<PAGE>
Registration No. 333-14779
Rule No. 424(b)(5)
PROSPECTUS SUPPLEMENT
(To Prospectus Dated June 5, 1998)
CHEVY CHASE MASTER CREDIT CARD TRUST II
$468,000,000 Class A Floating Rate Asset Backed Certificates, Series 1998-A
$72,000,000 Class B Floating Rate Asset Backed Certificates, Series 1998-A
[LOGO OF CHEVY CHASE BANK APPEARS HERE]
Transferor and Servicer
CCB HOLDING CORPORATION
Transferor
The Class A Floating Rate Asset Backed Certificates, Series 1998-A (the
"Class A Certificates") and the Class B Floating Rate Asset Backed
Certificates, Series 1998-A (the "Class B Certificates," and together with
the Class A Certificates, the "Series 1998-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 seven 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 1998-A, any other Series of Certificates
to be issued by the Trust and any Supplemental
Certificates issued or to be issued by the
Trust.
(continued on next page)
THERE CURRENTLY IS NO SECONDARY MARKET FOR THE SERIES 1998-A CERTIFICATES,
AND THERE IS NO ASSURANCE THAT ONE WILL DEVELOP OR, IF ONE DOES DEVELOP,
THAT IT WILL CONTINUE UNTIL THE SERIES 1998-A CERTIFICATES ARE PAID IN
FULL. POTENTIAL INVESTORS SHOULD CONSIDER, AMONG OTHER THINGS, THE
INFORMATION SET FORTH IN "RISK FACTORS" COMMENCING ON PAGE S-17
HEREIN AND ON PAGE 16 IN THE PROSPECTUS.
THE SERIES 1998-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 1998-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.................... 100.000% 0.275% 99.725%
Per Class B Certificate.................... 100.000% 0.325% 99.675%
Total...................................... $540,000,000 $1,521,000 $538,479,000
</TABLE>
(1) Plus accrued interest, if any, at the Class A Certificate Rate or the
Class B Certificate Rate, as applicable, from June 17, 1998.
(2) Before deduction of expenses payable by the Transferors, estimated to be
$650,000.
The Series 1998-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 1998-A Certificates will be offered globally and delivered in book-
entry form on or about June 17, 1998, through the facilities of The Depository
Trust Company, Cedel Bank, societe anonyme and the Euroclear System.
CREDIT SUISSE FIRST BOSTON
J.P. MORGAN & CO.
SALOMON SMITH BARNEY
June 11, 1998
<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 Floating Rate Asset Backed
Interests, Series 1998-A (the "Class C Interests"), which are not offered
hereby. The Class C Interests will constitute a Class of Series 1998-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 1998-A" or the
"Series 1998-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 1998-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 1998-A Certificates.
Interest will accrue on the Class A Certificates for the period from the
Closing Date through July 14, 1998, and for the period from July 15, 1998
through August 16, 1998, and with respect to each Interest Period (as defined
herein) thereafter, at the rate of 0.15% 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 July 14,
1998, and for the period from July 15, 1998 through August 16, 1998, and with
respect to each Interest Period thereafter, at the rate of 0.40% per annum
above LIBOR (the "Class B Certificate Rate"). Interest with respect to the
Series 1998-A Certificates will be distributed on August 17, 1998 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 May 2003 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 July
2003 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 $18,000,000 (though not all of the initial deposit will be
available for the benefit of the Series 1998-A Holders during the Funding
Period), 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."
THE SERIES 1998-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 1998-A CERTIFICATES
ARE BEING OFFERED BY THE TRANSFERORS FROM TIME TO TIME PURSUANT TO THEIR
PROSPECTUS, DATED JUNE 5, 1998. THIS PROSPECTUS SUPPLEMENT DOES NOT CONTAIN
COMPLETE INFORMATION
S-2
<PAGE>
ABOUT THE OFFERING OF THE SERIES 1998-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 1998-A
CERTIFICATES MAY NOT BE CONSUMMATED UNLESS THE PURCHASER HAS RECEIVED BOTH
THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS.
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.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE SECURITIES OFFERED
HEREBY, INCLUDING OVER-ALLOTMENT TRANSACTIONS, STABILIZING TRANSACTIONS,
SYNDICATE COVERING TRANSACTIONS AND PENALTY BIDS. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "UNDERWRITING."
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.
Trust................... Chevy Chase Master Credit Card Trust II (the
"Trust").
Title of Securities..... $468,000,000 Class A Floating Rate Asset Backed
Certificates, Series 1998-A (the "Class A
Certificates") and $72,000,000 Class B Floating Rate
Asset Backed Certificates, Series 1998-A (the "Class
B Certificates" and, together with the Class A
Certificates, the "Series 1998-A Certificates"). In
addition, the Trust will issue $60,000,000 Class C
Floating Rate Asset Backed Interests, Series 1998-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 1998-A" or the "Series
1998-A Interests."
Full Invested Amount.... $600,000,000.
Class A Full Invested
Amount.................. $468,000,000.
Class B Full Invested
Amount.................. $72,000,000.
Class C Full Invested
Amount.................. $60,000,000.
Class A Certificate
Rate.................... For the period from the Closing Date through July 14,
1998 and for the period from July 15, 1998 through
August 16, 1998, and with respect to each Interest
Period thereafter, 0.15% 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 July 14, 1998) and on the second London
Business Day immediately preceding July 15, 1998 (for
the period from July 15, 1998 through August 16,
1998), 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 July 14,
1998, and for the period from July 15, 1998 through
August 16, 1998, and for each Interest Period
thereafter, 0.40% per annum above LIBOR determined on
the related LIBOR Determination Date.
Interest Payment Date... Each Distribution Date beginning with the August 1998
Distribution Date.
S-4
<PAGE>
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 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, 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 May 2003 Distribution Date.
Class B Expected Final
Payment Date............ The July 2003 Distribution Date.
Series 1998-A Cut-Off
Date.................... April 30, 1998
Series Invested
Amount.................. As of any date of determination during the Funding
Period the Invested Amount, and as of any date
thereafter the Invested Amount as of the last day of
the Funding Period.
Initial Cash Collateral
Amount.................. $18,000,000. Not all of the initial deposit will be
available for the benefit of the Series 1998-A
Holders during the Funding Period.
Closing Date............ June 17, 1998
Invested Amount......... The Invested Amount will be $475,000,000 on the
Closing Date (the "Initial Invested Amount"). The
Invested Amount will, except as otherwise provided
herein, increase up to a maximum amount of
$600,000,000 (the "Full Invested Amount") during the
Funding Period to the extent amounts are withdrawn
from the Pre-Funding Account and are paid to the
Transferors as the Transferor Amount increases. See
"Series Provisions--Funding Period" herein. The
aggregate amount of Principal Receivables allocated
to the Class A Certificateholders (the "Class A
Invested Amount") will be $370,500,000 on the Closing
Date (the "Class A Initial Invested Amount"). The
aggregate amount of Principal Receivables allocated
to the Class B Certificateholders (the "Class B
Invested Amount") will be $57,000,000 on the Closing
Date (the "Class B Initial Invested Amount"). The
aggregate amount of Principal
S-5
<PAGE>
Receivables allocated to the Class C Interests (the
"Class C Invested Amount") will be $47,500,000 on the
Closing Date (the "Class C Initial Invested Amount").
During the Funding Period, the Class A Invested
Amount, the Class B Invested Amount and the Class C
Invested Amount may increase under certain conditions
as the Transferor Amount increases until the Class A
Invested Amount is equal to $468,000,000 (the "Class
A Full Invested Amount"), the Class B Invested Amount
is equal to $72,000,000 (the "Class B Full Invested
Amount"), and the Class C Invested Amount is equal to
$60,000,000 (the "Class C Full Invested Amount"). The
Transferor Amount will fluctuate as the amount of
Principal Receivables in the Trust, the invested
amount of each Series and the amounts on deposit in
the Special Funding Account, the principal funding
account for any Series and the Pre-Funding Account
change from time to time.
The Series 1998-A
Certificates............ Each of the Series 1998-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 1998-A as described under
"Description of the Certificates" in the Prospectus
will be further allocated among 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 A Certificateholders'
Interest, the Class B Certificateholders' Interest
and the Class C Interest will increase during the
Funding Period to the extent amounts are withdrawn
from the Pre-Funding Account and are paid to the
Transferors as the Transferor Amount increases. The
Class B Certificateholders' Interest will decrease in
certain circumstances as a result of (a) the
allocation to the Class B Certificateholders'
Interest of Defaulted Amounts otherwise allocable to
the Class A Certificateholders' Interest and (b) the
reallocation of collections of Principal Receivables
otherwise allocable to the Class B
Certificateholders' Interest to fund certain payments
in respect of the Class A Certificates. Any such
reductions of the Class B Certificateholders'
Interest may be reimbursed out of Excess Spread and
Excess Finance Charge Collections allocable to Series
1998-A, if any, as described herein. The Class C
Interests 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 with respect to such Class (as so
reduced, the "Class A Adjusted Invested Amount," the
S-6
<PAGE>
"Class B Adjusted Invested Amount" and the "Class C
Adjusted Invested Amount," respectively, and
collectively, the "Adjusted Invested Amount").
Series 1998-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 1998-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 1998-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 as a result of
certain other factors, and depending on whether
Series 1998-A is in its Funding Period, 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 seven 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. 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
(including receivables in Additional Accounts the
receivables of which are expected to be conveyed to
the Trust during the period from the date of this
Prospectus Supplement through the Closing Date) in
the Accounts as of the Series 1998-A Cut-Off Date was
$2,696,850,823, of which $2,599,480,375 were
Principal Receivables and $97,370,448 were Finance
Charge Receivables.
Registration of Series
1998-A Certificates..... The Series 1998-A Certificates initially will be
represented by Series 1998-A Certificates registered
in the name of Cede, as the nominee of DTC. No
purchaser of a Series 1998-A Certificate will be
entitled to receive a definitive certificate except
under certain limited circumstances.
S-7
<PAGE>
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.
Funding Period.......... During the period from and including the Closing Date
to but excluding the earlier of (i) the commencement
of the Early Amortization Period, (ii) the date on
which the Invested Amount first equals the Full
Invested Amount and (iii) December 31, 1998 (the
"Funding Period"), the Pre-Funding Amount will be
maintained in a trust account to be established with
an Eligible Institution (the "Pre-Funding Account").
The "Pre-Funding Amount" will equal $125,000,000,
less the amounts of any increases in the Invested
Amount during the Funding Period pursuant to the
Series 1998-A Supplement in connection with an
increase in the Transferor Amount and less the amount
of any principal losses on funds on deposit in the
Pre-Funding Account. Funds on deposit in the Pre-
Funding Account will be invested by the Trustee in
Eligible Investments.
During the Funding Period, funds on deposit in the
Pre-Funding Account shall be withdrawn on each
Business Day following the Closing Date to the extent
that the Transferor Amount on such day exceeds the
Pre-Funding Transferor Amount; provided, however,
that the Invested Amount will in no event exceed the
Full Invested Amount or increase by an amount in
excess of the Pre-Funding Amount immediately prior to
giving effect to such increase. Series 1998-A Holders
will have no further right to or interest in funds
withdrawn from the Pre-Funding Account in connection
with such increases in the Invested Amount. Amounts
remaining on deposit in the Pre-Funding Account at
the end of the Funding Period, if any, will be
payable pro rata to the Class A Certificateholders,
the Class B Certificateholders and the Class C
Interest Holders on the next succeeding Distribution
Date and will result in a reduction of the Full
Invested Amount. See "Series Provisions--Funding
Period" herein.
