<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED WITHOUT THE DELIVERY OF A FINAL PROSPECTUS SUPPLEMENT
AND PROSPECTUS. 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 SEPTEMBER 11, 1996
PRELIMINARY PROSPECTUS SUPPLEMENT
(To Prospectus Dated September , 1996)
$407,250,000
Chevy Chase Master Credit Card Trust II
$369,000,000 Class A Floating Rate Asset Backed Certificates, Series 1996-A
$38,250,000 Class B Floating Rate Asset Backed Certificates, Series 1996-A
Chevy Chase Bank, F.S.B.
Transferor and Servicer
CCB Holding Corporation
Transferor
The Class A Floating Rate Asset Backed Certificates, Series 1996-A (the "Class A
Certificates") and the Class B Floating Rate Asset Backed Certificates, Series
1996-A (the "Class B Certificates," and together with the Class A Certificates,
the "Series 1996-A Certificates") offered hereby will represent undivided
interests in certain assets of the Chevy Chase Master Credit Card Trust II (the
"Trust") created pursuant to a Pooling and Servicing Agreement (the "Pooling and
Servicing Agreement") among Chevy Chase Bank, F.S.B., a federally chartered
stock savings bank (the "Bank"), as transferor (in such capacity, a
"Transferor") and as servicer, CCB Holding Corporation ("CCB Holding"), as
transferor (in such capacity, a "Transferor," and together with the Bank, the
"Transferors") and Bankers Trust Company, as trustee (the "Trustee"). The
property of the Trust will include receivables (the "Receivables") transferred
to the Trust by one or both of the Transferors and 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. The Bank will service the Receivables. The Trust has
previously issued four other Series of Certificates that evidence undivided
interests in the Trust. One or both of the Transferors will own the remaining
undivided interest in the Trust not represented by the prior Series of
Certificates, Series 1996-A, any other Series of Certificates to be issued by
the Trust and any Supplemental Certificate issued or to be issued by the Trust.
(continued on next page)
There currently is no secondary market for the Series 1996-A Certificates, and
there is no assurance that one will develop or, if one does develop, that it
will continue until the Series 1996-A Certificates are paid in full. Potential
investors should consider, among other things, the information set forth in
"Risk Factors" commencing on page S-16 herein and on page 17 in the Prospectus.
THE SERIES 1996-A 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 SERIES
1996-A 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 OR THE PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
PRICE TO UNDERWRITING PROCEEDS TO THE
PUBLIC (1) DISCOUNT TRANSFERORS (1)(2)
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Class A Certificate % % %
- ------------------------------------------------------------------------------------------------------
Per Class B Certificate % % %
- ------------------------------------------------------------------------------------------------------
Total $ $ $
- ------------------------------------------------------------------------------------------------------
</TABLE>
(1) Plus accrued interest, if any, at the Class A Certificate Rate or the Class
B Certificate Rate, as applicable, from September , 1996.
(2) Before deduction of expenses payable by the Transferors, estimated to be
$ .
The Series 1996-A Certificates are offered by the Underwriters when, as and if
issued by the Trust and accepted by the Underwriters and subject to the
Underwriters' right to reject orders in whole or in part. It is expected that
the Series 1996-A Certificates will be offered globally and delivered in
book-entry form on or about September , 1996, through the facilities of The
Depository Trust Company, Cedel Bank, societe anonyme and the Euroclear System.
J.P. Morgan & Co.
CS First Boston
Merrill Lynch & Co.
The date of this Prospectus Supplement is September , 1996.
<PAGE>
(CONTINUED FROM PREVIOUS PAGE)
Concurrently with the issuance of the Class A Certificates and the Class B
Certificates, the Trust will issue the Class C Asset Backed Interests, Series
1996-A (the "Class C Interests"), which are not offered hereby. The Class C
Interests will constitute a Class of Series 1996-A. The Class C Interests will
represent an undivided interest in certain assets of the Trust. The Class A
Certificates, the Class B Certificates and the Class C Interests are referred to
collectively herein as "Series 1996-A" or the "Series 1996-A Interests." From
time to time, other Series of Certificates that evidence undivided interests in
certain assets of the Trust may be issued, and those Certificates, which are not
offered hereby, may have terms significantly different from Series 1996-A. The
issuance of additional Series of Certificates may have an impact on the timing
or amount of payments received by holders of the Series 1996-A Certificates.
Interest will accrue on the Class A Certificates for the period from the
Closing Date through October 14, 1996, and for the period from October 15, 1996
through November 14, 1996, and with respect to each Interest Period (as defined
herein) thereafter, at the rate of % per annum above the London interbank
offered rate for one month United States dollar deposits ("LIBOR") determined as
described herein (the "Class A Certificate Rate"). Interest will accrue on the
Class B Certificates for the period from the Closing Date through October 14,
1996, and for the period from October 15, 1996 through November 14, 1996, and
with respect to each Interest Period thereafter, at the rate of % per annum
above LIBOR (the "Class B Certificate Rate"). Interest with respect to the
Series 1996-A Certificates will be distributed on November 15, 1996 and on the
fifteenth day of each month thereafter (or, if such fifteenth day is not a
business day, the next succeeding business day) (each, a "Distribution Date").
Principal with respect to the Class A Certificates is scheduled to be
distributed on the September 2001 Distribution Date, 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 distributed on the
November 2001 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 Certificates, and principal payments will not be
made to Class C Interest Holders until the final principal payment has been paid
in respect of the Class B Certificates. See "Series Provisions -- Principal
Payments" herein.
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
fractional undivided interest in the Trust represented by the Class C Interests
will be subordinated to the extent necessary to fund payments with respect to
the Class A Certificates and the Class B 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 $13,500,000, for the benefit of the Class A Certificates, the Class B
Certificates and the Class C Interests. Amounts on deposit in the Cash
Collateral Account on each Distribution Date in excess of the Required Cash
Collateral Amount will be withdrawn and applied as described herein. 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 CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVERALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICES OF THE SERIES 1996-A
CERTIFICATES AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
THE SERIES 1996-A CERTIFICATES OFFERED HEREBY (TOGETHER WITH THE CLASS C
INTERESTS, WHICH ARE NOT OFFERED HEREBY OR BY THE PROSPECTUS) CONSTITUTE CLASSES
OF A SEPARATE SERIES OF CERTIFICATES, WHICH SERIES 1996-A CERTIFICATES ARE BEING
OFFERED BY THE TRANSFERORS FROM TIME TO TIME PURSUANT TO THEIR PROSPECTUS, DATED
SEPTEMBER , 1996. THIS PROSPECTUS SUPPLEMENT DOES NOT CONTAIN COMPLETE
INFORMATION ABOUT THE OFFERING OF THE SERIES 1996-A 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
1996-A CERTIFICATES MAY NOT BE CONSUMMATED UNLESS THE PURCHASER HAS RECEIVED
BOTH THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS.
S-2
<PAGE>
Upon receipt of a request by an investor, or his or her representative,
within the period during which there is a prospectus delivery obligation, the
Underwriters will transmit or cause to be transmitted promptly, without charge
and in addition to any such delivery requirements, a paper copy of a Prospectus
Supplement and a Prospectus or a Prospectus Supplement and a Prospectus in
electronic format.
No dealer, salesman or other person has been authorized to give any
information or to make any representation not contained in this Prospectus
Supplement or the accompanying Prospectus and, if given or made, such
information or representation must not be relied upon as having been authorized
by the Transferors or the Underwriters. Neither this Prospectus Supplement nor
the accompanying Prospectus constitutes an offer or solicitation by anyone in
any jurisdiction in which such offer or solicitation is not authorized or in
which the person making such offer or solicition is not qualified to do so or to
anyone to whom it is unlawful to make such offer or solicitation. Neither the
delivery of this Prospectus Supplement or the accompanying Prospectus, nor any
sale made hereunder shall, under any circumstances, create any implication that
there has been no change in the affairs of the Transferors since the date hereof
or thereof or that the information contained or incorporated by reference herein
or therein is correct as of any time subsequent to its date.
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Summary of Series Terms.................................................................................... S-4
Risk Factors............................................................................................... S-16
Maturity Considerations.................................................................................... S-16
The Bank Portfolio......................................................................................... S-18
The Receivables............................................................................................ S-21
Use of Proceeds............................................................................................ S-24
The Transferors............................................................................................ S-24
Series Provisions.......................................................................................... S-24
Certain Federal Income Tax Consequences.................................................................... S-49
Underwriting............................................................................................... S-49
Legal Matters.............................................................................................. S-50
Index of Defined Terms..................................................................................... S-51
PROSPECTUS
Available Information...................................................................................... 2
Reports to Certificateholders.............................................................................. 2
Incorporation of Certain Documents by Reference............................................................ 2
Prospectus Summary......................................................................................... 3
Risk Factors............................................................................................... 17
The Bank's Credit Card Activities.......................................................................... 24
The Bank................................................................................................... 27
CCB Holding Corporation.................................................................................... 27
Assumption of a Transferor's Obligations................................................................... 27
The Receivables............................................................................................ 28
Use of Proceeds............................................................................................ 29
The Trust.................................................................................................. 29
Description of the Certificates............................................................................ 30
The Pooling and Servicing Agreement........................................................................ 48
Description of the Receivables Purchase Agreement.......................................................... 60
Certain Legal Aspects of the Receivables................................................................... 62
Certain Federal Income Tax Consequences.................................................................... 66
ERISA Considerations....................................................................................... 71
Plan of Distribution....................................................................................... 74
Index of Defined Terms..................................................................................... 75
</TABLE>
UNTIL DECEMBER , 1996 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
S-3
<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>
<S> <C>
Trust.............................. Chevy Chase Master Credit Card Trust II (the
"Trust").
Title of Securities................ $369,000,000 Class A Floating Rate Asset
Backed Certificates, Series 1996-A (the
"Class A Certificates") and $38,250,000
Class B Floating Rate Asset Backed
Certificates, Series 1996-A (the "Class B
Certificates" and, together with the Class A
Certificates, the "Series 1996-A
Certificates"). In addition, the Trust will
issue $42,750,000 Class C Asset Backed
Interests, Series 1996-A (the "Class C
Interests"), which are not offered hereby.
The Class A Certificates, the Class B
Certificates and the Class C Interests are
referred to collectively as "Series 1996-A"
or the "Series 1996-A Interests."
Initial Invested Amount............ $450,000,000.
Class A Initial Invested Amount.... $369,000,000.
Class B Initial Invested Amount.... $38,250,000.
Class C Initial Invested Amount.... $42,750,000.
Class A Certificate Rate........... For the period from the Closing Date through
October 14, 1996, and for the period from
October 15, 1996 through November 14, 1996,
and with respect to each Interest Period
thereafter, % per annum above the rate
per annum shown on page 3750 of the Telerate
screen or any successor page as the
composite London interbank offered rate for
one month United States dollar deposits or,
in certain limited circumstances as
described herein, quotations from certain
banks ("LIBOR") determined as set forth
herein on the second London Business Day
immediately preceding the Closing Date (for
the period from the Closing Date through
October 14, 1996) and on the second London
Business Day immediately preceding October
15, 1996 (for the period from October 15,
1996 through November 14, 1996), and for
each Interest Period thereafter on the
second London Business Day prior to the
commencement of such Interest Period (each a
"LIBOR Determination Date").
Class B Certificate Rate........... For the period from the Closing Date through
October 14, 1996, and for the period from
October 15, 1996 through November 14, 1996,
and for each Interest Period thereafter,
% per annum above LIBOR determined on
the related LIBOR Determination Date.
Interest Payment Date.............. Each Distribution Date beginning with the
November 1996 Distribution Date.
Class A Controlled Accumulation
Amount............................ For each Distribution Date with respect to
the Class A Scheduled Accumulation Period,
one-fourteenth of the Class A Invested
Amount on the first day of such period;
PROVIDED, that if the commencement of the
Scheduled Accumulation Period (and of
</TABLE>
S-4
<PAGE>
<TABLE>
<S> <C>
the Class A Scheduled Accumulation Period)
is delayed as described herein under "Series
Provisions -- Principal Payments," which the
Transferors believe is likely, the Class A
Controlled Accumulation Amount for each
Distribution Date with respect to the Class
A Scheduled Accumulation Period may be a
different amount and will be determined as
described under "Series Provisions --
Application of Collections -- Payments of
Principal."
Class B Controlled Accumulation
Amount............................ For each Distribution Date with respect to
the Class B Scheduled Accumulation Period
after the Class A Invested Amount has been
paid in full, one-half of the Class B
Invested Amount on the first day of such
period; PROVIDED, that if the commencement
of the Class B Scheduled Accumulation Period
is delayed as described herein under "Series
Provisions -- Principal Payments", which the
Transferors believe is likely, the Class B
Controlled Accumulation Amount will equal
the Class B Invested Amount on the first day
of such period. See "Series Provisions --
Application of Collections -- Payments of
Principal."
Class A Expected Final
Payment Date...................... The September 2001 Distribution Date.
Class B Expected Final
Payment Date...................... The November 2001 Distribution Date.
Series 1996-A Cut-Off Date......... August 22, 1996.
Series Invested Amount............. The Initial Invested Amount.
Initial Cash Collateral Amount..... $13,500,000.
Closing Date....................... September , 1996.
The Series 1996-A Certificates..... Each of the Series 1996-A Certificates
offered hereby (together with the Class C
Interests, which are not offered hereby)
represents an undivided interest in certain
assets of the Trust. The portion of the
Trust Assets allocated to Series 1996-A as
described under "Description of the
Certificates" in the Prospectus will be
further allocated between the holders of the
Class A Certificates (the "Class A
Certificateholders' Interest"), the holders
of the Class B Certificates (the "Class B
Certificateholders' Interest") and the
holders of the Class C Interests as
described herein. Except as otherwise
provided herein, the respective principal
amounts of the Class A Certificateholders'
Interest, the Class B Certificateholders'
Interest and the Class C Interests will
remain fixed at the aggregate initial
principal amount of the Class A
Certificates, the Class B Certificates and
the Class C Interests, respectively. The
Class B Certificateholders' Interest will
decrease in certain circumstances as a re-
sult 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 of the
Class B Certificateholders' Interest may be
reimbursed out of Excess
</TABLE>
S-5
<PAGE>
<TABLE>
<S> <C>
Spread and Excess Finance Charge Collections
allocable to Series 1996-A, if any, as
described herein. The Class C Interest will
decrease and may be reimbursed in certain
circumstances, as described herein. During
the Scheduled Accumulation Period, for the
purpose of allocating collections of Finance
Charge Receivables and the Defaulted Amount
for each Monthly Period, the Class A
Certificateholders' Interest will be reduced
and (on and after the Class B Principal
Commencement Date) the Class B
Certificateholders' Interest will be reduced
and (on and after the Class C Principal
Commencement Date) the Class C Interest will
be reduced by the amount on deposit in the
Principal Funding Account (as so reduced,
the "Class A Adjusted Invested Amount," the
"Class B Adjusted Invested Amount" and the
"Class C Adjusted Invested Amount,"
respectively, and collectively, the
"Adjusted Invested Amount").
Series 1996-A will include the right to
receive (but only to the extent needed to
make payments of interest at the Class A
Certificate Rate, the Class B Certificate
Rate and the Class C Interest Rate, as
applicable, with respect to each Interest
Period, payments of certain additional
interest 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 Series 1996-A based on
the Floating Allocation Percentage. Such
amounts will be further allocated to the
Class A Certificateholders, the Class B
Certificateholders and the Class C Interest
Holders based on the Class A Floating
Allocation Percentage, the Class B Floating
Allocation Percentage and the Class C
Floating Allocation Percentage,
respectively. Collections of Principal
Receivables will be allocated to Series
1996-A based on the Principal Allocation
Percentage. Such amounts will be further
allocated to the Class A Certificateholders,
the Class B Certificateholders and the Class
C Interest Holders based on the Class A
Principal Allocation Percentage, the Class B
Principal Allocation Percentage and the
Class C Principal Allocation Percentage,
respectively. Such percentages 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 Series 1996-A is in its Revolving
Period, Scheduled Accumulation Period or
Early Amortization Period. See also
"Description of the Certificates --
Allocation Percentages" in the Prospectus.
Other Series....................... The Trust has previously issued four Series
of Certificates, each of which is still
outstanding. See "Annex I: Prior Issuances
of Certificates" for a summary of the terms
of the outstanding Series of Certificates
issued by the Trust. Additional Series are
expected to be issued from time to time by
the Trust, including an additional Series
that is expected to be issued on or about
September
</TABLE>
S-6
<PAGE>
<TABLE>
<S> <C>
30, 1996, which is not offered hereby. See
"Description of the Certificates -- New
Issuances" in the Prospectus and "Maturity
Considerations" herein.
Receivables........................ The Receivables arise in Accounts that have
been selected from the Bank Portfolio, based
on criteria provided in the Pooling and
Servicing Agreement and as more fully
described herein under "The Bank Portfolio."
The aggregate amount of Receivables in the
Accounts as of the Series 1996-A Cut-Off
Date (which does not include the Receivables
expected to be conveyed to the Trust on
September 13, 1996) was $1,487,298,782, of
which $1,449,122,681 were Principal
Receivables and $38,176,101 were Finance
Charge Receivables.
Registration of Series 1996-A
Certificates...................... The Series 1996-A Certificates initially will
be represented by Series 1996-A Certificates
registered in the name of Cede, as the
nominee of DTC. No purchaser of a Series
1996-A Certificate will be entitled to
receive a definitive certificate except
under certain limited circumstances. See
"The Pooling and Servicing Agreement --
Definitive Certificates" in the Prospectus.
