Registration No. 333-_____
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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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 of (I.R.S. employer
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)
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Copies to:
ANDREW M. FAULKNER
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022-9931
(212) 735-2853
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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.
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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
following box and list the Securities Act registration statement number of
the earlier effective registration statement for the same offering. |_|
_______________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, 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. |_|
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<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
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Proposed
Maximum Proposed
Offering Maximum
Title of Each Class of Amount to Price Offering Amount of
Securities to be Registered be Registered Per Unit (1) Price (1) Registration Fee
<S> <C> <C> <C> <C>
Asset Backed
Certificates................................. $1,000,000 100% $1,000,000 $303.03
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for purpose of calculating the registration fee.
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 ______ __, 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(R) and MasterCard(R) revolving credit
card accounts, all monies due or to become due in payment of the
Receivables and certain other property, as more fully described herein and,
with respect to any Series offered hereby, in the related Prospectus
Supplement. The Bank will own the remaining undivided interest in the Trust
not represented by the Certificates issued by the Trust and will service
the Receivables.
Each Series will consist of one or more classes of Certificates
(each, a "Class"), one or more of which may be fixed rate Certificates,
floating rate Certificates or another type of Certificates, as specified in
the related Prospectus Supplement. Each Certificate will represent an
undivided interest in the Trust and the interest of the Certificateholders
of each Class or Series will include the right to receive a varying
percentage of each month's collections with respect to the Receivables at
the time, in the manner and to the extent described herein and, with
respect to any Series offered hereby, in the related Prospectus Supplement.
Interest and principal payments with respect to each Series offered hereby
will be made as specified in the related Prospectus Supplement. One or more
Classes of a Series offered hereby may be entitled to the benefits of a
cash collateral account or guaranty, letter of credit, surety bond,
insurance policy or other form of enhancement as specified in the
Prospectus Supplement relating to such Series. In addition, any Series
offered hereby may include one or more Classes which are subordinated in
right and priority to payment of principal of, and/or interest on, one or
more other Classes of such Series or another Series, in each case to the
extent described in the related Prospectus Supplement. Each Series of
Certificates or Class thereof offered hereby will be rated in one of the
four highest rating categories by at least one nationally recognized
statistical rating organization.
While the specific terms of any Series in respect of which this
Prospectus is being delivered will be described in the related Prospectus
Supplement, the terms of such Series will not be subject to prior review
by, or consent of, the holders of the Certificates of any previously issued
Series.
THE CERTIFICATES WILL REPRESENT INTERESTS IN THE TRUST ONLY AND WILL
NOT 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 RECEIVABLES ARE
INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR
ANY OTHER GOVERNMENTAL AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
Potential investors should consider, among other things, the
information set forth in "Risk Factors" beginning on page 15. Benefit plan
investors should consider, among other things, the information set forth in
"ERISA Considerations."
Certificates may be sold by the Bank directly to purchasers,
through agents designated from time to time, through underwriting
syndicates led by one or more managing underwriters or through one or more
underwriters acting alone. If underwriters or agents are involved in the
offering of the Certificates of any Series offered hereby, the name of the
managing underwriter or underwriters or agents will be set forth in the
related Prospectus Supplement. If an underwriter, agent or dealer is
involved in the offering of the Certificates of any Series offered hereby,
the underwriter's discount, agent's commission or dealer's purchase price
will be set forth in, or may be calculated from, the related Prospectus
Supplement, and the net proceeds to the Bank from such offering will be the
public offering price of such Certificates less such discount in the case
of an underwriter, the purchase price of such Certificates less such
commission in the case of an agent or the purchase price of such
Certificates in the case of a dealer, and less, in each case, the other
expenses of the Bank associated with the issuance and distribution of such
Certificates. Any underwriter of the Certificates will be indemnified by
the Bank against certain liabilities, including liabilities under the
Securities Act of 1933, as amended (the "Securities Act"). See "Plan of
Distribution."
This Prospectus may not be used to consummate sales of any Series
of Certificates unless accompanied by the related Prospectus Supplement.
The date of this Prospectus is ______ __, 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
Certificates (the "Certificateholders"); (e) the extent to which any Class
within a Series is subordinated to any other Class of such Series or any
other Series; (f) the identity of each Class of floating rate Certificates
and fixed rate Certificates included in such Series, if any, or such other
type of Class of Certificates; (g) the Distribution Dates for the
respective Classes; (h) relevant financial information with respect to the
Receivables; (i) additional information with respect to any Enhancement
relating to such Series; and (j) the plan of distribution of such Series.
REPORTS TO CERTIFICATEHOLDERS
Unless and until Definitive Certificates (as defined herein) are
issued, monthly and annual reports, containing information concerning the
Trust and prepared by the Servicer (as defined herein), will be sent on
behalf of the Trust to Cede & Co. ("Cede"), as nominee of The Depository
Trust Company ("DTC") and registered holder of the related Certificates,
pursuant to the Pooling and Servicing Agreement. See "Description of the
Certificates--Book-Entry Registration," "--Reports to Certificateholders"
and "--Evidence as to Compliance." Such reports will not constitute
financial statements prepared in accordance with generally accepted
accounting principles. Neither the Bank nor any successor servicer intends
to send any of its financial reports to Certificateholders or to the owners
of beneficial interests in the Certificates ("Certificate Owners"). The
Servicer will file with the Securities and Exchange Commission (the
"Commission") such periodic reports with respect to the Trust as are
required under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the rules and regulations of the Commission
thereunder.
AVAILABLE INFORMATION
This Prospectus, which forms a part of the Registration Statement,
omits certain information contained in such Registration Statement pursuant
to the rules and regulations of the Commission. For further information,
reference is made to the Registration Statement (including any amendments
thereof and exhibits thereto) and any reports and other documents
incorporated herein by reference as described below under "Incorporation of
Certain Documents by Reference," which are available for inspection without
charge at the public reference facilities maintained by the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549; 7 World Trade Center, New
York, New York 10048; and Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661-2511. Copies of such material may be obtained
from the public Reference Section of the Commission, 450 Fifth Street,
N.W., Washington, D.C. 20549, at prescribed rates. In addition, the
Commission maintains a Web site at "http://www.sec.gov" that contains
information regarding registrants that file electronically with the
Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All reports and other documents filed by the Servicer, on behalf
of the Trust, pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange
Act subsequent to the date of this Prospectus and prior to the termination
of the offering of the Certificates offered hereby shall be deemed to be
incorporated by reference into this Prospectus and to be part hereof. Any
statement contained herein or in a document deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes
of this Prospectus to the extent that a statement contained in any other
subsequently filed document which also is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement
so modified or superseded shall not be deemed, except as modified or
superseded, to constitute a part of this Prospectus.
PROSPECTUS SUMMARY
The following is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus and in the
accompanying Prospectus Supplement. Certain capitalized terms used in this
summary are defined elsewhere in this Prospectus and in the accompanying
Prospectus Supplement. A listing of the pages on which some of such terms
are defined is found in the "Index of Terms for Prospectus." Unless the
context requires otherwise, capitalized terms used in this Prospectus and
in the accompanying Prospectus Supplement refer only to the particular
Series being offered by such Prospectus Supplement.
Type of Securities.................. Asset Backed Certificates (the
"Certificates") evidencing an
undivided ownership interest in the
assets of the First USA Credit Card
Master Trust may be issued from
time to time in one or more series
(each, a "Series") which will
consist of one or more classes of
Certificates (each, a "Class").
Trust............................... The First USA Credit Card Master
Trust (the "Trust") was formed
pursuant to a pooling and servicing
agreement dated as of September 1,
1992, as amended and supplemented
(the "Pooling and Servicing
Agreement"), between First USA
Bank, as transferor (the
"Transferor") and as servicer of
the Receivables, and The Bank of
New York (Delaware), as trustee
(the "Trustee"). The Trust was
created as a master trust under
which one or more Series could be
issued pursuant to a series 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
Prospectus Supplement will identify
all then outstanding Series
previously issued by the Trust.
Trust Assets........................ The Property of the Trust includes
and will include receivables (the
"Receivables") arising under
certain VISA(R)and MasterCard(R)*
revolving credit card accounts (the
"Accounts") selected from the
portfolio of VISA and MasterCard
accounts owned by the Transferor
(the "Bank Portfolio"), all monies
due or to become due in payment of
the Receivables, all proceeds of
the Receivables and all monies on
deposit in certain bank accounts of
the Trust (other than certain
investment earnings on such
amounts), Recoveries and any
Enhancement issued with respect to
any Series or Class, as described
in the related Prospectus
Supplement. The term "Enhancement"
means, with respect to any Series
or Class thereof, any letter of
credit, cash collateral account or
guaranty, collateral invested
amount, guaranteed rate agreement,
maturity guaranty facility, tax
protection agreement, interest rate
swap or other contract or agreement
for the benefit of
Certificateholders of such Series.
Enhancement may also take the form
of subordination of one or more
Classes of a Series to any other
Class or Classes of a Series or a
cross-support feature which
requires collections on Receivables
of one Series to be paid as
principal and/or interest with
respect to another Series. The
Receivables included in the 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.
_______________________
* VISA(R) and MasterCard(R) are registered trademarks of Visa USA
Incorporated and MasterCard International Incorporated, respectively.
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 addi-
tional cut off dates with respect
to Additional Accounts and has
conveyed and will convey all
Receivables arising under such
Accounts from time to time
thereafter until termination of the
Trust. See "Summary of
Terms--Trust Assets" in the
Prospectus Supplement. In addition,
pursuant to the Pooling and
Servicing Agreement, the Transferor
may (subject to certain limitations
and conditions) designate
Additional Accounts for inclusion
in the Trust. See "The Receivables"
and "Description of the
Certificates--Addition of
Accounts."
Securities Offered.................. Each Series of the Certificates
will represent an undivided
interest in the assets of the
Trust. Each Certificate of a Series
will represent the right to receive
payments of (i) interest at the
specified rate or rates per annum
(each, a "Certificate Rate"), which
may be fixed, floating or another
type of rate and (ii) unless
otherwise provided in the related
Prospectus Supplement, payments of
principal during the Controlled
Amortization Period, Accumulation
Period, Rapid Amortization Period
or other type of amortization
period (each, an "Amortization
Period"), all as specified in the
related Prospectus Supplement.
Each Series of Certificates will
consist of one or more Classes, one
or more of which may be Senior
Certificates ("Senior
Certificates") and one or more of
which may be Subordinated
Certificates ("Subordinated
Certificates"). Each Class of a
Series may evidence the right to
receive a specified portion of each
distribution of principal or
interest or both. The Certificates
of a Class may also differ from
Certificates of other Classes of
the same Series in, among other
things, the amounts allocated to
principal payments, priority of
payments, payment dates, maturity,
interest rate computation, and
availability and form of
Enhancement.
The assets of the Trust will be
allocated among the
Certificateholders of each Series
(the "Investor Interest"), the
holder of the Exchangeable
Transferor Certificate (the
"Exchangeable Transferor
Certificate") and, in certain
circumstances, Enhancement
Providers. The aggregate principal
amount of the Investor Interest of
a Series in Receivables is referred
to herein as the "Invested Amount"
and is based on the aggregate
amount of the Principal Receivables
in the Trust allocated to such
Series. The interest of the holder
of the Exchangeable Transferor
Certificate in Receivables is
referred to herein as the
"Transferor Interest," and is based
on the aggregate amount of
Principal Receivables (the
"Transferor Amount") in the Trust
not allocated to the Certifi-
cateholders or any Enhancement
Provider. See "Description of the
Certificates--General."
The Certificateholders of each
Series will have the right to
receive (but only to the extent
needed to make required payments
under the Pooling and Servicing
Agreement and related Supplement
and subject to any reallocation
of such amounts if the related
Supplement so provides) varying
percentages of the collections of
Finance Charge Receivables and
Principal Receivables for each
month and will be allocated a
varying percentage of the amount of
Receivables in Accounts which are
written off as uncollectible
("Defaulted Accounts") for such
month (each such percentage, an
"Investor Percentage").
The related Prospectus Supplement
will specify the Investor
Percentages with respect to the
allocation of collections of
Principal Receivables, Finance
Charge Receivables and Receivables
in Defaulted Accounts during the
Revolving Period and any
Amortization Period. If the
Certificates of a Series offered
hereby include more than one Class
of Certificates, the assets of the
Trust allocable to the Certificates
of such Series may be further
allocated among each Class in such
Series as described in the related
Prospectus Supplement. See
"Description of the
Certificates--Investor Percentage
and Transferor Percentage" in the
related Prospectus Supplement.
The Certificates represent
interests in the Trust only and do
not represent interests in or
recourse obligations of the
Transferor or any affiliate
thereof. A Certificate is not a
deposit and is not insured by the
Federal Deposit Insurance
Corporation (the "FDIC"). The
Receivables are not insured or
guaranteed by the FDIC or any other
governmental agency.
Receivables.......................... The Receivables arise in Accounts
that have been selected from the
Bank Portfolio based on criteria
provided in the Pooling and
Servicing Agreement. The
Receivables consist of amounts
charged by cardholders for goods
and services and cash advances
(such amounts, less the amount of
Discount Receivables, the
"Principal Receivables"), plus the
related periodic finance charges
(the "Periodic Finance Charges"),
annual membership fees ("Annual
Membership Fees"), and amounts
charged to the Accounts in respect
of cash advance finance charges,
late fees, overlimit fees, return
check fees and similar fees and
charges (the "Other Charges").
Receivables in an amount equal to
the product of the Yield Factor
(initially 1.3%) and amounts
charged by cardholders for goods
and services and cash advances (the
"Discount Receivables") will be
treated as Finance Charge
Receivables (Discount Receivables,
together with the Periodic Finance
Charges, Annual Membership Fees and
Other Charges, the "Finance Charge
Receivables"). See "Description
of the Certificates--Discount
Receivables." The Finance Charge
Receivables will not affect the
amount of the Invested Amount
represented by the Certificates
or the amount of the Transferor
Interest, which are determined on
the basis of the amount of
Principal Receivables in the
Trust.
During the term of the Trust, all
new Receivables arising in the
Accounts will be transferred
automatically to the Trust by the
Transferor. The total amount of
Receivables in the Trust will
fluctuate from day to day because
the amount of new Receivables
arising in the Accounts and the
amount of payments collected on
existing Receivables usually differ
each day. Because the Transferor
Interest represents the interest in
the Principal Receivables in the
Trust not represented by the
Certificates or any other Series of
certificates, the amount of the
Transferor Interest will fluctuate
from day to day as Receivables are
collected and new Receivables are
transferred to the Trust. See "The
Receivables."
Pursuant to the Pooling and
Servicing Agreement, the Transferor
has the right (subject to certain
limitations and conditions), and in
some circumstances will be
obligated, to designate additional
eligible revolving credit card
accounts to be included as Accounts
(the "Additional Accounts") and to
convey to the Trust all of the
Receivables in the Additional
Accounts, whether such Receivables
are then existing or thereafter
created. See "Description of the
Certificates--Addition of
Accounts."
Furthermore, pursuant to the
Pooling and Servicing Agreement,
the Transferor has the right
(subject to certain limitations and
conditions) to designate certain
Accounts and to accept the
reconveyance of all the Receivables
in such Accounts (the "Removed
Accounts"), whether such
Receivables are then existing or
thereafter created. See
"Description of the
Certificates--Removal of Accounts."
The aggregate undivided interest in
the Principal Receivables in the
Trust evidenced by the Certificates
will never exceed the aggregate
Invested Amount regardless of the
total amount of Principal
Receivables in the Trust at any
time.
Exchanges............................ The Pooling and Servicing Agreement
provides that the Trustee will
issue two types of certificates:
(i) one or more Series of
certificates that will be
transferable and have the
characteristics described below and
(ii) the Exchangeable Transferor
Certificate, a certificate that
evidences the Transferor Interest,
which is to be held by the
Transferor and which will be
transferable only as provided in
the Pooling and Servicing 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, certificates
representing any Series and the
Exchangeable Transferor
Certificate, to the Trustee in
exchange for one or more new Series
and a reissued Exchangeable
Transferor Certificate (any such
tender, an "Exchange"). However, at
all times, the interest in the
Principal Receivables in the Trust
represented by the Transferor
Interest must equal or exceed the
Minimum Transferor Interest (as
defined herein). Under the Pooling
and Servicing Agreement, the
Transferor may define, with respect
to any Series, the Principal Terms
of the Series. See "Description of
the Certificates--Exchanges." The
Transferor may offer any Series
to the public or other investors
under a prospectus or other
disclosure document (a "Disclosure
Document") in transactions either
registered under the Securities Act
or exempt from registration
thereunder, directly, through the
Underwriters or one or more other
underwriters or placement agents,
in fixed-price offerings or in
negotiated transactions or
otherwise. Other Series have been
issued by the Trust and may be
issued concurrently herewith. The
Transferor intends to offer, from
time to time, additional Series
issued by the Trust.
Under the Pooling and Servicing
Agreement and pursuant to a
Supplement, an Exchange may occur
only upon delivery to the Trustee
of the following: (i) a Supplement
specifying the Principal Terms of
such Series, (ii) an opinion of
counsel to the effect that, unless
otherwise stated in the related
Supplement, the certificates of
such Series will be characterized
as indebtedness for federal income
tax purposes under existing law,
and that the issuance of such
Series will not have a material
adverse effect on the federal
income tax characterization of any
outstanding Series, (iii) if
required by the related Supplement,
the form of Enhancement, (iv) if
Enhancement is required by the
Supplement, an appropriate
Enhancement agreement with respect
thereto, (v) written confirmation
from each Rating Agency that the
Exchange will not result in such
Rating Agency reducing or
withdrawing its rating on any then
outstanding Series rated by it,
(vi) an officer's certificate of
the Transferor to the effect that
on the date of the Exchange the
Transferor, after giving effect to
the Exchange, would not be required
to add the Receivables of
Additional Accounts pursuant to the
Pooling and Servicing Agreement,
and the Transferor Interest would
be at least equal to the Minimum
Transferor Interest, and (vii) the
existing Exchangeable Transferor
Certificate and, if applicable, the
certificates representing the
Series to be exchanged. See
"Description of the Certifi-
cates--Exchanges."
Denominations....................... Unless otherwise specified in the
related Prospectus Supplement,
beneficial interests in the
Certificates will be offered for
purchase in denominations of $1,000
and integral multiples thereof. See
"Description of the Certifi-
cates--General."
Registration of Certificates........ Unless otherwise specified in the
related Prospectus Supplement, the
Certificates of each Series
initially will be represented by
Certificates registered in the name
of Cede, as the nominee of DTC. No
Certificate Owner will be entitled
to receive a definitive certificate
representing such person's
interest, except in the event that
Definitive Certificates (as defined
herein) are issued under the
limited circumstances described
herein. See "Description of the
Certificates--Definitive
Certificates."
Clearance and Settlement............. Unless otherwise provided in the
related Prospectus Supplement,
Certificate Owners of each Series
offered hereby may elect to hold
their Certificates through any of
DTC (in the United States) or Cedel
or Euroclear (in Europe). Transfers
within DTC, Cedel or Euroclear, as
the case may be, will be made in
accordance with the usual rules and
operating procedures of the
relevant system. Cross-market
transfers between persons holding
directly or indirectly through DTC
in the United States, on the one
hand, and counterparties holding
directly or indirectly through
Cedel or Euroclear, on the other,
will be effected in DTC through the
relevant Depositaries of Cedel or
Euroclear. See "Description of the
Certificates--Book-Entry
Registration."
Transferor and Servicer............. First USA Bank (the "Bank"). The
principal executive offices of the
Bank are located at 201 North
Walnut Street, Wilmington, Delaware
19801, telephone number (302)
594-4000. The Servicer will receive
a fee as servicing compensation
from the Trust in respect of each
Series in the amounts and at the
times specified in the related
Prospectus Supplement (the
"Investor Servicing Fee"). In
certain limited circumstances, the
Bank may resign or be removed as
Servicer, in which event the
Trustee or a third party servicer
may be appointed as successor
servicer (the Bank, or any such
successor servicer, is referred to
herein as the "Servicer"). See "The
Bank and 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 Account"). All amounts
deposited in the Collection Account
will be allocated by the Servicer
between amounts collected on
Principal Receivables and amounts
collected on Finance Charge
Receivables. Collections of
Recoveries generally will be
treated as collections of Principal
Receivables. If so specified in the
related Prospectus Supplement,
Principal Receivables and/or
Finance Charge Receivables may be
otherwise characterized. See
"Description of the
Certificates--Discount
Receivables." All such amounts will
then be allocated in accordance
with the respective interests of
the Certificateholders of such
Series or Class, the
certificateholders of any other
Series or Class and the holder of
the Exchangeable Transferor
Certificate.
Interest............................ Interest on each Series of
Certificates or Class thereof for
each interest accrual period (each,
an "Interest Period") specified in
the related Prospectus Supplement
will be distributed in the amounts
and on the dates (which may be
monthly, quarterly, semiannually or
otherwise as specified in the
related Prospectus Supplement)
(each, a "Distribution Date")
specified in the related Prospectus
Supplement. Interest payments on
each Distribution Date will
generally be funded from the
collections of Finance Charge
Receivables allocated to the
Investor Interest during the
preceding monthly period or periods
(each, a "Monthly Period"), as
described in the related Prospectus
Supplement, and may be funded from
certain investment earnings on
funds in certain accounts of the
Trust, from any applicable
Enhancement or from other sources
specified in the related Prospectus
Supplement. If the Distribution
Dates for payment of interest for a
Series or Class occur less
frequently than monthly, such
collections or other amounts
allocable to such Series or Class
may be deposited in one or more
trust accounts pending distribution
to the Certificateholders of such
Series or Class, all as described
in the related Prospectus
Supplement. See "Risk
Factors--Enhancement," "Description
of the Certificates--Interest
Payments," "--Application of
Collections" and "Enhancement."
Revolving Period.................... Unless otherwise specified in the
related Prospectus Supplement, with
respect to each Series and any
Class thereof no principal will be
payable to Certificateholders until
the Principal Commencement Date or
the Scheduled Payment Date with
respect to such Series or Class.
For the period beginning on the
date of issuance of the related
Series (the "Closing Date") and
ending with the commencement of an
Amortization Period or an
Accumulation Period (the "Revolving
Period"), collections of Principal
Receivables otherwise allocable to
the Investor Interest will, subject
to certain limitations, be paid
from the Trust to the holder of the
Exchangeable Transferor Certificate
or, under certain circumstances and
if so specified in the related
Prospectus Supplement, will be
treated as Excess Principal
Collections and paid to the holders
of other Series of Certificates
issued by the Trust, as described
herein and in the related
Prospectus Supplement. See
"Description of the
Certificates--Pay Out Events" for a
discussion of the events which
might lead to early termination of
the Revolving Period.
Principal Payments.................. The principal of the Certificates
of each Series offered hereby will
be scheduled to be paid either in
installments commencing on a date
specified in the related Prospectus
Supplement (the "Principal Com-
mencement Date"), in which case
such Series will have a Controlled
Amortization Period, as described
below, or on an expected date
specified in the related Prospectus
Supplement (the "Scheduled Payment
Date"), in which case such Series
will have an Accumulation Period,
as described below. If a Series has
more than one Class of
Certificates, a different method of
paying principal, Principal
Commencement Date or Scheduled
Payment Date may be assigned to
each Class. The payment of
principal with respect to the
Certificates of a Series or Class
may commence earlier than the
applicable Principal Commencement
Date or Scheduled Payment Date, and
the final principal payment with
respect to the Certificates of a
Series or Class may be made later
than the applicable expected
payment date, Scheduled Payment
Date or other expected date, if a
Pay Out Event occurs and the Rapid
Amortization Period commences with
respect to such Series or Class or
under certain other circumstances
described herein or in the
Prospectus Supplement. See
"Description of the
Certificates--Principal Payments."
Controlled Amortization Period...... If the Prospectus Supplement
relating to a Series so specifies,
unless a Rapid Amortization Period
with respect to such Series
commences, the Certificates of such
Series or any Class thereof will
have an amortization period (the
"Controlled Amortization Period")
during which collections of
Principal Receivables allocable to
the Investor Interest of such
Series (and certain other amounts
if so specified in the related
Prospectus Supplement) will be used
on each Distribution Date to make
principal distributions in
scheduled amounts to the
Certificateholders of such Series
or any Class of such Series then
scheduled to receive such distri-
butions. The amount to be
distributed on any Distribution
Date during the Controlled
Amortization Period will be limited
to an amount (the "Controlled
Distribution Amount") equal to an
amount specified in the related
Prospectus Supplement (the
"Controlled Amortization Amount")
plus any existing deficit
Controlled Amortization Amount
arising from prior Distribution
Dates. If a Series has more than
one Class of Certificates, each
Class may have a separate
Controlled Amortization Amount. In
addition, the related Prospectus
Supplement may describe certain
priorities among such Classes with
respect to such distributions. The
Controlled Amortization Period will
commence at the close of business
on the Principal Commencement Date
and continue until the earliest of
(a) the commencement of the Rapid
Amortization Period, (b) payment in
full of the Invested Amount of the
Certificates of such Series or
Class and (c) the Stated Series
Termination Date with respect to
such Series. See "Description of
the Certificates--Principal
Payments."
Accumulation Period................. If the Prospectus Supplement
relating to a Series so specifies,
unless a Rapid Amortization Period
with respect to such Series
commences, the Certificates of such
Series or any Class thereof will
have an accumulation period (the
"Accumulation Period") during which
collections of Principal
Receivables allocable to the
Investor Interest of such Series
(and certain other amounts if so
specified in the related Prospectus
Supplement) will be deposited prior
to each Distribution Date in a
trust account established for the
benefit of the Certificateholders
of such Series or Class (a
"Principal Funding Account") and
used to make distributions of
principal to the Certificateholders
of such Series or Class on the
Scheduled Payment Date. The amount
to be deposited in the Principal
Funding Account on any date will be
limited to an amount (the
"Controlled Deposit Amount") equal
to an amount specified in the
related Prospectus Supplement (the
"Controlled Accumulation Amount")
plus the amount of any shortfalls
arising from the failure to pay the
Controlled Accumulation Amount on
any prior Distribution Dates. If a
Series has more than one Class of
Certificates, each Class may have a
separate Principal Funding Account
and Controlled Accumulation Amount.
