<PAGE>
Filed Pursuant to Rule 424(b)(3)
Registration File No. 333-43173
Prospectus Supplement to Prospectus Dated September 17, 1998
CHASE CREDIT CARD MASTER TRUST
(FORMERLY KNOWN AS CHEMICAL MASTER CREDIT CARD TRUST I)
$704,166,000
$650,000,000 CLASS A FLOATING RATE ASSET BACKED CERTIFICATES, SERIES 1998-5
$54,166,000 CLASS B FLOATING RATE ASSET BACKED CERTIFICATES, SERIES 1998-5
CHASE MANHATTAN BANK USA, NATIONAL ASSOCIATION
Transferor
THE CHASE MANHATTAN BANK
Servicer
Each Class A Floating Rate Asset Backed Certificate, Series 1998-5
(collectively, the "Class A Certificates") and each Class B Floating Rate Asset
Backed Certificate, Series 1998-5 (collectively, the "Class B Certificates" and,
together with the Class A Certificates, the "Certificates" or the "Series 1998-5
Certificates") will represent the right to receive certain payments from the
Chase Credit Card Master Trust (formerly known as Chemical Master Credit Card
Trust I) (the "Trust"), created pursuant to a Pooling and Servicing Agreement
among the Transferor (as defined herein), The Chase Manhattan Bank ("CMB"), as
servicer, and The Bank of New York, as trustee. The property of the Trust
includes receivables (the "Receivables") generated from time to time in a
portfolio of MasterCard and VISA revolving credit card accounts (the
"Accounts"), all monies due or to become due in payment of the Receivables and
the right to receive Interchange and Recoveries allocable to the Certificates,
as described herein. In addition, the Collateral Interest (as defined herein),
which is not offered hereby, will be issued in the initial amount of $69,643,524
and will be subordinated to the Certificates as described herein. Chase
Manhattan Bank USA, National Association ("Chase USA" or the "Bank") initially
will own the remaining undivided interest in the Trust not represented by the
Certificates, the Collateral Interest and the other interests issued by the
Trust from time to time and will service the Receivables. Chase USA may from
time to time offer other Series of certificates that evidence undivided
interests in certain assets of the Trust, which may have terms significantly
different from the Certificates, and may establish other trusts from time to
time having assets substantially similar to the assets of the Trust.
[Continued on next page]
There currently is no secondary market for the Certificates, and there is no
assurance that one will develop.
PROSPECTIVE INVESTORS SHOULD CONSIDER, AMONG OTHER THINGS, THE INFORMATION SET
FORTH IN "RISK FACTORS" BEGINNING ON PAGE S-18 HEREIN AND PAGE 21 IN THE
PROSPECTUS.
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THE CERTIFICATES REPRESENT INTERESTS IN THE TRUST ONLY AND DO 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.
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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 SUPPLEMENT OR THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC (1) DISCOUNTS TRANSFEROR (1)(2)
<S> <C> <C> <C>
PER CLASS A
CERTIFICATE........... 100.000% 0.275% 99.725%
PER CLASS B
CERTIFICATE........... 100.000% 0.300% 99.700%
TOTAL................... $ 704,166,000 $ 1,949,998 $ 702,216,002
</TABLE>
(1) Plus accrued interest, if any, at the Class A Certificate Rate or the
Class B Certificate Rate, as applicable, from September 24, 1998.
(2) Before deduction of expenses estimated to be $670,467.
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This Prospectus Supplement and the Prospectus may be used by Chase Securities
Inc., an affiliate of the Transferor and a subsidiary of The Chase Manhattan
Corporation, in connection with offers and sales related to market-making
transactions in the Certificates. Chase Securities Inc. may act as principal or
agent in such transactions. Such sales will be made at prices related to
prevailing market prices at the time of sale.
The Certificates are offered by the Underwriters when, as and if issued by the
Trust and accepted by the Underwriters and subject to the Underwriters' right to
reject orders in whole or in part. It is expected that the Certificates will be
delivered in book-entry form on or about September 24, 1998, through the
facilities of The Depository Trust Company, Cedel Bank, societe anonyme, and the
Euroclear System.
Underwriters of the Class A Certificates
CHASE SECURITIES INC.
BEAR, STEARNS & CO. INC.
CREDIT SUISSE FIRST BOSTON
PRUDENTIAL SECURITIES INCORPORATED
Underwriter of the Class B Certificates
CHASE SECURITIES INC.
The date of this Prospectus Supplement is September 17, 1998.
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(continued from previous page)
Interest will accrue on the Class A Certificates from September 24, 1998
(the "Closing Date") through November 15, 1998, and with respect to each
Interest Period (as defined herein) thereafter, at the rate of 0.16% per annum
above the London interbank offered rate for one-month United States dollar
deposits ("LIBOR"), determined as described herein, prevailing on the related
LIBOR Determination Date (as defined herein) with respect to such period (the
"Class A Certificate Rate"). Interest will accrue on the Class B Certificates
from the Closing Date through November 15, 1998 and with respect to each
Interest Period thereafter, at the rate of 0.36% per annum above LIBOR
prevailing on the related LIBOR Determination Date with respect to each such
period (the "Class B Certificate Rate"). The initial LIBOR Determination Date is
September 22, 1998. Interest with respect to the Certificates will be
distributed on November 16, 1998 and on the 15th day of each month thereafter
(or, if such 15th day is not a business day, the next succeeding business day)
(each, a "Distribution Date"). Principal on the Class A Certificates is
scheduled to be distributed on the September 2003 Distribution Date (the
"Class A Scheduled Payment Date"), but may be paid earlier or later under
certain limited circumstances described herein. Principal on the Class B
Certificates is scheduled to be distributed on the October 2003 Distribution
Date (the "Class B Scheduled Payment Date"), but may be paid earlier or later
under certain limited circumstances described herein. See "Maturity
Considerations."
The Class B Certificates will be subordinated to the Class A Certificates
as described herein. The Collateral Interest will be subordinated to the
Class A Certificates and the Class B Certificates as described herein.
Application will be made to list the Certificates on the Luxembourg Stock
Exchange.
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CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE CERTIFICATES,
INCLUDING OVER-ALLOTMENT TRANSACTIONS, STABILIZING TRANSACTIONS, SYNDICATE
COVERING TRANSACTIONS AND PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES,
SEE "UNDERWRITING."
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The Certificates offered hereby constitute a separate Series of
certificates being offered by the Transferor from time to time pursuant to its
Prospectus dated September 17, 1998. This Prospectus Supplement does not contain
complete information about the offering of the Certificates. Additional
information is contained in the Prospectus and purchasers are urged to read both
this Prospectus Supplement and the Prospectus in full. Sales of the Certificates
may not be consummated unless the purchaser has received both this Prospectus
Supplement and the Prospectus.
OTHER INFORMATION
The distribution of this Prospectus Supplement and Prospectus and the
offering of the Certificates in certain jurisdictions may be restricted by law.
Persons into whose possession this Prospectus Supplement and Prospectus comes
are required by the Underwriters to inform themselves about and to observe any
such restrictions.
The Bank has taken all reasonable care to ensure that the information
contained in this Prospectus Supplement and 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.
As used in this Prospectus Supplement and Prospectus, all references to
"dollars" and "$" refer to United States dollars.
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SUMMARY OF TERMS
The following is qualified in its entirety by reference to the detailed
information appearing elsewhere in this Prospectus Supplement and the
accompanying Prospectus. Certain capitalized terms used in this summary are
defined elsewhere in this Prospectus Supplement and the accompanying Prospectus.
A listing of the pages on which some of such terms are defined is found in the
"Index of Terms for Prospectus Supplement" and the "Index of Terms for
Prospectus."
<TABLE>
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TYPE OF SECURITIES........................ Class A Floating Rate Asset Backed Certificates, Series 1998-5 (the
"Class A Certificates") and Class B Floating Rate Asset Backed
Certificates, Series 1998-5 (the "Class B Certificates," and
together with the Class A Certificates, the "Certificates" or the
"Series 1998-5 Certificates").
TRUST..................................... Chase Credit Card Master Trust (formerly known as Chemical Master
Credit Card Trust I) (the "Trust") was formed pursuant to a pooling
and servicing agreement (as the same may be amended from time to
time, the "Agreement"), among the Transferor, The Chase Manhattan
Bank ("CMB"), as servicer of the Receivables, and The Bank of New
York, as trustee (the "Trustee"), as supplemented by the supplement
relating to the Certificates (the "Series 1998-5 Supplement") (the
term "Agreement," unless the context requires otherwise, refers to
the Agreement as supplemented by the Series 1998-5 Supplement). The
"Transferor" means (a) with respect to the period prior to June 1,
1996, CMB (formerly known as Chemical Bank) and (b) with respect
to the period beginning on June 1, 1996, Chase USA. As used in this
Prospectus Supplement, the term "Certificateholders" refers to
holders of the Certificates, the term "Class A Certificateholders"
refers to holders of the Class A Certificates and the term
"Class B Certificateholders" refers to holders of the Class B
Certificates.
THE TRUST ASSETS.......................... The property of the Trust includes receivables (the "Receivables")
arising under certain MasterCard(Registered) and VISA(Registered)1
revolving credit card accounts (the "Accounts") selected by the
Bank from the portfolio of MasterCard and VISA accounts owned by
the Transferor, 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, the right to
receive Interchange and Recoveries allocable to the Trust and all
monies on deposit in certain bank accounts of the Trust (other than
investment earnings on such amounts, except as otherwise specified
herein), and any Enhancement issued with respect to any Series. The
Certificateholders will not be entitled to the benefits of any
Enhancement issued with respect to any Series other than
Series 1998-5, and the holders of certificates of other Series will
not be entitled to the benefits of any Enhancement issued with
respect to Series 1998-5.
The Transferor has conveyed to the Trustee for the benefit of the
Trust all Receivables existing under certain Accounts that were
selected by the Bank from the Chemical Bank Portfolio based on
</TABLE>
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1 MasterCard(Registered) and VISA(Registered) are registered trademarks of
MasterCard International Inc. and VISA U.S.A., Inc., respectively.
S-3
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criteria provided in the Agreement as applied on September 27,
1995 (the "Cut-Off Date") and has conveyed and will convey to the
Trustee all Receivables arising under the Accounts from time to
time thereafter until the termination of the Trust. Since the Cut-
Off Date, the Transferor has conveyed to the Trustee for the
benefit of the Trust the Receivables in certain Additional Accounts
in accordance with the provisions of the Agreement, including
certain Receivables in Accounts from the Chase Portfolio. In
addition, pursuant to the Agreement, the Bank may or may be
obligated to (subject to certain limitations and conditions)
designate other Additional Accounts for inclusion in the Trust.
Also, the Agreement provides that in lieu of Additional Accounts or
in addition thereto, the Bank may, subject to certain conditions,
include Participations in the Trust. See "The Receivables" herein
and "Description of the Certificates--Addition of Trust Assets" in
the Prospectus.
CERTIFICATE INTEREST AND PRINCIPAL........ Each of the Certificates offered hereby represents the right to
receive certain payments from the assets of the Trust. The Trust's
assets will be allocated among the Class A Certificateholders (the
"Class A Investor Interest"), the Class B Certificateholders (the
"Class B Investor Interest"), the Collateral Interest Holder (the
"Collateral Interest," and together with the Class A Investor
Interest and the Class B Investor Interest, the "Investor
Interest"), the interest of the holders of other undivided
interests in the Trust issued pursuant to the Agreement and
applicable Series Supplements and the Transferor (the "Transferor
Interest"), as described below. The Collateral Interest in the
initial amount of $69,643,524 (which amount represents 9% of the
amount of the initial Investor Interest) constitutes Credit
Enhancement for the Certificates. The provider of such Credit
Enhancement is referred to herein as the "Collateral Interest
Holder." Allocations will be made to the Collateral Interest, and
the Collateral Interest Holder will have voting and certain other
rights, as if the Collateral Interest were a subordinated class of
Certificates. The Transferor Interest will represent the right to
the assets of the Trust not allocated to the Class A Investor
Interest, the Class B Investor Interest, the Collateral Interest or
the holders of other undivided interests in the Trust. The
principal amount of the Transferor Interest will fluctuate as the
amount of Receivables in the Trust changes from time to time.
The Class A Certificates will represent the right to receive from the
assets of the Trust allocated to the Class A Certificates funds up
to (but not in excess of) the amounts required to make
(a) payments of interest accruing from September 24, 1998 (the
"Closing Date") through November 15, 1998 and with respect to each
Interest Period thereafter, at the rate of 0.16% per annum above
the London interbank offered rate for one-month United States
dollar deposits ("LIBOR"), determined as described herein,
prevailing on the related LIBOR Determination Date (such rate, the
"Class A Certificate Rate") and (b) payments of principal on the
Class A Scheduled Payment Date or, under certain limited
circumstances, during the Rapid Amortization Period, to the extent
of the Class A Investor Interest, which may
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<S> <C>
be less than the unpaid principal balance of the Class A
Certificates in certain circumstances described herein.
The Class B Certificates will represent the right to receive, from
the assets of the Trust allocated to the Class B Certificates,
funds up to (but not in excess of) the amounts required to make
(a) payments of interest accruing from the Closing Date through
November 15, 1998 and with respect to each Interest Period
thereafter, at a rate of 0.36% per annum above LIBOR, determined as
described herein, prevailing on the related LIBOR Determination
Date (such rate, the "Class B Certificate Rate") and (b) payments
of principal on the Class B Scheduled Payment Date or, under
certain limited circumstances, during the Rapid Amortization
Period, to the extent of the Class B Investor Interest, which may
be less than the unpaid principal balance of the Class B
Certificates in certain circumstances described herein. No
principal will be paid to the Class B Certificateholders until the
Class A Investor Interest is paid in full. See "Description of the
Certificates--Subordination."
The aggregate principal amount of the Class A Investor Interest and
the Class B Investor Interest will, except as otherwise provided
herein, remain fixed at $650,000,000 and $54,166,000, respectively.
The Class A Investor Interest will decline in certain circumstances
if the Default Amounts allocated to the Class A Certificates
exceed funds allocable thereto as described herein and the Class B
Investor Interest and the Collateral Interest are zero. The
Class B Investor Interest will decline in certain circumstances as
a result of (a) the reallocation of collections of Principal
Receivables otherwise allocable to the Class B Investor Interest to
fund certain payments in respect of the Class A Certificates and
(b) the allocation to the Class B Investor Interest of certain
Default Amounts, including such amounts otherwise allocable to the
Class A Investor Interest when the Collateral Interest is zero.
During the Controlled Accumulation Period, for the sole purpose of
allocating collections of Finance Charge Receivables and Default
Amounts with respect to each Monthly Period, the Class A Investor
Interest will be further reduced by the amount on deposit in the
Principal Funding Account from time to time (as so reduced, the
"Class A Adjusted Investor Interest" and together with the Class B
Investor Interest and the Collateral Interest, the "Adjusted
Investor Interest").
The Class A Certificates, the Class B Certificates and the Collateral
Interest will each include the right to receive (but only to the
extent needed to make required payments under the Agreement)
varying percentages of collections of Finance Charge Receivables
and Principal Receivables and will be allocated varying percentages
of Default Amounts during each calendar month (a "Monthly Period").
Collections of Finance Charge Receivables and Default Amounts at
all times, and collections of Principal Receivables during the
Revolving Period, will be allocated to the Investor Interest based
on the Floating Investor Percentage and will be further allocated
among the Class A Investor Interest, the Class B Investor Interest
and the Collateral Interest based on the
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S-5
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Class A Floating Allocation, the Class B Floating Allocation and
the Collateral Floating Allocation, respectively, applicable during
the related Monthly Period. Collections of Principal Receivables
during the Controlled Accumulation Period and the Rapid
Amortization Period will be allocated to the Investor Interest
based on the Fixed Investor Percentage and will be further
allocated among the Class A Investor Interest, the Class B
Investor Interest and the Collateral Interest based on the Class A
Fixed Allocation, the Class B Fixed Allocation and the Collateral
Fixed Allocation, respectively. See "Description of the
Certificates--Allocation Percentages" and "--Pay Out Events" herein
and "Description of the Certificates--Pay Out Events" in the
Prospectus.
The Transferor initially will own the Transferor Interest. The
Transferor may tender the certificate that represents the
Transferor Interest (the "Transferor Certificate") or, if provided
in the relevant Series Supplement, certificates of any Series and
the Transferor Certificate, to the Trustee and, upon satisfying
certain conditions, cause the Trustee to issue one or more new
Series, as described in "Description of the Certificates--
Exchanges" in the Prospectus. The certificates of any new Series
will be issued pursuant to the Agreement and a related Series
Supplement. See "Description of the Certificates" herein and in the
Prospectus.
The final distribution of principal and interest on the Certificates
will be made no later than the January 2006 Distribution Date in
the manner provided in "Description of the Certificates--Final
Payment of Principal; Termination" in the Prospectus.
Series 1998-5 will terminate on the earliest to occur of (a) the
Distribution Date on which the Investor Interest is paid in full,
(b) the January 2006 Distribution Date or (c) the Trust Termination
Date (such earliest to occur, the "Series 1998-5 Termination
Date"). After the Series 1998-5 Termination Date, the Trust will
have no further obligation to pay principal or interest on the
Certificates.
OTHER SERIES.............................. The Trust has previously issued seventeen other Series. See
"Annex I: Other Series" for a summary of the terms of these other
Series. Additional Series are expected to be issued from time to
time by the Trust. See "Description of the Certificates--
Exchanges" in the Prospectus.
RECEIVABLES............................... The Receivables arise in Accounts that have been selected by the
Transferor from the Bank Portfolio. The Receivables consist of
Principal Receivables and Finance Charge Receivables. In addition,
certain amounts of Interchange attributed to cardholder charges for
goods and services in the Accounts, and Recoveries, will be
allocated to the Certificates and treated as Finance Charge
Receivables. See "Chase USA's Credit Card Portfolio--Interchange"
and "--Recoveries" herein and "Chase USA's Credit Card
Activities--Interchange" and "--Collection of Delinquent Accounts"
in the Prospectus.
The aggregate amount of Receivables in the Accounts as of the
beginning of the day on July 1, 1998 was approximately
</TABLE>
S-6
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<TABLE>
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$15.9 billion comprised of approximately $15.5 billion of Principal
Receivables and approximately $0.4 billion of Finance Charge
Receivables. The amount of Finance Charge Receivables will not
affect the amount of the Investor Interest represented by the
Certificates and the Collateral Interest or the amount of the
Transferor Interest, all of which are determined on the basis of
the amount of Principal Receivables in the Trust. The aggregate
interest in the Principal Receivables in the Trust evidenced by the
Certificates and the Collateral Interest will never exceed the
amount of the Investor Interest regardless of the total amount of
Principal Receivables in the Trust at any time.
DENOMINATIONS............................. Beneficial interests in the Certificates will be offered for purchase
in minimum denominations of $1,000 and integral multiples thereof.
REGISTRATION OF CERTIFICATES.............. The Certificates initially will be represented by certificates
registered in the name of Cede, as the nominee of DTC. No
Certificate Owner will be entitled to receive a Definitive
Certificate, except under the limited circumstances described in
the Prospectus. Certificateholders may elect to hold their
Certificates through DTC (in the United States) or Cedel or
Euroclear (in Europe). Transfers will be made in accordance with
the rules and operating procedures described herein and in the
Prospectus. See "Description of the Certificates--General,"
"--Book-Entry Registration" and "--Definitive Certificates" in the
Prospectus.
SERVICING FEE............................. The Servicer will receive a monthly fee as servicing compensation
from the Trust on each Transfer Date. On each Transfer Date,
Servicer Interchange with respect to the related Monthly Period
will be paid to the Servicer in respect of the Investor Servicing
Fee. In addition, the Class A Servicing Fee, the Class B Servicing
Fee and the Collateral Interest Servicing Fee will be paid on each
Transfer Date as described under "Description of the
Certificates--Servicing Compensation and Payment of Expenses." See
also "Description of the Certificates--Servicing Compensation and
Payment of Expenses" in the Prospectus.
INTEREST.................................. Interest on the Certificates for each Interest Period will be
distributed on November 16, 1998, and on the 15th day of each month
thereafter, or if such day is not a business day, on the next
succeeding business day (each, a "Distribution Date"), in an amount
equal to (a) with respect to the Class A Certificates, the product
of (i) the actual number of days in the related Interest Period
divided by 360, (ii) the Class A Certificate Rate and (iii) the
outstanding principal balance of the Class A Certificates as of the
preceding Record Date and (b) with respect to the Class B
Certificates, the product of (i) the actual number of days in the
related Interest Period divided by 360, (ii) the Class B
Certificate Rate and (iii) the outstanding principal balance of the
Class B Certificates as of the preceding Record Date. Interest for
any Distribution Date due but not paid on such Distribution Date
will be payable on the next succeeding Distribution Date, together
with additional interest on such amount at the applicable
Certificate Rate plus 2% per annum (such amount, as applicable,
"Additional Interest").
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The "Interest Period" with respect to any Distribution Date, will be
the period from and including the previous Distribution Date
through the day preceding such Distribution Date, except the
initial Interest Period will be the period from and including the
Closing Date through November 15, 1998. Interest payments on each
Distribution Date will be funded from the portion of Finance Charge
Receivables collected during the preceding Monthly Period (or with
respect to the first Distribution Date, from and including the
Closing Date through October 31, 1998) and certain other available
amounts (a) with respect to the Class A Certificates, allocated to
the Class A Investor Interest, and, if necessary, from Excess
Spread and Reallocated Principal Collections (to the extent
available), (b) with respect to the Class B Certificates, allocated
to the Class B Investor Interest and, if necessary, from Excess
Spread and Reallocated Collateral Principal Collections (to the
extent available) and (c) with respect to the Collateral Interest,
from Excess Spread. See "Description of the
Certificates--Reallocation of Cash Flows" and "--Application of
Collections--Payment of Interest, Fees and Other Items" herein and
"Credit Enhancement" in the Prospectus.
REVOLVING PERIOD.......................... The "Revolving Period" with respect to the Certificates means the
period from and including the Closing Date to, but not including,
the earlier of (a) the commencement of the Controlled Accumulation
Period and (b) the commencement of the Rapid Amortization Period.
The controlled accumulation period with respect to the Certificates
(the "Controlled Accumulation Period") is scheduled to begin at the
close of business on the last day of the August 2002 Monthly
Period. Subject to the conditions set forth under "Description of
the Certificates--Postponement of Controlled Accumulation Period,"
the day on which the Revolving Period ends and the Controlled
Accumulation Period begins may be delayed to no later than the
close of business on the last day of the July 2003 Monthly Period.
During the Revolving Period, Available Investor Principal
Collections otherwise allocable to the Investor Interest will,
subject to certain limitations and unless a reduction in the
Required Collateral Interest has occurred, be treated as Shared
Principal Collections and allocated to the holders of other Series
of certificates issued and outstanding or, subject to certain
limitations, paid to the holder of the Transferor Certificate or
deposited into an excess funding account (the "Excess Funding
Account"). See "Description of the Certificates--Principal
Payments." See "Description of the Certificates--Pay Out Events"
for a discussion of the events which might lead to the termination
of the Revolving Period prior to the commencement of the Controlled
Accumulation Period.
CONTROLLED ACCUMULATION PERIOD............ Unless a Pay Out Event has occurred, the Controlled Accumulation
Period will end on the earliest of (i) the commencement of the
Rapid Amortization Period, (ii) payment of the Investor Interest in
full and (iii) the Series 1998-5 Termination Date. During the
Controlled Accumulation Period, prior to the payment of the
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Class A Investor Interest in full, an amount equal to the least of
(a) Available Investor Principal Collections for the related
Monthly Period, (b) the sum of the Controlled Accumulation Amount
for such Monthly Period and the Accumulation Shortfall, if any
(such sum, the "Controlled Deposit Amount" for such Monthly Period)
and (c) the Class A Adjusted Investor Interest on such Transfer
Date will be deposited monthly in a trust account established by
the Trustee at the direction of the Servicer (the "Principal
Funding Account") on each Transfer Date beginning with the Transfer
Date in the month following the commencement of the Controlled
Accumulation Period until the Principal Funding Account Balance is
equal to the Class A Investor Interest. On each Transfer Date
during the Controlled Accumulation Period after the Distribution
Date on which the Class A Investor Interest has been paid in full
and not earlier than the Transfer Date preceding the Class B
Scheduled Payment Date, an amount equal to the lesser of
(a) Available Investor Principal Collections for the related
Monthly Period and (b) the Class B Investor Interest on such
Transfer Date will be deposited into the Distribution Account for
distribution to the Class B Certificateholders until the Class B
Investor Interest has been paid in full. If, for any Monthly
Period, the Available Investor Principal Collections for such
Monthly Period exceed the applicable Controlled Deposit Amount, the
amount of such excess will be first paid to the Collateral Interest
Holder to the extent that the Collateral Interest exceeds the
Required Collateral Interest and then will be treated as Shared
Principal Collections and allocated to the holders of other Series
of certificates within Group I issued and outstanding or, subject
to certain limitations, paid to the holder of the Transferor
Certificate or deposited into the Excess Funding Account. If, for
any Monthly Period, the Available Investor Principal Collections
for such Monthly Period are less than the applicable Controlled
Deposit Amount, the amount of such deficiency will be the
applicable "Accumulation Shortfall" for the succeeding Monthly
Period. See "Description of the Certificates--Application of
Collections."
Unless a Pay Out Event shall have occurred, prior to the payment of
the Class A Investor Interest in full, all funds on deposit in the
Principal Funding Account will be invested at the direction of the
Servicer by the Trustee in certain Permitted Investments.
Investment earnings (net of investment losses and expenses) on
funds on deposit in the Principal Funding Account (the "Principal
Funding Investment Proceeds") during the Controlled Accumulation
Period will be applied as Class A Available Funds. If, for any
Transfer Date, the Principal Funding Investment Proceeds are less
than an amount equal to the product of (a) the product of (i) a
fraction the numerator of which is the actual number of days in the
related Interest Period and the denominator of which is 360, and
(ii) the Class A Certificate Rate in effect with respect to such
Interest Period and (b) the Principal Funding Account Balance as of
the Record Date preceding such Transfer Date (the "Class A Covered
Amount"), the amount of such deficiency (the "Class A Principal
Funding Investment
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Shortfall") shall be withdrawn, to the extent available, from the
Reserve Account and applied as Class A Available Funds and, if
necessary, paid from Excess Spread and Reallocated Principal
Collections.
Funds on deposit in the Principal Funding Account will be available
to pay the Class A Certificateholders in respect of the Class A
Investor Interest on the Class A Scheduled Payment Date. If the
aggregate principal amount of deposits made to the Principal
Funding Account is insufficient to pay the Class A Investor
Interest in full on the Class A Scheduled Payment Date, the Rapid
Amortization Period will commence as described below. Although it
is anticipated that during the Controlled Accumulation Period prior
to the payment of the Class A Investor Interest in full, funds will
be deposited in the Principal Funding Account in an amount equal to
the applicable Controlled Deposit Amount on each Transfer Date and
that scheduled principal will be available for distribution to the
Class A Certificateholders on the Class A Scheduled Payment Date,
no assurance can be given in that regard. See "Risk
Factors--Certificate Rating" and "Maturity Considerations" herein
and "Risk Factors--Certificate Rating" and "Maturity Assumptions"
in the Prospectus.