Servicing Compensation............. The "Series Servicing Fee Percentage" for the
Class A Certificates, the Class B
Certificates and the Class C Interests will
be 2.00% per annum. The Class A Servicing
Fee, the Class B Servicing Fee and the Class
C 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 Scheduled
Accumulation Period............... Unless a Pay Out Event with respect to Series
1996-A has occurred, the revolving period
with respect to Series 1996-A (the
"Revolving Period") will end and the
scheduled accumulation period with respect
to Series 1996-A (the "Scheduled Accumu-
lation Period"), which includes scheduled
accumulation periods for each Class, is
scheduled to commence, at the close of busi-
ness on June 30, 2000. Subject to the
conditions set forth under "Series
Provisions -- Principal Payments" herein,
the day on which the Revolving Period ends,
and the day on which the Scheduled
Accumulation Period begins, may be delayed
to no later than the close of business on
July 31, 2001. The Class A scheduled
accumulation period (the "Class A Scheduled
Accumulation Period") will begin on the
first day of the Scheduled Accumulation
Period. In addition, the day on which the
Class B scheduled accumulation period (the
"Class B Scheduled Accumulation Period")
begins may be delayed one month and the day
on which the Class C scheduled accumulation
period (the "Class C Scheduled Accumulation
Period") begins may be delayed one month, as
set forth under "Series Provisions --
Principal Payments" herein. Unless a Pay Out
Event has occurred, (i) unless the beginning
of the Scheduled Accumulation Period (and of
the Class A Scheduled Accumulation Period)
is
</TABLE>
S-7
<PAGE>
<TABLE>
<S> <C>
delayed, the Class A Scheduled Accumulation
Period will commence at the close of
business on June 30, 2000 and will 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, (ii)
unless the beginning of the Class B
Scheduled Accumulation Period is delayed,
the Class B Scheduled Accumulation Period
will commence at the close of business on
the last day of the Monthly Period
immediately preceding the Distribution Date
on which the Class A Invested Amount is paid
in full and will 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, and (iii) unless
the beginning of the Class C Scheduled
Accumulation Period is delayed, the Class C
Scheduled Accumulation Period will commence
at the close of business on the last day of
the Monthly Period immediately preceding the
Distribution Date on which the Class B
Invested Amount is paid in full and will end
on the earlier of (a) the commencement of
the Early Amortization Period or (b) the
payment in full of the Class C Invested
Amount. Principal is expected to be paid to
the Class A Certificateholders on the
September 2001 Distribution Date (the "Class
A Expected Final Payment Date") or, upon the
occurrence of a Pay Out Event as described
herein, beginning on the first Distribution
Date with respect to the Early Amortization
Period. Principal is expected to be paid to
the Class B Certificateholders on the Novem-
ber 2001 Distribution Date (the "Class B
Expected Final Payment Date") or, if a Pay
Out Event has occurred, after the Class A
Invested Amount is paid in full. Principal
is expected to be paid to the holders of the
Class C Interests (the "Class C Interest
Holders") on the January 2002 Distribution
Date (the "Class C Expected Final Payment
Date") or, if a Pay Out Event has occurred,
after the Class B Invested Amount is paid in
full. For the period beginning on the
Closing Date and ending with the earlier of
the commencement of the Scheduled Accumula-
tion Period or the commencement of the Early
Amortization Period, collections of
Principal Receivables allocable to Series
1996-A 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
Series 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 commencement of the
Early Amortization 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
</TABLE>
S-8
<PAGE>
(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
(such deficiency, the "Class A Required
Amount"), Excess Spread and Excess Finance
Charge Collections allocable to Series
1996-A will be applied to fund the Class A
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, (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, and (iii)
current and overdue Class B Servicing Fee,
and (c) the excess of Collections of Finance
Charge Receivables allocated to the Class C
Interests and certain other available funds
described herein over the current and
overdue Class C Servicing Fee. If Excess
Spread and Excess Finance Charge Collections
allocable to Series 1996-A with respect to
such Distribution Date are less than the
Class A Required Amount, amounts available
under the Cash Collateral Account (but not
more than the Available Cash Collateral
Amount) will be used to fund the remaining
Class A Required Amount. If Excess Spread
and Excess Finance Charge Collections
allocable to Series 1996-A with respect to
such Distribution Date and amounts available
under the Cash Collateral Account with
respect to such Distribution Date are less
than the Class A Required Amount, Reallo-
cated Principal Collections allocable to the
Class C Interests and, if such amount is not
sufficient, allocable to the Class B
Certificates with respect to the related
Monthly Period will be used to fund the
remaining Class A Required Amount. If Real-
located Principal Collections with respect
to such Monthly Period, if any, are
insufficient to fund the remaining Class A
Required Amount for the related Distribution
Date, and during periods when no Reallocated
Principal Collections are available, the
Class C Invested Amount will be reduced by
the amount of the remaining unfunded Class A
Required Amount, but not by more than the
unfunded Class A Investor Default Amount for
such Distribution Date, until the Class C
Invested Amount is reduced to zero, and then
the Class B Invested Amount will be reduced
by the amount by which the Class C Invested
Amount would have been reduced below zero,
but not by more than any remaining unfunded
Class A Investor Default Amount for such
Distribution Date, until the Class B
Invested Amount is reduced to zero. If the
Class C Invested Amount and the Class B
Invested Amount are reduced to zero, the
Class A Invested Amount will be reduced to
the extent to which the Class B Invested
Amount would have been reduced below zero,
but not by more than any remaining unfunded
Class A Investor Default Amount for such
Distribution Date, and the Class A
Certificateholders will bear
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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; Class C Invested Amount" and "--
Defaulted Receivables; Investor Charge-Offs"
herein.
Additional Amounts Available to
Class B Certificateholders........ If collections of Finance Charge Receivables
allocable to the Class B 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 B Certificates, (ii)
Class B Additional Interest and (iii)
current and overdue Class B Servicing Fee,
or if there is a Class B Investor Default
Amount with respect to the related
Distribution Date (such deficiency, together
with such Class B Investor Default Amount,
the "Class B Required Amount"), Excess
Spread and Excess Finance Charge Collections
allocable to Series 1996-A (after giving
effect to the application thereof to the
Class A Required Amount, if any, for such
Distribution Date and the reimbursement of
Class A Investor Charge-Offs, if any, on
such Distribution Date) will be applied to
fund the Class B Required Amount. If such
Excess Spread and Excess Finance Charge
Collections allocable to Series 1996-A with
respect to such Distribution Date are less
than the Class B Required Amount, amounts
available under the Cash Collateral Account
(but not more than the Available Cash
Collateral Amount and after giving effect to
any withdrawals from the Cash Collateral Ac-
count with respect to the Class A Required
Amount for such Distribution Date) will be
used to fund the remaining Class B Required
Amount. If such Excess Spread and Excess
Finance Charge Collections allocable to
Series 1996-A with respect to such
Distribution Date and such amounts withdrawn
from the Cash Collateral Account are less
than the Class B Required Amount,
Reallocated Principal Collections allocable
to the Class C Interest (after giving effect
to any application thereof to fund the Class
A Required Amount for such Distribution
Date) with respect to the related Monthly
Period will be used to fund the remaining
Class B Required Amount. If such Reallocated
Principal Collections with respect to such
Monthly Period, if any, are insufficient to
fund the remaining Class B Required Amount
for the related Distribution Date, and
during periods when no Reallocated Principal
Collections are available, the Class C
Invested Amount (after giving effect to any
reduction thereof with respect to the Class
A Required Amount for such Distribution
Date) will be reduced by the amount of the
remaining unfunded Class B Required Amount
but not by more than the unfunded Class B
Investor Default Amount for such Distri-
bution Date, until the Class C Invested
Amount (after giving effect to such prior
reductions) is reduced to zero and then the
Class B Invested Amount will be reduced by
the amount by which the Class C Invested
Amount would have been reduced below zero,
but not by more than any remaining unfunded
Class B Investor Default Amount for such
Distribution Date, and the
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Class B 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 In-
vested Amount; Class C Invested Amount" and
"-- Defaulted Receivables; Investor
Charge-Offs" herein.
Excess Finance Charge
Collections....................... Series 1996-A will be included in a group of
Series ("Group I") expected to be issued by
the Trust from time to time. In addition to
Series 1996-A, Group I includes four Series
of Certificates previously issued by the
Trust and may include additional Series
issued hereafter. 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 I will be applied
to cover any shortfalls with respect to
certain amounts payable from collections of
Finance Charge Receivables allocable to any
other Series in Group I, PRO RATA based upon
the amount of the shortfall, if any, with
respect to each Series in Group I. See
"Description of the Certificates -- Sharing
of Excess Finance Charge 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
Series 1996-A. The Cash Collateral Account
will be fully funded on the Closing Date in
the amount of $13,500,000 (the "Initial Cash
Collateral Amount") for the benefit of the
Class A Certificates, the Class B
Certificates and the Class C Interests.
On each Distribution Date, the Available 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
Class A Required Amount with respect to such
Distribution Date over the amount of Excess
Spread and Excess Finance Charge Collections
allocated to Series 1996-A and available to
fund such Class A Required Amount, (b) with
respect to the Class B Certificates, the
excess, if any, of the Class B Required
Amount with respect to such Distribution
Date over the amount of Excess Spread and
Excess Finance Charge Collections allocated
to Series 1996-A and available to fund such
Class B Required Amount, and (c) with
respect to the Class C Interests, the
excess, if any, of the sum of (i) the
excess, if any, of current and overdue Class
C Servicing Fee over collections of Finance
Charge Receivables allocable to the Class C
Interests for the related Monthly Period and
certain other available amounts described
herein, (ii) current and overdue Monthly
Interest on the Class C Interests, (iii)
Class C Additional Interest, and (iv) the
Class C Investor Default Amount (such sum,
the "Class C Required Amount") with respect
to such Distribution Date over the amount of
Excess Spread and Excess Finance Charge
Collections allocated to Series 1996-A and
available to fund such Class C Required
Amount. See "Series Provisions -- Excess
Spread; Excess Finance Charge Collections."
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On each Distribution Date, Excess Spread
allocable to Series 1996-A (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 Required Cash Collateral Amount). The
"Required Cash Collateral Amount" with re-
spect to any Distribution Date will be equal
to the greater of (a) 3% of the Adjusted
Invested Amount and (b) $4,500,000;
PROVIDED, HOWEVER, that if certain
withdrawals are made from the Cash
Collateral Account or a Pay Out Event with
respect to Series 1996-A occurs, the
Required Cash Collateral Amount shall equal
the Required Cash Collateral Amount for the
Distribution Date immediately preceding the
occurrence of such withdrawal or such Pay
Out Event (or, prior to the first
Distribution Date, the initial Required Cash
Collateral Amount), PROVIDED FURTHER that
the Required Cash Collateral Amount shall
not exceed the Adjusted Invested Amount. In
addition, if on any Distribution Date the
amount on deposit in the Cash Collateral
Account exceeds the Required Cash Collateral
Amount, such excess will be withdrawn and
paid to the Cash Collateral Depositor or its
designee. The Required Cash Collateral
Amount may be modified without the consent
of the holders of the Class A Certificates,
the holders of the Class B Certificates or
the holders of the Class C Interests
(collectively, the "Series 1996-A Holders")
if the Transferors shall have received
written notice from each Rating Agency that
such modification will not have a Ratings
Effect and the Transferors shall have each
delivered to the Trustee a certificate of an
authorized officer of such Transferor to the
effect that, based on the facts known to
such officer at such time, in the reasonable
belief of the Transferors, such reduction
will not cause a Pay Out Event (or an event
that, after the giving of notice or the
lapse of time, would constitute a Pay Out
Event) to occur with respect to Series
1996-A. See "Series Provisions -- Cash
Collateral Account" herein.
Subordination of the Class B
Certificates...................... The Class B Certificates will be subordinated
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 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.
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Subordination of the Class C
Interests......................... The Class C Interests will be subordinated to
the extent necessary to fund payments with
respect to the Class A Certificates and the
Class B Certificates as described herein.
See "Series Provisions -- Subordination of
the Class C Certificates" herein.
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, or reallocated
to pay certain amounts to or 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 Series 1996-A. See "Description
of the Certificates -- Shared Principal
Collections" in the Prospectus.
Optional Repurchase................ The Series 1996-A Interests will be subject
to optional repurchase by the Transferors on
any date on or after the date on which the
Invested Amount (after giving effect to any
funds available for distribution in respect
of principal on such date) is reduced to an
amount less than or equal to 5% of the
Initial Invested Amount; PROVIDED that such
repurchase option may not be exercised if
the outstanding principal amount of Series
1996-A exceeds the Invested Amount. The
purchase price will be equal to the Invested
Amount plus accrued and unpaid interest on
the Class A Certificates, the Class B
Certificates and the Class C Interests
(including accrued and unpaid interest with
respect to interest amounts that were due
but not paid on a prior Distribution Date)
through (a) if the day on which such
repurchase 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 Pooling and Servicing Agreement provides
that the Transferors will be required to make
an Addition to the Trust if either (a) the
Transferor Amount is less than the Required
Transferor Amount or (b) the amount of
Principal Receivables in the Trust is not
maintained at a minimum level equal to the
sum of the series invested amounts of each
Series then outstanding minus amounts on
deposit in the Special Funding Account. The
occurrence of a Pay Out Event will be the
only consequence if an Addition is not made
when required. See "Description of the
Certificates -- Addition of Trust Assets" in
the Prospectus.
Aggregate Addition Limit........... Unless each Rating Agency otherwise consents,
the number of Automatic Additional Accounts
plus the number of Accounts designated to
maintain the Transferor Amount, as specified
in the Prospectus under "Description of the
Certificates -- Addition of Trust Assets,"
shall not either (i) with respect to any
three consecutive Monthly Periods, beginning
in January, April, July and October of each
calendar year, exceed 15% of the number of
Accounts as of the first day of the calendar
year during which such Monthly Periods
occur, and (ii) with respect to any twelve-
month period, exceed 20% of the number of
Accounts as of the
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first day of such twelve-month period.
Series 1996-A Termination Date..... The February 2005 Distribution Date. See
"Series Provisions -- Series Termination"
herein.
Defeasance......................... In certain circumstances and subject to
certain conditions, the Transferors may
terminate their substantive obligations in
respect of Series 1996-A or the Pooling and
Servicing Agreement as a whole. See
"Description of the Certificates --
Defeasance" in the Prospectus.
Tax Status......................... Orrick, Herrington & Sutcliffe LLP, special
tax counsel to the Transferors, will deliver
its opinion generally to the effect that
under existing law, the Class A Certificates
and the Class B Certificates will properly
be characterized as debt for federal income
tax purposes. Under the Pooling and
Servicing Agreement, the Certificate Owners
and the Certificateholders will agree to
treat the Certificates as debt for federal,
state and local income and franchise tax
purposes. See "Certain Federal Income Tax
Consequences" herein and 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 or other plan
(including an individual retirement account
or Keogh plan) which is subject to the
Employee Retirement Income Security Act of
1974, as amended ("ERISA"), or Section 4975
of the Internal Revenue Code of 1986, as
amended (the "Code") (each, a "Plan"), and
which acquires or holds the Class A
Certificates or the Class B Certificates, if
certain conditions are met, including that
the Certificates of that Class must be held,
upon completion of the public offering
thereof made hereby, by at least 100
investors who are independent of the
Transferors and of one another ("Independent
Investors"). However, the Underwriters have
advised the Transferors that they do not
expect that either the Class A Certificates
or the Class B Certificates will be held by
at least 100 Independent Investors at the
conclusion of the offering made hereby and,
therefore, do not expect that either the
Class A Certificates or the Class B
Certificates will qualify as
publicly-offered securities under the Plan
Asset Regulation. 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 ERISA and Section 4975 of the Code
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, neither the Class A
Certificates nor the Class B Certificates
may be acquired or held by any Plan, any
person investing "plan assets" of any Plan
or any entity whose underlying assets
include "plan assets" under the Plan Asset
Regulation by reason of any Plan's
investment in the entity.
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By its acceptance of a Class A Certificate or
a Class B Certificate, each
Certificateholder and each Certificate Owner
will be deemed to have represented and
warranted that it is not subject to the
foregoing limitations. The restrictions
contained in the foregoing representation
and warranty shall not apply to the
acquisition or holding of Series 1996-A
Certificates with assets of the general
account of an insurance company to the
extent the acquisition or holding,
respectively, of such Certificates is per-
missible under 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 transactions rules. Persons con-
templating acquiring the Series 1996-A
Certificates should consult their counsel to
determine whether they are purchasing on
behalf of, or with "plan assets" of, any
Plan. See "ERISA Considerations" in the
Prospectus for additional information, in-
cluding special considerations for
purchasers using assets of an insurance
company general account.
Class A Certificate Rating......... It is a condition to the issuance of the
Class A Certificates that they be rated in
the highest rating category by at least one
nationally recognized rating agency. The
rating of the Class A Certificates is based
primarily on the value of the Receivables,
the Initial 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 Class C Interests as
described herein. See "Risk Factors --
Limited Nature of Rating" in the Pro-
spectus.
Class B Certificate Rating......... It is a condition to the issuance of the
Class B Certificates that they be rated at
least "A" or its equivalent 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 and
the subordination of the Class C Interests
as described herein. See "Risk Factors --
Limited Nature of Rating" in the Prospectus.
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<PAGE>
RISK FACTORS
In addition to the risk factors described in the Prospectus under "Risk
Factors," potential investors should consider, among other things, the following
risk factors in connection with the purchase of the Series 1996-A 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 and of the Class C Interests to the Class A Certificates to
the extent described herein and by the Cash Collateral Account, and with respect
to the Class B Certificates will be provided by the subordination of the Class C
Interests to the Class B Certificates to the extent described herein and by the
Cash Collateral Account, the amount of the Credit Enhancement is limited, is
expected to decline during the Scheduled Accumulation Period and will be reduced
by payments made pursuant thereto. If the amount available under the Cash
Collateral Account and the Invested Amount of the Class C Interests has been
reduced to zero, Class B Certificateholders will bear directly the credit and
other risks associated with their undivided interest in the Trust. If the amount
available under the Cash Collateral Account, the Invested Amount of the Class C
Interests and the Invested Amount of the Class B Certificates has been reduced
to zero, Class A Certificateholders will bear directly the credit and other
risks associated with their undivided interest 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 Class A 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 1996-A, amounts
on deposit in the Cash Collateral Account, Reallocated Principal Collections
allocable to the Class C Interests and reductions of the Class C Invested
Amount. 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.
CONTROL. Subject to certain exceptions, the Holders 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. In determining whether the
required percentage of Holders of Series 1996-A have given their approval or
consent, except as otherwise specified, the Class A Certificateholders, the
Class B Certificateholders and the Class C Interest Holders will be treated as a
single Series. Accordingly, the Class A Certificateholders will generally have
the power to determine whether any such action is taken without regard to the
position or interests of the Class B Certificateholders or the Class C Interest
Holders relating to such action. Generally, neither the Class B
Certificateholders nor the Class C Interest Holders will have similar power.
Under certain circumstances, the consent or approval of a specified percentage
of the Invested Amount of each Class of Series 1996-A may be required to direct
certain actions, including amending the Pooling and Servicing Agreement in
certain circumstances and directing the Trustee not to sell the Receivables upon
the insolvency or receivership of a Transferor. The interests of the Class A
Certificateholders, the Class B Certificateholders and the Class C Interest
Holders may be different.
MATURITY CONSIDERATIONS
The Pooling and Servicing Agreement and the Series 1996-A Supplement provide
that the Class A Certificateholders will not receive payments of principal until
the September 2001 Distribution Date (the "Class A Expected Final Payment
Date"), or earlier in the event of a Pay Out Event with respect to Series
1996-A, which will result in the commencement of the Early Amortization Period.
Class A Certificateholders will receive payments of principal on each
Distribution Date following the Monthly Period in which a Pay Out Event occurs
until the Class A Invested Amount has been paid in full or the Series 1996-A
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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. The Class C Interest Holders will not begin to
receive payments of principal until the final principal payment on the Class B
Certificates has been made.