In addition, the related Prospectus
Supplement may describe certain
priorities among such Classes with
respect to deposits of principal
into such Principal Funding
Accounts. The Accumulation Period
will commence at the close of
business on a date specified in the
related Prospectus Supplement and
continue until the earliest of (a)
the commencement of the Rapid
Amortization Period, (b) payment in
full of the Invested Amount of the
Certificates of such Series or
Class and (c) the Stated Series
Termination Date with respect to
such Series.
Funds on deposit in any Principal
Funding Account may be invested in
eligible investments or subject to
a guaranteed rate or investment
agreement or other arrangement
intended to assure a specified
return on the investment of such
funds. Investment earnings on such
funds may be applied to pay
interest on the related Series of
Certificates. In order to enhance
the likelihood of payment in full
of principal at the end of an
Accumulation Period with respect to
a Series of Certificates, such
Series may be subject 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 Series
Termination Date (the "Rapid
Amortization Period"), unless
otherwise provided in the related
Prospectus Supplement,
collections of Principal
Receivables allocable to the
Investor Interest of such Series
(and certain other amounts if so
specified in the related Prospectus
Supplement) will be distributed as
principal payments to the
Certificateholders of such Series
monthly on each Distribution Date
with respect to such Series in the
manner and order of priority set
forth in the related Prospectus
Supplement. During the Rapid
Amortization Period with respect
to a Series, distributions of
principal to Certificateholders
will not be limited by any
Controlled Distribution Amount or
Controlled Deposit Amount. In
addition, upon the commencement
of the Rapid Amortization Period
with respect to a Series, unless
otherwise specified in the related
Prospectus Supplement, any funds on
deposit in a Principal Funding
Account with respect to such Series
or any Class thereof will be paid
to the Certificateholders of such
Series or Class on the first
Distribution Date in the Rapid
Amortization Period. See
"Description of the
Certificates--Pay Out Events" for a
discussion of the events which
might lead to commencement of the
Rapid Amortization Period.
Shared Excess Finance Charge
Collections....................... If so specified in the related
Prospectus Supplement, the
Certificateholders of a Series or
any Class thereof may be entitled
to receive all or a portion of
Excess Finance Charge Collections
with respect to another Series or
Class to cover any shortfalls with
respect to amounts payable from
collections of Finance Charge
Receivables allocable to such
Series or Class. Unless otherwise
provided in the related Prospectus
Supplement, with respect to any
Series, "Excess Finance Charge
Collections" for any Monthly Period
will equal the excess of
collections of Finance Charge
Receivables and certain other
amounts allocated to the Investor
Interest of such Series or Class
over the sum of (i) interest
accrued for the current month
("Monthly Interest") and overdue
Monthly Interest on the
Certificates of such Series or
Class, (ii) accrued and unpaid
Investor Servicing Fees with
respect to such Series or Class,
(iii) the Investor Default Amount
with respect to such Series or
Class, (iv) unreimbursed Investor
Charge-Offs with respect to such
Series or Class and (v) other
amounts specified in the related
Prospectus Supplement. See
"Description of the
Certificates--Shared Excess Finance
Charge Collections," "--Application
of Collections," "--Defaulted
Receivables; Rebates and Fraudulent
Charges" and "--Investor
Charge-Offs."
Shared Collections of Principal
Receivables....................... If so specified in the related
Prospectus Supplement, to the
extent that collections of
Principal Receivables and certain
other amounts that are allocated to
the Investor Interest of any Series
are not needed to make payments or
deposits with respect to such
Series, such collections may be
applied to cover principal payments
due to or for the benefit of
Certificateholders of another
Series. Any such reallocation will
not result in a reduction in the
Invested Amount of the Series to
which such collections were
initially allocated. See
"Description of the Certifi-
cates--Shared Collections of
Principal Receivables."
Funding Period...................... The Prospectus Supplement relating
to a Series of Certificates may
specify that for a period beginning
on the Closing Date and ending on a
specified date before the
commencement of an Amortization
Period with respect to such Series
(the "Funding Period"), the
aggregate amount of Principal
Receivables in the Trust allocable
to such Series may be less than the
aggregate principal amount of the
Certificates of such Series and
that the amount of such deficiency
(the "Pre-Funding Amount") will be
held in a trust account established
with the Trustee for the benefit of
Certificateholders of such Series
(the "Pre-Funding Account") pending
the transfer of additional
Principal Receivables to the Trust
or pending the reduction of the
Invested Amounts of other Series.
The related Prospectus Supplement
will specify the initial Invested
Amount on the Closing Date with
respect to such Series, the
aggregate principal amount of the
Certificates of such Series (the
"Full Invested Amount") and the
date by which the Invested Amount
is expected to equal the Full
Invested Amount. The Invested
Amount of such a Series will
increase as Principal Receivables
are created or as the Invested
Amounts of other Series are
reduced. The Invested Amount may
also decrease due to Investor
Charge-Offs.
During the Funding Period, funds on
deposit in the Pre-Funding Account
for a Series of Certificates will
be withdrawn and paid to the
Transferor or its assignees to the
extent of any increases in the
Invested Amount. In the event that
the Invested Amount does not for
any reason equal the Full Invested
Amount by the end of the Funding
Period, any amount remaining in the
Pre-Funding Account and any
additional amounts specified in the
related Prospectus Supplement will
be payable to the
Certificateholders of such Series
in a manner and at such time as set
forth in the related Prospectus
Supplement.
If so specified in the related
Prospectus Supplement, monies in
the Pre-Funding Account with
respect to any Series will be
invested by the Trustee in eligible
investments or will be subject to a
guaranteed rate or investment
agreement or other similar
arrangement, and investment
earnings and any applicable payment
under any such investment
arrangement will be applied to pay
interest on the Certificates of
such Series. See "Description of
the Certificates--Funding Period."
Companion Series.................... If so specified in the related
Prospectus Supplement, a Series of
Certificates may be paired with
another Series (a "Companion
Series"). The Prospectus Supplement
for such Series and the Prospectus
Supplement for the Companion Series
will each specify the relationship
between the Series. See
"Description of the
Certificates--Companion Series."
Enhancement......................... Enhancement with respect to a
Series or any Class thereof may be
provided as specified in the
related Prospectus Supplement.
The type, characteristics and
amount of the Enhancement will be
determined based on several
factors, including the
characteristics of the Receivables
and Accounts underlying or
comprising the Trust Portfolio as
of the Closing Date with respect to
any Series, and will be established
on the basis of requirements of
each Rating Agency rating the
Certificates of such Series. If so
specified in the related Prospectus
Supplement, any such Enhancement
will apply only in the event of
certain types of losses and the
protection against losses provided
by such Enhancement will be
limited. See "Risk
Factors--Certificate Rating" and
"Enhancement."
Optional Repurchase................. With respect to each Series of
Certificates, the Invested Amount
will be subject to optional
repurchase by the Transferor on any
Distribution Date after 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 Supplement, if
certain conditions set forth in the
related Pooling and Servicing
Agreement are met. Unless otherwise
specified in the related Prospectus
Supplement, the repurchase price
will be equal to the Invested
Amount plus accrued and unpaid
interest on the Certificates. See
"Description of the
Certificates--Final Payment of
Principal; Termination."
Tax Status.......................... Except to the extent otherwise
specified in the related Prospectus
Supplement, it is anticipated
that Special Tax Counsel will be of
the opinion that the Offered
Certificates of such Series will be
characterized as indebtedness for
Federal income tax purposes. Except
to the extent otherwise specified
in the related Prospectus
Supplement, the Certificate Owners
will agree to treat the Offered
Certificates as debt for Federal
income tax purposes. See "Certain
U.S. Federal Income Tax Conse-
quences" for additional information
concerning the application of
Federal income tax laws.
ERISA Considerations................ Under regulations issued by the
Department of Labor, the Trust's
assets would not be deemed "plan
assets" of any employee benefit
plan holding interests in the
Certificates of a Series if certain
conditions are met. If the Trust's
assets were deemed to be "plan
assets" of an employee benefit
plan, there is uncertainty as to
whether existing exemptions from
the "prohibited transaction" rules
of the Employee Retirement Income
Security Act of 1974, as amended
("ERISA"), would apply to all
transactions involving the
Trust's assets. No assurance can be
made with respect to any offering
of the Certificates of any Series
that the conditions which would
allow the Trust assets not to be
deemed "plan assets" will be met,
although the intention of the
Underwriters (but not their
assurance) as to whether the
Certificates of a particular Series
will be "publicly-offered
securities", and therefore eligible
for an ERISA exemption, will be set
forth in the related Prospectus
Supplement. Accordingly, employee
benefit plans contemplating
purchasing interests in
Certificates should consult their
counsel before making a purchase.
See "ERISA Considerations."
Certificate Rating.................. It will be a condition to the
issuance of each Series of
Certificates or Class thereof
offered pursuant to this Prospectus
and the related Prospectus
Supplement that they be rated in
one of the four highest rating
categories by at least one
nationally recognized statistical
rating organization (each such
rating organization rating any
Series, a "Rating Agency"). The
rating or ratings applicable to the
Certificates of each Series or
Class thereof offered hereby will
be set forth in the related
Prospectus Supplement.
A rating is not a recommendation to
buy, sell or hold securities and
may be subject to revision or
withdrawal at any time by the
assigning Rating Agency. Each
rating should be evaluated
independently of any other rating.
See "Risk Factors--Certificate
Rating."
Listing............................. If so specified in the Prospectus
Supplement relating to a Series,
application will be made to list
the Certificates of such Series, or
all or a portion of any Class
thereof, on the Luxembourg Stock
Exchange or any other specified
exchange.
RISK FACTORS
Limited Liquidity. It is anticipated that, to the extent
permitted, the underwriters of any Series of Certificates offered hereby
will make a market in such Certificates, but in no event will any such
underwriter be under an obligation to do so. There is no assurance that a
secondary market will develop with respect to the Certificates of any
Series offered hereby, or if it does develop, that it will provide
Certificateholders with liquidity of investment or that it will continue
for the life of such Certificates.
Certain Legal Aspects. While the Transferor has transferred and
will transfer interests in the Receivables to the Trust, a court could
treat such transactions as an assignment of collateral as security for the
benefit of holders of certificates issued by the Trust. The Transferor
represents and warrants in the Pooling and Servicing Agreement that the
transfer of the Receivables to the Trust is either a valid transfer and
assignment of the Receivables to the Trust or the grant to the Trust of a
security interest in the Receivables. The Transferor has taken and will
take certain actions as are required to perfect the Trust's security
interest in the Receivables and warrants that if the transfer to the Trust
is deemed to be a grant to the Trust of a security interest in the
Receivables, the Trustee will have a first priority perfected security
interest therein. Nevertheless, if the transfer of the Receivables to the
Trust is deemed to create a security interest therein, a tax or government
lien on property of the Transferor arising before Receivables come into
existence may have priority over the Trust's interest in such Receivables,
and, if the FDIC were appointed receiver of the Transferor, the receiver's
administrative expenses may also have priority over the Trust's interest in
such Receivables. In Octagon Gas Systems, Inc. v. Rimmer, 995 F.2d 948
(10th Cir. 1993), cert. denied, 114 S. Ct. 554 (1993), the United States
Court of Appeals for the 10th Circuit suggested that even where a transfer
of accounts from a seller to a buyer constitutes a "true sale," the
accounts would nevertheless constitute property of the seller's estate in a
bankruptcy of the seller. If the Transferor were to be placed into
receivership and a court were to follow the Octagon court's reasoning,
Certificateholders might experience delays in payment or possibly losses in
their investment in the Certificates. Counsel to the Transferor has advised
the Transferor that the facts of the Octagon case are distinguishable from
those in the sale transactions between the Transferor and the Trust and the
reasoning of the Octagon case appears to be inconsistent with established
precedent and the Uniform Commercial Code. See "Certain Legal Aspects of
the Receivables--Transfer of Receivables."
If, upon the insolvency of the Transferor, the Transferor were to
be placed into conservatorship or receivership, the FDIC as conservator or
receiver would have the power to repudiate contracts of, and to request a
stay of up to 90 days of any judicial action or proceeding involving, the
Transferor. With respect to the appointment of a receiver or conservator
for the Transferor, subject to certain qualifications, a valid perfected
security interest of the Trustee in the Receivables should be enforceable
(to the extent of the Trust's "actual direct compensatory damages" as
described below) and payments to the Trust with respect to the Receivables
(up to the amount of such damages) should not be subject to an automatic
stay of payment or to recovery by such a conservator or receiver. If,
however, the FDIC were to assert that the security interest was unperfected
or unenforceable, or were to require the Trustee to establish its right to
those payments by submitting to and completing the statutory administrative
claims procedure, or the FDIC were to request a stay of judicial
proceedings with respect to the Transferor, delays in payments on the
Certificates and possible reductions in the amount of those payments could
occur. In the event of a repudiation of obligations by the FDIC, a claim
for the repudiated obligation is limited to "actual direct compensatory
damages" determined as of the date of the appointment of the FDIC as
conservator or receiver. The FDIC has not adopted a formal policy statement
on "actual direct compensatory damages" with respect to collateralized
borrowings of banks that are repudiated. The Transferor believes that the
general practice of the FDIC in such circumstances is to permit the
collateral to be applied to pay the outstanding principal owed plus
interest accrued at the contract rate up to the date of payment, together
with the costs of liquidation of the collateral if provided for in the
contract. In one case, however, involving the repudiation by the Resolution
Trust Corporation (the "RTC") of certain secured zero-coupon bonds issued
by a savings association, a United States federal district court held that
"actual direct compensatory damages" in the case of a marketable security
meant the market value of the repudiated bonds as of the date of
repudiation. If that court's view were applied to determine the Trust's
"actual direct compensatory damages" in the event the FDIC repudiated the
Transferor's obligations under the Pooling and Servicing Agreement, the
amount paid to Certificateholders could, depending upon circumstances
existing on the date of the repudiation, be less than the principal of the
Certificates and the interest accrued thereon to the date of payment. See
"Certain Legal Aspects of the Receivables--Certain Matters Relating to
Receivership." If the FDIC were appointed as conservator or receiver for
the Transferor, under the Pooling and Servicing Agreement new Principal
Receivables would not be transferred to the Trust and the Trustee would
sell the portion of the Receivables allocable in accordance with the
Pooling and Servicing Agreement to each Series (unless holders of more than
50% of the principal amount of each Class of such Series instruct
otherwise), thereby causing early termination of the Trust and a loss to
certificateholders (including the Certificateholders) if the net proceeds
allocable to certificateholders from such sale, if any, were insufficient
to pay certificateholders (including the Certificateholders) in full. Upon
the occurrence of a Pay Out Event, if the FDIC were appointed as
conservator or receiver for the Transferor and no Pay Out Event other than
such conservatorship, receivership or insolvency of the Transferor exists,
the FDIC may have the power to prevent the early sale, liquidation or
disposition of the Receivables and the commencement of the Rapid
Amortization Period. In addition, the FDIC as conservator or receiver for
the Transferor may have the power to cause early payment of the
Certificates. See "Certain Legal Aspects of the Receivables--Certain
Matters Relating to Receivership."
If, upon the insolvency of the Servicer, the Servicer were to be
placed into conservatorship or receivership, the FDIC as conservator or
receiver would have the power to repudiate contracts of, and to request a
stay of up to 90 days of any judicial action or proceeding involving, the
Servicer. In the event of a Servicer Default, if the FDIC were appointed as
conservator or receiver for the Servicer, and no Servicer Default other
than such conservatorship or receivership or insolvency of the Servicer
exists, the FDIC may have the power to prevent a transfer of servicing to a
successor Servicer.
The Accounts and the Receivables are subject to numerous Federal
and state consumer protection laws which impose requirements on the making
and collection of consumer loans. Such laws, as well as any new laws or
rulings which may be adopted, may adversely affect the Servicer's ability
to collect on the Receivables or maintain previous levels of finance
charges, annual cardholder fees and other fees, and failure by the Servicer
to comply with such requirements also could adversely affect the Servicer's
ability to collect on the Receivables. Pursuant to the Pooling and
Servicing Agreement, the Transferor has covenanted to accept the transfer
of all Receivables in an Account if any Receivable in such Account does not
comply with all requirements of law or if the proceeds of any Receivable in
such Account are not available to the Trust. The Transferor has made and
will make certain other representations and warranties relating to the
validity and enforceability of the Accounts and the Receivables. However,
the Trustee has not made and will not make any examination of the
Receivables or the records relating thereto for the purpose of establishing
the presence or absence of defects, compliance with such representations
and warranties, or for any other purpose. The sole remedy if any such
representation or warranty is breached and such breach continues beyond the
applicable cure period, if any, is that the Transferor will generally be
obligated to accept the transfer of all Receivables in the Account affected
thereby. In addition, in the event of a breach of certain representations
and warranties, the Transferor may be obligated to accept the reassignment
and transfer of the entire Trust Portfolio. See "Description of the
Certificates--Representations and Warranties" and "Certain Legal Aspects of
the Receivables--Consumer Protection Laws."
Application of Federal and state bankruptcy and debtor relief laws
would affect the interests of the Certificateholders in the Receivables, if
such laws result in any Receivables being written off as uncollectible. See
"Description of the Certificates--Defaulted Receivables; Rebates and
Fraudulent Charges."
From time to time Congress and certain state and local
legislatures have considered legislation that would limit the finance
charges and fees that may be charged on credit card accounts. Although such
legislation has not been enacted, there can be no assurance that such
legislation will not become law in the future. The potential effect of any
legislation which limits the amount of finance charges or fees that may be
charged on credit card balances could be to reduce the Portfolio Yield on
the Accounts. If such Portfolio Yield is reduced, a Pay Out Event with
respect to a Series may occur. See "Description of the Certificates--Pay
Out Events." There can be 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 environment increasingly
focused on the interest and fees charged to consumers for credit card
services. As new card issuers enter the market and issuers seek to expand
their shares of the market, there is increased use of advertising, target
marketing, pricing competition and incentive programs, all of which may
adversely impact issuer profit margins. The MasterCard and VISA
organization do not require adherence to specific underwriting standards,
and therefore credit card issuers may compete on the basis of individual
account solicitation and underwriting criteria. If cardholders choose to
utilize competing sources of credit, the amount and rate of new Receivables
generated in the Accounts may be reduced and certain purchase and payment
patterns with respect to Receivables may be affected. The size of the Trust
will be dependent upon the Transferor's continued ability to generate new
Receivables. If the amount of new Receivables generated declines
significantly, Receivables from Additional Accounts (to the extent
available) may be added to the Trust, as described below, or a Pay Out
Event could occur, in which the Rapid Amortization Period would commence.
See "Description of the Certificates--Pay Out Events."
Payments and Maturity. The Receivables may be paid at any time and
there is no assurance that there will be additional Receivables created in
the Accounts or that any particular pattern of cardholder repayments will
occur. The commencement and continuation of a Controlled Amortization
Period or an Accumulation Period for a Series or a Class thereof will be
dependent upon the continued generation of new Receivables to be conveyed
to the Trust. A significant decline in the amount of Receivables generated
could result in the occurrence of a Pay Out Event for one or more Series
and the commencement of the Rapid Amortization Period for each such Series.
Certificateholders should be aware that the Transferor's ability to
continue to compete in the current industry environment will affect the
Transferor's ability to generate new Receivables to be conveyed to the
Trust and may also affect payment patterns. In addition, changes in
periodic finance charges can alter cardholder monthly payment rates. A
significant decrease in the cardholder monthly payment rate could slow the
return of principal during any Amortization Period. See "Maturity
Assumptions."
Social, Technological and Economic Factors. Changes in card use
and payment patterns by cardholders may result from a variety of social,
technological and economic factors. Social factors include potential
changes in consumers' attitudes toward financing purchases with debt.
Technological factors include new methods of payment, such as debit cards.
Economic factors include the rate of inflation, unemployment levels,
personal bankruptcy levels and relative interest rates. Cardholders whose
accounts are included in the Bank Portfolio have addresses in all 50
states, the District of Columbia and other United States territories and
possessions. Adverse changes in economic conditions in the areas where the
largest number of cardholders are located could have a direct impact on the
timing and amount of payments on the Certificates. See the Composition by
Geographic Distribution-Trust Portfolio table in "The Receivables" in the
Prospectus Supplement. The Transferor, however, is unable to determine and
has no basis to predict whether, or to what extent, social, technological
or economic factors will affect future card use or repayment patterns.
Effect of Subordination. With respect to Certificates of a Series
having a Class or Classes of Subordinated Certificates, unless otherwise
specified in the related Prospectus Supplement, payments of principal in
respect of the Subordinated Certificates of a Series will not commence
until after the final principal payment with respect to the Senior
Certificates of such Series. In addition, if so specified in the related
Prospectus Supplement, if collections of Finance Charge Receivables or
other amounts allocable to the Certificates of a Series are insufficient to
cover required amounts due with respect to the Senior Certificates of such
Series, the Invested Amount with respect to the Subordinated Certificates
will be reduced, resulting in a reduction of the portion of collections of
Finance Charge Receivables allocable to the Subordinated Certificates in
future periods and a possible delay or reduction in principal and interest
payments on the Subordinated Certificates. Moreover, if so specified in the
related Prospectus Supplement, in the event of a sale of Receivables in the
Trust due to the insolvency of the Transferor or the appointment of a
conservator or receiver for the Transferor, the portion of the net proceeds
of such sale allocable to pay principal to the Certificates of a Series
will be used first to pay amounts due to the Senior Certificateholders and
any remainder will be used to pay amounts due to the Subordinated
Certificateholders.
Transferor's Ability to Change Terms of the Receivables. Pursuant
to the Pooling and Servicing Agreement, the Transferor does not transfer
the Accounts to the Trust, but only the Receivables arising in the
Accounts. As owner of the Accounts, the Transferor has the right to
determine the monthly periodic finance charges and other fees which will be
applicable from time to time to the Accounts, to alter the minimum monthly
payment required on the Accounts and to change various other terms with
respect to the Accounts. A decrease in the monthly periodic finance charge
and other fees would decrease the effective yield on the Accounts and could
result in the occurrence of a Pay Out Event with respect to a Series and
the commencement of the Rapid Amortization Period with respect to a Series.
In addition, under the Pooling and Servicing Agreement, the Transferor may
change the terms of the contracts relating to the Accounts or its policies
and procedures with respect to the servicing thereof (including without
limitation the reduction of the required minimum monthly payment and the
calculation of the amount or the timing of finance charges, fees, and
charge offs), if such change (i) would not, in the reasonable belief of the
Transferor, cause a Pay Out Event for any Series to occur, and (ii) is made
applicable to the comparable segment of revolving credit card accounts
owned and serviced by the Transferor which have characteristics the same as
or substantially similar to the Accounts which are subject to such change.
In servicing the Accounts, the Servicer is also required to exercise the
same care and apply the same policies that it exercises in handling similar
matters for its own comparable accounts. Except as specified above, there
are no restrictions on the Transferor's ability to change the terms of the
Accounts. There can be no assurance that changes in applicable law, changes
in the marketplace or prudent business practice might not result in a
determination by the Transferor to take actions which would change this or
other Account terms.
Master Trust Considerations. The Trust, as a master trust, has
previously issued the Series specified on Annex I to the Prospectus
Supplement and is expected to issue additional Series from time to time.
While the Principal Terms of each Series will be specified in a Supplement,
the provisions of a Supplement and, therefore, the terms of any additional
series, will not be subject to the prior review or consent of holders of
the certificates of any previously issued Series. Such Principal Terms may
include: methods for determining applicable investor percentages and
allocating collections, provisions creating different or additional
security or other Enhancement, different classes of certificates (including
subordinated classes of certificates), provisions subordinating such Series
to another Series (if the Supplement relating to such Series so permits) or
other Series to such Series, and any other amendment or supplement to the
Pooling and Servicing Agreement which is made applicable only to such
Series. See "Description of the Certificates--Exchanges." It is a condition
precedent to issuance of any additional series that each Rating Agency that
has rated any outstanding Series at the request of the Transferor deliver
written confirmation to the Trustee that the Exchange will not result in
such Rating Agency reducing or withdrawing its rating on any outstanding
Series. There can be no assurance, however, that the Principal Terms of any
other Series, including any Series issued from time to time hereafter,
might not have an impact on the timing and amount of payments received by a
Certificateholder. See "Description of the Certificates--Exchanges."
Control. Subject to certain exceptions, the Certificateholders of
each Series may take certain actions, or direct certain actions to be
taken, under the Pooling and Servicing Agreement or the related Series
Supplement. However, the Pooling and Servicing Agreement or related
Supplement may provide that under certain circumstances the consent or
approval of a specified percentage of the aggregate Invested Amount of
other Series or of the Invested Amount of a specified Class of such other
Series will be required to direct certain actions, including amending the
Pooling and Servicing Agreement in certain circumstances.
Certificateholders of such other Series may have interests which do not
coincide in any way with the interests of Certificateholders of the subject
Series.
Certificate Rating. Any rating assigned to the Certificates of a
Series or a Class by a Rating Agency will reflect such Rating Agency's
assessment of the likelihood that Certificateholders of such Series or
Class will receive the payments of interest and principal required to be
made under the Pooling and Servicing Agreement and will be based primarily
on the value of the Receivables in the Trust and the availability of any
Enhancement with respect to such Series or Class. However, any such rating
will not, unless otherwise specified in the related Prospectus Supplement
with respect to any Class or Series offered hereby, address the likelihood
that the principal of, or interest on, any Certificates of such Class or
Series will be paid on a scheduled date. In addition, any such rating will
not address the possibility of the occurrence of a Pay Out Event with
respect to such Class or Series or the possibility of the imposition of
United States withholding tax with respect to non-U.S. Certificateholders.
