<PAGE> 1
Filed Pursuant to Rule 424(b)(3)
Registration No. 333-24227
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 WITHOUT THE DELIVERY OF A FINAL PROSPECTUS SUPPLEMENT
AND THE PROSPECTUS. THIS PROSPECTUS SUPPLEMENT AND THE 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 SEPTEMBER 2, 1998
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED SEPTEMBER 2, 1998)
$545,180,000
FIRST USA CREDIT CARD MASTER TRUST
$500,000,000 CLASS A FLOATING RATE ASSET BACKED CERTIFICATES, SERIES 1998-7
$45,180,000 CLASS B FLOATING RATE ASSET BACKED CERTIFICATES, SERIES 1998-7
FIRST USA BANK, N.A.
TRANSFEROR AND SERVICER
------------------------------
Each of the Class A Floating Rate Asset Backed Certificates, Series 1998-7
(collectively, the "Class A Certificates") and each of the Class B Floating Rate
Asset Backed Certificates, Series 1998-7 (collectively, the "Class B
Certificates" and, together with the Class A Certificates, the "Offered
Certificates") will represent an undivided interest in the First USA Credit Card
Master Trust (the "Trust") created pursuant to a Pooling and Servicing Agreement
between First USA Bank, N.A. (the "Bank"), as transferor and servicer (in such
capacities, the "Transferor" and the "Servicer," respectively), and The Bank of
New York (Delaware), as trustee (the "Trustee"). The property of the Trust
includes and will include receivables (the "Receivables") generated from time to
time in a
(Continued on next page)
------------------------------
POTENTIAL INVESTORS SHOULD CONSIDER, AMONG OTHER THINGS, THE INFORMATION
SET FORTH IN "RISK FACTORS" BEGINNING ON PAGE 16 IN THE PROSPECTUS.
THE OFFERED CERTIFICATES WILL REPRESENT INTERESTS IN THE TRUST ONLY AND WILL NOT
REPRESENT INTERESTS IN OR RECOURSE OBLIGATIONS OF FIRST USA BANK, N.A. OR ANY
AFFILIATE THEREOF. AN OFFERED CERTIFICATE IS NOT A DEPOSIT AND NEITHER THE
OFFERED CERTIFICATES NOR THE UNDERLYING ACCOUNTS OR RECEIVABLES ARE INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENTAL AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC(1) DISCOUNT THE TRANSFEROR(1)(2)
--------- ------------ --------------------
<S> <C> <C> <C>
Per Class A Certificate................ % % %
Per Class B Certificate................ % % %
Total.................................. $ $ $
</TABLE>
(1) Plus accrued interest, if any, at the Class A Certificate Rate or the Class
B Certificate Rate, as applicable, from September , 1998.
(2) Before deduction of expenses, estimated to be $480,000.
After the initial distribution of the Offered Certificates by the
Underwriters, this Prospectus Supplement and the Prospectus may be used by Banc
One Capital Markets, Inc., an affiliate of the Transferor, in connection with
offers and sales relating to market-making transactions in the Offered
Certificates. Banc One Capital Markets, Inc. may act as principal or agent in
such transactions. Such sales will be made at prices related to prevailing
market prices at the time of sale. Certain information in this Prospectus
Supplement and the Prospectus will be updated from time to time as described in
"Incorporation of Certain Documents by Reference" in the Prospectus.
The Offered Certificates are offered when, as and if issued to and accepted
by the Underwriters and subject to approval of certain legal matters by Skadden,
Arps, Slate, Meagher & Flom LLP, counsel for the Underwriters. The Underwriters
reserve the right to reject orders in whole or in part. It is expected that the
Offered Certificates will be delivered in book-entry form on or about September
, 1998, through the facilities of The Depository Trust Company, Cedel Bank,
societe anonyme, and the Euroclear System.
------------------------------
BANC ONE CAPITAL MARKETS, INC.
BEAR, STEARNS & CO. INC.
FIRST CHICAGO CAPITAL MARKETS, INC.
LEHMAN BROTHERS
SALOMON SMITH BARNEY
The date of this Prospectus Supplement is September , 1998
<PAGE> 2
(continued from previous page)
portfolio of VISA(R) and MasterCard(R) revolving credit card accounts (the
"Accounts"), all monies due or to become due in payment of the Receivables and
certain other property, as described herein. In addition, the Excess Collateral,
Series 1998-7 (the "Excess Collateral") will be issued in the initial amount of
$57,230,000 and will be subordinated to the Offered Certificates as described
herein. Only the Class A Certificates and the Class B Certificates are offered
hereby. The Bank will own the remaining undivided interest in the Trust not
represented by the Offered Certificates, the Excess Collateral and the other
interests issued by the Trust and will service the Receivables. The Bank has
offered and from time to time may offer other Series of certificates that
evidence undivided interests in certain assets of the Trust, which may have
terms significantly different from the Offered Certificates and the Excess
Collateral.
Interest will accrue on the Class A Certificates from September , 1998
through October 18, 1998 at the rate of % above the arithmetic mean of the
London interbank offered quotations for one-month United States dollar deposits
("LIBOR") as determined by the Trustee on September , 1998, and with respect
to each Interest Period (as defined herein) thereafter, at a rate of %
above LIBOR as determined by the Trustee on the related LIBOR Determination Date
(as defined herein). Interest will accrue on the Class B Certificates from
September , 1998 through October 18, 1998 at the rate of % above LIBOR as
determined by the Trustee on September , 1998, and with respect to each
Interest Period thereafter, at the rate of % above LIBOR as determined by
the Trustee on the related LIBOR Determination Date. Interest with respect to
the Offered Certificates will be distributed on October 19, 1998 and on the 18th
day of each month thereafter (or, if such 18th day is not a business day, the
next succeeding business day) (each, a "Distribution Date"). Principal on the
Class A Certificates is expected to be distributed on the August 2001
Distribution Date (the "Class A Scheduled Payment Date") but may be paid earlier
or later under certain limited circumstances described herein. Principal on the
Class B Certificates is expected to be distributed on the August 2001
Distribution Date (the "Class B Scheduled Payment Date" and, collectively with
the Class A Scheduled Payment Date and the Excess Collateral Scheduled Payment
Date, the "Scheduled Payment Date") but may be paid earlier or later under
certain limited circumstances described herein. See "Maturity Considerations"
herein.
The Class B Certificates will be subordinated to the Class A Certificates
as described herein. The Excess Collateral will be subordinated to the Class A
Certificates and the Class B Certificates as described herein.
There currently is no secondary market for the Offered Certificates, and
there is no assurance that one will develop.
Application has been made to list the Offered Certificates on the
Luxembourg Stock Exchange.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE OFFERED
CERTIFICATES. SUCH TRANSACTIONS MAY INCLUDE STABILIZING AND THE PURCHASE OF
CERTIFICATES TO COVER SHORT POSITIONS. FOR A DESCRIPTION OF THESE ACTIVITIES,
SEE "UNDERWRITING" HEREIN.
THIS DOCUMENT DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF
AN OFFER TO BUY SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION IS UNLAWFUL. THERE ARE RESTRICTIONS ON THE OFFER AND SALE OF
SECURITIES IN THE UNITED KINGDOM. ALL APPLICABLE PROVISIONS OF THE FINANCIAL
SERVICES ACT 1986 AND OTHER APPLICABLE LAWS AND REGULATIONS WITH RESPECT TO
ANYTHING DONE BY ANY PERSON IN RELATION TO SECURITIES IN, FROM OR OTHERWISE
INVOLVING THE UNITED KINGDOM MUST BE COMPLIED WITH. SEE "UNDERWRITING" HEREIN.
THE OFFERED CERTIFICATES OFFERED HEREBY CONSTITUTE PART OF A SEPARATE
SERIES OF CERTIFICATES BEING OFFERED BY THE TRANSFEROR FROM TIME TO TIME
PURSUANT TO ITS PROSPECTUS DATED SEPTEMBER 2, 1998. THIS PROSPECTUS SUPPLEMENT
DOES NOT CONTAIN COMPLETE INFORMATION ABOUT THE OFFERING OF THE OFFERED
CERTIFICATES. ADDITIONAL INFORMATION IS CONTAINED IN THE PROSPECTUS AND
PURCHASERS ARE URGED TO READ BOTH
S-2
<PAGE> 3
THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS IN FULL. SALES OF THE OFFERED
CERTIFICATES MAY NOT BE CONSUMMATED UNLESS THE PURCHASER HAS RECEIVED BOTH THE
FINAL PROSPECTUS SUPPLEMENT AND PROSPECTUS.
OTHER INFORMATION
The distribution of this Prospectus Supplement and the Prospectus and the
offering of the Offered Certificates in certain jurisdictions may be restricted
by law. Persons into whose possession this Prospectus Supplement and the
Prospectus come are required by the Underwriters to inform themselves about and
to observe any such restrictions.
This document is being distributed in the United Kingdom only to persons of
a kind described in Article 11(3) of the Financial Services Act 1986 (Investment
Advertisements) (Exemptions) Order 1996 (as amended) or to whom it would
otherwise be lawful to do so.
The Bank has taken all reasonable care to ensure that the information
contained in this Prospectus Supplement and the Prospectus in relation to the
Bank and the Offered Certificates is true and accurate in all material respects
and that in relation to the Bank and the Offered Certificates there are no
material facts the omission of which would make misleading any statement herein
or in the Prospectus, whether fact or opinion. The Bank accepts responsibility
accordingly.
As used in this Prospectus Supplement and the Prospectus, all references to
"dollars" and "$" refer to United States dollars.
S-3
<PAGE> 4
SUMMARY OF TERMS
The following is qualified in its entirety by reference to the detailed
information appearing elsewhere in this Prospectus Supplement and the
accompanying Prospectus. Certain capitalized terms used in this summary are
defined elsewhere in this Prospectus Supplement and the accompanying Prospectus.
A listing of the pages on which some of such terms are defined is found in the
"Index of Terms for Prospectus Supplement" herein and the "Index of Terms for
Prospectus" in the Prospectus.
Type of Securities............ Class A Floating Rate Asset Backed
Certificates, Series 1998-7 (the "Class A
Certificates") and Class B Floating Rate
Asset Backed Certificates, Series 1998-7
(the "Class B Certificates" and, together
with the Class A Certificates, the "Offered
Certificates").
Trust......................... The First USA Credit Card Master Trust (the
"Trust") was formed pursuant to a pooling
and servicing agreement dated as of
September 1, 1992 (as amended, the "Pooling
and Servicing Agreement"), between First USA
Bank, N.A., as transferor (in such capacity,
the "Transferor") and as servicer of the
Receivables (in such capacity, the
"Servicer"), and The Bank of New York
(Delaware), as trustee (the "Trustee"),
which will be supplemented by the supplement
relating to the Certificates (the "Offered
Series Supplement") (the term "Pooling and
Servicing Agreement," unless the context
requires otherwise, refers to the
Pooling and Servicing Agreement as
supplemented by the Offered
Series Supplement). As used in this
Prospectus Supplement, the term
"Certificateholders" refers to holders of
the Certificates, the term "Class A
Certificateholders" refers to holders of the
Class A Certificates, the term "Class B
Certificateholders" refers to holders of the
Class B Certificates and the term "Excess
Collateral Holders" refers to the holders of
the Excess Collateral.
Trust Assets.................. The property of the Trust includes and will
include receivables (the "Receivables")
arising under certain VISA(R) and
MasterCard(R)* revolving credit card
accounts (the "Accounts") selected by the
Transferor from a portfolio of VISA and
MasterCard accounts owned by the Transferor,
all monies due or to become due in payment
of the Receivables, all proceeds of the
Receivables and all monies on deposit in
certain bank accounts of the Trust (other
than certain investment earnings on such
amounts), Recoveries and any Enhancement
issued with respect to any Series. The
benefits of any Enhancement issued with
respect to any other Series will not be
available for the benefit of the
Certificateholders and the holders of the
certificates of other Series will not be
entitled to the benefits of any Enhancement
for this Series. The term "Enhancement"
means, with respect to any Series, any
letter of credit, cash collateral account,
cash collateral
- ---------------
* VISA(R) and MasterCard(R) are registered trademarks of Visa USA Incorporated
and MasterCard International Incorporated, respectively.
S-4
<PAGE> 5
guaranty, collateral invested amount,
guaranteed rate agreement, maturity
guaranty facility, tax protection
agreement, interest rate swap or other
contract or agreement for the benefit of
certificateholders of such Series.
The Transferor originally conveyed to the
Trust all Receivables existing under certain
Accounts that were selected by the
Transferor from the Bank Portfolio (as
defined herein) based on criteria provided
in the Pooling and Servicing Agreement as
applied on August 21, 1992 (the "Cut Off
Date"). Since the Cut Off Date, the
Transferor has transferred to the Trust the
Receivables in certain Additional Accounts
in accordance with the provisions of the
Pooling and Servicing Agreement. The
Transferor expects from time to time
(subject to certain limitations and
conditions), and in certain circumstances
will be obligated, to designate Additional
Accounts the Receivables in which will be
included in the Trust subsequent to the
Closing Date. The Transferor will transfer
to the Trust all Receivables in such
Additional Accounts, whether such
Receivables are then existing or thereafter
created. The addition to the Trust of
Receivables in Additional Accounts will be
subject to certain conditions including,
among others, that (a) the Transferor will
have received notice from the applicable
Rating Agencies that the inclusion of such
accounts as Additional Accounts will not
result in the reduction or withdrawal by
such Rating Agency of its then existing
rating of any Class of certificates of any
Series then outstanding, (b) each such
Additional Account must be an Eligible
Account at the time of its designation for
inclusion in the Trust and (c) no selection
procedure believed by the Transferor to be
materially adverse to the interests of the
holders of any Series of certificates will
have been used in selecting such Additional
Accounts. See "The Receivables" herein and
"Description of the Certificates--Addition
of Accounts" in the Prospectus.
Pursuant to the Pooling and Servicing
Agreement, the Transferor has the right
(subject to certain limitations and
conditions), but not the obligation, to
remove the Receivables in certain Accounts
from the Trust ("Removed Accounts"). See
"Description of the Certificates--Removal of
Accounts" in the Prospectus.
Certificateholders'
Interest...................... Each of the Offered Certificates represents an
undivided interest in the Trust. The Trust's
assets will be allocated among the Class A
Certificateholders (the "Class A
Certificateholders' Interest"), the Class B
Certificateholders (the "Class B
Certificateholders' Interest," and together
with the Class A Certificateholders'
Interest, the "Investor Interest"), the
Excess Collateral Holders (the "Excess
Collateral Holders' Interest"), the holders
of other Series previously issued or issued
at some future time pursuant to the Pooling
and Servicing Agreement and the applicable
S-5
<PAGE> 6
Supplements and the Transferor (the
"Transferor Interest"), as described below.
The "Excess Collateral Amount" in the
initial amount of $57,230,000 (which amount
represents 9.5% of the sum of the initial
Class A Invested Amount, the initial Class B
Invested Amount and the initial Excess
Collateral Amount) constitutes Enhancement
for the Offered Certificates. Allocations
will be made to the Excess Collateral Amount
and the Excess Collateral Holders will have
voting and certain other rights of a
subordinated Class of certificates. The
Excess Collateral together with the Offered
Certificates are referred to herein as the
"Certificates."
The aggregate principal amount of the Class A
Certificateholders' Interest and the Class B
Certificateholders' Interest will, except as
otherwise provided herein, remain fixed at
$500,000,000 and $45,180,000, respectively.
The principal amount of the Transferor
Interest will fluctuate as the amount of
Receivables in the Trust changes from time
to time. The Transferor Interest will
represent the right to the assets of the
Trust not allocated to the Investor
Interest, the Excess Collateral Holders'
Interest or the interests of
certificateholders of other Series.
The Class A Certificates offered hereby will
represent the right to receive from the
assets of the Trust allocated to the Class A
Certificateholders' Interest funds up to
(but not in excess of) the amounts required
to make payments of interest on the Class A
Certificates at the Class A Certificate
Rate, and the payment of principal during
the Amortization Period to the extent of the
Class A Invested Amount (which may be less
than the aggregate unpaid principal amount
of the Class A Certificates, in certain
circumstances, if there are any unreimbursed
Class A Investor Charge-Offs). See
"Description of the Certificates--General"
herein.
The Class B Certificates offered hereby will
represent the right to receive from the
assets of the Trust allocated to the Class B
Certificateholders' Interest funds up to
(but not in excess of) the amounts required
to make payments of interest on the Class B
Certificates at the Class B Certificate
Rate, and the payment of principal during
the Amortization Period, following the final
principal payment of the Class A Invested
Amount to the holders of the Class A
Certificates, to the extent of the Class B
Invested Amount (which may be less than the
aggregate unpaid principal amount of the
Class B Certificates, in certain
circumstances, if there has been a reduction
of the Class B Invested Amount).
The Class A Certificateholders' Interest and
the Class B Certificateholders' Interest
will each include the right to receive (but
only to the extent needed to make required
payments under the Pooling and Servicing
Agreement) varying percentages of
S-6
<PAGE> 7
collections of Finance Charge Receivables
and Principal Receivables during each
calendar month (a "Monthly Period").
Collections of Finance Charge Receivables
will be allocated at all times to the Class
A Certificateholders' Interest and the Class
B Certificateholders' Interest based on the
Class A Floating Allocation Percentage and
the Class B Floating Allocation Percentage,
respectively, applicable during the related
Monthly Period. During the Revolving Period,
subject to certain limitations, all
collections of Principal Receivables
allocable to the Certificates (other than
Unallocated Principal Collections and
Reallocated Principal Collections) will be
allocated and paid to the Transferor to
maintain the Invested Amount of each Class
at its initial amount. During an
Amortization Period, collections of
Principal Receivables and certain other
amounts allocable to the Investor Interest
will generally be applied first to the Class
A Certificateholders' Interest until the
Class A Invested Amount is paid in full and
then to the Class B Certificateholders'
Interest until the Class B Invested Amount
is paid in full based on the Fixed/Floating
Allocation Percentage. See "Description of
the Certificates--Investor Percentage and
Transferor Percentage" and "--Pay Out
Events" herein and "Description of the
Certificates--Pay Out Events" in the
Prospectus.
The Transferor initially will hold the
remaining undivided interest in the
Principal Receivables in the Trust not
represented by the Investor Interest, the
Excess Collateral Holders' Interest or any
other Series that has been or may be issued.
The Transferor may tender the certificate
that represents the Transferor Interest (the
"Exchangeable Transferor Certificate") or,
if provided in the relevant Supplement,
certificates of any Series and the
Exchangeable Transferor Certificate, to the
Trustee and, upon satisfying certain
conditions, cause the Trustee to issue one
or more new Series, as described in
"Description of the Certificates--Exchanges"
in the Prospectus. Any Exchange involving
the Exchangeable Transferor Certificate will
have the effect of decreasing the Transferor
Interest. The certificates of any new Series
will be issued pursuant to the Pooling and
Servicing Agreement and any related
Supplement. See "Description of the
Certificates" herein and in the Prospectus.
The final distribution of principal and
interest on the Certificates will be made no
later than the April 2004 Distribution Date
(the "Stated Series Termination Date") in
the manner provided in "Description of the
Certificates--Final Payment of Principal;
Termination" in the Prospectus. After the
Stated Series Termination Date, the Trust
will have no further obligation to pay
principal or interest on the Certificates.
Other Series.................. The Trust has previously issued thirty-three
other Series that the Transferor anticipates
will remain outstanding on the Closing
S-7
<PAGE> 8
Date. See "Annex I: Other Series" for a
summary of the terms of the previously
issued Series that the Transferor
anticipates will remain outstanding on the
Closing Date. Additional Series are expected
to be issued from time to time by the Trust.
See "Description of the
Certificates--Exchanges" in the Prospectus.
Receivables................... The aggregate amount of Receivables in the
Accounts (including the amount of
Receivables in the Additional Accounts added
to the Trust on August 4, 1998 and to be
added to the Trust on September 3, 1998) as
of the close of business on July 31, 1998
was $31,400,427,503, comprised of
$30,444,107,950 of Principal Receivables and
$956,319,553 of Finance Charge Receivables.
Fluctuations in the amount of Finance Charge
Receivables will not affect the Invested
Amount or the Transferor Amount, which are
determined on the basis of the amount of
Principal Receivables in the Trust. The
aggregate undivided interest in the
Principal Receivables in the Trust evidenced
by the Investor Interest will never exceed
the Invested Amount regardless of the total
amount of Principal Receivables in the Trust
at any time. See "The Receivables" herein.
Servicing Fee................. The Servicer will receive a monthly fee as
servicing compensation from the Receivables.
The portion of the monthly servicing fee
allocable to the Investor Interest and the
Excess Collateral Holders' Interest is equal
to one-twelfth of the product of the
Servicing Fee Percentage and the sum of the
Class A Adjusted Invested Amount, the Class
B Adjusted Invested Amount and the Excess
Collateral Adjusted Amount on the last day
of the related Monthly Period (the "Investor
Servicing Fee"); provided, however, that
with respect to the period from the Closing
Date to September 30, 1998, such amount will
be equal to the product of (i) the actual
number of days from and including the
Closing Date to and including September 30,
1998 divided by 365, (ii) the Servicing Fee
Percentage and (iii) the initial Invested
Amount. The "Servicing Fee Percentage" will
mean 1.5% for so long as the Bank is the
Servicer or 2.0% if the Bank is no longer
the Servicer. See "Description of the
Certificates--Servicing Compensation and
Payment of Expenses" herein.
Interest Payments............. Each Class A Certificate and Class B
Certificate represents the right to receive
interest accruing at the rate of %
and %, respectively, above LIBOR as
determined by the Trustee (i) on September
, 1998 for the period from September ,
1998 (the "Closing Date") through October
18, 1998 and (ii) on the related LIBOR
Determination Date with respect to each
Interest Period thereafter (such rates, as
in effect from time to time, the "Class A
Certificate Rate" and the "Class B
Certificate Rate", respectively, and each
sometimes referred to as a "Certificate
Rate" and collectively as the "Certificate
Rates"). Interest will be distributed on
October 19, 1998, and on each Distribution
Date thereafter to Certificateholders (or,
with respect to the Excess
S-8
<PAGE> 9
Collateral Holders, on each Transfer Date).
Interest payments on the Class A
Certificates and the Class B Certificates on
any Distribution Date will be calculated on
the outstanding principal balance of the
Class A Certificates or the outstanding
principal balance of the Class B
Certificates, as applicable, as of the
preceding Record Date, except that interest
for the first Distribution Date will accrue
at the applicable Certificate Rate on the
initial Class A Invested Amount or the
initial Class B Invested Amount from the
Closing Date. Interest payments on the Class
A Certificates on any Distribution Date will
be funded from collections of Finance Charge
Receivables allocated to the Class A
Certificateholders' Interest during the
preceding Monthly Period and, if necessary,
from Excess Finance Charge Collections and
Reallocated Principal Collections (to the
extent available) for such Monthly Period.
Interest payments on the Class B
Certificates on any Distribution Date will
be funded from the collections of Finance
Charge Receivables allocated to the Class B
Certificateholders' Interest during the
preceding Monthly Period and, if necessary,
from Excess Finance Charge Collections and
Reallocated Excess Collateral Principal
Collections (to the extent available)
remaining after certain other payments have
been made with respect to the Class A
Certificates. If the unpaid principal
balance of the Class B Certificates for such
Monthly Period exceeds the Class B Invested
Amount for such Monthly Period, Class B
Monthly Interest will be less than the
amount of accrued interest on the unpaid
principal balance of the Class B
Certificates. See "Description of the
Certificates--Interest Payments" herein and
"Risk Factors--Enhancement" in the
Prospectus.
Revolving Period.............. The "Revolving Period" with respect to the
Certificates means the period from and
including the Closing Date to but excluding
the earlier of (a) the commencement of the
Accumulation Period and (b) the commencement
of the Rapid Amortization Period. See
"Description of the Certificates--Pay Out
Events" herein for a discussion of the
events which might lead to the termination
of the Revolving Period prior to the
commencement of the Accumulation Period. The
accumulation period with respect to the
Certificates (the "Accumulation Period") is
scheduled to begin at the close of business
on July 31, 2000. Subject to the conditions
set forth herein under "Description of the
Certificates--Postponement of Accumulation
Period," the day on which the Revolving
Period ends and the Accumulation Period
begins may be delayed to no later than the
close of business on June 30, 2001. During
the Revolving Period, Available Investor
Principal Collections otherwise allocable to
the Investor Interest will, subject to
certain limitations, be treated as Excess
Principal Collections and allocated to the
holders of other Series of certificates
issued and outstanding or, subject to
certain limitations, paid to the holder of
the Exchangeable Transferor
S-9
<PAGE> 10
Certificate. See "Description of the
Certificates--Principal Payments" herein.
Principal Payments; Certain
Allocations................ Collections of Principal Receivables with
respect to any Monthly Period during the
Revolving Period will be allocated on the
basis of the Investor Percentage with
respect to Principal Receivables.
Collections of Principal Receivables with
respect to any Monthly Period during either
Amortization Period will be allocated on the
basis of the Fixed/Floating Allocation
Percentage with respect to Principal
Receivables. Under the Pooling and Servicing
Agreement, such collections (other than
Unallocated Principal Collections and
Reallocated Principal Collections) will be
paid to the holder of the Exchangeable
Transferor Certificate or, in certain
circumstances, to the holders of the
certificates of other Series, if any, during
the Revolving Period, or to the holders of
the Offered Certificates in payment of the
Investor Interest and to the Excess
Collateral Holders in payment of the Excess
Collateral Holders' Interest during either
Amortization Period. Such allocations will
be performed during the Revolving Period,
the Accumulation Period and the Rapid
Amortization Period. See "Description of the
Certificates--Investor Percentage and
Transferor Percentage" herein and
"Description of the
Certificates--Application of Collections"
herein and in the Prospectus.
Accumulation Period........... Unless a Pay Out Event has occurred, the
Accumulation Period will begin at the close
of business on the last day of the Revolving
Period and will end on the earliest to occur
of (i) the commencement of the Rapid
Amortization Period, (ii) payment of the
Invested Amount in full and (iii) the Stated
Series Termination Date. During the
Accumulation Period, prior to the payment of
the Class A Invested Amount in full, amounts
equal to the least of (a) Available Investor
Principal Collections for the related
Monthly Period, (b) the sum of the
applicable Controlled Accumulation Amount
for such Monthly Period and the applicable
Accumulation Shortfall, if any (such
applicable sum, the "Controlled Deposit
Amount"), and (c) the Class A Adjusted
Invested Amount on such Transfer Date will
be deposited monthly in a trust account
established by the Servicer (the "Principal
Funding Account") on each Transfer Date
beginning with the Transfer Date in the
month following the commencement of the
Accumulation Period until the Principal
Funding Account Balance is equal to the
Class A Invested Amount. During the
Accumulation Period, beginning with the
Transfer Date first preceding the Class B
Principal Commencement Date, amounts equal
to the least of (a) Available Investor
Principal Collections for the related
Monthly Period remaining after the
application thereof to the Class A Invested
Amount, (b) the Controlled Deposit Amount
for such Monthly
S-10
<PAGE> 11
Period (minus the Class A Monthly
Principal), and (c) the Class B Adjusted
Invested Amount on such Transfer Date, will
be deposited monthly in the Principal
Funding Account on such Transfer Date and
each subsequent Transfer Date until the
Principal Funding Account Balance is equal
to the sum of the Class A Invested Amount
and the Class B Invested Amount. If, for any
Monthly Period, the Available Investor
Principal Collections for such Monthly
Period are less than the applicable
Controlled Deposit Amount, the amount of
such deficiency will be the applicable
"Accumulation Shortfall" for the succeeding
Monthly Period. See "Description of the
Certificates--Application of Collections"
and "-- Payments of Principal" herein.
All amounts in the Principal Funding Account
will be invested at the direction of the
Servicer by the Trustee in certain Permitted
Investments. Investment earnings (net of
investment losses and expenses) on funds on
deposit in the Principal Funding Account
(the "Principal Funding Investment
Proceeds") during the Accumulation Period
will be included in Class A Available Funds,
Class B Available Funds and Excess
Collateral Available Funds. If, for any
Interest Period, the Principal Funding
Investment Proceeds are less than an amount
equal to, for such Interest Period, the sum
of (a) with respect to the Class A
Certificates, the product of (i) a fraction,
the numerator of which is the actual number
of days in such Interest Period and the
denominator of which is 360, (ii) the Class
A Certificate Rate in effect with respect to
such Interest Period and (iii) the aggregate
amount on deposit in the Principal Funding
Account with respect to Class A Monthly
Principal as of the last day of the Monthly
Period preceding the Monthly Period in which
such Interest Period ends, (b) with respect
to the Class B Certificates, the product of
(i) a fraction, the numerator of which is
the actual number of days in such Interest
Period and the denominator of which is 360,
(ii) the Class B Certificate Rate in effect
with respect to such Interest Period and
(iii) the aggregate amount on deposit in the
Principal Funding Account with respect to
Class B Monthly Principal as of the last day
of the Monthly Period preceding the Monthly
Period in which such Interest Period ends
and (c) with respect to the Excess
Collateral, the product of (i) a fraction,
the numerator of which is the actual number
of days in such Interest Period and the
denominator of which is 360, (ii) the Excess
Collateral Minimum Rate in effect with
respect to such Interest Period and (iii)
the aggregate amount on deposit in the
Principal Funding Account with respect to
Excess Collateral Monthly Principal as of
the last day of the Monthly Period preceding
the Monthly Period in which such Interest
Period ends (the "Covered Amount"), the
amount of such deficiency will be paid from
the Reserve Account to the extent of the
Available
S-11
<PAGE> 12
Reserve Account Amount and, if necessary,
from Excess Finance Charge Collections and
Reallocated Principal Collections.
Funds on deposit in the Principal Funding
Account will be available to pay the Class A
Certificateholders with respect to the Class
A Invested Amount on the Class A Scheduled
Payment Date. If the aggregate principal
amount of deposits made to the Principal
Funding Account are insufficient to pay in
full the Class A Invested Amount on the
Class A Scheduled Payment Date, the Rapid
Amortization Period will commence as
described below, and on each Distribution
Date thereafter until the Class A Invested
Amount is paid in full, the Class A
Certificateholders will receive
distributions of Class A Monthly Principal
and Class A Monthly Interest. Although it is
anticipated that during the Accumulation
Period prior to the payment of the Class A
Invested Amount in full, funds will be
deposited in the Principal Funding Account
in an amount equal to the applicable
Controlled Deposit Amount on each Transfer
Date and that scheduled principal will be
available for distribution to the Class A
Certificateholders on the Class A Scheduled
Payment Date, no assurance can be given in
that regard. See "Maturity Assumptions" in
the Prospectus and "Maturity Considerations"
herein.
On the Class B Scheduled Payment Date,
provided that the Class A Invested Amount is
paid in full on the Class A Scheduled
Payment Date and the Rapid Amortization
Period has not commenced, funds remaining on
deposit in the Principal Funding Account
will be used to pay the Class B Invested
Amount as described herein. If the funds
remaining on deposit in the Principal
Funding Account are insufficient to pay in
full the Class B Invested Amount on the
Class B Scheduled Payment Date, the Rapid
Amortization Period will commence as
described below, and on each Distribution
Date thereafter until the Class B Invested
Amount is paid in full, the Class B
Certificateholders will receive
distributions of Class B Monthly Principal
and Class B Monthly Interest. Although it is
anticipated that during the Accumulation
Period prior to the payment of the Class B
Invested Amount in full, funds will be
deposited in the Principal Funding Account
in an amount equal to the applicable
Controlled Deposit Amount on each Transfer
Date and that scheduled principal will be
available for distribution to the Class B
Certificateholders on the Class B Scheduled
Payment Date, no assurance can be given in
that regard. See "Maturity Assumptions" in
the Prospectus and "Maturity Considerations"
herein.
If a Pay Out Event occurs during the
Accumulation Period, the Rapid Amortization
Period will commence and any amount on
deposit in the Principal Funding Account
will be paid to the
S-12
<PAGE> 13
Certificateholders of each Class of
Certificates, sequentially, in order of
seniority, on the Distribution Date
following the Monthly Period in which the
Rapid Amortization Period commences.
Other Series offered by the Trust may or may
not have amortization or accumulation
periods like the Accumulation Period for the
Certificates, and such periods may have
different lengths and begin on different
dates than such Accumulation Period. Thus,
certain Series may be in their revolving
periods while others are in periods during
which collections of Principal Receivables
are distributed to or held for the benefit
of certificateholders of such other Series.
In addition, other Series may allocate
Principal Receivables based upon different
investor percentages. See "Description of
the Certificates--Exchanges" in the
Prospectus for a discussion of the potential
terms of any other Series.
Principal Payments; Rapid
Amortization Period........... During the period beginning on the earliest of
the day on which a Pay Out Event occurs, the
Class A Scheduled Payment Date if the Class
A Invested Amount is not paid in full on
such date, and the Class B Scheduled Payment
Date if the Class B Invested Amount is not
paid in full on such date and ending on the
earlier of (i) the date on which the Class A
Invested Amount, the Class B Invested Amount
and the Excess Collateral Amount each have
been paid in full and (ii) the Stated Series
Termination Date (the "Rapid Amortization
Period" and together with the Accumulation
Period sometimes referred to as an
"Amortization Period" and collectively as
the "Amortization Periods"), collections of
Principal Receivables allocated to the
Invested Amount will no longer be paid to
the holder of the Exchangeable Transferor
Certificate or the holders of the
certificates of any other Series, as
described above, but instead will be
distributed to the Class A
Certificateholders and, following payment in
full of the Class A Invested Amount, to the
Class B Certificateholders, and, following
payment in full of the Class B Invested
Amount, to the Excess Collateral Holders,
monthly on each Distribution Date beginning
with the Distribution Date in the month
following the commencement of the Rapid
Amortization Period. See "Description of the
Certificates--Pay Out Events" herein and in
the Prospectus for a discussion of the
events which might lead to the commencement
of the Rapid Amortization Period.
Subordination of the Class B
Certificates and the
Excess Collateral.......... The Class B Certificateholders' Interest will
be subordinated as described herein to the
extent necessary to fund payments with
respect to the Class A Certificates as
described herein. In addition, the Excess
Collateral will be subordinated as described
herein to the extent necessary to fund
certain payments with respect to the Class A
Certificates and the Class B Certificates as
S-13
<PAGE> 14
described herein. If the Excess Collateral
Amount is reduced to zero, the Class B
Certificateholders will bear directly the
credit and other risks associated with their
undivided interest in the Trust. To the
extent the Class B Invested Amount is
reduced, the percentage of collections of
Finance Charge Receivables allocated to the
Class B Certificateholders in subsequent
Monthly Periods will be reduced. Moreover,
to the extent the amount of such reduction
in the Class B Invested Amount is not
reimbursed, the amount of principal
distributable to the Class B
Certificateholders will be reduced. Such
reductions of the Class B Invested Amount
and the Excess Collateral Amount will
thereafter be reimbursed and the Class B
Invested Amount and the Excess Collateral
Amount increased on each Distribution Date
by the amount, if any, of Excess Finance
Charge Collections for such Distribution
Date available for that purpose. See
"Description of the
Certificates--Subordination of the Class B
Certificates," "--Investor Percentage and
Transferor Percentage," "--Excess Finance
Charge Collections," "--Reallocated
Principal Collections" and "--Defaulted
Receivables; Investor Charge-Offs" herein.
Additional Amounts Available
to Certificateholders......... With respect to any Transfer Date, Excess
Finance Charge Collections will be applied
to fund the Class A Required Amount and the
Class B Required Amount, if any. The "Class
A Required Amount" shall mean the amount, if
any, by which the sum of Class A Monthly
Interest and any overdue Class A Monthly
Interest on the related Distribution Date
(and default interest thereon), the Class A
Investor Default Amount for the related
Monthly Period and, if the Bank is no longer
the Servicer, the Class A Monthly Servicing
Fee for the related Monthly Period exceeds
the Class A Available Funds with respect to
the related Monthly Period. The "Class B
Required Amount" shall mean the sum of (i)
the sum of the amount, if any, by which
Class B Monthly Interest and any overdue
Class B Monthly Interest on the related
Distribution Date (and default interest
thereon) and, if the Bank is no longer the
Servicer, the Class B Monthly Servicing Fee
for the related Monthly Period exceeds the
Class B Available Funds with respect to the
related Monthly Period and (ii) the amount,
if any, by which the Class B Investor
Default Amount for the related Monthly
Period exceeds the amount of Excess Finance
Charge Collections available to make
payments with respect thereto on the related
Transfer Date. If Excess Finance Charge
Collections available with respect to such
Monthly Period are less than the Class A
Required Amount and there is a positive
Class B Required Amount, certain collections
of Principal Receivables for such Monthly
Period will then be used to fund first the
remaining Class A Required Amount and second
the Class B Required Amount in an aggregate
amount not to exceed the Excess Collateral
Amount and the Class B Invested
S-14
<PAGE> 15
Amount. See "Description of the
Certificates--Excess Finance Charge
Collections" and "--Reallocated Principal
Collections" herein.
On each Distribution Date, if the Class A
Investor Default Amount for such
Distribution Date exceeds the sum of the
Class A Available Funds, Excess Finance
Charge Collections and Reallocated Principal
Collections allocated and available to cover
such amount with respect to the Monthly
Period immediately preceding such
Distribution Date, the Excess Collateral
Amount will be reduced by the amount of such
excess, but not more than the lesser of the
Class A Investor Default Amount and the
Excess Collateral Amount for such
Distribution Date. In the event that, but
for the limitation on the amount of such
reduction in the preceding sentence, such
reduction would cause the Excess Collateral
Amount to be a negative number, the Excess
Collateral Amount will be reduced to zero,
and the Class B Invested Amount will be
reduced by the amount by which the Excess
Collateral Amount would have been reduced
below zero. In the event that such reduction
would cause the Class B Invested Amount to
be a negative number, the Class B Invested
Amount will be reduced to zero, and the
Class A Invested Amount will be reduced by
the amount by which the Class B Invested
Amount would have been reduced below zero,
but not more than the Class A Investor
Default Amount for such Distribution Date.
