Transferors may
terminate their substantive obligations with respect to a Series or the Pooling
and Servicing Agreement (the "Defeased Series") by depositing with the Trustee,
under the terms of an irrevocable trust agreement satisfactory to the Trustee,
from amounts representing or acquired with collections on the Receivables
(allocated to the Defeased Series and available to purchase additional
Receivables), monies or Eligible Investments sufficient to make all remaining
scheduled interest and principal payments on the Defeased Series on the dates
scheduled for such payments and to pay all amounts owing to any provider of
Series Enhancement. To achieve that end, the Transferors have the right to use
collections on Receivables to acquire Eligible Investments rather than
additional Receivables. Prior to their first exercise of their right to
substitute monies or Eligible Investments for Receivables, the Transferors shall
deliver to the Trustee a Tax Opinion with respect to such deposit and
termination of obligations and to the Servicer and the Trustee written notice
from each Rating Agency that such transaction will not have a Ratings Effect. In
addition, the Transferors must comply with certain other requirements set forth
in the Pooling and Servicing Agreement, including requirements that the
Transferors deliver to the Trustee an opinion of counsel to the effect that the
deposit and termination of obligations will not cause the Trust to become an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended, and that each Transferor deliver to the Trustee and certain
providers of Series Enhancement a certificate of an authorized representative
stating that, based on the facts known to such representative at the time, in
the reasonable opinion of such Transferor, such deposit and termination of
obligations will not at the time of its occurrence cause a Pay Out Event or an
event that, after the giving of notice of the lapse of time, would constitute a
Pay Out Event, to occur with respect to any Series. If the Transferors discharge
their substantive obligations in respect of the Defeased Series, any Series
Enhancement for the affected Series may no longer be available to make payments
for such Series.
OPTIONAL TERMINATION; FINAL PAYMENT OF PRINCIPAL
Unless otherwise specified in the Prospectus Supplement with respect to any
Series offered hereby, on any day occurring on or after the day that the sum of
the Invested Amount of the Certificates of a Series and the Enhancement Invested
Amount or Collateral Interest, if any, with respect to such Series is reduced to
5% or less of the initial Invested Amount of the Certificates of such Series,
the Transferors will have the option to repurchase the Certificateholders'
Interest of such Series. The purchase price will be equal to the sum of the
Invested Amount of such Series (less the amount, if any, of deposits or
distributions to be made with respect to such Series), plus the Enhancement
Invested Amount or Collateral Interest, if any, with respect to such Series,
plus accrued and unpaid interest on the unpaid principal amount of the
Certificates (and accrued and unpaid interest with respect to interest amounts
that were due but not paid on a prior Payment Date) through (a) if the day on
which such repurchase occurs is a Distribution Date, the Distribution Date or
(b) if the day on which such repurchase occurs is not a Distribution Date, the
Distribution Date following such repurchase, at the applicable certificate rate.
Following any such repurchase, the Certificateholders of such Series will have
no further rights with respect to the Receivables. If the Transferors fail for
any reason to deposit the aggregate purchase price for the Certificateholders'
Interest of a Series offered hereby, such repurchase will not occur and payments
will continue to be made to the Certificateholders of such Series as described
herein and in the related Prospectus Supplement.
The last payment of principal and interest on the Certificates of a Series
offered hereby will be due and payable no later than the date (the "Series
Termination Date") specified in the related Prospectus Supplement. In the event
that the Invested Amount of the Certificates of such Series is greater than zero
on the Series Termination Date (or a Distribution Date prior thereto specified
in the related Prospectus Supplement), the Trustee will, subject to any
conditions specified in such Prospectus Supplement, sell or cause to be sold an
interest in the Principal Receivables or certain Principal Receivables, together
in each case with related Finance Charge Receivables, as specified in such
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Prospectus Supplement, in an amount equal to the Invested Amount with respect to
such Series. The net proceeds of any such sale will be deposited in the
Collection Account and allocated to the Certificateholders of such Series, as
provided in such Prospectus Supplement.
REPORTS
Unless otherwise specified in the Prospectus Supplement with respect to any
Series offered hereby, no later than the third business day prior to each
Distribution Date, the Servicer will forward to the Trustee, the Paying Agent,
each Rating Agency and certain providers of Series Enhancement with respect to a
Series a statement (the "Monthly Report") prepared by the Servicer setting forth
certain information with respect to the Trust and the Certificates of such
Series (unless otherwise indicated), including: (a) the aggregate amount of
Principal Receivables and Finance Charge Receivables in the Trust as of the end
of such Monthly Period; (b) the Invested Amount with respect to such Series
(and, if such Series includes more than one Class, each such Class); (c) the
Floating Allocation Percentage and, during any Scheduled Accumulation Period,
Early Accumulation Period, Scheduled Amortization Period or Early Amortization
Period with respect to such Series, the Principal Allocation Percentage with
respect to such Series; (d) the amount of collections of Principal Receivables
and Finance Charge Receivables processed during the related Monthly Period and
the portion thereof allocated to the Certificateholders' Interest of such
Series; (e) the aggregate outstanding balance of Accounts that were 30, 60 and
90 days or more delinquent as of the end of such Monthly Period; (f) the
Defaulted Amount with respect to such Monthly Period and the portion thereof
allocated to the Certificateholders' Interest of such Series; (g) the amount, if
any, of charge-offs with respect to the Certificateholders' Interest of such
Series for such Monthly Period; (h) the Monthly Investor Servicing Fee with
respect to such Series for such Monthly Period; and (i) the available amount of
Credit Enhancement with respect to such Series for such Distribution Date.
With respect to each Interest Payment Date or Special Payment Date (each, a
"Payment Date"), as the case may be, the Monthly Report with respect to any
Series will include the following additional information with respect to the
Certificates of such Series: (a) the total amount distributed; (b) the amount of
such distribution allocable to principal on the Certificates; (c) the amount of
such distribution allocable to interest on the Certificates; and (d) the amount,
if any, by which the unpaid principal balance of the Certificates exceeds the
Invested Amount of such Series as of the Record Date with respect to such
Payment Date. On each Distribution Date, the Paying Agent, on behalf of the
Trustee, will forward to each Certificateholder of record a copy of the Monthly
Report.
On or before January 31 of each calendar year, the Paying Agent, on behalf
of the Trustee, will furnish (or cause to be furnished) to each person who at
any time during the preceding calendar year was a Certificateholder of record a
statement containing the information required to be provided by an issuer of
indebtedness under the Code for such preceding calendar year or the applicable
portion thereof during which such person was a Certificateholder, together with
such other customary information as is necessary to enable the
Certificateholders to prepare their tax returns. See "Certain Federal Income Tax
Consequences."
LIST OF INVESTOR CERTIFICATEHOLDERS
At such time, if any, as Definitive Certificates have been issued, upon
written request of any Certificateholder or group of Certificateholders of
record holding Certificates evidencing not less than 10% of the aggregate unpaid
principal amount of the Certificates of a Series or all outstanding Series, as
the case may be, the Trustee will afford such Certificateholders access during
normal business hours to the current list of Certificateholders of such Series
or all outstanding Series, as the case may be, for purposes of communicating
with other Certificateholders with respect to their rights under the Pooling and
Servicing Agreement or any Series Supplement or Certificates. See "Pooling and
Servicing Agreement -- Book-Entry Registration" and "-- Definitive
Certificates."
The Pooling and Servicing Agreement does not provide for any annual or other
meetings of Certificateholders.
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THE POOLING AND SERVICING AGREEMENT
BOOK-ENTRY REGISTRATION
Unless otherwise specified in the related Prospectus Supplement,
Certificateholders may hold Certificates of a Series offered hereby 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 be the registered holder of the global
Certificates. No Certificateholder will be entitled to receive a certificate
representing such person's interest in the Certificates. Unless and until
Definitive Certificates are issued under the limited circumstances described
below, all references herein to actions by Certificateholders shall refer to
actions taken by DTC upon instructions from its Participants, and all references
herein to distributions, notices, reports and statements to Certificateholders
shall refer to distributions, notices, reports and statements to Cede, as the
registered holder of the Certificates, for distribution to Certificateholders in
accordance with DTC procedures.
Cedel and Euroclear will hold omnibus positions on behalf of their
participants through customers' securities accounts in Cedel's and Euroclear's
names on the books of their respective Depositaries that, in turn, will hold
such positions in customers' securities accounts in the Depositaries' names on
the books of DTC. Citibank, N.A. will act as depositary for Cedel and Chase
Manhattan Bank will act as depositary for Euroclear (collectively in such
capacities, the "Depositaries").
Transfers between DTC participants will occur in the ordinary way 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 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 received in Cedel or
Euroclear as a result of a transaction with a DTC Participant will be made
during subsequent securities settlement processing and dated the business day
following the DTC settlement date. Such credits or any transactions in such
securities settled during such processing will be reported to the relevant
Euroclear Participant or Cedel 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. For information with respect to tax documentation procedures relating to
the Certificates, see "Certain Federal Income Tax Consequences -- Non-U.S.
Certificate Owners."
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 UCC and a "clearing agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC was created to hold
securities for its participating organizations ("Participants") and facilitate
the clearance and settlement of securities transactions between Participants
through electronic book-entry changes in accounts of its Participants, thereby
eliminating the need for physical movement of
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certificates. Participants include securities brokers and dealers, banks, trust
companies and clearing corporations and may include certain other organizations.
Indirect access to the DTC system also is available to others such as banks,
brokers, dealers and trust companies that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly ("Indirect
Participants").
Certificate Owners that are not Participants or Indirect Participants but
desire to purchase, sell or otherwise transfer ownership of, or other interests
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 Paying Agent or the Trustee through
DTC and its Participants. Under a book-entry format, Certificate Owners will
receive payments after the related Payment Date because, while payments are
required to be forwarded to Cede, as nominee for DTC, on each such date, DTC
will forward such payments to its Participants, which thereafter will be
required to forward them to Indirect Participants or Certificate Owners. It is
anticipated that the only "Certificateholder" (as such term is used in the
Pooling and Servicing Agreement and each Series Supplement) will be Cede, as
nominee of DTC, and that Certificate Owners will not be recognized by the
Trustee as "Certificateholders" under the Pooling and Servicing Agreement and
each Series Supplement. Certificate Owners will only be permitted to exercise
the rights of Certificateholders under the Pooling and Servicing Agreement and
each Series Supplement indirectly through DTC and its Participants which in turn
will exercise their rights 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 of 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.
Because DTC can only act on behalf of Participants, which in turn act on
behalf of Indirect Participants and certain banks, the ability of Certificate
Owners 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 because the only physical certificate for such Certificates is held
by DTC.
DTC has advised the Transferors that it will take any action permitted to be
taken by a Certificateholder under the Pooling and Servicing Agreement or the
Series Supplements only at the direction of one or more Participants to whose
account with DTC the Certificates are credited. Additionally, DTC has advised
the Transferors that it will take such actions with respect to specified
percentages of the Certificateholders' Interest only at the direction of and on
behalf of Participants whose holdings include undivided interests that satisfy
such specified percentages. DTC may take conflicting actions with respect to
other undivided interests to the extent that such actions are taken on behalf of
Participants whose holdings include such undivided interests.
Cedel Bank, SOCIETE ANONYME ("Cedel") is incorporated under the laws of
Luxembourg as a professional depository. Cedel holds securities for its
participating organizations ("Cedel Participants") and facilitates the clearance
and settlement of securities transactions between Cedel Participants through
electronic book-entry changes in accounts of Cedel Participants, thereby
eliminating the need for physical movement of certificates. Transactions may be
settled in Cedel in any of 28 currencies, including United States dollars. Cedel
provides to its 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 any underwriters, agents or dealers with
respect to a Series of Certificates offered
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hereby. Indirect access to Cedel is also available to others, such as banks,
brokers, dealers and trust companies that clear through or maintain a custodial
relationship with a Cedel Participant, either directly or indirectly.
The Euroclear System ("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 29
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"), under contract with Euroclear
Clearance System S.C., a Belgian cooperative corporation (the "Cooperative").
All operations are conducted by the Euroclear Operator, and all Euroclear
securities clearance accounts and Euroclear cash accounts are accounts with the
Euroclear Operator, not the Cooperative. The Cooperative establishes policy for
Euroclear on behalf of Euroclear Participants. Euroclear Participants include
banks (including central banks), securities brokers and dealers and other
professional financial intermediaries and may include any underwriters, agents
or dealers with respect to a Series of Certificates offered hereby. Indirect
access to Euroclear 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 that 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 Euroclear and applicable Belgian law
(collectively, the "Terms and Conditions"). The Terms and Conditions govern
transfers of securities and cash within Euroclear, withdrawals of securities and
cash from Euroclear and receipts of payments with respect to securities in
Euroclear. All securities in Euroclear are held on a fungible basis without
attribution of specific certificates to specific securities clearance accounts.
The Euroclear Operator acts under the Terms and Conditions only on behalf of
Euroclear Participants, and has no record of or relationship with persons
holding through Euroclear Participants.
Distributions with respect to Certificates held through Cedel or Euroclear
will be credited to the cash accounts of Cedel Participants or Euroclear
Participants in accordance with the relevant system's rules and procedures, to
the extent received by its Depositary. Such distributions will be subject to tax
reporting in accordance with relevant United States tax laws and regulations.
See "Certain Federal Income Tax Consequences." Cedel or the Euroclear Operator,
as the case may be, will take any other action permitted to be taken by a
Certificateholder under the Pooling and Servicing Agreement or the relevant
Series Supplement on behalf of a Cedel Participant or Euroclear Participant only
in accordance with its relevant rules and procedures and subject to its
Depositary's ability to effect such actions on its behalf through DTC.
Although DTC, Cedel and Euroclear have agreed to the foregoing procedures in
order to facilitate transfers of Certificates among participants of DTC, Cedel
and Euroclear, they are under no obligation to perform or continue to perform
such procedures and such procedures may be discontinued at any time.
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DEFINITIVE CERTIFICATES
Unless otherwise stated in the related Prospectus Supplement, the
Certificates of a Series offered hereby will be issued in fully registered,
certificated form to Certificate Owners or their respective nominees
("Definitive Certificates"), rather than to DTC or its nominee only if (i) the
Transferors advise the Trustee in writing that DTC is no longer willing or able
to discharge properly its responsibilities as Depository with respect to the
Certificates, and the Trustee or the Transferors are unable to locate a
qualified successor, (ii) the Transferors, at their option, elect to terminate
the book-entry system through DTC or (iii) after the occurrence of a Servicer
Default, Certificate Owners evidencing not less than 50% of the aggregate unpaid
principal amount of the Certificates of any Class of such Series 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
interests 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 global certificates representing the Certificates and instructions for re-
registration, the Trustee will issue such Certificates in the form of Definitive
Certificates, and thereafter the Trustee will recognize the Certificate Owners
in whose names such Definitive Certificates are registered as
"Certificateholders" under the Pooling and Servicing Agreement and the relevant
Series Supplement.
If Definitive Certificates are issued, distribution of principal and
interest on the Definitive Certificates will be made by the Paying Agent or the
Trustee directly to the Certificate Owners in whose names the Definitive
Certificates were registered on the related Record Date in accordance with the
procedures set forth herein and in the Pooling and Servicing Agreement and the
relevant Series Supplement. Distributions will be made by check mailed to the
address of each such Certificate Owner as it appears on the register maintained
by the Trustee, except that the final payment on any Definitive Certificate will
be made only upon presentation and surrender of such Definitive Certificate on
the date for such final payment at such office or agency as is specified in the
notice of final distribution to such Certificate Owners. The Trustee will
provide such notice to such Certificate Owners no later than the fifth day of
the month of the final distribution.
Definitive Certificates will be transferable and exchangeable at the offices
of the Transfer Agent and Registrar, which shall initially be the Trustee. No
service charge will be imposed for any registration of transfer or exchange, but
the Transfer Agent and Registrar may require payment of a sum sufficient to
cover any tax or other governmental charge imposed in connection therewith.
THE TRANSFEROR CERTIFICATES; ADDITIONAL TRANSFERORS
The Pooling and Servicing Agreement provides that the Transferors may
exchange a portion of the Bank Certificate for one or more additional
certificates (each, a "Supplemental Certificate") for transfer or assignment to
a person designated by the Transferors upon the execution and delivery of a
supplement to the Pooling and Servicing Agreement (which supplement shall be
subject to the amendment section of the Pooling and Servicing Agreement to the
extent that it amends any of the terms of the Pooling and Servicing Agreement;
see "-- Amendments"); PROVIDED that (a) such transfer will not result in a
Ratings Effect, (b) the Transferors' and any Additional Transferors' remaining
interest in Principal Receivables shall not be less in the aggregate than two
percent of the total amount of Principal Receivables, in each case as of the
date of, and after giving effect to, such exchange and (c) prior to such
exchange, the Transferors shall have delivered to the Trustee a Tax Opinion with
respect to the transfer or assignment of such Supplemental Certificate. Any
transfer or assignment of a Supplemental Certificate is subject to the
conditions set forth in clauses (a) and (c) above. The Transferors may also
transfer a portion of the Bank Certificate to certain affiliates provided that
the Transferors shall have delivered to the Trustee a Tax Opinion with respect
to such transfer.
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The Transferors may designate their affiliates, which may be banks, finance
companies or similar organizations, to be included as transferors (each, an
"Additional Transferor") under the Pooling and Servicing Agreement (by means of
an amendment to the Pooling and Servicing Agreement that will not require the
consent of any Certificateholder; see "-- Amendments") and, in connection with
the designation of an Additional Transferor, the Transferors shall surrender the
Bank Certificate to the Trustee in exchange for a newly issued Bank Certificate
modified to reflect such Additional Transferor's interest in the Transferors'
Interest; PROVIDED, HOWEVER, that (i) the conditions set forth in clauses (a)
and (c) in the preceding paragraph with respect to a transfer of a Supplemental
Certificate shall have been satisfied with respect to such designation and
issuance and (ii) any applicable conditions described in "Description of the
Certificates -- Addition of Trust Assets" shall have been satisfied with respect
to the transfer of Receivables or Participations by any Additional Transferor to
the Trust. Following the inclusion of an Additional Transferor, the Additional
Transferor will be treated in the same manner as a Transferor and each
Additional Transferor generally will have the same obligations and rights as a
Transferor described herein.
TERMINATION OF THE TRUST
Unless the Transferors instruct the Trustee otherwise, the Trust will
terminate only on the earlier to occur of (a) the day following the Distribution
Date on which the aggregate Invested Amounts and Enhancement Invested Amounts of
all Series is zero (provided that the Transferors shall have delivered a written
notice to the Trustee electing to terminate the Trust), (b) March 1, 2016, or
(c) following the occurrence of an Insolvency Event as described under
"Description of the Certificates -- Pay Out Events" (the "Trust Termination
Date"). Upon termination of the Trust, all right, title and interest in the
Receivables and other assets of the Trust (other than amounts in accounts
maintained by the Trust for the final payment of principal and interest to
Certificateholders) will be conveyed and transferred to the holders of the
Transferor Certificates.
CONVEYANCE OF RECEIVABLES
Pursuant to the Pooling and Servicing Agreement, the Transferors will
transfer and assign to the Trust their respective rights, titles and interests
in all Receivables in the Accounts outstanding as of the initial Series Closing
Date, all Receivables in the Additional Accounts as of the applicable Addition
Date, all Receivables thereafter created under the Accounts and the proceeds of
all of the foregoing.
In connection with the transfer of any Receivables to the Trust, each
Transferor is required to indicate in its computer records that the Receivables
transferred by it have been conveyed to the Trust. In addition, the Transferors
will provide the Trustee with a computer file or microfiche list containing a
true and complete list showing for each Initial Account, as of the Trust Cut-Off
Date, and for each Additional Account, as of the applicable Addition cut-off
date for such Additional Account, (a) its account number and (b) the aggregate
amount outstanding and the aggregate amount of Principal Receivables in such
Account. The Bank, as initial Servicer, will retain and will not deliver to the
Trustee any other records or agreements relating to the Accounts or the
Receivables. Except as set forth above, the records and agreements relating to
the Accounts and the Receivables will not be segregated from those relating to
other revolving credit card accounts and receivables, and the physical
documentation relating to the Accounts or Receivables will not be stamped or
marked to reflect the transfer of Receivables to the Trust. The Transferors have
filed and are required to file UCC financing statements with respect to the
transfer of the Receivables to the Trust meeting the requirements of applicable
state law. See "Risk Factors" and "Certain Legal Aspects of the Receivables."
REPRESENTATIONS AND WARRANTIES
As of the Series Closing Date specified in the related Prospectus Supplement
for a Series offered hereby, each Transferor will severally make representations
and warranties to the Trust relating to the Accounts and the Receivables
transferred by it to the effect, among other things, that (a) as of the Trust
Cut-Off Date (or as of the applicable Addition cut-off date) each Account (or
each Additional Account) was an Eligible Account, (b) as of the Trust Cut-Off
Date (or as of the applicable Addition cut-off date), each of the Receivables in
any Account (or Additional Account) that is conveyed to the
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Trust on such day is an Eligible Receivable and (c) thereafter, as of the date
of creation of any new Receivable, such Receivable is an Eligible Receivable. If
a Transferor breaches any representation and warranty described in this
paragraph, such breach remains uncured for 60 days, or such longer period as may
be agreed to by the Trustee, after the earlier to occur of the discovery of such
breach by such Transferor or receipt of written notice of such breach by such
Transferor, and as a result of such breach any Receivables in the related
Account become Defaulted Receivables or the Trust's rights in, to or under such
Receivables or the proceeds of such Receivables are impaired or such proceeds
are not available for any reason to the Trust free and clear of any lien, then
all Receivables with respect to the affected Account ("Ineligible Receivables")
will be reassigned to such Transferor on the terms and conditions set forth
below and such Account shall no longer be included as an Account; PROVIDED,
HOWEVER, that such Receivables will not be deemed to be Ineligible Receivables
and will not be reassigned to such Transferor if, on any day prior to the end of
such 60-day or longer period, (i) the relevant representation and warranty shall
be true and correct in all material respects as if made on such day and (ii)
such Transferor shall have delivered to the Trustee a certificate of an
authorized representative describing the nature of such breach and the manner in
which the relevant representation and warranty became true and correct.
An Ineligible Receivable shall be reassigned to the relevant Transferor on
or before the end of the Monthly Period in which such reassignment obligation
arises by such Transferor directing the Servicer to deduct the portion of such
Ineligible Receivable that is a Principal Receivable from the aggregate amount
of the Principal Receivables used to calculate the Transferor Amount. In the
event that the exclusion of an Ineligible Receivable from the calculation of the
Transferor Amount would cause the Transferor Amount to be less than the Required
Transferor Amount, on the Distribution Date following the Monthly Period in
which such reassignment obligation arises, the related Transferor will make a
deposit into the Special Funding Account in immediately available funds in an
amount equal to the amount by which the Transferor Amount would be reduced below
the Required Transferor Amount. Any deposit into the Special Funding Account,
together with the reduction in the Transferor Amount, in connection with the
reassignment of an Ineligible Receivable shall be considered a payment in full
of the Ineligible Receivable. The reassignment of any Ineligible Receivable to a
Transferor is the sole remedy respecting any breach of the representations and
warranties described in the preceding paragraph with respect to such Receivable
available to Certificateholders of any Series (or the Trustee on behalf of such
Certificateholders) or any provider of Series Enhancement.
Each Transferor will also make representations and warranties to the Trust
to the effect, among other things, that as of each Series Closing Date (a) it is
a federally chartered stock savings bank or corporation, as applicable, validly
existing and in good standing under the laws of the jurisdiction of its
organization or incorporation, it has the authority to consummate the
transactions contemplated by the Pooling and Servicing Agreement and the related
Series Supplement and each of the Pooling and Servicing Agreement and the
related Series Supplement constitutes a valid, binding and enforceable agreement
of such Transferor and (b) the Pooling and Servicing Agreement constitutes a
valid transfer and assignment to the Trust of all right, title and interest of
such Transferor in the Receivables transferred to the Trust by such Transferor,
whether then existing or thereafter created and the proceeds thereof (including
proceeds in any of the accounts established for the benefit of the
Certificateholders) or the grant of a first priority perfected security interest
under the UCC as in effect in Maryland or Delaware, as applicable, in such
Receivables and the proceeds thereof (including proceeds in any of the accounts
established for the benefit of the Certificateholders), which is effective as to
each Receivable then existing on the date of its transfer to the Trust or, as to
each Receivable arising thereafter, upon the creation thereof and until
termination of the Trust. If the breach of either of the representations and
warranties described in this paragraph has a material adverse effect on the
Certificateholders' Interest of all Series in the Receivables transferred to the
Trust by such Transferor, either the Trustee or the holders of Certificates
evidencing not less than 50% of the aggregate unpaid principal amount of the
Certificates of all Series, by written notice to such Transferor and the
Servicer (and to the Trustee if given by the holders of the requisite percentage
of Certificates of all Series), may direct such Transferor to accept the
reassignment of the Receivables transferred to the
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Trust by such Transferor within 60 days of such notice, or within such longer
period specified in such notice; PROVIDED, HOWEVER, that such Receivables will
not be reassigned to such Transferor if, on any day prior to the end of such
60-day or longer period, (i) the relevant representation and warranty shall be
true and correct in all material respects as if made on such day and (ii) such
Transferor shall have delivered to the Trustee a certificate of an authorized
representative describing the nature of such breach and the manner in which the
relevant representation and warranty became true and correct. Such Transferor
will be obligated to accept the reassignment of such Receivables on the
Distribution Date following the Monthly Period in which such reassignment
obligation arises. The price for such reassignment will generally be equal to
the product of (A) the aggregate Invested Amounts and Enhancement Invested
Amounts or Collateral Interests, if any, of all Series on the Distribution Date
on which the purchase is scheduled to be made plus accrued and unpaid interest
on the unpaid principal amount of all Series and any interest amounts that were
due but not paid on a prior date and interest on such overdue interest amounts
(if the applicable Series Supplement so provides) at the applicable certificate
rates through the day preceding such Distribution Date and (B) a fraction, the
numerator of which is equal to the aggregate amount of Principal Receivables in
the Trust on such Distribution Date that were transferred to the Trust by such
Transferor and the denominator of which is equal to the aggregate amount of
Principal Receivables in the Trust on such Distribution Date. The payment of
such reassignment price, in immediately available funds, will be considered a
payment in full of the Receivables and the principal portion of such funds and
the interest portion of such funds will be deposited into the Special Funding
Account and the Collection Account, respectively. The obligation of a Transferor
to make any such deposit will constitute the sole remedy respecting a breach of
the representations and warranties that gave rise to such obligation available
to Certificateholders of all Series (or the Trustee on behalf of such
Certificateholders) or any provider of Series Enhancement.
An "Eligible Account" is a revolving credit card account or other consumer
revolving credit account owned by the Bank, which as of the Trust Cut-Off Date
with respect to an Initial Account or as of the Addition cut-off date with
respect to an Additional Account: (a) is in existence and maintained with the
Bank, in the case of an Initial Account, or the Bank or an Additional Transferor
or an affiliate thereof, in the case of an Additional Account; (b) is payable in
United States dollars; (c) except as provided below, has not been identified as
an account the credit cards with respect to which have been reported to the Bank
or the applicable Additional Transferor as having been lost or stolen; (d) has a
cardholder who has provided, as his or her most recent billing address, an
address located in the United States or its territories or possessions or a
military address; (e) has a cardholder who has not been identified by the Bank
or the applicable Additional Transferor as an employee of the Bank or such
Additional Transferor or an affiliate of either (f) has not been, and does not
have any receivables that have been, transferred, pledged, assigned or otherwise
conveyed to any person (except pursuant to the Pooling and Servicing Agreement
or the Receivables Purchase Agreement), unless any such pledge or assignment is
released on or before the initial Closing Date or the Addition Date, as
applicable; (g) except as provided below, does not have any receivables that are
Defaulted Receivables; and (h) except as provided below, does not have any
receivables that have been identified as having been incurred as a result of
fraudulent use of any related credit card. In the case of Additional Accounts,
any accounts not meeting the foregoing requirements will be Eligible Accounts if
the addition of such accounts does not have a Ratings Effect.
Eligible Accounts may include Accounts, the Receivables of which have been
written off, or with respect to which the related Transferor believes the
related obligor is bankrupt, or as to which certain Receivables have been
identified as having been incurred as a result of fraudulent use of any related
credit card, or as to which any credit cards have been reported to the related
Transferor as having been lost or stolen, in each case as of the Trust Cut-Off
Date with respect to the Initial Accounts or as of the Addition cut-off date
with respect to any Additional Accounts, provided, that (a) the balance of
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all Receivables included in such Accounts is reflected on the books and records
of the related Transferor (and is treated for purposes of the Pooling and
Servicing Agreement), as "zero," and (b) charging privileges with respect to all
such Accounts have been canceled in accordance with the Credit Card Guidelines
and will not be reinstated by the related Transferor or the Servicer.
An "Eligible Receivable" is each Receivable: (a) that has arisen under an
Eligible Account; (b) that was created in compliance with the Credit Card
Guidelines and all requirements of law applicable to the relevant Transferor,
and pursuant to a cardholder agreement that complies with all requirements of
law applicable to the relevant Transferor; (c) with respect to which all
consents, licenses, approvals or authorizations of, or registrations with, any
governmental authority required to be obtained or given in connection with the
creation of such Receivable or the execution, delivery and performance by the
relevant Transferor of the related cardholder 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 transfer to the Trust, the
relevant Transferor or the Trust will have good and marketable title free and
clear of all liens and security interests (other than any lien for municipal or
other local taxes if such taxes are not then due and payable or if such
Transferor is then contesting the validity thereof in good faith by appropriate
proceedings and has set aside on its books adequate reserves with respect
thereto); (e) that has been the subject of either a valid transfer and
assignment from the relevant Transferor to the Trust of all of such Transferor's
right, title and interest therein or the grant of a first priority perfected
security interest therein (and in the proceeds thereof), effective until the
termination of the Trust; (f) that, at and after the time of transfer to the
Trust, is the legal, valid and binding payment obligation of the obligor
thereon, legally enforceable against such obligor in accordance with its terms
(with certain bankruptcy and equity-related exceptions); (g) that constitutes
either an "account" or a "general intangible" under Article 9 of the UCC as then
in effect in the State of Maryland or the State of Delaware, as applicable; (h)
at the time of its transfer to the Trust, has not been waived or modified except
as permitted by the Pooling and Servicing Agreement; (i) that, at the time of
its transfer to the Trust, is not subject to any right of rescission, setoff,
counterclaim or other defense of the obligor (including the defense of usury),
other than certain bankruptcy and equity-related defenses and adjustments
permitted by the Pooling and Servicing Agreement to be made by the Servicer; (j)
as to which at the time of its transfer to the Trust the relevant Transferor has
satisfied all obligations to be fulfilled at the time it is transferred to the
Trust; and (k) as to which at the time of its transfer to the Trust the relevant
Transferor has not taken any action which, or failed to take any action the
omission of which, would, at the time of its transfer to the Trust, impair the
rights of the Trust or the Certificateholders therein.
It is not required or anticipated that the Trustee will make any initial or
periodic general examination of any documents or records related to the
Receivables or the Accounts for the purpose of establishing the presence or
absence of defects, compliance with the Transferors' representations and
warranties or for any other purpose. In addition, it is not anticipated or
required that the Trustee will make any initial or periodic general examination
of the Servicer for the purpose of establishing the compliance by the Servicer
with its representations or warranties or the performance by the Servicer of its
obligations under the Pooling and Servicing Agreement or for any other purpose.
The Servicer, however, will deliver to the Trustee on or before March 31 of each
calendar year an opinion of counsel with respect to the validity of the interest
of the Trust in and to the Receivables and certain other components of the
Trust.
INDEMNIFICATION
The Pooling and Servicing Agreement provides that, subject to the
limitations set forth therein, the Servicer will indemnify the Trust and the
Trustee from and against any loss, liability, expense, damage or injury suffered
or sustained by reason of the Servicer's actions or omissions with respect to
the Trust pursuant to the Pooling and Servicing Agreement.
Under the Pooling and Servicing Agreement, the Transferors and any holder of
the Bank Certificate have agreed to be liable directly to an injured party for
the entire amount of any losses, claims, damages or liabilities (other than
those incurred by a Certificateholder in the capacity of an investor in
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the Certificates) arising out of or based on each of the arrangement created by
the Pooling and Servicing Agreement and the actions of the Servicer taken
pursuant thereto as though such agreement created a partnership under the New
York Uniform Partnership Act in which the Transferors and any such holder were
general partners. In the event of a transfer of servicing, the successor
Servicer will indemnify and hold harmless the Transferors and any such holder
for any losses, claims, damages and liabilities of the Transferors or such
holder as described in this paragraph arising from the actions or omissions of
such successor Servicer.
Except as provided in the two preceding paragraphs, the Pooling and
Servicing Agreement provides that none of the Transferors, the Servicer or any
of their directors, officers, employees or agents will be under any other
liability to the Trust, the Trustee, the holders of Certificates of any Series,
any provider of Series Enhancement or any other person for any action taken, or
for refraining from taking any action, in good faith pursuant to the Pooling and
Servicing Agreement. However, none of the Transferors, the Servicer or any of
their directors, officers, employees or agents will be protected against any
liability that would otherwise be imposed by reason of willful misfeasance, bad
faith or gross negligence of any such person in the performance of their duties
or by reason of reckless disregard of their obligations and duties thereunder,
and each Transferor shall be liable in all respects for the obligations,
covenants, representations and warranties of such Transferor specifically
undertaken by it in its capacity as a Transferor arising under or related to the
Pooling and Servicing Agreement.
In addition, the Pooling and Servicing Agreement provides that the Servicer
is not under any obligation to appear in, prosecute or defend any legal action
that is not incidental to its servicing responsibilities under the Pooling and
Servicing Agreement. The Servicer may, in its sole discretion, undertake any
such legal action it may deem necessary or desirable for the benefit of holders
of Certificates of any Series with respect to the Pooling and Servicing
Agreement and the rights and duties of the parties thereto and the interest of
such Certificateholders thereunder.
COLLECTION AND OTHER SERVICING PROCEDURES
Pursuant to the Pooling and Servicing Agreement, the Servicer is responsible
for servicing, collecting, enforcing and administering the Receivables in
accordance with its customary and usual procedures for servicing receivables
comparable to the Receivables and in accordance with the Credit Card Guidelines.
Servicing activities to be performed by the Servicer include collecting and
recording payments, communicating with cardholders, investigating payment
delinquencies, evaluating credit limits and the issuance and reissuance of
credit cards, providing billing and tax records, if any, to cardholders and
maintaining internal records with respect to each Account. Managerial and
custodial services performed by the Servicer on behalf of the Trust include
providing assistance in any inspections of the documents and records relating to
the Accounts and Receivables by the Trustee pursuant to the Pooling and
Servicing Agreement, maintaining the agreements, documents and files relating to
the Accounts and Receivables as custodian for the Trust and providing related
data processing and reporting services for Certificateholders of any Series and
on behalf of the Trustee.
Pursuant to the Pooling and Servicing Agreement, the Bank, as Servicer, has
the right to delegate any of its responsibilities and obligations as Servicer to
any of its affiliates and to certain third-party service providers that agree to
conduct such duties in accordance with the Pooling and Servicing Agreement and
the Credit Card Guidelines. The Bank currently contracts with FDC and intends to
continue to contract with FDC (and possibly one or more other third-party
service providers) to perform certain of its servicing activities as described
under "The Bank's Credit Card Activities -- General." Notwithstanding any such
delegation to any entity, the Servicer will continue to be liable for all of its
obligations under the Pooling and Servicing Agreement.
SERVICER COVENANTS
In the Pooling and Servicing Agreement, the Servicer has covenanted as to
each Receivable and related Account that: (a) it will duly fulfill all
obligations on its part to be fulfilled under or in
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connection with the Receivable or Account, and will maintain in effect all
qualifications required in order to service the Receivable or Account and will
comply in all respects with all other requirements of law in connection with
servicing the Receivables and the Accounts, the failure to comply with which
would have a material adverse effect on the Certificateholders or any provider
of Series Enhancement; (b) it will not permit any rescission or cancellation of
the Receivable except as ordered by a court of competent jurisdiction or other
governmental authority or in the ordinary course of business and in accordance
with the Credit Card Guidelines or as otherwise permitted by the Pooling and
Servicing Agreement; (c) it will do nothing to substantially impair the rights
of the Certificateholders in the Receivables or Accounts; (d) it will not
reschedule, revise or defer payments due on the Receivable except in the
ordinary course of business and in accordance with the Credit Card Guidelines;
and (e) except in connection with its enforcement or collection of an Account,
it will take no action to cause any Receivables to be evidenced by any
instruments (as defined in the UCC) and if any Receivable is so evidenced
(whether or not in connection with such enforcement or collection), it shall be
reassigned or assigned to the Servicer as provided below.
Under the terms of the Pooling and Servicing Agreement, in the event of any
of the representations, warranties or covenants of the Servicer contained in
clauses (a) through (e) above with respect to any Receivable or the related
Account is breached, such breach is not cured within 60 days (or such longer
period, not in excess of 150 days, as may be agreed to by the Trustee) of the
earlier to occur of the discovery of such event by the Servicer or receipt by
the Servicer of written notice of such event given by the Trustee, and as a
result of such breach the Trust's rights in, to or under any Receivables in the
related Account or the proceeds of such Receivables are impaired or such
proceeds are not available for any reason to the Trust free and clear of any
lien, then all Receivables in the Account or Accounts to which such event
relates shall be reassigned or assigned to the Servicer on the terms and
conditions set forth below; PROVIDED, HOWEVER, that such Receivables will not be
reassigned or assigned to the Servicer if, on any day prior to the end of such
60-day or longer period, (i) the relevant representation and warranty shall be
true and correct, or the relevant covenant shall have been complied with, in all
material respects and (ii) the Servicer shall have delivered to the Trustee a
certificate of an authorized representative describing the nature of such breach
and the manner in which such breach was cured. If the Bank is the Servicer, such
reassignment will be made on or before the Distribution Date following the
Monthly Period in which such reassignment obligation arises by the Servicer
deducting the portion of any such Receivable which is a Principal Receivable
from the aggregate amount of Principal Receivables used to calculate the
Transferor Amount. In addition, if the deduction of such Principal Receivable
would reduce the Transferor Amount below the Required Transferor Amount, the
Servicer will deposit into the Special Funding Account the amount of such
deficiency. If the Bank is not the Servicer, such assignment will be made when
the Servicer deposits an amount equal to the amount of such Receivables in the
Collection Account on the business day preceding the Distribution Date following
the Monthly Period during which such obligation arises. The amount of such
deposit shall be treated as a Collection with respect to such Receivables. The
obligation of the Servicer to accept reassignment or assignment of such
Receivables and to make the deposits provided in this paragraph constitutes the
sole remedy available to the Certificateholders of any Series with respect to
the event giving rise to such obligation.
CERTAIN MATTERS REGARDING THE SERVICER
The Servicer may not resign from its obligations and duties under the
Pooling and Servicing Agreement, except upon determination that such duties are
no longer permissible under applicable law. No such resignation will become
effective until the Trustee or a successor to the Servicer has assumed the
Servicer's responsibilities and obligations under the Pooling and Servicing
Agreement.
Any person into which, in accordance with the Pooling and Servicing
Agreement, the Servicer may be merged or consolidated or any person resulting
from any merger or consolidation to which the Servicer is a party, or any person
succeeding to the business of the Servicer, will be the successor to the
Servicer under the Pooling and Servicing Agreement.
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SERVICER DEFAULT
In the event of any Servicer Default either the Trustee or
Certificateholders holding Certificates evidencing more than 50% of the
aggregate unpaid principal amount of all outstanding Series, by notice to the
Servicer (and to the Trustee and certain providers of Series Enhancement, if
given by the Certificateholders) (a "Termination Notice"), may terminate all of
the rights and obligations of the Servicer, as servicer, under the Pooling and
Servicing Agreement and in and to the Receivables and proceeds thereof. If the
Trustee within 60 days of receipt of a Termination Notice does not receive any
bids from eligible Servicers and receives an officer's certificate from the
Servicer to the effect that the Servicer cannot in good faith cure the Servicer
Default that gave rise to the Termination Notice, then the Trustee shall offer
the Transferors the right at their option to purchase the Certificateholders'
Interest for all Series. The purchase price for such a purchase shall be paid by
the Transferors on a Distribution Date and shall be equal to, with respect to
each Series, the amount set forth in the Series Supplement for such Series and,
with respect to the Certificates offered hereby, the Prospectus Supplement.
The Trustee shall, as promptly as possible after giving a Termination
Notice, appoint a successor Servicer (such appointment, a "Service Transfer"),
and if no successor Servicer has been appointed by the Trustee and has accepted
such appointment by the time the Servicer ceases to act as Servicer, all rights,
authority, power and obligations of the Servicer under the Pooling and Servicing
Agreement shall pass to and be vested in the Trustee. Prior to any Service
Transfer, the Trustee will seek to obtain bids from potential Servicers meeting
certain eligibility requirements set forth in the Pooling and Servicing
Agreement to serve as a successor Servicer for servicing compensation not in
excess of the aggregate of the Servicing Fees for all Series. The rights and
interest of the Transferors, as the holders of the Bank Certificate, and of the
holders of any Supplemental Certificate, under the Pooling and Servicing
Agreement and any Series Supplement in the Transferors' Interest will not be
affected by any Termination Notice or Service Transfer.
A "Servicer Default" refers to any of the following events:
(a) any failure by the Servicer to make any payment, transfer or
deposit, or to give instructions or to give notice to the Trustee to make
such payment, transfer or deposit, on the date the Servicer is required to
do so under the Pooling and Servicing Agreement or any Series Supplement,
which is not cured within a five business day grace period;
(b) any failure on the part of the Servicer duly to observe or perform
in any material respect any other covenants or agreements of the Servicer in
the Pooling and Servicing Agreement or any Series Supplement which has a
material adverse effect on the Certificateholders of any Series or Class
(which determination shall be made without regard to whether funds are then
available pursuant to any Series Enhancement) and which continues unremedied
for a period of 60 days after written notice, requiring the same be
remedied, shall have been given to the Servicer by the Trustee, or to the
Servicer and Trustee by the holders of Certificates evidencing not less than
10% of the aggregate unpaid principal amount of all Certificates (or with
respect to any such failure that does not relate to all Series, 10% of the
aggregate unpaid principal amount of all Series to which such failure
relates), or the Servicer delegates its duties under the Pooling and
Servicing Agreement, except as specifically permitted thereunder, and such
delegation continues unremedied for 15 days after written notice, requiring
the same to be remedied, shall have been given to the Servicer by the
Trustee, or to the Servicer and the Trustee by holders of Certificates
evidencing not less than 10% of the aggregate unpaid principal amount of all
Certificates;
(c) any representation, warranty or certification made by the Servicer
in the Pooling and Servicing Agreement or any Series Supplement or in any
certificate delivered pursuant to the Pooling and Servicing Agreement or any
Series Supplement proves to have been incorrect when made, which has a
material adverse effect on the rights of the Certificateholders of any
Series or Class (which determination shall be made without regard to whether
funds are then available pursuant to any Series Enhancement) and which
continues to be materially incorrect for a period
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of 60 days after written notice, requiring the same to be remedied, shall
have been given to the Servicer by the Trustee, or to the Servicer and the
Trustee by holders of Certificates evidencing not less than 10% of the
aggregate unpaid principal amount of all Certificates (or, with respect to
any representation, warranty or certification that does not relate to all
Series, 10% of the aggregate unpaid principal amount of all Series to which
such representation, warranty or certification relates); or
(d) the occurrence of certain events of bankruptcy, insolvency or
receivership with respect to the Servicer.
Notwithstanding the foregoing, a delay in or failure of performance referred
to under clause (a) above for a period of five business days or referred to
under clause (b) or (c) above for a period of 60 days (in addition to any period
provided in (a), (b) or (c)) shall not constitute a Servicer Default until the
expiration of such additional five business days or 60 days, respectively, 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 Pooling and Servicing
Agreement and any Series Supplement and the Servicer shall provide the Trustee,
each Rating Agency, Holders of the Transferor Certificates, certain providers of
Series Enhancement and the Certificateholders of each Series prompt notice of
such failure or delay by it, together with a description of its efforts to so
perform its obligations. The Servicer shall immediately notify the Trustee in
writing of any Servicer Default.
EVIDENCE AS TO COMPLIANCE
The Pooling and Servicing Agreement provides that, on or before December 31
of each calendar year, the Servicer will cause a firm of nationally recognized
independent public accountants (who may also render other services to the
Servicer or the Transferors) to furnish a report to the effect that such firm
has applied certain procedures agreed upon with the Servicer and examined
certain documents and records relating to the servicing of the Accounts during
the preceding twelve month period ended September 30 or, in the case of the
first such report, during the period from the Series Closing Date and ending on
September 30, 1995, and that, on the basis of such procedures, nothing came to
the attention of such firm that caused them to believe that such servicing was
not conducted in compliance with the Pooling and Servicing Agreement and the
applicable provisions of each Series Supplement 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 Pooling and Servicing Agreement provides for delivery to the Trustee,
each Rating Agency and certain providers of Series Enhancement on or before
December 31 of each calendar year a statement signed by an officer of the
Servicer to the effect that, to the best of such officer's knowledge, the
Servicer has performed its obligations in all material respects under the
Pooling and Servicing Agreement throughout the preceding fiscal year or, if
there has been a default in the performance of any such obligation, specifying
the nature and status of the default.
Copies of all statements, certificates and reports furnished to the Trustee
may be obtained by a request in writing delivered to the Trustee.
AMENDMENTS
The Pooling and Servicing Agreement and any Series Supplement may be amended
from time to time (including in connection with (a) the issuance of a
Supplemental Certificate, (b) the addition of a Participation to the Trust, (c)
the assumption by an Assuming Entity of a Transferor's obligations thereunder,
(d) the provision of additional Credit Enhancement for the benefit of
Certificateholders of any Series (or the reduction of such Credit Enhancement),
or (e) the designation of an Additional Transferor) by agreement of the
Servicer, the Trustee and each of the Transferors without the consent of the
Certificateholders of any Series or the consent of the provider of any Series
Enhancement provided that (i) each Transferor shall have delivered to the
Trustee a certificate of an authorized representative to the effect that such
Transferor reasonably believes, based on the facts known to such
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representative at the time of such certificate, that such amendment will not
adversely affect in any material respect the interests of any such
Certificateholder and (ii) such amendment will not result in a Ratings Effect.
The Pooling and Servicing Agreement and any Series Supplement may also be
amended from time to time by the Transferors, the Servicer and the Trustee with
the consent of the holders of Certificates evidencing not less than 66 2/3% of
the aggregate unpaid principal amount of the Certificates of all adversely
affected Series for the purpose of adding any provisions to or changing in any
manner or eliminating any of the provisions of the Pooling and Servicing
Agreement or any Series Supplement or of modifying in any manner the rights of
such Certificateholders. No such amendment, however, may (a) reduce in any
manner the amount of or delay the timing of any distributions to be made to
Certificateholders or deposits of amounts to be so distributed or the amount
available under any Series Enhancement without the consent of each
Certificateholder affected (provided that an amendment of the terms of a Pay Out
Event shall not be deemed to be within the scope of this clause (a)); (b) change
the definition or the manner of calculating the interest on any holder's
Certificate without the consent of each affected Certificateholder; (c) reduce
the aforesaid percentage required to consent to any such amendment, without the
consent of each Certificateholder; or (d) adversely affect the rating of any
Series or Class by any Rating Agency without the consent of the holders of
Certificates of such Series or Class evidencing not less than 66 2/3% of the
aggregate unpaid principal amount of the Certificates of such Series or Class.
Promptly following the execution of any amendment (other than an amendment
described in the preceding paragraph), the Trustee will furnish written notice
of the substance of such amendment to each Certificateholder.
TRUSTEE
Bankers Trust Company is the Trustee under the Pooling and Servicing
Agreement. The Corporate Trust Department of Bankers Trust Company is located at
Four Albany Street, New York, New York, 10006. The Transferors, the Servicer and
their respective affiliates may from time to time enter into normal banking and
trust relationships with the Trustee and its affiliates. The Trustee, the
Transferors, the Servicer and any of their respective affiliates may hold
Certificates of any Series in their own names; however, any Certificates so held
shall not be entitled to participate in any decisions made or instructions given
to the Trustee by such Certificateholders as a group. 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 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 Transferors will be
obligated to appoint a successor Trustee. The Servicer may also remove the
Trustee if the Trustee ceases to be eligible to continue as such under the
Pooling and Servicing Agreement or if the Trustee becomes insolvent. In such
circumstances, the Servicer will be obligated to appoint a successor Trustee.
Any resignation or removal of the Trustee and appointment of a successor Trustee
will not become effective until acceptance of the appointment by the successor
Trustee.
DESCRIPTION OF THE RECEIVABLES PURCHASE AGREEMENT
The Receivables transferred to the Trust by CCB Holding will be originally
acquired by CCB Holding from the Bank pursuant to the Receivables Purchase
Agreement to be entered into between CCB Holding, as purchaser of such
Receivables, and the Bank, as seller. Pursuant to the Pooling and Servicing
Agreement, all such Receivables are transferred by CCB Holding to the Trust. The
following summary relating to the Receivables Purchase Agreement and the
transactions contemplated thereby
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is qualified in its entirety by reference to the Receivables Purchase Agreement,
a form of which is filed as an exhibit to the Registration Statement of which
this Prospectus is a part and which is incorporated by reference herein.
SALES AND TRANSFERS OF RECEIVABLES
Pursuant to the Receivables Purchase Agreement, the Bank sold without
recourse (except as specifically set forth in the Receivables Purchase
Agreement) to CCB Holding all its right, title and interest in and to all of the
Receivables then existing in either all or certain of the Initial Accounts and
all of the Receivables thereafter created in such Accounts and has sold and may
in the future sell the Receivables in all or certain of the Additional Accounts,
if any, added from time to time to the Accounts as of the date of such addition,
whether such Receivables shall then be existing or shall thereafter be created.
In connection with such sale of the Receivables to CCB Holding, the Bank
will indicate in its computer files that the relevant Receivables have been sold
to CCB Holding by the Bank and that all right, title and interest of CCB Holding
in such Receivables have been transferred by CCB Holding to the Trust. In
addition, the Bank will provide to CCB Holding a computer file or a microfiche
list containing a true and complete list showing each such Account, identified
by account number, by total outstanding balance and by aggregate amount of
Receivables on the Trust Cut-Off Date for the applicable Initial Accounts and,
with respect to Additional Accounts, the Receivables of which are being
transferred to CCB Holding under the Receivables Purchase Agreement, the
applicable Addition cut-off date for such Additional Accounts. The records and
agreements relating to the Accounts and Receivables are not segregated by the
Bank from other documents and agreements relating to other credit card accounts
and receivables and are not stamped or marked to reflect the sale of the
Receivables to CCB Holding, but the computer records of the Bank will be marked
to evidence such sale. The Bank, as debtor/seller will file any UCC financing
statements meeting the requirements of applicable state law and in each of the
jurisdictions as are necessary to perfect and to maintain perfection of the sale
of the Receivables in the Initial Accounts and the Bank will similarly file with
respect to the Receivables in Additional Accounts. See "Risk Factors -- Transfer
of Assets" and "Certain Legal Aspects of the Receivables."
REPRESENTATIONS AND WARRANTIES
In the Receivables Purchase Agreement, the Bank represents and warrants to
CCB Holding to the effect that, among other things, as of each Series Closing
Date and as of each date that Additional Accounts are designated under the
Receivables Purchase Agreement: (a) it is duly organized and in good standing
and that it has the authority to consummate the transactions contemplated by the
Receivables Purchase Agreement; (b) each such Additional Account will be an
Eligible Account; and (c) each Receivable generated thereunder is, on the
applicable date of designation, an Eligible Receivable. In the event of a breach
of any representation and warranty set forth in the Pooling and Servicing
Agreement that results in the requirement that CCB Holding accept retransfer of
an Ineligible Receivable, then the Bank shall repurchase such Ineligible
Receivable from CCB Holding on the date of such retransfer for the amount
specified in the Receivables Purchase Agreement.
The Bank also represents and warrants to CCB Holding that, among other
things, as of the date of the Receivables Purchase Agreement and each date that
Additional Accounts are designated under the Receivables Purchase Agreement (a)
the Receivables Purchase Agreement constitutes a valid and binding obligation of
the Bank and (b) the Receivables Purchase Agreement constitutes a valid sale to
CCB Holding of all right, title and interest of the Bank in and to the
Receivables then existing and thereafter created in the relevant Accounts and in
the proceeds thereof. If the breach of any of the representations and warranties
described in this paragraph results in the obligation of CCB Holding under the
Pooling and Servicing Agreement to accept retransfer of the Receivables
transferred by it, the Bank will repurchase the Receivables retransferred to CCB
Holding for an amount of cash equal to the amount of cash CCB Holding is
required to deposit under the Pooling and Servicing Agreement in connection with
such retransfer.
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CERTAIN COVENANTS
The Bank agrees, for the benefit of the Trust, that any amounts payable by
the Bank to CCB Holding pursuant to the Receivables Purchase Agreement in
respect of amounts that are to be paid by CCB Holding to the Trustee for the
benefit of the Certificateholders will be paid by the Bank, on behalf of CCB
Holding, directly to the Trustee. CCB Holding has agreed in the Pooling and
Servicing Agreement to enforce the covenants and agreements of the Bank in the
Receivables Purchase Agreement.
AMENDMENTS
The Receivables Purchase Agreement may be amended by CCB Holding and the
Bank without the consent of the Certificateholders so long as such amendment
does not have a Ratings Effect.
TERMINATION
The Receivables Purchase Agreement will not terminate prior to the
termination of the Trust. In addition, if a conservator or receiver is appointed
for the Bank or certain other liquidation events occur, the Bank will
immediately cease to sell Receivables to CCB Holding and promptly give notice of
such event to CCB Holding and to the Trustee; PROVIDED, HOWEVER, that the FDIC
may have the power to require the Bank to continue to sell new Receivables to
CCB Holding.
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES
TRANSFER OF RECEIVABLES
Each Transferor will represent and warrant to the Trust in the Pooling and
Servicing Agreement that the transfer of Receivables by it to the Trust
constitutes either a valid sale and assignment of such Receivables to the Trust
or a grant to the Trust of a security interest in such Receivables. Each
Transferor also will represent and warrant that if such transfer is a valid sale
and assignment, it constitutes a valid sale and assignment to the Trust of all
right, title and interest of such Transferor in and to such Receivables, except
for the interest of such Transferor, as a holder of the Bank Certificate, and
other rights of such Transferor under the Pooling and Servicing Agreement, free
and clear of all liens and security interests (except for certain permitted
liens as described below). The relevant Transferor also will represent and
warrant to the Trust in the Pooling and Servicing Agreement that if the transfer
of Receivables by such Transferor to the Trust creates a security interest under
the UCC as in effect in the State of Maryland or the State of Delaware, as
applicable, there will exist an enforceable first priority perfected security
interest in the Receivables in existence at the time of the formation of the
Trust in favor of the Trust and an enforceable first priority perfected security
interest in the Receivables created thereafter in favor of the Trust on and
after their creation (except for certain permitted tax liens as described
below). For a discussion of the Trust's rights arising from a breach of these
representations and warranties, see "The Pooling and Servicing Agreement --
Representations and Warranties."
The Receivables are "accounts" or "general intangibles" 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 such security interest
of the Trust. If a transfer of general intangibles is deemed to constitute the
creation of a security interest, rather than a sale, Article 9 of the UCC
applies and the filing of an appropriate financing statement is also required in
order to perfect the Trust's security interest. Financing statements covering
the Receivables of the Trust will be filed under the UCC with the appropriate
state and/or local governmental authority to perfect the interests of the Trust
in the Receivables.
There are certain limited circumstances under the UCC in which a prior or
subsequent transferee of Receivables coming into existence after a Series
Closing Date could have an interest in such Receivables with priority over the
Trust's interest. Under the Pooling and Servicing Agreement, however, each
Transferor will represent and warrant that it has transferred its Receivables to
the Trust free and clear of all liens and security interests (other than certain
tax and other governmental
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liens) except for the interest of the Holders of the Transferor Certificates and
other rights of such Transferor under the Pooling and Servicing Agreement. In
addition, each Transferor will covenant that it will not sell, pledge, assign or
transfer, or grant, create, incur, assume or suffer to exist any lien on, any
Receivable (or any interest therein) other than to the Trust, in connection with
any transfer of the Accounts selected for the Trust or in connection with any
transaction permitted by the Pooling and Servicing Agreement or the Receivables
Purchase Agreement. A tax or other governmental lien on property of a Transferor
arising prior to the time a Receivable comes into existence also may have
priority over the interest of the Trust in such Receivable. In addition, if a
receiver or conservator were appointed for a Transferor (or in the event of a
bankruptcy of CCB Holding), certain administrative expenses of the receiver or
conservator (or of such bankruptcy) also may have priority over the interest of
the Trust in such Receivables. While the Bank is the Servicer, cash collections
on the Receivables may be held by the Bank and commingled with its funds for
brief periods, and if an Insolvency Event occurs, the Trust may not have a
perfected interest in such commingled collections.
CERTAIN MATTERS RELATING TO INSOLVENCY AND RECEIVERSHIP
The FDIA, as amended, sets forth certain powers that the FDIC could exercise
if it were appointed conservator or receiver of the Bank. Subject to
clarification by regulations or interpretations, positions taken by the staff of
the FDIC prior to the passage of FIRREA do not suggest that the FDIC, as
receiver or conservator for the Bank, would interfere with the timely transfer
to the Trust of payments collected on the Receivables. If, however, the FDIC
were to assert a contrary position, such as requiring the Trustee to establish
its right to those payments by submitting to and completing the administrative
claims procedures under the FDIA, or the conservator or receiver were to request
a stay of proceedings with respect to the Bank as provided under the FDIA,
delays in payment on outstanding Series of Certificates and possible reductions
in the amount of those payments could occur. In the event the Bank's transfer of
Receivables to the Trust or the Bank's sale of the Receivables to CCB Holding,
as applicable, is deemed to constitute the creation of a security interest, such
a security interest, to the extent it was validly perfected before the
occurrence of an Insolvency Event and was not taken or granted in contemplation
of insolvency, or with the intent to hinder, delay or defraud the Bank or its
creditors, the FDIA provides that such security interest should not be subject
to avoidance by the FDIC, as receiver or conservator. A receiver or conservator
also may disaffirm or repudiate the Bank's obligations under the Pooling and
Servicing Agreement to accept reassignment of Ineligible Receivables or to
accept reassignment of the Trust Portfolio or other provisions of the Pooling
and Servicing Agreement.
The Pooling and Servicing Agreement provides that, upon the occurrence of an
Insolvency Event with respect to the Bank, the Bank will promptly give notice to
the Trustee of such appointment or liquidation, and a Pay Out Event will occur.
Pursuant to the Pooling and Servicing Agreement and the Receivables Purchase
Agreement, newly created Principal Receivables will not be transferred to the
Trust or to CCB Holding, as applicable, on and after any such Insolvency Event.
Notwithstanding the cessation of the transfer to the Trust of additional
Principal Receivables, Finance Charge Receivables, whenever created, accrued in
respect of Principal Receivables that have been transferred to the Trust will
continue to be a part of the Trust or to be transferred to CCB Holding, as
applicable. The Pooling and Servicing Agreement provides that the Servicer will
continue, on and after any such Insolvency Event, to collect and remit to the
Trustee payments on Receivables transferred to the Trust. Unless otherwise
instructed within a specified period by holders of Certificates of each Series
or, if a Series includes more than one Class, each Class of such Series,
evidencing more than 50% of the aggregate unpaid principal balance of each such
Series or Class, as well as each holder of an interest in the Transferors'
Interest not subject to the Insolvency Event and each person designated by the
Transferors to the Trustee prior to the occurrence of the Insolvency Event the
Trustee may proceed to sell, dispose of or otherwise liquidate the Receivables
in the Trust in a commercially reasonable manner and on commercially reasonable
terms. Under the Pooling and Servicing Agreement, the net proceeds from the
sale, liquidation or disposition of the Receivables will be deposited in the
Collection Account and allocated as provided in the Pooling and Servicing
Agreement and each Series Supplement. See "Description of the Certificates --
Pay Out Events." This procedure could be delayed, as described
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above. In addition, a conservator or receiver for the Bank may have the power to
prevent the early sale, liquidation or disposition of the Receivables
transferred by the Bank, the commencement of the Early Amortization Period or
Early Accumulation Period of a Class or Series or other exercise of rights
unless a Pay Out Event occurs due to an event in addition to the receivership,
conservatorship or insolvency the Bank. The receiver or conservator may also
have the power to cause the early sale of the Receivables of the Trust and the
early retirement of the Certificates or to require or prohibit the continued
transfer of Receivables to the Trust or to CCB Holding, as applicable.
If a receiver or conservator is appointed for the Servicer, the receiver or
conservator may have the power either to terminate the Servicer and replace it
with a successor Servicer or to prevent the termination of the Servicer and its
replacement with a successor Servicer if no Servicer Default exists other than
the receivership, conservatorship or insolvency of the Servicer. See "The
Pooling and Servicing Agreement -- Servicer Default."
CCB Holding has been structured such that the voluntary or involuntary
application with respect to CCB Holding for relief under the Bankruptcy Code or
similar state laws is unlikely. CCB Holding is a separate, limited purpose
subsidiary, the certificate of incorporation of which contains limitations on
the nature of CCB Holding's business and restrictions on the ability of CCB
Holding to commence a voluntary case or proceeding under such laws without the
prior unanimous consent of all directors. See "CCB Holding Corporation." CCB
Holding currently does not intend to file, and the Bank has agreed that it will
not file, a voluntary petition for relief under the Bankruptcy Code with respect
to CCB Holding.
If CCB Holding were to become a debtor in a bankruptcy case and a creditor
or bankruptcy trustee of such debtor or such debtor itself were to take the
position that the transfer of Receivables by CCB Holding to the Trust should be
recharacterized as a grant of a security interest in such Receivables to secure
a borrowing of such debtor, then delays in payments of collections of such
Receivables to the Trust (and therefore to the Certificateholders) could occur
or (should the court rule in favor of any such trustee, debtor or creditor)
reductions in the amount of such payments could result.
If an Insolvency Event relating to CCB Holding were to occur, then a Pay Out
Event with respect to each Series would occur and, pursuant to the terms of the
Pooling and Servicing Agreement, new Principal Receivables would not be
transferred to the Trust and the Trustee would sell the Receivables (unless
Certificateholders holding Certificates of each Series or, if a Series includes
more than one Class, each Class of such Series evidencing more than 50% of the
aggregate unpaid principal amount of each such Series or Class, as well as each
holder of an interest in the Transferors' Interest (other than CCB Holding) and
each person designated by the Transferors to the Trustee prior to the occurrence
of the Insolvency Event instruct otherwise), thereby causing early termination
of the Trust. In such event, the portion of the proceeds of such sale allocable
to such Certificateholders of a related Series and the proceeds of any
collections on the Receivables in the Collection Account allocated to the
Certificateholders' Interest of such Series may be insufficient to pay such
Certificateholders in full. However, in a bankruptcy proceeding, the Trustee may
not be permitted to suspend transfers of Receivables to the Trust, and the
instructions to sell the Receivables may not be given effect.
CONSUMER PROTECTION LAWS
The relationship of the cardholder and credit card issuer is extensively
regulated by federal and state consumer protection and related laws. With
respect to credit cards issued by the Bank, the most significant laws include
the federal Truth-in-Lending Act, Fair Credit Billing Act, Fair Debt Collection
Practices Act, Equal Credit Opportunity Act, Fair Credit Reporting Act and
Electronic Funds Transfer Act, as well as applicable Virginia laws and, to the
extent applicable, comparable statutes in the other states in which cardholders
reside. These statutes impose disclosure requirements when a credit card account
is advertised, when it is applied for, when it is opened, at the end of monthly
billing cycles and at year end and, in addition, prohibit certain discriminatory
practices in extending credit and impose certain limitations on the type of
account-related charges that may be assessed. Federal law
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requires credit card issuers to disclose to consumers the interest rates,
cardholder fees, grace periods and balance calculation methods associated with
their credit card accounts. In addition, cardholders are entitled under current
laws to have payments and credits applied to the credit card account promptly,
to receive prescribed notices and to require billing errors to be resolved
promptly.
Certain laws, including the laws described above, may limit the Bank's
ability to collect amounts owing with respect to the Receivables regardless of
any act or omission on the part of the Bank. For example, under the federal Fair
Credit Billing Act, a credit card issuer is subject to all claims (other than
tort claims) and defenses arising out of certain transactions in which a credit
card is used as a method of payment or extension of credit if the obligor has
made a good faith attempt to obtain satisfactory resolution of a disagreement or
problem relative to the transaction from the person honoring the credit card
and, except in cases where there is a certain relationship between the person
honoring the card and the credit card issuer, the amount of the initial
transaction exceeds $50 and the place where the initial transaction occurred was
in the same state as the cardholder's mailing address or within 100 miles of
that address. These statutes further provide that in certain cases cardholders
cannot be held liable for, or the cardholder's liability is limited with respect
to, charges to the credit card account that result from unauthorized use of the
credit card.
Additional consumer protection laws may be enacted that would impose
requirements on the making, enforcement and collection of consumer credit loans.
Any new laws or rulings that may be adopted, and existing consumer protection
laws, may adversely affect the ability to collect on the Receivables. In
addition, failure of the Servicer to comply with such requirements could
adversely affect the Servicer's ability to enforce the Receivables.
Application of federal and state bankruptcy and debtor relief laws
(including the Soldiers' and Sailors' Civil Relief Act of 1940) would affect the
interests of the holders of the Certificates if the protection provided to
debtors under such laws result in any Receivables of the Trust being written off
as uncollectible.
The Trust may be liable for certain violations of consumer protection laws
that apply to the Receivables transferred to it, either as assignee from a
Transferor with respect to violations arising before the transfer or as a party
directly responsible for violations 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. Each Transferor will
warrant to the Trust in the Pooling and Servicing Agreement that all Receivables
transferred by it to the Trust have been and will be created in compliance with
the requirements of such laws. For a discussion of the Trust's rights arising
from the breach of these warranties, see "The Pooling and Servicing Agreement --
Representations and Warranties."
CLAIMS AND DEFENSES OF CARDHOLDERS AGAINST THE TRUST
The UCC, the provisions of which would be applicable to the Trust if it were
deemed to have acquired a security interest in the Receivables transferred to
the Trust (see "-- Transfer of Receivables"), provides that (a) unless a
cardholder has made an enforceable agreement not to assert defenses or claims
arising out of a transaction, the rights of the Trust, as assignee, are subject
to all the terms of the cardholder agreement between the Bank and the cardholder
and any defense or claim arising therefrom, to rights of set-off and to any
other defense or claim of the cardholder against the Bank that accrues before
the cardholder receives notification of the assignment and (b) any cardholder is
authorized to continue to pay the Bank until (i) the cardholder receives
notification, reasonably identifying the rights assigned, that the amount due or
to become due has been assigned and that payment is to be made to the Trustee or
successor Servicer and (ii) if requested by the cardholders the Trustee or
successor Servicer has furnished reasonable proof of assignment. No such
agreement not to assert defenses has been entered into and no notice of the
assignment of the Receivables to the Trust will be sent to the cardholders
obligated on the Accounts in connection with the transfer of the Receivables to
the Trust.
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES
GENERAL
The following is a general discussion of material federal income tax
consequences relating to the purchase, ownership and disposition of a
Certificate offered hereby. 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 other tax
consequences of the purchase, ownership and disposition of a Certificate offered
hereby.
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 political subdivision of either
(including the District of Columbia), or an estate or trust the income of which
is includible in gross income for U.S. federal income tax purposes regardless of
its source. The term "U.S. Certificate Owner" means any U.S. Person and any
other person to the extent that the income attributable to its interest in a
Certificate offered hereby is effectively connected with that person's conduct
of a U.S. trade or business.
TREATMENT OF THE CERTIFICATES AS DEBT
The Transferors express in the Pooling and Servicing Agreement the intent
that for federal, state and local income and franchise tax purposes, the
Certificates will be debt secured by the Receivables. The Transferors, by
entering into the Pooling and Servicing Agreement, and each investor, by the
acceptance of a beneficial interest in a Certificate, will agree to treat the
Certificates as debt for federal, state and local income and franchise tax
purposes. However, the Pooling and Servicing Agreement generally is ambiguous in
characterizing the transfer of Receivables, and because different criteria are
used in determining the non-tax accounting treatment of the transaction, the
Transferors will treat the Pooling and Servicing Agreement for certain non-tax
accounting purposes as causing a transfer of an ownership interest in the
Receivables and not as creating a debt obligation.
A basic premise of federal income tax law is that the economic substance of
a transaction generally determines its tax consequences. The form and non-tax
characterization of a transaction, while relevant factors, are not conclusive
evidence of its economic substance. In appropriate circumstances, the courts
have allowed taxpayers, as well as the Internal Revenue Service (the "IRS"), to
treat a transaction in 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 transfer of an
interest in property is instead a loan secured by the transferred property has
been made by the IRS and the courts on the basis of numerous factors designed to
determine whether the transferor has relinquished (and the transferee has
obtained) substantial incidents of ownership in the property. Among those
factors, the primary ones examined are whether the transferee has the
opportunity to gain if the property increases in value, and has the risk of loss
if the property decreases in value. Special tax counsel to the Transferors to be
named in the Prospectus Supplement ("Tax Counsel"), will deliver its opinion
generally to the effect that, under current law as in effect on the Series
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
hereby will not constitute an ownership interest in the Receivables, but
properly will be characterized as debt. Except where indicated to the contrary,
the following discussion assumes that the Certificates offered hereby are debt
for federal income tax purposes.
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TREATMENT OF THE TRUST
GENERAL. The Pooling and Servicing 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 equity interests in the Trust. If all of the Certificates and other
interests (other than the Bank Certificate) in the Trust were characterized as
debt, the Trust might be characterized as a security arrangement for debt
collateralized by the Receivables and issued directly by the Transferors (or
other holder of the Bank Certificate). Under such a view, the Trust would be
disregarded for federal income tax purposes. Alternatively, if some of the
Transferor Certificates, the Certificates and other interests in the Trust were
characterized as equity therein, the Trust might be characterized as a separate
entity owning the Receivables, issuing its own debt, and jointly owned by the
Transferors (or other holder of the Bank Certificate) and any other holders of
equity interests in the Trust. However, Tax Counsel will deliver its opinion
generally to the effect that, under current law as in effect on the applicable
Series Closing Date, any such entity constituted by the Trust will not be an
association or publicly traded partnership taxable as a corporation.
POSSIBLE TREATMENT OF THE TRUST AS A PARTNERSHIP, A PUBLICLY TRADED
PARTNERSHIP OR AN ASSOCIATION. Although, as described above, Tax Counsel will
deliver its opinion generally to the effect that, for federal income tax
purposes, the Certificates offered hereby will properly be characterized as debt
and that the Trust will not be treated as an association or publicly traded
partnership taxable as a corporation, such opinion will not be binding on the
IRS and thus no assurance can be given that such a characterization will
prevail. Further, such opinion will be made with respect to current law, which
is subject to change as described below. If the IRS were to contend successfully
that some or all of the Transferor Certificates, Certificates or any other
interest in the Trust, including any Collateral Interest, were equity in the
Trust for federal income tax purposes, all or a portion of the Trust could be
classified as a partnership or an association taxable as a corporation for such
purposes. Because Tax Counsel will deliver its opinion that the Certificates
offered hereby 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 of the holders of interests in the publicly offered Certificates were
partners, that partnership could be classified as a publicly traded partnership
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 the
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 Transferors intend to take measures
designed to reduce the risk that Trust could be classified as a publicly traded
partnership by reason of interests in the Trust other than the publicly traded
Certificates. Although the Transferors expect 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 Transferors. As
a result, there can be no assurance that the measures the Transferors intend to
take will in all circumstances be sufficient to prevent the Trust from being
classified as a publicly traded partnership under the Regulations.
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If the Trust were treated as a partnership but nevertheless not 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 Transferors (or the holders of the Bank Certificate) and any Certificate
Owners or others 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 those
reportable by such Certificate Owners had they been treated as owning debt. In
addition, if the Trust were treated in whole or in part as a partnership other
than a publicly traded partnership, income derived from the partnership by any
Certificate Owner that is a pension fund or other tax-exempt entity may be
treated as unrelated business taxable income. Partnership characterization also
may have adverse state and local income or franchise tax consequences for a
Certificate Owner. From time to time, legislation has been introduced in
Congress that would affect the treatment of any "large partnership," defined as
any partnership in which there are at least 250 partners in a taxable year.
Under such legislative proposals, among other things, the availability of
certain deductions to partners may be limited, and certain computations (such as
those relating to the level of allowable miscellaneous itemized deductions and
the netting of capital gains and losses) would be made at the partnership rather
than the partner level. No prediction can be made regarding whether any such
legislation will be enacted or, if so, what its ultimate effective date will be.
If the arrangement created by the Pooling and Servicing Agreement were
treated in whole or in part as a publicly traded partnership or an association
taxable as a corporation, that entity would be subject to federal income tax at
corporate tax rates on its taxable income generated by ownership of the related
Receivables. That tax could result in reduced distributions to Certificate
Owners. No distributions from the Trust would be deductible in computing the
taxable income of the corporation, except to the extent that any Certificates
were treated as debt of the corporation and distributions to the related
Certificate Owners were treated as payments of interest thereon. In addition,
distributions to Certificate Owners not treated as holding debt would be
dividend income to the extent of the current and accumulated earnings and
profits of the corporation. Further, a Certificate Owner that is a corporation
may not be entitled to the corporate dividends received deduction with respect
to such distribution.
TAXATION OF INTEREST INCOME OF U.S. CERTIFICATE OWNERS
GENERAL. Stated interest on a beneficial interest in a Certificate offered
hereby will be includible in gross income in accordance with a U.S. Certificate
Owner's method of accounting.
ORIGINAL ISSUE DISCOUNT. If the Certificates offered hereby 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 such
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 offered hereby 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 offered hereby 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 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 offered hereby is unclear. Additionally, because the failure to pay
interest currently on a Certificate offered hereby is not a default and may not
be considered to give rise to any penalty or remedy to compel payment, the IRS
could take the position based on Treasury Regulations that all of the interest
payable on such Certificate should be included in its stated
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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 offered hereby 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 offered hereby and partial principal payments on such
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
offered hereby that has market discount.
MARKET PREMIUM. A U.S. Certificate Owner who purchases an interest in a
Certificate offered hereby 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 sale or exchange of an interest in a Certificate offered hereby, a
U.S. Certificate Owner generally will recognize gain or loss equal to the
difference between the amount realized on the sale or exchange and the U.S.
Certificate Owner's adjusted basis in its interest in the Certificate. The
adjusted basis in the interest in the Certificate offered hereby 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
offered hereby was held as a capital asset. Capital losses generally may be used
only to offset capital gains.
NON-U.S. CERTIFICATE OWNERS
In general, a non-U.S. Certificate Owner will not be subject to U.S. federal
income tax on interest (including OID) on a beneficial interest in a Certificate
offered hereby 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 either Transferor entitled to vote (or of a profits or
capital interest of the Trust if characterized as a partnership), (ii) the
non-U.S. Certificate Owner is a controlled foreign corporation that is related
to either Transferor (or the Trust if treated as a partnership) through stock
ownership, (iii) the Certificate Owner is a bank described in section
881(c)(3)(A) of the Code, (iv) such interest is contingent interest described in
section 871(h)(4) of the Code, or (v) the non-U.S. Certificate Owner bears
certain relationships to any holder of the Bank Certificate (other than the
Transferors) or of Investor Certificates or other interests not properly
characterized as debt. To qualify for the exemption from taxation, the last U.S.
Person in the chain of payment prior to payment to a non-U.S. Certificate Owner
(the "Withholding Agent") must have received (in the year in which a payment of
interest or principal occurs or in either of the two preceding years) a
statement that (a) is signed by the non-U.S. Certificate Owner under penalties
of perjury, (b) certifies that the non-U.S. Certificate Owner is not a U.S.
Person and (c) provides the name and address of the non-U.S. Certificate Owner.
The statement may be made on a Form W-8 or substantially similar substitute
form, and the non-U.S. Certificate Owner must inform the Withholding Agent of
any change in the information on the statement within 30 days of the change. If
a Certificate offered hereby 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 offered hereby on behalf of the non-U.S. Certificate Owner. The U.S.
Treasury Department is considering implementation of further certification
requirements aimed at determining whether the issuer of a debt obligation is
related to holders thereof.
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Generally, any gain or income realized by a non-U.S. Certificate Owner upon
retirement or disposition of an interest in a Certificate offered hereby will
not be subject to U.S. federal income tax, provided that (a) 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 (b) 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 offered hereby 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 offered hereby 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 offered hereby to a
registered owner who is not an "exempt recipient" and who fails to provide
certain identifying information (such as the registered owner's taxpayer
identification number) in the manner required. Generally, individuals are not
exempt recipients whereas corporations and certain other entities are exempt
recipients. Payments made in respect of a U.S. Certificate Owner must be
reported to the IRS, unless the U.S. Certificate Owner is an exempt recipient or
otherwise establishes an exemption. Compliance with the identification
procedures (described in the preceding section) would establish an exemption
from backup withholding for a non-U.S. Certificate Owner who is not an exempt
recipient.
In addition, upon the sale of a Certificate offered hereby to (or through) a
"broker," the broker must withhold 31 percent of the entire purchase price,
unless either (a) the broker determines that the seller is a corporation or
other exempt recipient or (b) 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 under proposed Treasury regulations 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 (a) that is a
controlled foreign corporation within the meaning of section 957(a) of the Code
or (b) 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 owning a Certificate offered hereby 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.
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The backup withholding rules have not been issued in final form and
therefore are potentially subject to change.
STATE AND LOCAL TAXATION
The discussion above does not address the taxation of the Trust or the tax
consequences of purchase, ownership or disposition of an interest in the
Certificates offered hereby under any state or local tax law. Each investor
should consult its own tax advisor 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 "plan assets" of
pension, profit sharing or other employee benefit plans, individual retirement
accounts or annuities, employee annuity plans and Keogh plans subject to ERISA
or Section 4975 of the Code (each a "Plan" or collectively, "Plans"), from
engaging in certain transactions involving "plan assets" with persons that are
"parties in interest" under ERISA or "disqualified persons" under Section 4975
of the Code with respect to the Plan. A violation of these "prohibited
transaction" rules may generate excise tax and other liabilities under ERISA and
Section 4975 of the Code for such persons, unless a statutory, regulatory or
administrative exemption is available. Plans that are governmental plans (as
defined by Section 3(32) of ERISA) and certain church plans (as defined by
Section 3(33) of ERISA) are not subject to ERISA requirements.
Subject to the considerations described below and except to the extent
otherwise specified in the related Prospectus Supplement with respect to any
Series or Class thereof offered hereby, the Transferors anticipate that only
certain Classes or Series of Certificates will be eligible for purchase by Plan
Investors (as defined below).
A violation of the prohibited transaction rules could occur if any
Certificates were to be purchased with "plan assets" of any Plan, and if either
Transferor, the Trustee, any underwriter of such Series or any of their
affiliates were a "party in interest" or a "disqualified person," with respect
to such Plan. Unless a statutory, regulatory or administrative exemption is
available or an exemption applies under a United States Department of Labor
("DoL") regulation defining what constitutes "plan assets" of a Plan (the "Plan
Asset Regulation"), the Transferors, the Trustee, any underwriters of a Series
and their affiliates are likely to be "parties in interest" and "disqualified
persons" with respect to many Plans. Before purchasing Certificates of any
Series or Class, any Plan fiduciary or other person (including an insurance
company investing general or separate account assets) investing "plan assets" of
any Plan (a "Plan Investor") should consider whether a non-exempt prohibited
transaction might arise by virtue of the relationship between any Plan and
either Transferor, the Trustee, any underwriter of such Series or any of their
affiliates and consult their counsel regarding the purchase in light of the
considerations described herein. The DoL has issued five class exemptions that
may apply to otherwise prohibited transactions arising from the purchase or
holding of the Certificates: DoL Prohibited Transaction Exemptions 96-23 (Class
Exemption for Plan Asset Transactions Determined by In-house Asset Managers),
95-60 (Class Exemption for Certain Transactions Involving Insurance Company
General Accounts), 91-38 (Class Exemption for Certain Transactions Involving
Bank Collective Investment Funds), 90-1 (Class Exemption for Certain
Transactions Involving Insurance Company Pooled Separate Accounts) and 84-14
(Class Exemption for Plan Asset Transactions Determined by Independent Qualified
Professional Asset Managers).
Under certain circumstances, the Plan Asset Regulation treats the assets of
an entity in which a Plan has an equity interest as "plan assets" of the Plan.
Although the Transferors and the Certificate Owners will agree 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. If that were the case, unless one of the two exceptions described
below applies, the Plan Asset Regulation would apply to treat the Trust Assets
as "plan assets" of any Plan that invests directly in the Certificates of any
Series.
71
<PAGE>
The first exception applies to a publicly-offered security. A
"publicly-offered security" is a security that is (a) freely transferable (as
defined in the Plan Asset Regulation), (b) part of a class of securities that is
owned, immediately subsequent to the initial offering, by 100 or more investors
who are independent of the issuer and of one another ("Independent Investors"),
and (c) either is (i) part of a class of securities registered under Section
12(b) or 12(g) of the Exchange Act, or (ii) sold to the plan as part of an
offering of securities to the public pursuant to an effective registration
statement under the Securities Act and the class of securities of which such
security is a part is registered under the Exchange Act within 120 days (or such
later time as may be allowed by the Commission) after the end of the fiscal year
of the issuer during which the offering of such securities to the public
occurred. For purposes of the 100 Independent Investor criterion, 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. Although
the Transferors may prohibit the transfer of certain Classes or Series of
Certificates to Plans and Plan Investors, no other restrictions will be imposed
on the transfer of the Certificates offered hereby. The related Prospectus
Supplement will state whether the Transferors expect, based on information
provided by the underwriters of a Series or Class of Certificates, that such
Series or Class of Certificates will be held by at least 100 Independent
Investors at the conclusion of the offering, although no assurance can be given,
and no monitoring or other measures will be taken to ensure, that such condition
will be met. The Transferors anticipate that the other conditions of the Plan
Asset Regulation will be met.
The second exception applies if equity participation in the entity by
"Benefit Plan Investors" (I.E., Plans and other employee benefit plans not
subject to ERISA, such as governmental or foreign plans, as well as entities
holding assets deemed to be "plan assets") is not "significant." Benefit Plan
Investors' equity participation in a 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 interest in the Trust (excluding interests
held by the Transferors, the Trustee or their affiliates) is held by Benefit
Plan Investors. No assurance can be given by the Transferors as to whether the
value of each class of equity interest in the Trust held by Benefit Plan
Investors will be less than that amount at the completion of the offering and
thereafter, and no monitoring or other measures will be taken with respect to
the satisfaction of the conditions to this exception.
If neither of the foregoing exceptions under the Plan Asset Regulation were
satisfied with respect to the Trust and the Trust is considered to hold "plan
assets" of Plan investors, transactions involving the Trust and "parties in
interest" or "disqualified persons" with respect to a Plan which is directly or
indirectly a Certificate Owner might be prohibited under Section 406 of ERISA
and/or Section 4975 of the Code unless an exemption is available. The five DoL
class exemptions mentioned above may not provide relief for all transactions
involving the Trust Assets even if they would otherwise apply to the purchase of
a Certificate with "plan assets" of any Plan.
Certificates may not be purchased by, on behalf of or with "plan assets" of
any Plan if either Transferor, the Servicer, the Trustee or any of their
affiliates (a) has investment or administrative discretion with respect to the
"plan assets" used to effect the purchase; (b) has authority or responsibility
to give, or regularly gives, investment advice with respect to such 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 assets
and (ii) will be based on the particular investment needs of the Plan involved;
or (c) is an employer maintaining or contributing to such Plan.
In light of the foregoing, Plan fiduciaries or other persons investing "plan
assets" of any Plan considering the purchase of Certificates should consult
their own counsel regarding whether the Trust Assets, which are represented by
the Certificates, would be considered "plan assets," the consequences that would
apply if the Trust Assets were considered "plan assets," and the availability of
exemptive relief from the prohibited transaction rules.
72
<PAGE>
Unless the related Prospectus Supplement states that the Transferors expect
that a particular Class of Certificates will be held by at least 100 separately
named persons at the completion of the offering made thereby, that Class of
Certificates may not be acquired by any Plan, Plan Investor or any entity whose
underlying assets include "plan assets" under the Plan Asset Regulation by
reason of any Plan's investment in the entity. In that event, by its acceptance
of a Certificate of that Class, except as provided below for insurance company
general accounts, each Certificateholder with respect to Certificates of a Class
will be deemed to have represented and warranted that it is not subject to the
foregoing limitations.
The Small Business Job Protection Act of 1996 added new Section 401(c) of
ERISA relating to the status of the assets of insurance company general accounts
under ERISA and Section 4975 of the Code. Pursuant to Section 401(c), the
Department of Labor is required to issue final regulations (the "General Account
Regulations") not later than December 31, 1997 with respect to insurance
policies issued on or before December 31, 1998 that are supported by an
insurer's general account. The General Account Regulations are to provide
guidance on which assets held by the insurer constitute "plan assets" for
purposes of the fiduciary responsibility provisions of ERISA and Section 4975 of
the Code. The assets of a general account that support insurance policies (other
than "guaranteed benefit policies" within the meaning of Section 401(b)(2) of
ERISA) (i) issued to employee benefit or other plans subject to ERISA or Section
4975 of the Code after December 31, 1998 or (ii) issued to such plans on or
before December 31, 1998 for which the insurance company does not comply with
the General Account Regulations, may be treated as plan assets. However, except
in the case of avoidance of the General Account Regulations and actions brought
by the Secretary of Labor relating to certain breaches of fiduciary duties that
also constitute breaches of state or federal criminal law, until the date that
is 18 months after the General Account Regulations become final, no liability
under the fiduciary responsibility and prohibited transaction provisions of
ERISA and Section 4975 may result on the basis of a claim that the assets of the
general account of an insurance company constitute the plan assets of any such
plan. The plan asset status of insurance company separate accounts is unaffected
by new Section 401(c) of ERISA, and separate account assets continue to be
treated as the plan assets of any such plan invested in a separate account.
If the assets of a general account invested in the Certificates are treated
as plan assets of any such plan or the protections of Section 401(c) of ERISA
become unavailable, certain violations of the prohibited transaction rules may
be deemed to occur as a result of the operation of the Trust. Insurance
companies contemplating the investment of general account assets in the
Certificates should consult with their legal advisors concerning the impact of
Section 401(c) of ERISA, including the status of assets of the general account
as plan assets of investing plans after December 31, 1998, and accordingly, the
general account's ability to continue to hold the Certificates after the date
that is 18 months after the General Account Regulations become final. The deemed
representation and warranty regarding the acquisition and holding of
Certificates by any Plan, Plan Investor or any entity whose underlying assets
constitute "plan assets" will not apply to the acquisition or holding of
Certificates with the assets of a general account of an insurance company to the
extent such acquisition or holding, respectively, is permitted by Section 401(c)
of ERISA and final regulations thereunder or other exemption under ERISA and
does not result in the contemplated operations of the Trust being treated as
violations of the prohibited transaction rules.
Finally, Plan fiduciaries or other persons investing "plan assets" of any
Plan 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, such fiduciaries should consider whether the investment (a)
satisfies the diversification requirement of ERISA or other applicable law, (b)
is in accordance with the Plan's governing instruments and (c) is prudent
considering the "Risk Factors" and other factors discussed herein and in the
related Prospectus Supplement.
73
<PAGE>
PLAN OF DISTRIBUTION
The Transferors may sell Certificates (a) through underwriters or dealers,
(b) directly to one or more purchasers, or (c) through agents. The related
Prospectus Supplement will set forth the terms of the offering of any
Certificates offered hereby, including, without limitation, the names of any
underwriters, the purchase price of such Certificates and the proceeds to the
Transferors from such sale, any underwriting discounts and other items
constituting underwriters' compensation, any initial public offering price and
any discounts or concessions allowed or reallowed or paid to dealers.
If underwriters are used in a sale of any Certificates of a Series offered
hereby, such Certificates will be acquired by the underwriters for their own
account and may be resold from time to time in one or more transactions,
including negotiated transactions, at a fixed public offering price or at
varying prices to be determined at the time of sale or at the time of commitment
therefor. Such Certificates may be offered to the public either through
underwriting syndicates represented by managing underwriters or by underwriters
without a syndicate. Unless otherwise set forth in the related Prospectus
Supplement, the obligations of the underwriters to purchase such Certificates
will be subject to certain conditions precedent, and the underwriters will be
obligated to purchase all of such Certificates if any of such Certificates are
purchased. Any initial public offering price and any discounts or concessions
allowed or reallowed or paid to dealers may be changed from time to time.
Certificates of a Series offered hereby may also be offered and sold, if so
indicated in the related Prospectus Supplement, in connection with a remarketing
upon their purchase, in accordance with a redemption or repayment pursuant to
their terms, by one or more firms ("remarketing firms") acting as principals for
their own accounts or as agents for the Transferors. Any remarketing firm will
be identified and the terms of its agreement, if any, with the Transferors and
its compensation will be described in the related Prospectus Supplement.
Remarketing firms may be deemed to be underwriters in connection with the
Certificates remarketed thereby.
Certificates may also be sold directly by the Transferors or through agents
designated by the Transferors from time to time. Any agent involved in the offer
or sale of Certificates will be named, and any commissions payable by the
Transferors to such agent will be set forth, in the related Prospectus
Supplement. Unless otherwise indicated in the related Prospectus Supplement, any
such agent will act on a best efforts basis for the period of its appointment.
Any underwriters, agents or dealers participating in the distribution of
Certificates may be deemed to be underwriters, and any discounts or commissions
received by them on the sale or resale of Certificates may be deemed to be
underwriting discounts and commissions, under the Securities Act. Agents and
underwriters may be entitled under agreements entered into with the Transferors
to indemnification by the Transferors against certain civil liabilities,
including liabilities under the Securities Act, or to contribution with respect
to payments that the agents or underwriters may be required to make in respect
thereof. Agents and underwriters may be affiliates or customers of, engage in
transactions with, or perform services for, the Transferors or their affiliates
in the ordinary course of business.
74
<PAGE>
INDEX OF DEFINED TERMS
<TABLE>
<S> <C>
Accounts.......................................................................... 1, 4
Addition.......................................................................... 32
Additional Accounts............................................................... 4, 33
Additional Transferor............................................................. 52
Aggregate Additional Limit........................................................ 33
Assigned Assets................................................................... 27
Assumed Obligations............................................................... 27
Assuming Entity................................................................... 27
Automatic Additional Accounts..................................................... 33
Bank.............................................................................. 1, 3
Bank Certificate.................................................................. 6
Bank Portfolio.................................................................... 24
Bankruptcy Code................................................................... 19
Benefit Plan Investors............................................................ 72
CCB Holding....................................................................... 1, 3
Cede.............................................................................. 2
Cedel............................................................................. 49
Cedel Participants................................................................ 49
Certificate Owners................................................................ 2
Certificateholders................................................................ 2
Certificateholders' Interest...................................................... 5
Certificates...................................................................... 1
Class............................................................................. 1
Code.............................................................................. 68
Collateral Interest............................................................... 43
Collection Account................................................................ 37
Commission........................................................................ 2
Controlled Accumulation Amount.................................................... 10
Controlled Amortization Amount.................................................... 11
Controlled Deposit Amount......................................................... 10
Controlled Distribution Amount.................................................... 11
Cooperative....................................................................... 50
Credit Card Guidelines............................................................ 23
Credit Enhancement................................................................ 14
Credit Enhancer................................................................... 42
Date of Processing................................................................ 15
Defaulted Amount.................................................................. 41
Defaulted Receivables............................................................. 41
Defeased Series................................................................... 46
Definitive Certificates........................................................... 51
Depositaries...................................................................... 48
Depository........................................................................ 30
Determination Date................................................................ 15
Disclosure Document............................................................... 7
Discount Option Receivables....................................................... 35
Discount Percentage............................................................... 35
Distribution Date................................................................. 14
DoL............................................................................... 71
DTC............................................................................... 2
Early Accumulation Period......................................................... 10
Early Amortization Period......................................................... 11
Eligible Account.................................................................. 54
Eligible Deposit Account.......................................................... 37
Eligible Institution.............................................................. 37
</TABLE>
75
<PAGE>
<TABLE>
<S> <C>
Eligible Investments.............................................................. 38
Eligible Receivable............................................................... 55
Enhancement Invested Amount....................................................... 42
ERISA............................................................................. 71
Euroclear......................................................................... 50
Euroclear Operator................................................................ 50
Euroclear Participants............................................................ 50
Excess Finance Charge Collections................................................. 40
Exchange Act...................................................................... 2
Expected Final Payment Date....................................................... 8
FDC............................................................................... 24
FDIA.............................................................................. 19
FDIC.............................................................................. 6, 18
Finance Charge Receivables........................................................ 5
FIRREA............................................................................ 19
Floating Allocation Percentage.................................................... 38
Full Invested Amount.............................................................. 13
Funding Period.................................................................... 13
General Account Regulations....................................................... 73
Group............................................................................. 12
Independent Investors............................................................. 72
Indirect Participants............................................................. 49
Ineligible Receivables............................................................ 53
Initial Accounts.................................................................. 4
Insolvency Event.................................................................. 18
Interchange....................................................................... 27
Interest Funding Account.......................................................... 8
Interest Payment Date............................................................. 36
Invested Amount................................................................... 35
IRS............................................................................... 66
L/C Issuer........................................................................ 43
MasterCard........................................................................ 24
Monthly Investor Servicing Fee.................................................... 45
Monthly Period.................................................................... 28
Monthly Report.................................................................... 47
Moody's........................................................................... 37
New Issuance...................................................................... 35
OID............................................................................... 68
OTS............................................................................... 27
Paired Series..................................................................... 13
Participants...................................................................... 48
Participation..................................................................... 32
Pay Out Event..................................................................... 43
Payment Date...................................................................... 47
Plan.............................................................................. 71
Plan Asset Regulation............................................................. 71
Plan Investor..................................................................... 71
Plans............................................................................. 71
Pooling and Servicing Agreement................................................... 1, 30
Pre-Funding Account............................................................... 13
Pre-Funding Amount................................................................ 13
Principal Allocation Percentage................................................... 38
Principal Commencement Date....................................................... 8
Principal Funding Account......................................................... 9
Principal Receivables............................................................. 5
Principal Shortfalls.............................................................. 39
</TABLE>
76
<PAGE>
<TABLE>
<S> <C>
Principal Terms................................................................... 36
Prospectus Supplement............................................................. 1
Rating Agency..................................................................... 16
Ratings Effect.................................................................... 17
Receivables....................................................................... 1, 3
Receivables Purchase Agreement.................................................... 4
Record Date....................................................................... 45
Regulations....................................................................... 67
Removal Date...................................................................... 34
Removal Notice Date............................................................... 34
Removed Accounts.................................................................. 4
Required Principal Balance........................................................ 21
Required Transferor Amount........................................................ 21
Required Transferor Percentage.................................................... 21
Revolving Period.................................................................. 9
Scheduled Accumulation Period..................................................... 9
Scheduled Amortization Period..................................................... 10
Securities Act.................................................................... 2
Series............................................................................ 1
Series Closing Date............................................................... 9
Series Enhancement................................................................ 3
Series Invested Amount............................................................ 21
Series Servicing Fee Percentage................................................... 45
Series Supplement................................................................. 7, 30
Series Termination Date........................................................... 46
Service Transfer.................................................................. 58
Servicer.......................................................................... 1, 14
Servicer Default.................................................................. 58
Servicing Fee..................................................................... 45
Shared Principal Collections...................................................... 39
Special Funding Account........................................................... 39
Special Payment Date.............................................................. 44
Standard & Poor's................................................................. 37
Supplemental Certificate.......................................................... 51
Supplemental Certificates......................................................... 6
Tax Counsel....................................................................... 66
Tax Opinion....................................................................... 37
Termination Notice................................................................ 58
Terms and Conditions.............................................................. 50
Transferor Amount................................................................. 6
Transferor Certificates........................................................... 7
Transferors....................................................................... 1, 3, 30
Transferors' Interest............................................................. 5
Trust............................................................................. 1, 3
Trust Assets...................................................................... 3
Trust Cut-Off Date................................................................ 4
Trust Portfolio................................................................... 28
Trust Termination Date............................................................ 52
Trustee........................................................................... 4
U.S. Certificate Owner............................................................ 66
U.S. Person....................................................................... 66
UCC............................................................................... 18
VISA.............................................................................. 24
Withholding Agent................................................................. 69
</TABLE>
77
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT.
A REGISTRATION STATEMENT RELATING TO
THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION
STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE
AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL
THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH
OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION
OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED OCTOBER 23, 1996
PROSPECTUS SUPPLEMENT
(To Prospectus dated _____ __, 199_) VERSION #1
CHEVY CHASE MASTER CREDIT CARD TRUST II
$__________ SERIES [199_-_] [FLOATING RATE] [____%]
ASSET BACKED CERTIFICATES
CHEVY CHASE BANK, F.S.B.,
as Transferor and as Servicer
CCB HOLDING CORPORATION,
as Transferor
The Series [199_-_] [Floating Rate] [____%] Asset Backed Certificates
(the "Certificates") offered hereby will represent undivided interests in
certain assets of the Chevy Chase Master Credit Card Trust II (the "Trust")
[to be]created pursuant to a Pooling and Servicing Agreement (the "Pooling
and Servicing Agreement") among Chevy Chase Bank, F.S.B. (the "Bank"), as
transferor and servicer (in such capacity, the "Servicer") and CCB Holding
Corporation ("CCB Holding"), a Delaware corporation, as transferor (the Bank
and CCB Holding together in their capacity as transferors, the
"Transferors"), and Bankers Trust Company, as trustee (the "Trustee"). The
property of the Trust includes receivables (the "Receivables") generated from
time to time in a portfolio of MasterCard-Registered Trademark- and
Visa-Registered Trademark- revolving credit card accounts (the "Accounts"),
collections thereon and certain other property as more fully described
herein. The Transferors initially will own the remaining undivided interest
in the Trust not represented by the Certificates and the other investor
certificates issued by the Trust. The Transferors [have offered and] may
offer from time to time other series of certificates that evidence undivided
interests in certain assets of the Trust, which may have terms significantly
different from the Certificates and which are not offered hereby. The
issuance of additional Series of Certificates may impact the timing or amount
of payments received by the holders of the Certificates.
(CONTINUED ON NEXT PAGE)
THERE IS CURRENTLY NO SECONDARY MARKET FOR THE CERTIFICATES, AND THERE
CAN BE NO ASSURANCE THAT ONE WILL DEVELOP OR, THAT IF ONE DOES DEVELOP, IT
WILL CONTINUE UNTIL THE CERTIFICATES ARE PAID IN FULL. POTENTIAL INVESTORS
SHOULD CONSIDER AMONG OTHER THINGS THE INFORMATION SET FORTH IN "SPECIAL
CONSIDERATIONS" COMMENCING ON PAGE ____ HEREIN AND ON PAGE ____ IN THE
PROSPECTUS.
THE CERTIFICATES WILL REPRESENT INTERESTS IN THE TRUST ONLY AND WILL NOT
REPRESENT INTERESTS IN OR OBLIGATIONS OF, NOR WILL THEY BE GUARANTEED BY,
EITHER BANK, THE SERVICER OR ANY AFFILIATE OF THE FOREGOING. NEITHER THE
CERTIFICATES NOR THE UNDERLYING ACCOUNTS OR RECEIVABLES OR ANY COLLECTIONS
THEREON ARE INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY OR INSTRUMENTALITY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Public Underwriting Proceeds to the
Price to (1) Discount Transferors (1)(2)
Per Certificate . . . ____% ____% ____%
Total . . . . . . . . $__________ $__________ $__________
(1) Plus accrued interest, if any, at the Certificate Rate from
[_______, 199_].
(2) Before deduction of expenses payable by the Transferors, estimated to be
$[_______].
--------------------
[The Certificates are offered by the Underwriters (defined herein) when, as
and if issued by the Trust and accepted by the Underwriters and subject to the
Underwriters' right to reject orders in whole or in part.] [The Certificates
are offered by [the Underwriters] subject to receipt and acceptance by them and
subject to their rights to reject any order in whole or in part.] It is expected
that the Certificates will be delivered in book-entry form on or about
__________, 199__, through the facilities of The Depository Trust Company [Cedel
SOCIETE ANONYME and the Euroclear System].
[Underwriters]
The date of this Prospectus Supplement is ________ __, 199_.
<PAGE>
(CONTINUED FROM PREVIOUS PAGE)
[Interest will accrue on the Certificates at the rate of ____% per annum
(the "Certificate Rate").]
[Interest will accrue on the Certificates with respect to the initial Interest
Period at the rate of ____% per annum and, with respect to each subsequent
Interest Period, at the rate of ____% per annum [above] [below] [times]
__________ (the "Index") prevailing on the Rate Determination Date, as defined
herein, [but in no event in excess of ____% per annum] (the "Certificate
Rate").] Interest with respect to the Certificates will be distributed on
[__________] and on the [__________] day of each [month][quarter] [other]
thereafter (or, if such [__________] day is not a business day, the next
succeeding business day) (each, an "Interest Payment Date").
Principal with respect to the Certificates is scheduled to be [paid on
__________, 199__] [distributed on each Distribution Date commencing on the
Distribution Date in __________ and ending on the Distribution Date in
__________], but may be paid earlier or later under certain limited
circumstances described herein. See "Maturity Considerations" and "Series
Provisions--Pay Out Events" herein and "Description of the Certificates--Pay Out
Events" in the Prospectus.
[THE CERTIFICATES WILL BE SUBORDINATED TO [SERIES [199_-_]] [ANY OTHER
SERIES] TO THE EXTENT DESCRIBED HEREIN.](1)
[The Trust will have the benefit of funds on deposit in a cash collateral
account (the "Cash Collateral Account"), which will be funded by an initial
deposit of $[__________]. Amounts available to be withdrawn from the Cash
Collateral Account will be applied as described herein under "Summary of Series
Terms--Cash Collateral Account" and "--Series Provisions--Cash Collateral
Account."](2)
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVERALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE
CERTIFICATES AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
THE CERTIFICATES OFFERED HEREBY CONSTITUTE A SEPARATE SERIES OF
CERTIFICATES BEING OFFERED BY THE TRUST FROM TIME TO TIME PURSUANT TO ITS
PROSPECTUS DATED [_____ __, 199_]. THIS PROSPECTUS SUPPLEMENT DOES NOT
CONTAIN COMPLETE INFORMATION ABOUT THE OFFERING OF THE CERTIFICATES.
ADDITIONAL INFORMATION IS CONTAINED IN THE PROSPECTUS AND PURCHASERS ARE
URGED TO READ BOTH THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS IN FULL.
SALES OF THE CERTIFICATES MAY NOT BE CONSUMMATED UNLESS THE PURCHASER HAS
RECEIVED BOTH THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS.
- ---------------------
(1) If the Certificates are to be subordinated to other Series, the Prospectus
Supplement will include appropriate descriptions of the subordination
provisions and related special considerations.
(2) Other forms of credit enhancement may be provided for the benefit of a
Series as described under "Description of the Certificates-Credit
Enhancement" in the Prospectus, and if so provided, the Prospectus Supplement
will reflect the provisions of such Credit Enhancement that are material to
the Certificateholders of such Series, as well as necessary information, if
any, with respect to the credit enhancement provider.
S-2
<PAGE>
SUMMARY OF SERIES TERMS
The following is qualified in its entirety by reference to the detailed
information appearing elsewhere in this Prospectus Supplement and the
accompanying Prospectus. Reference is made to the Index of Defined Terms in
each of this Prospectus Supplement and the Prospectus for the location herein
and therein of the definitions of certain capitalized terms used herein.
Certain capitalized terms used but not defined herein have the meanings assigned
to them in the Prospectus.
<TABLE>
<CAPTION>
<S> <C>
Title of Securities. . . . . . . $[__________] Series [199_-_] [Floating Rate] [____%]
Asset Backed Certificates (the "Certificates").
Trust. . . . . . . . . . . . . . The Chevy Chase Master Credit Card Trust II (the
"Trust") was formed pursuant to a Pooling and
Servicing Agreement (the "Pooling and Servicing
Agreement"), among Chevy Chase Bank, F.S.B. (the
"Bank"), as transferor and servicer (in such capacity,
the "Servicer"), CCB Holding Corporation ("CCB
Holding"), a Delaware corporation, as transferor (the
Bank and CCB Holding, together in their capacities as
transferors, the "Transferors"), and Bankers Trust
Company, as trustee (the "Trustee"), as supplemented
by the Series Supplement relating to the Certificates
(the "Series [199_-__] Supplement").
Trust Assets . . . . . . . . . . The property of the Trust includes receivables
(the "Receivables") arising under certain
MasterCard-Registered Trademark- and
VISA-Registered Trademark-(3) revolving credit
card accounts (the "Accounts") randomly
selected from a designated portion of the
portfolio of MasterCard and VISA accounts owned
by the Transferors (the "Designated
Portfolio"), all monies due or to become due in
payment of the Receivables (other than
recoveries on charged-off Receivables), all
proceeds of the Receivables and proceeds of
credit insurance policies relating to the
Receivables, the right to receive Interchange
(defined herein) allocable to the Certificates
[(which right may not be afforded to other Series
issued by the Trust)] and all monies on deposit in
certain accounts of the Trust (other than investment
earnings on such amounts)[, and any Credit Enhancement
issued with respect to any Series]. [The benefits of
any Credit Enhancement issued with respect to a
Series, other than Series [199_-__], will not be
available for the benefit of Certificateholders and
holders of certificates of other Series will not be
entitled to the benefits of any Credit Enhancement
for Series [199_-__].
The Transferors have conveyed to the Trustee
for the benefit of the Trust all Receivables
existing under certain Accounts that
- ---------------------------
(3) MasterCard-Registered Trademark- and VISA-Registered Trademark- are registered
trademarks of MasterCard International Incorporated and of VISA USA, Inc., respectively.
S-3
<PAGE>
were randomly selected from the Bank Portfolio based
on criteria provided in the Pooling and
Servicing Agreement as applied on the Trust
Cut-off Date (as defined herein) [and with respect
to certain Additional Accounts (defined herein), as
applied on [______ __, 199_], have conveyed and will
convey all Receivables arising under the
Accounts from time to time thereafter until the
termination of the Trust. In addition,
pursuant to the Pooling and Servicing
Agreement, the Transferors may (subject to
certain limitations and conditions) designate
Additional Accounts for inclusion in the Trust.
Also, the Pooling and Servicing Agreement
provides that, in lieu of Additional Accounts
or in addition thereto, the Transferors may,
subject to certain conditions, include
Participations in the Trust. See "The
Receivables" herein and "Description of the
Certificates--Addition of Trust Assets" in the
Prospectus.
Receivables. . . . . . . . . . . The Receivables arise in Accounts that have
been randomly selected from the Bank Portfolio,
based on criteria provided in the Pooling and
Servicing Agreement as applied on the Trust
Cut-Off Date and as more fully described herein
under "The Bank Portfolio." The Receivables
consist of Principal Receivables and Finance
Charge Receivables. In addition, certain
amounts of Interchange attributed to cardholder
charges for goods and services in the Accounts
will be allocated to the Certificates and
treated as Finance Charge Receivables. See
"The Bank's Credit Card
Activities--Interchange" in the Prospectus.
The aggregate amount of Receivables in the Accounts
as of [________ __, ____], the [Trust Cut-Off Date]
[Closing Date] was $[__________], comprised of
$[__________] of Principal Receivables and
$[__________] of Finance Charge Receivables. The
Finance Charge Receivables will not affect the Invested
Amount of the Certificates [and the Collateral
Interest] or the amount of the Transferors' Interest,
which are determined on the basis of the amount of
Principal Receivables in the Trust. [The aggregate
interest in the Principal Receivables in the Trust
evidenced by the Certificates and the Collateral
Interest will never exceed the amount of the Investor
Interest regardless of the total amount of Principal
Receivables in the Trust at any time].
Initial Invested Amount $[__________].(4)
Series Invested Amount . . . . . The [Initial Invested Amount] [plus the amount of any
withdrawals from the Pre-Funding Account in connection with
- -----------------------------
(4) Adjustments to the Invested Amount definition and allocations with respect to the
Invested Amount may be made in a Prospectus Supplement relating to a prefunded Series.
S-4
<PAGE>
the purchase of an additional interest in the
Principal Receivables] [other formula].
Certificate Rate . . . . . . . . [[____]% per annum] [[____]% per annum with respect
to the initial Interest Period and, with respect to
each subsequent Interest Period, ____% per annum
[above] [below] [times] ____ (the "Index") prevailing
on the [____] day immediately preceding the
commencement of such Interest Period (a "Rate
Determination Date")[, but in no event in excess
of ____% per annum]].
Interest Payment Dates . . . . . The [____] day of each [month] [quarter] [other] (or,
if any such day is not a business day, the next
business day), commencing [______ __, 199_].
Controlled [Amortization]
[Accumulation] Amount. . . . . For each Distribution Date with respect to the
[Controlled Amortization] [Accumulation] Period,
$[__________]; [except that, if the commencement of
the Scheduled Accumulation Period is delayed as
described herein under "Series Provisions--Principal
Payments," the Controlled Accumulation Amount for each
Distribution Date with respect to the Scheduled
Accumulation Period will be determined as described
under "Series Provisions--Application of Collections
--Payment of Principal."]
Expected Final Payment Date [_______ __, ____].
[Initial Cash Collateral
Amount . . . . . . . . . . . . $[__________].]
Closing Date . . . . . . . . . . [________ __, 199_]
The Certificates . . . . . . . . Each of the Certificates offered hereby represents an undivided
interest in the Trust (the "Certificateholders' Interest"). The
principal amount of the Certificateholders' Interest [will
decline as principal is paid to the Certificateholders during
the Controlled Amortization Period or Early Amortization Period]
[will remain fixed at the aggregate initial principal amount of
the Certificates, except as otherwise provided herein]. [During
the Scheduled Accumulation Period, for the sole purpose of
allocating collections of Finance Charge Receivables and the
Defaulted Amount with respect to each Monthly Period, the
Certificateholders' Interest will be further reduced by the
amount on deposit in the Principal Funding Account (as so
reduced, the "Adjusted Invested Amount").]