The rating will not be a recommendation to purchase, hold or sell
Certificates of such Series or Class, and such rating will not comment as
to the marketability of such Certificates, any market price or suitability
for a particular investor. There is no assurance that any rating will
remain for any given period of time or that any rating will not be lowered
or withdrawn entirely by a Rating Agency if in such Rating Agency's
judgment circumstances so warrant.
The Transferor will request a rating of the Certificates offered
hereby of each Series by at least one Rating Agency. There can be no
assurance as to whether any rating agency not requested to rate the
Certificates will nonetheless issue a rating with respect to any Series of
Certificates or Class thereof, and, if so, what such rating would be. A
rating assigned to any Series of Certificates or Class thereof by a rating
agency that has not been requested by the Transferor to do so may be lower
than the rating assigned by the Rating Agency or Rating Agencies pursuant
to the Transferor's request.
Enhancement. Although Enhancement may be provided with respect to
a Series of Certificates or any Class thereof, the amount available will be
limited and will be subject to certain reductions. If the amount available
under any Enhancement is reduced to zero, Certificateholders of the Series
or Class thereof covered by such Enhancement will bear directly the credit
and other risks associated with their undivided interest in the Trust. See
"Enhancement."
Book-Entry Registration. Unless otherwise specified in the related
Prospectus Supplement, the Certificates offered hereby of each Series
initially will be represented by one or more certificates registered in the
name of Cede, the nominee for DTC, and will not be registered in the names
of the Certificate Owners or their nominees. Unless and until Definitive
Certificates are issued for a Series, Certificate Owners relating to such
Series will not be recognized by the Trustee as Certificateholders, as that
term will be used in the Pooling and Servicing Agreement. Hence, until such
time, Certificate Owners will only be able to exercise the rights of
Certificateholders indirectly through DTC, Cedel or Euroclear and their
participating organizations. Because DTC can only act on behalf of
individuals who are Participants in DTC's system (or participate indirectly
through a Participant), the ability of a Certificate Owner to pledge its
Certificates to persons or entities that do not participate in the DTC
system, or otherwise take actions in respect of such Certificates, may be
limited due to the lack of a physical certificate representing such
Certificates. See "Description of the Certificates--Book-Entry
Registration" and "--Definitive Certificates."
THE TRUST
The Trust was formed, in accordance with the laws of the State of
Delaware, pursuant to the Pooling and Servicing Agreement. The Trust was
formed for the transaction relating to the issuance of the Series 1992-1
Certificates, this transaction and similar transactions, as contemplated by
the Pooling and Servicing Agreement, and prior to formation had no assets
or obligations. The Trust will not engage in any business activity, other
than as described herein and in the related Prospectus Supplements, but
rather will only acquire and hold the Receivables, issue (or cause to be
issued) the Certificates, the Exchangeable Transferor Certificate and
certificates representing additional Series or Classes of Series and
related activities (including, with respect to any Series or Class of such
Series, entering into any Enhancement agreement) and make payments thereon.
As a consequence, the Trust is not expected to have any need for additional
capital resources.
THE BANK'S CREDIT CARD ACTIVITIES
General
The Receivables which the Bank has conveyed and will convey to the
Trust pursuant to the Pooling and Servicing Agreement have been and will be
generated from transactions made by holders of selected VISA and MasterCard
credit card accounts. The Bank currently services the credit card accounts.
Certain data processing and administrative functions associated with such
servicing are performed on behalf of the Bank by First Data Resources, Inc.
("FDR"). See "--Description of FDR."
The following discussion describes certain terms and
characteristics of the accounts in the Bank Portfolio from which the
Accounts were selected. The Eligible Accounts from which the Accounts were
selected do not represent the entire Bank Portfolio. In addition,
Additional Accounts may consist of Eligible Accounts which are not
currently in existence and which are selected using different criteria from
those used in selecting the Accounts already included in the Trust. See
"Description of the Certificates--Addition of Accounts." Consequently,
actual loss and delinquency, revenue and monthly payment rate experience
with respect to the Eligible Accounts and the Additional Accounts may be
different from such experience for the Bank Portfolio described in the
Prospectus Supplement.
Growth Strategy and Origination. To achieve steady and diversified
growth, the Bank originates credit card accounts through several different
programs: (i) First USA brand products, (ii) partnership products such as
affinity group, financial institutions, sports marketing and co-branding
programs, and (iii) the acquisition of credit card portfolios from other
financial institutions. These programs (excluding portfolio acquisitions)
use direct mail, telemarketing, take-one application displays, events,
media and the Internet as channels to market the Bank's products.
Management believes that such multi-faceted account origination programs
help to ensure balanced and reliable growth for the Bank.
The First USA brand direct solicitation program represents the
greatest share of new account origination. The Bank has historically
emphasized direct solicitation as a source of new accounts as its expertise
has increased through experience and the benefit of numerous marketing,
credit and risk management tests. Currently, the Bank conducts national
direct mail and telemarketing solicitation to geographic areas that have
been selected from a process that includes a rigorous analysis of the
economic indicators of each region of the nation and targets the most
favorable regions. The Bank carefully targets consumers through various
datamining methods and targeting models. The Bank aligns the product
offering with the target customer segment along with the number and
sequence of offers in order to maximize penetration, response rates and
usage.
The affinity group, financial institutions and sports marketing
programs are partnership programs which involve the active participation of
endorsing organizations. The affinity group marketing program involves the
solicitation of prospective individual cardmembers from identifiable groups
with a common interest or affiliation. In this program, the Bank has
entered into exclusive marketing arrangements with a number of affinity
groups. The Bank typically pays referral compensation to the affinity
groups for each new account generated. The Bank has a similar relationship
with certain professional sports organizations.
In its financial institutions program, the Bank maintains
exclusive marketing partnership relationships with banks, as well as
mortgage companies, insurance companies, brokerage firms and other
financial institutions. Through this program, participating financial
institutions offer Visa and MasterCard products to their customers without
becoming primary issuers. In addition to placing the name of the
participating financial institution on the front of the plastic card, the
Bank typically pays a referral fee for each account. The Bank believes that
the endorsement of the participating financial institution reduces overall
origination costs and encourages cardmember usage.
The Bank also participates in co-branding, which involves a
partnership between the Bank and a consumer products or services company to
solicit the customers of such company. Companies such as airlines, oil and
gas companies, 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 partners in
these various programs. Management believes this network is one of the
largest of its kind in the nation.
Underwriting Procedures. Generally, the credit risk of each
applicant is evaluated by application of a credit scoring system, which is
intended to provide a general indication, based on the information
available, of the applicant's willingness and ability to repay his or her
obligations. Most applications are scored based on the information received
on the application as well as data obtained from an independent credit
reporting agency. In select cases, based on certain criteria, including
likelihood of fraud, and in accordance with criteria established by Bank
management, employment and earnings are verified by telephone. Credit
limits are determined based on income and score or, in the case of
applications that have not been scored, based on income and certain
information obtained from the application and the independent credit
reporting agency. Cardholder requests for increased credit limits are
evaluated based on a current credit bureau report, updated application
data, and prior account performance. In addition, credit limit increases
are effected periodically by the Bank for all cardholders meeting specific
criteria.
For preapproved solicitations, the Bank generally purchases
prospect names that meet established credit criteria from credit bureaus.
These lists are further edited and matched against internal and external
sources to insure optimal quality and accuracy. The Bank then mails
preapproved solicitation packages requiring only the signature and a brief
amount of information from the prospect. Preapproved solicitations are
targeted to high quality prospects and exhibit similar credit quality
results as compared to non-preapproved solicitations.
For non-preapproved solicitations, the Bank purchases prospect
names from a variety of sources and then edits the list utilizing internal
and external sources to insure quality and accuracy. The prospective
customers on the final list are mailed solicitations which include full
applications. Respondents are approved or declined based on both the
demographic characteristics drawn from the application and a credit bureau
check.
Portfolio Acquisitions. The Bank has made portfolio acquisitions
in the past, but does not plan to rely on such transactions in order to
achieve growth and earnings targets. While acquisitions are possible in the
future, management believes that such transactions should be pursued only
if favorable terms can be negotiated. See "The Bank and 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 acquired by
the Bank. Such accounts and any accounts acquired in the future may become
Additional Accounts provided that, at such time, they constitute Eligible
Accounts. See "The Receivables," "Description of the Certificates--Transfer
and Assignment of Receivables" and "--Representations and Warranties."
Description of FDR
With respect to the Accounts, certain data processing and
administrative functions associated with servicing the Receivables will
initially be performed by FDR. If FDR were to fail or become insolvent,
delays in processing and recovery of information with respect to charges
incurred by the respective cardholders could occur, and the replacement of
the services FDR currently provides to the Bank could be time-consuming. As
a result, delays in payments to Certificateholders could occur.
FDR is located in Omaha, Nebraska and provides computer data
processing services primarily to the bankcard industry. FDR is a subsidiary
of First Data Corp.
The Bank utilizes a variety of the services provided by FDR in
originating and servicing the Bank's VISA and MasterCard accounts,
including provision of network interface to other card processors through
Visa USA Incorporated and MasterCard International Incorporated. This
network provides cardholder authorizations in addition to a conduit for
funds transfer and settlement.
Billing and Payments
Cardholder Agreement. Each cardholder is subject to an agreement
with the Bank governing the terms and conditions of the related VISA or
MasterCard account. Pursuant to each such agreement, the Bank reserves the
right, upon advance notice to the cardholder, to add or to change any
terms, conditions, services or features of its VISA or MasterCard accounts
at any time, including increasing or decreasing periodic finance charges,
other charges or minimum payment terms. The agreement with each cardholder
provides that, subject to the requirements of applicable law, after notice
to a cardholder of any such new or changed terms, such new or changed terms
will become effective at the time stated in such notice and will apply to
all outstanding unpaid indebtedness as well as new transactions.
A cardholder may use the credit card to purchase or lease goods or
services wherever the card is honored ("Purchases") or to obtain cash loans
("Cash Advances") from any financial institution that accepts the card.
Cash Advances may also be obtained through the use of "Credit Line Checks"
issued by the Bank which may be completed and signed by the cardholder in
the same way as a regular personal check.
Billing, Payments and Fees. A billing statement is sent to each
cardholder at the end of each monthly billing cycle in which the account
has a debit or credit balance of more than one dollar or if a finance
charge has been imposed. The Bank may assess a late payment fee if it does
not receive the minimum payment by the payment due date shown on the
monthly billing statement, but generally does not assess such fee if the
minimum payment is received by the next billing date. The Bank may assess a
return check fee for each payment check that is dishonored or that is
unsigned or otherwise irregular, an overlimit fee for Purchases or Cash
Advances that cause the credit line to be exceeded and administrative fees
for certain functions performed at the request of the cardholder. Unless
otherwise arranged between the Bank and the cardholder, any late payment
fee, return check fee or administrative fee is added to the account and
treated as a Purchase. In some cases, the Bank charges a nonrefundable
Annual Membership Fee.
Monthly Periodic Finance Charges are not assessed in most
circumstances on purchases if all balances shown in the billing statement
are paid by the payment due date. Periodic Finance Charges accrue on new
Purchases from the day that they are posted to the account. Finance charges
accrue on Cash Advances from the later of the day that they are made and
the first day of the billing cycle during which they were posted to the
account; or, if a Credit Line Check is used, the day that the check is
presented for payment to the Bank. Aggregate monthly finance charges for
each account consist of the sum of the Cash Advance finance charge (not
applicable for certain accounts) for each new Cash Advance posted to the
account 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 Periodic Rate") multiplied by the average daily balance.
The Bank issues accounts with fixed Monthly Periodic Rates and accounts
with floating Monthly Periodic Rates that adjust periodically according to
an index.
The foregoing provisions apply with respect to cardholders that
have entered into one of the Bank's standard agreements by, in the case of
a new account, signing an application or, in the case of an account
acquired by the Bank from another institution, accepting the terms of the
Bank's agreement in writing or by using the credit card after disclosure
that the account will be governed by such terms. If the cardholder of an
account acquired by the Bank from another institution has not entered into
one of the Bank's standard agreements, the terms of the account may
continue to be governed by the agreement between the cardholder and the
seller of the account, which may differ in material respects from the
provisions described above.
Delinquencies and Charge Offs
An account is contractually delinquent if the minimum payment is
not received by the payment due date. An account is not treated as
delinquent by the Bank if the minimum payment is received by the next
billing date. Efforts to collect delinquent credit card receivables
currently are made by the Bank's collection department personnel with
regional collection units located in Wilmington, Delaware, Baton Rouge,
Louisiana and Dallas, Texas. Collection activities include statement
messages, telephone calls and formal collection letters. Collectors
generally initiate telephone contact with cardholders whose accounts have
become 5 days or more delinquent. In the event that initial telephone
contact fails to resolve the delinquency, the Bank continues to contact the
cardholder by telephone and by mail. The Bank may also enter into
arrangements with cardholders to extend or otherwise change payment
schedules as approved by one of the Bank's collection managers. Delinquency
levels are monitored daily by the respective collectors and aggregate
delinquency information is reported daily to senior management.
Accounts are generally charged off immediately prior to the end of
the seventh billing cycle after having become contractually past due unless
a payment has been received in an amount sufficient to bring the account
into a different delinquency category or to bring the account current.
Charge offs may occur earlier in some circumstances, as in the case of
bankrupt cardholders. At the time of charge off an evaluation is made on a
case by case basis whether to pursue further remedies. In most cases
outside collection agencies and, in some cases, outside attorneys, are
engaged. In some cases charged off accounts are sold to outside collection
agencies. The credit evaluation, servicing and charge off policies and
collection practices of the Bank may change from time to time in accordance
with the Bank's business judgment and applicable law.
The Bank has a policy of restoring or "reaging" a delinquent
account to current status when the cardholder has made three consecutive
payments and, in the collector's judgment, has the ability to keep the
account current. A collector may recommend that an account be reaged in
other circumstances. All reaging must be approved by a supervisor and an
account may be reaged no more than once per year.
Interchange
Creditors participating in the VISA and MasterCard associations
receive certain fees ("Interchange") as partial compensation for taking
credit risk, absorbing fraud losses and funding receivables for a limited
period prior to initial billing. Under the VISA and MasterCard systems a
portion of this Interchange in connection with cardholder Purchases is
collected by banks that issue credit cards by applying a discount to the
amount paid by such banks to the banks that clear the related transactions
for merchants. Interchange will be allocated to the Trust by treating 1.3%
(subject to adjustment at the option of the Transferor upon the
satisfaction of certain conditions as described herein in "Description of
the Certificates--Discount Receivables," which adjusted percentage, if
applicable, will be specified in the applicable Prospectus Supplement) of
collections on the Receivables (whether arising from Purchases or Cash
Advances), other than collections with respect to Periodic Finance Charges,
Annual Membership Fees and Other Charges, as collections of Discount
Receivables.
Recoveries
The Transferor and the Servicer will be required, pursuant to the
terms of the Pooling and Servicing Agreement, to transfer to the Trust all
amounts received by the Transferor or the Servicer with respect to
Receivables in Defaulted Accounts, including amounts received by the
Transferor or the Servicer from the purchaser or transferee with respect to
the sale or other disposition of Receivables in Defaulted Accounts
("Recoveries"). In the event of any such sale or other disposition of
Receivables, Recoveries will not include amounts received by the purchaser
or transferee of such Receivables but will be limited to amounts received
by the Transferor or the Servicer from the purchaser or transferee.
Collections of Recoveries will be treated as collections of Principal
Receivables; provided, however, that to the extent the aggregate amount of
Recoveries received with respect to any Monthly Period exceeds the
aggregate amount of Principal Receivables (other than Ineligible
Receivables) in Defaulted Accounts on the day such Account became a
Defaulted Account for each day in such Monthly Period, the amount of such
excess will be treated as collections of Finance Charge Receivables.
THE RECEIVABLES
The Receivables conveyed to the Trust arise in Accounts selected
from the Bank Portfolio on the basis of criteria set forth in the Pooling
and Servicing Agreement (the "Trust Portfolio"). Pursuant to the Pooling
and Servicing Agreement, the Transferor has the right, subject to certain
limitations and conditions set forth therein, to designate from time to
time Additional Accounts and to transfer to the Trust all Receivables of
such Additional Accounts, whether such Receivables are then existing or
thereafter created. Any Additional Accounts designated pursuant to the
Pooling and Servicing Agreement must be Eligible Accounts as of the date
the Transferor designates such accounts as Additional Accounts. In
addition, the Transferor is required to designate Additional Accounts (x)
to maintain the Transferor Interest so that, during any period of 30
consecutive days, the Transferor Interest averaged over that period equals
or exceeds such percentage as may be specified in any Supplement (such
percentage, the "Minimum Transferor Interest") of the average of the
aggregate amount of Principal Receivables for the same period, or (y) to
maintain, for so long as certificates of any Series (including the
Certificates) remain outstanding, an aggregate amount of Principal
Receivables in amount equal to or greater than the Minimum Aggregate
Principal Receivables. "Minimum Aggregate Principal Receivables" shall mean
(i) an amount equal to the sum of the initial invested amounts for all
Series then outstanding other than any Series of variable funding
certificates, (ii) with respect to any series of variable funding
certificates in its revolving period, the then current invested amount of
such Series and (iii) with respect to any Series of variable funding
certificates in its amortization period, the invested amount of such Series
at the end of the last day of the Revolving Period for such Series. The
Transferor will convey the Receivables then existing or thereafter created
under such Additional Accounts to the Trust. Furthermore, pursuant to the
Pooling and Servicing Agreement, the Transferor has the right (subject to
certain limitations and conditions) to designate certain Accounts and to
require the Trustee to reconvey all receivables in such Removed Accounts to
the Transferor, whether such Receivables are then existing or thereafter
created. Throughout the term of the Trust, the Accounts from which the
Receivables arise will be the Accounts designated by the Transferor on the
Original Cut Off Date plus any Additional Accounts minus any Removed
Accounts.
The Prospectus Supplement relating to each Series of Certificates
will provide certain information about the Trust Portfolio as of the date
specified. Such information will include, but not be limited to, the amount
of Principal Receivables, the amount of Finance Charge Receivables, the
range of principal balances of the Accounts and the average thereof, the
range of credit limits of the Accounts and the average thereof, the range
of ages of the Accounts and the average thereof, the geographic
distribution of the Accounts, the types of Accounts and delinquency and
loss statistics relating to the Accounts.
MATURITY ASSUMPTIONS
Unless otherwise specified in the related Prospectus Supplement,
for each Series, following the Revolving Period, collections of Principal
Receivables are expected to be distributed to the Certificateholders of
such Series or any specified Class thereof on each specified Distribution
Date during the Controlled Amortization Period, or are expected to be
accumulated for payment to Certificateholders of such Series or any
specified Class thereof during the Accumulation Period and distributed on a
Scheduled Payment Date; provided, however, that, if the Rapid Amortization
Period commences, collections of Principal Receivables will be paid to
Certificateholders in the manner described herein and in the related
Prospectus Supplement. The related Prospectus Supplement will specify the
date on which the Controlled Amortization Period or the Accumulation
Period, as applicable, will commence, the principal payments expected or
available to be received or accumulated during such Controlled Amortization
Period or Accumulation Period, or on the Scheduled Payment Date, as
applicable, the manner and priority of principal accumulations and payments
among the Classes of a Series of Certificates and the Pay Out Events which,
if any were to occur, would lead to the commencement of a Rapid
Amortization Period.
The related Prospectus Supplement will provide certain historical
data relating to payments by cardholders, total charge-offs and other
related information relating to the Bank Portfolio. There can be no
assurance that future events will be consistent with such historical data.
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 Supplement,
the net proceeds from the sale of the Certificates will be paid to the Bank
or applied to the purchase of receivables from First USA Credit Card Master
Trust II. The Bank will use such proceeds for its general corporate
purposes.
THE BANK AND 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 customers
throughout the United States. These products cover a range which includes
standard card products, those that are identified and developed through
datamining efforts, as well as products that are developed and marketed
through partnership relationships. Products include designs that are
tailored to an individual's lifestyle, profession or interest; those that
are built around affiliations, such as universities or fraternal
organizations, co-brand relationships and programs with financial
institutions; an upscale platinum card product; and the most individualized
product offering, a First USA Images Photocard.
The Bank's products feature low interest rates, specific features
and benefits, unique card design and individualized credit lines. The
Bank's strategy is to target customers through a carefully matched
combination of pricing, credit analysis and packaging. Rates, fees, other
features and credit lines offered vary depending on the profile of targeted
prospect groups. The Bank generally markets its products with low
introductory and regular rates and no annual fee.
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 conditions, 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 securities.
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. On November 8, 1996, First USA
Paymentech filed a Registration Statement on Form S-1 with the Commission
for a public offering of 6.8 million shares of First USA Paymentech common
stock. On December 17, 1996, FUSA and First USA Paymentech sold 4.3 million
and 3.0 million shares of First USA Paymentech common stock, respectively,
for $34.00 per share, which included the exercise of underwriters'
over-allotment options. As at December 31, 1996, net proceeds to FUSA from
the secondary offering were $139.8 million. Subsequent to this offering,
First USA Financial owns approximately 58% 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 sales of the Junior
Subordinated Debentures were used for general corporate purposes, including
capital contributions to operating subsidiaries.
First USA Federal Savings Bank ("First USA FSB"), a wholly-owned
subsidiary of FUSA and its newest operating unit, is primarily focused on
expanding FUSA's relationship with existing cardmembers and developing new
customer relationships which meet FUSA's credit profile. It expects to
offer financial products related to significant life events of the typical
household by using FUSA's existing distribution system as a conduit for
delivering multiple financial products. First USA FSB's portfolio of
financial products now includes auto loans, mortgages, retail certificates
of deposit, insurance and unsecured installment loans and soon is expected
to include remote banking and other financial products. FUSA expects that
these new products will create incremental revenue and strengthen
relationships with existing customers.
FUSA's other business units, conducted through other subsidiaries
of First USA Financial and First USA Paymentech, provide services that
complement the Bank's, First USA Paymentech's and First USA FSB'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 Prospectus) and the Exchangeable Transferor
Certificate. Each Series will be issued pursuant to the Pooling and
Servicing Agreement entered into by the Bank and the Trustee and a
Supplement to the Pooling and Servicing Agreement, a copy of the form of
which is filed as an exhibit to the Registration Statement of which this
Prospectus is a part. The Prospectus Supplement for each Series will
describe any provisions of the Pooling and Servicing Agreement relating to
such Series which may differ materially from the Pooling and Servicing
Agreement filed as an exhibit to the Registration Statement. The following
summaries describe certain provisions common to each Series of
Certificates. The summaries do not purport to be complete and are subject
to, and are qualified in their entirety by reference to, all of the
provisions of the related Pooling and Servicing Agreement and Supplement.
General
The Certificates of each Series will represent undivided interests
in certain assets of the Trust, including the right to the applicable
allocation percentage of all cardholder payments on the Receivables. For
each Series of Certificates, unless otherwise specified in the related
Prospectus Supplement, the Invested Amount on any date will be equal to the
Initial Invested Amount as of the related Closing Date for such Series
minus the amount of principal paid to the related Certificateholders prior
to such date and minus the amount of unreimbursed Investor Charge-Offs with
respect to such Series prior to such date. If so specified in the
Prospectus Supplement relating to any Series of Certificates, under certain
circumstances the Invested Amount may be further adjusted by the amount of
principal allocated to Certificateholders, the funds on deposit in any
specified account, and any other amount specified in the related Prospectus
Supplement.
Each Series of Certificates may consist of one or more Classes,
one or more of which may be Senior Certificates and one or more of which
may be Subordinated Certificates. Each Class of a Series will evidence the
right to receive a specified portion of each distribution of principal or
interest or both. The Invested Amount with respect to a Series with more
than one Class will be allocated among the Classes as described in the
related Prospectus Supplement. The Certificates of a Class may differ from
Certificates of other Classes of the same Series in, among other things,
the amounts allocated to principal payments, maturity date, Certificate
Rate and the availability of Enhancement.
For each Series of Certificates, payments of interest and
principal will be made on Distribution Dates or other payment dates as
specified in the related Prospectus Supplement to Certificateholders in
whose names the Certificates were registered on the record dates (each, a
"Record Date") specified in the related Prospectus Supplement. Interest
will be distributed to Certificateholders in the amounts, for the periods
and on the dates specified in the related Prospectus Supplement.
For each Series of Certificates, the Transferor initially will own
the Exchangeable Transferor Certificate. The Exchangeable Transferor
Certificate will represent the undivided interest in the Trust not
represented by the Certificates issued and outstanding under the Trust or
the rights, if any, of any Enhancement Providers to receive payments from
the Trust. The holder of the Exchangeable Transferor Certificate will have
the right to a percentage (the "Transferor Percentage") of all cardholder
payments from the Receivables in the Trust.
Unless otherwise specified in the related Prospectus Supplement,
with respect to each Series of Certificates, during the Revolving Period,
the Invested Amount will remain constant except under certain limited
circumstances. See "--Defaulted Receivables; Rebates and Fraudulent
Charges" and "--Investor Charge-Offs." The amount of Principal Receivables
in the Trust, however, will vary each day as new Principal Receivables are
created and others are paid or charged-off. The amount of the Transferor
Interest will fluctuate each day, therefore, to reflect the changes in the
amount of the Principal Receivables in the Trust. When a Series is
amortizing, the Invested Amount of such Series will generally decline as
payments of principal are distributed to the Certificateholders. As a
result, the Transferor Interest will generally increase each month during
an Amortization Period for any Series to reflect the reductions in the
Invested Amount of such Series and will also change to reflect the
variations in the amount of Principal Receivables in the related Trust. The
Transferor Interest may also be reduced as the result of an Exchange. See
"--Exchanges."
