<PAGE>
Filed pursuant to Rule 424(b)(5)
SEC File No. 333-24227
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED SEPTEMBER 10, 1997)
$850,482,000
FIRST USA CREDIT CARD MASTER TRUST
$780,000,000 CLASS A FLOATING RATE ASSET BACKED CERTIFICATES, SERIES 1997-8
$70,482,000 CLASS B FLOATING RATE ASSET BACKED CERTIFICATES, SERIES 1997-8
FIRST USA BANK
TRANSFEROR AND SERVICER
Each of the Class A Floating Rate Asset Backed Certificates, Series 1997-8
(collectively, the "Class A Certificates") and each of the Class B Floating
Rate Asset Backed Certificates, Series 1997-8 (collectively, the "Class B
Certificates" and, together with the Class A Certificates, the "Offered
Certificates") will represent an undivided interest in the First USA Credit
Card Master Trust (the "Trust") created pursuant to a Pooling and Servicing
Agreement between First USA Bank (the "Bank"), as transferor and servicer (in
such capacities, the "Transferor" and the "Servicer," respectively), and The
Bank of New York (Delaware), as trustee (the "Trustee").
(continued on next page)
---------------
POTENTIAL INVESTORS SHOULD CONSIDER, AMONG OTHER THINGS, THE INFORMATION SET
FORTH IN "RISK FACTORS" BEGINNING ON PAGE 15 IN THE PROSPECTUS.
---------------
THE OFFERED CERTIFICATES WILL REPRESENT INTERESTS IN THE TRUST ONLY AND WILL
NOT REPRESENT INTERESTS IN OR RECOURSE OBLIGATIONS OF FIRST USA BANK OR ANY
AFFILIATE THEREOF. AN OFFERED CERTIFICATE IS NOT A DEPOSIT AND NEITHER THE
OFFERED 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 SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC(1) DISCOUNT THE TRANSFEROR(1)(2)
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Class A
Certificate ........... 100.00% 0.43% 99.57%
- --------------------------------------------------------------------------------------------
Per Class B
Certificate ........... 100.00% 0.46% 99.54%
- --------------------------------------------------------------------------------------------
Total................... $850,482,000 $3,678,217 $846,803,783
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
</TABLE>
(1) Plus accrued interest, if any, at the Class A Certificate Rate or the
Class B Certificate Rate, as applicable, from September 23, 1997.
(2) Before deduction of expenses, estimated to be $700,000.
---------------
After the initial distribution of the Offered Certificates by the
Underwriters, this Prospectus Supplement and the Prospectus may be used by
Banc One Capital Corporation, an affiliate of the Transferor, in connection
with offers and sales relating to market-making transactions in the Offered
Certificates. Banc One Capital Corporation 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. Certain information in this Prospectus
Supplement and the Prospectus will be updated from time to time as described
in "Incorporation of Certain Documents by Reference" in the Prospectus.
The Offered Certificates are offered when, as and if issued to and accepted
by the Underwriters and subject to approval of certain legal matters by
Skadden, Arps, Slate, Meagher & Flom LLP, counsel for the Underwriters. The
Underwriters reserve the right to reject orders in whole or in part. It is
expected that the Offered Certificates will be delivered in book-entry form on
or about September 23, 1997, through the facilities of The Depository Trust
Company, Cedel Bank, societe anonyme, and the Euroclear System.
---------------
BEAR, STEARNS & CO. INC.
BANC ONE CAPITAL CORPORATION
The date of this Prospectus Supplement is September 10, 1997
<PAGE>
(continued from previous page)
The property of the Trust includes and will include receivables (the
"Receivables") generated from time to time in a portfolio of VISA(R) and
MasterCard(R) revolving credit card accounts (the "Accounts"), all monies due
or to become due in payment of the Receivables, and certain other property, as
described herein. In addition, the CIA Certificates, Series 1997-8
(collectively, the "CIA Certificates") will be issued in the initial amount of
$89,278,000 and will be subordinated to the Offered Certificates as described
herein. Only the Class A Certificates and the Class B Certificates are offered
hereby. The Bank will own the remaining undivided interest in the Trust not
represented by the Offered Certificates, the CIA Certificates and the other
interests issued by the Trust and will service the Receivables. The Bank has
offered and from time to time may offer other Series of certificates that
evidence undivided interests in certain assets of the Trust, which may have
terms significantly different from the Offered Certificates and the CIA
Certificates.
Interest will accrue on the Class A Certificates from September 23, 1997
through October 16, 1997 at the rate of 0.15% above the arithmetic mean of the
London interbank offered quotations for one-month United States dollar
deposits ("LIBOR") as determined by the Trustee on September 19, 1997, and
with respect to each Interest Period (as defined herein) thereafter, at a rate
of 0.15% above LIBOR as determined by the Trustee on the related LIBOR
Determination Date (as defined herein). Interest will accrue on the Class B
Certificates from September 23, 1997 through October 16, 1997 at the rate of
0.36% above LIBOR as determined by the Trustee on September 19, 1997, and with
respect to each Interest Period thereafter, at the rate of 0.36% above LIBOR
as determined by the Trustee on the related LIBOR Determination Date. Interest
with respect to the Offered Certificates will be distributed on October 17,
1997 and on the 17th day of each month thereafter (or, if such 17th day is not
a business day, the next succeeding business day) (each, a "Distribution
Date"). Principal on the Class A Certificates is expected to be distributed on
the September 2007 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 expected to be distributed on
the September 2007 Distribution Date (the "Class B Scheduled Payment Date"
and, collectively with the Class A Scheduled Payment Date and the CIA
Scheduled Payment Date, the "Scheduled Payment Date") but may be paid earlier
or later under certain limited circumstances described herein. See "Maturity
Considerations" herein.
The Class B Certificates will be subordinated to the Class A Certificates as
described herein. The CIA Certificates will be subordinated to the Class A
Certificates and the Class B Certificates as described herein.
There currently is no secondary market for the Offered Certificates, and
there is no assurance that one will develop.
Application has been made to list the Offered Certificates on the Luxembourg
Stock Exchange.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE OFFERED
CERTIFICATES, INCLUDING OVER-ALLOTMENT TRANSACTIONS, STABILIZING TRANSACTIONS,
SYNDICATE COVERING TRANSACTIONS AND PENALTY BIDS. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "UNDERWRITING" HEREIN.
THIS DOCUMENT DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN
OFFER TO BUY SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION IS UNLAWFUL. THERE ARE RESTRICTIONS ON THE OFFER AND SALE OF
SECURITIES IN THE UNITED KINGDOM. ALL APPLICABLE PROVISIONS OF THE FINANCIAL
SERVICES ACT 1986 AND OTHER APPLICABLE LAWS AND REGULATIONS WITH RESPECT TO
ANYTHING DONE BY ANY PERSON IN RELATION TO SECURITIES IN, FROM OR OTHERWISE
INVOLVING THE UNITED KINGDOM MUST BE COMPLIED WITH. SEE "UNDERWRITING" HEREIN.
S-2
<PAGE>
THE OFFERED CERTIFICATES OFFERED HEREBY CONSTITUTE PART OF A SEPARATE SERIES
OF CERTIFICATES BEING OFFERED BY THE TRANSFEROR FROM TIME TO TIME PURSUANT TO
ITS PROSPECTUS DATED SEPTEMBER 10, 1997. THIS PROSPECTUS SUPPLEMENT DOES NOT
CONTAIN COMPLETE INFORMATION ABOUT THE OFFERING OF THE OFFERED 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 OFFERED 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 the Prospectus and the
offering of the Offered Certificates in certain jurisdictions may be
restricted by law. Persons into whose possession this Prospectus Supplement
and the Prospectus come are required by the Underwriters to inform themselves
about and to observe any such restrictions.
This document is being distributed in the United Kingdom only to persons of
a kind described in Article 11(3) of the Financial Services Act 1986
(Investment Advertisements) (Exemptions) Order 1996 (as amended) or to whom it
would otherwise be lawful to do so.
The Bank has taken all reasonable care to ensure that the information
contained in this Prospectus Supplement and the Prospectus in relation to the
Bank and the Offered Certificates is true and accurate in all material
respects and that in relation to the Bank and the Offered Certificates there
are no material facts the omission of which would make misleading any
statement herein or in the Prospectus, whether fact or opinion. The Bank
accepts responsibility accordingly.
As used in this Prospectus Supplement and the Prospectus, all references to
"dollars" and "$" refer to United States dollars.
S-3
<PAGE>
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" herein and the "Index
of Terms for Prospectus" in the Prospectus.
Type of Securities.......... Class A Floating Rate Asset Backed
Certificates, Series 1997-8 (the "Class A
Certificates") and Class B Floating Rate
Asset Backed Certificates, Series 1997-8
(the "Class B Certificates" and, together
with the Class A Certificates, the "Offered
Certificates").
Trust....................... The First USA Credit Card Master Trust (the
"Trust") was formed pursuant to a pooling
and servicing agreement dated as of
September 1, 1992 (as amended, the "Pooling
and Servicing Agreement"), between First USA
Bank, as transferor (in such capacity, the
"Transferor") and as servicer of the
Receivables (in such capacity, the
"Servicer"), and The Bank of New York
(Delaware), as trustee (the "Trustee"),
which will be supplemented by the supplement
relating to the Certificates (the "Offered
Series Supplement") (the term "Pooling and
Servicing Agreement," unless the context
requires otherwise, refers to the Pooling
and Servicing Agreement as supplemented by
the Offered Series Supplement). 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, the term "Class B
Certificateholders" refers to holders of the
Class B Certificates and the term "CIA
Certificateholders" refers to the holders of
the CIA Certificates.
Trust Assets................ The property of the Trust includes and will
include receivables (the "Receivables")
arising under certain VISA (R) and
MasterCard (R)* revolving credit card
accounts (the "Accounts") selected by the
Transferor from a portfolio of VISA and
MasterCard accounts owned by the Transferor,
all monies due or to become due in payment
of the Receivables, all proceeds of the
Receivables and all monies on deposit in
certain bank accounts of the Trust (other
than certain investment earnings on such
amounts), Recoveries and any Enhancement
issued with respect to any Series. The
benefits of any Enhancement issued with
respect to any other Series will not be
available for the benefit of the
Certificateholders and the holders of the
certificates of other Series will not be
entitled to the benefits of any Enhancement
for this Series. The term "Enhancement"
means, with respect to any Series, any
letter of credit, cash collateral account,
cash collateral
- --------
* VISA (R) and MasterCard (R) are registered trademarks of Visa USA
Incorporated and MasterCard International Incorporated, respectively.
S-4
<PAGE>
guaranty, collateral invested amount,
guaranteed rate agreement, maturity guaranty
facility, tax protection agreement, interest
rate swap or other contract or agreement for
the benefit of certificateholders of such
Series.
The Transferor originally conveyed to the
Trust all Receivables existing under certain
Accounts that were selected by the
Transferor from the Bank Portfolio (as
defined herein) based on criteria provided
in the Pooling and Servicing Agreement as
applied on August 21, 1992 (the "Cut Off
Date"). Since the Cut Off Date, the
Transferor has transferred to the Trust the
Receivables in certain Additional Accounts
in accordance with the provisions of the
Pooling and Servicing Agreement. The
Transferor also will transfer the
Receivables in certain designated Additional
Accounts to the Trust on the Closing Date
and the Transferor expects from time to time
(subject to certain limitations and
conditions), and in certain circumstances
will be obligated, to designate Additional
Accounts the Receivables in which will be
included in the Trust subsequent to the
Closing Date. The Transferor will transfer
to the Trust all Receivables in such
Additional Accounts, whether such
Receivables are then existing or thereafter
created. The addition to the Trust of
Receivables in Additional Accounts will be
subject to certain conditions including,
among others, that (a) the Transferor will
have received notice from the applicable
Rating Agencies that the inclusion of such
accounts as Additional Accounts will not
result in the reduction or withdrawal by
such Rating Agency of its then existing
rating of any Class of certificates of any
Series then outstanding, (b) each such
Additional Account must be an Eligible
Account at the time of its designation for
inclusion in the Trust and (c) no selection
procedure believed by the Transferor to be
materially adverse to the interests of the
holders of any Series of certificates will
have been used in selecting such Additional
Accounts. See "The Receivables" herein and
"Description of the Certificates--Addition
of Accounts" in the Prospectus.
Pursuant to the Pooling and Servicing
Agreement, the Transferor has the right
(subject to certain limitations and
conditions), but not the obligation, to
remove the Receivables in certain Accounts
from the Trust ("Removed Accounts"). See
"Description of the Certificates--Removal of
Accounts" in the Prospectus.
Certificateholders' Each of the Offered Certificates represents
Interest.................... an undivided interest in the Trust. The
Trust's assets will be allocated among the
Class A Certificateholders (the "Class A
Certificateholders' Interest"), the Class B
Certificateholders (the "Class B
Certificateholders' Interest," and together
with the Class A Certificateholders'
Interest, the "Investor Interest"), the CIA
Certificateholders (the "CIA
Certificateholders' Interest"), the holders
of other Series previously issued or issued
at some future time pursuant to the Pooling
and Servicing Agreement and the applicable
Supplements
S-5
<PAGE>
and the Transferor (the "Transferor
Interest"), as described below. The "CIA
Invested Amount" in the initial amount of
$89,278,000 (which amount represents 9.5% of
the sum of the initial Class A Invested
Amount, the initial Class B Invested Amount
and the initial CIA Invested Amount)
constitutes Enhancement for the Offered
Certificates. Allocations will be made to
the CIA Invested Amount and the holders of
the CIA Certificates will have voting and
certain other rights of a subordinated Class
of certificates. The CIA Certificates
together with the Offered Certificates are
referred to herein as the "Certificates."
The aggregate principal amount of the Class A
Certificateholders' Interest and the Class B
Certificateholders' Interest will, except as
otherwise provided herein, remain fixed at
$780,000,000 and $70,482,000, respectively.
The principal amount of the Transferor
Interest will fluctuate as the amount of
Receivables in the Trust changes from time
to time. The Transferor Interest will
represent the right to the assets of the
Trust not allocated to the Investor
Interest, the CIA Certificateholders'
Interest or the interests of
certificateholders of other Series.
The Class A Certificates offered hereby will
represent the right to receive from the
assets of the Trust allocated to the Class A
Certificateholders' Interest funds up to
(but not in excess of) the amounts required
to make payments of interest on the Class A
Certificates at the Class A Certificate
Rate, and the payment of principal during
the Amortization Period to the extent of the
Class A Invested Amount (which may be less
than the aggregate unpaid principal amount
of the Class A Certificates, in certain
circumstances, if there are any unreimbursed
Class A Investor Charge-Offs). See
"Description of the Certificates--General"
herein.
The Class B Certificates will represent the
right to receive from the assets of the
Trust allocated to the Class B
Certificateholders' Interest funds up to
(but not in excess of) the amounts required
to make payments of interest on the Class B
Certificates at the Class B Certificate
Rate, and the payment of principal during
the Amortization Period, following the final
principal payment of the Class A Invested
Amount to the holders of the Class A
Certificates, to the extent of the Class B
Invested Amount (which may be less than the
aggregate unpaid principal amount of the
Class B Certificates, in certain
circumstances, if there has been a reduction
of the Class B Invested Amount).
The Class A Certificateholders' Interest and
the Class B Certificateholders' Interest
will each include the right to receive (but
only to the extent needed to make required
payments under the Pooling and Servicing
Agreement) varying percentages of
collections of Finance Charge Receivables
and Principal Receivables during each
calendar month (a "Monthly Period").
S-6
<PAGE>
Collections of Finance Charge Receivables
will be allocated at all times to the Class
A Certificateholders' Interest and the Class
B Certificateholders' Interest based on the
Class A Floating Allocation Percentage and
the Class B Floating Allocation Percentage,
respectively, applicable during the related
Monthly Period. During the Revolving Period,
subject to certain limitations, all
collections of Principal Receivables
allocable to the Certificates (other than
Reallocated Principal Collections) will be
allocated and paid to the Transferor to
maintain the Invested Amount of each Class
at its initial amount. During an
Amortization Period, collections of
Principal Receivables and certain other
amounts allocable to the Investor Interest
will generally be applied first to the Class
A Certificateholders' Interest until the
Class A Invested Amount is paid in full and
then to the Class B Certificateholders'
Interest until the Class B Invested Amount
is paid in full based on the Fixed/Floating
Allocation Percentage. See "Description of
the Certificates--Investor Percentage and
Transferor Percentage" and "--Pay Out
Events" herein and "Description of the
Certificates--Pay Out Events" in the
Prospectus.
The Transferor initially will hold the
remaining undivided interest in the
Principal Receivables in the Trust not
represented by the Investor Interest, the
CIA Certificateholders' Interest or any
other Series that has been or may be issued.
The Transferor may tender the certificate
that represents the Transferor Interest (the
"Exchangeable Transferor Certificate") or,
if provided in the relevant Supplement,
certificates of any Series and the
Exchangeable 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. Any Exchange involving
the Exchangeable Transferor Certificate will
have the effect of decreasing the Transferor
Interest. The certificates of any new Series
will be issued pursuant to the Pooling and
Servicing Agreement and any related
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 May 2010 Distribution Date
(the "Stated Series Termination Date") in
the manner provided in "Description of the
Certificates--Final Payment of Principal;
Termination" in the Prospectus. After the
Stated Series Termination Date, the Trust
will have no further obligation to pay
principal or interest on the Certificates.
Other Series................ The Trust has previously issued twenty-nine
other Series that remain outstanding. See
"Annex I: Other Series" for a summary of the
terms of the previously issued Series that
remain outstanding.
S-7
<PAGE>
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 aggregate amount of Receivables in the
Accounts (including the amount of
Receivables in the Additional Accounts added
to the Trust on September 9, 1997 and
certain Additional Accounts designated to be
added to the Trust on the Closing Date) as
of the close of business on August 31, 1997
was $24,983,428,016, comprised of
$24,277,199,446 of Principal Receivables and
$706,228,570 of Finance Charge Receivables.
Fluctuations in the amount of Finance Charge
Receivables will not affect the Invested
Amount or the Transferor Amount, which are
determined on the basis of the amount of
Principal Receivables in the Trust. The
aggregate undivided interest in the
Principal Receivables in the Trust evidenced
by the Investor Interest will never exceed
the Invested Amount regardless of the total
amount of Principal Receivables in the Trust
at any time. See "The Receivables" herein.
Servicing Fee............... The Servicer will receive a monthly fee as
servicing compensation from the Receivables.
The portion of the monthly servicing fee
allocable to the Investor Interest and the
CIA Certificateholders' Interest is equal to
one-twelfth of the product of the Servicing
Fee Percentage and the sum of the Class A
Adjusted Invested Amount, the Class B
Adjusted Invested Amount and the CIA
Adjusted Invested Amount on the last day of
the related Monthly Period (the "Investor
Servicing Fee"); provided, however, that
with respect to the period from the Closing
Date to September 30, 1997, such amount will
be equal to the product of (i) the actual
number of days from and including the
Closing Date to and including September 30,
1997 divided by 365, (ii) the Servicing Fee
Percentage and (iii) the initial Invested
Amount. The "Servicing Fee Percentage" will
mean 1.5% for so long as the Bank is the
Servicer or 2.0% if the Bank is no longer
the Servicer. See "Description of the
Certificates--Servicing Compensation and
Payment of Expenses" herein.
Interest Payments........... Each Class A Certificate and Class B
Certificate represents the right to receive
interest accruing at the rate of 0.15% and
0.36%, respectively, above LIBOR as
determined by the Trustee (i) on September
19, 1997 for the period from September 23,
1997 (the "Closing Date") through October
16, 1997 and (ii) on the related LIBOR
Determination Date with respect to each
Interest Period thereafter (such rates, as
in effect from time to time, the "Class A
Certificate Rate" and the "Class B
Certificate Rate", respectively, and each
sometimes referred to as a "Certificate
Rate" and collectively as the "Certificate
Rates"). Interest will be distributed on
October 17, 1997, and on each Distribution
Date thereafter to Certificateholders.
Interest payments on the Class A
S-8
<PAGE>
Certificates and the Class B Certificates on
any Distribution Date will be calculated on
the outstanding principal balance of the
Class A Certificates or 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 Class A Invested Amount or the
initial Class B Invested Amount from the
Closing Date. Interest payments on the Class
A Certificates on any Distribution Date will
be funded from collections of Finance Charge
Receivables allocated to the Class A
Certificateholders' Interest during the
preceding Monthly Period and, if necessary,
from Excess Finance Charge Collections 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 funded from the collections of Finance
Charge Receivables during the preceding
Monthly Period allocated to the Class B
Certificateholders' Interest and, if
necessary, from Excess Finance Charge
Collections and Reallocated CIA Principal
Collections (to the extent available)
remaining after certain other payments have
been made with respect to the Class A
Certificates. If the unpaid principal
balance of the Class B Certificates for such
Monthly Period exceeds the Class B Invested
Amount for such Monthly Period, Class B
Monthly Interest will be less than the
amount of accrued interest on the unpaid
principal balance of the Class B
Certificates. See "Description of the
Certificates--Interest Payments" herein and
"Risk Factors--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 excluding
the earlier of (a) the commencement of the
Accumulation Period and (b) the commencement
of the Rapid Amortization Period. See
"Description of the Certificates--Pay Out
Events" herein for a discussion of the
events which might lead to the termination
of the Revolving Period prior to the
commencement of the Accumulation Period. The
accumulation period with respect to the
Certificates (the "Accumulation Period") is
scheduled to begin at the close of business
on August 31, 2006. Subject to the
conditions set forth herein under
"Description of the Certificates--
Postponement of Accumulation Period," the
day on which the Revolving Period ends and
the Accumulation Period begins may be
delayed to no later than the close of
business on July 31, 2007. During the
Revolving Period, Available Investor
Principal Collections otherwise allocable to
the Investor Interest will, subject to
certain limitations, be treated as Excess
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 Exchangeable Transferor Certificate. See
"Description of the Certificates--Principal
Payments" herein.
S-9
<PAGE>
Principal Payments; Certain
Allocations................
Collections of Principal Receivables with
respect to any Monthly Period during the
Revolving Period will be allocated on the
basis of the Investor Percentage with
respect to Principal Receivables.
Collections of Principal Receivables with
respect to any Monthly Period during either
Amortization Period will be allocated on the
basis of the Fixed/Floating Allocation
Percentage with respect to Principal
Receivables. Under the Pooling and Servicing
Agreement, such collections (other than
Reallocated Principal Collections) will be
paid to the holder of the Exchangeable
Transferor Certificate or, in certain
circumstances, to the holders of the
certificates of other Series, if any, during
the Revolving Period, or to the holders of
the Certificates in payment of the Investor
Interest and to the CIA Certificateholders
in payment of the CIA Certificateholders'
Interest during either Amortization Period.
Such allocations will be performed during
the Revolving Period, the Accumulation
Period and the Rapid Amortization Period.
See "Description of the Certificates--
Investor Percentage and Transferor
Percentage" herein and "Description of the
Certificates--Application of Collections"
herein and in the Prospectus.
Accumulation Period......... Unless a Pay Out Event has occurred, the
Accumulation Period will begin at the close
of business on the last day of the Revolving
Period and will end on the earliest to occur
of (i) the commencement of the Rapid
Amortization Period, (ii) payment of the
Invested Amount in full and (iii) the Stated
Series Termination Date. During the
Accumulation Period, prior to the payment of
the Class A Invested Amount in full, amounts
equal to the least of (a) Available Investor
Principal Collections for the related
Monthly Period, (b) the sum of the
applicable Controlled Accumulation Amount
for such Monthly Period and the applicable
Accumulation Shortfall, if any (such
applicable sum, the "Controlled Deposit
Amount"), and (c) the Class A Adjusted
Invested Amount on such Transfer Date will
be deposited monthly in a trust account
established by the Servicer (the "Principal
Funding Account") on each Transfer Date
beginning with the Transfer Date in the
month following the commencement of the
Accumulation Period until the Principal
Funding Account Balance is equal to the
Class A Invested Amount. During the
Accumulation Period, beginning with the
Transfer Date first preceding the Class B
Principal Commencement Date, amounts equal
to the least of (a) Available Investor
Principal Collections for the related
Monthly Period remaining after the
application thereof to the Class A Invested
Amount, (b) the Controlled Deposit Amount
for such Monthly Period (minus the Class A
Monthly Principal), and (c) the Class B
Adjusted Invested Amount on such Transfer
Date, will be deposited monthly in the
Principal Funding Account on such Transfer
Date and each subsequent Transfer Date until
the Principal Funding Account
S-10
<PAGE>
Balance is equal to the sum of the Class A
Invested Amount and the Class B Invested
Amount. 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" herein.
All amounts 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 Accumulation Period
will be included in Class A Available Funds,
Class B Available Funds and CIA Available
Funds. If, for any Interest Period, the
Principal Funding Investment Proceeds are
less than an amount equal to, for such
Interest Period, the product of (a) a
fraction, the numerator of which is the
actual number of days in such Interest
Period and the denominator of which is 360,
(b) the weighted average of the Class A
Certificate Rate, the Class B Certificate
Rate and the CIA Certificate Rate in effect
with respect to such Interest Period and (c)
the Principal Funding Account Balance as of
the last day of the Monthly Period preceding
the Monthly Period in which such Interest
Period ends (the "Covered Amount"), the
amount of such deficiency will be paid from
the Reserve Account to the extent of the
Available Reserve Account Amount and, if
necessary, from Excess Finance Charge
Collections 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
Invested Amount on the Class A Scheduled
Payment Date. If the aggregate principal
amount of deposits made to the Principal
Funding Account are insufficient to pay in
full the Class A Invested Amount on the
Class A Scheduled Payment Date, the Rapid
Amortization Period will commence as
described below, and on each Distribution
Date thereafter until the Class A Invested
Amount is paid in full, the Class A
Certificateholders will receive
distributions of Class A Monthly Principal
and Class A Monthly Interest. Although it is
anticipated that during the Accumulation
Period prior to the payment of the Class A
Invested Amount 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 "Maturity Assumptions" in
the Prospectus and "Maturity Considerations"
herein.
On the Class B Scheduled Payment Date,
provided that the Class A Invested Amount is
paid in full on the Class A Scheduled
Payment Date and the Rapid Amortization
Period has not
S-11
<PAGE>
commenced, funds remaining on deposit in the
Principal Funding Account will be used to
pay the Class B Invested Amount as described
herein. If the funds remaining on deposit in
the Principal Funding Account are
insufficient to pay in full the Class B
Invested Amount on the Class B Scheduled
Payment Date, the Rapid Amortization Period
will commence as described below, and on
each Distribution Date thereafter until the
Class B Invested Amount is paid in full, the
Class B Certificateholders will receive
distributions of Class B Monthly Principal
and Class B Monthly Interest. Although it is
anticipated that during the Accumulation
Period prior to the payment of the Class B
Invested Amount 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 B
Certificateholders on the Class B Scheduled
Payment Date, no assurance can be given in
that regard. See "Maturity Assumptions" in
the Prospectus and "Maturity Considerations"
herein.
If a Pay Out Event occurs during the
Accumulation Period, the Rapid Amortization
Period will commence and any amount on
deposit in the Principal Funding Account
will be paid to the Certificateholders of
each Class of Certificates, sequentially, in
order of seniority, on the Distribution Date
following the Monthly Period in which the
Rapid Amortization Period commences.
Other Series offered by the Trust may or may
not have amortization or accumulation
periods like the Accumulation Period for the
Certificates, and such periods may have
different lengths and begin on different
dates than such 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 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.
Principal Payments; Rapid
Amortization Period........
During the period beginning on the earliest
of the day on which a Pay Out Event occurs,
the Class A Scheduled Payment Date if the
Class A Invested Amount is not paid in full
on such date, and the Class B Scheduled
Payment Date if the Class B Invested Amount
is not paid in full on such date and ending
on the earlier of (i) the date on which the
Class A Invested Amount, the Class B
Invested Amount and the CIA Invested Amount
each have been paid in full and (ii) the
Stated Series Termination Date (the "Rapid
Amortization Period" and together with the
Accumulation Period sometimes referred to as
an "Amortization Period" and collectively as
the "Amortization Periods"), collections of
Principal Receivables allocated to the
Invested Amount will no longer be paid to
the holder of the Exchangeable Transferor
S-12
<PAGE>
Certificate or the holders of the
certificates of any other Series, as
described above, but instead will be
distributed to the Class A
Certificateholders and, following payment in
full of the Class A Invested Amount, to the
Class B Certificateholders, and, following
payment in full of the Class B Invested
Amount, to the CIA Certificateholders,
monthly on each Distribution Date beginning
with the Distribution Date in the month
following the commencement of the Rapid
Amortization Period. See "Description of the
Certificates--Pay Out Events" herein and in
the Prospectus 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 CIA
Certificates...............
The Class B Certificateholders' 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 CIA
Certificateholders' Interest will be
subordinated as described herein to the
extent necessary to fund certain payments
with respect to the Class A Certificates and
the Class B Certificates as described
herein. If the CIA Invested Amount is
reduced to zero, the Class B
Certificateholders will bear directly the
credit and other risks associated with their
undivided interest in the Trust. To the
extent the Class B Invested Amount is
reduced, the percentage of collections of
Finance Charge Receivables allocated to the
Class B Certificateholders in subsequent
Monthly Periods will be reduced. Moreover,
to the extent the amount of such reduction
in the Class B Invested Amount is not
reimbursed, the amount of principal
distributable to the Class B
Certificateholders will be reduced. Such
reductions of the Class B Invested Amount
and the CIA Invested Amount will thereafter
be reimbursed and the Class B Invested
Amount and the CIA Invested Amount increased
on each Distribution Date by the amount, if
any, of Excess Finance Charge Collections
for such Distribution Date available for
that purpose. See "Description of the
Certificates--Subordination of the Class B
Certificates," "--Investor Percentage and
Transferor Percentage," "--Excess Finance
Charge Collections," "--Reallocated
Principal Collections" and "--Defaulted
Receivables; Investor Charge-Offs" herein.
Additional Amounts
Available to
Certificateholders......... With respect to any Transfer Date, Excess
Finance Charge Collections will be applied
to fund the Class A Required Amount and the
Class B Required Amount, if any. The "Class
A Required Amount" shall mean the amount, if
any, by which the sum of Class A Monthly
Interest and any overdue Class A Monthly
Interest on the related Distribution Date
(and default interest thereon), the Class A
Investor Default Amount for the related
Monthly Period and, if the Bank is no longer
the Servicer, the Class A Monthly Servicing
Fee for the related Monthly Period exceeds
the Class A Available Funds with respect to
the related
S-13
<PAGE>
Monthly Period. The "Class B Required
Amount" shall mean the sum of (i) the sum of
the amount, if any, by which Class B Monthly
Interest and any overdue Class B Monthly
Interest on the related Distribution Date
(and default interest thereon) and, if the
Bank is no longer the Servicer, the Class B
Monthly Servicing Fee for the related
Monthly Period exceeds the Class B Available
Funds with respect to the related Monthly
Period plus the amount of Excess Finance
Charge Collections available to make
payments with respect thereto on the related
Transfer Date and (ii) the amount, if any,
by which the Class B Investor Default Amount
for the related Monthly Period exceeds the
amount of Excess Finance Charge Collections
available to make payments with respect
thereto on the related Transfer Date. If
Excess Finance Charge Collections available
with respect to such Monthly Period are less
than the Class A Required Amount and there
is a positive Class B Required Amount,
certain collections of Principal Receivables
for such Monthly Period will then be used to
fund first the remaining Class A Required
Amount and second the Class B Required
Amount in an aggregate amount not to exceed
the CIA Invested Amount and the Class B
Invested Amount. See "Description of the
Certificates--Excess Finance Charge
Collections" and "--Reallocated Principal
Collections" herein.
On each Distribution Date, if the Class A
Investor Default Amount for such
Distribution Date exceeds the sum of the
Class A Available Funds, Excess Finance
Charge Collections and Reallocated Principal
Collections allocated and available to cover
such amount with respect to the Monthly
Period immediately preceding such
Distribution Date, the CIA Invested Amount
will be reduced by the amount of such
excess, but not more than the lesser of the
Class A Investor Default Amount and the CIA
Invested Amount for such Distribution Date.
In the event that, but for the limitation on
the amount of such reduction in the
preceding sentence, such reduction would
cause the CIA Invested Amount to be a
negative number, the CIA Invested Amount
will be reduced to zero, and the Class B
Invested Amount will be reduced by the
amount by which the CIA Invested Amount
would have been reduced below zero. In the
event that such reduction would cause the
Class B Invested Amount to be a negative
number, the Class B Invested Amount will be
reduced to zero, and the Class A Invested
Amount will be reduced by the amount by
which the Class B Invested Amount would have
been reduced below zero, but not more than
the Class A Investor Default Amount for
such Distribution Date. If the CIA Invested
Amount and the Class B Invested Amount are
reduced to zero, the Class A
Certificateholders will bear directly the
credit and other risks associated with their
undivided interest in the Trust.
If on any Distribution Date, the Class B
Investor Default Amount for such
Distribution Date exceeds the amount of
Excess Finance
S-14
<PAGE>
Charge Collections and Reallocated CIA
Principal Collections which are allocated
and available to fund such amount, the CIA
Invested Amount remaining after any
reduction thereof with respect to the Class
A Investor Default Amount as described above
will be reduced by the amount of such
excess, but not more than the lesser of the
Class B Investor Default Amount and the CIA
Invested Amount for such Distribution Date.
In the event that, but for the limitation on
the amount of such reduction in the
preceding sentence, such reduction would
cause the CIA Invested Amount to be a
negative number, the CIA Invested Amount
will be reduced to zero, and the Class B
Invested Amount will be reduced by the
amount by which the CIA Invested Amount
would have been reduced below zero, but not
more than the Class B Investor Default
Amount for such Distribution Date. The Class
B Invested Amount will also be reduced by
the amount of Reallocated Class B Principal
Collections applied to cover shortfalls in
excess of the CIA Invested Amount and the
amount of any portion of the Class B
Invested Amount allocated to the Class A
Certificates to avoid a reduction in the
Class A Invested Amount. See "Description of
the Certificates--Reallocation of Cash
Flows," "--Reallocated Principal
Collections" and "--Defaulted Receivables;
Investor Charge-Offs" herein. The initial
CIA Invested Amount will be equal to
$89,278,000 and will be decreased under
certain circumstances as described herein
and, accordingly, the amount available to
fund payments with respect to the Class A
Certificates and the Class B Certificates
will be decreased. The initial Class B
Invested Amount will be equal to $70,482,000
and will be decreased under certain
circumstances as described herein and,
accordingly, the amount available to fund
payments with respect to the Class A
Certificates will be decreased. See
"Description of the Certificates--Defaulted
Receivables; Investor Charge-Offs" herein.
With respect to any Transfer Date, if the CIA
Invested Amount has been reduced below the
initial CIA Invested Amount for reasons
other than the payment of principal to the
CIA Certificateholders, certain Excess
Finance Charge Collections, if available,
will be reallocated to increase the CIA
Invested Amount to the extent of such
shortfall. Any of such Excess Finance Charge
Collections not required to be so
reallocated with respect to any Distribution
Date will be applied in accordance with the
Spread Account Agreement among the
Transferor, the Servicer and the Trustee
(the "Spread Account Agreement"). See
"Description of the Certificates--Excess
Finance Charge Collections" herein.
Optional Repurchase......... The Invested Amount will be subject to
optional repurchase by the Transferor on any
Distribution Date on or after the
Distribution Date on which the Invested
Amount is reduced to an amount less
S-15
<PAGE>
than or equal to $93,976,000 (10% of the
initial Invested Amount), if certain
conditions set forth in the Pooling and
Servicing Agreement are met. The repurchase
price will be equal to the Invested Amount
plus accrued and unpaid interest on the
Certificates through the last day of the
Interest Period related to 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 (Delaware).
Tax Status.................. Skadden, Arps, Slate, Meagher & Flom LLP,
special tax counsel to the Transferor, is of
the opinion that, under existing law, the
Offered Certificates will be characterized
as indebtedness for Federal income tax
purposes. Under the Pooling and Servicing
Agreement, the Transferor, the Servicer, the
Certificateholders and the Certificate
Owners will agree to treat the Offered
Certificates as debt for Federal, state,
local and foreign income and franchise tax
purposes. See "Certain U.S. Federal Income
Tax Consequences" in the Prospectus for
additional information concerning the
application of Federal income tax laws.
ERISA Considerations........ Under regulations issued by the Department of
Labor, the Trust's assets would not be
deemed "plan assets" of an employee benefit
plan holding an interest in the Class A
Certificates or the Class B Certificates if
certain conditions are met, including that
interests in such Class of Certificates be
held by at least 100 persons independent of
the Transferor and each other upon
completion of the public offering of the
Offered Certificates. The Underwriters
expect, although no assurance can be given,
that the Class A Certificates will be held
by at least 100 such persons, and the
Transferor anticipates that the other
conditions of the "publicly-offered
security" exception contained in the
regulations will be met. No monitoring or
other measures will be taken to ensure that
any such conditions will be met with respect
to the Class A Certificates. If the Trust's
assets were deemed to be "plan assets" of
such a plan, there is uncertainty as to
whether existing exemptions from the
"prohibited transaction" rules of the
Employee Retirement Income Security Act of
1974, as amended ("ERISA") and the Internal
Revenue Code of 1986, as amended (the
"Code") would apply to all transactions
involving the Trust's assets. Accordingly,
employee benefit plans contemplating
purchasing Class A Certificates should
consult their counsel before making a
purchase.
The Underwriters currently do not expect that
the Class B Certificates will be held by at
least 100 such persons and, therefore, do
not expect that the Class B Certificates
will qualify as publicly-offered securities
under the regulations referred to in the
immediately preceding paragraph.
Accordingly, the Class B Certificates may
not be acquired by (i) an employee benefit
plan (as defined in Section 3(3) of ERISA)
that is subject to the
S-16
<PAGE>
provisions of Title I of ERISA, (ii) a plan
described in Section 4975(e)(1) of the Code,
or (iii) any entity whose underlying assets
include plan assets by reason of a plan's
investment in the entity (including, without
limitation, an insurance company general
account). By its acceptance of an interest
in a Class B Certificate, 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. See "ERISA Considerations" in
the Prospectus.
Class A Certificate Rating.. It is a condition to the issuance of the
Class A Certificates that they be rated in
the highest rating category by at least one
Rating Agency. The rating of the Class A
Certificates is based primarily on the value
of the Receivables, and the terms of the
Class B Certificates and the CIA
Certificates.
Class B Certificate Rating.. It is a condition to the issuance of the
Class B Certificates that they receive a
rating of at least "A" or its equivalent by
at least one Rating Agency. The rating of
the Class B Certificates is based primarily
on the value of the Receivables and the
terms of the CIA Certificates.
Listing..................... Application has been made to list the Offered
Certificates on the Luxembourg Stock
Exchange.
S-17
<PAGE>
RECENT DEVELOPMENTS
Pursuant to an Agreement and Plan of Merger dated as of January 19, 1997,
and amended as of April 23, 1997, between First USA, Inc. ("FUSA") and BANC
ONE CORPORATION ("BANC ONE"), FUSA was merged with and into BANC ONE on June
27, 1997 (the "Merger") at which time the separate corporate existence of FUSA
ceased. As a result of the Merger, the Bank is now an indirect wholly-owned
subsidiary of BANC ONE. See "The Bank and BANC ONE CORPORATION" in the
Prospectus.
BANC ONE intends to consolidate the management of its credit card operations
with those of FUSA. BANC ONE may also consolidate the operations of certain
other subsidiaries or divisions of BANC ONE and FUSA which provide similar
services, although no final determination with respect to such matters has
been made. No decision has been made as to whether receivables in accounts
originated by Bank One, N.A. or Bank One, Arizona, N.A., or any affiliate
thereof (other than the Bank) will be added at any time to the Trust. Any such
addition would be subject to the restrictions on additions of Accounts in the
Pooling and Servicing Agreement. See "Description of the Certificates--
Addition of Accounts" in the Prospectus.
THE BANK'S CREDIT CARD PORTFOLIO
GENERAL
The Receivables which the Bank has conveyed and will convey to the Trust
pursuant to the Pooling and Servicing Agreement have been and will be
generated from transactions made by holders of selected VISA and MasterCard
credit card accounts, including premium accounts and standard accounts. As of
June 30, 1997, approximately 70% of the accounts in the Bank Portfolio were
premium accounts and approximately 30% were standard accounts. See "The Bank's
Credit Card Activities" in the Prospectus.
ASSESSMENT OF FEES AND FINANCE AND OTHER CHARGES
A billing statement is sent to each cardholder at the end of each monthly
billing cycle in which the account has a debit or credit balance of more than
one dollar or if a finance charge has been imposed. With minor exceptions, the
minimum payment due each month on each account is equal to the greater of $10
or 2% of the new balance shown on the statement, plus any amount past due and
any amount over the cardholder's credit line. The Bank may assess a late
payment fee, generally ranging from $10 to $25 for most accounts, if it does
not receive the minimum payment by the payment due date shown on the monthly
billing statement, but generally does not assess such fee if the minimum
payment is received by the next billing date. The Bank may assess a return
check fee, generally ranging from $10 to $25, for each payment check that is
dishonored or that is unsigned or otherwise irregular, an overlimit fee,
generally ranging from $10 to $25, for Purchases or Cash Advances that cause
the credit line to be exceeded and administrative fees for certain functions
performed at the request of the cardholder. Unless otherwise arranged between
the Bank and the cardholder, any late payment fee, return check fee or
administrative fee is added to the account and treated as a Purchase. In some
cases, the Bank charges a non-refundable Annual Membership Fee. In addition,
the Bank assesses on some cardholder accounts a transaction fee for the
purchase of money orders, the use of wire transfers and the use of convenience
checks, equal to the greater of 2% of the amount thereof and $10.
Monthly Periodic Finance Charges are not assessed in most circumstances on
Purchases and credit line checks if all balances shown in the billing
statement are paid by the payment due date, which is approximately 23-25 days
from the previous cycle billing date. Monthly Periodic Finance Charges are
assessed on new Purchases and credit line checks from the day that they are
posted to the account if all balances shown in the prior billing statement
were not paid in full by the payment due date. Monthly Periodic Finance
Charges are assessed on Cash Advances from the later of the day that they are
made or the first day of the billing cycle during which they were posted to
the account. Aggregate monthly finance charges for each account consist of
Periodic Finance Charges equal to either (i) the product of the monthly
periodic rate (the "Monthly Periodic Rate") multiplied by the average daily
balance or (ii) the product of the daily balance and the daily periodic rate
totaled for each day during the monthly billing cycle; plus an additional Cash
Advance finance charge (not
S-18
<PAGE>
applicable for certain accounts), generally equal to a one-time charge of 2%
of the Cash Advance (with a minimum ranging from $2 to $10 and a maximum
ranging from $10 to unlimited), for each new Cash Advance posted to the
account. The Monthly Periodic Rates, exclusive of introductory rates, of the
accounts in the Bank Portfolio generally range between 0.825% and 1.83%
corresponding to annual percentage rates of between 9.9% and 22.0%. The
introductory rates on the accounts in the Bank Portfolio are primarily fixed
annual percentage rates. The annual percentage rates, after the introductory
rate period, are usually fixed or floating Monthly Periodic Rates that adjust
periodically according to an index.
DELINQUENCY AND LOSS EXPERIENCE
The following tables set forth the delinquency and loss experience for each
of the periods shown for the portfolio of VISA and MasterCard credit card
accounts serviced by the Bank (the "Bank Portfolio"). The Bank has changed its
charge-off policy to align it with that of BANC ONE. For the Trust, this
change in charge-off policy will be implemented over the course of a six month
period which began in July 1997 and will end in December 1997. The Bank will
now generally charge off an account immediately prior to the end of the sixth
billing cycle after having become contractually past due. Its prior policy was
to charge off accounts immediately prior to the end of the seventh billing
cycle after having become contractually past due. Receivables Delinquent 95 or
more days and Net Losses in the following tables have been restated to reflect
this change in charge-off policy for each of the periods shown.