If the Excess Collateral Amount and the
Class B Invested Amount are reduced to zero,
the Class A Certificateholders will bear
directly the credit and other risks
associated with their undivided interest in
the Trust.
If on any Distribution Date, the Class B
Investor Default Amount for such
Distribution Date exceeds the amount of
Excess Finance Charge Collections and
Reallocated Excess Collateral Principal
Collections which are allocated and
available to fund such amount, the Excess
Collateral Amount remaining after any
reduction thereof with respect to the Class
A Investor Default Amount as described above
will be reduced by the amount of such
excess, but not more than the lesser of the
Class B Investor Default Amount and the
Excess Collateral Amount for such
Distribution Date. In the event that, but
for the limitation on the amount of such
reduction in the preceding sentence, such
reduction would cause the Excess Collateral
Amount to be a negative number, the Excess
Collateral Amount will be reduced to zero,
and the Class B Invested Amount will be
reduced by the amount by which the Excess
Collateral Amount would have been reduced
below zero, but not more than the Class B
Investor Default Amount for such
Distribution Date. The Class B Invested
Amount will also be reduced by the amount of
Reallocated Class B Principal Collections
applied to cover shortfalls in excess of the
Excess Collateral Amount and the amount of
any portion
S-15
<PAGE> 16
of the Class B Invested Amount allocated to
the Class A Certificates to avoid a
reduction in the Class A Invested Amount.
See "Description of the
Certificates--Reallocation of Cash Flows,"
"--Reallocated Principal Collections" and
"--Defaulted Receivables; Investor
Charge-Offs" herein. The initial Excess
Collateral Amount will be equal to
$57,230,000 and will be decreased under
certain circumstances as described herein
and, accordingly, the amount available to
fund payments with respect to the Class A
Certificates and the Class B Certificates
will be decreased. The initial Class B
Invested Amount will be equal to $45,180,000
and will be decreased under certain
circumstances as described herein and,
accordingly, the amount available to fund
payments with respect to the Class A
Certificates will be decreased. See
"Description of the Certificates--Defaulted
Receivables; Investor Charge-Offs" herein.
With respect to any Transfer Date, if the
Excess Collateral Amount has been reduced
below the initial Excess Collateral Amount
for reasons other than the payment of
principal to the Excess Collateral Holders,
certain Excess Finance Charge Collections,
if available, will be reallocated to
increase the Excess Collateral Amount to the
extent of such shortfall. Any of such Excess
Finance Charge Collections not required to
be so reallocated or deposited into the
Reserve Account with respect to any
Distribution Date will be applied in
accordance with a Transfer and
Administration Agreement between a Delaware
business trust and the Bank (the "Transfer
and Administration Agreement"). See
"Description of the Certificates--Excess
Finance Charge Collections" herein.
Optional Repurchase........... The Invested Amount will be subject to
optional repurchase by the Transferor on any
Distribution Date on or after the
Distribution Date on which the Invested
Amount is reduced to an amount less than or
equal to $30,120,500 (5% of the initial
Invested Amount), if certain conditions set
forth in the Pooling and Servicing Agreement
are met. The repurchase price will be equal
to the Invested Amount plus accrued and
unpaid interest on the Certificates through
the last day of the Interest Period related
to the Distribution Date on which the
repurchase occurs. See "Description of the
Certificates--Final Payment of Principal;
Termination" in the Prospectus.
Trustee....................... The Bank of New York (Delaware).
Tax Status.................... Skadden, Arps, Slate, Meagher & Flom LLP,
special tax counsel to the Transferor, is of
the opinion that, under existing law, the
Offered Certificates will be characterized
as indebtedness for Federal income tax
purposes. Under the Pooling and Servicing
Agreement, the Transferor, the Servicer, the
Certificateholders
S-16
<PAGE> 17
and the Certificate Owners will agree to
treat the Offered Certificates as debt for
Federal, state, local and foreign income and
franchise tax purposes. See "Certain U.S.
Federal Income Tax Consequences" in the
Prospectus for additional information
concerning the application of Federal income
tax laws.
ERISA Considerations.......... Under regulations issued by the Department of
Labor, the Trust's assets would not be
deemed "plan assets" of an employee benefit
plan holding an interest in the Class A
Certificates or the Class B Certificates if
certain conditions are met, including that
interests in such Class of Certificates be
held by at least 100 persons independent of
the Transferor and each other upon
completion of the public offering of the
Offered Certificates. The Underwriters
expect, although no assurance can be given,
that the Class A Certificates will be held
by at least 100 such persons, and the
Transferor anticipates that the other
conditions of the "publicly-offered
security" exception contained in the
regulations will be met. No monitoring or
other measures will be taken to ensure that
any such conditions will be met with respect
to the Class A Certificates. If the Trust's
assets were deemed to be "plan assets" of
such a plan, there is uncertainty as to
whether existing exemptions from the
"prohibited transaction" rules of the
Employee Retirement Income Security Act of
1974, as amended ("ERISA") and the Internal
Revenue Code of 1986, as amended (the
"Code") would apply to all transactions
involving the Trust's assets. Accordingly,
employee benefit plans contemplating
purchasing Class A Certificates should
consult their counsel before making a
purchase.
The Underwriters currently do not expect that
the Class B Certificates will be held by at
least 100 such persons and, therefore, do
not expect that the Class B Certificates
will qualify as publicly-offered securities
under the regulations referred to in the
immediately preceding paragraph.
Accordingly, the Class B Certificates may
not be acquired by (i) an employee benefit
plan (as defined in Section 3(3) of ERISA)
that is subject to the provisions of Title I
of ERISA, (ii) a plan (as defined in Section
4975(e)(1) of the Code) that is subject to
Section 4975 of the Code, or (iii) any
entity whose underlying assets include plan
assets by reason of a plan's investment in
the entity (including, without limitation,
an insurance company general account). By
its acceptance of an interest in a Class B
Certificate, each Certificate Owner of a
Class B Certificate will be deemed to have
represented and warranted that it is not
subject to the foregoing limitation. See
"ERISA Considerations" in the Prospectus.
Class A Certificate Rating.... It is a condition to the issuance of the Class
A Certificates that they be rated in the
highest rating category by at least one
Rating Agency. The rating of the Class A
Certificates is based primarily
S-17
<PAGE> 18
on the value of the Receivables and the
terms of the Class B Certificates and the
Excess Collateral.
Class B Certificate Rating.... It is a condition to the issuance of the Class
B Certificates that they receive a rating of
at least "A" or its equivalent by at least
one Rating Agency. The rating of the Class B
Certificates is based primarily on the value
of the Receivables and the terms of the
Excess Collateral.
Listing....................... Application has been made to list the Offered
Certificates on the Luxembourg Stock
Exchange.
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<PAGE> 19
RECENT DEVELOPMENTS
The Bank converted to a national bank charter on July 1, 1998 and is now
named "First USA Bank, National Association". Concurrently with this charter
conversion, all consumer VISA and MasterCard credit card accounts previously
held by other bank subsidiaries of BANC ONE CORPORATION ("BANC ONE") were
consolidated in the Bank, which also replaced Bank One, N.A. as seller/servicer
for the Banc One Credit Card Master Trust and for Banc One Funding Corporation,
two other BANC ONE credit card securitization vehicles. As a result of the
merger of First USA, Inc. with and into BANC ONE on June 27, 1997, the Bank is
now an indirect wholly-owned subsidiary of BANC ONE.
BANC ONE and First Chicago NBD Corporation ("FCN"), together with BANK ONE
CORPORATION, formerly BANC ONE CORPORATION (DE) and Hornet Reorganization
Corporation, have entered into an Agreement and Plan of Reorganization, dated as
of April 10, 1998 (as the same may be amended or otherwise modified from time to
time, the "BANC ONE/FCN Agreement"), pursuant to which BANC ONE and FCN will be
merged into BANK ONE CORPORATION, a new corporation organized to effect the
merger (the "BANC ONE/FCN Merger"). BANK ONE CORPORATION will be the surviving
corporation in the BANC ONE/FCN Merger, at which time the separate corporate
existence of BANC ONE and FCN will cease. The BANC ONE/FCN Merger is subject to
the satisfaction of the terms and conditions stated in the BANC ONE/FCN
Agreement, which include the approval of the respective shareholders of BANC ONE
and FCN and certain regulatory approvals. Subject to the satisfaction of such
terms and conditions stated in the BANC ONE/FCN Agreement, the BANC ONE/FCN
Merger is targeted to be completed late in the third quarter or in the fourth
quarter of 1998.
THE BANK'S CREDIT CARD PORTFOLIO
GENERAL
The Receivables which the Bank has conveyed and will convey to the Trust
pursuant to the Pooling and Servicing Agreement have been and will be generated
from transactions made by holders of selected VISA and MasterCard credit card
accounts, including premium accounts and standard accounts. As of June 30, 1998,
approximately 74% of the accounts in the Bank Portfolio were premium accounts
and approximately 26% were standard accounts. See "The Bank's Credit Card
Activities" in the Prospectus.
On July 1, 1998, BANC ONE consolidated substantially all of its current
consumer credit card operations in the Bank. The Bank added receivables in
accounts originated by the Bank, Bank One, N.A., Bank One, Arizona, NA and other
affiliates of the Bank to the Trust on July 6, 1998. The Bank may, from time to
time, add to the Trust additional Receivables arising in accounts originated by
the affiliates of the Bank. Each such addition of receivables in accounts
originated by the Bank and affiliates of the Bank to the Trust is subject to
certain restrictions on additions of Accounts in the Pooling and Servicing
Agreement, including satisfaction of the Rating Agency Condition. See
"Description of the Certificates--Addition of Accounts" in the Prospectus.
ASSESSMENT OF FEES AND FINANCE AND OTHER CHARGES
A billing statement is sent to each cardholder at the end of each monthly
billing cycle in which the account has a debit or credit balance of more than
one dollar or if a finance charge has been imposed. With minor exceptions, the
minimum payment due each month on each account is equal to the greater of $10 or
2% of the new balance shown on the statement, plus the greater of any amount
past due on any amount over the cardholder's credit line. The Bank may assess a
late payment fee, generally ranging from $10 to $35 for most accounts, if it
does not receive the minimum payment by the payment due date shown on the
monthly billing statement. The Bank may assess a return check fee, generally
ranging from $10 to $35, for each payment check that is dishonored or that is
unsigned or otherwise irregular, an overlimit fee, generally ranging from $10 to
$25, for Purchases or Cash Advances that cause the credit line to be exceeded
and administrative fees for certain functions performed at the request of the
cardholder. Unless otherwise arranged between the Bank and the cardholder, any
late payment fee, return check fee or administrative fee is added to the account
and treated as a Purchase. In some cases, the Bank charges a non-refundable
Annual Membership Fee. In addition, the Bank assesses on some cardholder
accounts a transaction fee for the purchase of money orders, the use of wire
transfers
S-19
<PAGE> 20
and the use of convenience checks, equal to the greater of 2-3% of the amount
thereof and $5.
Periodic Finance Charges are not assessed in most circumstances on
Purchases and convenience checks if all balances shown in the billing statement
are paid by the payment due date, which is approximately 20 to 25 days from the
previous cycle billing date. Periodic Finance Charges are assessed on new
Purchases and convenience checks from the day that they are posted to the
account if all balances shown in the prior billing statement were not paid in
full by the payment due date. Periodic Finance Charges are assessed on Cash
Advances from the later of the day that they are made or the first day of the
billing cycle during which they were posted to the account. Aggregate finance
charges for each account in any given monthly billing cycle consist of Periodic
Finance Charges equal to either (i) the product of the monthly periodic rate
multiplied by the average daily balance or (ii) the product of the daily balance
and the daily periodic rate totaled, in each case, for each day during the
monthly billing cycle; plus, if applicable, an additional Cash Advance finance
charge or transaction finance charge (not applicable for certain accounts),
generally equal to a one-time charge of 2% to 3% of the Cash Advance or purchase
of a money order, wire transfer or use of a convenience check (with a minimum
ranging from $2 to $15 and a maximum ranging from $10 to unlimited), for each of
these transactions posted to the account. Certain accounts in the Bank Portfolio
have an introductory period annual percentage rate ranging from 3.90% to 9.90%.
The introductory rates on the accounts in the Bank Portfolio are primarily fixed
annual percentage rates. The annual percentage rates, after the introductory
rate period, are usually fixed or floating periodic rates that adjust
periodically according to an index. Post-introductory annual percentage rates
generally range from 9.99% to 26.99%.
DELINQUENCY AND LOSS EXPERIENCE
The following tables set forth the delinquency and loss experience for each
of the periods shown for the portfolio of VISA and MasterCard credit card
accounts serviced by the Bank other than certain accounts that were not
designated to have their receivables included in the Trust and which represented
less than 1% of the accounts serviced by the Bank as of June 30, 1998 (the "Bank
Portfolio"). The tables in this Prospectus Supplement that present information
with respect to the Bank Portfolio do not include the accounts originated by the
affiliates of the Bank whose consumer credit card operations have been
consolidated in the Bank as of July 1, 1998. However, the Bank believes that the
inclusion of the Accounts of the affiliates of the Bank added to the Trust on
July 6, 1998 would not adversely affect in any material respect the performance
of the Bank Portfolio as reflected in the following tables had information with
respect thereto been included in such tables. In 1997 the Bank changed its
charge-off policy to align it with that of BANC ONE. For the Trust, this change
in charge-off policy was implemented over the course of a six month period which
began in July 1997 and ended in December 1997. The Bank now generally charges
off an account immediately prior to the end of the sixth billing cycle after
having become contractually past due. See "The Bank's Credit Card
Activities-- Delinquencies and Charge Offs" in the Prospectus. Its prior policy
was to charge off accounts immediately prior to the end of the seventh billing
cycle after having become contractually past due. Receivables Delinquent 95 or
more days and Net Losses in the following tables have been restated to reflect
this change in charge-off policy for each of the periods shown.
As of the close of business on July 31, 1998, the Receivables in the Trust
Portfolio (including the Receivables in the Additional Accounts added to the
Trust on August 4, 1998 and to be added to the Trust on September 3, 1998)
represented approximately 97.9% of the Bank Portfolio. The accounts in the Bank
Portfolio that are not included in the Trust Portfolio are primarily newly
originated accounts with lower delinquency and loss rates than the average
accounts in the Trust Portfolio which are generally more seasoned. Therefore,
the actual delinquency and loss experience with respect to the Receivables in
the Trust Portfolio may be different from that set forth below. There can be no
assurance that the delinquency and loss experience for the Trust Portfolio will
be similar to the historical experience set forth below because, among other
things, economic and
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<PAGE> 21
financial conditions affecting the ability of cardholders to make payments may
be different from those that have prevailed during the periods reflected below.
DELINQUENCY EXPERIENCE
BANK PORTFOLIO
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
AS OF DECEMBER 31, (1)
SIX MONTHS ENDED -----------------------------------------------------
JUNE 30, 1998 1997 1996
------------------------- ------------------------- -------------------------
PERCENTAGE PERCENTAGE PERCENTAGE
OF TOTAL OF TOTAL OF TOTAL
RECEIVABLES RECEIVABLES RECEIVABLES RECEIVABLES RECEIVABLES RECEIVABLES
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Receivables Outstanding(2).............. $29,943,745 100.00% $28,888,003 100.00% $22,119,202 100.00%
=========== ====== =========== ====== =========== ======
Receivables Delinquent:
35-64 days............................ $ 371,612 1.24% $ 425,464 1.47% $ 359,275 1.62%
65-94 days............................ 247,057 0.83 275,747 0.96 250,468 1.13
95 or more days(3).................... 671,056 2.24 584,050 2.02 475,115 2.15
----------- ------ ----------- ------ ----------- ------
Total............................... $ 1,289,725 4.31% $ 1,285,261 4.45% $ 1,084,858 4.90%
=========== ====== =========== ====== =========== ======
<CAPTION>
AS OF DECEMBER 31, (1)
-------------------------
1995
-------------------------
PERCENTAGE
OF TOTAL
RECEIVABLES RECEIVABLES
----------- -----------
<S> <C> <C>
Receivables Outstanding(2).............. $17,411,514 100.00%
=========== ======
Receivables Delinquent:
35-64 days............................ $ 219,240 1.26%
65-94 days............................ 130,088 0.75
95 or more days(3).................... 231,315 1.32
----------- ------
Total............................... $ 580,643 3.33%
=========== ======
</TABLE>
- ------------
(1) The information set forth in the table above is stated on a basis
consistent with the Bank's current fiscal year. The Bank changed its
fiscal year end from June 30 to December 31 in connection with the merger
of First USA, Inc. with and into BANC ONE.
(2) The Receivables Outstanding on the accounts consist of all amounts due
from cardholders as posted to the accounts.
(3) The amount of Receivables Delinquent 95 or more days for each of the
periods shown is stated on a basis consistent with the Bank's current
policy of charging off an account immediately prior to the end of the
sixth billing cycle after having become contractually past due. Its prior
policy, which applied during the periods shown above, was to charge off
accounts immediately prior to the end of the seventh billing cycle after
having become contractually past due.
LOSS EXPERIENCE
BANK PORTFOLIO
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31, (1)
JUNE 30, ----------------------------------------
1998 1997 1996 1995
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
Average Receivables Outstanding(2).......... $29,133,393 $24,918,928 $ 18,986,458 $13,497,080
Gross Charge-Offs(3)........................ 806,503 1,350,863 895,267 416,406
Gross Charge-Offs as a percentage of Average
Receivables Outstanding(4)................ 5.58% 5.42% 4.72% 3.09%
Recoveries(5)............................... 79,675 122,234 61,787 23,597
Net Losses(5)............................... 726,828 1,228,629 833,480 392,809
Net Losses as a percentage of Average
Receivables Outstanding(4)................ 5.03% 4.93% 4.39% 2.91%
</TABLE>
- ------------
(1) The information set forth in the table above is stated on a basis
consistent with the Bank's current fiscal year. The Bank changed its fiscal
year end from June 30 to December 31 in connection with the merger of First
USA, Inc. with and into BANC ONE.
(2) Average Receivables Outstanding is the average daily receivables during the
periods indicated.
(3) Gross Charge-Offs are principal charge-offs before recoveries and do not
include the amount of any reductions in Average Receivables Outstanding due
to fraud, returned goods or customer disputes.
(4) Annualized.
(5) Recoveries are included in the Trust as of July 1, 1996. Net Losses for
each of the periods shown are stated on a basis consistent with the Bank's
current policy of charging off an account immediately prior to the end of
the sixth billing cycle after having become contractually past due. Its
prior policy, which applied during the periods shown above, was to charge
off accounts immediately prior to the end of the seventh billing cycle
after having become contractually past due.
S-21
<PAGE> 22
The Bank's delinquency and net credit loss rates at any time reflect, among
other factors, the quality of the credit card loans, the average seasoning of
the Bank's accounts, the success of the Bank's collection efforts and general
economic conditions. Receivables delinquent as a percentage of total receivables
outstanding increased from 3.33% at December 31, 1995 to 4.90% at December 31,
1996 and decreased at December 31, 1997 to 4.45% and at June 30, 1998 to 4.31%.
Net losses as a percentage of average receivables outstanding increased from
2.91% for 1995 to 4.39% for 1996 to 4.93% for 1997 to 5.03% for the six months
ended June 30, 1998. Newly booked accounts historically have exhibited rising
delinquencies and losses which reach a steady state within approximately two to
three years after origination. As new loan originations have continued to become
a smaller percentage of the Bank Portfolio, delinquency, gross charge-off and
net credit loss rates for the Bank Portfolio have increased. In addition,
industry losses and delinquencies have increased over recent periods. The
industry also continues to experience intense competition, which results in
increased account turnover and higher costs per account. The Bank's focus
continues to be to optimize the profitability of each account within the context
of acceptable risk characteristics. As the Bank increases market penetration, it
will continue to focus on segments of the credit market which have been highly
profitable, and the Bank believes its delinquency and loss rates will generally
follow industry trends.
INTERCHANGE
Creditors participating in the VISA and MasterCard associations receive
certain fees ("Interchange") as partial compensation for taking credit risk,
absorbing fraud losses and funding receivables for a limited period prior to
initial billing. Under the VISA and MasterCard systems a portion of this
Interchange in connection with cardholder Purchases is collected by banks that
issue credit cards by applying a discount to the amount paid by such banks to
the banks that clear the related transactions for merchants. Interchange
currently ranges from approximately 1.0% to 2.0% of the transaction amount.
Interchange will be allocated to the Trust by treating 1.3% (subject to
adjustment at the option of the Transferor upon the satisfaction of certain
conditions as described in the Prospectus under "Description of the
Certificates--Discount Receivables") of collections on the Receivables (whether
arising from Purchases or Cash Advances), other than collections with respect to
Periodic Finance Charges, Annual Membership Fees and Other Charges, as
collections of Discount Receivables.
THE RECEIVABLES
The Receivables in the Trust Portfolio (including the Additional Accounts
added to the Trust on August 4, 1998 and to be added to the Trust on September
3, 1998), as of the close of business on July 31, 1998, consisted of
$30,444,107,950 of Principal Receivables and $956,319,553 of Finance Charge
Receivables. On the Closing Date, the Transferor will deposit $
into the Finance Charge Account, which will be applied as collections of Finance
Charge Receivables received during the initial Monthly Period and allocated to
Series 1998-7 (the "Offered Series"). The Accounts, including such Additional
Accounts, had an average Principal Receivable balance of $1,427 (including
accounts with a zero balance) and an average credit limit of $8,441. The
percentage of the aggregate total Receivable balance to the aggregate total
credit limit was 17.4%.
As of July 31, 1998, cardholders whose Accounts are included in the Trust
Portfolio, including such Additional Accounts, had billing addresses in 50
states, the District of Columbia and other United States territories and
possessions. As of July 31, 1998, 71% of the Accounts, including such Additional
Accounts, were premium accounts and 29% were standard accounts, and the
aggregate Principal Receivable balances of premium accounts and standard
accounts, as a percentage of the aggregate total Principal Receivables, were 83%
and 17%, respectively.
The percentage used to determine the Minimum Transferor Interest (the
"Minimum Transferor Percentage") applicable to the Certificates is currently 4%.
The Minimum Aggregate Principal Receivables applicable to the Certificates is an
amount equal to (i) the sum of the initial invested amounts of all Series then
outstanding other than any Series of variable funding certificates, (ii) with
respect to any Series of variable funding certificates in its revolving period,
the then current invested amount of such Series and (iii) with respect to any
Series of variable funding certificates in its amortization period, the invested
amount of such Series at the end of the last day of the revolving period for
such Series.
S-22
<PAGE> 23
The following tables summarize the Trust Portfolio (including the
Additional Accounts added to the Trust on August 4, 1998 and to be added to the
Trust on September 3, 1998, certain of which Accounts added to the Trust on July
6, 1998, were originated by Bank One, N.A., Bank One, Arizona, NA and other
affiliates of the Bank) by various criteria as of the close of business on July
31, 1998. Because the future composition of the Trust Portfolio may change over
time, these tables are not necessarily indicative of the composition of the
Trust Portfolio at any subsequent time.
COMPOSITION BY ACCOUNT BALANCE
TRUST PORTFOLIO
<TABLE>
<CAPTION>
PERCENTAGE
OF TOTAL PERCENTAGE OF
ACCOUNT NUMBER OF NUMBER OF AMOUNT OF TOTAL AMOUNT OF
BALANCE RANGE ACCOUNTS ACCOUNTS RECEIVABLES RECEIVABLES
------------- ---------- ---------- --------------- ---------------
<S> <C> <C> <C> <C>
Credit Balance........................ 335,049 1.6% $ (56,542,618) (0.2%)
No Balance............................ 9,694,064 45.5 0 --
$0.01 to $2,000.00.................... 6,290,487 29.5 3,857,066,732 12.3
$2,000.01 to $5,000.00................ 2,824,507 13.2 9,803,661,841 31.2
$5,000.01 to $10,000.00............... 1,759,446 8.2 12,174,649,618 38.8
$10,000.01 or More.................... 425,349 2.0 5,621,591,930 17.9
---------- ----- --------------- -----
TOTAL....................... 21,328,902 100.0% $31,400,427,503 100.0%
========== ===== =============== =====
</TABLE>
COMPOSITION BY CREDIT LIMIT
TRUST PORTFOLIO
<TABLE>
<CAPTION>
PERCENTAGE
OF TOTAL PERCENTAGE OF
CREDIT NUMBER OF NUMBER OF AMOUNT OF TOTAL AMOUNT OF
LIMIT RANGE ACCOUNTS ACCOUNTS RECEIVABLES RECEIVABLES
----------- ---------- ---------- --------------- ---------------
<S> <C> <C> <C> <C>
$0.00 to $2,000.00.................... 2,068,543 9.7% $ 728,502,644 2.3%
$2,000.01 to $5,000.00................ 4,668,439 21.9 5,670,390,711 18.1
$5,000.01 to $10,000.00............... 7,771,787 36.4 12,027,572,624 38.3
$10,000.01 or More.................... 6,820,133 32.0 12,973,961,524 41.3
---------- ----- --------------- -----
TOTAL....................... 21,328,902 100.0% $31,400,427,503 100.0%
========== ===== =============== =====
</TABLE>
COMPOSITION BY PERIOD OF DELINQUENCY
TRUST PORTFOLIO
<TABLE>
<CAPTION>
PERCENTAGE
PERIOD OF DELINQUENCY OF TOTAL PERCENTAGE OF
(DAYS CONTRACTUALLY NUMBER OF NUMBER OF AMOUNT OF TOTAL AMOUNT OF
DELINQUENT) ACCOUNTS ACCOUNTS RECEIVABLES RECEIVABLES
----------- ---------- ---------- --------------- ---------------
<S> <C> <C> <C> <C>
Not Delinquent........................ 20,678,324 97.0% $28,739,737,972 91.5%
Up to 34 Days......................... 391,868 1.8 1,441,504,716 4.6
35 to 64 Days......................... 93,197 0.4 396,792,638 1.3
65 to 94 Days......................... 57,102 0.3 260,097,610 0.8
95 or More Days....................... 108,411 0.5 562,294,567 1.8
---------- ----- --------------- -----
TOTAL....................... 21,328,902 100.0% $31,400,427,503 100.0%
========== ===== =============== =====
</TABLE>
S-23
<PAGE> 24
COMPOSITION OF ACCOUNTS BY AGE
TRUST PORTFOLIO
<TABLE>
<CAPTION>
PERCENTAGE
OF TOTAL PERCENTAGE OF
NUMBER OF NUMBER OF AMOUNT OF TOTAL AMOUNT OF
AGE ACCOUNTS ACCOUNTS RECEIVABLES RECEIVABLES
--- ---------- ---------- --------------- ---------------
<S> <C> <C> <C> <C>
Less than or equal to 6 Months........ 3,187,844 14.9% $ 4,220,254,466 13.4%
Over 6 Months to 12 Months............ 3,677,708 17.2 5,148,110,850 16.4
Over 12 Months to 24 Months........... 4,597,285 21.6 6,585,760,493 21.0
Over 24 Months to 36 Months........... 2,941,532 13.8 4,965,810,275 15.8
Over 36 Months to 48 Months........... 3,203,866 15.0 4,943,343,436 15.7
Over 48 Months to 60 Months........... 1,568,787 7.4 2,312,904,632 7.4
Over 60 Months........................ 2,151,880 10.1 3,224,243,351 10.3
---------- ----- --------------- -----
TOTAL....................... 21,328,902 100.0% $31,400,427,503 100.0%
========== ===== =============== =====
</TABLE>
S-24
<PAGE> 25
COMPOSITION BY GEOGRAPHIC DISTRIBUTION
TRUST PORTFOLIO
<TABLE>
<CAPTION>
PERCENTAGE
OF TOTAL PERCENTAGE OF
NUMBER OF NUMBER OF AMOUNT OF TOTAL AMOUNT OF
STATE ACCOUNTS ACCOUNTS RECEIVABLES RECEIVABLES
----- ---------- ---------- --------------- ---------------
<S> <C> <C> <C> <C>
Alabama................................... 247,091 1.2% 377,273,725 1.2%
Alaska.................................... 44,738 0.2 91,407,093 0.3
Arizona................................... 372,035 1.7 565,255,409 1.8
Arkansas.................................. 165,491 0.8 242,023,439 0.8
California................................ 2,420,361 11.3 4,104,619,635 13.1
Colorado.................................. 399,122 1.9 568,725,950 1.8
Connecticut............................... 284,123 1.3 446,251,864 1.4
Delaware.................................. 63,910 0.3 88,778,833 0.3
District of Columbia...................... 37,167 0.2 62,971,253 0.2
Florida................................... 1,326,783 6.2 1,973,865,124 6.3
Georgia................................... 488,968 2.3 794,329,436 2.5
Hawaii.................................... 86,439 0.4 152,902,144 0.5
Idaho..................................... 91,575 0.4 139,731,352 0.4
Illinois.................................. 963,298 4.5 1,360,152,133 4.3
Indiana................................... 467,533 2.2 597,258,812 1.9
Iowa...................................... 35,050 0.2 38,532,498 0.1
Kansas.................................... 188,596 0.9 275,899,705 0.9
Kentucky.................................. 355,396 1.7 388,438,051 1.2
Louisiana................................. 354,261 1.7 518,071,661 1.6
Maine..................................... 84,540 0.4 120,742,551 0.4
Maryland.................................. 429,839 2.0 703,456,233 2.2
Massachusetts............................. 625,088 2.9 815,903,755 2.6
Michigan.................................. 661,356 3.1 1,008,147,199 3.2
Minnesota................................. 293,415 1.4 362,784,965 1.2
Mississippi............................... 143,842 0.7 211,977,139 0.7
Missouri.................................. 376,173 1.8 524,652,249 1.7
Montana................................... 75,191 0.4 112,431,657 0.4
Nebraska.................................. 121,597 0.6 152,037,545 0.5
Nevada.................................... 154,474 0.7 284,817,768 0.9
New Hampshire............................. 96,956 0.5 145,910,092 0.5
New Jersey................................ 748,615 3.5 1,106,437,318 3.5
New Mexico................................ 126,396 0.6 195,117,575 0.6
New York.................................. 1,427,939 6.7 2,168,235,856 6.9
North Carolina............................ 458,870 2.2 662,129,377 2.1
North Dakota.............................. 44,505 0.2 55,875,823 0.2
Ohio...................................... 1,223,018 5.7 1,516,563,781 4.8
Oklahoma.................................. 320,507 1.5 453,666,657 1.4
Oregon.................................... 305,222 1.4 456,003,119 1.5
Pennsylvania.............................. 949,406 4.5 1,171,814,077 3.7
Rhode Island.............................. 85,228 0.4 120,833,249 0.4
South Carolina............................ 223,099 1.0 309,735,225 1.0
South Dakota.............................. 47,032 0.2 65,305,515 0.2
Tennessee................................. 303,468 1.4 401,623,028 1.3
Texas..................................... 1,930,661 9.0 3,043,857,064 9.7
Utah...................................... 175,926 0.8 216,201,722 0.7
Vermont................................... 44,518 0.2 64,325,158 0.2
Virginia.................................. 519,674 2.4 823,239,097 2.6
Washington................................ 517,601 2.4 827,776,146 2.6
West Virginia............................. 151,205 0.7 204,622,458 0.7
Wisconsin................................. 183,149 0.9 167,814,800 0.5
Wyoming................................... 39,888 0.2 56,575,764 0.2
Other U.S. territories and possessions.... 48,567 0.2 83,325,424 0.3
---------- ----- --------------- -----
TOTAL............................ 21,328,902 100.0% $31,400,427,503 100.0%
========== ===== =============== =====
</TABLE>
Since the largest number of cardholders (based on billing addresses) whose
accounts were included in the Trust as of July 31, 1998 were in California,
Texas, New York, Florida and Ohio, adverse changes in the economic conditions in
these areas could have a direct impact on the timing and amount of payments on
the Certificates.
S-25
<PAGE> 26
MATURITY CONSIDERATIONS
The Pooling and Servicing Agreement provides that Class A
Certificateholders will not begin to receive payments of principal until the
Class A Scheduled Payment Date, which is the August 2001 Distribution Date, or
earlier in the event of a Pay Out Event which results in the commencement of the
Rapid Amortization Period. The Class B Certificateholders will not begin to
receive payments of principal until the Class A Invested Amount has been paid in
full. Principal on the Class B Certificates is expected to be paid on the Class
B Scheduled Payment Date which is the August 2001 Distribution Date.
On each Transfer Date during the Accumulation Period prior to the payment
of the Class A Invested Amount in full, an amount equal to, for each Monthly
Period, the least of (a) the Available Investor Principal Collections, (b) the
applicable "Controlled Deposit Amount," which is equal to the sum of the
applicable Controlled Accumulation Amount for such Monthly Period and the
applicable Accumulation Shortfall, if any, and (c) the Class A Adjusted Invested
Amount prior to any deposits on such day will be deposited in the Principal
Funding Account until the amount on deposit in the Principal Funding Account
(the "Principal Funding Account Balance") equals the Class A Invested Amount.
After the full amount of the Class A Invested Amount has been deposited in the
Principal Funding Account, an amount equal to, for each Monthly Period, the
least of (a) the Available Investor Principal Collections remaining after the
application thereof to the Class A Invested Amount, if any, (b) the applicable
Controlled Deposit Amount (minus the Class A Monthly Principal) and (c) the
Class B Adjusted Invested Amount prior to any deposits on such day will be
deposited in the Principal Funding Account until the Principal Funding Account
Balance equals the sum of the Class A Invested Amount and the Class B Invested
Amount and such amount will be distributed to the Class B Certificateholders on
the Class B Scheduled Payment Date and, if the Class B Invested Amount is not
paid in full on such date, on each subsequent Distribution Date until the
earlier of the date the Class B Invested Amount has been paid in full and the
Stated Series Termination Date. On and after the Transfer Date preceding the
Distribution Date on which the Class A Invested Amount and the Class B Invested
Amount will be paid in full, an amount equal to, for each Monthly Period, the
least of (a) the Available Investor Principal Collections remaining after the
application thereof to the Class A Invested Amount and the Class B Invested
Amount, if any, (b) the applicable Controlled Deposit Amount (minus the Class A
Monthly Principal and Class B Monthly Principal) and (c) the Excess Collateral
Adjusted Amount prior to any deposits on such day will be deposited in the
Principal Funding Account until the Principal Funding Account Balance equals the
sum of the Class A Invested Amount, the Class B Invested Amount and the Excess
Collateral Amount and such amount will be distributed to the Excess Collateral
Holders on the Transfer Date immediately preceding the Excess Collateral
Scheduled Payment Date and, if the Excess Collateral Amount is not paid in full
on such date, on each subsequent Transfer Date until the earlier of the date on
which the Invested Amount has been paid in full and the Stated Series
Termination Date. Amounts in the Principal Funding Account are expected to be
available to pay the Class A Invested Amount on the Class A Scheduled Payment
Date and the Class B Invested Amount on the Class B Scheduled Payment Date.
Although it is anticipated that collections of Principal Receivables will be
available on each Transfer Date during the Accumulation Period to make a deposit
of the applicable Controlled Deposit Amount and that the Class A Invested Amount
will be paid to the Class A Certificateholders on the Class A Scheduled Payment
Date and the Class B Invested Amount will be paid to the Class B
Certificateholders on the Class B Scheduled Payment Date, respectively, no
assurance can be given in this regard. If the amount required to pay the Class A
Invested Amount or the Class B Invested Amount in full is not available on the
Class A Scheduled Payment Date or the Class B Scheduled Payment Date,
respectively, the Rapid Amortization Period will commence.
If a Pay Out Event occurs during the Accumulation Period, the Rapid
Amortization Period will commence and any amount on deposit in the Principal
Funding Account will be paid to the Class A Certificateholders on the next
Distribution Date. In addition, to the extent that the Class A Invested Amount
has not been paid in full on the Class A Scheduled Payment Date, the Class A
Certificateholders will be entitled to monthly payments of principal on each
succeeding Distribution Date equal to the Available Investor Principal
Collections until the Class A Certificates have been paid in full. After the
Class A Certificates have been paid in full, Available Investor Principal
Collections will be paid to the Class B Certificates on each Distribution Date
until the earlier of the date on which the Class B Invested Amount has been paid
in full and the Stated Series Termination Date.
S-26
<PAGE> 27
A "Pay Out Event" occurs, either automatically or after specified notice,
upon (a) the failure of the Transferor to make certain payments or transfers of
funds for the benefit of the Certificateholders within the time periods stated
in the Pooling and Servicing Agreement, (b) material breaches of certain
representations, warranties or covenants of the Transferor, (c) certain events
of insolvency or receivership relating to the Transferor, (d) the occurrence of
a Servicer Default which would have a material adverse effect on the
Certificateholders, (e) the failure of the Transferor to convey Receivables
arising under Additional Accounts to the Trust when required by the Pooling and
Servicing Agreement, (f) the Trust's becoming an "investment company" within the
meaning of the Investment Company Act of 1940, as amended, or (g) a reduction in
the average Portfolio Yield for any three consecutive Monthly Periods to a rate
which is less than the weighted average Base Rate for such three consecutive
Monthly Periods. The "Base Rate" means, with respect to any Monthly Period, the
weighted average of the Class A Certificate Rate, the Class B Certificate Rate
and the Excess Collateral Minimum Rate as of the last day of such Monthly Period
(weighted based on the Class A Invested Amount, the Class B Invested Amount and
the Excess Collateral Amount, respectively, as of the last day of such Monthly
Period) plus the product of 2.00% per annum and the percentage equivalent of a
fraction the numerator of which is the sum of the Class A Adjusted Invested
Amount, the Class B Adjusted Invested Amount and the Excess Collateral Adjusted
Amount and the denominator of which is the Invested Amount, each as of the last
day of such Monthly Period. The term "Portfolio Yield" means, with respect to
any Monthly Period, the annualized percentage equivalent of a fraction the
numerator of which is an amount equal to the sum of (i) the amount of
collections of Finance Charge Receivables allocable to the Certificateholders
for such Monthly Period, (ii) the investment proceeds on amounts on deposit in
the Principal Funding Account which are deposited in the Finance Charge Account
on the Transfer Date related to such Monthly Period and (iii) the amount, if
any, withdrawn from the Reserve Account to be deposited in the Finance Charge
Account on the Transfer Date relating to such Monthly Period, calculated on a
cash basis after subtracting an amount equal to the Investor Default Amount for
such Monthly Period, and the denominator of which is the Invested Amount as of
the last day of the preceding Monthly Period. See "Description of the
Certificates--Pay Out Events" herein and in the Prospectus.
