AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 22, 1997
REGISTRATION NO. 333-24227
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
______________________
FIRST USA BANK
(Originator of the Trust described herein)
(Exact name of registrant as specified in its charter)
FIRST USA CREDIT CARD MASTER TRUST
DELAWARE 76-0039224
(State or other jurisdiction (I.R.S. employer
of incorporation or organization) identification number)
201 North Walnut Street, Wilmington, Delaware 19801
(302) 594-4000
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
RICHARD W. VAGUE
201 North Walnut Street
Wilmington, Delaware 19801
(302) 594-4100
(Name, address, including zip code, and telephone number
including area code, of agent for service)
______________________
COPIES TO:
ANDREW M. FAULKNER
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022-9931
(212) 735-2853
______________________
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
From time to time after this Registration Statement becomes effective as
determined by market conditions.
______________________
If the only securities being registered on this form are to be offered
pursuant to dividend or interest reinvestment plans, please check the
following box. ( )
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. (X)
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the follow-
ing box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering.
( ) _______________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. ( ) _______________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. ( ) _________________
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
PROPOSED
MAXIMUM PROPOSED AMOUNT OF
AMOUNT TO OFFERING MAXIMUM REGIS-
TITLE OF EACH CLASS OF BE PRICE PER OFFERING TRATION
SECURITIES TO BE REGISTERED REGISTERED UNIT (1) PRICE (1) FEE(2)
<S> <C> <C> <C> <C>
Asset Backed Certificates . . . $15,000,000,000 100% $15,000,000,000 $4,545,454.55
</TABLE>
(1) Estimated solely for purpose of calculating the registration fee.
(2) $303.03 of which was previously paid.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A)
OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL
BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
PURSUANT TO RULE 429 UNDER THE SECURITIES ACT OF 1933, THE PROSPECTUS
WHICH IS A PART OF THIS REGISTRATION STATEMENT SHALL RELATE TO ANY ASSET
BACKED CERTIFICATES WHICH REMAIN UNSOLD UNDER THE REGISTRATION STATEMENT ON
FORM S-3 (FILE NO. 33-99362) OF THE REGISTRANT, AND THIS REGISTRATION
STATEMENT CONSTITUTES POST-EFFECTIVE AMENDMENT NO. 1 TO SUCH REGISTRATION
STATEMENT.
[FLAG]
The information contained herein is subject to completion or amendment.
A registration statement relating to these securities has been filed with
the Securities and Exchange Commission. These securities may not be sold
nor may offers to buy be accepted prior to the time the registration
statement becomes effective. This prospectus shall not constitute an offer
to sell or the solicitation of an offer to buy nor shall there be any sale
of these securities in any State in which such offer, solicitation or sale
would be unlawful prior to registration or qualification under the securities
laws of any such State.
SUBJECT TO COMPLETION, DATED APRIL 22, 1997
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 and MasterCard
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 Certifi-
cates (each, a "Class"), one or more of which may be fixed rate
Certificates, floating rate Certificates or another type of Certif-
icates, 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 Supple-
ment. One or more Classes of a Series offered hereby may be enti-
tled 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 national-
ly 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 REPRESENT INTERESTS IN OR RECOURSE OBLIGATIONS OF FIRST
USA BANK OR ANY AFFILIATE THEREOF. A CERTIFICATE IS NOT A DEPOSIT
AND NEITHER THE CERTIFICATES NOR THE UNDERLYING ACCOUNTS OR RECEIV-
ABLES 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 COMMIS-
SION NOR HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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 Supple-
ment, 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 Certifi-
cates 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 Distribu-
tion."
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 ______ __, 1997
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 Certif-
icates (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 Certifi-
cates; (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 Certifi
cates Book-Entry Registration," " Reports to Certificateholders"
and " Evidence as to Compliance." Such reports will not consti-
tute financial statements prepared in accordance with generally
accepted accounting principles. Neither the Bank nor any succes-
sor 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 Registra-
tion 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 incorporat-
ed herein by reference as described below under "Incorporation of
Certain Documents by Reference," which are available for inspec-
tion 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 electroni-
cally 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 Prospec-
tus and prior to the termination of the offering of the Certifi-
cates offered hereby shall be deemed to be incorporated by
reference into this Prospectus and to be part hereof. Any state-
ment 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 super-
sedes such statement. Any such statement so modified or supersed-
ed shall not be deemed, except as modified or superseded, to
constitute a part of this Prospectus.
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 capital-
ized 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 "Certifi-
cates") evidencing an undivided owner-
ship interest in the assets of the First
USA Credit Card Master Trust may be is-
sued from time to time in one or more
series (each, a "Series") which will
consist of one or more classes of Cer-
tificates (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 supple ment 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 Pro-
spectus Supplement will identify all
then outstanding Series previously is-
sued by the Trust.
Trust Assets . . . The Property of the Trust includes and
will include receivables (the "Receiv-
ables") arising under certain VISA and
MasterCard* revolving credit card ac-
counts (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 Receiv-
ables, all proceeds of the Receivables
and all monies on deposit in certain
-----------------------
* VISA and MasterCard are registered trademarks of Visa USA
Incorporated and MasterCard International Incorporated, respec-
tively.
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 Pro-
spectus Supplement. The term "Enhance-
ment" 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 facil-
ity, 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-sup-
port feature which requires collections
on Receivables of one Series to be paid
as principal and/or interest with re-
spect to another Series. The Receivables
included in the 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 con-
ditions) 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 rep-
resent 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, pay-
ments of principal during the Controlled
Amortization Period, Accumulation Peri-
od, 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 ("Se-
nior 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 pay-
ments, 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 Transfer-
or Certificate") and, in certain circum-
stances, Enhancement Providers. The ag-
gregate 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 Exchange-
able Transferor Certificate in Receiv-
ables is referred to herein as the
"Transferor Interest," and is based on
the aggregate amount of Principal Re-
ceivables (the "Transferor Amount") in
the Trust not allocated to the Certifi-
cateholders or any Enhancement Provider.
See "Description of the Certifi-
cates - General."
The Certificateholders of each Series will
have the right to receive (but only to
the extent needed to make required pay-
ments under the Pooling and Servicing
Agreement and related Supplement and
subject to any realloca tion of such
amounts if the related Supplement so
provides) varying percentages of the
collections of Finance Charge Receiv-
ables and Principal Receivables for
each month and will be allocated a vary-
ing percentage of the amount of Receiv-
ables 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 Certifi
cates - Investor Percentage and Transferor
Percentage" in the related Prospectus
Supplement.
The Certificates represent interests in
the Trust only and do not represent in-
terests in or recourse obligations of
the Transferor or any affiliate there-
of. A Certificate is not a deposit and
is not insured by the Federal Deposit
Insurance Corporation (the "FDIC"). The
Receivables are not insured or guaran-
teed by the FDIC or any other governmen-
tal agency.
Receivables . . . . . The Receivables arise in Accounts that
have been selected from the Bank Port-
folio based on criteria provided in the
Pooling and Servicing Agree ment. 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 re-
lated periodic finance charges (the
"Periodic Finance Charges"), annual
membership fees ("Annual Membership
Fees"), and amounts charged to the Ac-
counts in respect of cash advance fi-
nance charges, late fees, overlimit
fees, return check fees and similar fees
and charges (the "Other Charges"). Re-
ceivables 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 Member-
ship Fees and Other Charges, the "Fi-
nance Charge Receivables"). See "De-
scription of the Certificates Discount
Receivables." The Finance Charge Receiv-
ables will not affect the amount of the
Invested Amount represented by the Cer-
tificates or the amount of the Transfer-
or Interest, which are determined on the
basis of the amount of Principal Receiv-
ables in the Trust.
During the term of the Trust, all new Re-
ceivables 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 because the
amount of new Receivables arising in the
Accounts and the amount of payments col-
lected 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 fluctu-
ate from day to day as Receivables are
collected and new Receivables are trans-
ferred to the Trust. See "The Receiv-
ables."
Pursuant to the Pooling and Servicing
Agreement, the Transferor has the right
(subject to certain limitations and con-
ditions), and in some circum stances
will be obligated, to designate addi-
tional 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 Re-
ceivables are then existing or thereaf-
ter 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 limita-
tions and conditions) to designate cer-
tain Accounts and to accept the recon-
veyance of all the Receivables in such
Accounts (the "Removed Accounts"),
whether such Receivables are then ex-
isting or thereafter created. See "De-
scription of the Certificates - Removal of
Accounts."