As of the close of business on August 31, 1997, the Receivables in the Trust
Portfolio (including the Receivables in the Additional Accounts added to the
Trust on September 9, 1997 and certain Additional Accounts designated to be
added to the Trust on the Closing Date) represented approximately 94.8% of the
Bank Portfolio. The accounts in the Bank Portfolio that are not included in
the Trust Portfolio are primarily newly originated accounts with lower
delinquency and loss rates than the average accounts in the Trust Portfolio
which are generally more seasoned. Therefore, the actual delinquency and loss
experience with respect to the Receivables in the Trust Portfolio may be
different from that set forth below. There can be no assurance that the
delinquency and loss experience for the Trust Portfolio will be similar to the
historical experience set forth below because, among other things, economic
and financial conditions affecting the ability of cardholders to make payments
may be different from those that have prevailed during the periods reflected
below.
DELINQUENCY EXPERIENCE
BANK PORTFOLIO
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
AS OF DECEMBER 31, (1)
SIX MONTHS ENDED -----------------------------------------------------------------------
JUNE 30, 1997 1996 1995 1994
------------------------ ----------------------- ----------------------- -----------------------
PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
OF TOTAL OF TOTAL OF TOTAL OF TOTAL
RECEIVABLES RECEIVABLES RECEIVABLES RECEIVABLES RECEIVABLES RECEIVABLES RECEIVABLES RECEIVABLES
------------ ----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Receivables
Outstanding(2)......... $ 24,619,969 100.00% $22,119,202 100.00% $17,411,514 100.00% $10,989,357 100.00%
============ ====== =========== ====== =========== ====== =========== ======
Receivables Delinquent:
35-64 days............. $ 321,263 1.30% $ 359,275 1.62% $ 219,240 1.26% $ 106,275 0.97%
65-94 days............. 242,393 0.98 250,468 1.13 130,088 0.75 53,691 0.49
95 or more days(3)..... 441,131 1.80 475,115 2.15 231,315 1.32 100,532 0.91
------------ ------ ----------- ------ ----------- ------ ----------- ------
Total................. $ 1,004,787 4.08% $ 1,084,858 4.90% $ 580,643 3.33% $ 260,498 2.37%
============ ====== =========== ====== =========== ====== =========== ======
</TABLE>
- --------
(1) The information set forth in the table above is stated on a basis
consistent with the Bank's current fiscal year. The Bank changed its
fiscal year end from June 30 to December 31 in connection with the Merger.
(2) The Receivables Outstanding on the accounts consist of all amounts due
from cardholders as posted to the accounts.
(3) The amount of Receivables Delinquent 95 or more days for each of the
periods shown is stated on a basis consistent with the Bank's current
policy of charging off an account immediately prior to the end of the
sixth billing cycle after having become contractually past due. Its prior
policy, which applied during the periods shown above, was to charge off
accounts immediately prior to the end of the seventh billing cycle after
having become contractually past due.
S-19
<PAGE>
LOSS EXPERIENCE
BANK PORTFOLIO
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31, (1)
JUNE 30, ------------------------------------
1997 1996 1995 1994
----------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Average Receivables Out-
standing(2)................ $23,003,652 $18,986,458 $13,497,080 $7,680,291
Gross Charge-Offs(3)........ 675,830 895,267 416,406 180,715
Gross Charge-Offs as a
percentage of Average
Receivables Outstanding(4). 5.92% 4.72% 3.09% 2.35%
Recoveries(5)............... 57,916 61,787 23,597 14,688
Net Losses(5)............... 617,914 833,480 392,809 166,027
Net Losses as a percentage
of Average Receivables
Outstanding(4)............. 5.42% 4.39% 2.91% 2.16%
</TABLE>
- --------
(1) The information set forth in the table above is stated on a basis
consistent with the Bank's current fiscal year. The Bank changed its
fiscal year end from June 30 to December 31 in connection with the Merger.
(2) Average Receivables Outstanding is the average daily receivables during
the periods indicated.
(3) Gross Charge-Offs are principal charge-offs before recoveries and do not
include the amount of any reductions in Average Receivables Outstanding
due to fraud, returned goods or customer disputes.
(4) Annualized.
(5) Recoveries are included in the Trust as of July 1, 1996. Net Losses for
each of the periods shown are stated on a basis consistent with the Bank's
current policy of charging off an account immediately prior to the end of
the sixth billing cycle after having become contractually past due. Its
prior policy, which applied during the periods shown above, was to charge
off accounts immediately prior to the end of the seventh billing cycle
after having become contractually past due.
The Bank's delinquency and net credit loss rates at any time reflect, among
other factors, the quality of the credit card loans, the average seasoning of
the Bank's accounts, the success of the Bank's collection efforts and general
economic conditions. Receivables delinquent as a percentage of total
receivables outstanding increased from 2.37% at December 31, 1994 to 3.33% at
December 31, 1995 to 4.90% at December 31, 1996 and decreased to 4.08% at June
30, 1997. Net losses as a percentage of average receivables outstanding
increased from 2.16% for 1994 to 2.91% for 1995 to 4.39% for 1996 to 5.42% for
the six months ended June 30, 1997. Newly booked accounts historically have
exhibited rising delinquencies and losses which reach a steady state within
approximately two to three years after origination. As new loan originations
have continued to become a smaller percentage of the Bank Portfolio,
delinquency, gross charge-off and net credit loss rates for the Bank Portfolio
have increased. In addition, industry losses and delinquencies have increased
over recent periods. The industry also continues to experience intense
competition, which results in increased account turnover and higher costs per
account. The Bank's focus continues to be to optimize the profitability of
each account within the context of acceptable risk characteristics. As the
Bank increases market penetration, it will continue to focus on segments of
the credit market which have been highly profitable, and the Bank believes its
delinquency and loss rates will generally follow industry trends.
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 this
Interchange in connection with cardholder Purchases is collected by banks that
issue credit cards by applying a discount to the amount paid by such banks to
the banks that clear the related transactions for merchants. Interchange
currently ranges from approximately 1.0% to 2.0% of the transaction amount.
Interchange will be allocated to the Trust by treating 1.3% (subject to
adjustment at the option of the Transferor upon the satisfaction of certain
conditions as described in the Prospectus under "Description of the
Certificates--Discount Receivables") of collections on
S-20
<PAGE>
the Receivables (whether arising from Purchases or Cash Advances), other than
collections with respect to Periodic Finance Charges, Annual Membership Fees
and Other Charges, as collections of Discount Receivables.
THE RECEIVABLES
The Receivables in the Trust Portfolio (including the Additional Accounts
added to the Trust on September 9, 1997 and certain Additional Accounts
designated to be added to the Trust on the Closing Date), as of the close of
business on August 31, 1997, consisted of $24,277,199,446 of Principal
Receivables and $706,228,570 of Finance Charge Receivables. On August 26, 1997
(the "Relevant Cut Off Date"), the Transferor designated Additional Accounts,
which included approximately $743,116,685 of Principal Receivables as of the
close of business on August 31, 1997, and will transfer the Receivables
arising therein to the Trust on the Closing Date. In addition, on the Closing
Date, the Transferor will deposit $2,310,000 into the Finance Charge Account,
which will be applied as collections of Finance Charge Receivables received
during the initial Monthly Period and allocated to Series 1997-8 (the "Offered
Series"). The Additional Accounts to be added to the Trust on the Closing Date
were, as of the Relevant Cut Off Date, Eligible Accounts. The Accounts,
including such Additional Accounts, had an average Principal Receivable
balance of $1,904 (including accounts with a zero balance) and an average
credit limit of $8,325. The percentage of the aggregate total Receivable
balance to the aggregate total credit limit was 23.5%.
As of August 31, 1997, cardholders whose Accounts are included in the Trust
Portfolio, including such Additional Accounts, had billing addresses in 50
states, the District of Columbia and other United States territories and
possessions. As of August 31, 1997, 72% of the Accounts, including such
Additional Accounts, were premium accounts and 28% were standard accounts, and
the aggregate Principal Receivable balances of premium accounts and standard
accounts, as a percentage of the aggregate total Principal Receivables, were
83% and 17%, respectively.
The percentage used to determine the Minimum Transferor Interest applicable
to the Certificates is 7%. The Minimum Aggregate Principal Receivables
applicable to the Certificates is an amount equal to (i) the sum of the
initial invested amounts of all Series then outstanding other than any Series
of variable funding certificates, (ii) with respect to any Series of variable
funding certificates in its revolving period, the then current invested amount
of such Series and (iii) with respect to any Series of variable funding
certificates in its amortization period, the invested amount of such Series at
the end of the last day of the revolving period for such Series.
The following tables summarize the Trust Portfolio (including the Additional
Accounts added to the Trust on September 9, 1997 and certain Additional
Accounts designated to be added to the Trust on the Closing Date) by various
criteria as of the close of business on August 31, 1997. Because the future
composition of the Trust Portfolio may change over time, these tables are not
necessarily indicative of the composition of the Trust Portfolio at any
subsequent time.
COMPOSITION BY ACCOUNT BALANCE
TRUST PORTFOLIO
<TABLE>
<CAPTION>
PERCENTAGE
OF TOTAL PERCENTAGE OF
ACCOUNT NUMBER OF NUMBER OF AMOUNT OF TOTAL AMOUNT OF
BALANCE RANGE ACCOUNTS ACCOUNTS RECEIVABLES RECEIVABLES
------------- ---------- ---------- --------------- ---------------
<S> <C> <C> <C> <C>
Credit Balance.......... 173,434 1.4% $ (40,408,994) (0.2%)
No Balance.............. 4,464,975 35.0 -- --
$0.01 to $2,000.00...... 4,058,979 31.8 2,706,215,307 10.8
$2,000.01 to $5,000.00.. 2,249,809 17.6 7,961,101,076 31.9
$5,000.01 to $10,000.00. 1,501,378 11.8 10,419,991,845 41.7
$10,000.01 or More...... 303,551 2.4 3,936,528,782 15.8
---------- ----- --------------- ----
TOTAL............... 12,752,126 100.0% $24,983,428,016 100%
========== ===== =============== ====
</TABLE>
S-21
<PAGE>
COMPOSITION BY CREDIT LIMIT
TRUST PORTFOLIO
<TABLE>
<CAPTION>
PERCENTAGE
OF TOTAL PERCENTAGE OF
CREDIT NUMBER OF NUMBER OF AMOUNT OF TOTAL AMOUNT OF
LIMIT RANGE ACCOUNTS ACCOUNTS RECEIVABLES RECEIVABLES
----------- ---------- ---------- --------------- ---------------
<S> <C> <C> <C> <C>
$0.00 to $2,000.00....... 966,271 7.6% $ 505,036,625 2.0%
$2,000.01 to $5,000.00... 3,316,809 26.0 5,116,796,874 20.5
$5,000.01 to $10,000.00.. 4,811,829 37.7 10,399,223,135 41.6
$10,000.01 or More....... 3,657,217 28.7 8,962,371,382 35.9
---------- ----- --------------- -----
TOTAL................ 12,752,126 100.0% $24,983,428,016 100.0%
========== ===== =============== =====
COMPOSITION BY PERIOD OF DELINQUENCY
TRUST PORTFOLIO
<CAPTION>
PERCENTAGE
PERIOD OF DELINQUENCY OF TOTAL PERCENTAGE OF
(DAYS CONTRACTUALLY NUMBER OF NUMBER OF AMOUNT OF TOTAL AMOUNT OF
DELINQUENT) ACCOUNTS ACCOUNTS RECEIVABLES RECEIVABLES
--------------------- ---------- ---------- --------------- ---------------
<S> <C> <C> <C> <C>
Not Delinquent........... 12,213,849 95.8% $22,569,987,028 90.4%
Up to 34 Days............ 328,611 2.6 1,333,046,873 5.3
35 to 64 Days............ 79,126 0.6 352,896,614 1.4
65 to 94 Days............ 45,876 0.4 221,139,840 0.9
95 or More Days (1)...... 84,664 0.6 506,357,661 2.0
---------- ----- --------------- -----
TOTAL................ 12,752,126 100.0% $24,983,428,016 100.0%
========== ===== =============== =====
</TABLE>
- --------
(1) A change in the Bank's charge-off policy, which is being implemented over
a six month period beginning in July 1997, will result in a decrease in
the number of accounts and amount of receivables delinquent 95 or more
days but will also result in an increase in Default Amounts during such
period. See "The Bank's Credit Card Portfolio--Delinquency and Loss
Experience" herein.
COMPOSITION OF ACCOUNTS BY AGE
TRUST PORTFOLIO
<TABLE>
<CAPTION>
PERCENTAGE
OF TOTAL PERCENTAGE OF
NUMBER OF NUMBER OF AMOUNT OF TOTAL AMOUNT OF
AGE ACCOUNTS ACCOUNTS RECEIVABLES RECEIVABLES
--- ---------- ---------- --------------- ---------------
<S> <C> <C> <C> <C>
Less than or equal to 6
Months.................. 2,574,320 20.2% $ 4,328,959,075 17.3%
Over 6 Months to 12
Months.................. 1,532,741 12.0 3,300,912,715 13.2
Over 12 Months to 24
Months.................. 2,889,620 22.6 6,100,995,098 24.4
Over 24 Months to 36
Months.................. 2,549,109 20.0 5,555,819,397 22.3
Over 36 Months to 48
Months.................. 1,462,146 11.5 2,684,064,019 10.8
Over 48 Months to 60
Months.................. 678,124 5.3 1,132,826,426 4.5
Over 60 Months........... 1,066,066 8.4 1,879,851,286 7.5
---------- ----- --------------- -----
TOTAL................ 12,752,126 100.0% $24,983,428,016 100.0%
========== ===== =============== =====
</TABLE>
S-22
<PAGE>
COMPOSITION BY GEOGRAPHIC DISTRIBUTION
TRUST PORTFOLIO
<TABLE>
<CAPTION>
PERCENTAGE
OF TOTAL PERCENTAGE OF
NUMBER OF NUMBER OF AMOUNT OF TOTAL AMOUNT OF
STATE ACCOUNTS ACCOUNTS RECEIVABLES RECEIVABLES
----- ---------- ---------- --------------- ---------------
<S> <C> <C> <C> <C>
Alabama.................. 135,938 1.1% $ 276,414,610 1.1%
Alaska................... 31,187 0.2 78,810,985 0.3
Arizona.................. 219,604 1.7 450,838,791 1.8
Arkansas................. 107,159 0.8 194,190,529 0.8
California............... 1,561,584 12.2 3,469,481,006 13.9
Colorado................. 213,154 1.7 423,749,025 1.7
Connecticut.............. 189,002 1.5 377,280,051 1.5
Delaware................. 41,544 0.3 62,395,449 0.2
District of Columbia..... 24,999 0.2 56,373,129 0.2
Florida.................. 843,344 6.6 1,668,991,898 6.7
Georgia.................. 289,714 2.3 623,387,430 2.5
Hawaii................... 58,319 0.5 131,999,466 0.5
Idaho.................... 56,355 0.4 110,855,482 0.4
Illinois................. 601,574 4.7 1,091,517,084 4.4
Indiana.................. 170,184 1.3 299,239,349 1.2
Iowa..................... 14,026 0.1 23,500,512 0.1
Kansas................... 122,389 1.0 232,380,194 0.9
Kentucky................. 135,074 1.1 233,681,441 0.9
Louisiana................ 263,892 2.1 466,337,332 1.9
Maine.................... 51,264 0.4 92,321,823 0.4
Maryland................. 300,647 2.4 634,021,532 2.5
Massachusetts............ 405,121 3.2 716,334,707 2.9
Michigan................. 424,679 3.3 838,484,078 3.4
Minnesota................ 152,222 1.2 250,872,890 1.0
Mississippi.............. 85,003 0.7 162,724,934 0.6
Missouri................. 234,317 1.8 424,061,413 1.7
Montana.................. 48,618 0.4 91,419,966 0.4
Nebraska................. 81,699 0.6 128,027,384 0.5
Nevada................... 101,323 0.8 228,733,568 0.9
New Hampshire............ 60,463 0.5 112,691,799 0.5
New Jersey............... 512,142 4.0 931,271,710 3.7
New Mexico............... 83,510 0.7 160,012,185 0.6
New York................. 939,183 7.4 1,849,285,351 7.4
North Carolina........... 256,183 2.0 504,432,638 2.0
North Dakota............. 27,911 0.2 43,630,169 0.2
Ohio..................... 501,147 3.9 915,276,810 3.7
Oklahoma................. 212,122 1.7 387,483,012 1.6
Oregon................... 177,243 1.4 363,597,850 1.5
Pennsylvania............. 555,651 4.4 883,877,666 3.5
Rhode Island............. 55,675 0.4 99,388,489 0.4
South Carolina........... 125,069 1.0 237,725,301 1.0
South Dakota............. 29,883 0.2 53,004,508 0.2
Tennessee................ 133,325 1.0 250,129,585 1.0
Texas.................... 1,208,122 9.5 2,487,388,508 10.0
Utah..................... 84,026 0.7 152,323,078 0.6
Vermont.................. 26,633 0.2 46,992,670 0.2
Virginia................. 336,683 2.6 705,879,325 2.8
Washington............... 303,166 2.4 671,496,988 2.7
West Virginia............ 70,592 0.6 128,148,383 0.5
Wisconsin................ 31,194 0.2 50,064,215 0.2
Wyoming.................. 24,838 0.2 45,386,333 0.2
Other U.S. territories
and possessions......... 33,430 0.2 65,515,385 0.2
---------- ----- --------------- -----
TOTAL.................... 12,752,126 100.0% $24,983,428,016 100.0%
========== ===== =============== =====
</TABLE>
Since the largest number of cardholders (based on billing addresses) whose
accounts were included in the Trust as of August 31, 1997 were in California,
Texas, New York, Florida and Illinois, adverse changes in the economic
conditions in these areas could have a direct impact on the timing and amount
of payments on the Certificates.
S-23
<PAGE>
MATURITY CONSIDERATIONS
The Pooling and Servicing Agreement provides that Class A Certificateholders
will not begin to receive payments of principal until the Class A Scheduled
Payment Date, which is the September 2007 Distribution Date, or earlier in the
event of a Pay Out Event which results in the commencement of the Rapid
Amortization Period. The Class B Certificateholders will not begin to receive
payments of principal until the Class A Invested Amount has been paid in full.
Principal on the Class B Certificates is expected to be paid on the Class B
Scheduled Payment Date which is the September 2007 Distribution Date.
On each Transfer Date during the Accumulation Period prior to the payment of
the Class A Invested Amount in full, an amount equal to, for each Monthly
Period, the least of (a) the Available Investor Principal Collections, (b) the
applicable "Controlled Deposit Amount," which is equal to the sum of the
applicable Controlled Accumulation Amount for such Monthly Period and the
applicable Accumulation Shortfall, if any, and (c) the Class A Adjusted
Invested Amount prior to any deposits on such day will be deposited in the
Principal Funding Account until the amount on deposit in the Principal Funding
Account (the "Principal Funding Account Balance") equals the Class A Invested
Amount. After the full amount of the Class A Invested Amount has been
deposited in the Principal Funding Account, an amount equal to, for each
Monthly Period, the least of (a) the Available Investor Principal Collections
remaining after the application thereof to the Class A Invested Amount, if
any, (b) the applicable Controlled Deposit Amount (minus the Class A Monthly
Principal) and (c) the Class B Adjusted Invested Amount prior to any deposits
on such day will be deposited in the Principal Funding Account until the
Principal Funding Account Balance equals the sum of the Class A Invested
Amount and the Class B Invested Amount and such amount will be distributed to
the Class B Certificateholders on the Class B Scheduled Payment Date and, if
the Class B Invested Amount is not paid in full on such date, on each
subsequent Distribution Date until the earlier of the date the Class B
Invested Amount has been paid in full and the Stated Series Termination Date.
After the Class A Invested Amount and the Class B Invested Amount have each
been paid in full, an amount equal to, for each Monthly Period, the least of
(a) the Available Investor Principal Collections remaining after the
application thereof to the Class A Invested Amount and the Class B Invested
Amount, if any, (b) the applicable Controlled Deposit Amount (minus the Class
A Monthly Principal and Class B Monthly Principal) and (c) the CIA Adjusted
Invested Amount prior to any deposits on such day will be deposited in the
Principal Funding Account until the Principal Funding Account Balance equals
the sum of the Class A Invested Amount, the Class B Invested Amount and the
CIA Invested Amount and such amount will be distributed to the CIA
Certificateholders on the CIA Scheduled Payment Date and, if the CIA Invested
Amount is not paid in full on such date, on each subsequent Distribution Date
until the earlier of the date on which the Invested Amount has been paid in
full and the Stated Series Termination Date. Amounts in the Principal Funding
Account are expected to be available to pay the Class A Invested Amount on the
Class A Scheduled Payment Date and the Class B Invested Amount 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
Accumulation Period to make a deposit of the applicable Controlled Deposit
Amount and that the Class A Invested Amount will be paid to the Class A
Certificateholders on the Class A Scheduled Payment Date and the Class B
Invested Amount 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 Invested Amount or the Class
B Invested Amount in full is not available on the Class A Scheduled Payment
Date or the Class B Scheduled Payment Date, respectively, the Rapid
Amortization Period will commence.
If a Pay Out Event occurs during the Accumulation Period, the Rapid
Amortization Period will commence and any amount on deposit in the Principal
Funding Account will be paid to the Class A Certificateholders on the next
Distribution Date. In addition, to the extent that the Class A Invested Amount
has not been paid in full on the Class A Scheduled Payment Date, the Class A
Certificateholders will be entitled to monthly payments of principal on each
succeeding Distribution Date equal to the Available Investor Principal
Collections until the Class A Certificates have been paid in full. After the
Class A Certificates have been paid in full, 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 Invested Amount has been
paid in full and the Stated Series Termination Date.
S-24
<PAGE>
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 Pooling and Servicing Agreement, (b) material breaches of
certain representations, warranties or covenants of the Transferor, (c)
certain events of insolvency or receivership relating to the Transferor, (d)
the occurrence of a Servicer Default which would have a material adverse
effect on the Certificateholders, (e) the failure of the Transferor to convey
Receivables arising under Additional Accounts to the Trust when required by
the Pooling and Servicing Agreement, (f) the Trust's becoming an "investment
company" within the meaning of the Investment Company Act of 1940, as amended,
or (g) a reduction in the average Portfolio Yield for any three consecutive
Monthly Periods to a rate which is less than the weighted average Base Rate
for such three consecutive Monthly Periods. The "Base Rate" means, with
respect to any Monthly Period, the weighted average of the Class A Certificate
Rate, the Class B Certificate Rate and the CIA Certificate Rate as of the last
day of such Monthly Period (weighted based on the Class A Invested Amount, the
Class B Invested Amount and the CIA Invested Amount, respectively, as of the
last day of such Monthly Period) plus the product of 2.00% per annum and the
percentage equivalent of a fraction the numerator of which is the sum of the
Class A Adjusted Invested Amount, the Class B Adjusted Invested Amount and the
CIA Adjusted Invested Amount and the denominator of which is the Invested
Amount, each as of 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 an amount equal to the sum
of (i) the amount of collections of Finance Charge Receivables allocable to
the Certificateholders for such Monthly Period, (ii) the investment proceeds
on amounts on deposit in the Principal Funding Account which are deposited in
the Finance Charge Account on the Transfer Date related to such Monthly Period
and (iii) the amount, if any, withdrawn from the Reserve Account to be
deposited in the Finance Charge Account on the Transfer Date relating to such
Monthly Period, calculated on a cash basis after subtracting an amount equal
to the Investor Default Amount for such Monthly Period, and the denominator of
which is the Invested Amount as of the last day of the preceding Monthly
Period. See "Description of the Certificates--Pay Out Events" herein and in
the Prospectus.
The following table sets forth the highest and lowest cardholder monthly
payment rates for the Bank Portfolio during any month in the periods 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
SIX MONTHS DECEMBER 31,
ENDED -------------------
JUNE 30, 1997 1996 1995 1994
------------- ----- ----- -----
<S> <C> <C> <C> <C>
Lowest Month................................. 11.73% 10.16% 9.86% 10.46%
Highest Month................................ 13.51 11.86 11.73 12.14
Monthly Average.............................. 12.62 11.18 10.90 11.17
</TABLE>
The amount of collections of Receivables may vary from month to month due to
seasonal variations, general economic conditions, payment habits of individual
cardholders and number of collection days. 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. If a Pay Out Event
occurs, the average life and maturity of the Certificates could be
significantly reduced. In addition, there can be no assurance that the
issuance of other Series or the terms of any other Series might not have an
impact on the timing of the payments received by the Certificateholders.
Because there may be a slowdown in the payment rate below the payment rate
used to determine the Controlled Accumulation Amount 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 expected number of months. See "Risk
Factors--Payments and Maturity" in the Prospectus. As described under
S-25
<PAGE>
"Description of the Certificates--Postponement of Accumulation Period" herein
the Servicer may shorten the Accumulation Period and, in such event, there can
be no assurance that the duration of the Accumulation Period will be
sufficient for the accumulation of all amounts necessary to pay the Class A
Invested Amount and the Class B Invested Amount on the Class A Scheduled
Payment Date and the Class B Scheduled Payment Date, respectively, especially
if a pay out event were to occur with respect to one or more other Series
thereby limiting the amount of Excess Principal Collections allocable to the
Offered Series.
RECEIVABLE YIELD CONSIDERATIONS
The portfolio yield on the Bank Portfolio for each of the three years
contained in the period ended December 31, 1996 and for the six months ended
June 30, 1997 is set forth in the following table. The portfolio yields in the
table are calculated on an accrual basis. The portfolio yield on Receivables
included in the Trust is calculated on a cash basis. Portfolio yields
calculated on an accrual basis may differ from portfolio yields calculated on
a cash basis due to (a) a lag between when finance charges and fees are
charged to cardholder accounts and when such finance charges and fees are
collected and (b) finance charges and fees that are not ultimately collected
from the cardholder. However, during the three years contained in the period
ended December 31, 1996 and for the six months ended June 30, 1997, portfolio
yield on an accrual basis approximated portfolio yield on a cash basis.
Portfolio yield on both an accrual and a cash basis will also be affected by
numerous factors, including changes in the Monthly Periodic Rates, variations
in the rate of payments and new borrowings on the Accounts, the amount of the
Annual Membership Fees and Other Charges, changes in the delinquency and loss
rates on the Receivables and the percentage of cardholders who pay their
balances in full each month and do not incur Periodic Finance Charges, which
may in turn be caused by a variety of factors, including seasonal variations,
the availability of other sources of credit and general economic conditions.
See "Maturity Assumptions" in the Prospectus. Interchange allocated to the
Trust with respect to the Receivables may vary from the amounts included in
the table below because Interchange will be included in the Trust on an
estimated basis by initially treating 1.3% of collections on the Receivables,
other than collections with respect to Periodic Finance Charges, Annual
Membership Fees and Other Charges, as Discount Receivables.
PORTFOLIO YIELD
BANK PORTFOLIO
<TABLE>
<CAPTION>
SIX MONTHS YEAR ENDED DECEMBER 31,
ENDED -------------------------
JUNE 30, 1997 1996 1995 1994
------------- ------- ------- -------
<S> <C> <C> <C> <C>
Average account monthly accrued fees
and charges (1)(2)................... $39.39 $36.82 $ 32.35 $27.17
Average account balance(3)............ 2,979 2,799 2,580 2,219
Portfolio yield from fees and charges
(1)(4)............................... 15.87% 15.79% 15.04% 14.69%
</TABLE>
- --------
(1) Fees and charges are comprised of Periodic Finance Charges, Interchange,
Annual Membership Fees and Other Charges.
(2) Average account monthly accrued fees and charges are presented net of
adjustments made pursuant to the Bank's normal servicing procedures,
including removal of incorrect or disputed Periodic Finance Charges, and
include Interchange.
(3) Average account balance includes Purchases, Cash Advances and accrued and
unpaid Periodic Finance Charges, Annual Membership Fees and Other Charges
and is calculated based on the average of the month end balances for
accounts with balances.
(4) Annualized.
The increase in portfolio yield for the years ended December 31, 1995 and
December 31, 1996 and for the six months ended June 30, 1997 reflects changes
in the overall pricing distribution of the Bank Portfolio. The accounts in the
Bank Portfolio that are not included in the Trust Portfolio are primarily
newly originated accounts with a greater proportion of Receivables arising
pursuant to direct solicitations of low-rate, no annual fee credit cards, with
on average a lower introductory rate, than the average accounts in the Trust
Portfolio, which are more seasoned. Therefore, the actual portfolio yield with
respect to the Receivables in the Trust Portfolio may be different from that
set forth above.
S-26
<PAGE>
POOL FACTOR AND TRADING INFORMATION
The "Class A Pool Factor" and the "Class B Pool Factor" are seven-digit
decimals, which the Servicer will compute monthly, expressing as of each
Record Date the Class A Invested Amount as a proportion of the Class A
Invested Amount as of the date of initial issuance of the Certificates (the
"Closing Date") and the Class B Invested Amount as a proportion of the Class B
Invested Amount as of the Closing Date, respectively. On the Closing Date, the
Class A Pool Factor and the Class B Pool Factor (referred to collectively as
the "Pool Factor") each will be 1.0000000 and will remain unchanged during the
Revolving Period, except in certain limited circumstances. Thereafter, the
Class A Pool Factor will decline to reflect reductions in the Class A Invested
Amount during either Amortization Period and the Class B Pool Factor will
decline to reflect reductions in the Class B Invested Amount during either
Amortization Period. The value of a Certificateholder's pro rata share in the
Principal Receivables in the Trust for a given month can be determined by
multiplying the denomination of the holder's Certificate by the Pool Factor
for the related Class for that month.
USE OF PROCEEDS
The net proceeds from the sale of the Offered Certificates will be (i) used
to make an initial deposit to the Finance Charge Account in the amount of
$2,310,000, (ii) if so required, used to make an initial deposit to an account
for the benefit of the CIA Certificates, (iii) applied to the purchase of
receivables from First USA Credit Card Master Trust II and (iv) paid to the
Bank. The Bank will use such balance of the proceeds for its general corporate
purposes.
FIRST USA BANK
The Bank is among the nation's largest issuers of VISA and MasterCard credit
cards in the United States, with more than 17.8 million credit cards issued
and approximately $24.6 billion in managed credit card loans outstanding as of
June 30, 1997. See "The Bank and BANC ONE CORPORATION" in the Prospectus.
DESCRIPTION OF THE CERTIFICATES
The Offered Certificates will be issued pursuant to the Pooling and
Servicing Agreement and the Offered Series Supplement. Pursuant to the Pooling
and Servicing Agreement, the Transferor and the Trustee may execute further
Supplements in order to issue additional Series. The following summary of the
Offered 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
Pooling and Servicing Agreement and the Offered Series Supplement. See
"Description of the Certificates" in the Prospectus for additional information
concerning the Offered Certificates and the Pooling and Servicing Agreement.
GENERAL
The Certificates will represent undivided interests in certain 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 applicable Class A
Certificate Rate for the related Interest Period and payments of principal on
the Class A Scheduled Payment Date, or on each Distribution Date during the
Rapid Amortization Period, funded from collections of Finance Charge
Receivables (and Reallocated Principal Collections) and Principal Receivables,
respectively, allocated to the Class A Certificateholders' Interest and
certain other amounts. Each Class B Certificate represents the right to
receive payments of interest at the applicable Class B Certificate Rate for
the related Interest Period and payments of principal on the Class B Scheduled
Payment Date and on each Distribution Date during the Rapid Amortization
Period after the Class A Invested Amount has been paid in full funded from
collections of Finance Charge Receivables (and Reallocated CIA Principal
Collections) and Principal Receivables, respectively, allocated to the Class B
Certificateholders' Interest and certain other amounts. Payments of interest
and principal will be made
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on each Distribution Date to Certificateholders in whose names the
Certificates were registered on the last day of the calendar month preceding
such Distribution Date (each, a "Record Date").
The Class A Certificates and the Class B Certificates initially will be
represented by certificates registered in the name of the nominee of DTC.
Application has been made to list the Class A Certificates and the Class B
Certificates on the Luxembourg Stock Exchange.
In the event that Definitive Certificates are issued, an Offered Certificate
that is mutilated, destroyed, lost or stolen may be exchanged or replaced, as
the case may be, at the offices of the co-transfer agent and co-registrar in
Luxembourg upon presentation of the Offered Certificate or satisfactory
evidence of the mutilation, destruction, loss or theft thereof to the co-
transfer agent and co-registrar. An indemnity satisfactory to the co-transfer
agent and co-registrar and the Trustee may be required at the expense of the
Certificateholder before a replacement Offered Certificate will be issued. The
Certificateholder will be required to pay any tax or other governmental charge
imposed in connection with such exchange or replacement and any other expenses
(including the fees and expenses of the Trustee and the co-transfer agent and
co-registrar) connected 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.
The Trustee will maintain a paying agent in Luxembourg for so long as the
Offered Certificates are outstanding. The name and address of the paying agent
in Luxembourg are set forth at the end of this Prospectus Supplement. If
Definitive Certificates are issued, such paying agent also will act as co-
transfer agent and co-registrar with respect to the Definitive Certificates
and transfers of the Definitive Certificates may be made through the
facilities of such co-transfer agent. In addition, upon maturity or final
payment, such Definitive Certificates may be presented for payment at the
offices of such paying agent in Luxembourg up to two years after maturity or
final payment.
STATUS OF THE OFFERED SERIES
The Offered Series will rank pari passu with all other outstanding Series.
Payments on the Class B Certificates are subordinated to payments on the Class
A Certificates to the extent described herein and in the Prospectus. Payments
on the CIA Certificates are subordinated to payments on the Class A
Certificates and the Class B Certificates to the extent described herein and
in the Prospectus.
PRESCRIPTION
The Pooling and Servicing Agreement provides that any money paid by the
Trust to any of the paying agents 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
holder of an Offered Certificate may look only to the Trust for payment
thereof.
INTEREST PAYMENTS
Interest will accrue on the outstanding principal balance of the Class A
Certificates at the Class A Certificate Rate and on the outstanding principal
balance of the Class B Certificates at the Class B Certificate Rate from the
Closing Date. Interest will accrue on the Certificates and be payable on
October 17, 1997, and on the 17th day of each month thereafter, or if such
17th day is not a business day, on the next succeeding business day (each, a
"Distribution Date"), in an amount equal to (i) with respect to the Class A
Certificates, the product of (a) the actual number of days in the related
Interest Period divided by 360, (b) the Class A Certificate Rate and (c) the
outstanding principal amount of the Class A Certificates as of the preceding
Record Date (or in the case of the first Distribution Date, an amount equal to
the product of (x) the outstanding principal amount of the Class A
Certificates on the Closing Date, (y) 24 divided by 360 and (z) the Class A
Certificate Rate determined on
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September 19, 1997) and (ii) with respect to the Class B Certificates, the
product of (a) the actual number of days in the related Interest Period
divided by 360, (b) the Class B Certificate Rate and (c) the outstanding
principal amount of the Class B Certificates as of the preceding Record Date
(or in the case of the first Distribution Date, an amount equal to the product
of (x) the outstanding principal amount of the Class B Certificates on the
Closing Date, (y) 24 divided by 360 and (z) the Class B Certificate Rate
determined on September 19, 1997). Interest payments on the Certificates 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 to and including September 30, 1997), (i) with
respect to the Class A Certificates, allocated to the Class A
Certificateholders' Interest and, if necessary, from Excess Finance Charge
Collections allocated to the Class A Certificates and Reallocated Principal
Collections (to the extent available), (ii) with respect to the Class B
Certificates, allocated to the Class B Certificateholders' Interest and, if
necessary, from Excess Finance Charge Collections allocated to the Class B
Certificates and Reallocated CIA Principal Collections (to the extent
available) and (iii) with respect to the CIA Certificates, from Excess Finance
Charge Collections allocated to the CIA Certificateholders. The "Interest
Period" with respect to any Distribution Date will be the period from the
previous Distribution Date through the day preceding such Distribution Date,
except that the initial Interest Period will be the period from the Closing
Date through the day preceding the initial Distribution Date.
The Class A Certificates will bear interest at the rate of 0.15% above LIBOR
determined as set forth below from the Closing Date through October 16, 1997
and with respect to each Interest Period thereafter. The Class B Certificates
will bear interest at the rate of 0.36% above LIBOR determined as set forth
below from the Closing Date through October 16, 1997 and with respect to each
Interest Period thereafter.
The Trustee will determine LIBOR on September 19, 1997, for the period from
the Closing Date through October 16, 1997, and for each Interest Period
following the initial Interest Period, on the second business day prior to the
Distribution Date on which such Interest Period commences (each, a "LIBOR
Determination Date"). For purposes of calculating LIBOR, a business day is any
day, other than a Saturday, Sunday or day on which banking institutions in
London, England trading in U.S. dollar deposits in the London interbank
markets, or banking institutions in New York, New York or in Newark, Delaware,
are authorized or obligated by law or executive order to be closed.
"LIBOR" means, as of any LIBOR Determination Date, the rate for deposits in
United States dollars for a one-month period equal to the relevant Interest
Period 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 one-month period. The Trustee will request the
principal London office of each of the Reference Banks to provide a quotation
of its rate. If at least two such quotations are provided, the rate for that
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, selected by the Servicer, at approximately 11:00 a.m.,
New York City time, on that day for loans in United States dollars to leading
European banks for a one-month period.
"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 then current and immediately preceding Interest Period may be obtained by
telephoning The Bank of New York at (212) 815-5737. The Trustee will cause the
Class A Certificate Rate and the Class B Certificate Rate as well as the
amount of Class A
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Monthly Interest and Class B Monthly Interest applicable to an Interest Period
to be provided to the Luxembourg Stock Exchange and to be published in a daily
newspaper in Luxembourg (expected to be the Luxemburger Wort) 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 Class A Certificates and the Class B Certificates will be
calculated on the basis of the actual number of days in the Interest Period
and a 360 day year.
PRINCIPAL PAYMENTS
On each Transfer Date during the Revolving Period (the period from and
including the Closing Date to but excluding the earlier of (a) the
commencement of the Accumulation Period and (b) the commencement of the Rapid
Amortization Period), collections of Principal Receivables allocable to the
Invested Amount 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 Excess Principal Collections.
On each Transfer Date following the commencement of the Accumulation Period,
prior to the earlier of the payment of the Class A Invested Amount in full and
the commencement of the Rapid Amortization 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 the preceding Monthly Period,
(b) the applicable Controlled Deposit Amount and (c) the Class A Adjusted
Invested Amount prior to any such deposit on such day. Amounts in the
Principal Funding Account will be paid to the Class A Certificateholders on
the Class A Scheduled Payment Date. After the full amount of the Class A
Invested Amount has been deposited in the Principal Funding Account and
beginning with the Transfer Date related to the Class B Principal Commencement
Date, prior to the commencement of the Rapid Amortization Period, the Trustee
will deposit in the Principal Funding Account an amount equal to the least of
(a) the Available Investor Principal Collections with respect to the preceding
Monthly Period remaining after application thereof to the Class A Invested
Amount, if any, (b) the applicable Controlled Deposit Amount (minus the Class
A Monthly Principal with respect to such Transfer Date) and (c) the Class B
Adjusted Invested Amount prior to any such deposit on such day. After payment
in full of the Class A Invested Amount, amounts in the Principal Funding
Account will be paid to the Class B Certificateholders on the Class B
Scheduled Payment Date. After the full amount of the sum of the Class A
Invested Amount and the Class B Invested Amount has been deposited in the
Principal Funding Account, prior to the commencement of the Rapid Amortization
Period, the Trustee will deposit in the Principal Funding Account an amount
equal to the least of (a) the Available Investor Principal Collections with
respect to the preceding Monthly Period remaining after application thereof to
the Class A Invested Amount and the Class B Invested Amount, if any, (b) the
applicable Controlled Deposit Amount (minus the Class A Monthly Principal and
the Class B Monthly Principal with respect to such Transfer Date) and (c) the
CIA Adjusted Invested Amount prior to any such deposit on such day. After
payment in full of the Class A Invested Amount and the Class B Invested
Amount, amounts in the Principal Funding Account will be paid to the CIA
Certificateholders on the CIA Scheduled Payment Date. Principal on the CIA
Certificates is scheduled to be distributed on the September 2007 Distribution
Date (the "CIA Scheduled Payment Date"). During the Accumulation Period, the
portion of Available Investor Principal Collections not applied to Class A
Monthly Principal, Class B Monthly Principal or CIA Monthly Principal on a
Transfer Date will generally be treated as Excess Principal Collections.
"Available Investor Principal Collections" means, with respect to any
Monthly Period, an amount equal to the sum of (a) (i) an amount equal to,
during the Revolving Period, the Investor Percentage, and during an
Amortization Period, the Fixed/Floating Allocation Percentage of all
collections in respect of Principal Receivables received during such Monthly
Period, plus (ii) the amount, if any, of Unallocated Principal Collections on
the next succeeding Distribution Date allocated to the Certificates, plus
(iii) the amount, if any, of collections of Finance Charge Receivables and
Excess Finance Charge Collections allocated and available on
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the next succeeding Distribution Date to (A) fund the Class A Investor Default
Amount, the Class B Investor Default Amount and the CIA Default Amount with
respect to the next succeeding Distribution Date and (B) reimburse Class A
Investor Charge-Offs and previous reductions in the Class B Invested Amount
and the CIA Invested Amount minus (iv) the amount of Reallocated Principal
Collections with respect to such Monthly Period used to fund the Class A
Required Amount and the Class B Required Amount, plus (b) any Excess Principal
Collections with respect to other Series that are allocated to the Offered
Series plus (c) any other amounts which pursuant to the Offered Series
Supplement are to be treated as Available Investor Principal Collections with
respect to the related Transfer Date.
"Class B Principal Commencement Date" means (a) with respect to the
Accumulation Period, the first Distribution Date on which an amount equal to
the Class A Invested Amount has been deposited in the Principal Funding
Account and allocated to the Class A Certificates or (b) with respect to the
Rapid Amortization Period, the Distribution Date on which the Class A Invested
Amount is paid in full or, if there are no Available Investor Principal
Collections remaining after payments have been made to the Class A
Certificates on such Distribution Date, the Distribution Date following the
Distribution Date on which the Class A Invested Amount is paid in full.
On each Distribution Date following the Monthly Period in which the Rapid
Amortization Period commences, the Class A Certificateholders will be entitled
to receive Available Investor Principal Collections for the preceding Monthly
Period in an amount up to the Class A Invested Amount until the earlier of the
date the Class A Invested Amount is paid in full and the Stated Series
Termination Date. In addition, if a Pay Out Event occurs during the
Accumulation Period, the Rapid Amortization Period will commence and any
amount on deposit in the Principal Funding Account will be paid to the
Certificateholders of each Class of Certificates, sequentially, in order of
seniority, on the Distribution Date following the Monthly Period in which the
Rapid Amortization Period commences. After payment in full of the Class A
Invested Amount, the Class B Certificateholders will be entitled to receive
Available Investor Principal Collections on each Distribution Date during the
Rapid Amortization Period until the earlier of the date the Class B Invested
Amount is paid in full and the Stated Series Termination Date. After payment
in full of the Class B Invested Amount, the CIA Certificateholders will be
entitled to receive Available Investor Principal Collections on each Transfer
Date (other than the Transfer Date prior to the Stated Series Termination
Date) and on the Stated Series Termination Date until the earlier of the date
the CIA Certificateholders' Interest is paid in full and the Stated Series
Termination Date. See "--Pay Out Events" below for a discussion of events
which might lead to the commencement of the Rapid Amortization Period.
In the event of a sale of the Receivables and an early termination of the
Trust due to an event of insolvency, the breach of certain representations and
warranties, an optional repurchase of the Receivables by the Bank, a
repurchase of the Receivables in connection with a Servicer Default or a sale
of the Receivables in connection with the Stated Series Termination Date (each
as described under "Description of the Certificates--Pay Out Events;" "--
Servicer Default;" and "--Final Payment of Principal; Termination" in the
Prospectus), distributions of principal will be made to the Certificateholders
upon surrender of their Certificates. The proceeds of any such sale or
repurchase of Receivables will be allocated first to pay amounts due with
respect to the Class A Certificates, then to pay amounts due with respect to
the Class B Certificates and then to pay amounts due with respect to the CIA
Certificates as described herein.