Revolving Period and
Scheduled Accumulation
Period.................. Unless a Pay Out Event with respect to Series 1998-A
has occurred, the revolving period with respect to
Series 1998-A (the "Revolving Period") will end and
the scheduled accumulation period with respect to
Series 1998-A (the "Scheduled Accumulation Period"),
which includes scheduled accumulation periods for
each Class, is scheduled to commence at the close of
business on February 28, 2002. 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
S-8
<PAGE>
close of business on March 31, 2003. 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 with respect to Series 1998-A has occurred,
(i) unless the beginning of the Scheduled
Accumulation Period (and of the Class A Scheduled
Accumulation Period) is delayed, the Class A
Scheduled Accumulation Period will commence at the
close of business on February 28, 2002 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. Except for
principal payments, if any, made from amounts on
deposit in the Pre-Funding Account at the end of the
Funding Period, principal is expected to be paid to
the Class A Certificateholders on the May 2003
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. Except for principal payments,
if any, made from amounts on deposit in the Pre-
Funding Account at the end of the Funding Period,
principal is expected to be paid to the Class B
Certificateholders on the July 2003 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. Except for principal
payments, if any, made from amounts on deposit in the
Pre-Funding Account at the end of the Funding Period,
principal is expected to be paid to the holders of
the Class C Interests (the "Class C Interest
Holders") on the September 2003 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
Accumulation Period or the commencement of the Early
Amortization Period, collections of Principal
Receivables allocable to Series 1998-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
S-9
<PAGE>
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 (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 1998-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
1998-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 1998-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, during the Early Amortization Period
Reallocated 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 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
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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 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 1998-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 1998-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 Account 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
1998-A with respect to such Distribution Date and
such amounts withdrawn from the Cash Collateral
Account are less than the Class B Required Amount,
during the Early Amortization Period 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
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<PAGE>
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 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
Invested Amount; Class C Invested Amount" and "--
Defaulted Receivables; Investor Charge-Offs" herein.
Excess Finance Charge
Collections............. Series 1998-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 1998-A, Group I
includes seven 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 1998-A. The Cash
Collateral Account will be funded on the Closing Date
in the amount of $18,000,000 (the "Initial Cash
Collateral Amount") for the benefit of the Class A
Certificates, the Class B Certificates and the Class
C Interests. Not all of the initial deposit will be
available for the benefit of the Series 1998-A
Holders during the Funding Period.
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 1998-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 1998-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
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<PAGE>
and Excess Finance Charge Collections allocated to
Series 1998-A and available to fund such Class C
Required Amount. See "Series Provisions--Excess
Spread; Excess Finance Charge Collections."
On each Distribution Date, Excess Spread (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 respect to any
Distribution Date will be equal to (i) during the
Funding Period, 3% of the Investor Amount on the
applicable Determination Date, and (ii) thereafter
the greater of (a) 3% of the Adjusted Invested Amount
on the date of determination and (b) 1% of the
Invested Amount as of the last day of the Funding
Period; provided, however, that if certain
withdrawals are made from the Cash Collateral Account
or a Pay Out Event with respect to Series 1998-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
Required Cash Collateral Amount in effect immediately
prior to the occurrence of such withdrawal or Pay Out
Event), provided further that if the Pre-Funding
Amount is greater than zero at the end of the Funding
Period and the Required Cash Collateral Amount is
being calculated pursuant to the first proviso of
this definition, the Required Cash Collateral Amount
will equal the amount calculated as set forth above
in the first proviso of this definition minus an
amount equal to the product of (x) 3% and (y) the
Pre-Funding Amount at the end of the Funding Period;
and provided further that notwithstanding the
foregoing the Required Cash Collateral Amount shall
not exceed the Adjusted Invested Amount. 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 1998-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 1998-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
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<PAGE>
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.
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.
Issuance of Additional
Class A Certificates.... After the completion of the offering made hereby, the
Transferors may cause the Trustee to issue additional
Class A Certificates ("Additional Class A
Certificates") from time to time during the Revolving
Period, provided that certain conditions included in
the Series 1998-A Supplement are met. After each
issuance of Additional Class A Certificates, the
outstanding principal amount of the Class A
Certificates will be increased, but the outstanding
principal amounts of the Class B Certificates and the
Class C Interests will remain at their previous
levels. However, the amount required to be deposited
in the Cash Collateral Account, and therefore the
Available Cash Collateral Amount, may not be
increased and accordingly the Series Enhancement
available to the Series 1998-A Certificates offered
hereby may be proportionately less as a result of
such issuance. When issued, the Additional Class A
Certificates will be identical in all respects to the
other outstanding Class A Certificates. See "Series
Provisions--Issuance of Additional Class A
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, if so specified in the applicable
Series Supplement, be applied to cover principal
payments due to or for the benefit of the holders of
Series 1998-A. See "Description of the Certificates--
Shared Principal Collections" in the Prospectus.
Optional Repurchase..... The Series 1998-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 Invested
Amount as of the last day of the Funding Period;
provided that such repurchase option may not be
exercised if the outstanding principal amount of
Series 1998-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
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<PAGE>
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 first day of such twelve-month
period.
Series 1998-A
Termination Date........ The October 2006 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 1998-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
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<PAGE>
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.
By its acceptance of a Class A Certificate or a Class
B Certificate (or an interest therein), each
Certificateholder (and each Certificate Owner) will
be deemed to have represented and warranted that it
is not subject to the foregoing limitations. Persons
contemplating acquiring the Series 1998-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.
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
availability of funds on deposit in the Pre-Funding
Account, 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 Prospectus.
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 availability of funds on deposit in the Pre-
Funding Account, 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 1998-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 (other than any principal payment made from amounts on deposit in
the Pre-Funding Account at the end of the Funding Period) 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 1998-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 1998-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 1998-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.
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<PAGE>
MATURITY CONSIDERATIONS
The Pooling and Servicing Agreement and the Series 1998-A Supplement provide
that the Class A Certificateholders will not receive payments of principal
(other than any principal payment made from amounts on deposit in the Pre-
Funding Account at the end of the Funding Period) until the May 2003
Distribution Date (the "Class A Expected Final Payment Date"), or earlier in
the event of a Pay Out Event with respect to Series 1998-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 1998-A Termination
Date has occurred. The Class B Certificateholders will not begin to receive
payments of principal (other than any principal payment made from amounts on
deposit in the Pre-Funding Account at the end of the Funding Period) 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 (other than
any principal payment made from amounts on deposit in the Pre-Funding Account
at the end of the Funding Period) 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 1998-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 1998-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 1998-A. No assurances can be
given as to whether Series 1998-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 1998-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 1998-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 1998-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
1998-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 1998-A
Certificates, payments of principal to the Series 1998-A Holders may be
delayed.
Should a Pay Out Event occur with respect to Series 1998-A and the Early
Amortization Period commence, any amount on deposit in the Principal Funding
Account will be paid to the Series 1998-A Holders on the first Distribution
Date with respect to the Early Amortization Period and the Series 1998-A
Holders will be entitled
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<PAGE>
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 1998-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 1998-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, increases and reductions in the
invested amounts of other 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 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 or other
enhancement 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 1998-A Interests or whether the terms of any other
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 1998-A Holders could expect to receive payments of principal on their
Series 1998-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. In addition, there can be no assurance that during the Funding
Period there will be a sufficient increase in the Transferor Amount to permit
the Invested Amount to reach the Full Invested Amount.
The Trust, as a master trust, has issued and may issue additional Series
from time to time, and there can be no assurance that the terms of any other
Series might not have an impact on the timing or amount of payments received
by Series 1998-A Holders. Further, if a Pay Out Event with respect to Series
1998-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.
In addition, if the Pre-Funding Amount is greater than zero at the end of
the Funding Period, any principal amounts remaining on deposit in the Pre-
Funding Account will be withdrawn for distribution to the Class A
Certificateholders, the Class B Certificateholders and the Class C Interest
Holders on a pro rata basis on the first Distribution Date after the end of
the Funding Period. See "Series Provisions--Funding Period" herein.
S-19
<PAGE>
THE BANK PORTFOLIO
GENERAL
Set forth below is certain information with respect to the Bank Portfolio.
See "The Bank's Credit Card Activities" in the Prospectus. There can be no
assurance that the yield, loss and delinquency experience with respect to the
Receivables will be comparable to that set forth below with respect to the
entire Bank Portfolio.
DELINQUENCY AND LOSS EXPERIENCE
The following tables set forth the delinquency and loss experience for the
Bank Portfolio at or for each of the periods shown. Accounts selected for
credit card trusts originated or purchased 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 (or
in the case of the Additional Accounts the receivables of which are expected
to be conveyed to the Trust during the period from the date of this Prospectus
Supplement through the Closing Date, will be) selected from accounts in the
Bank Portfolio 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
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 1995 in the delinquency and loss
rates in the Bank Portfolio is generally attributable to maturation of the
Bank Portfolio, economic factors affecting the entire industry and to the fact
that the Bank Portfolio has not experienced the same level of receivables
growth as that experienced by other issuers in the credit card market. 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 MARCH 31, 1998 AT DECEMBER 31, 1997 AT DECEMBER 31, 1996 AT DECEMBER 31, 1995
----------------------- ----------------------- ----------------------- -----------------------
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)........ $4,930,264 $5,098,839 $5,246,148 $4,572,475
Receivables
contractually
delinquent (2):
30-59 days............. $ 115,163 2.34% $ 136,640 2.68% $ 140,563 2.68% $ 89,970 1.97%
60-89.................. 79,921 1.62 92,230 1.81 92,715 1.77 57,693 1.26
90 days or more........ 156,592 3.18 164,127 3.23 166,092 3.16 92,153 2.02
---------- ---- ---------- ---- ---------- ---- ---------- ----
Total................. $ 351 ,676 7.14% $ 392,997 7.72% $ 399,370 7.61% $ 239,816 5.25%
========== ==== ========== ==== ========== ==== ========== ====
</TABLE>
- - --------
(1) Includes the receivables transferred in connection with credit card trusts
originated or purchased 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-20
<PAGE>
LOSS EXPERIENCE
BANK PORTFOLIO
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED YEAR ENDED DECEMBER 31,
MARCH 31, ----------------------------------
1998 1997 1996 1995
------------ ---------- ---------- ----------
<S> <C> <C> <C> <C>
Average receivables
outstanding (1)............. $4,999,631 $5,132,074 $4,822,877 $3,974,895
Total gross credit charge-
offs (2).................... $ 135,205 $ 551,479 $ 421,870 $ 205,406
Total gross credit charge-
offs as a percentage of
average receivables
outstanding (3)............. 10.82% 10.75% 8.75% 5.17%
Recoveries................... $ 9,696 $ 28,993 $ 19,460 $ 14,815
Net credit losses............ $ 125,509 $ 522,486 $ 402,410 $ 190,591
Net credit losses as a
percentage of average
receivables outstanding
(3)......................... 10.04% 10.18% 8.34% 4.79%
</TABLE>
- - --------
(1) Includes the receivables transferred in connection with credit card trusts
originated or purchased 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 three months ended March 31, 1998 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, 1997 and the three month period ended March 31,
1998.