The aggregate undivided interest in the
Principal Receivables in the Trust evi-
denced by the Certificates will never
exceed the aggregate Invested Amount
regardless of the total amount of Prin-
cipal 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 Trans-
feror and which will be transferable only as
provided in the Pooling and Servicing Agree-
ment. 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, cer-
tificates representing any Series and the
Exchangeable Transferor Certificate, to the
Trustee in exchange for one or more new Se-
ries and a reissued Exchangeable Transferor
Certificate (any such tender, an "Exchange").
However, at all times, the interest in the
Principal Receivables in the Trust represent-
ed by the Transferor Interest must equal or
exceed the Minimum Transferor Interest (as
defined herein). Under the Pooling and Ser-
vicing 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 in-
vestors under a prospectus or other disclo-
sure document (a "Disclosure Document") in
transactions either registered under the
Securities Act or exempt from registration
thereunder, directly, through the Underwrit-
ers 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 Ex-
change 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 oth-
erwise stated in the related Supplement,
the certificates of such Series will be
characterized as indebtedness for feder-
al income tax purposes under existing
law, and that the issuance of such Se-
ries will not have a material adverse
effect on the federal income tax charac-
terization of any outstanding Series,
(iii) if required by the related Supple-
ment, the form of Enhancement, (iv) if
Enhancement is required by the Supple-
ment, an appropriate Enhancement agree-
ment with respect thereto, (v) written
confirmation from each Rating Agency
that the Exchange will not result in
such Rating Agency reducing or withdraw-
ing its rating on any then outstanding
Series rated by it, (vi) an officer's
certificate of the Trans feror 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 Ac-
counts pursuant to the Pooling and Ser-
vicing 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 cer-
tificates representing the Series to be
exchanged. See "Description of the Cer-
tificates - Exchanges."
Denominations . . . Unless otherwise specified in the related
Prospectus Supplement, beneficial in-
terests in the Certificates will be of-
fered for purchase in denominations of
$1,000 and integral multiples thereof.
See "Description of the Certifi-
cates - General."
Registration of
Certificates. . . Unless otherwise specified in the related
Prospectus Supplement, the Certificates
of each Series initially will be repre-
sented by Certificates registered in
the name of Cede, as the nominee of DTC.
No Certificate Owner will be entitled to
receive a definitive certificate repre-
senting such person's interest, except
in the event that Definitive Certifi-
cates (as defined herein) are issued
under the limited circumstances de-
scribed herein. See "Description of the
Certificates - Definitive Certificates."
Clearance and
Settlement. . . . Unless otherwise provided in the related
Prospectus Supplement, Certificate Own-
ers 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). Trans-
fers within DTC, Cedel or Euroclear, as
the case may be, will be made in accor-
dance 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 direct-
ly or indirectly through Cedel or
Euroclear, on the other, will be effect-
ed in DTC through the relevant Deposi-
taries of Cedel or Euroclear. See "De-
scription of the Certificates - Book-Entry
Registration."
Transferor and
Servicer. . . . First USA Bank (the "Bank"). The principal
executive offices of the Bank are locat-
ed 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 speci-
fied in the related Prospectus Supple-
ment (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 succes-
sor servicer, is referred to herein as
the "Servicer"). See "The Bank and First
USA, Inc."
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 Ac-
count"). 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 re-
lated Prospectus Supplement, Principal
Receivables and/or Finance Charge Re-
ceivables may be otherwise character-
ized. See "Description of the Certifi-
cates Discount Receivables." All such
amounts will then be allocated in accor-
dance 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 oth-
erwise as specified in the related Pro-
spectus Supplement) (each, a "Distribu-
tion Date") specified in the related
Prospectus Supplement. Interest payments
on each Distribution Date will generally
be funded from the collections of Fi-
nance Charge Receivables allocated to
the Investor Interest during the preced-
ing monthly period or periods (each, a
"Monthly Period"), as described in the
related Prospectus Supplement, and may
be funded from certain investment earn-
ings 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 inter-
est for a Series or Class occur less
frequently than monthly, such collec-
tions or other amounts allocable to such
Series or Class may be deposited in one
or more trust accounts pending distribu-
tion 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 "En-
hancement."
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 Certifi-
cateholders until the Principal Com-
mencement 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 "Revolv-
ing Period"), collections of Principal
Receivables otherwise allocable to the
Investor Interest will, subject to cer-
tain limitations, be paid from the Trust
to the holder of the Exchangeable Trans-
feror Certificate or, under certain cir-
cumstances 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 Revolv-
ing Period.
Principal Payments. . The principal of the Certificates of each
Series offered hereby will be scheduled
to be paid either in installments com-
mencing on a date specified in the re-
lated Prospectus Supplement (the "Prin-
cipal Commencement Date"), in which case
such Series will have a Controlled Am-
ortization 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 circum-
stances described herein or in the Pro-
spectus Supplement. See "Description of
the Certificates - Principal Payments."
Controlled
Amortization
Period. . . . . If the Prospectus Supplement relating to a
Series so specifies, unless a Rapid Amor-
tization Period with respect to such Se-
ries commences, the Certificates of such
Series or any Class thereof will have an
amortization period (the "Controlled Amor-
tization Period") during which collections
of Principal Receivables allocable to the
Investor Interest of such Series (and cer-
tain 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 Dis-
tribution Date during the Controlled Amor-
tization Period will be limited to an
amount (the "Controlled Distribution
Amount") equal to an amount specified in
the related Prospectus Supplement (the
"Controlled Amortization Amount") plus any
existing deficit Controlled Amortization
Amount arising from prior Distribution
Dates. If a Series has more than one Class
of Certificates, each Class may have a
separate Controlled Amortization Amount.
In addition, the related Prospectus Sup-
plement may describe certain priorities
among such Classes with respect to such
distributions. The Controlled Amortization
Period will commence at the close of busi-
ness 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 Invest-
ed Amount of the Certificates of such Se-
ries or Class and (c) the Stated Series
Termination Date with respect to such Se-
ries. See "Description of the Certifi-
cates - Principal Payments."
Accumulation Period. If the Prospectus Supplement relating to a
Series so specifies, unless a Rapid Am-
ortization Period with respect to such
Series commences, the Certificates of
such Series or any Class thereof will
have an accumulation period (the "Accu-
mulation Period") during which collec-
tions of Principal Receivables allocable
to the Investor Interest of such Series
(and certain other amounts if so speci-
fied in the related Prospectus Supple-
ment) will be deposited prior to each
Distribution Date in a trust account
established for the benefit of the Cer-
tificateholders 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 lim-
ited to an amount (the "Controlled De-
posit Amount") equal to an amount speci-
fied in the related Prospectus Supple-
ment (the "Controlled Accumulation
Amount") plus the amount of any short-
falls arising from the failure to pay
the Controlled Accumulation Amount on
any prior Distribution Dates. If a Se-
ries has more than one Class of Certifi-
cates, each Class may have a separate
Principal Funding Account and Controlled
Accumulation Amount. In addition, the
related Prospectus Supplement may de-
scribe 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 earli-
est of (a) the commencement of the Rap-
id Amortization Period, (b) payment in
full of the Invested Amount of the Cer-
tificates 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 in-
vestments or subject to a guaranteed
rate or investment agreement or other
arrangement intended to assure a speci-
fied 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 Accu-
mulation Period with respect to a Series
of Certificates, such Series may be sub-
ject to a principal guaranty or other
similar arrangement. See "Description of
the Certificates - Principal Payments."
Rapid Amortization
Period. . . . . . . During the period from the day on which a
Pay Out 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 Se-
ries Termination Date (the "Rapid Amor-
tization Period"), unless otherwise pro-
vided in the related Prospectus Supple
ment, collections of Principal Receiv-
ables allocable to the Investor Interest
of such Series (and certain other
amounts if so specified in the related
Prospectus Supplement) will be distrib-
uted as principal payments to the Cer-
tificateholders 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 Amor-
tization Period with respect to a Se-
ries, 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 "De-
scription 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 enti-
tled to receive all or a portion of Ex-
cess Finance Charge Collections with
respect to another Series or Class to
cover any shortfalls with respect to
amounts payable from collections of Fi-
nance Charge Receivables allocable to
such Series or Class. Unless otherwise
provided in the related Prospectus Sup-
ple ment, with respect to any Series,
"Excess Finance Charge Collections" for
any Monthly Period will equal the excess
of collections of Finance Charge Receiv-
ables and certain other amounts allocat-
ed to the Investor Interest of such Se-
ries or Class over the sum of (i) inter-
est 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 Se-
ries or Class, (iv) unreimbursed Inves-
tor Charge-Offs with respect to such
Series or Class and (v) other amounts
specified in the related Prospectus Sup-
plement. See "Description of the Certif-
icates - Shared Excess Finance Charge Col-
lections," "-Application of Collec-
tions," "-Defaulted Receivables; Rebates
and Fraudulent Charges" and "-Investor
Charge-Offs."