POSTPONEMENT OF ACCUMULATION PERIOD
Upon written notice to the Trustee, the Servicer may elect to postpone the
commencement of the 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 each
Determination Date, until the Accumulation Period begins, the Servicer will
determine the "Accumulation Period Length," which is the number of months
expected to be
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required to fully fund the Principal Funding Account 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 (unless Excess Principal Collections from any such other Series
are not allocated to be shared with the Offered 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 Series (which may
exclude certain other Series) which are not expected to be in their revolving
periods during the Accumulation Period. If the Accumulation Period Length is
less than twelve months, the Servicer may, at its option, postpone the
commencement of the Accumulation Period such that the number of months
included in the 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 Accumulation Period based on the
invested amounts of certain other Series which are scheduled to be in their
revolving periods during the Accumulation Period and on increases in the
principal payment rate occurring after the Closing Date. The length of the
Accumulation Period will not be less than one month. If the Accumulation
Period is postponed in accordance with the foregoing, and if a Pay Out Event
occurs after the date originally scheduled as the commencement of the
Accumulation Period, it is probable that Certificateholders would receive some
of their principal later than if the Accumulation Period had not been so
postponed.
EXCESS PRINCIPAL COLLECTIONS
Collections of Principal Receivables for any Monthly Period allocated to the
Invested Amount will first be used to cover, with respect to any Monthly
Period during either Amortization Period, payments to the Class A
Certificateholders and the Class B Certificateholders and then under certain
circumstances payments to the CIA Certificateholders. The Servicer will
determine the amount of collections of Principal Receivables for any Monthly
Period allocated to the Invested Amount remaining after covering required
payments to the Certificateholders or deposits with respect thereto and any
similar amount remaining for any other Series ("Excess Principal
Collections"). The Servicer will allocate the Excess Principal Collections to
cover any scheduled or permitted principal distributions to certificateholders
and deposits to principal funding accounts, if any, for any Series which have
not been covered out of the collections of Principal Receivables allocable to
such Series and certain other amounts for such Series. Excess Principal
Collections will not be used to cover investor charge-offs for any Series. If
principal shortfalls for all Series exceed Excess Principal Collections for
any Monthly Period, Excess Principal Collections will be allocated pro rata
among the applicable Series based on the relative amounts of principal
shortfalls. To the extent that Excess Principal Collections exceed principal
shortfalls for all Series, the balance will, subject to certain limitations,
be paid to the holder of the Exchangeable Transferor Certificate. "Principal
Shortfalls" means with respect to the Offered Series and any Distribution Date
(a) the sum of the amount, if any, by which during the Accumulation Period the
Controlled Deposit Amount exceeds the sum of the Class A Monthly Principal,
Class B Monthly Principal and CIA Monthly Principal for such Distribution Date
or (b) during the Rapid Amortization Period, (i) the amount, if any, by which
the Class A Invested Amount exceeds the Class A Monthly Principal for such
Distribution Date, (ii) on and after the Class B Principal Commencement Date,
the amount, if any, by which the Class B Invested Amount exceeds the Class B
Monthly Principal for such Distribution Date and (iii) on and after the date
on which the Class B Invested Amount has been deposited in full in the
Principal Funding Account or paid in full, the amount, if any, by which the
CIA Invested Amount exceeds the CIA Monthly Principal for such Distribution
Date.
SUBORDINATION OF THE CLASS B CERTIFICATES
The Class B Certificateholders' Interest will be subordinated to the extent
necessary to fund payments with respect to the Class A Certificates. To the
extent the Class B Invested Amount is reduced, the percentage of collections
of Finance Charge Receivables allocated to the Class B Certificateholders in
subsequent Monthly Periods will be reduced. Moreover, to the extent the amount
of such reduction in the Class B Invested Amount is not reimbursed, the amount
of principal distributable to the Class B Certificateholders will be reduced.
If collections of Finance Charge Receivables allocable to the Class A
Certificateholders' Interest for any Monthly Period are insufficient to pay
Class A Monthly Interest and any overdue Class A Monthly Interest (with
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default interest thereon) on the related Distribution Date, the Class A
Investor Default Amount for such Monthly Period, and, if the Transferor is not
the Servicer, the Class A Monthly Servicing Fee for such Monthly Period, then
Excess Finance Charge Collections will be applied to fund the amount of such
deficiency. If Excess Finance Charge Collections available with respect to
such Monthly Period are less than the Class A Required Amount, Reallocated
Principal Collections will be applied to fund the remaining Class A Required
Amount and the CIA Invested Amount will be reduced until the CIA Invested
Amount is equal to zero and then the Class B Invested Amount will be reduced
by the amount of Reallocated Class B Principal Collections so used.
If Reallocated Principal Collections available with respect to such Monthly
Period are insufficient to fund the remaining Class A Required Amount and the
CIA Invested Amount is reduced to zero, then a portion of the Class B Invested
Amount equal to such insufficiency (but not in excess of the lesser of the
Class A Investor Default Amount for such Monthly Period and the Class B
Invested Amount) will be allocated to the Class A Certificates to avoid a
reduction in the Class A Invested Amount, and the Class B Invested Amount will
be reduced by the amount so allocated. Such reductions of the Class B Invested
Amount will thereafter be reimbursed and the Class B Invested Amount increased
on each Distribution Date by the amount, if any, of Excess Finance Charge
Collections for such Distribution Date allocated and available for such
purpose. See "--Excess Finance Charge Collections" and "--Reallocated
Principal Collections" herein.
INVESTOR PERCENTAGE AND TRANSFEROR PERCENTAGE
Pursuant to the Pooling and Servicing Agreement, during each Monthly Period
the Servicer will allocate among the Class A Certificateholders' Interest, the
Class B Certificateholders' Interest, the CIA Certificateholders' Interest,
the Transferor Interest and the interests of the holders of the other Series
outstanding at such time all collections of Finance Charge Receivables and all
collections on Principal Receivables and the amount of all Receivables in
Defaulted Accounts. Collections of Finance Charge Receivables and the amount
of Receivables in Defaulted Accounts at all times and collections of Principal
Receivables during the Revolving Period will be allocated to the Class A
Certificateholders' Interest, the Class B Certificateholders' Interest and the
CIA Certificateholders' Interest based on the percentage equivalent of the
ratio which each of the amount of the Class A Adjusted Invested Amount, the
Class B Adjusted Invested Amount or the CIA Adjusted Invested Amount,
respectively, on the last day of the preceding Monthly Period bears to the
total amount of Principal Receivables on the last day of the preceding Monthly
Period (the "Class A Floating Allocation Percentage," the "Class B Floating
Allocation Percentage" and the "CIA Floating Allocation Percentage,"
respectively, and the sum of all three percentages, the "Investor
Percentage"). During the initial Monthly Period, the Class A Floating
Allocation Percentage, the Class B Floating Allocation Percentage and the CIA
Floating Allocation Percentage will equal the percentage equivalent of the
ratio which the amount of the initial Class A Invested Amount, the initial
Class B Invested Amount and the initial CIA Invested Amount, respectively,
bears to the total amount of Principal Receivables on the Closing Date. During
the Revolving Period, all Principal Receivables allocable to the Class A
Certificates, the Class B Certificates and the CIA Certificates will be
allocated and paid to the holder of the Exchangeable Transferor Certificate
(except for (i) Reallocated Principal Collections used to pay interest and
certain other amounts on the Class A Certificates and Class B Certificates
and, if the Bank is not the Servicer, the Investor Servicing Fee, as described
under "--Reallocated Principal Collections" and "--Servicing Compensation and
Payment of Expenses" and (ii) amounts paid to the holders of certificates of
other Series as Excess Principal Collections, if any). During an Amortization
Period, all Principal Receivables collected will be allocated to the Investor
Interest based on the percentage equivalent of the ratio which each of the
Class A Invested Amount, the Class B Invested Amount and the CIA Invested
Amount, respectively, at the end of the last day of the Revolving Period bears
to the greater of (a) the total amount of Principal Receivables at the end of
the last day of the preceding Monthly Period and (b) the sum of the numerators
used to calculate allocation percentages with respect to Principal Receivables
for each Class of each Series outstanding for the current Distribution Date
(the "Class A Fixed/Floating Allocation Percentage," the "Class B
Fixed/Floating Allocation Percentage" and the "CIA Fixed/Floating Allocation
Percentage," respectively, and the sum of all three percentages, the
"Fixed/Floating Allocation Percentage") and the remainder will be allocated to
the Transferor Interest and the interest of certificateholders of other
Series, if any. Reallocated CIA Principal Collections will be allocated during
the Revolving Period based on the CIA Floating Allocation Percentage.
Reallocated CIA
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Principal Collections will be allocated during an Amortization Period based on
the CIA Fixed/Floating Allocation Percentage. Reallocated Class B Principal
Collections will be allocated during the Revolving Period based on the Class B
Floating Allocation Percentage. Reallocated Class B Principal Collections will
be allocated during an Amortization Period based on the Class B Fixed/Floating
Allocation Percentage. However, with respect to any Monthly Period in which
Additional Accounts are added on a specified date (an "Addition Date") to the
Trust and the Servicer need not make daily deposits of collections into the
Collection Account, the denominator in the definitions of the Class A Floating
Allocation Percentage, the Class B Floating Allocation Percentage and the CIA
Floating Allocation Percentage and the denominator determined pursuant to
clause (a) of the definitions of Fixed/Floating Allocation Percentage, Class A
Fixed/Floating Allocation Percentage, Class B Fixed/Floating Allocation
Percentage and CIA Fixed/Floating Allocation Percentage above shall be the
Average Principal Balance; provided, however, that with respect to any Monthly
Period in which an Addition Date occurs and the Servicer is required to make
daily deposits of collections into the Collection Account, the denominators in
the definitions of the Class A Floating Allocation Percentage, the Class B
Floating Allocation Percentage and the CIA Floating Allocation Percentage and
the denominator determined pursuant to clause (a) of the definitions of
Fixed/Floating Allocation Percentage, Class A Fixed/Floating Allocation
Percentage, Class B Fixed/Floating Allocation Percentage and CIA
Fixed/Floating Allocation Percentage shall be (1) for the period from and
including the first day of such Monthly Period to but excluding the related
Addition Date the aggregate amount of Principal Receivables in the Trust at
the end of the day on the last day of the prior Monthly Period and (2) for the
period from and including the Addition Date through the last day of such
Monthly Period the aggregate amount of Principal Receivables in the Trust at
the end of the day on the related Addition Date. "Average Principal Balance"
means, for a Monthly Period in which Additional Accounts are designated for
inclusion in the Trust, the weighted average of the Principal Receivables in
the Trust at the end of the day on the last day of the prior Monthly Period
and the Principal Receivables in the Trust at the end of the day on the
related Addition Date, weighted, respectively, by a fraction, the numerator of
which is the number of days from and including the first day of such Monthly
Period to but excluding the related Addition Date, and the denominator of
which is the number of days in such Monthly Period, and by a fraction, the
numerator of which is the number of days from and including the related
Addition Date to and including the last day of such Monthly Period, and the
denominator of which is the number of days in such Monthly Period.
As used herein, (i) the term "Class A Invested Amount" for any day means an
amount equal to (a) the initial principal balance of the Class A Certificates,
minus (b) the amount of principal payments made to Class A Certificateholders
prior to such date and minus (c) the excess, if any, of the aggregate amount
of Class A Investor Charge-Offs for all prior Distribution Dates over the
aggregate amount of any reimbursements of Class A Investor Charge-Offs for all
Distribution Dates preceding such date, provided, however, that the Class A
Invested Amount may not be reduced below zero, (ii) the term "Class A Adjusted
Invested Amount," for any date of determination, means an amount not less than
zero equal to the then current Class A Invested Amount, minus the Principal
Funding Account Balance on such date, (iii) the term "Class B Invested Amount"
for any date means an amount equal to (a) the initial principal balance of the
Class B Certificates, minus (b) the 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 Distribution Dates, minus (d) the
aggregate amount of Reallocated Class B Principal Collections for which the
CIA Invested Amount has not been reduced for all prior Distribution Dates
minus (e) an amount equal to the aggregate amount by which the Class B
Invested Amount has been reduced to fund the Class A Investor Default Amount
on all prior Distribution Dates as described herein under "--Defaulted
Receivables; Investor Charge-Offs," and plus (f) the aggregate amount of
Excess Finance Charge Collections and certain other amounts applied for the
purpose of reimbursing amounts deducted pursuant to the foregoing clauses (c),
(d) and (e), provided, however, that the Class B Invested Amount may not be
reduced below zero, (iv) the term "Class B Adjusted Invested Amount," for any
date of determination, means an amount not less than zero equal to the Class B
Invested Amount minus the excess, if any, of the Principal Funding Account
Balance over the Class A Invested Amount on such date of determination, (v)
the term "CIA Invested Amount" means an amount equal to (a) the initial CIA
Invested Amount, minus (b) the amount of principal payments made to the CIA
Certificateholders prior to such date, minus (c) the aggregate amount of CIA
Charge-Offs for all prior Distribution Dates, minus (d) the aggregate amount
of Reallocated Principal Collections for all
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prior Distribution Dates which have been used to fund the Class A Required
Amount or the Class B Required Amount, minus (e) an amount equal to the
aggregate amount by which the CIA Invested Amount has been reduced to fund the
Class A Investor Default Amount and the Class B Investor Default Amount on all
prior Distribution Dates as described under "--Defaulted Receivables; Investor
Charge-Offs," and plus (f) the aggregate amount of Excess Finance Charge
Collections and certain other amounts allocated and available for purposes of
reimbursing amounts deducted pursuant to the foregoing clauses (c), (d) and
(e), provided, however, that the CIA Invested Amount may not be reduced below
zero, (vi) the term "CIA Adjusted Invested Amount," for any date of
determination, means an amount not less than zero equal to the CIA Invested
Amount minus the excess, if any, of the Principal Funding Account Balance over
the sum of the Class A Invested Amount and the Class B Invested Amount on such
date of determination, (vii) the term "Invested Amount" means the sum of the
Class A Invested Amount, the Class B Invested Amount and the CIA Invested
Amount, and (viii) the term "Transferor Percentage" means (a) when used with
respect to collections of Finance Charge Receivables and the amount of
Receivables in Defaulted Accounts, 100% minus the sum of the Class A Floating
Allocation Percentage, the Class B Floating Allocation Percentage and the CIA
Floating Allocation Percentage and the floating allocation percentages for all
other Series, (b) when used with respect to collections of Principal
Receivables during the Revolving Period, 100% minus the sum of the Class A
Floating Allocation Percentage, the Class B Floating Allocation Percentage and
the CIA Floating Allocation Percentage and the allocation percentages for
Principal Receivables for all other Series and (c) when used with respect to
collections of Principal Receivables during either Amortization Period, 100%
minus the sum of the Fixed/Floating Allocation Percentage and the allocation
percentages for Principal Receivables for all other Series.
As a result of the Class A Floating Allocation Percentage, the Class B
Floating Allocation Percentage and the CIA Floating Allocation Percentage, the
portion of Receivables in Defaulted Accounts allocated to the Class A
Certificateholders, the Class B Certificateholders and the CIA
Certificateholders as well as the collections of Finance Charge Receivables
allocated to the Class A Certificateholders and the Class B Certificateholders
will change for each Monthly Period based on the relationship of the amount of
the Class A Invested Amount, the Class B Invested Amount and the CIA Invested
Amount to the total amount of Principal Receivables on the last day of the
preceding Monthly Period. The numerator of the percentages of collections on
Principal Receivables allocable to the Class A Certificateholders, the Class B
Certificateholders and the CIA Certificateholders, however, will remain fixed
during either Amortization Period. Collections of Principal Receivables
allocable to the Class B Certificates are subject to possible reallocation for
the benefit of the Class A Certificateholders and collections of Principal
Receivables allocable to the CIA Invested Amount are subject to possible
reallocation for the benefit of the Class A Certificateholders and the Class B
Certificateholders as described under "-- Reallocation of Cash Flows" below.
REALLOCATION OF CASH FLOWS
On each Determination Date, the Servicer will determine the Class A Required
Amount and the Class B Required Amount. If the Class A Required Amount is
greater than zero, Excess Finance Charge Collections will be used to pay the
Class A Required Amount with respect to such Distribution Date. If such Excess
Finance Charge Collections are insufficient to pay the Class A Required
Amount, Reallocated Principal Collections will then be used to fund the
remaining Class A Required Amount. If Reallocated Principal Collections with
respect to the related Monthly Period are insufficient to fund the remaining
Class A Required Amount for such related Monthly Period, then a portion of the
CIA Invested Amount equal to such insufficiency (but not in excess of the
lesser of the Class A Investor Default Amount for such Monthly Period and the
CIA Invested Amount) will be allocated to the Class A Certificates to avoid a
charge-off with respect to the Class A Certificates. If the CIA Invested
Amount is reduced to zero, then a portion of the Class B Invested Amount equal
to any remaining insufficiency (but not in excess of the lesser of the Class A
Investor Default Amount for such Monthly Period and the Class B Invested
Amount) will be allocated to the Class A Certificates to avoid a charge-off
with respect to the Class A Certificates. If the Class B Invested Amount is
reduced to zero, the Class A Invested Amount will be reduced by any remaining
deficiency (but not in excess of the Class A Investor Default Amount for such
Monthly Period).
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If the Class B Required Amount is greater than zero, any Reallocated CIA
Principal Collections remaining after application of such amounts to any Class
A Required Amount (after the application of Excess Finance Charge Collections)
will then be used to fund the Class B Required Amount. If such remaining
Reallocated CIA Principal Collections with respect to the related Monthly
Period are insufficient to fund the Class B Required Amount for such related
Monthly Period, then a portion of any remaining CIA Invested Amount equal to
such insufficiency (but not in excess of the lesser of the Class B Investor
Default Amount for such Monthly Period and the remaining CIA Invested Amount)
will be allocated to the Class B Certificates to avoid a charge-off with
respect to the Class B Certificates. If the CIA Invested Amount is reduced to
zero, the Class B Invested Amount will be reduced by any remaining deficiency
(but not in excess of the Class B Investor Default Amount for such Monthly
Period).
APPLICATION OF COLLECTIONS
Daily Allocations. The Servicer will instruct the Trustee to withdraw from
the Collection Account on each business day an amount equal to the Transferor
Percentage of the aggregate amount of such deposits in respect of Principal
Receivables and Finance Charge Receivables, respectively, and pay such amounts
to the holder of the Exchangeable Transferor Certificate.
With respect to the Certificates, the Servicer will instruct the Trustee to
make the following payments and deposits on each date of processing; provided,
however, that for so long as the Bank remains the Servicer under the Pooling
and Servicing Agreement and 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, then the Servicer may make such
deposits and payments on the business day immediately prior to the
Distribution 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:
(a) during the Revolving Period (i) allocate to the Certificateholders an
amount equal to the Investor Percentage of collections of Finance Charge
Receivables and retain in the Finance Charge Account (A) prior to the
Calculation Date in each Monthly Period an amount equal to the product of
the Investor Percentage and the aggregate amount of collections of Finance
Charge Receivables, or (B) on and after each such Calculation Date, the
lesser of (x) the product of the Investor Percentage and the aggregate
amount of collections of Finance Charge Receivables and (y) the excess of
(1) the amounts owing to Certificateholders with respect to interest for
the Distribution Date following the then current Monthly Period (plus, if
the Transferor is not the Servicer, the Investor Servicing Fee) over (2)
the amounts previously deposited in the Finance Charge Account with respect
thereto; on each date of processing on and after the Calculation Date
collections of Finance Charge Receivables allocated to the Certificates in
excess of the amount required to be retained in the Finance Charge Account
as provided above shall be held by the Servicer and applied on each
Transfer Date as described below and (ii) allocate to the
Certificateholders an amount equal to the product of (A) the Investor
Percentage and (B) the aggregate amount of collections of Principal
Receivables on such date of processing and pay such amount to the holder of
the Exchangeable Transferor Certificate subject to the obligation of such
holder to make an amount equal to the Reallocated Principal Collections and
Excess Principal Collections for such Monthly Period available on the
related Transfer Date as described below; provided, however, that the
amount to be paid to the holder of the Exchangeable Transferor Certificate
shall be paid only if the Transferor Interest is greater than zero (after
giving effect to all Principal Receivables transferred to the Trust on such
day) and otherwise will be deposited in the Collection Account and applied
as Unallocated Principal Collections; and provided, further, that on and
after the Calculation Date if the amounts previously deposited in the
Finance Charge Account with respect to the current Monthly Period are less
than the sum of the amounts owing to Certificateholders with respect to
interest for the Distribution Date following the then current Monthly
Period (plus, if the Transferor is not the Servicer, the Investor Servicing
Fee) (the amount of such shortfall, the "Finance Charge Deficit"), an
amount not to exceed the product of (x) the sum of the Class B Floating
Allocation Percentage and the CIA Floating Allocation Percentage and (y)
collections of Principal Receivables on any date of processing
("Subordinate Principal Collections") with respect to the then current
Monthly Period will be deposited into the Principal Account on a daily
basis during such Monthly Period in an aggregate amount not to
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exceed the Finance Charge Deficit; at such time as the Finance Charge
Deficit is equal to zero, such amounts may be paid from the Principal
Account to the holder of the Exchangeable Transferor Certificate;
(b) during the Accumulation Period, (i) allocate to the
Certificateholders and retain in the Finance Charge Account an amount equal
to the product of (A) the Investor Percentage and (B) the aggregate amount
of collections of Finance Charge Receivables and (ii) allocate to the
Certificateholders and retain in the Principal Account an amount equal to
the product of (x) the Fixed/Floating Allocation Percentage and (y) the
aggregate amount of collections of Principal Receivables (for any such
date, a "Percentage Allocation"); provided, however, that if the sum of
such Percentage Allocations with respect to the same Monthly Period exceeds
the Controlled Deposit Amount for the related Distribution Date, then such
excess shall be paid to the holder of the Exchangeable Transferor
Certificate (subject to the obligation of such holder to make an amount
equal to the Reallocated Principal Collections and Excess Principal
Collections for such Monthly Period available on the related Transfer Date
as described below), if the Transferor Interest is greater than zero (after
giving effect to all Principal Receivables transferred to the Trust on such
day) and otherwise shall be deposited in the Collection Account and applied
as Unallocated Principal Collections; provided, further, that on and after
the Calculation Date if there is a Finance Charge Deficit, Subordinate
Principal Collections with respect to each Monthly Period will be deposited
into the Principal Account on a daily basis during such Monthly Period in
an aggregate amount not to exceed the Finance Charge Deficit; at such time
as the Finance Charge Deficit is equal to zero, such amounts may be paid
from the Principal Account to the holder of the Exchangeable Transferor
Certificate; and
(c) during the Rapid Amortization Period, (i) allocate to the
Certificateholders and retain in the Finance Charge Account an amount equal
to the product of (A) the Investor Percentage and (B) the aggregate amount
of collections of Finance Charge Receivables and (ii) allocate to the
Certificateholders and retain in the Principal Account an amount equal to
the product of (A) the Fixed/Floating Allocation Percentage and (B) the
aggregate amount of collections of Principal Receivables; provided,
however, that after the date on which an amount of such collections equal
to the Invested Amount has been deposited into the Collection Account and
allocated to the Certificateholders, the amount determined above will be
paid to the holder of the Exchangeable Transferor Certificate only if the
Transferor Interest is greater than zero (after giving effect to all
Principal Receivables transferred to the Trust on such day) and otherwise
will be deposited in the Collection Account and applied as Unallocated
Principal Collections.
"Calculation Date" means October 10, 1997 and the second business day (as
defined for purposes of determining LIBOR) prior to the 15th day of each
calendar month thereafter, or if such 15th day is not a business day, the next
succeeding business day.
Monthly Deposits During the Revolving Period and Accumulation Period. During
the Revolving Period, the Servicer will deposit in the Finance Charge Account
on each Transfer Date an amount equal to (i) the lesser of (A) the product of
(x) the Investor Percentage with respect to the preceding Monthly Period and
(y) the aggregate amount of collections of Finance Charge Receivables for the
preceding Monthly Period, and (B) the aggregate of the amounts to be applied
from amounts on deposit in the Finance Charge Account on such Transfer Date
pursuant to clauses (a)(i) through (iii), (b)(i) and (ii) and (c)(i) under "--
Monthly Allocations" as described below and clauses (a) through (k) of "--
Excess Finance Charge Collections" less (ii) the amounts deposited in the
Finance Charge Account daily during such Monthly Period as described above in
"--Daily Allocations." During the Revolving Period and the Accumulation
Period, on each Transfer Date the Transferor will deposit in the Principal
Account an amount equal to the sum of (I) the excess of the amount of
Reallocated Principal Collections over the amount retained in the Collection
Account as described above in "--Daily Allocations" with respect to the
Revolving Period or Accumulation Period, respectively, and (II) an amount
equal to the amount of Excess Principal Collections to be applied for the
benefit of other Series from amounts that were originally allocated to the
Offered Series, not to exceed (a) during the Revolving Period, the Investor
Percentage of collections of Principal Receivables for the related Monthly
Period or (b) during the Accumulation Period, the Fixed/Floating Allocation
Percentage of collections of Principal Receivables for the related Monthly
Period less the amount thereof applied to pay Class A Monthly Principal, Class
B Monthly Principal or CIA Monthly Principal on the related Distribution Date.
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Monthly Allocations. On each Transfer Date, the Trustee, acting pursuant to
the Servicer's instructions, will make the following payments and deposits:
(a) An amount equal to the Class A Available Funds for the preceding
Monthly Period will be distributed in the following priority:
(i) an amount equal to Class A Monthly Interest for such Distribution
Date, plus the amount of any overdue Class A Monthly Interest, plus any
default interest with respect to interest amounts that were due but not
paid on a prior Distribution Date, such interest to be computed at the
Class A Certificate Rate plus 2.0% per annum, will be deposited into
the Distribution Account for distribution to Class A Certificateholders
on the next succeeding Distribution Date;
(ii) if the Bank is no longer the Servicer, an amount equal to the
Class A Monthly Servicing Fee for the related Monthly Period 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 paid in respect of principal to
the holder of the Exchangeable Transferor Certificate during the
Revolving Period (provided that if such amount exceeds the Transferor
Interest, the excess will be treated as Unallocated Principal
Collections) and deposited in the Principal Account and treated as a
portion of Available Investor Principal Collections during the
Amortization Period; and
(iv) the balance, if any, will constitute a portion of Excess Finance
Charge Collections and will be allocated and distributed as described
under "--Excess Finance Charge Collections" below.
(b) An amount equal to the Class B Available Funds for the preceding
Monthly Period will be distributed in the following priority:
(i) an amount equal to Class B Monthly Interest for such Distribution
Date, plus the amount of any overdue Class B Monthly Interest, plus any
default interest with respect to interest amounts that were due but not
paid on a prior Distribution Date, such interest to be computed at the
Class B Certificate Rate plus 2.0% per annum, will be deposited into
the Distribution Account for distribution to Class B Certificateholders
on the next succeeding Distribution Date;
(ii) if the Bank is no longer the Servicer, an amount equal to the
Class B Monthly Servicing Fee for the related Monthly Period will be
paid to the Servicer; and
(iii) the balance, if any, will constitute a portion of Excess
Finance Charge Collections and will be allocated and distributed as
described under "--Excess Finance Charge Collections" below.
(c) An amount equal to the CIA Available Funds for the preceding Monthly
Period will be distributed in the following priority:
(i) if the Bank is no longer the Servicer, an amount equal to the CIA
Monthly Servicing Fee for the related Monthly Period will be paid to
the Servicer; and
(ii) the balance, if any, will constitute a portion of Excess Finance
Charge Collections and will be allocated and distributed as described
under "--Excess Finance Charge Collections" below.
"Excess Finance Charge Collections" shall mean, 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.
"Class A Monthly Interest" with respect to any Distribution Date will equal
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 on the
related Record Date or, with respect to the first Distribution Date, the
initial Class A Invested Amount.
"Class A Available Funds" means, with respect to any Monthly Period, an
amount equal to the sum of (a) the Class A Floating Allocation Percentage of
collections of Finance Charge Receivables in respect of such Monthly Period
and (b) with respect to any Monthly Period during the Accumulation Period
prior to the payment in full of the Class A Invested Amount, the product of
(i) the Class A Account Percentage and (ii) the sum of the Principal Funding
Investment Proceeds, if any, with respect to the related Transfer Date and the
amounts, if any, to be withdrawn from the Reserve Account which will be
deposited into the Finance Charge Account on the related Transfer Date as
described under "--Reserve Account" herein.
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"Class A Account Percentage" means, with respect to any Determination Date,
the percentage equivalent of a fraction, the numerator of which is the
aggregate amount on deposit in the Principal Funding Account with respect to
the Class A Certificates and the denominator of which is the aggregate amount
on deposit in the Principal Funding Account, in each case as of the last day
of the preceding Monthly Period.
"Class B Monthly Interest" with respect to any Distribution Date will equal
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 Class B Invested Amount on the related Record Date or, with
respect to the first Distribution Date, the initial Class B Invested Amount.
"Class B Available Funds" means, with respect to any Monthly Period, an
amount equal to the sum of (a) the Class B Floating Allocation Percentage of
collections of Finance Charge Receivables in respect of such Monthly Period
and (b) with respect to any Monthly Period during the Accumulation Period
prior to the payment in full of the Class B Invested Amount, the product of
(i) the Class B Account Percentage and (ii) the sum of the Principal Funding
Investment Proceeds, if any, with respect to the related Transfer Date and the
amounts, if any, to be withdrawn from the Reserve Account which will be
deposited into the Finance Charge Account on the related Transfer Date as
described under "--Reserve Account" herein.
"Class B Account Percentage" means, with respect to any Determination Date,
the percentage equivalent of a fraction, the numerator of which is the
aggregate amount on deposit in the Principal Funding Account with respect to
the Class B Certificates, if any, and the denominator of which is the
aggregate amount on deposit in the Principal Funding Account, in each case as
of the last day of the preceding Monthly Period.
"CIA Available Funds" means, with respect to any Monthly Period, an amount
equal to the sum of (a) the CIA Floating Allocation Percentage of collections
of Finance Charge Receivables in respect of such Monthly Period and (b) with
respect to any Monthly Period during the Accumulation Period prior to the
payment in full of the CIA Invested Amount, the product of (i) the CIA Account
Percentage and (ii) the sum of the Principal Funding Investment Proceeds, if
any, with respect to the related Transfer Date and the amounts, if any, to be
withdrawn from the Reserve Account which will be deposited into the Finance
Charge Account on the related Transfer Date as described under "--Reserve
Account" herein.
"CIA Account Percentage" means, with respect to any Determination Date, the
percentage equivalent of a fraction, the numerator of which is the aggregate
amount on deposit in the Principal Funding Account with respect to the CIA
Certificates, if any, and the denominator of which is the aggregate amount on
deposit in the Principal Funding Account, in each case as of the last day of
the preceding Monthly Period.
EXCESS FINANCE CHARGE COLLECTIONS
On each Transfer Date, the Servicer will apply or cause the Trustee to apply
Excess Finance Charge Collections with respect to the related Monthly Period,
to make the following distributions in the following priority:
(a) an amount equal to the Class A Required Amount, if any, with respect
to the related Monthly Period will be used to fund the Class A Required
Amount;
(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 with respect to the related Distribution Date of certain other
amounts applied for that purpose), will be distributed to the holder of the
Exchangeable Transferor Certificate on each Transfer Date with respect to
the Revolving Period (but not exceeding the Transferor Interest in
Principal Receivables on such day (after giving effect to any new Principal
Receivables transferred to the Trust on such day)) and thereafter will be
deposited into the Principal Account and treated as a portion of Available
Investor Principal Collections for the related Distribution Date as
described under "--Payments of Principal" below;
(c) an amount equal to the amount of interest which has accrued with
respect to the outstanding aggregate principal amount of the Class B
Certificates at the applicable Class B Certificate Rate but has not been
deposited in the Distribution Account for the benefit of the Class B
Certificateholders either on such
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Transfer Date or on a prior Transfer Date and any other amounts due on the
related Distribution Date or on any prior Distribution Date as described in
clause (b)(i) of "--Application of Collections--Monthly Allocations" above
but not yet paid will be deposited into the Distribution Account for
payment to the Class B Certificateholders;
(d) an amount equal to the aggregate Class B Investor Default Amount, if
any, for the related Distribution Date will be distributed to the holder of
the Exchangeable Transferor Certificate on each Transfer Date with respect
to the Revolving Period (but not exceeding the Transferor Interest in
Principal Receivables on such day (after giving effect to any new Principal
Receivables transferred to the Trust on such day)) and on Transfer Dates
with respect to an Amortization Period will be deposited into the Principal
Account and treated as a portion of Available Investor Principal
Collections for the related Distribution Date as described under "--
Payments of Principal" below;
(e) an amount equal to the aggregate amount by which the Class B Invested
Amount has been reduced below the initial Class B Invested Amount 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 previously reimbursed) will be distributed
to the holder of the Exchangeable Transferor Certificate on each Transfer
Date with respect to the Revolving Period, but not in an amount exceeding
the Transferor Interest in Principal Receivables on such day (after giving
effect to any new Principal Receivables transferred to the Trust on such
day) and on Transfer Dates with respect to an Amortization Period will be
deposited into the Principal Account and treated as a portion of Available
Investor Principal Collections for the related Distribution Date as
described under "--Payments of Principal" below;
(f) an amount equal to CIA Monthly Interest for the related Distribution
Date, plus the amount of any overdue CIA Monthly Interest, plus any default
interest with respect to interest amounts that were due but not paid on a
prior Distribution Date, will be deposited into the Distribution Account
for distribution to CIA Certificateholders on the next succeeding
Distribution Date in accordance with the Spread Account Agreement;
(g) an amount equal to the unpaid Investor Servicing Fee will be paid to
the Servicer;
(h) an amount equal to the aggregate CIA Default Amount, if any, for the
related Distribution Date will be distributed to the holder of the
Exchangeable Transferor Certificate on each Transfer Date with respect to
the Revolving Period (but not exceeding the Transferor Interest in
Principal Receivables on such day (after giving effect to any new Principal
Receivables transferred to the Trust on such day)) and on Transfer Dates
with respect to an Amortization Period will be deposited into the Principal
Account and treated as a portion of Available Investor Principal
Collections for the related Distribution Date as described under "--
Payments of Principal" below;
(i) an amount equal to the aggregate amount by which the CIA Invested
Amount has been reduced below the initial CIA Invested Amount for reasons
other than the payment of principal to the CIA Certificateholders (but not
in excess of the aggregate amount of such reductions which have not been
previously reimbursed) will be distributed to the holder of the
Exchangeable Transferor Certificate on Transfer Dates with respect to the
Revolving Period, but not in an amount exceeding the Transferor Interest in
Principal Receivables on such day (after giving effect to any new Principal
Receivables transferred to the Trust on such day) and on Transfer Dates
with respect to an Amortization Period will be deposited into the Principal
Account and treated as a portion of Available Investor Principal
Collections for the related Distribution Date as described under "--
Payments of Principal" below;
(j) 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 shall be deposited into the Reserve Account; and
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(k) the balance, if any, after giving effect to the payments made
pursuant to clauses (a) through (j) above shall be applied in accordance
with the provisions of the Spread Account Agreement.
"CIA Monthly Interest" with respect to any Distribution Date will equal the
product of (i) the CIA Certificate Rate for the related Interest Period, (ii)
the actual number of days in such Interest Period divided by 360, and (iii)
the CIA Invested Amount on the related Record Date or, with respect to the
first Distribution Date, the initial CIA Invested Amount.
"CIA Certificate Rate" means LIBOR plus 1.50% per annum or such lesser rate
as may be designated in the Spread Account Agreement.
PAYMENTS OF PRINCIPAL
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 priority:
(a) on each Transfer Date with respect to the Revolving Period, all
Available Investor Principal Collections with respect to the preceding
Monthly Period will be treated as Excess Principal Collections and applied
as described under "--Excess Principal Collections" herein and "Description
of the Certificates--Shared Collections of Principal Receivables" in the
Prospectus;
(b) with respect to the Accumulation Period or the Rapid Amortization
Period, all Available Investor Principal Collections with respect to the
preceding Monthly Period will be distributed or deposited in the following
priority:
(i) an amount equal to the Class A Monthly Principal will be
deposited on each Transfer Date in the Principal Funding Account for
distribution to the Class A Certificateholders on the Class A Scheduled
Payment Date (with respect to the Accumulation Period) or distributed
to the Class A Certificateholders on each Distribution Date until the
Class A Invested Amount is paid in full (with respect to the Rapid
Amortization Period);
(ii) on the Transfer Date related to the Class B Principal
Commencement Date and on each Transfer Date thereafter, an amount equal
to the Class B Monthly Principal will be deposited in the Principal
Funding Account for distribution to the Class B Certificateholders on
the Class B Scheduled Payment Date (with respect to the Accumulation
Period) or distributed to the Class B Certificateholders on each
Distribution Date until the Class B Invested Amount is paid in full
(with respect to the Rapid Amortization Period); and
(iii) on the Transfer Date related to the Distribution Date on which
the Class B Invested Amount is deposited in full in the Principal
Funding Account or paid in full to the Class B Certificateholders and
on each Transfer Date thereafter, an amount equal to the CIA Monthly
Principal will be deposited in the Principal Funding Account for
distribution to the CIA Certificateholders on the CIA Scheduled Payment
Date (with respect to the Accumulation Period) or distributed to the
CIA Certificateholders on each Distribution Date until the CIA Invested
Amount is paid in full (with respect to the Rapid Amortization Period);
and
(c) on each Transfer Date with respect to the Accumulation Period and the
Rapid Amortization Period, the balance of Available Investor Principal
Collections not applied pursuant to (a) and (b) above, if any, will be
treated as Excess Principal Collections and applied as described under "--
Excess Principal Collections" herein and "Description of the Certificates--
Shared Collections of Principal Receivables" in the Prospectus.
"Class A Monthly Principal" with respect to any Transfer Date relating to
the Accumulation Period or the Rapid Amortization Period, prior to the payment
in full of the Class A Invested Amount, will equal 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 Accumulation Period, prior to the payment in full of the Class A
Invested Amount, 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 Invested Amount on such Transfer Date.
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"Class B Monthly Principal" with respect to each Transfer Date relating to
the Accumulation Period or the Rapid Amortization Period beginning with the
Transfer Date first preceding the Class B Principal Commencement Date, prior
to the payment in full of the Class B Invested Amount, will equal the least of
(i) the
Available Investor Principal Collections remaining on deposit in the Principal
Account with respect to such Transfer Date after application thereof to Class
A Monthly Principal, if any, (ii) for each Transfer Date with respect to the
Accumulation Period, prior to the Class B Scheduled Payment Date, the
applicable Controlled Deposit Amount for such Transfer Date (minus the Class A
Monthly Principal with respect to such Transfer Date) and (iii) the Class B
Adjusted Invested Amount on such Transfer Date.
"CIA Monthly Principal" with respect to each Transfer Date relating to the
Accumulation Period or the Rapid Amortization Period beginning with the
Transfer Date first preceding the Distribution Date on which the Class B
Invested Amount is deposited in full in the Principal Funding Account or paid
in full, prior to the payment in full of the CIA Invested Amount, will equal
the least of (i) the Available Investor Principal Collections remaining on
deposit in the Principal Account with respect to such Transfer Date after
application thereof to Class A Monthly Principal and Class B Monthly
Principal, if any, (ii) for each Transfer Date with respect to the
Accumulation Period, prior to the CIA Scheduled Payment Date, the applicable
Controlled Deposit Amount for such Transfer Date (minus the Class A Monthly
Principal and the Class B Monthly Principal with respect to such Transfer
Date) and (iii) the CIA Adjusted Invested Amount on such Transfer Date.
"Controlled Accumulation Amount" means for any Transfer Date with respect to
the Accumulation Period, prior to the payment in full of the Class A Invested
Amount, $78,313,334; provided, however, that if the commencement of the
Accumulation Period is delayed as described above under "--Postponement of
Accumulation Period," the Controlled Accumulation Amount may be higher than
the amount stated above for each Transfer Date with respect to the
Accumulation Period and will be determined by the Servicer in accordance with
the Pooling and Servicing Agreement based on the principal payment rates for
the Accounts and on the invested amounts of other Series (other than certain
excluded Series) which are scheduled to be in their revolving periods and then
scheduled to create Excess Principal Collections during the Accumulation
Period.
"Accumulation Shortfall" initially means zero and thereafter means, with
respect to any Monthly Period during the Accumulation Period, the excess, if
any, of the Controlled Deposit Amount for the previous Monthly Period over the
amount deposited into the Principal Funding Account as described in clause (b)
of this section with respect to the Certificates for the previous Monthly
Period.
REALLOCATED PRINCIPAL COLLECTIONS
On each Distribution Date, the Servicer will apply or cause the Trustee to
apply an amount, not to exceed the CIA Invested Amount, equal to the product
of (a)(i) during the Revolving Period, the CIA Floating Allocation Percentage
or (ii) during an Amortization Period, the CIA Fixed/Floating Allocation
Percentage and (b) the amount of collections of Principal Receivables with
respect to the related Monthly Period in the following priority (such
collections applied in accordance with clause (a) below are called
"Reallocated CIA Principal Collections"):
(a) an amount equal to the sum of (i) the excess, if any, of the Class A
Required Amount with respect to such related Monthly Period over the amount
of Excess Finance Charge Collections with respect to such related Monthly
Period and (ii) the Class B Required Amount with respect to the related
Monthly Period; and
(b) any such collections not applied in the foregoing manner (and
therefore not constituting Reallocated CIA Principal Collections) will, on
each Distribution Date with respect to the Revolving Period, be distributed
to the holder of the Exchangeable Transferor Certificate in an amount not
exceeding the Transferor Interest in Principal Receivables (determined
after giving effect to any Principal Receivables transferred to the Trust
on such date) and on Distribution Dates with respect to an Amortization
Period will be included in the funds available to make principal payments
to the Class A Certificateholders until the Class A Invested Amount is paid
in full and then to the Class B Certificateholders until the Class B
Invested Amount is paid in full and then to the CIA Certificateholders
until the CIA Invested Amount is paid in full.
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<PAGE>
On each Distribution Date, the Servicer will apply or cause the Trustee to
apply an amount, not to exceed the Class B Invested Amount, equal to the
product of (a)(i) during the Revolving Period, the Class B Floating Allocation
Percentage or (ii) during an Amortization Period, the Class B Fixed/Floating
Allocation Percentage and (b) the amount of collections of Principal
Receivables with respect to the related Monthly Period in the following
priority (such collections applied in accordance with clause (a) below are
called "Reallocated Class B Principal Collections" and the sum of Reallocated
CIA Principal Collections and Reallocated Class B Principal Collections is
called "Reallocated Principal Collections"):
(a) an amount equal to the excess, if any, of the Class A Required Amount
with respect to such related Monthly Period over the sum of (i) the amount
of Excess Finance Charge Collections with respect to such related Monthly
Period and (ii) the amount of Reallocated CIA Principal Collections applied
with respect thereto for the related Monthly Period; and
(b) any such collections not applied in the foregoing manner (and
therefore not constituting Reallocated Class B Principal Collections) will,
on each Distribution Date with respect to the Revolving Period, be
distributed to the holder of the Exchangeable Transferor Certificate in an
amount not exceeding the Transferor Interest in Principal Receivables
(determined after giving effect to any Principal Receivables transferred to
the Trust on such date) and on Distribution Dates with respect to an
Amortization Period will be included in the funds available to make
principal payments to the Class A Certificateholders until the Class A
Invested Amount is paid in full and then to the Class B Certificateholders
until the Class B Invested Amount is paid in full and then to the CIA
Certificateholders until the CIA Invested Amount is paid in full.