The following table sets forth the highest and lowest cardholder monthly
payment rates for the Bank Portfolio during any month in the periods shown and
the average cardholder monthly payment rates for all months during the periods
shown, in each case calculated as a percentage of total opening monthly account
balances during the periods shown. Payment rates shown in the table are based on
amounts which would be deemed payments of Principal Receivables and Finance
Charge Receivables with respect to the Accounts.
CARDHOLDER MONTHLY PAYMENT RATES
BANK PORTFOLIO
<TABLE>
<CAPTION>
SIX MONTHS YEAR ENDED DECEMBER 31,
ENDED --------------------------
JUNE 30, 1998 1997 1996 1995
------------- ------ ------ ------
<S> <C> <C> <C> <C>
Lowest Month...................................... 13.38% 11.73% 10.16% 9.86%
Highest Month..................................... 15.49 14.99 11.86 11.73
Monthly Average................................... 14.35 13.03 11.18 10.90
</TABLE>
The amount of collections of Receivables may vary from month to month due
to seasonal variations, general economic conditions, payment habits of
individual cardholders and number of collection days. There can be no assurance
that collections of Principal Receivables with respect to the Trust Portfolio
will be similar to the historical experience set forth above. If a Pay Out Event
occurs, the average life and maturity of the Certificates could be significantly
reduced. In addition, there can be no assurance that the issuance of other
Series or the terms of any such other Series might not have an impact on the
timing of the payments received by the Certificateholders.
Because there may be a slowdown in the payment rate below the payment rate
used to determine the Controlled Accumulation Amount or a Pay Out Event may
occur which would initiate the Rapid Amortization Period, there can be no
assurance that the actual number of months elapsed from the date of issuance of
the Class A Certificates and the Class B Certificates to their respective final
Distribution Dates will equal the
S-27
<PAGE> 28
expected number of months. See "Risk Factors--Payments and Maturity" in the
Prospectus. As described under "Description of the Certificates--Postponement of
Accumulation Period" herein the Servicer may shorten the Accumulation Period
and, in such event, there can be no assurance that the duration of the
Accumulation Period will be sufficient for the accumulation of all amounts
necessary to pay the Class A Invested Amount and the Class B Invested Amount on
the Class A Scheduled Payment Date and the Class B Scheduled Payment Date,
respectively, especially if a pay out event were to occur with respect to one or
more other Series thereby limiting the amount of Excess Principal Collections
allocable to the Offered Series.
RECEIVABLE YIELD CONSIDERATIONS
The portfolio yield on the Bank Portfolio for each of the three years
contained in the period ended December 31, 1997 and for the six months ended
June 30, 1998 is set forth in the following table. The portfolio yields in the
table are calculated on an accrual basis. The portfolio yield on Receivables
included in the Trust is calculated on a cash basis. Portfolio yields calculated
on an accrual basis may differ from portfolio yields calculated on a cash basis
due to (a) a lag between when finance charges and fees are charged to cardholder
accounts and when such finance charges and fees are collected and (b) finance
charges and fees that are not ultimately collected from the cardholder. However,
during the three years contained in the period ended December 31, 1997 and for
the six months ended June 30, 1998, portfolio yield on an accrual basis
approximated portfolio yield on a cash basis. Portfolio yield on both an accrual
and a cash basis will also be affected by numerous factors, including changes in
the periodic rates, variations in the rate of payments and new borrowings on the
Accounts, the amount of the Annual Membership Fees and Other Charges, changes in
the delinquency and loss rates on the Receivables and the percentage of
cardholders who pay their balances in full each month and do not incur Periodic
Finance Charges, which may in turn be caused by a variety of factors, including
seasonal variations, the availability of other sources of credit and general
economic conditions. See "Maturity Assumptions" in the Prospectus. Interchange
allocated to the Trust with respect to the Receivables may vary from the amounts
included in the table below because Interchange will be included in the Trust on
an estimated basis by initially treating 1.3% of collections on the Receivables,
other than collections with respect to Periodic Finance Charges, Annual
Membership Fees and Other Charges, as Discount Receivables.
PORTFOLIO YIELD
BANK PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
SIX MONTHS ENDED --------------------------
JUNE 30, 1998 1997 1996 1995
---------------- ------ ------ ------
<S> <C> <C> <C> <C>
Average account monthly accrued fees and
charges(1)(2)................................. $39.56 $39.90 $36.82 $32.35
Average account balance(3)...................... 2,822 2,959 2,799 2,580
Portfolio yield from fees and charges(1)(4)..... 16.82% 16.18% 15.79% 15.04%
</TABLE>
- ---------------
(1) Fees and charges are comprised of Periodic Finance Charges, Interchange,
Annual Membership Fees and Other Charges.
(2) Average account monthly accrued fees and charges are presented net of
adjustments made pursuant to the Bank's normal servicing procedures,
including removal of incorrect or disputed Periodic Finance Charges, and
include Interchange.
(3) Average account balance includes Purchases, Cash Advances and accrued and
unpaid Periodic Finance Charges, Annual Membership Fees and Other Charges
and is calculated based on the average of the month end balances for
accounts with balances.
(4) Annualized.
The increase in portfolio yield for the years ended December 31, 1996 and
December 31, 1997 and for the six months ended June 30, 1998 reflects changes in
the overall pricing distribution of the Bank Portfolio. The accounts in the Bank
Portfolio that are not included in the Trust Portfolio are primarily newly
originated accounts with a greater proportion of Receivables arising pursuant to
direct solicitations of low-rate, no annual fee credit cards, with on average a
lower introductory rate, than the average accounts in the Trust Portfolio, which
are more seasoned. Therefore, the actual portfolio yield with respect to the
Receivables in the Trust Portfolio may be different from that set forth above.
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<PAGE> 29
USE OF PROCEEDS
The net proceeds from the sale of the Offered Certificates, in the amount
of $ , before deduction of expenses, will be (i) used to make an
initial deposit to the Finance Charge Account in the amount of $ , and
(ii) paid to the Bank. The Bank will use such balance of the proceeds for its
general corporate purposes.
FIRST USA BANK, N.A.
The Bank is among the nation's largest issuers of VISA and MasterCard
credit cards in the United States, with more than 20.2 million credit cards
issued and approximately $29.9 billion in managed credit card loans outstanding
as of June 30, 1998. See "The Bank and BANC ONE CORPORATION" in the Prospectus.
DESCRIPTION OF THE CERTIFICATES
The Offered Certificates will be issued pursuant to the Pooling and
Servicing Agreement and the Offered Series Supplement. Pursuant to the Pooling
and Servicing Agreement, the Transferor and the Trustee may execute further
Supplements in order to issue additional Series. The following summary of the
Offered Certificates does not purport to be complete and is subject to, and is
qualified in its entirety by reference to, all of the provisions of the Pooling
and Servicing Agreement and the Offered Series Supplement. See "Description of
the Certificates" in the Prospectus for additional information concerning the
Offered Certificates and the Pooling and Servicing Agreement.
GENERAL
The Certificates will represent undivided interests in certain assets of
the Trust, including the right to the applicable allocation percentage of all
cardholder payments on the Receivables in the Trust. Each Class A Certificate
represents the right to receive payments of interest at the applicable Class A
Certificate Rate for the related Interest Period and payments of principal on
the Class A Scheduled Payment Date, or on each Distribution Date during the
Rapid Amortization Period, funded from collections of Finance Charge Receivables
(and Reallocated Principal Collections) and Principal Receivables, respectively,
allocated to the Class A Certificateholders' Interest and certain other amounts.
Each Class B Certificate represents the right to receive payments of interest at
the applicable Class B Certificate Rate for the related Interest Period and
payments of principal on the Class B Scheduled Payment Date and on each
Distribution Date during the Rapid Amortization Period after the Class A
Invested Amount has been paid in full funded from collections of Finance Charge
Receivables (and Reallocated Excess Collateral Principal Collections) and
Principal Receivables, respectively, allocated to the Class B
Certificateholders' Interest and certain other amounts. Payments of interest and
principal will be made on each Distribution Date to Certificateholders in whose
names the Certificates were registered on the last day of the calendar month
preceding such Distribution Date (each, a "Record Date").
The Class A Certificates and the Class B Certificates initially will be
represented by certificates registered in the name of the nominee of DTC.
Application has been made to list the Class A Certificates and the Class B
Certificates on the Luxembourg Stock Exchange.
In the event that Definitive Certificates are issued, an Offered
Certificate that is mutilated, destroyed, lost or stolen may be exchanged or
replaced, as the case may be, at the offices of the co-transfer agent and
co-registrar in Luxembourg upon presentation of the Offered Certificate or
satisfactory evidence of the mutilation, destruction, loss or theft thereof to
the co-transfer agent and co-registrar. An indemnity satisfactory to the
co-transfer agent and co-registrar and the Trustee may be required at the
expense of the Certificateholder before a replacement Offered Certificate will
be issued. The Certificateholder will be required to pay any tax or other
governmental charge imposed in connection with such exchange or replacement and
any other expenses (including the fees and expenses of the Trustee and the
co-transfer agent and co-registrar) connected therewith. The transfer agent and
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<PAGE> 30
registrar shall not be required to register the transfer or exchange of
Definitive Certificates for a period of fifteen days preceding the due date for
any payment with respect to such Definitive Certificates.
The Trustee will maintain a paying agent in Luxembourg for so long as the
Offered Certificates are outstanding. The name and address of the paying agent
in Luxembourg are set forth at the end of this Prospectus Supplement. If
Definitive Certificates are issued, such paying agent also will act as
co-transfer agent and co-registrar with respect to the Definitive Certificates
and transfers of the Definitive Certificates may be made through the facilities
of such co-transfer agent. In addition, upon maturity or final payment, such
Definitive Certificates may be presented for payment at the offices of such
paying agent in Luxembourg up to two years after maturity or final payment.
STATUS OF THE OFFERED SERIES
The Offered Series will rank pari passu with all other outstanding Series.
Payments on the Class B Certificates are subordinated to payments on the Class A
Certificates to the extent described herein and in the Prospectus. Payments on
the Excess Collateral are subordinated to payments on the Class A Certificates
and the Class B Certificates to the extent described herein and in the
Prospectus.
PRESCRIPTION
The Pooling and Servicing Agreement provides that any money paid by the
Trust to any of the paying agents for the payment of principal or interest which
remains unclaimed for two years after such principal or interest shall have
become due and payable will be repaid to the Trust, and thereafter any holder of
an Offered Certificate may look only to the Trust for payment thereof.
INTEREST PAYMENTS
Interest will accrue on the outstanding principal balance of the Class A
Certificates at the Class A Certificate Rate and on the outstanding principal
balance of the Class B Certificates at the Class B Certificate Rate from the
Closing Date. Interest will accrue on the Certificates and be payable on October
19, 1998, and on the 18th day of each month thereafter, or if such 18th day is
not a business day, on the next succeeding business day (each, a "Distribution
Date"), in an amount equal to (i) with respect to the Class A Certificates, the
product of (a) the actual number of days in the related Interest Period divided
by 360, (b) the Class A Certificate Rate and (c) the outstanding principal
amount of the Class A Certificates as of the preceding Record Date (or in the
case of the first Distribution Date, an amount equal to the product of (x) the
outstanding principal amount of the Class A Certificates on the Closing Date,
(y) divided by 360 and (z) the Class A Certificate Rate determined on
September , 1998) and (ii) with respect to the Class B Certificates, the
product of (a) the actual number of days in the related Interest Period divided
by 360, (b) the Class B Certificate Rate and (c) the outstanding principal
amount of the Class B Certificates as of the preceding Record Date (or in the
case of the first Distribution Date, an amount equal to the product of (x) the
outstanding principal amount of the Class B Certificates on the Closing Date,
(y) divided by 360 and (z) the Class B Certificate Rate determined on
September , 1998). Interest payments on the Certificates will be funded, (i)
with respect to the Class A Certificates, from the portion of Finance Charge
Receivables collected during the preceding Monthly Period (or with respect to
the first Distribution Date, from and including the Closing Date to and
including September 30, 1998) allocated to the Class A Certificateholders'
Interest and, if necessary, from Excess Finance Charge Collections allocated to
the Class A Certificates and Reallocated Principal Collections (to the extent
available), (ii) with respect to the Class B Certificates, from the portion of
Finance Charge Receivables collected during the preceding Monthly Period (or
with respect to the first Distribution Date, from and including the Closing Date
to and including September 30, 1998) allocated to the Class B
Certificateholders' Interest and, if necessary, from Excess Finance Charge
Collections allocated to the Class B Certificates and Reallocated Excess
Collateral Principal Collections (to the extent available) remaining after
certain other payments have been made with respect to the Class A Certificates
and (iii) with respect to the Excess Collateral Amount, from Excess Finance
Charge Collections allocated to the Excess Collateral Holders. The "Interest
Period" with respect to any Distribution Date, or related Transfer Date, as the
case may be, will be the period from the previous Distribution Date through the
day preceding such
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<PAGE> 31
Distribution Date, except that the initial Interest Period will be the period
from the Closing Date through the day preceding the initial Distribution Date.
The Class A Certificates will bear interest at the rate of % above
LIBOR determined as set forth below from the Closing Date through October 18,
1998 and with respect to each Interest Period thereafter. The Class B
Certificates will bear interest at the rate of % above LIBOR determined
as set forth below from the Closing Date through October 18, 1998 and with
respect to each Interest Period thereafter.
The Trustee will determine LIBOR on September , 1998, for the period from
the Closing Date through October 18, 1998, and for each Interest Period
following the initial Interest Period, on the second business day prior to the
Distribution Date on which such Interest Period commences (each, a "LIBOR
Determination Date"). For purposes of calculating LIBOR, a business day is any
day, other than a Saturday, Sunday or day on which banking institutions in
London, England trading in U.S. dollar deposits in the London interbank market,
or banking institutions in New York, New York or in Newark, Delaware, are
authorized or obligated by law or executive order to be closed.
"LIBOR" means, as of any LIBOR Determination Date, the rate for deposits in
United States dollars for a one-month period which appears on Telerate Page 3750
as of 11:00 a.m., London time, on such date. If such rate does not appear on
Telerate Page 3750, the rate for that LIBOR Determination Date will be
determined on the basis of the rates at which deposits in United States dollars
are offered by the Reference Banks at approximately 11:00 a.m., London time, on
that day to prime banks in the London interbank market for a one-month period.
The Trustee will request the principal London office of each of the Reference
Banks to provide a quotation of its rate. If at least two such quotations are
provided, the rate for that LIBOR Determination Date will be the arithmetic mean
of the quotations. If fewer than two quotations are provided as requested, the
rate for that LIBOR Determination Date will be the arithmetic mean of the rates
quoted by major banks in New York City, selected by the Servicer, at
approximately 11:00 a.m., New York City time, on that day for loans in United
States dollars to leading European banks for a one-month period.
"Telerate Page 3750" means the display page currently so designated on the
Dow Jones Telerate Service (or such other page as may replace that page on that
service for the purpose of displaying comparable rates or prices).
"Reference Banks" means four major banks in the London interbank market
selected by the Servicer.
The Class A Certificate Rate and the Class B Certificate Rate applicable to
the then current and immediately preceding Interest Period may be obtained by
telephoning The Bank of New York at (212) 815-5737. The Trustee will cause the
Class A Certificate Rate and the Class B Certificate Rate as well as the amount
of Class A Monthly Interest and Class B Monthly Interest applicable to an
Interest Period to be provided to the Luxembourg Stock Exchange and to be
published in a daily newspaper in Luxembourg (expected to be the Luxemburger
Wort) as soon as possible after its determination but in no event later than the
first day of such Interest Period. Such information will also be included in a
statement to the Certificateholders of record prepared by the Servicer. See
"Description of the Certificates--Reports to Certificateholders" in the
Prospectus.
Interest on the Class A Certificates and the Class B Certificates will be
calculated on the basis of the actual number of days in the Interest Period and
a 360 day year.
PRINCIPAL PAYMENTS
On each Transfer Date during the Revolving Period (the period from and
including the Closing Date to but excluding the earlier of (a) the commencement
of the Accumulation Period and (b) the commencement of the Rapid Amortization
Period), collections of Principal Receivables allocable to the Invested Amount
will, subject to certain limitations, including the allocation of any
Reallocated Principal Collections with respect to the related Monthly Period to
pay the Class A Required Amount and the Class B Required Amount, be treated as
Excess Principal Collections.
On each Transfer Date following the commencement of the Accumulation
Period, prior to the earlier of the payment of the Class A Invested Amount in
full and the commencement of the Rapid Amortization Period, the
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<PAGE> 32
Trustee will deposit in the Principal Funding Account an amount equal to the
least of (a) Available Investor Principal Collections with respect to the
preceding Monthly Period, (b) the applicable Controlled Deposit Amount and (c)
the Class A Adjusted Invested Amount prior to any such deposit on such day.
Amounts in the Principal Funding Account will be paid to the Class A
Certificateholders on the Class A Scheduled Payment Date. After the full amount
of the Class A Invested Amount has been deposited in the Principal Funding
Account and beginning with the Transfer Date related to the Class B Principal
Commencement Date, prior to the commencement of the Rapid Amortization Period,
the Trustee will deposit in the Principal Funding Account an amount equal to the
least of (a) the Available Investor Principal Collections with respect to the
preceding Monthly Period remaining after application thereof to the Class A
Invested Amount, if any, (b) the applicable Controlled Deposit Amount (minus the
Class A Monthly Principal with respect to such Transfer Date) and (c) the Class
B Adjusted Invested Amount prior to any such deposit on such day. After payment
in full of the Class A Invested Amount, amounts in the Principal Funding Account
will be paid to the Class B Certificateholders on the Class B Scheduled Payment
Date. After the full amount of the sum of the Class A Invested Amount and the
Class B Invested Amount has been deposited in the Principal Funding Account,
prior to the commencement of the Rapid Amortization Period, the Trustee will
deposit in the Principal Funding Account an amount equal to the least of (a) the
Available Investor Principal Collections with respect to the preceding Monthly
Period remaining after application thereof to the Class A Invested Amount and
the Class B Invested Amount, if any, (b) the applicable Controlled Deposit
Amount (minus the Class A Monthly Principal and the Class B Monthly Principal
with respect to such Transfer Date) and (c) the Excess Collateral Adjusted
Amount prior to any such deposit on such day. If the Class A Invested Amount and
the Class B Invested Amount will be paid in full on the Class A Scheduled
Payment Date and the Class B Scheduled Payment Date, respectively, amounts in
the Principal Funding Account will be paid to the Excess Collateral Holders on
the Transfer Date immediately preceding the Excess Collateral Scheduled Payment
Date. The "Excess Collateral Scheduled Payment Date" is the August 2001 Transfer
Date. During the Accumulation Period, the portion of Available Investor
Principal Collections not applied to Class A Monthly Principal, Class B Monthly
Principal or Excess Collateral Monthly Principal on a Transfer Date will
generally be treated as Excess Principal Collections.
"Available Investor Principal Collections" means, with respect to any
Monthly Period, an amount equal to the sum of (a) (i) an amount equal to, during
the Revolving Period, the Investor Percentage, and during an Amortization
Period, the Fixed/Floating Allocation Percentage of all collections in respect
of Principal Receivables received during such Monthly Period, plus (ii) the
amount, if any, of Unallocated Principal Collections on the next succeeding
Distribution Date allocated to the Certificates, plus (iii) the amount, if any,
of collections of Finance Charge Receivables and Excess Finance Charge
Collections allocated and available on the next succeeding Distribution Date to
(A) fund the Class A Investor Default Amount, the Class B Investor Default
Amount and the Excess Collateral Default Amount with respect to the next
succeeding Distribution Date and (B) reimburse Class A Investor Charge-Offs and
previous reductions in the Class B Invested Amount and the Excess Collateral
Amount minus (iv) the amount of Reallocated Principal Collections with respect
to such Monthly Period used to fund the Class A Required Amount and the Class B
Required Amount, plus (b) any Excess Principal Collections with respect to other
Series that are allocated to the Offered Series plus (c) any other amounts which
pursuant to the Offered Series Supplement are to be treated as Available
Investor Principal Collections with respect to the related Transfer Date.
"Class B Principal Commencement Date" means (a) with respect to the
Accumulation Period, the first Distribution Date on which an amount equal to the
Class A Invested Amount has been deposited in the Principal Funding Account and
allocated to the Class A Certificates or (b) with respect to the Rapid
Amortization Period, the Distribution Date on which the Class A Invested Amount
is paid in full or, if there are no Available Investor Principal Collections
remaining after payments have been made to the Class A Certificates on such
Distribution Date, the Distribution Date following the Distribution Date on
which the Class A Invested Amount is paid in full.
On each Distribution Date following the Monthly Period in which the Rapid
Amortization Period commences, the Class A Certificateholders will be entitled
to receive Available Investor Principal Collections for the preceding Monthly
Period in an amount up to the Class A Invested Amount until the earlier of the
date the Class A Invested Amount is paid in full and the Stated Series
Termination Date. In addition, if a Pay Out Event
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<PAGE> 33
occurs during the Accumulation Period, the Rapid Amortization Period will
commence and any amount on deposit in the Principal Funding Account will be paid
to the Certificateholders of each Class of Certificates, sequentially, in order
of seniority, on the Distribution Date following the Monthly Period in which the
Rapid Amortization Period commences. After payment in full of the Class A
Invested Amount, the Class B Certificateholders will be entitled to receive
Available Investor Principal Collections on each Distribution Date during the
Rapid Amortization Period until the earlier of the date the Class B Invested
Amount is paid in full and the Stated Series Termination Date. After payment in
full of the Class B Invested Amount, the Excess Collateral Holders will be
entitled to receive Available Investor Principal Collections on each Transfer
Date (other than the Transfer Date prior to the Stated Series Termination Date)
and on the Stated Series Termination Date until the earlier of the date the
Excess Collateral Holders' Interest is paid in full and the Stated Series
Termination Date. See "--Pay Out Events" below for a discussion of events which
might lead to the commencement of the Rapid Amortization Period.
In the event of a sale of the Receivables and an early termination of the
Trust due to an event of insolvency, the breach of certain representations and
warranties, an optional repurchase of the Receivables by the Bank, a repurchase
of the Receivables in connection with a Servicer Default or a sale of the
Receivables in connection with the Stated Series Termination Date (each as
described under "Description of the Certificates--Pay Out Events;" "--Servicer
Default;" and "--Final Payment of Principal; Termination" in the Prospectus),
distributions of principal will be made to the Certificateholders upon surrender
of their Certificates. The proceeds of any such sale or repurchase of
Receivables will be allocated first to pay amounts due with respect to the Class
A Certificates, then to pay amounts due with respect to the Class B Certificates
and then to pay amounts due with respect to the Excess Collateral as described
herein.
POSTPONEMENT OF ACCUMULATION PERIOD
Upon written notice to the Trustee, the Servicer may elect to postpone the
commencement of the Accumulation Period, and extend the length of the Revolving
Period, subject to certain conditions including those set forth below. The
Servicer may make such election only if the Accumulation Period Length
(determined as described below) is less than twelve months. On each
Determination Date, until the Accumulation Period begins, the Servicer will
determine the "Accumulation Period Length," which is the number of months
expected to be required to fully fund the Principal Funding Account no later
than the Class A Scheduled Payment Date, based on (a) the expected monthly
collections of Principal Receivables expected to be distributable to the
certificateholders of all Series (unless Excess Principal Collections from any
such other Series are not allocated to be shared with the Offered Series),
assuming a principal payment rate no greater than the lowest monthly principal
payment rate on the Receivables for the preceding twelve months and (b) the
amount of principal expected to be distributable to certificateholders of Series
(which may exclude certain other Series) which are not expected to be in their
revolving periods during the Accumulation Period. If the Accumulation Period
Length is less than twelve months, the Servicer may, at its option, postpone the
commencement of the Accumulation Period such that the number of months included
in the Accumulation Period will be equal to or exceed the Accumulation Period
Length. The effect of the foregoing calculation is to permit the reduction of
the length of the Accumulation Period based on the invested amounts of certain
other Series which are scheduled to be in their revolving periods during the
Accumulation Period and on increases in the principal payment rate occurring
after the Closing Date. The length of the Accumulation Period will not be less
than one month. If the Accumulation Period is postponed in accordance with the
foregoing, and if a Pay Out Event occurs after the date originally scheduled as
the commencement of the Accumulation Period, it is probable that
Certificateholders would receive some of their principal later than if the
Accumulation Period had not been so postponed.
EXCESS PRINCIPAL COLLECTIONS
Collections of Principal Receivables for any Monthly Period allocated to
the Invested Amount will first be used to cover, with respect to any Monthly
Period during either Amortization Period, payments to the Class A
Certificateholders and the Class B Certificateholders and then under certain
circumstances payments to the Excess Collateral Holders. The Servicer will
determine the amount of collections of Principal Receivables for any
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Monthly Period allocated to the Invested Amount remaining after covering
required payments to the Certificateholders or deposits with respect thereto and
any similar amount remaining for any other Series ("Excess Principal
Collections"). The Servicer will allocate the Excess Principal Collections to
cover any scheduled or permitted principal distributions to certificateholders
and deposits to principal funding accounts, if any, for any Series which have
not been covered out of the collections of Principal Receivables allocable to
such Series and certain other amounts for such Series. Excess Principal
Collections will not be used to cover investor charge-offs for any Series. If
principal shortfalls for all Series exceed Excess Principal Collections for any
Monthly Period, Excess Principal Collections will be allocated pro rata among
the applicable Series based on the relative amounts of principal shortfalls. To
the extent that Excess Principal Collections exceed principal shortfalls for all
Series, the balance will, subject to certain limitations, be paid to the holder
of the Exchangeable Transferor Certificate. "Principal Shortfalls" means with
respect to the Offered Series and any Distribution Date (a) the sum of the
amount, if any, by which during the Accumulation Period the Controlled Deposit
Amount exceeds the sum of the Class A Monthly Principal, Class B Monthly
Principal and Excess Collateral Monthly Principal for such Distribution Date or
(b) during the Rapid Amortization Period, (i) the amount, if any, by which the
Class A Invested Amount exceeds the Class A Monthly Principal for such
Distribution Date, (ii) on and after the Class B Principal Commencement Date,
the amount, if any, by which the Class B Invested Amount exceeds the Class B
Monthly Principal for such Distribution Date and (iii) on and after the date on
which the Class B Invested Amount has been deposited in full in the Principal
Funding Account or paid in full, the amount, if any, by which the Excess
Collateral Amount exceeds the Excess Collateral Monthly Principal for such
Distribution Date.
SUBORDINATION OF THE CLASS B CERTIFICATES
The Class B Certificateholders' Interest will be subordinated to the extent
necessary to fund payments with respect to the Class A Certificates. To the
extent the Class B Invested Amount is reduced, the percentage of collections of
Finance Charge Receivables allocated to the Class B Certificateholders in
subsequent Monthly Periods will be reduced. Moreover, to the extent the amount
of such reduction in the Class B Invested Amount is not reimbursed, the amount
of principal distributable to the Class B Certificateholders will be reduced.
If collections of Finance Charge Receivables allocable to the Class A
Certificateholders' Interest for any Monthly Period are insufficient to pay
Class A Monthly Interest, any overdue Class A Monthly Interest (with default
interest thereon), the Class A Investor Default Amount for such Monthly Period,
and, if the Transferor is not the Servicer, the Class A Monthly Servicing Fee
for such Monthly Period, then Excess Finance Charge Collections will be applied
to fund the amount of such deficiency. If Excess Finance Charge Collections
available with respect to such Monthly Period are less than the Class A Required
Amount, Reallocated Principal Collections will be applied to fund the remaining
Class A Required Amount and the Excess Collateral Amount will be reduced until
the Excess Collateral Amount is equal to zero and then the Class B Invested
Amount will be reduced by the amount of Reallocated Class B Principal
Collections so used.
If Reallocated Principal Collections available with respect to such Monthly
Period are insufficient to fund the remaining Class A Required Amount and the
Excess Collateral Amount is reduced to zero, then a portion of the Class B
Invested Amount equal to such insufficiency (but not in excess of the lesser of
the Class A Investor Default Amount for such Monthly Period and the Class B
Invested Amount) will be allocated to the Class A Certificates to avoid a
reduction in the Class A Invested Amount, and the Class B Invested Amount will
be reduced by the amount so allocated. Such reductions of the Class B Invested
Amount will thereafter be reimbursed and the Class B Invested Amount increased
on each Distribution Date by the amount, if any, of Excess Finance Charge
Collections for such Distribution Date allocated and available for such purpose.
See "--Excess Finance Charge Collections" and "--Reallocated Principal
Collections" herein.
INVESTOR PERCENTAGE AND TRANSFEROR PERCENTAGE
Pursuant to the Pooling and Servicing Agreement, during each Monthly Period
the Servicer will allocate among the Class A Certificateholders' Interest, the
Class B Certificateholders' Interest, the Excess Collateral Holders' Interest,
the Transferor Interest and the interests of the holders of the other Series
outstanding at such time all collections of Finance Charge Receivables and all
collections of Principal Receivables and the amount of
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<PAGE> 35
all Receivables in Defaulted Accounts. Collections of Finance Charge Receivables
and the amount of Receivables in Defaulted Accounts at all times and collections
of Principal Receivables during the Revolving Period will be allocated to the
Class A Certificateholders' Interest, the Class B Certificateholders' Interest
and the Excess Collateral Holders' Interest based on the percentage equivalent
of the ratio which each of the amount of the Class A Adjusted Invested Amount,
the Class B Adjusted Invested Amount or the Excess Collateral Adjusted Amount,
respectively, on the last day of the preceding Monthly Period bears to the total
amount of Principal Receivables on the last day of the preceding Monthly Period
(the "Class A Floating Allocation Percentage," the "Class B Floating Allocation
Percentage" and the "Excess Collateral Floating Allocation Percentage,"
respectively, and the sum of all three percentages, the "Investor Percentage").
During the initial Monthly Period, the Class A Floating Allocation Percentage,
the Class B Floating Allocation Percentage and the Excess Collateral Floating
Allocation Percentage will equal the percentage equivalent of the ratio which
the amount of the initial Class A Invested Amount, the initial Class B Invested
Amount and the initial Excess Collateral Amount, respectively, bears to the
total amount of Principal Receivables on the Closing Date. During the Revolving
Period, all Principal Receivables allocable to the Class A Certificates, the
Class B Certificates and the Excess Collateral will be allocated and paid to the
holder of the Exchangeable Transferor Certificate (except for (i) Reallocated
Principal Collections used to pay interest and certain other amounts on the
Class A Certificates and Class B Certificates and, if the Bank is not the
Servicer, the Investor Servicing Fee, as described under "--Reallocated
Principal Collections" and "--Servicing Compensation and Payment of Expenses,"
(ii) amounts paid to the holders of certificates of other Series as Excess
Principal Collections, if any and (iii) Unallocated Principal Collections).
During an Amortization Period, all Principal Receivables collected will be
allocated to the Investor Interest based on the percentage equivalent of the
ratio which each of the Class A Invested Amount, the Class B Invested Amount and
the Excess Collateral Amount, respectively, at the end of the last day of the
Revolving Period bears to the greater of (a) the total amount of Principal
Receivables at the end of the last day of the preceding Monthly Period and (b)
the sum of the numerators used to calculate allocation percentages with respect
to Principal Receivables for each Class of each Series outstanding for the
current Distribution Date (the "Class A Fixed/Floating Allocation Percentage,"
the "Class B Fixed/Floating Allocation Percentage" and the "Excess Collateral
Fixed/Floating Allocation Percentage," respectively, and the sum of all three
percentages, the "Fixed/Floating Allocation Percentage") and the remainder will
be allocated to the Transferor Interest and the interest of certificateholders
of other Series, if any. Reallocated Excess Collateral Principal Collections
will be allocated during the Revolving Period based on the Excess Collateral
Floating Allocation Percentage. Reallocated Excess Collateral Principal
Collections will be allocated during an Amortization Period based on the Excess
Collateral Fixed/Floating Allocation Percentage. Reallocated Class B Principal
Collections will be allocated during the Revolving Period based on the Class B
Floating Allocation Percentage. Reallocated Class B Principal Collections will
be allocated during an Amortization Period based on the Class B Fixed/Floating
Allocation Percentage. However, with respect to any Monthly Period in which
Additional Accounts are added on a specified date (an "Addition Date") to the
Trust and the Servicer need not make daily deposits of collections into the
Collection Account, the denominator in the definitions of the Class A Floating
Allocation Percentage, the Class B Floating Allocation Percentage and the Excess
Collateral Floating Allocation Percentage and the denominator determined
pursuant to clause (a) of the definitions of Fixed/Floating Allocation
Percentage, Class A Fixed/Floating Allocation Percentage, Class B Fixed/Floating
Allocation Percentage and Excess Collateral Fixed/Floating Allocation Percentage
above shall be the Average Principal Balance; provided, however, that with
respect to any Monthly Period in which an Addition Date occurs and the Servicer
is required to make daily deposits of collections into the Collection Account,
the denominators in the definitions of the Class A Floating Allocation
Percentage, the Class B Floating Allocation Percentage and the Excess Collateral
Floating Allocation Percentage and the denominator determined pursuant to clause
(a) of the definitions of Fixed/Floating Allocation Percentage, Class A
Fixed/Floating Allocation Percentage, Class B Fixed/Floating Allocation
Percentage and Excess Collateral Fixed/Floating Allocation Percentage shall be
(1) for the period from and including the first day of such Monthly Period to
but excluding the related Addition Date the aggregate amount of Principal
Receivables in the Trust at the end of the day on the last day of the prior
Monthly Period and (2) for the period from and including the Addition Date
through the last day of such Monthly Period the aggregate amount of Principal
Receivables in the Trust at the end of the day on the related Addition Date.
"Average Principal Balance" means, for a Monthly Period in which Additional
Accounts are designated for inclusion in the Trust, the weighted
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average of the Principal Receivables in the Trust at the end of the day on the
last day of the prior Monthly Period and the Principal Receivables in the Trust
at the end of the day on the related Addition Date, weighted, respectively, by a
fraction, the numerator of which is the number of days from and including the
first day of such Monthly Period to but excluding the related Addition Date, and
the denominator of which is the number of days in such Monthly Period, and by a
fraction, the numerator of which is the number of days from and including the
related Addition Date to and including the last day of such Monthly Period, and
the denominator of which is the number of days in such Monthly Period.
As used herein, (i) the term "Class A Invested Amount" for any day means an
amount equal to (a) the initial principal balance of the Class A Certificates,
minus (b) the amount of principal payments made to Class A Certificateholders
prior to such date and minus (c) the excess, if any, of the aggregate amount of
Class A Investor Charge-Offs for all prior Distribution Dates over the aggregate
amount of any reimbursements of Class A Investor Charge-Offs for all
Distribution Dates preceding such date, provided, however, that the Class A
Invested Amount may not be reduced below zero, (ii) the term "Class A Adjusted
Invested Amount," for any date of determination, means an amount not less than
zero equal to the then current Class A Invested Amount, minus the Principal
Funding Account Balance on such date, (iii) the term "Class B Invested Amount"
for any date means an amount equal to (a) the initial principal balance of the
Class B Certificates, minus (b) the amount of principal payments made to Class B
Certificateholders prior to such date, minus (c) the aggregate amount of Class B
Investor Charge-Offs for all prior Distribution Dates, minus (d) the aggregate
amount of Reallocated Class B Principal Collections for which the Excess
Collateral Amount has not been reduced for all prior Distribution Dates minus
(e) an amount equal to the aggregate amount by which the Class B Invested Amount
has been reduced to fund the Class A Investor Default Amount on all prior
Distribution Dates as described herein under "--Defaulted Receivables; Investor
Charge-Offs," and plus (f) the aggregate amount of Excess Finance Charge
Collections and certain other amounts applied for the purpose of reimbursing
amounts deducted pursuant to the foregoing clauses (c), (d) and (e), provided,
however, that the Class B Invested Amount may not be reduced below zero, (iv)
the term "Class B Adjusted Invested Amount," for any date of determination,
means an amount not less than zero equal to the Class B Invested Amount minus
the excess, if any, of the Principal Funding Account Balance over the Class A
Invested Amount on such date of determination, (v) the term "Excess Collateral
Amount" means an amount equal to (a) the initial Excess Collateral Amount, minus
(b) the amount of principal payments made to the Excess Collateral Holders prior
to such date, minus (c) the aggregate amount of Excess Collateral Charge-Offs
for all prior Distribution Dates, minus (d) the aggregate amount of Reallocated
Principal Collections for all prior Distribution Dates which have been used to
fund the Class A Required Amount or the Class B Required Amount, minus (e) an
amount equal to the aggregate amount by which the Excess Collateral Amount has
been reduced to fund the Class A Investor Default Amount and the Class B
Investor Default Amount on all prior Distribution Dates as described under
"--Defaulted Receivables; Investor Charge-Offs," and plus (f) the aggregate
amount of Excess Finance Charge Collections and certain other amounts allocated
and available for purposes of reimbursing amounts deducted pursuant to the
foregoing clauses (c), (d) and (e), provided, however, that the Excess
Collateral Amount may not be reduced below zero, (vi) the term "Excess
Collateral Adjusted Amount," for any date of determination, means an amount not
less than zero equal to the Excess Collateral Amount minus the excess, if any,
of the Principal Funding Account Balance over the sum of the Class A Invested
Amount and the Class B Invested Amount on such date of determination, (vii) the
term "Invested Amount" means the sum of the Class A Invested Amount, the Class B
Invested Amount and the Excess Collateral Amount, and (viii) the term
"Transferor Percentage" means (a) when used with respect to collections of
Finance Charge Receivables and the amount of Receivables in Defaulted Accounts,
100% minus the sum of the Class A Floating Allocation Percentage, the Class B
Floating Allocation Percentage and the Excess Collateral Floating Allocation
Percentage and the floating allocation percentages for all other Series, (b)
when used with respect to collections of Principal Receivables during the
Revolving Period, 100% minus the sum of the Class A Floating Allocation
Percentage, the Class B Floating Allocation Percentage and the Excess Collateral
Floating Allocation Percentage and the allocation percentages for Principal
Receivables for all other Series and (c) when used with respect to collections
of Principal Receivables during either Amortization Period, 100% minus the sum
of the Fixed/Floating Allocation Percentage and the allocation percentages for
Principal Receivables for all other Series.