REVENUE EXPERIENCE
BANK PORTFOLIO (1)(2)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED YEAR ENDED DECEMBER 31,
MARCH 31, --------------------------
1998 1997 1996 1995
------------ ------- ------- --------
<S> <C> <C> <C> <C>
Average Account Monthly Periodic
Charges and Fees (3)................ $28.11 $ 31.63 $ 32.25 $ 25.59
Average Account Balance (4).......... $1,745 $ 1,850 $ 1,916 $ 1,836
Yield from Monthly Periodic Charges
and Fees (5)........................ 19.33% 20.52% 20.20% 16.73%
</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.
(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.
S-21
<PAGE>
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
are not related to activity or balances in the Accounts) 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 1998-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 through
and including 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 1998-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 (1)
<TABLE>
<CAPTION>
THREE MONTHS YEAR ENDED DECEMBER 31,
ENDED ---------------------------
MARCH 31, 1998 1997 1996 1995
-------------- -------- ------- -------
<S> <C> <C> <C> <C>
Lowest.............................. 10.6% 9.0% 7.8% 8.1%
Highest............................. 11.8% 11.4% 9.8% 9.8%
Monthly Average..................... 11.1% 10.1% 9.0% 8.8%
</TABLE>
- - --------
(1) Changes in the minimum payment and in other terms of the accounts may
affect the comparability of periods.
S-22
<PAGE>
THE RECEIVABLES
The Receivables in the Trust Portfolio (including receivables in Additional
Accounts the receivables of which are expected to be conveyed to the Trust
during the period from the date of this Prospectus Supplement through the
Closing Date) as of the Series 1998-A Cut-Off Date included $2,599,480,375 of
Principal Receivables and $97,370,448 of Finance Charge Receivables. On the
Series 1998-A Cut-Off Date the Accounts had an average Receivable balance of
$1,586 and an average credit limit of $7,926 On the Series 1998-A Cut-Off Date
the ratio (expressed as a percentage) of the aggregate total Receivables
balance to the aggregate total credit limit was 20.01%. As of the Series 1998-
A Cut-Off Date, all of the Accounts in the Trust Portfolio (including
receivables in Additional Accounts the receivables of which are expected to be
conveyed to the Trust during the period from the date of this Prospectus
Supplement through the Closing Date) were VISA or MasterCard credit card
accounts, of which 29.20% were standard accounts and 70.80% were premium or
ultra premium accounts, and the aggregate Receivable balances of standard
accounts and premium or ultra premium accounts, as a percentage of the total
aggregate Receivables, were 17.45% and 82.55%, respectively.
The following tables summarize the Trust Portfolio (including receivables in
Additional Accounts the receivables of which are expected to be conveyed to
the Trust during the period from the date of this Prospectus Supplement
through the Closing Date) by various characteristics as of the Series 1998-A
Cut-Off Date. Because the future composition of the Trust Portfolio may change
over time, these tables are not necessarily indicative of the composition of
the Trust Portfolio at any subsequent time. 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................. 30,649 1.8% $ (3,163,808) (0.1)%
No Balance..................... 881,968 51.9 0 0.0
$0.01--$500.00................. 192,152 11.3 32,117,962 1.2
$500.01--$1,000.00............. 73,985 4.3 54,901,380 2.0
$1,000.01--$3,000.00........... 183,931 10.8 351,283,966 13.0
$3,000.01--$5,000.00........... 126,911 7.5 508,184,887 18.9
$5,000.01--$10,000.00.......... 162,289 9.5 1,155,003,179 42.8
$10,000.01--$15,000.00......... 45,354 2.7 552,610,684 20.5
$15,000.01 or more............. 2,845 0.2 45,912,573 1.7
--------- ----- -------------- -----
TOTAL........................ 1,700,084 100.0% $2,696,850,823 100.0%
========= ===== ============== =====
</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>
$0.00--$500.00.................. 35,734 2.1% $ 7,810,337 0.3%
$500.01--$1,000.00.............. 29,825 1.8 12,378,627 0.5
$1,000.01--$3,000.00............ 195,430 11.5 141,650,056 5.2
$3,000.01--$5,000.00............ 288,657 17.0 377,265,094 14.0
$5,000.01--$10,000.00........... 680,769 40.0 1,187,430,146 44.0
$10,000.01--$15,000.00.......... 469,152 27.6 968,045,350 35.9
$15,000.01 or more.............. 517 0.0 2,271,213 0.1
--------- ----- -------------- -----
TOTAL......................... 1,700,084 100.0% $2,696,850,823 100.0%
========= ===== ============== =====
</TABLE>
S-23
<PAGE>
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.................... 1,642,062 96.6% 2,403,937,440 89.2%
Up to 29 days..................... 34,372 2.0 157,192,523 5.8
30 days or more................... 23,650 1.4 135,720,860 5.0
--------- ----- ------------- -----
TOTAL........................... 1,700,084 100.0% 2,696,850,823 100.0%
========= ===== ============= =====
</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................... 106,441 6.3% 49,157,926 1.8%
Over 5 months to 11
months................... 155,331 9.1 101,392,984 3.7
Over 11 months to 17
months................... 161,864 9.5 214,797,788 8.0
Over 17 months to 23
months................... 334,120 19.7 525,563,040 19.5
Over 23 months............ 942,328 55.4 1,805,939,085 67.0
--------- ----- ------------- -----
TOTAL................... 1,700,084 100.0% 2,696,850,823 100.0%
========= ===== ============= =====
</TABLE>
S-24
<PAGE>
GEOGRAPHIC DISTRIBUTION OF ACCOUNTS
TRUST PORTFOLIO
<TABLE>
<CAPTION>
PERCENTAGE OF PERCENTAGE OF
NUMBER OF TOTAL NUMBER OF RECEIVABLES TOTAL
STATE ACCOUNTS ACCOUNTS OUTSTANDING RECEIVABLES
----- --------- --------------- -------------- -------------
<S> <C> <C> <C> <C>
Alabama................. 21,601 1.3% $ 34,167,363 1.3%
Alaska.................. 1,905 0.1 2,901,415 0.1
Arizona................. 21,405 1.3 38,946,093 1.4
Arkansas................ 6,711 0.4 11,574,876 0.4
California.............. 159,291 9.4 321,241,693 11.9
Colorado................ 25,188 1.5 40,907,699 1.5
Connecticut............. 23,817 1.4 38,209,984 1.4
Delaware................ 7,003 0.4 10,555,477 0.4
District of Columbia.... 13,253 0.8 22,155,192 0.8
Florida................. 75,684 4.4 123,355,213 4.6
Georgia................. 36,926 2.2 65,780,601 2.4
Guam.................... 49 0.0 188,328 0.0
Hawaii.................. 4,531 0.3 8,957,347 0.3
Idaho................... 6,603 0.4 8,966,549 0.3
Illinois................ 65,043 3.8 107,299,323 4.0
Indiana................. 42,294 2.5 65,187,899 2.4
Iowa.................... 18,619 1.1 21,312,656 0.8
Kansas.................. 15,450 0.9 23,918,807 0.9
Kentucky................ 20,776 1.2 28,965,419 1.1
Louisiana............... 19,558 1.1 28,060,888 1.0
Maine................... 7,760 0.5 12,339,207 0.5
Maryland................ 175,989 10.3 252,141,980 9.4
Massachusetts........... 40,448 2.4 59,565,584 2.2
Michigan................ 63,722 3.7 97,748,389 3.6
Minnesota............... 33,388 2.0 39,901,618 1.5
Mississippi............. 9,505 0.6 13,531,276 0.5
Missouri................ 28,320 1.7 41,463,696 1.5
Montana................. 4,869 0.3 6,160,872 0.2
Nebraska................ 10,535 0.6 13,144,327 0.5
Nevada.................. 10,394 0.6 22,568,199 0.8
New Hampshire........... 9,157 0.5 14,813,495 0.6
New Jersey.............. 52,085 3.1 89,344,157 3.3
New Mexico.............. 8,273 0.5 12,804,367 0.5
New York................ 90,821 5.3 147,797,257 5.5
North Carolina.......... 41,852 2.5 65,177,244 2.4
North Dakota............ 3,792 0.2 3,870,348 0.1
Ohio.................... 72,906 4.3 106,098,485 3.9
Oklahoma................ 17,692 1.0 27,131,125 1.0
Oregon.................. 17,902 1.1 26,717,508 1.0
Pennsylvania............ 83,977 4.9 119,326,074 4.4
Puerto Rico............. 205 0.0 436,163 0.0
Rhode Island............ 4,496 0.3 6,594,735 0.2
South Carolina.......... 17,972 1.1 29,110,318 1.1
South Dakota............ 3,450 0.2 4,265,244 0.2
Tennessee............... 27,974 1.6 43,163,749 1.6
Texas................... 83,413 4.9 147,199,236 5.5
Utah.................... 12,604 0.7 17,769,972 0.7
Vermont................. 1,508 0.1 1,881,076 0.1
Virgin Islands.......... 60 0.0 149,596 0.0
Virginia................ 97,290 5.7 160,342,775 6.0
Washington.............. 30,916 1.8 48,035,789 1.8
West Virginia........... 7,608 0.5 9,415,748 0.4
Wisconsin............... 39,758 2.3 48,898,852 1.8
Wyoming................. 2,996 0.2 4,200,564 0.2
Other................... 740 0.0 1,088,976 0.0
--------- ----- -------------- -----
TOTAL.................. 1,700,084 100.0% $2,696,850,823 100.0%
========= ===== ============== =====
</TABLE>
S-25
<PAGE>
USE OF PROCEEDS
The net proceeds from the sale of the Series 1998-A Certificates will be
paid to the Transferors. The Transferors will use such proceeds for general
corporate purposes.
THE TRANSFERORS
Based on unaudited results, at March 31, 1998, the Bank had consolidated
assets of approximately $6.3 billion, deposits of approximately $5.0 billion,
and stockholders' equity of approximately $374.3 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 March 31, 1998, the Bank's tangible, core, tier 1 risk-based
and total risk-based regulatory capital ratios were 6.52%, 6.52%, 6.30% and
12.18%, respectively. As of such date, the Bank's capital ratios exceeded the
requirements under FIRREA as well as the standards established for "well-
capitalized" institutions under the prompt corrective action regulations
established pursuant to the Federal Deposit Insurance Corporation Improvement
Act of 1991 ("FDICIA"). The OTS has the discretion to treat a "well-
capitalized" institution as an "adequately-capitalized" institution for
purposes of the prompt corrective action regulations if, after notice and an
opportunity for a hearing, the OTS determines that the institution (i) is
being operated in an unsafe or unsound condition or (ii) has received and has
not corrected a less than satisfactory examination rating for asset quality,
management, earnings or liquidity.
Legislation passed in 1996 requires the merger of the Bank Insurance Fund
("BIF") and the SAIF into a single Deposit Insurance Fund on January 1, 1999,
but only if the thrift charter is eliminated by that date. Congress is
considering legislation in various forms that would require federal thrifts,
like the Bank, to convert their charters to national or state bank charters.