Unless otherwise specified in the related Prospectus Supplement,
Certificates of each Series initially will be represented by certificates
registered in the name of the nominee of DTC (together with any successor
depository selected by the Transferor, the "Depository") except as set
forth below. Unless otherwise specified in the related Prospectus
Supplement, with respect to each Series of Certificates, beneficial
interests in the Certificates will be available for purchase in minimum
denominations of $1,000 and integral multiples thereof in book-entry form
only. The Transferor has been informed by DTC that DTC's nominee will be
Cede. No Certificate Owner acquiring an interest in the Certificates will
be entitled to receive a certificate representing such person's interest in
the Certificates unless Definitive Certificates are issued. Unless and
until Definitive Certificates are issued for any Series under the limited
circumstances described herein, all references herein to actions by
Certificateholders shall refer to actions taken by DTC upon instructions
from its Participants (as defined below), and all references herein to
distributions, notices, reports and statements to Certificateholders shall
refer to distributions, notices, reports and statements to DTC or Cede, as
the registered holder of the Certificates, as the case may be, for
distribution to Certificate Owners in accordance with DTC procedures. See
"--Book-Entry Registration" and "--Definitive Certificates."
If so specified in the Prospectus Supplement relating to a Series,
application will be made to list the Series of Certificates of such Series,
or all or a portion of any Class thereof, on the Luxembourg Stock Exchange
or any other specified exchange.
Book-Entry Registration
Unless otherwise specified in the related Prospectus Supplement,
with respect to each Series of Certificates in book-entry form,
Certificateholders may hold their Certificates through DTC (in the United
States) or Cedel or Euroclear (in Europe), which in turn hold through DTC,
if they are participants of such systems, or indirectly through
organizations that are participants in such systems.
Cede, as nominee for DTC, will hold the global Certificates. Cedel
and Euroclear will hold omnibus positions on behalf of the Cedel
Participants and the Euroclear Participants, respectively, through
customers' securities accounts in Cedel's and Euroclear's names on the
books of their respective depositaries (collectively, the "Depositaries")
which in turn will hold such positions in customers' securities accounts in
the Depositaries' names on the books of DTC.
DTC is a limited-purpose trust company organized under the laws of
the State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code,
and a "clearing agency" registered pursuant to the provisions of Section
17A of the Exchange Act. DTC was created to hold securities for its
participating organizations ("Participants") and facilitate the clearance
and settlement of securities transactions between Participants through
electronic book-entry changes in accounts of its Participants, thereby
eliminating the need for physical movement of certificates. Participants
include securities brokers and dealers (who may include the underwriters of
any Series), banks, trust companies and clearing corporations and may
include certain other organizations. Indirect access to the DTC system also
is available to others such as banks, brokers, dealers and trust companies
that clear through or maintain a custodial relationship with a Participant,
either directly or indirectly (the "Indirect Participants").
Transfers between DTC Participants will occur in accordance with
DTC rules. Transfers between Cedel Participants and Euroclear Participants
will occur in the ordinary way in accordance with their applicable rules
and operating procedures.
Cross-market transfers between persons holding directly or
indirectly through DTC in the United States, on the one hand, and directly
or indirectly through Cedel Participants or Euroclear Participants, on the
other, will be effected in DTC in accordance with DTC rules on behalf of
the relevant European international clearing system by its Depositary;
however, such cross-market transactions will require delivery of
instructions to the relevant European international clearing system by the
counterparty in such system in accordance with its rules and procedures and
within its established deadlines (European time). The relevant European
international clearing system will, if the transaction meets its settlement
requirements, deliver instructions to its Depositary to take action to
effect final settlement on its behalf by delivering or receiving securities
in DTC, and making or receiving payment in accordance with normal
procedures for same-day funds settlement applicable to DTC. Cedel
Participants and Euroclear Participants may not deliver instructions
directly to the Depositaries.
Because of time-zone differences, credits or securities in Cedel
or Euroclear as a result of a transaction with a DTC Participant will be
made during the subsequent securities settlement processing, dated the
business day following the DTC settlement date, and such credits or any
transactions in such securities settled during such processing will be
reported to the relevant Cedel Participant or Euroclear Participant on such
business day. Cash received in Cedel or Euroclear as a result of sales of
securities by or through a Cedel Participant or a Euroclear Participant to
a DTC Participant will be received with value on the DTC settlement date
but will be available in the relevant Cedel or Euroclear cash account only
as of the business day following settlement in DTC.
Certificate Owners that are not Participants or Indirect
Participants but desire to purchase, sell or otherwise transfer ownership
of, or other interest in, Certificates may do so only through Participants
and Indirect Participants. In addition, Certificate Owners will receive all
distributions of principal of and interest on the Certificates from the
Trustee through the Participants who in turn will receive them from DTC.
Under a book-entry format, Certificate Owners may experience some delay in
their receipt of payments, since such payments will be forwarded by the
Trustee to Cede, as nominee for DTC. DTC will forward such payments to its
Participants which thereafter will forward them to Indirect Participants or
Certificate Owners. It is anticipated that the only "Certificateholder" of
Certificates in book-entry form will be Cede, as nominee of DTC.
Certificate Owners will not be recognized by the Trustee as
Certificateholders, as such term is used in the Pooling and Servicing
Agreement, and Certificate Owners will only be permitted to exercise the
rights of Certificateholders indirectly through the Participants who in
turn will exercise the rights of Certificateholders through DTC.
Under the rules, regulations and procedures creating and affecting
DTC and its operations, DTC is required to make book-entry transfers among
Participants on whose behalf it acts with respect to the Certificates and
is required to receive and transmit distributions of principal and interest
on the Certificates. Participants and Indirect Participants with which
Certificate Owners have accounts with respect to the Certificates similarly
are required to make book-entry transfers and receive and transmit such
payments on behalf of their respective Certificate Owners. Accordingly,
although Certificate Owners will not possess Certificates, Certificate
Owners will receive payments and will be able to transfer their interests.
Because DTC can only act on behalf of Participants, who in turn
act on behalf of Indirect Participants and certain banks, the ability of a
Certificate Owner to pledge Certificates to persons or entities that do not
participate in the DTC system, or otherwise take actions in respect of such
Certificates, may be limited due to the lack of a physical certificate for
such Certificates.
DTC has advised the Transferor that it will take any action
permitted to be taken by a Certificateholder under the Pooling and
Servicing Agreement only at the direction of one or more Participants to
whose account with DTC the Certificates are credited. Additionally, DTC has
advised the Transferor that it will take such actions with respect to
specified percentages of the Invested Amount only at the direction of and
on behalf of Participants whose holdings include undivided interests that
satisfy such specified percentages. DTC may take conflicting actions with
respect to other undivided interests to the extent that such actions are
taken on behalf of Participants whose holdings include such undivided
interests.
Cedel Bank, societe anonyme ("Cedel"), is incorporated under the
laws of Luxembourg as a professional depository. Cedel holds securities for
its participating organizations ("Cedel Participants") and facilitates the
clearance and settlement of securities transactions between Cedel
Participants through electronic book-entry changes in accounts of Cedel
Participants, thereby eliminating the need for physical movement of
certificates. Transactions may be settled by Cedel in any of 36 currencies,
including United States dollars. Cedel provides to its Cedel Participants,
among other things, services for safekeeping, administration, clearance and
settlement of internationally traded securities and securities lending and
borrowing. Cedel interfaces with domestic markets in several countries. As
a professional depository, Cedel is subject to regulations by the
Luxembourg Monetary Institute. Cedel Participants are recognized financial
institutions around the world, including underwriters, securities brokers
and dealers, banks, trust companies, clearing corporations and certain
other organizations and may include the underwriters of any Series of
Certificates. Indirect access to Cedel is also available to others, such as
banks, brokers, dealers and trust companies that clear through or maintain
a custodial relationship with a Cedel Participant, either directly or
indirectly.
The Euroclear System (the "Euroclear System") was created in 1968
to hold securities for participants of the Euroclear System ("Euroclear
Participants") and to clear and settle transactions between Euroclear
Participants through simultaneous electronic book-entry delivery against
payment, thereby eliminating the need for physical movement of certificates
and any risk from lack of simultaneous transfers of securities and cash.
Transactions may now be settled in any of 34 currencies, including United
States dollars. The Euroclear System includes various other services,
including securities lending and borrowing and interfaces with domestic
markets in several countries generally similar to the arrangements for
cross-market transfers with DTC described above. The Euroclear System is
operated by Morgan Guaranty Trust Company of New York, Brussels, Belgium
office (the "Euroclear Operator" or "Euroclear"), under contract with
Euroclear Clearance System, S.C., a Belgian cooperative corporation (the
"Cooperative"). All operations are conducted by the Euroclear Operator, and
all Euroclear securities clearance accounts and Euroclear cash accounts are
accounts with the Euroclear Operator, not the Cooperative. The Cooperative
establishes policy for the Euroclear System on behalf of Euroclear
Participants. Euroclear Participants include banks (including central
banks), securities brokers and dealers and other professional financial
intermediaries and may include the underwriters of any Series of
Certificates. Indirect access to the Euroclear System is also available to
other firms that clear through or maintain a custodial relationship with a
Euroclear Participant, either directly or indirectly.
The Euroclear Operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such,
it is regulated and examined by the Board of Governors of the Federal
Reserve System and the New York State Banking Department, as well as the
Belgian Banking Commission.
Securities clearance accounts and cash accounts with the Euroclear
Operator are governed by the Terms and Conditions Governing Use of
Euroclear and the related Operating Procedures of the Euroclear System and
applicable Belgian law (collectively, the "Terms and Conditions"). The
Terms and Conditions govern transfers of securities and cash within the
Euroclear System, withdrawal of securities and cash from the Euroclear
System, and receipts of payments with respect to securities in the
Euroclear System. All securities in the Euroclear System are held on a
fungible basis without attribution of specific certificates to specific
securities clearance accounts. The Euroclear Operator acts under the Terms
and Conditions only on behalf of Euroclear Participants and has no record
of or relationship with persons holding through Euroclear Participants.
Distributions with respect to Certificates held through Cedel or
Euroclear will be credited to the cash accounts of Cedel Participants or
Euroclear Participants in accordance with the relevant system's rules and
procedures, to the extent received by its Depositary. Such distributions
will be subject to tax reporting in accordance with relevant United States
tax laws and regulations. Cedel or the Euroclear Operator, as the case may
be, will take any other action permitted to be taken by a Certificateholder
under the Pooling and Servicing Agreement on behalf of a Cedel Participant
or a Euroclear Participant only in accordance with its relevant rules and
procedures and subject to its Depositary's ability to effect such actions
on its behalf through DTC.
Although DTC, Cedel and Euroclear have agreed to the foregoing
procedures in order to facilitate transfers of Certificates among
participants of DTC, Cedel and Euroclear, they are under no obligation to
perform or continue to perform such procedures and such procedures may be
discontinued at any time.
Definitive Certificates
Unless otherwise specified in the related Prospectus Supplement,
the Certificates of each Series otherwise issued in book-entry form will be
issued in fully registered, certificated form to Certificate Owners or
their nominees ("Definitive Certificates"), rather than to DTC or its
nominee, only if (i) the Transferor advises the Trustee in writing that DTC
is no longer willing or able to discharge properly its responsibilities as
Depository with respect to such Series of Certificates, and the Trustee or
the Transferor is unable to locate a qualified successor, (ii) the
Transferor, at its option, advises the Trustee in writing that it elects to
terminate the book-entry system through DTC or (iii) after the occurrence
of a Servicer Default, Certificate Owners representing not less than 50%
(or such other percentage specified in the related Prospectus Supplement)
of the Invested Amount advise the Trustee and DTC through Participants in
writing that the continuation of a book-entry system through DTC (or a
successor thereto) is no longer in the best interest of the Certificate
Owners.
Upon the occurrence of any of the events described in the
immediately preceding paragraph, DTC is required to notify all Participants
of the availability through DTC of Definitive Certificates. Upon surrender
by DTC of the definitive certificate representing the Certificates and
instructions for re-registration, the Trustee will issue the Certificates
as Definitive Certificates, and thereafter the Trustee will recognize the
holders of such Definitive Certificates as holders under the Pooling and
Servicing Agreement ("Holders").
Distribution of principal and interest on the Certificates will be
made by the Trustee directly to Holders of Definitive Certificates in
accordance with the procedures set forth herein and in the Pooling and
Servicing Agreement. Interest payments and any principal payments on each
Distribution Date or other payment date as specified in the related
Prospectus Supplement will be made to Holders in whose names the Definitive
Certificates were registered at the close of business on the related Record
Date. Distributions will be made by check mailed to the address of such
Holder as it appears on the register maintained by the Trustee. The final
payment on any Certificate (whether Definitive Certificates or the
Certificates registered in the name of Cedel representing the
Certificates), however, will be made only upon presentation and surrender
of such Certificate at the office or agency specified in the notice of
final distribution to Certificateholders. The Trustee will provide such
notice to registered Certificateholders not later than the fifth day of the
month of such final distributions.
Definitive Certificates will be transferable and exchangeable at
the offices of the Transfer Agent and Registrar, which shall initially be
the Trustee. No service charge will be imposed for any registration of
transfer or exchange, but the transfer agent and registrar may require
payment of a sum sufficient to cover any tax or other governmental charge
imposed in connection therewith.
Interest Payments
For each Series of Certificates and Class thereof, interest will
accrue from the relevant Closing Date on the applicable Invested Amount,
plus, if applicable, the Pre-Funding Amount (or other amount specified in
the related Prospectus Supplement), at the applicable Certificate Rate,
which may be a fixed, floating or other type of rate as specified in the
related Prospectus Supplement. Interest will be distributed to
Certificateholders on the Distribution Dates specified in the related
Prospectus Supplement. Interest payments on any Distribution Date will
generally be funded from collections of Finance Charge Receivables
allocated to the Investor Interest during the preceding monthly period or
periods (each, a "Monthly Period") and may be funded from certain
investment earnings on funds held in accounts of the Trust, from any
applicable Enhancement, if necessary, or certain other amounts as specified
in the related Prospectus Supplement. If the Distribution Dates for payment
of interest for a Series or Class occur less frequently than monthly, such
collections or other amounts (or the portion thereof allocable to the
Investor Interest of such Class) may be deposited in one or more trust
accounts (each, an "Interest Funding Account") pending distribution to the
Certificateholders of such Series or Class, as described in the related
Prospectus Supplement. If a Series has more than one Class of Certificates,
each such Class may have a separate Interest Funding Account. The
Prospectus Supplement relating to each Series of Certificates and each
Class thereof will describe the amounts and sources of interest payments to
be made, the Certificate Rate, and, for a Series or Class thereof bearing
interest at a floating Certificate Rate, the initial Certificate Rate, the
dates and the manner for determining subsequent Certificate Rates, and the
formula, index or other method by which such Certificate Rates are
determined.
Principal Payments
Unless otherwise specified in the related Prospectus Supplement,
during the Revolving Period for each Series of Certificates (which begins
on the Closing Date relating to such Series and ends on the day before an
Amortization Period begins), no principal payments will be made to the
Certificateholders of such Series. During the Controlled Amortization
Period or Accumulation Period, as applicable, which will be scheduled to
begin on the date specified in the related Prospectus Supplement, and
during the Rapid Amortization Period, which will begin upon the occurrence
of a Pay Out Event, principal will be paid to the Certificateholders in the
amounts and on Distribution Dates specified in the related Prospectus
Supplement or will be accumulated in a Principal Funding Account for later
distribution to Certificateholders on the Scheduled Payment Date in the
amounts specified in the related Prospectus Supplement. Principal payments
for any Series or Class thereof will be funded from collections of
Principal Receivables received during the related Monthly Period or Periods
as specified in the related Prospectus Supplement and allocated to the
Investor Interest of such Series or Class and from certain other sources
specified in the related Prospectus Supplement. In the case of a Series
with more than one Class of Certificates, the Certificateholders of one or
more Classes may receive payments of principal at different times. The
related Prospectus Supplement will describe the manner, timing and priority
of payments of principal to Certificateholders of each Class.
Funds on deposit in any Principal Funding Account applicable to a
Series may be subject to a guaranteed rate or investment agreement or other
arrangement specified in the related Prospectus Supplement intended to
assure a minimum rate of return on the investment of such funds. In order
to enhance the likelihood of the payment in full of the principal amount of
a Series of Certificates or Class thereof at the end of an Accumulation
Period, such Series of Certificates or Class thereof may be subject to a
principal guaranty or other similar arrangement specified in the related
Prospectus Supplement.
Shared Excess Finance Charge Collections
If so specified in the related Prospectus Supplement, the
Certificateholders of a Series or any Class thereof may be entitled to
receive all or a portion of Excess Finance Charge Collections with respect
to another Series to cover any shortfalls with respect to amounts payable
from collections of Finance Charge Receivables allocable to such Series or
Class.
Shared Collections of Principal Receivables
Unless otherwise specified in the related Prospectus Supplement,
to the extent that collections of Principal Receivables and certain other
amounts that are allocated to the Invested Amount of any Series are not
needed to make payments or deposits with respect to such Series, such
collections ("Excess Principal Collections") will be applied to cover
principal payments due to or for the benefit of Certificateholders of
another Series. Any such reallocation will not result in a reduction in the
Invested Amount of the Series to which such collections were initially
allocated.
Companion Series
If so provided in the Prospectus Supplement relating to a Series,
each such Series is subject to being paired with another Series (in such
case, a "Companion Series"). The Prospectus Supplement for such Series and
the Prospectus Supplement for the Companion Series will each specify the
relationship between the Series.
Transfer and Assignment of Receivables
With respect to the Trust, the Transferor has transferred and
assigned to the Trust all its rights, title and interest in and to
Receivables in certain Accounts which were selected from 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 microfiche lists containing a true and
complete list showing each Account, including each Additional Account,
identified by account number and by total outstanding balance,
respectively. The Transferor has not delivered and will not deliver to the
Trustee any other records or agreements relating to the Accounts or the
Receivables, except in connection with additions or removals of Accounts.
Except as stated above, the records and agreements relating to the Accounts
and the Receivables maintained by the Transferor or the Servicer are not
segregated by the Transferor or the Servicer from other documents and
agreements relating to other credit card accounts and receivables and are
not stamped or marked to reflect the transfer of the Receivables to the
Trust, but the computer records of the Transferor are required to be marked
to evidence such transfer. The Transferor has filed UCC financing
statements with respect to the Receivables meeting the requirements of
Delaware state law. See "Risk Factors--Certain Legal Aspects" and "Certain
Legal Aspects of the Receivables."
Exchanges
The Pooling and Servicing Agreement provides for the Trustee to
issue two types of certificates: (i) one or more Series of certificates
which are transferable and have the characteristics described below and
(ii) the Exchangeable Transferor Certificate, a certificate which evidences
the Transferor Interest, which initially is held by the Transferor and is
transferable only as provided in the Pooling and Servicing Agreement. The
Pooling and Servicing Agreement also provides that, pursuant to any one or
more Supplements, the holder of the Exchangeable Transferor Certificate may
tender such certificate, or the Exchangeable Transferor Certificate and the
certificates evidencing any Series of certificates, to the Trustee in
exchange for one or more new Series and a reissued Exchangeable Transferor
Certificate. Under the Pooling and Servicing Agreement, the holder of the
Exchangeable Transferor Certificate may define, with respect to any newly
issued Series, certain terms including: (i) its initial investor interest
(or method for calculating such amount); (ii) its certificate rate (or
formula for the determination thereof); (iii) its payment dates and the
date from which interest shall accrue; (iv) its series termination date;
and (v) such other terms as the Transferor may deem appropriate (all such
terms, the "Principal Terms" of such Series). None of the Transferor, the
Servicer, the Trustee or the Trust is required or intends to obtain the
consent of any Certificateholder to issue any additional Series. However,
as a condition of an Exchange, the holder of the Exchangeable Transferor
Certificate will deliver to the Trustee written confirmation that the
Exchange will not result in the Rating Agency reducing or withdrawing its
rating of any certificates of any outstanding Series. The Transferor may
offer any Series to the public under a Disclosure Document in transactions
either registered under the Securities Act or exempt from registration
thereunder directly, through the Underwriters or one or more other
underwriters or placement agents, in fixed-price offerings or in negotiated
transactions or otherwise. Any such Series may be issued in fully
registered or book-entry form in minimum denominations determined by the
Transferor. Other Series have been or are being issued by the Trust. The
Transferor intends to offer, from time to time, additional Series issued by
the Trust.
Under the Pooling and Servicing Agreement and pursuant to a
Supplement, an Exchange may only occur upon the satisfaction of certain
conditions provided in the Pooling and Servicing Agreement. Under the
Pooling and Servicing Agreement, the holder of the Exchangeable Transferor
Certificate may perform an Exchange by notifying the Trustee at least five
days in advance of the date upon which the Exchange is to occur. Under the
Pooling and Servicing Agreement, the notice will state the designation of
any Series to be issued on the date of the Exchange and, with respect to
each such Series: (i) its initial principal amount (or method for
calculating such amount) which amount may not be greater than the current
principal amount of the Exchangeable Transferor Certificate, (ii) its
certificate rate (or method of calculating such rate) and (iii) the
provider of the Enhancement, if any, which is expected to provide credit
support with respect to it. On the date of the Exchange, the Pooling and
Servicing Agreement provides that the Trustee will authenticate any such
Series only upon delivery to it of the following, among other things, (i) a
Supplement specifying the Principal Terms of such Series, (ii) an opinion
of counsel to the effect that, unless otherwise stated in the related
Supplement, the certificates of such Series will be characterized as
indebtedness for Federal income tax purposes under existing law, and that
the issuance of such Series will not have a material adverse effect on the
Federal income tax characterization of any outstanding Series, (iii) if
required by the related Supplement, the form of Enhancement, (iv) if an
Enhancement is required by the Supplement, an appropriate Enhancement
agreement with respect thereto, (v) written confirmation from each Rating
Agency that the Exchange will not result in such Rating Agency's reducing
or withdrawing its rating on any then outstanding Series rated by it, (vi)
the existing Exchangeable Transferor Certificate and, if applicable, the
certificates representing the Series to be exchanged, and (vii) an
officer's certificate of the Transferor to the effect that on the date of
the Exchange the Transferor, after giving effect to the Exchange, would not
be required to add Receivables from Additional Accounts pursuant to the
Pooling and Servicing Agreement, and the Transferor Interest would be at
least equal to a Minimum Transferor Interest. Upon satisfaction of such
conditions, the Trustee will cancel the existing Exchangeable Transferor
Certificate and the certificates of the exchanged Series, if applicable,
and authenticate the new Series and a new Exchangeable Transferor
Certificate.
Representations and Warranties
The Transferor has made and will make certain representations and
warranties to the Trust to the effect that, among other things, (a) as of
the date of issuance of a Series (a "Series Closing Date"), the Transferor
was duly incorporated and in good standing and that it has the authority to
consummate the transactions contemplated by the Pooling and Servicing
Agreement and (b) as of the cut off date for each Series, as defined herein
and in the related Prospectus Supplement (the "Series Cut Off Dates"), each
Account was an Eligible Account (as defined below). If (i) any of these
representations and warranties proves to have been incorrect in any
material respect when made, and continues to be incorrect for 60 days after
notice to the Transferor by the Trustee or to the Transferor and the
Trustee by the Certificateholders holding more than 50% of the Investor
Interest, and (ii) as a result the interests of the Certificateholders are
materially adversely affected, and continue to be materially adversely
affected during such period, then the Trustee or Certificateholders holding
more than 50% of the Investor Interest may give notice to the Transferor
(and to the Trustee in the latter instance) declaring that a Pay Out Event
has occurred, thereby commencing the Rapid Amortization Period. See "--Pay
Out Events."
The Transferor has made and will make representations and
warranties to the Trust relating to the Receivables to the effect, among
other things, that (a) as of the Series Closing Date for the 1992-1 Series
(the "Initial Closing Date"), each of the Receivables then existing is an
Eligible Receivable (as defined below) and (b) as of the date of creation
of any new Receivable, such Receivable is an Eligible Receivable and the
representation and warranty set forth in clause (b) in the immediately
following paragraph is true and correct with respect to such Receivable. In
the event (i) of a breach of any representation and warranty set forth in
this paragraph, within 60 days, or such longer period as may be agreed to
by the Trustee, of the earlier to occur of the discovery of such breach by
the Transferor or Servicer or receipt by the Transferor of written notice
of such breach given by the Trustee, or, with respect to certain breaches
relating to prior liens, immediately upon the earlier to occur of such
discovery or notice and (ii) that as a result of such breach, the
Receivables in the related Accounts are charged off as uncollectible, the
Trust's rights in, to or under the Receivables or its proceeds are impaired
or the proceeds of such Receivables are not available for any reason to the
Trust free and clear of any lien, the Transferor shall accept reassignment
of each Principal Receivable as to which such breach relates (an
"Ineligible Receivable") on the terms and conditions set forth below;
provided, however, that no such reassignment shall be required to be made
with respect to such Ineligible Receivable if, on any day within the
applicable period (or such longer period as may be agreed to by the
Trustee), the representations and warranties with respect to such
Ineligible Receivable shall then be true and correct in all material
respects. The Transferor shall accept reassignment of each such Ineligible
Receivable by (i) directing the Servicer to deduct the amount of each such
Ineligible Receivable from the aggregate amount of Principal Receivables
used to calculate the Transferor Interest and (ii) depositing into the
Collection Account an amount equal to the finance charge at the annual
percentage rate applicable to such Ineligible Receivable from the last date
billed through the end of the Monthly Period in which such reassignment
obligation arises. In the event that the exclusion of an Ineligible
Receivable from the calculation of the Transferor Interest would cause the
Transferor Interest to be a negative number, on the date of reassignment of
such Ineligible Receivable the Transferor shall make a deposit in the
Principal Account in immediately available funds in an amount equal to the
amount by which the Transferor Interest would be reduced below zero. Any
such deduction or deposit shall be considered a repayment in full of the
Ineligible Receivable. The obligation of the Transferor to accept
reassignment of any Ineligible Receivable is the sole remedy respecting any
breach of the representations and warranties set forth in this paragraph
with respect to such Receivable available to the Certificateholders or the
Trustee on behalf of Certificateholders.