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As a result of the Class A Floating Allocation Percentage, the Class B
Floating Allocation Percentage and the Excess Collateral Floating Allocation
Percentage, the portion of Receivables in Defaulted Accounts allocated to the
Class A Certificateholders, the Class B Certificateholders and the Excess
Collateral Holders as well as the collections of Finance Charge Receivables
allocated to the Class A Certificateholders and the Class B Certificateholders
will change for each Monthly Period based on the relationship of the amount of
the Class A Invested Amount, the Class B Invested Amount and the Excess
Collateral Amount to the total amount of Principal Receivables on the last day
of the preceding Monthly Period. The numerator of the percentages of collections
on Principal Receivables allocable to the Class A Certificateholders, the Class
B Certificateholders and the Excess Collateral Holders, however, will remain
fixed during either Amortization Period. Collections of Principal Receivables
allocable to the Class B Certificates are subject to possible reallocation for
the benefit of the Class A Certificateholders and collections of Principal
Receivables allocable to the Excess Collateral are subject to possible
reallocation for the benefit of the Class A Certificateholders and the Class B
Certificateholders as described under "--Reallocation of Cash Flows" below.
REALLOCATION OF CASH FLOWS
On each Determination Date, the Servicer will determine the Class A
Required Amount and the Class B Required Amount. If the Class A Required Amount
is greater than zero, Excess Finance Charge Collections will be used to pay the
Class A Required Amount with respect to such Distribution Date. If such Excess
Finance Charge Collections are insufficient to pay the Class A Required Amount,
Reallocated Principal Collections will then be used to fund the remaining Class
A Required Amount. If Reallocated Principal Collections with respect to the
related Monthly Period are insufficient to fund the remaining Class A Required
Amount for such related Monthly Period, then a portion of the Excess Collateral
Amount equal to such insufficiency (but not in excess of the lesser of the Class
A Investor Default Amount for such Monthly Period and the Excess Collateral
Amount) will be allocated to the Class A Certificates to avoid a charge-off with
respect to the Class A Certificates. If the Excess Collateral Amount is reduced
to zero, then a portion of the Class B Invested Amount equal to any remaining
insufficiency (but not in excess of the lesser of the Class A Investor Default
Amount for such Monthly Period and the Class B Invested Amount) will be
allocated to the Class A Certificates to avoid a charge-off with respect to the
Class A Certificates. If the Class B Invested Amount is reduced to zero, the
Class A Invested Amount will be reduced by any remaining deficiency (but not in
excess of the Class A Investor Default Amount for such Monthly Period).
If the Class B Required Amount is greater than zero, any Reallocated Excess
Collateral Principal Collections remaining after application of such amounts to
any Class A Required Amount (after the application of Excess Finance Charge
Collections) will then be used to fund the Class B Required Amount. If such
remaining Reallocated Excess Collateral Principal Collections with respect to
the related Monthly Period are insufficient to fund the Class B Required Amount
for such related Monthly Period, then a portion of any remaining Excess
Collateral Amount equal to such insufficiency (but not in excess of the lesser
of the Class B Investor Default Amount for such Monthly Period and the remaining
Excess Collateral Amount) will be allocated to the Class B Certificates to avoid
a charge-off with respect to the Class B Certificates. If the Excess Collateral
Amount is reduced to zero, the Class B Invested Amount will be reduced by any
remaining deficiency (but not in excess of the Class B Investor Default Amount
for such Monthly Period).
APPLICATION OF COLLECTIONS
Daily Allocations. The Servicer will instruct the Trustee to withdraw from
the Collection Account on each business day an amount equal to the Transferor
Percentage of the aggregate amount of such deposits in respect of Principal
Receivables and Finance Charge Receivables, respectively, and pay such amounts
to the holder of the Exchangeable Transferor Certificate; provided, however,
that if the Transferor Interest is less than the Minimum Transferor Interest
such amount shall instead be deposited in the Collection Account and applied as
Unallocated Principal Collections.
With respect to the Certificates, the Servicer will instruct the Trustee to
make the following payments and deposits on each date of processing; provided,
however, that for so long as the Bank remains the Servicer under
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the Pooling and Servicing Agreement and the Servicer has and maintains a
certificate of deposit rating of "P-1" by Moody's and of "A-1" by Standard &
Poor's and deposit insurance provided by either BIF or SAIF, then the Servicer
may make such deposits and payments on each 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:
(a) during the Revolving Period, (i) allocate to the
Certificateholders an amount equal to the Investor Percentage of
collections of Finance Charge Receivables and retain in the Finance Charge
Account (A) prior to the Calculation Date in each Monthly Period an amount
equal to the product of the Investor Percentage and the aggregate amount of
collections of Finance Charge Receivables, or (B) on and after each such
Calculation Date, the lesser of (x) the product of the Investor Percentage
and the aggregate amount of collections of Finance Charge Receivables and
(y) the excess of (1) the amounts owing to Certificateholders with respect
to interest for the Distribution Date following the then current Monthly
Period (plus, if the Transferor is not the Servicer, the Investor Servicing
Fee) over (2) the amounts previously deposited in the Finance Charge
Account with respect thereto; on each date of processing on and after the
Calculation Date collections of Finance Charge Receivables allocated to the
Certificates in excess of the amount required to be retained in the Finance
Charge Account as provided above shall be held by the Servicer and applied
on each Transfer Date as described below and (ii) allocate to the
Certificateholders an amount equal to the product of (A) the Investor
Percentage and (B) the aggregate amount of collections of Principal
Receivables on such date of processing and pay such amount to the holder of
the Exchangeable Transferor Certificate subject to the obligation of such
holder to make an amount equal to the Reallocated Principal Collections and
Excess Principal Collections for such Monthly Period available on the
related Transfer Date as described below; provided, however, that the
amount to be paid to the holder of the Exchangeable Transferor Certificate
shall be paid only if the Transferor Interest is greater than the Minimum
Transferor Interest (after giving effect to all Principal Receivables
transferred to the Trust on such day) and otherwise will be deposited in
the Collection Account and applied as Unallocated Principal Collections;
and provided, further, that on and after the Calculation Date if the
amounts previously deposited in the Finance Charge Account with respect to
the current Monthly Period are less than the sum of the amounts owing to
Certificateholders with respect to interest for the Distribution Date
following the then current Monthly Period (plus, if the Transferor is not
the Servicer, the Investor Servicing Fee) (the amount of such shortfall,
the "Finance Charge Deficit"), an amount not to exceed the product of (x)
the sum of the Class B Floating Allocation Percentage and the Excess
Collateral Floating Allocation Percentage and (y) collections of Principal
Receivables on any date of processing ("Subordinate Principal Collections")
with respect to the then current Monthly Period will be deposited into the
Principal Account on a daily basis during such Monthly Period in an
aggregate amount not to exceed the Finance Charge Deficit; at such time as
the Finance Charge Deficit is equal to zero, such amounts may be paid from
the Principal Account to the holder of the Exchangeable Transferor
Certificate;
(b) during the Accumulation Period, (i) allocate to the
Certificateholders and retain in the Finance Charge Account an amount equal
to the product of (A) the Investor Percentage and (B) the aggregate amount
of collections of Finance Charge Receivables and (ii) allocate to the
Certificateholders and retain in the Principal Account an amount equal to
the product of (x) the Fixed/Floating Allocation Percentage and (y) the
aggregate amount of collections of Principal Receivables (for any such
date, a "Percentage Allocation"); provided, however, that if the sum of
such Percentage Allocations with respect to the same Monthly Period exceeds
the Controlled Deposit Amount for the related Distribution Date, then such
excess shall be paid to the holder of the Exchangeable Transferor
Certificate (subject to the obligation of such holder to make an amount
equal to the Reallocated Principal Collections and Excess Principal
Collections for such Monthly Period available on the related Transfer Date
as described below), only if the Transferor Interest is greater than the
Minimum Transferor Interest (after giving effect to all Principal
Receivables transferred to the Trust on such day) and otherwise shall be
deposited in the Collection Account and applied as Unallocated Principal
Collections; provided, further, that on and after the Calculation Date if
there is a Finance Charge Deficit, Subordinate Principal Collections with
respect to each Monthly Period will be deposited into the Principal Account
on a daily basis during such Monthly Period in an aggregate amount not to
exceed the
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Finance Charge Deficit; at such time as the Finance Charge Deficit is equal
to zero, such amounts may be paid from the Principal Account to the holder
of the Exchangeable Transferor Certificate; and
(c) during the Rapid Amortization Period, (i) allocate to the
Certificateholders and retain in the Finance Charge Account an amount equal
to the product of (A) the Investor Percentage and (B) the aggregate amount
of collections of Finance Charge Receivables and (ii) allocate to the
Certificateholders and retain in the Principal Account an amount equal to
the product of (A) the Fixed/Floating Allocation Percentage and (B) the
aggregate amount of collections of Principal Receivables; provided,
however, that after the date on which an amount of such collections equal
to the Invested Amount has been deposited into the Collection Account and
allocated to the Certificateholders, the amount determined above will be
paid to the holder of the Exchangeable Transferor Certificate only if the
Transferor Interest is greater than the Minimum Transferor Interest (after
giving effect to all Principal Receivables transferred to the Trust on such
day) and otherwise will be deposited in the Collection Account and applied
as Unallocated Principal Collections.
"Calculation Date" means October 13, 1998 and the second business day (as
defined for purposes of determining LIBOR) prior to the 15th day of each
calendar month thereafter.
Monthly Deposits During the Revolving Period and Accumulation
Period. During the Revolving Period, the Servicer will deposit in the Finance
Charge Account on each Transfer Date an amount equal to (i) the lesser of (A)
the product of (x) the Investor Percentage with respect to the preceding Monthly
Period and (y) the aggregate amount of collections of Finance Charge Receivables
for the preceding Monthly Period, and (B) the aggregate of the amounts to be
applied from amounts on deposit in the Finance Charge Account on such Transfer
Date pursuant to clauses (a)(i) through (iii), (b)(i) and (ii) and (c)(i) under
"--Monthly Allocations" as described below and clauses (a) through (k) of
"--Excess Finance Charge Collections" less (ii) the amounts deposited in the
Finance Charge Account daily during such Monthly Period as described above in
"--Daily Allocations." During the Revolving Period and the Accumulation Period,
on each Transfer Date the Transferor will deposit in the Principal Account an
amount equal to the sum of (I) the excess of the amount of Reallocated Principal
Collections over the amount retained in the Collection Account as described
above in "--Daily Allocations" with respect to the Revolving Period or
Accumulation Period, respectively, and (II) an amount equal to the amount of
Excess Principal Collections to be applied for the benefit of other Series from
amounts that were originally allocated to the Offered Series, not to exceed (a)
during the Revolving Period, the Investor Percentage of collections of Principal
Receivables for the related Monthly Period or (b) during the Accumulation
Period, the Fixed/Floating Allocation Percentage of collections of Principal
Receivables for the related Monthly Period less the amount thereof applied to
pay Class A Monthly Principal, Class B Monthly Principal or Excess Collateral
Monthly Principal on the related Distribution Date.
Monthly Allocations. On each Transfer Date, the Trustee, acting pursuant
to the Servicer's instructions, will make the following payments and deposits:
(a) An amount equal to the Class A Available Funds for the preceding
Monthly Period will be distributed in the following priority:
(i) an amount equal to Class A Monthly Interest for such
Distribution Date, plus the amount of any overdue Class A Monthly
Interest, plus any default interest with respect to interest amounts
that were due but not paid on a prior Distribution Date, such interest
to be computed at the Class A Certificate Rate plus 2.0% per annum, will
be deposited into the Distribution Account for distribution to Class A
Certificateholders on the next succeeding Distribution Date;
(ii) if the Bank is no longer the Servicer, an amount equal to the
Class A Monthly Servicing Fee for the related Monthly Period will be
paid to the Servicer;
(iii) an amount equal to the Class A Investor Default Amount, if
any, for the related Monthly Period will be paid in respect of principal
to the holder of the Exchangeable Transferor Certificate during the
Revolving Period (provided that if such amount exceeds the Transferor
Interest, the excess will be treated as Unallocated Principal
Collections) and deposited in the Principal Account and treated as a
portion of Available Investor Principal Collections during the
Amortization Period; and
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(iv) the balance, if any, will constitute a portion of Excess
Finance Charge Collections and will be allocated and distributed as
described under "--Excess Finance Charge Collections" below.
(b) An amount equal to the Class B Available Funds for the preceding
Monthly Period will be distributed in the following priority:
(i) an amount equal to Class B Monthly Interest for such
Distribution Date, plus the amount of any overdue Class B Monthly
Interest, plus any default interest with respect to interest amounts
that were due but not paid on a prior Distribution Date, such interest
to be computed at the Class B Certificate Rate plus 2.0% per annum, will
be deposited into the Distribution Account for distribution to Class B
Certificateholders on the next succeeding Distribution Date;
(ii) if the Bank is no longer the Servicer, an amount equal to the
Class B Monthly Servicing Fee for the related Monthly Period will be
paid to the Servicer; and
(iii) the balance, if any, will constitute a portion of Excess
Finance Charge Collections and will be allocated and distributed as
described under "--Excess Finance Charge Collections" below.
(c) An amount equal to the Excess Collateral Available Funds for the
preceding Monthly Period will be distributed in the following priority:
(i) if the Bank is no longer the Servicer, an amount equal to the
Excess Collateral Monthly Servicing Fee for the related Monthly Period
will be paid to the Servicer; and
(ii) the balance, if any, will constitute a portion of Excess
Finance Charge Collections and will be allocated and distributed as
described under "--Excess Finance Charge Collections" below.
"Excess Finance Charge Collections" shall mean, with respect to any
Transfer Date, an amount equal to the sum of the amounts described in clause
(a)(iv), clause (b)(iii) and clause (c)(ii) above.
"Class A Monthly Interest" with respect to any Distribution Date will equal
the product of (i) the Class A Certificate Rate for the related Interest Period,
(ii) the actual number of days in such Interest Period divided by 360 and (iii)
the outstanding principal balance of the Class A Certificates on the related
Record Date or, with respect to the first Distribution Date, the initial Class A
Invested Amount.
"Class A Available Funds" means, with respect to any Monthly Period, an
amount equal to the sum of (a) the Class A Floating Allocation Percentage of
collections of Finance Charge Receivables in respect of such Monthly Period and
(b) with respect to any Monthly Period during the Accumulation Period prior to
the payment in full of the Class A Invested Amount, the product of (i) the Class
A Account Percentage and (ii) the sum of the Principal Funding Investment
Proceeds, if any, with respect to the related Transfer Date and the amounts, if
any, to be withdrawn from the Reserve Account which will be deposited into the
Finance Charge Account on the related Transfer Date as described under
"--Reserve Account" herein.
"Class A Account Percentage" means, with respect to any Determination Date,
the percentage equivalent of a fraction, the numerator of which is the aggregate
amount on deposit in the Principal Funding Account with respect to the Class A
Certificates and the denominator of which is the aggregate amount on deposit in
the Principal Funding Account, in each case as of the last day of the preceding
Monthly Period.
"Class B Monthly Interest" with respect to any Distribution Date will equal
the product of (i) the Class B Certificate Rate for the related Interest Period,
(ii) the actual number of days in such Interest Period divided by 360 and (iii)
the Class B Invested Amount on the related Record Date or, with respect to the
first Distribution Date, the initial Class B Invested Amount.
"Class B Available Funds" means, with respect to any Monthly Period, an
amount equal to the sum of (a) the Class B Floating Allocation Percentage of
collections of Finance Charge Receivables in respect of such Monthly Period and
(b) with respect to any Monthly Period during the Accumulation Period prior to
the payment in full of the Class B Invested Amount, the product of (i) the Class
B Account Percentage and (ii) the sum of the Principal Funding Investment
Proceeds, if any, with respect to the related Transfer Date and the amounts, if
any,
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to be withdrawn from the Reserve Account which will be deposited into the
Finance Charge Account on the related Transfer Date as described under
"--Reserve Account" herein.
"Class B Account Percentage" means, with respect to any Determination Date,
the percentage equivalent of a fraction, the numerator of which is the aggregate
amount on deposit in the Principal Funding Account with respect to the Class B
Certificates, if any, and the denominator of which is the aggregate amount on
deposit in the Principal Funding Account, in each case as of the last day of the
preceding Monthly Period.
"Excess Collateral Available Funds" means, with respect to any Monthly
Period, an amount equal to the sum of (a) the Excess Collateral Floating
Allocation Percentage of collections of Finance Charge Receivables in respect of
such Monthly Period and (b) with respect to any Monthly Period during the
Accumulation Period prior to the payment in full of the Excess Collateral
Amount, the product of (i) the Excess Collateral Account Percentage and (ii) the
sum of the Principal Funding Investment Proceeds, if any, with respect to the
related Transfer Date and the amounts, if any, to be withdrawn from the Reserve
Account which will be deposited into the Finance Charge Account on the related
Transfer Date as described under "--Reserve Account" herein.
"Excess Collateral Account Percentage" means, with respect to any
Determination Date, the percentage equivalent of a fraction, the numerator of
which is the aggregate amount on deposit in the Principal Funding Account with
respect to the Excess Collateral, if any, and the denominator of which is the
aggregate amount on deposit in the Principal Funding Account, in each case as of
the last day of the preceding Monthly Period.
EXCESS FINANCE CHARGE COLLECTIONS
On each Transfer Date, the Servicer will apply or cause the Trustee to
apply Excess Finance Charge Collections with respect to the related Monthly
Period, to make the following distributions in the following priority:
(a) an amount equal to the Class A Required Amount, if any, with
respect to the related Monthly Period will be used to fund the Class A
Required Amount;
(b) an amount equal to the aggregate amount of Class A Investor
Charge-Offs, which have not been previously reimbursed (after giving effect
to the allocation with respect to the related Distribution Date of certain
other amounts applied for that purpose), will be distributed to the holder
of the Exchangeable Transferor Certificate on each Transfer Date with
respect to the Revolving Period (but not exceeding the Transferor Interest
in Principal Receivables on such day (after giving effect to any new
Principal Receivables transferred to the Trust on such day)) and thereafter
will be deposited into the Principal Account and treated as a portion of
Available Investor Principal Collections for the related Distribution Date
as described under "--Payments of Principal" below;
(c) an amount equal to the amount of interest which has accrued with
respect to the outstanding aggregate principal amount of the Class B
Certificates at the applicable Class B Certificate Rate but has not been
deposited in the Distribution Account for the benefit of the Class B
Certificateholders either on such Transfer Date or on a prior Transfer Date
and any other amounts due on the related Distribution Date or on any prior
Distribution Date as described in clause (b)(i) of "--Application of
Collections--Monthly Allocations" above but not yet paid will be deposited
into the Distribution Account for payment to the Class B
Certificateholders;
(d) an amount equal to the aggregate Class B Investor Default Amount,
if any, for the related Distribution Date will be distributed to the holder
of the Exchangeable Transferor Certificate on each Transfer Date with
respect to the Revolving Period (but not exceeding the Transferor Interest
in Principal Receivables on such day (after giving effect to any new
Principal Receivables transferred to the Trust on such day)) and on
Transfer Dates with respect to an Amortization Period will be deposited
into the Principal
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Account and treated as a portion of Available Investor Principal
Collections for the related Distribution Date as described under
"--Payments of Principal" below;
(e) an amount equal to the aggregate amount by which the Class B
Invested Amount has been reduced below the initial Class B Invested Amount
for reasons other than the payment of principal to the Class B
Certificateholders (but not in excess of the aggregate amount of such
reductions which have not been previously reimbursed) will be distributed
to the holder of the Exchangeable Transferor Certificate on each Transfer
Date with respect to the Revolving Period, but not in an amount exceeding
the Transferor Interest in Principal Receivables on such day (after giving
effect to any new Principal Receivables transferred to the Trust on such
day) and on Transfer Dates with respect to an Amortization Period will be
deposited into the Principal Account and treated as a portion of Available
Investor Principal Collections for the related Distribution Date as
described under "--Payments of Principal" below;
(f) an amount equal to Excess Collateral Minimum Monthly Interest for
the related Transfer Date, plus the amount of any overdue Excess Collateral
Minimum Monthly Interest, will be paid to the Excess Collateral Holders in
accordance with the Transfer and Administration Agreement;
(g) an amount equal to the unpaid Investor Servicing Fee will be paid
to the Servicer;
(h) an amount equal to the aggregate Excess Collateral Default Amount,
if any, for the related Distribution Date will be distributed to the holder
of the Exchangeable Transferor Certificate on each Transfer Date with
respect to the Revolving Period (but not exceeding the Transferor Interest
in Principal Receivables on such day (after giving effect to any new
Principal Receivables transferred to the Trust on such day)) and on
Transfer Dates with respect to an Amortization Period will be deposited
into the Principal Account and treated as a portion of Available Investor
Principal Collections for the related Distribution Date as described under
"--Payments of Principal" below;
(i) an amount equal to the aggregate amount by which the Excess
Collateral Amount has been reduced below the initial Excess Collateral
Amount for reasons other than the payment of principal to the Excess
Collateral Holders (but not in excess of the aggregate amount of such
reductions which have not been previously reimbursed) will be distributed
to the holder of the Exchangeable Transferor Certificate on each Transfer
Date with respect to the Revolving Period, but not in an amount exceeding
the Transferor Interest in Principal Receivables on such day (after giving
effect to any new Principal Receivables transferred to the Trust on such
day) and on Transfer Dates with respect to an Amortization Period will be
deposited into the Principal Account and treated as a portion of Available
Investor Principal Collections for the related Distribution Date as
described under "--Payments of Principal" below;
(j) on each Transfer Date from and after the Reserve Account Funding
Date, but prior to the date on which the Reserve Account terminates as
described under "--Reserve Account," an amount up to the excess, if any, of
the Required Reserve Account Amount over the Available Reserve Account
Amount shall be deposited into the Reserve Account; and
(k) the balance, if any, after giving effect to the payments made
pursuant to clauses (a) through (j) above shall be paid to the Excess
Collateral Holders in accordance with the Transfer and Administration
Agreement.
"Excess Collateral Minimum Monthly Interest" with respect to any Transfer
Date will equal the product of (i) the Excess Collateral Minimum Rate for the
related Interest Period, (ii) the actual number of days in the related Interest
Period divided by 360, and (iii) the Excess Collateral Amount on the related
Record Date or, with respect to the first Transfer Date, the initial Excess
Collateral Amount.
"Excess Collateral Minimum Rate" means LIBOR plus % per annum or
such lesser rate as may be specified in the Transfer and Administration
Agreement.
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PAYMENTS OF PRINCIPAL
The Trustee, acting pursuant to the Servicer's instructions, will
distribute Available Investor Principal Collections (see "--Principal Payments"
above) on deposit in the Principal Account in the following priority:
(a) on each Transfer Date with respect to the Revolving Period, all
Available Investor Principal Collections with respect to the preceding
Monthly Period will be treated as Excess Principal Collections and applied
as described under "--Excess Principal Collections" herein and "Description
of the Certificates--Shared Collections of Principal Receivables" in the
Prospectus;
(b) with respect to the Accumulation Period or the Rapid Amortization
Period, all Available Investor Principal Collections with respect to the
preceding Monthly Period will be distributed or deposited in the following
priority:
(i) an amount equal to the Class A Monthly Principal will be
deposited on each Transfer Date in the Principal Funding Account for
distribution to the Class A Certificateholders on the Class A Scheduled
Payment Date (with respect to the Accumulation Period) or distributed to
the Class A Certificateholders on each Distribution Date until the Class
A Invested Amount is paid in full (with respect to the Rapid
Amortization Period);
(ii) on the Transfer Date related to the Class B Principal
Commencement Date and on each Transfer Date thereafter, an amount equal
to the Class B Monthly Principal will be deposited in the Principal
Funding Account for distribution to the Class B Certificateholders on
the Class B Scheduled Payment Date (with respect to the Accumulation
Period) or distributed to the Class B Certificateholders on each
Distribution Date until the Class B Invested Amount is paid in full
(with respect to the Rapid Amortization Period); and
(iii) on the Transfer Date related to the Distribution Date on
which the Class B Invested Amount is deposited in full in the Principal
Funding Account or paid in full to the Class B Certificateholders and on
each Transfer Date thereafter, an amount equal to the Excess Collateral
Monthly Principal will be deposited in the Principal Funding Account for
distribution to the Excess Collateral Holders on the Transfer Date
immediately preceding the Excess Collateral Scheduled Payment Date (with
respect to the Accumulation Period) or distributed to the Excess
Collateral Holders on each Transfer Date until the Excess Collateral
Amount is paid in full (with respect to the Rapid Amortization Period);
and
(c) on each Transfer Date with respect to the Accumulation Period and
the Rapid Amortization Period, the balance of Available Investor Principal
Collections not applied pursuant to (a) and (b) above, if any, will be
treated as Excess Principal Collections and applied as described under
"--Excess Principal Collections" herein and "Description of the
Certificates--Shared Collections of Principal Receivables" in the
Prospectus.
"Class A Monthly Principal" with respect to any Transfer Date relating to
the Accumulation Period or the Rapid Amortization Period, prior to the payment
in full of the Class A Invested Amount, will equal the least of (i) the
Available Investor Principal Collections on deposit in the Principal Account
with respect to such Transfer Date, (ii) for each Transfer Date with respect to
the Accumulation Period, prior to the payment in full of the Class A Invested
Amount, and on or prior to the Class A Scheduled Payment Date, the applicable
Controlled Deposit Amount for such Transfer Date and (iii) the Class A Adjusted
Invested Amount on such Transfer Date.
"Class B Monthly Principal" with respect to each Transfer Date relating to
the Accumulation Period or the Rapid Amortization Period beginning with the
Transfer Date first preceding the Class B Principal Commencement Date, prior to
the payment in full of the Class B Invested Amount, will equal the least of (i)
the Available Investor Principal Collections remaining on deposit in the
Principal Account with respect to such Transfer Date after application thereof
to Class A Monthly Principal, if any, (ii) for each Transfer Date with respect
to the Accumulation Period, prior to the Class B Scheduled Payment Date, the
applicable Controlled Deposit Amount for such Transfer Date (minus the Class A
Monthly Principal with respect to such Transfer Date) and (iii) the Class B
Adjusted Invested Amount on such Transfer Date.
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<PAGE> 44
"Excess Collateral Monthly Principal" with respect to each Transfer Date
relating to the Accumulation Period or the Rapid Amortization Period beginning
with the Transfer Date first preceding the Distribution Date on which the Class
B Invested Amount is deposited in full in the Principal Funding Account or paid
in full, prior to the payment in full of the Excess Collateral Amount, will
equal the least of (i) the Available Investor Principal Collections remaining on
deposit in the Principal Account with respect to such Transfer Date after
application thereof to Class A Monthly Principal and Class B Monthly Principal,
if any, (ii) for each Transfer Date with respect to the Accumulation Period,
prior to the Excess Collateral Scheduled Payment Date, the applicable Controlled
Deposit Amount for such Transfer Date (minus the Class A Monthly Principal and
the Class B Monthly Principal with respect to such Transfer Date) and (iii) the
Excess Collateral Adjusted Amount on such Transfer Date.
"Controlled Accumulation Amount" means for any Transfer Date with respect
to the Accumulation Period, prior to the payment in full of the Class A Invested
Amount, $50,200,834; provided, however, that if the commencement of the
Accumulation Period is delayed as described above under "--Postponement of
Accumulation Period," the Controlled Accumulation Amount may be higher than the
amount stated above for each Transfer Date with respect to the Accumulation
Period and will be determined by the Servicer in accordance with the Pooling and
Servicing Agreement based on the principal payment rates for the Accounts and on
the invested amounts of other Series (other than certain excluded Series) which
are scheduled to be in their revolving periods and then scheduled to create
Excess Principal Collections during the Accumulation Period.
"Accumulation Shortfall" initially means zero and thereafter means, with
respect to any Monthly Period during the Accumulation Period, the excess, if
any, of the Controlled Deposit Amount for the previous Monthly Period over the
amount deposited into the Principal Funding Account as described in clause (b)
of this section with respect to the Certificates for the previous Monthly
Period.
REALLOCATED PRINCIPAL COLLECTIONS
On each Distribution Date, the Servicer will apply or cause the Trustee to
apply an amount, not to exceed the Excess Collateral Amount, equal to the
product of (a)(i) during the Revolving Period, the Excess Collateral Floating
Allocation Percentage or (ii) during an Amortization Period, the Excess
Collateral Fixed/Floating Allocation Percentage and (b) the amount of
collections of Principal Receivables with respect to the related Monthly Period
in the following priority (such collections applied in accordance with clause
(a) below are called "Reallocated Excess Collateral Principal Collections"):
(a) an amount equal to the sum of (i) the excess, if any, of the Class
A Required Amount with respect to such related Monthly Period over the
amount of Excess Finance Charge Collections with respect to such related
Monthly Period and (ii) the Class B Required Amount with respect to the
related Monthly Period; and
(b) any such collections not applied in the foregoing manner (and
therefore not constituting Reallocated Excess Collateral Principal
Collections) will, on each Distribution Date with respect to the Revolving
Period, first be applied as Excess Principal Collections for the benefit of
other Series and then be distributed to the holder of the Exchangeable
Transferor Certificate, if the Transferor Interest is equal to or greater
than the Minimum Transferor Interest, or applied as Unallocated Principal
Collections and on Distribution Dates with respect to an Amortization
Period will be included in the funds available to make principal payments
to the Class A Certificateholders until the Class A Invested Amount is paid
in full and then to the Class B Certificateholders until the Class B
Invested Amount is paid in full and then to the Excess Collateral Holders
until the Excess Collateral Amount is paid in full.
On each Distribution Date, the Servicer will apply or cause the Trustee to
apply an amount, not to exceed the Class B Invested Amount, equal to the product
of (a)(i) during the Revolving Period, the Class B Floating Allocation
Percentage or (ii) during an Amortization Period, the Class B Fixed/Floating
Allocation Percentage and (b) the amount of collections of Principal Receivables
with respect to the related Monthly Period in the following priority (such
collections applied in accordance with clause (a) below are called "Reallocated
Class B
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<PAGE> 45
Principal Collections" and the sum of Reallocated Excess Collateral Principal
Collections and Reallocated Class B Principal Collections is called "Reallocated
Principal Collections"):
(a) an amount equal to the excess, if any, of the Class A Required
Amount with respect to such related Monthly Period over the sum of (i) the
amount of Excess Finance Charge Collections with respect to such related
Monthly Period and (ii) the amount of Reallocated Excess Collateral
Principal Collections applied with respect thereto for the related Monthly
Period; and
(b) any such collections not applied in the foregoing manner (and
therefore not constituting Reallocated Class B Principal Collections) will,
on each Distribution Date with respect to the Revolving Period, first be
applied as Excess Principal Collections for the benefit of other Series and
then be distributed to the holder of the Exchangeable Transferor
Certificate, if the Transferor Interest is equal to or greater than the
Minimum Transferor Interest, or applied as Unallocated Principal
Collections and on Distribution Dates with respect to an Amortization
Period will be included in the funds available to make principal payments
to the Class A Certificateholders until the Class A Invested Amount is paid
in full and then to the Class B Certificateholders until the Class B
Invested Amount is paid in full and then to the Excess Collateral Holders
until the Excess Collateral Amount is paid in full.
On each Distribution Date the Excess Collateral Amount will be reduced by
the amount of Reallocated Excess Collateral Principal Collections and by the
amount of Reallocated Class B Principal Collections for such Distribution Date.
In the event that such reduction would cause the Excess Collateral Amount to be
a negative number, the Excess Collateral Amount will be reduced to zero and the
Class B Invested Amount will be reduced by the amount by which the Excess
Collateral Amount would have been reduced below zero. In the event that the
reallocation of collections of Principal Receivables would cause the Class B
Invested Amount to be a negative number on any Distribution Date, collections of
Principal Receivables will be reallocated on such Distribution Date in an
aggregate amount not to exceed the amount which would cause the Class B Invested
Amount to be reduced to zero.
DEFAULTED RECEIVABLES; INVESTOR CHARGE-OFFS
On each Determination Date, the Servicer will calculate the Investor
Default Amount for the preceding Monthly Period. The term "Default Amount"
means, for any Monthly Period, an amount (which shall not be less than zero)
equal to (a) the aggregate amount of Principal Receivables (other than
Ineligible Receivables) in Defaulted Accounts on the day such Account became a
Defaulted Account for each day in such Monthly Period minus (b) the aggregate
amount of Recoveries received in such Monthly Period. The term "Investor Default
Amount" means, for any Monthly Period, the product of (i) the Investor
Percentage with respect to such Monthly Period and (ii) the Default Amount for
such Monthly Period. A portion of the Default Amount will be allocated to the
Class A Certificateholders (the "Class A Investor Default Amount") on each
Distribution Date in an amount equal to the product of the Class A Floating
Allocation Percentage applicable during the related Monthly Period and the
Default Amount for such Monthly Period. A portion of the Default Amount will be
allocated to the Class B Certificateholders (the "Class B Investor Default
Amount") on each Distribution Date in an amount equal to the product of the
Class B Floating Allocation Percentage applicable during the related Monthly
Period and the Default Amount for such Monthly Period. A portion of the Default
Amount will be allocated to the Excess Collateral Holders (the "Excess
Collateral Default Amount") on each Distribution Date in an amount equal to the
product of the Excess Collateral Floating Allocation Percentage applicable
during the related Monthly Period and the Default Amount for such Monthly
Period.
On each Distribution Date, if the Class A Investor Default Amount for such
Distribution Date exceeds the sum of the Class A Floating Allocation Percentage
of collections in respect of Finance Charge Receivables allocable with respect
thereto, and the Excess Finance Charge Collections and the Reallocated Principal
Collections available to cover such amount with respect to the Monthly Period
immediately preceding such Distribution Date, the Excess Collateral Amount will
be reduced by the amount of such excess, but not more than the lesser of the
Class A Investor Default Amount and the Excess Collateral Amount for such
Distribution Date. In the event that, but for the limitation on the amount of
such reduction in the preceding sentence, such reduction
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<PAGE> 46
would cause the Excess Collateral Amount to be a negative number, the Excess
Collateral Amount will be reduced to zero, and the Class B Invested Amount will
be reduced by the amount by which the Excess Collateral Amount would have been
reduced below zero. In the event that such reduction would cause the Class B
Invested Amount to be a negative number, the Class B Invested Amount will be
reduced to zero, and the Class A Invested Amount will be reduced by the amount
by which the Class B Invested Amount would have been reduced below zero, but not
more than the Class A Investor Default Amount for such Distribution Date (a
"Class A Investor Charge-Off"), which will have the effect of slowing or
reducing the return of principal to the Class A Certificateholders. If the Class
A Invested Amount has been reduced by the amount of any Class A Investor
Charge-Offs, it will be reimbursed on any Transfer Date (but not by an amount in
excess of the aggregate Class A Investor Charge-Offs) by the amount of Excess
Finance Charge Collections allocated and available for such purpose as described
herein under "--Excess Finance Charge Collections."
If on any Distribution Date, the Class B Investor Default Amount for such
Distribution Date exceeds the amount of Excess Finance Charge Collections and
Reallocated Excess Collateral Principal Collections which are allocated and
available to fund such amount, the Excess Collateral Amount (after giving effect
to any adjustments with respect thereto as described in the preceding paragraph)
will be reduced by the amount of such excess, but not more than the lesser of
the Class B Investor Default Amount and the Excess Collateral Amount for such
Distribution Date. In the event that, but for the limitation on the amount of
such reduction in the preceding sentence, such reduction would cause the Excess
Collateral Amount to be a negative number, the Excess Collateral Amount will be
reduced to zero and the Class B Invested Amount will be reduced by the amount by
which the Excess Collateral Amount would have been reduced below zero, but not
more than the Class B Investor Default Amount for such Distribution Date (a
"Class B Investor Charge-Off"). The Class B Invested Amount will also be reduced
by the amount of Reallocated Class B Principal Collections applied to cover
shortfalls in excess of the Excess Collateral Amount and the amount of any
portion of the Class B Invested Amount allocated to the Class A Certificates to
avoid a reduction in the Class A Invested Amount. The Class B Invested Amount
will thereafter be reimbursed (but not in the excess of the unpaid principal
balance of the Class B Certificates) on any Transfer Date by the amount of
Excess Finance Charge Collections allocated and available for that purpose as
described herein under "--Excess Finance Charge Collections."
If on any Distribution Date, the Excess Collateral Default Amount for such
Distribution Date exceeds the amount of Excess Finance Charge Collections which
are allocated and available to fund such amount as described herein under
"--Excess Finance Charge Collections," the Excess Collateral Amount (after
giving effect to any adjustments with respect thereto as described in the
preceding paragraphs) will be reduced by the amount of such excess, but not more
than the lesser of the Excess Collateral Default Amount and the Excess
Collateral Amount for such Distribution Date (an "Excess Collateral
Charge-Off"). The Excess Collateral Amount will also be reduced by the amount of
Reallocated Principal Collections and the amount of any portion of the Excess
Collateral Amount allocated to the Class A Certificates to avoid a reduction in
the Class A Invested Amount or to the Class B Certificates to avoid a reduction
in the Class B Invested Amount. The Excess Collateral Amount will thereafter be
reimbursed on any Transfer Date by the amount of Excess Finance Charge
Collections allocated and available for that purpose as described herein under
"--Excess Finance Charge Collections."