Shared Collections
of Principal
Receivables . . . If so specified in the related Prospectus
Supplement, to the extent that collec-
tions of Principal Receivables and cer-
tain 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 col-
lections may be applied to cover princi-
pal 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 "Descrip-
tion of the Certificates - Shared Collec-
tions 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 be-
fore 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 Prin-
cipal Receivables to the Trust or pend-
ing 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 Cer-
tificates of such Series (the "Full In-
vested 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 depos-
it in the Pre-Funding Account for a Se-
ries of Certificates will be withdrawn
and paid to the Transferor or its as-
signees 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 spec-
ified in the related Prospectus Supple-
ment will be payable to the Certificate-
holders 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 in-
vestment earnings and any applicable
payment under any such investment ar-
rangement will be applied to pay inter-
est on the Certificates of such Series.
See "Description of the Certifi
cates - Funding Period."
Companion Series . If so specified in the related Prospectus
Supplement, a Series of Certificates may
be paired with another Series (a "Com-
panion Series"). The Prospectus Supple-
ment for such Series and the Prospectus
Supplement for the Companion Series will
each specify the relationship between
the Series. See "Description of the Cer-
tificates - Companion Series."
Enhancement . . . . Enhancement with respect to a Series or
any Class thereof may be provided as
specified in the related Prospectus Sup-
plement.
The type, characteristics and amount of
the Enhancement will be determined based
on several factors, including the char-
acteristics of the Receivables and Ac-
counts 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 Certif-
icates 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 Certifi-
cates, the Invested Amount will be sub-
ject to optional repurchase by the
Transferor on any Distribution Date af-
ter the Invested Amount is reduced to an
amount less than or equal to 5% of the
initial Invested Amount (the "Initial
Invested Amount") or such other amount
specified in the related Prospectus Sup-
plement, if certain conditions set forth
in the related Pooling and Servicing
Agreement are met. Unless otherwise
specified in the related Prospectus Sup-
plement, the repurchase price will be
equal to the Invested Amount plus ac-
crued and unpaid interest on the Certif-
icates. See "Description of the Certifi-
cates - Final Payment of Principal; Termi-
nation."
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 Feder-
al income tax purposes. Except to the
extent otherwise specified in the re-
lated Prospectus Supplement, the Certif-
icate 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 con-
ditions are met. If the Trust's assets
were deemed to be "plan assets" of an
employee benefit plan, there is uncer-
tainty as to whether existing exemptions
from the "prohibited transaction" rules
of the Employee Retirement Income Secu-
rity Act of 1974, as amended ("ERISA"),
would apply to all trans actions involv-
ing 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 to be deemed "plan assets"
will be met, although the intention of
the Underwriters (but not their assur-
ance) as to whether the Certificates of
a particular Series will be "publicly-
offered securities", and therefore eli-
gible for an ERISA exemption, will be
set forth in the related Prospectus Sup-
plement. 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 Pro-
spectus and the related Prospectus Sup-
plement that they be rated in one of the
four highest rating categories by at
least one nationally recognized statis-
tical 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 Pro-
spectus Supplement.
A rating is not a recommendation to buy,
sell or hold securities and may be sub-
ject to revision or withdrawal at any
time by the assigning Rating Agency.
Each rating should be evaluated indepen-
dently of any other rating. See "Risk
Factors - Certificate Rating."
Listing . . . . . . If so specified in the Prospectus Supple-
ment 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 ex-
change.
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 trans-
ferred 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 assign-
ment 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 experi-
ence 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 Commer-
cial 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 compen-
satory damages" as described below) and payments to the Trust
with respect to the Receivables (up to the amount of such damag-
es) 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 compensa-
tory 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 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 Receiv-
ables 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 other-
wise), 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 conservator-
ship, 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 con-
tracts 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 trans-
fer of servicing to a successor Servicer.
The Accounts and the Receivables are subject to numerous
Federal and state consumer protection laws which impose require-
ments 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 Receiv-
ables 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 covenant-
ed 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 examina-
tion 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 appli-
cable 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 Certifi-
cates - 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 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.
Competition in the Credit Card Industry. The consumer
credit industry is highly competitive and operates in an environ-
ment 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 organiza-
tion 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 Accumula-
tion 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 condi-
tions 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 Supple-
ment, if collections of Finance Charge Receivables or other
amounts allocable to the Certificates of a Series are insuffi-
cient 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 Receiv-
ables 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 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 Subordi-
nated 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 Receiv-
ables 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 appli-
cable 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 applica-
ble 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 certifi-
cates 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 Certificate-
holders of each Series may take certain actions, or direct
certain actions to be taken, under the Pooling and Servicing
Agreement or the related Series Supplement. However, the Pooling
and Servicing Agreement or related Supplement may provide that
under certain circumstances the consent or approval of a speci-
fied 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 circum-
stances. Certificateholders of such other Series may have inter-
ests which do not coincide in any way with the interests of
Certificateholders of the subject Series.
Certificate Rating. Any rating assigned to the Certifi-
cates of a Series or a Class by a Rating Agency will reflect
such Rating Agency's assessment of the likelihood that Certifi-
cateholders of such Series or Class will receive the payments of
interest and principal required to be made under the Pooling and
Servicing Agreement and will be based primarily on the value of
the Receivables in the Trust and the availability of any Enhance-
ment 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 inter-
est 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. Certifi-
cateholders. 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 Certifi-
cates, 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 with-
drawn 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 certifi-
cates 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 Agree-
ment. 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 Servic-
ing Agreement, and prior to formation had no assets or obliga-
tions. The Trust will not engage in any business activity, other
than as described herein and in the related Prospectus Supple-
ments, 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.
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 pro-
cessing and administrative functions associated with such servic-
ing are performed on behalf of the Bank by First Data Resources,
Inc. ("FDR"). See "-Description of FDR."
The following discussion describes certain terms and charac-
teristics 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 Portfo-
lio. 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 de-
scribed 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 prod-
ucts, (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 applica-
tion displays, events, media and the Internet as channels to
market the Bank's products. 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 organiza-
tions.
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, participat-
ing 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 origina-
tion 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 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 part-
ners 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 characteris-
tics 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 be-
lieves that such transactions should be pursued only if favorable
terms can be negotiated. See "The Bank and First USA, Inc."
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 ac-
quired 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 Receiv-
ables will initially be performed by FDR. If FDR were to fail or
become insolvent, delays in processing and recovery of informa-
tion 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.
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 Interna-
tional Incorporated. This network provides cardholder authoriza-
tions 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 agree-
ment, 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 appli-
cable 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 insti-
tution 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 pre-
sented 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 other than Cash Advances obtained
through Credit Line Checks plus the Periodic Finance Charge equal
to the product of the monthly periodic rate (the "Monthly Period-
ic 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. Efforts to collect delinquent
credit card receivables currently are made by the Bank's collec-
tion department personnel with regional collection units located
in Wilmington, Delaware, Baton Rouge, Louisiana and Dallas,
Texas. Collection activities include statement messages, tele-
phone 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.
Accounts are generally charged off immediately prior to the
end of the seventh billing cycle after having become contractual-
ly 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. 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 associa-
tions receive certain fees ("Interchange") as partial compensa-
tion 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 Receiv-
ables (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 Receiv-
ables, 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 Receiv-
ables) 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.
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 Portfo-
lio"). 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 designat-
ed 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. "Mini-
mum 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 Trans-
feror on the Original Cut Off Date plus any Additional Accounts
minus any Removed Accounts.
The Prospectus Supplement relating to each Series of Certif-
icates 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 Supple-
ment, for each Series, following the Revolving Period, collec-
tions 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 Receiv-
ables 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 Con-
trolled 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.
The amount of collections of Receivables may vary from month
to month due to seasonal variations, general economic conditions
and payment habits of individual cardholders. There can be no
assurance that collections of Principal Receivables with respect
to the Trust Portfolio, 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 Supple-
ment, 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 FIRST USA, INC.
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 First USA, Inc. ("FUSA").
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 custom-
ers 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 relation-
ships. 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.
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.
First USA, Inc. Incorporated in 1989, FUSA is a Delaware
corporation, which, through its wholly-owned subsidiary, First
USA Bank, is the fourth largest issuer of VISA and MasterCard
credit cards in the United States. FUSA conducts its business
through its wholly-owned subsidiary, First USA Financial, which
is the parent company of the Bank and the majority stockholder of
First USA Paymentech, Inc. ("First USA Paymentech") .
