<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 19, 1998
REGISTRATION NO. 333-43173
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
AMENDMENT NO. 1 TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
CHASE CREDIT CARD MASTER TRUSTS
(FORMERLY KNOWN AS CHEMICAL MASTER CREDIT CARD TRUSTS)
(ISSUERS OF THE CERTIFICATES)
CHASE MANHATTAN BANK USA, NATIONAL ASSOCIATION
(ORIGINATOR OF THE TRUSTS DESCRIBED HEREIN)
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
802 DELAWARE AVENUE
WILMINGTON, DELAWARE 19801
DELAWARE (302) 575-5000 22-2382028
(STATE OR OTHER (ADDRESS, INCLUDING ZIP CODE, AND (I.R.S. EMPLOYER
JURISDICTION OF TELEPHONE NUMBER, INCLUDING AREA CODE, IDENTIFICATION
INCORPORATION OR OF REGISTRANT'S PRINCIPAL ORGANIZATION)
EXECUTIVE OFFICES)
ANDREW T. SEMMELMAN
VICE PRESIDENT
CHASE MANHATTAN BANK USA,
NATIONAL ASSOCIATION
C/O 802 DELAWARE AVENUE
WILMINGTON, DELAWARE 19801
(302) 575-5000
COPIES TO:
DAVID M. EISENBERG, ESQ. CRIS T. KAKO, ESQ. ANDREW M. FAULKNER, ESQ.
SIMPSON THACHER & CHASE MANHATTAN BANK SKADDEN, ARPS, SLATE,
BARTLETT 270 PARK AVENUE MEAGHER & FLOM LLP
425 LEXINGTON AVENUE NEW YORK, NEW YORK 10017 919 THIRD AVENUE
NEW YORK, NEW YORK 10017 (212) 270-2074 NEW YORK, NEW YORK 10022
(212) 455-2000 (212) 735-2000
---------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
From time to time after this Registration Statement becomes effective as
determined by market conditions.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box: [_]
If any of the Securities being registered on this form are being offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box: [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, please check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE:
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TITLE OF EACH CLASS OF PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
REGISTERED REGISTERED PER UNIT* OFFERING PRICE* FEE**
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Asset Backed Certifi-
cates................. $7,000,000,000 100% $7,000,000,000 $2,065,000
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
</TABLE>
* Estimated solely for purposes of calculating the registration fee.
** $295.00 of which has previously been paid.
---------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
PURSUANT TO RULE 429 UNDER THE SECURITIES ACT OF 1933, THE PROSPECTUS WHICH
IS A PART OF THIS REGISTRATION STATEMENT SHALL RELATE TO ANY ASSET BACKED
CERTIFICATES WHICH REMAIN UNSOLD UNDER THE REGISTRATION STATEMENT ON FORM S-3
(FILE NO. 333-04607) OF THE REGISTRANT.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Subject to Completion, Dated February 19, 1998
PROSPECTUS
CHASE CREDIT CARD MASTER TRUSTS
(FORMERLY KNOWN AS CHEMICAL MASTER CREDIT CARD TRUSTS)
ASSET BACKED CERTIFICATES
CHASE MANHATTAN BANK USA, NATIONAL ASSOCIATION
Transferor
THE CHASE MANHATTAN BANK
Servicer
The Asset Backed Certificates (collectively, the "Certificates") described
herein may be sold from time to time in one or more series (each, a "Series"),
in amounts, at prices and on terms to be determined at the time of sale and to
be set forth in a supplement to this Prospectus (a "Prospectus Supplement").
The Certificates of each Series will represent an undivided interest in a
specified Chase Credit Card Master Trust (each, a "Trust"). Each Trust will be
formed pursuant to a pooling and servicing agreement among a transferor, a
servicer and a trustee, each as identified in the Prospectus Supplement related
to the Series of Certificates representing interests in such Trust. The
property of each Trust will include receivables (the "Receivables") generated
from time to time in a portfolio of consumer revolving credit card accounts
(the "Accounts"), all monies due or to become due in payment of the Receivables
and certain other property, as more fully described herein and, with respect to
any Series offered hereby, in the related Prospectus Supplement. It is
currently contemplated that Chase Manhattan Bank USA, National Association
("Chase USA" or the "Bank") will own the remaining undivided interest in each
Trust not represented by the Certificates issued by such Trust. The Chase
Manhattan Bank ("CMB"), an affiliate of Chase USA, initially will service the
related Receivables.
Each Series will consist of one or more classes of Certificates (each, a
"Class"), one or more of which may be fixed rate Certificates or floating or
variable rate Certificates, as specified in the related Prospectus Supplement.
Each Certificate will represent an undivided interest in the related Trust and
the interest of the Certificateholders of each Class or Series will include the
right to receive a varying percentage of each month's collections with respect
to the Receivables of such Trust at the times, in the manner and to the extent
described herein and, with respect to any Series offered hereby, in the related
Prospectus Supplement. Interest and principal payments with respect to each
Series offered hereby will be made as specified in the related Prospectus
Supplement. One or more Classes of a Series offered hereby may be entitled to
the benefits of a cash collateral account or guaranty, a collateral interest, a
letter of credit, a surety bond, an insurance policy or other form of
enhancement as specified in the Prospectus Supplement relating to such Series.
In addition, any Series offered hereby may include one or more Classes which
are subordinated in right and priority of payment to payment of principal of,
and/or interest on, one or more other Classes of such Series or another Series,
in each case to the extent described in the related Prospectus Supplement. Each
Series of Certificates or Class thereof offered hereby will be rated in one of
the four highest rating categories by at least one nationally recognized rating
organization.
While the specific terms of any Series in respect of which this Prospectus is
being delivered will be described in the related Prospectus Supplement, the
terms of such Series will not be subject to prior review by, or consent of, the
Certificateholders of any previously issued Series.
PROSPECTIVE INVESTORS SHOULD CONSIDER, AMONG OTHER THINGS, THE INFORMATION SET
FORTH UNDER THE HEADING "RISK FACTORS" BEGINNING ON PAGE 22.
------------------------------------
THE CERTIFICATES WILL REPRESENT INTERESTS IN THE RELATED TRUSTS ONLY AND WILL
NOT REPRESENT INTERESTS IN OR RECOURSE OBLIGATIONS OF CHASE USA, CMB OR ANY OF
THEIR AFFILIATES. A CERTIFICATE IS NOT A DEPOSIT AND NEITHER THE CERTIFICATES
NOR THE UNDERLYING ACCOUNTS OR RECEIVABLES ARE INSURED OR GUARANTEED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY.
------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------------------
Certificates may be sold by Chase USA directly to purchasers, through agents
designated from time to time, through underwriting syndicates led by one or
more managing underwriters or through one or more underwriters acting alone. If
underwriters or agents are involved in the offering of the Certificates of any
Series offered hereby, the name of the managing underwriter or underwriters or
agents will be set forth in the related Prospectus Supplement. If an
underwriter, agent or dealer is involved in the offering of the Certificates of
any Series offered hereby, the underwriter's discount, agent's commission or
dealer's purchase price will be set forth in, or may be calculated from, the
related Prospectus Supplement, and the net proceeds to Chase USA 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 Chase USA associated with the issuance and distribution of such
Certificates. See "Plan of Distribution."
THIS PROSPECTUS MAY NOT BE USED TO CONSUMMATE SALES OF ANY SERIES OF
CERTIFICATES UNLESS ACCOMPANIED BY THE RELATED PROSPECTUS SUPPLEMENT.
------------------------------------
The date of this Prospectus is , 1998.
<PAGE>
PROSPECTUS SUPPLEMENT
The Prospectus Supplement relating to a Series to be offered thereby and
hereby will, among other things, set forth with respect to such Series: (a)
the initial aggregate principal amount of each Class of such Series; (b) the
certificate interest rate (or method for determining it) of each Class of such
Series; (c) certain information concerning the Receivables allocated to such
Series; (d) the expected date or dates on which the principal amount of the
Certificates will be paid to holders of each Class of Certificates (the
"Certificateholders"); (e) the extent to which any Class within a Series is
subordinated to any other Class of such Series or any other Series; (f) the
identity of each Class of floating rate Certificates and fixed rate
Certificates included in such Series, if any; (g) the Distribution Dates for
the respective Classes; (h) relevant financial information with respect to the
Receivables; (i) additional information with respect to any Enhancement
relating to such Series; and (j) the plan of distribution of such Series.
REPORTS TO CERTIFICATEHOLDERS
Unless and until Definitive Certificates are issued, monthly and annual
reports, containing information concerning each Trust and prepared by the
Servicer, will be sent on behalf of such Trust to Cede & Co. ("Cede"), as
nominee of The Depositary Trust Company ("DTC") and registered holder of the
related Certificates, pursuant to the related Agreement. See "Description of
the Certificates--Book-Entry Registration," "--Reports to Certificateholders"
and "--Evidence as to Compliance." Such reports will not constitute financial
statements prepared in accordance with generally accepted accounting
principles. The Servicer does not intend to send any financial reports of
Chase USA or CMB to Certificateholders or to the owners of beneficial
interests in the Certificates ("Certificate Owners"). The Servicer will file
with the Securities and Exchange Commission (the "Commission") such periodic
reports with respect to each Trust as are required under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and
regulations of the Commission thereunder.
AVAILABLE INFORMATION
The Transferor has filed a Registration Statement under the Securities Act
of 1933, as amended (the "Securities Act") with the Commission on behalf of
the Trusts with respect to the Certificates offered pursuant to this
Prospectus. This Prospectus, which forms a part of the Registration Statement,
omits certain information contained in such Registration Statement pursuant to
the rules and regulations of the Commission. For further information,
reference is made to the Registration Statement (including any amendments
thereof and exhibits thereto) and any reports and other documents incorporated
herein by reference as described below under "Incorporation of Certain
Documents by Reference," which are available for inspection without charge at
the public reference facilities maintained by the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549; 7 World Trade Center, New York, New York
10048; and 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. Such reports and other documents may also be
obtained from the web site that the Commission maintains at
http://www.sec.gov. The Bank has taken all reasonable care to ensure that the
information contained in this Prospectus in relation to the Bank and the
Certificates is true and accurate in all material respects and that in
relation to the Bank and the Certificates there are no material facts the
omission of which would make misleading any statement herein, whether fact or
opinion. The Bank accepts responsibility accordingly.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All reports and other documents filed by the Servicer, on behalf of each
Trust, pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act
subsequent to the date of this Prospectus and prior to the termination of the
offering of the Certificates shall be deemed to be incorporated by reference
into this Prospectus and to be part hereof. Any statement contained in a
document incorporated or deemed to be incorporated by reference herein shall
be deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement in this Prospectus or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or replaces such statement. Any such statement so modified or
replaced shall not be deemed, except as so modified or replaced, 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 the Controller of Chase USA, 802
Delaware Avenue, Wilmington, Delaware 19801. Telephone requests for such
copies should be directed to Chase USA, at (302) 575-5000.
2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUPPLEMENT...................................................... 2
REPORTS TO CERTIFICATEHOLDERS.............................................. 2
AVAILABLE INFORMATION...................................................... 2
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............................ 2
PROSPECTUS SUMMARY......................................................... 4
RISK FACTORS............................................................... 22
THE TRUSTS................................................................. 27
CHASE USA'S CREDIT CARD ACTIVITIES......................................... 28
General.................................................................. 28
Acquisition and Use of Credit Card Accounts.............................. 28
Billing and Payments..................................................... 30
Collection of Delinquent Accounts........................................ 31
Description of FDR....................................................... 32
Interchange.............................................................. 32
Recoveries............................................................... 32
THE RECEIVABLES............................................................ 32
MATURITY ASSUMPTIONS....................................................... 33
USE OF PROCEEDS............................................................ 33
CHASE USA.................................................................. 34
DESCRIPTION OF THE CERTIFICATES............................................ 34
General.................................................................. 34
Book-Entry Registration.................................................. 35
Definitive Certificates.................................................. 38
Interest Payments........................................................ 39
Principal Payments....................................................... 39
Transfer and Assignment of Receivables................................... 40
Exchanges................................................................ 40
Representations and Warranties........................................... 41
Addition of Trust Assets................................................. 44
Removal of Accounts...................................................... 45
Collection and Other Servicing Procedures................................ 45
Discount Option.......................................................... 46
Trust Accounts........................................................... 46
Funding Period........................................................... 47
Companion Series......................................................... 47
Investor Percentage and Transferor Percentage............................ 48
Application of Collections............................................... 48
Shared Excess Finance Charge Collections................................. 50
Shared Principal Collections............................................. 50
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Defaulted Receivables; Rebates and Fraudulent Charges; Investor Charge-
Offs................................................................... 50
Defeasance.............................................................. 51
Final Payment of Principal; Termination................................. 51
Pay Out Events.......................................................... 52
Servicing Compensation and Payment of Expenses.......................... 52
Certain Matters Regarding the Transferor and the Servicer............... 53
Servicer Default........................................................ 54
Reports to Certificateholders........................................... 55
Evidence as to Compliance............................................... 55
Amendments.............................................................. 56
List of Certificateholders.............................................. 57
The Trustee............................................................. 57
CREDIT ENHANCEMENT........................................................ 57
General................................................................. 57
Subordination........................................................... 58
Letter of Credit........................................................ 58
Cash Collateral Guaranty or Account..................................... 58
Collateral Interest..................................................... 58
Surety Bond or Insurance Policy......................................... 59
Spread Account.......................................................... 59
Reserve Account......................................................... 59
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES.................................. 59
Transfer of Receivables................................................. 59
Certain Matters Relating to Receivership................................ 60
Consumer Protection Laws................................................ 61
TAX MATTERS............................................................... 63
General................................................................. 63
Treatment of the Certificates as Debt................................... 63
Taxation of Interest Income of U.S. Certificate Owners.................. 64
Sale or Exchange of Certificates........................................ 64
Possible Alternative Characterizations.................................. 64
Non-U.S. Certificate Owners............................................. 65
Information Reporting and Backup Withholding............................ 66
FASIT Considerations.................................................... 67
Recent Legislation...................................................... 67
State and Local Taxation................................................ 67
EMPLOYEE BENEFIT PLAN CONSIDERATIONS...................................... 68
PLAN OF DISTRIBUTION...................................................... 70
LEGAL MATTERS............................................................. 70
</TABLE>
3
<PAGE>
PROSPECTUS SUMMARY
The following is qualified in its entirety by reference to the detailed
information appearing elsewhere in this Prospectus and in any accompanying
Prospectus Supplement. Certain capitalized terms used in this summary are
defined elsewhere in this Prospectus and in the accompanying Prospectus
Supplement. A listing of the pages on which some of such terms are defined is
found in the "Index of Terms for Prospectus." Unless the context requires
otherwise, capitalized terms used in this Prospectus and in any accompanying
Prospectus Supplement refer only to the particular Series being offered by such
Prospectus Supplement.
TYPE OF SECURITIES.......... Asset Backed Certificates (the "Certificates")
evidencing an undivided interest in the assets
of a Chase Credit Card Master Trust (each, a
"Trust") may be issued from time to time in one
or more series (each, a "Series") which will
consist of one or more classes of Certificates
(each, a "Class").
TRUSTS...................... Each Trust will be formed pursuant to a pooling
and servicing agreement (each such agreement, an
"Agreement") among a transferor, a servicer, and
a trustee, each as identified in the Prospectus
Supplement relating to the Series of
Certificates representing interests in such
Trust (each trustee under an Agreement, a
"Trustee"). Each Trust will be created as a
master trust under which one or more Series will
be issued pursuant to a series supplement to the
related Agreement (a "Series Supplement"). Any
Series issued by a Trust may or may not be a
Series offered pursuant to this Prospectus. Each
Prospectus Supplement will identify the related
Trust and all Series previously or concurrently
issued by such Trust.
TRUST ASSETS................ The assets of each Trust will include receivables
(the "Receivables") arising under certain
MasterCard(R) and VISA(R)/1/ revolving credit
card accounts (the "Accounts") selected from the
portfolio of MasterCard and VISA accounts owned
by the Transferor (the "Bank Portfolio") and all
monies due or to become due in payment of the
Receivables, all proceeds of the Receivables and
proceeds of credit insurance policies relating
to the Receivables, and may include the right to
receive Interchange and Recoveries, if any,
allocable to the Trust and all monies on deposit
in certain bank accounts of the Trust (including
any permitted investments in which any such
monies are invested, but excluding investment
earnings on such amounts unless otherwise
specified in the related Prospectus Supplement),
and any Enhancement with respect to any
particular Series or Class, as described in the
related Prospectus Supplement. "Interchange"
consists of certain fees received by the
Transferor from VISA and MasterCard as partial
compensation for taking credit risk, absorbing
fraud losses and funding receivables for a
limited period prior to initial billing. The
term "Enhancement" means, with respect to any
Series or Class thereof, any Credit
- ----------
/1/ MasterCard(R) and VISA(R) are registered trademarks of MasterCard
International Inc. and VISA U.S.A., Inc., respectively.
4
<PAGE>
Enhancement, guaranteed rate agreement, maturity
liquidity facility, interest rate cap agreement,
interest rate swap agreement, currency swap
agreement or other similar arrangement for the
benefit of the Certificateholders of such Series
or Class. The term "Credit Enhancement" means,
with respect to any Series or Class thereof, any
letter of credit, cash collateral guaranty or
account, collateral interest, surety bond,
insurance policy, spread account, reserve
account or other similar arrangement for the
benefit of the Certificateholders of such Series
or Class. Credit Enhancement may also take the
form of subordination of one or more Classes of
a Series to any other Class or Classes of a
Series or a cross-support feature which requires
collections on Receivables of one Series to be
paid as principal and/or interest with respect
to another Series.
At the time of formation of each Trust and at
certain other times subsequent thereto, the
Transferor will convey to the related Trustee
all Receivables existing under certain Accounts
selected by the Transferor from the Bank
Portfolio based on criteria provided in the
related Agreement and all Receivables arising
under such Accounts from time to time thereafter
until termination of the related Trust. In
addition, each Agreement will provide that the
Transferor may from time to time (subject to
certain limitations and conditions), and in some
circumstances will be obligated to, designate
additional eligible revolving credit card
accounts to be included as Accounts ("Additional
Accounts"), the Receivables of which will be
included in the related Trust. Each Agreement
may provide, that in lieu of Additional Accounts
or in addition thereto, the Transferor may
include in the related Trust, participations
representing undivided interests in a pool of
assets primarily consisting of receivables
arising under consumer revolving credit card
accounts owned by the Transferor and collections
thereon ("Participations"). Unless otherwise
specified in the Prospectus Supplement relating
to a Series of Certificates, it will not be
required or anticipated that the Trustee will
make any initial or periodic general examination
of the Receivables or any records relating to
the Receivables for the purpose of establishing
the presence or absence of defects, compliance
with the Servicer's or the Transferor's
representations and warranties or for any other
purpose. See "The Receivables" and "Description
of the Certificates--Addition of Trust Assets"
and "--Representations and Warranties."
THE TRANSFEROR.............. The "Transferor" shall mean (a) with respect to
the time period prior to June 1, 1996, CMB
(formerly known as Chemical Bank), (b) with
respect to the time period beginning on June 1,
1996, Chase USA or (c) such other entity as
identified in the applicable Prospectus
Supplement. The principal executive office of
Chase USA is located at 802 Delaware Avenue,
Wilmington, Delaware 19801, telephone number
(302) 575-5000.
5
<PAGE>
CERTIFICATE INTEREST AND Each Series of Certificates will represent an
PRINCIPAL.................. undivided interest in the assets of the related
Trust. Each Certificate of a Series will
represent the right to receive (i) payments of
interest at the specified rate or rates per
annum (each, a "Certificate Rate"), which may be
fixed, floating or other type of rate and (ii)
unless otherwise provided in the related
Prospectus Supplement, payments of principal
during the Controlled Amortization Period, the
Principal Amortization Period, or, under certain
limited circumstances, the Rapid Amortization
Period (each, an "Amortization Period"), or on
Scheduled Payment Dates, all as specified in the
related Prospectus Supplement.
Each Series of Certificates will consist of one
or more Classes, one or more of which may be
senior Certificates ("Senior Certificates") and
one or more of which may be subordinated
Certificates ("Subordinated Certificates"). Any
Class of a Series may evidence the right to
receive a specified portion of each distribution
of principal or interest or both. The
Certificates of a Class may also differ from
Certificates of other Classes of the same Series
in, among other things, the amounts allocated to
principal payments, priority of payments,
payment dates, maturity, interest rates,
interest rate computation, and availability and
form of Enhancement.
The assets of each Trust will be allocated among
the Certificateholders of each Series of such
Trust and the holder of the Transferor
Certificate of such Trust and, in certain
circumstances, the related Credit Enhancement
Provider. With respect to a Trust, the aggregate
principal amount of the interest of the
Certificateholders of a Series in such Trust is
referred to herein as the "Investor Interest"
and is based on the aggregate amount of the
Principal Receivables, plus the amount on
deposit in certain accounts, in such Trust
allocated to such Series. If specified in any
Prospectus Supplement, the term "Investor
Interest" with respect to the related Series
will include the Collateral Interest with
respect to such Series. The aggregate principal
amount of the interest of the holder of the
Transferor Certificate in a Trust is referred to
herein as the "Transferor Interest," and is
based on the aggregate amount of Principal
Receivables, plus the amount on deposit in
certain accounts, in such Trust not allocated to
the Certificateholders or any Credit Enhancement
Provider with respect to such Trust. See
"Description of the Certificates--General."
The Certificateholders of each Series will have
the right to receive (but only to the extent
needed to make required payments under the
related Agreement and the related Series
Supplement and subject to any reallocation of
such amounts if the related Series Supplement so
provides) varying percentages of the collections
of Finance Charge Receivables and Principal
Receivables for each
6
<PAGE>
month and will be allocated a varying percentage
of the amount of Receivables in Accounts which
were written off as uncollectible by the
Servicer ("Defaulted Accounts") for such month
(each such percentage, an "Investor
Percentage"). The related Prospectus Supplement
will specify the Investor Percentages with
respect to the allocation of collections of
Principal Receivables, Finance Charge
Receivables and Receivables in Defaulted
Accounts during the Revolving Period, any
Amortization Period and any Accumulation Period,
as applicable. If the Certificates of a Series
offered hereby include more than one Class of
Certificates, the assets of the related Trust
allocable to the Certificates of such Series may
be further allocated among each Class in such
Series as described in the related Prospectus
Supplement. See "Description of the
Certificates--Investor Percentage and Transferor
Percentage."
The Certificates of each Series will represent
interests in the related Trust only and will not
represent interests in or recourse obligations
of Chase USA, CMB or any of their affiliates. A
Certificate is not a deposit and neither the
Certificates nor the underlying Accounts or
Receivables are insured or guaranteed by the
Federal Deposit Insurance Corporation (the
"FDIC") or any other governmental agency.
RECEIVABLES................. The Receivables held in each Trust will arise in
Accounts selected by the Transferor from the
Bank Portfolio based on criteria provided in the
related Agreement and described in the related
Prospectus Supplement as applied initially on
the date (the "Cut-Off Date") specified in the
related Prospectus Supplement and, with respect
to certain Additional Accounts, if any, on
subsequent dates.
The Receivables will consist of amounts charged
by cardholders for goods and services, cash
advances and consolidation or transfer of
balances from other credit cards (the "Principal
Receivables"), plus the related periodic finance
charges and amounts charged to the Accounts in
respect of certain credit card fees, including
cash advance fees, late fees and annual
membership fees (the "Finance Charge
Receivables"); provided, however, that if the
Transferor exercises the Discount Option with
respect to a Trust, an amount equal to the
product of the Discount Percentage and the
amount of Receivables arising in the related
Accounts on and after the date such option is
exercised that otherwise would be Principal
Receivables will be treated as Finance Charge
Receivables. See "Description of the
Certificates--Discount Option." Recoveries and
Interchange allocable to the Trust will be
treated as Finance Charge Receivables. See
"Chase USA's Credit Card Activities--
Interchange" and "--Recoveries."
During the term of each Trust, all new
Receivables arising in the Accounts relating to
such Trust will be transferred automatically
7
<PAGE>
to such Trust by the Transferor. The total
amount of Receivables in each Trust will
fluctuate from day to day, because the amount of
new Receivables arising in the Accounts and the
amount of payments collected on existing
Receivables usually differ each day.
Pursuant to each Agreement, the Transferor will
have the right (subject to certain limitations
and conditions), and in some circumstances, such
as the maintenance of the Transferor Interest at
a specified minimum level (the "Minimum
Transferor Interest"), will be obligated, to
designate additional eligible revolving credit
card accounts to be included as Additional
Accounts and to convey to the related Trust all
of the Receivables in the Additional Accounts,
whether such Receivables are then existing or
thereafter created or, if so specified in the
Prospectus Supplement relating to a Series,
designate Participations to be included in the
related Trust in lieu thereof or in addition
thereto. See "Description of the Certificates--
Addition of Trust Assets."
Pursuant to each Agreement, the Transferor will
have the right (subject to certain limitations
and conditions) to designate certain Accounts
and to accept the reconveyance of all the
Receivables in such Accounts (the "Removed
Accounts"), whether such Receivables are then
existing or thereafter created. See "Description
of the Certificates--Removal of Accounts."
EXCHANGES................... Each Agreement will authorize the related Trustee
to issue two types of certificates: (i) one or
more Series of Certificates that will be
transferable and have the characteristics
described below and (ii) a certificate that
evidences the Transferor Interest (the
"Transferor Certificate"), which initially will
be held by the Bank and which will be
transferable only as provided in the related
Agreement. Pursuant to any one or more Series
Supplements to the related Agreement, the holder
of the Transferor Certificate may tender the
Transferor Certificate or, if provided in the
relevant Series Supplement, Certificates
representing any Series (which may include
Series offered pursuant to this Prospectus)
issued by such Trust and the Transferor
Certificate, to the Trustee in exchange for one
or more new Series (which may include Series
offered pursuant to this Prospectus) and a
reissued Transferor Certificate (any such
tender, an "Exchange"). Any such Series may be
offered to the public or other investors under a
prospectus or other disclosure document (a
"Disclosure Document") in offerings pursuant to
this Prospectus or in transactions either
registered under the Securities Act of 1933, as
amended (the "Securities Act"), or exempt from
registration thereunder, directly or through one
or more other underwriters or placement agents,
in fixed-price offerings or in negotiated
transactions or otherwise.
8
<PAGE>
An Exchange may occur only upon delivery to the
Trustee of the following: (i) a Series
Supplement specifying the principal terms of
such Series (the "Principal Terms"), (ii) (a) an
opinion of counsel to the effect that, unless
otherwise stated in the related Series
Supplement, the certificates of such Series will
be characterized as indebtedness for federal
income tax purposes and (b) an opinion of
counsel to the effect that, for federal income
tax purposes, (1) such issuance will not
adversely affect the tax characterization as
debt of Certificates of any outstanding Series
or Class that were characterized as debt at the
time of their issuance, (2) following such
issuance the Trust will not be deemed to be an
association (or publicly traded partnership)
taxable as a corporation and (3) such issuance
will not cause or constitute an event in which
gain or loss would be recognized by any
Certificateholder or the Trust (an opinion of
counsel with respect to any matter to the effect
referred to in clause (b) with respect to any
action is referred to herein as a "Tax
Opinion"), (iii) if required by the related
Series Supplement, the form of Credit
Enhancement, (iv) if Credit Enhancement is
required by the related Series Supplement, an
appropriate Credit Enhancement agreement with
respect thereto, (v) written confirmation from
each Rating Agency that the Exchange will not
result in such Rating Agency reducing or
withdrawing its rating on any then outstanding
Series rated by it, (vi) an officer's
certificate of the Transferor to the effect that
after giving effect to the Exchange the
Transferor would not be required to add the
Receivables of any Additional Accounts pursuant
to the related Agreement and the Transferor
Interest would be at least equal to the Minimum
Transferor Interest and (vii) the existing
Transferor Certificate and, if applicable, the
Certificates representing the Series to be
exchanged. See "Description of the
Certificates--Exchanges."
DENOMINATIONS............... Unless otherwise specified in the related
Prospectus Supplement, beneficial interests in
the Certificates will be offered for purchase in
denominations of $1,000 and integral multiples
thereof.
BOOK-ENTRY REGISTRATION..... Unless otherwise specified in the related
Prospectus Supplement, the Certificates of each
Series initially offered hereby will be
represented by Certificates registered in the
name of Cede, as the nominee of DTC. No
Certificate Owner will be entitled to receive a
definitive certificate representing such
person's interest, except in the event that
Certificates in fully registered, certificated
form ("Definitive Certificates") are issued
under the limited circumstances described
herein. See "Description of the Certificates--
Definitive Certificates."
CLEARANCE AND SETTLEMENT.... Unless otherwise provided in the related
Prospectus Supplement, Certificate Owners of
each Series offered hereby may elect to hold
their Certificates through any of DTC (in the
United States)
9
<PAGE>
or Cedel or Euroclear (in Europe). Transfer
within DTC, Cedel or Euroclear, as the case may
be, will be made in accordance with the usual
rules and operating procedures of the relevant
system. Cross-market transfers between persons
holding directly or indirectly through DTC, on
the one hand, and counterparties holding
directly or indirectly through Cedel or
Euroclear, on the other, will be effected in DTC
through the relevant Depositaries of Cedel or
Euroclear. See "Description of the
Certificates--Book-Entry Registration."
THE SERVICER................ The Chase Manhattan Bank ("CMB"). The principal
executive office of CMB is located at 270 Park
Avenue, New York, New York 10017, telephone
number (212) 270-6000. The Servicer will receive
a fee as servicing compensation from the related
Trust in respect of each Series in the amounts
and at the times specified in the related
Prospectus Supplement (the "Servicing Fee"). The
Servicing Fee may be payable from Finance Charge
Receivables, Interchange or other amounts as
specified in the related Prospectus Supplement.
In certain limited circumstances, CMB may resign
or be removed, in which event the Trustee or a
third party servicer may be appointed as
successor servicer (CMB, or any such successor
servicer, is referred to herein as the
"Servicer"). CMB is a wholly-owned subsidiary of
The Chase Manhattan Corporation (the
"Corporation"). CMB has delegated some of its
servicing duties to FDR and has delegated
substantially all of its other servicing duties
to Chase USA effective as of June 1, 1996. The
principal executive office of Chase USA is
located at 802 Delaware Avenue, Wilmington,
Delaware 19801, telephone number (302) 575-5000.
See "Chase USA" and "Description of the
Certificates--Certain Matters Regarding the
Transferor and Servicer."
COLLECTIONS................. Unless otherwise specified in the related
Prospectus Supplement, the Servicer will deposit
all collections of Receivables in an account
required to be established for such purpose by
the related Agreement (the "Collection
Account"). See "Description of the
Certificates--Application of Collections." All
amounts deposited in the Collection Account with
respect to a Trust will be allocated by the
Servicer between amounts collected on Principal
Receivables and amounts collected on Finance
Charge Receivables. If so specified in the
related Prospectus Supplement, Principal
Receivables and/or Finance Charge Receivables
may be otherwise characterized. See "Description
of the Certificates--Discount Option." All such
amounts will then be allocated in accordance
with the respective interests of the
Certificateholders of each Series of
Certificates or Class thereof and the holder of
the Transferor Certificate and, in certain
circumstances, certain Credit Enhancement
Providers. See "Description of the
Certificates--Investor Percentage and Transferor
Percentage."
10
<PAGE>
INTEREST PAYMENTS........... Interest on each Series of Certificates or Class
thereof for each accrual period (each, an
"Interest Period") specified in the related
Prospectus Supplement will be distributed in the
amounts and on the dates (which may be monthly,
quarterly, semiannually or otherwise as
specified in the related Prospectus Supplement)
(each, a "Distribution Date") specified in the
related Prospectus Supplement. Interest payments
on each Distribution Date will be funded from
collections of Finance Charge Receivables
allocated to the Investor Interest during the
preceding monthly period or periods (each, a
"Monthly Period"), as described in the related
Prospectus Supplement, and may be funded from
certain investment earnings on funds in certain
accounts of the related Trust and from any
applicable Enhancement, if necessary, or certain
other amounts as specified in the related
Prospectus Supplement. If the Distribution Dates
for payment of interest for a Series or Class
occur less frequently than monthly, such
collections or other amounts allocable to such
Series or Class may be deposited in one or more
trust accounts pending distribution to the
Certificateholders of such Series or Class, all
as described in the related Prospectus
Supplement. See "Description of the
Certificates--Application of Collections," "--
Shared Excess Finance Charge Collections,"
"Credit Enhancement" and "Risk Factors--Credit
Enhancement."