PRINCIPAL FUNDING ACCOUNT
Pursuant to the Offered Series Supplement, the Servicer will establish and
maintain with a Qualified Institution the principal funding account as a
segregated trust account held for the benefit of the Certificateholders (the
"Principal Funding Account"). During the Accumulation Period, the Trustee at the
direction of the Servicer shall transfer collections in respect of Principal
Receivables (other than Reallocated Principal Collections) and Excess Principal
Collections from other Series, if any, allocated to the Offered Series from the
Principal Account to the Principal Funding Account as described herein under
"--Application of Collections."
Funds on deposit in the Principal Funding Account will be invested to the
following Transfer Date by the Trustee at the direction of the Servicer in
Permitted Investments. Investment earnings (net of investment losses and
expenses) on funds on deposit in the Principal Funding Account (the "Principal
Funding Investment Proceeds") during the Accumulation Period will be included in
Class A Available Funds, Class B Available
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Funds and Excess Collateral Available Funds. If, for any Interest Period, the
Principal Funding Investment Proceeds are less than an amount equal to, for each
Interest Period, the Covered Amount, the amount of such deficiency will be paid
from the Reserve Account to the extent of the Available Reserve Account Amount
and, if necessary, from Excess Finance Charge Collections and Reallocated
Principal Collections.
RESERVE ACCOUNT
Pursuant to the Offered Series Supplement, the Servicer will establish and
maintain with a Qualified Institution the reserve account as a segregated trust
account held for the benefit of the Certificateholders (the "Reserve Account").
The Reserve Account is established to assist with the subsequent distribution of
interest on the Certificates during the Accumulation Period. On each Transfer
Date from and after the Reserve Account Funding Date, but prior to the
termination of the Reserve Account, the Trustee, acting pursuant to the
Servicer's instructions, will apply Excess Finance Charge Collections allocated
to the Certificates (to the extent described above under "--Excess Finance
Charge Collections") to increase the amount on deposit in the Reserve Account
(to the extent such amount is less than the Required Reserve Account Amount).
The "Reserve Account Funding Date" will be the Transfer Date which commences no
later than three months prior to the commencement of the Accumulation Period, or
such earlier date as the Servicer may determine. The "Required Reserve Account
Amount" for any Transfer Date on or after the Reserve Account Funding Date will
be equal to (a) 0.5% of the Invested Amount or (b) any other amount designated
by the Transferor; provided, that if such designation is of a lesser amount, the
Transferor shall have provided the Servicer, the Excess Collateral Holders and
the Trustee with evidence that the Rating Agency Condition has been satisfied
and the Transferor shall have delivered to the Trustee a certificate of an
authorized officer to the effect that, based on the facts known to such officer
at such time, in the reasonable belief of the Transferor, such designation will
not cause a Pay Out Event or an event that, after the giving of notice or the
lapse of time, would cause a Pay Out Event to occur with respect to the Offered
Series. "Rating Agency Condition" means the notification in writing by each
Rating Agency to the Transferor, the Servicer and the Trustee that any action
will not result in any Rating Agency reducing or withdrawing its then existing
rating of the investor certificates of any outstanding Series or Class with
respect to which it is a Rating Agency.
Provided that the Reserve Account has not terminated as described below,
all amounts on deposit in the Reserve Account on any Transfer Date (after giving
effect to any deposits to, or withdrawals from, the Reserve Account to be made
on such Transfer Date) will be invested to the following Transfer Date by the
Trustee at the direction of the Servicer in Permitted Investments. The interest
and other investment income (net of investment expenses and losses) earned on
such investments will be retained in the Reserve Account (to the extent the
amount on deposit is less than the Required Reserve Account Amount) or deposited
in the Finance Charge Account for application as described in "--Application of
Collections--Monthly Allocations."
On or before each Transfer Date with respect to the Accumulation Period and
on the first Transfer Date with respect to the Rapid Amortization Period, a
withdrawal will be made from the Reserve Account, and the amount of such
withdrawal will be included in Class A Available Funds, Class B Available Funds
and Excess Collateral Available Funds to be applied to the payment of interest
on the Certificates for such Transfer Date in an amount equal to the lesser of
(a) the Available Reserve Account Amount with respect to such Transfer Date and
(b) the excess, if any, of (x) the sum of (a) with respect to the Class A
Certificates, the product of (i) a fraction, the numerator of which is the
actual number of days in such Interest Period and the denominator of which is
360, (ii) the Class A Certificate Rate in effect with respect to such Interest
Period and (iii) the aggregate amount on deposit in the Principal Funding
Account with respect to Class A Monthly Principal as of the last day of the
Monthly Period preceding the Monthly Period in which such Interest Period ends,
(b) with respect to the Class B Certificates, the product of (i) a fraction, the
numerator of which is the actual number of days in such Interest Period and the
denominator of which is 360, (ii) the Class B Certificate Rate in effect with
respect to such Interest Period and (iii) the aggregate amount on deposit in the
Principal Funding Account with respect to Class B Monthly Principal as of the
last day of the Monthly Period preceding the Monthly Period in which such
Interest Period ends and (c) with respect to the Excess Collateral, the product
of (i) a fraction, the numerator of which is the actual number of days in such
Interest Period and the denominator of which is 360, (ii) the Excess Collateral
Minimum Rate in effect with respect to such Interest Period and (iii) the
aggregate amount on deposit in the
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Principal Funding Account with respect to Excess Collateral Monthly Principal as
of the last day of the Monthly Period preceding the Monthly Period in which such
Interest Period ends (the "Covered Amount") over (y) the Principal Funding
Investment Proceeds with respect to such Transfer Date; provided, that the
amount of such withdrawal shall be reduced to the extent that funds otherwise
would be available to be deposited in the Reserve Account on such Transfer Date.
On each Transfer Date, the amount available to be withdrawn from the Reserve
Account (the "Available Reserve Account Amount") will be equal to the lesser of
the amount on deposit in the Reserve Account (before giving effect to any
deposit to be made to the Reserve Account on such Transfer Date) and the
Required Reserve Account Amount for such Transfer Date.
The Reserve Account will be terminated following the earliest to occur of
(a) the termination of the Trust pursuant to the Pooling and Servicing
Agreement, (b) the date on which the Invested Amount is paid in full, (c) if the
Accumulation Period has not commenced, the occurrence of a Pay Out Event with
respect to the Certificates and (d) if the Accumulation Period has commenced,
the earlier of the first Transfer Date with respect to the Rapid Amortization
Period and the Class A Scheduled Payment Date. Upon the termination of the
Reserve Account, all amounts on deposit therein (after giving effect to any
withdrawal from the Reserve Account on such date as described above) will be
deposited in the Finance Charge Account and applied in accordance with the
priority of payments described herein under "--Application of
Collections--Monthly Allocations." Any amounts withdrawn from the Reserve
Account and distributed to the Excess Collateral Holders as described above will
not be available for distribution to the Class A Certificateholders or the Class
B Certificateholders.
PAY OUT EVENTS
As described above, the Revolving Period will continue until the
commencement of the Accumulation Period, unless a Pay Out Event occurs prior to
such date. A "Pay Out Event" refers to any of the following events:
(a) failure on the part of the Transferor (i) to make any payment or
deposit on the date required under the Pooling and Servicing Agreement (or
within the applicable grace period which will not exceed five business
days) or (ii) to observe or perform in any material respect any other
covenants or agreements of the Transferor set forth in the Pooling and
Servicing Agreement or the Offered Series Supplement, which failure has a
material adverse effect on the Certificateholders and which continues
unremedied for a period of 60 days after written notice and continues to
materially and adversely affect the interests of the Certificateholders
(which determination shall be made without regard to whether funds are
available pursuant to any Enhancement) for such period;
(b) any representation or warranty made by the Transferor in the
Pooling and Servicing Agreement or any information required to be given by
the Transferor to the Trustee to identify the Accounts proves to have been
incorrect in any material respect when made and which continues to be
incorrect in any material respect for a period of 60 days after written
notice and as a result of which the interests of the Certificateholders are
materially and adversely affected and continue to be materially and
adversely affected for such period; provided, however, that a Pay Out Event
pursuant to this clause (b) shall not be deemed to occur thereunder if the
Transferor has accepted reassignment of the related Receivable or all such
Receivables, if applicable, during such period (or such longer period as
the Trustee may specify) in accordance with the provisions thereof;
(c) certain events of insolvency or receivership relating to the
Transferor;
(d) the average Portfolio Yield for any three consecutive Monthly
Periods is less than the average Base Rate for such three consecutive
Monthly Periods;
(e) the Trust becomes an "investment company" within the meaning of
the Investment Company Act of 1940, as amended;
(f) a failure by the Transferor to convey Receivables arising under
Additional Accounts to the Trust when required by the Pooling and Servicing
Agreement; or
(g) any Servicer Default occurs which would have a material adverse
effect on the Certificateholders.
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In the case of any event described in clause (a), (b) or (g) above, a Pay
Out Event will be deemed to have occurred with respect to the Certificates only
if, after any applicable grace period, either the Trustee or Certificateholders
evidencing undivided interests aggregating more than 50% of the Investor
Interest, by written notice to the Transferor and the Servicer (and to the
Trustee if given by the Certificateholders) declare that a Pay Out Event has
occurred with respect to the Certificates as of the date of such notice. In the
case of any event described in clause (c) or (e), a Pay Out Event with respect
to all Series then outstanding, and in the case of any event described in clause
(d) or (f), a Pay Out Event with respect to only the Certificates, will be
deemed to have occurred without any notice or other action on the part of the
Trustee or the Certificateholders or all certificateholders, as appropriate,
immediately upon the occurrence of such event. On the date on which a Pay Out
Event is deemed to have occurred, the Rapid Amortization Period will commence.
If pursuant to certain provisions of federal law, the Transferor
voluntarily enters liquidation or a receiver is appointed for the Transferor, on
the day of such event the Transferor will immediately cease to transfer
Principal Receivables to the Trust and promptly give notice to the Trustee of
such event. Within 15 days, the Trustee will publish a notice of the liquidation
or the appointment stating that the Trustee intends to sell, dispose of, or
otherwise liquidate the Receivables in a commercially reasonable manner. Unless
otherwise instructed within a specified period by certificateholders
representing undivided interests aggregating more than 50% of the invested
amount of each Series (or, if a Series has more than one Class, of each Class of
such Series, and with respect to Series required to vote as a group, all Classes
of all such Series), the Trustee will sell, dispose of, or otherwise liquidate
the portion of the Receivables allocated to the Certificates and the Receivables
allocable to other Series with respect to which all outstanding Classes did not
vote to continue the Trust in accordance with the Pooling and Servicing
Agreement in a commercially reasonable manner and on commercially reasonable
terms. The proceeds from the sale, disposition or liquidation of the Receivables
will be treated as collections of the Receivables and applied with respect to
such Series as provided above under "--Application of Collections." If the only
Pay Out Event to occur is either the insolvency of the Transferor or the
appointment of a conservator or receiver for the Transferor, the conservator or
receiver may have the power to prevent the early sale, liquidation or
disposition of the Receivables and the commencement of the Rapid Amortization
Period. In addition, a conservator or receiver may have the power to cause the
early sale of the Receivables and the early retirement of the Certificates. See
"Description of the Certificates--Pay Out Events" in the Prospectus for an
additional discussion of the consequences of an insolvency, conservatorship or
receivership of the Transferor.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
The Servicer's compensation for its servicing activities and reimbursement
for its expenses will take the form of the payment to it of a monthly servicing
fee in an amount equal to the sum of, with respect to all Series, one-twelfth of
the product of the applicable servicing fee percentages with respect to each
Series and the allocable portion of the Transferor Interest and the average
amount of the Principal Receivables during each month. The monthly servicing fee
will be allocated between the Transferor Interest, the Investor Interest and the
Excess Collateral Holders' Interest and the investor interests for all other
Series. The portion of the servicing fee allocable to the Investor Interest and
the Excess Collateral Holders' Interest on each Distribution Date (the "Investor
Servicing Fee") will be equal to one-twelfth of the product of the Servicing Fee
Percentage and the sum of the Class A Adjusted Invested Amount, the Class B
Adjusted Invested Amount and the Excess Collateral Adjusted Amount on the last
day of the related Monthly Period or, in the case of the first Distribution
Date, the product of (i) the actual number of days from and including the
Closing Date to and including September 30, 1998 divided by 365, (ii) the
Servicing Fee Percentage and (iii) the initial Invested Amount. "Class A Monthly
Servicing Fee," "Class B Monthly Servicing Fee" and "Excess Collateral Monthly
Servicing Fee" mean, with respect to any Distribution Date, one-twelfth of the
product of the Servicing Fee Percentage and the Class A Adjusted Invested
Amount, Class B Adjusted Invested Amount or Excess Collateral Adjusted Amount,
as applicable, on the last day of the preceding Monthly Period. The "Servicing
Fee Percentage" will mean 1.5% for so long as the Bank is the Servicer or 2.0%
if the Bank is no longer the Servicer. The Investor Servicing Fee will be funded
from Excess Finance Charge Collections and, with respect to a Servicer other
than the Bank, from the Investor Percentage of collections of Finance Charge
Receivables and Reallocated Principal Collections. The
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remainder of the servicing fee will be allocable to the Transferor Interest and
the investor interests of other Series. Neither the Trust nor the
Certificateholders will have any obligation to pay such portion of the servicing
fee.
The Servicer will pay from its servicing compensation certain expenses
incurred in connection with servicing the Receivables including, without
limitation, payment of the fees and disbursements of the Trustee and independent
certified public accountants and other fees which are not expressly stated in
the Pooling and Servicing Agreement to be payable by the Trust or the
Certificateholders other than Federal, state and local income and franchise
taxes, if any, of the Trust.
REPORTS; NOTICES
The Trustee will publish or will cause to be published following each
Distribution Date (including the Stated Series Termination Date) in a daily
newspaper in Luxembourg (expected to be the Luxemburger Wort) a notice to the
effect that the information described in "Description of the
Certificates--Reports to Certificateholders" in the Prospectus will be available
for review at the main office of the listing agent of the Trust in Luxembourg.
Notices to Certificateholders will be given by publication in a daily
newspaper in Luxembourg, which is expected to be the Luxemburger Wort. In the
event that Definitive Certificates are issued, notices to Certificateholders
will also be given by mail to the addresses of such holders as they appear in
the Certificate register.
S-50
<PAGE> 51
UNDERWRITING
Subject to the terms and conditions set forth in the underwriting agreement
dated September , 1998 (the "Underwriting Agreement") between the Transferor and
the underwriters named below (the "Underwriters"), the Transferor has agreed to
sell to the Underwriters, and each of the Underwriters has severally agreed to
purchase, the principal amount of the Class A Certificates and Class B
Certificates set forth opposite its name.
<TABLE>
<CAPTION>
CLASS A CLASS B
CERTIFICATES CERTIFICATES
PRINCIPAL PRINCIPAL
UNDERWRITERS AMOUNT AMOUNT
------------ ------------ ------------
<S> <C> <C>
Banc One Capital Markets, Inc. .............................
Bear, Stearns & Co. Inc. ...................................
First Chicago Capital Markets, Inc. ........................
Lehman Brothers Inc. .......................................
Salomon Brothers Inc .......................................
------------ -----------
Total..................................................... $500,000,000 $45,180,000
============ ===========
</TABLE>
In the Underwriting Agreement, the Underwriters have agreed, subject to the
terms and conditions set forth therein, to purchase all the Offered Certificates
offered hereby if any of the Offered Certificates are purchased.
In connection with the offering, the Underwriters may engage in
transactions that stabilize, maintain or otherwise affect the price of the
Offered Certificates. Specifically, the Underwriters may overallot the offering,
creating a short position in the Offered Certificates for their own account. The
Underwriters may bid for and purchase Offered Certificates in the open market to
cover such short positions. In addition, the Underwriters may bid for and
purchase Offered Certificates in the open market to stabilize the price of the
Offered Certificates. These activities may stabilize or maintain the market
price of the Offered Certificates above independent market levels. The
Underwriters are not required to engage in these activities, and may end these
activities at any time.
The Transferor has been advised by the Underwriters that they propose
initially to offer the Class A Certificates to the public at the price set forth
on the cover page hereof and to certain dealers at such price less concessions
not in excess of % of the principal amount of the Class A Certificates.
The Underwriters may allow, and such dealers may reallow, concessions not in
excess of % of the principal amount of the Class A Certificates to
certain brokers and dealers. After the initial public offering, the public
offering price and other selling terms may be changed by the Underwriters.
The Transferor has been advised by the Underwriters that they propose
initially to offer the Class B Certificates to the public at the price set forth
on the cover page hereof and to certain dealers at such price less concessions
not in excess of % of the principal amount of the Class B Certificates.
The Underwriters may allow, and such dealers may reallow, concessions not in
excess of % of the principal amount of the Class B Certificates to
certain brokers and dealers. After the initial public offering, the public
offering price and other selling terms may be changed by the Underwriters.
Each Underwriter has represented and agreed that (a) it has only issued or
passed on and will only issue or pass on in the United Kingdom any document
received by it in connection with the issue of the Offered Certificates to a
person who is of a kind described in Article 11(3) of the Financial Services Act
1986 (Investment Advertisements) (Exemptions) Order 1996 (as amended) or who is
a person to whom the document may otherwise lawfully be issued or passed on, (b)
it has complied and will comply with all applicable provisions of the Financial
Services Act 1986 and other applicable laws and regulations with respect to
anything done by it in relation to the Offered Certificates in, from or
otherwise involving the United Kingdom and (c) if that Underwriter is an
authorized person under the Financial Services Act 1986, it has only promoted
and will only promote (as that term is defined in Regulation 1.02 of the
Financial Services (Promotion of Unregulated Schemes) Regulations 1991) to any
person in the United Kingdom the scheme described herein if that person is of a
kind described either in Section 76(2) of the Financial Services Act 1986 or in
Regulation 1.04 of the Financial Services (Promotion of Unregulated Schemes)
Regulations 1991.
S-51
<PAGE> 52
The Transferor will indemnify the Underwriters against certain liabilities,
including liabilities under the Securities Act or contribute to payments the
Underwriters may be required to make in respect thereof. The Underwriters have
agreed to reimburse the Transferor for certain expenses incurred in connection
with the issuance and distribution of the Offered Certificates.
In the ordinary course of business, the Underwriters and their affiliates
have engaged and may engage in investment banking and/or commercial banking
transactions with the Transferor, its affiliates and the Trust. In addition, the
Underwriters and their affiliates may from time to time take positions in the
Certificates and other certificates issued by the Trust.
Banc One Capital Markets, Inc., an underwriter of the Offered Certificates,
is a wholly-owned subsidiary of BANC ONE CORPORATION and an affiliate of the
Transferor. See "Recent Developments" herein and "The Bank and BANC ONE
CORPORATION" in the Prospectus.
After the initial distribution of the Offered Certificates by the
Underwriters, this Prospectus Supplement and the Prospectus may be used by Banc
One Capital Markets, Inc. in connection with offers and sales relating to
market-making transactions in the Offered Certificates. Banc One Capital
Markets, Inc. may act as principal or agent in such transactions. Such sales
will be made at prices related to prevailing market prices at the time of sale.
Banc One Capital Markets, Inc. has no obligation to make a market in the Offered
Certificates and any such market-making may be discontinued by Banc One Capital
Markets, Inc. at any time without notice, in its sole discretion. Banc One
Capital Markets, Inc. is among the Underwriters participating in the initial
distribution of the Offered Certificates.
LISTING AND GENERAL INFORMATION
Application has been made to list the Offered Certificates on the
Luxembourg Stock Exchange. In connection with the listing application, the
Articles of Association and By-laws of the Bank, as well as legal notice
relating to the issuance of the Offered Certificates will be deposited prior to
listing with the Chief Registrar of the District Court in Luxembourg, where
copies thereof may be obtained upon request. Once the Offered Certificates have
been so listed, trading of the Offered Certificates may be effected on the
Luxembourg Stock Exchange. The Class A Certificates and the Class B Certificates
have been accepted for clearance through the facilities of DTC, Cedel and
Euroclear (ISIN number for the Class A Certificates , and for the
Class B Certificates , and Common Code number for the Class A
Certificates , and for the Class B Certificates ).
The transactions contemplated in this Prospectus Supplement were authorized
by resolutions adopted by the Bank on April 19, 1995.
Copies of the Pooling and Servicing Agreement, the Offered Series
Supplement, the annual report of independent public accountants described in
"Description of the Certificates--Evidence as to Compliance" in the Prospectus,
the documents listed under "Available Information" and the reports to
Certificateholders referred to under "Reports to Certificateholders" and
"Description of the Certificates--Reports to Certificateholders" in the
Prospectus will be available at the office of the listing agent of the Trust in
Luxembourg, whose address is 14 Boulevard Royal, 2449 Luxembourg, Grand-Duche de
Luxembourg. Financial information regarding the Bank is included in the
consolidated financial statements of BANC ONE in BANC ONE's Annual Report for
the fiscal year ended December 31, 1997, which documents are also available at
the office of the listing agent in Luxembourg.
The Certificates, the Pooling and Servicing Agreement and the Offered
Series Supplement are governed by the laws of the State of Delaware.
S-52
<PAGE> 53
ANNEX I
OTHER SERIES
The Trust has previously issued thirty-three other Series that the
Transferor anticipates will remain outstanding on the Closing Date. The table
below sets forth the principal characteristics of such Series: Series 1993-3,
Series 1994-4, Series 1994-6, Series 1994-7, Series 1994-8, Series 1995-1,
Series 1995-2, Series 1995-5, Series 1995-6, Series 1996-1, Series 1996-E1,
Series 1996-2, Series 1996-3, Series 1996-4, Series 1996-6, Series 1996-7,
Series 1996-8, Series 1997-1, Series 1997-2, Series 1997-3, Series 1997-4,
Series 1997-5, Series 1997-6, Series 1997-7, Series 1997-8, Series 1997-9,
Series 1997-10, Series 1998-1, Series 1998-2, Series 1998-3, Series 1998-4,
Series 1998-5 and Series 1998-6. For more specific information with respect to
any Series, any prospective investor should contact the Servicer at (214)
849-3700. The Servicer will provide, without charge, to any prospective
purchaser of the Certificates, a copy of the disclosure documents for any
previous publicly issued Series.
<TABLE>
<S> <C>
SERIES 1993-3
Initial Invested Amount................................ $750,000,000
Invested Amount on September 15, 1998.................. $437,500,000
Certificate Rate....................................... One Month LIBOR + 0.25%
Controlled Amortization Amount......................... $62,500,000
Commencement of Controlled Amortization Period......... April 1, 1998
Annual Servicing Fee Percentage........................ 1.5%, subject to increase to 2.0%
Initial Cash Collateral Amount......................... $97,500,000
Expected Series Termination Date....................... April 15, 1999
Scheduled Series Termination Date...................... December 15, 2000
Series Issuance Date................................... October 14, 1993
SERIES 1994-4
1. CLASS A CERTIFICATES
Initial Invested Amount................................ $726,450,000
Certificate Rate....................................... One Month LIBOR + 0.37%
Controlled Amortization Amount......................... $60,537,500
Commencement of Controlled Amortization Period......... November 1, 2000
Annual Servicing Fee Percentage........................ 1.5%, subject to increase to 2.0%
Initial Collateral Invested Amount..................... $87,000,000
Other Enhancement...................................... Subordination of Class B Certificates
Expected Final Payment Date............................ November 15, 2001
Scheduled Series Termination Date...................... August 15, 2003
Series Issuance Date................................... June 9, 1994
2. CLASS B CERTIFICATES
Initial Invested Amount................................ $56,550,000
Certificate Rate....................................... One Month LIBOR + 0.58%
Controlled Amortization Amount......................... $56,550,000
Annual Servicing Fee Percentage........................ Same as above for Class A Certificates
Initial Collateral Invested Amount..................... Same as above for Class A Certificates
Expected Final Payment Date............................ Same as above for Class A Certificates
Scheduled Series Termination Date...................... Same as above for Class A Certificates
Series Issuance Date................................... Same as above for Class A Certificates
</TABLE>
AI-1
<PAGE> 54
<TABLE>
<S> <C>
SERIES 1994-6
1. CLASS A CERTIFICATES
Initial Invested Amount................................ $750,000,000
Certificate Rate....................................... One Month LIBOR + 0.35%
Controlled Amortization Amount......................... $62,500,000
Commencement of Controlled Amortization Period......... January 1, 2001
Annual Servicing Fee Percentage........................ 1.5%, subject to increase to 2.0%
Initial Collateral Invested Amount..................... $89,820,000
Other Enhancement...................................... Subordination of Class B Certificates
Expected Final Payment Date............................ January 15, 2002
Scheduled Series Termination Date...................... October 15, 2003
Series Issuance Date................................... August 24, 1994
2. CLASS B CERTIFICATES
Initial Invested Amount................................ $58,380,000
Certificate Rate....................................... One Month LIBOR + 0.58%
Controlled Amortization Amount......................... $58,380,000
Annual Servicing Fee Percentage........................ Same as above for Class A Certificates
Initial Collateral Invested Amount..................... Same as above for Class A Certificates
Expected Final Payment Date............................ Same as above for Class A Certificates
Scheduled Series Termination Date...................... Same as above for Class A Certificates
Series Issuance Date................................... Same as above for Class A Certificates
SERIES 1994-7
1. CLASS A CERTIFICATES
Initial Invested Amount................................ $750,000,000
Certificate Rate....................................... One Month LIBOR + 0.18%
Controlled Accumulation Amount
(subject to adjustment).............................. $62,500,000
Commencement of Controlled Accumulation Period (subject
to adjustment)....................................... October 31, 1998
Annual Servicing Fee Percentage........................ 1.5%, subject to increase to 2.0%
Initial Collateral Invested Amount..................... $94,880,000
Other Enhancement...................................... Subordination of Class B Certificates
Expected Final Payment Date............................ November 15, 1999
Scheduled Series Termination Date...................... June 15, 2002
Series Issuance Date................................... November 8, 1994
2. CLASS B CERTIFICATES
Initial Invested Amount................................ $58,735,000
Certificate Rate....................................... One Month LIBOR + 0.40%
Annual Servicing Fee Percentage........................ Same as above for Class A Certificates
Initial Collateral Invested Amount..................... Same as above for Class A Certificates
Expected Final Payment Date............................ Same as above for Class A Certificates
Scheduled Series Termination Date...................... Same as above for Class A Certificates
Series Issuance Date................................... Same as above for Class A Certificates
</TABLE>
AI-2
<PAGE> 55
<TABLE>
<S> <C>
SERIES 1994-8
1. CLASS A CERTIFICATES
Initial Invested Amount................................ $500,000,000
Certificate Rate....................................... Three Month LIBOR + 0.24%
Controlled Accumulation Amount
(subject to adjustment).............................. $41,666,667
Commencement of Controlled Accumulation Period (subject
to adjustment)....................................... October 31, 2000
Annual Servicing Fee Percentage........................ 1.5%, subject to increase to 2.0%
Initial Collateral Invested Amount..................... $63,253,000
Other Enhancement...................................... Subordination of Class B Certificates
Expected Final Payment Date............................ November 15, 2001
Scheduled Series Termination Date...................... June 15, 2004
Series Issuance Date................................... November 8, 1994
2. CLASS B CERTIFICATES
Initial Invested Amount................................ $39,157,000
Certificate Rate....................................... Three Month LIBOR + 0.45%
Annual Servicing Fee Percentage........................ Same as above for Class A Certificates
Initial Collateral Invested Amount..................... Same as above for Class A Certificates
Expected Final Payment Date............................ Same as above for Class A Certificates
Scheduled Series Termination Date...................... Same as above for Class A Certificates
Series Issuance Date................................... Same as above for Class A Certificates
SERIES 1995-1
1. CLASS A CERTIFICATES
Initial Invested Amount................................ $1,000,000,000
Certificate Rate....................................... One Month LIBOR + 0.14%
Controlled Accumulation Amount
(subject to adjustment).............................. $1,000,000,000
Commencement of Controlled Accumulation Period (subject
to adjustment)....................................... January 31, 1999
Annual Servicing Fee Percentage........................ 1.5%, subject to increase to 2.0%
Initial Collateral Invested Amount..................... $126,500,000
Other Enhancement...................................... Subordination of Class B Certificates
Expected Final Payment Date............................ March 15, 1999
Scheduled Series Termination Date...................... October 15, 2001
Series Issuance Date................................... March 1, 1995
2. CLASS B CERTIFICATES
Initial Invested Amount................................ $78,300,000
Certificate Rate....................................... One Month LIBOR + 0.35%
Annual Servicing Fee Percentage........................ Same as above for Class A Certificates
Initial Collateral Invested Amount..................... Same as above for Class A Certificates
Expected Final Payment Date............................ Same as above for Class A Certificates
Scheduled Series Termination Date...................... Same as above for Class A Certificates
Series Issuance Date................................... Same as above for Class A Certificates
</TABLE>
AI-3
<PAGE> 56
<TABLE>
<S> <C>
SERIES 1995-2
1. CLASS A CERTIFICATES
Initial Invested Amount................................ $660,000,000
Certificate Rate....................................... One Month LIBOR + 0.24%
Controlled Accumulation Amount
(subject to adjustment).............................. $55,000,000
Commencement of Controlled Accumulation Period (subject
to adjustment)....................................... February 28, 2001
Annual Servicing Fee Percentage........................ 1.5%, subject to increase to 2.0%
Initial Collateral Invested Amount..................... $83,500,000
Other Enhancement...................................... Subordination of Class B Certificates
Expected Final Payment Date............................ March 15, 2002
Scheduled Series Termination Date...................... October 15, 2004
Series Issuance Date................................... March 1, 1995
2. CLASS B CERTIFICATES
Initial Invested Amount................................ $51,700,000
Certificate Rate....................................... One Month LIBOR + 0.425%
Annual Servicing Fee Percentage........................ Same as above for Class A Certificates
Initial Collateral Invested Amount..................... Same as above for Class A Certificates
Expected Final Payment Date............................ Same as above for Class A Certificates
Scheduled Series Termination Date...................... Same as above for Class A Certificates
Series Issuance Date................................... Same as above for Class A Certificates
SERIES 1995-5
1. CLASS A CERTIFICATES
Initial Invested Amount................................ $500,000,000
Certificate Rate....................................... One Month LIBOR + 0.17%
Controlled Accumulation Amount
(subject to adjustment).............................. $41,666,667
Commencement of Controlled Accumulation Period (subject
to adjustment)....................................... August 31, 1999
Annual Servicing Fee Percentage........................ 1.5%, subject to increase to 2.0%
Initial Collateral Invested Amount..................... $57,230,000
Other Enhancement...................................... Subordination of Class B Certificates
Expected Final Payment Date............................ September 15, 2000
Scheduled Series Termination Date...................... April 15, 2003
Series Issuance Date................................... September 14, 1995
2. CLASS B CERTIFICATES
Initial Invested Amount................................ $45,180,000
Certificate Rate....................................... One Month LIBOR + 0.29%
Annual Servicing Fee Percentage........................ Same as above for Class A Certificates
Initial Collateral Invested Amount..................... Same as above for Class A Certificates
Expected Final Payment Date............................ Same as above for Class A Certificates
Scheduled Series Termination Date...................... Same as above for Class A Certificates
Series Issuance Date................................... Same as above for Class A Certificates
</TABLE>
AI-4
<PAGE> 57
<TABLE>
<S> <C>
SERIES 1995-6
1. CLASS A CERTIFICATES
Initial Invested Amount................................ $1,245,000,000
Certificate Rate....................................... One Month LIBOR + 0.17%
Controlled Accumulation Amount
(subject to adjustment).............................. $103,750,000
Commencement of Controlled Accumulation Period (subject
to adjustment)....................................... October 31, 1999
Annual Servicing Fee Percentage........................ 1.5%, subject to increase to 2.0%
Initial Collateral Invested Amount..................... $142,500,000
Other Enhancement...................................... Subordination of Class B Certificates
Expected Final Payment Date............................ November 10, 2000
Scheduled Series Termination Date...................... July 10, 2003
Series Issuance Date................................... December 7, 1995
2. CLASS B CERTIFICATES
Initial Invested Amount................................ $112,500,000
Certificate Rate....................................... One Month LIBOR + 0.33%
Annual Servicing Fee Percentage........................ Same as above for Class A Certificates
Initial Collateral Invested Amount..................... Same as above for Class A Certificates
Expected Final Payment Date............................ Same as above for Class A Certificates
Scheduled Series Termination Date...................... Same as above for Class A Certificates
Series Issuance Date................................... Same as above for Class A Certificates
SERIES 1996-1
1. CLASS A CERTIFICATES
Initial Invested Amount................................ $750,000,000
Certificate Rate....................................... One Month LIBOR + 0.16%
Controlled Accumulation Amount
(subject to adjustment).............................. $75,301,250
Commencement of Controlled Accumulation Period (subject
to adjustment)....................................... February 29, 2000
Annual Servicing Fee Percentage........................ 1.5%, subject to increase to 2.0%
Initial CIA Certificate Amount......................... $85,845,000
Other Enhancement...................................... Subordination of Class B Certificates
Expected Final Payment Date............................ March 15, 2001
Scheduled Series Termination Date...................... November 15, 2003
Series Issuance Date................................... March 6, 1996
2. CLASS B CERTIFICATES
Initial Invested Amount................................ $67,770,000
Certificate Rate....................................... One Month LIBOR + 0.29%
Controlled Accumulation Amount
(subject to adjustment).............................. Same as above for Class A Certificates
Commencement of Controlled Accumulation Period (subject
to adjustment)....................................... Same as above for Class A Certificates
Annual Servicing Fee Percentage........................ Same as above for Class A Certificates
Initial CIA Certificate Amount......................... Same as above for Class A Certificates
Expected Final Payment Date............................ Same as above for Class A Certificates
Scheduled Series Termination Date...................... Same as above for Class A Certificates
Series Issuance Date................................... Same as above for Class A Certificates
</TABLE>
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<PAGE> 58
<TABLE>
<S> <C>
SERIES 1996-E1
Initial Invested Amount................................ $500,000,000
Outstanding Invested Amount as of September 15, 1998... $374,079,000
Certificate Rate....................................... One month LIBOR + 1.00% (or such lesser
rate as designated in the
Exchangeable Certificate Purchase
Agreement)
Controlled Accumulation Amount (subject to
adjustment).......................................... $374,079,000
Commencement of Controlled Accumulation Period (subject
to adjustment)....................................... August 31, 1998
Annual Servicing Fee Percentage........................ 1.5%, subject to increase to 2.0%
Other Enhancement...................................... Group E Spread Account
Group.................................................. Group E1
Exchange Period........................................ 25 months from Series Issuance Date
Expected Final Payment Date............................ October 15, 1998
Scheduled Series Termination Date...................... June 15, 2001
Series Issuance Date................................... May 2, 1996
SERIES 1996-2
1. CLASS A CERTIFICATES
Initial Invested Amount................................ $600,000,000
Certificate Rate....................................... One Month LIBOR + 0.18%
Controlled Accumulation Amount
(subject to adjustment).............................. $60,250,000
Commencement of Controlled Accumulation Period (subject
to adjustment)....................................... May 31, 2002
Annual Servicing Fee Percentage........................ 1.5%, subject to increase to 2.0%
Initial CIA Certificate Amount......................... $68,700,000
Other Enhancement...................................... Subordination of Class B Certificates
Expected Final Payment Date............................ June 10, 2003
Scheduled Series Termination Date...................... February 10, 2006
Series Issuance Date................................... June 4, 1996
2. CLASS B CERTIFICATES
Initial Invested Amount................................ $54,300,000
Certificate Rate....................................... One Month LIBOR + 0.33%
Controlled Accumulation Amount
(subject to adjustment).............................. Same as above for Class A Certificates
Commencement of Controlled Accumulation Period (subject
to adjustment)....................................... Same as above for Class A Certificates
Annual Servicing Fee Percentage........................ Same as above for Class A Certificates
Initial CIA Certificate Amount......................... Same as above for Class A Certificates
Expected Final Payment Date............................ Same as above for Class A Certificates
Scheduled Series Termination Date...................... Same as above for Class A Certificates
Series Issuance Date................................... Same as above for Class A Certificates
</TABLE>
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<PAGE> 59
<TABLE>
<S> <C>
SERIES 1996-3
1. CLASS A CERTIFICATES
Initial Invested Amount................................ $400,000,000
Certificate Rate....................................... One Month LIBOR + 0.10%
Controlled Accumulation Amount
(subject to adjustment).............................. $40,166,667
Commencement of Controlled Accumulation Period (subject
to adjustment)....................................... April 30, 1999
Annual Servicing Fee Percentage........................ 1.5%, subject to increase to 2.0%
Initial CIA Certificate Amount......................... $45,800,000
Other Enhancement...................................... Subordination of Class B Certificates
Expected Final Payment Date............................ June 10, 1999
Scheduled Series Termination Date...................... February 10, 2002
Series Issuance Date................................... June 6, 1996
2. CLASS B CERTIFICATES
Initial Invested Amount................................ $36,200,000
Certificate Rate....................................... One Month LIBOR + 0.23%
Controlled Accumulation Amount
(subject to adjustment).............................. Same as above for Class A Certificates
Commencement of Controlled Accumulation Period (subject
to adjustment)....................................... Same as above for Class A Certificates
Annual Servicing Fee Percentage........................ Same as above for Class A Certificates
Initial CIA Certificate Amount......................... Same as above for Class A Certificates
Expected Final Payment Date............................ Same as above for Class A Certificates
Scheduled Series Termination Date...................... Same as above for Class A Certificates
Series Issuance Date................................... Same as above for Class A Certificates
SERIES 1996-4
1. CLASS A CERTIFICATES
Initial Invested Amount................................ $500,000,000
Certificate Rate....................................... One Month LIBOR + 0.19%
Controlled Accumulation Amount
(subject to adjustment).............................. $50,200,834
Commencement of Controlled Accumulation Period (subject
to adjustment)....................................... July 31, 2005
Annual Servicing Fee Percentage........................ 1.5%, subject to increase to 2.0%
Initial CIA Certificate Amount......................... $57,230,000
Other Enhancement...................................... Subordination of Class B Certificates
Expected Final Payment Date............................ August 10, 2006
Scheduled Series Termination Date...................... April 10, 2009
Series Issuance Date................................... August 6, 1996
2. CLASS B CERTIFICATES
Initial Invested Amount................................ $45,180,000
Certificate Rate....................................... One Month LIBOR + 0.37%
Controlled Accumulation Amount
(subject to adjustment).............................. Same as above for Class A Certificates
Commencement of Controlled Accumulation Period (subject
to adjustment)....................................... Same as above for Class A Certificates