However, the House of Representatives passed a financial modernization bill on
May 13, 1998, that would not require the Bank to convert its charter.
Nevertheless, if legislation were enacted that required the Bank to convert
its charter that lacked appropriate "grandfather" provisions, such legislation
could have an adverse effect on the Bank and its parent company, the B.F. Saul
Real Estate Investment Trust (the "Real Estate Investment Trust") because,
among other things, the Real Estate Investment Trust engages in activities
that are not permissible for bank holding companies and the regulatory capital
and accounting treatment for banks and thrifts differs in certain significant
respects. The Bank cannot determine at this time whether, or in what form,
such legislation may eventually be enacted, and there can be no assurances
that any such legislation that is enacted will contain adequate grandfather
rights for the Bank or the Real Estate Investment Trust.
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 1998-A will be issued pursuant to the Pooling and Servicing Agreement
and a Series Supplement specifying the Principal Terms of Series 1998-A (the
"Series 1998-A Supplement"), the forms of which have been filed as exhibits to
the Registration Statement of which the Prospectus and this Prospectus
Supplement are a part. The following summary describes certain terms
applicable to the Series 1998-A Certificates. Reference should be made to the
Prospectus for additional information concerning Series 1998-A and the Pooling
and Servicing Agreement.
S-26
<PAGE>
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 August
17, 1998 and on each Distribution Date thereafter to Series 1998-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 0.15% per annum above LIBOR (determined as set
forth below) for the period from the Closing Date through July 14, 1998, and
for the period from July 15, 1998 through August 16, 1998, 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 1998-
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 1998-A with respect to such Monthly
Period, including any investment earnings (net of losses and investment
expenses) on amounts on deposit in the Pre-Funding Account on or before the
related Determination Date 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 (or in certain limited circumstances on) 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 0.40% per annum above LIBOR (determined as set
forth below) for the period from the Closing Date through July 14, 1998, and
for the period from July 15, 1998 through August 16, 1998, 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 1998-
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 Period, an amount equal to the sum of (i) the Class B Floating
Allocation
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Percentage of collections of Finance Charge Receivables allocated to Series
1998-A with respect to such Monthly Period, including any investment earnings
(net of losses and investment expenses) on amounts on deposit in the Pre-
Funding Account on or before the related Determination Date 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 after (or in certain limited
circumstances on) 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 1.00% per annum over LIBOR (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 1998-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 1998-A with respect to such
Monthly Period, including any investment earnings (net of losses and
investment expenses) on amounts on deposit in the Pre-Funding Account on or
before the related Determination Date 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 after (or in certain limited circumstances on)
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 July 14, 1998 and on the second London Business Day immediately
preceding July 15, 1998 for the period from July 15, 1998 through August 16,
1998, 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).
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"London Business Day" means any Business Day on which dealings in deposits
in United States dollars are transacted in the London interbank market.
"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 1998-A Certificateholder by telephoning the Trustee at
its Corporate Trust Office at 1-800-735-7777.
FUNDING PERIOD
The Servicer will establish and maintain in the name of the Trustee, on
behalf of the Series 1998-A Holders, the Pre-Funding Account with an Eligible
Institution. Funds on deposit in the Pre-Funding Account shall be withdrawn on
each Business Day following the Closing Date to the extent that the Transferor
Amount on such day exceeds the Pre-Funding Transferor Amount; provided,
however, that the Invested Amount will in no event exceed the Full Invested
Amount or increase by an amount in excess of the Pre-Funding Amount
immediately prior to giving effect to such increase. The "Pre-Funding
Transferor Amount" for any date is equal to 10% of the sum of the aggregate
amount of Principal Receivables in the Trust on such day and amounts on
deposit in the Special Funding Account on such day (or such lesser amount as
may be established by the Transferors with respect to such day by notice to
the Trustee and the Servicer).
Should the Pre-Funding Amount be greater than zero at the end of the Funding
Period, any principal amounts remaining on deposit in the Pre-Funding Account
will be withdrawn for distribution to the Class A Certificateholders, the
Class B Certificateholders and the Class C Interest Holders on a pro rata
basis on the next succeeding Distribution Date.
All amounts on deposit in the Pre-Funding Account will be invested by the
Trustee in Eligible Investments. On each Distribution Date with respect to the
Funding Period, all net investment income earned on amounts in the Pre-Funding
Account received on or prior to the related Determination Date will be
withdrawn on or before the related Transfer Date from the Pre-Funding Account
and deposited into the Collection Account for distribution to Series 1998-A
Holders. Such investment income will be deemed to be collections of Finance
Charge Receivables allocable to Series 1998-A.
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 (other than any
principal payment made from any amount on deposit in the Pre-Funding Account
at the end of the Funding Period) will be made to the Series 1998-A Holders.
During the Scheduled Accumulation Period, funds available to pay principal in
respect of Series 1998-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
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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 1998-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 1998-A,
and until the Series 1998-A Termination Date occurs, funds available to pay
principal in respect of Series 1998-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. 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, (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.
If a Pay Out Event occurs with respect to Series 1998-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 1998-A, and (c) any other amounts that
pursuant to the Series 1998-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 February 2002 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 December 2001 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
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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 April 2003 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 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 1998-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
1998-A Termination Date.
In addition, any principal amount remaining on deposit in the Pre-Funding
Account at the end of the Funding Period will be distributed pro rata to the
Series 1998-A Certificateholders and to holders of the Class C Interests on
the next succeeding Distribution 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
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<PAGE>
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 1998-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 each Monthly Period.
Collections of Finance Charge Receivables and the Defaulted Amount with
respect to any Monthly Period will be allocated to Series 1998-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; provided that with respect to any
Monthly Period during the Funding Period, if the Invested Amount has increased
during such Monthly Period, the Floating Allocation Percentage shall be
calculated for the period from and including the day on which such increase
occurred through but not including the day on which the next such increase
occurs (or, if no further increase occurs during such Monthly Period, through
and including the last day of such Monthly Period) as a percentage equivalent
(which percentage shall never exceed 100%) of a fraction, the numerator of
which is the Invested Amount on the day of such increase and the denominator
of which shall be determined as provided in clause (y) above (after giving
effect to any adjustment to such denominator described below) as of each such
day. The collections of Finance Charge Receivables so allocated to Series
1998-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) 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
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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 1998-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 1998-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 1998-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; provided
further that with respect to any Monthly Period during the Funding Period, if
the Invested Amount has increased during such Monthly Period, the Principal
Allocation Percentage shall be calculated for the period from and including
the day on which such increase occurred through but not including the day on
which the next such increase occurs (or, if no further increase occurs during
such Monthly Period, through and including the last day of such Monthly
Period) as a percentage equivalent (which percentage shall never exceed 100%)
of a fraction, the numerator of which is the Invested Amount on the day of
such increase and the denominator of which shall be determined as provided in
clause (y) above (after giving effect to any adjustment to such denominator
described below) as of such day. The collections of Principal Receivables so
allocated to Series 1998-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 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
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<PAGE>
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. The increase in the invested amount of
any other Series during the funding period for such other Series will be
treated as an Addition Date for purposes of the foregoing sentence.
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, plus (ii) the amount of any increases in the
Class A Invested Amount during the Funding Period as a result of withdrawals
from the Pre-Funding Account in connection with increases in the Transferor
Amount, minus (iii) the aggregate amount of principal payments made to the
Class A Certificateholders on or prior to such date (other than principal
payments made from amounts on deposit in the Pre-Funding Account on the first
Distribution Date following the end of the Funding Period) minus (iv) 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, plus (ii) the amount of any increases in the
Class B Invested Amount during the Funding Period as a result of withdrawals
from the Pre-Funding Account in connection with increases in the Transferor
Amount, minus (iii) the aggregate amount of principal payments made to Class B
Certificateholders on or prior to such date (other than principal payments
made from amounts on deposit in the Pre-Funding Account on the first
Distribution Date following the end of the Funding Period), minus (iv) the
aggregate amount of Class B Investor Charge-Offs for all prior Distribution
Dates, minus (v) 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 (vi) 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 (vii) the aggregate amount of Excess Spread and Excess
Finance Charge Collections allocated to Series 1998-A and allocated on or
prior to such Distribution Date to amounts deducted pursuant to the foregoing
clauses (iv), (v) and (vi).
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"Class C Invested Amount" for any date means an amount equal to (i) the
Class C Initial Invested Amount, plus (ii) the amount of any increases in the
Class C Invested Amount during the Funding Period as a result of withdrawals
from the Pre-Funding Account in connection with increases in the Transferor
Amount, minus (iii) the aggregate amount of principal payments made to Class C
Interest Holders on or prior to such date (other than principal payments made
from amounts on deposit in the Pre-Funding Account on the first Distribution
Date following the end of the Funding Period and 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 (iv)
the aggregate amount of Class C Investor Charge-Offs for all prior
Distribution Dates, minus (v) the 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 (vi) an amount equal to the amount by which the Class C Invested 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 (vii) the aggregate amount of Excess Spread and Excess
Finance Charge Collections allocated to Series 1998-A and allocated on or
prior to such Distribution Date to amounts deducted pursuant to the foregoing
clauses (iv), (v) and (vi).
"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.
"Investor Amount" for any date means an amount equal to the sum of the
Invested Amount and the Pre-Funding Amount.
"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 Deposit
Account held for the benefit of the Series 1998-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 1998-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."
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Unless a Pay Out Event has occurred with respect to Series 1998-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
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 1998-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
following the Monthly Period in which a Pay Out Event with respect to Series
1998-A occurs, 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
following the Monthly Period in which a Pay Out Event with respect to Series
1998-A occurs, 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
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Date, and (c) for any Distribution Date with respect to the Class C Scheduled
Accumulation Period (or the first Distribution Date following the Monthly
Period in which a Pay Out Event with respect to Series 1998-A occurs, 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, 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 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
1998-A Holders (the "Reserve Account"). The Reserve Account is established to
increase the likelihood of the distribution of interest on Series 1998-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 (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 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 1998-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 1998-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 with respect to Series 1998-A 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 Commencement 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
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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 1998-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 1998-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 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 1998-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, on amounts on deposit in the Pre-
Funding Account on or before the related Determination Date 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 1998-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 1998-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 1998-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 1998-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, during the Early Amortization
Period 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
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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, on amounts on deposit in the
Pre-Funding Account on or before the related Determination Date 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 1998-A Supplement with respect to such Distribution
Date, 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 1998-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 1998-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 1998-A
with respect to such Distribution Date and such amounts withdrawn from the
Cash Collateral Account are less than the Class B Required Amount, during the
Early Amortization Period 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.
Collections of Principal Receivables 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. Collections of Principal
Receivables 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 collections of Principal Receivables allocable to the Class C Interests on
any Distribution Date exceed the Class
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C Invested Amount on such Distribution Date and in no event will the
collections of Principal Receivables 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;
(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.
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"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 1998-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;
(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 (iv), (v) and (vi) 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;
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(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 (iv), (v) and (vi) 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 amount on deposit in the Cash Collateral Account
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;
(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 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 C Interest Rate in effect during such Interest
Period (or such portion thereof) and (C) the outstanding principal amount of
the Class C Interests 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).