On each Distribution Date the CIA Invested Amount will be reduced by the
amount of Reallocated CIA Principal Collections and by the amount of
Reallocated Class B Principal Collections for such Distribution Date. In the
event that such reduction would cause the CIA Invested Amount to be a negative
number, the CIA Invested Amount will be reduced to zero and the Class B
Invested Amount will be reduced by the amount by which the CIA Invested Amount
would have been reduced below zero. In the event that the reallocation of
collections of Principal Receivables would cause the Class B Invested Amount
to be a negative number on any Distribution Date, collections of Principal
Receivables will be reallocated on such Distribution Date in an aggregate
amount not to exceed the amount which would cause the Class B Invested Amount
to be reduced to zero.
DEFAULTED RECEIVABLES; INVESTOR CHARGE-OFFS
On each Determination Date, the Servicer will calculate the Investor Default
Amount for the preceding Monthly Period. The term "Default Amount" means, for
any Monthly Period, an amount (which shall not be less than zero) equal to (a)
the aggregate amount of Principal Receivables (other than Ineligible
Receivables) in Defaulted Accounts on the day such Account became a Defaulted
Account for each day in such Monthly Period minus (b) the aggregate amount of
Recoveries received in such Monthly Period. The term "Investor Default Amount"
means, for any Monthly Period, the product of (i) the Investor Percentage with
respect to such Monthly Period and (ii) the Default Amount for such Monthly
Period. A portion of the Default Amount will be allocated to the Class A
Certificateholders (the "Class A Investor Default Amount") on each
Distribution Date in an amount equal to the product of the Class A Floating
Allocation Percentage applicable during the related Monthly Period and the
Default Amount for such Monthly Period. A portion of the Default Amount will
be allocated to the Class B Certificateholders (the "Class B Investor Default
Amount") on each Distribution Date in an amount equal to the product of the
Class B Floating Allocation Percentage applicable during the related Monthly
Period and the Default Amount for such Monthly Period. A portion of the
Default Amount will be allocated to the CIA Certificateholders (the "CIA
Default Amount") on each Distribution Date in an amount equal to the product
of the CIA Floating Allocation Percentage applicable during the related
Monthly Period and the Default Amount for such Monthly Period.
On each Distribution Date, if the Class A Investor Default Amount for such
Distribution Date exceeds the sum of the Class A Floating Allocation
Percentage of collections in respect of Finance Charge Receivables allocable
with respect thereto, and the Excess Finance Charge Collections and the
Reallocated Principal Collections available to cover such amount with respect
to the Monthly Period immediately preceding such
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<PAGE>
Distribution Date, the CIA Invested Amount will be reduced by the amount of
such excess, but not more than the lesser of the Class A Investor Default
Amount and the CIA Invested Amount for such Distribution Date. In the event
that, but for the limitation on the amount of such reduction in the preceding
sentence, such reduction would cause the CIA Invested Amount to be a negative
number, the CIA Invested Amount will be reduced to zero, and the Class B
Invested Amount will be reduced by the amount by which the CIA Invested Amount
would have been reduced below zero. In the event that such reduction would
cause the Class B Invested Amount to be a negative number, the Class B
Invested Amount will be reduced to zero, and the Class A Invested Amount will
be reduced by the amount by which the Class B Invested Amount would have been
reduced below zero, but not more than the Class A Investor Default Amount for
such Distribution Date (a "Class A Investor Charge-Off"), which will have the
effect of slowing or reducing the return of principal to the Class A
Certificateholders. If the Class A Invested Amount has been reduced by the
amount of any Class A Investor Charge-Offs, it will 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 Finance Charge Collections
allocated and available for such purpose as described herein under "--Excess
Finance Charge Collections."
If on any Distribution Date, the Class B Investor Default Amount for such
Distribution Date exceeds the amount of Excess Finance Charge Collections and
Reallocated CIA Principal Collections which are allocated and available to
fund such amount, the CIA Invested Amount (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 CIA Invested Amount for such
Distribution Date. In the event that, but for the limitation on the amount of
such reduction in the preceding sentence, such reduction would cause the CIA
Invested Amount to be a negative number, the CIA Invested Amount will be
reduced to zero and the Class B Invested Amount will be reduced by the amount
by which the CIA Invested Amount would have been reduced below zero, but not
more than the Class B Investor Default Amount for such Distribution Date (a
"Class B Investor Charge-Off"). The Class B Invested Amount will also be
reduced by the amount of Reallocated Class B Principal Collections applied to
cover shortfalls in excess of the CIA Invested Amount and the amount of any
portion of the Class B Invested Amount allocated to the Class A Certificates
to avoid a reduction in the Class A Invested Amount. The Class B Invested
Amount will thereafter be reimbursed (but not in the excess of the unpaid
principal balance of the Class B Certificates) on any Transfer Date by the
amount of Excess Finance Charge Collections allocated and available for that
purpose as described herein under "--Excess Finance Charge Collections."
If on any Distribution Date, the CIA Default Amount for such Distribution
Date exceeds the sum of the amount of Excess Finance Charge Collections which
are allocated and available to fund such amount as described herein under "--
Excess Finance Charge Collections" and amounts applied with respect to the CIA
Default Amount pursuant to the Spread Account Agreement, the CIA Invested
Amount (after giving effect to any adjustments with respect thereto as
described in the preceding paragraphs) will be reduced by the amount of such
excess, but not more than the lesser of the CIA Default Amount and the CIA
Invested Amount for such Distribution Date (a "CIA Charge-Off"). The CIA
Invested Amount will also be reduced by the amount of Reallocated Principal
Collections and the amount of any portion of the CIA Invested Amount allocated
to the Class A Certificates to avoid a reduction in the Class A Invested
Amount or to the Class B Certificates to avoid a reduction in the Class B
Invested Amount. The CIA Invested Amount will thereafter be reimbursed on any
Transfer Date by the amount of Excess Finance Charge Collections allocated and
available for that purpose as described herein under "--Excess Finance Charge
Collections."
PRINCIPAL FUNDING ACCOUNT
Pursuant to the Offered Series Supplement, the Servicer will establish and
maintain with a Qualified Institution the principal funding account as a
segregated trust account held for the benefit of the Certificateholders (the
"Principal Funding Account"). During the Accumulation Period, the Trustee at
the direction of the Servicer shall transfer collections in respect of
Principal Receivables (other than Reallocated Principal Collections) and
Excess Principal Collections from other Series, if any, allocated to the
Offered Series from the Principal Account to the Principal Funding Account as
described herein under "--Application of Collections."
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<PAGE>
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") during the Accumulation Period will be included
in Class A Available Funds, Class B Available Funds and CIA Available Funds.
If, for any Interest Period, the Principal Funding Investment Proceeds are
less than an amount equal to, for each Interest Period, the Covered Amount,
the amount of such deficiency will be paid from the Reserve Account to the
extent of the Available Reserve Account Amount and, if necessary, from Excess
Finance Charge Collections and Reallocated Principal Collections.
RESERVE ACCOUNT
Pursuant to the Offered Series Supplement, the Servicer will establish and
maintain with a Qualified Institution the reserve account as a segregated
trust 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 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 Finance Charge Collections
allocated to the Certificates (to the extent described above under "--Excess
Finance Charge Collections") to increase the amount on deposit in the Reserve
Account (to the extent such amount is less than the Required Reserve Account
Amount). The "Reserve Account Funding Date" will be the Transfer Date which
commences no later than three months prior to the commencement of the
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) 0.5% of the Invested Amount
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 CIA Certificateholders 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 the Offered Series. "Rating Agency
Condition" means the notification in writing by each Rating Agency to the
Transferor, the Servicer and the Trustee that any action will not result in
any Rating Agency reducing or withdrawing its then existing rating of the
investor certificates of any outstanding Series or Class with respect to which
it is a Rating Agency.
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 for application as described in "--
Application of Collections--Monthly Allocations."
On or before each Transfer Date with respect to the 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 included in Class A Available Funds, Class B Available
Funds and CIA Available Funds to be applied to the payment of interest on the
Certificates 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 excess, if any, of (i) the product of (x) a fraction, the numerator of
which is the actual number of days in the then current Interest Period and the
denominator of which is 360, (y) the weighted average of the Class A
Certificate Rate, the Class B Certificate Rate and the CIA Certificate Rate in
effect with respect to such Interest Period and (z) the Principal Funding
Account Balance as of the last day of the Monthly Period preceding the Monthly
Period in which such Interest Periods ends (the "Covered Amount") over (ii)
the Principal Funding Investment Proceeds with respect to such Transfer Date;
provided, that the amount of such withdrawal shall be reduced to
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<PAGE>
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 following the earliest to occur of
(a) the termination of the Trust pursuant to the Pooling and Servicing
Agreement, (b) the date on which the Invested Amount is paid in full, (c) if
the Accumulation Period has not commenced, the occurrence of a Pay Out Event
with respect to the Certificates and (d) if the Accumulation Period has
commenced, the earlier of the first Transfer Date with respect to the Rapid
Amortization Period and 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 date as
described above) will be deposited in the Finance Charge Account and applied
in accordance with the priority of payments described herein under "--
Application of Collections--Monthly Allocations." Any amounts withdrawn from
the Reserve Account and distributed to the CIA Certificateholders as described
above will not be available for distribution to the Class A Certificateholders
or the Class B Certificateholders.
PAY OUT EVENTS
As described above, the Revolving Period will continue until the
commencement of the 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 Pooling and Servicing Agreement (or
within the applicable grace period which will not exceed five business
days) or (ii) to observe or perform in any material respect any other
covenants or agreements of the Transferor set forth in the Pooling and
Servicing Agreement or the Offered Series Supplement, which failure has a
material adverse effect on the Certificateholders 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 whether funds are
available pursuant to any Enhancement) for such period;
(b) any representation or warranty made by the Transferor in the Pooling
and Servicing Agreement 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 and continue to be materially and
adversely affected for such period; provided, however, that a Pay Out Event
pursuant to this subparagraph (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
thereof;
(c) certain events of insolvency or receivership relating to the
Transferor;
(d) the average Portfolio Yield for any three consecutive Monthly Periods
is less than the average Base Rate for such three consecutive Monthly
Periods;
(e) the Trust becomes an "investment company" within the meaning of the
Investment Company Act of 1940, as amended;
(f) a failure by the Transferor to convey Receivables arising under
Additional Accounts to the Trust when required by the Pooling and Servicing
Agreement; or
(g) any Servicer Default occurs which would have a material adverse
effect on the Certificateholders.
In the case of any event described in clause (a), (b) or (g) 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
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<PAGE>
Certificateholders 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 (c) or (e), a Pay Out
Event with respect to all Series then outstanding, and in the case of any
event described in clause (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 Trustee or the Certificateholders 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.
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 invested
amount of each Series (or, if a Series has more than one Class, of each Class
of such Series, and with respect to Series required to vote as a group, all
Classes of all such Series), the Trustee will sell, dispose of, or otherwise
liquidate the portion of the Receivables allocated to the Certificates and the
Receivables allocable to other Series with respect to which all outstanding
Classes did not vote to continue the Trust in accordance with the Pooling and
Servicing Agreement 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
with respect to such Series as provided above under "--Application of
Collections." 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 "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 Servicer's compensation for its servicing activities and reimbursement
for its expenses will take the form of the payment to it of a monthly
servicing fee in an amount equal to the sum of, with respect to all Series,
one-twelfth of the product of the applicable servicing fee percentages with
respect to each Series and the allocable portion of the Transferor Interest
and the average amount of the Principal Receivables during each month. The
monthly servicing fee will be allocated between the Transferor Interest, the
Investor Interest and the CIA Certificateholders' Interest and the investor
interests for all other Series. The portion of the servicing fee allocable to
the Investor Interest and the CIA Certificateholders' Interest on each
Distribution Date (the "Investor Servicing Fee") will be equal to one-twelfth
of the product of the Servicing Fee Percentage and the sum of the Class A
Adjusted Invested Amount, the Class B Adjusted Invested Amount and the CIA
Adjusted Invested Amount on the last day of the related Monthly Period or, in
the case of the first Distribution Date, the product of (i) the actual number
of days from and including the Closing Date to and including September 30,
1997 divided by 365, (ii) the Servicing Fee Percentage and (iii) the initial
Invested Amount. "Class A Monthly Servicing Fee," "Class B Monthly Servicing
Fee" and "CIA Monthly Servicing Fee" mean, with respect to any Distribution
Date, one-twelfth of the product of the Servicing Fee Percentage and the Class
A Adjusted Invested Amount, Class B Adjusted Invested Amount or CIA Adjusted
Invested Amount, as applicable, on the last day of the preceding Monthly
Period. The "Servicing Fee Percentage" will mean 1.5% for so long as the Bank
is the Servicer or 2.0% if the Bank is no longer the Servicer. The Investor
Servicing Fee will be funded from Excess Finance Charge Collections and, with
respect to a Servicer other than the Bank, from the Investor Percentage of
collections of Finance Charge Receivables and Reallocated Principal
Collections. The remainder of the servicing fee will be allocable to the
Transferor Interest and the investor interests of other Series. Neither the
Trust nor the Certificateholders will have any obligation to pay such portion
of the servicing fee.
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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 Pooling and Servicing 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; NOTICES
The Trustee will publish or will cause to be published following each
Distribution Date (including the Stated Series Termination Date) in a daily
newspaper in Luxembourg (expected to be the Luxemburger Wort) a notice to the
effect that the information described in "Description of the Certificates--
Reports to Certificateholders" in the Prospectus will be available for review
at the main office of the listing agent of the Trust in Luxembourg.
Notices to Certificateholders will be given by publication in a daily
newspaper in Luxembourg, which is expected to be the Luxemburger Wort. In the
event that Definitive Certificates are issued, notices to Certificateholders
will also be given by mail to the addresses of such holders as they appear in
the Certificate register.
UNDERWRITING
Subject to the terms and conditions set forth in the underwriting agreement
dated September 10, 1997 (the "Underwriting Agreement") between the Transferor
and the underwriters named below (the "Underwriters"), the Transferor has
agreed to sell to the Underwriters, and each of the Underwriters has severally
agreed to purchase, the principal amount of the Class A Certificates and Class
B Certificates set forth opposite its name.
<TABLE>
<CAPTION>
CLASS A CLASS B
CERTIFICATES CERTIFICATES
PRINCIPAL PRINCIPAL
UNDERWRITERS AMOUNT AMOUNT
------------ ------------ ------------
<S> <C> <C>
Bear, Stearns & Co. Inc. .......................... $390,000,000 $35,241,000
Banc One Capital Corporation ...................... 390,000,000 35,241,000
------------ -----------
Total............................................ $780,000,000 $70,482,000
============ ===========
</TABLE>
In the Underwriting Agreement, the Underwriters have agreed, subject to the
terms and conditions set forth therein, to purchase all the Offered
Certificates offered hereby if any of the Offered Certificates are purchased.
Until the distribution of the Offered Certificates is completed, the rules
of the Securities and Exchange Commission may limit the ability of the
Underwriters and certain selling group members to bid for and purchase the
Offered Certificates. As an exception to these rules, the Underwriters are
permitted to engage in over-allotment transactions, stabilizing transactions,
syndicate covering transactions and penalty bids with respect to the Offered
Certificates in accordance with Regulation M under the Exchange Act.
Over-allotment transactions involve syndicate sales in excess of the
offering size, which create syndicate short positions. Stabilizing
transactions permit bids to purchase the Offered Certificates so long as the
stabilizing bids do not exceed a specified maximum. Syndicate covering
transactions involve purchases of the Offered 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 Offered Certificates originally
sold by such syndicate member are purchased in a syndicate covering
transaction.
Such over-allotment transactions, stabilizing transactions, syndicate
covering transactions and penalty bids may cause the prices of the Offered
Certificates to be higher than they would otherwise be in the absence of
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<PAGE>
such transactions. Neither the Transferor nor any of the Underwriters makes
any representation or prediction as to the direction or magnitude of any
effect that the transactions described above may have on the price of the
Offered Certificates. In addition, neither the Transferor nor any of the
Underwriters represents that any of the Underwriters will engage in any such
transactions or that such transactions, once commenced, will not be
discontinued without notice.
The Transferor has been advised by the Underwriters that they 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 0.125% of the principal amount of the Class A
Certificates. The Underwriters may allow, and such dealers may reallow,
concessions not in excess of 0.125% of the principal amount of the Class A
Certificates to certain brokers and dealers. After the initial public
offering, the public offering price and other selling terms may be changed by
the Underwriters.
The Transferor has been advised by the Underwriters that they propose
initially to offer the Class B Certificates to the public at the price set
forth on the cover page hereof and to certain dealers at such price less
concessions not in excess of 0.150% of the principal amount of the Class B
Certificates. The Underwriters may allow, and such dealers may reallow,
concessions not in excess of 0.150% of the principal amount of the Class B
Certificates to certain brokers and dealers. After the initial public
offering, the public offering price and other selling terms may be changed by
the Underwriters.
Each Underwriter has represented and agreed that (a) it has 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 Offered 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 and other applicable laws and regulations with
respect to anything done by it in relation to the Offered 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.
In the ordinary course of business, the Underwriters and their affiliates
have engaged and may engage in investment banking and/or commercial banking
transactions with the Transferor, its affiliates and the Trust. In addition,
the Underwriters may from time to time take positions in the Certificates and
other certificates issued by the Trust.
Banc One Capital Corporation, an underwriter of the Offered Certificates, is
a wholly-owned subsidiary of BANC ONE CORPORATION and an affiliate of the
Transferor. See "Recent Developments" herein and "The Bank and BANC ONE
CORPORATION" in the Prospectus.
After the initial distribution of the Offered Certificates by the
Underwriters, this Prospectus Supplement and the Prospectus may be used by
Banc One Capital Corporation in connection with offers and sales relating to
market-making transactions in the Offered Certificates. Banc One Capital
Corporation 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. Banc One Capital Corporation has no obligation to make a market in the
Offered Certificates and any such market-making may be discontinued by Banc
One Capital Corporation at any time without notice, in its sole discretion.
Banc One Capital Corporation is among the Underwriters participating in the
initial distribution of the Offered Certificates.
S-49
<PAGE>
LISTING AND GENERAL INFORMATION
Application has been made to list the Offered Certificates on the Luxembourg
Stock Exchange. In connection with the listing application, the Articles of
Association and By-laws of the Bank, as well as legal notice relating to the
issuance of the Offered Certificates will be deposited prior to listing with
the Chief Registrar of the District Court in Luxembourg, where copies thereof
may be obtained upon request. Once the Offered Certificates have been so
listed, trading of the Offered Certificates may be effected on the Luxembourg
Stock Exchange. The Class A Certificates and the Class B Certificates have
been accepted for clearance through the facilities of DTC, Cedel and Euroclear
(ISIN number for the Class A Certificates, US337435CT63, and for the Class B
Certificates, US337435CU37, and Common Code number for the Class A
Certificates 8018731, and for the Class B Certificates 8018740).
The transactions contemplated in this Prospectus Supplement were authorized
by resolutions adopted by the Bank on April 19, 1995.
Copies of the Pooling and Servicing Agreement, the Offered Series
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 at the office of the listing agent of the Trust
in Luxembourg, whose address is 14 Boulevard Royal, 2449 Luxembourg, Grand-
Duche de Luxembourg. Financial information regarding the Bank is included in
the consolidated financial statements of First USA, Inc. in First USA, Inc.'s
Annual Report and Form 10-K for the fiscal year ended June 30, 1996, which
documents are also available at the office of the listing agent in Luxembourg.
The Certificates, the Pooling and Servicing Agreement and the Offered Series
Supplement are governed by the laws of the State of Delaware.
S-50
<PAGE>
ANNEX I
OTHER SERIES
The Trust has previously issued twenty-nine other Series that remain
outstanding. The table below sets forth the principal characteristics of such
Series: Series 1993-1, Series 1993-3, Series 1994-2, Series 1994-4, Series
1994-5, Series 1994-6, Series 1994-7, Series 1994-8, Series 1995-1, Series
1995-2, Series 1995-3, Series 1995-4, Series 1995-5, Series 1995-6, Series
1996-1, Series 1996-E1, Series 1996-2, Series 1996-3, Series 1996-4, Series
1996-6, Series 1996-7, Series 1996-8, Series 1997-1, Series 1997-2, Series
1997-3, Series 1997-4, Series 1997-5, Series 1997-6 and Series 1997-7. For
more specific information with respect to any Series, any prospective investor
should contact the Servicer at (214) 849-3700. The Servicer will provide,
without charge, to any prospective purchaser of the Certificates, a copy of
the disclosure documents for any previous publicly issued Series.
<TABLE>
<S> <C>
SERIES 1993-1
Initial Invested Amount.................... $500,000,000
Outstanding Invested Amount as of August
15, 1997.................................. $375,000,000
Certificate Rate........................... One Month LIBOR + 0.30%
Controlled Amortization Amount............. $41,666,667
Commencement of Controlled Amortization Pe-
riod...................................... May 1, 1997
Annual Servicing Fee Percentage............ 1.5%, subject to increase to 2.0%
Initial Cash Collateral Amount............. $70,000,000
Expected Series Termination Date........... May 15, 1998
Scheduled Series Termination Date.......... February 15, 2000
Series Issuance Date....................... May 13, 1993
SERIES 1993-3
Initial Invested Amount.................... $750,000,000
Certificate Rate........................... One Month LIBOR + 0.25%
Controlled Amortization Amount............. $62,500,000
Commencement of Controlled Amortization Pe-
riod...................................... April 1, 1998
Annual Servicing Fee Percentage............ 1.5%, subject to increase to 2.0%
Initial Cash Collateral Amount............. $97,500,000
Expected Series Termination Date........... April 15, 1999
Scheduled Series Termination Date.......... December 15, 2000
Series Issuance Date....................... October 14, 1993
SERIES 1994-2
Maximum Permitted Invested Amount.......... $500,000,000
Invested Amount as of August 15, 1997...... $2,000,000
Certificate Rate........................... Commercial Paper Index
Commencement of Amortization Period........ July 1, 1998 (extendible)
Annual Servicing Fee Percentage............ 1.5%, subject to increase to 2.0%
Initial Letter of Credit Amount............ 12% of Initial Invested Amount
Scheduled Series Termination Date.......... December 15, 2000 (extendible)
Series Issuance Date....................... April 14, 1994
</TABLE>
AI-1
<PAGE>
<TABLE>
<S> <C>
SERIES 1994-4
1. CLASS A CERTIFICATES
Initial Invested Amount............... $726,450,000
Certificate Rate...................... One Month LIBOR + 0.37%
Controlled Amortization Amount........ $60,537,500
Commencement of Controlled Amortiza-
tion Period.......................... November 1, 2000
Annual Servicing Fee Percentage....... 1.5%, subject to increase to 2.0%
Initial Collateral Invested Amount.... $87,000,000
Other Enhancement..................... Subordination of Class B Certificates
Expected Final Payment Date........... November 15, 2001
Scheduled Series Termination Date..... August 15, 2003
Series Issuance Date.................. June 9, 1994
2. CLASS B CERTIFICATES
Initial Invested Amount............... $56,550,000
Certificate Rate...................... One Month LIBOR + 0.58%
Controlled Amortization Amount........ $56,550,000
Annual Servicing Fee Percentage....... Same as above for Class A Certificates
Initial Collateral Invested Amount.... Same as above for Class A Certificates
Expected Final Payment Date........... Same as above for Class A Certificates
Scheduled Series Termination Date..... Same as above for Class A Certificates
Series Issuance Date.................. Same as above for Class A Certificates
SERIES 1994-5
1. CLASS A CERTIFICATES
Initial Invested Amount............... $500,000,000
Outstanding Invested Amount as of Au-
gust 15, 1997........................ $250,000,000
Certificate Rate...................... One Month LIBOR + 0.14%
Controlled Amortization Amount........ $250,000,000
Commencement of Controlled Amortiza-
tion Period.......................... July 1, 1997
Annual Servicing Fee Percentage....... 1.5%, subject to increase to 2.0%
Initial Collateral Invested Amount.... $63,250,000
Other Enhancement..................... Subordination of Class B Certificates
Expected Final Payment Date........... September 15, 1997
Scheduled Series Termination Date..... April 15, 2000
Series Issuance Date.................. August 24, 1994
2. CLASS B CERTIFICATES
Initial Invested Amount............... $39,160,000
Certificate Rate...................... One Month LIBOR + 0.34%
Controlled Amortization Amount........ $39,160,000
Annual Servicing Fee Percentage....... Same as above for Class A Certificates
Initial Collateral Invested Amount.... Same as above for Class A Certificates
Expected Final Payment Date........... Same as above for Class A Certificates
Scheduled Series Termination Date..... Same as above for Class A Certificates
Series Issuance Date.................. Same as above for Class A Certificates
</TABLE>
AI-2
<PAGE>
<TABLE>
<S> <C>
SERIES 1994-6
1. CLASS A CERTIFICATES
Initial Invested Amount............... $750,000,000
Certificate Rate...................... One Month LIBOR + 0.35%
Controlled Amortization Amount........ $62,500,000
Commencement of Controlled Amortiza-
tion Period.......................... January 1, 2001
Annual Servicing Fee Percentage....... 1.5%, subject to increase to 2.0%
Initial Collateral Invested Amount.... $89,820,000
Other Enhancement..................... Subordination of Class B Certificates
Expected Final Payment Date........... January 15, 2002
Scheduled Series Termination Date..... October 15, 2003
Series Issuance Date.................. August 24, 1994
2. CLASS B CERTIFICATES
Initial Invested Amount............... $58,380,000
Certificate Rate...................... One Month LIBOR + 0.58%
Controlled Amortization Amount........ $58,380,000
Annual Servicing Fee Percentage....... Same as above for Class A Certificates
Initial Collateral Invested Amount.... Same as above for Class A Certificates
Expected Final Payment Date........... Same as above for Class A Certificates
Scheduled Series Termination Date..... Same as above for Class A Certificates
Series Issuance Date.................. Same as above for Class A Certificates
SERIES 1994-7
1. CLASS A CERTIFICATES
Initial Invested Amount............... $750,000,000
Certificate Rate...................... One Month LIBOR + 0.18%
Controlled Accumulation Amount
(subject to adjustment).............. $62,500,000
Commencement of Controlled
Accumulation Period (subject to
adjustment).......................... October 31, 1998
Annual Servicing Fee Percentage....... 1.5%, subject to increase to 2.0%
Initial Collateral Invested Amount.... $94,880,000
Other Enhancement..................... Subordination of Class B Certificates
Expected Final Payment Date........... November 15, 1999
Scheduled Series Termination Date..... June 15, 2002
Series Issuance Date.................. November 8, 1994
2. CLASS B CERTIFICATES
Initial Invested Amount............... $58,735,000
Certificate Rate...................... One Month LIBOR + 0.40%
Controlled Accumulation Amount
(subject to adjustment).............. Same as above for Class A Certificates
Commencement of Controlled
Accumulation Period (subject to
adjustment).......................... Same as above for Class A Certificates
Annual Servicing Fee Percentage....... Same as above for Class A Certificates
Initial Collateral Invested Amount.... Same as above for Class A Certificates
Expected Final Payment Date........... Same as above for Class A Certificates
Scheduled Series Termination Date..... Same as above for Class A Certificates
Series Issuance Date.................. Same as above for Class A Certificates
</TABLE>
AI-3
<PAGE>
<TABLE>
<S> <C>
SERIES 1994-8
1. CLASS A CERTIFICATES
Initial Invested Amount............... $500,000,000
Certificate Rate...................... Three Month LIBOR + 0.24%
Controlled Accumulation Amount
(subject to adjustment).............. $41,666,667
Commencement of Controlled Accumula-
tion Period
(subject to adjustment).............. October 31, 2000
Annual Servicing Fee Percentage....... 1.5%, subject to increase to 2.0%
Initial Collateral Invested Amount.... $63,253,000
Other Enhancement..................... Subordination of Class B Certificates
Expected Final Payment Date........... November 15, 2001
Scheduled Series Termination Date..... June 15, 2004
Series Issuance Date.................. November 8, 1994
2. CLASS B CERTIFICATES
Initial Invested Amount............... $39,157,000
Certificate Rate...................... Three Month LIBOR + 0.45%
Controlled Accumulation Amount
(subject to adjustment).............. Same as above for Class A Certificates
Commencement of Controlled Accumula-
tion Period
(subject to adjustment).............. Same as above for Class A Certificates
Annual Servicing Fee Percentage....... Same as above for Class A Certificates
Initial Collateral Invested Amount.... Same as above for Class A Certificates
Expected Final Payment Date........... Same as above for Class A Certificates
Scheduled Series Termination Date..... Same as above for Class A Certificates
Series Issuance Date.................. Same as above for Class A Certificates
SERIES 1995-1
1. CLASS A CERTIFICATES
Initial Invested Amount............... $1,000,000,000
Certificate Rate...................... One Month LIBOR + 0.14%
Controlled Accumulation Amount
(subject to adjustment).............. $83,333,333
Commencement of Controlled Accumula-
tion Period
(subject to adjustment).............. February 28, 1998
Annual Servicing Fee Percentage....... 1.5%, subject to increase to 2.0%
Initial Collateral Invested Amount.... $126,500,000
Other Enhancement..................... Subordination of Class B Certificates
Expected Final Payment Date........... March 15, 1999
Scheduled Series Termination Date..... October 15, 2001
Series Issuance Date.................. March 1, 1995
2. CLASS B CERTIFICATES
Initial Invested Amount............... $78,300,000
Certificate Rate...................... One Month LIBOR + 0.35%
Controlled Accumulation Amount
(subject to adjustment).............. Same as above for Class A Certificates
Commencement of Controlled Accumula-
tion Period
(subject to adjustment).............. Same as above for Class A Certificates
Annual Servicing Fee Percentage....... Same as above for Class A Certificates
Initial Collateral Invested Amount.... Same as above for Class A Certificates
Expected Final Payment Date........... Same as above for Class A Certificates
Scheduled Series Termination Date..... Same as above for Class A Certificates
Series Issuance Date.................. Same as above for Class A Certificates
</TABLE>
AI-4
<PAGE>
<TABLE>
<S> <C>
SERIES 1995-2
1. CLASS A CERTIFICATES
Initial Invested Amount............... $660,000,000
Certificate Rate...................... One Month LIBOR + 0.24%
Controlled Accumulation Amount
(subject to adjustment).............. $55,000,000
Commencement of Controlled Accumula-
tion Period
(subject to adjustment).............. February 28, 2001
Annual Servicing Fee Percentage....... 1.5%, subject to increase to 2.0%
Initial Collateral Invested Amount.... $83,500,000
Other Enhancement..................... Subordination of Class B Certificates
Expected Final Payment Date........... March 15, 2002
Scheduled Series Termination Date..... October 15, 2004
Series Issuance Date.................. March 1, 1995
2. CLASS B CERTIFICATES
Initial Invested Amount............... $51,700,000
Certificate Rate...................... One Month LIBOR + 0.425%
Controlled Accumulation Amount
(subject to adjustment).............. Same as above for Class A Certificates
Commencement of Controlled Accumula-
tion Period
(subject to adjustment).............. Same as above for Class A Certificates
Annual Servicing Fee Percentage....... Same as above for Class A Certificates
Initial Collateral Invested Amount.... Same as above for Class A Certificates
Expected Final Payment Date........... Same as above for Class A Certificates
Scheduled Series 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 Invested Amount............... $830,000,000
Certificate Rate...................... One Month LIBOR + 0.10%
Controlled Accumulation Amount
(subject to adjustment).............. $69,166,667
Commencement of Controlled Accumula-
tion Period
(subject to adjustment).............. April 30, 1997
Annual Servicing Fee Percentage....... 1.5%, subject to increase to 2.0%
Initial Collateral Invested Amount.... $105,000,000
Other Enhancement..................... Subordination of Class B Certificates
Expected Final Payment Date........... May 15, 1998
Scheduled Series Termination Date..... December 15, 2000
Series Issuance Date.................. May 16, 1995
2. CLASS B CERTIFICATES
Initial Invested Amount............... $65,000,000
Certificate Rate...................... One Month LIBOR + 0.27%
Controlled Accumulation Amount
(subject to adjustment).............. Same as above for Class A Certificates
Commencement of Controlled Accumula-
tion Period
(subject to adjustment).............. Same as above for Class A Certificates
Annual Servicing Fee Percentage....... Same as above for Class A Certificates
Initial Collateral Invested Amount.... Same as above for Class A Certificates
Expected Final Payment Date........... Same as above for Class A Certificates
Scheduled Series Termination Date..... Same as above for Class A Certificates
Series Issuance Date.................. Same as above for Class A Certificates
</TABLE>
AI-5
<PAGE>
<TABLE>
<S> <C>
SERIES 1995-4
1. CLASS A CERTIFICATES
Initial Invested Amount............... $750,000,000
Certificate Rate...................... One Month LIBOR + 0.12%
Controlled Accumulation Amount
(subject to adjustment).............. $62,500,000
Commencement of Controlled Accumula-
tion Period
(subject to adjustment).............. August 29, 1997
Annual Servicing Fee Percentage....... 1.5%, subject to increase to 2.0%
Initial Collateral Invested Amount.... $85,845,000
Other Enhancement..................... Subordination of Class B Certificates
Expected Final Payment Date........... September 15, 1998
Scheduled Series Termination Date..... April 15, 2001
Series Issuance Date.................. September 14, 1995
2. CLASS B CERTIFICATES
Initial Invested Amount............... $67,770,000
Certificate Rate...................... One Month LIBOR + 0.24%
Controlled Accumulation Amount
(subject to adjustment).............. Same as above for Class A Certificates
Commencement of Controlled Accumula-
tion Period
(subject to adjustment).............. Same as above for Class A Certificates
Annual Servicing Fee Percentage....... Same as above for Class A Certificates
Initial Collateral Invested Amount.... Same as above for Class A Certificates
Expected Final Payment Date........... Same as above for Class A Certificates
Scheduled Series Termination Date..... Same as above for Class A Certificates
Series Issuance Date.................. Same as above for Class A Certificates
SERIES 1995-5
1. CLASS A CERTIFICATES
Initial Invested Amount............... $500,000,000
Certificate Rate...................... One Month LIBOR + 0.17%
Controlled Accumulation Amount
(subject to adjustment).............. $41,666,667
Commencement of Controlled
Accumulation Period (subject to
adjustment).......................... August 31, 1999
Annual Servicing Fee Percentage....... 1.5%, subject to increase to 2.0%
Initial Collateral Invested Amount.... $57,230,000
Other Enhancement..................... Subordination of Class B Certificates
Expected Final Payment Date........... September 15, 2000
Scheduled Series Termination Date..... April 15, 2003
Series Issuance Date.................. September 14, 1995
2. CLASS B CERTIFICATES
Initial Invested Amount............... $45,180,000
Certificate Rate...................... One Month LIBOR + 0.29%
Controlled Accumulation Amount
(subject to adjustment).............. Same as above for Class A Certificates
Commencement of Controlled
Accumulation Period (subject to
adjustment).......................... Same as above for Class A Certificates
Annual Servicing Fee Percentage....... Same as above for Class A Certificates
Initial Collateral Invested Amount.... Same as above for Class A Certificates
Expected Final Payment Date........... Same as above for Class A Certificates
Scheduled Series Termination Date..... Same as above for Class A Certificates
Series Issuance Date.................. Same as above for Class A Certificates
</TABLE>
AI-6
<PAGE>
<TABLE>
<S> <C>
SERIES 1995-6
1. CLASS A CERTIFICATES
Initial Invested Amount............... $1,245,000,000
Certificate Rate...................... One Month LIBOR + 0.17%
Controlled Accumulation Amount
(subject to adjustment).............. $103,750,000
Commencement of Controlled
Accumulation Period (subject to
adjustment).......................... October 31, 1999
Annual Servicing Fee Percentage....... 1.5%, subject to increase to 2.0%
Initial Collateral Invested Amount.... $142,500,000
Other Enhancement..................... Subordination of Class B Certificates
Expected Final Payment Date........... November 10, 2000
Scheduled Series Termination Date..... July 10, 2003
Series Issuance Date.................. December 7, 1995
2. CLASS B CERTIFICATES
Initial Invested Amount............... $112,500,000
Certificate Rate...................... One Month LIBOR + 0.33%
Controlled Accumulation Amount
(subject to adjustment).............. Same as above for Class A Certificates
Commencement of Controlled
Accumulation Period (subject to
adjustment).......................... Same as above for Class A Certificates
Annual Servicing Fee Percentage....... Same as above for Class A Certificates
Initial Collateral Invested Amount.... Same as above for Class A Certificates
Expected Final Payment Date........... Same as above for Class A Certificates
Scheduled Series Termination Date..... Same as above for Class A Certificates
Series Issuance Date.................. Same as above for Class A Certificates
SERIES 1996-1
1. CLASS A CERTIFICATES
Initial Invested Amount............... $750,000,000
Certificate Rate...................... One Month LIBOR + 0.16%
Controlled Accumulation Amount
(subject to adjustment).............. $75,301,250
Commencement of Controlled
Accumulation Period (subject to
adjustment).......................... February 29, 2000
Annual Servicing Fee Percentage....... 1.5%, subject to increase to 2.0%
Initial CIA Certificate Amount........ $85,845,000
Other Enhancement..................... Subordination of Class B Certificates
Expected Final Payment Date........... March 15, 2001
Scheduled Series Termination Date..... November 15, 2003
Series Issuance Date.................. March 6, 1996
2. CLASS B CERTIFICATES
Initial Invested Amount............... $67,770,000
Certificate Rate...................... One Month LIBOR + 0.29%
Controlled Accumulation Amount
(subject to adjustment).............. Same as above for Class A Certificates
Commencement of Controlled
Accumulation Period (subject to
adjustment).......................... Same as above for Class A Certificates
Annual Servicing Fee Percentage....... Same as above for Class A Certificates
Initial CIA Certificate Amount........ Same as above for Class A Certificates
Expected Final Payment Date........... Same as above for Class A Certificates
Scheduled Series Termination Date..... Same as above for Class A Certificates
Series Issuance Date.................. Same as above for Class A Certificates
</TABLE>
AI-7
<PAGE>
<TABLE>
<S> <C>
SERIES 1996-E1
Initial Invested Amount............... $500,000,000
Outstanding Invested Amount as of July
15, 1997............................. $454,200,000
Certificate Rate...................... One month LIBOR + 1.00% (or such
lesser rate as designated in the
Exchangeable Certificate Purchase
Agreement)
Controlled Accumulation Amount
(subject to adjustment).............. Invested Amount at the end of
Revolving Period divided by 3
Commencement of Controlled
Accumulation Period (subject to
adjustment).......................... June 30, 1998
Annual Servicing Fee Percentage....... 1.5%, subject to increase to 2.0%
Other Enhancement..................... Group E Spread Account
Group................................. Group E1
Exchange Period....................... 25 months from Series Issuance Date
Expected Final Payment Date........... October 15, 1998
Scheduled Series Termination Date..... June 15, 2001
Series Issuance Date.................. May 2, 1996
SERIES 1996-2
1. CLASS A CERTIFICATES
Initial Invested Amount............... $600,000,000
Certificate Rate...................... One Month LIBOR + 0.18%
Controlled Accumulation Amount
(subject to adjustment).............. $60,250,000
Commencement of Controlled
Accumulation Period (subject to
adjustment).......................... May 31, 2002
Annual Servicing Fee Percentage....... 1.5%, subject to increase to 2.0%
Initial CIA Certificate Amount........ $68,700,000
Other Enhancement..................... Subordination of Class B Certificates
Expected Final Payment Date........... June 10, 2003
Scheduled Series Termination Date..... February 10, 2006
Series Issuance Date.................. June 4, 1996
2. CLASS B CERTIFICATES
Initial Invested Amount............... $54,300,000
Certificate Rate...................... One Month LIBOR + 0.33%
Controlled Accumulation Amount
(subject to adjustment).............. Same as above for Class A Certificates
Commencement of Controlled
Accumulation Period (subject to
adjustment).......................... Same as above for Class A Certificates
Annual Servicing Fee Percentage....... Same as above for Class A Certificates
Initial CIA Certificate Amount........ Same as above for Class A Certificates
Expected Final Payment Date........... Same as above for Class A Certificates
Scheduled Series Termination Date..... Same as above for Class A Certificates
Series Issuance Date.................. Same as above for Class A Certificates
</TABLE>
AI-8
<PAGE>
<TABLE>
<S> <C>
SERIES 1996-3
1. CLASS A CERTIFICATES
Initial Invested Amount............... $400,000,000
Certificate Rate...................... One Month LIBOR + 0.10%
Controlled Accumulation Amount
(subject to adjustment).............. $40,166,667
Commencement of Controlled
Accumulation Period (subject to
adjustment).......................... May 31, 1998
Annual Servicing Fee Percentage....... 1.5%, subject to increase to 2.0%
Initial CIA Certificate Amount........ $45,800,000
Other Enhancement..................... Subordination of Class B Certificates
Expected Final Payment Date........... June 10, 1999
Scheduled Series Termination Date..... February 10, 2002
Series Issuance Date.................. June 6, 1996
2. CLASS B CERTIFICATES
Initial Invested Amount............... $36,200,000
Certificate Rate...................... One Month LIBOR + 0.23%
Controlled Accumulation Amount
(subject to adjustment).............. Same as above for Class A Certificates
Commencement of Controlled
Accumulation Period (subject to
adjustment).......................... Same as above for Class A Certificates
Annual Servicing Fee Percentage....... Same as above for Class A Certificates
Initial CIA Certificate Amount........ Same as above for Class A Certificates
Expected Final Payment Date........... Same as above for Class A Certificates
Scheduled Series 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 Invested Amount............... $500,000,000
Certificate Rate...................... One Month LIBOR + 0.19%
Controlled Accumulation Amount
(subject to adjustment).............. $50,200,834
Commencement of Controlled
Accumulation Period (subject to
adjustment).......................... July 31, 2005
Annual Servicing Fee Percentage....... 1.5%, subject to increase to 2.0%
Initial CIA Certificate Amount........ $57,230,000
Other Enhancement..................... Subordination of Class B Certificates
Expected Final Payment Date........... August 10, 2006
Scheduled Series Termination Date..... April 10, 2009
Series Issuance Date.................. August 6, 1996
2. CLASS B CERTIFICATES
Initial Invested Amount............... $45,180,000
Certificate Rate...................... One Month LIBOR + 0.37%
Controlled Accumulation Amount
(subject to adjustment).............. Same as above for Class A Certificates
Commencement of Controlled
Accumulation Period (subject to
adjustment).......................... Same as above for Class A Certificates
Annual Servicing Fee Percentage....... Same as above for Class A Certificates
Initial CIA Certificate Amount........ Same as above for Class A Certificates
Expected Final Payment Date........... Same as above for Class A Certificates
Scheduled Series Termination Date..... Same as above for Class A Certificates
Series Issuance Date.................. Same as above for Class A Certificates
</TABLE>
AI-9
<PAGE>
<TABLE>
<S> <C>
SERIES 1996-6
1. CLASS A CERTIFICATES
Initial Invested Amount............... $862,650,000
Certificate Rate...................... One Month LIBOR + 0.14%
Controlled Accumulation Amount
(subject to adjustment).............. $86,616,667
Commencement of Controlled
Accumulation Period (subject to
adjustment).......................... October 31, 2002
Annual Servicing Fee Percentage....... 1.5%, subject to increase to 2.0%
Initial CIA Certificate Amount........ $98,750,000
Other Enhancement..................... Subordination of Class B Certificates
Expected Final Payment Date........... November 10, 2003
Scheduled Series Termination Date..... July 10, 2006
Series Issuance Date.................. November 13, 1996
2. CLASS B CERTIFICATES
Initial Invested Amount............... $78,000,000
Certificate Rate...................... One Month LIBOR + 0.35%
Controlled Accumulation Amount
(subject to adjustment).............. Same as above for Class A Certificates
Commencement of Controlled
Accumulation Period (subject to
adjustment).......................... Same as above for Class A Certificates
Annual Servicing Fee Percentage....... Same as above for Class A Certificates
Initial CIA Certificate Amount........ Same as above for Class A Certificates
Expected Final Payment Date........... Same as above for Class A Certificates
Scheduled Series Termination Date..... Same as above for Class A Certificates
Series Issuance Date.................. Same as above for Class A Certificates
SERIES 1996-7
1. CLASS A CERTIFICATES
Initial Invested Amount............... $483,060,000
Certificate Rate...................... One Month LIBOR + 0.095%
Controlled Accumulation Amount
(subject to adjustment).............. $48,500,000
Commencement of Controlled
Accumulation Period (subject to
adjustment).......................... January 31, 1999
Annual Servicing Fee Percentage....... 1.5%, subject to increase to 2.0%
Initial CIA Certificate Amount........ $55,290,000
Other Enhancement..................... Subordination of Class B Certificates
Expected Final Payment Date........... February 10, 2000
Scheduled Series Termination Date..... October 10, 2002
Series Issuance Date.................. December 11, 1996
2. CLASS B CERTIFICATES
Initial Invested Amount............... $43,650,000
Certificate Rate...................... One Month LIBOR + 0.29%
Controlled Accumulation Amount
(subject to adjustment).............. Same as above for Class A Certificates
Commencement of Controlled
Accumulation Period (subject to
adjustment).......................... Same as above for Class A Certificates
Annual Servicing Fee Percentage....... Same as above for Class A Certificates
Initial CIA Certificate Amount........ Same as above for Class A Certificates
Expected Final Payment Date........... Same as above for Class A Certificates
Scheduled Series Termination Date..... Same as above for Class A Certificates
Series Issuance Date.................. Same as above for Class A Certificates
</TABLE>
AI-10
<PAGE>
<TABLE>
<S> <C>
SERIES 1996-8
1. CLASS A CERTIFICATES
Initial Invested Amount............... $400,000,000
Certificate Rate...................... One Month LIBOR + 0.12%
Controlled Accumulation Amount
(subject to adjustment).............. $40,166,667
Commencement of Controlled
Accumulation Period (subject to
adjustment).......................... December 31, 2002
Annual Servicing Fee Percentage....... 1.5%, subject to increase to 2.0%
Initial CIA Certificate Amount........ $45,800,000
Other Enhancement..................... Subordination of Class B Certificates
Expected Final Payment Date........... January 10, 2004
Scheduled Series Termination Date..... September 10, 2006
Series Issuance Date.................. December 11, 1996
2. CLASS B CERTIFICATES
Initial Invested Amount............... $36,200,000
Certificate Rate...................... One Month LIBOR + 0.34%
Controlled Accumulation Amount
(subject to adjustment).............. Same as above for Class A Certificates
Commencement of Controlled
Accumulation Period (subject to
adjustment).......................... Same as above for Class A Certificates
Annual Servicing Fee Percentage....... Same as above for Class A Certificates
Initial CIA Certificate Amount........ Same as above for Class A Certificates
Expected Final Payment Date........... Same as above for Class A Certificates
Scheduled Series Termination Date..... Same as above for Class A Certificates
Series Issuance Date.................. Same as above for Class A Certificates
</TABLE>
<TABLE>
<S> <C>
SERIES 1997-1
1. CLASS A CERTIFICATES
Initial Invested Amount............... $750,000,000
Certificate Rate...................... One Month LIBOR + 0.10%
Controlled Accumulation Amount
(subject to adjustment).............. $75,301,250
Commencement of Controlled
Accumulation Period (subject to
adjustment).......................... January 31, 2003
Annual Servicing Fee Percentage....... 1.5%, subject to increase to 2.0%
Initial CIA Certificate Amount........ $85,845,000
Other Enhancement..................... Subordination of Class B Certificates
Expected Final Payment Date........... February 17, 2004
Scheduled Series Termination Date..... October 17, 2006
Series Issuance Date.................. February 4, 1997
2. CLASS B CERTIFICATES
Initial Invested Amount............... $67,770,000
Certificate Rate...................... One Month LIBOR + 0.31%
Controlled Accumulation Amount
(subject to adjustment).............. Same as above for Class A Certificates
Commencement of Controlled
Accumulation Period (subject to
adjustment).......................... Same as above for Class A Certificates
Annual Servicing Fee Percentage....... Same as above for Class A Certificates
Initial CIA Certificate Amount........ Same as above for Class A Certificates
Expected Final Payment Date........... Same as above for Class A Certificates
Scheduled Series Termination Date..... Same as above for Class A Certificates
Series Issuance Date.................. Same as above for Class A Certificates
</TABLE>
AI-11
<PAGE>
<TABLE>
<S> <C>
SERIES 1997-2
1. CLASS A CERTIFICATES
Initial Invested Amount............... $500,000,000
Certificate Rate...................... One Month LIBOR + 0.13%
Controlled Accumulation Amount
(subject to adjustment).............. $50,200,834
Commencement of Controlled
Accumulation Period (subject to
adjustment).......................... April 30, 2003
Annual Servicing Fee Percentage....... 1.5%, subject to increase to 2.0%
Initial CIA Certificate Amount........ $57,230,000
Other Enhancement..................... Subordination of Class B Certificates
Expected Final Payment Date........... May 17, 2004
Scheduled Series Termination Date..... January 17, 2007
Series Issuance Date.................. May 8, 1997
2. CLASS B CERTIFICATES
Initial Invested Amount............... $45,180,000
Certificate Rate...................... One Month LIBOR + 0.33%
Controlled Accumulation Amount
(subject to adjustment).............. Same as above for Class A Certificates
Commencement of Controlled
Accumulation Period (subject to
adjustment).......................... Same as above for Class A Certificates
Annual Servicing Fee Percentage....... Same as above for Class A Certificates
Initial CIA Certificate Amount........ Same as above for Class A Certificates
Expected Final Payment Date........... Same as above for Class A Certificates
Scheduled Series Termination Date..... Same as above for Class A Certificates
Series Issuance Date.................. Same as above for Class A Certificates
</TABLE>
<TABLE>
<S> <C>
SERIES 1997-3
1. CLASS A CERTIFICATES
Initial Invested Amount............... $500,000,000
Certificate Rate...................... One Month LIBOR + 0.11%
Controlled Accumulation Amount
(subject to adjustment).............. $50,200,834
Commencement of Controlled
Accumulation Period (subject to
adjustment).......................... May 31, 2001
Annual Servicing Fee Percentage....... 1.5%, subject to increase to 2.0%
Initial CIA Certificate Amount........ $57,230,000
Other Enhancement..................... Subordination of Class B Certificates
Expected Final Payment Date........... June 17, 2002
Scheduled Series Termination Date..... February 17, 2005
Series Issuance Date.................. June 10, 1997
2. CLASS B CERTIFICATES
Initial Invested Amount............... $45,180,000
Certificate Rate...................... One Month LIBOR + 0.29%
Controlled Accumulation Amount
(subject to adjustment).............. Same as above for Class A Certificates
Commencement of Controlled
Accumulation Period (subject to
adjustment).......................... Same as above for Class A Certificates
Annual Servicing Fee Percentage....... Same as above for Class A Certificates
Initial CIA Certificate Amount........ Same as above for Class A Certificates
Expected Final Payment Date........... Same as above for Class A Certificates
Scheduled Series Termination Date..... Same as above for Class A Certificates
Series Issuance Date.................. Same as above for Class A Certificates
</TABLE>
AI-12
<PAGE>
<TABLE>
<S> <C>
SERIES 1997-4
1. CLASS A CERTIFICATES
Initial Invested Amount............... $500,000,000
Certificate Rate...................... One Month LIBOR + 0.21%
Controlled Accumulation Amount
(subject to adjustment).............. $50,200,834
Commencement of Controlled
Accumulation Period (subject to
adjustment).......................... May 31, 2006
Annual Servicing Fee Percentage....... 1.5%, subject to increase to 2.0%
Initial CIA Certificate Amount........ $57,230,000
Other Enhancement..................... Subordination of Class B Certificates
Expected Final Payment Date........... June 17, 2007
Scheduled Series Termination Date..... February 17, 2010
Series Issuance Date.................. June 10, 1997
2. CLASS B CERTIFICATES
Initial Invested Amount............... $45,180,000
Certificate Rate...................... One Month LIBOR + 0.41%
Controlled Accumulation Amount
(subject to adjustment).............. Same as above for Class A Certificates
Commencement of Controlled
Accumulation Period (subject to
adjustment).......................... Same as above for Class A Certificates
Annual Servicing Fee Percentage....... Same as above for Class A Certificates
Initial CIA Certificate Amount........ Same as above for Class A Certificates
Expected Final Payment Date........... Same as above for Class A Certificates
Scheduled Series 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 Invested Amount............... $650,000,000
Certificate Rate...................... One Month LIBOR + 0.14%
Controlled Accumulation Amount
(subject to adjustment).............. $65,260,834
Commencement of Controlled
Accumulation Period (subject to
adjustment).......................... July 31, 2003
Annual Servicing Fee Percentage....... 1.5%, subject to increase to 2.0%
Initial CIA Certificate Amount........ $74,395,000
Other Enhancement..................... Subordination of Class B Certificates
Expected Final Payment Date........... August 17, 2004
Scheduled Series Termination Date..... April 17, 2007
Series Issuance Date.................. August 7, 1997
2. CLASS B CERTIFICATES
Initial Invested Amount............... $58,735,000
Certificate Rate...................... One Month LIBOR + 0.33%
Controlled Accumulation Amount
(subject to adjustment).............. Same as above for Class A Certificates
Commencement of Controlled
Accumulation Period (subject to
adjustment).......................... Same as above for Class A Certificates
Annual Servicing Fee Percentage....... Same as above for Class A Certificates
Initial CIA Certificate Amount........ Same as above for Class A Certificates
Expected Final Payment Date........... Same as above for Class A Certificates
Scheduled Series Termination Date..... Same as above for Class A Certificates
Series Issuance Date.................. Same as above for Class A Certificates
</TABLE>
AI-13
<PAGE>
<TABLE>
<S> <C>
SERIES 1997-6
1. CLASS A CERTIFICATES
Initial Invested Amount............... $1,300,000,000
Certificate Rate...................... 6.42%
Controlled Accumulation Amount
(subject to adjustment).............. $130,521,667
Commencement of Controlled
Accumulation Period (subject to
adjustment).......................... June 31, 2001
Annual Servicing Fee Percentage....... 1.5%, subject to increase to 2.0%
Initial CIA Certificate Amount........ $148,790,000
Other Enhancement..................... Subordination of Class B Certificates
Expected Final Payment Date........... July 17, 2002
Scheduled Series Termination Date..... March 17, 2005
Expected Series Issuance Date......... September 9, 1997
2. CLASS B CERTIFICATES
Initial Invested Amount............... $117,470,000
Certificate Rate...................... 6.58%
Controlled Accumulation Amount
(subject to adjustment).............. Same as above for Class A Certificates
Commencement of Controlled
Accumulation Period (subject to
adjustment).......................... Same as above for Class A Certificates
Annual Servicing Fee Percentage....... Same as above for Class A Certificates
Initial CIA Certificate Amount........ Same as above for Class A Certificates
Expected Final Payment Date........... Same as above for Class A Certificates
Scheduled Series Termination Date..... Same as above for Class A Certificates
Expected Series Issuance Date......... Same as above for Class A Certificates
SERIES 1997-7
1. CLASS A CERTIFICATES
Initial Invested Amount............... $500,000,000
Certificate Rate...................... One Month LIBOR + 0.098%
Controlled Accumulation Amount
(subject to adjustment).............. $50,200,834
Commencement of Controlled
Accumulation Period (subject to
adjustment).......................... August 31, 2003
Annual Servicing Fee Percentage....... 1.5%, subject to increase to 2.0%
Initial CIA Certificate Amount........ $57,230,000
Other Enhancement..................... Subordination of Class B Certificates
Expected Final Payment Date........... September 17, 2004
Scheduled Series Termination Date..... May 17, 2007
Expected Series Issuance Date......... September 9, 1997
2. CLASS B CERTIFICATES
Initial Invested Amount............... $45,180,000
Certificate Rate...................... One Month LIBOR + 0.30%
Controlled Accumulation Amount
(subject to adjustment).............. Same as above for Class A Certificates
Commencement of Controlled
Accumulation Period (subject to
adjustment).......................... Same as above for Class A Certificates
Annual Servicing Fee Percentage....... Same as above for Class A Certificates
Initial CIA Certificate Amount........ Same as above for Class A Certificates
Expected Final Payment Date........... Same as above for Class A Certificates
Scheduled Series Termination Date..... Same as above for Class A Certificates
Expected Series Issuance Date......... Same as above for Class A Certificates
</TABLE>
AI-14
<PAGE>
ANNEX II
GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the globally offered First USA
Credit Card Master Trust Floating Rate Asset Backed Certificates, Series 1997-
8, Class A and Class B (the "Global Securities") 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 and prior First USA Credit Card Master Trust
issues.