The Transferor has made representations and warranties to the
Trust to the effect, among other things, that as of the Initial Closing
Date (a) the Pooling and Servicing Agreement constituted a legal, valid and
binding obligation of the Transferor and (b) the transfer of Receivables by
it to the Trust under the Pooling and Servicing Agreement constituted
either a valid transfer and assignment to the Trust of all right, title and
interest of the Transferor in and to the Receivables (other than
Receivables in Additional Accounts), whether then existing or thereafter
created and the proceeds thereof (including amounts in any of the accounts
established for the benefit of certificateholders) or the grant of a first
priority perfected security interest in such Receivables (except for
certain tax liens) and the proceeds thereof (including amounts in any of
the accounts established for the benefit of certificateholders), which is
effective as to each such Receivable upon the creation thereof. In the
event of a breach of any of the representations and warranties described in
this paragraph, either the Trustee or the holders of certificates
evidencing undivided interests in the Trust aggregating more than 50% of
the investor interest of all Series outstanding, by written notice to the
Transferor (and to the Trustee and the Servicer if given by the
certificateholders of all Series outstanding), may direct the Transferor to
accept reassignment of the Trust Portfolio within 60 days of such notice,
or within such longer period specified in such notice. The Transferor will
be obligated to accept reassignment of such Receivables on a Distribution
Date occurring within such applicable period. Such reassignment will not be
required to be made, however, if at any time during such applicable period,
or such longer period, the representations and warranties shall then be
true and correct in all material respects. The deposit amount for such
reassignment, unless otherwise specified in the related Prospectus
Supplement, will be equal to the invested amount for all Series of
certificates required to be repurchased on the last day of the Monthly
Period preceding the Distribution Date on which the reassignment is
scheduled to be made less the amount, if any, previously allocated for
payment of principal to such certificateholders on such Distribution Date,
plus an amount equal to all interest accrued but unpaid on such
certificates at the applicable certificate rate through such last day of
such Monthly Period, less the amount transferred to the Distribution
Account from the Finance Charge Account in respect of interest on such
certificates. The payment of the reassignment deposit amount and the
transfer of all other amounts deposited for the preceding month in the
Distribution Account will be considered a payment in full of the invested
amount for all Series of certificates required to be repurchased and will
be distributed upon presentation and surrender of the certificates for each
such Series. If the Trustee or certificateholders give a notice as provided
above, the obligation of the Transferor to make any such deposit will
constitute the sole remedy respecting a breach of the representations and
warranties available to the Trustee or such certificateholders.
An "Eligible Account" is defined to mean, as of the Original Cut
Off Date (or, with respect to Additional Accounts, as of their date of
designation for inclusion or their date of inclusion in the Trust), each
Account owned by the Transferor (a) which was in existence and maintained
with the Transferor, (b) which is payable in United States dollars, (c) the
cardholder of which has provided, as his most recent billing address, an
address located in the United States or its territories or possessions, (d)
which has not been identified by the Transferor in its computer files as
being involved in a voluntary or involuntary bankruptcy proceeding, (e)
which has not been identified as an Account with respect to which the
related card has been lost or stolen, (f) which is not sold or pledged to
any other party at the time of its inclusion in the Trust, (g) which does
not have receivables which are sold or pledged to any other party at the
time of their inclusion in the Trust, and (h) which is a VISA or MasterCard
revolving credit card account.
An "Eligible Receivable" is defined to mean each Receivable (a)
which has arisen under an Eligible Account, (b) which was created in
compliance, in all material respects, with all requirements of law
applicable to the Transferor, and pursuant to a credit card agreement which
complies in all material respects with all requirements of law applicable
to the Transferor, (c) with respect to which all consents, licenses or
authorizations of, or registrations with, any governmental authority
required to be obtained or given by the Transferor in connection with the
creation of such Receivable or the execution, delivery, creation and
performance by the Transferor or the related credit card agreement have
been duly obtained or given and are in full force and effect as of the date
of the creation of such Receivable, (d) as to which, at the time of its
inclusion in the Trust, the Transferor or the Trust had good and marketable
title, free and clear of all liens and security interests arising under or
through the Transferor (other than certain tax liens for taxes not then due
or which the Transferor is contesting), (e) which is the legal, valid and
binding payment obligation of the cardholder thereof, legally enforceable
against such cardholder in accordance with its terms (with certain
bankruptcy-related exceptions), and (f) which constitutes an "account"
under Article 9 of the UCC as then in effect in the State of Delaware.
It is not required or anticipated that the Trustee will make any
initial or periodic general examination of the Receivables or any records
relating to the Receivables for the purpose of establishing the presence or
absence of defects, compliance with the Transferor's representations and
warranties or for any other purpose. The Servicer, however, will deliver to
the Trustee on or before March 31 of each year an opinion of counsel with
respect to the validity of the security interest of the Trust in and to the
Receivables.
Addition of Accounts
As described above in "The Receivables," the Transferor has the
right and, in some circumstances, is obligated to designate from time to
time Additional Accounts to be included as Accounts. The Transferor will be
required to designate Additional Accounts, (i) if the average of the
Transferor Interest for any 30-day period is less than the Minimum
Transferor Interest, or (ii) if, on the last day of any Monthly Period, the
aggregate amount of Principal Receivables is less than the Minimum
Aggregate Principal Receivables. Receivables from such Additional Accounts
shall be transferred to the Trust on or before the tenth business day
following such 30-day period or the last day of any Monthly Period, as the
case may be. The Transferor will convey to the Trust its interest in all
Receivables of such Additional Accounts, whether such Receivables are then
existing or thereafter created, subject to the following conditions, among
others: (i) each such Additional Account must be an Eligible Account and
(ii) no selection procedure believed by the Transferor to be materially
adverse to the interests of the holders of any Series of certificates was
used in selecting the Additional Accounts.
Each Additional Account must be an Eligible Account at the time of
its designation. However, Additional Accounts may not be of the same credit
quality as the initial Accounts; Additional Accounts may have been
originated by the Transferor using credit criteria different from those
which were applied by the Transferor to the initial Accounts or may have
been acquired by the Transferor from a third-party financial institution
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
reassignment to it of the Receivables from Removed Accounts only upon
satisfaction of the following conditions: (i) the removal of any
Receivables of any Removed Accounts shall not, in the reasonable belief of
the Transferor, cause a Pay Out Event to occur, cause the Transferor
Interest as a percentage of the aggregate amount of Principal Receivables
to be less than 7% on such date of removal, or result in the failure to
make any payment specified in the related Supplement with respect to any
Series; (ii) the Transferor shall have delivered to the Trustee for
execution a written assignment and, within five business days thereafter, a
computer file or microfiche list containing a true and complete list of all
Removed Accounts identified by account number and the aggregate amount of
the Receivables in such Removed Accounts; (iii) not more than 15% of the
Trust Portfolio is more than 34 days delinquent; (iv) the Transferor shall
represent and warrant that no selection procedures believed by the
Transferor to be materially adverse to the interests of the
Certificateholders were utilized in selecting the Removed Accounts to be
removed from the Trust; (v) the Rating Agency shall have received notice of
such proposed removal of Accounts and the Transferor shall not have
received notice from the Rating Agency that such proposed removal will
result in a downgrade of its then-current rating for any Series of
Certificates; (vi) the Principal Receivables of the Removed Accounts shall
not equal or exceed 5% of the aggregate amount of the Principal Receivables
in the Trust at such time; provided, that if any Series has been paid in
full, the Principal Receivables in such Removed Accounts may equal the
initial invested amount of such Series; and (vii) the Transferor shall have
delivered to the Trustee an officer's certificate confirming the items set
forth in clauses (i) through (vi) above.
Collection and Other Servicing Procedures
Pursuant to the Pooling and Servicing Agreement, the Servicer will
be responsible for servicing and administering the Receivables in
accordance with the Servicer's policies and procedures for servicing credit
card receivables comparable to the Receivables. The Servicer is required to
maintain fidelity bond coverage insuring against losses through wrongdoing
of its officers and employees who are involved in the servicing of credit
card receivables covering such actions and in such amounts as the Servicer
believes to be reasonable from time to time.
Trust Accounts
The Trustee has established and maintains in the name of the Trust
two separate accounts in a segregated trust account (which need not be a
deposit account), a "Finance Charge Account" and a "Principal Account" for
the benefit of the certificateholders of each Series. The Trustee has also
established a "Distribution Account" (a non-interest bearing segregated
demand deposit account established with a "Qualified Institution" other
than the Transferor). The Servicer has established and maintains, in the
name of the Trust, for the benefit of certificateholders of all Series, a
"Collection Account," which is a non-interest bearing segregated account
established and maintained with the Servicer or with a Qualified
Institution, defined as a depository institution, which may include the
Trustee, organized under the laws of the United States or any one of the
states thereof, which at all times has a certificate of deposit rating of
P-1 by Moody's Investors Service, Inc. ("Moody's") and of A-1+ by Standard
& Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc.
("Standard & Poor's") or long-term unsecured debt obligation (other than
such obligation the rating of which is based on collateral or on the credit
of a person other than such institution or trust company) rating of Aa3 by
Moody's and AA-by Standard & Poor's and deposit insurance provided by
either the Bank Insurance Fund ("BIF") or the Savings Association Insurance
Fund ("SAIF"), each administered by the FDIC, or a depository institution,
which may include the Trustee, which is acceptable to the Rating Agency.
Funds in the Principal Account and the Finance Charge Account will be
invested, at the direction of the Servicer, in (i) obligations fully
guaranteed by the United States of America, (ii) demand deposits, time
deposits or certificates of deposit of depository institutions or trust
companies, the certificates of deposit of which have the highest rating
from Moody's and Standard & Poor's, (iii) commercial paper having, at the
time of the Trust's investment, a rating in the highest rating category
from Moody's and Standard & Poor's, (iv) bankers acceptances issued by any
depository institution or trust company described in clause (ii) above, (v)
money market funds which have the highest rating from, or have otherwise
been approved in writing by, Moody's and Standard & Poor's, (vi) certain
open end diversified investment companies, and (vii) any other investment
if the Rating Agency confirms in writing that such investment will not
adversely affect its then current rating of the Certificates (such
investments, "Permitted Investments"). Any earnings (net of losses and
investment expenses) on funds in the Finance Charge Account or the
Principal Account will be paid to the Transferor. The Servicer has the
revocable power to withdraw funds from the Collection Account and to
instruct the Trustee to make withdrawals and payments from the Finance
Charge Account and the Principal Account for the purpose of carrying out
the Servicer's duties under the Pooling and Servicing Agreement. The Paying
Agent has the revocable power to withdraw funds from the Distribution
Account for the purpose of making distributions to the Certificateholders.
Discount Receivables
The Pooling and Servicing Agreement provides that 1.3% (the "Yield
Factor") of the amount of Receivables consisting of amounts charged by
cardholders for goods and services and cash advances be treated as Finance
Charge Receivables (the "Discount Receivables"). On the date of processing
of any collections, the product of the Yield Factor and collections of
Receivables consisting of amounts charged by cardholders for goods and
services and cash advances on such day which otherwise would be Principal
Receivables will be deemed "Discount Receivable Collections." An amount
equal to the product of (i) the investor percentage with respect to Finance
Charge Receivables for each Series of certificates issued and outstanding
and (ii) the amount of such Discount Receivables Collections will be
deposited by the Transferor into the Collection Account and an amount equal
to the product of (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 Receivables. The Transferor may at any time
increase the Yield Factor to a fixed percentage up to 4%; provided that the
Transferor must provide 30 days' prior written notice to the Servicer, the
Trustee, any provider of Enhancement and the Rating Agency of any such
designation, and such designation will become effective on the date
specified therein only if (i) in the reasonable belief of the Transferor
such designation would not cause a Pay Out Event to occur or an event,
which with notice or the lapse of time or both would constitute a Pay Out
Event and (ii) the Rating Agency confirms in writing its then current
rating on any outstanding Series.
Application of Collections
Allocations. Except as otherwise provided below or in a 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
Certificateholders 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 provides to the Trustee a letter of
credit covering collection risk of the Servicer acceptable to the Rating
Agency and (ii) the Transferor shall not have received a notice from the
Rating Agency that such letter of credit would result in the lowering of
such Rating Agency's then-existing rating of any Series of certificates
then outstanding, or (b) the Servicer has and maintains a certificate of
deposit rating of P-1 by Moody's and of A-1 by Standard & Poor's and
deposit insurance provided by either BIF or SAIF, then the Servicer may
make such deposits and payments on the business day immediately prior to
the Distribution Date (the "Transfer Date") in an amount equal to the net
amount of such deposits and payments which would have been made had the
conditions of this proviso not applied.
Any amounts collected in respect of Principal Receivables not paid
to the Transferor because the Transferor Interest has been reduced to zero
("Unallocated Principal Collections"), together with any adjustment
payments, as described below, will be paid to and held in the Principal
Account and paid to the Transferor if and to the extent that the Transferor
Interest is greater than zero. If an Amortization Period has commenced,
Unallocated Principal Collections will be held for distribution to the
Certificateholders on the related Distribution Date.
Funding Period
For any Series of Certificates, the related Prospectus Supplement
may specify that for a period beginning on the Closing Date and ending on a
specified date before the commencement of an Amortization Period or
Accumulation Period with respect to such Series (the "Funding Period"), the
aggregate amount of Principal Receivables in the Trust allocable to such
Series may be less than the aggregate principal amount of the Certificates
of such Series and that the amount of such deficiency (the "Pre-Funding
Amount") will be held in a trust account established with the Trustee for
the benefit of the Certificateholders of such Series (the "Pre-Funding
Account") pending the transfer of additional Receivables to the Trust or
pending the reduction of the Invested Amounts of other Series. The related
Prospectus Supplement will specify the Initial Invested Amount with respect
to such Series, the aggregate principal amount of such Series (the "Full
Invested Amount") and the date by which the Invested Amount is expected to
equal the Full Invested Amount. The Invested Amount will increase as
Receivables are delivered to the Trust or as the Invested Amounts of other
Series are reduced. The Invested Amount may also decrease due to Investor
Charge-Offs as provided in the related Prospectus Supplement.
During the Funding Period, funds on deposit in the Pre-Funding
Account for a Series of Certificates will be withdrawn and paid to the
Transferor to the extent of any increases in the Invested Amount. In the
event that the Invested Amount does not for any reason equal the Full
Invested Amount by the end of the Funding Period, any amount remaining in
the Pre-Funding Account and any additional amounts specified in the related
Prospectus Supplement will be payable to the Certificateholders of such
Series in the manner and at such time as set forth in the related
Prospectus Supplement.
If so specified in the related Prospectus Supplement, monies in
the Pre-Funding Account will be invested by the Trustee in Permitted
Investments or will be subject to a guaranteed rate or investment agreement
or other similar arrangement, and, in connection with each Distribution
Date during the Funding Period, investment earnings on funds in the
Pre-Funding Account during the related Monthly Period will be withdrawn
from the Pre-Funding Account and deposited, together with any applicable
payment under a guaranteed rate or investment agreement or other similar
arrangement, into the Collection Account for distribution in respect of
interest on the Certificates of the related Series in the manner specified
in the related Prospectus Supplement.
Defaulted Receivables; Rebates and Fraudulent Charges
On the first business day on or before the eighth calendar day
prior to each Distribution Date (the "Determination Date"), the Servicer
will calculate the Investor Default Amount for the preceding Monthly
Period. Receivables in any Account will be charged off as uncollectible in
accordance with the Servicer's customary and usual policies and procedures
for servicing its own comparable credit card accounts (such an Account, a
"Defaulted Account"). The term "Default Amount" means, for any Monthly
Period, an amount (which shall not be less than zero) equal to (a) the
aggregate amount of Principal Receivables (other than Ineligible
Receivables) in Defaulted Accounts on the day such Account became a
Defaulted Account for each day in such Monthly Period minus (b) the
aggregate amount of Recoveries received in such Monthly Period. A portion
of the Default Amount (the "Investor Default Amount") will be allocated to
the Certificateholders for each Distribution Date in an amount equal to the
product of the Investor Percentage for the relevant Series applicable
during the related Monthly Period and the Default Amount for such related
Monthly Period. In the case of a Series of Certificates having more than
one Class, the Investor Default Amount will be allocated among the Classes
in the manner described in the related Prospectus Supplement. If so
provided in the related Prospectus Supplement, an amount equal to the
Investor Default Amount for any Monthly Period may be paid from other
amounts, including from Enhancement, and applied to pay principal to
Certificateholders or the holder of the Exchangeable Transferor
Certificate, as appropriate. In the case of a Series of Certificates having
one or more Classes of Subordinated Certificates, the related Prospectus
Supplement may provide that all or a portion of amounts otherwise allocable
to such Subordinated Certificates may be paid to the Senior
Certificateholders to make up any Investor Default Amount allocable to such
Senior Certificateholders.
If the Servicer adjusts the amount of any Principal Receivable
because of transactions occurring in respect of a rebate or refund to a
cardholder, or because such Principal Receivable was created in respect of
merchandise which was refused or returned by a cardholder, then the amount
of the Transferor Interest in the Trust will be reduced, on a net basis, by
the amount of the adjustment. In addition, the Transferor Interest in the
Trust will be reduced, on a net basis, as a result of transactions in
respect of any Principal Receivable which was discovered as having been
created through a fraudulent or counterfeit charge.
Investor Charge-Offs
With respect to each Series of Certificates, if the amount payable
on a Distribution Date or other specified date in respect of interest on
the Certificates, the Investor Servicing Fee (unless otherwise specified in
the related Prospectus Supplement), the Investor Default Amount and other
required fees exceeds the amount on deposit in the Collection Account
available therefor, available Enhancement amounts, if any, and amounts
available from other specified sources, then the Invested Amount with
respect to such Series will be reduced by the amount of such excess, but
not more than the Investor Default Amount (an "Investor Charge-Off").
Investor Charge-Offs will be reimbursed on any Distribution Date to the
extent amounts on deposit in the Collection Account and otherwise available
therefor exceed such interest, fees and any aggregate Investor Default
Amount payable on such date. Such reimbursement of Investor Charge-Offs
will result in an increase in the Invested Amount with respect to such
Series. In the case of a Series of Certificates having more than one Class,
the related Prospectus Supplement will describe the manner and priority of
allocating Investor Charge-Offs and reimbursements thereof among the
Invested Amounts of the Classes.
Final Payment of Principal; Termination
With respect to each Series, the Certificates will be subject to
optional repurchase by the Transferor on any Distribution Date after the
Invested Amount is reduced to an amount less than or equal to 5% (or such
other amount specified in the related Prospectus Supplement) of the initial
outstanding principal 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 Distribution Date with respect to any
Series following the date on which funds shall have been deposited in the
Distribution Account for the payment to certificateholders of each Series
outstanding sufficient to pay in full the aggregate investor interest of
all Series outstanding plus interest thereon at the applicable certificate
rates through the end of the related Monthly Period, or (b) August 1, 2032.
Upon the termination of the Trust and the surrender of the Exchangeable
Transferor Certificate, the Trustee shall convey to the holder of the
Exchangeable Transferor Certificate all right, title and interest of the
Trust in and to the Receivables and other funds of the Trust (other than
funds on deposit in the Distribution Account and other similar bank
accounts of the Trust with respect to other Series).
Pay Out Events
Unless otherwise specified in the related Prospectus Supplement,
as described above, the Revolving Period will continue through the date
specified in the related Prospectus Supplement unless a Pay Out Event
occurs prior to such date. A "Pay Out Event" occurs with respect to all
Series issued by the Trust upon the occurrence of either of the following
events:
(a) certain events of insolvency or receivership relating to the
Transferor; or
(b) the Trust becomes an "investment company" within the meaning
of the Investment Company Act of 1940, as amended.
In addition, a Pay Out Event may occur with respect to any
specific Series upon the occurrence of any other event specified in the
related Prospectus Supplement. On the date on which a Pay Out Event is
deemed to have occurred, the Rapid Amortization Period will commence. If,
because of the occurrence of a Pay Out Event, the Rapid Amortization Period
begins earlier than the scheduled commencement of an Amortization Period or
prior to a Scheduled Payment Date, Certificateholders will begin receiving
distributions of principal earlier than they otherwise would have, which
may shorten the average life of the Certificates.
If the only Pay Out Event to occur is either the insolvency of the
Transferor or the appointment of a receiver or conservator for the
Transferor, the receiver or conservator for the Transferor may have the
power to delay or prevent commencement of the Rapid Amortization Period.
In addition to the consequences of a Pay Out Event discussed
above, if pursuant to certain provisions of federal law, the Transferor
voluntarily enters liquidation or a receiver is appointed for the
Transferor, on the day of such event the Transferor will immediately cease
to transfer Principal Receivables to the Trust and promptly give notice to
the Trustee of such event. Within 15 days, the Trustee will publish a
notice of the liquidation or the appointment stating that the Trustee
intends to sell, dispose of, or otherwise liquidate the Receivables in a
commercially reasonable manner. Unless otherwise instructed within a
specified period by certificateholders representing undivided interests
aggregating more than 50% of the invested amount of each Series (or, if any
Series has more than one class, of each class of such Series and with
respect to any Series any additional person specified in such Prospectus
Supplement), the Trustee will sell, dispose of, or otherwise liquidate the
portion of the Receivables allocated to the Certificates and the
Receivables allocable to other Series with respect to which all outstanding
classes did not vote to continue the Trust in accordance with the Pooling
and Servicing Agreement in a commercially reasonable manner and on
commercially reasonable terms. The proceeds from the sale, disposition or
liquidation of the Receivables will be treated as collections of the
Receivables and applied with respect to such Series as provided above in
"--Application of Collections."
If the only Pay Out Event to occur is either the insolvency of the
Transferor or the appointment of a conservator or receiver for the
Transferor, the conservator or receiver may have the power to prevent the
early sale, liquidation or disposition of the Receivables and the
commencement of the Rapid Amortization Period. In addition, a conservator
or receiver may have the power to cause the early sale of the Receivables
and the early retirement of the Certificates.
Certain Matters Regarding the Transferor and the Servicer
The Servicer may not resign from its obligations and duties under
the Pooling and Servicing Agreement, except upon determination that
performance of its duties is no longer permissible under applicable law. No
such resignation will become effective until the Trustee or a successor to
the Servicer has assumed the Servicer's responsibilities and obligations
under the Pooling and Servicing Agreement. The Bank, as initial Servicer,
intends to delegate some of its servicing duties to FDR; however, such
delegation will not relieve it of its obligation to perform such duties in
accordance with the Pooling and Servicing Agreement.
The Pooling and Servicing Agreement provides that the Servicer
will indemnify the Trust and the Trustee from and against any reasonable
loss, liability, expense, damage or injury suffered or sustained by reason
of any acts or omissions or alleged acts or omissions of the Servicer with
respect to the activities of the Trust or the Trustee; provided, however,
that the Servicer shall not indemnify (a) the Trustee for liabilities
imposed by reason of fraud, negligence, or willful misconduct by the
Trustee in the performance of its duties under the Pooling and Servicing
Agreement, (b) the Trust, the Certificateholders or the Certificate Owners
for liabilities arising from actions taken by the Trustee at the request of
Certificateholders, (c) the Trust, the Certificateholders or the
Certificate Owners for any losses, claims, damages or liabilities incurred
by any of them in their capacities as investors, including, without
limitation, losses incurred as a result of defaulted Receivables or
Receivables which are written off as uncollectible, or (d) the Trust, the
Certificateholders or the Certificate Owners for any liabilities, costs or
expenses of the Trust, the Certificateholders or the Certificate Owners
arising under any tax law, including without limitation, any federal, state
or local income or franchise tax or any other tax imposed on or measured by
income (or any interest or penalties with respect thereto or arising from a
failure to comply therewith) required to be paid by the Trust, the
Certificateholders or the Certificate Owners in connection with the Pooling
and Servicing Agreement to any taxing authority.
In addition, the Pooling and Servicing Agreement provides that,
subject to certain exceptions, the Transferor will indemnify the Trust and
the Trustee from and against any reasonable loss, liability, expense,
damage or injury arising out of or based upon the arrangement created by
the Pooling and Servicing Agreement as though the Pooling and Servicing
Agreement created a partnership under the New York Uniform Partnership Act
in which the Transferor is a general partner.
The Pooling and Servicing Agreement provides that neither the
Transferor nor the Servicer nor any of their respective directors,
officers, employees or agents will be under any other liability to the
Trust, the Certificateholders or any other person for any action taken,
or for refraining from taking any action, in good faith pursuant to the
Pooling and Servicing Agreement. Neither the Transferor, the Servicer, nor
any of their respective directors, officers, employees or agents will be
protected against any liability which would otherwise be imposed by reason
of willful misfeasance, bad faith or gross negligence of the Transferor,
the Servicer or any such person in the performance of its duties or by
reason of reckless disregard of obligations and duties thereunder. In
addition, the Pooling and Servicing Agreement provides that the Servicer is
not under any obligation to appear in, prosecute or defend any legal action
which is not incidental to its servicing responsibilities under the Pooling
and Servicing Agreement and which in its opinion may expose it to any
expense or liability.
The Pooling and Servicing Agreement provides that, in addition to
Exchanges, the Transferor may transfer its interest in a portion of the
Exchangeable Transferor Certificate, provided that prior to any such
transfer (a) the Trustee receives written notification from each Rating
Agency that such transfer will not result in a lowering of its
then-existing rating of the certificates rated by it and (b) the Trustee
receives a written opinion of counsel confirming that such transfer would
not adversely affect the treatment of the certificates for each outstanding
Series as debt for federal income tax purposes.