Annual Servicing Fee Percentage........................ Same as above for Class A Certificates
Initial CIA Certificate Amount......................... Same as above for Class A Certificates
Expected Final Payment Date............................ Same as above for Class A Certificates
Scheduled Series Termination Date...................... Same as above for Class A Certificates
Series Issuance Date................................... Same as above for Class A Certificates
</TABLE>
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<TABLE>
<S> <C>
SERIES 1996-6
1. CLASS A CERTIFICATES
Initial Invested Amount................................ $862,650,000
Certificate Rate....................................... One Month LIBOR + 0.14%
Controlled Accumulation Amount
(subject to adjustment).............................. $86,616,667
Commencement of Controlled Accumulation Period (subject
to adjustment)....................................... October 31, 2002
Annual Servicing Fee Percentage........................ 1.5%, subject to increase to 2.0%
Initial CIA Certificate Amount......................... $98,750,000
Other Enhancement...................................... Subordination of Class B Certificates
Expected Final Payment Date............................ November 10, 2003
Scheduled Series Termination Date...................... July 10, 2006
Series Issuance Date................................... November 13, 1996
2. CLASS B CERTIFICATES
Initial Invested Amount................................ $78,000,000
Certificate Rate....................................... One Month LIBOR + 0.35%
Controlled Accumulation Amount
(subject to adjustment).............................. Same as above for Class A Certificates
Commencement of Controlled Accumulation Period (subject
to adjustment)....................................... Same as above for Class A Certificates
Annual Servicing Fee Percentage........................ Same as above for Class A Certificates
Initial CIA Certificate Amount......................... Same as above for Class A Certificates
Expected Final Payment Date............................ Same as above for Class A Certificates
Scheduled Series Termination Date...................... Same as above for Class A Certificates
Series Issuance Date................................... Same as above for Class A Certificates
SERIES 1996-7
1. CLASS A CERTIFICATES
Initial Invested Amount................................ $483,060,000
Certificate Rate....................................... One Month LIBOR + 0.095%
Controlled Accumulation Amount
(subject to adjustment).............................. $48,500,000
Commencement of Controlled Accumulation Period (subject
to adjustment)....................................... January 31, 1999
Annual Servicing Fee Percentage........................ 1.5%, subject to increase to 2.0%
Initial CIA Certificate Amount......................... $55,290,000
Other Enhancement...................................... Subordination of Class B Certificates
Expected Final Payment Date............................ February 10, 2000
Scheduled Series Termination Date...................... October 10, 2002
Series Issuance Date................................... December 11, 1996
2. CLASS B CERTIFICATES
Initial Invested Amount................................ $43,650,000
Certificate Rate....................................... One Month LIBOR + 0.29%
Controlled Accumulation Amount
(subject to adjustment).............................. Same as above for Class A Certificates
Commencement of Controlled Accumulation Period (subject
to adjustment)....................................... Same as above for Class A Certificates
Annual Servicing Fee Percentage........................ Same as above for Class A Certificates
Initial CIA Certificate Amount......................... Same as above for Class A Certificates
Expected Final Payment Date............................ Same as above for Class A Certificates
Scheduled Series Termination Date...................... Same as above for Class A Certificates
Series Issuance Date................................... Same as above for Class A Certificates
</TABLE>
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<TABLE>
<S> <C>
SERIES 1996-8
1. CLASS A CERTIFICATES
Initial Invested Amount................................ $400,000,000
Certificate Rate....................................... One Month LIBOR + 0.12%
Controlled Accumulation Amount
(subject to adjustment).............................. $40,166,667
Commencement of Controlled Accumulation Period (subject
to adjustment)....................................... December 31, 2002
Annual Servicing Fee Percentage........................ 1.5%, subject to increase to 2.0%
Initial CIA Certificate Amount......................... $45,800,000
Other Enhancement...................................... Subordination of Class B Certificates
Expected Final Payment Date............................ January 10, 2004
Scheduled Series Termination Date...................... September 10, 2006
Series Issuance Date................................... December 11, 1996
2. CLASS B CERTIFICATES
Initial Invested Amount................................ $36,200,000
Certificate Rate....................................... One Month LIBOR + 0.34%
Controlled Accumulation Amount
(subject to adjustment).............................. Same as above for Class A Certificates
Commencement of Controlled Accumulation Period (subject
to adjustment)....................................... Same as above for Class A Certificates
Annual Servicing Fee Percentage........................ Same as above for Class A Certificates
Initial CIA Certificate Amount......................... Same as above for Class A Certificates
Expected Final Payment Date............................ Same as above for Class A Certificates
Scheduled Series Termination Date...................... Same as above for Class A Certificates
Series Issuance Date................................... Same as above for Class A Certificates
SERIES 1997-1
1. CLASS A CERTIFICATES
Initial Invested Amount................................ $750,000,000
Certificate Rate....................................... One Month LIBOR + 0.10%
Controlled Accumulation Amount
(subject to adjustment).............................. $75,301,250
Commencement of Controlled Accumulation Period (subject
to adjustment)....................................... January 31, 2003
Annual Servicing Fee Percentage........................ 1.5%, subject to increase to 2.0%
Initial CIA Certificate Amount......................... $85,845,000
Other Enhancement...................................... Subordination of Class B Certificates
Expected Final Payment Date............................ February 17, 2004
Scheduled Series Termination Date...................... October 17, 2006
Series Issuance Date................................... February 4, 1997
2. CLASS B CERTIFICATES
Initial Invested Amount................................ $67,770,000
Certificate Rate....................................... One Month LIBOR + 0.31%
Controlled Accumulation Amount
(subject to adjustment).............................. Same as above for Class A Certificates
Commencement of Controlled Accumulation Period (subject
to adjustment)....................................... Same as above for Class A Certificates
Annual Servicing Fee Percentage........................ Same as above for Class A Certificates
Initial CIA Certificate Amount......................... Same as above for Class A Certificates
Expected Final Payment Date............................ Same as above for Class A Certificates
Scheduled Series Termination Date...................... Same as above for Class A Certificates
Series Issuance Date................................... Same as above for Class A Certificates
</TABLE>
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<PAGE> 62
<TABLE>
<S> <C>
SERIES 1997-2
1. CLASS A CERTIFICATES
Initial Invested Amount................................ $500,000,000
Certificate Rate....................................... One Month LIBOR + 0.13%
Controlled Accumulation Amount
(subject to adjustment).............................. $50,200,834
Commencement of Controlled Accumulation Period (subject
to adjustment)....................................... April 30, 2003
Annual Servicing Fee Percentage........................ 1.5%, subject to increase to 2.0%
Initial CIA Certificate Amount......................... $57,230,000
Other Enhancement...................................... Subordination of Class B Certificates
Expected Final Payment Date............................ May 17, 2004
Scheduled Series Termination Date...................... January 17, 2007
Series Issuance Date................................... May 8, 1997
2. CLASS B CERTIFICATES
Initial Invested Amount................................ $45,180,000
Certificate Rate....................................... One Month LIBOR + 0.33%
Controlled Accumulation Amount
(subject to adjustment).............................. Same as above for Class A Certificates
Commencement of Controlled Accumulation Period (subject
to adjustment)....................................... Same as above for Class A Certificates
Annual Servicing Fee Percentage........................ Same as above for Class A Certificates
Initial CIA Certificate Amount......................... Same as above for Class A Certificates
Expected Final Payment Date............................ Same as above for Class A Certificates
Scheduled Series Termination Date...................... Same as above for Class A Certificates
Series Issuance Date................................... Same as above for Class A Certificates
SERIES 1997-3
1. CLASS A CERTIFICATES
Initial Invested Amount................................ $500,000,000
Certificate Rate....................................... One Month LIBOR + 0.11%
Controlled Accumulation Amount
(subject to adjustment).............................. $50,200,834
Commencement of Controlled Accumulation Period (subject
to adjustment)....................................... May 31, 2001
Annual Servicing Fee Percentage........................ 1.5%, subject to increase to 2.0%
Initial CIA Certificate Amount......................... $57,230,000
Other Enhancement...................................... Subordination of Class B Certificates
Expected Final Payment Date............................ June 17, 2002
Scheduled Series Termination Date...................... February 17, 2005
Series Issuance Date................................... June 10, 1997
2. CLASS B CERTIFICATES
Initial Invested Amount................................ $45,180,000
Certificate Rate....................................... One Month LIBOR + 0.29%
Controlled Accumulation Amount
(subject to adjustment).............................. Same as above for Class A Certificates
Commencement of Controlled Accumulation Period (subject
to adjustment)....................................... Same as above for Class A Certificates
Annual Servicing Fee Percentage........................ Same as above for Class A Certificates
Initial CIA Certificate Amount......................... Same as above for Class A Certificates
Expected Final Payment Date............................ Same as above for Class A Certificates
Scheduled Series Termination Date...................... Same as above for Class A Certificates
Series Issuance Date................................... Same as above for Class A Certificates
</TABLE>
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<PAGE> 63
<TABLE>
<S> <C>
SERIES 1997-4
1. CLASS A CERTIFICATES
Initial Invested Amount................................ $500,000,000
Certificate Rate....................................... One Month LIBOR + 0.21%
Controlled Accumulation Amount
(subject to adjustment).............................. $50,200,834
Commencement of Controlled Accumulation Period (subject
to adjustment)....................................... May 31, 2006
Annual Servicing Fee Percentage........................ 1.5%, subject to increase to 2.0%
Initial CIA Certificate Amount......................... $57,230,000
Other Enhancement...................................... Subordination of Class B Certificates
Expected Final Payment Date............................ June 17, 2007
Scheduled Series Termination Date...................... February 17, 2010
Series Issuance Date................................... June 10, 1997
2. CLASS B CERTIFICATES
Initial Invested Amount................................ $45,180,000
Certificate Rate....................................... One Month LIBOR + 0.41%
Controlled Accumulation Amount
(subject to adjustment).............................. Same as above for Class A Certificates
Commencement of Controlled Accumulation Period (subject
to adjustment)....................................... Same as above for Class A Certificates
Annual Servicing Fee Percentage........................ Same as above for Class A Certificates
Initial CIA Certificate Amount......................... Same as above for Class A Certificates
Expected Final Payment Date............................ Same as above for Class A Certificates
Scheduled Series Termination Date...................... Same as above for Class A Certificates
Series Issuance Date................................... Same as above for Class A Certificates
SERIES 1997-5
1. CLASS A CERTIFICATES
Initial Invested Amount................................ $650,000,000
Certificate Rate....................................... One Month LIBOR + 0.14%
Controlled Accumulation Amount
(subject to adjustment).............................. $65,260,834
Commencement of Controlled Accumulation Period (subject
to adjustment)....................................... July 31, 2003
Annual Servicing Fee Percentage........................ 1.5%, subject to increase to 2.0%
Initial CIA Certificate Amount......................... $74,395,000
Other Enhancement...................................... Subordination of Class B Certificates
Expected Final Payment Date............................ August 17, 2004
Scheduled Series Termination Date...................... April 17, 2007
Series Issuance Date................................... August 7, 1997
2. CLASS B CERTIFICATES
Initial Invested Amount................................ $58,735,000
Certificate Rate....................................... One Month LIBOR + 0.33%
Controlled Accumulation Amount
(subject to adjustment).............................. Same as above for Class A Certificates
Commencement of Controlled Accumulation Period (subject
to adjustment)....................................... Same as above for Class A Certificates
Annual Servicing Fee Percentage........................ Same as above for Class A Certificates
Initial CIA Certificate Amount......................... Same as above for Class A Certificates
Expected Final Payment Date............................ Same as above for Class A Certificates
Scheduled Series Termination Date...................... Same as above for Class A Certificates
Series Issuance Date................................... Same as above for Class A Certificates
</TABLE>
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<PAGE> 64
<TABLE>
<S> <C>
SERIES 1997-6
1. CLASS A CERTIFICATES
Initial Invested Amount................................ $1,300,000,000
Certificate Rate....................................... 6.42%
Controlled Accumulation Amount
(subject to adjustment).............................. $130,521,667
Commencement of Controlled Accumulation Period (subject
to adjustment)....................................... June 30, 2001
Annual Servicing Fee Percentage........................ 1.5%, subject to increase to 2.0%
Initial CIA Certificate Amount......................... $148,790,000
Other Enhancement...................................... Subordination of Class B Certificates
Expected Final Payment Date............................ July 17, 2002
Scheduled Series Termination Date...................... March 17, 2005
Series Issuance Date................................... September 9, 1997
2. CLASS B CERTIFICATES
Initial Invested Amount................................ $117,470,000
Certificate Rate....................................... 6.58%
Controlled Accumulation Amount
(subject to adjustment).............................. Same as above for Class A Certificates
Commencement of Controlled Accumulation Period (subject
to adjustment)....................................... Same as above for Class A Certificates
Annual Servicing Fee Percentage........................ Same as above for Class A Certificates
Initial CIA Certificate Amount......................... Same as above for Class A Certificates
Expected Final Payment Date............................ Same as above for Class A Certificates
Scheduled Series Termination Date...................... Same as above for Class A Certificates
Series Issuance Date................................... Same as above for Class A Certificates
SERIES 1997-7
1. CLASS A CERTIFICATES
Initial Invested Amount................................ $500,000,000
Certificate Rate....................................... One Month LIBOR + 0.098%
Controlled Accumulation Amount
(subject to adjustment).............................. $50,200,834
Commencement of Controlled Accumulation Period (subject
to adjustment)....................................... August 31, 2003
Annual Servicing Fee Percentage........................ 1.5%, subject to increase to 2.0%
Initial CIA Certificate Amount......................... $57,230,000
Other Enhancement...................................... Subordination of Class B Certificates
Expected Final Payment Date............................ September 17, 2004
Scheduled Series Termination Date...................... May 17, 2007
Series Issuance Date................................... September 9, 1997
2. CLASS B CERTIFICATES
Initial Invested Amount................................ $45,180,000
Certificate Rate....................................... One Month LIBOR + 0.30%
Controlled Accumulation Amount
(subject to adjustment).............................. Same as above for Class A Certificates
Commencement of Controlled Accumulation Period (subject
to adjustment)....................................... Same as above for Class A Certificates
Annual Servicing Fee Percentage........................ Same as above for Class A Certificates
Initial CIA Certificate Amount......................... Same as above for Class A Certificates
Expected Final Payment Date............................ Same as above for Class A Certificates
Scheduled Series Termination Date...................... Same as above for Class A Certificates
Series Issuance Date................................... Same as above for Class A Certificates
</TABLE>
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<PAGE> 65
<TABLE>
<S> <C>
SERIES 1997-8
1. CLASS A CERTIFICATES
Initial Invested Amount................................ $780,000,000
Certificate Rate....................................... One Month LIBOR + 0.15%
Controlled Accumulation Amount
(subject to adjustment).............................. $78,313,334
Commencement of Controlled Accumulation Period (subject
to adjustment)....................................... August 31, 2006
Annual Servicing Fee Percentage........................ 1.5%, subject to increase to 2.0%
Initial CIA Certificate Amount......................... $89,278,000
Other Enhancement...................................... Subordination of Class B Certificates
Expected Final Payment Date............................ September 17, 2007
Scheduled Series Termination Date...................... March 17, 2010
Series Issuance Date................................... September 23, 1997
2. CLASS B CERTIFICATES
Initial Invested Amount................................ $70,482,000
Certificate Rate....................................... One Month LIBOR + 0.36%
Controlled Accumulation Amount
(subject to adjustment).............................. Same as above for Class A Certificates
Commencement of Controlled Accumulation Period (subject
to adjustment)....................................... Same as above for Class A Certificates
Annual Servicing Fee Percentage........................ Same as above for Class A Certificates
Initial CIA Certificate Amount......................... Same as above for Class A Certificates
Expected Final Payment Date............................ Same as above for Class A Certificates
Scheduled Series Termination Date...................... Same as above for Class A Certificates
Series Issuance Date................................... Same as above for Class A Certificates
SERIES 1997-9
1. CLASS A CERTIFICATES
Initial Invested Amount................................ $500,000,000
Certificate Rate....................................... One Month LIBOR + 0.06%
Controlled Accumulation Amount
(subject to adjustment).............................. $50,200,834
Commencement of Controlled Accumulation Period (subject
to adjustment)....................................... September 30, 2003
Annual Servicing Fee Percentage........................ 1.5%, subject to increase to 2.0%
Initial CIA Certificate Amount......................... $57,230,000
Other Enhancement...................................... Subordination of Class B Certificates
Expected Final Payment Date............................ October 17, 2004
Scheduled Series Termination Date...................... June 17, 2007
Series Issuance Date................................... October 9, 1997
2. CLASS B CERTIFICATES
Initial Invested Amount................................ $45,180,000
Certificate Rate....................................... One Month LIBOR + 0.33%
Controlled Accumulation Amount
(subject to adjustment).............................. Same as above for Class A Certificates
Commencement of Controlled Accumulation Period (subject
to adjustment)....................................... Same as above for Class A Certificates
Annual Servicing Fee Percentage........................ Same as above for Class A Certificates
Initial CIA Certificate Amount......................... Same as above for Class A Certificates
Expected Final Payment Date............................ Same as above for Class A Certificates
Scheduled Series Termination Date...................... Same as above for Class A Certificates
Series Issuance Date................................... Same as above for Class A Certificates
</TABLE>
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<PAGE> 66
<TABLE>
<S> <C>
SERIES 1997-10
1. CLASS A CERTIFICATES
Initial Invested Amount................................ $700,000,000
Certificate Rate....................................... One Month LIBOR + 0.09%
Controlled Accumulation Amount
(subject to adjustment).............................. $70,281,167
Commencement of Controlled Accumulation Period (subject
to adjustment)....................................... December 31, 1999
Annual Servicing Fee Percentage........................ 1.5% subject to increase to 2.0%
Initial CIA Certificates Amount........................ $80,121,000
Other Enhancement...................................... Subordination of Class B Certificates
Expected Final Payment Date............................ January 17, 2001
Scheduled Series Termination Date...................... September 17, 2003
Series Issuance Date................................... December 23, 1997
2. CLASS B CERTIFICATES
Initial Invested Amount................................ $63,253,000
Certificate Rate....................................... One Month LIBOR + 0.27%
Controlled Accumulation Amount
(subject to adjustment).............................. Same as above for Class A Certificates
Commencement of Controlled Accumulation Period (subject
to adjustment)....................................... Same as above for Class A Certificates
Annual Servicing Fee Percentage........................ Same as above for Class A Certificates
Initial CIA Certificate Amount......................... Same as above for Class A Certificates
Expected Final Payment Date............................ Same as above for Class A Certificates
Scheduled Series Termination Date...................... Same as above for Class A Certificates
Series Issuance Date................................... Same as above for Class A Certificates
SERIES 1998-1
1. CLASS A CERTIFICATES
Initial Invested Amount................................ $700,000,000
Certificate Rate....................................... One Month LIBOR + 0.08%
Controlled Accumulation Amount
(subject to adjustment).............................. $70,281,167
Commencement of Controlled Accumulation Period (subject
to adjustment)....................................... April 30, 2002
Annual Servicing Fee Percentage........................ 1.5% subject to increase to 2.0%
Initial Excess Collateral Amount....................... $80,121,000
Other Enhancement...................................... Subordination of Class B Certificates
Expected Final Payment Date............................ May 18, 2003
Scheduled Series Termination Date...................... January 18, 2006
Series Issuance Date................................... May 21, 1998
2. CLASS B CERTIFICATES
Initial Invested Amount................................ $63,253,000
Certificate Rate....................................... One Month LIBOR + 0.25%
Controlled Accumulation Amount
(subject to adjustment).............................. Same as above for Class A Certificates
Commencement of Controlled Accumulation Period (subject
to adjustment)....................................... Same as above for Class A Certificates
Annual Servicing Fee Percentage........................ Same as above for Class A Certificates
Initial Excess Collateral Amount....................... Same as above for Class A Certificates
Expected Final Payment Date............................ Same as above for Class A Certificates
Scheduled Series Termination Date...................... Same as above for Class A Certificates
Series Issuance Date................................... Same as above for Class A Certificates
</TABLE>
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<PAGE> 67
<TABLE>
<S> <C>
SERIES 1998-2
1. CLASS A CERTIFICATES
Initial Invested Amount................................ $579,000,000
Certificate Rate....................................... One Month LIBOR - 0.125%
Controlled Accumulation Amount
(subject to adjustment).............................. $58,132,667
Commencement of Controlled Accumulation Period (subject
to adjustment)....................................... May 31, 2007
Annual Servicing Fee Percentage........................ 1.5% subject to increase to 2.0%
Initial Excess Collateral Amount....................... $66,272,000
Other Enhancement...................................... Subordination of Class B Certificates
Expected Final Payment Date............................ June 18, 2008
Scheduled Series Termination Date...................... February 18, 2011
Series Issuance Date................................... May 21, 1998
2. CLASS B CERTIFICATES
Initial Invested Amount................................ $52,320,000
Certificate Rate....................................... One Month LIBOR - 0.125%
Controlled Accumulation Amount
(subject to adjustment).............................. Same as above for Class A Certificates
Commencement of Controlled Accumulation Period (subject
to adjustment)....................................... Same as above for Class A Certificates
Annual Servicing Fee Percentage........................ Same as above for Class A Certificates
Initial Excess Collateral Amount....................... Same as above for Class A Certificates
Expected Final Payment Date............................ Same as above for Class A Certificates
Scheduled Series Termination Date...................... Same as above for Class A Certificates
Series Issuance Date................................... Same as above for Class A Certificates
SERIES 1998-3
1. CLASS A CERTIFICATES
Initial Invested Amount................................ $800,000,000
Certificate Rate....................................... One Month LIBOR + 0.06%
Controlled Accumulation Amount
(subject to adjustment).............................. $80,321,334
Commencement of Controlled Accumulation Period (subject
to adjustment)....................................... May 31, 2000
Annual Servicing Fee Percentage........................ 1.5% subject to increase to 2.0%
Initial Excess Collateral Amount....................... $91,567,000
Other Enhancement...................................... Subordination of Class B Certificates
Expected Final Payment Date............................ June 18, 2001
Scheduled Series Termination Date...................... February 18, 2004
Series Issuance Date................................... June 25, 1998
2. CLASS B CERTIFICATES
Initial Invested Amount................................ $72,289,000
Certificate Rate....................................... One Month LIBOR + 0.22%
Controlled Accumulation Amount
(subject to adjustment).............................. Same as above for Class A Certificates
Commencement of Controlled Accumulation Period (subject
to adjustment)....................................... Same as above for Class A Certificates
Annual Servicing Fee Percentage........................ Same as above for Class A Certificates
Initial Excess Collateral Amount....................... Same as above for Class A Certificates
Expected Final Payment Date............................ Same as above for Class A Certificates
Scheduled Series Termination Date...................... Same as above for Class A Certificates
Series Issuance Date................................... Same as above for Class A Certificates
</TABLE>
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<PAGE> 68
<TABLE>
<S> <C>
SERIES 1998-4
1. CLASS A CERTIFICATES
Initial Invested Amount................................ $700,000,000
Certificate Rate....................................... One Month LIBOR + 0.12%
Controlled Accumulation Amount
(subject to adjustment).............................. $70,281,167
Commencement of Controlled Accumulation Period (subject
to adjustment)....................................... June 30, 2004
Annual Servicing Fee Percentage........................ 1.5% subject to increase to 2.0%
Initial Excess Collateral Amount....................... $80,121,000
Other Enhancement...................................... Subordination of Class B Certificates
Expected Final Payment Date............................ July 18, 2005
Scheduled Series Termination Date...................... March 18, 2008
Series Issuance Date................................... July 22, 1998
2. CLASS B CERTIFICATES
Initial Invested Amount................................ $63,253,000
Certificate Rate....................................... One Month LIBOR + 0.30%
Controlled Accumulation Amount
(subject to adjustment).............................. Same as above for Class A Certificates
Commencement of Controlled Accumulation Period (subject
to adjustment)....................................... Same as above for Class A Certificates
Annual Servicing Fee Percentage........................ Same as above for Class A Certificates
Initial Excess Collateral Amount....................... Same as above for Class A Certificates
Expected Final Payment Date............................ Same as above for Class A Certificates
Scheduled Series Termination Date...................... Same as above for Class A Certificates
Series Issuance Date................................... Same as above for Class A Certificates
</TABLE>
<TABLE>
<S> <C>
SERIES 1998-5
1. CLASS A CERTIFICATES
Initial Invested Amount................................ $650,000,000
Certificate Rate....................................... One Month LIBOR + 0.10%
Controlled Accumulation Amount
(subject to adjustment).............................. $65,260,834
Commencement of Controlled Accumulation Period (subject
to adjustment)....................................... July 31, 2002
Annual Servicing Fee Percentage........................ 1.5% subject to increase to 2.0%
Initial Excess Collateral Amount....................... $74,395,000
Other Enhancement...................................... Subordination of Class B Certificates
Expected Final Payment Date............................ August 18, 2003
Scheduled Series Termination Date...................... April 18, 2006
Series Issuance Date................................... August 27, 1998
2. CLASS B CERTIFICATES
Initial Invested Amount................................ $58,735,000
Certificate Rate....................................... One Month LIBOR + 0.28%
Controlled Accumulation Amount
(subject to adjustment).............................. Same as above for Class A Certificates
Commencement of Controlled Accumulation Period (subject
to adjustment)....................................... Same as above for Class A Certificates
Annual Servicing Fee Percentage........................ Same as above for Class A Certificates
Initial Excess Collateral Amount....................... Same as above for Class A Certificates
Expected Final Payment Date............................ Same as above for Class A Certificates
Scheduled Series Termination Date...................... Same as above for Class A Certificates
Series Issuance Date................................... Same as above for Class A Certificates
</TABLE>
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<PAGE> 69
<TABLE>
<S> <C>
SERIES 1998-6
1. CLASS A CERTIFICATES
Initial Invested Amount................................ $800,000,000
Certificate Rate....................................... One Month LIBOR + 0.16%
Controlled Accumulation Amount
(subject to adjustment).............................. $80,321,334
Commencement of Controlled Accumulation Period (subject
to adjustment)....................................... July 31, 2007
Annual Servicing Fee Percentage........................ 1.5% subject to increase to 2.0%
Initial Excess Collateral Amount....................... $91,567,000
Other Enhancement...................................... Subordination of Class B Certificates
Expected Final Payment Date............................ August 18, 2008
Scheduled Series Termination Date...................... April 18, 2011
Series Issuance Date................................... August 27, 1998
2. CLASS B CERTIFICATES
Initial Invested Amount................................ $72,289,000
Certificate Rate....................................... One Month LIBOR + 0.36%
Controlled Accumulation Amount
(subject to adjustment).............................. Same as above for Class A Certificates
Commencement of Controlled Accumulation Period (subject
to adjustment)....................................... Same as above for Class A Certificates
Annual Servicing Fee Percentage........................ Same as above for Class A Certificates
Initial Excess Collateral Amount....................... Same as above for Class A Certificates
Expected Final Payment Date............................ Same as above for Class A Certificates
Scheduled Series Termination Date...................... Same as above for Class A Certificates
Series Issuance Date................................... Same as above for Class A Certificates
</TABLE>
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<PAGE> 70
ANNEX II
GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the globally offered First USA
Credit Card Master Trust Floating Rate Asset Backed Certificates, Series 1998-7,
Class A and Class B (the "Global Securities") will be available only in
book-entry form. Investors in the Global Securities may hold such Global
Securities through any of The Depository Trust Company ("DTC"), Cedel or
Euroclear. The Global Securities will be tradeable as home market instruments in
both the European and U.S. domestic markets. Initial settlement and all
secondary trades will settle in same-day funds.
Secondary market trading between investors holding Global Securities
through Cedel and Euroclear will be conducted in the ordinary way in accordance
with their normal rules and operating procedures and in accordance with
conventional eurobond practice (i.e., seven calendar day settlement).
Secondary market trading between investors holding Global Securities
through DTC will be conducted according to the rules and procedures applicable
to U.S. corporate debt obligations and prior First USA Credit Card Master Trust
issues.
Secondary cross-market trading between Cedel or Euroclear and Participants
holding Certificates will be effected on a delivery-against-payment basis
through the respective Depositaries of Cedel and Euroclear (in such capacity)
and as Participants.
Non-U.S. holders (as described below) of Global Securities will be subject
to U.S. withholding taxes unless such holders meet certain requirements and
deliver appropriate U.S. tax documents to the securities clearing organizations
or their participants.
Initial Settlement. All Global Securities will be held in book-entry form
by DTC in the name of Cede & Co. as nominee of DTC. Investors' interests in the
Global Securities will be represented through financial institutions acting on
their behalf as direct and indirect Participants. As a result, Cedel and
Euroclear will hold positions on behalf of their participants through their
respective Depositaries, which in turn will hold such positions in accounts as
Participants.
Investors electing to hold their Global Securities through DTC will follow
the settlement practices applicable to U.S. corporate debt obligations and prior
First USA Credit Card Master Trust issues. Investor securities custody accounts
will be credited with their holdings against payment in same-day funds on the
settlement date.
Investors electing to hold their Global Securities through Cedel or
Euroclear accounts will follow the settlement procedures applicable to
conventional eurobonds, except that there will be no temporary global security
and no "lock-up" or restricted period. Global Securities will be credited to the
securities custody accounts on the settlement date against payment in same-day
funds.
Secondary Market Trading. Since the purchaser determines the place of
delivery, it is important to establish at the time of the trade where both the
purchaser's and seller's accounts are located to ensure that settlement can be
made on the desired value date.
Trading between DTC Participants. Secondary market trading between
Participants will be settled using the procedures applicable to prior First USA
Credit Card Master Trust issues in same-day funds.
Trading between Cedel and/or Euroclear Participants. Secondary market
trading between Cedel Participants or Euroclear Participants will be settled
using the procedures applicable to conventional eurobonds in same-day funds.
Trading between DTC seller and Cedel or Euroclear purchaser. When Global
Securities are to be transferred from the account of a Participant to the
accounts of a Cedel Participant or a Euroclear Participant, the purchaser will
send instructions to Cedel or Euroclear through a Cedel Participant or Euroclear
Participant at least
AII-1
<PAGE> 71
one business day prior to settlement. Cedel or Euroclear, as the case may be,
will instruct their respective Depositary to receive the Global Securities
against payment. Payment will include interest accrued on the Global Securities
from and including the last coupon payment date to and excluding the settlement
date, on the basis of actual days elapsed and a 360 day year. Payment will then
be made by the respective Depositary to the Participant's account against
delivery of the Global Securities. After settlement has been completed, the
Global Securities will be credited to the respective clearing system and by the
clearing system, in accordance with its usual procedures, to the Cedel
Participant's or Euroclear Participant's account. The Global Securities credit
will appear the next day (European time) and the cash debit will be back-valued
to, and the interest on the Global Securities will accrue from, the value date
(which would be the preceding day when settlement occurred in New York). If
settlement is not completed on the intended value date (i.e., the trade fails),
the Cedel or Euroclear cash debit will be valued instead as of the actual
settlement date.
Cedel Participants and Euroclear Participants will need to make available
to the respective clearing systems the funds necessary to process same-day funds
settlement. The most direct means of doing so is to pre-position funds for
settlement, either from cash on hand or existing lines of credit, as they would
for any settlement occurring within Cedel or Euroclear. Under this approach,
they may take on credit exposure to Cedel or Euroclear until the Global
Securities are credited to their accounts one day later.
As an alternative, if Cedel or Euroclear has extended a line of credit to
them, Cedel Participants or Euroclear Participants can elect not to pre-position
funds and allow that credit line to be drawn upon the finance settlement. Under
this procedure, Cedel Participants or Euroclear Participants purchasing Global
Securities would incur overdraft charges for one day, assuming they cleared the
overdraft when the Global Securities were credited to their accounts. However,
interest on the Global Securities would accrue from the value date. Therefore,
in many cases the investment income on the Global Securities earned during that
one-day period may substantially reduce or offset the amount of such overdraft
charges, although this result will depend on each Cedel Participant's or
Euroclear Participant's particular cost of funds.
Since the settlement is taking place during New York business hours,
Participants can employ their usual procedures for sending Global Securities to
the respective Depositary for the benefit of Cedel Participants or Euroclear
Participants. The sale proceeds will be available to the DTC seller on the
settlement date. Thus, to the Participants a cross-market transaction will
settle no differently than a trade between two Participants.
Trading between Cedel or Euroclear seller and DTC purchaser. Due to time
zone differences in their favor, Cedel Participants and Euroclear Participants
may employ their customary procedures for transactions in which Global
Securities are to be transferred by the respective clearing system, through the
respective Depositary, to a Participant. The seller will send instructions to
Cedel or Euroclear through a Cedel Participant or Euroclear Participant at least
one business day prior to settlement. In these cases, Cedel or Euroclear will
instruct their respective Depositary, as appropriate, to deliver the bonds to
the Participant's account against payment. Payment will include interest accrued
on the Global Securities from and including the last coupon payment date to and
excluding the settlement date on the basis of actual days elapsed and a 360 day
year. The payment will then be reflected in the account of the Cedel Participant
or Euroclear Participant the following day, and receipt of the cash proceeds in
the Cedel Participant's or Euroclear Participant's account would be back-valued
to the value date (which would be the preceding day, when settlement occurred in
New York). Should the Cedel Participant or Euroclear Participant have a line of
credit with its respective clearing system and elect to be in debit in
anticipation of receipt of the sale proceeds in its account, the back-valuation
will extinguish any overdraft charges incurred over that one-day period. If
settlement is not completed on the intended value date (i.e., the trade fails),
receipt of the cash proceeds in the Cedel Participant's or Euroclear
Participant's account would instead be valued as of the actual settlement date.
Finally, day traders that use Cedel or Euroclear and that purchase Global
Securities from Participants for delivery to Cedel Participants or Euroclear
Participants should note that these trades would automatically fail on the sale
side unless affirmative action were taken. At least three techniques should be
readily available to eliminate this potential problem:
AII-2
<PAGE> 72
(a) borrowing through Cedel or Euroclear for one day (until the
purchase side of the day trade is reflected in their Cedel or Euroclear
accounts) in accordance with the clearing system's customary procedures;
(b) borrowing the Global Securities in the U.S. from a Participant no
later than one day prior to settlement, which would give the Global
Securities sufficient time to be reflected in their Cedel or Euroclear
accounts in order to settle the sale side of the trade; or
(c) staggering the value dates for the buy and sell sides of the trade
so that the value date for the purchase from the Participant is at least
one day prior to the value date for the sale to the Cedel Participant or
Euroclear Participant.
CERTAIN U.S. FEDERAL INCOME TAX DOCUMENTATION REQUIREMENTS
A beneficial owner of Global Securities holding securities through Cedel or
Euroclear (or through DTC if the holder has an address outside the U.S.) will be
subject to the 30% U.S. withholding tax that generally applies to payments of
interest (including original issue discount) on registered debt issued by U.S.
Persons, unless (i) each clearing system, bank or other financial institution
that holds customers' securities in the ordinary course of its trade or business
in the chain of intermediaries between such beneficial owner and the U.S. entity
required to withhold tax complies with applicable certification requirements and
(ii) such beneficial owner takes one of the following steps to obtain an
exemption or reduced tax rate:
Exemption for non-U.S. Persons (Form W-8). Beneficial owners of
Certificates that are non-U.S. Persons can obtain a complete exemption from the
withholding tax by filing a signed Form W-8 (Certificate of Foreign Status). If
the information shown on Form W-8 changes, a new Form W-8 must be filed within
30 days of such change.
Exemption for non-U.S. Persons with effectively connected income (Form
4224). A non-U.S. Person, including a non-U.S. corporation or bank with a U.S.
branch, for which the interest income is effectively connected with its conduct
of a trade or business in the United States, can obtain an exemption from the
withholding tax by filing Form 4224 (Exemption from Withholding of Tax on Income
Effectively Connected with the Conduct of a Trade or Business in the United
States).
Exemption or reduced rate for non-U.S. Persons resident in treaty countries
(Form 1001). Non-U.S. Persons that are Certificate Owners residing in a country
that has a tax treaty with the United States can obtain an exemption or reduced
tax rate (depending on the treaty terms) by filing Form 1001 (Ownership,
Exemption or Reduced Rate Certificate). If the treaty provides only for a
reduced rate, withholding tax will be imposed at that rate unless the filer
alternatively files Form W-8. Form 1001 may be filed by the Certificate Owner or
his agent.
Exemption for U.S. Persons (Form W-9). U.S. Persons can obtain a complete
exemption from the withholding tax by filing Form W-9 (Payer's Request for
Taxpayer Identification Number and Certification).
U.S. Federal Income Tax Reporting Procedure. The Certificate Owner of a
Global Security or, in the case of a Form 1001 or a Form 4224 filer, his agent,
files by submitting the appropriate form to the person through whom it holds
(the clearing agency, in the case of persons holding directly on the books of
the clearing agency). Form W-8 and Form 1001 are effective for three calendar
years and Form 4224 is effective for one calendar year.
The term "U.S. Person" means (i) a citizen or resident of the United
States, (ii) a corporation or partnership organized in or under the laws of the
United States or any political subdivision thereof, (iii) an estate the income
of which is includible in gross income for United States tax purposes,
regardless of its source or (iv) 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.
persons have the authority to control all substantial decisions of such trust.