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.
Investors electing to hold their Global Securities through DTC will follow
the settlement practices applicable to U.S. corporate debt obligations and
prior First USA Credit Card Master Trust issues. Investor securities custody
accounts 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 using the procedures applicable to prior First
USA Credit Card Master Trust issues 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.
AII-1
<PAGE>
Trading between DTC seller and Cedel or Euroclear purchaser. When Global
Securities are to be transferred from the account of a DTC Participant to the
accounts 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, as the case may be, will instruct their respective Depositary 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, on the basis of actual days elapsed
and a 360 day year. Payment will then be made by the respective Depositary to
the DTC Participant's account against delivery of the Global Securities. After
settlement has been completed, the Global Securities will be credited to the
respective clearing system and by the clearing system, 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 Participants 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 their 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 on the basis of
actual days elapsed and a 360 day year. 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.
AII-2
<PAGE>
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:
(a) 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 procedures;
(b) 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
accounts in order to settle the sale side of the trade; or
(c) 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 discount) 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 organized in or under the laws of the United
States or any political subdivision thereof, (iii) an estate the income
AII-3
<PAGE>
of which is includible in gross income for United States tax purposes,
regardless of its source or (iv) a trust the income of which is includible in
gross income for U.S. Federal income tax purposes, regardless of its source
or, for tax years beginning after December 31, 1996 (and, if a trustee so
elects, for tax years ending after August 20, 1996), a trust if a U.S. court
is able to exercise primary supervision over the administration of such trust
and one or more U.S. 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.
AII-4
<PAGE>
INDEX OF TERMS FOR PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
TERM PAGE
- ---- ----------
<S> <C>
Accounts............................................................. S-2, S-4
Accumulation Period.................................................. S-9
Accumulation Period Length........................................... S-31
Accumulation Shortfall............................................... S-11, S-42
Addition Date........................................................ S-34
Amortization Periods................................................. S-12
Available Investor Principal Collections............................. S-30
Available Reserve Account Amount..................................... S-46
Average Principal Balance............................................ S-34
BANC ONE............................................................. S-18
Bank................................................................. S-1
Bank Portfolio....................................................... S-19
Base Rate............................................................ S-25
Calculation Date..................................................... S-37
Certificate Rates.................................................... S-8
Certificateholders................................................... S-4
Certificates......................................................... S-6
CIA Account Percentage............................................... S-39
CIA Adjusted Invested Amount......................................... S-35
CIA Available Funds.................................................. S-39
CIA Certificate Rate................................................. S-41
CIA Certificateholders............................................... S-4
CIA Certificateholders' Interest..................................... S-5
CIA Certificates..................................................... S-2
CIA Charge-Off....................................................... S-44
CIA Default Amount................................................... S-43
CIA Fixed/Floating Allocation Percentage............................. S-33
CIA Floating Allocation Percentage................................... S-33
CIA Invested Amount.................................................. S-6, S-34
CIA Monthly Interest................................................. S-41
CIA Monthly Principal................................................ S-42
CIA Monthly Servicing Fee............................................ S-47
CIA Scheduled Payment Date .......................................... S-30
Class A Account Percentage........................................... S-39
Class A Adjusted Invested Amount..................................... S-34
Class A Available Funds.............................................. S-38
Class A Certificate Rate............................................. S-8
Class A Certificateholders........................................... S-4
Class A Certificateholders' Interest................................. S-5
Class A Certificates................................................. S-1, S-4
Class A Fixed/Floating Allocation Percentage......................... S-33
Class A Floating Allocation Percentage............................... S-33
Class A Invested Amount.............................................. S-34
Class A Investor Charge-Off.......................................... S-44
Class A Investor Default Amount...................................... S-43
Class A Monthly Interest............................................. S-38
Class A Monthly Principal............................................ S-41
Class A Monthly Servicing Fee........................................ S-47
Class A Pool Factor.................................................. S-27
Class A Required Amount.............................................. S-13
Class A Scheduled Payment Date....................................... S-2
Class B Account Percentage........................................... S-39
Class B Adjusted Invested Amount..................................... S-34
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TERM PAGE
- ---- ----------
<S> <C>
Class B Available Funds.............................................. S-39
Class B Certificate Rate............................................. S-8
Class B Certificateholders........................................... S-4
Class B Certificateholders' Interest................................. S-5
Class B Certificates................................................. S-1, S-4
Class B Fixed/Floating Allocation Percentage......................... S-33
Class B Floating Allocation Percentage............................... S-33
Class B Invested Amount.............................................. S-34
Class B Investor Charge-Off.......................................... S-44
Class B Investor Default Amount...................................... S-43
Class B Monthly Interest............................................. S-39
Class B Monthly Principal............................................ S-42
Class B Monthly Servicing Fee........................................ S-47
Class B Pool Factor.................................................. S-27
Class B Principal Commencement Date.................................. S-31
Class B Required Amount.............................................. S-14
Class B Scheduled Payment Date....................................... S-2
Closing Date......................................................... S-8, S-27
Code................................................................. S-16
Controlled Accumulation Amount....................................... S-42
Controlled Deposit Amount............................................ S-10, S-24
Covered Amount....................................................... S-11, S-45
Cut Off Date......................................................... S-5
Default Amount....................................................... S-43
Distribution Date.................................................... S-2, S-28
DTC.................................................................. AII-1
Enhancement.......................................................... S-4
ERISA................................................................ S-16
Excess Finance Charge Collections.................................... S-38
Excess Principal Collections......................................... S-32
Exchangeable Transferor Certificate.................................. S-7
Finance Charge Deficit............................................... S-36
Fixed/Floating Allocation Percentage................................. S-33
FUSA................................................................. S-18
Global Securities.................................................... AII-1
Interchange.......................................................... S-20
Interest Period...................................................... S-29
Invested Amount...................................................... S-35
Investor Default Amount.............................................. S-43
Investor Interest.................................................... S-5
Investor Percentage.................................................. S-33
Investor Servicing Fee............................................... S-8, S-47
LIBOR................................................................ S-2, S-29
LIBOR Determination Date............................................. S-29
Merger............................................................... S-18
Monthly Period....................................................... S-6
Monthly Periodic Rate................................................ S-18
Offered Certificates................................................. S-1, S-4
Offered Series....................................................... S-21
Offered Series Supplement............................................ S-4
Pay Out Event........................................................ S-25, S-46
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TERM PAGE
- ---- ----------
<S> <C>
Percentage Allocation................................................ S-37
Pool Factor.......................................................... S-27
Pooling and Servicing Agreement...................................... S-4
Portfolio Yield...................................................... S-25
Principal Funding Account............................................ S-10, S-44
Principal Funding Account Balance.................................... S-24
Principal Funding Investment Proceeds................................ S-11, S-45
Principal Shortfalls................................................. S-32
Rapid Amortization Period............................................ S-12
Rating Agency Condition.............................................. S-45
Reallocated CIA Principal Collections................................ S-42
Reallocated Class B Principal Collections............................ S-43
Reallocated Principal Collections.................................... S-43
Receivables.......................................................... S-2, S-4
Record Date.......................................................... S-28
Reference Banks...................................................... S-29
Relevant Cut Off Date................................................ S-21
Removed Accounts..................................................... S-5
Required Reserve Account Amount ..................................... S-45
Reserve Account...................................................... S-45
Reserve Account Funding Date......................................... S-45
Revolving Period..................................................... S-9
Scheduled Payment Date............................................... S-2
Servicer............................................................. S-1, S-4
Servicing Fee Percentage............................................. S-8, S-47
Spread Account Agreement............................................. S-15
Stated Series Termination Date....................................... S-7
Subordinate Principal Collections.................................... S-36
Telerate Page 3750 .................................................. S-29
Transferor........................................................... S-1, S-4
Transferor Interest.................................................. S-6
Transferor Percentage................................................ S-35
Trust................................................................ S-1, S-4
Trustee.............................................................. S-1, S-4
Underwriters......................................................... S-48
Underwriting Agreement............................................... S-48
U.S. Person.......................................................... AII-3
</TABLE>
<PAGE>
PROSPECTUS
FIRST USA CREDIT CARD MASTER TRUST
ASSET BACKED CERTIFICATES
FIRST USA BANK
TRANSFEROR AND SERVICER
---------------
The Asset Backed Certificates offered hereby (collectively, the
"Certificates") 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 the First USA Credit Card Master Trust (the "Trust"). The Trust
was created pursuant to a Pooling and Servicing Agreement between First USA
Bank (the "Bank"), as transferor and servicer, and The Bank of New York
(Delaware), as trustee (the "Trustee"). The property of the Trust includes and
will include receivables (the "Receivables") generated from time to time in a
portfolio of VISA(R) and MasterCard(R) revolving credit card 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. The Bank will own the
remaining undivided interest in the Trust not represented by the Certificates
issued by the Trust and will service the 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, floating rate
Certificates or another type of Certificates, as specified in the related
Prospectus Supplement. Each Certificate will represent an undivided interest
in the Trust and the interest of the Certificateholders of each Class or
Series will include the right to receive a varying percentage of each month's
collections with respect to the Receivables at the time, 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, letter of
credit, surety bond, insurance policy or other form of enhancement as
specified in the Prospectus Supplement relating to such Series. In addition,
any Series offered hereby may include one or more Classes which are
subordinated in right and priority to payment of principal of, 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 statistical
rating organization.
While the specific terms of any Series in respect of which this Prospectus
is being delivered will be described in the related Prospectus Supplement, the
terms of such Series will not be subject to prior review by, or consent of,
the holders of the Certificates of any previously issued Series.
---------------
THE CERTIFICATES WILL REPRESENT INTERESTS IN THE TRUST ONLY AND WILL NOT REP-
RESENT INTERESTS IN OR RECOURSE OBLIGATIONS OF FIRST USA BANK OR ANY AFFIL-
IATE THEREOF. 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 COMMIS-
SION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADE-
QUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMI-
NAL OFFENSE.
POTENTIAL INVESTORS SHOULD CONSIDER, AMONG OTHER THINGS, THE INFORMATION SET
FORTH IN "RISK FACTORS" BEGINNING ON PAGE 15. BENEFIT PLAN INVESTORS SHOULD
CONSIDER, AMONG OTHER THINGS, THE INFORMATION SET FORTH IN "ERISA
CONSIDERATIONS."
Certificates may be sold by the Bank directly to purchasers, through agents
designated from time to time, through underwriting syndicates led by one or
more managing underwriters or through one or more underwriters acting alone.
If underwriters or agents are involved in the offering of the Certificates of
any Series offered hereby, the name of the managing underwriter or
underwriters or agents will be set forth in the related Prospectus Supplement.
If an underwriter, agent or dealer is involved in the offering of the
Certificates of any Series offered hereby, the underwriter's discount, agent's
commission or dealer's purchase price will be set forth in, or may be
calculated from, the related Prospectus Supplement, and the net proceeds to
the Bank from such offering will be the public offering price of such
Certificates less such discount in the case of an underwriter, the purchase
price of such Certificates less such commission in the case of an agent or the
purchase price of such Certificates in the case of a dealer, and less, in each
case, the other expenses of the Bank associated with the issuance and
distribution of such Certificates. Any underwriter of the Certificates will be
indemnified by the Bank against certain liabilities, including liabilities
under the Securities Act of 1933, as amended (the "Securities Act"). See "Plan
of Distribution."
THIS PROSPECTUS MAY NOT BE USED TO CONSUMMATE SALES OF ANY SERIES OF
CERTIFICATES UNLESS ACCOMPANIED BY THE RELATED PROSPECTUS SUPPLEMENT.
The date of this Prospectus is September 10, 1997
<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
interest rate (or method for determining it) of each Class of such Series; (c)
certain information concerning the Receivables allocated for such Series; (d)
the expected date or dates on which the principal amount of the Certificates
will be paid to holders of the Certificates (the "Certificateholders"); (e)
the extent to which any Class within a Series is subordinated to any other
Class of such Series or any other Series; (f) the identity of each Class of
floating rate Certificates and fixed rate Certificates included in such
Series, if any, or such other type of Class of Certificates; (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 (as defined herein) are issued,
monthly and annual reports, containing information concerning the Trust and
prepared by the Servicer (as defined herein), will be sent on behalf of the
Trust to Cede & Co. ("Cede"), as nominee of The Depository Trust Company
("DTC") and registered holder of the related Certificates, pursuant to the
Pooling and Servicing 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. Neither the Bank nor
any successor servicer intends to send any of its financial reports 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 the Trust as are required under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and the rules and regulations of the
Commission thereunder.
AVAILABLE INFORMATION
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. In addition, the Commission maintains a Web site at
"http://www.sec.gov" that contains information regarding registrants that file
electronically with the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All reports and other documents filed by the Servicer, on behalf of the
Trust, pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act
subsequent to the date of this Prospectus and prior to the termination of the
offering of the Certificates offered hereby shall be deemed to be incorporated
by reference into this Prospectus and to be part hereof. Any statement
contained herein or in a document deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained in any other subsequently
filed document which also is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as modified or superseded, to
constitute a part of this Prospectus.
2
<PAGE>
PROSPECTUS SUMMARY
The following is qualified in its entirety by reference to the detailed
information appearing elsewhere in this Prospectus and in the 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 the accompanying
Prospectus Supplement refer only to the particular Series being offered by such
Prospectus Supplement.
Type of Securities...... Asset Backed Certificates (the "Certificates")
evidencing an undivided ownership interest in the
assets of the First USA Credit Card Master 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").
Trust................... The First USA Credit Card Master Trust (the "Trust")
was formed pursuant to a pooling and servicing
agreement dated as of September 1, 1992, as amended
and supplemented (the "Pooling and Servicing
Agreement"), between First USA Bank, as transferor
(the "Transferor") and as servicer of the
Receivables, and The Bank of New York (Delaware), as
trustee (the "Trustee"). The Trust was created as a
master trust under which one or more Series could be
issued pursuant to a series supplement to the
Pooling and Servicing Agreement (a "Supplement").
Any Series issued by the Trust may or may not be a
Series offered pursuant to this Prospectus and
certain previously issued Series have already been
offered under different prospectuses. Each
Prospectus Supplement will identify all then
outstanding Series previously issued by the Trust.
Trust Assets............ The Property of the Trust includes and will include
receivables (the "Receivables") arising under
certain VISA(R) and MasterCard(R)* revolving credit
card accounts (the "Accounts") selected from the
portfolio of VISA and MasterCard accounts owned by
the Transferor (the "Bank Portfolio"), all monies
due or to become due in payment of the Receivables,
all proceeds of the Receivables and all monies on
deposit in certain bank accounts of the Trust (other
than certain investment earnings on such amounts),
Recoveries and any Enhancement issued with respect
to any Series or Class, as described in the related
Prospectus Supplement. The term "Enhancement" means,
with respect to any Series or Class thereof, any
letter of credit, cash collateral account or
guaranty, collateral invested amount, guaranteed
rate agreement, maturity guaranty facility, tax
protection agreement, interest rate swap or other
contract or agreement for the benefit of
Certificateholders of such Series. 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. The Receivables included in the
- --------
* VISA(R) and MasterCard(R) are registered trademarks of Visa USA Incorporated
and MasterCard International Incorporated, respectively.
3
<PAGE>
Trust may consist of Accounts originated and owned
by the Transferor and/or Accounts otherwise acquired
by the Transferor, as specified in the related
Prospectus Supplement.
The Transferor originally conveyed to the Trustee all
Receivables existing under certain Accounts that
were selected from the Bank Portfolio based on
criteria provided in the Pooling and Servicing
Agreement as applied on August 21, 1992 (the
"Original Cut Off Date"), and on certain additional
cut off dates with respect to Additional Accounts
and has conveyed and will convey all Receivables
arising under such Accounts from time to time
thereafter until termination of the Trust. See
"Summary of Terms--Trust Assets" in the Prospectus
Supplement. In addition, pursuant to the Pooling and
Servicing Agreement, the Transferor may (subject to
certain limitations and conditions) designate
Additional Accounts for inclusion in the Trust. See
"The Receivables" and "Description of the
Certificates--Addition of Accounts."
Securities Offered...... Each Series of the Certificates will represent an
undivided interest in the assets of the Trust. Each
Certificate of a Series will represent the right to
receive payments of (i) interest at the specified
rate or rates per annum (each, a "Certificate
Rate"), which may be fixed, floating or another type
of rate and (ii) unless otherwise provided in the
related Prospectus Supplement, payments of principal
during the Controlled Amortization Period,
Accumulation Period, Rapid Amortization Period or
other type of amortization period (each, an
"Amortization Period"), 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"). Each 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 rate
computation, and availability and form of
Enhancement.
The assets of the Trust will be allocated among the
Certificateholders of each Series (the "Investor
Interest"), the holder of the Exchangeable
Transferor Certificate (the "Exchangeable Transferor
Certificate") and, in certain circumstances,
Enhancement Providers. The aggregate principal
amount of the Investor Interest of a Series in
Receivables is referred to herein as the "Invested
Amount" and is based on the aggregate amount of the
Principal Receivables in the Trust allocated to such
Series. The interest of the holder of the
Exchangeable Transferor Certificate in Receivables
is referred to herein as the "Transferor Interest,"
and is based on the aggregate amount of Principal
Receivables (the "Transferor Amount") in the Trust
not allocated to the Certificateholders or any
Enhancement Provider. See "Description of the
Certificates--General."
4
<PAGE>
The Certificateholders of each Series will have the
right to receive (but only to the extent needed to
make required payments under the Pooling and
Servicing Agreement and related Supplement and
subject to any reallocation of such amounts if the
related 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 are written off as
uncollectible ("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 and any
Amortization Period. If the Certificates of a Series
offered hereby include more than one Class of
Certificates, the assets of the 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" in the related
Prospectus Supplement.
The Certificates represent interests in the Trust
only and do not represent interests in or recourse
obligations of the Transferor or any affiliate
thereof. A Certificate is not a deposit and is not
insured by the Federal Deposit Insurance Corporation
(the "FDIC"). Neither the Receivables nor the
Accounts are insured or guaranteed by the FDIC or
any other governmental agency.
Receivables............. The Receivables arise in Accounts that have been
selected from the Bank Portfolio based on criteria
provided in the Pooling and Servicing Agreement. The
Receivables consist of amounts charged by
cardholders for goods and services and cash advances
(such amounts, less the amount of Discount
Receivables, the "Principal Receivables"), plus the
related periodic finance charges (the "Periodic
Finance Charges"), annual membership fees ("Annual
Membership Fees"), and amounts charged to the
Accounts in respect of cash advance finance charges,
late fees, overlimit fees, return check fees and
similar fees and charges (the "Other Charges").
Receivables in an amount equal to the product of the
Yield Factor (initially 1.3%) and amounts charged by
cardholders for goods and services and cash advances
(the "Discount Receivables") will be treated as
Finance Charge Receivables (Discount Receivables,
together with the Periodic Finance Charges, Annual
Membership Fees and Other Charges, the "Finance
Charge Receivables"). See "Description of the
Certificates--Discount Receivables." The Finance
Charge Receivables will not affect the amount of the
Invested Amount represented by the Certificates or
the amount of the Transferor Interest, which are
determined on the basis of the amount of Principal
Receivables in the Trust.
During the term of the Trust, all new Receivables
arising in the Accounts will be transferred
automatically to the Trust by the Transferor. The
total amount of Receivables in the Trust will
fluctuate from day to day
5
<PAGE>
because the amount of new Receivables arising in the
Accounts and the amount of payments collected on
existing Receivables usually differ each day.
Because the Transferor Interest represents the
interest in the Principal Receivables in the Trust
not represented by the Certificates or any other
Series of certificates, the amount of the Transferor
Interest will fluctuate from day to day as
Receivables are collected and new Receivables are
transferred to the Trust. See "The Receivables."
Pursuant to the Pooling and Servicing Agreement, the
Transferor has the right (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 (the "Additional
Accounts") and to convey to the Trust all of the
Receivables in the Additional Accounts, whether such
Receivables are then existing or thereafter created.
See "Description of the Certificates--Addition of
Accounts."
Furthermore, pursuant to the Pooling and Servicing
Agreement, the Transferor has the right (subject to
certain limitations and conditions), but not the
obligation, 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."
The aggregate undivided interest in the Principal
Receivables in the Trust evidenced by the
Certificates will never exceed the aggregate
Invested Amount regardless of the total amount of
Principal Receivables in the Trust at any time.
Exchanges............... The Pooling and Servicing Agreement provides that the
Trustee will issue two types of certificates: (i)
one or more Series of certificates that will be
transferable and have the characteristics described
below and (ii) the Exchangeable Transferor
Certificate, a certificate that evidences the
Transferor Interest, which is to be held by the
Transferor and which will be transferable only as
provided in the Pooling and Servicing Agreement. The
Pooling and Servicing Agreement also provides that,
pursuant to any one or more Supplements, the
Transferor may tender the Exchangeable Transferor
Certificate, or, if provided in the relevant
Supplement, certificates representing any Series and
the Exchangeable Transferor Certificate, to the
Trustee in exchange for one or more new Series and a
reissued Exchangeable Transferor Certificate (any
such tender, an "Exchange"). However, at all times,
the interest in the Principal Receivables in the
Trust represented by the Transferor Interest must
equal or exceed the Minimum Transferor Interest (as
defined herein). Under the Pooling and Servicing
Agreement, the Transferor may define, with respect
to any Series, the Principal Terms of the Series.
See "Description of the Certificates--Exchanges."
The Transferor may offer any Series to the public or
other investors under a prospectus or other
disclosure document (a "Disclosure Document") in
transactions either registered under the Securities
Act or exempt from
6
<PAGE>
registration thereunder, directly, through the
Underwriters or one or more other underwriters or
placement agents, in fixed-price offerings or in
negotiated transactions or otherwise. Other Series
have been issued by the Trust and may be issued
concurrently herewith. The Transferor intends to
offer, from time to time, additional Series issued
by the Trust.
Under the Pooling and Servicing Agreement and
pursuant to a Supplement, an Exchange may occur only
upon delivery to the Trustee of the following: (i) a
Supplement specifying the Principal Terms of such
Series, (ii) an opinion of counsel to the effect
that, unless otherwise stated in the related
Supplement, the certificates of such Series will be
characterized as indebtedness for federal income tax
purposes under existing law, and that the issuance
of such Series will not have a material adverse
effect on the federal income tax characterization of
any outstanding Series, (iii) if required by the
related Supplement, the form of Enhancement, (iv) if
Enhancement is required by the Supplement, an
appropriate 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 on the date of the Exchange the
Transferor, after giving effect to the Exchange,
would not be required to add the Receivables of
Additional Accounts pursuant to the Pooling and
Servicing Agreement, and the Transferor Interest
would be at least equal to the Minimum Transferor
Interest, and (vii) the existing Exchangeable
Transferor Certificate and, if applicable, the
certificates representing the Series to be
exchanged. See "Description of the Certificates--
Exchanges."
Denominations........... Unless otherwise specified in the related Prospectus
Supplement, beneficial interests in the Certificates
will be offered for purchase in denominations of
$1,000 and integral multiples thereof. See
"Description of the Certificates--General."
Registration of Unless otherwise specified in the related Prospectus
Certificates............ Supplement, the Certificates of each Series
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 representing such
person's interest, except in the event that
Definitive Certificates (as defined herein) are
issued under the limited circumstances described
herein. See "Description of the Certificates--
Definitive Certificates."
Clearance and Unless otherwise provided in the related Prospectus
Settlement.............. 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). Transfers 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 in the United States, on the
one hand, and counterparties holding directly or
indirectly through Cedel or Euroclear, on the other,
will be effected in
7
<PAGE>
DTC through the relevant Depositaries of Cedel or
Euroclear. See "Description of the Certificates--
Book-Entry Registration."
Transferor and First USA Bank (the "Bank"). The principal executive
Servicer................ offices of the Bank are located at 201 North Walnut
Street, Wilmington, Delaware 19801, telephone number
(302) 594-4000. The Servicer will receive a fee as
servicing compensation from the Trust in respect of
each Series in the amounts and at the times
specified in the related Prospectus Supplement (the
"Investor Servicing Fee"). In certain limited
circumstances, the Bank may resign or be removed as
Servicer, in which event the Trustee or a third
party servicer may be appointed as successor
servicer (the Bank, or any such successor servicer,
is referred to herein as the "Servicer"). See "The
Bank and BANC ONE CORPORATION."
Collections............. Unless otherwise specified in the related Prospectus
Supplement, with respect to each Series of
Certificates, the Servicer will deposit all
collections of Receivables in an account established
for such purpose (the "Collection Account"). All
amounts deposited in the Collection Account will be
allocated by the Servicer between amounts collected
on Principal Receivables and amounts collected on
Finance Charge Receivables. Collections of
Recoveries generally will be treated as collections
of Principal 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 Receivables." All such
amounts will then be allocated in accordance with
the respective interests of the Certificateholders
of such Series or Class, the certificateholders of
any other Series or Class and the holder of the
Exchangeable Transferor Certificate.
Interest................ Interest on each Series of Certificates or Class
thereof for each interest 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 generally be funded from the
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 Trust, from any applicable Enhancement or from
other sources 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 "Risk Factors--Enhancement,"
"Description of the Certificates--Interest
Payments," "--Application of Collections" and
"Enhancement."
8
<PAGE>
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. 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
Exchangeable Transferor Certificate or, under
certain circumstances and if so specified in the
related Prospectus Supplement, will be treated as
Excess Principal Collections and paid to the holders
of other Series of Certificates issued by the 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 a Controlled Amortization Period, as described
below, or on an expected date 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 or in the Prospectus Supplement. See
"Description of the Certificates--Principal
Payments."
Controlled Amortization If the Prospectus Supplement relating to a Series so
Period.................. 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 scheduled amounts to the
Certificateholders of such Series or any Class of
such Series then scheduled to receive such
distributions. The amount to be distributed on any
Distribution Date during the Controlled Amortization
Period will be
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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 the
Principal Commencement Date and continue until the
earliest of (a) the commencement of the Rapid
Amortization Period, (b) payment in full of the
Invested Amount of the Certificates of such Series
or Class and (c) the Stated Series Termination Date
with respect to such Series. See "Description of the
Certificates--Principal Payments."
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
prior to each Distribution Date in a trust account
established for the benefit of the
Certificateholders of such Series or Class (a
"Principal Funding Account") and used to make
distributions of principal to the Certificateholders
of such Series or Class on the Scheduled Payment
Date. The amount to be deposited in the Principal
Funding Account on any 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 the amount of any shortfalls arising from the
failure to pay the Controlled Accumulation Amount on
any 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 the
related Prospectus Supplement and continue until the
earliest of (a) the commencement of the Rapid
Amortization Period, (b) payment in full of the
Invested Amount of the Certificates of such Series
or Class and (c) the Stated Series Termination Date
with respect to such Series.
Funds on deposit in any Principal Funding Account may
be invested in eligible investments or subject to a
guaranteed rate or investment agreement or other
arrangement intended to assure a specified 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
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Series may be subject to a principal guaranty or
other similar arrangement. See "Description of the
Certificates--Principal Payments."
Rapid Amortization During the period from the day on which a Pay Out
Period.................. Event has occurred with respect to a Series to the
earlier of the date on which the Invested Amount of
the Certificates of such Series has been paid in
full or the related Stated Series Termination Date
(the "Rapid Amortization Period"), unless otherwise
provided in the related Prospectus Supplement,
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 monthly on 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
to Certificateholders will not be limited by any
Controlled Distribution Amount or Controlled Deposit
Amount. In addition, upon the commencement of the
Rapid Amortization Period with respect to a Series,
unless otherwise specified in the related Prospectus
Supplement, any funds on deposit in a Principal
Funding Account with respect to such Series or any
Class thereof will be paid to the Certificateholders
of such Series or Class on the first Distribution
Date in the Rapid Amortization Period. See
"Description of the Certificates--Pay Out Events"
for a discussion of the events which might lead to
commencement of the Rapid Amortization Period.
Shared Excess Finance
Charge Collections.....
If so specified in the related Prospectus Supplement,
the Certificateholders of a Series or any Class
thereof may be entitled to receive all or a portion
of Excess Finance Charge Collections with respect to
another Series or Class 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 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, (ii) accrued and unpaid Investor Servicing
Fees with respect to such Series or Class, (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. See "Description of the Certificates--
Shared Excess Finance Charge Collections," "--
Application of Collections," "--Defaulted
Receivables; Rebates and Fraudulent Charges" and "--
Investor Charge-Offs."
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Shared Collections of
Principal Receivables..
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 may be applied to
cover principal payments due to or for the benefit
of Certificateholders of another Series. Any such
reallocation will not result in a reduction in the
Invested Amount of the Series to which such
collections were initially allocated. See
"Description of the Certificates--Shared Collections
of Principal Receivables."
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
with respect to such Series (the "Funding Period"),
the aggregate amount of Principal Receivables in the
Trust allocable to such Series may be less than the
aggregate principal amount of the Certificates of
such Series and that the amount of such deficiency
(the "Pre-Funding Amount") will be held in a trust
account established with the Trustee for the benefit
of Certificateholders of such Series (the "Pre-
Funding Account") pending the transfer of additional
Principal Receivables to the Trust or pending the
reduction of the Invested Amounts of other Series.
The related Prospectus Supplement will specify the
initial Invested Amount on the Closing Date with
respect to such Series, the aggregate principal
amount of the Certificates of such Series (the "Full
Invested Amount") and the date by which the Invested
Amount is expected to equal the Full Invested
Amount. The Invested Amount of such a Series will
increase as Principal Receivables are created or as
the Invested Amounts of other Series are reduced.
The Invested Amount 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 or its
assignees to the extent of any increases in the
Invested Amount. In the event that the Invested
Amount does not for any reason equal the Full
Invested Amount by the end of the Funding Period,
any amount remaining in the Pre-Funding Account and
any additional amounts specified in the related
Prospectus Supplement will be payable to the
Certificateholders of such Series in a manner and at
such time as set forth in the related Prospectus
Supplement.
If so specified in the related Prospectus Supplement,
monies in the Pre-Funding Account with respect to
any Series will be invested by the Trustee in
eligible investments or will be subject to a
guaranteed rate or investment agreement or other
similar arrangement, and investment earnings and any
applicable payment under any such investment
arrangement will be applied to pay interest on the
Certificates of such Series. See "Description of the
Certificates--Funding Period."
Companion Series........ If so specified in the related Prospectus Supplement,
a Series of Certificates may be paired with another
Series (a "Companion Series").
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The Prospectus Supplement for such Series and the
Prospectus Supplement for the Companion Series will
each specify the relationship between the Series.
See "Description of the Certificates--Companion
Series."
Enhancement............. Enhancement with respect to a Series or any Class
thereof may be provided as specified in the related
Prospectus Supplement.
The type, characteristics and amount of the
Enhancement will be determined based on several
factors, including the characteristics of the
Receivables and Accounts underlying or comprising
the Trust Portfolio as of the Closing Date with
respect to any Series, 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 Enhancement will apply only in the event of
certain types of losses and the protection against
losses provided by such Enhancement will be limited.
See "Risk Factors--Certificate Rating" and
"Enhancement."
Optional Repurchase..... With respect to each Series of Certificates, the
Invested Amount will be subject to optional
repurchase by the Transferor on any Distribution
Date on or after the Distribution Date on which the
Invested Amount is reduced to an amount less than or
equal to the percentage of the initial Invested
Amount (the "Initial Invested Amount") specified in
the related Prospectus Supplement, if certain
conditions set forth in the related Pooling and
Servicing Agreement are met. Unless otherwise
specified in the related Prospectus Supplement, the
repurchase price will be equal to the Invested
Amount plus accrued and unpaid interest on the
Certificates. See "Description of the Certificates--
Final Payment of Principal; Termination."