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"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 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 and 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,
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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.
"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
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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 1998-A Holders and the Cash Collateral Depositor, as
their interests appear in the Series 1998-A Supplement, which interest, in the
case of the Cash Collateral Depositor, will be subordinated to the interests
of the Series 1998-A Holders as provided in the Series 1998-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 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 1998-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 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 1998-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 1998-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 1998-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 (a) 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 (b)(i) during the
Funding Period, the Adjusted Cash Collateral Amount and (ii) from and after
the end of the Funding Period, the Required Cash Collateral Amount.
The "Adjusted Cash Collateral Amount" will be, on each date of determination
during the Funding Period, (i) the product of (a) the Required Cash Collateral
Amount and (b) the percentage equivalent of a fraction, the numerator of which
is the Invested Amount and the denominator of which is the Investor Amount,
minus (ii) the excess of (x) the aggregate of all amounts that have been
withdrawn from the Cash Collateral Account to fund the amounts set forth in
clauses (a) through (e) of the following paragraph over (y) the amounts that
have been subsequently deposited to the Cash Collateral Account as set forth
in the second following paragraph to reinstate the amount of such withdrawals.
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 1998-A available to fund
such Class A Required Amount will be used first to fund any deficiency in
current Class A Monthly Interest, overdue Class A Monthly Interest and any
current or overdue Class A Additional Interest, second to fund any
deficiency in the Class A Servicing Fee, and third to pay the Class A
Investor Default Amount, if any, for such Distribution Date;
(b) the excess, if any, of the 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 1998-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 1998-A and available to fund such amount;
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(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 1998-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 1998-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
1998-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 1998-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
1998-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
Excess Finance Charge Collections allocated to Series 1998-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 1998-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
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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 that have not previously been reimbursed) by the amount
of Excess Spread and Excess Finance Charge Collections allocable to Series
1998-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 1998-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 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 1998-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 1998-A (after giving effect to the
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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 Interests 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 (iv), (v) or (vi) 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 (iv), (v) or (vi)
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 Excess Spread and Excess Finance Charge Collections will be
available for such purpose until all reductions of the Class B Invested Amount
have been reimbursed.
ISSUANCE OF ADDITIONAL CLASS A CERTIFICATES
The Series 1998-A Supplement provides that, from time to time during the
Revolving Period, the Transferors may, subject to certain conditions described
below, cause the Trustee to issue Additional Class A Certificates (each such
issuance, an "Additional Issuance"). When issued, the Additional Class A
Certificates will be identical to the other outstanding Class A Certificates
and will be equally and ratably entitled to the benefits of the Pooling and
Servicing Agreement and the Series 1998-A Supplement without preference,
priority or distinction.
In connection with each Additional Issuance, the outstanding principal
amount of the Class A Certificates will be increased but the outstanding
principal balance of the Class B Certificates and the Class C Interests will
remain the same. However, the amount required to be deposited in the Cash
Collateral Account, and therefore the Available Cash Collateral Amount, may
not be increased proportionately to reflect the then outstanding Invested
Amount of Series 1998-A. Accordingly, an Additional Issuance may have the
effect of decreasing the amount of Series Enhancement available to the Series
1998-A Certificates offered hereby.
Following an Additional Issuance, the Controlled Accumulation Amount for the
Class A Scheduled Accumulation Period and the Class A Invested Amount will be
increased proportionately to reflect the then principal amount of Additional
Class A Certificates.
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Additional Class A Certificates may be issued only upon the satisfaction of
certain conditions provided in the Series 1998-A Supplement, including the
following: (a) on or before the fifth Business Day immediately preceding the
date on which Additional Class A Certificates are to be issued, the
Transferors shall have given the Trustee and the Servicer written notice of
such issuance and the date upon which it is to occur; (b) after giving effect
to the Additional Issuance, the aggregate amount of Principal Receivables will
be at least equal to the Required Principal Balance and the Transferor Amount
will be at least equal to the Required Transferor Amount; (c) the Trustee
shall have received confirmation from each Rating Agency that such Additional
Issuance will not result in a Ratings Effect; (d) the Transferors shall have
delivered to the Trustee a certificate of an authorized officer, dated the
date upon which the Additional Issuance is to occur, to the effect that the
Transferors reasonably believe, based on the facts known to such officer at
the time of such certificate, that such issuance will not cause a Pay Out
Event; (e) as of the date of the Additional Issuance, all amounts then due and
owing to the Series 1998-A Holders shall have been paid, and there shall not
be any unreimbursed Class A Investor Charge-Offs or unreimbursed reductions in
the Class B Invested Amount or the Class C Invested Amount; (f) the excess of
the principal amount of the Additional Class A Certificates over their issue
price shall not exceed the maximum amount permitted under the Code without the
creation of original issue discount; and (g) the Transferors shall have
delivered to the Trustee an opinion of counsel acceptable to the Trustee that,
for federal income tax purposes and for Maryland State income and franchise
tax purposes: (x) following such Additional Issuance the Trust will not be
deemed to be an association (or publicly traded partnership) taxable as a
corporation, (y) the Additional Class A Certificates will be properly
characterized as debt and (z) such Additional Issuance will not adversely
affect the tax characterization as debt of Certificates (including the Series
1998-A Certificates) of any outstanding Series or Class that were
characterized as debt at the time of their issuance and will not cause or
constitute an event in which gain or loss would be recognized by any
Certificateholder.
PAIRED SERIES
The Series 1998-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 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 1998-A
Holders after the Series 1998-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
1998-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 1998-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
1998-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 1998-A Supplement, which failure has a
material adverse effect on the Series 1998-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 1998-A Holders
for such period;
(b) any representation or warranty made by either Transferor in the
Pooling and Servicing Agreement or the Series 1998-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
S-49
<PAGE>
interests of the Series 1998-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
1998-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 1998-A Interests evidencing more than 50%
of the aggregate unpaid principal amount of Series 1998-A Interests by notice
then given in writing to the Transferors and the Servicer (and to the Trustee
if given by the Series 1998-A Holders) may declare that a Pay Out Event has
occurred with respect to Series 1998-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 1998-A without any notice or other
action on the part of the Trustee immediately upon the occurrence of such
event.
For purposes of the Pay Out Event described in clause (e) above, the terms
"Base Rate" and "Portfolio Yield" will be defined as follows with respect to
the Series 1998-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 1998-A
Interests for the related Distribution Date and the denominator of which is
the Investor Amount as of the last day of the preceding Monthly Period (or
with respect to the first Monthly Period, the Investor Amount as of the
Closing Date).
"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, on amounts on deposit in the Pre-Funding Account on or before the
related Determination Date 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
Investor Amount as of the last day of the preceding Monthly Period (or with
respect to the first Monthly Period, the Investor Amount as of the Closing
Date).
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
S-50
<PAGE>
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
The share of the Servicing Fee allocable to Series 1998-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 $1,400,000.
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 $1,092,000. 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 $168,000. 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 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 $140,000. 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 1998-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
Principal Collections" above.
SERIES TERMINATION
If on the Distribution Date that is two months prior to the Series 1998-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 1998-A Termination Date (after giving effect to all
distributions required to be made on the Series 1998-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 1998-A Termination Date
for distribution to the Series 1998-A Holders. The Servicer will sell such
Receivables (or interests therein) on the Series 1998-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 1998-A Interest.
S-51
<PAGE>
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 1998-A.
Accordingly, in such event, the Series 1998-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, the Class C Adjusted
Invested Amount and the Pre-Funding 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 1998-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.
AMENDMENTS
The Series 1998-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 Certificateholders (including Series 1998-A
Holders 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 Ratings
Effect.
The Series 1998-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 Certificateholders (including Series 1998-A
Holders 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 1998-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 1998-A Supplement
provides that the Series 1998-A Supplement and the Pooling and Servicing
Agreement may be amended by the Transferors without the consent of the
Servicer,
S-52
<PAGE>
the Trustee, any Investor Certificateholders (including Series 1998-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 1998-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
Ratings Effect.
The Series 1998-A Supplement provides that the Floating Allocation
Percentage, the Class A Floating Allocation Percentage, the Class B Floating
Allocation Percentage, the Class C Floating Allocation Percentage, the
Principal Allocation Percentage, the Class A Principal Allocation Percentage,
the Class B Principal Allocation Percentage and the Class C Principal
Allocation Percentage may be modified by the Transferors without the consent
of the Servicer, the Trustee, any Certificateholders (including Series 1998-A
Holders) or (unless specifically provided in the related Series Supplement)
any Series Enhancer if each Rating Agency has provided written confirmation
that such modification will not have a Ratings 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 1998-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 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>
Credit Suisse First Boston Corporation....... $156,000,000 $24,000,000
Salomon Brothers Inc......................... 156,000,000 24,000,000
J.P. Morgan Securities Inc................... 156,000,000 24,000,000
------------ -----------
Total...................................... $468,000,000 $72,000,000
============ ===========
</TABLE>
S-53
<PAGE>
The Underwriting Agreement provides that the obligations of the Underwriters
to pay for and accept delivery of the Series 1998-A Certificates are subject
to the approval of certain legal matters by their counsel and to certain other
conditions. All of the Series 1998-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 0.165% of the principal amount
of the Class A Certificates. The Underwriters may allow, and such dealers may
reallow, concessions not in excess of 0.150% 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 0.165% of the principal amount
of the Class B Certificates. The Underwriters may allow, and such dealers may
reallow, concessions not in excess of 0.150% 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.
The Underwriters may engage in over-allotment transactions, stabilizing
transactions, syndicate covering transactions and penalty bids with respect to
the Series 1998-A Certificates in accordance with Regulation M under the
Exchange Act. Over-allotment transactions involve syndicate sales in excess of
the offering size, which creates a syndicate short position. Stabilizing
transactions permit bids to purchase the Series 1998-A Certificates so long as
the stabilizing bids do not exceed a specified maximum. Syndicate covering
transactions involve purchases of the Series 1998-A Certificates in the open
market after the distribution has been completed in order to cover syndicate
short positions. Penalty bids permit the Underwriters to reclaim a selling
concession from a syndicate member when the Series 1998-A Certificates
originally sold by such syndicate member are purchased in a syndicate covering
transaction. Such over-allotment transactions, stabilizing transactions,
syndicate covering transactions and penalty bids may cause the prices of the
Series 1998-A Certificates to be higher than they would otherwise be in the
absence of such transactions. Neither the Transferors nor the Underwriters
represent that the Underwriters will engage in any such transactions or that
such transactions, once commenced, will not be discontinued without notice at
any time.
LEGAL MATTERS
Certain legal matters relating to the issuance of the Series 1998-A
Certificates will be passed upon for the Transferors and the Trust 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.
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
1998-A Certificates will be passed upon for the Underwriters by Orrick,
Herrington & Sutcliffe LLP, New York, New York.