The Certificateholders' Interest will include the right to receive
(but only to the extent needed to make payments of interest at the
S-5
<PAGE>
Certificate Rate with respect to each Interest
Period and payments of principal as described herein), varying
percentages of the collections of Finance Charge Receivables and
Principal Receivables and will be allocated a varying percentage
of the Defaulted Amount with respect to each Monthly Period.
Collections of Finance Charge Receivables and the Defaulted
Amount will be allocated to the Certificateholders based on the
Floating Allocation Percentage. Collections of Principal
Receivables will be allocated to the Certificates based on the
Principal Allocation Percentage. Such percentage will vary as
described herein under "Series Provisions--Allocation
Percentages" as the aggregate amount of Principal Receivables in
the Trust varies from month to month and depending on whether
the Certificates are in their Revolving Period, [Controlled
Amortization] [Accumulation] Period or Early Amortization
Period. See "Description of the Certificates--Allocation
Percentages" in the Prospectus. [Following the occurrence of an
Economic Pay Out Event (defined herein) and a withdrawal of
funds from the Cash Collateral Account, a portion of the
Certificateholders' Interest (corresponding to the aggregate
amount of such withdrawal) will be allocated to the Cash
Collateral Depositor (the "Enhancement Invested Amount").]
[Other Series. . . . . . . . . . [The Certificates are the first Certificates issued by the
Trust] [Additional Series are expected to be issued from time to
time by the Trust.] See "Description of the Certificates--New
Issuances" in the Prospectus and "Maturity Considerations"
herein.](5)
[Subordination to Other Series. .The Certificates will be subordinated in right
of payment of [interest] [and] [principal] to
the certificates of Series [199_-_].]
[Funding Period. . . . . . . . . During the period from and including the Closing Date to, but
excluding, the earliest of (i) the day on which the Series
[199_-__] Invested Amount equals $[__________] (the "Full
Invested Amount"), (ii) the day on which a Pay Out Event occurs
and (iii) the [______ 199_] Distribution Date (the "Funding
Period"), the Pre-Funding Amount will be held in a trust account
established with the Trustee for the benefit of the
Certificateholders (the "Pre-Funding Account"). The "Pre-
Funding Amount" will equal $[______], less the amounts of any
increases in the Invested Amount pursuant to the Series [199_-_]
Supplement in connection with the addition of Principal
Receivables to the Trust or principal payments made to other
amortizing Series.]
- ------------------------------
(5) If Series [199_-_] is issued at a time when there are other outstanding Series, appropriate
summary disclosure about the principal terms of such other Series will be included in the
Prospectus Supplement.
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<PAGE>
[Funds on deposit in the Pre-Funding Account will be invested by
the Trustee in certain Eligible Investments [pursuant to a
guaranteed rate agreement] [guaranteed investment contract].
Interest earnings on the Pre-Funding Amount (net of investment
losses and expenses) will be used to pay interest on the
Certificates during the Funding Period.]
[During the Funding Period, funds on deposit in the Pre-Funding
Account will be withdrawn and paid to the Transferors to the
extent of any increases in the Invested Amount. The Transferors
expect that the Invested Amount will equal the Full Invested
Amount by the [______ 199_] Monthly Period. If the Invested
Amount does not for any reason equal the Full Invested Amount by
the end of the Funding Period, any amount remaining in the Pre-
Funding Account will be payable to the Certificateholders on the
Distribution Date that is the last day of the Funding Period.]
[Early Termination Amount. . . . An early termination amount (the "Early Termination Amount")
will be payable by the Transferors to the Certificateholders on
the first Distribution Date following the end of the Funding
Period if any Pre-Funding Amount exists at the end of the
Funding Period. The Early Termination Amount will equal the
excess, if any, discounted as described below, of (i) the amount
of interest that would have accrued on such Pre-Funding Amount
at the Certificate Rate during the period commencing on and
including such Distribution Date to, but excluding,
[__________], over (ii) the amount of interest that would have
accrued on such Pre-Funding Amount over the same period at a per
annum rate of interest equal to the bond equivalent yield to
maturity on the [___] day preceding such Distribution Date on
[________]. Such excess shall be discounted to present value to
such Distribution Date at the applicable yield described in
clause (ii).]
Denominations. . . . . . . . . . Beneficial interests in the Certificates will be offered for
purchase in denominations of $[_________] and integral multiples
thereof.
[Registration of Certificates. . The Certificates initially will be represented
by Certificates registered in the name of Cede,
as the nominee of DTC. No purchaser of a
Certificate will be entitled to receive a
definitive certificate except under certain
limited circumstances. Purchasers of the
Certificates may elect to hold their
Certificates through DTC (in the United States)
[or Cedel or Euroclear (in Europe)]. See "The
Pooling and Servicing Agreement--Definitive
Certificates" in the Prospectus.]
Servicing Fee. . . . . . . . . . The Servicing Fee Rate for the Certificates will be [____]% per
annum. The Servicing Fee will be paid on each Distribution
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
Date as described under "Series Provisions--Application
of Collections--Payment of Fees, Interest and Other
Items" and "--Servicing Compensation and Payment of Expenses" herein. See
"Description of the Certificates--Servicing Compensation and
Payment of Expenses" in the Prospectus.
Revolving Period and
[Controlled Amortization]
[Accumulation] Period. . . . . . Unless a Pay Out Event has occurred, the Revolving Period with
respect to the Certificates will end and the [controlled
amortization period with respect to the Certificates (the
"Controlled Amortization Period")] [accumulation period with
respect to the Certificates (the "Scheduled Accumulation
Period")] will commence at the close of business on
[__________]] [(except that, subject to the conditions set forth
under "Series Provisions--Principal Payments" herein, the day on
which the Revolving Period ends and the Scheduled Accumulation
Period begins may be delayed to no later than the close of
business on [__________])]. The [Controlled Amortization]
[Accumulation] Period] will end on the earliest of (a) the
commencement of the Early Amortization Period, (b) the payment
in full of the Invested Amount or (c) the termination date for
Series [199_-__] (the "Termination Date"). No principal will be
payable to Certificateholders until [the first Distribution Date
with respect to the Controlled Amortization Period] the Expected
Final Payment Date], or, upon the occurrence of a Pay Out Event
as described herein, the first Distribution Date with respect to
the Early Amortization Period. [For the period beginning on the
Closing Date and ending with the commencement of the [Controlled
Amortization] [Accumulation] Period or the Early Amortization
Period, collections of Principal Receivables otherwise allocable
to the Certificateholders' Interest will, subject to certain
limitations, be treated as Shared Principal Collections and
applied to make principal payments due to or for the benefit of
Certificateholders of other Series, if so specified in the
Supplements for such other Series, or paid to the holders of the
Transferor Certificates.] See "Series Provisions--Pay Out
Events" herein and "Description of the Certificates--Pay Out
Events" in the Prospectus for a discussion of the events which
might lead to the termination of the Revolving Period prior to
the commencement of the [Controlled Amortization] [Accumulation]
Period. In addition, see "Series Provisions--Principal
Payments" herein [and "Description of the Certificates--Shared
Principal Collections" in the Prospectus].
[Excess Finance Charge
Collections. . . . . . . . . . . The Certificates will be included in a group of Series ("Group
[____]") expected to be issued by the Trust from time to time.
Subject to certain limitations described under "Description of the
S-8
<PAGE>
Certificates--Sharing of Excess Finance Charge Collections"
in the Prospectus, Excess Finance Charge Collections, if any,
with respect to a Series included in Group [____] will be
applied to cover any shortfalls with respect to amounts payable
from collections of Finance Charge Receivables allocable to any
other Series in Group [____], PRO RATA based upon the amount of
the shortfall, if any, with respect to each Series in Group
[____]. See "Description of the Certificates--Sharing of Excess
Finance Charge Collections" in the Prospectus.]
[Shared Principal Collections. . . . Collections of Principal Receivables and certain
other amounts otherwise allocable to other
Series, to the extent such collections are not
needed to make payments to or deposits for the
benefit of the certificateholders of such other
Series, will be applied to cover principal
payments due to or for the benefit of the
holders of the Certificates. See "Description
of the Certificates--Shared Principal
Collections" in the Prospectus.]
[Cash Collateral Account. . . . . . A cash collateral account (the "Cash Collateral Account") will
be established in the name of the Trustee for the benefit of the
Certificateholders. The Cash Collateral Account will be funded
on the Closing Date in the amount of $[__________] (the "Initial
Cash Collateral Amount"), which amount will include the proceeds
of an advance to be made by the Cash Collateral Depositor
pursuant to the Loan Agreement. On each Distribution Date, the
Available Cash Collateral Amount will be applied to fund the
Required Amount, if any, with respect to such Distribution Date.
[On the first Special Payment Date following an Economic Pay Out
Event, the Available Cash Collateral Amount (after giving effect
to other withdrawals from the Cash Collateral Account on such
Distribution Date), will be applied to pay principal of the
Certificates, up to the Invested Amount. Following such
withdrawal from the Cash Collateral Account on such Special
Payment Date, the Cash Collateral Account will be terminated and
no further deposits to, or withdrawals from, the Cash Collateral
Account will be made for the benefit of the Certificateholders.]
[On each Distribution Date, Available Finance Charge Collections
allocated and available for that purpose (as described under
"Series Provisions--Application of Collections--Payment of Fees,
Interest and Other Items") will be applied to increase the
amount on deposit in the Cash Collateral Account (to the extent
such amount is less than the Initial Cash Collateral Amount).
In addition, if on any Distribution Date the amount on deposit
in the Cash Collateral Account exceeds [the lesser of] the
Initial Cash Collateral Amount [and the Adjusted Invested Amount], such
S-9
<PAGE>
excess will be withdrawn and paid to the Cash
Collateral Depositor for application in accordance with the Loan
Agreement. See "Series Provisions--Cash Collateral Account".]]
[Credit Enhancement. . . . . . . . . The Trust will have the benefit of a [letter of credit] [surety
bond] [insurance policy] [spread account] [reserve account]
[other credit enhancement] [issued by __________] for the
benefit of the Certificateholders as described herein. See
"Series Provisions--Credit Enhancement" herein.]
[Optional Repurchase . . . . . . . . The Certificateholders' Interest will be subject to optional
repurchase by the Transferors on any Distribution Date after the
[sum of the] Invested Amount [and the Enhancement Invested
Amount, if any,] is reduced to an amount less than or equal to
$[__________] ([___]% of the Initial Invested Amount). The
purchase price will be equal to the [sum of the Invested Amount
[(less the Principal Funding Account Balance, if any)] [and the
Enhancement Invested Amount, if any,] and accrued and unpaid
interest on the Certificates [(and accrued and unpaid interest
with respect to interest amounts that were due but not paid on a
prior Interest Payment Date)] through (a) if the day on which
such purchase occurs is a Distribution Date, the day preceding
such Distribution Date or (b) if the day on which such
repurchase occurs is not a Distribution Date, the day preceding
the Distribution Date following such day. See "Description of
the Certificates--Optional Termination; Final Payment of
Principal" in the Prospectus.]
Required Principal Balance;
Addition of Accounts. . . . . . .The Series [199_-_] Supplement provides that the Transferors
will be required to make an Addition of Accounts to the Trust if
the amount of Principal Receivables in the Trust is not
maintained at a minimum level equal to the sum of the initial
invested amounts of each Series then outstanding (provided that
certain Series may be excluded from such calculation [if the
issuance of such Series will not result in a Ratings Effect])
less amounts on deposit in the Special Funding Account [and
Principal Funding Account]. See "Series Provisions--Required
Principal Balance; Addition of Accounts" herein and "Description
of the Certificates--Addition of Trust Assets" in the
Prospectus.
Termination Date . . . . . . . . . . [__________ __, ____]. See "Series Provisions--Series
Termination."
[Defeasance. . . . . . . . . . . . . In certain circumstances and subject to certain conditions, the
Transferors may terminate their substantive obligations in
respect of Series [199_-_] or the Pooling and Servicing
Agreement as a whole. See "Description of the Certificates--
Defeasance" in the Prospectus.]
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<PAGE>
Trustee. . . . . . . . . . . . . . . Bankers Trust Company, in its capacity as Trustee under the
Pooling and Servicing Agreement.
Tax Status . . . . . . . . . . . . . Special tax counsel to the Transferors is of the opinion that
under existing law the Certificates will be characterized as
debt for federal income tax purposes. Under the Pooling and
Servicing Agreement, the Certificate Owners will agree to treat
the Certificates as debt for federal income tax purposes. See
"Certain Federal Income Consequences" in the Prospectus for
additional information concerning the application of federal
income tax laws.
ERISA Considerations . . . . . . . . Under a regulation issued by the Department of Labor (the "Plan
Asset Regulation"), the Trust's assets would not be deemed "plan
assets" of an employee benefit plan (a "Plan") holding the
Certificates if certain conditions are met, including that the
Certificates must be held, upon completion of the public
offering made hereby, by at least 100 investors who are
independent of the Transferors and of one another. The
Underwriter[s] expect[s] that the Certificates will be held by
at least 100 independent investors at the conclusion of the
offering, although no assurances can be given, and no monitoring
or other measures will be taken to ensure that such conditions
will be met. The Transferors anticipate that the other
conditions of the Plan Asset Regulation will be met. If the
Trust's assets were deemed to be "plan assets" of Plan investor
(E.G., if the 100 independent investor criterion is not
satisfied), violations of the "prohibited transaction" rules of
the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), could result and generate excise tax and other
liabilities under ERISA and Section 4975 of the Code, unless a
statutory, regulatory or administrative exemption is available.
Accordingly, Plan fiduciaries contemplating purchasing the
Certificates should consult their counsel before making a
purchase. See "ERISA Considerations" in the Prospectus.
Certificate Rating . . . . . . . . . It is a condition to the issuance of the Certificates that they
be rated in [the highest rating category] [one of the four
highest rating categories] by at least one nationally recognized
rating agency. [The rating of the Certificates is based
primarily on the value of the Receivables, [the Initial Cash
Collateral Amount and the circumstances in which funds may be
withdrawn from the Cash Collateral Account in respect of the
Certificates] [other reasons]]. See "Special Considerations--
Limited Nature of Rating" in the Prospectus.
[Listing . . . . . . . . . . . . . . Application will be made to list the Certificates on the
[Luxembourg Stock Exchange] [other exchange].]
</TABLE>
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<PAGE>
SPECIAL CONSIDERATIONS
Potential investors should consider, among other things, the risk
factors discussed under "Special Considerations" in the Prospectus and the
following risk factors in connection with the purchase of the Certificates.
Limited Amounts of Credit Enhancement. Although Credit Enhancement with
respect to the Certificates will be provided by the [the Cash Collateral
Account] [Credit Enhancement], the amount available thereunder is limited,
[is expected to] [may] decline during the [Controlled Amortization]
[Accumulation] Period or the Early Amortization Period and will be reduced by
payments made pursuant thereto. If the amount available under [the Cash
Collateral Account][such Credit Enhancement] has been reduced to zero,]
Certificateholders will bear directly the credit and other risks associated
with their respective undivided interests in the Trust.
MATURITY CONSIDERATIONS
The Pooling and Servicing Agreement and the Series [199_-_] Supplement
(defined herein) provide that Certificateholders will not receive payments of
principal until [the first Distribution Date with respect to the [Controlled
Amortization Period], which is the __________, 199_ Distribution Date,]
[__________, 199_ (the "Expected Final Payment Date")], or earlier in the
event of a Pay Out Event that results in the commencement of the Early
Amortization Period. Certificateholders will receive payment of principal on
each Distribution Date following the Monthly Period in which a Pay Out Event
occurs (each such Distribution Date, a "Special Payment Date") until the
Invested Amount has been paid in full or the Termination Date has occurred.
[On each Distribution Date during the Controlled Amortization Period,
the Certificateholders will be entitled to receive monthly payments of
principal until the Certificates have been paid in full equal to the least of
(a) Available Principal Collections (see "Series Provisions--Principal
Payments") for the related Monthly Period on deposit in the Collection
Account, (b) the Controlled Distribution Amount, which is equal to the sum of
the Controlled Amortization Amount and any existing Deficit Controlled
Amortization Amount (both as defined under "Series Provisions--Application of
Collections--Payments of Principal") and (c) the Invested Amount.]
[On each Distribution Date during the Scheduled Accumulation Period,
amounts equal to the least of (a) Available Principal Collections (see
"Series Provisions--Principal Payments") for the related Monthly Period on
deposit in the Collection Account, (b) the Controlled Deposit Amount, which
is equal to the sum of the Controlled Accumulation Amount for such Monthly
Period and any Deficit Controlled Accumulation Amount (both as defined under
"Series Provisions--Application of Collections--Payments of Principal"
herein) and (c) the Adjusted Invested Amount will be deposited in the
Principal Funding Account held by the Trustee (the "Principal Funding
Account") until the Principal Funding Account Balance is equal to the
Invested Amount. See "Series Provisions--Principal Payments" for a
discussion of the circumstances under which the commencement of the Scheduled
Accumulation Period may be delayed.]
[The Transferors may, at or after the time at which the [Controlled
Amortization] [Scheduled Accumulation] Period commences for Series [199_-_],
cause the Trust to issue another Series (or some portion thereof, to the
extent that the full principal amount of such other Series is not otherwise
outstanding at such time) as a Paired Series with respect to Series [199_-_].
Although no assurances can be given as to whether such other Series will be
issued and, if issued, the terms thereof, the outstanding principal amount of
such Series may vary from time to time whether or not a Pay Out Event occurs
with respect to the Certificates, and the interest rate with respect to
certificates of such other Series may be established on its
S-12
<PAGE>
date of issuance and may be reset periodically at intervals of from one day
to [____] days. Further, since the terms of the Certificates will vary from
the terms of such other Series, the Pay Out Events with respect to such other
Series will vary from the Pay Out Events with respect to Series [199_-_] and
may include Pay Out Events which are unrelated to the status of the
Transferors or the Servicer or the Receivables, such as Pay Out Events
related to the continued availability and rating of certain providers of
Series Enhancement to such other Series. If a Pay Out Event does occur with
respect to any such Paired Series prior to the payment in full of the
Certificates, the final payment of principal to the Certificateholders may be
delayed.]
[Should a Pay Out Event occur with respect to the Certificates and the
Early Amortization Period commence or should the Invested Amount not be paid
in full on [the __________ Distribution Date] [the Expected Final Payment
Date], [any amount on deposit (a) in the Principal Funding Account will be
paid to the Certificateholders on the first Special Payment Date and] the
Certificateholders will be entitled to receive Available Principal
Collections on each Distribution Date with respect to such Early Amortization
Period or following the [_________] Distribution Date] [Expected Final
Payment Date], as the case may be, as described herein until the Invested
Amount is paid in full or until the Series Termination Date occurs [and (b)
in the Special Funding Account will be released and treated as Shared
Principal Collections to the extent needed to cover principal payments due to
or for the benefit of any Series entitled to the benefits of Shared Principal
Collections]. See "Description of the Certificates--Pay Out Events" in the
Prospectus and "Series Provisions--Pay Out Events" herein. [In addition, on
the first Special Payment Date following the occurrence of an Economic Pay
Out Event, after giving effect to any payment of principal on such date as
described under "Series Provisions--Application of Collections--Payments of
Principal," an amount equal to the lesser of (i) the excess, if any, of the
Available Cash Collateral Amount (after giving effect to any withdrawal from
the Cash Collateral Account on such date of amounts to fund the Required
Amount) and (ii) the unpaid principal amount of the Certificates (less the
Principal Funding Account Balance), will be withdrawn from the Cash
Collateral Account and distributed to the Certificateholders as a payment of
principal of the Certificates. See "Series Provisions--Principal Payments"
and "--Cash Collateral Account."]
The ability of Certificateholders to receive payments of principal
[during the Controlled Amortization Period] [on the Expected Final Payment
Date] depends on the payment rates on the Receivables, the amount of
outstanding Receivables, delinquencies, charge-offs and new borrowings on the
Accounts and the potential issuance by the Trust of additional Series.
Monthly payment rates on the Receivables may vary because, among other
things, cardholders may fail to make a required minimum payment, may only
make payments as low as the minimum required amount or may make payments as
high as the entire outstanding balance. Monthly payment rates may also vary
due to seasonal purchasing and payment habits of cardholders and to changes
in any terms of rebate programs in which cardholders participate. See the
table entitled "Cardholder Monthly Payment Rates for the Designated
Portfolio" under "The Designated Portfolio" herein. The Transferors cannot
predict, and no assurance can be given, as to the cardholder monthly payment
rates that will actually occur in any future period, as to the actual rate of
payment of principal of the Certificates or whether the terms of any
subsequently issued Series might have an impact on the amount or timing of
any such payment of principal. See "Special Considerations--Payment and
Maturity Considerations; Dependency or Cardholder Repayments" and
"Description of the Certificates--Shared Principal Collections" in the
Prospectus.
In addition, the amount of outstanding Receivables and delinquencies,
charge-offs and new borrowings on the Accounts may vary from month to month
due to seasonal variations, the availability of other sources of credit,
legal factors, general economic conditions and spending and borrowing habits
of individual cardholders. There can be no assurance that collections of
Principal Receivables with respect to the Trust Portfolio, and thus the rate
at which Certificateholders could expect to receive payments of principal on
their Certificates during the [Controlled Amortization Period or the] Early
Amortization Period [or the rate at which the Principal Funding Account could
be funded during the Scheduled Accumulation
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<PAGE>
Period], will be similar to the historical experience set forth in the table
entitled "Cardholder Monthly Payment Rates for the Designated Portfolio" under
"The Designated Portfolio" herein. In addition, the Trust, as a master trust,
may issue additional Series from time to time, and there can be no assurance
that the terms of any such Series might not have an impact on the timing or
amount of payments received by Certificateholders. Further, if a Pay Out Event
occurs, the average life and maturity of the Certificates could be significantly
reduced.
Due to the reasons set forth above, there can be no assurance that
[principal payments] [deposits in the Principal Funding Account] will be made
in accordance with the applicable Controlled [Amortization] [Accumulation]
Amounts or that the actual number of months elapsed from the date of issuance
of the Certificates to the final Distribution Date with respect thereto will
equal the expected number of months. See "Special Considerations--Payment
and Maturity Considerations; Dependency on Cardholder Repayments" in the
Prospectus.
THE DESIGNATED PORTFOLIO
GENERAL
Set forth below is certain information with respect to the Designated
Portfolio. See "The Bank's Credit Card Activities" in the Prospectus. There
can be no assurance that the yield, loss and delinquency experience with
respect to the Receivables will be comparable to that set forth below with
respect to the entire Designated Portfolio.
DELINQUENCY AND LOSS EXPERIENCE
The following tables set forth the delinquency experience for the
Designated Portfolio at the date shown and loss experience for the Designated
Portfolio for each of the periods shown. The Accounts constituting the Trust
Portfolio have been randomly selected from accounts in the Designated
Portfolio based on certain eligibility criteria specified in the Pooling and
Servicing Agreement. See "The Accounts" in the Prospectus. There can be no
assurance that the delinquency and loss experience for the Receivables in the
Trust Portfolio will be similar to the historical experience set forth below.
S-14
<PAGE>
DELINQUENCY EXPERIENCE
DESIGNATED PORTFOLIO
(Dollars in Thousands)
<TABLE>
<CAPTION>
At December 31,
----------------------------------------------------------------------------
[199_] [199_] [199_]
------------------------ ------------------------ ------------------------
Percentage Percentage Percentage
of Total of Total of Total
Receivables Receivables Receivables Receivables Receivables Receivables
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Receivables Outstanding(1) . $ % % $ %
Receivables Delinquent:
30-59 Days . . . . . . . . $ % $ % $ %
60-89 Days . . . . . . . .
90 Days or More. . . . . .
----------- ----------- ----------- ----------- ----------- -----------
TOTAL $ % $ % $ %
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
</TABLE>
- ---------------
(1) "Receivables Outstanding" on the accounts consist of all amounts due
from cardholders as posted to the accounts at the dates shown.
LOSS EXPERIENCE
DESIGNATED PORTFOLIO
(Dollars in Thousands)
Year Ended December 31,
-----------------------
[199_] [199_] [199_]
------ ------ ------
Average Receivables Outstanding(1) . . . . . . $ $ $
Total Gross Charge-Offs(2) . . . . . . . . . . $ $ $
Total Gross Charge-Offs as a percentage of
Average Receivables Outstanding. . . . . . . % % %
- ---------------
(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.
REVENUE EXPERIENCE
The following table sets forth the revenues from finance charges and fees
billed with respect to the Designated Portfolio for each year during the
three-year period ended December 31, [199_].
S-15
<PAGE>
YIELD EXPERIENCE
DESIGNATED PORTFOLIO
(Dollars in Thousands)
Year Ended December 31,
-----------------------
[199_] [199_] [199_]
------ ------ ------
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 . . . . . . . . . . . . . . . . . % % %
------ ------ ------
------ ------ ------
- ---------------
(1) "Finance Charges and Fees" are comprised of monthly periodic finance
charges and other credit card fees.
(2) "Average Account Monthly Accrued Finance Changes and Fees" are presented
net of adjustments made pursuant to the Bank's normal servicing procedures,
including removal of incorrect or disputed monthly periodic finance changes.
(3) "Average Account Balances" includes purchases, cash advances and accrued
and unpaid monthly periodic finance and other charges and are calculated
based on the average of the account balances during the periods shown for
accounts with charging privileges.
(4) "Yield from Finance Charges and Fees" is the result of dividing the
annualized Average Account Monthly Accrued Finance Charges and Fees by the
Average Account Balance for the period.
(5) "Yield from Interchange" is the result of dividing annualized revenue
attributable to Interchange received during the period by the Average
Account Balance for the period. The amount of Interchange for each of the
periods indicated above has been estimated.
[The yield on the Designated Portfolio shown in the table above is
comprised of three primary components: monthly periodic rate finance charges,
the amortized portion of annual fees and other service charges, such as cash
advance fees, late charges, overlimit charges and other miscellaneous fees.
If payment rates decline, the balances subject to monthly periodic finance
charges tend to grow, assuming no change in the level of purchasing activity.
Conversely, if payment rates increase, the balances subject to monthly
periodic finance charges tend to fall, assuming no change in the level of
purchasing activity. Accordingly, under these circumstances, the yield
related to periodic finance charges normally increases. The yield related to
service charges varies with the type and volume of activity in and the amount
of each account. As account balances increase, annual fees, which remain
constant, represent a smaller percentage of the aggregate account balances.]
PAYMENT RATES
The following table sets forth the highest and lowest cardholder monthly
payment rates for the Designated 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 payments of Principal Receivables and Finance Charge
Receivables with respect to the Accounts.
S-16
<PAGE>
CARDHOLDER MONTHLY PAYMENT RATES
DESIGNATED PORTFOLIO
Year Ended December 31,
-----------------------
[1994] [1993] [1992]
------ ------ ------
Lowest . . . . . . . . . . . . . . % % %
Highest. . . . . . . . . . . . . . % % %
Monthly Average. . . . . . . . . . % % %
THE RECEIVABLES
The Receivables in the Trust Portfolio, as of [__________ ___], [199_]
the [Trust Cut-Off Date][Closing Date], included $[_________] of Principal
Receivables and $[__________] of Finance Charge Receivables. The Accounts
had an average Principal Receivable balance of $[__________] and an average
credit limit of $[__________]. The percentage of the aggregate total
Receivables balance to the aggregate total credit limit was [___]%. The
average age of the Accounts was approximately [____] months. As of the
[Trust Cut-Off Date][Closing Date], all of the Accounts in the Trust
Portfolio were VISA or MasterCard credit card accounts, of which [____]% were
classic accounts and [____]% were gold accounts, and the aggregate Principal
Receivable balances of classic accounts and gold accounts, as a percentage of
the total aggregate Principal Receivables, were [____]% and [____]%,
respectively.
The following tables summarize the Trust Portfolio by various criteria
as of the [Trust Cut-Off Date][Closing Date]. References to "Receivables
Outstanding" in the following tables include both Finance Charge Receivables
and Principal Receivables. Because the future composition of the Trust
Portfolio may change over time, these tables are not necessarily indicative
of the composition of the Trust Portfolio at any subsequent time.
COMPOSITION BY ACCOUNT BALANCE
TRUST PORTFOLIO
<TABLE>
<CAPTION>
Percentage
of Total Percentage
Number of Number of of Total
Account Balance Range Accounts Accounts Receivables Receivables
--------------------- --------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Credit Balance . . . . . . . . % $ %
No Balance . . . . . . . . . .
$0.01 - $500.00 . . . . . . . .
$500.01 - $1,000.00 . . . . . .
$1,000.01 - $3,000.00 . . . . .
$3,000.01 - $5,000.00 . . . . .
$5,000.01 - $10,000.00 . . . .
$10,000.01 or more . . . . . .
--------- ----------- ----------- -----------
TOTAL . . . . . . . . . 100.0% $ 100.0%
--------- ----------- ----------- -----------
--------- ----------- ----------- -----------
</TABLE>
S-17
<PAGE>
COMPOSITION BY CREDIT LIMIT
TRUST PORTFOLIO
Percentage
of Total Percentage
Number of Number of of Total
Credit Limit Range Accounts Accounts Receivables Receivables
------------------ --------- ---------- ----------- -----------
Less than $500.01 . . . . . . % $ %
$500.01 - $1,000.00 . . . . .
$1,000.01 - $3,000.00 . . . .
$3,000.01 - $5,000.00 . . . .
$5,000.01 - $10,000.00 . . .
$10,000.01 - $15,000.00 . . .
--------- ---------- ----------- -----------
TOTAL . . . . . . . . . 100.0% $ 100.0%
--------- ---------- ----------- -----------
--------- ---------- ----------- -----------
COMPOSITION BY PERIOD OF DELINQUENCY
TRUST PORTFOLIO
Percentage
of Total Percentage
Number of Number of of Total
Period of Delinquency Accounts Accounts Receivables Receivables
--------------------- --------- ---------- ----------- -----------
Not Delinquent . . . . . . . % $ %
Up to 29 Days . . . . . . . .
30 to 59 Days . . . . . . . .
60 to 89 Days . . . . . . . .
90 or More Days . . . . . . .
--------- ---------- ----------- -----------
TOTAL . . . . . . . . . 100.0% $ 100.0%
--------- ---------- ----------- -----------
--------- ---------- ----------- -----------
COMPOSITION BY ACCOUNT AGE
TRUST PORTFOLIO
Percentage
of Total Percentage
Number of Number of of Total
Account Age Accounts Accounts Receivables Receivables
----------- --------- ---------- ----------- -----------
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 . . . . . . . . . 100.0% $ 100.0%
--------- ---------- ----------- -----------
--------- ---------- ----------- -----------
S-18
<PAGE>
GEOGRAPHIC DISTRIBUTION OF ACCOUNTS
TRUST PORTFOLIO
Percentage
of Total Percentage
State or Number of Number of of Total
Territory Accounts Accounts Receivables Receivables
- --------- ---------- ---------- ----------- -----------
Alabama . . . . . . . . . % $ %
Alaska . . . . . . . . .
Arizona . . . . . . . . .
Arkansas . . . . . . . .
California . . . . . .
Colorado . . . . . . . .
Connecticut . . . . . .
Delaware . . . . . . . .
District of Columbia . .
Florida . . . . . . . . .
Georgia . . . . . . . . .
Guam . . . . . . . . . .
Hawaii . . . . . . . . .
Idaho . . . . . . . . . .
Illinois . . . . . . . .
Indiana . . . . . . . . .
Iowa . . . . . . . . . .
Kansas . . . . . . . . .
Kentucky . . . . . . . .
Louisiana . . . . . . . .
Maine . . . . . . . . . .
Maryland . . . . . . . .
Massachusetts . . . . . .
Michigan . . . . . . . .
Minnesota . . . . . . . .
Mississippi . . . . . .
Missouri . . . . . . . .
Montana . . . . . . . . .
Nebraska . . . . . . . .
Nevada . . . . . . . . .
New Hampshire . . . . . .
New Jersey . . . . . . .
New Mexico . . . . . . .
New York . . . . . . . .
North Carolina . . . . .
North Dakota . . . . . .
Ohio . . . . . . . . . .
Oklahoma . . . . . . . .
Oregon . . . . . . . . .
Pennsylvania . . . . . .
Puerto Rico . . . . . .
Rhode Island . . . . . .
South Carolina . . . . .
South Dakota . . . . . .
Tennessee . . . . . . . .
Texas . . . . . . . . . .
Utah . . . . . . . . . .
Vermont . . . . . . . . .
Virgin Islands . . . . .
Virginia . . . . . . . .
Washington . . . . . . .
West Virginia . . . . . .
Wisconsin . . . . . . . .
Wyoming . . . . . . . . .
---------- ---------- ----------- -----------
TOTAL 100.0% $ 100.0%
---------- ---------- ----------- -----------
---------- ---------- ----------- -----------
S-19
<PAGE>
USE OF PROCEEDS
The net proceeds from the sale of the Certificates will be paid to the
Transferors. The Transferors will use such proceeds for [general corporate
purposes].
THE TRANSFERORS
At its [______ __, 199_] Call Report, the Bank had total deposits of
approximately $[_______], total assets of approximately $[_______] and total
stockholders' equity of approximately $[_______]. A Call Report is required
to be prepared in accordance with regulatory accounting principles, which
differ in some respects from generally accepted accounting principles. See
"The Transferors--The Bank" in the Prospectus.
[Description of CCB Holding]
SERIES PROVISIONS
The Certificates will be issued pursuant to the Pooling and Servicing
Agreement and a Series Supplement specifying the Principal Terms of the
Certificates (the "Series [199_-__] Supplement"), the forms of which have
been filed as exhibits to the Registration Statement of which the Prospectus
and this Prospectus Supplement are a part. The following summary describes
certain terms applicable to the Certificates. Reference should be made to
the Prospectus for additional information concerning the Certificates and the
Pooling and Servicing Agreement. See "The Pooling and Servicing Agreement"
in the Prospectus.
INTEREST PAYMENTS
Interest on the Certificates will accrue from the Closing Date on the
Invested Amount at the Certificate Rate. Interest will be distributed on
[______ __, 199_], and on each Interest Payment Date thereafter to the
Certificateholders in whose names the Certificates were registered on at the
close of business on the last day of the calendar month preceding the date of
such payment (each, a "Record Date"). Interest for any Interest Payment Date
will accrue from and including the preceding Interest Payment Date (or in the
case of the first Interest Payment Date, from and including the Closing Date)
but excluding the next Interest Payment Date (each, an "Interest Period").
Interest payments on the Certificates for each Interest Payment Date
will be calculated on the Invested Amount as of the preceding Record Date (or
in the case of the initial Interest Payment Date, on the initial Invested
Amount based upon the Certificate Rate [for such Interest Period]. Interest
will be calculated on the basis of a [360-day] [365-day] year [consisting of
twelve 30-day months]. Interest payments in respect of the Certificates on
any Interest Payment Date will be funded from collections of Finance Charge
Receivables allocated to the Certificateholders' Interest during the [____]
preceding Monthly Period[s] and other Available Funds for such Monthly
Period[s]. [To the extent [the sum of (i)] the product of the Floating
Allocation Percentage of collections of Finance Charge Receivables during the
preceding [____] Monthly Period[s] [and (ii) other Available Funds for such
Monthly Period[s]] is insufficient to pay such interest, [Excess Finance
Charge Collections allocated to Series [199_-_]] [amounts on deposit in the
Cash Collateral Account up to the Available Cash Collateral Amount] [other
Credit Enhancement] will be used to make such payments.] "Available Funds"
means, with respect to any Monthly Period, an amount equal to the sum of
[(i)] the Floating Allocation Percentage of collections of Finance Charge
Receivables allocated to the Certificates with respect to such Monthly
Period,including any investment earnings that are to be treated as
collections of Finance Charge Receivables in accordance with the Pooling and
Servicing
S-20
<PAGE>
Agreement [and (ii) if such Monthly Period relates to a Distribution Date with
respect to the Scheduled Accumulation Period, Principal Funding Investment
Proceeds, if any, with respect to the related Distribution Date [and the amount
of funds, if any, to be withdrawn from the Reserve Account that are required
to be included in Available Funds on such Distribution Date][and (iii) amounts,
if any, to be withdrawn from the Reserve Account which are required to be
included in Available Funds pursuant to the Series [199_-_] Supplement with
respect to such Distribution Date] [and (iv) any investment earnings
transferred from the Pre-Funding Account to the Collection Account on such
Distribution Date].
PRINCIPAL PAYMENTS
During the Revolving Period (which begins on the Closing Date and ends
on the day before the commencement of the [Controlled Amortization Period]
[Scheduled Accumulation Period] or, if earlier, the Early Amortization
Period), no principal payments will be made to Certificateholders.
[During the Controlled Amortization Period, the Certificateholders will be
entitled to receive [for the related Monthly Period]the least of (a)
Available Principal Collections on deposit in the Collection Account with
respect to the related Distribution Date, (b) the Controlled Distribution
Amount for such Distribution Date and (c) the Invested Amount.]
[On each Distribution Date with respect to the Scheduled Accumulation
Period, the Trustee will deposit in the Principal Funding Account an amount
equal to the least of (a) Available Principal Collections on deposit in the
Collection Account with respect to such Distribution Date, (b) the Controlled
Deposit Amount for such Distribution Date and (c) the [Adjusted] Invested
Amount, until the Principal Funding Account Balance equals the Invested
Amount. Amounts on deposit in the Principal Funding Account will be paid to
the Certificateholders on the Expected Final Payment Date. If a Pay Out
Event occurs with respect to the Certificates during the Scheduled
Accumulation Period, the Early Amortization Period will commence and any
amount on deposit in the Principal Funding Account will be paid to the
Certificateholders on the first Special Payment Date. [If, on the Expected
Final Payment Date, the amount on deposit in the Principal Funding Account
are insufficient to pay the scheduled principal amount, a Pay Out Event will
occur and the Early Amortization Period will commence.] ]
"Available Principal Collections" means, with respect to any Monthly
Period, an amount equal to [the sum of (a)] the Principal Allocation
Percentage of collections of Principal Receivables received during such
Monthly Period, [(b) any Shared Principal Collections with respect to other
Series that are allocated to Series [199_-_]] and (c) any other amounts which
pursuant to the Series [199_-_] Supplement are to be treated as Available
Principal Collections with respect to the related Distribution Date.
[The Scheduled Accumulation Period is scheduled to commence at the close
of business on the last business day of [__________, 199_]; PROVIDED,
HOWEVER, the date on which the Scheduled Accumulation Period actually
commences may be delayed if the Scheduled Accumulation Period Length
(determined as described below) is less than the number of months remaining
between each Period Length Determination Date (as hereinafter defined) and
the Expected Final Payment Date. Beginning on the Determination Date
immediately preceding the [__________ 199_] Distribution Date and on each
Determination Date thereafter until the Accumulation Date actually commences
(each, a "Period Length Determination Date"), the Transferors will determine
the "Scheduled Accumulation Period Length" [based on, among other things, the
then current principal payment rate on the Accounts and the principal amount
of Series that are entitled to share principal with Series [199_-_]];
PROVIDED, HOWEVER, that the Scheduled Accumulation Period Length will not be
less than [____] months]. If the Scheduled Accumulation Period Length is
less than the number of months remaining between the related Period Length
Determination Date and the Expected Final Payment Date, the Scheduled
Accumulation Period will commence later than the last business day of
[__________ 199__] and the number of months in the Scheduled Accumulation
Period will be equal to the Scheduled
S-21
<PAGE>
Accumulation Period Length. [Notwithstanding the foregoing, unless a Pay Out
Event occurs with respect to the Certificates, the Scheduled Accumulation
Period will commence on the last business day of [________ __, 199_] if,
prior to such date, a Pay Out Event shall have occurred with respect to any
other Series (other than a Series that does not share principal with Series
[199_-_] or is designated by the Transferors as an Excluded Series (defined
herein)).] The effect of the foregoing calculation is to reduce the
Scheduled Accumulation Period Length based on the invested amounts of other
Series that are scheduled to be in their revolving periods and thus scheduled
to create Shared Principal Collections during the Scheduled Accumulation
Period. In addition, if the Scheduled Accumulation Period Length shall have
been determined to be less than [____] months and, after the date on which
such determination is made, a Pay Out Event shall occur with respect to any
outstanding Series, the Scheduled Accumulation Period will commence on the
earlier of (i) the date that such Pay Out Event shall have occurred with
respect to such Series and (ii) the date on which the Scheduled Accumulation
Period is then scheduled to commence.](6)
On each Distribution Date with respect to the Early Amortization Period
until the Invested Amount has been paid in full or the Termination Date
occurs, the Certificateholders will be entitled to receive Available
Principal Collections in an amount up to the Invested Amount. [In addition,
on the first Special Payment Date following the occurrence of an Economic Pay
Out Event, after giving effect to any payment of principal on such date as
described under "Series Provisions--Application of Collections--Payments of
Principal" principal payments will be made to the Certificateholders from
amounts on deposit in the Cash Collateral Account as described under "--Cash
Collateral Account" below.]
[FUNDING PERIOD]
[During the period from and including the Closing Date to but excluding
the earliest of (i) the day on which the Invested Amount equals the [Full
Invested Amount], (ii) the day on which a Pay Out Event occurs and (iii) the
[________ __, 199_] Distribution Date (the "Funding Period"), the Pre-Funding
Amount will be held in a trust account established with the Trustee for the
benefit of the Certificateholders (the "Pre-Funding Account"). The
Pre-Funding Amount will equal $[__________].
Funds on deposit in the Pre-Funding Account will be invested by the
Trustee [in certain Eligible Investments] [pursuant to a guaranteed rate
agreement] [guaranteed investment contract]. Investment earnings on the
Pre-Funding Amount (net of investment losses and investment expenses) will be
used to pay interest on the Certificates during the Funding Period.
During the Funding Period, funds on deposit in the Pre-Funding Account
will be withdrawn and paid to the Transferors to the extent of any increases
in the Invested Amount. The Transferors expect that the Invested Amount will
equal the [Full Invested Amount] by the [_______, 199_] Monthly Period. In
the event that the Invested Amount does not for any reason equal the [Full
Invested Amount] by the end of the Funding Period, any amount remaining in
the Pre-Funding Account will be payable to the Certificateholders on the
Distribution Date on which the Funding Period ends.]
ALLOCATION PERCENTAGES
Pursuant to the Pooling and Servicing Agreement, the Servicer will
allocate among the Certificateholders' Interest, the certificateholders'
interest for all other Series of certificates issued and outstanding and the
Transferors' Interest all collections of Finance Charge Receivables and
Principal Receivables and the Defaulted Amount with respect to such Monthly
Period.
- --------------
(6) Different Series may have different methods of determining the
Accumulation Period Length.
S-22
<PAGE>
Collections of Finance Charge Receivables and the Defaulted Amount with
respect to any Monthly Period will be allocated to the Certificateholders'
Interest for a Series [199_-_] based on the Floating Allocation Percentage.
The "Floating Allocation Percentage" means, with respect to any Monthly
Period, the percentage equivalent (which percentage shall never exceed 100%)
of a fraction, the numerator of which is [the sum of] the [Adjusted] Invested
Amount [and the Enhancement Invested Amount, if any,] as of the last day of
the preceding Monthly Period (or with respect to the first Monthly Period,
the Initial Invested Amount) and the denominator of which is the sum of the
total amount of the Principal Receivables in the Trust as of such day (or
with respect to the first Monthly Period, the total amount of Principal
Receivables in the Trust on the Closing Date) and the principal amount on
deposit in the Special Funding Account as of such day. [Appropriate
adjustments to the calculation methodology will be made to accommodate
changes in the Invested Amount during the Funding Period.]
Collections of Principal Receivables will be allocated to the
Certificateholders' Interest based on the Principal Allocation Percentage.
The "Principal Allocation Percentage" means, with respect to any Monthly
Period, the percentage equivalent (which percentage shall never exceed 100%)
of a fraction, the numerator of which is (a) during the Revolving Period, the
Invested Amount as of the last day of the immediately preceding Monthly
Period (or, with respect to the first Monthly Period, the Initial Invested
Amount) and (b) during the [Accumulation] [Controlled Amortization] Period or
the Early Amortization Period, the Invested Amount as of the last day of the
Revolving Period and the denominator of which is the greater of (i) the sum
of the total amount of Principal Receivables in the Trust as of the last day
of the immediately preceding Monthly Period and the principal amount on
deposit in the Special Funding Account as of such last day (or, in the case
of the first Monthly Period, the Closing Date) and (ii) the sum of the
numerators used to calculate the principal allocation percentages for all
Series outstanding as of the date as to which such determination is being
made; [PROVIDED, HOWEVER, that because the Certificates offered hereby are
subject to being paired with a future Series, if a Pay Out Event occurs with
respect to such a paired Series during the [Controlled Amortization] Period
[Accumulation] Period with respect to Series [199_-_], the Transferors may,
by written notice delivered to the Trustee and the Servicer, designate a
different numerator for the foregoing fraction, provided that such numerator
is not less than the [Adjusted] Invested Amount for such Paired Series as of
the last day of the Monthly Period preceding such Pay Out Event and the
Transferors shall have received written notice from each Rating Agency that
such designation will not have a Ratings Effect.
Notwithstanding the foregoing, in any Monthly Period in which there
occurs (a) an Addition Date or (b) a Removal Date, the amount of Principal
Receivables used for the denominator in the calculation of the Floating
Allocation Percentage and the Principal Allocation Percentage described above
will be (i) the aggregate amount of Principal Receivables in the Trust at the
end of the day on the last day of the prior Monthly Period 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 end of the day on the related
Addition Date or Removal Date for the period from and including the related
Addition Date or Removal Date to and including the last day of such Monthly
Period [; PROVIDED, HOWEVER, that with respect to any Monthly Period during
the Funding Period in which the Invested Amount is increased pursuant to the
Series [199_-_] Supplement, the numerator in the calculation of the Floating
Allocation Percentage and the Principal Allocation Percentage described above
will be (1) the Invested Amount at the last day of the prior Monthly Period
for the period from and including the first day of such Monthly Period to but
excluding the day the Invested Amount is increased and (2) the Invested
Amount at the end of the day on which the Invested Amount is increased for
the period from and including such day to and including the last day of such
Monthly Period].
S-23
<PAGE>
As used herein, the following terms have the meanings
indicated:(7)
"Invested Amount" for any date means an amount equal to (i) the Initial
Invested Amount, [plus (ii) the amount of any withdrawals from the
Pre-Funding Account in connection with the purchase of an additional interest
in Principal Receivables,] less (iii) the amount of principal payments made
to the Certificateholders on or prior to such date [other than any payments
of principal to the Certificateholders from the Pre-Funding Account], less
(iv) the excess, if any, of the aggregate amount of Investor Charge-Offs for
all prior Distribution Dates over the aggregate amount of any reimbursements
of Investor Charge-Offs for all Distribution Dates prior to such date.
["Adjusted Invested Amount" for any date means an amount equal to the
then current Invested Amount, less the funds on deposit in the Principal
Funding Account on such date.]
["Enhancement Invested Amount" for any date means an amount equal to (a)
the amount withdrawn from the Cash Collateral Account and applied to the
payment of principal on the Certificates on the first Special Payment Date
following an Economic Pay Out Event, less (b) the aggregate amount of
principal payments made to the Cash Collateral Depositor prior to such day
less (c) the aggregate amount by which the Enhancement Invested Amount has
been reduced to fund the Investor Default Amount on all prior Distribution
Dates as described below, and plus (d) the aggregate amount of Available
Finance Charge Collections on all prior Distribution Dates applied to
reimburse amounts deducted pursuant to the foregoing clause (c). In the
absence of the occurrence of an Economic Pay Out Event and a related
withdrawal from the Cash Collateral Account to pay principal of the
Certificates, the Enhancement Invested Amount will be zero.]
[PRINCIPAL FUNDING ACCOUNT]
[The Servicer will establish and maintain in the name of the Trustee, on
behalf of the Trust, the Principal Funding Account as an Eligible Account
held for the benefit of the Certificateholders. During the Scheduled
Accumulation Period, the Servicer will transfer collections in respect of
Principal Receivables [and Shared Principal Collections allocated to Series
[199_-_]] [other amounts] described herein to be treated in the same manner
as collections of Principal Receivables from the Collection Account to the
Principal Funding Account as described under "--Application of Collections."
Unless a Pay Out Event has occurred with respect to the Certificates,
all amounts on deposit in the Principal Funding Account (the "Principal
Funding Account Balance") on any Distribution Date (after giving effect to
any deposits to, or withdrawals from, the Principal Funding Account to be
made on such Distribution Date) will be invested to the following
Distribution Date by the Trustee at the direction of the Servicer in Eligible
Investments. On each Distribution Date with respect to the Scheduled
Accumulation Period, the interest and other investment income (net of
investment expenses and losses) earned on such investments (the "Principal
Funding Investment Proceeds") will be withdrawn from the Principal Funding
Account and will be treated as a portion of Available Finance Charge
Collections. If such investments with respect to any such Distribution Date
yield less than the applicable Certificate Rate, the Principal Funding
Investment Proceeds with respect to such Distribution Date will be less than
the Covered Amount for such following Distribution Date. It is intended that
any such shortfall will be funded from Available Finance Charge Collections
(including a withdrawal from the Reserve Account, if necessary, as described
under "--Reserve Account"), or a withdrawal from the Cash Collateral Account
as described under "--Cash Collateral Account"] [other sources]. The
Available Reserve Account Amount and the Available Cash Collateral Amount at
any time will be limited and there can be no assurance that sufficient funds
will be
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(7) Appropriate changes to Invested Amount definitions must be made for a
prefunded Series.
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available to fund any such shortfall. [The "Covered Amount" shall mean for
any Distribution Date with respect to the Scheduled Accumulation Period or
the first Special Payment Date [one-twelfth of the product of (i) the
Certificate Rate and (ii) the Principal Funding Account Balance, if any, as
of the preceding Distribution Date] [the product of (i) (A) a fraction, the
numerator of which is the actual number of days in the related Interest
Period and the denominator of which is 360, times (B) the Certificate Rate in
effect with respect to such Interest Period, and (ii) the Principal Funding
Account Balance, if any, as of the preceding Distribution Date].]
[RESERVE ACCOUNT]
[The Servicer will establish and maintain in the name of the Trustee, on
behalf of the Trust, an Eligible Deposit Account for the benefit of the
Certificateholders (the "Reserve Account"). The Reserve Account is intended
to help assure the subsequent distribution of interest on the Certificates as
provided in this Prospectus Supplement during the Scheduled Accumulation
Period. On each Distribution Date from and after the Reserve Account Funding
Date, but prior to the termination of the Reserve Account, the Trustee,
acting pursuant to the Servicer's instructions, will apply Available Finance
Charge Collections (in the order of priority described below under
"--Application of Collections--Payment of Fees, Interest and Other Items") to
increase the amount on deposit in the Reserve Account (to the extent such
amount is less than the Required Reserve Account Amount). The "Reserve
Account Funding Date" will be the Distribution Date with respect to the
Monthly Period that begins [____] months prior to the Distribution Date with
respect to the first Monthly Period in the Scheduled Accumulation Period,
provided that the Transferors may delay the Reserve Account Funding Date to
the earliest of (a) the Distribution Date with respect to the Monthly Period
that begins [____] months prior to the first Monthly Period that begins the
Scheduled Accumulation Period; (b) the first Distribution Date for which the
Portfolio Adjusted Yield is less than [____]%, but in such event the Reserve
Account Funding Date does not have to occur earlier than the Distribution
Date with respect to the Monthly Period that begins [____] months prior to
the commencement of the Scheduled Accumulation Period; (c) the first
Distribution Date for which the Portfolio Adjusted Yield is less than
[____]%, but in such event the Reserve Account Funding Date does not have to
occur earlier than the Distribution Date that begins [____] months prior to
the commencement of the Scheduled Accumulation Period; or (d) the first
Distribution Date for which Portfolio Adjusted Yield is less than [____]%,
but in such event the Reserve Account Funding Date does not have to occur
earlier than the Distribution Date that begins [____] months prior to the
commencement of the Scheduled Accumulation Period or any other date
designated by the Transferors, provided that the Transferors have received
written notice from each Rating Agency that such designation will not have a
Ratings Effect. "Portfolio Adjusted Yield" for any Distribution Date will be
equal to the average of the percentages obtained for each of the three
preceding Monthly Periods by subtracting the Base Rate from the Portfolio
Yield for such Monthly Period and deducting [____] from the result for each
Monthly Period. The "Required Reserve Account Amount" for any Distribution
Date on or after the Reserve Account Funding Date will be equal to [____]% of
the Invested Amount as of the preceding Distribution Date, or any other
amount designated by the Transferors, provided that the Transferors have
received written notice from each Rating Agency that such designation will
not have a Ratings Effect. On each Distribution Date, after giving effect to
any deposit to be made to, and any withdrawal to be made from, the Reserve
Account on such Distribution 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 or at the direction of [the Transferors] [the Cash
Collateral Depositor] [the Credit Enhancer].
Provided that the Reserve Account has not terminated as described below,
all amounts on deposit in the Reserve Account on any Distribution Date (after
giving effect to any deposits to, or withdrawals from, the Reserve Account to
be made on such Distribution Date) will be invested to the following
Distribution Date by the Trustee at the direction of the Servicer in Eligible
Investments. The interest and other investment income (net of investment
expenses and losses) earned on such investments (the "Interest Funding
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Investment Proceeds") will be retained in the Reserve Account [to the extent
the amount on deposit therein is less than the Required Reserve Account
Amount) or [distributed to or at the direction of] [the Transferors] [the
Cash Collateral Depositor] [the Credit Enhancer] [deposited in the Collection
Account for application as Available Funds].
On or before each Distribution Date with respect to the Scheduled
Accumulation Period and on the first Special Payment Date, a withdrawal will
be made from the Reserve Account, and the amount of such withdrawal will be
deposited in the Collection Account and included in Available Finance Charge
Collections in an amount equal to the lesser of (a) the Available Reserve
Account Amount with respect to such Distribution Date or Special Payment Date
and (b) the excess, if any, of the Covered Amount with respect to such
Distribution Date or Special Payment Date over the Principal Funding
Investment Proceeds with respect to such Distribution Date or Special Payment
Date; PROVIDED that the amount of such withdrawal will be reduced to the
extent that funds otherwise would be available to be deposited in the Reserve
Account on such Distribution Date or Special Payment Date. On each
Distribution Date, the amount available to be withdrawn from the Reserve
Account (the "Available Reserve Account Amount") will be equal to the lesser
of the amount on deposit in the Reserve Account (before giving effect to any
deposit to be made to the Reserve Account on such Distribution Date) and the
Required Reserve Account Amount for such Distribution Date.
The Reserve Account will be terminated following the earlier to occur of
(a) the termination of the Trust pursuant to the Pooling and Servicing
Agreement, (b) the date on which the Certificates are paid in full and (c) if
the Scheduled Accumulation Period has not commenced, the occurrence of a Pay
Out Event with respect to the Certificates or, if the Scheduled Accumulation
Period has commenced, the earlier of the first Special Payment Date and the
Expected Final 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
or at the direction of [the Transferors] [the Cash Collateral Depositor] [the
Credit Enhancer]. Any amounts withdrawn from the Reserve Account and
distributed to or at the direction of [the Transferors] [the Cash Collateral
Depositor] [the Credit Enhancer] as described above will not be available for
distribution to the Certificateholders.]
APPLICATION OF COLLECTIONS
PAYMENT OF FEES, INTEREST AND OTHER ITEMS. On each Distribution Date,
the Trustee, acting pursuant to the Servicer's instructions, will apply all
amounts allocated to the Certificateholders' Interest for Series [199_-_]
with respect to Finance Charge Receivables for the preceding Monthly Period
(as described above under "--Allocation Percentages"), [any Excess Finance
Charge Collections with respect to the Series in Group [____] that are
allocated to Series [199_-_] (as described under "Description of the
Certificates--Sharing of Excess Finance Charge Collections" in the
Prospectus)], [any investment earnings transferred from the Pre-Funding
Account to the Collection Account as described under "--Funding Period"
above] [any Principal Funding Investment Proceeds with respect to such
Distribution Date (as described under "--Principal Funding Account" above)] ,
[any Interest Funding Investment Proceeds deposited in the Collection Account
with respect to such Distribution Date] [and any funds withdrawn from the
Reserve Account that are required to be included in Available Finance Charge
Collections (as described under "--Reserve Account" above)] ([collectively,]
"Available Finance Charge Collections") on deposit in the Collection Account
in the following priority:
(i) an amount equal to Monthly Interest for such Distribution Date,
plus the amount of any Monthly Interest previously due but not paid to
the Certificateholders [or deposited to the Interest Funding Account]
on a prior Distribution Date, [plus additional interest at the
Certificate Rate with respect to amounts that were due but not paid to
the Certificateholders [or deposited to the Interest Funding Account]
on a prior Distribution Date] (the "Additional Interest"), will be
[distributed to
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Certificateholders] [deposited in the Interest Funding Account for
distribution to Certificateholders on the applicable Payment Date];
(ii) an amount equal to the Servicing Fee for such Distribution Date,
plus the amount of any Servicing Fee previously due but not distributed
to the Servicer on a prior Distribution Date, will be distributed to
the Servicer;
(iii) an amount equal to the Investor Default Amount for such
Distribution Date will be treated as a portion of Available Principal
Collections for such Distribution Date;
(iv) an amount equal to the aggregate amount of Investor Charge-Offs
that have not been previously reimbursed will be treated as a portion
of Available Principal Collections for such Distribution Date;
(v) [an amount equal to the "Monthly Cash Collateral Fee" (as defined
in the agreement (the "Loan Agreement") among the Transferors, the Cash
Collateral Depositor and the Trustee)] for such Distribution Date will
be distributed to the Cash Collateral Depositor for application in
accordance with the Loan Agreement];
[(vi) an amount equal to the aggregate amount by which the
Enhancement Invested Amount has been reduced pursuant to clause (c) of
the definition of "Enhancement Invested Amount" under "--Allocation
Percentages" above (but not in excess of the aggregate amount of such
reductions which have not been previously reimbursed) will be treated
as a portion of Available Principal Collections for such Distribution
Date;]
[(vii) an amount up to the excess, if any, of the [lesser of the]
Initial Cash Collateral Amount [and the Adjusted Invested Amount] over
the remaining Available Cash Collateral Amount will be deposited into
the Cash Collateral Account in accordance with the Loan Agreement;]
[(viii) on each Distribution 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" above, an amount up
to the excess, if any, of the Required Reserve Account Amount over the
Available Reserve Account Amount will be deposited into the Reserve
Account;]
[(ix) an amount equal to the aggregate of any other amounts then due
to the [Cash Collateral Depositor] [Credit Enhancement Provider]
pursuant to the [Loan Agreement] [Credit Enhancement Agreement] (to the
extent such amounts are payable pursuant to the [Loan Agreement]
[Credit Enhancement Agreement] out of Available Finance Charge
Collections) will be distributed to the [Cash Collateral Depositor]
[Credit Enhancement Provider] for application in accordance with the
[Loan Agreement] [Credit Enhancement Agreement];] and
[(x) the balance, if any, will constitute a portion of Excess Finance
Charge Collections for such Distribution Date and will be available for
allocation to other Series in Group [____] or to the holders of the
Transferor Certificates as described in "Description of the
Certificates--Sharing of Excess Finance Charge Collections" in the
Prospectus.](8)
"Monthly Interest" means, with respect to any Distribution Date, an
amount equal to [one-twelfth of] the product of (i) [(A) a fraction, the
numerator of which is the actual number of days in the related
- -----------------
(8) Distributions and priorities may be modified to reflect another form of
Credit Enhancement.
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<PAGE>
accrual period and the denominator of which is 360, times (B) ] the
Certificate Rate and (ii) [the sum of (A) ] the Invested Amount [and (B) the
[product of the Floating Allocation Percentage and the] Pre-Funding Amount,
each] as of the close of the preceding Record Date; PROVIDED, HOWEVER, with
respect to the first Distribution Date, Monthly Interest will be equal to
$[__________]. [Monthly Interest will be calculated on the basis of a
360-day year consisting of twelve 30-day months.]
"Required Amount" means, with respect to any Distribution Date, the
excess, if any, of the full amount required to be paid pursuant to paragraphs
(i), (ii) and (iii) of the second preceding paragraph for such Distribution
Date over the amount of Available Finance Charge Collections for such
Distribution Date.
PAYMENTS OF PRINCIPAL. On each Distribution Date, the Trustee, acting
pursuant to the Servicer's instructions, will distribute Available Principal
Collections (see "--Principal Payments" above) on deposit in the Collection
Account in the following priority:
(i) on each Distribution Date with respect to the Revolving Period,
all such Available Principal Collections will be treated as Shared
Principal Collections and applied as described under "Description of
the Certificates--Shared Principal Collections" in the Prospectus;
(ii) on each Distribution Date with respect to the [Controlled
Amortization] [Accumulation] Period or the Early Amortization Period,
all such Available Principal Collections will be distributed or
deposited in the following priority:
(A) an amount equal to Monthly Principal, up to the [Adjusted]
Invested Amount on such Distribution Date, will be [deposited in
the Principal Funding Account (during the Scheduled Accumulation
Period) or] distributed to the Certificateholders (during the
[Controlled Amortization Period] Early Amortization Period);
[(B) for each Distribution Date with respect to the Early
Amortization Period, beginning with the Distribution Date on which
the Invested Amount is paid in full, an amount equal to the
balance, if any, of such Available Principal Collections then on
deposit in the Collection Account, to the extent of the
Enhancement Invested Amount, if any, will be distributed to the
Cash Collateral Depositor for application in accordance with the
Loan Agreement; and]
(C) for each Distribution Date, after giving effect to paragraphs
(A) [and (B)] above, an amount equal to the balance, if any of
such Available Principal Collections, will be treated as Shared
Principal Collections and applied as described under "Description
of the Certificates--Shared Principal Collections" in the
Prospectus.
"Monthly Principal" with respect to any Distribution Date relating to
the [Scheduled Accumulation Period] [Controlled Amortization Period] or the
Early Amortization Period will equal the least of (i) the Available Principal
Collections on deposit in the Collection Account with respect to such
Distribution Date, (ii) for each Distribution Date with respect to the
[Scheduled Accumulation Period], [Controlled Amortization Period], [the
Controlled Deposit Amount] [the Controlled Distribution Amount] for such
Distribution Date and (iii) the [Adjusted] Invested Amount on such
Distribution Date.
["Controlled Amortization Amount" means for any Distribution Date,
$[__________].]
["Deficit Controlled Amortization Amount" means (a) on the first
Distribution Date with respect to the Controlled Amortization Period, the
excess, if any, of the Controlled Amortization Amount for such Distribution Date
over the amount distributed from the Collection Account as Monthly Principal for
such
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<PAGE>
Distribution Date and (b) on each subsequent Distribution Date with respect
to the Controlled Amortization Period, the excess, if any, of the Controlled
Distribution Amount for such subsequent Distribution Date plus any Deficit
Controlled Amortization Amount for the prior Distribution Date over the
amount distributed from the Collection Account as Monthly Principal for such
subsequent Distribution Date.]
["Controlled Accumulation Amount" means (a) for any Distribution Date
with respect to the Scheduled Accumulation Period, $[__________]; [PROVIDED,
HOWEVER, that, if the Scheduled Accumulation Period Length is less than
[____] months, the Controlled Accumulation Amount for each Distribution Date
with respect to the Scheduled Accumulation Period will be equal to (i) the
[Initial] [Full] Invested Amount divided by (ii) the number of Distribution
Dates from, and including, the first Distribution Date with respect to the
Scheduled Accumulation Period to, and including, the Expected Final Payment
Date].]
["Deficit Controlled Accumulation Amount" means (a) on the first
Distribution Date with respect to the Scheduled Accumulation Period, the
excess, if any, of the Controlled Accumulation Amount for such Distribution
Date over the amount distributed from the Collection Account as Monthly
Principal for such Distribution Date and (b) on each subsequent Distribution
Date with respect to the Scheduled Accumulation Period, the excess, if any,
of the Controlled Deposit Amount for such subsequent Distribution Date plus
any Deficit Controlled Accumulation Amount for the prior Distribution Date
over the amount distributed from the Collection Account as Monthly Principal
for such subsequent Distribution Date.]
[CASH COLLATERAL ACCOUNT]
[The Trust will have the benefit of the Cash Collateral Account for the
benefit of the Certificateholders and the Cash Collateral Depositor, as their
interests appear in the Series [199_-_] Supplement, and in the case of the
Cash Collateral Depositor, in the Loan Agreement (which interest, in the case
of the Cash Collateral Depositor, will be subordinated to the interests of
the Certificateholders as provided in the Series [199_-_] Supplement). The
Cash Collateral Account will be one or more Eligible Deposit Accounts. Funds
on deposit in the Cash Collateral Account will be invested in certain
Eligible Investments.
The Cash Collateral Account will be funded on the Closing Date in the
Initial Cash Collateral Amount, which amount will include the proceeds of an
advance to be made by one or more financial institutions to be selected by
the Transferors (such financial institution or institutions, the "Cash
Collateral Depositor"). Such advance will be repaid pursuant to the Loan
Agreement. The Cash Collateral Account will be terminated following the
earliest to occur of (a) the date on which the Certificates are paid in full,
[(b) the date on which the entire Available Cash Collateral Amount is
distributed to the Certificateholders as a result of the occurrence of an
Economic Pay Out Event,] (c) the Termination Date and (d) the termination of
the Trust pursuant to the Pooling and Servicing Agreement.
On each Distribution Date, the amount available to be withdrawn from the
Cash Collateral Account (the "Available Cash Collateral Amount") will be
equal to the lesser of the amount on deposit in the Cash Collateral Account
(before giving effect to any deposit to be made to the Cash Collateral
Account on such Distribution Date) and the [lesser of the] Initial Cash
Collateral Amount [and the Adjusted Invested Amount].
On each Distribution Date, unless an Economic Pay Out Event has
occurred, a withdrawal will be made from the Cash Collateral Account, to the
extent of the Available Cash Collateral Amount, in an amount equal to the
Required Amount, if any, with respect to such Distribution Date. Any such
funds withdrawn from the Cash Collateral Account will be applied in
accordance with, and subject to the priorities set forth in paragraphs (i),
(ii) and (iii) under "--Application of Collections--Payment of Fees, Interest
and Other Items" above.
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<PAGE>
[On the first Special Payment Date following a Pay Out Event described
below in clause [(e)] under "--Pay Out Events" (an "Economic Pay Out Event"),
(a) an amount equal to the lesser of (i) the Available Cash Collateral Amount
(after giving effect to any withdrawals from the Cash Collateral Account on
such date as described above) and (ii) the unpaid principal amount of the
Certificates [(less the Principal Funding Account Balance)], will be
withdrawn from the Cash Collateral Account and distributed to the
Certificateholders as a payment of principal of the Certificates. See "--Pay
Out Events" below.]
On each Distribution Date, the Servicer or the Trustee, acting pursuant
to the Servicer's instructions, will deposit Available Finance Charge
Collections (in the order of priority described above under "--Application of
Collections--Payment of Fees, Interest and Other Items") to the Cash
Collateral Account (to the extent the amount on deposit in the Cash
Collateral Account is less than the [lesser of the] Initial Cash Collateral
Amount [and the Adjusted Invested Amount]). On each Distribution Date, after
giving effect to any deposit to be made to, and any withdrawal to be made
from, the Cash Collateral Account on such Distribution Date, the Trustee will
withdraw from the Cash Collateral Account an amount equal to the excess, if
any, of the amount on deposit in the Cash Collateral Account over the
[[lesser of the] Initial Cash Collateral Amount [and the Adjusted Invested
Amount]] [Required Cash Collateral Amount], and shall distribute such excess
to the Cash Collateral Depositor for application in accordance with the Loan
Agreement. [The "Required Cash Collateral Amount" with respect to any
Distribution Date means the product of (i) the Investor Interest as of the
last day of the preceding Monthly Period, and (ii) [___]%, but not less that
$[________]; PROVIDED, HOWEVER, that if certain withdrawals are made from the
Cash Collateral Account during the Controlled Amortization Period or if a Pay
Out Event occurs, the Required Cash Collateral Account for each Distribution
Date thereafter shall equal the Required Cash Collateral Amount for the
Distribution Date immediately preceding the occurrence of such withdrawal or
Pay Out Event.] Any amounts withdrawn from the Cash Collateral Account and
distributed to the Cash Collateral Depositor as described above will not be
available for distribution to the Certificateholders.]
[OTHER FORMS OF CREDIT ENHANCEMENT]
[The Certificates will have the benefit of the [letter of credit] [cash
collateral guaranty] [surety Bond] [insurance policy] [spread account]
[reserve account] [issued by __________ (the "Credit Enhancer")] in the
initial amount of $[__________].
With respect to any Distribution Date, the amount available to be drawn
under the [letter of credit] [cash collateral guaranty] [surety bond]
[insurance policy] [spread account] [reserve account] (the "Available Credit
Enhancement Amount") will equal [$__________].]
[Information with respect to Credit Enhancement]
[CREDIT ENHANCER]
[Information, if applicable, to be provided by Credit Enhancer]
DEFAULTED RECEIVABLES; INVESTOR CHARGE-OFFS
On each Determination Date, the Servicer will calculate the Investor
Default Amount for the preceding Monthly Period. The term "Investor Default
Amount" means, with respect to any Distribution Date, the product of (i) the
Floating Allocation Percentage with respect to the related Monthly Period and
(ii) the Defaulted Amount for such Monthly Period.
On each Distribution Date, if the Required Amount for such Distribution
Date exceeds the Available Cash Collateral Amount, [the Enhancement Invested
Amount, if any, will be reduced by the amount of such
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<PAGE>
excess, but not by more than the Investor Default Amount for such
Distribution Date. In the event that such reduction would cause the
Enhancement Invested Amount to be a negative number, the Enhancement Invested
Amount will be reduced to zero, and the Invested Amount will be reduced by
the amount by which the Enhancement Invested Amount would have been reduced
below zero, but not by more than the excess, if any, of the Investor Default
Amount for such Distribution Date over the amount of such reduction, if any,
of the Enhancement Invested Amount with respect to such Distribution Date]
[the Invested Amount will be reduced by the amount of such excess, but not by
more than the Investor Default Amount for such Distribution Date] (an
"Investor Charge-Off"). If the Invested Amount has been reduced by the
amount of any Investor Charge-Offs, it will thereafter be increased on any
Distribution Date (but not by an amount in excess of the aggregate
unreimbursed Investor Charge-Offs) by the amount of Available Finance Charge
Collections allocated and available for such purpose as described under
"--Application of Collections--Payment of Fees, Interest and Other Items."
If an Investor Charge-Off is not subsequently reimbursed, it will have the
effect of slowing or reducing the return, of principal to the
Certificateholders.
[Any such reductions of the Enhancement Invested Amount shall thereafter
be reimbursed and the Enhancement Invested Amount increased (but not by an
amount in excess of the aggregate reductions of the Enhancement Invested
Amount) on any Distribution Date by the amount of Available Finance Charge
Collections allocated and available for such purpose as described above
under "--Application of Collections--Payment of Fees, Interest and Other
Items."]
[PAIRED SERIES]
[The Certificates may be paired with one or more other Series (each a
"Paired Series") at or after the commencement of the [Controlled
Amortization] Period [Accumulation] Period. As [funds are accumulated in the
Principal Funding Account] [principal is paid to the Certificateholders
during the Controlled Amortization Period] , the invested amount in the Trust
of such Paired Series will increase by a corresponding amount. Upon payment
in full of the Certificates, assuming that there have been no unreimbursed
charge-offs with respect to any related Paired Series, the aggregate invested
amount of such related Paired Series will have been increased by an amount up
to an aggregate amount equal to the Invested Amount paid to the
Certificateholders after the Certificates were paired with the Paired Series.
The issuance of a Paired Series will be subject to the conditions described
under "Description of the Certificates--New Issuances" in the Prospectus.
There can be no assurance, however, that the terms of any Paired Series might
not have an impact on the timing or amount of payments received by a
Certificateholder. See "Special Considerations--Master Trust
Considerations--Issuance of Additional Series" in the Prospectus.]
PAY OUT EVENTS
The Pay Out Events with respect to the Certificates will include each of
the events specified in the Prospectus under "Description of the
Certificates--Pay Out Events" and the following:
[(a) a failure on the part of the Transferors (i) to make any payment
or deposit required under the Pooling and Servicing Agreement or the Series
[199_-_] Supplement within [___] business days after the day such payment
or deposit is required to be made; or (ii) to observe or perform any other
covenants or agreements of the Transferors set forth in the Pooling and
Servicing Agreement or the Series [199_-_] Supplement, which failure has a
material adverse effect on the Certificateholders] and which continues
unremedied for a period of [____] days after written notice;
(b) any representation or warranty made by the Transferors in the
Pooling and Servicing Agreement or the Series [199_-_] Supplement or any
information required to be given by the Transferors to the Trustee to
identify the Accounts proves to have been incorrect in any material
respect when made and continues to be incorrect in any material respect
for a period of [____] days
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after written notice and as a result of which the interests of the
Certificateholders are materially and adversely affected; PROVIDED,
HOWEVER, that a Pay Out Event shall not be deemed to occur
thereunder if the Transferors have repurchased the related Receivables
or all such Receivables, if applicable, during such period in
accordance with the provisions of the Pooling and Servicing Agreement;
(c) a failure by the Transferors to make an Addition to the Trust
within [___] business days after the day on which it is required to make
such Addition pursuant to the Pooling and Servicing Agreement [or the
Series [199_-_] Supplement];
(d) the occurrence of any Servicer Default;
[(e) a reduction of the [average] Portfolio Yield for any [three]
consecutive Monthly Periods to a rate less than the [average of the Base
Rate[s]] for such period;]
[(f) the failure to pay in full the Invested Amount on the Expected
Final Payment Date]; and
[(g) the [Available Credit Enhancement Amount] [Available Cash
Collateral Amount] is less than [___]% of the Invested Amount].]
Then, in the case of any event described in subparagraph (a), (b) or
(d), after the applicable grace period, if any, set forth in such
subparagraphs, either the Trustee or the holders of Certificates evidencing
more than 50% of the aggregate unpaid principal amount of Certificates by
notice then given in writing to the Transferors and the Servicer (and to the
Trustee if given by the Certificateholders) may declare that a Pay Out Event
has occurred with respect to Series [199_-_] as of the date of such notice,
and, in the case of any event described in subparagraph (c), (e) or (f), a
Pay Out Event shall occur with respect to Series [199_-_] without any notice
or other action on the part of the Trustee immediately upon the occurrence of
such event.
For purposes of the Pay Out Event described in clause [(e)] above, the
terms "Base Rate" and "Portfolio Yield" will be defined as follows with
respect to the Certificates:
"Base Rate" means, with respect to any Monthly Period, [____]% [the
annualized percentage equivalent of a fraction, the numerator of which
is equal to the sum of Monthly Interest and the Monthly Servicing Fee
with respect to the Certificates for the related Distribution Date and the
denominator of which is the Invested Amount as of the last day of the
preceding Monthly Period] [the sum of the Certificate Rate for the related
Interest Period and the Servicing Fee Rate].
"Portfolio Yield" means, with respect to any Monthly Period, the
annualized percentage equivalent of a fraction, the numerator of which is
equal to [(a) the Floating Allocation Percentage of collections of Finance
Charge Receivables (including any investment earnings that are to be
treated as collections of Finance Charges Receivables in accordance with
the Pooling and Servicing Agreement) for such Monthly Period [plus
(b) the amount of Principal Funding Investment Proceeds for the related
Distribution Date,] [plus (c) the amount of any Interest Funding Investment
Proceeds for the related Distribution Date] [plus (d) any Excess Finance
Charge Collections that are allocated to Series [199_-_] with respect to
such Monthly Period] [plus (e) the amount of funds, if any, withdrawn
from the Reserve Account which are required to be included as Available
Finance Charge Collections for the Distribution Date with respect to
such Monthly Period][plus (f) the amount of any investment earnings
transferred from the Pre-Funding Account to the Collection Account
on such Distribution Date] less (g) the Investor Default Amount for the
Distribution Date with respect
S-32
<PAGE>
to such Monthly Period, and the denominator of which is the Invested
Amount as of the last day of the preceding Monthly Period].
If the proceeds of any sale of the Receivables following the occurrence
of an Insolvency Event with respect to the Transferors, as described in the
Prospectus under "Description of the Certificates--Pay Out Events," allocated
to the Invested Amount and the proceeds of any collections on the Receivables
in the Collection Account [and any Available Cash Collateral Amount] [and any
amounts on deposit in the [Principal Funding Account] [Interest Funding
Account] [other amounts] are not sufficient to pay in full the remaining
amount due on the Certificates, the Certificateholders will suffer a
corresponding loss. See "Certain Legal Aspects of the Receivables--Certain
Matters Relating to Receivership" in the Prospectus for a discussion of the
impact of recent federal legislation on the Trustee's ability to liquidate
the Receivables.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
The share of the Servicing Fee allocable to the Certificateholders with
respect to any Distribution Date (the "Monthly Servicing Fee") shall be equal
to one-twelfth of the product of (a) [____]% (the "Servicing Fee Rate") and
(b) (i) the [sum of the] [Adjusted] Invested Amount [and the Enhancement
Invested Amount, if any,] as of the last day of the Monthly Period preceding
such Distribution Date, less (ii) the product of (A) any amount on deposit in
the Special Funding Account as of the last day of the Monthly Period
preceding such Distribution Date and (B) the Floating Allocation Percentage
with respect to such Monthly Period (the amount calculated pursuant to this
clause (b) is referred to as the "Servicing Base Amount"); PROVIDED, HOWEVER,
with respect to the first Distribution Date, the Monthly Servicing Fee shall
be equal to $[__________]. The share of the Monthly Servicing Fee allocable
to the Certificateholders with respect to Distribution Date (the "Servicing
Fee") shall be equal to one-twelfth of the product of (a) [____]% (the "Net
Servicing Fee Rate") and (b) the Servicing Base Amount; PROVIDED, HOWEVER,
that with respect to the first Distribution Date, the Servicing Fee shall be
equal to $[__________]. The remainder of the Servicing Fee shall be paid by
the holders of the Transferor Certificates or the certificateholders of other
Series (as provided in the related Supplements) and in no event shall the
Trust, the Trustee, the Certificateholders [or the Cash Collateral Depositor]
[Credit Enhancement Provider] be liable for the share of the Servicing Fee to
be paid by the holders of the Transferor Certificates or the
Certificateholders of any other Series. The 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
Fees, Interest and Other Items" above.
[SERIES TERMINATION]
[If, on the [____] Distribution Date, [____] months prior to the
Termination Date, the Invested Amount (after giving effect to all changes
therein on such date) exceeds zero, the Servicer will, within the 40-day
period beginning on such date, solicit bids for the sale of interests in the
Principal Receivables or certain Principal Receivables, together in each case
with the related Finance Charge Receivables, in an amount equal to the [sum
of the] Invested Amount [and the Enhancement Invested Amount, if any,] at the
close of business on the last day of the Monthly Period preceding the
Termination Date (after giving effect to all distributions required to be
made on the Termination Date). The Transferors and the [Cash Collateral
Depositor] [Credit Enhancement Provider] will be entitled to participate in,
and to receive notice of each bid submitted in connection with, such bidding
process. Upon the expiration of such 40-day period, the Trustee will
determine (a) which bid is the highest cash purchase offer (the "Highest
Bid") and (b) the amount (the "Available Final Distribution Amount") which
otherwise would be available in the Collection Account on the Series
Termination Date for distribution to the Certificateholders. The Servicer
will sell such Receivables on the Termination Date to the bidder who provided
the Highest Bid and will deposit the proceeds of such sale in the Collection
Account for allocation (together with the Available Final Distribution
Amount) to the Certificateholders' Interest.
S-33
<PAGE>
Except as necessary to reimburse previous reductions in the Invested
Amount as a result of unreimbursed Investor Charge-Offs, amounts [on deposit
in the Cash Collateral Account] [available under the Credit Enhancement] will
not be available to cover any shortfall, if the proceeds of such sale,
together with the Available Final Distribution Amount, are less than the
Invested Amount plus accrued and unpaid interest on the Certificates.
Accordingly, in such event, the Certificateholders will incur a loss.]
REPORTS
No later than the third business day prior to each Distribution Date,
the Servicer will forward to the Trustee, the Paying Agent, each Rating
Agency and [the Cash Collateral Depositor] [Credit Enhancement Provider], a
statement (the "Monthly Report") prepared by the Servicer setting forth
certain information with respect to the Trust and the Certificates,
including: [(a) the aggregate amount of Principal Receivables and Finance
Charge Receivables in the Trust as of the end of such Monthly Period; (b) the
Invested Amount [and the Adjusted Invested Amount]; (c) the Floating
Allocation Percentage and, during the [Scheduled Accumulation Period]
[Controlled Amortization Period] or Early Amortization Period, the Principal
Allocation Percentage; (d) the amount of collections of Principal Receivables
and Finance Charge Receivables processed during the related Monthly Period
and the portion thereof allocated to the Certificateholders' Interest; (e)
the aggregate outstanding balance of Accounts that were [30], [60] and [90]
days or more delinquent as of the end of such Monthly Period; (f) the
Investor Defaulted Amount and the Defaulted Amount with respect to such
Monthly Period; (g) the aggregate amount, if any, of Investor charge-offs and
any Investor charge-offs reimbursed on the related Monthly Period, for such
Monthly Period; (h) the Monthly Investor Servicing Fee for such Monthly
Period; (i) the Portfolio Yield for such Monthly Period; (j) the Base Rate
for such Monthly Period; (k) the [Available Cash Collateral Amount]
[Available Credit Enhancement Amount] for such Distribution Date]; and [other
amounts].
UNDERWRITING
Subject to the terms and conditions set forth in the underwriting
agreement (the "Underwriting Agreement") between the Transferors and the
underwriters named below (the "Underwriters"), the Transferors have agreed to
sell to the Underwriters, and each of the Underwriters has severally agreed
to purchase, the principal amount of the Certificates and set forth opposite
its name:
<TABLE>
<CAPTION>
Principal
Amount of
Underwriters Certificates
------------ ------------
<S> <C>
. . . . . . . . . . . . . . . . . . . . . $
. . . . . . . . . . . . . . . . . . . . .
---------------
Total . . . . . . . . . . . . . . . $
</TABLE>
The Underwriting Agreement provides that the obligations of the
Underwriters to pay for and accept delivery of the Certificates are subject
to the approval of certain legal matters by their counsel and to certain
other conditions. All of the Certificates offered hereby will be issued if
any are issued.
The Underwriters propose initially to offer the Certificates to the
public at the price set forth on the cover page hereof and to certain dealers
at such price less concessions not in excess of [____]% of the principal
amount of the Certificates. The Underwriters may allow, and such dealers may
reallow, concessions not in excess of [____]% of the principal amount of the
Certificates to certain brokers and
S-34
<PAGE>
dealers. After the initial public offering, the public offering price and
other selling terms may be changed by the Underwriters.
The Transferors severally will indemnify the Underwriters against
certain liabilities, including liabilities under the Securities Act, or
contribute to payments the Underwriters may be required to make in respect
thereof.
S-35
<PAGE>
INDEX OF DEFINED TERMS
Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-1, S-3
Additional Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-26
Adjusted Invested Amount . . . . . . . . . . . . . . . . . . . . . . . S-5, S-24
Available Cash Collateral Amount . . . . . . . . . . . . . . . . . . . . . .S-29
Available Credit Enhancement Amount. . . . . . . . . . . . . . . . . . . . .S-30
Available Final Distribution Amount. . . . . . . . . . . . . . . . . . . . .S-33
Available Finance Charge Collections . . . . . . . . . . . . . . . . . . . .S-26
Available Funds. . . . . . . . . . . . . . . . . . . . . . . . . . . .S-20, S-26
Available Principal Collections. . . . . . . . . . . . . . . . . . . . . . .S-21
Available Reserve Account Amount . . . . . . . . . . . . . . . . . . . . . .S-26
Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-3
Base Rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-32
Cash Collateral Account. . . . . . . . . . . . . . . . . . . . . . . . . . . S-9
Cash Collateral Depositor. . . . . . . . . . . . . . . . . . . . . . . . . .S-29
CCB Holding. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-1, S-3
Certificate Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-2, S-5
Certificateholders' Interest . . . . . . . . . . . . . . . . . . . . . . . . S-5
Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-1
Controlled Accumulation Amount . . . . . . . . . . . . . . . . . . . . . . .S-29
Controlled Amortization Amount . . . . . . . . . . . . . . . . . . . . . . .S-28
Controlled Amortization Period . . . . . . . . . . . . . . . . . . . . . . . S-8
Covered Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-25
Credit Enhancer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-30
Deficit Controlled Accumulation Amount . . . . . . . . . . . . . . . . . . .S-29
Deficit Controlled Amortization Amount . . . . . . . . . . . . . . . . . . .S-28
Designated Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-3
Early Termination Amount . . . . . . . . . . . . . . . . . . . . . . . . . . S-7
Economic Pay Out Event . . . . . . . . . . . . . . . . . . . . . . . . . . .S-30
Enhancement Invested Amount. . . . . . . . . . . . . . . . . . . S-6, S-24, S-27
ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-11
Expected Final Payment Date. . . . . . . . . . . . . . . . . . . . . . S-5, S-12
Floating Allocation Percentage . . . . . . . . . . . . . . . . . . . . . . .S-23
Full Invested Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-6
Funding Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-6, S-22
Group [____] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-8
Highest Bid. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-33
Index. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-5
Initial Cash Collateral Amount . . . . . . . . . . . . . . . . . . . . .S-5, S-9
Initial Invested Amount. . . . . . . . . . . . . . . . . . . . . . . . . . . S-4
Interest Funding Investment Proceeds . . . . . . . . . . . . . . . . . . . .S-25
Interest Payment Date. . . . . . . . . . . . . . . . . . . . . . . . . . . . S-2
Interest Period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-20
Invested Amount. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-24
Investor Charge-Off. . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-31
Investor Default Amount. . . . . . . . . . . . . . . . . . . . . . . . . . .S-30
Loan Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-27
Monthly Cash Collateral Fee. . . . . . . . . . . . . . . . . . . . . . . . .S-27
Monthly Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-27
S-36
<PAGE>
Monthly Principal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-28
Monthly Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-34
Monthly Servicing Fee. . . . . . . . . . . . . . . . . . . . . . . . . . . .S-33
Net Servicing Fee Rate . . . . . . . . . . . . . . . . . . . . . . . . . . .S-33
Paired Series. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-31
Period Length Determination Date . . . . . . . . . . . . . . . . . . . . . .S-21
Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-11
Pooling and Servicing Agreement. . . . . . . . . . . . . . . . . . . . .S-1, S-3
Portfolio Adjusted Yield . . . . . . . . . . . . . . . . . . . . . . . . . .S-25
Portfolio Yield. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-32
Pre-Funding Account. . . . . . . . . . . . . . . . . . . . . . . . . . S-6, S-22
Pre-Funding Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-6
Principal Allocation Percentage. . . . . . . . . . . . . . . . . . . . . . .S-23
Principal Funding Account. . . . . . . . . . . . . . . . . . . . . . . . . .S-12
Principal Funding Account Balance. . . . . . . . . . . . . . . . . . . . . .S-24
Principal Funding Investment Proceeds. . . . . . . . . . . . . . . . . . . .S-24
Rate Determination Date. . . . . . . . . . . . . . . . . . . . . . . . . . . S-5
Receivables. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-1, S-3
Record Date. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-20
Required Amount. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-28
Required Cash Collateral Amount. . . . . . . . . . . . . . . . . . . . . . .S-30
Required Reserve Account Amount. . . . . . . . . . . . . . . . . . . . . . .S-25
Reserve Account. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-25
Reserve Account Funding Date . . . . . . . . . . . . . . . . . . . . . . . .S-25
Scheduled Accumulation Period. . . . . . . . . . . . . . . . . . . . . . . . S-8
Scheduled Accumulation Period Length . . . . . . . . . . . . . . . . . . . .S-21
Series Cut-Off Date. . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-5
Series Servicing Fee Percentage. . . . . . . . . . . . . . . . . . . . . . . S-7
Series [199_-__] Supplement. . . . . . . . . . . . . . . . . . . . . . . . .S-20
Servicer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-1, S-3
Servicing Base Amount. . . . . . . . . . . . . . . . . . . . . . . . . . . .S-33
Servicing Fee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-33
Servicing Fee Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-33
Special Payment Date . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-12
Termination Date . . . . . . . . . . . . . . . . . . . . . . . . . . . S-8, S-10
Transferors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-1, S-3
Trust. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-1, S-3
Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-1, S-3
Underwriters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-34
Underwriting Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . .S-34
S-37
<PAGE>
- ----------------------------------------
NO DEALER, SALESMAN OR OTHER PERSON
HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN
THIS PROSPECTUS SUPPLEMENT OR THE
ACCOMPANYING PROSPECTUS AND, IF
GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY
EITHER TRANSFEROR OR BY THE
UNDERWRITERS. NEITHER THIS
PROSPECTUS SUPPLEMENT NOR THE
ACCOMPANYING PROSPECTUS CONSTITUTES
AN OFFER OR A SOLICITATION BY ANYONE
IN ANY STATE IN WHICH SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED OR TO
ANYONE TO WHOM IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION.
NEITHER THE DELIVERY OF THIS
PROSPECTUS SUPPLEMENT OR THE
ACCOMPANYING PROSPECTUS, NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF EITHER
TRANSFEROR SINCE THE DATE HEREOF OR
THEREOF OR THAT THE INFORMATION
CONTAINED OR INCORPORATED BY
REFERENCE HEREIN OR THEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO
ITS DATE.
-------------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT PAGE
Summary of Series Terms. . . . . . . S-
Special Considerations . . . . . . . S-
Maturity Considerations. . . . . . . S-
The Portfolio. . . . . . . . . . . . S-
The Receivables. . . . . . . . . . . S-
Use of Proceeds. . . . . . . . . . . S-
The Transferors. . . . . . . . . . . S-
Series Provisions. . . . . . . . . . S-
Underwriting . . . . . . . . . . . . S-
Index of Defined Terms . . . . . . . S-
PROSPECTUS
Available Information. . . . . . . . . .
Reports to Certificateholders. . . . . .
Incorporation of Certain Documents by
Reference . . . . . . . . . . . . . .
Prospectus Summary . . . . . . . . . . .
Special Considerations . . . . . . . . .
The Bank's Credit Card Activities. . . .
The Bank . . . . . . . . . . . . . . . .
CCB Holding Corporation. . . . . . . . .
The Receivables. . . . . . . . . . . . .
Use of Proceeds. . . . . . . . . . . . .
The Trust. . . . . . . . . . . . . . . .
Description of the Certificates. . . . .
The Pooling and Servicing Agreement. . .
Description of the Receivables
Purchase Agreement . . . . . . . . .
Certain Legal Aspects of the
Receivables. . . . . . . . . . . . . . .
Certain Federal Income Tax
Consequences . . . . . . . . . . . . . .
ERISA Considerations . . . . . . . . . .
Plan of Distribution . . . . . . . . . .
Index of Defined Terms . . . . . . . . .
UNTIL [ ], 199[ ]
[(90 DAYS AFTER THE DATE OF THIS
PROSPECTUS)], ALL DEALERS EFFECTING
TRANSACTIONS IN THE CERTIFICATES
WHETHER OR NOT PARTICIPATING IN THIS
DISTRIBUTION, MAY BE REQUIRED TO
DELIVER A PROSPECTUS SUPPLEMENT AND
PROSPECTUS. THIS IS IN ADDITION TO
THE OBLIGATION OF DEALERS TO DELIVER
A PROSPECTUS SUPPLEMENT AND
PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO
THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
- ----------------------------------------
- ----------------------------------------
CHEVY CHASE
MASTER CREDIT CARD TRUST II
$[_________] [FLOATING RATE] [ %]
SERIES [199 - ]
ASSET BACKED CERTIFICATES
CHEVY CHASE
BANK, F.S.B.,
AS TRANSFEROR AND SERVICER
CCB HOLDING CORPORATION,
as Transferor
_____________________
PROSPECTUS SUPPLEMENT
_____________________
[NAME OF UNDERWRITERS]
- ----------------------------------------
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT.
A REGISTRATION STATEMENT RELATING TO
THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION
STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE
AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL
THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH
OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION
OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED OCTOBER 23, 1996
PROSPECTUS SUPPLEMENT
(To Prospectus dated _________ __, 199_) VERSION #2
CHEVY CHASE MASTER CREDIT CARD TRUST II
$__________ CLASS A SERIES [199_-__] [FLOATING RATE] [____%]
ASSET BACKED CERTIFICATES
$__________ CLASS B SERIES [199_-__] [FLOATING RATE] [____%]
ASSET BACKED CERTIFICATES
CHEVY CHASE BANK, F.S.B.,
as Transferor and Servicer
CCB HOLDING CORPORATION,
as Transferor
The Class A Series [199_-__] [Floating Rate] [____%] Asset Backed
Certificates (the "Class A Certificates") and the Class B Series [199_-__]
[Floating Rate] [____%] Asset Backed Certificates (the "Class B Certificates"
and, together with the Class A Certificates, the "Certificates") offered hereby
will represent undivided interests in certain assets of the Chevy Chase Master
Credit Card Trust II (the "Trust") [to be] created pursuant to a Pooling and
Servicing Agreement (the "Pooling and Servicing Agreement") among Chevy Chase
Bank, F.S.B. (the "Bank"), as transferor and servicer (in such capacity, the
"Servicer") and CCB Holding Corporation ("CCB Holding"), a Delaware corporation,
as transferor (the Bank and CCB Holding together in their capacity as
transferors, the "Transferors"), and Bankers Trust Company, as trustee (the
"Trustee"). The property of the Trust includes receivables (the "Receivables")
generated from time to time in a portfolio of MasterCard-Registered Trademark-
and Visa-Registered Trademark- revolving credit card accounts (the "Accounts"),
collections thereon and certain other property as more fully described herein.
The Transferors initially will own the remaining undivided interest in the Trust
not represented by the Certificates and the other investor certificates or
interests issued by the Trust. The Transferors [have offered and] may offer
from time to time other series of certificates that evidence undivided interests
in certain assets of the Trust, which may have terms significantly different
from the Certificates and which are not offered hereby. The issuance of
additional Series of certificates may impact the timing or amount of payments
received by holders of the Certificates.
(CONTINUED ON NEXT PAGE)
--------------------
THERE CURRENTLY IS NO SECONDARY MARKET FOR THE CERTIFICATES, AND THERE IS
NO ASSURANCE THAT ONE WILL DEVELOP OR, IF ONE DOES DEVELOP, THAT IT WILL
CONTINUE UNTIL THE CERTIFICATES ARE PAID IN FULL. POTENTIAL INVESTORS SHOULD
CONSIDER, AMONG OTHER THINGS, THE INFORMATION SET FORTH IN "SPECIAL
CONSIDERATIONS" COMMENCING ON PAGE ____ HEREIN AND ON PAGE ____ IN THE
PROSPECTUS.
THE CERTIFICATES WILL REPRESENT INTERESTS IN THE TRUST ONLY AND WILL NOT
REPRESENT INTERESTS IN OR OBLIGATIONS OF, NOR WILL THEY BE GUARANTEED BY, EITHER
BANK, THE SERVICER OR ANY AFFILIATE OF THE FOREGOING. NEITHER THE CERTIFICATES
NOR THE UNDERLYING ACCOUNTS OR RECEIVABLES OR ANY COLLECTIONS THEREON ARE
INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENTAL AGENCY OR INSTRUMENTALITY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Price to Underwriting Proceeds to
Public (1) Discount the Transferors (1)(2)
- -------------------------------------------------------------------------------
Per Class A Certificate . . ____% ____% ____%
- -------------------------------------------------------------------------------
Per Class B Certificate . . ____% ____% ____%
- -------------------------------------------------------------------------------
Total . . . . . . . . . . . $__________ $__________ $__________
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(1) Plus accrued interest, if any, at the Class A Certificate Rate or Class B
Certificate Rate, as applicable, from [__________, 199_].
(2) Before deduction of expenses payable by the Transferors, estimated to be
$[__________].
____________________
[The Certificates are offered by the Underwriters when, as and if issued by
the Trust and accepted by the Underwriters and subject to the Underwriters'
right to reject orders in whole or in part.] [The Certificates are offered by
[the Underwriters], subject to receipt and acceptance by them and subject to
their rights to reject any order in whole or in part.] It is expected that the
Certificates will be delivered in book-entry form on or about __________, 199_,
through the facilities of The Depository Trust Company [, Cedel SOCIETE ANONYME
and the Euroclear System].]
[Underwriters]
The date of this Prospectus Supplement is _________ __, 199_.
<PAGE>
(CONTINUED FROM PREVIOUS PAGE)
[Interest will accrue on the Class A Certificates at the rate of ____% per
annum (the "Class A Certificate Rate"). Interest will accrue on the Class B
Certificates at the rate of ____% per annum (the "Class B Certificate Rate").]
[Interest will accrue on the Class A Certificates with respect to the initial
Interest Period at the rate of ____% per annum and, with respect to each
subsequent Interest Period, at the rate of ____% per annum [above] [below]
[times] ______________ (the "Index") prevailing on the Rate Determination Date
(defined herein) [but in no event in excess of____% per annum] (the "Class A
Certificate Rate"). Interest will accrue on the Class B Certificates with
respect to the initial Interest Period at the rate of ____% per annum and, with
respect to each subsequent Interest Period, at the rate of ____% per annum
[above] [below] [times] the Index prevailing on the Rate Determination Date [but
in no event in excess of ____% per annum] (the "Class B Certificate Rate").]
Interest with respect to the Certificates will be distributed on __________ and
on the __________ day of each [month] [quarter] [other] thereafter (or, if such
__________ day is not a business day, the next business day) (each, an "Interest
Payment Date").
Principal with respect to the Class A Certificates is scheduled to be [paid
on __________, 199_] [distributed on each Distribution Date commencing on the
Distribution Date in __________ and ending on the Distribution Date in
__________], but may be paid earlier or later under certain limited
circumstances described herein. Principal with respect to the Class B
Certificates is scheduled to be [paid on __________, 199_] [distributed on each
Distribution Date,] [commencing on the Distribution Date in __________, 199_]
[commencing with the Distribution Date following the Distribution Date on which
the Class A Certificates have been paid in full,] [and ending on the 199_
Distribution Date], but may be paid earlier or later under certain limited
circumstances described herein. See "Maturity Considerations" and "Series
Provisions--Pay Out Events" herein and "Description of the Certificates--Pay Out
Events" in the Prospectus. [Principal payments will not be made to Class B
Certificateholders until the final principal payment has been paid in respect of
the Class A Certificateholders.] See "Series Provisions--Principal Payments."
THE FRACTIONAL UNDIVIDED INTEREST IN THE TRUST REPRESENTED BY THE CLASS B
CERTIFICATES WILL BE SUBORDINATED TO THE EXTENT NECESSARY TO FUND PAYMENTS WITH
RESPECT TO THE CLASS A CERTIFICATES TO THE EXTENT DESCRIBED HEREIN.
[The Trust will have the benefit of funds on deposit in a cash collateral
account (the "Cash Collateral Account") which will be funded by an initial
deposit of $__________, [of which $__________ will be for the benefit of both
the Class A Certificates and the Class B Certificates and $__________] [which]
will be for the exclusive benefit of the Class B Certificates. Amounts
available to be withdrawn from the Cash Collateral Account will be applied as
described herein under "Summary of Series Terms--Cash Collateral Account" and
"Series Provisions--Cash Collateral Account."] [In addition, the Collateral
Interest (defined herein) will be issued in the initial amount of $[______] and
will be subordinated to the Certificates as described herein.](1)
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVERALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE CERTIFICATES AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
THE CERTIFICATES OFFERED HEREBY CONSTITUTE A SEPARATE SERIES OF
CERTIFICATES BEING OFFERED BY THE TRUST FROM TIME TO TIME PURSUANT TO ITS
PROSPECTUS DATED [_________ __, 199_]. THIS PROSPECTUS SUPPLEMENT DOES NOT
CONTAIN COMPLETE INFORMATION ABOUT THE OFFERING OF THE CERTIFICATES. ADDITIONAL
INFORMATION IS CONTAINED IN THE PROSPECTUS AND PURCHASERS ARE URGED TO READ BOTH
THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS IN FULL. SALES OF THE
CERTIFICATES MAY NOT BE CONSUMMATED UNLESS THE PURCHASER HAS RECEIVED BOTH THIS
PROSPECTUS SUPPLEMENT AND THE PROSPECTUS.
- ------------------------
(1) Other forms of credit enhancement may be provided for the benefit of
a Series or a Class or Classes within a Series as described under "Description
of the Certificates--Credit Enhancement" in the Prospectus, and if so provided,
the Prospectus Supplement will reflect the provisions of the credit enhancement
that are material to the Certificateholders of such Series or Class as well as
certain information, if applicable, with respect to the credit enhancement
provider.
S-2
<PAGE>
SUMMARY OF SERIES TERMS
The following is qualified in its entirety by reference to the detailed
information appearing elsewhere in this Prospectus Supplement and the
accompanying Prospectus. Reference is made to the Index of Defined Terms in
each of this Prospectus Supplement and the Prospectus for the location herein
and therein of the definitions of certain capitalized terms used herein.
Certain capitalized terms used but not defined herein have the meanings assigned
to them in the Prospectus.
Title of Securities. . . $__________ Class A Series [199_-__] [Floating Rate]
[____%] Asset Backed Certificates [the "Class A
Certificates") and $__________ Class B Series
[199_-__] [Floating Rate] [____%] Asset Backed
Certificates (the "Class B Certificates" and,
together with the Class A Certificates, the
"Certificates").
Trust. . . . . . . . . . The Chevy Chase Master Credit Card Trust II (the
"Trust")was formed pursuant to a Pooling and
Servicing Agreement (the "Pooling and Servicing
Agreement"), among Chevy Chase Bank, F.S.B. (the
"Bank"), as transferor and servicer (in such
capacity, the "Servicer"), CCB Holding Corporation
("CCB Holding"), a Delaware corporation, as
transferor (the Bank and CCB Holding, together in
their capacities as transferors, the "Transferors"),
and Bankers Trust Company, as trustee (the
"Trustee"), as supplemented by the Series Supplement
relating to the Certificates (the "Series [199_-__]
Supplement").
Trust Assets . . . . . . The property of the Trust includes receivables (the
"Receivables") arising under certain MasterCard-
Registered Trademark- and VISA-Registered
Trademark-(2) revolving credit card
accounts (the "Accounts") randomly selected
from a designated portion of the portfolio
of MasterCard and VISA accounts owned by
the Transferors (the "Designated Portfolio"), all
monies due or to become due in payment of the
Receivables (other than recoveries on charged-off
Receivables), all proceeds of the Receivables and
proceeds of credit insurance policies relating to the
Receivables, the right to receive Interchange
(defined herein) allocable to the Certificates
[(which right may not be afforded to other Series
issued by the Trust)] and all monies on deposit in
certain accounts of the Trust (other than investment
earnings on such amounts)[, and any Credit
Enhancement issued with respect to any Series]. [The
benefits of any Credit Enhancement issued with
respect to a Series, other than Series [199_-__],
will not be available for the benefit of
Certificateholders and holders of certificates of
other Series will not be entitled to the benefits of
any Credit Enhancement for Series [199_-__].
- -----------------------
(2) MasterCard-Registered Trademark-and VISA-Registered Trademark- are
registered trademarks of MasterCard International Incorporated and VISA USA,
Inc., respectively.
S-3
<PAGE>
The Transferors have conveyed to the Trustee for the
benefit of the Trust all Receivables existing under
certain Accounts that were randomly selected from the
Designated Portfolio based on criteria provided in
the Pooling and Servicing Agreement as applied on the
Trust Cut-off Date (as defined herein) [and with
respect to certain Additional Accounts (defined
herein), as applied on [______ __, 199_], have
conveyed and will convey all Receivables arising
under the Accounts from time to time thereafter until
the termination of the Trust. In addition, pursuant
to the Pooling and Servicing Agreement, the
Transferors may (subject to certain limitations and
conditions) designate Additional Accounts for
inclusion in the Trust. Also, the Pooling and
Servicing Agreement provides that, in lieu of
Additional Accounts or in addition thereto, the
Transferors may, subject to certain conditions,
include Participations in the Trust. See "The
Receivables" herein and "Description of the
Certificates--Addition of Trust Assets" in the
Prospectus.
Receivables. . . . . . . The Receivables arise in Accounts that have been
randomly selected from the Designated Portfolio,
based on criteria provided in the Pooling and
Servicing Agreement as applied on the Trust Cut-Off
Date and as more fully described herein under "The
Designated Portfolio." The Receivables consist of
Principal Receivables and Finance Charge Receivables.
In addition, certain amounts of Interchange
attributed to cardholder charges for goods and
services in the Accounts will be allocated to the
Certificates and treated as Finance Charge
Receivables. See "The Bank's Credit Card Activities-
-Interchange" in the Prospectus.
The aggregate amount of Receivables in the Accounts
as of [_________ __, ____,] the [Trust Cut-Off Date]
[Closing Date] was $[__________], comprised of
$[_________] of Principal Receivables and
$[_________] of Finance Charge Receivables. The
Finance Charge Receivables will not affect the
Invested Amount of the Certificates [and the
Collateral Interest] or the amount of the
Transferors' Interest, which are determined on the
basis of the amount of Principal Receivables in the
Trust. [The aggregate interest in the Principal
Receivables in the Trust evidenced by the
Certificates and the Collateral Interest will never
exceed the amount of the Investor Interest regardless
of the total amount of Principal Receivables in the
Trust at any time].
S-4
<PAGE>
Initial Invested Amount. . . . . . . . $[__________].(3)
Series Invested Amount . . . . . . . . The [Initial Invested Amount] [plus
the amount of any withdrawals from the
Pre-Funding Account in connection with
the purchase of an additional interest
in the Principal Receivables] [other
formula].
Initial Class A Invested Amount. . . . $[__________].(3)
Initial Class B Invested Amount. . . . $[__________].(3)
Class A Certificate Rate . . . . . . . [[____]% per annum] [[____]% per annum
with respect to the initial Interest
Period (defined herein) and, with
respect to each subsequent Interest
Period, ____% per annum [above] [below]
[times] _______ (the "Index") prevailing
on the [____] day immediately preceding
the commencement of such Interest Period
(a "Rate Determination Date")[, but in
no event in excess of ____% per annum]].
Class B Certificate Rate . . . . . . . [[____]% per annum] [[____]% per annum
with respect to the initial Interest
Period and, with respect to each
subsequent Interest Period, ____% per
annum [above] [below] [times] the Index
prevailing on the [____] day immediately
preceding the commencement of such
Interest Period (a "Rate Determination
Date")[, but in no event in excess of
____% per annum]].
Interest Payment Dates. . . . . . . . The [____] day of each [month] [quarter]
[other] (or, if any such day is not a
business day, the next business day),
commencing [_________ __, 199_].
Class A Controlled [Amortization]
[Accumulation] Amount. . . . . . . For each Distribution Date with respect
to the Class A [Controlled
Amortization] [Accumulation]
Period, $[__________]; [except that, if
the commencement of the Class A
Scheduled Accumulation Period is
delayed as described herein
under "Series Provisions--
Principal Payments," the Class A
Controlled Accumulation Amount
for each Distribution Date
with respect to the Class A
Scheduled Accumulation Period
will be determined as described
under "Series Provisions--
Application of Collections--
Payments of Principal."]
Class B Controlled [Amortization]
[Accumulation] Amount . . . . . . . For each Distribution Date with respect
to the Class B [Controlled Amortization]
[Accumulation] Period [after the
- -----------------------
(3) Adjustments to the Invested Amount definitions and allocations with
respect to the Invested Amount may be made in a Prospectus Supplement
relating to a prefunded Series or Class.
S-5
<PAGE>
Class A Invested Amount has been paid
in full], $[__________].
Class A Expected Final
Payment Date. . . . . [_________ __, ____].
Class B Expected Final
Payment Date. . . . . [_________ __, ____].
[Initial Shared
Collateral Amount . . . $[__________].]
[Initial Class B
Collateral Amount . . . $[__________].]
Closing Date . . . . . . [_________ __, 199_] (the "Closing Date").
The Certificates . . . . Each of the Certificates offered hereby represents an
undivided interest in the Trust. The portion of the
Trust Assets allocated to the holders of the
Certificates as described under "Description of the
Certificates" in the Prospectus (the
"Certificateholders' Interest")(4) will be
further allocated between the holders of the Class A
Certificates (the "Class A Certificateholders'
Interest") and the holders of the Class B
Certificates (the "Class B Certificateholders'
Interest") [, the Collateral Interest Holder (defined
below), the interest of other holders of other
undivided interests in the Trust issued pursuant to
the Pooling and Servicing Agreement and the
applicable Series Supplements and the interest of the
Transferors (the "Transferors' Interest"), as
described below. [The Collateral Interest in the
initial amount of $[________] (which amount
represents [____]% of the sum of the Initial Class A
Invested Amount, Initial Class B Invested Amount and
the initial Collateral Interest) constitutes Credit
Enhancement for the Certificates. The provider of
such Credit Enhancement is referred to herein as the
"Collateral Interest Holder." Allocations will be
made to the Collateral Interest and the Collateral
Interest Holder will have voting and certain other
rights as if the Collateral Interest were a
subordinated class of Certificates.] [The
Transferors' Interest will represent the right to the
assets of the Trust not allocated to the Class A
Certificateholders' Interest, the Class B
Certificateholders' Interest, the Collateral Interest
or the holders of other undivided interests in the
Trust. The principal amount of the Transferors'
Interest will fluctuate as the amount of Receivables
in the Trust changes from time to time.]
- ----------------------
(4) Adjustments to Certificateholders' Interest definitions may be made in
a Prospectus Supplement relating to a prefunded Series.
S-6
<PAGE>
The principal amount of the [Class A
Certificateholders' Interest] and the [Class B
Certificateholders' Interest] [will decline as
principal is paid to the [Class A Certificateholders]
[and] [Class B Certificateholders], [respectively,]
during the Controlled Amortization Period or Early
Amortization Period] [will remain fixed at the
aggregate initial principal amount of the [Class A
Certificates] [and] [the Class B Certificates]
[respectively,]] except as otherwise provided herein.