On the Class B Scheduled Payment Date, provided that the Class A
Investor Interest is paid in full on the Class A Scheduled Payment
Date and the Rapid Amortization Period has not commenced, Available
Investor Principal Collections will be used to pay the Class B
Certificateholders in respect of the Class B Investor Interest as
described herein. If the Available Investor Principal Collections
are insufficient to pay the Class B Investor Interest in full on
the Class B Scheduled Payment Date, the Rapid Amortization Period
will commence as described below. Although it is anticipated that
scheduled principal will be available for distribution to the
Class B Certificateholders on the Class B Scheduled Payment Date,
no assurance can be given in that regard. See "Risk Factors--
Certificate Rating" and "Maturity Considerations" herein and
"Risk Factors--Certificate Rating" and "Maturity Assumptions"
in the Prospectus.
If a Pay Out Event occurs during the Controlled Accumulation Period,
the Rapid Amortization Period will commence and any amounts on
deposit in the Principal Funding Account will be paid to the
Class A Certificateholders on the Distribution Date in the month
following the commencement of the Rapid Amortization Period.
Other Series offered by the Trust may or may not have amortization or
accumulation periods like the Controlled Accumulation Period for
the Certificates, and such periods may have different lengths and
begin on different dates than such Controlled Accumulation Period.
Thus, certain Series may be in their revolving periods while others
are in periods during which collections of Principal Receivables
are distributed to or held for the benefit of certificateholders of
such other Series. In addition, other Series
</TABLE>
S-10
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<S> <C>
may allocate Principal Receivables based upon different investor
percentages. See "Description of the Certificates--Exchanges" in
the Prospectus for a discussion of the potential terms of any other
Series.
The terms of any Companion Series issued by the Trust may have an
impact on the timing or amount of payments received by a
Certificateholder. In particular, the denominator of the Fixed
Investor Percentage may be increased upon the occurrence of a Pay
Out Event with respect to such a Companion Series resulting in a
possible reduction of the percentage of collections of Principal
Receivables allocated to Series 1998-5 if such event allowed the
payment of principal at such time to the Companion Series and
required reliance by Series 1998-5 on clause (y) of the denominator
of the Fixed Investor Percentage for Series 1998-5. See
"Description of the Certificates--Allocation Percentages" and
"--Companion Series" herein, and "Risk Factors--Master Trust
Considerations" in the Prospectus.
RAPID AMORTIZATION PERIOD................. During the period beginning on the first day on which a Pay Out Event
has occurred and ending on the earlier of (a) the payment of the
Investor Interest in full and (b) the Series 1998-5 Termination
Date (the "Rapid Amortization Period"), Available Investor
Principal Collections will be applied to the payment of principal
on the Certificates and will be distributed monthly on each
Distribution Date to the Class A Certificateholders and, following
payment of the Class A Investor Interest in full, to the Class B
Certificateholders and, following payment of the Class B Investor
Interest in full, to the Collateral Interest Holder beginning with
the Distribution Date in the month following the commencement of
the Rapid Amortization Period. See "Description of the
Certificates--Pay Out Events" for a discussion of the events which
might lead to the commencement of the Rapid Amortization Period.
SUBORDINATION OF THE CLASS B
CERTIFICATES AND THE COLLATERAL
INTEREST................................ The Class B Certificates and the Collateral Interest will be
subordinated, as described herein, to the extent necessary to fund
payments with respect to the Class A Certificates as described
herein. In addition, the Collateral Interest will be subordinated
to the extent necessary to fund certain payments with respect to
the Class A Certificates and the Class B Certificates. If the
Collateral Interest is reduced to zero, the Class B
Certificateholders will bear directly the credit and other risks
associated with their interest in the Trust and thus will be more
likely to suffer a loss. To the extent the Class B Investor
Interest is reduced, the percentage of collections of Finance
Charge Receivables allocable to the Class B Certificateholders in
subsequent Monthly Periods will be reduced. Such reductions of the
Class B Investor Interest will thereafter be reimbursed and the
Class B Investor Interest increased on each Transfer Date by the
amount, if any, of Excess Spread for such Transfer Date available
for that purpose. To the extent the amount of such reduction in the
Class B Investor Interest is not reimbursed, the amount of
principal and interest
</TABLE>
S-11
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<TABLE>
<S> <C>
distributable to the Class B Certificateholders will be reduced. No
principal will be paid to the Class B Certificateholders until the
Class A Investor Interest is paid in full. See "Description of the
Certificates--Subordination" herein and "Risk Factors--Effect of
Subordination" in the Prospectus.
ADDITIONAL AMOUNTS AVAILABLE TO
CERTIFICATEHOLDERS...................... With respect to any Transfer Date, Excess Spread will be applied to
fund the Class A Required Amount and the Class B Required Amount,
if any. The "Class A Required Amount" means the amount, if any, by
which the sum of (a) Class A Monthly Interest due on the related
Distribution Date and any overdue Class A Monthly Interest and
Class A Additional Interest thereon, (b) the Class A Servicing Fee
for the related Monthly Period and any overdue Class A Servicing
Fee and (c) the Class A Investor Default Amount, if any, for the
related Monthly Period exceeds the Class A Available Funds for the
related Monthly Period. The "Class B Required Amount" means the
amount, if any, equal to the sum of (a) the amount, if any, by
which the sum of (i) Class B Monthly Interest due on the related
Distribution Date and any overdue Class B Monthly Interest and
Class B Additional Interest thereon and (ii) the Class B Servicing
Fee for the related Monthly Period and any overdue Class B
Servicing Fee exceeds the Class B Available Funds for the related
Monthly Period and (b) the Class B Investor Default Amount, if any,
for the related Monthly Period. The "Required Amount" for any
Monthly Period shall mean the sum of (a) the Class A Required
Amount and (b) the Class B Required Amount, each for such Monthly
Period. "Excess Spread" for any Transfer Date will equal the sum of
(a) the excess of (i) Class A Available Funds for the related
Monthly Period over (ii) the sum of the amounts referred to in
clauses (a), (b) and (c) in the definition of "Class A Required
Amount" above, (b) the excess of (i) Class B Available Funds for
the related Monthly Period over (ii) the sum of the amounts
referred to in clauses (a) (i) and (a) (ii) in the definition of
"Class B Required Amount" above and (c) Collateral Available Funds
for the related Monthly Period not used under certain circumstances
to pay the Collateral Interest Servicing Fee, as described herein.
If, on any Transfer Date, Excess Spread is less than the Class A
Required Amount, Reallocated Principal Collections allocable first
to the Collateral Interest and then to the Class B Investor
Interest with respect to the related Monthly Period will be used to
fund the remaining Class A Required Amount. If Reallocated
Principal Collections with respect to such Monthly Period are
insufficient to fund the remaining Class A Required Amount for the
related Transfer Date, then the Collateral Interest (after giving
effect to reductions for any Collateral Charge-Offs and Reallocated
Principal Collections on such Transfer Date) will be reduced by the
amount of such deficiency (but not by more than the Class A
Investor Default Amount for such Monthly Period). In the event that
such reduction would cause the Collateral Interest to be a negative
number, the Collateral Interest will be
</TABLE>
S-12
<PAGE>
<TABLE>
<S> <C>
reduced to zero, and the Class B Investor Interest (after giving
effect to reductions for any Class B Investor Charge-Offs and any
Reallocated Class B Principal Collections on such Transfer Date)
will be reduced by the amount by which the Collateral Interest
would have been reduced below zero (but not by more than the excess
of the Class A Investor Default Amount, if any, for such Monthly
Period over the amount of such reduction, if any, of the Collateral
Interest with respect to such Monthly Period). In the event that
such reduction would cause the Class B Investor Interest to be a
negative number, the Class B Investor Interest will be reduced to
zero and the Class A Investor Interest will be reduced by the
amount by which the Class B Investor Interest would have been
reduced below zero (but not by more than the excess, if any, of the
Class A Investor Default Amount for such Monthly Period over such
reductions in the Collateral Interest and the Class B Investor
Interest with respect to such Monthly Period) (such reduction, a
"Class A Investor Charge-Off"). If the Collateral Interest and the
Class B Investor Interest are reduced to zero, the Class A
Certificateholders will bear directly the credit and other risks
associated with their undivided interest in the Trust. See
"Description of the Certificates--Reallocation of Cash Flows" and
"--Defaulted Receivables; Investor Charge-Offs."
If, on any Transfer Date, Excess Spread not required to pay the
Class A Required Amount and to reimburse Class A Investor
Charge-Offs is less than the Class B Required Amount, Reallocated
Principal Collections allocable to the Collateral Interest for the
related Monthly Period not required to pay the Class A Required
Amount will be used to fund the remaining Class B Required Amount.
If such remaining Reallocated Principal Collections allocable to
the Collateral Interest with respect to such Monthly Period are
insufficient to fund the remaining Class B Required Amount for the
related Transfer Date, then the Collateral Interest (after giving
effect to reductions for any Collateral Charge-Offs, Reallocated
Principal Collections and any adjustments made thereto for the
benefit of the Class A Certificateholders) will be reduced by the
amount of such deficiency (but not by more than the Class B
Investor Default Amount for such Monthly Period). In the event that
such reduction would cause the Collateral Interest to be a negative
number, the Collateral Interest will be reduced to zero, and the
Class B Investor Interest will be reduced by the amount by which
the Collateral Interest would have been reduced below zero (but not
by more than the excess, if any, of the Class B Investor Default
Amount for such Monthly Period over such reduction in the
Collateral Interest with respect to such Monthly Period) (such
reduction, a "Class B Investor Charge-Off"). In the event of a
reduction of the Class A Investor Interest, the Class B Investor
Interest or the Collateral Interest, the amount of principal and
interest available to fund payments with respect to the Class A
Certificates and the Class B Certificates will be decreased. See
"Description of the Certificates--Reallocation of Cash Flows" and
"--Defaulted Receivables; Investor Charge-Offs."
</TABLE>
S-13
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<TABLE>
<S> <C>
REQUIRED COLLATERAL INTEREST.............. The "Required Collateral Interest" with respect to any Transfer Date
means (a) initially, $69,643,524 (the "Initial Collateral
Interest") and (b) on any Transfer Date thereafter, an amount equal
to 9% of the sum of the Class A Adjusted Investor Interest, the
Class B Investor Interest and the Collateral Interest on such
Transfer Date, after taking into account deposits into the
Principal Funding Account on such Transfer Date and payments to be
made on the related Distribution Date, and the Collateral Interest
on the prior Transfer Date after any adjustments made on such
Transfer Date, but not less than $23,214,286; provided, however,
(i) that if certain reductions in the Collateral Interest are made
or if a Pay Out Event occurs, the Required Collateral Interest for
such Transfer Date shall equal the Required Collateral Interest for
the Transfer Date immediately preceding the occurrence of such
reduction or Pay Out Event; (ii) in no event shall the Required
Collateral Interest exceed the unpaid principal amount of the
Certificates as of the last day of the Monthly Period preceding
such Transfer Date after taking into account payments to be made on
the related Distribution Date; and (iii) the Required Collateral
Interest may be reduced at any time to a lesser amount if the
Rating Agency Condition is satisfied. See "Description of the
Certificates--Required Collateral Interest."
If on any Transfer Date, the Collateral Interest is less than the
Required Collateral Interest, certain Excess Spread amounts, if
available, will be used to increase the Collateral Interest to the
extent of such shortfall. If on any Transfer Date the Collateral
Interest equals or exceeds the Required Collateral Interest, any
such Excess Spread amounts will first be deposited into the Reserve
Account as described herein and second, to the extent available, be
applied in accordance with the Loan Agreement among the Trustee,
the Transferor, the Servicer and the Collateral Interest Holder
(the "Loan Agreement") and will not be available to the
Certificateholders.
ISSUANCE OF ADDITIONAL CERTIFICATES....... After the completion of the offering made hereby, the Transferor may
cause the Trustee to issue additional Certificates ("Additional
Certificates") and to increase the size of the Collateral Interest
from time to time, provided that certain conditions set forth in
the Series 1998-5 Supplement are met. Whenever Additional
Certificates are issued, a pro rata principal amount of each Class
of Certificates will be issued and there will be a pro rata
increase in the Collateral Interest. When issued, Additional
Certificates of each Class will be identical in all respects to the
other outstanding Certificates of that Class. See "Description of
the Certificates--Issuance of Additional Certificates."
COMPANION SERIES.......................... The Series 1998-5 Certificates may be paired with one or more other
Series (each, a "Companion Series"). Each Companion Series either
will be prefunded with an initial deposit to a prefunding account
in an amount up to the initial principal balance of such Companion
Series, funded primarily from the proceeds for the sale of such
Companion Series, or will have a variable principal amount. Any
such prefunding account will be held for the benefit
</TABLE>
S-14
<PAGE>
<TABLE>
<S> <C>
of such Companion Series and not for the benefit of Series 1998-5
Certificateholders. As principal is paid with respect to the
Series 1998-5 Certificates, either (i) in the case of a prefunded
Companion Series, an equal amount of funds on deposit in any
prefunding account for such prefunded Companion Series will be
released (which funds will be distributed to the Transferor) or
(ii) in the case of a Companion Series having a variable principal
amount, an interest in such variable Companion Series in an equal
or lesser amount may be sold by the Trust (and the proceeds thereof
will be distributed to the Transferor) and, in either case, the
invested amount in the Trust of such Companion Series will increase
by up to the corresponding amount. See "Description of the
Certificates--Companion Series."
SHARED EXCESS FINANCE CHARGE
COLLECTIONS............................. The Series 1998-5 Certificates will be included in a group of Series
("Group I") which may be issued by the Trust from time to time.
Series 1995-1, Series 1995-2, Series 1995-3, Series 1995-4,
Series 1996-1, Series 1996-2, Series 1996-3, Series 1996-4,
Series 1997-1, Series 1997-2, Series 1997-3, Series 1997-4,
Series 1997-5, Series 1998-1, Series 1998-2, Series 1998-3, Series
1998-4 and Series 1998-5 are, and other Series issued in the future
may be, included in Group I. Subject to certain limitations
described under "Description of the Certificates--Shared Excess
Finance Charge Collections," Excess Finance Charge Collections, if
any, with respect to a Series included in Group I, including
Series 1998-5, will be applied to cover any shortfalls with respect
to amounts payable from collections of Finance Charge Receivables
allocable to any other Series in Group I, pro rata based upon the
amount of the shortfall, if any, with respect to each Series in
Group I. There can be no assurance that any other Series will be
issued by the Trust or included in Group I. See "Description of the
Certificates--Shared Excess Finance Charge Collections."
SHARED PRINCIPAL COLLECTIONS.............. To the extent that collections of Principal Receivables allocated to
the Investor Interest are not needed to make payments on the
Investor Interest or to be deposited in the Principal Funding
Account, such collections ("Shared Principal Collections") will be
allocated to cover certain principal payments due to or for the
benefit of certificateholders of other Series or, under certain
circumstances, deposited into the Excess Funding Account. Any such
reallocation or deposit will not result in a reduction in the
Investor Interest with respect to Series 1998-5. In addition,
collections of Principal Receivables and certain other amounts
otherwise allocable to other Series, to the extent such collections
are not needed to make payments to or deposits for the benefit of
the certificateholders of such other Series, may be applied to
cover principal payments due to or for the benefit of the holders
of the Class A Certificates and the Class B Certificates or the
Collateral Interest Holder. See "Description of the Certificates--
Shared Principal Collections."
OPTIONAL REPURCHASE....................... The Investor Interest will be subject to optional repurchase by the
Transferor on any Distribution Date on or after the Distribution
</TABLE>
S-15
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<TABLE>
<S> <C>
Date on which the Investor Interest is reduced to an amount less
than or equal to $38,690,477 (5% of the initial Investor Interest),
if certain conditions set forth in the Agreement are met. The
repurchase price will be equal to the sum of the Investor Interest
and all accrued and unpaid interest on the Certificates and the
Collateral Interest through the day preceding the Distribution Date
on which the repurchase occurs. See "Description of the
Certificates--Final Payment of Principal; Termination" in the
Prospectus.
TRUSTEE................................... The Bank of New York.
TAX STATUS................................ Tax Counsel to the Transferor is of the opinion that under existing
law the Certificates will be characterized as debt for United
States ("U.S.") federal income tax purposes and that the Trust will
not be an association or publicly traded partnership taxable as a
corporation for U.S. federal income tax purposes. Under the
Agreement, the Transferor, the Servicer, the Certificateholders and
the Certificate Owners will agree to treat the Certificates as debt
for all U.S. and foreign income and franchise tax purposes. See
"Tax Matters" in the Prospectus for additional information
concerning the application of U.S. federal income tax laws.
ERISA CONSIDERATIONS...................... Neither the Class A Certificates nor the Class B Certificates may be
acquired by (a) any "employee benefit plan" as defined in section
3(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), that is subject to Title I of ERISA, (b) any
"plan" as defined in section 4975 of the Internal Revenue Code of
1986, as amended (the "Code") (including an individual retirement
account or Keogh plan) that is subject to section 4975 of the Code
or (c) any entity whose underlying assets may be deemed to include
"plan assets" under ERISA by reason of any such plan's investment
in the entity, including without limitation, as applicable, an
insurance company general account. By its acceptance of a Class A
Certificate or a Class B Certificate or an interest therein, each
Class A Certificateholder, each Certificate Owner of a Class A
Certificate, each Class B Certificateholder and each Certificate
Owner of a Class B Certificate will be deemed to have represented
and warranted that it is not subject to the foregoing limitation.
CERTIFICATE RATINGS....................... It is a condition to the issuance of the Class A Certificates that
they be rated AAA or its equivalent by at least one Rating Agency. It
is a condition to the issuance of the Class B Certificates that
they be rated at least A or its equivalent by at least one Rating
Agency.
Any rating assigned to the Class A Certificates or the Class B
Certificates by a Rating Agency will reflect such Rating Agency's
assessment of the likelihood that Certificateholders of such 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 Series 1998-5 Termination Date, and in the case of interest, on
each Distribution Date. 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 the Class A Certificateholders or the Class B
</TABLE>
S-16
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<TABLE>
<S> <C>
Certificateholders, as the case may be, of the terms of the
Collateral Interest and, with respect to the Class A Certificates,
the subordination of the Class B Certificates.
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" herein and "Risk Factors--Certificate Rating" in the
Prospectus.
LISTING................................... Application will be made to list the Certificates on the Luxembourg
Stock Exchange.
</TABLE>
S-17
<PAGE>
RISK FACTORS
Prospective investors should consider, among other things, the risk factors
discussed under "Risk Factors" beginning on page 21 in the Prospectus and the
following risk factors in connection with the purchase of the Certificates.
Floating Rate Risk. Certain of the Accounts in the Trust have finance
charges set at a variable rate above a designated prime rate or other designated
index. The Class A Certificate Rate and the Class B Certificate Rate are each
based upon LIBOR. If there is a decline in such prime rate or other designated
index which does not coincide with a decline in LIBOR, the amount of collections
of Finance Charge Receivables on such Accounts may be reduced, whereas the
amounts payable as Class A Monthly Interest and Class B Monthly Interest and
other amounts required to be funded out of collections of Finance Charge
Receivables will remain constant.
Certain of the Accounts in the Trust have finance charges set at a fixed
rate. If LIBOR increases, the amounts payable as Class A Monthly Interest and
Class B Monthly Interest and other amounts required to be funded out of
collections of Finance Charge Receivables will increase, whereas the amount of
collections of Finance Charge Receivables on such Accounts will remain the same
unless and until the rates on such Accounts are reset.
Certificate Rating. Any rating assigned to the Class A Certificates or the
Class B Certificates by a Rating Agency will reflect such Rating Agency's
assessment of the likelihood that Certificateholders of such 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 Series 1998-5 Termination Date, and
in the case of interest, on each Distribution Date. 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 the
Class A Certificateholders or the Class B Certificateholders, as the case may
be, of the terms of the Collateral Interest and, with respect to the Class A
Certificates, the subordination of the Class B Certificates. However, any such
rating will not address the possibility of the occurrence of a Pay Out Event
with respect to such Class, the possibility of the imposition of United States
withholding tax with respect to non-U.S. Certificateholders or the likelihood of
payment of principal on the Class A Scheduled Payment Date or the Class B
Scheduled Payment Date. The rating will not be a recommendation to purchase,
hold or sell Class A Certificates or Class B Certificates, and such rating will
not comment as to the marketability of such Certificates, any market price or
suitability for a particular investor. There is no assurance that any rating
will remain for any given period of time or that any rating will not be lowered
or withdrawn entirely by a Rating Agency if in such Rating Agency's judgment
circumstances so warrant.
The Bank will request a rating for the Class A Certificates of AAA or its
equivalent and a rating for the Class B Certificates of at least A or its
equivalent 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 either the Class A Certificates or
the Class B Certificates, and, if so, what such rating would be. A rating
assigned to either the Class A Certificates or the Class B Certificates by a
rating agency that has not been requested by the Bank to do so may be lower than
the rating assigned by a Rating Agency pursuant to the Bank's request. Only a
rating agency that has been requested to rate either the Class A Certificates or
the Class B Certificates will be a "Rating Agency" for purposes of such
Certificates.
S-18
<PAGE>
CHASE USA'S CREDIT CARD PORTFOLIO
GENERAL
The Receivables conveyed to the Trust by the Transferor pursuant to the
Agreement have been or will be generated from transactions made by holders of
MasterCard and VISA credit card accounts selected by the Transferor, including
premium accounts and standard accounts, from the Bank Portfolio.
DELINQUENCY AND LOSS EXPERIENCE
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.
Efforts to collect delinquent credit card receivables are made by the
Bank's account management department, collection agencies and attorneys retained
by the Bank. For a description of the Bank's collection practices and policies,
see "Chase USA's Credit Card Activities--Collection of Delinquent Accounts" in
the Prospectus.
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 account upon the
earlier of seventy-five (75) days after receipt of such notice and the time
period set forth in the previous sentence.
The following tables set forth the delinquency and loss experience as of
the dates and for each of the periods shown for the Bank Portfolio. As of the
beginning of the day on July 1, 1998, the Receivables in the Trust Portfolio
represented approximately 51% of the Bank Portfolio. Because the Trust Portfolio
represents only a portion of the Bank Portfolio, actual delinquency and loss
experience with respect to the Receivables may be different from that set forth
below. See "The Receivables--Additional Trust Portfolio Information." In
particular, reported loss and delinquency percentages for each portfolio may be
reduced as a result of the addition of receivables. Receivables in newly
originated accounts generally have lower delinquency and loss levels than
receivables in more seasoned accounts and the addition of these receivables to a
portfolio increases the outstanding receivables balance for such portfolio
which, for the Bank Portfolio, is the denominator used to calculate the
percentages set forth below. Whereas all newly originated and newly acquired
accounts become part of the Bank Portfolio when originated or acquired, newly
originated or acquired accounts do not automatically become part of the Trust
Portfolio but may be added from time to time at the option of the Transferor.
DELINQUENCY EXPERIENCE
BANK PORTFOLIO
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------------------------------------
JUNE 30, 1998 1997 1996 1995
-------------------------- -------------------------- -------------------------- ----------
PERCENTAGE OF PERCENTAGE OF PERCENTAGE OF
NUMBER OF DAYS DELINQUENT TOTAL DELINQUENT TOTAL DELINQUENT TOTAL DELINQUENT
DELINQUENT(1) AMOUNT RECEIVABLES(2) AMOUNT RECEIVABLES(2) AMOUNT RECEIVABLES(2) AMOUNT
- --------------------- ---------- -------------- ---------- -------------- ---------- -------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
30 to 59 Days........ $ 471,420 1.51% $ 498,981 1.54% $ 477,569 1.90% $ 375,758
60 to 89 Days........ 307,161 0.98 340,895 1.05 314,006 1.25 241,653
90 Days or More...... 648,934 2.08 633,104 1.95 564,256 2.24 505,904
---------- ---- ---------- ---- ---------- ---- ----------
TOTAL............ $1,427,515 4.58% $1,472,980 4.54% $1,355,831 5.39% $1,123,315
---------- ---- ---------- ---- ---------- ---- ----------
---------- ---- ---------- ---- ---------- ---- ----------
<CAPTION>
DECEMBER 31,
-----------------
1995
-----------------
PERCENTAGE OF
NUMBER OF DAYS TOTAL
DELINQUENT(1) RECEIVABLES(2)
- --------------------- --------------
<S> <C>
30 to 59 Days........ 1.59%
60 to 89 Days........ 1.02
90 Days or More...... 2.15
----
TOTAL............ 4.76%
----
----
</TABLE>
- ------------------
(1) Number of days delinquent means the number of days after the first billing
date following the original billing date. For example, 30 days delinquent
means that no payment was received within 60 days after the original billing
date.
(2) Delinquencies are calculated as a percentage of outstanding receivables as
of the end of the month.
S-19
<PAGE>
LOSS EXPERIENCE
BANK PORTFOLIO
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
SIX MONTHS YEAR ENDED DECEMBER 31,
ENDED -----------------------------
JUNE 30, 1998 1997 1996 1995
-------------- ------- ------- -------
<S> <C> <C> <C> <C>
Average Receivables Outstanding(1).............................. $ 31,581 $26,848 $23,709 $20,980
Gross Charge-Offs(2)(3)......................................... 1,007 1,671 1,285 933
Recoveries...................................................... 77 152 129 84
Net Charge-Offs................................................. 930 1,519 1,156 849
Net Charge-Offs as a Percentage of Average Receivables
Outstanding(4)................................................ 5.89% 5.66% 4.87% 4.05%
</TABLE>
- ------------------
(1) Average Receivables Outstanding is the average of the daily receivable
balance during the period indicated.
(2) Gross Charge-Offs shown include only the principal portion of charged-off
receivables.
(3) Gross Charge-Offs do not include the amount of any reductions in Average
Receivables Outstanding due to fraud, returned goods or customer disputes.
Gross Charge-Offs exclude charges relating to changes in Chase USA's
charge-off policies.
(4) The percentage reflected for the six months ended June 30, 1998 is an
annualized figure.
Net Charge-Offs as a percentage of Average Receivables Outstanding for the
Bank Portfolio for the annualized eight months ended August 31, 1998 were 6.01%.
The increase in Net Charge-Offs as a Percentage of Average Receivables
Outstanding for the Bank Portfolio for the year ended December 31, 1996, the
year ended December 31, 1997, the annualized six months ended June 30, 1998 and
the annualized eight months ended August 31, 1998, when compared with prior
years, reflects, among other factors, higher levels of personal bankruptcies.
Because the Receivables do not constitute all of the Bank Portfolio, actual
delinquency and loss experience with respect to Receivables may be different
from that applicable to the Bank Portfolio as a whole. See "The
Receivables--Additional Trust Portfolio Information" for information with
respect to net charge-offs as a percentage of the average Principal Receivables
outstanding in the Trust.