S-54
<PAGE>
INDEX OF DEFINED TERMS
<TABLE>
<S> <C>
Accounts............................................................. S-1
Additional Class A Certificates...................................... S14
Additional Issuance.................................................. S-48
Adjusted Cash Collateral Amount...................................... S-45
Adjusted Invested Amount............................................. S-7, S-35
Available Cash Collateral Amount..................................... S-45
Available Final Distribution Amount.................................. S-51
Available Principal Collections...................................... S-30
Available Reserve Account Amount..................................... S-38
Bank................................................................. S-1
Base Rate............................................................ S-50
BIF.................................................................. S-26
Business Day......................................................... S-29
Cash Collateral Account.............................................. S-2, S-12
Cash Collateral Depositor............................................ S-45
CCB Holding.......................................................... S-1
Certificate Rate..................................................... S-28
Class A Additional Interest.......................................... S-40
Class A Adjusted Invested Amount..................................... S-6, S-35
Class A Available Funds.............................................. S-27
Class A Certificate Rate............................................. S-2
Class A Certificateholders' Interest................................. S-6
Class A Certificates................................................. S-1, S-4
Class A Expected Final Payment Date.................................. S-9, S-18
Class A Floating Allocation Percentage............................... S-32
Class A Full Invested Amount......................................... S-6
Class A Initial Invested Amount...................................... S-5
Class A Invested Amount.............................................. S-5, S-34
Class A Investor Charge-Off.......................................... S-47
Class A Investor Default Amount...................................... S-46
Class A Monthly Interest............................................. S-41
Class A Monthly Principal............................................ S-43
Class A Principal Allocation Percentage.............................. S-33
Class A Required Amount.............................................. S-10, S-38
Class A Scheduled Accumulation Period................................ S-9
Class A Scheduled Accumulation Period Length......................... S-30
Class A Servicing Fee................................................ S-51
Class B Additional Interest.......................................... S-40
Class B Adjusted Invested Amount..................................... S-7, S-35
Class B Available Funds.............................................. S-27
Class B Certificate Rate............................................. S-2
Class B Certificateholders' Interest................................. S-6
Class B Certificates................................................. S-1, S-4
Class B Expected Final Payment Date.................................. S-9
Class B Full Invested Amount......................................... S-6
Class B Floating Allocation Percentage............................... S-32
Class B Initial Invested Amount...................................... S-5
Class B Invested Amount.............................................. S-5, S-34
Class B Investor Charge-Off.......................................... S-47
Class B Investor Default Amount...................................... S-46
</TABLE>
S-55
<PAGE>
<TABLE>
<S> <C>
Class B Monthly Interest......................................... S-41
Class B Monthly Principal........................................ S-43
Class B Principal Allocation Percentage.......................... S-33
Class B Principal Commencement Date.............................. S-36
Class B Required Amount.......................................... S-11, S-39
Class B Scheduled Accumulation Period............................ S-9
Class B Servicing Fee............................................ S-51
Class C Additional Interest...................................... S-43
Class C Adjusted Invested Amount................................. S-7, S-35
Class C Available Funds.......................................... S-28
Class C Expected Final Payment Date.............................. S-9
Class C Floating Allocation Percentage........................... S-32
Class C Full Invested Amount..................................... S-6
Class C Initial Invested Amount.................................. S-6
Class C Interest Holders......................................... S-9
Class C Interest Rate............................................ S-28
Class C Interests................................................ S-2, S-4
Class C Invested Amount.......................................... S-6, S-35
Class C Investor Charge-Off...................................... S-48
Class C Investor Default Amount.................................. S-46
Class C Monthly Interest......................................... S-42
Class C Monthly Principal........................................ S-44
Class C Principal Allocation Percentage.......................... S-33
Class C Principal Commencement Date.............................. S-36
Class C Required Amount.......................................... S-12
Class C Scheduled Accumulation Period............................ S-9
Class C Servicing Fee............................................ S-51
Closing Date..................................................... S-5
Code............................................................. S-15
Controlled Accumulation Amount................................... S-44
Controlled Deposit Amount........................................ S-44
Covered Amount................................................... S-36
Deficit Controlled Accumulation Amount........................... S-44
Distribution Date................................................ S-2
ERISA............................................................ S-15
Excess Spread.................................................... S-10, S-41
FDICIA........................................................... S-26
FIRREA........................................................... S-26
Floating Allocation Percentage................................... S-32
Full Invested Amount............................................. S-5
Funding Period................................................... S-8
Group I.......................................................... S-12
Highest Bid...................................................... S-51
Independent Investors............................................ S-15
Initial Cash Collateral Amount................................... S-12
Initial Invested Amount.......................................... S-5
Interest Period.................................................. S-29
Invested Amount.................................................. S-35
Investor Amount.................................................. S-35
Investor Default Amount.......................................... S-46
LIBOR............................................................ S-2, S-4, S-28
LIBOR Determination Date......................................... S-4, S-28
</TABLE>
S-56
<PAGE>
<TABLE>
<S> <C>
London Business Day................................................... S-29
Monthly Cash Collateral Fee........................................... S-42
Monthly Report........................................................ S-52
Monthly Servicing Fee................................................. S-51
Paired Series......................................................... S-49
Plan.................................................................. S-15
Plan Asset Regulation................................................. S-15
Pooling and Servicing Agreement....................................... S-1
Portfolio Yield....................................................... S-50
Pre-Funding Account................................................... S-8
Pre-Funding Amount.................................................... S-8
Pre-Funding Transferor Amount......................................... S-29
Principal Allocation Percentage....................................... S-33
Principal Funding Account............................................. S-18
Principal Funding Account Balance..................................... S-36
Principal Funding Investment Proceeds................................. S-36
Real Estate Investment Trust.......................................... S-26
Reallocated Principal Collections..................................... S-38
Receivables........................................................... S-1
Record Date........................................................... S-27
Reference Banks....................................................... S-29
Required Cash Collateral Amount....................................... S-13
Required Reserve Account Amount....................................... S-37
Reserve Account....................................................... S-37
Reserve Account Funding Date.......................................... S-37
Revolving Period...................................................... S-8
Scheduled Accumulation Period......................................... S-8
Series 1998-A......................................................... S-2, S-4
Series 1998-A Certificates............................................ S-1, S-4
Series 1998-A Cut-Off Date............................................ S-5
Series 1998-A Holders................................................. S-13
Series 1998-A Interests............................................... S-2, S-4
Series 1998-A Supplement.............................................. S-26
Series 1998-A Termination Date........................................ S-15
Series Servicing Fee Percentage....................................... S-8, S-51
Servicing Base Amount................................................. S-51
Spread Account........................................................ S-28
Telerate Page 3750.................................................... S-29
Transferor............................................................ S-1
Transferors........................................................... S-1
Trust................................................................. S-1, S-4
Trustee............................................................... S-1
Underwriters.......................................................... S-53
Underwriting Agreement................................................ S-53
</TABLE>
S-57
<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, the Series 1995-D Certificates, the Series 1996-A Certificates,
the Series 1996-B Certificates and the Series 1996-C Certificates, the only
Series heretofore issued by the Trust. For more specific information with
respect to the Series 1995-A Certificates, the Series 1995-C Certificates, the
Series 1996-A Certificates and/or the Series 1996-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 1998-A
Certificates, a copy of the Prospectus Supplements for the Series 1995-A
Certificates, the Series 1995-C Certificates, the Series 1996-A Certificates
and/or the Series 1996-C Certificates.
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
Series Issuance Date.........................................September 28, 1995
A-1
<PAGE>
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
(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>
SERIES 1996-A CERTIFICATES
Initial Series 1996-A Invested Amount..............................$450,000,000
Initial Class A Invested Amount....................................$369,000,000
Initial Class B Invested Amount.....................................$38,250,000
Initial Class C Invested Amount.....................................$42,750,000
Class A Certificate Rate...................One-month LIBOR plus 0.15% per annum
Class B Certificate Rate..................One-month LIBOR plus 0.375% per annum
Class C Certificate Rate.....Not more than one-month LIBOR plus 1.00% per annum
Class A Expected Final Payment Date............September 2001 Distribution Date
Class B Expected Final Payment Date.............November 2001 Distribution Date
Class C Expected Final Payment Date..............January 2002 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
(subject to adjustment)
Class C Controlled Accumulation Amount.... 1/2 of Class C Invested Amount
(subject to adjustment)
Initial Cash Collateral Amount......................................$13,500,000
Group.........................................................................I
Series Servicing Fee Percentage...........................................2.00%
Series Termination Date.........................February 2005 Distribution Date
Series Issuance Date.........................................September 27, 1996
SERIES 1996-B CERTIFICATES
Minimum Invested Amount......................................................$0
Maximum Invested Amount............................................$200,000,000
Certificate Rate.....................Commercial Paper Rate plus 0.23% per annum
Expected Final Payment Date.....................November 2001 Distribution Date
Initial Spread Account Deposit.......................................$4,275,000
Group.........................................................................I
Series Servicing Fee Percentage...........................................2.00%
Series Termination Date............................March 2005 Distribution Date
Series Issuance Date...........................................October 18, 1996
(the outstanding principal amount of the Series 1996-B Certificates may be
repaid and readvanced under the terms of the Series 1996-B Supplement)
SERIES 1996-C CERTIFICATES
Initial Series 1996-C Investor Amount..............................$300,000,000
Initial Class A Investor Amount....................................$246,000,000
Initial Class B Investor Amount.....................................$25,500,000
Initial Class C Investor Amount.....................................$28,500,000
Pre-Funding Amount..................................................$75,000,000
Initial Series 1996-C Invested Amount..............................$225,500,000
Initial Class A Invested Amount....................................$184,500,000
Initial Class B Invested Amount.....................................$19,125,000
Initial Class C Invested Amount.....................................$21,375,000
Class A Certificate Rate...................One-month LIBOR plus 0.14% per annum
Class B Certificate Rate..................One-month LIBOR plus 0.375% per annum
Class C Certificate Rate.....Not more than one-month LIBOR plus 1.00% per annum
Class A Expected Final Payment Date.............December 2003 Distribution Date
Class B Expected Final Payment Date.............February 2004 Distribution Date
A-3
<PAGE>
Class C Expected Final Payment Date................April 2004 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
(subject to adjustment)
Class C Controlled Accumulation Amount.... 1/2 of Class C Invested Amount
(subject to adjustment)
Initial Cash Collateral Amount.......................................$6,750,000
Group.........................................................................I
Series Servicing Fee Percentage...........................................2.00%
Series Termination Date..............................May 2007 Distribution Date
Series Issuance Date..........................................December 12, 1996
A-4
<PAGE>
- - -------------------------------------------------------------------------------
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 16 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 JUNE 5, 1998
<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; the Commission's regional offices at Seven World Trade
Center, 13th Floor, New York, New York 10048; and Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such
material may be obtained from the Public Reference Section of the Commission,
450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. In
addition, the Commission maintains a Web site at "http://www.sec.gov" that
contains information regarding registrants that file electronically with the
Commission.