REVOLVING PERIOD............ Unless otherwise specified in the related
Prospectus Supplement, with respect to each
Series and any Class thereof, no principal will
be payable to Certificateholders until the
Principal Commencement Date or the Scheduled
Payment Date with respect to such Series or
Class, as described below. For the period
beginning on the date of issuance of the related
Series (the "Closing Date") and ending with the
commencement of an Amortization Period or an
Accumulation Period (the "Revolving Period"),
collections of Principal Receivables otherwise
allocable to the Investor Interest will, subject
to certain limitations, be paid from the Trust
to the holder of the Transferor Certificate or,
under certain circumstances and if so specified
in the related Prospectus Supplement, will be
treated as Shared Principal Collections and paid
to the holders of other Series of Certificates
issued by such Trust, as described herein and in
the related Prospectus Supplement. See
"Description of the Certificates--Pay Out
Events" for a discussion of the events which
might lead to early termination of the Revolving
Period.
PRINCIPAL PAYMENTS.......... The principal of the Certificates of each Series
offered hereby will be scheduled to be paid
either in installments commencing on a date
specified in the related Prospectus Supplement
(the "Principal Commencement Date"), in which
case such Series will have either a Controlled
Amortization Period or a Principal Amortization
Period, as described below, or on an expected
date specified in, or determined in the manner
specified in, the related
11
<PAGE>
Prospectus Supplement (the "Scheduled Payment
Date"), in which case such Series will have an
Accumulation Period, as described below. If a
Series has more than one Class of Certificates,
a different method of paying principal,
Principal Commencement Date or Scheduled Payment
Date may be assigned to each Class. The payment
of principal with respect to the Certificates of
a Series or Class may commence earlier than the
applicable Principal Commencement Date or
Scheduled Payment Date, and the final principal
payment with respect to the Certificates of a
Series or Class may be made later than the
applicable expected payment date, Scheduled
Payment Date or other expected date, if a Pay
Out Event occurs and the Rapid Amortization
Period commences with respect to such Series or
Class or under certain other circumstances
described herein. See "Description of the
Certificates--Principal Payments."
CONTROLLED AMORTIZATION
PERIOD..................... If the Prospectus Supplement relating to a Series
so specifies, unless a Rapid Amortization Period
with respect to such Series commences, the
Certificates of such Series or any Class thereof
will have an amortization period (the
"Controlled Amortization Period") during which
collections of Principal Receivables allocable
to the Investor Interest of such Series (and
certain other amounts if so specified in the
related Prospectus Supplement) will be used on
each Distribution Date to make principal
distributions in amounts determined in the
manner specified in the related Prospectus
Supplement to the Certificateholders of such
Series or any Class of such Series then
scheduled to receive such distributions. The
amount to be distributed on any Distribution
Date during the Controlled Amortization Period
will be limited to an amount (the "Controlled
Distribution Amount") equal to an amount
specified in the related Prospectus Supplement
(the "Controlled Amortization Amount") plus any
existing deficit controlled amortization amount
arising from prior Distribution Dates. If a
Series has more than one Class of Certificates,
each Class may have a separate Controlled
Amortization Amount. In addition, the related
Prospectus Supplement may describe certain
priorities among such Classes with respect to
such distributions. The Controlled Amortization
Period will commence at the close of business on
a date specified in the related Prospectus
Supplement and continue until the earliest of
(a) the commencement of the Rapid Amortization
Period, (b) payment in full of the Investor
Interest of the Certificates of such Series or
Class and, if so specified in the related
Prospectus Supplement, of the Collateral
Interest, if any, with respect to such Series
and (c) the Series Termination Date with respect
to such Series.
PRINCIPAL AMORTIZATION If the Prospectus Supplement relating to a Series
PERIOD..................... so specifies, unless a Rapid Amortization Period
with respect to such Series commences, the
Certificates of such Series or any Class thereof
will have an amortization period (the "Principal
Amortization Period") during which collections
of Principal Receivables allocable to the
Investor Interest of such Series (and certain
other
12
<PAGE>
amounts if so specified in the related
Prospectus Supplement) will be used on each
Distribution Date to make principal
distributions to the Certificateholders of such
Series or any Class of such Series then
scheduled to receive such distributions. If a
Series has more than one Class of Certificates,
the related Prospectus Supplement may describe
certain priorities among such Classes with
respect to such distributions. The Principal
Amortization Period will commence at the close
of business on a date specified in the related
Prospectus Supplement and continue until the
earlier of (a) the commencement of the Rapid
Amortization Period, (b) payment in full of the
Investor Interest of the Certificates of such
Series or Class and, if so specified in the
related Prospectus Supplement, of the Collateral
Interest, if any, with respect to such Series
and (c) the Series Termination Date with respect
to such Series.
ACCUMULATION PERIOD......... If the Prospectus Supplement relating to a Series
so specifies, unless a Rapid Amortization Period
with respect to such Series commences, the
Certificates of such Series or any Class thereof
will have an accumulation period (the
"Accumulation Period") during which collections
of Principal Receivables allocable to the
Investor Interest of such Series (and certain
other amounts if so specified in the related
Prospectus Supplement) will be deposited on the
business day immediately prior to each
Distribution Date or other business day
specified in the related Prospectus Supplement
(each a "Transfer Date") in a trust account
established for the benefit of the
Certificateholders of such Series or Class (a
"Principal Funding Account") and used to make
distributions of principal to the
Certificateholders of such Series or Class on
the Scheduled Payment Date. The amount to be
deposited in the Principal Funding Account on
any Transfer Date will be limited to an amount
(the "Controlled Deposit Amount") equal to an
amount specified in the related Prospectus
Supplement (the "Controlled Accumulation
Amount") plus any deficit controlled
accumulation amount arising from prior
Distribution Dates. If a Series has more than
one Class of Certificates, each Class may have a
separate Principal Funding Account and
Controlled Accumulation Amount. In addition, the
related Prospectus Supplement may describe
certain priorities among such Classes with
respect to deposits of principal into such
Principal Funding Accounts. The Accumulation
Period will commence at the close of business on
a date specified in or determined in the manner
specified in the related Prospectus Supplement
and continue until the earliest of (a) the
commencement of the Rapid Amortization Period,
or, if so specified in the related Prospectus
Supplement, the Rapid Accumulation Period, (b)
payment in full of the Investor Interest of the
Certificates of such Series or Class and, if so
specified in the related Prospectus Supplement,
of the Collateral Interest, if any, with respect
to such Series and (c) the Series Termination
Date with respect to such Series.
13
<PAGE>
Funds on deposit in any Principal Funding Account
may be invested in permitted investments or
subject to a guaranteed rate or investment
contract or other arrangement intended to assure
a minimum return on the investment of such
funds. Investment earnings on such funds may be
applied to pay interest on the related Series of
Certificates. In order to enhance the likelihood
of payment in full of principal at the end of an
Accumulation Period with respect to a Series of
Certificates, such Series or any Class thereof
may be subject to a principal payment guaranty
or other similar arrangement.
RAPID ACCUMULATION PERIOD... If so specified and under the conditions set
forth in the Prospectus Supplement relating to a
Series having a Controlled Accumulation Period,
during the period from the day on which a Pay
Out Event has occurred until the earliest of (a)
the commencement of the Rapid Amortization
Period, (b) payment in full of the Investor
Interest of the Certificates of such Series and,
if so specified in the related Prospectus
Supplement, of the Collateral Interest, if any,
with respect to such Series and (c) the related
Series Termination Date (the "Rapid Accumulation
Period"), collections of Principal Receivables
allocable to the Investor Interest of such
Series (and certain other amounts if so
specified in the related Prospectus Supplement)
will be deposited on each Transfer Date in the
Principal Funding Account and used to make
distributions of principal to the
Certificateholders of such Series or Class on
the Scheduled Payment Date. The amount to be
deposited in the Principal Funding Account
during the Rapid Accumulation Period will not be
limited to the Controlled Deposit Amount. The
term "Pay Out Event" with respect to a Series of
Certificates issued by a Trust means any of the
events identified as such in the related
Prospectus Supplement and any of the following:
(a) certain events of insolvency or receivership
relating to the Transferor, (b) the Transferor
is unable for any reason to transfer Receivables
to such Trust in accordance with the provisions
of the related Agreement or (c) such trust
becomes an "investment company" within the
meaning of the Investment Company Act of 1940,
as amended. See "Description of the
Certificates--Pay Out Events" for a discussion
of the events which might lead to commencement
of a Rapid Accumulation Period.
During the Rapid Accumulation Period, funds on
deposit in any Principal Funding Account may be
invested in permitted investments subject to a
guaranteed rate or investment contract or other
arrangement intended to assure a minimum return
on the investment of such funds. Investment
earnings on such funds may be applied to pay
interest on the related Series of Certificates
or make other payments as specified in the
related Prospectus Supplement. In order to
enhance the likelihood of payment in full of
principal at the end of the Rapid Accumulation
Period with respect to a Series of Certificates,
such Series may be subject to a principal
guaranty or other similar arrangement.
14
<PAGE>
RAPID AMORTIZATION PERIOD... During the period from the day on which a Pay Out
Event has occurred with respect to a Series or,
if so specified in the Prospectus Supplement
relating to a Series with a Controlled
Accumulation Period, from such time specified in
the related Prospectus Supplement after a Pay
Out Event has occurred and the Rapid
Accumulation Period has commenced, to the
earlier of (a) the date on which the Investor
Interest of the Certificates of such Series and
the Enhancement Invested Amount or the
Collateral Interest, if any, with respect to
such Series have been paid in full and (b) the
related Series Termination Date (the "Rapid
Amortization Period"), collections of Principal
Receivables allocable to the Investor Interest
of such Series (and certain other amounts if so
specified in the related Prospectus Supplement)
will be distributed as principal payments to the
Certificateholders of such Series and, in
certain circumstances, to the Credit Enhancement
Provider, monthly on or before each Distribution
Date with respect to such Series in the manner
and order of priority set forth in the related
Prospectus Supplement. During the Rapid
Amortization Period with respect to a Series,
distributions of principal will not be limited
by any Controlled Deposit Amount or Controlled
Distribution Amount. In addition, upon the
commencement of the Rapid Amortization Period
with respect to a Series, any funds on deposit
in a Principal Funding Account with respect to
such Series or any Class thereof will be paid to
the Certificateholders of such Series or Class
on the first Distribution Date in the Rapid
Amortization Period. See "Description of the
Certificates--Pay Out Events" for a discussion
of the events which might lead to commencement
of the Rapid Amortization Period.
SHARED EXCESS FINANCE
CHARGE COLLECTIONS.........
Any Series offered hereby may be included in a
group of Series (a "Group"). If so specified in
the related Prospectus Supplement, the
Certificateholders of a Series within a Group or
any Class thereof may be entitled to receive all
or a portion of Excess Finance Charge
Collections with respect to another Series
within such Group or Class thereof to cover any
shortfalls with respect to amounts payable from
collections of Finance Charge Receivables
allocable to such Series or Class. Unless
otherwise provided in the related Prospectus
Supplement, with respect to any Series, "Excess
Finance Charge Collections" for any Monthly
Period will equal the excess of collections of
Finance Charge Receivables, annual membership
fees and certain other amounts allocated to the
Investor Interest of such Series or Class over
the sum of (i) interest accrued for the current
month ("Monthly Interest") and overdue Monthly
Interest on the Certificates of such Series or
Class (together with, if applicable, interest on
overdue Monthly Interest at the rate specified
in the related Prospectus Supplement
("Additional Interest")), (ii) accrued and
unpaid Investor Servicing Fees with respect to
such
15
<PAGE>
Series or Class payable from collections of
Finance Charge Receivables, (iii) the Investor
Default Amount with respect to such Series or
Class, (iv) unreimbursed Investor Charge-Offs
with respect to such Series or Class and (v)
other amounts specified in the related
Prospectus Supplement. The term "Investor
Servicing Fee" for any Series of Certificates or
Class thereof means the Servicing Fee allocable
to the Investor Interest with respect to such
Series or Class, as specified in the related
Prospectus Supplement. The term "Investor
Default Amount" means, for any Monthly Period
and for any Series or Class thereof, the
aggregate amount of the applicable Investor
Percentage of Principal Receivables in Defaulted
Accounts. The term "Investor Charge-Off" means,
for any Monthly Period, and for any Series or
Class thereof, the amount by which (a) the
related Monthly Interest and overdue Monthly
Interest (together with, if applicable,
Additional Interest), the accrued and unpaid
Investor Servicing Fees payable from collections
of Finance Charge Receivables, the Investor
Default Amount and any other required fees
exceeds (b) amounts available to pay such
amounts out of collections of Finance Charge
Receivables, available Credit Enhancement
amounts, if any, and other sources specified in
the related Prospectus Supplement, if any, but
not more than such Investor Default Amount. See
"Description of the Certificates--Application of
Collections," "--Shared Excess Finance Charge
Collections," "--Defaulted Receivables; Rebates
and Fraudulent Charges; Investor Charge-Offs"
and "Credit Enhancement."
SHARED PRINCIPAL If so specified in the related Prospectus
COLLECTIONS................ Supplement, to the extent that collections of
Principal Receivables that are allocated to the
Investor Interest of any Series are not needed
to make payments or deposits with respect to
such Series, such collections ("Shared Principal
Collections") will be applied to cover principal
payments due to or for the benefit of
Certificateholders of another Series. If so
specified in the related Prospectus Supplement,
the allocation of Shared Principal Collections
may be among Series within a Group. Any such
reallocation will not result in a reduction in
the Investor Interest of the Series to which
such collections were initially allocated.
FUNDING PERIOD.............. The Prospectus Supplement relating to a Series of
Certificates may specify that for a period
beginning on the Closing Date and ending on a
specified date before the commencement of an
Amortization Period or Accumulation Period with
respect to such Series (the "Funding Period"),
the aggregate amount of Principal Receivables in
the related Trust allocable to such Series may
be less than the aggregate principal amount of
the Certificates of such Series and that the
amount of such deficiency (the "Pre-Funding
Amount"), which may be up to 100% of the
aggregate principal amount of such Series, will
be held in a trust account
16
<PAGE>
established with the related Trustee for the
benefit of Certificateholders of such Series
(the "Pre-Funding Account") pending the transfer
of additional Principal Receivables to the Trust
or pending the reduction of the Investor
Interests of other Series issued by the related
Trust. The Prospectus Supplement relating to a
Series of Certificates will specify that the
Funding Period for such Series will end on a
specified date certain or earlier under certain
circumstances, such as the commencement of the
Rapid Amortization Period. The actual length of
a Funding Period for a Series will be contingent
upon another event such as the generation by the
Transferor of additional Principal Receivables
or the term of the Amortization Period or
Accumulation Period of a related Companion
Series. Generally, the Amortization Period or
Accumulation Period of a related Companion
Series will depend upon the payment rate of the
Receivables in the Trust. See "Maturity
Assumptions." Until the end of the Funding
Period of a Series paired with a related
Companion Series, the Certificates of such
Series will evidence an undivided interest in
Receivables to the extent of the Investor
Interest in such Series and in funds on deposit
in the Pre-Funding Account and Permitted
Investments of such funds to the extent of the
difference between the aggregate principal
amount of the Certificate of such Series (the
"Full Investor Interest") and the Investor
Interest. The related Prospectus Supplement will
specify the initial Investor Interest on the
Closing Date with respect to such Series, the
Full Investor Interest and the date by which the
Investor Interest is expected to equal the Full
Investor Interest. The Investor Interest will
increase as Principal Receivables are delivered
to the related Trust or as the Investor
Interests of other Series of the related Trust
are reduced. The Investor Interest may also
decrease due to Investor Charge-Offs.
During the Funding Period, funds on deposit in
the Pre-Funding Account for a Series of
Certificates will be withdrawn and paid to the
Transferor to the extent of any increases in the
Investor Interest. In the event that the
Investor Interest does not for any reason equal
the Full Investor Interest by the end of the
Funding Period, any amount remaining in the Pre-
Funding Account and any additional amounts
specified in the related Prospectus Supplement
will be payable to the Certificateholders of
such Series in a manner and at such time as set
forth in the related Prospectus Supplement.
If so specified in the related Prospectus
Supplement, funds on deposit in the Pre-Funding
Account with respect to any Series will be
invested by the Trustee in Permitted Investments
or will be subject to a guaranteed rate or
investment agreement or other similar
arrangement, and investment earnings and any
applicable payment under any such investment
arrangement will be applied to pay interest on
the Certificates of such Series.
17
<PAGE>
COMPANION SERIES............ If so specified in the related Prospectus
Supplement, a Series of Certificates may be
paired with another Series issued by the related
Trust (a "Companion Series") on or prior to the
commencement of an Accumulation Period or
Amortization Period for such Series. As the
Investor Interest of the Series having a
Companion Series is reduced, the Investor
Interest of the Companion Series will increase
by an equal amount. Upon payment in full of such
Series, the Investor Interest of the Companion
Series will have increased by the amount of the
Investor Interest paid to Certificateholders of
such Series. If a Pay Out Event occurs with
respect to the Series having a Companion Series
or with respect to the Companion Series when
such Series is in an Amortization Period or
Accumulation Period, the Investor Percentage in
respect of collections of Principal Receivables
for the Series and the Investor Percentage in
respect of collections of Principal Receivables
for the Companion Series may be reset as
specified in the related Prospectus Supplement.
Resetting of such Investor Percentage may have
the effect of reducing the amount of collections
of Principal Receivables allocable to the Series
that is paired with the Companion Series. While
the issuance of a Companion Series will be
subject to the conditions described under
"Description of the Certificates--Exchanges,"
there can be no assurance that the terms of a
Companion Series will not have an impact on the
timing or amount of payments received on the
Series with which it is paired. See "Maturity
Assumptions" and "Description of the
Certificates--Companion Series."
CREDIT ENHANCEMENT.......... Credit Enhancement with respect to a Series or
any Class thereof may be provided in the form or
forms of subordination, a letter of credit, a
cash collateral guaranty or account, a
collateral interest, a surety bond, an insurance
policy, a spread account, a reserve account or
other form of support as specified in the
related Prospectus Supplement. Credit
Enhancement may also be provided to a Class or
Classes of different Series by a cross- support
feature which requires that distributions of
principal and/or interest be made with respect
to Certificates of one or more Classes of a
particular Series before distributions are made
to one or more Classes of another Series.
The type, characteristics and amount of the
Credit Enhancement for any Series or Class will
be determined based on several factors,
including the characteristics of the Receivables
and Accounts included in the Trust Portfolio as
of the Closing Date with respect to such Series
and the desired rating for each Class, and will
be established on the basis of requirements of
each Rating Agency rating the Certificates of
such Series. If so specified in the related
Prospectus Supplement, any such Credit
Enhancement will apply only in the event of
certain types of losses and the protection
against losses provided by such Credit
Enhancement will be
18
<PAGE>
limited. The terms of the Credit Enhancement
with respect to a Series, and the conditions
under which the Credit Enhancement may be
increased, reduced or replaced, will be
described in the related Prospectus Supplement.
See "Credit Enhancement" and "Risk Factors--
Certificate Rating."
OPTIONAL REPURCHASE......... With respect to each Series of Certificates, the
Investor Interest will be subject to optional
repurchase by the Transferor on any Distribution
Date after the Investor Interest and the
Enhancement Invested Amount, if any, with
respect to such Series, is reduced to an amount
less than or equal to 5% of the initial Investor
Interest, if any, or such other amount specified
in the related Prospectus Supplement, if certain
conditions set forth in the related Agreement
are met. Unless otherwise specified in the
related Prospectus Supplement, the repurchase
price will be equal to the Investor Interest
(less the amount, if any, on deposit in any
Principal Funding Account with respect to such
Series), plus the Enhancement Invested Amount,
if any, with respect to such Series, plus
accrued and unpaid interest on the Certificates
and interest or other amounts payable on the
Enhancement Invested Amount or the Collateral
Interest, if any, through the day preceding the
Distribution Date on which the repurchase
occurs. See "Description of the Certificates--
Final Payment of Principal; Termination."
CERTAIN LEGAL ASPECTS OF
THE RECEIVABLES............
The Transferor will represent and warrant in each
Agreement that the transfer by it to the related
Trust is either a valid transfer and assignment
to such Trust of the related Receivables, or the
grant to such Trust of a security interest in
such Receivables. There are certain limited
circumstances in which a prior or subsequent
transferee of Receivables coming into existence
after the Closing Date could have an interest in
such Receivables with priority over such Trust's
interest. A Trust may be liable for certain
violations of consumer protection laws that
apply to the related Receivables. See "Certain
Legal Aspects of the Receivables."
TAX STATUS.................. Except to the extent otherwise specified in the
related Prospectus Supplement, counsel to the
Bank is of the opinion that under existing law
the Certificates of each Series will properly be
characterized as debt for United States ("U.S.")
federal income tax purposes. Except to the
extent otherwise specified in the related
Prospectus Supplement, the Certificate Owners
will agree to treat the Certificates as debt for
U.S. federal income tax purposes. See "Tax
Matters" for additional information concerning
the application of U.S. federal income tax laws.
ERISA CONSIDERATIONS........ Subject to the considerations described below and
except to the extent otherwise specified in the
related Prospectus Supplement, the Transferor
anticipates that each Class of Certificates will
be eligible for purchase by employee benefit
plan investors. Under a
19
<PAGE>
regulation issued by the Department of Labor,
the assets of each Trust would not be deemed
"plan assets" of an employee benefit plan
holding the Certificates of any Class if certain
conditions are met, including that the
Certificates of such Class must be held, upon
completion of the public offering being made
hereby and by the related Prospectus Supplement,
by at least 100 investors who are independent of
the Transferor and of one another ("Independent
Investors"). Except to the extent otherwise
disclosed in the related Prospectus Supplement,
the Transferor expects that each Class of
Certificates will be held by at least 100
Independent Investors at the conclusion of the
initial public offering, although no assurance
can be given, and no monitoring or other
measures will be taken to ensure that such
condition will be met. The Transferor
anticipates that the other conditions of the
regulation will be met. If the assets of a Trust
were deemed to be "plan assets" of an employee
benefit plan investor (e.g., if the 100
Independent Investor criterion is not
satisfied), violation of the "prohibited
transaction" rules of the Employee Retirement
Income Security Act of 1974, as amended
("ERISA"), could result and generate excise tax
and other liabilities under ERISA and the
Internal Revenue Code of 1986, as amended (the
"Code"), unless a statutory, regulatory or
administrative exemption is available. It is
uncertain whether existing exemptions from the
"prohibited transaction" rules of ERISA would
apply to all transactions involving such Trust's
assets. Accordingly, fiduciaries or other
persons contemplating purchasing Certificates on
behalf of or with "plan assets" of any employee
benefit plan should consult their counsel before
making a purchase. See "Employee Benefit Plan
Considerations."
CERTIFICATE RATING.......... It will be a condition to the issuance of the
certificates of each Series or Class thereof
offered pursuant to this Prospectus and the
related Prospectus Supplement (including each
Series that includes a Pre-Funding Account) that
they be rated in one of the four highest rating
categories by at least one nationally recognized
rating organization (each such rating agency
selected by the Transferor to rate any Series, a
"Rating Agency"). The rating or ratings
applicable to the Certificates of each Series or
Class thereof offered hereby will be set forth
in the related Prospectus Supplement.
Any rating assigned to the Certificates of a
Series or a Class by a Rating Agency will
reflect such Rating Agency's assessment of the
likelihood that Certificateholders of such
Series or Class will receive the payments of
interest and principal required to be made under
the Agreement, in the case of principal on or
prior to the scheduled maturity date set forth
in the related Prospectus Supplement, and in the
case of interest, on the applicable interest
payment dates. The ratings will be based
primarily on an assessment of the Receivables in
the Trust (including the
20
<PAGE>
eligibility criteria for the transfer of
Receivables in Additional Accounts to the
Trust), of the amounts held in any trust account
for the benefit of any Series or Class
(including in any Pre-Funding Account) and the
availability of any Enhancement with respect to
such Series or Class.
A rating is not a recommendation to buy, sell or
hold securities and may be subject to revision
or withdrawal at any time by the assigning
Rating Agency. Each rating should be evaluated
independently of any other rating. See "Risk
Factors--Certificate Rating."
LISTING..................... If so specified in the Prospectus Supplement
relating to a Series, application will be made
to list the Certificates of such Series, or any
Class thereof, on the Luxembourg Stock Exchange
or any other specified exchange.
21
<PAGE>
RISK FACTORS
Potential investors should consider, among other things, the following risk
factors in connection with the purchase of the Certificates.
Limited Liquidity. It is anticipated that, to the extent permitted, the
underwriters of any Series of Certificates offered hereby will make a market
in such Certificates, but in no event will any such underwriter be under an
obligation to do so. There is no assurance that a secondary market will
develop with respect to the Certificates of any Series offered hereby, or if
it does develop, that it will provide Certificateholders with liquidity of
investment or that it will continue for the life of such Certificates.
Transfer of Receivables. A court could treat the transfer of Receivables to
each Trust as the grant of a security interest in such Receivables for the
benefit of holders of Certificates issued by such Trust. The Transferor will
represent and warrant in each Agreement that the transfer of the Receivables
to the related Trust is either a valid assignment of the related Receivables
to such Trust or the grant to the related Trust of a security interest in such
Receivables. The Transferor will take, with respect to each Trust, certain
actions as are required under Delaware or New York law, as the case may be, to
perfect each such Trust's security interest in the related Receivables, and
the Transferor will warrant that, if the transfer to such Trust is deemed to
be a grant to such Trust of a security interest in the related Receivables,
the Trustee will have a first priority perfected security interest therein,
and, subject to the limitations described in the penultimate sentence of this
paragraph, in the proceeds thereof (subject, in each case, to certain
potential tax liens referred to under "Description of the Certificates--
Representations and Warranties"). Nevertheless, if the transfer of Receivables
to a Trust is deemed to create a security interest therein, a tax or
government lien or other nonconsensual lien on property of the Transferor
arising before Receivables come into existence may have priority over the
Trust's interest in such Receivables, and if the FDIC were appointed receiver
of the Transferor, the receiver's administrative expenses may also have
priority over the Trust's interest in such Receivables. In addition, while CMB
or Chase USA is the Servicer, collections will be commingled with such bank's
general funds and used for its benefit prior to each Distribution Date.
Accordingly, in the event of the insolvency of Chase USA or CMB, as the case
may be, the Trust may not have a perfected security interest in such
collections. If the short-term deposit rating of Chase USA or CMB, as the case
may be, is reduced below A-1 or P-1 by the applicable Rating Agency, such bank
will be obligated to cease commingling collections and commence depositing
collections into the Collection Account within two business days after the
date of processing. See "Certain Legal Aspects of the Receivables--Transfer of
Receivables."
Certain Matters Relating to Receivership. Chase USA is chartered as a
national bank and is primarily subject to regulation and supervision by the
United States Comptroller of the Currency (the "Comptroller"). If Chase USA
becomes insolvent or is in an unsound condition or if certain other
circumstances occur, the Comptroller is authorized to appoint the FDIC as
receiver. The Federal Deposit Insurance Act ("FDIA"), as amended by the
Financial Institutions Reform, Recovery and Enforcement Act of 1989
("FIRREA"), sets forth certain powers that the FDIC may exercise as receiver
for the Transferor. With respect to the appointment of a receiver or
conservator for the Transferor, subject to certain qualifications, a valid
perfected security interest of the Trustee in the Receivables should be
enforceable (to the extent of the Trust's "actual direct compensatory damages"
as described below) and payments to the Trust with respect to the Receivables
(up to the amount of such damages) should not be subject to an automatic stay
of payment or to recovery by such a conservator or receiver. If, however, the
conservator or receiver were to assert that the security interest was
unperfected or unenforceable, or were to require the Trustee to establish its
right to those payments by submitting to and completing the administrative
claims procedure established under FIRREA, or the conservator or receiver were
to request a stay of judicial proceedings with respect to the Transferor as
provided under FIRREA, delays in payments on the Certificates and possible
reductions in the amount of those payments could occur. In the event of a
repudiation of obligations by a conservator or receiver, FIRREA provides that
a claim for the repudiated obligation is limited to "actual direct
compensatory damages" determined as of the date of the appointment of the
conservator or receiver (which in most cases are expected to include the
outstanding principal on the Certificates plus interest accrued thereon to the
date of payment). The FDIC has not adopted a formal policy
22
<PAGE>
statement on payment of principal and interest on collateralized borrowings of
banks which are repudiated. The Transferor believes that the general practice
of the FDIC in such circumstances is to permit the collateral to be applied to
pay the principal owed plus interest at the contract rate up to the date of
payment, together with the costs of liquidation of the collateral if provided
for in the contract. In one case, however, involving the repudiation by the
Resolution Trust Corporation (the "RTC") of certain secured zero-coupon bonds
issued by a savings association, a United States federal district court held
that "actual direct compensatory damages" in the case of a marketable security
meant the market value of the repudiated bonds as of the date of repudiation.
If that court's view were applied to determine the Trust's "actual direct
compensatory damages" in the event a conservator or receiver of the Transferor
repudiated its obligations under the Agreement, the amount paid to
Certificateholders could, depending upon circumstances existing on the date of
the repudiation, be less than the principal of the Certificates and the
interest accrued thereon to the date of payment. See "Certain Legal Aspects of
the Receivables--Certain Matters Relating to Receivership."
If a conservator or receiver were appointed for the Transferor, then a Pay
Out Event would occur with respect to all Series then outstanding and,
pursuant to the related Agreement, new Principal Receivables would not be
transferred to the related Trust, and the Trustee would sell the Receivables
(unless otherwise instructed by holders of more than 50% of the Investor
Interest of each Series of Certificates, or with respect to any Series with
more than one Class, of each Class, and any other Person specified in the
related Agreement or a Series Supplement), thereby causing early termination
of the Trust and a loss to Certificateholders of a Series if the net proceeds
of such sale allocable to such Series were insufficient to pay the
Certificateholders of such Series in full. If the only Pay Out Event to occur
is either the insolvency of the Transferor or the appointment of a conservator
or receiver for the Transferor, the conservator or receiver may have the power
to prevent the early sale, liquidation or disposition of the Receivables and
the commencement of the Rapid Amortization Period. A conservator or receiver
may also have the power to cause the early sale of the Receivables and the
early retirement of the Certificates of each Series or to prohibit the
continued transfer of Principal Receivables to a Trust. If no Servicer Default
other than the conservatorship or receivership of the Servicer exists, the
conservator or receiver for the Servicer may have the power to prevent either
the Trustee or the Certificateholders from appointing a successor Servicer
under the related Agreement. See "Certain Legal Aspects of the Receivables--
Certain Matters Relating to Receivership."
Consumer Protection Laws; Litigation. The Accounts and the Receivables are
subject to numerous federal, state and local consumer protection laws that
impose requirements on the making and collection of consumer loans. Congress
and the states may enact new laws and amendments to existing laws to regulate
further the credit card and consumer credit industry or to reduce finance
charges or other fees or charges applicable to credit card accounts. Such
laws, as well as any new laws or rulings which may be adopted, may adversely
affect the Servicer's ability to collect on the Receivables or maintain
previous levels of monthly periodic finance charges and other credit card
fees. 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.
Federal or state legislation could be enacted which would impose additional
limitations on the monthly periodic finance charges or other fees or charges
relating to the Accounts. One potential effect of any legislation which
regulates the amount of interest and other charges that may be assessed on
credit card account balances would be to reduce the Portfolio Yield on the
Accounts. If such legislation were to result in a significant reduction in the
Portfolio Yield, a Pay Out Event could occur, in which case the Rapid
Amortization Period would commence. See "Description of the Certificates--Pay
Out Events."
Pursuant to each Agreement, the Transferor will covenant to accept
reassignment, subject to certain conditions described under "Description of
the Certificates--Representations and Warranties," of each Receivable that
does not comply in all material respects with all requirements of applicable
law. The Transferor will make certain other representations and warranties
relating to the validity and enforceability of the Receivables. However, it is
not anticipated that the Trustee will make any examination of the related
Receivables or the records relating thereto for the purpose of establishing
the presence or absence of defects, compliance with such representations and
warranties, or for any other purpose. The sole remedy if any such
representation or warranty is breached and such breach continues beyond the
applicable cure period is that the Transferor will
23
<PAGE>
be obligated to accept reassignment, subject to certain conditions described
under "Description of the Certificates--Representations and Warranties," of
the Receivables affected thereby. See "Description of the Certificates--
Representations and Warranties" and "Certain Legal Aspects of the
Receivables--Consumer Protection Laws."
Application of federal and state bankruptcy and debtor relief laws would
affect the interests of the Certificateholders in the Receivables if such laws
result in any Receivables being written off as uncollectible when there are no
funds available from any Credit Enhancement or other source. See "Description
of the Certificates--Defaulted Receivables; Rebates and Fraudulent Charges;
Investor Charge-Offs."
Competition in the Credit Card Industry. The credit card industry is highly
competitive. As new credit card issuers enter the market and issuers seek to
expand their share of the market, there is increased use of advertising,
target marketing and pricing competition. Each Trust will be dependent upon
the Transferor's continued ability to generate new Receivables. If the rate at
which new Receivables are generated declines significantly and the Transferor
is unable to designate Additional Accounts with respect to a Trust, a Pay Out
Event could occur with respect to each Series relating to such Trust, in which
case the Rapid Amortization Period with respect to each such Series would
commence.