Tax Status.............. Except to the extent otherwise specified in the
related Prospectus Supplement, it is anticipated
that Special Tax Counsel will be of the opinion that
the Offered Certificates of such Series will be
characterized as indebtedness for Federal income tax
purposes. Except to the extent otherwise specified
in the related Prospectus Supplement, the
Certificate Owners will agree to treat the Offered
Certificates as debt for Federal income tax
purposes. See "Certain U.S. Federal Income Tax
Consequences" for additional information concerning
the application of Federal income tax laws.
ERISA Considerations.... Under regulations issued by the Department of Labor,
the Trust's assets would not be deemed "plan assets"
of any employee benefit plan holding interests in
the Certificates of a Series if certain conditions
are met. If the Trust's assets were deemed to be
"plan assets" of an employee benefit plan, there is
uncertainty as to whether existing exemptions from
the "prohibited transaction" rules of the Employee
Retirement Income Security Act of 1974, as amended
("ERISA"), would apply to all transactions involving
the Trust's assets. No assurance can be made with
respect to any offering of the Certificates of any
Series that the conditions which would allow the
Trust assets not
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to be deemed "plan assets" will be met, although the
intention of the Underwriters (but not their
assurance) as to whether the Certificates of a
particular Series will be "publicly-offered
securities", and therefore eligible for an ERISA
exemption, will be set forth in the related
Prospectus Supplement. Accordingly, employee benefit
plans contemplating purchasing interests in
Certificates should consult their counsel before
making a purchase. See "ERISA Considerations."
Certificate Rating...... It will be a condition to the issuance of each Series
of Certificates or Class thereof offered pursuant to
this Prospectus and the related Prospectus
Supplement that they be rated in one of the four
highest rating categories by at least one nationally
recognized statistical rating organization (each
such rating organization rating 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.
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 all or a portion of
any Class thereof, on the Luxembourg Stock Exchange
or any other specified exchange.
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RISK FACTORS
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.
Certain Legal Aspects. While the Transferor has transferred and will
transfer interests in the Receivables to the Trust, a court could treat such
transactions as an assignment of collateral as security for the benefit of
holders of certificates issued by the Trust. The Transferor represents and
warrants in the Pooling and Servicing Agreement that the transfer of the
Receivables to the Trust is either a valid transfer and assignment of the
Receivables to the Trust or the grant to the Trust of a security interest in
the Receivables. The Transferor has taken and will take certain actions as are
required to perfect the Trust's security interest in the Receivables and
warrants that if the transfer to the Trust is deemed to be a grant to the
Trust of a security interest in the Receivables, the Trustee will have a first
priority perfected security interest therein. Nevertheless, if the transfer of
the Receivables to the Trust is deemed to create a security interest therein,
a tax or government 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 Octagon Gas Systems, Inc. v. Rimmer, 995 F.2d
948 (10th Cir. 1993), cert. denied, 114 S. Ct. 554 (1993), the United States
Court of Appeals for the 10th Circuit suggested that even where a transfer of
accounts from a seller to a buyer constitutes a "true sale," the accounts
would nevertheless constitute property of the seller's estate in a bankruptcy
of the seller. If the Transferor were to be placed into receivership and a
court were to follow the Octagon court's reasoning, Certificateholders might
experience delays in payment or possibly losses in their investment in the
Certificates. Counsel to the Transferor has advised the Transferor that the
facts of the Octagon case are distinguishable from those in the sale
transactions between the Transferor and the Trust and the reasoning of the
Octagon case appears to be inconsistent with established precedent and the
Uniform Commercial Code. See "Certain Legal Aspects of the Receivables--
Transfer of Receivables."
If, upon the insolvency of the Transferor, the Transferor were to be placed
into conservatorship or receivership, the FDIC as conservator or receiver
would have the power to repudiate contracts of, and to request a stay of up to
90 days of any judicial action or proceeding involving, 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 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 statutory administrative claims procedure, or the FDIC were to
request a stay of judicial proceedings with respect to the Transferor, 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 the
FDIC, a claim for the repudiated obligation is limited to "actual direct
compensatory damages" determined as of the date of the appointment of the FDIC
as conservator or receiver. The FDIC has not adopted a formal policy statement
on "actual direct compensatory damages" with respect to collateralized
borrowings of banks that are repudiated. The Transferor believes that the
general practice of the FDIC in such circumstances is to permit the collateral
to be applied to pay the outstanding principal owed plus interest accrued at
the contract rate up to the date of payment, together with the costs of
liquidation of the collateral if provided for in the contract. In one case,
however, involving the repudiation by the Resolution Trust Corporation (the
"RTC") of certain secured zero-coupon bonds issued by a savings association, a
United States federal district court held that "actual direct compensatory
damages" in the case of a marketable security meant the market value of the
repudiated bonds as of the date of repudiation. If that court's view were
applied to determine the Trust's "actual direct compensatory
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<PAGE>
damages" in the event the FDIC repudiated the Transferor's obligations under
the Pooling and Servicing 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 the FDIC were
appointed as conservator or receiver for the Transferor, under the Pooling and
Servicing Agreement new Principal Receivables would not be transferred to the
Trust and the Trustee would sell the portion of the Receivables allocable in
accordance with the Pooling and Servicing Agreement to each Series (unless
holders of more than 50% of the principal amount of each Class of such Series
instruct otherwise), thereby causing early termination of the Trust and a loss
to certificateholders (including the Certificateholders) if the net proceeds
allocable to certificateholders from such sale, if any, were insufficient to
pay certificateholders (including the Certificateholders) in full. Upon the
occurrence of a Pay Out Event, if the FDIC were appointed as conservator or
receiver for the Transferor and no Pay Out Event other than such
conservatorship, receivership or insolvency of the Transferor exists, the FDIC
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, the FDIC as conservator or receiver for the Transferor may have the
power to cause early payment of the Certificates. See "Certain Legal Aspects
of the Receivables--Certain Matters Relating to Receivership."
If, upon the insolvency of the Servicer, the Servicer were to be placed into
conservatorship or receivership, the FDIC as conservator or receiver would
have the power to repudiate contracts of, and to request a stay of up to 90
days of any judicial action or proceeding involving, the Servicer. In the
event of a Servicer Default, if the FDIC were appointed as conservator or
receiver for the Servicer, and no Servicer Default other than such
conservatorship or receivership or insolvency of the Servicer exists, the FDIC
may have the power to prevent a transfer of servicing to a successor Servicer.
The Accounts and the Receivables are subject to numerous Federal and state
consumer protection laws which impose requirements on the making and
collection of consumer loans. 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 finance charges, annual
cardholder fees and other fees, and failure by the Servicer to comply with
such requirements also could adversely affect the Servicer's ability to
collect on the Receivables. Pursuant to the Pooling and Servicing Agreement,
the Transferor has covenanted to accept the transfer of all Receivables in an
Account if any Receivable in such Account does not comply with all
requirements of law or if the proceeds of any Receivable in such Account are
not available to the Trust. The Transferor has made and will make certain
other representations and warranties relating to the validity and
enforceability of the Accounts and the Receivables. However, the Trustee has
not made and will not make any examination of the Receivables or the records
relating thereto for the purpose of establishing the presence or absence of
defects, compliance with such representations and warranties, or for any other
purpose. The sole remedy if any such representation or warranty is breached
and such breach continues beyond the applicable cure period, if any, is that
the Transferor will generally be obligated to accept the transfer of all
Receivables in the Account affected thereby. In addition, in the event of a
breach of certain representations and warranties, the Transferor may be
obligated to accept the reassignment and transfer of the entire Trust
Portfolio. 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. See
"Description of the Certificates--Defaulted Receivables; Rebates and
Fraudulent Charges."
From time to time Congress and certain state and local legislatures have
considered legislation that would limit the finance charges and fees that may
be charged on credit card accounts. Although such legislation has not been
enacted, there can be no assurance that such legislation will not become law
in the future. The potential effect of any legislation which limits the amount
of finance charges or fees that may be charged on credit card balances could
be to reduce the Portfolio Yield on the Accounts. If such Portfolio Yield is
reduced, a Pay Out Event with respect to a Series may occur. See "Description
of the Certificates--Pay Out Events." There can be
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<PAGE>
no assurance as to whether any federal or state legislation will be
promulgated which would impose additional limitations on the monthly periodic
finance charges or fees relating to the Accounts. See "Certain Legal Aspects
of the Receivables--Consumer Protection Laws" herein.
Competition in the Credit Card Industry. The consumer credit industry is
highly competitive and operates in an environment increasingly focused on the
interest and fees charged to consumers for credit card services. As new card
issuers enter the market and issuers seek to expand their shares of the
market, there is increased use of advertising, target marketing, pricing
competition and incentive programs, all of which may adversely impact issuer
profit margins. The MasterCard and VISA associations do not require adherence
to specific underwriting standards, and therefore credit card issuers may
compete on the basis of individual account solicitation and underwriting
criteria. If cardholders choose to utilize competing sources of credit, the
amount and rate of new Receivables generated in the Accounts may be reduced
and certain purchase and payment patterns with respect to Receivables may be
affected. The size of the Trust will be dependent upon the Transferor's
continued ability to generate new Receivables. If the amount of new
Receivables generated declines significantly, Receivables from Additional
Accounts (to the extent available) may be added to the Trust, as described
below, or a Pay Out Event could occur, in which the Rapid Amortization Period
would commence. See "Description of the Certificates--Pay Out Events."
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 or an
Accumulation Period for a Series or a Class thereof will be dependent upon the
continued generation of new Receivables to be conveyed to the 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 the Trust and may also affect payment patterns.
In addition, changes in periodic finance charges can alter cardholder monthly
payment rates. A significant decrease in the cardholder monthly payment rate
could slow the return of principal during any Amortization Period. See
"Maturity Assumptions."
Social, Technological and Economic Factors. Changes in card use and payment
patterns by cardholders 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, personal bankruptcy levels and relative
interest rates. Cardholders whose accounts are included in the Bank Portfolio
have addresses in all 50 states, the District of Columbia and other United
States territories and possessions. Adverse changes in economic conditions in
the areas where the largest number of cardholders are located could have a
direct impact on the timing and amount of payments on the Certificates. See
the Composition by Geographic Distribution-Trust Portfolio table in "The
Receivables" in the Prospectus Supplement. The Transferor, however, is unable
to determine and has no basis to predict whether, or to what extent, social,
technological or economic factors will affect future card use 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 or other amounts allocable to the Certificates
of a Series are insufficient to cover required amounts due with respect to the
Senior Certificates of such Series, the Invested Amount 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 the Trust due to the insolvency of the Transferor or the
appointment of a conservator or receiver for the Transferor, the portion of
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the net proceeds of such sale allocable to pay 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.
Transferor's Ability to Change Terms of the Receivables. Pursuant to the
Pooling and Servicing Agreement, the Transferor does not transfer the Accounts
to the Trust, but only the Receivables arising in the Accounts. As owner of
the Accounts, the Transferor has 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. A decrease in
the monthly periodic finance charge and other fees would decrease the
effective yield on the Accounts and could result in the occurrence of a Pay
Out Event with respect to a Series and the commencement of the Rapid
Amortization Period with respect to a Series. In addition, under the Pooling
and Servicing Agreement, the Transferor may change the terms of the contracts
relating to the 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, fees, and charge offs), if such change (i) would not, in the
reasonable belief of the Transferor, cause a Pay Out Event for any 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 Accounts which are
subject to such change. In servicing the Accounts, the Servicer is also
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, there are no restrictions on the Transferor's ability to
change the terms of the Accounts. There 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 this or other Account terms.
Master Trust Considerations. The Trust, as a master trust, has previously
issued the Series specified on Annex I to the Prospectus Supplement and is
expected to issue additional Series from time to time. While the Principal
Terms of each Series will be specified in a Supplement, the provisions of a
Supplement and, therefore, the terms of any additional series, will not be
subject to the prior review 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 Enhancement,
different classes of certificates (including subordinated classes of
certificates), provisions subordinating such Series to another Series (if the
Supplement relating to such Series so permits) or other Series to such Series,
and any other amendment or supplement to the Pooling and Servicing Agreement
which is made applicable only to such Series. See "Description of the
Certificates--Exchanges." It is a condition precedent to issuance of any
additional series that each Rating Agency that has rated any outstanding
Series at the request of the Transferor deliver written confirmation to the
Trustee that the Exchange 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. See "Description of the
Certificates-- Exchanges."
Control. Subject to certain exceptions, the Certificateholders of each
Series may take certain actions, or direct certain actions to be taken, under
the Pooling and Servicing Agreement or the related Series Supplement. However,
the Pooling and Servicing Agreement or related Supplement may provide that
under certain circumstances the consent or approval of a specified percentage
of the aggregate Invested Amount of other Series or of the Invested Amount of
a specified Class of such other Series will be required to direct certain
actions, including amending the Pooling and Servicing Agreement in certain
circumstances. Certificateholders of such other Series may have interests
which do not coincide in any way with the interests of Certificateholders of
the subject Series.
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 will receive the
payments of interest and principal required to be made under the Pooling and
Servicing Agreement
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and will be based primarily on the value of the Receivables in the Trust and
the availability of any Enhancement with respect to such Series or Class.
However, any such rating will not, unless otherwise specified in the related
Prospectus Supplement with respect to any Class or Series offered hereby,
address the likelihood that the principal of, or interest on, any Certificates
of such Class or Series will be paid on a scheduled date. In addition, any
such rating will not address the possibility of the occurrence of a Pay Out
Event with respect to such Class or Series or the possibility of the
imposition of United States withholding tax with respect to non-U.S.
Certificateholders. 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 the Certificates offered hereby of
each Series 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
the Rating Agency or Rating Agencies pursuant to the Transferor's request.
Enhancement. Although 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
Enhancement is reduced to zero, Certificateholders of the Series or Class
thereof covered by such Enhancement will bear directly the credit and other
risks associated with their undivided interest in the Trust. See
"Enhancement."
Book-Entry Registration. Unless otherwise specified in the related
Prospectus Supplement, the Certificates offered hereby 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 nominees. 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 the Pooling and Servicing 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. Because DTC can only act on behalf of individuals
who are Participants in DTC's system (or participate indirectly through a
Participant), the ability of a Certificate Owner to pledge its Certificates to
persons or entities that do not participate in the DTC system, or otherwise
take actions in respect of such Certificates, may be limited due to the lack
of a physical certificate representing such Certificates. See "Description of
the Certificates--Book-Entry Registration" and "--Definitive Certificates."
THE TRUST
The Trust was formed, in accordance with the laws of the State of Delaware,
pursuant to the Pooling and Servicing Agreement. The Trust was formed for the
transaction relating to the issuance of the Series 1992-1 Certificates, this
transaction and similar transactions, as contemplated by the Pooling and
Servicing Agreement, and prior to formation had no assets or obligations. The
Trust will not engage in any business activity, other than as described herein
and in the related Prospectus Supplements, but rather will only acquire and
hold the Receivables, issue (or cause to be issued) the Certificates, the
Exchangeable Transferor Certificate and certificates representing additional
Series or Classes of Series and related activities (including, with respect to
any Series or Class of such Series, entering into any Enhancement agreement)
and make payments thereon. As a consequence, the Trust is not expected to have
any need for additional capital resources.
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THE BANK'S CREDIT CARD ACTIVITIES
GENERAL
The Receivables which the Bank has conveyed and will convey to the Trust
pursuant to the Pooling and Servicing Agreement have been and will be
generated from transactions made by holders of selected VISA and MasterCard
credit card accounts. The Bank currently services the credit card accounts.
Certain data processing and administrative functions associated with such
servicing are performed on behalf of the Bank by First Data Resources, Inc.
("FDR"). See "--Description of FDR."
The following discussion describes certain terms and characteristics of the
accounts in the Bank Portfolio from which the Accounts were selected. The
Eligible Accounts from which the Accounts were selected do not represent the
entire Bank Portfolio. In addition, Additional Accounts may consist of
Eligible Accounts which are not currently in existence and which are selected
using different criteria from those used in selecting the Accounts already
included in the Trust. See "Description of the Certificates--Addition of
Accounts." Consequently, actual loss and delinquency, revenue and monthly
payment rate experience with respect to the Eligible Accounts and the
Additional Accounts may be different from such experience for the Bank
Portfolio described in the Prospectus Supplement.
Growth Strategy and Origination. To achieve steady and diversified growth,
the Bank originates credit card accounts through several different programs:
(i) First USA brand products, (ii) partnership products such as affinity
group, financial institutions, sports marketing and co-branding programs, and
(iii) the acquisition of credit card portfolios from other financial
institutions. These programs (excluding portfolio acquisitions) use direct
mail, telemarketing, take-one application displays, events, media and the
Internet as channels to market the Bank's products. The Bank has also
originated credit card accounts through mailings to BANC ONE customers and
prospects. Management believes that such multi-faceted account origination
programs help to ensure balanced and reliable growth for the Bank.
The First USA brand direct solicitation program represents the greatest
share of new account origination. The Bank has historically emphasized direct
solicitation as a source of new accounts as its expertise has increased
through experience and the benefit of numerous marketing, credit and risk
management tests. Currently, the Bank conducts national direct mail and
telemarketing solicitation to geographic areas that have been selected from a
process that includes a rigorous analysis of the economic indicators of each
region of the nation and targets the most favorable regions. The Bank
carefully targets consumers through various datamining methods and targeting
models. The Bank aligns the product offering with the target customer segment
along with the number and sequence of offers in order to maximize penetration,
response rates and usage.
The affinity group, financial institutions and sports marketing programs are
partnership programs which involve the active participation of endorsing
organizations. The affinity group marketing program involves the solicitation
of prospective individual cardmembers from identifiable groups with a common
interest or affiliation. In this program, the Bank has entered into exclusive
marketing arrangements with a number of affinity groups. The Bank typically
pays referral compensation to the affinity groups for each new account
generated. The Bank has a similar relationship with certain professional
sports organizations.
In its financial institutions program, the Bank maintains exclusive
marketing partnership relationships with banks, as well as mortgage companies,
insurance companies, brokerage firms and other financial institutions. Through
this program, participating financial institutions offer Visa and MasterCard
products to their customers without becoming primary issuers. In addition to
placing the name of the participating financial institution on the front of
the plastic card, the Bank typically pays a referral fee for each account. The
Bank believes that the endorsement of the participating financial institution
reduces overall origination costs and encourages cardmember usage.
The Bank also participates in co-branding, which involves a partnership
between the Bank and a consumer products or services company to solicit the
customers of such company. Companies such as airlines, computer on-line
services, catalog companies and general retailers participate with financial
institutions in co-branding
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programs. The Bank typically pays a portion of on-going revenue to the co-
branding partner, with the benefit of such payment generally accruing to the
customer in the form of "points" which can then be redeemed with the co-
branding partner.
The Bank currently has relationships with over 1,000 partners in these
various programs. Management believes this network is one of the largest of
its kind in the nation.
Underwriting Procedures. Generally, the credit risk of each applicant is
evaluated by application of a credit scoring system, which is intended to
provide a general indication, based on the information available, of the
applicant's willingness and ability to repay his or her obligations. Most
applications are scored based on the information received on the application
as well as data obtained from an independent credit reporting agency. In
select cases, based on certain criteria, including likelihood of fraud, and in
accordance with criteria established by Bank management, employment and
earnings are verified by telephone. Credit limits are determined based on
income and score or, in the case of applications that have not been scored,
based on income and certain information obtained from the application and the
independent credit reporting agency. Cardholder requests for increased credit
limits are evaluated based on a current credit bureau report, updated
application data, and prior account performance. In addition, credit limit
increases are effected periodically by the Bank for all cardholders meeting
specific criteria.
For preapproved solicitations, the Bank generally purchases prospect names
that meet established credit criteria from credit bureaus. These lists are
further edited and matched against internal and external sources to insure
optimal quality and accuracy. The Bank then mails preapproved solicitation
packages requiring only the signature and a brief amount of information from
the prospect. Preapproved solicitations are targeted to high quality prospects
and exhibit similar credit quality results as compared to non-preapproved
solicitations.
For non-preapproved solicitations, the Bank purchases prospect names from a
variety of sources and then edits the list utilizing internal and external
sources to insure quality and accuracy. The prospective customers on the final
list are mailed solicitations which include full applications. Respondents are
approved or declined based on both the demographic characteristics drawn from
the application and a credit bureau check.
Portfolio Acquisitions. The Bank has made portfolio acquisitions in the
past, but does not plan to rely on such transactions in order to achieve
growth and earnings targets. While acquisitions are possible in the future,
management believes that such transactions should be pursued only if favorable
terms can be negotiated. See "The Bank and BANC ONE CORPORATION." Prior to
acquiring a portfolio, the Bank reviews the historical performance and
seasoning of the portfolio and the policies and practices of the selling
institution, but individual accounts are not requalified by the Bank. There
can be no assurance that Accounts so acquired were originated in a manner
consistent with the Bank's policies as described under "--Growth Strategy and
Origination" and "-- Underwriting Procedures" above or that the underwriting
and qualification of such Accounts conformed to any given standards. The
Accounts include accounts previously acquired by the Bank. Such accounts and
any accounts acquired in the future may become Additional Accounts provided
that, at such time, they constitute Eligible Accounts. See "The Receivables,"
"Description of the Certificates--Transfer and Assignment of Receivables" and
"--Representations and Warranties."
DESCRIPTION OF FDR
With respect to the Accounts, certain data processing and administrative
functions associated with servicing the Receivables will initially be
performed by FDR. If FDR were to fail or become insolvent, delays in
processing and recovery of information with respect to charges incurred by the
respective cardholders could occur, and the replacement of the services FDR
currently provides to the Bank could be time-consuming. As a result, delays in
payments to Certificateholders could occur.
FDR is located in Omaha, Nebraska and provides computer data processing
services primarily to the bankcard industry. FDR is a subsidiary of First Data
Corp.
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The Bank utilizes a variety of the services provided by FDR in originating
and servicing the Bank's VISA and MasterCard accounts, including provision of
network interface to other card processors through Visa USA Incorporated and
MasterCard International Incorporated. This network provides cardholder
authorizations in addition to a conduit for funds transfer and settlement.
BILLING AND PAYMENTS
Cardholder Agreement. Each cardholder is subject to an agreement with the
Bank governing the terms and conditions of the related VISA or MasterCard
account. Pursuant to each such agreement, the Bank reserves the right, upon
advance notice to the cardholder, to add or to change any terms, conditions,
services or features of its VISA or MasterCard accounts at any time, including
increasing or decreasing periodic finance charges, other charges or minimum
payment terms. The agreement with each cardholder provides that, subject to
the requirements of applicable law, after notice to a cardholder of any such
new or changed terms, such new or changed terms will become effective at the
time stated in such notice and will apply to all outstanding unpaid
indebtedness as well as new transactions.
A cardholder may use the credit card to purchase or lease goods or services
wherever the card is honored ("Purchases") or to obtain cash loans ("Cash
Advances") from any financial institution that accepts the card. Cash Advances
may also be obtained through the use of "Credit Line Checks" issued by the
Bank which may be completed and signed by the cardholder in the same way as a
regular personal check.
Billing, Payments and Fees. A billing statement is sent to each cardholder
at the end of each monthly billing cycle in which the account has a debit or
credit balance of more than one dollar or if a finance charge has been
imposed. The Bank may assess a late payment fee if it does not receive the
minimum payment by the payment due date shown on the monthly billing
statement, but generally does not assess such fee if the minimum payment is
received by the next billing date. The Bank may assess a return check fee for
each payment check that is dishonored or that is unsigned or otherwise
irregular, an overlimit fee for Purchases or Cash Advances that cause the
credit line to be exceeded and administrative fees for certain functions
performed at the request of the cardholder. Unless otherwise arranged between
the Bank and the cardholder, any late payment fee, return check fee or
administrative fee is added to the account and treated as a Purchase. In some
cases, the Bank charges a nonrefundable Annual Membership Fee.
Monthly Periodic Finance Charges are not assessed in most circumstances on
purchases if all balances shown in the billing statement are paid by the
payment due date. Periodic Finance Charges accrue on new Purchases from the
day that they are posted to the account. Finance charges accrue on Cash
Advances from the later of the day that they are made and the first day of the
billing cycle during which they were posted to the account; or, if a Credit
Line Check is used, the day that the check is presented for payment to the
Bank. Aggregate monthly finance charges for each account consist of the sum of
the Cash Advance finance charge (not applicable for certain accounts) for each
new Cash Advance posted to the account plus the Periodic Finance Charge equal
to the product of the monthly periodic rate (the "Monthly Periodic Rate")
multiplied by the average daily balance. The Bank issues accounts with fixed
Monthly Periodic Rates and accounts with floating Monthly Periodic Rates that
adjust periodically according to an index.
The foregoing provisions apply with respect to cardholders that have entered
into one of the Bank's standard agreements by, in the case of a new account,
signing an application or, in the case of an account acquired by the Bank from
another institution, accepting the terms of the Bank's agreement in writing or
by using the credit card after disclosure that the account will be governed by
such terms. If the cardholder of an account acquired by the Bank from another
institution has not entered into one of the Bank's standard agreements, the
terms of the account may continue to be governed by the agreement between the
cardholder and the seller of the account, which may differ in material
respects from the provisions described above.
DELINQUENCIES AND CHARGE OFFS
An account is contractually delinquent if the minimum payment is not
received by the payment due date. An account is not treated as delinquent by
the Bank if the minimum payment is received by the next billing date.
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Efforts to collect delinquent credit card receivables currently are made by
the Bank's collection department personnel with regional collection units
located in Wilmington, Delaware, Baton Rouge, Louisiana and Dallas, Texas.
Collection activities include statement messages, telephone calls and formal
collection letters. Collectors generally initiate telephone contact with
cardholders whose accounts have become 5 days or more delinquent. In the event
that initial telephone contact fails to resolve the delinquency, the Bank
continues to contact the cardholder by telephone and by mail. The Bank may
also enter into arrangements with cardholders to extend or otherwise change
payment schedules as approved by one of the Bank's collection managers.
Delinquency levels are monitored daily by the respective collectors and
aggregate delinquency information is reported daily to senior management.
In connection with the merger of First USA, Inc. ("FUSA") with and into BANC
ONE, the Bank changed its charge-off policy to align it with that of BANC ONE.
The Bank will now generally charge off an account immediately prior to the end
of the sixth billing cycle after having become contractually past due unless a
payment has been received in an amount sufficient to bring the account into a
different delinquency category or to bring the account current. The Bank's
prior policy was generally to charge off an account immediately prior to the
end of the seventh billing cycle after having become contractually past due.
For the Trust, this change in charge-off policy will be implemented over the
course of a six-month period which began in July 1997 and will end in December
1997. Charge-offs may occur earlier in some circumstances, as in the case of
bankrupt cardholders. At the time of charge-off, an evaluation is made on a
case by case basis whether to pursue further remedies. In most cases outside
collection agencies and, in some cases, outside attorneys, are engaged. In
some cases charged off accounts are sold to outside collection agencies. The
credit evaluation, servicing and charge-off policies and collection practices
of the Bank may change from time to time in accordance with the Bank's
business judgment and applicable law.
The Bank has a policy of restoring or "reaging" a delinquent account to
current status when the cardholder has made three consecutive payments and, in
the collector's judgment, has the ability to keep the account current. A
collector may recommend that an account be reaged in other circumstances. All
reaging must be approved by a supervisor and an account may be reaged no more
than once per year.
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 this
Interchange in connection with cardholder Purchases is collected by banks that
issue credit cards by applying a discount to the amount paid by such banks to
the banks that clear the related transactions for merchants. Interchange will
be allocated to the Trust by treating 1.3% (subject to adjustment at the
option of the Transferor upon the satisfaction of certain conditions as
described herein in "Description of the Certificates--Discount Receivables,"
which adjusted percentage, if applicable, will be specified in the applicable
Prospectus Supplement) of collections on the Receivables (whether arising from
Purchases or Cash Advances), other than collections with respect to Periodic
Finance Charges, Annual Membership Fees and Other Charges, as collections of
Discount Receivables.
RECOVERIES
The Transferor and the Servicer will be required, pursuant to the terms of
the Pooling and Servicing Agreement, to transfer to the Trust all amounts
received by the Transferor or the Servicer with respect to Receivables in
Defaulted Accounts, including amounts received by the Transferor or the
Servicer from the purchaser or transferee with respect to the sale or other
disposition of Receivables in Defaulted Accounts ("Recoveries"). In the event
of any such sale or other disposition of Receivables, Recoveries will not
include amounts received by the purchaser or transferee of such Receivables
but will be limited to amounts received by the Transferor or the Servicer from
the purchaser or transferee. Collections of Recoveries will be treated as
collections of Principal Receivables; provided, however, that to the extent
the aggregate amount of Recoveries received with respect to any Monthly Period
exceeds the aggregate amount of Principal Receivables (other than Ineligible
Receivables) in Defaulted Accounts on the day such Account became a Defaulted
Account for each day in such Monthly Period, the amount of such excess will be
treated as collections of Finance Charge Receivables.
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THE RECEIVABLES
The Receivables conveyed to the Trust arise in Accounts selected from the
Bank Portfolio on the basis of criteria set forth in the Pooling and Servicing
Agreement (the "Trust Portfolio"). Pursuant to the Pooling and Servicing
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 Pooling and Servicing
Agreement must be Eligible Accounts as of the date the Transferor designates
such accounts as Additional Accounts. In addition, the Transferor is required
to designate Additional Accounts (x) to maintain the Transferor Interest so
that, during any period of 30 consecutive days, the Transferor Interest
averaged over that period equals or exceeds such percentage as may be
specified in any Supplement (such percentage, the "Minimum Transferor
Interest") of the average of the aggregate amount of Principal Receivables for
the same period, or (y) to maintain, for so long as certificates of any Series
(including the Certificates) remain outstanding, an aggregate amount of
Principal Receivables in amount equal to or greater than the Minimum Aggregate
Principal Receivables. "Minimum Aggregate Principal Receivables" shall mean
(i) an amount equal to the sum of the initial invested amounts for all Series
then outstanding other than any Series of variable funding certificates, (ii)
with respect to any series of variable funding certificates in its revolving
period, the then current invested amount of such Series and (iii) with respect
to any Series of variable funding certificates in its amortization period, the
invested amount of such Series at the end of the last day of the Revolving
Period for such Series. The Transferor will convey the Receivables then
existing or thereafter created under such Additional Accounts to the Trust.
Furthermore, pursuant to the Pooling and Servicing Agreement, the Transferor
has the right (subject to certain limitations and conditions) to designate
certain 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 the Trust, the Accounts
from which the Receivables arise will be the Accounts designated by the
Transferor on the Original Cut Off Date plus any Additional Accounts minus any
Removed Accounts.
The Prospectus Supplement relating to each Series of Certificates will
provide certain information about the 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 range of ages of
the Accounts and the average thereof, the geographic distribution of the
Accounts, the types of Accounts and delinquency and loss statistics relating
to the Accounts.
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 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 the date on which the Controlled
Amortization Period or the Accumulation Period, as applicable, will commence,
the principal payments expected or available to be received or accumulated
during such Controlled 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 and
the Pay Out Events which, if any were to occur, would lead to the commencement
of a Rapid Amortization Period.
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.
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The amount of collections of Receivables may vary from month to month due to
seasonal variations, general economic conditions, payment habits of individual
cardholders and number of collection days. There can be no assurance that
collections of Principal Receivables with respect to the 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 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. In addition, there can
be no assurance that the issuance of other Series of Certificates or the terms
of such other Series might not have an impact on the timing of the payments
received by Certificateholders.
Because, for any Series of Certificates, there may be a slowdown in the
payment rate below 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 a specified Class
thereof during the Controlled Amortization Period or the 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.
USE OF PROCEEDS
Unless otherwise specified in the related Prospectus Supplement, the net
proceeds from the sale of the Certificates will be paid to the Bank or applied
to the purchase of receivables from First USA Credit Card Master Trust II. The
Bank will use such proceeds for its general corporate purposes.
THE BANK AND BANC ONE CORPORATION
First USA Bank. The Bank is a wholly-owned subsidiary of First USA
Financial, Inc. ("First USA Financial"), which is a wholly-owned subsidiary of
BANC ONE CORPORATION ("BANC ONE").
The Bank is among the nation's largest issuers of VISA and MasterCard credit
cards in the United States. The Bank's revenues derive primarily from interest
income and fees on its credit card accounts and interchange income. Its
primary cash expenses include the cost of funding credit card loans, credit
losses, salaries and employee benefits, marketing expenses, processing
expenses and income taxes.
The Bank offers a broad array of bankcard products to targeted segments of
creditworthy consumers. The Bank's primary target market is experienced users
of general purpose credit products. The strategy of the Bank is to offer
uniquely tailored individualized products to profitable consumer segments.
The Bank markets over 1,000 credit card products to customers throughout the
United States. These products cover a range which includes standard card
products, those that are identified and developed through datamining efforts,
as well as products that are developed and marketed through partnership
relationships. Products include designs that are tailored to an individual's
lifestyle, profession or interest; those that are built around affiliations,
such as universities or fraternal organizations, co-brand relationships and
programs with financial institutions; an upscale platinum card product; and
the most individualized product offering, a First USA Images Photocard.
The Bank's products feature low interest rates, specific features and
benefits, unique card design and individualized credit lines. The Bank's
strategy is to target customers through a carefully matched combination of
pricing, credit analysis and packaging. Rates, fees, other features and credit
lines offered vary depending on the profile of targeted prospect groups. The
Bank generally markets its products with low introductory and regular rates
and no annual fee.
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In line with its product diversity, the Bank has built and maintains a broad
set of distribution channels. The Bank is one of the leading direct mailers
and telemarketers in the industry and manages a large active sales force to
distribute its products via fairs, tradeshows and other events. The Bank also
markets its products through an array of Web sites and utilizes other direct
response media channels for distribution.
BANC ONE CORPORATION. BANC ONE is a multi-bank holding company that, at June
30, 1997, operated approximately 1,500 banking offices in Arizona, Colorado,
Illinois, Indiana, Kentucky, Louisiana, Ohio, Oklahoma, Texas, Utah, West
Virginia and Wisconsin. BANC ONE, through the Bank and certain other
subsidiaries, is currently the third largest issuer of VISA and MasterCard
credit cards in the United States. BANC ONE also owns several additional
corporations that engage in merchant processing, consumer finance, mortgage
banking, insurance, venture capital, investment and merchant banking, trust,
brokerage, investment management, equipment leasing and data processing.
Pursuant to an Agreement and Plan of Merger dated as of January 19, 1997,
and amended as of April 23, 1997, between FUSA and BANC ONE, FUSA was merged
with and into BANC ONE on June 27, 1997 at which time the separate corporate
existence of FUSA ceased. As a result of the merger, the Bank is now an
indirect wholly-owned subsidiary of BANC ONE.
BANC ONE intends to consolidate the management of its credit card operations
with those of FUSA. BANC ONE may also consolidate the operations of certain
other subsidiaries or divisions of BANC ONE and FUSA, which provide similar
services, although no final determination with respect to such matters has
been made. No decision has been made as to whether receivables in accounts
originated by Bank One, N.A. or Bank One, Arizona, N.A., or any affiliate
thereof (other than the Bank) will be added at any time to the Trust. Any such
addition would be subject to the restrictions on additions of Accounts in the
Pooling and Servicing Agreement. See "Description of the Certificates--
Addition of Accounts" herein.
DESCRIPTION OF THE CERTIFICATES
The Certificates will be issued in Series. Each Series will represent an
interest in the Trust other than the interests represented by any other Series
of Certificates issued by the Trust (which may include Series offered pursuant
to this Prospectus) and the Exchangeable Transferor Certificate. Each Series
will be issued pursuant to the Pooling and Servicing Agreement entered into by
the Bank and the Trustee and a Supplement to the Pooling and Servicing
Agreement, a copy of the form of which is filed as an exhibit to the
Registration Statement of which this Prospectus is a part. The Prospectus
Supplement for each Series will describe any provisions of the Pooling and
Servicing Agreement relating to such Series which may differ materially from
the Pooling and Servicing Agreement filed as an exhibit to the Registration
Statement. The following summaries describe certain provisions common to each
Series of Certificates. The summaries do not purport to be complete and are
subject to, and are qualified in their entirety by reference to, all of the
provisions of the related Pooling and Servicing Agreement and Supplement.
GENERAL
The Certificates of each Series will represent undivided interests in
certain assets of the Trust, including the right to the applicable allocation
percentage of all cardholder payments on the Receivables. For each Series of
Certificates, unless otherwise specified in the related Prospectus Supplement,
the Invested Amount on any date will be equal to the Initial Invested Amount
as of the related 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 Series prior to such
date. If so specified in the Prospectus Supplement relating to any Series of
Certificates, under certain circumstances the Invested Amount 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.
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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 Invested Amount 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 or other payment dates as 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
Exchangeable Transferor Certificate. The Exchangeable Transferor Certificate
will represent the undivided interest in the Trust not represented by the
Certificates issued and outstanding under the Trust or the rights, if any, of
any Enhancement Providers to receive payments from the Trust. The holder of
the Exchangeable Transferor Certificate will have the right to a percentage
(the "Transferor Percentage") of all cardholder payments from the Receivables
in the Trust.
Unless otherwise specified in the related Prospectus Supplement, with
respect to each Series of Certificates, during the Revolving Period, the
Invested Amount will remain constant except under certain limited
circumstances. See "--Defaulted Receivables; Rebates and Fraudulent Charges"
and "--Investor Charge-Offs." The amount of Principal Receivables in the
Trust, however, will vary each day as new Principal Receivables are created
and others are paid or charged-off. 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 Invested
Amount of such Series will generally decline as payments of principal are
distributed to the Certificateholders. As a result, the Transferor Interest
will generally increase each month during an Amortization Period for any
Series to reflect the reductions in the Invested Amount of such Series and
will also change to reflect the variations in the amount of Principal
Receivables in the related Trust. The Transferor Interest 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 Transferor, 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. 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
Definitive Certificates are issued. 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 Series of Certificates of such Series, or
all or a portion of any Class thereof, on the Luxembourg Stock Exchange or any
other specified exchange.
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BOOK-ENTRY REGISTRATION
Unless otherwise specified in the related Prospectus Supplement, with
respect to each Series of Certificates in book-entry form, Certificateholders
may hold their Certificates through DTC (in the United States) or Cedel or
Euroclear (in Europe), which in turn hold through DTC, 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 laws of the State
of New York, 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 was created to hold securities for its participating organizations
("Participants") and facilitate the clearance and settlement of securities
transactions between Participants through electronic book-entry changes in
accounts of its Participants, thereby eliminating the need for physical
movement of certificates. Participants include securities brokers and dealers
(who may include the underwriters of any Series), banks, trust companies and
clearing corporations and may include certain other organizations. Indirect
access to the DTC system also is available to others such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly (the "Indirect
Participants").
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 in the United States, 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 or 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 business day. Cash
received in Cedel or Euroclear as a result of sales of securities by or
through a Cedel Participant or a Euroclear Participant to a DTC Participant
will be received with value on the DTC settlement date but will be available
in the relevant Cedel or Euroclear cash account only as of the business day
following settlement in DTC.
Certificate Owners that are not Participants or Indirect Participants but
desire to purchase, sell or otherwise transfer ownership of, or other interest
in, Certificates may do so only through Participants and Indirect
Participants. In addition, Certificate Owners will receive all distributions
of principal of and interest on the Certificates from the Trustee through the
Participants who in turn will receive them from DTC. Under a book-entry
format, Certificate Owners may experience some delay in their receipt of
payments, since such payments will be forwarded by the Trustee to Cede, as
nominee for DTC. DTC will forward such payments to its
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Participants which thereafter will forward them to Indirect Participants or
Certificate Owners. It is anticipated that the only "Certificateholder" of
Certificates in book-entry form will be Cede, as nominee of DTC. Certificate
Owners will not be recognized by the Trustee as Certificateholders, as such
term is used in the Pooling and Servicing Agreement, and Certificate Owners
will only be permitted to exercise the rights of Certificateholders indirectly
through the Participants who in turn will exercise the rights of
Certificateholders through DTC.
Under the rules, regulations and procedures creating and affecting DTC and
its operations, DTC is required to make book-entry transfers among
Participants on whose behalf it acts with respect to the Certificates and is
required to receive and transmit distributions of principal and interest on
the Certificates. Participants and Indirect Participants with which
Certificate Owners have accounts with respect to the Certificates similarly
are required to make book-entry transfers and receive and transmit such
payments on behalf of their respective Certificate Owners. Accordingly,
although Certificate Owners will not possess Certificates, Certificate Owners
will receive payments and will be able to transfer their interests.
Because DTC can only act on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of a
Certificate Owner to pledge Certificates to persons or entities that do not
participate in the DTC system, or otherwise take actions in respect of such
Certificates, may be limited due to the lack of a physical certificate for
such Certificates.
DTC has advised the Transferor that it will take any action permitted to be
taken by a Certificateholder under the Pooling and Servicing Agreement only at
the direction of one or more Participants to whose account with DTC the
Certificates are credited. Additionally, DTC has advised the Transferor that
it will take such actions with respect to specified percentages of the
Invested Amount only at the direction of and on behalf of Participants whose
holdings include undivided interests that satisfy such specified percentages.
DTC may take conflicting actions with respect to other undivided interests to
the extent that such actions are taken on behalf of Participants whose
holdings include such undivided interests.
Cedel Bank, societe anonyme ("Cedel"), is incorporated under the laws of
Luxembourg as a professional depository. Cedel holds securities for its
participating organizations ("Cedel Participants") and facilitates the
clearance and settlement of securities transactions between Cedel Participants
through electronic book-entry changes in accounts of Cedel Participants,
thereby eliminating the need for physical movement of certificates.
Transactions may be settled by 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 regulations 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 (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, Brussels, Belgium office (the "Euroclear Operator" or
"Euroclear"), under contract with Euroclear Clearance System, S.C., a Belgian
cooperative corporation (the "Cooperative"). All operations are conducted by
the Euroclear Operator, and all Euroclear securities clearance accounts and
Euroclear cash accounts are accounts with the Euroclear Operator, not the
Cooperative. The Cooperative establishes policy for the Euroclear System on
behalf of Euroclear
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Participants. Euroclear Participants include banks (including central banks),
securities brokers and dealers and other professional financial intermediaries
and may include the underwriters of any Series of Certificates. Indirect
access to the Euroclear System is also available to other firms that clear
through or maintain a custodial relationship with a Euroclear Participant,
either directly or indirectly.
The Euroclear Operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such, it
is regulated and examined by the Board of Governors of the Federal Reserve
System and the New York State Banking Department, as well as the Belgian
Banking Commission.
Securities clearance accounts and cash accounts with the Euroclear Operator
are governed by the Terms and Conditions Governing Use of Euroclear and the
related Operating Procedures of the Euroclear System and applicable Belgian
law (collectively, the "Terms and Conditions"). The Terms and Conditions
govern transfers of securities and cash within the Euroclear System,
withdrawal of securities and cash from the Euroclear System, and receipts of
payments with respect to securities in the Euroclear System. All securities in
the Euroclear System are held on a fungible basis without attribution of
specific certificates to specific securities clearance accounts. The Euroclear
Operator acts under the Terms and Conditions only on behalf of Euroclear
Participants and has no record of or relationship with persons holding through
Euroclear Participants.
Distributions with respect to Certificates held through Cedel or Euroclear
will be credited to the cash accounts of Cedel Participants or Euroclear
Participants in accordance with the relevant system's rules and procedures, to
the extent received by its Depositary. Such distributions will be subject to
tax reporting in accordance with relevant United States tax laws and
regulations. Cedel or the Euroclear Operator, as the case may be, will take
any other action permitted to be taken by a Certificateholder under the
Pooling and Servicing Agreement on behalf of a Cedel Participant or a
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 otherwise issued in book-entry form will be issued
in fully registered, certificated form to Certificate Owners or their nominees
("Definitive Certificates"), rather than to DTC or its nominee, only if (i)
the Transferor advises the Trustee 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 Invested Amount 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 Pooling and Servicing 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 Pooling and Servicing Agreement.