REPORTS TO CERTIFICATEHOLDERS
Unless and until Definitive Certificates are issued with respect to any
Series or Class thereof offered hereby, Monthly Reports, which contain
unaudited information concerning the Trust and are prepared by the Servicer,
will be sent on behalf of the Trust to Cede & Co. ("Cede"), as nominee of The
Depository Trust Company ("DTC") and registered holder of the Certificates
offered hereby, pursuant to the Pooling and Servicing Agreement. See
"Description of the Certificates--Reports" and "The Pooling and Servicing
Agreement--Book-Entry Registration" and "--Evidence as to Compliance." Such
reports will not constitute financial statements prepared in accordance with
generally accepted accounting principles. The Pooling and Servicing Agreement
will not require the sending of, and neither the Bank nor CCB Holding intends
to send, any of their financial reports to registered holders of Certificates
(the "Certificateholders") offered hereby or to owners of beneficial interests
in the Certificates ("Certificate Owners"). The Servicer will file with the
Commission such periodic reports with respect to the Trust as are required
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
and the rules and regulations of the Commission thereunder.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All reports and other documents filed by the Servicer, on behalf of the
Trust, pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act
subsequent to the date of this Prospectus and prior to the termination of the
offering of the Certificates offered hereby shall be deemed to be incorporated
by reference into this Prospectus and to be part hereof. Any statement
contained herein or in a document deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained in any other subsequently
filed document, which also is deemed to be incorporated by reference herein,
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as modified or superseded, to
constitute a part of this Prospectus.
The Servicer will provide without charge to each person to whom a copy of
this Prospectus is delivered, on the written or oral request of any such
person, a copy of any or all of the documents incorporated herein by
reference, except the exhibits to such documents (unless such exhibits are
specifically incorporated by reference in such documents). Written requests
for such copies should be directed to Chevy Chase Bank, F.S.B., 8401
Connecticut Avenue, Chevy Chase, Maryland, 20815, Attention: Chief Financial
Officer. Telephone requests for such copies should be directed to Chevy Chase
Bank, F.S.B. at (301) 986-7000.
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus and in any
accompanying Prospectus Supplement. Reference is made to the "Index of Defined
Terms" for the location herein of the definitions of certain capitalized terms
used herein. Unless the context requires otherwise, capitalized terms used in
this Prospectus and in any accompanying Prospectus Supplement refer only to the
particular Series or Class thereof being offered by such Prospectus Supplement.
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 Servicing 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 respect 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."
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
3
<PAGE>
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 "Receivables 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
representative 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."
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
4
<PAGE>
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. 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
5
<PAGE>
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 fluctuations in the
amount of Principal Receivables held by the Trust
from time to time (due to, among other things,
seasonal purchase and payment habits of cardholders
or adjustments in the amount of Principal
Receivables because of rebates, refunds, fraudulent
charges or otherwise). See "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 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 reduction 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
6
<PAGE>
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
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
7
<PAGE>
(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 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, if specified in the applicable
Series Supplement, 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.
8
<PAGE>
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 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 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
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
9
<PAGE>
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 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
10
<PAGE>
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.
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 commences with respect
to any Series, any funds on deposit in the Special
Funding Account will be released and treated as
Shared Principal Collections to the extent needed
to cover principal payments due to or for the
benefit of such Series.
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<PAGE>
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 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 last day of the
Funding Period. 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, to the extent that as a
result thereof the Transferor Amount exceeds the
amount specified in the related Prospectus
Supplement. 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.
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<PAGE>
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 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
distributions of principal or interest be made with
respect to the Certificates of such Class or
Classes before distributions are made to one or
more other Classes of such Series. If so specified
in the Prospectus Supplement for a Series or Class
offered hereby, the level of Credit Enhancement for
such Series may be modified if such modification
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 Enhancement 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
13
<PAGE>
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 Series 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 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
determine the application of the amounts 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 Compensation 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
14
<PAGE>
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 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.
15
<PAGE>
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
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
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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 CCB Holding to the Trust should
be recharacterized as a grant of a security interest in such Receivables to
secure a borrowing, 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.
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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. From time to time
members of Congress have 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 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."
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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.
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
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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, reduced late charges and
other fees or charges and other enhancements such as cash rebates and airline
miles. 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 Transferors do not add Receivables in
Additional Accounts to the Trust, a Pay Out Event could occur with respect to
a Series.
Other credit card issuers have announced changes in the terms of certain of
their VISA (R) and MasterCard (R)(/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 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
- - --------
(1) VISA(R) and MasterCard(R) are registered trademarks of VISA U.S.A., Inc.
and MasterCard International Inc., respectively.
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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 its
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 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
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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 a 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 standard accounts, premium accounts and ultra-premium platinum
accounts from the Bank's portfolio of such accounts (the "Bank Portfolio").
Generally, ultra-premium, premium and standard accounts undergo the same
credit analysis methods, but ultra-premium and premium accounts have higher
credit limits and more stringent credit requirements.
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 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. In addition, the Bank
generates new accounts through solicitations directed to individuals who have
recently purchased homes.
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
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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 a minimum monthly payment
equal to the sum of (x) the greater of $15 or 2% of the new balance plus (y)
any amounts past due. The Bank reserves the option to add to the minimum
payment any amount by which the new balance exceeds the account's 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 ranges from $28 to $40. Other
charges currently assessed by the Bank include a late charge (generally $25,
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 $25 for returned payments as well as for cash advance checks), an
overlimit fee of $25 if, at the close of a billing cycle, a cardholder's
outstanding balance exceeds the cardholder's credit limit) and a minimum
monthly finance charge on purchases of $0.50. Cardholders may also purchase
credit
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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. To
calculate such balance, the Bank first takes the beginning balance each day,
adds any new purchases, cash advances, applicable fees and charges and
interest on the previous day's balance and subtracts any payments or credits.
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. 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 following
statement closing date, which must be at least 25 days after the current
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 11.3% to 13.8% over the selected prime rate for cash advances. Cardholders
who are evaluated as higher risk may have higher rates. Certain accounts will
have promotional rates as low as the selected prime rate for a limited period
of time (generally six months from account issuances). The rates described
herein 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, (2) a no-annual fee product and (3)
mileage credits for airline travel.
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 its 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 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 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, but only if there is no living or
nonbankrupt obligor left on the account), 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.
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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 home office
is located at 7926 Jones Branch Drive, McLean, Virginia 22102 and 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: (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
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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 the transferring 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) except as provided in the Pooling and
Servicing Agreement, does not have any receivables that are Defaulted
Receivables and (c) except as provided in the Pooling and Servicing Agreement,
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 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.
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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 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
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(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 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'
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Interest of such Series (other than amounts reallocated pursuant to the Series
Supplement for such Series) will, if specified in the applicable Series
Supplement, 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
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
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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.
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
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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, the applicable 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.
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.
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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.
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
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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 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
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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, if specified in the Series Supplement, 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 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.
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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 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 with respect to each business day during any Monthly
Period and the Defaulted Amount for 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.
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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 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, if any, 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
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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.
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.
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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 last day of the Funding Period. The Invested Amount
will increase during the Funding Period as Receivables are delivered to the
Trust or as the Invested Amounts of other Series of the Trust are reduced, to
the extent that as a result thereof the Transferor Amount exceeds the amount
specified in the related Prospectus Supplement. The Invested Amount may also
decrease due to the occurrence of a Pay Out Event with respect to such Series
as provided in the related Prospectus Supplement.
During the Funding Period, funds on deposit in the Pre-Funding Account for a
Series of Certificates will be withdrawn and paid to the 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. For purposes of
the Pooling and Servicing Agreement, Receivables that become Defaulted
Receivables cease to be included as Receivables on the day they become
Defaulted Receivables. The "Defaulted Amount" for any Monthly Period will be
an amount (not less than zero) equal to
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(a) the amount of Principal Receivables that became Defaulted Receivables for
such Monthly Period minus (b) the sum of (i) 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) and (ii) the amount of recoveries received in such Monthly
Period with respect to Finance Charge Receivables and Principal Receivables
previously charged off as uncollectible. 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, but only if there is
no living or nonbankrupt obligor left on the account).
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.
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 modified by the Transferors
if such modification 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
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to the Certificateholders of such Series. Additionally, in certain cases, the
related Prospectus Supplement may set forth certain information with respect
to the provider of any third-party Credit Enhancement (the "Credit Enhancer"),
including (i) a brief description of its principal business activities, (ii)
its principal place of business, place of incorporation or the jurisdiction
under which it is chartered or licensed to do business, (iii) if applicable,
the identity of regulatory agencies that exercise primary jurisdiction over
the conduct of its business and (iv) its total assets, and its stockholders'
or policyholders' surplus, if applicable, as of a date specified in the
Prospectus Supplement. If so described in the related Prospectus Supplement,
Credit Enhancement with respect to a Series offered hereby may be available to
pay principal of the Certificates of such Series following the occurrence of
certain Pay Out Events with respect to such Series. In such event, the Credit
Enhancer will have an interest in certain cash flows in respect of the
Receivables to the extent described in such Prospectus Supplement (the
"Enhancement Invested Amount") and may be entitled to the benefit of the
Trustee's security interest in the Receivables, in each case subordinated to
the interest of the Certificateholders of such Series.
Subordination. If so specified in the related Prospectus Supplement, one or
more Classes of a Series offered hereby may be subordinated to one or more
other Classes of such Series. If so specified in the related Prospectus
Supplement, the rights of the holders of the subordinated Certificates to
receive distributions of principal or interest on any Payment Date will be
subordinated to such rights of the holders of the Certificates that are senior
to such subordinated Certificates to the extent set forth in the related
Prospectus Supplement. The related Prospectus Supplement will also set forth
information concerning the amount of subordination of a Class or Classes of
subordinated Certificates in a Series, the circumstances in which such
subordination will be applicable, the manner, if any, in which the amount of
subordination will decrease over time, and the conditions under which amounts
available from payments that would otherwise be made to holders of such
subordinated Certificates will be distributed to holders of Certificates that
are senior to such subordinated Certificates. The amount of subordination will
decrease whenever amounts otherwise payable to the holders of subordinated
Certificates are paid to the holders of the Certificates that are senior to
such subordinated Certificates.
Letter of Credit. If so specified in the related Prospectus Supplement, a
letter of credit with respect to a Series or Class of Certificates offered
hereby may be issued by a bank or financial institution specified in the
related Prospectus Supplement (the "L/C Issuer"). Subject to the terms and
conditions specified in the related Prospectus Supplement, the L/C Issuer will
be obligated to honor drawings under a letter of credit in an aggregate dollar
amount (which may be fixed or may be reduced as described in the related
Prospectus Supplement), net of unreimbursed payments thereunder, equal to the
amount described in the related Prospectus Supplement. The amount available
under a letter of credit will be reduced to the extent of the unreimbursed
payments thereunder.
Cash Collateral Account. If specified in the related Prospectus Supplement,
the Certificates of any Class or Series offered hereby may have the benefit of
a cash collateral account. A cash collateral account 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.
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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;
(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
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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.
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
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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."
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
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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 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."
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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.
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
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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 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
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clearance and settlement of securities transactions between Cedel Participants
through electronic book-entry changes in accounts of Cedel Participants,
thereby eliminating the need for physical movement of certificates.
Transactions may be settled in Cedel in any of 28 currencies, including United
States dollars. Cedel provides to its Participants, among other things,
services for safekeeping, administration, clearance and settlement of
internationally traded securities and securities lending and borrowing. Cedel
interfaces with domestic markets in several countries. As a professional
depository, Cedel is subject to regulation by the Luxembourg Monetary
Institute. Cedel Participants are recognized financial institutions around the
world including underwriters, securities brokers and dealers, banks, trust
companies, clearing corporations and certain other organizations and may
include any underwriters, agents or dealers with respect to a Series of
Certificates offered hereby. Indirect access to Cedel is also available to
others, such as banks, brokers, dealers and trust companies that clear through
or maintain a custodial relationship with a Cedel Participant, either directly
or indirectly.