The Class A Certificateholders' Interest will decline
in certain circumstances if the Defaulted Amounts
allocated to the Class A Certificates exceed funds
allocable thereto as described herein and the Class B
Certificateholders' Interest [is] [and the Collateral
Interest are] zero. The Class B Certificateholders'
Interest will [also] decline in certain circumstances
as a result of (a) the allocation to the Class B
Certificateholders' Interest of certain Defaulted
Amounts, including such amounts otherwise allocable
to the Class A Certificateholders' Interest [when the
Collateral Interest is zero] and (b) the reallocation
of collections of Principal Receivables otherwise
allocable to the Class B Certificateholders' Interest
to fund certain payments in respect of the Class A
Certificates. [Any such reductions in the
Certificateholders' Interest may be reimbursed out of
Excess Spread, if any, [Excess Finance Charge
Collections allocable to Series [199_-__]] and
certain amounts [withdrawn from the Cash Collateral
Account] [drawn on other Credit Enhancement] as
described herein.] [During the Scheduled
Accumulation Period, for the purpose of allocating
collections of Finance Charge Receivables and the
Defaulted Amount with respect to each Monthly Period,
the Class A Certificateholders' Interest and (after
the Class B Principal Commencement Date) the Class B
Certificateholders' Interest will be further reduced
by the amount on deposit in the Principal Funding
Account (as so reduced, the "Class A Adjusted
Invested Amount" and "Class B Adjusted Invested
Amount" and, together [with the Collateral Interest],
the "Adjusted Invested Amount").]
The Class A Certificates, the Class B Certificates
[and the Collateral Interest] will each include the
right to receive (but only to the extent needed to
make payments of interest at the [applicable]
Certificate Rate [with respect to each Interest
Period] and payments of principal as described
herein), varying percentages of the collections of
Finance Charge Receivables and Principal Receivables
and will be allocated varying percentages of the
Defaulted Amount with respect to each Monthly Period.
Collections of Finance Charge Receivables and the
Defaulted Amount will be allocated to the holders of
the Certificates based on the Floating Allocation
Percentages (as defined herein) [and the Collateral
Interest based on the Collateral Percentage (defined
herein)]. Such amounts will be
S-7
<PAGE>
further allocated to the holders of the
Class A Certificates and the holders of
the Class B Certificates
[and the Collateral Interest] based on the
Class A Floating Percentage and the Class
B Floating Percentage
[and the Collateral Percentage],
respectively (each, defined herein).
Collections of Principal Receivables will
be allocated to the Certificates
[and the Collateral Interest] based on the
Principal Allocation Percentage. Such
percentage will vary as described herein
under "Series Provisions--Allocation
Percentages" as the aggregate amount of
Principal Receivables in the Trust varies
from month to month and depending on
whether the Certificates are in their
Revolving Period, [Controlled Amortization]
[Accumulation] Period or Early
Amortization Period. See "Description of
the Certificates--Allocation Percentages"
in the Prospectus. Such amounts will be
further allocated to the holders of the
Class A Certificates, the Class B
Certificates [and the Collateral Interest]
based on the Class A Principal Percentage,
the Class B Principal Percentage
[and the Collateral Percentage],
respectively (each, defined herein).
[Following the occurrence of an Economic
Pay Out Event (defined herein) and a
withdrawal of funds from the Cash Collateral
Account, a portion of the Certificateholders'
Interest (corresponding to the aggregate
amount of such withdrawal) will be
allocated to the Cash Collateral Depositor
(the "Enhancement Invested Amount").]
[Other Series. . . . . . [The Certificates are the first Certificates issued
by the Trust.] [Additional Series are expected to be
issued from time to time by the Trust.] See
"Description of the Certificates--New Issuances" in
the Prospectus and "Maturity Considerations"
herein.](5)
[Funding Period. . . . . During the period from and including the Closing Date
to, but excluding, the earliest of (i) the day on
which the Invested Amount equals $[__________] (the
"Full Invested Amount"), (ii) the day on which a Pay
Out Event occurs and (iii) the [______ 199_]
Distribution Date (the "Funding Period"), the Pre-
Funding Amount will be held in a trust account
established with the Trustee for the benefit of the
Certificateholders (the "Pre-Funding Account"). The
"Pre-Funding Amount" will equal $[_______], less the
amounts of any increases in the Invested Amount
pursuant to the Series [199_-__] Supplement in
connection with the addition of Principal Receivables
to the Trust or principal payments made to other
amortizing Series.]
- ---------------------
(5) If Series [199_-__] is issued at a time when there are other outstanding
Series, appropriate summary disclosure about the principal terms of such
other Series will be included in the Prospectus Supplement.
S-8
<PAGE>
[Funds on deposit in the Pre-Funding Account will be
invested by the Trustee in certain Eligible
Investments [pursuant to a guaranteed rate agreement]
[guaranteed investment contract]. Interest earnings
on the Pre-Funding Amount (net of investment losses
and expenses) will be used to pay interest on the
Certificates during the Funding Period.]
[During the Funding Period, funds on deposit in the
Pre-Funding Account will be withdrawn and paid to the
Transferors to the extent of any increases in the
Invested Amount. The Transferors expect that the
Invested Amount will equal the Full Invested Amount
by the [______ 199_] Monthly Period. If the Invested
Amount does not for any reason equal the Full
Invested Amount by the end of the Funding Period, any
amount remaining in the Pre-Funding Account will be
payable to the [Class A] [and Class B]
Certificateholders [and the Collateral Interest
Holder] [PRO RATA, on the basis of the ratio of the
Class A Invested Amount and the Class B Invested
Amount [and the Collateral Interest], respectively,
to the Invested Amount as of the last day of the
related Monthly Period] on the Distribution Date that
is the last day of the Funding Period.]
[Early Termination
Amount . . . . . . . . An early termination amount (the "Early
Termination Amount") will be payable by the
Transferors to the [Class A] [and Class B]
Certificateholders [and the Collateral
Interest Holder] on the first Distribution
Date following the end of the Funding Period
if any Pre-Funding Amount exists at the end
of the Funding Period. The Early Termination
Amount will equal the excess, if any,
discounted as described below, of (i) the
amount of interest that would have accrued on
such Pre-Funding Amount at the [Class A]
Certificate Rate [and Class B Certificate
Rate] [and the Collateral Rate] during the
period commencing on and including such
Distribution Date to, but excluding,
[__________], over (ii) the amount of
interest that would have accrued on such Pre-
Funding Amount over the same period at a per
annum rate of interest equal to the bond
equivalent yield to maturity on the [__] day
preceding such Distribution Date on
[________]. Such excess shall be discounted
to present value to such Distribution Date at
the applicable yield described in clause
(ii).]
Denominations. . . . . . Beneficial interests in the Certificates will be
offered for purchase in denominations of $1,000 and
integral multiples thereof.
[Registration of
Certificates. . . . . The Certificates initially will be
represented by Certificates registered
in the name of Cede, as the nominee of
DTC. No purchaser of a Certificate will
be entitled to receive a definitive
certificate except under certain limited
circumstances described
S-9
<PAGE>
in the Prospectus. Purchasers of the
Certificates may elect to hold their
Certificates through DTC (in the United
States) [or Cedel or Euroclear (in
Europe)]. See "The Pooling and
Servicing Agreement--Definitive
Certificates" in the Prospectus.]
Servicing Fee. . . . . . The Servicing Fee Rate for the Certificates will be
[____]% per annum. The Class A Servicing Fee and the
Class B Servicing Fee [and the Collateral Interest
Servicing Fee] will be paid on each Distribution Date
as described under "Series Provisions--Application of
Collections--Payment of Fees, Interest and Other
Items" and "--Servicing Compensation and Payment of
Expenses" herein. See "Description of the
Certificates--Servicing Compensation and Payment of
Expenses" in the Prospectus.
Revolving Period
and [Controlled
Amortization]
[Accumulation] Period . . Unless a Pay Out Event has occurred, the Revolving
Period with respect to the Certificates will end and
the [controlled amortization period with respect to
the Certificates (the "Controlled Amortization
Period"), which includes controlled amortization
periods for each Class] [accumulation period with
respect to the Certificates (the "Scheduled
Accumulation Period") which includes separate
accumulation periods for each Class will commence at
the close of business on [__________]] [except that,
subject to the conditions set forth under "Series
Provisions--Principal Payments" herein, the day on
which the Revolving Period ends and the Scheduled
Accumulation Period begins may be delayed to no later
than the close of business on [__________])]. Unless
a Pay Out Event has occurred, (i) the Class A
[controlled amortization] [accumulation] period [(the
"Class A [Controlled Amortization] [Accumulation]
Period") will commence at the close of business on
[____] [or such later date as is determined for the
Class A Scheduled Accumulation Period under "Series
Provisions--Principal Payments"] and end on the
earlier of (a) the commencement of the Early
Amortization Period or (b) the payment in full of the
Class A Invested Amount, and (ii) the Class B
[controlled amortization] [accumulation] period (the
"Class B [Controlled Amortization] [Accumulation]
Period") will commence on the Distribution Date on
which the Class A Invested Amount is paid in full or,
if the Class A Invested Amount is paid in full on the
Class A Expected Final Payment Date and the Early
Amortization Period has not yet commenced, the
Distribution Date following the Class A Expected
Final Payment Date (the "Class B Principal
Commencement Date") and end on the earlier of (a) the
commencement of the Early Amortization Period or
(b) the payment in full of the Class B Invested
Amount. No
S-10
<PAGE>
principal will be payable to Class A
Certificateholders until [the first Distribution Date
with respect to the Class A Controlled Amortization
Period] [__________, 199_ (the "[Class A] Expected
Final Payment Date")], or, upon the occurrence of a
Pay Out Event as described herein, the first
Distribution Date with respect to the Early
Amortization Period. No principal will be payable to
the Class B Certificateholders until the Class A
Invested Amount is paid in full. [No principal will
be payable to the Collateral Interest Holder until
the Class B Invested Amount is paid in full.] [For
the period beginning on the Closing Date and ending
with the commencement of the [Controlled
Amortization] [Accumulation] Period or the Early
Amortization Period, collections of Principal
Receivables otherwise allocable to the
Certificateholders' Interest (other than collections
of Principal Receivables allocated to the Class B
Certificateholders' Interest [or to the Collateral
Interest] ("Reallocated Principal Collections") that
are used to pay any deficiency in the Required
Amount) will, subject to certain limitations, be
treated as Shared Principal Collections and applied
to cover principal payments due to or for the benefit
of Certificateholders of other Series, if so
specified in the Supplements for such other Series,
or paid to the holders of the Transferor
Certificates.] See "Series Provisions--Pay Out
Events" herein and "Description of the Certificates--
Pay Out Events" in the Prospectus for a discussion of
the events which might lead to the termination of the
Revolving Period prior to the commencement of the
[Controlled Amortization] [Accumulation] Period. In
addition, see "Series Provisions--Principal Payments"
herein [and "Description of the Certificates--Shared
Principal Collections" in the Prospectus].
Rapid Amortization
Period . . . . . . . . During the period from the day on which a Pay
Out Event has occurred and ending on the
earlier of (a) the payment of the Invested
Amount in full and (b) the Termination Date
(the "Rapid Amortization Period"), Available
Principal Collections will be distributed
monthly on each Distribution Date to the
holders of the Class A Certificates and,
following payment in full of the Class A
Investor Interest, to the holders of the
Class B Certificates [and, following payment
in full of the Class B Investor Interest, to
the Collateral Interest Holder] beginning
with the Distribution Date in the month
following the commencement of the Rapid
Amortization Period. See "Description of the
Certificates--Pay Out Events" for a
discussion of the events which might lead to
the commencement of the Rapid Amortization
Period.
S-11
<PAGE>
[Subordination of the
Class B Certificates
[and the Collateral
Interest] . . . . . . . The Class B Certificates [and the Collateral
Interest] will be subordinated, as described herein,
to the extent necessary to fund payments with respect
to the Class A Certificates as described herein. [In
addition, the Collateral Interest will be
subordinated to the extent necessary to fund certain
payments with respect to the Class A Certificates and
the Class B Certificates. If the Collateral Interest
is reduced to zero, holders of the Class B
Certificates will bear directly the credit and other
risks associated with their interest in the Trust.]
To the extent the Class B Certificateholders'
Interest is reduced, the percentage of collections of
Finance Charge Receivables allocable to holders of
the Class B Certificates in subsequent monthly
Periods will be reduced. Moreover, to the extent the
amount of such reduction in the Class B
Certificateholders' Interest is not reimbursed, the
amount of principal and interest distributable to
holders of the Class B Certificates will be reduced.
Such reductions of the Class B Certificateholders'
Interest will thereafter be reimbursed and the Class
B Certificateholders' Interest increased on each
Transfer Date by the amount, if any, of Excess Spread
for such Transfer Date available for that purpose.
See "Description of the Certificates--Credit
Enhancement--Subordination" in the Prospectus.
Additional Amounts
Available to Class A
Certificateholders . . . If collections of Finance Charge
Receivables allocable to the Class A
Certificates for any Monthly Period [and
certain other available amounts
described herein] are less than the sum
of (i) current and overdue Monthly
Interest on the Class A Certificates,
(ii) [Class A Additional Interest,
(iii)] current and overdue Class A
Servicing Fee and (iv) the Class A
Investor Default Amount, with respect to
the related Distribution Date, Excess
Spread [and Excess Finance Charge
Collections allocable to Series
[199_-__]] will be applied to fund the
deficiency (the "Required Amount").
"Excess Spread" for any Distribution
Date will equal the sum of [(a) the
excess of collections of Finance Charge
Receivables allocated to the Class A
Certificates [and other available funds
described herein] over the sum of the
amounts referred to in clauses (i),
(ii), (iii) and (iv) above and (b) the
excess of collections of Finance Charge
Receivables allocated to the Class B
Certificates [and certain other
available funds described herein] over
the sum of (i) current and overdue
Monthly Interest on the Class B
Certificates, (ii) [Class B Additional
Interest, (iii)] current and overdue
Class B Servicing Fee and (iv) the Class
B Investor Default Amount.]
S-12
<PAGE>
If Excess Spread [and Excess Finance Charge
Collections allocable to Series [199_-__]] with
respect to such Distribution Date are less than the
Required Amount, amounts [on deposit in the Cash
Collateral Account and available to make payments
with respect to the Class A Certificates] [available
under the Credit Enhancement] will be used to fund
the remaining Required Amount. If Excess Spread
[and] [Excess Finance Charge Collections allocable to
Series [199_-__]] with respect to such Distribution
Date and amounts [on deposit in the Cash Collateral
Account and available to make payments with respect
to the Class A Certificates] [available under the
Credit Enhancement] with respect to such Distribution
Date [is] [are] less than the Required Amount,
Reallocated Principal Collections with respect to the
related Monthly Period will then be used to fund the
remaining Required Amount. If Reallocated Principal
Collections with respect to such Monthly Period are
insufficient to fund the remaining Required Amount
for the related Distribution Date, then a portion of
[the Enhancement Invested Amount, if any, will be
reduced by the amount of such deficiency (but not by
more than the Class A Investor Default Amount for
such Monthly Period). If such reduction would cause
the Enhancement Invested Amount to be reduced below
zero, the Class B Invested Amount will be reduced by
the amount by which the Enhancement Invested Amount
would have been reduced below zero (but not by more
than the excess of the Class A Investor Default
Amount for such Monthly Period over the amount of
such reduction in the Enhancement Invested Amount) to
avoid a charge-off with respect to the Class A
Certificates] [the Class B Invested Amount will be
reduced by the amount of such insufficiency (but not
by more than the Class A Investor Default Amount) to
avoid a charge-off with respect to the Class A
Certificates]. If the Class B Invested Amount is
reduced to zero, the Class A Invested Amount will be
reduced if the Required Amount for any Distribution
Date exceeds the sum of Excess Spread [and Excess
Finance Charge Collections allocated to Series
[199_-__]] and amounts [on deposit in the Cash
Collateral Account and available to make payments
with respect to the Class A Certificates] [available
under the Credit Enhancement] and Reallocated
Principal Collections for Monthly Period, but not by
more than the excess of the Class A Investor Default
Amount for such Monthly Period over the aggregate
reductions in [the Enhancement Invested Amount and]
the Class B Invested Amount with respect to such
Monthly Period, and the Class A Certificateholders
will bear directly the credit and other risks
associated with their undivided interest in the
Trust. See "Series Provisions--Reallocation of Cash
Flows; Class B Invested Amount" and "--Defaulted
Receivables; Investor Charge-Offs."]
S-13
<PAGE>
[For use in lieu of above if
Collateral Interest Structure:]
[Additional Amounts
Available to
Certificateholders . . With respect to any Distribution Date, Excess Spread
will be applied to fund the Class A Required Amount
and the Class B Required Amount, if any. The "Class
A Required Amount" means the amount, if any, by which
the sum of (a) the Class A Monthly Interest due on
such Distribution Date and any overdue Class A
Monthly Interest and Class A Additional Interest
thereon and (b) the Class A Servicing Fee for the
related Monthly Period and any overdue Class A
Servicing Fee and (c) the Class A Investor Default
Amount, if any, for the related Monthly Period
exceeds the Class A Available Funds for the related
Monthly Period. The "Class B Required Amount" means
the amount, if any, equal to the sum of (a) the
amount, if any, by which the sum of (i) Class B
Monthly Interest due on the related Distribution Date
and any overdue Class B Monthly Interest and Class B
Additional Interest thereon, and (ii) the Class B
Servicing Fee for the related Monthly Period and any
overdue Class B Servicing Fee exceeds the Class B
Available Funds for the related Monthly Period and
(b) the Class B Investor Default Amount, if any, for
the related Monthly Period. The "Required Amount"
for any Monthly Period shall mean the sum of (a) the
Class A Required Amount and (b) the Class B Required
Amount for such Monthly Period. "Excess Spread" for
any Transfer Date will equal the sum of (a) the
excess of (i) Class A Available Funds for the related
Monthly Period over (ii) the sum of the amounts
referred to in clauses (a), (b) and (c) in the
definition of "Class A Required Amount" above and (b)
the excess of (i) Class B Available Funds for the
related Monthly Period over (ii) the sum of the
amounts referred to in clauses (a)(i) and (a)(ii) in
the definition of "Class B Required Amount" above
[and (c) Collateral Available Funds for the related
Monthly Period not used, under certain circumstances,
to pay the Collateral Interest Servicing Fee, as
described herein].
[If, on any Distribution Date, Excess Spread is less
than the Class A Required Amount, Reallocated
Principal Collections [allocable first to the
Collateral Interest and then to the Class B Investor
Interest] with respect to the related Monthly Period
will be used to fund the remaining Class A Required
Amount. If Reallocated Principal Collections with
respect to such Monthly Period are insufficient to
fund the remaining Class A Required Amount for the
related Distribution Date, then the Collateral
Interest (after giving effect to reductions for any
Collateral Charge-Offs and Reallocated Principal
Collections on such Distribution Date) will be
reduced by the amount of such
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<PAGE>
deficiency (but not by more than the Class A Investor
Default Amount for such Monthly Period). In the
event that such reduction would cause the Collateral
Interest to be a negative number, the Collateral
Interest will be reduced to zero, and the Class B
Invested Amount (after giving effect to reductions
for any Class B Investor Charge-Offs (defined below)
and any Reallocated Class B Principal Collections on
such Distribution Date) will be reduced by the amount
by which the Collateral Interest would have been
reduced below zero (but not by more than the excess
of the Class A Investor Default Amount, if any, for
such Monthly Period over the amount of such reduc-
tion, if any, of the Collateral Interest with respect
to such Monthly Period). In the event that such
reduction would cause the Class B Invested Amount to
be a negative number, the Class B Invested Amount
will be reduced to zero and the Class A Invested
Amount will be reduced by the amount by which the
Class B Invested Amount would have been reduced below
zero (but not by more than the excess, if any, of the
Class A Investor Default Amount for such Monthly
Period over such reductions in the Collateral
Interest and the Class B Invested Amount with respect
to such Monthly Period) (such reduction, a "Class A
Investor Charge-Off"). If the Collateral Interest
and the Class B Invested Amount are reduced to zero,
the Class A Certificateholders will bear directly the
credit and other risks associated with their
undivided interest in the Trust. See "Description of
the Certificates--Reallocation of Cash Flows" and
"--Defaulted Receivables; Investor Charge-Offs."]
[If, on any Distribution Date, Excess Spread not
required to pay the Class A Required Amount and
reimburse Class A Investor Charge-Offs is less than
the Class B Required Amount, Reallocated Principal
Collections allocable to the Collateral Interest for
the related Monthly Period not required to pay the
Class A Required Amount will be used to fund the
remaining Class B Required Amount. If such remaining
Reallocated Principal Collections allocable to the
Collateral Interest with respect to such Monthly
Period are insufficient to fund the remaining Class B
Required Amount for such Distribution Date, then the
Collateral Interest (after giving effect to
reductions for any Collateral Charge-Offs,
Reallocated Principal Collections and any adjustments
made thereto for the benefit of the Class A
Certificateholders) will be reduced by the amount of
such deficiency (but not by more than the Class B
Investor Default Amount for such Monthly Period). In
the event that such reduction would cause the
Collateral Interest to be a negative number, the
Collateral Interest will be reduced to zero, and the
Class B Invested Amount will be reduced by the amount
by which the Collateral Interest would have been
reduced below zero (but not by more than the excess,
if any,
S-15
<PAGE>
of the Class B Investor Default Amount for
such Monthly Period over such reduction in the
Collateral Interest with respect to such Monthly
Period) (such reduction, a "Class B Investor Charge-
Off"). In the event of a reduction of the Class A
Invested Amount, the Class B Invested Amount or the
Collateral Interest, the amount of principal and
interest available to fund payments with respect to
the Class A Certificates and the Class B Certificates
will be decreased. See "Description of the
Certificates--Reallocation of Cash Flows" and "--
Defaulted Receivables; Investor Charge-Offs."]
[Excess Finance Charge
Collections . . . . . . The Certificates will be included in a group of
Series ("Group [____]") expected to be issued by
the Trust from time to time. Subject to certain
limitations described under "Description of the
Certificates--Sharing of Excess Finance Charge
Collections" in the Prospectus, Excess Finance
Charge Collections, if any, with respect to a
Series included in Group [____] will be applied to
cover any shortfalls with respect to amounts payable
from collections of Finance Charge Receivables
allocable to any other Series in Group [____], PRO
RATA based upon the amount of the shortfall, if
any, with respect to each Series in Group [____].
See "Description of the Certificates--Sharing of
Excess Finance Charge Collections" in the
Prospectus.]
[Shared Principal
Collections. . . . . . Collections of Principal Receivables and certain
other amounts otherwise allocable to other Series,
to the extent such collections are not needed to make
payments to or deposits for the benefit of the certi-
ficateholders of such other Series, will be applied
to cover principal payments due to or for the benefit
of the holders of the Certificates [and the
Collateral Interest]. See "Description of the
Certificates--Shared Principal Collections" in the
Prospectus.]
[Cash Collateral
Account. . . . . . . . A cash collateral account (the "Cash Collateral
Account") will be established in the name of the
Trustee for the benefit of the Certificateholders.
The Cash Collateral Account will be funded on the
Closing Date in the amount of $__________ (the
"Initial Cash Collateral Amount")[, of which
$__________ (the "Initial Shared Collateral Amount")
will be for the benefit of both the Class A
Certificates and the Class B Certificates and the
remaining $__________ (the "Initial Class B
Collateral Amount") will be for the exclusive benefit
of the Class B Certificates].
On each Distribution Date, the Available [Shared]
[Cash] Collateral Amount will be applied to fund [the
following amounts in the following priority: (a)
with respect to the Class A Certificates, the excess,
if any, of the Required Amount with
S-16
<PAGE>
respect to such Distribution Date over the amount of
Excess Spread[,Excess Finance Charge Collections
allocated to Series [199_-__]] [and other available
amounts] allocated and available to fund such
Required Amount and (b) with respect to the Class B
Certificates,] the excess, if any, of (i) current and
overdue Class B Monthly Interest, (ii) [Class B
Additional Interest, (iii)] current and overdue Class
B Servicing Fee and (iv) the Class B Investor Default
Amount with respect to the related Monthly Period
over the amount of Excess Spread [and Excess Finance
Charge Collections allocated to Series [199_-__]
[and other available amounts] allocated and available
to fund such amounts.
[On the first Special Payment Date following an
Economic Pay Out Event, the Available [Shared] [Cash]
Collateral Amount (after giving effect to other
withdrawals from the Cash Collateral Account on such
Distribution Date) will be applied to pay [principal
of the Class A Certificates and the remainder of the
Available Collateral Amount will be applied to pay]
principal of the Class B Certificates. Following
such withdrawal[s] from the Cash Collateral Account
on such Special Payment Date, the Cash Collateral
Account will be terminated and no further deposits
to, or withdrawals from, the Cash Collateral Account
will be made for the benefit of the [Class B]
Certificateholders.
On each Distribution Date commencing with the Class B
Principal Commencement Date, provided that an
Economic Pay Out Event has not occurred, the
Available [Cash] Collateral Amount (after giving
effect to other withdrawals from the Cash Collateral
Account on such Distribution Date) will be applied to
pay the excess, if any, of (i) the Class B Initial
Invested Amount less the sum of the aggregate amount
of principal payments previously distributed to the
Class B Certificateholders [or deposited in the
Principal Funding Account in respect of Class B
Certificates] over (ii) the Class B Invested Amount
(after giving effect to certain changes made in the
Class B Invested Amount). See "Series Provisions--
Allocation Percentages" and "--Cash Collateral
Account."
On each Distribution Date, Excess Spread [and Excess
Finance Charge Collections allocable to Series
[199_-__]] (to the extent described under "Series
Provisions--Application of Collections--Excess
Spread[; Excess Finance Charge Collections]" herein)
will be deposited in the Cash Collateral Account (to
the extent the amount on deposit in the Cash
Collateral Account is less than the Initial Cash
Collateral Amount). In addition, if on any
Distribution Date the amount
S-17
<PAGE>
on deposit in the Cash Collateral Account exceeds the
Initial Cash Collateral Amount, such excess will be
withdrawn and paid to the [Cash Collateral Depositor]
for application in accordance with the Loan Agree-
ment. See "Series Provisions--Cash Collateral
Account" herein.]
Required Collateral
Interest. . . . . . . . The "Required Collateral Interest" with respect to
any Distribution Date means (a) initially,
$[_______] (the "Initial Collateral Interest") and
(b) on any Distribution Date thereafter an amount
equal to [__]% of the sum of the Class A Invested
Amount and the Class B Invested Amount on such
Distribution Date, [after taking into account
deposits into the Principal Funding Account on such
date] and payments to be made on such Distribution
Date, and the Collateral Interest on the prior
Distribution Date after any adjustments made on such
Distribution Date, but not less than $[______];
PROVIDED, HOWEVER, (i) that if certain reductions in
the Collateral Interest occur or if a Pay Out Event
occurs, the Required Collateral Interest for such
Distribution Date shall equal the Required Collateral
Interest for the Distribution Date immediately
preceding the occurrence of such reduction or Pay
Out Event; (ii) in no event shall the Required
Collateral Interest exceed the unpaid principal
amount of the Certificates as of the last day of the
Monthly Period preceding such Distribution Date
after taking into account payments to be made on
such Distribution Date; and (iii) the Required
Collateral Interest may be reduced at any time to
a lesser amount if the Rating Agency Condition is
satisfied.]
[If on any Distribution Date, the Collateral Interest
is less than the Required Collateral Interest,
certain Excess Spread amounts, if available, will be
used to increase the Collateral Interest to the
extent of such shortfall. If on any Distribution
Date, the Collateral Interest equals or exceeds the
Required Collateral Interest, any of such Excess
Spread amounts will first, be deposited into the
Reserve Account as described herein and second, to
the extent available, be applied in accordance with
the Loan Agreement among the Transferor, the Trustee,
the Servicer and the Collateral Interest Holder (the
"Loan Agreement") and will not be available to the
Certificateholders.]
[Credit Enhancement. . . The Trust will have the benefit of a [letter of
credit] [surety bond] [insurance policy] [spread
account] [reserve account] [other credit enhancement]
[issued by __________] for the benefit of the [Class
A] [and] [Class B] Certificateholders as described
herein. See "Series Provisions--Other Forms of
Credit Enhancement" and "Credit Enhancer" herein.]
S-18
<PAGE>
[Optional Repurchase . . The Certificateholders' Interest [and the Collateral
Interest] will be subject to optional repurchase by
the Transferors on any Distribution Date after the
[sum of the] Invested Amount [and the Enhancement
Invested Amount, if any,] is reduced to an amount
less than or equal to $[__________] [____]% of the
Initial Invested Amount). The purchase price will be
equal to the [sum of the] Invested Amount [and the
Collateral Interest] [(less the Principal Funding
Account Balance, if any)] [, the Enhancement Invested
Amount, if any,] and accrued and unpaid interest on
the Certificates and the Collateral Interest [(and
accrued and unpaid interest with respect to interest
amounts that were due but not paid on a prior
Interest Payment Date)] through (a) if the day on
which such purchase occurs is a Distribution Date,
the day preceding such Distribution Date or (b) if
the day on which such repurchase occurs is not a
Distribution Date, the day preceding the Distribution
Date following such day. See "Description of the
Certificates--Optional Termination; Final Payment of
Principal" in the Prospectus.]
Required Principal Balance;
Addition of Accounts. The Series [199_-__] Supplement provides that the
Transferors will be required to make an Addition of
Accounts to the Trust if the amount of Principal
Receivables in the Trust is not maintained at a
minimum level equal to the sum of the initial
invested amounts of each Series then outstanding
(provided that certain Series may be excluded from
such calculation [if the issuance of such Series will
not result in a Ratings Effect]) less amounts on
deposit in the Special Funding Account [and Principal
Funding Account]. See "Series Provisions--Required
Principal Balance; Addition of Accounts" herein and
"Description of the Certificates--Addition of Trust
Assets" in the Prospectus.
Termination Date . . . . [______________ __, ____]. See "Series Provisions--
Series Termination."
[Defeasance. . . . . . . In certain circumstances and subject to certain
conditions, the Transferors may terminate their
substantive obligations in respect of Series
[199_-__] or the Pooling and Servicing Agreement as a
whole. See "Description of the Certificates--
Defeasance" in the Prospectus.]
Trustee. . . . . . . . . Bankers Trust Company, in its capacity as Trustee
under the Pooling and Servicing Agreement.
Tax Status . . . . . . . Special tax counsel to the Transferors is of the
opinion that under existing law the Certificates will
be characterized as debt
S-19
<PAGE>
for federal income tax purposes. Under the Pooling
and Servicing Agreement, the Certificate Owners will
agree to treat the Certificates as debt for
federal income tax purposes. See "Certain Federal
Income Tax Consequences" in the Prospectus for
additional information concerning the application
of federal income tax laws.
ERISA Considerations . . Under a regulation issued by the Department of Labor
(the "Plan Asset Regulation"), the Trust's assets
would not be deemed "plan assets" of an employee
benefit plan (a "Plan") holding the [Class A]
Certificates if certain conditions are met, including
that the [Class A] Certificates must be held, upon
completion of the public offering made hereby, by at
least 100 investors who are independent of the
Transferors and of one another. The Underwriter[s]
expect[s] that the [Class A] Certificates will be
held by at least 100 independent investors at the
conclusion of the offering, although no assurance can
be given and not monitoring or other measures will be
taken to ensure that such conditions will be met.
The Underwriters do not expect that the Class B
Certificates will be held by at least 100 independent
investors at the conclusion of the offering. The
Transferors anticipate that the other conditions of
the Plan Asset Regulation will be met. If the
Trust's assets were deemed to be "plan assets" of a
Plan investor (E.G., if the 100 independent investor
criterion is not satisfied), violations of the
"prohibited transaction" rules of the Employee
Retirement Income Security Act of 1974, as amended
("ERISA"), could result and generate excise tax and
other liabilities under ERISA and Section 4975 of the
Code, unless a statutory, regulatory or
administrative exemption is available. Accordingly,
employee benefit plan fiduciaries contemplating
purchasing the Certificates should consult their
counsel before making a purchase. See "ERISA
Considerations" in the Prospectus.
Class A Certificate
Rating . . . . . . . . . It is a condition to the issuance of the
Class A Certificates that they be rated in
[the highest rating category] [one of the
four highest rating categories] by at least
one nationally recognized rating agency.
[The rating of the Class A Certificates is
based primarily on the value of the
Receivables[, the Initial [Shared] [Cash]
Collateral Amount, the circumstances in which
funds may be withdrawn from the Cash
Collateral Account in respect of the Class A
Certificates,] and the subordination of the
Class B Certificates [and the Collateral
Interest][, other reasons]]. See "Special
Considerations--Limited Nature of Rating" in
the Prospectus.
Class B Certificate
Rating . . . . . . . . . It is a condition to the issuance of the
Class B Certificates that they be rated in
one of the [four] highest rating categories
by at least one nationally recognized rating
agency. The rating of
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<PAGE>
the Class B Certificates is based primarily on the
value of the Receivables[, the Initial Cash
Collateral Amount, the circumstances in which
funds may be withdrawn from the Cash
Collateral Account in respect of the Class B
Certificates,] [and the Collateral Interest]
[other reasons]. See "Special
Considerations--Limited Nature of Rating" in
the Prospectus. [The Class B Certificates
are not offered hereby.]
[Listing . . . . . . . . Application will be made to list the [Class A] [Class
B] Certificates on the [Luxembourg Stock Exchange]
[other exchange].]
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<PAGE>
SPECIAL CONSIDERATIONS
Potential investors should consider, among other things, the risk factors
discussed under "Special Considerations" in the Prospectus and the following
risk factors in connection with the purchase of the Certificates.
LIMITED AMOUNTS OF CREDIT ENHANCEMENT. Although Credit Enhancement with
respect to the Class A Certificates will be provided by the subordination of the
Class B Certificates to the Class A Certificates to the extent described herein
[and by the Cash Collateral Account (up to the Initial [Shared] [Cash]
Collateral Amount)] [[and by the Credit Enhancement], and with respect to the
Class B Certificates, will be provided by [the Cash Collateral Account] [Credit
Enhancement], the amount available thereunder is limited, [is expected to] [may]
decline during the [Controlled Amortization] [Accumulation] Period or the Early
Amortization Period and will be reduced by payments made pursuant thereto. If
the amount available under [the Cash Collateral Account] [the Credit
Enhancement] has been reduced to zero, [Class A] Certificateholders [and Class B
Certificateholders] will [each] bear directly the credit and other risks
associated with their respective undivided interests in the Trust.
EFFECT OF SUBORDINATION OF CLASS B CERTIFICATES; PRINCIPAL PAYMENTS. The
Class B Certificates are subordinated in right of payment of principal to the
Class A Certificates. [Payments of principal in respect of the Class B
Certificates will not commence until after the final principal payment with
respect to the Class A Certificates has been made as described herein.]
Moreover, the Class B Invested Amount is subject to reduction if the Required
Amount for any Monthly Period is greater than zero and is not funded from Excess
Spread [and Excess Finance Charge Collections allocated to Series [199_-__]],
amounts [on deposit in the Cash Collateral Account and available to make
payments with respect to the Class A Certificates] [available under the Credit
Enhancement], [Reallocated Principal Collections] [and reductions in the
Enhancement Invested Amount, if any]. To the extent the Class B Invested Amount
is reduced, the percentage of collections of Finance Charge Receivables
allocable to the Class B Certificateholders' Interest in future Monthly Periods
will be reduced. Moreover, to the extent the amount of such reduction in the
Class B Invested Amount is not reimbursed, the amount of principal distributable
to the Class B Certificateholders will be reduced. See "Series Provisions--
Allocation Percentages" and "--Subordination of the Class B Certificates"
herein. If the Class B Invested Amount is reduced to zero, the holders of the
Class A Certificates will bear directly the credit and other risks associated
with their undivided interest in the Trust.
MATURITY CONSIDERATIONS
The Pooling and Servicing Agreement and the Series [199_-__] Supplement
(defined herein) provide that the Class A Certificateholders will not receive
payments of principal until [the first Distribution Date with respect to the
[Controlled Amortization Period], which is the __________, 199_ Distribution
Date,] [__________, 199_ (the "[Class A] Expected Final Payment Date")], or
earlier in the event of a Pay Out Event which results in the commencement of the
Early Amortization Period. Class A Certificateholders will receive payment of
principal on each Distribution Date following the Monthly Period in which a Pay
Out Event occurs (each such Distribution Date, a "Special Payment Date") until
the Class A Invested Amount has been paid in full or the Termination Date has
occurred. [The Class B Certificateholders will not begin to receive payments of
principal until the final principal payment on the Class A Certificates has been
made.]
[On each Distribution Date during the Controlled Amortization Period, the
Class A Certificateholders will be entitled to receive monthly payments of
principal [until the Class A Certificates have been paid in full, and then the
Class B Certificateholders will be entitled to receive monthly payments of
principal] equal to the least of (a) Available Principal Collections (see
"Series Provisions--Principal Repayments") for the related Monthly Period on
deposit in the Collection Account, (b) the [applicable]
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<PAGE>
Controlled Distribution Amount, which is equal to the sum of the [applicable]
Controlled Amortization Amount and any existing [applicable] Deficit
Controlled Amortization Amount (both as defined under "Series
Provisions--Application of Collections--Payments of Principal") and (c) the
Class A Invested Amount. (6) [After the Class A Invested Amount has been
paid in full, the Principal Allocation Percentage of collections of Principal
Receivables received during any Monthly Period and the other amounts described
above will be distributed to the holders of the Class B Certificates on each
Distribution Date until the earlier of the date the Class B Invested Amount
has been paid in full and the Termination Date.]
[On each Distribution Date during the Class A Scheduled Accumulation
Period, amounts equal to the least of (a) Available Principal Collections (see
"Series Provisions--Principal Payments") for the related Monthly Period on
deposit in the Collection Account, (b) the [applicable] Controlled Deposit
Amount, which is equal to the sum of the [applicable] Controlled Accumulation
Amount for such Monthly Period and any [applicable] Deficit Controlled
Accumulation Amount (both as defined under "Series Provisions--Application of
Collections--Payments of Principal") and (c) the Class A Adjusted Invested
Amount will be deposited in the Principal Funding Account [held by the Trustee]
(the "Principal Funding Account") until the Principal Funding Account Balance is
equal to the Class A Invested Amount. [After the Class A Invested Amount has
been paid in full, on each Distribution Date during the Class B Scheduled
Accumulation Period, amounts equal to the least of (a) Available Principal
Collections for the related Monthly Period on deposit in the Collection Account,
(b) the [applicable] Controlled Deposit Amount, which is equal to the sum of the
[applicable] Controlled Accumulation Amount for such Monthly Period and any
[applicable] Deficit Controlled Accumulation Amount and (c) the Class B Adjusted
Invested Amount will be deposited in the Principal Funding Account until the
Principal Funding Account Balance is equal to the Class B Invested Amount or, if
earlier, the Termination Date. See "Series Considerations--Principal Payments"
for a discussion of the circumstances under which the commencement of the
Scheduled Accumulation Period may be delayed.]
[The Transferors may, at or after the time at which the [Controlled
Amortization] [Accumulation] Period commences for Series [199_-__], cause the
Trust to issue another Series (or some portion thereof, to the extent that the
full principal amount of such other Series is not otherwise outstanding at such
time) as a Paired Series with respect to Series [199_-__]. Although no
assurances can be given as to whether such other Series will be issued and, if
issued, the terms thereof, the outstanding principal amount of such Series may
vary from time to time whether or not a Pay Out Event occurs with respect to the
Certificates, and the interest rate with respect to certificates of such other
Series may be established on its date of issuance and may be reset periodically
at intervals of from one day to [____] days. Further, since the terms of the
Certificates will vary from the terms of such other Series, the Pay Out Events
with respect to such other Series will vary from the Pay Out Events with respect
to Series [199_-__] and may include Pay Out Events which are unrelated to the
status of the Transferors or the Servicer or the Receivables, such as Pay Out
Events related to the continued availability and rating of certain providers of
Series Enhancement to such other Series. If a Pay Out Event does occur with
respect to any such Paired Series prior to the payment in full of the
Certificates, the final payment of principal to the Certificateholders may be
delayed.]
[Should a Pay Out Event occur with respect to the Certificates and the
Early Amortization Period commence or should the [Class A] Invested Amount not
be paid in full on [the __________ Distribution Date] [the [Class A] Expected
Final Payment Date], any amount on deposit (a) in the Principal Funding Account
will be paid to the Certificateholders on the first Special Payment Date and]
the Certificateholders will be entitled to receive Available Principal
Collections on each Distribution Date with respect to such Early Amortization
Period or following the [_________ Distribution Date] [Expected Final Payment
Date], as the case may be, as described herein until the Invested Amount is paid
in full or until the Termination
- ---------------------
(6) There may be different Controlled Amortization Amounts for Class A and
Class B Certificates.
S-23
<PAGE>
Date occurs and] [(b) in the Special Funding Account will be released and
treated as Shared Principal Collections to the extent needed to cover
principal payments due to or for the benefit of any Series entitled to the
benefits of Shared Principal Collections]. See "Description of the
Certificates--Pay Out Events" in the Prospectus and "Series Provisions--Pay
Out Events" herein. [In addition, on the first Special Payment Date
following the occurrence of an Economic Pay Out Event, after giving effect to
any payment of principal on such date as described under "Series
Provisions--Application of Collections--Payments of Principal," (a) an amount
equal to the lesser of (i) the excess, if any, of the Available [Shared]
[Cash] Collateral Amount (after giving effect to any withdrawal from the Cash
Collateral Account on such date of amounts to fund the Required Amount and
similar amounts for the Class B Certificates) and (ii) the unpaid principal
amount of the Class A Certificates (less the Principal Funding Account
Balance allocable to the Class A Certificates), will be withdrawn from the
Cash Collateral Account and distributed to the Class A Certificateholders as
a payment of principal of the Class A Certificates, and (b) an amount equal
to the lesser of (i) the [remainder of the] Available [Cash] Collateral
Amount and (ii) the unpaid principal amount of the Class B Certificates (less
the Principal Funding Account Balance, if any, allocable to the Class B
Certificates), will be withdrawn from the Cash Collateral Account and
distributed to the Class B Certificateholders as a payment of principal of
the Class B Certificates. See "Series Provisions--Principal Payments" and
"--Cash Collateral Account."
The ability of Certificateholders to receive payments of principal [during
the Controlled Amortization Period] [on the [applicable] Expected Final Payment
Date] depends on the payment rates on the Receivables, the amount of outstanding
Receivables, delinquencies, charge-offs and new borrowings on the Accounts and
the potential issuance by the Trust of additional Series. Monthly payment rates
on the Receivables may vary because, among other things, cardholders may fail to
make a required minimum payment, may only make payments as low as the minimum
required amount or may make payments as high as the entire outstanding balance.
Monthly payment rates may also vary due to seasonal purchasing and payment
habits of cardholders and to changes in any terms of rebate programs in which
cardholders participate. See the table entitled "Cardholder Monthly Payment
Rates for the Designated Portfolio" under "The Designated Portfolio" herein.
The Transferors cannot predict, and no assurance can be given, as to the
cardholder monthly payment rates that will actually occur in any future period,
as to the actual rate of payment of principal of the Certificates or whether the
terms of any subsequently issued Series might have an impact on the amount or
timing of any such payment of principal. See "Special Considerations--Payment
and Maturity Considerations; Dependency on Cardholder Repayments" and
"Description of the Certificates--Shared Principal Collections" in the
Prospectus.
In addition, the amount of outstanding Receivables and the delinquencies,
charge-offs and new borrowings on the Accounts may vary from month to month due
to seasonal variations, the availability of other sources of credit, legal
factors, general economic conditions and spending and borrowing habits of
individual cardholders. There can be no assurance that collections of Principal
Receivables with respect to the Trust Portfolio, and thus the rate at which
Certificateholders could expect to receive payments of principal on their
Certificates during the [Controlled Amortization Period or the] Early
Amortization Period [or the rate at which the Principal Funding Account could be
funded during the Scheduled Accumulation Period], will be similar to the
historical experience set forth in the table entitled "Cardholder Monthly
Payment Rates for the Designated Portfolio" under "The Designated Portfolio"
herein. In addition, the Trust, as a master trust, may issue additional Series
from time to time, and there can be no assurance that the terms of any such
Series might not have an impact on the timing or amount of payments received by
Certificateholders. Further, if a Pay Out Event occurs, the average life and
maturity of the Class A Certificates and the Class B Certificates could be
significantly reduced.
Due to the reasons set forth above, there can be no assurance that
[principal payments] [deposits in the Principal Funding Account] will be made in
accordance with the applicable Controlled [Amortization] [Accumulation] Amounts
or that the actual number of months elapsed from the date of issuance of the
Class
S-24
<PAGE>
A and Class B Certificates to their respective final Distribution Dates will
equal the expected number of months. See "Special Considerations--Payment
and Maturity Considerations; Dependency on Cardholder Repayments" in the
Prospectus.
THE DESIGNATED PORTFOLIO
GENERAL
Set forth below is certain information with respect to the Designated
Portfolio. See "The Bank's Credit Card Activities" in the Prospectus. There
can be no assurance that the yield, loss and delinquency experience with respect
to the Receivables will be comparable to that set forth below with respect to
the entire Designated Portfolio.
DELINQUENCY AND LOSS EXPERIENCE
The following tables set forth the delinquency experience for the
Designated Portfolio at the date shown and loss experience for the Designated
Portfolio for each of the periods shown. The Accounts constituting the Trust
Portfolio have been randomly selected from accounts in the Designated Portfolio
based on certain eligibility criteria specified in the Pooling and Servicing
Agreement. See "The Accounts" in the Prospectus. There can be no assurance
that the delinquency and loss experience for the Receivables in the Trust
Portfolio will be similar to the historical experience set forth below.
DELINQUENCY EXPERIENCE
DESIGNATED PORTFOLIO
(Dollars in Thousands)
<TABLE>
<CAPTION>
At December 31,
----------------------------------------------------------------------------
[1994] [1993] [1992]
------------------------ ------------------------ ------------------------
Percentage Percentage Percentage
of Total of Total of Total
Receivables Receivables Receivables Receivables Receivables Receivables
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Receivables Outstanding(1). $ % % $ %
Receivables Delinquent:
30-59 Days . . . . $ % $ % $ %
60-89 Days . . . .
90 Days or More. .
----------- ----------- ----------- ----------- ----------- -----------
TOTAL. . $ % $ % $ %
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
</TABLE>
- ---------------
(1) "Receivables Outstanding" on the accounts consist of all amounts due from
cardholders as posted to the accounts at the dates shown.
S-25
<PAGE>
LOSS EXPERIENCE
DESIGNATED PORTFOLIO
(Dollars in Thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------
[1994] [1993] [1992]
-------- -------- -------
<S> <C> <C> <C>
Average Receivables Outstanding(1) . $ $ $
Total Gross Charge-Offs(2) . . . . . $ $ $
Total Gross Charge-Offs as a
percentage of Average
Receivables Outstanding. . . . . . % % %
</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.
REVENUE EXPERIENCE
The following table sets forth the revenues from finance charges and fees
billed with respect to the Designated Portfolio for each year during the
three-year period ended December 31, [199_].
YIELD EXPERIENCE
DESIGNATED PORTFOLIO
(Dollars in Thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------
[1994] [1993] [1992]
------- ------ ------
<S> <C> <C> <C>
Average Account Monthly Accrued Finance
Charges and Fees(1)(2) . . . . . $ $ $
Average Account Balance(3) . . . . $ $ $
Yield from Finance Charges and Fees(4) % % %
Yield from Interchange(5). . . . .
------- ------ ------
Yield from Finance Charges, Fees and
Interchange. . . . . . . . . . . % % %
------- ------ ------
------- ------ ------
</TABLE>
- ---------------
(1) "Finance Charges and Fees" are comprised of monthly periodic finance charges
and other credit card fees.
(2) "Average Account Monthly Accrued Finance Changes and Fees" are presented net
of adjustments made pursuant to the Bank's normal servicing procedures,
including removal of incorrect or disputed monthly periodic finance changes.
S-26
<PAGE>
(3) "Average Account Balances" includes purchases, cash advances and accrued and
unpaid monthly periodic finance and other charges and are calculated based
on the average of the account balances during the periods shown for accounts
with charging privileges.
(4) "Yield from Finance Charges and Fees" is the result of dividing the
annualized Average Account Monthly Accrued Finance Charges and Fees by the
Average Account Balance for the period.
(5) "Yield from Interchange" is the result of dividing annualized revenue
attributable to Interchange received during the period by the Average
Account Balance for the period. The amount of Interchange for each of the
periods indicated above has been estimated.
[The yield on the Designated Portfolio shown in the table above is comprised
of three primary components: monthly periodic rate finance charges, the
amortized portion of annual fees and other service charges, such as cash advance
fees, late charges, overlimit charges and other miscellaneous fees. If payment
rates decline, the balances subject to monthly periodic finance charges tend to
grow, assuming no change in the level of purchasing activity. Conversely, if
payment rates increase, the balances subject to monthly periodic finance charges
tend to fall, assuming no change in the level of purchasing activity.
Accordingly, under these circumstances, the yield related to periodic finance
charges normally increases. The yield related to service charges varies with
the type and volume of activity in and the amount of each account. As account
balances increase, annual fees, which remain constant, represent a smaller
percentage of the aggregate account balances.]
PAYMENT RATES
The following table sets forth the highest and lowest cardholder monthly
payment rates for the Designated 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 payments of Principal Receivables and Finance Charge Receivables with
respect to the Accounts.
CARDHOLDER MONTHLY PAYMENT RATES
DESIGNATED PORTFOLIO
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------
[1994] [1993] [1992]
------ ------ ------
<S> <C> <C> <C>
Lowest . . . . . . . . . . . . . . % % %
Highest. . . . . . . . . . . . . . % % %
Monthly Average. . . . . . . . . . % % %
</TABLE>
THE RECEIVABLES
The Receivables in the Trust Portfolio, as of [__________ ___], [199_] the
[Trust Cut-Off Date][Closing Date], included $[_________] of Principal
Receivables and $[__________] of Finance Charge Receivables. The Accounts had
an average Principal Receivable balance of $[__________] and an average credit
limit of $[__________]. The percentage of the aggregate total Receivables
balance to the aggregate total credit limit was [___]%. The average age of the
Accounts was approximately [____] months. As of the [Trust Cut-Off
Date][Closing Date], all of the Accounts in the Trust Portfolio were VISA or
MasterCard credit card accounts, of which [____]% were classic accounts and
[____]% were gold accounts, and the
S-27
<PAGE>
aggregate Principal Receivable balances of classic accounts and gold accounts,
as a percentage of the total aggregate Principal Receivables, were [____]%
and [____]%, respectively.
The following tables summarize the Trust Portfolio by various criteria as
of the [Trust Cut-Off Date][Closing Date]. References to "Receivables
Outstanding" in the following tables include both Finance Charge Receivables and
Principal Receivables. Because the future composition of the Trust Portfolio
may change over time, these tables are not necessarily indicative of the
composition of the Trust Portfolio at any subsequent time.
COMPOSITION BY ACCOUNT BALANCE
TRUST PORTFOLIO
<TABLE>
<CAPTION>
Percentage
of Total Percentage
Number of Number of of Total
Account Balance Range Accounts Accounts Receivables Receivables
--------------------- --------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Credit Balance . . . . . . . % $ %
No Balance . . . . . . . . .
$0.01 - $500.00 . . . . . . .
$500.01 - $1,000.00 . . . . .
$1,000.01 - $3,000.00 . . . .
$3,000.01 - $5,000.00 . . . .
$5,000.01 - $10,000.00 . . .
$10,000.01 or more . . . . .
--------- ---------- ----------- -----------
TOTAL . . . . . . . . . 100.0% $ 100.0%
--------- ---------- ----------- -----------
--------- ---------- ----------- -----------
</TABLE>
COMPOSITION BY CREDIT LIMIT
TRUST PORTFOLIO
<TABLE>
<CAPTION>
Percentage
of Total Percentage
Number of Number of of Total
Credit Limit Range Accounts Accounts Receivables Receivables
--------------------- --------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Less than $500.01 . . . . . . % $ %
$500.01 - $1,000.00 . . . . .
$1,000.01 - $3,000.00 . . . .
$3,000.01 - $5,000.00 . . . .
$5,000.01 - $10,000.00 . . .
$10,000.01 - $15,000.00 . . .
--------- ---------- ----------- -----------
TOTAL . . . . . . . . . 100.0% 100.0%
--------- ---------- ----------- -----------
--------- ---------- ----------- -----------
</TABLE>
S-28
<PAGE>
COMPOSITION BY PERIOD OF DELINQUENCY
TRUST PORTFOLIO
<TABLE>
<CAPTION>
Percentage
of Total Percentage
Number of Number of of Total
Period of Delinquency Accounts Accounts Receivables Receivables
-------------------- -------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Not Delinquent . . . . . . . % $ %
Up to 29 Days . . . . . . . .
30 to 59 Days . . . . . . . .
60 to 89 Days . . . . . . . .
90 or More Days . . . . . . .
-------- ---------- ----------- -----------
TOTAL . . . . . . . . . 100.0% 100.0%
-------- ---------- ----------- -----------
-------- ---------- ----------- -----------
</TABLE>
COMPOSITION BY ACCOUNT AGE
TRUST PORTFOLIO
<TABLE>
<CAPTION>
Percentage
of Total Percentage
Number of Number of of Total
Account Age Accounts Accounts Receivables Receivables
----------- --------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Not More than 6 Months . . . % $ %
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 . . . . . . . . . 100.0% $ 100.0%
--------- ---------- ----------- -----------
--------- ---------- ----------- -----------
</TABLE>
S-29
<PAGE>
<TABLE>
<CAPTION>
GEOGRAPHIC DISTRIBUTION OF ACCOUNTS
TRUST PORTFOLIO
Percentage
of Total Percentage
State or Number of Number of of Total
Territory Accounts Accounts Receivables Receivables
--------- --------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
% $ %
Alabama . . . . . .
Alaska . . . . . .
Arizona . . . . . .
Arkansas . . . . .
California . . . .
Colorado . . . . .
Connecticut . . . .
Delaware . . . . .
District of
Columbia . . . . .
Florida . . . . . .
Georgia . . . . . .
Guam . . . . . . .
Hawaii . . . . . .
Idaho . . . . . . .
Illinois . . . . .
Indiana . . . . . .
Iowa . . . . . . .
Kansas . . . . . .
Kentucky . . . . .
Louisiana . . . . .
Maine . . . . . . .
Maryland . . . . .
Massachusetts . . .
Michigan . . . . .
Minnesota . . . . .
Mississippi . . . .
Missouri . . . . .
Montana . . . . . .
Nebraska . . . . .
Nevada . . . . . .
New Hampshire . . .
New Jersey . . . .
New Mexico . . . .
New York . . . . .
North Carolina . .
North Dakota . . .
Ohio . . . . . . .
Oklahoma . . . . .
Oregon . . . . . .
Pennsylvania . . .
Puerto Rico . . . .
Rhode Island . . .
South Carolina . .
South Dakota . . .
Tennessee . . . . .
Texas . . . . . . .
Utah . . . . . . .
Vermont . . . . . .
Virgin Islands . .
Virginia . . . . .
Washington . . . .
West Virginia . . .
Wisconsin . . . . .
Wyoming . . . . . .
--------- ---------- ----------- -----------
TOTAL . . . . 100.0% $ 100.0%
--------- ---------- ----------- -----------
S-30
</TABLE>
<PAGE>
USE OF PROCEEDS
The net proceeds from the sale of the Certificates will be paid to the
Transferors. The Transferors will use such proceeds for
[general corporate purposes].
THE TRANSFERORS
At its [______ __, 199_] Call Report, the Bank had total deposits of
approximately $[_______], total assets of approximately $[_______] and total
equity of approximately $[_______]. A Call Report is required to be prepared in
accordance with regulatory accounting principles, which differ in some respects
from generally accepted accounting principles. See "The Transferors - The Bank"
in the Prospectus.
[DESCRIPTION OF CCB HOLDING]
SERIES PROVISIONS
The Certificates will be issued pursuant to the Pooling and Servicing
Agreement and a Series Supplement specifying the Principal Terms of the
Certificates (the "Series [199_-__] Supplement"), the forms of which have been
filed as exhibits to the Registration Statement of which the Prospectus and this
Prospectus Supplement are a part. The following summary describes certain terms
applicable to the Certificates. Reference should be made to the Prospectus for
additional information concerning the Certificates and the Pooling and Servicing
Agreement. See "The Pooling and Servicing Agreement" in the Prospectus.
INTEREST PAYMENTS
Interest on the Class A Certificates and the Class B Certificates will
accrue from the Closing Date on the Class A Invested Amount and Class B
Invested Amount at the Class A Certificate Rate and Class B Certificate Rate,
respectively. Interest will be distributed on [__________ __, 199_], and on
each Interest Payment Date thereafter to the Certificateholders in whose
names the Certificates were registered at the close of business on the last
day of the calendar month preceding the date of such payment (each, a "Record
Date"). Interest for any Interest Payment Date will accrue from and including
the preceding Interest Payment Date (or in the case of the first Interest
Payment Date, from and including the Closing Date) but excluding the next
Interest Payment Date (each, an "Interest Period").
Interest payments on the Class A Certificates for each Interest Payment
Date will be calculated on the Class A Invested Amount as of the preceding
Record Date (or in the case of the initial Interest Payment Date, on the
initial Class A Invested Amount) based upon the Class A Certificate Rate.
Interest will be calculated on the basis of a [360-day][365-day] year
[consisting of twelve 30-day months]. Interest payments in respect of the
Class A Certificates on any Interest Payment Date will be funded from
collections of Finance Charge Receivables allocated to the Class A
Certificateholders' Interest during the [____] preceding Monthly Period[s]
and other Class A Available Funds allocated to the Class A
Certificateholders' Interest for such Monthly Period[s]. To the extent
[the sum of (i)] the product of the Class A Floating Percentage of the
Floating Allocation Percentage of collections of Finance Charge Receivables
during the preceding [____] Monthly Period[s] [and (ii) other Class A Available
Funds allocated to the Class A Certificateholders' Interest for such Monthly
Period[s]] is insufficient to pay such interest, Excess Spread [and Excess
Finance Charge Collections allocated to Series [199_-__]] [amounts on deposit in
the Cash Collateral Account up to the Available [Shared] [Cash] Collateral
Amount] [Credit Enhancement] [and] Reallocated Principal Collections will be
used to make such payments. "Class A Available Funds" means, with respect to
any
S-31
<PAGE>
Monthly Period, an amount equal to the sum of [(i)] the Class A Floating
Percentage of collections of Finance Charge Receivables allocated to the
Certificates with respect to such Monthly Period including any investment
earnings that are to be treated as collections of Finance Charge Receivables in
accordance with the Pooling and Servicing Agreement; [(ii) the [Class A Floating
Percentage of the] amount of any earnings transferred from the Pre-Funding
Account to the Collection Account on such Distribution Date] [and (iii) if such
Monthly Period relates to a Distribution Date with respect to the Scheduled
Accumulation Period, Principal Funding Investment Proceeds [and Interest Funding
Investment Proceeds], if any, with respect to the related Distribution Date and
(iv) amounts, if any, to be withdrawn from the Reserve Account that must be
included in Class A Available Funds pursuant to the Series [199_-__] Supplement
with respect to such Distribution Date].
Interest payments on the Class B Certificates for each Interest Payment
Date will be calculated on the Class B Invested Amount as of the preceding
Record Date (or in the case of the initial Interest Period, on the initial Class
B Invested Amount) based upon the Class B Certificate Rate. Interest will be
calculated on the basis of [____]. Interest payments in respect of the Class B
Certificates on any Interest Payment Date will be funded from collections of
Finance Charge Receivables allocated to the Class B Certificateholders' Interest
during the [____] preceding Monthly Period[s] [and other Class B Available Funds
allocated to the Class B Certificateholders' Interest for such Monthly
Period[s]], and, if necessary, from Excess Spread [and] [Excess Finance Charge
Collections allocated to Series [199_-__] [Credit Enhancement] [amounts in the
Cash Collateral Account up to the Available [Shared] [Cash] Collateral Amount].
["Class B Available Funds" means, with respect to any Monthly Period, an amount
equal to the sum of (i) the Class B Floating Percentage of collections of
Finance Charge Receivables allocated to the Certificates with respect to such
Monthly Period [(ii) if such Monthly Period relates to a Distribution Date that
occurs on or after the Class B Principal Commencement Date, Principal Funding
Investment Proceeds, if any, with respect to the related Distribution Date] [and
(iii) amounts, if any, withdrawn from the Reserve Account that must be included
in Class B Available Funds pursuant to the Series [199_-__] Supplement with
respect to such Distribution Date].]
PRINCIPAL PAYMENTS
During the Revolving Period (which begins on the Closing Date and ends on
the day before the commencement of the [Controlled Amortization Period]
[Scheduled Accumulation Period] or, if earlier, the Early Amortization Period),
no principal payments will be made to Certificateholders. [During the
Controlled Amortization Period, which is scheduled to begin on __________, 199_,
and during the Early Amortization Period, which will begin upon the occurrence
of a Pay Out Event, and until the Termination Date occurs, principal will be
paid first to the Class A Certificateholders [until the Class A Invested Amount
has been paid in full], and [then] to the Class B Certificateholders until the
Class B Invested Amount has been paid in full.] [During the Scheduled
Accumulation Period (on or prior to the respective Expected Final Payment
Dates), principal will be deposited in the Principal Funding Account as
described below and on the Class A Expected Final Payment Date will be
distributed to Class A Certificateholders up to the Class A [Adjusted] Invested
Amount and then to Class B Certificateholders on the Class B Expected Final
Payment Date up to the Class B [Adjusted] Invested Amount. During the Early
Amortization Period, which will begin upon the occurrence of a Pay Out Event,
and until the Termination Date occurs, principal will be paid first to the Class
A Certificateholders until the Class A [Adjusted] Invested Amount has been paid
in full, and then to the Class B Certificateholders until the Class B [Adjusted]
Invested Amount has been paid in full.
[At the end of the Funding Period, which is the __________ Distribution
Date, the Class A Certificateholders and the Class B Certificateholders will be
paid all funds [(except investment earnings thereon)] remaining in the
Pre-Funding Account (PRO RATA, on the basis of the ratio of the Class A Invested
Amount and the Class B Invested Amount to the Invested Amount.]
S-32
<PAGE>
[On each Interest Payment Date with respect to the Controlled Amortization
Period unless [the Class A Invested Amount has been paid in full or] an Early
Amortization Period commences, the Class A Certificateholders will be entitled
to receive [for each related Monthly Period since the previous Interest Payment
Date] the lesser of (a) collections of Principal Receivables received during
[each] such Monthly Period allocated to the Certificates (other than Reallocated
Principal Collections applied to fund the Required Amount) [Shared Principal
Collections allocated to Series [199_-__] [and] [other amounts] (collectively,
"Available Principal Collections"), and (b) the Class A Controlled Distribution
Amount.] [After payment in full of the Class A Invested Amount,] the Class B
Certificateholders will be entitled to receive on each Interest Payment Date
[during the Class B Controlled Amortization Period] the least of (i) the amount
of Available Principal Collections, [(ii) the Class B Controlled Distribution
Amount], and (iii) the Class B Invested Amount, until the earlier of the date
the Class B Invested Amount is paid in full and the Termination Date.]
[On each Distribution Date with respect to the Class A Scheduled
Accumulation Period, the Trustee will deposit in the Principal Funding Account
an amount equal to the least of (a) Available Principal Collections on deposit
in the Collection Account with respect to such Distribution Date, (b) the
[applicable] Controlled Deposit Amount for such Distribution Date and (c) the
Class A Adjusted Invested Amount, until the Principal Funding Account Balance
equals the Class A Invested Amount. Amounts on deposit in the Principal Funding
Account will be paid to the Class A Certificateholders on the Class A Expected
Final Payment Date. [After the Class A Invested Amount has been paid in full,
on each Distribution Date during the Class B Scheduled Accumulation Period,
amounts equal to the least of (i) Available Principal Collections on deposit in
the Collection Account with respect to such Distribution Date (less the portion
of Available Principal Collections applied to Class A Monthly Principal on such
Distribution Date), (ii) the [applicable] Controlled Deposit Amount for such
Distribution Date and (iii) the Class B Adjusted Invested Amount will be
deposited in the Principal Funding Account until the earlier of the date the
Class B Invested Amount is paid in full and the Termination Date.] Amounts on
deposit in the Principal Funding Account in respect of the Class B Certificates
will be paid to the Class B Certificateholders on the Class B Expected Final
Payment Date. If a Pay Out Event occurs with respect to the Certificates during
the Scheduled Accumulation Period, the Early Amortization Period will commence
and any amount on deposit in the Principal Funding Account will be paid first to
the Class A Certificateholders on the first Special Payment Date and then, to
the extent the Class A Invested Amount is paid in full, to the Class B
Certificateholders. [If on an Expected Final Payment Date, moneys on deposit in
the Principal Funding Account are insufficient to pay the scheduled principal
amount, a Pay Out Event will occur and the Early Amortization Period will
commence. After payment in full of the Class A Invested Amount, the Class B
Certificateholders will be entitled to receive an amount equal to the Class B
Invested Amount.] "Available Principal Collections" means, with respect to any
Monthly Period, an amount equal to the sum of (1) an amount equal to the
Principal Allocation Percentage of all collections of Principal Receivables
received during such Monthly Period (less the amount of Reallocated Principal
Collections with respect to such Monthly Period used to fund the Required
Amount)[, (2) any Shared Principal Collections with respect to other Series that
are allocated to Series [199_-__]] and (3) any other amounts which pursuant to
the Series [199_-__] Supplement are to be treated as Available Principal
Collections with respect to the related Distribution Date [other amounts].]
[The Class A Scheduled Accumulation Period is currently expected to
commence at the close of business on the last business day of [__________,
199_]; however, the date on which the Class A Scheduled Accumulation Period
actually commences may be delayed if the Class A Scheduled Accumulation Period
Length (determined as described below) is less than the number of months
remaining between each Period Length Determination Date (defined herein) and the
[Class A] Expected Final Payment Date. Beginning on the Determination Date
immediately preceding the [__________, 199_] Distribution Date and on each
Determination Date thereafter until the Class A Accumulation Date actually
commences (each, a "Period Length Determination Date"), the Transferors will
determine the "Class A Scheduled Accumulation Period Length" [based on, among
other things, the then current principal payment rate on the Accounts and the
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<PAGE>
principal amount of Series that are entitled to share principal with Series
[199_-__]]; PROVIDED, HOWEVER, that the Class A Scheduled Accumulation Period
Length will not be less than [____] months]. If the Class A Scheduled
Accumulation Period Length is less than the number of months remaining between
the related Period Length Determination Date and the [Class A] Expected Final
Payment Date, the Class A Scheduled Accumulation Period will commence later than
the last business day of [__________, 199_] and the number of months in the
Class A Scheduled Accumulation Period will be equal to the Class A Scheduled
Accumulation Period Length. [Notwithstanding the foregoing, unless a Pay Out
Event occurs with respect to the Certificates, the Class A Scheduled
Accumulation Period will commence on the last business day of [__________, 199_]
if, prior to such date, a Pay Out Event shall have occurred with respect to any
other Series (other than a Series that does not share principal with Series
[199_-__] or is designated by the Transferor as an Excluded Series (defined
herein)).] The effect of the foregoing calculation is to reduce the Class A
Scheduled Accumulation Period Length based on the invested amounts of other
Series that are scheduled to be in their revolving periods and thus scheduled to
create Shared Principal Collections during the Class A Scheduled Accumulation
Period. In addition, if the Class A Scheduled Accumulation Period Length shall
have been determined to be less than [____] months and, after the date on which
such determination is made, a Pay Out Event shall occur with respect to any
outstanding Series, the Class A Scheduled Accumulation Period will commence on
the earlier of (i) the date that such Pay Out Event shall have occurred with
respect to such Series and (ii) the date on which the Class A Scheduled
Accumulation Period is then scheduled to commence.](7/)
On each Distribution Date with respect to the Early Amortization Period
until the Class A Invested Amount has been paid in full or the Termination Date
occurs, the holders of the Class A Certificates will be entitled to receive
Available Principal Collections in an amount up to the Class A Invested Amount.
[After payment in full of the Class A Invested Amount, the holders of the Class
B Certificates will be entitled to receive on each Distribution Date Available
Principal Collections until the earlier of the date the Class B Invested Amount
is paid in full and the Termination Date.] [In addition, on the first Special
Payment Date following the occurrence of an Economic Pay Out Event, after giving
effect to any payment of principal on such date as described under "Series
Provisions--Application of Collections--Payments of Principal," principal
payments will be made to the Class A Certificateholders and the Class B
Certificateholders from amounts on deposit in the Cash Collateral Account as
described under "--Cash Collateral Account" below.]
[On each Distribution Date commencing with the Class B Principal
Commencement Date, [unless an Economic Pay Out Event has occurred,] a withdrawal
will be made from the Cash Collateral Account to pay principal with respect to
the Class B Certificates to the extent that the Class B Initial Invested Amount
less the sum of the aggregate amount of principal payments previously
distributed to Class B Certificateholders [or deposited in the Principal Funding
Account in respect of the Class B Certificates] exceeds the Class B Invested
Amount on the last day of the related Monthly Period (determined after giving
effect to any change made to the Class B Invested Amount as a result of
unreimbursed charge-offs on the following Distribution Date).]
SUBORDINATION OF THE CLASS B CERTIFICATES [AND THE COLLATERAL INTEREST]
The Class B Certificateholders' Interest [and the Collateral Interest] will
be subordinated [(other than with respect to the [Initial Class B Collateral
Amount]] to the extent necessary to fund 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 A
Certificates and the Class B Certificates. If the Collateral Interest is
reduced to zero, holders of the Class B Certificates will bear directly the
credit and
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(7/) Different Series may have different methods of determining the
Accumulation Period Length.
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<PAGE>
other risks associated with their interest in the Trust.] To the extent the
Class B Invested Amount is reduced, the percentage of collections of Finance
Charge Receivables allocated to the Class B Certificateholders in subsequent
Monthly Periods will be reduced. Moreover, to the extent the amount of such
reduction in the Class B Invested Amount is not reimbursed, the amount of
principal distributable to the Class B Certificateholders will be reduced.
See "--Allocation Percentages," "--Reallocation of Cash Flows; Class B
Invested Amount," ["--Application of Collections--[Excess Spread]; [Excess
Finance Charge Collections]" below].
[FUNDING PERIOD]
[During the period from and including the Closing Date to but excluding the
earliest of (i) the day on which the Invested Amount equals the [Full Invested
Amount], (ii) the day on which a Pay Out Event occurs and (iii) the __________,
199_ Distribution Date (the "Funding Period"), the Pre-Funding Amount will be
held in a trust account established with the Trustee for the benefit of the
Certificateholders (the "Pre-Funding Account"). The Pre-Funding Amount will
equal $[__________].
Funds on deposit in the Pre-Funding Account will be invested by the Trustee
[in certain Eligible Investments] [pursuant to a guaranteed rate agreement]
[guaranteed investment contract]. Investment earnings on the Pre-Funding Amount
(net of investment losses and investment expenses) will be used to pay interest
on the [Class A] [and] [Class B] Certificates during the Funding Period.
During the Funding Period, funds on deposit in the Pre-Funding Account will
be withdrawn and paid to the Transferors to the extent of any increases in the
Invested Amount. The Transferors expect that the Invested Amount will equal the
[Full Invested Amount] by the [__________, 199_] Monthly Period. In the event
that the Invested Amount does not for any reason equal the [Full Invested
Amount] by the end of the Funding Period, any amount remaining in the
Pre-Funding Account will be payable to the [Class A] [and] [Class B]
Certificateholders [PRO RATA, on the basis of the ratio of the Class A Invested
Amount and the Class B Invested Amount, respectively, to the Invested Amount as
of the last day of the related Monthly Period] on the Distribution Date on which
the Funding Period ends.]
ALLOCATION PERCENTAGES
Pursuant to the Pooling and Servicing Agreement, the Servicer will allocate
among the Invested Amount, the certificateholders' interest for all other Series
of certificates issued and outstanding and the Transferors' Interest, all
collections of Finance Charge Receivables and Principal Receivables and the
Defaulted Amount with respect to such Monthly Period.
Collections of Finance Charge Receivables and the Defaulted Amount with
respect to any Monthly Period will be allocated to the Invested Amount based on
the Floating Allocation Percentage. The "Floating Allocation Percentage" means,
with respect to any Monthly Period, the percentage equivalent (which percentage
shall never exceed 100%) of a fraction, the numerator of which is the sum of the
[Adjusted] Invested Amount [and the Enhancement Invested Amount, if any,] as of
the last day of the preceding Monthly Period (or with respect to the first
Monthly Period, the Initial Invested Amount) and the denominator of which is
[the sum of] the total amount of the Principal Receivables in the Trust as of
such day (or with respect to the first Monthly Period, the total amount of
Principal Receivables in the Trust on the Closing Date) [and the principal
amount on deposit in the Special Funding Account as of such day]. [Appropriate
adjustments to the calculation methodology will be made to accommodate changes
in the Invested Amount during the Funding Period.] Such amounts so allocated to
the Invested Amount will be further allocated between the Class A
Certificateholders and Class B Certificateholders [and the Collateral Interest]
in accordance with the Class A Floating Percentage and the Class B Floating
Percentage [and the Collateral Percentage], respectively. The "Class A Floating
Percentage" means, with respect to any Monthly
S-35
<PAGE>
Period, the percentage equivalent (which percentage shall never exceed 100%)
of a fraction, the numerator of which is equal to the Class A [Adjusted]
Invested Amount as of the close of business on the last day of the preceding
Monthly Period (or with respect to the first Monthly Period, as of the
Closing Date) and the denominator of which is equal to the [Adjusted]
Invested Amount as of the close of business on such day (or with respect to
the first Monthly Period, the Initial Invested Amount). The "Class B
Floating Percentage" means, with respect to any Monthly Period, the
percentage equivalent (which percentage shall never exceed 100%) of a
fraction, the numerator of which is equal to the Class B [Adjusted] Invested
Amount as of the close of business on the last day of the preceding Monthly
Period (or with respect to the first Monthly Period, as of the Closing Date)
and the denominator of which is equal to the [Adjusted] Invested Amount at
the close of business on such day (or with respect to the first Monthly
Period, the initial Invested Amount). [The "Collateral Percentage" means, with
respect to any Monthly Period, the percentage equivalent (which shall never
exceed 100%) of a fraction, the numerator of which is equal to the Collateral
Interest as of the close of business on the last day of the preceding Monthly
Period [or, during an amortization period or an Scheduled Accumulation Period,
as of the last day of the Revolving Period] and the denominator of which is
equal to the [Adjusted] Invested Amount as of the close of business on such
day.]
Collections of Principal Receivables will be allocated to the Invested
Amount based on the Principal Allocation Percentage. The "Principal Allocation
Percentage" means, with respect to any Monthly Period, the percentage equivalent
(which percentage shall never exceed 100%) of a fraction, the numerator of which
is (a) during the Revolving Period, the Invested Amount as of the last day of
the immediately preceding Monthly Period (or, in the case of the first Monthly
Period, the Closing Date) and (b) during the [Accumulation] [Controlled
Amortization] Period or the Early Amortization Period, the Invested Amount as of
the last day of the Revolving Period and the denominator of which is the greater
of (i) [the sum of the] total amount of Principal Receivables in the Trust as of
the last day of the immediately preceding Monthly Period [and the principal
amount on deposit in the Special Funding Account as of such last day] (or, in
the case of the first Monthly Period, the Closing Date) and (ii) the sum of the
numerators used to calculate the principal allocation percentages for all Series
outstanding as of the date as to which such determination is being made;
[PROVIDED, HOWEVER, that because the Certificates offered hereby are subject to
being paired with a future Series, if a Pay Out Event occurs with respect to a
Paired Series during the [Controlled Amortization] [Accumulation] Period with
respect to Series [199_-__], the Transferors may, by written notice delivered to
the Trustee and the Servicer, designate a different numerator for the foregoing
fraction, provided that such numerator is not less than [the [Adjusted] Invested
Amount as of the last day of the Revolving Period for such Paired Series] and
the Transferors shall have received written notice from each Rating Agency that
such designation will not have a Ratings Effect. Such amounts so allocated to
the Invested Amount will be further allocated between the Class A Certificates
and the Class B Certificates [and the Collateral Interest] based on the Class A
Principal Percentage and the Class B Principal Percentage [and the Collateral
Percentage], respectively. The "Class A Principal Percentage" means, with
respect to any Monthly Period (a) during the Revolving Period, the percentage
equivalent (which shall never exceed 100%) of a fraction, the numerator of which
is equal to the Class A Invested Amount as of the last day of the immediately
preceding Monthly Period (or, in the case of the first Monthly Period, the Class
A Initial Invested Amount), and the denominator of which is equal to the
Invested Amount as of such day, (or, in the case of the first Monthly Period,
the Initial Invested Amount) and (b) during the [Scheduled Accumulation Period]
[Controlled Amortization Period] or the Early Amortization Period, the
percentage equivalent (which shall never exceed 100%) of a fraction, the
numerator of which is the Class A Invested Amount as of the end of the Revolving
Period, and the denominator or which is the Invested Amount as of such day. The
"Class B Principal Percentage" means, with respect to any Monthly Period, (i)
during the Revolving Period, the percentage equivalent (which percentage shall
never exceed 100%) of a fraction, the numerator of which is the Class B Invested
Amount as of the last day of the immediately preceding Monthly Period (or, in
the case of the first Monthly Period, the Class B Initial Invested Amount) and
the denominator of which is the Invested Amount as of such day (or, in the case
of the first Monthly Period, the Initial Invested Amount)
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<PAGE>
and (ii) during the [Scheduled Accumulation Period] [Controlled Amortization
Period] or the Early Amortization Period, the percentage equivalent (which
percentage shall never exceed 100%) of a fraction, the numerator of which is the
Class B Invested Amount as of the end of the Revolving Period, and the
denominator of which is the Class B Invested Amount as of such day.
[Notwithstanding the foregoing, in any Monthly Period in which there occurs
(a) an Addition Date or (b) a Removal Date, the amount of Principal Receivables
used for the denominator in the calculation of the Floating Allocation
Percentage and the Principal Allocation Percentage described above will be (i)
the aggregate amount of Principal Receivables in the Trust at the end of the day
on the last day of the prior Monthly Period 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 end of the day on the related Addition Date or Removal Date for the
period from and including the related Addition Date or Removal Date to and
including the last day of such Monthly Period] [; PROVIDED, HOWEVER, that with
respect to any Monthly Period during the Funding Period in which the Invested
Amount is increased pursuant to the Series [199_-__] Supplement, the numerator
in the calculation of the Floating Allocation Percentage and the Principal
Allocation Percentage described above will be (1) the Invested Amount at the
last day of the prior Monthly Period for the period from and including the first
day of such Monthly Period to but excluding the day the Invested Amount is
increased and (2) the Invested Amount at the end of the day on which the
Invested Amount is increased for the period from and including such day to and
including the last day of such Monthly Period].
As used herein, the following terms have the meanings indicated:(8)
"Class A Invested Amount" for any date means an amount equal to (i) the
Class A Initial Invested Amount, less (ii) the amount of principal payments made
to holders of the Class A Certificates on or prior to such date, less (iii) the
excess, if any, of the aggregate amount of Class A Investor Charge-Offs for all
prior Distribution Dates over the aggregate amount of any reimbursements of
Class A Investor Charge-Offs for all Distribution Dates prior to such date.
"Class B Invested Amount" for any date means an amount equal to (i) the
Class B Initial Invested Amount, less (ii) the amount of principal payments made
to holders of the Class B Certificates on or prior to such date [(other than
principal payments made from the proceeds of amounts received from the Cash
Collateral Account for the purpose of reimbursing previous reductions in the
Class B Invested Amount)], less (iii) the aggregate amount of Class B Investor
Charge-Offs for all prior Distribution Dates, less (iv) the aggregate amount of
Reallocated Principal Collections for all prior Distribution Dates which have
been used to fund the Required Amount with respect to such Distribution Dates
[(excluding any Reallocated Principal Collections that have resulted in a
reduction of the [Collateral Interest] [Enhancement Invested Amount)], less (v)
an amount equal to the amount by which the Class B Invested Amount has been
reduced to cover the Class A Investor Default Amount on all prior Distribution
Dates as described herein under "--Defaulted Receivables; Investor Charge-Offs,"
and plus (vi) the aggregate amount of Excess Spread and [Excess Finance Charge
Collections allocated to Series [199_-__]] [other amounts] applied on all prior
Distribution Dates for the purpose of reimbursing amounts deducted pursuant to
the foregoing clauses (iii), (iv) and (v).
["Class A Adjusted Invested Amount" for any date means an amount equal to
the then current Class A Invested Amount less the funds on deposit in the
Principal Funding Account on such date.]
["Class B Adjusted Invested Amount" for any date means (a) if such date
occurs prior to the Class B Principal Commencement Date, an amount equal to the
Class B Invested Amount and (b) if such date
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(8) Appropriate changes to Invested Amount definitions must be made for a
prefunded Series.
S-37
<PAGE>
occurs on or after the Class B Principal Commencement Date, an amount equal
to the Class B Invested Amount less the funds on deposit in the Principal
Funding Account on such date].
["Collateral Interest" for any date means an amount equal to (a) the
initial Collateral Interest, LESS (b) the aggregate amount of principal payments
made to the Collateral Interest Holder prior to such date, LESS (c) the
aggregate amount of Collateral Charge-Offs for all prior Distribution Dates,
LESS (d) the aggregate amount of Reallocated Principal Collections for all prior
Distribution Dates, LESS (e) an amount equal to the aggregate amount by which
the Collateral Interest has been reduced to fund the Class A Investor Default
Amount and the Class B Investor Default Amount on all prior Distribution Dates
as described under "--Defaulted Receivables; Investor Charge-Offs," and PLUS (f)
the aggregate amount of Excess Spread allocated and available on all prior
Distribution Dates for the purpose of reimbursing amounts deducted pursuant to
the foregoing clauses (c), (d) and (e); PROVIDED, HOWEVER, that the Collateral
Interest may not be reduced below zero.]
["Enhancement Invested Amount" for any date means an amount equal to (a)
the amount withdrawn from the Cash Collateral Account and applied to the payment
of principal of the Certificates on the first Special Payment Date following an
Economic Pay Out Event, less (b) the amount of principal payments made to the
Cash Collateral Depositor prior to such day less (c) the aggregate amount by
which the Enhancement Invested Amount has been reduced to fund the Class A
Investor Default Amount and the Class B Investor Default Amount on all prior
Distribution Dates as described below, less (d) the amount by which the
Enhancement Invested Amount has been reduced by Reallocated Principal
Collections applied to reimburse the Required Amount and plus (e) the aggregate
amount of Excess Spread [Excess Finance Charge Collections allocated to Series
[199_-__]] [other amounts] applied on all prior Distribution Dates for the
purpose of reimbursing amounts deducted pursuant to the foregoing clauses (c)
and (d). In the absence of the occurrence of an Economic Pay Out Event and a
related withdrawal from the Cash Collateral Account to pay principal of the
Certificates, the Enhancement Invested Amount will be zero.]
"Invested Amount" for any date means an amount equal to the sum of the
Class A Invested Amount and the Class B Invested Amount [and the Collateral
Interest] on such date.
[PRINCIPAL FUNDING ACCOUNT]
[The Servicer will establish and maintain in the name of the Trustee, on
behalf of the Trust, the Principal Funding Account as an Eligible Account held
for the benefit of the Certificateholders. During the Scheduled Accumulation
Period, the Servicer will transfer collections in respect of Principal
Receivables [and Shared Principal Collections allocated to Series [199_-__]]
[other amounts] to be treated in the same manner as collections of Principal
Receivables from the Collection Account to the Principal Funding Account as
described under "--Application of Collections."
Unless a Pay Out Event has occurred with respect to the Certificates, all
amounts on deposit in the Principal Funding Account (the "Principal Funding
Account Balance") on any Distribution Date (after giving effect to any deposits
to, or withdrawals from, the Principal Funding Account to be made on such
Distribution Date) will be invested to the following Distribution Date by the
Trustee at the direction of the Servicer in Eligible Investments. On each
Distribution Date with respect to the Scheduled Accumulation Period (on or prior
to the Class B Expected Final Payment Date) the interest and other investment
income (net of investment expenses and losses) earned on such investments (the
"Principal Funding Investment Proceeds") will be withdrawn from the Principal
Funding Account and will be treated as a portion of Class A Available Funds,
prior to the Class B Principal Commencement Date and, thereafter, as Class B
Available Funds. If such investments with respect to any such Distribution Date
yield less than the applicable Certificate Rate, the Principal Funding
Investment Proceeds with respect to such Distribution Date will be less than the
Covered Amount for such following Distribution Date. It is intended that any
such shortfall
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<PAGE>
will be funded from Class A Available Funds or Class B Available
Funds, as the case may be (including a withdrawal from the Reserve Account, if
necessary, as described under "--Reserve Account"), [or a withdrawal from the
Cash Collateral Account as described under "--Cash Collateral Account"] [other
sources]. The Available Reserve Account Amount and the Available Cash
Collateral Amount at any time will be limited and there can be no assurance that
sufficient funds will be available to fund any such shortfall. [The "Covered
Amount" shall mean (a) for any Distribution Date with respect to the Class A
Scheduled Accumulation Period or the first Special Payment Date, if such Special
Payment Date occurs prior to the Class B Principal Commencement Date, an amount
equal to [one-twelfth of the product of (i) the Class A Certificate Rate and
(ii) the Principal Funding Account Balance, if any, as of the preceding
Distribution Date and (b) for any Distribution Date with respect to the Class B
Scheduled Accumulation Period or the first Special Payment Date, if such Special
Payment Date occurs on or after the Class B Principal Commencement Date, an
amount equal to one-twelfth of the product of (i) the Class B Certificate Rate
and (ii) the Principal Funding Account Balance, if any, as of the preceding
Distribution Date] [the product of (i) (A) a fraction the numerator of which is
the actual number of days in the related Interest Period and the denominator of
which is 360, times (B) the applicable Certificate Rate in effect with respect
to such Interest Period, and (ii) the Principal Funding Account Balance as of
the last day of the Monthly Period in which such Interest Period ends].]
[RESERVE ACCOUNT]
[The Servicer will establish and maintain in the name of the Trustee, on
behalf of the Trust, an Eligible Deposit Account for the benefit of the
Certificateholders (the "Reserve Account"). The Reserve Account is intended to
help assure the subsequent distribution of interest on the Certificates as
provided in this Prospectus Supplement during the Scheduled Accumulation Period.
On each Distribution Date from and after the Reserve Account Funding Date, but
prior to the termination of the Reserve Account, the Trustee, acting pursuant to
the Servicer's instructions, will apply Excess Spread [and Excess Finance Charge
Collections allocated to Series [199_-__] (in the order of priority described
below under "--Application of Collections--Payment of Fees, Interest and Other
Items") to increase the amount on deposit in the Reserve Account (to the extent
such amount is less than the Required Reserve Account Amount). The "Reserve
Account Funding Date" will be the Distribution Date with respect to the Monthly
Period that begins [____] months prior to the Distribution Date with respect to
the first Monthly Period in the [Class A] Scheduled Accumulation Period,
provided that the Transferors may delay the Reserve Account Funding Date to the
earliest of: (a) the Distribution Date with respect to the Monthly Period that
begins [____] months prior to the first Monthly Period in the [Class A]
Scheduled Accumulation Period; (b) the first Distribution Date for which the
Portfolio Adjusted Yield is less than [____]%, but in such event the Reserve
Account Funding Date does not have to occur earlier than the Distribution Date
with respect to the Monthly Period that begins [____] months prior to the
commencement of the [Class A] Scheduled Accumulation Period; (c) the first
Distribution Date for which the Portfolio Adjusted Yield is less than [____]%,
but in such event the Reserve Account Funding Date does not have to occur
earlier than the Distribution Date that begins [____] months prior to the
commencement of the [Class A] Scheduled Accumulation Period; or (d) the first
Distribution Date for which the Portfolio Adjusted Yield is less than [____]%,
but in such event the Reserve Account Funding Date does not have to occur
earlier than the Distribution Date that begins [____] months prior to the
commencement of the [Class A] Scheduled Accumulation Period or any other date
designated by the Transferors, provided that the Transferors have received
written notice from each Rating Agency that such designation will not have a
Ratings Effect. "Portfolio Adjusted Yield" for any Distribution Date will be
equal to the average of the percentages obtained for each of the three preceding
Monthly Periods by subtracting the Base Rate from the Portfolio Yield for such
Monthly Period and deducting [____] from the result for each Monthly Period.
The "Required Reserve Account Amount" for any Distribution Date on or after the
Reserve Account Funding Date will be equal to [____]% of the Invested Amount as
of the preceding Distribution Date, or any other amount designated by the
Transferors provided that the Transferors have received written notice from each
Rating Agency that such designation will not have a Ratings Effect.
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<PAGE>
On each Distribution Date, after giving effect to any deposit to be made to,
and any withdrawal to be made from, the Reserve Account on such Distribution
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 or at the
direction of [the Transferors] [the Cash Collateral Depositor] [the Credit
Enhancer].
Provided that the Reserve Account has not terminated as described below,
all amounts on deposit in the Reserve Account on any Distribution Date (after
giving effect to any deposits to, or withdrawals from, the Reserve Account to be
made on such Distribution Date) will be invested to the following Distribution
Date by the Trustee at the direction of the Servicer in Eligible Investments.
The interest and other investment income (net of investment expenses and losses)
earned on such investments (the "Interest Funding Investment Proceeds") will be
retained in the Reserve Account (to the extent the amount on deposit therein is
less than the Required Reserve Account Amount) or [distributed to or at the
direction of] [the Transferors] [the Cash Collateral Depositor] [the Credit
Enhancer] [deposited in the Collection Account for application as Available
Funds].
On or before each Distribution Date with respect to the Scheduled
Accumulation Period (on or prior to the Class A Expected Final Payment Date) and
on the first Special Payment Date, a withdrawal will be made from the Reserve
Account, and the amount of such withdrawal will be deposited in the Collection
Account and included in Class A Available Funds, prior to the Class B Principal
Commencement Date, and, thereafter, in Class B Available Funds, in an amount
equal to the lesser of (a) the Available Reserve Account Amount with respect to
such Distribution Date or Special Payment Date and (b) the excess, if any, of
the Covered Amount with respect to such Distribution Date or Special Payment
Date over the Principal Funding Investment Proceeds with respect to such
Distribution Date or Special Payment Date; PROVIDED that the amount of such
withdrawal will be reduced to the extent that funds otherwise would be available
to be deposited in the Reserve Account on such Distribution Date or Special
Payment Date. On each Distribution Date, the amount available to be withdrawn
from the Reserve Account (the "Available Reserve Account Amount") will be equal
to the lesser of the amount on deposit in the Reserve Account (before giving
effect to any deposit to be made to the Reserve Account on such Distribution
Date) and the Required Reserve Account Amount for such Distribution Date.
The Reserve Account will be terminated following the earlier to occur of
(a) the termination of the Trust pursuant to the Pooling and Servicing
Agreement, (b) the date on which the Certificates are paid in full and (c) if
the Scheduled Accumulation Period has not commenced, the occurrence of a Pay Out
Event with respect to the Certificates or, if the Scheduled Accumulation Period
has commenced, the earlier of the first Special Payment Date and the Class B
Expected Final 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 or at
the direction of [the Transferors] [the Cash Collateral Depositor] [the Credit
Enhancer]. Any amounts withdrawn from the Reserve Account and distributed to or
at the direction of [the Transferors] [the Cash Collateral Depositor] [the
Credit Enhancer] as described above will not be available for distribution to
the Certificateholders.]
REALLOCATION OF CASH FLOWS(9)
With respect to each Distribution Date, on each Determination Date, the
Servicer will determine the amount (the "Required Amount"), which will be equal
to the amount, if any, by which (a) the sum of (i) Class A Monthly Interest for
such Distribution Date, (ii) any Class A Monthly Interest previously due but
- --------------------------
(9) Required Amount to be defined separately for each Class and other conforming
changes to be made if Collateral Interest structure.
S-40
<PAGE>
not paid to the Class A Certificateholders [or deposited in the Interest Funding
Account] on a prior Distribution Date[, (iii) any Class A Additional Interest],
(iv) the Class A Servicing Fee for such Distribution Date and any unpaid Class A
Servicing Fee and (v) the Class A Investor Default Amount, if any, for such
Distribution Date exceeds the sum of (A) [the amount of Principal Funding
Investment Proceeds, if any, with respect to such Distribution Date, (B)] the
Class A Floating Percentage of the Floating Allocation Percentage collections of
Finance Charge Receivables to Series [199_-__] (including any investment
earnings treated as collections of Finance Charge Receivables in accordance with
the Pooling and Servicing Agreement) [and (C) the amount of funds, if any, to be
withdrawn from the Reserve Account and allocated to the Class A Certificates
pursuant to the Pooling and Servicing Agreement]. If the Required Amount is
greater than zero, Excess Spread [and Excess Finance Charge Collections
allocated to Series [199_-__]] will be used to pay the Required Amount with
respect to such Distribution Date. [If Excess Spread [and such Excess Finance
Charge Collections] available with respect to such Distribution Date are less
than the Required Amount, amounts available from [[the Cash Collateral Account]
[Credit Enhancement] available to pay amounts in respect of the Class A
Certificates], will then be used to fund the remaining Required Amount.] If
such Excess Spread [and Excess Finance Charge Collections] [and amounts
available from the [Cash Collateral Account] [Credit Enhancement]] [is] [are]
insufficient to pay the Required Amount, collections of Principal Receivables
allocable to the Class B Certificates for the related Monthly Period (the
"Reallocated Principal Collections") will then be used to fund the remaining
Required Amount. If Reallocated Principal Collections with respect to the
related Monthly Period, together with Excess Spread and [Excess Finance Charge
Collections allocated to Series [199_-__]] [amount available under the [Cash
Collateral Account] [Credit Enhancement]] to make payments in respect of the
Class A Certificates are insufficient to fund the Required Amount for such
related Monthly Period, then [the Enhancement Invested Amount, if any,] [the
Class B Invested Amount] will be reduced by the amount of such excess (but not
by more than the Class A Investor Default Amount for such Distribution Date).]
In the event that such reduction would cause the Enhancement Invested Amount to
be a negative number, the Enhancement Invested Amount will be reduced to zero,
the Class B Invested Amount will be reduced by the amount by which the
Enhancement Invested Amount would have been reduced below zero (but not by more
than the excess of the Class A Investor Default Amount, if any, for such
Distribution Date over the amount] of such reduction, if any, of the Enhancement
Invested Amount with respect to such Distribution Date).] In the event that
such reduction would cause the Class B Invested Amount to be a negative number,
the Class B Invested Amount will be reduced to zero, and the Class A Invested
Amount will be reduced by the amount by which the Class B Invested Amount would
have been reduced below zero, but not by more than the excess, if any, of the
Class A Investor Default Amount for such Distribution Date over the amount of
reduction[s], [if any, of the Enhancement Invested Amount and] of the Class B
Invested Amount with respect to such Distribution Date as described above, which
will have the effect of slowing or reducing the return of principal to the Class
A Certificateholders. In such case, the Class A Certificateholders will bear
directly the credit and other risks associated with the undivided interest in
the Trust. See "--Defaulted Receivables; Investor Charge-Offs" below.
APPLICATION OF COLLECTIONS
PAYMENT OF FEES, INTEREST AND OTHER ITEMS. On each Distribution Date, the
Trustee, acting pursuant to the Servicer's instructions, will apply the Class A
Available Funds and Class B Available Funds [and certain Funds allocable to the
Collateral Interest] (see "--Interest Payments" above) on deposit in the
Collection Account in the following priority:
(A) On each Distribution Date, an amount equal to the Class A Available
Funds with respect to such Distribution Date will be distributed [or deposited]
in the following priority:
(i) an amount equal to Class A Monthly Interest for such Distribution
Date, plus the amount of any Class A Monthly Interest previously due but
not paid to holders of the Class A Certificates [or deposited to the
Interest Funding Account] on a prior Distribution Date, [plus additional
interest
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at the Class A Certificate Rate with respect to amounts that were
due but not paid to holders of the Class A Certificates [or deposited to
the Interest Funding Account] on a prior Distribution Date (the "Class A
Additional Interest"), will be [distributed to holders of the Class A
Certificates] [deposited in the Interest Funding Account for distribution
to holders of the Class A Certificates on the Payment Date therefor];
(ii) an amount equal to the Class A Servicing Fee for such
Distribution Date, plus the amount of any Class A Servicing Fee previously
due but not distributed to the Servicer on a prior Distribution Date, will
be distributed to the Servicer;
(iii) an amount equal to the Class A Investor Default Amount for such
Distribution Date will be treated as a portion of Available Principal
Collections for such Distribution Date;
(iv) the balance, if any, shall constitute Excess Spread and shall be
allocated and distributed as described under "--Excess Spread[; Excess
Finance Charge Collections]" below.
(B) On each Distribution Date, an amount equal to the Class B Available
Funds with respect to such Distribution Date will be distributed or deposited in
the following priority:
(i) an amount equal to Class B Monthly Interest for such Distribution
Date, plus the amount of any Class B Monthly Interest previously due but
not paid to the holders of the Class B Certificates [or deposited to the
Interest Funding Account] on a prior Distribution Date, [plus any
additional interest at the Class B Certificate Rate with respect to amounts
that were due but not paid to the holders of the Class B Certificates [or
deposited to the Interest Funding Account] on a prior Distribution Date
("Class B Additional Interest")], [will be distributed to the holders of
the Class B Certificates] [deposited in the Interest Funding Account for
distribution to the holders of the Class B Certificates on the next Payment
Date therefor];
(ii) an amount equal to the Class B Servicing Fee for such
Distribution Date, plus the amount of any Class B Servicing Fee previously
due but not distributed to the Servicer on a prior Distribution Date, will
be distributed to the Servicer;
(iii) an amount equal to the Class B Investor Default Amount for such
Distribution Date will be treated as a portion of Available Principal
Collections for such Distribution Date;
(iv) the balance, if any, shall constitute Excess Spread and shall be
allocated and distributed as described under "--Excess Spread[; Excess
Finance Charge Collections]" below.
[(C) On each Distribution Date, an amount equal to the Collateral
Percentage of collections of Finance Charge Receivables allocated to the
Invested Amount with respect to the preceding Monthly Period will be distributed
in the following priority:
(i) an amount equal to the Collateral Interest Servicing Fee, plus
the amount of any overdue Collateral Interest Servicing Fee, for the
related Monthly Period will be paid to the Servicer; and
(ii) the balance, if any, will constitute a portion of Excess Spread
and will be allocated and distributed as described under "--Excess
Spread."]
"Class A Monthly Interest" means, with respect to any Distribution Date, an
amount equal to [one-twelfth of] the product of (i) [(A) a fraction, the
numerator of which is the actual number of days in the related accrual period
and the denominator of which is 360, times (B)] the Class A Certificate Rate and
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(ii) [the sum of (A)] the Class A Invested Amount [and [(B) the product of the
Class A Floating Percentage and the] Pre-Funding Amount, each] as of the close
of the preceding Record Date; PROVIDED, HOWEVER, with respect to the first
Distribution Date, Class A Monthly Interest shall be equal to $[__________].
[Class A Monthly Interest shall be calculated on the basis of a 360-day year
consisting of twelve 30-day months.]
"Class B Monthly Interest" means, with respect to any Distribution Date, an
amount equal to [one-twelfth of] the product of (i) [(A) a fraction, the
numerator of which is the actual number of days in the related accrual period
and the denominator of which is 360, times (B)] the Class B Certificate Rate and
(ii) [the sum of (A)] the Class B Invested Amount [and (B) [the product of the
Class B Floating Percentage and] the Pre-Funding Amount, each] as of the close
of business on the last day of the preceding Monthly Period; PROVIDED, HOWEVER,
with respect to the first Distribution Date, Class B Monthly Interest shall be
equal to $[__________] [Class B Monthly Interest shall be calculated on the
basis of a 360-day year consisting of twelve 30-day months.]
"Excess Spread" means, with respect to any Distribution Date, an amount
equal to the sum of the amounts described in clause (A)(iv) above and clause
(B)(iv) [and clause (C)(ii)] above.
EXCESS SPREAD[; EXCESS FINANCE CHARGE COLLECTIONS]. On each Distribution
Date, the Trustee; acting pursuant to the Servicer's instructions, will apply
Excess Spread [and Excess Finance Charge Collections allocated to Series
[199_-__]] 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 the related Monthly Period will be used to fund any deficiency
pursuant to clauses (A)(i), (ii) and (iii) above under "--Payment of Fees,
Interest 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 Distribution Date of certain other amounts
applied for that purpose) will be treated as a portion of as Available
Principal Collections for such Distribution Date as described under "--
Payments of Principal" below;
(c) an amount equal to the sum of any Class B Monthly Interest and
any Class B Additional Interest due but not distributed to the Class B
Certificateholders [or deposited to the Interest Funding Account] either on
such Distribution Date or on a prior Distribution Date, will be
[distributed to the Class B Certificateholders] [deposited into the
Interest Funding Account for payment to the Class B Certificateholders on
the Payment Date therefor];
(d) an amount equal to the Class B Servicing Fee due but not paid to
the Servicer either on such Distribution Date or a prior Distribution Date
will be paid to the Servicer;
(e) an amount equal to the remaining Class B Investor Default Amount
for such Distribution Date, after giving effect to the allocation in clause
(B)(iii) under "--Payment of Fees, Interest and Other Items" above, shall
be treated as a portion of Available Principal Collections for such
Distribution Date;
(f) an amount equal to the aggregate by which the Class B Invested
Amount has been reduced pursuant to clauses (iii), (iv) and (v) of the
definition of "Class B Invested Amount" under "--Allocation Percentages"
above (but not in excess of the aggregate amount of such reductions which
have not been previously reimbursed) shall be treated as a portion of
Available Principal Collections for such Distribution Date;
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[(g) an amount equal to the [Collateral Monthly Interest for such
Distribution Date, plus the amount of any Collateral Monthly Interest
previously due but not distributed on a prior Distribution Date, will be
distributed to the Collateral Interest Holder for distribution in
accordance with the Loan Agreement] ["Monthly Cash Collateral Fee" (as
defined in the agreement (the "Loan Agreement") among the Transferors, the
Cash Collateral Depositor and the Trustee) for such Distribution Date shall
be distributed to the Cash Collateral Depositor for application in
accordance with the Loan Agreement] ["Monthly Credit Enhancement Fee" (as
defined in the agreement among the Transferors, the Trustee and the Credit
Enhancement Provider (the "Credit Enhancement Agreement")) shall be
distributed to the Credit Enhancement Provider];]
[(h) an amount equal to the [Collateral Charge-Offs] aggregate amount
by which the Enhancement Invested Amount has been reduced pursuant to
clauses (c) and (d) of the definition of "Enhancement Invested Amount"
under "--Allocation Percentages" above (but not in excess of the aggregate
amount of such reductions which have not been previously reimbursed) shall
be treated as a portion of Available Principal Collections for such
Distribution Date;]
[(i) an amount up to the excess, if any, of the Initial Cash
Collateral Amount over the remaining Available Cash Collateral Amount shall
be deposited into the Cash Collateral Account in accordance with the Loan
Agreement;]
[(j) on each Distribution 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" above, 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;]
[(k) an amount equal to the aggregate of any other amounts then due
to the [Collateral Interest Holder] [Cash Collateral Depositor] [Credit
Enhancement Provider] pursuant to the [Loan Agreement] [Credit Enhancement
Agreement] (to the extent such amounts are payable pursuant to the [Loan
Agreement] [Credit Enhancement Agreement] out of Excess Spread [and Excess
Finance Charge Collections]) shall be distributed to the Cash Collateral
Depositor [Collateral Interest Holder] for application in accordance with
the [Loan Agreement[ [Credit Enhancement Agreement];] and
[(l) the balance, if any, will constitute a portion of Excess Finance
Charge Collections for such Distribution Date and will be available for
allocation to other Series in Group [____] or to the holders of the
Transferor Certificates as described in "Description of the Certificates--
Sharing of Excess Finance Charge Collections" in the Prospectus.](10)
["Collateral Monthly Interest" with respect to any Distribution Date
will equal the product of (i) an amount equal to [name of index] plus
[___]% per annum, or such lesser amount as may be designated in the Loan
Agreement (the "Collateral Rate"), (ii) the actual number of days in the
related Interest Period divided by 360 and (iii) the Collateral Interest on
the related Record Date or, with respect to the first Distribution Date,
the initial Collateral Interest.]
PAYMENTS OF PRINCIPAL. On each Distribution Date, the Trustee, acting
pursuant to the Servicer's instructions, will [after applying amounts with
respect to Collateral Monthly Principal] distribute Available Principal
Collections (see "--Principal Payments" above) on deposit in the Collection
Account in the following priority:
- -----------------------------
(10) Distributions and priorities may be modified to reflect another form of
Credit Enhancement.
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<PAGE>
(i) on each Distribution Date with respect to the Revolving Period,
all such Available Principal Collections will be treated as Shared
Principal Collections and applied as described under "Description of the
Certificates--Shared Principal Collections" in the Prospectus;
(ii) on each Distribution Date with respect to the [Controlled
Amortization] [Accumulation] Period or the Early Amortization Period, all
such Available Principal Collections will be distributed or deposited in
the following priority:
(A) an amount equal to Class A Monthly Principal, up to the
Class A [Adjusted] Invested Amount on such Distribution Date, will be
[deposited in the Principal Funding Account (during the Class A
Scheduled Accumulation Period) or] distributed to the Class A
Certificateholders (during the [Controlled Amortization Period] Early
Amortization Period);
[(B) for each Distribution Date [beginning on the Class B
Principal Commencement Date], an amount equal to Class B Monthly
Principal for such Distribution Date, up to the Class B [Adjusted]
Invested Amount on such Distribution Date, will be [deposited in the
Principal Funding Account (during the Class B Scheduled Accumulation
Period) or] distributed to the Class B Certificateholders (during the
[Controlled Amortization Period] Early Amortization Period);]
[(C) for each Distribution Date with respect to the Early
Amortization Period, beginning with the Distribution Date on which the
Invested Amount is paid in full, an amount equal to the balance, if
any, of such Available Principal Collections then on deposit in the
Collection Account, to the extent of the Enhancement Invested Amount,
if any, shall be distributed to the Cash Collateral Depositor for
application in accordance with the Loan Agreement; and]
(D) for each Distribution Date, after giving effect to
paragraphs (A), (B) [and (C)] above, an amount equal to the balance,
if any, of such Available Principal Collections will be allocated to
Shared Principal Collections and applied in accordance with the
Pooling and Servicing Agreement.
"Class A Monthly Principal" with respect to any Distribution Date relating
to the [Class A Scheduled Accumulation Period] [Class A Controlled Amortization
Period] or the Early Amortization Period will equal the least of (i) the
Available Principal Collections on deposit in the Collection Account with
respect to such Distribution Date, (ii) for each Distribution Date with respect
to the [Class A Scheduled Accumulation Period] [Class A Controlled Amortization
Period] [and on or prior to the Class A Expected Final Payment Date], the
applicable [Controlled Deposit Amount] [Controlled Distribution Amount] for such
Distribution Date and (iii) the Class A [Adjusted] Invested Amount on such
Distribution Date.
"Class B Monthly Principal" with respect to any Distribution Date relating
to the [Class B Scheduled Accumulation Period] [the Class B Controlled
Amortization Period] or the Early Amortization Period, after the Class A
Certificates have been paid in full, will equal the least of (i) the Available
Principal Collections on deposit in the Collection Account with respect to such
Distribution Date, (ii) for each Distribution Date with respect to the [Class B
Scheduled Accumulation Period] [Class B Controlled Amortization Period] [and on
or prior to the Class B Expected Final Payment Date] the applicable [Controlled
Deposit Amount] [Controlled Distribution Amount] for such Distribution Date and
(iii) the Class B [Adjusted] Invested Amount on such Distribution Date.
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<PAGE>
["Collateral Monthly Principal" with respect to any Distribution Date shall
mean the amount specified in the Series [199_-__] Supplement for such date.]
["Controlled Amortization Amount" means (a) for any Distribution Date with
respect to the Class A Controlled Amortization Period, $[__________], and (b)
for any Distribution Date with respect to the Class B Controlled Amortization
Period, [after the Class A Invested Amount has been paid in full,]
$[__________].]
["Deficit Controlled Amortization Amount" means (a) on the first
Distribution Date with respect to the Class A Controlled Amortization Period or
the Class B Controlled Amortization Period, the excess, if any, of the
Controlled Amortization Amount for such Distribution Date over the amount
distributed from the Collection Account as Class A Monthly Principal or Class B
Monthly Principal, as the case may be, for such Distribution Date and (b) on
each subsequent Distribution Date with respect to the Class A Controlled
Amortization Period or the Class B Controlled Amortization Period, the excess,
if any, of the Controlled Distribution Amount for such subsequent Distribution
Date plus any Deficit Controlled Amortization Amount for the prior Distribution
Date over the amount distributed from the Collection Account as Class A Monthly
Principal or Class B Monthly Principal, as the case may be, for such subsequent
Distribution Date.]
["Controlled Accumulation Amount" means [(a)] for any Distribution Date
with respect to the [Class A] Scheduled Accumulation Period, $[__________];
PROVIDED, HOWEVER, that, if the commencement of the [Class A] Scheduled
Accumulation Period is delayed as described above under "--Principal Payments,"
the Controlled Accumulation Amount for each Distribution Date with respect to
the [Class A] Scheduled Accumulation Period will be determined as described
therein[; and (b) for any Distribution Date with respect to the [Class B]
Scheduled Accumulation Period, $[__________].]