On each Distribution Date with respect to the Class A Scheduled Accumulation
Period, an amount 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 and
any existing 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 with respect to the Class B Scheduled Accumulation
Period, an amount 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. See
"Series Provisions -- Principal Payments" for a discussion of circumstances
under which the commencement of the Scheduled Accumulation Period (and of the
Class A Scheduled Accumulation Period) may be delayed or the commencement of the
Class B Scheduled Accumulation Period may be delayed.
The Transferors may, at or after the time at which the Scheduled
Accumulation Period commences for Series 1996-A, 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 1996-A, to be used to offset the increase
in the Transferor Amount caused by the accumulation of principal in the
Principal Funding Account with respect to Series 1996-A. No assurances can be
given as to whether Series 1996-A will be paired with another Series or the
nature of the specific terms of such other Series. If a Paired Series is issued
with respect to Series 1996-A, the outstanding principal amount of such other
Series may vary from time to time whether or not a Pay Out Event occurs with
respect to Series 1996-A, 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. Further, since the terms of Series 1996-A will vary from the terms
of such other Series, the Pay Out Events with respect to such other Series may
vary from the Pay Out Events with respect to Series 1996-A and may include Pay
Out Events which are unrelated to the status of the Transferors, 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 1996-A Certificates, payments of principal to the
Series 1996-A Holders may be delayed.
Should a Pay Out Event occur with respect to Series 1996-A and the Early
Amortization Period commence, any amount on deposit in the Principal Funding
Account will be paid to the Series 1996-A Holders on the first Distribution Date
with respect to the Early Amortization Period and the Series 1996-A Holders will
be entitled to receive (after application of the amount paid from the Principal
Funding Account) Available Principal Collections on each Distribution Date with
respect to such Early Amortization Period until the Invested Amount is paid in
full or until the Series 1996-A Termination Date occurs, in each case in the
order of priority described herein. See "Description of the Certificates -- Pay
Out Events" in the Prospectus and "Series Provisions -- Pay Out Events" and "--
Principal Payments" herein.
The ability of a Class of Series 1996-A Holders to receive payments of
principal 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, the potential issuance by the
Trust of additional Series and the availability of Shared Principal Collections.
Monthly payment rates on the Receivables may vary because, among other things,
cardholders may fail to make a required minimum
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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 the establishment, termination or 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 Transferors cannot
predict the cardholder monthly payment rates that will actually occur in any
future period, the actual rate of payment of principal of the Series 1996-A
Interests or whether the terms of any subsequently issued Series might have an
impact on the amount or timing of any such payment of principal and no assurance
can be given with respect thereto. See "Risk Factors -- Payment and Maturity
Considerations; Dependence on Cardholder Repayments" and "Description of the
Certificates -- Shared Principal Collections" in the Prospectus.
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 1996-A Holders could
expect to receive payments of principal on their Series 1996-A Interests during
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 "Cardholder Monthly Payment Rates for the
Bank Portfolio" table under the heading "The Bank Portfolio." As described under
"Series Provisions -- Principal Payments," the Transferors may shorten the Class
A Scheduled Accumulation Period and the Class B Scheduled Accumulation Period.
There can be no assurance that there will be sufficient time to accumulate all
amounts necessary to pay the Class A Invested Amount on the Class A Expected
Final Payment Date or that there will be sufficient time to accumulate all
amounts necessary to pay the Class B Invested Amount on the Class B Expected
Final Payment Date.
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 1996-A Holders.
Further, if a Pay Out Event with respect to Series 1996-A occurs, the average
life and maturity of the Class A Certificates, the Class B Certificates and the
Class C Interests could be significantly reduced.
Due to the reasons set forth above, there can be no assurance that deposits
in the Principal Funding Account will be made in accordance with the applicable
Controlled Accumulation Amounts or that the actual number of months elapsed from
the date of issuance of the Class A Certificates, the Class B Certificates and
the Class C Interests to their respective final Distribution Dates will equal
the expected number of months. See "Risk Factors -- Payment and Maturity
Considerations; Dependence on Cardholder Repayments" 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 one or both of the Transferors (including the Trust)
are considered to be part of the Bank Portfolio for purposes hereof. The
Accounts constituting the Trust Portfolio have been selected from accounts in
the Bank Portfolio (but exclude accounts currently designated for other
presently existing credit card trusts that were originated by the Bank) based on
certain eligibility criteria specified in the Pooling and Servicing Agreement.
See "Prospectus Summary -- The Accounts" in the Prospectus. Because the Trust
Portfolio is only a portion of the Bank
S-18
<PAGE>
Portfolio, and because the Bank will have the right, and, in some circumstances,
the obligation, to designate Additional Accounts (and to convey to the Trust all
Receivables in such Additional Accounts), which Additional Accounts may not
currently be included in the Bank Portfolio, actual delinquency and loss
experience with respect to the Receivables may be different from that set forth
below for the Bank Portfolio.
The Bank believes that the increase since 1994 in the delinquencies and
losses in the Bank Portfolio is comparable to that experienced by other issuers
in the credit card market and is attributable in part to maturation of the Bank
Portfolio. The increase in delinquencies and losses was consistent with what the
Bank believes to be the normal progression of events characteristic of the
seasoning of new credit card accounts. As accounts mature, delinquencies, which
typically are low in the early periods of account activity, may be expected to
increase for some of the accounts. 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
BANK PORTFOLIO
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
AT DECEMBER 31,
---------------------------------------------------------------------------------
AT JUNE 30, 1996 1995 1994 1993
------------------------- ------------------------- ------------------------- -------------------------
PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
OF TOTAL OF TOTAL OF TOTAL OF TOTAL
RECEIVABLES RECEIVABLES RECEIVABLES RECEIVABLES RECEIVABLES RECEIVABLES RECEIVABLES RECEIVABLES
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Receivables
Outstanding (1).... $4,712,224 $4,572,475 $3,270,660 $1,727,323
Receivables
contractually
delinquent (2):
30-59 days........ $ 107,174 2.27% $ 89,970 1.97% $ 47,506 1.45% $ 37,595 2.18%
60-89............. 65,773 1.40 57,693 1.26 28,016 0.86 23,871 1.38
90 days or more... 110,837 2.35 92,153 2.01 38,425 1.17 32,686 1.89
----------- --- ----------- --- ----------- --- ----------- ---
Total............... $ 283,784 6.02% $ 239,816 5.24% $ 113,947 3.48% $ 94,152 5.45%
----------- --- ----------- --- ----------- --- ----------- ---
----------- --- ----------- --- ----------- --- ----------- ---
</TABLE>
- ------------------------
(1) Reflects the sale of approximately $96,500,000 of credit card accounts by
the Bank that occurred in 1994, and includes the receivables transferred in
connection with credit card trusts originated by one or both of the
Transferors 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.
(2) The Bank uses billing cycles to determine delinquency. This table assumes
that each billing cycle is 30 days long; however, actual billing cycles
range from 28 days to 33 days each.
S-19
<PAGE>
LOSS EXPERIENCE
BANK PORTFOLIO
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
SIX MONTHS ENDED -------------------------------------------
JUNE 30, 1996 1995 1994 1993
----------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Average receivables outstanding (1).............. $ 4,691,137 $ 3,974,895 $ 2,191,303 $ 1,583,793
Total gross credit charge-offs (2)............... $ 184,032 $ 205,406 $ 90,594 $ 99,568
Total gross credit charge-offs as a percentage of
average receivables outstanding (3)............. 7.85% 5.17% 4.13% 6.29%
Recoveries....................................... $ 9,139 $ 14,815 $ 13,391 $ 13,522
Net credit losses................................ $ 174,893 $ 190,591 $ 77,204 $ 86,046
Net credit losses as a percentage of average
receivables outstanding (3)..................... 7.46% 4.79% 3.52% 5.43%
</TABLE>
- ------------------------
(1) Reflects the sale of approximately $96,500,000 of credit card accounts by
the Bank that occurred in 1994, and includes the receivables transferred in
connection with credit card trusts originated by one or both of the
Transferors that were in existence during the specified periods. Average
receivables outstanding is the weighted average of average monthly
receivables outstanding during the period indicated.
(2) Does not include charge-offs for fraud or cardholder disputes.
(3) The percentage for the six months ended June 30, 1996 is an annualized
figure. Annualized figures are not necessarily indicative of results for the
entire year.
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, 1995 and the six month period ended June 30, 1996.
REVENUE EXPERIENCE
BANK PORTFOLIO (1)(2)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
SIX MONTHS ENDED -------------------------------------
JUNE 30, 1996 1995 1994 1993
----------------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Average Account Monthly Periodic Charges and Fees (3)..... $ 31.85 $ 25.59 $ 20.69 $ 32.98
Average Account Balance (4)............................... $ 1,938 $ 1,836 $ 1,695 $ 2,257
Yield from Monthly Periodic Charges and Fees (5).......... 19.72% 16.73% 14.65% 17.53%
</TABLE>
- ------------------------
(1) Changes in the monthly periodic charges rates and in other terms of the
accounts may affect the comparability of periods.
(2) Average Account Monthly Periodic Charges and Fees shown in the table are
comprised of monthly periodic charges, annual fees and other charges, but do
not include Interchange.
(3) Average Account Monthly Periodic Charges and Fees are presented net of
adjustments made pursuant to the Bank's normal servicing procedures,
including removal of incorrect or disputed Monthly Periodic Charges and fees
in charged-off accounts.
(4) Average Account Balance includes purchases and cash advances and accrued and
unpaid Monthly Periodic Charges, Annual Fees and Other Charges, and is
calculated based on the average of the daily account balances during the
periods shown.
S-20
<PAGE>
(5) Yield from Monthly Periodic Charges and Fees is the result of dividing the
annualized Average Account Monthly Periodic Charges and Fees by the Average
Account Balance for the period. Annualized figures are not necessarily
indicative of results for the entire year.
The yield for the Bank Portfolio shown in the above table is comprised of
monthly periodic charges, annual fees on accounts and other charges (which
include late charges, cash advance transaction charges and all other charges and
fees specified in the credit card agreement between the Bank and the cardholder
that are treated as finance charges). The yield related to monthly periodic
charges and certain other charges (such as cash advance transaction charges)
varies with the type and volume of activity in and the balance of each Account.
See "The Bank's Credit Card Activities -- Billing and Payments" in the
Prospectus. As account balances increase, annual membership fees, which remain
constant, represent a smaller percentage of the aggregate account balances.
INTERCHANGE
In respect of Interchange attributed to the cardholder charges for
merchandise and services in the Accounts, the Transferors will be required,
pursuant to the terms of the Pooling and Servicing Agreement, to transfer to the
Trust on the Business Day immediately preceding each Distribution Date an amount
equal to one-twelfth of 1.50% of the average daily balance of the Principal
Receivables allocable to Series 1996-A during the preceding Monthly Period;
PROVIDED, HOWEVER, that with respect to the first Distribution Date, Interchange
will be an amount equal to the product of (i)(A) a fraction the numerator of
which is the actual number of days from the Closing Date to the last day of the
Monthly Period immediately preceding the first Distribution Date and the
denominator of which is 360, times (B) 1.50% and (ii) the average daily balance
of Principal Receivables allocable to Series 1996-A during such period.
PAYMENT RATES
The following table sets forth the highest and lowest cardholder monthly
payment rates for the Bank Portfolio during any month in the period shown and
the average cardholder monthly payment rates for all months during the periods
shown, in each case calculated as a percentage of total opening monthly account
balances during the periods shown. Payment rates shown in the table are based on
amounts that would be deemed payments of Principal Receivables and Finance
Charge Receivables with respect to the Accounts.
CARDHOLDER MONTHLY PAYMENT RATES
BANK PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
SIX MONTHS ENDED JUNE -------------------------------------
30, 1996 1995 1994 1993
--------------------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Lowest.............................................................. 7.8% 8.1% 8.6% 7.8%
Highest............................................................. 9.7% 9.8% 11.1% 9.6%
Monthly Average..................................................... 9.1% 8.8% 9.6% 8.9%
</TABLE>
THE RECEIVABLES
The Receivables in the Trust Portfolio as of the Series 1996-A Cut-Off Date
(which does not include the Receivables expected to be conveyed to the Trust on
September 13, 1996) included $1,449,122,681 of Principal Receivables and
$38,176,101 of Finance Charge Receivables. On the Series 1996-A Cut-Off Date the
Accounts had an average Receivable balance of $1,791 and an average credit limit
of $7,612. On the Series 1996-A Cut-Off Date the ratio (expressed as a
percentage) of the aggregate total Receivables balance to the aggregate total
credit limit was 23.52%. As of the Series 1996-A Cut-Off Date, all of the
Accounts in the Trust Portfolio were VISA or MasterCard credit card accounts, of
which 32.5% were standard accounts and 67.5% were premium accounts, and the
aggregate Receivable balances of standard accounts and premium accounts, as a
percentage of the total aggregate Receivables, were 19% and 81%, respectively.
The following tables summarize the Trust Portfolio by various
characteristics as of the Series 1996-A Cut-Off Date and, therefore, do not
include the Receivables expected to be conveyed to the Trust on September 13,
1996. Because the future composition of the Trust Portfolio may change over
time, these
S-21
<PAGE>
tables are not necessarily indicative of the composition of the Trust Portfolio
at any subsequent time. References to "Receivables Outstanding" in the following
tables include both Finance Charge Receivables and Principal Receivables.
COMPOSITION BY ACCOUNT BALANCE
TRUST PORTFOLIO
<TABLE>
<CAPTION>
PERCENTAGE
OF TOTAL PERCENTAGE
NUMBER OF NUMBER OF RECEIVABLES OF TOTAL
ACCOUNT BALANCE RANGE ACCOUNTS ACCOUNTS OUTSTANDING RECEIVABLES
- ------------------------------------------------------------ ----------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
Credit Balance.............................................. 19,172 2.3% $ (1,361,935) -0.1%
No Balance.................................................. 345,127 41.5 0 0.0
$0.01 - $500.00............................................. 129,658 15.6 21,597,144 1.5
$500.01 - $1,000.00......................................... 46,153 5.6 33,982,691 2.3
$1,000.01 - $3,000.00....................................... 105,563 12.7 198,589,507 13.3
$3,000.01 - $5,000.00....................................... 71,682 8.6 288,182,470 19.4
$5,000.01 - $10,000.00...................................... 86,826 10.5 618,499,791 41.6
$10,000.01 - $15,000.00..................................... 24,993 3.0 304,832,454 20.5
$15,000.01 or more.......................................... 1,461 0.2 22,976,660 1.5
----------- ----- -------------- -----
TOTAL..................................................... 830,635 100.0% $1,487,298,782 100.0%
----------- ----- -------------- -----
----------- ----- -------------- -----
</TABLE>
COMPOSITION BY CREDIT LIMIT
TRUST PORTFOLIO
<TABLE>
<CAPTION>
PERCENTAGE
OF TOTAL PERCENTAGE
NUMBER OF NUMBER OF RECEIVABLES OF TOTAL
CREDIT LIMIT RANGE ACCOUNTS ACCOUNTS OUTSTANDING RECEIVABLES
- ------------------------------------------------------------ ----------- ------------- -------------- ---------------
<S> <C> <C> <C> <C>
$0.01 - $500.00............................................. 35,276 4.3% $ 7,793,780 0.5%
$500.01 - $1,000.00......................................... 13,653 1.6 7,057,702 0.5
$1,000.01 - $3,000.00....................................... 107,941 13.0 79,098,635 5.3
$3,000.01 - $5,000.00....................................... 158,875 19.1 224,649,982 15.1
$5,000.01 - $10,000.00...................................... 290,360 35.0 604,061,529 40.6
$10,000.01 - $15,000.00..................................... 224,439 27.0 564,277,348 38.0
$15,000.01 or more.......................................... 91 0.0 359,806 0.0
----------- ----- -------------- -----
TOTAL..................................................... 830,635 100.0% $1,487,298,782 100.0%
----------- ----- -------------- -----
----------- ----- -------------- -----
</TABLE>
COMPOSITION BY PERIOD OF DELINQUENCY
TRUST PORTFOLIO
<TABLE>
<CAPTION>
PERCENTAGE
OF TOTAL PERCENTAGE
NUMBER OF NUMBER OF RECEIVABLES OF TOTAL
PERIOD OF DELINQUENCY RANGE ACCOUNTS ACCOUNTS OUTSTANDING RECEIVABLES
- ------------------------------------------------------------ ----------- ------------- -------------- ---------------
<S> <C> <C> <C> <C>
Not Delinquent.............................................. 771,271 92.8% $1,231,489,717 82.8%
Up to 29 days............................................... 41,359 5.0 166,564,096 11.2
30 days or more............................................. 18,005 2.2 89,244,969 6.0
----------- ----- -------------- -----
TOTAL..................................................... 830,635 100.0% $1,487,298,782 100.0%
----------- ----- -------------- -----
----------- ----- -------------- -----
</TABLE>
COMPOSITION BY ACCOUNT AGE
TRUST PORTFOLIO
<TABLE>
<CAPTION>
PERCENTAGE
OF TOTAL PERCENTAGE
NUMBER OF NUMBER OF RECEIVABLES OF TOTAL
AGE ACCOUNTS ACCOUNTS OUTSTANDING RECEIVABLES
- ------------------------------------------------------------ ----------- ------------- -------------- ---------------
<S> <C> <C> <C> <C>
Less than or equal to 5 months.............................. 3,779 0.5% $ 4,220,203 0.3%
Over 5 months to 11 months.................................. 234,746 28.3 374,359,552 25.2
Over 11 months to 17 months................................. 290,771 35.0 429,816,528 28.9
Over 17 months to 23 months................................. 151,593 18.2 274,891,538 18.5
Over 23 months.............................................. 149,746 18.0 404,010,961 27.1
----------- ----- -------------- -----
TOTAL..................................................... 830,635 100.0% $1,487,298,782 100.0%
----------- ----- -------------- -----
----------- ----- -------------- -----
</TABLE>
S-22
<PAGE>
CHEVY CHASE BANK, F.S.B.