Payments and Maturity. The Receivables may be paid at any time and there is
no assurance that there will be additional Receivables created in the Accounts
or that any particular pattern of cardholder repayments will occur. The
commencement and continuation of a Controlled Amortization Period, a Principal
Amortization Period or an Accumulation Period for a Series or Class thereof
with respect to a Trust will be dependent upon the continued generation of new
Receivables to be conveyed to such Trust. A significant decline in the amount
of Receivables generated could result in the occurrence of a Pay Out Event for
one or more Series and the commencement of the Rapid Amortization Period for
each such Series. Certificateholders should be aware that the Transferor's
ability to continue to compete in the current industry environment will affect
the Transferor's ability to generate new receivables to be conveyed to each
Trust and may also affect payment patterns. In addition, increased convenience
use (which occurs when cardholders pay their balances in full every month and
thus avoid all finance charges on their purchase balances) would decrease the
effective yield on the Accounts. In addition, changes in periodic finance
charges can alter the monthly payment rates of cardholders. A significant
decrease in such monthly payment rate could slow the return or accumulation of
principal during an Amortization Period or Accumulation Period. See "Maturity
Assumptions."
Social, Technological and Economic Factors. Changes in use of credit and
payment patterns by customers may result from a variety of social,
technological and economic factors. Social factors include potential changes
in consumers' attitudes toward financing purchases with debt. Technological
factors include new methods of payment, such as debit cards. Economic factors
include the rate of inflation, unemployment levels and relative
interest rates. Cardholders whose accounts are included in the Bank Portfolio
have billing addresses in all 50 states and the District of Columbia. The
Bank, however, is unable to determine and has no basis to predict whether, or
to what extent, social, technological or economic factors will affect future
use of credit or repayment patterns.
Effect of Subordination. With respect to Certificates of a Series having a
Class or Classes of Subordinated Certificates, unless otherwise specified in
the related Prospectus Supplement, payments of principal in respect of the
Subordinated Certificates of a Series will not commence until after the final
principal payment with respect to the Senior Certificates of such Series. In
addition, if so specified in the related Prospectus Supplement, if collections
of Finance Charge Receivables allocable to the Certificates of a Series are
insufficient to cover required amounts due with respect to the Senior
Certificates of such Series, the Investor Interest with respect to the
Subordinated Certificates will be reduced, resulting in a reduction of the
portion of collections of Finance Charge Receivables allocable to the
Subordinated Certificates in future periods and a possible delay or reduction
in principal and interest payments on the Subordinated Certificates. Moreover,
if so specified in the related Prospectus Supplement, in the event of a sale
of Receivables in a Trust due to the insolvency of the Transferor or the
appointment of a conservator or receiver for the Transferor, or due to the
inability of the Trustee to act as or find a successor Servicer after a
Servicer Default, the portion of the net proceeds of such sale allocable to
pay
24
<PAGE>
principal to the Certificates of a Series will be used first to pay amounts
due to the Senior Certificateholders and any remainder will be used to pay
amounts due to the Subordinated Certificateholders.
Effects of Prepayment Distinctions Among Classes. Classes of Certificates
may be issued to which may be allocated the risk of early repayment within a
Series. With respect to such a Class, a Holder of a Certificate of such Class
will be more likely to receive prepayment of his Certificate than would
otherwise be the case. In such event such Holder will not receive the benefit
of the Certificate Rate for the period of time originally expected on the
amount of any such repayment. There can be no assurance that the Holder will
be able to reinvest the proceeds at a similar rate of return and at a similar
risk level. Assuming that a Holder could identify an identical reinvestment
opportunity, an early repayment could benefit a Holder who acquired a
Certificate of such Class at a discount and harm a Holder who acquired a
Certificate of such Class at a premium.
Effect on Certain Pre-Funded Series of Ability to Generate Additional
Receivables. With respect to Certificates of a Series having a Class that
employs a Pre-Funding Account in anticipation of the Transferor transferring
additional Receivables to the related Trust, if, and to the extent that, the
requisite amount of such Receivables are not created during the Pre-Funding
Period specified in the related Prospectus Supplement, the Certificateholders
of such Class will receive the balance remaining in the Pre-Funding Account at
the end of the Pre-Funding Period as an early repayment of Certificate
principal. See "Risk Factors--Competition in the Credit Card Industry" and "--
Payments and Maturity" and "Description of Certificates--Funding Period." In
such event the Holder of such a Certificate will not receive the benefit of
the Certificate Rate for the period of time originally expected on the amount
of such early repayment. See "Risk Factors--Effects of Prepayment Distinctions
among Classes."
Ability to Change Terms of the Accounts. Pursuant to each Agreement, the
Transferor does not transfer to the related Trust the Accounts but only the
Receivables arising in the Accounts. As owner of the Accounts, the Transferor
retains the right to determine the monthly periodic finance charges and other
fees which will be applicable from time to time to the Accounts, to alter the
minimum monthly payment required on the Accounts and to change various other
terms with respect to the Accounts, including changing the annual percentage
rate from a fixed rate to a variable rate. To the extent that there is an
increase in the proportion of Receivables in variable rate Accounts, the
effective yield on such Accounts will be affected by fluctuations in the prime
rate, and decreases in the prime rate could reduce the yield on such Accounts.
A decrease in the monthly periodic finance charge and a reduction in credit
card or other fees would decrease the effective yield on the Accounts with
respect to a Trust and could result in the occurrence of a Pay Out Event with
respect to each Series relating to such Trust and the commencement of the
Rapid Amortization Period with respect to each such Series. Unless otherwise
specified in the related Prospectus Supplement, under each Agreement the
Transferor will agree that, except as otherwise required by law or as is
deemed by the Transferor to be necessary in order to maintain its credit card
business, based upon a good faith assessment by it, in its sole discretion, of
the nature of the competition in that business, the Transferor will not reduce
the annual percentage rate of the monthly periodic finance charges assessed on
the related Receivables or other fees on the related Accounts if, as a result
of such reduction, the Portfolio Yield for any Series as of such date would be
less than the Base Rate for such Series. The terms "Portfolio Yield" and "Base
Rate" for each Series will have the meanings set forth in the Prospectus
Supplement relating to each such Series. In addition, unless otherwise
specified in the related Prospectus Supplement, each Agreement will provide
that the Bank may change the terms of the contracts relating to the related
Accounts or its policies and procedures with respect to the servicing thereof
(including without limitation the reduction of the required minimum monthly
payment and the calculation of the amount or the timing of finance charges,
credit card fees, and charge offs), if such change (i) would not, in the
reasonable belief of the Transferor, cause a Pay Out Event for any related
Series to occur, and (ii) is made applicable to the comparable segment of
revolving credit card accounts owned and serviced by the Transferor which have
characteristics the same as or substantially similar to the related Accounts
which are subject to such change. In servicing the Accounts, the Servicer will
be required to exercise the same care and apply the same policies that it
exercises in handling similar matters for its own comparable accounts. Except
as specified above or in any Prospectus Supplement, there will be no
restrictions on the Transferor's ability to change the terms of the Accounts.
There
25
<PAGE>
can be no assurance that changes in applicable law, changes in the marketplace
or prudent business practice might not result in a determination by the
Transferor to take actions which would change the Account terms.
Basis Risk. A portion of the Accounts in a Trust will have finance charges
set at a variable rate above a designated prime rate or other designated
index. The Certificate Rate applicable to a Series of Certificates issued by
such Trust may be based upon an index other than such prime rate or other
designated index. If there is a decline in such prime rate or other designated
index which does not coincide with a decline in the index upon which the
Certificate Rate is based, the amount of collections of Finance Charge
Receivables on such Accounts may be reduced, whereas the amounts payable as
Monthly Interest on such Series of Certificates and other amounts required to
be funded out of collections of Finance Charge Receivables with respect to
such Series will not be similarly reduced.
Master Trust Considerations. Each Trust, as a master trust, may issue Series
from time to time. While the Principal Terms of any Series will be specified
in a Series Supplement, the provisions of a Series Supplement and, therefore,
the terms of any additional Series, will not be subject to the prior review by
or consent of, holders of the Certificates of any previously issued Series.
Such Principal Terms may include methods for determining applicable investor
percentages and allocating collections, provisions creating different or
additional security or other Credit Enhancement, provisions subordinating such
Series to another Series or other Series (if the Series Supplement relating to
such Series so permits) to such Series, and any other amendment or supplement
to the related Agreement which is made applicable only to such Series. It is a
condition precedent to the issuance of any additional Series by a Trust that
each Rating Agency that has rated any outstanding Series issued by such Trust
deliver written confirmation to the Trustee that such additional issuance will
not result in such Rating Agency reducing or withdrawing its rating on any
outstanding Series. There can be no assurance, however, that the Principal
Terms of any other Series, including any Series issued from time to time
hereafter, might not have an impact on the timing and amount of payments
received by a Certificateholder of any other Series. See "Description of the
Certificates--Exchanges."
Addition of Trust Assets. The Transferor expects, and in some cases will be
obligated, to designate Additional Accounts, the Receivables in which will be
conveyed to a Trust. Such Additional Accounts are expected to include accounts
originated using criteria different from those which were applied to the
Accounts designated on the Cut-Off Date related to such Trust or to
previously-designated Additional Accounts, because such accounts were
originated at a different date, under different underwriting criteria or by
different institutions, or represent a separate segment of the Bank's credit
card business. Consequently, there can be no assurance that Additional
Accounts designated in the future will be of the same credit quality as
previously-designated Accounts. In addition, each Agreement provides that the
Bank may add Participations to a Trust. The designation of Additional Accounts
and Participations will be subject to the satisfaction of certain conditions
described herein under "Description of the Certificates--Addition of Trust
Assets."
Control. Subject to certain exceptions, the Certificateholders of each
Series may take certain actions, or direct certain actions to be taken, under
the related Agreement or the related Series Supplement. However, the related
Agreement or related Series Supplement may provide that under certain
circumstances the consent or approval of a specified percentage of the
aggregate Investor Interest of other Series or of the Investor Interest of a
specified Class of such other Series will be required to direct certain
actions, including requiring the appointment of a successor Servicer following
a Servicer Default, amending the related Agreement in certain circumstances
and directing a repurchase of all outstanding Series upon the breach of
certain representations and warranties by the Transferor. Certificateholders
of such other Series may have interests which do not coincide in any way with
the interests of Certificateholders of the subject Series. In such instances,
it may be difficult for the Certificateholders of such Series to achieve the
results from the vote that they desire.
Certificate Rating. Any rating assigned to the Certificates of a Series or a
Class by a Rating Agency will reflect such Rating Agency's assessment of the
likelihood that Certificateholders of such Series or Class
26
<PAGE>
(including each Series that includes a Pre-Funding Account) will receive the
payments of interest and principal required to be made under the Agreement, in
the case of principal on or prior to the scheduled maturity date set forth in
the related Prospectus Supplement, and in the case of interest, on the
applicable interest payment dates. The ratings will be based primarily on an
assessment of the Receivables in the Trust (including the eligibility criteria
for the transfer of Receivables in Additional Accounts to the Trust), of the
amounts held in any trust account for the benefit of any Series or Class
(including in any Pre-Funding Account) and the availability of any Enhancement
with respect to such Series or Class. However, any such rating will not
address the possibility of the occurrence of a Pay Out Event with respect to
such Class or Series or the possibility of the imposition of United States
withholding tax with respect to non-U.S. Certificateholders. The rating will
not be a recommendation to purchase, hold or sell Certificates of such Series
or Class, and such rating will not comment as to the marketability of such
Certificates, any market price or suitability for a particular investor. There
is no assurance that any rating will remain for any given period of time or
that any rating will not be lowered or withdrawn entirely by a Rating Agency
if in such Rating Agency's judgment circumstances so warrant.
The Transferor will request a rating of each Class of Certificates offered
hereby by at least one Rating Agency. There can be no assurance as to whether
any rating agency not requested to rate the Certificates will nonetheless
issue a rating with respect to any Series of Certificates or Class thereof,
and, if so, what such rating would be. A rating assigned to any Series of
Certificates or Class thereof by a rating agency that has not been requested
by the Transferor to do so may be lower than the rating assigned by a Rating
Agency pursuant to the Transferor's request. Only rating agencies that have
been requested to rate a particular Series will be a "Rating Agency" for
purposes of such Series.
Credit Enhancement. Although Credit Enhancement may be provided with respect
to a Series of Certificates or any Class thereof, the amount available will be
limited and will be subject to certain reductions. If the amount available
under any Credit Enhancement is reduced to zero, Certificateholders of the
Series or Class thereof covered by such Credit Enhancement will bear directly
the credit and other risks associated with their undivided interest in the
Trust. Unless otherwise specified in the related Prospectus Supplement, Credit
Enhancement available to one Series issued under a Trust will not be available
to any other Series under such Trust. See "Credit Enhancement."
Book-Entry Registration. Unless otherwise specified in the related
Prospectus Supplement, the Certificates of each Series initially will be
represented by one or more Certificates registered in the name of Cede, the
nominee for DTC, and will not be registered in the names of the Certificate
Owners or their nominee. Unless and until Definitive Certificates are issued
for a Series, Certificate Owners relating to such Series will not be
recognized by the Trustee as Certificateholders, as that term will be used in
each Agreement. Hence, until such time, Certificate Owners will only be able
to exercise the rights of Certificateholders indirectly through DTC, Cedel or
Euroclear and their participating organizations. See "Description of the
Certificates--Book-Entry Registration" and "--Definitive Certificates."
THE TRUSTS
Each Trust will be formed pursuant to an Agreement in accordance with the
laws of the State of New York, unless otherwise specified in the related
Prospectus Supplement. No Trust will engage in any business activity other
than acquiring and holding Receivables, issuing Series of Certificates and the
related Transferor Certificate, making payments thereon and engaging in
related activities (including, with respect to any Series, obtaining any
Enhancement and entering into an Enhancement agreement relating thereto). As a
consequence, no Trust is expected to have any need for additional capital
resources other than the assets of such Trust.
27
<PAGE>
CHASE USA'S CREDIT CARD ACTIVITIES
GENERAL
The Bank Portfolio consists of MasterCard and VISA accounts that were
originated prior to June 1, 1996 (the "Account Transfer Date") by Chemical
Bank (the "Old Chemical Bank Portfolio"), the portfolio of MasterCard and VISA
accounts that have been originated on and after the Account Transfer Date by
Chase USA and that were originated pursuant to a co-branding arrangement which
had been in place prior to the Account Transfer Date between a third party and
Chemical Bank or were originated through applications made available to
prospective cardholders at branch banking facilities operated by Chemical Bank
prior to the Account Transfer Date (the "New Chemical Bank Portfolio," and
together with the Old Chemical Bank Portfolio, the "Chemical Bank Portfolio"),
the MasterCard and VISA accounts that were originated prior to the Account
Transfer Date by Chase USA (the "Old Chase Portfolio") and the portfolio of
MasterCard and VISA accounts that have been originated on and after the
Account Transfer Date and that are not part of the New Chemical Bank Portfolio
(the "New Chase Portfolio" and, together with the Old Chase Portfolio, the
"Chase Portfolio"). The Chemical Bank Portfolio together with the Chase
Portfolio is herein referred to as the "Bank Portfolio." On the Account
Transfer Date, the MasterCard and VISA accounts comprising the Chemical Bank
Portfolio were transferred from Chemical Bank to Chase USA.
The Receivables which the Bank will convey to each Trust pursuant to the
related Agreement have been and will be generated from transactions made by
holders of certain VISA and MasterCard credit card accounts, which are regular
accounts, and certain Gold VISA and MasterCard and GrandElite Gold VISA and
MasterCard credit card accounts, which are premium accounts, including in each
case co-branded accounts. Premium cards are targeted at individuals with
higher levels of income. The Bank services these accounts at its facilities
located in Hicksville, New York; Brooklyn, New York; Tempe, Arizona and Tampa,
Florida. Certain data processing and administrative functions associated with
the servicing of the Chemical Bank Portfolio have been, and since October 20,
1996, on behalf of the entire Bank Portfolio are, performed through First Data
Resources, Inc. ("FDR"). See "--Description of FDR."
Pursuant to a master pooling and servicing agreement dated as of June 1,
1991 between Chase USA, as seller and servicer, and Yasuda Bank and Trust
Company (U.S.A.) as trustee, the Chase Manhattan Credit Card Master Trust (the
"Chase Manhattan Trust") has issued several series of asset backed
certificates (each such series, a "Chase Manhattan Series") evidencing
undivided interests in receivables generated by certain accounts in the Chase
Portfolio (the "Securitized Chase Portfolio"). As long as any Chase Manhattan
Series remains outstanding, receivables in accounts which remain in the
Securitized Chase Portfolio will not be available for addition to the Trusts,
although the Transferor would be permitted to add Participations in the Chase
Manhattan Trust to the assets of the Trusts. See "Description of the
Certificates--Addition of Trust Assets."
Accounts in the Chase Portfolio which are not in the Securitized Chase
Portfolio have been added and are expected to be added in the future and
accounts in the New Chase Portfolio are expected to be added, at some time in
the future, to the Trusts. There can be no assurance, however, that such
accounts will be added or that, if added, the receivables in such accounts
will constitute a material portion of the Receivables in the Trusts.
In addition, accounts in the Chase Portfolio, the Chemical Bank Portfolio
and the New Chase Portfolio were originated under policies and procedures
which differed from each other in certain respects. The Bank does not expect
any of these differences to have a material adverse effect on the credit
quality of the Receivables in the Trusts or on the interests of the
Certificateholders.
ACQUISITION AND USE OF CREDIT CARD ACCOUNTS
The accounts were generated under the VISA U.S.A., Inc. ("VISA") or
MasterCard International Inc. ("MasterCard International") programs and were
originated, purchased by, or otherwise transferred to, the Bank. The Bank is a
member of VISA and of MasterCard International. VISA and MasterCard
International license
28
<PAGE>
their respective marks permitting financial institutions to issue credit cards
to their customers. In addition, VISA and MasterCard International provide
clearing services facilitating exchange of payments among member institutions
and networks linking members' credit authorization systems.
The VISA and MasterCard credit cards are issued as part of the worldwide
VISA and MasterCard International systems, and transactions creating the
receivables through the use of the credit cards are processed through the VISA
and MasterCard International authorization and settlement systems.
The VISA and MasterCard credit cards from which the Accounts were
established may be used to purchase merchandise and services, to obtain cash
advances and to consolidate and transfer account balances from other credit
cards. Cardholders make purchases when using a credit card to buy merchandise
or services. A cash advance is made when a credit card is used to obtain cash
from a financial institution, from an automated teller machine, by a check
drawn on an Account or through the use of overdraft protection. Amounts due
with respect to purchases, cash advances and transfers of account balances
will be included in the Receivables.
The VISA and MasterCard credit card accounts owned by the Bank were
principally generated through: (a) direct mail and telemarketing solicitation
for accounts on a pre-screened credit basis, (b) applications mailed directly
to prospective cardholders, (c) applications made available to prospective
cardholders at the Bank's branch banking facilities and point of sale outlets,
(d) applications generated by advertising on television, radio and in
magazines and (e) purchases of accounts from other credit card issuers.
In each case where an account is generated through an application, the Bank
reviews the application for completeness and creditworthiness. Applications
provide information to the Bank on the applicant's employment history, income
and residence status. In addition to reviewing the application, the Bank
obtains a credit report issued by an independent credit reporting agency with
respect to the applicant. In the event there are discrepancies between the
application and the credit report, the Bank may resolve the inconsistency
regarding the applicant by contacting employers or credit references. The Bank
generally evaluates the ability of an applicant for a VISA or MasterCard
credit card account to repay credit card balances by applying a credit scoring
system using models developed by independent consulting firms and proprietary
models and data. Credit scoring is intended to provide a general indication,
based on the information available, including data provided from applications
and credit bureaus, of the applicant's likelihood to repay his or her
obligations. Credit scoring assigns values to the information provided in each
applicant's application and credit bureau report and then estimates the
associated credit risk. The score at which an applicant will be approved
correlates to the Bank's credit risk tolerance at the time of approval. The
Bank personnel and outside consultants regularly review the predictive
accuracy of the scoring models.
Once an application to open an account is approved an initial credit limit
is established for the account based on the applicant's credit score and the
applicant's level of income. At least once per year a systematic evaluation of
cardholder payment and behavioral information is used to determine eligibility
for automatic credit line increases. Credit limits may also be adjusted at the
request of the applicant, subject to the Bank's independent evaluation of the
applicant's payment and usage history.
The Bank also generates new accounts through direct mail and telemarketing
solicitation campaigns directed at individuals who have been pre-screened by
the Bank. A list of prospects from a variety of sources are screened at one or
more credit bureaus in accordance with the Bank's credit criteria, including
previous payment patterns and longevity of account relationships. Individuals
qualifying for pre-screened direct mail or telemarketing solicitation are
conditionally offered the Bank's credit card without having to complete a
detailed application. Various credit limits are offered to members of the
group being solicited, which are based upon the prospective cardholder's
credit profile and the level of existing and potential indebtedness relative
to inferred income based on geographic and demographic characteristics.
Each cardholder is subject to an agreement governing the terms and
conditions of the accounts. Pursuant to such agreement, the Bank reserves the
right to change or terminate any terms, conditions, services or features of
29
<PAGE>
the accounts (including increasing or decreasing periodic finance charges,
other charges or minimum payments) and to sell or transfer the accounts and
any amounts owed on such accounts to another creditor.
The Bank has added, and may continue to add, accounts to its portfolio by
purchasing credit card accounts from other financial institutions. Credit card
accounts that have been purchased by the Bank were originally opened using
criteria established by the institution from which the accounts were purchased
or by the institution from which the selling institution originally purchased
the accounts and may not have been subject to the same level of credit review
as accounts established by the Bank. Following acquisition, purchased accounts
are evaluated against the same criteria utilized by the Bank to maintain Bank-
originated accounts to determine whether any of the purchased accounts should
be closed immediately. Any of the purchased accounts failing the criteria are
closed and no further purchases or cash advances are authorized. All other
such accounts remain open, subject to the same criteria the Bank uses to
evaluate Bank-originated accounts. The credit limits on such accounts are
based initially on the limits established or maintained by the selling
institution. Following acquisition, credit limits on purchased accounts will
be adjusted based on the criteria applied to Bank-originated accounts.
BILLING AND PAYMENTS
The Accounts have various billing and payment structures, including varying
minimum payment levels and fees. Monthly billing statements are sent by the
Bank to cardholders. The following information reflects the current billing
and payment characteristics of the Accounts. When an account is established,
it is randomly assigned to a billing cycle. Currently, there are 20 billing
cycles. Each billing cycle has a separate monthly billing date at which time
the activity in the related accounts during the month ending on such billing
date are processed and billed to cardholders.
The Bank generally determines the minimum monthly payment with respect to
the accounts by multiplying the combined new balance of purchases and cash
advances, less any disputed amounts, by 2.000% ( 1/50 expressed as a
percentage). If the amount so calculated is less than $10.00, it is increased
to $10.00. The sum of such amount and any past due amounts equals the minimum
payment amount. The minimum payment, however, is never more than the new
balance.
A daily periodic finance charge is assessed on certain Principal Receivables
for each billing cycle. Daily periodic finance charges for a billing cycle are
not assessed on Principal Receivables which arise from new purchases made
during such billing cycle if either on the first day of such billing cycle
there was no purchase balance outstanding or if the purchase balance
outstanding on the first day of such billing cycle is paid in full during such
billing cycle or if on the last day of such billing cycle there is no purchase
balance outstanding. The daily periodic finance charge assessed on cash
advances and applicable purchase balances is calculated by multiplying (i) the
average daily cash advance and applicable purchase balance during the billing
cycle by (ii) the applicable daily periodic finance charge by (iii) the number
of days in the billing cycle. A monthly periodic finance charge is assessed
for certain Principal Receivables. This monthly periodic finance charge
assessed on cash advances and applicable purchase balances is calculated by
multiplying (i) the average daily cash advance and applicable purchase balance
during the billing cycle by (ii) the applicable monthly periodic finance
charge. Cash advances are included in the average daily cash advance balance
and purchases are included in the average daily purchase balance from the date
such advance or purchase occurs or, in certain circumstances, on the first day
of the billing cycle following the billing cycle in which such advance or
purchase occurs. The annual percentage rate for fixed rate accounts ranges
from 13.9% per annum to 19.8% per annum. The current annual percentage rate
for variable rate accounts is based on The Wall Street Journal prime rate plus
a spread generally ranging from 4.4% to 13.8%. The Bank also offers temporary
promotional rates and, under certain circumstances, the periodic finance
charges on a limited number of accounts may be either greater than or less
than those assessed by the Bank generally. To the extent that the amount of
any finance charge applicable to a purchase balance is less than $0.50, the
Bank increases such amount to $0.50.
The Bank charges annual membership fees on accounts originated pursuant to
certain of its solicitations while certain other accounts carry no annual
membership fee. For those accounts with an annual membership
30
<PAGE>
fee, such fee is generally $20.00 for regular accounts, $40.00 for premium
fixed rate accounts and $45.00 for premium variable rate accounts. The Bank
may waive the annual membership fees, or a portion thereof, in connection with
solicitations of new accounts (and has done so for portions of recent
solicitations) or when the Bank determines a waiver to be necessary to operate
its credit card business on a competitive basis. In addition to the annual
membership fee, the Bank may charge accounts certain other fees including: (i)
a late fee of $20.00 with respect to any unpaid monthly payment if the Bank
does not receive the required minimum monthly payment by the payment due date
set forth on the monthly billing statement and the amount of the past due
payment is $2.00 or more (provided that no late fee is assessed if the minimum
payment is paid prior to the first day of the following billing cycle,
including any minimum payment due with respect to cash advances); (ii) a cash
advance fee of 2.0% of the amount of each cash advance, but such cash advance
fee shall not be less than $2.00; (iii) a fee of $20.00 for each check written
on an account (a cash advance) which is returned to the Bank as a result of
the account being delinquent or overdrawn; (iv) a fee of $20.00 with respect
to each check submitted by a cardholder in payment of an account which is
dishonored and (v) an overlimit charge of $20.00 if, at the end of the billing
cycle, the total amount owed for principal and finance charges, in respect of
purchases and cash advances exceeds the cardholder's credit line.
Payments by cardholders to the Bank on the Accounts are processed and
applied first to any billed fees and other amounts not subject to finance
charges, next to billed and unpaid finance charges and then to billed and
unpaid transactions in the order determined by the Bank. Any excess is applied
to unbilled transactions in the order determined by the Bank and then to
unbilled finance charges. There can be no assurance that periodic finance
charges, fees and other charges will remain at current levels in the future.
COLLECTION OF DELINQUENT ACCOUNTS
The Bank considers an account delinquent if a payment due thereunder is not
received by the Bank by the date of the statement following the statement on
which the amount is first stated to be due. The Bank classifies an account as
"over limit" if its posted balance exceeds its credit limit.
Efforts to collect delinquent credit card receivables are made by the Bank's
personnel and collection agencies and attorneys retained by the Bank.
Collection procedures are determined by an adaptive control system that uses
statistical models and basic account financial information to determine the
steps to be followed at various stages of delinquency. Generally, the Bank
includes a request for payment of overdue amounts on billing statements issued
after the account becomes delinquent. In addition, after a period determined
by the control system, the Bank mails a separate notice to the cardholder
notifying him or her of the delinquency and possible revocation of the credit
card and requesting payment of the delinquent amount. Collection personnel
generally initiate telephone contact with cardholders whose credit card
accounts have become 30 days or more delinquent. In the event that initial
telephone contact fails to resolve the delinquency, the Bank continues to
contact the cardholder by telephone and by mail. Based upon the control
system, the Bank may suspend an account as early as the date on which such
account becomes 30 days or more delinquent and generally does so by the time
the account becomes 50 days delinquent. One hundred days after an account
becomes delinquent the credit card is automatically canceled. Based on the
Bank's analysis of a cardholder's behavior through the control system, the
Bank may take any or all of the above actions at an earlier point in time. In
some cases, depending on the financial profile of the cardholder and the
stated reason for and magnitude of a delinquency, the Bank may enter into
arrangements with a delinquent cardholder to extend or otherwise change the
payment schedule.
The Bank's policy is to charge off an account during the billing cycle
immediately following the cycle in which such account became one hundred fifty
(150) days delinquent. If the Bank receives notice that a cardholder is the
subject of a bankruptcy proceeding, the Bank charges off such cardholder's
account upon the earlier of seventy-five (75) days after receipt of such
notice and the time period set forth in the previous sentence.
Under the terms of an Agreement, Recoveries may be included in the assets of
the Trust to the extent, if any, specified in the applicable Supplement for
any Series.
31
<PAGE>
DESCRIPTION OF FDR
FDR is located in Omaha, Nebraska and provides computer data processing
services primarily to the bankcard industry. FDR is a subsidiary of First Data
Corp.
INTERCHANGE
Creditors 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
Interchange in connection with cardholder charges for goods and services is
passed from banks which clear the transactions for merchants to credit card
issuing banks. Interchange fees are set annually by MasterCard and VISA and
are based on the number of credit card transactions and the amount charged per
transaction. MasterCard and VISA may from time to time change the amount of
Interchange reimbursed to banks issuing their credit cards. The Transferor
will be required, pursuant to the terms of the Agreement, to transfer to the
Trust a percentage of Interchange. Interchange will be allocated to the Trust,
on the basis of the percentage equivalent of the ratio which the amount of
purchases of merchandise and services relating to the Accounts made during
such Monthly Period bears to the total amount of purchases of merchandise and
services relating to the Bank Portfolio with respect to such Monthly Period.
Interchange allocated to the Trust will be treated as collections of Finance
Charge Receivables.
RECOVERIES
The Transferor will be required, pursuant to the terms of the Agreement, to
transfer to the Trust a percentage of the Recoveries. Recoveries will be
allocated to the Trust on the basis of the percentage equivalent of the ratio
which the amount of the aggregate principal amount of Principal Receivables
(prior to giving effect to any reduction thereof for Finance Charge
Receivables which are Discount Option Receivables) bears to the aggregate
principal balance of the Bank Portfolio. Recoveries allocated to the Trust
will be treated as collections of Finance Charge Receivables.
THE RECEIVABLES
The Receivables conveyed to each Trust will arise in Accounts selected from
the Bank Portfolio on the basis of criteria set forth in the related Agreement
as applied on the relevant Cut-Off Date and, with respect to Additional
Accounts, as of the related date of their designation (the "Trust Portfolio").
The Transferor will have the right (subject to certain limitations and
conditions set forth therein), and in some circumstances will be obligated, to
designate from time to time Additional Accounts and to transfer to the related
Trust all Receivables of such Additional Accounts, whether such Receivables
are then existing or thereafter created, or to transfer to such Trust
Participations in lieu of such Receivables or in addition thereto. Any
Additional Accounts designated pursuant to an Agreement must be Eligible
Accounts as of the date the Transferor designates such accounts as Additional
Accounts. Furthermore, pursuant to each Agreement, the Transferor has the
right (subject to certain limitations and conditions) to designate certain
Accounts as Removed Accounts and to require the Trustee to reconvey all
receivables in such Removed Accounts to the Transferor, whether such
Receivables are then existing or thereafter created. Throughout the term of
each Trust, the related Accounts from which the Receivables arise will be the
Accounts designated by the Transferor on the relevant Cut-Off Date plus any
Additional Accounts minus any Removed Accounts. With respect to each Series of
Certificates, the Transferor will represent and warrant to the related Trust
that, as of the Closing Date and the date Receivables are conveyed to the
Trust, such Receivables meet certain eligibility requirements. See
"Description of the Certificates--Representations and Warranties."
The Prospectus Supplement relating to each Series of Certificates will
provide certain information about the related Trust Portfolio as of the date
specified. Such information will include, but not be limited to, the amount of
Principal Receivables, the amount of Finance Charge Receivables, the range of
principal balances of the Accounts and the average thereof, the range of
credit limits of the Accounts and the average thereof, the geographic
distribution of the Accounts, the types of Accounts and delinquency statistics
relating to the Accounts.
32
<PAGE>
MATURITY ASSUMPTIONS
Unless otherwise specified in the related Prospectus Supplement, for each
Series, following the Revolving Period, collections of Principal Receivables
are expected to be distributed to the Certificateholders of such Series or any
specified Class thereof on each specified Distribution Date during the
Controlled Amortization Period or the Principal Amortization Period, or are
expected to be accumulated for payment to Certificateholders of such Series or
any specified Class thereof during the Accumulation Period and distributed on
a Scheduled Payment Date; provided, however, that, if the Rapid Amortization
Period commences, collections of Principal Receivables will be paid to
Certificateholders in the manner described herein and in the related
Prospectus Supplement. The related Prospectus Supplement will specify when the
Controlled Amortization Period, the Principal Amortization Period or
Accumulation Period, as applicable, will commence, the principal payments
expected or available to be received or accumulated during such Controlled
Amortization Period, Principal Amortization Period or Accumulation Period, or
on the Scheduled Payment Date, as applicable, the manner and priority of
principal accumulations and payments among the Classes of a Series of
Certificates, the payment rate assumptions on which such expected principal
accumulations and payments are based and the Pay Out Events which, if any were
to occur, would lead to the commencement of a Rapid Amortization Period or, if
so specified in the related Prospectus Supplement, a Rapid Accumulation
Period.