["Deficit Controlled Accumulation Amount" means (a) on the first
Distribution Date with respect to the [Class A] Scheduled Accumulation Period
[or the Class B Scheduled Accumulation Period], the excess, if any, of the
[applicable] Controlled Accumulation Amount for such Distribution Date over the
amount distributed from the Collection Account as Class A Monthly Principal [or
Class B Monthly Principal, as the case may be,] for such Distribution Date and
(b) on each subsequent Distribution Date with respect to the [Class A] Scheduled
Accumulation Period [or the Class B Scheduled Accumulation Period], the excess,
if any, of the [applicable] Controlled Deposit Amount for such subsequent
Distribution Date plus any Deficit Controlled Accumulation Amount for the prior
Distribution Date over the amount distributed from the Collection Account as
Class A Monthly Principal [or Class B Monthly Principal, as the case may be,]
for such subsequent Distribution Date.]
[CASH COLLATERAL ACCOUNT]
[The Trust will have the benefit of the Cash Collateral Account for the
benefit of the Certificateholders and the Cash Collateral Depositor, as their
interests appear in the Series [199_-__] Supplement, and in the case of the Cash
Collateral Depositor, in the Loan Agreement [which interest, in the case of the
Cash Collateral Depositor, will be subordinated to the interests of the
Certificateholders as provided in the Series [199_-__] Supplement. The Cash
Collateral Account will be one or more Eligible Deposit Accounts. Funds on
deposit in the Cash Collateral Account will be invested in certain Eligible
Investments.
The Cash Collateral Account will be funded on the Closing Date in the
Initial Cash Collateral Amount, which amount will include the proceeds of an
advance to be made by one or more financial institutions to be selected by the
Transferors (such financial institution or institutions, the "Cash Collateral
Depositor"). Such advance will be repaid pursuant to the Loan Agreement. The
Cash Collateral Account will be terminated following the earliest to occur of
(a) the date on which the Certificates are paid in full,
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[(b) the date on which the entire Available [Cash] Collateral Amount is
distributed to the Certificateholders as a result of the occurrence of an
Economic Pay Out Event,] (c) the Termination Date and (d) the termination of
the Trust pursuant to the Pooling and Servicing Agreement.
On each Distribution Date, the amount available to be withdrawn from the
Cash Collateral Account (the "Available Cash Collateral Amount") will be equal
to the lesser of the amount on deposit in the Cash Collateral Account (before
giving effect to any deposit to be made to the Cash Collateral Account on such
Distribution Date) and the Initial Cash Collateral Amount.
[The Initial Shared Collateral Amount will be for the benefit of both the
Class A Certificates and the Class B Certificates, while the Initial Class B
Collateral Amount will be for the exclusive benefit of the Class B Certificates.
On each Distribution Date, the "Available Shared Collateral Amount" shall equal
the lesser of (a) the Initial Shared Collateral Amount and (b) the excess, if
any, of the Available Cash Collateral Amount on such Distribution Date over the
Initial Class B Collateral Amount.]
On each Distribution Date, one or more withdrawals will be made from the
Cash Collateral Account in an amount up to the Available [Shared] [Cash]
Collateral Amount, to fund the following amounts in the following priority:
(a) the excess, if any, of the Required Amount with respect to the
related Distribution Date over the amount of Excess Spread [and Excess
Finance Charge Collections] allocated to Series [199_-__]] available to
fund such Required Amount will be used first to fund any deficiency in
current Class A Monthly Interest, overdue Class A Monthly Interest [and any
current or overdue Class A Additional Interest], second to fund any
deficiency in the Class A Servicing Fee, and third to pay the Class A
Investor Default Amount, if any, for such Distribution Date;
(b) the excess, if any, of the accrued and unpaid Class B Monthly
Interest on the outstanding principal balance of the Class B Certificates
for the related Distribution Date (plus any current or overdue Class B
Additional Interest) over the amount of Class B Available Funds, Excess
Spread [and Excess Finance Charge Collections] allocated to Series
[199_-__] and available to holders of the Class B Certificates;
(c) the excess, if any, of the accrued and unpaid Class B Servicing
Fee with respect to the related Distribution Date over the Class B
Available Funds, Excess Spread [and Excess Finance Charge Collections]
allocated to Series [199_-__] and available to holders of the Class B
Certificates; and
(d) the excess, if any, of the Class B Investor Default Amount for
the related Distribution Date over the amount of Class B Available Funds,
Excess Spread [and Excess Finance Charge Collections] allocated to Series
[199_-__]] and available to holders of the Class B Certificates.]
[On the first Special Payment Date following a Pay Out Event described in
clause (e) under "--Pay Out Events" herein (an "Economic Pay Out Event"), after
giving effect to any payment of principal on such date described under "--
Application of Collections--Payments of Principal," the Available [Shared]
[Cash] Collateral Amount (after giving effect to any withdrawal from the Cash
Collateral Account on such date to fund the Required Amount) will be applied to
pay principal of the Class A Certificates and the remainder of the Available
[Cash] Collateral Amount will be applied to pay principal of the Class B
Certificates.]
On each Distribution Date commencing with the Class B Principal
Commencement Date, unless an Economic Pay Out Event has occurred, a withdrawal
will be made from the Cash Collateral Account, to the extent of the Available
[Shared] [Cash] Collateral Amount, in an amount equal to the excess, if any, of
the
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Class B Initial Invested Amount (less the sum of the aggregate amount of
principal payments previously distributed to Class B Certificateholders]
[or deposited to the Principal Funding Account in respect of the Class B
Certificates] over the Class B Invested Amount on the last day of the related
Monthly Period (determined after giving effect to any changes to be made in
the Class B Invested Amount pursuant to clauses (iii), (iv), (v) or (vi) of the
definition of "Class B Invested Amount" under "--Allocation Percentages" on
such Distribution Date.
In the event of a sale of the Receivables and an early termination of the
Trust due to an Insolvency Event, an optional repurchase of the
Certificateholders' Interest by the Transferors, a sale of a portion of the
Receivables in connection with the Termination Date, a repurchase or sale of the
Certificateholders' Interest and the Certificateholders' Interest of all other
Series in connection with a Servicer Default or a reassignment of the
Certificateholders' Interest and the certificateholders' interest of all other
Series in connection with a breach by the Transferors of certain representations
and warranties (each as described in the Prospectus under "Description of the
Certificates--Pay Out Events" and "--Optional Termination; Final Payment of
Principal" or "The Pooling and Servicing Agreement Generally--Termination of
Trust," "--Representations and Warranties" and "--Servicer Default"), any
Available [Cash] Collateral Amount on the related Distribution Date (after
giving effect to all other withdrawals from the Cash Collateral Account on such
Distribution Date as described above) will be withdrawn from the Cash Collateral
Account and the proceeds thereof will be distributed to Class B
Certificateholders to the extent of all previous reductions of the Class B
Invested Amount pursuant to clauses (iii), (iv) or (v) of the definition of
"Class B Invested Amount" under "--Allocation Percentages" above.
On each Distribution Date, the Servicer or the Trustee, acting pursuant to
the Servicer's instructions, will apply Excess Spread [and Excess Finance Charge
Collections allocated to Series [199_-__]] (to the extent described above under
"[--Application of Collections--[Excess Spread;] [Excess Finance Charge
Collections]" to increase the amount on deposit in the Cash Collateral Account
(to the extent such amount is less than the Initial Cash Collateral Amount).]
[REQUIRED COLLATERAL INTEREST]
[The "Required Collateral Interest" with respect to any Distribution Date
means (i) initially $[__________] and (ii) thereafter on each Distribution Date
an amount equal to [___]% of the sum of the Class A Invested Amount and the
Class B Invested Amount on such Distribution Date, after taking into account
payments to be made on the related Distribution Date, and the Collateral
Interest on the prior Distribution Date after any adjustments made on such
Distribution Date, but not less than $[________]; PROVIDED, HOWEVER, that (1) if
certain reductions in the Collateral Interest are made or if a Pay Out Event
occurs, the Required Collateral Interest for such Distribution Date shall equal
the Required Collateral Interest for the Distribution Date immediately preceding
the occurrence of such reduction or Pay Out Event, (2) in no event shall the
Required Collateral Interest exceed the unpaid principal amount of the
Certificates as of the last day of the Monthly Period preceding such
Distribution Date after taking into account payments to be made on the related
Distribution Date and (3) the Required Collateral Interest may be reduced to a
lesser amount at any time if the Rating Agency Condition is satisfied.]
["Rating Agency Condition" means the notification in writing by each Rating
Agency to the Transferor, 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 with
respect to which it is a Rating Agency.]
[With respect to any Distribution Date, if the Collateral Interest is less
than the Required Collateral Interest, certain Excess Spread, if available, will
be allocated to increase the Collateral Interest to the extent of such
shortfall. Any of such Excess Spread not required to be so allocated or
deposited into the Reserve
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Account with respect to any Distribution Date will be
applied in accordance with the Loan Agreement. See "--Application of
Collections--Excess Spread."]
[OTHER FORMS OF CREDIT ENHANCEMENT]
[The [Class ____] Certificates [and the Class _ Certificates] will have
the benefit of the [letter of credit] [cash collateral guaranty] [surety bond]
[insurance policy] [spread account] [reserve account] [issued by __________
(the "Credit Enhancer")] in the initial amount of $[__________].
With respect to any Distribution Date, the amount available to be drawn
under the [letter of credit] [cash collateral account guaranty] [surety bond]
[insurance policy] [spread account] [reserve account] (the "Available Credit
Enhancement Amount") will equal $[__________].]
[Information with respect to Credit Enhancement]
[CREDIT ENHANCER]
[Information to be provided by Credit Enhancer]
DEFAULTED RECEIVABLES; INVESTOR CHARGE-OFFS
On each Determination Date, the Servicer will calculate the Investor
Default Amount for the preceding Monthly Period. The term "Investor Default
Amount" means, for any Monthly Period, the product of (i) the Floating
Allocation Percentage with respect to such Monthly Period and (ii) the Defaulted
Amount for such Monthly Period. A portion of the Investor Default Amount will
be allocated to the Class A Certificates (the "Class A Investor Default Amount")
on each Distribution Date in an amount equal to the product of the Class A
Floating Percentage applicable during the related Monthly Period and the
Investor Default Amount for such Monthly Period. A portion of the Investor
Default Amount will be allocated to the Class B Certificates (the "Class B
Investor Default Amount") in an amount equal to the product of the Class B
Floating Percentage applicable during the related Monthly Period and the
Investor Default Amount for such Monthly Period. An amount equal to the Class A
Investor Default Amount for each Monthly Period will be paid from Class A
Available Funds, Excess Spread [and Excess Finance Charge Collections allocated
to Series [199_-__] or [from amounts available under the [Cash Collateral
Account] [Credit Enhancement]] and Reallocated Principal Collections, if
applicable, and applied as described above in "--Application of Collections--
Payment of Fees, Interest and Other Items." An amount equal to the Class B
Investor Default Amount for each Monthly Period will be paid from Class B
Available Funds, Excess Spread [and Excess Finance Charge Collections allocated
to Series [199_-__]] [from amounts available under the [Cash Collateral Account]
[Credit Enhancement]] and applied as described above in "--Application of
Collections--Payment of Fees, Interest and other Items."
On each Distribution Date, if the Required Amount for such Distribution
Date exceeds the sum of Excess Spread [and Excess Finance Charge Collections
allocable to Series [199_-__]] [the Available [Shared] [Cash] Collateral Amount]
and Reallocated Principal Collections, [the Enhancement Invested Amount, if
any,] [the Class B Invested Amount] will be reduced by the amount of such
excess, but not by more than the Class A Investor Default Amount for such
Distribution Date. In the event that such reduction would cause the Enhancement
Invested Amount to be a negative number, the Enhancement Invested Amount will be
reduced to zero, and the Class B Invested Amount will be reduced by the amount
by which the Enhancement Invested Amount would have been reduced below zero, but
not by more than the excess, if any, of the Class A Investor Default Amount for
such Distribution Date over the amount of such reduction, if any, of the
Enhancement Invested Amount with respect to such Distribution Date.] In the
event that such reduction would cause the Class B Invested Amount to be a
negative number, the Class B Invested Amount
S-49
<PAGE>
will be reduced to zero, and the Class A Invested Amount will be reduced by
the amount by which the Class B Invested Amount would have been reduced below
zero, but not by more than the excess, if any, of the Class A Investor
Default Amount for such Distribution Date over the amount of the reduction[s]
[, if any, of the Enhancement Invested Amount and] of the Class B Invested
Amount with respect to such Distribution Date as described above (a "Class A
Investor Charge-Off"), which will have the effect of slowing or reducing the
return of principal to the holders of the Class A Certificates. If the Class
A Invested Amount has been reduced by the amount of any Class A Investor
Charge-Offs, it will thereafter be increased on any Distribution Date (but
not by an amount in excess of the aggregate Class A Investor Charge-Offs) by
the amount of Excess Spread [and Excess Finance Charge Collections allocable
to Series [199_-__]] [and other amounts] allocated and available for such
purpose as described under "--Excess Spread[; Excess Finance Charges]."
If on any Distribution Date the Class B Investor Default Amount for such
Distribution Date exceeds the amount of Class B Available Funds, Excess Spread
[and Excess Finance Charge Collections allocable to Series [199_-__]] [Available
[Shared] [Cash] Collateral Amount] which are allocated and available to fund
such amount, [the Enhancement Invested Amount, if any, will be reduced by the
amount of such excess. In the event that any such reduction would cause the
Enhancement Invested Amount to be a negative number, the Enhancement Invested
Amount will be reduced to zero, and] the Class B Invested Amount will be reduced
by [the amount by which the Enhancement Invested Amount would have been reduced
below zero] [such excess], but not by more than the Class B Investor Default
Amount for such Distribution Date (a "Class B Investor Charge-Off").
If on any Distribution Date Reallocated Principal Collections for such
Distribution Date are applied to fund the Required Amount, [the Enhancement
Invested Amount will be reduced by the amount of such Reallocated Principal
Collections. In the event such reduction would cause the Enhancement Invested
Amount to be a negative number, the Enhancement Invested Amount shall be reduced
to zero, and] the Class B Invested Amount will be reduced by the amount [of such
Reallocated Principal Collections] [by which the Enhancement Invested Amount
would have been reduced below zero].
The Class B Invested Amount will thereafter be reimbursed (but not in
excess of the aggregate unreimbursed Class B Investor Charge-Offs on any
Distribution Date by the amount of Excess Spread [and Excess Finance Charge
Collections allocated to Series [199_-__]] [and other amounts] allocated and
available for the purpose as described under "--Excess Spread; Excess Finance
Charge Collections."]
Any such reductions of the Enhancement Invested Amount shall thereafter be
reimbursed and the Enhancement Invested Amount increased (but not by an amount
in excess of the aggregate reductions of the Enhancement Invested Amount) on any
Distribution Date by the amount of Excess Spread [and Excess Finance Charge
Collections] allocated to Series [199_-__]] and available for such purpose as
described above under "--Application of Collections--Payment of Fees, Interest
and Other Items."
[On each Distribution Date, if the Collateral Percentage of Defaulted
Amount (the "Collateral Default Amount") for such Distribution Date exceeds the
amount of Excess Spread which is allocated and available to fund such amount as
described under "--Application of Collections--Excess Spread," the Collateral
Interest will be reduced by the amount of such excess but not more than the
lesser of the Collateral Default Amount and the Collateral Interest for such
Distribution Date (a "Collateral Charge-Off"). The Collateral Interest will
also be reduced by the amount of Reallocated Principal Collections and the
amount of any portion of the Collateral Interest allocated to the Class A
Certificates to avoid a reduction in the Class A Investor Interest or to the
Class B Certificates to avoid a reduction in the Class B Investor Interest. The
Collateral Interest will thereafter be reimbursed on any Distribution Date by
the amount of Excess Spread allocated and available for that purposes as
described under "--Application of Collections--Excess Spread."]
S-50
<PAGE>
[PAIRED SERIES]
[The Certificates may be paired with one or more other Series (each, a
"Paired Series" at or after the commencement of the [Controlled Amortization]
[Accumulation] Period. As [funds are accumulated in the Principal Funding
Account] [principal is paid to the Certificateholders during the Controlled
Amortization Period], the invested amount in the Trust of such Paired Series
will increase by up to a corresponding amount. Upon payment in full of the
Certificates, assuming that there have been no unreimbursed charge-offs with
respect to any related Paired Series, the aggregate invested amount of such
related Paired Series will have been increased by an amount up to an aggregate
amount equal to the Invested Amount paid to the Certificateholders after the
Certificates were paired with the Paired Series. The issuance of a Paired
Series will be subject to the conditions described under "Description of the
Certificates--New Issuances" in the Prospectus. There can be no assurance,
however, that the terms of any Paired Series might not have an impact on the
timing or amount of payments received by a Certificateholder. See "Special
Considerations--Issuance of Additional Series; Effect on Payments to
Certificateholders" in the Prospectus.]
[REQUIRED PRINCIPAL BALANCE; ADDITION OF ACCOUNTS]
[The obligation of the Trustee to authenticate certificates of a new Series
and to execute and deliver the related Series Supplement shall be subject to the
conditions described under "Description of the Certificates--New Issuances" in
the Prospectus and to the additional condition that, as of the applicable
closing date and after giving effect to such new issuance, the aggregate amount
of Principal Receivables in the Trust shall equal or exceed the Required
Principal Balance. The "Required Principal Balance" means, as of any date of
determination, the sum of the "initial invested amounts" (as defined in the
relevant Series Supplements) of the investor certificates of each Series
outstanding on such date (other than any Series or portion thereof (an "Excluded
Series") which is designated in the relevant Supplement as then being an
"Excluded Series") less the principal amount on deposit in the Special Funding
Account on such date; PROVIDED, HOWEVER, that if at any time the only Series
outstanding are Excluded Series and a Pay Out Event has occurred with respect to
one or more such Series, the Required Principal Balance shall mean the sum of
the "invested amounts" (as defined in the relevant Supplements) of each such
Excluded Series as of the earliest date on which any such Pay Out Event is
deemed to have occurred less the principal amount on deposit in the Special
Funding Account.
If as of the close of business on the last business day of any Monthly
Period, the aggregate amount of Principal Receivables in the Trust is less than
the Required Principal Balance on such date, the Transferors shall on or before
the [10th] business day following such day, unless the amount of Principal
Receivables in the Trust equals or exceeds the Required Principal Balance as of
the close of business on any day after the last business day of such Monthly
Period and prior to such [10th] business day, make an Addition to the Trust such
that, after giving effect to such Addition, the amount of Principal Receivables
in the Trust is at least equal to the Required Principal Balance.]
PAY OUT EVENTS
The Pay Out Events with respect to the Certificates will include each of
the events specified in the Prospectus under "Description of the Certificates--
Pay Out Events" and the following:
[(a) a failure on the part of the Transferors (i) to make any payment
or deposit required under the Pooling and Servicing Agreement or the Series
[199_-__] Supplement within [____] business days after the day such payment
or deposit is required to be made; or (ii) to observe or perform any other
covenants or agreements of the Transferors set forth in the Pooling and
Servicing Agreement or the Series [199_-__] Supplement, which failure has a
material adverse effect on the Certificateholders] and which continues
unremedied for a period of [___] days after written notice;
S-51
<PAGE>
(b) any representation or warranty made by the Transferors in the
Pooling and Servicing Agreement or the Series [199_-__] Supplement or any
information required to be given by the Transferors to the Trustee to
identify the Accounts proves to have been incorrect in any material respect
when made and continues to be incorrect in any material respect for a
period of [___] days after written notice and as a result of which the
interests of the Certificateholders are materially and adversely affected;
PROVIDED, HOWEVER, that a Pay Out Event shall not be deemed to occur
thereunder if the Transferors have repurchased the related Receivables or
all such Receivables, if applicable, during such period in accordance with
the provisions of the Pooling and Servicing Agreement;
(c) a failure by the Transferors to make an Addition to the Trust
within [____] business days after the day on which it is required to make
such Addition pursuant to the Pooling and Servicing Agreement or the Series
[199_-__] Supplement;
(d) the occurrence of any Servicer Default;
[(e) a reduction of the [average] Portfolio Yield for any [three]
consecutive Monthly Periods to a rate less than the [average of the Base
Rate[s]] for such period;]
[(f) the failure to pay in full the Class A Invested Amount on the
Class A Expected Final Payment Date, or the Class B Invested Amount on the
Class B Expected Final Payment Date]; and
[(g) the Class B Investment Amount is reduced to less that
$__________.]
Then, in the case of any event described in subparagraph (a), (b) or (d),
after the applicable grace period, if any, set forth in such subparagraphs,
either the Trustee or the holders of Certificates evidencing more than 50% of
the aggregate unpaid principal amount of Certificates by notice then given in
writing to the Transferors and the Servicer (and to the Trustee if given by the
Certificateholders) may declare that a Pay Out Event has occurred with respect
to Series [199_-__] as of the date of such notice, and, in the case of any event
described in subparagraph (c), (e) or (f), a Pay Out Event shall occur with
respect to Series [199_-__] without any notice or other action on the part of
the Trustee immediately upon the occurrence of such event.
For purposes of the Pay Out Event described in clause [(e)] above, the
terms "Base Rate" and "Portfolio Yield" will be defined as follows with respect
to the Certificates:
"Base Rate" means, with respect to any Monthly Period, [___]% [the
annualized percentage equivalent of a fraction, the numerator of which is
equal to the sum of Class A Monthly Interest, Class B Monthly Interest[,
Collateral Monthly Interest] and the Monthly Servicing Fee with respect to
the Certificates [and the Collateral Interest] for the related Distribution
Date and the denominator of which is the Invested Amount as of the last day
of the preceding Monthly Period] [the sum of the weighted average of the
Class A Certificate Rate and the Class B Certificate Rate for the related
Interest Period and the Servicing Fee Rate].
"Portfolio Yield" means, with respect to any Monthly Period, the
annualized percentage equivalent of a fraction, the numerator of which is
equal to [(a) the Floating Allocation Percentage of collections of Finance
Charge Receivables [(including any investment earnings that are to be
treated as collections of Finance Charges Receivables in accordance with
the Pooling and Servicing Agreement)] for such Monthly Period [plus (b) the
amount of Principal Funding Investment Proceeds for the related
Distribution Date,] [plus (c) the amount of any Interest Funding Investment
Proceeds for the related Distribution Date] [plus (d) any Excess Finance
Charge Collections that are allocated to Series [199_-__]], [plus (e) the
amount of funds withdrawn from the Reserve Account and
S-52
<PAGE>
included in Class A Available Funds or Class B Available Funds, in each
case for the Distribution Date with respect to such Monthly Period]
[plus (f) the amount of any investment earnings transferred from the
Pre-Funding Account to the Collection Account on such Distribution Date]
, and less (g) the Investor Default Amount for the Distribution Date
with respect to such Monthly Period, and the denominator of which is the
Invested Amount as of the last day of the preceding Monthly Period].
If the proceeds of any sale of the Receivables following the occurrence of
an Insolvency Event with respect to the Transferors, as described in the
Prospectus under "Description of the Certificates--Pay Out Events," allocated to
the Class A Invested Amount and the proceeds of any collections on the
Receivables in the Collection Account [and any Available [Cash] Collateral
Amount] [and any amounts on deposit in the [Principal Funding Account] [Interest
Funding Account] [other accounts]] are not sufficient to pay in full the
remaining amount due on the Class A Certificates, the Class A Certificateholders
will suffer a corresponding loss and no such proceeds will be available to the
Class B Certificateholders. [Following any such sale of the Receivables, any
[Available [Cash] Collateral Amount] will be drawn and distributed to the Class
B Certificateholders to the extent necessary to reimburse any previous
reductions in the Class B Invested Amount as a result of unreimbursed
charge-offs. If the [amount available under the Cash Collateral Account] is
less than the amount of such previous reductions, the Class B Certificateholders
will incur a loss.] See "Certain Legal Aspects of the Receivables--Certain
Matters Relating to Receivership" in the Prospectus for a discussion of the
impact of recent federal legislation on the Trustee's ability to liquidate the
Receivables.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
The share of the Servicing Fee allocable to the Certificateholders with
respect to any Distribution Date (the "Monthly Servicing Fee") shall be equal to
one-twelfth of the product of (a) [____]% (the "Servicing Fee Rate") and (b) (i)
the [sum of the] [Adjusted] Invested Amount [and the Enhancement Invested
Amount, if any,] as of the last day of the Monthly Period preceding such
Distribution Date, less (ii) the product of (A) any amount on deposit in the
Special Funding Account as of the last day of the Monthly Period preceding such
Distribution Date and (B) the Floating Allocation Percentage with respect to
such Monthly Period (the amount calculated pursuant to this clause (b) is
referred to as the "Servicing Base Amount"); PROVIDED, HOWEVER, with respect to
the first Distribution Date, the Monthly Servicing Fee shall be equal to
$[__________]. The share of the Monthly Servicing Fee allocable to the Class A
Certificateholders with respect to any Distribution Date (the "Class A Servicing
Fee") shall be equal to one-twelfth of the product of (a) the Class A Floating
Percentage, (b) [the Servicing Fee Rate][ [____]% (the "Net Servicing Fee
Rate")] and (c) the Servicing Base Amount; PROVIDED, HOWEVER, that with respect
to the first Distribution Date, the Class A Servicing Fee shall be equal to
$[__________]. The share of the Monthly Servicing Fee allocable to the Class B
Certificateholders with respect to any Distribution Date (the "Class B Servicing
Fee") shall be equal to one-twelfth of the product of (a) the Class B Floating
Percentage, (b) [the Servicing Fee Rate] [the Net Servicing Fee Rate] and (c)
the Servicing Base Amount; PROVIDED, HOWEVER, that with respect to the first
Distribution Date, the Class B Servicing Fee shall be equal to $[__________].
[The share of the Monthly Servicing Fee allocable to the Collateral Interest
with respect to any Distribution Date (the "Collateral Interest Servicing Fee")
shall be equal to one-twelfth of the product of (a) the Collateral Percentage,
(b) [the Servicing Fee Rate] [the Net Servicing Fee Rate] and (c) the Servicing
Base Amount; PROVIDED, HOWEVER, that with respect to the first Distribution
Date, the Collateral Interest Servicing Fee shall be equal to $_____.] [The
portion of the Servicing Fee payable by the Certificateholders and the
Collateral Interest Holder with respect to any Monthly Period shall be reduced
by an amount equal to the amount by which Interchange received during the
preceding Monthly Period as a percentage of Principal Receivables at the end of
such Monthly Period is less than ____% per annum.] The remainder of the
Servicing Fee shall be paid by the holders of the Transferor Certificates or the
certificateholders of other Series (as provided in the related Series
Supplements) and in no event will the
S-53
<PAGE>
Trust, the Trustee, the Certificateholders or the [Cash Collateral Depositor]
[Credit Enhancement Provider] be liable for the share of the Servicing Fee to
be paid by the holders of the Transferor Certificates or the
certificateholders of any other Series. 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
"--Payment of Fees, Interest and Other Items" above.
[SERIES TERMINATION]
[If, on the [__________] Distribution Date, [____] months prior to the
Termination Date, the Invested Amount (after giving effect to all changes
therein on such date) exceeds zero, the Servicer will, within the 40-day period
beginning on such date, solicit bids for the sale of interests in the Principal
Receivables or certain Principal Receivables, together in each case with the
related Finance Charge Receivables, in an amount equal to the [sum of the]
Invested Amount [and the Enhancement Invested Amount, if any,] at the close of
business on the last day of the Monthly Period preceding the Termination Date
(after giving effect to all distributions required to be made on the Termination
Date). The Transferors and the [Cash Collateral Depositor] [Credit Enhancement
Provider] will be entitled to participate in, and to receive notice of each bid
submitted in connection with, such bidding process. Upon the expiration of such
40-day period, the Trustee will determine (a) which bid is the highest cash
purchase offer (the "Highest Bid") and (b) the amount (the "Available Final
Distribution Amount") which otherwise would be available in the Collection
Account on the Termination Date for distribution to the Certificateholders. The
Servicer will sell such Receivables on the Termination Date to the bidder who
provided the Highest Bid and will deposit the proceeds of such sale in the
Collection Account for allocation (together with the Available Final
Distribution Amount) to the Certificateholders' Interest.
Except as necessary to reimburse previous reductions in the Invested Amount
as a result of unreimbursed Class B Investor Charge-offs, amounts [on deposit in
the Cash Collateral Account] [available under the Credit Enhancement] will not
be available to cover any shortfall, if the proceeds of such sale, together with
the Available Final Distribution Amount, are less than the Invested Amount plus
accrued and unpaid interest on the Certificates. Accordingly, in such event,
the Certificateholders will incur a loss.]
REPORTS
No later than the third business day prior to each Distribution Date, the
Servicer will forward to the Trustee, the Paying Agent, each Rating Agency and
[the Cash Collateral Depositor] [Credit Enhancement Provider], a statement (the
"Monthly Report") prepared by the Servicer setting forth certain information
with respect to the Trust and the Class A Certificates and the Class B
Certificates, including: [(a) the aggregate amount of Principal Receivables and
Finance Charge Receivables in the Trust as of the end of such Monthly Period;
(b) the Invested Amount [and the Adjusted Invested Amount], the Class A
Investment Amount [and the Class A Adjusted Invested Amount] and the Class B
Invested Amount [and the Class B Adjusted Invested Amount]; (c) the Floating
Allocation Percentage the Class A Floating Percentage and the Class B Floating
Percentage and the Class A Principal Percentage and the Class B Principal
Percentage and, during the [Scheduled Accumulation Period] [Controlled
Amortization Period] or Early Amortization Period, the Principal Allocation
Percentage; (d)the amount of collections of Principal Receivables and Finance
Charge Receivables processed during the related Monthly Period and the portion
thereof allocated to the Certificateholders' Interest; (e) the aggregate
outstanding balance of Accounts that were [30], [60] and [90] days or more
delinquent as of the end of such Monthly Period; (f) the Investor Defaulted
Amount, the Class A Investor Defaulted Amount and the Class B Investor Defaulted
Amount and the Defaulted Amount with respect to such Monthly Period; (g) the
aggregate amount, if any, of Class A or Class B Investor Charge-Offs and any
Class A or Class B Investor Charge-Offs reimbursed on the related Monthly
Period, for such Monthly Period; (h) the Monthly Investor Servicing Fee, Class A
Servicing Fee and Class B Servicing Fee for such Monthly Period; (i) the
Portfolio Yield for such Monthly Period; (j) the Base Rate for such Monthly
S-54
<PAGE>
Period; (k)the [Available [Shared] [Cash] Collateral Amount] [Available Credit
Enhancement Amount] for such Distribution Date]; and [other amounts].
UNDERWRITING
Subject to the terms and conditions set forth in the underwriting agreement
(the "Underwriting Agreement") between the Transferors and the underwriters
named below (the "Underwriters"), the Transferors have agreed to sell to the
Underwriters, and each of the Underwriters has severally agreed to purchase, the
principal amount of the Class A Certificates and Class B Certificates set forth
opposite its name:
Principal Principal
Amount of Amount of
Class A Class B
Underwriters Certificates Certificates
- ------------ ------------ ------------
. . . . . . . . . . . . . . . . . $ $
. . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . $ $
The Underwriting Agreement provides that the obligations of the
Underwriters to pay for and accept delivery of the Certificates are subject to
the approval of certain legal matters by their counsel and to certain other
conditions. All of the Certificates offered hereby will be issued if any are
issued.
The Underwriters propose initially to offer the Class A Certificates to the
public at the price set forth on the cover page hereof and to certain dealers at
such price less concessions not in excess of [____]% of the principal amount of
the Class A Certificates. The Underwriters may allow, and such dealers may
reallow, concessions not in excess of [____]% of the principal amount of the
Class A Certificates to certain brokers and dealers. After the initial public
offering, the public offering price and other selling terms may be changed by
the Underwriters.
The Underwriters propose initially to offer the Class B Certificates to the
public at the price set forth on the cover page hereof and to certain dealers at
such price less concessions not in excess of [____]% of the principal amount of
the Class B Certificates. The Underwriters may allow, and such dealers may
reallow, concessions not in excess of [____]% of the principal amount of the
Class B Certificates to certain brokers and dealers. After the initial public
offering, the public offering price and other selling terms may be changed by
the Underwriters.
The Transferors severally will indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, or contribute to
payments the Underwriters may be required to make in respect thereof.
S-55
<PAGE>
INDEX OF DEFINED TERMS
Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-1, S-3
Accumulation Period. . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-10
Adjusted Invested Amount . . . . . . . . . . . . . . . . . . . . . . . . . . S-7
Available Cash Collateral Amount . . . . . . . . . . . . . . . . . . . . . .S-47
Available Credit Enhancement Amount. . . . . . . . . . . . . . . . . . . . .S-49
Available Final Distribution Amount. . . . . . . . . . . . . . . . . . . . .S-54
Available Principal Collections. . . . . . . . . . . . . . . . . . . . . . .S-33
Available Reserve Account Amount . . . . . . . . . . . . . . . . . . . . . .S-40
Available Shared Collateral Amount . . . . . . . . . . . . . . . . . . . . .S-47
Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-3
Base Rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-52
Cash Collateral Account. . . . . . . . . . . . . . . . . . . . . . . . S-2, S-16
Cash Collateral Depositor. . . . . . . . . . . . . . . . . . . . . . . . . .S-46
CCB Holding. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-1, S-3
Certificateholders' Interest . . . . . . . . . . . . . . . . . . . . . . . . S-6
Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-1, S-3
Class A Accumulation Period Length . . . . . . . . . . . . . . . . . . . . .S-33
Class A Additional Interest. . . . . . . . . . . . . . . . . . . . . . . . .S-42
Class A Adjusted Invested Amount . . . . . . . . . . . . . . . . . . . S-7, S-37
Class A Available Funds. . . . . . . . . . . . . . . . . . . . . . . . . . .S-31
Class A Certificate Rate . . . . . . . . . . . . . . . . . . . . . . . . . . S-2
Class A Certificateholders' Interest . . . . . . . . . . . . . . . . . . . . S-6
Class A Certificates . . . . . . . . . . . . . . . . . . . . . . . . . .S-1, S-3
Class A Floating Percentage. . . . . . . . . . . . . . . . . . . . . . . . .S-35
Class A Invested Amount. . . . . . . . . . . . . . . . . . . . . . . . . . .S-37
Class A Investor Charge-Off. . . . . . . . . . . . . . . . . . . . . .S-15, S-50
Class A Investor Default Amount. . . . . . . . . . . . . . . . . . . . . . .S-49
Class A Monthly Interest . . . . . . . . . . . . . . . . . . . . . . . . . .S-42
Class A Monthly Principal. . . . . . . . . . . . . . . . . . . . . . . . . .S-45
Class A Principal Percentage . . . . . . . . . . . . . . . . . . . . . . . .S-36
Class A Required Amount. . . . . . . . . . . . . . . . . . . . . . . . . . .S-14
Class A Servicing Fee. . . . . . . . . . . . . . . . . . . . . . . . . . . .S-53
Class A [Controlled Amortization] [Accumulation] Period. . . . . . . . . . .S-10
Class B Additional Interest. . . . . . . . . . . . . . . . . . . . . . . . .S-42
Class B Adjusted Invested Amount.. . . . . . . . . . . . . . . . . . . . . . S-7
Class B Available Funds. . . . . . . . . . . . . . . . . . . . . . . . . . .S-32
Class B Certificate Rate . . . . . . . . . . . . . . . . . . . . . . . . . . S-2
Class B Certificateholders' Interest . . . . . . . . . . . . . . . . . . . . S-6
Class B Certificates . . . . . . . . . . . . . . . . . . . . . . . . . .S-1, S-3
Class B Floating Percentage. . . . . . . . . . . . . . . . . . . . . . . . .S-36
Class B Invested Amount. . . . . . . . . . . . . . . . . . . . . . . . . . .S-37
Class B Investor Charge-Off. . . . . . . . . . . . . . . . . . . . . .S-16, S-50
Class B Investor Default Amount. . . . . . . . . . . . . . . . . . . . . . .S-49
Class B Monthly Interest . . . . . . . . . . . . . . . . . . . . . . . . . .S-43
Class B Monthly Principal. . . . . . . . . . . . . . . . . . . . . . . . . .S-45
Class B Principal Commencement Date. . . . . . . . . . . . . . . . . . . . .S-10
Class B Principal Percentage . . . . . . . . . . . . . . . . . . . . . . . .S-36
Class B Required Amount. . . . . . . . . . . . . . . . . . . . . . . . . . .S-14
S-56
<PAGE>
Class B Servicing Fee. . . . . . . . . . . . . . . . . . . . . . . . . . . .S-53
Class B [Controlled Amortization] [Accumulation] Period. . . . . . . . . . .S-10
Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-6
Collateral Charge-Off. . . . . . . . . . . . . . . . . . . . . . . . . . . .S-50
Collateral Default Amount. . . . . . . . . . . . . . . . . . . . . . . . . .S-50
Collateral Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-38
Collateral Interest Holder . . . . . . . . . . . . . . . . . . . . . . . . . S-6
Collateral Interest Servicing Fee. . . . . . . . . . . . . . . . . . . . . .S-53
Collateral Monthly Interest. . . . . . . . . . . . . . . . . . . . . . . . .S-44
Collateral Monthly Principal . . . . . . . . . . . . . . . . . . . . . . . .S-46
Collateral Percentage. . . . . . . . . . . . . . . . . . . . . . . . . . . .S-36
Controlled Accumulation Amount . . . . . . . . . . . . . . . . . . . . . . .S-46
Controlled Amortization Amount . . . . . . . . . . . . . . . . . . . . . . .S-46
Controlled Amortization Period . . . . . . . . . . . . . . . . . . . . . . .S-10
Covered Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-39
Credit Enhancement Agreement . . . . . . . . . . . . . . . . . . . . . . . .S-44
Credit Enhancer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-49
Deficit Controlled Accumulation Amount . . . . . . . . . . . . . . . . . . .S-46
Deficit Controlled Amortization Amount . . . . . . . . . . . . . . . . . . .S-46
Designated Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-3
Early Termination Amount . . . . . . . . . . . . . . . . . . . . . . . . . . S-9
Economic Pay Out Event . . . . . . . . . . . . . . . . . . . . . . . . . . .S-47
Enhancement Invested Amount. . . . . . . . . . . . . . . . . . . . . . S-8, S-38
ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-20
Excess Spread. . . . . . . . . . . . . . . . . . . . . . . . . .S-12, S-14, S-43
Excluded Series. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-51
Floating Allocation Percentage . . . . . . . . . . . . . . . . . . . . . . .S-35
Full Invested Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-8
Funding Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-8, S-35
Group [____] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-16
Highest Bid. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-54
Index. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-2, S-5
Initial Cash Collateral Amount . . . . . . . . . . . . . . . . . . . . . . .S-16
Initial Class B Collateral Amount. . . . . . . . . . . . . . . . . . . . . .S-16
Initial Collateral Interest. . . . . . . . . . . . . . . . . . . . . . . . .S-18
Initial Shared Collateral Amount . . . . . . . . . . . . . . . . . . . . . .S-16
Interest Funding Investment Proceeds . . . . . . . . . . . . . . . . . . . .S-40
Interest Payment Date. . . . . . . . . . . . . . . . . . . . . . . . . . . . S-2
Interest Period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-31
Invested Amount. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-38
Investor Default Amount. . . . . . . . . . . . . . . . . . . . . . . . . . .S-49
LIBOR. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-44
Loan Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-18, S-44
Monthly Cash Collateral Fee. . . . . . . . . . . . . . . . . . . . . . . . .S-44
Monthly Credit Enhancement Fee . . . . . . . . . . . . . . . . . . . . . . .S-44
Monthly Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-54
Monthly Servicing Fee. . . . . . . . . . . . . . . . . . . . . . . . . . . .S-53
Net Servicing Fee Rate . . . . . . . . . . . . . . . . . . . . . . . . . . .S-53
Paired Series. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-51
Period Length Determination Date . . . . . . . . . . . . . . . . . . . . . .S-33
Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-20
S-57
<PAGE>
Plan Asset Regulation. . . . . . . . . . . . . . . . . . . . . . . . . . . .S-20
Pooling and Servicing Agreement. . . . . . . . . . . . . . . . . . . . .S-1, S-3
Portfolio Adjusted Yield . . . . . . . . . . . . . . . . . . . . . . . . . .S-39
Portfolio Yield. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-52
Pre-Funding Account. . . . . . . . . . . . . . . . . . . . . . . . . . S-8, S-35
Pre-Funding Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-8
Principal Allocation Percentage. . . . . . . . . . . . . . . . . . . . . . .S-36
Principal Funding Account. . . . . . . . . . . . . . . . . . . . . . . . . .S-23
Principal Funding Account Balance. . . . . . . . . . . . . . . . . . . . . .S-38
Principal Funding Investment Proceeds. . . . . . . . . . . . . . . . . . . .S-38
Rapid Amortization Period. . . . . . . . . . . . . . . . . . . . . . . . . .S-11
Rate Determination Date. . . . . . . . . . . . . . . . . . . . . . . . . . . S-5
Rating Agency Condition. . . . . . . . . . . . . . . . . . . . . . . . . . .S-48
Reallocated Principal Collections. . . . . . . . . . . . . . . . . . .S-11, S-41
Receivables. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-1, S-3
Record Date. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-31
Required Amount. . . . . . . . . . . . . . . . . . . . . . . . .S-12, S-14, S-40
Required Collateral Interest . . . . . . . . . . . . . . . . . . . . .S-18, S-48
Required Principal Balance . . . . . . . . . . . . . . . . . . . . . . . . .S-51
Required Reserve Account Amount. . . . . . . . . . . . . . . . . . . . . . .S-39
Reserve Account. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-39
Reserve Account Funding Date . . . . . . . . . . . . . . . . . . . . . . . .S-39
Series Servicing Fee Percentage. . . . . . . . . . . . . . . . . . . . . . .S-10
Series [199__-__] Supplement . . . . . . . . . . . . . . . . . . . . . . . .S-31
Servicer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-1, S-3
Servicing Base Amount. . . . . . . . . . . . . . . . . . . . . . . . . . . .S-53
Servicing Fee Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-53
Special Payment Date . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-22
Termination Date . . . . . . . . . . . . . . . . . . . . . . . . . . .S-10, S-19
Transferors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-1, S-3
Transferors' Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . S-6
Trust. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-1, S-3
Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-1, S-3
Underwriters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-55
Underwriting Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . .S-55
[Class A] Expected Final Payment Date. . . . . . . . . . . . . . . . .S-11, S-22
S-58
<PAGE>
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS
SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY EITHER TRANSFEROR OR THE UNDERWRITERS. NEITHER THIS PROSPECTUS
SUPPLEMENT NOR THE ACCOMPANYING PROSPECTUS CONSTITUTES AN OFFER OR A
SOLICITATION BY ANYONE IN ANY STATE IN WHICH SUCH OFFER OR SOLICITATION IS
NOT QUALIFIED OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR THE
ACCOMPANYING PROSPECTUS, NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF EITHER TRANSFEROR SINCE THE DATE HEREOF OR THEREOF OR THAT THE
INFORMATION CONTAINED OR INCORPORATED BY REFERENCE HEREIN OR THEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT PAGE
Summary of Series Terms. . . . . . . . . . . . . . . . . . . . . . . . . S-
Special Considerations . . . . . . . . . . . . . . . . . . . . . . . . . S-
Maturity Considerations. . . . . . . . . . . . . . . . . . . . . . . . . S-
The Designated Portfolio . . . . . . . . . . . . . . . . . . . . . . . . S-
The Receivables. . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-
Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-
The Transferors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-
Series Provisions. . . . . . . . . . . . . . . . . . . . . . . . . . . . S-
Underwriting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-
Index of Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . S-
PROSPECTUS
Available Information. . . . . . . . . . . . . . . . . . . . . . . . . .
Reports to Certificateholders. . . . . . . . . . . . . . . . . . . . . .
Incorporation of Certain
Documents
by Reference . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prospectus Summary . . . . . . . . . . . . . . . . . . . . . . . . . . .
Special Considerations . . . . . . . . . . . . . . . . . . . . . . . . .
The Bank's Credit Card
Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
CCB Holding Corporation. . . . . . . . . . . . . . . . . . . . . . . . .
The Receivables. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Trust. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Description of the
Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Pooling and Servicing
Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Description of the Receivables
Purchase Agreement . . . . . . . . . . . . . . . . . . . . . . . . . .
Certain Legal Aspects of the
Receivables. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Certain Federal Income Tax
Consequences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ERISA Considerations . . . . . . . . . . . . . . . . . . . . . . . . . .
Plan of Distribution . . . . . . . . . . . . . . . . . . . . . . . . . .
Index of Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . .
UNTIL [ ], 199[ ][(90 DAYS AFTER THE DATE OF THIS PROSPECTUS)],
ALL DEALERS EFFECTING TRANSACTIONS IN THE SERIES [199_-__] CERTIFICATES
WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER
A PROSPECTUS SUPPLEMENT AND PROSPECTUS. THIS IS IN ADDITION TO THE
OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS SUPPLEMENT AND PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
- ----------------------------------------
- ----------------------------------------
CHEVY CHASE
MASTER CREDIT CARD TRUST II
$[_________] [FLOATING RATE] [ %]
SERIES [199 - ]
ASSET BACKED CERTIFICATES
CHEVY CHASE
BANK, F.S.B.,
AS TRANSFEROR AND SERVICER
CCB HOLDING CORPORATION,
as Transferor
_____________________
PROSPECTUS SUPPLEMENT
_____________________
[NAME OF UNDERWRITERS]
- ----------------------------------------
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION, DATED OCTOBER 23, 1996
- --------------------------------------------------------------------------------
P R O S P E C T U S
- ---------------------------------------------------------
CHEVY CHASE MASTER CREDIT CARD TRUST
Asset Backed Certificates
CHEVY CHASE BANK, F.S.B.
Seller and Servicer
Chevy Chase Bank, F.S.B. (the "Bank"), may sell from time to time one or
more series (each a "Series") of asset backed certificates (the "Certificates")
evidencing undivided interests in certain assets of the Chevy Chase Master
Credit Card Trust (the "Trust"). The Trust will be formed pursuant to a Pooling
and Servicing Agreement between the Bank, as seller and servicer, and Bankers
Trust Company, as Trustee. The property of the Trust will include receivables
(the "Receivables") generated from time to time in a portfolio of consumer
revolving credit card accounts (the "Accounts"), collections thereon and certain
other property, as more fully described herein and, with respect to any Series,
in an accompanying prospectus supplement (a "Prospectus Supplement") relating to
such Series.
Certificates will be sold from time to time under this Prospectus on terms
determined for each Series at the time of the sale and described in the related
Prospectus Supplement. Each Series will consist of one or more classes of
Certificates (each a "Class"). Each Certificate will represent an undivided
interest in the Trust and the interest of the Certificateholders of each Class
or Series will include the right to receive a varying percentage of each month's
collections with respect to the Receivables at the times, in the manner and to
the extent described herein and, with respect to any Series offered hereby, in
the related Prospectus Supplement. Interest and principal payments with respect
to each Series offered hereby will be made as specified in the related
Prospectus Supplement. A Series offered hereby (or any Class within such Series)
may be entitled to the benefits of a cash collateral account, letter of credit,
surety bond, insurance policy or other form of enhancement as specified in the
Prospectus Supplement relating to such Series. In addition, any Series offered
hereby may include one or more Classes which are subordinated in right and
priority to payment of principal of, or interest on, one or more other Classes
of such Series or another Series, in each case to the extent described in the
related Prospectus Supplement. Each Series of Certificates or Class offered
hereby will be rated in one of the four highest categories by at least one
nationally recognized statistical rating organization.
While the specific terms of any Series in respect of which this Prospectus
is being delivered will be described in the related Prospectus Supplement, the
terms of such Series will not be subject to prior review by, or consent of, the
holders of the Certificates of any previously issued Series.
POTENTIAL INVESTORS SHOULD CONSIDER, AMONG OTHER THINGS, THE INFORMATION SET
FORTH IN "SPECIAL CONSIDERATIONS."
--------------------------
THE CERTIFICATES WILL REPRESENT INTERESTS IN THE TRUST ONLY AND WILL NOT
REPRESENT INTERESTS IN OR OBLIGATIONS OF THE BANK OR ANY AFFILIATE THEREOF.
NEITHER THE CERTIFICATES NOR THE UNDERLYING ACCOUNTS OR RECEIVABLES OR ANY
COLLECTIONS THEREON ARE INSURED OR GUARANTEED BY THE SAVINGS ASSOCIATION
INSURANCE FUND, THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENTAL AGENCY OR INSTRUMENTALITY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
--------------------------
Certificates may be sold by the Bank directly to purchasers, through agents
designated from time to time, through underwriting syndicates led by one or more
managing underwriters or through one or more underwriters acting alone. If
underwriters or agents are involved in the offering of the Certificates of any
Series offered hereby, the name of the managing underwriter or underwriters or
agents will be set forth in the related Prospectus Supplement. If an
underwriter, agent or dealer is involved in the offering of the Certificates of
any Series offered hereby, the underwriter's discount, agent's commission or
dealer's purchase price will be set forth in, or may be calculated from, the
related Prospectus Supplement, and the net proceeds to the Bank from such
offering will be the public offering price of such Certificates less such
discount in the case of an underwriter, the purchase price of such Certificates
less such commission in the case of an agent or the purchase price of such
Certificates in the case of a dealer, and less, in each case, the other expenses
of the Bank associated with the issuance and distribution of such Certificates.
See "Plan of Distribution."
THIS PROSPECTUS MAY NOT BE USED TO CONSUMMATE SALES OF CERTIFICATES OF ANY
SERIES UNLESS ACCOMPANIED BY THE RELATED PROSPECTUS SUPPLEMENT.
- --------------------------------------------------------------------------------
The date of this Prospectus is , 199
<PAGE>
AVAILABLE INFORMATION
The Bank, as originator of the Trust, has filed a Registration Statement
under the Securities Act of 1933, as amended (the "Act"), with the Securities
and Exchange Commission (the "Commission") on behalf of the Trust with respect
to the Certificates offered hereby. This Prospectus, which forms a part of the
Registration Statement, omits certain information contained in such Registration
Statement pursuant to the rules and regulations of the Commission. For further
information, reference is made to the Registration Statement (including any
amendments thereof and exhibits thereto) and any reports and other documents
incorporated herein by reference as described below under "Incorporation of
Certain Documents by Reference," which are available for inspection without
charge at the public reference facilities maintained by the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549; 7 World Trade Center, New York, New
York 10048; and Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511. Copies of such material may be obtained from the
Public Reference Section of the Commission, 450 Fifth Street, N.W., Washington,
D.C. 20549, at prescribed rates.
REPORTS TO CERTIFICATEHOLDERS
Unless and until Definitive Certificates are issued, Monthly Reports, which
contain unaudited information concerning the Trust and are prepared by the
Servicer, will be sent on behalf of the Trust to Cede & Co. ("Cede"), as nominee
of The Depository Trust Company ("DTC") and registered holder of the
Certificates offered hereby, pursuant to the Pooling Agreement. See "Description
of the Certificates--Reports" and "The Pooling Agreement Generally--Book-Entry
Registration" and "--Evidence as to Compliance." Such reports will not
constitute financial statements prepared in accordance with generally accepted
accounting principles. The Pooling Agreement will not require the sending of,
and the Bank does not intend to send, any of its financial reports to registered
holders of Certificates (the "Certificateholders") offered hereby or to owners
of beneficial interests in the Certificates ("Certificate Owners"). The Servicer
will file with the Commission such periodic reports with respect to the Trust as
are required under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the rules and regulations of the Commission thereunder.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All reports and other documents filed by the Servicer, on behalf of the
Trust, pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act
subsequent to the date of this Prospectus and prior to the termination of the
offering of the Certificates offered hereby shall be deemed to be incorporated
by reference into this Prospectus and to be part hereof. Any statement contained
herein or in a document deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained in any other subsequently filed document which
also is deemed to be incorporated by reference herein modifies or supersedes
such statement. Any such statement so modified or superseded shall not be
deemed, except as modified or superseded, to constitute a part of this
Prospectus.
The Servicer will provide without charge to each person to whom a copy of
this Prospectus is delivered, on the written or oral request of any such person,
a copy of any or all of the documents incorporated herein by reference, except
the exhibits to such documents (unless such exhibits are specifically
incorporated by reference in such documents). Written requests for such copies
should be directed to Chevy Chase Bank, F.S.B., 8401 Connecticut Avenue, Chevy
Chase, Maryland, 20815, Attention: Chief Financial Officer. Telephone requests
for such copies should be directed to Chevy Chase Bank, F.S.B. at (301)
986-7000.
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus and in any
accompanying Prospectus Supplement. Reference is made to the Glossary for the
location herein of the definitions of certain capitalized terms used herein.
Unless the context requires otherwise, capitalized terms used in this Prospectus
and in any accompanying Prospectus Supplement refer only to the particular
Series being offered by such Prospectus Supplement.
<TABLE>
<S> <C>
Trust............................. Chevy Chase Master Credit Card Trust (the "Trust"). The
Trust, as a master trust, is expected to issue Series
from time to time. The assets of the Trust (the "Trust
Assets") will include a portfolio of receivables (the
"Receivables") arising under the Accounts included in
the Trust from time to time, funds collected or to be
collected from cardholders in respect of the Receiv-
ables, monies on deposit in certain accounts of the
Trust, any Participation included in the Trust, funds
collected or to be collected with respect to such
Participations and any Series Enhancement with respect
to a particular Series or Class. The term "Series
Enhancement" means, with respect to any Series or Class
of Certificates, any Credit Enhancement, guaranteed
rate agreement, maturity liquidity facility, tax
protection agreement, interest rate cap agreement,
interest rate swap agreement or other similar
arrangement for the benefit of Certificateholders of
such Series or Class. The Trust Assets are expected to
change over the life of the Trust as receivables in
revolving credit card accounts and other revolving
credit accounts and related assets are included in the
Trust and as receivables in accounts subject to the
Trust are charged-off or removed. See "The Trust" and
"Description of the Certificates--Addition of Trust
Assets," "--Removal of Accounts" and "--New Issuances."
Bank.............................. Chevy Chase Bank, F.S.B. (the "Bank"), a federally
chartered stock savings bank, is the seller (in such
capacity, the "Seller") of the Receivables and the
originator of the Trust. Under certain circumstances
the Bank may transfer its interests and obligations as
seller and servicer of the Trust and another entity
that will assume all of the Bank's obligations under
the Pooling Agreement and related agreements. See
"Assumption of the Bank's Obligations."
Trustee........................... Bankers Trust Company (the "Trustee").
The Accounts...................... The Accounts will consist of the Initial Accounts and
any Additional Accounts but will not include any Removed
Accounts. The Seller will convey to the Trust all
Receivables existing on a specified date prior to the
issuance of the first Series (the "Trust Cut-Off Date")
in certain consumer revolving credit card accounts and
other consumer revolving credit accounts (the "Initial
Accounts") and all Receivables arising in the Initial
Accounts from time to time thereafter until the
termination of the Trust. Pursuant to the Pooling
Agreement, the Seller expects (subject to certain
limitations and conditions), and in some circumstances
will be obligated, to designate Additional Accounts the
Receivables of which will be included in the Trust or,
in lieu thereof or in addition thereto, to include
Participations in the Trust. The Seller will convey to
the Trust all Receivables in
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Additional Accounts, whether such Receivables are then
existing or thereafter created. The addition to the
Trust of Receivables in Additional Accounts (other than
Automatic Additional Accounts) or Participations will
be subject to certain conditions, among others, that
(a) such addition will not result in a Ratings Effect
and (b) the Seller shall have delivered to the Trustee
and certain providers of Series Enhancement a
certificate of an authorized officer to the effect
that, in the reasonable belief of the Seller, such
addition will not, based on the facts known to such
officer at the time of such certification, cause a Pay
Out Event to occur with respect to any Series. See
"Description of the Certificates--Addition of Trust
Assets."
Pursuant to the Pooling Agreement, the Seller will have
the right (subject to certain limitations and
conditions) to remove the Receivables in certain
Accounts owned by it from the Trust ("Removed
Accounts"). See "Description of the Certificates--
Removal of Accounts."
The Receivables................... The Receivables consist of all amounts charged by
cardholders for merchandise and services and cash
advances ("Principal Receivables") and all related
periodic finance charges, cash advance fees, late
charges and any other fees and charges billed on the
Accounts ("Finance Charge Receivables"). The amount of
Receivables will fluctuate from day to day as new
Receivables are generated or added to the Trust and as
existing Receivables are collected, charged-off as
uncollectible or otherwise adjusted.
The Certificates.................. The Certificates will be issued in Series, each of which
will consist of one or more Classes. The specific terms
of a Series or Class will be established as described
herein under "Description of the Certificates--New
Issuances." However, while the specific terms of any
Series or Class offered hereby will be described in the
related Prospectus Supplement, the terms of such Series
or Class will not be subject to prior review by, or
consent of, the holders of the Certificates of any
previously issued Series.
Unless otherwise specified in the related Prospectus
Supplement, the Certificates of a Series offered hereby
will be available for purchase in minimum denominations
of $1,000 and in integral multiples thereof, and will
only be available in book-entry form except in certain
limited circumstances as described herein under "The
Pooling Agreement Generally--Definitive Certificates."
A portion of the Trust Assets will be allocated among
the Certificateholders of a particular Series (the
"Certificateholders' Interest"), the Certificateholders
of other Series and the interest of the Bank (the
"Seller's Interest"), as described below. The aggregate
principal amount of the Certificateholders' Interest of
a Series offered hereby will, except as otherwise
provided herein and in the related Prospectus
Supplement, remain fixed at the aggregate initial
principal amount of the Certificates of such Series.
The Certificateholders' Interest of a Series will
include the right to receive (but only to the extent
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needed to make required payments under the Pooling
Agreement and the related Supplement and subject to any
reallocation of such amounts if the related Supplement
so provides) varying percentages of collections of
Finance Charge Receivables and Principal Receivables
and will be allocated a varying percentage of the
Defaulted Amount with respect to each Monthly Period.
See "Description of the Certificates--Interest" and
"--Principal." If the Certificates of a Series offered
hereby include more than one Class of Certificates, the
Trust Assets allocable to the Certificateholders'
Interest of such Series may be further allocated among
each Class in such Series as described in the related
Prospectus Supplement.
The Certificates of a Series will evidence undivided
interests in the Trust Assets allocated to the
Certificateholders' Interest of such Series. The
Certificates represent beneficial interests in the
Trust only and do not represent interests in or
obligations of the Bank or any affiliate of the Bank.
Neither the Certificates nor the Accounts, the
Receivables or any collections thereon are insured or
guaranteed by the Savings Association Insurance Fund,
the Federal Deposit Insurance Corporation (the "FDIC")
or any other governmental agency or instrumentality.
The Seller's Interest............. The Seller's Interest at any time represents the right
to the Trust Assets in excess of the Certificateholders'
Interest of all Series then outstanding. The principal
amount of the Seller's Interest (the "Seller Amount")
will fluctuate as the amount of the Principal
Receivables held by the Trust changes from time to
time. In addition, the Seller intends to cause the
issuance of additional Series from time to time and any
such issuance will have the effect of decreasing the
Seller Amount to the extent of the Invested Amount of
such Series. See "Description of the Certificates--New
Issuances."
The Pooling Agreement provides that the Seller will be
required to make an Addition to the Trust if the Seller
Amount is less than the Required Seller Amount on the
last business day of any Monthly Period. See
"Description of the Certificates--Addition of Trust
Assets." The level of the Required Seller Amount, which
may be reduced subject to certain conditions described
under "Description of the Certificates--Addition of
Trust Assets," is intended to enable the Seller's
Interest to absorb fluctuations in the amount of
Principal Receivables held by the Trust from time to
time (due to, among other things, seasonal purchase and
payment habits of cardholders or adjustments in the
amount of Principal Receivables because of rebates,
refunds, fraudulent charges or otherwise). See "Special
Considerations--Payment and Maturity Considerations;
Dependence on Cardholder Repayments" and "Description
of the Certificates--Defaulted Receivables; Rebates and
Fraudulent Charges."
Issuance of Additional Series..... The Pooling Agreement authorizes the Trustee to issue
one or more Series of Certificates, and a certificate
evidencing the Seller's Interest in the Trust (the
"Seller Certificate"), which
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initially is to be held by the Seller. The Pooling
Agreement provides that, pursuant to any one or more
supplements to the Pooling Agreement (each a
"Supplement"), the Seller may cause the Trustee without
the consent of the Certificateholders to issue one or
more new Series and accordingly cause a reduction in
the Seller's Interest represented by the Seller
Certificate. There can be no assurance that the terms
of any Series, including any Series issued from time to
time hereafter, might not have an impact on the timing
or amount of payments received by a Certificateholder
of another Series. Under the Pooling Agreement, the
Seller may define, with respect to any Series, the
Principal Terms of such Series. See "Description of the
Certificates--New Issuances." The Seller may offer any
Series to the public or other investors under a
disclosure document (a "Disclosure Document"), which
will consist of a Prospectus Supplement in the case of
a Series offered hereby, in transactions either
registered under the Securities Act or exempt from
registration thereunder, directly or through one or
more underwriters or placement agents, in fixed-price
offerings or in negotiated transactions or otherwise.
See "Plan of Distribution." The Seller expects to
offer, from time to time, additional Series issued by
the Trust.
A new Series may only be issued upon satisfaction of the
conditions described herein under "Description of the
Certificates-- New Issuances" including, among others,
that (a) such issuance will not result in a Ratings
Effect and (b) the Seller shall have delivered to the
Trustee and certain providers of Series Enhancement a
certificate of an authorized officer to the effect
that, in the reasonable belief of the Seller, such
issuance will not, based on the facts known to such
officer at the time of such certification, cause a Pay
Out Event to occur with respect to any Series.
Collections....................... All collections of Receivables will be allocated by the
Servicer between amounts collected on Principal
Receivables and on Finance Charge Receivables. The
Servicer will allocate between the Certificateholders'
Interest of each Series and the Seller's Interest all
amounts collected with respect to Finance Charge
Receivables and Principal Receivables and the Defaulted
Amount with respect to each day during each Monthly
Period. Collections of Finance Charge Receivables and
the Defaulted Amount will be allocated to each Series
at all times based upon its Floating Allocation
Percentage. Collections of Principal Receivables will
be allocated to each Series at all times based upon its
Principal Allocation Percentage. The Floating
Allocation Percentage and the Principal Allocation
Percentage with respect to each Series will be
determined as set forth in the related Supplement and,
with respect to each Series offered hereby, in the
related Prospectus Supplement.
Interest.......................... Interest will accrue on the Invested Amount of the
Certificates of a Series or Class offered hereby at the
per annum rate either specified in or determined in the
manner specified in the related Prospectus Supplement.
Except as otherwise provided herein or
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in the related Prospectus Supplement, collections of
Finance Charge Receivables and certain other amounts
allocable to the Certificateholders' Interest of a
Series offered hereby will be used to make interest
payments to Certificateholders of such Series on each
Interest Payment Date with respect thereto, provided
that if an Early Amortization Period commences with
respect to such Series, thereafter interest will be
distributed to such Certificateholders monthly on each
Special Payment Date. If the Interest Payment Dates for
a Series or Class occur less frequently than monthly,
such collections or other amounts (or the portion
thereof allocable to such Class) will be deposited in
one or more trust accounts (each an "Interest Funding
Account") and used to make interest payments to
Certificateholders of such Series or Class on the
following Interest Payment Date with respect thereto.
If a Series has more than one Class of Certificates,
each such Class may have a separate Interest Funding
Account.
Principal......................... The principal of the Certificates of each Series offered
hereby will be scheduled to be paid either in full on an
expected date specified in the related Prospectus
Supplement (the "Expected Final Payment Date"), in
which case such Series will have an Accumulation Period
as described below under "--Accumulation Period," or in
installments commencing on a date specified in the
related Prospectus Supplement (the "Principal
Commencement Date"), in which case such Series will
have a Scheduled Amortization Period as described below
under "--Scheduled Amortization Period." If a Series
has more than one Class of Certificates, a different
method of paying principal, Expected Final Payment Date
or Principal Commencement Date may be assigned to each
Class. The payment of principal with respect to the
Certificates of a Series or Class may commence earlier
than the applicable Expected Final Payment Date or
Principal Commencement Date, and the final principal
payment with respect to the Certificates of a Series or
Class may be made later than the applicable Expected
Final Payment Date or other expected date, if a Pay Out
Event occurs with respect to such Series or Class or
under certain other circumstances described herein. See
"Special Considerations--Payment and Maturity Consider-
ations; Dependence on Cardholder Repayments" for a
description of factors that may affect the timing of
principal payments on Certificates.
Revolving Period.................. The Certificates of each Series offered hereby will have
a revolving period (the "Revolving Period"), which will
commence on the date of issuance of the related Series
(the "Closing Date") and continue until the earlier of
(a) the commencement of the Early Amortization Period
with respect to such Series and (b) the date specified
in the related Prospectus Supplement as the end of the
Revolving Period with respect to such Series. During
the Revolving Period with respect to any Series offered
hereby, collections of Principal Receivables and
certain other amounts otherwise allocable to the
Certificateholders' Interest of such Series will be
treated as Shared Principal Collections and
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will be distributed to, or for the benefit of, the
Certificateholders of other Series or the holder of the
Seller Certificate. See "Description of the
Certificates--Principal" and "--Shared Principal
Collections" and see "--Pay Out Events" for a discus-
sion of the events which might lead to the termination
of the Revolving Period with respect to a Series prior
to its scheduled date.
Accumulation Period............... If the related Prospectus Supplement so specifies,
unless an Early Amortization Period commences with
respect to a Series offered hereby, the Certificates of
such Series will have an accumulation period (the
"Accumulation Period"), which will commence at the
close of business on the date specified in such
Prospectus Supplement and continue until the earliest
of (a) the commencement of the Early Amortization
Period with respect to such Series, (b) payment in full
of the Invested Amount of the Certificates of such
Series and (c) the Series Termination Date with respect
to such Series. During the Accumulation Period with
respect to a Series, collections of Principal
Receivables and certain other amounts allocable to the
Certificateholders' Interest of such Series will be
deposited on each Distribution Date in a trust account
established for the benefit of the Certificateholders
of such Series (a "Principal Funding Account") and used
to make principal distributions to the
Certificateholders of such Series when due. The amount
to be deposited in the Principal Funding Account for
any Series offered hereby on any Distribution Date may,
but will not necessarily, be limited to an amount (the
"Controlled Deposit Amount") equal to an amount speci-
fied in the related Prospectus Supplement (the
"Controlled Accumulation Amount") plus any existing
deficit controlled accumulation amount arising from
prior Distribution Dates. If a Series has more than one
Class of Certificates, each Class may have a separate
Principal Funding Account and Controlled Accumulation
Amount and the Accumulation Period with respect to each
Class may commence on different dates. In addition, the
related Prospectus Supplement may describe certain
priorities among such Classes with respect to deposits
of principal into such Principal Funding Accounts.
Scheduled Amortization Period..... If the related Prospectus Supplement so specifies,
unless an Early Amortization Period commences with
respect to a Series offered hereby, the Certificates of
such Series will have an amortization period (the
"Scheduled Amortization Period"), which will commence
at the close of business on the date specified in such
Prospectus Supplement and continue until the earliest
of (a) the commencement of the Early Amortization
Period with respect to such Series, (b) payment in full
of the Invested Amount of the Certificates of such
Series and (c) the Series Termination Date with respect
to such Series. During the Scheduled Amortization
Period with respect to a Series, collections of
Principal Receivables and certain other amounts
allocable to the Certificateholders' Interest of such
Series will be used on each Distribution Date to make
principal distributions to Certificateholders of such
Series or any Class of such Series then scheduled to
receive
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such distributions. The amount to be distributed to
Certificateholders of any Series offered hereby on any
Distribution Date may, but will not necessarily, be
limited to an amount (the "Controlled Distribution
Amount") equal to an amount (the "Controlled
Amortization Amount") specified in the related
Prospectus Supplement plus any existing deficit
controlled amortization amount arising from prior
Distribution Dates. If a Series has more than one Class
of Certificates, each Class may have a separate
Controlled Amortization Amount. In addition, the
related Prospectus Supplement may describe certain
priorities among such Classes with respect to such
distributions.
Early Amortization Period......... During the period from the day on which a Pay Out Event
has occurred with respect to a Series to the date on
which the Invested Amount of the Certificates of such
Series and the Enhancement Invested Amount, if any,
with respect to such Series have been paid in full or
the related Series Termination Date has occurred (the
"Early Amortization Period"), collections of Principal
Receivables and certain other amounts allocable to the
Certificateholders' Interest of such Series (including
Shared Principal Collections, if any, allocable to such
Series) will be distributed as principal payments to
the Certificateholders of such Series monthly on each
Distribution Date beginning with the first Special
Payment Date with respect to such Series. During the
Early Amortization Period with respect to a Series,
distributions of principal to Certificateholders will
not be subject to any Controlled Deposit Amount or
Controlled Distribution Amount. In addition, upon the
commencement of the Early Amortization Period with
respect to a Series, any funds on deposit in a
Principal Funding Account with respect to such Series
will be paid to the Certificateholders of the relevant
Class or Series on the first Special Payment Date with
respect to such Series. See "Description of the
Certificates--Pay Out Events" for a discussion of the
events which might lead to the commencement of the
Early Amortization Period with respect to a Series.
Shared Principal Collections...... To the extent that collections of Principal Receivables
and certain other amounts that are allocated to the
Certificateholders' Interest of any Series are not
needed to make payments to the Certificateholders of
such Series or required to be deposited in a Principal
Funding Account for such Series, such collections will
be applied to cover principal payments due to or for
the benefit of Certificateholders of another Series.
Any such reallocation will not result in a reduction in
the Invested Amount of the Series to which such
collections were initially allocated. See "Description
of the Certificates--Shared Principal Collections."
Special Funding Account........... If on any date the Seller Amount is less than or equal
to the Required Seller Amount or the amount of Principal
Receivables in the Trust is less than or equal to the
Required Principal Balance, the Servicer shall not
distribute to the holder of the Seller Certificate any
Shared Principal Collections which otherwise would be
distributed to the holder of the Seller Certificate,
but shall deposit such funds in the Special Funding
Account.
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Funds on deposit in the Special Funding Account will be
withdrawn and paid to the holder of the Seller
Certificate on any Distribution Date to the extent
that, after giving effect to such payment, the Seller
Amount exceeds the Required Seller Amount and the
amount of Principal Receivables in the Trust exceeds
the Required Principal Balance on such date; PROVIDED,
HOWEVER, that if an Accumulation Period, Scheduled
Amortization Period or Early Amortization Period
commences with respect to any Series, any funds on
deposit in the Special Funding Account will be released
and treated as Shared Principal Collections to the
extent needed to cover principal payments due to or for
the benefit of such Series.
Sharing of Excess Finance Charge
Collections....................... Subject to certain limitations described under
"Description of the Certificates--Sharing of Excess
Finance Charge Collections," collections of Finance
Charge Receivables and certain other amounts allocable
to the Certificateholders' Interest of any Series which
is included in a group of series (a "Group") in excess
of the amounts necessary to make required payments with
respect to such Series (including payments to the
provider of any related Series Enhancement) will be
applied to cover any shortfalls with respect to amounts
payable from collections of Finance Charge Receivables
allocable to any other Series included in such Group,
in each case pro rata based upon the amount of the
shortfall, if any, with respect to such other Series.
See "Description of the Certificates--Sharing of Excess
Finance Charge Collections."
Funding Period.................... The Prospectus Supplement relating to a Series of
Certificates may specify that for a period beginning on
the Closing Date and ending on a specified date before
the commencement of a Scheduled 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 an amount equal to the
amount of such deficiency (the "Pre-Funding Amount")
will be held in a trust account established with the
Trustee for the benefit of Certificateholders of such
Series (the "Pre-Funding Account") pending the transfer
of additional Principal Receivables to the Trust or
pending the reduction of the Invested Amounts of other
Series issued by the Trust. The related Prospectus
Supplement will specify the initial Invested Amount on
the Closing Date with respect to such Series, the
aggregate principal amount of the Certificates of such
Series (the "Full Invested Amount") and the date by
which the Invested Amount is expected to equal the Full
Invested Amount. The Invested Amount will increase as
Principal Receivables are delivered to the Trust or as
the Invested Amounts of other Series of the Trust are
reduced. The Invested Amount may also decrease due to
the occurrence of a Pay Out Event as specified in the
related Prospectus Supplement.
During the Funding Period, funds on deposit in the
Pre-Funding Account for a Series of Certificates will
be withdrawn and paid
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to the Seller to the extent of any increases in the
Invested Amount. In the event that the Invested Amount
does not for any reason equal the Full Invested Amount
by the end of the Funding Period, any amount remaining
in the Pre-Funding Account and any additional amounts
specified in the related Prospectus Supplement will be
payable to the Certificateholders of such Series in a
manner and at such time as set forth in the related
Prospectus Supplement.
If so specified in the related Prospectus Supplement,
moneys in the Pre-Funding Account with respect to any
Series will be invested by the Trustee in Eligible
Investments or will be subject to a guaranteed rate or
investment agreement or other similar arrangement, and
investment earnings and any applicable payment under
any such investment arrangement will be applied to pay
interest on the Certificates of such Series.
Paired Series..................... If so specified in the related Prospectus Supplement, a
Series of Certificates may be paired with one or more
other Series or a portion of one or more other series
issued by the Trust (each a "Paired Series") at or
after the commencement of an Accumulation Period or
Scheduled Amortization Period for such Series. As the
Invested Amount of the Series having a Paired Series is
reduced, the Invested Amount of the Paired Series will
increase by an equal amount. Upon payment in full of
such Series, the Invested Amount of the Paired Series
will be equal to the amount of the Invested Amount paid
to Certificateholders of such Series. If a Pay Out
Event occurs with respect to the Series having a Paired
Series or with respect to the Paired Series when such
Series is in a Scheduled Amortization Period or
Accumulation Period, the Principal Allocation
Percentage for the Series and the Principal Allocation
Percentage for the Paired Series will be reset as
specified in the related Prospectus Supplement.
Credit Enhancement................ The credit enhancement ("Credit Enhancement") with
respect to a Series offered hereby may include a letter
of credit, a cash collateral account, a surety bond, an
insurance policy or any other form of credit
enhancement described in the related Prospectus
Supplement. Credit Enhancement may also be provided to
a Class or Classes of a Series by subordination
provisions which require that distributions of
principal or interest be made with respect to the
Certificates of such Class or Classes before
distributions are made to one or more other Classes of
such Series.
The type, characteristics and amount of the Credit
Enhancement with respect to any Series will be
determined based on several factors, including the
characteristics of the Receivables and Accounts
underlying or comprising the Trust Assets as of the
Closing Date with respect thereto, and will be
established on the basis of requirements of each
applicable Rating Agency. The terms of the Credit
Enhancement with respect to any Series
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offered hereby will be described in the related
Prospectus Supplement. See "Description of the
Certificates--Credit Enhancement" and "Special
Considerations--Limited Nature of Rating."
Servicing......................... The Servicer will be responsible for servicing, managing
and making collections on the Receivables. Subject to
certain exceptions described under "Description of the
Certificates--Deposits in Collection Account," the
Servicer will deposit any collections on the
Receivables in a Monthly Period into the Collection
Account within two business days of the Date of
Processing to the extent such collections are allocable
to the Certificateholders' Interest of any Series and
are required to be deposited into an account for the
benefit of, or distributed to, the Certificateholders
of any Series or the issuer of any Series Enhancement.
The "Distribution Date" is the 15th day of each
calendar month (or, if any such day is not a business
day, the next succeeding business day). On the earlier
of (i) the second business day following the Date of
Processing and (ii) the day on which the Servicer
deposits any collections into the Collection Account,
subject to certain exceptions described herein, the
Servicer will pay to the holder of the Seller
Certificate its allocable portion of any collections
then held by the Servicer. The "Date of Processing" is
the business day a record of any transaction is first
recorded pursuant to the Servicer's data processing
procedures. On or about the third business day
preceding each Distribution Date (each, a "Deter-
mination Date"), the Servicer will calculate the
amounts to be allocated to the Certificateholders of
each Class or Series and the holder of the Seller
Certificate as described herein in respect of
collections of Receivables received with respect to the
preceding Monthly Period.
In certain limited circumstances, the Bank may resign or
be removed as Servicer, in which event either the
Trustee or, so long as it meets certain eligibility
standards set forth in the Pooling Agreement, a
third-party servicer may be appointed as successor
servicer. The Bank or any such successor servicer is
referred to herein as the "Servicer." The Bank is
permitted to delegate any of its duties as Servicer to
any of its affiliates and to certain third-party
service providers, but any such delegation will not
relieve the Servicer of its liability and
responsibility with respect to such duties under the
Pooling Agreement or any Supplement. In certain
circumstances, however, the Bank could be relieved of
its duties as Servicer upon the assumption of such
duties by another entity. See "Assumption of the Bank's
Obligations." The Servicer will receive servicing fees
payable with respect to each Series offered hereby as
servicing compensation from the Trust. See "Description
of the Certificates--Servicing Compensation and Payment
of Expenses."
Mandatory Reassignment and
Transfer of Certain Receivables... Pursuant to the Pooling Agreement, the Seller will make
certain representations and warranties in the Pooling
Agreement with respect to the Accounts and the
Receivables. If the Seller breaches any such
representation and warranty, under certain
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circumstances and subject to certain conditions
described under "The Pooling Agreement
Generally--Representations and Warranties," all
Receivables with respect to the affected Account will
be reassigned to the Seller. In addition, if the Seller
breaches certain other representations and warranties
described under "The Pooling Agreement
Generally--Representations and Warranties," all the
Receivables may be reassigned to the Seller. See "The
Pooling Agreement Generally--Representations and War-
ranties."
The Bank will provide certain covenants in the Pooling
Agreement in its capacity as a Servicer. If the
Servicer breaches any such covenant with respect to any
Receivable, subject to certain conditions described
under "The Pooling Agreement Generally--Servicer
Covenants," all Receivables with respect to the
affected Account will be assigned to the Servicer. In
the event of a transfer of servicing obligations to a
successor servicer, such successor servicer, rather
than the Bank, would be responsible for any subsequent
failure to comply with the Servicer's covenants.
Tax Status........................ Except to the extent otherwise provide in the related
Prospectus Supplement, in the opinion of special tax
counsel for the Bank and the Trust, the Certificates of
each Series offered hereby are properly characterized
as debt for federal income tax purposes. Each
Certificateholder, by acceptance of a Certificate of
such a Series, will agree to treat the Certificates of
such Series as debt for federal, state and local income
and franchise tax purposes. See "Tax Matters" for
additional information concerning the application of
federal income tax laws.
ERISA Considerations.............. Certificates of any Series offered hereby may be
eligible for purchase by Benefit Plan Investors. See
"ERISA Considerations."
Certificate Rating................ It will be a condition to the issuance of each Series of
Certificates or Class thereof offered pursuant to this
Prospectus and the related Prospectus Supplement that
they be rated in one of the four highest applicable
rating categories by at least one nationally recognized
statistical rating organization selected by the Bank
(each rating agency rating any Series, a "Rating
Agency"). The rating or ratings applicable to the
Certificates of each such Series or Class thereof will
be set forth in the related Prospectus Supplement.
A security rating should be evaluated independently of
similar ratings of different types of securities. A
rating is not a recommendation to buy, sell or hold
securities and may be subject to revision or withdrawal
at any time by the assigning Rating Agency. Each rating
should be evaluated independently of any other rating.
See "Special Considerations--Limited Nature of Rat-
ing."
Listing........................... If so specified in the Prospectus Supplement relating to
a Series, application will be made to list the
Certificates of such Series, or all or a portion of any
Class thereof, on the Luxembourg Stock Exchange or any
other specified exchange.
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SPECIAL CONSIDERATIONS
Investors should consider, among other things, the following risk factors in
connection with the purchase of Certificates.
LIMITED LIQUIDITY. It is anticipated that, to the extent permitted, the
underwriters of any Series of Certificates offered hereby will make a market in
such Certificates, but in no event will any such underwriter be under an
obligation to do so. There can be no assurance that a secondary market will
develop with respect to the Certificates of any Series offered hereby, or if
such secondary market does develop, that it will provide Certificateholders with
liquidity of investment or that it will continue for the life of such
Certificates.
ISSUANCE OF ADDITIONAL SERIES; EFFECT ON PAYMENTS TO
CERTIFICATEHOLDERS. The Trust, as a master trust, is expected to issue Series
from time to time. While the terms of any Series will be specified in a
Supplement, the provisions of a Supplement and, therefore, the terms of any
additional Series, will not be subject to the prior review by, or consent of,
holders of the Certificates of any previously issued Series. Such terms may
include methods for determining applicable investor percentages and allocating
collections, provisions creating different or additional security or other
Series Enhancements and any other amendment or supplement to the Pooling
Agreement which is made applicable only to such Series. The obligation of the
Trustee to issue any new Series is subject to the conditions, among others,
that: (a) such issuance will not result in any Rating Agency reducing or
withdrawing its rating of the Certificates of any outstanding Series (any such
reduction or withdrawal is referred to herein as a "Ratings Effect") and (b) the
Seller shall have delivered to the Trustee and certain providers of Series
Enhancement a certificate of an authorized officer to the effect that, in the
reasonable belief of the Seller, such issuance will not, based on the facts
known to such officer at the time of such certification, cause a Pay Out Event
to occur with respect to any Series. Such issuance will cause a reduction in the
Seller's Interest represented by the Seller Certificate and therefore the
relative amount of the Seller's Interest available to absorb fluctuations in the
amount of Principal Receivables in the Trust. There can be no assurance that the
terms of any Series, including any Series issued from time to time hereafter,
might not have an impact on the timing or amount of payments received by a
Certificateholder of another Series. See "Description of the Certificates--New
Issuances."
IMPACT OF ADDITION OF TRUST ASSETS; DIFFERENT CHARACTERISTICS. The Seller
expects, and in some cases will be obligated, to designate Additional Accounts,
the Receivables of which will be conveyed to the Trust. Such Additional Accounts
may include accounts originated using criteria different from those which were
applied to the Initial Accounts because such accounts were originated at a later
date, were part of a portfolio of accounts which were not part of the Bank
Portfolio as of the Trust Cut-Off Date or were acquired from another
institution. Moreover, Additional Accounts designated at any time may not be
accounts of the same type as those previously included in the Trust. See "The
Pooling Agreement Generally--Representations and Warranties." Consequently,
there can be no assurance that such Additional Accounts will be of the same
credit quality as the Initial Accounts or the Additional Accounts previously
included in the Trust. In addition, such Additional Accounts may consist of
revolving credit card accounts that have different terms than the Initial
Accounts and the Additional Accounts previously included in the Trust, including
lower periodic finance charges and other fees and charges, which may have the
effect of reducing the average yield on the portfolio of Accounts included in
the Trust. The designation of Additional Accounts will be subject to the
satisfaction of certain conditions described herein under "Description of the
Certificates--Addition of Trust Assets," including that (a) such addition will
not result in a Ratings Effect and (b) the Seller shall have delivered to the
Trustee and certain providers of Series Enhancement a certificate of an
authorized officer to the effect that, in the reasonable belief of the Seller,
such addition will not, based on the facts known to such officer at the time of
such certification, cause a Pay Out Event to occur with respect to any Series.
The only limitations on the Bank's right to designate Additional Accounts,
including Automatic Additional Accounts, are those described herein and in the
Prospectus Supplement. See "Description of the Certificates-- Addition of Trust
Assets."
TRANSFER OF ASSETS. While the Seller will sell Receivables to the Trust, a
court could treat such transaction as an assignment of collateral as security
for the benefit of the Certificateholders of the outstanding Series. The Seller
represents and warrants in the Pooling Agreement that the transfer of
Receivables by it to
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the Trust is either a sale of the Receivables to the Trust or the grant to the
Trust of a security interest in the Receivables. The Seller will take certain
actions under applicable state law to perfect the Trust's interest in the
Receivables transferred to the Trust and, in the Pooling Agreement, the Seller
represents and warrants that, if the transfer by the Seller to the Trust is a
grant to the Trust of a security interest in the Receivables, the Trust will
have a first priority perfected security interest therein and, with certain
exceptions and for certain limited periods of time, in the proceeds thereof
(subject, in each case, to certain potential tax liens referred to under "The
Pooling Agreement Generally--Representation and Warranties"). Nevertheless, if
the transfer of Receivables by the Seller to the Trust is deemed to create a
security interest therein under the Maryland Uniform Commercial Code (the
"UCC"), a tax or government lien or other nonconsensual lien on property of the
Seller arising before Receivables come into existence may have priority over the
Trust's interest in the Receivables and, if the FDIC were appointed receiver of
the Seller, the receiver's administrative expenses may also have priority over
the Trust's interest in the Receivables. In addition, while the Bank is the
Servicer, cash collections held by the Bank may, subject to certain conditions,
be commingled and used for the benefit of the Bank prior to the date on which
such collections are required to be deposited in the Collection Account, as
described under "Description of the Certificates--Deposits in Collection
Account" and, in the event of the insolvency or receivership of the Bank or, in
certain circumstances, the lapse of certain time periods, the Trust may not have
a perfected interest in such collections.
CERTAIN MATTERS RELATING TO RECEIVERSHIP. If the FDIC were appointed
receiver or conservator of the Seller or if certain other events relating to the
bankruptcy, insolvency, conservatorship or receivership of the Seller were to
occur (an "Insolvency Event"), then a Pay Out Event would occur with respect to
each Series and, pursuant to the terms of the Pooling Agreement, new Principal
Receivables would not be transferred to the Trust and the Trustee would sell the
Receivables (unless Certificateholders holding Certificates of each Series or,
if a Series includes more than one Class, each Class of such Series, evidencing
more than 50% of the aggregate unpaid principal amount of each such Series or
Class and, to the extent provided in the Supplement for any Series, any Credit
Enhancer instruct otherwise), thereby causing early termination of the Trust. In
such event, the portion of the proceeds of such sale allocable to such
Certificateholders of a related Series and the proceeds of any collections on
the Receivables in the Collection Account allocated to the Certificateholders'
Interest of such Series may be insufficient to pay such Certificateholders in
full. To the extent the Seller grants a security interest in the Receivables to
the Trust, and such security interest is validly perfected before the occurrence
of an Insolvency Event and is not taken in contemplation of insolvency or with
the intent to hinder, delay or defraud the Seller or its creditors, based upon
opinions issued by the general counsel of the FDIC and a related policy
statement issued by the FDIC addressing the enforceability against the FDIC, as
conservator or receiver for a depository institution, of a security interest in
collateral granted by such depository institution, such security interest should
not be subject to avoidance, and payments to the Trust with respect to the
Receivables should not be subject to recovery, by the FDIC. However, such
opinions and policy statement are not binding on the FDIC and, if the FDIC were
to assert a contrary position, certain provisions of the FDIA which, at the
request of the FDIC, have been applied in lawsuits to avoid security interests
in collateral granted by depository institutions, would permit the FDIC to avoid
such security interest, thereby resulting in possible delays and reductions in
payments to the Certificateholders of all outstanding Series. In addition,
federal law governing receivership of federally-insured depository institutions
would be interpreted to require compliance with certain claims procedures if a
receiver were appointed for the Seller before the Trustee could collect, sell,
dispose of, foreclose upon or otherwise liquidate the Receivables, which could
delay or possibly reduce payments on the Certificates of all outstanding Series.
Upon the occurrence of an Insolvency Event, if no Pay Out Event other than such
Insolvency Event exists, the FDIC may have the power to continue to require the
Seller to transfer new Principal Receivables to the Trust and to prevent the
early sale, liquidation, foreclosure or disposition of the Receivables and the
commencement of an Early Amortization Period. In the event of a Servicer
Default, if a conservator, receiver or liquidator is appointed for the Servicer,
and no Servicer Default other than such conservatorship, receivership,
liquidation or insolvency of the Servicer exists, the conservator, receiver or
liquidator may have the power to prevent either the Trustee or the
Certificateholders from appointing a successor Servicer. See "Certain Legal
Aspects of the Receivables--Transfer of Receivables" and "--Certain Matters
Relating to Receivership."
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CONSUMER PROTECTION LAWS. The Accounts and Receivables are subject to
numerous federal and state consumer protection laws that impose requirements on
the making, enforcement and collection of consumer loans. The United States
Congress and the states may enact laws and amendments to existing laws to
regulate further the credit card and consumer revolving loan industry or to
reduce finance charges or other fees or charges applicable to credit card and
other consumer revolving loan accounts. Such laws, as well as any new laws or
rulings which may be adopted, may adversely affect the Servicer's ability to
collect on the Receivables or maintain the current level of periodic finance
charges and other fees and charges with respect to the Accounts. In addition,
failure by the Servicer to comply with such requirements could adversely affect
the Servicer's ability to enforce the Receivables. In October 1987 and November
1991, members of Congress attempted unsuccessfully to limit the maximum annual
percentage rate that may be assessed on credit card accounts. In addition, on
May 5, 1992, two members of the House Banking Committee asked the United States
General Accounting Office to undertake a study of competition in the credit card
industry and particularly to address how a government-imposed limit on credit
card interest rates could affect credit availability. The Bank cannot predict
what action, if any, will be taken by Congress as a result of such study. If
federal legislation were enacted which contained an interest rate cap
substantially lower than the annual percentage rates currently assessed on the
Accounts, it is possible that the Portfolio Yield for a Series would be reduced
and therefore a Pay Out Event could occur with respect to the Certificates of a
Series. See "Description of the Certificates--Pay Out Events." In addition,
during recent years, there has been increased consumer awareness with respect to
the level of finance charges and fees and other practices of credit card issuers
and other consumer revolving loan providers. As a result of these developments
and other factors, there can be no assurance as to whether any federal or state
legislation will be promulgated which would impose additional limitations on the
monthly periodic finance charges or other fees or charges relating to the
Accounts.
LEGAL MATTERS AND LITIGATION. Since October 1991, a number of lawsuits and
administrative actions have been filed in several states against out-of-state
banks (both federally-insured state-chartered banks and federally-insured
national banks) that issue credit cards. These actions challenge various fees
and charges (such as late fees, over-the-limit fees, returned check charges and
annual membership fees) assessed against residents of the states in which such
suits were filed, based on restrictions or prohibitions under such states' laws
alleged to be applicable to the out-of-state credit card issuers. To date, the
Bank has not been named as a defendant in any such suit. There can be no
assurance that the Bank will not be named as a defendant in future lawsuits or
administrative actions challenging the fees and charges which it assesses
cardholders. In October 1991 a federal district court upheld a Massachusetts law
that bars banks from assessing late payment fees on credit card accounts of
residents of that state in a proceeding involving Greenwood Trust (the issuer of
the Discover Card). However, in August 1992 the court of appeals reversed the
federal district court on the grounds that the Massachusetts law was pre-empted
by applicable federal law and in January 1993 the United States Supreme Court
declined to review the ruling by the court of appeals. In other cases decided
recently in lower courts similar rulings have resulted. One state trial court in
Pennsylvania, however, has ruled in favor of a challenge to the assessment of
late payment and other fees, thereby rejecting the outcome in the Greenwood
Trust case. These cases may be appealed, other cases of this kind remain pending
in the lower courts and still others may be brought in the future. It is likely
that some plaintiffs will continue to press such cases and appeals, seeking to
obtain results in other Federal Circuit Courts at variance with the First
Circuit's decision in the Greenwood Trust case, thereby inducing the United
States Supreme Court to hear such a case in order to resolve the conflict among
the Circuits, and otherwise seeking to draw distinctions between their case and
Greenwood Trust. Such actions, if resolved adversely to bank credit card issuers
and other consumer revolving loan providers, could have the effect of limiting
certain charges, other than periodic finance charges, that could be assessed on
credit card or other consumer revolving credit accounts of residents of such
states and could require credit card issuers and other consumer revolving loan
providers such as the Bank to pay refunds and civil penalties with respect to
charges previously imposed on cardholders in such states. Consequently, such
actions could have an adverse impact on the Bank's credit card and other
consumer revolving loan operations. One potential effect of any such litigation
involving the
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Bank, if successful, would be to reduce the Portfolio Yield for a Series. If
such a reduction occurs, a Pay Out Event could occur with respect to the
Certificates of such Series. See "Certain Legal Aspects of the
Receivables--Consumer Protection Laws."
Pursuant to the Pooling Agreement, if a Receivable fails to comply in all
material respects with applicable requirements of law, subject to certain
conditions described under "The Pooling Agreement Generally--Representations and
Warranties," all Receivables in the affected Account will be reassigned to the
Seller or, in some circumstances, to the Servicer. On the Closing Date with
respect to each Series, the Seller will make certain representations and
warranties relating to the validity and enforceability of the Accounts and the
related Receivables. The sole remedy if any such representation or warranty is
breached is that, subject to certain conditions described herein under "The
Pooling Agreement Generally--Representations and Warranties," the interest of
Certificateholders of all Series in the Receivables affected thereby will be
reassigned to the Seller or assigned to the Servicer, as the case may be. In
addition, in the event of the breach of certain representations and warranties,
the Seller may be obligated to accept the reassignment of all the Receivables,
which reassignment will constitute the sole remedy available to
Certificateholders with respect to any such breach. See "The Pooling Agreement
Generally--Representations and Warranties" and "--Servicer Covenants" and
"Certain Legal Aspects of the Receivables--Consumer Protection Laws."
PAYMENT AND MATURITY CONSIDERATIONS; DEPENDENCY ON CARDHOLDER
REPAYMENTS. The Receivables may be paid at any time and there is no assurance
that there will be new Receivables created in the Accounts, that Receivables
will be added to the Trust or that any particular pattern of cardholder
repayments will occur. The actual rate of accumulation of principal with respect
to a Series in a Principal Funding Account during an Accumulation Period and the
rate of distribution of principal with respect to a Series during a Scheduled
Amortization Period or Early Amortization Period will depend on, among other
factors, the rate of cardholder repayments, the timing of the receipt of
repayments and the rate of default by cardholders. As a result, no assurance can
be given that the Invested Amount of a Series will be paid on the Expected Final
Payment Date, if any, with respect to a Series or that payments of principal
during the Scheduled Amortization Period with respect to a Series will equal the
Controlled Amortization Amount, if any, with respect to such Series or will
follow any expected pattern. Cardholder monthly payment rates with respect to
the Accounts are dependent upon a variety of factors, including seasonal
purchasing and payment habits of cardholders, the availability of other sources
of credit, general economic conditions, tax laws and the terms of the Accounts
(which are subject to change by the Bank). Increased convenience use, where
cardholders pay their Account balances in full on or prior to the due date, and
thus avoid all finance charges, would decrease the effective yield on the
Accounts and could cause the commencement of an Early Amortization Period for
one or more Series, as well as a decrease in protection to Certificateholders
against defaults under the Accounts. No assurance can be given as to the
cardholder payment rates which will actually occur in any future period.
A decline in the amount of Receivables in the Accounts for any reason
(including, the decision by cardholders to use competing sources of credit, an
economic downturn or other factors) could result in the occurrence of a Pay Out
Event with respect to a Series and the commencement of an Early Amortization
Period with respect to such Series. The Pooling Agreement provides that the
Seller will be required to make an Addition to the Trust in the event that
either (a) the Seller Amount is not maintained at a minimum level equal to the
Required Seller Percentage of the sum of (i) the aggregate amount of Principal
Receivables and (ii) the aggregate principal amount on deposit in the Special
Funding Account (the "Required Seller Amount") or (b) the amount of Principal
Receivables in the Trust is not maintained at a minimum level equal to the sum
of (i) the Series Invested Amount of each Series then outstanding less (ii) the
aggregate principal amount on deposit in the Special Funding Account (the
"Required Principal Balance"). The "Required Seller Percentage" is equal to 7%,
but may be reduced under certain circumstances described under "Description of
the Certificates--Addition of Trust Assets." The "Series Invested Amount" for
any Series will be specified in the Supplement and, for each Series offered
hereby, in the related Prospectus Supplement for such Series, but will generally
equal the initial Invested Amount for a Series. In the event that the Seller
fails to make such Addition within five business days (or any other time period
specified in a
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Supplement with respect to a Series) of the day on which it is required to make
such Addition pursuant to the Pooling Agreement as described under "Description
of the Certificates--Addition of Trust Assets" a Pay Out Event could occur with
respect to one or more Series.
LIMITED NATURE OF RATING. Any rating assigned to the Certificates of a
Series or a Class by a Rating Agency will reflect such Rating Agency's
assessment of the likelihood that Certificateholders of such Series or Class
will receive the payments of interest and principal required to be made under
the Pooling Agreement and the related Supplement and will be based primarily on
the value of the Receivables in the Trust and the availability of any Series
Enhancement with respect to such Series or Class. Any such rating will therefore
generally address credit risk and will not, unless otherwise specified in the
related Prospectus Supplement with respect to any Class or Series offered
hereby, address the likelihood that the principal of, or interest on, any
Certificates of such Class or Series will be prepaid, paid on a scheduled date
or paid on any particular date before the applicable Series Termination Date. In
addition, any such rating will not address the possibility of the occurrence of
a Pay Out Event with respect to such Class or Series or the possibility of the
imposition of United States withholding tax with respect to non-U.S.
Certificateholders. Further, the available amount of any Credit Enhancement or
other Series Enhancement with respect to any such Series or Class will be
limited and will be subject to reduction from time to time as described in the
related Prospectus Supplement. The rating of the Certificates of a Class or
Series will not be a recommendation to purchase, hold or sell such Certificates,
and such rating will not comment as to the marketability of such Certificates,
any market price or suitability for a particular investor. There is no assurance
that any rating will remain for any given period of time or that any rating will
not be lowered or withdrawn entirely by a Rating Agency if in such Rating
Agency's judgment circumstances so warrant.
BOOK-ENTRY REGISTRATION. Unless otherwise stated in the related Prospectus
Supplement, the Certificates of each Series offered hereby initially will be
represented by one or more certificates registered in the name of Cede, the
nominee for DTC, and will not be registered in the names of the
Certificateholders or their nominees. Consequently, unless and until Definitive
Certificates are issued, Certificate Owners will not be recognized by the
Trustee as "Certificateholders" (as such term is used in the Pooling Agreement
and any Supplement). Hence, until such time, Certificate Owners will only be
able to exercise the rights of Certificateholders indirectly through DTC, CEDEL
or Euroclear and their respective participating organizations. See "The Pooling
Agreement Generally--Book Entry Registration" and "--Definitive Certificates."
SOCIAL, LEGAL, ECONOMIC AND OTHER FACTORS. Changes in credit use and
payment patterns by cardholders result from a variety of economic, legal and
social factors. Economic factors include the rate of inflation, unemployment
levels and relative interest rates. The use of incentive programs (E.G., gift
awards for credit usage) may affect credit use. The Bank is unable to determine
whether or to what extent changes in applicable laws or other economic or social
factors will affect credit use or repayment patterns.
COMPETITION IN THE CREDIT CARD AND CONSUMER REVOLVING LOAN INDUSTRY. The
credit card and consumer revolving loan industry is highly competitive and
operates in a legal and regulatory environment increasingly focused on the cost
of services charged to consumers. There is increased use of advertising, target
marketing, pricing competition and incentive programs. New consumer credit
providers seek to enter, or expand their share of, the market. In addition,
certain credit card issuers and other revolving credit providers assess periodic
finance charges or other fees or charges at rates lower than the rate currently
being assessed on most of the Accounts. The Bank may also solicit existing
cardholders to open other revolving credit card accounts or revolving credit
accounts which offer certain benefits not available under the Accounts,
including lower periodic finance charges or reduced late charges and other fees
or charges. If cardholders choose to utilize competing sources of credit, the
rate at which new Receivables are generated in the Accounts may be reduced and
certain purchase and payment patterns with respect to the Receivables may be
affected. The Trust will be dependent upon the Bank's continued ability to
generate new Receivables. If the rate at which new Receivables are generated
declines significantly and the Bank does not add Receivables in Additional
Accounts to the Trust, a Pay Out Event could occur with respect to a Series.
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Recently, other credit card issuers have announced changes in the terms of
certain of their VISA and MasterCard-Registered Trademark-* credit cards,
including lowering the fixed annual percentage rate charged on balances or
converting the annual percentage rate charged on balances from a fixed per annum
rate to a variable rate. In addition, other credit card issuers have recently
announced "tiered" or "risk adjusted" rates under which the annual percentage
rate for the issuer's most creditworthy customers would be lowered.
In 1992, a jury in federal court in Utah found that the VISA association
violated antitrust laws when it denied membership in VISA to a subsidiary of
Sears Roebuck & Co., on the basis that another Sears subsidiary is the issuer of
the Discover credit card, a competitor of the VISA credit card. In April 1993, a
motion by VISA for a new trial was denied. Even though it is expected that VISA
will appeal, a final decision against VISA could result in increased competition
among issuers of VISA and MasterCard credit cards and thereby have adverse
consequences for members of the VISA and MasterCard associations, such as the
Bank.
THE ABILITY OF THE SELLER TO CHANGE TERMS OF THE ACCOUNTS. Pursuant to the
Pooling Agreement, the Seller does not transfer to the Trust the Accounts but
only the Receivables arising in the Accounts. As owner of the Accounts, the
Seller will have the right to determine the periodic finance charge, the fees
and the other charges which will be applicable from time to time to the
Accounts, to alter the minimum monthly payment required under the Accounts and
to change various other terms with respect to the Accounts. A decrease in the
periodic finance charges or other fees or charges applicable to the Accounts
would decrease the effective yield on the Accounts and could result in the
occurrence of a Pay Out Event with respect to a Series and the commencement of
an Early Amortization Period with respect to such Series, as well as decreased
protection to Certificateholders against charged-off Accounts. Under the Pooling
Agreement, the Seller has agreed that, unless required by law or unless, in its
sole discretion, the Seller deems it necessary to maintain on a competitive
basis its lending business, it will not reduce the annual percentage rate of the
monthly periodic finance charge assessed on the Receivables or reduce other fees
on the Accounts, if as a result of such reduction, either (i) its reasonable
expectation is that such reduction will (based on facts known at such time)
cause a Pay Out Event to occur with respect to a Series or (ii) such reduction
is not applied to any comparable segment of consumer revolving credit accounts
owned by the Seller that have characteristics the same as or substantially
similar to the Accounts. In addition, the Seller, subject to compliance with
applicable laws, may in its sole discretion change the other terms of its
Accounts, if such change is made applicable to any comparable segment of
consumer revolving credit accounts owned by the Seller that have characteristics
the same as, or substantially similar to, such Accounts. Except as specified
above, there are no restrictions on the Seller's ability to change the terms of
the Accounts. There can be no assurance that changes in applicable law, changes
in the marketplace, including recent announcements by other credit card issuers
lowering annual percentage rates, or prudent business practice might not result
in a determination by the Seller to decrease customer finance charges or
otherwise take actions which would change any Account terms. See "--Competition
in the Credit Card and Consumer Revolving Loan Industry." In servicing the
Accounts, the Servicer is required to apply its usual and customary servicing
procedures for servicing receivables comparable to the Receivables and to act in
accordance with the Seller's written policies and procedures relating to the
operation of their consumer revolving lending business (the "Credit Card
Guidelines").
CONTROL. Subject to certain exceptions, the Certificateholders of each
Series may take certain actions, or direct certain actions to be taken, under
the Pooling Agreement or the related Supplement. However, under certain
circumstances, the consent or approval of a specified percentage of the
aggregate unpaid principal amount of the Certificates of all outstanding Series
will be required to direct certain actions, including requiring appointment of a
successor Servicer following a Servicer Default, amending the Pooling Agreement
under certain circumstances and directing a reassignment of the entire portfolio
of Accounts. In addition, following the occurrence of an Insolvency Event with
respect to the Seller, the Trust Assets will be liquidated unless the holders of
Certificates evidencing more than 50% of the aggregate unpaid principal amount
of each Series or, if a Series included more than one Class, each Class of such
Series (along with, to
- ------------------------
* VISA and MasterCard are registered trademarks of VISA USA, Inc. and MasterCard
International Incorporated, respectively.
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the extent provided in the Supplement for any Series, any Credit Enhancer)
direct the Trustee not to sell or otherwise liquidate the Receivables. Further,
in certain cases (including with respect to certain amendments described under
"The Pooling Agreement Generally--Amendments"), when determining whether the
required percentage of Certificateholders of a Series have given their approval
or consent, all the Certificateholders of such Series will be treated as a
single class (whether or not such Series includes more than one Class).
Accordingly, one or more Classes of Certificateholders may have the power to
determine whether any such action is taken without regard to the position or
interests of other Classes of Certificateholders relating to such action.
NONRECOURSE OBLIGATIONS. The Certificates represent interests in the Trust
only and do not represent interests in or recourse obligations of the Seller or
any affiliate thereof or, if applicable, an Assuming Entity. Certificateholders
must rely solely upon the Receivables and the Series Enhancement, if any, for
the payment of principal of and interest on the Certificates. The only
obligations of the Seller or, if applicable, an Assuming Entity with respect to
the Trust are generally limited to the obligation to accept reassignment of all
or a portion of the Receivables under certain circumstances upon breach of
certain representations and warranties, the obligations to make Additions to the
Trust under certain circumstances and certain other limited obligations, all as
more fully described herein. The ability of the Seller or, if applicable, an
Assuming Entity to perform such obligations will be dependent in part on the
financial condition of the Seller or, if applicable, an Assuming Entity at the
time such obligation arises.
ASSUMPTION OF THE BANK'S OBLIGATIONS BY AN ASSUMING ENTITY. The Bank may,
subject to certain conditions, transfer its assets and obligations with respect
to the Trust and under the Pooling Agreement to an Assuming Entity that is not
affiliated with the Bank without obtaining Certificateholder consent to such
transfer. See "Assumption of the Bank's Obligations."
THE BANK'S CREDIT CARD ACTIVITIES
GENERAL
The Receivables which the Bank has conveyed and will convey to the Trust
pursuant to the Pooling Agreement have been and will be generated from
transactions made by holders of selected VISA and MasterCard credit card
accounts, including premium and standard accounts from the Bank's portfolio of
such accounts (the "Bank Portfolio"). Generally, both premium and standard
accounts undergo the same credit analysis, but premium accounts have higher
credit limits.
The Bank presently services all of its credit card accounts at offices
located in Maryland. Certain data processing and ministerial functions
associated with the servicing of the Bank's credit card accounts are performed
on behalf of the Bank by First Data Resources, Inc. ("FDR"). If FDR were to fail
or become insolvent, delays in processing and recovery of information with
respect to charges incurred by cardholders could occur and the replacement of
the services FDR currently provides to the Bank could be time consuming. As a
result, delays in payments to Certificateholders could occur.
FDR was established in 1968 as the data processing unit of MidAmerica
Bankcard Association and was acquired by American Express Company in 1980.
According to publicly filed documents, American Express Company's interest in
FDR has been significantly reduced.
FDR's executive offices are currently located in New York, New York.
Principal facilities used in connection with FDR's operations in the United
States are located in Nebraska and Oklahoma.
The Bank utilizes a variety of the services provided by FDR in originating
and servicing the Bank's VISA and MasterCard accounts, including provision of
network interface to other card processors through VISA USA, Inc. and MasterCard
International, Incorporated. This network provides cardholder authorizations in
addition to a conduit for funds transfer and settlement.
NEW ACCOUNTS AND UNDERWRITING
The Bank generated substantially all of its credit card accounts through
direct mailings and telemarketing. The Bank's credit card program commenced in
June 1985. From November 1990 through January 1993,
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the Bank did not actively solicit new accounts, although it continued to acquire
new accounts through applications available at the Bank's branches. The Bank
resumed active solicitation of new accounts in February 1993. Prior to February
1993, the Bank generally did not preapprove accounts for its credit cards;
however, with the resumption of its solicitation of new accounts the Bank
currently generates new accounts through direct mailing and telemarketing
solicitation campaigns directed at individuals who have been preapproved. The
Bank identifies potential cardholders for preapproved solicitations by supplying
a list of credit criteria to a credit bureau, which generates a list of
individuals who meet such criteria. When the Bank receives an acceptance
certificate from an individual that received a preapproved solicitation, the
Bank obtains a credit report on such individual issued by an independent credit
reporting agency, and the issuance of a credit card to such individual and the
credit limit and terms of the account are subject to certain post-screening
underwriting reviews by the Bank.
The Bank's underwriting approach to account approval supplements a
computerized credit scoring system with an evaluation of each completed
application for creditworthiness. In the underwriting process, the Bank
considers the prospective cardholder's income, credit history, outstanding debt
as a percentage of gross income and other factors intended to provide a general
indication of the applicant's willingness and ability to repay his obligations.
The Bank also reviews a credit report on each applicant issued by an independent
credit reporting agency and, for certain applicants, independently verifies
employment, income or other information contained in the credit application.
If an application is approved, the Bank establishes an initial credit limit
on the cardholder's account based on the Bank's evaluation of the cardholder's
creditworthiness. This credit limit is adjusted from time to time based on the
Bank's continuing evaluation of the cardholder's repayment ability as evidenced
by the cardholder's payment history and other factors. The Bank also may
increase the credit limit at the cardholder's request after completion of an
evaluation comparable to that performed during the initial underwriting.
The Bank reviews credit losses on a monthly basis and adjusts its
underwriting standards appropriately. The Bank also performs an ongoing credit
review for each account, which may result in the Bank's (i) limiting the amount
of credit available for cash advances on an account to 30% of the credit limit
for such account, (ii) reducing the available credit limit for such account, or
(iii) closing the account.
USE OF CREDIT CARDS
Each cardholder is subject to an agreement with the Bank governing the terms
and conditions of the cardholder's account. Pursuant to each such agreement, the
Bank reserves the right to change or terminate any terms, conditions, services
or features of its accounts (including increasing or decreasing Monthly Periodic
Charges, Annual Fees, Other Charges or minimum payment terms) at any time. The
agreement with each cardholder provides that the Bank may apply such changes,
when applicable, to current outstanding balances as well as to future
transactions upon written notice to cardholders. However, applicable laws may
limit the ability of the Bank to make such changes. See "Certain Legal Aspects
of the Receivables-- Consumer Protection Laws."
A cardholder may use his or her credit card for purchases and for cash
advances. Cardholders make purchases when using their credit cards to buy goods
or services. A cash advance is made when a credit card is used to obtain cash
from a financial institution or an automated teller machine (ATM). Cardholders
may also use special "convenience" checks issued by the bank to draw against
their credit line.
BILLING AND PAYMENTS
The accounts in the Bank Portfolio currently have various billing and
payment characteristics, including varying periodic rate finance charges and
fees.