On January 19, 1997, FUSA and Banc One Corporation, an Ohio
corporation ("Banc One"), entered into an Agreement and Plan of
Merger (the "Merger Agreement") providing, among other things,
for the merger (the "Merger") of FUSA with and into Banc One,
with Banc One as the surviving corporation following the Merger.
Consummation of the Merger is subject to certain standard condi-
tions, including, but not limited to, approval of the Merger
Agreement by the holders of a majority of the shares of FUSA's
common stock and FUSA's 61/4% convertible preferred stock, voting
together as a class, and a majority of the shares of Banc One's
common stock, the receipt of all required regulatory approvals
and the making of all necessary governmental filings. Stockholder
meetings to vote on the Merger are expected to be held in the
second quarter of calendar year 1997 and the Merger is expected
to occur shortly thereafter.
The Merger Agreement contains certain covenants of the
parties pending consummation of the Merger. Generally, FUSA and
Banc One and their subsidiaries must carry on their businesses in
the ordinary course consistent with past practice. Under the
Merger Agreement, FUSA and its subsidiaries are also subject to
certain restrictions and limitations on, among other things, the
sale or encumbrance of assets except in the ordinary course of
business consistent with past practice and except for sales,
transfers or dispositions of receivables in connection with
securitizations of such receivables, and the incurrence of
indebtedness except for indebtedness incurred in the ordinary
course of business, such as the issuance of asset backed securi-
ties.
FUSA's majority owned subsidiary, First USA Paymentech,
engages in the credit card industry primarily as a payment
processor of merchant bankcard transactions. In March 1996, First
USA Paymentech completed an initial public offering of its common
stock. First USA Paymentech, through its wholly-owned subsidiary,
First USA Merchant Services, Inc. ("Merchant Services"), is the
third largest payment processor of merchant bankcard transactions
in the United States. In December 1996 and January 1997, FUSA
and First USA Paymentech sold an aggregate of approximately 4.4
million and 3.1 million shares of First USA Paymentech common
stock, respectively, for $34.00 per share, which included the
exercise of underwriters' over-allotment options. Net proceeds
to FUSA from the secondary offering were $139.8 million. Subse-
quent to this offering, First USA Financial owns approximately
57% of First USA Paymentech common stock.
During the fiscal quarter ended December 31, 1996, First USA
Capital Trust I (the "Capital Trust"), a Delaware business trust
wholly owned by FUSA, completed a $200 million underwritten
public offering of 9.33% tax deductible Capital Securities. The
Capital Trust invested the proceeds from the Capital Securities
in Junior Subordinated Debentures, due January 15, 2027, issued
by FUSA. Proceeds from the sale of the Junior Subordinated
Debentures were used for general corporate purposes, including
capital contributions to operating subsidiaries.
FUSA's other business units, conducted through other subsid-
iaries of First USA Financial and First USA Paymentech, provide
services that complement the Bank's and First USA Paymentech's
business operations.
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 Prospec-
tus) 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 Agree-
ment 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 quali-
fied 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 ac-
count, and any other amount specified in the related Prospectus
Supplement.
Each Series of Certificates may consist of one or more
Classes, one or more of which may be Senior Certificates and one
or more of which may be Subordinated Certificates. Each Class of
a Series will evidence the right to receive a specified portion
of each distribution of principal or interest or both. The
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 Enhance-
ment.
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 regis-
tered 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 Exchange-
able 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 En-
hancement 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 Supple-
ment, 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 Certifi-
cateholders. 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 Supple-
ment, 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 Transfer-
or, 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 Certifi-
cates 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 represent-
ing 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 de-
scribed herein, all references herein to actions by Certificate-
holders 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 Certifi-
cates of such Series, or all or a portion of any Class thereof,
on the Luxembourg Stock Exchange or any other specified exchange.
BOOK-ENTRY REGISTRATION
Unless otherwise specified in the related Prospectus Supple-
ment, 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 partici-
pants 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 (collective-
ly, 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 organi-
zations ("Participants") and facilitate the clearance and settle-
ment of securities transactions between Participants through
electronic book-entry changes in accounts of its Participants,
thereby eliminating the need for physical movement of certifi-
cates. Participants include securities brokers and dealers (who
may include the underwriters of any Series), banks, trust compa-
nies and clearing corporations and may include certain other
organizations. Indirect access to the DTC system also is avail-
able to others such as banks, brokers, dealers and trust compa-
nies 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 accor-
dance 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 rele-
vant 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 settle-
ment processing, dated the business day following the DTC settle-
ment date, and such credits or any transactions in such securi-
ties 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 for-
warded by the Trustee to Cede, as nominee for DTC. DTC will
forward such payments to its 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 Certificatehold-
ers, 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 Certifi-
cates. Participants and Indirect Participants with which Certifi-
cate 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 Certifi-
cate 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 Partici-
pants") and facilitates the clearance and settlement of securi-
ties 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 Participants. Euroclear Partici-
pants 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 relation-
ship 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 report-
ing 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 Certifi-
cateholder 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 forego-
ing 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 Supple-
ment, 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 Certifi-
cates"), 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 succes-
sor, (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, Certifi-
cate Owners representing not less than 50% (or such other per-
centage 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-registra-
tion, 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 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 Certifi-
cates or the Certificates registered in the name of Cedel repre-
senting 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 Certifi-
cateholders. 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 exchange-
able 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 Receiv-
ables 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 pay-
ments 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 Supple-
ment, 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 princi-
pal 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 occur-
rence of a Pay Out Event, principal will be paid to the Certifi-
cateholders 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 Certificate-
holders 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 Prospec-
tus Supplement intended to assure a minimum rate of return on the
investment of such funds. In order to enhance the likelihood of
the payment in full of the principal amount of a Series of
Certificates or Class thereof at the end of an Accumulation
Period, such Series of Certificates or Class thereof may be
subject to a principal 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 short-
falls 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 Supple-
ment, 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
its 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 micro-
fiche 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
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 Exchange-
able 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 addi-
tional 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 transac-
tions 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 Agree-
ment. 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 charac-
terization of any outstanding Series, (iii) if required by the
related Supplement, the form of Enhancement, (iv) if an Enhance-
ment 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 Trans-
feror 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 authen-
ticate the new Series and a new Exchangeable Transferor Certifi-
cate.
REPRESENTATIONS AND WARRANTIES
The Transferor has made and will make certain representa-
tions 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 transac-
tions 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 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 Certificate-
holders holding more than 50% of the Investor Interest, and (ii)
as a result the interests of the Certificateholders are material-
ly adversely affected, and continue to be materially adversely
affected during such period, then the Trustee or Certificatehold-
ers 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 represen-
tation 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 Transfer-
or 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 Receiv-
able 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 Ineligi-
ble 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 Certifi-
cateholders.
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 Trans-
feror 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 certifi-
cateholders) 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 applica-
ble 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 presen-
tation 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 inclu-
sion 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 invol-
untary 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 re-
quirements 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 accor-
dance with its terms (with certain bankruptcy-related excep-
tions), 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 of
Principal Receivables is less than the Minimum Aggregate Princi-
pal 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 Ac-
counts, 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 material-
ly 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 Transfer-
or to the initial Accounts or may have been acquired by the
Transferor from a third-party financial institution who 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 reas-
signment 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" (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 institu-
tion, 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 institu-
tion 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 certif-
icates 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 Certifi-
cates (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 Collec-
tions." 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 (iii) the Transferor Percentage and (iv) 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 Receiv-
ables. 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 out-
standing Series.
APPLICATION OF COLLECTIONS
Allocations. Except as otherwise provided below or in a
Series Supplement, the Servicer will deposit into the Collection
Account, no later than the second business day following the date
of processing, any payment collected by the Servicer on the
Receivables; 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 Certifi-
cateholders of a Series, as specified in the related Series
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 pro-
vides 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 Distribu-
tion 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.
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 "Inves-
tor 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 Certifi-
cates 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 Certifi-
cateholders.
If the Servicer adjusts the amount of any Principal Receiv-
able 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 Supple-
ment), 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 "Inves-
tor Charge-Off"). Investor Charge-Offs will be reimbursed on any
Distribution Date to the extent amounts on deposit in the Collec-
tion Account and otherwise available therefor exceed such inter-
est, 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 Distri-
bution Date after the Invested Amount is reduced to an amount
less than or equal to 5% (or such other amount specified in the
related Prospectus Supplement) of the initial outstanding princi-
pal amount of the Certificates, 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.