INTERCHANGE
The Transferor will be required, pursuant to the terms of the Agreement, to
transfer to the Trust a percentage of Interchange (as defined in the
Prospectus). Interchange arising from the Bank Portfolio will be allocated to
the Trust based upon the same ratio which the aggregate amount of purchases of
merchandise and services relating to the Accounts made during such Monthly
Period bears to the aggregate 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. MasterCard and VISA may from time to time change the amount of
Interchange reimbursed to banks issuing their credit cards. Under the
circumstances described herein, Interchange will be used to pay a portion of the
Investor Servicing Fee required to be paid on each Transfer Date. See
"Description of the Certificates--Servicing Compensation and Payment of
Expenses" herein and "Chase USA's Credit Card Activities--Interchange" in the
Prospectus.
RECOVERIES
The Transferor will be required, pursuant to the terms of the Agreement, to
transfer to the Trust a percentage of the recoveries on charged-off accounts in
the Bank Portfolio ("Recoveries"). For each Monthly Period, Recoveries will be
allocated to the Certificates on the basis of the percentage equivalent of the
ratio which the amount of Receivables in Defaulted Accounts for such Monthly
Period bears to the amount of receivables in defaulted accounts recorded in the
Bank Portfolio for such Monthly Period. Recoveries allocated to the Trust will
be treated as collections of Finance Charge Receivables. See "Delinquency and
Loss Experience" above and "Chase USA's Credit Card Activities--Collection of
Delinquent Accounts" in the Prospectus.
S-20
<PAGE>
THE RECEIVABLES
GENERAL
The Receivables conveyed to the Trust arise in Accounts selected by the
Transferor from the Bank Portfolio on the basis of criteria set forth in the
Agreement as applied on the Cut-Off Date and, with respect to Additional
Accounts, as of the related dates of their designations (the "Trust Portfolio").
Pursuant to the Agreement, the Transferor has the right, subject to certain
limitations and conditions set forth therein, to designate from time to time
Additional Accounts and to transfer to the Trust all Receivables of such
Additional Accounts, whether such Receivables are then existing or thereafter
created. Any Additional Accounts designated pursuant to the Agreement must be
Eligible Accounts as of the date the Transferor designates such accounts as
Additional Accounts. The Transferor will be required to designate Additional
Accounts, to the extent available, (a) to maintain the Transferor Interest so
that during any period of 30 consecutive days, the Transferor Interest averaged
over that period equals or exceeds the Minimum Transferor Interest for the same
period and (b) to maintain, for so long as certificates of any Series (including
the Certificates) remain outstanding, the sum of (i) the aggregate amount of
Principal Receivables and (ii) the principal amount on deposit in the Excess
Funding Account equal to or greater than the Minimum Aggregate Principal
Receivables. "Minimum Transferor Interest" for any period means 7% of the sum of
(i) the average Principal Receivables for such period and (ii) the average
principal amount on deposit in the Excess Funding Account, the Principal Funding
Account and any other account specified from time to time pursuant to the
Agreement or the Series Supplement for such period; provided, however, that the
Transferor may reduce the Minimum Transferor Interest to not less than 2% of the
sum of the amounts specified in clauses (i) and (ii) above upon satisfaction of
the Rating Agency Condition and certain other conditions set forth in the
Agreement. "Minimum Aggregate Principal Receivables" means an amount equal to
the sum of the numerators used to calculate the Investor Percentages with
respect to the allocation of collections of Principal Receivables for each
Series then outstanding minus the amount on deposit in the Excess Funding
Account as of the date of determination; provided, that the Minimum Aggregate
Principal Receivables may be reduced to a lesser amount at any time if the
Rating Agency Condition is satisfied. The Transferor will convey the Receivables
then existing or thereafter created under such Additional Accounts to the Trust.
Further, pursuant to the Agreement, the Transferor will have the right (subject
to certain limitations and conditions) to designate certain Accounts and to
require the Trustee to reconvey all Receivables in such Accounts (the "Removed
Accounts") to the Transferor, whether such Receivables are then existing or
thereafter created. Throughout the term of the Trust, the Accounts from which
the Receivables arise will be the Accounts designated by the Transferor on the
Cut-Off Date plus any Additional Accounts minus any Removed Accounts. As of the
Cut-Off Date and, with respect to Receivables in Additional Accounts, as of the
related date of their conveyance to the Trust, and on the date any new
Receivables are created, the Transferor will represent and warrant to the Trust
that the Receivables meet the eligibility requirements specified in the
Agreement. See "Description of the Certificates--Representations and Warranties"
in the Prospectus.
The Receivables in the Trust Portfolio, as of the beginning of the day on
July 1, 1998, included approximately $15.5 billion of Principal Receivables and
approximately $0.4 billion of Finance Charge Receivables. The Accounts had an
average Principal Receivable balance of $1,633.71 and an average credit limit of
$6,789.33. The percentage of the aggregate total Receivable balance to the
aggregate total credit limit was approximately 25%. The average age of the
Accounts was approximately 79 months. As of the beginning of the day on July 1,
1998, cardholders whose Accounts are included in the Trust Portfolio had billing
addresses in all 50 states and the District of Columbia. As of the beginning of
the day on July 1, 1998, approximately 68% of the Accounts were standard
accounts and 32% were premium accounts, and the aggregate Principal Receivable
balances of standard accounts and premium accounts, as a percentage of the total
aggregate Principal Receivables, were approximately 65% and 35%, respectively.
On November 24, 1997, the Transferor purchased from The Bank of New York
(Delaware) approximately $3.9 billion of receivables. None of the accounts in
which these receivables arose has been designated as an Additional Account. The
Transferor has no current intention to designate such accounts as Additional
Accounts but such a determination may be made in the future. Such accounts were
originated using criteria different from
S-21
<PAGE>
those which were applied in originating the Accounts designated on the Cut-Off
Date or to previously-designated Additional Accounts because such accounts were
originated at different dates, under different underwriting criteria and by a
different institution. Consequently, there can be no assurance that Additional
Accounts designated in the future from such accounts, if any, will be of the
same credit quality as previously-designated Accounts.
The following tables summarize the Trust Portfolio by various criteria as
of the beginning of the day on July 1, 1998. Because the future composition of
the Trust Portfolio may change over time, these tables are not necessarily
indicative of the composition of the Trust Portfolio at any subsequent time.
COMPOSITION BY ACCOUNT BALANCE--TRUST PORTFOLIO
AS OF JUNE 30, 1998
<TABLE>
<CAPTION>
NUMBER OF RECEIVABLES
ACCOUNT BALANCE ACCOUNTS PERCENTAGE OUTSTANDING PERCENTAGE
- ----------------------------------------------------- --------- --------- ------------------ -----------
<S> <C> <C> <C> <C>
Credit Balance....................................... 126,104 1.33% $ (15,081,861.49) (0.09)%
No Balance........................................... 3,647,969 38.46 0.00 0.00
$0.01 to $1,500.00................................... 2,775,680 29.26 1,351,196,008.70 8.50
$1,500.01 to $5,000.00............................... 1,751,260 18.46 5,222,104,595.52 32.86
$5,000.01 to $10,000.00.............................. 1,020,636 10.76 7,410,559,890.80 46.63
$10,000.01 to $20,000.00............................. 162,804 1.72 1,899,289,434.01 11.95
Over $20,000.00...................................... 930 0.01 24,225,044.48 0.15
--------- ------- ------------------ -------
TOTAL........................................... 9,485,383 100.00% $15,892,293,112.02 100.00%
--------- ------- ------------------ -------
--------- ------- ------------------ -------
</TABLE>
COMPOSITION BY CREDIT LIMIT--TRUST PORTFOLIO
AS OF JUNE 30, 1998
<TABLE>
<CAPTION>
NUMBER OF RECEIVABLES
CREDIT LIMIT ACCOUNTS PERCENTAGE OUTSTANDING PERCENTAGE
- ----------------------------------------------------- --------- --------- ------------------ -----------
<S> <C> <C> <C> <C>
$0.00................................................ 6,626 0.07% $ 99,709.73 0.00%
$0.01 to $1,500.00................................... 828,911 8.74 450,646,671.38 2.84
$1,500.01 to $5,000.00............................... 2,675,673 28.21 3,009,048,177.72 18.93
$5,000.01 to $10,000.00.............................. 4,776,626 50.35 8,695,153,647.64 54.71
Over $10,000.00...................................... 1,197,547 12.63 3,737,344,905.55 23.52
--------- ------- ------------------ -------
TOTAL........................................... 9,485,383 100.00% $15,892,293,112.02 100.00%
--------- ------- ------------------ -------
--------- ------- ------------------ -------
</TABLE>
COMPOSITION BY PERIOD OF DELINQUENCY--TRUST PORTFOLIO
AS OF JUNE 30, 1998
<TABLE>
<CAPTION>
NUMBER OF RECEIVABLES
PAYMENT STATUS ACCOUNTS PERCENTAGE OUTSTANDING PERCENTAGE
- ----------------------------------------------------- --------- --------- ------------------ -----------
<S> <C> <C> <C> <C>
Current to 29 days delinquent........................ 9,054,525 95.46% $14,368,945,388.93 90.41%
30 to 59 days delinquent............................. 249,508 2.63 788,089,574.62 4.96
60 to 89 days delinquent............................. 68,083 0.72 244,521,316.67 1.54
90 to 119 days delinquent............................ 39,174 0.41 158,925,812.24 1.00
120 days delinquent or more.......................... 74,093 0.78 331,811,019.56 2.09
--------- ------- ------------------ -------
TOTAL........................................... 9,485,383 100.00% $15,892,293,112.02 100.00%
--------- ------- ------------------ -------
--------- ------- ------------------ -------
</TABLE>
S-22
<PAGE>
COMPOSITION BY ACCOUNT SEASONING--TRUST PORTFOLIO(1)
AS OF JUNE 30, 1998
<TABLE>
<CAPTION>
NUMBER OF RECEIVABLES
AGE ACCOUNTS PERCENTAGE OUTSTANDING PERCENTAGE
- ----------------------------------------------------- --------- --------- ------------------ -----------
<S> <C> <C> <C> <C>
Not More than 6 Months............................... 20,939 0.22% $ 47,837,144.66 0.30%
Over 6 Months to 12 Months........................... 241,541 2.55 508,087,871.05 3.20
Over 12 Months to 24 Months.......................... 847,632 8.94 1,227,777,107.85 7.73
Over 24 Months to 36 Months.......................... 1,621,247 17.09 1,987,395,661.09 12.51
Over 36 Months to 48 Months.......................... 1,337,055 14.10 2,460,828,109.99 15.48
Over 48 Months to 60 Months.......................... 1,914,781 20.19 2,982,296,430.83 18.77
Over 60 Months to 120 Months......................... 1,532,583 16.16 3,100,459,820.79 19.51
Over 120 Months...................................... 1,969,605 20.75 3,577,610,965.76 22.50
--------- ------- ------------------ -------
TOTAL........................................... 9,485,383 100.00% $15,892,293,112.02 100.00%
--------- ------- ------------------ -------
--------- ------- ------------------ -------
</TABLE>
- ------------------
(1) Account age is determined by the number of months elapsed since the account
was originally opened, except that with respect to the Chemical Bank
Portfolio accounts which were converted from standard to premium accounts,
account age is determined by the number of months since the account was
converted.
GEOGRAPHIC DISTRIBUTION OF ACCOUNTS--TRUST PORTFOLIO
RANKED BY RECEIVABLES OUTSTANDING
AS OF JUNE 30, 1998
<TABLE>
<CAPTION>
NUMBER OF RECEIVABLES
STATE ACCOUNTS PERCENTAGE OUTSTANDING PERCENTAGE
- ----------------------------------------------------- --------- --------- ------------------ -----------
<S> <C> <C> <C> <C>
California........................................... 1,271,872 13.41% $ 2,291,587,575.10 14.43%
New York............................................. 1,345,351 14.18 2,259,545,214.61 14.22
Texas................................................ 622,092 6.56 1,123,782,737.42 7.07
Florida.............................................. 623,005 6.57 1,012,313,237.62 6.37
New Jersey........................................... 551,595 5.82 894,448,428.30 5.63
Illinois............................................. 508,673 5.36 842,892,702.66 5.30
Ohio................................................. 332,586 3.51 548,512,612.32 3.45
Massachusetts........................................ 368,606 3.89 528,433,954.60 3.33
Pennsylvania......................................... 321,261 3.39 488,725,355.01 3.08
Michigan............................................. 291,255 3.07 455,035,124.12 2.86
Virginia............................................. 198,898 2.10 354,225,182.87 2.23
Maryland............................................. 184,025 1.94 309,703,617.11 1.95
Indiana.............................................. 187,035 1.97 307,548,652.84 1.94
Georgia.............................................. 155,901 1.64 280,309,651.90 1.76
Connecticut.......................................... 178,647 1.88 276,258,345.28 1.74
North Carolina....................................... 154,611 1.63 262,531,085.08 1.65
Missouri............................................. 127,867 1.35 214,922,771.39 1.35
Washington........................................... 117,039 1.23 213,415,988.71 1.34
Tennessee............................................ 122,744 1.29 208,380,770.83 1.31
Minnesota............................................ 131,477 1.39 201,696,356.75 1.27
Arizona.............................................. 111,152 1.17 200,867,592.73 1.26
Wisconsin............................................ 126,821 1.34 191,259,104.49 1.20
Louisiana............................................ 122,321 1.29 188,200,960.17 1.18
Colorado............................................. 109,857 1.16 183,656,204.94 1.16
Alabama.............................................. 101,710 1.07 171,908,974.79 1.08
Kentucky............................................. 89,769 0.95 139,391,781.32 0.88
Oregon............................................... 78,521 0.83 134,297,110.36 0.85
</TABLE>
S-23
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF RECEIVABLES
STATE ACCOUNTS PERCENTAGE OUTSTANDING PERCENTAGE
- ----------------------------------------------------- --------- ------- ------------------ -------
<S> <C> <C> <C> <C>
Oklahoma............................................. 76,759 0.81 127,363,443.50 0.80
South Carolina....................................... 73,210 0.77 124,692,124.95 0.78
Nevada............................................... 59,968 0.63 120,400,395.14 0.76
Arkansas............................................. 63,309 0.67 103,517,846.15 0.65
Kansas............................................... 57,006 0.60 95,634,611.25 0.60
Rhode Island......................................... 65,565 0.69 93,643,141.56 0.59
Mississippi.......................................... 57,223 0.60 90,256,460.16 0.57
New Hampshire........................................ 47,549 0.50 83,282,196.65 0.52
Iowa................................................. 52,789 0.56 79,365,964.08 0.50
New Mexico........................................... 43,560 0.46 72,704,437.52 0.46
Hawaii............................................... 36,902 0.39 68,399,204.58 0.43
Maine................................................ 36,660 0.39 59,579,076.22 0.37
Nebraska............................................. 33,196 0.35 52,787,240.60 0.33
West Virginia........................................ 32,766 0.35 52,247,808.67 0.33
Utah................................................. 31,288 0.33 51,611,180.44 0.32
Vermont.............................................. 23,905 0.25 39,438,470.96 0.25
Idaho................................................ 22,925 0.24 39,077,600.35 0.25
Delaware............................................. 18,478 0.19 37,482,623.73 0.24
Washington, DC....................................... 18,554 0.20 32,443,081.84 0.20
Montana.............................................. 19,202 0.20 31,308,643.67 0.20
Alaska............................................... 14,228 0.15 28,995,365.47 0.18
Wyoming.............................................. 12,761 0.13 22,116,764.03 0.14
South Dakota......................................... 12,144 0.13 19,126,711.44 0.12
North Dakota......................................... 11,972 0.13 18,950,083.15 0.12
Other................................................ 28,773 0.29 64,017,542.59 0.40
--------- ------- ------------------ -------
TOTAL........................................... 9,485,383 100.00% $15,892,293,112.02 100.00%
--------- ------- ------------------ -------
--------- ------- ------------------ -------
</TABLE>
ADDITIONAL TRUST PORTFOLIO INFORMATION
The loss experience for the Trust Portfolio has generally been different
from the loss experience for the Bank Portfolio due to the different composition
of such portfolios. In particular, reported loss and delinquency percentages for
each portfolio may be reduced as a result of the addition of receivables.
Receivables in newly originated accounts generally have lower delinquency and
loss levels than receivables in more seasoned accounts and the addition of these
receivables to a portfolio increases the outstanding Principal Receivables
balance for such portfolio which, for the Trust Portfolio, is the denominator
used to calculate the percentages set forth below. Whereas all newly originated
accounts become part of the Bank Portfolio when created, newly originated
accounts do not become part of the Trust Portfolio but may be added from time to
time at the option of the Transferor. The net charge-offs as a percentage of the
average Principal Receivables outstanding in the Trust were 6.61%, on an
annualized basis, for the six months ended June 30, 1998, 6.64%, on an
annualized basis, for the eight months ended August 31, 1998, and 7.03% and
6.28% for the years ended December 31, 1997 and December 31, 1996, respectively.
S-24
<PAGE>
MATURITY CONSIDERATIONS
The Agreement provides that Class A Certificateholders will not receive
payments of principal until the Class A Scheduled Payment Date, or earlier in
the event of a Pay Out Event which results in the commencement of the Rapid
Amortization Period. The Agreement also provides that Class B Certificateholders
will not receive payments of principal until the Class B Scheduled Payment Date,
or earlier in the event of a Pay Out Event which results in the commencement of
the Rapid Amortization Period (in either case, only after the Class A Investor
Interest has been paid in full). The Class B Certificateholders will not begin
to receive payments of principal until the final principal payment on the Class
A Certificates has been made.
Controlled Accumulation Period. On each Transfer Date during the
Controlled Accumulation Period prior to the payment of the Class A Investor
Interest in full, an amount equal to, for each Monthly Period, the least of
(a) the Available Investor Principal Collections, (b) the "Controlled Deposit
Amount" for such Monthly Period, which is equal to the sum of the Controlled
Accumulation Amount for such Monthly Period and the Accumulation Shortfall, if
any, for such Monthly Period and (c) the Class A Adjusted Investor Interest
prior to any deposits on such day, will be deposited in the Principal Funding
Account until the principal amount on deposit in the Principal Funding Account
(the "Principal Funding Account Balance") equals the Class A Investor Interest.
After the Class A Investor Interest has been paid in full, or following the
first Transfer Date upon which the Principal Funding Account Balance has
increased to the amount of the Class A Investor Interest, Available Investor
Principal Collections, to the extent required, will be distributed to the Class
B Certificateholders on each Distribution Date beginning, during the Controlled
Accumulation Period, on the Class B Scheduled Payment Date, until the earlier of
the date the Class B Investor Interest has been paid in full and the Series
1998-5 Termination Date. After the Class A Investor Interest and the Class B
Investor Interest have each been paid in full, Available Investor Principal
Collections, to the extent required, will be distributed to the Collateral
Interest Holder on each Transfer Date until the earlier of the date the
Collateral Interest has been paid in full and the Series 1998-5 Termination
Date. Amounts in the Principal Funding Account are expected to be available to
pay the Class A Investor Interest on the Class A Scheduled Payment Date. After
the payment of the Class A Investor Interest in full, Available Investor
Principal Collections are expected to be available to pay the Class B Investor
Interest on the Class B Scheduled Payment Date. Although it is anticipated that
collections of Principal Receivables will be available on each Transfer Date
during the Controlled Accumulation Period to make a deposit of the applicable
Controlled Deposit Amount and that the Class A Investor Interest will be paid to
the Class A Certificateholders on the Class A Scheduled Payment Date and the
Class B Investor Interest will be paid to the Class B Certificateholders on the
Class B Scheduled Payment Date, respectively, no assurance can be given in this
regard. If the amount required to pay the Class A Investor Interest or the Class
B Investor Interest in full is not available on the Class A Scheduled Payment
Date or the Class B Scheduled Payment Date, respectively, a Pay Out Event will
occur and the Rapid Amortization Period will commence.
Rapid Amortization Period. If a Pay Out Event occurs, the Rapid
Amortization Period will commence and any amounts on deposit in the Principal
Funding Account will be paid to the Class A Certificateholders on the
Distribution Date in the month following the commencement of the Rapid
Amortization Period. In addition, to the extent that the Class A Investor
Interest has not been paid in full, the Class A Certificateholders will be
entitled to monthly payments of principal equal to the Available Investor
Principal Collections until the earlier of the date on which the Class A
Certificates have been paid in full and the Series 1998-5 Termination Date.
After the Class A Certificates have been paid in full and if the Series 1998-5
Termination Date has not occurred, Available Investor Principal Collections will
be paid to the Class B Certificates on each Distribution Date until the earlier
of the date on which the Class B Certificates have been paid in full and the
Series 1998-5 Termination Date.
Pay Out Events. A Pay Out Event occurs, either automatically or after
specified notice, upon (a) the failure of the Transferor to make certain
payments or transfers of funds for the benefit of the Certificateholders within
the time periods stated in the Agreement, (b) material breaches of certain
representations, warranties or covenants of the Transferor, (c) certain
insolvency events involving the Transferor, (d) a reduction of the average of
the Portfolio Yields for any three consecutive Monthly Periods to a rate that is
less than the average of the Base Rates for such period, (e) the Trust becoming
an "investment company" within the meaning of the Investment
S-25
<PAGE>
Company Act of 1940, as amended, (f) the failure of the Transferor to convey
Receivables arising under Additional Accounts or Participations to the Trust
when required by the Agreement, (g) the occurrence of a Servicer Default which
would have a material adverse effect on the Certificateholders,
(h) insufficient funds in the Distribution Account to pay the Class A Investor
Interest or the Class B Investor Interest in full on the Class A Scheduled
Payment Date or the Class B Scheduled Payment Date, respectively, or (i) the
Transferor becomes unable for any reason to transfer Receivables to the Trust in
accordance with the provisions of the Agreement. See "Description of the
Certificates--Pay Out Events." The term "Base Rate" means, with respect to any
Monthly Period, the annualized percentage equivalent of a fraction, the
numerator of which is the sum of the Class A Monthly Interest, the Class B
Monthly Interest and the Collateral Monthly Interest, each for the related
Interest Period, and the Investor Servicing Fee for such Monthly Period, and the
denominator of which is the Investor Interest as of the close of business on the
last day of such Monthly Period. The term "Portfolio Yield" means, with respect
to any Monthly Period, the annualized percentage equivalent of a fraction, the
numerator of which is the sum of collections of Finance Charge Receivables,
Principal Funding Investment Proceeds and amounts withdrawn from the Reserve
Account deposited into the Finance Charge Account and allocable to the
Certificates and the Collateral Interest for such Monthly Period, calculated on
a cash basis after subtracting the Investor Default Amount for such Monthly
Period, and the denominator of which is the Investor Interest as of the close of
business on the last day of such Monthly Period.
Payment Rates. The following table sets forth the highest and lowest
cardholder monthly payment rates for the Bank Portfolio during any month in the
period shown and the average cardholder monthly payment rates for all months
during the periods shown, in each case calculated as a percentage of total
opening monthly account balances during the periods shown. Payment rates shown
in the table are based on amounts which would be deemed payments of Principal
Receivables and Finance Charge Receivables with respect to the Accounts.
CARDHOLDER MONTHLY PAYMENT RATES
BANK PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
SIX MONTHS ENDED --------------------------
JUNE 30, 1998 1997 1996 1995
---------------- ------ ------ ------
<S> <C> <C> <C> <C>
Highest Month........................................ 13.26% 12.63% 12.07% 12.38%
Lowest Month......................................... 11.32% 10.96% 10.29% 10.42%
Monthly Average (1).................................. 12.44% 11.97% 11.33% 11.23%
</TABLE>
- ------------------
(1) Monthly Averages shown are expressed as an arithmetic average of the payment
rate for each month during the period indicated, each such month's payment
rate representing total payments collected during the given month expressed
as a percentage of the prior month's ending outstanding receivables.
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 amount, however, is never more than the new
balance.
There can be no assurance that the cardholder monthly payment rates in the
future will be similar to the historical experience set forth above. In
addition, the amount of collections of Receivables may vary from month to month
due to seasonal variations, general economic conditions and payment habits of
individual cardholders. There can be no assurance that collections of Principal
Receivables with respect to the Trust Portfolio will be similar to the
historical experience set forth above or that deposits into the Principal
Funding Account or the Distribution Account, as applicable, will be made in
accordance with the applicable Controlled Accumulation Amount. If a Pay Out
Event occurs, the average life of the Certificates could be significantly
reduced or increased.
Because there may be a slowdown in the payment rate below the payment rates
used to determine the Controlled Accumulation Amounts, or a Pay Out Event may
occur which would initiate the Rapid Amortization Period, there can be no
assurance that the actual number of months elapsed from the date of issuance of
the Class A Certificates and the Class B Certificates to their respective final
Distribution Dates will equal the
S-26
<PAGE>
expected number of months. As described under "Description of the
Certificates--Postponement of Controlled Accumulation Period," the Servicer may
shorten the Controlled Accumulation Period. There can be no assurance that there
will be sufficient time to accumulate all amounts necessary to pay the Class A
Investor Interest and the Class B Investor Interest on the Class A Scheduled
Payment Date and the Class B Scheduled Payment Date, respectively. See "Risk
Factors--Certificate Rating" and "Maturity Considerations" herein and "Risk
Factors--Payments and Maturity" in the Prospectus.
RECEIVABLE YIELD CONSIDERATIONS
The gross revenues from finance charges and fees billed to accounts in the
Bank Portfolio for each of the three calendar years contained in the period
ended December 31, 1997 and for the six-month period ended June 30, 1998, are
set forth in the following table. The historical yield figures in the following
tables are calculated on an accrual basis. Collections of Receivables included
in the Trust will be on a cash basis and may not reflect the historical yield
experience in the table. During periods of increasing delinquencies or periodic
payment deferral programs, accrual yields may exceed cash amounts accrued and
billed to cardholders. Conversely, cash yields may exceed accrual yields as
amounts collected in a current period may include amounts accrued during prior
periods. However, the Transferor believes that during the three calendar years
contained in the period ended December 31, 1997 and for the six-month period
ended June 30, 1998, the yield on an accrual basis closely approximated the
yield on a cash basis. The yield on both an accrual and a cash basis will be
affected by numerous factors, including the monthly periodic finance charges on
the Receivables, the amount of the annual membership fees and other fees,
changes in the delinquency rate on the Receivables and the percentage of
cardholders who pay their balances in full each month and do not incur monthly
periodic finance charges. Additionally, the monthly yield on a cash basis will
be affected by the number of collection days in such month. See "Risk Factors"
in the Prospectus.
PORTFOLIO YIELD
BANK PORTFOLIO
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
SIX MONTHS ENDED -----------------------------
JUNE 30, 1998 1997 1996 1995
---------------- ------- ------- -------
<S> <C> <C> <C> <C>
Finance Charges and Fees Billed(1)(2)......................... $ 2,578 $ 4,457 $ 3,908 $ 3,632
Average Receivables Outstanding(3)............................ $ 31,581 $26,848 $23,709 $20,980
Yield from Finance Charges and Fees Billed(4)(5).............. 16.46% 16.60% 16.48% 17.31%
</TABLE>
- ------------------
(1) Finance Charges and Fees Billed include periodic and minimum finance
charges, annual membership fees, late charges, cash advance transaction
fees, Interchange, overlimit fees and fees for returned checks.