This summary does not deal with all aspects of U.S. Federal income tax
withholding that may be relevant to foreign holders of the Global Securities.
Investors are advised to consult their own tax advisors for specific tax advice
concerning their holding and disposing of the Global Securities.
AII-3
<PAGE> 73
INDEX OF TERMS FOR PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
TERM PAGE
- ---- ----------
<S> <C>
Accounts.................................................... S-2, S-4
Accumulation Period......................................... S-9
Accumulation Period Length.................................. S-33
Accumulation Shortfall...................................... S-11, S-44
Addition Date............................................... S-35
Amortization Periods........................................ S-13
Available Investor Principal Collections.................... S-32
Available Reserve Account Amount............................ S-47
Average Principal Balance................................... S-35
BANC ONE.................................................... S-19
BANC ONE/FCN Agreement...................................... S-19
BANC ONE/FCN Merger......................................... S-19
Bank........................................................ S-1
Bank Portfolio.............................................. S-20
Base Rate................................................... S-27
Calculation Date............................................ S-39
Certificate Rates........................................... S-8
Certificateholders.......................................... S-4
Certificates................................................ S-6
Class A Account Percentage.................................. S-40
Class A Adjusted Invested Amount............................ S-36
Class A Available Funds..................................... S-40
Class A Certificate Rate.................................... S-8
Class A Certificateholders.................................. S-4
Class A Certificateholders' Interest........................ S-5
Class A Certificates........................................ S-1, S-4
Class A Fixed/Floating Allocation Percentage................ S-35
Class A Floating Allocation Percentage...................... S-35
Class A Invested Amount..................................... S-36
Class A Investor Charge-Off................................. S-45
Class A Investor Default Amount............................. S-45
Class A Monthly Interest.................................... S-40
Class A Monthly Principal................................... S-43
Class A Monthly Servicing Fee............................... S-49
Class A Required Amount..................................... S-14
Class A Scheduled Payment Date.............................. S-2
Class B Account Percentage.................................. S-41
Class B Adjusted Invested Amount............................ S-36
Class B Available Funds..................................... S-40
Class B Certificate Rate.................................... S-8
Class B Certificateholders.................................. S-4
Class B Certificateholders' Interest........................ S-5
Class B Certificates........................................ S-1, S-4
Class B Fixed/Floating Allocation Percentage................ S-35
Class B Floating Allocation Percentage...................... S-35
Class B Invested Amount..................................... S-36
Class B Investor Charge-Off................................. S-46
Class B Investor Default Amount............................. S-45
Class B Monthly Interest.................................... S-40
</TABLE>
<PAGE> 74
<TABLE>
<CAPTION>
TERM PAGE
- ---- ----------
<S> <C>
Class B Monthly Principal................................... S-43
Class B Monthly Servicing Fee............................... S-49
Class B Principal Commencement Date......................... S-32
Class B Required Amount..................................... S-14
Class B Scheduled Payment Date.............................. S-2
Closing Date................................................ S-8
Code........................................................ S-17
Controlled Accumulation Amount.............................. S-44
Controlled Deposit Amount................................... S-10, S-26
Covered Amount.............................................. S-11, S-47
Cut Off Date................................................ S-5
Default Amount.............................................. S-45
Distribution Date........................................... S-2, S-30
DTC......................................................... AII-1
Enhancement................................................. S-4
ERISA....................................................... S-17
Excess Collateral........................................... S-2
Excess Collateral Account Percentage........................ S-41
Excess Collateral Adjusted Amount........................... S-36
Excess Collateral Amount.................................... S-6, S-36
Excess Collateral Available Funds........................... S-41
Excess Collateral Charge-Off................................ S-46
Excess Collateral Default Amount............................ S-45
Excess Collateral Fixed/Floating Allocation Percentage...... S-35
Excess Collateral Floating Allocation Percentage............ S-35
Excess Collateral Holders................................... S-4
Excess Collateral Holders' Interest......................... S-5
Excess Collateral Minimum Monthly Interest.................. S-42
Excess Collateral Minimum Rate.............................. S-42
Excess Collateral Monthly Principal......................... S-43
Excess Collateral Monthly Servicing Fee..................... S-49
Excess Collateral Scheduled Payment Date.................... S-32
Excess Finance Charge Collections........................... S-40
Excess Principal Collections................................ S-34
Exchangeable Transferor Certificate......................... S-7
FCN......................................................... S-19
Finance Charge Deficit...................................... S-38
Fixed/Floating Allocation Percentage........................ S-35
Global Securities........................................... AII-1
Interchange................................................. S-22
Interest Period............................................. S-30
Invested Amount............................................. S-36
Investor Default Amount..................................... S-45
Investor Interest........................................... S-5
Investor Percentage......................................... S-35
Investor Servicing Fee...................................... S-8, S-49
LIBOR....................................................... S-2, S-31
LIBOR Determination Date.................................... S-31
Minimum Transferor Percentage............................... S-22
Monthly Period.............................................. S-7
Offered Certificates........................................ S-1, S-4
</TABLE>
<PAGE> 75
<TABLE>
<CAPTION>
TERM PAGE
- ---- ----------
<S> <C>
Offered Series.............................................. S-22
Offered Series Supplement................................... S-4
Pay Out Event............................................... S-27, S-48
Percentage Allocation....................................... S-38
Pooling and Servicing Agreement............................. S-4
Portfolio Yield............................................. S-27
Principal Funding Account................................... S-10, S-46
Principal Funding Account Balance........................... S-26
Principal Funding Investment Proceeds....................... S-11, S-46
Principal Shortfalls........................................ S-34
Rapid Amortization Period................................... S-13
Rating Agency Condition..................................... S-47
Reallocated Excess Collateral Principal Collections......... S-44
Reallocated Class B Principal Collections................... S-44
Reallocated Principal Collections........................... S-44
Receivables................................................. S-1, S-4
Record Date................................................. S-29
Reference Banks............................................. S-31
Removed Accounts............................................ S-5
Required Reserve Account Amount............................. S-47
Reserve Account............................................. S-46
Reserve Account Funding Date................................ S-47
Revolving Period............................................ S-9
Scheduled Payment Date...................................... S-2
Servicer.................................................... S-1, S-4
Servicing Fee Percentage.................................... S-8, S-49
Stated Series Termination Date.............................. S-7
Subordinate Principal Collections........................... S-38
Telerate Page 3750.......................................... S-31
Transfer and Administration Agreement....................... S-16
Transferor.................................................. S-1, S-4
Transferor Interest......................................... S-6
Transferor Percentage....................................... S-36
Trust....................................................... S-1, S-4
Trustee..................................................... S-1, S-4
Underwriters................................................ S-51
Underwriting Agreement...................................... S-51
U.S. Person................................................. AII-3
</TABLE>
<PAGE> 76
PROSPECTUS
FIRST USA CREDIT CARD MASTER TRUST
ASSET BACKED CERTIFICATES
FIRST USA BANK, N.A.
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,
N.A. (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 and other
interests 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, N.A. 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 SECURITIES
AND EXCHANGE 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 16. BENEFIT PLAN INVESTORS SHOULD
CONSIDER, AMONG OTHER THINGS, THE INFORMATION SET FORTH IN "ERISA
CONSIDERATIONS."
Certificates may be sold by the Bank directly to purchasers, through agents
designated from time to time, through underwriting syndicates led by one or more
managing underwriters or through one or more underwriters acting alone. If
underwriters or agents are involved in the offering of the Certificates of any
Series offered hereby, the name of the managing underwriter or underwriters or
agents will be set forth in the related Prospectus Supplement. If an
underwriter, agent or dealer is involved in the offering of the Certificates of
any Series offered hereby, the underwriter's discount, agent's commission or
dealer's purchase price will be set forth in, or may be calculated from, the
related Prospectus Supplement, and the net proceeds to the Bank from such
offering will be the public offering price of such Certificates less such
discount in the case of an underwriter, the purchase price of such Certificates
less such commission in the case of an agent or the purchase price of such
Certificates in the case of a dealer, and less, in each case, the other expenses
of the Bank associated with the issuance and distribution of such Certificates.
Any underwriter of the Certificates will be indemnified by the Bank against
certain liabilities, including liabilities under the Securities Act of 1933, as
amended (the "Securities Act"). See "Plan of Distribution."
THIS PROSPECTUS MAY NOT BE USED TO CONSUMMATE SALES OF ANY SERIES OF
CERTIFICATES UNLESS ACCOMPANIED BY THE RELATED PROSPECTUS SUPPLEMENT.
The date of this Prospectus is September 2, 1998
<PAGE> 77
PROSPECTUS SUPPLEMENT
The Prospectus Supplement relating to a Series to be offered thereby and
hereby will, among other things, set forth with respect to such Series: (a) the
initial aggregate principal amount of each Class of such Series; (b) the
interest rate (or method for determining it) of each Class of such Series; (c)
certain information concerning the Receivables allocated for such Series; (d)
the expected date or dates on which the principal amount of the Certificates
will be paid to holders of the Certificates (the "Certificateholders"); (e) the
extent to which any Class within a Series is subordinated to any other Class of
such Series or any other Series; (f) the identity of each Class of floating rate
Certificates and fixed rate Certificates included in such Series, if any, or
such other type of Class of Certificates; (g) the Distribution Dates for the
respective Classes; (h) relevant financial information with respect to the
Receivables; (i) additional information with respect to any Enhancement relating
to such Series; and (j) the plan of distribution of such Series.
REPORTS TO CERTIFICATEHOLDERS
Unless and until Definitive Certificates (as defined herein) are issued,
monthly and annual reports, containing information concerning the Trust and
prepared by the Servicer (as defined herein), will be sent on behalf of the
Trust to Cede & Co. ("Cede"), as nominee of The Depository Trust Company ("DTC")
and registered holder of the related Certificates, pursuant to the Pooling and
Servicing Agreement. See "Description of the Certificates--Book-Entry
Registration," "--Reports to Certificateholders" and "--Evidence as to
Compliance." Such reports will not constitute financial statements prepared in
accordance with generally accepted accounting principles. Neither the Bank nor
any successor servicer intends to send any of its financial reports to
Certificateholders or to the owners of beneficial interests in the Certificates
("Certificate Owners"). The Servicer will file with the Securities and Exchange
Commission (the "Commission") such periodic reports with respect to the Trust as
are required under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the rules and regulations of the Commission thereunder.
AVAILABLE INFORMATION
This Prospectus, which forms a part of the Registration Statement, omits
certain information contained in such Registration Statement pursuant to the
rules and regulations of the Commission. For further information, reference is
made to the Registration Statement (including any amendments thereof and
exhibits thereto) and any reports and other documents incorporated herein by
reference as described below under "Incorporation of Certain Documents by
Reference," which are available for inspection without charge at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549; 7 World Trade Center, New York, New York 10048; and
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511. Copies of such material may be obtained from the public Reference
Section of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. In addition, the Commission maintains a Web site at
"http://www.sec.gov" that contains information regarding registrants that file
electronically with the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All reports and other documents filed by the Servicer, on behalf of the
Trust, pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act
subsequent to the date of this Prospectus and prior to the termination of the
offering of the Certificates offered hereby shall be deemed to be incorporated
by reference into this Prospectus and to be part hereof. Any statement contained
herein or in a document deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained in any other subsequently filed document which
also is deemed to be incorporated by reference herein modifies or supersedes
such statement. Any such statement so modified or superseded shall not be
deemed, except as modified or superseded, to constitute a part of this
Prospectus.
2
<PAGE> 78
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, N.A.,
as transferor (the "Transferor") and as
servicer of the Receivables, and The Bank of
New York (Delaware), as trustee (the
"Trustee"). The Trust was created as a
master trust under which one or more Series
could be issued pursuant to a series
supplement to the Pooling and Servicing
Agreement (a "Supplement"). Any Series
issued by the Trust may or may not be a
Series offered pursuant to this Prospectus
and certain previously issued Series have
already been offered under different
prospectuses. Each Prospectus Supplement
will identify all then outstanding Series
previously issued by the Trust.
Trust Assets.................. The property of the Trust includes and will
include receivables (the "Receivables")
arising under certain VISA(R) and
MasterCard(R)* revolving credit card
accounts (the "Accounts") selected from the
portfolio of VISA and MasterCard accounts
owned by the Transferor (the "Bank
Portfolio"), all monies due or to become due
in payment of the Receivables, all proceeds
of the Receivables and all monies on deposit
in certain bank accounts of the Trust (other
than certain investment earnings on such
amounts), Recoveries and any Enhancement
issued with respect to any Series or Class,
as described in the related Prospectus
Supplement. The term "Enhancement" means,
with respect to any Series or Class thereof,
any letter of credit, cash collateral
account or guaranty, collateral invested
amount, guaranteed rate agreement, maturity
guaranty facility, tax protection agreement,
interest rate swap or other contract or
agreement for the benefit of
Certificateholders of such Series.
Enhancement may also take the form of
subordination of one or more Classes of a
Series to any
- ---------------
* VISA(R) and MasterCard(R) are registered trademarks of Visa USA Incorporated
and MasterCard International Incorporated, respectively.
3
<PAGE> 79
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.
The Transferor originally conveyed to the
Trustee all Receivables existing under
certain Accounts that were selected from the
Bank Portfolio based on criteria provided in
the Pooling and Servicing Agreement as
applied on August 21, 1992 (the "Original
Cut Off Date"), and on certain additional
cut off dates with respect to Additional
Accounts and has conveyed and will convey
all Receivables arising under such Accounts
from time to time thereafter until
termination of the Trust. See "Summary of
Terms--Trust Assets" in the Prospectus
Supplement. In addition, pursuant to the
Pooling and Servicing Agreement, the
Transferor may (subject to certain
limitations and conditions) designate
Additional Accounts for inclusion in the
Trust. See "The Receivables" and
"Description of the Certificates--Addition
of Accounts."
Securities Offered............ Each Series of the Certificates will represent
an undivided interest in the assets of the
Trust. Each Certificate of a Series will
represent the right to receive (i) payments
of 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
4
<PAGE> 80
Providers. The aggregate principal amount of
the Investor Interest of a Series in
Receivables is referred to herein as the
"Invested Amount" and is based on the
aggregate amount of the Principal
Receivables in the Trust allocated to such
Series. The interest of the holder of the
Exchangeable Transferor Certificate in
Receivables is referred to herein as the
"Transferor Interest," and is based on the
aggregate amount of Principal Receivables
(the "Transferor Amount") in the Trust not
allocated to the Certificateholders or any
Enhancement Provider. See "Description of
the Certificates--General."
The Certificateholders of each Series will
have the right to receive (but only to the
extent needed to make required payments
under the Pooling and Servicing Agreement
and related Supplement and subject to any
reallocation of such amounts if the related
Supplement so provides) varying percentages
of the collections of Finance Charge
Receivables and Principal Receivables for
each month and will be allocated a varying
percentage of the amount of Receivables in
Accounts which are written off as
uncollectible ("Defaulted Accounts") for
such month (each such percentage, an
"Investor Percentage").
The related Prospectus Supplement will specify
the Investor Percentages with respect to the
allocation of collections of Principal
Receivables, Finance Charge Receivables and
Receivables in Defaulted Accounts during the
Revolving Period and any Amortization
Period. If the Certificates of a Series
offered hereby include more than one Class
of Certificates, the assets of the Trust
allocable to the Certificates of such Series
may be further allocated among each Class in
such Series as described in the related
Prospectus Supplement. See "Description of
the Certificates--Investor Percentage and
Transferor Percentage" in the related
Prospectus Supplement.
The Certificates represent interests in the
Trust only and do not represent interests in
or recourse obligations of the Transferor or
any affiliate thereof. A Certificate is not
a deposit and is not insured by the Federal
Deposit Insurance Corporation (the "FDIC").
Neither the Receivables nor the Accounts are
insured or guaranteed by the FDIC or any
other governmental agency.
Receivables................... The Receivables arise in Accounts that have
been selected from the Bank Portfolio based
on criteria provided in the Pooling and
Servicing Agreement. The Receivables consist
of amounts charged by cardholders for goods
and services and cash advances (such
amounts, less the amount of Discount
Receivables, the "Principal Receivables"),
plus the related periodic finance charges
(the "Periodic Finance Charges"), annual
membership fees ("Annual Membership Fees"),
and amounts charged to the Accounts in
respect of cash advance finance charges,
late fees,
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<PAGE> 81
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), but not the obligation, to
designate certain Accounts and to accept the
reconveyance of all the Receivables in such
Accounts (the "Removed Accounts"), whether
such Receivables are then existing or
thereafter created. See "Description of the
Certificates--Removal of Accounts."
The aggregate undivided interest in the
Principal Receivables in the Trust evidenced
by the Certificates will never exceed the
aggregate Invested Amount regardless of the
total amount of Principal Receivables in the
Trust at any time.
Exchanges..................... The Pooling and Servicing Agreement provides
that the Trustee will issue two types of
certificates: (i) one or more Series of
certifi
6
<PAGE> 82
cates that will be transferable and have the
characteristics described below and (ii) the
Exchangeable Transferor Certificate, a
certificate that evidences the Transferor
Interest, which is to be held by the
Transferor and which will be transferable
only as provided in the Pooling and
Servicing Agreement. The Pooling and
Servicing Agreement also provides that,
pursuant to any one or more Supplements, the
Transferor may tender the Exchangeable
Transferor Certificate, or, if provided in
the relevant Supplement, certificates
representing any Series and the Exchangeable
Transferor Certificate, to the Trustee in
exchange for one or more new Series and a
reissued Exchangeable Transferor Certificate
(any such tender, an "Exchange"). However,
at all times, the interest in the Principal
Receivables in the Trust represented by the
Transferor Interest must equal or exceed the
Minimum Transferor Interest (as defined
herein). Under the Pooling and Servicing
Agreement, the Transferor may define, with
respect to any Series, the Principal Terms
of the Series. See "Description of the
Certificates--Exchanges." The Transferor may
offer any Series to the public or other
investors under a prospectus or other
disclosure document (a "Disclosure
Document") in transactions either registered
under the Securities Act or exempt from
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
7
<PAGE> 83
the Series to be exchanged. See "Description
of the Certificates--Exchanges."
Denominations................. Unless otherwise specified in the related
Prospectus Supplement, beneficial interests
in the Certificates will be offered for
purchase in denominations of $1,000 and
integral multiples thereof. See "Description
of the Certificates--General."
Registration of
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, N.A. (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 BANC ONE CORPORATION."
Collections................... Unless otherwise specified in the related
Prospectus Supplement, with respect to each
Series of Certificates, the Servicer will
deposit all collections of Receivables in an
account established for such purpose (the
"Collection Account"). All amounts deposited
in the Collection Account will be allocated
by the Servicer between amounts collected on
Principal Receivables and amounts collected
on Finance Charge Receivables. Collections
of Recov-
8
<PAGE> 84
eries 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 discus-
9
<PAGE> 85
sion of the events which might lead to early
termination of the Revolving Period.
Principal Payments............ The principal of the Certificates of each
Series offered hereby will be scheduled to
be paid either in installments commencing on
a date specified in the related Prospectus
Supplement (the "Principal Commencement
Date"), in which case such Series will have
a Controlled Amortization Period, as
described below, or on an expected date
specified in the related Prospectus
Supplement (the "Scheduled Payment Date"),
in which case such Series will have an
Accumulation Period, as described below. If
a Series has more than one Class of
Certificates, a different method of paying
principal, Principal Commencement Date or
Scheduled Payment Date may be assigned to
each Class. The payment of principal with
respect to the Certificates of a Series or
Class may commence earlier than the
applicable Principal Commencement Date or
Scheduled Payment Date, and the final
principal payment with respect to the
Certificates of a Series or Class may be
made later than the applicable expected
payment date, Scheduled Payment Date or
other expected date, if a Pay Out Event
occurs and the Rapid Amortization Period
commences with respect to such Series or
Class or under certain other circumstances
described herein or in the Prospectus
Supplement. See "Description of the
Certificates--Principal Payments."
Controlled Amortization
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 distributions. The amount to be
distributed on any Distribution Date during
the Controlled Amortization Period will be
limited to an amount (the "Controlled
Distribution Amount") equal to an amount
specified in the related Prospectus
Supplement (the "Controlled Amortization
Amount") plus any existing deficit
Controlled Amortization Amount arising from
prior Distribution Dates. If a Series has
more than one Class of Certificates, each
Class may have a separate Controlled
Amortization Amount. In addition, the
related Prospectus Supplement may describe
certain priorities among such Classes with
respect to such distributions. The
Controlled Amortization Period will commence
at the close of business on 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 Ter-
10
<PAGE> 86
mination 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 Re-
11
<PAGE> 87
ceivables 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
12
<PAGE> 88
Series. Any such reallocation will not
result in a reduction in the Invested Amount
of the Series to which such collections were
initially allocated. See "Description of the
Certificates--Shared Collections of
Principal Receivables."
Funding Period................ The Prospectus Supplement relating to a Series
of Certificates may specify that for a
period beginning on the Closing Date and
ending on a specified date before the
commencement of an Amortization Period with
respect to such Series (the "Funding
Period"), the aggregate amount of Principal
Receivables in the Trust allocable to such
Series may be less than the aggregate
principal amount of the Certificates of such
Series and that the amount of such
deficiency (the "Pre-Funding Amount") will
be held in a trust account established with
the Trustee for the benefit of
Certificateholders of such Series (the
"Pre-Funding Account") pending the transfer
of additional Principal Receivables to the
Trust or pending the reduction of the
Invested Amounts of other Series. The
related Prospectus Supplement will specify
the initial Invested Amount on the Closing
Date with respect to such Series, the
aggregate principal amount of the
Certificates of such Series (the "Full
Invested Amount") and the date by which the
Invested Amount is expected to equal the
Full Invested Amount. The Invested Amount of
such a Series will increase as Principal
Receivables are created or as the Invested
Amounts of other Series are reduced. The
Invested Amount may also decrease due to
Investor Charge-Offs.
During the Funding Period, funds on deposit in
the Pre-Funding Account for a Series of
Certificates will be withdrawn and paid to
the Transferor or its assignees to the
extent of any increases in the Invested
Amount. In the event that the Invested
Amount does not for any reason equal the
Full Invested Amount by the end of the
Funding Period, any amount remaining in the
Pre-Funding Account and any additional
amounts specified in the related Prospectus
Supplement will be payable to the
Certificateholders of such Series in a
manner and at such time as set forth in the
related Prospectus Supplement.
If so specified in the related Prospectus
Supplement, monies in the Pre-Funding
Account with respect to any Series will be
invested by the Trustee in eligible
investments or will be subject to a
guaranteed rate or investment agreement or
other similar arrangement, and investment
earnings and any applicable payment under
any such investment arrangement will be
applied to pay interest on the Certificates
of such Series. See "Description of the
Certificates--Funding Period."
Companion Series.............. If so specified in the related Prospectus
Supplement, a Series of Certificates may be
paired with another Series (a "Companion
Series"). The Prospectus Supplement for such
Series and the
13
<PAGE> 89
Prospectus Supplement for the Companion
Series will each specify the relationship
between the Series. See "Description of the
Certificates--Companion Series."
Enhancement................... Enhancement with respect to a Series or any
Class thereof may be provided as specified
in the related Prospectus Supplement.
The type, characteristics and amount of the
Enhancement will be determined based on
several factors, including the
characteristics of the Receivables and
Accounts underlying or comprising the Trust
Portfolio as of the Closing Date with
respect to any Series, and will be
established on the basis of requirements of
each Rating Agency rating the Certificates
of such Series. If so specified in the
related Prospectus Supplement, any such
Enhancement will apply only in the event of
certain types of losses and the protection
against losses provided by such Enhancement
will be limited. See "Risk
Factors--Certificate Rating" and
"Enhancement."
Optional Repurchase........... With respect to each Series of Certificates,
the Invested Amount will be subject to
optional repurchase by the Transferor on any
Distribution Date on or after the
Distribution Date on which the Invested
Amount is reduced to an amount less than or
equal to the percentage of the initial
Invested Amount (the "Initial Invested
Amount") specified in the related Prospectus
Supplement, if certain conditions set forth
in the related Pooling and Servicing
Agreement are met. Unless otherwise
specified in the related Prospectus
Supplement, the repurchase price will be
equal to the Invested Amount plus accrued
and unpaid interest on the Certificates. See
"Description of the Certificates--Final
Payment of Principal; Termination."
Tax Status.................... Except to the extent otherwise specified in
the related Prospectus Supplement, it is
anticipated that Special Tax Counsel will be
of the opinion that the Offered Certificates
of such Series will be characterized as
indebtedness for Federal income tax
purposes. Except to the extent otherwise
specified in the related Prospectus
Supplement, the Certificate Owners will
agree to treat the Offered Certificates as
debt for Federal income tax purposes. See
"Certain U.S. Federal Income Tax
Consequences" for additional information
concerning the application of Federal income
tax laws.
ERISA Considerations.......... Under regulations issued by the Department of
Labor, the Trust's assets would not be
deemed "plan assets" of any employee benefit
plan holding interests in the Certificates
of a Series if certain conditions are met.
If the Trust's assets were deemed to be
"plan assets" of an employee benefit plan,
there is uncertainty as to whether existing
exemptions from the "prohibited transaction"
rules of the Employee Retirement Income
Security Act of 1974,
14
<PAGE> 90
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.
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<PAGE> 91
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. On April 10, 1990, the Resolution Trust Corporation (the "RTC"),
formerly a sister agency of the FDIC, adopted a statement of policy (the "RTC
Policy 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, however, has not adopted a
formal policy statement on "actual direct compensatory damages" with respect to
collateralized borrowings of banks that are repudiated, and may not follow the
approach of the RTC. In addition, in one case involving the repudiation by the
RTC of certain secured zero-coupon bonds issued by a savings association, a
United States federal district court held that "actual direct
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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 and refuse to perform any obligations, including
servicing obligations, of the Servicer under the Pooling and Servicing Agreement
or any other contract, 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 or to appoint a successor Servicer chosen by
the FDIC.
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
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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. See "Certain
Legal Aspects of the Receivables--Consumer Protection Laws" herein.
Competition in the Credit Card Industry. The consumer credit industry is
highly competitive and operates in an environment increasingly focused on the
interest and fees charged to consumers for credit card services. As new card
issuers enter the market and issuers seek to expand their shares of the market,
there is increased use of advertising, target marketing, pricing competition and
incentive programs, all of which may adversely impact issuer profit margins. The
MasterCard and VISA associations do not require adherence to specific
underwriting standards, and therefore credit card issuers may compete on the
basis of individual account solicitation and underwriting criteria. If
cardholders choose to utilize competing sources of credit, the amount and rate
of new Receivables generated in the Accounts may be reduced and certain purchase
and payment patterns with respect to Receivables may be affected. The size of
the Trust will be dependent upon the Transferor's continued ability to generate
new Receivables. If the amount of new Receivables generated declines
significantly, Receivables from Additional Accounts (to the extent available)
may be added to the Trust, as described below, or a Pay Out Event could occur,
in which event 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
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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, and may issue substantially concurrently 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 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
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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.
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THE BANK'S CREDIT CARD ACTIVITIES
GENERAL
The Receivables which the Bank has conveyed and will convey to the Trust
pursuant to the Pooling and Servicing Agreement have been and will be generated
from transactions made by holders of selected VISA and MasterCard credit card
accounts. The Bank currently services the credit card accounts. Certain data
processing and administrative functions associated with such servicing are
performed on behalf of the Bank by First Data Resources, Inc. ("FDR"). See
"--Description of FDR."
The following discussion describes certain terms and characteristics of the
accounts in the Bank Portfolio from which the Accounts were selected. The
Eligible Accounts from which the Accounts were selected do not represent the
entire Bank Portfolio. In addition, Additional Accounts may consist of Eligible
Accounts which are not currently in existence and which are selected using
different criteria from those used in selecting the Accounts already included in
the Trust. See "Description of the Certificates--Addition of Accounts."
Consequently, actual loss and delinquency, revenue and monthly payment rate
experience with respect to the Eligible Accounts and the Additional Accounts may
be different from such experience for the Bank Portfolio described in the
Prospectus Supplement.
Growth Strategy and Origination. To achieve steady and diversified growth,
the Bank originates credit card accounts through several different programs: (i)
First USA brand products, (ii) partnership products such as affinity group,
financial institutions, sports marketing and co-branding programs, and (iii) the
acquisition of credit card portfolios from other financial institutions. These
programs (excluding portfolio acquisitions) emphasize segmentation and use
direct mail, telemarketing, take-one application displays, events, media and the
Internet as channels to market the Bank's products. The Bank has also originated
credit card accounts through mailings to BANC ONE customers and prospects.
Management believes that such multi-faceted account origination programs help to
ensure balanced and reliable growth for the Bank.
The First USA brand direct solicitation program represents the greatest
share of new account origination. The Bank has historically emphasized direct
solicitation as a source of new accounts as its expertise has increased through
experience and the benefit of numerous marketing, credit and risk management
tests. Currently, the Bank conducts national direct mail and telemarketing
solicitation to geographic areas that have been selected from a process that
includes a rigorous analysis of the economic indicators of each region of the
nation and targets the most favorable regions. The Bank carefully targets
consumers through various datamining methods and targeting models. The Bank
aligns the product offering with the target customer segment along with the
number and sequence of offers in order to maximize penetration, response rates
and usage.
The affinity groups, financial institutions and sports marketing programs
are partnership programs which involve the active participation of endorsing
organizations. The affinity group marketing program involves the solicitation of
prospective individual cardmembers from identifiable groups with a common
interest or affiliation. In this program, the Bank has entered into exclusive
marketing arrangements with a number of affinity groups. The Bank typically pays
referral compensation to the affinity groups for each new account generated. The
Bank has a similar relationship with certain professional sports organizations.
In its financial institutions program, the Bank maintains exclusive
marketing partnership relationships with banks, as well as mortgage companies,
insurance companies, brokerage firms and other financial institutions. Through
this program, participating financial institutions offer VISA and MasterCard
products to their customers without becoming primary issuers. In addition to
placing the name of the participating financial institution on the front of the
plastic card, the Bank typically pays a referral fee for each account. The Bank
believes that the endorsement of the participating financial institution reduces
overall origination costs and encourages cardmember usage.
The Bank also participates in co-branding, which involves a partnership
between the Bank and a consumer products or services company to solicit the
customers of such company. Companies such as airlines, computer on-line
services, catalog companies and general retailers participate with financial
institutions in co-branding programs. The Bank typically pays a portion of
on-going revenue to the co-branding partner, with the benefit of
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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 and such acquisitions are possible in the future. See "The Bank and BANC
ONE CORPORATION." Prior to acquiring a portfolio, the Bank reviews the
historical performance and seasoning of the portfolio and the policies and
practices of the selling institution, but individual accounts are not
requalified by the Bank. There can be no assurance that Accounts so acquired
were originated in a manner consistent with the Bank's policies as described
under "--Growth Strategy and Origination" and "--Underwriting Procedures" above
or that the underwriting and qualification of such Accounts conformed to any
given standards. The Accounts include accounts previously acquired by the Bank.
Such accounts and any accounts acquired in the future may become Additional
Accounts provided that, at such time, they constitute Eligible Accounts. See
"The Receivables," "Description of the Certificates--Transfer and Assignment of
Receivables" and "--Representations and Warranties."
DESCRIPTION OF FDR
With respect to the Accounts, certain data processing and administrative
functions associated with servicing the Receivables will initially be performed
by FDR. If FDR were to fail or become insolvent, delays in processing and
recovery of information with respect to charges incurred by the respective
cardholders could occur, and the replacement of the services FDR currently
provides to the Bank could be time-consuming. As a result, delays in payments to
Certificateholders could occur.
FDR is located in Omaha, Nebraska and provides computer data processing
services primarily to the bankcard industry. FDR is a subsidiary of First Data
Corp.
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.
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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 generally 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. Purchases and
Cash Advances may also be obtained through the use of "Convenience 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. 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.
Periodic Finance Charges are not assessed in most circumstances on
Purchases if the entire balance shown on the previous billing statement was paid
in full by the payment due date. New Purchases and Cash Advances are included in
the calculation of the balance subject to finance charge as of 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 Convenience Check is used, the transaction
date of the check. 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, transaction finance charge (not
applicable for certain accounts) plus the Periodic Finance Charge. The Bank
issues accounts with fixed periodic rates and accounts with floating 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, signature, recorded verbal confirmation of disclosure information or,
in the case of an account acquired by the Bank from another institution,
acceptance of 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, Orlando, Florida, Baton Rouge, Louisiana, Columbus, Ohio,
Austin, Texas 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
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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.
The Bank generally charges off an account immediately prior to the end of
the sixth billing cycle after having become contractually past due unless a
payment has been received in an amount sufficient to bring the account into a
different delinquency category or to bring the account current. 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 two 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.
The Federal Financial Institutions Examination Counsel on June 30, 1998
proposed a revised policy statement on the classification of retail credit. If
adopted, the revised policy statement could establish, effective January 1,
2001, a uniform charge-off period of 150 days past due from the contractual due
date for open-end and closed-end credit, including credit card receivables. The
revised policy statement could also, effective January 1, 1999, provide guidance
for loans affected by bankruptcy, fraudulent activity, and death; establish
standards for reaging, extending, deferring, or rewriting of past due accounts;
and broaden the circumstances under which partial payments are recognized as
full payments for purposes of determining that a loan is no longer delinquent.
INTERCHANGE
Creditors participating in the VISA and MasterCard associations receive
certain fees ("Interchange") as partial compensation for taking credit risk,
absorbing fraud losses and funding receivables for a limited period prior to
initial billing. Under the VISA and MasterCard systems a portion of this
Interchange in connection with cardholder Purchases is collected by banks that
issue credit cards by applying a discount to the amount paid by such banks to
the banks that clear the related transactions for merchants. Interchange will be
allocated to the Trust by treating 1.3% (subject to adjustment at the option of
the Transferor upon the satisfaction of certain conditions as described herein
in "Description of the Certificates--Discount Receivables," which adjusted
percentage, if applicable, will be specified in the applicable Prospectus
Supplement) of collections on the Receivables (whether arising from Purchases or
Cash Advances), other than collections with respect to Periodic Finance Charges,
Annual Membership Fees and Other Charges, as collections of Discount
Receivables.
RECOVERIES
The Transferor and the Servicer will be required, pursuant to the terms of
the Pooling and Servicing Agreement, to transfer to the Trust all amounts
received by the Transferor or the Servicer with respect to Receivables in
Defaulted Accounts, including amounts received by the Transferor or the Servicer
from the purchaser or transferee with respect to the sale or other disposition
of Receivables in Defaulted Accounts ("Recoveries"). In the event of any such
sale or other disposition of Receivables, Recoveries will not include amounts
received by the purchaser or transferee of such Receivables but will be limited
to amounts received by the Transferor or the Servicer from the purchaser or
transferee. Collections of Recoveries will be treated as collections of
Principal Receivables; provided, however, that to the extent the aggregate
amount of Recoveries received with respect to any Monthly Period exceeds the
aggregate amount of Principal Receivables (other than Ineligible Receivables) in
Defaulted Accounts on the day such Account became a Defaulted Account for each
day in such Monthly Period, the amount of such excess will be treated as
collections of Finance Charge Receivables.
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THE RECEIVABLES
The Receivables conveyed to the Trust arise in Accounts selected from the
Bank Portfolio on the basis of criteria set forth in the Pooling and Servicing
Agreement (the "Trust Portfolio"). Pursuant to the Pooling and Servicing
Agreement, the Transferor has the right, subject to certain limitations and
conditions set forth therein, to designate from time to time Additional Accounts
and to transfer to the Trust all Receivables of such Additional Accounts,
whether such Receivables are then existing or thereafter created. Any Additional
Accounts designated pursuant to the Pooling and Servicing Agreement must be
Eligible Accounts as of the date the Transferor designates such accounts as
Additional Accounts. In addition, the Transferor is required to designate
Additional Accounts (x) to maintain the Transferor Interest so that, during any
period of 30 consecutive days, the Transferor Interest averaged over that period
equals or exceeds such percentage as may be specified in any Supplement (such
percentage, the "Minimum Transferor Interest") of the average of the aggregate
amount of Principal Receivables for the same period, or (y) to maintain, for so
long as certificates of any Series (including the Certificates) remain
outstanding, an aggregate amount of Principal Receivables in amount equal to or
greater than the Minimum Aggregate Principal Receivables. "Minimum Aggregate
Principal Receivables" shall mean an amount equal to (i) the sum of the initial
invested amounts for all Series then outstanding other than any Series of
variable funding certificates, (ii) with respect to any Series of variable
funding certificates in its revolving period, the then current invested amount
of such Series and (iii) with respect to any Series of variable funding
certificates in its amortization period, the invested amount of such Series at
the end of the last day of the Revolving Period for such Series. The Transferor
will convey the Receivables then existing or thereafter created under such
Additional Accounts to the Trust. Furthermore, pursuant to the Pooling and
Servicing Agreement, the Transferor has the right (subject to certain
limitations and conditions) to designate certain Accounts and to require the
Trustee to reconvey all receivables in such Removed Accounts to the Transferor,
whether such Receivables are then existing or thereafter created. Throughout the
term of the Trust, the Accounts from which the Receivables arise will be the
Accounts designated by the Transferor on the Original Cut Off Date plus any
Additional Accounts minus any Removed Accounts.
The Prospectus Supplement relating to each Series of Certificates will
provide certain information about the Trust Portfolio as of the date specified.
Such information will include, but not be limited to, the amount of Principal
Receivables, the amount of Finance Charge Receivables, the range of principal
balances of the Accounts and the average thereof, the range of credit limits of
the Accounts and the average thereof, the range of ages of the Accounts and the
average thereof, the geographic distribution of the Accounts, the types of
Accounts and delinquency and loss statistics relating to the Accounts.