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 Distribu-
tion 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 Supple-
ment, 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 Transfer-
or 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 Receiv-
ables 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 Receiv-
ables 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 Supple-
ment), 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 commer-
cially 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 " Appli-
cation 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 retire-
ment 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 determina-
tion 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 Receiv-
ables which are written off as uncollectible, or (d) the Trust,
the Certificateholders or the Certificate Owners for any liabili-
ties, 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 fran-
chise 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 indemni-
fy 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 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 certifi-
cates 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 certificate-
holders 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 certificate-
holders of any Series, including the Certificates (which determi-
nation shall be made without regard to whether funds are avail-
able 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 there-
under;
(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 from any Enhance-
ment), 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 certifi-
cateholders for such period; or
(d) the occurrence of certain events of bankruptcy, insol-
vency 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 occur-
rence. 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 descrip-
tion 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 Certifi-
cates of each Series, including: (a) the total amount distribut-
ed, (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 Certifi-
cates, (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 delin-
quency, 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 Luxem-
bourg (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.
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 Certifi-
cate 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 preven-
tion 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 662/3% 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 Certificateholder. Any Supplement and any amendments regard-
ing 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 Agree-
ment and any Supplement.
LIST OF CERTIFICATEHOLDERS
Upon written request of Certificateholders of record repre-
senting 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 Certificate-
holders 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 Certifi-
cates 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 con-
ferred 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 circum-
stances, the Transferor will be obligated to appoint a successor
Trustee. Any resignation or removal of the Trustee and appoint-
ment 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 Supple-
ment 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 there-
on. If losses occur which exceed the amount covered by the
Enhancement or which are not covered by the Enhancement, Certifi-
cateholders 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 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 "En-
hancement 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 de-
crease over time, and the conditions under which amounts avail-
able 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 benefi-
ciaries of the Cash Collateral Guaranty or by a Cash Collateral
Account alone. The amount available pursuant to the Cash Collat-
eral 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 Enhance-
ment available pursuant to the Collateral Invested Amount and the
Cash Collateral 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 speci-
fied 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 insur-
ance 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 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 Receiv-
ables 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 assign-
ment 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 Trans-
feror, such valid perfected security interest of the Trustee
should be enforceable (to the extent of the Trust's "actual
direct compensatory damages") notwithstanding the insolvency of,
or the appointment of a receiver or conservator for, the Trans-
feror 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 conserva-
tor or receiver of the Transferor. If, however, the FDIC were to
assert that the security interest was unperfected or unenforce-
able 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 repudia-
tion 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 appoint-
ment 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 princi-
pal 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 commer-
cially reasonable terms, unless otherwise instructed within a
specified period by holders of certificates representing undivid-
ed 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 Transfer-
or. 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 dis-
tributed 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 conser-
vator or receiver may have the power to prevent the early sale,
liquidation or disposition of the Receivables and the commence-
ment 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 con-
tracts 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 trans-
fer of servicing to a successor Servicer.
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 receiver-
ship 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 inter-
est 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 Certifi-
cates - 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 insti-
tution may assess finance charges and fees on credit card ac-
counts that would be substantially below the rates of the finance
charges and fees the Bank currently assesses on its accounts.
Although such proposed legislation has not been enacted, there
can be no assurance that such a bill will not become law in the
future. The potential effect of any legislation which limits the
amount of finance charges and fees that may be charged on credit
cards could be to reduce the portfolio yield on the Accounts. If
such portfolio yield is reduced, a Pay Out Event may occur, and
the Rapid Amortization Period would commence.
Application of Federal and state bankruptcy and debtor
relief laws would affect the interests of the Certificateholders
if such laws result in any 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 be-
lieves 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 tenta-
tive 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. No date has yet been set for that
hearing. 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.
CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES
GENERAL
The following discussion, summarizing certain anticipated
Federal income tax aspects of the purchase, ownership and dispo-
sition of the Certificates of a Series, is based upon the provi-
sions 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 invest-
ment 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). PROSPEC-
TIVE INVESTORS ARE ADVISED TO CONSULT THEIR OWN TAX ADVISORS WITH
REGARD TO THE FEDERAL TAX CONSEQUENCES OF THE PURCHASE, OWNER-
SHIP, 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 Supple-
ment, 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 Supple-
ment (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 repay-
ment 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 inappli-
cable 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 invest-
ment interest expense.
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 nonpay-
ment 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 (princi-
pally, loss rates and payment delays on the Receivables substan-
tially in excess of those anticipated), nonpayment is a remote
contingency. Based on the foregoing, and on the fact that gener-
ally 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 Certifi-
cate.
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 de-
creased 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 capital gain treatment, any such gain or loss generally
will be long-term capital gain, provided that the Offered Certif-
icate 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 taxpay-
ers. 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 partner-
ship. 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 part-
ners, and which has issued debt represented by other Classes of
Certificates (including, unless otherwise specified in a Supple-
ment, 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 qualifica-
tions set forth therein, that under then current law, the issu-
ance of the Certificates of such Series will not cause the Trust
to be characterized for Federal income tax purposes as an associ-
ation (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 require-
ments 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 partner-
ship 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 partner-
ship 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 corpora-
tion 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 Certificate-
holders of one or more Series, the partnership itself would not
be subject to Federal income tax (unless it were to be character-
ized as a publicly traded partnership taxable as a corporation);
rather, the partners of such partnership, including the Certifi-
cate 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 Certifi-
cate 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 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 inter-
est 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
Recently enacted 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 ad-
dressed by Treasury regulations. 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 subse-
quent 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 Certifi-
cates will be treated as debt for U.S. Federal income tax purpos-
es. 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 adminis-
tration 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 organiza-
tion, bank, or other financial institution that holds the Offered
Certificates on behalf of the customer in the ordinary course of
its 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 charac-
terized 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 organi-
zation (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 withhold-
ing under an applicable tax treaty, or (iii) IRS Form 4224 signed
by the Certificate Owner or such owner's agent, claiming exemp-
tion from withholding of tax on income effectively connected with
the conduct of a trade or business in the United States; provid-
ed 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 with-
holding, backup withholding and information reporting rules. The
Proposed Regulations are not currently effective but, if final-
ized 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 effec-
tively 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 corpora-
tion, 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 con-
nected" 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 disposi-
tion of the Certificates of any Series under any state or local
tax law.
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 "disquali-
fied 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 respect-
ing 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 defini-
tion 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 Regula-
tion 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 regis-
tered 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 inter-
ests 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.
Unless otherwise specified in the related Prospectus Supple-
ment, 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 Certifi-
cates 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 Certifi-
cateholders, 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 transac-
tion. 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 condi-
tions 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 INVEST-
MENT 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 conse-
quences 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 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 Regula-
tions 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 under-
writing 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 underwrit-
ers 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 aggre-
gate 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 there-
in, 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 circumstanc-
es, 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 liabili-
ties, including liabilities under the Securities Act of 1933, as
amended. The place and time of delivery for any Series of Certif-
icates 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 David L.
Nelson, Vice President and Associate General Counsel of First
USA, Inc., 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.