(2) Finance Charges and Fees Billed are presented net of adjustments made
pursuant to the Bank's normal servicing procedures, including removal of
incorrect or disputed finance charges and reversal of finance charges
accrued on charged-off accounts.
(3) Average Receivables Outstanding is the average of the daily receivable
balance during the period indicated.
(4) Yield from Finance Charges and Fees Billed is calculated as a percentage of
Average Receivables Outstanding.
(5) The percentage reflected for the six months ended June 30, 1998 is an
annualized figure.
Revenues vary for each account based on the type and volume of activity for
each account. Because the Trust Portfolio represents only a portion of the Bank
Portfolio, actual yield with respect to Receivables may be different from that
set forth above. See "Chase USA's Credit Card Portfolio" and "The Receivables--
Additional Trust Portfolio Information" herein and "Chase USA's Credit Card
Activities" in the Prospectus.
USE OF PROCEEDS
The net proceeds from the sale of the Certificates will be (i) if so
required, used to make an initial deposit to an account for the benefit of the
Collateral Interest Holder and (ii) paid to the Transferor. The Transferor will
use such balance of the proceeds for its general corporate purposes.
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<PAGE>
DESCRIPTION OF THE CERTIFICATES
The Certificates will be issued pursuant to the Agreement and the Series
1998-5 Supplement. Pursuant to the Agreement, the Transferor and the Trustee may
execute further Series Supplements in order to issue additional Series. The
following summary of the Certificates does not purport to be complete and is
subject to, and is qualified in its entirety by reference to, all of the
provisions of the Agreement and the Series 1998-5 Supplement. See "Description
of the Certificates" in the Prospectus for additional information concerning the
Certificates and the Agreement.
GENERAL
The Certificates will represent the right to receive certain payments from
the assets of the Trust, including the right to the applicable allocation
percentage of all cardholder payments on the Receivables in the Trust. Each
Class A Certificate represents the right to receive payments of interest at the
Class A Certificate Rate for the related Interest Period and payments of
principal on the Class A Scheduled Payment Date or, to the extent of the
Class A Investor Interest, on each Distribution Date during the Rapid
Amortization Period, funded from collections of Finance Charge Receivables and
Principal Receivables, respectively, allocated to the Class A Investor Interest
and certain other available amounts. Each Class B Certificate represents the
right to receive payments of interest at the Class B Certificate Rate, and
payments of principal on the Class B Scheduled Payment Date or, to the extent of
the Class B Investor Interest, on each Distribution Date during the Rapid
Amortization Period after the Class A Certificates have been paid in full,
funded from collections of Finance Charge Receivables and Principal Receivables,
respectively, allocated to the Class B Investor Interest and certain other
available amounts. In addition to representing the right to payment from
collections of Finance Charge Receivables and Principal Receivables, each
Class A Certificate also represents the right to receive payments from Excess
Spread, funds on deposit in the Principal Funding Account and the Reserve
Account and certain investment earnings thereon, Reallocated Principal
Collections and Shared Principal Collections and certain other available amounts
(including, under certain circumstances, amounts on deposit in the Excess
Funding Account). In addition to representing the right to payment from
collections of Finance Charge Receivables and Principal Receivables, each
Class B Certificate also represents the right to receive payments from Excess
Spread, Reallocated Collateral Principal Collections and Shared Principal
Collections and certain other available amounts (including, under certain
circumstances, amounts on deposit in the Excess Funding Account). Payments of
interest and principal will be made, to the extent of funds available therefor,
on each Distribution Date on which such amounts are due to Certificateholders in
whose names the Certificates were registered on the last business day of the
calendar month preceding such Distribution Date (each, a "Record Date").
The Transferor initially will own the Transferor Certificate. The
Transferor Certificate will represent the right to receive certain payments from
the assets of the Trust, including the right to a percentage (the "Transferor
Percentage") of all cardholder payments on the Receivables in the Trust equal to
100% minus the sum of the applicable Investor Percentages for all Series of
certificates then outstanding. The Transferor Certificate may be transferred in
whole or in part subject to certain limitations and conditions set forth in the
Agreement. See "Description of the Certificates--Certain Matters Regarding the
Transferor and the Servicer" in the Prospectus.
Application will be made to list the Certificates on the Luxembourg Stock
Exchange.
The Class A Certificates and the Class B Certificates initially will be
represented by certificates registered in the name of Cede, as the nominee of
DTC. Unless and until Definitive Certificates are issued, all references herein
to actions by Class A Certificateholders and/or Class B Certificateholders shall
refer to actions taken by DTC upon instructions from DTC Participants and all
references herein to distributions, notices, reports and statements to Class A
Certificateholders and/or Class B Certificateholders shall refer to
distributions, notices, reports and statements to DTC or Cede, as the registered
holder of the Class A Certificates and the Class B Certificates, as the case may
be, for distribution to Certificate Owners in accordance with DTC procedures.
Certificateholders may hold their Certificates through DTC (in the United
States) or Cedel or Euroclear (in Europe) if they are participants of such
systems, or indirectly through organizations that are participants in such
systems. Cede, as nominee for DTC, will hold the global Certificates. Cedel and
Euroclear will hold omnibus
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<PAGE>
positions on behalf of the Cedel Participants and the Euroclear Participants,
respectively, through customers' securities accounts in Cedel's and Euroclear's
names on the books of their respective Depositaries which in turn will hold such
positions in customers' securities accounts in the Depositaries' names on the
books of DTC. See "Description of the Certificates--General," "--Book-Entry
Registration" and "--Definitive Certificates" in the Prospectus.
The Series 1998-5 Supplement and the Certificates will provide that any
money paid by the Trust to any Paying Agent for the payment of principal or
interest which remains unclaimed for two years after such principal or interest
shall have become due and payable will be repaid to the Trust, and thereafter
any Certificateholder may look only to the Trust for payment thereof.
Certificateholders, by purchase of their Certificates, will be deemed to have
consented to an amendment to the Agreement to permit, among other things, the
assignment from CMB to Chase USA and assumption by Chase USA from CMB of all of
its servicing obligations thereunder.
EXCHANGES
The Transferor Certificate is transferable only as provided in the
Agreement. The Agreement also provides that the holder of the Transferor
Certificate may tender the Transferor Certificate to the Trustee in exchange for
one or more new Series and a reissued Transferor Certificate as described under
"Description of the Certificates--Exchanges" in the Prospectus.
STATUS OF THE CERTIFICATES
Upon issuance, the Certificates will rank pari passu with all other
outstanding Series. Payments on the Class B Certificates are subordinated to
payments on the Class A Certificates as described herein.
INTEREST PAYMENTS
Interest will accrue on the Class A Certificates at the Class A Certificate
Rate and on the Class B Certificates at the Class B Certificate Rate from the
Closing Date. Interest will be distributed to Certificateholders on
November 16, 1998 and on each Distribution Date thereafter. Interest payments on
the Class A Certificates and the Class B Certificates on any Distribution Date
will be calculated on the outstanding principal balance of the Class A
Certificates and the outstanding principal balance of the Class B Certificates,
as applicable, as of the preceding Record Date, except that interest for the
first Distribution Date will accrue at the applicable Certificate Rate on the
initial outstanding principal balance of the Class A Certificates and the
initial outstanding principal balance of the Class B Certificates, as
applicable, from the Closing Date. Interest due on the Certificates but not paid
on any Distribution Date will be payable on the next succeeding Distribution
Date together with additional interest on such amount at the applicable
Certificate Rate plus 2% per annum (such amount with respect to the Class A
Certificates, the "Class A Additional Interest," and such amount with respect to
the Class B Certificates, the "Class B Additional Interest"). Additional
Interest shall accrue on the same basis as interest on the Certificates, and
shall accrue from the Distribution Date on which such overdue interest first
became due, to but excluding the Distribution Date on which such Additional
Interest is paid. Interest payments on the Class A Certificates on any
Distribution Date will be paid from Class A Available Funds for the related
Monthly Period, and to the extent such Class A Available Funds are insufficient
to pay such interest, from Excess Spread and Reallocated Principal Collections
(to the extent available) for such Monthly Period. Interest payments on the
Class B Certificates on any Distribution Date will be paid from Class B
Available Funds for the related Monthly Period, and to the extent such Class B
Available Funds are insufficient to pay such interest, from Excess Spread and
Reallocated Collateral Principal Collections (to the extent available) remaining
after certain other payments have been made with respect to the Class A
Certificates.
"Class A Available Funds" means, with respect to any Monthly Period, an
amount equal to the sum of (a) the Class A Floating Allocation of collections of
Finance Charge Receivables allocated to the Investor Interest with respect to
such Monthly Period (excluding the portion of collections of Finance Charge
Receivables attributable to Interchange that is allocable to Servicer
Interchange), (b) Principal Funding Investment Proceeds,
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<PAGE>
if any, with respect to the related Transfer Date and (c) amounts, if any, to be
withdrawn from the Reserve Account which are required to be included in Class A
Available Funds pursuant to the Series 1998-5 Supplement with respect to such
Transfer Date. "Class B Available Funds" means, with respect to any Monthly
Period, an amount equal to the Class B Floating Allocation of collections of
Finance Charge Receivables allocated to the Investor Interest with respect to
such Monthly Period (excluding the portion of collections of Finance Charge
Receivables attributable to Interchange that is allocable to Servicer
Interchange).
The Class A Certificates will bear interest from the Closing Date through
November 15, 1998, and with respect to each Interest Period thereafter, at a
rate of 0.16% per annum above LIBOR prevailing on the related LIBOR
Determination Date with respect to each such period (the "Class A Certificate
Rate"). The Class B Certificates will bear interest from the Closing Date
through November 15, 1998, and with respect to each Interest Period thereafter,
at a rate of 0.36% per annum above LIBOR prevailing on the related LIBOR
Determination Date with respect to each such period (the "Class B Certificate
Rate").
The Trustee will determine LIBOR on September 22, 1998 for the period from
the Closing Date through November 15, 1998, and for each Interest Period
thereafter, on the second business day prior to the Distribution Date on which
such Interest Period commences (each, a "LIBOR Determination Date"). For the
purposes of calculating LIBOR, a business day is any business day on which
dealings in deposits in United States dollars are transacted in the London
interbank market.
"LIBOR" means, as of any LIBOR Determination Date, the rate for deposits in
United States dollars for a period equal to the relevant Interest Period (except
that, for the purpose of determining LIBOR, the initial Interest Period shall be
one month) which appears on Telerate Page 3750 as of 11:00 a.m., London time, on
such date. If such rate does not appear on Telerate Page 3750, the rate for that
LIBOR Determination Date will be determined on the basis of the rates at which
deposits in United States dollars are offered by the Reference Banks at
approximately 11:00 a.m., London time, on that day to prime banks in the London
interbank market for a period equal to the relevant Interest Period. The Trustee
will request the principal office of each of the Reference Banks to provide a
quotation of its rate. If at least two such quotations are provided, the rate
for that LIBOR Determination Date will be the arithmetic mean of the quotations.
If fewer than two quotations are provided as requested, the rate for that LIBOR
Determination Date will be the arithmetic mean of the rates quoted by major
banks in New York City, as selected by the Servicer, at approximately 11:00
a.m., New York City time, on that day for loans in United States dollars to
leading European banks for a period equal to the relevant Interest Period.
"Telerate Page 3750" means the display page currently so designated on the
Dow Jones Telerate Service (or such other page as may replace that page on that
service for the purpose of displaying comparable rates or prices).
"Reference Banks" means four major banks in the London interbank market
selected by the Servicer.
The Class A Certificate Rate and the Class B Certificate Rate applicable to
the current and immediately preceding Interest Period may be obtained by
telephoning the Trustee at its Corporate Trust Office at (212) 815-5286. The
Trustee will cause the Class A Certificate Rate and the Class B Certificate Rate
as well as the amount of Class A Monthly Interest and Class B Monthly Interest
applicable to an Interest Period to be provided to the Luxembourg Stock Exchange
as soon as possible after its determination but in no event later than the first
day of such Interest Period. Such information will also be included in a
statement to the Certificateholders of record prepared by the Servicer. See
"Description of the Certificates--Reports to Certificateholders" in the
Prospectus.
Interest on the Certificates will be calculated on the basis of the actual
number of days in the relevant Interest Period and a 360-day year.
PRINCIPAL PAYMENTS
On each Transfer Date relating to the Revolving Period (which begins on the
Closing Date and ends at the commencement of the Controlled Accumulation Period
or, if earlier, the Rapid Amortization Period), unless a reduction in the
Required Collateral Interest has occurred, collections of Principal Receivables
allocable to the
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<PAGE>
Investor Interest will, subject to certain limitations, including the allocation
of any Reallocated Principal Collections with respect to the related Monthly
Period to pay the Class A Required Amount and the Class B Required Amount, be
treated as Shared Principal Collections or, under certain circumstances,
deposited into the Excess Funding Account.
On each Transfer Date relating to the Controlled Accumulation Period, the
Trustee will deposit in the Principal Funding Account an amount equal to the
least of (a) Available Investor Principal Collections with respect to such
Transfer Date, (b) the applicable Controlled Deposit Amount and (c) the Class A
Adjusted Investor Interest prior to any deposits on such date. Amounts in the
Principal Funding Account will be paid to the Class A Certificateholders on the
Class A Scheduled Payment Date. After the Class A Investor Interest has been
paid in full, on each Transfer Date during the Controlled Accumulation Period,
amounts equal to the lesser of (a) Available Investor Principal Collections with
respect to such Transfer Date and (b) the Class B Investor Interest will be
deposited in the Distribution Account for distribution to the Class B
Certificateholders until the Class B Investor Interest has been paid in full.
Such amounts in the Distribution Account will be paid to the Class B
Certificateholders on the Class B Scheduled Payment Date. On each Transfer Date,
if a reduction in the Required Collateral Interest has occurred, a portion of
collections of Principal Receivables allocable to the Investor Interest will be
applied in accordance with the Loan Agreement to reduce the Collateral Interest
to the Required Collateral Interest. During the Controlled Accumulation Period
until the final principal payment to the Class B Certificateholders, the portion
of Available Investor Principal Collections not applied to Class A Monthly
Principal, Class B Monthly Principal or Collateral Monthly Principal on a
Transfer Date will generally be treated as Shared Principal Collections or,
under certain circumstances, deposited into the Excess Funding Account.
"Available Investor Principal Collections" means, with respect to any
Monthly Period, an amount equal to the sum of (a) (i) collections of Principal
Receivables received during such Monthly Period and certain other amounts
allocable to the Investor Interest, minus (ii) the amount of Reallocated
Principal Collections with respect to such Monthly Period used to fund the
Required Amount, plus (b) any Shared Principal Collections with respect to other
Series that are allocated to Series 1998-5.
On each Distribution Date during the Rapid Amortization Period, the
Class A Certificateholders will be entitled to receive Available Investor
Principal Collections for the related Monthly Period in an amount up to the
Class A Investor Interest until the earlier of the date the Class A Certificates
are paid in full and the Series 1998-5 Termination Date. After payment in full
of the Class A Investor Interest, the Class B Certificateholders will be
entitled to receive on each Distribution Date during the Rapid Amortization
Period Available Investor Principal Collections until the earlier of the date
the Class B Certificates are paid in full and the Series 1998-5 Termination
Date. After payment in full of the Class B Investor Interest, the Collateral
Interest Holder will be entitled to receive on each Transfer Date (other than
the Transfer Date prior to the Series 1998-5 Termination Date) and on the Series
1998-5 Termination Date, Available Investor Principal Collections until the
earlier of the date the Collateral Interest is paid in full and the Series
1998-5 Termination Date. See "--Pay Out Events" below for a discussion of events
which might lead to the commencement of the Rapid Amortization Period.
POSTPONEMENT OF CONTROLLED ACCUMULATION PERIOD
Upon written notice to the Trustee, the Servicer may elect to postpone the
commencement of the Controlled Accumulation Period, and extend the length of the
Revolving Period, subject to certain conditions including those set forth below.
The Servicer may make such election only if the Accumulation Period Length
(determined as described below) is less than twelve months. On the June 2002
Determination Date and on each Determination Date thereafter, until the
Controlled Accumulation Period begins, the Servicer will determine the
"Accumulation Period Length," which is the number of whole months expected to be
required to fund the Principal Funding Account up to the initial outstanding
principal amount of the Class A Certificates no later than the Class A Scheduled
Payment Date, based on (a) the expected monthly collections of Principal
Receivables expected to be distributable to the certificateholders of all Series
(excluding certain other Series), assuming a principal payment rate no greater
than the lowest monthly principal payment rate on the Receivables for the
preceding twelve months and (b) the amount of principal expected to be
distributable to certificateholders of all Series (excluding
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<PAGE>
certain other Series) which are not expected to be in their revolving periods
during the Controlled Accumulation Period. If the Accumulation Period Length is
less than twelve months, the Servicer may, at its option, postpone the
commencement of the Controlled Accumulation Period such that the number of
months included in the Controlled Accumulation Period will be equal to or exceed
the Accumulation Period Length. The effect of the foregoing calculation is to
permit the reduction of the length of the Controlled Accumulation Period based
on the investor interests of certain other Series which are scheduled to be in
their revolving periods during the Controlled Accumulation Period and on
increases in the principal payment rate occurring after the Closing Date. The
length of the Controlled Accumulation Period will not be determined to be less
than one month.
SUBORDINATION
The Class B Certificates and the Collateral Interest will be subordinated
to the extent necessary to fund certain payments with respect to the Class A
Certificates. In addition, the Collateral Interest will be subordinated to the
extent necessary to fund certain payments with respect to the Class B
Certificates. Certain principal payments otherwise allocable to the Class B
Certificateholders may be reallocated to cover amounts in respect of the
Class A Certificates and the Class B Investor Interest may be reduced if the
Collateral Interest is equal to zero. Similarly, certain principal payments
allocable to the Collateral Interest may be reallocated to cover amounts in
respect of the Class A Certificates and the Class B Certificates and the
Collateral Interest may be reduced. To the extent the Class B Investor Interest
is reduced, the percentage of collections of Finance Charge Receivables
allocated to the Class B Certificates in subsequent Monthly Periods will be
reduced. Moreover, to the extent the amount of such reduction in the Class B
Investor Interest is not reimbursed, the amount of principal and interest
distributable to the Class B Certificateholders will be reduced. No principal
will be paid to the Class B Certificateholders until the Class A Investor
Interest is paid in full. See "--Allocation Percentages," "--Reallocation of
Cash Flows" and "--Application of Collections--Excess Spread."
ALLOCATION PERCENTAGES
Pursuant to the Agreement, with respect to each Monthly Period the Servicer
will allocate among the Investor Interest, the investor interest for all other
Series issued and outstanding and the Transferor Interest, all amounts collected
on Finance Charge Receivables, all amounts collected on Principal Receivables
and all Default Amounts with respect to such Monthly Period.
Collections of Finance Charge Receivables and Default Amounts at any time
and collections of Principal Receivables during the Revolving Period will be
allocated to the Investor Interest based on the Floating Investor Percentage.
The "Floating Investor Percentage" means, with respect to any Monthly Period,
the percentage equivalent of a fraction, the numerator of which is the Adjusted
Investor Interest as of the close of business on the last day of the preceding
Monthly Period (or with respect to the first Monthly Period, the initial
Investor Interest) and the denominator of which is the greater of (x) the sum of
(A) the aggregate amount of Principal Receivables as of the close of business on
the last day of the preceding Monthly Period (or with respect to the first
Monthly Period, the aggregate amount of Principal Receivables as of the close of
business on the day immediately preceding the Closing Date) and (B) the
principal amount on deposit in the Excess Funding Account as of the close of
business on such day and (y) the sum of the numerators used to calculate the
Investor Percentages for allocations with respect to Finance Charge Receivables,
Default Amounts or Principal Receivables, as applicable, for all outstanding
Series on such date of determination; provided, however, that with respect to
any Monthly Period in which an addition of Accounts occurs or in which a removal
of Accounts occurs, the amount in clause (x)(A) above shall be (i) the aggregate
amount of Principal Receivables in the Trust as of the close of business on the
last day of the prior Monthly Period for the period from and including the first
day of such Monthly Period to but excluding the related date of the first
addition to the Trust of Receivables in certain designated Accounts (the
"Addition Date") or the date of the removal from the Trust of Receivables in
certain designated Accounts (the "Removal Date") and (ii) the aggregate amount
of Principal Receivables in the Trust as of the beginning of the day on the
related Addition Date or Removal Date after adjusting for the aggregate amount
of Principal Receivables added to or removed from the Trust on the related
Addition Date or Removal Date, as the case may be, for the period from and
including the related Addition Date or Removal Date to and including the last
day of such Monthly Period. The amounts so allocated will be further allocated
among the Class A Certificateholders,
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<PAGE>
Class B Certificateholders and the Collateral Interest Holder based on the
Class A Floating Allocation, the Class B Floating Allocation and the Collateral
Floating Allocation, respectively. The "Class A Floating Allocation" means, with
respect to any Monthly Period, the percentage equivalent (which percentage shall
never exceed 100%) of a fraction, the numerator of which is equal to the
Class A Adjusted Investor Interest as of the close of business on the last day
of the preceding Monthly Period (or with respect to the first Monthly Period, as
of the Closing Date) and the denominator of which is equal to the Adjusted
Investor Interest as of the close of business on such day. The "Class B Floating
Allocation" means, with respect to any Monthly Period, the percentage equivalent
(which percentage shall never exceed 100%) of a fraction, the numerator of which
is equal to the Class B Investor Interest as of the close of business on the
last day of the preceding Monthly Period (or with respect to the first Monthly
Period, as of the Closing Date) and the denominator of which is equal to the
Adjusted Investor Interest as of the close of business on such day. The
"Collateral Floating Allocation" means, with respect to any Monthly Period, the
percentage equivalent (which percentage shall never exceed 100%) of a fraction,
the numerator of which is equal to the Collateral Interest as of the close of
business on the last day of the preceding Monthly Period (or with respect to the
first Monthly Period, as of the Closing Date) and the denominator of which is
equal to the Adjusted Investor Interest as of the close of business on such day.
Collections of Principal Receivables during the Controlled Accumulation
Period and the Rapid Amortization Period will be allocated to the Investor
Interest based on the Fixed Investor Percentage. The "Fixed Investor Percentage"
means, with respect to any Monthly Period, the percentage equivalent of a
fraction, the numerator of which is the Investor Interest as of the close of
business on the last day of the Revolving Period and the denominator of which is
the greater of (x) the sum of (A) the aggregate amount of Principal Receivables
as of the close of business on the last day of the prior Monthly Period and
(B) the principal amount on deposit in the Excess Funding Account as of the
close of business on such day and (y) the sum of the numerators used to
calculate the Investor Percentages for allocations with respect to Principal
Receivables for all outstanding Series for such Monthly Period; provided,
however, that with respect to any Monthly Period in which an Addition Date
occurs or in which a Removal Date occurs, the amount in clause (x)(A) above
shall be (i) the aggregate amount of Principal Receivables in the Trust as of
the close of business on the last day of the prior Monthly Period for the period
from and including the first day of such Monthly Period to but excluding the
related Addition Date or Removal Date and (ii) the aggregate amount of Principal
Receivables in the Trust at the beginning of the day on the related Addition
Date or Removal Date after adjusting for the aggregate amount of Principal
Receivables added to or removed from the Trust on the related Addition Date or
Removal Date, as the case may be, for the period from and including the related
Addition Date or Removal Date to and including the last day of such Monthly
Period. The amounts so allocated will be further allocated among the Class A
Certificateholders, the Class B Certificateholders and the Collateral Interest
Holder based on the Class A Fixed Allocation, the Class B Fixed Allocation and
the Collateral Fixed Allocation, respectively. The "Class A Fixed Allocation"
means, with respect to any Monthly Period, the percentage equivalent (which
percentage shall never exceed 100%) of a fraction, the numerator of which is
equal to the Class A Investor Interest as of the close of business on the last
day of the Revolving Period, and the denominator of which is equal to the
Investor Interest as of the close of business on the last day of the Revolving
Period. The "Class B Fixed Allocation" means, with respect to any Monthly
Period, the percentage equivalent (which percentage shall never exceed 100%) of
a fraction, the numerator of which is equal to the Class B Investor Interest as
of the close of business on the last day of the Revolving Period, and the
denominator of which is equal to the Investor Interest as of the close of
business on the last day of the Revolving Period. The "Collateral Fixed
Allocation" means, with respect to any Monthly Period, the percentage equivalent
(which percentage shall never exceed 100%) of a fraction, the numerator of which
is equal to the Collateral Interest as of the close of business on the last day
of the Revolving Period, and the denominator of which is equal to the Investor
Interest as of the close of business on the last day of the Revolving Period.
"Class A Investor Interest" for any date means an amount equal to (a) the
aggregate initial principal amount of the Class A Certificates, minus (b) the
aggregate amount of principal payments made to Class A Certificateholders prior
to such date, minus (c) the excess, if any, of the aggregate amount of Class A
Investor Charge-Offs for all Transfer Dates preceding such date over the
aggregate amount of any reimbursements of
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Class A Investor Charge-Offs for all Transfer Dates preceding such date;
provided, however, that the Class A Investor Interest may not be reduced below
zero.
"Class A Adjusted Investor Interest" for any date of determination means an
amount equal to the then current Class A Investor Interest, minus the Principal
Funding Account Balance on such date.
"Class B Investor Interest" for any date means an amount equal to (a) the
aggregate initial principal amount of the Class B Certificates, minus (b) the
aggregate amount of principal payments made to Class B Certificateholders prior
to such date, minus (c) the aggregate amount of Class B Investor Charge-Offs for
all prior Transfer Dates, minus (d) the aggregate amount of Reallocated Class B
Principal Collections for all prior Transfer Dates for which the Collateral
Interest has not been reduced, minus (e) an amount equal to the aggregate amount
by which the Class B Investor Interest has been reduced to fund the Class A
Investor Default Amount on all prior Transfer Dates as described under
"--Defaulted Receivables; Investor Charge Offs," and plus (f) the aggregate
amount of Excess Spread allocated and available on all prior Transfer Dates for
the purpose of reimbursing amounts deducted pursuant to the foregoing clauses
(c), (d) and (e); provided, however, that the Class B Investor Interest may not
be reduced below zero.
"Collateral Interest" for any date means an amount equal to (a) the Initial
Collateral Interest, minus (b) the aggregate amount of principal payments made
to the Collateral Interest Holder prior to such date, minus (c) the aggregate
amount of Collateral Charge-Offs for all prior Transfer Dates, minus (d) the
aggregate amount of Reallocated Principal Collections for all prior Transfer
Dates, minus (e) an amount equal to the aggregate amount by which the Collateral
Interest has been reduced to fund the Class A Investor Default Amount and the
Class B Investor Default Amount on all prior Transfer Dates as described under
"--Defaulted Receivables; Investor Charge-Offs," plus (f) the aggregate amount
of Excess Spread allocated and available on all prior Transfer Dates for the
purpose of reimbursing amounts deducted pursuant to the foregoing clauses (c),
(d) and (e); provided, however, that the Collateral Interest may not be reduced
below zero.