Any person into which, in accordance with the Pooling and
Servicing Agreement, the Transferor or the Servicer may be merged or
consolidated or any person resulting from any merger or consolidation to
which the Transferor or the Servicer is a party, or any person succeeding
to the business of the Transferor or the Servicer, upon execution of a
supplement to the Pooling and Servicing Agreement and delivery of an
opinion of counsel with respect to the compliance of the transaction with
the applicable provisions of the Pooling and Servicing Agreement, will be
the successor to the Transferor or the Servicer, as the case may be, under
the Pooling and Servicing Agreement.
Servicer Default
In the event of any Servicer Default (as defined below), either
the Trustee or certificateholders representing undivided interests
aggregating more than 50% of the aggregate investor interests for all
outstanding Series, by written notice to the Servicer (and to the Trustee
if given by the certificateholders), may terminate all of the rights and
obligations of the Servicer as servicer under the Pooling and Servicing
Agreement and in and to the Receivables and the proceeds thereof and the
Trustee may appoint a new Servicer (a "Service Transfer"). The rights and
interest of the Transferor under the Pooling and Servicing Agreement and in
the Transferor Interest will not be affected by such termination. The
Trustee shall as promptly as possible appoint a successor Servicer. If no
such Servicer has been appointed and has accepted such appointment by the
time the Servicer ceases to act as Servicer, all authority, power and
obligations of the Servicer under the Pooling and Servicing Agreement shall
pass to and be vested in the Trustee. If the Trustee is unable to obtain
any bids from eligible servicers and the Servicer delivers an officer's
certificate to the effect that it cannot in good faith cure the Servicer
Default which gave rise to a transfer of servicing, and if the Trustee is
legally unable to act as Successor Servicer, then the Trustee shall give
the Transferor the right of first refusal to purchase the Receivables on
terms equivalent to the best purchase offer as determined by the Trustee.
A "Servicer Default" refers to any of the following events:
(a) failure by the Servicer to make any payment, transfer or
deposit, or to give instructions to the Trustee to make certain payments,
transfers or deposits, on the date the Servicer is required to do so under
the Pooling and Servicing Agreement or any Supplement (or within the
applicable grace period, which shall not exceed five business days);
(b) failure on the part of the Servicer duly to observe or perform
in any respect any other covenants or agreements of the Servicer which has
a material adverse effect on the certificateholders of any Series then
outstanding and which continues unremedied for a period of 60 days after
written notice and continues to have a material adverse effect on the
certificateholders of any Series, including the Certificates (which
determination shall be made without regard to whether funds are available
from any Enhancement), then outstanding for such period; or the delegation
by the Servicer of its duties under the Pooling and Servicing Agreement,
except as specifically permitted thereunder;
(c) any representation, warranty or certification made by the
Servicer in the Pooling and Servicing Agreement, or in any certificate
delivered pursuant to the Pooling and Servicing Agreement, proves to have
been incorrect when made which has a material adverse effect on the
certificateholders of any Series, including the Certificates (which
determination shall be made without regard to whether funds are available
from any Enhancement), then outstanding, and which continues to be
incorrect in any material respect for a period of 60 days after written
notice and continues to have a material adverse effect on such
certificateholders for such period; or
(d) the occurrence of certain events of bankruptcy, insolvency or
receivership of the Servicer.
Notwithstanding the foregoing, a delay in or failure of
performance referred to in clause (a) above for a period of 10 business
days, or referred to under clause (b) or (c) for a period of 60 business
days, shall not constitute a Servicer Default if such delay or failure
could not be prevented by the exercise of reasonable diligence by the
Servicer and such delay or failure was caused by an act of God or other
similar occurrence. Upon the occurrence of any such event, the Servicer
shall not be relieved from using its best efforts to perform its
obligations in a timely manner in accordance with the terms of the Pooling
and Servicing Agreement, and the Servicer shall provide the Trustee, any
provider of Enhancement, the Transferor and the holders of certificates of
all Series outstanding prompt notice of such failure or delay by it,
together with a description of the cause of such failure or delay and its
efforts to perform its obligations.
In the event of a Servicer Default, if a conservator or receiver
is appointed for the Servicer and no Servicer Default other than such
conservatorship or receivership or the insolvency of the Servicer exists,
the conservator or receiver may have the power to prevent either the
Trustee or the majority of the certificateholders from effecting a Service
Transfer.
Reports to Certificateholders
On each Distribution Date, the Trustee or any paying agent
appointed by the Trustee will forward to each Certificateholder of record a
statement prepared by the Servicer setting forth certain information with
respect to the Trust and the Certificates of each Series, including: (a)
the total amount distributed, (b) the amount of the distribution allocable
to principal on the Certificates, (c) the amount of such distribution
allocable to interest on the Certificates, (d) the amount of collections of
Principal Receivables processed during the related Monthly Period and
allocated in respect of the Certificates, (e) the amount of collections of
Finance Charge Receivables processed during the related Monthly Period and
allocated in respect of the Certificates, (f) the Investor Percentage for
the related Monthly Period, (g) the aggregate outstanding balance of
Accounts which are 35 or more days contractually delinquent, by class of
delinquency, as of the end of the last day of the related Monthly Period,
(h) the applicable Investor Default Amount for the related Monthly Period,
(i) the applicable Investor Charge-Offs for the related Monthly Period and
the amount of Investor Charge-Offs reimbursed on the Transfer Date
immediately preceding the Distribution Date, (j) the amount of the Investor
Servicing Fee for the related Monthly Period, (k) the Invested Amount at
the close of business on the last day of the related Monthly Period, (l)
the Pool Factor as of the end of the last day of the related Monthly
Period, and (m) the amount available, if any, pursuant to the applicable
Enhancement.
On or before January 31 of each calendar year, the Trustee or any
paying agent appointed by the Trustee will furnish to each person who at
any time during the preceding calendar year was a Certificateholder of
record a statement prepared by the Servicer containing the information
required to be contained in the regular monthly report to
Certificateholders, as set forth in clauses (a), (b) and (c) above
aggregated for such calendar year or the applicable portion thereof during
which such person was a Certificateholder, together with such other
customary information (consistent with the treatment of the Certificates as
debt) as the Trustee or the Servicer deems necessary or desirable to enable
the Certificateholders to prepare their United States tax returns.
Reports; Notices
The Trustee will publish or will cause to be published following
each Distribution Date in a daily newspaper in Luxembourg (expected to be
the Luxemburger Wort) a notice to the effect that the information set forth
in the foregoing paragraph will be available for review at the main office
of the listing agent of the Trust in Luxembourg, Luxembourg.
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
Certificatehold-ers will also be given by mail to the addresses of such
holders as they appear in the Certificate Register.
Evidence as to Compliance
The Pooling and Servicing Agreement provides that the Servicer
will cause a firm of independent public accountants to furnish to the
Trustee on an annual basis a report to the effect that such firm has
reviewed the Servicer's computer reports regarding the Receivables,
including information regarding delinquencies, charge-offs and yield and
that such reports are in agreement with monthly statements prepared by the
Servicer and distributed to the Trustee and the Certificateholders, except
as set forth in such report.
The Pooling and Servicing Agreement provides that the Servicer
will cause a firm of independent public accountants to furnish to the
Trustee on an annual basis a report to the effect that such firm has made a
study and evaluation in accordance with generally accepted auditing
standards of the Servicer's internal accounting controls relative to the
servicing of the Accounts and that, on the basis of such examination, such
firm is of the opinion (assuming the accuracy of reports by the Servicer's
third party agents) that the system of internal controls in effect for the
reporting period relating to servicing procedures performed by the
Servicer, taken as a whole, provided reasonable assurance that the internal
control system was sufficient for the prevention and detection of errors
and irregularities and that such servicing was conducted in compliance with
such provisions of the Pooling and Servicing Agreement with which such
accountants can reasonably be expected to possess adequate knowledge of the
subject matter, which are susceptible of positive assurance by such
accountants and for which their professional competence is relevant, except
for such exceptions as such firm shall believe to be immaterial and such
other exceptions as shall be set forth in such statement.
The Pooling and Servicing Agreement also provides for delivery to
the Trustee, on or before a certain date each year, of a certificate signed
by an officer of the Servicer stating that the Servicer has fulfilled its
obligations under the Pooling and Servicing Agreement throughout the
preceding twelve months or, if there has been a default in the fulfillment
of any such obligations, describing each such default.
Amendments
The Pooling and Servicing Agreement and any Supplement may be
amended by the Transferor, the Servicer and the Trustee, without the
consent of certificateholders of any Series then outstanding for any
purpose, provided that (i) the Transferor shall deliver an opinion of
counsel acceptable to the Trustee to the effect that such amendment will
not adversely affect in any material respect the interest of such
certificateholders, and (ii) such amendment will not result in a withdrawal
or reduction of the rating of any outstanding Series. Such an amendment may
be entered into in order to comply with or obtain the benefits of certain
future tax legislation (such as legislation creating FASITs) as described
below under "Certain U.S. Federal Income Tax Consequences--Recent
Legislation."
The Pooling and Servicing Agreement and the Supplement may be
amended by the Transferor, the Servicer and the Trustee with the consent of
the holders of certificates evidencing undivided interests aggregating not
less than 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 regarding the addition
or removal of Receivables from the Trust will not be considered an
amendment requiring certificateholder consent under the provisions of the
Pooling and Servicing Agreement and any Supplement.
List of Certificateholders
Upon written request of Certificateholders of record representing
undivided interests in the Trust aggregating not less than 10% of the
Invested Amount of a Series, the Trustee after having been adequately
indemnified by such Certificateholders for its costs and expenses, and
having given the Servicer notice that such request has been made, will
afford such Certificateholders access during business hours to the current
list of Certificateholders of the Trust for purposes of communicating with
other Certificateholders with respect to their rights under the Pooling and
Servicing Agreement. See "--Book-Entry Registration" and "--Definitive
Certificates" above.
The Trustee
The Bank of New York (Delaware) is currently the Trustee under the
Pooling and Servicing Agreement. The Transferor, the Servicer and their
respective affiliates may from time to time enter into normal banking and
trustee relationships with the Trustee and its affiliates. The Trustee, the
Transferor, the Servicer and any of their respective affiliates may hold
Certificates in their own names. In addition, for purposes of meeting the
legal requirements of certain local jurisdictions, the Trustee shall have
the power to appoint a co-trustee or separate trustees of all or any part
of the Trust. In the event of such appointment, all rights, powers, duties
and obligations conferred or imposed upon the Trustee by the Pooling and
Servicing Agreement shall be conferred or imposed upon the Trustee and such
separate trustee or co-trustee jointly, or, in any jurisdiction in which
the Trustee shall be incompetent or unqualified to perform certain acts,
singly upon such separate trustee or co-trustee who shall exercise and
perform such rights, powers, duties and obligations solely at the direction
of the Trustee.
The Trustee may resign at any time, in which event the Transferor
will be obligated to appoint a successor Trustee. The Transferor may also
remove the Trustee if the Trustee ceases to be eligible to continue as such
under the Pooling and Servicing Agreement or if the Trustee becomes
insolvent. In such circumstances, the Transferor will be obligated to
appoint a successor Trustee. Any resignation or removal of the Trustee and
appointment of a successor Trustee does not become effective until
acceptance of the appointment by the successor Trustee.
ENHANCEMENT
General
For any Series, Enhancement may be provided with respect to one or
more Classes thereof. Enhancement may be in the form of the subordination
of one or more Classes of the Certificates of such Series, the
establishment of a cash collateral guaranty or account, a letter of credit,
a surety bond, insurance, spread account, reserve account, the use of
cross-support features or another method of Enhancement described in the
related Prospectus Supplement, or any combination of the foregoing. If so
specified in the related Prospectus Supplement, any form of Enhancement may
be structured so as to be drawn upon by more than one Class to the extent
described therein.
Unless otherwise specified in the related Prospectus Supplement
for a Series, the Enhancement will not provide protection against all risks
of loss and will not guarantee repayment of the entire principal balance of
the Certificates and interest thereon. If losses occur which exceed the
amount covered by the Enhancement or which are not covered by the
Enhancement, Certificateholders will bear their allocable share of
deficiencies.
If Enhancement is provided with respect to a Series, the related
Prospectus Supplement will include a description of (a) the amount payable
under such Enhancement, (b) any conditions to payment thereunder not
otherwise described herein, (c) the conditions (if any) under which the
amount payable under such Enhancement may be reduced and under which such
Enhancement may be terminated or replaced and (d) any material provision of
any agreement relating to such Enhancement. Additionally, the related
Prospectus Supplement may set forth certain information with respect to the
issuer of any third party Enhancement (the "Enhancement Provider"),
including (i) a brief description of its principal business activities,
(ii) its principal place of business, place of incorporation and the
jurisdiction under which it is chartered or licensed to do business, (iii)
if applicable, the identity of regulatory agencies which exercise primary
jurisdiction over the conduct of its business and (iv) its total assets,
and its stockholders' or policyholders' surplus, if applicable, and other
appropriate financial information as of the date specified in the
Prospectus Supplement.
Subordination
If so specified in the related Prospectus Supplement, one or more
Classes of any Series will be subordinated as described in the related
Prospectus Supplement to the extent necessary to fund payments with respect
to the Senior Certificates or specified Certificates of another Series. The
rights of the holders of any such Subordinated Certificates to receive
distributions of principal and/or interest on any Distribution Date for
such Series will be subordinate in right and priority to the rights of the
holders of Senior Certificates, but only to the extent set forth in the
related Prospectus Supplement. If so specified in the related Prospectus
Supplement, subordination may apply only in the event of certain types of
losses not covered by another Enhancement. The related Prospectus
Supplement will also set forth information concerning the amount of
subordination of a Class or Classes of Subordinated Certificates of a
Series, the circumstances in which such subordination will be applicable,
the manner, if any, in which the amount of subordination will decrease over
time, and the conditions under which amounts available from payments that
would otherwise be made to holders of such Subordinated Certificates will
be distributed to holders of Senior Certificates. If collections of
Receivables otherwise distributable to holders of a Subordinated Class of a
Series will be used as support for a Class of another Series, the related
Prospectus Supplement will specify the manner and conditions for applying
such a cross-support feature.
Cash Collateral Guaranty or Account
If so specified in the related Prospectus Supplement, support for
a Series or one or more Classes thereof will be provided by a guaranty (the
"Cash Collateral Guaranty") secured by the deposit of cash or certain
permitted investments in an account (the "Cash Collateral Account")
reserved for the beneficiaries of the Cash Collateral Guaranty or by a Cash
Collateral Account alone. The amount available pursuant to the Cash
Collateral Guaranty or the Cash Collateral Account will be the lesser of
amounts on deposit in the Cash Collateral Account and an amount specified
in the related Prospectus Supplement. The related Prospectus Supplement
will set forth the circumstances under which payments are made to
beneficiaries of the Cash Collateral Guaranty from the Cash Collateral
Account or from the Cash Collateral Account directly.
Collateral Invested Amount
If so specified in the related Prospectus Supplement, support for
a Series or one or more Classes thereof will be provided initially by an
undivided interest in the Trust (the "Collateral Invested Amount") in an
amount initially equal to a percentage of the senior Certificates of such
Series as specified in the Prospectus Supplement. Such Series will also
have the benefit of a Cash Collateral Guaranty or Cash Collateral Account
with an initial amount on deposit therein of zero or such amount as
specified in the Prospectus Supplement which will be increased (i) to the
extent the Transferor elects, subject to certain conditions specified in
the related Prospectus Supplement, to apply collections of Principal
Receivables allocable to the Collateral Invested Amount to decrease the
Collateral Invested Amount, (ii) to the extent collections of Principal
Receivables allocable to the Collateral Invested Amount are required to be
deposited into the Cash Collateral Account as specified in the related
Prospectus Supplement and (iii) to the extent excess collections of Finance
Charge Receivables are required to be deposited into the Cash Collateral
Account as specified in the related Prospectus Supplement. The total amount
of the Enhancement available pursuant to the Collateral Invested Amount and
the Cash Collateral Guaranty or Cash Collateral Account will be the lesser
of the sum of the Collateral Invested Amount and the amount on deposit in
the Cash Collateral Account and an amount specified in the related
Prospectus Supplement. The related Prospectus Supplement will set forth the
circumstances under which payments which otherwise would be made to holders
of the Collateral Invested Amount will be distributed to holders of senior
Certificates and the circumstances under which payment will be made to the
beneficiaries of the Cash Collateral Guaranty from the Cash Collateral
Account or from the Cash Collateral Account directly.
If so specified in the related Prospectus Supplement, the
Collateral Invested Amount may be issued in certificated form and may have
voting and certain other rights of a subordinated Class of certificates.
Any Collateral Invested Amount issued in certificated form may be offered
hereby or under a separate Disclosure Document in transactions either
registered under the Securities Act or exempt from registration thereunder.
Letter of Credit
If so specified in the related Prospectus Supplement, support for
a Series or one or more Classes thereof will be provided by one or more
letters of credit. A letter of credit may provide limited protection
against certain losses in addition to or in lieu of other Enhancement. The
issuer of the letter of credit (the "L/C Bank") will be obligated to honor
demands with respect to such letter of credit, to the extent of the amount
available thereunder, to provide funds under the circumstances and subject
to such conditions as are specified in the related Prospectus Supplement.
The maximum liability of an L/C Bank under its letter of credit
will generally be an amount equal to a percentage specified in the related
Prospectus Supplement of the Initial Invested Amount of a Series or a Class
of such Series. The maximum amount available at any time to be paid under a
letter of credit will be determined in the manner specified therein and in
the related Prospectus Supplement.
Surety Bond or Insurance Policy
If so specified in the related Prospectus Supplement, insurance
with respect to a Series or one or more Classes thereof will be provided by
one or more insurance companies. Such insurance will guarantee, with
respect to one or more Classes of the related Series, distributions of
interest or principal in the manner and amount specified in the related
Prospectus Supplement.
If so specified in the related Prospectus Supplement, a surety
bond will be purchased for the benefit of the holders of any Series or
Class of such Series to assure distributions or interest or principal with
respect to such Series or Class of Certificates in the manner and amount
specified in the related Prospectus Supplement.
Spread Account
If so specified in the related Prospectus Supplement, support for
a Series or one or more Classes thereof will be provided by the periodic
deposit of certain available excess cash flow from the Trust assets into an
account (the "Spread Account") intended to assure the subsequent
distribution of interest and principal on the Certificates of such Class or
Series in the manner specified in the related Prospectus Supplement.
Reserve Account
If so specified in the related Prospectus Supplement, support for
a Series or one or more Classes thereof will be provided by the
establishment of a reserve account (the "Reserve Account"). The Reserve
Account may be funded, to the extent provided in the related Prospectus
Supplement, by an initial cash deposit, the retention of certain periodic
distributions of principal or interest otherwise payable to one or more
Classes of Certificates, including the Subordinated Certificates, or both,
or the provision of a letter of credit, guarantee insurance policy or other
form of credit or any combination thereof. The Reserve Account will be
established to assure the subsequent distribution of principal or interest
on the Certificates of such Series or Class thereof in the manner provided
in the related Prospectus Supplement.
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES
Transfer of Receivables
The Transferor has represented and warranted in the Pooling and
Servicing Agreement that the transfer of Receivables by it to the Trust
constitutes either a valid transfer and assignment to the Trust of all
right, title and interest of the Transferor in and to the Receivables,
except for the interest of the Transferor as holder of the Exchangeable
Transferor Certificate, or the grant to the Trust of a security interest in
the Receivables. The Transferor has also represented and warranted in the
Pooling and Servicing Agreement that, in the event the transfer of
Receivables by the Transferor to the Trust is deemed to create a security
interest under the Uniform Commercial Code, as in effect in the State of
Delaware (the "UCC"), there will exist a valid, subsisting and enforceable
first priority perfected security interest in such Receivables created
thereafter in favor of the Trust on and after their creation, except for
certain tax and other governmental liens. For a discussion of the Trust's
rights arising from a breach of these warranties, see "Description of the
Certificates--Representations and Warranties."
The Transferor has represented that the Receivables are "accounts"
for purposes of the UCC. Both the transfer and assignment of accounts and
the transfer of accounts as security for an obligation are treated under
Article 9 of the UCC as creating a security interest therein and are
subject to its provisions, and the filing of an appropriate financing
statement is required to perfect the security interest of the Trust.
Financing statements covering the Receivables have been filed with the
appropriate governmental authority to protect the interests of the Trust in
the Receivables.
There are certain limited circumstances under the UCC in which a
prior or subsequent transferee of Receivables coming into existence after
the Closing Date could have an interest in such Receivables with priority
over the Trust's interest. Under the Pooling and Servicing Agreement,
however, the Transferor has represented and warranted that it transferred
the Receivables to the Trust free and clear of the lien of any third party.
In addition, the Transferor has covenanted that it will not sell, pledge,
assign, transfer or grant any lien on any Receivable (or any interest
therein) other than to the Trust. A tax or other government lien or other
nonconsensual lien on property of the Transferor arising prior to the time
a Receivable comes into existence may also have priority over the interest
of the Trust in such Receivable. In addition, if the FDIC were appointed as
receiver of the Transferor, certain administrative expenses of the receiver
may also have priority over the interest of the Trust in such Receivable.
Certain Matters Relating to Receivership
The Federal Deposit Insurance Act ("FDIA"), as amended by the
Financial Institutions Reform, Recovery and Enforcement Act of 1989, sets
forth certain powers that the FDIC could exercise if it were appointed as
conservator or receiver of the Transferor or the Servicer. Among other
things, the FDIA grants such a conservator or receiver the power to
repudiate contracts of, and to request a stay of up to 90 days of any
judicial action or proceeding involving, the Transferor or the Servicer.
To the extent that (i) the Transferor granted a security interest
in the Receivables to the Trust, (ii) the interest was validly perfected
before the Transferor's insolvency, (iii) the interest was not taken or
granted in contemplation of the Transferor's insolvency or with the intent
to hinder, delay or defraud the Transferor or its creditors, (iv) the
Pooling and Servicing Agreement is continuously a record of the Bank, and
(v) the Pooling and Servicing Agreement represents a bona fide and arm's
length transaction undertaken for adequate consideration in the ordinary
course of business and that the Trustee is the secured party and is not an
insider or affiliate of the Transferor, such valid perfected security
interest of the Trustee should be enforceable (to the extent of the Trust's
"actual direct compensatory damages") notwithstanding the insolvency of, or
the appointment of a receiver or conservator for, the Transferor and
payments to the Trust with respect to the Receivables (up to the amount of
such damages) should not be subject to an automatic stay of payment or to
recovery by the FDIC as conservator or receiver of the Transferor. If,
however, the FDIC were to assert that the security interest was unperfected
or unenforceable or were to require the Trustee to establish its right to
those payments by submitting to and completing the statutory administrative
claims procedure, or the FDIC were to request a stay of proceedings with
respect to the Transferor, delays in payments on the Certificates and
possible reductions in the amount of those payments could occur. In the
event of a repudiation of obligations by the FDIC as conservator or
receiver, a claim for the repudiated obligation is limited to "actual
direct compensatory damages" determined as of the date of the appointment
of the FDIC as conservator or receiver. The FDIA does not define the term
"actual direct compensatory damages." On April 10, 1990, the RTC, formerly
a sister agency of the FDIC, adopted a statement of policy (the "RTC Policy
Statement") with respect to the payment of interest on collateralized
borrowings. The RTC Policy Statement states that interest on such
borrowings will be payable at the contract rate up to the date of the
redemption or payment by the conservator, receiver, or the trustee of an
amount equal to the principal owed plus the contract rate of interest up to
the date of such payment or redemption, plus any expenses of liquidation if
provided for in the contract, to the extent secured by the collateral. The
FDIC has not adopted a formal policy statement on payment of "actual direct
compensatory damages" with respect to collateralized borrowings of banks
that are repudiated. The Transferor believes that the general practice of
the FDIC in such circumstances is to permit the collateral to be applied to
pay the outstanding principal owed plus interest accrued at the contract
rate up to the date of payment, together with the costs of liquidation of
the collateral if provided for in the contract. In one case, however,
involving the repudiation by the RTC of certain secured zero-coupon bonds
issued by a savings association, a United States federal district court
held that "actual direct compensatory damages" in the case of a marketable
security meant the market value of the repudiated bonds as of the date of
repudiation. If that court's view were applied to determine the Trust's
"actual direct compensatory damages" in the event the FDIC repudiated the
Transferor's obligations under the Pooling and Servicing Agreement, the
amount paid to Certificateholders could, depending upon circumstances
existing on the date of the repudiation, be less than the principal of the
Certificates and the interest accrued thereon to the date of payment.
The Pooling and Servicing Agreement provides that, upon the
appointment of a conservator or receiver or upon a voluntary liquidation
with respect to the Transferor, the Transferor will promptly give notice
thereof to the Trustee and a Pay Out Event will occur with respect to all
Series then outstanding. Pursuant to the Pooling and Servicing Agreement,
newly created Principal Receivables would not be transferred to the Trust
on and after any such appointment or voluntary liquidation, and the Trustee
would proceed to sell, dispose of or otherwise liquidate the Receivables in
a commercially reasonable manner and on commercially reasonable terms,
unless otherwise instructed within a specified period by holders of
certificates representing undivided interests aggregating more than 50% of
the investor interest of each outstanding Series (or with respect to each
Series with two or more Classes, 50% of each Class), or unless otherwise
required by the FDIC as receiver or conservator of the Transferor. Under
the Pooling and Servicing Agreement, the proceeds from the sale of the
Receivables allocable to the Certificates would be treated as collections
of the Receivables and would be distributed to the Certificateholders. This
procedure could be delayed, as described above. If the only Pay Out Event
to occur is either the insolvency of the Transferor or the appointment of a
conservator or receiver for the Transferor, the FDIC as conservator or
receiver may have the power to prevent the early sale, liquidation or
disposition of the Receivables and the commencement of the Rapid
Amortization Period. See "Description of the Certificates--Pay Out Events."