No assurance can be given, however, that the Principal Receivables allocated
to be paid to Certificateholders or the holders of any specified Class thereof
will be available for distribution or accumulation for payment to
Certificateholders on each Distribution Date during the Controlled
Amortization Period, the Principal Amortization Period or Accumulation Period,
or on the Scheduled Payment Date, as applicable. In addition, the Transferor
can give no assurance that the payment rate assumptions for any Series will
prove to be correct. The related Prospectus Supplement will provide certain
historical data relating to payments by cardholders, total charge-offs and
other related information relating to the Bank Portfolio. There can be no
assurance that future events will be consistent with such historical data.
The amount of collections of Receivables may vary from month to month due to
seasonal variations, general economic conditions and payment habits of
individual cardholders. There can be no assurance that collections of
Principal Receivables with respect to any Trust Portfolio, and thus the rate
at which the related Certificateholders could expect to receive or accumulate
payments of principal on their Certificates during an Amortization Period or
Accumulation Period, or on any Scheduled Payment Date, as applicable, will be
similar to any historical experience set forth in a related Prospectus
Supplement. If a Pay Out Event occurs, the average life and maturity of such
Series of Certificates could be significantly reduced.
The actual payment rate for any Series of Certificates may be slower than
the payment rate used to determine the amount of collections of Principal
Receivables scheduled or available to be distributed or accumulated for later
payment to Certificateholders or any specified Class thereof during the
Controlled Amortization Period, the Principal Amortization Period or
Accumulation Period or on the Scheduled Payment Date, as applicable, or a Pay
Out Event may occur which would initiate the Rapid Amortization Period. There
can be no assurance that the actual number of months elapsed from the date of
issuance of such Series of Certificates to the final Distribution Date with
respect to the Certificates will equal the expected number of months. In
addition if, after the issuance of a Series, a related Companion Series is
issued and a Rapid Amortization Period commences, payments to the Holders of
such Series may be delayed. See "Description of the Certificates--Companion
Series."
USE OF PROCEEDS
Unless otherwise specified in the related Prospectus Supplement, the net
proceeds from the sale of each Series of Certificates offered hereby will be
paid to the Transferor. The Transferor will use such proceeds for its general
corporate purposes.
33
<PAGE>
CHASE USA
Chase USA, a wholly-owned banking subsidiary of The Chase Manhattan
Corporation (the "Corporation"), was formed in 1982 and is headquartered in
Wilmington, Delaware. Chase USA is currently chartered as a national bank and
as such is regulated primarily by the Comptroller. Chase USA's activities are
predominantly related to credit card lending and other forms of consumer
lending.
The Corporation is a bank holding company the principal bank subsidiary of
which is The Chase Manhattan Bank, a New York State bank.
The principal executive office of Chase USA is located at 802 Delaware
Avenue, Wilmington, Delaware 19801, telephone number (302) 575-5000.
DESCRIPTION OF THE CERTIFICATES
The Certificates will be issued in Series. Each Series will represent an
interest in the specified Trust other than the interests represented by any
other Series of Certificates issued by such Trust (which may include Series
offered pursuant to this Prospectus) and the Transferor Certificate. Each
Series will be issued pursuant to an Agreement entered into by the Bank and
the Trustee named in the related Prospectus Supplement and a Series Supplement
to the Agreement. The Prospectus Supplement for each Series will describe any
provisions of the particular Agreement relating to such Series which may
differ materially from the Agreement filed as an exhibit to the Registration
Statement. The following is a summary of the provisions common to each Series
of Certificates. The summaries are qualified in their entirety by reference to
the provisions of the related Agreement and Series Supplement.
GENERAL
The Certificates of each Series will represent undivided interests in
certain assets of the related Trust, including the right to the applicable
Investor Percentage of all cardholder payments on the Receivables in such
Trust. Unless otherwise specified in the related Prospectus Supplement, the
Investor Interest for each Series of Certificates on any date will be equal to
the initial Investor Interest as of the related Closing Date for such Series
(increased by the principal balance of any Certificates of such Series issued
after the Closing Date for such Series) minus the amount of principal paid to
the related Certificateholders prior to such date and minus the amount of
unreimbursed Investor Charge-Offs with respect to such Certificates prior to
such date. If so specified in the Prospectus Supplement relating to any Series
of Certificates, under certain circumstances the Investor Interest may be
further adjusted by the amount of principal allocated to Certificateholders,
the funds on deposit in any specified account, and any other amount specified
in the related Prospectus Supplement.
Each Series of Certificates may consist of one or more Classes, one or more
of which may be Senior Certificates and one or more of which may be
Subordinated Certificates. Each Class of a Series will evidence the right to
receive a specified portion of each distribution of principal or interest or
both. The Investor Interest with respect to a Series with more than one Class
will be allocated among the Classes as described in the related Prospectus
Supplement. The Certificates of a Class may differ from Certificates of other
Classes of the same Series in, among other things, the amounts allocated to
principal payments, maturity date, Certificate Rate and the availability of
Enhancement.
For each Series of Certificates, payments of interest and principal will be
made on Distribution Dates specified in the related Prospectus Supplement to
Certificateholders in whose names the Certificates were registered on the
record dates (each, a "Record Date") specified in the related Prospectus
Supplement. Interest will be distributed to Certificateholders in the amounts,
for the periods and on the dates specified in the related Prospectus
Supplement.
34
<PAGE>
For each Series of Certificates, the Transferor initially will own the
Transferor Certificate. The Transferor Certificate will represent the
undivided interest in each Trust not represented by the Certificates issued
and outstanding under such Trust or the rights, if any, of any Credit
Enhancement Providers to receive payments from each Trust. The holder of the
Transferor Certificate will have the right to a percentage (the "Transferor
Percentage") of all cardholder payments from the Receivables in the Trust. If
provided in the related Agreement and Prospectus Supplement, the Transferor
Certificate may be transferred in whole or in part subject to certain
limitations and conditions set forth therein. See "--Certain Matters Regarding
the Transferor and the Servicer."
Unless otherwise specified in the related Prospectus Supplement, with
respect to each Series of Certificates, during the Revolving Period, the
amount of the Investor Interest in the Trust will remain constant except under
certain limited circumstances. See "--Defaulted Receivables; Rebates and
Fraudulent Charges; Investor Charge-Offs." The amount of Principal Receivables
in each Trust, however, will vary each day as new Principal Receivables are
created and others are paid. The amount of the Transferor Interest will
fluctuate each day, therefore, to reflect the changes in the amount of the
Principal Receivables in the Trust. When a Series is amortizing, the Investor
Interest of such Series will decline as customer payments of Principal
Receivables are collected and distributed to or accumulated for distribution
to the Certificateholders. As a result, the Transferor Interest will generally
increase to reflect reductions in the Investor Interest for such Series and
will also change to reflect the variations in the amount of Principal
Receivables in the related Trust. The Transferor Interest in each Trust may
also be reduced as the result of an Exchange. See "--Exchanges."
Unless otherwise specified in the related Prospectus Supplement,
Certificates of each Series initially will be represented by certificates
registered in the name of the nominee of DTC (together with any successor
depository selected by the Bank, the "Depository") except as set forth below.
Unless otherwise specified in the related Prospectus Supplement, with respect
to each Series of Certificates, beneficial interests in the Certificates will
be available for purchase in minimum denominations of $1,000 and integral
multiples thereof in book-entry form only. The Transferor has been informed by
DTC that DTC's nominee will be Cede. Accordingly, Cede is expected to be the
holder of record of each Series of Certificates. No Certificate Owner
acquiring an interest in the Certificates will be entitled to receive a
certificate representing such person's interest in the Certificates. Unless
and until Definitive Certificates are issued for any Series under the limited
circumstances described herein, all references herein to actions by
Certificateholders shall refer to actions taken by DTC upon instructions from
its Participants (as defined below), and all references herein to
distributions, notices, reports and statements to Certificateholders shall
refer to distributions, notices, reports and statements to DTC or Cede, as the
registered holder of the Certificates, as the case may be, for distribution to
Certificate Owners in accordance with DTC procedures. See "--Book-Entry
Registration" and "--Definitive Certificates."
If so specified in the Prospectus Supplement relating to a Series,
application will be made to list the Certificates of such Series, or one or
more Classes thereof, on the Luxembourg Stock Exchange, or all or a portion of
such Series or Classes thereof on any other specified exchange.
BOOK-ENTRY REGISTRATION
Unless otherwise specified in the related Prospectus Supplement, with
respect to each Series of Certificates, Certificateholders may hold their
Certificates through DTC (in the United States) or Cedel or Euroclear (in
Europe) if they are participants of such systems, or indirectly through
organizations that are participants in such systems.
Cede, as nominee for DTC, will hold the global Certificates. Cedel and
Euroclear will hold omnibus positions on behalf of the Cedel Participants and
the Euroclear Participants, respectively, through customers' securities
accounts in Cedel's and Euroclear's names on the books of their respective
depositaries (collectively, the "Depositaries") which in turn will hold such
positions in customers' securities accounts in the Depositaries' names on the
books of DTC.
35
<PAGE>
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law,
a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
holds securities for its Participants ("DTC Participants") and facilitates the
clearance and settlement among Participants of securities transactions, such
as transfers and pledges, in deposited securities through electronic book-
entry changes in Participants' accounts, thereby eliminating the need for
physical movement of securities certificates. Participants include securities
brokers and dealers, banks, trust companies, clearing corporations and certain
other organizations. Indirect access to the DTC system is also available to
others such as securities brokers and dealers, banks, and trust companies that
clear through or maintain a custodial relationship with a Participant, either
directly or indirectly ("Indirect Participants"). The rules applicable to DTC
and its Participants are on file with the Securities and Exchange Commission.
Transfers between DTC Participants will occur in accordance with DTC rules.
Transfers between Cedel Participants and Euroclear Participants will occur in
the ordinary way in accordance with their applicable rules and operating
procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly or indirectly through Cedel
Participants or Euroclear Participants, on the other, will be effected in DTC
in accordance with DTC rules on behalf of the relevant European international
clearing system by its Depositary; however, such cross-market transactions
will require delivery of instructions to the relevant European international
clearing system by the counterparty in such system in accordance with its
rules and procedures and within its established deadlines (European time). The
relevant European international clearing system will, if the transaction meets
its settlement requirements, deliver instructions to its Depositary to take
action to effect final settlement on its behalf by delivering or receiving
securities in DTC, and making or receiving payment in accordance with normal
procedures for same-day funds settlement applicable to DTC. Cedel Participants
and Euroclear Participants may not deliver instructions directly to the
Depositaries.
Because of time-zone differences, credits of securities in Cedel or
Euroclear as a result of a transaction with a DTC Participant will be made
during the subsequent securities settlement processing, dated the business day
following the DTC settlement date, and such credits or any transactions in
such securities settled during such processing will be reported to the
relevant Cedel Participant or Euroclear Participant on such day. Cash received
in Cedel or Euroclear as a result of sales of securities by or through a Cedel
Participant or a Euroclear 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.
Purchases of Certificates under the DTC system must be made by or through
DTC Participants, which will receive a credit for the Certificates on DTC's
records. The ownership interest of each actual Certificate Owner is in turn to
be recorded on the DTC Participants' and Indirect Participants' records.
Certificate Owners will not receive written confirmation from DTC of their
purchase, but Certificate Owners are expected to receive written confirmations
providing details of the transaction, as well as periodic statements of their
holdings, from the DTC Participant or Indirect Participant through which the
Certificate Owner entered into the transaction. Transfers of ownership
interests in the Certificates are to be accomplished by entries made on the
books of DTC Participants acting on behalf of Certificate Owners. Certificate
Owners will not receive certificates representing their ownership interest in
Certificates, except in the event that use of the book-entry system for the
Certificates is discontinued.
To facilitate subsequent transfers, all Certificates deposited by DTC
Participants with DTC are registered in the name of DTC's nominee, Cede. The
deposit of Certificates with DTC and their registration in the name of Cede
effects no change in beneficial ownership. DTC has no knowledge of the actual
Certificate Owners of the Certificates; DTC's records reflect only the
identity of the Participants to whose accounts such Certificates are credited,
which may or may not be the Certificate Owners. The DTC Participants will
remain responsible for keeping account of their holdings on behalf of their
customers.
36
<PAGE>
Conveyance of notices and other communications by DTC to DTC Participants,
by DTC Participants to Indirect Participants, and by DTC Participants and
Indirect Participants to Certificate Owners will be governed by arrangements
among them, subject to any statutory or regulatory requirements as may be in
effect from time to time.
Neither DTC nor Cede will consent or vote with respect to Certificates.
Under its usual procedures, DTC mails an omnibus proxy to the Transferor as
soon as possible after the record date, which assigns Cede's consenting or
voting rights to those DTC Participants to whose accounts the Certificates are
credited on the record date (identified in a listing attached thereto).
Principal and interest payments on the Certificates will be made to DTC.
DTC's practice is to credit Participants' accounts on the applicable
Distribution Date in accordance with their respective holdings shown on DTC's
records unless DTC has reason to believe that it will not receive payment on
such Distribution Date. Payments by DTC Participants to Certificate Owners
will be governed by standing instructions and customary practices, as is the
case with securities held for the accounts of customers in bearer form or
registered in "street name" and will be the responsibility of such DTC
Participant and not of DTC, the Trustee or the Transferor, subject to any
statutory or regulatory requirements as may be in effect from time to time.
Payment of principal and interest to DTC is the responsibility of the Trustee,
disbursement of such payments to DTC Participants shall be the responsibility
of DTC, and disbursement of such payments to Certificate Owners shall be the
responsibility of DTC Participants and Indirect Participants.
DTC may discontinue providing its services as securities depository with
respect to the Certificates at any time by giving reasonable notice to the
Transferor or the Trustee. Under such circumstances, in the event that a
successor securities depository is not obtained, Definitive Certificates are
required to be printed and delivered. The Transferor may decide to discontinue
use of the system of book-entry transfers through DTC (or a successor
securities depository). In that event, Definitive Certificates will be
delivered to Certificateholders. See "--Definitive Certificates."
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that the Transferor believes to be reliable,
but the Transferor takes no responsibility for the accuracy thereof.
Cedel Bank, societe anonyme ("Cedel") is incorporated under the laws of
Luxembourg as a professional depository. Cedel holds securities for its
participating organizations ("Cedel Participants") and facilitates the
clearance and settlement of securities transactions between Cedel Participants
through electronic book-entry changes in accounts of Cedel Participants,
thereby eliminating the need for physical movement of certificates.
Transactions may be settled in Cedel in any of 36 currencies, including United
States dollars. Cedel provides to its Cedel Participants, among other things,
services for safekeeping, administration, clearance and settlement of
internationally traded securities and securities lending and borrowing. Cedel
interfaces with domestic markets in several countries. As a professional
depository, Cedel is subject to regulation by the Luxembourg Monetary
Institute. Cedel Participants are recognized financial institutions around the
world, including underwriters, securities brokers and dealers, banks, trust
companies, clearing corporations and certain other organizations and may
include the underwriters of any Series of Certificates. Indirect access to
Cedel is also available to others, such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a Cedel
Participant, either directly or indirectly.
The Euroclear System was created in 1968 to hold securities for participants
of the Euroclear System ("Euroclear Participants") and to clear and settle
transactions between Euroclear Participants through simultaneous electronic
book-entry delivery against payment, thereby eliminating the need for physical
movement of certificates and any risk from lack of simultaneous transfers of
securities and cash. Transactions may now be settled in any of 34 currencies,
including United States dollars. The Euroclear System includes
37
<PAGE>
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's
Brussels, Belgium office (the "Euroclear Operator" or "Euroclear"), under
contract with Euro-clear Clearance System, S.C., a Belgian cooperative
corporation (the "Cooperative"). All operations are conducted by the Euroclear
Operator, and all Euroclear securities clearance accounts and Euroclear cash
accounts are accounts with the Euroclear Operator, not the Cooperative. The
Cooperative establishes policy for the Euroclear System on behalf of Euroclear
Participants. Euroclear Participants include banks (including central banks),
securities brokers and dealers and other professional financial intermediaries
and may include the underwriters of any Series of Certificates. Indirect
access to the Euroclear System is also available to other firms that clear
through or maintain a custodial relationship with a Euroclear Participant,
either directly or indirectly.
The Euroclear Operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such, it
is regulated and examined by the Board of Governors of the Federal Reserve
System and the New York State Banking Department, as well as the Belgian
Banking Commission.
Securities clearance accounts and cash accounts with the Euroclear Operator
are governed by the Terms and Conditions Governing Use of Euroclear and the
related Operating Procedures of the Euroclear System and applicable Belgian
law (collectively, the "Terms and Conditions"). The Terms and Conditions
govern transfers of securities and cash within the Euroclear System,
withdrawal of securities and cash from the Euroclear System, and receipts of
payments with respect to securities in the Euroclear System. All securities in
the Euroclear System are held on a fungible basis without attribution of
specific certificates to specific securities clearance accounts. The Euroclear
Operator acts under the Terms and Conditions only on behalf of Euroclear
Participants and has no record of or relationship with persons holding through
Euroclear Participants.
Distributions with respect to Certificates held through Cedel or Euroclear
will be credited to the cash accounts of Cedel Participants or Euroclear
Participants in accordance with the relevant system's rules and procedures, to
the extent received by its Depositary. Such distributions will be subject to
tax reporting in accordance with relevant United States tax laws and
regulations. See "Tax Matters." Cedel or the Euroclear Operator, as the case
may be, will take any other action permitted to be taken by a
Certificateholder under related Agreement on behalf of a Cedel Participant or
Euroclear Participant only in accordance with its relevant rules and
procedures and subject to its Depositary's ability to effect such actions on
its behalf through DTC.
Although DTC, Cedel and Euroclear have agreed to the foregoing procedures in
order to facilitate transfers of Certificates among participants of DTC, Cedel
and Euroclear, they are under no obligation to perform or continue to perform
such procedures and such procedures may be discontinued at any time.
DEFINITIVE CERTIFICATES
Unless otherwise specified in the related Prospectus Supplement, the
Certificates of each Series will be issued as Definitive Certificates in fully
registered, certificated form to Certificate Owners or their nominees rather
than to DTC or its nominee, only if (i) the Transferor advises the Trustee for
such Series in writing that DTC is no longer willing or able to discharge
properly its responsibilities as Depository with respect to such Series of
Certificates, and the Trustee or the Transferor is unable to locate a
qualified successor, (ii) the Transferor, at its option, advises the Trustee
in writing that it elects to terminate the book-entry system through DTC or
(iii) after the occurrence of a Servicer Default, Certificate Owners
representing not less than 50% (or such other percentage specified in the
related Prospectus Supplement) of the Investor Interest advise the Trustee and
DTC through Participants in writing that the continuation of a book-entry
system through DTC (or a successor thereto) is no longer in the best interest
of the Certificate Owners.
Upon the occurrence of any of the events described in the immediately
preceding paragraph, DTC is required to notify all Participants of the
availability through DTC of Definitive Certificates. Upon surrender by
38
<PAGE>
DTC of the definitive certificate representing the Certificates and
instructions for re-registration, the Trustee will issue the Certificates as
Definitive Certificates, and thereafter the Trustee will recognize the holders
of such Definitive Certificates as holders under the Agreement ("Holders").
Distribution of principal and interest on the Certificates will be made by
the Trustee directly to Holders of Definitive Certificates in accordance with
the procedures set forth herein and in the Agreement. Interest payments and
any principal payments on each Distribution Date will be made to Holders in
whose names the Definitive Certificates were registered at the close of
business on the related Record Date. Distributions will be made by check
mailed to the address of such Holder as it appears on the register maintained
by the Trustee or, if such Holder holds more than an aggregate principal
amount of such Definitive Certificates to be specified in the Agreement, by
wire transfer to such Holder's account. The final payment on any Certificate
(whether Definitive Certificates or the Certificates registered in the name of
Cede representing the Certificates), however, will be made only upon
presentation and surrender of such Certificate at the office or agency
specified in the notice of final distribution to Certificateholders. The
Trustee will provide such notice to registered Certificateholders not later
than the fifth day of the month of such final distributions. In addition, if
the Certificates are listed on the Luxembourg Stock Exchange, payments of
principal and interest, including the final payment on any Certificate, will
also be made at the offices of Banque Generale du Luxembourg, S.A.
Definitive Certificates will be transferable and exchangeable at the offices
of any of the Transfer Agents and Registrars, which shall initially be CMB and
the Trustee. No service charge will be imposed for any registration of
transfer or exchange, but the Transfer Agent and Registrar may require payment
of a sum sufficient to cover any tax or other governmental charge imposed in
connection therewith. The Transfer Agent and Registrar shall not be required
to register the transfer or exchange of Definitive Certificates for a period
of fifteen days preceding the due date for any payment with respect to such
Definitive Certificates.
INTEREST PAYMENTS
For each Series of Certificates and Class thereof, interest will accrue from
the date specified in the applicable Prospectus Supplement on the applicable
Investor Interest at the applicable Certificate Rate, which may be a fixed,
floating or other type of rate as specified in the related Prospectus
Supplement. Interest will be distributed to Certificateholders on the
Distribution Dates specified in the related Prospectus Supplement. Interest
payments on any Distribution Date will be funded from collections of Finance
Charge Receivables allocated to the Investor Interest during the preceding
Monthly Period or Periods and may be funded from certain investment earnings
on funds held in accounts of the related Trust and, from any applicable Credit
Enhancement, if necessary, or certain other amounts as specified in the
related Prospectus Supplement. If the Distribution Dates for payment of
interest for a Series or Class occur less frequently than monthly, such
collections or other amounts (or the portion thereof allocable to such Class)
may be deposited in one or more trust accounts (each, an "Interest Funding
Account") pending distribution to the Certificateholders of such Series or
Class, as described in the related Prospectus Supplement. If a Series has more
than one class of Certificates, each such Class may have a separate Interest
Funding Account. The Prospectus Supplement relating to each Series of
Certificates and each Class thereof will describe the amounts and sources of
interest payments to be made, the Certificate Rate for each Class thereof,
and, for a Series or each Class thereof bearing interest at a floating
Certificate Rate, the initial Certificate Rate, the dates and the manner for
determining subsequent Certificate Rates, the formula, index or other method
by which such Certificate Rates are determined and any cap or other
limitations on any Certificate Rate.
PRINCIPAL PAYMENTS
Unless otherwise specified in the related Prospectus Supplement, during the
Revolving Period for each Series of Certificates (which begins on the Closing
Date relating to such Series and ends on the day before an Amortization Period
or Accumulation Period begins), no principal payments will be made to the
39
<PAGE>
Certificateholders of such Series. During the Controlled Amortization Period,
Principal Amortization Period or Accumulation Period, as applicable, which
will be scheduled to begin on the date specified in, or determined in the
manner specified in, the related Prospectus Supplement, and during the Rapid
Amortization Period, which will begin upon the occurrence of a Pay Out Event,
principal will be paid to the Certificateholders in the amounts and on
Distribution Dates specified in the related Prospectus Supplement or will be
accumulated in a Principal Funding Account for later distribution to
Certificateholders on the Schedule Payment Date in the amounts specified in
the related Prospectus Supplement. Principal payments for any Series or Class
thereof will be funded from collections of Principal Receivables received
during the related Monthly Period or Periods as specified in the related
Prospectus Supplement and allocated to such Series or Class and from certain
other sources specified in the related Prospectus Supplement. In the case of a
Series with more than one Class of Certificates, the Certificateholders of one
or more Classes may receive payments of principal at different times. The
related Prospectus Supplement will describe the manner, timing and priority of
payments of principal to Certificateholders of each Class.
Funds on deposit in any Principal Funding Account applicable to a Series may
be subject to a guaranteed rate agreement or guaranteed investment contract or
other arrangement specified in the related Prospectus Supplement intended to
assure a minimum rate of return on the investment of such funds. In order to
enhance the likelihood of the payment in full of the principal amount of a
Series of Certificates or Class thereof at the end of an Accumulation Period,
such Series of Certificates or Class thereof may be subject to a principal
payment guaranty or other similar arrangement specified in the related
Prospectus Supplement.
TRANSFER AND ASSIGNMENT OF RECEIVABLES
The Transferor will transfer and assign at the time of formation of each
Trust all of its right, title and interest in and to the Receivables in the
related Accounts and all Receivables thereafter created in such Accounts.
In connection with each such initial transfer and in connection with each
subsequent transfer of Receivables to a Trust, the Transferor will indicate in
its computer files that the related Receivables have been conveyed to such
Trust. In addition, the Transferor will provide to the Trustee with respect to
each Trust computer files or microfiche lists, containing a true and complete
list showing each related Account, identified by account number and by total
outstanding balance on the date of transfer. The Transferor will not deliver
to the related Trustee any other records or agreements relating to the
Accounts or the Receivables, except in connection with additions or removals
of Accounts. Except as stated above, the records and agreements relating to
the Accounts and the Receivables maintained by the Transferor or the Servicer
are not and will not be segregated by the Transferor or the Servicer from
other documents and agreements relating to other credit card accounts and
receivables and are not and will not be stamped or marked to reflect the
transfer of the Receivables to a Trust, but the computer records of the
Transferor are and will be required to be marked to evidence such transfer.
The Transferor will file with respect to each Trust Uniform Commercial Code
financing statements with respect to the Receivables meeting the requirements
of applicable state law. See "Risk Factors--Transfer of Receivables" and
"Certain Legal Aspects of the Receivables."
EXCHANGES
For each Series of Certificates, the related Agreement will provide for the
related Trustee to issue two types of certificates: (i) one or more Series of
Certificates which are transferable and have the characteristics described
below and (ii) the Transferor Certificate, a certificate which evidences the
Transferor Interest, which initially will be held by the Transferor and will
be transferable only as provided in the related Agreement. The related
Prospectus Supplement may also provide that, pursuant to any one or more
Series Supplements, the holder of the Transferor Certificate may tender such
Transferor Certificate, or the Transferor Certificate and the Certificates
evidencing any Series of Certificates issued by such Trust, to the related
Trustee in exchange for one or more new Series (which may include Series
offered pursuant to this Prospectus) and a reissued Transferor Certificate.
Pursuant to each Agreement, the holder of the Transferor Certificate may
define, with respect to any newly issued Series, all Principal Terms of such
new Series. Upon the issuance of an additional Series of Certificates, none of
40
<PAGE>
the Transferor, the Servicer, the Trustee or the related Trust will be
required or will intend to obtain the consent of any Certificateholder of any
other Series previously issued by such Trust. However, as a condition of an
Exchange, the holder of the Transferor Certificate will deliver to the Trustee
written confirmation that the Exchange will not result in the reduction or
withdrawal by any Rating Agency of its rating of any outstanding Series. The
Transferor may offer any Series under a Disclosure Document in offerings
pursuant to this Prospectus or in transactions either registered under the
Securities Act or exempt from registration thereunder directly, through one or
more other underwriters or placement agents, in fixed-price offerings or in
negotiated transactions or otherwise.
Unless otherwise specified in the related Prospectus Supplement, the holder
of the Transferor Certificate may perform Exchanges and define Principal Terms
such that each Series issued under a Trust has a period during which
amortization or accumulation of the principal amount thereof is intended to
occur which may have a different length and begin on a different date than
such period for any other Series. Further, one or more Series may be in their
amortization or accumulation periods while other Series are not. Moreover,
each Series may have the benefit of a Credit Enhancement which is available
only to such Series. Under the related Agreement, the Trustee shall hold any
such form of Credit Enhancement only on behalf of the Series with respect to
which it relates. The holder of the Transferor Certificate may deliver a
different form of Credit Enhancement agreement with respect to each Series.
The holder of the Transferor Certificate may specify different certificate
rates and monthly servicing fees with respect to each Series (or a particular
Class within such Series). The holder of the Transferor Certificate will also
have the option under the related Agreement to vary between Series the terms
upon which a Series (or a particular Class within such Series) may be
repurchased by the Transferor. Additionally, certain Series may be
subordinated to other Series, or Classes within a Series may have different
priorities. There will be no limit to the number of Exchanges that may be
performed under a related Agreement.
Unless otherwise specified in the related Prospectus Supplement, an Exchange
may only occur upon the satisfaction of certain conditions provided in the
related Agreement. Under each Agreement, the holder of the Transferor
Certificate may perform an Exchange by notifying the Trustee at least five
days in advance of the date upon which the Exchange is to occur. Under each
Agreement, the notice will state the designation of any Series to be issued on
the date of the Exchange and, with respect to each such Series (and, if
applicable, each Class thereof): (i) its initial principal amount (or method
for calculating such amount) which amount may not be greater than the current
principal amount of the Transferor Certificate, (ii) its certificate rate (or
method of calculating such rate) and (iii) the provider of Credit Enhancement,
if any, which is expected to provide support with respect to it. Each
Agreement will provide that on the date of the Exchange the Trustee will
authenticate any such Series only upon delivery to it of the following, among
others, (i) a Series Supplement specifying the Principal Terms of such Series,
(ii) (a) an opinion of counsel to the effect that, unless otherwise stated in
the related Series Supplement, the certificates of such Series will be
characterized as indebtedness for federal income tax purposes and (b) a Tax
Opinion, (iii) if required by the related Series Supplement, the form of
Credit Enhancement, (iv) if Credit Enhancement is required by the Series
Supplement, an appropriate Credit Enhancement agreement executed by the
Transferor and the issuer of the Credit Enhancement, (v) written confirmation
from each Rating Agency that the Exchange will not result in such Rating
Agency's reducing or withdrawing its rating on any then outstanding Series
rated by it, (vi) an officer's certificate of the Transferor to the effect
that after giving effect to the Exchange the Transferor would not be required
to add Additional Accounts pursuant to the related Agreement and the
Transferor Interest would be at least equal to the Minimum Transferor Interest
and (vii) the existing Transferor Certificate and, if applicable, the
certificates representing the Series to be exchanged. Upon satisfaction of
such conditions, the Trustee will cancel the existing Transferor Certificate
and the certificates of the exchanged Series, if applicable, and authenticate
the new Series and a new Transferor Certificate.
REPRESENTATIONS AND WARRANTIES
Unless otherwise specified in the Prospectus Supplement relating to a Series
of Certificates, the Transferor will make in each Agreement, certain
representations and warranties to the Trust to the effect that, among other
things, (a) as of the Closing Date, the Transferor was duly incorporated and
in good standing and that it has the
41
<PAGE>
authority to consummate the transactions contemplated by the related Agreement
and (b) as of the relevant Cut-Off Date (or as of the date of the designation
of Additional Accounts), each Account was an Eligible Account (as defined
below). If so provided in the related Prospectus Supplement, if (i) any of
these representations and warranties proves to have been incorrect in any
material respect when made, and continues to be incorrect for 60 days after
notice to the Transferor by the related Trustee or to the Transferor and the
related Trustee by the Certificateholders holding more than 50% of the
Investor Interest of the related Series, and (ii) as a result the interests of
the Certificateholders are materially and adversely affected, and continue to
be materially and adversely affected during such period, then the Trustee or
Certificateholders holding more than 50% of the Investor Interest may give
notice to the Transferor (and to the related Trustee in the latter instance)
declaring that a Pay Out Event has occurred, thereby commencing the Rapid
Amortization Period.
Unless otherwise specified in the Prospectus Supplement relating to a Series
of Certificates, the Transferor will make in each Agreement representations
and warranties to the related Trust relating to the Receivables in such Trust
to the effect, among other things, that (a) as of the Closing Date of the
initial Series of Certificates issued by such Trust, each of the Receivables
then existing is an Eligible Receivable (as defined below) and (b) as of the
date of creation of any new Receivable, such Receivable is an Eligible
Receivable and the representation and warranty set forth in clause (b) in the
immediately following paragraph is true and correct with respect to such
Receivable. In the event (i) of a breach of any representation and warranty
set forth in this paragraph, within 60 days, or such longer period as may be
agreed to by the Trustee, of the earlier to occur of the discovery of such
breach by the Transferor or Servicer or receipt by the Transferor of written
notice of such breach given by the Trustee, or, with respect to certain
breaches relating to prior liens, immediately upon the earlier to occur of
such discovery or notice and (ii) that as a result of such breach, the
Receivables in the related Accounts are charged off as uncollectible, the
Trust's rights in, to or under the Receivables or its proceeds are impaired or
the proceeds of such Receivables are not available for any reason to the Trust
free and clear of any lien, the Transferor shall accept reassignment of each
Principal Receivable as to which such breach relates (an "Ineligible
Receivable") on the terms and conditions set forth below; provided, however,
that no such reassignment shall be required to be made with respect to such
Ineligible Receivable if, on any day within the applicable period (or such
longer period as may be agreed to by the Trustee), the representations and
warranties with respect to such Ineligible Receivable shall then be true and
correct in all material respects. The Transferor shall accept reassignment of
each such Ineligible Receivable by directing the Servicer to deduct the amount
of each such Ineligible Receivable from the aggregate amount of Principal
Receivables used to calculate the Transferor Interest. In the event that the
exclusion of an Ineligible Receivable from the calculation of the Transferor
Interest would cause the Transferor Interest to be a negative number, on the
date of reassignment of such Ineligible Receivable the Transferor shall make a
deposit in the Principal Account in immediately available funds in an amount
equal to the amount by which the Transferor Interest would be reduced below
zero. Any such deduction or deposit shall be considered a repayment in full of
the Ineligible Receivable. The obligation of the Transferor to accept
reassignment of any Ineligible Receivable is the sole remedy respecting any
breach of the representations and warranties set forth in this paragraph with
respect to such Receivable available to the Certificateholders or the Trustee
on behalf of Certificateholders.