INDEX OF TERMS FOR PROSPECTUS
PAGE
-------
Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Accumulation Period . . . . . . . . . . . . . . . . . . . . . 10
Additional Accounts . . . . . . . . . . . . . . . . . . . . . . 6
Amortization Period . . . . . . . . . . . . . . . . . . . . . . 4
Annual Membership Fees . . . . . . . . . . . . . . . . . . . . 5
Banc One . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . 1, 8
Bank Portfolio . . . . . . . . . . . . . . . . . . . . . . . . 3
Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . 58
BIF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Capital Trust . . . . . . . . . . . . . . . . . . . . . . . . 27
Cash Advances . . . . . . . . . . . . . . . . . . . . . . . . 22
Cash Collateral Account . . . . . . . . . . . . . . . . . . . 47
Cash Collateral Guaranty . . . . . . . . . . . . . . . . . . 47
Cede . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Cedel . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Cedel Participants . . . . . . . . . . . . . . . . . . . . . 30
Certificate Owner . . . . . . . . . . . . . . . . . . . . . 2, 52
Certificate Rate . . . . . . . . . . . . . . . . . . . . . . . 4
Certificateholder . . . . . . . . . . . . . . . . . . . . . 2, 29
Certificates . . . . . . . . . . . . . . . . . . . . . . . 1, 3
Class . . . . . . . . . . . . . . . . . . . . . . . . . . . 1, 3
Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . 8
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Collection Account . . . . . . . . . . . . . . . . . . . . 8, 37
Collateral Invested Amount . . . . . . . . . . . . . . . . . 47
Commission . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Companion Series . . . . . . . . . . . . . . . . . . . . 12, 33
Controlled Accumulation Amount . . . . . . . . . . . . . . . 10
Controlled Amortization Amount . . . . . . . . . . . . . . . . 9
Controlled Amortization Period . . . . . . . . . . . . . . . . 9
Controlled Deposit Amount . . . . . . . . . . . . . . . . . . 10
Controlled Distribution Amount . . . . . . . . . . . . . . . . 9
Cooperative . . . . . . . . . . . . . . . . . . . . . . . . . 30
Credit Line Checks . . . . . . . . . . . . . . . . . . . . . 22
Default Amount . . . . . . . . . . . . . . . . . . . . . . . 39
Defaulted Account . . . . . . . . . . . . . . . . . . . . . 5, 39
Definitive Certificates . . . . . . . . . . . . . . . . . . . 31
Depositaries . . . . . . . . . . . . . . . . . . . . . . . . 29
Depository . . . . . . . . . . . . . . . . . . . . . . . . . 28
Determination Date . . . . . . . . . . . . . . . . . . . . . 39
Disclosure Document . . . . . . . . . . . . . . . . . . . . . . 6
Discount Receivable Collections . . . . . . . . . . . . . . . 38
Discount Receivables . . . . . . . . . . . . . . . . . . . 5, 38
Distribution Account . . . . . . . . . . . . . . . . . . . . 37
Distribution Date . . . . . . . . . . . . . . . . . . . . . . . 8
DOL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
DTC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Eligible Account . . . . . . . . . . . . . . . . . . . . . . 36
Eligible Receivable . . . . . . . . . . . . . . . . . . . . . 36
Enhancement . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Enhancement Provider . . . . . . . . . . . . . . . . . . . . 46
ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Euroclear . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Euroclear Operator . . . . . . . . . . . . . . . . . . . . . .30
Euroclear Participants . . . . . . . . . . . . . . . . . . . 30
Euroclear System . . . . . . . . . . . . . . . . . . . . . . 30
Excess Finance Charge Collections . . . . . . . . . . . . . . 11
Excess Principal Collections . . . . . . . . . . . . . . . . 33
Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Exchange Act . . . . . . . . . . . . . . . . . . . . . . . . . 2
Exchangeable Transferor Certificate . . . . . . . . . . . . . . 4
FASIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
FDIA . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
FDIC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
FDR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Final Regulation . . . . . . . . . . . . . . . . . . . . . . 58
Finance Charge Account . . . . . . . . . . . . . . . . . . . 37
Finance Charge Receivables . . . . . . . . . . . . . . . . . . 5
First USA Financial . . . . . . . . . . . . . . . . . . . . . 25
First USA Paymentech . . . . . . . . . . . . . . . . . . . 26
Foreign Investors . . . . . . . . . . . . . . . . . . . . . . 56
Full Invested Amount . . . . . . . . . . . . . . . . . . 12, 39
Funding Period . . . . . . . . . . . . . . . . . . . . . 11, 39
FUSA . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
General Account Regulations . . . . . . . . . . . . . . . . . 59
Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Indirect Participants . . . . . . . . . . . . . . . . . . . . 29
Ineligible Receivable . . . . . . . . . . . . . . . . . . . . 35
Initial Closing Date . . . . . . . . . . . . . . . . . . . . 35
Initial Invested Amount . . . . . . . . . . . . . . . . . . . 12
Interchange . . . . . . . . . . . . . . . . . . . . . . . . . 23
Interest Funding Account . . . . . . . . . . . . . . . . . . 32
Interest Period . . . . . . . . . . . . . . . . . . . . . . . . 8
Invested Amount . . . . . . . . . . . . . . . . . . . . . . . . 4
Investor Charge-Off . . . . . . . . . . . . . . . . . . . . . 40
Investor Default Amount . . . . . . . . . . . . . . . . . . . 39
Investor Interest . . . . . . . . . . . . . . . . . . . . . . . 4
Investor Percentage . . . . . . . . . . . . . . . . . . . . . . 5
Investor Servicing Fee . . . . . . . . . . . . . . . . . . . . 8
IRA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
IRS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
John Hancock . . . . . . . . . . . . . . . . . . . . . . . . 59
L/C Bank . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Merchant Services . . . . . . . . . . . . . . . . . . . . . . 26
Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Merger Agreement . . . . . . . . . . . . . . . . . . . . . . 26
Minimum Aggregate Principal Receivables . . . . . . . . . . . 24
Minimum Transferor Interest . . . . . . . . . . . . . . . . . 24
Monthly Interest . . . . . . . . . . . . . . . . . . . . . . 11
Monthly Period . . . . . . . . . . . . . . . . . . . . . . 8, 32
Monthly Periodic Rate . . . . . . . . . . . . . . . . . . . . 22
Moody's . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Octagon . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Offered Certificates . . . . . . . . . . . . . . . . . . . . 52
OID . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Original Cut Off Date . . . . . . . . . . . . . . . . . . . . . 4
Other Charges . . . . . . . . . . . . . . . . . . . . . . . . . 5
Participants . . . . . . . . . . . . . . . . . . . . . . . . 29
Pay Out Event . . . . . . . . . . . . . . . . . . . . . . . . 41
Periodic Finance Charges . . . . . . . . . . . . . . . . . . . 5
Permitted Investments . . . . . . . . . . . . . . . . . . . . 38
Pooling and Servicing Agreement . . . . . . . . . . . . . . . . 3
Pre-Funding Account . . . . . . . . . . . . . . . . . . . 12, 39
Pre-Funding Amount . . . . . . . . . . . . . . . . . . . 12, 39
Prepayable Instrument . . . . . . . . . . . . . . . . . . . . 54
Principal Account . . . . . . . . . . . . . . . . . . . . . . 37
Principal Commencement Date . . . . . . . . . . . . . . . . . . 9
Principal Funding Account . . . . . . . . . . . . . . . . . . 10
Principal Receivables . . . . . . . . . . . . . . . . . . . . . 5
Principal Terms . . . . . . . . . . . . . . . . . . . . . . . 34
Proposed Regulations . . . . . . . . . . . . . . . . . . . . 57
Prospectus Supplement . . . . . . . . . . . . . . . . . . . . . 1
PTE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Qualified Institution . . . . . . . . . . . . . . . . . . . . 38
Rapid Amortization Period . . . . . . . . . . . . . . . . . . 10
Rating Agency . . . . . . . . . . . . . . . . . . . . . . . . 13
Receivables . . . . . . . . . . . . . . . . . . . . . . . . 1, 3
Record Date . . . . . . . . . . . . . . . . . . . . . . . . . 28
Recoveries . . . . . . . . . . . . . . . . . . . . . . . . . 23
Regulations . . . . . . . . . . . . . . . . . . . . . . . . . 53
Removed Accounts . . . . . . . . . . . . . . . . . . . . . 6, 37
Reserve Account . . . . . . . . . . . . . . . . . . . . . . . 48
Revolving Period . . . . . . . . . . . . . . . . . . . . . . . 8
RTC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
RTC Policy Statement . . . . . . . . . . . . . . . . . . . . 50
SAIF . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Scheduled Payment Date . . . . . . . . . . . . . . . . . . . . 9
Securities Act . . . . . . . . . . . . . . . . . . . . . . . . 1
Senior Certificates . . . . . . . . . . . . . . . . . . . . . . 4
Series . . . . . . . . . . . . . . . . . . . . . . . . . . 1, 3
Series Closing Date . . . . . . . . . . . . . . . . . . . . . 34
Series Cut Off Dates . . . . . . . . . . . . . . . . . . . . 34
Service Transfer . . . . . . . . . . . . . . . . . . . . . . 43
Servicer . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Servicer Default . . . . . . . . . . . . . . . . . . . . . . 43
Special Tax Counsel . . . . . . . . . . . . . . . . . . . . . 52
Spread Account . . . . . . . . . . . . . . . . . . . . . . . 48
Standard & Poor's . . . . . . . . . . . . . . . . . . . . . . 37
Stated Series Termination Date . . . . . . . . . . . . . . . 40
Subordinated Certificates . . . . . . . . . . . . . . . . . . . 4
Supplement . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Terms and Conditions . . . . . . . . . . . . . . . . . . . . 31
Transfer Date . . . . . . . . . . . . . . . . . . . . . . . . 39
Transferor . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Transferor Amount . . . . . . . . . . . . . . . . . . . . . . . 4
Transferor Interest . . . . . . . . . . . . . . . . . . . . . . 4
Transferor Percentage . . . . . . . . . . . . . . . . . . . . 28
Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . 1, 3
Trust Portfolio . . . . . . . . . . . . . . . . . . . . . . . 24
Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . 1, 3
UCC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Unallocated Principal Collections . . . . . . . . . . . . . . 39
Underwriting Agreement . . . . . . . . . . . . . . . . . . . 60
Yield Factor . . . . . . . . . . . . . . . . . . . . . . . . 38
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following is an itemized list of the estimated expenses
to be incurred in connection with the offering of the securities
being offered hereunder other than underwriting discounts and
commissions.