REALLOCATION OF CASH FLOWS
With respect to each Transfer Date, the Servicer will determine the amount
(the "Class A Required Amount"), which will be equal to the amount, if any, by
which the sum of (a) Class A Monthly Interest due on the related Distribution
Date and overdue Class A Monthly Interest and Class A Additional Interest
thereon, if any, (b) the Class A Servicing Fee for the related Monthly Period
and overdue Class A Servicing Fee, if any, and (c) the Class A Investor Default
Amount, if any, for the related Monthly Period exceeds the Class A Available
Funds for the related Monthly Period. If the Class A Required Amount is greater
than zero, Excess Spread allocated to Series 1998-5 and available for such
purpose will be used to fund the Class A Required Amount with respect to such
Transfer Date. If such Excess Spread is insufficient to fund the Class A
Required Amount, first, Reallocated Collateral Principal Collections and, then,
Reallocated Class B Principal Collections will be used to fund the remaining
Class A Required Amount. If Reallocated Principal Collections with respect to
the related Monthly Period, together with Excess Spread, are insufficient to
fund the remaining Class A Required Amount for such related Monthly Period, then
the Collateral Interest (after giving effect to reductions for any Collateral
Charge-Offs and Reallocated Principal Collections on such Transfer Date) will be
reduced by the amount of such excess (but not by more than the Class A Investor
Default Amount for such Monthly Period). In the event that such reduction would
cause the Collateral Interest to be a negative number, the Collateral Interest
will be reduced to zero, and the Class B Investor Interest (after giving effect
to reductions for any Class B Investor Charge-Offs and any Reallocated Class B
Principal Collections for which the Collateral Interest was not reduced on such
Transfer Date) will be reduced by the amount by which the Collateral Interest
would have been reduced below zero (but not by more than the excess of the Class
A Investor Default Amount, if any, for such Monthly Period over the amount of
such reduction, if any, of the Collateral Interest with respect to such Monthly
Period). In the event that such reduction would cause the Class B Investor
Interest to be a negative number, the Class B Investor Interest will be reduced
to zero and the Class A Investor Interest will be reduced by the amount by which
the Class B Investor Interest would have been reduced below zero (but not by
more than the excess, if any, of the Class A Investor Default Amount for such
Monthly Period over the amount of the reductions, if any, of the Collateral
Interest and the Class B Investor Interest with respect to such Monthly Period).
Any such reduction in the Class A Investor Interest will have the effect of
slowing or reducing the return of principal and interest to the
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Class A Certificateholders. In such case, the Class A Certificateholders will
bear directly the credit and other risks associated with their interests in the
Trust. See "--Defaulted Receivables; Investor Charge-Offs."
With respect to each Transfer Date, the Servicer will determine the amount
(the "Class B Required Amount"), which will be equal to the sum of (a) the
amount, if any, by which the sum of (i) Class B Monthly Interest due on the
related Distribution Date and overdue Class B Monthly Interest and Class B
Additional Interest thereon, if any, and (ii) the Class B Servicing Fee for the
related Monthly Period and overdue Class B Servicing Fee, if any, exceeds the
Class B Available Funds for the related Monthly Period and (b) the Class B
Investor Default Amount, if any, for the related Monthly Period. If the Class B
Required Amount is greater than zero, Excess Spread allocated to Series 1998-5
not required to pay the Class A Required Amount or reimburse Class A Investor
Charge-Offs will be used to fund the Class B Required Amount with respect to
such Transfer Date. If such Excess Spread is insufficient to fund the Class B
Required Amount, Reallocated Collateral Principal Collections not required to
fund the Class A Required Amount for the related Monthly Period will be used to
fund the remaining Class B Required Amount. If such Reallocated Collateral
Principal Collections with respect to the related Monthly Period are
insufficient to fund the remaining Class B Required Amount, then the Collateral
Interest (after giving effect to reductions for any Collateral Charge-Offs and
Reallocated Principal Collections on such Transfer Date and after any
adjustments made thereto for the benefit of the Class A Certificateholders) will
be reduced by the amount of such deficiency (but not by more than the Class B
Investor Default Amount for such Monthly Period). In the event that such a
reduction would cause the Collateral Interest to be a negative number, the
Collateral Interest will be reduced to zero, and the Class B Investor Interest
will be reduced by the amount by which the Collateral Interest would have been
reduced below zero (but not by more than the excess of the Class B Investor
Default Amount for such Monthly Period over the amount of such reduction of the
Collateral Interest), and the Class B Certificateholders will bear directly the
credit and other risks associated with their interests in the Trust. See
"--Defaulted Receivables; Investor Charge-Offs."
Reductions of the Class A Investor Interest or Class B Investor Interest
described above shall be reimbursed by, and the Class A Investor Interest or
Class B Investor Interest increased to the extent of, Excess Spread available
for such purposes on each Transfer Date. See "--Application of
Collections--Excess Spread." When such reductions of the Class A Investor
Interest and Class B Investor Interest have been fully reimbursed, reductions of
the Collateral Interest shall be reimbursed until reimbursed in full in a
similar manner.
"Reallocated Class B Principal Collections" for any Monthly Period means
collections of Principal Receivables allocable to the Class B Investor Interest
for the related Monthly Period in an amount not to exceed the amount applied to
fund the Class A Required Amount, if any; provided, however, that such amount
will not exceed the Class B Investor Interest after giving effect to any
Class B Investor Charge-Offs for the related Transfer Date.
"Reallocated Collateral Principal Collections" for any Monthly Period means
collections of Principal Receivables allocable to the Collateral Interest for
the related Monthly Period in an amount not to exceed the amount applied to fund
the Class A Required Amount and the Class B Required Amount, if any; provided,
however, that such amount will not exceed the Collateral Interest after giving
effect to any Collateral Charge-Offs for the related Transfer Date.
"Reallocated Principal Collections" for any Monthly Period means the sum of
(a) the Reallocated Class B Principal Collections for such Monthly Period, if
any, and (b) the Reallocated Collateral Principal Collections for such Monthly
Period, if any.
APPLICATION OF COLLECTIONS
Allocations. Except as otherwise provided below, the Servicer will deposit
into the Collection Account, no later than the second business day following the
date of processing, any payment collected by the Servicer 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 Agreement and
(a) (i) the Servicer provides to the Trustee a letter of credit or other credit
enhancement covering the risk of collection of the Servicer acceptable to the
Rating Agency and (ii) the Transferor shall not have received a notice from the
Rating Agency that reliance on such letter of credit or other credit enhancement
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would result in the lowering of such Rating Agency's then-existing rating of any
Series then outstanding or (b) the Servicer has and maintains a certificate of
deposit rating of P-1 by Moody's and of A-1 by Standard & Poor's and deposit
insurance provided by either BIF or SAIF or makes other arrangements
satisfactory to each Rating Agency rating any Series then outstanding, then the
Servicer may make such deposits and payments on the business day immediately
prior to the Distribution Date (the "Transfer Date") in an amount equal to the
net amount of such deposits and payments which would have been made had the
conditions of this proviso not applied.
With respect to the Certificates and any Monthly Period, and
notwithstanding anything in the Agreement to the contrary, whether the Servicer
is required to make monthly or daily deposits from the Collection Account into
the Finance Charge Account or the Principal Account, (i) the Servicer will only
be required to deposit collections from the Collection Account into the Finance
Charge Account or the Principal Account up to the required amount to be
deposited into any such deposit account or, without duplication, distributed on
or prior to the related Distribution Date to Certificateholders or to the
Collateral Interest Holder and (ii) if at any time prior to such Distribution
Date the amount of collections deposited in the Collection Account exceeds the
amount required to be deposited pursuant to clause (i) above, the Servicer will
be permitted to withdraw the excess from the Collection Account.
Payment of Interest, Fees and Other Items. On each Transfer Date, the
Trustee, acting pursuant to the Servicer's instructions, will apply the Class A
Available Funds, Class B Available Funds and Collateral Available Funds in the
Finance Charge Account in the following manner:
(a) On each Transfer Date, an amount equal to the Class A Available
Funds will be distributed in the following priority:
(i) an amount equal to Class A Monthly Interest for the related
Distribution Date, plus the amount of any overdue Class A Monthly
Interest and Class A Additional Interest thereon, if any, will be
deposited into the Distribution Account for distribution to Class A
Certificateholders on such Distribution Date;
(ii) an amount equal to the Class A Servicing Fee for the related
Monthly Period, plus the amount of any overdue Class A Servicing Fee,
will be paid to the Servicer;
(iii) an amount equal to the Class A Investor Default Amount, if
any, for the related Monthly Period will be treated as a portion of
Available Investor Principal Collections and deposited into the
Principal Account for such Transfer Date; and
(iv) the balance, if any, will constitute a portion of Excess
Spread and will be allocated and distributed as described under
"--Excess Spread."
(b) On each Transfer Date, an amount equal to the Class B Available
Funds will be distributed in the following priority:
(i) an amount equal to Class B Monthly Interest for the related
Distribution Date, plus the amount of any overdue Class B Monthly
Interest and Class B Additional Interest thereon, if any, will be
deposited into the Distribution Account for distribution to Class B
Certificateholders on such Distribution Date;
(ii) an amount equal to the Class B Servicing Fee for the related
Monthly Period, plus the amount of any overdue Class B Servicing Fee,
will be paid to the Servicer; and
(iii) the balance, if any, will constitute a portion of Excess
Spread and will be allocated and distributed as described under
"--Excess Spread."
(c) On each Transfer Date, an amount equal to the Collateral Available
Funds will be distributed in the following priority:
(i) if neither the Bank nor The Bank of New York is the Servicer,
an amount equal to the Collateral Interest Servicing Fee for the related
Monthly Period, plus the amount of any overdue Collateral Interest
Servicing Fee, will be paid to the Servicer; and
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(ii) the balance, if any, will constitute a portion of Excess
Spread and will be allocated and distributed as described under
"--Excess Spread."
"Class A Monthly Interest" means, with respect to any Distribution Date, an
amount equal to the product of (i) the Class A Certificate Rate for the related
Interest Period, (ii) the actual number of days in such Interest Period divided
by 360 and (iii) the outstanding principal balance of the Class A Certificates
as of the related Record Date; provided, however, with respect to the first
Distribution Date, Class A Monthly Interest will be equal to the interest
accrued on the initial outstanding principal balance of the Class A Certificates
at the Class A Certificate Rate for the period from the Closing Date through
November 15, 1998.
"Class B Monthly Interest" means, with respect to any Distribution Date, an
amount equal to the product of (i) the Class B Certificate Rate for the related
Interest Period, (ii) the actual number of days in such Interest Period divided
by 360 and (iii) the outstanding principal balance of the Class B Certificates
as of the related Record Date; provided, however, with respect to the first
Distribution Date, Class B Monthly Interest will be equal to the interest
accrued on the initial outstanding principal balance of the Class B Certificates
at the Class B Certificate Rate for the period from the Closing Date through
November 15, 1998.
"Collateral Available Funds" means, with respect to any Monthly Period, an
amount equal to the Collateral Floating Allocation of collections of Finance
Charge Receivables allocated to the Investor Interest with respect to such
Monthly Period (excluding the portion of collections of Finance Charge
Receivables attributable to Interchange that is allocable to Servicer
Interchange).
"Excess Spread" means, with respect to any Transfer Date, an amount equal
to the sum of the amounts described in clause (a) (iv), clause (b) (iii) and
clause (c) (ii) above. To the extent such amounts are insufficient to make the
distributions required by subparagraphs (a) through (j) below under "--Excess
Spread," Excess Spread shall also be deemed to include any Excess Finance Charge
Collections allocable to other Series available to Series 1998-5 in accordance
with the Agreement. See "--Shared Excess Finance Charge Collections."
Excess Spread. On each Transfer Date, the Trustee, acting pursuant to the
Servicer's instructions, will apply Excess Spread with respect to the related
Monthly Period, to make the following distributions in the following priority:
(a) an amount equal to the Class A Required Amount, if any, with
respect to such Transfer Date will be used to fund the Class A Required
Amount; provided, that in the event the Class A Required Amount for such
Transfer Date exceeds the amount of Excess Spread, such Excess Spread shall
be applied first to pay amounts due with respect to such Transfer Date
pursuant to clause (a)(i) above under "--Payment of Interest, Fees and
Other Items," second to pay amounts due with respect to such Transfer Date
pursuant to clause (a)(ii) above under "--Payment of Interest, Fees and
Other Items" and third to pay amounts due with respect to such Transfer
Date pursuant to clause (a)(iii) above under "--Payment of Interest, Fees
and Other Items;"
(b) an amount equal to the aggregate amount of Class A Investor
Charge-Offs which have not been previously reimbursed (after giving effect
to the allocation on such Transfer Date of certain other amounts applied
for that purpose) will be deposited into the Principal Account and treated
as a portion of Available Investor Principal Collections for such Transfer
Date as described under "--Payments of Principal" below;
(c) an amount equal to the Class B Required Amount, if any, with
respect to such Transfer Date will be used to fund the Class B Required
Amount and will be applied first to pay amounts due with respect to such
Transfer Date pursuant to clause (b)(i) above under "--Payment of Interest,
Fees and Other Items," second to pay amounts due with respect to such
Transfer Date pursuant to clause (b)(ii) above under "--Payment of
Interest, Fees and Other Items" and third, the amount remaining, up to the
Class B Investor Default Amount, will be deposited into the Principal
Account and treated as a portion of Available Investor Principal
Collections for such Transfer Date as described under "--Payments of
Principal" below;
(d) an amount equal to the aggregate amount by which the Class B
Investor Interest has been reduced below the initial Class B Investor
Interest for reasons other than the payment of principal to the Class B
Certificateholders (but not in excess of the aggregate amount of such
reductions which have not been
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previously reimbursed) will be deposited into the Principal Account and
treated as a portion of Available Investor Principal Collections for such
Transfer Date as described under "--Payments of Principal" below;
(e) an amount equal to the Collateral Monthly Interest for such
Transfer Date, plus the amount of any Collateral Monthly Interest
previously due but not distributed to the Collateral Interest Holder on a
prior Transfer Date, will be distributed to the Collateral Interest Holder
for distribution in accordance with the Loan Agreement;
(f) if the Bank or The Bank of New York is the Servicer, an amount
equal to the Collateral Interest Servicing Fee for the related Monthly
Period, plus the amount of any overdue Collateral Interest Servicing Fee,
will be paid to the Servicer;
(g) an amount equal to the aggregate Collateral Default Amount, if
any, for such Transfer Date will be deposited into the Principal Account
and treated as a portion of Available Investor Principal Collections for
such Transfer Date as described under "--Payments of Principal" below;
(h) an amount equal to the aggregate amount by which the Collateral
Interest has been reduced below the Required Collateral Interest for
reasons other than the payment of principal to the Collateral Interest
Holder (but not in excess of the aggregate amount of such reductions which
have not been previously reimbursed) will be deposited into the Principal
Account and treated as a portion of Available Investor Principal
Collections for such Transfer Date as described under "--Payments of
Principal" below;
(i) on each Transfer Date from and after the Reserve Account Funding
Date, but prior to the date on which the Reserve Account terminates as
described under "--Reserve Account," an amount up to the excess, if any, of
the Required Reserve Account Amount over the Available Reserve Account
Amount will be deposited into the Reserve Account;
(j) an amount equal to the amounts determined to be payable pursuant
to the Loan Agreement shall be paid to the Collateral Interest Holder; and
(k) the balance, if any, after giving effect to the payments made
pursuant to subparagraphs (a) through (j) above, will constitute Excess
Finance Charge Collections to be applied with respect to other Series in
accordance with the Agreement.
"Collateral Monthly Interest" with respect to any Transfer Date will equal
the product of (a) an amount equal to LIBOR plus 1.0% per annum, or such lesser
amount as may be designated in the Loan Agreement (the "Collateral Rate"), (b)
the actual number of days in the related Interest Period divided by 360 and (c)
the Collateral Interest as of the related Record Date or, with respect to the
first Transfer Date, the Initial Collateral Interest.
Payments of Principal. On each Transfer Date, the Trustee, acting pursuant
to the Servicer's instructions, will distribute Available Investor Principal
Collections (see "--Principal Payments" above) on deposit in the Principal
Account in the following manner:
(a) on each Transfer Date with respect to the Revolving Period, all
such Available Investor Principal Collections will be distributed or
deposited in the following priority:
(i) an amount equal to Collateral Monthly Principal will be paid
to the Collateral Interest Holder in accordance with the Loan Agreement;
and
(ii) the balance will be treated as Shared Principal Collections
and applied as described under "Description of the Certificates--Shared
Principal Collections" herein and in the Prospectus;
(b) on each Transfer Date with respect to the Controlled Accumulation
Period or the Rapid Amortization Period, all such Available Investor
Principal Collections will be distributed or deposited in the following
priority:
(i) an amount equal to Class A Monthly Principal will be
(i) during the Controlled Accumulation Period, deposited in the
Principal Funding Account (up to the Controlled Deposit Amount for such
Transfer Date) or (ii) during the Rapid Amortization Period, distributed
to the Class A Certificateholders; and
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(ii) for each Transfer Date after the Class A Investor Interest
has been paid in full (after taking into account payments to be made on
the related Distribution Date), an amount equal to the Class B Monthly
Principal for such Transfer Date will be distributed to the Class B
Certificateholders;
(c) on each Transfer Date with respect to the Controlled Accumulation
Period and the Rapid Amortization Period in which a reduction in the
Required Collateral Interest has occurred, Available Investor Principal
Collections not applied to Class A Monthly Principal or Class B Monthly
Principal will be applied to reduce the Collateral Interest to the Required
Collateral Interest; and
(d) on each Transfer Date with respect to the Controlled Accumulation
Period and the Rapid Amortization Period, the balance of Available Investor
Principal Collections not applied pursuant to (b) and (c) above, if any,
will be treated as Shared Principal Collections and applied as described
under "Description of the Certificates--Shared Principal Collections"
herein and in the Prospectus.
"Class A Monthly Principal" means, with respect to any Transfer Date
relating to the Controlled Accumulation Period or the Rapid Amortization Period,
prior to the payment in full of the Class A Investor Interest, an amount equal
to the least of (i) the Available Investor Principal Collections on deposit in
the Principal Account with respect to such Transfer Date, (ii) for each Transfer
Date with respect to the Controlled Accumulation Period, prior to the payment in
full of the Class A Investor Interest, and on or prior to the Class A Scheduled
Payment Date, the applicable Controlled Deposit Amount for such Transfer Date
and (iii) the Class A Adjusted Investor Interest prior to any deposits on such
Transfer Date.
"Class B Monthly Principal" means, with respect to any Transfer Date
relating to the Controlled Accumulation Period or the Rapid Amortization Period,
after the Class A Certificates have been paid in full (after taking into account
payments to be made on the related Distribution Date), an amount equal to the
lesser of (i) the Available Investor Principal Collections on deposit in the
Principal Account with respect to such Transfer Date (minus the portion of such
Available Investor Principal Collections applied to Class A Monthly Principal on
such Transfer Date) and (ii) the Class B Investor Interest for such Transfer
Date.
"Collateral Monthly Principal" means (a) with respect to any Transfer Date
relating to the Revolving Period following any reduction of the Required
Collateral Interest pursuant to clause (3) of the proviso in the definition
thereof, an amount equal to the lesser of (i) the excess, if any, of the
Collateral Interest (after giving effect to reductions for any Collateral
Charge-Offs and Reallocated Principal Collections on such Transfer Date and
after giving effect to any adjustments thereto for the benefit of the Class A
Certificateholders and the Class B Certificateholders on such Transfer Date)
over the Required Collateral Interest on such Transfer Date, and (ii) the
Available Investor Principal Collections on such Transfer Date or (b) with
respect to any Transfer Date relating to the Controlled Accumulation Period or
Rapid Amortization Period, an amount equal to the lesser of (i) the excess, if
any, of the Collateral Interest (after giving effect to reductions for any
Collateral Charge-Offs and Reallocated Principal Collections on such Transfer
Date and after giving effect to any adjustments thereto for the benefit of the
Class A Certificateholders and the Class B Certificateholders on such Transfer
Date) over the Required Collateral Interest on such Transfer Date, and (ii) the
excess, if any, of (A) the Available Investor Principal Collections on such
Transfer Date over (B) the sum of the Class A Monthly Principal and the Class B
Monthly Principal for such Transfer Date.
"Controlled Accumulation Amount" means (a) for any Transfer Date with
respect to the Controlled Accumulation Period, prior to the payment in full of
the Class A Investor Interest, $54,166,667; provided, however, that if the
commencement of the Controlled Accumulation Period is delayed as described above
under "--Postponement of Controlled Accumulation Period," the Controlled
Accumulation Amount may be higher than the amount stated above for each Transfer
Date with respect to the Controlled Accumulation Period and will be determined
by the Servicer in accordance with the Agreement based on the principal payment
rates for the Accounts and on the investor interests of other Series (other than
certain excluded Series) which are scheduled to be in their revolving periods
and then scheduled to create Shared Principal Collections during the Controlled
Accumulation Period and (b) for any Transfer Date with respect to the Controlled
Accumulation Period after the payment in full of the Class A Investor Interest,
an amount equal to the Class B Investor Interest on such Transfer Date.
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"Accumulation Shortfall" means (a) on the first Transfer Date with respect
to the Controlled Accumulation Period, the excess, if any, of the Controlled
Accumulation Amount for such Transfer Date over the amount distributed from the
Principal Account as Class A Monthly Principal for such Transfer Date and
(b) on each subsequent Transfer Date with respect to the Controlled Accumulation
Period, the excess, if any, of the applicable Controlled Accumulation Amount for
such subsequent Transfer Date plus any Accumulation Shortfall for the prior
Transfer Date over the amount distributed from the Principal Account as Class A
Monthly Principal for such subsequent Transfer Date.
SHARED EXCESS FINANCE CHARGE COLLECTIONS
Any Series may be included in a Group. Series 1998-5 will be, Series
1998-1, Series 1998-2, Series 1998-3, Series 1998-4, Series 1997-1, Series
1997-2, Series 1997-3, Series 1997-4, Series 1997-5, Series 1996-1, Series
1996-2, Series 1996-3, Series 1996-4, Series 1995-1, Series 1995-2, Series
1995-3 and Series 1995-4 are, and other Series may in the future be, included in
Group I. Group I is currently the only Group in the Trust. Each Series in Group
I will be entitled to share Excess Finance Charge Collections in the manner, and
to the extent, described below with each other Series, if any, in Group I. The
Series Supplement with respect to each Series will specify whether such Series
will be included in a Group. Collections of Finance Charge Receivables and
certain other amounts allocable to the Investor Interest of any Series that is
included in Group I in excess of the amounts necessary to make required payments
with respect to such Series (including payments to any related Credit
Enhancement Providers) that are payable out of collections of Finance Charge
Receivables (any such excess, the "Excess Finance Charge Collections") will be
applied to cover any shortfalls with respect to amounts payable from collections
of Finance Charge Receivables allocable to any other Series included in Group I,
pro rata based upon the amount of the shortfall, if any, with respect to each
other Series in Group I. In all cases, any Excess Finance Charge Collections
remaining after covering shortfalls with respect to all outstanding Series in a
Group will be paid to the holder of the Transferor Certificate. While any Series
offered hereby may be included in a Group, there can be no assurance that
(a) any other Series will be included in such Group or (b) there will be any
Excess Finance Charge Collections with respect to such Group for any Monthly
Period. Excess Finance Charge Collections permit coverage of shortfalls with
respect to amounts payable from collections of Finance Charge Receivables
allocable to Series 1998-5 by using Excess Finance Charge Collections from other
Series which would otherwise be paid to the Transferor to cover shortfalls in
amounts payable from Excess Spread as described above under "--Application of
Collections--Excess Spread." While the Transferor believes that, based upon
applicable rules and regulations as currently in effect, the sharing of Excess
Finance Charge Collections among Series in a Group will not have adverse
regulatory implications for it, there can be no assurance that this will
continue to be true in the future.
SHARED PRINCIPAL COLLECTIONS
Collections of Principal Receivables for any Monthly Period allocated to
the Investor Interest will first be used to cover, with respect to any Monthly
Period during the Controlled Accumulation Period, deposits of the applicable
Controlled Deposit Amount to the Principal Funding Account or the Distribution
Account, and during the Rapid Amortization Period, payments to the
Certificateholders and then under certain circumstances payments to the
Collateral Interest Holder. The Servicer will determine the amount of
collections of Principal Receivables for any Monthly Period allocated to the
Investor Interest remaining after covering required payments to the
Certificateholders and any similar amount remaining for any other Series
("Shared Principal Collections"). The Servicer will allocate the Shared
Principal Collections to cover any scheduled or permitted principal
distributions to certificateholders and deposits to principal funding accounts,
if any, for any Series entitled thereto which have not been covered out of the
collections of Principal Receivables allocable to such Series and certain other
amounts for such Series ("Principal Shortfalls"). Shared Principal Collections
will not be used to cover investor charge-offs for any Series. If Principal
Shortfalls exceed Shared Principal Collections for any Monthly Period, Shared
Principal Collections will be allocated pro rata among the applicable Series
based on the relative amounts of Principal Shortfalls. To the extent that Shared
Principal Collections exceed Principal Shortfalls, the balance will be paid to
the holder of the Transferor Certificate or, under certain circumstances,
deposited into the Excess Funding Account.
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REQUIRED COLLATERAL INTEREST
The "Required Collateral Interest" with respect to any Transfer Date means
(i) initially $69,643,524 and (ii) thereafter on each Transfer Date an amount
equal to 9% of the sum of the Class A Adjusted Investor Interest, the Class B
Investor Interest and the Collateral Interest on such Transfer Date, after
taking into account deposits into the Principal Funding Account on such Transfer
Date and payments to be made on the related Distribution Date, and the
Collateral Interest on the prior Transfer Date after any adjustments made on
such Transfer Date, but not less than $23,214,286; provided, however, (1) that
if certain reductions in the Collateral Interest are made or if a Pay Out Event
occurs, the Required Collateral Interest for such Transfer Date shall equal the
Required Collateral Interest for the Transfer Date immediately preceding the
occurrence of such reduction or Pay Out Event, (2) in no event shall the
Required Collateral Interest exceed the unpaid principal amount of the
Certificates as of the last day of the Monthly Period preceding such Transfer
Date after taking into account payments to be made on the related Distribution
Date and (3) the Required Collateral Interest may be reduced to a lesser amount
at any time if the Rating Agency Condition is satisfied.
"Rating Agency Condition" means the notification in writing by each Rating
Agency that a proposed action will not result in such Rating Agency reducing or
withdrawing its then-existing rating of the investor certificates of any
outstanding Series or class with respect to which it is a Rating Agency.