Unless otherwise specified in the Prospectus Supplement relating to a Series
of Certificates, the Transferor will make in each Agreement representations
and warranties to the related Trust to the effect, among other things, that as
of the Closing Date of the initial Series of Certificates issued by such Trust
(a) the related Agreement will constitute a legal, valid and binding
obligation of the Transferor and (b) the transfer of Receivables by it to the
Trust under the Agreement will constitute either a valid transfer and
assignment to the Trust of all right, title and interest of the Transferor in
and to the Receivables (other than Receivables in Additional Accounts),
whether then existing or thereafter created and the proceeds thereof
(including amounts in any of the accounts established for the benefit of
Certificateholders) or the grant of a first priority perfected security
interest in such Receivables (except for certain tax liens) and the proceeds
thereof (including amounts in any of the accounts established for the benefit
of Certificateholders), which is effective as to each such Receivable upon the
creation thereof. In the event of a breach of any of the representations and
warranties described in this paragraph, either the Trustee or the Holders of
Certificates evidencing undivided interests in the Trust aggregating more than
50% of the aggregate Investor Interest of all Series outstanding under such
Trust may direct the Transferor to accept
42
<PAGE>
reassignment of the Trust Portfolio within 60 days of such notice, or within
such longer period specified in such notice. The Transferor will be obligated
to accept reassignment of such Receivables on a Distribution Date occurring
within such applicable period. Such reassignment will not be required to be
made, however, if at any time during such applicable period, or such longer
period, the representations and warranties shall then be true and correct in
all material respects. The deposit amount for such reassignment will be equal
to the Investor Interest and Enhancement Invested Amount, if any, for each
Series outstanding under such Trust on the last day of the Monthly Period
preceding the Distribution Date on which the reassignment is scheduled to be
made less the amount, if any, previously allocated for payment of principal to
such Certificateholders or such holders of the Enhancement Invested Amount or
the Collateral Interest, if any, on such Distribution Date, plus an amount
equal to all accrued and unpaid interest less the amount, if any, previously
allocated for payment of such interest on such Distribution Date. The payment
of the reassignment deposit amount and the transfer of all other amounts
deposited for the preceding month in the Distribution Account will be
considered a payment in full of the Investor Interest and the Enhancement
Invested Amount, if any, for each such Series required to be repurchased and
will be distributed upon presentation and surrender of the Certificates for
each such Series. The obligation of the Transferor to make any such deposit
will constitute the sole remedy respecting a breach of the representations and
warranties available to the Trustee or such Certificateholders.
Unless otherwise specified in the related Prospectus Supplement, with
respect to each Series of Certificates, an "Eligible Account" will mean, as of
the relevant Cut-Off Date (or, with respect to Additional Accounts, as of
their date of designation for inclusion in the related Trust), each Account
owned by the Transferor (a) which was in existence and maintained with the
Transferor, (b) which is payable in United States dollars, (c) the obligor of
which has provided, as his most recent billing address, an address located in
the United States or its territories or possessions, (d) which has not been
classified by the Transferor as counterfeit, deleted, fraudulent, stolen or
lost, (e) which has either been originated by the Transferor or acquired by
the Transferor from other institutions and (f) which has not been charged off
by the Transferor in its customary and usual manner for charging off such
Account as of the Cut-Off Date and, with respect to Additional Accounts, as of
their date of designation for inclusion in the Trust. Under each Agreement,
the definition of Eligible Account may be changed by amendment to such
Agreement without the consent of the related Certificateholders if (i) the
Transferor delivers to the Trustee a certificate of an authorized officer to
the effect that, in the reasonable belief of the Transferor, such amendment
will not as of the date of such amendment adversely affect in any material
respect the interest of such Certificateholders and (ii) such amendment will
not result in a withdrawal or reduction of the rating of any outstanding
Series under the related Trust.
Unless otherwise specified in the related Prospectus Supplement, with
respect to each Series of Certificates, an "Eligible Receivable" will be
defined to mean each Receivable (a) which has arisen under an Eligible
Account, (b) which was created in compliance, in all material respects, with
all requirements of law applicable to the Transferor, and pursuant to a credit
card agreement which complies in all material respects with all requirements
of law applicable to the Transferor, (c) with respect to which all consents,
licenses or authorizations of, or registrations with, any governmental
authority required to be obtained or given by the Transferor in connection
with the creation of such Receivable or the execution, delivery, creation and
performance by the Transferor of the related credit card agreement have been
duly obtained or given and are in full force and effect as of the date of the
creation of such Receivable, (d) as to which, at the time of its creation, the
Transferor or the related Trust has good title free and clear of all liens and
security interests arising under or through the Transferor (other than certain
tax liens for taxes not then due or which the Transferor is contesting), (e)
which is the legal, valid and binding payment obligation of the obligor
thereon, legally enforceable against such obligor in accordance with its terms
(with certain bankruptcy-related exceptions) and (f) which constitutes an
"account" or "general intangible" under Article 9 of the UCC as then in effect
in the State of Delaware.
Unless otherwise specified in the Prospectus Supplement relating to a Series
of Certificates, it will not be required or anticipated that the Trustee will
make any initial or periodic general examination of the Receivables or any
records relating to the Receivables for the purpose of establishing the
presence or absence of defects, compliance with the Transferor's
representations and warranties or for any other purpose. The Servicer,
however,
43
<PAGE>
will deliver to the Trustee on or before March 31 of each year (or such other
date specified in the related Prospectus Supplement) an opinion of counsel
with respect to the validity of the security interest of the Trust in and to
the Receivables and certain other components of the Trust.
ADDITION OF TRUST ASSETS
As described above under "The Receivables," the Transferor will have the
right to designate for each Trust, from time to time, Additional Accounts to
be included as Accounts with respect to such Trust. In addition, the
Transferor will be required to designate Additional Accounts under the
circumstances and in the amounts specified in the related Prospectus
Supplement. The Transferor will convey to the related Trust its interest in
all Receivables of such Additional Accounts, whether such Receivables are then
existing or thereafter created.
Each Additional Account must be an Eligible Account at the time of its
designation. However, Additional Accounts may not be of the same credit
quality as the initial Accounts. Additional Accounts may have been originated
by the Transferor using credit criteria different from those which were
applied by the Transferor to the initial Accounts or may have been acquired by
the Transferor from an institution which may have had different credit
criteria.
In addition to or in lieu of Additional Accounts, the Transferor will be
permitted to add to the related Trust participations representing undivided
interests in a pool of assets primarily consisting of receivables arising
under consumer revolving credit card accounts owned by the Transferor and
collections thereon ("Participations"). Participations may be evidenced by one
or more certificates of ownership issued under a separate pooling and
servicing agreement or similar agreement (a "Participation Agreement") entered
into by the Transferor which entitles the certificateholder to receive
percentages of collections generated by the pool of assets subject to such
Participation Agreement from time to time and to certain other rights and
remedies specified therein. Participations may have their own credit
enhancement, pay out events, servicing obligations and servicer defaults, all
of which are likely to be enforceable by a separate trustee under the
Participation Agreement and may be different from those specified herein. The
rights and remedies of the related Trust as the holder of a Participation (and
therefore the Certificateholders) will be subject to all the terms and
provisions of the related Participation Agreement. Each Agreement may be
amended to permit the addition of a Participation in a Trust without the
consent of the related Certificateholders if (i) the Transferor delivers to
the Trustee a certificate of an authorized officer to the effect that, in the
reasonable belief of the Transferor, such amendment will not as of the date of
such amendment adversely affect in any material respect the interest of such
Certificateholders, and (ii) such amendment will not result in a withdrawal or
reduction of the rating of any outstanding Series under the related Trust. To
the extent required pursuant to the Securities Act, any Participations
transferred to a Trust (a) will have been (i) registered under the Securities
Act or (ii) held for at least the Rule 144(k) holding period, and (b) will be
acquired in secondary market transactions not from the issuer or an affiliate.
Except as described in the following paragraph, a conveyance by the
Transferor to a Trust of Receivables in Additional Accounts or Participations
is subject to the following conditions, among others: (i) the Transferor shall
give the Trustee, each Rating Agency and the Servicer written notice that such
Additional Accounts or Participations will be included, which notice shall
specify the approximate aggregate amount of the Receivables or interests
therein to be transferred; (ii) the Transferor shall have delivered to the
Trustee a written assignment (including an acceptance by the Trustee on behalf
of the Trust for the benefit of the Certificateholders) as provided in the
Agreement relating to such Additional Accounts or Participations (the
"Assignment") and, the Transferor shall have delivered to the Trustee a
computer file or microfiche list, dated the date of such Assignment,
containing a true and complete list of such Additional Accounts or
Participations; (iii) the Transferor shall represent and warrant that (x) each
Additional Account is, as of the Addition Date, an Eligible Account, and each
Receivable in such Additional Account is, as of the Addition Date, an Eligible
Receivable, (y) no selection procedures believed by the Transferor to be
materially adverse to the interests of the Certificateholders were utilized in
selecting the Additional Accounts from the available Eligible Accounts from
the Bank Portfolio, and (z) as of the Addition Date, the Transferor is not
insolvent; (iv) the Transferor shall deliver an opinion of counsel with
respect to the security interest of the Trust in the Receivables in the
Additional
44
<PAGE>
Accounts or the Participations transferred to the Trust and (v) under certain
circumstances, if any, specified in the related Prospectus Supplement with
respect to Additional Accounts and Participations, each Rating Agency then
rating any Series of Certificates outstanding under such Trust shall have
consented to the addition of such Additional Accounts or Participations.
If specified in the related Prospectus Supplement, Additional Accounts may
be automatically added to the Accounts on an ongoing basis; provided, however,
that such automatic inclusion and transfer shall not occur with respect to any
such account if: (i) such account does not qualify as an Eligible Account or
(ii) the Transferor otherwise designates such account as an account which is
not to be included as an Account. The Transferor will deliver to the Trustee a
computer file or microfiche list of all such included Accounts. In connection
with any such automatic addition of Additional Accounts, the Transferor will
be required to satisfy the conditions specified in clause (iii) in the
preceding paragraph.
In addition to the periodic reports otherwise required to be filed by the
Servicer with the Commission pursuant to the Exchange Act, the Servicer
intends to file, on behalf of each Trust, a Report on Form 8-K with respect to
any addition to a Trust of Receivables in Additional Accounts or
Participations that would have a material effect on the composition of the
assets of such Trust.
REMOVAL OF ACCOUNTS
Unless otherwise specified in the Prospectus Supplement relating to a Series
of Certificates, subject to the conditions set forth in the next succeeding
sentence, the Transferor may, but shall not be obligated to, designate from
time to time (which may be restricted to certain periods if so specified in
the related Prospectus Supplement) certain Accounts to be Removed Accounts,
all Receivables in which shall be subject to deletion and removal from the
related Trust; provided, however, that the Transferor shall not make more than
one such designation in any Monthly Period. The Transferor will be permitted
to designate and require reassignment to it of the Receivables from Removed
Accounts only upon satisfaction of the following conditions: (i) the removal
of any Receivables of any Removed Accounts shall not, in the reasonable belief
of the Transferor, cause a Pay Out Event for any Series to occur; (ii) the
Transferor shall have delivered to the related Trustee for execution a written
assignment and a computer file or microfiche list containing a true and
complete list of all Removed Accounts identified by account number and the
aggregate amount of the Receivables in such Removed Accounts; (iii) the
Transferor shall represent and warrant that no selection procedures believed
by the Transferor to be materially adverse to the interests of the holders of
any Series of Certificates outstanding under such Trust were utilized in
selecting the Removed Accounts to be removed from such Trust; (iv) each Rating
Agency then rating each Series of Certificates outstanding under such Trust
shall have received notice of such proposed removal of Accounts and the
Transferor shall have received notice from each such Rating Agency that such
proposed removal will not result in a downgrade of its then current rating for
any such Series; (v) the aggregate amount of Principal Receivables of the
Accounts then existing less the aggregate amount of Principal Receivables of
the Removed Accounts shall not be less than the amount, if any, specified for
any period specified; (vi) the Principal Receivables of the Removed Accounts
shall not equal or exceed 5% (or such other percentage specified in the
related Prospectus Supplement) of the aggregate amount of the Principal
Receivables in such Trust at such time; provided, that if any Series has been
paid in full, the Principal Receivables in such Removed Accounts may equal or
approximately equal the initial Investor Interest or highest Investor Interest
at any time during the Revolving Period, as applicable, of such Series; (vii)
such other conditions as are specified in the related Prospectus Supplement;
and (viii) the Transferor shall have delivered to the Trustee an officer's
certificate confirming the items set forth in clauses (i) through (vii) above.
Notwithstanding the above, the Transferor will be permitted to designate as a
Removed Account without the consent of the related Trustee, Certificateholders
or Rating Agencies any Account that has a zero balance and which the
Transferor will remove from its computer file.
COLLECTION AND OTHER SERVICING PROCEDURES
For each Series of Certificates, the Servicer will be responsible for
servicing and administering the Receivables in accordance with the Servicer's
policies and procedures for servicing credit card receivables comparable to
the Receivables. The Servicer will be required to maintain fidelity bond
coverage insuring against
45
<PAGE>
losses through wrongdoing of its officers and employees who are involved in
the servicing of credit card receivables covering such actions and in such
amounts as the Servicer believes to be reasonable from time to time.
DISCOUNT OPTION
The Transferor may at any time designate a specified fixed or variable
percentage as specified in the related Prospectus Supplement (the "Discount
Percentage") of the amount of Receivables arising in the Accounts with respect
to the related Trust on and after the date such option is exercised that
otherwise would have been treated as Principal Receivables to be treated as
Finance Charge Receivables (the "Discount Option Receivables"). Such
designation will become effective upon satisfaction of the requirements set
forth in the related Agreement, including confirmation by each Rating Agency
in writing of its then current rating on each outstanding Series of the
related Trust. Collections of Receivables to which such Discount Option is
applicable that otherwise would be Principal Receivables will be deemed
collections of Finance Charge Receivables and will be applied accordingly,
unless otherwise provided in the related Prospectus Supplement.
TRUST ACCOUNTS
Unless otherwise specified in the Prospectus Supplement relating to a Trust,
the related Trustee will establish and maintain in the name of the Trust two
separate accounts in a segregated trust account (which need not be a deposit
account), a "Finance Charge Account" and a "Principal Account," for the
benefit of the Certificateholders of all related Series, including any Series
offered pursuant to this Prospectus. Each Agreement will provide that the
Trustee shall have the power to establish series accounts in Series
Supplements, including an Interest Funding Account, a Principal Funding
Account, a Pre-Funding Account or such other account specified in the related
Series Supplement, each of which series accounts shall be held for the benefit
of the Certificateholders of the related Series and for the purposes set forth
in the related Prospectus Supplement. The Trustee will also establish one or
more "Distribution Accounts" each of which shall be Eligible Deposit Accounts.
The Servicer will establish and maintain, in the name of the Trust, for the
benefit of Certificateholders of all Series issued thereby including any
Series offered pursuant to this Prospectus, a Collection Account, which will
be an Eligible Deposit 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 accounts,
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 which signifies investment grade. "Eligible Institution" means (a)
the Servicer, (b) a depository institution (which may be the Trustee or an
affiliate) organized under the laws of the United States or any one of the
states thereof which at all times (i) has a certificate of deposit rating of
"P-1" by Moody's Investors Service, Inc. ("Moody's"), (ii) has either (x) a
long-term unsecured debt rating of "AAA" by Standard & Poor's or (y) a
certificate of deposit rating of "A-1+" by Standard & Poor's Ratings Service
("Standard & Poor's") and (iii) is a member of the FDIC or (c) any other
institution that is acceptable to the Rating Agencies. Unless otherwise
specified in the related Prospectus Supplement, funds in the Principal Account
and the Finance Charge Account for each Trust will be invested, at the
direction of the Servicer, in (i) obligations fully guaranteed by the United
States of America, (ii) demand deposits, time deposits or certificates of
deposit of depository institutions or trust companies, the certificates of
deposit of which have a rating in the highest rating category from Moody's and
Standard & Poor's (unless otherwise specified in the related Prospectus
Supplement), (iii) commercial paper having, at the time of the Trust's
investment, a rating in the highest rating category from Moody's and Standard
& Poor's (unless otherwise specified in the related Prospectus Supplement),
(iv) bankers' acceptances issued by any depository institution or trust
company described in clause (ii) above, (v) certain repurchase agreements
transacted with either (a) an entity subject to the United States federal
bankruptcy code or (b) a financial institution insured by the FDIC or any
broker-dealer with "retail customers" that is under the jurisdiction of the
Securities Investors Protection Corp. and (vi) any other investment that by
its terms converts to cash within a finite time period if the Rating Agency
confirms in writing that such investment will not adversely affect its then
current rating or ratings of the Investor Certificates
46
<PAGE>
(such investments, "Permitted Investments"). Unless otherwise specified in the
related Prospectus Supplement, any earnings (net of losses and investment
expenses) on funds in the Finance Charge Account or the Principal Account will
be paid to the Transferor. Funds in any other series account established by a
Series Supplement may be invested in Permitted Investments or otherwise as
provided in the related Prospectus Supplement. The Servicer will have the
revocable power to withdraw funds from the Collection Account and to instruct
the Trustee to make withdrawals and payments from the Finance Charge Account
and the Principal Account for the purpose of carrying out the Servicer's
duties under the Agreement. Unless otherwise specified in the related
Prospectus Supplement, CMB will be the paying agent (the "Paying Agent") and
will have the revocable power to withdraw funds from the Distribution Account
for the purpose of making distributions to the Certificateholders.
FUNDING PERIOD
For any Series of Certificates, the related Prospectus Supplement may
specify that during a Funding Period specified in such Prospectus Supplement,
the Pre-Funding Amount, which may be up to 100% of the aggregate principal
amount of the Certificates of such Series, will be held in a Pre-Funding
Account pending the transfer of additional Receivables to the Trust or pending
the reduction of the Investor Interests of other Series issued by the related
Trust. The Prospectus Supplement relating to a Series of Certificates will
specify that the Funding Period for such Series will end on a specified date
certain or earlier under certain circumstances, such as the commencement of
the Rapid Amortization Period. The actual length of a Funding Period for a
Series may be contingent upon another event such as the generation by the
Transferor of additional Principal Receivables or the term of the Amortization
Period or Accumulation Period of a related Companion Series. Generally, the
Amortization Period or Accumulation Period of a related Companion Series will
depend upon the payment rate of the Receivables in the Trust. See "Maturity
Assumptions." Until the end of the Funding Period of a Series paired with a
related Companion Series, the Certificates of such Series will evidence an
undivided interest in Receivables to the extent of the Investor Interest in
such Series and in funds on deposit in the Pre-Funding Account and Permitted
Investments of such funds to the extent of the difference between the Full
Investor Interest and the initial Investor Interest. The related Prospectus
Supplement will specify the initial Investor Interest with respect to such
Series, the Full Investor Interest and the date by which the Investor Interest
is expected to equal the Full Investor Interest. The Investor Interest will
increase as Receivables are delivered to the related Trust or as the Investor
Interests of other Series of the related Trust are reduced. The Investor
Interest may also decrease due to Investor Charge-Offs.
During the Funding Period, funds on deposit in the Pre-Funding Account for a
Series of Certificates will be withdrawn and paid to the Transferor to the
extent of any increases in the Investor Interest. In the event that the
Investor Interest does not for any reason equal the Full Investor Interest by
the end of the Funding Period, any amount remaining in the Pre-Funding Account
and any additional amounts specified in the related Prospectus Supplement will
be payable to the Certificateholders of such Series in the manner and at such
time as set forth in the related Prospectus Supplement. Such event will result
in an early repayment of Certificate principal and the Certificateholders of
such Series will not receive the benefit of the Certificate Rate for the
period of time originally expected on the amount of such early repayment.
If so specified in the related Prospectus Supplement, monies in the Pre-
Funding Account will be invested by the Trustee in Permitted Investments or
will be subject to a guaranteed rate or investment agreement or other similar
arrangement, and, in connection with each Distribution Date during the Funding
Period, investment earnings on funds in the Pre-Funding Account during the
related Monthly Period will be withdrawn from the Pre-Funding Account and
deposited, together with any applicable payment under a guaranteed rate or
investment agreement or other similar arrangement, into the Finance Charge
Account for distribution in respect of interest on the Certificates of the
related Series in the manner specified in the related Prospectus Supplement.
COMPANION SERIES
If so provided in the Prospectus Supplement relating to a Series, each such
Series is subject to being paired with a Companion Series issued by the
related Trust on or prior to the commencement of the Amortization Period
47
<PAGE>
or Accumulation Period for such Series. As the Investor Interest of the Series
having a Companion Series is reduced, the Investor Interest in the related
Trust of the Companion Series will be increased. If a Pay Out Event occurs
with respect to the Series having a Companion Series or with respect to the
Companion Series when the Series is in an Amortization Period, the Investor
Percentage in respect of collections of Principal Receivables for the Series
and the Investor Percentage in respect of collections of Principal Receivables
for the Companion Series may be reset as provided in the related Prospectus
Supplement. Resetting of such Investor Percentage may have the effect of
reducing the amount of collections of Principal Receivables allocable to the
Series that is paired with the Companion Series. While the issuance of a
Companion Series will be subject to the conditions described under "--
Exchanges," there can be no assurance that the terms of a Companion Series
might not have an impact on the timing or amount of payments received on the
Series with which it is paired. See "Maturity Assumptions."
INVESTOR PERCENTAGE AND TRANSFEROR PERCENTAGE
For each Trust, the Servicer will allocate between the Investor Interest of
each Series issued by such Trust (and between each Class of each Series) and
the Transferor Interest, and, in certain circumstances, the interest of
certain Credit Enhancement Providers, all amounts collected on Finance Charge
Receivables, all amounts collected on Principal Receivables and all
Receivables in Defaulted Accounts. The Servicer will make each allocation by
reference to the applicable Investor Percentage of each Series and the
Transferor Percentage, and, in certain circumstances, the percentage interest
of certain Credit Enhancement Providers (the "Credit Enhancement Percentage")
with respect to such Series. The Prospectus Supplement relating to a Series
will specify the Investor Percentage and, if applicable, the Credit
Enhancement Percentage (or the method of calculating such percentage) with
respect to the allocations of collections of Principal Receivables, Finance
Charge Receivables and Receivables in Defaulted Accounts during the Revolving
Period, any Amortization Period and the Accumulation Period, as applicable. In
addition, for each Series of Certificates having more than one Class, the
related Prospectus Supplement will specify the method of allocation between
each Class.
The Transferor Percentage will, in all cases, be equal to 100% minus the
aggregate Investor Percentages and, if applicable, the Credit Enhancement
Percentages, for all Series then outstanding.
APPLICATION OF COLLECTIONS
Unless otherwise specified in the related Prospectus Supplement, except as
otherwise provided below, the Servicer will deposit into the Collection
Account for the related Trust, no later than the second business day (or such
other day specified in the related Prospectus Supplement) following the date
of processing, any payment collected by the Servicer on the Receivables. On
the same day as any such deposit is made, the Servicer will make the deposits
and payments to the accounts and parties as indicated below; provided,
however, that for as long as CMB remains the Servicer under the related
Agreement, and (a)(i) the Servicer provides to the Trustee a letter of credit
or other credit support acceptable to each Rating Agency and (ii) the
Transferor shall not have received a notice from the Rating Agency that such
letter of credit would result in the lowering of such Rating Agency's then
existing rating of the related Series (and if a Trust has issued more than one
Series, any Series of certificates then issued and outstanding thereunder), or
(b) the Servicer has and maintains a minimum certificate of deposit rating of
P-1 by Moody's and A-1 by Standard & Poor's unless otherwise specified in the
related Prospectus Supplement and deposit insurance provided by either the
Bank Insurance Fund ("BIF") or the Savings Association Insurance Fund
("SAIF"), then the Servicer may make such deposits and payments on a monthly
or other periodic basis on the Transfer Date in an amount equal to the net
amount of such deposits and payments which would have been made had the
conditions of this proviso not applied.
Unless otherwise specified in the related Prospectus Supplement,
notwithstanding anything in the related Agreement to the contrary, whether the
Servicer is required to make monthly or daily deposits from the Collection
Account into the Finance Charge Account or the Principal Account, with respect
to any Monthly Period, (i) the Servicer will only be required to deposit
Collections from the Collection Account into the Finance Charge Account, the
Principal Account or any series account established by a related Series
Supplement up to
48
<PAGE>
the required amount to be deposited into any such account or, without
duplication, distributed on or prior to the related Distribution Date to
Certificateholders or to the provider of Enhancement and (ii) if at any time
prior to such Distribution Date the amount of Collections deposited in the
Collection Account exceeds the amount required to be deposited pursuant to
clause (i) above, the Servicer will be permitted to withdraw the excess from
the Collection Account.
Unless otherwise specified in the related Prospectus Supplement, the
Servicer will withdraw the following amounts from the Collection Account for
application as indicated:
(a) an amount equal to the Transferor Percentage of the aggregate amount
of such deposits in respect of Principal Receivables and Finance Charge
Receivables, respectively, will be paid or held for payment to the holder
of the Transferor Certificate, provided that if after giving effect to the
inclusion in the related Trust of all Receivables on or prior to such date
of processing the Transferor Interest would be reduced below the Minimum
Transferor Interest the excess will be deposited in the Principal Account
or other specified account and will be used as described in the related
Prospectus Supplement, including for payment to other Series of
Certificates issued by the related Trust;
(b) an amount equal to the applicable Investor Percentage of the
aggregate amount of such deposits in respect of Finance Charge Receivables
will be deposited into the Finance Charge Account for allocation and
distribution as described in the related Prospectus Supplement;
(c) during the Revolving Period, an amount equal to the applicable
Investor Percentage of the aggregate amount of such deposits in respect of
Principal Receivables will be invested or held for investment in Principal
Receivables, provided that if after giving effect to the inclusion in the
related Trust of all Receivables on or prior to such date of processing the
Transferor Interest would be reduced below the Minimum Transferor Interest
the excess will be deposited in the Principal Account or other specified
account and will be used as described in the related Prospectus Supplement,
including for payment to other Series of Certificates issued by the related
Trust;
(d) during the Controlled Amortization Period or Accumulation Period, as
applicable, an amount equal to the applicable Investor Percentage of such
deposits in respect of Principal Receivables up to the amount, if any, as
specified in the related Prospectus Supplement will be deposited in the
Principal Account or Principal Funding Account, as applicable, for
allocation and distribution to Certificateholders as described in the
related Prospectus Supplement, provided that if collections of Principal
Receivables exceed the principal payments which may be allocated or
distributed to Certificateholders, the amount of such excess will be paid
to the holder of the Transferor Certificate until the Transferor Interest
is reduced to the Minimum Transferor Interest, and thereafter will be
deposited in the Principal Account or other specified account and will be
used as described in the related Prospectus Supplement, including for
payment to other Series of Certificates issued by the related Trust; and
(e) during the Principal Amortization Period, if applicable, and the
Rapid Amortization Period, an amount equal to the applicable Investor
Percentage of such deposits in respect of Principal Receivables will be
deposited into the Principal Account for application and distribution as
provided in the related Prospectus Supplement.
In the case of a Series of Certificates having more than one Class, the
amounts in the Collection Account will be allocated and applied to each Class
in the manner and order of priority described in the related Prospectus
Supplement.
Any amounts collected in respect of Principal Receivables and not paid to
the Transferor because the Transferor Interest is zero as described above
(with respect to each Series, "Unallocated Principal Collections"), together
with any adjustment payments as described below, will be paid to and held in
the Principal Account and paid to the Transferor if and to the extent that the
Transferor Interest is equal to or greater than zero. If an Amortization
Period or Accumulation Period has commenced, Unallocated Principal Collections
will be held for distribution to the Certificateholders on the related
Distribution Date or accumulated for distribution on the
49
<PAGE>
Scheduled Payment Date, as applicable, and distributed to the
Certificateholders of each Class or held for and distributed to the
Certificateholders of other Series of Certificates issued by the related Trust
in the manner and order of priority specified in the related Prospectus
Supplement.
SHARED EXCESS FINANCE CHARGE COLLECTIONS
Any Series offered hereby may be included in a Group. The Prospectus
Supplement relating to a Series will specify whether such Series will be
included in a Group and will identify any previously issued Series included in
such Group. If so specified in the related Prospectus Supplement, the
Certificateholders of a Series within a Group or any Class thereof may be
entitled to receive all or a portion of Excess Finance Charge Collections with
respect to another Series within such Group to cover any shortfalls with
respect to amounts payable from collections of Finance Charge Receivables
allocable to such Series or Class. See "--Application of Collections" and "--
Defaulted Receivables; Rebates and Fraudulent Charges; Investor Charge-Offs."
SHARED PRINCIPAL COLLECTIONS
If so specified in the related Prospectus Supplement, to the extent that
collections of Principal Receivables and certain other amounts that are
allocated to the Investor Interest of any Series are not needed to make
payments or deposits with respect to such Series, such collections will
constitute Shared Principal Collections and will be applied to cover principal
payments due to or for the benefit of Certificateholders of other Series. If
so specified in the related Prospectus Supplement, the allocation of Shared
Principal Collections may be among Series within a Group. Any such
reallocation will not result in a reduction in the Investor Interest of the
Series to which such collections were initially allocated.
DEFAULTED RECEIVABLES; REBATES AND FRAUDULENT CHARGES; INVESTOR CHARGE-OFFS
Unless otherwise specified in the related Prospectus Supplement, for each
Series of Certificates, on the fourth business day preceding each Transfer
Date (the "Determination Date"), the Servicer will calculate the aggregate
Investor Default Amount for the preceding Monthly Period, which will be equal
to the aggregate amount of the Investor Percentage of Principal Receivables in
Defaulted Accounts; that is, Accounts which in such Monthly Period were
written off as uncollectible in accordance with the Servicer's policies and
procedures for servicing credit card receivables, comparable to the
Receivables. In the case of a Series of Certificates having more than one
Class, the Investor Default Amount will be allocated among the Classes in the
manner described in the related Prospectus Supplement. If so provided in the
related Prospectus Supplement, an amount equal to the Investor Default amount
for any Monthly Period may be paid from other amounts, including collections
in the Finance Charge Account or from Credit Enhancement, and applied to pay
principal to Certificateholders or the holder of the Transferor Certificate,
as appropriate. In the case of a Series of Certificates having one or more
Classes of Subordinated Certificates, the related Prospectus Supplement may
provide that all or a portion of amounts otherwise allocable to such
Subordinated Certificates may be paid to the Senior Certificateholders to make
up any Investor Default Amount allocable to such Senior Certificateholders.
With respect to each Series of Certificates, the Investor Interest with
respect to such Series will be reduced by the amount of Investor Charge-Offs
for any Monthly Period. Investor Charge-Offs will be reimbursed on any
Distribution Date to the extent amounts on deposit in the Finance Charge
Account and otherwise available therefor exceed such interest, fees and any
aggregate Investor Default Amount payable on such date. Such reimbursement of
Investor Charge-Offs will result in an increase in the Investor Interest with
respect to such Series. In the case of a Series of Certificates having more
than one Class, the related Prospectus Supplement will describe the manner and
priority of allocating Investor Charge-Offs and reimbursements thereof among
the Investor Interests of the several Classes.
If the Servicer adjusts the amount of any Principal Receivable because of
transactions occurring in respect of a rebate or refund to a cardholder, or
because such Principal Receivable was created in respect of merchandise which
was refused or returned by a cardholder, then the amount of the Transferor
Interest in the related Trust
50
<PAGE>
will be reduced, on a net basis, by the amount of the adjustment. In addition,
the Transferor Interest in such Trust will be reduced, on a net basis, as a
result of transactions in respect of any Principal Receivable which was
discovered as having been created through a fraudulent or counterfeit charge.
In the event that the exclusion of such Receivables from the calculation of
the Transferor Interest at such time would cause the Transferor Interest to be
less than the Minimum Transferor Interest, the Transferor will be required to
pay an amount equal to such deficiency to the Principal Account.