MASTER CREDIT CARD TRUST II
GEOGRAPHIC DISTRIBUTION OF ACCOUNTS
<TABLE>
<CAPTION>
PERCENTAGE OF PERCENTAGE OF
NUMBER OF TOTAL NUMBER OF RECEIVABLES TOTAL
STATE ACCOUNTS ACCOUNTS OUTSTANDING RECEIVABLES
- ---------------------------------------------------- ----------- ----------------- --------------- ---------------
<S> <C> <C> <C> <C>
Alabama............................................. 10,298 1.2% $ 18,152,728 1.2%
Alaska.............................................. 592 0.1 1,387,368 0.1
Arizona............................................. 9,413 1.1 18,622,044 1.3
Arkansas............................................ 850 0.1 1,627,223 0.1
California.......................................... 82,026 9.9 186,514,838 12.5
Colorado............................................ 12,145 1.5 21,775,409 1.5
Connecticut......................................... 11,431 1.4 22,178,047 1.5
Delaware............................................ 2,778 0.3 5,883,652 0.4
District of Columbia................................ 8,188 1.0 14,729,515 1.0
Florida............................................. 37,712 4.5 67,079,931 4.5
Georgia............................................. 19,412 2.3 38,882,823 2.6
Hawaii.............................................. 2,015 0.2 5,089,809 0.3
Idaho............................................... 2,735 0.3 4,773,868 0.3
Illinois............................................ 32,207 3.9 57,418,849 3.9
Indiana............................................. 20,585 2.5 36,921,298 2.5
Iowa................................................ 8,077 1.0 11,057,231 0.7
Kansas.............................................. 6,972 0.8 12,669,299 0.9
Kentucky............................................ 9,256 1.1 14,414,901 1.0
Louisiana........................................... 9,168 1.1 14,097,146 0.9
Maine............................................... 3,859 0.5 7,266,635 0.5
Maryland............................................ 89,462 10.8 150,187,286 10.1
Massachusetts....................................... 15,434 1.9 30,824,567 2.1
Michigan............................................ 29,952 3.6 51,486,018 3.5
Minnesota........................................... 15,239 1.8 22,601,894 1.5
Mississippi......................................... 4,165 0.5 6,464,142 0.4
Missouri............................................ 12,455 1.5 20,943,134 1.4
Montana............................................. 2,123 0.3 3,430,714 0.2
Nebraska............................................ 4,705 0.6 6,513,985 0.4
Nevada.............................................. 4,625 0.6 12,281,429 0.8
New Hampshire....................................... 4,363 0.5 8,452,081 0.6
New Jersey.......................................... 31,292 3.8 57,605,526 3.9
New Mexico.......................................... 3,924 0.5 7,002,844 0.5
New York............................................ 55,771 6.7 91,367,752 6.1
North Carolina...................................... 19,120 2.3 33,769,937 2.3
North Dakota........................................ 1,668 0.2 2,044,536 0.1
Ohio................................................ 32,790 3.9 52,323,741 3.5
Oklahoma............................................ 7,917 0.9 14,107,204 1.0
Oregon.............................................. 8,572 1.0 14,680,879 1.0
Pennsylvania........................................ 41,971 5.0 65,507,960 4.4
Puerto Rico......................................... 88 0.0 216,327 0.0
Rhode Island........................................ 643 0.1 1,253,622 0.1
South Carolina...................................... 8,774 1.1 15,322,176 1.0
South Dakota........................................ 1,641 0.2 2,384,372 0.2
Tennessee........................................... 14,610 1.8 23,415,940 1.6
Texas............................................... 39,802 4.8 70,468,532 4.7
Utah................................................ 5,820 0.7 9,379,746 0.6
Vermont............................................. 181 0.0 426,508 0.0
Virginia............................................ 45,757 5.5 90,767,894 6.1
Washington.......................................... 14,447 1.7 26,627,451 1.8
West Virginia....................................... 3,313 0.4 4,679,027 0.3
Wisconsin........................................... 18,493 2.2 26,994,460 1.8
Wyoming............................................. 1,359 0.2 2,362,558 0.2
Other............................................... 440 0.1 861,926 0.1
----------- ----- --------------- -----
TOTAL............................................. 830,635 100.0% $ 1,487,298,782 100.0%
----------- ----- --------------- -----
----------- ----- --------------- -----
</TABLE>
S-23
<PAGE>
USE OF PROCEEDS
The net proceeds from the sale of the Series 1996-A Certificates will be
paid to the Transferors. The Transferors will use such proceeds for general
corporate purposes, including but not limited to reduction of approximately
$285,000,000 of the outstanding principal balance of the Series 1995-D
Certificates previously issued by the Trust in accordance with the terms of such
Series. The terms of the Series 1995-D Certificates are described in "Annex I:
Prior Issuances of Certificates."
THE TRANSFERORS
At June 30, 1996, the Bank had consolidated assets of approximately $5.0
billion, deposits of approximately $4.2 billion, and stockholders' equity of
approximately $357.0 million. As a savings bank chartered under the laws of the
United States, the Bank is subject to certain minimum regulatory capital
requirements imposed under the Financial Institutions Reform, Recovery, and
Enforcement Act of 1989, as amended ("FIRREA"). At June 30, 1996, the Bank was
in compliance with all such regulatory capital requirements in effect at that
date. In addition, the Bank's capital ratios at June 30, 1996 were sufficient
for the Bank to meet the ratios established for "well capitalized" institutions
pursuant to "prompt corrective action" regulations promulgated by the OTS
pursuant to the Federal Deposit Insurance Corporation Improvement Act of 1991.
On the basis of its balance sheet at June 30, 1996, the Bank also met the fully
phased-in capital requirements under FIRREA that took effect on July 1, 1996 as
the last of the phase-in periods for the deductions for capital expired, and,
after giving effect to those deductions, met the ratios established for "well
capitalized" institutions under the prompt corrective action regulations.
In connection with the termination of the Bank's written agreement with the
OTS in March 1996, the Board of Directors of the Bank has adopted a resolution
that addresses certain issues previously addressed by the written agreement. The
resolution also provides that the Bank will present a plan annually to the OTS
detailing anticipated consumer loan securitization activity.
Institutions insured by the Savings Association Insurance Fund ("SAIF"),
including the Bank, currently pay substantially higher deposit insurance
premiums than similarly-situated institutions insured by the Bank Insurance Fund
("BIF"). Legislation designed to reduce or eliminate the disparity between the
BIF and SAIF insurance premiums by, among other things, imposing on thrift
institutions, including the Bank, a one-time assessment estimated to be up to 85
basis points on their SAIF-insured deposits to capitalize the SAIF is being
considered by Congress. Congress is also considering legislation that would,
among other things: (i) abolish the OTS and transfer its functions to other
agencies, and (ii) require federally chartered thrifts, including the Bank, to
convert to national bank or state bank or thrift charters. It cannot be
determined whether, or in what form, such legislation will eventually be
enacted.
On August 20, 1996, President Clinton signed legislation eliminating a
provision of the Internal Revenue Code that permits thrifts that meet certain
requirements, including the Bank, to establish reserves for bad debts and to
deduct each year reasonable additions to those reserves in lieu of taking a
deduction for bad debts actually sustained during the taxable year. The
legislation also requires thrifts to recapture and pay tax on bad debt reserves
accumulated since 1987 over a six year period, beginning with a thrift's first
taxable year after December 31, 1995 (or, if the thrift meets a loan origination
text, beginning up to two years later). This legislation will not have a
material impact on the Bank's financial statements.
For additional information relating to the Bank, see "The Bank" in the
Prospectus.
See "CCB Holding Corporation" in the Prospectus for a description of CCB
Holding.
SERIES PROVISIONS
Series 1996-A will be issued pursuant to the Pooling and Servicing Agreement
and a Series Supplement specifying the Principal Terms of Series 1996-A (the
"Series 1996-A Supplement"), the forms of which have been filed as exhibits to
the Registration Statement of which the Prospectus and this Prospectus
Supplement
S-24
<PAGE>
are a part. The following summary describes certain terms applicable to the
Series 1996-A Certificates. Reference should be made to the Prospectus for
additional information concerning Series 1996-A and the Pooling and Servicing
Agreement.
INTEREST PAYMENTS
Interest on the Class A Certificates, the Class B Certificates and the Class
C Interests will accrue from the Closing Date on the outstanding principal
amount of the Class A Certificates, the Class B Certificates and the Class C
Interests at the Class A Certificate Rate, Class B Certificate Rate and the
Class C Interest Rate, respectively. Interest will be distributed on November
15, 1996 and on each Distribution Date thereafter to Series 1996-A Holders in
whose names the Class A Certificates, the Class B Certificates or the Class C
Interests, as applicable, 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 Distribution Date will accrue from and including the preceding
Distribution Date (or in the case of the first Distribution Date, from and
including the Closing Date) to but excluding the next Distribution Date.
Interest payments on the Class A Certificates for each Distribution Date
will be calculated on the outstanding principal amount of the Class A
Certificates as of the last day of the Monthly Period preceding such
Distribution Date (or in the case of the first Distribution Date, as of the
Closing Date) based upon the Class A Certificate Rate and on the basis of the
actual number of days in the period from and including the preceding
Distribution Date to but excluding such Distribution Date and a 360-day year
(or, with respect to the initial Interest Period, on the basis of the actual
number of days in the applicable period specified in the next sentence). The
Class A Certificate Rate is % per annum above LIBOR (determined as set forth
below) for the period from the Closing Date through October 14, 1996, and for
the period from October 15, 1996 through November 14, 1996, and for each
Interest Period thereafter. Interest payments in respect of the Class A
Certificates on any Distribution Date will be funded from Class A Available
Funds for the preceding Monthly Period. To the extent the Class A Available
Funds for the preceding Monthly Period are insufficient to pay such interest,
Excess Spread and Excess Finance Charge Collections allocated to Series 1996-A,
amounts on deposit in the Cash Collateral Account up to the Available Cash
Collateral Amount and Reallocated Principal Collections allocable to the Class C
Interests and the Class B Certificates, each to the extent available as
described herein, 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 Allocation Percentage of collections of Finance Charge
Receivables allocated to Series 1996-A with respect to such Monthly Period,
including any investment earnings (net of losses and investment expenses) and
certain other amounts that are to be treated as collections of Finance Charge
Receivables in accordance with the Pooling and Servicing Agreement; (ii) if such
Monthly Period relates to a Distribution Date that occurs prior to the Class B
Principal Commencement Date, the Principal Funding Investment Proceeds, if any,
with respect to the related Distribution Date; and (iii) amounts, if any, to be
withdrawn from the Reserve Account that are required to be included in Class A
Available Funds with respect to such Distribution Date.
Interest payments on the Class B Certificates for each Distribution Date
will be calculated on the outstanding principal amount of the Class B
Certificates as of the last day of the Monthly Period preceding such
Distribution Date (or in the case of the first Distribution Date, as of the
Closing Date) based upon the Class B Certificate Rate and on the basis of the
actual number of days in the period from and including the preceding
Distribution Date to but excluding such Distribution Date and a 360-day year
(or, with respect to the initial Interest Period, on the basis of the actual
number of days in the applicable period specified in the next sentence). The
Class B Certificate Rate is % per annum above LIBOR (determined as set forth
below) for the period from the Closing Date through October 14, 1996, and for
the period from October 15, 1996 through November 14, 1996, and for each
Interest Period thereafter. Interest payments in respect of the Class B
Certificates on any Distribution Date will be funded from Class B Available
Funds for the related Monthly Period. To the extent the Class B Available Funds
for the preceding Monthly Period are insufficient to pay such interest, Excess
Spread and Excess Finance Charge Collections allocated to Series 1996-A, amounts
on deposit in the Cash Collateral Account up to the Available Cash Collateral
Amount and Reallocated Principal Collections allocable to the Class C Interests,
each to the extent available as described herein, will be used to make such
payments. "Class B Available Funds" means, with respect to any Monthly
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Period, an amount equal to the sum of (i) the Class B Floating Allocation
Percentage of collections of Finance Charge Receivables allocated to Series
1996-A with respect to such Monthly Period, including any investment earnings
(net of losses and investment expenses) and certain other amounts that are to be
treated as collections of Finance Charge Receivables in accordance with the
Pooling and Servicing Agreement; (ii) if such Monthly Period relates to a
Distribution Date that occurs on or after the Class B Principal Commencement
Date and prior to the Class C Principal Commencement Date, the Principal Funding
Investment Proceeds, if any, with respect to the related Distribution Date; and
(iii) amounts, if any, to be withdrawn from the Reserve Account that are
required to be included in Class B Available Funds with respect to such
Distribution Date.
Interest payments on the Class C Interests for each Distribution Date will
be calculated on the outstanding principal amount of the Class C Interests as of
the last day of the Monthly Period preceding such Distribution Date (or in the
case of the first Distribution Date, as of the Closing Date) based upon a rate
not to exceed % per annum (the "Class C Interest Rate"). Interest payments
in respect of the Class C Interests on any Distribution Date will be funded from
Excess Spread and Excess Finance Charge Collections allocable to Series 1996-A
and amounts on deposit in the Cash Collateral Account up to the Available Cash
Collateral Amount, each to the extent available as described herein, and from
the spread account maintained solely for the benefit of the Class C Interest
Holders (the "Spread Account"). "Class C Available Funds" means, with respect to
any Monthly Period, an amount equal to the sum of (i) the Class C Floating
Allocation Percentage of collections of Finance Charge Receivables allocated to
Series 1996-A with respect to such Monthly Period, including any investment
earnings (net of losses and investment expenses) and certain other amounts that
are to be treated as collections of Finance Charge Receivables in accordance
with the Pooling and Servicing Agreement; (ii) if such Monthly Period relates to
a Distribution Date that occurs on or after the Class C Principal Commencement
Date, the Principal Funding Investment Proceeds, if any, with respect to the
related Distribution Date; and (iii) amounts, if any, to be withdrawn from the
Reserve Account that are required to be included in Class C Available Funds with
respect to such Distribution Date.
"Certificate Rate" shall mean the Class A Certificate Rate, the Class B
Certificate Rate or the Class C Interest Rate, as applicable.
The Trustee will determine LIBOR on the second London Business Day
immediately preceding the Closing Date for the period from the Closing Date
through October 14, 1996 and on the second London Business Day immediately
preceding October 15, 1996 for the period from October 15, 1996 through November
14, 1996, and for each Interest Period thereafter on the second London Business
Day prior to the commencement of such Interest Period (each a "LIBOR
Determination Date").
"LIBOR" means, as of any LIBOR Determination Date, the rate for one month
deposits in United States dollars (commencing on the first day of the applicable
Interest Period (or portion of the initial Interest Period), or if such day is
not a London Business Day, the rate that will be in effect on the next
succeeding London Business Day) which appears on Telerate Page 3750 as of 11:00
a.m., London time, on such date. If such rate does not appear on Telerate Page
3750, the rate for that day will be determined on the basis of the rates at
which deposits in United States dollars are offered by the Reference Banks at
approximately 11:00 a.m., London time, on that day to prime banks in the London
interbank market for a one month period (commencing on the first day of the
applicable Interest Period, or portion of the initial Interest Period). The
Trustee will request the principal London office of each of the Reference Banks
to provide a quotation of its rate. If at least two such quotations are
provided, the rate for that day will be the arithmetic mean (rounded upwards to
four decimal places) of the quotations. If fewer than two quotations are
provided as requested, the rate for that day will be the arithmetic mean
(rounded upwards to four decimal places) of the rates quoted by major banks in
New York City, selected by the Servicer, at approximately 11:00 a.m., New York
City time, on that day for loans in United States dollars to leading European
banks for a one-month period (commencing on the first day of the applicable
Interest Period or portion of the initial Interest Period).
"London Business Day" means any Business Day on which dealings in deposits
in United States dollars are transacted in the London interbank market.
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"Business Day" means any day other than (a) a Saturday or Sunday or (b) any
other day on which national banking associations or state banking institutions
in New York, New York, Chevy Chase, Maryland or Wilmington, Delaware are
authorized or obligated by law, executive order or governmental decree to be
closed.
"Telerate Page 3750" means the display page currently so designated on the
Dow Jones Telerate Service (or such other page as may replace that page on that
service for the purpose of displaying comparable rates or prices).
"Reference Banks" means four major banks in the London interbank market
selected by the Servicer.
"Interest Period" means, with respect to any Distribution Date, a period
from and including the preceding Distribution Date to but excluding such
Distribution Date; PROVIDED, HOWEVER, that the initial Interest Period will
commence on the Closing Date.
The Class A Certificate Rate and the Class B Certificate Rate applicable to
the then current and the immediately preceding Interest Periods may be obtained
by any Series 1996-A Certificateholder by telephoning the Trustee at its
Corporate Trust Office at 1-800-735-7777.
PRINCIPAL PAYMENTS
During the Revolving Period (which begins on the Closing Date and ends on
the day before the commencement of the Scheduled Accumulation Period or, if
earlier, the Early Amortization Period), no principal payments will be made to
the Series 1996-A Certificateholders. During the Scheduled Accumulation Period,
funds available to pay principal in respect of Series 1996-A will be deposited
in the Principal Funding Account as described below and on the Class A Expected
Final Payment Date will be distributed to the Class A Certificateholders up to
the Class A Invested Amount, then to Class B Certificateholders on the Class B
Expected Final Payment Date up to the Class B Invested Amount and then to Class
C Interest Holders on the Class C Expected Final Payment Date up to the Class C
Invested Amount; PROVIDED that if, following the Class A Scheduled Accumulation
Period, the commencement of the Class B Scheduled Accumulation Period is delayed
and until such period begins, collections of Principal Receivables allocable to
Series 1996-A will not be deposited in the Principal Funding Account and 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 Series Supplements
for such other Series, or paid to the holders of the Transferor Certificates.
During the Early Amortization Period, which will begin upon the occurrence of a
Pay Out Event with respect to Series 1996-A, and until the Series 1996-A
Termination Date occurs, funds available to pay principal in respect of Series
1996-A will be paid first to the Class A Certificateholders until the Class A
Invested Amount has been paid in full, then to the Class B Certificateholders
until the Class B Invested Amount has been paid in full and then to the Class C
Interest Holders until the Class C Invested Amount has been paid in full.
On each Distribution Date with respect to the Class A Scheduled Accumulation
Period, the Trustee will deposit into 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 with respect to the Class A Scheduled Accumulation Period 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 payment in full of the Class A Invested
Amount, on each Distribution Date with respect to the Class B Scheduled
Accumulation Period, amounts equal to the least of (i) the amount of Available
Principal Collections (minus the portion of such Available Principal Collections
applied to Class A Monthly Principal on such Distribution Date), (ii) the
Controlled Deposit Amount with respect to the Class B Scheduled Accumulation
Period, and (iii) the Class B Adjusted Invested Amount will be deposited in the
Principal Funding Account until the Principal Funding Account Balance equals the
Class B Invested Amount. 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.
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If a Pay Out Event occurs with respect to Series 1996-A 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 Distribution Date after the Monthly Period in
which such Pay Out Event occurs, then, if the Class A Invested Amount is paid in
full, to the Class B Certificateholders and then, if the Class B Invested Amount
is paid in full, to the Class C Interest Holders. If, on an expected final
payment date, monies on deposit in the Principal Funding Account are
insufficient to pay the Invested Amount of the applicable Class, a Pay Out Event
will occur and the Early Amortization Period will commence.
"Available Principal Collections" means, with respect to any Distribution
Date, an amount equal to the sum of (a) the Principal Allocation Percentage of
all collections of Principal Receivables deposited in the Collection Account
during the related Monthly Period (minus the amount of Reallocated Principal
Collections with respect to such Monthly Period that are retained in the
Collection Account during the Early Amortization Period and used to pay any
deficiency in the Class A Required Amount or the Class B Required Amount, as
described herein), (b) any Shared Principal Collections with respect to other
Series that are allocated to Series 1996-A, and (c) any other amounts that
pursuant to the Series 1996-A Supplement are to be treated as Available
Principal Collections with respect to the related Distribution Date.