Cardholders receive monthly billing statements summarizing the activity in
their accounts. Currently, a cardholder must make a monthly minimum payment
generally equal to the sum of (i) the greater of 3% of the outstanding account
balance (up to the applicable credit limit) or $15; however, from June 1, 1994
through May 31, 1995 each cardholder has the option of paying 2% of the
outstanding account balance (up to the applicable credit limit) or $15, (ii) any
amount past due, and (iii) any amount by which the account
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balance exceeds the applicable credit limit. Balances of $15 or less must be
paid in full. Certain eligible cardholders are periodically offered the option
to defer monthly minimum payments for one month. The Bank assesses certain
cardholders a non-refundable annual fee (which it has waived and may continue to
waive in connection with other promotional programs for a one-year period) which
generally ranges from $10 to $40. Other charges currently assessed by the Bank
include a late charge (generally $15, assessed by the Bank if it does not
receive the required minimum payment on or before the 15th day following the
payment due date, or for certain accounts the 5th day following the statement
closing date), a cash advance fee (generally equal to 2% of the cash advance
subject to a $2 minimum and a $10 maximum), and a return check charge (generally
$15). Cardholders may also purchase credit life, unemployment and disability
insurance covering their account. All fees, charges and insurance premiums
assessed by the Bank are automatically charged to the account and are included
in the account balance.
The Bank assesses interest based on the average daily account balance;
effective in October 1991, the daily account balance includes due and unpaid
interest on certain accounts. To calculate such balance, the Bank first takes
the beginning account balance each day, adds any new purchases or cash advances
and subtracts any payments or credits. This computation yields the daily account
balance. The Bank then adds all the daily account balances for the billing cycle
and divides the total by the number of days in the billing cycle. This produces
the average daily account balance. The total periodic charge for a billing cycle
is calculated by multiplying the average daily account balance by the monthly
periodic rate. Periodic charges for purchases are not assessed if all balances
shown in the billing statement are paid by the due date, which is normally 25
days after the statement closing date, or if the previous purchase balance on
the most recent prior monthly statement was zero. Cash advances accrue periodic
charges on the outstanding balance of the advance from the date of the advance
until the date full payment is received.
Currently, accounts in the Bank Portfolio incur periodic finance charges at
a variety of fixed and variable annual percentage rates ranging from 6.0% to
21.8%. Accounts may have a different periodic finance charge for purchases and
cash advances. In late 1987 the Bank increased the annual interest rate for all
accounts from 14.0% to 14.9%. In February 1989 the annual interest rate on all
accounts was increased to 15.9% and in June 1989 to 16.9%. In November 1989 the
annual interest rate for all standard accounts was increased to 18.9% while Gold
accounts remained at 16.9%. In September 1990 the annual interest rate on all
standard accounts outside the Washington, D.C., Maryland and Virginia area was
increased to 19.8%, and the annual interest rate on cash advances for all
accounts was increased to 19.8%. In October 1991 the annual interest rate on
certain accounts was increased to 21.8% and the annual interest rate on certain
Gold accounts (for charges other than cash advances) was increased to 17.9%. In
response to products offered by competitors, beginning in November 1992 the Bank
began offering to low-risk customers and certain other existing customers the
option to convert to a variable-rate credit card account that provides the
cardholder with a reduced interest rate compared to the current rate on the
Bank's fixed-rate accounts. The variable rate is applicable to purchases and
cash advances made after the variable rate is elected by the cardholder, but
generally is not applicable to the then existing balance in the cardholder's
account. In the solicitation of new accounts, the Bank has various marketing
programs for which the annual percentage rate and fees may vary. The Bank makes
use of introductory periodic finance charge rates. The introductory periodic
finance charge rates are generally fixed for some initial period, and at the
conclusion of this period rise to a higher, variable periodic finance charge
rate, which generally ranges from 8.9% to 10.9% over a selected prime rate for
purchases and 13.8% over the selected prime rate for cash advances. Such rates
may be changed from time to time. In its solicitation of new accounts and to
certain existing customers, the Bank is offering various products which
currently include (1) a rebate program in which the customer will generally
receive a rebate of 1% of purchases charged to the account during a year if the
purchases exceed specified thresholds and (2) a no-annual fee product.
The Bank periodically offers promotional discounts to certain customers to
encourage increased usage of their credit card accounts with the Bank, including
(i) a reduced interest rate for purchases and cash advances made during
specified promotional periods, (ii) an option to periodically defer the monthly
minimum payment, (iii) a reduction of the monthly minimum payment, and (iv) an
increase in the rebate amount for a specified period.
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An account opened prior to announcement of a rate change will continue to be
assessed at the rate in effect at the time the account was opened until the
cardholder ratifies a rate change by using his card to make a purchase or obtain
a cash advance after notice of the change (or, in certain cases, until the Bank
notifies the cardholder of a rate change unless the cardholder notifies the Bank
that he will not accept the rate change). The cardholder must affirmatively
notify the Bank that the customer has elected the variable rate option described
above. Subject to maintaining the Portfolio Yield for each Series at a level at
least equal to the Base Rate for each such Series (or any Class within such
Series) pursuant to the Pooling Agreement (unless otherwise required by law or
deemed by the Seller to be necessary in order to maintain its credit card
business, based upon a good faith assessment by it, in its sole discretion, of
the nature of the competition in that business), so that a Pay Out Event with
respect to any Series based on a decline in the Portfolio Yield for such Series
does not occur, the Bank may change the monthly periodic rate and other fees and
charges applicable to the Accounts at any time so long as it makes the change
for all accounts owned and serviced by the Bank that are the same as or
substantially similar to the Accounts, subject to certain exceptions set forth
in the Pooling Agreement. The terms "Portfolio Yield" and "Base Rate" for each
Series will have the meanings set forth in the Prospectus Supplement relating to
each such Series. See "Special Considerations-- The Ability of the Seller to
Change Terms of The Accounts."
DELINQUENCIES
An account is contractually delinquent if the minimum payment indicated on
the cardholder's statement is not received by the statement cycle date, which is
generally 5 days after the due date. Efforts to collect contractually delinquent
credit card receivables are made by the Bank's service center personnel or the
Bank's designees. Collection activities include statement messages, formal
collection letters and telephone calls. Collection personnel generally initiate
telephone contact with cardholders whose accounts have become five days or more
delinquent. In the event that initial telephone contact fails to resolve the
delinquency, the Bank continues to contact the cardholder by telephone and by
mail. The Bank may enter into arrangements with cardholders to extend or
otherwise change payment schedules and other account terms. Delinquency levels
are monitored by collections managers and information is reported regularly to
senior management of the Bank. Accounts are generally charged off when they
become 190 days contractually delinquent (or sooner in the event of receipt of
notice of death or bankruptcy of the credit card holder), at which time they are
generally referred to outside collection agencies.
The Bank's account origination, credit evaluation, servicing and chargeoff
policies and collection practices may change from time to time in accordance
with the Bank's business judgment, industry practice, applicable laws and
regulations and other factors. Such changes may affect the performance of the
Trust Portfolio and the collectibility of the Receivables.
INTERCHANGE
Members participating in the VISA and MasterCard associations receive
certain fees ("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 purchases is collected by banks that
issue credit cards by applying a discount to the amount paid by such banks to
the banks that clear the related transactions for merchants. Interchange will be
allocated within the Trust by treating 1.0% (subject to adjustment at the option
of the Bank upon the satisfaction of certain conditions as described herein in
"Description of the Certificates -- Discount Option" which adjusted percentage,
if applicable, will be specified in the applicable Prospectus Supplement) of
collections of Principal Receivables (whether arising from purchases or cash
advances) as collections of Finance Charge Receivables.
THE BANK
The Bank is a federally chartered stock savings bank. The Bank's executive
offices are located at 8401 Connecticut Avenue, Chevy Chase, Maryland 20815, and
the Bank's telephone number is (301) 986-7000. The Bank is subject to
comprehensive regulation, examination and supervision by the OTS within the
Department of the Treasury and the FDIC. Deposits at the Bank are fully insured
up to $100,000
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per insured depositor by the Savings Association Insurance Fund, which is
administered by the FDIC. The Prospectus Supplement for each Series will provide
additional information, including financial information, relating to the Bank.
ASSUMPTION OF THE BANK'S OBLIGATIONS
The Bank from time to time may consider a transfer of all or a portion of
its consumer revolving credit card accounts and the receivables arising
thereunder, which may include all, but not less than all, of the Accounts and
the Bank's remaining interest in the Receivables arising thereunder, its
interest in Participations and its interest in the Trust (collectively, the
"Assigned Assets"), together with all servicing functions and other obligations
under the Pooling Agreement or relating to the transactions contemplated thereby
(collectively, the "Assumed Obligations"), to another entity (the "Assuming
Entity") which may be an entity that is not affiliated with the Bank. Pursuant
to the Pooling Agreement, the Bank is permitted to assign, convey and transfer
the Assigned Assets and the Assumed Obligations to the Assuming Entity, without
the consent or approval of the holders of any Certificates, if the following
conditions, among others, are satisfied: (i) the Assuming Entity, the Bank and
the Trustee shall have entered into an assumption agreement providing for the
Assuming Entity to assume the Assumed Obligations, including the obligation
under the Pooling Agreement to transfer the Receivables arising under the
Accounts and the Receivables arising under any Additional Accounts to the Trust,
(ii) each provider of Series Enhancement, if any, shall have consented to the
transfer and assumption, (iii) all filings required to perfect the interest of
the Trustee in the Receivables arising under such Accounts shall have been duly
made and copies thereof shall have been delivered by the Bank to the Trustee,
(iv) the Bank shall have received written notice from each Rating Agency that
such transfer and assumption will not have a Ratings Effect, (v) the Trustee
shall have received an opinion of counsel with respect to clause (iii) above and
as to certain other matters specified in the Pooling Agreement, and (vi) the
Trustee shall have received an opinion of counsel acceptable to the Trustee that
for federal and Maryland state tax purposes (and for purposes of taxation in the
jurisdiction in which the Assuming Entity engages in its principal servicing
activities, if different from Maryland), (x) such transfer and assumption 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, (y) following such transfer and assumption the Trust will be deemed
not to be an association (or publicly traded partnership) taxable as a
corporation and (z) such transfer and assumption will not cause or constitute an
event in which gain or loss would be recognized by any Certificateholders or the
Trust. The Pooling Agreement provides that the Bank, the Assuming Entity and the
Trustee may enter into amendments to the Pooling Agreement to permit the
transfer and assumption described above without the consent of the holders of
any Certificates. After any permitted transfer and assumption, the Assuming
Entity will be considered to be the "Seller" for all purposes hereof, and the
Bank will have no further liability or obligation under the Pooling Agreement,
other than those liabilities that arose prior to such transfer.
THE RECEIVABLES
The Receivables arise in certain Eligible Accounts (the "Trust Portfolio")
selected by the Bank from the Bank Portfolio as described below.
The Bank will transfer to the Trust all Receivables existing in each Account
owned by it on the date of transfer to the Trust and all Receivables generated
in such Accounts after such date. All monthly calculations with respect to such
Accounts are computed based on activity occurring during a calendar month (each
a "Monthly Period"). Pursuant to the Pooling Agreement, the Bank has the right,
and in certain cases the obligation (subject to certain limitations and
conditions described below), to designate from time to time additional
qualifying VISA or MasterCard consumer revolving credit card accounts owned by
the Bank to be included as Accounts and to convey to the Trust all Receivables
in such Additional Accounts, whether such Receivables are then existing or
thereafter created. These Accounts must be Eligible Accounts as of the date the
Bank designates such accounts as Additional Accounts. In addition, as of the
Trust Cut-Off Date (or as of the addition date) and on the date any new
Receivables are created, the Bank will represent and warrant to the Trust that
each of the Receivables in any Account or Additional Account that is conveyed to
the Trust on
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such day meets the eligibility requirements specified in the Pooling Agreement.
Those requirements include, but are not limited to (i) with respect to an
Account, that such Account (a) has not been, and does not have any receivables
that have been, sold, pledged or assigned to any person except pursuant to the
Pooling Agreement, (b) does not have any receivables that are Defaulted
Receivables and (c) does not have any receivables identified as having been
incurred as a result of fraudulent use of any related credit card, and (ii) with
respect to a Receivable, that such Receivable (a) has arisen under an Eligible
Account, (b) was created in compliance with the Credit Card Guidelines and (c)
at the time of transfer to the Trust is not subject to any right of rescission,
setoff, counterclaim or other defense other than certain bankruptcy and
equity-related defenses and adjustments permitted by the Pooling Agreement. See
"The Pooling Agreement Generally--Representations and Warranties." However,
there can be no assurance that all the Accounts will continue to meet the
applicable eligibility requirements throughout the life of the Trust.
Subject to certain limitations and restrictions, the Bank may also designate
certain Accounts owned by it the Receivables of which will be removed from the
Trust. In such case, the Receivables in the Removed Accounts will be reassigned
to the Bank. Throughout the term of the Trust, the Trust Portfolio will consist
of the Initial Accounts, plus any Additional Accounts, and minus any Removed
Accounts.
Additional Accounts may not be accounts of the same type previously included
in the Trust. Therefore there can be no assurance that such Additional Accounts
will be of the same credit quality as the Initial Accounts or the Additional
Accounts the Receivables of which have been conveyed previously to the Trust.
Moreover, Additional Accounts may contain Receivables which consist of fees,
charges and amounts which are different from the fees, charges and amounts
described below. Such Additional Accounts may also be subject to different
credit limits, balances and ages. Consequently, there can be no assurance that
the Accounts will continue to have the characteristics described herein as
Additional Accounts are added. In addition, the inclusion in the Trust of
Additional Accounts with lower periodic finance charges may have the effect of
reducing the Portfolio Yield for a Series. The Bank intends to file with the
Commission, on behalf of the Trust, a Current Report on Form 8-K with respect to
any addition of accounts which would have a material effect on the composition
of the Accounts.
The Prospectus Supplement relating to a Series will provide certain
information about the Trust Portfolio as of the date specified. Such information
will include the amount of Principal Receivables, the amount of Finance Charge
Receivables, the range of 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.
USE OF PROCEEDS
The net proceeds from the sale of the Certificates of any Series offered
hereby will be paid to the Bank. Unless otherwise specified in the related
Prospectus Supplement, the Bank will use such proceeds for general corporate
purposes.
THE TRUST
The Trust, as a master trust, is expected to issue additional Series from
time to time. The Trust has not engaged and will not engage in any business
activity other than acquiring and holding Trust Assets and proceeds therefrom,
issuing Series of Certificates and the Seller Certificate and making payments
thereon and related activities. As a consequence, the Trust does not and is not
expected to have any source of capital resources other than the Trust Assets.
The Trust will be administered in accordance with the laws of the State of New
York.
The Seller will convey to the Trust, without recourse, its interest in all
Receivables arising under the Accounts. The Trust Assets will consist of the
Receivables, all monies due or to become due thereunder, the proceeds of the
Receivables, all monies on deposit in the Collection Account and in certain
accounts maintained for the benefit of the Certificateholders, any
Participations included in the Trust, funds collected or to be collected with
respect to such Participations and any Series Enhancements. The Trust Assets are
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expected to change over the life of the Trust as revolving credit card accounts
and related assets become subject to the Trust and as Accounts are closed,
charged off or removed and are no longer subject to the Trust. Pursuant to the
Pooling Agreement, the Seller will have the right (subject to certain
limitations and conditions), and in some circumstances will be obligated, to
designate as Trust Assets, Receivables arising in Additional Accounts or, in
lieu thereof or in addition thereto, Participations. See "Description of the
Certificates--Addition of Trust Assets." In addition, the Seller will have the
right to remove from the Trust, Receivables arising in designated Accounts as
described herein under "Description of the Certificates-- Removal of Accounts."
DESCRIPTION OF THE CERTIFICATES
GENERAL
The Certificates of a Series will be issued pursuant to a Pooling and
Servicing Agreement (the "Pooling Agreement"), and a Supplement thereto relating
to such Certificates, between the Bank, as seller of its interest in the
Receivables (in such capacity, the "Seller"; which term shall include, if
applicable, an Assuming Entity) and servicer of the Accounts, and the Trustee.
The Pooling Agreement and each Supplement with respect to any Series offered
hereby will be substantially in the form filed as exhibits to the Registration
Statement of which this Prospectus is a part. See "Description of the
Certificates--New Issuances." The Trustee will provide a copy of the Pooling
Agreement (without exhibits or schedules), including any Supplements, to
Certificateholders upon written request. The following summary describes certain
terms generally applicable to the Certificates of each Series and is qualified
in its entirety by reference to the Pooling Agreement and the applicable
Supplement.
The Certificates of each Series offered hereby will initially be represented
by one or more certificates registered in the name of the nominee of DTC
(together with any successor depository selected by the Seller, the
"Depository"), except as set forth below. Unless otherwise specified in the
related Prospectus Supplement, the Certificates of each Series offered hereby
will be available for purchase in minimum denominations of $1,000 and in
integral multiples thereof in book-entry form. The Seller has been informed by
DTC that DTC's nominee will be Cede. See "The Pooling Agreement
Generally--Book-Entry Registration" and "--Definitive Certificates."
The Certificates of each Series offered hereby will evidence undivided
interests in the Trust Assets allocated to the Certificateholders' Interest of
such Series, representing the right to receive from such Trust Assets funds up
to (but not in excess of) the amounts required to make payments of interest and
principal with respect thereto as described in the related Prospectus
Supplement.
INTEREST
Interest will accrue on the Certificates of a Series or Class offered hereby
at the per annum rate either specified in or determined in the manner specified
in the related Prospectus Supplement. Except as otherwise provided herein or in
the related Prospectus Supplement, collections of Finance Charge Receivables and
certain other amounts allocable to the Certificateholders' Interest of a Series
offered hereby will be used to make interest payments to Certificateholders of
such Series on each Interest Payment Date specified in the related Prospectus
Supplement, provided that after the commencement of an Early Amortization Period
with respect to such Series, interest will be distributed to such
Certificateholders monthly on each Special Payment Date. If the Interest Payment
Dates for a Series or Class occur less frequently than monthly, such collections
or other amounts (or the portion thereof allocable to such Class) will be
deposited in one or more Interest Funding Accounts and used to make interest
payments to Certificateholders of such Series or Class on the following Interest
Payment Date. If a Series has more than one Class of Certificates, each such
Class may have a separate Interest Funding Account. Funds on deposit in an
Interest Funding Account will be invested in Eligible Investments. Any earnings
(net of losses and investment expenses) on funds in an Interest Funding Account
will be paid to, or at the direction of, the Seller except as otherwise
specified in any Supplement. Interest with respect to the Certificates of each
Series offered hereby will accrue and be calculated on the basis described in
the related Prospectus Supplement.
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PRINCIPAL
The Certificates of each Series will have a Revolving Period during which
collections of Principal Receivables and certain other amounts otherwise
allocable to the Certificateholders' Interest of such Series will be treated as
Shared Principal Collections and will be distributed to, or for the benefit of,
the Certificateholders of other Series or the holder of the Seller Certificate.
Unless an Early Amortization Period commences with respect to a Series,
following the Revolving Period with respect to such Series, such Series will
have either an Accumulation Period or a Scheduled Amortization Period.
During the Accumulation Period, if any, with respect to a Series,
collections of Principal Receivables and certain other amounts allocable to the
Certificateholders' Interest of such Series will be deposited on each
Distribution Date in a Principal Funding Account and used to make principal
distributions to the Certificateholders of such Series when due. If so specified
in the related Prospectus Supplement, the amount to be deposited in a Principal
Funding Account for any Series offered hereby on any Distribution Date may be
limited to an amount equal to a Controlled Accumulation Amount specified in such
Prospectus Supplement plus any existing deficit controlled accumulation amount
arising from prior Distribution Dates. If a Series has more than one Class of
Certificates, each Class may have a separate Principal Funding Account and
Controlled Accumulation Amount. In addition, the related Prospectus Supplement
may describe certain priorities among such Classes with respect to deposits of
principal into such Principal Funding Accounts.
During the Scheduled Amortization Period, if any, with respect to a Series,
collections of Principal Receivables and certain other amounts allocable to the
Certificateholders' Interest of such Series will be used on each Distribution
Date to make principal distributions to any Class of Certificateholders then
scheduled to receive such distributions. If so specified in the related
Prospectus Supplement, the amount to be distributed to Certificateholders of any
Series offered hereby on any Distribution Date may be limited to an amount equal
to the Controlled Amortization Amount specified in such Prospectus Supplement
plus any existing deficit controlled amortization amount arising from prior
Distribution Dates. If a Series has more than one Class of Certificates, each
Class may have a separate Controlled Amortization Amount. In addition, the
related Prospectus Supplement may describe certain priorities among such Classes
with respect to such distributions.
During the Early Amortization Period with respect to a Series, collections
of Principal Receivables and certain other amounts allocable to the
Certificateholders' Interest of such Series (including Shared Principal
Collections, if any, allocable to such Series) will be distributed as principal
payments to the applicable Certificateholders monthly on each Distribution Date
beginning with the first Special Payment Date. During the Early Amortization
Period with respect to a Series, distributions of principal to
Certificateholders of such Series will not be subject to any Controlled Deposit
Amount or Controlled Distribution Amount. In addition, upon the commencement of
the Early Amortization Period, any funds on deposit in a Principal Funding
Account with respect to such Series will be paid to the Certificateholders of
the relevant Class or Series on the first Special Payment Date. See "Series
Provisions--Pay Out Events" in the related Prospectus Supplement for a
discussion of the events which might lead to the commencement of the Early
Amortization Period with respect to a Series.
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Funds on deposit in any Principal Funding Account established with respect
to a Class or Series offered hereby will be invested in Eligible Investments and
may be subject to a guarantee or guaranteed investment contract or a deposit
account or other mechanism specified in the related Prospectus Supplement
intended to assure a minimum rate of return on the investment of such funds. In
order to enhance the likelihood of the payment in full of the principal amount
of a Class of Certificates offered hereby at the end of an Accumulation Period
with respect thereto, such Class may be subject to a maturity liquidity facility
or a deposit account or other similar mechanism specified in the relevant
Prospectus Supplement.
ADDITION OF TRUST ASSETS
If, as of the close of business on the last business day of any Monthly
Period, either (a) the Seller Amount is less than the Required Seller Amount or
(b) the amount of Principal Receivables in the Trust is less than the Required
Principal Balance, the Seller shall, on or prior to the close of business on the
10th calendar day following such day (unless the Seller Amount equals or exceeds
the Required Seller Amount or the amount of Principal Receivables in the Trust
equals or exceeds the Required Principal Balance, as the case may be, as of the
close of business on any day after the last business day of such Monthly Period
and prior to such 10th day) make an Addition to the Trust such that, after
giving effect to such Addition, the Seller Amount is at least equal to the
Required Seller Amount and the amount of Principal Receivables in the Trust is
at least equal to the Required Principal Balance. An "Addition" will consist of
(i) receivables arising in Eligible Accounts owned by the Seller or (ii)
participations representing undivided interests in a pool of assets primarily
consisting of revolving credit card accounts owned by the Seller and collections
thereon ("Participations"). The addition of Participations to the Trust pursuant
to this paragraph will be effected by an amendment to the Pooling Agreement
which will not require the consent of Certificateholders. The Seller upon 30
days' prior notice to the Trustee, each Rating Agency and certain providers of
Series Enhancement, may reduce the Required Seller Percentage (but not below
2%), PROVIDED that (a) such reduction will not result in a Ratings Effect and
(b) the Seller shall have delivered to the Trustee and certain providers of
Series Enhancement a certificate of an authorized officer to the effect that, in
the reasonable belief of the Seller, such reduction will not, based on the facts
known to such officer at the time of such certification, cause a Pay Out Event
to occur with respect to any Series. In addition, the Seller may from time to
time, at its sole discretion, subject to the conditions described below,
voluntarily make an Addition to the Trust.
The Seller may designate, from time to time, at its sole discretion,
Eligible Accounts to be included as Accounts ("Automatic Additional Accounts"),
subject to the limitations (the "Aggregate Additional Limit") specified in each
Prospectus Supplement. The Aggregate Additional Limit is intended to limit the
extent to which the Seller, by designating Automatic Additional Accounts, may
alter the composition of the Accounts without Rating Agency consent. If the
aggregate number of Automatic Additional Accounts designated to be included as
Accounts plus the number of Accounts added pursuant to the preceding paragraph
without prior review by each Rating Agency with respect to any of the periods
specified in the Prospectus Supplements would exceed the Aggregate Additional
Limit, then no Automatic Additional Accounts may be added during such periods
without the consent of each Rating Agency. On or before each Distribution Date,
the Seller shall have delivered to the Trustee, each Rating Agency and certain
providers of Series Enhancement an opinion of outside counsel with respect to
the Automatic Additional Accounts included as Accounts during the preceding
Monthly Period confirming the validity and perfection of each transfer of such
Automatic Additional Accounts. If such opinion of counsel with respect to any
Automatic Additional Accounts is not so received, the ability of the Bank to
designate Automatic Additional Accounts will be suspended until such time as the
Rating Agency otherwise consents in writing. Automatic Additional Accounts and
Accounts relating to any Addition are collectively referred to herein as
"Additional Accounts."
In connection with an Addition, the Seller will convey to the Trust the
Receivables arising in Additional Accounts and Participations subject to the
following conditions, among others (provided that the following conditions
(other than the delivery of a written assignment and a computer file or
microfiche list as described in clause (b)) shall not apply to the transfer to
the Trust of Receivables in Automatic Additional Accounts): (a) on or before the
fifth calendar day immediately preceding any such required Addition or on or
before the tenth business day immediately preceding any such other Addition, the
Seller shall have given the Trustee, the Servicer, the Rating Agencies and
certain providers of Series Enhancement written notice that the
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Receivables arising in the Additional Accounts or Participations will be
included as Trust Assets; (b) on or before the date on which any such
Receivables are added to the Trust, the Seller shall have delivered to the
Trustee a written assignment and a computer file or microfiche list containing a
true and complete list of the related Additional Accounts specifying for each
such Account its account number, the aggregate amount outstanding in such
Account and the aggregate amount of Principal Receivables outstanding in such
Account; (c) in the case of an Addition other than a required Addition, the
Seller shall have received confirmation from each Rating Agency that such
Addition will not result in a Ratings Effect; (d) in the case of a required
Addition which exceeds the Aggregate Additional Limit, the Seller shall have
provided each Rating Agency with 10 calendar days' prior written notice and each
Rating Agency shall not have notified the Seller that such Addition would result
in a Ratings Effect; and (e) prior to or on the date any such Receivables or
Participations are added to the Trust, the Seller shall have delivered to the
Trustee and certain providers of Series Enhancement a certificate of an
authorized officer stating that any related Additional Accounts are Eligible
Accounts and that the Seller reasonably believes that (i) such Addition will
not, based on the facts known to such officer at the time of such certification,
cause a Pay Out Event to occur with respect to any Series (ii) in the case of
Additional Accounts, no selection procedure was utilized by the Seller that
would result in a selection of Additional Accounts (from the available Eligible
Accounts owned by the Seller) that would be materially adverse to the interests
of the Certificateholders of any Series as of the date of the Addition. The only
limitations on the Bank's right to designate Additional Accounts, including
Automatic Additional Accounts, are those described herein and in the related
Prospectus Supplement.
The Seller may direct that the Principal Receivables in the Additional
Accounts be treated as Principal Receivables outstanding on the last day of the
Monthly Period preceding the Monthly Period in which the Addition is made for
purposes of calculating Floating Allocation Percentages and Principal Allocation
Percentages for the Monthly Period of such Addition. Such direction may be made
on the date such Addition is made (the "Addition Date") only if all Collections
with respect to the Additional Accounts for the period from the last day of the
preceding Monthly Period through the Addition Date must be deposited in the
Collection Account on the Addition Date. Following any such Addition, the
Servicer will allocate Collections for the balance of such Monthly Period,
including the Collections deposited on the Addition Date, to the
Certificateholders' Interest of each Series and the Seller's Interest so that
each interest receives the same allocations of Finance Charge Receivables,
Principal Receivables and Defaulted Amounts that it would have received if such
Additional Accounts had been included in the Trust for the entire Monthly Period
in which the Addition occurred.
Additional Accounts or Participations may include accounts originated using
criteria different from those that were applied to the Initial Accounts because
such accounts were originated at a later date or were part of a portfolio of
revolving credit card accounts which were not part of the Bank Portfolio as of
the Trust Cut-Off Date or which were acquired from another institution.
Moreover, Additional Accounts and accounts included in Participations may not be
accounts of the same type previously included in the Trust. See "The Pooling
Agreement Generally--Representations and Warranties." Consequently, there can be
no assurance that such Additional Accounts or Participations will be of the same
credit quality or have the same payment characteristics as the Initial Accounts
or the Additional Accounts previously included in the Trust.
Additional Accounts of a type different than the Initial Accounts may
contain Receivables that consist of fees, charges and amounts that are different
from the fees, charges and amounts that have been designated as Finance Charge
Receivables and Principal Receivables herein and Participations may be added to
the Trust as Additions. In either case, the Servicer will designate the portions
of funds collected or to be collected in respect of such Receivables or
Participations to be treated for purposes of the Pooling Agreement as Principal
Receivables and Finance Charge Receivables.
REMOVAL OF ACCOUNTS
On any day of any Monthly Period, the Seller shall have the right to require
the reassignment to it or its designee of all the Trust's right, title and
interest in, to and under the Receivables then existing and thereafter created,
all monies due or to become due and all amounts received with respect thereto
and all proceeds thereof in or with respect to the Removed Accounts designated
by the Seller, upon satisfaction of the following conditions: (a) on or before
the fifth business day (the "Removal Notice Date") immediately
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preceding the date upon which the Receivables in such Accounts are to be removed
from the Trust, the Seller shall have given the Trustee, the Servicer, each
Rating Agency and certain providers of Series Enhancement written notice of such
removal specifying the date for removal of the Removed Accounts (the "Removal
Date"); (b) on or prior to the date that is ten business days after the Removal
Date, the Seller shall have delivered to the Trustee a computer file or
microfiche list containing a true and complete list of the Removed Accounts
specifying for each such Account, as of the Removal Notice Date, its account
number, the aggregate amount outstanding in such account and the aggregate
amount of Principal Receivables outstanding in such Account; (c) the Seller
shall have represented and warranted as of such Removal Date that the list of
Removed Accounts delivered pursuant to clause (b) above is true and complete in
all material respects; (d) the Seller shall have received confirmation from each
Rating Agency that such removal will not result in a Ratings Effect; and (e) the
Seller shall have delivered to the Trustee and certain providers of Series
Enhancement a certificate of an authorized officer, dated the Removal Date, to
the effect that the Seller reasonably believes that (i) such removal will not,
based on the facts known to such officer at the time of such certification,
cause a Pay Out Event to occur with respect to any Series and (ii) no selection
procedure was utilized by the Seller that would result in a selection of Removed
Accounts that would be materially adverse to the interests of the
Certificateholders of any Series as of the Removal Date; and (f) as of the
Removal Notice Date. Such removal could occur for a number of reasons including,
among others, a determination by the Seller that the Trust contains more
Receivables than the Seller is obligated to retain in the Trust under the
Pooling Agreement and any applicable Supplements and a determination that the
Seller does not desire to obtain additional financing through the Trust at such
time. The only limitation on the Bank's right to require the reassignment to it
or its designee of the Receivables in designated Removed Accounts are those
described herein and in the related Prospectus Supplement.
Upon satisfaction of the above conditions, the Trustee shall execute and
deliver to the Seller a written reassignment and shall be deemed to sell,
transfer, assign, set over and otherwise convey to the Seller or its designee,
without recourse, representation or warranty, all the right, title and interest
of the Trust in and to the Receivables arising in the Removed Accounts, all
monies due and to become due and all amounts received with respect thereto and
all proceeds thereof.
DISCOUNT OPTION
The Pooling Agreement provides that the Seller may at any time and from time
to time, but without any obligation to do so, designate a specified fixed or
variable percentage based on a formula as specified in the related Prospectus
Supplement (the "Discount Percentage") of the amount of Receivables arising in
the Accounts on and after the date such designation becomes effective that
otherwise would have been treated as Principal Receivables to be treated as
Finance Charge Receivables (the "Discount Option Receivables"). Although there
can be no assurance that the Seller will do so, such designation may occur
because the Seller determines that the exercise of the discount option is needed
to provide a sufficient yield on the Receivables to cover interest and other
amounts due and payable from collections of Finance Charge Receivables or to
avoid the occurrence of a Pay Out Event relating to the reduction of the average
yield on the portfolio of Accounts in the Trust, if the Supplement for the
related Series provides for such a Pay Out Event. After any such designation,
pursuant to the Pooling Agreement, the Seller may, without notice to or consent
of the Certificateholders, from time to time reduce or eliminate the percentage
of Receivables subject to such designation or reduction; provided, however, that
such reduction or elimination will only occur at the time, if any, that the
Seller delivers to the Trustee a certificate of an authorized officer to the
effect that, in the reasonable belief of the Seller, such reduction or
elimination would not have adverse regulatory or other accounting implications
for the Seller. The Seller must provide 30 days' prior written notice to the
Servicer, the Trustee, each Rating Agency and any Series Enhancer of any such
designation or reduction, and such designation or reduction will become
effective on the date specified therein only if (i) the Seller has delivered to
the Trustee and certain providers of Series Enhancement a certificate of an
authorized officer to the effect that, based on the facts known to such officer
at the time, the Seller reasonably believes that such designation or reduction
will not at the time of its occurrence cause a Pay Out Event or an event which
with notice or the lapse of time would constitute a Pay Out Event, to occur with
respect to any Series and (ii) the Seller has received written notice from each
Rating Agency that such designation or reduction will not have a Ratings Effect.
On the Date of Processing of any collections on or after the date the exercise
of the discount
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option takes effect, the product of (a) a fraction the numerator of which is the
amount of Discount Option Receivables and the denominator of which is the amount
of all of the Principal Receivables (including Discount Option Receivables) at
the end of the prior Monthly Period and (b) collections of Receivables that
arise in the Accounts on such day on or after the date such option is exercised
that otherwise would be Principal Receivables will be deemed collections of
Finance Charge Receivables and will be applied accordingly, unless otherwise
provided in the related Prospectus Supplement. Any such designation would result
in an increase in the amount of Finance Charge Receivables and a lower payment
rate of collections in respect of Principal Receivables than would otherwise
occur.
NEW ISSUANCES
The Pooling Agreement provides that, pursuant to any one or more
Supplements, the Seller may direct the Trustee to issue from time to time new
Series subject to the conditions described below (each such issuance a "New
Issuance"). Each New Issuance will have the effect of decreasing the Seller
Amount to the extent of the Invested Amount of such new Series. Under the
Pooling Agreement, the Seller may designate, with respect to any newly issued
Series: (i) its name or designation; (ii) its initial principal amount (or
method for calculating such amount) and its invested amount in the Trust (the
"Invested Amount"), which is generally based on the aggregate amount of
Principal Receivables in the Trust allocated to such Series; (iii) its
certificate rate (or formula for the determination thereof); (iv) the interest
payment date or dates (the "Interest Payment Date") and the date or dates from
which interest shall accrue; (v) the method for allocating collections to
Certificateholders of such Series; (vi) any bank accounts to be used by such
Series and the terms governing the operation of any such bank accounts; (vii)
the percentage used to calculate monthly servicing fees; (viii) the provider and
terms of any form of Series Enhancement with respect thereto; (ix) the terms on
which the Certificates of such Series may be repurchased or remarketed to other
investors; (x) the Series Termination Date; (xi) the number of Classes of
Certificates of such Series, and if such Series consists of more than one Class,
the rights and priorities of each such Class; (xii) the extent to which the
Certificates of such Series will be issuable in temporary or permanent global
form (and, in such case, the depositary for such global certificate or
certificates, the terms and conditions, if any, upon which such global
certificate may be exchanged, in whole or in part, for definitive certificates,
and the manner in which any interest payable on a global certificate will be
paid); (xiii) whether the Certificates of such Series may be issued in bearer
form and any limitations imposed thereon; (xiv) the priority of such Series with
respect to any other Series; (xv) the Group, if any, in which such Series will
be included; and (xvi) any other relevant terms (all such terms, the "Principal
Terms" of such Series). None of the Seller, the Servicer, the Trustee or the
Trust is required or intends to obtain the consent of any Certificateholder of
any outstanding Series to issue any additional Series. The Seller may offer any
Series to the public under a Prospectus Supplement or other Disclosure Document
in transactions either registered under the Securities Act or exempt from
registration thereunder directly, through one or more underwriters or placement
agents, in fixed-price offerings or in negotiated transactions or otherwise. See
"Plan of Distribution." Any such Series may be issued in fully registered or
book-entry form in minimum denominations determined by the Seller. The Seller
intends to offer, from time to time, additional Series.
The Pooling Agreement provides that the Seller may designate Principal Terms
such that each Series has an Accumulation Period or a Scheduled Amortization
Period which may have a different length and begin on a different date than such
periods for any other Series. Further, one or more Series may be in their
Accumulation Period or Scheduled Amortization Period while other Series are not.
Collections of Principal Receivables otherwise allocable to a Series that is not
amortizing or accumulating principal will be treated as Shared Principal
Collections and reallocated to a Series that is amortizing or accumulating
principal. Moreover, each Series may have the benefits of Series Enhancements
issued by enhancement providers different from the providers of Series
Enhancement with respect to any other Series. Under the Pooling Agreement, the
Trustee shall hold any such Series Enhancement only on behalf of the Series to
which such Series Enhancement relates. With respect to each such Series
Enhancement, the Seller may deliver a different form of Series Enhancement
agreement. The Seller also has the option under the Pooling Agreement to vary
among Series the terms upon which a Series may be repurchased by the Seller or
remarketed to other investors. There is no limit to the number of New Issuances
the Seller may cause under the Pooling
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Agreement. The Trust will terminate only as provided in the Pooling Agreement.
There can be no assurance that the terms of any Series might not have an impact
on the timing and amount of payments received by a Certificateholder of another
Series.
Under the Pooling Agreement and pursuant to a Supplement, a New Issuance may
only occur upon the satisfaction of certain conditions provided in the Pooling
Agreement. The obligation of the Trustee to authenticate the Certificates of
such new Series and to execute and deliver the related Supplement is subject to
the satisfaction of the following conditions: (a) on or before the fifth
business day immediately preceding the date upon which the New Issuance is to
occur, the Seller shall have given the Trustee, the Servicer, each Rating Agency
and certain providers of Series Enhancement written notice of such New Issuance
and the date upon which the New Issuance is to occur; (b) the Seller shall have
delivered to the Trustee the related Supplement, in form satisfactory to the
Trustee, executed by each party to the Pooling Agreement other than the Trustee;
(c) the Seller shall have delivered to the Trustee any related Series
Enhancement agreement executed by each of the parties to such agreement; (d) the
Trustee shall have received confirmation from each Rating Agency that such New
Issuance will not result in a Ratings Effect; (e) the Seller shall have
delivered to the Trustee and certain providers of Series Enhancement a
certificate of an authorized officer, dated the date upon which the New Issuance
is to occur, to the effect that the Seller reasonably believes that such
issuance will not, based on the facts known to such officer at the time of such
certification, cause a Pay Out Event to occur with respect to any Series; (f)
the Seller shall have delivered to the Trustee, each Rating Agency and certain
providers of Series Enhancement an opinion of counsel acceptable to the Trustee
that for federal and Maryland state income tax purposes (x) following such New
Issuance the Trust will not be deemed to be an association (or publicly traded
partnership) taxable as a corporation, (y) such New Issuance will not 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 and (z) such New
Issuance will not cause or constitute an event in which gain or loss would be
recognized by any Certificateholders or the Trust (an opinion of counsel to the
effect referred to in clauses (x), (y) and (z) with respect to any action is
referred to herein as a "Tax Opinion"); (g) the Seller Amount shall not be less
than 2% of the total amount of Principal Receivables, in each case as of the
date upon which the New Issuance is to occur after giving effect to such
issuance; and (h) any other conditions specified in any Supplement. Upon
satisfaction of the above conditions, the Trustee shall execute the Supplement
and issue to the Seller the Certificates of such new Series for execution and
redelivery to the Trustee for authentication.
COLLECTION ACCOUNT
The Servicer will establish and maintain for the benefit of the
Certificateholders of each Series, in the name of the Trustee, on behalf of the
Trust, an Eligible Deposit Account bearing a designation clearly indicating that
the funds deposited therein are held for the benefit of the Certificateholders
of each Series (the "Collection Account"). "Eligible Deposit Account" means
either (a) a segregated account with an Eligible Institution or (b) a segregated
trust account with the corporate trust department of a depository institution
organized under the laws of the United States or any one of the states thereof,
including the District of Columbia (or any domestic branch of a foreign bank),
and acting as a trustee for funds deposited in such account, so long as any of
the securities of such depository institution shall have a credit rating from
the Rating Agency in one of its generic credit rating categories which signifies
investment grade. "Eligible Institution" means (x) a depository institution
(which may be the Trustee) organized under the laws of the United States or any
one of the states thereof which at all times (a) has either (i) a long-term
unsecured debt rating of A2 or better by Moody's Investors Service, Inc.
("Moody's") or (ii) a certificate of deposit rating of P-1 by Moody's, (b) has
either (i) a long-term unsecured debt rating of AAA by Standard & Poor's
Corporation ("Standard & Poor's") or (ii) a certificate of deposit rating of
A-1+ by Standard & Poor's and (c) is a member of the FDIC or (y) any other
institution that is acceptable to each Rating Agency. The Collection Account
will initially be maintained with the Trustee. If at any time the Collection
Account ceases to be an Eligible Deposit Account, the Collection Account shall
be moved so that it will again be qualified as an Eligible Deposit Account.
Funds in the Collection Account generally will be invested in (i) obligations
fully guaranteed by the United States of America, (ii) demand deposits, time
deposits or certificates of deposit of depository institutions or trust
companies, the commercial paper, if any, of which has the highest rating from
Moody's and Standard & Poor's (iii) commercial paper (or other short term
obligations) having,
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at the time of the Trust's investment therein, a rating in the highest rating
category from Moody's and Standard & Poor's, (iv) demand deposits, time deposits
and certificates of deposit which are fully insured by the FDIC, (v) notes or
bankers' acceptances issued by any depository institution or trust company
described in (ii) above, (vi) money market funds which have the highest rating
from Moody's and Standard & Poor's, or have otherwise been approved in writing
by each Rating Agency, (vii) time deposits with an entity, the commercial paper
of which has the highest rating from Moody's and Standard & Poor's and (viii)
any other investments approved in writing by each Rating Agency (collectively,
"Eligible Investments"). Such funds may be invested in debt obligations of the
Bank or its affiliates so long as such obligations qualify as Eligible
Investments. Any earnings (net of losses and investment expenses) on funds in
the Collection Account will be treated as collections of Finance Charge
Receivables with respect to the last day of the related Monthly Period except as
otherwise specified in any 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 Collection Account for the purpose of
carrying out its duties under the Pooling Agreement and any Supplement. The
Paying Agent shall have the revocable power to withdraw funds from the
Collection Account for the purpose of making distributions to the
Certificateholders. The Paying Agent shall initially be the Trustee.
ALLOCATION PERCENTAGES
Pursuant to the Pooling Agreement, the Servicer will allocate among the
Certificateholders' Interest of each Series and the Seller's Interest all
amounts collected with respect to Finance Charge Receivables and Principal
Receivables and the Defaulted Amount with respect to each day during any Monthly
Period as follows:
(a) collections of Finance Charge Receivables and the Defaulted Amount
will at all times be allocated to the Certificateholders' Interest of
a Series based on the Floating Allocation Percentage of such Series; and
(b) collections of Principal Receivables will at all times be allocated
to the Certificateholders' Interest of such Series based on the
Principal Allocation Percentage of such Series.
The "Floating Allocation Percentage" and the "Principal Allocation Percentage"
with respect to any Series will be determined as set forth in the related
Supplement and, with respect to each Series offered hereby, in the related
Prospectus Supplement. Amounts not allocated to the Certificateholders' Interest
of any Series as described above will be allocated to the Seller's Interest.
DEPOSITS IN COLLECTION ACCOUNT
For as long as (i) the Bank remains the Servicer under the Pooling Agreement
and (ii) either (x) the Bank, as the Servicer, provides to the Trustee a letter
of credit covering collection risk of the Servicer acceptable to each Rating
Agency (as evidenced by a letter from each Rating Agency to the effect that no
Ratings Effect would occur) or (y) the Bank has and maintains a certificate of
deposit rating of at least A-1 and P-1 (or their equivalent) by Moody's and
Standard & Poor's, the Bank may use for its own benefit all collections received
with respect to the Receivables in each Monthly Period until the business day
preceding the related Distribution Date, at which time the Bank will deposit all
such collections, to the extent described below, into the Collection Account,
and the Servicer will make the deposits and payments to the accounts and parties
described herein and in the related Prospectus Supplement on the date of such
deposit. However, if the Bank is no longer the Servicer or fails to maintain the
required letter of credit covering collection risk or the required certificate
of deposit rating, the Servicer will make such deposits, as described below, not
later than two business days after the Date of Processing. Whether the Servicer
is required to make deposits of collections pursuant to the first or the second
preceding sentence, (i) the Servicer will only be required to deposit
collections into the Collection Account up to the aggregate amount of
collections required to be deposited into an account established for any Series
or, without duplication, distributed on the related Distribution Date or Payment
Date to Certificateholders of any Series or to the issuer of any Series
Enhancement pursuant to the terms of any Supplement or Series Enhancement
agreement and (ii) if
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at any time prior to such Distribution Date or Payment 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 such excess from the Collection Account.
On the earlier of (i) the second business day after the Date of Processing
and (ii) the day on which the Servicer deposits any collections into the
Collection Account, the Servicer will pay to the holder of the Seller
Certificate (a) such holder's allocable portion of collections of Principal
Receivables, provided that the Seller Amount on such day (after giving effect to
any new Receivables transferred to the Trust on such day) is greater than zero;
and (b) such holder's allocable portion of collections of Finance Charge
Receivables. Any amount not allocated to the holder of the Seller Certificate
because the Seller Amount is zero will be deposited in the Special Funding
Account until the Seller Amount is greater than zero (at which time such amount
will be allocated to the holder of the Seller Certificate) or until an
Accumulation Period, Scheduled Amortization Period or Early Amortization Period
commences for any Series (after which such amount will be treated as Shared
Principal Collections to the extent needed to cover principal payments due to or
for the benefit of such Series).
SHARED PRINCIPAL COLLECTIONS
Collections of Principal Receivables for any Monthly Period allocated to the
Certificateholders' Interest of any Series offered hereby will first be used to
cover certain amounts described in the related Prospectus Supplement (including
any required deposits into a Principal Funding Account or required distributions
to Certificateholders of such Series). The Servicer will determine the amount of
collections of Principal Receivables for any Monthly Period (plus certain other
amounts described in the related Prospectus Supplement) allocated to such Series
remaining after covering such required deposits and distributions and any
similar amount remaining for any other Series (collectively, "Shared Principal
Collections"). The Servicer will allocate the Shared Principal Collections to
cover any principal distributions to Certificateholders and deposits to
Principal Funding Accounts for any Series that are either scheduled or permitted
and that have not been covered out of the investor principal collections and
certain other amounts for such Series ("Principal Shortfalls"). If Principal
Shortfalls exceed Shared Principal Collections for any Monthly Period, Shared
Principal Collections will be allocated pro rata among the applicable Series
based on the respective Principal Shortfalls of such Series. To the extent that
Shared Principal Collections exceed Principal Shortfalls, the balance will be
allocated to the holder of the Seller Certificate, PROVIDED that (a) such Shared
Principal Collections will be distributed to the holder of the Seller
Certificate only to the extent that the Seller Amount is greater than the
Required Seller Amount (see "--Deposits in Collection Account") and (b) in
certain circumstances described below under "--Special Funding Account," such
Shared Principal Collections will be deposited in the Special Funding Account.
Any such reallocation of collections of Principal Receivables will not result in
a reduction in the Investment Amount of the Series to which such collections
were initially allocated. There can be no assurance that there will be any
Shared Principal Collections with respect to any Monthly Period.
SPECIAL FUNDING ACCOUNT
If, on any date, the Seller Amount is less than or equal to the Required
Seller Amount or the amount of Principal Receivables in the Trust is less than
or equal to the Required Principal Balance, the Servicer shall not distribute to
the holder of the Seller Certificate any Shared Principal Collections that
otherwise would be distributed to such holder, but shall deposit such funds in
an Eligible Deposit Account established and maintained by the Servicer for the
benefit of the Certificateholders of each Series, in the name of the Trustee, on
behalf of the Trust, and bearing a designation clearly indicating that the funds
deposited therein are held for the benefit of the Certificateholders of each
Series (the "Special Funding Account"). Funds on deposit in the Special Funding
Account will be withdrawn and paid to the holder of the Seller Certificate on
any Distribution Date to the extent that, after giving effect to such payment,
the Seller Amount exceeds the Required Seller Amount and the amount of Principal
Receivables in the Trust exceeds the Required Principal Balance on such date;
PROVIDED, HOWEVER, that if an Accumulation Period, Scheduled Amortization Period
or Early Amortization Period commences with respect to any Series, any funds on
deposit in the
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Special Funding Account will be released from the Special Funding Account,
deposited in the Collection Account and treated as Shared Principal Collections
to the extent needed to make principal payments due to or for the benefit of
such Series.
Funds on deposit in the Special Funding Account will be invested by the
Trustee, at the direction of the Servicer, in Eligible Investments. Any earnings
(net of losses and investment expenses) earned on amounts on deposit in the
Special Funding Account during any Monthly Period will be withdrawn from the
Special Funding Account and treated as collections of Finance Charge Receivables
with respect to such Monthly Period.
SHARING OF EXCESS FINANCE CHARGE COLLECTIONS
Any Series offered hereby may be included in a Group. Each Series in a
specific Group will be entitled to share Excess Finance Charge Collections in
the manner, and to the extent, described below with each other Series, if any,
in such Group. The Prospectus Supplement with respect to a Series offered hereby
will specify whether such Series will be included in a Group and whether any
previously issued Series have been included in such Group. Subsequently issued
Series may also be included in such Group. Collections of Finance Charge
Receivables and certain other amounts allocable to the Certificateholders'
Interest of any Series that is included in a Group in excess of the amounts
necessary to make required payments with respect to such Series (including
payments to the provider of any related Series Enhancement) that are payable out
of collections of Finance Charge Receivables ("Excess Finance Charge
Collections") will be applied to cover any shortfalls with respect to amounts
payable from collections of Finance Charge Receivables allocable to any other
Series included in such Group, pro rata based upon the amount of the shortfall,
if any, with respect to each other Series in such Group; PROVIDED, HOWEVER, that
the sharing of Excess Finance Charge Collections among Series in any Group will
cease if the Seller shall deliver to the Trustee a certificate of an authorized
officer to the effect that, in the reasonable belief of the Seller, the
continued sharing of Excess Finance Charge Collections among Series in any Group
would have adverse regulatory implications with respect to the Seller. Following
the delivery by the Seller of any such certificate to the Trustee there will not
be any further sharing of Excess Finance Charge Collections among the Series in
any Group. In all cases, any Excess Finance Charge Collections remaining after
covering shortfalls with respect to all outstanding Series in a Group will be
paid to the holder of the Seller Certificate. While any Series offered hereby
may be included in a Group, there can be no assurance that (i) any other Series
will be included in such Group, (ii) there will be any Excess Finance Charge
Collections with respect to such Group for any Monthly Period or (iii) the
Seller will not at any time deliver a certificate as described above. While the
Seller believes that, based upon applicable rules and regulations as currently
in effect, the sharing of Excess Finance Charge Collections among Series in a
Group will not have adverse regulatory implications for it, there can be no
assurance that this will continue to be true in the future.
FUNDING PERIOD
For any Series of Certificates, the related Prospectus Supplement may
specify that during a Funding Period, the Pre-Funding Amount will be held in a
Pre-Funding Account pending the transfer of additional Receivables to the Trust
or pending the reduction of the Invested Amounts of other Series issued by the
Trust. The related Prospectus Supplement will specify the initial Invested
Amount with respect to such Series, the Full Invested Amount and the date by
which the Invested Amount is expected to equal the Full Invested Amount. The
Invested Amount will increase as Receivables are delivered to the Trust or as
the Invested Amounts of other Series of the Trust are reduced. The Invested
Amount may also decrease due to the occurrence of a Pay Out Event with respect
to such Series as provided in the related Prospectus Supplement.
During the Funding Period, funds on deposit in the Pre-Funding Account for a
Series of Certificates will be withdrawn and paid to the Seller to the extent of
any increases in the Invested Amount. If the Invested Amount does not for any
reason equal the Full Invested Amount by the end of the Funding Period, any
amount remaining in the Pre-Funding Account and any additional amounts specified
in the related Prospectus Supplement will be payable to the Certificateholders
of such Series in the manner and at such time as set forth in the related
Prospectus Supplement.
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If so specified in the related Prospectus Supplement, moneys in the
Pre-Funding Account will be invested by the Trustee in Eligible Investments or
will be subject to a guaranteed rate or investment agreement or other similar
arrangement, and, 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 Collection Account
for distribution in respect of interest on the Certificates of the related
Series in the manner specified in the related Prospectus Supplement.
PAIRED SERIES
If so provided in the related Prospectus Supplement, a Series may be paired
with a Paired Series issued by the Trust at or after the commencement of the
Scheduled Amortization Period or Accumulation Period for such Series. As the
Invested Amount of the Series having a Paired Series is reduced, the Invested
Amount in the Trust of the Paired Series will increase by an equal amount. Upon
payment in full of the Series having a Paired Series, the Invested Amount of
such Paired Series will be equal to the Invested Amount paid to
Certificateholders of such Series. If a Pay Out Event occurs with respect to the
Series having a Paired Series or with respect to the Paired Series when the
Series is in a Scheduled Amortization Period or Accumulation Period, the
Principal Allocation Percentage for the Series and the Principal Allocation
Percentage for the Paired Series will be reset as provided in the related
Prospectus Supplement.
DEFAULTED RECEIVABLES; REBATES AND FRAUDULENT CHARGES
"Defaulted Receivables" for any Monthly Period are Principal Receivables
that were charged-off as uncollectible in such Monthly Period. The "Defaulted
Amount" for any Monthly Period will be an amount (not less than zero) equal to
(a) the amount of Defaulted Receivables for such Monthly Period minus (b) the
amount of any Defaulted Receivables that the Seller or the Servicer becomes
obligated to accept reassignment or assignment during such Monthly Period
(unless an Insolvency Event has occurred with respect to the Seller or the
Servicer, in which event the amount of such Defaulted Receivables will not be
added to the sum so subtracted). Receivables in any account will be charged-off
as uncollectible in accordance with the Credit Card Guidelines and the
Servicer's customary and usual policies and procedures for servicing revolving
credit card and other revolving credit account receivables comparable to the
Receivables. The current policy of the Seller is to charge off the receivables
in an account when that account becomes 190 days delinquent (or sooner in the
event of receipt of notice of death or bankruptcy of the credit card holder).
If the Servicer adjusts downward the amount of any Principal Receivable
(other than Ineligible Receivables which have been, or are to be, reassigned to
the Seller) because of a rebate, refund, counterclaim, defense, error,
fraudulent charge or counterfeit charge to a cardholder or such Principal
Receivable was created in respect of merchandise which was refused or returned
by a cardholder, or if the Servicer otherwise adjusts downward the amount of any
Principal Receivable without receiving collections therefor or charging off such
amount as uncollectible, the amount of the Principal Receivables in the Trust
with respect to the Monthly Period in which such adjustment takes place will be
reduced by the amount of the adjustment. Furthermore, in the event that the
exclusion of any such Receivables would cause the Seller Amount at such time to
be less than the Required Seller Amount, the Seller shall be required to pay an
amount equal to such deficiency into the Special Funding Account.
CREDIT ENHANCEMENT
GENERAL. For any Series, Credit Enhancement may be provided with respect to
one or more Classes thereof. Credit Enhancement with respect to one or more
Classes of a Series offered hereby may include a letter of credit, a cash
collateral account, a surety bond, an insurance policy or any other form of
credit enhancement described in the related Prospectus Supplement, or any
combination of the foregoing. Credit Enhancement may also be provided to a Class
or Classes of a Series by subordination provisions that require that
distributions of principal or interest be made with respect to the Certificates
of such Class or Classes before distributions are made to one or more Classes of
such Series. If so specified in the related Prospectus Supplement, any form of
Credit Enhancement may be available to more than one Class or Series to the
extent described therein.
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The presence of Credit Enhancement with respect to a Class is intended to
enhance the likelihood of receipt by Certificateholders of such Class of the
full amount of principal and interest with respect thereto and to decrease the
likelihood that such Certificateholders will experience losses. However, unless
otherwise specified in the related Prospectus Supplement, the Credit
Enhancement, if any, with respect thereto 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 that exceed
the amount covered by the Credit Enhancement or that are not covered by the
Credit Enhancement, Certificateholders will bear their allocable share of
deficiencies. In addition, if specific Credit Enhancement is provided for the
benefit of more than one Class or Series, Certificateholders of any such Class
or Series will be subject to the risk that such Credit Enhancement will be
exhausted by the claims of Certificateholders of other Classes or Series.
If Credit Enhancement is provided with respect to a Series offered hereby,
the related Prospectus Supplement will include a description of (a) the amount
payable under such Credit Enhancement, (b) any conditions to payment thereunder
not otherwise described herein, (c) the conditions (if any) under which the
amount payable under such Credit Enhancement may be reduced and under which such
Credit Enhancement may be terminated or replaced and (d) any provisions of any
agreement relating to such Credit Enhancement material to the Certificateholders
of such Series. Additionally, in certain cases, the related Prospectus
Supplement may set forth certain information with respect to the provider of any
third-party Credit Enhancement (the "Credit Enhancer"), including (i) a brief
description of its principal business activities, (ii) its principal place of
business, place of incorporation or the jurisdiction under which it is chartered
or licensed to do business, (iii) if applicable, the identity of regulatory
agencies that exercise primary jurisdiction over the conduct of its business and
(iv) its total assets, and its stockholders' or policyholders' surplus, if
applicable, as of a date specified in the Prospectus Supplement. If so described
in the related Prospectus Supplement, Credit Enhancement with respect to a
Series offered hereby 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 Enhancer 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") and may be entitled to
the benefit of the Trustee's security interest in the Receivables, in each case
subordinated to the interest of the Certificateholders of such Series.
SUBORDINATION. If so specified in the related Prospectus Supplement, one or
more Classes of a Series offered hereby may be subordinated to one or more other
Classes of such Series. If so specified in the related Prospectus Supplement,
the rights of the holders of the subordinated Certificates to receive
distributions of principal or interest on any Payment Date will be subordinated
to such rights of the holders of the Certificates that are senior to such
subordinated Certificates to the extent set forth in the related Prospectus
Supplement. The related Prospectus Supplement will also set forth information
concerning the amount of subordination of a Class or Classes of subordinated
Certificates in a Series, the circumstances in which such subordination will be
applicable, the manner, if any, in which the amount of subordination will
decrease over time, and the conditions under which amounts available from
payments that would otherwise be made to holders of such subordinated
Certificates will be distributed to holders of Certificates that are senior to
such subordinated Certificates. The amount of subordination will decrease
whenever amounts otherwise payable to the holders of subordinated Certificates
are paid to the holders of the Certificates that are senior to such subordinated
Certificates.
LETTER OF CREDIT. If so specified in the related Prospectus Supplement, a
letter of credit with respect to a Series or Class of Certificates offered
hereby may be issued by a bank or financial institution specified in the related
Prospectus Supplement (the "L/C Issuer"). Subject to the terms and conditions
specified in the related Prospectus Supplement, the L/C Issuer will be obligated
to honor drawings under a letter of credit in an aggregate dollar amount (which
may be fixed or may be reduced as described in the related Prospectus
Supplement), net of unreimbursed payments thereunder, equal to the amount
described in the related Prospectus Supplement. The amount available under a
letter of credit will be reduced to the extent of the unreimbursed payments
thereunder.
CASH COLLATERAL ACCOUNT. If specified in the related Prospectus Supplement,
the Certificates of any Class or Series offered hereby may have the benefit of a
cash collateral account. A cash collateral account
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with respect to a Class or Series may be fully or partially funded on the
Closing Date with respect thereto and the funds on deposit therein will be
invested in Eligible Investments. The amount available to be withdrawn from a
cash collateral account will be the lesser of the amount on deposit in the cash
collateral account and an amount specified in the related Prospectus Supplement.
The related Prospectus Supplement will set forth the circumstances under which
such withdrawals will be made from the cash collateral account.
SURETY BOND OR INSURANCE POLICY. If so specified in the related Prospectus
Supplement, insurance with respect to a Series or Class of Certificates offered
hereby may be provided by one or more insurance companies. Such insurance will
guarantee, with respect to one or more Classes of the related Series,
distributions of interest or principal in the manner and amount specified in the
related Prospectus Supplement.
If so specified in the related Prospectus Supplement, a surety bond may be
purchased for the benefit of the holders of any Series or Class of Certificates
offered hereby to assure distributions of interest or principal with respect to
such Series or Class of Certificates in the manner and amount specified in the
related Prospectus Supplement.
SPREAD ACCOUNT. If so specified in the related Prospectus Supplement,
support for a Series or one or more Classes of a Series offered hereby may be
provided by the periodic deposit of certain available excess cash flow from the
Trust Assets into a spread account intended to assure the subsequent
distributions of interest and principal on the Certificates of such Class or
Series in the manner specified in the related Prospectus Supplement.
PAY OUT EVENTS
As described above, the Revolving Period with respect to a Series will
continue until the commencement of the Accumulation Period or the Scheduled
Amortization Period with respect thereto, which will continue until the Invested
Amount of such Series shall have been paid in full or the Series Termination
Date with respect to such Series occurs, unless a Pay Out Event occurs with
respect to such Series prior to any such dates. A "Pay Out Event" will occur
with respect to all Series upon the occurrence of any of the following events:
(a) the occurrence of an Insolvency Event relating to the Seller;
(b) the Trust becomes an "investment company" within the meaning of the
Investment Company Act of 1940, as amended; or
(c) the Seller becomes unable for any reason to transfer Receivables to
the Trust in accordance with the Pooling Agreement.
In addition, a Pay Out Event may occur with respect to any specific Series
upon the occurrence of any other event specified in the related Prospectus
Supplement. Such events may include, but are not required to include nor are
they limited to, (i) the failure by the Seller to make any payment or deposit
required under the Pooling Agreement or the related Supplement within a
specified period of the date such payment or deposit is required to be made,
(ii) the breach of certain other covenants, representations or warranties
contained in the Pooling Agreement or related Supplement, after any applicable
notice and cure period (and, if so specified in the related Prospectus
Supplement, only to the extent such breach has a material adverse effect on the
related Certificateholders), (iii) the failure by the Seller to make a required
Addition to the Trust within a specified time after the date such Addition is
required to be made, (iv) a reduction in the Portfolio Yield below the rates,
and for the period, specified in the related Prospectus Supplement and (v) the
occurrence of a Servicer Default. The Early Amortization Period with respect to
a Series will commence on the day on which a Pay Out Event occurs with respect
thereto. Monthly distributions of principal to the Certificateholders of such
Series will begin on the Distribution Date in the Monthly Period following the
Monthly Period in which such Pay Out Event occurs (such Distribution Date and
each following Distribution Date with respect to such Series, a "Special Payment
Date"). Any amounts on deposit in a Principal Funding Account or an Interest
Funding Account with respect to such Series at such time will be distributed on
such first Special Payment Date to the Certificateholders of such Series. If,
because of the
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occurrence of a Pay Out Event, the Early Amortization Period begins earlier than
the scheduled commencement of a Scheduled Amortization Period or prior to an
Expected Final Payment Date, Certificateholders will begin receiving
distributions of principal earlier than they otherwise would have and such
distributions will not be subject to the Controlled Deposit Amount or the
Controlled Distribution Amount. As a result, the average life of the
Certificates may be reduced. If a Series has more than one Class of
Certificates, each Class may have different Pay Out Events which, in the case of
any Series of Certificates offered hereby, will be described in the related
Prospectus Supplement.
In addition to the consequences of a Pay Out Event discussed above, if an
Insolvency Event occurs, pursuant to the Pooling Agreement, on the day of such
Insolvency Event, the Bank will immediately cease to transfer Principal
Receivables to the Trust and promptly give notice to the Trustee of such
Insolvency Event. Under the terms of the Pooling Agreement, within 15 days the
Trustee will publish a notice of the occurrence of the Insolvency Event stating
that the Trustee intends to sell, dispose of or otherwise liquidate the
Receivables in a commercially reasonable manner and on commercially reasonable
terms unless within 90 days from the date such notice is published, the holders
of Certificates of each Series or, if a Series includes more than one Class,
each Class of such Series, evidencing more than 50% of the aggregate unpaid
principal amount of each such Series or Class (and, in the case of any Series
with respect to which there is an Enhancement Invested Amount, any Credit
Enhancer with respect thereto) instruct the Trustee not to dispose of or
liquidate the Receivables and to continue transferring Principal Receivables as
before such Insolvency Event. The proceeds from any such sale, disposition or
liquidation of the Receivables will be deposited in the Collection Account and
allocated as described in the Pooling Agreement and each Series Supplement. If
the sum of (a) the portion of such proceeds allocated to the Certificateholders'
Interest of any Series and (b) the proceeds of any collections of the
Receivables in the Collection Account allocated to the Certificateholders'
Interest of such Series is not sufficient to pay the Invested Amount of the
Certificates of such Series in full, such Certificateholders may incur a loss.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
The Servicer's compensation for its servicing activities and reimbursement
for its expenses for any Monthly Period will be a servicing fee (the "Servicing
Fee") payable monthly on each Distribution Date in an amount equal to
one-twelfth of the product of (a) the weighted average of the applicable
servicing fee percentages with respect to each Series outstanding (based upon
the applicable servicing fee percentage for each Series and the amount of
Receivables serviced on behalf of each Series) and (b) the amount of Principal
Receivables in the Trust on the last day of the prior Monthly Period. The
Servicing Fee will be allocated among the Seller's Interest, the
Certificateholders' Interests of each Series and, after the Certificates of a
Series have been paid in full, the interest represented by the Enhancement
Investment Amount, if any, with respect to such Series. The share of the
Servicing Fee allocable to the Certificateholders' Interest, which includes the
Enhancement Invested Amount, if any, of a Series offered hereby with respect to
any Distribution Date shall be equal to one-twelfth of the product of (A) the
servicing fee percentage specified in the related Prospectus Supplement with
respect to such Series (the "Series Servicing Fee Percentage") and (B) the sum
of the Invested Amount with respect to such Series (less the amount, if any, on
deposit in any Principal Funding Account with respect to such Series) and the
Enhancement Invested Amount, if any, with respect to such Series as of the last
day of the prior Monthly Period (the "Monthly Investor Servicing Fee"). The
portion of the Servicing Fee not so allocated to the Certificateholders'
Interest of a Series shall be paid by the holder of the Seller Certificate and
in no event shall the Trust, the Trustee or the Certificateholders of any Series
be liable for the share of the Servicing Fee to be paid by such holder. Unless
otherwise provided in any Supplement, in the case of the first Distribution Date
with respect to any Series, the Monthly Investor Servicing Fee shall accrue from
the Closing Date with respect to such Series. The Monthly Investor Servicing Fee
with respect to a Series will be funded from collections of Finance Charge
Receivables allocated to such Series (which, if so specified in the related
Prospectus Supplement, may include all or a portion of the Interchange arising
in the Accounts) or, in certain limited circumstances, from amounts available
from Series Enhancement and other sources, if any, and will be paid on the
Distribution Date with respect to each Monthly Period from the Collection
Account (unless such amount has been netted against deposits by the Servicer to
the Collection Account).
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The Servicer will pay from its servicing compensation certain expenses
incurred in connection with servicing the Receivables including, without
limitation, expenses related to the enforcement of the Receivables, payment of
the fees and disbursements of the Trustee and independent accountants and other
fees that are not expressly stated in the Pooling Agreement to be payable by the
Trust, the Certificateholders of a Series or the Seller (other than Federal,
state, local and foreign income, franchise or other taxes based on income, if
any, or any interest or penalties with respect thereto, imposed upon the Trust).
If the Seller is acting as Servicer and fails to pay the fees and disbursements
of the Trustee, the Trustee will be entitled to receive the portion of the
Servicing Fee that is equal to such unpaid amounts. In no event will the
Certificateholders of a Series be liable to the Trustee for the Servicer's
failure to pay such amounts, and any such amounts so paid to the Trustee will be
treated as paid to the Servicer for all other purposes of the Pooling Agreement.
RECORD DATE
Payments on the Certificates of a Series offered hereby will be made as
described herein and in the relevant Prospectus Supplement to the
Certificateholders in whose names the Certificates were registered (expected to
be Cede, as nominee of DTC) at the close of business on the last day of the
calendar month preceding the date of such payment (each a "Record Date").
However, the final payment on the Certificates of a Series offered hereby will
be made only upon presentation and surrender of such Certificates. Distributions
will be made to DTC in immediately available funds. See "The Pooling Agreement
Generally--Book-Entry Registration."
THE SELLER CERTIFICATE
The Pooling Agreement provides that, in addition to Exchanges, the Seller
may transfer its interest in all or a portion of the Seller Certificate,
provided that prior to any such transfer (a) the Trustee receives written
notification from each Rating Agency that such transfer will not have a Ratings
Effect and (b) the Trustee receives a Tax Opinion. See also "Assumption of the
Bank's Obligations."
DEFEASANCE
Pursuant to the Pooling Agreement, the Seller may terminate its substantive
obligations in respect to a Series or the Pooling Agreement (the "Defeased
Series") by depositing with the Trustee, under the terms of an irrevocable trust
agreement satisfactory to the Trustee, from amounts representing or acquired
with collections on the Receivables (allocated to the Defeased Series and
available to purchase additional Receivables) monies or Eligible Investments
sufficient to make all remaining scheduled interest and principal payments on
the Defeased Series on the dates scheduled for such payments and to pay all
amounts owing to any provider of Series Enhancement. To achieve that end, the
Seller has the right to use collections on Receivables to purchase Eligible
Investments rather than additional Receivables. Prior to its first exercise of
its right to substitute monies or Eligible Investments for Receivables, the
Seller shall deliver to the Trustee a Tax Opinion with respect to such deposit
and termination of obligations and to the Servicer and the Trustee written
notice from each Rating Agency that such transaction will not have a Ratings
Effect. In addition, the Seller must comply with certain other requirements set
forth in the Pooling Agreement, including requirements that the Bank deliver to
the Trustee an opinion of counsel to the effect that the deposit and termination
of obligations will not require the Trust to register as an "investment company"
within the meaning of the Investment Company Act of 1940, as amended, and that
the Seller deliver to the Trustee and certain providers of Series Enhancement a
certificate of an authorized officer stating that, based on the facts known to
such officer at the time, in the reasonable opinion of the Seller, such deposit
and termination of obligations will not at the time of its occurrence cause a
Pay Out Event or an event that, after the giving of notice of the lapse of time,
would constitute a Pay Out Event, to occur with respect to any Series. If the
Seller discharges its substantive obligations in respect of the Defeased Series,
any Series Enhancement for the affected Series might no longer be available to
make payments for such Series.
OPTIONAL TERMINATION; FINAL PAYMENT OF PRINCIPAL
Unless otherwise specified in the Prospectus Supplement with respect to any
Series offered hereby, on any day occurring on or after the day that the sum of
the Invested Amount of the Certificates of a Series and the Enhancement Invested
Amount, if any, with respect to such Series is reduced to 5% or less of the
initial
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Invested Amount of the Certificates of such Series, the Seller will have the
option to repurchase the Certificateholders' Interest of such Series. The
purchase price will be equal to the sum of the Invested Amount 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 unpaid principal
amount of the Certificates (and accrued and unpaid interest with respect to
interest amounts that were due but not paid on a prior Payment Date) through (a)
if the day on which such repurchase occurs is a Distribution Date, the day
preceding the Distribution Date or (b) if the day on which such repurchase
occurs is not a Distribution Date, the day preceding the Distribution Date
following such day, at the applicable certificate rate. Following any such
repurchase, the Certificateholders of such Series will have no further rights
with respect to the Receivables. If the Seller fails for any reason to deposit
the aggregate purchase price for the Certificateholders' Interest of a Series
offered hereby, such repurchase will not occur and payments will continue to be
made to the Certificateholders of such Series as described herein and in the
related Prospectus Supplement.
The last payment of principal and interest on the Certificates of a Series
offered hereby will be due and payable no later than the date (the "Series
Termination Date") specified in the related Prospectus Supplement. In the event
that the Invested Amount of the Certificates of such Series is greater than zero
on the Series Termination Date (or a Distribution Date prior thereto specified
in the related Prospectus Supplement), the Trustee may, subject to any
conditions specified in such Prospectus Supplement, sell or cause to be sold an
interest in the Principal Receivables or certain Principal Receivables, together
in each case with related Finance Charge Receivables, as specified in such
Prospectus Supplement, in an amount equal to the sum of the Invested Amount and
the Enhancement Invested Amount, if any, with respect to such Series. The net
proceeds of any such sale will be deposited in the Collection Account and
allocated to the Certificateholders of such Series, as provided in such
Prospectus Supplement.
REPORTS
No later than the third business day prior to each Distribution Date, the
Servicer will forward to the Trustee, the Paying Agent, each Rating Agency and
certain providers of Series Enhancement with respect to a Series a statement
(the "Monthly Report") prepared by the Servicer setting forth certain
information with respect to the Trust and the Certificates of such Series
(unless otherwise indicated), including: (a) the aggregate amount of Principal
Receivables and Finance Charge Receivables in the Trust as of the end of such
Monthly Period; (b) the Invested Amount with respect to such Series (and, if
such Series includes more than one Class, each such Class); (c) the Floating
Allocation Percentage and, during any Accumulation Period, Scheduled
Amortization Period or Early Amortization Period with respect to such Series,
the Principal Allocation Percentage with respect to such Series; (d) the amount
of collections of Principal Receivables and Finance Charge Receivables processed
during the related Monthly Period and the portion thereof allocated to the
Certificateholders' Interest of such Series; (e) the aggregate outstanding
balance of Accounts which were 30, 60 and 90 days or more delinquent as of the
end of such Monthly Period; (f) the Defaulted Amount with respect to such
Monthly Period and the portion thereof allocated to the Certificateholders'
Interest of such Series; (g) the amount, if any, of charge-offs with respect to
the Certificateholders' Interest of such Series for such Monthly Period; (h) the
Monthly Investor Servicing Fee with respect to such Series for such Monthly
Period; and (i) the available amount of Credit Enhancement with respect to such
Series for such Distribution Date.
With respect to each Interest Payment Date or Special Payment Date (each, a
"Payment Date"), as the case may be, the Monthly Report with respect to any
Series will include the following additional information with respect to the
Certificates of such Series: (a) the total amount distributed; (b) the amount of
such distribution allocable to principal on the Certificates; (c) the amount of
such distribution allocable to interest on the Certificates; and (d) the amount,
if any, by which the unpaid principal balance of the Certificates exceeds the
Invested Amount of such Series as of the Record Date with respect to such
Payment Date. On each Distribution Date, the Paying Agent, on behalf of the
Trustee, will forward to each Certificateholder of record a copy of the Monthly
Report.
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On or before January 31 of each calendar year, the Paying Agent, on behalf
of the Trustee, will furnish (or cause to be furnished) to each person who at
any time during the preceding calendar year was a Certificateholder of record a
statement containing the information required to be provided by an issuer of
indebtedness under the Code for such preceding calendar year or the applicable
portion thereof during which such person was a Certificateholder, together with
such other customary information as is necessary to enable the
Certificateholders to prepare their tax returns. See "Tax Matters."
LIST OF INVESTOR CERTIFICATEHOLDERS
At such time, if any, as Definitive Certificates have been issued, upon
written request of any Certificateholder or group of Certificateholders of
record holding Certificates evidencing not less than 10% of the aggregate unpaid
principal amount of the Certificates of a Series or all outstanding Series, as
the case may be, the Trustee will afford such Certificateholders access during
normal business hours to the current list of Certificateholders of such Series
or all outstanding Series, as the case may be, for purposes of communicating
with other Certificateholders with respect to their rights under the Pooling
Agreement or any Supplement or Certificates. See "Pooling Agreement
Generally--Book-Entry Registration" and "--Definitive Certificates."
The Pooling Agreement does not provide for any annual or other meetings of
Certificateholders.
THE POOLING AGREEMENT GENERALLY
BOOK-ENTRY REGISTRATION
Unless otherwise specified in the related Prospectus Supplement,
Certificateholders may hold Certificates of a Series offered hereby 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 be the registered holder of the global
Certificates. No Certificateholder will be entitled to receive a certificate
representing such person's interest in the Certificates. Unless and until
Definitive Certificates are issued under the limited circumstances described
below, all references herein to actions by Certificateholders shall refer to
actions taken by DTC upon instructions from its Participants, and all references
herein to distributions, notices, reports and statements to Certificateholders
shall refer to distributions, notices, reports and statements to Cede, as the
registered holder of the Certificates, for distribution to Certificateholders in
accordance with DTC procedures.
CEDEL and Euroclear will hold omnibus positions on behalf of their
participants through customers' securities accounts in CEDEL's and Euroclear's
names on the books of their respective Depositaries which in turn will hold such
positions in customers' securities accounts in the Depositaries' names on the
books of DTC. Citibank, N.A. ("Citibank"), will act as depositary for CEDEL and
Morgan Guaranty Trust Company of New York ("Morgan") will act as depositary for
Euroclear (in such capacities, the "Depositaries").
Transfers between DTC participants will occur in the ordinary way 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 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.
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Because of time-zone differences, credits of securities received in CEDEL or
Euroclear as a result of a transaction with a DTC participant will be made
during subsequent securities settlement processing and dated the business day
following the DTC settlement date. Such credits or any transactions in such
securities settled during such processing will be reported to the relevant
Euroclear or CEDEL 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. For
information with respect to tax documentation procedures relating to the
Certificates, see "Tax Matters--Non-U.S. Certificate Owners."
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 UCC and a "clearing agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC was created to hold
securities for its participating organizations ("Participants") and facilitate
the clearance and settlement of securities transactions between Participants
through electronic book-entry changes in accounts of its Participants, thereby
eliminating the need for physical movement of certificates. Participants include
securities brokers and dealers, banks, trust companies and clearing corporations
and may include certain other organizations. Indirect access to the DTC system
also is available to others such as banks, brokers, dealers and trust companies
that clear through or maintain a custodial relationship with a Participant,
either directly or indirectly ("Indirect Participants").
Certificate Owners that are not Participants or Indirect Participants but
desire to purchase, sell or otherwise transfer ownership of, or other interests
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 Paying Agent or the Trustee through
DTC and its Participants. Under a book-entry format, Certificate Owners will
receive payments after the related Payment Date because, while payments are
required to be forwarded to Cede, as nominee for DTC, on each such date, DTC
will forward such payments to its Participants which thereafter will be required
to forward them to Indirect Participants or Certificate Owners. It is
anticipated that the only "Certificateholder" (as such term is used in the
Pooling Agreement and its Supplements) will be Cede, as nominee of DTC, and that
Certificate Owners will not be recognized by the Trustee as "Certificateholders"
under the Pooling Agreement and the Supplements. Certificate Owners will only be
permitted to exercise the rights of Certificateholders under the Pooling
Agreement and the Supplements indirectly through DTC and its Participants which
in turn will exercise their rights 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 of 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.
Because DTC can only act on behalf of Participants, which in turn act on
behalf of Indirect Participants and certain banks, the ability of Certificate
Owners to pledge Certificates to persons or entities that do not participate in
the DTC system, or otherwise take actions in respect of such Certificates, may
be limited due to the lack of a physical certificate for such Certificates.
DTC has advised the Seller that it will take any action permitted to be
taken by a Certificateholder under the Pooling Agreement or the Supplements 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
Certificateholders' Interest only at the direction of and on behalf of
Participants whose holdings include undivided interests that satisfy such
specified percentages. DTC may take conflicting actions with respect to other
undivided interests to the extent that such actions are taken on behalf of
Participants whose holdings include such undivided interests.
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Centrale de Livraison de Valeurs Mobilieres S.A. ("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 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 any
underwriters, agents or dealers with respect to a Series of Certificates offered
hereby. Indirect access to CEDEL is also available to others, such as banks,
brokers, dealers and trust companies that clear through or maintain a custodial
relationship with a CEDEL Participant, either directly or indirectly.
The Euroclear System ("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"), under contract with Euroclear
Clearance System S.C., a Belgian cooperative corporation (the "Cooperative").
All operations are conducted by the Euroclear Operator, and all Euroclear
securities clearance accounts and Euroclear cash accounts are accounts with the
Euroclear Operator, not the Cooperative. The Cooperative establishes policy for
Euroclear on behalf of Euroclear Participants. Euroclear Participants include
banks (including central banks), securities brokers and dealers and other
professional financial intermediaries and may include any underwriters, agents
or dealers with respect to a Series of Certificates offered hereby. Indirect
access to Euroclear 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 that 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 Euroclear and applicable Belgian law
(collectively, the "Terms and Conditions"). The Terms and Conditions govern
transfers of securities and cash within Euroclear, withdrawals of securities and
cash from Euroclear and receipts of payments with respect to securities in the
Euroclear. All securities in Euroclear are held on a fungible basis without
attribution of specific certificates to specific securities clearance accounts.
The Euroclear Operator acts under the Terms and Conditions only on behalf of
Euroclear Participants, and has no record of or relationship with persons
holding through Euroclear Participants.
Distributions with respect to Certificates held through CEDEL or Euroclear
will be credited to the cash accounts of CEDEL Participants or Euroclear
Participants in accordance with the relevant system's rules and procedures, to
the extent received by its Depositary. Such distributions will be subject to tax
reporting in accordance with relevant United States tax laws and regulations.
See "Tax Matters." CEDEL or the Euroclear Operator, as the case may be, will
take any other action permitted to be taken by a Certificateholder under the
Pooling Agreement or the relevant Supplement 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.
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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 stated in the related Prospectus Supplement, the
Certificates of a Series offered hereby will be issued in fully registered,
certificated form to Certificate Owners or their respective nominees
("Definitive Certificates"), rather than to DTC or its nominee only if (i) the
Seller advises the Trustee in writing that DTC is no longer willing or able to
discharge properly its responsibilities as Depository with respect to the
Certificates, and the Trustee or the Seller is unable to locate a qualified
successor, (ii) the Seller, at its option, elects to terminate the book-entry
system through DTC or (iii) after the occurrence of a Servicer Default,
Certificate Owners evidencing not less than 50% of the aggregate unpaid
principal amount of the Certificates of any Class of such Series 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
interests 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 certificates representing the Certificates and instructions for
re-registration, the Trustee will issue such Certificates in the form of
Definitive Certificates, and thereafter the Trustee will recognize the holders
of such Definitive Certificates as "Certificateholders" under the Pooling
Agreement and the relevant Supplement ("Holders").
If Definitive Certificates are issued, distribution of principal and
interest on the Definitive Certificates will be made by the Paying Agent or the
Trustee directly to the Holders in whose names the Definitive Certificates were
registered on the related Record Date in accordance with the procedures set
forth herein and in the Pooling Agreement and the relevant Supplement.
Distributions will be made by check mailed to the address of each Holder as it
appears on the register maintained by the Trustee, except that the final payment
on any Definitive Certificate will be made only upon presentation and surrender
of such Definitive Certificate on the date for such final payment at such office
or agency as is specified in the notice of final distribution to Holders. The
Trustee will provide such notice to Holders no later than the fifth day of the
month of the final distribution.
Definitive Certificates will be transferable and exchangeable at the offices
of the Transfer Agent and Registrar, which shall initially be the Trustee. No
service charge will be imposed for any registration of transfer or exchange, but
the Transfer Agent and Registrar may require payment of a sum sufficient to
cover any tax or other governmental charge imposed in connection therewith.
TERMINATION OF THE TRUST
Unless the Seller instructs the Trustees otherwise, the Trust will only
terminate on the earlier to occur of (a) the day following the day on which the
aggregate Invested Amounts and Enhancement Invested Amounts of all Series is
zero (provided that the Bank shall have delivered a written notice to the
Trustee electing to terminate the Trust), (b) March 1, 2015, or (c) if the
Receivables are sold, disposed of or liquidated following the occurrence of an
Insolvency Event as described under "Description of the Certificates--Pay Out
Events," immediately following such sale, disposition or liquidation (the "Trust
Termination Date"). Upon termination of the Trust, all right, title and interest
in the Receivables and other funds of the Trust (other than amounts in accounts
maintained by the Trust for the final payment of principal and interest to
Certificateholders) will be conveyed and transferred to the Bank.
CONVEYANCE OF RECEIVABLES
Pursuant to the Pooling Agreement, the Seller will sell and assign to the
Trust its interest in all Receivables in the Initial Accounts outstanding as of
the Trust Cut-Off Date, all Receivables in the Additional Accounts as of the
applicable Addition Date, all Receivables thereafter created under the Accounts
and the proceeds of all of the foregoing.
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In connection with the transfer of any Receivables to the Trust, the Seller
is required to indicate in its computer records that the Receivables have been
conveyed to the Trust. In addition, the Seller will provide the Trustee with a
computer file or microfiche list containing a true and complete list showing for
each Initial Account, as of the Trust Cut-Off Date, and for each Additional
Account, as of the applicable addition cut-off date for such Additional Account,
(i) its account number and (ii) the aggregate amount outstanding and the
aggregate amount of Principal Receivables in such Account. The Seller, as
initial Servicer, will retain and will not deliver to the Trustee any other
records or agreements relating to the Accounts or the Receivables. Except as set
forth above, the records and agreements relating to the Accounts and the
Receivables will not be segregated from those relating to other revolving credit
card accounts and receivables, and the physical documentation relating to the
Accounts or Receivables will not be stamped or marked to reflect the transfer of
Receivables to the Trust. The Seller has filed and is required to file UCC
financing statements with respect to the sale of the Receivables to the Trust
meeting the requirements of applicable state law. See "Special Considerations"
and "Certain Legal Aspects of the Receivables."
REPRESENTATIONS AND WARRANTIES
As of the Closing Date for a Series offered hereby specified in the related
Prospectus Supplement, the Seller will make representations and warranties to
the Trust relating to the Accounts and the Receivables to the effect, among
other things, that (a) as of the Trust Cut-Off Date (or as of the Addition Date)
each Account or each Additional Account was an Eligible Account, (b) as of the
Trust Cut-Off Date (or as of the Addition Date), each of the Receivables in any
Account or Additional Account that is conveyed to the Trust on such day is an
Eligible Receivable and (c) thereafter, as of the date of creation of any new
Receivable, such Receivable is an Eligible Receivable. If the Seller breaches
any representation and warranty described in this paragraph, such breach remains
uncured for 60 days, or such longer period as may be agreed to by the Trustee,
after the earlier to occur of the discovery of such breach by the Seller or
receipt of written notice of such breach by the Seller, and as a result of such
breach any Receivables in the related Account become Defaulted Receivables or
the Trust's rights in, to or under such Receivables or the proceeds of such
Receivables are impaired or such proceeds are not available for any reason to
the Trust free and clear of any lien, then the Certificateholders' Interest in
all Receivables with respect to the affected Account ("Ineligible Receivables")
will be reassigned to the Seller on the terms and conditions set forth below and
such Account shall no longer be included as an Account; PROVIDED, HOWEVER, that
such Receivables will not be deemed to be Ineligible Receivables and will not be
reassigned to the Seller if, on any day prior to the end of such 60-day or
longer period, (i) the relevant representation and warranty shall be true and
correct in all material respects as if made on such day and (ii) the Seller
shall have delivered to the Trustee a certificate of an authorized officer
describing the nature of such breach and the manner in which the relevant
representation and warranty became true and correct.
An Ineligible Receivable shall be reassigned to the Seller on or before the
end of the Monthly Period in which such reassignment obligation arises by the
Seller directing the Servicer to deduct the portion of such Ineligible
Receivable that is a Principal Receivable from the aggregate amount of the
Principal Receivables used to calculate the Seller Amount. In the event that the
exclusion of an Ineligible Receivable from the calculation of the Seller Amount
would cause the Seller Amount to be less than the Required Seller Amount, on the
Distribution Date following the Monthly Period in which such reassignment
obligation arises, the Seller will make a deposit into the Special Funding
Account in immediately available funds in an amount equal to the amount by which
the Seller Amount would be reduced below the Required Seller Amount. Any deposit
into the Special Funding Account, together with the reduction in the Seller's
Interest, in connection with the reassignment of an Ineligible Receivable shall
be considered a payment in full of the Ineligible Receivable. The reassignment
of any Ineligible Receivable to the Seller is the sole remedy respecting any
breach of the representations and warranties described in the preceding
paragraph with respect to such Receivable available to Certificateholders of any
Series (or the Trustee on behalf of such Certificateholders) or any provider of
Series Enhancement.
The Seller will also make representations and warranties to the Trust to the
effect, among other things, that as of each Closing Date (a) it is a federally
chartered savings bank validly existing under the laws of the United States, it
has the authority to consummate the transactions contemplated by the Pooling
Agreement
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and the related Supplement and each of the Pooling Agreement and the related
Supplement constitutes a valid, binding and enforceable agreement of the Seller
and (b) the Pooling Agreement constitutes a valid sale, transfer and assignment
to the Trust of all right, title and interest of the Seller in the Receivables,
whether then existing or thereafter created and the proceeds thereof (including
proceeds in any of the accounts established for the benefit of the
Certificateholders) or the grant of a first priority perfected security interest
under the UCC as in effect in Maryland in such Receivables and the proceeds
thereof (including proceeds in any of the accounts established for the benefit
of the Certificateholders), which is effective as to each Receivable then
existing on the date of its transfer to the Trust or, as to each Receivable
arising thereafter, upon the creation thereof and until termination of the
Trust. If the breach of either of the representations and warranties described
in this paragraph has a material adverse effect on the Certificateholders'
Interest of all Series in the Receivables, either the Trustee or the holders of
Certificates evidencing not less than 50% of the aggregate unpaid principal
amount of the Certificates of all Series, by written notice to the Seller and
the Servicer (and to the Trustee if given by the Holders of the requisite
percentage of Certificates of all Series), may direct the Seller to accept the
reassignment of the Receivables within 60 days of such notice, or within such
longer period specified in such notice; PROVIDED, HOWEVER, that such Receivables
will not be reassigned to the Seller if, on any day prior to the end of such
60-day or longer period, (i) the relevant representation and warranty shall be
true and correct in all material respects as if made on such day and (ii) the
Seller shall have delivered to the Trustee a certificate of an authorized
officer describing the nature of such breach and the manner in which the
relevant representation and warranty became true and correct. The Seller will be
obligated to accept the reassignment of such Receivables on the Distribution
Date following the Monthly Period in which such reassignment obligation arises.
The price for such reassignment will generally be equal to the aggregate
Invested Amounts and Enhancement Invested Amounts of all Series on the
Distribution Date on which the purchase is scheduled to be made plus accrued and
unpaid interest on the unpaid principal amount of all Series and any interest
amounts that were due but not paid on a prior date and interest on such overdue
interest amounts (if the applicable Supplement so provides) at the applicable
certificate rates through the day preceding such Distribution Date. The payment
of such reassignment price, in immediately available funds, will be considered a
payment in full of the Receivables and the principal portion of such funds and
the interest portion of such funds will be deposited into the Special Funding
Account and the Collection Account, respectively. If the Trustee or the
requisite percentage of holders of Certificates of all Series gives 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 Certificateholders of all Series (or the Trustee on
behalf of such Certificateholders) or any provider of Series Enhancement.
An "Eligible Account" is a revolving credit card account owned by the
Seller, which as of the Trust Cut-Off Date with respect to an Initial Account or
as of the Addition Date with respect to an Additional Account: (a) is in
existence and serviced at certain facilities of the Seller; (b) is payable in
United States dollars; (c) except as provided below, has not been identified as
an account the credit cards with respect to which have been reported to the
Seller as having been lost or stolen; (d) has a cardholder who has provided, as
his or her billing address, an address located in the United States or its
territories or possessions or a military address; (e) has a cardholder who has
not been identified by the Seller as an employee of the Seller or any affiliate;
(f) has not been, and does not have any receivables that have been, sold,
pledged, assigned or otherwise conveyed to any person (except pursuant to the
Pooling Agreement); (g) does not have any receivables that are Defaulted
Receivables; and (h) does not have any receivables that have been identified as
having been incurred as a result of fraudulent use of any related credit card.
An "Eligible Receivable" is each Receivable (a) which has arisen under an
Eligible Account; (b) which was created in compliance with the Credit Card
Guidelines and all requirements of law applicable to the Seller, the failure to
comply with which would have a material adverse effect on Certificateholders,
and pursuant to a cardholder agreement which complies with all requirements of
law applicable to the Seller, the failure to comply with which would have a
material adverse effect on Certificateholders; (c) with respect to which all
consents, licenses, approvals 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 and
performance by the Seller of the related lending agreement have been duly
obtained
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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 transfer to the Trust, the
Seller or the Trust will have good and marketable title free and clear of all
liens and security interests (other than any lien for municipal or other local
taxes if such taxes are not then due and payable or if the Seller is then
contesting the validity thereof in good faith by appropriate proceedings and has
set aside on its books adequate reserves with respect thereto); (e) which has
been the subject of either a valid transfer and assignment from the Seller to
the Trust of all the Seller's right, title and interest therein or the grant of
a first priority perfected security interest therein (and in the proceeds
thereof), effective until the termination of the Trust; (f) which at and after
the time of transfer to the Trust is the legal, valid and binding payment
obligation of the cardholder thereof, legally enforceable against such
cardholder in accordance with its terms (with certain bankruptcy and
equity-related exceptions); (g) which constitutes either an "account" or a
"general intangible" under Article 9 of the UCC as then in effect in the State
of Maryland; (h) which, at the time of its transfer to the Trust, has not been
waived or modified except as permitted by the Pooling Agreement; (i) which, at
the time of its transfer to the Trust, is not subject to any right of
rescission, setoff, counterclaim or other defense of the cardholder (including
the defense of usury), other than certain bankruptcy and equity-related defenses
and adjustments permitted by the Pooling Agreement to be made by the Servicer;
(j) as to which the Seller has satisfied all obligations to be fulfilled at the
time it is transferred to the Trust; and (k) as to which the Seller has not
taken any action which, or failed to take any action the omission of which,
would, at the time of its transfer to the Trust, to impair the rights of the
Trust or the Certificateholders therein.
It is not required or anticipated that the Trustee will make any initial or
periodic general examination of any documents or records related to the
Receivables or the Accounts for the purpose of establishing the presence or
absence of defects, compliance with the Seller's representations and warranties
or for any other purpose. In addition, it is not anticipated or required that
the Trustee will make any initial or periodic general examination of the
Servicer for the purpose of establishing the compliance by the Servicer with its
representations or warranties or the performance by the Servicer of its
obligations under the Pooling Agreement or for any other purpose. The Servicer,
however, will deliver to the Trustee on or before March 31 of each calendar year
an opinion of counsel with respect to the validity of the interest of the Trust
in and to the Receivables and certain other components of the Trust.
INDEMNIFICATION
The Pooling Agreement provides that the Servicer will indemnify the Trust
and the Trustee from and against any loss, liability, expense, damage or injury
suffered or sustained, arising out of the Servicer's actions or omissions with
respect to the Trust pursuant to the Pooling Agreement.
Under the Pooling Agreement, the Seller has agreed to be liable directly to
an injured party for the entire amount of any losses, claims, damages or
liabilities (other than those incurred by a Certificateholder in the capacity of
an investor in the Certificates of any Series) arising out of or based on the
arrangement created by the Pooling Agreement as though such agreement created a
partnership under the New York Uniform Partnership Act in which the Seller was a
general partner. In the event of a Service Transfer, the successor Servicer will
indemnify and hold harmless the Seller for any losses, claims, damages and
liabilities of the Seller as described in this paragraph arising from the
actions or omissions of such successor Servicer.
Except as provided in the preceding paragraph, the Pooling Agreement
provides that none of the Seller, the Servicer or any of their directors,
officers, employees or agents will be under any other liability to the Trust,
the Trustee, the holders of Certificates of any Series, any provider of Series
Enhancement or any other person for any action taken, or for refraining from
taking any action, in good faith pursuant to the Pooling Agreement. However,
none of the Seller, the Servicer or any of their 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 any
such person in the performance of their duties or by reason of reckless
disregard of their obligations and duties thereunder.
In addition, the Pooling Agreement provides that the Servicer is not under
any obligation to appear in, prosecute or defend any legal action that is not
incidental to its servicing responsibilities under the Pooling Agreement. The
Servicer may, in its sole discretion, undertake any such legal action which it
may deem
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necessary or desirable for the benefit of holders of Certificates of any Series
with respect to the Pooling Agreement and the rights and duties of the parties
thereto and the interest of such Certificateholders thereunder.
COLLECTION AND OTHER SERVICING PROCEDURES
Pursuant to the Pooling Agreement, the Servicer is responsible for
servicing, collecting, enforcing and administering the Receivables in accordance
with its customary and usual procedures for servicing receivables comparable to
the Receivables and the Credit Card Guidelines.
Servicing activities to be performed by the Servicer include collecting and
recording payments, communicating with cardholders, investigating payment
delinquencies, evaluating the increase of credit limits and the issuance of
credit cards, providing billing and tax records, if any, to cardholders and
maintaining internal records with respect to each Account. Managerial and
custodial services performed by the Servicer on behalf of the Trust include
providing assistance in any inspections of the documents and records relating to
the Accounts and Receivables by the Trustee pursuant to the Pooling Agreement,
maintaining the agreements, documents and files relating to the Accounts and
Receivables as custodian for the Trust and providing related data processing and
reporting services for Certificateholders of any Series and on behalf of the
Trustee.
Pursuant to the Pooling Agreement, the Bank, as Servicer, has the right to
delegate any of its responsibilities and obligations as Servicer to any of its
affiliates and to certain third-party service providers that agree to conduct
such duties in accordance with the Pooling Agreement and the Credit Card
Guidelines. The Bank currently contracts with FDR and intends to continue to
contract with FDR (and possibly one or more other third-party service providers)
to perform certain of its servicing activities as described under "The Bank's
Credit Card Activities--General." Notwithstanding any such delegation to any
entity, the Servicer will continue to be liable for all of its obligations under
the Pooling Agreement. In certain circumstances, however, the Bank could be
relieved of its duties as Servicer upon the assumption of such duties by another
entity. See "Assumption of the Bank's Obligations."
SERVICER COVENANTS
In the Pooling Agreement, the Servicer has covenanted as to each Receivable
and related Account that: (a) it will duly fulfill all obligations on its part
to be fulfilled under or in connection with the Receivable or Account, and will
maintain in effect all qualifications required in order to service the
Receivable or Account the failure to comply with which would have a material
adverse effect on the Certificateholders or any provider of Series Enhancement;
(b) it will not permit any rescission or cancellation of the Receivable except
as ordered by a court of competent jurisdiction or other governmental authority
or in the ordinary course of business and in accordance with the Credit Card
Guidelines; (c) it will do nothing to substantially impair the rights of the
Certificateholders in the Receivables or Accounts; (d) it will not reschedule,
revise or defer payments due on the Receivable except in accordance with the
Credit Card Guidelines; and (e) except in connection with its enforcement or
collection of an Account, it will take no action to cause any Receivables to be
evidenced by any instruments (as defined in the UCC) and if any Receivable is so
evidenced, it shall be reassigned or assigned to the Servicer as provided below.
Under the terms of the Pooling Agreement, in the event of any of the
representations, warranties or covenants of the Servicer contained in clauses
(a) through (e) above with respect to any Receivable or the related Account is
breached, such breach is not cured within 60 days (or such longer period, not in
excess of 150 days, as may be agreed to by the Trustee) of the earlier to occur
of the discovery of such event by the Servicer or receipt by the Servicer of
written notice of such event given by the Trustee, and as a result of such
breach the Trust's rights in, to or under any Receivables in the related Account
or the proceeds of such Receivables are impaired or such proceeds are not
available for any reason to the Trust free and clear of any lien, then all
Receivables in the Account or Accounts to which such event relates shall be
reassigned or assigned to the Servicer on the terms and conditions set forth
below; PROVIDED, HOWEVER, that such Receivables will not be reassigned or
assigned to the Servicer if, on any day prior to the end of such 60-day or
longer period, (i) the relevant representation and warranty shall be true and
correct, or the relevant covenant shall have been complied with, in all material
respects and (ii) the Servicer shall have delivered to the Trustee a
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certificate of an authorized officer describing the nature of such breach and
the manner in which such breach was cured. If the Seller is the Servicer, such
reassignment will be made on or before the Distribution Date following the
Monthly Period in which such reassignment obligation arises by the Servicer
deducting the portion of any such Receivable which is a Principal Receivable
from the aggregate amount of Principal Receivables used to calculate the Seller
Amount. In addition, if the deduction of such Principal Receivable would reduce
the Seller Amount below the Required Seller Amount, the Servicer will deposit
into the Special Funding Account the amount of such deficiency. If the Seller is
not the Servicer, such assignment and transfer will be made when the Servicer
deposits an amount equal to the amount of such Receivable in the Collection
Account on the business day preceding the Distribution Date following the
Monthly Period during which such obligation arises. The amount of such deposit
shall be treated as a portion of Shared Principal Collections as described under
"Description of the Certificates--Shared Principal Collections." This
reassignment or transfer and assignment to the Servicer constitutes the sole
remedy available to the Certificateholders of any Series if such covenant or
warranty of the Servicer is not satisfied and the Trust's interest in any such
reassigned Receivables shall be automatically assigned to the Servicer.
CERTAIN MATTERS REGARDING THE SERVICER
The Servicer may not resign from its obligations and duties under the
Pooling Agreement, except upon determination that such duties are no longer
permissible under applicable law. No such resignation will become effective
until the Trustee or a successor to the Servicer has assumed the Servicer's
responsibilities and obligations under the Pooling Agreement. Notwithstanding
the foregoing, subject to compliance with certain conditions described under
"Assumption of the Bank's Obligations," the Bank may transfer its servicing
obligations to another entity and be relieved of its obligations and duties
under the Pooling Agreement.
Any person into which, in accordance with the Pooling Agreement, the
Servicer may be merged or consolidated or any person resulting from any merger
or consolidation to which the Servicer is a party, or any person succeeding to
the business of the Servicer, will be the successor to the Servicer under the
Pooling Agreement.
SERVICER DEFAULT
In the event of any Servicer Default either the Trustee or
Certificateholders holding Certificates evidencing more than 50% of the
aggregate unpaid principal amount of all outstanding Series, by written notice
to the Servicer (and to the Trustee and certain providers of Series Enhancement,
if given by the Certificateholders) (a "Termination Notice"), may terminate all
of the rights and obligations of the Servicer, as servicer, under the Pooling
Agreement. If the Trustee within 60 days of receipt of a Termination Notice is
unable to obtain any bids from eligible Servicers and the Servicer delivers an
officer's certificate to the effect that the Servicer cannot in good faith cure
the Servicer Default that gave rise to the Termination Notice, then the Trustee
shall offer the Seller the right at its option to purchase the
Certificateholders' Interest for all Series. The purchase price for such a
purchase shall be paid on a Distribution Date and shall generally be equal to,
with respect to each Series, the higher of (a) the sum of the Invested Amount
and the Enhancement Invested Amount, if any, of such Series on such Distribution
Date (less the amount, if any, on deposit in any Principal Funding Account with
respect to such Series) plus accrued and unpaid interest at the applicable
certificate rate (together with, if applicable, interest on interest amounts
that were due and not paid on a prior date), through the last day of the
calendar month preceding such Distribution Date and (b) the sum of (i) the
average bid price quoted by at least two recognized dealers for similar
securities rated in the same rating category as the initial rating of the
Certificates of such Series with a remaining maturity approximately equal to the
remaining maturity of the Certificates of such Series and (ii) the Enhancement
Invested Amount, if any, of such Series.
The Trustee shall, as promptly as possible after giving a Termination
Notice, appoint a successor Servicer (a "Service Transfer"), and if no successor
Servicer has been appointed by the Trustee and has accepted such appointment by
the time the Servicer ceases to act as Servicer, all rights, authority, power
and obligations of the Servicer under the Pooling Agreement shall pass to and be
vested in the Trustee. Prior to any Service Transfer, the Trustee will seek to
obtain bids from potential Servicers meeting certain eligibility
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requirements set forth in the Pooling Agreement to serve as a successor Servicer
for servicing compensation not in excess of the Servicing Fee. The rights and
interest of the Seller as holder of the Seller Certificate under the Pooling
Agreement and any Supplement in the Seller's Interest will not be affected by
any Termination Notice or Service Transfer.
A "Servicer Default" refers to any of the following events:
(a) failure by the Servicer to make any payment, transfer or deposit, or
to give instructions or to give notice to the Trustee to make such
payment, transfer or deposit, on the date the Servicer is required to do so
under the Pooling Agreement or any Supplement, which is not cured within a
five business day grace period;
(b) failure on the part of the Servicer duly to observe or perform in any
material respect any other covenants or agreements of the Servicer in
the Pooling Agreement or any Supplement which has a material adverse effect
on the Certificateholders of any Series or Class (which determination shall
be made without regard to whether funds are then available pursuant to any
Series Enhancement) and which continues unremedied for a period of 60 days
after written notice, or the Servicer delegates its duties under the Pooling
Agreement, except as specifically permitted thereunder, and such delegation
continues unremedied for 15 days after written notice;
(c) any representation, warranty or certification made by the Servicer in
the Pooling Agreement or any Supplement or in any certificate
delivered pursuant to the Pooling Agreement or any Supplement proves to have
been incorrect when made, which has a material adverse effect on the rights
of the Certificateholders of any Series or Class (which determination shall
be made without regard to whether funds are then available pursuant to any
Series Enhancement), and which material adverse effect continues for a
period of 60 days after written notice; or
(d) the occurrence of certain events of bankruptcy, insolvency or
receivership with respect to the Servicer.
Notwithstanding the foregoing, a delay in or failure of performance referred
to under clause (a) above for a period of five business days or referred to
under clause (b) or (c) for a period of 60 days (in addition to any period
provided in (a), (b) or (c)) shall not constitute a Servicer Default until the
expiration of such additional five business days or 60 days, respectively, 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 Pooling Agreement and any
Supplement and the Servicer shall provide the Trustee, the Seller, certain
providers of Series Enhancement and the Certificateholders of each Series prompt
notice of such failure or delay by it, together with a description of its
efforts to so perform its obligations. The Servicer shall immediately notify the
Trustee in writing of any Servicer Default.
EVIDENCE AS TO COMPLIANCE
The Pooling Agreement provides that, on or before December 31 of each
calendar year, the Servicer will cause a firm of nationally recognized
independent public accountants (who may also render other services to the
Servicer or the Seller) to furnish a report to the effect that such firm has
applied certain procedures agreed upon with the Servicer and examined certain
documents and records relating to the servicing of the Accounts during the
Servicer's preceding fiscal year ended September 30 or, in the case of the first
such report, during the period from the Closing Date and ending on September 30,
1994, and that, on the basis of such procedures, nothing came to the attention
of such firm that caused them to believe that such servicing was not conducted
in compliance with the Pooling Agreement and the applicable provisions of each
Supplement 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 Pooling Agreement provides for delivery to the Trustee, each Rating
Agency and certain providers of Series Enhancement on or before December 31 of
each calendar year a statement signed by an officer of the Servicer to the
effect that, to the best of such officer's knowledge, the Servicer has performed
its
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obligations in all material respects under the Pooling Agreement throughout the
preceding fiscal year or, if there has been a default in the performance of any
such obligation, specifying the nature and status of the default.
Copies of all statements, certificates and reports furnished to the Trustee
may be obtained by a request in writing delivered to the Trustee.
AMENDMENTS
The Pooling Agreement and any Supplement may be amended from time to time
(including in connection with the addition of a Participation to the Trust) by
agreement of the Trustee and the Seller without the consent of the
Certificateholders of any Series or the consent of the provider of any Series
Enhancement provided that (i) the Seller shall have delivered to the Trustee a
certificate of an authorized officer to the effect that the Seller reasonably
believes, based on the facts known to such officer at the time of such
certificate, that such amendment will not adversely affect in any material
respect the interests of any such Certificateholder and (ii) such amendment will
not result in a Ratings Effect.
The Pooling Agreement and any Supplement may also be amended from time to
time by the Seller, the Servicer and the Trustee with the consent of the holders
of Certificates evidencing not less than 66 2/3% of the aggregate unpaid
principal amount of the Certificates of all adversely affected Series for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions of the Pooling Agreement or any Supplement or of modifying in
any manner the rights of such Certificateholders. No such amendment, however,
may (a) reduce in any manner the amount of or delay the timing of any
distributions to be made to Certificateholders or deposits of amounts to be so
distributed or the amount available under any Series Enhancement without the
consent of each Certificateholder affected (provided that an amendment of the
terms of a Pay Out Event shall not be deemed to be within the scope of this
clause (a)); (b) change the definition or the manner of calculating the interest
of any Certificateholder without the consent of each affected Certificateholder;
(c) reduce the aforesaid percentage required to consent to any such amendment,
without the consent of each Certificateholder; or (d) adversely affect the
rating of any Series or Class by any Rating Agency without the consent of the
holders of Certificates of such Series or Class evidencing not less than 66 2/3%
of the aggregate unpaid principal amount of the Certificates of such Series or
Class. Promptly following the execution of any such amendment (other than an
amendment described in the preceding paragraph), the Trustee will furnish
written notice of the substance of such amendment to each Certificateholder.
TRUSTEE
Bankers Trust Company is the Trustee under the Pooling Agreement. The
Corporate Trust Department of Bankers Trust Company is located at Four Albany
Street, New York, New York 10006. The Seller, the Servicer and their respective
affiliates may from time to time enter into normal banking and trust
relationships with the Trustee and its affiliates. The Trustee, the Seller, the
Servicer and any of their respective affiliates may hold Certificates of any
Series in their own names; however, any Certificates so held shall not be
entitled to participate in any decisions made or instructions given to the
Trustee by such Certificateholders as a group. 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 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 Bank will be
obligated to appoint a successor Trustee. The Servicer may also remove the
Trustee if the Trustee ceases to be eligible to continue as such under the
Pooling Agreement or if the Trustee becomes insolvent. In such circumstances,
the Servicer will be obligated to appoint a successor Trustee. Any resignation
or removal of the Trustee and appointment of a successor Trustee will not become
effective until acceptance of the appointment by the successor Trustee.