Registration Fee . . . . . . . . . . . . . . . . . $ 4,545,454.55
Printing and Engraving . . . . . . . . . . . . . . $ 1,100,000.00
Trustee's Fees . . . . . . . . . . . . . . . . . . $ 88,000.00
Legal Fees and Expenses . . . . . . . . . . . . . $ 1,700,000.00
Accountant's Fees and Expenses . . . . . . . . . . $ 300,000.00
Rating Agency Fees . . . . . . . . . . . . . . . . $ 4,541,000.00
Miscellaneous Fees . . . . . . . . . . . . . . . . $ 110,000.00
Total . . . . . . . . . . . . . . . . . . . . . $12,384,454.55
ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS
Article Twelfth of the Bank's Restated Certificate of Incorpo-
ration provides that the Bank shall indemnify and hold harmless to
the fullest extent authorized by the Delaware General Corporation
Law, as the same exists or may hereafter be amended (but, in the
case of any such amendment, only to the extent that such amendment
permits the Bank to provide broader indemnification rights than
permitted prior thereto), any person who was or is made a party or
is threatened to be made a party to or is otherwise involved in any
action, suit or proceeding, whether civil, criminal, administrative
or investigative by reason of the fact that he or she is or was a
director or officer of the Bank or is or was serving at the request
of the Bank as a director, officer, employee or agent of another
corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to an employee benefit
plan (hereinafter an "indemnitee") whether the basis of such
proceeding is alleged action in an official capacity as a director,
officer, employee or agent or in any other capacity while serving
as a director, officer, employee or agent, against all expense,
liability and loss (including, attorney's fees, judgments, fines,
ERISA excise taxes or penalties and amounts paid in settlement)
reasonably incurred or suffered by such indemnitee in connection
therewith and such indemnification shall continue as an indemnitee
who has ceased to be a director, officer, employee or agent and
shall inure to the benefit of the indemnitee's heirs, executors and
administrators; provided, however, that except as provided in
paragraph (C) of such Article Twelfth with respect to proceedings
to enforce rights to indemnification, the Bank shall indemnify any
such indemnitee in connection with a proceeding (or part thereof)
initiated by such indemnitee only if such proceeding (or part
thereof) was authorized by the Board of Directors of the Bank.
Article Twelfth further provides that the right to indemnification
conferred therein shall be contract rights and shall include the
right to be paid by the Bank the expenses incurred in defending any
such proceeding in advance of its final disposition; provided,
however, that, if the Delaware General Corporation Law requires, an
advancement of expenses incurred by an indemnitee in his or her
capacity as a director shall be made only upon delivery to the Bank
of an undertaking, by or on behalf of such indemnitee, to repay all
amounts so advanced if it shall ultimately be determined by final
judicial decision from which there is no further right to appeal
that such indemnitee is not entitled to be indemnified for such
expenses under Article Twelfth or otherwise.
Article Twelfth provides that the rights to indemnification
and to the advancement of expenses conferred in Article Twelfth
shall not be exclusive of any other right that those seeking
indemnification may have or hereafter acquire under any statute,
the Certificate of Incorporation, bylaw, agreement, vote of stock-
holders or disinterested directors or otherwise.
Article Twelfth also provides that the Bank may, to the extent
authorized by its board of directors, grant rights to indemnifica-
tion and to the advancement of expenses to any employee or agent of
the Bank to the fullest extent provided to directors and officers
under Article Twelfth.
Article Twelfth also provides that the Bank shall have the
power to maintain insurance at its expense, to protect itself and
any such indemnitee against any expense, liability or loss, whether
or not the Bank would have the power to indemnify such person
against such expense, liability, or loss under the Delaware General
Corporation Law.
Section 145 of the Delaware General Corporation Law provides
generally and in pertinent part that a Delaware corporation may
indemnify its directors and officers against expenses, judgments,
fines and settlements actually and reasonably incurred by them in
connection with any civil, criminal, administrative, or investiga-
tive suit or action, except actions by or in the right of the
corporation if, in connection with the matters in issue, they acted
in good faith and in a manner they reasonably believed to be in or
not opposed to the best interests of the corporation, and in
connection with any criminal suit or proceeding, if in connection
with the matters in issue, they had no reasonable cause to believe
their conduct was unlawful. Section 145 further provides that in
connection with the defense or settlement of any action by or in
the right of the corporation, a Delaware corporation may indemnify
its directors and officers against any expenses actually and
reasonably incurred by them if, in connection with the matters in
issue, they acted in good faith in a manner they reasonably be-
lieved to be in or not opposed to the best interests of the corpo-
ration, except that no indemnification may be made with respect to
any claim, issue or matter as to which such person has been ad-
judged liable to the corporation unless the Court of Chancery or
the court in which such action or suit is brought approves such
indemnification. Section 145 further permits a Delaware corpora-
tion to grant its directors and officers additional rights of
indemnification through bylaw provisions and otherwise, and to
purchase indemnity insurance on behalf of its directors and offi-
cers.
Article Eleventh of the Bank's Certificate of Incorporation
eliminates the personal liability of directors of the Bank for
monetary damages for breach of fiduciary duties to the full extent
permitted by Delaware law.
Section 102(b)(7) of the Delaware General Corporation Law
provides that a Delaware corporation may eliminate or limit the
personal liability of a director to the corporation or its stock-
holders for monetary damages for breach of fiduciary duty as
director, provided that such corporation shall not eliminate or
limit the liability of a director: (i) for any breach of the
director's duty of loyalty to the corporation or its stockholders;
(ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law; (iii) under
SECTION 174 of the Delaware General Corporation Law; or (iv) for any
transaction from which the director derived an improper personal
benefit.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
1.1 Form of Underwriting Agreement. (Incorporated herein by
reference to Exhibit 1.1 of Registration Statement No.
33-74304 of First USA Bank).
3.1 Certificate of Incorporation of the Bank. (Incorporated
herein by reference to Exhibit 3.1 of Registration State-
ment No. 33-50600 of First USA Bank).
3.2 Bylaws of the Bank. (Incorporated herein by reference to
Exhibit 3.2 of Registration Statement No. 33-50600 of
First USA Bank).
4.1 Pooling and Servicing Agreement and related agreements as
exhibits thereto (incorporated herein by reference to
Exhibit 4.1 of Registration Statement No. 33-50600 of
First USA Bank); the first, second and third amendments
thereto (incorporated herein by reference to Exhibit 4.1
of Registration Statement No. 33-99362 of First USA
Bank); and the fourth and fifth amendments thereto.*
5.1 Opinion of David L. Nelson with respect to legality.
8.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP with
respect to tax matters.
23.1 Consent of David L. Nelson included in his opinions,
filed as Exhibit 5.1.
23.2 Consent of Skadden, Arps, Slate, Meagher & Flom LLP
included in its opinions filed as Exhibit 8.1.
____________________
* Previously filed.
(b) Financial Statements
All financial statements, schedules and historical financial
information have been omitted as they are not applicable.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes as follows:
(a) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration state-
ment: (i) to include any prospectus required by Section 10(a)(3) of
the Securities Act; (ii) to reflect in the prospectus any facts or
events arising after the effective date of the registration state-
ment (or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental change in
the information set forth in the registration statement; (iii) to
include any material information with respect to the plan of
distribution not previously disclosed in the registration state-
ment or any material change to such information in the registration
statement; provided, however, that (a)(i) and (a)(ii) will not
apply if the information required to be included in a post-effec-
tive amendment by those sub-paragraphs is contained in periodic
reports filed by the registrant pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934 that are incorporated by
reference in this registration statement.
(b) That, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof.
(c) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
(d) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the registrant's annual
report pursuant to Section 13(a) or 15(d) of the Securities Ex-
change Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of
the Securities Exchange Act of 1934) that is incorporated by
reference in the registration statement shall be deemed to be a new
registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
(e) Insofar as indemnification for liabilities arising under
the Securities Act may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the provisions
described under Item 15 above, or otherwise, the Registrant has
been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as ex
pressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connec-
tion with the securities being registered, the Registrant will
unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdic-
tion the question whether such indemnification by it is against
public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
(f) For purposes of determining any liability under the
Securities Act, the information omitted from the form of prospectus
filed as part of this Registration statement in reliance upon Rule
430A and contained in form of prospectus filed by the Registrant
pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities
Act shall be deemed to be part of this Registration Statement as of
the time it was declared effective.