The Scheduled Accumulation Period (and the Class A Scheduled Accumulation
Period) is scheduled to commence at the close of business on the last day of the
June 2000 Monthly Period; however, the Transferors may elect to postpone the
commencement of the Scheduled Accumulation Period (and of the Class A Scheduled
Accumulation Period) and extend the Revolving Period, subject to certain
conditions including those set forth below. Beginning on the Determination Date
immediately preceding the April 2000 Distribution Date and on each Determination
Date thereafter until the commencement of the Scheduled Accumulation Period (and
of the Class A Scheduled Accumulation Period), the Servicer will determine the
"Class A Scheduled Accumulation Period Length," which is the number of months
expected to be required to fully fund the Principal Funding Account no later
than the Class A Expected Final Payment Date, based on (a) the expected monthly
collections of Principal Receivables expected to be distributable to the
Certificateholders of all Series (excluding certain other Series), assuming a
monthly principal payment rate no greater than the lowest monthly principal
payment rate on the Receivables for the preceding twelve months and (b) the
amount of principal expected to be distributable to Certificateholders of all
Series (excluding certain other Series) that are not expected to be in their
revolving periods during the Class A Scheduled Accumulation Period. If the Class
A Scheduled Accumulation Period Length is less than 14 months, the Transferors
may, at their option, postpone the commencement of the Scheduled Accumulation
Period (and of the Class A Scheduled Accumulation Period) such that the number
of months included in the Class A Scheduled Accumulation Period will be equal to
or exceed the Class A Scheduled Accumulation Period Length. The effect of the
foregoing calculation is to permit the reduction of the Class A Scheduled
Accumulation Period Length and a delay in the commencement of the Scheduled
Accumulation Period (and of the Class A Scheduled Accumulation Period) 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 and on increases in the monthly principal
payment rate, which, if continued, would result in the shorter Class A Scheduled
Accumulation Period. In no event will the Class A Scheduled Accumulation Period
Length be less than one month.
The Class B Scheduled Accumulation Period is scheduled to commence at the
close of business on the last day of the August 2001 Monthly Period; however,
the Transferors may elect to postpone the commencement of the Class B Scheduled
Accumulation Period for one month, and reduce the length of such period from two
months to one month, based on (a) the expected Monthly Collections of Principal
Receivables expected to be distributable to the Certificateholders of all Series
(excluding certain other Series), assuming a monthly principal payment rate no
greater than the lowest monthly principal payment rate on the Receivables for
the preceding twelve months and (b) the amount of principal expected to be
distributable to
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Certificateholders of all Series (excluding certain other Series) that are not
expected to be in their revolving periods during the Class B Scheduled
Accumulation Period. In no event will the length of the Class B Scheduled
Accumulation Period be less than one month.
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 1996-A
Termination Date occurs, the Class A Certificateholders will be entitled to
receive Available Principal Collections. On each Distribution Date with respect
to the Early Amortization Period, 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 to occur of
the date the Class B Invested Amount is paid in full and the Series 1996-A
Termination Date.
SUBORDINATION OF THE CLASS B CERTIFICATES
The Class B Certificates will be subordinated to the extent necessary to
fund payments with respect to the Class A Certificates as described herein. 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 collections distributable to the Class B Certificateholders will be
reduced. See "-- Allocation Percentages," "-- Reallocation of Cash Flows; Class
B Invested Amount; Class C Invested Amount" and "-- Application of Collections
- -- Excess Spread; Excess Finance Charge Collections" herein.
SUBORDINATION OF THE CLASS C INTERESTS
The Class C Interests will be subordinated to the extent necessary to fund
payments with respect to the Class A Certificates and the Class B Certificates
as described herein. To the extent the Class C Invested Amount is reduced, the
percentage of collections of Finance Charge Receivables allocated to the Class C
Interests in subsequent Monthly Periods will be reduced. Moreover, to the extent
the amount of such reduction in the Class C Invested Amount is not reimbursed,
the amount of principal collections distributable to the Class C Interest
Holders will be reduced. See "-- Allocation Percentages," "-- Reallocation of
Cash Flows; Class B Invested Amount; Class C Invested Amount" and "--
Application of Collections -- Excess Spread; Excess Finance Charge Collections"
herein.
ALLOCATION PERCENTAGES
Pursuant to the Pooling and Servicing Agreement, the Servicer will allocate
among Series 1996-A, 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 Series 1996-A 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, (x) the numerator of which is the Adjusted
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
(y) the denominator of which is the greater of (i) the sum of the total amount
of the Principal Receivables in the Trust as of the last day of such preceding
Monthly Period (or with respect to the first Monthly Period, as of the Closing
Date) and the principal amount on deposit in the Special Funding Account as of
the last day of such preceding Monthly Period (or with respect to the first
Monthly Period, as of the Closing Date) and (ii) the sum of the numerators used
to calculate the floating allocation percentages for all Series then
outstanding. The collections of Finance Charge Receivables so allocated to
Series 1996-A will be further allocated among the Class A Certificateholders,
the Class B Certificateholders and the Class C Interest Holders in accordance
with the Class A Floating Allocation Percentage, the Class B Floating Allocation
Percentage and the Class C Floating Allocation Percentage, respectively. The
"Class A 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 equal to the Class A Adjusted Invested
Amount as of the close of business on the last day of the immediately preceding
Monthly Period (or with respect to the first Monthly Period, the Class A Initial
Invested Amount)
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and the denominator of which is equal to the Adjusted Invested Amount as of the
close of business on the last day of such preceding Monthly Period (or with
respect to the first Monthly Period, the Initial Invested Amount). The "Class B
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 equal to the Class B Adjusted Invested Amount as of
the close of business on the last day of the immediately preceding Monthly
Period (or with respect to the first Monthly Period, the Class B Initial
Invested Amount) and the denominator of which is equal to the Adjusted Invested
Amount as of the close of business on the last day of such preceding Monthly
Period (or with respect to the first Monthly Period, the Initial Invested
Amount). The "Class C 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 equal to the Class C Adjusted
Invested Amount as of the close of business on the last day of the immediately
preceding Monthly Period (or with respect to the first Monthly Period, the Class
C Initial Invested Amount) and the denominator of which is equal to the Adjusted
Invested Amount as of the close of business on the last day of such preceding
Monthly Period (or with respect to the first Monthly Period, the Initial
Invested Amount).
Collections of Principal Receivables will be allocated to Series 1996-A
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, (x) 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 Scheduled
Accumulation Period or the Early Amortization Period, the Invested Amount as of
the last day of the Revolving Period and (y) 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 (or with respect
to the first Monthly Period, as of the Closing Date) and the principal amount on
deposit in the Special Funding Account as of the last day of such preceding
Monthly Period (or with respect to the first Monthly Period, as of 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 Series 1996-A
is subject to being paired with a future Series, if a Pay Out Event occurs with
respect to a Paired Series during the Scheduled Accumulation Period or the Early
Amortization Period with respect to Series 1996-A, 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 Monthly Period
preceding such Pay Out Event (or in the case of the first Monthly Period, the
Initial Invested Amount) and the Transferors shall have received written notice
from each Rating Agency that such designation will not have a Ratings Effect.
The collections of Principal Receivables so allocated to Series 1996-A will be
further allocated among the Class A Certificateholders, the Class B
Certificateholders and the Class C Interest Holders based on the Class A
Principal Allocation Percentage, the Class B Principal Allocation Percentage and
the Class C Principal Allocation Percentage, respectively. The "Class A
Principal Allocation Percentage" means, with respect to any Monthly Period (a)
during the Revolving Period, the percentage equivalent (which percentage 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 the
last day of such preceding Monthly Period (or with respect to the first Monthly
Period, the Initial Invested Amount) and (b) during the Scheduled Accumulation
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 A Invested Amount as of the end of the Revolving Period, and the
denominator of which is the Invested Amount as of the end of the Revolving
Period. The "Class B Principal Allocation Percentage" means, with respect to any
Monthly Period, (a) during the Revolving Period, the percentage equivalent
(which percentage shall never exceed 100%) of a fraction, the numerator of which
is equal to 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 equal to the Invested
Amount as of the last day of such preceding Monthly Period (or with respect to
the first Monthly
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Period, the Initial Invested Amount) and (b) during the Scheduled Accumulation
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 Invested Amount as of the end of the Revolving
Period. The "Class C Principal Allocation Percentage" means, with respect to any
Monthly Period, (a) during the Revolving Period, the percentage equivalent
(which percentage shall never exceed 100%) of a fraction, the numerator of which
is equal to the Class C Invested Amount as of the last day of the immediately
preceding Monthly Period (or in the case of the first Monthly Period, the Class
C Initial Invested Amount) and the denominator of which is equal to the Invested
Amount as of the last day of such preceding Monthly Period (or with respect to
the first Monthly Period, the Initial Invested Amount) and (b) during the
Scheduled Accumulation 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 C Invested Amount as of the end of the Revolving
Period and the denominator of which is the Invested Amount as of the end of the
Revolving Period.
Notwithstanding the foregoing, in any Monthly Period in which there occurs
an Addition Date or 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 as of the end of the day on the last day
of the prior Monthly Period (or, in the case of the first Monthly Period, on the
Closing Date) for the period from and including the first day of such Monthly
Period (or in the case of the first Monthly Period, from and including the
Closing Date) to but excluding the related Addition Date or Removal Date, (ii)
if there is more than one Addition Date and/or Removal Date in a Monthly Period
then with respect to each of such Dates occurring after the first of such Dates
in such Monthly Period, the aggregate amount of Principal Receivables in the
Trust as of the end of the day on the immediately preceding Addition Date or
Removal Date for the period from and including such immediately preceding
Addition Date or Removal Date to but excluding such Addition Date or Removal
Date, and (iii) the aggregate amount of Principal Receivables in the Trust as of
the end of the day on the last Addition Date or Removal Date that occurs during
that Monthly Period for the period from and including such Addition Date or
Removal Date to and including the last day of such Monthly Period.
As used herein, the following terms have the meanings indicated:
"Class A Invested Amount" for any date means an amount equal to (i) the
Class A Initial Invested Amount, minus (ii) the aggregate 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 on or 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 aggregate amount of principal
payments made to Class B Certificateholders on or prior to such date, 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 allocable to the Class B Certificates for all prior Distribution
Dates that have been used to fund the Class A Required Amount with respect to
such Distribution Dates as described herein, minus (v) an amount equal to the
amount by which the Class B Invested Amount has been reduced on all prior
Distribution Dates to cover the Class A Investor Default Amount on all prior
Distribution Dates as described under "-- Defaulted Receivables; Investor
Charge-Offs," and plus (vi) the aggregate amount of Excess Spread and Excess
Finance Charge Collections allocated to Series 1996-A and allocated on or prior
to such Distribution Date to amounts deducted pursuant to the foregoing clauses
(iii), (iv) and (v).
"Class C Invested Amount" for any date means an amount equal to (i) the
Class C Initial Invested Amount, minus (ii) the aggregate amount of principal
payments made to Class C Interest Holders on or prior to such date (other than
principal payments made from the proceeds of any amounts received from the
Spread Account for the purpose of reimbursing previous reductions in the Class C
Invested Amount), minus (iii) the aggregate amount of Class C Investor
Charge-Offs for all prior Distribution Dates, minus (iv) the
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aggregate amount of Reallocated Principal Collections allocable to the Class C
Interests for all prior Distribution Dates that have been used to fund the Class
A Required Amount or the Class B Required Amount with respect to such
Distribution Dates as described herein, minus (v) an amount equal to the amount
by which the Class C Investor Amount has been reduced on all prior Distribution
Dates to cover the Class A Investor Default Amount or the Class B Investor
Default Amount on all prior Distribution Dates as described under "-- Defaulted
Receivables; Investor Charge-Offs," and plus (vi) the aggregate amount of Excess
Spread and Excess Finance Charge Collections allocable to Series 1996-A
allocated on or prior to such Distribution Date to amounts deducted pursuant to
the foregoing clauses (iii), (iv) and (v).
"Invested Amount" for any date means an amount equal to the sum of the Class
A Invested Amount, the Class B Invested Amount and the Class C Invested Amount
on such date.
"Class A Adjusted Invested Amount," for any date of determination, means an
amount equal to the Class A Invested Amount minus the funds on deposit in the
Principal Funding Account on such date with respect to such Class.
"Class B Adjusted Invested Amount," for any date of determination, 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 (after giving
effect to any portion thereof to be paid to the Class A Certificateholders) on
such date with respect to such Class.
"Class C Adjusted Invested Amount," for any date of determination, means (a)
if such date occurs prior to the Class C Principal Commencement Date, an amount
equal to the Class C Invested Amount and (b) if such date occurs on or after the
Class C Principal Commencement Date, an amount equal to the Class C Invested
Amount minus the funds deposited in the Principal Funding Account (after giving
effect to any portion thereof to be paid to the Class A Certificateholders or
the Class B Certificateholders) on such date with respect to such Class.
"Adjusted Invested Amount," for any date of determination, means the sum of
the Class A Adjusted Invested Amount, the Class B Adjusted Invested Amount and
the Class C Adjusted Invested Amount.
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 1996-A Holders. During the Scheduled Accumulation
Period (except for limited periods if the commencement of the Class B Scheduled
Accumulation Period or the Class C Scheduled Accumulation Period is delayed, as
described herein), the Servicer shall transfer collections in respect of
Principal Receivables, Shared Principal Collections allocated to Series 1996-A
and 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 Series 1996-A, 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 until 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 (or, if a
Pay Out Event occurs during the Scheduled Accumulation Period, on the
Distribution Date following the Monthly Period in which such Pay Out Event
occurs) 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 (i) on
or prior to the Class A Expected Final Payment Date, as Class A Available Funds,
(ii) on and after the Class B Principal Commencement Date and on or prior to the
Class B Expected Final Payment Date, as Class B Available Funds and (iii) on and
after the Class C Principal Commencement Date and on or prior to the Class C
Expected Final Payment Date, as Class C Available Funds. If such investments
with respect to any such Distribution Date yield less than the applicable
Certificate Rate, the Principal Funding Investment Proceeds
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with respect to such Distribution Date will be less than the Covered Amount for
such Distribution Date. It is intended that any such shortfall will be funded
from Class A Available Funds (including the portion of the Available Reserve
Account Amount included therein) (in the case of the Class A Certificates) and
Class B Available Funds (including the portion of the Available Reserve Account
Amount included therein) (in the case of the Class B Certificates), Excess
Spread and Excess Finance Charge Collections allocable to Series 1996-A and
available to fund such amount as described under "-- Application of Collections
- -- Excess Spread; Excess Finance Charge Collections" or a withdrawal from the
Cash Collateral Account as described under "-- Cash Collateral Account." The
Available Reserve Account Amount, the Available Cash Collateral Amount and other
amounts described in the preceding sentence at any time will be limited and
there can be no assurance that sufficient funds will be available to fund any
such shortfall.
The "Class B Principal Commencement Date" shall mean (i) the Distribution
Date on which the Class A Invested Amount is paid in full, or (ii) 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 commenced, the Distribution Date following
the Class A Expected Final Payment Date or, if the commencement of the Class B
Scheduled Accumulation Period is delayed as described herein, the immediately
following Distribution Date (which is the Class B Expected Final Payment Date).
The "Class C Principal Commencement Date" shall mean (i) the Distribution
Date on which the Class B Invested Amount is paid in full, or (ii) if the Class
B Invested Amount is paid in full on the Class B Expected Final Payment Date and
the Early Amortization Period has not commenced, the Distribution Date following
the Class B Expected Final Payment Date or, if the commencement of the Class C
Scheduled Accumulation Period is delayed as described herein, the immediately
following Distribution Date (which is the Class C Expected Final Payment Date).
The "Covered Amount" shall mean (a) for any Distribution Date with respect
to the Class A Scheduled Accumulation Period (or the first Distribution Date
after the occurrence of a Pay Out Event, if such Distribution Date occurs on or
prior to the Class A Expected Final Payment Date), an amount equal to 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 Class A Certificate Rate in effect during such Interest Period and (ii)
the Principal Funding Account Balance, if any, with respect to such Class as of
the preceding Distribution Date, (b) for any Distribution Date with respect to
the Class B Scheduled Accumulation Period (or the first Distribution Date after
the occurrence of a Pay Out Event, if such Distribution Date occurs on or after
the Class B Principal Commencement Date and on or prior to the Class B Expected
Final Payment Date), an amount equal to 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 Class B Certificate Rate in
effect during such Interest Period and (ii) the Principal Funding Account
Balance, if any, with respect to such Class as of the preceding Distribution
Date, and (c) for any Distribution Date with respect to the Class C Scheduled
Accumulation Period (or the first Distribution Date after the occurrence of a
Pay Out Event, if such Distribution Date occurs on or after the Class C
Principal Commencement Date), an amount equal to the product of (i)(A) a
fraction as set forth in the terms of the Class C Interests times (B) the Class
C Interest Rate in effect during such Interest Period and (ii) the Principal
Funding Account Balance, if any, with respect to such Class 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 Series
1996-A Holders (the "Reserve Account"). The Reserve Account is established to
increase the likelihood of the distribution of interest on Series 1996-A as
described 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 allocated to
Series 1996-A (to the extent described below under "-- Application of
Collections -- Excess Spread; Excess Finance Charge Collections") to increase
the amount on deposit in the Reserve Account (to the extent such amount is less
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than the Required Reserve Account Amount). The "Reserve Account Funding Date"
will be the Distribution Date with respect to the Monthly Period which commences
no later than three months prior to the Distribution Date with respect to the
first Monthly Period of the Class A Scheduled Accumulation Period or such
earlier date as the Servicer may designate. The "Required Reserve Account
Amount" shall mean, except in certain limited circumstances, for any
Distribution Date on or after the Reserve Account Funding Date an amount equal
to 0.50% of the Invested Amount as of the preceding Distribution Date (after
giving effect to all changes therein on such date) or any other amount
designated by the Transferors, PROVIDED FURTHER, that if such designation is of
a lesser amount, the Transferors shall have received written notice from each
Rating Agency that such designation will have no Ratings Effect and the
Transferors shall have delivered to the Trustee a certificate of an authorized
officer of the Transferors to the effect that, based on the facts known to such
officer at such time, in the reasonable belief of the Transferors, such
designation will not cause a Pay Out Event with respect to Series 1996-A or an
event that, after the giving of notice or the lapse of time, would cause a Pay
Out Event to occur with respect to Series 1996-A. 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 the holders of the Transferor Certificates or
their designees.
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 until 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 will be retained in the Reserve Account (to the
extent the amount on deposit therein is less than the Required Reserve Account
Amount) and the balance will be distributed to the holders of the Transferor
Certificates or their designees.