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CERTAIN LEGAL ASPECTS OF THE RECEIVABLES
TRANSFER OF RECEIVABLES
The Seller will represent and warrant to the Trust in the Pooling Agreement
that the transfer of the Receivables by it to the Trust constitutes either a
valid transfer and assignment of such Receivables to the Trust or a grant to the
Trust of a security interest in such Receivables. The Seller also will represent
and warrant that if such transfer is a valid transfer and assignment, it
constitutes a valid transfer and assignment to the Trust of all right, title and
interest of the Seller in and to such Receivables, except for the interest of
the Seller as holder of the Seller Certificate and other rights of the Seller
under the Pooling Agreement, free and clear of all liens and security interests
(except for certain permitted liens as described below). The Seller also will
represent and warrant to the Trust in the Pooling Agreement that if the transfer
of Receivables by the Seller to the Trust creates a security interest under the
Uniform Commercial Code as in effect in the State of Maryland (the "UCC"), there
will exist an enforceable first priority perfected security interest in the
Receivables in existence at the time of the formation of the Trust in favor of
the Trust and an enforceable first priority perfected security interest in the
Receivables created thereafter in favor of the Trust on and after their creation
(except for certain permitted tax liens as described below). For a discussion of
the Trust's rights arising from a breach of these representations and
warranties, see "The Pooling Agreement Generally-- Representations and
Warranties."
The Receivables are "accounts" or "general intangibles" 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 such security interest
of the Trust. If a transfer of general intangibles is deemed to constitute the
creation of a security interest, rather than a sale, Article 9 of the UCC
applies and the filing of an appropriate financing statement is also required in
order to perfect the Trust's security interest. Financing statements covering
the Receivables of the Trust will be filed under the UCC.
There are certain limited circumstances under the UCC in which a prior or
subsequent transferee of Receivables coming into existence after a Closing Date
could have an interest in such Receivables with priority over the Trust's
interest. Under the Pooling Agreement, however, the Seller will represent and
warrant that it has transferred the Receivables to the Trust free and clear of
all liens and security interests (other than certain tax liens) except for the
interest of the Seller as holder of the Seller Certificate and other rights of
the Seller under the Pooling Agreement. In addition, the Seller will covenant
that it will not sell, pledge, assign or transfer, or grant, create, incur,
assume or suffer to exist any lien on, any Receivable (or any interest therein)
other than to the Trust or in connection with any transfer of the Accounts
selected for the Trust. A tax or other governmental lien on property of the
Seller arising prior to the time a Receivable comes into existence also may have
priority over the interest of the Trust in such Receivable. In addition, if a
receiver or conservator were appointed for the Seller, certain administrative
expenses of the receiver or conservator also may have priority over the interest
of the Trust in such Receivables. While the Bank is the Servicer, cash
collections on the Receivables may be held by the Bank and commingled with its
funds for brief periods, and if an Insolvency Event occurs, the Trust may not
have a perfected interest in such commingled collections.
CERTAIN MATTERS RELATING TO RECEIVERSHIP
Under the Financial Institutions Reform, Recovery, and Enforcement Act of
1989, as amended ("FIRREA"), which made significant changes in the regulatory
structure and policies governing federally insured savings banks such as the
Bank, the Resolution Trust Corporation (the "RTC") is authorized to act as
receiver or conservator for insolvent savings banks that fail before October 1,
1993, and the FDIC is authorized to act as receiver or conservator for insolvent
savings banks that fail thereafter. FIRREA contains detailed provisions setting
forth the receivership and conservatorship powers of the FDIC and the RTC.
Subject to clarification by regulations or interpretations, it would appear
from the positions taken by the FDIC that the FDIC or the RTC, in their capacity
as receiver or conservator for the Bank, would not
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interfere with the timely transfer to the Trust of payments collected on the
Receivables. In the event the transfer of Receivables to the Trust is deemed to
constitute the creation of a security interest, such a security interest, to the
extent it was validly perfected before the Seller's insolvency and was not taken
or granted in contemplation of insolvency, or with the intent to hinder, delay
or defraud the Seller, creditors of the Seller, or the FDIC, the RTC or other
receivers, or conservators of the Seller, or other federal banking agency or any
other person or entity, based upon opinions issued by the general counsel of the
FDIC and a statement of policy of the FDIC addressing the enforceability against
the FDIC or RTC, a conservator or receiver for a depositary institution, of a
security interest in collateral granted by such depositary institution, the
transfer of Receivables to the Trust should not be subject to avoidance in the
event of the insolvency, receivership or conservatorship of the Seller. Thus,
payments to the Trust with respect to the Receivables transferred to the Trust
should not be subject to recovery by the FDIC as receiver or conservator for the
Seller. However, such opinions and policy statements are not binding on the FDIC
and, if the FDIC were to assert a contrary position, certain provisions of
FIRREA would permit the receiver or conservator of the Seller to avoid security
interests, thereby resulting in delays and possible reductions in payments on
the Certificates. In addition, federal law governing receivership of federally
insured depository institutions has been interpreted to require the Trustee to
comply with certain claims procedures to establish its right to those payments,
or if a receiver or conservator were to request a stay of proceedings with
respect to the Seller, delays in payments on the Certificates and possible
reductions in the amount of those payments could occur. A receiver or
conservator also may disaffirm or repudiate the Bank's obligations under the
Pooling Agreement to accept reassignment of Ineligible Receivables or to accept
reassignment of the Trust Portfolio or other provisions of the Pooling
Agreement.
The Pooling Agreement provides that, upon the occurrence of an Insolvency
Event, the Seller promptly will give notice to the Trustee of such appointment
or liquidation, and a Pay Out Event will occur. Pursuant to the Pooling
Agreement, newly created Principal Receivables will not be transferred to the
Trust on and after any such Insolvency Event. Notwithstanding the cessation of
the transfer to the Trust of additional Principal Receivables, Finance Charge
Receivables with respect to Monthly Periodic Charges, whenever created, accrued
in respect of Principal Receivables that have been transferred to the Trust will
continue to be a part of the Trust. The Pooling Agreement provides that the
Servicer will continue, on and after any such Insolvency Event, to collect and
remit to the Trustee payments on Receivables transferred to the Trust. Unless
otherwise instructed within a specified period by holders of Certificates of
each Series or, if a Series includes more than one Class, each Class of such
Series, evidencing more than 50% of the aggregate unpaid principal amount of
each such Series or Class (and, in the case of any Series with respect to which
there is an Enhancement Invested Amount, any Credit Enhancer with respect
thereto) the Trustee may proceed to sell, dispose of or otherwise liquidate the
Receivables in the Trust in a commercially reasonable manner and on commercially
reasonable terms. Under the Pooling Agreement, the net proceeds from the sale,
liquidation or disposition of the Receivables will be deposited in the
Collection Account and allocated as provided in the Pooling Agreement and each
Supplement. See "Description of the Certificates--Pay Out Events." This
procedure could be delayed, as described above. In addition, a conservator or
receiver for the Seller may have the power to prevent the early sale,
liquidation or disposition of the Receivables, the commencement of the Early
Amortization Period of a Class or Series or other exercise of rights unless a
Pay Out Event occurs due to an event in addition to the receivership,
conservatorship or insolvency of the Seller. The receiver or conservator may
also have the power to cause the early sale of the Receivables of the Trust and
the early retirement of the Certificates or to require or prohibit the continued
transfer of Receivables to the Trust.
If a receiver or conservator is appointed for the Servicer, the receiver or
conservator may have the power either to terminate the Servicer and replace it
with a successor Servicer or to prevent the termination of the Servicer and its
replacement with a successor Servicer if no Servicer Default exists other than
the receivership, conservatorship or insolvency of the Servicer. See "The
Pooling Agreement Generally-- Servicer Default."
CONSUMER PROTECTION LAWS
The relationship of the cardholder and credit card issuer is extensively
regulated by federal and state consumer protection and related laws. With
respect to credit cards issued by the Bank, the most significant
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laws include the federal Truth-in-Lending Act, Fair Credit Billing Act, Fair
Debt Collection Practices Act, Equal Credit Opportunity Act, Fair Credit
Reporting Act and Electronic Funds Transfer Act, as well as applicable Maryland
laws and, to the extent applicable, comparable statutes in the other states in
which cardholders reside. These statutes impose disclosure requirements when a
credit card account is advertised, when it is opened, at the end of monthly
billing cycles and at year end and, in addition, prohibit certain discriminatory
practices in extending credit and impose certain limitations on the type of
account-related charges that may be assessed. Federal legislation requires
credit card issuers to disclose to consumers the interest rates, cardholder
fees, grace periods and balance calculation methods associated with their credit
card accounts. In addition, cardholders are entitled under current laws to have
payments and credits applied to the credit card account promptly, to receive
prescribed notices and to require billing errors to be resolved promptly.
Certain laws, including the laws described above, may limit the Bank's
ability to collect amounts owing with respect to the Receivables regardless of
any act or omission on the part of the Bank. For example, under the federal Fair
Credit Billing Act, a credit card issuer is subject to all claims (other than
tort claims) and defenses arising out of certain transactions in which a credit
card is used as a method of payment or extension of credit if the obligor has
made a good faith attempt to obtain satisfactory resolution of a disagreement or
problem relative to the transaction from the person honoring the credit card
and, except in cases where there is a certain relationship between the person
honoring the card and the credit card issuer, the amount of the initial
transaction exceeds $50 and the place where the initial transaction occurred was
in the same state as the cardholder's mailing address or within 100 miles of
that address. These statutes further provide that in certain cases cardholders
cannot be held liable for, or the cardholder's liability is limited with respect
to, charges to the credit card account that result from unauthorized use of the
credit card.
Additional consumer protection laws may be enacted that would impose
requirements on the making, enforcement and collection of consumer credit loans.
Any new laws or rulings that may be adopted, and existing consumer protection
laws, may adversely affect the ability to collect on the Receivables. In
addition, failure of the Servicer to comply with such requirements could
adversely affect the Servicer's ability to enforce the Receivables.
Certain jurisdictions may attempt to require out-of-state credit card
issuers to comply with such jurisdictions' consumer protection laws (including
laws limiting the charges imposed by such credit card issuers) in connection
with their operations in such jurisdictions. If it were determined that
out-of-state credit card issuers must comply with a jurisdiction's laws limiting
the charges imposed by credit card issuers, such actions could have an adverse
impact on the Bank's credit card operations. Application of federal and state
bankruptcy and debtor relief laws (including the Soldiers' and Sailors' Civil
Relief Act of 1940) would affect the interests of the holders of the
Certificates if the protection provided to debtors under such laws result in any
Receivables of the Trust being written off as uncollectible.
The Trust may be liable for certain violations of consumer protection laws
that apply to the Receivables transferred to it, either as assignee from the
Seller with respect to obligations arising before the transfer 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 will warrant
to the Trust in the Pooling Agreement that all Receivables transferred to the
Trust have been and will be created in compliance with the requirements of such
laws. For a discussion of the Trust's rights arising from the breach of these
warranties, see "The Pooling Agreement Generally--Representations and
Warranties."
CLAIMS AND DEFENSES OF CARDHOLDERS AGAINST THE TRUST
The UCC, the provisions of which would be applicable to the Trust if it were
deemed to have acquired a security interest in the Receivables transferred to
the Trust (see "--Transfer of the Receivables"), provides that (i) unless a
cardholder has made an enforceable agreement not to assert defenses or claims
arising out of a transaction, the rights of the Trust, as assignee, are subject
to all the terms of the cardholder agreement between the Bank and the cardholder
and any defense or claim arising therefrom, to rights of set- off and to any
other defense or claim of the cardholder against the Bank that accrues before
the cardholder receives
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notification of the assignment and (ii) any cardholder is authorized to continue
to pay the Bank until (a) the cardholder receives notification, reasonably
identifying the rights assigned, that the amount due or to become due has been
assigned and that payment is to be made to the Trustee or Successor Servicer and
(b) if requested by the cardholder, the Trustee or Successor Servicer has
furnished reasonable proof of assignment. No such agreement not to assert
defenses has been entered into and no notice of the assignment of the
Receivables to the Trust will be sent to the cardholders obligated on the
Accounts in connection with the transfer of the Receivables to the Trust.
TAX MATTERS
FEDERAL INCOME TAX CONSEQUENCES--GENERAL
The following is a general discussion of federal income tax consequences
relating to the purchase, ownership and disposition of a Certificate. 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 or any political subdivision thereof or an estate or
trust the income of which is includible in gross income for U.S. federal income
tax purposes regardless of its source. The term "U.S. Certificate Owner"
includes any U.S. Person and any other person to the extent that the income
attributable to 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, the holder of the Seller Certificate and the Certificate Owners
express in the Pooling 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 Pooling Agreement, the holder of
the Seller Certificate by its acceptance of the Seller Certificate and each
investor, by the acceptance of a beneficial interest in a Certificate, will
agree to treat the Certificates as indebtedness of the holder of the Seller
Certificate for federal, state and local income and franchise tax purposes.
However, the Pooling Agreement generally refers to the transfer of Receivables
as a "sale," and because different criteria are used in determining the nontax
accounting treatment of the transaction, the Seller and the holder of the Seller
Certificate will treat the Pooling Agreement, for certain nontax 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 the 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 nontax 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 factors 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. Based upon its analysis of such factors, special tax counsel
to the Seller to be named in the Prospectus Supplement ("Tax Counsel"), has
concluded that, although no transaction closely comparable to that contemplated
herein has been the subject of any Treasury regulation, revenue ruling or
judicial decision, the holder of the Seller Certificate rather than the
Certificate Owners (through their
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ownership of a beneficial interest in the Certificates) is the owner of the
Receivables for federal income tax purposes. As a result, in the opinion of Tax
Counsel, the Certificates will properly be characterized for federal income tax
purposes as debt secured by the Receivables and the Trust will be disregarded
and treated as a mere security device. Except where indicated to the contrary,
the following discussion assumes that the Certificates are debt for federal
income tax purposes.
Although as described above, it is the opinion of Tax Counsel that the
Certificates will properly be characterized as debt for federal income tax
purposes, such opinion is not binding on the IRS and thus no assurance can be
given that such a characterization will prevail. If the IRS were to contend
successfully that the Certificates were not debt obligations for federal income
tax purposes, the issuance of the Certificates could be characterized as a sale
of an interest in the Receivables to the Trust or to the Certificate Owners. In
that event, the Trust could be classified, for federal income tax purposes, as a
partnership or an association taxable as a corporation. Because in the opinion
of Tax Counsel the Certificates will be characterized as debt for federal income
tax purposes, no attempt will be made to comply with any IRS reporting or other
requirements that would apply if a Trust were treated as a partnership or a
corporation.
If a Trust were treated as a partnership, other than a publicly traded
partnership, that partnership would not be subject to federal income tax.
Rather, each item of income, gain, loss, deduction and credit of the partnership
generated through the ownership of the related Receivables would be taken into
account directly in computing taxable income of the holder of the Seller
Certificate and the Certificate Owners, and the holder of the Seller Certificate
and the Certificate Owners would be treated as partners in accordance with their
respective partnership interests therein. The amounts and timing of income
reportable by Certificate Owners treated as partners would likely differ if the
Certificates were not characterized as debt and the arrangement were treated as
a partnership. In addition, if a Trust were treated as a partnership other than
a publicly traded partnership, income derived from the partnership by a
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. Legislation pending before Congress would affect the
treatment of any "large partnership," defined as any partnership in which there
are at least 250 partners in a taxable year. Under the pending legislation,
among other things, the availability of certain deductions to partners may be
limited, and certain computations (such as those relating to the level of
allowable miscellaneous itemized deductions and the netting of capital gains and
losses) would be made at the partnership rather than the partner level. These
particular provisions are proposed to be effective for taxable years ending on
or after December 31, 1994. No prediction can be made regarding whether such
legislation will be enacted or, if so, what its ultimate effective date will be.
If the arrangement created by the Pooling Agreement were treated as a
publicly traded partnership or an association and were therefore taxable as a
corporation, it would be subject to federal income tax at corporate tax rates on
its taxable income generated by ownership of the related Receivables. That tax
could result in reduced distributions to the related Certificate Owners. No
distributions from the Trust would be deductible in computing the taxable income
of the corporation, except to the extent that the Certificates were treated as
debt of the corporation and distributions to the Certificate Owners were treated
as payments of interest thereon. In addition, all or a portion of those
distributions would be dividend income to the Certificate Owners to the extent
of the current and accumulated earnings and profits of the corporation.
TAXATION OF INTEREST INCOME OF U.S. CERTIFICATE OWNERS
GENERAL. Interest on 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, as amended (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 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. Under section 1272(a)(6) of the Code, special
provisions
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<PAGE>
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.
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 for any partial principal payments). However, because the failure to
pay interest currently on the Certificates is not a default and may not be
considered to give rise to any penalty, the IRS could take the position on the
basis of Treasury regulations that all of the interest payments on the
Certificates will be treated as payments of principal and the Certificates
should be treated as having OID. If sustained, such position should not
significantly accelerate taxable income recognition for most U.S. Certificate
Owners, but prospective U.S. Certificate Owners should consult their own tax
advisors concerning the impact to them in their particular circumstances.
MARKET DISCOUNT. A U.S. Certificate Owner who purchases 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 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 sale or exchange of a Certificate, a U.S. Certificate Owner generally
will recognize gain or loss equal to the difference between the amount realized
on the sale or exchange and the U.S. Certificate Owner's adjusted basis in the
Certificate. The adjusted basis in the Certificate will equal its cost,
increased by any OID or market discount includible in income with respect to the
Certificate prior to its sale, and reduced by any principal payments previously
received with respect to the Certificate and any amortized premium. Subject to
the market discount rules, gain or loss will be capital gain or loss if the
Certificate was held as a capital asset. Capital losses generally may be used
only to offset capital gains.
NON-U.S. CERTIFICATE OWNERS
In general, a non-U.S. Certificate Owner will not be subject to U.S. federal
income tax on interest (including OID) on a Certificate unless the non-U.S.
Certificate Owner is a direct or indirect 10 percent or greater shareholder of,
or a controlled foreign corporation related to, the Seller. To qualify for the
exemption from taxation, the last U.S. Person in the chain of payment prior to
payment to a non-U.S. Certificate Owner (the "Withholding Agent") must have
received (in the year in which a payment of interest or principal occurs or in
either of the two preceding years) a statement that (i) is signed by the
non-U.S. Certificate Owner under penalties of perjury, (ii) certifies that the
non-U.S. Certificate Owner is not a U.S. Person, and (iii) provides the name and
address of the non-U.S. Certificate Owner. The statement may be made on a Form
W-8 or substantially similar substitute form, and the non-U.S. Certificate Owner
must inform the Withholding Agent of any change in the information on the
statement within 30 days of the change. If a Certificate is held through a
securities clearing organization or certain other financial institutions, the
organization or institution may provide a signed statement to the Withholding
Agent. However, in that case, the signed statement must be accompanied by a Form
W-8 or substitute form provided by the non-U.S. Certificate Owner to the
organization or institution holding the Certificate on behalf of the non-U.S.
Certificate Owner. The U.S. Treasury Department is considering implementation of
further certification requirements aimed at determining whether the issuer of a
debt obligation is related to holders thereof.
Generally, any gain or income realized by a non-U.S. Certificate Owner upon
retirement or disposition of a Certificate will not be subject to U.S. federal
income tax, provided that (i) in the case of a Certificate
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<PAGE>
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.
A Certificate will not be includible in the estate of a non-U.S. Certificate
Owner unless the non-U.S. Certificate Owner is a direct or indirect 10 percent
or greater shareholder of the Seller and the holding of the Certificate is not
effectively connected with the conduct by the Certificate Owner of a trade or
business in the United States.
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 the Certificates were treated as stock in a corporation,
distributions to a non-U.S. Certificate Owner treated as dividends generally
would be subject to withholding of tax at the rate of 30 percent, unless that
rate were reduced by an applicable tax treaty.
INFORMATION REPORTING AND BACKUP WITHHOLDING
Backup withholding of U.S. federal income tax at a rate of 31 percent may
apply to payments made in respect of a Certificate to a registered owner who is
not an "exempt recipient" and who fails to provide certain identifying
information (such as the registered owner's taxpayer identification number) in
the manner required. Generally, individuals are not exempt recipients whereas
corporations and certain other entities are exempt recipients. Payments made in
respect of a U.S. Certificate Owner must be reported to the IRS, unless the U.S.
Certificate Owner is an exempt recipient or otherwise establishes an exemption.
Compliance with the identification procedures (described in the preceding
section) would establish an exemption from backup withholding for a non-U.S.
Certificate Owner who is not an exempt recipient.
In addition, upon the sale of a Certificate to (or through) a "broker," the
broker must withhold 31 percent of the entire purchase price unless either (i)
the broker determines that the seller is a corporation or other exempt
recipient, or (ii) the seller provides certain identifying information in the
required manner, and in the case of a non-U.S. Certificate Owner certifies that
the seller is a non-U.S. Certificate Owner (and certain other conditions are
met). Such a sale must also be reported by the broker to the IRS, unless either
(i) the broker determines that the seller is an exempt recipient or (ii) the
seller certifies its non-U.S. status (and certain other conditions are met).
Certification of the registered owner's non-U.S. status normally would be made
on Form W-8 under penalties of perjury, although in certain cases under proposed
Treasury regulations 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.
The backup withholding rules have not been issued in final form and
therefore are potentially subject to change.
59
<PAGE>
STATE AND LOCAL TAX CONSEQUENCES
The discussion above does not address the tax consequences of purchase,
ownership or disposition of the Certificates under any state or local tax law.
Each investor should consult its own tax advisor regarding state and local tax
consequences.
ERISA CONSIDERATIONS
Section 406 of ERISA and section 4975 of the Code prohibit certain pension,
profit sharing or other employee benefit plans, individual retirement accounts
or annuities and employee annuity plans (collectively, "Plans") from engaging in
certain transactions involving "plan assets" with persons that are "parties in
interest" under ERISA or "disqualified persons" under the Code with respect to
the Plan. A violation of these "prohibited transaction" rules may generate
excise tax and other liabilities under ERISA and section 4975 of the Code for
such persons.
A possible violation of the prohibited transaction rules could occur if any
Series of Certificates were to be purchased with "plan assets" of any Plan if
the Seller, the Trustee, any underwriter of such Series or any of their
affiliates were a "party in interest" or a "disqualified person," with respect
to such Plan. The Seller, the Trustee, any underwriter of a Series and their
affiliates are "parties in interest" and "disqualified persons" with respect to
many Plans. Before purchasing Certificates of any Series, any Plan fiduciary or
other person (including an insurance company investing general or separate
account assets) investing "plan assets" of any Plan should consider whether a
prohibited transaction might arise by virtue of the relationship between any
Plan and the Seller, the Trustee, any underwriter of such Series or any of their
affiliates and consult their counsel regarding the purchase. The Department of
Labor (the "DOL") has issued three class exemptions that may apply to otherwise
prohibited transactions arising from the purchase or holding of the
Certificates: DOL Prohibited Transaction Exemptions 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).
Other prohibited transactions may arise through the operation of a
regulation (the "Plan Asset Regulation") issued by the DOL. Under certain
circumstances, the Plan Asset Regulation treats the assets of an entity in which
a Plan has an equity interest as assets of such Plan. Although the Seller and
the Certificate Owners will agree to treat each Series of Certificates as debt
instruments, the Certificates may be considered equity interests in the Trust
for purposes of the Plan Asset Regulation. If that were the case, unless one of
the two exceptions described below applies, the Plan Asset Regulation would
apply to treat assets of the Trust as "plan assets" of the Plan investing
directly in the Certificates issued by the Trust.
The first exception applies to a "publicly-offered security." A
publicly-offered security is a security that is (a) freely transferable, (b)
part of a class of securities that is owned, immediately subsequent to the
initial offering, by 100 or more investors who were independent of the issuer
and of one another ("Independent Investors"), and (c) either is (i) part of a
class of securities registered under section 12(b) or 12(g) of the Exchange Act,
or (ii) sold to the plan as part of an offering of securities to the public
pursuant to an effective registration statement under the Securities Act and the
class of securities of which such security is a part is registered under the
Exchange Act within 120 days (or such later time as may be allowed by the
Commission) after the end of the fiscal year of the issuer during which the
offering of such securities to the public occurred. For purposes of the 100
Independent Investor criterion, 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. Unless otherwise specified in the
related Prospectus Supplement, it is anticipated that each Class of Certificates
will meet the foregoing criteria of publicly-offered securities and no
restrictions will be imposed on the transfer of the Certificates. Unless
otherwise specified in the related Prospectus Supplement, the Seller expects
that each Class of Certificates will be held by at least 100 Independent
Investors at the conclusion of the offering although no assurance can be given,
and no monitoring or other measures will be taken, to ensure that such condition
is met. Each Class of Certificates will be sold as part of an offering pursuant
to an effective registration statement under the Securities Act and then will be
timely registered under the Exchange Act.
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<PAGE>
The second exception applies if equity participation in the entity by
"Benefit Plan Investors" (i.e., Plans and other employee benefit plans not
subject to ERISA, such as governmental or foreign plans, as well as entities
holding assets deemed to be "plan assets") is not "significant." Benefit Plan
Investors' equity participation in a 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 interest 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 interest in the Trust held by Benefit Plan Investors will
be less than that amount at the completion of the offering and thereafter, and
no monitoring or other measures will be taken with respect to the satisfaction
of the conditions to this exception.
If the Plan Asset Regulation were to apply so that the Trust is considered
to hold "plan assets," transactions involving the Trust and "parties in
interest" or "disqualified persons" with respect to a Plan that is directly or
indirectly a Certificate Owner might be prohibited under section 406 of ERISA
and section 4975 of the Code unless an exemption is available. The three DOL
class exemptions mentioned above may not provide relief for all transactions
involving the Trust's assets even if they would otherwise apply to the purchase
of a Certificate by a Plan.
Certificates may not be purchased with "plan assets" of any Plan if the
Seller, the Servicer, the Trustee or any of their affiliates (a) has investment
or administrative discretion with respect to such Plan assets; (b) has authority
or responsibility to give, or regularly gives, investment advice with respect to
such Plan assets, for a fee and pursuant to an agreement or understanding that
such advice (i) will serve as a primary basis for investment decisions with
respect to such Plan assets, and (ii) will be based on the particular investment
needs of such Plan; or (c) is an employer maintaining or contributing to such
Plan.
In light of the foregoing, Plan fiduciaries or other persons investing "plan
assets" of any Plan considering the purchase of Certificates should consult
their own counsel regarding whether the assets of the Trust which are
represented by the Certificates would be considered "plan assets," the
consequences that would apply if the Trust's assets were considered "plan
assets," and the possibility of exemptive relief from the prohibited transaction
rules.
Finally, Plan fiduciaries or other persons investing "plan assets" of any
Plan 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, such fiduciaries 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
considering the "Special Considerations" and other factors discussed in this
Prospectus.
PLAN OF DISTRIBUTION
The Bank may sell Certificates (i) through underwriters or dealers, (ii)
directly to one or more purchasers, or (iii) through agents. The related
Prospectus Supplement will set forth the terms of the offering of any
Certificates offered hereby, including, without limitation, the names of any
underwriters, the purchase price of such Certificates and the proceeds to the
Bank from such sale, any underwriting discounts and other items constituting
underwriters' compensation, any initial public offering price and any discounts
or concessions allowed or reallowed or paid to dealers.
If underwriters are used in a sale of any Certificates of a Series offered
hereby, such Certificates will be acquired by the underwriters for their own
account and may be resold from time to time in one or more transactions,
including negotiated transactions, at a fixed public offering price or at
varying prices to be determined at the time of sale or at the time of commitment
therefor. Such Certificates may be offered to the public either through
underwriting syndicates represented by managing underwriters or by underwriters
without a syndicate. Unless otherwise set forth in the related Prospectus
Supplement, the obligations of the
61
<PAGE>
underwriters to purchase such Certificates will be subject to certain conditions
precedent, and the underwriters will be obligated to purchase all of such
Certificates if any of such Certificates are purchased. Any initial public
offering price and any discounts or concessions allowed or reallowed or paid to
dealers may be changed from time to time.
Certificates of a Series offered hereby may also be offered and sold, if so
indicated in the related Prospectus Supplement, in connection with a remarketing
upon their purchase, in accordance with a redemption or repayment pursuant to
their terms, by one or more firms ("remarketing firms") acting as principals for
their own accounts or as agents for the Bank. Any remarketing firm will be
identified and the terms of its agreement, if any, with the Bank and its
compensation will be described in the related Prospectus Supplement. Remarketing
firms may be deemed to be underwriters in connection with the Certificates
remarketed thereby.
Certificates may also be sold directly by the Bank or through agents
designated by the Bank from time to time. Any agent involved in the offer or
sale of Certificates will be named, and any commissions payable by the Bank to
such agent will be set forth, in the related Prospectus Supplement. Unless
otherwise indicated in the related Prospectus Supplement, any such agent will
act on a best efforts basis for the period of its appointment.
Any underwriters, agents or dealers participating in the distribution of
Certificates may be deemed to be underwriters, and any discounts or commissions
received by them on the sale or resale of Certificates may be deemed to be
underwriting discounts and commissions, under the Securities Act. Agents and
underwriters may be entitled under agreements entered into with the Bank to
indemnification by the Bank against certain civil liabilities, including
liabilities under the Securities Act, or to contribution with respect to
payments that the agents or underwriters may be required to make in respect
thereof. Agents and underwriters may be customers of, engage in transactions
with, or perform services for, the Bank or their affiliates in the ordinary
course of business.
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<PAGE>
GLOSSARY FOR PROSPECTUS
<TABLE>
<S> <C>
Accounts.......................................................................... 1
Accumulation Period............................................................... 8
Act............................................................................... 2
Addition.......................................................................... 28
Addition Date..................................................................... 29
Additional Accounts............................................................... 28
Aggregate Additional Limit........................................................ 28
Assigned Assets................................................................... 24
Assumed Obligations............................................................... 24
Assuming Entity................................................................... 24
Automatic Additional Accounts..................................................... 28
Bank.............................................................................. 1, 3
Bank Portfolio.................................................................... 20
Base Rate......................................................................... 23
Benefit Plan Investors............................................................ 61
Cede.............................................................................. 2
CEDEL............................................................................. 44
CEDEL Participants................................................................ 44
Certificate Owners................................................................ 2
Certificateholders................................................................ 2, 18, 43
Certificateholders' Interest...................................................... 4
Certificates...................................................................... 1
Citibank.......................................................................... 42
Class............................................................................. 1
Closing Date...................................................................... 7
Code.............................................................................. 57
Collection Account................................................................ 32
Commission........................................................................ 2
Controlled Accumulation Amount.................................................... 8
Controlled Amortization Amount.................................................... 9
Controlled Deposit Amount......................................................... 8
Controlled Distribution Amount.................................................... 9
Cooperative....................................................................... 44
Credit Card Guidelines............................................................ 19
Credit Enhancement................................................................ 11
Credit Enhancer................................................................... 37
Date of Processing................................................................ 12
Defaulted Amount.................................................................. 36
Defaulted Receivables............................................................. 36
Defeased Series................................................................... 40
Definitive Certificates........................................................... 45
Depositaries...................................................................... 42
Depository........................................................................ 26
Determination Date................................................................ 12
Disclosure Document............................................................... 6
Discount Option Receivables....................................................... 30
Discount Percentage............................................................... 30
Distribution Date................................................................. 12
DOL............................................................................... 60
DTC............................................................................... 2
Early Amortization Period......................................................... 9
</TABLE>
63
<PAGE>
<TABLE>
<S> <C>
Eligible Account.................................................................. 47
Eligible Deposit Account.......................................................... 32
Eligible Institution.............................................................. 32
Eligible Investments.............................................................. 33
Eligible Receivable............................................................... 47
Enhancement Invested Amount....................................................... 37
Euroclear......................................................................... 44
Euroclear Operator................................................................ 44
Euroclear Participants............................................................ 44
Excess Finance Charge Collections................................................. 35
Exchange Act...................................................................... 2
Expected Final Payment Date....................................................... 7
FDIC.............................................................................. 5
FDR............................................................................... 20
Finance Charge Receivables........................................................ 4
FIRREA............................................................................ 53
Full Invested Amount.............................................................. 10
Floating Allocation Percentage.................................................... 33
Funding Period.................................................................... 10
Group............................................................................. 10
Holders........................................................................... 45
Independent Investors............................................................. 60
Indirect Participants............................................................. 43
Ineligible Receivables............................................................ 46
Initial Accounts.................................................................. 3
Insolvency Event.................................................................. 15
Interchange....................................................................... 23
Interest Funding Account.......................................................... 7
Interest Payment Date............................................................. 31
Invested Amount................................................................... 31
IRS............................................................................... 56
L/C Issuer........................................................................ 37
Monthly Investor Servicing Fee.................................................... 39
Monthly Period.................................................................... 24
Monthly Report.................................................................... 41
Moody's........................................................................... 32
Morgan............................................................................ 42
New Issuance...................................................................... 31
OID............................................................................... 57
Paired Series..................................................................... 11
Participants...................................................................... 43
Participations.................................................................... 28
Pay Out Event..................................................................... 38
Payment Date...................................................................... 41
Plan Asset Regulation............................................................. 60
Plans............................................................................. 60
Pooling Agreement................................................................. 26
Portfolio Yield................................................................... 23
Pre-Funding Account............................................................... 10
Pre-Funding Amount................................................................ 10
Principal Allocation Percentage................................................... 33
Principal Commencement Date....................................................... 7
Principal Funding Account......................................................... 8
</TABLE>
64
<PAGE>
<TABLE>
<S> <C>
Principal Receivables............................................................. 4
Principal Shortfalls.............................................................. 34
Principal Terms................................................................... 31
Prospectus Supplement............................................................. 1
Rating Agency..................................................................... 13
Ratings Effect.................................................................... 14
Receivables....................................................................... 1, 3
Record Date....................................................................... 40
Removal Date...................................................................... 30
Removal Notice Date............................................................... 30
Removed Accounts.................................................................. 4
Required Principal Balance........................................................ 17
Required Seller Amount............................................................ 17
Required Seller Percentage........................................................ 17
Revolving Period.................................................................. 7
RTC............................................................................... 53
Scheduled Amortization Period..................................................... 8
Seller............................................................................ 3, 24, 26
Seller Amount..................................................................... 5
Seller Certificate................................................................ 5
Seller's Interest................................................................. 4
Series............................................................................ 1
Series Enhancement................................................................ 3
Series Invested Amount............................................................ 17
Series Servicing Fee Percentage................................................... 39
Series Termination Date........................................................... 41
Service Transfer.................................................................. 50
Servicer.......................................................................... 12
Servicer Default.................................................................. 51
Servicing Fee..................................................................... 39
Shared Principal Collections...................................................... 34
Special Funding Account........................................................... 34
Special Payment Date.............................................................. 38
Standard & Poor's................................................................. 32
Supplement........................................................................ 6
Tax Counsel....................................................................... 56
Tax Opinion....................................................................... 32
Termination Notice................................................................ 50
Terms and Conditions.............................................................. 44
Trust............................................................................. 1, 3
Trust Assets...................................................................... 3
Trust Cut-Off Date................................................................ 3
Trust Portfolio................................................................... 24
Trust Termination Date............................................................ 45
Trustee........................................................................... 3
U.S. Certificate Owner............................................................ 56
U.S. Person....................................................................... 56
UCC............................................................................... 15, 53
Withholding Agent................................................................. 58
</TABLE>
65
<PAGE>
CHEVY CHASE
MASTER CREDIT CARD TRUST II
$[_________] CLASS A [SERIES 199_-__]
[FLOATING RATE] [____%]
ASSET BACKED CERTIFICATES
$[_________] CLASS B [SERIES 199_-__]
[FLOATING RATE] [____%]
ASSET BACKED CERTIFICATES
CHEVY CHASE BANK, F.S.B.,
as Transferor and Servicer
CCB HOLDING CORPORATION
as Transferor
PROSPECTUS SUPPLEMENT
[NAME OF UNDERWRITERS]
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT.
A REGISTRATION STATEMENT RELATING TO
THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION
STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE
AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL
THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH
OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION
OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED OCTOBER 23, 1996
Version #1
PROSPECTUS SUPPLEMENT
(To Prospectus dated ________, 199 )
$__________
CHEVY CHASE MASTER CREDIT CARD TRUST
SERIES [199_-_] [FLOATING RATE] [____%]
ASSET BACKED CERTIFICATES
CHEVY CHASE BANK, F.S.B.
SELLER AND SERVICER
____________________
The Series [199_-_] [Floating Rate] [____%] Asset Backed Certificates (the
"Series [199_-_] Certificates") offered hereby will represent undivided
interests in certain assets of the Chevy Chase Master Credit Card Trust (the
"Trust") [to be] created pursuant to a Pooling and Servicing Agreement (the
"Pooling Agreement") between Chevy Chase Bank, F.S.B., a federally chartered
stock savings bank (the "Bank"), as seller and servicer, and _______________, as
trustee. The property of the Trust will include receivables (the "Receivables")
generated from time to time in a portfolio of consumer revolving credit card
accounts (the "Accounts"), collections thereon and certain other property as
more fully described herein. The Bank initially will own the remaining
undivided interest in the Trust not represented by the Series [199_-_]
Certificates and the other investor certificates issued by the Trust and will
service the Receivables. The Bank [has offered and] may offer from time to time
other series of certificates that evidence undivided interests in certain assets
of the Trust, which may have terms significantly different from the Series
[199_-_] Certificates and which are not offered hereby. The issuance of
additional Series of Certificates may impact the timing or amount of payments
received by Series [199_-_] Certificateholders.
(CONTINUED ON NEXT PAGE)
_______________________
THERE CURRENTLY IS NO SECONDARY MARKET FOR THE SERIES [199_-_] CERTIFICATES, AND
THERE IS NO ASSURANCE THAT ONE WILL DEVELOP OR, IF ONE DOES DEVELOP, THAT IT
WILL CONTINUE UNTIL THE SERIES [199_-_] CERTIFICATES ARE PAID IN FULL.
POTENTIAL INVESTORS SHOULD CONSIDER, AMONG OTHER THINGS, THE INFORMATION SET
FORTH IN "SPECIAL CONSIDERATIONS" HEREIN AND IN THE PROSPECTUS.
THE SERIES [199_-_] CERTIFICATES WILL REPRESENT INTERESTS IN THE TRUST ONLY
AND WILL NOT REPRESENT INTERESTS IN OR OBLIGATIONS OF THE BANK OR ANY AFFILIATE
OF THE BANK. NEITHER THE SERIES [199_-_] CERTIFICATES NOR THE UNDERLYING
ACCOUNTS OR RECEIVABLES OR ANY COLLECTIONS THEREON ARE INSURED OR GUARANTEED BY
THE SAVINGS ASSOCIATION INSURANCE FUND, THE FEDERAL DEPOSIT INSURANCE
CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY OR INSTRUMENTALITY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
Price to Underwriting Proceeds to the
Public (1) Discount Bank (1)(2)
Per Certificate . . . ____% ____% ____%
Total . . . . . . . . $__________ $__________ $__________
(1)Plus accrued interest, if any, at the Certificate Rate from _______, 199_.
(2)Before deduction of expenses payable by the Bank, estimated to be $_______.
________________
[The Series [199_-_] Certificates are offered by the Underwriters when, as and
if issued by the Trust and accepted by the Underwriters and subject to the
Underwriters' right to reject orders in whole or in part.] [The Series [199_-_]
Certificates are offered by [the Underwriters] subject to receipt and acceptance
by them and subject to their rights to reject any order in whole or in part.] It
is expected that the Series [199_-_] Certificates will be delivered in
book-entry form on or about __________, 199__, through the facilities of The
Depository Trust Company[, Cedel S.A. and the Euroclear System].
[Underwriters]
THE DATE OF THIS PROSPECTUS SUPPLEMENT IS ___________, 199_.
<PAGE>
(CONTINUED FROM PREVIOUS PAGE)
[Interest will accrue on the Series [199_-_] Certificates at the rate of
____% per annum (the "Certificate Rate").] [Interest will accrue on the Series
[199_-_] Certificates with respect to the initial Interest Period at the rate of
____% per annum and, with respect to each subsequent Interest Period, at the
rate of ____% per annum [above] [below] [times] __________ (the "Index")
prevailing on the Rate Determination Date, as defined herein, [but in no event
in excess of ____% per annum] (the "Certificate Rate").] Interest with respect
to the Series [199_-_] Certificates will be distributed on __________ and on the
__________ day of each [month] [quarter] [other] thereafter (or, if such
__________ day is not a business day, the next succeeding business day) (each,
an "Interest Payment Date").
Principal with respect to the Series [199_-_] Certificates [is scheduled to
be paid on __________, 199__] [is scheduled to be distributed on each
Distribution Date commencing on the Distribution Date in __________ and ending
on the Distribution Date in __________], but may be paid earlier or later under
certain limited circumstances described herein. See "Maturity Considerations"
and "Series Provisions -- Pay Out Events" herein and "Description of the
Certificates -- Pay Out Events" in the Prospectus.
[The Series [199_-_] Certificates will be subordinated to [Series [199_-_]]
[any other Series] to the extent described herein.] (1)
[The Trust will have the benefit of funds on deposit in a cash collateral
account (the "Cash Collateral Account") which will be funded by an initial
deposit of $__________. Amounts available to be withdrawn from the Cash
Collateral Account will be applied as described herein under "Summary of Series
Terms -- Cash Collateral Account" and "Series Provisions -- Cash Collateral
Account."] (2)
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVERALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SERIES [199_-_]
CERTIFICATES AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
THE CERTIFICATES OFFERED HEREBY CONSTITUTE A SEPARATE SERIES OF
CERTIFICATES BEING OFFERED BY THE BANK FROM TIME TO TIME PURSUANT TO ITS
PROSPECTUS DATED MARCH __, 1994. THIS PROSPECTUS SUPPLEMENT DOES NOT CONTAIN
COMPLETE INFORMATION ABOUT THE OFFERING OF THE SERIES [199_-_] CERTIFICATES.
ADDITIONAL INFORMATION IS CONTAINED IN THE PROSPECTUS AND PURCHASERS ARE URGED
TO READ BOTH THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS IN FULL. SALES OF
THE SERIES [199_-_] CERTIFICATES MAY NOT BE CONSUMMATED UNLESS THE PURCHASER HAS
RECEIVED BOTH THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS.
Until __________, __________ (90 days after the date of this Prospectus
Supplement), all dealers effecting transactions in the Series [199_-_]
Certificates, whether or not participating in this distribution, may be required
to deliver a Prospectus Supplement and Prospectus. This is in addition to the
obligation of dealers to deliver a Prospectus Supplement and Prospectus when
acting as underwriters and with respect to their unsold allotments or
subscriptions. [NOTE: This will be put on back cover.]
- --------------
(1) If the Series [199_-_] Certificates are to be subordinated to other Series,
appropriate descriptions of the subordination provisions and related
special considerations will be included in the Prospectus Supplement.
(2) Other forms of credit enhancement may be provided for the benefit of a
Series as described under "Description of the Certificates -- Credit
Enhancement" in the Prospectus, and if so provided, the Prospectus
Supplement will reflect the provisions of such Credit Enhancement that are
material to the Certificateholders of such Series, as well as necessary
information, if any, with respect to the credit enhancement provider.
S-2
<PAGE>
PROSPECTUS SUMMARY
The following is qualified in its entirety by reference to the detailed
information appearing elsewhere in this Prospectus Supplement and the
accompanying Prospectus. Reference is made to the Glossary in each of this
Prospectus Supplement and the Prospectus for the location herein and therein
of the definitions of certain capitalized terms used herein. Certain
capitalized terms used but not defined herein have the meanings assigned to
them in the Prospectus. <TABLE>
<S> <C>
Trust. . . . . . . . . . Chevy Chase Master Credit Card Trust (the "Trust").
Title of Securities. . . $__________ Series [199_-_] [Floating Rate] [____%] Asset
Backed Certificates (the "Series [199_-_] Certificates").
Initial Series [199_-_]
Invested Amount . . . . $[__________].(3)
Series Invested Amount . The [Initial Series [199_-_] Invested Amount] [Initial Series
[199_-_] Invested Amount plus the amount of any withdrawals
from the Pre-Funding Account in connection with the purchase of
an additional interest in the Principal Receivables] [other
formula].
Certificate Rate . . . . [[____]% per annum] [[____]% per annum with respect to the
initial Interest Period and, with respect to each subsequent
Interest Period, ____% per annum [above] [below] [times] ____
(the "Index") prevailing on the [____] day immediately
preceding the commencement of such Interest Period (a "Rate
Determination Date"), [but in no event in excess of ____% per
annum]].
Interest Payment Dates . The [____] day of each [month] [quarter] [other] (or, if any
such day is not a business day, the next succeeding business
day), commencing [____].
Controlled [Amortization]
[Accumulation] Amount. . For each Distribution Date with respect to the [Controlled
Amortization] [Accumulation] Period, $[__________]; [except
that, if the commencement of the Accumulation Period is delayed
as described herein under "Series Provisions -- Principal
Payments," the Controlled Accumulation Amount for each
Distribution Date with respect to the Accumulation Period will
be determined as described under "Series Provisions --
Application of Collections -- Payment of Principal."]
Expected Final Payment Date. . [__________].
- --------------------
(3) Adjustments to the Invested Amount definition and allocations with
respect to the Invested Amount may be made in a Prospectus
Supplement relating to a prefunded Series.
S-3
<PAGE>
[Initial Cash Collateral
Amount . . . . . . . . . $[__________].]
Closing Date . . . . . . [__________], 199__.
The Series [199_-_] Certificates. . Each of the Series [199_-_] Certificates offered
hereby represents an undivided interest in the
Trust (the "Series [199_-_] Certificateholders'
Interest") The principal amount of the Series
[199_-_] Certificateholders' Interest [will
decline as principal is paid to the Series
[199_-_] Certificateholders during the
Controlled Amortization Period or Early
Amortization Period] [will remain fixed at the
aggregate initial principal amount of the Series
[199_-_] Certificates, except as otherwise
provided herein]. [During the Accumulation
Period, for the sole purpose of allocating
collections of Finance Charge Receivables and
the Defaulted Amount with respect to each
Monthly Period, the [Series 199_-_]
Certificateholders' Interest will be further
reduced by the amount on deposit in the
Principal Funding Account (as so reduced, the
"Adjusted Invested Amount").]
The Series [199_-_] Certificateholders' Interest
will include the right to receive (but only to
the extent needed to make payments of interest
at the Certificate Rate with respect to each
Interest Period and payments of principal as
described herein), varying percentages of the
collections of Finance Charge Receivables and
Principal Receivables and will be allocated a
varying percentage of the Defaulted Amount with
respect to each Monthly Period. Collections of
Finance Charge Receivables and the Defaulted
Amount will be allocated to the Series [199_-_]
Certificateholders based on the Floating
Allocation Percentage. Collections of Principal
Receivables will be allocated to the Series
[199_-_] Certificates based on the Principal
Allocation Percentage. Such percentage will
vary as described herein under "Series
Provisions -- Allocation Percentages" as the
aggregate amount of Principal Receivables in the
Trust varies from month to month and depending
on whether the Series [199_-_] Certificates are
in their Revolving Period, [Controlled
Amortization] [Accumulation] Period or Early
Amortization Period. See also "Description of
the Certificates -- Allocation Percentages" in
the Prospectus. [Following the occurrence of an
Economic Pay Out Event and a withdrawal of funds
from the Cash Collateral Account, a portion of
the Series [199_-_] Certificateholders' Interest
(corresponding to the aggregate amount of such
withdrawal) will be allocated to the Cash
Collateral Depositor (the "Enhancement Invested
Amount").]
[Other Series. . . . . . [The Series [199_-_] Certificates are the first Certificates
issued by the Trust] [Additional Series are expected to be
issued from time to time by the Trust.] See "Description of the
S-4
<PAGE>
Certificates -- New Issuances" in the Prospectus and "Maturity
Considerations" herein.](4)
[Subordination to Other Series. . The Series [199_-_] Certificates will be subordinated in right
of payment of [interest] [and] [principal] to
the certificates of Series [199_-_].]
Receivables. . . . . . . The Receivables arise in Accounts that have been selected from the
Bank Portfolio, based on criteria provided in the Pooling
Agreement as applied on the Trust Cut-Off Date and as more
fully described herein under "The Bank Portfolio." The
aggregate amount of Receivables in the Accounts as of
[__________, ____] [the Trust Cut-Off Date] was $__________,
comprised of $__________ of Principal Receivables and
$__________ of Finance Charge Receivables.
[Funding Period. . . . . During the period from and including the Closing Date to but
excluding the earliest of (i) the day on which the Series
199_-_ Invested Amount equals [$__________] (the "Full Invested
Amount"), (ii) the day on which a Pay Out Event occurs and
(iii) the ______ 199_ Distribution Date (the "Funding Period"),
the Pre-Funding Amount will be held in a trust account
established with the Trustee for the benefit of the Series
199_-_ Certificateholders (the "Pre-Funding Account"). The
"Pre-Funding Amount" will equal $______, less the amounts of
any increases in the Series 199_-_ Invested Amount pursuant to
the Series [199_-_] Supplement in connection with the addition
of Principal Receivables to the Trust or principal payments
made to other amortizing Series.
[Funds on deposit in the Pre-Funding Account will be invested by
the Trustee in certain Eligible Investments [pursuant to a
guaranteed rate agreement] [guaranteed investment contract].
Interest earnings on the Pre-Funding Amount (net of investment
losses and expenses) will be used to pay interest on the Series
[199_-_] Certificates during the Funding Period.]
During the Funding Period, funds on deposit in the Pre-Funding
Account will be withdrawn and paid to the Seller to the extent
of any increases in the Series 199_-_ Invested Amount. The
Seller expects that the Series 199_-_ Invested Amount will
equal the Full Invested Amount by the ______ 199_ Monthly
Period. If the Series 199_-_ Invested Amount does not for any
reason equal the Full Invested Amount by the end of the
- -------------------
(4) If Series [199_-_] is issued at a time when there are other
outstanding Series, appropriate summary disclosure about the
principal terms of such other Series will be included in the
Prospectus Supplement.
S-5
<PAGE>
Funding Period, any amount remaining in the Pre-Funding Account
will be payable to the Series [199_-_] Certificateholders on
the Distribution Date that is the last day of the Funding
Period.]
[Early Termination Amount. . An early termination amount (the "Early Termination Amount") will
be payable by the Seller to the Series [199_-_]
Certificateholders on the first Distribution Date following the
end of the Funding Period if any Pre-Funding Amount exists at
the end of the Funding Period. The Early Termination Amount
will equal the excess, if any, discounted as described below,
of (i) the amount of interest that would have accrued on such
Pre-Funding Amount at the Certificate Rate during the period
commencing on and including such Distribution Date to, but
excluding, __________, over (ii) the amount of interest that
would have accrued on such Pre-Funding Amount over the same
period at a per annum rate of interest equal to the bond
equivalent yield to maturity on the [ ] day preceding such
Distribution Date on [________]. Such excess shall be
discounted to present value to such Distribution Date at the
applicable yield described in clause (ii).]
[Registration of Series
[199_-_] Certificates. . The Series [199_-_] Certificates initially will be represented by
Series [199_-_] Certificates registered in the name of Cede, as
the nominee of DTC. No purchaser of a Series [199_-_]
Certificate will be entitled to receive a definitive
certificate except under certain limited circumstances.
Purchasers of Series [199_-_] Certificates may elect to hold
their Series [199_-_] Certificates through DTC (in the United
States) [or Cedel or Euroclear (in Europe)]. See "The Pooling
Agreement Generally -- Definitive Certificates" in the
Prospectus.]
Servicing Compensation . The Series Servicing Fee Percentage for the Series [199_-_]
Certificates will be ____% per annum. [On each Distribution
Date, Servicer Interchange with respect to the related Monthly
Period that is on deposit in the Collection Account will be
withdrawn from the Collection Account and paid to the Servicer
in respect of the Monthly Servicing Fee. In addition,] The
Series [199_-_] Servicing Fee will be paid on each Distribution
Date as described under "Series Provisions -- Application of
Collections -- Payment of Fees, Interest and Other Items" and
"-- Servicing Compensation and Payment of Expenses" herein.
See also "Description of the Certificates -- Servicing
Compensation and Payment of Expenses" in the Prospectus.
</TABLE>
S-6
<PAGE>
Revolving Period and
[Controlled Amortization]
[Accumulation] Period. . Unless a Pay Out Event has occurred, the revolving
period with respect to the Series [199_-_]
Certificates (the "Revolving Period") will end and
the [controlled amortization period with respect to
the Series [199_-_] Certificates (the "Controlled
Amortization Period")] [accumulation period with
respect to the Series [199 ] Certificates (the
"Accumulation Period")] will commence at the close
of business on [__________]] [(except that, subject
to the conditions set forth under "Series Provisions
-- Principal Payments" herein, the day on which the
Revolving Period ends and the Accumulation Period
begins may be delayed to no later than the close of
business on [__________] )]. The [Controlled
Amortization] [Accumulation]Period] will end on the
earliest of (a) the commencement of the Early
Amortization Period, (b) the payment in full of the
Series [199_-_] Invested Amount or (c) the Series
[199_-_]Termination Date (the "Termination Date").
No principal will be payable to Series [199_-_]
Certificateholders until [the first Distribution
Date with respect to the Controlled Amortization
Period] [__________, 199_ (the "Expected Final
Payment Date")], or, upon the occurrence of a Pay
Out Event as described herein, the first
Distribution Date with respect to the Early
Amortization Period. [For the period beginning on
the Closing Date and ending with the commencement of
the [Controlled Amortization] [Accumulation] Period
or the Early Amortization Period, collections of
Principal Receivables otherwise allocable to the
Series [199_-_] Certificateholders' Interest will,
subject to certain limitations, be treated as Shared
Principal Collections and applied to make principal
payments due to or for the benefit of
Certificateholders of other Series, if so specified
in the Supplements for such other Series, or paid to
the holder of the Seller Certificate.] See "Series
Provisions -- Pay Out Events" herein and
"Description of the Certificates -- Pay Out Events"
in the Prospectus for a discussion of the events
which might lead to the termination of the Revolving
Period prior to the commencement of the [Controlled
Amortization] [Accumulation] Period. In addition,
see "Series Provisions -- Principal Payments" herein
[and "Description of the Certificates -- Shared
Principal Collections" in the Prospectus] .
[Excess Finance Charge
Collections. . . . . . . The Series [199_-_] Certificates will be included in a
group of Series ("Group [____]") expected to be
issued by the Trust from time to time. Subject to
certain limitations described under "Description of
the Certificates -- Sharing of Excess Finance Charge
Collections" in the Prospectus, Excess Finance
Charge Collections, if any, with respect to a Series
included in Group [____] will be applied to cover
any shortfalls with
S-7
<PAGE>
respect to amounts payable from collections of
Finance Charge Receivables allocable to any other
Series in Group [____], pro rata based upon the
amount of the shortfall, if any, with respect to
each Series in Group [____]. See "Description of
the Certificates -- Sharing of Excess Finance Charge
Collections" in the Prospectus.]
[Shared Principal
Collections . . . . . . Collections of Principal Receivables and certain other
amounts otherwise allocable to other Series, to the
extent such collections are not needed to make
payments to or deposits for the benefit of the
certificateholders of such other Series, will be
applied to cover principal payments due to or for
the benefit of the holders of the Series [199_-_]
Certificates. See "Description of the Certificates
-- Shared Principal Collections" in the Prospectus.]
[Cash Collateral
Account . . . . . . . . A cash collateral account (the "Cash Collateral
Account") will be established in the name of the
Trustee for the benefit of the Series [199_-_]
Certificateholders. The Cash Collateral Account
will be funded on the Closing Date in the amount of
$__________ (the "Initial Cash Collateral Amount"),
which amount will include the proceeds of an advance
to be made by the Cash Collateral Depositor pursuant
to the Loan Agreement. On each Distribution Date,
the Available Cash Collateral Amount will be applied
to fund the Required Amount, if any, with respect to
such Distribution Date.
[On the first Special Payment Date following an
Economic Pay Out Event, the Available Cash
Collateral Amount (after giving effect to other
withdrawals from the Cash Collateral Account on such
Distribution Date), will be applied to pay principal
of the Series [199_-_] Certificates, up to the
Series [199_-_] Invested Amount. Following such
withdrawal from the Cash Collateral Account on such
Special Payment Date, the Cash Collateral Account
will be terminated and no further deposits to, or
withdrawals from, the Cash Collateral Account will
be made for the benefit of the Series [199_-_]
Certificateholders.]
[On each Distribution Date, Available Finance Charge
Collections allocated and available for that purpose
(as described under "Series Provisions --
Application of Collections -- Payment of Interest,
Fees and Other Items") will be applied to increase
the amount on deposit in the Cash Collateral Account
(to the extent such amount is less than the Initial
Cash Collateral Amount). In addition, if on any
Distribution Date the amount on deposit in the Cash
Collateral Account exceeds [the lesser of] the
Initial Cash Collateral Amount [and the Adjusted
Invested Amount], such excess will be withdrawn and
paid to the Cash Collateral Depositor for
application in accordance with the Loan
S-8
<PAGE>
Agreement. See "Series Provisions -- Cash Collateral
Account".]]
[Credit Enhancement. . . The Trust will have the benefit of a [letter of credit]
[surety bond] [insurance policy] [spread account]
[reserve account] [other credit enhancement] [issued
by __________ for the benefit of the Series [199_-_]
Certificateholders as described herein. See "Series
Provisions -- Credit Enhancement" herein.]
[Optional Repurchase . . The Series [199_-_] Certificateholders' Interest will
be subject to optional repurchase by the Seller on
any Distribution Date after the [sum of the] Series
[199_-_] Invested Amount [and the Enhancement
Invested Amount, if any,] is reduced to an amount
less than or equal to $__________ (____% of the
Initial Invested Amount). The purchase price will
be equal to the [sum of the Series [199_-_] Invested
Amount [(less the Principal Funding Account Balance,
if any)] [and the Enhancement Invested Amount, if
any,] and accrued and unpaid interest on the Series
[199_-_] Certificates [(and accrued and unpaid
interest with respect to interest amounts that were
due but not paid on a prior Interest Payment Date)]
through (a) if the day on which such purchase occurs
is a Distribution Date, the day preceding such
Distribution Date or (b) if the day on which such
repurchase occurs is not a Distribution Date, the
day preceding the Distribution Date following such
day. See "Description of the Certificates --
Optional Termination; Final Payment of Principal" in
the Prospectus.]
Required Principal Balance;
Addition of Accounts . . The Series [199_-_] Supplement provides that the Seller
will be required to make an Addition of Accounts to
the Trust if the amount of Principal Receivables in
the Trust is not maintained at a minimum level equal
to the sum of the initial invested amounts of each
Series then outstanding (provided that certain
Series may be excluded from such calculation [if the
issuance of such Series will not result in a Ratings
Effect]) minus amounts on deposit in the Special
Funding Account [and Principal Funding Account].
See "Series Provisions -- Required Principal Balance;
Addition of Accounts herein and "Description of the
Certificates -- Addition of Trust Assets" in the
Prospectus.
Series [199_-_]
Termination Date . . . . ____________________, __________. See "Series
Provisions -- Series Termination."
Defeasance . . . . . . . In certain circumstances and subject to certain
conditions, the Bank may terminate its substantive
obligations in respect of Series [199_-_] or the
Pooling Agreement as a whole. See
S-9
<PAGE>
"Description of the Certificates -- Defeasance" in
the Prospectus.
Tax Status . . . . . . . Special tax counsel to the Seller is of the opinion
that under existing law the Series [199_-_]
Certificates will be characterized as debt for
federal income tax purposes. Under the Pooling
Agreement, the Certificate Owners will agree to
treat the Certificates as debt for federal income
tax purposes. See "Tax Matters" in the Prospectus
for additional information concerning the
application of federal income tax laws.
ERISA Considerations . . Under a regulation issued by the Department of Labor,
the Trust's assets would not be deemed "plan assets"
of an employee benefit plan holding the Series
[199_-_] Certificates if certain conditions are met,
including that the Series [199_-_] Certificates must
be held, upon completion of the public offering made
hereby by at least 100 investors who are independent
of the Seller and of one another. The
Underwriter[s] expect that the Series [199_-_]
Certificates will be held by at least 100
independent investors at the conclusion of the
offering, although no assurance can be given, and no
monitoring or other measures will be taken to ensure
that such condition will be met. The Seller
anticipates that the other conditions of the
regulation will be met. If the Trust's assets were
deemed to be "plan assets" of an employee benefit
plan investor, it is uncertain whether existing
exemptions from the "prohibited transaction" rules
of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), would apply to all
transactions involving the Trust's assets.
Accordingly, employee benefit plan fiduciaries
contemplating purchasing the Series [199_-_]
Certificates should consult their counsel before
making a purchase. See "ERISA Considerations" in
the Prospectus.
Certificate Rating . . . It is a condition to the issuance of the Series
[199_-_] Certificates that they be rated in [the
highest rating category] [one of the four highest
rating categories] by at least one nationally
recognized rating agency. [The rating of the Series
[199_-_] Certificates is based primarily on the
value of the Receivables, [the Initial Cash
Collateral Amount and the circumstances in which
funds may be withdrawn from the Cash Collateral
Account in respect of the Certificates] [other
reasons]]. See "Special Considerations -- Series
Considerations -- Limited Nature of Rating" in the
Prospectus.
[Listing . . . . . . . . Application will be made to list the Series [199_-_]
Certificates on the [Luxembourg Stock Exchange]
[other exchange].]
S-10
<PAGE>
SPECIAL CONSIDERATIONS
Potential investors should consider, among other things, the following
risk factors in connection with the purchase of the Series [199_-_]
Certificates.
LIMITED AMOUNTS OF CREDIT ENHANCEMENT. Although Credit Enhancement with
respect to the Series [199_-_] Certificates will be provided by the
[the Cash Collateral Account] [Credit Enhancement], the amount available
thereunder is limited, [is expected to] [may] decline during the
[Controlled Amortization] [Accumulation] Period or the Early Amortization
Period and will be reduced by payments made pursuant thereto. If the amount
available under [the Cash Collateral Account] [such Credit Enhancement] has
been reduced to zero, Series [199_-_] Certificateholders will bear directly
the credit and other risks associated with their respective undivided
interests in the Trust.
MATURITY CONSIDERATIONS
The Pooling Agreement and the Series [199_-_] Supplement provide that
Series [199_-_]Certificateholders will not receive payments of principal
until [the first Distribution Date with respect to the [Controlled Amortization
Period], which is the __________, 199_ Distribution Date,] [__________,
199_ (the "Expected Final Payment Date")], or earlier in the event of a
Pay Out Event which results in the commencement of the Early Amortization
Period. Series [199_-_]Certificateholders will receive payment of principal
on each Distribution Date following the Monthly Period in which a Pay Out
Event occurs (each such Distribution Date, a "Special Payment Date") until
the Series [199_-_] Invested Amount has been paid in full or the Termination
Date has occurred.
[On each Distribution Date during the Controlled Amortization Period,
the Series [199_-_] Certificateholders will be entitled to receive monthly
payments of principal until the Series [199_-_] Certificates have been paid
in full equal to the least of (a) Available Principal Collections (see
"Series Provisions -- Principal Repayments") for the related Monthly Period
on deposit in the Collection Account, (b) the Controlled Distribution Amount,
which is equal to the sum of the Controlled Amortization Amount and any
existing Deficit Controlled Amortization Amount (both as defined under
"Series Provisions -- Application of Collections -- Payments of Principal")
and (c) the Invested Amount.]
[On each Distribution Date during the Accumulation Period, amounts equal
to the least of (a) Available Principal Collections (see "Series
Provisions -- Principal Repayments") for the related Monthly Period on deposit
in the Collection Account, (b) the Controlled Deposit Amount, which is equal
to the sum of the Controlled Accumulation Amount for such Monthly Period and
any Deficit Controlled Accumulation Amount (both as defined under "Series
Provisions -- Application of Collections -- Payments of Principal") and (c) the
Adjusted Invested Amount will be deposited in the Principal Funding Account
held by the Trustee (the "Principal Funding Account") until the Principal
Funding Account Balance is equal to the Series [199_-_]
Invested Amount. See "Series Considerations -- Principal Payments" for a
discussion of the circumstances under which the commencement of the
Accumulation Period may be delayed.]
[The Seller may, at or after the time at which the [Controlled
Amortization] [Accumulation] Period commences for Series [199_-_], cause the
Trust to issue another Series (or some portion thereof, to the extent that
the full principal amount of such other Series is not otherwise outstanding
at such time) as a Paired Series with respect to Series [199_-_]. Although no
assurances can be given as to whether such other Series will be issued and,
if issued, the terms thereof, the outstanding principal amount of such Series
may vary from time to time whether or not a Pay Out Event occurs with respect
to the Series [199_-_] Certificates, and the interest rate with respect to
certificates of such other Series may be established on its date of issuance
and may be reset periodically at intervals of from one day to [____] days.
Further, since the terms of the Series [199_-_] Certificates will vary from
the terms of such other Series, the Pay Out
S-11
<PAGE>
Events with respect to such other Series will vary from the Pay Out Events
with respect to Series [199_-_] and may include Pay Out Events which are
unrelated to the status of the Seller or the Servicer or the Receivables,
such as Pay Out Events related to the continued availability and rating of
certain providers of Series Enhancement to such other Series. If a Pay Out
Event does occur with respect to any such Paired Series prior to the payment
in full of the Series [199_-_] Certificates, the final payment of principal
to the Series [199_-_] Certificateholders may be delayed.]
[Should a Pay Out Event occur with respect to the Series [199_-_]
Certificates and the Early Amortization Period commence or should the
[Series [199_-_]] Invested Amount not be paid in full on
[the __________ Distribution Date] [the Expected Final Payment Date],
[any amount on deposit (a) in the Principal Funding Account will be paid to
the Series [199_-_] Certificateholders on the first Special Payment Date and]
the Series [199_-_] Certificateholders will be entitled to receive Available
Principal Collections on each Distribution Date with respect to such Early
Amortization Period or following the [____] Distribution Date]
[Expected Final Payment Date], as the case may be, as described herein until
the Series [199_-_] Invested Amount is paid in full or until the Series
Termination Date occurs [and (b) in the Special Funding Account will be
released and treated as Shared Principal Collections to the extent needed to
cover principal payments due to or for the benefit of any Series entitled to
the benefits of Shared Principal Collections]. See "Description of the
Certificates -- Pay Out Events" in the Prospectus and "Series
Provisions -- Pay Out Events" herein. [In addition, on the first Special
Payment Date following the occurrence of an Economic Pay Out Event, after
giving effect to any payment of principal on such date as described under
Series Provisions --Application of Collections -- Payments of Principal," an
amount equal to the lesser of (i) the excess, if any, of the Available Cash
Collateral Amount (after giving effect to any withdrawal from the Cash
Collateral Account on such date of amounts to fund the Required Amount) and
(ii) the unpaid principal amount of the Series [199_-_] Certificates (less
the Principal Funding Account Balance), will be withdrawn from the Cash
Collateral Account and distributed to the Series [199_-_] Certificateholders
as a payment of principal of the Series [199_-_]Certificates. See "Series
Provisions -- Principal Payments" and "-- Cash Collateral Account."]
The ability of Series [199_-_] Certificateholders to receive payments of
principal [during the Controlled Amortization Period]
[on the applicable Expected Final Payment Date] depends on the payment rates
on the Receivables, the amount of outstanding Receivables, delinquencies,
charge-offs and new borrowings on the Accounts and the potential issuance by
the Trust of additional Series. Monthly payment rates on the Receivables may
vary because, among other things, cardholders may fail to make a required
minimum payment, may only make payments as low as the minimum required amount
or may make payments as high as the entire outstanding balance. Monthly
payment rates may also vary due to seasonal purchasing and payment habits of
cardholders and to changes in any terms of rebate programs in which
cardholders participate. See the "Cardholder Monthly Payment Rates for the
Bank Portfolio" table under "The Bank Portfolio" herein. The Bank cannot
predict, and no assurance can be given, as to the cardholder monthly payment
rates that will actually occur in any future period, as to the actual rate of
payment of principal of the Series [199_-_] Certificates or whether the terms
of any subsequently issued Series might have an impact on the amount or
timing of any such payment of principal. See "Special Considerations --
Series Considerations -- Payments and Maturity" and "Description of the
Certificates -- Shared Principal Collections" in the Prospectus.
In addition, the amount of outstanding Receivables and delinquencies,
charge-offs and new borrowings on the Accounts may vary from month to month
due to seasonal variations, the availability of other sources of credit,
legal factors, general economic conditions and spending and borrowing habits
of individual cardholders. There can be no assurance that collections of
Principal Receivables with respect to the Trust Portfolio, and thus the rate
at which Series [199_-_] Certificateholders could expect to receive payments
of principal on their Series [199_-_] Certificates during the
[Controlled Amortization Period or the] Early Amortization Period
[or the rate at which the Principal Funding Account could be funded during
the Accumulation Period], will be similar to the historical experience set
forth in the "Cardholder Monthly
S-12
<PAGE>
Payment Rates for the Bank Portfolio" table under the heading "The Bank
Portfolio." In addition, the Trust, as a master trust, may issue additional
Series from time to time, and there can be no assurance that the terms of any
such Series might not have an impact on the timing or amount of payments
received by Series [199_-_] Certificateholders. Further, if a Pay Out Event
occurs, the average life and maturity of the Series [199_-_] Certificates
could be significantly reduced.
Due to the reasons set forth above, there can be no assurance that
[principal payments][deposits in the Principal Funding Account] will be made
in accordance with the applicable Controlled [Amortization] [Accumulation]
Amounts or that the actual number of months elapsed from the date of issuance
of the Series [199_-_] Certificates to the final Distribution Date with
respect thereto will equal the expected number of months. See "Special
Considerations --Series Considerations -- Payments and Maturity" in the
Prospectus.
THE BANK PORTFOLIO
GENERAL
Set forth below is certain information with respect to the Bank
Portfolio. See "The Bank's Credit Card Activities" in the Prospectus. There
can be no assurance that the yield, loss and delinquency experience with
respect to the Receivables will be comparable to that set forth below with
respect to the entire Bank Portfolio.
DELINQUENCY AND LOSS EXPERIENCE
The following tables set forth the delinquency and loss experience for
the Bank Portfolio at or for each of the periods shown.
[Accounts selected for credit card trusts originated by the Bank in 1988, 1992
and March 1993 are considered to be part of the Bank Portfolio for purposes
of this Prospectus.] The Accounts constituting the Trust Portfolio have been
selected from accounts in the Bank Portfolio [(but excluding accounts selected
for presently existing credit card trusts that were originated by the Bank)]
based on certain eligibility criteria specified in the Pooling Agreement.
See "The Accounts" in the Prospectus.
[Since 1989, the Bank has sold credit card accounts with balances of
over $1.1 billion to other financial institutions, and the historical
information regarding the Bank Portfolio reflects credit card account sales
of approximately 124,000 MasterCard and VISA accounts and the Bank's interest
in the related receivables of approximately $289,000,000 during the year
ended December 31, 1991, credit card account sales of approximately 243,000
MasterCard and VISA accounts and the Bank's interest in the related
receivables of approximately $646,000,000 during the year ended December 31,
1990 and credit card account sales of approximately 83,000 MasterCard and
VISA accounts and the Bank's interest in the related receivables of
approximately $200,000,000 during the year ended December 31, 1989
(collectively, the "Account Sales"). In each of the Account Sales, servicing
was not retained by the Bank. The accounts sold were required to meet credit
quality and geographic criteria established by the purchasers. The sale of
such accounts has affected comparability among periods shown for the
historical experience set forth below and comparability of the present Bank
Portfolio with the historical experience.] There can be no assurance that the
delinquency and loss experience for the Receivables in the Trust Portfolio
will be similar to the historical experience set forth below.
S-13
<PAGE>
Delinquency Experience
Bank Portfolio (1)
(Dollars in Thousands)
<TABLE>
<CAPTION>
[Year ended December 31]
-------------------------------------------------------------------------------------------------
[1993] [1992] [1991]
----------------------------- --------------------------- -----------------------------
Percentage Percentage Percentage
of Total of Total of Total
Receivables Receivables Receivables Receivables Receivables Receivables
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Receivables
Outstanding . . . . . . . [$________ $ $
Receivables
contractually
delinquent:
30-59 days . . . . . . . . $________ ____% $ % $ %
60-89 . . . . . . . . . . . ________ ____%
90 days or more . . . . . . ________ ____% _______ ______ _______ _____
Total . . . . . . . . . . . . $________ ____% $ % $ %]
</TABLE>
- ---------------
(1) The Bank's credit card program commenced in June 1985.
[(2) Reflects the Account Sales that occurred in 1991, but includes the
receivables transferred in connection with credit card trusts previously
originated by the Bank that were in existence on the specified dates.
Receivables outstanding is the total balance of the accounts and consists
of all amounts due from cardholders as posted to the accounts.]
S-14
<PAGE>
Loss Experience
Bank Portfolio (1)
(Dollars in Thousands)
[Year ended December 31]
--------------------------------
[1993] [1992] [1991]
------ ------ ------
Average receivables
outstanding(2) . . . . . . . [$ $ $
Total gross credit charge-
offs(3) . . . . . . . . . . . $ $ $
Total gross credit charge-
offs as a percentage of
average receivables
outstanding(4) . . . . . . . % %
Recoveries(5) . . . . . . . . . $ $ $
Net credit losses(5) . . . . . $ $ $
Net credit losses as a
percentage of average
receivables outstanding(4) . % %]
- ---------------
(1) The Bank's credit card program commenced in June 1985.
[(2) Reflects the Account Sales that occurred in 1991, but includes the
receivables transferred in connection with the credit card trusts
previously originated by the Bank that were in existence during
the specified periods. Average receivables outstanding is the weighted
average of average monthly receivables outstanding during the period
indicated.]
(3) Does not include charge-offs for fraud or cardholder disputes.
(4) Annualized.
(5) Recoveries are not included in the Trust.
REVENUE EXPERIENCE
The following table sets forth the revenues from finance charges and fees
billed with respect to the Bank Portfolio for each year during the three-year
period ended [December 31, 1993].
S-15
<PAGE>
REVENUE EXPERIENCE FOR THE BANK PORTFOLIO
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------
[1993 1992 1991]
-------- -------- --------
<S> <C> <C> <C>
Average Receivables Outstanding (1) . . . . . [$ $ $
Finance Charges and Fees (2). . . . . . . . . $ $ $
Finance Charges and Fees (Yield). . . . . . . % % %]
[Interchange (Yield). . . . . . . . . . . . . % % %]
</TABLE>
(1) [Average Receivables Outstanding is the monthly average of receivables
outstanding during the periods indicated.]
(2) [Finance Charges And Fees does not include interest on subsequent
collections on accounts previously charged-off or revenue attributable to
Interchange[, although Interchange in respect of the accounts will be conveyed
to the Trust. See "The Bank's Credit Card Activities- Interchange" in the
Prospectus]. Finance Charges and Fees includes monthly periodic finance charges,
the portion of the annual membership fees amortized on a monthly basis, cash
advance fees, late charges, overlimit charges and other miscellaneous fees.]
[The revenue for the accounts in the Bank Portfolio shown in the above
table is comprised of three primary components: monthly periodic rate finance
charges, the amortized portion of annual membership fees and other service
charges, such as cash advance fees, late charges, overlimit charges and other
miscellaneous fees. If payment rates decline, the balances subject to monthly
periodic finance charges tend to grow, assuming no change in the level of
purchasing activity. Conversely, if payment rates increase, the balances
subject to monthly periodic finance charges tend to fall, assuming no change in
the level of purchasing activity. Accordingly, under these circumstances, the
yield related to periodic finance charges normally increases. The yield related
to service charges varies with the type and volume of activity in and the
amount of each account. As account balances increase, annual membership fees,
which remain constant, represent a smaller percentage of the aggregate account
balances.]
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 that would be [deemed] payments of Principal Receivables and Finance
Charge Receivables with respect to the Accounts.
CARDHOLDER MONTHLY PAYMENT RATES
FOR THE BANK PORTFOLIO
<TABLE>
<CAPTION>
Year Ended December 31,
[1993] [1992] [1991]
<S> <C> <C> <C>
Lowest. . . . . . . . . . . . . . . . . . % % %
Highest . . . . . . . . . . . . . . . . . % % %
Monthly Average . . . . . . . . . . . . . % % %
</TABLE>
S-16
<PAGE>
THE RECEIVABLES
The Receivables in the Trust Portfolio, as of [__________,____], 1994
[the Trust Cut-Off Date], included $__________ of Principal Receivables and
$__________ of Finance Charge Receivables. The Accounts had an average Principal
Receivable balance of $__________ and an average credit limit of
$__________. The percentage of the aggregate total Receivables balance to the
aggregate total credit limit was ____%. The average age of the Accounts was
approximately ____ months. As of the Trust Cut-Off Date, all of the Accounts in
the Trust Portfolio were VISA or MasterCard credit card accounts, of which
____% were standard accounts and ____% were premium accounts, and the aggregate
Principal Receivable balances of standard accounts and premium accounts, as a
percentage of the total aggregate Principal Receivables, were ____% and ____%,
respectively.
The following tables summarize the Trust Portfolio by various criteria as
of [the Trust Cut-Off Date]. References to "Receivables Outstanding" in the
following tables include both Finance Charge Receivables and Principal
Receivables. Because the future composition of the Trust Portfolio may change
over time, these tables are not necessarily indicative of the composition of
the Trust Portfolio at any subsequent time.
COMPOSITION BY ACCOUNT BALANCE
TRUST PORTFOLIO
<TABLE>
<CAPTION>
Percentage Percentage
of Total of Total
Number of Number of Receivables Receivables
Account Balance Range Accounts Accounts Outstanding Outstanding
--------------------- --------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Credit Balance. . . . . . . . [ % $(________) (____%)
No Balance. . . . . . . . . .
$0.01 - $500.00 . . . . . . .
$500.01 - $1,000.00 . . . . .
$1,000.01 - $3,000.00 . . . .
$3,000.01 - $5,000.00 . . . .
$5,000.01 - $10,000.00. . . .
$10,000.01 or more. . . . . . ]
--------- ---------- ----------- -----------
TOTAL $[ ] 100.00% $[ ] 100.00%
--------- ---------- ----------- -----------
--------- ---------- ----------- -----------
</TABLE>
S-17
<PAGE>
COMPOSITION BY CREDIT LIMIT
TRUST PORTFOLIO
<TABLE>
<CAPTION>
Percentage Percentages
of Total of Total
Number of Number of Receivables Receivables
Credit Limit Range Accounts Accounts Outstanding Outstanding
--------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
$0.01 - $500.00 . . . . . . . [ % $ %
$500.01 - $1,000.00 . . . . .
$1,000.01 - $3,000.00 . . . .
$3,000.01 - $5,000.00 . . . .
$5,000.01 - $10,000.00. . . .
$10,000.01 -$15,000.00. . . . ]
--------- ---------- ----------- -----------
TOTAL . . . . . . . . [ ] 100.00% $[ ] 100.00%
--------- ---------- ----------- -----------
--------- ---------- ----------- -----------
</TABLE>
COMPOSITION OF ACCOUNTS BY PERIOD OF DELINQUENCY
TRUST PORTFOLIO
<TABLE>
<CAPTION>
Percentage Percentages
of Total of Total
Number of Number of Receivables Receivables
Period of Delinquency Accounts Accounts Outstanding Outstanding
--------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Not Delinquent . . . . . . . . [ % $ %
Up to 29 days. . . . . . . . .
30 days or more. . . . . . . . ]
--------- ---------- ----------- -----------
TOTAL. . . . . . . . . [ ] 100.00% $[ ] 100.00%
--------- ---------- ----------- -----------
--------- ---------- ----------- -----------
</TABLE>
S-18
<PAGE>
COMPOSITION OF ACCOUNTS BY CARDHOLDER BILLING ADDRESS
GEOGRAPHIC DISTRIBUTION OF ACCOUNTS
<TABLE>
<CAPTION>
Percentage Percentage
of Total of Total
State or Number of Number of Receivables Receivables
Territory Accounts Accounts Outstanding Outstanding
- -----------------------------------------------------------------------------------------
S> <C> <C> <C> <C>
Alabama [
Alaska
Arizona
Arkansas
California
Colorado
Connecticut
Delaware
District of Columbia
Florida
Georgia
Guam
Hawaii
Idaho
Illinois
Indiana
Iowa
Kansas
Kentucky
Louisiana
Maine
Maryland
Massachusetts
Michigan
Minnesota
Mississippi
Missouri
Montana
Nebraska
Nevada
New Hampshire
New Jersey
New Mexico
New York
North Carolina
North Dakota
Ohio
Oklahoma
Oregon
Pennsylvania
Puerto Rico
Rhode Island
South Carolina
South Dakota
Tennessee
Texas
Utah
Vermont
Virgin Islands
Virginia
Washington
West Virginia
Wisconsin
Wyoming
]
---------- ---------- ----------- ------------
TOTAL [ ] 100.00% [ 100.00%
---------- ---------- ----------- ------------
---------- ---------- ----------- ------------
</TABLE>
S-19
<PAGE>
USE OF PROCEEDS
The net proceeds from the sale of the Series [199_-_] Certificates will be
paid to the Bank. The Bank will use such proceeds for [general corporate
purposes].
THE BANK
At [__________ ____], 199[3], the Bank had consolidated assets of
approximately $[____] billion, deposits of approximately $[____] billion, and
stockholders' equity of approximately $[____] million.
SERIES PROVISIONS
The Series [199_-_] Certificates will be issued pursuant to the Pooling
Agreement and a Supplement specifying the Principal Terms of the Series
[199_-_] Certificates (the "Series [199_-_] Supplement"), the forms of which
have been filed as exhibits to the Registration Statement of which the
Prospectus and this Prospectus Supplement are a part. The following summary
describes certain terms applicable to the Series [199_-_] Certificates.
Reference should be made to the Prospectus for additional information
concerning the Series [199_-_] Certificates and the Pooling Agreement.
INTEREST PAYMENTS
Interest on the Series [199_-_] Certificates will accrue from the Closing
Date on the Series [199_-_] Invested Amount at the Certificate Rate.
Interest will be distributed on __________, 199_, and on each Interest
Payment Date thereafter to Series [199 ] Certificateholders in whose names
the Series [199_-_] Certificates were registered on at the close of business
on the last day of the calendar month preceding the date of such payment (a
"Record Date"). Interest for any Interest Payment Date will accrue from and
including the preceding Interest Payment Date (or in the case of the first
Interest Payment Date, from and including the Closing Date) but excluding the
next Interest Payment Date (an "Interest Period").
Interest payments on the Series [199_-_] Certificates for each Interest
Payment Date will be calculated on the Series [199_-_] Invested Amount as of
the preceding Record Date (or in the case of the initial Interest Payment
Date, on the initial Series [199_-_] Invested Amount based upon the
Certificate Rate [for such Interest Period]. Interest will be calculated on
the basis of [__________]. Interest payments in respect of the Certificates
on any Interest Payment Date will be funded from collections of Finance
Charge Receivables allocated to the Series [199_-_] Certificateholders'
Interest during the [____] preceding Monthly Period[s] and other Available
Funds for such Monthly Period[s]. [To the extent [the sum of (i)] the
product of the Floating Allocation Percentage of collections of Finance
Charge Receivables during the preceding [____] Monthly Period[s] [and (ii)
other Available Funds for such Monthly Period[s]] is insufficient to pay such
interest, [Excess Finance Charge Collections allocated to Series [199_-_]]
[amounts on deposit in the Cash Collateral Account up to the Available Cash
Collateral Amount] [other Credit Enhancement] will be used to make such
payments.] "Available Funds" means, with respect to any Monthly Period, an
amount equal to the sum of [(i)] the Floating Allocation Percentage of
collections of Finance Charge Receivables allocated to the Series [199_-_]
Certificates with respect to such Monthly Period,including any investment
earnings that are to be treated as collections of Finance Charge Receivables
in accordance with the Pooling Agreement [and (ii) if such Monthly Period
relates to a Distribution Date with respect to the Accumulation Period,
Principal Funding Investment Proceeds, if any, with respect to the related
Distribution Date [and the amount of funds, if any, to be withdrawn from the
Reserve Account that are required to be included in Available Funds on such
Distribution Date] [and] (iii) amounts, if any, to be withdrawn from the
Reserve Account which are required to be included in Available Funds pursuant
to the Series [199_-_] Supplement
S-20
<PAGE>
with respect to such Distribution Date] [and (iv) any investment earnings
transferred from the Pre-Funding Account to the Collection Account on such
Distribution Date].
PRINCIPAL PAYMENTS
During the Revolving Period (which begins on the Closing Date and ends on
the day before the commencement of the [Controlled Amortization Period]
[Accumulation Period] or, if earlier, the Early Amortization Period), no
principal payments will be made to Series [199_-_] Certificateholders.
[During the Controlled Amortization Period, the Series [199_-_]
Certificateholders will be entitled to receive [for the related Monthly Period]
the least of (a) Available Principal Collections on deposit in the Collection
Account with respect to the related Distribution Date, (b) the Controlled
Distribution Amount for such Distribution Date and (c) the Invested Amount.]
[On each Distribution Date with respect to the Accumulation Period, the
Trustee will deposit in the Principal Funding Account an amount equal to the
least of (a) Available Principal Collections on deposit in the Collection
Account with respect to such Distribution Date, (b) the Controlled Deposit
Amount for such Distribution Date and (c) the [Adjusted] Invested Amount, until
the Principal Funding Account Balance equals the Invested Amount. Amounts on
deposit in the Principal Funding Account will be paid to the Series [199_-_]
Certificateholders on the Expected Final Payment Date. If a Pay Out Event
occurs with respect to the Series [199_-_] Certificates during the Accumulation
Period, the Early Amortization Period will commence and any amount on deposit in
the Principal Funding Account will be paid to the Series [199_-_]
Certificateholders on the first Special Payment Date. [If, on the Expected
Final Payment Date, the amount on deposit in the Principal Funding Account are
insufficient to pay the scheduled principal amount, a Pay Out Event will occur
and the Early Amortization Period will commence.]]
"Available Principal Collections" means, with respect to any Monthly Period,
an amount equal to [the sum of (a)] the Principal Allocation Percentage of
collections of Principal Receivables received during such Monthly Period, [(b)
any Shared Principal Collections with respect to other Series that are allocated
to Series [199_-_]] and (c) any other amounts which pursuant to the Series
[199_-_] Supplement are to be treated as Available Principal Collections with
respect to the related Distribution Date.
[The Accumulation Period is scheduled to commence at the close of business
on the last business day of __________, 199_; however, the date on which the
Accumulation Period actually commences may be delayed if the Accumulation Period
Length (determined as described below) is less than the number of months
remaining between each Period Length Determination Date (as hereinafter defined)
and the Expected Final Payment Date. Beginning on the Determination Date
immediately preceding the __________ 199_ Distribution Date and on each
Determination Date thereafter until the Accumulation Date actually commences
(each, a "Period Length Determination Date"), the Seller will determine the
"Accumulation Period Length" [based on, among other things, the then current
principal payment rate on the Accounts and the principal amount of Series that
are entitled to share principal with Series [199_-_]]; PROVIDED, HOWEVER, that
the Accumulation Period Length will not be less than [____] months]. If the
Accumulation Period Length is less than the number of months remaining between
the related Period Length Determination Date and the Expected Final Payment
Date, the Accumulation Period will commence later than the last business day of
__________ 199__ and the number of months in the Accumulation Period will be
equal to the Accumulation Period Length. [Notwithstanding the foregoing, unless
a Pay Out Event occurs with respect to the Series [199_-_] Certificates, the
Accumulation Period will commence on the last business day of __________ 199_
if, prior to such date, a Pay Out Event shall have occurred with respect to any
other Series (other than a Series that does not share principal with Series
[199_-_] or is designated by the Seller as an Excluded Series).] The effect of
the foregoing calculation is to reduce the Accumulation Period Length based on
the invested amounts of other Series that are scheduled to be in their revolving
periods and thus scheduled to create Shared Principal Collections during the
Accumulation Period. In addition, if the
S-21
<PAGE>
Accumulation Period Length shall have been determined to be less than [____]
months and, after the date on which such determination is made, a Pay Out
Event shall occur with respect to any outstanding Series, the Accumulation
Period will commence on the earlier of (i) the date that such Pay Out Event
shall have occurred with respect to such Series and (ii) the date on which
the Accumulation Period is then scheduled to commence.] (5)
On each Distribution Date with respect to the Early Amortization Period
until the Series [199_-_] Invested Amount has been paid in full or the
Termination Date occurs, the Series [199_-_] Certificateholders will be entitled
to receive Available Principal Collections in an amount up to the Invested
Amount. [In addition, on the first Special Payment Date following the
occurrence of an Economic Pay Out Event, after giving effect to any payment of
principal on such date as described under "Series Provisions -- Application of
Collections -- Payments of Principal,- principal payments will be made to the
Series [199_-_] Certificateholders from amounts on deposit in the Cash
Collateral Account as described under "-- Cash Collateral Account" below.]
[FUNDING PERIOD
During the period from and including the Closing Date to but excluding the
earliest of (i) the day on which the Series [199_-_] Invested Amount equals the
[Full Invested Amount], (ii) the day on which a Pay Out Event occurs and (iii)
the __________, 199_ Distribution Date (the "Funding Period"), the Pre-Funding
Amount will be held in a trust account established with the Trustee for the
benefit of the Series [199_-_] Certificateholders (the "Pre-Funding Account").
The Pre-Funding Amount will equal $[__________].
Funds on deposit in the Pre-Funding Account will be invested by the Trustee
[in certain Eligible Investments] [pursuant to a guaranteed rate agreement]
[guaranteed investment contract]. Investment earnings on the Pre-Funding Amount
(net of investment losses and investment expenses) will be used to pay interest
on the Series [199_-_] Certificates during the Funding Period.
During the Funding Period, funds on deposit in the Pre-Funding Account will
be withdrawn and paid to the Seller to the extent of any increases in the
Invested Amount. The Seller expects that the Invested Amount will equal the
[Full Invested Amount] by the _ 199_ Monthly Period. In the event that the
Series [199_-_] Invested Amount does not for any reason equal the [Full Invested
Amount] by the end of the Funding Period, any amount remaining in the
Pre-Funding Account will be payable to the Series [199_-_] Certificateholders on
the Distribution Date on which the Funding Period ends.]
ALLOCATION PERCENTAGES
Pursuant to the Pooling Agreement, the Servicer will allocate among the
Series [199_-_] Certificateholders' Interest, the certificateholders' interest
for all other Series of certificates issued and outstanding and the Seller
Interest all collections of Finance Charge Receivables and Principal Receivables
and the Defaulted Amount with respect to such Monthly Period.
Collections of Finance Charge Receivables and the Defaulted Amount with
respect to any Monthly Period will be allocated to the Series [199_-_]
Certificateholders' Interest based on the Floating Allocation Percentage. The
"Floating Allocation Percentage" means, with respect to any Monthly Period, the
percentage equivalent (which percentage shall never exceed 100%) of a fraction,
the numerator of which is [the sum of] the [Adjusted] Invested Amount [and the
Enhancement Invested Amount, if any,] as of the last day of the preceding
Monthly Period (or with respect to the first Monthly Period, the Initial
Invested
- --------------------
(5) Different Series may have different methods of determining the Accumulation
Period Length.
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<PAGE>
Amount) and the denominator of which is the sum of the total amount of the
Principal Receivables in the Trust as of such day (or with respect to the
first Monthly Period, the total amount of Principal Receivables in the Trust
on the Closing Date) and the principal amount on deposit in the Special
Funding Account as of such day. [Appropriate adjustments to the calculation
methodology will be made to accommodate changes in the Invested Amount during
the Funding Period.]
Collections of Principal Receivables will be allocated to the Series
[199_-_] Certificateholders' Interest based on the Principal Allocation
Percentage. The "Principal Allocation Percentage" means, with respect to any
Monthly Period, the percentage equivalent (which percentage shall never exceed
100%) of a fraction, the numerator of which is (a) during the Revolving Period,
the Invested Amount as of the last day of the immediately preceding Monthly
Period (or, with respect to the first Monthly Period, the Initial Invested
Amount) and (b) during the [Accumulation Period] [Controlled Amortization
Period] or the Early Amortization Period, the Invested Amount as of the last day
of the Revolving Period and the denominator of which is the greater of (i) the
sum of the total amount of Principal Receivables in the Trust as of the last day
of the immediately preceding Monthly Period and the principal amount on deposit
in the Special Funding Account as of such last day (or, in the case of the first
Monthly Period, the Closing Date) and (ii) the sum of the numerators used to
calculate the principal allocation percentages for all Series outstanding as of
the date as to which such determination is being made; [provided, however, that
because the Series [199_-_] Certificates offered hereby are subject to being
paired with a future Series, if a Pay Out Event occurs with respect to such a
paired Series during the [Controlled Amortization Period] [Accumulation Period]
with respect to Series [199_-_], the Bank may, by written notice delivered to
the Trustee and the Servicer, designate a different numerator for the foregoing
fraction, provided that such numerator is not less than the [Adjusted] Invested
Amount for such paired Series as of the last day of the Monthly Period preceding
such Pay Out Event and the Bank shall have received written notice from each
Rating Agency that such designation will not have a Ratings Effect.
Notwithstanding the foregoing, in any Monthly Period in which there occurs
(a) an Addition Date or (b) a Removal Date, the amount of Principal Receivables
used for the denominator in the calculation of the Floating Allocation
Percentage and the Principal Allocation Percentage described above will be (i)
the aggregate amount of Principal Receivables in the Trust at the end of the day
on the last day of the prior Monthly Period 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 end of the day on the related Addition Date or Removal Date for the
period from and including the related Addition Date or Removal Date to and
including the last day of such Monthly Period [; provided further, however, that
with respect to any Monthly Period during the Funding Period in which the Series
199_-_ Invested Amount is increased pursuant to the Series [199_-_] Supplement,
the numerator in the calculation of the Floating Allocation Percentage and the
Principal Allocation Percentage described above will be (1) the Series 199_-_
Invested Amount at the last day of the prior Monthly Period for the period from
and including the first day of such Monthly Period to but excluding the day the
Series 199_-_ Invested Amount is increased and (2) the Series 199_-_ Invested
Amount at the end of the day on which the Series 199_-_ Invested Amount is
increased for the period from and including such day to and including the last
day of such Monthly Period].
As used herein, the following terms have the meanings indicated: (6)
"Series [199_-_] Invested Amount" for any date means an amount equal to (i)
the Series [199_-_] Initial Invested Amount, [plus (ii) the amount of any
withdrawals from the Pre-Funding Account in connection with the purchase of an
additional interest in Principal Receivables,] minus (iii) the amount of
principal payments made to the Series [199_-_] Certificateholders on or prior to
such date [other than any
- ------------------------
(6) Appropriate changes to Invested Amount definitions must be made for a
prefunded Series.
S-23
<PAGE>
payments of principal to the Series 199_-_ Certificateholders from the
Pre-Funding Account], minus (iv) the excess, if any, of the aggregate amount
of Investor Charge-Offs for all prior Distribution Dates over the aggregate
amount of any reimbursements of Investor Charge-Offs for all Distribution
Dates prior to such date.
["Series [199_-_] Adjusted Invested Amount" for any date means an amount
equal to the then current Series [199_-_] Invested Amount, minus the funds on
deposit in the Principal Funding Account on such date.]
["Enhancement Invested Amount" for any date means an amount equal to (a) the
amount withdrawn from the Cash Collateral Account and applied to the payment of
principal on the Series [199_-_] Certificates on the first Special Payment Date
following an Economic Pay Out Event, MINUS (b) the aggregate amount of principal
payments made to the Cash Collateral Depositor prior to such day MINUS (c) the
aggregate amount by which the Enhancement Invested Amount has been reduced to
fund the Investor Default Amount on all prior Distribution Dates as described
below, and PLUS (d) the aggregate amount of Available Finance Charge Collections
on all prior Distribution Dates applied to reimburse amounts deducted pursuant
to the foregoing clause (c). In the absence of the occurrence of an Economic
Pay Out Event and a related withdrawal from the Cash Collateral Account to pay
principal of the Series [199_-_] Certificates, the Enhancement Invested Amount
will be zero.]
[PRINCIPAL FUNDING ACCOUNT
The Servicer will establish and maintain in the name of the trustee, on
behalf of the Trust, the Principal Funding Account as an Eligible Account held
for the benefit of the Series [199_-_] Certificateholders. During the
Accumulation Period, the Servicer will transfer collections in respect of
Principal Receivables [and Shared Principal Collections allocated to Series
[199_-_]] [other amounts] described herein to be treated in the same manner as
collections of Principal Receivables from the Collection Account to the
Principal Funding Account as described under "-- Application of Collections."
Unless a Pay Out Event has occurred with respect to the Series [199_-_]
Certificates, all amounts on deposit in the Principal Funding Account (the
"Principal Funding Account Balance") on any Distribution Date (after giving
effect to any deposits to, or withdrawals from, the Principal Funding Account to
be made on such Distribution Date) will be invested to the following
Distribution Date by the Trustee at the direction of the Servicer in Eligible
Investments. On each Distribution Date with respect to the Accumulation Period,
the interest and other investment income (net of investment expenses and losses)
earned on such investments (the "Principal Funding Investment Proceeds") will be
withdrawn from the Principal Funding Account and will be treated as a portion of
Available Finance Charge Collections. If such investments with respect to any
such Distribution Date yield less than the applicable Certificate Rate, the
Principal Funding Investment Proceeds with respect to such Distribution Date
will be less than the Covered Amount for such following Distribution Date. It
is intended that any such shortfall will be funded from Available Finance Charge
Collections (including a withdrawal from the Reserve Account, if necessary, as
described under "-- Reserve Account"), or a withdrawal from the Cash Collateral
Account as described under "-- Cash Collateral Account"] [other sources]. The
Available Reserve Account Amount and the Available Cash Collateral Amount at any
time will be limited and there can be no assurance that sufficient funds will be
available to fund any such shortfall. [The "Covered Amount" shall mean for any
Distribution Date with respect to the Accumulation Period or the first Special
Payment Date [one-twelfth of the product of (i) the Certificate Rate and (ii)
the Principal Funding Account Balance, if any, as of the preceding Distribution
Date] [the product of (i) (A) a fraction, the numerator of which is the actual
number of days in the related Interest Period and the denominator of which is
360, times (B) the Certificate Rate in effect with respect to such Interest
Period, and (ii) the Principal Funding Account Balance, if any, as of the
preceding Distribution Date].]
S-24
<PAGE>
[RESERVE ACCOUNT
The Servicer will establish and maintain in the name of the Trustee, on
behalf of the Trust, an Eligible Deposit Account for the benefit of the
Series [199_-_] Certificateholders (the "Reserve Account"). The Reserve
Account is intended to help assure the subsequent distribution of interest on
the Series [199_-_] Certificates as provided in this Prospectus Supplement
during the Accumulation Period. On each Distribution Date from and after the
Reserve Account Funding Date, but prior to the termination of the Reserve
Account, the Trustee, acting pursuant to the Servicer's instructions, will
apply Available Finance Charge Collections (in the order of priority
described below under "-- Application of Collections -- Payment of Interest,
Fees and Other Items") to increase the amount on deposit in the Reserve
Account (to the extent such amount is less than the Required Reserve Account
Amount). The "Reserve Account Funding Date" will be the Distribution Date
with respect to the Monthly Period that begins [____] months prior to the
Distribution Date with respect to the first Monthly Period in the
Accumulation Period, provided that the Seller may delay the Reserve Account
Funding Date to the earliest of (a) the Distribution Date with respect to the
Monthly Period that begins [____] months prior to the first Monthly Period
that begins the Accumulation Period; (b) the first Distribution Date for
which the Portfolio Adjusted Yield is less than [____], but in such event the
Reserve Account Funding Date does not have to occur earlier than the
Distribution Date with respect to the Monthly Period that begins [____]
months prior to the commencement of the Accumulation Period, (c) the first
Distribution Date for which the Portfolio Adjusted Yield is less than [____],
but in such event the Reserve Account Funding Date does not have to occur
earlier than the Distribution Date that begins [____] months prior to the
commencement of the Accumulation Period; or (d) the first Distribution Date
for which Portfolio Adjusted Yield is less than [____], but in such event the
Reserve Account Funding Date does not have to occur earlier than the
Distribution Date that begins [____] months prior to the commencement of the
Accumulation Period or any other date designated by the Seller, provided that
the Seller has received written notice from each Rating Agency that such
designation will not have a Ratings Effect. "Portfolio Adjusted Yield" for
any Distribution Date will be equal to the average of the percentages
obtained for each of the three preceding Monthly Periods by subtracting the
Base Rate from the Portfolio Yield for such Monthly Period and deducting
[____] from the result for each Monthly Period. The "Required Reserve Account
Amount" for any Distribution Date on or after the Reserve Account Funding
Date will be equal to [____]% of the Series [199_-_]Invested Amount as of the
preceding Distribution Date, or any other amount designated by the Seller,
provided that the Seller has received written notice from each Rating Agency
that such designation will not have a Ratings Effect. On each Distribution
Date, after giving effect to any deposit to be made to, and any withdrawal to
be made from, the Reserve Account on such Distribution 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 or at the direction of
[the Seller] [the Cash Collateral Depositor] [the Credit Enhancer].
Provided that the Reserve Account has not terminated as described below, all
amounts on deposit in the Reserve Account on any Distribution Date (after giving
effect to any deposits to, or withdrawals from, the Reserve Account to be made
on such Distribution Date) will be invested to the following Distribution Date
by the Trustee at the direction of the Servicer in Eligible Investments. The
interest and other investment income (net of investment expenses and losses)
earned on such investments ("Interest Funding Investment Proceeds") will be
retained in the Reserve Account [to the extent the amount on deposit therein is
less than the Required Reserve Account Amount) or [distributed to or at the
direction of] [the Seller] [the Cash Collateral Depositor] [the Credit Enhancer]
[deposited in the Collection Account for application as Available Funds].
On or before each Distribution Date with respect to the Accumulation Period
and on the first Special Payment Date, a withdrawal will be made from the
Reserve Account, and the amount of such withdrawal will be deposited in the
Collection Account and included in Available Finance Charge Collections in an
amount equal to the lesser of (a) the Available Reserve Account Amount with
respect to such Distribution
S-25
<PAGE>
Date or Special Payment Date and (b) the excess, if any, of the Covered
Amount with respect to such Distribution
Date or Special Payment Date over the Principal Funding Investment Proceeds
with respect to such Distribution Date or Special Payment Date; provided that
the amount of such withdrawal will be reduced to the extent that funds
otherwise would be available to be deposited in the Reserve Account on such
Distribution Date or Special Payment Date. On each Distribution Date, the
amount available to be withdrawn from the Reserve Account (the "Available
Reserve Account Amount") will be equal to the lesser of the amount on deposit
in the Reserve Account (before giving effect to any deposit to be made to the
Reserve Account on such Distribution Date) and the Required Reserve Account
Amount for such Distribution Date.
The Reserve Account will be terminated following the earlier to occur of (a)
the termination of the Trust pursuant to the Pooling Agreement, (b) the date on
which the Series [199_-_] Certificates are paid in full and (c) if the
Accumulation Period has not commenced, the occurrence of a Pay Out Event with
respect to the Series [199-_] Certificates or, if the Accumulation Period has
commenced, the earlier of the first Special Payment Date and the Expected Final
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 or at the direction of
[the Seller] [the Cash Collateral Depositor] [the Credit Enhancer]. Any amounts
withdrawn from the Reserve Account and distributed to or at the direction of
[the Seller] [the Cash Collateral Depositor] [the Credit Enhancer] as described
above will not be available for distribution to the Series [199_-_]
Certificateholders.]
APPLICATION OF COLLECTIONS
PAYMENT OF FEES, INTEREST AND OTHER ITEMS. On each Distribution Date, the
Trustee, acting pursuant to the Servicer's instructions, will apply all amounts
allocated to the Series [199_-_] Certificateholders' Interest with respect to
Finance Charge Receivables for the preceding Monthly Period (as described above
under "-- Allocation Percentages"), [any Excess Finance Charge Collections with
respect to the Series in Group [____] that are allocated to Series [199_-_] (as
described under "Description of the Certificates -- Sharing of Excess Finance
Charge Collections" in the Prospectus)], [any investment earnings transferred
from the Pre-Funding Account to the Collection Account as described under
"--Funding Period"] [any Principal Funding Investment Proceeds with respect to
such Distribution Date (as described under "-- Principal Funding Account")] ,
[any Interest Funding Investment Proceeds deposited in the Collection Account
with respect to such Distribution Date] [and any funds withdrawn from the
Reserve Account that are required to be included in Available Finance Charge
Collections (as described under "-- Reserve Account")] ([collectively],
"Available Finance Charge Collections") on deposit in the Collection Account in
the following priority:
(i) an amount equal to Monthly Interest for such Distribution Date, plus
the amount of any Monthly Interest previously due but not paid to the Series
[199_-_] Certificateholders [or deposited to the Interest Funding Account]
on a prior Distribution Date, [plus additional interest at the Certificate
Rate with respect to amounts that were due but not paid to the Series
[199-_] Certificateholders [or deposited to the Interest Funding Account] on
a prior Distribution Date] ("Additional Interest"), will be [distributed to
Series [199_-_] Certificateholders] [deposited in the Interest Funding
Account for distribution to Series [199_-_] Certificateholders on the
applicable Payment Date];
(ii) an amount equal to the Series [199_-_] Servicing Fee for such
Distribution Date, plus the amount of any Series [199_-_] Servicing Fee
previously due but not distributed to the Servicer on a prior Distribution
Date, will be distributed to the Servicer;
(iii) an amount equal to the Investor Default Amount for such
Distribution Date will be treated as a portion of Available Principal
Collections for such Distribution Date;
S-26
<PAGE>
(iv) an amount equal to the aggregate amount of Investor Charge-Offs
that have not been previously reimbursed will be treated as a portion of
Available Principal Collections for such Distribution Date;
(v) [an amount equal to the "Monthly Cash Collateral Fee" (as defined
in the agreement (the "Loan Agreement") among the Bank, the Cash Collateral
Depositor and the Trustee)] for such Distribution Date will be distributed
to the Cash Collateral Depositor for application in accordance with the Loan
Agreement];
[(vi) an amount equal to the aggregate amount by which the Enhancement
Invested Amount has been reduced pursuant to clause (c) of the definition of
"Enhancement Invested Amount" under "-- Allocation Percentages" above (but
not in excess of the aggregate amount of such reductions which have not been
previously reimbursed) will be treated as a portion of Available Principal
Collections for such Distribution Date;]
[(vii) an amount up to the excess, if any, of the [lesser of the] Initial
Cash Collateral Amount [and the Adjusted Invested Amount] over the remaining
Available Cash Collateral Amount will be deposited into the Cash Collateral
Account in accordance with the Loan Agreement;]
[(viii) on each Distribution 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" above, an amount up to the excess,
if any, of the Required Reserve Account Amount over the Available Reserve
Account Amount will be deposited into the Reserve Account;]
[(ix) an amount equal to the aggregate of any other amounts then due to
the [Cash Collateral Depositor] [Credit Enhancement Provider] pursuant to the
[Loan Agreement] [Credit Enhancement Agreement] (to the extent such amounts
are payable pursuant to the [Loan Agreement] [Credit Enhancement Agreement]
out of Available Finance Charge Collections) will be distributed to the
[Cash Collateral Depositor] [Credit Enhancement Provider] for application in
accordance with the [Loan Agreement] [Credit Enhancement Agreement];] and
[(x) the balance, if any, will constitute a portion of Excess Finance
Charge Collections for such Distribution Date and will be available for
allocation to other Series in Group [____] or to the holder of the Seller
Certificate as described in "Description of the Certificates -- Sharing of
Excess Finance Charge Collections" in the Prospectus.](7)
"Monthly Interest" means, with respect to any Distribution Date, an amount
equal to [one-twelfth of] the product of (i) [(A) a fraction, the numerator of
which is the actual number of days in the related accrual period and the
denominator of which is 360, times (B) ] the Certificate Rate and (ii) [the sum
of (A) ] the Series [199_-_] Invested Amount [and (B) the [product of the
Floating Allocation Percentage and the] Pre-Funding Amount, each] as of the
close of the preceding Record Date; PROVIDED, HOWEVER, with respect to the first
Distribution Date, Monthly Interest will be equal to $[__________]. [Monthly
Interest will be calculated on the basis of a 360-day year of twelve 30-day
months.]
"Required Amount" means, with respect to any Distribution Date, the excess,
if any, of the full amount required to be paid pursuant to paragraphs (i), (ii)
and (iii) of the second preceding paragraph for such Distribution Date over the
amount of Available Finance Charge Collections for such Distribution Date.
- ---------
(7) Distributions and priorities may be modified to reflect another form of
Credit Enhancement.
S-27
<PAGE>
PAYMENTS OF PRINCIPAL. On each Distribution Date, the Trustee, acting
pursuant to the Servicer's instructions, will distribute Available Principal
Collections (see "-- Principal Payments" above) on deposit in the Collection
Account in the following priority:
(i) on each Distribution Date with respect to the Revolving Period, all
such Available Principal Collections will be treated as Shared Principal
Collections and applied as described under "Description of the
Certificates -- Shared Principal Collections" in the Prospectus;
(ii) on each Distribution Date with respect to the [Controlled
Amortization] [Accumulation] Period or the Early Amortization Period, all
such Available Principal Collections will be distributed or deposited in the
following priority:
(x) an amount equal to Monthly Principal, up to the Series [199_-_]
[Adjusted] Invested Amount on such Distribution Date, will be [deposited
in the Principal Funding Account (during the Accumulation Period) or]
distributed to the Series [199_-_] Certificateholders (during the
[Controlled Amortization Period] Early Amortization Period);
[(y) for each Distribution Date with respect to the Early Amortization
Period, beginning with the Distribution Date on which the Invested Amount
is paid in full, an amount equal to the balance, if any, of such
Available Principal Collections then on deposit in the Collection
Account, to the extent of the Enhancement Invested Amount, if any,
will be distributed to the Cash Collateral Depositor for application in
accordance with the Loan Agreement; and]
(z) for each Distribution Date, after giving effect to paragraphs (x) [and
(y)] above, an amount equal to the balance, if any of such Available
Principal Collections, will be treated as Shared Principal Collections and
applied as described under "Description of the Certificates -- Shared
Principal Collections" in the Prospectus.