MATURITY ASSUMPTIONS
Unless otherwise specified in the related Prospectus Supplement, for each
Series, following the Revolving Period, collections of Principal Receivables are
expected to be distributed to the Certificateholders of such Series or any
specified Class thereof on each specified Distribution Date during the
Controlled Amortization Period, or are expected to be accumulated for payment to
Certificateholders of such Series or any specified Class thereof during the
Accumulation Period and distributed on a Scheduled Payment Date; provided,
however, that, if the Rapid Amortization Period commences, collections of
Principal Receivables will be paid to Certificateholders in the manner described
herein and in the related Prospectus Supplement. The related Prospectus
Supplement will specify the date on which the Controlled Amortization Period or
the Accumulation Period, as applicable, will commence, the principal payments
expected or available to be received or accumulated during such Controlled
Amortization Period or Accumulation Period, or on the Scheduled Payment Date, as
applicable, the manner and priority of principal accumulations and payments
among the Classes of a Series of Certificates and the Pay Out Events which, if
any were to occur, would lead to the commencement of a Rapid Amortization
Period.
The related Prospectus Supplement will provide certain historical data
relating to payments by cardholders, total charge-offs and other related
information relating to the Bank Portfolio. There can be no assurance that
future events will be consistent with such historical data.
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The amount of collections of Receivables may vary from month to month due
to seasonal variations, general economic conditions, payment habits of
individual cardholders and number of collection days. There can be no assurance
that collections of Principal Receivables with respect to the Trust Portfolio,
and thus the rate at which the related Certificateholders could expect to
receive or accumulate payments of principal on their Certificates during an
Amortization Period, or on any Scheduled Payment Date, as applicable, will be
similar to any historical experience set forth in a related Prospectus
Supplement. If a Pay Out Event occurs, the average life and maturity of such
Series of Certificates could be significantly reduced. In addition, there can be
no assurance that the issuance of other Series of Certificates or the terms of
such other Series might not have an impact on the timing of the payments
received by Certificateholders.
Because, for any Series of Certificates, there may be a slowdown in the
payment rate below the payment rate used to determine the amount of collections
of Principal Receivables scheduled or available to be distributed or accumulated
for later payment to Certificateholders or a specified Class thereof during the
Controlled Amortization Period or the Accumulation Period or on the Scheduled
Payment Date, as applicable, or a Pay Out Event may occur which would initiate
the Rapid Amortization Period, there can be no assurance that the actual number
of months elapsed from the date of issuance of such Series of Certificates to
the final Distribution Date with respect to the Certificates will equal the
expected number of months.
USE OF PROCEEDS
Unless otherwise specified in the related Prospectus Supplement, the net
proceeds from the sale of the Certificates will be paid to the Bank. The Bank
will use such proceeds for its general corporate purposes.
THE BANK AND BANC ONE CORPORATION
First USA Bank, N.A. The Bank is a wholly-owned subsidiary of First USA
Financial, Inc. ("First USA Financial"), which is a wholly-owned subsidiary of
BANC ONE CORPORATION ("BANC ONE").
The Bank is among the nation's largest issuers of VISA and MasterCard
credit cards in the United States. The Bank's revenues derive primarily from
interest income and fees on its credit card accounts and interchange income. Its
primary cash expenses include the cost of funding credit card loans, credit
losses, salaries and employee benefits, marketing expenses, processing expenses
and income taxes.
The Bank offers a broad array of bankcard products to targeted segments of
creditworthy consumers. The Bank's primary target market is experienced users of
general purpose credit products. The strategy of the Bank is to offer uniquely
tailored individualized products to profitable consumer segments.
The Bank markets over 1,000 credit card products to customers throughout
the United States. These products cover a range which includes standard card
products, those that are identified and developed through datamining efforts, as
well as products that are developed and marketed through partnership
relationships. Products include designs that are tailored to an individual's
lifestyle, profession or interest; those that are built around affiliations,
such as universities or fraternal organizations, co-brand relationships and
programs with financial institutions; an upscale platinum card product; and the
most individualized product offering, a First USA Images Photocard.
The Bank's products feature low interest rates, specific features and
benefits, unique card design and individualized credit lines. The Bank's
strategy is to target customers through a carefully matched combination of
pricing, credit analysis and packaging. Rates, fees, other features and credit
lines offered vary depending on the profile of targeted prospect groups. The
Bank generally markets its products with low introductory and regular rates and
no annual fee.
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.
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BANC ONE CORPORATION
BANC ONE. BANC ONE is a multi-bank holding company that, at June 30, 1998,
operated banking offices in Arizona, Colorado, Delaware, Illinois, Indiana,
Kentucky, Louisiana, Ohio, Oklahoma, Texas, Utah, West Virginia and Wisconsin.
BANC ONE, through the Bank and certain other subsidiaries, is currently the
third largest issuer of VISA and MasterCard credit cards in the United States.
BANC ONE also owns several additional corporations that engage in merchant
processing, consumer finance, mortgage banking, insurance, venture capital,
investment and merchant banking, trust, brokerage, investment management,
equipment leasing and data processing.
On July 1, 1998, BANC ONE consolidated substantially all of its current
consumer credit card operations in the Bank. The Bank added receivables in
accounts originated by the Bank, Bank One, N.A., Bank One, Arizona, NA and other
affiliates of the Bank to the Trust on July 6, 1998. The Bank, may, from time to
time, add to the Trust additional Receivables in accounts originated by Bank
One, N.A., Bank One, Arizona, NA and other affiliates of the Bank. Each such
addition of receivables in accounts originated by the Bank and affiliates of the
Bank to the Trust is subject to certain restrictions on additions of Accounts in
the Pooling and Servicing Agreement, including satisfaction of the Rating Agency
Conditions. See "Description of the Certificates--Addition of Accounts" herein.
BANC ONE and First Chicago NBD Corporation ("FCN"), together with BANK ONE
CORPORATION, formerly BANC ONE CORPORATION (DE), and Hornet Reorganization
Corporation, have entered into an Agreement and Plan of Reorganization, dated as
of April 10, 1998 (as the same may be amended or otherwise modified from time to
time, the "BANC ONE/FCN Agreement"), pursuant to which BANC ONE and FCN will be
merged into BANK ONE CORPORATION, a new corporation organized to effect the
merger (the "BANC ONE/FCN Merger"). BANK ONE CORPORATION will be the surviving
corporation in the BANC ONE/FCN Merger, at which time the separate corporate
existence of BANC ONE and FCN will cease. The BANC ONE/FCN Merger is subject to
the satisfaction of the terms and conditions set forth in the BANC ONE/FCN
Agreement, which include the approval of the respective shareholders of BANC ONE
and FCN and certain regulatory approvals. Subject to the satisfaction of the
terms and conditions set forth in the BANC ONE/FCN Agreement, the BANC ONE/FCN
Merger is targeted to be completed late in the third quarter or in the fourth
quarter of 1998.
Year 2000. BANC ONE, like most other companies, utilizes computer programs
which process transactions based on using two digits for the year of the
transaction rather than a full four digits. Programs that process year 2000
transactions with the year "00" may encounter significant processing
inaccuracies or inoperability. BANC ONE has determined that it, like most other
companies, will be required to modify or replace significant portions of its
software so that its information systems will be able to properly utilize dates
subsequent to December 31, 1999. The year 2000 issue will be addressed through
either modification to existing software or conversion to new software. However,
if such modifications are not made or completed on a timely basis, the year 2000
issue could have a material impact on the operations of BANC ONE.
A plan has been developed and is being followed to ensure that the
modifications and conversions are implemented and thoroughly tested on a timely
basis. Based on progress made to date, BANC ONE anticipates that software for
mission critical information systems will be year 2000 ready by the end of 1998.
Other less essential software applications will be modified or replaced during
1999 which would enable all internal software applications to become year 2000
ready prior to the year 2000.
BANC ONE utilizes software provided by outside suppliers which must also
become year 2000 ready. Approximately 30% of all software applications used by
BANC ONE are provided by outside suppliers and commitment letters from such
suppliers that they will take the necessary actions to become year 2000 ready on
a timely basis have been required. BANC ONE is actively monitoring the progress
of outside suppliers in their efforts to become year 2000 ready, including BANC
ONE testing of the results of the outside suppliers' efforts and actions deemed
necessary will be taken to mitigate the exposure to the year 2000 issue.
However, there is no guarantee that the software of other suppliers on which
BANC ONE's information systems rely will be converted on a timely basis, or that
failure to convert would not have a material adverse effect on BANC ONE's
operations.
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Year 2000 costs and the date on which the Year 2000 modifications are
expected to be completed are based on management's best estimates, which were
derived utilizing numerous assumptions of future events including the
availability of certain resources, third party modifications and other factors.
However, there can be no guarantee that these estimates will be achieved and
actual results could differ materially from those plans. Specific factors that
might cause material differences include, but are not limited to, the
availability and cost of personnel trained in this area, the ability to locate
and correct all relevant computer codes and similar uncertainties.
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.
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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 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 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").
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<PAGE> 105
Transfers between 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 or Euroclear, 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 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 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 of 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.
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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 branch (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.
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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 specified in the Pooling and
Servicing Agreement, 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
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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.
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TRANSFER AND ASSIGNMENT OF RECEIVABLES
With respect to the Trust, the Transferor has transferred and assigned to
the Trust all its rights, title and interest in and to Receivables in certain
Accounts which were selected from the Bank Portfolio based upon criteria set
forth in the Pooling and Servicing Agreement.
In connection with the transfer of the Receivables to the Trust, the
Transferor has indicated in its computer files that the Receivables have been
conveyed to the Trust. In addition, the Transferor has provided to the Trustee
computer files or microfiche lists containing a true and complete list showing
each Account, including each Additional Account, identified by account number
and by total outstanding balance, respectively. The Transferor has not delivered
and will not deliver to the Trustee any other records or agreements relating to
the Accounts or the Receivables, except in connection with additions or removals
of Accounts. Except as stated above, the records and agreements relating to the
Accounts and the Receivables maintained by the Transferor or the Servicer are
not segregated by the Transferor or the Servicer from other documents and
agreements relating to other credit card accounts and receivables and are not
stamped or marked to reflect the transfer of the Receivables to the Trust, but
the computer records of the Transferor are required to be marked to evidence
such transfer. The Transferor has filed UCC financing statements with respect to
the Receivables meeting the requirements of Delaware state law. See "Risk
Factors--Certain Legal Aspects" and "Certain Legal Aspects of the Receivables."
EXCHANGES
The Pooling and Servicing Agreement provides for the Trustee to issue two
types of certificates: (i) one or more Series of certificates which are
transferable and have the characteristics described below and (ii) the
Exchangeable Transferor Certificate, a certificate which evidences the
Transferor Interest, which initially is held by the Transferor and is
transferable only as provided in the Pooling and Servicing Agreement. The
Pooling and 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 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 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
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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 the 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
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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 or any mailing address on any United
States armed forces military base of operations, including APO and FPO
addresses, (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
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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 which had different credit criteria.
REMOVAL OF ACCOUNTS
Subject to the conditions set forth in the next succeeding sentence, the
Transferor may, but shall not be obligated to, designate from time to time all
Receivables from certain Accounts for deletion and removal from the Trust (such
Accounts, the "Removed Accounts"); provided, however, that the Transferor shall
not make more than one such designation in any Monthly Period. The Transferor
will be permitted to designate and require reassignment to it of the Receivables
from Removed Accounts only upon satisfaction of the following conditions: (i)
the removal of any Receivables of any Removed Accounts shall not, in the
reasonable belief of the Transferor, cause a Pay Out Event to occur, cause the
Transferor Interest as a percentage of the aggregate amount of Principal
Receivables to be less than the Minimum Transferor Interest 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
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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 specified in the Pooling and Servicing Agreement has the
revocable power to withdraw funds from the Distribution Account for the purpose
of making distributions to the Certificateholders.
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DISCOUNT RECEIVABLES
The Pooling and Servicing Agreement provides that 1.3% (the "Yield Factor")
of the amount of Receivables consisting of amounts charged by cardholders for
goods and services and cash advances be treated as Finance Charge Receivables
(the "Discount Receivables"). On the date of processing of any collections, the
product of the Yield Factor and collections of Receivables consisting of amounts
charged by cardholders for goods and services and cash advances on such day
which otherwise would be Principal Receivables will be deemed "Discount
Receivable Collections." An amount equal to the product of (i) the investor
percentage with respect to Finance Charge Receivables for each Series of
certificates issued and outstanding and (ii) the amount of such Discount
Receivables Collections will be deposited by the Transferor into the Collection
Account and an amount equal to the product of (i) the Transferor Percentage and
(ii) the amount of the Discount Receivable Collections will be paid to the
holder of the Exchangeable Transferor Certificate. The former amount deposited
into the Collection Account will be applied as provided below regarding payments
with respect to Finance Charge Receivables. The Transferor may at any time
increase the Yield Factor to a fixed percentage up to 4%; provided that the
Transferor must provide 30 days' prior written notice to the Servicer, the
Trustee, any provider of Enhancement and the Rating Agency of any such
designation, and such designation will become effective on the date specified
therein only if (i) in the reasonable belief of the Transferor such designation
would not cause a Pay Out Event to occur or an event which, with notice or the
lapse of time or both, would constitute a Pay Out Event and (ii) the Rating
Agency confirms in writing its then current rating on any outstanding Series.
APPLICATION OF COLLECTIONS
Allocations. Except as otherwise provided below or in a Supplement, the
Servicer will deposit into the Collection Account, no later than the second
business day following the date of processing, any payment collected by the
Servicer on the Receivables; provided, however, that the Servicer need not
deposit amounts to be paid to the holder of the Exchangeable Transferor
Certificate and certain amounts allocated to Certificateholders of a Series, as
specified in the related Supplement, into the Collection Account, and provided,
further, that for as long as the Bank remains the Servicer under the Pooling and
Servicing Agreement, and (a)(i) the Servicer provides to the Trustee a letter of
credit covering collection risk of the Servicer acceptable to the Rating Agency
and (ii) the Transferor shall not have received a notice from the Rating Agency
that such letter of credit would result in the lowering of such Rating Agency's
then existing rating of any Series of certificates then outstanding, or (b) the
Servicer has and maintains a certificate of deposit rating of P-1 by Moody's and
of A-1 by Standard & Poor's and deposit insurance provided by either BIF or
SAIF, then the Servicer may make such deposits and payments on the business day
immediately prior to the Distribution Date (the "Transfer Date") in an amount
equal to the net amount of such deposits and payments which would have been made
had the conditions of this proviso not applied.
Any amounts collected in respect of Principal Receivables not paid to the
Transferor because the Transferor Interest has been reduced below the Minimum
Transferor Interest ("Unallocated Principal Collections"), together with any
adjustment payments, as described below, will be held in the Collection Account
and only paid to the Transferor if and to the extent that the Transferor
Interest is greater than the Minimum Transferor Interest. Unallocated Principal
Collections will be applied to principal shortfalls for each Series on the
applicable Transfer Date. If principal shortfalls for all Series exceed
Unallocated Principal Collections for any Monthly Period, Unallocated Principal
Collections will be allocated pro rata among the applicable Series based on the
relative amounts of principal shortfalls.
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-
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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 Holders of the Senior
Certificates to make up any Investor Default Amount allocable to such Holders of
the Senior Certificates.
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.
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INVESTOR CHARGE-OFFS
With respect to each Series of Certificates, if the amount payable on a
Distribution Date or other specified date in respect of interest on the
Certificates, the Investor Servicing Fee (unless otherwise specified in the
related Prospectus Supplement), the Investor Default Amount and other required
fees exceeds the amount on deposit in the Collection Account available therefor,
available Enhancement amounts, if any, and amounts available from other
specified sources, then the Invested Amount with respect to such Series will be
reduced by the amount of such excess, but not more than the Investor Default
Amount (an "Investor Charge-Off"). Investor Charge-Offs will be reimbursed on
any Distribution Date to the extent amounts on deposit in the Collection Account
and otherwise available therefor exceed such interest, fees and any aggregate
Investor Default Amount payable on such date. Such reimbursement of Investor
Charge-Offs will result in an increase in the Invested Amount with respect to
such Series. In the case of a Series of Certificates having more than one Class,
the related Prospectus Supplement will describe the manner and priority of
allocating Investor Charge-Offs and reimbursements thereof among the Invested
Amounts of the Classes.
FINAL PAYMENT OF PRINCIPAL; TERMINATION
With respect to each Series, the Certificates will be subject to optional
repurchase by the Transferor on any Distribution Date after the Invested Amount
is reduced to an amount less than or equal to the percentage of the initial
outstanding principal amount of the Certificates specified in the Prospectus
Supplement, if certain conditions set forth in the related Pooling and Servicing
Agreement are met. Unless otherwise specified in the related Prospectus
Supplement, the repurchase price will be equal to the Invested Amount plus
accrued and unpaid interest on the Certificates.
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
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(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,
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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:
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(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, and (l) the amount available, if any, pursuant to
the applicable Enhancement.
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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
With respect to any Series which is listed on the Luxembourg Stock
Exchange, 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.
In addition, with respect to such Series, notices to Certificateholders
will be given by publication in a daily newspaper in Luxembourg, which is
expected to be the Luxemburger Wort. In the event that Definitive Certificates
are issued, notices to Certificateholders will also be given by mail to the
addresses of such holders as they appear in the Certificate Register referred to
in the Pooling and Servicing Agreement.
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 current and future tax
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legislation (such as the legislation creating FASITs) as described below under
"Certain U.S. Federal Income Tax Consequences--Recent Legislation."
The Pooling and Servicing Agreement and the Supplement may be amended by
the Transferor, the Servicer and the Trustee with the consent of the holders of
certificates evidencing undivided interests aggregating not less than 66 2/3% of
the investor interests of all Series adversely affected, for the purpose of
adding any provisions to, changing in any manner or eliminating any of the
provisions of the Pooling and Servicing Agreement or the Supplement or of
modifying in any manner the rights of certificateholders of any then outstanding
Series. No such amendment, however, may (a) reduce in any manner the amount of,
or delay the timing of, distributions required to be made on any such Series,
(b) change the definition of or the manner of calculating the interest of any
certificateholder of such Series, or (c) reduce the aforesaid percentage of
undivided interests the holders of which are required to consent to any such
amendment, in each case without the consent of all certificateholders of all
Series adversely affected. Promptly following the execution of any amendment to
the Pooling and Servicing Agreement, the Trustee will furnish written notice of
the substance of such amendment to each 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
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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.
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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.
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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
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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, however, has not adopted a formal policy statement
on payment of "actual direct compensatory damages" with respect to
collateralized borrowings of banks that are repudiated, and may not follow the
approach of the RTC. In addition, in one case involving the repudiation by the
RTC of certain secured zero-coupon bonds issued by a savings association, a
United States federal district court held that "actual direct compensatory
damages" in the case of a marketable security meant the market value of the
repudiated bonds as of the date of repudiation. If that court's view were
applied to determine the Trust's "actual direct compensatory damages" in the
event 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 and refuse to perform any obligations, including
servicing obligations, of the Servicer under the Pooling and Servicing Agreement
or any other contract, 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
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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 or to appoint a successor Servicer chosen by the FDIC.
In Octagon Gas Systems, Inc. v. Rimmer, 995 F.2d 948 (10th Cir. 1993),
cert. denied, 114 S. Ct. 554 (1993) ("Octagon"), the United States Court of
Appeals for the 10th Circuit suggested that even where a transfer of accounts
from a seller to a buyer constitutes a "true sale," the accounts would
nevertheless constitute property of the seller's bankruptcy estate in a
bankruptcy of the seller. If the Transferor were to be placed into receivership
and a court were to follow the Octagon court's reasoning, Certificateholders
might experience delays in payment or possibly losses in their investment in the
Certificates. Counsel has advised the Transferor that the facts of the Octagon
case are distinguishable from those in the sale transactions between the
Transferor and the Trust and that the reasoning of the Octagon case appears to
be inconsistent with established precedent and the UCC. In addition, because the
Transferor, the Trust and the transactions governed by the Pooling and Servicing
Agreement do not have any particular link to the 10th Circuit, it is unlikely
that the Transferor would be subject to a receivership proceeding in the 10th
Circuit. Accordingly, the Octagon case should not be binding precedent on a
court in a receivership proceeding.
CONSUMER PROTECTION LAWS
The relationship of the cardholder and credit card issuer is extensively
regulated by Federal and state consumer protection laws. With respect to credit
cards issued by the Bank, the most significant of these laws include the Federal
Truth-in-Lending Act, Equal Credit Opportunity Act, Fair Debt Collection
Practices Act, Fair Credit Reporting Act and Electronic Funds Transfer Act, as
well as the Delaware Banking Code. These statutes impose disclosure requirements
when a credit card account is advertised, when it is opened, at the end of
monthly billing cycles, upon account renewal for accounts on which annual fees
are assessed, and at year end and, in addition, limit cardholder liability for
unauthorized use, prohibit certain discriminatory practices in extending credit,
and impose certain limitations on the type of account-related charges that may
be assessed. Federal legislation requires credit card issuers to disclose to
consumers the interest rates, annual cardholder fees, grace periods, balance
calculation methods, and other features associated with their credit card
accounts. Cardholders are entitled under current law to have payments and
credits applied to the credit card account promptly, to receive prescribed
notices and to have billing errors resolved promptly.
The Trust may be liable for certain violations of consumer protection laws
that apply to the Receivables, either as assignee of the Transferor with respect
to obligations arising before transfer of the Receivables to the Trust or as a
party directly responsible for obligations arising after the transfer. In
addition, a cardholder may be entitled to assert such violations by way of
set-off against his obligation to pay the amount of Receivables owing. The
Transferor covenants in the Pooling and Servicing Agreement to accept the
transfer of all Receivables in an Account if any Receivable in such Account has
not been created in compliance with the requirements of such laws. The Bank has
also agreed in the Pooling and Servicing Agreement to indemnify the Trust for,
among other things, any liability arising from such violations. See "Description
of the Certificates--Representations and Warranties."
Various proposed laws and amendments to existing laws have from time to
time been introduced in Congress and certain state and local legislatures that,
if enacted, would further regulate the credit card industry, certain of which
would, among other things, impose a ceiling on the rate at which a financial
institution may assess finance charges and fees on credit card accounts that
would be substantially below the rates of the finance charges and fees the Bank
currently assesses on its accounts. In particular, on June 19, 1997, a proposal
to amend the Federal Truth-in-Lending Act was introduced in the House of
Representatives and referred to the Committee on Banking and Financial Services,
which would, among other things, prohibit the imposition of certain minimum
finance charges and other fees, prohibit certain methods of calculating finance
charges, require prior notice of any increase in the interest rate assessed with
respect to a credit card account and limit the amount of certain fees. Although
such proposed legislation has not been enacted, there can be no assurance that
such a bill will not become law in the future. The potential effect of any
legislation which limits the amount of finance charges and
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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.
The Soldiers' and Sailors' Civil Relief Act of 1940 allows individuals on
active duty in the military to cap the interest rate on debts incurred before
the call to active duty to 6% per annum. In addition, subject to judicial
discretion, any action or court proceeding in which an individual in military
service is involved may be stayed if the individual's rights would be prejudiced
by denial of such stay.
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 December
19, 1995 in the United States District Court for the Northern District of
California by a former cardmember of the Bank. A settlement with the plaintiff
class has been reached and was approved by the U.S. District Court at a hearing
on November 13, 1997. The Bank believes that any liability arising from this
matter will not have a material adverse effect on the Transferor's business or
on the Receivables in the Trust.
The Bank has been named as a defendant in four class action lawsuits filed
in late 1997 by cardmembers of the Bank. These actions were filed in the
Superior Court of the State of Delaware, New Castle County, the Circuit Court of
Multnomah County, Oregon, the United States District Court for the Western
District of Washington and in the 14th District Court of Dallas County, Texas.
The plaintiffs in all four cases contend that they and others similarly situated
are entitled to equitable relief for alleged violations of the Delaware Consumer
Fraud Act, breach of contract, breach of the covenant of good faith and fair
dealing and fraud. The court granted summary judgment in favor of the Bank in
the Delaware case in April 1998 and the court in Oregon entered partial summary
judgment in favor of the Bank in May 1998. The Bank has filed a second motion in
the Oregon case seeking dismissal of the remaining claim. The Bank believes that
these claims are without merit and intends to vigorously defend against all
claims. While it is impossible to predict the outcome of these matters, the Bank
believes that any liability arising from these matters will not have a material
adverse effect on the Transferor's business or on the Receivables of the Trust.
CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES
GENERAL
The following discussion, summarizing certain anticipated U.S. 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.
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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
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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 Certificate Owner 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 Certificate Owner who purchases an Offered Certificate for an amount in
excess of the sum of all amounts payable on such Certificate after the purchase
date other than payment of qualified stated interest (the "Remaining Redemption
Amount") shall be considered to have purchased the Certificates at a premium.
Such Certificate Owner may generally elect to amortize such premium (as an
offset to interest income), using a constant yield method, over the remaining
term of the Certificate.
A subsequent Certificate Owner who purchases an Offered Certificate that
was issued with OID for an amount less than or equal to the Remaining Redemption
Amount but in excess of the Certificate adjusted issue price (any such excess
being "acquisition premium") generally is permitted to reduce the daily portion
of OID otherwise includible in such Certificate Owner's taxable income.
SALE OR OTHER DISPOSITION 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
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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 assumptions and qualifications set forth in such opinion will
include the qualification that the opinion is limited to the issuance of the
Certificates of such Series by the Trust and an assumption that any secondary
transactions entered into with respect to any Class of Certificates (such as the
deposit of Certificates into a second trust and the issuance of securities out
of that trust) will not adversely affect the Federal income tax status of the
Trust.
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
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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
Certain provisions of the Code provide for the creation of a new type of
entity for federal income tax purposes, the "financial asset securitization
investment trust" ("FASIT"). However, although these provisions were effective
September 1, 1997, many technical issues concerning FASITs must be addressed by
Treasury regulations which have not yet been issued. Although transition rules
permit an entity in existence on August 31, 1997, such as the Trust, to elect
FASIT status, at the present time it is not clear how outstanding interests of
such an entity would be treated subsequent to such an election. The Pooling and
Servicing Agreement may be amended in accordance with the provisions thereof to
provide that the Transferor may cause a FASIT election to be made for the Trust
if the Transferor delivers to the Trustee an opinion of counsel to the effect
that, for Federal income tax purposes, (i) the issuance of FASIT regular
interests will not adversely affect the tax characterization as debt of
Certificates of any outstanding Series or Class that were characterized as debt
at the time of their issuance, (ii) following such issuance the Trust will not
be deemed to be an association (or publicly traded partnership) taxable as a
corporation and (iii) such issuance will not cause or constitute an event in
which gain or loss would be recognized by any Certificateholder or the Trust.
FOREIGN INVESTORS
As set forth above, it is expected that Special Tax Counsel will render an
opinion, upon issuance, that the Offered Certificates will be treated as debt
for U.S. Federal income tax purposes. The following information describes the
U.S. Federal income tax treatment of investors that are not U.S. persons
("Foreign Investors") if the Offered Certificates are treated as debt. The term
"Foreign Investor" means any person other than (i) a citizen or resident of the
United States, (ii) a corporation, partnership or other entity organized in or
under the laws of the United States or any political subdivision thereof, (iii)
an estate the income of which is includible in gross income for U.S. Federal
income tax purposes, regardless of its source or (iv) a trust if a U.S. court is
able to exercise primary supervision over the administration of such trust and
one or more U.S. persons 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
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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.
On October 6, 1997, the Department of the Treasury issued new regulations
(the "New Regulations") which make certain modifications to the withholding,
backup withholding and information reporting rules described above. The New
Regulations attempt to unify certification requirements and modify reliance
standards. The New Regulations will generally be effective for payments made
after December 31, 1999, subject to certain transition rules. Prospective
investors are urged to consult their own tax advisors regarding the New
Regulations.
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
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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
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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") 84-14 (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.
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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") 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 Benefit Plan.
The DOL has recently issued proposed regulations under Section 401(c). It should
be noted that if the General Account Regulations are adopted substantially in
the form in which proposed, the General Account Regulations may not exempt the
assets of insurance company general accounts from treatment as "plan assets"
after December 31, 1998. 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 Benefit Plan invested in
a separate account. Plan investors considering the purchase of Certificates of
any Series on behalf of an insurance company general account should consult
their legal advisors regarding the effect of the General Account Regulations on
such purchase.
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, or contribute to payments such
underwriters may be required to make in respect thereof. 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 Clinton W. Walker, Executive Vice President
and General Counsel of First USA Bank, N.A., 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.
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INDEX OF TERMS FOR PROSPECTUS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Accounts.................................................... 3
Accumulation Period......................................... 11
Additional Accounts......................................... 6
Amortization Period......................................... 4
Annual Membership Fees...................................... 5
BANC ONE.................................................... 26
BANC ONE/FCN Agreement...................................... 27
BANC ONE/FCN Merger......................................... 27
Bank........................................................ 1, 8
Bank Portfolio.............................................. 3
Benefit Plans............................................... 58
BIF......................................................... 38
Cash Advances............................................... 23
Cash Collateral Account..................................... 47
Cash Collateral Guaranty.................................... 47
Cede........................................................ 2
Cedel....................................................... 31
Cedel Participants.......................................... 31
Certificate Owner........................................... 2, 53
Certificate Rate............................................ 4
Certificateholder........................................... 2, 30
Certificates................................................ 1, 3
Class....................................................... 1, 3
Closing Date................................................ 9
Code........................................................ 52
Collection Account.......................................... 8, 38
Collateral Invested Amount.................................. 47
Commission.................................................. 2
Companion Series............................................ 13, 33
Controlled Accumulation Amount.............................. 11
Controlled Amortization Amount.............................. 10
Controlled Amortization Period.............................. 10
Controlled Deposit Amount................................... 11
Controlled Distribution Amount.............................. 10
Convenience Checks.......................................... 23
Cooperative................................................. 31
Default Amount.............................................. 40
Defaulted Account........................................... 5, 40
Definitive Certificates..................................... 32
Depositaries................................................ 29
Depository.................................................. 29
Determination Date.......................................... 40
Disclosure Document......................................... 7
Discount Receivable Collections............................. 39
Discount Receivables........................................ 6, 39
Distribution Account........................................ 38
Distribution Date........................................... 9
DOL......................................................... 58
DTC......................................................... 2
</TABLE>
61
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<TABLE>
<CAPTION>
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<S> <C>
Eligible Account............................................ 36
Eligible Receivable......................................... 36
Enhancement................................................. 3
Enhancement Provider........................................ 47
ERISA....................................................... 15
Euroclear................................................... 31
Euroclear Operator.......................................... 31
Euroclear Participants...................................... 31
Euroclear System............................................ 31
Excess Finance Charge Collections........................... 12
Excess Principal Collections................................ 33
Exchange.................................................... 7
Exchange Act................................................ 2
Exchangeable Transferor Certificate......................... 4
FASIT....................................................... 56
FCN......................................................... 27
FDIA........................................................ 49
FDIC........................................................ 5
FDR......................................................... 21
Final Regulation............................................ 58
Finance Charge Account...................................... 38
Finance Charge Receivables.................................. 6
First USA Financial......................................... 26
Foreign Investors........................................... 56
Full Invested Amount........................................ 13, 40
Funding Period.............................................. 13, 39
General Account Regulations................................. 60
Holders..................................................... 32
Indirect Participants....................................... 29
Ineligible Receivable....................................... 35
Initial Closing Date........................................ 35
Initial Invested Amount..................................... 14
Interchange................................................. 24
Interest Funding Account.................................... 32
Interest Period............................................. 9
Invested Amount............................................. 5
Investor Charge-Off......................................... 41
Investor Default Amount..................................... 40
Investor Interest........................................... 4
Investor Percentage......................................... 5
Investor Servicing Fee...................................... 8
IRA......................................................... 58
IRS......................................................... 53
John Hancock................................................ 59
L/C Bank.................................................... 48
Minimum Aggregate Principal Receivables..................... 25
Minimum Transferor Interest................................. 25
Monthly Interest............................................ 12
Monthly Period.............................................. 9, 32
Moody's..................................................... 38
</TABLE>
62
<PAGE> 138
<TABLE>
<CAPTION>
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New Regulations............................................. 57
Octagon..................................................... 51
Offered Certificates........................................ 53
OID......................................................... 53
Original Cut Off Date....................................... 4
Other Charges............................................... 6
Participants................................................ 29
Pay Out Event............................................... 41
Periodic Finance Charges.................................... 5
Permitted Investments....................................... 38
Pooling and Servicing Agreement............................. 3
Pre-Funding Account......................................... 13, 39
Pre-Funding Amount.......................................... 13, 39
Prepayable Instrument....................................... 54
Principal Account........................................... 38
Principal Commencement Date................................. 10
Principal Funding Account................................... 11
Principal Receivables....................................... 5
Principal Terms............................................. 34
Prospectus Supplement....................................... 1
PTE......................................................... 59
Purchases................................................... 23
Qualified Institution....................................... 38
Rapid Amortization Period................................... 11
Rating Agency............................................... 15
Receivables................................................. 1, 3
Record Date................................................. 28
Recoveries.................................................. 24
Regulations................................................. 53
Remaining Redemption Amount................................. 54
Removed Accounts............................................ 6, 37
Reserve Account............................................. 49
Revolving Period............................................ 9
RTC......................................................... 16
RTC Policy Statement........................................ 16, 50
SAIF........................................................ 38
Scheduled Payment Date...................................... 10
Securities Act.............................................. 1
Senior Certificates......................................... 4
Series...................................................... 1, 3
Series Closing Date......................................... 35
Series Cut Off Dates........................................ 35
Service Transfer............................................ 43
Servicer.................................................... 8
Servicer Default............................................ 43
Special Tax Counsel......................................... 53
Spread Account.............................................. 48
Standard & Poor's........................................... 38
Stated Series Termination Date.............................. 41
Subordinated Certificates................................... 4
</TABLE>
63
<PAGE> 139
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<CAPTION>
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<S> <C>
Supplement.................................................. 3
Terms and Conditions........................................ 31
Transfer Date............................................... 39
Transferor.................................................. 3
Transferor Amount........................................... 5
Transferor Interest......................................... 5
Transferor Percentage....................................... 28
Trust....................................................... 1, 3
Trust Portfolio............................................. 25
Trustee..................................................... 1, 3
UCC......................................................... 49
Unallocated Principal Collections........................... 39
Underwriting Agreement...................................... 60
Yield Factor................................................ 39
</TABLE>
64
<PAGE> 140
PRINCIPAL OFFICE OF
FIRST USA BANK, N.A.
201 North Walnut Street
Wilmington, Delaware 19801
TRUSTEE
The Bank of New York (Delaware)
White Clay Center
Route 273
Newark, Delaware 19711
PAYING AGENTS
<TABLE>
<S> <C>
The Bank of New York Banque de Luxembourg
101 Barclay Street, Floor 12E 14 Boulevard Royal
New York, New York 10286 2449 Luxembourg
Grand-Duche de Luxembourg
</TABLE>
LISTING AGENT
Banque de Luxembourg
14 Boulevard Royal
2449 Luxembourg
Grand-Duche de Luxembourg
LEGAL ADVISOR TO THE BANK AND THE UNDERWRITERS
AS TO UNITED STATES LAW
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
INDEPENDENT ACCOUNTANTS TO THE BANK
PricewaterhouseCoopers LLP
100 East Broad Street
Columbus, Ohio 43215
<PAGE> 141
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NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS AND, IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE TRANSFEROR OR ANY AGENT OR THE UNDERWRITERS.
NEITHER THIS PROSPECTUS SUPPLEMENT NOR THE ACCOMPANYING PROSPECTUS CONSTITUTES
AN OFFER OR SOLICITATION BY ANYONE IN ANY STATE IN WHICH SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS
SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS, NOR ANY SALE MADE HEREUNDER OR
THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE TRANSFEROR OR THE RECEIVABLES OR THE
ACCOUNTS SINCE THE DATE HEREOF OR THEREOF OR THAT THE INFORMATION CONTAINED OR
INCORPORATED BY REFERENCE HEREIN OR THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT
TO ITS DATE.
------------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Other Information..................................... S-3
Summary of Terms...................................... S-4
Recent Developments................................... S-19
The Bank's Credit Card Portfolio...................... S-19
The Receivables....................................... S-22
Maturity Considerations............................... S-26
Receivable Yield Considerations....................... S-28
Use of Proceeds....................................... S-29
First USA Bank, N.A................................... S-29
Description of the Certificates....................... S-29
Underwriting.......................................... S-51
Listing and General Information....................... S-52
Annex I: Other Series................................. AI-1
Annex II: Global Clearance, Settlement and Tax
Documentation Procedures............................ AII-1
Index of Terms for Prospectus Supplement
PROSPECTUS
Prospectus Supplement................................. 2
Reports to Certificateholders......................... 2
Available Information................................. 2
Incorporation of Certain Documents by Reference....... 2
Prospectus Summary.................................... 3
Risk Factors.......................................... 16
The Trust............................................. 20
The Bank's Credit Card Activities..................... 21
The Receivables....................................... 25
Maturity Assumptions.................................. 25
Use of Proceeds....................................... 26
The Bank and BANC ONE CORPORATION..................... 26
Description of the Certificates....................... 28
Enhancement........................................... 46
Certain Legal Aspects of the Receivables.............. 49
Certain U.S. Federal Income Tax Consequences.......... 52
State and Local Taxation.............................. 57
ERISA Considerations.................................. 58
Plan of Distribution.................................. 60
Legal Matters......................................... 60
Index of Terms for Prospectus......................... 61
</TABLE>
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$545,180,000
FIRST USA
CREDIT CARD MASTER TRUST
$500,000,000
CLASS A
FLOATING RATE
ASSET BACKED CERTIFICATES,
SERIES 1998-7
$45,180,000
CLASS B
FLOATING RATE
ASSET BACKED CERTIFICATES,
SERIES 1998-7
FIRST USA BANK, N.A.
TRANSFEROR AND SERVICER
------------------------
PROSPECTUS SUPPLEMENT
SEPTEMBER , 1998
------------------------
BANC ONE CAPITAL MARKETS, INC.
BEAR, STEARNS & CO. INC.
FIRST CHICAGO CAPITAL MARKETS, INC.
LEHMAN BROTHERS
SALOMON SMITH BARNEY
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