With respect to any Transfer Date, if the Collateral Interest is less than
the Required Collateral Interest, certain Excess Spread, if available, will be
allocated to increase the Collateral Interest to the extent of such shortfall.
Any of such Excess Spread not required to be so allocated or deposited into the
Reserve Account with respect to any Transfer Date will be applied in accordance
with the Loan Agreement. See "--Application of Collections--Excess Spread."
DEFAULTED RECEIVABLES; INVESTOR CHARGE-OFFS
On or before each Transfer Date, the Servicer will calculate the Investor
Default Amount for the preceding Monthly Period. The term "Investor Default
Amount" means, for any Monthly Period, the product of (a) the Floating Investor
Percentage with respect to such Monthly Period and (b) the aggregate amount of
Receivables in Defaulted Accounts (the "Default Amount") for such Monthly
Period. A portion of the Investor Default Amount will be allocated to the Class
A Certificateholders (the "Class A Investor Default Amount") on each Transfer
Date in an amount equal to the product of the Class A Floating Allocation
applicable during the related Monthly Period and the Investor Default Amount for
such Monthly Period. A portion of the Investor Default Amount will be allocated
to the Class B Certificateholders (the "Class B Investor Default Amount") on
each Transfer Date in an amount equal to the product of the Class B Floating
Allocation applicable during the related Monthly Period and the Investor Default
Amount for such Monthly Period. A portion of the Investor Default Amount will be
allocated to the Collateral Interest Holder (the "Collateral Default Amount") on
each Transfer Date in an amount equal to the product of the Collateral Floating
Allocation applicable during the related Monthly Period and the Investor Default
Amount for such Monthly Period.
On each Transfer Date, if the Class A Investor Default Amount for such
Transfer Date exceeds the amount of Excess Spread and Reallocated Principal
Collections available to fund such amount with respect to the Monthly Period
immediately preceding such Transfer Date, the Collateral Interest (after giving
effect to reductions for any Collateral Charge-Offs and any Reallocated
Principal Collections on such Transfer Date) will be reduced by the amount of
such excess, but not more than the lesser of the Class A Investor Default Amount
and the Collateral Interest (after giving effect to reductions for any
Collateral Charge-Offs and any Reallocated Principal Collections on such
Transfer Date) for such Transfer Date. In the event that such reduction would
cause the Collateral Interest to be a negative number, the Collateral Interest
will be reduced to zero, and the Class B Investor Interest (after giving effect
to reductions for any Class B Investor Charge-Offs and any Reallocated Class B
Principal Collections on such Transfer Date) will be reduced by the amount by
which the Collateral Interest would have been reduced below zero. In the event
that such reduction would cause the Class B Investor Interest to be a negative
number, the Class B Investor Interest will be reduced to zero, and the Class A
Investor Interest will be reduced by the amount by which the Class B Investor
Interest would have been reduced below zero, but not more than the Class A
Investor Default Amount for such Transfer Date (a "Class A Investor
Charge-Off"), which will have the effect of slowing or reducing the return of
principal and interest to the Class A
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<PAGE>
Certificateholders. If the Class A Investor Interest has been reduced by the
amount of any Class A Investor Charge-Offs, it will be reimbursed on any
Transfer Date (but not by an amount in excess of the aggregate Class A Investor
Charge-Offs) by the amount of Excess Spread allocated and available for such
purpose as described under "--Application of Collections--Excess Spread."
On each Transfer Date, if the Class B Investor Default Amount for such
Transfer Date exceeds the amount of Excess Spread and Reallocated Collateral
Principal Collections which are allocated and available to fund such amount with
respect to the Monthly Period preceding such Transfer Date, the Collateral
Interest (after giving effect to reductions for any Collateral Charge-Offs and
any Reallocated Principal Collections on such Transfer Date and after giving
effect to any adjustments with respect thereto as described in the preceding
paragraph) will be reduced by the amount of such excess but not more than the
lesser of the Class B Investor Default Amount and the Collateral Interest (after
giving effect to reductions for any Collateral Charge-Offs and any Reallocated
Principal Collections on such Transfer Date and after giving effect to any
adjustments with respect thereto as described in the preceding paragraph) for
such Transfer Date. In the event that such reduction would cause the Collateral
Interest to be a negative number, the Collateral Interest will be reduced to
zero and the Class B Investor Interest will be reduced by the amount by which
the Collateral Interest would have been reduced below zero, but not more than
the Class B Investor Default Amount for such Transfer Date (a "Class B Investor
Charge-Off"). The Class B Investor Interest will also be reduced by the amount
of Reallocated Class B Principal Collections in excess of the Collateral
Interest (after giving effect to reductions for any Collateral Charge-Offs and
any Reallocated Collateral Principal Collections on such Transfer Date) and the
amount of any portion of the Class B Investor Interest allocated to the Class A
Certificates to avoid a reduction in the Class A Investor Interest. The Class B
Investor Interest will thereafter be reimbursed (but not in excess of the unpaid
principal balance of the Class B Certificates) on any Transfer Date by the
amount of Excess Spread allocated and available for that purpose as described
under "--Application of Collections--Excess Spread."
On each Transfer Date, if the Collateral Default Amount for such Transfer
Date exceeds the amount of Excess Spread which is allocated and available to
fund such amount as described under "--Application of Collections--Excess
Spread," the Collateral Interest will be reduced by the amount of such excess
but not more than the lesser of the Collateral Default Amount and the Collateral
Interest for such Transfer Date (a "Collateral Charge-Off"). The Collateral
Interest will also be reduced by the amount of Reallocated Principal Collections
and the amount of any portion of the Collateral Interest allocated to the
Class A Certificates to avoid a reduction in the Class A Investor Interest or to
the Class B Certificates to avoid a reduction in the Class B Investor Interest.
The Collateral Interest will thereafter be reimbursed on any Transfer Date by
the amount of Excess Spread allocated and available for that purpose as
described under "--Application of Collections--Excess Spread."
PRINCIPAL FUNDING ACCOUNT
Pursuant to the Series 1998-5 Supplement, the Trustee at the direction of
the Servicer will establish and maintain an Eligible Deposit Account held for
the benefit of the Certificateholders (the "Principal Funding Account"). During
the Controlled Accumulation Period, the Trustee at the direction of the Servicer
will transfer collections in respect of Principal Receivables (other than
Reallocated Principal Collections) and Shared Principal Collections from other
Series, if any, allocated to Series 1998-5 from the Principal Account to the
Principal Funding Account as described under "--Application of Collections."
Such collections will be retained in the Principal Funding Account and
ultimately used to pay the principal of the Class A Certificates on the Class A
Scheduled Payment Date or the first Distribution Date with respect to the Rapid
Amortization Period, whichever occurs earlier.
Funds on deposit in the Principal Funding Account will be invested to the
following Transfer Date by the Trustee at the direction of the Servicer in
Permitted Investments. Investment earnings (net of investment losses and
expenses) on funds on deposit in the Principal Funding Account (the "Principal
Funding Investment Proceeds") will be applied on each Transfer Date as Class A
Available Funds. If, for any Transfer Date, the Principal Funding Investment
Proceeds are less than the product of (a) the product of (i) a fraction, the
numerator of which is the actual number of days in the related Interest Period
and the denominator of which is 360 and (ii) the Class A Certificate Rate in
effect with respect to such Interest Period and (b) the Principal Funding
Account Balance as of the Record Date preceding such Transfer Date (the
"Class A Covered Amount"), the
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amount of such deficiency (the "Class A Principal Funding Investment Shortfall")
shall be withdrawn, to the extent available, from the Reserve Account and
deposited in the Finance Charge Account and included in collections of Finance
Charge Receivables to be applied to the payment of Class A Monthly Interest.
RESERVE ACCOUNT
Pursuant to the Series 1998-5 Supplement, the Trustee will establish and
maintain an Eligible Deposit Account held for the benefit of the
Certificateholders (the "Reserve Account"). The Reserve Account is established
to assist with the subsequent distribution of interest on the Certificates
during the Controlled Accumulation Period. On each Transfer Date from and after
the Reserve Account Funding Date, but prior to the termination of the Reserve
Account, the Trustee, acting pursuant to the Servicer's instructions, will apply
Excess Spread allocated to the Certificates (to the extent described above under
"--Application of Collections--Excess Spread") to increase the amount on deposit
in the Reserve Account (to the extent such amount is less than the Required
Reserve Account Amount). The "Reserve Account Funding Date" will be the Transfer
Date with respect to the Monthly Period which commences no later than three
months prior to the commencement of the Controlled Accumulation Period, or such
earlier date as the Servicer may determine. The "Required Reserve Account
Amount" for any Transfer Date on or after the Reserve Account Funding Date will
be equal to (a) 0.50% of the outstanding principal balance of the Class A
Certificates or (b) any other amount designated by the Transferor; provided,
that if such designation is of a lesser amount, the Transferor shall have
provided the Servicer, the Collateral Interest Holder and the Trustee with
evidence that the Rating Agency Condition has been satisfied and the Transferor
shall have delivered to the Trustee a certificate of an authorized officer to
the effect that, based on the facts known to such officer at such time, in the
reasonable belief of the Transferor, such designation will not cause a Pay Out
Event or an event that, after the giving of notice or the lapse of time, would
cause a Pay Out Event to occur with respect to Series 1998-5. On each Transfer
Date, after giving effect to any deposit to be made to, and any withdrawal to be
made from, the Reserve Account on such Transfer Date, the Trustee will withdraw
from the Reserve Account an amount equal to the excess, if any, of the amount on
deposit in the Reserve Account over the Required Reserve Account Amount and
distribute such excess to the Collateral Interest Holder for application in
accordance with the terms of the Loan Agreement.
Provided that the Reserve Account has not terminated as described below,
all amounts on deposit in the Reserve Account on any Transfer Date (after giving
effect to any deposits to, or withdrawals from, the Reserve Account to be made
on such Transfer Date) will be invested to the following Transfer Date by the
Trustee at the direction of the Servicer in Permitted Investments. The interest
and other investment income (net of investment expenses and losses) earned on
such investments will be retained in the Reserve Account (to the extent the
amount on deposit is less than the Required Reserve Account Amount) or deposited
in the Finance Charge Account and treated as Class A Available Funds.
On or before each Transfer Date with respect to the Controlled Accumulation
Period and on the first Transfer Date with respect to the Rapid Amortization
Period, a withdrawal will be made from the Reserve Account, and the amount of
such withdrawal will be deposited in the Finance Charge Account and included in
collections of Finance Charge Receivables to be applied to the payment of the
Class A Monthly Interest for such Transfer Date in an amount equal to the lesser
of (a) the Available Reserve Account Amount with respect to such Transfer Date
and (b) the Class A Principal Funding Investment Shortfall with respect to such
Transfer Date; provided, that the amount of such withdrawal shall be reduced to
the extent that funds otherwise would be available to be deposited in the
Reserve Account on such Transfer Date. On each Transfer Date, the amount
available to be withdrawn from the Reserve Account (the "Available Reserve
Account Amount") will be equal to the lesser of the amount on deposit in the
Reserve Account (before giving effect to any deposit to be made to the Reserve
Account on such Transfer Date) and the Required Reserve Account Amount for such
Transfer Date.
The Reserve Account will be terminated upon the earlier to occur of
(a) the termination of the Trust pursuant to the Agreement and (b) if the
Controlled Accumulation Period has not commenced, the first Transfer Date with
respect to the Rapid Amortization Period or, if the Controlled Accumulation
Period has commenced, the earlier to occur of (i) the first Transfer Date with
respect to the Rapid Amortization Period and (ii) the Transfer Date immediately
preceding the Class A Scheduled Payment Date. Upon the termination of the
Reserve Account, all amounts on deposit therein (after giving effect to any
withdrawal from the Reserve Account on such
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date as described above) will be distributed to the Collateral Interest Holder
for application in accordance with the terms of the Loan Agreement. Any amounts
withdrawn from the Reserve Account and distributed to the Collateral Interest
Holder as described above will not be available for distribution to the
Certificateholders.
ISSUANCE OF ADDITIONAL CERTIFICATES
The Series 1998-5 Supplement provides that, from time to time during the
Revolving Period, the Transferor may, subject to certain conditions described
below, cause the Trustee to issue additional Certificates ("Additional
Certificates") and to increase the size of the Collateral Interest (each such
issuance, an "Additional Issuance"). When issued, the Additional Certificates of
each Class will be identical in all respects to the other outstanding
Certificates of that Class and will be equally and ratably entitled to the
benefits of the Agreement without preference, priority or distinction.
In connection with each Additional Issuance, a pro rata principal amount of
each Class of Certificates will be issued and there will be a pro rata increase
in the Collateral Interest.
As of the date of any Additional Issuance, the Collateral Interest, the
Controlled Accumulation Amount and the Investor Interest for each Class of this
Series will be increased proportionately to reflect the aggregate face amount of
the Additional Certificates.
Additional Certificates may be issued only upon the satisfaction of certain
conditions provided in the Series 1998-5 Supplement, including the following:
(a) on or before the fifth Business Day immediately preceding the date on which
the Additional Certificates are to be issued, the Transferor will have given the
Trustee, the Servicer and the Rating Agencies notice of such issuance and the
date upon which it is to occur, (b) after giving effect to the Additional
Issuance, the total amount of Principal Receivables will be greater than or
equal to the Minimum Aggregate Principal Receivables, (c) the Transferor shall
have delivered evidence of the proportional increase in the Collateral Interest
to the Trustee and the Rating Agencies, (d) the Rating Agency Condition shall
have been satisfied with respect to the Additional Issuance, (e) the Transferor
shall have delivered to the Trustee a certificate of an authorized officer to
the effect that, in the reasonable belief of the Transferor, such Additional
Issuance will not have a material adverse effect on any outstanding Class of
this Series, (f) as of the date of the Additional Issuance there shall be no
Investor Charge-Offs with respect to any Class of this Series and (g) the
Transferor shall have delivered to the Trustee a Tax Opinion with respect to the
Additional Issuance. There are no restrictions on the timing or amount of any
Additional Issuance other than the foregoing conditions.
COMPANION SERIES
The Series 1998-5 Certificates may be paired with one or more other Series
(each a "Companion Series"). Each Companion Series either will be prefunded with
an initial deposit to a prefunding account in an amount up to the initial
principal balance of such Companion Series, funded primarily from the proceeds
for the sale of such Companion Series, or will have a variable principal amount.
Any such prefunding account will be held for the benefit of such Companion
Series and not for the benefit of Certificateholders. As principal is paid with
respect to the Series 1998-5 Certificates, either (i) in the case of a prefunded
Companion Series, an equal amount of funds on deposit in any prefunding account
for such prefunded Companion Series will be released (which funds will be
distributed to the Transferor) or (ii) in the case of a Companion Series having
a variable principal amount, an interest in such variable Companion Series in an
equal or lesser amount may be sold by the Trust (and the proceeds thereof will
be distributed to the Transferor) and, in either case, the invested amount in
the Trust of such Companion Series will increase by up to the corresponding
amount. Upon payment in full of the Series 1998-5 Certificates, assuming that
there have been no unreimbursed charge-offs with respect to any related
Companion Series, the aggregate invested amount of such related Companion Series
will have been increased by an amount up to an aggregate amount equal to the
Series 1998-5 Investor Interest paid to the Series 1998-5 Certificateholders
since the issuance of such Companion Series. The issuance of a Companion Series
will be subject to the conditions described under "Description of the
Certificates--Exchanges" in the Prospectus. There can be no assurance, however,
that the terms of any Companion Series might not have an impact on the timing or
amount of payments received by a Series 1998-5 Certificateholder. In particular,
the denominator of the Fixed Investor Percentage may be increased upon the
occurrence of a Pay Out Event with respect to a Companion Series resulting in a
possible reduction of the percentage of collections of Principal Receivables
allocated to
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<PAGE>
Series 1998-5 if such event allowed the payment of principal at such time to the
Companion Series and required reliance by Series 1998-5 on clause (y) of the
denominator of the Fixed Investor Percentage for Series 1998-5. See "Maturity
Considerations" and "--Allocation Percentages" herein and "Risk Factors--Master
Trust Considerations" and "Maturity Assumptions" in the Prospectus.
PAY OUT EVENTS
As described above, the Revolving Period will continue through the close of
business on the last day of the August 2002 Monthly Period (unless such date is
postponed as described under "--Postponement of Controlled Accumulation
Period"), unless a Pay Out Event occurs prior to such date. A "Pay Out Event"
refers to any of the following events:
(a) failure on the part of the Transferor (i) to make any payment or
deposit on the date required under the Agreement (or within the applicable
grace period which shall not exceed five days) or (ii) to observe or
perform in any material respect any other covenants or agreements of the
Transferor set forth in the Agreement or the Series 1998-5 Supplement,
which failure has a material adverse effect on the Certificateholders
(which determination shall be made without regard to the existence of the
Collateral Interest) and which continues unremedied for a period of
60 days after written notice and continues to materially and adversely
affect the interests of the Certificateholders (which determination shall
be made without regard to the existence of the Collateral Interest) for
such period;
(b) any representation or warranty made by the Transferor in the
Agreement or the Series 1998-5 Supplement, or any information required to
be given by the Transferor to the Trustee to identify the Accounts proves
to have been incorrect in any material respect when made and which
continues to be incorrect in any material respect for a period of 60 days
after written notice and as a result of which the interests of the
Certificateholders are materially and adversely affected (which
determination shall be made without regard to the existence of the
Collateral Interest) and continue to be materially and adversely affected
for such period; provided, however, that a Pay Out Event pursuant to this
clause (b) shall not be deemed to occur thereunder if the Transferor has
accepted reassignment of the related Receivable or all such Receivables, if
applicable, during such period (or such longer period as the Trustee may
specify) in accordance with the provisions of the Agreement;
(c) any reduction of the average of the Portfolio Yields for any three
consecutive Monthly Periods to a rate which is less than the average of the
Base Rates for such period;
(d) a failure by the Transferor to convey Receivables arising under
Additional Accounts, or Participations, to the Trust when required by the
Agreement;
(e) any Servicer Default occurs which would have a material adverse
effect on the Certificateholders;
(f) insufficient funds in the Distribution Account to pay the Class A
Investor Interest in full on the Class A Scheduled Payment Date or the
Class B Investor Interest in full on the Class B Scheduled Payment Date;
(g) certain events of bankruptcy, insolvency, conservatorship or
receivership relating to the Transferor;
(h) the Transferor becomes unable for any reason to transfer
Receivables to the Trust in accordance with the provisions of the
Agreement; or
(i) the Trust becomes an "investment company" within the meaning of
the Investment Company Act of 1940, as amended.
In the case of any event described in clause (a), (b) or (e) above, a Pay
Out Event will be deemed to have occurred with respect to the Certificates only
if, after any applicable grace period, either the Trustee or Certificateholders
and the Collateral Interest Holder evidencing undivided interests aggregating
more than 50% of the Investor Interest, by written notice to the Transferor and
the Servicer (and to the Trustee if given by the Certificateholders) declare
that a Pay Out Event has occurred with respect to the Certificates as of the
date of such notice. In the case of any event described in clause (g), (h) or
(i), a Pay Out Event with respect to all Series then outstanding, and in the
case of any event described in clause (c), (d) or (f), a Pay Out Event with
respect to only the Certificates, will be deemed to have occurred without any
notice or other action on the part of the
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Trustee, the Certificateholders, the Collateral Interest Holder or all
certificateholders, as appropriate, immediately upon the occurrence of such
event. On the date on which a Pay Out Event is deemed to have occurred, the
Rapid Amortization Period will commence. In such event, distributions of
principal to the Certificateholders will begin on the first Distribution Date
following the month in which such Pay Out Event occurred. If, because of the
occurrence of a Pay Out Event, the Rapid Amortization Period begins earlier than
the close of business on the last day of the July 2003 Monthly Period
Certificateholders will begin receiving distributions of principal earlier than
they otherwise would have, which may shorten the average life of the
Certificates.
See "Description of the Certificates--Pay Out Events" in the Prospectus for
an additional discussion of the consequences of an insolvency, conservatorship
or receivership of the Transferor.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
The share of the Servicing Fee allocable to the Investor Interest with
respect to any Transfer Date (the "Investor Servicing Fee") shall be equal to
one-twelfth of the product of (a) 2.0% and (b) the Adjusted Investor Interest as
of the last day of the Monthly Period preceding such Transfer Date; provided,
however, with respect to the first Transfer Date, the Investor Servicing Fee
shall be equal to the product of (i) a fraction the numerator of which is the
number of days from and including the Closing Date to and including the last day
of the October 1998 Monthly Period and the denominator of which is 360,
(ii) 2.0% and (iii) the Investor Interest on the Closing Date. On each Transfer
Date Servicer Interchange with respect to the related Monthly Period will be
paid to the Servicer in payment of a portion of the Investor Servicing Fee with
respect to such Monthly Period. The "Servicer Interchange" for any Monthly
Period will be an amount equal to the portion of collections of Finance Charge
Receivables allocated to the Investor Interest with respect to such Monthly
Period that is attributable to Interchange; provided, however, that Servicer
Interchange for a Monthly Period shall not exceed one-twelfth of the product of
(i) the Adjusted Investor Interest, as of the last day of such Monthly Period
and (ii) 1.0%. In the case of any insufficiency of Servicer Interchange on
deposit in the Finance Charge Account, a portion of the Investor Servicing Fee
with respect to such Monthly Period will not be paid to the extent of such
insufficiency and in no event shall the Trust, the Trustee, the
Certificateholders or the Collateral Interest Holder be liable for the share of
the Servicing Fee to be paid out of Servicer Interchange.
The share of the Investor Servicing Fee allocable to the Class A
Certificateholders with respect to any Transfer Date (the "Class A Servicing
Fee") shall be equal to one-twelfth of the product of (a) the Class A Floating
Allocation, (b) 1.0% (the "Net Servicing Fee Rate") and (c) the Adjusted
Investor Interest as of the last day of the Monthly Period preceding such
Transfer Date; provided, however, that with respect to the first Transfer Date,
the Class A Servicing Fee shall be equal to the product of (i) the Class A
Floating Allocation, (ii) a fraction, the numerator of which is the number of
days from and including the Closing Date to and including the last day of the
October 1998 Monthly Period and the denominator of which is 360, (iii) the Net
Servicing Fee Rate and (iv) the Investor Interest on the Closing Date. The share
of the Investor Servicing Fee allocable to the Class B Certificateholders with
respect to any Transfer Date (the "Class B Servicing Fee") shall be equal to
one-twelfth of the product of (a) the Class B Floating Allocation, (b) the Net
Servicing Fee Rate and (c) the Adjusted Investor Interest as of the last day of
the Monthly Period preceding such Transfer Date; provided, however, that with
respect to the first Transfer Date, the Class B Servicing Fee shall be equal to
the product of (i) the Class B Floating Allocation, (ii) a fraction, the
numerator of which is the number of days from and including the Closing Date to
and including the last day of the October 1998 Monthly Period and the
denominator of which is 360, (iii) the Net Servicing Fee Rate and (iv) the
Investor Interest on the Closing Date. The share of the Investor Servicing Fee
allocable to the Collateral Interest Holder with respect to any Transfer Date
(the "Collateral Interest Servicing Fee") shall be equal to one-twelfth of the
product of (a) the Collateral Floating Allocation, (b) the Net Servicing Fee
Rate and (c) the Adjusted Investor Interest as of the last day of the Monthly
Period preceding such Transfer Date; provided, however, that with respect to the
first Transfer Date, the Collateral Interest Servicing Fee shall be equal to the
product of (i) the Collateral Floating Allocation, (ii) a fraction, the
numerator of which is the number of days from and including the Closing Date to
and including the last day of the October 1998 Monthly Period and the
denominator of which is 360, (iii) the Net Servicing Fee Rate and (iv) the
Investor Interest on the Closing Date. Pursuant to the Agreement, the amount by
which the Servicing Fee exceeds the Investor Servicing Fee will be paid from
amounts allocable to the Transferor Certificate and to other
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Series. In no event shall the Trust, the Trustee, the Certificateholders or the
Collateral Interest Holder be liable for the share of the Servicing Fee to be
paid out of Servicer Interchange. The Class A Servicing Fee and the Class B
Servicing Fee shall be payable to the Servicer solely to the extent amounts are
available for distribution in respect thereof as described under "--Application
of Collections."
The Servicer will pay from its servicing compensation certain expenses
incurred in connection with servicing the Receivables including, without
limitation, payment of the fees and disbursements of the Trustee and independent
certified public accountants and other fees which are not expressly stated in
the Agreement to be payable by the Trust or the Certificateholders other than
federal, state and local income and franchise taxes, if any, of the Trust.
REPORTS TO CERTIFICATEHOLDERS
On each Transfer Date, the Trustee will forward to each Certificateholder
of record, a statement prepared by the Servicer setting forth the items
described in "Description of the Certificates--Reports to Certificateholders" in
the Prospectus. In addition, such statement will include (a) the amount, if any,
withdrawn from the Principal Funding Account for such Transfer Date, and
(b) the Collateral Interest, if any, for such Transfer Date. So long as the
Certificates are listed on the Luxembourg Stock Exchange, notice to
Certificateholders will be given by publication in a daily newspaper in
Luxembourg (expected to be the Luxemburger Wort). In the event that Definitive
Certificates are issued, notices to Certificateholders will also be given by
mail to their addresses as they appear on the register maintained by the
Trustee.
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<PAGE>
LISTING AND GENERAL INFORMATION
Application will be made to list the Class A Certificates and the Class B
Certificates on the Luxembourg Stock Exchange. In connection with the listing
application, the Organization Certificate and By-laws of the Bank, as well as
legal notice relating to the issuance of the Class A Certificates and the Class
B Certificates will be deposited prior to listing with the Chief Registrar of
the District Court of Luxembourg, where copies thereof may be obtained upon
request. The Class A and the Class B Certificates have been accepted for
clearance through the facilities of DTC, Cedel and Euroclear. The CUSIP numbers
for the Class A Certificates and the Class B Certificates are 16151PAY3 and
16151PAZ0, respectively; the International Securities Identification Numbers
(ISIN) for the Class A Certificates and the Class B Certificates are
US16151PAY34 and US16157PAZ09, respectively; the Common Code numbers for the
Class A Certificates and the Class B Certificates are 9112413 and 9112430,
respectively.
The transactions contemplated in this Prospectus Supplement were authorized
by resolutions adopted by the Bank's Board of Directors on February 4, 1998 and
by the Bank's Asset and Loan Securitization Committee as of September 17, 1998.
Copies of the Pooling and Servicing Agreement, the Series 1998-5
Supplement, the annual report of independent public accountants described in
"Description of the Certificates--Evidence as to Compliance" in the Prospectus,
the documents listed under "Available Information" and the reports to
Certificateholders referred to under "Reports to Certificateholders" and
"Description of the Certificates--Reports to Certificateholders" in the
Prospectus will be available free of charge at the office of Banque Generale du
Luxembourg, S.A. (the "Listing Agent"), 50 Avenue J.F. Kennedy, L-2951,
Luxembourg. Financial information regarding the Bank is included in the
consolidated financial statements of The Chase Manhattan Corporation in The
Chase Manhattan Corporation's Annual Report on Form 10-K for the fiscal year
ended December 31, 1997. Such report is available, and reports for subsequent
years will be available, at the office of the Listing Agent.