The Euroclear System ("Euroclear") was created in 1968 to hold securities
for participants of the Euroclear System ("Euroclear Participants") and to
clear and settle transactions between Euroclear Participants through
simultaneous electronic book-entry delivery against payment, thereby
eliminating the need for physical movement of certificates and any risk from
lack of simultaneous transfers of securities and cash. Transactions may now be
settled in any of 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.
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
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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
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
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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 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
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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
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 will be payable by
the Transferor specified in the Pooling and Servicing Agreement. 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 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
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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 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
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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 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 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 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.
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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.
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
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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 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.
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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 initial 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
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.
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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 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
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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.
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
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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 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
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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 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
of 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, 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.
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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. Federal law
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
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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.
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,
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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.
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
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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.
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.
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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
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.
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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.
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,
67
<PAGE>
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.
The Treasury Department has issued new regulations (the "New Regulations")
which make certain modifications to the withholding, backup withholding and
information reporting rules described above. The New Regulations attempt to
unify certification requirements and modify reliance standards. The New
Regulations will generally be effective for payments made after December 31,
1999, subject to certain transition rules. Prospective investors are urged to
consult their own tax advisors regarding the New Regulations.
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
68
<PAGE>
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.
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 with respect to any
Class or Series of Certificates that meets the 100 Independent Investor
criterion.
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 were 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 were
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.
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<PAGE>
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.
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, 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 DoL was 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 DoL issued proposed regulations under Section
401(c) on December 22, 1997, but the required final regulations have not, as
of the date hereof, yet been issued. 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 Plans 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 "plan assets" of any 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 Plan invested in a separate account.
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.
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
70
<PAGE>
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.
71
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INDEX OF DEFINED TERMS
<TABLE>
<S> <C>
Accounts.......................................................... 1, 4
Addition.......................................................... 31
Additional Accounts............................................... 4, 32
Additional Transferor............................................. 49
Aggregate Additional Limit........................................ 31
Assigned Assets................................................... 26
Assumed Obligations............................................... 26
Assuming Entity................................................... 26
Automatic Additional Accounts..................................... 31
Bank.............................................................. 1, 3
Bank Certificate.................................................. 6
Bank Portfolio.................................................... 23
Bankruptcy Code................................................... 18
Benefit Plan Investors............................................ 69
CCB Holding....................................................... 1, 3
CCB Holding Corporation........................................... 18
Cede.............................................................. 2
Cedel............................................................. 47
Cedel Participants................................................ 47
Certificate Owners................................................ 2
Certificateholder................................................. 47
Certificateholders................................................ 2, 21, 47, 49
Certificateholders' Interest...................................... 5
Certificates...................................................... 1, 29
Class............................................................. 1
Code.............................................................. 66
Collateral Interest............................................... 41
Collection Account................................................ 36
Commission........................................................ 2
Controlled Accumulation Amount.................................... 9
Controlled Amortization Amount.................................... 10
Controlled Deposit Amount......................................... 9
Controlled Distribution Amount.................................... 10
Cooperative....................................................... 48
Credit Card Guidelines............................................ 22
Credit Enhancement................................................ 13
Credit Enhancer................................................... 41
Date of Processing................................................ 14
Defaulted Amount.................................................. 39
Defaulted Receivables............................................. 39
Defeased Series................................................... 44
Definitive Certificates........................................... 49
Depositaries...................................................... 46
Depository........................................................ 29
Determination Date................................................ 14
Disclosure Document............................................... 7
Discount Option Receivables....................................... 33
Discount Percentage............................................... 33
Distribution Date................................................. 14
DoL............................................................... 68
</TABLE>
72
<PAGE>
<TABLE>
<S> <C>
DTC....................................................................... 2
Early Accumulation Period................................................. 9
Early Amortization Period................................................. 10
Eligible Account.......................................................... 52
Eligible Deposit Account.................................................. 36
Eligible Institution...................................................... 36
Eligible Investments...................................................... 36
Eligible Receivable....................................................... 52
Enhancement Invested Amount............................................... 41
ERISA..................................................................... 68
Euroclear................................................................. 48
Euroclear Operator........................................................ 48
Euroclear Participants.................................................... 48
Excess Finance Charge Collections......................................... 38
Exchange Act.............................................................. 2
Expected Final Payment Date............................................... 8
FDC....................................................................... 23
FDIA...................................................................... 18
FDIC...................................................................... 5, 17
Finance Charge Receivables................................................ 4
FIRREA.................................................................... 18
Floating Allocation Percentage............................................ 37
Full Invested Amount...................................................... 12
Funding Period............................................................ 12
General Account Regulations............................................... 70
Group..................................................................... 12
Independent Investors..................................................... 69
Indirect Participants..................................................... 47
Ineligible Receivables.................................................... 51
Initial Accounts.......................................................... 4
Insolvency Event.......................................................... 17
Interchange............................................................... 26
Interest Funding Account.................................................. 8
Interest Payment Date..................................................... 34
Invested Amount........................................................... 34
IRS....................................................................... 64
L/C Issuer................................................................ 41
MasterCard................................................................ 23
Monthly Investor Servicing Fee............................................ 43
Monthly Period............................................................ 27
Monthly Report............................................................ 45
Moody's................................................................... 36
New Issuance.............................................................. 34
New Regulations........................................................... 68
OID....................................................................... 66
OTS....................................................................... 26
Paired Series............................................................. 13
Participants.............................................................. 47
Participation............................................................. 31
Pay Out Event............................................................. 42
Payment Date.............................................................. 45
Plan...................................................................... 68
</TABLE>
73
<PAGE>
<TABLE>
<S> <C>
Plan Asset Regulation..................................................... 68
Plan Investor............................................................. 68
Plans..................................................................... 68
Pooling and Servicing Agreement........................................... 1, 28
Pre-Funding Account....................................................... 12
Pre-Funding Amount........................................................ 12
Principal Allocation Percentage........................................... 37
Principal Commencement Date............................................... 8
Principal Funding Account................................................. 9
Principal Receivables..................................................... 4
Principal Shortfalls...................................................... 37
Principal Terms........................................................... 34
Prospectus Supplement..................................................... 1
Rating Agency............................................................. 15
Ratings Effect............................................................ 16
Receivables............................................................... 1, 3
Receivables Purchase Agreement............................................ 4
Record Date............................................................... 44
Regulations............................................................... 64
Removal Date.............................................................. 33
Removal Notice Date....................................................... 33
Removed Accounts.......................................................... 4
Required Principal Balance................................................ 20
Required Transferor Amount................................................ 20
Required Transferor Percentage............................................ 20
Revolving Period.......................................................... 8
Scheduled Accumulation Period............................................. 9
Scheduled Amortization Period............................................. 10
Securities Act............................................................ 2
Series.................................................................... 1
Series Closing Date....................................................... 8
Series Enhancement........................................................ 3
Series Invested Amount.................................................... 20
Series Servicing Fee Percentage........................................... 43
Series Supplement......................................................... 6, 29
Series Termination Date................................................... 45
Service Transfer.......................................................... 55
Servicer.................................................................. 1, 14
Servicer Default.......................................................... 56
Servicing Fee............................................................. 43
Shared Principal Collections.............................................. 37
Special Funding Account................................................... 38
Special Payment Date...................................................... 42
Standard & Poor's......................................................... 36
Supplemental Certificate.................................................. 49
Supplemental Certificates................................................. 6
Tax Counsel............................................................... 64
Tax Opinion............................................................... 35
Termination Notice........................................................ 55
Terms and Conditions...................................................... 48
Transferor................................................................ 27
Transferor Amount......................................................... 6
</TABLE>
74
<PAGE>
<TABLE>
<S> <C>
Transferor Certificates................................................ 6
Transferors............................................................ 1, 3, 29
Transferors' Interest.................................................. 5
Trust.................................................................. 1, 3
Trust Assets........................................................... 3
Trust Cut-Off Date..................................................... 4
Trust Portfolio........................................................ 27
Trust Termination Date................................................. 50
Trustee................................................................ 3
U.S. Certificate Owner................................................. 63
U.S. Person............................................................ 63
UCC.................................................................... 17
VISA................................................................... 23
Withholding Agent...................................................... 67
</TABLE>
75
<PAGE>
- - --------------------------------------------------------------------------------
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 REPRE-
SENTATION 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 HEREUN-
DER 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
<TABLE>
<CAPTION>
PAGE
----
PROSPECTUS SUPPLEMENT
<S> <C>
Summary of Series Terms.................................................... S-4
Risk Factors............................................................... S-17
Maturity Considerations.................................................... S-18
The Bank Portfolio......................................................... S-20
The Receivables............................................................ S-23
Use of Proceeds............................................................ S-26
The Transferors............................................................ S-26
Series Provisions.......................................................... S-26
Certain Federal Income Tax Consequences.................................... S-53
Underwriting............................................................... S-53
Legal Matters.............................................................. S-54
Index of Defined Terms..................................................... S-55
PROSPECTUS
Available Information...................................................... 2
Reports to Certificateholders.............................................. 2
Incorporation of Certain Documents by Reference............................ 2
Prospectus Summary......................................................... 3
Risk Factors............................................................... 16
The Bank's Credit Card Activities.......................................... 23
The Bank................................................................... 26
CCB Holding Corporation.................................................... 26
Assumption of a Transferor's Obligations................................... 26
The Receivables............................................................ 27
Use of Proceeds............................................................ 28
The Trust.................................................................. 28
Description of the Certificates............................................ 28
The Pooling and Servicing Agreement........................................ 46
Description of the Receivables Purchase Agreement.......................... 58
Certain Legal Aspects of the Receivables................................... 59
Certain Federal Income Tax Consequences.................................... 63
ERISA Considerations....................................................... 68
Plan of Distribution....................................................... 70
Index of Defined Terms..................................................... 72
</TABLE>
-----------
UNTIL SEPTEMBER 9, 1998 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS SUPPLEMENT),
ALL DEALERS EFFECTING TRANSACTIONS IN THE CLASS A CERTIFICATES OR THE CLASS B
CERTIFICATES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE RE-
QUIRED TO DELIVER A PROSPECTUS AND A PROSPECTUS SUPPLEMENT. THIS IS IN ADDITION
TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS AND A PROSPECTUS SUPPLE-
MENT WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
$540,000,000
CHEVY CHASE MASTER
CREDIT CARD TRUST II
$468,000,000 Class A Floating Rate
Asset Backed Certificates, Series 1998-A
$72,000,000 Class B Floating Rate
Asset Backed Certificates, Series 1998-A
[LOGO OF CHEVY CHASE BANK APPEARS HERE]
TRANSFEROR AND SERVICER
CCB HOLDING CORPORATION
TRANSFEROR
PROSPECTUS SUPPLEMENT
Underwriters of the Class A Certificates
CREDIT SUISSE FIRST BOSTON
J.P. MORGAN & CO.
SALOMON SMITH BARNEY
Underwriters of the Class B Certificates
CREDIT SUISSE FIRST BOSTON
J.P. MORGAN & CO.
SALOMON SMITH BARNEY
- - --------------------------------------------------------------------------------