On each Distribution Date with respect to the Scheduled Accumulation Period
(or if a Pay Out Event occurs during the Scheduled Accumulation Period, on the
Distribution Date following the Monthly Period in which such Pay Out Event
occurs) a withdrawal will be made from the Reserve Account, and the amount of
such withdrawal will be deposited in the Collection Account and will be treated
(i) on or prior to the Class A Expected Final Payment Date, as Class A Available
Funds, (ii) on and after the Class B Principal Commencement Date and on or prior
to the Class B Expected Final Payment Date, as Class B Available Funds, and
(iii) on and after the Class C Principal Commencment Date and on or prior to the
Class C Expected Final Payment Date, as Class C Available Funds, in an amount
equal to the lesser of (a) the Available Reserve Account Amount with respect to
such Distribution Date and (b) the excess, if any, of the Covered Amount with
respect to such Distribution Date over the Principal Funding Investment Proceeds
with respect to such Distribution Date; PROVIDED, that the amount of such
withdrawal shall be reduced to the extent that funds otherwise would be
available to be deposited in the Reserve Account on such Distribution Date. If
the length of the Scheduled Accumulation Period for a Class is reduced to one
month, no funds will be withdrawn from the Reserve Account with respect to such
Class. 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 on such date (before
giving effect to any deposit to, or withdrawal from, the Reserve Account to be
made on such Distribution Date) and the Required Reserve Account Amount for such
Distribution Date.
The Reserve Account will be terminated following the earliest to occur of
(a) the Series 1996-A Termination Date (b) the date on which the Invested Amount
is paid in full, (c) if the Scheduled Accumulation Period has not commenced, the
occurrence of a Pay Out Event with respect to Series 1996-A or, (d) if the
Scheduled Accumulation Period has commenced, the earlier of the first
Distribution Date after the Monthly Period in which a Pay Out Event occurs and
the Class C 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
the holders of the
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Transferor Certificates or their designees. Any amounts withdrawn from the
Reserve Account and distributed to the holders of the Transferor Certificates or
their designees as described above will not be available for distribution to the
Series 1996-A Holders.
REALLOCATION OF CASH FLOWS; CLASS B INVESTED AMOUNT; CLASS C INVESTED AMOUNT
With respect to each Distribution Date, on the related Determination Date
the Servicer will determine the amount (the "Class A 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 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 (b) the sum of (A) the amount of Principal Funding Investment Proceeds,
if any, with respect to such Distribution Date, (B) the Class A Floating
Allocation Percentage of the Floating Allocation Percentage of collections of
Finance Charge Receivables (including any investment earnings, net of losses and
investment expenses, and certain other amounts that are to be treated as
collections of Finance Charge Receivables in accordance with the Pooling and
Servicing Agreement) with respect to such Distribution Date 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 Series 1996-A Supplement with respect to
such Distribution Date. If the Class A Required Amount is greater than zero,
Excess Spread and Excess Finance Charge Collections allocated to Series 1996-A
will be used to pay the Class A Required Amount with respect to such
Distribution Date. If Excess Spread and Excess Finance Charge Collections
allocable to Series 1996-A with respect to such Distribution Date are less than
the Class A Required Amount, amounts available under the Cash Collateral Account
(but not more than the Available Cash Collateral Amount) will be used to fund
the remaining Class A Required Amount. If Excess Spread and Excess Finance
Charge Collections allocable to Series 1996-A with respect to such Distribution
Date and amounts available under the Cash Collateral Account with respect to
such Distribution Date are insufficient to pay the Class A Required Amount,
collections of Principal Receivables allocable to the Class C Interests and, if
such amount is insufficient, allocable to the Class B Certificates with respect
to the related Monthly Period (collectively "Reallocated Principal Collections")
will be used to fund the remaining Class A Required Amount. If Reallocated
Principal Collections with respect to such Monthly Period, if any, are
insufficient to fund the remaining Class A Required Amount for the related
Distribution Date, and during periods when no Reallocated Principal Collections
are available, the Class C Invested Amount will be reduced by the amount of the
remaining unfunded Class A Required Amount, but not by more than the unfunded
Class A Investor Default Amount for such Distribution Date, until the Class C
Invested Amount is reduced to zero, and then the Class B Invested Amount will be
reduced by the amount by which the Class C Invested Amount would have been
reduced below zero but not by more than any remaining unfunded Class A Investor
Default Amount for such Distribution Date, until the Class B Invested Amount is
reduced to zero. If the Class C Invested Amount and the Class B Invested Amount
are reduced to zero, the Class A Invested Amount will be reduced to the extent
to which the Class B Invested Amount would have been reduced below zero, but not
by more than any remaining unfunded Class A Investor Default Amount for such
Distribution Date.
With respect to each Distribution Date, on the related Determination Date
the Servicer will determine the amount (the "Class B Required Amount"), which
will be equal to the sum of (x) the amount, if any, by which (a) the sum of (i)
Class B Monthly Interest for such Distribution Date, (ii) any Class B Monthly
Interest previously due but not paid to the Class B Certificateholders on a
prior Distribution Date, (iii) any Class B Additional Interest and (iv) the
Class B Servicing Fee for such Distribution Date and any unpaid Class B
Servicing Fee exceeds the sum of (A) the amount of Principal Funding Investment
Proceeds, if any, with respect to such Distribution Date, (B) the Class B
Floating Allocation Percentage of the Floating Allocation Percentage of
collections of Finance Charge Receivables (including any investment earnings,
net of losses and investment expenses, and certain other amounts that are to be
treated as collections of Finance Charge Receivables in accordance with the
Pooling and Servicing Agreement) with respect to such Distribution Date and (C)
the amount of funds, if any, to be withdrawn from the Reserve Account and
allocated to the Class B Certificates pursuant to the Series 1996-A Supplement
with respect to such Distribution Date,
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plus (y) the Class B Investor Default Amount, if any, for such Distribution
Date. If the Class B Required Amount is greater than zero, Excess Spread and
Excess Finance Charge Collections allocated to Series 1996-A (after giving
effect to the application thereof to the Class A Required Amount for such
Distribution Date, if any, and the reimbursement of Class A Investor
Charge-Offs, if any, on such Distribution Date) will be used to pay the Class B
Required Amount with respect to such Distribution Date. If such Excess Spread
and Excess Finance Charge Collections allocable to Series 1996-A with respect to
such Distribution Date are less than the Class B Required Amount, amounts
available under the Cash Collateral Account (but not more than the Available
Cash Collateral Amount and after giving effect to any withdrawals therefrom with
respect to the Class A Required Amount for such Distribution Date) will be used
to fund the remaining Class B Required Amount. If such Excess Spread and Excess
Finance Charge Collections allocable to Series 1996-A with respect to such
Distribution Date and such amounts withdrawn from the Cash Collateral Account
are less than the Class B Required Amount, Reallocated Principal Collections
allocable to the Class C Interests (after giving effect to any application
thereof to fund the Class A Required Amount for such Distribution Date) with
respect to the related Monthly Period will be used to fund the remaining Class B
Required Amount. If such Reallocated Principal Collections with respect to such
Monthly Period, if any, are insufficient to fund the remaining Class B Required
Amount for the related Distribution Date, and during periods when no Reallocated
Principal Collections are available, the Class C Invested Amount (after giving
effect to any reduction thereof with respect to the Class A Required Amount for
such Distribution Date) will be reduced by the amount of the remaining unfunded
Class B Required Amount but not by more than the unfunded Class B Investor
Default Amount for such Distribution Date, until the Class C Invested Amount
(after giving effect to such prior reductions) is reduced to zero and then the
Class B Invested Amount will be reduced by the amount by which the Class C
Invested Amount would have been reduced below zero, but not by more than any
remaining unfunded Class B Investor Default Amount for such Distribution Date.
Principal Collections allocable to the Class B Certificates and to the Class
C Interests will be retained in the Collection Account and be available for
application as Reallocated Principal Collections as described herein only during
the Early Amortization Period. Principal Collections shall be allocated to the
Class B Certificates and the Class C Interests based on the Class B Principal
Allocation Percentage and the Class C Principal Allocation Percentage,
respectively; PROVIDED that in no event will the Principal Collections allocable
to the Class C Interests on any Distribution Date exceed the Class C Invested
Amount on such Distribution Date and in no event will the Principal Collections
allocable to the Class B Certificates on any Distribution Date exceed the Class
B Invested Amount on such Distribution Date.
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, Class B Available Funds and Class C Available Funds (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 will be distributed 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 on a prior Distribution Date,
plus additional interest at 2.00% plus the Class A Certificate Rate (or,
if such amount is not permitted by applicable law, such lesser amount as
is permitted by applicable law) with respect to the amount that was due
but not paid to Class A Certificateholders on a prior Distribution Date
("Class A Additional Interest"), will be distributed to the Class A
Certificateholders;
(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;
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(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; and
(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 will be distributed 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 on a prior Distribution Date,
plus additional interest at 2.00% plus the Class B Certificate Rate (or,
if such amount is not permitted by applicable law, such lesser amount as
is permitted by applicable law) with respect to the amount that was due
but not paid to Class B Certificateholders on a prior Distribution Date
("Class B Additional Interest"), will be distributed to the Class B
Certificateholders;
(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; and
(iii) 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 Class C Available
Funds will be distributed in the following priority:
(i) an amount equal to the Class C Servicing Fee for such
Distribution Date, plus the amount of any Class C Servicing Fee
previously due but not distributed to the Servicer on a prior
Distribution Date, will be distributed to the Servicer; and
(ii) the balance, if any, shall constitute Excess Spread and shall be
allocated and distributed as described under "-- Excess Spread; Excess
Finance Charge Collections" below.
"Excess Spread" means, with respect to any Distribution Date, an amount
equal to the sum of the amounts described in clause (A)(iv) above, clause
(B)(iii) above and clause (C)(ii) above.
"Class A Monthly Interest" means, with respect to any Distribution Date, an
amount equal to the product of (A) a fraction, the numerator of which is the
actual number of days in the related Interest Period (or, in the case of the
initial Interest Period, the applicable portion thereof) and the denominator of
which is 360, (B) the Class A Certificate Rate in effect during such Interest
Period (or such portion thereof) and (C) the outstanding principal amount of the
Class A Certificates as of the close of business on the last day of the
preceding Monthly Period (or with respect to the first Distribution Date, on the
Closing Date).
"Class B Monthly Interest" means, with respect to any Distribution Date, an
amount equal to the product of (A) a fraction, the numerator of which is the
actual number of days in the related Interest Period (or, in the case of the
initial Interest Period, the applicable portion thereof) and the denominator of
which is 360, (B) the Class B Certificate Rate in effect during such Interest
Period (or such portion thereof) and (C) the outstanding principal amount of the
Class B Certificates as of the close of business on the last day of the
preceding Monthly Period (or with respect to the first Distribution Date, on the
Closing Date).
EXCESS SPREAD; EXCESS FINANCE CHARGE COLLECTIONS. On each Distribution
Date, the Trustee, acting pursuant to the Servicer's instructions, will apply
Excess Spread and (except as otherwise provided below), to the extent Excess
Spread is insufficient, Excess Finance Charge Collections allocated to Series
1996-A 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) under "-- Payment of Fees, Interest and
Other Items" above, in that order of priority;
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(b) an amount equal to the aggregate amount of Class A Investor
Charge-Offs which have not been previously reimbursed will be treated as a
portion of 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 either on such Distribution Date or on a prior
Distribution Date (to the extent not paid from Class B Available Funds) will
be distributed to the Class B Certificateholders;
(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 (to
the extent not paid from Class B Available Funds) will be paid to the
Servicer;
(e) 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;
(f) an amount equal to the aggregate amount 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) will be treated as a
portion of Available Principal Collections for such Distribution Date;
(g) an amount equal to the sum of (i) any Class C Monthly Interest for
such Distribution Date PLUS the amount of any Class C Monthly Interest
previously due but not distributed to the Class C Interest Holders on a
prior Distribution Date plus (ii) the amount of any Class C Additional
Interest for such Distribution Date and any Class C Additional Interest
previously due but not distributed to the Class C Interest Holders on a
prior Distribution Date will be distributed to the Class C Interest Holders;
(h) an amount equal to the Class C Servicing Fee due but not paid to the
Servicer either on such Distribution Date or a prior Distribution Date (to
the extent not paid from Class C Available Funds) will be paid to the
Servicer;
(i) an amount equal to the Class C Investor Default Amount for such
Distribution Date will be treated as a portion of Available Principal
Collections for such Distribution Date;
(j) an amount equal to the aggregate amount by which the Class C
Invested Amount has been reduced pursuant to clauses (iii), (iv) and (v) of
the definition of "Class C Invested Amount" under "-- Allocation
Percentages" above (but not in excess of the aggregate amount of such
reductions that have not been previously reimbursed, including from the
Spread Account) will be treated as a portion of Available Principal
Collections with respect to such Distribution Date;
(k) an amount equal to the "Monthly Cash Collateral Fee" (as defined in
the agreement, as amended from time to time, among the Transferors, the
Servicer, the Cash Collateral Depositor and the Trustee) for such
Distribution Date plus the amount of any Monthly Cash Collateral Fee
previously due but not paid to the Cash Collateral Depositor or its designee
on a prior Distribution Date will be distributed to the Cash Collateral
Depositor or its designee;
(l) an amount equal to the excess, if any, of the Required Cash
Collateral Amount over the Available Cash Collateral Amount will (to the
extent of Excess Spread available after application thereof in accordance
with clauses (a)-(k) above) be deposited into the Cash Collateral Account;
(m) amounts required to be deposited in the Spread Account will (to the
extent of Excess Spread available after application thereof in accordance
with clauses (a)-(l) above) be deposited into the Spread Account;
(n) 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 (to the extent of Excess Spread available after
application thereof in accordance with clauses (a)-(m) above) be deposited
into the Reserve Account;
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(o) an amount equal to the aggregate of any other amounts then due to
the Cash Collateral Depositor pursuant to the agreement, as amended from
time to time, among the Transferors, the Servicer, the Cash Collateral
Depositor and the Trustee (to the extent such amounts are payable pursuant
to the terms thereof out of Excess Spread or Excess Finance Charge
Collections) will be distributed to the Cash Collateral Depositor or its
designee for application in accordance with such agreement;
(p) an amount equal to the aggregate of any amounts then due to the
depositor of funds into the Spread Account (or any successor or assignee
thereto) pursuant to an agreement, as amended from time to time, among the
Transferors, the Servicer, such depositor and the Trustee (to the extent
such amounts are payable pursuant to the terms of such agreement out of
Excess Spread or Excess Finance Charge Collections) will be distributed to
the depositor or its designee for application in accordance with such
agreement; and
(q) 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 I or to the holders of the Transferor
Certificates or their designee as described in "Description of the
Certificates -- Sharing of Excess Finance Charge Collections" in the
Prospectus.
"Class C Monthly Interest" means, with respect to any Distribution Date, an
amount determined as provided in the terms of the Class C Interests.
"Class C Additional Interest" means interest at 2.00% plus the Class C
Interest Rate (or, if such amount is not permitted by applicable law, such
lesser amount as is permitted by applicable law) with respect to the amount of
interest that was due but not paid to Class C Interest Holders on a prior
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 (and,
if the commencement of the Class B Scheduled Accumulation Period or of the
Class C Scheduled Accumulation Period is delayed as described in "--
Principal Payments" above, during such delay) 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 Scheduled
Accumulation Period (except as provided in clause (i) above with respect to
a delay in the commencement of the Class B Scheduled Accumulation Period or
of the Class C Scheduled 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 (on the Class A Expected Final Payment Date and
on each Distribution Date during the 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 (on the Class B Expected Final Payment Date and
on each Distribution Date during the Early Amortization Period
after payment of the Class A Invested Amount);
(C) for each Distribution Date beginning on the Class C Principal
Commencement Date, an amount equal to Class C Monthly Principal
for such Distribution Date, up to the Class C Adjusted Invested
Amount on such Distribution Date, will be deposited in the
Principal
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Funding Account (during the Class C Scheduled Accumulation Period)
or distributed to the Class C Interest Holders (on the Class C
Expected Final Payment Date, on each Distribution Date during the
Early Amortization Period after payment of the Class A Invested
Amount and the Class B Invested Amount or in connection with an
optional repurchase); 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 treated as Shared
Principal Collections and applied as described under "Description
of the Certificates -- Shared Principal Collections" in the
Prospectus.
"Class A Monthly Principal" with respect to any Distribution Date relating
to the Class A Scheduled Accumulation 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, and
on or prior to the Class A Expected Final Payment Date, the applicable
Controlled Deposit 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 or the Early Amortization Period,
after the Class A Invested Amount has 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 (minus the portion of such Available
Principal Collections, if any, applied to Class A Monthly Principal on such
Distribution Date), (ii) for each Distribution Date with respect to the Class B
Scheduled Accumulation Period, and on or prior to the Class B Expected Final
Payment Date, the applicable Controlled Deposit Amount for such Distribution
Date and (iii) the Class B Adjusted Invested Amount on such Distribution Date.
"Class C Monthly Principal" with respect to any Distribution Date relating
to the Class C Scheduled Accumulation Period or the Early Amortization Period,
after the Class A Invested Amount and the Class B Invested Amount 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 (minus
the portion of such Available Principal Collections, if any, applied to Class A
Monthly Principal or Class B Monthly Principal on such Distribution Date), (ii)
for each Distribution Date with respect to the Class C Scheduled Accumulation
Period, and on or prior to the Class C Expected Final Payment Date, the
applicable Controlled Deposit Amount for such Distribution Date and (iii) the
Class C Adjusted Invested Amount on such Distribution Date.
"Controlled Accumulation Amount" means (a) for each Distribution Date with
respect to the Class A Scheduled Accumulation Period, one-fourteenth of the
Class A Invested Amount on the first day of such period; PROVIDED, HOWEVER, that
if the commencement of the Class A Scheduled Accumulation Period is delayed as
described under "-- Principal Payments" above, the Controlled Accumulation
Amount may be greater than the amount stated above for each Distribution Date
with respect to the Class A Scheduled Accumulation Period and will be determined
by the Servicer in accordance with the Pooling and Servicing Agreement based on
the principal payment rates for the Accounts and on the series invested amounts
of other Series that are scheduled to be in their revolving periods and then
scheduled to create Shared Principal Collections during the Class A Scheduled
Accumulation Period; (b) for each Distribution Date with respect to the Class B
Scheduled Accumulation Period, one-half of the Class B Invested Amount on the
first day of such period; PROVIDED, HOWEVER, that if the commencement of the
Class B Scheduled Accumulation Period is delayed as described under "--
Principal Payments" above, the Controlled Accumulation Amount will be equal to
the Class B Invested Amount on the first day of such period; and (c) for each
Distribution Date with respect to the Class C Scheduled Accumulation Period,
one-half of the Class C Invested Amount on the first day of such period;
PROVIDED, HOWEVER, that if the commencement of the Class C Scheduled
Accumulation Period is delayed as described under "-- Principal Payments" above,
the Controlled Accumulation Amount will be equal to the Class C Invested Amount
on the first day of such period.