Interest payments and any principal payments on each Distribution Date or
other payment date as specified in the related Prospectus Supplement will be
made to Holders in whose names the Definitive
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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. The final payment on
any Certificate (whether Definitive Certificates or the Certificates
registered in the name of Cedel 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.
Definitive Certificates will be transferable and exchangeable at the offices
of the Transfer Agent and Registrar, which shall initially be the Trustee. No
service charge will be imposed for any registration of transfer or exchange,
but the transfer agent and registrar may require payment of a sum sufficient
to cover any tax or other governmental charge imposed in connection therewith.
INTEREST PAYMENTS
For each Series of Certificates and Class thereof, interest will accrue from
the relevant Closing Date on the applicable Invested Amount, plus, if
applicable, the Pre-Funding Amount (or other amount specified in the related
Prospectus Supplement), 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 generally be funded from collections of
Finance Charge Receivables allocated to the Investor Interest during the
preceding monthly period or periods (each, a "Monthly Period") and may be
funded from certain investment earnings on funds held in accounts of the
Trust, 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 (or the portion thereof allocable
to the Investor Interest of 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, and, for a Series or Class thereof bearing interest at a
floating Certificate Rate, the initial Certificate Rate, the dates and the
manner for determining subsequent Certificate Rates, and the formula, index or
other method by which such Certificate Rates are determined.
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
begins), no principal payments will be made to the Certificateholders of such
Series. During the Controlled Amortization Period or Accumulation Period, as
applicable, which will be scheduled to begin on the date 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 the Investor Interest of 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 or investment agreement or other arrangement
specified in the related Prospectus Supplement intended to
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assure a minimum rate of return on the investment of such funds. In order to
enhance the likelihood of the payment in full of the principal amount of a
Series of Certificates or Class thereof at the end of an Accumulation Period,
such Series of Certificates or Class thereof may be subject to a principal
guaranty or other similar arrangement specified in the related Prospectus
Supplement.
SHARED EXCESS FINANCE CHARGE COLLECTIONS
If so specified in the related Prospectus Supplement, the Certificateholders
of a Series or any Class thereof may be entitled to receive all or a portion
of Excess Finance Charge Collections with respect to another Series to cover
any shortfalls with respect to amounts payable from collections of Finance
Charge Receivables allocable to such Series or Class.
SHARED COLLECTIONS OF PRINCIPAL RECEIVABLES
Unless otherwise specified in the related Prospectus Supplement, to the
extent that collections of Principal Receivables and certain other amounts
that are allocated to the Invested Amount of any Series are not needed to make
payments or deposits with respect to such Series, such collections ("Excess
Principal Collections") will be applied to cover principal payments due to or
for the benefit of Certificateholders of another Series. Any such reallocation
will not result in a reduction in the Invested Amount of the Series to which
such collections were initially allocated.
COMPANION SERIES
If so provided in the Prospectus Supplement relating to a Series, each such
Series is subject to being paired with another Series (in such case, a
"Companion Series"). The Prospectus Supplement for such Series and the
Prospectus Supplement for the Companion Series will each specify the
relationship between the Series.
TRANSFER AND ASSIGNMENT OF RECEIVABLES
With respect to the Trust, the Transferor has transferred and assigned to
the Trust all its rights, title and interest in and to Receivables in certain
Accounts which were selected from the Bank Portfolio based upon criteria set
forth in the Pooling and Servicing Agreement.
In connection with the transfer of the Receivables to the Trust, the
Transferor has indicated in its computer files that the Receivables have been
conveyed to the Trust. In addition, the Transferor has provided to the Trustee
computer files or microfiche lists containing a true and complete list showing
each Account, including each Additional Account, identified by account number
and by total outstanding balance, respectively. The Transferor has not
delivered and will not deliver to the 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 segregated by the Transferor or the
Servicer from other documents and agreements relating to other credit card
accounts and receivables and are not stamped or marked to reflect the transfer
of the Receivables to the Trust, but the computer records of the Transferor
are required to be marked to evidence such transfer. The Transferor has filed
UCC financing statements with respect to the Receivables meeting the
requirements of Delaware state law. See "Risk Factors--Certain Legal Aspects"
and "Certain Legal Aspects of the Receivables."
EXCHANGES
The Pooling and Servicing Agreement provides for the 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
Exchangeable Transferor Certificate, a certificate which evidences the
Transferor Interest, which initially is held by the Transferor and is
transferable only as provided in the Pooling and Servicing Agreement. The
Pooling and
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Servicing Agreement also provides that, pursuant to any one or more
Supplements, the holder of the Exchangeable Transferor Certificate may tender
such certificate, or the Exchangeable Transferor Certificate and the
certificates evidencing any Series of certificates, to the Trustee in exchange
for one or more new Series and a reissued Exchangeable Transferor Certificate.
Under the Pooling and Servicing Agreement, the holder of the Exchangeable
Transferor Certificate may define, with respect to any newly issued Series,
certain terms including: (i) its initial investor interest (or method for
calculating such amount); (ii) its certificate rate (or formula for the
determination thereof); (iii) its payment dates and the date from which
interest shall accrue; (iv) its series termination date; and (v) such other
terms as the Transferor may deem appropriate (all such terms, the "Principal
Terms" of such Series). None of the Transferor, the Servicer, the Trustee or
the Trust is required or intends to obtain the consent of any
Certificateholder to issue any additional Series. However, as a condition of
an Exchange, the holder of the Exchangeable Transferor Certificate will
deliver to the Trustee written confirmation that the Exchange will not result
in the Rating Agency reducing or withdrawing its rating of any certificates of
any outstanding Series. The Transferor may offer any Series to the public
under a Disclosure Document in transactions either registered under the
Securities Act or exempt from registration thereunder directly, through the
Underwriters or one or more other underwriters or placement agents, in fixed-
price offerings or in negotiated transactions or otherwise. Any such Series
may be issued in fully registered or book-entry form in minimum denominations
determined by the Transferor. Other Series have been or are being issued by
the Trust. The Transferor intends to offer, from time to time, additional
Series issued by the Trust.
Under the Pooling and Servicing Agreement and pursuant to a Supplement, an
Exchange may only occur upon the satisfaction of certain conditions provided
in the Pooling and Servicing Agreement. Under the Pooling and Servicing
Agreement, the holder of the Exchangeable 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 the Pooling and Servicing
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: (i) its
initial principal amount (or method for calculating such amount) which amount
may not be greater than the current principal amount of the Exchangeable
Transferor Certificate, (ii) its certificate rate (or method of calculating
such rate) and (iii) the provider of the Enhancement, if any, which is
expected to provide credit support with respect to it. On the date of the
Exchange, the Pooling and Servicing Agreement provides that the Trustee will
authenticate any such Series only upon delivery to it of the following, among
other things, (i) a Supplement specifying the Principal Terms of such Series,
(ii) an opinion of counsel to the effect that, unless otherwise stated in the
related Supplement, the certificates of such Series will be characterized as
indebtedness for Federal income tax purposes under existing law, and that the
issuance of such Series will not have a material adverse effect on the Federal
income tax characterization of any outstanding Series, (iii) if required by
the related Supplement, the form of Enhancement, (iv) if an Enhancement is
required by the Supplement, an appropriate Enhancement agreement with respect
thereto, (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) the existing Exchangeable
Transferor Certificate and, if applicable, the certificates representing the
Series to be exchanged, and (vii) an officer's certificate of the Transferor
to the effect that on the date of the Exchange the Transferor, after giving
effect to the Exchange, would not be required to add Receivables from
Additional Accounts pursuant to the Pooling and Servicing Agreement, and the
Transferor Interest would be at least equal to a Minimum Transferor Interest.
Upon satisfaction of such conditions, the Trustee will cancel the existing
Exchangeable Transferor Certificate and the certificates of the exchanged
Series, if applicable, and authenticate the new Series and a new Exchangeable
Transferor Certificate.
REPRESENTATIONS AND WARRANTIES
The Transferor has made and will make certain representations and warranties
to the Trust to the effect that, among other things, (a) as of the date of
issuance of a Series (a "Series Closing Date"), the Transferor was duly
incorporated and in good standing and that it has the authority to consummate
the transactions contemplated by the Pooling and Servicing Agreement and (b)
as of the cut off date for each Series, as defined herein and in the related
Prospectus Supplement (the "Series Cut Off Dates"), each Account was an
Eligible Account (as defined below). If (i) any of these representations and
warranties proves to have been incorrect in any material respect
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when made, and continues to be incorrect for 60 days after notice to the
Transferor by the Trustee or to the Transferor and the Trustee by the
Certificateholders holding more than 50% of the Investor Interest, and (ii) as
a result the interests of the Certificateholders are materially adversely
affected, and continue to be materially 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 Trustee in the latter
instance) declaring that a Pay Out Event has occurred, thereby commencing the
Rapid Amortization Period. See "--Pay Out Events."
The Transferor has made and will make representations and warranties to the
Trust relating to the Receivables to the effect, among other things, that (a)
as of the Series Closing Date for the 1992-1 Series (the "Initial Closing
Date"), each of the Receivables then existing is an Eligible Receivable (as
defined below) and (b) as of the date of creation of any new Receivable, such
Receivable is an Eligible Receivable and the representation and warranty set
forth in clause (b) in the immediately following paragraph is true and correct
with respect to such Receivable. In the event (i) of a breach of any
representation and warranty set forth in this paragraph, within 60 days, or
such longer period as may be agreed to by the Trustee, of the earlier to occur
of the discovery of such breach by the Transferor or Servicer or receipt by
the Transferor of written notice of such breach given by the Trustee, or, with
respect to certain breaches relating to prior liens, immediately upon the
earlier to occur of such discovery or notice and (ii) that as a result of such
breach, the Receivables in the related Accounts are charged off as
uncollectible, the Trust's rights in, to or under the Receivables or its
proceeds are impaired or the proceeds of such Receivables are not available
for any reason to the Trust free and clear of any lien, the Transferor shall
accept reassignment of each Principal Receivable as to which such breach
relates (an "Ineligible Receivable") on the terms and conditions set forth
below; provided, however, that no such reassignment shall be required to be
made with respect to such Ineligible Receivable if, on any day within the
applicable period (or such longer period as may be agreed to by the Trustee),
the representations and warranties with respect to such Ineligible Receivable
shall then be true and correct in all material respects. The Transferor shall
accept reassignment of each such Ineligible Receivable by (i) 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 and (ii) depositing into the Collection Account an amount equal to
the finance charge at the annual percentage rate applicable to such Ineligible
Receivable from the last date billed through the end of the Monthly Period in
which such reassignment obligation arises. 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.
The Transferor has made representations and warranties to the Trust to the
effect, among other things, that as of the Initial Closing Date (a) the
Pooling and Servicing Agreement constituted a legal, valid and binding
obligation of the Transferor and (b) the transfer of Receivables by it to the
Trust under the Pooling and Servicing Agreement constituted 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 investor interest of all Series outstanding, by written notice to
the Transferor (and to the Trustee and the Servicer if given by the
certificateholders of all Series outstanding), 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
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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, unless otherwise specified
in the related Prospectus Supplement, will be equal to the invested amount for
all Series of certificates required to be repurchased 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 on such Distribution Date, plus an
amount equal to all interest accrued but unpaid on such certificates at the
applicable certificate rate through such last day of such Monthly Period, less
the amount transferred to the Distribution Account from the Finance Charge
Account in respect of interest on such certificates. 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 invested amount for all Series of certificates required
to be repurchased and will be distributed upon presentation and surrender of
the certificates for each such Series. If the Trustee or certificateholders
give a notice as provided above, 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.
An "Eligible Account" is defined to mean, as of the Original Cut Off Date
(or, with respect to Additional Accounts, as of their date of designation for
inclusion or their date of inclusion in the Trust), each Account owned by the
Transferor (a) which was in existence and maintained with the Transferor, (b)
which is payable in United States dollars, (c) the cardholder 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 identified by
the Transferor in its computer files as being involved in a voluntary or
involuntary bankruptcy proceeding, (e) which has not been identified as an
Account with respect to which the related card has been lost or stolen, (f)
which is not sold or pledged to any other party at the time of its inclusion
in the Trust, (g) which does not have receivables which are sold or pledged to
any other party at the time of their inclusion in the Trust, and (h) which is
a VISA or MasterCard revolving credit card account.
An "Eligible Receivable" is 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 or 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 inclusion in the Trust, the Transferor or the Trust had
good and marketable 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 cardholder thereof, legally
enforceable against such cardholder in accordance with its terms (with certain
bankruptcy-related exceptions), and (f) which constitutes an "account" under
Article 9 of the UCC as then in effect in the State of Delaware.
It is not 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 an opinion of counsel with respect to the
validity of the security interest of the Trust in and to the Receivables.
ADDITION OF ACCOUNTS
As described above in "The Receivables," the Transferor has the right and,
in some circumstances, is obligated to designate from time to time Additional
Accounts to be included as Accounts. The Transferor will be required to
designate Additional Accounts, (i) if the average of the Transferor Interest
for any 30-day period is less than the Minimum Transferor Interest, or (ii)
if, on the last day of any Monthly Period, the aggregate amount
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of Principal Receivables is less than the Minimum Aggregate Principal
Receivables. Receivables from such Additional Accounts shall be transferred to
the Trust on or before the tenth business day following such 30-day period or
the last day of any Monthly Period, as the case may be. The Transferor will
convey to the Trust its interest in all Receivables of such Additional
Accounts, whether such Receivables are then existing or thereafter created,
subject to the following conditions, among others: (i) each such Additional
Account must be an Eligible Account and (ii) no selection procedure believed
by the Transferor to be materially adverse to the interests of the holders of
any Series of certificates was used in selecting the Additional Accounts.
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 a third-party financial institution which had different
credit criteria.
REMOVAL OF ACCOUNTS
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 all
Receivables from certain Accounts for deletion and removal from the Trust
(such Accounts, the "Removed Accounts"); 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 to occur, cause the Transferor Interest as a percentage of the
aggregate amount of Principal Receivables to be less than 7% on such date of
removal, or result in the failure to make any payment specified in the related
Supplement with respect to any Series; (ii) the Transferor shall have
delivered to the Trustee for execution a written assignment and, within five
business days thereafter, 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) not more
than 15% of the Trust Portfolio is more than 34 days delinquent; (iv) the
Transferor shall represent and warrant that no selection procedures believed
by the Transferor to be materially adverse to the interests of the
Certificateholders were utilized in selecting the Removed Accounts to be
removed from the Trust; (v) the Rating Agency shall have received notice of
such proposed removal of Accounts and the Transferor shall not have received
notice from the Rating Agency that such proposed removal will result in a
downgrade of its then-current rating for any Series of Certificates; (vi) the
Principal Receivables of the Removed Accounts shall not equal or exceed 5% of
the aggregate amount of the Principal Receivables in the Trust at such time;
provided, that if any Series has been paid in full, the Principal Receivables
in such Removed Accounts may equal the initial invested amount of such Series;
and (vii) the Transferor shall have delivered to the Trustee an officer's
certificate confirming the items set forth in clauses (i) through (vi) above.
COLLECTION AND OTHER SERVICING PROCEDURES
Pursuant to the Pooling and Servicing Agreement, 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 is 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.
TRUST ACCOUNTS
The Trustee has established and maintains 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 each Series. The Trustee has also established a
"Distribution Account"
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(a non-interest bearing segregated demand deposit account established with a
"Qualified Institution" other than the Transferor). The Servicer has
established and maintains, in the name of the Trust, for the benefit of
certificateholders of all Series, a "Collection Account," which is a non-
interest bearing segregated account established and maintained with the
Servicer or with a Qualified Institution, defined as a depository institution,
which may include the Trustee, organized under the laws of the United States
or any one of the states thereof, which at all times has a certificate of
deposit rating of P-1 by Moody's Investors Service, Inc. ("Moody's") and of A-
1+ by Standard & Poor's Ratings Services, a division of The McGraw-Hill
Companies, Inc. ("Standard & Poor's") or long-term unsecured debt obligation
(other than such obligation the rating of which is based on collateral or on
the credit of a person other than such institution or trust company) rating of
Aa3 by Moody's and AA- by Standard & Poor's and deposit insurance provided by
either the Bank Insurance Fund ("BIF") or the Savings Association Insurance
Fund ("SAIF"), each administered by the FDIC, or a depository institution,
which may include the Trustee, which is acceptable to the Rating Agency. Funds
in the Principal Account and the Finance Charge Account 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 the highest rating from Moody's and Standard & Poor's,
(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, (iv)
bankers acceptances issued by any depository institution or trust company
described in clause (ii) above, (v) money market funds which have the highest
rating from, or have otherwise been approved in writing by, Moody's and
Standard & Poor's, (vi) certain open end diversified investment companies, and
(vii) any other investment if the Rating Agency confirms in writing that such
investment will not adversely affect its then current rating of the
Certificates (such investments, "Permitted Investments"). 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. The Servicer has 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 Pooling and Servicing Agreement. The Paying Agent has the
revocable power to withdraw funds from the Distribution Account for the
purpose of making distributions to the Certificateholders.
DISCOUNT RECEIVABLES
The Pooling and Servicing Agreement provides that 1.3% (the "Yield Factor")
of the amount of Receivables consisting of amounts charged by cardholders for
goods and services and cash advances be treated as Finance Charge Receivables
(the "Discount Receivables"). On the date of processing of any collections,
the product of the Yield Factor and collections of Receivables consisting of
amounts charged by cardholders for goods and services and cash advances on
such day which otherwise would be Principal Receivables will be deemed
"Discount Receivable Collections." An amount equal to the product of (i) the
investor percentage with respect to Finance Charge Receivables for each Series
of certificates issued and outstanding and (ii) the amount of such Discount
Receivables Collections will be deposited by the Transferor into the
Collection Account and an amount equal to the product of (i) the Transferor
Percentage and (ii) the amount of the Discount Receivable Collections will be
paid to the holder of the Exchangeable Transferor Certificate. The former
amount deposited into the Collection Account will be applied as provided below
regarding payments with respect to Finance Charge Receivables. The Transferor
may at any time increase the Yield Factor to a fixed percentage up to 4%;
provided that the Transferor must provide 30 days' prior written notice to the
Servicer, the Trustee, any provider of Enhancement and the Rating Agency of
any such designation, and such designation will become effective on the date
specified therein only if (i) in the reasonable belief of the Transferor such
designation would not cause a Pay Out Event to occur or an event, which with
notice or the lapse of time or both would constitute a Pay Out Event and (ii)
the Rating Agency confirms in writing its then current rating on any
outstanding Series.
APPLICATION OF COLLECTIONS
Allocations. Except as otherwise provided below or in a Supplement, the
Servicer will deposit into the Collection Account, no later than the second
business day following the date of processing, any payment
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collected by the Servicer on the Receivables; provided, however, that the
Servicer need not deposit amounts to be paid to the holder of the Exchangeable
Transferor Certificate and certain amounts allocated to Certificateholders of
a Series, as specified in the related Supplement, into the Collection Account,
and provided, further, that for as long as the Bank remains the Servicer under
the Pooling and Servicing Agreement, and (a)(i) the Servicer provides to the
Trustee a letter of credit covering collection risk of the Servicer acceptable
to the 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 any Series of certificates
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, 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.
Any amounts collected in respect of Principal Receivables not paid to the
Transferor because the Transferor Interest has been reduced to zero
("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 greater
than zero. If an Amortization Period has commenced, Unallocated Principal
Collections will be held for distribution to the Certificateholders on the
related Distribution Date.
FUNDING PERIOD
For any Series of Certificates, the related Prospectus Supplement 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 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")
will be held in a trust account established with the Trustee for the benefit
of the Certificateholders of such Series (the "Pre-Funding Account") pending
the transfer of additional Receivables to the Trust or pending the reduction
of the Invested Amounts of other Series. The related Prospectus Supplement
will specify the Initial Invested Amount with respect to such Series, the
aggregate principal amount of such Series (the "Full Invested Amount") and the
date by which the Invested Amount is expected to equal the Full Invested
Amount. The Invested Amount will increase as Receivables are delivered to the
Trust or as the Invested Amounts of other Series are reduced. The Invested
Amount may also decrease due to Investor Charge-Offs as provided in the
related Prospectus Supplement.
During the Funding Period, funds on deposit in the Pre-Funding Account for a
Series of Certificates will be withdrawn and paid to the Transferor to the
extent of any increases in the Invested Amount. In the event that the Invested
Amount does not for any reason equal the Full Invested Amount by the end of
the Funding Period, any amount remaining in the Pre-Funding Account and any
additional amounts specified in the related Prospectus Supplement will be
payable to the Certificateholders of such Series in the manner and at such
time as set forth in the related Prospectus Supplement.
If so specified in the related Prospectus Supplement, monies in the Pre-
Funding Account 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 Collection Account
for distribution in respect of interest on the Certificates of the related
Series in the manner specified in the related Prospectus Supplement.
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DEFAULTED RECEIVABLES; REBATES AND FRAUDULENT CHARGES
On the first business day on or before the eighth calendar day prior to each
Distribution Date (the "Determination Date"), the Servicer will calculate the
Investor Default Amount for the preceding Monthly Period. Receivables in any
Account will be charged off as uncollectible in accordance with the Servicer's
customary and usual policies and procedures for servicing its own comparable
credit card accounts (such an Account, a "Defaulted Account"). The term
"Default Amount" means, for any Monthly Period, an amount (which shall not be
less than zero) equal to (a) the aggregate amount of Principal Receivables
(other than Ineligible Receivables) in Defaulted Accounts on the day such
Account became a Defaulted Account for each day in such Monthly Period minus
(b) the aggregate amount of Recoveries received in such Monthly Period. A
portion of the Default Amount (the "Investor Default Amount") will be
allocated to the Certificateholders for each Distribution Date in an amount
equal to the product of the Investor Percentage for the relevant Series
applicable during the related Monthly Period and the Default Amount for such
related Monthly Period. 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 from Enhancement, and applied to pay principal to Certificateholders
or the holder of the Exchangeable Transferor Certificate, as appropriate. In
the case of a Series of Certificates having one or more Classes of
Subordinated Certificates, the related Prospectus Supplement may provide that
all or a portion of amounts otherwise allocable to such Subordinated
Certificates may be paid to the Senior Certificateholders to make up any
Investor Default Amount allocable to such Senior Certificateholders.
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 Trust will be reduced, on a net basis, by the amount of the
adjustment. In addition, the Transferor Interest in the 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.
INVESTOR CHARGE-OFFS
With respect to each Series of Certificates, if the amount payable on a
Distribution Date or other specified date in respect of interest on the
Certificates, the Investor Servicing Fee (unless otherwise specified in the
related Prospectus Supplement), the Investor Default Amount and other required
fees exceeds the amount on deposit in the Collection Account available
therefor, available Enhancement amounts, if any, and amounts available from
other specified sources, then the Invested Amount with respect to such Series
will be reduced by the amount of such excess, but not more than the Investor
Default Amount (an "Investor Charge-Off"). Investor Charge-Offs will be
reimbursed on any Distribution Date to the extent amounts on deposit in the
Collection 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
Invested Amount 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 Invested Amounts of the Classes.
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 Invested
Amount is reduced to an amount less than or equal to the percentage of the
initial outstanding principal amount of the Certificates specified in the
Prospectus Supplement, if certain conditions set forth in the related Pooling
and Servicing Agreement are met. Unless otherwise specified in the related
Prospectus Supplement, the repurchase price will be equal to the Invested
Amount plus accrued and unpaid interest on the Certificates.
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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 "Stated Series
Termination Date"); provided, however, that the Certificates may be subject to
prior termination as provided above. If the Invested Amount is greater than
zero on the Stated Series Termination Date, the Trustee will sell or cause to
be sold certain Receivables allocable to such Series in the manner provided in
the Pooling and Servicing Agreement and Supplement and pay the net proceeds of
such sale and any collections on the Receivables, up to an amount equal to the
Invested Amount plus accrued interest due on the Certificates and any other
amounts specified in the related Supplement, to the Certificateholders of such
Series on such Stated Series Termination Date as final payment of the
Certificates.
Unless the Servicer and the holder of the Exchangeable Transferor
Certificate instruct the Trustee otherwise, the Trust will terminate on the
earlier of (a) the day after the Distribution Date with respect to any Series
following the date on which funds shall have been deposited in the
Distribution Account for the payment to certificateholders of each Series
outstanding sufficient to pay in full the aggregate investor interest of all
Series outstanding plus interest thereon at the applicable certificate rates
through the end of the related Monthly Period, or (b) August 1, 2032. Upon the
termination of the Trust and the surrender of the Exchangeable Transferor
Certificate, the Trustee shall convey to the holder of the Exchangeable
Transferor Certificate all right, title and interest of the Trust in and to
the Receivables and other funds of the Trust (other than funds on deposit in
the Distribution Account and other similar bank accounts of the Trust with
respect to other Series).
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 the
Trust upon the occurrence of either of the following events:
(a) certain events of insolvency or receivership relating to the
Transferor; or
(b) the 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 specific 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.
If the only Pay Out Event to occur is either the insolvency of the
Transferor or the appointment of a receiver or conservator for the Transferor,
the receiver or conservator for the Transferor may have the power to delay or
prevent commencement of the Rapid Amortization Period.
In addition to the consequences of a Pay Out Event discussed above, 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 invested
amount of each Series (or, if any Series has more than one class, of each
class of such Series and with respect to any Series any additional person
specified in such Prospectus Supplement), the Trustee will sell, dispose of,
or otherwise liquidate the portion of
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the Receivables allocated to the Certificates and the Receivables allocable to
other Series with respect to which all outstanding classes did not vote to
continue the Trust in accordance with the Pooling and Servicing Agreement 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 with respect to such
Series as provided above in "--Application of Collections."
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.
CERTAIN MATTERS REGARDING THE TRANSFEROR AND THE SERVICER
The Servicer may not resign from its obligations and duties under the
Pooling and Servicing 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 Pooling and
Servicing Agreement. The Bank, as initial Servicer, intends to delegate some
of its servicing duties to FDR; however, such delegation will not relieve it
of its obligation to perform such duties in accordance with the Pooling and
Servicing Agreement.
The Pooling and Servicing Agreement provides that the Servicer will
indemnify the Trust and the 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 Pooling and Servicing 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
Pooling and Servicing Agreement to any taxing authority.
In addition, the Pooling and Servicing Agreement provides that, subject to
certain exceptions, the Transferor will indemnify the Trust and the Trustee
from and against any reasonable loss, liability, expense, damage or injury
arising out of or based upon the arrangement created by the Pooling and
Servicing Agreement as though the Pooling and Servicing Agreement created a
partnership under the New York Uniform Partnership Act in which the Transferor
is a general partner.
The Pooling and Servicing Agreement provides 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 Trust, the Certificateholders
or any other person for any action taken, or for refraining from taking any
action, in good faith pursuant to the Pooling and Servicing Agreement. 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, the Pooling and Servicing Agreement
provides that the Servicer is not under any obligation to appear in, prosecute
or defend any legal action which is not incidental to its servicing
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responsibilities under the Pooling and Servicing Agreement and which in its
opinion may expose it to any expense or liability.
The Pooling and Servicing Agreement provides that, in addition to Exchanges,
the Transferor may transfer its interest in a portion of the Exchangeable
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 rated by it and (b) the Trustee receives a written opinion of
counsel confirming that such transfer would not adversely affect the treatment
of the certificates for each outstanding Series as debt for federal income tax
purposes.
Any person into which, in accordance with the Pooling and Servicing
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 Pooling and
Servicing Agreement and delivery of an opinion of counsel with respect to the
compliance of the transaction with the applicable provisions of the Pooling
and Servicing Agreement, will be the successor to the Transferor or the
Servicer, as the case may be, under the Pooling and Servicing Agreement.
SERVICER DEFAULT
In the event of any Servicer Default (as defined below), either the Trustee
or certificateholders representing undivided interests aggregating more than
50% of the aggregate investor interests for all outstanding Series, 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 Pooling and Servicing 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 Pooling and Servicing Agreement and in the Transferor Interest will
not be affected by such termination. The 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 Pooling and
Servicing 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.
A "Servicer Default" refers to any of the following events:
(a) failure by the Servicer to make any payment, transfer or deposit, or
to give instructions to the Trustee to make certain payments, transfers or
deposits, on the date the Servicer is required to do so under the Pooling
and Servicing Agreement or any Supplement (or within the applicable grace
period, which shall not exceed five 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 then
outstanding and which continues unremedied for a period of 60 days after
written notice and continues to have a material adverse effect on the
certificateholders of any Series, including the Certificates (which
determination shall be made without regard to whether funds are available
from any Enhancement), then outstanding for such period; or the delegation
by the Servicer of its duties under the Pooling and Servicing Agreement,
except as specifically permitted thereunder;
(c) any representation, warranty or certification made by the Servicer in
the Pooling and Servicing Agreement, or in any certificate delivered
pursuant to the Pooling and Servicing Agreement, proves to have been
incorrect when made which has a material adverse effect on the
certificateholders of any Series, including the Certificates (which
determination shall be made without regard to whether funds are available
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from any Enhancement), then outstanding, 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 for such period; or
(d) the occurrence of certain events of bankruptcy, insolvency or
receivership of the Servicer.
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 Pooling and Servicing Agreement, and the Servicer shall provide the
Trustee, any provider of Enhancement, the Transferor and the holders of
certificates of all Series outstanding 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 the Trustee or
the majority of the certificateholders from effecting a Service Transfer.
REPORTS TO CERTIFICATEHOLDERS
On each Distribution Date, the Trustee or any paying agent appointed by the
Trustee will forward to each Certificateholder of record a statement prepared
by the Servicer setting forth certain information with respect to the Trust
and the Certificates of each Series, including: (a) the total amount
distributed, (b) the amount of the distribution 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 related Monthly Period and allocated in respect of the
Certificates, (e) the amount of collections of Finance Charge Receivables
processed during the related Monthly Period and allocated in respect of the
Certificates, (f) the Investor Percentage for the related Monthly Period, (g)
the aggregate outstanding balance of Accounts which are 35 or more days
contractually delinquent, by class of delinquency, as of the end of the last
day of the related Monthly Period, (h) the applicable Investor Default Amount
for the related Monthly Period, (i) the applicable Investor Charge-Offs for
the related Monthly Period and the amount of Investor Charge-Offs reimbursed
on the Transfer Date immediately preceding the Distribution Date, (j) the
amount of the Investor Servicing Fee for the related Monthly Period, (k) the
Invested Amount at the close of business on the last day of the related
Monthly Period, (l) the Pool Factor as of the end of the last day of the
related Monthly Period, and (m) the amount available, if any, pursuant to the
applicable Enhancement.
On or before January 31 of each calendar year, the Trustee or any paying
agent appointed by the Trustee 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.
REPORTS; NOTICES
The Trustee will publish or will cause to be published following each
Distribution Date in a daily newspaper in Luxembourg (expected to be the
Luxemburger Wort) a notice to the effect that the information set forth in the
foregoing paragraph will be available for review at the main office of the
listing agent of the Trust in Luxembourg, Luxembourg.
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Notices to Certificateholders will be given by publication in a daily
newspaper in Luxembourg, which is expected to be the Luxemburger Wort. In the
event that Definitive Certificates are issued, notices to Certificateholders
will also be given by mail to the addresses of such holders as they appear in
the Certificate Register.
EVIDENCE AS TO COMPLIANCE
The Pooling and Servicing Agreement provides that the Servicer will cause a
firm of independent public accountants to furnish to the Trustee on an annual
basis a report to the effect that such firm has reviewed the Servicer's
computer reports regarding the Receivables, including information regarding
delinquencies, charge-offs and yield and that such reports are in agreement
with monthly statements prepared by the Servicer and distributed to the
Trustee and the Certificateholders, except as set forth in such report.
The Pooling and Servicing Agreement provides that the Servicer will cause a
firm of independent public accountants to furnish to the Trustee on an annual
basis a report to the effect that such firm has made a study and evaluation in
accordance with generally accepted auditing standards of the Servicer's
internal accounting controls relative to the servicing of the Accounts and
that, on the basis of such examination, such firm is of the opinion (assuming
the accuracy of reports by the Servicer's third party agents) that the system
of internal controls in effect for the reporting period relating to servicing
procedures performed by the Servicer, taken as a whole, provided reasonable
assurance that the internal control system was sufficient for the prevention
and detection of errors and irregularities and that such servicing was
conducted in compliance with such provisions of the Pooling and Servicing
Agreement with which such accountants can reasonably be expected to possess
adequate knowledge of the subject matter, which are susceptible of positive
assurance by such accountants and for which their professional competence is
relevant, except for such exceptions as such firm shall believe to be
immaterial and such other exceptions as shall be set forth in such statement.
The Pooling and Servicing Agreement also provides for delivery to the
Trustee, on or before a certain date each year, of a certificate signed by an
officer of the Servicer stating that the Servicer has fulfilled its
obligations under the Pooling and Servicing Agreement throughout the preceding
twelve months or, if there has been a default in the fulfillment of any such
obligations, describing each such default.
AMENDMENTS
The Pooling and Servicing Agreement and any Supplement may be amended by the
Transferor, the Servicer and the Trustee, without the consent of
certificateholders of any Series then outstanding for any purpose, provided
that (i) the Transferor shall deliver an opinion of counsel acceptable to the
Trustee to the effect that such amendment will not 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. Such an amendment may be entered into in order to comply
with or obtain the benefits of certain future tax legislation (such as
legislation creating FASITs) as described below under "Certain U.S. Federal
Income Tax Consequences--Recent Legislation."
The Pooling and Servicing Agreement and the Supplement may be amended by the
Transferor, the Servicer and the Trustee with the consent of the holders of
certificates evidencing undivided interests aggregating not less than 66 2/3%
of the investor interests of all Series adversely affected, for the purpose of
adding any provisions to, changing in any manner or eliminating any of the
provisions of the Pooling and Servicing Agreement or the Supplement or of
modifying in any manner the rights of certificateholders of any then
outstanding Series. 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 such Series, (b) change the definition of or the manner of calculating the
interest of any certificateholder of such Series, or (c) reduce the aforesaid
percentage of undivided interests the holders of which are required to consent
to any such amendment, in each case without the consent of all
certificateholders of all Series adversely affected. Promptly following the
execution of any amendment to the Pooling and Servicing Agreement, the Trustee
will furnish written notice of the substance of such amendment to each
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Certificateholder. Any Supplement and any amendments regarding the addition or
removal of Receivables from the Trust will not be considered an amendment
requiring certificateholder consent under the provisions of the Pooling and
Servicing Agreement and any Supplement.
LIST OF CERTIFICATEHOLDERS
Upon written request of Certificateholders of record representing undivided
interests in the Trust aggregating not less than 10% of the Invested Amount of
a Series, 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 Pooling and Servicing Agreement. See "--Book-Entry
Registration" and "--Definitive Certificates" above.
THE TRUSTEE
The Bank of New York (Delaware) is currently the Trustee under the Pooling
and Servicing 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 Pooling and Servicing
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
Pooling and Servicing 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.
ENHANCEMENT
GENERAL
For any Series, Enhancement may be provided with respect to one or more
Classes thereof. Enhancement may be in the form of the subordination of one or
more Classes of the Certificates of such Series, the establishment of a cash
collateral guaranty or account, a letter of credit, a surety bond, insurance,
spread account, reserve account, the use of cross-support features or another
method of Enhancement described in the related Prospectus Supplement, or any
combination of the foregoing. If so specified in the related Prospectus
Supplement, any form of 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 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 Enhancement or which are not covered by the Enhancement,
Certificateholders will bear their allocable share of deficiencies.
If Enhancement is provided with respect to a Series, the related Prospectus
Supplement will include a description of (a) the amount payable under such
Enhancement, (b) any conditions to payment thereunder not
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otherwise described herein, (c) the conditions (if any) under which the amount
payable under such Enhancement may be reduced and under which such Enhancement
may be terminated or replaced and (d) any material provision of any agreement
relating to such Enhancement. Additionally, the related Prospectus Supplement
may set forth certain information with respect to the issuer of any third
party Enhancement (the "Enhancement Provider"), including (i) a brief
description of its principal business activities, (ii) its principal place of
business, place of incorporation and the jurisdiction under which it is
chartered or licensed to do business, (iii) if applicable, the identity of
regulatory agencies which exercise primary jurisdiction over the conduct of
its business and (iv) its total assets, and its stockholders' or
policyholders' surplus, if applicable, and other appropriate financial
information as of the date specified in the Prospectus Supplement.
SUBORDINATION
If so specified in the related Prospectus Supplement, one or more Classes 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 or specified Certificates of another Series. 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
subordinate 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 Enhancement. The related Prospectus Supplement will also
set forth information concerning the amount of subordination of a Class or
Classes of Subordinated Certificates of a Series, the circumstances in which
such subordination will be applicable, the manner, if any, in which the amount
of subordination will decrease over time, and the conditions under which
amounts available from payments that would otherwise be made to holders of
such Subordinated Certificates will be distributed to holders of 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.
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 INVESTED AMOUNT
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 Invested Amount") in an amount
initially equal to a percentage of the senior Certificates of such Series as
specified in the Prospectus Supplement. Such Series will also have the benefit
of a Cash Collateral Guaranty or Cash Collateral Account with an initial
amount on deposit therein of zero or such amount as specified in the
Prospectus Supplement which will be increased (i) to the extent the Transferor
elects, subject to certain conditions specified in the related Prospectus
Supplement, to apply collections of Principal Receivables allocable to the
Collateral Invested Amount to decrease the Collateral Invested Amount, (ii) to
the extent collections of Principal Receivables allocable to the Collateral
Invested Amount 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 Enhancement available pursuant to the
Collateral Invested Amount and the Cash Collateral
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Guaranty or Cash Collateral Account will be the lesser of the sum of the
Collateral Invested Amount 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 Invested
Amount will be distributed to holders of senior Certificates and the
circumstances under which payment will be made to the beneficiaries of the
Cash Collateral Guaranty from the Cash Collateral Account or from the Cash
Collateral Account directly.
If so specified in the related Prospectus Supplement, the Collateral
Invested Amount may be issued in certificated form and may have voting and
certain other rights of a subordinated Class of certificates. Any Collateral
Invested Amount issued in certificated form may be offered hereby or under a
separate Disclosure Document in transactions either registered under the
Securities Act or exempt from registration thereunder.
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 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.
The maximum liability of an L/C Bank under its letter of credit will
generally be an amount equal to a percentage specified in the related
Prospectus Supplement of the Initial Invested Amount of a Series or a Class of
such Series. The maximum amount available at any time to be paid under a
letter of credit will be determined in the manner specified therein and in the
related Prospectus Supplement.
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 of such Series
to assure distributions or 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 assure the 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 Prospectus 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 otherwise payable to one or more Classes of Certificates, including
the Subordinated Certificates, or both, 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 assure the
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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 has represented and warranted in the Pooling and Servicing
Agreement that the transfer of Receivables by it to the Trust constitutes
either a valid transfer and assignment to the Trust of all right, title and
interest of the Transferor in and to the Receivables, except for the interest
of the Transferor as holder of the Exchangeable Transferor Certificate, or the
grant to the Trust of a security interest in the Receivables. The Transferor
has also represented and warranted in the Pooling and Servicing Agreement
that, in the event the transfer of Receivables by the Transferor to the 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 the Trust on and after their
creation, except for certain tax and other governmental liens. 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 has represented that the Receivables are "accounts" for
purposes of the UCC. Both the transfer and assignment of accounts and the
transfer of accounts as security for an obligation are treated under Article 9
of the UCC as creating a security interest therein and are subject to its
provisions, and the filing of an appropriate financing statement is required
to perfect the security interest of the Trust. Financing statements covering
the Receivables have been filed with the appropriate governmental authority to
protect the interests of the Trust in the Receivables.
There are certain limited circumstances under the UCC in which a prior or
subsequent transferee of Receivables coming into existence after the Closing
Date could have an interest in such Receivables with priority over the Trust's
interest. Under the Pooling and Servicing Agreement, however, the Transferor
has represented and warranted that it transferred the Receivables to the Trust
free and clear of the lien of any third party. In addition, the Transferor has
covenanted 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
other 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. In
addition, 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.
CERTAIN MATTERS RELATING TO RECEIVERSHIP
The Federal Deposit Insurance Act ("FDIA"), as amended by the Financial
Institutions Reform, Recovery and Enforcement Act of 1989, sets forth certain
powers that the FDIC could exercise if it were appointed as conservator or
receiver of the Transferor or the Servicer. Among other things, the FDIA
grants such a conservator or receiver the power to repudiate contracts of, and
to request a stay of up to 90 days of any judicial action or proceeding
involving, the Transferor or the Servicer.
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 Pooling and
Servicing Agreement is continuously a record of the Bank, and (v) the Pooling
and Servicing Agreement represents 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 should
be enforceable (to the extent
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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 statutory
administrative claims procedure, or the FDIC were to request a stay of
proceedings with respect to the Transferor, 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 the FDIC as conservator
or receiver, a claim for the repudiated obligation is limited to "actual
direct compensatory damages" determined as of the date of the appointment of
the FDIC as conservator or receiver. The FDIA does not define the term "actual
direct compensatory damages." On April 10, 1990, the RTC, formerly a sister
agency of the FDIC, adopted a statement of policy (the "RTC Policy Statement")
with respect to the payment of interest on collateralized borrowings. The RTC
Policy Statement states that interest on such borrowings will be payable at
the contract rate up to the date of the redemption or payment by the
conservator, receiver, or the trustee of an amount equal to the principal owed
plus the contract rate of interest up to the date of such payment or
redemption, plus any expenses of liquidation if provided for in the contract,
to the extent secured by the collateral. The FDIC has not adopted a formal
policy statement on payment of "actual direct compensatory damages" with
respect to collateralized borrowings of banks that are repudiated. The
Transferor believes that the general practice of the FDIC in such
circumstances is to permit the collateral to be applied to pay the outstanding
principal owed plus interest accrued at the contract rate up to the date of
payment, together with the costs of liquidation of the collateral if provided
for in the contract. In one case, however, involving the repudiation by the
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 the FDIC repudiated the Transferor's obligations under the Pooling and
Servicing 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.
The Pooling and Servicing Agreement provides that, 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 the Trustee
and a Pay Out Event will occur with respect to all Series then outstanding.
Pursuant to the Pooling and Servicing Agreement, newly created Principal
Receivables would not be transferred to the Trust on and after any such
appointment or voluntary liquidation, and the Trustee would 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
outstanding Series (or with respect to each Series with two or more Classes,
50% of each Class), or unless otherwise required by the FDIC as receiver or
conservator of the Transferor. Under the Pooling and Servicing Agreement, the
proceeds from the sale of the Receivables allocable to the Certificates would
be treated as collections of the Receivables and 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 FDIC as
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. See "Description of the Certificates--Pay Out
Events."
If, upon the insolvency of the Servicer, the Servicer were to be placed into
conservatorship or receivership, the FDIC as conservator or receiver would
have the power to repudiate contracts of, and to request a stay of up to 90
days of any judicial action or proceeding involving, the Servicer. In the
event of a Servicer Default, if the FDIC were appointed as conservator or
receiver for the Servicer, and no Servicer Default other than such
conservatorship or receivership or insolvency of the Servicer exists, the FDIC
may have the power to prevent a transfer of servicing to a successor Servicer.
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In Octagon Gas Systems, Inc. v. Rimmer, 995 F.2d 948 (10th Cir. 1993), cert.
denied, 114 S. Ct. 554 (1993) ("Octagon"), the United States Court of Appeals
for the 10th Circuit suggested that even where a transfer of accounts from a
seller to a buyer constitutes a "true sale," the accounts would nevertheless
constitute property of the seller's bankruptcy estate in a bankruptcy of the
seller. If the Transferor were to be placed into receivership and a court were
to follow the Octagon court's reasoning, Certificateholders might experience
delays in payment or possibly losses in their investment in the Certificates.