(g) For the purpose of determining any liability under the
Securities Act, each post-effective amendment that contains a form
of prospectus shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial bona
fide offering thereof.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the Registrant certifies that it has reasonable grounds to believe
that it meets all of the requirements for filing on Form S-3 and
has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City
of Dallas, State of Texas, on April 21, 1997.
FIRST USA BANK
as Transferor and Servicer
(Registrant)
By /s/ W. Todd Peterson
-----------------------
W. Todd Peterson
Vice President
Pursuant to the Requirements of the Securities Act of 1933,
this Registration Statement has been signed on April 21, 1997 by
the following persons in the capacities and on the dates indicated.
FIRST USA BANK
SIGNATURE TITLE
PRINCIPAL EXECUTIVE OFFICER:
*-------------------- Chairman of the Board and April 21, 1997
Richard W. Vague Chief Executive Officer
PRINCIPAL FINANCIAL AND
ACCOUNTING OFFICER:
*-------------------- Executive Vice President April 21, 1997
George P. Hubley
DIRECTORS:
*-------------------- April 21, 1997
Jack M. Antonini
*-------------------- April 21, 1997
Randy L. Christofferson
*-------------------- April 21, 1997
George P. Hubley
*-------------------- April 21, 1997
Pamela H. Patsley
*-------------------- April 21, 1997
John C. Tolleson
*-------------------- April 21, 1997
Richard W. Vague
__________
* The undersigned, by signing his name hereto, does hereby sign
this Amendment No. 1 to the Registration Statement on behalf of
each of the above-indicated officers and directors of the Regis-
trant pursuant to a power of attorney signed by such directors
and officers.
/s/ David L. Nelson
------------------
David L. Nelson
Attorney-in-fact
EXHIBIT INDEX
Exhibit No. Description Page No.
1.1 Form of Underwriting Agreement Incorporated by refer-
ence to Exhibit 1.1 of
Registration Statement
No. 33-74304 of First
USA Bank
3.1 Certificate of Incorporation Incorporated by refer-
of the Bank ence to Exhibit 3.1 of
Registration Statement
No. 33-50600 of First
USA Bank
3.2 By-laws of the Bank Incorporated by refer-
ence to Exhibit 3.2 of
Registration Statement
No. 33-50600 of First
USA Bank
4.1* Pooling and Servicing Agreement Incorporated by refer-
and related agreements as exhib- ence to Exhibit 4.1 of
its thereto; the first, second Registration State-
and third amendments thereto; ments No. 33-50600 and
and the fourth and fifth amend- No. 33-99362 of First
ments thereto USA Bank
5.1 Opinion of counsel of David L.
Nelson
8.1 Opinion of Skadden, Arps, Slate,
Meagher & Flom LLP with respect
to tax matters
23.1 Consent of David L. Nelson
(included in his opinion filed
as Exhibit 5.1)
23.2 Consent of Skadden, Arps, Slate,
Meagher & Flom LLP (included in
its opinion filed as Exhibit
8.1)
____________
* Previously filed.
EXHIBIT 5.1
April 22, 1997
First USA Bank
201 North Walnut
Wilmington, Delaware 19801
Re: Registration Statement on Form S-3
(Registration No. 333-24227)
----------------------------------
Ladies and Gentlemen:
I am Associate General Counsel to First USA,
Inc. and have acted as counsel to First USA Bank, a
Delaware banking corporation (the "Bank"), in connection
with the transfer of receivables ("Receivables") generat-
ed from time to time in a portfolio of VISA and
MasterCard revolving credit card accounts by the Bank to
The Bank of New York (Delaware), as trustee (the "Trust-
ee") for the First USA Credit Card Master Trust (the
"Trust") formed pursuant to a Pooling and Servicing
Agreement, dated as of September 1, 1992 (the "Pooling
and Servicing Agreement") between the Bank, as transferor
and as servicer of the Receivables, and the Trustee, as
amended, in exchange for certain Asset Backed Certifi-
cates (the "Certificates"), each such Certificate evi-
dencing a fractional undivided interest in the Trust,
which Certificates will be offered and sold pursuant to
the Registration Statement filed on Form S-3 (Registra-
tion No. 333-24227), as amended from time to time (the
"Registration Statement") being filed concurrently here-
with under the Securities Act of 1933.
In connection herewith, I have examined and
relied upon the forms of the Pooling and Servicing Agree-
ment and the Underwriting Agreement filed as exhibits to
the Registration Statement. I also have examined such
corporate records, certificates and other documents, and
reviewed such questions of law as I deemed appropriate.
In rendering the following opinions, I have
assumed the accuracy and truthfulness of all public
records of the Bank and of all certifications, documents
and other proceedings examined by me that have been
produced by officials of the Bank acting within the scope
of their official capacities, without verifying the
accuracy or truthfulness of such representations. I also
have assumed the genuineness of such signatures appearing
upon such public records, certifications, documents and
proceedings. In addition, I have assumed that the Under-
writing Agreement will be executed and delivered in
substantially the form filed as an exhibit to the Regis-
tration Statement, and that the Certificates will be sold
as described therein.
I express no opinion as to the laws of any
jurisdiction other than the laws of the State of Texas
and the federal laws of the United States of America,
except to the extent the matters of Delaware corporate
law are involved in the opinions set forth below. With
respect to any opinions concerning Delaware corporate
law, you are aware that I am not admitted to the Bar in
the State of Delaware and I am not an expert in the law
of such jurisdiction, and that such opinions concerning
Delaware corporate law are based upon my general (al-
though not necessarily complete) familiarity with the
Delaware General Corporation Law as a result of my prior
involvement in transactions involving such law.
Based upon and subject to the foregoing, it is
my opinion that when a particular series of Certificates
to be issued under the Registration Statement has been
duly and validly authorized by the Bank, and when such
Certificates are executed by the Trustee in accordance
with the provisions of the Pooling and Servicing Agree-
ment and are paid for by the Underwriters pursuant to the
Underwriting Agreement, such series of Certificates will
be legally issued, fully paid and non-assessable.
I hereby consent to the filing of this opinion
as an exhibit to the Registration Statement and to the
reference to me under the heading "Legal Matters" in the
Prospectus included in the Registration Statement without
implying or admitting that I am an "expert" within the
meaning of the Securities Act of 1933, as amended, or
other rules and regulations of the Securities Act of
1933, as amended, or other rules and regulations of the
Securities and Exchange Commission issued thereunder with
respect to any part of the Registration Statement includ-
ing this exhibit.
Sincerely,
/s/ David L. Nelson
David L. Nelson
Vice President
and Associate General Counsel
EXHIBIT 8.1
April 22, 1997
First USA Bank
201 North Walnut Street
Wilmington, Delaware 19801
Re: Registration Statement No. 333-24227
on Form S-3 relating to First USA
Credit Card Master Trust
------------------------------------
Ladies and Gentlemen:
In connection with the filing of Registration
Statement No. 333-24227 on Form S-3 relating to First USA
Credit Card Master Trust (the "Registration Statement")
with the Securities and Exchange Commission, you have
requested our opinion regarding certain descriptions of
tax consequences contained in the form of prospectus (the
"Prospectus") included in the Registration Statement.
Our opinion is based on an examination of the
Prospectus, the Pooling and Servicing Agreement, dated as
of September 1, 1992 between First USA Bank as Transferor
and Servicer and The Bank of New York (Delaware) (as
successor to The Bank of New York as successor to
NationsBank, N.A.), as Trustee, as amended (the "Agree-
ment") and such other documents, instruments and informa-
tion as we considered necessary. Our opinion is also
based upon the Internal Revenue Code of 1986, as amended,
administrative rulings, judicial decisions, Treasury
regulations and other applicable authorities. The statu-
tory provisions, regulations and interpretations on which
our opinion is based are subject to changes, and such
changes could apply retroactively. In addition, there
can be no assurance that positions contrary to those
stated in our opinion may not be taken by the Internal
Revenue Service.
We also note that the Prospectus and the Agree-
ment do not relate to a specific transaction. According-
ly, the above-referenced description of Federal income
tax consequences may, under certain circumstances, re-
quire modification in the context of an actual transac-
tion.
Based on the foregoing, we hereby confirm that
the statements in the Prospectus under the headings
"Prospectus Summary-Tax Status," "Certain U.S. Federal
Income Tax consequences," and "State and Local Taxation,"
subject to the qualifications set forth therein, accu-
rately describe the material federal and Delaware income
tax consequences to holders of the offered Certificates,
under existing law and the assumptions stated therein.
We express no opinion with respect to the
matters addressed in this letter other than as set forth
above.
We consent to the filing of this opinion as an
exhibit to the Registration Statement.
Very truly yours,
/s/ Skadden, Arps, Slate,
Meagher & Flom LLP