DEFEASANCE
If so specified in the Prospectus Supplement relating to a Series, the
Transferor may terminate its substantive obligations in respect of such Series
or the related Trust by depositing with the Trustee, from amounts
representing, or acquired with, collections of Receivables, money or Permitted
Investments sufficient to make all remaining scheduled interest and principal
payments on such Series or all outstanding Series of Certificates of such
Trust, as the case may be, on the dates scheduled for such payments and to pay
all amounts owing to any Credit Enhancement Provider with respect to such
Series or all outstanding Series, as the case may be, if such action would not
result in a Pay Out Event for any Series. Prior to its first exercise of its
right to substitute money or Permitted Investments for Receivables, the
Transferor will deliver to the Trustee (i) an opinion of counsel to the effect
that such deposit and termination of obligations will not result in the
related Trust being required to register as an "investment company" within the
meaning of the Investment Company Act of 1940, as amended and (ii) a Tax
Opinion.
FINAL PAYMENT OF PRINCIPAL; TERMINATION
With respect to each Series, the Certificates will be subject to optional
repurchase by the Transferor on any Distribution Date after the total Investor
Interest of such Series and the Enhancement Invested Amount, if any, with
respect to such Series, is reduced to an amount less than or equal to 5% of
the initial Investor Interest, if any (or such other amount specified in the
related Prospectus Supplement), if certain conditions set forth in the related
Agreement are met. Unless otherwise specified in the related Prospectus
Supplement, the repurchase price will be equal to the total Investor Interest
of such Series (less the amount, if any, on deposit in any Principal Funding
Account with respect to such Series), plus the Enhancement Invested Amount, if
any, with respect to such Series, plus accrued and unpaid interest on the
Certificates and interest or other amounts payable on the Enhancement Invested
Amount or the Collateral Interest, if any, through the day preceding the
Distribution Date on which the repurchase occurs.
The Certificates of each Series will be retired on the day following the
Distribution Date on which the final payment of principal is scheduled to be
made to the Certificateholders, whether as a result of optional reassignment
to the Transferor or otherwise. Each Prospectus Supplement will specify the
final date on which principal and interest with respect to the related Series
of Certificates will be scheduled to be distributed (the "Series Termination
Date"); provided, however, that the Certificates may be subject to prior
termination as provided above. If the Investor Interest is greater than zero
on the Series Termination Date, the Trustee or Servicer may be required to
sell or cause to be sold certain Receivables in the manner provided in the
related Agreement and Series Supplement and to pay the net proceeds of such
sale and any collections on the Receivables, in an amount at least equal to
the sum of the Investor Interest and the Enhancement Invested Amount, if any,
with respect to such Series plus accrued interest due thereon.
Unless the Servicer and the holder of the Transferor Certificate instruct
the Trustee otherwise, each Trust will terminate on the earlier of (a) the day
after the Distribution Date on which the aggregate Investor Interest and
Enhancement Invested Amount or Collateral Interest, if any, with respect to
each Series outstanding is zero, (b) August 31, 2016, or (c) if the
Receivables are sold, disposed of or liquidated following the occurrence of an
Insolvency Event, immediately following such sale, disposition or liquidation
(such date, the "Trust Termination Date"). Upon the termination of each Trust
and the surrender of the Transferor Certificate, the Trustee shall convey to
the holder of the Transferor Certificate all right, title and interest of the
Trust in and to the Receivables and other funds of the Trust.
51
<PAGE>
PAY OUT EVENTS
Unless otherwise specified in the related Prospectus Supplement, as
described above, the Revolving Period will continue through the date specified
in the related Prospectus Supplement unless a Pay Out Event occurs prior to
such date. A Pay Out Event occurs with respect to all Series issued by a Trust
upon the occurrence of either of the following events:
(a) certain events of insolvency or receivership relating to the
Transferor;
(b) the Transferor is unable for any reason to transfer Receivables to
such Trust in accordance with the provisions of the related Agreement; or
(c) such Trust becomes an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
In addition, a Pay Out Event may occur with respect to any Series upon the
occurrence of any other event specified in the related Prospectus Supplement.
On the date on which a Pay Out Event is deemed to have occurred, the Rapid
Amortization Period will commence. If, because of the occurrence of a Pay Out
Event, the Rapid Amortization Period begins earlier than the scheduled
commencement of an Amortization Period or prior to a Scheduled Payment Date,
Certificateholders will begin receiving distributions of principal earlier
than they otherwise would have, which may shorten the average life of the
Certificates.
In addition to the consequences of a Pay Out Event discussed above, unless
otherwise specified in the related Prospectus Supplement, if pursuant to
certain provisions of federal law, the Transferor voluntarily enters
liquidation or a receiver is appointed for the Transferor, on the day of such
event the Transferor will immediately cease to transfer Principal Receivables
to the Trust and promptly give notice to the Trustee of such event. Within 15
days, the Trustee will publish a notice of the liquidation or the appointment
stating that the Trustee intends to sell, dispose of, or otherwise liquidate
the Receivables in a commercially reasonable manner. Unless otherwise
instructed within a specified period by Certificateholders representing
undivided interests aggregating more than 50% of the Investor Interest of each
such Series (or if any Series has more than one Class, of each Class, and any
other Person specified in the related Agreement or a Series Supplement) issued
and outstanding, the Trustee will sell, dispose of, or otherwise liquidate the
Receivables in a commercially reasonable manner and on commercially reasonable
terms. The proceeds from the sale, disposition or liquidation of the
Receivables will be treated as collections of the Receivables and applied as
specified above in "--Application of Collections" and in the related
Prospectus Supplement.
If the only Pay Out Event to occur is either the insolvency of the
Transferor or the appointment of a conservator or receiver for the Transferor,
the conservator or receiver may have the power to prevent the early sale,
liquidation or disposition of the Receivables and the commencement of the
Rapid Amortization Period. In addition, a conservator or receiver may have the
power to cause the early sale of the Receivables and the early retirement of
the Certificates. See "Certain Legal Aspects of the Receivables--Certain
Matters Relating to Receivership."
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
Unless otherwise specified in the related Prospectus Supplement, for each
Series of Certificates, the Servicer's compensation for its servicing
activities and reimbursement for its expenses will take the form of the
payment to it of the Servicing Fee payable at the times and in the amounts
specified in the related Prospectus Supplement. The Investor Servicing Fee
will be funded from collections of Finance Charge Receivables allocated to the
Investor Interest and will be paid each month, or on such other specified
periodic basis, from amounts so allocated and on deposit in the Finance Charge
Account (which, if so specified in the related Prospectus Supplement, may
include all or a portion of the Interchange arising from the Accounts) or, in
certain limited circumstances, from amounts available from Enhancement and
other sources, if any. The remainder of the servicing fee for each Trust will
be allocable to the Transferor Interest, the Investor Interests of any other
Series issued by such Trust and the interest represented by the Enhancement
Invested Amount or the Collateral Interest, if any, with respect to such
Series, as described in the related Prospectus Supplement. Neither the Trust
52
<PAGE>
nor the Certificateholders will have any obligation to pay the portion of the
servicing fee allocable to the Transferor Interest.
The Servicer will pay from its servicing compensation certain expenses
incurred in connection with servicing the Receivables including, without
limitation, payment of the fees and disbursements of the Trustee and
independent certified public accountants and other fees which are not
expressly stated in the Agreement to be payable by the related Trust or the
Certificateholders other than federal, state and local income and franchise
taxes, if any, of the Trust.
CERTAIN MATTERS REGARDING THE TRANSFEROR AND THE SERVICER
With respect to each Series of Certificates, the Servicer may not resign
from its obligations and duties under the related Agreement, except upon
determination that performance of its duties is no longer permissible under
applicable law. No such resignation will become effective until the Trustee or
a successor to the Servicer has assumed the Servicer's responsibilities and
obligations under the related Agreement. CMB has delegated some of its
servicing duties to FDR and substantially all of its other servicing duties to
the Bank; however, such delegation does not relieve it of its obligation to
perform such duties in accordance with the related Agreement.
Each Agreement will provide that the Servicer will indemnify the related
Trust and Trustee from and against any reasonable loss, liability, expense,
damage or injury suffered or sustained by reason of any acts or omissions or
alleged acts or omissions of the Servicer with respect to the activities of
the Trust or the Trustee; provided, however, that the Servicer shall not
indemnify (a) the Trustee for liabilities imposed by reason of fraud,
negligence, or willful misconduct by the Trustee in the performance of its
duties under the Agreement, (b) the Trust, the Certificateholders or the
Certificate Owners for liabilities arising from actions taken by the Trustee
at the request of Certificateholders, (c) the Trust, the Certificateholders or
the Certificate Owners for any losses, claims, damages or liabilities incurred
by any of them in their capacities as investors, including without limitation,
losses incurred as a result of defaulted Receivables or Receivables which are
written off as uncollectible or (d) the Trust, the Certificateholders or the
Certificate Owners for any liabilities, costs or expenses of the Trust, the
Certificateholders or the Certificate Owners arising under any tax law,
including without limitation, any federal, state or local income or franchise
tax or any other tax imposed on or measured by income (or any interest or
penalties with respect thereto or arising from a failure to comply therewith)
required to be paid by the Trust, the Certificateholders or the Certificate
Owners in connection with the Agreement to any taxing authority.
In addition, each Agreement will provide that, subject to certain
exceptions, the Transferor will indemnify an injured party for any losses,
claims, damages or liabilities (other than those incurred by a
Certificateholder as an investor in the Certificates or those which arise from
any action of a Certificateholder) arising out of or based upon the
arrangement created by the Agreement as though the Agreement created a
partnership under the New York Revised Limited Partnership Act in which the
Transferor is a general partner.
Each Agreement will provide that neither the Transferor nor the Servicer nor
any of their respective directors, officers, employees or agents will be under
any other liability to the related Trust, Trustee, Certificateholders or any
other person for any action taken, or for refraining from taking any action,
in good faith pursuant to the Agreement. Neither the Transferor, the Servicer,
nor any of their respective directors, officers, employees or agents will be
protected against any liability which would otherwise be imposed by reason of
willful misfeasance, bad faith or gross negligence of the Transferor, the
Servicer or any such person in the performance of its duties or by reason of
reckless disregard of obligations and duties thereunder. In addition, each
Agreement will provide that the Servicer is not under any obligation to appear
in, prosecute or defend any legal action which is not incidental to its
servicing responsibilities under the Agreement and which in its opinion may
expose it to any expense or liability.
Each Agreement will provide that, in addition to Exchanges, if applicable,
the Bank may transfer its interest in all or a portion of the Transferor
Certificate, provided that prior to any such transfer (a) the Trustee receives
53
<PAGE>
written notification from each Rating Agency that such transfer will not
result in a lowering of its then existing rating of the Certificates of each
outstanding Series rated by it and (b) the Trustee receives a Tax Opinion.
Any person into which, in accordance with each Agreement, the Transferor or
the Servicer may be merged or consolidated or any person resulting from any
merger or consolidation to which the Transferor or the Servicer is a party, or
any person succeeding to the business of the Transferor or the Servicer, upon
execution of a supplement to the Agreement and delivery of an opinion of
counsel with respect to the compliance of the transaction with the applicable
provisions of the Agreement, will be the successor to the Transferor or the
Servicer, as the case may be, under the Agreement.
SERVICER DEFAULT
Unless otherwise specified in the related Prospectus Supplement, in the
event of any Servicer Default (as defined below), either the Trustee or
Certificateholders representing undivided interests aggregating more than 50%
of the Investor Interests for all Series of Certificates of the related Trust,
by written notice to the Servicer (and to the Trustee if given by the
Certificateholders), may terminate all of the rights and obligations of the
Servicer as servicer under the Agreement and in and to the Receivables and the
proceeds thereof and the Trustee may appoint a new Servicer (a "Service
Transfer"). The rights and interest of the Transferor under the related
Agreement and in the Transferor Interest will not be affected by such
termination. The related Trustee shall as promptly as possible appoint a
successor Servicer. If no such Servicer has been appointed and has accepted
such appointment by the time the Servicer ceases to act as Servicer, all
authority, power and obligations of the Servicer under the Agreement shall
pass to and be vested in the Trustee. If the Trustee is unable to obtain any
bids from eligible servicers and the Servicer delivers an officer's
certificate to the effect that it cannot in good faith cure the Servicer
Default which gave rise to a transfer of servicing, and if the Trustee is
legally unable to act as successor Servicer, then the Trustee shall give the
Transferor the right of first refusal to purchase the Receivables on terms
equivalent to the best purchase offer as determined by the Trustee.
Unless otherwise specified in the related Prospectus Supplement, "Servicer
Default" under any Agreement refers to any of the following events:
(a) failure by the Servicer to make any payment, transfer or deposit, or
to give instructions to the Trustee to make certain payments, transfers or
deposits, on the date the Servicer is required to do so under the related
Agreement or any Series Supplement (or within the applicable grace period,
which shall not exceed 10 business days);
(b) failure on the part of the Servicer duly to observe or perform in any
respect any other covenants or agreements of the Servicer which has a
material adverse effect on the Certificateholders of any Series issued and
outstanding under such Trust and which continues unremedied for a period of
60 days after written notice and continues to have a material adverse
effect on such Certificateholders; or the delegation by the Servicer of its
duties under the Agreement, except as specifically permitted thereunder;
(c) any representation, warranty or certification made by the Servicer in
the Agreement, or in any certificate delivered pursuant to the Agreement,
proves to have been incorrect when made which has a material adverse effect
on the Certificateholders of any Series issued and outstanding under such
Trust, and which continues to be incorrect in any material respect for a
period of 60 days after written notice and continues to have a material
adverse effect on such Certificateholders;
(d) the occurrence of certain events of bankruptcy, insolvency or
receivership of the Servicer, or
(e) such other event specified in the related Prospectus Supplement.
Unless otherwise stated in the related Prospectus Supplement,
notwithstanding the foregoing, a delay in or failure of performance referred
to in clause (a) above for a period of 10 business days, or referred to under
clause (b) or (c) for a period of 60 business days, shall not constitute a
Servicer Default if such delay or failure could not be prevented by the
exercise of reasonable diligence by the Servicer and such delay or failure was
caused by an act of God or other similar occurrence. Upon the occurrence of
any such event, the Servicer shall not be
54
<PAGE>
relieved from using its best efforts to perform its obligations in a timely
manner in accordance with the terms of the Agreement, and the Servicer shall
provide the Trustee, any provider of Enhancement and/or any issuer of any
third-party Credit Enhancement (a "Credit Enhancement Provider"), the
Transferor and the holders of Certificates of each Series issued and
outstanding under the related Trust prompt notice of such failure or delay by
it, together with a description of the cause of such failure or delay and its
efforts to perform its obligations.
In the event of a Servicer Default, if a conservator or receiver is
appointed for the Servicer and no Servicer Default other than such
conservatorship or receivership or the insolvency of the Servicer exists, the
conservator or receiver may have the power to prevent either Trustee or the
majority of the Certificateholders from effecting a Service Transfer.
REPORTS TO CERTIFICATEHOLDERS
Unless otherwise specified in the related Prospectus Supplement, for each
Series of Certificates, on each Distribution Date, or as soon thereafter as is
practicable, as specified in the related Prospectus Supplement, the Paying
Agent will forward to each Certificateholder of record a statement prepared by
the Servicer setting forth, among other things: (a) the total amount
distributed, (b) the amount of distribution on such Distribution Date
allocable to principal on the Certificates, (c) the amount of such
distribution allocable to interest on the Certificates, (d) the amount of
collections of Principal Receivables processed during the preceding month or
months since the last Distribution Date and allocated in respect of the
Certificates, (e) the aggregate amount of Principal Receivables, the Investor
Interest and the Investor Interest as a percentage of the aggregate amount of
the Principal Receivables in the Trust as of the end of the last day of the
preceding Monthly Period or Periods since the last Distribution Date, (f) the
aggregate outstanding balance of Accounts which are at least a specified
number of days delinquent by class of delinquency as of the end of the last
day of the preceding Monthly Period or Periods since the last Distribution
Date, (g) the aggregate Investor Default Amount for the preceding Monthly
Period or Periods since the last Distribution Date, (h) the amount of Investor
Charge-Offs for the preceding Monthly Period or Periods since the last
Distribution Date and the amount of reimbursements of previous Investor
Charge-Offs for the preceding Monthly Period or Periods since the last
Distribution Date, (i) the amount of the Investor Servicing Fee for the
preceding Monthly Period or Periods since the last Distribution Date, (j) the
amount available under any Enhancement and Credit Enhancement, if any, as of
the close of business on such Distribution Date, (k) the "pool factor" as of
the end of the related Record Date (consisting of a seven-digit decimal
expressing the ratio of the Investor Interest to the initial Investor
Interest), (l) the aggregate amount of collections on Finance Charge
Receivables and annual membership fees processed during the preceding Monthly
Period or Periods since the last Distribution Date, (m) the Portfolio Yield
for the preceding Monthly Period or Periods since the last Distribution Date
and (n) certain information relating to the floating or variable Certificate
Rates, if applicable, for the Monthly Period or Periods ending on such
Distribution Date. In the case of a Series of Certificates having more than
one Class, the statements forwarded to Certificateholders will provide
information as to each Class of Certificates, as appropriate.
On or before January 31 of each calendar year or such other date as
specified in the related Prospectus Supplement, the Paying Agent will furnish
to each person who at any time during the preceding calendar year was a
Certificateholder of record, a statement prepared by the Servicer containing
the information required to be contained in the regular monthly report to
Certificateholders, as set forth in clauses (a), (b) and (c) above aggregated
for such calendar year or the applicable portion thereof during which such
person was a Certificateholder, together with such other customary information
(consistent with the treatment of the Certificates as debt) as the Trustee or
the Servicer deems necessary or desirable to enable the Certificateholders to
prepare their United States tax returns.
EVIDENCE AS TO COMPLIANCE
Unless otherwise specified in the related Prospectus Supplement, each
Agreement will provide that on or before March 31 of each calendar year, or
such other date as specified in the related Prospectus Supplement, the
Servicer will cause a firm of independent certified public accountants to
furnish (i) a report to the effect that
55
<PAGE>
such accounting firm has examined management's assertion that, as of the date
of such report, the system of internal control over servicing of securitized
credit card receivables met the criteria for effective internal control
described in the report entitled "Internal Control--Integrated Framework"
issued by the Committee of Sponsoring Organizations of the Treadway Commission
("COSO") and that in their opinion, management's assertion is fairly stated,
in all material respects and (ii) a report, prepared using generally accepted
attestation standards to the effect that such accountants have compared the
amounts set forth in at least two of the monthly certificates forwarded by the
Servicer during the period covered by such report (which shall be the twelve-
month period ending on December 31 of the preceding calendar year) with the
Servicer's computer reports which were the source of such amounts and found
them to be in agreement or shall disclose any exceptions noted and that such
firm has recalculated the mathematical accuracy of amounts derived in the
monthly certificates.
Each Agreement will provide for delivery to the Trustee on or before August
31 of each calendar year, or such other date as specified in the related
Prospectus Supplement, of an annual statement signed by an officer of the
Servicer to the effect that the Servicer has fully performed its obligations
under the Agreement throughout the preceding year, or, if there has been a
default in the performance of any such obligation, specifying the nature and
status of the default.
AMENDMENTS
Unless otherwise specified in the related Prospectus Supplement, each
Agreement and any Series Supplement may be amended by the Transferor, the
Servicer and the related Trustee, without the consent of Certificateholders of
any Series then outstanding, to cure any ambiguity, to revise certain exhibits
and schedules, to correct or supplement any provision therein which may be
inconsistent with any other provision therein, or to add any other provisions
with respect to matters or questions arising thereunder which are not
inconsistent with the provisions of such Agreement or Series Supplement. No
such amendment, however, may adversely affect in any material respect the
interests of the Certificateholders of any Series then outstanding.
Each Agreement and any related Series Supplement may be amended by the
Transferor, the Servicer and the related Trustee without the consent of any of
the Certificateholders of any Series then outstanding for the purpose of
adding, changing or eliminating any provision thereof or any right of the
holders of Certificates thereunder, provided that (i) the Servicer shall have
furnished the Trustee with an officer's certificate to the effect that the
amendment will not materially and adversely affect the interests of any
Certificateholder, (ii) such amendment will not cause the Trust to be
characterized as a corporation for federal income tax purposes or otherwise
have a material adverse effect on the federal income taxation of any Series
and (iii) the Servicer shall have given each Rating Agency ten business days'
prior written notice of such amendment and shall have received written
confirmation from each Rating Agency that the rating of the Certificates of
any Series will not be reduced or withdrawn as a result of such amendment. No
such amendment, however, may effect any of the amendments that require
unanimous Certificateholder consent as set forth in the next paragraph, or (i)
reduce in any manner the amount of, or delay the timing of, distributions
which are required to be made on Certificates of any Series, (ii) change the
definition of or the manner of calculating the interest of any
Certificateholder of any Series, (iii) alter the requirements for changing the
percentage by which the Minimum Transferor Interest for Certificates of any
Series is determined, (iv) change the manner in which the Transferor Interest
of any Series is determined or (v) reduce the percentage required in the
following paragraphs to consent to such amendment.
Each Agreement may also be amended by the Transferor, the Servicer and the
related Trustee with the consent of the holders of the Certificates evidencing
undivided interests aggregating more than 50% of the Investor Interest of each
Series adversely affected for the purpose of adding any provisions to,
changing in any manner or eliminating any of the provisions of the Agreement
or of modifying in any manner the rights of holders of Certificates. No such
amendment, however, may (a) reduce in any manner the amount of, or delay the
timing of, distributions required to be made on any Certificate of such Series
without the consent of all the related Certificateholders, (b) change the
definition of or the manner of calculating the Investor Interest, the Investor
Percentage or the Investor Default Amount of such Series without the consent
of each holder of Certificates adversely affected thereby or (c) reduce the
aforesaid percentage of undivided interests the holders of which are
56
<PAGE>
required to consent to any such amendment, without the consent of each holder
of Certificates of all Series affected thereby.
LIST OF CERTIFICATEHOLDERS
With respect to each Series of Certificates, upon written request of
Certificateholders of record representing undivided interests in the Trust
aggregating not less than 10% (or such other percentage specified in the
related Prospectus Supplement) of the Investor Interest, the Trustee after
having been adequately indemnified by such Certificateholders for its costs
and expenses, and having given the Servicer notice that such request has been
made, will afford such Certificateholders access during business hours to the
current list of Certificateholders of the Trust for purposes of communicating
with other Certificateholders with respect to their rights under the
Agreement. See "--Book-Entry Registration" and "--Definitive Certificates"
above.
THE TRUSTEE
The Prospectus Supplement for each Series will specify the Trustee under the
related Agreement. The Transferor, the Servicer and their respective
affiliates may from time to time enter into normal banking and trustee
relationships with the Trustee and its affiliates. The Trustee, the
Transferor, the Servicer and any of their respective affiliates may hold
Certificates in their own names. In addition, for purposes of meeting the
legal requirements of certain local jurisdictions, the Trustee shall have the
power to appoint a co-trustee or separate trustees of all or any part of the
Trust. In the event of such appointment, all rights, powers, duties and
obligations conferred or imposed upon the Trustee by the Agreement shall be
conferred or imposed upon the Trustee and such separate trustee or co-trustee
jointly, or, in any jurisdiction in which the Trustee shall be incompetent or
unqualified to perform certain acts, singly upon such separate trustee or co-
trustee who shall exercise and perform such rights, powers, duties and
obligations solely at the direction of the Trustee.
The Trustee may resign at any time, in which event the Transferor will be
obligated to appoint a successor Trustee. The Transferor may also remove the
Trustee if the Trustee ceases to be eligible to continue as such under the
Agreement or if the Trustee becomes insolvent. In such circumstances, the
Transferor will be obligated to appoint a successor Trustee. Any resignation
or removal of the Trustee and appointment of a successor Trustee does not
become effective until acceptance of the appointment by the successor Trustee.
CREDIT ENHANCEMENT
GENERAL
For any Series, Credit Enhancement may be provided with respect to one or
more Classes thereof. Credit Enhancement may be in the form of the
subordination of one or more Classes of the Certificates of such Series, a
letter of credit, the establishment of a cash collateral guaranty or account,
a collateral interest, a surety bond, an insurance policy, a spread account, a
reserve account, the use of cross support features or another method of Credit
Enhancement described in the related Prospectus Supplement, or any combination
of the foregoing. If so specified in the related Prospectus Supplement, any
form of Credit Enhancement may be structured so as to be drawn upon by more
than one Class to the extent described therein.
Unless otherwise specified in the related Prospectus Supplement for a
Series, the Credit Enhancement will not provide protection against all risks
of loss and will not guarantee repayment of the entire principal balance of
the Certificates and interest thereon. If losses occur which exceed the amount
covered by the Credit Enhancement or which are not covered by the Credit
Enhancement, Certificateholders will bear their allocable share of
deficiencies.
If Credit Enhancement is provided with respect to a Series, the related
Prospectus Supplement will include a description of (a) the amount payable
under such Credit Enhancement, (b) any conditions to payment thereunder not
otherwise described herein, (c) the conditions (if any) under which the amount
payable under such Credit Enhancement may be reduced and under which such
Credit Enhancement may be terminated or replaced and (d) any material
provision of any agreement relating to such Credit Enhancement. Additionally,
the related
57
<PAGE>
Prospectus Supplement may set forth information with respect to any Credit
Enhancement Provider, including (i) a brief description of its principal
business activities, (ii) its principal place of business, place of
incorporation and the jurisdiction under which it is chartered or licensed to
do business, (iii) if applicable, the identity of regulatory agencies which
exercise primary jurisdiction over the conduct of its business and (iv) its
total assets, and its stockholders' or policy holders' surplus, if applicable,
and other appropriate financial information as of the date specified in the
Prospectus Supplement. If so specified in the related Prospectus Supplement,
Credit Enhancement with respect to a Series may be available to pay principal
of the Certificates of such Series following the occurrence of certain Pay Out
Events with respect to such Series. In such event, the Credit Enhancement
Provider may have an interest in certain cash flows in respect of the
Receivables to the extent described in such Prospectus Supplement (the
"Enhancement Invested Amount").
SUBORDINATION
If so specified in the related Prospectus Supplement, one or more of any
Series will be subordinated as described in the related Prospectus Supplement
to the extent necessary to fund payments with respect to the Senior
Certificates. The rights of the holders of any such Subordinated Certificates
to receive distributions of principal and/or interest on any Distribution Date
for such Series will be subordinated in right and priority to the rights of
the holders of Senior Certificates, but only to the extent set forth in the
related Prospectus Supplement. If so specified in the related Prospectus
Supplement, subordination may apply only in the event of certain types of
losses not covered by another Credit Enhancement. The related Prospectus
Supplement will also set forth information concerning the amount of
subordination of a Class or Classes of Subordinated Certificates in a Series,
the circumstances in which such subordination will be applicable, the manner,
if any, in which the amount of subordination will be applicable, the manner,
if any, in which the amount of subordination will decrease over time, and the
conditions under which amounts available from payments that would otherwise be
made to holders of such Subordinated Certificates will be distributed to
holders of Senior Certificates. If collections of Receivables otherwise
distributable to holders of a Subordinated Class of a Series will be used as
support for a Class of another Series, the related Prospectus Supplement will
specify the manner and conditions for applying such a cross-support feature.
LETTER OF CREDIT
If so specified in the related Prospectus Supplement, support for a Series
or one or more Classes thereof will be provided by one or more letters of
credit. A letter of credit may provide limited protection against certain
losses in addition to or in lieu of other Credit Enhancement. The issuer of
the letter of credit (the "L/C Bank") will be obligated to honor demands with
respect to such letter of credit, to the extent of the amount available
thereunder, to provide funds under the circumstances and subject to such
conditions as are specified in the related Prospectus Supplement.
CASH COLLATERAL GUARANTY OR ACCOUNT
If so specified in the related Prospectus Supplement, support for a Series
or one or more Classes thereof will be provided by a guaranty (the "Cash
Collateral Guaranty") secured by the deposit of cash or certain permitted
investments in an account (the "Cash Collateral Account") reserved for the
beneficiaries of the Cash Collateral Guaranty or by a Cash Collateral Account
alone. The amount available pursuant to the Cash Collateral Guaranty or the
Cash Collateral Account will be the lesser of amounts on deposit in the Cash
Collateral Account and an amount specified in the related Prospectus
Supplement. The related Prospectus Supplement will set forth the circumstances
under which payments are made to beneficiaries of the Cash Collateral Guaranty
from the Cash Collateral Account or from the Cash Collateral Account directly.
COLLATERAL INTEREST
If so specified in the related Prospectus Supplement, support for a Series
or one or more Classes thereof will be provided initially by an undivided
interest in the Trust (the "Collateral Interest") in an amount initially equal
to a percentage of the Certificates of such Series as specified in the
Prospectus Supplement. Such Series may also have the benefit of a Cash
Collateral Guaranty or Cash Collateral Account with an initial amount on
58
<PAGE>
deposit therein, if any, as specified in the Prospectus Supplement which will
be increased (i) to the extent the Transferor elects, subject to certain
conditions specified in the related Prospectus Supplement, to apply
collections of Principal Receivables allocable to the Collateral Interest to
decrease the Collateral Interest, (ii) to the extent collections of Principal
Receivables allocable to the Collateral Interest are required to be deposited
into the Cash Collateral Account as specified in the related Prospectus
Supplement and (iii) to the extent excess collections of Finance Charge
Receivables are required to be deposited into the Cash Collateral Account as
specified in the related Prospectus Supplement. The total amount of the Credit
Enhancement available pursuant to the Collateral Interest and, if applicable,
the Cash Collateral Guaranty or Cash Collateral Account will be the lesser of
the sum of the Collateral Interest and the amount on deposit in the Cash
Collateral Account and an amount specified in the related Prospectus
Supplement. The related Prospectus Supplement will set forth the circumstances
under which payments which otherwise would be made to holders of the
Collateral Interest will be distributed to holders of Certificates and, if
applicable, the circumstances under which payment will be made under the Cash
Collateral Guaranty or under the Cash Collateral Account.
SURETY BOND OR INSURANCE POLICY
If so specified in the related Prospectus Supplement, insurance with respect
to a Series or one or more Classes thereof will be provided by one or more
insurance companies. Such insurance will guarantee, with respect to one or
more Classes of the related Series, distributions of interest or principal in
the manner and amount specified in the related Prospectus Supplement.
If so specified in the related Prospectus Supplement, a surety bond will be
purchased for the benefit of the holders of any Series or Class or such Series
to assure distributions of interest or principal with respect to such Series
or Class of Certificates in the manner and amount specified in the related
Prospectus Supplement.
SPREAD ACCOUNT
If so specified in the related Prospectus Supplement, support for a Series
or one or more Classes thereof will be provided by the periodic deposit of
certain available excess cash flow from the Trust assets into an account (the
"Spread Account") intended to assist with subsequent distribution of interest
and principal on the Certificates of such Class or Series in the manner
specified in the related Prospectus Supplement.
RESERVE ACCOUNT
If so specified in the related Prospective Supplement, support for a Series
or one or more Classes thereof will be provided by the establishment of a
reserve account (the "Reserve Account"). The Reserve Account may be funded, to
the extent provided in the related Prospectus Supplement, by an initial cash
deposit, the retention of certain periodic distributions of principal or
interest or both otherwise payable to one or more Classes or Certificates,
including the Subordinated Certificates, or the provision of a letter of
credit, guarantee, insurance policy or other form of credit or any combination
thereof. The Reserve Account will be established to assist with the subsequent
distribution of principal or interest on the Certificates of such Series or
Class thereof in the manner provided in the related Prospectus Supplement.
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES
TRANSFER OF RECEIVABLES
The Transferor will represent and warrant in each Agreement that the
transfer of Receivables by it to the related Trust is either a valid transfer
and assignment to such Trust of all right, title and interest of the
Transferor in and to the related Receivables, except for the interest of the
Transferor as holder of the Transferor Certificate, or the grant to the Trust
of a security interest in such Receivables. The Transferor will also represent
and warrant in each Agreement that, in the event the transfer of Receivables
by the Transferor to the related Trust is deemed to create a security interest
under the Uniform Commercial Code as in effect in The State of Delaware (the
"UCC") there will exist a valid, subsisting and enforceable first priority
perfected security interest in such Receivables created thereafter in favor of
such Trust on and after their creation, except for certain tax and other
59
<PAGE>
governmental liens, subject to the limitations described below. For a
discussion of the Trust's rights arising from a breach of these warranties,
see "Description of Certificates--Representations and Warranties."
The Transferor will represent as to Receivables to be conveyed, that the
Receivables are "accounts" or "general intangibles" for purposes of the UCC.