"Monthly Principal" with respect to any Distribution Date relating to the
[Accumulation Period] [Controlled Amortization Period] or the Early Amortization
Period will equal the least of (i) the Available Principal Collections on
deposit in the Collection Account with respect to such Distribution Date, (ii)
for each Distribution Date with respect to the [Accumulation Period],
[Controlled Amortization Period], [the Controlled Deposit Amount] [the
Controlled Distribution Amount] for such Distribution Date and (iii) the Series
[199_-_] [Adjusted] Invested Amount on such Distribution Date.
["Controlled Amortization Amount" means for any Distribution Date,
$[__________].]
["Deficit Controlled Amortization Amount" means (a) on the first
Distribution Date with respect to the Controlled Amortization Period, the
excess, if any, of the Controlled Amortization Amount for such Distribution Date
over the amount distributed from the Collection Account as Monthly Principal for
such Distribution Date and (b) on each subsequent Distribution Date with respect
to the Controlled Amortization Period, the excess, if any, of the Controlled
Distribution Amount for such subsequent Distribution Date plus any Deficit
Controlled Amortization Amount for the prior Distribution Date over the amount
distributed from the Collection Account as Monthly Principal for such subsequent
Distribution Date.]
["Controlled Accumulation Amount" means (a) for any Distribution Date with
respect to the Accumulation Period, $[__________]; [PROVIDED, HOWEVER, that, if
the Accumulation Period Length is less than [____] months, the Controlled
Accumulation Amount for each Distribution Date with respect to the Accumulation
Period will be equal to (x) the [Initial] [Full] Invested Amount divided by (y)
the number of Distribution Dates from, and including, the first Distribution
Date with respect to the Accumulation Period to, and including, the Expected
Final Payment Date].]
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<PAGE>
["Deficit Controlled Accumulation Amount" means (a) on the first
Distribution Date with respect to the Accumulation Period, the excess, if any,
of the Controlled Accumulation Amount for such Distribution Date over the amount
distributed from the Collection Account as Monthly Principal for such
Distribution Date and (b) on each subsequent Distribution Date with respect to
the Accumulation Period, the excess, if any, of the Controlled Deposit Amount
for such subsequent Distribution Date plus any Deficit Controlled Accumulation
Amount for the prior Distribution Date over the amount distributed from the
Collection Account as Monthly Principal for such subsequent Distribution Date.]
[CASH COLLATERAL ACCOUNT
The Trust will have the benefit of the Cash Collateral Account for the
benefit of the Series [199_-_] Certificateholders and the Cash Collateral
Depositor, as their interests appear in the Series [199_-_] Supplement, and in
the case of the Cash Collateral Depositor, in the Loan Agreement (which
interest, in the case of the Cash Collateral Depositor, will be subordinated to
the interests of the Series [199_-_] Certificateholders as provided in the
Series [199_-_] Supplement). The Cash Collateral Account will be one or more
Eligible Deposit Accounts. Funds on deposit in the Cash Collateral Account will
be invested in certain Eligible Investments.
The Cash Collateral Account will be funded on the Closing Date in the
Initial Cash Collateral Amount, which amount will include the proceeds of an
advance to be made by one or more financial institutions to be selected by the
Seller (such financial institution or institutions, the "Cash Collateral
Depositor"). Such advance will be repaid pursuant to the Loan Agreement. The
Cash Collateral Account will be terminated following the earliest to occur of
(a) the date on which the Series [199_-_] Certificates are paid in full, [(b)
the date on which the entire Available Cash Collateral Amount is distributed to
the Series [199_-_] Certificateholders as a result of the occurrence of an
Economic Pay Out Event,] (c) the Series [199_-_] Termination Date and (d) the
termination of the Trust pursuant to the Pooling Agreement.
On each Distribution Date, the amount available to be withdrawn from the
Cash Collateral Account [the "Available Cash Collateral Amount") will be equal
to the lesser of the amount on deposit in the Cash Collateral Account (before
giving effect to any deposit to be made to the Cash Collateral Account on such
Distribution Date) and the [lesser of the] Initial Cash Collateral Amount [and
the Adjusted Invested Amount].
On each Distribution Date, unless an Economic Pay Out Event has occurred, a
withdrawal will be made from the Cash Collateral Account, to the extent of the
Available Cash Collateral Amount, in an amount equal to the Required Amount, if
any, with respect to such Distribution Date. Any such funds withdrawn from the
Cash Collateral Account will be applied in accordance with, and subject to the
priorities set forth in paragraphs (i), (ii) and (iii) under "-- Application of
Collections -- Payment of Interest Fees and other Items" above.
[On the first Special Payment Date following a Pay Out Event described below
in clause [(e)] under "-- Pay Out Events" (an "Economic Pay Out Event"), (a) an
amount equal to the lesser of (i) the Available Cash Collateral Amount (after
giving effect to any withdrawals from the Cash Collateral Account on such date
as described above) and (ii) the unpaid principal amount of the Series [199_-_]
Certificates [(less the Principal Funding Account Balance)], will be withdrawn
from the Cash Collateral Account and distributed to the Series [199_-_]
Certificateholders as a payment of principal of the Series [199_-_]
Certificates. See "-- Pay Out Events".]
On each Distribution Date, the Servicer or the Trustee, acting pursuant to
the Servicer's instructions, will deposit Available Finance Charge Collections
(in the order of priority described above under "-- Application of
Collections -- Payment of Interest, Fees and Other Items") to the Cash
Collateral Account (to the extent the amount on deposit in the Cash Collateral
Account is less than the [lesser of the] Initial Cash Collateral Amount [and the
Adjusted Invested Amount]). On each Distribution Date, after giving effect
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<PAGE>
to any deposit to be made to, and any withdrawal to be made from, the Cash
Collateral Account on such Distribution Date, the Trustee will withdraw from the
Cash Collateral Account an amount equal to the excess, if any, of the amount on
deposit in the Cash Collateral Account over the [[lesser of the] Initial Cash
Collateral Amount [and the Adjusted Invested Amount]] [Required Cash Collateral
Amount], and shall distribute such excess to the Cash Collateral Depositor for
application in accordance with the Loan Agreement. [The "Required Cash
Collateral Amount" with respect to any Distribution Date means the product of
(i) the Investor Interest as of the last day of the preceding Monthly Period,
and (ii) ___%, but not less that $________; PROVIDED, HOWEVER, that if certain
withdrawals are made from the Cash Collateral Account during the Controlled
Amortization Period or if a Pay Out Event occurs, the Required Cash Collateral
Account for each Distribution Date thereafter shall equal the Required Cash
Collateral Amount for the Distribution Date immediately preceding the occurrence
of such withdrawal or Pay Out Event.] Any amounts withdrawn from the Cash
Collateral Account and distributed to the Cash Collateral Depositor as described
above will not be available for distribution to the Series [199_-_]
Certificateholders.]
[OTHER FORMS OF CREDIT ENHANCEMENT
The Series [199_-_] Certificates will have the benefit of the [letter of
credit] [cash collateral guaranty] [surety Bond] [insurance policy] [spread
account] [reserve account] [issued by __________ (the "Credit Enhancement
Provider")] in the initial amount of $__________.
With respect to any Distribution Date, the amount available to be drawn
under the [letter of credit] [cash collateral guaranty] [surety bond] [insurance
policy] [spread account] [reserve account] (the "Available Credit Enhancement
Amount") will equal [__________].]
[Information with respect to Credit Enhancement]
[CREDIT ENHANCEMENT PROVIDER
[Information, if applicable, to be provided by Credit Enhancement Provider]]
DEFAULTED RECEIVABLES; INVESTOR CHARGE-OFFS
On each Determination Date, the Servicer will calculate the Investor Default
Amount for the preceding Monthly Period. The term "Investor Default Amount"
means, with respect to any Distribution Date, the product of (i) the Floating
Allocation Percentage with respect to the related Monthly Period and (ii) the
Defaulted Amount for such Monthly Period.
On each Distribution Date, if the Required Amount for such Distribution Date
exceeds the Available Cash Collateral Amount, [the Enhancement Invested Amount,
if any, will be reduced by the amount of such excess, but not by more than the
Investor Default Amount for such Distribution Date. In the event that such
reduction would cause the Enhancement Invested Amount to be a negative number,
the Enhancement Invested Amount will be reduced to zero, and the Series [199_-_]
Invested Amount will be reduced by the amount by which the Enhancement Invested
Amount would have been reduced below zero, but not by more than the excess, if
any, of the Investor Default Amount for such Distribution Date over the amount
of such reduction, if any, of the Enhancement Invested Amount with respect to
such Distribution Date] [the Series [199_-_] Invested Amount will be reduced by
the amount of such excess, but not by more than the Investor Default Amount for
such Distribution Date] (an "Investor Charge-Off"). If the Series [199_-_]
Invested Amount has been reduced by the amount of any Investor Charge-Offs, it
will thereafter be increased on any Distribution Date (but not by an amount in
excess of the aggregate unreimbursed Investor Charge-Offs) by the amount of
Available Finance Charge Collections allocated and available for such purpose as
described under "-- Application of Collections -- Payment of Interest, Fees and
Other Items." If an Investor
S-30
<PAGE>
Charge-Off is not subsequently reimbursed, it will have the effect of slowing
or reducing the return, of principal to the Series [199_-_] Certificateholders.
[Any such reductions of the Enhancement Invested Amount shall thereafter be
reimbursed and the Enhancement Invested Amount increased (but not by an amount
in excess of the aggregate reductions of the Enhancement Invested Amount) on any
Distribution Date by the amount of Available Finance Charge Collections
allocated and available for such purpose as described under "-- Application of
Collections -- Payment of Interest, Fees and Other Items".]
[PAIRED SERIES
The Series [199_-_] Certificates may be paired with one or more other Series
(each a "Paired Series") at or after the commencement of the [Controlled
Amortization Period] [Accumulation Period]. As [funds are accumulated in the
Principal Funding Account] [principal is paid to the Series [199_-_]
Certificateholders during the Controlled Amortization Period], the invested
amount in the Trust of such Paired Series will increase by a corresponding
amount. Upon payment in full of the Series [199_-_] Certificates, assuming that
there have been no unreimbursed charge-offs with respect to any related Paired
Series, the aggregate invested amount of such related Paired Series will have
been increased by an amount up to an aggregate amount equal to the Series
[199_-_] Invested Amount paid to the Series [199_-_] Certificateholders after
the Series [199_-_] Certificates were paired with the Paired Series. The
issuance of a Paired Series will be subject to the conditions described under
"Description of the Certificates -- New Issuances" in the Prospectus. There can
be no assurance, however, that the terms of any Paired Series might not have an
impact on the timing or amount of payments received by a Series [199_-_]
Certificateholder. See "Special Considerations -- Master Trust
Considerations -- Issuance of Additional Series" in the Prospectus.]
PAY OUT EVENTS
The Pay Out Events with respect to the Certificates will include each of the
events specified in the Prospectus under "Description of the Certificates -- Pay
Out Events" and the following:
[(a) a failure on the part of the Seller (i) to make any payment or
deposit required under the Pooling Agreement or the Series [199_-_]
Supplement within [___] business days after the day such payment or deposit
is required to be made; or (ii) to observe or perform any other covenants or
agreements of the Seller set forth in the Pooling Agreement or the Series
[199 ] Supplement, which failure has a material adverse effect on the
[Series [199_-_] Certificateholders] and which continues unremedied for a
period of [____] days after written notice;
(b) any representation or warranty made by the Seller in the Pooling
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 and continues to be
incorrect in any material respect for a period of [____] days after written
notice and as a result of which the interests of the Series [199_-_]
Certificateholders are materially and adversely affected; PROVIDED, HOWEVER,
that a Pay Out Event shall not be deemed to occur thereunder if the Seller
has repurchased the related Receivables or all such Receivables, if
applicable, during such period in accordance with the provisions of the
Pooling Agreement;
(c) a failure by the Seller to make an Addition to the Trust within [___]
business days after the day on which it is required to make such Addition
pursuant to the Pooling Agreement [or the Series [199_-_] Supplement];
(d) the occurrence of any Servicer Default;
S-31
<PAGE>
[(e) a reduction of the [average] Portfolio Yield for any [three]
consecutive Monthly Periods to a rate less than the [average of the Base
Rate[s]] for such period;]
[(f) the failure to pay in full the Series [199_-_] Invested Amount on
the Expected Final Payment Date].
[(g) the [Available Credit Enhancement Amount] [Available Cash Collateral
Amount] is less than [ ]% of the Invested Amount].]
Then, in the case of any event described in subparagraph (a), (b) or (d),
after the applicable grace period, if any, set forth in such subparagraphs,
either the Trustee or the Holders of Series [199_-_] Certificates evidencing
more than 50% of the aggregate unpaid principal amount of Series [199_-_]
Certificates by notice then given in writing to the Seller and the Servicer (and
to the Trustee if given by the Series [199_-_] Certificateholders) may declare
that a Pay Out Event has occurred with respect to Series [199_-_] as of the date
of such notice, and, in the case of any event described in subparagraph (c), (e)
or [(f)], a Pay Out Event shall occur with respect to Series [199_-_] without
any notice or other action on the part of the Trustee immediately upon the
occurrence of such event.
For purposes of the Pay Out Event described in clause [(e)] above, the terms
"Base Rate" and "Portfolio Yield" will be defined as follows with respect to the
Series [199_-_] Certificates:
"Base Rate" means, with respect to any Monthly Period, [____%] [the
annualized percentage equivalent of a fraction, the numerator of which is
equal to the sum of Monthly Interest and the Monthly Servicing Fee with
respect to the Series [199_-_] Certificates for the related Distribution
Date and the denominator of which is the Series [199_-_] Invested Amount as
of the last day of the preceding Monthly Period] [the sum of the Certificate
Rate for the related Interest Period and the Servicing Fee Rate].
"Portfolio Yield" means, with respect to any Monthly Period, the
annualized percentage equivalent of a fraction, the numerator of which is
equal to [(a) the Floating Allocation Percentage of collections of Finance
Charge Receivables (including any investment earnings that are to be treated
as collections of Finance Charges Receivables in accordance with the Pooling
Agreement) for such Monthly Period [plus (b) the amount of Principal Funding
Investment Proceeds for the related Distribution Date,] [plus (c) the amount
of any Interest Funding Investment Proceeds for the related Distribution
Date] [plus (d) any Excess Finance Charge Collections that are allocated to
Series [199_-_] with respect to such Monthly Period] [plus (e) the amount of
funds, if any, withdrawn from the Reserve Account which are required to be
included as Available Finance Charge Collections for the Distribution Date
with respect to such Monthly Period] [plus (f) the amount of any investment
earnings transferred from the Pre-Funding Account to the Collection Account
on such Distribution Date] minus (g) the Investor Default Amount for the
Distribution Date with respect to such Monthly Period, and the denominator
of which is the Series [199_-_] Invested Amount as of the last day of the
preceding Monthly Period].
If the proceeds of any sale of the Receivables following the occurrence of
an Insolvency Event with respect to the Bank, as described in the Prospectus
under "Description of the Certificates -- Pay Out Events," allocated to the
Series [199_-_] Invested Amount and the proceeds of any collections on the
Receivables in the Collection Account [and any Available Cash Collateral Amount]
[and any amounts on deposit in the [Principal Funding Account] [Interest Funding
Account] [other amounts] are not sufficient to pay in full the remaining amount
due on the Series [199_-_] Certificates, the Series [199_-_] Certificateholders
will suffer a corresponding loss. See "Certain Legal Aspects of the
Receivables -- Certain Matters Relating to Receivership" in the Prospectus for a
discussion of the impact of recent federal legislation on the Trustee's ability
to liquidate the Receivables.
S-32
<PAGE>
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
The share of the Servicing Fee allocable to the Series [199_-_]
Certificateholders with respect to any Distribution Date (the "Monthly Servicing
Fee") shall be equal to one-twelfth of the product of (a) [____]% (the
"Servicing Fee Rate" and (b) (i) the [sum of the] [Adjusted] Invested Amount
[and the Enhancement Invested Amount, if any,] as of the last day of the Monthly
Period preceding such Distribution Date, minus (ii) the product of (A) any
amount on deposit in the Special Funding Account as of the last day of the
Monthly Period preceding such Distribution Date and (B) the Floating Allocation
Percentage with respect to such Monthly Period (the amount calculated pursuant
to this clause (b) is referred to as the "Servicing Base Amount"); PROVIDED,
HOWEVER, with respect to the first Distribution Date, the Monthly Servicing Fee
shall be equal to $[__________]. [On each Distribution Date, Servicer
Interchange with respect to the related Monthly Period that is on deposit in the
Collection Account shall be withdrawn from the Collection Account and paid to
the Servicer in payment of a portion of the Monthly Servicing Fee with respect
to such Monthly Period. In the case of any insufficiency of Servicer
Interchange on deposit in the Collection Account, a portion of the Monthly
Servicing Fee will not be paid to the extent of such insufficiency. The
"Servicer Interchange" for any Monthly Period [for which the Bank is the
Servicer] will be the lesser of (a) the amount of Interchange that is allocated
to the Series [199_-_] Certificateholders and deposited in the Collection
Account with respect to such Monthly Period and (b) one-twelfth of the product
of (i) [ ]% and (ii) the Servicing Base Amount. [In the case of any
insufficiency of Servicer Interchange on deposit in the Collection Account, a
portion of the Monthly Servicing Fee will not be paid to the extent of such
insufficiency.] The share of the Monthly Servicing Fee allocable to the Series
[199_-_] Certificateholders (after giving effect to the distribution of any
Servicer Interchange to the Servicer) with respect to Distribution Date (the
"Series [199_-_] Servicing Fee") shall be equal to one-twelfth of the product of
(a) [____]% (the "Net Servicing Fee Rate") and (b) the Servicing Base Amount;
PROVIDED, HOWEVER, that with respect to the first Distribution Date, the Series
[199_-_] Servicing Fee shall be equal to $[__________].] The remainder of the
Servicing Fee shall be paid by the holder of the Seller Certificate or the
certificateholders of other Series (as provided in the related Supplements) and
in no event shall the Trust, the Trustee, the Series [199_-_] Certificateholders
[or the Cash Collateral Depositor] [Credit Enhancement Provider] be liable for
the share of the Servicing Fee to be paid by the holder of the Seller
Certificate or the Certificateholders of any other Series. The Series [199_-_]
Servicing Fee shall be payable to the Servicer solely to the extent amounts are
available for distribution in respect thereof as described under "-- Payment of
Interest, Fees and Other Items" above.
[SERIES TERMINATION
If, on the [____] Distribution Date, [____] months prior to the Termination
Date, the Series [199_-_] Invested Amount (after giving effect to all changes
therein on such date) exceeds zero, the Servicer will, within the 40-day period
beginning on such date, solicit bids for the sale of interests in the Principal
Receivables or certain Principal Receivables, together in each case with the
related Finance Charge Receivables, in an amount equal to the [sum of the]
Series [199_-_] Invested Amount [and the Enhancement Invested Amount, if any,]
at the close of business on the last day of the Monthly Period preceding the
Termination Date (after giving effect to all distributions required to be made
on the Termination Date). The Seller and the [Cash Collateral Depositor]
[Credit Enhancement Provider] will be entitled to participate in, and to receive
notice of each bid submitted in connection with, such bidding process. Upon the
expiration of such 40-day period, the Trustee will determine (a) which bid is
the highest cash purchase offer (the "Highest Bid") and (b) the amount (the
"Available Final Distribution Amount") which otherwise would be available in the
Collection Account on the Series Termination Date for distribution to the Series
[199_-_] Certificateholders. The Servicer will sell such Receivables on the
Series [199_-_] Termination Date to the bidder who provided the Highest Bid and
will deposit the proceeds of such sale in the Collection Account for allocation
(together with the Available Final Distribution Amount) to the Series [199 _-_]
Certificateholders' Interest.
S-33
<PAGE>
Except as necessary to reimburse previous reductions in the Series [199_-_]
Invested Amount as a result of unreimbursed Investor Charge-Offs, amounts [on
deposit in the Cash Collateral Account] [available under the Credit Enhancement]
will not be available to cover any shortfall, if the proceeds of such sale,
together with the Available Final Distribution Amount, are less than the Series
[199_-_] Invested Amount plus accrued and unpaid interest on the Series [199_-_]
Certificates. Accordingly, in such event, the Series [199_-_]
Certificateholders will incur a loss.]
REPORTS
No later than the third business day prior to each Distribution Date, the
Servicer will forward to the Trustee, the Paying Agent, each Rating Agency and
[the Cash Collateral Depositor] [Credit Enhancement Provider], a statement (the
"Monthly Report") prepared by the Servicer setting forth certain information
with respect to the Trust and the Series [199_-_] Certificates, including: [(a)
the aggregate amount of Principal Receivables and Finance Charge Receivables in
the Trust as of the end of such Monthly Period; (b) the Series [199_-_] Invested
Amount [and the Series [199_-_] Adjusted Invested Amount]; (c) the Floating
Allocation Percentage and, during the [Accumulation Period] [Controlled
Amortization Period] or Early Amortization Period, the Principal Allocation
Percentage; (d) the amount of collections of Principal Receivables and Finance
Charge Receivables processed during the related Monthly Period and the portion
thereof allocated to the Series [199_-_] Certificateholders' Interest; (e) the
aggregate outstanding balance of Accounts that were [30], [60] and [90] days or
more delinquent as of the end of such Monthly Period; (f) the Investor Defaulted
Amount and the Defaulted Amount with respect to such Monthly Period; (g) the
aggregate amount, if any, of Investor charge-offs and any Investor charge-offs
reimbursed on the related Monthly Period, for such Monthly Period; (h) the
Monthly Investor Servicing Fee for such Monthly Period; (i) the Portfolio Yield
for such Monthly Period; (j) the Base Rate for such Monthly Period; (k) the
[Available Cash Collateral Amount] [Available Credit Enhancement Amount] for
such Distribution Date]; and [other amounts].
UNDERWRITING
Subject to the terms and conditions set forth in the underwriting agreement
(the "Underwriting Agreement") between the Bank and the underwriters named below
(the "Underwriters"), the Bank has agreed to sell to the Underwriters, and each
of the Underwriters has severally agreed to purchase, the principal amount of
the Series [199_-_] Certificates and set forth opposite its name:
Principal Amount of
Series [199_-_]
UNDERWRITERS CERTIFICATES
------------ ------------
. . . . . . . . . . .
. . . . . . . . . . .
Total . . . . . $
------------
The Underwriting Agreement provides that the obligations of the Underwriters
to pay for and accept delivery of the Series [199_-_] Certificates are subject
to the approval of certain legal matters by their counsel and to certain other
conditions. All of the Series [199_-_] Certificates offered hereby will be
issued if any are issued.
The Underwriters propose initially to offer the Series [199_-_] Certificates
to the public at the price set forth on the cover page hereof and to certain
dealers at such price less concessions not in excess of ____% of the principal
amount of the Series [199_-_] Certificates. The Underwriters may allow, and
such
S-34
<PAGE>
dealers may reallow, concessions not in excess of ____% of the principal
amount of the Series [199_-_] Certificates to certain brokers and dealers.
After the initial public offering, the public offering price and other selling
terms may be changed by the Underwriters.
The Bank will indemnify the Underwriters against certain liabilities,
including liabilities under the Securities Act, or contribute to payments the
Underwriters may be required to make in respect thereof.
S-35
<PAGE>
GLOSSARY FOR PROSPECTUS SUPPLEMENT
Account Sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-13
Accumulation Period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-7
Accumulation Period Length . . . . . . . . . . . . . . . . . . . . . . . . .S-21
Additional Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-26
Adjusted Invested Amount . . . . . . . . . . . . . . . . . . . . . . . . . . S-4
Available Cash Collateral Amount . . . . . . . . . . . . . . . . . . . . . .S-29
Available Credit Enhancement Amount. . . . . . . . . . . . . . . . . . . . .S-30
Available Final Distribution Amount. . . . . . . . . . . . . . . . . . . . .S-33
Available Funds. . . . . . . . . . . . . . . . . . . . . . . . . . . .S-20, S-26
Available Principal Collections. . . . . . . . . . . . . . . . . . . . . . .S-21
Available Reserve Account Amount . . . . . . . . . . . . . . . . . . . . . .S-26
Base Rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-32
Cash Collateral Account. . . . . . . . . . . . . . . . . . . . . . . . . . . S-8
Cash Collateral Depositor. . . . . . . . . . . . . . . . . . . . . . . . . .S-29
Certificate Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-3
Controlled Accumulation Amount . . . . . . . . . . . . . . . . . . . . . . .S-28
Controlled Amortization Amount . . . . . . . . . . . . . . . . . . . . . . .S-28
Controlled Amortization Period . . . . . . . . . . . . . . . . . . . . . . . S-7
Covered Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-24
Credit Enhancement Provider. . . . . . . . . . . . . . . . . . . . . . . . .S-30
Deficit Controlled Accumulation Amount . . . . . . . . . . . . . . . . . . .S-29
Deficit Controlled Amortization Amount . . . . . . . . . . . . . . . . . . .S-28
Early Termination Amount . . . . . . . . . . . . . . . . . . . . . . . . . . S-6
Economic Pay Out Event . . . . . . . . . . . . . . . . . . . . . . . . . . .S-29
Enhancement Invested Amount. . . . . . . . . . . . . . . . . . . . . . S-4, S-24
ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-10
Expected Final Payment Date. . . . . . . . . . . . . . . . . . . .S-3, S-7, S-11
Floating Allocation Percentage . . . . . . . . . . . . . . . . . . . . . . .S-22
Full Invested Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-5
Funding Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-5, S-22
Group [____] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-7
Highest Bid. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-33
Index. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-3
Initial Cash Collateral Amount . . . . . . . . . . . . . . . . . . . . .S-4, S-8
Initial Series [199_-_] Invested Amount. . . . . . . . . . . . . . . . . . . S-3
Interest Funding Investment Proceeds . . . . . . . . . . . . . . . . . . . .S-25
Interest Period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-20
Investor Charge-Off. . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-30
Loan Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-27
Monthly Cash Collateral Fee. . . . . . . . . . . . . . . . . . . . . . . . .S-27
Monthly Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-27
Monthly Principal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-28
Monthly Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-34
Monthly Servicing Fee. . . . . . . . . . . . . . . . . . . . . . . . . . . .S-33
Net Servicing Fee Rate . . . . . . . . . . . . . . . . . . . . . . . . . . .S-33
Paired Series. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-31
Period Length Determination Date . . . . . . . . . . . . . . . . . . . . . .S-21
Portfolio Adjusted Yield . . . . . . . . . . . . . . . . . . . . . . . . . .S-25
Portfolio Yield. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-32
S-36
<PAGE>
Pre-Funding Account. . . . . . . . . . . . . . . . . . . . . . . . . . S-5, S-22
Pre-Funding Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-5
Principal Allocation Percentage. . . . . . . . . . . . . . . . . . . . . . .S-23
Principal Funding Account. . . . . . . . . . . . . . . . . . . . . . . . . .S-11
Principal Funding Account Balance. . . . . . . . . . . . . . . . . . . . . .S-24
Principal Funding Investment Proceeds. . . . . . . . . . . . . . . . . . . .S-24
Rate Determination Date. . . . . . . . . . . . . . . . . . . . . . . . . . . S-3
Record Date. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-20
Required Amount. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-27
Required Cash Collateral Amount. . . . . . . . . . . . . . . . . . . . . . .S-30
Required Reserve Account Amount. . . . . . . . . . . . . . . . . . . . . . .S-25
Reserve Account. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-25
Reserve Account Funding Date . . . . . . . . . . . . . . . . . . . . . . . .S-25
Revolving Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-7
Series Cut-Off Date. . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-4
Series Servicing Fee Percentage. . . . . . . . . . . . . . . . . . . . . . . S-6
Series [199_-_] Certificateholders' Interest . . . . . . . . . . . . . . . . S-4
Series [199_-_] Certificates . . . . . . . . . . . . . . . . . . . . . . . . S-3
Series [199_-_] Invested Amount. . . . . . . . . . . . . . . . . . . . . . .S-23
Series [199_-_] Servicing Fee. . . . . . . . . . . . . . . . . . . . . . . .S-33
Series [199_-_] Supplement . . . . . . . . . . . . . . . . . . . . . . . . .S-20
Series [199_-_] Termination Date . . . . . . . . . . . . . . . . . . . . . . S-9
Servicer Interchange . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-33
Servicing Base Amount. . . . . . . . . . . . . . . . . . . . . . . . . . . .S-33
Servicing Fee Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-33
Special Payment Date . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-11
Termination Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-7
Trust. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-3
Underwriters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-34
Underwriting Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . .S-34
S-37
<PAGE>
- ----------------------------------------
NO DEALER, SALESMAN OR OTHER
PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN
THIS PROSPECTUS SUPPLEMENT OR THE
ACCOMPANYING PROSPECTUS AND, IF
GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY
THE SELLER OR BY THE UNDERWRITERS.
NEITHER THIS PROSPECTUS SUPPLEMENT
NOR THE ACCOMPANYING PROSPECTUS
CONSTITUTES AN OFFER OR A
SOLICITATION BY ANYONE IN ANY
STATE IN WHICH SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED OR
TO ANYONE TO WHOM IT IS UNLAWFUL
TO MAKE SUCH OFFER OR
SOLICITATION. NEITHER THE DELIVERY
OF THIS PROSPECTUS SUPPLEMENT OR
THE ACCOMPANYING PROSPECTUS, NOR
ANY SALE MADE HEREUNDER SHALL,
UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF
THE SELLER SINCE THE DATE HEREOF
OR THEREOF OR THAT THE INFORMATION
CONTAINED OR INCORPORATED BY
REFERENCE HEREIN OR THEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT
TO ITS DATE.
-------------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT PAGE
Summary of Series Terms. . . . . . . S-
Special Considerations . . . . . . . S-
Maturity Considerations. . . . . . . S-
The Portfolio. . . . . . . . . . . . S-
The Receivables. . . . . . . . . . . S-
Use of Proceeds. . . . . . . . . . . S-
The Bank . . . . . . . . . . . . . . S-
Series Provisions. . . . . . . . . . S-
Underwriting . . . . . . . . . . . . S-
Index of Defined Terms . . . . . . . S-
PROSPECTUS
Available Information. . . . . . . . . .
Reports to Certificateholders. . . . . .
Incorporation of Certain Documents by
Reference . . . . . . . . . . . . . .
Prospectus Summary . . . . . . . . . . .
Special Considerations . . . . . . . . .
The Bank's Credit Card Activities. . . .
The Bank . . . . . . . . . . . . . . . .
The Receivables. . . . . . . . . . . . .
Use of Proceeds. . . . . . . . . . . . .
The Trust. . . . . . . . . . . . . . . .
Description of the Certificates. . . . .
The Pooling and Servicing Agreement. . .
Certain Legal Aspects of the
Receivables. . . . . . . . . . . . . . .
Certain Federal Income Tax
Consequences . . . . . . . . . . . . . .
ERISA Considerations . . . . . . . . . .
Plan of Distribution . . . . . . . . . .
Index of Defined Terms . . . . . . . . .
UNTIL [ ], 199[ ]
[(90 DAYS AFTER THE DATE OF THIS
PROSPECTUS)], ALL DEALERS EFFECTING
TRANSACTIONS IN THE CERTIFICATES
WHETHER OR NOT PARTICIPATING IN THIS
DISTRIBUTION, MAY BE REQUIRED TO
DELIVER A PROSPECTUS SUPPLEMENT AND
PROSPECTUS. THIS IS IN ADDITION TO
THE OBLIGATION OF DEALERS TO DELIVER
A PROSPECTUS SUPPLEMENT AND
PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO
THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
- ----------------------------------------
- ----------------------------------------
CHEVY CHASE
MASTER CREDIT CARD TRUST
$[_________] [FLOATING RATE] [ %]
SERIES [199 - ]
ASSET BACKED CERTIFICATES
CHEVY CHASE
BANK, F.S.B.,
AS SELLER AND SERVICER
_____________________
PROSPECTUS SUPPLEMENT
_____________________
[NAME OF UNDERWRITERS]
- ----------------------------------------
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT.
A REGISTRATION STATEMENT RELATING TO
THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION
STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE
AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL
THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH
OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION
OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED OCTOBER 23, 1996
PROSPECTUS SUPPLEMENT Version #2
(To Prospectus dated _________, 199 )
$__________
CHEVY CHASE MASTER CREDIT CARD TRUST
$__________ CLASS A SERIES [199__-__] [FLOATING RATE] [____%]
ASSET BACKED CERTIFICATES
$__________ CLASS B SERIES [199__-__] [FLOATING RATE] [____%]
ASSET BACKED CERTIFICATES
CHEVY CHASE BANK, F.S.B.
SELLER AND SERVICER
____________________
The Class A Series [199__-__] [Floating Rate] [____%] Asset Backed
Certificates (the "Class A Certificates") and the Class B Series [199__-__]
[Floating Rate] [____%] Asset Backed Certificates (the "Class B Certificates,"
and together with the Class A Certificates, the "Series [199__-__]
Certificates") offered hereby will represent undivided interests in certain
assets of the Chevy Chase Master Credit Card Trust (the "Trust") [to be] created
pursuant to a Pooling and Servicing Agreement (the "Pooling Agreement") between
Chevy Chase Bank, F.S.B., a federally chartered stock savings bank (the "Bank"),
as seller and servicer, and __________, as trustee. The property of the Trust
will include receivables (the "Receivables") generated from time to time in a
portfolio of consumer revolving credit card accounts (the "Accounts"),
collections thereon and certain other property as more fully described herein.
The Bank initially will own the remaining undivided interest in the Trust not
represented by the Series [199__-__] Certificates and the other investor
certificates issued by the Trust and will service the Receivables. The Bank
[has offered and] may offer from time to time other series of certificates that
evidence undivided interests in certain assets of the Trust, which may have
terms significantly different from the Series [199__-__] Certificates and which
are not offered hereby. The issuance of additional Series of Certificates may
impact the timing or amount of payments received by Series [199__-__]
Certificateholders.
(CONTINUED ON NEXT PAGE)
____________________
THERE CURRENTLY IS NO SECONDARY MARKET FOR THE SERIES [199__-__]
CERTIFICATES, AND THERE IS NO ASSURANCE THAT ONE WILL DEVELOP OR, IF ONE DOES
DEVELOP, THAT IT WILL CONTINUE UNTIL THE SERIES [199__-__] CERTIFICATES ARE PAID
IN FULL. POTENTIAL INVESTORS SHOULD CONSIDER, AMONG OTHER THINGS, THE
INFORMATION SET FORTH IN "SPECIAL CONSIDERATIONS" HEREIN AND IN THE PROSPECTUS.
THE SERIES [199__-__] CERTIFICATES WILL REPRESENT INTERESTS IN THE TRUST
ONLY AND WILL NOT REPRESENT INTERESTS IN OR OBLIGATIONS OF THE BANK OR ANY
AFFILIATE OF THE BANK. NEITHER THE SERIES [199__-__] CERTIFICATES NOR THE
UNDERLYING ACCOUNTS OR RECEIVABLES OR ANY COLLECTIONS THEREON ARE INSURED OR
GUARANTEED BY THE SAVINGS ASSOCIATION INSURANCE FUND, THE FEDERAL DEPOSIT
INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY OR INSTRUMENTALITY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
Price to Underwriting Proceeds to
Public (1) Discount the Bank (1)(2)
Per Class A Certificate . . . ____% ____% ____%
Per Class B Certificate . . . ____% ____% ____%
Total . . . . . . . . . . . . $__________ $__________ $__________
(1) Plus accrued interest, if any, at the Class A Certificate Rate or Class B
Certificate Rate, as applicable, from __________, 199__.
(2) Before deduction of expenses payable by the Bank, estimated to be
$__________.
____________________
[The Series [199__-__] Certificates are offered by the Underwriters when,
as and if issued by the Trust and accepted by the Underwriters and subject to
the Underwriters' right to reject orders in whole or in part.] [The Series
[199__-__] Certificates are offered by [the Underwriters], subject to receipt
and acceptance by them and subject to their rights to reject any order in whole
or in part.] It is expected that the Series [199__-__] Certificates will be
delivered in book-entry form on or about __________, 199__, through the
facilities of The Depository Trust Company, [Cedel S.A. and the Euroclear
System].]
[Underwriters]
THE DATE OF THIS PROSPECTUS SUPPLEMENT IS __________, 199__.
<PAGE>
(CONTINUED FROM PREVIOUS PAGE)
[Interest will accrue on the Class A Certificates at the rate of ____% per
annum (the "Class A Certificate Rate"). Interest will accrue on the Class B
Certificates at the rate of ____% per annum (the "Class B Certificate Rate").]
[Interest will accrue on the Class A Certificates with respect to the initial
Interest Period at the rate of ____% per annum and, with respect to each
subsequent Interest Period, at the rate of ____% per annum [above] [below]
[times] __________ (the "Index") prevailing on the Rate Determination Date (as
defined herein) [but in no event in excess of____% per annum] (the "Class A
Certificate Rate"). Interest will accrue on the Class B Certificates with
respect to the initial Interest Period at the rate of ____% per annum and, with
respect to each subsequent Interest Period, at the rate of ____% per annum
[above] [below] [times] __________ (the "Index") prevailing on the Rate
Determination Date (as defined herein) [but in no event in excess of ____% per
annum] (the "Class B Certificate Rate").] Interest with respect to the
Certificates will be distributed on __________ and on the __________ day of each
[month] [quarter] [other] thereafter (or, if such __________ day is not a
business day, the next succeeding business day) (each, an "Interest Payment
Date").
Principal with respect to the Class A Certificates [is scheduled to be paid
on __________, 199__] [is scheduled to be distributed on each Distribution Date
commencing on the Distribution Date in __________ and ending on the Distribution
Date in __________], but may be paid earlier or later under certain limited
circumstances described herein. Principal with respect to the Class B
Certificates [is scheduled to be paid on __________, 199__] [is scheduled to be
distributed on each Distribution Date,] [commencing on the Distribution Date in
__________, 199__] [commencing with the Distribution Date following the
Distribution Date on which the Class A Certificates have been paid in full,]
[and ending on the 199__ Distribution Date], but may be paid earlier or later
under certain limited circumstances described herein. See "Maturity
Considerations" and "Series Provisions -- Pay Out Events" herein and
"Description of the Certificates -- Pay Out Events" in the Prospectus.
[Principal payments will not be made to Class B Certificateholders until the
final principal payment has been paid in respect of the Class A
Certificateholders.] See "Series Provisions -- Principal Payments."
THE FRACTIONAL UNDIVIDED INTEREST IN THE TRUST REPRESENTED BY THE CLASS B
CERTIFICATES WILL BE SUBORDINATED TO THE EXTENT NECESSARY TO FUND PAYMENTS WITH
RESPECT TO THE CLASS A CERTIFICATES TO THE EXTENT DESCRIBED HEREIN.
[The Trust will have the benefit of funds on deposit in a cash collateral
account (the "Cash Collateral Account") which will be funded by an initial
deposit of $__________, [of which $__________ will be for the benefit of both
the Class A Certificates and the Class B Certificates and $__________] [which]
will be for the exclusive benefit of the Class B Certificates. Amounts
available to be withdrawn from the Cash Collateral Account will be applied as
described herein under "Summary of Series Terms -- Cash Collateral Account" and
"Series Provisions -- Cash Collateral Account."](1)
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVERALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE
SERIES [199__-__] CERTIFICATES AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE
PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
THE CERTIFICATES OFFERED HEREBY CONSTITUTE A SEPARATE SERIES OF
CERTIFICATES BEING OFFERED BY THE BANK FROM TIME TO TIME PURSUANT TO ITS
PROSPECTUS DATED MARCH __, 1994. THIS PROSPECTUS SUPPLEMENT DOES NOT CONTAIN
COMPLETE INFORMATION ABOUT THE OFFERING OF THE SERIES [199__-__]CERTIFICATES.
ADDITIONAL INFORMATION IS CONTAINED IN THE PROSPECTUS AND PURCHASERS ARE
URGED TO READ BOTH THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS IN FULL.
SALES OF THE SERIES [199__-__]CERTIFICATES MAY NOT BE CONSUMMATED UNLESS THE
PURCHASER HAS RECEIVED BOTH THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS.
Until __________, ____ (90 days after the date of this Prospectus
Supplement), all dealers effecting transactions in the Series [199__-__]
Certificates, whether or not participating in this distribution, may be
required to deliver a Prospectus Supplement and Prospectus. This is in
addition to the obligation of dealers to deliver a Prospectus Supplement and
Prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions. [NOTE: This will be put on back cover.]
- --------------
(1) Other forms of credit enhancement may be provided for the benefit
of a Series or a Class or Classes within a Series as described under
"Description of the Certificates -- Credit Enhancement" in the Prospectus,
and if so provided, the Prospectus Supplement will reflect the provisions of
the credit enhancement that are material to the Certificate holders of such
Series or Class as well as certain information, if applicable, with respect
to the credit enhancement provider.
S-2
<PAGE>
SUMMARY OF SERIES TERMS
The following is qualified in its entirety by reference to the detailed
information appearing elsewhere in this Prospectus Supplement and the
accompanying Prospectus. Reference is made to the Glossary in each of this
Prospectus Supplement and the Prospectus for the location herein and therein
of the definitions of certain capitalized terms used herein. Certain
capitalized terms used but not defined herein have the meanings assigned to
them in the Prospectus.
<TABLE>
<S> <C>
Trust. . . . . . . . . . . . . . . . . Chevy Chase Master Credit Card Trust (the "Trust").
Title of Securities. . . . . . . . . . $__________ Class A Series [199__-__] [Floating Rate] [____%] Asset Backed
Certificates [the "Class A Certificates") and $__________ Class B Series
[199__-__] [Floating Rate] [____%] Asset Backed Certificates (the "Class B
Certificates" and, together with the Class A Certificates, the "Series
[199__-__] Certificates").
Initial Series [199__-__]
Invested Amount. . . . . . . . . . . . $[__________].(2)
Series Invested Amount . . . . . . . . The [Initial Series [199__-__] Invested Amount] [Initial Series 199__-__]
Invested Amount plus the amount of any withdrawals from the Pre-Funding
Account in connection with the purchase of an additional interest in the
Principal Receivables] [other formula].
Initial Class A Invested Amount . . . $[__________].(2)
Initial Class B Invested Amount . . . $[__________].(2)
Class A Certificate Rate. . . . . . . [[____]% per annum] [[____]% per annum with respect to the initial Interest Period
and, with respect to each subsequent Interest Period, ____% per annum [above] [below]
[times] (the "Index") prevailing on the [____] day immediately preceding the commencement
of such Interest Period (a "Rate Determination Date" but in no event in excess of ____% per
annum]].
Class B Certificate Rate. . . . . . . [[____]% per annum] [[____]% per annum with respect to the initial Interest Period and, with
respect to each subsequent Interest Period, ____% per annum [above] [below] [times] __________
(the "Index") prevailing on the [____] day immediately preceding the commencement of such
Interest Period (a "Rate Determination Date"), [but in no event in excess of ____% per
annum]].
- ---------
(2) Adjustments to the Invested Amount definitions and allocations with respect
to the Invested Amount may be made in a Prospectus Supplement relating to a
prefunded Series or Class.
S-3
<PAGE>
Interest Payment Dates . . . . . . . . The [____] day of each [month] [quarter] [other] (or, if any such day is not a business day,
the next succeeding business day), commencing [____].
Class A Controlled [Amortization]
[Accumulation] Amount. . . . . . . . . For each Distribution Date with respect to the Class A [Controlled Amortization]
[Accumulation] Period, $[__________]]; [except that, if the commencement of the Class A
Accumulation Period is delayed as described herein under "Series Provisions -- Principal
Payments," the Class A Controlled Accumulation Amount for each Distribution Date with respect
to the Class A Accumulation Period will be determined as described under "Series Provisions
-- Application of Collections -- Payments of Principal."]
Class B Controlled [Amortization]
[Accumulation] Amount. . . . . . . . . For each Distribution Date with respect to the Class B [Controlled Amortization]
[Accumulation] Period [after the Class A Invested Amount has been paid in full],
$[__________].
Class A Expected Final Payment Date. . [__________].
Class B Expected Final Payment Date. . [__________].
[Initial Shared Collateral Amount. . . [__________].
[Initial Class B Collateral Amount . . $[__________].]
Closing Date . . . . . . . . . . . . . [__________], 199__.
The Series [199__-__] Certificates . . Each of the Series [199__-__] Certificates offered hereby represents an undivided interest
in the Trust. The portion of the Trust Assets allocated to the holders of the Series
[199__-__] Certificates as described under "Description of the Certificates" in the
Prospectus (the "Series [199__-__] Certificateholders' Interest") will be further
allocated between the holders of the Class A Certificates (the "Class A Certificateholders'
Interest") and the holders of the Class B Certificates (the "Class B Certificateholders'
Interest") as described herein. The principal amount of the [Class A Certificateholders'
Interest] and the [Class B Certificateholders' Interest] [will decline as principal is paid
to the [Class A Certificateholders] [and] [Class B Certificateholders], [respectively,]
during the Controlled Amortization Period or Early Amortization Period [will remain fixed at
the aggregate initial principal amount of the [Class A Certificates] [and] [the Class B
Certificates]
- ---------
(3) Adjustments to Certificateholders' Interest definitions may be
made in a Prospectus Supplement relating to a prefunded Series.
S-4
<PAGE>
[respectively,] except as otherwise provided herein]. The Class B Certificateholders'
Interest will [also] decline in certain circumstances as a result of (a) the allocation to
the Class B Certificateholders' Interest of Defaulted Amounts otherwise allocable to the
Class A Certificateholders' Interest and (b) the reallocation of collections of Principal
Receivables otherwise allocable to the Class B Certificateholders' Interest to fund certain
payments in respect of the Class A Certificates. [Any such reductions in the Class B
Certificateholders' Interest may be reimbursed out of Excess Spread, if any, [Excess
Finance Charge Collections allocable to Series [199__-__]] and certain amounts [withdrawn
from the Cash Collateral Account] [drawn on other Credit Enhancement] as described herein.]
[During the Accumulation Period, for the purpose of allocating collections of Finance Charge
Receivables and the Defaulted Amount with respect to each Monthly Period, the Class A
Certificateholders' Interest and (after the Class B Principal Commencement Date) the Class B
Certificateholders' Interest will be further reduced by the amount on deposit in the
Principal Funding Account (as so reduced, the "Class A Adjusted Invested Amount" and "Class B
Adjusted Invested Amount."]
The Series [199__-__] Certificateholders' Interest will include the right to receive (but
only to the extent needed to make payments of interest at the [applicable] Certificate Rate
[with respect to each Interest Period] and payments of principal as described herein),
varying percentages of the collections of Finance Charge Receivables and Principal
Receivables and will be allocated a varying percentage of the Defaulted Amount with respect
to each Monthly Period. Collections of Finance Charge Receivables and the Defaulted Amount
will be allocated to the Series [199__-__] Certificateholders based on the Floating
Allocation Percentage. Such amounts will be further allocated to the Class A
Certificateholders and the Class B Certificateholders based on the Class A Floating
Percentage and the Class B Floating Percentage, respectively. Collections of Principal
Receivables will be allocated to the Series [199__-__] Certificates based on the Principal
Allocation Percentage. Such percentage will vary as described herein under "Series
Provisions -- Allocation Percentages" as the aggregate amount of Principal Receivables in
the trust varies from month to month and depending on whether the Series [199__-__]
Certificates are in their Revolving Period, [Controlled Amortization] [Accumulation] Period
or Early Amortization Period. See also "Description of the Certificates -- Allocation
Percentages" in the Prospectus. Such amounts will be further
S-5
<PAGE>
allocated to the Class A Certificateholders and the Class B Certificateholders based on
the Class A Principal Percentage and the Class B Principal Percentage, respectively.
[Following the occurrence of an Economic Pay Out Event and a withdrawal of funds from the
Cash Collateral Account, a portion of the Series [199__-__] Certificateholders' Interest
(corresponding to the aggregate amount of such withdrawal) will be allocated to the Cash
Collateral Depositor (the "Enhancement Invested Amount").]
[Other Series. . . . . . . . . . . . . [The Series [199__-__] Certificates are the first Certificates issued by the Trust.]
[Additional Series are expected to be issued from time to time by the Trust.] See
"Description of the Certificates -- New Issuances" in the Prospectus and "Maturity
Considerations" herein.](4)
Receivables. . . . . . . . . . . . . . The Receivables arise in Accounts that have been selected from the Bank Portfolio,
based on criteria provided in the Pooling Agreement as applied on the Trust Cut-Off Date and
as more fully described herein under "The Bank Portfolio." The aggregate amount of
Receivables in the Accounts as of [__________, ____,] [the Trust Cut-Off Date] was
$__________, comprised of $__________ of Principal Receivables and $__________ of Finance
Charge Receivables.
[Funding Period. . . . . . . . . . . . During the period from and including the Closing Date to but excluding the earliest of (i)
the day on which the Invested Amount equals [$__________] (the "Full Invested Amount"),
(ii) the day on which a Pay Out Event occurs and (iii) the ______ 199_ Distribution Date
(the "Funding Period"), the Pre-Funding Amount will be held in a trust account established
with the Trustee for the benefit of the Series [199__-__] Certificateholders (the
"Pre-Funding Account"). The "Pre-Funding Amount" will equal $______, less the amounts of
any increases in the [199__-__] Invested Amount pursuant to the Series [199__-__] Supplement
in connection with the addition of Principal Receivables to the Trust or principal payments
made to other amortizing Series.
[Funds on deposit in the Pre-Funding Account will be invested by the Trustee in certain
Eligible Investments [pursuant to a guaranteed rate agreement] [guaranteed investment
contract]. Interest earnings on the Pre-Funding Amount (net of investment losses and
expenses) will be used to pay interest on the Series [199__-__] Certificates during the
Funding Period.]
- ---------
(4) If Series [199__-__] is issued at a time when there are other
outstanding Series, appropriate summary disclosure about the principal
terms of such other Series will be included in the Prospectus Supplement.
S-6
<PAGE>
During the Funding Period, funds on deposit in the Pre-Funding Account will be withdrawn and
paid to the Seller to the extent of any increases in the [199__-__] Invested Amount. The
Seller expects that the [199__-__] Invested Amount will equal the Full Invested Amount by
the ______ 199_ Monthly Period. If the [199__-__] Invested Amount does not for any reason
equal the Full Invested Amount by the end of the Funding Period, any amount remaining in
the Pre-Funding Account will be payable to the [Class A] [Class B] Certificateholders [pro
rata, on the basis of the ratio of the Class A Invested Amount and the Class B Invested
Amount, respectively, to the Series [199__-__] Invested Amount as of the last day of the
related Monthly Period] on the Distribution Date that is the last day of the Funding
Period.]
[Early Termination Amount. . . . . . . An early termination amount (the "Early Termination Amount") will be payable by the Seller
to the [Class A] [Class B] Certificateholders on the first Distribution Date following the
end of the Funding Period if any Pre-Funding Amount exists at the end of the Funding
Period. The Early Termination Amount will equal the excess, if any, discounted as
described below, of (i) the amount of interest that would have accrued on such Pre-Funding
Amount at the [Class A] Certificate Rate [and Class B Certificate Rate] during the period
commencing on and including such Distribution Date to, but excluding, __________, over
(ii) the amount of interest that would have accrued on such Pre-Funding Amount over the
same period at a per annum rate of interest equal to the bond equivalent yield to
maturity on the [ ] day preceding such Distribution Date on [________]. Such excess
shall be discounted to present value to such Distribution Date at the applicable yield
described in clause (ii).]
[Registration of Series [199__-__]
Certificates . . . . . . . . . . . . . The Series [199__-__] Certificates initially will be represented by Series [199__-__]
Certificates registered in the name of Cede, as the nominee of DTC. No purchaser of a
Series [199__-__] Certificate will be entitled to receive a definitive certificate
except under certain limited circumstances. Purchasers of Series [199__-__] Certificates
may elect to hold their Series [199__-__] Certificates through DTC (in the United States)
[or Cedel or Euroclear (in Europe)]. See "The Pooling Agreement Generally -- Definitive
Certificates" in the Prospectus.]
Servicing Compensation . . . . . . . . The Series Servicing Fee Percentage for the Series [199__-__] Certificates will be ____%
per annum. [On each Distribution Date, Servicer Interchange with respect to the related
Monthly Period that is on deposit in the Collection Account will be withdrawn from the
Collection Account and paid to the Servicer in respect of the Monthly Servicing Fee.
In addition,]
S-7
<PAGE>
The Class A Servicing Fee and the Class B Servicing Fee will be paid on each Distribution
Date as described under "Series Provisions -- Application of Collections -- Payment of Fees,
Interest and Other Items" and "-- Servicing Compensation and Payment of Expenses" herein.
See also "Description of the Certificates -- Servicing Compensation and Payment of Expenses"
in the Prospectus.
Revolving Period and [Controlled
Amortization] [Accumulation]
Period . . . . . . . . . . . . . . . . Unless a Pay Out Event has occurred, the revolving period with respect to the Series
[199__-__] Certificates (the "Revolving Period") will end and the [controlled
amortization period with respect to the Series [199__-__] Certificates (the "Controlled
Amortization Period"), which includes controlled amortization periods for each Class]
[accumulation period with respect to the Series [199__-__] Certificates (the "Accumulation
Period") which includes separate accumulation periods for each Class will commence at the
close of business on [__________]] [except that, subject to the conditions set forth under
"Series Provisions -- Principal Payments" herein, the day on which the Revolving
Period ends and the Accumulation Period begins may be delayed to no later than the close
of business on [__________])]. Unless a Pay Out Event has occurred, (i) the Class A
[controlled amortization] [accumulation] period [(the "Class A [Controlled Amortization]
[Accumulation] Period") will commence at the close of business on [____] [or such later
date as is determined for the Class A Accumulation Period under "Series Provisions --
Principal Payments"] and end on the earliest of (a) the commencement of the Early
Amortization Period or (b) the payment in full of the Class A Invested Amount, and (ii)
the Class B [controlled amortization] [accumulation] period (the "Class B [Controlled
Amortization] [Accumulation] Period") will commence on the Distribution Date on which the
Class A Invested Amount is paid in full or, if the Class A Invested Amount is paid in full
on the Class A Expected Final Payment Date and the Early Amortization Period has not yet
commenced, the Distribution Date following the Class A Expected Final Payment Date (the
"Class B Principal Commencement Date") and end on the earliest of (a) the commencement of
the Early Amortization Period, (b) the payment in full of the Class B Invested Amount or
(c) the Series [199__-__] Termination Date. No principal will be payable to Class A
Certificateholders until [the first Distribution Date with respect to the Class A
Controlled Amortization Period] [__________, 199__ (the "[Class A] Expected Final Payment
Date")], or, upon the occurrence of a Pay Out Event as described herein, the first
Distribution Date with respect to the Early Amortization Period. No principal will be
payable to the Class B Certificateholders until the Class
</TABLE>
S-8
<PAGE>
A Invested Amount is paid in full. [For the
period beginning on the Closing Date and ending
with the commencement of the [Controlled
Amortization] [Accumulation] Period or the Early
Amortization Period, collections of Principal
Receivables otherwise allocable to the Series
[199__-__] Certificateholders' Interest (other
than collections of Principal Receivables
allocated to the Class B Certificateholders'
Interest ("Reallocated Principal Collections")
that are used to pay any deficiency in the
Required Amount) will, subject to certain
limitations, be treated as Shared Principal
Collections and applied to cover principal
payments due to or for the benefit of
Certificateholders of other Series, if so
specified in the Supplements for such other
Series, or paid to the holder of the Seller
Certificate.] See "Series Provisions -- Pay Out
Events" herein and "Description of the
Certificates -- Pay Out Events" in the Prospectus
for a discussion of the events which might lead
to the termination of the Revolving Period prior
to the commencement of the [Controlled
Amortization] [Accumulation] Period. In
addition, see "Series Provisions -- Principal
Payments" herein [and "Description of the
Certificates --Shared Principal Collections" in
the Prospectus].
[Additional Amounts
Available to Class A
Certificateholders . . . . If collections of Finance Charge Receivables
allocable to the Class A Certificates for any
Monthly Period [and certain other available
amounts described herein] are less than the sum
of (i) current and overdue Monthly Interest on
the Class A Certificates, [(ii) Class A
Additional Interest,] (iii) current and overdue
Class A Servicing Fee and (iv) the Class A
Investor Default Amount, with respect to the
related Distribution Date, Excess Spread [and
Excess Finance Charge Collections allocable to
Series [199__-__]] will be applied to fund the
deficiency (the "Required Amount"). "Excess
Spread" for any Distribution Date will equal the
sum of [(a) the excess of collections of Finance
Charge Receivables allocated to the Class A
Certificates [and other available funds described
herein] over the sum of the amounts referred to
in clauses (i), (ii), (iii) and (iv) above and
(b) the excess of collections of Finance Charge
Receivables allocated to the Class B Certificates
[and certain other available funds described
herein] over the sum of (i) current and overdue
Monthly Interest on the Class B Certificates,
[(ii) Class B Additional Interest], (iii) current
and overdue Class B Servicing Fee and (iv) the
Class B Investor Default Amount.] If Excess
Spread [and Excess Finance Charge Collections
allocable to Series [199__-__]] with respect to
such Distribution Date are less than the Required
Amount, amounts [on deposit in the Cash
Collateral Account and available to make payments
with respect to the Class A Certificates]
[available under the Credit Enhancement] will be
used to fund the remaining Required Amount. If
Excess
S-9
<PAGE>
Spread [and] [Excess Finance Charge Collections
allocable to Series [199__-__] with respect to
such Distribution Date and amounts [on deposit in
the Cash Collateral Account and available to make
payments with respect to the Class A
Certificates] [available under the Credit
Enhancement] with respect to such Distribution
Date is [are] less than the Required Amount,
Reallocated Principal Collections with respect to
the related Monthly Period will then be used to
fund the remaining Required Amount. If
Reallocated Principal Collections with respect to
such Monthly Period are insufficient to fund the
remaining Required Amount for the related
Distribution Date, then a portion of [the
Enhancement Invested Amount, if any, will be
reduced by the amount of such deficiency (but not
by more than the Class A Investor Default Amount
for such Monthly Period). If such reduction would
cause the Enhancement Invested Amount to be
reduced below zero, the Class B Invested Amount
will be reduced by the amount by which the
Enhancement Invested Amount would have been
reduced below zero (but not by more than the
excess of the Class A Investor Default Amount for
such Monthly Period over the amount of such
reduction in the Enhancement Invested Amount) to
avoid a charge-off with respect to the Class A
Certificates] [the Class B Invested Amount will
be reduced by the amount of such insufficiency
(but not by more than the Class A Investor
Default Amount) to avoid a charge-off with
respect to the Class A Certificates]. If the
Class B Invested Amount is reduced to zero, the
Class A Invested Amount will be reduced if the
Required Amount for any Distribution Date exceeds
the sum of Excess Spread [and Excess Finance
Charge Collections allocated to Series [199__-__]
and amounts [on deposit in the Cash Collateral
Account and available to make payments with
respect to the Class A Certificates] [available
under the Credit Enhancement] and Reallocated
Principal Collections for Monthly Period, but not
by more than the excess of the Class A Investor
Default Amount for such Monthly Period over the
aggregate reductions in [the Enhancement Invested
Amount and] the Class B Invested Amount with
respect to such Monthly Period, and the Class A
Certificateholders will bear directly the credit
and other risks associated with their undivided
interest in the Trust. See "Series Provisions --
Reallocation of Cash Flows; Class B Invested
Amount" and "-- Defaulted Receivables; Investor
Charge-Offs."]
Subordination of the
Class B Certificates . . . The Class B Certificates will be subordinated as
described herein to the extent necessary to fund
payments with respect to the Class A Certificates
as described herein. If the Class B Invested
Amount is reduced, the percentage of collections
of Finance Charge Receivables allocable to the
Class B
S-10
<PAGE>
Certificateholders with respect to
subsequent Monthly Periods will be reduced.
Moreover, to the extent the amount of such
reduction in the Class B Invested Amount is not
reimbursed, the amount of principal distributable
to the Class B Certificateholders will be
reduced. See "Series Provisions --Allocation
Percentages" and "-- Subordination of the Class B
Certificates" herein.
[Excess Finance Charges. . The Series [199__-__] Certificates will be included
in a group of Series ("Group [____]") expected to
be issued by the Trust from time to time.
Subject to certain limitations described under
"Description of the Certificates -- Sharing of
Excess Finance Charge Collections" in the
Prospectus, Excess Finance Charge Collections, if
any, with respect to a Series included in Group
[____] will be applied to cover any shortfalls
with respect to amounts payable from collections
of Finance Charge Receivables allocable to any
other Series in Group [____], pro rata based upon
the amount of the shortfall, if any, with respect
to each Series in Group [____]. See "Description
of the Certificates -- Sharing of Excess Finance
Charge Collections" in the Prospectus.]
[Shared Principal
Collections . . . . . . . Collections of Principal Receivables and certain
other amounts otherwise allocable to other
Series, to the extent such collections are not
needed to make payments to or deposits for the
benefit of the certificateholders of such other
Series, will be applied to cover principal
payments due to or for the benefit of the holders
of the Series [199__-__] Certificates. See
"Description of the Certificates -- Shared
Principal Collections" in the Prospectus.]
[Cash Collateral Account . A cash collateral account (the "Cash Collateral
Account") will be established in the name of the
Trustee for the benefit of the Series [199__-__]
Certificateholders. The Cash Collateral Account
will be funded on the Closing Date in the amount
of $__________ (the "Initial Cash Collateral
Amount")[, of which $__________ (the "Initial
Shared Collateral Amount") will be for the
benefit of both the Class A Certificates and the
Class B Certificates and the remaining
$__________ (the "Initial Class B Collateral
Amount") will be for the exclusive benefit of the
Class B Certificates].
On each Distribution Date, the Available [Shared]
[Cash] Collateral Amount will be applied to fund
[the following amounts in the following priority:
(a) with respect to the Class A Certificates,
the excess, if any, of the Required Amount with
respect to such Distribution Date over the amount
of Excess Spread[, Excess Finance Charge
Collections allocated to Series [199__-__]] [and
other available amounts] allocated and available
to fund such Required Amount and (b) with respect
S-11
<PAGE>
to the Class B Certificates,] the excess, if any,
of (i) current and overdue Class B Monthly
Interest, [(ii) Class B Additional Interest,]
(iii) current and overdue Class B Servicing Fee
and (iv) the Class B Investor Default Amount with
respect to the related Monthly Period over the
amount of Excess Spread [and Excess Finance Charge
Collections allocated to Series [199__-__] [and
other available amounts] allocated and available
to fund such amounts.
[On the first Special Payment Date following an
Economic Pay Out Event, the Available [Shared]
[Cash] Collateral Amount (after giving effect to
other withdrawals from the Cash Collateral
Account on such Distribution Date) will be
applied to pay [principal of the Class A
Certificates and the remainder of the Available
Collateral Amount will be applied to pay]
principal of the Class B Certificates. Following
such withdrawal[s] from the Cash Collateral
Account on such Special Payment Date, the Cash
Collateral Account will be terminated and no
further deposits to, or withdrawals from, the
Cash Collateral Account will be made for the
benefit of the [Series [199__-__] [Class B]
Certificateholders.]]
On each Distribution Date commencing with the
Class B Principal Commencement Date, provided that
an Economic Pay Out Event has not occurred, the
Available [Cash] Collateral Amount (after giving
effect to other withdrawals from the Cash
Collateral Account on such Distribution Date)
will be applied to pay the excess, if any, of (i)
the Class B Initial Invested Amount minus the sum
of the aggregate amount of principal payments
previously distributed to the Class B
Certificateholders [or deposited in the Principal
Funding Account in respect of Class B
Certificates] over (ii) the Class B Invested
Amount (after giving effect to certain changes
made in the Class B Invested Amount). See
"Series Provisions -- Allocation Percentages" and
"-- Cash Collateral Account."
On each Distribution Date, Excess Spread [and
Excess Finance Charge Collections allocable to
Series [199__-__]] (to the extent described under
"Series Provisions -- Application of Collections
-- Excess Spread[; Excess Finance Charges]"
herein) will be deposited in the Cash Collateral
Account (to the extent the amount on deposit in
the Cash Collateral Account is less than the
Initial Cash Collateral Amount). In addition, if
on any Distribution Date the amount on deposit in
the Cash Collateral Account exceeds the Initial
Cash Collateral Amount, such excess will be
withdrawn and paid to the [Cash Collateral
Depositor] for application in accordance with the
Loan Agreement. See "Series Provisions -- Cash
Collateral Account" herein.]
S-12
<PAGE>
[Credit Enhancement. . . . The Trust will have the benefit of a [letter of
credit] [surety bond] [insurance policy] [spread
account] [reserve account] [other credit
enhancement] [issued by __________ for the
benefit of the [Class A] [and] [Class B]
Certificateholders as described herein. See
"Series Provisions -- Credit Enhancement" herein.]
[Optional Repurchase . . . The Series [199__-__] Certificateholders' Interest
will be subject to optional repurchase by the
Seller on any Distribution Date after the [sum of
the] Series [199__-__] Invested Amount [and the
Enhancement Invested Amount, if any,] is reduced
to an amount less than or equal to $__________
(____% of the Initial Invested Amount). The
purchase price will be equal to the [sum of the]
Series [199__-__] Invested Amount [(less the
Principal Funding Account Balance, if any)] [,
the Enhancement Invested Amount, if any,] and
accrued and unpaid interest on the Class A
Certificates and the Class B Certificates [(and
accrued and unpaid interest with respect to
interest amounts that were due but not paid on a
prior Interest Payment Date)] through (a) if the
day on which such purchase occurs is a
Distribution Date, the day preceding such
Distribution Date or (b) if the day on which such
repurchase occurs is not a Distribution Date, the
day preceding the Distribution Date following
such day. See "Description of the Certificates
-- Optional Termination; Final Payment of
Principal" in the Prospectus.]
Required Principal Balance;
Addition of Accounts . . . The Series [199__-__] Supplement provides that the
Seller will be required to make an Addition of
Accounts to the Trust if the amount of Principal
Receivables in the Trust is not maintained at a
minimum level equal to the sum of the initial
invested amounts of each Series then outstanding
(provided that certain Series may be excluded
from such calculation [if the issuance of such
Series will not result in a Ratings Effect])
minus amounts on deposit in the Special Funding
Account [and Principal Funding Account]. See
"Series Provisions -- Required Principal Balance;
Addition of Accounts" herein and "Description of
the Certificates -- Addition of Trust Assets" in
the Prospectus.
Series [199__-__]
Termination Date . . . . . ____________________, __________. See "Series
Provisions -- Series Termination."
Defeasance . . . . . . . . In certain circumstances and subject to certain
conditions, the Bank may terminate its
substantive obligations in respect of Series
[199__-__] or the Pooling Agreement as a whole.
See "Description of the Certificates --
Defeasance" in the Prospectus.
S-13
<PAGE>
Tax Status . . . . . . . . Special tax counsel to the Seller is of the opinion
that under existing law the Series [199__-__]
Certificates will be characterized as debt for
federal income tax purposes. Under the Pooling
Agreement, the Certificate Owners will agree to
treat the Certificates as debt for federal income
tax purposes. See "Tax Matters" in the Prospectus
for additional information concerning the
application of federal income tax laws.
ERISA Considerations . . . Under a regulation issued by the Department of
Labor, the Trust's assets would not be deemed
"plan assets" of an employee benefit plan holding
the Series [199__-__] Certificates if certain
conditions are met, including that the Series
[199__-__] Certificates must be held, upon
completion of the public offering made hereby by
at least 100 investors who are independent of the
Seller and of one another. The Underwriter[s]
expect that the Series [199__-__] Certificates
will be held by at least 100 independent
investors at the conclusion of the offering,
although no assurance can be given, and no
monitoring or other measures will be taken to
ensure that such condition will be met. The
Seller anticipates that the other conditions of
the regulation will be met. If the Trust's
assets were deemed to be "plan assets" of an
employee benefit plan investor, it is uncertain
whether existing exemptions from the "prohibited
transaction" rules of the Employee Retirement
Income Security Act of 1974, as amended
("ERISA"), would apply to all transactions
involving the Trust's assets. Accordingly,
employee benefit plan fiduciaries contemplating
purchasing the Series [199__-__] Certificates
should consult their counsel before making a
purchase. See "ERISA Considerations" in the
Prospectus.
Class A Certificate
Rating . . . . . . . . . . It is a condition to the issuance of the Class A
Certificates that they be rated in [the highest
rating category] [one of the four highest rating
categories] by at least one nationally recognized
rating agency. [The rating of the Class A
Certificates is based primarily on the value of
the Receivables, [the Initial [Shared] [Cash]
Collateral Amount, the circumstances in which
funds may be withdrawn from the Cash Collateral
Account in respect of the Class A Certificates,]
and the subordination of the Class B
Certificates, [other reasons]]. See "Special
Considerations -- Series Considerations --
Limited Nature of Rating" in the Prospectus.
Class B Certificate
[Rating] . . . . . . . . . [It is a condition to the issuance of the Class B
Certificates that they be rated in [one of the
four highest rating categories] by at least one
nationally recognized rating agency. The rating
of the Class B Certificates is based primarily on
the value of the Receivables, [the Initial Cash
Collateral Amount, the circumstances in which
funds may be withdrawn from the Cash Collateral
Account in respect of the Class B Certificates,]
S-14
<PAGE>
[other reasons]. See "Special Considerations --
Series Considerations -- Limited Nature of
Rating" in the Prospectus. [The Class B
Certificates are not offered hereby.]
[Listing . . . . . . . . . Application will be made to list the [Class A]
[Class B] Certificates on the [Luxembourg Stock
Exchange] [other exchange].]
S-15
<PAGE>
SPECIAL CONSIDERATIONS
Potential investors should consider, among other things, the following
risk factors in connection with the purchase of the Series [199__-__]
Certificates.
LIMITED AMOUNTS OF CREDIT ENHANCEMENT. Although Credit Enhancement with
respect to the Class A Certificates will be provided by the subordination of
the Class B Certificates to the Class A Certificates to the extent described
herein [and by the Cash Collateral Account (up to the Initial [Shared] [Cash]
Collateral Amount)] [[and by the Credit Enhancement], and with respect to the
Class B Certificates, will be provided by [the Cash Collateral Account]
[Credit Enhancement], the amount available thereunder is limited, [is
expected to] [may] decline during the [Controlled Amortization]
[Accumulation] Period or the Early Amortization Period and will be reduced by
payments made pursuant thereto. If the amount available under [the Cash
Collateral Account] [the Credit Enhancement] has been reduced to zero, [Class
A] Certificateholders [and Class B Certificateholders] will [each] bear
directly the credit and other risks associated with their respective
undivided interests in the Trust.
EFFECT OF SUBORDINATION OF CLASS B CERTIFICATES; PRINCIPAL PAYMENTS.
The Class B Certificates are subordinated in right of payment of principal to
the Class A Certificates. [Payments of principal in respect of the Class B
Certificates will not commence until after the final principal payment with
respect to the Class A Certificates has been made as described herein.]
Moreover, the Class B Invested Amount is subject to reduction if the Required
Amount for any Monthly Period is greater than zero and is not funded from
Excess Spread [and Excess Finance Charge Collections allocated to Series
[199__-__]], amounts [on deposit in the Cash Collateral Account and available
to make payments with respect to the Class A Certificates] [available under
the Credit Enhancement], [Reallocated Principal Collections] [and reductions
in the Enhancement Invested Amount, if any]. To the extent the Class B
Invested Amount is reduced, the percentage of collections of Finance Charge
Receivables allocable to the Class B Certificateholders' Interest in future
Monthly Periods will be reduced. Moreover, to the extent the amount of such
reduction in the Class B Invested Amount is not reimbursed, the amount of
principal distributable to the Class B Certificateholders will be reduced.
See "Series Provisions -- Allocation Percentages" and "-- Subordination of
the Class B Certificates" herein. If the Class B Invested Amount is reduced
to zero, the Class A Certificateholders will bear directly the credit and
other risks associated with their undivided interest in the Trust.
MATURITY CONSIDERATIONS
The Pooling Agreement and the Series [199__-__] Supplement provide that
the Class A Certificateholders will not receive payments of principal until
[the first Distribution Date with respect to the [Controlled Amortization
Period], which is the __________, 199__ Distribution Date,] [__________,
199__ (the "[Class A] Expected Final Payment Date")], or earlier in the event
of a Pay Out Event which results in the commencement of the Early
Amortization Period. Class A Certificateholders will receive payment of
principal on each Distribution Date following the Monthly Period in which a
Pay Out Event occurs (each such Distribution Date, a "Special Payment Date")
until the Class A Invested Amount has been paid in full or the Series
[199__-__] Termination Date has occurred. [The Class B Certificateholders
will not begin to receive payments of principal until the final principal
payment on the Class A Certificates has been made.]
[On each Distribution Date during the Controlled Amortization Period,
the Class A Certificateholders will be entitled to receive monthly payments
of principal [until the Class A Certificates have been paid in full, and then
the Class B Certificateholders will be entitled to receive monthly payments
of principal] equal to the least of (a) Available Principal Collections (see
"Series Provisions -- Principal Repayments") for the related Monthly Period
on deposit in the Collection Account, (b) the [applicable] Controlled
Distribution Amount, which is equal to the sum of the [applicable] Controlled
Amortization
S-16
<PAGE>
Amount and any existing [applicable] Deficit Controlled Amortization Amount
(both as defined under "Series Provisions -- Application of Collections --
Payments of Principal") and (c) the Class A Invested Amount.(5) [After the
Class A Invested Amount has been paid in full, the Principal Allocation
Percentage of collections of Principal Receivables received during any
Monthly Period and the other amounts described above will be distributed to
the Class B Certificateholders on each Distribution Date until the earlier of
the date the Class B Invested Amount has been paid in full and the Series
[199__-__] Termination Date.]
[On each Distribution Date during the Class A Accumulation Period,
amounts equal to the least of (a) Available Principal Collections (see
"Series Provisions -- Principal Repayments") for the related Monthly Period
on deposit in the Collection Account, (b) the [applicable] Controlled Deposit
Amount, which is equal to the sum of the [applicable] Controlled Accumulation
Amount for such Monthly Period and any [applicable] Deficit Controlled
Accumulation Amount (both as defined under "Series Provisions -- Application
of Collections -- Payments of Principal") and (c) the Class A Adjusted
Invested Amount will be deposited in the Principal Funding Account [held by
the Trustee] (the "Principal Funding Account") until the Principal Funding
Account Balance is equal to the Class A Invested Amount. [After the Class A
Invested Amount has been paid in full, on each Distribution Date during the
Class B Accumulation Period, amounts equal to the least of (a) Available
Principal Collections for the related Monthly Period on deposit in the
Collection Account, (b) the [applicable] Controlled Deposit Amount, which is
equal to the sum of the [applicable] Controlled Accumulation Amount for such
Monthly Period and any [applicable] Deficit Controlled Accumulation Amount
and (c) the Class B Adjusted Invested Amount will be deposited in the
Principal Funding Account until the Principal Funding Account Balance is
equal to the Class B Invested Amount or, if earlier, the Series [199__-__]
Termination Date. See "Series Considerations -- Principal Payments" for a
discussion of the circumstances under which the commencement of the
Accumulation Period may be delayed.]
[The Seller may, at or after the time at which the [Controlled
Amortization] [Accumulation] Period commences for Series [199__-__], cause
the Trust to issue another Series (or some portion thereof, to the extent
that the full principal amount of such other Series is not otherwise
outstanding at such time) as a Paired Series with respect to Series
[199__-__]. Although no assurances can be given as to whether such other
Series will be issued and, if issued, the terms thereof, the outstanding
principal amount of such Series may vary from time to time whether or not a
Pay Out Event occurs with respect to the Series [199__-__] Certificates, and
the interest rate with respect to certificates of such other Series may be
established on its date of issuance and may be reset periodically at
intervals of from one day to [____] days. Further, since the terms of the
Series [199__-__] Certificates will vary from the terms of such other Series,
the Pay Out Events with respect to such other Series will vary from the Pay
Out Events with respect to Series [199__-__] and may include Pay Out Events
which are unrelated to the status of the Seller or the Servicer or the
Receivables, such as Pay Out Events related to the continued availability and
rating of certain providers of Series Enhancement to such other Series. If a
Pay Out Event does occur with respect to any such Paired Series prior to the
payment in full of the Series [199__-__] Certificates, the final payment of
principal to the Series [199__-__] Certificateholders may be delayed.]
[Should a Pay Out Event occur with respect to the Series [199__-__]
Certificates and the Early Amortization Period commence or should the [Series
[199__-__]] [Class A] Invested Amount not be paid in full on [the __________
Distribution Date] [the [Class A] Expected Final Payment Date], any amount on
deposit (a) in the Principal Funding Account will be paid to the Series
[199__-__] Certificateholders on the first Special Payment Date and] the
Series [199__-__] Certificateholders will be entitled to receive Available
Principal Collections on each Distribution Date with respect to such Early
Amortization Period or following the [_________ Distribution Date] [Expected
Final Payment Date], as the case may be, as described herein until the Series
[199__-__] Invested Amount is paid in full or until the Series [199__-__]
Termination Date
- ---------------------
(5) There may be different Controlled Amortization Amounts for Class A and
Class B Certificates.
S-17
<PAGE>
occurs and] [(b) in the Special Funding Account will be released and treated
as Shared Principal Collections to the extent needed to cover principal
payments due to or for the benefit of any Series entitled to the benefits of
Shared Principal Collections] . See "Description of the Certificates -- Pay
Out Events" in the Prospectus and "Series Provisions -- Pay Out Events"
herein. [In addition, on the first Special Payment Date following the
occurrence of an Economic Pay Out Event, after giving effect to any payment
of principal on such date as described under "Series Provisions --
Application of Collections -- Payments of Principal," (a) an amount equal to
the lesser of (i) the excess, if any, of the Available [Shared] [Cash]
Collateral Amount (after giving effect to any withdrawal from the Cash
Collateral Account on such date of amounts to fund the Required Amount and
similar amounts for the Class B Certificates) and (ii) the unpaid principal
amount of the Class A Certificates (less the Principal Funding Account
Balance allocable to the Class A Certificates), will be withdrawn from the
Cash Collateral Account and distributed to the Class A Certificateholders as
a payment of principal of the Class A Certificates, and (b) an amount equal
to the lesser of (i) the [remainder of the] Available [Cash] Collateral
Amount and (ii) the unpaid principal amount of the Class B Certificates (less
the Principal Funding Account Balance, if any, allocable to the Class B
Certificates), will be withdrawn from the Cash Collateral Account and
distributed to the Class B Certificateholders as a payment of principal of
the Class B Certificates. See "Series Provisions -- Principal Payments" and
"-- Cash Collateral Account."
The ability of Series [199__-__] Certificateholders to receive payments
of principal [during the Controlled Amortization Period] [on the [applicable]
Expected Final Payment Date]depends on the payment rates on the Receivables,
the amount of outstanding Receivables, delinquencies, charge-offs and new
borrowings on the Accounts and the potential issuance by the Trust of
additional Series. Monthly payment rates on the Receivables may vary
because, among other things, cardholders may fail to make a required minimum
payment, may only make payments as low as the minimum required amount or may
make payments as high as the entire outstanding balance. Monthly payment
rates may also vary due to seasonal purchasing and payment habits of
cardholders and to changes in any terms of rebate programs in which
cardholders participate. See the "Cardholder Monthly Payment Rates for the
Bank Portfolio" table under "The Bank Portfolio" herein. The Bank cannot
predict, and no assurance can be given, as to the cardholder monthly payment
rates that will actually occur in any future period, as to the actual rate of
payment of principal of the Series [199__-__] Certificates or whether the
terms of any subsequently issued Series might have an impact on the amount or
timing of any such payment of principal. See "Special Considerations --
Series Considerations -- Payments and Maturity" and "Description of the
Certificates -- Shared Principal Collections" in the Prospectus.
In addition, the amount of outstanding Receivables and the
delinquencies, charge-offs and new borrowings on the Accounts may vary from
month to month due to seasonal variations, the availability of other sources
of credit, legal factors, general economic conditions and spending and
borrowing habits of individual cardholders. There can be no assurance that
collections of Principal Receivables with respect to the Trust Portfolio, and
thus the rate at which Series [199__-__] Certificateholders could expect to
receive payments of principal on their Series [199__-__] Certificates during
the [Controlled Amortization Period or the] Early Amortization Period [or the
rate at which the Principal Funding Account could be funded during the
Accumulation Period], will be similar to the historical experience set forth
in the "Cardholder Monthly Payment Rates for the Bank Portfolio" table under
the heading "The Bank Portfolio." In addition, the Trust, as a master trust,
may issue additional Series from time to time, and there can be no assurance
that the terms of any such Series might not have an impact on the timing or
amount of payments received by Series [199__-__] Certificateholders.
Further, if a Pay Out Event occurs, the average life and maturity of the
Class A Certificates and the Class B Certificates could be significantly
reduced.
Due to the reasons set forth above, there can be no assurance that
[principal payments][deposits in the Principal Funding Account] will be made
in accordance with the applicable Controlled [Amortization] [Accumulation]
Amounts or that the actual number of months elapsed from the date of issuance
of the Class A and Class B Certificates to their respective final
Distribution Dates will equal the expected number of months. See "Special
Considerations --Series Considerations -- Payments and Maturity" in the
Prospectus.
S-18
<PAGE>
THE BANK PORTFOLIO
GENERAL
Set forth below is certain information with respect to the Bank
Portfolio. See "The Bank's Credit Card Activities" in the Prospectus. There
can be no assurance that the yield, loss and delinquency experience with
respect to the Receivables will be comparable to that set forth below with
respect to the entire Bank Portfolio.
DELINQUENCY AND LOSS EXPERIENCE
The following tables set forth the delinquency and loss experience for
the Bank Portfolio at or for each of the periods shown. [Accounts selected
for credit card trusts originated by the Bank in 1988, 1992 and March 1993
are considered to be part of the Bank Portfolio for purposes of this
Prospectus.] The Accounts constituting the Trust Portfolio have been
selected from accounts in the Bank Portfolio [(but excluding accounts
selected for presently existing credit card trusts that were originated by
the Bank)] based on certain eligibility criteria specified in the Pooling
Agreement. See "The Accounts" in the Prospectus.
[Since 1989, the Bank has sold credit card accounts with balances of
over $1.1 billion to other financial institutions, and the historical
information regarding the Bank Portfolio reflects credit card account sales
of approximately 124,000 MasterCard and VISA accounts and the Bank's interest
in the related receivables of approximately $289,000,000 during the year
ended December 31, 1991, credit card account sales of approximately 243,000
MasterCard and VISA accounts and the Bank's interest in the related
receivables of approximately $646,000,000 during the year ended December 31,
1990 and credit card account sales of approximately 83,000 MasterCard and
VISA accounts and the Bank's interest in the related receivables of
approximately $200,000,000 during the year ended December 31, 1989
(collectively, the "Account Sales"). In each of the Account Sales, servicing
was not retained by the Bank. The accounts sold were required to meet credit
quality and geographic criteria established by the purchasers. The sale of
such accounts has affected comparability among periods shown for the
historical experience set forth below and comparability of the present Bank
Portfolio with the historical experience.] There can be no assurance that the
delinquency and loss experience for the Receivables in the Trust Portfolio
will be similar to the historical experience set forth below.
S-19
<PAGE>
Delinquency Experience
Bank Portfolio (1)
(Dollars in Thousands)
<TABLE>
<CAPTION>
[Year ended December 31]
----------------------------------------------------------------------------
[1993] [1992] [1991]
------------------------ ------------------------ ------------------------
Percentage Percentage Percentage
of Total of Total of Total
Receivables Receivables Receivables Receivables Receivables Receivables
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Receivables
Outstanding . . . [$_______ $ $
Receivables
contractually
delinquent:
30-59 days . . . $________ ____% $ % $ %
60-89 . . . . . . ________ ____%
90 days or more . ________ ____% _________ ____ ________ ____
Total . . . . . . $________ ____% $ % $ %]
</TABLE>
- ---------------
(1) The Bank's credit card program commenced in June 1985.
(2) Reflects the Account Sales that occurred in 1991, but includes the
receivables transferred in connection with credit card trusts previously
originated by the Bank that were in existence on the specified dates.
Receivables outstanding is the total balance of the accounts and
consists of all amounts due from cardholders as posted to the accounts.
S-20
<PAGE>
Loss Experience
Bank Portfolio (1)
(Dollars in Thousands)
<TABLE>
<CAPTION>
[Year ended December 31]
------------------------------------------
[1993] [1992] [1991]
------ ------ ------
<S> <C> <C> <C>
Average receivables
outstanding[(2)] . . . . . . . [$ $ $
Total gross credit charge-
offs(3) . . . . . . . . . . . . $ $ $
Total gross credit charge-
offs as a percentage of
average receivables
outstanding(4) . . . . . . . . % %
Recoveries[(5)] . . . . . . . . . $ $ $
Net credit losses[(5)] . . . . . $ $ $
Net credit losses as a
percentage of average
receivables outstanding(4) . . % %]
</TABLE>
_______________
(1) The Bank's credit card program commenced in June 1985.
[(2) Reflects the Account Sales that occurred in 1991, but includes the
receivables transferred in connection with the credit card trusts
previously originated by the Bank that were in existence during
the specified periods. Average receivables outstanding is the
weighted average of average monthly receivables outstanding during
the period indicated.]
(3) Does not include charge-offs for fraud or cardholder disputes.
(4) Annualized.
(5) [Recoveries are not included in the Trust.]
REVENUE EXPERIENCE
The following table sets forth the revenues from finance charges and fees
billed with respect to the Bank Portfolio for each year during the three-year
period ended [December 31, 1993].
S-21
<PAGE>
REVENUE EXPERIENCE FOR THE BANK PORTFOLIO
(DOLLARS IN THOUSANDS)
Year Ended December 31,
---------------------------
[1993 1992 1991]
--------- -------- ---------
Average Receivables Outstanding (1) . . [$ $ $
Finance Charges and Fees (2) . . . . . $ $ $
Finance Charges and Fees (Yield) . . . % % %]
[Interchange (Yield) . . . . . . . . . % % %]
(1) [Average Receivables Outstanding is the monthly average of receivables
outstanding during the periods indicated.]
(2) [Finance Charges And Fees does not include interest on subsequent
collections on accounts previously charged-off or revenue attributable to
Interchange[, although Interchange in respect of the accounts will be
conveyed to the Trust. See "The Bank's Credit Card Activities-Interchange"
in the Prospectus]. Finance Charges and Fees includes monthly periodic
finance charges, the portion of the annual membership fees amortized on a
monthly basis, cash advance fees, late charges, overlimit charges and other
miscellaneous fees.]
[The revenue for the accounts in the Bank Portfolio shown in the above
table is comprised of three primary components: monthly periodic rate finance
charges, the amortized portion of annual membership fees and other service
charges, such as cash advance fees, late charges, overlimit charges and other
miscellaneous fees. If payment rates decline, the balances subject to monthly
periodic finance charges tend to grow, assuming no change in the level of
purchasing activity. Conversely, if payment rates increase, the balances
subject to monthly periodic finance charges tend to fall, assuming no change in
the level of purchasing activity. Accordingly, under these circumstances, the
yield related to periodic finance charges normally increases. The yield related
to service charges varies with the type and volume of activity in and the amount
of each account. As account balances increase, annual membership fees, which
remain constant, represent a smaller percentage of the aggregate account
balances.]
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 that would be [deemed] payments of Principal Receivables and Finance
Charge Receivables with respect to the Accounts.
CARDHOLDER MONTHLY PAYMENT RATES
FOR THE BANK PORTFOLIO
Year Ended December 31,
[1993] [1992] [1991]
Lowest . . . . . . . . . . . . . . . [ % % %
Highest . . . . . . . . . . . . . . . % % %
Monthly Average . . . . . . . . . . . % % %]
S-22
<PAGE>
THE RECEIVABLES
The Receivables in the Trust Portfolio, as of [__________, ____], 1994 [the
Trust Cut-Off Date], included $__________ of Principal Receivables and
$__________ of Finance Charge Receivables. The Accounts had an average
Principal Receivable balance of $__________ and an average credit limit of
$__________. The percentage of the aggregate total Receivables balance to the
aggregate total credit limit was ____%. The average age of the Accounts was
approximately ____ months. As of the Trust Cut-Off Date, all of the Accounts in
the Trust Portfolio were VISA or MasterCard credit card accounts, of which ____%
were standard accounts and ____% were premium accounts, and the aggregate
Principal Receivable balances of standard accounts and premium accounts, as a
percentage of the total aggregate Principal Receivables, were ____% and ____%,
respectively.
The following tables summarize the Trust Portfolio by various criteria as
of [the Trust Cut-Off Date]. References to "Receivables Outstanding" in the
following tables include both Finance Charge Receivables and Principal
Receivables. 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
Percentage Percentage
of Total of Total
Number of Number of Receivables Receivables
Account Balance Range Accounts Accounts Outstanding Outstanding
--------------------- -------- -------- ----------- -----------
Credit Balance . . . . . [ % $(__________) (____%)
No Balance . . . . . . .
$0.01 - $500.00 . . . . .
$500.01 - $1,000.00 . . .
$1,000.01 - $3,000.00 . .
$3,000.01 - $5,000.00 . .
$5,000.01 - $10,000.00 .
$10,000.01 or more . . . ]
-------- ------ ------- -------
TOTAL [ ] 100.00% $ [ ] 100.00%
S-23
<PAGE>
COMPOSITION BY CREDIT LIMIT
TRUST PORTFOLIO
Percentage Percentages
of Total of Total
Number of Number of Receivables Receivables
Credit Limit Range Accounts Accounts Outstanding Outstanding
-------- -------- ----------- -----------
$0.01 - $500.00 . . . .[ % $ %
$500.01 - $1,000.00 . .
$1,000.01 - $3,000.00 .
$3,000.01 - $5,000.00 .
$5,000.01 - $10,000.00 .
$10,000.01 - $15,000.00. ]
---------- ------ ------------ ------
TOTAL . . . . . . [ ] 100.00% $[ ] 100.00%
---------- ------ ------------ ------
---------- ------ ------------ ------
COMPOSITION OF ACCOUNTS BY PERIOD OF DELINQUENCY
TRUST PORTFOLIO
Percentage Percentages
of Total of Total
Number of Number of Receivables Receivables
Period of Delinquency Accounts Accounts Outstanding Outstanding
-------- -------- ----------- -----------
Not Delinquent [ % $ %
Up to 29 days
30 days or more
---------- ------ ---------- ------]
TOTAL [ ] 100.00% $[ ] 100.00%
S-24
<PAGE>
<TABLE>
<CAPTION>
COMPOSITION OF ACCOUNTS BY CARDHOLDER BILLING ADDRESS
GEOGRAPHIC DISTRIBUTION OF ACCOUNTS
Percentage Percentage
of Total of Total
State or Number of Number of Receivables Receivables
Territory Accounts Accounts Outstanding Outstanding
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Alabama [
Alaska
Arizona
Arkansas
California
Colorado
Connecticut
Delaware
District of Columbia
Florida
Georgia
Guam
Hawaii
Idaho
Illinois
Indiana
Iowa
Kansas
Kentucky
Louisiana
Maine
Maryland
Massachusetts
Michigan
Minnesota
Mississippi
Missouri
Montana
Nebraska
Nevada
New Hampshire
New Jersey
New Mexico
New York
North Carolina
North Dakota
Ohio
Oklahoma
Oregon
Pennsylvania
Puerto Rico
Rhode Island
South Carolina
South Dakota
Tennessee
Texas
Utah
Vermont
Virgin Islands
Virginia
Washington
West Virginia
Wisconsin
Wyoming
------------- --------- ------------- ----------]
TOTAL [ ] 100.00% [ ] 100.00%
------------- --------- ------------- ---------
------------- --------- ------------- ---------
S-25
</TABLE>
<PAGE>
USE OF PROCEEDS
The net proceeds from the sale of the Series [199__-__] Certificates
will be paid to the Bank. The Bank will use such proceeds for
[general corporate purposes].
THE BANK
At [_______], 199[3], the Bank had consolidated assets of approximately
[$___] billion, deposits of approximately [$___] billion, and stockholders'
equity of approximately [$___] million.
SERIES PROVISIONS
The Series [199__-__] Certificates will be issued pursuant to the
Pooling Agreement and a Supplement specifying the Principal Terms of the
Series [199__-__] Certificates (the "Series [199__-__] Supplement"), the
forms of which have been filed as exhibits to the Registration Statement of
which the Prospectus and this Prospectus Supplement are a part. The
following summary describes certain terms applicable to the Series [199__-__]
Certificates. Reference should be made to the Prospectus for additional
information concerning the Series [199__-__] Certificates and the Pooling
Agreement.
INTEREST PAYMENTS
Interest on the Class A Certificates and the Class B Certificates will
accrue from the Closing Date on the Class A Invested Amount and Class B
Invested Amount at the Class A Certificate Rate and Class B Certificate Rate,
respectively. Interest will be distributed on __________, 199__, and on each
Interest Payment Date thereafter to Series [199__-__] Certificateholders in
whose names the Series [199__-__] Certificates were registered at the close
of business on the last day of the calendar month preceding the date of such
payment (a "Record Date"). Interest for any Interest Payment Date will
accrue from and including the preceding Interest Payment Date (or in the case
of the first Interest Payment Date, from and including the Closing Date) but
excluding the next Interest Payment Date (an "Interest Period").
Interest payments on the Class A Certificates for each Interest Payment
Date will be calculated on the Class A Invested Amount as of the preceding
Record Date (or in the case of the initial Interest Payment Date, on the
initial Class A Invested Amount) based upon the Class A Certificate Rate.
Interest will be calculated on the basis of [____]. Interest payments in
respect of the Class A Certificates on any Interest Payment Date will be
funded from collections of Finance Charge Receivables allocated to the Class
A Certificateholders' Interest during the [____] preceding Monthly Period[s]
and other Class A Available Funds allocated to the Class A
Certificateholders' Interest for such Monthly Period[s]. To the extent [the
sum of (i)] the product of the Class A Floating Percentage of the Floating
Allocation Percentage of collections of Finance Charge Receivables during the
preceding [____] Monthly Period[s] [and (ii) other Class A Available Funds
allocated to the Class A Certificateholders' Interest for such Monthly
Period[s]] is insufficient to pay such interest, Excess Spread [and Excess
Finance Charge Collections allocated to Series [199__-__]] [amounts on
deposit in the Cash Collateral Account up to the Available [Shared] [Cash]
Collateral Amount] [Credit Enhancement] [and] Reallocated Principal
Collections will be used to make such payments. "Class A Available Funds"
means, with respect to any Monthly Period, an amount equal to the sum of
[(i)] the Class A Floating Percentage of collections of Finance Charge
Receivables allocated to the Series [199__-__] Certificates with respect to
such Monthly Period including any investment earnings that are to be treated
as collections of Finance Charge Receivables in accordance with the Pooling
Agreement; [(ii) the [Class A Floating Percentage of the] amount of any
earnings transferred from the Pre-Funding Account to the Collection Account
on such Distribution Date] [and (iii) if such Monthly Period relates to a
Distribution Date with respect to the Accumulation Period, Principal Funding
Investment Proceeds [and Interest Funding
S-26
<PAGE>
Investment Proceeds], if any, with respect to the related Distribution Date
and (iv) amounts, if any, to be withdrawn from the Reserve Account that must
be included in Class A Available Funds pursuant to the Series [199__-__]
Supplement with respect to such Distribution Date].
Interest payments on the Class B Certificates for each Interest Payment
Date will be calculated on the Class B Invested Amount as of the preceding
Record Date (or in the case of the initial Interest Period, on the initial
Class B Invested Amount) based upon the Class B Certificate Rate. Interest
will be calculated on the basis of [____]. Interest payments in respect of
the Class B Certificates on any Interest Payment Date will be funded from
collections of Finance Charge Receivables allocated to the Class B
Certificateholders' Interest during the [____] preceding Monthly Period[s]
[and other Class B Available Funds allocated to the Class B
Certificateholders' Interest for such Monthly Period[s]], and, if necessary,
from Excess Spread [and] [Excess Finance Charge Collections allocated to
Series [199__-__] [Credit Enhancement][amounts in the Cash Collateral Account
up to the Available [Shared] [Cash] Collateral Amount]. ["Class B Available
Funds" means, with respect to any Monthly Period, an amount equal to the sum
of (i) the Class B Floating Percentage of collections of Finance Charge
Receivables allocated to the Series [199__-__] Certificates with respect to
such Monthly Period [(ii) if such Monthly Period relates to a Distribution
Date that occurs on or after the Class B Principal Commencement Date,
Principal Funding Investment Proceeds, if any, with respect to the related
Distribution Date] [and (iii) amounts, if any, withdrawn from the Reserve
Account that must be included in Class B Available Funds pursuant to the
Series [199__-__] Supplement with respect to such Distribution Date].]
PRINCIPAL PAYMENTS
During the Revolving Period (which begins on the Closing Date and ends
on the day before the commencement of the [Controlled Amortization Period]
[Accumulation Period] or, if earlier, the Early Amortization Period), no
principal payments will be made to Series [199__-__] Certificateholders.
[During the Controlled Amortization Period, which is scheduled to begin on
__________, 199__, and during the Early Amortization Period, which will begin
upon the occurrence of a Pay Out Event, and until the Series [199__-__]
Termination Date occurs, principal will be paid first to the Class A
Certificateholders [until the Class A Invested Amount has been paid in full],
and [then] to the Class B Certificateholders until the Class B Invested
Amount has been paid in full.] [During the Accumulation Period (on or prior
to the respective Expected Final Payment Dates), principal will be deposited
in the Principal Funding Account as described below and on the Class A
Expected Final Payment Date will be distributed to Class A Certificateholders
up to the Class A [Adjusted] Invested Amount and then to Class B
Certificateholders on the Class B Expected Final Payment Date up to the Class
B [Adjusted] Invested Amount. During the Early Amortization Period, which
will begin upon the occurrence of a Pay Out Event, and until the Series
[99__-__] Termination Date occurs, principal will be paid first to the Class
A Certificateholders until the Class A [Adjusted] Invested Amount has been
paid in full, and then to the Class B Certificateholders until the Class B
[Adjusted] Invested Amount has been paid in full.
[At the end of the Funding Period, which is the __________ Distribution
Date, the Class A Certificateholders and the Class B Certificateholders will
be paid all funds [(except investment earnings thereon)] remaining in the
Pre-Funding Account (pro rata, on the basis of the ratio of the Class A
Invested Amount and the Class B Invested Amount to the Series [199__-__]
Invested Amount.]
[On each Interest Payment Date with respect to the Controlled
Amortization Period unless [the Class A Invested Amount has been paid in full
or] an Early Amortization Period commences, the Class A Certificateholders
will be entitled to receive [for each related Monthly Period since the
previous Interest Payment Date] the lesser of (a) collections of Principal
Receivables received during [each] such Monthly Period allocated to the
Series [199__-__] Certificates (other than Reallocated Principal Collections
applied to fund the Required Amount) [Shared Principal Collections allocated
to Series [199__-__] [and] [other amounts] (collectively, "Available
Principal Collections"), and (b) the Class A Controlled Distribution
S-27
<PAGE>
Amount.] [After payment in full of the Class A Invested Amount,] the Class B
Certificateholders will be entitled to receive on each Interest Payment Date
[during the Class B Controlled Amortization Period] the least of (i) the
amount of Available Principal Collections, [(ii) the Class B Controlled
Distribution Amount], and (iii) the Class B Invested Amount, until the
earlier of the date the Class B Invested Amount is paid in full and the
Series [199__-__] Termination Date.]
[On each Distribution Date with respect to the Class A Accumulation
Period, the Trustee will deposit in the Principal Funding Account an amount
equal to the least of (a) Available Principal Collections on deposit in the
Collection Account with respect to such Distribution Date, (b) the
[applicable] Controlled Deposit Amount for such Distribution Date and (c) the
Class A Adjusted Invested Amount, until the Principal Funding Account Balance
equals the Class A Invested Amount. Amounts on deposit in the Principal
Funding Account will be paid to the Class A Certificateholders on the Class A
Expected Final Payment Date. [After the Class A Invested Amount has been
paid in full, on each Distribution Date during the Class B Accumulation
Period, amounts equal to the least of (a) Available Principal Collections on
deposit in the Collection Account with respect to such Distribution Date
(minus the portion of Available Principal Collections applied to Class A
Monthly Principal on such Distribution Date), (b) the [applicable] Controlled
Deposit Amount for such Distribution Date and (c) the Class B Adjusted
Invested Amount will be deposited in the Principal Funding Account until the
earlier of the date the Class B Invested Amount is paid in full and the
Series [199__-__] Termination Date.] Amounts on deposit in the Principal
Funding Account in respect of the Class B Certificates will be paid to the
Class B Certificateholders on the Class B Expected Final Payment Date. If a
Pay Out Event occurs with respect to the Series [199__-__] Certificates
during the Accumulation Period, the Early Amortization Period will commence
and any amount on deposit in the Principal Funding Account will be paid first
to the Class A Certificateholders on the first Special Payment Date and then,
to the extent the Class A Invested Amount is paid in full, to the Class B
Certificateholders. [If on an Expected Final Payment Date, moneys on deposit
in the Principal Funding Account are insufficient to pay the scheduled
principal amount, a Pay Out Event will occur and the Early Amortization
Period will commence. After payment in full of the Class A Invested Amount,
the Class B Certificateholders will be entitled to receive an amount equal to
the Class B Invested Amount.] "Available Principal Collections" means, with
respect to any Monthly Period, an amount equal to the sum of (a) an amount
equal to the Principal Allocation Percentage of all collections of Principal
Receivables received during such Monthly Period (minus the amount of
Reallocated Principal Collections with respect to such Monthly Period used to
fund the Required Amount), [(b) any Shared Principal Collections with respect
to other Series that are allocated to Series 199__-__]] and (c) any other
amounts which pursuant to the Series 199__-__] Supplement are to be treated
as Available Principal Collections with respect to the related Distribution
Date [other amounts].]
[The Class A Accumulation Period is currently expected to commence at
the close of business on the last business day of __________, 199__; however,
the date on which the Class A Accumulation Period actually commences may be
delayed if the Class A Accumulation Period Length (determined as described
below) is less than the number of months remaining between each Period Length
Determination Date (as hereinafter defined) and the [Class A] Expected Final
Payment Date. Beginning on the Determination Date immediately preceding the
__________, 199__ Distribution Date and on each Determination Date thereafter
until the Class A Accumulation Date actually commences (each, a "Period
Length Determination Date"), the Seller will determine the "Class A
Accumulation Period Length" [based on, among other things, the then current
principal payment rate on the Accounts and the principal amount of Series
that are entitled to share principal with Series [199__-__]]; PROVIDED,
HOWEVER, that the Class A Accumulation Period Length will not be less than
[____] months]. If the Class A Accumulation Period Length is less than the
number of months remaining between the related Period Length Determination
Date and the [Class A] Expected Final Payment Date, the Class A Accumulation
Period will commence later than the last business day of__________, 199__ and
the number of months in the Class A Accumulation Period will be equal to the
Class A Accumulation Period Length. [Notwithstanding the foregoing, unless a
Pay Out Event occurs with respect to the Series [199__-__] Certificates, the
Class A Accumulation Period will commence on the last business day of
S-28
<PAGE>
__________, 199__ if, prior to such date, a Pay Out Event shall have occurred
with respect to any other Series (other than a Series that does not share
principal with Series [199__-__] or is designated by the Seller as an
Excluded Series).] The effect of the foregoing calculation is to reduce the
Class A Accumulation Period Length based on the invested amounts of other
Series that are scheduled to be in their revolving periods and thus scheduled
to create Shared Principal Collections during the Class A Accumulation
Period. In addition, if the Class A Accumulation Period Length shall have
been determined to be less than [____] months and, after the date on which
such determination is made, a Pay Out Event shall occur with respect to any
outstanding Series, the Class A Accumulation Period will commence on the
earlier of (i) the date that such Pay Out Event shall have occurred with
respect to such Series and (ii) the date on which the Class A Accumulation
Period is then scheduled to commence.](6)
On each Distribution Date with respect to the Early Amortization Period
until the Class A Invested Amount has been paid in full or the Series
[199__-__] Termination Date occurs, the Class A Certificateholders will be
entitled to receive Available Principal Collections in an amount up to the
Class A Invested Amount. [After payment in full of the Class A Invested
Amount, the Class B Certificateholders will be entitled to receive on each
Distribution Date Available Principal Collections until the earlier of the
date the Class B Invested Amount is paid in full and the Series [__-__]
Termination Date.] [In addition, on the first Special Payment Date following
the occurrence of an Economic Pay Out Event, after giving effect to any
payment of principal on such date as described under "Series Provisions --
Application of Collections -- Payments of Principal," principal payments will
be made to the Class A Certificateholders and the Class B Certificateholders
from amounts on deposit in the Cash Collateral Account as described under "--
Cash Collateral Account" below.]
[On each Distribution Date commencing with the Class B Principal
Commencement Date, [unless an Economic Pay Out Event has occurred,] a
withdrawal will be made from the Cash Collateral Account to pay principal
with respect to the Class B Certificates to the extent that the Class B
Initial Invested Amount minus the sum of the aggregate amount of principal
payments previously distributed to Class B Certificateholders [or deposited
in the Principal Funding Account in respect of the Class B Certificates]
exceeds the Class B Invested Amount on the last day of the related Monthly
Period (determined after giving effect to any change made to the Class B
Invested Amount as a result of unreimbursed charge-offs on the following
Distribution Date).]
SUBORDINATION OF THE CLASS B CERTIFICATES
The Class B Certificateholders' Interest will be subordinated [(other
than with respect to the [Initial Class B Collateral Amount]] to the extent
necessary to fund payments with respect to the Class A Certificates. To the
extent the Class B Invested Amount is reduced, the percentage of collections
of Finance Charge Receivables allocated to the Class B Certificateholders in
subsequent Monthly Periods will be reduced. Moreover, to the extent the
amount of such reduction in the Class B Invested Amount is not reimbursed,
the amount of principal distributable to the Class B Certificateholders will
be reduced. See "-- Allocation Percentages," "-- Reallocation of Cash Flows;
Class B Invested Amount," "-- Excess Spread; Excess Finance Charge
Collections" herein.
[FUNDING PERIOD
During the period from and including the Closing Date to but excluding
the earliest of (i) the day on which the Series [199__-__] Invested Amount
equals the [Full Invested Amount], (ii) the day on which a Pay Out Event
occurs and (iii) the __________, 199__ Distribution Date (the "Funding
Period"), the Pre-Funding Amount will be held in a trust account established
with the Trustee for the benefit of the Series
- ----------
(6) Different Series may have different methods of determining the
Accumulation Period Length.
S-29
<PAGE>
[199__-__] Certificateholders (the "Pre-Funding Account"). The Pre-Funding
Amount will equal $[__________].
Funds on deposit in the Pre-Funding Account will be invested by the
Trustee [in certain Eligible Investments] [pursuant to a guaranteed rate
agreement] [guaranteed investment contract]. Investment earnings on the
Pre-Funding Amount (net of investment losses and investment expenses) will be
used to pay interest on the [Class A] [and] [Class B] Certificates during the
Funding Period.
During the Funding Period, funds on deposit in the Pre-Funding Account
will be withdrawn and paid to the Seller to the extent of any increases in
the Invested Amount. The Seller expects that the Invested Amount will equal
the [Full Invested Amount] by the __________, 199__ Monthly Period. In the
event that the Series [199__-__] Invested Amount does not for any reason
equal the [Full Invested Amount] by the end of the Funding Period, any amount
remaining in the Pre-Funding Account will be payable to the [Class A] [and]
[Class B] Certificateholders [pro rata, on the basis of the ratio of the
Class A Invested Amount and the Class B Invested Amount, respectively, to the
Invested Amount as of the last day of the related Monthly Period] on the
Distribution Date on which the Funding Period ends.]
ALLOCATION PERCENTAGES
Pursuant to the Pooling Agreement, the Servicer will allocate among the
Series [199__-__] Certificateholders' Interest, the certificateholders'
interest for all other Series of certificates issued and outstanding and the
Seller Interest, all collections of Finance Charge Receivables and Principal
Receivables and the Defaulted Amount with respect to such Monthly Period.
Collections of Finance Charge Receivables and the Defaulted Amount with
respect to any Monthly Period will be allocated to the Series [199__-__]
Certificateholders' Interest based on the Floating Allocation Percentage.
The "Floating Allocation Percentage" means, with respect to any Monthly
Period, the percentage equivalent (which percentage shall never exceed 100%)
of a fraction, the numerator of which is the sum of the [Adjusted] Invested
Amount [and the Enhancement Invested Amount, if any,] as of the last day of
the preceding Monthly Period (or with respect to the first Monthly Period,
the Initial Invested Amount) and the denominator of which is [the sum of] the
total amount of the Principal Receivables in the Trust as of such day (or
with respect to the first Monthly Period, the total amount of Principal
Receivables in the Trust on the Series Cut-Off Date) [and the principal
amount on deposit in the Special Funding Account as of such day].
[Appropriate adjustments to the calculation methodology will be made to
accommodate changes in the Invested Amount during the Funding Period.] Such
amounts so allocated to the Series [199__-__] Certificateholders will be
further allocated between the Class A Certificateholders and Class B
Certificateholders in accordance with the Class A Floating Percentage and the
Class B Floating Percentage, respectively. The "Class A Floating Percentage"
means, with respect to any Monthly Period, the percentage equivalent (which
percentage shall never exceed 100%) of a fraction, the numerator of which is
equal to the Class A [Adjusted] Invested Amount as of the close of business
on the last day of the preceding Monthly Period (or with respect to the first
Monthly Period, as of the Closing Date) and the denominator of which is equal
to the [Adjusted] Invested Amount as of the close of business on such day (or
with respect to the first Monthly Period, the Initial Invested Amount). The
"Class B Floating Percentage" means, with respect to any Monthly Period, the
percentage equivalent (which percentage shall never exceed 100%) of a
fraction, the numerator of which is equal to the Class B [Adjusted] Invested
Amount as of the close of business on the last day of the preceding Monthly
Period (or with respect to the first Monthly Period, as of the Closing Date)
and the denominator of which is equal to the [Adjusted] Invested Amount at
the close of business on such day (or with respect to the first Monthly
Period, the initial Invested Amount).