So long as there is no Paying Agent and Transfer Agent in Luxembourg,
Banque Generale du Luxembourg, S.A. will act as intermediary agent in
Luxembourg. In the event that Definitive Certificates are issued, a Paying Agent
and Transfer Agent will be appointed in Luxembourg.
The Certificates, the Agreement and the Series 1998-5 Supplement are
governed by the laws of the State of New York.
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<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement
(the "Underwriting Agreement") between the Transferor and the underwriters named
below (the "Underwriters"), the Transferor has agreed to sell to the
Underwriters of the Class A Certificates (the "Class A Underwriters") and the
Underwriter of the Class B Certificates (the "Class B Underwriter"), and each of
the Underwriters has severally agreed to purchase, the principal amount of the
Class A Certificates and the Class B Certificates, as applicable, set forth
opposite its name:
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT OF
CLASS A
CLASS A UNDERWRITERS CERTIFICATES
- -------------------------------------------------------------------------- -------------------
<S> <C>
Chase Securities Inc...................................................... $ 162,500,000
Bear, Stearns & Co. Inc................................................... 162,500,000
Credit Suisse First Boston Corporation.................................... 162,500,000
Prudential Securities Incorporated........................................ 162,500,000
-------------
Total................................................................ $ 650,000,000
-------------
-------------
<CAPTION>
PRINCIPAL AMOUNT OF
CLASS B
CLASS B UNDERWRITER CERTIFICATES
- -------------------------------------------------------------------------- -------------
<S> <C>
Chase Securities Inc...................................................... $ 54,166,000
</TABLE>
In the Underwriting Agreement, the Underwriters have agreed, subject to the
terms and conditions set forth therein, to purchase all of the Certificates
offered hereby if any of the Certificates are purchased. The Underwriters have
agreed to reimburse the Transferor for certain expenses of the issuance and
distribution of the Certificates.
The Class A Underwriters propose initially to offer the Class A
Certificates to the public at the price set forth on the cover page hereof and
to certain dealers at such price less concessions not in excess of 0.175% of the
principal amount of the Class A Certificates. The Class A Underwriters may
allow, and such dealers may reallow, concessions not in excess of 0.150% of the
principal amount of the Class A Certificates to certain brokers and dealers.
After the initial public offering, the public offering price and other selling
terms may be changed by the Class A Underwriters.
The Class B Underwriter proposes initially to offer the Class B
Certificates to the public at the price set forth on the cover page hereof and
to certain dealers at such price less concessions not in excess of 0.200% of the
principal amount of the Class B Certificates. The Class B Underwriter may allow,
and such dealers may reallow, concessions not in excess of 0.150% of the
principal amount of the Class B Certificates to certain brokers and dealers.
After the initial public offering, the public offering price and other selling
terms may be changed by the Class B Underwriter.
Each Underwriter has represented and agreed that (a) it only issued or
passed on and will only issue or pass on in the United Kingdom any document
received by it in connection with the issue of the Certificates to a person who
is of a kind described in Article 11(3) of the Financial Services Act 1986
(Investment Advertisements) (Exemptions) Order 1996 or who is a person to whom
the document may otherwise lawfully be issued or passed on, (b) it has complied
and will comply with all applicable provisions of the Financial Services Act
1986 of Great Britain with respect to anything done by it in relation to the
Certificates in, from or otherwise involving the United Kingdom and (c) if that
Underwriter is an authorized person under the Financial Services Act 1986, it
has only promoted and will only promote (as that term is defined in Regulation
1.02 of the Financial Services (Promotion of Unregulated Schemes) Regulations
1991) to any person in the United Kingdom the scheme described herein if that
person is of a kind described either in Section 76(2) of the Financial Services
Act 1986 or in Regulation 1.04 of the Financial Services (Promotion of
Unregulated Schemes) Regulations 1991.
The Transferor will indemnify the Underwriters against certain liabilities,
including liabilities under the Securities Act, or contribute to payments the
Underwriters may be required to make in respect thereof.
S-49
<PAGE>
Chase Securities Inc. is a wholly owned subsidiary of The Chase Manhattan
Corporation. See "Chase USA" in the Prospectus.
The Underwriters may engage in over-allotment transactions, stabilizing
transactions, syndicate covering transactions and penalty bids with respect to
the Certificates in accordance with Regulation M under the Exchange Act.
Over-allotment transactions involve syndicate sales in excess of the offering
size creating a syndicate short position. Stabilizing transactions permit bids
to purchase the Certificates so long as the stabilizing bids do not exceed a
specified maximum. Syndicate covering transactions involve purchases of the
Certificates in the open market after the distribution has been completed in
order to cover syndicate short positions. Penalty bids permit the Underwriters
to reclaim a selling concession from a syndicate member when the Certificates
originally sold by such syndicate member are purchased in a syndicate covering
transaction. Such over-allotment transactions, stabilizing transactions,
syndicate covering transactions and penalty bids may cause prices of the
Certificates to be higher than they would otherwise be in the absence of such
transactions. Neither the Trust nor any of the Underwriters represent that the
Underwriters will engage in any such transactions nor that such transactions,
once commenced, will not be discontinued without notice.
This Prospectus Supplement and the Prospectus may be used by Chase
Securities Inc. in connection with offers and sales related to market-making
transactions in the Certificates. Chase Securities Inc. may act as principal or
agent in such transactions. Such sales will be made at prices related to
prevailing market prices at the time of sale. Chase Securities Inc. has no
obligation to make a market in the Certificates and any such market-making may
be discontinued at any time without notice, in its sole discretion. Chase
Securities Inc. is among the Underwriters participating in the initial
distribution of the Certificates.
S-50
<PAGE>
INDEX OF TERMS FOR PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
TERM PAGE
- -------------------------------------------------------------------------------------------- ---------------------
<S> <C>
Accounts.................................................................................... S-1, S-3
Accumulation Period Length.................................................................. S-31
Accumulation Shortfall...................................................................... S-9, S-40
Additional Certificates..................................................................... S-14, S-44
Additional Interest......................................................................... S-7
Additional Issuance......................................................................... S-44
Addition Date............................................................................... S-32
Adjusted Investor Interest.................................................................. S-5
Agreement................................................................................... S-3
Available Investor Principal Collections.................................................... S-31
Available Reserve Account Amount............................................................ S-43
Bank........................................................................................ S-1
Base Rate................................................................................... S-26
Certificateholders.......................................................................... S-3
Certificates................................................................................ S-1, S-3
Chase USA................................................................................... S-1
Class A Additional Interest................................................................. S-29
Class A Adjusted Investor Interest.......................................................... S-5, S-34
Class A Available Funds..................................................................... S-31
Class A Certificate Rate.................................................................... S-2, S-4, S-30
Class A Certificateholders.................................................................. S-3
Class A Certificates........................................................................ S-1, S-3
Class A Covered Amount...................................................................... S-9, S-42
Class A Fixed Allocation.................................................................... S-33
Class A Floating Allocation................................................................. S-33
Class A Investor Charge-Off................................................................. S-13, S-41
Class A Investor Default Amount............................................................. S-43
Class A Investor Interest................................................................... S-4, S-33
Class A Monthly Interest.................................................................... S-37
Class A Monthly Principal................................................................... S-39
Class A Principal Funding Investment Shortfall.............................................. S-9, S-43
Class A Required Amount..................................................................... S-12, S-34
Class A Scheduled Payment Date.............................................................. S-2
Class A Servicing Fee....................................................................... S-46
Class A Underwriters........................................................................ S-49
Class B Additional Interest................................................................. S-29
Class B Available Funds..................................................................... S-30
Class B Certificate Rate.................................................................... S-2, S-5, S-30
Class B Certificateholders.................................................................. S-3
Class B Certificates........................................................................ S-1, S-3
Class B Fixed Allocation.................................................................... S-33
Class B Floating Allocation................................................................. S-33
Class B Investor Charge-Off................................................................. S-13, S-42
Class B Investor Default Amount............................................................. S-41
Class B Investor Interest................................................................... S-4, S-34
Class B Monthly Interest.................................................................... S-37
Class B Monthly Principal................................................................... S-39
Class B Required Amount..................................................................... S-12, S-35
Class B Scheduled Payment Date.............................................................. S-2
</TABLE>
S-51
<PAGE>
<TABLE>
<CAPTION>
TERM PAGE
- -------------------------------------------------------------------------------------------- ---------------------
<S> <C>
Class B Servicing Fee....................................................................... S-46
Class B Underwriter......................................................................... S-49
Closing Date................................................................................ S-2, S-4
CMB......................................................................................... S-1, S-3
Code........................................................................................ S-16
Collateral Available Funds.................................................................. S-37
Collateral Charge-Off....................................................................... S-42
Collateral Default Amount................................................................... S-41
Collateral Fixed Allocation................................................................. S-33
Collateral Floating Allocation.............................................................. S-33
Collateral Interest......................................................................... S-4, S-34
Collateral Interest Holder.................................................................. S-4
Collateral Interest Servicing Fee........................................................... S-46
Collateral Monthly Interest................................................................. S-38
Collateral Monthly Principal................................................................ S-39
Collateral Rate............................................................................. S-38
Companion Series............................................................................ S-14, S-44
Controlled Accumulation Amount.............................................................. S-39
Controlled Accumulation Period.............................................................. S-8
Controlled Deposit Amount................................................................... S-9, S-26
Cut-Off Date................................................................................ S-4
Default Amount.............................................................................. S-41
Distribution Date........................................................................... S-2, S-7
ERISA....................................................................................... S-16
Excess Finance Charge Collections........................................................... S-40
Excess Funding Account...................................................................... S-8
Excess Spread............................................................................... S-12, S-37
Fixed Investor Percentage................................................................... S-33
Floating Investor Percentage................................................................ S-32
Group I..................................................................................... S-15
Initial Collateral Interest................................................................. S-13
Interest Period............................................................................. S-8
Investor Default Amount..................................................................... S-41
Investor Interest........................................................................... S-4
Investor Servicing Fee...................................................................... S-46
LIBOR....................................................................................... S-2, S-4, S-30
LIBOR Determination Date.................................................................... S-30
Listing Agent............................................................................... S-48
Loan Agreement.............................................................................. S-14
Minimum Aggregate Principal Receivables..................................................... S-21
Minimum Transferor Interest................................................................. S-21
Monthly Period.............................................................................. S-5
Net Servicing Fee Rate...................................................................... S-46
Pay Out Event............................................................................... S-45
Portfolio Yield............................................................................. S-26
Principal Funding Account................................................................... S-9, S-42
Principal Funding Account Balance........................................................... S-25
Principal Funding Investment Proceeds....................................................... S-9, S-42
Principal Shortfalls........................................................................ S-40
Rapid Amortization Period................................................................... S-11
Rating Agency............................................................................... S-18
</TABLE>
S-52
<PAGE>
<TABLE>
<CAPTION>
TERM PAGE
- -------------------------------------------------------------------------------------------- ---------------------
<S> <C>
Rating Agency Condition..................................................................... S-41
Reallocated Class B Principal Collections................................................... S-35
Reallocated Collateral Principal Collections................................................ S-35
Reallocated Principal Collections........................................................... S-35
Receivables................................................................................. S-1, S-3
Record Date................................................................................. S-28
Recoveries.................................................................................. S-20
Reference Banks............................................................................. S-30
Removal Date................................................................................ S-32
Removed Accounts............................................................................ S-21
Required Amount............................................................................. S-12
Required Collateral Interest................................................................ S-13, S-41
Required Reserve Account Amount............................................................. S-43
Reserve Account............................................................................. S-43
Reserve Account Funding Date................................................................ S-43
Revolving Period............................................................................ S-8
Series 1998-5 Certificates.................................................................. S-1, S-3
Series 1998-5 Supplement.................................................................... S-3
Series 1998-5 Termination Date.............................................................. S-6
Servicer Interchange........................................................................ S-46
Shared Principal Collections................................................................ S-15, S-40
Telerate Page 3750.......................................................................... S-30
Transfer Date............................................................................... S-36
Transferor.................................................................................. S-3
Transferor Certificate...................................................................... S-6
Transferor Interest......................................................................... S-4
Transferor Percentage....................................................................... S-28
Trust....................................................................................... S-1, S-3
Trust Portfolio............................................................................. S-21
Trustee..................................................................................... S-3
Underwriter................................................................................. S-49
Underwriting Agreement...................................................................... S-49
U.S......................................................................................... S-16
</TABLE>
S-53
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
ANNEX I
OTHER SERIES
The table below sets forth the principal characteristics of the seventeen
other Series previously issued by the Trust. For more specific information with
respect to any Series, any prospective investor should contact The Chase
Manhattan Bank at (212) 270-6000. The Chase Manhattan Bank will provide, without
charge, to any prospective purchaser of the Certificates, a copy of the
Disclosure Documents for any other publicly issued Series.
<TABLE>
<S> <C>
SERIES 1995-1
1. CLASS A CERTIFICATES
Initial Investor Interest........................................ $750,000,000
Certificate Rate................................................. One Month LIBOR + 0.12%
Controlled Accumulation Amount (subject to adjustment)........... $62,500,000
Commencement of Controlled Accumulation Period (subject to
adjustment).................................................... September 30, 1997
Annual Servicing Fee Percentage.................................. 2.0%
Initial Collateral Interest...................................... $80,357,142.86
Other Enhancement................................................ Subordination of Class B Certificates
Scheduled Payment Date........................................... October 15, 1998
Series 1995-1 Termination Date................................... June 15, 2001
Series Issuance Date............................................. October 19, 1995
2. CLASS B CERTIFICATES
Initial Investor Interest........................................ $62,500,000
Certificate Rate................................................. One Month LIBOR + 0.24%
Annual Servicing Fee Percentage.................................. 2.0%
Initial Collateral Interest...................................... Same as above for Class A Certificates
Scheduled Payment Date........................................... November 15, 1998
Series 1995-1 Termination Date................................... Same as above for Class A Certificates
Series Issuance Date............................................. Same as above for Class A Certificates
SERIES 1995-2
1. CLASS A CERTIFICATES
Initial Investor Interest........................................ $600,000,000
Certificate Rate................................................. 6.23%
Controlled Accumulation Amount (subject to adjustment)........... $50,000,000
Commencement of Controlled Accumulation Period (subject to
adjustment).................................................... September 30, 1999
Annual Servicing Fee Percentage.................................. 2.0%
Initial Collateral Interest...................................... $47,728,181.82
Other Enhancement................................................ Subordination of Class B Certificates
Scheduled Payment Date........................................... October 15, 2000
Series 1995-2 Termination Date................................... June 15, 2003
Series Issuance Date............................................. October 19, 1995
2. CLASS B CERTIFICATES
Initial Investor Interest........................................ $34,090,000
Certificate Rate................................................. 6.38%
Annual Servicing Fee Percentage.................................. 2.0%
Initial Collateral Interest...................................... Same as above for Class A Certificates
</TABLE>
A-1
<PAGE>
<TABLE>
<S> <C>
Scheduled Payment Date........................................... November 15, 2000
Series 1995-2 Termination Date................................... Same as above for Class A Certificates
Series Issuance Date............................................. Same as above for Class A Certificates
SERIES 1995-3
1. CLASS A CERTIFICATES
Initial Investor Interest........................................ $450,000,000
Certificate Rate................................................. 6.23%
Controlled Accumulation Amount (subject to adjustment)........... $37,500,000
Commencement of Controlled Accumulation Period (subject to
adjustment).................................................... July 31, 2001
Annual Servicing Fee Percentage.................................. 2.0%
Initial Collateral Interest...................................... $35,795,636.36
Other Enhancement................................................ Subordination of Class B Certificates
Scheduled Payment Date........................................... August 15, 2002
Series 1995-3 Termination Date................................... April 15, 2005
Series Issuance Date............................................. November 21, 1995
2. CLASS B CERTIFICATES
Initial Investor Interest........................................ $25,568,000
Certificate Rate................................................. 6.39%
Annual Servicing Fee Percentage.................................. 2.0%
Initial Collateral Interest...................................... Same as above for Class A Certificates
Scheduled Payment Date........................................... September 15, 2002
Series 1995-3 Termination Date................................... Same as above for Class A Certificates
Series Issuance Date............................................. Same as above for Class A Certificates
SERIES 1995-4
1. CLASS A CERTIFICATES
Initial Investor Interest........................................ $300,000,000
Certificate Rate................................................. Three Month LIBOR + 0.20%
Controlled Accumulation Amount (subject to adjustment)........... $25,000,000
Commencement of Controlled Accumulation Period (subject to
adjustment).................................................... October 31, 2001
Annual Servicing Fee Percentage.................................. 2.0%
Initial Collateral Interest...................................... $35,714,857.14
Other Enhancement................................................ Subordination of Class B Certificates
Scheduled Payment Date........................................... November 25, 2002
Series 1995-4 Termination Date................................... July 25, 2005
Series Issuance Date............................................. November 29, 1995
2. CLASS B CERTIFICATES
Initial Investor Interest........................................ $21,428,000
Certificate Rate................................................. Three Month LIBOR + 0.32%
Annual Servicing Fee Percentage.................................. 2.0%
Initial Collateral Interest...................................... Same as above for Class A Certificates
Scheduled Payment Date........................................... November 25, 2002
Series 1995-4 Termination Date................................... Same as above for Class A Certificates
Series Issuance Date............................................. Same as above for Class A Certificates
</TABLE>
A-2
<PAGE>
<TABLE>
<S> <C>
SERIES 1996-1
1. CLASS A CERTIFICATES
Initial Investor Interest........................................ $700,000,000
Certificate Rate................................................. 5.55%
Controlled Accumulation Amount (subject to adjustment)........... $58,333,333.33
Commencement of Controlled Accumulation Period (subject to
adjustment).................................................... December 31, 1999
Annual Servicing Fee Percentage.................................. 2.0%
Initial Collateral Interest...................................... $55,682,545.45
Other Enhancement................................................ Subordination of Class B Certificates
Scheduled Payment Date........................................... January 15, 2001
Series 1996-1 Termination Date................................... September 15, 2003
Series Issuance Date............................................. January 23, 1996
2. CLASS B CERTIFICATES
Initial Investor Interest........................................ $39,772,000
Certificate Rate................................................. 5.71%
Annual Servicing Fee Percentage.................................. 2.0%
Initial Collateral Interest...................................... Same as above for Class A Certificates
Scheduled Payment Date........................................... February 15, 2001
Series 1996-1 Termination Date................................... Same as above for Class A Certificates
Series Issuance Date............................................. Same as above for Class A Certificates
SERIES 1996-2
1. CLASS A CERTIFICATES
Initial Investor Interest........................................ $550,000,000
Certificate Rate................................................. 5.98%
Controlled Accumulation Amount (subject to adjustment)........... $45,833,333.33
Commencement of Controlled Accumulation Period (subject to
adjustment).................................................... December 31, 2004
Annual Servicing Fee Percentage.................................. 2.0%
Initial Collateral Interest...................................... $43,750,000.00
Other Enhancement................................................ Subordination of Class B Certificates
Scheduled Payment Date........................................... January 15, 2006
Series 1996-2 Termination Date................................... September 15, 2008
Series Issuance Date............................................. January 23, 1996
2. CLASS B CERTIFICATES
Initial Investor Interest........................................ $31,250,000
Certificate Rate................................................. 6.16%
Annual Servicing Fee Percentage.................................. 2.0%
Initial Collateral Interest...................................... Same as above for Class A Certificates
Scheduled Payment Date........................................... February 15, 2006
Series 1996-2 Termination Date................................... Same as above for Class A Certificates
Series Issuance Date............................................. Same as above for Class A Certificates
SERIES 1996-3
1. CLASS A CERTIFICATES
Initial Investor Interest........................................ $411,983,000
Certificate Rate................................................. 7.09%
Controlled Accumulation Amount (subject to adjustment)........... $34,331,916.67
</TABLE>
A-3
<PAGE>
<TABLE>
<S> <C>
Commencement of Controlled Accumulation Period (subject to
adjustment).................................................... May 31, 2005
Annual Servicing Fee Percentage.................................. 2.0%
Initial Collateral Interest...................................... $32,772,440.86
Other Enhancement................................................ Subordination of Class B Certificates
Scheduled Payment Date........................................... June 15, 2006
Series 1996-3 Termination Date................................... February 15, 2009
Series Issuance Date............................................. May 30, 1996
2. CLASS B CERTIFICATES
Initial Investor Interest........................................ $23,408,000
Certificate Rate................................................. 7.27%
Annual Servicing Fee Percentage.................................. 2.0%
Initial Collateral Interest...................................... Same as above for Class A Certificates
Scheduled Payment Date........................................... July 15, 2006
Series 1996-3 Termination Date................................... Same as above for Class A Certificates
Series Issuance Date............................................. Same as above for Class A Certificates
SERIES 1996-4
1. CLASS A CERTIFICATES
Initial Investor Interest........................................ $1,400,000,000
Certificate Rate................................................. One Month LIBOR + 0.13%
Controlled Accumulation Amount (subject to adjustment)........... $116,666,666.67
Commencement of Controlled Accumulation Period (subject to
adjustment).................................................... October 31, 2002
Annual Servicing Fee Percentage.................................. 2.0%
Initial Collateral Interest...................................... $150,000,666.67
Other Enhancement................................................ Subordination of Class B Certificates
Scheduled Payment Date........................................... November 17, 2003
Series 1996-4 Termination Date................................... July 17, 2006
Series Issuance Date............................................. November 14, 1996
2. CLASS B CERTIFICATES
Initial Investor Interest........................................ $116,666,000
Certificate Rate................................................. One Month LIBOR + 0.35%
Annual Servicing Fee Percentage.................................. 2.0%
Initial Collateral Interest...................................... Same as above for Class A Certificates
Scheduled Payment Date........................................... December 15, 2003
Series 1996-4 Termination Date................................... Same as above for Class A Certificates
Series Issuance Date............................................. Same as above for Class A Certificates
SERIES 1997-1
1. CLASS A CERTIFICATES
Initial Investor Interest........................................ $1,150,000,000
Certificate Rate................................................. One Month LIBOR + 0.09%
Controlled Accumulation Amount (subject to adjustment)........... $95,833,333.33
Commencement of Controlled Accumulation Period (subject to
adjustment).................................................... January 31, 2003
Annual Servicing Fee Percentage.................................. 2.0%
Initial Collateral Interest...................................... $123,214,619
Other Enhancement................................................ Subordination of Class B Certificates
Scheduled Payment Date........................................... February 15, 2004
</TABLE>
A-4
<PAGE>
<TABLE>
<S> <C>
Series 1997-1 Termination Date................................... October 15, 2006
Series Issuance Date............................................. February 24, 1997
2. CLASS B CERTIFICATES
Initial Investor Interest........................................ $95,833,000
Certificate Rate................................................. One Month LIBOR + 0.29%
Annual Servicing Fee Percentage.................................. 2.0%
Initial Collateral Interest...................................... Same as above for Class A Certificates
Scheduled Payment Date........................................... March 15, 2004
Series 1997-1 Termination Date................................... Same as above for Class A Certificates
Series Issuance Date............................................. Same as above for Class A Certificates
SERIES 1997-2
1. CLASS A CERTIFICATES
Initial Investor Interest........................................ $1,500,000,000
Certificate Rate................................................. 6.30%
Controlled Accumulation Amount (subject to adjustment)........... $125,000,000
Commencement of Controlled Accumulation Period (subject to
adjustment).................................................... July 31, 1999
Annual Servicing Fee Percentage.................................. 2.0%
Initial Collateral Interest...................................... $119,318,455
Other Enhancement................................................ Subordination of Class B Certificates
Scheduled Payment Date........................................... August 15, 2000
Series 1997-2 Termination Date................................... April 15, 2003
Series Issuance Date............................................. August 18, 1997
2. CLASS B CERTIFICATES
Initial Investor Interest........................................ $85,227,000
Certificate Rate................................................. 6.45%
Annual Servicing Fee Percentage.................................. 2.0%
Initial Collateral Interest...................................... Same as above for Class A Certificates
Scheduled Payment Date........................................... September 15, 2000
Series 1997-2 Termination Date................................... Same as above for Class A Certificates
Series Issuance Date............................................. Same as above for Class A Certificates
SERIES 1997-3
1. CLASS A CERTIFICATES
Initial Investor Interest........................................ $250,000,000
Certificate Rate................................................. 6.777%
Controlled Accumulation Amount (subject to adjustment)........... One-twelfth of outstanding balance of
Class A Certificates on August 1, 2003
Commencement of Controlled Accumulation Period (subject to
adjustment).................................................... August 31, 2003
Annual Servicing Fee Percentage.................................. 2.0%
Initial Collateral Interest...................................... $26,786,048
Other Enhancement................................................ Subordination of Class B Certificates
Scheduled Payment Date........................................... September 15, 2004
Series 1997-3 Termination Date................................... May 15, 2007
Series Issuance Date............................................. September 22, 1997
2. CLASS B CERTIFICATES
Initial Investor Interest........................................ $20,833,000
</TABLE>
A-5
<PAGE>
<TABLE>
<S> <C>
Certificate Rate................................................. One Month LIBOR + 0.35%
Annual Servicing Fee Percentage.................................. 2.0%
Initial Collateral Interest...................................... Same as above for Class A Certificates
Scheduled Payment Date........................................... October 15, 2004
Series 1997-3 Termination Date................................... Same as above for Class A Certificates
Series Issuance Date............................................. Same as above for Class A Certificates
SERIES 1997-4
1. CLASS A CERTIFICATES
Initial Investor Interest........................................ $600,000,000
Certificate Rate................................................. One Month LIBOR + 0.16%
Controlled Accumulation Amount (subject to adjustment)........... $50,000,000
Commencement of Controlled Accumulation Period (subject to
adjustment).................................................... November 30, 2001
Annual Servicing Fee Percentage.................................. 2.0%
Initial Collateral Interest...................................... $64,285,715
Other Enhancement................................................ Subordination of Class B Certificates
Scheduled Payment Date........................................... December 15, 2002
Series 1997-4 Termination Date................................... August 15, 2005
Series Issuance Date............................................. December 8, 1997
2. CLASS B CERTIFICATES
Initial Investor Interest........................................ $50,000,000
Certificate Rate................................................. One Month LIBOR + 0.36%
Annual Servicing Fee Percentage.................................. 2.0%
Initial Collateral Interest...................................... Same as above for Class A Certificates
Scheduled Payment Date........................................... January 15, 2003
Series 1997-4 Termination Date................................... Same as above for Class A Certificates
Series Issuance Date............................................. Same as above for Class A Certificates
SERIES 1997-5
1. CLASS A CERTIFICATES
Initial Investor Interest........................................ $500,000,000
Certificate Rate................................................. 6.194%
Controlled Accumulation Amount (subject to adjustment)........... $41,666,667
Commencement of Controlled Accumulation Period (subject to
adjustment).................................................... November 30, 2001
Annual Servicing Fee Percentage.................................. 2.0%
Initial Collateral Interest...................................... $39,772,819
Other Enhancement................................................ Subordination of Class B Certificates
Scheduled Payment Date........................................... December 15, 2002
Series 1997-5 Termination Date................................... August 15, 2005
Series Issuance Date............................................. December 23, 1997
</TABLE>
A-6
<PAGE>
<TABLE>
<S> <C>
2. CLASS B CERTIFICATES
Initial Investor Interest........................................ $28,409,000
Certificate Rate................................................. 6.388%
Annual Servicing Fee Percentage.................................. 2.0%
Initial Collateral Interest...................................... Same as above for Class A Certificates
Scheduled Payment Date........................................... January 15, 2003
Series 1997-5 Termination Date................................... Same as above for Class A Certificates
Series Issuance Date............................................. Same as above for Class A Certificates
SERIES 1998-1
1. CLASS A-1 CERTIFICATES
Initial Investor Interest........................................ $273,822,563
Certificate Rate................................................. One Month LIBOR + 0.231%
Controlled Accumulation Amount (subject to adjustment)........... $22,818,547
Commencement of Controlled Accumulation Period (subject to
adjustment).................................................... January 31, 2004
Annual Servicing Fee Percentage.................................. 2.0%
Enhancement...................................................... Subordination of Class B Certificates and
Initial Collateral Interest
Scheduled Payment Date........................................... February 15, 2005
Series 1998-1 Termination Date................................... October 15, 2007
Series Issuance Date............................................. February 12, 1998
CLASS A-2 CERTIFICATES
Initial Investor Interest........................................ $245,278,391
Certificate Rate................................................. One Month LIBOR + 0.1885%
Controlled Accumulation Amount (subject to adjustment)........... $20,439,866
Commencement of Controlled Accumulation Period (subject to
adjustment).................................................... January 31, 2004
Annual Servicing Fee Percentage.................................. 2.0%
Enhancement...................................................... Subordination of Class B Certificates and
Initial Collateral Interest
Scheduled Payment Date........................................... February 15, 2005
Series 1998-1 Termination Date................................... October 15, 2007
Series Issuance Date............................................. February 12, 1998
CLASS A-3 CERTIFICATES
Initial Investor Interest........................................ $243,131,534
Certificate Rate................................................. One Month LIBOR + 0.2445%
Controlled Accumulation Amount (subject to adjustment)........... $20,260,961
Commencement of Controlled Accumulation Period (subject to
adjustment).................................................... January 31, 2004
Annual Servicing Fee Percentage.................................. 2.0%
Enhancement...................................................... Subordination of Class B Certificates and
Initial Collateral Interest
Scheduled Payment Date........................................... February 15, 2005
Series 1998-1 Termination Date................................... October 15, 2007
Series Issuance Date............................................. February 12, 1998
2. CLASS B CERTIFICATES
Initial Investor Interest........................................ $63,519,000
Certificate Rate................................................. One Month LIBOR + 0.37%
Annual Servicing Fee Percentage.................................. 2.0%
</TABLE>
A-7
<PAGE>
<TABLE>
<S> <C>
Initial Collateral Interest...................................... $81,668,141
Scheduled Payment Date........................................... March 15, 2005
Series 1998-1 Termination Date................................... Same as above for Class A Certificates
Series Issuance Date............................................. Same as above for Class A Certificates
SERIES 1998-2
1. CLASS A CERTIFICATES
Initial Investor Interest........................................ $800,000,000
Certificate Rate................................................. Federal Funds Rate + 0.24%
Controlled Accumulation Amount (subject to adjustment)........... $66,666,667
Commencement of Controlled Accumulation Period (subject to
adjustment).................................................... January 31, 2000
Annual Servicing Fee Percentage.................................. 2.0%
Initial Collateral Interest...................................... $85,714,953
Other Enhancement................................................ Subordination of Class B Certificates
Scheduled Payment Date........................................... February 15, 2001
Series 1998-2 Termination Date................................... February 15, 2003
Series Issuance Date............................................. March 9, 1998
2. CLASS B CERTIFICATES
Initial Investor Interest........................................ $66,666,000
Certificate Rate................................................. One Month LIBOR + 0.25%
Annual Servicing Fee Percentage.................................. 2.0%
Initial Collateral Interest...................................... Same as above for Class A Certificates
Scheduled Payment Date........................................... March 15, 2003
Series 1998-2 Termination Date................................... Same as above for Class A Certificates
Series Issuance Date............................................. Same as above for Class A Certificates
SERIES 1998-3
1. CLASS A CERTIFICATES
Initial Investor Interest........................................ $600,000,000
Certificate Rate................................................. 6.000%
Controlled Accumulation Amount
(subject to adjustment)........................................ $50,000,000
Commencement of Controlled Accumulation
Period (subject to adjustment)................................. March 31, 2002
Annual Servicing Fee Percentage.................................. 2.0%
Initial Collateral Interest...................................... $47,728,182
Other Enhancement................................................ Subordination of Class B Certificates
Scheduled Payment Date........................................... April 15, 2003
Series 1998-3 Termination Date................................... August 15, 2005
Series Issuance Date............................................. May 1, 1998
2. CLASS B CERTIFICATES
Initial Investor Interest........................................ $34,090,000
Certificate Rate................................................. 6.150%
Annual Servicing Fee Percentage.................................. 2.0%
Initial Collateral Interest...................................... Same as above for Class A Certificates
Scheduled Payment Date........................................... May 15, 2003
Series 1998-3 Termination Date................................... Same as above for Class A Certificates
Series Issuance Date............................................. Same as above for Class A Certificates
</TABLE>
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SERIES 1998-4
1. CLASS A CERTIFICATES
Initial Investor Interest........................................ $552,486,188
Certificate Rate................................................. One Month LIBOR + 0.134%
Controlled Accumulation Amount
(subject to adjustment)........................................ $46,040,516
Commencement of Controlled Accumulation
Period (subject to adjustment)................................. July 31, 2007
Annual Servicing Fee Percentage.................................. 2.0%
Initial Collateral Interest...................................... $59,195,465
Enhancement...................................................... Subordination of Class B Certificates and
Initial Collateral Interest
Scheduled Payment Date........................................... August 15, 2008
Series 1998-4 Termination Date................................... December 15, 2010
Series Issuance Date............................................. July 28, 1998
2. CLASS B CERTIFICATES
Initial Investor Interest........................................ $46,040,000
Certificate Rate................................................. One Month LIBOR + 0.36%
Annual Servicing Fee Percentage.................................. 2.0%
Initial Collateral Interest...................................... $59,195,465
Scheduled Payment Date........................................... September 15, 2008
Series 1998-4 Termination Date................................... Same as above for Class A Certificates
Series Issuance Date............................................. Same as above for Class A Certificates
</TABLE>
A-9
<PAGE>
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 21.