Both the transfer and assignment of accounts and chattel paper and the
transfer of accounts as security for an obligation are treated under Article 9
of the UCC as creating a security interest therein and are subject to its
provisions, and the filing of an appropriate financing statement is required
to perfect the security interest of the related Trust. If a transfer of
general intangibles is deemed to create a security interest, the UCC applies
and filing an appropriate financing statement or statements is also required
in order to perfect the Trust's security interest. Financing statements
covering the Receivables have been and will be filed with the appropriate
governmental authority to protect the interests of the related Trust in the
Receivables. If a transfer of general intangibles is deemed to be a sale, then
the UCC is not applicable and no further action under the UCC is required to
protect the Trust's interest from third parties.
There are certain limited circumstances under the UCC in which a prior or
subsequent transferee of Receivables coming into existence after a Closing
Date could have an interest in such Receivables with priority over such
Trust's interest. Under each Agreement, however, the Transferor will represent
and warrant that it transferred the Receivables to the Trust free and clear of
the lien of any third party. In addition, the Transferor has covenanted and
will covenant that it will not sell, pledge, assign, transfer or grant any
lien on any Receivable (or any interest therein) other than to the Trust. A
tax or government lien or other nonconsensual lien on property of the
Transferor arising prior to the time a Receivable comes into existence may
also have priority over the interest of the Trust in such Receivable. If the
FDIC were appointed as receiver of the Transferor, certain administrative
expenses of the receiver may also have priority over the interest of the Trust
in such Receivable. While CMB is the Servicer, collections will be commingled
with CMB's general funds and used for CMB's benefit prior to each Distribution
Date. Accordingly, in the event of the insolvency of CMB, the Trust may not
have a perfected security interest in such collections. If the short-term
deposit rating of CMB is reduced below A-1 or P-1 by the applicable Rating
Agency, CMB will be obligated to cease commingling collections and commence
depositing collections into the Collection Account within two business days
after the date of processing.
CERTAIN MATTERS RELATING TO RECEIVERSHIP
The Bank is chartered as a national banking corporation and is subject to
regulation and supervision by the Comptroller. If the Bank becomes insolvent
or is in an unsound condition or if certain other circumstances occur, the
Comptroller is authorized to appoint the FDIC as receiver.
FIRREA sets forth certain powers that the FDIC may exercise as receiver for
the Bank. To the extent that (i) the Transferor granted a security interest in
the Receivables to the Trust, (ii) the interest was validly perfected before
the Transferor's insolvency, (iii) the interest was not taken or granted in
contemplation of the Transferor's insolvency or with the intent to hinder,
delay or defraud the Transferor or its creditors, (iv) the Agreement is
continuously a record of the Bank, and (v) the Agreement represent a bona fide
and arm's length transaction undertaken for adequate consideration in the
ordinary course of business and that the Trustee is the secured party and is
not an insider or affiliate of the Transferor, such valid perfected security
interest of the Trustee would be enforceable (to the extent of the Trust's
"actual direct compensatory damages") notwithstanding the insolvency of, or
the appointment of a receiver or conservator for, the Transferor and payments
to the Trust with respect to the Receivables (up to the amount of such
damages) should not be subject to an automatic stay of payment or to recovery
by the FDIC as conservator or receiver of the Transferor. If, however, the
FDIC were to assert that the security interest was unperfected or
unenforceable or were to require the Trustee to establish its right to those
payments by submitting to and completing the administrative claims procedure
established under FIRREA, or the conservator or receiver were to request a
stay of proceedings with respect to the Transferor as provided under FIRREA,
delays in payments on the Certificates and possible reductions in the amount
of those payments could occur. The FDIA does not define the term "actual
direct compensatory damages." On April 10, 1990, the RTC, formerly a sister
agency of the FDIC, adopted a statement of policy (the "RTC Policy Statement")
with respect to the payment of interest on collateralized borrowings. The RTC
Policy Statement states that interest on such
60
<PAGE>
borrowings will be payable at the contract rate up to the date of the
redemption or payment by the conservator, receiver, or the trustee of an
amount equal to the principal owed plus the contract rate of interest up to
the date of such payment or redemption, plus any expenses of liquidation if
provided for in the contract, to the extent secured by the collateral. In a
1993 case involving zero-coupon bonds, however, a federal district court held
that the RTC was instead obligated to pay bondholders the fair market value of
repudiated bonds as of the date of repudiation. The FDIC itself has not
adopted a policy statement on payment of interest on collateralized
borrowings.
Upon the appointment of a conservator or receiver or upon a voluntary
liquidation with respect to the Transferor, the Transferor will promptly give
notice thereof to each Trustee and a Pay Out Event will occur with respect to
all Series then outstanding under the related Trust. Pursuant to each
Agreement, newly created Principal Receivables will not be transferred to the
related Trust on and after any such appointment or voluntary liquidation, and
the Trustee will proceed to sell, dispose of or otherwise liquidate the
Receivables in a commercially reasonable manner and on commercially reasonable
terms, unless otherwise instructed within a specified period by holders of
Certificates representing undivided interests aggregating more than 50% of the
Investor Interest of each Series (or if any Series has more than one Class, of
each Class, and any other Person specified in the related Agreement or a
Series Supplement), or unless otherwise required by the FDIC as receiver or
conservator of the Bank. Under the Agreement, the proceeds from the sale of
the Receivables would be treated as collections of the Receivables and the
Investor Percentage of such proceeds would be distributed to the
Certificateholders. This procedure could be delayed, as described above. If
the only Pay Out Event to occur is either the insolvency of the Transferor or
the appointment of a conservator or receiver for the Transferor, the
conservator or receiver may have the power to prevent the early sale,
liquidation or disposition of the Receivables and the commencement of the
Rapid Amortization Period. In addition, a conservator or receiver may have the
power to cause the early sale of the Receivables and the early retirement of
the Certificates or to prohibit the continued transfer of Principal
Receivables to the Trust. However, if no Servicer Default other than the
conservatorship or receivership of the Servicer exists, the conservator or
receiver for the Servicer may have the power to prevent either the Trustee or
the Certificateholders from appointing a successor Servicer under the related
Agreement. See "Description of the Certificates--Pay Out Events."
CONSUMER PROTECTION LAWS
The relationships of the cardholder and credit card issuer and the lender
are extensively regulated by federal and state consumer protection laws. With
respect to credit cards issued by CMB or Chase USA, the most significant laws
include the federal Truth-in-Lending, Equal Credit Opportunity, Fair Credit
Reporting, Fair Debt Collection Practice and Electronic Funds Transfer Acts.
These statutes impose disclosure requirements when a credit card account is
advertised, when it is opened, at the end of monthly billing cycles, and at
year end. In addition, these statutes limit customer liability for
unauthorized use, prohibit certain discriminatory practices in extending
credit, and impose certain limitations on the type of account-related charges
that may be assessed. Cardholders are entitled under these laws to have
payments and credits applied to the credit card accounts promptly, to receive
prescribed notices and to require billing errors to be resolved promptly. A
Trust may be liable for certain violations of consumer protection laws that
apply to the related Receivables, either as assignee from the Transferor with
respect to obligations arising before transfer of the Receivables to such
Trust or as a party directly responsible for obligations arising after the
transfer. In addition, a cardholder may be entitled to assert such violations
by way of set-off against his obligation to pay the amount of Receivables
owing. The Transferor will warrant in each Agreement that all related
Receivables have been and will be created in compliance with the requirements
of such laws. The Servicer will also agree in each Agreement to indemnify the
Trust, among other things, for any liability arising from such violations
caused by the Servicer. For a discussion of the Trust's rights arising from
the breach of these warranties, see "Description of the Certificates--
Representations and Warranties."
Various proposed laws and amendments to existing laws have from time to time
been introduced in Congress and certain state and local legislatures that, if
enacted, would further regulate the credit card industry, certain of which
would, among other things, impose a ceiling on the rate at which a financial
institution may
61
<PAGE>
assess finance charges and fees on credit card accounts that would be
substantially below the rates of the finance charges and fees the Bank
currently assesses on its accounts. In particular, on June 19, 1997, a
proposal to amend the Federal Truth-in-Lending Act was introduced in the House
of Representatives and referred to the Committee on Banking and Financial
Services, which would, among other things, prohibit the imposition of certain
minimum finance charges and other fees, prohibit certain methods of
calculating finance charges, require prior notice of any increase in the
interest rate assessed with respect to a credit card account and limit the
amount of certain fees. Although such proposed legislation has not been
enacted, there can be no assurance that such a bill will not become law in the
future. The potential effect of any legislation which limits the amount of
finance charges and fees that may be charged on credit cards could be to
reduce the portfolio yield on the Accounts. If such portfolio yield is
reduced, a Pay Out Event may occur, and the Rapid Amortization Period would
commence.
Application of federal and state bankruptcy and debtor relief laws would
affect the interests of the Certificateholders if such laws result in any
related Receivables being written off as uncollectible when the amount
available under any Credit Enhancement is equal to zero. See "Description of
the Certificates--Defaulted Receivables; Rebates and Fraudulent Charges;
Investor Charge-Offs."
62
<PAGE>
TAX MATTERS
GENERAL
The following is a general discussion of the material U.S. federal income
tax consequences relating to the purchase, ownership and disposition of a
Certificate. Unless otherwise indicated, this summary deals only with U.S.
Certificate Owners who acquire Certificates at their original issue price
pursuant to the original issuance of such Certificates and who hold such
Certificates as capital assets. This discussion is based on present provisions
of the Internal Revenue Code of 1986 as amended (the "Code"), the regulations
promulgated thereunder, and judicial or ruling authorities, all of which are
subject to change, which change may be retroactive. The discussion does not
address all of the tax consequences relevant to a particular Certificate Owner
in light of that Certificate Owner's circumstances, and some Certificate
Owners may be subject to special tax rules and limitations not discussed
below. Each prospective Certificate Owner is urged to consult its own tax
adviser in determining the federal, state, local and foreign income and any
other tax consequences of the purchase, ownership and disposition of a
Certificate. No ruling on any of the issues discussed below will be sought
from the Internal Revenue Service (the "IRS").
For purposes of this discussion, a "U.S. Certificate Owner" means a
Certificate Owner that is (i) a citizen or resident of the United States, (ii)
a corporation or partnership created or organized in the United States or
under the laws of the United States or any political subdivision thereof,
(iii) an estate the income of which is subject to United States federal income
taxation regardless of its source or (iv) a trust which is subject to the
supervision of a court within the United States and the control of a United
States person as described in section 7701(a)(30) of the Code. For purposes of
this discussion, the term "non-U.S. Certificate Owner" means any Certificate
Owner other than a U.S. Certificate Owner.
TREATMENT OF THE CERTIFICATES AS DEBT
The Transferor will express in each Agreement its intent that the
Certificates will be debt for U.S. income and franchise tax purposes, and the
Transferor, by entering into an Agreement, and each investor, by the
acceptance of a beneficial interest in a Certificate, will agree to treat the
Certificates as debt for such purposes. However, each Agreement generally
refers to the transfer of Receivables as a "transfer, assignment and
conveyance," and because different criteria are used in determining the non-
tax accounting treatment of the transaction, the Transferor will treat each
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 U.S. federal income tax law is that the economic
substance of a transaction generally determines its tax consequences. The form
of a transaction, while a relevant factor, is not conclusive evidence of the
economic substance of the transaction. In appropriate circumstances, the
courts have allowed taxpayers, as well as the IRS, to treat a transaction in
accordance with its economic substance, as determined under U.S. 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 purported sale of
an interest in property is, instead, a loan secured by such transferred
property has been made by the IRS and the courts on the basis of numerous
factors designed to determine whether the seller has relinquished (and the
purchaser has obtained) substantial incidents of ownership in the transferred
property. Among those factors, the primary factors examined are whether the
purchaser has the opportunity to gain if the property increases in value, and
has the risk of loss if the property decreases in value. Simpson Thacher &
Bartlett, a partnership which includes professional corporations ("Tax
Counsel"), will deliver an opinion that, although no transaction closely
comparable to that contemplated herein has been the subject of any Treasury
regulation, revenue ruling or judicial decision, the Certificates will
properly be characterized as indebtedness for U.S. federal income tax
purposes. In addition, Tax Counsel will deliver an opinion that the Trust will
not be classified as an association or publicly traded partnership taxable as
a corporation for such purposes. Except where indicated to the contrary, the
following discussion assumes that the Certificates will be considered debt for
U.S. federal income tax purposes.
63
<PAGE>
TAXATION OF INTEREST INCOME OF U.S. CERTIFICATE OWNERS
Unless otherwise specified in the related Prospectus Supplement, a U.S.
Certificate Owner generally will include the stated interest on a Certificate
in gross income at the time such interest income is received or accrued in
accordance with such U.S. Certificate Owner's regular method of tax
accounting. This conclusion is based on the Transferor's position that the
stated interest on a Certificate is "unconditionally payable."
Under the applicable Treasury regulations, the stated interest on the
Certificates will be considered "unconditionally payable" only if the terms
and conditions of the Certificates make the likelihood of late payment or non-
payment of such stated interest a "remote contingency." Since each Trust and
Trustee will have no discretion to withhold, delay or otherwise defer
scheduled monthly payments of stated interest on the Certificates (provided
such Trust has sufficient cash on hand to allow the Trustee to make such
interest payments) the Transferor intends to take the position that late
payment or non-payment of stated interest on the Certificates is a remote
contingency.
If, however, the stated interest on the Certificates is not considered
"unconditionally payable", the stated interest on the Certificates will be
considered original issue discount ("OID") within the meaning of section
1273(a) of the Code and a U.S. Certificate Owner will be required to include
such stated interest in income (as OID) on a daily economic accrual basis
regardless of the U.S. Certificate Owner's regular method of tax accounting
and in advance of receipt of the cash related to such income. In addition, if
the stated interest on the Certificates is not paid in full on a Distribution
Date, the Certificates may at such time, and at all times thereafter, be
considered to be issued with OID and all Certificate Owners would be required
to include such stated interest in income as OID on an economic accrual basis.
SALE, EXCHANGE OR RETIREMENT OF CERTIFICATES
Upon a sale, exchange, retirement or other disposition of a Certificate, a
U.S. Certificate Owner generally will recognize gain or loss equal to the
difference between the amount realized on the sale, exchange, retirement or
other disposition (less any accrued but unpaid interest which the U.S.
Certificate Owner has not included in gross income previously) and the U.S.
Certificate Owner's adjusted basis in the Certificate. Such gain or loss will
be capital gain or loss. Under recently enacted legislation, capital gains of
individuals derived in respect of capital assets held for more than one year
are eligible for reduced rates of taxation which may vary depending upon the
holding period of such capital assets. Capital losses generally may be used
only to offset capital gains.
POSSIBLE ALTERNATIVE CHARACTERIZATIONS
Although, as described above, it is the opinion of Tax Counsel that the
Certificates will be properly characterized as debt for U.S. federal income
tax purposes, such opinion is not binding on the IRS and thus no assurance can
be given that such a characterization will prevail. If the IRS were to contend
successfully that some or all of the Certificates or any Collateral Interest
were not debt obligations for U.S. federal income tax purposes, all or a
portion of a Trust could be classified as a partnership or a publicly traded
partnership taxable as a corporation for such purposes. Because in the opinion
of Tax Counsel the Certificates will be characterized as debt for U.S. federal
income tax purposes and because any holder of an interest in a Collateral
Interest will agree to treat that interest as debt, no attempt will be made to
comply with any IRS reporting or other requirements that would apply if all or
a portion of a Trust were treated as a partnership or a corporation.
If a Trust were treated in whole or in part as a partnership (other than a
publicly traded partnership taxable as a corporation) for U.S. federal income
tax purposes, such partnership would not be subject to U.S. 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 the taxable income of the Transferor (or the
holder of the Transferor Certificate) and any Certificate Owners treated as
partners in
64
<PAGE>
such partnership in accordance with their respective partnership interests
therein. The amount and timing of income reportable by any Certificate Owners
treated as partners in such partnership would likely differ from that
reportable by such Certificate Owners had they been treated as owning debt.
Moreover, unless the partnership were treated as engaged in a trade or
business, an individual's (and, under certain circumstances, a trust's) share
of expenses of such partnership would be miscellaneous itemized deductions
that, in the aggregate, are allowed as deductions only to the extent that they
exceed two percent of the individual's adjusted gross income, and would be
subject to reduction if the individual's adjusted gross income exceeded
certain limits. As a result, the individual may be taxed on a greater amount
of income than the stated rate on the Certificates. In addition, all or a
portion of any taxable income allocated to a Certificate Owner that is a
pension, profit sharing or employee benefit plan or other tax exempt entity
(including an individual retirement account) may, under certain circumstances,
constitute "unrelated business taxable income" which generally would be
taxable to such Certificate Owner under the Code.
Alternatively, if a Trust were treated in whole or in part as a publicly
traded partnership taxable as a corporation, such Trust would be subject to
U.S. federal income tax at corporate tax rates on the taxable income generated
by its ownership of the Receivables. Such entity-level tax could result in
reduced distributions to Certificate Owners. In addition, the distributions
from such Trust would not be deductible in computing the taxable income of
such deemed corporation, except to the extent that any Certificates were
treated as debt of such corporation and distributions to the related
Certificate Owners were treated as payments of interest thereon. Moreover,
distributions to Certificate Owners not treated as holding debt would be
treated as "dividends" for U.S. federal income tax purposes to the extent of
the current and accumulated earnings and profits of the deemed corporation.
NON-U.S. CERTIFICATE OWNERS
Assuming the Certificates are considered to be debt for U.S. federal income
tax purposes, under present U.S. federal income and estate tax law, and
subject to the discussion below concerning backup withholding:
(a) no withholding of U.S. federal income tax will be required with
respect to the payment by the Transferor or any other person that is
required to withhold U.S. taxes (each a "Withholding Agent") of principal
or interest on a Certificate owned by a non-U.S. Certificate Owner,
provided (i) that the beneficial owner does not actually or constructively
own 10% or more of the total combined voting power of all classes of stock
of the Transferor entitled to vote within the meaning of section 871(h)(3)
of the Code and the regulations thereunder, (ii) the beneficial owner is
not a controlled foreign corporation that is related to the Transferor
through stock ownership, (iii) the beneficial owner is not a bank whose
receipt of interest on a Certificate is described in section 881(e)(3)(A)
of the Code and (iv) the beneficial owner satisfies the statement
requirement (described generally below) set forth in section 871(h) and
section 881(e) of the Code and the regulations thereunder;
(b) no withholding of U.S. federal income tax will be required with
respect to any gain realized by a non-U.S. Certificate Owner upon the sale,
exchange, retirement or other disposition of a Certificate; and
(c) a Certificate beneficially owned by an individual who at the time of
death is a non-U.S. Certificate Owner will not be subject to U.S. federal
estate tax as a result of such individual's death, provided that such
individual does not actually or constructively own 10% or more of the total
combined voting power of all classes of stock of the Transferor entitled to
vote within the meaning of section 871(h)(3) of the Code and provided that
the interest payments with respect to such Certificate would not have been,
if received at the time of such individual's death, effectively connected
with the conduct of a United State trade or business by such individual.
To satisfy the requirement referred to in (a)(iv) above, the beneficial
owner of such Certificate, or a financial institution holding the Certificate
on behalf of such owner, must provide, in accordance with specified
procedures, the Transferor and/or any Withholding Agent with a statement to
the effect that the beneficial owner is not a U.S. Certificate Owner.
Currently, these requirements will be met if (1) the beneficial owner provides
65
<PAGE>
his name and address, and certifies, under penalties of perjury, that he is
not a U.S. Certificate Owner (which certification may be made on an IRS Form
W-8 or successor form), or (2) a financial institution holding the Certificate
on behalf of the beneficial owner certifies, under penalties of perjury, that
such statement has been received by it and furnishes the Transferor or any
Withholding Agent with a copy thereof. Under recently finalized Treasury
regulations (the "Final Regulations"), the statement requirement referred to
in (a)(iv) above may also be satisfied with other documentary evidence for
interest paid after December 31, 1998 with respect to an offshore account or
through certain foreign intermediaries.
If a non-U.S. Certificate Owner cannot satisfy the requirements of the
"portfolio interest" exception of paragraph (a) above, payments of interest
made to such non-U.S. Certificate Owner will be subject to a 30% withholding
tax unless the beneficial owner of the Certificate provides the Transferor or
any Withholding Agent with a properly executed (1) IRS Form 1001 (or successor
form) claiming an exemption from such withholding tax under the benefit of a
tax treaty or (2) IRS Form 4224 (or successor form) stating that interest paid
on the Certificate is not subject to such withholding tax because it is
effectively connected with the beneficial owner's conduct of a trade or
business in the United States. Under the Final Regulations, non-U.S.
Certificate Owners will generally be required to provide IRS Form W-8 in lieu
of IRS Form 1001 and IRS Form 4224, although alternative documentation may be
applicable in certain situations.
If a non-U.S. Certificate Owner is engaged in a trade or business in the
United States and interest on the Certificate is effectively connected with
the conduct of such trade or business, the non-U.S. Certificate Owner,
although exempt from the withholding tax discussed above, will be subject to
U.S. federal income tax on such interest on a net income basis in the same
manner as if it were a U.S. Certificate Owner. In addition, if such holder is
a foreign corporation, it may be subject to a branch profits tax equal to 30%
of its effectively connected earnings and profits for the taxable year,
subject to adjustments. For this purpose, such interest will be included in
such foreign corporation's earnings and profits.
Any gain realized upon the sale, exchange, retirement or other disposition
of a Certificate by a non-U.S. Certificate Owner generally will not be subject
to U.S. federal income tax unless (i) such gain is effectively connected with
a trade or business of the non-U.S. Certificate Owner in the United States, or
(ii) in the case of a non-U.S. Certificate Owner who is an individual, such
individual is present in the United States for 183 days or more in the taxable
year of such sale, exchange, retirement or other disposition, and certain
other conditions are met.
If the Certificates were treated as an interest in a partnership (other than
a publicly traded partnership taxable as a corporation), 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 U.S. federal income tax
return and, in general, would be subject to U.S. federal income tax
(including, in the case of a non-U.S. Certificate Owner that is a corporation,
the branch profits tax) on its allocable share of the net income from the
partnership. Further, certain withholding obligations apply with respect to
income allocable or distributions made to a foreign partner. That withholding
would be at the highest applicable rate in effect with respect to the non-U.S.
Certificate Owner. Alternatively, if some or all of the Certificates were
treated as equity interests in a publicly traded partnership taxable as a
corporation, any related dividend distributions to a non-U.S. Certificate
Owner generally would be subject to withholding tax at the rate of 30 percent,
unless that rate were reduced under an applicable tax treaty. See "Tax
Matters--Possible Alternative Characterizations".
INFORMATION REPORTING AND BACKUP WITHHOLDING
In general, information reporting requirements will apply to certain
payments of principal and interest paid on Certificates and to the proceeds of
sale of a Certificate made to U.S. Certificate Owners other than certain
exempt recipients (such as corporations). A 31% backup withholding tax will
apply to such payments if the U.S. Certificate Owner fails to provide a
taxpayer identification number or certification of foreign or other exempt
status or fails to report in full dividend and interest income.
66
<PAGE>
No information reporting or backup withholding will be required with respect
to payments made by the Transferor or any Withholding Agent to a non-U.S.
Certificate Owner if a statement described in (a)(iv) under "Non-U.S.
Certificate Owners" has been received and the payor does not have actual
knowledge that the beneficial owner is a U.S. Certificate Owner.
In addition, backup withholding and information reporting will not apply if
payments of principal and interest on a Certificate are paid or collected by a
foreign office of a custodian, nominee or other foreign agent on behalf of the
beneficial owner of such Certificate, or if a foreign office of a broker (as
defined in applicable Treasury regulations) pays the proceeds of the sale of a
Certificate to the owner thereof. If, however, such nominee, custodian, agent
or broker is, for U.S. federal income tax purposes, a United States person, a
controlled foreign corporation or a foreign person that derives 50% or more of
its gross income for certain periods from the conduct of a trade or business
in the United States, or, for taxable years beginning after December 31, 1998,
a foreign partnership, in which one or more United States persons, in the
aggregate, own more than 50% of the income or capital interests in the
partnership or which is engaged in a trade or business in the United States,
such payments will not be subject to backup withholding but will be subject to
information reporting, unless (1) such custodian, nominee, agent or broker has
documentary evidence in its records that the beneficial owner is not a United
States person and certain other conditions are met or (2) the beneficial owner
otherwise establishes an exemption.
Payments of principal and interest on a Certificate paid to the beneficial
owner of a Certificate by a United States office of a custodian, nominee or
agent, or the payment by the United States office of a broker of the proceeds
of sale of a Certificate, will be subject to both backup withholding and
information reporting unless the beneficial owner provides the statement
referred to in (a)(iv) above and the payor does not have actual knowledge that
the beneficial owner is a U.S. Certificate Owner or otherwise establishes an
exemption.
Any amounts withheld under the backup withholding rules will be allowed as a
refund or a credit against such Certificate Owner's U.S. federal income tax
liability provided the required information is furnished to the IRS.
FASIT CONSIDERATIONS
The Agreement may be amended to provide that an election may be made to
treat the Trust as a "financial asset securitization investment trust" (a
"FASIT"). Prior to any such amendment, the Transferor will be required to
deliver to the Trustee an opinion of counsel to the effect that, for U.S.
federal income tax purposes, (i) the issuance of FASIT regular interests 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, (ii) following such issuance the Trust will not be deemed to
be an association (or publicly traded partnership) taxable as a corporation
and (iii) such issuance will not cause or constitute an event in which gain or
loss would be recognized by any Certificate Owner or the Trust.
STATE AND LOCAL TAXATION
The discussion above does not address the tax consequences of the purchase,
ownership or disposition of a Certificate under any state or local tax law.
Each investor should consult its own tax adviser regarding state and local tax
consequences.
67
<PAGE>
EMPLOYEE BENEFIT PLAN CONSIDERATIONS
ERISA and the Code impose certain requirements on those employee benefit
plans to which they apply ("Plans") and on those persons who are fiduciaries
with respect to such Plans. In accordance with ERISA's general fiduciary
standards, before investing in Certificates, a Plan fiduciary should determine
whether such an investment (i) is permitted under the governing Plan
instruments; (ii) is appropriate for the Plan in view of its overall
investment policy and the composition and diversification of its portfolio;
and (iii) is prudent considering the factors discussed in this prospectus.
Section 406 of ERISA and Section 4975 of the Code prohibit certain
transactions involving the assets of a Plan and persons who have certain
specified relationships to the Plan ("parties in interest" within the meaning
of ERISA or "disqualified persons" within the meaning of the Code). Prohibited
transactions may generate excise taxes and other liabilities. Thus, a Plan
fiduciary considering an investment in Offered Certificates should also
consider whether such an investment might constitute or give rise to a
prohibited transaction under ERISA or the Code.
For example, regardless of whether the Trust was deemed to hold "plan
assets" of Plans that are Certificate Owners (as discussed below), the
purchase of Certificates by a Plan with respect to which the Transferor, the
Trustee, or underwriters or any of their affiliates is a "party in interest"
under ERISA or a "disqualified person" under the Code could constitute a
prohibited transaction under the Code or ERISA unless an exemption is
applicable. Accordingly, fiduciaries of a Plan with respect to which the
Transferor, the Trustee, or underwriters or any of their affiliates is a
"party in interest" or "disqualified person" should consult their own counsel
concerning the propriety of the investment prior to making the purchase.
Certain transactions involved in the operation of the Trust might also be
deemed to constitute prohibited transactions under ERISA and the Code, if
assets of the Trust were deemed to be assets of an investing Plan. The U.S.
Department of Labor (the "DOL") has issued a regulation (the "Regulation")
concerning whether or not a Plan's assets would be deemed to include an
interest in the underlying assets of an entity (such as the Trust) for
purposes of the reporting and disclosure and fiduciary responsibility
provisions of ERISA. If assets of the Trust were deemed to be assets of an
investing Plan, any person who is a "fiduciary," as described in the preceding
paragraph, with respect to Trust assets will be a fiduciary of the investing
Plan, thus increasing the scope of activities which could be considered
prohibited transactions under ERISA and the Code. If investments by Plans are
made in the Trust, the Trust could be deemed to hold plan assets unless one of
the exceptions contained in the Regulation is applicable to the Trust.
The Regulation contains an exception which provides that if a Plan acquires
a "publicly-offered security," the issuer of the security is not deemed to
hold plan assets solely by reason of such acquisition. A publicly-offered
security is a security that is (i) freely transferable, (ii) part of a class
of securities that is owned by 100 or more investors independent of the issuer
and of one another and (iii) either is (A) part of a class of securities
registered under section 12(b) or 12(g) of the Securities Exchange Act of
1934, or (B) sold to the plan as part of an offering of securities to the
public pursuant to an effective registration statement under the Securities
Act of 1933 and the class of securities of which such security is a part is
registered under the Securities Exchange Act of 1934 within 120 days (or such
later time as may be allowed by the Securities and Exchange Commission) after
the end of the fiscal year of the issuer during which the offering of such
securities to the public occurred. Although it is anticipated that the
conditions of this exception may be met with respect to certain Classes of
Certificates, no assurance can be given, and no monitoring or other measures
will be taken to ensure that the exception will be met with respect to any
such Class.
The Regulation also states that an entity's assets will not be deemed to be
plan assets if equity participation in the entity by "benefit plan investors"
(e.g. employee welfare benefit plans and employee pension benefit plans
defined pursuant to Section 3(3) of ERISA, trusts described in Section 401(a)
of the Code or a plan described in Section 403(a) of the Code, which trust or
plan is exempt from tax under Section 501(a) of the Code, an individual
retirement account or annuity under Section 408 of the Code and any entity
whose underlying assets
68
<PAGE>
include plan assets by reason of a plan's investment in the entity) is not
"significant." Equity participation in an entity by benefit plan investors is
not significant on any date if, immediately after the most recent acquisition
of any equity interests in the entity, less than 25% of the value of each
class of equity interests in the entity (excluding the value of any equity
interests held by the Transferor, the Trustee or its affiliates) is held by
benefit plan investors. No assurance can be given as to whether the value of
any class of equity interests in the Trust held by benefit plan investors will
be less than 25%, or whether the value will remain below 25%.
If the Trust were deemed to hold "plan assets" of Plans that are Certificate
Owners, transactions involving the Trust and "parties in interest" or
"disqualified persons" with respect to such Plans might be prohibited under
Section 406 of ERISA and Section 4975 of the Code unless an exemption is
applicable.
In light of the foregoing, fiduciaries of a Plan considering the purchase of
Certificates should consult their own counsel regarding whether the assets of
the Trust which are represented by the Certificates would be considered plan
assets, the consequences that would apply if the Trust's assets were
considered plan assets and the applicability of exemptive relief from the
prohibited transaction rules.
In particular, insurance companies considering the purchase of Certificates
of any Series should consult their own employee benefits counsel or other
appropriate counsel with respect to the United States Supreme Court's decision
in John Hancock Mutual Life Insurance Co. v. Harris Trust & Savings Bank, 114
S. Ct. 517 (1993) ("John Hancock"). In John Hancock, the Supreme Court held
that assets held in an insurance company's general account may be deemed to be
"plan assets" of plans that were issued policies supported by such general
account under certain circumstances; however, the Small Business Job
Protection Act of 1996 added a 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. Section 401(c) provides that assets underlying
general account policies issued before December 31, 1998 will not be
considered "plan assets" to the extent criteria set forth in DOL regulations
are satisfied. Section 401(c) also requires the DOL to issue regulations
establishing such criteria. On December 22, 1997, the DOL published proposed
regulations (the "General Account Regulations") for this purpose. The General
Account Regulations provide that when a plan acquires a transition policy
issued by an insurance company on or before December 31, 1998, which is
supported by assets of the insurance company's general account, the plan's
assets will include the policy but not the underlying assets of the general
account to the extent the requirements set forth in the General Account
Regulations are satisfied. The General Account Regulations also require an
independent fiduciary who has the authority to manage the plan's assets to
expressly authorize the acquisition of such a transition policy. If adopted as
proposed, the General Account Regulations would not apply to any general
account policies issued after December 31, 1998. Accordingly, investors should
analyze whether John Hancock, Section 401(c) and the General Account
Regulations may have an impact with respect to their purchase of the
Certificates of any Series.
69
<PAGE>
PLAN OF DISTRIBUTION
The Transferor may sell Certificates (a) through underwriters or dealers,
(b) directly to one or more purchasers, or (c) through agents. The related
Prospectus Supplement will set forth the terms of the offering of any
Certificates offered hereby, including, without limitation, the names of any
underwriters, the purchase price of such Certificates and the proceeds to the
Transferor 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 may also be sold directly by the Transferor or through agents
designated by the Transferor from time to time. Any agent involved in the
offer or sale of Certificates will be named, and any commissions payable by
the Transferor 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
Transferor to indemnification by the Transferor 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
Transferor or its affiliates in the ordinary course of business.
Each underwriting agreement will provide that the Transferor will indemnify
the related underwriters against certain liabilities, including liabilities
under the Securities Act of 1933, as amended.