Counsel has advised the Transferor that the facts of the Octagon case are
distinguishable from those in the sale transactions between the Transferor and
the Trust and that the reasoning of the Octagon case appears to be
inconsistent with established precedent and the UCC. In addition, because the
Transferor, the Trust and the transactions governed by the Pooling and
Servicing Agreement do not have any particular link to the 10th Circuit, it is
unlikely that the Transferor would be subject to a receivership proceeding in
the 10th Circuit. Accordingly, the Octagon case should not be binding
precedent on a court in a receivership proceeding.
CONSUMER PROTECTION LAWS
The relationship of the cardholder and credit card issuer is extensively
regulated by Federal and state consumer protection laws. With respect to
credit cards issued by the Bank, the most significant of these laws include
the Federal Truth-in-Lending Act, Equal Credit Opportunity Act, Fair Debt
Collection Practices Act, Fair Credit Reporting Act and Electronic Funds
Transfer Act, as well as the Delaware Banking Code. These statutes impose
disclosure requirements when a credit card account is advertised, when it is
opened, at the end of monthly billing cycles, upon account renewal for
accounts on which annual fees are assessed, and at year end and, in addition,
limit cardholder 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. Federal
legislation requires credit card issuers to disclose to consumers the interest
rates, annual cardholder fees, grace periods, balance calculation methods, and
other features associated with their credit card accounts. Cardholders are
entitled under current law to have payments and credits applied to the credit
card account promptly, to receive prescribed notices and to have billing
errors resolved promptly.
The Trust may be liable for certain violations of consumer protection laws
that apply to the Receivables, either as assignee of the Transferor with
respect to obligations arising before transfer of the Receivables to the 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 covenants in the Pooling and Servicing Agreement to accept the
transfer of all Receivables in an Account if any Receivable in such Account
has not been created in compliance with the requirements of such laws. The
Bank has also agreed in the Pooling and Servicing Agreement to indemnify the
Trust for, among other things, any liability arising from such violations. 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 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.
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Application of Federal and state bankruptcy and debtor relief laws would
affect the interests of the Certificateholders if such laws result in any
Receivables being written off as uncollectible when the applicable Enhancement
is equal to zero. See "Description of the Certificates--Defaulted Receivables;
Rebates and Fraudulent Charges."
OTHER LITIGATION
The Bank was named a defendant in a class action lawsuit filed on May 26,
1995 in the District Court of Willacy County, Texas by a former cardmember of
the Bank. In this action, the plaintiff contends that he and all others
similarly situated are entitled to statutory penalties for alleged violations
by the Bank of the Texas Debt Collection Act and the Texas Deceptive Trade
Practices Act. Similar class action lawsuits have been filed in Texas against
other banks and entities. The Bank believes that the plaintiff's claim under
these statutes is not valid. The Bank removed the case to the United States
District Court for the Southern District of Texas, Brownsville Division. On
April 8, 1996, the United States District Court for the Southern District of
Texas, Brownsville Division granted the Bank's motion for summary judgment and
dismissed the plaintiff's claim. The plaintiff has appealed the judgment and
the Bank intends to vigorously defend against all claims arising under such
appeal. While it is impossible to predict the outcome of such lawsuit, the
Bank believes that any liability arising from such lawsuit will not have a
material adverse effect on the Transferor's business or on the Receivables in
the Trust.
The Bank was named a defendant in a class action lawsuit filed on December
19, 1995 in the United States District Court for the Northern District of
California by a former cardmember of the Bank. In this action, the plaintiff
contends that she and all others similarly situated are entitled to equitable
relief and compensatory and statutory damages for alleged violations by the
Bank of the Federal Truth-in-Lending Act, the California unfair business
practices statutes, breach of contract, negligent misrepresentation and fraud
and deceit. The Bank believes that the plaintiff's claims are not valid and
has answered the plaintiff's complaint, denying all liability. On June 21,
1996, the District Court denied the Bank's motion to dismiss the case and
plaintiff's motion for a preliminary injunction. A tentative settlement with
the plaintiff class has been reached. The settlement must be approved by the
U.S. District Court after notice has been sent to class members and they have
had an opportunity to be heard. The hearing has been set for October 17, 1997.
While it is impossible to predict the outcome of this matter, the Bank
believes that any liability arising from this matter will not have a material
adverse effect on the Transferor's business or on the Receivables in the
Trust.
The Bank also was named a defendant in a class action lawsuit filed on or
about September 8, 1997 in the Circuit Court of Multnomah County, Oregon by a
cardmember of the Bank. In this action, plaintiff contends that she and others
similarly situated are entitled to equitable relief for alleged violations of
the Delaware Consumer Fraud Act, breach of contract, breach of the covenant of
good faith and fraud. The Bank believes that plaintiff's claims are without
merit and intends to vigorously defend against all claims. While it is
impossible to predict the outcome of this matter, the Bank believes that any
liability arising from this matter will not have a material adverse effect on
the Transferor's business or on the Receivables in the Trust.
CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES
GENERAL
The following discussion, summarizing certain anticipated Federal income tax
aspects of the purchase, ownership and disposition of the Certificates of a
Series, is based upon the provisions of the Internal Revenue Code of 1986, as
amended (the "Code"), proposed, temporary and final Treasury regulations
thereunder, and published rulings and court decisions in effect as of the date
hereof, all of which are subject to change, possibly retroactively. This
discussion does not address every aspect of the Federal income tax laws that
may be relevant to Certificate Owners of a Series in light of their personal
investment circumstances or to certain types of Certificate Owners of a Series
subject to special treatment under the Federal income tax laws (for example,
banks and life insurance companies). PROSPECTIVE INVESTORS ARE ADVISED TO
CONSULT THEIR OWN TAX ADVISORS WITH REGARD TO THE FEDERAL TAX CONSEQUENCES OF
THE PURCHASE,
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OWNERSHIP, OR DISPOSITION OF INTERESTS IN CERTIFICATES, AS WELL AS THE TAX
CONSEQUENCES ARISING UNDER THE LAWS OF ANY STATE, FOREIGN COUNTRY, OR OTHER
TAXING JURISDICTION.
CHARACTERIZATION OF THE CERTIFICATES AS INDEBTEDNESS
Unless otherwise specified in the related Prospectus Supplement, special tax
counsel to the Bank ("Special Tax Counsel") specified in such Prospectus
Supplement will, upon issuance of a Series of Certificates, advise the Bank
based on the assumptions and qualifications set forth in the opinion that the
Certificates of such Series that are offered pursuant to a Prospectus
Supplement (the "Offered Certificates;" and for purposes of this section
"Certain U.S. Federal Income Tax Consequences" the term "Certificate Owner"
refers to a holder of a beneficial interest in an Offered Certificate) will be
treated as indebtedness for Federal income tax purposes. However, opinions of
counsel are not binding on the Internal Revenue Service (the "IRS") and there
can be no assurance that the IRS could not successfully challenge this
conclusion.
The Transferor expresses in the Pooling and Servicing Agreement its intent
that for Federal, state and local income or franchise tax purposes, the
Offered Certificates of each Series will be indebtedness secured by the
Receivables. The Transferor agrees and each Certificateholder and Certificate
Owner, by acquiring an interest in an Offered Certificate, agrees or will be
deemed to agree to treat the Offered Certificates of such Series as
indebtedness for Federal, state and local income or franchise tax purposes.
However, because different criteria are used to determine the non-tax
accounting characterization of the transactions contemplated by the Pooling
and Servicing Agreement, the Transferor expects to treat such transaction, for
regulatory and financial accounting purposes, as a sale of an ownership
interest in the Receivables and not as a debt obligation.
In general, whether for Federal income tax purposes a transaction
constitutes a sale of property or a loan, the repayment of which is secured by
the property, is a question of fact, the resolution of which is based upon the
economic substance of the transaction rather than its form or the manner in
which it is labeled. While the IRS and the courts have set forth several
factors to be taken into account in determining whether the substance of a
transaction is a sale of property or a secured indebtedness for Federal income
tax purposes, the primary factor in making this determination is whether the
transferee has assumed the risk of loss or other economic burdens relating to
the property and has obtained the benefits of ownership thereof. Unless
otherwise set forth in a Prospectus Supplement, it is expected that, as set
forth in its opinion, Special Tax Counsel will analyze and rely on several
factors in reaching its opinion that the weight of the benefits and burdens of
ownership of the Receivables has not been transferred to the Certificate
Owners.
In some instances, courts have held that a taxpayer is bound by a particular
form it has chosen for a transaction, even if the substance of the transaction
does not accord with its form. Unless otherwise specified in a Prospectus
Supplement, it is expected that Special Tax Counsel will advise that the
rationale of those cases will not apply to the transaction evidenced by a
Series of Certificates, because the form of the transaction, as reflected in
the operative provisions of the documents, either is not inconsistent with the
characterization of the Offered Certificates of such Series as debt for
Federal income tax purposes or otherwise makes the rationale of those cases
inapplicable to this situation.
TAXATION OF INTEREST INCOME OF CERTIFICATEHOLDERS
As set forth above, it is expected that, unless otherwise specified in a
Prospectus Supplement, Special Tax Counsel will advise the Bank that the
Offered Certificates will constitute indebtedness for Federal income tax
purposes, and accordingly, interest thereon will be includible in income by
Certificate Owners as ordinary income when received (in the case of a cash
basis taxpayer) or accrued (in the case of an accrual basis taxpayer) in
accordance with their respective methods of tax accounting. Interest received
on the Offered Certificates may also constitute "investment income" for
purposes of certain limitations of the Code concerning the deductibility of
investment interest expense.
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While it is not anticipated that the Offered Certificates will be issued at
a greater than de minimis discount, under applicable Treasury regulations (the
"Regulations") the Offered Certificates may nevertheless be deemed to have
been issued with original issue discount ("OID"). This could be the case, for
example, if interest payments for a Series are not treated as "qualified
stated interest" because the IRS determines that (i) no reasonable legal
remedies exist to compel timely payment and (ii) the Offered Certificates do
not have terms and conditions that make the likelihood of late payment (other
than a late payment that occurs within a reasonable grace period) or
nonpayment a remote contingency. Applicable regulations provide that, for
purposes of the foregoing test, the possibility of nonpayment due to default,
insolvency, or similar circumstances, is ignored. Although this provision does
not directly apply to the Offered Certificates (because they have no actual
default provisions) the Transferor intends to take the position that, because
nonpayment can occur only as a result of events beyond its control
(principally, loss rates and payment delays on the Receivables substantially
in excess of those anticipated), nonpayment is a remote contingency. Based on
the foregoing, and on the fact that generally interest will accrue on the
Offered Certificates at a "qualified floating rate," the Transferor intends to
take the position that interest payments on the Offered Certificates
constitute qualified stated interest. If, however, interest payments for a
Series were not classified as "qualified stated interest," all of the taxable
income to be recognized with respect to the Offered Certificates would be
includible in income as OID but would not be includible again when the
interest is actually received.
If the Offered Certificates are in fact issued at a greater than de minimis
discount or are treated as having been issued with OID under the Regulations,
the following rules will apply. The excess of the "stated redemption price at
maturity" of an Offered Certificate over the original issue price (in this
case, the initial offering price at which a substantial amount of the Offered
Certificates are sold to the public) will constitute OID. A Certificate Owner
must include OID in income as interest over the term of the Offered
Certificate under a constant yield method. In general, OID must be included in
income in advance of the receipt of cash representing that income. In the case
of a debt instrument as to which the repayment of principal may be accelerated
as a result of the prepayment of other obligations securing the debt
instrument (a "Prepayable Instrument"), the periodic accrual of OID is
determined by taking into account both the prepayment assumptions used in
pricing the debt instrument and the prepayment experience. If this provision
applies to a Class of Certificates (which is not clear), the amount of OID
which will accrue in any given "accrual period" may either increase or
decrease depending upon the actual prepayment rate. Accordingly, each
Certificate Owner should consult its own tax advisor regarding the impact to
it of the OID rules if the Offered Certificates are issued with OID. Under the
Regulations, a holder of a Certificate issued with de minimis OID must include
such OID in income proportionately as principal payments are made on a Class
of Certificates.
A holder who purchases an Offered Certificate at a discount from its
adjusted issue price may be subject to the "market discount" rules of the
Code. These rules provide, in part, for the treatment of gain attributable to
accrued market discount as ordinary income upon the receipt of partial
principal payments or on the sale or other disposition of the Offered
Certificate, and for the deferral of interest deductions with respect to debt
incurred to acquire or carry the market discount Offered Certificate.
A subsequent holder who purchases an Offered Certificate at a premium may
elect to amortize and deduct this premium over the remaining term of the
Offered Certificate in accordance with rules set forth in Section 171 of the
Code.
SALE OF A CERTIFICATE
In general, a Certificate Owner will recognize gain or loss upon the sale,
exchange, redemption, or other taxable disposition of an Offered Certificate
measured by the difference between (i) the amount of cash and the fair market
value of any property received (other than amounts attributable to, and
taxable as, accrued interest) and (ii) the Certificate Owner's tax basis in
the Offered Certificate (as increased by any OID or market discount previously
included in income by the holder and decreased by any deductions previously
allowed for amortizable bond premium and by any payments reflecting principal
or OID received with respect to such Certificate). Subject to the market
discount rules discussed above and to the one-year holding requirement for
long-term
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capital gain treatment, any such gain or loss generally will be long-term
capital gain, provided that the Offered Certificate was held as a capital
asset and provided, further, that if the rules applicable to Prepayable
Instruments apply, any OID not previously accrued will be treated as ordinary
income. The maximum ordinary income rate for individuals, estates, and trusts
exceeds the maximum long-term capital gains rate for such taxpayers. In
addition, capital losses generally may be used only to offset capital gains.
TAX CHARACTERIZATION OF THE TRUST
The Pooling and Servicing Agreement permits the issuance of Classes of
Certificates that are treated for Federal income tax purposes either as
indebtedness or as an interest in a partnership. Accordingly, the Trust could
be characterized either as (i) a security device to hold Receivables securing
the repayment of the Certificates of all Series or (ii) a partnership in which
the Transferor and certain classes of Certificateholders are partners, and
which has issued debt represented by other Classes of Certificates (including,
unless otherwise specified in a Supplement, the Offered Certificates). In
connection with the issuance of Certificates of any Series, Special Tax
Counsel will render an opinion to the Bank, based on the assumptions and
qualifications set forth therein, that under then current law, the issuance of
the Certificates of such Series will not cause the Trust to be characterized
for Federal income tax purposes as an association (or publicly traded
partnership) taxable as a corporation.
The opinion of Special Tax Counsel with respect to Offered Certificates and
the Trust will not be binding on the courts or the IRS. It is possible that
the IRS could assert that, for purposes of the Code, the transaction
contemplated by this Prospectus and a related Prospectus Supplement
constitutes a sale of the Receivables (or an interest therein) to the
Certificate Owners of one or more Series or Classes and that the proper
classification of the legal relationship between the Bank and some or all of
the Certificate Owners or Certificateholders of one or more Series resulting
from the transaction is that of a partnership (including a publicly traded
partnership), a publicly traded partnership taxable as a corporation, or an
association taxable as a corporation. The Transferor currently does not intend
to comply with the Federal income tax reporting requirements that would apply
if any Classes of Certificates were treated as interests in a partnership or
corporation (unless, as is permitted by the Pooling and Servicing Agreement,
an interest in the Trust is issued or sold that is intended to be classified
as an interest in a partnership).
If the Trust were treated in whole or in part as a partnership in which some
or all Certificate Owners of one or more Series were partners, that
partnership could be classified as a publicly traded partnership taxable as a
corporation. A partnership will be classified as a publicly traded partnership
taxable as a corporation if equity interests therein are traded on an
"established securities market," or are "readily tradeable" on a "secondary
market" or its "substantial equivalent" unless certain exceptions apply. One
such exception would apply if the Trust is not engaged in a "financial
business" and 90% or more of its income consists of interest and certain other
types of passive income. Because Treasury regulations do not clarify the
meaning of a "financial business" for this purpose, it is unclear whether this
exception applies. The Transferor has taken and intends to take measures
designed to reduce the risk that the Trust could be classified as a publicly
traded partnership taxable as a corporation by reason of trading of interests
in the Trust other than the Offered Certificates and other certificates with
respect to which an opinion is rendered that such certificates constitute debt
for Federal income tax purposes. However, there can be no assurance that the
Trust could not become a publicly traded partnership, because certain of the
actions necessary to comply with such exceptions are not fully within the
control of the Transferor. Furthermore, certain Series issued prior to May 2,
1995 may not be able to be conformed to the measures taken by the Transferor
with respect to Series issued on or after that date.
If a transaction were treated as creating a partnership between the
Transferor and the Certificate Owners or Certificateholders of one or more
Series, the partnership itself would not be subject to Federal income tax
(unless it were to be characterized as a publicly traded partnership taxable
as a corporation); rather, the partners of such partnership, including the
Certificate Owners or Certificateholders of such Series, would be taxed
individually on their respective distributive shares of the partnership's
income, gain, loss, deductions and credits. The amount and timing of items of
income and deductions of a Certificate Owner could differ if the Offered
Certificates were held to constitute partnership interests, rather than
indebtedness. Moreover, unless the partnership were treated as engaged in a
trade or business, an individual's share of expenses of the partnership would
be miscellaneous
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itemized deductions that, in the aggregate, are allowed as deductions only to
the extent they exceed two percent of the individual's adjusted gross income,
and would be subject to reduction under Section 68 of the Code if the
individual's adjusted gross income exceeded certain limits. As a result, the
individual might be taxed on a greater amount of income than the stated rate
on the Offered Certificates. Finally, if the partnership were a publicly
traded partnership that qualifies for exemption from taxation as a
corporation, 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 the holder under the Code. Partnership characterization
also may have adverse state and local income or franchise tax consequences for
a Certificate Owner.
If it were determined that a transaction created an entity classified as an
association or as a publicly traded partnership taxable as a corporation, the
Trust would be subject to Federal income tax at corporate income tax rates on
the income it derives from the Receivables, which would reduce the amounts
available for distribution to the Certificate Owners, possibly including
Certificate Owners of a Class that is treated as indebtedness. Such
classification may also have adverse state and local tax consequences that
would reduce amounts available for distribution to Certificate Owners. Cash
distributions to the Certificate Owners (except any Class not recharacterized
as an equity interest in an association) generally would be treated as
dividends for tax purposes to the extent of such deemed corporation's earnings
and profits.
RECENT LEGISLATION
Certain provisions of the Code provide for the creation of a new type of
entity for federal income tax purposes, the "financial asset securitization
investment trust" ("FASIT"). However, these provisions are not effective until
September 1, 1997, and many technical issues concerning FASITs must be
addressed by Treasury regulations which have not yet been issued. Although
transition rules permit an entity in existence on August 31, 1997, such as the
Trust, to elect FASIT status, at the present time it is not clear how
outstanding interests of such an entity would be treated subsequent to such an
election. The Pooling and Servicing Agreement may be amended in accordance
with the provisions thereof to provide that the Transferor may cause a FASIT
election to be made for the Trust if the Transferor delivers to the Trustee an
opinion of counsel to the effect that, for 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
Certificateholder or the Trust.
FOREIGN INVESTORS
As set forth above, it is expected that Special Tax Counsel will render an
opinion, upon issuance, that the Offered Certificates will be treated as debt
for U.S. Federal income tax purposes. The following information describes the
U.S. Federal income tax treatment of investors that are not U.S. persons
("Foreign Investors") if the Offered Certificates are treated as debt. The
term "Foreign Investor" means any person other than (i) a citizen or resident
of the United States, (ii) a corporation, partnership or other entity
organized in or under the laws of the United States or any political
subdivision thereof, (iii) an estate the income of which is includible in
gross income for U.S. Federal income tax purposes, regardless of its source or
(iv) a trust the income of which is includible in gross income for U.S.
Federal income tax purposes, regardless of its source or, for tax years
beginning after December 31, 1996 (and, if a trustee so elects, for tax years
ending after August 20, 1996), a trust if a U.S. court is able to exercise
primary supervision over the administration of such trust and one or more U.S.
fiduciaries have the authority to control all substantial decisions of such
trust.
Interest, including OID, paid to a Foreign Investor will be subject to U.S.
withholding taxes at a rate of 30% unless (x) the income is "effectively
connected" with the conduct by such Foreign Investor of a trade or business in
the United States or (y) the Foreign Investor and each securities clearing
organization, bank, or other financial institution that holds the Offered
Certificates on behalf of the customer in the ordinary course of its
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trade or business, in the chain between the Certificate Owner and the U.S.
person otherwise required to withhold the U.S. tax, complies with applicable
identification requirements and, in addition (i) the non-U.S. Certificate
Owner does not actually or constructively own 10 percent or more of the total
combined voting power of all classes of stock of the Transferor entitled to
vote (or of a profits or capital interest of a trust characterized as a
partnership), (ii) the non-U.S. Certificate Owner is not a controlled foreign
corporation that is related to the Transferor (or a trust treated as a
partnership) through stock ownership, (iii) the non-U.S. Certificate Owner is
not a bank receiving interest described in Code Section 881(c)(3)(A), (iv)
such interest is not contingent interest described in Code Section 871(h)(4),
and (v) the non-U.S. Certificate Owner does not bear certain relationships to
any holder of the Exchangeable Transferor Certificate other than the
Transferor or any holder of the Certificates of any Series not properly
characterized as debt. Applicable identification requirements generally will
be satisfied if there is delivered to a securities clearing organization (i)
IRS Form W-8 signed under penalties of perjury by the Certificate Owner,
stating that the Certificate Owner is not a U.S. person and providing such
Certificate Owner's name and address, (ii) IRS Form 1001, signed by the
Certificate Owner or such Certificate Owner's agent, claiming exemption from
withholding under an applicable tax treaty, or (iii) IRS Form 4224 signed by
the Certificate Owner or such owner's agent, claiming exemption from
withholding of tax on income effectively connected with the conduct of a trade
or business in the United States; provided that in any such case (x) the
applicable form is delivered pursuant to applicable procedures and is properly
transmitted to the United States entity otherwise required to withhold tax and
(y) none of the entities receiving the form has actual knowledge that the
Certificate Owner is a U.S. person.
Recently proposed Treasury regulations (the "Proposed Regulations") could
affect the procedures to be followed by a Foreign Investor in complying with
United States Federal withholding, backup withholding and information
reporting rules. The Proposed Regulations are not currently effective but, if
finalized in their current form, would be effective for payments made after
December 31, 1997. Prospective investors are urged to consult their tax
advisors regarding the effect, if any, of the Proposed Regulations on the
purchase, ownership, and disposition of the Offered Certificates.
A Certificate Owner that is a nonresident alien or foreign corporation will
not be subject to U.S. Federal income tax on gain realized upon the sale,
exchange, or redemption of an Offered Certificate, provided that (i) such gain
is not effectively connected with the conduct of a trade or business in the
United States, (ii) in the case of a Certificate Owner that is an individual,
such Certificate Owner is not present in the United States for 183 days or
more during the taxable year in which such sale, exchange, or redemption
occurs, and (iii) in the case of gain representing accrued interest, the
conditions described in the second preceding paragraph are satisfied.
If the interests of the Certificate Owners of a Series were reclassified as
interests in a partnership (not taxable as a corporation), such
recharacterization could cause a Foreign Investor to be treated as engaged in
a trade or business in the United States. In such event the Certificate Owner
of such Series would be required to file a Federal income tax return and, in
general, would be subject to Federal income tax, including branch profits tax
in the case of a Certificateholder that is a corporation, on its net income
from the partnership. Further, the partnership would be required, on a
quarterly basis, to pay withholding tax equal to the sum, for each foreign
partner, of such foreign partner's distributive share of "effectively
connected" income of the partnership multiplied by the highest rate of tax
applicable to that foreign partner. The tax withheld from each foreign partner
would be credited against such foreign partner's U.S. Federal income tax
liability.
If the Trust were taxable as a corporation, distributions to foreign
persons, to the extent treated as dividends, would generally be subject to
withholding at the rate of 30%, unless such rate were reduced by an applicable
tax treaty.
STATE AND LOCAL TAXATION
The discussion above does not address the tax treatment of the Trust, the
Certificates of any Series, or the Certificate Owners of any Series under
state tax laws. Prospective investors are urged to consult their own tax
advisors regarding state and local tax treatment of the Trust and the
Certificates of any Series, and the consequences of purchase, ownership or
disposition of the Certificates of any Series under any state or local tax
law.
56
<PAGE>
ERISA CONSIDERATIONS
Section 406 of ERISA and Section 4975 of the Code prohibit a pension, profit
sharing or other employee benefit plan from engaging in certain transactions
involving "plan assets" with persons that are "parties in interest" under
ERISA or "disqualified persons" under the Code with respect to the plan. ERISA
also imposes certain duties on persons who are fiduciaries of plans subject to
ERISA and prohibits certain transactions between a plan and parties in
interest with respect to such plans. Under ERISA, any person who exercises any
authority or control respecting the management or disposition of the assets of
a plan is considered to be a fiduciary of such plan (subject to certain
exceptions not here relevant). A violation of these "prohibited transaction"
rules may generate excise tax and other liabilities under ERISA and the Code
for such persons.
Plan fiduciaries must determine whether the acquisition and holding of the
Certificates of a Series and the operations of the Trust would result in
direct or indirect prohibited transactions under ERISA and the Code. The
operations of the Trust could result in prohibited transactions if Benefit
Plans that purchase the Certificates of a Series are deemed to own an interest
in the underlying assets of the Trust. There may also be an improper
delegation of the responsibility to manage Benefit Plan assets if Benefit
Plans that purchase the Certificates are deemed to own an interest in the
underlying assets of the Trust.
Pursuant to a final regulation (the "Final Regulation") issued by the
Department of Labor ("DOL") concerning the definition of what constitutes the
"plan assets" of an employee benefit plan subject to ERISA or the Code, or an
individual retirement account ("IRA") (collectively referred to as "Benefit
Plans"), the assets and properties of certain entities in which a Benefit Plan
makes an equity investment could be deemed to be assets of the Benefit Plan in
certain circumstances. Accordingly, if Benefit Plans purchase Certificates of
a Series, the Trust could be deemed to hold plan assets unless one of the
exceptions under the Final Regulation is applicable to the Trust.
The Final Regulation only applies to the purchase by a Benefit Plan of an
"equity interest" in an entity. Assuming that interests in Certificates of a
Series are equity interests, the Final Regulation contains an exception that
provides that if a Benefit Plan acquires a "publicly-offered security," the
issuer of the security is not deemed to hold plan assets. A publicly-offered
security is a security that is (i) freely transferable, (ii) part of a class
of securities that is owned by 100 or more investors independent of the issuer
and of one another and (iii) either is (A) part of a class of securities
registered under Section 12(b) or 12(g) of the 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. In addition, the Final Regulation
provides that if a Benefit Plan invests in an "equity interest" of an entity
that is neither a "publicly-offered security" nor a security issued by an
investment company registered under the Investment Company Act, the Benefit
Plan's assets include both the equity interest and an undivided interest in
each of the entity's underlying assets, unless it is established that equity
participation by "benefit plan investors" is not "significant" or that another
exception applies.
Under the Final Regulation, equity participation in an entity by "benefit
plan investors" is "significant" on any date if, immediately after the most
recent acquisition of any equity interest in the entity (other than a
publicly-offered class of equity), 25% or more of the value of any class of
equity interests in the entity (other than a publicly-offered class) is held
by "benefit plan investors." For purposes of this determination, the value of
equity interests held by a person (other than a benefit plan investor) that
has discretionary authority or control with respect to the assets of the
entity or that provides investment advice for a fee with respect to such
assets (or any affiliate of such person) is disregarded. The term "benefit
plan investor" is defined in the Final Regulation as (a) any employee benefit
plan (as defined in Section 3(3) of ERISA), whether or not it is subject to
the provisions of Title I of ERISA, (b) any plan described in Section
4975(e)(1) of the Code and (c) any entity whose underlying assets include plan
assets by reason of a plan's investment in the entity.
57
<PAGE>
Unless otherwise specified in the related Prospectus Supplement, it is
anticipated that interests in the Certificates of a Series will meet the
criteria of publicly-offered securities as set forth above. Unless otherwise
specified in the related Prospectus Supplement, the underwriters expect
(although no assurances can be given) that interests in each Class of
Certificates of each Series offered hereby will be held by at least 100
independent investors at the conclusion of the offering for such Series; there
are no restrictions imposed on the transfer of interests in the Certificates
of such Series; and interests in the Certificates of such Series will be sold
as part of an offering pursuant to an effective registration statement under
the Securities Act and then will be timely registered under the Exchange Act.
If interests in the Certificates of a Series fail to meet the criteria of
publicly-offered securities or investment by benefit plan investors becomes
significant and the Trust's assets are deemed to include assets of Benefit
Plans that are Certificateholders, 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 addition, the Transferor or any
underwriter of such Series may be considered to be a party in interest,
disqualified person or fiduciary with respect to an investing Benefit Plan.
Accordingly, an investment by a Benefit Plan in Certificates may be a
prohibited transaction under ERISA and the Code unless such investment is
subject to a statutory or administrative exemption. Thus, for example, if a
participant in any Benefit Plan is a cardholder of one of the Accounts, under
DOL interpretations the purchase of interests in Certificates by such plan
could constitute a prohibited transaction. Five class exemptions issued by the
DOL that could apply in such event are DOL Prohibited Transaction Exemption
("PTE") 84-l4 (Class Exemption for Plan Asset Transactions Determined by
Independent Qualified Professional Asset Managers), 91-38 (Class Exemption for
Certain Transactions Involving Bank Collective Investment Funds), 90-1 (Class
Exemption for Certain Transactions Involving Insurance Company Pooled Separate
Accounts), 95-60 (Class Exemption for Certain Transactions Involving Insurance
Company General Accounts) and 96-23 (Class Exemption for Plan Asset
Transactions Determined by In-House Asset Managers). There is no assurance
that these exemptions, even if all of the conditions specified therein are
satisfied, or any other exemption will apply to all transactions involving the
Trust's assets.
IN LIGHT OF THE FOREGOING, FIDUCIARIES OF A BENEFIT PLAN CONSIDERING THE
PURCHASE OF INTERESTS IN CERTIFICATES OF ANY SERIES SHOULD CONSULT THEIR OWN
COUNSEL AS TO WHETHER THE ASSETS OF THE TRUST WHICH ARE REPRESENTED BY SUCH
INTERESTS WOULD BE CONSIDERED PLAN ASSETS, AND WHETHER, UNDER THE GENERAL
FIDUCIARY STANDARDS OF INVESTMENT PRUDENCE AND DIVERSIFICATION, AN INVESTMENT
IN CERTIFICATES OF ANY SERIES IS APPROPRIATE FOR THE BENEFIT PLAN TAKING INTO
ACCOUNT THE OVERALL INVESTMENT POLICY OF THE BENEFIT PLAN AND THE COMPOSITION
OF THE BENEFIT PLAN'S INVESTMENT PORTFOLIO. In addition, fiduciaries should
consider the consequences that would apply if the Trust's assets were
considered plan assets, the applicability of exemptive relief from the
prohibited transaction rules and whether all conditions for such exemptive
relief would be satisfied.
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") and the applicability of PTE 95-60. In John
Hancock, the Supreme Court held that assets held in an insurance company's
general account may be deemed to be "plan assets" under certain circumstances;
however, PTE 95-60 may exempt some or all of the transactions that could occur
as the result of the acquisition and holding of the Certificates of a Series
by an insurance company general account from the penalties normally associated
with prohibited transactions. Accordingly, investors should analyze whether
John Hancock and PTE 95-60 or any other exemption may have an impact with
respect to their purchase of the Certificates of any Series.
In addition, insurance companies considering the purchase of Certificates
using assets of a general account should consult their own employee benefits
counsel or other appropriate counsel with respect to the effect of the Small
Business Job Protection Act of 1996 which added a new Section 401(c) of ERISA
relating to the status of
58
<PAGE>
the assets of insurance company general accounts under ERISA and Section 4975
of the Code. Pursuant to Section 401(c), the DOL is required to issue final
regulations (the "General Account Regulations") not later than December 31,
1997 with respect to insurance policies issued on or before December 31, 1998
that are supported by an insurer's general account. The General Account
Regulations are intended to provide guidance on which assets held by the
insurer constitute "plan assets" for purposes of the fiduciary responsibility
provisions of ERISA and Section 4975 of the Code. Section 401(c) also provides
that, except in the case of avoidance of the General Account Regulations and
actions brought by the Secretary of Labor relating to certain breaches of
fiduciary duties that also constitute breaches of state or Federal criminal
law, until the date that is 18 months after the General Account Regulations
become final, no liability under the fiduciary responsibility and prohibited
transaction provisions of ERISA and Section 4975 may result on the basis of a
claim that the assets of the general account of an insurance company
constitute the plan assets of any such plan. The plan asset status of
insurance company separate accounts is unaffected by new Section 401(c) of
ERISA, and separate account assets continue to be treated as the plan assets
of any such plan invested in a separate account.
PLAN OF DISTRIBUTION
Subject to the terms and conditions set forth in an underwriting agreement
(an "Underwriting Agreement") to be entered into with respect to a Series of
Certificates, the Transferor will agree to sell to each of the underwriters
named therein and in the related Prospectus Supplement, and each of such
underwriters will severally agree to purchase from the Transferor, the
principal amount of Certificates set forth therein and in the related
Prospectus Supplement (subject to proportional adjustment on the terms and
conditions set forth in the related Underwriting Agreement in the event of an
increase or decrease in the aggregate amount of Certificates offered hereby
and by the related Prospectus Supplement).
In each Underwriting Agreement, the several underwriters will agree, subject
to the terms and conditions set forth therein, to purchase all the
Certificates offered hereby and by the related Prospectus Supplement if any of
such Certificates are purchased. In the event of a default by any underwriter,
each Underwriting Agreement will provide that, in certain circumstances,
purchase commitments of the nondefaulting underwriters may be increased or the
Underwriting Agreement may be terminated.
Each Prospectus Supplement will set forth the price at which each Series of
Certificates or Class being offered thereby initially will be offered to the
public and any concessions that may be offered to certain dealers
participating in the offering of such Certificates. After the initial public
offering, the public offering price and such concessions may be changed.
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. The place and time of delivery
for any Series of Certificates in respect of which this Prospectus is
delivered will be set forth in the accompanying Prospectus Supplement.
LEGAL MATTERS
Certain legal matters relating to the issuance of the Certificates will be
passed upon for the Transferor by Joanne Sundheim, Vice President and
Associate General Counsel of First USA Bank, and by special counsel, Skadden,
Arps, Slate, Meagher & Flom LLP, New York, New York. Certain legal matters
relating to the issuance of the Certificates and ERISA matters will be passed
upon for the underwriters by Skadden, Arps, Slate, Meagher & Flom LLP, New
York, New York.
59
<PAGE>
INDEX OF TERMS FOR PROSPECTUS
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
Accounts................................................................. 3
Accumulation Period...................................................... 10
Additional Accounts...................................................... 6
Amortization Period...................................................... 4
Annual Membership Fees................................................... 5
BANC ONE................................................................. 25
Bank..................................................................... 1, 8
Bank Portfolio........................................................... 3
Benefit Plans............................................................ 57
BIF...................................................................... 37
Cash Advances............................................................ 22
Cash Collateral Account.................................................. 46
Cash Collateral Guaranty................................................. 46
Cede..................................................................... 2
Cedel.................................................................... 29
Cedel Participants....................................................... 29
Certificate Owner........................................................ 2, 52
Certificate Rate......................................................... 4
Certificateholder........................................................ 2, 29
Certificates............................................................. 1, 3
Class.................................................................... 1, 3
Closing Date............................................................. 9
Code..................................................................... 51
Collection Account....................................................... 8, 37
Collateral Invested Amount............................................... 46
Commission............................................................... 2
Companion Series......................................................... 12, 32
Controlled Accumulation Amount........................................... 10
Controlled Amortization Amount........................................... 10
Controlled Amortization Period........................................... 9
Controlled Deposit Amount................................................ 10
Controlled Distribution Amount........................................... 10
Cooperative.............................................................. 29
Credit Line Checks....................................................... 22
Default Amount........................................................... 39
Defaulted Account........................................................ 5, 39
Definitive Certificates.................................................. 30
Depositaries............................................................. 28
Depository............................................................... 27
Determination Date....................................................... 39
Disclosure Document...................................................... 6
Discount Receivable Collections.......................................... 37
Discount Receivables..................................................... 5, 37
Distribution Account..................................................... 36
Distribution Date........................................................ 8
DOL...................................................................... 57
DTC...................................................................... 2
Eligible Account......................................................... 35
</TABLE>
60
<PAGE>
<TABLE>
<S> <C>
Eligible Receivable...................................................... 35
Enhancement.............................................................. 3
Enhancement Provider..................................................... 46
ERISA.................................................................... 13
Euroclear................................................................ 29
Euroclear Operator....................................................... 29
Euroclear Participants................................................... 29
Euroclear System......................................................... 29
Excess Finance Charge Collections........................................ 11
Excess Principal Collections............................................. 32
Exchange................................................................. 6
Exchange Act............................................................. 2
Exchangeable Transferor Certificate...................................... 4
FASIT.................................................................... 55
FDIA..................................................................... 48
FDIC..................................................................... 5
FDR...................................................................... 20
Final Regulation......................................................... 57
Finance Charge Account................................................... 36
Finance Charge Receivables............................................... 5
First USA Financial...................................................... 25
Foreign Investors........................................................ 55
Full Invested Amount..................................................... 12, 38
Funding Period........................................................... 12, 38
FUSA..................................................................... 23
General Account Regulations.............................................. 59
Holders.................................................................. 30
Indirect Participants.................................................... 28
Ineligible Receivable.................................................... 34
Initial Closing Date..................................................... 34
Initial Invested Amount.................................................. 13
Interchange.............................................................. 23
Interest Funding Account................................................. 31
Interest Period.......................................................... 8
Invested Amount.......................................................... 4
Investor Charge-Off...................................................... 39
Investor Default Amount.................................................. 39
Investor Interest........................................................ 4
Investor Percentage...................................................... 5
Investor Servicing Fee................................................... 8
IRA...................................................................... 57
IRS...................................................................... 52
John Hancock............................................................. 58
L/C Bank................................................................. 47
Minimum Aggregate Principal Receivables.................................. 24
Minimum Transferor Interest.............................................. 24
Monthly Interest......................................................... 11
Monthly Period........................................................... 8, 31
Monthly Periodic Rate.................................................... 22
Moody's.................................................................. 37
Octagon.................................................................. 50
Offered Certificates..................................................... 52
</TABLE>
61
<PAGE>
<TABLE>
<S> <C>
OID...................................................................... 53
Original Cut Off Date.................................................... 4
Other Charges............................................................ 5
Participants............................................................. 28
Pay Out Event............................................................ 40
Periodic Finance Charges................................................. 5
Permitted Investments.................................................... 37
Pooling and Servicing Agreement.......................................... 3
Pre-Funding Account...................................................... 12, 38
Pre-Funding Amount....................................................... 12, 38
Prepayable Instrument.................................................... 53
Principal Account........................................................ 36
Principal Commencement Date.............................................. 9
Principal Funding Account................................................ 10
Principal Receivables.................................................... 5
Principal Terms.......................................................... 33
Proposed Regulations..................................................... 56
Prospectus Supplement.................................................... 1
PTE...................................................................... 58
Purchases................................................................ 22
Qualified Institution.................................................... 37
Rapid Amortization Period................................................ 11
Rating Agency............................................................ 14
Receivables.............................................................. 1, 3
Record Date.............................................................. 27
Recoveries............................................................... 23
Regulations.............................................................. 53
Removed Accounts......................................................... 6, 36
Reserve Account.......................................................... 47
Revolving Period......................................................... 9
RTC...................................................................... 15
RTC Policy Statement..................................................... 49
SAIF..................................................................... 37
Scheduled Payment Date................................................... 9
Securities Act........................................................... 1
Senior Certificates...................................................... 4
Series................................................................... 1, 3
Series Closing Date...................................................... 33
Series Cut Off Dates..................................................... 33
Service Transfer......................................................... 42
Servicer................................................................. 8
Servicer Default......................................................... 42
Special Tax Counsel...................................................... 52
Spread Account........................................................... 47
Standard & Poor's........................................................ 37
Stated Series Termination Date........................................... 40
Subordinated Certificates................................................ 4
Supplement............................................................... 3
Terms and Conditions..................................................... 30
Transfer Date............................................................ 38
Transferor............................................................... 3
Transferor Amount........................................................ 4
</TABLE>
62
<PAGE>
<TABLE>
<S> <C>
Transferor Interest........................................................ 4
Transferor Percentage...................................................... 27
Trust...................................................................... 1, 3
Trust Portfolio............................................................ 24
Trustee.................................................................... 1, 3
UCC........................................................................ 48
Unallocated Principal Collections.......................................... 38
Underwriting Agreement..................................................... 59
Yield Factor............................................................... 37
</TABLE>
63
<PAGE>
PRINCIPAL OFFICE OF
FIRST USA BANK
201 North Walnut Street
Wilmington, Delaware 19801
TRUSTEE
The Bank of New York (Delaware)
White Clay Center
Route 273
Newark, Delaware 19711
PAYING AGENTS
The Bank of New York Banque de Luxembourg
101 Barclay Street, 14 Boulevard Royal
Floor 12E 2449 Luxembourg
New York, New York 10286 Grand-Duche de Luxembourg
LISTING AGENT
Banque de Luxembourg
14 Boulevard Royal
2449 Luxembourg
Grand-Duche de Luxembourg
LEGAL ADVISOR TO THE BANK AND 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 BANK
Coopers & Lybrand L.L.P.
100 East Broad Street
Columbus, Ohio 43215
<PAGE>
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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 ACCOM-
PANYING PROSPECTUS, NOR ANY SALE MADE HEREUNDER OR THEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AF-
FAIRS OF THE TRANSFEROR OR THE RECEIVABLES OR THE ACCOUNTS SINCE THE DATE
HEREOF OR THEREOF OR THAT THE INFORMATION CONTAINED OR INCORPORATED BY REFER-
ENCE HEREIN OR THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
----------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Other Information......................................................... S-3
Summary of Terms.......................................................... S-4
Recent Developments....................................................... S-18
The Bank's Credit Card Portfolio.......................................... S-18
The Receivables........................................................... S-21
Maturity Considerations................................................... S-24
Receivable Yield Considerations........................................... S-26
Pool Factor and Trading Information....................................... S-27
Use of Proceeds........................................................... S-27
First USA Bank............................................................ S-27
Description of the Certificates........................................... S-27
Underwriting.............................................................. S-48
Listing and General Information........................................... S-50
Annex I: Other Series..................................................... AI-1
Annex II: Global Clearance, Settlement and Tax
Documentation Procedures................................................. AII-1
Index of Terms for Prospectus Supplement
PROSPECTUS
Prospectus Supplement..................................................... 2
Reports to Certificateholders............................................. 2
Available Information..................................................... 2
Incorporation of Certain Documents by Reference........................... 2
Prospectus Summary........................................................ 3
Risk Factors.............................................................. 15
The Trust................................................................. 19
The Bank's Credit Card Activities......................................... 20
The Receivables........................................................... 24
Maturity Assumptions...................................................... 24
Use of Proceeds........................................................... 25
The Bank and BANC ONE CORPORATION......................................... 25
Description of the Certificates........................................... 26
Enhancement............................................................... 45
Certain Legal Aspects of the Receivables.................................. 48
Certain U.S. Federal Income Tax Consequences.............................. 51
State and Local Taxation.................................................. 56
ERISA Considerations...................................................... 57
Plan of Distribution...................................................... 59
Legal Matters............................................................. 59
Index of Terms for Prospectus............................................. 60
</TABLE>
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$850,482,000
FIRST USA
CREDIT CARD MASTER TRUST
$780,000,000 CLASS A
FLOATING RATE ASSET BACKED CERTIFICATES, SERIES 1997-8
$70,482,000 CLASS B
FLOATING RATE ASSET BACKED CERTIFICATES, SERIES 1997-8
FIRST USA BANK
TRANSFEROR AND SERVICER
----------------------
PROSPECTUS SUPPLEMENT
----------------------
BEAR, STEARNS & CO. INC.
BANC ONE CAPITAL CORPORATION
September 10, 1997
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