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"Deficit Controlled Accumulation Amount" means (a) on the first Distribution
Date with respect to the Class A Scheduled Accumulation Period, the Class B
Scheduled Accumulation Period or the Class C Scheduled Accumulation Period, the
excess, if any, of the Controlled Accumulation Amount for such Distribution Date
over the amount withdrawn from the Collection Account and deposited to the
Principal Funding Account as Class A Monthly Principal, Class B Monthly
Principal or Class C 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, the Class B Scheduled Accumulation
Period or the Class C Scheduled Accumulation Period, the excess, if any, of the
Controlled Accumulation Amount for such subsequent Distribution Date plus any
Deficit Controlled Accumulation Amount for the prior Distribution Date over the
amount withdrawn from the Collection Account and deposited to the Principal
Funding Account as Class A Monthly Principal, Class B Monthly Principal or Class
C Monthly Principal, as the case may be, for such subsequent Distribution Date.
"Controlled Deposit Amount" means, for any Distribution Date with respect to
the Scheduled Accumulation Period, an amount equal to the sum of the Controlled
Accumulation Amount for such Distribution Date and any Deficit Controlled
Accumulation Amount for the immediately preceding Distribution Date; PROVIDED,
HOWEVER, that if the commencement of the Class B Scheduled Accumulation Period
or of the Class C Scheduled Accumulation Period is delayed, the Controlled
Deposit Amount with respect to the Distribution Date prior to the Class B
Principal Commencement Date or to the Class C Principal Commencement Date, as
applicable, shall be zero.
CASH COLLATERAL ACCOUNT
The Trust will have the benefit of the Cash Collateral Account for the
benefit of the Series 1996-A Holders and the Cash Collateral Depositor, as their
interests appear in the Series 1996-A Supplement, which interest, in the case of
the Cash Collateral Depositor, will be subordinated to the interests of the
Series 1996-A Holders as provided in the Series 1996-A 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 fully funded on the Closing Date in the
Initial Cash Collateral Amount with a deposit to be made by the Transferors (in
such capacity, together with any successor or assignee in such capacity, the
"Cash Collateral Depositor"). The Required Cash Collateral Amount may be
modified without the consent of the Series 1996-A Holders if the Transferors
shall have received written notice from each Rating Agency that such reduction
will not have a Ratings Effect and the Transferors shall have each delivered to
the Trustee a certificate of an authorized officer to the effect that, based on
the facts known to such officer at the time, in the reasonable belief of the
Transferors, such modification will not cause a Pay Out Event with respect to
Series 1996-A, or an event that, after the giving of notice or the lapse of
time, would constitute a Pay Out Event to occur with respect to Series 1996-A.
The Cash Collateral Account will be terminated following the earlier to occur of
(a) the date on which the Invested Amount is paid in full, and (b) the Series
1996-A Termination Date.
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 on such
date (before giving effect to any deposit to or withdrawal from the Cash
Collateral Account to be made on such Distribution Date) and the Required Cash
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 Cash Collateral Amount,
to fund the following amounts in the following priority:
(a) the excess, if any, of the Class A Required Amount with respect to
the related Distribution Date over the amount of Excess Spread and Excess
Finance Charge Collections allocated to Series 1996-A available to fund such
Class A Required Amount will be used FIRST to fund any deficiency in
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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 Class B Required Amount with respect to
the related Distribution Date over the amount of Excess Spread and Excess
Finance Charge Collections allocated to Series 1996-A available to fund such
Class B Required Amount will be used FIRST to fund any deficiency in current
Class B Monthly Interest, overdue Class B Monthly Interest and any current
or overdue Class B Additional Interest, SECOND to fund any deficiency in the
Class B Servicing Fee and THIRD to pay the Class B Investor Default Amount,
if any, for such Distribution Date;
(c) the excess, if any, of the current Class C Monthly Interest, overdue
Class C Monthly Interest and any current or overdue Class C Additional
Interest over the amount of Excess Spread and Excess Finance Charge
Collections allocated to Series 1996-A and available to fund such amount;
(d) the excess, if any of the accrued and unpaid Class C Servicing Fee
with respect to the related Distribution Date over the amount of Class C
Available Funds and Excess Spread and Excess Finance Charge Collections
allocated to Series 1996-A and available to fund such amount; and
(e) the excess, if any, of the Class C Investor Default Amount for the
related Distribution Date over the amount of Excess Spread and Excess
Finance Charge Collections allocated to Series 1996-A and available to fund
such amount.
On each Distribution Date, the Servicer or the Trustee, acting pursuant to
the Servicer's instructions, will apply Excess Spread allocated to Series 1996-A
(to the extent described under "-- Application of Collections -- Excess Spread;
Excess Finance Charge Collections" above) to increase the amount on deposit in
the Cash Collateral Account (to the extent such amount is less than the Required
Cash Collateral Amount). In addition, if on any Distribution Date the amount on
deposit in the Cash Collateral Account exceeds the Required Cash Collateral
Amount, such excess will be withdrawn and paid to the Cash Collateral Depositor
or its designee.
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
Allocation 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 Allocation 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 C Interest Holders (the "Class C
Investor Default Amount") in an amount equal to the product of the Class C
Floating Allocation 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 1996-A, amounts available under the Cash Collateral Account and
Reallocated Principal Collections, if any, and applied as described in "--
Application of Collections -- Payment of Fees, Interest and Other Items" above.
An amount equal to the Class B Investor Default Amount for each Monthly Period
will be paid from Excess Spread and Excess Finance Charge Collections allocated
to Series 1996-A, amounts available under the Cash Collateral Account and
Reallocated Principal Collections allocable to the Class C Interests, if any,
and applied as described under "-- Application of Collections -- Excess Spread;
Excess Finance Charge Collections" above. An amount equal to the Class C
Investor Default Amount for each Monthly Period will be paid from Excess Spread
and
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Excess Finance Charge Collections allocated to Series 1996-A and from amounts
available under the Cash Collateral Account and applied as described under "--
Application of Collections -- Excess Spread; Excess Finance Charge Collections"
above.
On each Distribution Date, if the Class A Required Amount for such
Distribution Date exceeds the sum of Excess Spread and Excess Finance Charge
Collections allocable to Series 1996-A, the Available Cash Collateral Amount and
Reallocated Principal Collections allocable to the Class C Interests and the
Class B Certificates, the Class C Invested Amount will be reduced by the amount
of the remaining unfunded Class A Required Amount, but not by more than the
excess of the Class A Investor Default Amount for such Distribution Date over
the aggregate of the amount of Class A Available Funds, Excess Spread and Excess
Finance Charge Collections, the amount withdrawn from the Cash Collateral
Account and the amount of Reallocated Principal Collections used to fund the
Class A Investor Default Amount for such Distribution Date, until the Class C
Invested Amount is reduced to zero, and then the Class B Invested Amount will be
reduced by the amount by which the Class C 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 aggregate of the
amount of Class A Available Funds, Excess Spread and Excess Finance Charge
Collections, the amount withdrawn from the Cash Collateral Account, the amount
of Reallocated Principal Collections and the amount of such reduction, if any,
of the Class C Invested Amount with respect to such Distribution Date used to
fund the Class A Investor Default Amount for such Distribution Date, until the
Class B Invested Amount is reduced to zero. 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 of the Class A Investor
Default Amount for such Distribution Date over the aggregate of the amount of
Class A Available Funds, Excess Spread and Excess Finance Charge Collections,
the amount withdrawn from the Cash Collateral Account, the amount of Reallocated
Principal Collections and the amount of such reductions, if any, of the Class C
Invested Amount and the Class B Invested Amount with respect to such
Distribution Date used to fund the Class A Investor Default Amount for such
Distribution Date (a "Class A Investor Charge-Off"), which will have the effect
of slowing or reducing the return of principal to the Class A
Certificateholders. If the Class A 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 1996-A available for such purpose as described
under "-- Application of Collections -- Excess Spread; Excess Finance Charge
Collections" above.
On each Distribution Date, if the Class B Required Amount for such
Distribution Date exceeds the sum of Excess Spread and Excess Finance Charge
Collections allocable to Series 1996-A (after giving effect to the application
thereof to the payment of the Class A Required Amount for such Distribution
Date, if any, and the reimbursement of Class A Investor Charge-Offs, if any, for
such Distribution Date), the Available Cash Collateral Amount (after giving
effect to the application thereof to the payment of the Class A Required Amount
for such Distribution Date) and Reallocated Principal Collections allocable to
the Class C Interest (after giving effect to the application thereof to fund the
Class A Required Amount for such Distribution Date), if any, the Class C
Invested Amount (after giving effect to any reduction thereof in connection with
the Class A Required Amount for such Distribution Date) will be reduced by the
amount of the remaining unfunded Class B Required Amount, but not by more than
the excess of the Class B Investor Default Amount for such Distribution Date
over the amount of Excess Spread and Excess Finance Charge Collections, the
amount withdrawn from the Cash Collateral Account and the amount of Reallocated
Principal Collections allocable to the Class C Interests used to fund the Class
B Investor Default Amount for such Distribution Date. In the event that such
reduction would cause the Class C Invested Amount to be a negative number, the
Class C Invested Amount will be reduced to zero, and the Class B Invested Amount
will be reduced by the amount by which the Class C Invested Amount would have
been reduced below zero, but not by more than the excess of the Class B Investor
Default Amount for such Distribution Date over the aggregate of the amount of
Excess Spread and Excess Finance Charge Collections, the amount withdrawn from
the Cash Collateral Account, the amount of Reallocated Principal Collections and
the amount of such
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reduction, if any, of the Class C Invested Amount with respect to such
Distribution Date used to fund the Class B Investor Default Amount for such
Distribution Date (a "Class B Investor Charge Off"), which will have the effect
of slowing or reducing the return of principal to the Class B
Certificateholders. If the Class B Invested Amount has been reduced by the
amount of any Class B Investor Charge-Offs, it will thereafter be increased on
any Distribution Date (but not by an amount in excess of the aggregate Class B
Investor Charge-Offs that have not previously been reimbursed) by the amount of
Excess Spread and Excess Finance Charge Collections allocable to Series 1996-A
and available for such purpose as described under "-- Application of Collections
- -- Excess Spread; Excess Finance Charge Collections" above.
On each Distribution Date, if the Class C Required Amount for such
Distribution Date exceeds the sum of Excess Spread and Excess Finance Charge
Collections allocable to Series 1996-A (after giving effect to the application
thereof to the payment of the Class A Required Amount for such Distribution
Date, the reimbursement of Class A Investor Charge Offs, if any, for such
Distribution Date, the payment of the Class B Required Amount for such
Distribution Date and the reimbursement of reductions in the Class B Invested
Amount for such Distribution Date), the Available Cash Collateral Amount (after
giving effect to the application thereof to the payment of the Class A Required
Amount and the Class B Required Amount for such Distribution Date) and funds
withdrawn from the Spread Account maintained solely for the benefit of the Class
C Interests to pay interest on the Class C Interests and to fund the Class C
Investor Default Amount, the Class C Invested Amount (after giving effect to any
reduction thereof in connection with the Class A Required Amount or the Class B
Required Amount for such Distribution Date) will be reduced by the amount of
such excess, but not by more than the excess of the Class C Investor Default
Amount for such Distribution Date over the aggregate of the amount of the Excess
Spread and Excess Finance Charge Collections, the amount withdrawn from the Cash
Collateral Account and the amount withdrawn from the Spread Amount used to fund
the Class C Investor Default Amount for such Distribution Date (a "Class C
Investor Charge-Off").
If on any Distribution Date Reallocated Principal Collections for such
Distribution Date allocable to the Class B Certificates are applied to fund the
Class A Required Amount, the Class B Invested Amount will be reduced by the
amount of such Reallocated Principal Collections. If on any Distribution Date
Reallocated Principal Collections for such Distribution Date allocable to the
Class C Interest are applied to fund the Class A Required Amount or the Class B
Required Amount, the Class C Invested Amount will be reduced by the amount of
such Reallocated Principal Collections.
The reductions of the Class B Invested Amount described above will
thereafter be reimbursed and the Class B Invested Amount increased (but not in
excess of the aggregate amount of any reductions of the Class B Invested Amount
pursuant to clause (iii), (iv) or (v) of the definition of Class B Invested
Amount under "-- Allocation Percentages" above not previously reimbursed) on
each Distribution Date by the amount, if any, of Excess Spread and Excess
Finance Charge Collections for such Distribution Date allocated and available
for such purpose as described under "-- Application of Collections -- Excess
Spread; Excess Finance Charge Collections." The reductions of the Class C
Invested Amount described above will thereafter be reimbursed and the Class C
Invested Amount increased (but not in excess of the aggregate amount of any
reductions of the Class C Invested Amount pursuant to clause (iii), (iv) or (v)
of the definition of Class C Invested Amount under "-- Allocation Percentages"
above not previously reimbursed, including from the Spread Account maintained
for such Class) on each Distribution Date by the amount, if any, of Excess
Spread and Excess Finance Charge Collections for such Distribution Date
allocated and available for such purpose as described under "-- Application of
Collections -- Excess Spread and Excess Finance Charge Collections;" PROVIDED
that no such funds will be available for such purpose until all reductions of
the Class B Invested Amount have been reimbursed.
PAIRED SERIES
The Series 1996-A Certificates may be paired with one or more other Series
(each a "Paired Series") at or after the commencement of the Scheduled
Accumulation Period. As funds are accumulated in the Principal Funding Account
during the Scheduled Accumulation 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 Invested
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Amount, 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 Series 1996-A Holders after the Series
1996-A Interests 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 1996-A Holder. See "Risk
Factors -- Issuance of Additional Series; Effect on Payments to
Certificateholders" in the Prospectus.
PAY OUT EVENTS
The Pay Out Events with respect to Series 1996-A 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 either Transferor (i) to make any payment
or deposit required under the Pooling and Servicing Agreement or the Series
1996-A Supplement within 5 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 such Transferor set forth in the Pooling and
Servicing Agreement or the Series 1996-A Supplement, which failure has a
material adverse effect on the Series 1996-A Holders and which continues
unremedied for a period of 60 days after written notice and continues to
materially and adversely affect the interests of the Series 1996-A Holders
for such period;
(b) any representation or warranty made by either Transferor in the
Pooling and Servicing Agreement or the Series 1996-A 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 60 days after written notice and as a result of which the interests of
the Series 1996-A Holders are materially and adversely affected and continue
to be materially and adversely affected for such period; PROVIDED, HOWEVER,
that a Pay Out Event shall not be deemed to occur under this clause (b) if
the Transferors have accepted reassignment of the related Receivables or all
such Receivables, if applicable, during such period (or such longer period
as the Trustee may specify) in accordance with the provisions of the Pooling
and Servicing Agreement;
(c) a failure by the Transferors to make an Addition to the Trust within
5 business days after the day on which they are required to make such
Addition pursuant to the Pooling and Servicing Agreement or the Series
1996-A 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 Rates for such
periods; or
(f) the failure to pay in full the Class A Invested Amount on the Class
A Expected Final Payment Date, the Class B Invested Amount on the Class B
Expected Final Payment Date or the Class C Invested Amount on the Class C
Expected Final Payment Date.
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 1996-A Interests evidencing more than 50% of
the aggregate unpaid principal amount of Series 1996-A Interests by notice then
given in writing to the Transferors and the Servicer (and to the Trustee if
given by the Series 1996-A Holders) may declare that a Pay Out Event has
occurred with respect to Series 1996-A as of the date of such notice, and, in
the case of any event described in subparagraphs (c), (e) or (f), a Pay Out
Event shall occur with respect to Series 1996-A without any notice or other
action on the part of the Trustee immediately upon the occurrence of such event.
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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 1996-A.
"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, Class C Monthly
Interest and the Monthly Servicing Fee with respect to the Series 1996-A
Interests for the related Distribution Date and the denominator of which is
the Invested Amount as of the last day of the preceding Monthly Period (or
with respect to the first Monthly Period, the Initial Invested Amount).
"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, net of losses and
investment expenses, and certain other amounts that are to be treated as
collections of Finance Charge Receivables in accordance with the Pooling and
Servicing Agreement), plus (b) the amount of Principal Funding Investment
Proceeds for the related Distribution Date, if any, plus (c) the amount of
funds withdrawn from the Reserve Account, if any, and which are required to
be included as Class A Available Funds, Class B Available Funds or Class C
Available Funds, in each case for the Distribution Date with respect to such
Monthly Period, and minus (d) 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 (or with respect to the first Monthly Period, the Initial Invested
Amount).
If the proceeds of any sale of the Receivables following the occurrence of
an Insolvency Event, 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
the Available Cash Collateral Amount 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. If the proceeds of any such sale of the Receivables
and the other available funds, if any, after the payment of all amounts
allocated to Class A Certificates, are not sufficient to pay in full the
remaining amount due on the Class B Certificates, the Class B Certificateholders
will suffer a corresponding loss. See "Certain Legal Aspects of the Receivables
- -- Certain Matters Relating to Insolvency and Receivership" in the Prospectus
for a discussion of the impact of 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 Series 1996-A with respect to
any Distribution Date (the "Monthly Servicing Fee") shall be equal to
one-twelfth of the product of (a)2.00% (the "Series Servicing Fee Percentage")
and (b) (i) the Adjusted Invested Amount 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, that with respect to the first Distribution Date, the Monthly Servicing
Fee will be $ .
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
Allocation Percentage, (b) the Series Servicing Fee Percentage and (c) the
Servicing Base Amount; PROVIDED, HOWEVER, that with respect to the first
Distribution Date, the Class A Servicing Fee will be $ . 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 Allocation Percentage,
(b) the Series Servicing Fee Percentage and (c) the Servicing Base Amount;
PROVIDED, HOWEVER, that with respect to the first Distribution Date, the Class B
Servicing Fee will be $ . The share of the Monthly Servicing Fee
allocable to the Class C Interest Holders with respect to any Distribution Date
(the "Class C Servicing Fee") shall be equal to one-twelfth of the product of
(a) the
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Class C Floating Allocation Percentage, (b) the Series Servicing Fee Percentage,
and (c) the Servicing Base Amount; PROVIDED, HOWEVER, that with respect to the
first Distribution Date, the Class C Servicing Fee will be $ . 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 Trust, the Trustee, the
Series 1996-A Holders or the Cash Collateral Depositor 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, the Class
B Servicing Fee and the Class C 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," "-- Cash Collateral Account"
and "-- Reallocated Principle Collections" above.
SERIES TERMINATION
If on the Distribution Date that is two months prior to the Series 1996-A
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 (subject to certain
limitations) equal to the Invested Amount and accrued and unpaid interest
thereon at the close of business on the last day of the Monthly Period preceding
the Series 1996-A Termination Date (after giving effect to all distributions
required to be made on the Series 1996-A Termination Date). The Transferors and
each Series Enhancer will be entitled to participate in, and to receive a copy
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 1996-A Termination Date for distribution to the
Series 1996-A Holders. The Servicer will sell such Receivables (or interests
therein) on the Series 1996-A 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 1996-A Interest.