LEGAL MATTERS
Certain legal matters relating to the issuance of the Certificates will be
passed upon for the Transferor by Simpson Thacher & Bartlett, a partnership
which includes professional corporations, New York, New York. Certain legal
matters relating to the issuance of the Certificates will be passed upon for
the Underwriters by Skadden, Arps, Slate, Meagher & Flom LLP, New York, New
York. Helene L. Kaplan, of counsel to Skadden, Arps, Slate, Meagher & Flom
LLP, is a member of the Board of Directors of The Chase Manhattan Bank and The
Chase Manhattan Corporation and owns 3,900 shares of the Corporation's common
stock, with the associated rights attached thereto, 5,108.88 units of the
Corporation's Common Stock equivalents which entitle the holder upon
termination of service as a member of the Corporation's Board of Directors to
receive a cash payment for each unit equal to the fair market value at that
time of a share of the Corporation's Common Stock and 444.54 units of the
Corporation's Common Stock equivalents which entitle the holder upon
termination of service as a member of the Corporation's Board of Directors to
receive an equal number of shares of the Corporation's Common Stock.
70
<PAGE>
INDEX OF TERMS FOR PROSPECTUS
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
Account Transfer Date.................................................... 28
Accounts................................................................. 1, 4
Accumulation Period...................................................... 13
Additional Accounts...................................................... 5
Additional Interest...................................................... 15
Agreement................................................................ 4
Amortization Period...................................................... 6
Assignment............................................................... 44
Bank..................................................................... 1
Bank Portfolio........................................................... 4, 28
Banking organization..................................................... 36
Base Rate................................................................ 25
BIF...................................................................... 48
Cash Collateral Account.................................................. 58
Cash Collateral Guaranty................................................. 58
Cede..................................................................... 2
Cedel.................................................................... 37
Cedel Participants....................................................... 37
Certificate Owners....................................................... 2
Certificate Rate......................................................... 6
Certificateholders....................................................... 2
Certificates............................................................. 1, 4
Chase Manhattan Trust.................................................... 28
Chase Portfolio.......................................................... 28
Chase Manhattan Series................................................... 28
Chase USA................................................................ 1
Chemical Bank Portfolio.................................................. 28
Class.................................................................... 1, 4
Clearing agency.......................................................... 36
Clearing corporation..................................................... 36
Closing Date............................................................. 11
CMB...................................................................... 1, 10
Code..................................................................... 20, 63
Collateral Interest...................................................... 58
Collection Account....................................................... 10
Commission............................................................... 2
Companion Series......................................................... 18
Comptroller.............................................................. 22
Controlled Accumulation Amount........................................... 13
Controlled Amortization Amount........................................... 12
Controlled Amortization Period........................................... 12
Controlled Deposit Amount................................................ 13
Controlled Distribution Amount........................................... 12
Cooperative.............................................................. 38
Corporation.............................................................. 10, 34
COSO..................................................................... 56
Credit Enhancement....................................................... 5
Credit Enhancement Percentage............................................ 48
Credit Enhancement Provider.............................................. 55
</TABLE>
71
<PAGE>
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Cut-Off Date.............................................................. 7
Defaulted Accounts........................................................ 7
Definitive Certificates................................................... 9
Depositaries.............................................................. 35
Depository................................................................ 35
Determination Date........................................................ 50
Disclosure Document....................................................... 8
Discount Option Receivables............................................... 46
Discount Percentage....................................................... 46
Distribution Account...................................................... 46
Distribution Date......................................................... 11
DOL....................................................................... 68
DTC....................................................................... 2
DTC Participants.......................................................... 36
Eligible Account.......................................................... 43
Eligible Deposit Account.................................................. 46
Eligible Institution...................................................... 46
Eligible Receivable....................................................... 43
Enhancement............................................................... 4
Enhancement Invested Amount............................................... 58
ERISA..................................................................... 20
Euroclear................................................................. 38
Euroclear Operator........................................................ 38
Euroclear Participants.................................................... 37
Excess Finance Charge Collections......................................... 15
Exchange.................................................................. 8
Exchange Act.............................................................. 2
FASIT..................................................................... 67
FDIA...................................................................... 22
FDIC...................................................................... 7
FDR....................................................................... 28
Final Regulations......................................................... 66
Finance Charge Account.................................................... 46
Finance Charge Receivables................................................ 7
FIRREA.................................................................... 22
Full Investor Interest.................................................... 17
Funding Period............................................................ 16
General Account Regulations............................................... 69
Group..................................................................... 15
Holders................................................................... 39
Independent Investors..................................................... 20
Indirect Participants..................................................... 36
Ineligible Receivable..................................................... 42
Interchange............................................................... 4, 32
Interest Funding Account.................................................. 39
Interest Period........................................................... 11
Investor Charge-Off....................................................... 16
Investor Default Amount................................................... 16
Investor Interest......................................................... 6
Investor Percentage....................................................... 7
Investor Servicing Fee.................................................... 16
</TABLE>
72
<PAGE>
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
IRS...................................................................... 63
John Hancock............................................................. 69
L/C Bank................................................................. 58
MasterCard International................................................. 28
Minimum Transferor Interest.............................................. 8
Monthly Interest......................................................... 15
Monthly Period........................................................... 11
Moody's.................................................................. 46
New Chase Portfolio...................................................... 28
New Chemical Bank Portfolio.............................................. 28
Non-U.S. Certificate Owner............................................... 63
OID...................................................................... 64
Old Chase Portfolio...................................................... 28
Old Chemical Bank Portfolio.............................................. 28
Participation Agreement.................................................. 44
Participations........................................................... 5, 44
Pay Out Event............................................................ 14
Paying Agent............................................................. 47
Permitted Investments.................................................... 47
Plans.................................................................... 68
Portfolio Yield.......................................................... 25
Pre-Funding Account...................................................... 17
Pre-Funding Amount....................................................... 16
Principal Account........................................................ 46
Principal Amortization Period............................................ 12
Principal Commencement Date.............................................. 11
Principal Funding Account................................................ 13
Principal Receivables.................................................... 7
Principal Terms.......................................................... 9
Prospectus Supplement.................................................... 1
Rapid Accumulation Period................................................ 14
Rapid Amortization Period................................................ 15
Rating Agency............................................................ 20, 27
Receivables.............................................................. 1, 4
Record Date.............................................................. 34
Regulation............................................................... 68
Removed Accounts......................................................... 8
Reserve Account.......................................................... 59
Revolving Period......................................................... 11
RTC...................................................................... 23
RTC Policy Statement..................................................... 60
SAIF..................................................................... 48
Scheduled Payment Date................................................... 12
Securities Act........................................................... 2, 8
Securitized Chase Portfolio.............................................. 28
Senior Certificates...................................................... 6
Series................................................................... 1, 4
Series Supplement........................................................ 4
Series Termination Date.................................................. 51
Service Transfer......................................................... 54
Servicer................................................................. 10
</TABLE>
73
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Servicer Default........................................................... 54
Servicing Fee.............................................................. 10
Shared Principal Collections............................................... 16
Spread Account............................................................. 59
Standard & Poor's.......................................................... 46
Subordinated Certificates.................................................. 6
Tax Counsel................................................................ 63
Tax Opinion................................................................ 9
Terms and Conditions....................................................... 38
Transfer Date.............................................................. 13
Transferor................................................................. 5
Transferor Certificate..................................................... 8
Transferor Interest........................................................ 6
Transferor Percentage...................................................... 35
Trust...................................................................... 1, 4
Trust Portfolio............................................................ 32
Trust Termination Date..................................................... 51
Trustee.................................................................... 4
U.S. ...................................................................... 19
U.S. Certificate Owner..................................................... 63
U.S. Person................................................................ 63
UCC........................................................................ 59
Unallocated Principal Collections.......................................... 49
VISA....................................................................... 28
Withholding Agent.......................................................... 65
</TABLE>
74
<PAGE>
ANNEX I
GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the globally offered Chase Credit
Card Master Trusts Asset Backed Certificates (the "Global Securities") to be
issued in Series from time to time (each, a "Series") will be available only
in book-entry form. Investors in the Global Securities may hold such Global
Securities through any of The Depository Trust Company ("DTC"), Cedel or
Euroclear. The Global Securities will be tradeable as home market instruments
in both the European and U.S. domestic markets. Initial settlement and all
secondary trades will settle in same day funds.
Secondary market trading between investors holding Global Securities through
Cedel and Euroclear will be conducted in the ordinary way in accordance with
their normal rules and operating procedures and in accordance with
conventional eurobond practice (i.e., seven calendar day settlement).
Secondary market trading between investors holding Global Securities through
DTC will be conducted according to the rules and procedures applicable to U.S.
corporate debt obligations.
Secondary cross-market trading between Cedel or Euroclear and DTC
Participants holding Certificates will be effected on a delivery-against-
payment basis through the respective Depositaries of Cedel and Euroclear (in
such capacity) and as DTC Participants.
Non-U.S. holders (as described below) of Global Securities will be subject
to U.S. withholding taxes unless such holders meet certain requirements and
deliver appropriate U.S. tax documents to the securities clearing
organizations or their participants.
INITIAL SETTLEMENT
All Global Securities will be held in book-entry form by DTC in the name of
Cede & Co. as nominee of DTC. Investors' interests in the Global Securities
will be represented through financial institutions acting on their behalf as
direct and indirect Participants in DTC. As a result, Cedel and Euroclear will
hold positions on behalf of their participants through their respective
Depositaries, which in turn will hold such positions in accounts as DTC
Participants.
Custody accounts of investors electing to hold their Global Securities
through DTC will be credited with their holdings against payment in same-day
funds on the settlement date.
Investors electing to hold their Global Securities through Cedel or
Euroclear accounts will follow the settlement procedures applicable to
conventional eurobonds, except that there will be no temporary global security
and no "lock-up" or restricted period. Global Securities will be credited to
the securities custody accounts on the settlement date against payment in
same-day funds.
SECONDARY MARKET TRADING
Since the purchaser determines the place of delivery, it is important to
establish at the time of the trade where both the purchaser's and seller's
accounts are located to ensure that settlement can be made on the desired
value date.
Trading between DTC Participants. Secondary market trading between DTC
Participants will be settled in same-day funds.
Trading between Cedel and/or Euroclear Participants. Secondary market
trading between Cedel Participants or Euroclear Participants will be settled
using the procedures applicable to conventional eurobonds in same-day funds.
A-1
<PAGE>
Trading between DTC seller and Cedel or Euroclear purchaser. When Global
Securities are to be transferred from the account of a DTC Participant to the
account of a Cedel Participant or a Euroclear Participant, the purchaser will
send instructions to Cedel or Euroclear through a Cedel Participant or
Euroclear Participant at least one business day prior to settlement. Cedel or
Euroclear will instruct the respective Depositary, as the case may be, to
receive the Global Securities against payment. Payment will include interest
accrued on the Global Securities from and including the last coupon payment
date to and excluding the settlement date. Payment will then be made by the
respective depositary to the DTC Participant's account against delivery of the
Global Securities. After settlement has been completed, the Global Securities
will be credited to the respective clearing system and by the clearing system
and by the clearing system, in accordance with its usual procedures, to the
Cedel Participant's or Euroclear Participant's account. The Global Securities
credit will appear the next day (European time) and the cash debit will be
back-valued to, and the interest on the Global Securities will accrue from,
the value date (which would be the preceding day when settlement occurred in
New York). If settlement is not completed on the intended value date (i.e.,
the trade fails), the Cedel or Euroclear cash debit will be valued instead as
of the actual settlement date.
Cedel Participants and Euroclear Participants will need to make available to
the respective clearing systems the funds necessary to process same-day funds
settlement. The most direct means of doing so is to pre-position funds for
settlement, either from cash on hand or existing lines of credit, as they
would for any settlement occurring within Cedel or Euroclear. Under this
approach, they may take on credit exposure to Cedel or Euroclear until the
Global Securities are credited to their accounts one day later.
As an alternative, if Cedel or Euroclear has extended a line of credit to
them, Cedel Participants or Euroclear Participants can elect not to pre-
position funds and allow that credit line to be drawn upon the finance
settlement. Under this procedure, Cedel Participants or Euroclear Participants
purchasing Global Securities would incur overdraft charges for one day,
assuming they cleared the overdraft when the Global Securities were credited
to their accounts. However, interest on the Global Securities would accrue
from the value date. Therefore, in many cases the investment income on the
Global Securities earned during that one-day period may substantially reduce
or offset the amount of such overdraft charges, although this result will
depend on each Cedel Participant's or Euroclear Participant's particular cost
of funds.
Since the settlement is taking place during New York business hours, DTC
Participants can employ their usual procedures for sending Global Securities
to the respective Depositary for the benefit of Cedel Participants or
Euroclear Participants. The sale proceeds will be available to the DTC seller
on the settlement date. Thus, to the DTC Participant a cross-market
transaction will settle no differently than a trade between two DTC
Participants.
Trading between Cedel or Euroclear seller and DTC purchaser. Due to time
zone differences in their favor, Cedel Participants and Euroclear Participants
may employ their customary procedures for transactions in which Global
Securities are to be transferred by the respective clearing system, through
the respective Depositary, to a DTC Participant. The seller will send
instructions to Cedel or Euroclear through a Cedel Participant or Euroclear
Participant at least one business day prior to settlement. In these cases,
Cedel or Euroclear will instruct the respective Depositary, as appropriate, to
deliver the bonds to the DTC Participant's account against payment. Payment
will include interest accrued on the Global Securities from and including the
last coupon payment date to and excluding the settlement date. The payment
will then be reflected in the account of the Cedel Participant or Euroclear
Participant the following day, and receipt of the cash proceeds in the Cedel
Participant's or Euroclear Participant's account would be back-valued to the
value date (which would be the preceding day, when settlement occurred in New
York). Should the Cedel Participant or Euroclear Participant have a line of
credit with its respective clearing system and elect to be in debit in
anticipation of receipt of the sale proceeds in its account, the back-
valuation will extinguish any overdraft charges incurred over that one-day
period. If settlement is not completed on the intended value date (i.e., the
trade fails), receipt of the cash proceeds in the Cedel Participant's or
Euroclear Participant's account would instead be valued as of the actual
settlement date. Finally, day traders that use Cedel or Euroclear and that
purchase Global Securities from DTC Participants for delivery to Cedel
Participants or Euroclear Participants should note that these trades would
automatically fail
A-2
<PAGE>
on the sale side unless affirmative action were taken. At least three
techniques should be readily available to eliminate this potential problem:
(1) borrowing through Cedel or Euroclear for one day (until the purchase
side of the day trade is reflected in their Cedel or Euroclear accounts) in
accordance with the clearing system's customary procedure;
(2) borrowing the Global Securities in the U.S. from a DTC Participant no
later than one day prior to settlement which would give the Global
Securities sufficient time to be reflected in their Cedel or Euroclear
account in order to settle the sale side of the trade; or
(3) staggering the value dates for the buy and sell sides of the trade so
that the value date for the purchase from the DTC Participant is at least
one day prior to the value date for the sale to the Cedel Participant or
Euroclear Participant.
CERTAIN U.S. FEDERAL INCOME TAX DOCUMENTATION REQUIREMENTS
A beneficial owner of Global Securities holding securities through Cedel or
Euroclear (or through DTC if the holder has an address outside the U.S.) will
be subject to the 30% U.S. withholding tax that generally applies to payments
of interest (including original issue document) on registered debt issued by
U.S. Persons, unless (i) each clearing system, bank or other financial
institution that holds customers' securities in the ordinary course of its
trade or business in the chain of intermediaries between such beneficial owner
and the U.S. entity required to withhold tax complies with applicable
certification requirements and (ii) such beneficial owner takes one of the
following steps to obtain an exemption or reduced tax rate:
Exemption for non-U.S. Persons (Form W-8). Beneficial owners of Certificates
that are non-U.S. Persons can obtain a complete exemption from the withholding
tax by filing a signed Form W-8 (Certificate of Foreign Status). If the
information shown on Form W-8 changes, a new Form W-8 must be filed within 30
days of such change.
Exemption for non-U.S. Persons with effectively connected income (Form
4224). A non-U.S. Person, including a non-U.S. corporation or bank with a U.S.
branch, for which the interest income is effectively connected with its
conduct of a trade or business in the United States, can obtain an exemption
from the withholding tax by filing Form 4224 (Exemption from Withholding of
Tax on Income Effectively Connected with the Conduct of a Trade or Business in
the United States).
Exemption or reduced rate for non-U.S. Persons resident in treaty countries
(Form 1001). Non-U.S. Persons that are Certificate Owners residing in a
country that has a tax treaty with the United States can obtain an exemption
or reduced tax rate (depending on the treaty terms) by filing Form 1001
(Ownership, Exemption or Reduced Rate Certificate). If the treaty provides
only for a reduced rate, withholding tax will be imposed at that rate unless
the filer alternatively files Form W-8. Form 1001 may be filed by the
Certificate Owner or his agent.
Exemption for U.S. Persons (Form W-9). U.S. Persons can obtain a complete
exemption from the withholding tax by filing Form W-9 (Payer's Request for
Taxpayer Identification Number and Certification).
U.S. Federal Income Tax Reporting Procedure. The Certificate Owner of a
Global Security or, in the case of a Form 1001 or a Form 4224 filer, his
agent, files by submitting the appropriate form to the person through whom it
holds (the clearing agency, in the case of persons holding directly on the
books of the clearing agency). Form W-8 and Form 1001 are effective for three
calendar years and Form 4224 is effective for one calendar year.
The term "U.S. Person" means (i) a citizen or resident of the United States,
(ii) a corporation or partnership created or organized in the United States or
under the laws of the United States or of any state, (iii) an estate the
income of which is subject to United States federal income taxation regardless
of its source or (iv) a trust the income of which is subject to United States
federal income taxation regardless of its source; provided, however, that for
tax years beginning after December 31, 1996 (and, if a trustee so elects, for
tax years ending after August 20, 1996), a "U.S. Person" shall include any
trust if a court within the United States is able to exercise primary
supervision over the administration of such trust and one or more United
States fiduciaries have the authority to control all substantial decisions of
such trust. This summary does not deal with all aspects of U.S. Federal income
tax withholding that may be relevant to foreign holders of the Global
Securities. Investors are advised to consult their own tax advisors for
specific tax advice concerning their holding and disposing of the Global
Securities.
A-3
<PAGE>
PART II
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following is an itemized list of the estimated expenses to be incurred
in connection with the offering of the securities being offered hereunder
other than underwriting discounts and commissions.
<TABLE>
<S> <C>
Registration Fee............................................... $2,065,000
Printing and Engraving......................................... 500,000
Trustee's Fees................................................. 150,000
Legal Fees and Expenses........................................ 1,000,000
Blue Sky Fees and Expenses..................................... 100,000
Accountants' Fees and Expenses................................. 350,000
Rating Agency Fees............................................. 2,250,000
Miscellaneous Fees............................................. 250,000
----------
Total........................................................ $6,665,000
==========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article IX of the By-Laws of Chase Manhattan Bank USA, National Association
(the "Bank") provide that any person who was or is made a party or is
threatened to be made a party to or is otherwise involved in any action, suit
or proceeding, whether civil, criminal, administrative or investigative (a
"proceeding"), by reason of the fact that he or she is or was a director or
officer of the Bank or is or was serving at the request of the Bank as a
director, officer, employee or agent of another corporation or of a
partnership, joint venture, trust or other enterprise, including service with
respect to an employee benefit plan (an "indemnitee"), whether the basis for
such proceeding is alleged action in an official capacity as a director,
officer, employee or agent or in any other capacity while serving as a
director, officer, employee or agent, shall be indemnified and held harmless
by the Bank to the fullest extent authorized by the Delaware General
Corporation Law, as the same exists or may hereafter be amended (but, in the
case of any such amendment, only to the extent that such amendment permits the
Bank to provide broader indemnification rights than permitted prior thereto),
against all expense, liability and loss (including attorneys' fees, judgments,
fines, ERISA excise taxes or penalties and amounts paid in settlement)
reasonably incurred or suffered by such indemnitee in connection therewith and
such indemnification shall continue as to an indemnitee who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
indemnitee's heirs, executors and administrators; provided, however, that,
except as provided in the second following paragraph with respect to
proceedings to enforce rights to indemnification, the Bank shall indemnify any
such indemnitee in connection with a proceeding (or part thereof) initiated by
such indemnitee only if such proceeding (or part thereof) was authorized by
the board of directors of the Bank.
The right to indemnification described in the immediately preceding
paragraph shall include the right to be paid by the Bank the expenses incurred
in defending any proceeding for which such right to indemnification is
applicable in advance of its final disposition (hereafter an "advancement of
expenses"); provided, however, that, if the Delaware General Corporation Law
requires, an advancement of expenses incurred by an indemnitee in his or her
capacity as a director or officer (and not in any other capacity in which
service was or is rendered by such indemnitee, including, without limitation,
service to an employee benefit plan) shall be made only upon delivery to the
Bank of an undertaking (hereinafter an "undertaking"), by or on behalf of such
indemnitee, to repay all amounts so advanced if it shall ultimately be
determined by final judicial decision from which there is no further right to
appeal (hereinafter a "final adjudication") that such indemnitee is not
entitled to be indemnified for such expenses under such Article IX or
otherwise.
The rights to indemnification and to the advancement of expenses described
in the two preceding paragraphs are contract rights. If a claim under either
of such paragraphs is not paid in full by the Bank within sixty days after a
written claim has been received by the Bank except in the case of a claim for
an advancement of expenses, in which case the applicable period shall be
twenty days, the indemnitee may at any time thereafter bring suit against the
Bank to recover the unpaid amount of the claim. If successful in whole or in
part in any such suit, or
II-1
<PAGE>
in a suit brought by the Bank to recover an advancement of expenses pursuant
to the terms of an undertaking, the indemnitee shall be entitled to be paid
also the expense of prosecuting or defending such suit. In any suit brought by
the indemnitee to enforce a right to indemnification under such Article IX
(but not in a suit brought by the indemnitee to enforce a right to an
advancement of expenses) it shall be a defense that, and in any suit by the
Bank to recover an advancement of expenses pursuant to the terms of an
undertaking, the Bank shall be entitled to recover such expense upon a final
adjudication that, the indemnitee has not met any applicable standard for
indemnification set forth in the Delaware General Corporation Law. Neither the
failure of the Bank (including its board of directors, independent legal
counsel, or its stockholders) to have made a determination prior to the
commencement of such suit that indemnification of the indemnitee is proper in
the circumstances because the indemnitee has met the applicable standard of
conduct set forth in the Delaware General Corporation Law, nor an actual
determination by the Bank (including its board of directors, independent legal
counsel, or its stockholders) that the indemnitee has not met such applicable
standard of conduct shall create a presumption that the indemnitee has not met
such applicable standard of conduct or, in the case of such a suit brought by
the indemnitee, be a defense to such suit. In any suit brought by the
indemnitee to enforce a right to indemnification or to an advancement of
expenses under such Article IX, or by the Bank to recover an advancement of
expenses pursuant to the terms of an undertaking, the burden of proving that
the indemnitee is not entitled to be indemnified, or to such advancement of
expenses, under such Article IX or otherwise shall be on the Bank.
Article IX of the Bank's By-Laws also provides that the foregoing right of
indemnification or reimbursement shall not be exclusive of other rights to
which any person may be entitled under any statute, Articles of Association,
by-law, agreement, or vote of stockholders or disinterested stockholders or
otherwise. Section 145 of the Delaware General Corporation Law provides that a
Delaware corporation must indemnify a director or officer who has defended
successfully, on the merits or otherwise, any proceeding against him or any
claim, matter or issue therein, for reasonable expenses actually incurred in
such defense.
There are directors and officers liability insurance policies presently
outstanding which insure directors and officers of the Bank, the Bank's parent
and certain of its subsidiaries. The policies cover losses for which the Bank,
the Bank's parent or any of those subsidiaries shall be required or permitted
by law to indemnify directors and officers and which result from claims made
against such directors or officers based upon the commission of wrongful acts
in the performance of their duties. The policies also cover losses which the
directors or officers must pay as the result of claims brought against them
based upon the commission of wrongful acts in the performance of their duties
and for which they are not indemnified by the Bank, the Bank's parent or any
of those subsidiaries. The losses covered by the policies are subject to
certain exclusions and do not include fines or penalties imposed by law or
other matters deemed uninsurable under the law. The policies contain self-
insured retention provisions.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(A) EXHIBITS
1.1--Form of Underwriting Agreement (incorporated by reference to
Exhibit 1.1 to the Registration Statement on Form S-3 of Chemical
Bank (No. 33-94190)).
4.1--Pooling and Servicing Agreement, dated as of October 19, 1995,
between Chemical Bank, as Transferor and Servicer, and The Bank of
New York, as Trustee (incorporated by reference to Exhibit 4.1 to
the Registration Statement on Form S-3 of Chemical Bank (No. 33-
94190)).
4.2--Amended and Restated Pooling and Servicing Agreement, dated as of
June 1, 1996, among the Registrant, Chemical Bank and The Bank of
New York (incorporated by reference to Exhibit 4.2 to the
Registration Statement on Form S-3 of the Registrant (No. 333-
04607)).
5.1--Opinion of Simpson Thacher & Bartlett (a partnership which
includes professional corporations).
8.1--Opinion of Simpson Thacher & Bartlett with respect to certain tax
matters (included in opinion to be filed as Exhibit 5.1).
23.1--Consent of Simpson Thacher & Bartlett (included in opinion to be
filed as Exhibit 5.1).
24.1--Powers of Attorney.*
- --------
* Previously filed
II-2
<PAGE>
(B) FINANCIAL STATEMENTS
All financial statements, schedules and historical financial information
have been omitted as they are not applicable.
ITEM 17. UNDERTAKINGS
The undersigned Registrant on behalf of the Chase Credit Card Master Trust
(the "Trust") hereby undertakes as follows:
(a) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement; (i) to include any
prospectus required by Section 10(a)(3) of the Securities Act of 1933 (the
"Act"); (ii) to reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement; (iii) to include any material information with
respect to the plan of distribution not previously disclosed in the
Registration Statement or any material change to such information in the
Registration Statement; provided, however, that (a)(i) and (a)(ii) will not
apply if the information required to be included in a post-effective
amendment thereby is contained in periodic reports filed pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in this Registration Statement.
(b) That, for the purpose of determining any liability under the Act,
each such post-effective amendment shall be deemed to be a new Registration
Statement relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial bona fide
offering thereof.
(c) To remove from registration by means of a post-effective amendment
any of the securities being registered that remain unsold at the
termination of the offering.
(d) That, for purposes of determining any liability under the Act, each
filing of the Trust's annual report pursuant to Section 13(a) or 15(d) of
the Securities Exchange Act of 1934 (and, where applicable, each filing of
an employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
Registration Statement shall be deemed to be a new Registration Statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
(e) That insofar as indemnification for liabilities arising under the Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described under Item 15 above, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense
of any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of each issue.
II-3
<PAGE>
(f) That, for purposes of determining any liability under the Act, the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4)
under the Act shall be deemed to be part of this Registrant Statement as of
the time it was declared effective.
(g) That, for the purpose of determining any liability under the Act,
each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS
ALL OF THE REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS
AMENDMENT NO. 1 TO THE REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY
THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF WILMINGTON, STATE
OF DELAWARE, ON FEBRUARY 18, 1998.
Chase Manhattan Bank USA, National
Association
as originator of the Trust
By /s/ Keith Schuck
___________________________________
Keith Schuck
Controller
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
AMENDMENT NO. 1 TO THE REGISTRATION STATEMENT HAS BEEN SIGNED ON FEBRUARY 18,
1998 BY THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED.
SIGNATURE TITLE
* Chairman of the Board and
___________________________________ Director
Donald L. Boudreau
* President (Chief Executive
___________________________________ Officer) and Director
Michael Barrett
* Director
___________________________________
Luke S. Hayden
Director
___________________________________
John J. Hehir, Jr.
* Director
___________________________________
William H. Hoefling
* Director
___________________________________
Kevin T. Hurley
* Director
___________________________________
Thomas Jacob
* Director
___________________________________
John M. Nuzum
* Director
___________________________________
Michael Urkowitz
II-5
<PAGE>
/s/ Keith Schuck Vice President and Controller
___________________________________ (Chief Financial Officer and
Keith Schuck Principal Accounting Officer)
- --------
* The undersigned, by signing his name hereto, does hereby sign this
Registration Statement on behalf of each of the above-indicated directors
and officers of the Registrant pursuant to powers of attorney signed by
such directors and officers.
/s/ Keith Schuck
_____________________________________
Keith Schuck
Attorney-in-Fact
II-6
<PAGE>
EXHIBIT 5.1
SIMPSON THACHER & BARTLETT
425 LEXINGTON AVENUE
NEW YORK, N.Y. 10017-3954
(212) 455-2000
Telecoopier: (212) 455-2502
Telex: 129158
February 19, 1998
The Chase Manhattan Bank
270 Park Avenue
New York, New York 10017
Chase Manhattan Bank USA, National Association
802 Delaware Avenue
Wilmington, Delaware 19801
Re: Chase Credit Card Master Trusts
Asset-Backed Certificates
-------------------------
Ladies and Gentlemen:
We have acted as counsel for Chase Manhattan Bank USA, National
Association (the "Bank"), a national banking association and The Chase Manhattan
Bank ("CMB"), a banking corporation organized under the laws of the State of New
York, in connection with the filing by the Bank, on behalf of the Chase Credit
Card Master Trusts (the "Trusts"), with the Securities and Exchange Commission
under the Securities Act of 1933, as amended (the "Act"), of a Registration
Statement on Form S-3, Registration No. 333-43173 (the "Registration
Statement"), and Amendment No. 1 to the Registration Statement filed by the Bank
under the Act, registering Asset-Backed Certificates representing undivided
interests in certain assets of the Trusts (the "Certificates"). The
Certificates of a particular Series will be issued pursuant to a Pooling and
Servicing Agreement (the "Pooling and Servicing Agreement") between the Bank,
CMB and a trustee to be designated thereunder (the "Trustee"), and a related
Series Supplement to the Pooling and Servicing Agreement (a "Series Supplement")
between the Bank, CMB and the Trustee, substantially in the forms filed as
Exhibits 4.1 and 4.2, respectively, to the Registration Statement.
<PAGE>
-2-
In that connection, we have examined, and relied as to matters of fact
upon, originals or copies, certified or otherwise identified to our
satisfaction, of such corporate records, agreements, documents, and other
instruments and such certificates or comparable documents of public officials
and of officers and representatives of the Bank and CMB, and have made such
other and further investigations, as we have deemed relevant and necessary as a
basis for the opinions hereinafter set forth.
In such examination, we have assumed the genuineness of all signatures,
the legal capacity of natural persons, the authenticity of all documents
submitted to us as originals, the conformity to original documents of all
documents submitted to us as certified or photostatic copies, and the
authenticity of the originals of such latter documents.
Based upon the foregoing, and subject to the qualifications and
limitations stated herein, we are of the opinion as follows:
1. The Pooling and Servicing Agreement has been duly authorized,
executed and delivered by the Bank and CMB, and assuming the due
authorization, execution and delivery by the other parties thereto, will
constitute a valid and legally binding obligation of the Bank and CMB
enforceable against the Bank and CMB in accordance with its terms.
2. When the Series Supplement relating to a particular Series of
Certificates has been duly authorized, executed and delivered by each of the
Bank, CMB and the Trustee, such Series Supplement will constitute a valid
and legally binding obligation of the Bank and CMB enforceable against the
Bank and CMB in accordance with its terms.
3. When the Certificates of a particular Series have been duly
authorized by the Bank, when such Certificates have been duly executed and
authenticated in accordance with the terms of the Pooling and Servicing
Agreement and the related Series Supplement and when such Certificates have
been delivered and sold as contemplated by the Registration Statement, such
Certificates will be validly issued and outstanding and entitled to the
benefits provided for by the Pooling and Servicing Agreement and such Series
Supplement.
Our opinions set forth in paragraphs 1 and 2 above are subject to the
effects of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting creditors' rights
generally or of creditors of banks the accounts of which are insured by the
Federal Deposit Insurance Corporation, general
<PAGE>
-3-
equitable principles (whether considered in a proceeding in equity or at law)
and an implied covenant of good faith and fair dealing.
We hereby confirm that the statements made in the prospectus (the
"Prospectus") forming a part of the Registration Statement under the caption
"Tax Matters" insofar as they purport to constitute summaries of matters of
United States federal tax law and regulations or legal conclusions with respect
thereto, constitute accurate summaries of the matters described therein in all
material respects.
We are members of the Bar of the State of New York, and we do not
express any opinion herein concerning any law other than the law of the State of
New York and the Federal law of the United States.
We hereby consent to the use of our name under the headings "Tax Matters"
and "Legal Matters" in the Prospectus forming a part of the Registration
Statement and to the use of this opinion letter for filing with the Registration
Statement as Exhibits 5.1 and 24.1 thereto.
Very truly yours,
SIMPSON THACHER & BARTLETT