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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.
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The date of this Prospectus is September 17, 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 or variable 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 Depository 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
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PROSPECTUS SUPPLEMENT.......................... 2
REPORTS TO CERTIFICATEHOLDERS.................. 2
AVAILABLE INFORMATION.......................... 2
INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE.................................... 2
PROSPECTUS SUMMARY............................. 4
RISK FACTORS................................... 21
THE TRUSTS..................................... 26
CHASE USA'S CREDIT CARD ACTIVITIES............. 27
General...................................... 27
Acquisition and Use of Credit Card
Accounts.................................. 27
Billing and Payments......................... 29
Collection of Delinquent Accounts............ 30
Description of FDR........................... 31
Interchange.................................. 31
Recoveries................................... 31
Year 2000 Compliance......................... 31
THE RECEIVABLES................................ 31
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..................... 43
Removal of Accounts.......................... 44
Collection and Other Servicing
Procedures................................ 45
Discount Option.............................. 45
Trust Accounts............................... 45
Funding Period............................... 46
Companion Series............................. 47
Investor Percentage and Transferor
Percentage................................ 47
Application of Collections................... 48
Shared Excess Finance Charge Collections..... 49
Shared Principal Collections................. 49
Defaulted Receivables; Rebates and Fraudulent
Charges; Investor
Charge-Offs............................... 50
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Defeasance................................... 50
Final Payment of Principal;
Termination............................... 50
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, Exchange or Retirement of
Certificates.............................. 64
Possible Alternative Characterizations....... 64
Non-U.S. Certificate Owners.................. 65
Information Reporting and Backup
Withholding............................... 66
FASIT Considerations......................... 67
State and Local Taxation..................... 67
EMPLOYEE BENEFIT PLAN CONSIDERATIONS........... 68
PLAN OF DISTRIBUTION........................... 70
LEGAL MATTERS.................................. 70
</TABLE>
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<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.
<TABLE>
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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(Registered) and VISA(Registered)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 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
</TABLE>
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1 MasterCard(Registered) and VISA(Registered) are registered trademarks of
MasterCard International Inc. and VISA U.S.A., Inc., respectively.
4
<PAGE>
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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.
CERTIFICATE INTEREST AND PRINCIPAL........ Each Series of Certificates will represent an 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,
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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 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
</TABLE>
6
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<TABLE>
<S> <C>
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
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
</TABLE>
7
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<S> <C>
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.
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
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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 minimum 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) 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
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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 the
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."
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."
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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 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
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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 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 "Principal 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 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 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.
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
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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.
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
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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.
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.
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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 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 COLLECTIONS.............. If so specified in the related Prospectus 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
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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 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
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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.
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.
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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 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 all U.S. and foreign income
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and franchise 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
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
</TABLE>
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<TABLE>
<S> <C>
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.
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.
</TABLE>
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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). On April 10, 1990, the Resolution Trust
Corporation (the "RTC"), formerly a sister agency of the FDIC, adopted a
statement of policy (the "RTC Policy
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Statement") with respect to the payment of interest on collateralized
borrowings. The RTC Policy Statement states that interest on such borrowings
will be payable by the conservator, receiver, or the trustee in 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. The FDIC, however, has not
adopted a formal policy statement on payment of principal and interest on
collateralized borrowings of banks which are repudiated. In addition, in one
case involving the repudiation by 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
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warranty is breached and such breach continues beyond the applicable cure period
is that the Transferor will 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
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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 "--Competition in the Credit Card Industry" and "--Payments and Maturity"
and "Description of the 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
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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 (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.
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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.
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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, GrandElite Gold VISA and
MasterCard and Platinum 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 their respective marks permitting financial institutions
to issue credit cards to their customers. In addition, VISA
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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 on the internet 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 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.
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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. In calculating the daily cash advance and purchase balance on
each day the Bank will add the interest amount accrued on the previous day's
ending balance of the daily cash advance and purchase balance. 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 9.9% 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
13.99%. The Bank also offers temporary promotional rates and promotional rates
on transferred balances, 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 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
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the annual membership fee, the Bank may charge accounts certain other fees (at
the rates specified below) including: (i) a late fee of $29.00 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; (ii) a cash advance fee of 3.0% of the amount of each cash advance,
but such cash advance fee shall not be less than $3.00; (iii) a fee of $29.00
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
$29.00 with respect to each check submitted by a cardholder in payment of an
account which is dishonored; and (v) an overlimit charge of $29.00 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 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 Series
Supplement for any Series.
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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.
YEAR 2000 COMPLIANCE
The Corporation has been actively working on the year 2000 computer problem
for the past several years and has made significant progress in repairing its
systems. The Corporation's year 2000 remediation program includes repair of the
systems of the Bank and of the Servicer for the Trust. To date, the Corporation
has completed the inventory, assessment and strategy phases of its year 2000
program. During these phases, the Corporation identified hardware and software
that required modification, developed implementation plans, prioritized tasks
and established implementation time frames. The process undertaken by the
Corporation has required working with vendors, third-party service providers and
customers, as well as with the Corporation's internal users of systems
applications. Although many applications, interfaces and locations are already
able to handle post-year 2000 data processing, much work remains to be
completed. During 1998, year 2000 activities are being given highest priority,
and the Corporation is targeting to have all major systems repaired, including
those systems that are used by the Corporation in connection with the Trust, and
the majority of testing of such systems, including those used in connection with
the Trust, completed by year end. Notwithstanding the substantial expense
involved in such efforts by the Corporation, it is not expected that the Trust
will be required to bear any expense in connection with the Corporation's year
2000 remediation program.
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
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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.
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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.
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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.
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
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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.
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
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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 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.
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).
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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
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.
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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 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
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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
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 Scheduled 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
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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 the Transferor, the Servicer, the
Trustee or the related Trust will be required or will intend to obtain the
consent of, or be subject to the prior review by, 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
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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 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
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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 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
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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, 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
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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 date the Receivables
in such Account are first added to the Trust (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 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
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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 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
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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 Certificates (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
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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 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
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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 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
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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 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.
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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 Holders of Senior Certificates to make up any
Investor Default Amount allocable to such Holders of Senior Certificates.
With respect to each Series of Certificates, the Investor Interest with
respect to such Series will be reduced by the amount of Investor Charge-Offs for
any Monthly Period. Investor Charge-Offs will be reimbursed on any Distribution
Date to the extent amounts on deposit in the Finance Charge Account and
otherwise available therefor exceed such interest, fees and any aggregate
Investor Default Amount payable on such date. Such reimbursement of Investor
Charge-Offs will result in an increase in the Investor Interest with respect to
such Series. In the case of a Series of Certificates having more than one Class,
the 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 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
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(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 earliest 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.
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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 nor the
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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
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.
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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 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
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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 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
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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 required to
consent to any such amendment, without the consent of each holder of
Certificates of all Series affected thereby.
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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
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
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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 deposit
therein, if any, as specified in the Prospectus Supplement which will be
increased (i) to the extent the Transferor
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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
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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 the 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 with respect to the payment of interest on collateralized borrowings. The
RTC Policy Statement states that interest on such 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
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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 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
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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."
PROPOSED POLICY CHANGE
The Federal Financial Institutions Examination Counsel on June 30, 1998
proposed a revised policy statement on the classification of retail credit. If
adopted, the revised policy statement could establish, effective January 1,
2001, a uniform charge-off period of 150 days past due from the contractual due
date for open-end and closed-end credit, including credit card receivables. The
revised policy statement could also, effective January 1, 1999, provide guidance
for loans affected by bankruptcy, fraudulent activity and death; establish
standards for re-aging, extending, deferring or rewriting of past due accounts;
and broaden the circumstances under which partial payments are recognized as
full payments for purposes of determining that a loan is no longer delinquent.
If a charge-off period of 150 days past due from the contractual due date were
adopted the result would be an acceleration by the Bank of charge-offs of
delinquent accounts by one billing cycle.
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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 all U.S. and foreign 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 ("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.
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TAXATION OF INTEREST INCOME OF U.S. CERTIFICATE OWNERS
Unless otherwise specified in the related Prospectus Supplement, the
Transferor intends to take the position that stated interest on a Certificates
is "unconditionally payable," and therefore 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.
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. Capital gains of individuals derived in respect of capital
assets held for more than one year are eligible for reduced rates of taxation.
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 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
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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 States 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 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
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may also be satisfied with other documentary evidence for interest paid after
December 31, 1999 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 "--Possible Alternative
Characterizations" above.
Special rules may apply to certain Non-U.S. Persons, such as "controlled
foreign corporations", "passive foreign investment companies" and "foreign
personal holding companies" that are subject to special treatment under the
Code. Such entities should consult their own tax advisors to determine the
United States federal, state, local and other tax consequences that may be
relevant to them.
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.
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) above
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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, 1999, 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 under "--Non-U.S Certificate Owners" 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.
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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 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 (A) part of a class of securities registered under
section 12(b) or 12(g) of the Exchange Act, 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 and the class of securities of which such
security is a part is registered under the Exchange Act within 120 days (or such
later time as may be allowed by the Commission) after the end of the fiscal year
of the issuer during which the offering of such securities to the public
occurred. 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 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
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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.
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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, 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 7,800 shares of the
Corporation's common stock, with the associated rights attached thereto,
11,037.81 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 897.94 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.
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INDEX OF TERMS FOR PROSPECTUS
<TABLE>
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<S> <C>
Account Transfer Date.................................................................................... 27
Accounts................................................................................................. 1, 4
Accumulation Period...................................................................................... 12
Addition Date............................................................................................ 44
Additional Accounts...................................................................................... 5
Additional Interest...................................................................................... 15
Agreement................................................................................................ 4
Amortization Period...................................................................................... 6
Assignment............................................................................................... 44
Bank..................................................................................................... 1
Bank Portfolio........................................................................................... 4, 27
Base Rate................................................................................................ 24
BIF...................................................................................................... 48
Cash Collateral Account.................................................................................. 58
Cash Collateral Guaranty................................................................................. 58
Cede..................................................................................................... 2
Cedel.................................................................................................... 37
Cedel Participants....................................................................................... 37
Certificate Owners....................................................................................... 2
Certificate Rate......................................................................................... 5
Certificateholders....................................................................................... 2
Certificates............................................................................................. 1, 4
Chase Manhattan Series................................................................................... 27
Chase Manhattan Trust.................................................................................... 27
Chase Portfolio.......................................................................................... 27
Chase USA................................................................................................ 1
Chemical Bank Portfolio.................................................................................. 27
Class.................................................................................................... 1, 4
Closing Date............................................................................................. 11
CMB...................................................................................................... 1, 9
Code..................................................................................................... 19, 63
Collateral Interest...................................................................................... 58
Collection Account....................................................................................... 10
Commission............................................................................................... 2
Companion Series......................................................................................... 17
Comptroller.............................................................................................. 21
Controlled Accumulation Amount........................................................................... 13
Controlled Amortization Amount........................................................................... 12
Controlled Amortization Period........................................................................... 11
Controlled Deposit Amount................................................................................ 13
Controlled Distribution Amount........................................................................... 12
Cooperative.............................................................................................. 37
Corporation.............................................................................................. 10, 34
COSO..................................................................................................... 55
Credit Enhancement....................................................................................... 5
Credit Enhancement Percentage............................................................................ 47
Credit Enhancement Provider.............................................................................. 54
Cut-Off Date............................................................................................. 7
Defaulted Accounts....................................................................................... 6
</TABLE>
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<TABLE>
<CAPTION>
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<S> <C>
Definitive Certificates.................................................................................. 9
Depositaries............................................................................................. 35
Depository............................................................................................... 35
Determination Date....................................................................................... 50
Disclosure Document...................................................................................... 8
Discount Option Receivables.............................................................................. 45
Discount Percentage...................................................................................... 45
Distribution Accounts.................................................................................... 46
Distribution Date........................................................................................ 10
DOL...................................................................................................... 68
DTC...................................................................................................... 2
DTC Participants......................................................................................... 35
Eligible Account......................................................................................... 42
Eligible Deposit Account................................................................................. 46
Eligible Institution..................................................................................... 46
Eligible Receivable...................................................................................... 43
Enhancement.............................................................................................. 4
Enhancement Invested Amount.............................................................................. 58
ERISA.................................................................................................... 19
Euroclear................................................................................................ 37
Euroclear Operator....................................................................................... 37
Euroclear Participants................................................................................... 37
Excess Finance Charge Collections........................................................................ 15
Exchange................................................................................................. 8
Exchange Act............................................................................................. 2
FASIT.................................................................................................... 67
FDIA..................................................................................................... 21
FDIC..................................................................................................... 7
FDR...................................................................................................... 27
Final Regulations........................................................................................ 65
Finance Charge Account................................................................................... 45
Finance Charge Receivables............................................................................... 7
FIRREA................................................................................................... 21
Full Investor Interest................................................................................... 16
Funding Period........................................................................................... 16
General Account Regulations.............................................................................. 69
Group.................................................................................................... 15
Holders.................................................................................................. 38
Independent Investors.................................................................................... 19
Indirect Participants.................................................................................... 36
Ineligible Receivable.................................................................................... 42
Interchange.............................................................................................. 4, 31
Interest Funding Account................................................................................. 39
Interest Period.......................................................................................... 10
Investor Charge-Off...................................................................................... 15
Investor Default Amount.................................................................................. 15
Investor Interest........................................................................................ 6
Investor Percentage...................................................................................... 6
Investor Servicing Fee................................................................................... 16
IRS...................................................................................................... 63
John Hancock............................................................................................. 69
</TABLE>
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<TABLE>
<CAPTION>
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<S> <C>
L/C Bank................................................................................................. 58
MasterCard International................................................................................. 27
Minimum Transferor Interest.............................................................................. 7
Monthly Interest......................................................................................... 15
Monthly Period........................................................................................... 10
Moody's.................................................................................................. 46
New Chase Portfolio...................................................................................... 27
New Chemical Bank Portfolio.............................................................................. 27
Non-U.S. Certificate Owner............................................................................... 63
OID...................................................................................................... 64
Old Chase Portfolio...................................................................................... 27
Old Chemical Bank Portfolio.............................................................................. 27
Participation Agreement.................................................................................. 43
Participations........................................................................................... 5, 43
Pay Out Event............................................................................................ 13
Paying Agent............................................................................................. 46
Permitted Investments.................................................................................... 46
Plans.................................................................................................... 68
Portfolio Yield.......................................................................................... 24
Pre-Funding Account...................................................................................... 16
Pre-Funding Amount....................................................................................... 16
Principal Account........................................................................................ 45
Principal Amortization Period............................................................................ 12
Principal Commencement Date.............................................................................. 11
Principal Funding Account................................................................................ 12
Principal Receivables.................................................................................... 7
Principal Terms.......................................................................................... 8
Prospectus Supplement.................................................................................... 1
Rapid Accumulation Period................................................................................ 13
Rapid Amortization Period................................................................................ 14
Rating Agency............................................................................................ 19, 26
Receivables.............................................................................................. 1, 4
Record Date.............................................................................................. 34
Regulation............................................................................................... 68
Removed Accounts......................................................................................... 8
Reserve Account.......................................................................................... 59
Revolving Period......................................................................................... 11
RTC...................................................................................................... 21
RTC Policy Statement..................................................................................... 21
SAIF..................................................................................................... 48
Scheduled Payment Date................................................................................... 11
Securities Act........................................................................................... 2, 8
Securitized Chase Portfolio.............................................................................. 27
Senior Certificates...................................................................................... 6
Series................................................................................................... 1, 4
Series Supplement........................................................................................ 4
Series Termination Date.................................................................................. 51
Service Transfer......................................................................................... 54
Servicer................................................................................................. 10
Servicer Default......................................................................................... 54
Servicing Fee............................................................................................ 19
</TABLE>
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<TABLE>
<CAPTION>
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<S> <C>
Shared Principal Collections............................................................................. 15
Spread Account........................................................................................... 59
Standard & Poor's........................................................................................ 46
Subordinated Certificates................................................................................ 6
Tax Counsel.............................................................................................. 63
Tax Opinion.............................................................................................. 8
Terms and Conditions..................................................................................... 38
Transfer Date............................................................................................ 12
Transferor............................................................................................... 5
Transferor Certificate................................................................................... 8
Transferor Interest...................................................................................... 6
Transferor Percentage.................................................................................... 34
Trust.................................................................................................... 1, 4
Trust Portfolio.......................................................................................... 31
Trust Termination Date................................................................................... 51
Trustee.................................................................................................. 4
U.S...................................................................................................... 18
U.S. Certificate Owner................................................................................... 63
UCC...................................................................................................... 59
Unallocated Principal Collections........................................................................ 49
VISA..................................................................................................... 27
Withholding Agent........................................................................................ 65
</TABLE>
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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.
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
A-1
<PAGE>
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 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;
A-2
<PAGE>
(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>
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<PAGE>
PRINCIPAL OFFICE OF
CHASE MANHATTAN BANK USA, NATIONAL ASSOCIATION
802 Delaware Avenue
Wilmington, Delaware 19801
TRUSTEE
The Bank of New York
101 Barclay Street
New York, New York 10286
PAYING AGENT AND TRANSFER AGENT
The Chase Manhattan Bank
450 West 33rd Street
New York, New York 10036
LISTING AND INTERMEDIARY AGENT
Banque Generale du Luxembourg, S.A.
50 Avenue J.F. Kennedy
L-2951 Luxembourg
LEGAL ADVISOR TO THE TRANSFEROR
AS TO UNITED STATES LAW
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
LEGAL ADVISOR TO THE UNDERWRITERS
AS TO UNITED STATES LAW
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
INDEPENDENT ACCOUNTANTS TO THE TRANSFEROR
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
<PAGE>
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION
OR TO MAKE ANY REPRESENTATION NOT CONTAINED OR INCORPORATED BY REFERENCE IN THIS
PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE TRANSFEROR OR ANY AGENT OR THE UNDERWRITERS. NEITHER THIS PROSPECTUS
SUPPLEMENT NOR THE ACCOMPANYING PROSPECTUS CONSTITUTES AN OFFER OR SOLICITATION
BY ANYONE IN ANY STATE IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR
IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO
OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER
THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS, NOR
ANY SALE MADE HEREUNDER OR THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE TRANSFEROR OR
THE RECEIVABLES OR THE ACCOUNTS SINCE THE DATE HEREOF OR THEREOF OR THAT THE
INFORMATION CONTAINED OR INCORPORATED BY REFERENCE HEREIN OR THEREIN IS CORRECT
AS OF ANY TIME SUBSEQUENT TO ITS DATE.
- ------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<S> <C>
PROSPECTUS SUPPLEMENT
Other Information S-2
Summary of Terms S-3
Risk Factors S-18
Chase USA's Credit Card Portfolio S-19
The Receivables S-21
Maturity Considerations S-25
Receivable Yield Considerations S-27
Use of Proceeds S-27
Description of the Certificates S-28
Listing and General Information S-48
Underwriting S-49
Index of Terms for Prospectus Supplement S-51
Annex I: Other Series A-1
PROSPECTUS
Prospectus Supplement 2
Reports to Certificateholders 2
Available Information 2
Incorporation of Certain Documents by Reference 2
Prospectus Summary 4
Risk Factors 21
The Trusts 26
Chase USA's Credit Card Activities 27
The Receivables 31
Maturity Assumptions 33
Use of Proceeds 33
Chase USA 34
Description of the Certificates 34
Credit Enhancement 57
Certain Legal Aspects of the Receivables 59
Tax Matters 63
Employee Benefit Plan Considerations 68
Plan of Distribution 70
Legal Matters 70
Index of Terms for Prospectus 71
Annex I: Global Clearance, Settlement and Tax
Documentation Procedures A-1
</TABLE>
Prospectus Supplement
CHASE
CREDIT CARD
MASTER TRUST
$704,166,000
$650,000,000
CLASS A FLOATING RATE ASSET BACKED
CERTIFICATES, SERIES 1998-5
$54,166,000
CLASS B FLOATING RATE ASSET BACKED
CERTIFICATES, SERIES 1998-5
CHASE MANHATTAN BANK USA,
NATIONAL ASSOCIATION
Transferor
THE CHASE MANHATTAN BANK
Servicer
Underwriters of the Class A Certificates
CHASE SECURITIES INC.
BEAR, STEARNS & CO. INC.
CREDIT SUISSE FIRST BOSTON
PRUDENTIAL SECURITIES INCORPORATED
Underwriter of the Class B Certificates
CHASE SECURITIES INC.
Dated September 17, 1998