If, upon the insolvency of the Servicer, the Servicer were to be
placed into conservatorship or receivership, the FDIC as conservator or
receiver would have the power to repudiate contracts of, and to request a
stay of up to 90 days of any judicial action or proceeding involving, the
Servicer. In the event of a Servicer Default, if the FDIC were appointed as
conservator or receiver for the Servicer, and no Servicer Default other
than such conservatorship or receivership or insolvency of the Servicer
exists, the FDIC may have the power to prevent a transfer of servicing to a
successor Servicer.
In Octagon Gas Systems, Inc. v. Rimmer, 995 F.2d 948 (10th Cir.
1993), cert. denied, 114 S. Ct. 554 (1993) ("Octagon"), the United States
Court of Appeals for the 10th Circuit suggested that even where a transfer
of accounts from a seller to a buyer constitutes a "true sale," the
accounts would nevertheless constitute property of the seller's bankruptcy
estate in a bankruptcy of the seller. If the Transferor were to be placed
into receivership and a court were to follow the Octagon court's reasoning,
Certificateholders might experience delays in payment or possibly losses in
their investment in the Certificates. Counsel has advised the Transferor
that the facts of the Octagon case are distinguishable from those in the
sale transactions between the Transferor and the Trust and that the
reasoning of the Octagon case appears to be inconsistent with established
precedent and the UCC. In addition, because the Transferor, the Trust and
the transactions governed by the Pooling and Servicing Agreement do not
have any particular link to the 10th Circuit, it is unlikely that the
Transferor would be subject to a receivership proceeding in the 10th
Circuit. Accordingly, the Octagon case should not be binding precedent on a
court in a receivership proceeding.
Consumer Protection Laws
The relationship of the cardholder and credit card issuer is
extensively regulated by Federal and state consumer protection laws. With
respect to credit cards issued by the Bank, the most significant of these
laws include the Federal Truth-in-Lending Act, Equal Credit Opportunity
Act, Fair Debt Collection Practices Act, Fair Credit Reporting Act and
Electronic Funds Transfer Act, as well as the Delaware Banking Code and
comparable statutes in the states in which cardholders reside. These
statutes impose disclosure requirements when a credit card account is
advertised, when it is opened, at the end of monthly billing cycles, upon
account renewal for accounts on which annual fees are assessed, and at year
end and, in addition, limit cardholder liability for unauthorized use,
prohibit certain discriminatory practices in extending credit, and impose
certain limitations on the type of account-related charges that may be
assessed. Federal legislation requires credit card issuers to disclose to
consumers the interest rates, annual cardholder fees, grace periods, and
balance calculation methods associated with their credit card accounts.
Cardholders are entitled under current law to have payments and credits
applied to the credit card account promptly, to receive prescribed notices
and to have billing errors resolved promptly.
The Trust may be liable for certain violations of consumer
protection laws that apply to the Receivables, either as assignee of the
Transferor with respect to obligations arising before transfer of the
Receivables to the Trust or as a party directly responsible for obligations
arising after the transfer. In addition, a cardholder may be entitled to
assert such violations by way of set-off against his obligation to pay the
amount of Receivables owing. The Transferor covenants in the Pooling and
Servicing Agreement to accept the transfer of all Receivables in an Account
if any Receivable in such Account has not been created in compliance with
the requirements of such laws. The Bank has also agreed in the Pooling and
Servicing Agreement to indemnify the Trust for, among other things, any
liability arising from such violations. See "Description of the
Certificates--Representations and Warranties."
Various proposed laws and amendments to existing laws have from
time to time been introduced in Congress and certain state and local
legislatures that, if enacted, would further regulate the credit card
industry, certain of which would, among other things, impose a ceiling on
the rate at which a financial institution may assess finance charges and
fees on credit card accounts that would be substantially below the rates of
the finance charges and fees the Bank currently assesses on its accounts.
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 believes
that the plaintiff's claim under these statutes is not valid. The Bank
removed the case to the United States District Court for the Southern
District of Texas, Brownsville Division. On April 8, 1996, the United
States District Court for the Southern District of Texas, Brownsville
Division granted the Bank's motion for summary judgment and dismissed the
plaintiff's claim. The plaintiff has appealed the judgment and the Bank
intends to vigorously defend against all claims arising under such appeal.
While it is impossible to predict the outcome of such lawsuit, the Bank
believes that any liability arising from such lawsuit will not have a
material adverse effect on the Transferor's business or on the Receivables
in the Trust.
The Bank was named a defendant in a class action lawsuit filed on
December 19, 1995 in the United States District Court for the Northern
District of California by a former cardmember of the Bank. In this action,
the plaintiff contends that she and all others similarly situated are
entitled to equitable relief and compensatory and statutory damages for
alleged violations by the Bank of the Federal Truth-in-Lending Act, the
California unfair business practices statutes, breach of contract,
negligent misrepresentation and fraud and deceit. The Bank believes that
the plaintiff's claims are not valid and has answered the plaintiff's
complaint, denying all liability. On June 21, 1996, the District Court
denied the Bank's motion to dismiss the case and plaintiff's motion for a
preliminary injunction. The Bank intends to vigorously defend against the
plaintiff's claims. 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 disposition of the
Certificates of a Series, is based upon the provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), proposed, temporary and
final Treasury regulations thereunder, and published rulings and court
decisions in effect as of the date hereof, all of which are subject to
change, possibly retroactively. This discussion does not address every
aspect of the Federal income tax laws that may be relevant to Certificate
Owners of a Series in light of their personal investment circumstances or
to certain types of Certificate Owners of a Series subject to special
treatment under the Federal income tax laws (for example, banks and life
insurance companies). PROSPECTIVE INVESTORS ARE ADVISED TO CONSULT THEIR
OWN TAX ADVISORS WITH REGARD TO THE FEDERAL TAX CONSEQUENCES OF THE
PURCHASE, OWNERSHIP, OR DISPOSITION OF INTERESTS IN CERTIFICATES, AS WELL
AS THE TAX CONSEQUENCES ARISING UNDER THE LAWS OF ANY STATE, FOREIGN
COUNTRY, OR OTHER TAXING JURISDICTION.
Characterization of the Certificates as Indebtedness
Unless otherwise specified in the related Prospectus Supplement,
special tax counsel to the Bank ("Special Tax Counsel") specified in such
Prospectus Supplement will, upon issuance of a Series of Certificates,
advise the Bank based on the assumptions and qualifications set forth in
the opinion that the Certificates of such Series that are offered pursuant
to a Prospectus Supplement (the "Offered Certificates;" and for purposes of
this section "Certain U.S. Federal Income Tax Consequences" the term
"Certificate Owner" refers to a holder of a beneficial interest in an
Offered Certificate) will be treated as indebtedness for Federal income tax
purposes. However, opinions of counsel are not binding on the Internal
Revenue Service (the "IRS") and there can be no assurance that the IRS
could not successfully challenge this conclusion.
The Transferor expresses in the Pooling and Servicing Agreement
its intent that for Federal, state and local income or franchise tax
purposes, the Offered Certificates of each Series will be indebtedness
secured by the Receivables. The Transferor agrees and each
Certificateholder and Certificate Owner, by acquiring an interest in an
Offered Certificate, agrees or will be deemed to agree to treat the Offered
Certificates of such Series as indebtedness for Federal, state and local
income or franchise tax purposes. However, because different criteria are
used to determine the non-tax accounting characterization of the
transactions contemplated by the Pooling and Servicing Agreement, the
Transferor expects to treat such transaction, for regulatory and financial
accounting purposes, as a sale of an ownership interest in the Receivables
and not as a debt obligation.
In general, whether for Federal income tax purposes a transaction
constitutes a sale of property or a loan, the repayment of which is secured
by the property, is a question of fact, the resolution of which is based
upon the economic substance of the transaction rather than its form or the
manner in which it is labeled. While the IRS and the courts have set forth
several factors to be taken into account in determining whether the
substance of a transaction is a sale of property or a secured indebtedness
for Federal income tax purposes, the primary factor in making this
determination is whether the transferee has assumed the risk of loss or
other economic burdens relating to the property and has obtained the
benefits of ownership thereof. Unless otherwise set forth in a Prospectus
Supplement, it is expected that, as set forth in its opinion, Special Tax
Counsel will analyze and rely on several factors in reaching its opinion
that the weight of the benefits and burdens of ownership of the Receivables
has not been transferred to the Certificate Owners.
In some instances, courts have held that a taxpayer is bound by a
particular form it has chosen for a transaction, even if the substance of
the transaction does not accord with its form. Unless otherwise specified
in a Prospectus Supplement, it is expected that Special Tax Counsel will
advise that the rationale of those cases will not apply to the transaction
evidenced by a Series of Certificates, because the form of the transaction,
as reflected in the operative provisions of the documents, either is not
inconsistent with the characterization of the Offered Certificates of such
Series as debt for Federal income tax purposes or otherwise makes the
rationale of those cases inapplicable to this situation.
Taxation of Interest Income of Certificateholders
As set forth above, it is expected that, unless otherwise
specified in a Prospectus Supplement, Special Tax Counsel will advise the
Bank that the Offered Certificates will constitute indebtedness for Federal
income tax purposes, and accordingly, interest thereon will be includible
in income by Certificate Owners as ordinary income when received (in the
case of a cash basis taxpayer) or accrued (in the case of an accrual basis
taxpayer) in accordance with their respective methods of tax accounting.
Interest received on the Offered Certificates may also constitute
"investment income" for purposes of certain limitations of the Code
concerning the deductibility of investment interest expense.
While it is not anticipated that the Offered Certificates will be
issued at a greater than de minimis discount, under applicable Treasury
regulations (the "Regulations") the Offered Certificates may nevertheless
be deemed to have been issued with original issue discount ("OID"). This
could be the case, for example, if interest payments for a Series are not
treated as "qualified stated interest" because the IRS determines that (i)
no reasonable legal remedies exist to compel timely payment and (ii) the
Offered Certificates do not have terms and conditions that make the
likelihood of late payment (other than a late payment that occurs within a
reasonable grace period) or nonpayment a remote contingency. Applicable
regulations provide that, for purposes of the foregoing test, the
possibility of nonpayment due to default, insolvency, or similar
circumstances, is ignored. Although this provision does not directly apply
to the Offered Certificates (because they have no actual default
provisions) the Transferor intends to take the position that, because
nonpayment can occur only as a result of events beyond its control
(principally, loss rates and payment delays on the Receivables
substantially in excess of those anticipated), nonpayment is a remote
contingency. Based on the foregoing, and on the fact that generally
interest will accrue on the Offered Certificates at a "qualified floating
rate," the Transferor intends to take the position that interest payments
on the Offered Certificates constitute qualified stated interest. If,
however, interest payments for a Series were not classified as "qualified
stated interest," all of the taxable income to be recognized with respect
to the Offered Certificates would be includible in income as OID but would
not be includible again when the interest is actually received.
If the Offered Certificates are in fact issued at a greater than
de minimis discount or are treated as having been issued with OID under the
Regulations, the following rules will apply. The excess of the "stated
redemption price at maturity" of an Offered Certificate over the original
issue price (in this case, the initial offering price at which a
substantial amount of the Offered Certificates are sold to the public) will
constitute OID. A Certificate Owner must include OID in income as interest
over the term of the Offered Certificate under a constant yield method. In
general, OID must be included in income in advance of the receipt of cash
representing that income. In the case of a debt instrument as to which the
repayment of principal may be accelerated as a result of the prepayment of
other obligations securing the debt instrument (a "Prepayable Instrument"),
the periodic accrual of OID is determined by taking into account both the
prepayment assumptions used in pricing the debt instrument and the
prepayment experience. If this provision applies to a Class of Certificates
(which is not clear), the amount of OID which will accrue in any given
"accrual period" may either increase or decrease depending upon the actual
prepayment rate. Accordingly, each Certificate Owner should consult its own
tax advisor regarding the impact to it of the OID rules if the Offered
Certificates are issued with OID. Under the Regulations, a holder of a
Certificate issued with de minimis OID must include such OID in income
proportionately as principal payments are made on a Class of Certificates.
A holder who purchases an Offered Certificate at a discount from
its adjusted issue price may be subject to the "market discount" rules of
the Code. These rules provide, in part, for the treatment of gain
attributable to accrued market discount as ordinary income upon the receipt
of partial principal payments or on the sale or other disposition of the
Offered Certificate, and for the deferral of interest deductions with
respect to debt incurred to acquire or carry the market discount Offered
Certificate.
A subsequent holder who purchases an Offered Certificate at a
premium may elect to amortize and deduct this premium over the remaining
term of the Offered Certificate in accordance with rules set forth in
Section 171 of the Code.
Sale of a Certificate
In general, a Certificate Owner will recognize gain or loss upon
the sale, exchange, redemption, or other taxable disposition of an Offered
Certificate measured by the difference between (i) the amount of cash and
the fair market value of any property received (other than amounts
attributable to, and taxable as, accrued interest) and (ii) the Certificate
Owner's tax basis in the Offered Certificate (as increased by any OID or
market discount previously included in income by the holder and decreased
by any deductions previously allowed for amortizable bond premium and by
any payments reflecting principal or OID received with respect to such
Certificate). Subject to the market discount rules discussed above and to
the one-year holding requirement for long-term capital gain treatment, any
such gain or loss generally will be long-term capital gain, provided that
the Offered Certificate was held as a capital asset and provided, further,
that if the rules applicable to Prepayable Instruments apply, any OID not
previously accrued will be treated as ordinary income. The maximum ordinary
income rate for individuals, estates, and trusts exceeds the maximum
long-term capital gains rate for such taxpayers. In addition, capital
losses generally may be used only to offset capital gains.
Tax Characterization of the Trust
The Pooling and Servicing Agreement permits the issuance of
Classes of Certificates that are treated for Federal income tax purposes
either as indebtedness or as an interest in a partnership. Accordingly, the
Trust could be characterized either as (i) a security device to hold
Receivables securing the repayment of the Certificates of all Series or
(ii) a partnership in which the Transferor and certain classes of
Certificateholders are partners, and which has issued debt represented by
other Classes of Certificates (including, unless otherwise specified in a
Supplement, the Offered Certificates). In connection with the issuance of
Certificates of any Series, Special Tax Counsel will render an opinion to
the Bank, based on the assumptions and qualifications set forth therein,
that under then current law, the issuance of the Certificates of such
Series will not cause the Trust to be characterized for Federal income tax
purposes as an association (or publicly traded partnership) taxable as a
corporation.
The opinion of Special Tax Counsel with respect to Offered
Certificates and the Trust will not be binding on the courts or the IRS. It
is possible that the IRS could assert that, for purposes of the Code, the
transaction contemplated by this Prospectus and a related Prospectus
Supplement constitutes a sale of the Receivables (or an interest therein)
to the Certificate Owners of one or more Series or Classes and that the
proper classification of the legal relationship between the Bank and some
or all of the Certificate Owners or Certificateholders of one or more
Series resulting from the transaction is that of a partnership (including a
publicly traded partnership), a publicly traded partnership taxable as a
corporation, or an association taxable as a corporation. The Transferor
currently does not intend to comply with the Federal income tax reporting
requirements that would apply if any Classes of Certificates were treated
as interests in a partnership or corporation (unless, as is permitted by
the Pooling and Servicing Agreement, an interest in the Trust is issued or
sold that is intended to be classified as an interest in a partnership).
If the Trust were treated in whole or in part as a partnership in
which some or all Certificate Owners of one or more Series were partners,
that partnership could be classified as a publicly traded partnership
taxable as a corporation. A partnership will be classified as a publicly
traded partnership taxable as a corporation if equity interests therein are
traded on an "established securities market," or are "readily tradeable" on
a "secondary market" or its "substantial equivalent" unless certain
exceptions apply. One such exception would apply if the Trust is not
engaged in a "financial business" and 90% or more of its income consists of
interest and certain other types of passive income. Because Treasury
regulations do not clarify the meaning of a "financial business" for this
purpose, it is unclear whether this exception applies. The Transferor has
taken and intends to take measures designed to reduce the risk that the
Trust could be classified as a publicly traded partnership taxable as a
corporation by reason of trading of interests in the Trust other than the
Offered Certificates and other certificates with respect to which an
opinion is rendered that such certificates constitute debt for Federal
income tax purposes. However, there can be no assurance that the Trust
could not become a publicly traded partnership, because certain of the
actions necessary to comply with such exceptions are not fully within the
control of the Transferor. Furthermore, certain Series issued prior to May
2, 1995 may not be able to be conformed to the measures taken by the
Transferor with respect to Series issued on or after that date.
If a transaction were treated as creating a partnership between
the Transferor and the Certificate Owners or Certificateholders of one or
more Series, the partnership itself would not be subject to Federal income
tax (unless it were to be characterized as a publicly traded partnership
taxable as a corporation); rather, the partners of such partnership,
including the Certificate Owners or Certificateholders of such Series,
would be taxed individually on their respective distributive shares of the
partnership's income, gain, loss, deductions and credits. The amount and
timing of items of income and deductions of a Certificate Owner could
differ if the Offered Certificates were held to constitute partnership
interests, rather than indebtedness. Moreover, unless the partnership were
treated as engaged in a trade or business, an individual's share of
expenses of the partnership would be miscellaneous itemized deductions
that, in the aggregate, are allowed as deductions only to the extent they
exceed two percent of the individual's adjusted gross income, and would be
subject to reduction under Section 68 of the Code if the individual's
adjusted gross income exceeded certain limits. As a result, the individual
might be taxed on a greater amount of income than the stated rate on the
Offered Certificates. Finally, if the partnership were a publicly traded
partnership that qualifies for exemption from taxation as a corporation,
all or a portion of any taxable income allocated to a Certificate Owner
that is a pension, profit-sharing or employee benefit plan or other
tax-exempt entity (including an individual retirement account) may, under
certain circumstances, constitute "unrelated business taxable income" which
generally would be taxable to the holder under the Code. Partnership
characterization also may have adverse state and local income or franchise
tax consequences for a Certificate Owner.
If it were determined that a transaction created an entity
classified as an association or as a publicly traded partnership taxable as
a corporation, the Trust would be subject to Federal income tax at
corporate income tax rates on the income it derives from the Receivables,
which would reduce the amounts available for distribution to the
Certificate Owners, possibly including Certificate Owners of a Class that
is treated as indebtedness. Such classification may also have adverse state
and local tax consequences that would reduce amounts available for
distribution to Certificate Owners. Cash distributions to the Certificate
Owners (except any Class not recharacterized as an equity interest in an
association) generally would be treated as dividends for tax purposes to
the extent of such deemed corporation's earnings and profits.
Recent Legislation
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 addressed 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 subsequent to such
an election. The Pooling and Servicing Agreement may be amended in
accordance with the provisions thereof to provide that the Transferor may
cause a FASIT election to be made for the Trust if the Transferor delivers
to the Trustee an opinion of counsel to the effect that, for Federal income
tax purposes, (i) the issuance of FASIT regular interests will not
adversely affect the tax characterization as debt of Certificates of any
outstanding Series or Class that were characterized as debt at the time of
their issuance, (ii) following such issuance the Trust will not be deemed
to be an association (or publicly traded partnership) taxable as a
corporation and (iii) such issuance will not cause or constitute an event
in which gain or loss would be recognized by any Certificateholder or the
Trust.
Foreign Investors
As set forth above, it is expected that Special Tax Counsel will
render an opinion, upon issuance, that the Offered Certificates will be
treated as debt for U.S. Federal income tax purposes. The following
information describes the U.S. Federal income tax treatment of investors
that are not U.S. persons ("Foreign Investors") if the Offered Certificates
are treated as debt. The term "Foreign Investor" means any person other
than (i) a citizen or resident of the United States, (ii) a corporation,
partnership or other entity organized in or under the laws of the United
States or any political subdivision thereof, (iii) an estate the income of
which is includible in gross income for U.S. Federal income tax purposes,
regardless of its source or (iv) a trust the income of which is includible
in gross income for U.S. Federal income tax purposes, regardless of its
source or, for tax years beginning after December 31, 1996 (and, if a
trustee so elects, for tax years ending after August 20, 1996), a trust if
a U.S. court is able to exercise primary supervision over the
administration of such trust and one or more U.S. fiduciaries have the
authority to control all substantial decisions of such trust.
Interest, including OID, paid to a Foreign Investor will be
subject to U.S. withholding taxes at a rate of 30% unless (x) the income is
"effectively connected" with the conduct by such Foreign Investor of a
trade or business in the United States or (y) the Foreign Investor and each
securities clearing organization, bank, or other financial institution that
holds the Offered Certificates on behalf of the customer in the ordinary
course of its trade or business, in the chain between the Certificate Owner
and the U.S. person otherwise required to withhold the U.S. tax, complies
with applicable identification requirements and, in addition (i) the
non-U.S. Certificate Owner does not actually or constructively own 10
percent or more of the total combined voting power of all classes of stock
of the Transferor entitled to vote (or of a profits or capital interest of
a trust characterized as a partnership), (ii) the non-U.S. Certificate
Owner is not a controlled foreign corporation that is related to the
Transferor (or a trust treated as a partnership) through stock ownership,
(iii) the non-U.S. Certificate Owner is not a bank receiving interest
described in Code Section 881(c)(3)(A), (iv) such interest is not
contingent interest described in Code Section 871(h)(4), and (v) the
non-U.S. Certificate Owner does not bear certain relationships to any
holder of the Exchangeable Transferor Certificate other than the Transferor
or any holder of the Certificates of any Series not properly characterized
as debt. Applicable identification requirements generally will be satisfied
if there is delivered to a securities clearing organization (i) IRS Form
W-8 signed under penalties of perjury by the Certificate Owner, stating
that the Certificate Owner is not a U.S. person and providing such
Certificate Owner's name and address, (ii) IRS Form 1001, signed by the
Certificate Owner or such Certificate Owner's agent, claiming exemption
from withholding under an applicable tax treaty, or (iii) IRS Form 4224
signed by the Certificate Owner or such owner's agent, claiming exemption
from withholding of tax on income effectively connected with the conduct of
a trade or business in the United States; provided that in any such case
(x) the applicable form is delivered pursuant to applicable procedures and
is properly transmitted to the United States entity otherwise required to
withhold tax and (y) none of the entities receiving the form has actual
knowledge that the Certificate Owner is a U.S. person.
Recently proposed Treasury regulations (the "Proposed
Regulations") could affect the procedures to be followed by a Foreign
Investor in complying with United States Federal withholding, backup
withholding and information reporting rules. The Proposed Regulations are
not currently effective but, if finalized in their current form, would be
effective for payments made after December 31, 1997. Prospective investors
are urged to consult their tax advisors regarding the effect, if any, of
the Proposed Regulations on the purchase, ownership, and disposition of the
Offered Certificates.
A Certificate Owner that is a nonresident alien or foreign
corporation will not be subject to U.S. Federal income tax on gain realized
upon the sale, exchange, or redemption of an Offered Certificate, provided
that (i) such gain is not effectively connected with the conduct of a trade
or business in the United States, (ii) in the case of a Certificate Owner
that is an individual, such Certificate Owner is not present in the United
States for 183 days or more during the taxable year in which such sale,
exchange, or redemption occurs, and (iii) in the case of gain representing
accrued interest, the conditions described in the second preceding
paragraph are satisfied.
If the interests of the Certificate Owners of a Series were
reclassified as interests in a partnership (not taxable as a corporation),
such recharacterization could cause a Foreign Investor to be treated as
engaged in a trade or business in the United States. In such event the
Certificate Owner of such Series would be required to file a Federal income
tax return and, in general, would be subject to Federal income tax,
including branch profits tax in the case of a Certificateholder that is a
corporation, on its net income from the partnership. Further, the
partnership would be required, on a quarterly basis, to pay withholding tax
equal to the sum, for each foreign partner, of such foreign partner's
distributive share of "effectively connected" income of the partnership
multiplied by the highest rate of tax applicable to that foreign partner.
The tax withheld from each foreign partner would be credited against such
foreign partner's U.S. Federal income tax liability.
If the Trust were taxable as a corporation, distributions to
foreign persons, to the extent treated as dividends, would generally be
subject to withholding at the rate of 30%, unless such rate were reduced by
an applicable tax treaty.
STATE AND LOCAL TAXATION
The discussion above does not address the tax treatment of the
Trust, the Certificates of any Series, or the Certificate Owners of any
Series under state tax laws. Prospective investors are urged to consult
their own tax advisors regarding state and local tax treatment of the Trust
and the Certificates of any Series, and the consequences of purchase,
ownership or disposition of the Certificates of any Series under any state
or local tax law.
ERISA CONSIDERATIONS
Section 406 of ERISA and Section 4975 of the Code prohibit a
pension, profit sharing or other employee benefit plan from engaging in
certain transactions involving "plan assets" with persons that are "parties
in interest" under ERISA or "disqualified persons" under the Code with
respect to the plan. ERISA also imposes certain duties on persons who are
fiduciaries of plans subject to ERISA and prohibits certain transactions
between a plan and parties in interest with respect to such plans. Under
ERISA, any person who exercises any authority or control respecting the
management or disposition of the assets of a plan is considered to be a
fiduciary of such plan (subject to certain exceptions not here relevant). A
violation of these "prohibited transaction" rules may generate excise tax
and other liabilities under ERISA and the Code for such persons.
Plan fiduciaries must determine whether the acquisition and
holding of the Certificates of a Series and the operations of the Trust
would result in direct or indirect prohibited transactions under ERISA and
the Code. The operations of the Trust could result in prohibited
transactions if Benefit Plans that purchase the Certificates of a Series
are deemed to own an interest in the underlying assets of the Trust. There
may also be an improper delegation of the responsibility to manage Benefit
Plan assets if Benefit Plans that purchase the Certificates are deemed to
own an interest in the underlying assets of the Trust.