Collections of Principal Receivables will be allocated to the Series
[199__-__] Certificateholders' Interest based on the Principal Allocation
Percentage. The "Principal Allocation Percentage" means, with respect to any
Monthly Period, the percentage equivalent (which percentage shall never
exceed 100%) of
S-30
<PAGE>
a fraction, the numerator of which is (a) during the Revolving Period, the
Invested Amount as of the last day of the immediately preceding Monthly
Period (or, in the case of the first Monthly Period, the Closing Date) and
(b) during the [Accumulation Period] [Controlled Amortization Period] or the
Early Amortization Period, the Invested Amount as of the last day of the
Revolving Period and the denominator of which is the greater of (i) [the sum
of the] total amount of Principal Receivables in the Trust as of the last day
of the immediately preceding Monthly Period [and the principal amount on
deposit in the Special Funding Account as of such last day] (or, in the case
of the first Monthly Period, the Closing Date) and (ii) the sum of the
numerators used to calculate the principal allocation percentages for all
Series outstanding as of the date as to which such determination is being
made; [provided, however, that because the Series [199__-__] Certificates
offered hereby are subject to being paired with a future Series, if a Pay Out
Event occurs with respect to a Paired Series during the [Controlled
Amortization Period] [Accumulation Period] with respect to Series [199__-__],
the Seller may, by written notice delivered to the Trustee and the Servicer,
designate a different numerator for the foregoing fraction, provided that
such numerator is not less than [the [Adjusted] Invested Amount as of the
last day of the Revolving Period for such Paired Series] and the Seller shall
have received written notice from each Rating Agency that such designation
will not have a Ratings Effect. Such amounts so allocated to the
Certificateholders will be further allocated between the Class A
Certificateholders and the Class B Certificateholders based on the Class A
Principal Percentage and the Class B Principal Percentage, respectively. The
"Class A Principal Percentage" means, with respect to any Monthly Period (a)
during the Revolving Period, the percentage equivalent (which shall never
exceed 100%) of a fraction, the numerator of which is equal to the Class A
Invested Amount as of the last day of the immediately preceding Monthly
Period (or, in the case of the first Monthly Period, the Class A Initial
Invested Amount), and the denominator of which is equal to the Invested
Amount as of such day, (or, in the case of the first Monthly Period, the
Initial Invested Amount) and (b) during the [Accumulation Period] [Controlled
Amortization Period] or the Early Amortization Period, the percentage
equivalent (which shall never exceed 100%) of a fraction, the numerator of
which is the Class A Invested Amount as of the end of the Revolving Period,
and the denominator or which is the Invested Amount as of such day. The
"Class B Principal Percentage" means, with respect to any Monthly Period, (i)
during the Revolving Period, the percentage equivalent (which percentage
shall never exceed 100%) of a fraction, the numerator of which is the Class B
Invested Amount as of the last day of the immediately preceding Monthly
Period (or, in the case of the first Monthly Period, the Class B Initial
Invested Amount) and the denominator of which is the Invested Amount as of
such day (or, in the case of the first Monthly Period, the Initial Invested
Amount) and (ii) during the [Accumulation Period] [Controlled Amortization
Period] or the Early Amortization Period, the percentage equivalent (which
percentage shall never exceed 100%) of a fraction, the numerator of which is
the Class B Invested Amount as of the end of the Revolving Period, and the
denominator of which is the Class B Invested Amount as of such day.
[Notwithstanding the foregoing, in any Monthly Period in which there
occurs (a) an Addition Date or (b) a Removal Date, the amount of Principal
Receivables used for the denominator in the calculation of the Floating
Allocation Percentage and the Principal Allocation Percentage described above
will be (i) the aggregate amount of Principal Receivables in the Trust at the
end of the day on the last day of the prior Monthly Period 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 end of the day on the related
Addition Date or Removal Date for the period from and including the related
Addition Date or Removal Date to and including the last day of such Monthly
Period] [; provided further, however, that with respect to any Monthly Period
during the Funding Period in which the Series [199__-__] Invested Amount is
increased pursuant to the Series [199__-__] Supplement, the numerator in the
calculation of the Floating Allocation Percentage and the Principal
Allocation Percentage described above will be (1) the Series [199__-__]
Invested Amount at the last day of the prior Monthly Period for the period
from and including the first day of such Monthly Period to but excluding the
day the Series [199__-__] Invested Amount is increased and (2) the Series
[199__-__] Invested Amount at the end of the day on which the Series
[199__-__] Invested Amount is increased for the period from and including
such day to and including the last day of such Monthly Period].
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<PAGE>
As used herein, the following terms have the meanings indicated:(7)
"Class A Invested Amount" for any date means an amount equal to (i) the
Class A Initial Invested Amount, minus (ii) the amount of principal payments
made to the Class A Certificateholders on or prior to such date, minus (iii)
the excess, if any, of the aggregate amount of Class A Investor Charge-Offs
for all prior Distribution Dates over the aggregate amount of any
reimbursements of Class A Investor Charge-Offs for all Distribution Dates
prior to such date.
"Class B Invested Amount" for any date means an amount equal to (i) the
Class B Initial Invested Amount, minus (ii) the amount of principal payments
made to Class B Certificateholders on or prior to such date [(other than
principal payments made from the proceeds of amounts received from the Cash
Collateral Account for the purpose of reimbursing previous reductions in the
Class B Invested Amount)], minus (iii) the aggregate amount of Class B
Investor Charge-Offs for all prior Distribution Dates, minus (iv) the
aggregate amount of Reallocated Principal Collections for all prior
Distribution Dates which have been used to fund the Required Amount with
respect to such Distribution Dates [(excluding any Reallocated Principal
Collections that have resulted in a reduction of the Enhancement Invested
Amount)], minus (v) an amount equal to the amount by which the Class B
Invested Amount has been reduced to cover the Class A Investor Default Amount
on all prior Distribution Dates as described under "Class A Investor
Charge-Offs," and plus (vi) the aggregate amount of Excess Spread and [Excess
Finance Charge Collections allocated to Series [199__-__]] [other amounts]
applied on all prior Distribution Dates for the purpose of reimbursing
amounts deducted pursuant to the foregoing clauses (iii), (iv) and (v).
["Class A Adjusted Invested Amount" for any date means an amount equal
to the then current Class A Invested Amount minus the funds on deposit in the
Principal Funding Account on such date.]
["Class B Adjusted Invested Amount" for any date means (a) if such date
occurs prior to the Class B Principal Commencement Date, an amount equal to
the Class B Invested Amount and (b) if such date occurs on or after the Class
B Principal Commencement Date, an amount equal to the Class B Invested Amount
minus the funds on deposit in the Principal Funding Account on such date].
["Enhancement Invested Amount" for any date means an amount equal to (a)
the amount withdrawn from the Cash Collateral Account and applied to the
payment of principal of the Series [199__-__] Certificates on the first
Special Payment Date following an Economic Pay Out Event, minus (b) the
amount of principal payments made to the Cash Collateral Depositor prior to
such day minus (c) the aggregate amount by which the Enhancement Invested
Amount has been reduced to fund the Class A Investor Default Amount and the
Class B Investor Default Amount on all prior Distribution Dates as described
below, minus (d) the amount by which the Enhancement Invested Amount has been
reduced by Reallocated Principal Collections applied to reimburse the
Required Amount and plus (e) the aggregate amount of Excess Spread [Excess
Finance Charge Collections allocated to Series [199__-__]] [other amounts]
applied on all prior Distribution Dates for the purpose of reimbursing
amounts deducted pursuant to the foregoing clauses (c) and (d). In the
absence of the occurrence of an Economic Pay Out Event and a related
withdrawal from the Cash Collateral Account to pay principal of the Series
[199__-__] Certificates, the Enhancement Invested Amount will be zero.]
[PRINCIPAL FUNDING ACCOUNT
The Servicer will establish and maintain in the name of the trustee, on
behalf of the Trust, the Principal Funding Account as an Eligible Account
held for the benefit of the Series [199__-__] Certificateholders. During the
Accumulation Period, the Servicer will transfer collections in respect of
- ----------
(7) Appropriate changes to Invested Amount definitions must be made for a
prefunded Series.
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<PAGE>
Principal Receivables [and Shared Principal Collections allocated to Series
[199__-__]] [other amounts] to be treated in the same manner as collections
of Principal Receivables from the Collection Account to the Principal Funding
Account as described under "-- Application of Collections."
Unless a Pay Out Event has occurred with respect to the Series
[199__-__] Certificates, all amounts on deposit in the Principal Funding
Account (the "Principal Funding Account Balance") on any Distribution Date
(after giving effect to any deposits to, or withdrawals from, the Principal
Funding Account to be made on such Distribution Date) will be invested to the
following Distribution Date by the Trustee at the direction of the Servicer
in Eligible Investments. On each Distribution Date with respect to the
Accumulation Period (on or prior to the Class B Expected Final Payment Date)
the interest and other investment income (net of investment expenses and
losses) earned on such investments (the "Principal Funding Investment
Proceeds") will be withdrawn from the Principal Funding Account and will be
treated as a portion of Class A Available Funds, prior to the Class B
Principal Commencement Date and, thereafter, as Class B Available Funds. If
such investments with respect to any such Distribution Date yield less than
the applicable Certificate Rate, the Principal Funding Investment Proceeds
with respect to such Distribution Date will be less than the Covered Amount
for such following Distribution Date. It is intended that any such shortfall
will be funded from Class A Available Funds or Class B Available Funds, as
the case may be (including a withdrawal from the Reserve Account, if
necessary, as described under "-- Reserve Account"), [or a withdrawal from
the Cash Collateral Account as described under "-- Cash Collateral Account"]
[other sources]. The Available Reserve Account Amount and the Available Cash
Collateral Amount at any time will be limited and there can be no assurance
that sufficient funds will be available to fund any such shortfall. [The
"Covered Amount" shall mean (a) for any Distribution Date with respect to the
Class A Accumulation Period or the first Special Payment Date, if such
Special Payment Date occurs prior to the Class B Principal Commencement Date,
an amount equal to [one-twelfth of the product of (i) the Class A Certificate
Rate and (ii) the Principal Funding Account Balance, if any, as of the
preceding Distribution Date and (b) for any Distribution Date with respect to
the Class B Accumulation Period or the first Special Payment Date, if such
Special Payment Date occurs on or after the Class B Principal Commencement
Date, an amount equal to one-twelfth of the product of (i) the Class B
Certificate Rate and (ii) the Principal Funding Account Balance, if any, as
of the preceding Distribution Date] [the product of (i) (A) a fraction the
numerator of which is the actual number of days in the related Interest
Period and the denominator of which is 360, times (B) the applicable
Certificate Rate in effect with respect to such Interest Period, and (ii) the
Principal Funding Account Balance as of the last day of the Monthly Period in
which such Interest Period ends].]
[RESERVE ACCOUNT
The Servicer will establish and maintain in the name of the Trustee, on
behalf of the Trust, an Eligible Deposit Account for the benefit of the
Series [199__-__] Certificateholders (the "Reserve Account"). The Reserve
Account is intended to help assure the subsequent distribution of interest on
the Series [199__-__] Certificates as provided in this Prospectus Supplement
during the Accumulation Period. On each Distribution Date from and after the
Reserve Account Funding Date, but prior to the termination of the Reserve
Account, the Trustee, acting pursuant to the Servicer's instructions, will
apply Excess Spread [and Excess Finance Charge Collections allocated to
Series [199__-__] (in the order of priority described below under "--
Application of Collections -- Payment of Interest, Fees and Other Items") to
increase the amount on deposit in the Reserve Account (to the extent such
amount is less than the Required Reserve Account Amount). The "Reserve
Account Funding Date" will be the Distribution Date with respect to the
Monthly Period that begins [____] months prior to the Distribution Date with
respect to the first Monthly Period in the [Class A] Accumulation Period,
provided that the Seller may delay the Reserve Account Funding Date to the
earliest of (a) the Distribution Date with respect to the Monthly Period that
begins [____] months prior to the first Monthly Period in the [Class A]
Accumulation Period; (b) the first Distribution Date for which the Portfolio
Adjusted Yield is less than [____], but in such event the Reserve Account
Funding Date does not have to occur earlier than the Distribution Date with
respect to the Monthly Period that begins [____] months prior to the
commencement of the [Class A] Accumulation Period, (c) the first Distribution
Date for
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<PAGE>
which the Portfolio Adjusted Yield is less than [____], but in such event the
Reserve Account Funding Date does not have to occur earlier than the
Distribution Date that begins [____] months prior to the commencement of the
[Class A] Accumulation Period; or (d) the first Distribution Date for which
the Portfolio Adjusted Yield is less than [____], but in such event the
Reserve Account Funding Date does not have to occur earlier than the
Distribution Date that begins [____] months prior to the commencement of the
[Class A] Accumulation Period or any other date designated by the Seller,
provided that the Seller has received written notice from each Rating Agency
that such designation will not have a Ratings Effect. "Portfolio Adjusted
Yield" for any Distribution Date will be equal to the average of the
percentages obtained for each of the three preceding Monthly Periods by
subtracting the Base Rate from the Portfolio Yield for such Monthly Period
and deducting [____] from the result for each Monthly Period. The "Required
Reserve Account Amount" for any Distribution Date on or after the Reserve
Account Funding Date will be equal to [____]% of the Series [199__-__]
Invested Amount as of the preceding Distribution Date, or any other amount
designated by the Seller provided that the Seller has received written notice
from each Rating Agency that such designation will not have a Ratings Effect.
On each Distribution Date, after giving effect to any deposit to be made to,
and any withdrawal to be made from, the Reserve Account on such Distribution
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 or at the
direction of [the Seller] [the Cash Collateral Depositor] [the Credit
Enhancer].
Provided that the Reserve Account has not terminated as described below,
all amounts on deposit in the Reserve Account on any Distribution Date (after
giving effect to any deposits to, or withdrawals from, the Reserve Account to
be made on such Distribution Date) will be invested to the following
Distribution Date by the Trustee at the direction of the Servicer in Eligible
Investments. The interest and other investment income (net of investment
expenses and losses) earned on such investments ("Interest Funding Investment
Proceeds") will be retained in the Reserve Account (to the extent the amount
on deposit therein is less than the Required Reserve Account Amount) or
[distributed to or at the direction of] [the Seller] [the Cash Collateral
Depositor] [the Credit Enhancer] [deposited in the Collection Account for
application as Available Funds].
On or before each Distribution Date with respect to the Accumulation
Period (on or prior to the Class A Expected Final Payment Date) and on the
first Special Payment Date, a withdrawal will be made from the Reserve
Account, and the amount of such withdrawal will be deposited in the
Collection Account and included in Class A Available Funds, prior to the
Class B Principal Commencement Date, and, thereafter, in Class B Available
Funds, in an amount equal to the lesser of (a) the Available Reserve Account
Amount with respect to such Distribution Date or Special Payment Date and (b)
the excess, if any, of the Covered Amount with respect to such Distribution
Date or Special Payment Date over the Principal Funding Investment Proceeds
with respect to such Distribution Date or Special Payment Date; provided that
the amount of such withdrawal will be reduced to the extent that funds
otherwise would be available to be deposited in the Reserve Account on such
Distribution Date or Special Payment Date. On each Distribution Date, the
amount available to be withdrawn from the Reserve Account (the "Available
Reserve Account Amount") will be equal to the lesser of the amount on deposit
in the Reserve Account (before giving effect to any deposit to be made to the
Reserve Account on such Distribution Date) and the Required Reserve Account
Amount for such Distribution Date.
The Reserve Account will be terminated following the earlier to occur of
(a) the termination of the Trust pursuant to the Pooling Agreement, (b) the
date on which the Series [199__-__] Certificates are paid in full and (c) if
the Accumulation Period has not commenced, the occurrence of a Pay Out Event
with respect to the Series [199__-__] Certificates or, if the Accumulation
Period has commenced, the earlier of the first Special Payment Date and the
Class B Expected Final 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 or at the direction of [the Seller] [the Cash Collateral
Depositor] [the Credit Enhancer]. Any amounts withdrawn from the Reserve
Account and distributed to or at the direction of [the Seller] [the Cash
S-34
<PAGE>
Collateral Depositor] [the Credit Enhancer] as described above will not be
available for distribution to the Series [199__-__] Certificateholders.]
REALLOCATION OF CASH FLOWS; CLASS B INVESTED AMOUNT
With respect to each Distribution Date, on each Determination Date, the
Servicer will determine the amount (the "Required Amount"), which will be
equal to the amount, if any, by which (a) the sum of (i) Class A Monthly
Interest for such Distribution Date, (ii) any Class A Monthly Interest
previously due but not paid to the Class A Certificateholders [or deposited
in the Interest Funding Account] on a prior Distribution Date, [(iii) any
Class A Additional Interest], (iv) the Class A Servicing Fee for such
Distribution Date and any unpaid Class A Servicing Fee and (v) the Class A
Investor Default Amount, if any, for such Distribution Date exceeds the sum
of (A) [the amount of Principal Funding Investment Proceeds, if any, with
respect to such Distribution Date, (B)] the Class A Floating Percentage of
the Floating Allocation Percentage collections of Finance Charge Receivables
to Series [199__-__] (including any investment earnings treated as
collections of Finance Charge Receivables in accordance with the Pooling
Agreement) [and (C) the amount of funds, if any, to be withdrawn from the
Reserve Account and allocated to the Class A Certificates pursuant to the
Pooling Agreement]. If the Required Amount is greater than zero, Excess
Spread [and Excess Finance Charge Collections allocated to Series [199__-__]]
will be used to pay the Required Amount with respect to such Distribution
Date. [If Excess Spread [and such Excess Finance Charge Collections]
available with respect to such Distribution Date are less than the Required
Amount, amounts available from [[the Cash Collateral Account] [Credit
Enhancement] available to pay amounts in respect of the Class A
Certificates], will then be used to fund the remaining Required Amount.] If
such Excess Spread [and Excess Finance Charge Collections] [and amounts
available from the [Cash Collateral Account] [Credit Enhancement]] [is] [are]
insufficient to pay the Required Amount, collections of Principal Receivables
allocable to the Class B Certificates for the related Monthly Period
("Reallocated Principal Collections") will then be used to fund the remaining
Required Amount. If Reallocated Principal Collections with respect to the
related Monthly Period, together with Excess Spread and [Excess Finance
Charge Collections allocated to Series [199__-__]] [amount available under
the [Cash Collateral Account] [Credit Enhancement]] to make payments in
respect of the Class A Certificates are insufficient to fund the Required
Amount for such related Monthly Period, then [the Enhancement Invested
Amount, if any,] [the Class B Invested Amount] will be reduced by the amount
of such excess (but not by more than the Class A Investor Default Amount for
such Distribution Date).] In the event that such reduction would cause the
Enhancement Invested Amount to be a negative number, the Enhancement Invested
Amount will be reduced to zero, the Class B Invested Amount will be reduced
by the amount by which the Enhancement Invested Amount would have been
reduced below zero (but not by more than the excess of the Class A Investor
Default Amount, if any, for such Distribution Date over the amount] of such
reduction, if any, of the Enhancement Invested Amount with respect to such
Distribution Date).] In the event that such reduction would cause the Class
B Invested Amount to be a negative number, the Class B Invested Amount will
be reduced to zero, and the Class A Invested Amount will be reduced by the
amount by which the Class B Invested Amount would have been reduced below
zero, but not by more than the excess, if any, of the Class A Investor
Default Amount for such Distribution Date over the amount of reduction[s],
[if any, of the Enhancement Invested Amount and] of the Class B Invested
Amount with respect to such Distribution Date as described above, which will
have the effect of slowing or reducing the return of principal to the Class A
Certificateholders. In such case, the Class A Certificateholders will bear
directly the credit and other risks associated with the undivided interest in
the Trust. See "-- Defaulted Receivables; Investor Charge-Offs."
APPLICATION OF COLLECTIONS
PAYMENT OF FEES, INTEREST AND OTHER ITEMS. On each Distribution Date,
the Trustee, acting pursuant to the Servicer's instructions, will apply the
Class A Available Funds and Class B Available Funds (see "-- Interest
Payments" above) on deposit in the Collection Account in the following
priority:
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<PAGE>
(A) On each Distribution Date, an amount equal to the Class A Available
Funds with respect to such Distribution Date will be distributed [or deposited]
in the following priority:
(i) an amount equal to Class A Monthly Interest for such Distribution
Date, plus the amount of any Class A Monthly Interest previously due but
not paid to the Class A Certificateholders [or deposited to the Interest
Funding Account] on a prior Distribution Date, [plus additional interest at
the Class A Certificate Rate with respect to amounts that were due but not
paid to Class A Certificateholders [or deposited to the Interest Funding
Account] on a prior Distribution Date ("Class A Additional Interest"),
will be [distributed to Class A Certificateholders] [deposited in the
Interest Funding Account for distribution to Class A Certificateholders on
the Payment Date therefor];
(ii) an amount equal to the Class A Servicing Fee for such
Distribution Date, plus the amount of any Class A Servicing Fee previously
due but not distributed to the Servicer on a prior Distribution Date, will
be distributed to the Servicer;
(iii) an amount equal to the Class A Investor Default Amount for such
Distribution Date will be treated as a portion of Available Principal
Collections for such Distribution Date;
(iv) the balance, if any, shall constitute Excess Spread and shall
be allocated and distributed as described under "-- Excess Spread[; Excess
Finance Charge Collections]" below.
(B) On each Distribution Date, an amount equal to the Class B Available
Funds with respect to such Distribution Date will be distributed or deposited
in the following priority:
(i) an amount equal to Class B Monthly Interest for such
Distribution Date, plus the amount of any Class B Monthly Interest
previously due but not paid to the Class B Certificateholders [or
deposited to the Interest Funding Account] on a prior Distribution Date,
[plus any additional interest at the Class B Certificate Rate with respect
to amounts that were due but not paid to Class B Certificateholders [or
deposited to the Interest Funding Account] on a prior Distribution Date
("Class B Additional Interest")], [will be distributed to the Class B
Certificateholders] [deposited in the Interest Funding Account for
distribution to Class B Certificateholders on the next Payment Date
therefor];
(ii) an amount equal to the Class B Servicing Fee for such
Distribution Date, plus the amount of any Class B Servicing Fee previously
due but not distributed to the Servicer on a prior Distribution Date, will
be distributed to the Servicer;
(iii) an amount equal to the Class B Investor Default Amount for such
Distribution Date will be treated as a portion of Available Principal
Collections for such Distribution Date;
(iv) the balance, if any, shall constitute Excess Spread and shall
be allocated and distributed as described under "-- Excess Spread[; Excess
Finance Charge Collections]" below.
"Class A Monthly Interest" means, with respect to any Distribution Date,
an amount equal to [one-twelfth of] the product of (i) [(A) a fraction, the
numerator of which is the actual number of days in the related accrual period
and the denominator of which is 360, times (B)] the Class A Certificate Rate
and (ii) [the sum of (A)] the Class A Invested Amount [and [(B) the product of
the Class A Floating Percentage and the] Pre-Funding Amount, each] as of the
close of the preceding Record Date; PROVIDED, HOWEVER, with respect to the
first Distribution Date, Class A Monthly Interest shall be equal to
$[__________]. [Class A Monthly Interest shall be calculated on the basis of
a 360-day year of twelve 30-day months.]
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<PAGE>
"Class B Monthly Interest" means, with respect to any Distribution
Date, an amount equal to [one-twelfth of] the product of (i) [(A) a fraction,
the numerator of which is the actual number of days in the related accrual
period and the denominator of which is 360, times (B)] the Class B Certificate
Rate and (ii) [the sum of (A)] the Class B Invested Amount [and (B) [the
product of the Class B Floating Percentage and] the Pre-Funding Amount, each]
as of the close of business on the last day of the preceding Monthly Period;
PROVIDED, HOWEVER, with respect to the first Distribution Date, Class B
Monthly Interest shall be equal to $[__________] [Class B Monthly Interest
shall be calculated on the basis of a 360-day year of twelve 30-day months.]
"Excess Spread" means, with respect to any Distribution Date, an amount
equal to the sum of the amounts described in clause (A)(iv) above and clause
(B)(iv) above.
EXCESS SPREAD[; EXCESS FINANCE CHARGE COLLECTIONS]. On each
Distribution Date, the Trustee; acting pursuant to the Servicer's
instructions, will apply Excess Spread [and Excess Finance Charge Collections
allocated to Series [199__-__] with respect to the related Monthly Period,
to make the following distributions in the following priority:
(a) an amount equal to the Required Amount, if any, with respect
to the related Monthly Period will be used to fund any deficiency pursuant
to clauses (A)(i), (ii) and (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 Distribution Date of certain other amounts
applied for that purpose) will be treated as a portion of as Available
Principal Collections for such Distribution Date as described under "--
Payments of Principal" below;
(c) an amount equal to the sum of any Class B Monthly Interest and
any Class B Additional Interest due but not distributed to the Class B
Certificateholders [or deposited to the Interest Funding Account] either on
such Distribution Date or on a prior Distribution Date, will be
[distributed to the Class B Certificateholders] [deposited into the
Interest Funding Account for payment to the Class B Certificateholders
on the Payment Date therefor];
(d) an amount equal to the Class B Servicing Fee due but not paid to
the Servicer either on such Distribution Date or a prior Distribution
Date will be paid to the Servicer;
(e) an amount equal to the remaining Class B Investor Default Amount
for such Distribution Date, after giving effect to the allocation in
clause B (iii) under "-- Payment of Interest, Fees and Other Items" above,
shall be treated as a portion of Available Principal Collections for
such Distribution Date;
(f) an amount equal to the aggregate by which the Class B Invested
Amount has been reduced pursuant to clauses (iii), (iv) and (v) of the
definition of "Class B Invested Amount" under "-- Allocation
Percentages" above (but not in excess of the aggregate amount of such
reductions which have not been previously reimbursed) shall be treated
as a portion of Available Principal Collections for such Distribution Date;
[(g) an amount equal to the ["Monthly Cash Collateral Fee" (as
defined in the agreement (the "Loan Agreement") among the Bank, the Cash
Collateral Depositor and the Trustee) for such Distribution Date shall
be distributed to the Cash Collateral Depositor for application in
accordance with the Loan Agreement] ["Monthly Credit Enhancement Fee"
(as defined in the agreement among the Bank, the Trustee and the Credit
Enhancement Provider (the "Credit Enhancement Agreement")) shall be
distributed to the Credit Enhancement Provider];]
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<PAGE>
[(h) an amount equal to the aggregate amount by which the Enhancement
Invested Amount has been reduced pursuant to clauses (c) and (d) of the
definition of "Enhancement Invested Amount" under "-- Allocation
Percentages" above (but not in excess of the aggregate amount of such
reductions which have not been previously reimbursed) shall be treated
as a portion of Available Principal Collections for such Distribution
Date;]
[(i) an amount up to the excess, if any, of the Initial Cash
Collateral Amount over the remaining Available Cash Collateral Amount
shall be deposited into the Cash Collateral Account in accordance with
the Loan Agreement;]
[(j) on each Distribution 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" above, 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;]
[(k) an amount equal to the aggregate of any other amounts then due
to the [Cash Collateral Depositor] [Credit Enhancement Provider]
pursuant to the [Loan Agreement] [Credit Enhancement Agreement] (to the
extent such amounts are payable pursuant to the [Loan Agreement] [Credit
Enhancement Agreement] out of Excess Spread [and Excess Finance Charge
Collections]) shall be distributed to the Cash Collateral Depositor for
application in accordance with the [Loan Agreement[ [Credit Enhancement
Agreement];] and
[(l) the balance, if any, will constitute a portion of Excess Finance
Charge Collections for such Distribution Date and will be available for
allocation to other Series in Group [____] or to the Seller as described
in "Description of the Certificates -- Sharing of Excess Finance Charge
Collections" in the Prospectus.](8)
PAYMENTS OF PRINCIPAL. On each Distribution Date, the Trustee, acting
pursuant to the Servicer's instructions, will distribute Available Principal
Collections (see "-- Principal Payments" above) on deposit in the Collection
Account in the following priority:
(i) on each Distribution Date with respect to the Revolving Period, all
such Available Principal Collections will be treated as Shared Principal
Collections and applied as described under "Description of the
Certificates -- Shared Principal Collections" in the Prospectus;
(ii) on each Distribution Date with respect to the [Controlled
Amortization] [Accumulation] Period or the Early Amortization Period,
all such Available Principal Collections will be distributed or
deposited in the following priority:
(w) an amount equal to Class A Monthly Principal, up to the Class A
[Adjusted] Invested Amount on such Distribution Date, will be
[deposited in the Principal Funding Account (during the Class A
Accumulation Period) or] distributed to the Class A Certificateholders
(during the [Controlled Amortization Period] Early Amortization
Period);
[(x) for each Distribution Date [beginning on the Class B Principal
Commencement Date], an amount equal to Class B Monthly Principal for
such Distribution Date, up to the Class B [Adjusted] Invested Amount
on such Distribution Date, will be [deposited in the Principal
Funding Account (during the Class B Accumulation Period) or]
distributed to the Class B Certificateholders (during the [Controlled
Amortization Period] Early Amortization Period)l;
- ---------------------
(8) Distributions and priorities may be modified to reflect another form of
Credit Enhancement.
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[(y) for each Distribution Date with respect to the Early
Amortization Period, beginning with the Distribution Date on which
the Series [199__-__] Invested Amount is paid in full, an amount equal
to the balance, if any, of such Available Principal Collections then
on deposit in the Collection Account, to the extent of the Enhancement
Invested Amount, if any, shall be distributed to the Cash Collateral
Depositor for application in accordance with the Loan Agreement; and]
(z) for each Distribution Date, after giving effect to paragraphs
(w), (x) [and (y)] above, an amount equal to the balance, if any, of
such Available Principal Collections will be allocated to Shared
Principal Collections and applied in accordance with the Pooling
Agreement.
"Class A Monthly Principal" with respect to any Distribution Date
relating to the [Class A Accumulation Period] [Class A Controlled Amortization
Period] or the Early Amortization Period will equal the least of (i) the
Available Principal Collections on deposit in the Collection Account with
respect to such Distribution Date, (ii) for each Distribution Date with
respect to the [Class A Accumulation Period] [Class A Controlled Amortization
Period] [and on or prior to the Class A Expected Final Payment Date], the
applicable [Controlled Deposit Amount] [Controlled Distribution Amount] for
such Distribution Date and (iii) the Class A [Adjusted] Invested Amount on
such Distribution Date.
"Class B Monthly Principal" with respect to any Distribution Date
relating to the [Class B Accumulation Period] [the Class B Controlled
Amortization Period] or the Early Amortization Period, after the Class A
Certificates have been paid in full, will equal the least of (i) the
Available Principal Collections on deposit in the Collection Account with
respect to such Distribution Date, (ii) for each Distribution Date with
respect to the [Class B Accumulation Period] [Class B Controlled Amortization
Period] [and on or prior to the Class B Expected Final Payment Date] the
applicable [Controlled Deposit Amount] [Controlled Distribution Amount] for
such Distribution Date and (iii) the Class B [Adjusted] Invested Amount on
such Distribution Date.
["Controlled Amortization Amount" means (a) for any Distribution Date with
respect to the Class A Controlled Amortization Period, $[__________], and (b)
for any Distribution Date with respect to the Class B Controlled Amortization
Period, [after the Class A Invested Amount has been paid in full],
$[__________].]
["Deficit Controlled Amortization Amount" means (a) on the first Distribution
Date with respect to the Class A Controlled Amortization Period or the Class B
Controlled Amortization Period, the excess, if any, of the Controlled
Amortization Amount for such Distribution Date over the amount distributed from
the Collection Account as Class A Monthly Principal or Class B Monthly
Principal, as the case may be, for such Distribution Date and (b) on each
subsequent Distribution Date with respect to the Class A Controlled
Amortization Period or the Class B Controlled Amortization Period, the excess,
if any, of the Controlled Distribution Amount for such subsequent Distribution
Date plus any Deficit Controlled Amortization Amount for the prior Distribution
Date over the amount distributed from the Collection Account as Class A Monthly
Principal or Class B Monthly Principal, as the case may be, for such subsequent
Distribution Date.]
["Controlled Accumulation Amount" means (a) for any Distribution Date with
respect to the [Class A] Accumulation Period, $[__________]; provided,
however, that, if the commencement of the [Class A] Accumulation Period is
delayed as described above under "-- Principal Payments," the Controlled
Accumulation Amount for each Distribution Date with respect to the [Class A]
Accumulation Period will be determined as described therein; [and (b) for any
Distribution Date with respect to the [Class B] Accumulation Period,
$[__________].]
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["Deficit Controlled Accumulation Amount" means (a) on the first Distribution
Date with respect to the [Class A] Accumulation Period [or the Class B
Accumulation Period], the excess, if any, of the [applicable] Controlled
Accumulation Amount for such Distribution Date over the amount distributed
from the Collection Account as Class A Monthly Principal [or Class B Monthly
Principal, as the case may be,] for such Distribution Date and (b) on each
subsequent Distribution Date with respect to the [Class A] Accumulation
Period [or the Class B Accumulation Period], the excess, if any, of the
[applicable] Controlled Deposit Amount for such subsequent Distribution Date
plus any Deficit Controlled Accumulation Amount for the prior Distribution
Date over the amount distributed from the Collection Account as Class A
Monthly Principal [or Class B Monthly Principal, as the case may be,] for
such subsequent Distribution Date.]
[CASH COLLATERAL ACCOUNT
The Trust will have the benefit of the Cash Collateral Account for the
benefit of the Series [199__-__] Certificateholders and the Cash Collateral
Depositor, as their interests appear in the Series [199__-__] Supplement, and
in the case of the Cash Collateral Depositor, in the Loan Agreement [which
interest, in the case of the Cash Collateral Depositor, will be subordinated
to the interests of the Series [199__-__] Certificateholders as provided in
the Series [199__-__] Supplement). The Cash Collateral Account will be one or
more Eligible Deposit Accounts. Funds on deposit in the Cash Collateral
Account will be invested in certain Eligible Investments.
The Cash Collateral Account will be funded on the Closing Date in the
Initial Cash Collateral Amount, which amount will include the proceeds of an
advance to be made by one or more financial institutions to be selected by
the Seller (such financial institution or institutions, the "Cash Collateral
Depositor"). Such advance will be repaid pursuant to the Loan Agreement.
The Cash Collateral Account will be terminated following the earliest to
occur of (a) the date on which the Series [199__-__] Certificates are paid in
full, [(b) the date on which the entire Available [Cash] Collateral Amount is
distributed to the Series [199__-__]Certificateholders as a result of the
occurrence of an Economic Pay Out Event,] (c) the Series [199__-__]
Termination Date and (d) the termination of the Trust pursuant to the Pooling
Agreement.
On each Distribution Date, the amount available to be withdrawn from the
Cash Collateral Account (the "Available [Cash] Collateral Amount") will be
equal to the lesser of the amount on deposit in the Cash Collateral Account
(before giving effect to any deposit to be made to the Cash Collateral
Account on such Distribution Date) and the Initial Cash Collateral Amount.
[The Initial Shared Collateral Amount will be for the benefit of both the
Class A Certificates and the Class B Certificates, while the Initial Class
B Collateral Amount will be for the exclusive benefit of the Class B
Certificates. On each Distribution Date, the "Available Shared Collateral
Amount" shall equal the lesser of (a) the Initial Shared Collateral Amount
and (b) the excess, if any, of the Available Cash Collateral Amount on such
Distribution Date over the Initial Class B Collateral Amount.]
On each Distribution Date, one or more withdrawals will be made from the
Cash Collateral Account in an amount up to the Available [Shared] [Cash]
Collateral Amount, to fund the following amounts in the following priority:
(a) the excess, if any, of the Required Amount with respect to the
related Distribution Date over the amount of Excess Spread [and Excess
Finance Charge Collections] allocated to Series [199__-__]] available to
fund such Required Amount will be used first to fund any deficiency in
current Class A Monthly Interest, overdue Class A Monthly Interest [and
any current or overdue Class A Additional Interest], second to fund any
deficiency in the Class A Servicing Fee, and third to pay the Class A
Investor Default Amount, if any, for such Distribution Date;
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(b) the excess, if any, of the accrued and unpaid Class B Monthly
Interest on the outstanding principal balance of the Class B
Certificates for the related Distribution Date (plus any current or
overdue Class B Additional Interest) over the amount of Class B
Available Funds, Excess Spread [and Excess Finance Charge Collections]
allocated to Series [199__-__] and available to Class B Certificateholders;
(c) the excess, if any, of the accrued and unpaid Class B Servicing
Fee with respect to the related Distribution Date over the Class B
Available Funds, Excess Spread [and Excess Finance Charge Collections]
allocated to Series [199__-__] and available to Class B
Certificateholders; and
(d) the excess, if any, of the Class B Investor Default Amount for
the related Distribution Date over the amount of Class B Available Funds,
Excess Spread [and Excess Finance Charge Collections] allocated to
Series [199__-__]] and available to Class B Certificateholders
[On the first Special Payment Date following a Pay Out Event described in
clause (e) under "-- Pay Out Events" herein (an "Economic Pay Out Event"),
after giving effect to any payment of principal on such date described under
"-- Application of Collections -- Payments of Principal," the Available [Shared]
[Cash] Collateral Amount (after giving effect to any withdrawal from the
Cash Collateral Account on such date to fund the Required Amount) will be
applied to pay principal of the Class A Certificates and the remainder of the
Available [Cash] Collateral Amount will be applied to pay principal of the
Class B Certificates.]
On each Distribution Date commencing with the Class B Principal
Commencement Date, unless an Economic Pay Out Event has occurred, a
withdrawal will be made from the Cash Collateral Account, to the extent of
the Available [Shared] [Cash] Collateral Amount, in an amount equal to the
excess, if any, of the Class B Initial Invested Amount (minus the sum of the
aggregate amount of principal payments previously distributed to Class B
Certificateholders] [or deposited to the Principal Funding Account in respect
of the Class B Certificates] over the Class B Invested Amount on the last day
of the related Monthly Period (determined after giving effect to any changes
to be made in the Class B Invested Amount pursuant to clauses (iii), (iv),
(v) or (vi) of the definition of "Class B Invested Amount" under "--
Allocation Percentages" on such Distribution Date.
In the event of a sale of the Receivables and an early termination of
the Trust due to an Insolvency Event, an optional repurchase of the Series
[199__-__] Certificateholders' Interest by the Seller, a sale of a portion of
the Receivables in connection with the Series [199__-__]Termination Date, a
repurchase or sale of the Series [199__-__] Certificateholders' Interest and
the Certificateholders' Interest of all other Series in connection with a
Servicer Default or a reassignment of the Series [199__-__]
Certificateholders' Interest and the certificateholders' interest of all
other Series in connection with a breach by the Bank of certain
representations and warranties (each as described in the Prospectus under
"Description of the Certificates --Pay Out Events" and "-- Optional
Termination; Final Payment of Principal" or "The Pooling Agreement Generally
- -- Termination of Trust," "-- Representations and Warranties" and "--
Servicer Default"), any Available [Cash] Collateral Amount on the related
Distribution Date (after giving effect to all other withdrawals from the Cash
Collateral Account on such Distribution Date as described above) will be
withdrawn from the Cash Collateral Account and the proceeds thereof will be
distributed to Class B Certificateholders to the extent of all previous
reductions of the Class B Invested Amount pursuant to clauses (iii), (iv) or
(v) of the definition of "Class B Invested Amount" under "-- Allocation
Percentages" above.
On each Distribution Date, the Servicer or the Trustee, acting pursuant
to the Servicer's instructions, will apply Excess Spread and [Excess Finance
Charge Collections allocated to Series [199__-__]] (to the extent described
above under "[-- Application of Collections --Excess Spread; Excess Finance
Charge Collections]" to increase the amount on deposit in the Cash Collateral
Account (to the extent such amount is less than the Initial Cash Collateral
Amount.)
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<PAGE>
[OTHER FORMS OF CREDIT ENHANCEMENT
The [Class ____] Certificates [and the Class _ Certificates] will have
the benefit of the [letter of credit] [cash collateral guaranty] [surety bond]
[insurance policy] [spread account][reserve account] [issued by __________
(the "Credit Enhancement Provider")] in the initial amount of $__________.
With respect to any Distribution Date, the amount available to be drawn
under the [letter of credit] [cash collateral account guaranty] [surety bond]
[insurance policy] [spread account][reserve account] (the "Available Credit
Enhancement Amount") will equal [__________].]
[Information with respect to Credit Enhancement]
[CREDIT ENHANCEMENT PROVIDER
[Information to be provided by Credit Enhancement Provider]]
DEFAULTED RECEIVABLES; INVESTOR CHARGE-OFFS
On each Determination Date, the Servicer will calculate the Investor
Default Amount for the preceding Monthly Period. The term "Investor Default
Amount" means, for any Monthly Period, the product of (i) the Floating
Allocation Percentage with respect to such Monthly Period and (ii) the
Defaulted Amount for such Monthly Period. A portion of the Investor Default
Amount will be allocated to the Class A Certificateholders (the "Class A
Investor Default Amount") on each Distribution Date in an amount equal to the
product of the Class A Floating Percentage applicable during the related
Monthly Period and the Investor Default Amount for such Monthly Period. A
portion of the Investor Default Amount will be allocated to the Class B
Certificateholders (the "Class B Investor Default Amount") in an amount equal
to the product of the Class B Floating Percentage applicable during the
related Monthly Period and the Investor Default Amount for such Monthly
Period. An amount equal to the Class A Investor Default Amount for each
Monthly Period will be paid from Class A Available Funds, Excess Spread
[and Excess Finance Charge Collections allocated to Series [199__-__] or
[from amounts available under the [Cash Collateral Account]
[Credit Enhancement]] and Reallocated Principal Collections, if applicable,
and applied as described above in "-- Application of Collections -- Payment
of Fees, Interest and Other Items." An amount equal to the Class B Investor
Default Amount for each Monthly Period will be paid from Class B Available
Funds, Excess Spread [and Excess Finance Charge Collections allocated to
Series [199__-__]] [from amounts available under the [Cash Collateral Account]
[Credit Enhancement]] and applied as described above in "-- Application of
Collections -- Payment of Fees, Interest and other Items."
On each Distribution Date, if the Required Amount for such Distribution
Date exceeds the sum of Excess Spread [and Excess Finance Charge Collections
allocable to Series [199__-__]] [the Available [Shared] [Cash] Collateral
Amount] and Reallocated Principal Collections, [the Enhancement Invested Amount,
if any,] [the Class B Invested Amount] will be reduced by the amount of such
excess, but not by more than the Class A Investor Default Amount for such
Distribution Date. In the event that such reduction would cause the
Enhancement Invested Amount to be a negative number, the Enhancement Invested
Amount will be reduced to zero, and the Class B Invested Amount will be
reduced by the amount by which the Enhancement Invested Amount would have
been reduced below zero, but not by more than the excess, if any, of the
Class A Investor Default Amount for such Distribution Date over the amount of
such reduction, if any, of the Enhancement Invested Amount with respect to
such Distribution Date.] In the event that such reduction would cause the
Class B Invested Amount to be a negative number, the Class B Invested Amount
will be reduced to zero, and the Class A Invested Amount will be reduced by
the amount by which the Class B Invested Amount would have been reduced below
zero, but not by more than the excess, if any, of the Class A Investor
Default Amount for such Distribution Date over the amount of the reduction[s]
[, if any, of the Enhancement Invested Amount and] of the Class B Invested
Amount with respect to such Distribution
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<PAGE>
Date as described above (a "Class A Investor Charge-Off"), which will have
the effect of slowing or reducing the return of principal to the Class A
Certificateholders. If the Class A Invested Amount has been reduced by the
amount of any Class A Investor Charge-Offs, it will thereafter be increased
on any Distribution Date (but not by an amount in excess of the aggregate
Class A Investor Charge-Offs) by the amount of Excess Spread [and Excess
Finance Charge Collections allocable to Series [199__-__]] [and other amounts]
allocated and available for such purpose as described under "-- Excess
Spread[; Excess Finance Charges]."
If on any Distribution Date the Class B Investor Default Amount for such
Distribution Date exceeds the amount of Class B Available Funds, Excess
Spread [and Excess Finance Charge Collections allocable to Series [199__-__]]
[Available [Shared] [Cash] Collateral Amount] which are allocated and
available to fund such amount, [the Enhancement Invested Amount, if any, will
be reduced by the amount of such excess. In the event that any such
reduction would cause the Enhancement Invested Amount to be a negative
number, the Enhancement Invested Amount will be reduced to zero, and] the
Class B Invested Amount will be reduced by [the amount by which the Enhancement
Invested Amount would have been reduced below zero] [such excess], but not by
more than the Class B Investor Default Amount for such Distribution Date (a
"Class B Investor Charge-Off").
If on any Distribution Date Reallocated Principal Collections for such
Distribution Date are applied to fund the Required Amount, [the Enhancement
Invested Amount will be reduced by the amount of such Reallocated Principal
Collections. In the event such reduction would cause the Enhancement
Invested Amount to be a negative number, the Enhancement Invested Amount
shall be reduced to zero, and] the Class B Invested Amount will be reduced by
the amount [of such Reallocated Principal Collections] [by which the
Enhancement Invested Amount would have been reduced below zero].
The Class B Invested Amount will thereafter be reimbursed (but not in
excess of the aggregate unreimbursed Class B Investor Charge-Offs on any
Distribution Date by the amount of Excess Spread [and Excess Finance Charge
Collections allocated to Series [199__-__]] [and other amounts] allocated
and available for the purpose as described under "-- Excess Spread; Excess
Finance Charge Collections."]
Any such reductions of the Enhancement Invested Amount shall thereafter
be reimbursed and the Enhancement Invested Amount increased (but not by an
amount in excess of the aggregate reductions of the Enhancement Invested
Amount) on any Distribution Date by the amount of Excess Spread [and Excess
Finance Charge Collections] allocated to Series [199__-__]] and available for
such purpose as described under "Application of Collections -- Payment of
Interest, Fees and Other Items."
[PAIRED SERIES
The Series [199__-__] Certificates may be paired with one or more other
Series (each a "Paired Series" at or after the commencement of the
[Controlled Amortization Period][Accumulation Period]. As [funds are
accumulated in the Principal Funding Account] [principal is paid to the
Series [199__-__] Certificateholders during the Controlled Amortization
Period], the invested amount in the Trust of such Paired Series will increase
by up to a corresponding amount. Upon payment in full of the Series [199__-__]
Certificates, assuming that there have been no unreimbursed charge-offs with
respect to any related Paired Series, the aggregate invested amount of such
related Paired Series will have been increased by an amount up to an aggregate
amount equal to the Series [199__-__] Invested Amount paid to the Series
[199__-__]Certificateholders after the Series [199__-__] Certificates were
paired with the Paired Series. The issuance of a Paired Series will be subject
to the conditions described under "Description of the Certificates -- New
Issuances" in the Prospectus. There can be no assurance, however, that the
terms of any Paired Series might not have an impact on the timing or amount
of payments received by a Series [199__-__] Certificateholder. See "Special
Considerations -- Master Trust Considerations -- Issuance of Additional
Series" in the Prospectus.]
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<PAGE>
[REQUIRED PRINCIPAL BALANCE; ADDITION OF ACCOUNTS
The obligation of the Trustee to authenticate certificates of a new
Series and to execute and deliver the related Series Supplement shall be
subject to the conditions described under "Description of the Certificates --
New Issuances" in the Prospectus and to the additional condition that, as of
the applicable closing date and after giving effect to such new issuance, the
aggregate amount of Principal Receivables in the Trust shall equal or exceed
the Required Principal Balance. The "Required Principal Balance" means, as
of any date of determination, the sum of the "initial invested amounts" (as
defined in the relevant Supplements) of the investor certificates of each
Series outstanding on such date (other than any Series or portion thereof (an
"Excluded Series") which is designated in the relevant Supplement as then
being an "Excluded Series") MINUS the principal amount on deposit in the
Special Funding Account on such date; PROVIDED, HOWEVER, that if at any time
the only Series outstanding are Excluded Series and a Pay Out Event has
occurred with respect to one or more such Series, the Required Principal
Balance shall mean the sum of the "invested amounts" (as defined in the
relevant Supplements) of each such Excluded Series as of the earliest date on
which any such Pay Out Event is deemed to have occurred MINUS the principal
amount on deposit in the Special Funding Account.
If as of the close of business on the last business day of any Monthly
Period, the aggregate amount of Principal Receivables in the Trust is less
than the Required Principal Balance on such date, the Seller shall on or
before the [10th] business day following such day, unless the amount of
Principal Receivables in the Trust equals or exceeds the Required Principal
Balance as of the close of business on any day after the last business day of
such Monthly Period and prior to such [10th] business day, make an Addition
to the Trust such that, after giving effect to such Addition, the amount of
Principal Receivables in the Trust is at least equal to the Required
Principal Balance.]
PAY OUT EVENTS
The Pay Out Events with respect to the Certificates will include each of
the events specified in the Prospectus under "Description of the Certificates
- -- Pay Out Events" and the following:
[(a) a failure on the part of the Seller (i) to make any payment or
deposit required under the Pooling Agreement or the Series [199__-__]
Supplement within [____] business days after the day such payment or
deposit is required to be made; or (ii) to observe or perform any other
covenants or agreements of the Seller set forth in the Pooling Agreement
or the Series [199__-__] Supplement, which failure has a material
adverse effect on the [Series [199__-__] Certificateholders] and which
continues unremedied for a period of [___] days after written notice;
(b) any representation or warranty made by the Seller in the Pooling
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
and continues to be incorrect in any material respect for a period of
[___] days after written notice and as a result of which the interests
of the Series [199__-__] Certificateholders are materially and adversely
affected; PROVIDED, HOWEVER, that a Pay Out Event shall not be deemed to
occur thereunder if the Bank has repurchased the related Receivables or
all such Receivables, if applicable, during such period in accordance with
the provisions of the Pooling Agreement;
(c) a failure by the Seller to make an Addition to the Trust within
[____] business days after the day on which it is required to make such
Addition pursuant to the Pooling Agreement or the Series [199__-__]
Supplement;
(d) the occurrence of any Servicer Default;
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[(e) a reduction of the [average] Portfolio Yield for any [three]
consecutive Monthly Periods to a rate less than the [average of the Base
Rate[s]] for such period;]
[(f) the failure to pay in full the Class A Invested Amount on the
Class A Expected Final Payment Date, or the Class B Invested Amount on
the Class B Expected Final Payment Date]; and
[(g) the Class B Investment Amount is reduced to less that
$__________.]
Then, in the case of any event described in subparagraph (a), (b) or
(d), after the applicable grace period, if any, set forth in such
subparagraphs, either the Trustee or the Holders of Series [199__-__]
Certificates evidencing more than 50% of the aggregate unpaid principal
amount of Series [199__-__] Certificates by notice then given in writing to
the Seller and the Servicer (and to the Trustee if given by the Series
[199__-__] Certificateholders) may declare that a Pay Out Event has occurred
with respect to Series [199__-__] as of the date of such notice, and, in the
case of any event described in subparagraph (c), (e) or (f), a Pay Out Event
shall occur with respect to Series [199__-__] without any notice or other
action on the part of the Trustee immediately upon the occurrence of such
event.
For purposes of the Pay Out Event described in clause [(e)] above, the
terms "Base Rate" and "Portfolio Yield" will be defined as follows with
respect to the Series [199__-__]Certificates:
"Base Rate" means, with respect to any Monthly Period, [___%] [the
annualized percentage equivalent of a fraction, the numerator of which
is equal to the sum of Class A Monthly Interest, Class B Monthly Interest
and the Monthly Servicing Fee with respect to the Series [199__-__]
Certificates for the related Distribution Date and the denominator of
which is the Series [199__-__] Invested Amount as of the last day of the
preceding Monthly Period] [the sum of the weighted average of the Class
A Certificate Rate and the Class B Certificate Rate for the related
Interest Period and the Servicing Fee Rate].
"Portfolio Yield" means, with respect to any Monthly Period, the
annualized percentage equivalent of a fraction, the numerator of which
is equal to [(a) the Floating Allocation Percentage of collections of
Finance Charge Receivables [(including any investment earnings that are
to be treated as collections of Finance Charges Receivables in accordance
with the Pooling Agreement)] for such Monthly Period [plus (b) the amount
of Principal Funding Investment Proceeds for the related Distribution
Date,] [plus (c) the amount of any Interest Funding Investment Proceeds
for the related Distribution Date] [plus (d) any Excess Finance Charge
Collections that are allocated to Series [199__-__]], [plus (e) the amount
of funds withdrawn from the Reserve Account and included in Class A
Available Funds or Class B Available Funds, in each case for the
Distribution Date with respect to such Monthly Period] [plus (f) the amount
of any investment earnings transferred from the Pre-Funding Account to
the Collection Account on such Distribution Date], and minus (g) the
Investor Default Amount for the Distribution Date with respect to such
Monthly Period, and the denominator of which is the Series [199__-__]
Invested Amount as of the last day of the preceding Monthly Period].
If the proceeds of any sale of the Receivables following the occurrence of
an Insolvency Event with respect to the Seller, as described in the
Prospectus under "Description of the Certificates-Pay Out Events," allocated
to the Class A Invested Amount and the proceeds of any collections on the
Receivables in the Collection Account [and any Available [Cash] Collateral
Amount] [and any amounts on deposit in the [Principal Funding Account]
[Interest Funding Account] [other accounts]] are not sufficient to pay in
full the remaining amount due on the Class A Certificates, the Class A
Certificateholders will suffer a corresponding loss and no such proceeds will
be available to the Class B Certificateholders. [Following any such sale of
the Receivables, any [Available [Cash] Collateral Amount] will be drawn and
distributed to the Class B Certificateholders to the extent necessary to
reimburse any previous reductions in the Class B
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Invested Amount as a result of unreimbursed charge-offs. If the [amount
available under the Cash Collateral Account] is less than the amount of such
previous reductions, the Class B Certificateholders will incur a loss.] See
"Certain Legal Aspects of the Receivables -- Certain Matters Relating to
Receivership" in the Prospectus for a discussion of the impact of recent
federal legislation on the Trustee's ability to liquidate the Receivables.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
The share of the Servicing Fee allocable to the Series [199__-__]
Certificateholders with respect to any Distribution Date (the "Monthly
Servicing Fee") shall be equal to one-twelfth of the product of (a) [____]%
(the "Servicing Fee Rate") and (b) (i) the [sum of the] [Adjusted] Invested
Amount [and the Enhancement Invested Amount, if any,] as of the last day of
the Monthly Period preceding such Distribution Date, minus (ii) the product
of (A) any amount on deposit in the Special Funding Account as of the last
day of the Monthly Period preceding such Distribution Date and (B) the
Floating Allocation Percentage with respect to such Monthly Period (the
amount calculated pursuant to this clause (b) is referred to as the
"Servicing Base Amount"); PROVIDED, HOWEVER, with respect to the first
Distribution Date, the Monthly Servicing Fee shall be equal to $[__________].
[On each Distribution Date, Servicer Interchange with respect to the related
Monthly Period that is on deposit in the Collection Account shall be
withdrawn from the Collection Account and paid to the Servicer in payment of
a portion of the Monthly Servicing Fee with respect to such Monthly Period.
The "Servicer Interchange" for any Monthly Period [for which the Bank is the
Servicer] will be the lesser of (a) the amount of Interchange that is
allocated to the Series [Series 199__-__] Certificateholders and deposited in
the Collection Account with respect to such Monthly Period and (b)
one-twelfth of the product of (i) [ ]% and (ii) the Servicing Base Amount.
[In the case of any insufficiency of Servicer Interchange on deposit in the
Collection Account, a portion of the Monthly Servicing Fee with respect to
such Monthly Period will not be paid to the extent of such insufficiency.]]
The share of the Monthly Servicing Fee allocable to the Class A
Certificateholders [(after giving effect to the distribution of any Servicer
Interchange to the Servicer)] with respect to any Distribution Date (the
"Class A Servicing Fee") shall be equal to one-twelfth of the product of (a)
the Class A Floating Percentage, (b) [the Servicing Fee Rate][ [____]% (the
"Net Servicing Fee Rate")] and (c) the Servicing Base Amount; PROVIDED,
HOWEVER, that with respect to the first Distribution Date, the Class A
Servicing Fee shall be equal to $[__________]. The share of the Monthly
Servicing Fee allocable to the Class B Certificateholders [(after giving
effect to any distribution of Servicer Interchange to the Servicer)] with
respect to any Distribution Date (the "Class B Servicing Fee") shall be equal
to one-twelfth of the product of (a) the Class B Floating Percentage, (b)
[the Servicing Fee Rate] [the Net Servicing Fee Rate] and (c) the Servicing
Base Amount; PROVIDED, HOWEVER, that with respect to the first Distribution
Date, the Class B Servicing Fee shall be equal to $[__________]. The
remainder of the Servicing Fee shall be paid by the holder of the Seller
Certificate or the certificateholders of other Series (as provided in the
related Supplements) and in no event will the Trust, the Trustee, the Series
[199__-__] Certificateholders or the [Cash Collateral Depositor] [Credit
Enhancement Provider] be liable for the share of the Servicing Fee to be paid
by the holder of the Seller Certificate or the Certificateholders of any
other Series. 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 "-- Payment of Interest,
Fees and Other Items" above.
[SERIES TERMINATION
If, on the [__________] Distribution Date, [____] months prior to the
Termination Date, the Series [199__-__] Invested Amount (after giving effect
to all changes therein on such date) exceeds zero, the Servicer will, within
the 40-day period beginning on such date, solicit bids for the sale of
interests in the Principal Receivables or certain Principal Receivables,
together in each case with the related Finance Charge Receivables, in an
amount equal to the [sum of the] Series [199__-__] Invested Amount [and the
Enhancement Invested Amount, if any,] at the close of business on the last
day of the Monthly Period preceding the Series [199__-__] Termination Date
(after giving effect to all distributions required to be made
S-46
<PAGE>
on the Series [199__-__] Termination Date). The Seller and the [Cash
Collateral Depositor] [Credit Enhancement Provider] will be entitled to
participate in, and to receive notice of each bid submitted in connection
with, such bidding process. Upon the expiration of such 40-day period, the
Trustee will determine (a) which bid is the highest cash purchase offer (the
"Highest Bid") and (b) the amount (the "Available Final Distribution Amount")
which otherwise would be available in the Collection Account on the Series
[199__-__] Termination Date for distribution to the Series [199__-__]
Certificateholders. The Servicer will sell such Receivables on the Series
[199__-__] Termination Date to the bidder who provided the Highest Bid and
will deposit the proceeds of such sale in the Collection Account for
allocation (together with the Available Final Distribution Amount) to the
Series [199__-__] Certificateholders' Interest.
Except as necessary to reimburse previous reductions in the Series
199__-__ Invested Amount as a result of unreimbursed Class B Investor
Charge-offs, amounts [on deposit in the Cash Collateral Account] [available
under the Credit Enhancement] will not be available to cover any shortfall,
if the proceeds of such sale, together with the Available Final Distribution
Amount, are less than the Series [199__-__] Invested Amount plus accrued and
unpaid interest on the Series [199__-__] Certificates. Accordingly, in such
event, the Series [199__-__] Certificateholders will incur a loss.
REPORTS
No later than the third business day prior to each Distribution Date,
the Servicer will forward to the Trustee, the Paying Agent, each Rating
Agency and [the Cash Collateral Depositor] [Credit Enhancement Provider], a
statement (the "Monthly Report") prepared by the Servicer setting forth
certain information with respect to the Trust and the Class A Certificates
and the Class B Certificates, including: [(a) the aggregate amount of
Principal Receivables and Finance Charge Receivables in the Trust as of the
end of such Monthly Period; (b) the Series [199__-__] Invested Amount [and
the Series [199__-__] Adjusted Invested Amount], the Class A Investment
Amount [and the Class A Adjusted Invested Amount] and the Class B Invested
Amount [and the Class B Adjusted Invested Amount]; (c) the Floating
Allocation Percentage the Class A Floating Percentage and the Class B
Floating Percentage and the Class A Principal Percentage and the Class B
Principal Percentage and, during the [Accumulation Period] [Controlled
Amortization Period] or Early Amortization Period, the Principal Allocation
Percentage; (d) the amount of collections of Principal Receivables and
Finance Charge Receivables processed during the related Monthly Period and
the portion thereof allocated to the Series [199__-__] Certificateholders'
Interest; (e) the aggregate outstanding balance of Accounts that were [30],
[60] and [90] days or more delinquent as of the end of such Monthly Period;
(f) the Investor Defaulted Amount, the Class A Investor Defaulted Amount and
the Class B Investor Defaulted Amount and the Defaulted Amount with respect
to such Monthly Period; (g) the aggregate amount, if any, of Class A or Class
B Investor Charge-Offs and any Class A or Class B Investor Charge-Offs
reimbursed on the related Monthly Period, for such Monthly Period; (h) the
Monthly Investor Servicing Fee, Class A Servicing Fee and Class B Servicing
Fee for such Monthly Period; (i) the Portfolio Yield for such Monthly Period;
(j) the Base Rate for such Monthly Period; (k) the [Available [Shared] [Cash]
Collateral Amount] [Available Credit Enhancement Amount] for such
Distribution Date]; and [other amounts].
UNDERWRITING
Subject to the terms and conditions set forth in the underwriting
agreement (the "Underwriting Agreement") between the Bank and the
underwriters named below (the "Underwriters"), the Bank has agreed to sell to
the Underwriters, and each of the Underwriters has severally agreed to
purchase, the principal amount of the Class A Certificates and Class B
Certificates set forth opposite its name:
S-47
<PAGE>
Principal Amount Principal Amount
of Class A of Class B
Underwriters Certificates Certificates
------------ --------------- ---------------
. . . . . . . . . . .
. . . . . . . . . . .
----------- -----------
Total . . . . .$ $
=========== ===========
The Underwriting Agreement provides that the obligations of the
Underwriters to pay for and accept delivery of the Series [199__-__]
Certificates are subject to the approval of certain legal matters by their
counsel and to certain other conditions. All of the Series [199__-__]
Certificates offered hereby will be issued if any are issued.
The Underwriters propose initially to offer the Class A Certificates to
the public at the price set forth on the cover page hereof and to certain
dealers at such price less concessions not in excess of ____% of the
principal amount of the Class A Certificates. The Underwriters may allow,
and such dealers may reallow, concessions not in excess of ____% of the
principal amount of the Class A Certificates to certain brokers and dealers.
After the initial public offering, the public offering price and other
selling terms may be changed by the Underwriters.
The Underwriters propose initially to offer the Class B Certificates to
the public at the price set forth on the cover page hereof and to certain
dealers at such price less concessions not in excess of ____% of the
principal amount of the Class B Certificates. The Underwriters may allow,
and such dealers may reallow, concessions not in excess of ____% of the
principal amount of the Class B Certificates to certain brokers and dealers.
After the initial public offering, the public offering price and other
selling terms may be changed by the Underwriters.
The Bank will indemnify the Underwriters against certain liabilities,
including liabilities under the Securities Act, or contribute to payments the
Underwriters may be required to make in respect thereof.
S-48
<PAGE>
GLOSSARY
Account Sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-19
Accumulation Period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-8
Available Credit Enhancement Amount. . . . . . . . . . . . . . . . . . . . .S-42
Available Final Distribution Amount. . . . . . . . . . . . . . . . . . . . .S-47
Available Principal Collections. . . . . . . . . . . . . . . . . . . .S-27, S-28
Available Reserve Account Amount . . . . . . . . . . . . . . . . . . . . . .S-34
Available Shared Collateral Amount . . . . . . . . . . . . . . . . . . . . .S-40
Available [Cash] Collateral Amount . . . . . . . . . . . . . . . . . . . . .S-40
Base Rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-45
Cash Collateral Account. . . . . . . . . . . . . . . . . . . . . . . . . . .S-11
Cash Collateral Depositor. . . . . . . . . . . . . . . . . . . . . . . . . .S-40
Class A Accumulation Period Length . . . . . . . . . . . . . . . . . . . . .S-28
Class A Additional Interest. . . . . . . . . . . . . . . . . . . . . . . . .S-36
Class A Adjusted Invested Amount . . . . . . . . . . . . . . . . . . . S-5, S-32
Class A Available Funds. . . . . . . . . . . . . . . . . . . . . . . . . . .S-26
Class A Certificateholders' Interest . . . . . . . . . . . . . . . . . . . . S-4
Class A Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-3
Class A Expected Final Payment Date. . . . . . . . . . . . . . . . . . . . . S-8
Class A Floating Percentage. . . . . . . . . . . . . . . . . . . . . . . . .S-30
Class A Invested Amount. . . . . . . . . . . . . . . . . . . . . . . . . . .S-32
Class A Investor Charge-Off. . . . . . . . . . . . . . . . . . . . . . . . .S-43
Class A Investor Default Amount. . . . . . . . . . . . . . . . . . . . . . .S-42
Class A Monthly Interest . . . . . . . . . . . . . . . . . . . . . . . . . .S-36
Class A Monthly Principal. . . . . . . . . . . . . . . . . . . . . . . . . .S-39
Class A Principal Percentage . . . . . . . . . . . . . . . . . . . . . . . .S-31
Class A Servicing Fee. . . . . . . . . . . . . . . . . . . . . . . . . . . .S-46
Class A [Controlled Amortization] [Accumulation] Period. . . . . . . . . . . S-8
Class B Additional Interest. . . . . . . . . . . . . . . . . . . . . . . . .S-36
Class B Adjusted Invested Amount . . . . . . . . . . . . . . . . . . . . . .S-32
Class B Adjusted Invested Amount.. . . . . . . . . . . . . . . . . . . . . . S-5
Class B Available Funds. . . . . . . . . . . . . . . . . . . . . . . . . . .S-27
Class B Certificateholders' Interest . . . . . . . . . . . . . . . . . . . . S-4
Class B Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-3
Class B Floating Percentage. . . . . . . . . . . . . . . . . . . . . . . . .S-30
Class B Invested Amount. . . . . . . . . . . . . . . . . . . . . . . . . . .S-32
Class B Investor Charge-Off. . . . . . . . . . . . . . . . . . . . . . . . .S-43
Class B Investor Default Amount. . . . . . . . . . . . . . . . . . . . . . .S-42
Class B Monthly Interest . . . . . . . . . . . . . . . . . . . . . . . . . .S-37
Class B Monthly Principal. . . . . . . . . . . . . . . . . . . . . . . . . .S-39
Class B Principal Commencement Date. . . . . . . . . . . . . . . . . . . . . S-8
Class B Principal Percentage . . . . . . . . . . . . . . . . . . . . . . . .S-31
Class B [Controlled Amortization] [Accumulation] Period. . . . . . . . . . . S-8
Controlled Accumulation Amount . . . . . . . . . . . . . . . . . . . . . . .S-39
Controlled Amortization Amount . . . . . . . . . . . . . . . . . . . . . . .S-39
Controlled Amortization Period . . . . . . . . . . . . . . . . . . . . . . . S-8
Covered Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-33
Credit Enhancement Agreement . . . . . . . . . . . . . . . . . . . . . . . .S-37
Credit Enhancement Provider. . . . . . . . . . . . . . . . . . . . . . . . .S-42
Deficit Controlled Accumulation Amount . . . . . . . . . . . . . . . . . . .S-40
S-49
<PAGE>
Deficit Controlled Amortization Amount . . . . . . . . . . . . . . . . . . .S-39
Early Termination Amount . . . . . . . . . . . . . . . . . . . . . . . . . . S-7
Economic Pay Out Event . . . . . . . . . . . . . . . . . . . . . . . . . . .S-41
Enhancement Invested Amount. . . . . . . . . . . . . . . . . . . . . . S-6, S-32
ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-14
Excess Spread. . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-9, S-37
Excluded Series. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-44
Floating Allocation Percentage . . . . . . . . . . . . . . . . . . . . . . .S-30
Full Invested Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-6
Funding Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-6, S-29
Group [____] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-11
Highest Bid. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-47
Index. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-3
Initial Cash Collateral Amount . . . . . . . . . . . . . . . . . . . . . . .S-11
Initial Class B Collateral Amount. . . . . . . . . . . . . . . . . . . . . .S-11
Initial Shared Collateral Amount . . . . . . . . . . . . . . . . . . . . . .S-11
Interest Funding Investment Proceeds . . . . . . . . . . . . . . . . . . . .S-34
Interest Period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-26
Investor Default Amount. . . . . . . . . . . . . . . . . . . . . . . . . . .S-42
Loan Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-37
Monthly Cash Collateral Fee. . . . . . . . . . . . . . . . . . . . . . . . .S-37
Monthly Credit Enhancement Fee . . . . . . . . . . . . . . . . . . . . . . .S-37
Monthly Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-47
Monthly Servicing Fee. . . . . . . . . . . . . . . . . . . . . . . . . . . .S-46
Net Servicing Fee Rate . . . . . . . . . . . . . . . . . . . . . . . . . . .S-46
Paired Series. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-43
Period Length Determination Date . . . . . . . . . . . . . . . . . . . . . .S-28
Portfolio Adjusted Yield . . . . . . . . . . . . . . . . . . . . . . . . . .S-34
Portfolio Yield. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-45
Pre-Funding Account. . . . . . . . . . . . . . . . . . . . . . . . . . S-6, S-30
Pre-Funding Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-6
Principal Allocation Percentage. . . . . . . . . . . . . . . . . . . . . . .S-30
Principal Funding Account Balance. . . . . . . . . . . . . . . . . . . . . .S-33
Principal Funding Investment Proceeds. . . . . . . . . . . . . . . . . . . .S-33
Rate Determination Date. . . . . . . . . . . . . . . . . . . . . . . . . . . S-3
Reallocated Principal Collections. . . . . . . . . . . . . . . . . . . S-9, S-35
Record Date. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-26
Required Amount. . . . . . . . . . . . . . . . . . . . . . . . . . . . S-9, S-35
Required Principal Balance . . . . . . . . . . . . . . . . . . . . . . . . .S-44
Required Reserve Account Amount. . . . . . . . . . . . . . . . . . . . . . .S-34
Reserve Account. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-33
Reserve Account Funding Date . . . . . . . . . . . . . . . . . . . . . . . .S-33
Revolving Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-8
Series Servicing Fee Percentage. . . . . . . . . . . . . . . . . . . . . . . S-7
Series [199__-__] Supplement . . . . . . . . . . . . . . . . . . . . . . . .S-26
Series [199__-__] Certificates . . . . . . . . . . . . . . . . . . . . . . . S-3
Series [199__-__] Termination Date . . . . . . . . . . . . . . . . . . . . .S-13
Servicer Interchange . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-46
Servicing Fee Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-46
Trust. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-3
Underwriters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .S-47
Underwriting Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . .S-47
S-50
<PAGE>
- ----------------------------------------
NO DEALER, SALESMAN OR OTHER
PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN
THIS PROSPECTUS SUPPLEMENT OR THE
ACCOMPANYING PROSPECTUS AND, IF
GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY
THE SELLER OR BY THE UNDERWRITERS.
NEITHER THIS PROSPECTUS
SUPPLEMENT NOR THE ACCOMPANYING
PROSPECTUS CONSTITUTES AN OFFER OR
A SOLICITATION BY ANYONE IN ANY
STATE IN WHICH SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED OR
TO ANYONE TO WHOM IT IS UNLAWFUL
TO MAKE SUCH OFFER OR
SOLICITATION. NEITHER THE DELIVERY
OF THIS PROSPECTUS SUPPLEMENT OR
THE ACCOMPANYING PROSPECTUS, NOR
ANY SALE MADE HEREUNDER SHALL,
UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF
THE SELLER SINCE THE DATE HEREOF
OR THEREOF OR THAT THE INFORMATION
CONTAINED OR INCORPORATED BY
REFERENCE HEREIN OR THEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT
TO ITS DATE.
-------------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT PAGE
Summary of Series Terms. . . . . . . S-
Special Considerations . . . . . . . S-
Maturity Considerations. . . . . . . S-
The Portfolio. . . . . . . . . . . . S-
The Receivables. . . . . . . . . . . S-
Use of Proceeds. . . . . . . . . . . S-
The Bank . . . . . . . . . . . . . . S-
Series Provisions. . . . . . . . . . S-
Underwriting . . . . . . . . . . . . S-
Index of Defined Terms . . . . . . . S-
PROSPECTUS
Available Information. . . . . . . . . .
Reports to Certificateholders. . . . . .
Incorporation of Certain Documents by
Reference . . . . . . . . . . . . . .
Prospectus Summary . . . . . . . . . . .
Special Considerations . . . . . . . . .
The Bank's Credit Card Activities. . . .
The Bank . . . . . . . . . . . . . . . .
The Receivables. . . . . . . . . . . . .
Use of Proceeds. . . . . . . . . . . . .
The Trust. . . . . . . . . . . . . . . .
Description of the Certificates. . . . .
The Pooling and Servicing Agreement. . .
Certain Legal Aspects of the
Receivables. . . . . . . . . . . . . . .
Certain Federal Income Tax
Consequences . . . . . . . . . . . . . .
ERISA Considerations . . . . . . . . . .
Plan of Distribution . . . . . . . . . .
Index of Defined Terms . . . . . . . . .
UNTIL [ ], 199[ ]
[(90 DAYS AFTER THE DATE OF THIS
PROSPECTUS)], ALL DEALERS EFFECTING
TRANSACTIONS IN THE CERTIFICATES
WHETHER OR NOT PARTICIPATING IN THIS
DISTRIBUTION, MAY BE REQUIRED TO
DELIVER A PROSPECTUS SUPPLEMENT AND
PROSPECTUS. THIS IS IN ADDITION TO
THE OBLIGATION OF DEALERS TO DELIVER
A PROSPECTUS SUPPLEMENT AND
PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO
THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
- ----------------------------------------
- ----------------------------------------
CHEVY CHASE
MASTER CREDIT CARD TRUST
$[_________] [FLOATING RATE] [ %]
SERIES [199 - ]
ASSET BACKED CERTIFICATES
CHEVY CHASE
BANK, F.S.B.,
AS SELLER AND SERVICER
_____________________
PROSPECTUS SUPPLEMENT
_____________________
[NAME OF UNDERWRITERS]
- ----------------------------------------
<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.
Registration Fee. . . . . . . . . . . . . . . . . . . . .. . . $303.03
Printing and Engraving. . . . . . . . . . . . . . . . . . . . . . *
Trustee's Fees. . . . . . . . . . . . . . . . . . . . . . . . . . *
Legal Fees and Expenses . . . . . . . . . . . . . . . . . . . . *
Blue Sky Fees and Expenses . . . . . . . . . . . . . . . . . . *
Accountants' Fees and Expenses. . . . . . . . . . . . . . . . . *
Rating Agency Fees. . . . . . . . . . . . . . . . . . . . . . . *
Miscellaneous Fees. . . . . . . . . . . . . . . . . . . . . . . . *
Total. . . . . . . . . . . . . . . . . . . . . . . . . . .$ *
- ------------------
* To be filed by Amendment
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
In the case of the Bank, 12 C.F.R. Section 545.121 of the rules and
regulations of the OTS prescribe the conditions under which indemnification may
be obtained by a present or former director, officer or employee of the Bank
against whom an action has been brought or is threatened, for any amount for
which that person is liable under a judgment and for reasonable costs and
expenses, including reasonable attorney's fees, actually paid or incurred by
that person defending or settling such action. Subject to prior OTS review, the
OTS rules and regulations require the Bank to indemnify the director, officer or
employee if (a) a final judgment on the merits is in his favor, or (b) in the
case of (i) settlement, (ii) final judgment against him or (iii) final judgment
in his favor, other than on the merits, if a majority of the disinterested
directors of the Bank determines that he was acting in good faith within the
scope of his employment or authority as he could reasonably have perceived it
under the circumstances, and for a purpose he could reasonably have believed
under the circumstances was in the best interests of the Bank or its
shareholders.
In the case of CCB Holding, Article EIGHTH of the Articles of Incorporation
of CCB Holding provides for the indemnification of the directors, officers and
employees of CCB Holding, or persons serving at the request of CCB Holding as a
director, officer, employee or agent of another corporation or other business
entity, to the full extent provided by Section 145 of the State of Delaware
applicable to Delaware corporations, as such laws exist or may hereafter be
amended (but in the case of any such amendment, only to the extent that such
amendment permits CCB Holding to provide broader indemnification that such laws
permitted prior to such amendment). This indemnification applies to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative. Such indemnification may include all
expenses (including attorneys' fees, judgments, fines, penalties and amounts
paid in settlement) actually and reasonably incurred by the indemnified person.
However, CCB Holding is not authorized to indemnify against expenses, penalties,
or other payments incurred in an administrative proceeding or action instituted
by a bank regulatory agency, which proceedings or action results in a final
order against such person assessing civil money penalties or
II-1
<PAGE>
requiring payments to CCB Holding. CCB Holding is authorized to advance
expenses upon receipt of an undertaking by or on behalf of such director,
officer or employee to repay the same if it shall ultimately be determined
that he or she is not entitled to be indemnified.
The rights of indemnification and advancement of expenses provided by the
Articles of Incorporation of CCB Holding are not exclusive of any other rights
to which a person seeking indemnification or advancement of expenses may be
entitled under any statute, by-law, agreement, vote of stockholders or
disinterested directors, or otherwise.
The officers and directors of the Bank and of CCB Holding are covered by
directors' and officers' insurance insuring them against liability they may
incur in their capacities as such, subject in the case of the Bank to 12 C.F.R.
Section 545.121 of the rules and regulations of the OTS.
Pursuant to Section 7 of each of the contemplated underwriting
agreements relating to Chevy Chase Master Credit Card Trust and Chevy Chase
Master Credit Card Trust II, forms of which are incorporated by reference,
the underwriters will agree to indemnify the Bank and CCB Holding, if
applicable, and each of their respective officers and directors against
certain liabilities, including liabilities under the Securities Act of 1933,
as amended, arising from information which has been or will be furnished to
the Bank and to CCB Holding by, if applicable, the Underwriters that appears
in the Registration Statement or any Prospectus.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENTS
(a) EXHIBITS
----------
1.1 -- Form of Underwriting Agreement (relating to Chevy Chase
Master Credit Card Trust).(1)
1.2 -- Form of Underwriting Agreement (relating to Chevy Chase
Master Credit Card Trust II).(4)
4.1 -- Amended and Restated Pooling and Servicing Agreement
(relating to Chevy Chase Master Credit Card Trust), dated as
of August 1, 1994, and certain other related agreements as
Exhibits thereto.(2)
4.2 -- First Amendment to the Amended and Restated Pooling and
Servicing Agreement, dated as of September 28, 1994.(3)
4.3 -- Second Amendment to the Amended and Restated Pooling and
Servicing Agreement, dated as of March 31, 1995.(5)
4.4 -- Third Amendment to the Amended and Restated Pooling and
Servicing Agreement, dated as of July 1, 1996.(6)
4.5 -- Form of Series Supplement (relating to Chevy Chase Master
Credit Card Trust), Version #1 (including form of
Certificates).(7)
4.6 -- Form of Series Supplement (relating to Chevy Chase Master
Credit Card Trust), Version #2 (including forms of
Certificates).(8)
4.7 -- Pooling and Servicing Agreement (relating to Chevy
Chase Master Credit Card Trust II), dated as of
June 1, 1995, and certain other related
agreements as exhibits thereto.(9)
4.8 -- First Amendment, dated as of March 28, 1996, to the
Pooling and Servicing Agreement relating to Chevy Chase
Master Credt Card Trust II.(10)
4.9 -- Second Amendment, dated as of July 1, 1996, to the Pooling
and Servicing Agreement relating to Chevy Chase Master
Credit Card Trust II.(11)
4.10 -- Form of Series Supplement (relating to Chevy Chase Master
Credit Card Trust II), Version #1 (including form of
Certificate).(12)
4.11 -- Form of Series Supplement (relating to Chevy Chase Master
Credit Card Trust II), Version #2 (including forms of
Certificates).(13)
II-2
<PAGE>
5.1 -- Opinion of Shaw, Pittman, Potts & Trowbridge, counsel to the
Transferors, with respect to legality.
8.1 -- Opinion of Orrick, Herrington & Sutcliffe with respect to
tax matters.
8.2 -- Opinion of Shaw, Pittman, Potts & Trowbridge with respect to
tax matters.
10.1 -- Receivables Purchase Agreement (relating to Chevy Chase
Master Credit Card Trust II), dated as of June 1, 1995,
and certain other related agreements as exhibits
thereto.(14)
23.1 -- Consent of Shaw, Pittman, Potts & Trowbridge, counsel to the
Transferors, (included in its opinions filed as Exhibits 5.1
and 8.2).
23.2 -- Consent of Orrick, Herrington & Sutcliffe (included in its
opinion filed as Exhibit 8.1).
24.1 -- Powers of Attorney (included on signature pages).
- --------------------------
(1) Incorporated by reference to Exhibit 1 in Registration Statement No. 33-
74802.
(2) Incorporated by reference to Exhibit 4 in Form 8-A, filed by
Chevy Chase Bank, F.S.B. with the Commission on August 9, 1994.
(3) Incorporated by reference to Exhibit No. 4.4 in Form 8-A, filed by Chevy
Chase Bank, F.S.B. with the Commission on November 4, 1994.
(4) Incorporated by reference to the identically numbered exhibit in
Registration Statement No. 33-92180.
(5) Incorporated by reference to Exhibit 4.13 in Form 8-K, filed by Chevy
Chase Master Credit Card Trust I with the Commission on August 21, 1996.
(6) Incorporated by reference to Exhibit 4.14 in Form 8-K, filed by Chevy
Chase Master Credit Card Trust I with the Commission on August 21, 1996.
(7) Incorporated by reference to Exhibit 4.4 in Registration Statement
No. 33-92180.
(8) Incorporated by reference to Exhibit 4.5 in Registration Statement
No. 33-92180.
(9) Incorporated by reference to Exhibit 4.10 in Form 8-A, filed by Chevy
Chase Bank, F.S.B. and CCB Holding Corporation with the Commission on
July 17, 1995.
(10) Incorporated by reference to Exhibit 4.5 in Form 8-K, filed by Chevy
Chase Master Credit Card Trust II with the Commission on August 21, 1996.
(11) Incorporated by reference to Exhibit 4.6 in Form 8-K, filed by Chevy
Chase Master Credit Card Trust II with the Commission on August 21, 1996.
(12) Incorporated by reference to Exhibit 4.7 in Registration Statement
No. 33-92180.
(13) Incorporated by reference to Exhibit 4.8 in Registration Statement
No. 33-92180.
(14) Incorporated by reference to Exhibit 4.12 in Form 8-A, filed by Chevy
Chase Bank, F.S.B. and CCB Holding Corporation with the Commission on
July 17, 1995.
(b) Financial Statements
All financial statements, schedules and historical financial information
have been omitted as they are not applicable.
ITEM 17. UNDERTAKINGS
Each of the undersigned Registrants hereby undertakes:
(a) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement: (i) to include any
prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii)
to reflect in the prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent post-
effective amendment thereof) that, 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 volume of
securities offered would not exceed that which was registered) and any
deviation from the low or high end 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
paragraphs (a)(i) and (a)(ii) do not apply if the information required
to be included in a post-effective amendment thereby is contained in
periodic reports filed pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in
this Registration Statement.
II-3
<PAGE>
(b) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new Registration Statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial BONA FIDE offering hereof.
(c) To remove from registration by means of a post-effective amendment any
of the securities being registered that 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) 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-4
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL
REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF CHEVY CHASE, STATE OF MARYLAND, ON OCTOBER 23, 1996.
CHEVY CHASE BANK, F.S.B.
as Originator of the Trust and Registrant
By: /s/ B. Francis Saul II
--------------------------------------
Name: B. Francis Saul II
Title: Chairman of the Board and
Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Stephen R. Halpin, Jr. and Joel A.
Friedman, and each of them, his true and lawful attorney-in-fact and agent,
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 attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as might or could be done in person, hereby ratifying and confirming
all said attorneys-in-fact and agents or any of them, or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS
AMENDED, THIS REGISTRATION STATEMENT HAS BEEN SIGNED ON OCTOBER 23, 1996 BY THE
FOLLOWING PERSONS IN THE CAPACITIES INDICATED.
SIGNATURE TITLE
--------- -----
/s/ Alexander R. M. Boyle Vice Chairman of the Board
- -----------------------------------
Alexander R. M. Boyle
/s/ Vincent C. Burke, Jr. Director
- -----------------------------------
Vincent C. Burke, Jr.
/s/ Donald G. Conrad Director
- -----------------------------------
Donald G. Conrad
/s/ Gavin Malloy Farr Director
- -----------------------------------
Gavin Malloy Farr
/s/ Joel A. Friedman Senior Vice President and
- ------------------------------------ Controller (Principal
Joel A. Friedman Accounting Officer)
/s/ Gilbert M. Grosvenor
- ------------------------------------
Gilbert M. Grosvenor Director
/s/ Stephen R. Halpin, Jr.
- ------------------------------------ Executive Vice President
Stephen R. Halpin, Jr. (Principal Financial Officer)
<PAGE>
SIGNATURE TITLE
--------- -----
/s/ Penne Percy Korth
- ------------------------------------ Director
Penne Percy Korth
/s/ LaSalle D. Leffall
- ------------------------------------ Director
LaSalle D. Leffall
/s/ William F. McSweeny
- ------------------------------------ Director
William F. McSweeny
/s/ Garland P. Moore, Jr.
- ------------------------------------ Director
Garland P. Moore, Jr.
/s/ Jesse F. Nicholson
- ------------------------------------ Director
Jesse F. Nicholson
- ------------------------------------ Director
George M. Rogers, Jr.
/s/ B. Francis Saul II
- ------------------------------------ Chairman of the Board and Chief
B. Francis Saul II Executive Officer (Principal
Executive Officer)
/s/ Leonard L. Silverstein
- ------------------------------------ Director
Leonard L. Silverstein
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL
REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF WILMINGTON, STATE OF DELAWARE, ON OCTOBER 23, 1996.
CCB HOLDING CORPORATION
as Originator of the Trust and Registrant
By: /s/ Jessica L. Parker
------------------------------
Jessica L. Parker
Director, President, Secretary and Treasurer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Stephen R. Halpin, Jr. and Joel A.
Friedman, and each of them, his true and lawful attorneys-in-fact and agent,
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 attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as might or could be done in person, hereby ratifying and confirming
all said attorneys-in-fact and agents or any of them, or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED ON OCTOBER 23, 1996 BY THE
FOLLOWING PERSONS IN THE CAPACITIES INDICATED.
SIGNATURE TITLE
--------- -----
Director, Senior Vice President
- ------------------------------------ and Controller
Joel A. Friedman
- ------------------------------------ Director
Stephen R. Halpin, Jr.
- ------------------------------------ Director, Vice President and
Mark A. Holles Assistant Secretary
/s/ Katherine M. Palmer
- ------------------------------------ Director
Katherine M. Palmer
/s/ Jessica L. Parker Director, President, Secretary
- ------------------------------------ and Treasurer (Principal Executive
Jessica L. Parker Officer, Principal Financial
Officer and Principal
Accounting Officer)
/s/ Dan M. Roberts
- ------------------------------------ Director
Dan M. Roberts
/s/ Francis B. Jacobs II
- ------------------------------------ Director
Francis B. Jacobs II
<PAGE>
REGISTRATION NO. 33-
==============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
EXHIBITS
TO
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
--------------
CHEVY CHASE BANK, F.S.B. CCB HOLDING CORPORATION
(Originator of the Trusts (Originator of the Chevy
Described Herein) Chase Master Credit Card Trust
II Described Herein)
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
==============================================================================
<PAGE>
EXHIBIT INDEX
EXHIBITS
- --------
5.1 -- Opinion of Shaw, Pittman, Potts & Trowbridge, counsel to the
Transferors, with respect to legality.
8.1 -- Opinion of Orrick, Herrington & Sutcliffe LLP with respect to tax
matters.
8.2 -- Opinion of Shaw, Pittman, Potts & Trowbridge with respect to
tax matters.
23.1 -- Consent of Shaw, Pittman, Potts & Trowbridge (included in its
opinions filed as Exhibits 5.1 and 8.1).
23.2 -- Consent of Orrick, Herrington & Sutcliffe LLP (included in its
opinion filed as Exhibit 8.1).
<PAGE>
Exhibit 5.1
October 23, 1996
Chevy Chase Bank, F.S.B.
8401 Connecticut Avenue
Chevy Chase, Maryland 20815
CCB Holding Corporation
913 North Market Street
Suite 405
Wilmington, Delaware 19801
RE: CHEVY CHASE MASTER CREDIT CARD TRUST AND
CHEVY CHASE MASTER CREDIT CARD TRUST II
ASSET BACKED CERTIFICATES
REGISTRATION STATEMENT NO. 33-_____ ON FORM S-3
-----------------------------------------------
Ladies and Gentlemen:
We have acted as special counsel for Chevy Chase Bank, F.S.B., a federally
chartered stock savings bank (the "Bank"), and CCB Holding Corporation, a
Delaware corporation that is a wholly owned subsidiary of the Bank ("CCB," and
together with the Bank, the "Transferors"), in connection with Registration
Statement No. 33-______ on Form S-3 filed with the Securities and Exchange
Commission (the "Commission") on October 23, 1996 (the "Registration
Statement") 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 or one or more classes (each a "Class") of any such Series
(collectively, the "Certificates"), each such Series representing an
undivided interest in either the Chevy Chase Master Credit Card Trust ("Trust
I") or the Chevy Chase Master Credit Card Trust II ("Trust II," and together
with Trust I, the "Trusts").
Each Series of Certificates issued by Trust I hereafter will be issued
pursuant to an Amended and Restated Pooling and Servicing Agreement between
the Bank, as seller and servicer (the "Seller"), and Bankers Trust Company,
as trustee, as amended from time to time pursuant to the terms thereof, and
the applicable Trust I Supplement (as defined below). Such Amended and
Restated Pooling and Servicing Agreement was
<PAGE>
Chevy Chase Bank, F.S.B.
CCB Holding Corporation
October 23, 1996
Page 2
filed with the Commission on August 9, 1994 as Exhibit 4 to Form 8-A, which
exhibit is incorporated by reference into the Registration Statement as
Exhibit 4.1, was amended by the First Amendment to the Amended and Restated
Pooling and Servicing Agreement, a copy of which was filed with the
Commission on November 4, 1994 as Exhibit 4.4 to Form 8-A, which exhibit is
incorporated by reference into the Registration Statement as Exhibit 4.2, was
further amended by the Second Amendment to the Amended and Restated Pooling
and Servicing Agreement, a copy of which was filed with the Commission on
August 21, 1996 as Exhibit 4.13 to Form 8-K, which exhibit is incorporated by
reference into the Registration Statement as Exhibit 4.3, and was further
amended by the Third Amendment to the Amended and Restated Pooling and
Servicing Agreement, a copy of which was filed with the Commission on August
21, 1996 as Exhibit 4.14 to Form 8-K, which exhibit is incorporated by
reference into the Registration Statement as Exhibit 4.4. The Amended and
Restated Pooling and Servicing Agreement, as amended from time to time
pursuant to the terms thereof, is referred to herein as the "Trust I Pooling
and Servicing Agreement." The forms of Series Supplements relating to the
Series of Certificates to be issued by Trust I (the "Trust I Supplements")
consist of two versions. These versions are attached as Exhibits 4.4 and 4.5
to Registration Statement No. 33-92180, which exhibits are incorporated by
reference into the Registration Statement as Exhibits 4.5 and 4.6.
Each Series of Certificates issued by Trust II will be issued pursuant
to a Pooling and Servicing Agreement among the Bank, as transferor and
servicer, CCB, as transferor, and Bankers Trust Company, as trustee, as
amended from time to time pursuant to the terms thereof, and the applicable
Trust II Supplement (as defined below). Such Pooling and Servicing Agreement
is attached as Exhibit 4.10 to the Form 8-A filed with the Commission on July
17, 1995, which exhibit is incorporated by reference into the Registration
Statement as Exhibit 4.7, was amended by the First Amendment to the Pooling
and Servicing Agreement, a copy of which was filed with the Commission on
August 21, 1996 as Exhibit 4.5 to Form 8-K, which exhibit is incorporated by
reference into the Registration Statement as Exhibit 4.8, and was further
amended by the Second Amendment to the Pooling and Servicing Agreement, a
copy of which was filed with the Commission on August 21, 1996 as Exhibit 4.6
to Form 8-K, which exhibit is incorporated by reference into the Registration
Statement as Exhibit 4.9. The Pooling and Servicing Agreement, as amended from
time to time pursuant to the terms thereof, is referred to herein as the
"Trust II Pooling and Servicing Agreement," and together with the Trust I
Pooling and Servicing Agreement, the "Pooling and Servicing Agreements." The
forms of Series Supplements relating to the Series of Certificates to be
issued by Trust II (the "Trust II Supplements", and together with the Trust I
Supplements, the "Supplements") were filed as Exhibit 4.7 and Exhibit 4.8 to
Registration Statement No. 33-92180, which are incorporated by reference into
the Registration Statement as Exhibit 4.10 and Exhibit 4.11.
We have examined and are familiar with originals, or copies certified or
otherwise identified to our satisfaction, of (i) the federal stock charter
(in the case of the Bank) and the certificate of incorporation (in the case
of CCB) and bylaws of the Transferors, (ii) certain resolutions of the Boards
of Directors or duly authorized committees thereof of the Transferors, (iii)
each Pooling and Servicing Agreement and the form of each Supplement filed
with the Commission (including the forms of Certificate attached as exhibits
thereto) and (iv) such other documents as we have deemed necessary or
appropriate as a basis for the opinion set forth below. In our examination,
we have assumed the genuineness of all signatures, the legal capacity of
natural persons, the authenticity of all documents submitted to us as
originals, the conformity to original documents of all documents submitted to
us as certified, photostatic or facsimile copies and the authenticity
<PAGE>
Chevy Chase Bank, F.S.B.
CCB Holding Corporation
October 23, 1996
Page 3
of the originals of such copies. As to any facts material to the opinion set
forth below, we have relied upon statements and representations of officers and
other representatives of the Transferors.
Based on the foregoing, it is our opinion that:
1. When a Trust I Supplement pertaining to a Series of Certificates has
been duly executed and delivered by the parties thereto, such Trust I
Supplement, taken together with the Trust I Pooling and Servicing Agreement,
upon due authorization by the Seller, will constitute the valid and binding
obligation of the Seller, enforceable against the Seller in accordance with
its terms, subject, as to enforcement, to (a) the effect of bankruptcy,
insolvency, reorganization, moratorium, receivership, conservatorship,
fraudulent conveyance, fraudulent transfer or other similar laws, regulations
or procedures of general applicability relating to or affecting creditors' or
obligees' rights generally or the rights of creditors or obligees of
federally chartered savings banks, the deposits of which are insured by the
Federal Deposit Insurance Corporation, and (b) general principles of equity
and the discretion of the court (regardless of whether enforceability is
considered in a proceeding in equity or at law).
2. When a Trust II Supplement pertaining to a Series of Certificates
has been duly executed and delivered by the parties thereto, such Trust II
Supplement, taken together with the Trust II Pooling and Servicing Agreement,
upon due authorization by the Transferors, will constitute the valid and
binding obligation of the Transferors, enforceable against the Transferors in
accordance with its terms, subject, as to enforcement, to (a) the effect of
bankruptcy, insolvency, reorganization, moratorium, receivership,
conservatorship, fraudulent conveyance, fraudulent transfer or other similar
laws, regulations or procedures of general applicability relating to or
affecting creditors' or obligees' rights generally or the rights of creditors
or obligees of federally chartered savings banks, the deposits of which are
insured by the Federal Deposit Insurance Corporation, or subsidiaries thereof
and (b) general principles of equity and the discretion of the court
(regardless of whether enforceability is considered in a proceeding in equity
or at law).
3. With respect to Trust I, when Certificates of a Series (or a Class or
Classes thereof) registered under the Registration Statement have been duly
executed by the Seller and countersigned and delivered by the Trustee, in
accordance with the Trust I Pooling and Servicing Agreement and the applicable
Trust I Supplement, against payment of the consideration therefor specified in
the applicable Underwriting Agreement, a form of which is attached as Exhibit 1
to Registration Statement No. 33-74802, which exhibit is incorporated by
reference into the Registration Statement as Exhibit 1.1, such Certificates,
upon due authorization by the Seller of their issuance, execution, sale and
delivery, will be legally issued, fully paid and nonassessable and will be
entitled to the benefits of the Trust I Pooling and Servicing Agreement and the
applicable Trust I Supplement.
<PAGE>
Chevy Chase Bank, F.S.B.
CCB Holding Corporation
October 23, 1996
Page 4
4. With respect to Trust II, when Certificates of a Series (or a Class
or Classes thereof) registered under the Registration Statement have been
duly executed by the Transferors and countersigned and delivered by the
Trustee, in accordance with the Trust II Pooling and Servicing Agreement and
the applicable Trust II Supplement, against payment of the consideration
therefor specified in the applicable Underwriting Agreement, a form of which
is attached as Exhibit 1.2 to Registration Statement No. 33-92180, which
exhibit is incorporated by reference into the Registration Statement as
Exhibit 1.2, such Certificates, upon due authorization by the Transferors of
their issuance, execution, sale and delivery, will be legally issued, fully
paid and nonassessable and will be entitled to the benefits of the Trust II
Pooling and Servicing Agreement and the applicable Trust II Supplement.
We do not express any opinion herein concerning any law other than the
laws of the State of Delaware and the federal law of the United States
(excluding the choice of law provisions thereof).
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. We also consent to the reference to Shaw, Pittman,
Potts & Trowbridge under the caption "Legal Matters" in each prospectus
supplement relating to Certificates of a Series (or a Class or Classes thereof)
registered under the Registration Statement in which we are designated as
special counsel for either the Bank or CCB.
Very truly yours,
/s/ Shaw, Pittman, Potts & Trowbridge
SHAW, PITTMAN, POTTS & TROWBRIDGE
<PAGE>
EXHIBIT 8.1
October 23, 1996
Chevy Chase Bank, F.S.B.
8401 Connecticut Avenue
Chevy Chase, Maryland 20815
CCB Holding Corporation
913 North Market Street
Suite 405
Wilmington, Delaware 19801
Re: Chevy Chase Master Credit Card Trust and
Chevy Chase Master Credit Card Trust II
Asset Backed Certificates
Registration Statement No. 33-_____ on Form S-3
--------------------------------------------
Ladies and Gentlemen:
We have acted as special tax counsel for Chevy Chase Bank, F.S.B.
(the "Bank"), a federally chartered stock savings bank, and CCB Holding
Corporation, a Delaware corporation that is a wholly owned subsidiary of the
Bank ("CCB Holding" and, together with the Bank, the "Transferors"), in
connection with Registration Statement No. 33-_____ on Form S-3, as filed
with the Securities and Exchange Commission (the "Commission") on October 23,
1996 (the "Registration Statement"), 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 either Chevy Chase
Master Credit Card Trust ("Trust I") or Chevy Chase Master Credit Card Trust
II ("Trust II", and together with Trust I, the "Trusts").
Each Series of Certificates issued by Trust I hereafter will be
issued pursuant to an Amended and Restated Pooling and Servicing Agreement,
between the Bank, as seller and servicer (the "Seller"), and Bankers Trust
Company, as trustee, as amended from time to time pursuant to the terms
thereof, and the applicable Trust I Supplement (as defined below). Such
Amended and Restated Pooling and Servicing Agreement was filed with the
Commission on August 9, 1994, as Exhibit 4 to Form 8-A, which exhibit is
incorporated by reference into the Registration Statement as Exhibit 4.1, and
was amended by the First Amendment to the Amended and Restated Pooling and
Servicing Agreement, a copy of which was filed by the Bank with the
Commission on November 4, 1994, as Exhibit 4.4 to Form 8-A, which exhibit is
incorporated by reference into the Registration Statement as Exhibit 4.2, was
further amended by the Second Amendment to the Amended and Restated Pooling
and Servicing Agreement, a copy of which was filed with the Commission on
August 21, 1996 as Exhibit 4.13 to Form 8-K, which exhibit is incorporated by
reference into the Registration Statement as Exhibit 4.3, and was further
amended by the Third Amendment to the Amended and Restated Pooling and
Servicing
<PAGE>
Chevy Chase Bank, F.S.B.
CCB Holding Corporation
October 23, 1996
Page 2
Agreement, a copy of which was filed with the Commission on August 21, 1996
as Exhibit 4.14 to Form 8-K, which exhibit is incorporated by reference into
the Registration Statement as Exhibit 4.4. The Amended and Restated Pooling
and Servicing Agreement, as amended from time to time pursuant to the terms
thereof, is referred to herein as the "Trust I Pooling and Servicing
Agreement." The forms of Series Supplements relating to the Series of
Certificates to be issued by Trust I (the "Trust I Supplements") were filed
with Registration Statement No. 33-92180 as Exhibits 4.4 and 4.5, which
exhibits are incorporated by reference into the Registration Statement as
Exhibits 4.5 and 4.6.
Each Series of Certificates issued by Trust II will be issued
pursuant to a Pooling and Servicing Agreement, among the Bank, as transferor
and servicer, CCB Holdings, as transferor, and Bankers Trust Company, as
trustee, as amended from time to time pursuant to the terms thereof, and the
applicable Trust II Supplement (as defined below). Such Pooling and Servicing
Agreement is attached as Exhibit 4.10 to the Form 8-A filed with the
Commission on July 17, 1995, which exhibit is incorporated by reference into
the Registration Statement as Exhibit 4.7, and was amended by the First
Amendment to the Pooling and Servicing Agreement, a copy of which was filed
with the Commission on August 21, 1996 as Exhibit 4.5 to Form 8-K, which
exhibit is incorporated by reference into the Registration Statement as
Exhibit 4.8, and was further amended by the Second Amendment to the Pooling
and Servicing Agreement, a copy of which was filed with the Commission on
August 21, 1996 as Exhibit 4.6 to Form 8-K, which exhibit is incorporated by
reference into the Registration Statement as Exhibit 4.9. The Pooling and
Servicing Agreement, as amended from time to time pursuant to the terms
thereof, is referred to herein as the "Trust II Pooling and Servicing
Agreement," and together with the Trust I Pooling and Servicing Agreement,
the "Pooling and Servicing Agreements." The Forms of Series Supplements
relating to the Series of Certificates to be issued by Trust II (the "Trust
II Supplements," and together with the Trust I Supplements, the
"Supplements") were filed as Exhibit 4.7 and Exhibit 4.8 to Registration
Statement No. 33-92180, which exhibits are incorporated by reference into the
Registration Statement as Exhibit 4.10 and Exhibit 4.11. Terms used herein
and not defined herein shall have the meaning set forth in the Trust I
Pooling and Servicing Agreement or the Trust II Pooling and Servicing
Agreement, as applicable.
We hereby confirm that the Statements set forth in the prospectus
relating to the Certificates offered by the Prospectus for Trust I (the
"Trust I Prospectus") and in the prospectus relating to the Certificates
offered by the Prospectus for Trust II (the "Trust II Prospectus" and,
together with the Trust I Prospectus, the "Prospectus") forming a part of the
Registration Statement under the heading "Tax Matters," with respect to the
Trust I Prospectus, and "Federal Income Tax Consequences," with respect to
the Trust II Prospectus, and the statements set forth in each of the forms of
prospectus supplements relating to the Certificates offered by the Prospectus
(collectively, the "Prospectus Supplement") forming a part of the
Registration Statement under the heading "Summary of Series 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.
We note that the forms of Prospectus and Prospectus Supplement do
not relate to a specific transaction. Accordingly, the above-referenced
description of federal income tax consequences may, under certain
circumstances, require modification in the context of an actual transaction.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. We also consent to the reference to Orrick,
Herrington & Sutcliffe LLP under the
<PAGE>
Chevy Chase Bank, F.S.B.
CCB Holding Corporation
October 23, 1996
Page 3
captions "Legal Matters" and "Tax Matters" in the Trust I Prospectus and "Legal
Matters" and "Certain Federal Income Tax Consequences" in the Trust II
Prospectus. In giving such consent, we do not consider 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 promulgated 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
<PAGE>
Exhibit 8.2
October 23, 1996
Chevy Chase Bank, F.S.B.
8401 Connecticut Avenue
Chevy Chase, Maryland 20815
CCB Holding Corporation
913 North Market Street
Suite 405
Wilmington, Delaware 19801
RE: CHEVY CHASE MASTER CREDIT CARD TRUST AND
CHEVY CHASE MASTER CREDIT CARD TRUST II
ASSET BACKED CERTIFICATES
REGISTRATION STATEMENT ON FORM S-3 (FILE NO. 33-_____)
Ladies and Gentlemen:
We have acted as special tax counsel for Chevy Chase Bank, F.S.B. (the
"Bank"), a federally chartered stock savings bank, and CCB Holding
Corporation, a Delaware corporation that is a wholly-owned subsidiary of the
Bank ("CCB Holding" and, together with the Bank, the "Transferors"), in
connection with Registration Statement No. 33-_____ on Form S-3, as filed
with the Securities and Exchange Commission (the "Commission") on October 23,
1996 (the "Registration Statement"), 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 either Chevy Chase
Master Credit Card Trust ("Trust I") or Chevy Chase Master Credit Card Trust
II ("Trust II", and together with Trust I, the "Trusts").
Each Series of Certificates issued by Trust I hereafter will be issued
pursuant to an Amended and Restated Pooling and Servicing Agreement, between
the Bank, as seller and servicer (the "Seller"), and Bankers Trust Company,
as trustee, as amended from time to time pursuant to the terms thereof,
and the applicable Trust I Supplement (as defined below). Such Amended and
Restated Pooling and Servicing Agreement was filed with the Commission on
August 9, 1994 as Exhibit 4 to form 8-A, which exhibit is incorporated by
reference into the Registration Statement as Exhibit 4.1, was amended by
the First Amendment to the Amended and Restated Pooling and Servicing
Agreement, a copy of which was filed with the Commission on November 4, 1994
as Exhibit 4.4 to Form 8-A, which exhibit is incorporated
<PAGE>
Chevy Chase Bank, F.S.B.
CCB Holding Corporation
October 23, 1996
Page 2
by reference into the Registration Statement as Exhibit 4.2, was further
amended by the Second Amendment to the Amended and Restated Pooling and
Servicing Agreement, a copy of which was filed with the Commission on August
21, 1996 as Exhibit 4.13 to Form 8-K, which exhibit is incorporated by
reference into the Registration Statement as Exhibit 4.3, and was further
amended by the Third Amendment to the Amended and Restated Pooling Agreement,
a copy of which was filed with the Commission on August 21, 1996 as Exhibit
4.14 to Form 8-K, which exhibit is incorporated by reference into the
Registration Statement as Exhibit 4.4. The Amended and Restated Pooling and
Servicing Agreement, as amended from time to time pursuant to the terms
thereof, is referred to herein as the "Trust I Pooling and Servicing
Agreement." The forms of Series Supplements relating to the Series of
Certificates to be issued by Trust I (the "Trust I Supplement") were filed
with Registration Statement No. 33-92180 as Exhibits 4.4 and 4.5, which
exhibits are incorporated by reference into the Registration Statement as
Exhibits 4.5 and 4.6.
Each Series of Certificates issued by Trust II will be issued pursuant
to a Pooling and Servicing Agreement, among the Bank, as transferor and
servicer, CCB, as transferor, and Bankers Trust Company, as trustee, as
amended from time to time pursuant to the terms thereof, and the
applicable Trust II Supplement (as defined below). Such Pooling and
Servicing Agreement is attached as Exhibit 4.10 to the Form 8-A filed with
the Commission on July 17, 1995, which exhibit is incorporated by reference
into the Registration Statement as Exhibit 4.7, was amended by the First
Amendment to the Pooling and Servicing Agreement, a copy of which was filed
with the Commission on August 21, 1996 as Exhibit 4.5 to Form 8-K, which
exhibit is incorporated by reference into the Registration Statement as
Exhibit 4.8, and was further amended by the Second Amendment to the Pooling
and Servicing Agreement, a copy of which was filed with the commission on
August 21, 1996 as Exhibit 4.6 to Form 8-K, which exhibit is incorporated by
reference into the Registration Statement as Exhibit 4.9. The Pooling and
Servicing Agreement, as amended from time to time pursuant to the terms
hereof, is referred to herein as the "Trust II Pooling and Servicing
Agreement," and together with the Trust I Pooling and Servicing Agreement,
the "Pooling and Servicing Agreements." The forms of Series
Supplements relating to the Series of Certificates to be issued by Trust II
(the "Trust II Supplements," and together with the Trust I Supplements, the
"Supplements") were filed as Exhibit 4.7 and Exhibit 4.8
to Registration Statement No. 33-92180, which exhibits are incorporated by
reference into the Registration Statement as Exhibit 4.10 and Exhibit 4.11.
Terms used herein and not defined herein shall have the meaning set forth in
the Trust I Pooling and Servicing Agreement or the Trust II Pooling and
Servicing Agreement, as applicable.
We hereby confirm that the statements set forth in the prospectus
relating to the Certificates offered by the Prospectus for Trust I (the
"Trust I Prospectus") and in the prospectus relating to the Certificates
offered by the Prospectus for Trust II (the "Trust II
<PAGE>
Chevy Chase Bank, F.S.B.
CCB Holding Corporation
October 23, 1996
Page 3
Prospectus" and, together with the Trust I Prospectus, the "Prospectus")
forming a part of the Registration Statement under the heading "Tax Matters,"
with respect to the Trust II Prospectus, and the statements set forth in each
of the forms of prospectus supplements relating to the Certificates offered
by the Prospectus (collectively, the "Prospectus Supplement") forming a part
of the Registration Statement under the heading "Summary of Series 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.
We note that the forms of Prospectus and Prospectus Supplement do not
relate to a specific transaction. Accordingly, the above-referenced
description of federal income tax consequences may, under certain
circumstances, require modification in the context of an actual transaction.
We hereby consent to the filling of this opinion as an exhibit to the
Registration Statement. We also consent to the reference to Shaw, Pittman,
Potts & Trowbridge under the captions "Legal Matters" and "Tax Matters" in
the Trust I Prospectus and "Legal Matters" and "Certain Federal Income Tax
Consequences" in the Trust II Prospectus. In giving such consent, we do not
consider 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
promulgated thereunder, with respect to any part of the Registration
statement, including this opinion as an exhibit or otherwise.
Very truly yours,
/s/ Shaw, Pittman, Potts & Trowbridge
SHAW, PITTMAN, POTTS & TROWBRIDGE