Amounts on deposit in the Cash Collateral Account 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 of Series 1996-A.
Accordingly, in such event, the Series 1996-A Holders 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, a statement (the "Monthly Report") prepared by
the Servicer setting forth certain information with respect to the Trust and the
Class A Certificates, the Class B Certificates and the Class C Interests,
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, the Adjusted Invested Amount, the Class A Invested Amount, the Class B
Invested Amount, the Class C Invested Amount, the Class A Adjusted Invested
Amount, the Class B Adjusted Invested Amount and the Class C Adjusted Invested
Amount; (c) the Floating Allocation Percentage, the Class A Floating Allocation
Percentage, the Class B Floating Allocation Percentage and the Class C Floating
Allocation Percentage and the Principal Allocation Percentage, the Class A
Principal Allocation Percentage, the Class B Principal Allocation Percentage and
the Class C 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 1996-A
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 Default Amount, the Class A Investor Default Amount, the Class B
Investor Default Amount, the Class C Investor Default Amount and the Defaulted
Amount with respect to such Monthly Period; (g) the aggregate amount, if any, of
Class A, Class B or Class C Investor Charge-Offs and any Class A, Class B or
Class C Investor Charge-Offs reimbursed for such Monthly Period; (h) the Monthly
Servicing Fee, Class A Servicing Fee, Class B Servicing Fee and Class C
Servicing Fee for such Monthly Period; (i) the Portfolio Yield for such Monthly
Period; (j) the Base Rate for such Monthly Period; and (k) the Available Cash
Collateral Amount for such Distribution Date.
S-47
<PAGE>
AMENDMENTS
The Series 1996-A Supplement provides that such Supplement and the Pooling
and Servicing Agreement may be amended by the Transferors without the consent of
the Servicer, the Trustee, any Investor Certificateholders (including Series
1996-A but excluding any other Series unless the related Series Supplement so
provides) or (unless specifically provided in the related Series Supplement) any
Series Enhancer if the Transferors provide to the Trustee an opinion of counsel
to the effect that such amendment or modification would reduce the risk that the
Trust would be treated as taxable as a publicly traded partnership and an
officer's certificate that such amendment or modification would not materially
and adversely affect any Investor Certificateholder, PROVIDED that no such
amendment shall be effective unless each Rating Agency has provided written
confirmation that such amendment will not have a Rating Effect.
The Series 1996-A Supplement provides that such Supplement and the Pooling
and Servicing Agreement may be amended by the Transferors without the consent of
the Servicer, the Trustee, any Investor Certificateholders (including Series
1996-A but excluding any other Series unless the related Series Supplement so
provides) or (unless specifically provided in the related Series Supplement) any
Series Enhancer (i) to add, modify or eliminate such provisions as may be
necessary or advisable in order to enable all or a portion of the Trust to
qualify as, and to permit an election to be made to cause the Trust or a portion
thereof to be treated as, a "financial asset securitization investment trust" as
described in the Small Business Job Protection Act of 1996, or to enable the
Trust or any portion thereof to qualify and an election to be made for similar
treatment under any comparable subsequent federal income tax provisions as may
be enacted into law, and (ii) in connection with any such election, to modify or
eliminate existing provisions of the Series 1996-A Supplement or the Pooling and
Servicing Agreement relating to the intended federal income tax treatment of the
Class A Certificates, the Class B Certificates, the Class C Interests, any other
Series or Class of Certificates or the Trust in the absence of the election. The
Series 1996-A Supplement provides that the Series 1996-A Supplement and the
Pooling and Servicing Agreement may be amended by the Transferors without the
consent of the Servicer, the Trustee, any Investor Certificateholders (including
Series 1996-A but excluding any other Series unless the related Series
Supplement so provides) or (unless specifically provided in the related Series
Supplement) any Series Enhancer (i) to add, modify or eliminate such provisions
as may be necessary or advisable in order to enable all or a portion of the
Trust to qualify as, and to permit an election to be made to cause the Trust or
a portion thereof to be treated as, an entity which for United States federal
income tax purposes will be disregarded or will be a partnership, or to enable
the Trust or a portion thereof to qualify and an election to be made for similar
treatment under such comparable subsequent federal income tax provisions as may
become law, and (ii) in connection with any such election, to modify or
eliminate existing provisions of the Series 1996-A Supplement or the Pooling and
Servicing Agreement relating to the intended federal income tax treatment of the
Class A Certificates, the Class B Certificates, the Class C Interests, any other
Series or Class of Certificates or the Trust in the absence of the election. No
amendment described in this paragraph shall be effective without delivery to the
Trustee by each of the Transferors of a certificate of an authorized officer of
the Transferors to the effect that the proposed amendments meet the requirements
set forth in this paragraph and written confirmation from each Rating Agency
that such amendment will not have a Rating Effect.
See "The Pooling and Servicing Agreement -- Amendments" in the Prospectus
for additional information regarding the amendment of the Pooling and Servicing
Agreement and the Series 1996-A Supplement.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The Class A Certificates and the Class B Certificates are not expected to be
issued with OID. However, because the failure to pay interest currently on the
Class A Certificates and the Class B Certificates 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 on the basis of Treasury regulations that all of the
interest payments on the Class A Certificates and the Class B Certificates will
be treated as payments of principal and the Class A Certificates and the Class B
Certificates should be treated as having OID. If sustained, such position should
not
S-48
<PAGE>
significantly accelerate taxable income recognition for most Certificate Owners
with respect to the Class A Certificates or the Class B Certificates, but
prospective Certificate Owners should consult their own tax advisers concerning
the impact to them in their particular circumstances.
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:
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT PRINCIPAL AMOUNT
OF CLASS A OF CLASS B
UNDERWRITERS CERTIFICATES CERTIFICATES
---------------- ----------------
<S> <C> <C>
J.P. Morgan Securities Inc......................................... $ $
CS First Boston Corporation........................................
Merrill Lynch, Pierce, Fenner & Smith
Incorporated...............................................
---------------- ----------------
Total............................................................ $ $
---------------- ----------------
---------------- ----------------
</TABLE>
The Underwriting Agreement provides that the obligations of the Underwriters
to pay for and accept delivery of the Series 1996-A Certificates are subject to
the approval of certain legal matters by their counsel and to certain other
conditions. All of the Series 1996-A 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 concessions and discounts to dealers 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 concessions and discounts to dealers may
be changed by the Underwriters.
The Transferors will indemnify the Underwriters against certain liabilities,
including certain liabilities under the Securities Act, or contribute to
payments the Underwriters may be required to make in respect thereof.
LEGAL MATTERS
Certain legal matters relating to the issuance of the Certificates will be
passed upon for the Transferors and the Trust by Michael J. Gugerty, Associate
General Counsel of the Bank, or by C. Keith McLendon, Associate General Counsel
of the Bank, and by Shaw, Pittman, Potts & Trowbridge, Washington, D.C., a
partnership including professional corporations. George M. Rogers, Jr., whose
professional corporation is a member of such firm, is a director of the Bank and
the parent of the Bank. Attorneys employed by Shaw, Pittman, Potts & Trowbridge
hold securities issued by the Bank and certain affiliates in an aggregate amount
of approximately $1.0 million. Certain federal income tax matters will be passed
upon for the Transferors by Orrick, Herrington & Sutcliffe LLP, New York, New
York, special tax counsel to the Transferors. Certain legal matters relating to
the issuance of the Series 1996-A Certificates will be passed upon for the
Underwriters by Orrick, Herrington & Sutcliffe LLP, New York, New York.
S-49
<PAGE>
INDEX OF DEFINED TERMS
<TABLE>
<S> <C>
Accounts...................................................................... S-1
Adjusted Invested Amount...................................................... S-6, S-32
Available Cash Collateral Amount.............................................. S-41
Available Final Distribution Amount........................................... S-47
Available Principal Collections............................................... S-28
Available Reserve Account Amount.............................................. S-34
Bank.......................................................................... S-1
Base Rate..................................................................... S-46
BIF........................................................................... S-24
Business Day.................................................................. S-27
Cash Collateral Account....................................................... S-2, S-11
Cash Collateral Depositor..................................................... S-41
CCB Holding................................................................... S-1
Certificate Rate.............................................................. S-26
Class A Additional Interest................................................... S-36
Class A Adjusted Invested Amount.............................................. S-6, S-32
Class A Available Funds....................................................... S-25
Class A Certificate Rate...................................................... S-2
Class A Certificateholders' Interest.......................................... S-5
Class A Certificates.......................................................... S-1, S-4
S-5, S-8,
Class A Expected Final Payment Date........................................... S-16
Class A Floating Allocation Percentage........................................ S-29
Class A Initial Invested Amount............................................... S-4
Class A Invested Amount....................................................... S-31
Class A Investor Charge-Off................................................... S-43
Class A Investor Default Amount............................................... S-42
Class A Monthly Interest...................................................... S-37
Class A Monthly Principal..................................................... S-40
Class A Principal Allocation Percentage....................................... S-30
Class A Required Amount....................................................... S-9, S-35
Class A Scheduled Accumulation Period......................................... S-7
Class A Scheduled Accumulation Period Length.................................. S-28
Class A Servicing Fee......................................................... S-46
Class B Additional Interest................................................... S-37
Class B Adjusted Invested Amount.............................................. S-6, S-32
Class B Available Funds....................................................... S-25
Class B Certificate Rate...................................................... S-2
Class B Certificateholders' Interest.......................................... S-5
Class B Certificates.......................................................... S-1, S-4
Class B Expected Final Payment Date........................................... S-5, S-8
Class B Floating Allocation Percentage........................................ S-30
Class B Initial Invested Amount............................................... S-4
Class B Invested Amount....................................................... S-31
Class B Investor Charge-Off................................................... S-44
Class B Investor Default Amount............................................... S-42
Class B Monthly Interest...................................................... S-37
Class B Monthly Principal..................................................... S-40
Class B Principal Commencement Date........................................... S-33
Class B Principal Allocation Percentage....................................... S-30
Class B Required Amount....................................................... S-10, S-35
Class B Scheduled Accumulation Period......................................... S-7
</TABLE>
S-50
<PAGE>
<TABLE>
<S> <C>
Class B Servicing Fee......................................................... S-46
Class C Additional Interest................................................... S-39
Class C Adjusted Invested Amount.............................................. S-6, S-32
Class C Available Funds....................................................... S-26
Class C Expected Final Payment Date........................................... S-8
Class C Floating Allocation Percentage........................................ S-30
Class C Initial Invested Amount............................................... S-4
Class C Interest Holders...................................................... S-8
Class C Interest Rate......................................................... S-26
Class C Interests............................................................. S-2, S-4
Class C Invested Amount....................................................... S-31
Class C Investor Charge-Off................................................... S-44
Class C Investor Default Amount............................................... S-42
Class C Monthly Interest...................................................... S-39
Class C Monthly Principal..................................................... S-40
Class C Principal Allocation Percentage....................................... S-31
Class C Principal Commencement Date........................................... S-33
Class C Required Amount....................................................... S-11
Class C Scheduled Accumulated Period.......................................... S-7
Class C Servicing Fee......................................................... S-46
Closing Date.................................................................. S-5
Code.......................................................................... S-14
Controlled Accumulation Amount................................................ S-40
Controlled Deposit Amount..................................................... S-41
Covered Amount................................................................ S-33
Deficit Controlled Accumulation Amount........................................ S-41
Distribution Date............................................................. S-2
ERISA......................................................................... S-14
Excess Spread................................................................. S-9, S-37
FIRREA........................................................................ S-24
Floating Allocation Percentage................................................ S-29
Group I....................................................................... S-11
Highest Bid................................................................... S-47
Independent Investors......................................................... S-14
Initial Cash Collateral Amount................................................ S-11
Initial Invested Amount....................................................... S-4
Interest Period............................................................... S-27
Invested Amount............................................................... S-32
Investor Default Amount....................................................... S-42
S-2, S-4,
LIBOR......................................................................... S-26
LIBOR Determination Date...................................................... S-4, S-26
London Business Day........................................................... S-26
Monthly Cash Collateral Fee................................................... S-38
Monthly Report................................................................ S-47
Monthly Servicing Fee......................................................... S-46
Paired Series................................................................. S-44
Plan.......................................................................... S-14
Plan Asset Regulation......................................................... S-14
Pooling and Servicing Agreement............................................... S-1
Portfolio Yield............................................................... S-46
Principal Allocation Percentage............................................... S-30
Principal Funding Account..................................................... S-17
Principal Funding Account Balance............................................. S-32
</TABLE>
S-51
<PAGE>
<TABLE>
<S> <C>
Principal Funding Investment Proceeds......................................... S-32
Reallocated Principal Collections............................................. S-35
Receivables................................................................... S-1
Record Date................................................................... S-25
Reference Banks............................................................... S-27
Required Cash Collateral Amount............................................... S-12
Required Reserve Account Amount............................................... S-34
Reserve Account............................................................... S-33
Reserve Account Funding Date.................................................. S-34
Revolving Period.............................................................. S-7
SAIF.......................................................................... S-24
Scheduled Accumulation Period................................................. S-7
Series 1996-A................................................................. S-2, S-4
Series 1996-A Certificates.................................................... S-1, S-4
Series 1996-A Cut-Off Date.................................................... S-5
Series 1996-A Holders......................................................... S-12
Series 1996-A Interests....................................................... S-4
Series 1996-A Supplement...................................................... S-24
Series 1996-A Termination Date................................................ S-14
Series Servicing Fee Percentage............................................... S-7, S-46
Servicing Base Amount......................................................... S-46
Spread Account................................................................ S-26
Telerate Page 3750............................................................ S-27
Transferors................................................................... S-1
Trust......................................................................... S-1, S-4
Trustee....................................................................... S-1
Underwriters.................................................................. S-49
Underwriting Agreement........................................................ S-49
</TABLE>
S-52
<PAGE>
ANNEX I
PRIOR ISSUANCES OF CERTIFICATES
The table below sets forth the principal characteristics of the Series
1995-A Certificates, the Series 1995-B Certificates, the Series 1995-C
Certificates, and the Series 1995-D Certificates, the only Series heretofore
issued by the Trust. For more specific information with respect to the Series
1995-A Certificates and/or the Series 1995-C Certificates, prospective investors
should contact the Servicer (care of Chevy Chase Bank, F.S.B., attention: Chief
Financial Officer) at (301) 986-7000. The Servicer will provide, without charge,
to any prospective purchaser of the Series 1996-A Certificates, a copy of the
Prospectus Supplements for the Series 1995-A Certificates and/or the Series
1995-C Certificates.
<TABLE>
<S> <C>
SERIES 1995-A CERTIFICATES
Initial Series 1995-A Invested Amount.................... $400,000,000
Initial Class A Invested Amount.......................... $368,000,000
Initial Class B Invested Amount.......................... $ 32,000,000
Class A Certificate Rate................................. One-month LIBOR plus 0.25% per
annum
Class B Certificate Rate................................. One-month LIBOR plus 0.36% per
annum
Class A Expected Final Payment Date...................... June 2002 Distribution Date
Class B Expected Final Payment Date...................... August 2002 Distribution Date
Class A Controlled Accumulation Amount................... $ 26,285,715
Class B Controlled Accumulation Amount................... $ 16,000,000 (subject to
adjustment)
Initial Cash Collateral Amount........................... $ 52,000,000
Group.................................................... I
Series Servicing Fee Percentage.......................... 2.00%
Series Termination Date.................................. November 15, 2005
Series Issuance Date..................................... June 27, 1995
SERIES 1995-B CERTIFICATES
Initial Series 1995-B Invested Amount.................... $150,000,000
Initial Class A Invested Amount.......................... $138,000,000
Initial Class B Invested Amount.......................... $ 12,000,000
Class A Certificate Rate................................. One-month LIBOR plus 0.25% per
annum
Class B Certificate Rate................................. One-month LIBOR plus 0.37% per
annum
Class A Expected Final Payment Date...................... September 2002 Distribution Date
Class B Expected Final Payment Date...................... November 2002 Distribution Date
Class A Controlled Accumulation Amount................... $ 9,857,143 (subject to
adjustment)
Class B Controlled Accumulation Amount................... $ 6,000,000
Initial Cash Collateral Amount........................... $ 19,500,000
Group.................................................... I
Series Servicing Fee Percentage.......................... 2.00%
Series Termination Date.................................. February 15, 2006
</TABLE>
A-1
<PAGE>
<TABLE>
<S> <C>
Series Issuance Date..................................... September 28, 1995
SERIES 1995-C CERTIFICATES
Initial Series 1995-C Investor Amount.................... $400,000,000
Initial Class A Investor Amount.......................... $368,000,000
Initial Class B Investor Amount.......................... $ 32,000,000
Pre-Funding Amount....................................... $ 50,000,000
Initial Series 1995-C Invested Amount.................... $350,000,000
Initial Class A Invested Amount.......................... $322,000,000
Initial Class B Invested Amount.......................... $ 28,000,000
Class A Certificate Rate................................. One-month LIBOR plus 0.26% per
annum
Class B Certificate Rate................................. One-month LIBOR plus 0.385% per
annum
Class A Expected Final Payment Date...................... December 2002 Distribution Date
Class B Expected Final Payment Date...................... February 2003 Distribution Date
Class A Controlled Accumulation Amount................... 1/14 of Class A Invested Amount
(subject to adjustment)
Class B Controlled Accumulation Amount................... 1/2 of Class B Invested Amount
Initial Cash Collateral Amount........................... $ 52,000,000
Group.................................................... I
Series Servicing Fee Percentage.......................... 2.00%
Series Termination Date.................................. May 2006 Distribution Date
Series Issuance Date..................................... December 14, 1995
SERIES 1995-D CERTIFICATES
Minimum Invested Amount.................................. $ 0
Maximum Invested Amount.................................. $300,000,000
Certificate Rate......................................... Commercial Paper Rate plus 0.23%
per annum
Expected Final Payment Date.............................. January 2001 Distribution Date
Initial Spread Account Deposit........................... $2,250,000
Group.................................................... I
Series Servicing Fee Percentage.......................... 2.00%
Series Termination Date.................................. May 2004 Distribution Date
Series Issuance Date..................................... December 22, 1995
</TABLE>
(the outstanding principal amount of the Series 1995-D Certificates may be
repaid and readvanced
under the terms of the Series 1995-D Supplement)
A-2
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED WITHOUT THE DELIVERY OF A FINAL PROSPECTUS SUPPLEMENT
AND PROSPECTUS. 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 SEPTEMBER 11, 1996
- --------------------------------------------------------------------------------
P R O S P E C T U S
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
THE DATE OF THIS PROSPECTUS IS SEPTEMBER , 1996
<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.
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<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."
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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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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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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
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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
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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.
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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.
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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.
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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.
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INDEX OF DEFINED TERMS
<TABLE>
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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
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<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
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<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
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