Pursuant to a final regulation (the "Final Regulation") issued by
the Department of Labor ("DOL") concerning the definition of what
constitutes the "plan assets" of an employee benefit plan subject to ERISA
or the Code, or an individual retirement account ("IRA") (collectively
referred to as "Benefit Plans"), the assets and properties of certain
entities in which a Benefit Plan makes an equity investment could be deemed
to be assets of the Benefit Plan in certain circumstances. Accordingly, if
Benefit Plans purchase Certificates of a Series, the Trust could be deemed
to hold plan assets unless one of the exceptions under the Final Regulation
is applicable to the Trust.
The Final Regulation only applies to the purchase by a Benefit
Plan of an "equity interest" in an entity. Assuming that interests in
Certificates of a Series are equity interests, the Final Regulation
contains an exception that provides that if a Benefit Plan acquires a
"publicly-offered security," the issuer of the security is not deemed to
hold plan assets. A publicly-offered security is a security that is (i)
freely transferable, (ii) part of a class of securities that is owned by
100 or more investors independent of the issuer and of one another and
(iii) either is (A) part of a class of securities registered under Section
12(b) or 12(g) of the Exchange Act or (B) sold to the plan as part of an
offering of securities to the public pursuant to an effective registration
statement under the Securities Act and the class of securities of which
such security is a part is registered under the Exchange Act within 120
days (or such later time as may be allowed by the Commission) after the end
of the fiscal year of the issuer during which the offering of such
securities to the public occurred. In addition, the Final Regulation
provides that if a Benefit Plan invests in an "equity interest" of an
entity that is neither a "publicly-offered security" nor a security issued
by an investment company registered under the Investment Company Act, the
Benefit Plan's assets include both the equity interest and an undivided
interest in each of the entity's underlying assets, unless it is
established that equity participation by "benefit plan investors" is not
"significant" or that another exception applies.
Under the Final Regulation, equity participation in an entity by
"benefit plan investors" is "significant" on any date if, immediately after
the most recent acquisition of any equity interest in the entity (other
than a publicly-offered class of equity), 25% or more of the value of any
class of equity interests in the entity (other than a publicly-offered
class) is held by "benefit plan investors." For purposes of this
determination, the value of equity interests held by a person (other than a
benefit plan investor) that has discretionary authority or control with
respect to the assets of the entity or that provides investment advice for
a fee with respect to such assets (or any affiliate of such person) is
disregarded. The term "benefit plan investor" is defined in the Final
Regulation as (a) any employee benefit plan (as defined in Section 3(3) of
ERISA), whether or not it is subject to the provisions of Title I of ERISA,
(b) any plan described in Section 4975(e)(1) of the Code and (c) any entity
whose underlying assets include plan assets by reason of a plan's
investment in the entity.
Unless otherwise specified in the related Prospectus Supplement,
it is anticipated that interests in the Certificates of a Series will meet
the criteria of publicly-offered securities as set forth above. Unless
otherwise specified in the related Prospectus Supplement, the underwriters
expect (although no assurances can be given) that interests in each Class
of Certificates of each Series offered hereby will be held by at least 100
independent investors at the conclusion of the offering for such Series;
there are no restrictions imposed on the transfer of interests in the
Certificates of such Series; and interests in the Certificates of such
Series will be sold as part of an offering pursuant to an effective
registration statement under the Securities Act and then will be timely
registered under the Exchange Act.
If interests in the Certificates of a Series fail to meet the
criteria of publicly-offered securities or investment by benefit plan
investors becomes significant and the Trust's assets are deemed to include
assets of Benefit Plans that are Certificateholders, transactions involving
the Trust and "parties in interest" or "disqualified persons" with respect
to such plans might be prohibited under Section 406 of ERISA and Section
4975 of the Code unless an exemption is applicable. In addition, the
Transferor or any underwriter of such Series may be considered to be a
party in interest, disqualified person or fiduciary with respect to an
investing Benefit Plan. Accordingly, an investment by a Benefit Plan in
Certificates may be a prohibited transaction under ERISA and the Code
unless such investment is subject to a statutory or administrative
exemption. Thus, for example, if a participant in any Benefit Plan is a
cardholder of one of the Accounts, under DOL interpretations the purchase
of interests in Certificates by such plan could constitute a prohibited
transaction. Five class exemptions issued by the DOL that could apply in
such event are DOL Prohibited Transaction Exemption ("PTE") 84-l4 (Class
Exemption for Plan Asset Transactions Determined by Independent Qualified
Professional Asset Managers), 91-38 (Class Exemption for Certain
Transactions Involving Bank Collective Investment Funds), 90-1 (Class
Exemption for Certain Transactions Involving Insurance Company Pooled
Separate Accounts), 95-60 (Class Exemption for Certain Transactions
Involving Insurance Company General Accounts) and 96-23 (Class Exemption
for Plan Asset Transactions Determined by In-House Asset Managers). There
is no assurance that these exemptions, even if all of the conditions
specified therein are satisfied, or any other exemption will apply to all
transactions involving the Trust's assets.
IN LIGHT OF THE FOREGOING, FIDUCIARIES OF A BENEFIT PLAN
CONSIDERING THE PURCHASE OF INTERESTS IN CERTIFICATES OF ANY SERIES SHOULD
CONSULT THEIR OWN COUNSEL AS TO WHETHER THE ASSETS OF THE TRUST WHICH ARE
REPRESENTED BY SUCH INTERESTS WOULD BE CONSIDERED PLAN ASSETS, AND WHETHER,
UNDER THE GENERAL FIDUCIARY STANDARDS OF INVESTMENT PRUDENCE AND
DIVERSIFICATION, AN INVESTMENT IN CERTIFICATES OF ANY SERIES IS APPROPRIATE
FOR THE BENEFIT PLAN TAKING INTO ACCOUNT THE OVERALL INVESTMENT POLICY OF
THE BENEFIT PLAN AND THE COMPOSITION OF THE BENEFIT PLAN'S INVESTMENT
PORTFOLIO. In addition, fiduciaries should consider the consequences that
would apply if the Trust's assets were considered plan assets, the
applicability of exemptive relief from the prohibited transaction rules,
and, whether all conditions for such exemptive relief would be satisfied.
In particular, insurance companies considering the purchase of
Certificates of any Series should consult their own employee benefits
counsel or other appropriate counsel with respect to the United States
Supreme Court's decision in John Hancock Mutual Life Insurance Co. v.
Harris Trust & Savings Bank, 114 S. Ct. 517 (1993) ("John Hancock") and the
applicability of PTE 95-60. In John Hancock, the Supreme Court held that
assets held in an insurance company's general account may be deemed to be
"plan assets" under certain circumstances; however, PTE 95-60 may exempt
some or all of the transactions that could occur as the result of the
acquisition and holding of the Certificates of a Series by an insurance
company general account from the penalties normally associated with
prohibited transactions. Accordingly, investors should analyze whether John
Hancock and PTE 95-60 or any other exemption may have an impact with
respect to their purchase of the Certificates of any Series.
In addition, insurance companies considering the purchase of
Certificates using assets of a general account should consult their own
employee benefits counsel or other appropriate counsel with respect to the
effect of the Small Business Job Protection Act of 1996 which added a new
Section 401(c) of ERISA relating to the status of the assets of insurance
company general accounts under ERISA and Section 4975 of the Code. Pursuant
to Section 401(c), the DOL is required to issue final regulations (the
"General Account Regulations") not later than December 31, 1997 with
respect to insurance policies issued on or before December 31, 1998 that
are supported by an insurer's general account. The General Account
Regulations are intended to provide guidance on which assets held by the
insurer constitute "plan assets" for purposes of the fiduciary
responsibility provisions of ERISA and Section 4975 of the Code. Section
401(c) also provides that, except in the case of avoidance of the General
Account Regulations and actions brought by the Secretary of Labor relating
to certain breaches of fiduciary duties that also constitute breaches of
state or Federal criminal law, until the date that is 18 months after the
General Account Regulations become final, no liability under the fiduciary
responsibility and prohibited transaction provisions of ERISA and Section
4975 may result on the basis of a claim that the assets of the general
account of an insurance company constitute the plan assets of any such
plan. The plan asset status of insurance company separate accounts is
unaffected by new Section 401(c) of ERISA, and separate account assets
continue to be treated as the plan assets of any such plan invested in a
separate account.
PLAN OF DISTRIBUTION
Subject to the terms and conditions set forth in an underwriting
agreement (an "Underwriting Agreement") to be entered into with respect to
a Series of Certificates, the Transferor will agree to sell to each of the
underwriters named therein and in the related Prospectus Supplement, and
each of such underwriters will severally agree to purchase from the
Transferor, the principal amount of Certificates set forth therein and in
the related Prospectus Supplement (subject to proportional adjustment on
the terms and conditions set forth in the related Underwriting Agreement in
the event of an increase or decrease in the aggregate amount of
Certificates offered hereby and by the related Prospectus Supplement).
In each Underwriting Agreement, the several underwriters will
agree, subject to the terms and conditions set forth therein, to purchase
all the Certificates offered hereby and by the related Prospectus
Supplement if any of such Certificates are purchased. In the event of a
default by any underwriter, each Underwriting Agreement will provide that,
in certain circumstances, purchase commitments of the nondefaulting
underwriters may be increased or the Underwriting Agreement may be
terminated.
Each Prospectus Supplement will set forth the price at which each
Series of Certificates or Class being offered thereby initially will be
offered to the public and any concessions that may be offered to certain
dealers participating in the offering of such Certificates. After the
initial public offering, the public offering price and such concessions may
be changed.
Each Underwriting Agreement will provide that the Transferor will
indemnify the related underwriters against certain liabilities, including
liabilities under the Securities Act of 1933, as amended. The place and
time of delivery for any Series of Certificates in respect of which this
Prospectus is delivered will be set forth in the accompanying Prospectus
Supplement.
LEGAL MATTERS
Certain legal matters relating to the issuance of the Certificates
will be passed upon for the Transferor by 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 FSB..........................................................27
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................................ $ 303
Printing and Engraving.......................... *
Trustee's Fees.................................. *
Legal Fees and Expenses......................... *
Accountant's Fees and Expenses.................. *
Rating Agency Fees.............................. *
Miscellaneous Fees.............................. *
--------------
Total......................................... *
==============
* To be supplied by amendment.
Item 15. Indemnification of Officers and Directors
Article Twelfth of the Bank's Restated Certificate of
Incorporation 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 indemni-
tee, 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 stockholders 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 indemnification 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 investigative 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 believed to be in or not opposed to the best
interests of the corporation, except that no indemnification may be made
with respect to any claim, issue or matter as to which such person has been
adjudged 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 corporation 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 officers.
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 stockholders 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 ss. 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
Statement 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.*
--------------------
* To be filed by amendment.
(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 statement:
(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 statement (or the
most recent post-effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the information set
forth in the registration statement; (iii) to include any material
information with respect to the plan of distribution not previously
disclosed in the registration statement or any material change to such
information in the registration statement; provided, however, that
(a)(i) and (a)(ii) will not apply if the information required to be
included in a post-effective amendment 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 Exchange Act of
1934 (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Securities Exchange Act
of 1934) that is incorporated by reference in the registration statement
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(e) 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 expressed 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 connection with the securities being
registered, the Registrant will unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the 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 March 31, 1997.
FIRST USA BANK
as Transferor and Servicer
(Registrant)
By /s/ W. Todd Peterson
W. Todd Peterson
Vice President
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned
does hereby constitute and appoint both David L. Nelson and Philip E.
Taken his or her true and lawful attorney-in-fact and agent, each with
full power of substitution, for him or her and on his or her behalf to
sign, execute and file this Registration Statement and any or all amend-
ments (including, without limitation, post-effective amendments and any
amendment or amendments increasing the amount of securities for which
registration is being sought) to this Registration Statement, with all
exhibits and any and all documents required to be filed with respect
thereto, with the Securities and Exchange Commission or any regulatory
authority, granting unto such attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises in order to effectuate
the same as fully to all intents and purposes as he or she might or
could do if personally present, hereby ratifying and confirming all that
such attorney-in-fact and agents may lawfully do or cause to be done.
Pursuant to the Requirements of the Securities Act of 1933,
this Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
FIRST USA BANK
Signature Title
Principal Executive Officer:
/s/ Richard W. Vague Chairman of the Board and March 31, 1997
- ------------------------ Chief Executive Officer
Richard W. Vague
Principal Financial and
Accounting Officer:
/s/ George P. Hubley Executive Vice President March 31, 1997
- -------------------------
George P. Hubley
Directors:
/s/ Jack M. Antonini March 31, 1997
- -------------------------
Jack M. Antonini
/s/ Randy L. Christofferson March 31, 1997
- -------------------------------
Randy L. Christofferson
/s/ George P. Hubley March 31, 1997
- -------------------------
George P. Hubley
/s/ Pamela H. Patsley March 31, 1997
- -------------------------
Pamela H. Patsley
/s/ John C. Tolleson March 31, 1997
- --------------------------
John C. Tolleson
/s/ Richard W. Vague March 31, 1997
- ------------------------
Richard W. Vague
<TABLE>
<CAPTION>
EXHIBIT INDEX
Exhibit No. Description Page No.
<S> <C> <C>
1.1 Form of Underwriting Agreement Incorporated 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 by reference to Exhibit 3.1
of Registration Statement No. 33-50600
of First USA Bank
3.2 By-laws of the Bank Incorporated by reference to Exhibit 3.2
of Registration Statement No. 33-50600
of First USA Bank
4.1 Pooling and Servicing Agreement and Incorporated by reference to Exhibit 4.1
related agreements as exhibits thereto; of Registration Statements No. 33-50600
the first, second and third amendments and No. 33-99362 of First USA Bank
thereto; and the fourth and fifth
amendments thereto
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)*
</TABLE>
--------------------
* To be filed by amendment.
EXHIBIT 4.1
FOURTH AMENDMENT TO THE
POOLING AND SERVICING AGREEMENT
FOURTH AMENDMENT TO POOLING AND SERVICING AGREEMENT dated as of
January 26, 1996 (the "Amendment"), by and between FIRST USA BANK, as
Transferor and Servicer (in such capacities, the "Transferor" and the
"Servicer," respectively), and THE BANK OF NEW YORK (DELAWARE), as
Trustee (the "Trustee").
WHEREAS, the Transferor, the Servicer and the Trustee have
heretofore executed and delivered a Pooling and Servicing Agreement
dated as of September 1, 1992 (the "Master Pooling and Servicing
Agreement"), between the Transferor, the Servicer and the Trustee for
the issuance by the First USA Credit Card Master Trust (the "Trust") of
the Investor Certificates and the Exchangeable Transferor Certificate;
WHEREAS, Section 13.1(a) of the Master Pooling and Servicing
Agreement provides that the Servicer, the Transferor and the Trustee,
without the consent of the Investor Certificateholders may amend the
Master Pooling and Servicing Agreement from time to time so long as the
Trustee shall have received (i) from each Rating Agency then rating the
Investor Certificates, a written notification that such action will not
result in a reduction or withdrawal of the rating of any outstanding
Series which it is then rating and (ii) an Opinion of Counsel to the
effect that such amendment will not adversely affect in any material
respect the interests of the Investor Certificateholders;
WHEREAS, the Trustee has received from (i) each Rating Agency,
a letter confirming the current rating of each outstanding Series and
(ii) an Opinion of Counsel to the effect that such amendment will not
adversely affect in any material respect the interests of the Investor
Certificateholders; and
WHEREAS, all other conditions precedent to the execution of
this Amendment have been complied with;
NOW, THEREFORE, the Servicer, the Transferor and the Trustee
are executing and delivering this Amendment in order to amend the
provisions of the Master Pooling and Servicing Agreement in the manner
set forth below.
Capitalized terms used but not defined herein shall have the
meanings assigned to them in the Master Pooling and Servicing Agreement.
SECTION 1.1 Defined Terms. Section 1.01 of the Master Pooling
and Servicing Agreement is hereby amended by deleting the defined term
"Additional Cut Off Date" and substituting therefor the following
defined term:
"Addition Cut Off Date" shall mean each date as of which
Additional Accounts shall be selected to be included as Accounts
pursuant to Section 2.6; provided, however, that in no event shall
an Addition Cut Off Date be greater than ten months prior to the
related Addition Date.
SECTION 2.1 Ratification of Master Pooling and Servicing
Agreement. As amended by this Amendment, the Master Pooling and
Servicing Agreement is in all respects ratified and confirmed, and the
Master Pooling and Servicing Agreement, as so amended by this Amendment,
shall be read, taken and construed as one and the same instrument.
SECTION 3.1 Severability. If any one or more of the covenants,
agreements, provisions or terms or portions thereof of this Amendment
shall be for any reason whatsoever held invalid, then such covenants,
agreements, provisions or terms or portions thereof shall be deemed
severable from the remaining covenants, agreements, provisions or terms
of this Amendment and shall in no way affect the validity or
enforceability of the other provisions or portions of this Amendment.
SECTION 4.1 Counterparts. This Amendment may be executed in one
or more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
SECTION 5.1 GOVERNING LAW. THIS AMENDMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REFERENCE TO
ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES
OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH
LAWS.
IN WITNESS WHEREOF, the Servicer, the Transferor and the
Trustee have caused this Amendment to be executed by their respective
officers, thereunto duly authorized, as of the day and year first above
written.
FIRST USA BANK,
as Transferor and Servicer
By: /s/ Steven L. McDonald
Name: Steven L. McDonald
Title: Senior Vice President
THE BANK OF NEW YORK (DELAWARE),
as Trustee
By: /s/ Donald Wrobel
Name: Donald J. Wrobel
Title: Executive Vice President
FIFTH AMENDMENT TO THE
POOLING AND SERVICING AGREEMENT
FIFTH AMENDMENT TO POOLING AND SERVICING AGREEMENT dated as of
June 28, 1996 (this "Amendment"), by and between FIRST USA BANK, as
Transferor and Servicer (in such capacities, the "Transferor" and the
"Servicer," respectively), and THE BANK OF NEW YORK (DELAWARE), as
Trustee (the "Trustee").
WHEREAS, the Transferor, the Servicer and the Trustee have
heretofore executed and delivered a Pooling and Servicing Agreement
dated as of September 1, 1992 (as amended and supplemented through the
date hereof, the "Master Pooling and Servicing Agreement"), between the
Transferor, the Servicer and the Trustee for the issuance by the First
USA Credit Card Master Trust (the "Trust") of the Investor Certificates
and the Exchangeable Trans-feror Certificate;
WHEREAS, Section 13.01(a) of the Master Pooling and Servicing
Agreement provides that the Servicer, the Transferor and the Trustee,
without the consent of the Investor Certificateholders may amend the
Master Pooling and Servicing Agreement from time to time so long as the
Trustee shall have received (i) from each Rating Agency then rating the
Investor Certificates, a written notification that such action will not
result in a reduction or withdrawal of the rating of any outstanding
Series which it is then rating and (ii) an Opinion of Counsel to the
effect that such amendment will not adversely affect in any material
respect the interests of the Investor Cer-tificateholders;
WHEREAS, the Trustee has received from (i) each Rating Agency,
a letter confirming the current rating of each outstanding Series and
(ii) an Opinion of Counsel to the effect that such amendment will not
adversely affect in any material respect the interests of the Investor
Certificateholders; and
WHEREAS, all other conditions precedent to the execution of
this Amendment have been complied with;
NOW, THEREFORE, the Servicer, the Transferor and the Trustee
are executing and delivering this Amendment in order to amend the
provisions of the Master Pooling and Servicing Agreement in the manner
set forth below.
Capitalized terms used but not defined herein shall have the
meanings assigned to them in the Master Pooling and Servicing Agreement.
SECTION 1.1 Defined Terms.
(h) Section 1.01 of the Master Pooling and Servicing Agreement
is hereby amended by deleting the definition of the term "Collections"
and substituting therefor the following definition:
"Collections" shall mean all payments (including
Recoveries of Principal Receivables or Finance Charge Receivables
and Insurance Proceeds) received by the Servicer in respect of the
Receivables, in the form of cash, checks, wire transfers, ATM
transfers or other form of payment in accordance with the Credit
Card Agreement in effect from time to time on any Receivables. A
Collection processed on an Account in excess of the aggregate
amount of Receivables in such Account as of the Date of Processing
of such Collection shall be deemed to be a payment in respect of
Principal Receivables to the extent of such excess. Collections
with respect to any Monthly Period shall include the amount of
Interchange (if any) allocable to any Series of Certificates
pursuant to any Supplement with respect to such Monthly Period (to
the extent received by the Trust and deposited into the Finance
Charge Account or any Series Account as the case may be, on the
Transfer Date following such Monthly Period), to be applied as if
such Collections were Finance Charge Receivables for all purposes.
Collections with respect to any Monthly Period shall also include
the amount deposited by the Transferor into the Finance Charge
Account (or Series Account if provided in any Supplement) pursuant
to Section 2.08. Collections of Recoveries will be treated as
Collections of Principal Receivables; provided, however, that to
the extent the aggregate amount of Recoveries received with respect
to any Monthly Period exceeds the aggregate amount of Principal
Receivables (other than Ineligible Receivables) in Defaulted
Accounts on the day such Account became a Defaulted Account for
each day in such Monthly Period, the amount of such excess shall be
treated as Collections of Finance Charge Receivables.
(i) Section 1.01 of the Master Pooling and Servicing Agreement
is hereby further amended by deleting the definition of the term
"Default Amount" and substituting therefor the following definition:
"Default Amount" shall mean 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.
(j) Section 1.01 of the Master Pooling and Servicing Agreement
is hereby further amended by adding the following definition of the term
"Recoveries" after the definition of the term "Record Date":
"Recoveries" shall mean 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 and all
rights (but not obligations) under any agreement to sell or
transfer such Receivables (including any rights to payment from any
purchaser or transferee in connection with such sale or other
disposition). In the event of any such sale or disposition of such
Receivables, Recoveries shall not include amounts received by the
purchaser or transferee of such Receivables but shall be limited to
amounts received by the Transferor or the Servicer from the
purchaser or transferee and all rights of the Transferor and the
Servicer against the purchaser or transferee, including any right
to payment.
(k) Section 1.01 of the Master Pooling and Servicing Agreement
is hereby further amended by deleting the definition of the term "Trust"
and substituting therefor the following definition:
"Trust" shall mean the trust created by this Agreement,
the corpus of which shall consist of the Receivables now existing
or hereafter created and all monies due or to become due with
respect thereto, all proceeds (as defined in Section 9-306 of the
UCC as in effect in the State of Delaware) including, without
limitation, Recoveries of the Receivables and Insurance Proceeds
relating thereto, the right to receive certain amounts paid or
payable as Interchange (if provided for in any Supplement), such
funds as from time to time are deposited in the Collection Account,
the Finance Charge Account, the Principal Account, the Distribution
Account and any Series Account and the rights to any Enhancement
with respect to any Series.
SECTION 2.1 Transfer of Ineligible Receivables. Section 2.04 of
the Master Pooling and Servicing Agreement is hereby amended by deleting
the word "ouch" in the fourth sentence of subsection (d)(iii) thereof
and replacing it with the word "such".
SECTION 3.1 Transfer of Defaulted Accounts. Section 4.03 of the
Master Pooling and Servicing Agreement is hereby amended by deleting
subsection (d) thereof and replacing it with the following:
(d) Transfer of Defaulted Accounts. Unless otherwise
provided in any Supplement, in consideration of receiving
Recoveries as provided in Section 4.03(g) hereof, on the date on
which an Account becomes a Defaulted Account, the Trust shall
automatically and without further action or consideration be deemed
to transfer, set over, and otherwise convey to the Transferor,
without recourse, representation or warranty, all the right, title
and interest of the Trust in and to the Receivables in such
Defaulted Account, all monies due or to become due with respect
thereto, all proceeds thereof allocable to the Trust with respect
to such Receivables, excluding Recoveries relating thereto, which
shall remain an asset of the Trust.
SECTION 4.1 Recoveries. Section 4.03 of the Master Pooling and
Servicing Agreement is hereby amended by adding a new subsection (g)
thereto which shall read in its entirety as follows:
(g) Recoveries. On or prior to the earliest Determination
Date in each Monthly Period, the Trans-feror shall notify the
Servicer of the amount of Recoveries to be included as Collections
with respect to the preceding Monthly Period. On the earliest
Transfer Date in each Monthly Period, the Transferor shall pay to
the Servicer and the Servicer shall deposit into the Collection
Account, the amount of Recoveries to be so included as Collections
with respect to the preceding Monthly Period; provided, however,
that such deposit need be made only to the extent that such funds
are required to be retained in the Principal Account or the Finance
Charge Account for the benefit of any Series pursuant to the
provisions of Article IV of this Agreement or any Series
Supplement.
SECTION 5.1 Ratification of Master Pooling and Servicing
Agreement. As amended by this Amendment, the Master Pooling and
Servicing Agreement is in all respects ratified and confirmed, and the
Master Pooling and Servicing Agreement, as so amended by this Amendment,
shall be read, taken and construed as one and the same instrument.
SECTION 6.1 Severability. If any one or more of the covenants,
agreements, provisions or terms or portions thereof of this Amendment
shall be for any reason whatsoever held invalid, then such covenants,
agreements, provisions or terms or portions thereof shall be deemed
severable from the remaining covenants, agreements, provisions or terms
of this Amendment and shall in no way affect the validity or
enforceability of the other provisions or portions of this Amendment.
SECTION 7.1 Counterparts. This Amendment may be executed in one
or more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
SECTION 8.1 GOVERNING LAW. THIS AMENDMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REFERENCE TO
ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES
OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH
LAWS.
SECTION 9.1 Effective Date. The provisions of this Amendment
shall take effect as of the opening of business on July 1, 1996.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the Servicer, the Transfer-or and the
Trustee have caused this Amendment to be executed by their respective
officers, thereunto duly authorized, as of the day and year first above
written.
FIRST USA BANK,
as Transferor and Servicer
By: /s/ W. Todd Peterson
Name: W. Todd Peterson
Title: Vice President
THE BANK OF NEW YORK (DELAWARE),
as Trustee
By: /s/ Melissa Beneduce
Name: Melissa J. Beneduce
Title: Assistant Vice President
